EXHIBIT 99.1
 
 
Earnings Release & Supplemental Information — Unaudited
 
September 30, 2012
 
 
OVERVIEW:
Section I

 
INVESTING ACTIVITY:
Section IV

Earnings Release
i-viii

 
Dispositions
21

Summary Description
1

 
Acquisition
22

Equity Research Coverage
2

 
Construction, Redevelopment, Wholesale Data Center and Land
 
Selected Financial Summary Data
3

 
& Pre-Construction Summary
23

Selected Portfolio Data
4

 
Summary of Construction Projects
24

 
 

 
Summary of Redevelopment Projects
25

FINANCIAL STATEMENTS:
Section II

 
Wholesale Data Center
26

Quarterly Consolidated Balance Sheets
5

 
Summary of Land Held and Pre-Construction
27

Consolidated Statements of FFO
6-7

 
 
 

Consolidated Statements of Operations
8-9

 
CAPITALIZATION:
Section V

Consolidated Reconciliations of AFFO
10

 
Quarterly Common Equity Analysis
28

 
 

 
Quarterly Preferred Equity and Total Market Capitalization Analysis
29

PORTFOLIO INFORMATION:
Section III

 
Dividend Analysis
30

Consolidated Office Properties by Region
11

 
Debt Analysis
31-32

NOI from Real Estate Operations and Occupancy by Property Grouping
12

 
Debt Maturity Schedule
33

Unstabilized Office Properties
13

 
Consolidated Joint Ventures
34

Real Estate Revenues & NOI from Real Estate Operations by Segment
14

 
Unconsolidated Joint Venture
35

Same Office Properties Average Occupancy Rates by Region
15

 
 
 

Same Office Property Real Estate Revenues & NOI by Region
16

 
RECONCILIATIONS & DEFINITIONS:
Section VI

Office Leasing
17-18

 
Supplementary Reconciliations of Non-GAAP Measures
36-37

Office Lease Expiration Analysis
19

 
Definitions
38-42

Top 20 Office Tenants
20

 
 
 
 
 
 
 
 
 
Please refer to the section entitled “Definitions” for definitions of non-GAAP measures and other terms we use herein that may not be customary or commonly known.


6711 Columbia Gateway Drive, Suite 300
Columbia, Maryland 21046
Telephone 443-285-5400
Facsimile 443-285-7650
www.copt.com
NYSE: OFC
 
 
 
NEWS RELEASE
 
 
 
FOR IMMEDIATE RELEASE
IR Contacts:
 
 
Stephanie Krewson
Michelle Layne
 
VP, Investor Relations
Investor Relations Specialist
 
443-285-5453
443-285-5452
 
stephanie.krewson@copt.com
michelle.layne@copt.com
 
COPT REPORTS THIRD QUARTER 2012 RESULTS

COLUMBIA, MD October 25, 2012 - Corporate Office Properties Trust (COPT or the Company) (NYSE: OFC), announced financial and operating results for the third quarter ended September 30, 2012.

“Year to date, we are ahead of plan on leasing, on selling non-strategic properties, and in de-leveraging our balance sheet," stated Roger A. Waesche, Jr., President and Chief Executive Officer. "We remain focused on completing the strategic initiatives currently in progress to position the Company for future growth," he added.

Results:
Diluted loss per share was ($0.39) for the quarter ended September 30, 2012 as compared to earnings per share (EPS) of $0.03 in the third quarter of 2011. The third quarter 2012 loss per diluted share includes impairment losses of $55.8 million associated with non-strategic operating properties. Diluted funds from operations per share (FFOPS), as adjusted for comparability, was $0.53 for the third quarter ended September 30, 2012, which represented a 2% increase from the $0.52 reported for the third quarter of 2011. Adjustments for comparability encompass items such as acquisition costs, impairments and gains on non-operating properties, gains (losses) on early extinguishment of debt, derivative losses and issuance costs on redeemed preferred shares. Please refer to the reconciliation tables that appear later in this press release. Per NAREIT's definition, FFOPS for the third quarter of 2012 was $0.52 versus $0.49 reported in the third quarter of 2011.

Operating Performance:
Portfolio Summary - At September 30, 2012, the Company's consolidated portfolio of 206 operating office properties totaled 18.6 million square feet. The weighted average remaining lease term for the portfolio was 4.6 years and the average rental rate (including tenant reimbursements) was $27.73 per square foot. The Company's consolidated portfolio was 88.1% occupied and 89.9% leased as of September 30, 2012, up 70 and 60 basis points, respectively, from June 30, 2012 levels.

Same Office Performance - The Company's same office portfolio excludes properties identified for eventual disposal. For the quarter ended September 30, 2012, COPT's same office portfolio represents 81.6% of the rentable square feet of the portfolio and consists of 163 properties. The Company's same office portfolio occupancy was 89.3% at the end of the third quarter of 2012, down 160 basis points from the end of the third quarter 2011. Sequentially, same office occupancy declined 30 basis points from June 30, 2012 to September 30, 2012.

On a GAAP basis, same office NOI grew 2.5% year-over-year for the quarter ended September 30, 2012, and increased 3.5% for the nine months ended September 30, 2012 versus the prior year period. On a cash basis and excluding lease termination fees, same office NOI declined 2.1% in the third quarter of 2012 versus

i

2011, owing to the receipt of a prepayment of rent in 2011. Excluding this prepayment and lease termination fees, same office cash NOI in the third quarter would have increased 3.9% year-over-year.

Leasing - COPT leased a total of 608,000 square feet during the quarter ended September 30, 2012, which included 259,000 square feet of development and first generation leasing. During this same period, the Company's renewal rate was 48.3%. For the quarter ended September 30, 2012, total rent on renewed space increased 9.4% as measured from the straight-line rent in effect preceding the renewal date; on a cash basis, renewal rents decreased 1.9%.

Investment Activity:
Construction - The Company had eight office properties under construction at September 30, 2012, and three additional properties placed under construction in early October 2012. These 11 construction properties total 1.3 million square feet and have a total projected cost of $307.9 million, of which $162.4 million had been incurred by September 30, 2012. As of the same date, COPT had two properties under redevelopment for an anticipated total cost of $56.3 million, of which $31.1 million had been spent.

Acquisitions - In the third quarter of 2012, COPT acquired one five-story, Class-A building with 202,000 square feet for $48.3 million. The building is located at 13857 McLearen Road, known as the McLearen Center in Herndon, Virginia. McLearen Center is in close proximity to several large US Government controlled campuses. The building is 100% leased to a strategic tenant in the Defense Information Technology industry.

Dispositions - In the third quarter of 2012, COPT disposed of 24 operating properties for $178.1 million. The operating buildings contained a total of 1.5 million square feet and were 83.8% occupied (90 leases) at the time of disposition. During the nine months ended September 30, 2012, COPT disposed of a total of $318 million of properties and adjacent land that aggregated 2.3 million operational square feet that were 80.4% occupied at the time of sale.

Capital Transactions:
In August, the Company entered into a $120 million term loan agreement, with the ability to expand the amount drawn during the term, subject to certain conditions, by an additional $80 million. The Term Loan has a seven-year term and a variable interest rate of LIBOR plus 2.10% to 2.60%, depending on the Company's leverage levels.

Balance Sheet and Financial Flexibility:
As of September 30, 2012, the Company had a total market capitalization of $4.3 billion, with $2.2 billion in debt outstanding, equating to a 50% debt-to-total market capitalization ratio. Also, the Company's weighted average interest rate was 4.4% for the quarter ended September 30, 2012 and 76% of the Company's debt was subject to fixed interest rates, including the effect of interest rate swaps.

For the third quarter 2012, the Company's adjusted EBITDA to interest expense coverage ratio was 3.4x, and the adjusted EBITDA fixed charge coverage ratio was 2.6x. Adjusting for construction in progress, the Company's debt-to-adjusted EBITDA ratio was 6.2x for the three months ended September 30, 2012.

Subsequent Events:
Leasing - Between October 1 and October 17, 2012, COPT completed 437,000 square feet of leases at development projects. Specifically, the Company executed leases for 363,000 square feet of Class-A office space at Redstone Gateway in Huntsville, AL, 55,000 square feet at its redevelopment project in Blue Bell, PA, and 19,000 square feet in Colorado Springs, CO.

Capital Raises - On October 16, 2012, the Company completed a public offering of 8,625,000 common shares at a price of $24.75 per share for net proceeds of $204.9 million after underwriter discounts but before offering expenses.

ii


2012 FFO Guidance:
Management is narrowing its previously issued guidance for 2012 FFOPS of $2.02 to $2.08 to a new range of $2.05 to $2.08. Management also is issuing fourth quarter 2012 FFOPS guidance of $0.45 to $0.48. A reconciliation of projected EPS to projected FFOPS for the quarter and year ending December 31, 2012 is provided as follows:
 
Quarter Ending
 
Year Ending
 
December 31, 2012
 
December 31, 2012
 
Low
 
High
 
Low
 
High
FFOPS, as adjusted for comparability
$
0.45

 
$
0.48

 
$
2.05

 
$
2.08

Gains on non-operating properties, net of income taxes
—

 
—

 
0.01

 
0.01

Net gains on early extinguishment of debt
—

 
—

 
0.01

 
0.01

Issuance costs on redeemed preferred shares
—

 
—

 
(0.02
)
 
(0.02
)
FFOPS, NAREIT definition
0.45

 
0.48

 
2.05

 
2.08

Real estate depreciation and amortization
(0.40
)
 
(0.40
)
 
(1.62
)
 
(1.62
)
Impairments and exit costs on previously depreciated properties
—

 
—

 
(0.90
)
 
(0.90
)
Gains on sales of previously depreciated properties
—

 
—

 
0.27

 
0.27

EPS
$
0.05

 
$
0.08

 
$
(0.20
)
 
$
(0.17
)
 

Conference Call Information:
Management will discuss third quarter 2012 earnings results, as well as its 2012 guidance, on its conference call today at 11:00 a.m. Eastern Time, details of which are listed below:

Time:                  11:00 a.m. Eastern Time

Telephone Number: (within the U.S.)     888-679-8018

Telephone Number:    (outside the U.S.)    617-213-4845

Passcode:                  49667248

Please use the following link to pre-register and view important information about this conference call. Pre-registering is not mandatory but is recommended as it will provide you immediate entry into the call and will facilitate the timely start of the conference. Pre-registration only takes a few moments and you may pre-register at anytime, including up to and after the call start time. To pre-register, please click on the below link:
https://www.theconferencingservice.com/prereg/key.process?key=PQFR39JDX

You may also pre-register in the Investor Relations section of the Company's website at www.copt.com. Alternatively, you may be placed into the call by an operator by calling the number provided above at least 5 to 10 minutes before the start of the call. A replay of this call will be available beginning Thursday, October 25 at 3:00 p.m. Eastern Time through Thursday, November 8 at midnight Eastern Time. To access the replay within the United States, please call 888-286-8010 and use passcode 51365923. To access the replay outside the United States, please call 617-801-6888 and use passcode 51365923.

The conference calls will also be available via live webcast in the Investor Relations section of the Company's website at www.copt.com. A replay of the conference calls will be immediately available via webcast in the Investor Relations section of the Company's website.


iii

Company Information:
COPT is an office REIT that focuses primarily on strategic customer relationships and specialized tenant requirements in the U.S. Government and Defense Information Technology sectors and Data Centers serving such sectors. The Company acquires, develops, manages and leases office and data center properties that are typically concentrated in large office parks primarily located adjacent to government demand drivers and/or in strong markets that we believe possess growth opportunities. As of September 30, 2012, the Company's consolidated portfolio consisted of 206 office properties totaling 18.6 million rentable square feet. The Company's portfolio primarily consists of technically sophisticated buildings in visually appealing settings that are environmentally sensitive, sustainable and meet unique customer requirements. COPT is an S&P MidCap 400 company and more information can be found at www.copt.com.

Forward-Looking Information:
This press release may contain “forward-looking” statements, as defined in Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, that are based on the Company's current expectations, estimates and projections about future events and financial trends affecting the Company. 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 the Company cannot predict with accuracy and some of which the Company might not even anticipate. Accordingly, the Company 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 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 strategic tenants;
•
the Company's 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;
•
the Company's ability to sell properties included in its Strategic Reallocation Plan;
•
risks of investing through joint venture structures, including risks that the Company's joint venture partners may not fulfill their financial obligations as investors or may take actions that are inconsistent with the Company's objectives;
•
changes in the Company's plans or views of market economic conditions or failure to obtain development rights, any of which could result in recognition of impairment losses;
•
the Company's ability to satisfy and operate effectively under Federal income tax rules relating to real estate investment trusts and partnerships;
•
the dilutive effect of issuing additional common shares; and
•
environmental requirements.

The Company undertakes no obligation to update or supplement any forward-looking statements. For further information, please refer to the Company's filings with the Securities and Exchange Commission, particularly the section entitled “Risk Factors” in Item 1A of the Company's Annual Report on Form 10-K for the year ended December 31, 2011.

Reconciliations:
Reconciliations of non-GAAP measures to the most directly comparable GAAP measures are included in the tables, below. Please refer to the information furnished with our Form 8-K on our website (www.copt.com) for definitions of these non-GAAP measures and other terms used in this press release.

iv
Corporate Office Properties Trust
Summary Financial Data
(unaudited)
(in thousands, except per share data)


 
For the Three Months Ended September 30,
 
For the Nine Months Ended September 30,
 
2012
 
2011
 
2012
 
2011
Revenues
 

 
 

 
 
 
 
Real estate revenues
$
114,861

 
$
107,978

 
$
336,687

 
$
317,013

Construction contract and other service revenues
15,283

 
18,729

 
53,812

 
67,854

Total revenues
130,144

 
126,707

 
390,499

 
384,867

Expenses
 

 
 

 
 
 
 
Property operating expenses
42,799

 
41,669

 
126,339

 
123,135

Depreciation and amortization associated with real estate operations
28,698

 
31,269

 
84,920

 
84,205

Construction contract and other service expenses
14,410

 
18,171

 
51,302

 
65,698

Impairment losses
46,096

 
—

 
41,260

 
42,983

General and administrative expenses
5,061

 
6,154

 
19,820

 
19,251

Business development expenses and land carry costs
1,632

 
1,751

 
4,506

 
4,322

Total operating expenses
138,696

 
99,014

 
328,147

 
339,594

Operating (loss) income
(8,552
)
 
27,693


62,352


45,273

Interest expense
(23,239
)
 
(24,176
)
 
(71,909
)
 
(74,861
)
Interest and other income
1,095

 
(242
)
 
3,152

 
3,682

Loss on early extinguishment of debt
(768
)
 
(1,611
)
 
(937
)
 
(1,636
)
(Loss) income from continuing operations before equity in loss of unconsolidated entities and income taxes
(31,464
)
 
1,664

 
(7,342
)
 
(27,542
)
Equity in loss of unconsolidated entities
(246
)
 
(159
)
 
(522
)
 
(223
)
Income tax (expense) benefit
(106
)
 
457

 
(4,296
)
 
6,043

(Loss) income from continuing operations
(31,816
)
 
1,962

 
(12,160
)
 
(21,722
)
Discontinued operations
11,051

 
5,508

 
10,212

 
(18,109
)
(Loss) income before gain on sales of real estate
(20,765
)
 
7,470

 
(1,948
)
 
(39,831
)
Gain on sales of real estate, net of income taxes
—

 
—

 
21

 
2,728

Net (loss) income
(20,765
)
 
7,470

 
(1,927
)
 
(37,103
)
Net loss (income) attributable to noncontrolling interests
 

 
 

 
 
 
 
Common units in the Operating Partnership
1,569

 
(178
)
 
1,020

 
3,188

Preferred units in the Operating Partnership
(165
)
 
(165
)
 
(495
)
 
(495
)
Other consolidated entities
(411
)
 
(561
)
 
(939
)
 
(1,038
)
Net (loss) income attributable to COPT
(19,772
)
 
6,566

 
(2,341
)
 
(35,448
)
Preferred share dividends
(6,546
)
 
(4,025
)
 
(14,738
)
 
(12,076
)
Issuance costs associated with redeemed preferred shares
(1,827
)
 
—

 
(1,827
)
 
—

Net (loss) income attributable to COPT common shareholders
$
(28,145
)
 
$
2,541

 
$
(18,906
)
 
$
(47,524
)
 
 
 
 
 
 
 
 
Earnings per share (“EPS”) computation:
 

 
 

 
 
 
 
Numerator for diluted EPS:
 

 
 

 
 
 
 
Net (loss) income attributable to common shareholders
$
(28,145
)
 
$
2,541

 
$
(18,906
)
 
$
(47,524
)
Dilutive effect of common units in the Operating Partnership
—

 
—

 
—

 
(3,188
)
Amount allocable to restricted shares
(111
)
 
(262
)
 
(357
)
 
(781
)
Numerator for diluted EPS
$
(28,256
)
 
$
2,279

 
$
(19,263
)
 
$
(51,493
)
 
 
 
 
 
 
 
 
Denominator:
 

 
 

 
 
 
 
Weighted average common shares - basic
71,688

 
71,312

 
71,590

 
68,718

Dilutive effect of common units in the Operating Partnership
—

 
—

 
—

 
4,371

Weighted average common shares - diluted
71,688

 
71,312

 
71,590

 
73,089

Diluted EPS
$
(0.39
)
 
$
0.03

 
$
(0.27
)
 
$
(0.70
)

v
Corporate Office Properties Trust
Summary Financial Data
(unaudited)
(in thousands, except per share data)

 
For the Three Months Ended September 30,
 
For the Nine Months Ended September 30,
 
2012
 
2011
 
2012
 
2011
Net (loss) income
$
(20,765
)
 
$
7,470

 
$
(1,927
)
 
$
(37,103
)
Real estate-related depreciation and amortization
30,624

 
36,032

 
93,377

 
101,101

Impairment losses on previously depreciated operating properties
55,829

 
—

 
70,016

 
31,031

Depreciation and amortization on unconsolidated real estate entities
113

 
116

 
346

 
350

Gain on sales of previously depreciated operating properties, net of income taxes
(16,913
)
 
(1,299
)
 
(20,936
)
 
(1,449
)
Funds from operations (“FFO”)
48,888

 
42,319

 
140,876

 
93,930

Noncontrolling interests - preferred units in the Operating Partnership
(165
)
 
(165
)
 
(495
)
 
(495
)
Noncontrolling interests - other consolidated entities
(411
)
 
(561
)
 
(939
)
 
(1,038
)
Preferred share dividends
(6,546
)
 
(4,025
)
 
(14,738
)
 
(12,076
)
Issuance costs associated with redeemed preferred shares
(1,827
)
 
—

 
(1,827
)
 
—

Depreciation and amortization allocable to noncontrolling interests in other consolidated entities
(160
)
 
(276
)
 
(312
)
 
(566
)
Basic and diluted FFO allocable to restricted shares
(214
)
 
(263
)
 
(728
)
 
(782
)
Basic and diluted FFO available to common share and common unit holders (“Basic and diluted FFO”)
39,565

 
37,029

 
121,837

 
78,973

Operating property acquisition costs
222

 
77

 
229

 
152

Gain on sales of non-operating properties, net of income taxes
—

 
—

 
(33
)
 
(2,717
)
Impairment (recoveries) losses on other properties
—

 
—

 
(5,246
)
 
41,316

Income tax expense on impairment recoveries on other properties
—

 
—

 
4,642

 
(4,598
)
(Gain) loss on early extinguishment of debt
(970
)
 
1,995

 
(799
)
 
2,020

Issuance costs associated with redeemed preferred shares
1,827

 
—

 
1,827

 
—

Diluted FFO available to common share and common unit holders, as adjusted for comparability
40,644

 
39,101

 
122,457

 
115,146

Straight line rent adjustments
(2,595
)
 
(2
)
 
(6,631
)
 
(6,525
)
Amortization of acquisition intangibles included in net operating income
251

 
212

 
659

 
600

Share-based compensation, net of amounts capitalized
1,703

 
2,759

 
8,262

 
8,156

Amortization of deferred financing costs
1,527

 
1,629

 
4,696

 
5,090

Amortization of net debt discounts, net of amounts capitalized
683

 
1,184

 
2,028

 
4,046

Amortization of settled debt hedges
15

 
16

 
46

 
47

Recurring capital expenditures on properties not in disposition plans
(8,518
)
 
(8,710
)
 
(16,467
)
 
(26,960
)
Diluted adjusted funds from operations available to common share and common unit holders, excluding recurring capital expenditures on properties sold or in disposition plans
33,710

 
36,189

 
115,050

 
99,600

Recurring capital expenditures on properties sold or in disposition plans
651

 
(2,889
)
 
(3,330
)
 
(13,896
)
Diluted adjusted funds from operations available to common share and common unit holders (“Diluted AFFO”)
$
34,361

 
$
33,300

 
$
111,720

 
$
85,704

Diluted FFO per share
$
0.52

 
$
0.49

 
$
1.61

 
$
1.08

Diluted FFO per share, as adjusted for comparability
$
0.53

 
$
0.52

 
$
1.61

 
$
1.57

Dividends/distributions per common share/unit
$
0.2750

 
$
0.4125

 
$
0.8250

 
$
1.2375

Payout ratios
 

 
 

 
 

 
 

Diluted FFO
53.1
%
 
85.0
%
 
51.7
%
 
117.0
%
Diluted FFO, as adjusted for comparability
51.7
%
 
80.5
%
 
51.4
%
 
80.3
%
Diluted AFFO, excluding recurring capital expenditures on properties sold or in disposition plans
62.3
%
 
