EXHIBIT 99.1
 
 
Earnings Release & Supplemental Information — Unaudited
 
December 31, 2012
 
 
OVERVIEW:
Section I

 
INVESTING ACTIVITY:
Section IV

Earnings Release
i-ix

 
Dispositions
21

Summary Description
1

 
Operating Property 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 Operations
6-7

 
 
 

Consolidated Statements of FFO
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

 
 
 
Same Office Properties Average Occupancy Rates by Region
15

 
RECONCILIATIONS & DEFINITIONS:
Section VI

Same Office Property Real Estate Revenues & NOI by Region
16

 
Supplementary Reconciliations of Non-GAAP Measures
35-37

Office Leasing
17-18

 
Definitions
38-42

Office Lease Expiration Analysis
19

 
 
 
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 2012 RESULTS; AFFIRMS 2013 GUIDANCE


COLUMBIA, MD February 8, 2013 - Corporate Office Properties Trust (COPT or the Company) (NYSE: OFC) announced financial and operating results for the fourth quarter and full year ended December 31, 2012.

"The COPT team exceeded expectations in 2012, with our strong execution of the Strategic Reallocation Plan, record development leasing and strengthening our balance sheet," stated Roger A. Waesche, Jr., COPT's President & Chief Executive Officer. "In fact, notwithstanding the on-going challenges presented by the Federal budget issues, we executed leases at development and redevelopment properties for 1.2 million square feet - the highest new leasing volume in COPT's history," he stated.

Results:
For the fourth quarter ended December 31, 2012 - Diluted earnings per share (EPS) was $0.16 for the quarter ended December 31, 2012 as compared to EPS loss of ($1.26) in the fourth quarter of 2011. Diluted funds from operations per share (FFOPS), as adjusted for comparability, was $0.51 for the fourth quarter ended December 31, 2012, which represented an 11% decrease from the $0.57 reported for the fourth quarter of 2011. Adjustments for comparability encompass items such as acquisition costs, impairments and gains on non-operating properties, losses on early extinguishment of debt and derivative losses. Please refer to the reconciliation tables that appear later in this press release. Per NAREIT's definition, FFOPS for the fourth quarter of 2012 was $0.49 versus ($0.35) reported in the fourth quarter of 2011.

For the year ended December 31, 2012 - EPS loss was ($0.03) for the year ended December 31, 2012 as compared to an EPS loss of ($1.97) for 2011. FFOPS for the full year 2012, as adjusted for comparability, was $2.11, which represented a 1% decrease from the $2.14 reported in 2011. Per NAREIT's definition, FFOPS for 2012 was $2.13 as compared to $0.72 for the full year 2011.

Operating Performance:
Portfolio Summary - At December 31, 2012, the Company's consolidated portfolio of 208 operating office properties totaled 18.8 million square feet. The weighted average remaining lease term for the portfolio was 4.4 years and the average rental rate (including tenant reimbursements) was $27.92 per square foot. The Company's consolidated portfolio was 87.8% occupied and 89.2% leased as of December 31, 2012.

Same Office Performance - The Company's same office portfolio excludes properties identified for eventual sale, including those in its Strategic Reallocation Plan. For the year ended December 31, 2012, COPT's same office portfolio represents 84% of the rentable square feet of the portfolio and consists of 177 properties.

i


For the year ended December 31, 2012, the Company's same office property cash NOI, excluding gross lease termination fees, increased 2.3% as compared to the year ended 2011. Including gross lease termination fees, same office property cash NOI for the year ended December 31, 2012 increased 2.8% over 2011. The Company's same office portfolio occupancy was 89.1% at year end 2012, up 80 basis points from the end of 2011.

Leasing - COPT completed a total of 1.4 million and 3.3 million square feet of leasing, respectively, for the quarter and year ended December 31, 2012. During these same periods, the Company's respective renewal rates were 86% and 64%. For the quarter and year ended December 31, 2012, total rent on renewed space increased 3.9% and 2.2%, respectively, as measured from the straight-line rent in effect preceding the renewal date; on a cash basis, renewal rents increased 1.0% in the fourth quarter of 2012 and decreased 4.2% for the year versus 2011.

Investment Activity for the year ended December 31, 2012:
Construction - At December 31, 2012, the Company had 11 properties totaling 1.4 million square feet under construction for a total projected cost of $288.7 million, of which $154.0 million had been incurred which was 67% pre-leased.

Acquisitions - During 2012, the Company acquired one building located at 13857 McLearen Road in Herndon, Virginia, with 202,000 square feet for $48.3 million.

Dispositions - In 2012, as part of the Company's Strategic Reallocation Plan, COPT disposed of 35 buildings aggregating 2.3 million square feet for $317.6 million.

Capital Transactions in 2012:
In February, the Company entered into a $250 million term loan agreement with its bank group. The Term Loan has a five-year term and a variable interest rate of LIBOR plus 1.65% to 2.40%, depending on the Company's leverage levels. The Company used proceeds from the Term Loan to repay outstanding balances on its unsecured line of credit.

In June, the Company issued $172.5 million dollars of Series L preferred shares with a 7.375% annual dividend. The Company used the proceeds to pay down its line of credit and redeemed all $55 million of its outstanding Series G preferred shares, which paid an 8% annual dividend.

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.

In October, the Company completed a public offering of 8,625,000 newly issued common shares, which generated net proceeds of approximately $204.9 million. COPT used the net proceeds from the offering to repay amounts outstanding under its unsecured revolving credit facility and for general corporate purposes.

Balance Sheet and Financial Flexibility:
As of December 31, 2012, the Company had a total market capitalization of $4.5 billion, with $2.0 billion in debt outstanding, equating to a 45.0% debt-to-total market capitalization ratio. Also, the Company's weighted average interest rate was 4.5% for the quarter ended December 31, 2012 and 80% of the Company's debt was subject to fixed interest rates, including the effect of interest rate swaps.


ii

2013 FFO Guidance:
Management is affirming its previously issued guidance for 2013 FFOPS of between $1.83 and $1.93, and its first quarter 2013 FFOPS guidance of between $0.44 and $0.46. A reconciliation of projected diluted EPS to projected FFOPS for the quarter ending March 31, 2013 and the year ending December 31, 2013 is provided, as follows:
 
Quarter Ending
 
Year Ending
 
March 31, 2013
 
December 31, 2013
 
Low
 
High
 
Low
 
High
FFOPS, NAREIT definition
$
0.44

 
$
0.46

 
$
1.83

 
$
1.93

Real estate depreciation and amortization
(0.35
)
 
(0.37
)
 
(1.41
)
 
(1.48
)
Noncontrolling interests in non-FFO items and other
0.01

 
0.02

 
0.04

 
0.08

EPS
$
0.10

 
$
0.11

 
$
0.46

 
$
0.53


Conference Call Information:
Management will discuss fourth quarter and full year 2012 earnings results, as well as its 2013 guidance, on its conference call today at 12:00 p.m. Eastern Time, details of which are listed below:

Conference Call Date:     Friday, February 8, 2013

Time:     12:00 p.m. Eastern Time

Telephone Number: (within the U.S.)     888-679-8034

Telephone Number: (outside the U.S.)    617-213-4847

Passcode:    99191178
        
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=PXR4G4A6B

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 Friday, February 8 at 1:00 p.m. Eastern Time through Friday, February 22 at midnight Eastern Time. To access the replay within the United States, please call 888-286-8010 and use passcode 65264157. To access the replay outside the United States, please call 617-801-6888 and use passcode 65264157.

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.

Definitions:
Please refer to the information furnished with our Form 8-K or our website (www.copt.com) for definitions of certain terms used in this press release. Reconciliations of non-GAAP measures to the most directly comparable GAAP measures are included in the attached tables.

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 December 31, 2012, the Company's consolidated portfolio consisted of 208 office properties totaling 18.8 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 sell properties included in its Strategic Reallocation Plan;
•
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;
•
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 Company's ability to achieve projected results;
•
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 and in our Current Report on Form 8-K dated October 10, 2012.





iv


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


 
For the Three Months Ended December 31,
 
For the Years Ended December 31,
 
2012
 
2011
 
2012
 
2011
Revenues
 

 
 

 
 
 
 
Real estate revenues
$
117,481

 
$
111,483

 
$
454,171

 
$
428,496

Construction contract and other service revenues
20,024

 
16,491

 
73,836

 
84,345

Total revenues
137,505

 
127,974

 
528,007

 
512,841

Expenses
 

 
 

 
 
 
 
Property operating expenses
44,887

 
42,525

 
167,161

 
162,397

Depreciation and amortization associated with real estate operations
28,560

 
28,906

 
113,480

 
113,111

Construction contract and other service expenses
19,274

 
15,941

 
70,576

 
81,639

Impairment losses
1,954

 
40,495

 
43,214

 
83,478

General and administrative expenses
5,740

 
5,881

 
26,271

 
25,133

Leasing expenses
1,363

 
1,433

 
5,629

 
5,181

Business development expenses and land carry costs
1,205

 
1,800

 
5,711

 
6,122

Total operating expenses
102,983

 
136,981

 
432,042

 
477,061

Operating income (loss)
34,522

 
(9,007
)

95,965


35,780

Interest expense
(22,715
)
 
(23,361
)
 
(94,624
)
 
(98,222
)
Interest and other income
4,020

 
1,921

 
7,172

 
5,603

Loss on early extinguishment of debt
(6
)
 
(3
)
 
(943
)
 
(1,639
)
Loss on interest rate derivatives
—

 
(29,805
)
 
—

 
(29,805
)
Income (loss) from continuing operations before equity in loss of unconsolidated entities and income taxes
15,821

 
(60,255
)
 
7,570

 
(88,283
)
Equity in loss of unconsolidated entities
(24
)
 
(108
)
 
(546
)
 
(331
)
Income tax (expense) benefit
(54
)
 
38

 
(381
)
 
6,710

Income (loss) from continuing operations
15,743

 
(60,325
)
 
6,643

 
(81,904
)
Discontinued operations
3,267

 
(30,781
)
 
13,677

 
(48,404
)
Income (loss) before gain on sales of real estate
19,010

 
(91,106
)
 
20,320

 
(130,308
)
Gain on sales of real estate, net of income taxes
—

 
4

 
21

 
2,732

Net income (loss)
19,010

 
(91,102
)
 
20,341

 
(127,576
)
Net (income) loss attributable to noncontrolling interests
 

 
 

 
 
 
 
Common units in the Operating Partnership
(651
)
 
5,348

 
87

 
8,439

Preferred units in the Operating Partnership
(165
)
 
(165
)
 
(660
)
 
(660
)
Other consolidated entities
345

 
423

 
1,209

 
369

Net income (loss) attributable to COPT
18,539

 
(85,496
)
 
20,977

 
(119,428
)
Preferred share dividends
(6,106
)
 
(4,026
)
 
(20,844
)
 
(16,102
)
Issuance costs associated with redeemed preferred shares
—

 
—

 
(1,827
)
 
—

Net income (loss) attributable to COPT common shareholders
$
12,433

 
$
(89,522
)
 
$
(1,694
)
 
$
(135,530
)
 
 
 
 
 
 
 
 
Earnings per share (“EPS”) computation:
 

 
 

 
 
 
 
Numerator for diluted EPS:
 

 
 

 
 
 
 
