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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): July 29, 2019
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)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
 
Trading Symbol(s)
 
Name of each exchange on which registered
Common Shares of beneficial interest, $0.01 par value
 
OFC
 
New York Stock Exchange
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 July 29, 2019, Corporate Office Properties Trust (the “Company”) issued a press release relating to its financial results for the three and six months ended June 30, 2019 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 June 30, 2019.  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:
July 29, 2019
Dated:
July 29, 2019




(Back To Top)

Section 2: EX-99.1 (EXHIBIT 99.1)

Exhibit

Exhibit 99.1

398941842_a2019q2cover.jpg




398941842_tableofcontentsq219toca02.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. 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. As of June 30, 2019, we derived 88% of our core portfolio annualized rental revenue from Defense/IT Locations and 12% from Regional Office Properties. As of June 30, 2019, our core portfolio of 167 office and data center shell properties, including 13 owned through unconsolidated joint ventures, encompassed 18.8 million square feet and was 94.1% leased. As of the same date, we also owned a wholesale data center with a critical load of 19.25 megawatts that was 82.1% leased.
Management:
Investor Relations:
Stephen E. Budorick, President & CEO
Stephanie M. Krewson-Kelly, VP of IR
Paul R. Adkins, EVP & COO
443-285-5453, stephanie.kelly@copt.com
Anthony Mifsud, EVP & CFO
Michelle Layne, Manager of IR
 
443-285-5452, michelle.layne@copt.com
 
Corporate Credit Rating: Fitch: BBB- Positive; Moody’s: Baa3 Stable; and S&P: BBB- Positive

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 reduced or delayed 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 significant impairment losses; our ability to satisfy and operate effectively under Federal income tax rules relating to real estate investment trusts and partnerships; possible adverse changes in tax laws; the dilutive effects of issuing additional common shares; our ability to achieve projected results; security breaches relating to cyber attacks, cyber intrusions or other factors; and environmental requirements.  We undertake no obligation to update or supplement any forward-looking statements.  For further information, 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, 2018.

1


Corporate Office Properties Trust
Equity Research Coverage
 
Firm
 
Senior Analyst
 
Phone
 
Email
Bank of America Merrill Lynch
 
Jamie Feldman
 
646-855-5808
 
james.feldman@baml.com
BTIG
 
Tom Catherwood
 
212-738-6410
 
tcatherwood@btig.com
Capital One Securities
 
Chris Lucas
 
571-633-8151
 
christopher.lucas@capitalone.com
Citigroup Global Markets
 
Manny Korchman
 
212-816-1382
 
emmanuel.korchman@citi.com
Evercore ISI
 
Steve Sakwa
 
212-446-9462
 
steve.sakwa@evercoreisi.com
Green Street Advisors
 
Daniel Ismail
 
949-640-8780
 
dismail@greenst.com
Jefferies & Co.
 
Jonathan Petersen
 
212-284-1705
 
jpetersen@jefferies.com
JP Morgan
 
Tony Paolone
 
212-622-6682
 
anthony.paolone@jpmorgan.com
KeyBanc Capital Markets
 
Craig Mailman
 
917-368-2316
 
cmailman@key.com
Mizuho Securities USA Inc.
 
Haendel St. Juste
 
212-205-7860
 
haendel.st.juste@mizuhogroup.com
Raymond James
 
Bill Crow
 
727-567-2594
 
bill.crow@raymondjames.com
Robert W. Baird & Co., Inc.
 
Dave Rodgers
 
216-737-7341
 
drodgers@rwbaird.com
SMBC Nikko Securities America, Inc.
 
Rich Anderson
 
917-262-2795
 
randerson@smbcnikko-si.com
Stifel Financial Corp.
 
John Guinee
 
443-224-1307
 
jwguinee@stifel.com
SunTrust Robinson Humphrey, Inc.
 
Michael Lewis
 
212-319-5659
 
michael.lewis@suntrust.com
Wells Fargo Securities
 
Blaine Heck
 
443-263-6529
 
blaine.heck@wellsfargo.com
 
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
(in thousands, except per share data)
 
 
Page
 
Three Months Ended
 
Six Months Ended
SUMMARY OF RESULTS 
 
Refer.
 