87.0
%
 
54.7
%
 
92.8
%
Adjusted EBITDA interest coverage ratio
3.40
x
 
3.07x

 
3.19x

 
2.98x

Adjusted EBITDA fixed charge coverage ratio
2.58x

 
2.59x

 
2.60x

 
2.53x

Debt to Adjusted EBITDA ratio (1)
7.54x

 
8.65x

 
7.58x

 
8.67x

Adjusted debt to Adjusted EBITDA ratio (2)
6.17x

 
6.96x

 
6.20x

 
6.98x

Reconciliation of denominators for diluted EPS and diluted FFO per share
 
 

 
 
 
 
Denominator for diluted EPS
71,688

 
71,312

 
71,590

 
73,089

Weighted average common units
4,233

 
4,336

 
4,256

 
—

Anti-dilutive EPS effect of share-based compensation awards
73

 
52

 
48

 
147

Denominator for diluted FFO per share
75,994

 
75,700

 
75,894

 
73,236

(1) Represents debt as of period end divided by Adjusted EBITDA for the period, as annualized (i.e. three month periods are multiplied by four).
(2) Represents debt adjusted to subtract construction in progress as of period end divided by Adjusted EBITDA for the period, as annualized (i.e. three month periods are multiplied by four).

vi
Corporate Office Properties Trust
Summary Financial Data
(unaudited)
(Dollars and shares in thousands, except per share data)

 
 
September 30,
2012
 
December 31,
2011
Balance Sheet Data
 
 

 
 

Properties, net of accumulated depreciation
 
$
3,102,514

 
$
3,352,975

Total assets
 
3,597,656

 
3,867,524

Debt, net
 
2,169,315

 
2,426,303

Total liabilities
 
2,347,435

 
2,649,459

Equity
 
1,250,221

 
1,218,065

Debt to adjusted book
 
51.9
%
 
54.6
%
Debt to total market capitalization
 
50.0
%
 
56.8
%
 
 
 
 
 
Consolidated Property Data (as of period end)
 
 

 
 

Number of operating properties
 
206

 
238

Total net rentable square feet owned (in thousands)
 
18,591

 
20,514

Occupancy
 
88.1
%
 
86.2
%
 
 
 
 
 
Reconciliation of total assets to denominator for debt to adjusted book
 
 

 
 

Denominator for debt to total assets
 
$
3,597,656

 
$
3,867,524

Accumulated depreciation
 
565,724

 
559,679

Accumulated depreciation included in assets held for sale
 
12,669

 
17,922

Denominator for debt to adjusted book
 
$
4,176,049

 
$
4,445,125

 
Reconciliations of tenant improvements and incentives, capital improvements and leasing costs for operating properties to recurring capital expenditures
For the Three Months Ended September 30,
 
For the Nine Months Ended September 30,
2012
 
2011
 
2012
 
2011
Properties to be held
 

 
 

 
 
 
 
Tenant improvements and incentives on operating properties
$
7,774

 
$
5,533

 
$
11,103

 
$
20,720

Building improvements on operating properties
4,646

 
2,239

 
6,813

 
5,321

Leasing costs for operating properties
947

 
3,933

 
5,109

 
9,026

Less: Nonrecurring tenant improvements and incentives on operating properties
(3,852
)
 
(1,816
)
 
(4,510
)
 
(4,893
)
Less: Nonrecurring building improvements on operating properties
(940
)
 
(1,069
)
 
(1,919
)
 
(2,188
)
Less: Nonrecurring leasing costs for operating properties
(130
)
 
(130
)
 
(209
)
 
(1,093
)
Add: Recurring capital expenditures on operating properties held through joint ventures
73

 
20

 
80

 
67

Recurring capital expenditures on properties not sold or in disposition plans
$
8,518

 
$
8,710

 
$
16,467

 
$
26,960

 
 
 
 
 
 
 
 
Properties sold or in disposition plans
 

 
 

 
 
 
 
Tenant improvements and incentives on operating properties
$
(737
)
 
$
1,549

 
$
2,020

 
$
10,748

Building improvements on operating properties
191

 
3,141

 
1,473

 
4,475

Leasing costs for operating properties
7

 
290

 
541

 
1,321

Less: Nonrecurring tenant improvements and incentives on operating properties
—

 
(10
)
 
(165
)
 
(256
)
Less: Nonrecurring building improvements on operating properties
(112
)
 
(1,977
)
 
(530
)
 
(2,288
)
Less: Nonrecurring leasing costs for operating properties
—

 
(104
)
 
(9
)
 
(104
)
Recurring capital expenditures on properties sold or in disposition plans
$
(651
)
 
$
2,889

 
$
3,330

 
$
13,896


vii
Corporate Office Properties Trust
Summary Financial Data
(unaudited)
(Dollars in thousands)

 
For the Three Months Ended September 30,
 
For the Nine Months Ended September 30,
 
2012
 
2011
 
2012
 
2011
Reconciliation of common share dividends to dividends and distributions for payout ratios
 

 
 

 
 
 
 
Common share dividends
$
19,837

 
$
29,688

 
$
59,465

 
$
87,024

Common unit distributions
1,157

 
1,781

 
3,498

 
5,398

Dividends and distributions for payout ratios
$
20,994

 
$
31,469

 
$
62,963

 
$
92,422

Reconciliation of FFO to FFO, as adjusted for comparability
 

 
 

 
 

 
 

FFO
$
48,888

 
$
42,319

 
$
140,876

 
$
93,930

Gain on sales of non-operating properties, net of income taxes
—

 
—

 
(33
)
 
(2,717
)
Impairment (recoveries) losses on non-operating properties, net of associated tax
—

 
—

 
(604
)
 
36,718

Operating property acquisition costs
222

 
77

 
229

 
152

(Gain) loss on early extinguishment of debt, continuing and discontinued operations
(970
)
 
1,995

 
(799
)
 
2,020

Issuance costs associated with redemption of preferred shares
1,827

 
—

 
1,827

 
—

FFO, as adjusted for comparability
$
49,967

 
$
44,391

 
$
141,496

 
$
130,103

Reconciliation of GAAP net (loss) income to adjusted earnings before interest, income taxes, depreciation and amortization (“Adjusted EBITDA”)
 

 
 

 
 

 
 

Net (loss) income
$
(20,765
)
 
$
7,470

 
$
(1,927
)
 
$
(37,103
)
Interest expense on continuing operations
23,239

 
24,176

 
71,909

 
74,861

Interest expense on discontinued operations
127

 
1,453

 
2,107

 
4,526

Income tax expense (benefit)
106

 
(457
)
 
4,296

 
(6,043
)
Real estate-related depreciation and amortization
30,624

 
36,032

 
93,377

 
101,101

Depreciation of furniture, fixtures and equipment
624

 
614

 
1,871

 
1,862

Impairment losses
55,829

 
—

 
64,770

 
72,347

(Gain) loss on early extinguishment of debt on continuing and discont. operations
(970
)
 
1,995

 
(799
)
 
2,020

Gain on sales of operating properties
(16,913
)
 
(1,299
)
 
(20,936
)
 
(1,449
)
Gain on sales of non-operational properties
—

 
—

 
(33
)
 
(2,717
)
Adjusted EBITDA
$
71,901

 
$
69,984

 
$
214,635

 
$
209,405

Reconciliation of interest expense from continuing operations to the denominators for interest coverage-Adjusted EBITDA and fixed charge coverage-Adjusted EBITDA
 

 
 

 
 

 
 

Interest expense from continuing operations
$
23,239

 
$
24,176

 
$
71,909

 
$
74,861

Interest expense from discontinued operations
127

 
1,453

 
2,107

 
4,526

Less: Amortization of deferred financing costs
(1,527
)
 
(1,629
)
 
(4,696
)
 
(5,090
)
Less: Amortization of net debt discount, net of amounts capitalized
(683
)
 
(1,184
)
 
(2,028
)
 
(4,046
)
Denominator for interest coverage-Adjusted EBITDA
21,156

 
22,816

 
67,292

 
70,251

Preferred share dividends
6,546

 
4,025

 
14,738

 
12,076

Preferred unit distributions
165

 
165

 
495

 
495

Denominator for fixed charge coverage-Adjusted EBITDA
$
27,867

 
$
27,006

 
$
82,525

 
$
82,822

Reconciliation of same office property net operating income to same office property cash net operating income and same office property cash net operating income, excluding gross lease termination fees
 

 
 

 
 

 
 

Same office property net operating income
$
64,159

 
$
62,603

 
$
190,173

 
$
183,776

Less: Straight-line rent adjustments
(1,407
)
 
1,135

 
(4,222
)
 
(4,474
)
Less: Amortization of deferred market rental revenue
(80
)
 
(73
)
 
(276
)
 
(205
)
Add: Amortization of above-market cost arrangements
371

 
434

 
1,095

 
1,302

Same office property cash net operating income
63,043

 
64,099

 
186,770

 
180,399

Less: Lease termination fees, gross
(413
)
 
(130
)
 
(1,111
)
 
(443
)
Same office property cash net operating income, excluding gross lease termination fees
$
62,630

 
$
63,969

 
$
185,659

 
$
179,956

Reconciliation of debt, net to denominator for adjusted debt to Adjusted EBITDA ratio
 

 
 

 
 

 
 

Debt, net
$
2,169,315


$
2,420,073

 
$
2,169,315

 
$
2,420,073

Less: Construction in progress
(394,361
)

(447,969
)
 
(394,361
)
 
(447,969
)
Less: Construction in progress on assets held for sale
—


(22,936
)
 
—

 
(22,936
)
Denominator for adjusted debt to adjusted EBITDA ratio
$
1,774,954


$
1,949,168

 
$
1,774,954

 
$
1,949,168


viii


Corporate Office Properties Trust
Summary Description
 
The Company — Corporate Office Properties Trust (the “Company” or “COPT”) is a self-managed office real estate investment trust (“REIT”). As of September 30, 2012, COPT derived 62% of its annualized rental revenue from properties occupied primarily by tenants in the U.S. Government and/or defense information technology (“Defense IT”) sectors and 82% of the Company’s square footage was located in the Greater Washington/Baltimore region. At September 30, 2012, COPT’s operating portfolio of 206 office properties encompassed 18.6 million square feet and was 89.9% leased. As of the same date, COPT also owned one wholesale data center that was 22% leased.
 
Corporate Strategy — Through acquisitions and development activities, COPT has assembled a portfolio of Class A office parks located adjacent to knowledge-based defense installations (rather than weapons production-oriented bases) that are executing programs deemed critical to current and future national security efforts. COPT also owns dedicated data centers that serve the specialized requirements of our government and Defense IT tenants and a wholesale data center.
 
Management:
Investor Relations:
Roger A. Waesche, Jr., President & CEO
Stephanie M. Krewson, VP of IR
Stephen E. Budorick, EVP & COO
443-285-5453, stephanie.krewson@copt.com
Wayne H. Lingafelter, EVP, Development & Construction
Michelle Layne, IR Specialist
Stephen E. Riffee, EVP & CFO
443-285-5452, michelle.layne@copt.com
 
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 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 sell properties included in our Strategic Reallocation Plan; our ability to borrow on favorable terms; risks of real estate acquisition or 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 and 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; 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, 2011.

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
BMO Capital Markets
 
Richard Anderson
 
212-885-4180
 
richard.anderson@bmo.com
Citigroup Global Markets
 
Josh Attie
 
212-816-7685
 
joshua.attie@citi.com
Cowen and Company
 
Mike Gorman
 
646-562-1381
 
michael.gorman@cowen.com
Evercore Partners
 
Sheila McGrath
 
212-497-0882
 
sheila.mcgrath@evercore.com
Green Street Advisors
 
Michael Knott
 
949-640-8780
 
mknott@greenstreetadvisors.com
ISI Group
 
Steve Sakwa
 
212-446-9462
 
ssakwa@isigrp.com
Jefferies & Co.
 
Omotayo Okusanya
 
212-336-7076
 
tokusanya@jefferies.com
JP Morgan
 
Anthony Paolone
 
212-622-6682
 
anthony.paolone@jpmorgan.com
KeyBanc Capital Markets
 
Craig Mailman
 
917-368-2316
 
cmailman@keybanccm.com
Macquarie Securities
 
Rob Stevenson
 
212-231-8068
 
rob.stevenson@macquarie.com
Raymond James
 
Bill Crow
 
727-567-2594
 
bill.crow@raymondjames.com
RBC Capital Markets
 
Michael Carroll
 
440-715-2649
 
michael.carroll@rbccm.com
Robert W. Baird & Co., Inc.
 
Dave Rodgers
 
216-737-7341
 
drodgers@rwbaird.com
Stifel, Nicolaus & Company, Inc.
 
John Guinee
 
443-224-1307
 
jwguinee@stifel.com
Wells Fargo Securities
 
Brendan Maiorana
 
443-263-6516
 
brendan.maiorana@wachovia.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)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended
 
Nine Months Ended
SUMMARY OF RESULTS 
 
9/30/12
 
6/30/12
 
3/31/12
 
12/31/11
 
9/30/11
 
9/30/12
 
9/30/11
Same Office NOI
 
$
64,159

 
$
63,735

 
$
62,279

 
$
62,330

 
$
62,603

 
$
190,173

 
$
183,776

NOI from real estate operations
 
$
76,248

 
$
78,809

 
$
76,917

 
$
77,261

 
$
77,135

 
$
231,974

 
$
225,557

Adjusted EBITDA
 
$
71,901

 
$
71,755

 
$
70,979

 
$
71,814

 
$
69,984

 
$
214,635

 
$
209,405

Net income (loss) attributable to COPT common shareholders
 
$
(28,145
)
 
$
6,587

 
$
2,652

 
$
(86,253
)
 
$
2,541

 
$
(18,906
)
 
$
(47,524
)
FFO - per NAREIT
 
$
48,888

 
$
46,115

 
$
45,873

 
$
(17,924
)
 
$
42,319

 
$
140,876

 
$
93,930

FFO - as adjusted for comparability
 
$
49,967

 
$
46,260

 
$
45,269

 
$
46,935

 
$
44,391

 
$
141,496

 
$
130,103

Basic and diluted FFO available to common share and common unit holders
 
$
39,565

 
$
41,143

 
$
41,129

 
$
(22,653
)
 
$
37,029

 
$
121,837

 
$
78,973

Diluted AFFO available to common share and common unit holders
 
$
34,361

 
$
36,593

 
$
40,766

 
$
24,846

 
$
33,300

 
$
111,720

 
$
85,704

Per share - diluted:
 
 

 
 

 
 

 
 

 
 

 
 

 
 
EPS
 
$
(0.39
)
 
$
0.09

 
$
0.04

 
$
(1.21
)
 
$
0.03

 
$
(0.27
)
 
$
(0.70
)
FFO - NAREIT
 
$
0.52

 
$
0.54

 
$
0.54

 
$
(0.30
)
 
$
0.49

 
$
1.61

 
$
1.08

FFO - as adjusted for comparability
 
$
0.53

 
$
0.54

 
$
0.53

 
$
0.56

 
$
0.52

 
$
1.61

 
$
1.57

Dividend per common share
 
$
0.2750

 
$
0.2750

 
$
0.2750

 
$
0.4125

 
$
0.4125

 
$
0.8250

 
$
1.2375

Payout ratios:
 
 

 
 

 
 

 
 

 
 

 
 

 
 
Diluted FFO
 
53.1
%
 
51.0
%
 
51.0
%
 
(138.9
)%
 
85.0
%
 
51.7
%
 
117.0
%
Diluted FFO - as adjusted for comparability
 
51.7
%
 
50.8
%
 
51.8
%
 
74.6
 %
 
80.5
%
 
51.4
%
 
80.3
%
Diluted AFFO, excluding recurring capital expenditures on properties in disposition plans
 
62.3
%
 
53.8
%
 
49.6
%
 
93.4
 %
 
87.0
%
 
54.7
%
 
92.8
%
CAPITALIZATION
 
 

 
 

 
 
 
 

 
 

 
 

 
 
Debt, net
 
$
2,169,315

 
$
2,191,851

 
$
2,418,078

 
$
2,426,303

 
$
2,420,073

 
 
 
 
Debt to Total Market Capitalization
 
50.0
%
 
50.0
%
 
54.8
%
 
56.8
 %
 
56.2
%
 
 
 
 
Debt to Adjusted Book
 
51.9
%
 
50.8
%
 
55.3
%
 
54.6
 %
 
53.5
%
 
 
 
 
Adjusted EBITDA fixed charge coverage ratio
 
2.6
x
 
2.7
x
 
2.6
x
 
2.7
x
 
2.6
x
 
2.6
x
 
2.5
x
Debt to Adjusted EBITDA ratio
 
7.5
x
 
7.6
x
 
8.5
x
 
8.4
x
 
8.6
x
 
7.6
x
 
8.7
x
Adjusted Debt to Adjusted EBITDA ratio
 
6.2
x
 
6.3
x
 
7.1
x
 
7.0
x
 
7.0
x
 
6.2
x
 
7.0
x
OTHER
 
 

 
 

 
 

 
 

 
 

 
 

 
 
Revenue from early termination of leases
 
$
543

 
$
350

 
$
395

 
$
45

 
$
103

 
$
1,288

 
$
445

Capitalized interest costs
 
$
3,390

 
$
3,595

 
$
3,809

 
$
4,294

 
$
4,458

 
$
10,794

 
$
13,107


3

Corporate Office Properties Trust
Selected Portfolio Data
 
 
 
 
 
 
 
 
 
 
 
 
9/30/12
 
6/30/12
 
3/31/12
 
12/31/11
 
9/30/11
 
# of Operating Office Properties
 

 
 

 
 

 
 

 
 

 
Wholly-owned
202

 
224

 
227

 
234

 
246

 
+ Consolidated JV (1)
4

 
4

 
4

 
4

 
4

 
Consolidated properties
206

 
228

 
231

 
238

 
250

 
% Occupied
 

 
 

 
 

 
 

 
 

 
Wholly-owned
88.1
%
 
87.6
%
 
87.6
%
 
86.9
%
 
88.0
%
 
+ Consolidated JV (1)
89.2
%
 
78.1
%
 
60.0
%
 
56.6
%
 
60.0
%
 
Consolidated properties
88.1
%
 
87.4
%
 
87.0
%
 
86.2
%
 
87.4
%
 
% Leased
 

 
 

 
 

 
 

 
 

 
Wholly-owned
89.8
%
 
89.2
%
 
89.2
%
 
88.7
%
 
89.8
%
 
+ Consolidated JV (1)
96.1
%
 
95.0
%
 
78.4
%
 
67.3
%
 
63.6
%
 
Consolidated properties
89.9
%
 
89.3
%
 
88.9
%
 
88.2
%
 
89.2
%
 
Square Feet of Office Properties (in thousands)
 

 
 

 
 

 
 

 
 

 
Wholly-owned
18,146

 
19,342

 
19,793

 
20,072

 
20,205

 
+ Consolidated JV Square Footage (1)
445

 
445

 
444

 
442

 
442

 
Consolidated Square Footage
18,591

 
19,787

 
20,237

 
20,514

 
20,647

 
 
 
 
 
 
 
 
 
 
 
 
(1) See page 34 for detail regarding consolidated JVs.
 
 
 
 
 
 
 
 
 
 








4

Corporate Office Properties Trust
Quarterly Consolidated Balance Sheets
(dollars in thousands)
 
9/30/12
 
6/30/12
 
3/31/12
 
12/31/11
 
9/30/11
Assets
 

 
 

 
 

 
 

 
 

Properties, net
 

 
 

 
 

 
 

 
 

Operating properties
$
3,053,643

 
$
3,191,481

 
$
3,274,565

 
$
3,273,735

 
$
3,325,609

Less: accumulated depreciation
(565,724
)
 
(562,345
)
 
(570,242
)
 
(559,679
)
 
(553,306
)
Projects in development or held for future development, including associated land costs (1)
614,595

 
603,456

 
633,968

 
638,919

 
696,914

Total properties, net
3,102,514

 
3,232,592

 
3,338,291

 
3,352,975

 
3,469,217

Assets held for sale
137,815

 
144,392

 
81,352

 
116,616

 
72,767

Cash and cash equivalents
5,009

 
4,702

 
7,987

 
5,559

 
11,504

Restricted cash and marketable securities
20,926

 
22,632

 
21,711

 
36,232

 
39,232

Accounts receivable, net
15,877

 
10,992

 
11,231

 
26,032

 
20,991

Deferred rent receivable
83,156

 
85,595

 
89,337

 
86,856

 
87,148

Intangible assets on real estate acquisitions, net
81,059

 
76,426

 
83,940

 
89,120

 
97,954

Deferred leasing and financing costs, net
58,753

 
63,861

 
66,987

 
66,515

 
70,791

Prepaid expenses and other assets
92,547

 
73,883

 
96,532

 
87,619

 
95,788

Total assets
$
3,597,656

 
$
3,715,075

 
$
3,797,368

 
$
3,867,524

 
$
3,965,392

Liabilities and equity
 

 
 

 
 

 
 

 
 

Liabilities:
 

 
 

 
 

 
 

 
 

Debt, net
$
2,169,315

 
$
2,191,851

 
$
2,418,078

 
$
2,426,303

 
$
2,420,073

Accounts payable and accrued expenses
87,390

 
84,733

 
93,156

 
96,425

 
114,834

Rents received in advance and security deposits
26,773

 
27,124

 
27,647

 
29,548

 
28,241

Dividends and distributions payable
26,954

 
24,695

 
24,544

 
35,038

 
35,029

Deferred revenue associated with operating leases
13,102

 
13,938

 
15,258

 
15,554

 
15,621

Distributions received in excess of investment in unconsolidated real estate joint venture
6,420

 
6,282

 
6,178

 
6,071

 
5,953

Interest rate derivatives
6,543

 
4,400

 
2,673

 
30,863

 
30,629

Other liabilities
10,938

 
8,703

 
9,038

 
9,657

 
7,389

Total liabilities
2,347,435

 
2,361,726

 
2,596,572

 
2,649,459

 
2,657,769

Commitments and contingencies


 


 


 


 


Equity:
 

 
 

 
 

 
 
 
 
COPT’s shareholders’ equity:
 

 
 

 
 

 
 
 
 
Preferred shares at liquidation preference
333,833

 
388,833

 
216,333

 
216,333

 
216,333

Common shares
722

 
721

 
720

 
720

 
720

Additional paid-in capital
1,455,558

 
1,450,923

 
1,454,199

 
1,452,393

 
1,447,598

Cumulative distributions in excess of net income
(610,659
)
 
(562,678
)
 
(549,456
)
 
(532,288
)
 
(416,342
)
Accumulated other comprehensive loss
(5,688
)
 
(3,717
)
 
(2,201
)
 
(1,733
)
 
(28,618
)
Total COPT’s shareholders’ equity
1,173,766

 
1,274,082

 
1,119,595

 
1,135,425

 
1,219,691

Noncontrolling interests in subsidiaries
 

 
 

 
 

 
 

 
 

Common units in the Operating Partnership
48,973

 
52,152

 
53,883

 
55,281

 
60,583

Preferred units in the Operating Partnership
8,800

 
8,800

 
8,800

 
8,800

 
8,800

Other consolidated entities
18,682

 
18,315

 
18,518

 
18,559

 
18,549

Total noncontrolling interests in subsidiaries
76,455

 
79,267

 
81,201

 
82,640

 
87,932

Total equity
1,250,221

 
1,353,349

 
1,200,796

 
1,218,065

 
1,307,623

Total liabilities and equity
$
3,597,656

 
$
3,715,075

 
$
3,797,368

 
$
3,867,524

 
$
3,965,392

(1) Please refer to pages 23-27 for detail.
 