Net income (loss) attributable to common shareholders
$
12,433

 
$
(89,522
)
 
$
(1,694
)
 
$
(135,530
)
Amount allocable to restricted shares
(112
)
 
(256
)
 
(469
)
 
(1,037
)
Numerator for diluted EPS
$
12,321

 
$
(89,778
)
 
$
(2,163
)
 
$
(136,567
)
 
 
 
 
 
 
 
 
Denominator:
 

 
 

 
 
 
 
Weighted average common shares - basic
79,004

 
71,351

 
73,454

 
69,382

Dilutive effect of share-based compensation awards
67

 
—

 
—

 
—

Weighted average common shares - diluted
79,071

 
71,351

 
73,454

 
69,382

Diluted EPS
$
0.16

 
$
(1.26
)
 
$
(0.03
)
 
$
(1.97
)

v


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

 
For the Three Months Ended December 31,
 
For the Years Ended December 31,
 
2012
 
2011
 
2012
 
2011
Net income (loss)
$
19,010

 
$
(91,102
)
 
$
20,341

 
$
(127,576
)
Real estate-related depreciation and amortization
28,560

 
33,030

 
121,937

 
134,131

Impairment losses on previously depreciated operating properties
247

 
39,481

 
70,263

 
70,512

Gain on sales of previously depreciated operating properties, net of income taxes
8

 
(3,362
)
 
(20,928
)
 
(4,811
)
Depreciation and amortization on unconsolidated real estate entities
—

 
142

 
346

 
492

Funds from operations (“FFO”)
47,825

 
(21,811
)
 
191,959

 
72,748

Noncontrolling interests - preferred units in the Operating Partnership
(165
)
 
(165
)
 
(660
)
 
(660
)
FFO allocable to other noncontrolling interests
(738
)
 
(283
)
 
(1,989
)
 
(1,887
)
Preferred share dividends
(6,106
)
 
(4,026
)
 
(20,844
)
 
(16,102
)
Issuance costs associated with redeemed preferred shares
—

 
—

 
(1,827
)
 
—

Basic and diluted FFO allocable to restricted shares
(191
)
 
(255
)
 
(919
)
 
(1,037
)
Basic and diluted FFO available to common share and common unit holders (“Basic and diluted FFO”)
40,625

 
(26,540
)
 
165,720

 
53,062

Operating property acquisition costs
—

 
4

 
229

 
156

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

 
—

 
(33
)
 
(2,717
)
Impairment losses (recoveries) on non-operating properties
1,893

 
39,193

 
(3,353
)
 
80,509

Income tax expense on impairment (losses) recoveries on non-operating properties
—

 
452

 
673

 
(4,775
)
Loss on interest rate derivatives
—

 
29,805

 
—

 
29,805

Loss (gain) on early extinguishment of debt
6

 
3

 
(793
)
 
2,023

Issuance costs associated with redeemed preferred shares
—

 
—

 
1,827

 
—

Diluted FFO available to common share and common unit holders, as adjusted for comparability
42,524

 
42,917

 
164,270

 
158,063

Straight line rent adjustments
(3,385
)
 
(2,144
)
 
(10,016
)
 
(8,669
)
Amortization of intangibles included in net operating income
221

 
249

 
880

 
849

Share-based compensation, net of amounts capitalized
1,720

 
3,764

 
9,982

 
11,920

Amortization of deferred financing costs
1,547

 
1,506

 
6,243

 
6,596

Amortization of net debt discounts, net of amounts capitalized
693

 
634

 
2,721

 
4,680

Amortization of settled debt hedges
16

 
15

 
62

 
62

Recurring capital expenditures
(27,476
)
 
(12,550
)
 
(43,943
)
 
(39,510
)
Diluted adjusted funds from operations available to common share and common unit holders (“Diluted AFFO”)
$
15,860

 
$
34,391

 
$
130,199

 
$
133,991

Diluted FFO per share
$
0.49

 
$
(0.35
)
 
$
2.13

 
$
0.72

Diluted FFO per share, as adjusted for comparability
$
0.51

 
$
0.57

 
$
2.11

 
$
2.14

Dividends/distributions per common share/unit
$
0.2750

 
$
0.4125

 
$
1.1000

 
$
1.6500




vi


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

 
 
December 31,
2012
 
December 31,
2011
Balance Sheet Data
 
 

 
 

Properties, net of accumulated depreciation
 
$
3,163,044

 
$
3,352,975

Total assets
 
3,653,759

 
3,863,555

Debt, net
 
2,019,168

 
2,426,303

Total liabilities
 
2,206,962

 
2,648,748

Redeemable noncontrolling interest
 
10,298

 
8,908

Equity
 
1,436,499

 
1,205,899

Debt to adjusted book
 
47.8
%
 
54.6
%
Debt to total market capitalization
 
45.0
%
 
56.8
%
 
 
 
 
 
Consolidated Property Data (as of period end)
 
 

 
 

Number of operating properties
 
208

 
238

Total net rentable square feet owned (in thousands)
 
18,831

 
20,514

Occupancy
 
87.8
%
 
86.2
%
 
 
 
 
 
Reconciliation of total assets to denominator for debt to adjusted book
 
 

 
 

Denominator for debt to total assets
 
$
3,653,759

 
$
3,863,555

Accumulated depreciation
 
555,975

 
559,679

Accumulated depreciation included in assets held for sale
 
12,201

 
17,922

Denominator for debt to adjusted book
 
$
4,221,935

 
$
4,441,156

 
For the Three Months Ended December 31,
 
For the Years Ended December 31,
2012
 
2011
 
2012
 
2011
Payout ratios
 

 
 

 
 

 
 

Diluted FFO
57.5
%
 
(118.6
)%
 
52.1
%
 
233.5
%
Diluted FFO, as adjusted for comparability
55.0
%
 
73.3
 %
 
52.6
%
 
78.4
%
Diluted AFFO
147.4
%
 
91.5
 %
 
66.3
%
 
92.5
%
Adjusted EBITDA interest coverage ratio
3.4
x
 
3.2
x
 
3.2
x
 
3.0
x
Adjusted EBITDA fixed charge coverage ratio
2.6
x
 
2.7
x
 
2.6
x
 
2.6
x
Debt to Adjusted EBITDA ratio (1)
7.2
x
 
8.5
x
 
7.1
x
 
8.6
x
Adjusted debt to Adjusted EBITDA ratio (2)
6.0
x
 
7.0
x
 
6.0
x
 
7.1
x
 
 
 
 
 
 
 
 
Reconciliation of denominators for diluted EPS and diluted FFO per share
 
 

 
 
 
 
Denominator for diluted EPS
79,071

 
71,351

 
73,454

 
69,382

Weighted average common units
4,171

 
4,308

 
4,235

 
4,355

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

 
29

 
53

 
111

Denominator for diluted FFO per share
83,242

 
75,688

 
77,742

 
73,848

 
 
 
 
 
 
 
 
Reconciliation of FFO to FFO, as adjusted for comparability
 

 
 

 
 

 
 

FFO
$
47,825

 
$
(21,811
)
 
$
191,959

 
$
72,748

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

 
—

 
(33
)
 
(2,717
)
Impairment losses (recoveries) on non-operating properties, net of associated tax
1,893

 
39,645

 
(2,680
)
 
75,734

Operating property acquisition costs
—

 
4

 
229

 
156

Loss on interest rate derivatives
—

 
29,805

 
—

 
29,805

Loss (gain) on early extinguishment of debt, continuing and discontinued operations
6

 
3

 
(793
)
 
2,023

Issuance costs associated with redemption of preferred shares
—

 
—

 
1,827

 
—

FFO, as adjusted for comparability
$
49,724

 
$
47,646

 
$
190,509

 
$
177,749

(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).

vii


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

 
For the Three Months Ended December 31,
 
For the Years Ended December 31,
 
2012
 
2011
 
2012
 
2011
Reconciliation of common share dividends to dividends and distributions for payout ratios
 

 
 

 
 
 
 
Common share dividends
$
22,255

 
$
29,693

 
$
81,720

 
$
116,717

Common unit distributions
1,119

 
1,775

 
4,617

 
7,173

Dividends and distributions for payout ratios
$
23,374

 
$
31,468

 
$
86,337

 
$
123,890

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

 
 

 
 

 
 

Net income (loss)
$
19,010

 
$
(91,102
)
 
$
20,341

 
$
(127,576
)
Interest expense on continuing operations
22,715

 
23,361

 
94,624

 
98,222

Interest expense on discontinued operations
67

 
1,553

 
2,174

 
6,079

Income tax expense (benefit)
54

 
(38
)
 
381

 
(6,710
)
Real estate-related depreciation and amortization
28,560

 
33,030

 
121,937

 
134,131

Depreciation of furniture, fixtures and equipment
610

 
601

 
2,481

 
2,463

Impairment losses
2,140

 
78,674

 
66,910

 
151,021

Loss (gain) on early extinguishment of debt on continuing and discontinued operations
6

 
3

 
(793
)
 
2,023

Gain on sales of operating properties
8

 
(3,362
)
 
(20,928
)
 
(4,811
)
Gain on sales of non-operational properties
—

 
—

 
(33
)
 
(2,717
)
Net gain on investments in unconsolidated entities included in interest and other income
(2,992
)
 
(771
)
 
(3,589
)
 
(1,820
)
Operating property acquisition costs
—

 
4

 
229

 
156

Loss on interest rate derivatives
—

 
29,805

 
—

 
29,805

Adjusted EBITDA
$
70,178

 
$
71,758

 
$
283,734

 
$
280,266

 
 
 
 
 
 
 
 
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
$
22,715

 
$
23,361

 
$
94,624

 
$
98,222

Interest expense from discontinued operations
67

 
1,553

 
2,174

 
6,079

Less: Amortization of deferred financing costs
(1,547
)
 
(1,506
)
 
(6,243
)
 
(6,596
)
Less: Amortization of net debt discount, net of amounts capitalized
(693
)
 
(634
)
 
(2,721
)
 
(4,680
)
Denominator for interest coverage-Adjusted EBITDA
20,542

 
22,774

 
87,834

 
93,025

Preferred share dividends
6,106

 
4,026

 
20,844

 
16,102

Preferred unit distributions
165

 
165

 
660

 
660

Denominator for fixed charge coverage-Adjusted EBITDA
$
26,813

 
$
26,965

 
$
109,338

 
$
109,787

 
 
 
 
 
 
 
 

viii


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

 
For the Three Months Ended December 31,
 
For the Years Ended December 31,
 
2012
 
2011
 
2012
 
2011
Reconciliations of tenant improvements and incentives, capital improvements and leasing costs for operating properties to recurring capital expenditures
 
 
 
 
 
 
 
 

 
 

 
 
 
 
Tenant improvements and incentives on operating properties
$
10,713

 
$
10,036

 
$
21,816

 
$
30,756

Building improvements on operating properties
18,049

 
4,519

 
24,862

 
9,840

Leasing costs for operating properties
1,381

 
1,448

 
6,490

 
10,474

Less: Nonrecurring tenant improvements and incentives on operating properties
(283
)
 
(1,371
)
 
(4,793
)
 
(6,264
)
Less: Nonrecurring building improvements on operating properties
(2,226
)
 
(2,106
)
 
(4,145
)
 
