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Section 1: 8-K (8-K)

Document


 
 
 
 
 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC  20549

FORM 8-K

CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of report (Date of earliest event reported) April 26, 2018
CORPORATE OFFICE PROPERTIES TRUST
CORPORATE OFFICE PROPERTIES, L.P.
(Exact name of registrant as specified in its charter)
Corporate Office Properties Trust
 
Maryland
 
1-14023
 
23-2947217
 
 
(State or other jurisdiction of
 
(Commission File
 
(IRS Employer
 
 
incorporation or organization)
 
Number)
 
Identification No.)
 
 
 
 
 
 
 
Corporate Office Properties, L.P.
 
Delaware
 
333-189188
 
23-2930022
 
 
(State or other jurisdiction of
 
(Commission File
 
(IRS Employer
 
 
incorporation or organization)
 
Number)
 
Identification No.)

6711 Columbia Gateway Drive, Suite 300
Columbia, Maryland 21046
(Address of principal executive offices)
(443) 285-5400
(Registrant’s telephone number, including area code)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2 below):
o
 
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
o
 
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
o
 
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
o
 
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging Growth Company (Corporate Office Properties Trust) o
Emerging Growth Company (Corporate Office Properties, L.P.) o

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Corporate Office Properties Trust o
Corporate Office Properties, L.P. o
 
 
 
 
 





Item 2.02.             Results of Operations and Financial Condition
 
On April 26, 2018, Corporate Office Properties Trust (the “Company”) issued a press release relating to its financial results for the three months ended March 31, 2018 and, in connection with this release, is making available certain supplemental information pertaining to its properties and operations as of and for the period ended March 31, 2018.  The earnings release and supplemental information are included as Exhibit 99.1 to this report and are incorporated herein by reference.
 
The information included herein, including the exhibits, shall not be deemed “filed” for any purpose, including the purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or subject to liabilities of that Section.  The information included herein, including the exhibits, shall also not be deemed incorporated by reference into any filing under the Securities Act of 1933, as amended (the “Securities Act”), or the Exchange Act regardless of any general incorporation language in such filing.

Item 9.01.             Financial Statements and Exhibits

Exhibit Number
 
Exhibit Title
 





SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrants have duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
 
CORPORATE OFFICE PROPERTIES TRUST
 
CORPORATE OFFICE PROPERTIES, L.P.
 
 
 
By: Corporate Office Properties Trust,
 
 
 
its General Partner
 
 
 
 
 
 
 
 
 
/s/ Anthony Mifsud
 
/s/ Anthony Mifsud
 
Anthony Mifsud
 
Anthony Mifsud
 
Executive Vice President and Chief Financial Officer
 
Executive Vice President and Chief Financial Officer
 
 
 
 
Dated:
April 26, 2018
Dated:
April 26, 2018




(Back To Top)

Section 2: EX-99.1 (EXHIBIT 99.1)

Exhibit

Exhibit 99.1

393203000_a2018q1cover.jpg




393203000_tableofcontentsa18.jpg



Corporate Office Properties Trust
Summary Description
 
The Company: Corporate Office Properties Trust (the “Company” or “COPT”) is a self-managed real estate investment trust (“REIT”). COPT is listed on the New York Stock Exchange under the symbol “OFC” and is an S&P MidCap 400 Company. We own, manage, lease, develop and selectively acquire office and data center properties. The majority of our portfolio is in locations that support the United States Government and its contractors, most of whom are engaged in national security, defense and information technology (“IT”) related activities servicing what we believe are growing, durable, priority missions; we refer to these properties as Defense/IT Locations (sometimes also referred to as “Mission-Centric”). We also own a portfolio of office properties located in select urban/urban-like submarkets in the Greater Washington, DC/Baltimore region with durable Class-A office fundamentals and characteristics; these properties are included in a segment referred to as Regional Office Properties (sometimes also referred to as “Urban-Centric”). As of March 31, 2018, we derived 88% of our core portfolio annualized revenue from Defense/IT Locations and 12% from our Regional Office Properties. As of March 31, 2018, our core portfolio of 157 office and data center shell properties, including six owned through an unconsolidated joint venture, encompassed 17.5 million square feet and was 91.9% leased. As of the same date, we also owned a wholesale data center with a critical load of 19.25 megawatts in operations.
Management:
Investor Relations:
Stephen E. Budorick, President & CEO
Stephanie M. Krewson-Kelly, VP of IR
Paul R. Adkins, EVP & COO
443-285-5453, [email protected]
Anthony Mifsud, EVP & CFO
Michelle Layne, Manager of IR
 
443-285-5452, [email protected]
 
Corporate Credit Rating: Fitch: BBB- Stable; Moody’s: Baa3 Positive; and S&P: BBB- Stable