 
 
 
 
 
 
 
 

5

Corporate Office Properties Trust
Consolidated Statements of FFO
(in thousands, except per share data)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended
 
Nine Months Ended
 
9/30/12
 
6/30/12
 
3/31/12
 
12/31/11
 
9/30/11
 
9/30/12
 
9/30/11
NOI from real estate operations (1)
 

 
 

 
 

 
 

 
 

 
 
 
 
Real estate revenues
$
121,264

 
$
123,968

 
$
125,304

 
$
127,456

 
$
125,129

 
$
370,536

 
$
368,376

Real estate property operating expenses
(45,016
)
 
(45,159
)
 
(48,387
)
 
(50,195
)
 
(47,994
)
 
(138,562
)
 
(142,819
)
NOI from real estate operations (1)
76,248

 
78,809

 
76,917

 
77,261

 
77,135

 
231,974

 
225,557

General and administrative expenses
(5,061
)
 
(7,742
)
 
(7,017
)
 
(6,592
)
 
(6,154
)
 
(19,820
)
 
(19,251
)
Business development expenses and land carry costs
(1,632
)
 
(1,304
)
 
(1,594
)
 
(1,819
)
 
(1,768
)
 
(4,530
)
 
(4,378
)
NOI from construction contracts and other service operations
873

 
710

 
927

 
550

 
558

 
2,510

 
2,156

Impairment recoveries (losses) on non-operating properties
—

 
—

 
5,246

 
(39,193
)
 
—

 
5,246

 
(41,316
)
Equity in loss of unconsolidated entities
(246
)
 
(187
)
 
(89
)
 
(108
)
 
(159
)
 
(522
)
 
(223
)
Depreciation and amortization on unconsolidated real estate entities
113

 
119

 
114

 
142

 
116

 
346

 
350

Interest and other income (loss)
1,095

 
840

 
1,217

 
1,921

 
(242
)
 
3,152

 
3,682

Gain (loss) on early extinguishment of debt, continuing and discontinued operations
970

 
(171
)
 
—

 
(3
)
 
(1,995
)
 
799

 
(2,020
)
Loss on interest rate derivatives
—

 
—

 
—

 
(29,805
)
 
—

 
—

 
—

Gain on sales of non-operating properties, net of income taxes
—

 
33

 
—

 
—

 
—

 
33

 
2,717

Total interest expense
(23,366
)
 
(24,975
)
 
(25,675
)
 
(24,914
)
 
(25,629
)
 
(74,016
)
 
(79,387
)
Income tax (expense) benefit
(106
)
 
(17
)
 
(4,173
)
 
4,636

 
457

 
(4,296
)
 
6,043

FFO - per NAREIT (1)
48,888

 
46,115

 
45,873

 
(17,924
)
 
42,319

 
140,876

 
93,930

Preferred share dividends
(6,546
)
 
(4,167
)
 
(4,025
)
 
(4,026
)
 
(4,025
)
 
(14,738
)
 
(12,076
)
Issuance costs associated with redeemed preferred shares
(1,827
)
 
—

 
—

 
—

 
—

 
(1,827
)
 
—

Noncontrolling interests - preferred units in the Operating Partnership
(165
)
 
(165
)
 
(165
)
 
(165
)
 
(165
)
 
(495
)
 
(495
)
Noncontrolling interests - other consolidated entities
(411
)
 
(552
)
 
24

 
—

 
(561
)
 
(939
)
 
(1,038
)
Depreciation and amortization allocable to noncontrolling interests in other consolidated entities
(160
)
 
132

 
(284
)
 
(283
)
 
(276
)
 
(312
)
 
(566
)
Basic and diluted FFO allocable to restricted shares
(214
)
 
(220
)
 
(294
)
 
(255
)
 
(263
)
 
(728
)
 
(782
)
Basic and diluted FFO available to common share and common unit holders (1)
39,565

 
41,143

 
41,129

 
(22,653
)
 
37,029

 
121,837

 
78,973

Operating property acquisition costs
222

 
7

 
—

 
4

 
77

 
229

 
152

Gain on sales of non-operating properties, net of income taxes
—

 
(33
)
 
—

 
—

 
—

 
(33
)
 
(2,717
)
Impairment (recoveries) losses on non-operating properties, net of associated tax
—

 
—

 
(604
)
 
35,047

 
—

 
(604
)
 
36,718

Loss on interest rate derivatives
—

 
—

 
—

 
29,805

 
—

 
—

 
—

(Gain) loss on early extinguishment of debt, continuing and discontinued operations
(970
)
 
171

 
—

 
3

 
1,995

 
(799
)
 
2,020

Issuance costs associated with redeemed preferred shares
1,827

 
—

 
—

 
—

 
—

 
1,827

 
—

Diluted FFO available to common share and common unit holders, as adjusted for comparability (1)
$
40,644

 
$
41,288

 
$
40,525

 
$
42,206

 
$
39,101

 
$
122,457

 
$
115,146

 
 
 
 
 
 
 
 
 
 
 
 
 
 
(1) Please refer to the section entitled “Definitions” for a definition of this measure.

6

Corporate Office Properties Trust
Consolidated Statements of FFO (continued)
(in thousands, except per share data)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended
 
Nine Months Ended
 
9/30/12
 
6/30/12
 
3/31/12
 
12/31/11
 
9/30/11
 
9/30/12
 
9/30/11
Net (loss) income
$
(20,765
)
 
$
11,861

 
$
6,977

 
$
(87,215
)
 
$
7,470

 
$
(1,927
)
 
$
(37,103
)
Real estate-related depreciation and amortization
30,624

 
31,666

 
31,087

 
33,030

 
36,032

 
93,377

 
101,101

Impairment losses on previously depreciated operating properties (1)
55,829

 
2,354

 
11,833

 
39,481

 
—

 
70,016

 
31,031

Gain on sales of previously depreciated operating properties, net of income taxes
(16,913
)
 
115

 
(4,138
)
 
(3,362
)
 
(1,299
)
 
(20,936
)
 
(1,449
)
Depreciation and amortization on unconsolidated real estate entities
113

 
119

 
114

 
142

 
116

 
346

 
350

FFO - per NAREIT (2)
48,888

 
46,115

 
45,873

 
(17,924
)
 
42,319

 
140,876

 
93,930

Operating property acquisition costs
222

 
7

 
—

 
4

 
77

 
229

 
152

Gain on sales of non-operating properties, net of income taxes
—

 
(33
)
 
—

 
—

 
—

 
(33
)
 
(2,717
)
Impairment (recoveries) losses on non-operating properties, net of associated tax
—

 
—

 
(604
)
 
35,047

 
—

 
(604
)
 
36,718

Loss on interest rate derivatives
—

 
—

 
—

 
29,805

 
—

 
—

 
—

(Gain) loss on early extinguishment of debt, continuing and discontinued operations
(970
)
 
171

 
—

 
3

 
1,995

 
(799
)
 
2,020

Issuance costs associated with redeemed preferred shares
1,827

 
—

 
—

 
—

 
—

 
1,827

 
—

FFO - as adjusted for comparability (2)
$
49,967

 
$
46,260

 
$
45,269

 
$
46,935

 
$
44,391

 
$
141,496

 
$
130,103

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Weighted Average Shares for period ended:
 

 
 

 
 

 
 

 
 

 
 

 
 

Common Shares Outstanding
71,688

 
71,624

 
71,458

 
71,351

 
71,312

 
71,590

 
68,718

Dilutive effect of share-based compensation awards
73

 
25

 
44

 
29

 
52

 
48

 
147

Common Units
4,233

 
4,255

 
4,281

 
4,308

 
4,336

 
4,256

 
4,371

Denominator for FFO per share - diluted
75,994

 
75,904

 
75,783

 
75,688

 
75,700

 
75,894

 
73,236

Anti-dilutive EPS effect of share-based compensation awards
(73
)
 
—

 
—

 
(29
)
 
(52
)
 
(48
)
 
(147
)
Weighted average common units
(4,233
)
 
(4,255
)
 
(4,281
)
 
(4,308
)
 
(4,336
)
 
(4,256
)
 
—

Denominator for diluted EPS
71,688

 
71,649

 
71,502

 
71,351

 
71,312

 
71,590

 
73,089

 
 
 
 
 
 
 
 
 
 
 
 
 
 
(1) Please see reconciliations on pages 36 and 37.
 
 
 
 
 
 
 
 
 
 
 
 
 
(2) Please refer to the section entitled “Definitions” for a definition of this measure.

7

Corporate Office Properties Trust
Consolidated Statements of Operations
(in thousands, except per share data)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended
 
Nine Months Ended
 
9/30/12
 
6/30/12
 
3/31/12
 
12/31/11
 
9/30/11
 
9/30/12
 
9/30/11
Revenues
 

 
 

 
 

 
 

 
 

 
 
 
 
Rental revenue
$
92,783

 
$
90,450

 
$
89,856

 
$
89,110

 
$
87,692

 
$
273,089

 
$
258,896

Tenant recoveries and other real estate operations revenue
22,078

 
20,718

 
20,802

 
22,373

 
20,286

 
63,598

 
58,117

Construction contract and other service revenues
15,283

 
16,995

 
21,534

 
16,491

 
18,729

 
53,812

 
67,854

Total revenues
130,144

 
128,163

 
132,192

 
127,974

 
126,707

 
390,499

 
384,867

Expenses
 

 
 

 
 

 
 

 
 

 
 
 
 
Property operating expenses
42,799

 
40,487

 
43,053

 
43,826

 
41,669

 
126,339

 
123,135

Depreciation and amortization associated with real estate operations
28,698

 
28,388

 
27,834

 
28,906

 
31,269

 
84,920

 
84,205

Construction contract and other service expenses
14,410

 
16,285

 
20,607

 
15,941

 
18,171

 
51,302

 
65,698

Impairment losses (recoveries)
46,096

 
—

 
(4,836
)
 
40,495

 
—

 
41,260

 
42,983

General and administrative expenses
5,061

 
7,742

 
7,017

 
6,592

 
6,154

 
19,820

 
19,251

Business development expenses and land carry costs
1,632

 
1,298

 
1,576

 
1,800

 
1,751

 
4,506

 
4,322

Total operating expenses
138,696

 
94,200

 
95,251

 
137,560

 
99,014

 
328,147

 
339,594

Operating (loss) income
(8,552
)
 
33,963

 
36,941

 
(9,586
)
 
27,693

 
62,352

 
45,273

Interest expense
(23,239
)
 
(24,239
)
 
(24,431
)
 
(23,361
)
 
(24,176
)
 
(71,909
)
 
(74,861
)
Interest and other income (loss)
1,095

 
840

 
1,217

 
1,921

 
(242
)
 
3,152

 
3,682

Loss on interest rate derivatives
—

 
—

 
—

 
(29,805
)
 
—

 
—

 
—

Loss on early extinguishment of debt
(768
)
 
(169
)
 
—

 
(3
)
 
(1,611
)
 
(937
)
 
(1,636
)
(Loss) income from continuing operations before equity in loss of unconsolidated entities and income taxes
(31,464
)
 
10,395

 
13,727

 
(60,834
)
 
1,664

 
(7,342
)
 
(27,542
)
Equity in loss of unconsolidated entities
(246
)
 
(187
)
 
(89
)
 
(108
)
 
(159
)
 
(522
)
 
(223
)
Income tax (expense) benefit
(106
)
 
(17
)
 
(4,173
)
 
4,636

 
457

 
(4,296
)
 
6,043

(Loss) income from continuing operations
(31,816
)
 
10,191

 
9,465

 
(56,306
)
 
1,962

 
(12,160
)
 
(21,722
)
Discontinued operations
11,051

 
1,649

 
(2,488
)
 
(30,913
)
 
5,508

 
10,212

 
(18,109
)
(Loss) income before gain on sales of real estate
(20,765
)
 
11,840

 
6,977

 
(87,219
)
 
7,470

 
(1,948
)
 
(39,831
)
Gain on sales of real estate, net of income taxes
—

 
21

 
—

 
4

 
—

 
21

 
2,728

Net (loss) income
(20,765
)
 
11,861

 
6,977

 
(87,215
)
 
7,470

 
(1,927
)
 
(37,103
)
Net loss (income) attributable to noncontrolling interests
 

 
 

 
 

 
 

 
 

 
 
 
 
Common units in the Operating Partnership
1,569

 
(390
)
 
(159
)
 
5,153

 
(178
)
 
1,020

 
3,188

Preferred units in the Operating Partnership
(165
)
 
(165
)
 
(165
)
 
(165
)
 
(165
)
 
(495
)
 
(495
)
Other consolidated entities
(411
)
 
(552
)
 
24

 
—

 
(561
)
 
(939
)
 
(1,038
)
Net (loss) income attributable to COPT
(19,772
)
 
10,754

 
6,677

 
(82,227
)
 
6,566

 
(2,341
)
 
(35,448
)
Preferred share dividends
(6,546
)
 
(4,167
)
 
(4,025
)
 
(4,026
)
 
(4,025
)
 
(14,738
)
 
(12,076
)
Issuance costs associated with redeemed preferred shares
(1,827
)
 
—

 
—

 
—

 
—

 
(1,827
)
 
—

Net (loss) income attributable to COPT common shareholders
$
(28,145
)
 
$
6,587

 
$
2,652

 
$
(86,253
)
 
$
2,541

 
$
(18,906
)
 
$
(47,524
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 

8

Corporate Office Properties Trust
Consolidated Statements of Operations (continued)
(in thousands, except per share data)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended
 
Nine Months Ended
 
9/30/12
 
6/30/12
 
3/31/12
 
12/31/11
 
9/30/11
 
9/30/12
 
9/30/11
For diluted EPS computations:
 

 
 

 
 

 
 

 
 

 
 
 
 
Numerator for diluted EPS
 

 
 

 
 

 
 

 
 

 
 
 
 
Net (loss) income attributable to common shareholders
$
(28,145
)
 
$
6,587

 
$
2,652

 
$
(86,253
)
 
$
2,541

 
$
(18,906
)
 
$
(47,524
)
Dilutive effect of common units in the Operating Partnership
—

 
—

 
—

 
—

 
—

 
—

 
(3,188
)
Amount allocable to restricted shares
(111
)
 
(105
)
 
(141
)
 
(256
)
 
(262
)
 
(357
)
 
(781
)
Numerator for diluted EPS
$
(28,256
)
 
$
6,482

 
$
2,511

 
$
(86,509
)
 
$
2,279

 
$
(19,263
)
 
$
(51,493
)
Denominator:
 

 
 

 
 

 
 

 
 

 
 
 
 
Weighted average common shares - basic
71,688

 
71,624

 
71,458

 
71,351

 
71,312

 
71,590

 
68,718

Dilutive effect of common units in the Operating Partnership
—

 
—

 
—

 
—

 
—

 
—

 
4,371

Dilutive effect of share-based compensation awards
—

 
25

 
44

 
—

 
—

 
—

 
—

Weighted average common shares - diluted
71,688

 
71,649

 
71,502

 
71,351

 
71,312

 
71,590

 
73,089

Diluted EPS
$
(0.39
)
 
$
0.09

 
$
0.04

 
$
(1.21
)
 
$
0.03

 
$
(0.27
)
 
$
(0.70
)

9

Corporate Office Properties Trust
Consolidated Reconciliations of AFFO
(in thousands, except per share data)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended
 
Nine Months Ended
 
9/30/12
 
6/30/12
 
3/31/12
 
12/31/11
 
9/30/11
 
9/30/12
 
9/30/11
Diluted FFO available to common share and common unit holders, as adjusted for comparability
$
40,644

 
$
41,288

 
$
40,525

 
$
42,206

 
$
39,101

 
$
122,457

 
$
115,146

Straight line rent adjustments (1)
(2,595
)
 
(1,857
)
 
(2,179
)
 
(2,144
)
 
(2
)
 
(6,631
)
 
(6,525
)
Amortization of acquisition intangibles included in NOI
251

 
218

 
190

 
249

 
212

 
659

 
600

Share-based compensation, net of amounts capitalized
1,703

 
3,157

 
3,402

 
3,764

 
2,759

 
8,262

 
8,156

Amortization of deferred financing costs
1,527

 
1,597

 
1,572

 
1,506

 
1,629

 
4,696

 
5,090

Amortization of net debt discounts, net of amounts capitalized
683

 
682

 
663

 
634

 
1,184

 
2,028

 
4,046

Amortization of settled debt hedges
15

 
15

 
16

 
15

 
16

 
46

 
47

Recurring capital expenditures on properties not sold or in disposition plans
(8,518
)
 
(6,074
)
 
(1,875
)
 
(12,550
)
 
(8,710
)
 
(16,467
)
 
(26,960
)
Diluted AFFO, excluding recurring capital expenditures on properties in disposition plans
33,710

 
39,026

 
42,314

 
33,680

 
36,189

 
115,050

 
99,600

Recurring capital expenditures on properties sold or in disposition plans
651

 
(2,433
)
 
(1,548
)
 
(8,834
)
 
(2,889
)
 
(3,330
)
 
(13,896
)
Diluted AFFO available to common share and common unit holders (“diluted AFFO”)
$
34,361

 
$
36,593

 
$
40,766

 
$
24,846

 
$
33,300

 
$
111,720

 
$
85,704

Recurring capital expenditures on properties not sold or in disposition plans
 

 
 

 
 

 
 

 
 

 
 
 
 
Tenant improvements and incentives on operating properties
$
7,774

 
$
2,663

 
$
666

 
$
10,036

 
$
5,533

 
$
11,103

 
$
20,720

Building improvements on operating properties
4,646

 
1,296

 
871

 
4,519

 
2,239

 
6,813

 
5,321

Leasing costs for operating properties
947

 
2,863

 
1,299

 
1,448

 
3,933

 
5,109

 
9,026

Less: Nonrecurring tenant improvements and incentives on operating properties
(3,852
)
 
(97
)
 
(561
)
 
(1,371
)
 
(1,816
)
 
(4,510
)
 
(4,893
)
Less: Nonrecurring building improvements on operating properties
(940
)
 
(572
)
 
(407
)
 
(2,106
)
 
(1,069
)
 
(1,919
)
 
(2,188
)
Less: Nonrecurring leasing costs for operating properties
(130
)
 
(79
)
 
—

 
(5
)
 
(130
)
 
(209
)
 
(1,093
)
Add: Recurring capital expenditures on operating properties held through joint ventures
73

 
—

 
7

 
29

 
20

 
80

 
67

Recurring capital expenditures on properties not sold or in disposition plans
$
8,518

 
$
6,074

 
$
1,875

 
$
12,550

 
$
8,710

 
$
16,467

 
$
26,960

Recurring capital expenditures on properties sold or in disposition plans
 

 
 

 
 

 
 

 
 

 
 
 
 
Tenant improvements and incentives on operating properties
$
(737
)
 
$
1,827

 
$
930

 
$
7,648

 
$
1,549

 
$
2,020

 
$
10,748

Building improvements on operating properties
191

 
459

 
823

 
2,256

 
3,141

 
1,473

 
4,475

Leasing costs for operating properties
7

 
392

 
142

 
145

 
290

 
541

 
1,321

Less: Nonrecurring tenant improvements and incentives on operating properties
—

 
(7
)
 
(158
)
 
(244
)
 
(10
)
 
(165
)
 
(256
)
Less: Nonrecurring building improvements on operating properties
(112
)
 
(229
)
 
(189
)
 
(1,162
)
 
(1,977
)
 
(530
)
 
(2,288
)
Less: Nonrecurring leasing costs for operating properties
—

 
(9
)
 
—

 
191

 
(104
)
 
(9
)
 
(104
)
Recurring capital expenditures on properties sold or in disposition plans
$
(651
)
 
$
2,433

 
$
1,548

 
$
8,834

 
$
2,889

 
$
3,330

 
$
13,896

 
 
 
 
 
 
 
 
 
 
 
 
 
 
(1) Includes COPT's pro rata share of straight line rent adjustments from properties held through joint ventures.