(4,294
)
Less: Nonrecurring leasing costs for operating properties
—

 
(5
)
 
(209
)
 
(1,098
)
Add: Recurring capital expenditures on operating properties held through joint ventures
(158
)
 
29

 
(78
)
 
96

Recurring capital expenditures
$
27,476

 
$
12,550

 
$
43,943

 
$
39,510

 
 
 
 
 
 
 
 
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
$
64,911

 
$
64,601

 
$
262,343

 
$
254,419

Less: Straight-line rent adjustments
(1,291
)
 
(617
)
 
(5,703
)
 
(5,170
)
Less: Amortization of deferred market rental revenue
(79
)
 
(83
)
 
(354
)
 
(288
)
Add: Amortization of above-market cost arrangements
371

 
434

 
1,466

 
1,735

Same office property cash net operating income
63,912

 
64,335

 
257,752

 
250,696

Less: Lease termination fees, gross
(544
)
 
(48
)
 
(1,692
)
 
(491
)
Same office property cash net operating income, excluding gross lease termination fees
$
63,368

 
$
64,287

 
$
256,060

 
$
250,205

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

 
 

 
 

 
 

Debt, net
$
2,019,168


$
2,426,303

 
$
2,019,168

 
$
2,426,303

Less: Construction in progress
(329,054
)

(409,086
)
 
(329,054
)
 
(409,086
)
Less: Construction in progress on assets held for sale
—


(12,277
)
 
—

 
(12,277
)
Denominator for adjusted debt to adjusted EBITDA ratio
$
1,690,114


$
2,004,940

 
$
1,690,114

 
$
2,004,940


ix


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 December 31, 2012, COPT derived 70% of its office property annualized rental revenue from strategic tenant properties. Strategic tenant properties are those held for long-term investment that are either located near defense installations and other knowledge-based government demand drivers, or otherwise occupied primarily by U.S. Government agencies and defense contractors. As of December 31, 2012, 82% of the Company’s square footage was located in the Greater Washington, DC/Baltimore region. As of December 31, 2012, COPT’s operating portfolio of 208 office properties encompassed 18.8 million square feet and was 89.2% 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 near defense installations and other knowledge-based government demand drivers (rather than force structure and weapon system production-oriented demand drivers) 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 government and defense contractor tenants and a wholesale data center. In addition, COPT owns other properties in targeted markets or submarkets with strong growth attributes in the Greater Washington, DC/Baltimore region.
 
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 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; our ability to sell properties included in our Strategic Reallocation Plan; risks of investing through joint venture structures, including risks that our joint venture partners may not fulfill their financial obligations as investors or may take actions that are inconsistent with our objectives; changes in our plans for properties or views of market economic conditions or failure to obtain development rights, either of which could result in recognition of impairment losses; our ability to satisfy and operate effectively under Federal income tax rules relating to real estate investment trusts and partnerships; the dilutive effects of issuing additional common shares; our ability to achieve projected results; and environmental requirements.  We undertake no obligation to update or supplement any forward-looking statements.  For further information, please refer to our filings with the Securities and Exchange Commission, particularly the section entitled “Risk Factors” in Item 1A of our Annual Report on Form 10-K for the year ended December 31, 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.
 
Tayo Okusanya
 
212-336-7076
 
tokusanya@jefferies.com
JP Morgan
 
Tony 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
Morningstar
 
Todd Lukasik
 
303-688-7418
 
todd.lukasik@morningstar.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 and Macquarie Securities, 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
 
Year Ended
SUMMARY OF RESULTS 
 
12/31/12
 
9/30/12
 
6/30/12
 
3/31/12
 
12/31/11
 
12/31/12
 
12/31/11
Same Office NOI
 
$
64,911

 
$
66,577

 
$
66,238

 
$
64,617

 
$
64,601

 
$
262,343

 
$
254,419

NOI from real estate operations
 
$
76,122

 
$
77,565

 
$
79,920

 
$
78,758

 
$
78,694

 
$
312,365

 
$
308,012

Adjusted EBITDA
 
$
70,178

 
$
72,042

 
$
71,696

 
$
69,818

 
$
71,758

 
$
283,734

 
$
280,266

Net income (loss) attributable to COPT common shareholders
 
$
12,433

 
$
(27,535
)
 
$
7,138

 
$
6,270

 
$
(89,522
)
 
$
(1,694
)
 
$
(135,530
)
FFO - per NAREIT
 
$
47,825

 
$
48,888

 
$
46,115

 
$
49,131

 
$
(21,811
)
 
$
191,959

 
$
72,748

FFO - as adjusted for comparability
 
$
49,724

 
$
49,967

 
$
46,260

 
$
44,558

 
$
47,646

 
$
190,509

 
$
177,749

Basic and diluted FFO available to common share and common unit holders
 
$
40,625

 
$
39,565

 
$
41,143

 
$
44,387

 
$
(26,540
)
 
$
165,720

 
$
53,062

Diluted AFFO available to common share and common unit holders
 
$
15,860

 
$
33,710

 
$
39,026

 
$
41,603

 
$
34,391

 
$
130,199

 
$
133,991

Per share - diluted: (1)
 
 

 
 

 
 

 
 

 
 

 
 

 
 
EPS
 
$
0.16

 
$
(0.39
)
 
$
0.10

 
$
0.09

 
$
(1.26
)
 
$
(0.03
)
 
$
(1.97
)
FFO - NAREIT
 
$
0.49

 
$
0.52

 
$
0.54

 
$
0.59

 
$
(0.35
)
 
$
2.13

 
$
0.72

FFO - as adjusted for comparability
 
$
0.51

 
$
0.53

 
$
0.54

 
$
0.53

 
$
0.57

 
$
2.11

 
$
2.14

Dividend per common share
 
$
0.2750

 
$
0.2750

 
$
0.2750

 
$
0.2750

 
$
0.4125

 
$
1.1000

 
$
1.6500

Payout ratios:
 
 

 
 

 
 

 
 

 
 

 
 

 
 
Diluted FFO
 
57.5
%
 
53.1
%
 
51.0
%
 
47.3
%
 
(118.6
)%
 
52.1
%
 
233.5
%
Diluted FFO - as adjusted for comparability
 
55.0
%
 
51.7
%
 
50.8
%
 
52.7
%
 
73.3
 %
 
52.6
%
 
78.4
%
Diluted AFFO
 
147.4
%
 
62.3
%
 
53.8
%
 
50.5
%
 
91.5
 %
 
66.3
%
 
92.5
%
Real estate operating margin
 
62.1
%
 
64.0
%
 
64.5
%
 
62.9
%
 
61.7
 %
 
63.3
%
 
62.1
%
CAPITALIZATION
 
 

 
 

 
 
 
 

 
 

 
 

 
 
Debt, net
 
$
2,019,168

 
$
2,169,315

 
$
2,191,851

 
$
2,418,078

 
$
2,426,303

 
 
 
 
Debt to Total Market Capitalization
 
45.0
%
 
50.0
%
 
50.0
%
 
54.8
%
 
56.8
 %
 
 
 
 
Debt to Adjusted Book
 
47.8
%
 
51.9
%
 
50.8
%
 
55.3
%
 
54.6
 %
 
 
 
 
Adjusted EBITDA fixed charge coverage ratio
 
2.6
x
 
2.6
x
 
2.7
x
 
2.5
x
 
2.7
x
 
2.6
x
 
2.6
x
Debt to Adjusted EBITDA ratio
 
7.2
x
 
7.5
x
 
7.6
x
 
8.7
x
 
8.5
x
 
7.1
x
 
8.6
x
Adjusted Debt to Adjusted EBITDA ratio
 
6.0
x
 
6.2
x
 
6.3
x
 
7.2
x
 
7.0
x
 
6.0
x
 
7.1
x
OTHER
 
 

 
 

 
 

 
 

 
 

 
 

 
 
Revenue from early termination of leases
 
$
583

 
$
543

 
$
350

 
$
395

 
$
45

 
$
1,871

 
$
490

Capitalized interest costs
 
$
3,109

 
$
3,390

 
$
3,595

 
$
3,809

 
$
4,294

 
$
13,903

 
$
17,401

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(1) Reflects the following revisions to per share amounts previously reported:
Per share effect of revisions - diluted:
 
 

 
 

 
 

 
 

 
 

 
 

 
 
EPS
 
N/A

 
$
—

 
$
0.01

 
$
0.05

 
$
(0.05
)
 
N/A

 
$
(0.03
)
FFO - NAREIT
 
N/A

 
$
—

 
$
—

 
$
(0.05
)
 
$
0.05

 
N/A

 
$
0.04

FFO - as adjusted for comparability
 
N/A

 
$
—

 
$
—

 
$
—

 
$
0.01

 
N/A

 
$
0.01



3

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

 
 

 
 

 
 

 
 

 
Wholly-owned
204

 
202

 
224

 
227

 
234

 
+ Consolidated JV (1)
4

 
4

 
4

 
4

 
4

 
Consolidated properties
208

 
206

 
228

 
231

 
238

 
% Occupied
 

 
 

 
 

 
 

 
 

 
Wholly-owned
87.6
%
 
88.1
%
 
87.6
%
 
87.6
%
 
86.9
%
 
+ Consolidated JV (1)
96.1
%
 
89.2
%
 
78.1
%
 
60.0
%
 
56.6
%
 
Consolidated properties
87.8
%
 
88.1
%
 
87.4
%
 
87.0
%
 
86.2
%
 
% Leased
 

 
 

 
 

 
 

 
 

 
Wholly-owned
89.1
%
 
89.8
%
 
89.2
%
 
89.2
%
 
88.7
%
 
+ Consolidated JV (1)
96.1
%
 
96.1
%
 
95.0
%
 
78.4
%
 
67.3
%
 
Consolidated properties
89.2
%
 
89.9
%
 
89.3
%
 
88.9
%
 
88.2
%
 
Square Feet of Office Properties (in thousands)
 

 
 

 
 

 
 

 
 

 
Wholly-owned
18,386

 
18,146

 
19,342

 
19,793

 
20,072

 
+ Consolidated JV Square Footage (1)
445

 
445

 
445

 
444

 
442

 
Consolidated Square Footage
18,831

 
18,591

 
19,787

 
20,237

 
20,514

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 








4

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

 
 

 
 

 
 

 
 

Properties, net
 

 
 

 
 

 
 

 
 

Operating properties, net
$
2,597,666

 
$
2,487,919

 
$
2,629,136

 
$
2,704,323

 
$
2,714,056

Construction and redevelopment in progress, including land
247,386

 
271,798

 
243,220

 
282,476

 
296,798

Land held for future development and pre-construction costs
317,992

 
342,797

 
360,236

 
351,492

 
342,121

Total properties, net
3,163,044

 
3,102,514

 
3,232,592

 
3,338,291

 
3,352,975

Assets held for sale
140,229

 
137,815

 
144,392

 
81,352

 
116,616

Cash and cash equivalents
10,594

 
5,009

 
4,702

 
7,987

 
5,559

Restricted cash and marketable securities
21,557

 
20,926

 
22,632

 
21,711

 
36,232

Accounts receivable, net
19,247

 
15,877

 
10,992

 
11,231

 
26,032

Deferred rent receivable
85,802

 
83,156

 
85,595

 
89,337

 
86,856

Intangible assets on real estate acquisitions, net
75,879

 
81,059

 
76,426

 
83,940

 
89,120

Deferred leasing and financing costs, net
59,952

 
58,753

 
63,861

 
66,987

 
66,515

Prepaid expenses and other assets
77,455

 
92,547

 
73,883

 
96,532

 
83,650

Total assets
$
3,653,759

 
$
3,597,656

 
$
3,715,075

 
$
3,797,368

 
$
3,863,555

Liabilities and equity
 

 
 