6/30/19
 
3/31/19
 
12/31/18
 
9/30/18
 
6/30/18
 
6/30/19
 
6/30/18
Net income
 
6
 
$
109,563

 
$
22,318

 
$
18,456

 
$
20,322

 
$
21,085

 
$
131,881

 
$
39,865

NOI from real estate operations
 
13
 
$
86,136

 
$
83,764

 
$
80,738

 
$
80,854

 
$
80,918

 
$
169,900

 
$
159,444

Same Properties NOI
 
16
 
$
73,268

 
$
71,726

 
$
71,430

 
$
71,692

 
$
71,977

 
$
144,994

 
$
141,887

Same Properties cash NOI
 
17
 
$
73,436

 
$
70,886

 
$
71,011

 
$
72,406

 
$
70,304

 
$
144,322

 
$
138,062

Adjusted EBITDA
 
10
 
$
80,280

 
$
77,450

 
$
75,200

 
$
75,768

 
$
75,572

 
$
157,730

 
$
149,279

Diluted AFFO avail. to common share and unit holders
 
9
 
$
46,961

 
$
46,648

 
$
42,755

 
$
38,340

 
$
39,742

 
$
94,137

 
$
77,960

Dividend per common share
 
N/A
 
$
0.275

 
$
0.275

 
$
0.275

 
$
0.275

 
$
0.275

 
$
0.550

 
$
0.550

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Per share - diluted:
 
 
 
 

 
 

 
 

 
 

 
 

 
 

 
 
EPS
 
8
 
$
0.95

 
$
0.19

 
$
0.16

 
$
0.18

 
$
0.19

 
$
1.15

 
$
0.36

FFO - Nareit
 
8
 
$
0.52

 
$
0.50

 
$
0.49

 
$
0.50

 
$
0.51

 
$
1.02

 
$
1.00

FFO - as adjusted for comparability
 
8
 
$
0.52

 
$
0.50

 
$
0.50

 
$
0.50

 
$
0.51

 
$
1.03

 
$
1.01

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Numerators for diluted per share amounts:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Diluted EPS
 
6
 
$
107,512

 
$
20,773

 
$
16,906

 
$
18,583

 
$
19,317

 
$
128,840

 
$
36,350

Diluted FFO available to common share and unit holders
 
7
 
$
58,913

 
$
56,740

 
$
54,195

 
$
53,642

 
$
53,720

 
$
116,181

 
$
105,257

Diluted FFO available to common share and unit holders, as adjusted for comparability
 
7
 
$
59,222

 
$
56,788

 
$
54,974

 
$
53,938

 
$
53,941

 
$
116,538

 
$
105,679

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Payout ratios:
 
 
 
 

 
 

 
 

 
 

 
 

 
 

 
 
Diluted FFO
 
N/A
 
52.7
%
 
54.7
%
 
56.4
%
 
56.3
%
 
54.3
%
 
53.5
%
 
55.1
%
Diluted FFO - as adjusted for comparability
 
N/A
 
52.4
%
 
54.7
%
 
55.6
%
 
56.0
%
 
54.1
%
 
53.3
%
 
54.9
%
Diluted AFFO
 
N/A
 
66.1
%
 
66.6
%
 
71.5
%
 
78.8
%
 
73.4
%
 
66.0
%
 
74.4
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
CAPITALIZATION
 
 
 
 

 
 

 
 
 
 

 
 

 
 

 
 
Total Market Capitalization
 
29
 
$
4,794,853

 
$
4,992,411

 
$
4,193,726

 
$
5,119,467

 
$
4,979,083

 
 
 
 
Total Equity Market Capitalization
 
29
 
$
2,997,549

 
$
3,102,491

 
$
2,355,222

 
$
3,296,155

 
$
3,095,017

 
 
 
 
Gross debt
 
30
 
$
1,827,304

 
$
1,919,920

 
$
1,868,504

 
$
1,853,312

 
$
1,914,066

 
 
 
 
Net debt to adjusted book
 
32
 
36.1
%
 
38.8
%
 
38.9
%
 
39.2
%
 
41.1
%
 
N/A

 
N/A

Net debt plus preferred equity to adjusted book
 
32
 
36.2
%
 
39.0
%
 
39.1
%
 
39.4
%
 
41.3
%
 
N/A

 
N/A

Adjusted EBITDA fixed charge coverage ratio
 
32
 
3.7
x
 
3.6
x
 
3.6
x
 
3.6
x
 
3.6
x
 
3.7
x
 
3.6
x
Net debt to in-place adjusted EBITDA ratio
 
32
 
5.7
x
 
6.2
x
 
6.0
x
 
6.1
x
 
6.3
x
 
N/A

 
N/A

Net debt plus pref. equity to in-place adj. EBITDA ratio
 
32
 
5.7
x
 
6.2
x
 
6.0
x
 
6.1
x
 
6.3
x
 
N/A

 
N/A

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 



3


Corporate Office Properties Trust
Selected Portfolio Data (1)
 