10


 Corporate Office Properties Trust
Consolidated Office Properties by Region - September 30, 2012 (2)
 
 
Operational Properties (1)
 
Construction/Redevelopment Properties (2)
Property Region and Business Park/Submarket
 
# of
Properties
 
Operational
Square Feet (1)
 
Occupancy
%
 
Leased
 %
 
# of
Properties
 
Construction/Redevelopment Square Feet
 
Operational Square Feet (1)
 
Total
Square Feet
Baltimore/Washington Corridor:
 
 

 
 

 
 

 
 

 
 

 
 

 
 
 
 
National Business Park
 
26

 
3,113,346

 
97.5
%
 
99.4
%
 
3

 
372,520

 
—

 
372,520

Columbia Gateway
 
28

 
2,221,756

 
85.9
%
 
89.6
%
 
—

 
—

 
—

 
—

Airport Square/bwtech
 
26

 
1,940,891

 
80.9
%
 
82.3
%
 
—

 
—

 
—

 
—

Commons/Parkway
 
10

 
432,104

 
69.4
%
 
69.4
%
 
—

 
—

 
—

 
—

Other
 
7

 
762,572

 
95.3
%
 
99.4
%
 
2

 
115,207

 
—

 
115,207

Subtotal
 
97

 
8,470,669

 
89.0
%
 
91.0
%
 
5

 
487,727

 
—

 
487,727

Northern Virginia:
 
 

 
 

 
 

 
 

 
 

 
 

 
 
 
 
Westfields Corporate Center
 
9

 
1,434,692

 
88.2
%
 
91.0
%
 
—

 
—

 
—

 
—

Patriot Ridge
 
1

 
81,675

 
100.0
%
 
100.0
%
 
1

 
157,597

 
81,675

 
239,272

Herndon, Tysons Corner and Merrifield
 
9

 
1,701,822

 
87.1
%
 
88.8
%
 
—

 
—

 
—

 
—

Subtotal
 
19

 
3,218,189

 
87.9
%
 
90.1
%
 
1

 
157,597

 
81,675

 
239,272

San Antonio, Texas
 
 

 
 

 
 

 
 

 
 

 
 

 
 
 
 
Sentry Gateway
 
6

 
792,454

 
100.0
%
 
100.0
%
 
—

 
—

 
—

 
—

Other
 
2

 
122,975

 
73.6
%
 
73.6
%
 
—

 
—

 
—

 
—

Subtotal
 
8

 
915,429

 
96.5
%
 
96.5
%
 
—

 
—

 
—

 
—

Huntsville (3)
 
1

 
138,466

 
100.0
%
 
100.0
%
 
4

 
424,749

 
—

 
424,749

Washington, DC- Capital Riverfront (Maritime)
 
2

 
360,326

 
89.0
%
 
89.0
%
 
—

 
—

 
—

 
—

St. Mary’s & King George Counties
 
19

 
903,591

 
85.4
%
 
86.2
%
 
—

 
—

 
—

 
—

Greater Baltimore:
 
 

 
 

 
 

 
 

 
 

 
 

 


 
—

White Marsh and Rt 83 Corridor
 
28

 
1,287,005

 
82.5
%
 
82.8
%
 
—

 
—

 
—

 
—

Canton Crossing-Baltimore City
 
1

 
481,016

 
94.3
%
 
94.3
%
 
—

 
—

 
—

 
—

North Gate Business Park
 
2

 
156,765

 
68.8
%
 
68.8
%
 
1

 
128,119

 
—

 
128,119

Subtotal
 
31

 
1,924,786

 
84.3
%
 
84.5
%
 
1

 
128,119

 
—

 
128,119

Suburban Maryland
 
3

 
297,936

 
94.1
%
 
94.1
%
 
—

 
—

 
—

 
—

Colorado Springs
 
21

 
1,577,508

 
76.5
%
 
81.8
%
 
—

 
—

 
—

 
—

Greater Philadelphia, Pennsylvania
 
3

 
488,611

 
100.0
%
 
100.0
%
 
2

 
243,155

 
53,605

 
296,760

Other (3)
 
2

 
295,842

 
100.0
%
 
100.0
%
 
—

 
—

 
—

 
—

Total
 
206

 
18,591,353

 
88.1
%
 
89.9
%
 
13

 
1,441,347

 
135,280

 
1,576,627

 
(1) Includes square feet in operations for partially operational properties.
(2) This schedule includes properties designated as under construction or redevelopment as of 9/30/12 as well as three properties designated as under construction subsequent to 9/30/12. Please refer to pages 24 and 25.
(3) For purposes of this summary, Huntsville is reported as a separate region. Other presentations within this package include Huntsville in our “Other” region.

11

Corporate Office Properties Trust
NOI from Real Estate Operations and Occupancy by Property Grouping
(dollars and square feet in thousands)
 
 
As of 9/30/12
 
 
 
 
 
 
# of
Operating Properties
 
Operational Square Feet
 
 
 
 
 
Annualized
Rental Revenue
 
Percentage of Total
Annualized
Rental Revenue
 
NOI from Real
Estate Operations
for Three Months Ended
 
NOI from Real
Estate Operations
for Nine Months Ended
Property Grouping
 
 
 
% Occupied (1)
 
% Leased (1)
 
 
 
9/30/12
 
9/30/12
Same Office Properties (2)
 
 

 
 

 
 
 
 
 
 

 
 

 
 

 
 

Stabilized properties
 
161

 
14,835

 
89.9%
 
91.2%
 
$
382,903

 
84.3
%
 
$
63,384

 
$
188,935

Unstabilized properties (3)
 
2

 
328

 
60.9%
 
70.2%
 
6,017

 
1.3
%
 
775

 
1,238

Total Same Office Properties
 
163

 
15,163

 
89.3%
 
90.8%
 
388,920

 
85.6
%
 
64,159

 
190,173

Office Properties Placed in Service (4)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Stabilized properties
 
4

 
393

 
100.0%
 
100.0%
 
12,736

 
2.8
%
 
2,053

 
6,174

Unstabilized properties (3)
 
3

 
315

 
64.9%
 
79.6%
 
6,035

 
1.3
%
 
864

 
1,857

Acquired Office Properties (5)
 
2

 
340

 
100.0%
 
100.0%
 
9,456

 
2.1
%
 
1,892

 
3,551

Other
 
N/A

 
N/A

 
N/A
 
N/A
 
N/A

 
N/A

 
305

 
872

Subtotal
 
172

 
16,211

 
89.3%
 
91.2%
 
417,147

 
91.8
%
 
69,273

 
202,627

Strategic Reallocation Plan Properties (6)
 
31

 
1,891

 
74.5%
 
78.4%
 
27,677

 
6.1
%
 
4,491

 
13,630

Greater Philadelphia
 
3

 
489

 
100.0%
 
100.0%
 
9,340

 
2.1
%
 
1,805

 
5,088

Disposed Office Properties (7)
 
N/A

 
N/A

 
N/A
 
N/A
 
N/A

 
N/A

 
679

 
10,629

Total Portfolio
 
206

 
18,591

 
88.1%
 
89.9%
 
$
454,164

 
100.0
%
 
$
76,248

 
$
231,974

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Strategic Tenant Properties
 
94

 
9,976

 
92.0%
 
93.5%
 
$
279,931

 
61.6
%
 
$
46,829

 
$
139,447

 
(1) Percentages calculated based on operational square feet.
(2) Properties owned and 100% operational since 1/1/11.
(3) Properties with first generation operational space less than 90% occupied at 9/30/12.
(4) Newly constructed or redeveloped properties placed in service that were not fully operational by 1/1/11.
(5) Acquired properties that were not owned and fully operational by 1/1/11.
(6) The carrying value of operating property assets in the Strategic Reallocation Plan totaled $200,649 at 9/30/12.
(7) See page 21.



12

Corporate Office Properties Trust
Unstabilized Office Properties (1) - September 30, 2012  
 
 
 
 
 
 
 
Property Grouping
Operational Square Feet
 
Occupancy %
 
Leased %
 
Same Office Properties (2) 
 

 
 
 
 
 
3120 Fairview Park Drive
180,854

 
46.0%
 
46.0%
 
7740 Milestone Parkway
146,666

 
79.2%
 
100.0%
 
Total Unstabilized Same Office Properties
327,520

 
60.9%
 
70.2%
 
Office Properties Placed in Service (3) 
 

 
 
 
 
 
316 Sentinel Way
125,149

 
63.1%
 
100.0%

430 National Business Parkway
110,136

 
86.1%
 
86.1%
 
210 Research Boulevard
79,573

 
38.6%
 
38.6%
 
Total Unstabilized Office Properties Placed in Service
314,858

 
64.9%
 
79.6%
 
Total Unstabilized Office Properties, Excluding Properties in Strategic Reallocation Plan
642,378

 
62.9%
 
74.8%
 
Unstabilized Strategic Reallocation Plan Office Properties (3 Properties)
309,575

 
32.1%
 
53.3%
 
Total Unstabilized Office Properties
951,953

 
52.9%
 
67.8%
 
 
(1) Properties with first generation operational space less than 90% occupied at 9/30/12.
(2) Properties owned and 100% operational since 1/1/11.
(3) Newly constructed or redeveloped properties placed in service that were not fully operational by 1/1/11.




13

Corporate Office Properties Trust
Real Estate Revenues* by Segment
(dollars in thousands)
 
 
Three Months Ended
 
Nine Months Ended
 
 
9/30/12
 
6/30/12
 
3/31/12
 
12/31/11
 
9/30/11
 
9/30/12
 
9/30/11
 
Office Properties:
 

 
 

 
 

 
 

 
 

 
 
 
 
 
Baltimore/Washington Corridor
$
55,799

 
$
55,677

 
$
56,250

 
$
57,195

 
$
54,744

 
167,726

 
160,856

 
Northern Virginia
20,363

 
19,051

 
18,560

 
18,855

 
18,640

 
57,974

 
55,359

 
San Antonio
8,125

 
7,830

 
7,608

 
7,613

 
7,701

 
23,563

 
22,453

 
Washington, DC - Capitol Riverfront
4,389

 
4,232

 
3,894

 
4,529

 
4,507

 
12,515

 
13,349

 
St. Mary’s and King George Counties
4,085

 
4,139

 
4,212

 
3,760

 
3,508

 
12,436

 
10,606

 
Greater Baltimore
11,918

 
14,664

 
15,372

 
17,017

 
18,193

 
41,954

 
53,651

 
Suburban Maryland
2,371

 
4,560

 
5,749

 
5,400

 
5,648

 
12,680

 
16,582

 
Colorado Springs
6,278

 
6,149

 
6,453

 
5,991

 
6,037

 
18,880

 
17,869

 
Greater Philadelphia
2,541

 
2,458

 
2,172

 
2,143

 
1,701

 
7,171

 
5,315

 
Other
3,589

 
3,770

 
3,618

 
3,668

 
3,167

 
10,977

 
8,567

 
Wholesale Data Center
1,806

 
1,438

 
1,416

 
1,285

 
1,283

 
4,660

 
3,769

 
Real estate revenues
$
121,264

 
$
123,968

 
$
125,304

 
$
127,456

 
$
125,129

 
$
370,536

 
$
368,376

 
NOI from Real Estate Operations* by Segment
(dollars in thousands)
 
 
 
 
 
 
 
 
Three Months Ended
 
Nine Months Ended
 
 
9/30/12
 
6/30/12
 
3/31/12
 
12/31/11
 
9/30/11
 
9/30/12
 
9/30/11
 
Office Properties:
 

 
 

 
 

 
 

 
 

 
 
 
 
 
Baltimore/Washington Corridor
$
36,730

 
$
36,612

 
$
36,099

 
$
35,192

 
$
35,116

 
109,441

 
102,187

 
Northern Virginia
13,050

 
11,875

 
11,160

 
11,715

 
11,362

 
36,085

 
33,215

 
San Antonio
3,788

 
3,807

 
3,791

 
3,816

 
3,877

 
11,386

 
11,678

 
Washington, DC - Capitol Riverfront
2,430

 
2,516

 
1,984

 
2,733

 
2,699

 
6,930

 
8,257

 
St. Mary’s and King George Counties
2,793

 
3,000

 
2,954

 
2,578

 
2,365

 
8,747

 
7,488

 
Greater Baltimore
7,256

 
8,859

 
9,482

 
9,936

 
10,640

 
25,597

 
30,413

 
Suburban Maryland
1,313

 
2,678

 
3,228

 
2,902

 
3,673

 
7,219

 
9,768

 
Colorado Springs
3,750

 
3,955

 
4,068

 
3,383

 
3,572

 
11,773

 
11,081

 
Greater Philadelphia
1,805

 
1,726

 
1,557

 
1,655

 
1,284

 
5,088

 
4,135

 
Other
2,873

 
3,518

 
2,385

 
2,964

 
2,318

 
8,776

 
6,158

 
Wholesale Data Center
460

 
263

 
209

 
387

 
229

 
932

 
1,177

 
NOI from real estate operations
$
76,248

 
$
78,809

 
$
76,917

 
$
77,261

 
$
77,135

 
$
231,974

 
$
225,557


*Includes continuing and discontinued operations.


14

Corporate Office Properties Trust
Same Office Properties (1) Average Occupancy Rates by Region 
 
Number of Buildings
 
Rentable Square Feet
 
Three Months Ended
 
Nine Months Ended
 
 
 
9/30/12
 
6/30/12
 
3/31/12
 
12/31/11
 
9/30/11
 
9/30/12
 
9/30/11
Baltimore Washington Corridor
87

 
7,814,550

 
90.0
%
 
90.4
%
 
89.6
%
 
90.2
%
 
90.2
%
 
90.0
%
 
89.7
%
Northern Virginia
16

 
2,783,180

 
87.0
%
 
87.4
%
 
86.8
%
 
88.0
%
 
90.2
%
 
87.1
%
 
89.5
%
San Antonio
8

 
915,429

 
96.5
%
 
96.5
%
 
97.6
%
 
100.0
%
 
100.0
%
 
96.9
%
 
100.0
%
Washington, DC - Capitol Riverfront
2

 
360,326

 
89.0
%
 
89.0
%
 
88.3
%
 
95.5
%
 
98.0
%
 
88.7
%
 
97.0
%
St. Mary’s and King George Counties
12

 
585,756

 
90.9
%
 
94.1
%
 
94.9
%
 
95.6
%
 
96.9
%
 
93.3
%
 
97.4
%
Greater Baltimore
29

 
1,768,021

 
87.4
%
 
87.5
%
 
86.8
%
 
85.6
%
 
85.5
%
 
87.2
%
 
85.1
%
Suburban Maryland
2

 
242,070

 
94.1
%
 
92.5
%
 
90.0
%
 
90.0
%
 
89.2
%
 
92.2
%
 
88.2
%
Colorado Springs
5

 
398,044

 
74.9
%
 
74.5
%
 
74.7
%
 
79.0
%
 
84.6
%
 
74.7
%
 
85.8
%
Other
2

 
295,842

 
100.0
%
 
100.0
%
 
100.0
%
 
100.0
%
 
100.0
%
 
100.0
%
 
100.0
%
Total Office
163

 
15,163,218

 
89.4
%
 
89.8
%
 
89.2
%
 
90.1
%
 
90.7
%
 
89.5
%
 
90.3
%
Total Same Office Properties occupancy as of period end
 
 

 
89.3
%
 
89.6
%
 
89.3
%
 
89.5
%
 
90.9
%
 
89.3
%
 
90.9
%

(1)  Same office properties represent buildings owned and 100% operational since January 1, 2011, excluding properties held for future disposition.




15

Corporate Office Properties Trust
Same Office Property Real Estate Revenues by Region
(dollars in thousands)
 
Three Months Ended
 
Nine Months Ended
 
9/30/12
 
6/30/12
 
3/31/12
 
12/31/11
 
9/30/11
 
9/30/12
 
9/30/11
Office Properties:
 

 
 

 
 

 
 

 
 

 
 
 
 
Baltimore/Washington Corridor
$
52,029

 
$
51,110

 
$
51,560

 
$
52,622

 
$
50,722

 
154,698

 
149,311

Northern Virginia
18,588

 
18,440

 
17,996

 
18,471

 
18,246

 
55,024

 
54,211

San Antonio
8,125

 
7,830

 
7,614

 
7,610

 
7,698

 
23,569

 
22,450

Washington, DC - Capitol Riverfront
4,389

 
4,232

 
3,894

 
4,529

 
4,507

 
12,515

 
13,349

St. Mary’s and King George Counties
2,877

 
2,917

 
2,995

 
2,867

 
2,935

 
8,789

 
8,899

Greater Baltimore
10,016

 
9,735

 
10,083

 
9,941

 
9,599

 
29,834

 
28,670

Suburban Maryland
2,105

 
2,069

 
2,051

 
1,994

 
2,207

 
6,225

 
6,390

Colorado Springs
1,537

 
1,524

 
1,627

 
1,469

 
1,507

 
4,687

 
4,442

Other
2,422

 
2,434

 
2,402

 
2,448

 
2,377

 
7,261

 
6,965

Real estate revenues
$
102,088

 
$
100,291

 
$
100,222

 
$
101,951

 
$
99,798

 
$
302,602

 
$
294,687

 
Same Office Property NOI by Region
(dollars in thousands)
 
Three Months Ended
 
Nine Months Ended
 
9/30/12
 
6/30/12
 
3/31/12
 
12/31/11
 
9/30/11
 
9/30/12
 
9/30/11
Office Properties:
 

 
 

 
 

 
 

 
 

 
 
 
 
Baltimore/Washington Corridor
$
34,082

 
$
33,529

 
$
32,944

 
$
31,951

 
$
32,510

 
100,554

 
94,796

Northern Virginia
11,587

 
11,409

 
10,729

 
11,458

 
11,129

 
33,725

 
32,528

San Antonio
3,787

 
3,805

 
3,847

 
3,885

 
3,879

 
11,439

 
11,680

Washington, DC - Capitol Riverfront
2,430

 
2,516

 
1,984

 
2,733

 
2,699

 
6,930

 
8,257

St. Mary’s and King George Counties
1,926

 
2,147

 
2,107

 
2,016

 
2,051

 
6,179

 
6,478

Greater Baltimore
6,105

 
5,929

 
6,350

 
6,103

 
5,682

 
18,385

 
16,987

Suburban Maryland
1,304

 
1,350

 
1,276

 
1,218

 
1,819

 
3,930

 
4,495

Colorado Springs
773

 
875

 
881

 
732

 
741

 
2,529

 
2,331

Other
2,165

 
2,175

 
2,161

 
2,234

 
2,093

 
6,502

 
6,224

Same office property NOI
64,159

 
63,735

 
62,279

 
62,330

 
62,603

 
190,173

 
183,776

Add (less): Straight-line rent adjustments
(1,407
)
 
(939
)
 
(1,876
)
 
(616
)
 
1,135

 
(4,222
)
 
(4,474
)
Less: Amortization of deferred market rental revenue
(80
)
 
(97
)
 
(99
)
 
(83
)
 
(73
)
 
(276
)
 
(205
)
Add: Amortization of above-market cost arrangements
371

 
371

 
353

 
434

 
434

 
1,095

 
1,302

Same office property cash NOI
63,043

 
63,070

 
60,657

 
62,065

 
64,099

 
186,770

 
180,399

Less: Lease termination fees, gross
(413
)
 
(164
)
 
(534
)
 
(48
)
 
(130
)
 
(1,111
)
 
(443
)
Same office property cash NOI, excluding gross lease termination fees
$
62,630

 
$
62,906

 
$
60,123

 
$
62,017

 
$
63,969

 
$
185,659

 
$
179,956

 
Note:  Same office properties represent buildings owned and 100% operational since January 1, 2011, excluding properties held for future disposition.