 
 

 
 

 
 

Liabilities:
 

 
 

 
 

 
 

 
 

Debt, net
$
2,019,168

 
$
2,169,315

 
$
2,191,851

 
$
2,418,078

 
$
2,426,303

Accounts payable and accrued expenses
97,922

 
87,390

 
84,733

 
93,156

 
95,714

Rents received in advance and security deposits
27,632

 
26,773

 
27,124

 
27,647

 
29,548

Dividends and distributions payable
28,698

 
26,954

 
24,695

 
24,544

 
35,038

Deferred revenue associated with operating leases
11,995

 
13,102

 
13,938

 
15,258

 
15,554

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

 
6,420

 
6,282

 
6,178

 
6,071

Interest rate derivatives
6,185

 
6,543

 
4,400

 
2,673

 
30,863

Other liabilities
8,942

 
10,938

 
8,703

 
9,038

 
9,657

Total liabilities
2,206,962

 
2,347,435

 
2,361,726

 
2,596,572

 
2,648,748

Commitments and contingencies


 


 
—

 


 


Redeemable noncontrolling interest
10,298

 
9,932

 
9,578

 
9,237

 
8,908

Equity:
 

 
 

 
 

 
 
 
 
COPT’s shareholders’ equity:
 

 
 

 
 

 
 
 
 
Preferred shares at liquidation preference
333,833

 
333,833

 
388,833

 
216,333

 
216,333

Common shares
809

 
722

 
721

 
720

 
720

Additional paid-in capital
1,653,672

 
1,451,416

 
1,447,781

 
1,451,981

 
1,451,078

Cumulative distributions in excess of net income
(617,455
)
 
(607,633
)
 
(560,262
)
 
(547,591
)
 
(534,041
)
Accumulated other comprehensive loss
(5,435
)
 
(5,688
)
 
(3,717
)
 
(2,201
)
 
(1,733
)
Total COPT’s shareholders’ equity
1,365,424

 
1,172,650

 
1,273,356

 
1,119,242

 
1,132,357

Noncontrolling interests in subsidiaries
 

 
 

 
 

 
 

 
 

Common units in the Operating Partnership
52,122

 
49,157

 
52,300

 
53,999

 
55,183

Preferred units in the Operating Partnership
8,800

 
8,800

 
8,800

 
8,800

 
8,800

Other consolidated entities
10,153

 
9,682

 
9,315

 
9,518

 
9,559

Total noncontrolling interests in subsidiaries
71,075

 
67,639

 
70,415

 
72,317

 
73,542

Total equity
1,436,499

 
1,240,289

 
1,343,771

 
1,191,559

 
1,205,899

Total liabilities, redeemable noncontrolling interest and equity
$
3,653,759

 
$
3,597,656

 
$
3,715,075

 
$
3,797,368

 
$
3,863,555

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

5

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

 
 

 
 

 
 

 
 

 
 
 
 
Rental revenue
$
94,562

 
$
92,783

 
$
90,450

 
$
89,859

 
$
89,110

 
$
367,654

 
$
348,006

Tenant recoveries and other real estate operations revenue
22,919

 
22,078

 
20,718

 
20,802

 
22,373

 
86,517

 
80,490

Construction contract and other service revenues
20,024

 
15,283

 
16,995

 
21,534

 
16,491

 
73,836

 
84,345

Total revenues
137,505

 
130,144

 
128,163

 
132,195

 
127,974

 
528,007

 
512,841

Expenses
 

 
 

 
 

 
 

 
 

 
 
 
 
Property operating expenses
44,887

 
41,517

 
39,504

 
41,253

 
42,525

 
167,161

 
162,397

Depreciation and amortization associated with real estate operations
28,560

 
28,698

 
28,388

 
27,834

 
28,906

 
113,480

 
113,111

Construction contract and other service expenses
19,274

 
14,410

 
16,285

 
20,607

 
15,941

 
70,576

 
81,639

Impairment losses (recoveries)
1,954

 
46,096

 
—

 
(4,836
)
 
40,495

 
43,214

 
83,478

General and administrative expenses
5,740

 
5,062

 
7,741

 
7,728

 
5,881

 
26,271

 
25,133

Leasing expenses
1,363

 
1,315

 
1,110

 
1,841

 
1,433

 
5,629

 
5,181

Business development expenses and land carry costs
1,205

 
1,632

 
1,298

 
1,576

 
1,800

 
5,711

 
6,122

Total operating expenses
102,983

 
138,730

 
94,326

 
96,003

 
136,981

 
432,042

 
477,061

Operating income (loss)
34,522

 
(8,586
)
 
33,837

 
36,192

 
(9,007
)
 
95,965

 
35,780

Interest expense
(22,715
)
 
(23,239
)
 
(24,239
)
 
(24,431
)
 
(23,361
)
 
(94,624
)
 
(98,222
)
Interest and other income
4,020

 
1,095

 
840

 
1,217

 
1,921

 
7,172

 
5,603

Loss on early extinguishment of debt
(6
)
 
(768
)
 
(169
)
 
—

 
(3
)
 
(943
)
 
(1,639
)
Loss on interest rate derivatives
—

 
—

 
—

 
—

 
(29,805
)
 
—

 
(29,805
)
Income (loss) from continuing operations before equity in loss of unconsolidated entities and income taxes
15,821

 
(31,498
)
 
10,269

 
12,978

 
(60,255
)
 
7,570

 
(88,283
)
Equity in loss of unconsolidated entities
(24
)
 
(246
)
 
(187
)
 
(89
)
 
(108
)
 
(546
)
 
(331
)
Income tax (expense) benefit
(54
)
 
(106
)
 
(17
)
 
(204
)
 
38

 
(381
)
 
6,710

Income (loss) from continuing operations
15,743

 
(31,850
)
 
10,065

 
12,685

 
(60,325
)
 
6,643

 
(81,904
)
Discontinued operations
3,267

 
11,085

 
1,775

 
(2,450
)
 
(30,781
)
 
13,677

 
(48,404
)
Income (loss) before gain on sales of real estate
19,010

 
(20,765
)
 
11,840

 
10,235

 
(91,106
)
 
20,320

 
(130,308
)
Gain on sales of real estate, net of income taxes
—

 
—

 
21

 
—

 
4

 
21

 
2,732

Net income (loss)
19,010

 
(20,765
)
 
11,861

 
10,235

 
(91,102
)
 
20,341

 
(127,576
)
Net (income) loss attributable to noncontrolling interests
 

 
 

 
 

 
 

 
 

 
 
 
 
Common units in the Operating Partnership
(651
)
 
1,533

 
(422
)
 
(373
)
 
5,348

 
87

 
8,439

Preferred units in the Operating Partnership
(165
)
 
(165
)
 
(165
)
 
(165
)
 
(165
)
 
(660
)
 
(660
)
Other consolidated entities
345

 
235

 
31

 
598

 
423

 
1,209

 
369

Net income (loss) attributable to COPT
18,539

 
(19,162
)
 
11,305

 
10,295

 
(85,496
)
 
20,977

 
(119,428
)
Preferred share dividends
(6,106
)
 
(6,546
)
 
(4,167
)
 
(4,025
)
 
(4,026
)
 
(20,844
)
 
(16,102
)
Issuance costs associated with redeemed preferred shares
—

 
(1,827
)
 
—

 
—

 
—

 
(1,827
)
 
—

Net income (loss) attributable to COPT common shareholders
$
12,433

 
$
(27,535
)
 
$
7,138

 
$
6,270

 
$
(89,522
)
 
$
(1,694
)
 
$
(135,530
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 

6

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

 
 

 
 

 
 

 
 

 
 
 
 
Numerator for diluted EPS
 

 
 

 
 

 
 

 
 

 
 
 
 
Net income (loss) attributable to common shareholders
$
12,433

 
$
(27,535
)
 
$
7,138

 
$
6,270

 
$
(89,522
)
 
$
(1,694
)
 
$
(135,530
)
Amount allocable to restricted shares
(112
)
 
(111
)
 
(105
)
 
(141
)
 
(256
)
 
(469
)
 
(1,037
)
Numerator for diluted EPS
$
12,321

 
$
(27,646
)
 
$
7,033

 
$
6,129

 
$
(89,778
)
 
$
(2,163
)
 
$
(136,567
)
Denominator:
 

 
 

 
 

 
 

 
 

 
 
 
 
Weighted average common shares - basic
79,004

 
71,688

 
71,624

 
71,458

 
71,351

 
73,454

 
69,382

Dilutive effect of share-based compensation awards
67

 
—

 
25

 
44

 
—

 
—

 
—

Weighted average common shares - diluted
79,071

 
71,688

 
71,649

 
71,502

 
71,351

 
73,454

 
69,382

Diluted EPS
$
0.16

 
$
(0.39
)
 
$
0.10

 
$
0.09

 
$
(1.26
)
 
$
(0.03
)
 
$
(1.97
)

7

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

 
 

 
 

 
 

 
 

 
 
 
 
Real estate revenues
$
122,564

 
$
121,264

 
$
123,968

 
$
125,304

 
$
127,456

 
$
493,100

 
$
495,832

Real estate property operating expenses
(46,442
)
 
(43,699
)
 
(44,048
)
 
(46,546
)
 
(48,762
)
 
(180,735
)
 
(187,820
)
NOI from real estate operations (1) (2)
76,122

 
77,565

 
79,920

 
78,758

 
78,694

 
312,365

 
308,012

General and administrative expenses
(5,740
)
 
(5,062
)
 
(7,741
)
 
(7,728
)
 
(5,881
)
 
(26,271
)
 
(25,133
)
Leasing expenses (2)
(1,363
)
 
(1,316
)
 
(1,112
)
 
(1,841
)
 
(1,433
)
 
(5,632
)
 
(5,193
)
Business development expenses and land carry costs (2)
(1,205
)
 
(1,632
)
 
(1,304
)
 
(1,594
)
 
(1,819
)
 
(5,735
)
 
(6,197
)
Income from construction contracts and other service operations
750

 
873

 
710

 
927

 
550

 
3,260

 
2,706

Impairment (losses) recoveries on non-operating properties
(1,893
)
 
—

 
—

 
5,246

 
(39,193
)
 
3,353

 
(80,509
)
Equity in loss of unconsolidated entities
(24
)
 
(246
)
 
(187
)
 
(89
)
 
(108
)
 
(546
)
 
(331
)
Depreciation and amortization on unconsolidated real estate entities
—

 
113

 
119

 
114

 
142

 
346

 
492

Interest and other income
4,020

 
1,095

 
840

 
1,217

 
1,921

 
7,172

 
5,603

(Loss) gain on early extinguishment of debt (2)
(6
)
 
970

 
(171
)
 
—

 
(3
)
 
793

 
(2,023
)
Loss on interest rate derivatives
—

 
—

 
—

 
—

 
(29,805
)
 