 
 
 
 
 
 
 
 
 
 
6/30/19
 
3/31/19
 
12/31/18
 
9/30/18
 
6/30/18
Operating Office and Data Center Shell Properties
 
 
 
 
 
 
 
 
 
# of Properties
 
 
 
 
 
 
 
 
 
Total Portfolio
169

 
165

 
163
 
161

 
159

Consolidated Portfolio
156

 
159

 
157
 
155

 
153

Core Portfolio
167

 
163

 
161
 
159

 
157

Same Properties
150

 
150

 
150
 
150

 
150

 
 
 
 
 
 
 
 
 
 
% Occupied
 
 
 
 
 
 
 
 
 
Total Portfolio
92.7
%
 
92.6
%
 
93.0
%
 
92.1
%
 
91.4
%
Consolidated Portfolio
91.8
%
 
92.2
%
 
92.6
%
 
91.7
%
 
90.9
%
Core Portfolio
92.9
%
 
92.8
%
 
93.1
%
 
92.2
%
 
91.5
%
Same Properties
92.0
%
 
92.2
%
 
92.8
%
 
92.0
%
 
91.1
%
 
 
 
 
 
 
 
 
 
 
% Leased
 
 
 
 
 
 
 
 
 
Total Portfolio
93.9
%
 
93.5
%
 
93.9
%
 
93.9
%
 
93.3
%
Consolidated Portfolio
93.1
%
 
93.1
%
 
93.5
%
 
93.5
%
 
92.9
%
Core Portfolio
94.1
%
 
93.7
%
 
94.0
%
 
94.0
%
 
93.4
%
Same Properties
93.3
%
 
93.1
%
 
93.7
%
 
93.7
%
 
93.2
%
 
 
 
 
 
 
 
 
 
 
Square Feet (in thousands)
 
 
 
 
 
 
 
 
 
Total Portfolio
18,945

 
18,338

 
18,094

 
17,867

 
17,655

Consolidated Portfolio
16,807

 
17,374

 
17,132

 
16,905

 
16,694

Core Portfolio
18,788

 
18,181

 
17,937

 
17,710

 
17,498

Same Properties
16,347

 
16,347

 
16,347

 
16,347

 
16,347

 
 
 
 
 
 
 
 
 
 
Wholesale Data Center
 
 
 
 
 
 
 
 
 
Megawatts Operational
19.25

 
19.25

 
19.25

 
19.25

 
19.25

% Leased
82.1
%
 
87.6
%
 
87.6
%
 
87.6
%
 
87.6
%

(1)
Total and core portfolio and same properties include properties owned through unconsolidated real estate joint ventures (see page 34).

4


Corporate Office Properties Trust
Consolidated Balance Sheets
(dollars in thousands)
 
6/30/19
 
3/31/19
 
12/31/18
 
9/30/18
 
6/30/18
Assets
 

 
 

 
 

 
 

 
 

Properties, net:
 

 
 

 
 

 
 

 
 

Operating properties, net
$
2,719,585

 
$
2,865,829

 
$
2,847,265

 
$
2,796,577

 
$
2,760,632

Construction and redevelopment in progress, including land (1)
185,007

 
146,514

 
139,304

 
149,042

 
91,630

Land held (1)
289,780

 
290,659

 
264,057

 
261,808

 
331,275

Total properties, net
3,194,372

 
3,303,002

 
3,250,626

 
3,207,427

 
3,183,537

Property - operating right-of-use assets (2)
27,434

 
27,569

 

 

 

Property - finance right-of-use assets (2)
40,476

 
40,488

 

 

 

Assets held for sale, net
54,448

 

 

