Office REITs Deliver Mixed Results

One of the recurring questions about the changing economy of late has been whether the slowdown would affect the office market and if results from office REIT earnings are any indication, the evidence is still inconclusive. At least one office REIT, Corporate Office Properties Trust in Columbia, MD, reported such solid results that it’s a financial analyst favorite, but the company’s CEO says that COPT has its eyes on the recession. Results from others reporting last week were mixed, with some ups and downs in FFO, income and leasing.

Columbia, MD-based Corporate Office Properties Trust [COPT], in its earnings call last week, reported a 17.3% increase in diluted FFO to $2.24 for the year. But in the words of president and CEO Randall M. Griffin, the REIT has “conservatively planned for a recession” this year despite feeling that it is “well positioned for strong growth in 2008.” The company’s tenants are heavily concentrated in the US government and defense information technology sectors, known for stability in good times and bad.

On the opposite coast from COPT, president and CEO Jordan L. Kaplan of Douglas Emmett Inc., commenting in that company’s earnings conference call, acknowledged 2007 as “an extremely volatile year for the real estate industry,” but noted that the REIT’s portfolio, which includes Sherman Oaks Galleria in the San Fernando Valley, reached a record level of nearly 96% leased in the year. The Santa Monica, CA-based Emmett is one of the newest public REITs, just finishing its first year as a publicly held company, having gone to the public markets at a time when other REITs were going in the opposite direction–being taken private.