—

 
(29,805
)
Gain on sales of non-operating properties, net of income taxes
—

 
—

 
33

 
—

 
—

 
33

 
2,717

Total interest expense (2)
(22,782
)
 
(23,366
)
 
(24,975
)
 
(25,675
)
 
(24,914
)
 
(96,798
)
 
(104,301
)
Income tax (expense) benefit
(54
)
 
(106
)
 
(17
)
 
(204
)
 
38

 
(381
)
 
6,710

FFO - per NAREIT (1)
47,825

 
48,888

 
46,115

 
49,131

 
(21,811
)
 
191,959

 
72,748

Preferred share dividends
(6,106
)
 
(6,546
)
 
(4,167
)
 
(4,025
)
 
(4,026
)
 
(20,844
)
 
(16,102
)
Issuance costs associated with redeemed preferred shares
—

 
(1,827
)
 
—

 
—

 
—

 
(1,827
)
 
—

Noncontrolling interests - preferred units in the Operating Partnership
(165
)
 
(165
)
 
(165
)
 
(165
)
 
(165
)
 
(660
)
 
(660
)
FFO allocable to other noncontrolling interests
(738
)
 
(571
)
 
(420
)
 
(260
)
 
(283
)
 
(1,989
)
 
(1,887
)
Basic and diluted FFO allocable to restricted shares
(191
)
 
(214
)
 
(220
)
 
(294
)
 
(255
)
 
(919
)
 
(1,037
)
Basic and diluted FFO available to common share and common unit holders (1)
40,625

 
39,565

 
41,143

 
44,387

 
(26,540
)
 
165,720

 
53,062

Operating property acquisition costs
—

 
222

 
7

 
—

 
4

 
229

 
156

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
1,893

 
—

 
—

 
(4,573
)
 
39,645

 
(2,680
)
 
75,734

Loss on interest rate derivatives
—

 
—

 
—

 
—

 
29,805

 
—

 
29,805

Loss (gain) on early extinguishment of debt (2)
6

 
(970
)
 
171

 
—

 
3

 
(793
)
 
2,023

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)
$
42,524

 
$
40,644

 
$
41,288

 
$
39,814

 
$
42,917

 
$
164,270

 
$
158,063

 
 
 
 
 
 
 
 
 
 
 
 
 
 
(1) Please refer to the section entitled “Definitions” for a definition of this measure.
(2) Includes continuing and discontinued operations.

8

Corporate Office Properties Trust
Consolidated Statements of FFO (continued)
(in thousands, except per share data)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended
 
Year Ended
 
12/31/12
 
9/30/12
 
6/30/12
 
3/31/12
 
12/31/11
 
12/31/12
 
12/31/11
Net income (loss)
$
19,010

 
$
(20,765
)
 
$
11,861

 
$
10,235

 
$
(91,102
)
 
$
20,341

 
$
(127,576
)
Real estate-related depreciation and amortization
28,560

 
30,624

 
31,666

 
31,087

 
33,030

 
121,937

 
134,131

Impairment losses on previously depreciated operating properties (1)
247

 
55,829

 
2,354

 
11,833

 
39,481

 
70,263

 
70,512

Gain on sales of previously depreciated operating properties, net of income taxes
8

 
(16,913
)
 
115

 
(4,138
)
 
(3,362
)
 
(20,928
)
 
(4,811
)
Depreciation and amortization on unconsolidated real estate entities
—

 
113

 
119

 
114

 
142

 
346

 
492

FFO - per NAREIT (2)
47,825

 
48,888

 
46,115

 
49,131

 
(21,811
)
 
191,959

 
72,748

Operating property acquisition costs
—

 
222

 
7

 
—

 
4

 
229

 
156

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

 
—

 
(33
)
 
—

 
—

 
(33
)
 
(2,717
)
Impairment losses (recoveries) on non-operating properties, net of associated tax
1,893

 
—

 
—

 
(4,573
)
 
39,645

 
(2,680
)
 
75,734

Loss on interest rate derivatives
—

 
—

 
—

 
—

 
29,805

 
—

 
29,805

Loss (gain) on early extinguishment of debt, continuing and discontinued operations
6

 
(970
)
 
171

 
—

 
3

 
(793
)
 
2,023

Issuance costs associated with redeemed preferred shares
—

 
1,827

 
—

 
—

 
—

 
1,827

 
—

FFO - as adjusted for comparability (2)
$
49,724

 
$
49,967

 
$
46,260

 
$
44,558

 
$
47,646

 
$
190,509

 
$
177,749

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Weighted Average Shares for period ended:
 

 
 

 
 

 
 

 
 

 
 

 
 

Common Shares Outstanding
79,004

 
71,688

 
71,624

 
71,458

 
71,351

 
73,454

 
69,382

Dilutive effect of share-based compensation awards
67

 
73

 
25

 
44

 
29

 
53

 
111

Common Units
4,171

 
4,233

 
4,255

 
4,281

 
4,308

 
4,235

 
4,355

Denominator for FFO per share - diluted
83,242

 
75,994

 
75,904

 
75,783

 
75,688

 
77,742

 
73,848

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

 
(73
)
 
—

 
—

 
(29
)
 
(53
)
 
(111
)
Weighted average common units
(4,171
)
 
(4,233
)
 
(4,255
)
 
(4,281
)
 
(4,308
)
 
(4,235
)
 
(4,355
)
Denominator for diluted EPS
79,071

 
71,688

 
71,649

 
71,502

 
71,351

 
73,454

 
69,382

 
 
 
 
 
 
 
 
 
 
 
 
 
 
(1) Please see reconciliations on pages 35 through 37.
 
 
 
 
 
 
 
 
 
 
 
 
 
(2) Please refer to the section entitled “Definitions” for a definition of this measure.

9

Corporate Office Properties Trust
Consolidated Reconciliations of AFFO
(in thousands, except per share data)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended
 
Year Ended
 
12/31/12
 
9/30/12
 
6/30/12
 
3/31/12
 
12/31/11
 
12/31/12
 
12/31/11
Diluted FFO available to common share and common unit holders, as adjusted for comparability
$
42,524

 
$
40,644

 
$
41,288

 
$
39,814

 
$
42,917

 
$
164,270

 
$
158,063

Straight line rent adjustments (1)
(3,385
)
 
(2,595
)
 
(1,857
)
 
(2,179
)
 
(2,144
)
 
(10,016
)
 
(8,669
)
Amortization of intangibles included in NOI
221

 
251

 
218

 
190

 
249

 
880

 
849

Share-based compensation, net of amounts capitalized
1,720

 
1,703

 
3,157

 
3,402

 
3,764

 
9,982

 
11,920

Amortization of deferred financing costs
1,547

 
1,527

 
1,597

 
1,572

 
1,506

 
6,243

 
6,596

Amortization of net debt discounts, net of amounts capitalized
693

 
683

 
682

 
663

 
634

 
2,721

 
4,680

Amortization of settled debt hedges
16

 
15

 
15

 
16

 
15

 
62

 
62

Recurring capital expenditures on properties to be held
(27,476
)
 
(8,518
)
 
(6,074
)
 
(1,875
)
 
(12,550
)
 
(43,943
)
 
(39,510
)
Diluted AFFO available to common share and common unit holders (“diluted AFFO”)
$
15,860

 
$
33,710

 
$
39,026

 
$
41,603

 
$
34,391

 
$
130,199

 
$
133,991

Recurring capital expenditures
 

 
 

 
 

 
 

 
 

 
 
 
 
Tenant improvements and incentives on operating properties
$
10,713

 
$
7,774

 
$
2,663

 
$
666

 
$
10,036

 
$
21,816

 
$
30,756

Building improvements on operating properties
18,049

 
4,646

 
1,296

 
871

 
4,519

 
24,862

 
9,840

Leasing costs for operating properties
1,381

 
947

 
2,863

 
1,299

 
1,448

 
6,490

 
10,474

Less: Nonrecurring tenant improvements and incentives on operating properties
(283
)
 
(3,852
)
 
(97
)
 
(561
)
 
(1,371
)
 
(4,793
)
 
(6,264
)
Less: Nonrecurring building improvements on operating properties
(2,226
)
 
(940
)
 
(572
)
 
(407
)
 
(2,106
)
 
(4,145
)
 
(4,294
)
Less: Nonrecurring leasing costs for operating properties
—

 
(130
)
 
(79
)
 
—

 
(5
)
 
(209
)
 
(1,098
)
Add: Recurring capital expenditures on operating properties held through joint ventures
(158
)
 
73

 
—

 
7

 
29

 
(78
)
 
96

Recurring capital expenditures
$
27,476

 
$
8,518

 
$
6,074

 
$
1,875

 
$
12,550

 
$
43,943

 
$
39,510

 
 
 
 
 
 
 
 
 
 
 
 
 
 
(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 - December 31, 2012 (2)
 
 
Operational Properties (1)
 
Active or Committed Construction/Redevelopment (2)
Property Region and Business Park/Submarket
 
# of
Properties
 
Operational
Square Feet
 
Occupancy
%
 
Leased
 %
 
# of
Properties
 
Construction/Redevelopment Square Feet
 
Operational Square Feet (1)
 
Total
Square Feet
Baltimore/Washington Corridor:
 
 

 
 

 
 

 
 

 
 

 
 

 
 
 
 
National Business Park
 
27

 
3,223,501

 
96.2
%
 
97.6
%
 
2

 
262,482

 
—

 
262,482

Columbia Gateway
 
28

 
2,221,453

 
86.6
%
 
87.5
%
 
—

 
—

 
—

 
—

Airport Square/bwtech
 
26

 
1,940,891

 
81.8
%
 
82.8
%
 
—

 
—

 
—

 
—

Commons/Parkway
 
10

 
432,104

 
68.5
%
 
69.1
%
 
—

 
—

 
—

 
—

Other
 
7

 
762,572

 
99.4
%
 
99.4
%
 
2

 
115,207

 
—

 
115,207

Subtotal
 
98

 
8,580,521

 
89.4
%
 
90.4
%
 
4

 
377,689

 
—

 
377,689

Northern Virginia:
 
 

 
 

 
 

 
 

 
 

 
 

 
 
 
 
Westfields Corporate Center
 
9

 
1,434,692

 
91.0
%
 
93.0
%
 
—

 
—

 
—

 
—

Patriot Ridge
 
1

 
83,987

 
100.0
%
 
100.0
%
 
1

 
155,285

 
83,987

 
239,272

Herndon, Tysons Corner, Merrifield and Ashburn
 
9

 
1,701,822

 
87.1
%
 
88.9
%
 
2

 
315,000

 
—

 
315,000

Subtotal
 
19

 
3,220,501

 
89.2
%
 
91.0
%
 
3

 
470,285

 
83,987

 
554,272

San Antonio, Texas
 
 

 
 

 
 

 
 

 
 

 
 

 
 
 
 
Sentry Gateway
 
6

 
792,454

 
100.0
%
 
100.0
%
 
—

 
—

 
—

 
—

Other
 
2

 
122,639

 
73.5
%
 
73.5
%
 
—

 
—

 
—

 
—

Subtotal
 
8

 
915,093

 
96.4
%
 
96.4
%
 
—

 
—

 
—

 
—

Huntsville (3)
 