 
42,226

 
42,226

Cash and cash equivalents
46,282

 
7,780

 
8,066

 
9,492

 
8,472

Investment in unconsolidated real estate joint ventures
65,336

 
39,359

 
39,845

 
40,318

 
40,806

Accounts receivable
58,189

 
25,261

 
26,277

 
19,245

 
23,656

Deferred rent receivable
86,707

 
91,304

 
89,350

 
89,171

 
89,606

Intangible assets on real estate acquisitions, net
31,162

 
33,172

 
43,470

 
47,065

 
50,586

Deferred leasing costs, net
52,227

 
51,736

 
50,191

 
49,510

 
48,183

Investing receivables
70,656

 
69,390

 
56,982

 
55,688

 
54,427

Prepaid expenses and other assets, net
76,180

 
86,798

 
91,198

 
90,224

 
70,863

Total assets
$
3,803,469

 
$
3,775,859

 
$
3,656,005

 
$
3,650,366

 
$
3,612,362

Liabilities and equity
 

 
 

 
 

 
 

 
 

Liabilities:
 

 
 

 
 

 
 

 
 

Debt
$
1,784,362

 
$
1,876,149

 
$
1,823,909

 
$
1,808,030

 
$
1,871,445

Accounts payable and accrued expenses
152,196

 
112,076

 
92,855

 
90,224

 
88,885

Rents received in advance and security deposits
27,477

 
25,635

 
30,079

 
23,159

 
24,905

Dividends and distributions payable
31,346

 
31,346

 
30,856

 
30,483

 
29,449

Deferred revenue associated with operating leases
8,161

 
8,415

 
9,125

 
10,006

 
10,783

Deferred property sale

 

 

 
43,377

 
43,377

Property - operating lease liabilities (2)
16,640

 
16,619

 

 

 

Interest rate derivatives
23,547

 
11,894

 
5,459

 

 

Other liabilities
10,826

 
10,162

 
10,414

 
9,927

 
10,489

Total liabilities
2,054,555

 
2,092,296

 
2,002,697

 
2,015,206

 
2,079,333

Redeemable noncontrolling interests
29,803

 
27,385

 
26,260

 
25,431

 
24,544

Equity:
 

 
 

 
 

 
 
 
 
COPT’s shareholders’ equity:
 

 
 

 
 

 
 
 
 
Common shares
1,119

 
1,119

 
1,102

 
1,088

 
1,033

Additional paid-in capital
2,475,293

 
2,475,497

 
2,431,355

 
2,390,484

 
2,254,430

Cumulative distributions in excess of net income
(780,667
)
 
(856,703
)
 
(846,808
)
 
(833,508
)
 
(822,270
)
Accumulated other comprehensive (loss) income
(23,465
)
 
(9,538
)
 
(238
)
 
10,108

 
9,012

Total COPT’s shareholders’ equity
1,672,280

 
1,610,375

 
1,585,411

 
1,568,172

 
1,442,205

Noncontrolling interests in subsidiaries:
 

 
 

 
 

 
 

 
 

Common units in the Operating Partnership
21,039

 
20,167

 
19,168

 
19,525

 
44,651

Preferred units in the Operating Partnership
8,800

 
8,800

 
8,800

 
8,800

 
8,800

Other consolidated entities
16,992

 
16,836

 
13,669

 
13,232

 
12,829

Total noncontrolling interests in subsidiaries
46,831

 
45,803

 
41,637

 
41,557

 
66,280

Total equity
1,719,111

 
1,656,178

 
1,627,048

 
1,609,729

 
1,508,485

Total liabilities, redeemable noncontrolling interests and equity
$
3,803,469

 
$
3,775,859

 
$
3,656,005

 
$
3,650,366

 
$
3,612,362

(1)
Refer to pages 25, 26 and 28 for detail.
(2)
Applicable to periods subsequent to 12/31/18 in connection with our adoption of lease accounting guidance effective 1/1/19 without adjustments to prior reporting periods.

5


Corporate Office Properties Trust
Consolidated Statements of Operations
(in thousands, except per share data)
 
Three Months Ended
 
Six Months Ended
 
6/30/19
 
3/31/19
 
12/31/18
 
9/30/18
 
6/30/18
 
6/30/19
 
6/30/18
Revenues
 

 
 

 
 

 
 

 
 

 
 
 
 
Lease revenue
$
131,415

 
$
130,903

 
$
129,596

 
$
127,691

 
$
127,907

 
$
262,318

 
$
255,040

Other property revenue
1,356

 
1,087

 
1,229

 
1,297

 
1,255

 
2,443

 
2,400

Construction contract and other service revenues
42,299

 
16,950

 
7,657

 
8,423

 
17,581

 
59,249

 
44,779

Total revenues
175,070

 
148,940

 
138,482

 
137,411

 
146,743

 
324,010

 
302,219

Operating expenses
 

 
 