Disclosure Statement: This supplemental package contains forward-looking statements within the meaning of the Federal securities laws. Forward-looking statements can be identified by the use of words such as “may,” “will,” “should,” “could,” “believe,” “anticipate,” “expect,” “estimate,” “plan” or other comparable terminology.  Forward-looking statements are inherently subject to risks and uncertainties, many of which we cannot predict with accuracy and some of which we might not even anticipate.  Although we believe that the expectations, estimates and projections reflected in such forward-looking statements are based on reasonable assumptions at the time made, we can give no assurance that these expectations, estimates and projections will be achieved.  Future events and actual results may differ materially from those discussed in the forward-looking statements.  Important factors that may affect these expectations, estimates and projections include, but are not limited to: general economic and business conditions, which will, among other things, affect office property and data center demand and rents, tenant creditworthiness, interest rates, financing availability and property values; adverse changes in the real estate markets, including, among other things, increased competition with other companies; governmental actions and initiatives, including risks associated with the impact of a prolonged government shutdown or budgetary reductions or impasses, such as a reduction in rental revenues, non-renewal of leases and/or a curtailment of demand for additional space by our strategic customers; our ability to borrow on favorable terms; risks of real estate acquisition and development activities, including, among other things, risks that development projects may not be completed on schedule, that tenants may not take occupancy or pay rent or that development or operating costs may be greater than anticipated; risks of investing through joint venture structures, including risks that our joint venture partners may not fulfill their financial obligations as investors or may take actions that are inconsistent with our objectives; changes in our plans for properties or views of market economic conditions or failure to obtain development rights, either of which could result in recognition of impairment losses; our ability to satisfy and operate effectively under Federal income tax rules relating to real estate investment trusts and partnerships; the dilutive effects of issuing additional common shares; our ability to achieve projected results; and environmental requirements.  We undertake no obligation to update or supplement any forward-looking statements.  For further information, please refer to our filings with the Securities and Exchange Commission, particularly the section entitled “Risk Factors” in Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2017.

1


Corporate Office Properties Trust
Equity Research Coverage
 
Firm
 
Senior Analyst
 
Phone
 
Email
Bank of America Merrill Lynch
 
Jamie Feldman
 
646-855-5808
 
BTIG
 
Tom Catherwood
 
212-738-6410
 
Capital One Securities
 
Chris Lucas
 
571-633-8151
 
Citigroup Global Markets
 
Manny Korchman
 
212-816-1382
 
Evercore ISI
 
Steve Sakwa
 
212-446-9462
 
[email protected]evercoreisi.com
Green Street Advisors
 
Jed Reagan
 
949-640-8780
 
Jefferies & Co.
 
Jonathan Petersen
 
212-284-1705
 
JP Morgan
 
Tony Paolone
 
212-622-6682
 
KeyBanc Capital Markets
 
Craig Mailman
 
917-368-2316
 
Mizuho Securities USA Inc.
 
Richard Anderson
 
212-205-8445
 
Raymond James
 
Bill Crow
 
727-567-2594
 
Robert W. Baird & Co., Inc.
 
Dave Rodgers
 
216-737-7341
 
Stifel Financial Corp.
 
John Guinee
 
443-224-1307
 
SunTrust Robinson Humphrey, Inc.
 
Michael Lewis
 
212-319-5659
 
Wells Fargo Securities
 
Blaine Heck
 
443-263-6529
 
 
With the exception of Green Street Advisors, the above-listed firms are those whose analysts publish research material on the Company and whose estimates of our FFO per share can be tracked through Thomson’s First Call Corporation. Any opinions, estimates, or forecasts the above analysts make regarding COPT’s future performance are their own and do not represent the views, estimates, or forecasts of COPT’s management.

2


Corporate Office Properties Trust
Selected Financial Summary Data (1)
(in thousands, except per share data)
 
 
Page
 
Three Months Ended
SUMMARY OF RESULTS 
 
Refer.
 
3/31/18
 
12/31/17
 
9/30/17
 
6/30/17
 
3/31/17
Net income
 
6
 
$
18,780

 
$
11,008

 
$
22,334

 
$
18,859

 
$
22,740

NOI from real estate operations
 
13
 
$
78,526

 
$
81,439

 
$
82,065

 
$
80,867

 
$
79,450

Same Properties NOI
 
16
 
$
70,241

 
$
72,488

 
$
71,958

 
$
72,339

 
$
71,999

Same Properties Cash NOI
 
17
 
$
69,376

 
$
72,164

 
$
72,068

 
$
71,462

 
$
70,466

Adjusted EBITDA
 
10
 
$
73,707

 
$
76,862

 
$
77,241

 
$
75,499

 
$
73,789

Diluted AFFO avail. to common share and unit holders
 
9
 
$
38,218

 
$
31,920

 
$
41,359

 
$
43,687

 
$
38,347

Dividend per common share
 
N/A
 
$
0.275

 
$
0.275

 
$
0.275

 
$
0.275

 
$
0.275

 
 
 
 
 
 
 
 
 
 
 
 
 
Per share - diluted:
 
 
 
 

 
 

 
 

 
 

 
 