1

 
138,466

 
83.2
%
 
83.2
%
 
4

 
424,974

 
—

 
424,974

Washington, DC- Capital Riverfront (Maritime)
 
2

 
360,326

 
89.0
%
 
89.0
%
 
—

 
—

 
—

 
—

St. Mary’s & King George Counties
 
19

 
903,592

 
85.9
%
 
87.7
%
 
—

 
—

 
—

 
—

Greater Baltimore:
 
 

 
 

 
 

 
 

 
 

 
 

 


 
—

White Marsh and Rt 83 Corridor
 
28

 
1,287,005

 
82.1
%
 
83.1
%
 
—

 
—

 
—

 
—

Canton Crossing-Baltimore City
 
1

 
481,016

 
93.4
%
 
93.4
%
 
—

 
—

 
—

 
—

North Gate Business Park
 
3

 
284,884

 
37.9
%
 
37.9
%
 
—

 
—

 
—

 
—

Subtotal
 
32

 
2,052,905

 
78.6
%
 
79.3
%
 
—

 
—

 
—

 
—

Suburban Maryland
 
3

 
297,936

 
94.1
%
 
94.1
%
 
—

 
—

 
—

 
—

Colorado Springs
 
21

 
1,577,511

 
77.8
%
 
83.4
%
 
—

 
—

 
—

 
—

Greater Philadelphia, Pennsylvania
 
3

 
488,741

 
100.0
%
 
100.0
%
 
2

 
243,028

 
53,735

 
296,763

Other (3)
 
2

 
295,842

 
100.0
%
 
100.0
%
 
—

 
—

 
—

 
—

Total
 
208

 
18,831,434

 
87.8
%
 
89.2
%
 
13

 
1,515,976

 
137,722

 
1,653,698

 
(1)
Number of properties includes buildings under construction once those buildings become partially operational. Operational square feet includes square feet in operations for partially operational properties.
(2)
This schedule includes properties under active construction or redevelopment and properties that we were contractually committed to construct. 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 12/31/2012
 
 
 
 
 
 
# 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 Year Ended
Property Grouping
 
 
 
% Occupied (1)
 
% Leased (1)
 
 
 
12/31/12
 
12/31/12
Same Office Properties (2)
 
 

 
 

 
 
 
 
 
 

 
 

 
 

 
 

Stabilized properties
 
176

 
15,638

 
89.6%
 
90.5%
 
$
399,752

 
86.6
%
 
$
64,343

 
$
261,188

Unstabilized properties (3)
 
1

 
181

 
46.0%
 
46.0%
 
3,059

 
0.7
%
 
568

 
1,155

Total Same Office Properties
 
177

 
15,819

 
89.1%
 
90.0%
 
402,811

 
87.2
%
 
64,911

 
262,343

Office Properties Placed in Service (4)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Stabilized properties
 
4

 
395

 
100.0%
 
100.0%
 
12,831

 
2.8
%
 
2,596

 
8,843

Unstabilized properties (3)
 
5

 
553

 
46.5%
 
54.8%
 
8,380

 
1.8
%
 
1,435

 
3,354

Acquired Office Properties (5)
 
2

 
340

 
93.2%
 
93.2%
 
8,925

 
1.9
%
 
1,573

 
5,124

Other
 
N/A

 
N/A

 
N/A
 
N/A
 
N/A

 
N/A

 
509

 
1,807

Subtotal
 
188

 
17,107

 
89.3%
 
91.2%
 
432,947

 
93.7
%
 
71,024

 
281,471

Office Properties Held for Sale (6)
 
17

 
1,235

 
79.5%
 
86.6%
 
19,539

 
4.2
%
 
3,160

 
12,858

Greater Philadelphia
 
3

 
489

 
100.0%
 
100.0%
 
9,370

 
2.0
%
 
1,816

 
7,136

Disposed Office Properties (7)
 
N/A

 
N/A

 
N/A
 
N/A
 
N/A

 
N/A

 
122

 
10,900

Total Portfolio
 
208

 
18,831

 
87.8%
 
89.2%
 
$
461,856

 
100.0
%
 
$
76,122

 
$
312,365

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Strategic Tenant Properties (8)
 
114

 
11,580

 
92.8%
 
93.6%
 
$
323,410

 
70.0
%
 
$
54,824

 
$
213,273

 
(1)     Percentages calculated based on operational square feet.
(2)     Properties held for long-term investment owned and 100% operational since at least 1/1/11.
(3)     Properties with first generation operational space less than 90% occupied at 12/31/12, as detailed on page 13.
(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 held for sale at 12/31/12 totaled $140,229.
(7)     See page 21.
(8)
Office properties held for long-term investment located near defense installations and other knowledge-based government demand drivers, or that were otherwise at least 50% leased as of most recent year end by United States Government agencies or defense contractors.



12

Corporate Office Properties Trust
Unstabilized Office Properties (1) - December 31, 2012  
 
 
 
 
 
 
 
Property Grouping
Operational Square Feet
 
Occupancy %
 
Leased %
 
Same Office Properties (2) 
 

 
 
 
 
 
3120 Fairview Park Drive
180,854

 
46.0%
 
46.0%
 
Office Properties Placed in Service (3) 
 

 
 
 
 
 
206 Research Blvd
128,119

 
0.0%
 
0.0%
 
316 Sentinel Way
125,150

 
63.1%
 
100.0%
 
410 National Business Parkway
110,154

 
47.7%
 
47.7%
(4)
430 National Business Parkway
110,136

 
86.1%
 
86.1%
 
210 Research Blvd
79,573

 
38.6%
 
38.6%
 
Total Unstabilized Office Properties Placed in Service
553,132

 
46.5%
 
54.8%
 
Total Unstabilized Office Properties, Excluding Properties Held for Sale
733,986

 
46.3%
 
52.6%
 
Unstabilized Properties Held for Sale (3 Properties)
309,576

 
37.4%
 
64.5%
 
Total Unstabilized Office Properties
1,043,562

 
43.7%
 
56.2%
 
 
(1) Properties with first generation operational space less than 90% occupied at 12/31/12.
(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.
(4) Property was 100% leased in January 2013.




13

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

 
 

 
 

 
 

 
 

 
 
 
 
 
Baltimore/Washington Corridor
$
57,233

 
$
55,799

 
$
55,677

 
$
56,250

 
$
57,195

 
224,959

 
218,051

 
Northern Virginia
21,600

 
20,363

 
19,051

 
18,560

 
18,855

 
79,574

 
74,214

 
San Antonio
8,455

 
8,125

 
7,830

 
7,608

 
7,613

 
32,018

 
30,066

 
Washington, DC - Capitol Riverfront
4,182

 
4,389

 
4,232

 
3,894

 
4,529

 
16,697

 
17,878

 
St. Mary’s and King George Counties
3,956

 
4,085

 
4,139

 
4,212

 
3,760

 
16,392

 
14,366

 
Greater Baltimore
10,662

 
11,918

 
14,664

 
15,372

 
17,017

 
52,616

 
70,668

 
Suburban Maryland
2,336

 
2,371

 
4,560

 
5,749

 
5,400

 
15,016

 
21,982

 
Colorado Springs
6,309

 
6,278

 
6,149

 
6,453

 
5,991

 
25,189

 
23,860

 
Greater Philadelphia
2,527

 
2,541

 
2,458

 
2,172

 
2,143

 
9,698

 
7,458

 
Other
3,317

 
3,589

 
3,770

 
3,618

 
3,668

 
14,294

 
12,235

 
Wholesale Data Center
1,987

 
1,806

 
1,438

 
1,416

 
1,285

 
6,647

 
5,054

 
Real estate revenues
$
122,564

 
$
121,264

 
$
123,968

 
$
125,304

 
$
127,456

 
$
493,100

 
$
495,832

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

 
 

 
 

 
 

 
 

 
 
 
 
 
Baltimore/Washington Corridor
$
36,615

 
$
37,265

 
$
37,208

 
$
36,576

 
$
35,800

 
147,664

 
139,420

 
Northern Virginia
13,767

 
13,248

 
12,126

 
11,330

 
11,925

 
50,471

 
45,696

 
San Antonio
3,954

 
3,853

 
3,866

 
3,846

 
3,876

 
15,519

 
15,695

 
Washington, DC - Capitol Riverfront
2,112

 
2,465

 
2,556

 
2,009

 
2,776

 
9,142

 
11,116

 
St. Mary’s and King George Counties
2,735

 
2,844

 
3,068

 
3,000

 
2,626

 
11,647

 
10,224

 
Greater Baltimore
6,656

 
7,379

 
9,053

 
9,611

 
10,152

 
32,699

 
41,125

 
Suburban Maryland
1,398

 
1,330

 
2,703

 
3,290

 
2,947

 
8,721

 
12,808

 
Colorado Springs
3,780

 
3,846

 
4,134

 
4,146

 
3,523

 
15,906

 
15,060

 
Greater Philadelphia
1,816

 
1,878

 
1,783

 
1,659

 
1,706

 
7,136

 
6,056

 
Other
2,739

 
2,903

 
3,056

 
2,930

 
2,959

 
11,628

 
9,187

 
Wholesale Data Center
550

 
554

 
367

 
361

 
404

 
1,832

 
1,625

 
NOI from real estate operations
$
76,122

 
$
77,565

 
$
79,920

 
$
78,758

 
$
78,694

 
$
312,365

 
$
308,012


*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
 
Year Ended
 
 
 
12/31/12
 
9/30/12
 
6/30/12
 
3/31/12
 
12/31/11
 
12/31/12
 
12/31/11
Baltimore Washington Corridor
94

 
8,083,874

 
89.7
%
 
89.0
%
 
89.5
%
 
88.7
%
 
89.4
%
 
89.2
%
 
89.1
%
Northern Virginia
17

 
2,934,677

 
88.1
%
 
86.6
%
 
87.0
%
 
86.1
%
 
86.1
%
 
87.0
%
 
87.0
%
San Antonio
8

 
915,429

 
96.5
%
 
96.5
%
 
96.5
%
 
97.6
%
 
100.0
%
 
96.8
%
 
100.0
%
Washington, DC - Capitol Riverfront
2

 
360,326

 
89.0
%
 
89.0
%
 
89.0
%
 
88.3
%
 
95.5
%
 
88.8
%
 
96.6
%
St. Mary’s and King George Counties
18

 
820,750

 
84.1
%
 
84.1
%
 
86.5
%
 
87.0
%
 
87.5
%
 
85.4
%
 
88.0
%
Greater Baltimore
29

 
1,768,021

 
85.2
%
 
87.4
%
 
87.5
%
 
86.8
%
 
85.6
%
 
86.7
%
 
85.2
%
Suburban Maryland
2

 
242,070

 
94.9
%
 
94.1
%
 
92.5
%
 
90.0
%
 
90.0
%
 
92.9
%
 
88.6
%
Colorado Springs
5

 
398,044

 
72.9
%
 
74.9
%
 
74.5
%
 
74.7
%
 
79.0
%
 
74.2
%
 
84.1
%
Other
2

 
295,842

 
100.0
%
 
100.0
%
 
100.0
%
 
100.0
%
 
100.0
%
 
100.0
%
 
100.0
%
Total Office
177

 
15,818,697

 
88.8
%
 
88.5
%
 
88.9
%
 
88.3
%
 
88.9
%
 
88.6
%
 
89.1
%
Total Same Office Properties occupancy as of period end
 
 