16

Corporate Office Properties Trust
Office Leasing (1)
Quarter Ended September 30, 2012
 
Baltimore/
Washington
Corridor
 
Northern
Virginia
 
St. Mary’s & King George Counties
 
Greater
Baltimore
 
Colorado
Springs
 
Total
Office
First Generation Space Leasing
 

 
 

 
 
 
 

 
 

 
 

Construction and Redevelopment Space
 

 
 

 
 
 
 

 
 

 
 

Leased Square Feet
161,810

 
7,838.0

 
—

 
—

 
59,448

 
229,096

Average Committed Cost Per Square Foot
$
76.56

 
$
71.54

 
$
—

 
$
—

 
$
46.84

 
$
68.67

Weighted Average Lease Term in years
8.6

 
7.7

 
—

 
—

 
7.1

 
8.2

Other First Generation Space
 

 
 

 
 

 
 

 
 

 
 

Leased Square Feet
14,294

 
5,199

 
—

 
4,398

 
5,815

 
29,706

Average Committed Cost Per Square Foot
$
52.25

 
$
43.17

 
$
—

 
$
31.01

 
$
16.19

 
$
40.46

Weighted Average Lease Term in years
10.1

 
7.0

 
—

 
7.2

 
5.1

 
8.2

Total First Generation Space Leased
176,104

 
13,037

 
—

 
4,398

 
65,263

 
258,802

Second Generation Space Leasing
 

 
 

 
 

 
 

 
 

 
 

Renewed Space
 

 
 

 
 

 
 

 
 

 
 

Renewal Square Feet Leased
97,474

 
—

 
28,412

 
9,184

 
80,393

 
215,463

Expiring Square Feet
178,925

 
65,728

 
46,293

 
59,120

 
95,909

 
445,975

Vacated Square Feet
81,451

 
65,728

 
17,881

 
49,936

 
15,516

 
230,512

Retention Rate (% based upon square feet)
54.5
 %
 
0.0
 %
 
61.4
 %
 
15.5
 %
 
83.8
 %
 
48.3
 %
Renewed Space Data:
 

 
 

 
 

 
 

 
 

 
 

Average Committed Cost per Square Foot
$
9.49

 
$
—

 
$
0.10

 
$
—

 
$
11.65

 
$
8.65

Weighted Average Lease Term in years
4.9

 
—

 
1.4

 
4.4

 
5.7

 
4.7

Change in Total Rent - GAAP
10.8
 %
 
0.0
 %
 
1.9
 %
 
(11.1
)%
 
12.4
 %
 
9.4
 %
Change in Total Rent - Cash
1.7
 %
 
0.0
 %
 
0.3
 %
 
(15.6
)%
 
(8.4
)%
 
(1.9
)%
Retenanted Space
 

 
 

 
 

 
 

 
 

 
 

Leased Square Feet
48,409

 
73,492

 
7,714

 
—

 
8,930

 
138,545

Retenanted Space Data:
 

 
 

 
 

 
 

 
 

 
 

Average Committed Cost per Square Foot
$
17.73

 
$
37.82

 
$
29.51

 
$
—

 
$
30.00

 
$
29.83

Weighted Average Lease Term in years
6.3

 
6.0

 
7.0

 
—

 
5.6

 
6.2

Change in Total Rent - GAAP
0.9
 %
 
(17.3
)%
 
12.8
 %
 
0.0
 %
 
36.1
 %
 
(8.2
)%
Change in Total Rent - Cash
(8.4
)%
 
(23.2
)%
 
(2.4
)%
 
0.0
 %
 
(13.0
)%
 
(16.9
)%
Total Second Generation Space Leased
145,883

 
73,492

 
36,126

 
9,184

 
89,323

 
354,008

Total Second Generation Space Data:
 

 
 

 
 

 
 

 
 

 
 

Average Committed Cost per Square Foot
$
12.23

 
$
37.82

 
$
6.38

 
$
—

 
$
13.48

 
$
16.94

Weighted Average Lease Term in Years
5.4

 
6.0

 
2.6

 
4.4

 
5.7

 
5.3

Change in Total Rent - GAAP
7.7
 %
 
(17.3
)%
 
4.0
 %
 
(11.1
)%
 
13.9
 %
 
2.0
 %
Change in Total Rent - Cash
(1.5
)%
 
(23.2
)%
 
(0.2
)%
 
(15.6
)%
 
(8.8
)%
 
(8.3
)%
Total Square Feet Leased
321,987

 
86,529

 
36,126

 
13,582

 
154,586

 
612,810

(1) This presentation reflects consolidated properties.
Notes:  No expiration, renewal or retenanting activity transpired in our San Antonio, Washington DC-Capital Riverfront, Suburban Maryland, Greater Philadelphia and Other regions.
Activity is exclusive of owner occupied space and leases with less than a one-year term. Retention rate includes early renewals.


17

Corporate Office Properties Trust
Office Leasing (1)
Nine Months Ended September 30, 2012
 
Baltimore/
Washington
Corridor
 
Northern
Virginia
 
San Antonio
 
Washington DC-Capital Riverfront
 
St. Mary’s & King George Counties
 
Greater
Baltimore
 
Suburban
Maryland
 
Colorado
Springs
 
Greater
Philadelphia
 
Total
Office
First Generation Space Leasing
 

 
 

 
 

 
 

 
 
 
 

 
 

 
 

 
 

 
 

Construction and Redevelopment Space
 

 
 

 
 

 
 

 
 
 
 

 
 

 
 

 
 

 
 

Leased Square Feet
293,678

 
7,838.0

 
—

 
—

 
—

 
3,174

 
2,710

 
89,866

 
11,371

 
408,637

Average Committed Cost Per Square Foot
$
68.54

 
$
71.54

 
$
—

 
$
—

 
$
—

 
$
30.17

 
$
55.16

 
$
47.75

 
$
59.58

 
$
63.39

Weighted Average Lease Term in years
8.4

 
7.7

 
—

 
—

 
—

 
5.1

 
8.6

 
4.7

 
6.3

 
7.5

Other First Generation Space
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

Leased Square Feet
103,291

 
59,131

 
—

 
—

 
—

 
22,509

 
9,155

 
11,124

 
—

 
205,210

Average Committed Cost Per Square Foot
$
31.19

 
$
49.87

 
$
—

 
$
—

 
$
—

 
$
28.42

 
$
40.67

 
$
15.62

 
$
—

 
$
35.85

Weighted Average Lease Term in years
6.6

 
7.5

 
—

 
—

 
—

 
5.9

 
5.2

 
4.8

 
—

 
6.6

Total First Generation Space Leased
396,969

 
66,969

 
—

 
—

 
—

 
25,683

 
11,865

 
100,990

 
11,371

 
613,847

Second Generation Space Leasing
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

Renewed Space
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

Renewal Square Feet Leased
386,900

 
38,584

 
45,935

 
21,734

 
192,069

 
134,406

 
15,756

 
100,445

 
—

 
935,829

Expiring Square Feet
748,767

 
129,702

 
78,359

 
21,734

 
230,003

 
242,780

 
15,756

 
149,769

 
—

 
1,616,870

Vacated Square Feet
361,867

 
91,118

 
32,424

 
—

 
37,934

 
108,374

 
—

 
49,324

 
—

 
681,041

Retention Rate (% based upon square feet)
51.7
 %
 
29.8
 %
 
58.6
%
 
100.0
 %
 
83.5
 %
 
55.4
 %
 
100.0
 %
 
67.1
 %
 
0.0
%
 
57.9
 %
Renewed Space Data:
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

Average Committed Cost per Square Foot
$
8.52

 
$
8.70

 
$
15.70

 
$
10.94

 
$
4.35

 
$
5.13

 
$
2.41

 
$
12.53

 
$
—

 
$
7.92

Weighted Average Lease Term in years
4.0

 
4.3

 
5.3

 
4.9

 
2.6

 
4.3

 
6.5

 
5.4

 
—

 
4.1

Change in Total Rent - GAAP
2.9
 %
 
(4.8
)%
 
9.3
%
 
(11.6
)%
 
3.1
 %
 
(5.3
)%
 
1.6
 %
 
9.5
 %
 
0.0
%
 
1.5
 %
Change in Total Rent - Cash
(4.6
)%
 
(12.7
)%
 
3.8
%
 
(19.0
)%
 
(1.1
)%
 
(14.6
)%
 
(5.9
)%
 
(7.9
)%
 
0.0
%
 
(6.5
)%
Retenanted Space
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

Leased Square Feet
168,477

 
87,175

 
—

 
—

 
14,370

 
34,431

 
26,786

 
32,554

 
—

 
363,793

Retenanted Space Data:
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

Average Committed Cost per Square Foot
$
17.33

 
$
37.22

 
$
—

 
$
—

 
$
17.49

 
$
5.86

 
$
7.50

 
$
25.75

 
$
—

 
$
21.05

Weighted Average Lease Term in years
4.9

 
6.0

 
—

 
—

 
5.3

 
3.4

 
5.3

 
5.4

 
—

 
5.1

Change in Total Rent - GAAP
(0.2
)%
 
(15.1
)%
 
0.0
%
 
0.0
 %
 
4.9
 %
 
(16.2
)%
 
(24.0
)%
 
(9.1
)%
 
0.0
%
 
(7.8
)%
Change in Total Rent - Cash
(10.3
)%
 
(21.0
)%
 
0.0
%
 
0.0
 %
 
1.0
 %
 
(26.4
)%
 
(41.8
)%
 
(20.5
)%
 
0.0
%
 
(17.1
)%
Total Second Generation Space Leased
555,377

 
125,759

 
45,935

 
21,734

 
206,439

 
168,837

 
42,542

 
132,999

 
—

 
1,299,622

Total Second Generation Space Data:
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

Average Committed Cost per Square Foot
$
11.19

 
$
28.47

 
$
15.70

 
$
10.94

 
$
5.27

 
$
5.28

 
$
5.62

 
$
15.76

 
$
—

 
$
11.60

Weighted Average Lease Term in Years
4.3

 
5.5

 
5.3

 
4.9

 
2.8

 
4.1

 
5.8

 
5.4

 
—

 
4.3

Change in Total Rent - GAAP
2.0
 %
 
(11.9
)%
 
9.3
%
 
(11.6
)%
 
3.2
 %
 
(7.5
)%
 
(15.5
)%
 
5.0
 %
 
0.0
%
 
(1.2
)%
Change in Total Rent - Cash
(6.2
)%
 
(18.5
)%
 
3.8
%
 
(19.0
)%
 
(0.9
)%
 
(17.1
)%
 
(30.7
)%
 
(11.0
)%
 
0.0
%
 
(9.5
)%
Total Square Feet Leased
952,346

 
192,728

 
45,935

 
21,734

 
206,439

 
194,520

 
54,407

 
233,989

 
11,371

 
1,913,469


(1) This presentation reflects consolidated properties.
Notes:  No expiration, renewal or retenanting activity transpired in our Other region.
Activity is exclusive of owner occupied space and leases with less than a one-year term. Retention rate includes early renewals.

18

Corporate Office Properties Trust
Office Lease Expiration Analysis as of 9/30/12 (1)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total Office Portfolio
Strategic Tenant Properties Only
Year and Region of Lease (2)
 
Number of Leases Expiring
 
Square Footage of Leases Expiring
 
Annual Rental
Revenue of Expiring Leases (3) (000's)
 
Percentage
of Total Annualized 
Rental Revenue Expiring
 
Annual Rental Revenue of Expiring Leases per Occupied Square Foot
 
 
Number of Leases Expiring
 
Square Footage of Leases Expiring
 
Annual Rental
Revenue of Expiring Leases (3) (000's)
 
Percentage of Strategic TenantProperties Annualized Rental Revenue Expiring
 
Annual Rental Revenue of Expiring Leases per Occupied Square Foot
Baltimore/Washington Corridor
 
19

 
365,413

 
$
10,348

 
2.3
%
 
$
28.32

 
 
3

 
290,523

 
$
8,599

 
3.1
%
 
$
29.60

Northern Virginia
 
9

 
253,083

 
7,046

 
1.6
%
 
27.84

 
 
2

 
235,595

 
6,483

 
2.3
%
 
27.52

Washington, DC-Capitol Riverfront
 
2

 
7,779

 
350

 
0.1
%
 
44.97

 
 
2

 
7,779

 
350

 
0.1
%
 
44.97

St. Mary’s and King George Cos.
 
5

 
124,522

 
2,019

 
0.4
%
 
16.22

 
 
5

 
124,522

 
2,019

 
0.7
%
 
16.22

Greater Baltimore
 
9

 
33,070

 
576

 
0.1
%
 
17.41

 
 
—

 
—

 
—

 
0.0
%
 
—

Colorado Springs
 
5

 
23,774

 
384

 
0.1
%
 
16.17

 
 
—

 
—

 
—

 
0.0
%
 
—

Other
 
0

 
23,299

 
617

 
0.1
%
 
26.49

 
 
—

 
—

 
—

 
0.0
%
 
—

2012
 
49

 
830,940

 
21,340

 
4.7
%
 
25.68

 
 
12

 
658,419

 
17,451

 
6.2
%
 
26.50

Baltimore/Washington Corridor
 
50

 
1,340,381

 
41,557

 
9.0
%
 
31.00

 
 
18

 
942,295

 
32,048

 
11.4
%
 
34.01

Northern Virginia
 
13

 
136,504

 
3,614

 
1.0
%
 
26.48

 
 
5

 
41,036

 
1,246

 
0.4
%
 
30.35

Washington, DC-Capitol Riverfront
 
4

 
111,822

 
4,771

 
1.0
%
 
42.67

 
 
4

 
111,822

 
4,771

 
1.7
%
 
42.67

St. Mary’s and King George Cos.
 
13

 
156,724

 
3,169

 
1.0
%
 
20.22

 
 
13

 
156,724

 
3,169

 
1.1
%
 
20.22

Greater Baltimore
 
12

 
61,161

 
1,357

 
—
%
 
22.19

 
 
—

 
—

 
—

 
0.0
%
 
—

Suburban Maryland
 
2

 
47,484

 
1,412

 
—
%
 
29.75

 
 
—

 
—

 
—

 
0.0
%
 
—

Colorado Springs
 
11

 
139,179

 
2,967

 
1.0
%
 
21.32

 
 
1

 
1,268

 
2

 
0.0
%
 
1.89

2013
 
105

 
1,993,255

 
58,847

 
13.0
%
 
29.52

 
 
41

 
1,253,145

 
41,236

 
14.7
%
 
32.91

Baltimore/Washington Corridor
 
39

 
767,005

 
22,670

 
5.0
%
 
29.56

 
 
14

 
566,139

 
17,041

 
6.1
%
 
30.10

Northern Virginia
 
10

 
474,721

 
14,967

 
3.3
%
 
31.53

 
 
6

 
258,433

 
8,168

 
2.9
%
 
31.61

Washington, DC-Capitol Riverfront
 
6

 
70,200

 
3,209

 
0.7
%
 
45.71

 
 
6

 
70,200

 
3,209

 
1.1
%
 
45.71

St. Mary’s and King George Cos.
 
12

 
84,068

 
1,689

 
0.4
%
 
20.09

 
 
12

 
84,068

 
1,689

 
0.6
%
 
20.09

Greater Baltimore
 
20

 
115,516

 
2,055

 
0.5
%
 
17.79

 
 
—

 
—

 
—

 
0.0
%
 
—

Suburban Maryland
 
2

 
19,261

 
668

 
0.1
%
 
34.69

 
 
—

 
—

 
—

 
0.0
%
 
—

Colorado Springs
 
10

 
167,375

 
3,405

 
0.7
%
 
20.35

 
 
1

 
22,814

 
539

 
0.2
%
 
23.61

Other
 
1

 
115,167

 
3,050

 
0.7
%
 
26.49

 
 
—

 
—

 
—

 
0.0
%
 
—

2014
 
100

 
1,813,313

 
51,713

 
11.4
%
 
28.52

 
 
39

 
1,001,654

 
30,646

 
10.9
%
 
30.60

2015
 
110

 
2,736,784

 
72,603

 
16.0
%
 
26.53

 
 
52

 
1,795,635

 
52,825

 
18.9
%
 
29.42

2016
 
76

 
1,572,429

 
42,140

 
9.3
%
 
26.80

 
 
26

 
824,210

 
22,940

 
8.3
%
 
27.83

Thereafter
 
243

 
7,432,539

 
207,521

 
45.6
%
 
27.92

 
 
83

 
3,641,852

 
114,833

 
41.0
%
 
31.53

Total / Average
 
683
 
16,379,260

 
$
454,164

 
100.0
%
 
$
27.73

 
 
253

 
9,174,915

 
$
279,931

 
100.0
%
 
$
30.51

Note:  As of September 30, 2012, the weighted average lease term is 4.6 years for the consolidated portfolio and 4.5 for the Strategic Tenant Properties.
(1)
This presentation reflects consolidated properties.  This expiration analysis reflects occupied space and includes the effect of early renewals completed on existing leases but excludes the effect of new tenant leases on square feet yet to commence as of September 30, 2012 of 340,647 for the portfolio, including 148,867 for the Strategic Tenant Properties.
(2)
Many of our government leases are subject to certain early termination provisions which are customary to government leases.  The year of lease expiration was computed assuming no exercise of such early termination rights.
(3)
Total Annualized Rental Revenue is the monthly contractual base rent as of September 30, 2012 multiplied by 12 plus the estimated annualized expense reimbursements under existing leases.

19

Corporate Office Properties Trust
Top 20 Office Tenants as of 9/30/12
(Based on Annualized Rental Revenue of
office properties, dollars in thousands)
Tenant
 
Number of Leases
 
Total
Occupied Square Feet
 
Percentage of
Total
Occupied Square Feet
 
Total
Annualized
Rental Revenue (1)
 
Percentage
of Total
Annualized 
Rental Revenue
 
Weighted
Average
Remaining Lease Term (2)
United States of America
(3)
62

 
3,316,416

 
20.2
%
 
$
109,350

 
24.1
%
 
5.1

Northrop Grumman Corporation
 
12

 
1,076,634

 
6.6
%
 
28,873

 
6.4
%
 
6.7

Booz Allen Hamilton, Inc.
 
8

 
778,834

 
4.8
%
 
24,994

 
5.5
%
 
3.6

Computer Sciences Corporation
 
7

 
735,391

 
4.5
%
 
22,786

 
5.0
%
 
1.4

General Dynamics Corporation
 
10

 
536,105

 
3.3
%
 
16,619

 
3.7
%
 
4.8

The MITRE Corporation
 
4

 
286,553

 
1.7
%
 
8,682

 
1.9
%
 
4.3

The Aerospace Corporation
 
3

 
254,869

 
1.6
%
 
7,993

 
1.8
%
 
2.4

ITT Corporation
 
7

 
317,612

 
1.9
%
 
7,992

 
1.8
%
 
3.4

Wells Fargo & Company
 
4

 
202,674

 
1.2
%
 
7,814

 
1.7
%
 
5.9

CareFirst, Inc.
 
2

 
222,343

 
1.4
%
 
7,194

 
1.6
%
 
9.1

Kratos Defense and Security Solutions
 
5

 
251,792

 
1.5
%
 
7,016

 
1.5
%
 
7.4

L-3 Communications Holdings, Inc.
 
3

 
214,236

 
1.3
%
 
6,331

 
1.4
%
 
2.1

The Boeing Company
 
6

 
199,785

 
1.2
%
 
6,293

 
1.4
%
 
3.1

AT&T Corporation
 
4

 
315,353

 
1.9
%
 
5,717

 
1.3
%
 
6.6

Raytheon Company
 
7

 
162,919

 
1.0
%
 
5,032

 
1.1
%
 
2.7

Ciena Corporation
 
4

 
236,678

 
1.4
%
 
4,748

 
1.0
%
 
1.1

Science Applications International Corp.
 
4

 
133,408

 
0.8
%
 
4,409

 
1.0
%
 
6.9

The Johns Hopkins Institutions
 
5

 
141,122

 
0.9
%
 
3,758

 
0.8
%
 
4.1

Unisys Corporation
 
1

 
156,891

 
1.0
%
 
3,697

 
0.8
%
 
7.7

TASC Inc.
 
2

 
103,303

 
0.6
%
 
3,362

 
0.7
%
 
1.4

Subtotal Top 20 Office Tenants
 
160

 
9,642,918

 
58.9
%
 
292,660

 
64.4
%
 
4.7

All remaining tenants
 
523

 
6,736,342

 
41.1
%
 
161,504

 
35.6
%
 
4.4

Total/Weighted Average
 
683

 
16,379,260

 
100.0
%
 
$
454,164

 
100.0
%
 
4.6

 
(1)  Total Annualized Rental Revenue is the monthly contractual base rent as of September 30, 2012, multiplied by 12, plus the estimated annualized expense reimbursements under existing leases.
(2)  The weighting of the lease term was computed using Total Rental Revenue.
(3)  Substantially all of our government leases are subject to early termination provisions which are customary in government leases. The weighted average remaining lease term was computed assuming no exercise of such early termination rights.


20


Corporate Office Properties Trust
Dispositions
Location
 
Property Region
 
Business Park/Submarket
 
Number of Buildings
 
Square Feet
 
Transaction
Date
 
Occupancy on Transaction Date
 
Transaction 
Price
(in thousands)
 
Operating Properties
 
 
 
 
 
 
 
 

 
 
 
 
 
 

January 2012 White Marsh Portfolio Disposition
 
Greater Baltimore
 
White Marsh Portfolio
 
5

 
163,000

 
1/30/12
 
82.3
%
 
$
19,100

1101 Sentry Gateway
 
San Antonio
 
San Antonio
 
1

 
95,000

 
1/31/12
 
0.0
%
 
13,500

222 and 224 Schilling Circle
 
Greater Baltimore
 
Hunt Valley
 
2

 
56,000

 
2/10/12
 
72.3
%
 
4,400

Total Operating Properties
 
 
 
 
 
8

 
314,000

 
 
 
 
 
37,000

Non Operating Properties
 
 
 
 
 
N/A

 
N/A

 
Various
 
N/A

 
25,695

Subtotal - Quarter Ended 3/31/12
 
 
 
 
 
8

 
314,000

 
 
 
 
 
62,695

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Operating Properties
 
 
 
 
 
 
 
 

 
 
 
 
 
 

15 and 45 West Gude Drive
 
Suburban Maryland
 
Rockville
 
2

 
231,000

 
5/2/12
 
89.4
%
 
53,070

11800 Tech Road
 
Suburban Maryland
 
Montgomery
 
1

 
240,000

 
6/14/12
 
82.5
%
 
21,300

Total Operating Properties
 
 
 
 
 
3

 
471,000

 
 
 
 
 
74,370

Non Operating Properties
 
 
 
 
 
N/A

 
N/A

 
5/2/12
 
N/A

 
1,100

Subtotal - Quarter Ended 6/30/12
 
 
 
 
 
3

 
471,000

 
 
 
 
 
75,470

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Operating Properties
 
 
 
 
 
 
 
 
 
 
 
 
 
 
400 Professional Drive (1)
 
Suburban Maryland
 
Gaithersburg
 
1

 
130,000

 
7/2/12
 
66.7
%
 
16,198

July 2012 Portfolio Disposition
 
B/W Corridor and Greater Baltimore
 
Various
 
23

 
1,387,000

 
7/24/12
 
85.4
%
 
161,901

Total Operating Properties
 
 
 
 
 
24

 
1,517,000

 
 
 
 
 
178,099

Non Operating Properties
 
 
 
 
 
N/A

 
N/A

 
7/24/12
 
N/A

 
1,289

Subtotal - Quarter Ended 9/30/12
 
 
 
 
 
24

 
1,517,000

 
 
 
 
 
179,388

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total
 
 
 
 
 
35

 
2,302,000

 
 
 
 
 
$
317,553

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(1) The mortgage lender accepted a deed in lieu of foreclosure on the property, resulting in our transfer of title to the property in exchange for extinguishment of debt plus accrued interest. The transaction price represents the amount of debt and accrued interest extinguished.