EPS
 
8
 
$
0.17

 
$
0.10

 
$
0.21

 
$
0.08

 
$
0.18

FFO - NAREIT
 
8
 
$
0.49

 
$
0.47

 
$
0.54

 
$
0.42

 
$
0.51

FFO - as adjusted for comparability
 
8
 
$
0.50

 
$
0.53

 
$
0.53

 
$
0.49

 
$
0.47

 
 
 
 
 
 
 
 
 
 
 
 
 
Numerators for diluted per share amounts:
 
 
 
 
 
 
 
 
 
 
 
 
Diluted EPS
 
6
 
$
17,033

 
$
9,509

 
$
20,484

 
$
7,523

 
$
17,714

Diluted FFO available to common share and unit holders
 
7
 
$
51,537

 
$
48,824

 
$
55,871

 
$
42,671

 
$
51,804

Diluted FFO available to common share and unit holders, as adjusted for comparability
 
7
 
$
51,738

 
$
54,065

 
$
54,662

 
$
50,562

 
$
48,067

 
 
 
 
 
 
 
 
 
 
 
 
 
Payout ratios:
 
 
 
 

 
 

 
 

 
 

 
 

Diluted FFO
 
N/A
 
56.0
%
 
58.7
%
 
50.4
%
 
66.0
%
 
54.3
%
Diluted FFO - as adjusted for comparability
 
N/A
 
55.8
%
 
53.0
%
 
51.5
%
 
55.7
%
 
58.6
%
Diluted AFFO
 
N/A
 
75.5
%
 
89.7
%
 
68.1
%
 
64.5
%
 
73.4
%
 
 
 
 
 
 
 
 
 
 
 
 
 
CAPITALIZATION
 
 
 
 

 
 

 
 
 
 

 
 

Total Market Capitalization
 
27
 
$
4,598,028

 
$
4,903,623

 
$
5,272,960

 
$
5,524,727

 
$
5,503,036

Total Equity Market Capitalization
 
27
 
$
2,729,913

 
$
3,061,456

 
$
3,385,759

 
$
3,612,511

 
$
3,583,815

Gross debt
 
28
 
$
1,898,115

 
$
1,872,167

 
$
1,917,201

 
$
1,942,216

 
$
1,949,221

Net debt to adjusted book
 
30
 
41.2
%
 
40.8
%
 
41.7
%
 
42.3
%
 
38.0
%
Net debt plus preferred equity to adjusted book
 
30
 
41.3
%
 
41.0
%
 
41.9
%
 
42.5
%
 
42.0
%
Adjusted EBITDA fixed charge coverage ratio
 
30
 
3.5
x
 
3.7
x
 
3.6
x
 
3.2
x
 
3.0
x
Net debt to in-place adjusted EBITDA ratio
 
30
 
6.4
x
 
6.1
x
 
6.2
x
 
6.4
x
 
5.9
x
Net debt plus pref. equity to in-place adj. EBITDA ratio
 
30
 
6.4
x
 
6.1
x
 
6.2
x
 
6.4
x
 
6.5
x
 
 
 
 
 
 
 
 
 
 
 
 
 
OTHER
 
 
 
 

 
 

 
 

 
 

 
 

Revenue from early termination of leases
 
N/A
 
$
1,246

 
$
634

 
$
749

 
$
467

 
$
612

Capitalized interest costs
 
N/A
 
$
1,374

 
$
1,032

 
$
1,055

 
$
1,611

 
$
1,531


(1)
Many of the prior period amounts reported above changed in the current period due to our adoption of guidance using the full retrospective method that changed our accounting for a partial sale transaction in 2016; this resulted in additional income being retrospectively recognized in 2016 that was being amortized into income in subsequent periods under the previous guidance.

3


Corporate Office Properties Trust
Selected Portfolio Data (1)
 
 
 
 
 
 
 
 
 
 
 
3/31/2018 (2)
 
12/31/17
 
9/30/17
 
6/30/17
 
3/31/17
Operating Office and Data Center Shell Properties
 
 
 
 
 
 
 
 
 
# of Properties
 
 
 
 
 
 
 
 
 
Total Portfolio
159

 
159

 
159
 
165

 
164

Consolidated Portfolio
153

 
153

 
153
 
159

 
158

Core Portfolio
157

 
156

 
153
 
153

 
152

Same Properties
148

 
148

 
148
 
148

 
148

 
 
 
 
 
 
 
 
 
 
% Occupied
 
 
 
 
 
 
 
 
 
Total Portfolio
91.0
%
 
93.6
%
 
93.4
%
 
93.0
%
 
92.4
%
Consolidated Portfolio
90.5
%
 
93.2
%
 
93.0
%
 
92.6
%
 
92.0
%
Core Portfolio (2)
91.1
%
 
94.5
%
 
94.3
%
 
93.8
%
 
93.3
%
Same Properties
91.0
%
 
92.1
%
 
91.8
%
 
91.6
%
 
91.4
%
 
 
 
 
 
 
 