 
 

 
 

 
 

 
 
 
 
Property operating expenses
47,886

 
49,445

 
51,298

 
49,340

 
49,446

 
97,331

 
100,397

Depreciation and amortization associated with real estate operations
34,802

 
34,796

 
36,219

 
34,195

 
33,190

 
69,598

 
66,702

Construction contract and other service expenses
41,002

 
16,326

 
7,111

 
8,058

 
16,941

 
57,328

 
43,157

Impairment losses

 

 
2,367

 

 

 

 

General and administrative expenses
7,650

 
6,719

 
5,105

 
5,796

 
6,067

 
14,369

 
11,928

Leasing expenses
1,736

 
2,032

 
1,976

 
1,103

 
1,561

 
3,768

 
2,992

Business development expenses and land carry costs
870

 
1,113

 
1,425

 
1,567

 
1,234

 
1,983

 
2,848

Total operating expenses
133,946

 
110,431

 
105,501

 
100,059

 
108,439

 
244,377

 
228,024

Interest expense
(18,475
)
 
(18,674
)
 
(18,475
)
 
(19,181
)
 
(18,945
)
 
(37,149
)
 
(37,729
)
Interest and other income
1,849

 
2,286

 
74

 
1,486

 
1,439

 
4,135

 
2,798

Gain on sales of real estate
84,469

 

 
2,367

 

 
(23
)
 
84,469

 
(27
)
Loss on early extinguishment of debt

 

 
(258
)
 

 

 

 

Income before equity in income of unconsolidated entities and income taxes
108,967

 
22,121

 
16,689

 
19,657

 
20,775

 
131,088

 
39,237

Equity in income of unconsolidated entities
420

 
391

 
1,577

 
374

 
373

 
811

 
746

Income tax benefit (expense)
176

 
(194
)
 
190

 
291

 
(63
)
 
(18
)
 
(118
)
Net income
109,563

 
22,318

 
18,456

 
20,322

 
21,085

 
131,881

 
39,865

Net income attributable to noncontrolling interests:
 

 
 

 
 

 
 

 
 

 
 
 
 
Common units in the Operating Partnership
(1,339
)
 
(257
)
 
(210
)
 
(380
)
 
(608
)
 
(1,596
)
 
(1,152
)
Preferred units in the Operating Partnership
(165
)
 
(165
)
 
(165
)
 
(165
)
 
(165
)
 
(330
)
 
(330
)
Other consolidated entities
(1,268
)
 
(1,037
)
 
(1,061
)
 
(1,080
)
 
(878
)
 
(2,305
)
 
(1,799
)
Net income attributable to COPT common shareholders
$
106,791

 
$
20,859

 
$
17,020

 
$
18,697

 
$
19,434

 
$
127,650

 
$
36,584

Distributions on dilutive convertible preferred units
165

 

 

 

 

 

 

Redeemable noncontrolling interests
902

 

 

 

 

 
66

 

Common units in the Operating Partnership

 

 

 

 

 
1,515

 

Amount allocable to share-based compensation awards
(346
)
 
(86
)
 
(114
)
 
(114
)
 
(117
)
 
(391
)
 
(234
)
Numerator for diluted EPS
$
107,512

 
$
20,773

 
$
16,906

 
$
18,583

 
$
19,317

 
$
128,840

 
$
36,350




6


Corporate Office Properties Trust
Funds from Operations
(in thousands)
 
Three Months Ended
 
Six Months Ended
 
6/30/19
 
3/31/19
 
12/31/18
 
9/30/18
 
6/30/18
 
6/30/19
 
6/30/18
Net income
$
109,563

 
$
22,318

 
$
18,456

 
$
20,322

 
$
21,085

 
$
131,881

 
$
39,865

Real estate-related depreciation and amortization
34,802

 
34,796

 
36,219

 
34,195

 
33,190

 
69,598

 
66,702

Impairment losses on real estate

 

 
2,367

 

 

 

 

Gain on sales of real estate
(84,469
)
 

 
(2,367
)
 

 
23

 
(84,469
)
 
27

Depreciation and amortization on unconsolidated real estate JVs (1)
566

 
566

 
565

 
564

 
564

 
1,132

 
1,127

FFO - per Nareit (2)(3)
60,462

 
57,680

 
55,240

 
55,081

 
54,862

 
118,142

 
107,721

Noncontrolling interests - preferred units in the Operating Partnership
(165
)
 