21

Corporate Office Properties Trust
Acquisition
Location
 
Property Region
 
Business Park/Submarket
 
Number of Buildings
 
Square Feet
 
Transaction
Date
 
Occupancy on Transaction Date
 
Transaction 
Price
(in thousands)
 
13857 McLearen Road
 
Northern Virginia
 
Route 28 South
 
1

 
202,000

 
7/11/2012
 
100.0%
 
$
48,308



22


Corporate Office Properties Trust
Construction, Redevelopment, Wholesale Data Center and Land and Pre-Construction as of 9/30/12
(dollars in thousands)
 
Construction
Projects (1)
 
Redevelopment
Projects (2)
 
Wholesale Data
Center (3)
 
Land and
Pre-Construction (4)
 
Total
 
Rentable Square Feet
Baltimore/Washington Corridor
487,727

 
—

 
N/A

 
3,968,000

 
4,455,727

Northern Virginia
239,272

 
—

 
N/A

 
1,764,000

 
2,003,272

San Antonio
—

 
—

 
N/A

 
1,157,600

 
1,157,600

Huntsville, Alabama
424,749

 
—

 
N/A

 
4,173,000

 
4,597,749

St. Mary’s and King George Counties
—

 
—

 
N/A

 
109,000

 
109,000

Greater Baltimore
128,119

 
—

 
N/A

 
2,692,000

 
2,820,119

Suburban Maryland
—

 
—

 
N/A

 
1,510,000

 
1,510,000

Colorado Springs
—

 
—

 
N/A

 
2,570,000

 
2,570,000

Greater Philadelphia
—

 
296,760

 
N/A

 
604,000

 
900,760

Other
—

 
—

 
N/A

 
967,000

 
967,000

Total
1,279,867

 
296,760

 
N/A

 
19,514,600

 
21,091,227

 
Costs to date by region
Baltimore/Washington Corridor
$
63,422

 
$
—

 
$
—

 
$
93,010

 
$
156,432

Northern Virginia
57,428

 
—

 
—

 
66,692

 
124,120

San Antonio
—

 
—

 
—

 
23,452

 
23,452

Huntsville, Alabama
22,513

 
—

 
—

 
13,511

 
36,024

St. Mary’s and King George Counties
—

 
—

 
—

 
2,685

 
2,685

Greater Baltimore
19,051

 
—

 
—

 
96,395

 
115,446

Suburban Maryland
—

 
—

 
—

 
12,524

 
12,524

Colorado Springs
—

 
—

 
—

 
24,905

 
24,905

Greater Philadelphia
—

 
31,131

 
—

 
20,593

 
51,724

Wholesale Data Center
—

 
—

 
205,152

 
—

 
205,152

Other
—

 
—

 
—

 
6,527

 
6,527

Total
$
162,414

 
$
31,131

 
$
205,152

 
$
360,294

 
$
758,991

 
Costs to date by balance sheet line item
Operating properties
$
12,214

 
$
8,665

 
$
103,034

 
$
17,005

 
$
140,918

Projects in development or held for future development, including associated land costs
148,583

 
21,652

 
101,563

 
342,797

 
614,595

Assets held for sale
—

 
—

 
—

 
466

 
466

Deferred leasing costs
1,617

 
814

 
555

 
26

 
3,012

Total
$
162,414

 
$
31,131

 
$
205,152

 
$
360,294

 
$
758,991

(1) Represents construction projects as listed on page 24, which includes three properties designated as under construction subsequent to 9/30/12.
(2) Represents redevelopment projects as listed on page 25.
(3) Represents our wholesale data center as listed on page 26.
(4) Represents our land held for future development and pre-construction as listed on page 27, which excludes three properties designated as under construction subsequent to 9/30/12.

23

Corporate Office Properties Trust
Summary of Construction Projects as of 10/17/12 (1)
(dollars in thousands) 
 
 
 
Park/Submarket
Total Rentable Square Feet
Percentage Leased as of
as of 9/30/12 (2)
Actual or Anticipated Shell Completion Date
 Anticipated Operational Date (3)
 
Anticipated Total Cost
Cost to Date
Cost to Date Placed in Service
 
 
Property and Location
10/17/2012
 
Government Demand Drivers
 
 
 

 
 

 

 

 
 
 
7205 Riverwood Road
Columbia, Maryland
 
Howard Co. Perimeter
89,268

100%
$
22,996

$
15,551

$
—

1Q 12
1Q 13
 
7175 Riverwood Road
Columbia, Maryland
 
Howard Co. Perimeter
25,939

100%
9,013

2,846

—

1Q 13
3Q 13
 
312 Sentinel Way
Annapolis Junction, Maryland
(1)
Howard Co. Perimeter
125,044

0%
36,700

12,580

3,969

4Q 13
4Q 14
 
Subtotal Government
 
 
240,251

48%
$
68,709

$
30,977

$
3,969

 
 
 
% of Total Demand Drivers
 
 
19
%
 
 

 

 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Defense IT Demand Drivers
 
 
 

 
 

 

 

 
 
 
410 National Business Parkway Jessup, Maryland
 
BWI Airport
110,154

48%
$
25,310

$
18,482

$
—

4Q 11
4Q 12
 
420 National Business Parkway
   Jessup, Maryland
 
BWI Airport
137,322

0%
35,482

13,963

—

2Q 13
2Q 14
 
7770 Backlick Road (Patriot Ridge) Springfield, Virginia
(4)
Springfield
239,272

46%
74,000

57,428

12,979

4Q 12
4Q 13
 
206 Research Boulevard
Aberdeen, Maryland
 
Harford County
128,119

0%
26,442

19,051

—

3Q 11
3Q 12
 
1000 Redstone Gateway
Huntsville, Alabama
 
Huntsville
121,105

100%
23,719

16,565

—

1Q 12
1Q 13
 
1100 Redstone Gateway
Huntsville, Alabama
(1)
Huntsville
121,105

100%
21,677

519

—

1Q 14
1Q 14
 
1200 Redstone Gateway
Huntsville, Alabama
(1)
Huntsville
121,105

100%
24,813

1,592

—

4Q 13
4Q 13
 
7200 Redstone Gateway
    Huntsville, Alabama
 
Huntsville
61,434

0%
7,792

3,837

—

4Q 12
4Q 13
 
Subtotal Defense IT Demand Drivers
 
 
1,039,616

51%
$
239,235

$
131,437

$
12,979

 
 
 
% of Total Demand Drivers
 
 
81
%
 
 

 

 

 
 
 
Total Under Construction
 
 
1,279,867

50%
$
307,944

$
162,414

$
16,948

 
 
(1) This schedule includes properties designated as under construction as of 9/30/12, as well as our 312 Sentinel Way, 1100 Redstone Gateway and 1200 Redstone Gateway properties, which were designated as under construction subsequent to 9/30/12.
(2)
Cost includes land, construction, leasing costs and allocated portion of structured parking and other shared infrastructure, if applicable.
(3)
Anticipated operational date is the estimated date when leases have commenced on 100% of a property’s space or one year from the cessation of major construction activities.
(4)
Although classified as “Under Construction,” 81,675 square feet are operational.
 
Demand Driver Categories (as classified by COPT management):
*
Defense IT:  Development opportunity created through our current and future relationships with defense information technology contractors and, possibly, minor Government tenancy.
*
Government:  Development opportunity created through our existing and future relationship with various agencies of the government of the United States of America.  Excludes Government tenancy included in Defense Information Technology.
*
Market Demand:  Development opportunity created through projected unfulfilled space requirements within a specific submarket; potential submarket demand exceeds existing supply.
*
Research Park:  Development opportunity created through specific research park relationship.

24

Corporate Office Properties Trust
Summary of Redevelopment Projects as of 9/30/12
(dollars in thousands) 
 
 
 
 
 
 
 
 
 
 
 
 
Park/Submarket
Total Rentable Square Feet
Percentage Leased as of
as of 9/30/12 (1)
Actual or Anticipated Shell Completion Date
 Anticipated Operational Date (2)
 
 
Anticipated Total Cost
 Cost to Date
Cost to Date Placed in Service
 
 
Property and Location
 
10/17/2012
Market Demand Drivers
 
 
 

 
 

 

 

 
 
751 Arbor Way (Hillcrest I)
Blue Bell, Pennsylvania
(3)
Greater Philadelphia
113,293

51%
$
21,416

$
17,400

$
9,483

1Q12
1Q13
755 Arbor Way (Hillcrest II)
Blue Bell, Pennsylvania
 
Greater Philadelphia
183,467

28%
34,900

13,731

$
—

2Q 13
2Q 14
Total Under Redevelopment
296,760

36%
$
56,316

$
31,131

$
9,483

 
 
 
(1)
Cost includes construction, leasing costs and allocated portion of shared infrastructure.
(2)
Anticipated operational date is the estimated date when leases have commenced on 100% of a property’s space or one year from the cessation of major construction activities.
(3)
Although classified as “Under Redevelopment,” 53,605 square feet are operational.



25

Corporate Office Properties Trust
Wholesale Data Center as of 9/30/12
(dollars in thousands) 
 
Gross 
Building Area
 
Raised Floor Square Footage (1)
 
Initial Stabilization Critical Load (in MWs) (2)
 
Critical Load Used
 
Critical Load Leased
 
Critical Load
Upon
Completion Leased
 
MW Operational
 
Anticipated Total Cost (3)
 
Cost to date
 
Cash NOI Three Months Ended 9/30/12
 
Cash NOI Nine Months Ended 9/30/12
 
 
 
 
 
 
 
 
 
Property and Location
 
 
 
 
 
 
 
 
COPT DC-6
9651 Hornbaker Road
Manassas, Virginia
233,000
 
100,000
 
18
 
3
 
4
 
22%
 
33%
 
$
275,230

 
$
205,152

 
$
(17
)
 
$
256



Lease Expiration Analysis
Year of Lease Expiration
Number of Leases Expiring
Raised Floor Square Footage
Critical Load Used (MW)
Total
Annual Rental
Revenue of
Expiring Leases
2019
1
7,172

1.0
$
2,098

2020
1
19,023

2.0
3,958

 
 
 

3.0
$
6,056

 
(1)
Raised floor square footage is that portion of the gross building area where tenants locate their computer servers. Raised floor area is considered to be the net rentable square footage.
(2)
Critical load is the power available for exclusive use of tenants in the property (expressed in terms of megawatts (“MWs”)).
(3)
Anticipated total cost includes land, construction and leasing costs.


26

Corporate Office Properties Trust
Summary of Land and Pre-Construction as of 10/17/12 (1)
Location
Acres
 
Estimated Developable Square Feet
Baltimore/Washington Corridor
 

 
 

National Business Park
182

 
1,792,000

Columbia Gateway
22

 
520,000

Airport Square
6

 
89,000

Arundel Preserve
84

up to
1,382,000

Other
6

 
60,000

Subtotal
300

 
3,843,000

Northern Virginia
 

 
 

Westfields Corporate Center
23

 
400,000

Westfields Park Center
33

 
400,000

Woodland Park
5

 
225,000

Patriot Ridge
11

 
739,000

Subtotal
72

 
1,764,000

San Antonio, Texas
 

 
 

8100 Potranco Road
9

 
125,000

Northwest Crossroads
31

 
375,000

Sentry Gateway
38

 
658,000

Subtotal
78

 
1,158,000

Huntsville, Alabama
443

 
4,173,000

St. Mary’s & King George Counties
44

 
109,000

Greater Baltimore
187

 
2,692,000

Suburban Maryland
156

 
1,510,000

Colorado Springs
175

 
2,570,000

Greater Philadelphia, Pennsylvania
8

 
604,000

Other (2)
217

 
967,000

Total land held and pre-construction
1,680

 
19,390,000

Total costs to date as of 9/30/12 (3)
 

 
$
360,294

 
(1)
This land inventory schedule excludes all properties listed as construction or redevelopment as detailed on pages 24 and 25, and includes properties under ground lease to us. This schedule excludes our 312 Sentinel Way, 1100 Redstone Gateway and 1200 Redstone Gateway properties, which were designated as under construction subsequent to 9/30/12.
(2)
This land is being put back to the jurisdictional county per a development agreement described under “Consolidated Joint Ventures.”
(3)
Represents total costs to date, as reported on page 23.

27


Corporate Office Properties Trust
Quarterly Common Equity Analysis
(dollars and shares in thousands, except per share amounts)
SHAREHOLDER CLASSIFICATION
Common Shares
 
Common Units
 
As if Converted
Preferred
Shares/Units
 
Total
 
Diluted
Ownership % of Total
As of September 30, 2012:
Insiders
632

 
3,568

 
—

 
4,200

 
5.46
%
Non-insiders
71,526

 
639

 
610

 
72,775

 
94.54
%
 
72,158

 
4,207

 
610

 
76,975

 
100.00
%
 
COMMON EQUITY - End of Quarter
9/30/12
 
6/30/12
 
3/31/12
 
12/31/11
 
9/30/11
Unrestricted Common Shares
71,730

 
71,652

 
71,558

 
71,363

 
71,336

Restricted Common Shares
428

 
433

 
480

 
648

 
651

Common Shares
72,158

 
72,085

 
72,038

 
72,011

 
71,987

Common Units
4,207

 
4,247

 
4,267

 
4,302

 
4,319

Total
76,365

 
76,332

 
76,305

 
76,313

 
76,306

End of Quarter Common Share Price
$
23.97

 
$
23.51

 
$
23.21

 
$
21.26

 
$
21.78

Market Value of Common Shares/Units
$
1,830,469


$
1,794,565


$
1,771,045


$
1,622,417


$
1,661,948

Common Shares Trading Volume
 

 
 

 
 

 
 

 
 

Average Daily Volume (Shares)
528

 
588

 
809

 
842

 
951

Average Daily Volume
$
12,246

 
$
13,303

 
$
19,218

 
$
18,604

 
$
25,589

As a Percentage of Weighted Average Common Shares
0.7
%
 
0.8
%
 
1.1
%
 
1.2
%
 
1.3
%
Common Share Price Range
 

 
 

 
 

 
 

 
 

Quarterly High
$
25.61

 
$
24.05

 
$
25.48

 
$
25.96

 
$
32.07

Quarterly Low
$
21.36

 
$
21.13

 
$
20.58

 
$
19.35

 
$
21.75

Quarterly Average
$
23.18

 
$
22.64

 
$
23.76

 
$
22.11

 
$
26.90



28

Corporate Office Properties Trust
Quarterly Preferred Equity and Total Market Capitalization Analysis
(dollars and shares in thousands, except per share amounts)
 
9/30/12
 
6/30/12
 
3/31/12
 
12/31/11
 
9/30/11
PREFERRED EQUITY
 

 
 

 
 

 
 

 
 

Convertible Preferred Equity - End of Quarter
 

 
 

 
 

 
 

 
 

Convertible Series I Preferred Units Outstanding
352

 
352

 
352

 
352

 
352

Conversion Ratio
0.5000

 
0.5000

 
0.5000

 
0.5000

 
0.5000

Common Shares Issued Assuming Conversion
176

 
176

 
176

 
176

 
176

Convertible Series K Preferred Shares Outstanding
532

 
532

 
532

 
532

 
532

Conversion Ratio
0.8163

 
0.8163

 
0.8163

 
0.8163

 
0.8163

Common Shares Issued Assuming Conversion
434

 
434

 
434

 
434

 
434

Nonconvertible Preferred Equity - liquidation preference
 

 
 

 
 

 
 

 
 

Redeemable Series G Shares - 8.0%
$
—

 
$
55,000

 
$
55,000

 
$
55,000

 
$
55,000

Redeemable Series H Shares - 7.5%
50,000

 
50,000

 
50,000

 
50,000

 
50,000

Redeemable Series J Shares - 7.625%
84,750

 
84,750

 
84,750

 
84,750

 
84,750

Redeemable Series L Shares Outstanding - 7.375%
172,500

 
172,500

 
—

 
—

 
—

Total Nonconvertible Preferred Equity
307,250

 
362,250

 
189,750

 
189,750

 
189,750

Convertible Preferred Equity - liquidation preference
 

 
 

 
 

 
 

 
 

Convertible Series I Units - 7.5%
8,800

 
8,800

 
8,800

 
8,800

 
8,800

Convertible Preferred Equity - liquidation preference
 

 
 

 
 

 
 

 
 

Convertible Series K Shares - 5.6%
26,583

 
26,583

 
26,583

 
26,583

 
26,583

Total Convertible Preferred Equity
35,383

 
35,383

 
35,383

 
35,383

 
35,383

Total Liquidation Preference of Preferred Equity
$
342,633

 
$
397,633

 
$
225,133

 
$
225,133

 
$
225,133

CAPITALIZATION
 

 
 

 
 

 
 

 
 

Liquidation Value of Preferred Shares/Units
$
342,633

 
$
397,633

 
$
225,133

 
$
225,133

 
$
225,133

Market Value of Common Shares/Units
1,830,469

 
1,794,565

 
1,771,045

 
1,622,417

 
1,661,948

Total Equity Market Capitalization
2,173,102

 
2,192,198

 
1,996,178

 
1,847,550

 
1,887,081

Total Debt
2,169,315

 
2,191,851

 
2,418,078

 
2,426,303

 
2,420,073

Total Market Capitalization
$
4,342,417

 
$
4,384,049

 
$
4,414,256

 
$
4,273,853

 
$
4,307,154


29

Corporate Office Properties Trust
Dividend Analysis
 
Three Months Ended
 
Nine Months Ended
 
9/30/12
 
6/30/12
 
3/31/12
 
12/31/11
 
9/30/11
 
9/30/12
 
9/30/11
Common Share Dividends
 

 
 

 
 

 
 

 
 

 
 
 
 
Dividends per share/unit
$
0.2750

 
$
0.2750

 
$
0.2750

 
$
0.4125

 
$
0.4125

 
$
0.8250

 
$
1.2375

Dividend Yield at Quarter End
4.59
%

4.68
%

4.74
%
 
7.76
 %
 
7.58
%
 
4.59
%
 
7.58
%
Common Dividend Payout Ratios
 

 
 

 
 

 
 

 
 

 
 

 
 

Diluted FFO Payout
53.1
%
 
51.0
%
 
51.0
%
 
(138.9
)%
 
85.0
%
 
51.7
%
 
117.0
%
Diluted FFO Payout, as adjusted for comparability
51.7
%
 
50.8
%
 
51.8
%
 
74.6
 %
 
80.5
%
 
51.4
%
 
80.3
%
Diluted AFFO Payout
61.1
%
 
57.3
%
 
51.5
%
 
126.7
 %
 
94.5
%
 
56.4
%
 
107.8
%
Diluted AFFO Payout, excluding recurring capital expenditures on properties in disposition plans
62.3
%
 
53.8
%
 
49.6
%
 
93.4
 %
 
87.0
%
 
54.7
%
 
92.8
%
Dividend Coverage - Diluted FFO
1.88
x
 
1.96
x
 
1.96
x
 
(0.72
)x
 
1.18
x
 
1.94
x
 
0.85
x
Dividend Coverage - Diluted FFO, as adjusted for comparability
1.94
x
 
1.97
x
 
1.93
x
 
1.34
x
 
1.24
x
 
1.94
x
 
1.25
x
Dividend Coverage - Diluted AFFO
1.64
x
 
1.74
x
 
1.94
x
 
0.79
x
 
1.06
x
 
1.77
x
 
0.93
x
Series I Preferred Unit Distributions
 

 
 

 
 

 
 

 
 

 
 

 
 

Preferred Unit Distributions Per Unit
$
0.46875

 
$
0.46875

 
$
0.46875

 
$
0.46875

 
$
0.46875

 
 

 
 

Preferred Unit Distributions Yield
7.500
%
 
7.500
%
 
7.500
%
 
7.500
 %
 
7.500
%
 
 

 
 

Quarter End Recorded Book Value
$
25.00

 
$
25.00

 
$
25.00

 
$
25.00

 
$
25.00

 
 

 
 

Series G Preferred Share Dividends (1)
 

 
 

 
 

 
 

 
 

 
 

 
 

Preferred Share Dividends Per Share
$
0.20000

 
$
0.50000

 
$
0.50000

 
$
0.50000

 
$
0.50000

 
 

 
 

Preferred Share Dividend Yield
8.000
%
 
8.000
%
 
8.000
%
 
8.000
 %
 
8.000
%
 
 

 
 

Quarter End Recorded Book Value
$
25.00

 
$
25.00

 
$
25.00

 
$
25.00

 
$
25.00

 
 

 
 

Series H Preferred Share Dividends
 

 
 

 
 

 
 

 
 

 
 

 
 

Preferred Share Dividends Per Share
$
0.46875

 
$
0.46875

 
$
0.46875

 
$
0.46875

 
$
0.46875

 
 

 
 

Preferred Share Dividend Yield
7.500
%
 
7.500
%
 
7.500
%
 
7.500
 %
 
7.500
%
 
 

 
 

Quarter End Recorded Book Value
$
25.00

 
$
25.00

 
$
25.00

 
$
25.00

 
$
25.00

 
 

 
 

Series J Preferred Share Dividends
 

 
 

 
 

 
 

 
 

 
 

 
 

Preferred Share Dividends Per Share
$
0.47656

 
$
0.47656

 
$
0.47656

 
$
0.47656

 
$
0.47656

 
 

 
 

Preferred Share Dividend Yield
7.625
%
 
7.625
%
 
7.625
%
 
7.625
 %
 
7.625
%
 
 

 
 

Quarter End Recorded Book Value
$
25.00

 
$
25.00

 
$
25.00

 
$
25.00

 
$
25.00

 
 

 
 

Series K Preferred Share Dividends
 

 
 

 
 

 
 

 
 

 
 

 
 

Preferred Share Dividends Per Share
$
0.70000

 
$
0.70000

 
$
0.70000

 
$
0.70000

 
$
0.70000

 
 

 
 

Preferred Share Dividend Yield
5.600
%
 
5.600
%
 
5.600
%
 
5.600
 %
 
5.600
%
 
 

 
 

Quarter End Recorded Book Value
$
50.00

 
$
50.00

 
$
50.00

 
$
50.00

 
$
50.00

 
 

 
 

Series L Preferred Share Dividends (2)
 
 
 
 
 
 
 
 
 
 
 
 
 
Preferred Share Dividends Per Share
$
0.4609

 
$
0.0205

 
N/A

 
N/A

 
N/A

 
 
 
 
Preferred Share Dividend Yield
7.375
%
 
7.375
%
 
N/A

 
N/A

 
N/A

 
 
 
 
Quarter End Recorded Book Value
$
25.00

 
$
25.00

 
N/A

 
N/A

 
N/A

 
 
 
 
(1)    These shares were redeemed on August 6, 2012. The dividends reported represents the quarterly dividends prorated for the number of days the shares were outstanding.
(2)
These shares were issued on June 27, 2012. The dividends reported represents the quarterly dividends prorated for the number of days the shares were outstanding.