 
 
 
% Leased
 
 
 
 
 
 
 
 
 
Total Portfolio
91.8
%
 
94.2
%
 
94.2
%
 
94.0
%
 
93.3
%
Consolidated Portfolio
91.3
%
 
93.9
%
 
93.8
%
 
93.7
%
 
92.9
%
Core Portfolio (2)
91.9
%
 
95.1
%
 
95.1
%
 
94.8
%
 
94.2
%
Same Properties
91.7
%
 
92.8
%
 
92.7
%
 
92.7
%
 
92.3
%
 
 
 
 
 
 
 
 
 
 
Square Feet (in thousands)
 
 
 
 
 
 
 
 
 
Total Portfolio
17,613

 
17,345

 
17,376

 
17,323

 
17,082

Consolidated Portfolio
16,651

 
16,383

 
16,413

 
16,361

 
16,121

Core Portfolio
17,456

 
17,059

 
16,737

 
16,568

 
16,347

Same Properties
16,342

 
16,342

 
16,342

 
16,342

 
16,342

 
 
 
 
 
 
 
 
 
 
Wholesale Data Center (in megawatts (“MWs”))
 
 
 
 
 
 
 
 
 
MWs Operational
19.25

 
19.25

 
19.25

 
19.25

 
19.25

MWs Leased (3)
16.86

 
16.86

 
16.86

 
16.86

 
14.86

(1)
Our total portfolio, core portfolio and Same Properties reporting included six properties owned through an unconsolidated joint venture totaling 962,000 square feet that were 100% occupied and leased.
(2)
The data above reflects the effect of two properties reported as fully placed in service during the quarter that were previously reported as construction projects since they were held for future lease to the United States Government. If these two properties were reported as fully placed in service as of 12/31/17, our Core Portfolio would have been 92.8% occupied and 93.3% leased as of 12/31/17. Our Same Properties data is reported as if these two properties were fully placed in service as of 1/1/17.
(3)
Leased to tenants with further expansion rights of up to a combined 17.92 megawatts as of 3/31/2018.

4


Corporate Office Properties Trust
Consolidated Balance Sheets
(dollars in thousands)
 
3/31/18
 
12/31/17
 
9/30/17
 
6/30/17
 
3/31/17
Assets
 

 
 

 
 

 
 

 
 

Properties, net
 

 
 

 
 

 
 

 
 

Operating properties, net
$
2,740,264

 
$
2,737,611

 
$
2,690,712

 
$
2,688,174

 
$
2,670,157

Construction and redevelopment in progress, including land (1)
61,844

 
50,316

 
70,202

 
107,910

 
108,925

Land held (1)
356,171

 
353,178

 
336,117

 
338,475

 
313,932

Total properties, net
3,158,279

 
3,141,105

 
3,097,031

 
3,134,559

 
3,093,014

Assets held for sale (2)
42,226

 
42,226

 
74,415

 
51,291

 
41,391

Cash and cash equivalents
8,888

 
12,261

 
10,858

 
10,606

 
226,470

Investment in unconsolidated real estate joint venture
41,311

 
41,787

 
42,263

 
42,752

 
43,182

Accounts receivable, net
23,982

 
31,802

 
27,624

 
42,742

 
29,431

Deferred rent receivable, net
87,985

 
86,710

 
84,743

 
89,832

 
89,410

Intangible assets on real estate acquisitions, net
54,600

 
59,092

 
64,055

 
69,205

 
73,748

Deferred leasing costs, net
47,886

 
48,322

 
47,033

 
40,506

 
40,753

Investing receivables
58,800

 
57,493

 
56,108

 
54,598

 
53,570

Prepaid expenses and other assets, net
72,281

 
74,407

 
72,711

 
56,213

 
66,162

Total assets
$
3,596,238

 
$
3,595,205

 
$
3,576,841

 
$
3,592,304

 
$
3,757,131

Liabilities and equity
 

 
 

 
 

 
 

 
 

Liabilities:
 

 
 

 
 

 
 

 
 

Debt
$
1,854,886

 
$
1,828,333

 
$
1,873,291

 
$
1,897,734

 
$
1,903,657

Accounts payable and accrued expenses
95,721

 
108,137

 
121,483

 
95,267

 
83,107

Rents received in advance and security deposits
26,569

 
25,648

 
26,223

 
25,444

 
28,393

Dividends and distributions payable
29,146

 
28,921

 
28,462

 
28,462

 
31,131

Deferred revenue associated with operating leases
11,246

 
11,682

 
12,047

 
13,172

 
11,750

Deferred property sale (2)
43,377

 
43,377

 

 

 

Capital lease obligation
11,778

 
15,853

 
16,347

 
16,177

 

Other liabilities
17,643

 
41,822

 
43,866

 
56,076

 
55,784

Total liabilities
2,090,366

 
2,103,773

 
2,121,719

 
2,132,332

 
2,113,822

Redeemable noncontrolling interests
23,848

 
23,125

 
23,269

 
23,731

 
23,676

Equity:
 

