ne of 2003’s highlights in the Washington, D.C. market was the opening of Terrell Place. This project is a classic example of how CarrAmerica does business. We invested in the project in a joint venture with a client of JP Morgan. The company is also providing development, property management and leasing services. With regard to its development, many team members consider Terrell Place to be the most complex project CarrAmerica has ever done.

The challenging design, construction and operational issues of this project all played out in a complicated historic preservation context. A 1924 building formerly housing a department store, four Victorian townhouse facades, and a new 11-story building were combined to create a 476,000 square foot complex of integrated office and retail space. Complementary residential space, featuring 29 luxury condominiums, was created within and above adjacent historic buildings.

The Terrell Place development was also unique from a land use perspective. Terrell Place’s strategic location in the Downtown district mandated that it also create special retail and arts spaces, contributing further to its unique character as a major new office development which both serves its important Washington tenants while energizing the 24-hour vitality of its community. Developing this multifaceted project, and preparing to add a new Shakespeare Theatre next door, has been a challenging and rewarding development experience.

We are particularly proud to have named this property for Mary Church Terrell, the civil rights activist who, among her many accomplishments, led efforts resulting in the desegregation of Washington’s dining establishments - including one that existed where Terrell Place now stands. We encourage you to visit the exhibit hall honoring her accomplishments in the Terrell Place lobby.

Another significant investment, buying out our partner to gain 100% ownership of 1717 Pennsylvania Avenue, was a major accomplishment given that Washington remains such a challenging acquisition market.

Washington is also the location of many of the prestigious fee-based projects CarrAmerica is developing. When completed, the value of the current D.C. development projects will exceed $1.0 billion. With current projects include the Kennedy Center Plaza, The Newseum, the second headquarters building for the International Monetary Fund, and the proposed Shakespeare Theatre, CarrAmerica continues to define the cityscape of our Nation’s Capital.

“The company is particularly pleased to take such a substantive role in the city’s

transformation,” said Robert O. Carr, President of CarrAmerica Urban Development, CarrAmerica’s affiliate focused exclusively on urban development opportunities in Washington, D.C., “We value our responsibilities to these very special clients and projects.”

Our property management and leasing teams also had a good year in this market. “That we take property management and tenant satisfaction so seriously is illustrated by 1201

F Street being honored by Building Owners and Managers Association as The Office Building of the Year for its size in the Middle Atlantic region,” said John Donovan, Washington’s Senior Managing Director. “By keeping tenant satisfaction paramount, we reap the rewards in lease renewals as well as in the attraction of new tenants. It shows in our occupancy compared to the overall market.”

Looking at the downtown Washington office market, the vacancy rate was the lowest of any major urban market, 8.4% at year’s end. It is a testament to the quality of our properties and the skill and dedication of our leasing and property management personnel that, at year-end 2003, the vacancy rate for CarrAmerica’s Washington, D.C. portfolio (consolidated and joint venture) was only 2%. We had some noteworthy leasing activity in a challenging leasing environment. This included the 15-year lease of 417,000 square feet in International Square to the law firm of Dickstein Shapiro Morin & Oshinsky LLP. We were also pleased to welcome the law firm of Venable LLP as the lead tenant in Terrell Place with 242,000 square feet. Finally, the law firm of Alston & Bird signed a 119,000 square foot pre-lease for approximately half the space in The Atlantic Building— a complex project combining historic preservation with new construction—recently started at 950 F Street, N.W. for which we are providing development, property management, and leasing services as well as mezzanine financing to the property owner.

We remain proud of our work in Washington, D.C.—CarrAmerica’s headquarters and first market office.

 

 

 

	CarrAmerica’s Southern California Management Team (left to right)  Malcolm O’Donnell, Market Managing Director Andy Fishburn, Senior Vice President for Leasing and Marketing Phil Matchett, Vice President and Director of Operations

arrAmerica’s Southern California market office covers three distinct and significant markets—Los Angeles, Orange County, and San Diego. We have increased occupancy and surpassed the market throughout the region, with our total occupancy now at approximately 90%.

Our Southern California team believes this success is a result of greater responsiveness and attentive broker relationships. The leasing team completed 71 lease transactions in 2003, including a 65,000 square foot campus expansion for the University of Phoenix in Costa Mesa. The market office can take credit for one of Orange County’s most significant 2003 lease transactions, bringing the occupancy at South Coast Executive Centre to 95%. Another noteworthy transaction was the lease extension with Pinkerton’s, Inc. and Burns International, both Securitas companies. Pleased with the relationship, they renewed their 72,610 square foot lease at Westlake Spectrum in Westlake Village.

The real story for Southern California in 2003 is the repositioning and upgrading of our investment portfolio in this market. This year brought the disposition of three smaller non-strategic suburban properties and the investment in two significant urban high-rise buildings in Los Angeles.

10 Universal City Plaza is a landmark building and one of L.A.’s premier office towers. The company formed a joint venture with Beacon Capital Partners to pay $190.0 million for the 775,000 square foot, 35-story, Class A, trophy-quality office building adjacent to the Burbank Media District submarket.

1888 Century Park East, our second Los Angeles investment, was acquired for $119.0 million through another joint venture with Beacon. CarrAmerica will provide property management services for this 475,000 square foot, 21-story Century City building, as well as leasing and management for 10 Universal City Plaza. Both these high profile investment transactions were successful because we went to great lengths to work within, and be responsive to, the seller’s requirements.

Looking to the future, we are very optimistic about Southern California. In the words of Malcolm O’Donnell, our Managing Director for this market, “We are bullish about job growth in our region and look forward to expanding our portfolio in Southern California. We believe the company is well-positioned to capitalize and benefit from future growth here.”