(165
)
 
(165
)
 
(165
)
 
(165
)
 
(330
)
 
(330
)
FFO allocable to other noncontrolling interests (4)
(1,188
)
 
(971
)
 
(1,011
)
 
(1,060
)
 
(753
)
 
(2,159
)
 
(1,697
)
Basic and diluted FFO allocable to share-based compensation awards
(229
)
 
(185
)
 
(200
)
 
(214
)
 
(224
)
 
(414
)
 
(437
)
Basic FFO available to common share and common unit holders (3)
58,880

 
56,359

 
53,864

 
53,642

 
53,720

 
115,239

 
105,257

Redeemable noncontrolling interests
33

 
381

 
331

 

 

 
942

 

Diluted FFO available to common share and common unit holders (3)
58,913

 
56,740

 
54,195

 
53,642

 
53,720

 
116,181

 
105,257

Loss on early extinguishment of debt

 

 
258

 

 

 

 

Demolition costs on redevelopment and nonrecurring improvements

 
44

 
163

 
251

 
9

 
44

 
48

Executive transition costs

 
4

 
371

 
46

 
213

 
4

 
376

Non-comparable professional and legal expenses
311

 

 

 

 

 
311

 

Diluted FFO comparability adjustments allocable to share-based compensation awards
(2
)
 

 
(13
)
 
(1
)
 
(1
)
 
(2
)
 
(2
)
Diluted FFO avail. to common share and common unit holders, as adj. for comparability (3)
$
59,222

 
$
56,788

 
$
54,974

 
$
53,938

 
$
53,941

 
$
116,538

 
$
105,679


(1)
FFO adjustment pertaining to COPT’s share of unconsolidated real estate joint ventures reported on page 34.
(2)
See reconciliation on page 35 for components of FFO per Nareit.
(3)
Refer to the section entitled “Definitions” for a definition of this measure.
(4)
Pertains to noncontrolling interests in consolidated real estate joint ventures reported on page 33.

7


Corporate Office Properties Trust
Diluted Share and Unit Computations
(in thousands)
 
Three Months Ended
 
Six Months Ended
 
6/30/19
 
3/31/19
 
12/31/18
 
9/30/18
 
6/30/18
 
6/30/19
 
6/30/18
EPS Denominator:
 

 
 

 
 

 
 

 
 

 
 
 
 
Weighted average common shares - basic
111,557

 
109,951

 
108,528

 
104,379

 
101,789

 
110,759

 
101,397

Dilutive effect of share-based compensation awards
310

 
267

 
45

 
231

 
119

 
289

 
131

Dilutive effect of forward equity sale agreements

 

 

 
178

 

 

 

Dilutive effect of redeemable noncontrolling interests
1,062

 

 

 

 

 
130

 

Dilutive convertible preferred units
176

 

 

 

 

 

 

Common units in the Operating Partnership

 

 

 

 

 
1,329

 

Weighted average common shares - diluted
113,105

 
110,218

 
108,573

 
104,788

 
101,908

 
112,507

 
101,528

Diluted EPS
$
0.95

 
$
0.19

 
$
0.16

 
$
0.18

 
$
0.19

 
$
1.15

 
$
0.36

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Weighted Average Shares for period ended:
 

 
 

 
 

 
 

 
 

 
 

 
 

Common Shares Outstanding
111,557

 
109,951

 
108,528

 
104,379

 
101,789

 
110,759

 
101,397

Dilutive effect of share-based compensation awards
310

 
302

 
45

 
231

 
119

 
289

 
131

Dilutive effect of forward equity sale agreements

 

 

 
178

 

 

 

Common units
1,327

 
1,331

 
1,345

 
2,135

 
3,197

 
1,329

 
3,208

Redeemable noncontrolling interests
136

 
1,013

 
1,126

 

 

 
1,037

 

Denominator for diluted FFO per share and as adjusted for comparability
113,330

 
112,597

 
111,044

 
106,923

 
105,105

 
113,414

 
104,736

Weighted average common units
(1,327
)
 
(1,331
)
 
(1,345
)
 
(2,135
)
 
(3,197
)
 

 
(3,208
)
Redeemable noncontrolling interests
926

 
(1,013
)
 
(1,126
)
 

 