 
 

 
 

 
 
 
 
COPT’s shareholders’ equity:
 

 
 

 
 

 
 
 
 
Preferred shares at liquidation preference

 

 

 

 
172,500

Common shares
1,022

 
1,013

 
996

 
995

 
994

Additional paid-in capital
2,221,427

 
2,201,047

 
2,150,067

 
2,146,119

 
2,136,369

Cumulative distributions in excess of net income
(813,302
)
 
(802,085
)
 
(783,848
)
 
(777,049
)
 
(757,330
)
Accumulated other comprehensive income (loss)
7,204

 
2,167

 
(859
)
 
(1,163
)
 
(370
)
Total COPT’s shareholders’ equity
1,416,351

 
1,402,142

 
1,366,356

 
1,368,902

 
1,552,163

Noncontrolling interests in subsidiaries
 

 
 

 
 

 
 

 
 

Common units in the Operating Partnership
44,327

 
45,097

 
44,716

 
46,871

 
47,333

Preferred units in the Operating Partnership
8,800

 
8,800

 
8,800

 
8,800

 
8,800

Other consolidated entities
12,546

 
12,268

 
11,981

 
11,668

 
11,337

Total noncontrolling interests in subsidiaries
65,673

 
66,165

 
65,497

 
67,339

 
67,470

Total equity
1,482,024

 
1,468,307

 
1,431,853

 
1,436,241

 
1,619,633

Total liabilities, redeemable noncontrolling interests and equity
$
3,596,238

 
$
3,595,205

 
$
3,576,841

 
$
3,592,304

 
$
3,757,131

(1)
Please refer to pages 23, 24 and 26 for detail.
(2)
As of 3/31/18 and 12/31/17, these lines include the carrying amount and sale proceeds pertaining to a property sale not recognized for accounting purposes that we expect to recognize by 6/30/19.

5


Corporate Office Properties Trust
Consolidated Statements of Operations
(in thousands, except per share data)
 
Three Months Ended
 
3/31/18
 
12/31/17
 
9/30/17
 
6/30/17
 
3/31/17
Revenues
 

 
 

 
 

 
 

 
 

Rental revenue
$
100,834

 
$
101,485

 
$
102,275

 
$
101,347

 
$
100,615

Tenant recoveries and other real estate operations revenue
27,444

 
26,200

 
24,956

 
26,950

 
26,152

Construction contract and other service revenues
27,198

 
36,882

 
29,786

 
23,138

 
13,034

Total revenues
155,476

 
164,567

 
157,017

 
151,435

 
139,801

Expenses
 

 
 

 
 

 
 

 
 

Property operating expenses
50,951

 
47,449

 
46,368

 
48,628

 
48,519

Depreciation and amortization associated with real estate operations
33,512

 
33,938

 
34,438

 
32,793

 
33,059

Construction contract and other service expenses
26,216

 
36,029

 
28,788

 
22,315

 
12,486

Impairment losses (recoveries)

 
13,659

 
(161
)
 
1,625

 

General and administrative expenses
5,861

 
5,552

 
5,692

 
6,017

 
6,747

Leasing expenses
1,431

 
1,447

 
1,676

 
1,842

 
1,864

Business development expenses and land carry costs
1,614

 
1,646

 
1,277

 
1,597

 
1,693

Total operating expenses
119,585

 
139,720

 
118,078

 
114,817

 
104,368

Operating income
35,891

 
24,847

 
38,939

 
36,618

 
35,433

Interest expense
(18,784
)
 
(19,211
)
 
(19,615
)
 
(19,163
)
 
(18,994
)
Interest and other income
1,359

 
1,501

 
1,508

 
1,583

 
1,726

Loss on early extinguishment of debt

 

 

 
(513
)
 

Income before equity in income of unconsolidated entities and income taxes
18,466

 
7,137

 
20,832

 
18,525

 
18,165

Equity in income of unconsolidated entities (1)
373

 
372

 
371

 
370

 
377

Income tax expense
(55
)
 
(953
)
 
(57
)
 
(48
)
 
(40
)
Income before gain on sales of real estate
18,784

 
6,556

 
21,146

 
18,847

 
18,502

Gain on sales of real estate
(4
)
 
4,452

 
1,188

 
12

 
4,238

Net income
18,780

 
11,008

 
22,334

 
18,859

 
22,740

Net income attributable to noncontrolling interests
 

 
 

 
 

 
 

 
 

Common units in the Operating Partnership (1)
(544
)
 
(314
)
 
(693
)
 
(261
)
 
(622
)
Preferred units in the Operating Partnership
(165
)
 
(165
)
 
(165
)
 
(165
)
 
(165
)
Other consolidated entities
(921
)
 
(908
)
 
(897
)
 
(907
)
 
(934
)
Net income attributable to COPT
17,150

 
9,621

 
20,579

 
17,526

 
21,019

Preferred share dividends

 

 