 
89.1
%
 
88.5
%
 
88.7
%
 
88.4
%
 
88.3
%
 
89.1
%
 
88.3
%

(1)  Same office properties represent buildings owned and 100% operational since at least 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
 
Year Ended
 
12/31/12
 
9/30/12
 
6/30/12
 
3/31/12
 
12/31/11
 
12/31/12
 
12/31/11
Office Properties:
 

 
 

 
 

 
 

 
 

 
 
 
 
Baltimore/Washington Corridor
$
54,050

 
$
52,948

 
$
51,992

 
$
52,574

 
$
53,571

 
211,564

 
206,055

Northern Virginia
19,334

 
19,181

 
19,051

 
18,560

 
18,855

 
76,126

 
74,214

San Antonio
8,455

 
8,125

 
7,830

 
7,614

 
7,610

 
32,024

 
30,060

Washington, DC - Capitol Riverfront
4,182

 
4,389

 
4,232

 
3,894

 
4,529

 
16,697

 
17,878

St. Mary’s and King George Counties
3,388

 
3,511

 
3,551

 
3,622

 
3,485

 
14,072

 
14,091

Greater Baltimore
9,747

 
10,016

 
9,735

 
10,083

 
9,941

 
39,581

 
38,611

Suburban Maryland
2,132

 
2,105

 
2,069

 
2,051

 
1,993

 
8,357

 
8,384

Colorado Springs
1,471

 
1,537

 
1,524

 
1,627

 
1,469

 
6,159

 
5,911

Other
2,435

 
2,423

 
2,434

 
2,403

 
2,449

 
9,695

 
9,413

Real estate revenues
$
105,194

 
$
104,235

 
$
102,418

 
$
102,428

 
$
103,902

 
$
414,275

 
$
404,617

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

 
 

 
 

 
 

 
 

 
 
 
 
Baltimore/Washington Corridor
$
34,056

 
$
35,139

 
$
34,540

 
$
34,013

 
$
33,050

 
137,748

 
130,878

Northern Virginia
12,194

 
12,248

 
12,122

 
11,330

 
11,925

 
47,894

 
45,695

San Antonio
3,954

 
3,852

 
3,864

 
3,902

 
3,945

 
15,572

 
15,766

Washington, DC - Capitol Riverfront
2,112

 
2,465

 
2,556

 
2,009

 
2,776

 
9,142

 
11,116

St. Mary’s and King George Counties
2,332

 
2,368

 
2,615

 
2,529

 
2,440

 
9,844

 
10,043

Greater Baltimore
6,069

 
6,209

 
6,070

 
6,436

 
6,225

 
24,784

 
23,501

Suburban Maryland
1,296

 
1,315

 
1,357

 
1,319

 
1,222

 
5,287

 
5,723

Colorado Springs
729

 
797

 
924

 
901

 
765

 
3,351

 
3,177

Other
2,169

 
2,184

 
2,190

 
2,178

 
2,253

 
8,721

 
8,520

Same office property NOI
64,911

 
66,577

 
66,238

 
64,617

 
64,601

 
262,343

 
254,419

Add (less): Straight-line rent adjustments
(1,291
)
 
(1,452
)
 
(952
)
 
(2,008
)
 
(617
)
 
(5,703
)
 
(5,170
)
Less: Amortization of deferred market rental revenue
(79
)
 
(80
)
 
(96
)
 
(99
)
 
(83
)
 
(354
)
 
(288
)
Add: Amortization of above-market cost arrangements
371

 
371

 
371

 
353

 
434

 
1,466

 
1,735

Same office property cash NOI
63,912

 
65,416

 
65,561

 
62,863

 
64,335

 
257,752

 
250,696

Less: Lease termination fees, gross
(544
)
 
(432
)
 
(182
)
 
(534
)
 
(48
)
 
(1,692
)
 
(491
)
Same office property cash NOI, excluding gross lease termination fees
$
63,368

 
$
64,984

 
$
65,379

 
$
62,329

 
$
64,287

 
$
256,060

 
$
250,205

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

16

Corporate Office Properties Trust
Office Leasing (1)
Quarter Ended December 31, 2012
 
Baltimore/
Washington
Corridor
 
Northern
Virginia
 
Washington DC-Capital Riverfront
 
St. Mary’s & King George Counties
 
Greater
Baltimore
 
Colorado
Springs
 
Greater
Philadelphia
 
Huntsville
 
Total
Office
Renewed Space
 

 
 

 
 

 
 
 
 

 
 

 
 

 
 
 
 

Leased Square Feet
35,238

 
245,566

 
4,563

 
116,144

 
7,571

 
7,304

 
—

 
—

 
416,386

Expiring Square Feet
66,235

 
245,566

 
4,563

 
116,144

 
12,451

 
18,113

 
—

 
23,299

 
486,371

Vacated Square Feet
30,997

 
—

 
—

 
—

 
4,880

 
10,809

 
—

 
23,299

 
69,985

Retention Rate (% based upon square feet)
53.20
%
 
100.00
%
 
100.00
%
 
100.00
%
 
60.81
 %
 
40.32
 %
 
0.00
%
 
0.00
%
 
85.61
%
Statistics for Completed Leasing:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Average Committed Cost per Square Foot
$
9.05

 
$
2.76

 
$
0.90

 
$
—

 
$
0.09

 
$
22.50

 
$
—

 
$
—

 
$
2.80

Weighted Average Lease Term in Years
4.9

 
1.4

 
1.0

 
1.2

 
1.3

 
5.1

 
—

 
—

 
1.7

GAAP Rent Per Square Foot
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
        Renewal GAAP Rent
$
34.23

 
$
27.20

 
$
46.27

 
$
17.65

 
$
13.22

 
$
18.43

 
$
—

 
$
—

 
$
24.93

        Expiring GAAP Rent
$
29.07

 
$
26.88

 
$
45.17

 
$
16.36

 
$
18.96

 
$
16.36

 
$
—

 
$
—

 
$
24.00

        Change in GAAP Rent
17.78
%
 
1.21
%
 
2.44
%
 
7.9
%
 
(30.31
)%
 
12.64
 %
 
0.00
%
 
0.00
%
 
3.89
%
Cash Rent Per Square Foot
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
        Renewal Cash Rent
$
32.84

 
$
27.18

 
$
46.27

 
$
17.60

 
$
13.22

 
$
17.80

 
$
—

 
$
—

 
$
24.78

        Expiring Cash Rent
$
30.44

 
$
27.05

 
$
45.17

 
$
17.30

 
$
19.65

 
$
18.64

 
$
—

 
$
—

 
$
24.54

        Change in Cash Rent
7.88
%
 
0.48
%
 
2.44
%
 
1.69
%
 
(32.73
)%
 
(4.52
)%
 
0.00
%
 
0.00
%
 
0.99
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
New Leases
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Development and Redevelopment Space
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Leased Square Feet (2)
—

 
317,818

 
—

 
—

 
—

 
36,468

 
105,763

 
363,298

 
823,347

Statistics for Completed Leasing:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Average Committed Cost per Square Foot
$
—

 
$
5.68

 
$
—

 
$
—

 
$
—

 
$
63.70

 
$
80.19

 
$
42.41

 
$
34.03

Weighted Average Lease Term in Years
—

 
11.5

 
—

 
—

 
—

 
8.7

 
13.8

 
5.4

 
9.0

GAAP Rent Per Square Foot
$
—

 
$
11.78

 
$
—

 
$
—

 
$
—

 
$
18.59

 
$
23.60

 
$
20.15

 
$
17.29

Cash Rent Per Square Foot
$
—

 
$
11.37

 
$
—

 
$
—

 
$
—

 
$
16.82

 
$
24.13

 
$
19.05

 
$
16.64

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Other New Leases (3)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Leased Square Feet
68,906

 
24,710

 
10,165

 
13,581

 
46,427

 
2,720

 
—

 
—

 
166,509

Statistics for Completed Leasing:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Average Committed Cost per Square Foot
$
19.86

 
$
18.76

 
$
39.55

 
$
24.47

 
$
50.00

 
$
3.68

 
$
—

 
$
—

 
$
29.41

Weighted Average Lease Term in Years
5.7

 
6.7

 
5.2

 
4.4

 
3.8

 
4.1

 
—

 
—

 
5.2

GAAP Rent Per Square Foot
$
24.45

 
$
24.39

 
$
42.67

 
$
22.31

 
$
30.12

 
$
22.51

 
$
—

 
$
—

 
$
26.93

Cash Rent Per Square Foot
$
23.79

 
$
23.74

 
$
43.00

 
$
21.49

 
$
29.00

 
$
21.78

 
$
—

 
$
—

 
$
26.19

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total Square Feet Leased
104,144

 
588,094

 
14,728

 
129,725

 
53,998

 
46,492

 
105,763

 
363,298

 
1,406,242

(1) This presentation reflects consolidated properties.
(2) New leasing activity in Northern Virginia is related to two Ashburn Crossing properties.
(3) Other New Leases includes acquired first generation space and vacated second generation space.
Notes:  No expiration, renewal or retenanting activity transpired in our San Antonio, Suburban Maryland or Greater Philadelphia 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)
Year Ended December 31, 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
 
Huntsville
 
Total
Office
Renewed Space
 

 
 

 
 

 
 

 
 
 
 

 
 

 
 

 
 

 
 
 
 

Leased Square Feet
422,138

 
284,150

 
45,935

 
26,297

 
308,213

 
141,977

 
15,756

 
107,749

 
—

 
—

 
1,352,215

Expiring Square Feet
815,002

 
375,268

 
78,359

 
26,297

 
346,147

 
255,231

 
15,756

 
167,882

 
—

 
23,299

 
2,103,241

Vacated Square Feet
392,864

 
91,118

 
32,424

 
—

 
37,934

 
113,254

 
—

 
60,133

 
—

 
23,299

 
751,026

Retention Rate (% based upon square feet)
51.80
 %
 
75.72
 %
 
58.62
%
 
100.00
 %
 
89.04
 %
 
55.63
 %
 
100.00
 %
 
64.18
 %
 
0.00
%
 
0.00
%
 
64.29
 %
Statistics for Completed Leasing:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Average Committed Cost per Square Foot
$
8.56

 
$
3.57

 
$
15.70

 
$
9.19

 
$
2.71

 
$
4.86

 
$
2.41

 
$
13.20

 
$
—

 
$
—

 
$
6.35

Weighted Average Lease Term in Years
4.1

 
1.8

 
5.3

 
4.2

 
2.1

 
4.1

 
6.5

 
5.4

 
—

 
—

 
3.3

GAAP Rent Per Square Foot
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
        Renewal GAAP Rent
$
27.22

 
$
27.45

 
$
13.98

 
$
46.27

 
$
20.38

 
$
18.96

 
$
15.29

 
$
20.26

 
$
—

 
$
—

 
$
24.07

        Expiring GAAP Rent
$
26.10

 
$
27.37

 
$
12.79

 
$
51.09

 
$
19.48

 
$
20.29

 
$
15.05

 
$
18.47

 
$
—

 
$
—

 
$
23.55

        Change in GAAP Rent
4.27
 %
 
0.30
 %
 
9.29
%
 
(9.45
)%
 
4.60
 %
 
(6.56
)%
 
1.60
 %
 
9.68
 %
 
0.00
%
 
0.00
%
 
2.22
 %
Cash Rent Per Square Foot
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
        Renewal Cash Rent
$
26.41