 
(907
)
 

Anti-dilutive EPS effect of share-based compensation awards

 
(35
)
 

 

 

 

 

Dilutive convertible preferred units
176

 

 

 

 

 

 

Denominator for diluted EPS
113,105

 
110,218

 
108,573

 
104,788

 
101,908

 
112,507

 
101,528

Diluted FFO per share - Nareit
$
0.52

 
$
0.50

 
$
0.49

 
$
0.50

 
$
0.51

 
$
1.02

 
$
1.00

Diluted FFO per share - as adjusted for comparability
$
0.52

 
$
0.50

 
$
0.50

 
$
0.50

 
$
0.51

 
$
1.03

 
$
1.01






8


Corporate Office Properties Trust
Adjusted Funds from Operations
(in thousands)
 
Three Months Ended
 
Six Months Ended
 
6/30/19
 
3/31/19
 
12/31/18
 
9/30/18
 
6/30/18
 
6/30/19
 
6/30/18
Diluted FFO available to common share and common unit holders, as adjusted for comparability
$
59,222

 
$
56,788

 
$
54,974

 
$
53,938

 
$
53,941

 
$
116,538

 
$
105,679

Straight line rent adjustments and lease incentive amortization
1,051

 
(1,667
)
 
(46
)
 
582

 
(1,195
)
 
(616
)
 
(2,023
)
Amortization of intangibles included in NOI
(50
)
 
62

 
153

 
153

 
231

 
12

 
587

Share-based compensation, net of amounts capitalized
1,623

 
1,673

 
1,601

 
1,557

 
1,550

 
3,296

 
3,035

Amortization of deferred financing costs
529

 
528

 
550

 
468

 
468

 
1,057

 
936

Amortization of net debt discounts, net of amounts capitalized
374

 
370

 
365

 
362

 
358

 
744

 
712

Accum. other comprehensive loss on derivatives amortized to expense
33

 
34

 
34

 
33

 
34

 
67

 
68

Replacement capital expenditures (1)
(16,002
)
 
(11,173
)
 
(14,848
)
 
(18,803
)
 
(15,613
)
 
(27,175
)
 
(31,133
)
Other diluted AFFO adjustments associated with real estate JVs (2)
181

 
33

 
(28
)
 
50

 
(32
)
 
214

 
99

Diluted AFFO available to common share and common unit holders (“diluted AFFO”)
$
46,961

 
$
46,648

 
$
42,755

 
$
38,340

 
$
39,742

 
$
94,137

 
$
77,960

Replacement capital expenditures (1)
 

 
 

 
 

 
 

 
 

 
 
 
 
Tenant improvements and incentives
$
8,568

 
$
7,152

 
$
7,876

 
$
12,894

 
$
8,117

 
$
15,720

 
$
16,732

Building improvements
4,333

 
4,531

 
9,306

 
5,975

 
5,775

 
8,864

 
7,696

Leasing costs
2,761

 
3,182

 
3,800

 
2,945

 
1,822

 
5,943

 
3,102

Net (exclusions from) additions to tenant improvements and incentives
1,759

 
(1,469
)
 
(2,131
)
 
(896
)
 
1,315

 
290

 
4,604

Excluded building improvements
(1,419
)
 
(2,223
)
 
(3,984
)
 
(2,134
)
 
(1,370
)
 
(3,642
)
 
(955
)
Excluded leasing costs

 

 
(19
)
 
19

 
(46
)
 

 
(46
)
Replacement capital expenditures
$
16,002

 
$
11,173

 
$
14,848

 
$
18,803

 
$
15,613

 
$
27,175

 
$
31,133

 
 
 
 
 
 
 
 
 
 
 
 
 
 
(1) 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 33 and COPTs share of unconsolidated real estate joint ventures reported on page 34.
 
 
 
 

9


Corporate Office Properties Trust
EBITDAre and Adjusted EBITDA
(in thousands)
 
Three Months Ended
 
Six Months Ended
 
6/30/19
 
3/31/19
 
12/31/18
 
9/30/18
 
6/30/18
 
6/30/19
 
6/30/18
Net income
$
109,563

 
$
22,318

 
$
18,456

 
$
20,322

 
$
21,085

 
$
131,881

 
$
39,865

Interest expense
18,475

 
18,674

 
18,475

 
19,181

 
18,945

 
37,149

 
37,729

Income tax (benefit) expense
(176
)
 
194