30

Corporate Office Properties Trust
Debt Analysis
(dollars in thousands)
 
9/30/2012
 
 
 
 
 
 
 
 
 
 
 
Stated Rate
 
GAAP 
Effective Rate
 
 
 
 
 
 
 
 
 
 
 
 
 
9/30/2012
 
6/30/2012
 
3/31/2012
 
12/31/2011
 
9/30/2011
Debt Outstanding
 
 
 
 
 

 
 

 
 

 
 

 
 

Fixed rate
 
 
 
 
 

 
 

 
 

 
 

 
 

Secured debt
6.00%
 
5.92%
 
$
978,461

 
$
1,009,164

 
$
1,049,204

 
$
1,052,421

 
$
1,055,540

Exchangeable Senior Notes
4.25%
 
6.05%
 
230,000

 
229,081

 
228,175

 
227,283

 
226,404

Other Unsecured Debt
0.00%
 
6.50%
 
1,809

 
5,106

 
5,078

 
5,050

 
5,022

Total fixed rate debt
5.64%
 
5.95%
 
1,210,270

 
1,243,351

 
1,282,457

 
1,284,754

 
1,286,966

Variable rate
 
 
 
 
 

 
 

 
 

 
 

 
 

Secured debt
2.48%
 
2.48%
 
$
38,671

 
$
38,844

 
$
39,027

 
$
39,213

 
$
39,397

Unsecured Revolving Credit Facility (1)
2.19%
 
2.19%
 
80,000

 
195,000

 
396,000

 
662,000

 
671,000

Construction Loans
2.72%
 
2.72%
 
70,374

 
64,656

 
50,594

 
40,336

 
22,710

Other Unsecured Debt
2.19%
 
2.19%
 
770,000

 
650,000

 
650,000

 
400,000

 
400,000

Total variable rate debt
2.24%
 
2.24%
 
$
959,045

 
$
948,500

 
$
1,135,621

 
$
1,141,549

 
$
1,133,107

Total debt outstanding
 
 
 
 
$
2,169,315

 
$
2,191,851

 
$
2,418,078

 
$
2,426,303

 
$
2,420,073

Variable Rate Loans Subject to Interest Rate Swaps (2)
 
 
 
 
$
438,671

 
$
438,844

 
$
659,027

 
$
659,213

 
$
409,397

% of Fixed Rate Loans (2)
 
 
 
 
76
%
 
77
%
 
80
%
 
80
%
 
70
%
% of Variable Rate Loans (2)
 
 
 
 
24
%
 
23
%
 
20
%
 
20
%
 
30
%
 
 
 
 
 
100
%
 
100
%
 
100
%
 
100
%
 
100
%
Recourse debt
 
 
 
 
$
1,163,079

 
$
1,157,860

 
$
1,350,311

 
$
1,359,343

 
$
1,355,846

Nonrecourse debt
 
 
 
 
1,006,236

 
1,033,991

 
1,067,767

 
1,066,960

 
1,064,227

Total debt outstanding
 
 
 
 
$
2,169,315

 
$
2,191,851

 
$
2,418,078

 
$
2,426,303

 
$
2,420,073

 
(1) As of September 30, 2012, our borrowing capacity under the facility was $800.0 million, of which $701.5 million was available.
(2) Includes the effect of interest rate swaps in effect during certain of the periods set forth above that hedge the risk of changes in interest rates on certain of our one-month LIBOR-based variable rate debt.

31

Corporate Office Properties Trust
Debt Analysis  (continued)
 
Three Months Ended
 
Nine Months Ended
 
9/30/12
 
6/30/12
 
3/31/12
 
12/31/11
 
9/30/11
 
9/30/12
 
9/30/11
Average Stated Interest Rates
 

 
 

 
 

 
 

 
 

 
 
 
 
Fixed rate
 

 
 

 
 

 
 

 
 

 
 
 
 
Secured debt
6.1
%
 
6.0
%
 
6.1
%
 
6.0
%
 
6.0
%
 
6.1
%
 
5.9
%
Exchangeable Senior Notes
4.3
%
 
4.3
%
 
4.3
%
 
4.3
%
 
4.0
%
 
4.3
%
 
4.0
%
Other Unsecured Debt
0.0
%
 
0.0
%
 
0.0
%
 
0.0
%
 
0.0
%
 
0.0
%
 
0.0
%
Total fixed rate debt
5.7
%
 
5.7
%
 
5.7
%
 
5.7
%
 
5.5
%
 
5.7
%
 
5.4
%
Variable rate
 

 
 

 
 

 
 

 
 

 
 

 
 

Secured debt
2.6
%
 
2.5
%
 
2.6
%
 
2.5
%
 
4.2
%
 
2.5
%
 
4.2
%
Unsecured Revolving Credit Facility
2.3
%
 
2.3
%
 
2.3
%
 
2.3
%
 
1.6
%
 
2.3
%
 
1.3
%
Construction Loans
2.8
%
 
2.7
%
 
2.8
%
 
3.0
%
 
2.1
%
 
2.8
%
 
2.0
%
Other Unsecured Debt
2.2
%
 
2.2
%
 
2.2
%
 
2.2
%
 
2.1
%
 
2.2
%
 
2.1
%
Interest rate swaps (1)
0.6
%
 
0.7
%
 
0.9
%
 
1.1
%
 
1.2
%
 
0.8
%
 
1.1
%
Total variable rate debt (1)
2.8
%
 
2.8
%
 
2.9
%
 
2.7
%
 
2.9
%
 
2.7
%
 
3.0
%
Total debt outstanding
4.4
%
 
4.3
%
 
4.3
%
 
4.3
%
 
4.5
%
 
4.4
%
 
4.6
%
Debt ratios (coverage ratios excluding capitalized interest) — All coverage computations include the effect of discontinued operations
NOI interest coverage ratio
3.6x

 
3.5x

 
3.3x

 
3.4x

 
3.4x

 
3.4x

 
3.2x

Adjusted EBITDA interest coverage ratio
3.4x

 
3.2x

 
3.0x

 
3.2x

 
3.1x

 
3.2x

 
3.0x

NOI debt service coverage ratio
3.2x

 
3.1x

 
2.9x

 
3.0x

 
3.0x

 
3.0x

 
2.8x

Adjusted EBITDA debt service coverage ratio
3.0x

 
2.8x

 
2.7x

 
2.8x

 
2.7x

 
2.8x

 
2.6x

NOI fixed charge coverage ratio
2.7x

 
2.9x

 
2.8x

 
2.9x

 
2.9x

 
2.8x

 
2.7x

Adjusted EBITDA fixed charge coverage ratio
2.6x

 
2.7x

 
2.6x

 
2.7x

 
2.6x

 
2.6x

 
2.5x

Debt to Adjusted EBITDA ratio
7.5x

 
7.6x

 
8.5x

 
8.4x

 
8.6x

 
7.6x

 
8.7x

Adjusted debt to Adjusted EBITDA ratio
6.2x

 
6.3x

 
7.1x

 
7.0x

 
7.0x

 
6.2x

 
7.0x

 

(1) Includes the effect of interest rate swaps in effect during certain of the periods set forth above that hedge the risk of changes in interest rates on certain of our one-month LIBOR-based variable rate debt.

32

Corporate Office Properties Trust
Debt Maturity Schedule
(dollars in thousands) 
 
Fixed Rate Debt
 
Variable Rate Debt
 
 
 
Annual Amortization
of Monthly
Payments
 
Balloon
Payments Due
on Maturity
 
Stated Interest Rate 
of Amounts
Maturing
 
Annual Amortization
of Monthly
Payments
 
Balloon
Payments Due
on Maturity
 
Stated Interest Rate 
of Amounts
Maturing
 
Revolving
Credit
Facility
 
Total
Scheduled
Payments
October - December
$
2,695

 
$
—

 
N/A
 
$
195

 
$
—

 
N/A
 
$
—

 
$
2,890

Total 2012
$
2,695

 
$
—

 
N/A
 
$
195

 
$
—

 
N/A
 
$
—

 
$
2,890

2013
$
9,090

 
$
120,012

 
5.56%
 
$
784

 
$
59,356

 
 
 
$
—

 
$
189,242

2014
5,845

 
151,681

(1)
 
 
815

 
—

 
 
 
80,000

(2)
238,341

2015
4,847

 
343,000

(3)
 
 
701

 
447,194

(4)
 
 
—

 
795,742

2016
4,037

 
274,605

 
 
 
—

 
—

 
 
 
—

 
278,642

Thereafter
3,257

 
300,621

 
 
 
—

 
370,000

 
 
 
—

 
673,878

 
$
29,771

 
$
1,189,919

 
 
 
$
2,495

 
$
876,550

 
 
 
$
80,000

 
$
2,178,735

 
 

 
 

 
 
 
 

 
 

 
 
 
Net discount
 
(9,420
)
 
 

 
 

 
 
 
 

 
 

 
 
 
Total Debt
 
$
2,169,315


Interest Rate Hedges at 9/30/12
 
Notional Amount
 
Fixed Rate
 
Floating Rate Index
 
Effective Date
 
Expiration Date
$
38,671

(5)
3.8300
%
 
One-Month LIBOR
 
11/2/2010
 
11/2/2015
100,000

 
0.6100
%
 
One-Month LIBOR
 
1/3/2012
 
9/1/2014
100,000

 
0.6123
%
 
One-Month LIBOR
 
1/3/2012
 
9/1/2014
100,000

 
0.8320
%
 
One-Month LIBOR
 
1/3/2012
 
9/1/2015
100,000

 
0.8320
%
 
One-Month LIBOR
 
1/3/2012
 
9/1/2015
100,000

 
0.8055
%
 
One-Month LIBOR
 
9/2/2014
 
9/1/2016
100,000

 
0.8100
%
 
One-Month LIBOR
 
9/2/2014
 
9/1/2016
100,000

 
1.6730
%
 
One-Month LIBOR
 
9/1/2015
 
8/1/2019
100,000

 
1.7300
%
 
One-Month LIBOR
 
9/1/2015
 
8/1/2019

Notes: 
(1)
We have $71.6 million of fixed debt maturing in 2034 that may be prepaid in 2014, subject to certain conditions. The above table includes $69.2 million in maturities on these loans in 2014.
(2)
Our Revolving Credit Facility matures in September 2014 and may be extended by one year at our option, subject to certain conditions.
(3)
4.25% Exchangeable Senior Notes totaling $240.0 million mature in April 2030 but are subject to a put by the holders in April 2015 and every five years thereafter.
(4)
Includes $400.0 million pertaining to a term credit agreement that matures in September 2015 and may be extended by one year at our option, subject to certain conditions.
(5)
The notional amount is scheduled to amortize to $36.2 million.

33

Corporate Office Properties Trust
Consolidated Joint Ventures as of 9/30/12
(dollars and square feet in thousands) 
Operating Properties
Operational
Square Feet
Occupancy
 
Total Assets (1)
Property Level Debt
% COPT Owned
Baltimore/Washington Corridor:
 

 
 
 

 

 
Arundel Preserve #5 (1 property)
147

79.2%
(2)
$
37,194

$
17,548

50%
Suburban Maryland:
 

 
 
 

 

 
MOR Forbes 2 LLC
56

90.9%
 
3,830

—

50%
M Square Associates, LLC (2 properties)
242

94.9%
 
56,669

38,671

50%
Total/Average
445

89.2%
 
$
97,693

$
56,219

 
NOI of Operating Properties for Three Months Ended 9/30/12 (3)
$
1,866

 
 
 

 

 
NOI of Operating Properties for Nine Months Ended 9/30/12 (3)
$
4,848

 
 
 
 
 
 
Non-operational Properties
Estimated Developable Square Feet
 
Total Assets (1)
Property Level Debt
% COPT Owned
Baltimore/Washington Corridor:
 

 
 

 

 
Arundel Preserve
1,382

 
$
5,849

$
—

50%
Suburban Maryland:
 

 
 

 

 
Indian Head Technology Center
 

 
 

 

 
Business Park (4)
967

 
6,538

—

75%
M Square Research Park
510

 
3,938

—

50%
Huntsville, Alabama:
 

 
 

 

 
Redstone Gateway
4,422

 
68,494

11,018

85%
Total
7,281

 
$
84,819

$
11,018

 
 
(1)  Total assets includes the total assets recorded on the books of the consolidated joint venture plus any outside investment basis related to the applicable joint venture and related joint ventures (formed and to be formed).
(2)
Property was 100% leased at 9/30/12.
(3)
Represents gross NOI of the joint venture operating properties before allocation to joint venture partners.
(4)
During the third quarter of 2012, the joint venture exercised its option under its development agreement with the project's jurisdictional county to require the county to repurchase the joint venture's land at its original acquisition cost. Under the terms of the agreement with the county, the repurchase must occur by August 2014.

34

Corporate Office Properties Trust
Unconsolidated Joint Venture as of 9/30/12
(dollars and square feet in thousands) 
 
 
 
 
 
Property and Location
Operational
Square Feet
Occupancy
Greater Harrisburg:
 

 
Total/Average (16 properties)
670

67.2%
COPT Investment
$
(6,420
)
 
Total Assets
$
62,986

 
Property Level Debt
$
64,264

 
NOI of Operating Properties for Three Months Ended 9/30/12 (1)
$
1,020

 
NOI of Operating Properties for Nine Months Ended 9/30/12 (1)
$
3,278

 
% COPT Owned
20
%
 
 
(1) Represents gross NOI of the joint venture operating properties before allocation to joint venture partners.




35


Corporate Office Properties Trust
Supplementary Reconciliations of Non-GAAP Measures
(in thousands)
 
Three Months Ended
 
Nine Months Ended
 
9/30/12
 
6/30/12
 
3/31/12
 
12/31/11
 
9/30/11
 
9/30/12
 
9/30/11
Net (loss) income
$
(20,765
)
 
$
11,861

 
$
6,977

 
$
(87,215
)
 
$
7,470

 
$
(1,927
)
 
$
(37,103
)
Interest expense on continuing and discontinued operations
23,366

 
24,975

 
25,675

 
24,914

 
25,629

 
74,016

 
79,387

Total income tax expense (benefit)
106

 
17

 
4,173

 
(4,636
)
 
(457
)
 
4,296

 
(6,043
)
Depreciation of furniture, fixtures and equipment (FF&E)
624

 
629

 
618

 
601

 
614

 
1,871

 
1,862

Real estate-related depreciation and amortization
30,624

 
31,666

 
31,087

 
33,030

 
36,032

 
93,377

 
101,101

Impairment losses
55,829

 
2,354

 
6,587

 
78,674

 
—

 
64,770

 
72,347

(Gain) loss on early extinguishment of debt on continuing and discontinued operations
(970
)
 
171

 
—

 
3

 
1,995

 
(799
)
 
2,020

Gain on sales of operating properties
(16,913
)
 
115

 
(4,138
)
 
(3,362
)
 
(1,299
)
 
(20,936
)
 
(1,449
)
Non-operational property sales
—

 
(33
)
 
—

 
—

 
—

 
(33
)
 
(2,717
)
Loss on interest rate derivatives
—

 
—

 
—

 
29,805

 
—

 
—

 
—

Adjusted EBITDA
$
71,901

 
$
71,755

 
$
70,979

 
$
71,814

 
$
69,984

 
$
214,635

 
$
209,405

Add back:
 

 
 

 
 

 
 

 
 

 
 

 
 

General and administrative
5,061

 
7,742

 
7,017

 
6,592

 
6,154

 
19,820

 
19,251

Business development expenses and land carry costs, including discontinued operations
1,632

 
1,304

 
1,594

 
1,819

 
1,768

 
4,530

 
4,378

Depreciation of FF&E
(624
)
 
(629
)
 
(618
)
 
(601
)
 
(614
)
 
(1,871
)
 
(1,862
)
Income from construction contracts and other service operations
(873
)
 
(710
)
 
(927
)
 
(550
)
 
(558
)
 
(2,510
)
 
(2,156
)
Interest and other (income) loss
(1,095
)
 
(840
)
 
(1,217
)
 
(1,921
)
 
242

 
(3,152
)
 
(3,682
)
Equity in loss of unconsolidated entities
246

 
187

 
89

 
108

 
159

 
522

 
223

NOI from real estate operations
$
76,248

 
$
78,809

 
$
76,917

 
$
77,261

 
$
77,135

 
$
231,974

 
$
225,557

Discontinued Operations
 

 
 

 
 

 
 

 
 

 
 

 
 

Revenues from real estate operations
$
6,403

 
$
12,800

 
$
14,646

 
$
15,973

 
$
17,151

 
$
33,849

 
$
51,363

Property operating expenses
(2,217
)
 
(4,672
)
 
(5,334
)
 
(6,369
)
 
(6,325
)
 
(12,223
)
 
(19,684
)
Depreciation and amortization
(1,926
)
 
(3,278
)
 
(3,253
)
 
(4,124
)
 
(4,763
)
 
(8,457
)
 
(16,896
)
Business development expenses and land carry costs
—

 
(6
)
 
(18
)
 
(19
)
 
(17
)
 
(24
)
 
(56
)
Interest
(127
)
 
(736
)
 
(1,244
)
 
(1,553
)
 
(1,453
)
 
(2,107
)
 
(4,526
)
Gain (loss) on early extinguishment of debt
1,738

 
(2
)
 
—

 
—

 
(384
)
 
1,736

 
(384
)
Impairment losses
(9,733
)
 
(2,354
)
 
(11,423
)
 
(38,179
)
 
—

 
(23,510
)
 
(29,364
)
Gain on sales of depreciated real estate properties
16,913

 
(103
)
 
4,138

 
3,358

 
1,299

 
20,948

 
1,438

Discontinued operations
$
11,051

 
$
1,649

 
$
(2,488
)
 
$
(30,913
)
 
$
5,508

 
$
10,212

 
$
(18,109
)
GAAP revenues from real estate operations from continuing operations
$
114,861

 
$
111,168

 
$
110,658

 
$
111,483

 
$
107,978

 
$
336,687

 
$
317,013

Revenues from discontinued operations
6,403

 
12,800

 
14,646

 
15,973

 
17,151

 
33,849

 
51,363

Real estate revenues
$
121,264

 
$
123,968

 
$
125,304


$
127,456

 
$
125,129

 
$
370,536

 
$
368,376

GAAP property operating expenses from continuing operations
$
42,799

 
$
40,487

 
$
43,053

 
$
43,826

 
$
41,669

 
$
126,339

 
$
123,135

Property operating expenses from discontinued operations
2,217

 
4,672

 
5,334

 
6,369

 
6,325

 
12,223

 
19,684

Real estate property operating expenses
$
45,016

 
$
45,159

 
$
48,387

 
$
50,195

 
$
47,994

 
$
138,562

 
$
142,819

Depreciation and amortization associated with real estate operations from continuing operations
$
28,698

 
$
28,388

 
$
27,834

 
$
28,906

 
$
31,269

 
$
84,920

 
$
84,205

Depreciation and amortization from discontinued operations
1,926

 
3,278

 
3,253

 
4,124

 
4,763

 
8,457

 
16,896

Real estate-related depreciation and amortization
$
30,624

 
$
31,666

 
$
31,087

 
$
33,030

 
$
36,032

 
$
93,377

 
$
101,101

Gain on sales of real estate, net, per statements of operations
$
—

 
$
21

 
$
—

 
$
4

 
$
—

 
$
21

 
$
2,728

Gain on sales of real estate from discontinued operations
16,913

 
(103
)
 
4,138

 
3,358

 
1,299

 
20,948

 
1,438

Gain on sales of real estate from continuing and discontinued operations
16,913

 
(82
)
 
4,138

 
3,362

 
1,299

 
20,969

 
4,166

Less: Gain on sales of non-operating properties
—

 
(33
)
 