 
(3,039
)
 
(3,180
)
Issuance costs associated with redeemed preferred shares

 

 

 
(6,847
)
 

Net income attributable to COPT common shareholders
$
17,150

 
$
9,621

 
$
20,579

 
$
7,640

 
$
17,839

Amount allocable to share-based compensation awards
(117
)
 
(112
)
 
(95
)
 
(117
)
 
(125
)
Numerator for diluted EPS
$
17,033

 
$
9,509

 
$
20,484

 
$
7,523

 
$
17,714


(1)
Prior period amounts for this line changed in the current period due to our adoption of guidance using the full retrospective method that changed our accounting for a partial sale transaction in 2016; this resulted in additional income being retrospectively recognized in 2016 that was being amortized into equity in income of unconsolidated entities in subsequent periods under the previous guidance.

6


Corporate Office Properties Trust
Funds from Operations
(in thousands)
 
Three Months Ended
 
3/31/18
 
12/31/17
 
9/30/17
 
6/30/17
 
3/31/17
Net income (1)
$
18,780

 
$
11,008

 
$
22,334

 
$
18,859

 
$
22,740

Real estate-related depreciation and amortization
33,512

 
33,938

 
34,438

 
32,793

 
33,059

Impairment losses (recoveries) on previously depreciated operating properties

 
9,004

 
(159
)
 
1,610

 

Gain on sales of previously depreciated operating properties
4

 
(4,452
)
 
(8
)
 
(12
)
 
(19
)
Depreciation and amortization on unconsolidated real estate JV (1)(2)
563

 
563

 
563

 
563

 
563

FFO - per NAREIT (3)(4)
52,859

 
50,061

 
57,168

 
53,813

 
56,343

Preferred share dividends

 

 

 
(3,039
)
 
(3,180
)
Issuance costs associated with redeemed preferred shares

 

 

 
(6,847
)
 

Noncontrolling interests - preferred units in the Operating Partnership
(165
)
 
(165
)
 
(165
)
 
(165
)
 
(165
)
FFO allocable to other noncontrolling interests (5)
(944
)
 
(874
)
 
(917
)
 
(906
)
 
(978
)
Basic and diluted FFO allocable to share-based compensation awards
(213
)
 
(198
)
 
(215
)
 
(185
)
 
(216
)
Basic and Diluted FFO available to common share and common unit holders (4)
51,537

 
48,824

 
55,871

 
42,671

 
51,804

Gain on sales of non-operating properties

 

 
(1,180
)
 

 
(4,219
)
Impairment losses (recoveries) on non-operating properties

 
4,655

 
(2
)
 
15

 

Income tax expense associated with FFO comparability adjustments

 
800

 

 

 

(Gain) loss on interest rate derivatives

 
(191
)
 
(34
)
 
444

 
(453
)
Loss on early extinguishment of debt

 

 

 
513

 

Issuance costs associated with redeemed preferred shares

 

 

 
6,847

 

Demolition costs on redevelopment and nonrecurring improvements
39

 

 

 
72

 
222

Executive transition costs
163

 

 
2

 
31

 
699

Diluted FFO comparability adjustments allocable to share-based compensation awards
(1
)
 
(23
)
 
5

 
(31
)
 
14

Diluted FFO avail. to common share and common unit holders, as adj. for comparability (4)
$
51,738

 
$
54,065

 
$
54,662

 
$
50,562

 
$
48,067


(1)
Prior period amounts for this line changed in the current period due to our adoption of guidance using the full retrospective method that changed our accounting for a partial sale transaction in 2016; this resulted in additional income being retrospectively recognized in 2016 that was being amortized into income in subsequent periods under the previous guidance.
(2)
FFO adjustment pertaining to COPT’s share of an unconsolidated real estate joint venture reported on page 32.
(3)
Please see reconciliation on page 33 for components of FFO per NAREIT.
(4)
Please refer to the section entitled “Definitions” for a definition of this measure.
(5)
Pertains to noncontrolling interests in consolidated real estate joint ventures reported on page 31.

7


Corporate Office Properties Trust
Diluted Share and Unit Computations
(in thousands)
 
Three Months Ended
 
3/31/18
 
12/31/17
 
9/30/17
 
6/30/17
 
3/31/17
EPS Denominator:
 

 
 

 
 

 
 

 
 

Weighted average common shares - basic
100,999

 
99,304

 
99,112

 
99,036

 
98,411

Dilutive effect of forward equity sale agreements and share-based compensation awards
144

 
283

 
146

 
160

 
155

Weighted average common shares - diluted
101,143

 
99,587

 
99,258

 
99,196

 
98,566

Diluted EPS
$
0.17

 
$
0.10

 
$
0.21

 
$
0.08

 
$
0.18

 
 
 
 
 
 
 
 
 
 
Weighted Average Shares for period ended:
 

 
 

 
 

 
 

 
 

Common Shares Outstanding
100,999

 
99,304

 
99,112

 
99,036

 
98,411

Dilutive effect of forward equity sale agreements and share-based compensation awards
144