—

 
—

 
—

 
(33
)
 
(2,717
)
Gain on sales of operating properties
$
16,913

 
$
(115
)
 
$
4,138

 
$
3,362

 
$
1,299

 
$
20,936

 
$
1,449


36

Corporate Office Properties Trust
Supplementary Reconciliations of Non-GAAP Measures (continued)
(dollars in thousands)
 
Three Months Ended
 
Nine Months Ended
 
9/30/12
 
6/30/12
 
3/31/12
 
12/31/11
 
9/30/11
 
9/30/12
 
9/30/11
Total Assets
$
3,597,656

 
$
3,715,075

 
$
3,797,368

 
$
3,867,524

 
$
3,965,392

 
$
3,597,656

 
$
3,965,392

Accumulated depreciation
565,724

 
562,345

 
570,242

 
559,679

 
553,306

 
565,724

 
553,306

Accumulated depreciation included in assets held for sale
12,669

 
34,234

 
5,840

 
17,922

 
6,791

 
12,669

 
6,791

Denominator for debt to adjusted book
$
4,176,049

 
$
4,311,654

 
$
4,373,450

 
$
4,445,125

 
$
4,525,489

 
$
4,176,049

 
$
4,525,489

Impairment losses, per statements of operations
$
46,096

 
$
—

 
$
(4,836
)
 
$
40,495

 
$
—

 
$
41,260

 
$
42,983

Impairment losses on discontinued operations
9,733

 
2,354

 
11,423

 
38,179

 
—

 
23,510

 
29,364

Total impairment losses
55,829

 
2,354

 
6,587

 
78,674

 
—

 
64,770

 
72,347

Less: Impairment losses on previously depreciated operating properties
(55,829
)
 
(2,354
)
 
(11,833
)
 
(39,481
)
 
—

 
(70,016
)
 
(31,031
)
Impairment (recoveries) losses on non-operating properties
—

 
—

 
(5,246
)
 
39,193

 
—

 
(5,246
)
 
41,316

Less: Income tax expense (benefit) from impairments on non-operating properties
—

 
—

 
4,642

 
(4,146
)
 
—

 
4,642

 
(4,598
)
Impairment (recoveries) losses on non-operating properties, net of related tax
$
—

 
$
—

 
$
(604
)
 
$
35,047

 
$
—

 
$
(604
)
 
$
36,718

Interest expense from continuing operations
$
23,239

 
$
24,239

 
$
24,431

 
$
23,361

 
$
24,176

 
$
71,909

 
$
74,861

Interest expense from discontinued operations
127

 
736

 
1,244

 
1,553

 
1,453

 
2,107

 
4,526

Total interest expense
23,366

 
24,975

 
25,675

 
24,914

 
25,629

 
74,016

 
79,387

Less: Amortization of deferred financing costs
(1,527
)
 
(1,597
)
 
(1,572
)
 
(1,506
)
 
(1,629
)
 
(4,696
)
 
(5,090
)
Less: Amortization of net debt discounts and premiums, net of amounts capitalized
(683
)
 
(682
)
 
(663
)
 
(634
)
 
(1,184
)
 
(2,028
)
 
(4,046
)
Denominator for interest coverage
21,156

 
22,696

 
23,440

 
22,774

 
22,816

 
67,292

 
70,251

Scheduled principal amortization
2,791

 
3,096

 
3,207

 
3,108

 
3,226

 
9,094

 
10,647

Denominator for debt service coverage
23,947

 
25,792

 
26,647

 
25,882

 
26,042

 
76,386

 
80,898

Scheduled principal amortization
(2,791
)
 
(3,096
)
 
(3,207
)
 
(3,108
)
 
(3,226
)
 
(9,094
)
 
(10,647
)
Preferred share dividends - redeemable non-convertible
6,546

 
4,167

 
4,025

 
4,026

 
4,025

 
14,738

 
12,076

Preferred unit distributions
165

 
165

 
165

 
165

 
165

 
495

 
495

Denominator for fixed charge coverage
$
27,867

 
$
27,028

 
$
27,630

 
$
26,965

 
$
27,006

 
$
82,525

 
$
82,822

Preferred share dividends
$
6,546

 
$
4,167

 
$
4,025

 
$
4,026

 
$
4,025

 
$
14,738

 
$
12,076

Preferred unit distributions
165

 
165

 
165

 
165

 
165

 
495

 
495

Common share dividends
19,837

 
19,809

 
19,819

 
29,693

 
29,688

 
59,465

 
87,024

Common unit distributions
1,157

 
1,168

 
1,173

 
1,775

 
1,781

 
3,498

 
5,398

Total dividends/distributions
$
27,705

 
$
25,309

 
$
25,182

 
$
35,659

 
$
35,659

 
$
78,196

 
$
104,993

Common share dividends
$
19,837

 
$
19,809

 
$
19,819

 
$
29,693

 
$
29,688

 
$
59,465

 
$
87,024

Common unit distributions
1,157

 
1,168

 
1,173

 
1,775

 
1,781

 
3,498

 
5,398

Dividends and distributions for payout ratios
$
20,994

 
$
20,977

 
$
20,992

 
$
31,468

 
$
31,469

 
$
62,963

 
$
92,422

Debt, net
$
2,169,315

 
$
2,191,851

 
$
2,418,078

 
$
2,426,303

 
$
2,420,073

 
$
2,169,315

 
$
2,420,073

Less: Construction in progress on assets held for sale
—

 
(1,220
)
 
(75
)
 
(12,277
)
 
(22,936
)
 
—

 
(22,936
)
Less: Construction in progress
(394,361
)
 
(380,879
)
 
(408,883
)
 
(409,086
)
 
(447,969
)
 
(394,361
)
 
(447,969
)
Adjusted debt for adjusted debt to adjusted EBITDA ratio
$
1,774,954

 
$
1,809,752

 
$
2,009,120

 
$
2,004,940

 
$
1,949,168

 
$
1,774,954

 
$
1,949,168


37


Corporate Office Properties Trust
Definitions

Non-GAAP Measures

We believe that the measures defined below that are not determined in accordance with generally accepted accounting principles (“GAAP”) are helpful to investors in measuring our performance and comparing it to that of other real estate investment trusts (“REITs”).  Since these measures exclude certain items includable in their respective most comparable GAAP measures, reliance on the measures has limitations; management compensates for these limitations by using the measures simply as supplemental measures that are weighed in balance with other GAAP and non-GAAP measures.  These measures are not necessarily indications of our cash flow available to fund cash needs.  Additionally, they should not be used as an alternative to the respective most comparable GAAP measures when evaluating our financial performance or to cash flow from operating, investing and financing activities when evaluating our liquidity or ability to make cash distributions or pay debt service.
 
Adjusted Debt to Adjusted EBITDA ratio 
Defined as (1) debt adjusted to subtract construction in progress as of the end of the period divided by (2) Adjusted EBITDA for the three month period that is annualized by multiplying by four.
 
Adjusted Earnings Before Interest, Income Taxes, Depreciation and Amortization (“Adjusted EBITDA”) 
Adjusted EBITDA is net (loss) income adjusted for the effects of interest expense, depreciation and amortization, impairment losses, gain on sales of properties, gain or loss on early extinguishment of debt, loss on interest rate derivatives and income taxes.  We believe that adjusted EBITDA is a useful supplemental measure of performance for assessing our un-levered performance.  We believe that net (loss) income is the most directly comparable GAAP measure to adjusted EBITDA.
 
Amortization of Acquisition Intangibles Included in Net Operating Income 
Represents the amortization of intangible asset and liability categories that is included in net operating income, including amortization of above- or below-market leases and above- or below-market cost arrangements.

Basic FFO available to common share and common unit holders (“Basic FFO”) 
This measure is FFO adjusted to subtract (1) preferred share dividends, (2) income attributable to noncontrolling interests through ownership of preferred units in Corporate Office Properties, L.P. (the “Operating Partnership”) or interests in other consolidated entities not owned by us, (3) depreciation and amortization allocable to noncontrolling interests in other consolidated entities, (4) Basic FFO allocable to restricted shares and (5) issuance costs associated with redeemed preferred shares.  With these adjustments, Basic FFO represents FFO available to common shareholders and holders of common units in the Operating Partnership (“common units”).  Common units are substantially similar to our common shares of beneficial interest (“common shares”) and are exchangeable into common shares, subject to certain conditions.  We believe that Basic FFO is useful to investors due to the close correlation of common units to common shares.  We believe that net (loss) income is the most directly comparable GAAP measure to Basic FFO.
 
Cash net operating income (“Cash NOI”) 
Defined as NOI from real estate operations adjusted to eliminate the effects of noncash rental revenues and property operating expenses (comprised of straight-line rental adjustments, which includes the amortization of tenant incentives, and amortization of acquisition intangibles included in FFO and NOI).  Under GAAP, rental revenue is recognized evenly over the term of tenant leases.  Many leases provide for contractual rent increases and the effect of accounting under GAAP for such leases is to accelerate the recognition of lease revenue.  Since some leases provide for periods under the lease in which rental concessions are provided to tenants, the effect of accounting under GAAP is to allocate rental revenue to such periods.  Also under GAAP, when a property is acquired, we allocate the acquisition to certain intangible components (including above- and below-market leases and above- or below-market cost arrangements), which are then amortized into FFO and NOI over their estimated lives.  We believe that Cash NOI is an important supplemental measure of operating performance for a REIT’s operating real estate because it makes adjustments to NOI for the above stated items that are not associated with cash to us.  As is the case with NOI, the measure is useful in our opinion in evaluating and comparing the performance of geographic segments, same-office property groupings and individual properties.  We believe that net (loss) income is the most directly comparable GAAP measure to Cash

38


Corporate Office Properties Trust
Definitions

NOI.

Cash NOI, excluding gross lease termination fees 
Defined as Cash NOI adjusted to eliminate the effects of lease termination fees paid by tenants to terminate their lease obligations prior to the end of the agreed lease terms.  Lease termination fees are often recognized as revenue in large one-time lump sum amounts upon the termination of tenant leases.  We believe that Cash NOI adjusted for lease termination fees is a useful supplemental measure of operating performance in evaluating same-office property groupings because it provides a means of evaluating the effect that lease terminations had on the performance of the property groupings.  We believe that net (loss) income is the most directly comparable GAAP measure to Cash NOI, excluding gross lease termination fees.
 
Debt to Adjusted EBITDA ratio 
Defined as debt divided by Adjusted EBITDA for the three month period that is annualized by multiplying by four.
 
Debt to Adjusted Book 
Defined as the carrying value of our debt divided by total assets presented on our consolidated balance sheet excluding the effect of accumulated depreciation incurred to date on such properties.
 
Diluted adjusted funds from operations available to common share and common unit holders (“Diluted AFFO”) 
Defined as Diluted FFO, as adjusted for comparability, adjusted for the following: (1) the elimination of the effect of (a) noncash rental revenues and property operating expenses (comprised of straight-line rental adjustments, which includes the amortization of recurring tenant incentives, and amortization of acquisition intangibles included in FFO and NOI, both of which are described under “Cash NOI” below), (b) share-based compensation, net of amounts capitalized, (c) amortization of deferred financing costs, (d) amortization of debt discounts and premiums and (e) amortization of settlements of debt hedges; and (2) recurring capital expenditures.  Recurring capital expenditures are defined as tenant improvements and incentives, building improvements and leasing costs for operating properties that are not (1) items contemplated prior to the acquisition of a property, (2) improvements associated with the expansion of a building or its improvements, (3) renovations to a building which change the underlying classification of the building (for example, from industrial to office or Class C office to Class B office) or (4) capital improvements that represent the addition of something new to the property rather than the replacement of something (for example, the addition of a new heating and air conditioning unit that is not replacing one that was previously there).  We believe that Diluted AFFO is an important supplemental measure of liquidity for an equity REIT because it provides management and investors with an indication of our ability to incur and service debt and to fund dividends and other cash needs.  We believe that the numerator to diluted EPS is the most directly comparable GAAP measure to Diluted AFFO.
 
Diluted AFFO, as adjusted for recurring capital expenditures of properties included in disposition plans 
Defined as Diluted AFFO adjusted to add back recurring capital expenditures of properties included in disposition plans during the period that were already sold or are held for future disposition.  We believe that this measure is a useful supplemental measure of liquidity because it provides management and investors with an additional indication of our ability to incur and service debt and to fund dividends and other cash needs without the effect of the recurring capital expenditures that we expect to recover through the proceeds from the property dispositions.  We believe that the numerator to diluted EPS is the most directly comparable GAAP measure to this measure.
 
Diluted FFO available to common share and common unit holders (“Diluted FFO”) 
Diluted FFO is Basic FFO adjusted to add back any changes in Basic FFO that would result from the assumed conversion of securities that are convertible or exchangeable into common shares.  The computation of Diluted FFO assumes the conversion of common units in the Operating Partnership but does not assume the conversion of other securities that are convertible into common shares if the conversion of those securities would increase Diluted FFO per share in a given period.  We believe that Diluted FFO is useful to investors because it is the numerator used to compute Diluted FFO per share, discussed below.  We believe that the numerator to diluted EPS is the most directly comparable GAAP measure to Diluted FFO.
 

39


Corporate Office Properties Trust
Definitions

Diluted FFO available to common share and common unit holders, as adjusted for comparability (“Diluted FFO, as adjusted for comparability”) and FFO, as adjusted for comparability 
Defined as Diluted FFO or FFO adjusted to exclude operating property acquisition costs, gains on sales of, and impairment losses on, properties other than previously depreciated operating properties, net of associated income tax, gain or loss on early extinguishment of debt, loss on interest rate derivatives and accounting charges for original issuance costs associated with redeemed preferred shares.  We believe that the excluded items are not reflective of normal operations and, as a result, believe that a measure that excludes these items is a useful supplemental measure in evaluating operating performance.  We believe that the numerator to diluted EPS is the most directly comparable GAAP measure to this non-GAAP measure.
 
Diluted FFO per share 
Diluted FFO per share is (1) Diluted FFO divided by (2) the sum of the (a) weighted average common shares outstanding during a period, (b) weighted average common units outstanding during a period and (c) weighted average number of potential additional common shares that would have been outstanding during a period if other securities that are convertible or exchangeable into common shares were converted or exchanged.  The computation of Diluted FFO per share assumes the conversion of common units in the Operating Partnership but does not assume the conversion of other securities that are convertible into common shares if the conversion of those securities would increase Diluted FFO per share in a given period.  We believe that Diluted FFO per share is useful to investors because it provides investors with a further context for evaluating our FFO results in the same manner that investors use earnings per share (“EPS”) in evaluating net (loss) income available to common shareholders.  We believe that diluted EPS is the most directly comparable GAAP measure to Diluted FFO per share.
 
Diluted FFO per share, as adjusted for comparability 
Defined as (1) Diluted FFO available to common share and common unit holders, as adjusted for comparability divided by (2) the sum of the (a) weighted average common shares outstanding during a period, (b) weighted average common units outstanding during a period and (c) weighted average number of potential additional common shares that would have been outstanding during a period if other securities that are convertible or exchangeable into common shares were converted or exchanged.  The computation of this measure assumes the conversion of common units in the Operating Partnership but does not assume the conversion of other securities that are convertible into common shares if the conversion of those securities would increase the per share measure in a given period.  As discussed above, we believe that the excluded items are not indicative of normal operations.  As such, we believe that a measure that excludes these items is a useful supplemental measure in evaluating our operating performance.  We believe that diluted EPS is the most directly comparable GAAP measure.
 
Dividend Coverage-Diluted FFO, Diluted FFO, as adjusted for comparability, and Dividend Coverage-Diluted AFFO 
These measures divide either Diluted FFO, Diluted FFO, as adjusted for comparability, or Diluted AFFO by the sum of (1) dividends on common shares and (2) distributions to holders of interests in the Operating Partnership and dividends on convertible preferred shares when such distributions and dividends are included in Diluted FFO.

Funds from operations (“FFO” or “FFO per NAREIT”) 
Defined as net (loss) income computed using GAAP, excluding gains on sales of, and impairment losses on, previously depreciated operating properties and real estate-related depreciation and amortization.  When multiple properties consisting of both operating and non-operating properties exist on a single tax parcel, we classify all of the gains on sales of, and impairment losses on, the tax parcel as all being for previously depreciated operating properties when most of the value of the parcel is associated with operating properties on the parcel. We believe that we use the National Association of Real Estate Investment Trust’s (“NAREIT”) definition of FFO, although others may interpret the definition differently and, accordingly, our presentation of FFO may differ from those of other REITs.  We believe that FFO is useful to management and investors as a supplemental measure of operating performance because, by excluding gains related to sales of, and impairment losses on, previously depreciated operating properties and excluding real estate-related depreciation and amortization, FFO can help one compare our operating performance between periods.  We believe that net (loss) income is the most directly comparable GAAP measure to FFO.
 

40


Corporate Office Properties Trust
Definitions

Net operating income (“NOI”) from real estate operations 
NOI is real estate revenues from continuing and discontinued operations reduced by total property expenses associated with real estate operations, including discontinued operations; total property expenses, as used in this definition, do not include depreciation, amortization or interest expense associated with real estate operations.  We believe that NOI is an important supplemental measure of operating performance for a REIT’s operating real estate because it provides a measure of the core real estate operations that is unaffected by depreciation, amortization, financing and general and administrative expenses; we believe this measure is particularly useful in evaluating the performance of geographic segments, same-office property groupings and individual properties.  We believe that net (loss) income is the most directly comparable GAAP measure to NOI.
 
NOI Debt Service Coverage Ratio and Adjusted EBITDA Debt Service Coverage Ratio 
These measures divide either NOI from real estate operations or Adjusted EBITDA by the sum of interest expense on continuing and discontinued operations (excluding amortization of deferred financing costs and amortization of debt discounts and premiums, net of amounts capitalized) and scheduled principal amortization on mortgage loans for continuing and discontinued operations.
 
NOI Fixed Charge Coverage Ratio and Adjusted EBITDA Fixed Charge Coverage Ratio 
These measures divide either NOI from real estate operations or Adjusted EBITDA by the sum of (1) interest expense on continuing and discontinued operations (excluding amortization of deferred financing costs and amortization of debt discounts and premiums, net of amounts capitalized), (2) dividends on preferred shares and (3) distributions on preferred units in the Operating Partnership not owned by us.
 
NOI Interest Coverage Ratio and Adjusted EBITDA Interest Coverage Ratio 
These measures divide either NOI from real estate operations or Adjusted EBITDA by interest expense on continuing and discontinued operations (excluding amortization of deferred financing costs and amortization of debt discounts and premiums, net of amounts capitalized).
 
Payout ratios based on: (1) Diluted FFO; (2) Diluted FFO, as adjusted for comparability; (3) Diluted AFFO; and (4) Diluted AFFO, as adjusted for recurring capital expenditures of properties included in disposition plan 
These payout ratios are defined as (1) the sum of (a) dividends on common shares and (b) distributions to holders of interests in the Operating Partnership and dividends on convertible preferred shares when such distributions and dividends are included in Diluted FFO divided by (2) the respective non-GAAP measures on which the payout ratios are based.

Recurring Capital Expenditures 
Definition is included above in the definition for Diluted AFFO.
 
Same Office Property NOI 
Defined as NOI from real estate operations of Same Office Properties.  We believe that Same Office Property NOI is an important supplemental measure of operating performance of Same Office Properties for the same reasons discussed above for NOI from real estate operations.
 
Other Definitions
 
Acquisition costs — Transaction costs expensed in connection with executed or anticipated acquisitions of operating properties.
 
Annualized Rental Revenue — The monthly contractual base rent as of the reporting date multiplied by 12, plus the estimated annualized expense reimbursements under existing office leases.
 

41


Corporate Office Properties Trust
Definitions

Demand Drivers Categories — Demand opportunity created through:
•
Defense IT — current and future relationships with defense information technology contractors and, possibly, minor Government tenancy.
•
Government — existing and future relationship with various agencies of the government of the United States of America.  Excludes Government tenancy included in Defense Information IT.
•
Market — projected unfulfilled space requirements within a specific submarket; potential submarket demand exceeds existing supply.
•
Research Park — specific research park relationship.
 
First Generation Space — Newly constructed or redeveloped space that has never been occupied.
 
Greater Washington/Baltimore Region — Includes counties that comprise the Baltimore/Washington Corridor, Northern Virginia, Greater Baltimore, Suburban Maryland, St. Mary’s & King George Counties, and the Washington, DC-Capitol Riverfront.
 
Operational Space — The portion of a property in operations (excludes portion under construction or redevelopment).
 
Retenanted Space — Space leased to a new tenant after being occupied by a previous tenant.
 
Same Office Properties — Operating office properties owned and 100% operational since January 1, 2011, excluding properties held for future disposition.
 
Second Generation Space — Space leased that has been previously occupied.
 
Strategic Reallocation Plan — Plan approved by our Board of Trustees to dispose of properties that are no longer closely aligned with our strategy.
 
Strategic Tenant Properties — Properties occupied primarily by tenants in the United States Government and defense information technology sectors and data centers serving such sectors.
 
Under Construction — Properties on which vertical construction activities are underway.
 
Under Pre-Construction — Properties on which work associated with one or more of the following tasks is underway on a regular basis: pursuing entitlements, planning, design and engineering, bidding, permitting and premarketing/preleasing. Typically, these projects, as categorized in this Supplemental Information package, are targeted to begin construction in 12 months or less.
 
Under Redevelopment — Properties previously in operations on which activities to substantially renovate such properties are underway.
 
Unstabilized Properties — Properties with first generation operational space less than 90% occupied at period end.


42