 
283

 
146

 
160

 
155

Common Units
3,221

 
3,252

 
3,350

 
3,405

 
3,446

Denominator for diluted FFO per share and as adjusted for comparability
104,364

 
102,839

 
102,608

 
102,601

 
102,012

Weighted average common units
(3,221
)
 
(3,252
)
 
(3,350
)
 
(3,405
)
 
(3,446
)
Denominator for diluted EPS
101,143

 
99,587

 
99,258

 
99,196

 
98,566

Diluted FFO per share - NAREIT
$
0.49

 
$
0.47

 
$
0.54

 
$
0.42

 
$
0.51

Diluted FFO per share - as adjusted for comparability
$
0.50

 
$
0.53

 
$
0.53

 
$
0.49

 
$
0.47






8


Corporate Office Properties Trust
Adjusted Funds from Operations
(in thousands)
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended
 
3/31/18
 
12/31/17
 
9/30/17
 
6/30/17
 
3/31/17
Diluted FFO available to common share and common unit holders, as adjusted for comparability
$
51,738

 
$
54,065

 
$
54,662

 
$
50,562

 
$
48,067

Straight line rent adjustments and lease incentive amortization
(828
)
 
(1,343
)
 
(561
)
 
1,517

 
433

Amortization of intangibles included in NOI
356

 
342

 
318

 
325

 
359

Share-based compensation, net of amounts capitalized
1,485

 
1,523

 
1,272

 
1,309

 
1,249

Amortization of deferred financing costs
468

 
443

 
554

 
922

 
1,009

Amortization of net debt discounts, net of amounts capitalized
354

 
350

 
347

 
343

 
339

Accum. other comprehensive loss on derivatives amortized to expense
34

 
54

 
53

 
36

 

Replacement capital expenditures (1)
(15,520
)
 
(23,475
)
 
(15,233
)
 
(11,269
)
 
(13,049
)
Other diluted AFFO adjustments associated with real estate JVs (2)
131

 
(39
)
 
(53
)
 
(58
)
 
(60
)
Diluted AFFO available to common share and common unit holders (“diluted AFFO”)
$
38,218

 
$
31,920

 
$
41,359

 
$
43,687

 
$
38,347

Replacement capital expenditures (1)
 

 
 

 
 

 
 

 
 

Tenant improvements and incentives
$
8,615

 
$
14,804

 
$
11,342

 
$
6,148

 
$
4,740

Building improvements
1,921

 
9,241

 
3,865

 
5,972

 
3,230

Leasing costs
1,280

 
3,242

 
2,428

 
1,666

 
1,151

Net additions to (exclusions from) tenant improvements and incentives
3,289

 
(2,929
)
 
(1,509
)
 
626

 
6,796

Excluded building improvements
415

 
(853
)
 
(893
)
 
(3,143
)
 
(2,868
)
Excluded leasing costs

 
(30
)
 

 

 

Replacement capital expenditures
$
15,520

 
$
23,475

 
$
15,233

 
$
11,269

 
$
13,049

 
 
 
 
 
 
 
 
 
 
(1) Please refer to the section entitled “Definitions” for a definition of this measure.
(2) AFFO adjustments pertaining to noncontrolling interests on consolidated joint ventures reported on page 31 and COPTs share of an unconsolidated real estate joint venture reported on page 32.

9


Corporate Office Properties Trust
EBITDAre and Adjusted EBITDA
(in thousands)
 
Three Months Ended
 
3/31/18
 
12/31/17
 
9/30/17
 
6/30/17
 
3/31/17
Net income
$
18,780

 
$
11,008

 
$
22,334

 
$
18,859

 
$
22,740

Interest expense
18,784

 
19,211

 
19,615

 
19,163

 
18,994

Income tax expense
55

 
953

 
57

 
48

 
40

Depreciation of furniture, fixtures and equipment
523

 
600

 
577

 
585

 
511

Real estate-related depreciation and amortization
33,512

 
33,938

 
34,438

 
32,793

 
33,059

Impairment losses (recoveries) on previously depreciated operating properties

 
9,004

 
(159
)
 
1,610

 

Gain on sales of previously depreciated operating properties
4

 
(4,452
)
 
(8
)
 
(12
)
 
(19
)
Adjustments from unconsolidated real estate JV (1)
824

 
829

 
830

 
827

 
824

EBITDAre
72,482

 
71,091

 
77,684

 
73,873

 
76,149

Impairment losses (recoveries) on non-operating properties

 
4,655

 
(2
)
 
15

 

Loss on early extinguishment of debt

 

 

 
513

 

Gain on sales of non-operating properties

 

 
(1,180
)
 

 
(4,219
)
Business development expenses
1,023

 
1,116

 
737

 
995

 
938

Demolition costs on redevelopment and nonrecurring improvements
39

 

 

 
72

 
222

Executive transition costs
163

 

 
2

 
31

 
699

Adjusted EBITDA
73,707

 
76,862

 
77,241

 
75,499

 
73,789

Proforma NOI adjustment for property changes within period

 
(578
)
 
(410
)
 
421

 
(440
)
In-place adjusted EBITDA
$
73,707

 
$
76,284

 
$
76,831

 
$
75,920

 
$
73,349


(1) Includes COPT’s share of adjusted EBITDA adjustments in an unconsolidated real estate JV (see page 32).


10



Corporate Office Properties Trust
Office and Data Center Shell Properties by Segment (1) - 3/31/2018
(square feet in thousands)
 
 
# of
Properties
 
Operational
Square Feet
 
Occupancy
%
 
Leased
 %
Core Portfolio: (2)
 
 
 
 
 
 
 
 
Defense/IT Locations:
 
 
 
 
 
 
 
 
Fort Meade/Baltimore Washington (“BW”) Corridor:
 
 

 
 

 
 

 
 

National Business Park (3)
 
31

 
3,820

 
89.0
%
 
89.0
%
Howard County
 
35

 
2,767

 
90.1
%
 
92.8
%
Other
 
21

 
1,563

 
94.8
%
 
95.2
%
Total Fort Meade/BW Corridor
 
87

 
8,150

 
90.5
%
 
91.5
%
Northern Virginia (“NoVA”) Defense/IT (3)
 
13

 
2,001

 
82.6
%
 
83.1
%
Lackland AFB (San Antonio, Texas)
 
7

 
953

 
100.0
%
 
100.0
%
Navy Support
 
21

 
1,254

 
88.0
%
 
90.0
%
Redstone Arsenal (Huntsville, Alabama)
 
7

 
651

 
98.2
%
 
99.0
%
Data Center Shells
 
 
 
 
 
 
 
 
Consolidated Properties
 
9

 
1,478

 
100.0
%
 
100.0
%
Unconsolidated JV Properties (4)
 
6

 
962

 
100.0
%
 
100.0
%
Total Defense/IT Locations
 
150

 
15,449

 
91.7
%
 
92.5
%
Regional Office
 
7

 
2,007

 
86.8
%
 
87.2
%
Core Portfolio
 
157

 
17,456

 
91.1
%
 
91.9
%
Other Properties
 
2

 
157

 
80.0
%
 
81.4
%
Total Portfolio
 
159

 
17,613

 
91.0
%
 
91.8
%
Consolidated Portfolio
 
153

 
16,651

 
90.5
%
 
91.3
%

(1)
This presentation sets forth Core Portfolio data by segment followed by data for the remainder of the portfolio.
(2)
Represents Defense/IT Locations and Regional Office properties.
(3)
These lines include the addition of properties reported as fully placed in service during the quarter that were previously reported as construction projects since they were held for future lease to the United States Government.
(4)
See page 32 for additional disclosure regarding an unconsolidated real estate joint venture.




11


Corporate Office Properties Trust
NOI from Real Estate Operations and Occupancy by Property Grouping
(dollars and square feet in thousands)
 
 
3/31/18
 
 
 
 
# of Office and Data Center Shell
Properties
 
Operational Square Feet
 
 
 
 
 
Office and Data Center Shell Properties
Annualized
Rental Revenue (2)
 
Percentage of Total Office and Data Center Shell Properties
Annualized
Rental Revenue (2)
 
NOI from Real
Estate Operations
for Three Months Ended
Property Grouping
 
 
 
% Occupied (1)
 
% Leased (1)
 
 
 
3/31/18
Core Portfolio:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Same Properties (3)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Consolidated properties
 
140

 
15,223

 
90.5%
 
91.3%
 
$
445,369

 
93.9
%
 
$
68,616

Unconsolidated real estate JV (4)
 
6

 
962

 
100.0%
 
100.0%
 
5,448

 
1.1
%
 
1,199

Total Same Properties in Core Portfolio (3)
 
146

 
16,185

 
91.1%
 
91.8%
 
450,817

 
95.0
%
 
69,815

Properties Placed in Service (5)
 
11

 
1,271

 
91.7%
 
92.2%
 
20,559

 
4.3
%
 
4,283

Wholesale Data Center and Other
 
N/A

 
N/A

 
N/A
 
N/A
 
N/A

 
N/A

 
3,888

Total Core Portfolio
 
157

 
17,456

 
91.1%
 
91.9%
 
471,376

 
99.4
%
 
77,986

Disposed Office Properties
 
N/A

 
N/A

 
N/A
 
N/A
 
N/A

 
N/A

 
114

Other Properties (Same Properties)
 
2

 
157

 
80.0%
 
81.4%
 
3,044

 
0.6
%
 
426

Total Portfolio
 
159

 
17,613

 
91.0%
 
91.8%
 
$
474,420

 
100.0
%
 
$
78,526

Consolidated Portfolio
 
153

 
16,651

 
90.5%
 
91.3%
 
$
468,972

 
98.9
%
 
$