 
$
27.35

 
$
13.79

 
$
43.63

 
$
20.32

 
$
18.07

 
$
14.86

 
$
19.07

 
$
—

 
$
—

 
$
23.53

        Expiring Cash Rent
$
27.36

 
$
27.80

 
$
13.29

 
$
51.77

 
$
20.36

 
$
21.38

 
$
15.80

 
$
20.66

 
$
—

 
$
—

 
$
24.56

        Change in Cash Rent
(3.46
)%
 
(1.60
)%
 
3.76
%
 
(15.73
)%
 
(0.20
)%
 
(15.48
)%
 
(5.94
)%
 
(7.68
)%
 
0.00
%
 
0.00
%
 
(4.17
)%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
New Leases
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Development and Redevelopment Space
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Leased Square Feet (2)
293,678

 
325,656

 
—

 
—

 
—

 
3,174

 
2,710

 
126,334

 
117,134

 
363,298

 
1,231,984

Statistics for Completed Leasing:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Average Committed Cost per Square Foot
$
68.54

 
$
7.26

 
$
—

 
$
—

 
$
—

 
$
30.17

 
$
55.16

 
$
52.36

 
$
78.19

 
$
42.41

 
$
43.77

Weighted Average Lease Term in Years
8.4

 
11.4

 
—

 
—

 
—

 
5.1

 
8.6

 
7.3

 
13.1

 
5.4

 
8.6

GAAP Rent Per Square Foot
$
29.43

 
$
12.39

 
$
—

 
$
—

 
$
—

 
$
27.56

 
$
31.36

 
$
16.48

 
$
23.86

 
$
20.15

 
$
20.33

Cash Rent Per Square Foot
$
26.76

 
$
11.98

 
$
—

 
$
—

 
$
—

 
$
25.93

 
$
29.34

 
$
15.58

 
$
24.29

 
$
19.05

 
$
19.20

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Other New Leases (3)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Leased Square Feet
340,674

 
171,016

 
—

 
10,165

 
27,951

 
103,367

 
35,941

 
46,398

 
—

 
—

 
735,512

Statistics for Completed Leasing:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Average Committed Cost per Square Foot
$
22.04

 
$
38.92

 
$
—

 
$
39.55

 
$
20.88

 
$
30.60

 
$
15.95

 
$
22.03

 
$
—

 
$
—

 
$
27.07

Weighted Average Lease Term in Years
5.6

 
6.6

 
—

 
5.2

 
4.9

 
4.1

 
5.3

 
5.2

 
—

 
—

 
5.5

GAAP Rent Per Square Foot
$
22.73

 
$
26.09

 
$
—

 
$
42.67

 
$
23.38

 
$
23.95

 
$
17.25

 
$
17.74

 
$
—

 
$
—

 
$
23.40

Cash Rent Per Square Foot
$
21.66

 
$
26.12

 
$
—

 
$
43.00

 
$
22.37

 
$
23.10

 
$
16.17

 
$
17.51

 
$
—

 
$
—

 
$
22.69

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total Square Feet Leased
1,056,490

 
780,822

 
45,935

 
36,462

 
336,164

 
248,518

 
54,407

 
280,481

 
117,134

 
363,298

 
3,319,711

(1) This presentation reflects consolidated properties.
(2) New leasing activity in Northern Virginia is related to two Ashburn Crossing properties.
(3) Other New Leases includes acquired first generation space and vacated second generation space.
Notes:  No expiration, renewal or retenanting activity transpired in Greater Philadelphia.
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 12/31/12 (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
 
67

 
1,710,198

 
$
51,881

 
11.2
%
 
$
30.34

 
 
29

 
1,458,190

 
$
45,900

 
14.2
%
 
$
31.48

Northern Virginia
 
22

 
157,585

 
4,168

 
0.9
%
 
26.45

 
 
10

 
91,863

 
2,221

 
0.7
%
 
24.18

San Antonio
 
1

 
1,520

 
48

 
—
%
 
31.58

 
 
—

 
—

 
—

 
0.0
%
 
—

Washington, DC-Capitol Riverfront
 
6

 
119,601

 
5,198

 
1.1
%
 
43.46

 
 
6

 
119,601

 
5,198

 
1.6
%
 
43.46

St. Mary’s and King George Cos.
 
16

 
178,495

 
3,587

 
0.8
%
 
20.10

 
 
16

 
178,495

 
3,587

 
1.1
%
 
20.10

Greater Baltimore
 
18

 
76,625

 
1,632

 
0.4
%
 
21.30

 
 
—

 
—

 
—

 
0.0
%
 
—

Suburban Maryland
 
2

 
47,484

 
1,414

 
0.3
%
 
29.77

 
 
1

 
43,484

 
1,357

 
0.4
%
 
31.21

Colorado Springs
 
14

 
151,238

 
3,154

 
0.7
%
 
20.86

 
 
—

 
—

 
—

 
0.0
%
 
—

2013
 
146

 
2,442,746

 
71,083

 
15.4
%
 
29.10

 
 
62

 
1,891,633

 
58,264

 
18.0
%
 
30.80

Baltimore/Washington Corridor
 
37

 
715,440

 
21,741

 
4.7
%
 
30.39

 
 
17

 
566,978

 
17,872

 
5.5
%
 
31.52

Northern Virginia
 
11

 
829,730

 
25,863

 
5.6
%
 
31.17

 
 
8

 
773,903

 
23,930

 
7.4
%
 
30.92

Washington, DC-Capitol Riverfront
 
6

 
70,200

 
3,209

 
0.7
%
 
45.71

 
 
6

 
70,200

 
3,209

 
1.0
%
 
45.71

St. Mary’s and King George Cos.
 
14

 
186,819

 
3,324

 
0.7
%
 
17.79

 
 
14

 
186,819

 
3,324

 
1.0
%
 
17.79

Greater Baltimore
 
21

 
119,802

 
2,115

 
0.5
%
 
17.65

 
 
—

 
—

 
—

 
0.0
%
 
—

Suburban Maryland
 
2

 
19,261

 
668

 
0.1
%
 
34.69

 
 
2

 
19,261

 
668

 
0.2
%
 
34.69

Colorado Springs
 
9

 
164,656

 
3,344

 
0.7
%
 
20.31

 
 
1

 
22,814

 
539

 
0.2
%
 
23.61

Other
 
1

 
115,167

 
3,137

 
0.7
%
 
27.24

 
 
1

 
115,167

 
3,137

 
1.0
%
 
27.24

2014
 
101
 
2,221,075

 
63,401

 
13.7
%
 
28.54

 
 
49

 
1,755,142

 
52,679

 
16.3
%
 
30.01

Baltimore/Washington Corridor
 
55

 
1,288,505

 
35,932

 
7.8
%
 
27.89

 
 
27

 
993,242

 
28,806

 
8.9
%
 
29.00

Northern Virginia
 
12

 
662,842

 
20,723

 
4.5
%
 
31.26

 
 
9

 
647,814

 
20,164

 
6.2
%
 
31.13

Washington, DC-Capitol Riverfront
 
4

 
32,092

 
1,536

 
0.3
%
 
47.86

 
 
4

 
32,092

 
1,536

 
0.5
%
 
47.86

St. Mary’s and King George Cos.
 
16

 
255,778

 
5,066

 
1.1
%
 
19.81

 
 
16

 
255,778

 
5,066

 
1.6
%
 
19.81

Greater Baltimore
 
15

 
169,758

 
4,392

 
1.0
%
 
25.87

 
 
5

 
49,231

 
1,506

 
0.5
%
 
30.59

Colorado Springs
 
9

 
110,202

 
2,197

 
0.5
%
 
19.94

 
 
—

 
—

 
—

 
0.0
%
 
—

Greater Philadelphia
 
1

 
218,337

 
2,944

 
0.6
%
 
13.49

 
 
—

 
—

 
—

 
0.0
%
 
—

2015
 
112

 
2,737,514

 
72,790

 
15.8
%
 
26.59

 
 
61

 
1,978,157

 
57,078

 
17.6
%
 
28.85

2016
 
79

 
1,637,241

 
43,799

 
9.5
%
 
26.75

 
 
32

 
872,873

 
24,533

 
7.6
%
 
28.11

2017
 
96

 
1,842,182

 
49,748

 
10.8
%
 
27.01

 
 
30

 
910,523

 
28,135

 
8.7
%
 
30.90

Thereafter
 
157

 
5,660,026

 
161,035

 
34.9
%
 
28.45

 
 
80

 
3,335,056

 
102,721

 
31.8
%
 
30.80

Total / Average
 
691
 
16,540,784

 
$
461,856

 
100.0
%
 
$
27.92

 
 
314

 
10,743,384

 
$
323,410

 
100.0
%
 
$
30.10

Note:  As of December 31, 2012, the weighted average lease term is 4.4 years for the consolidated portfolio and 4.2 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 December 31, 2012 of 264,380 for the portfolio, including 91,360 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 December 31, 2012 multiplied by 12 plus the estimated annualized expense reimbursements under existing leases.

19

Corporate Office Properties Trust
Top 20 Office Tenants as of 12/31/12
(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)
63

 
3,358,861

 
20.3
%
 
$
111,745

 
24.2
%
 
4.9

Northrop Grumman Corporation
 
12

 
1,076,634

 
6.5
%
 
29,061

 
6.3
%
 
5.9

Booz Allen Hamilton, Inc.
 
10

 
802,916

 
4.9
%
 
25,598

 
5.5
%
 
3.4

Computer Sciences Corporation
 
7

 
712,092

 
4.3
%
 
22,321

 
4.8
%
 
1.5

General Dynamics Corporation
 
10

 
536,105

 
3.2
%
 
16,696

 
3.6
%
 
4.5

CareFirst, Inc.
 
3

 
268,770

 
1.6
%
 
8,719

 
1.9
%
 
8.0

The MITRE Corporation
 
4

 
286,553

 
1.7
%
 
8,682

 
1.9
%
 
4.1

ITT Exelis
 
7

 
317,612

 
1.9
%
 
8,079

 
1.7
%
 
3.1

The Aerospace Corporation
 
3

 
254,869

 
1.5
%
 
8,029

 
1.7
%
 
2.1

Wells Fargo & Company
 
4

 
202,674

 
1.2
%
 
7,814

 
1.7
%
 
5.6

Kratos Defense and Security Solutions
 
5

 
251,792

 
1.5
%
 
7,016

 
1.5
%
 
7.1

L-3 Communications Holdings, Inc.
 
3

 
214,236

 
1.3
%
 
6,478

 
1.4
%
 
1.9

The Boeing Company
 
6

 
199,785

 
1.2
%
 
6,257

 
1.4
%
 
2.8

AT&T Corporation
 
4

 
315,353

 
1.9
%
 
5,717

 
1.2
%
 
6.3

Raytheon Company
 
7

 
162,919

 
1.0
%
 
5,032

 
1.1
%
 
2.5

Ciena Corporation
 
4

 
236,678

 
1.4
%
 
4,748

 
1.0
%
 
0.8

Science Applications International Corp.
 
4

 
133,408

 
0.8
%
 
4,409

 
1.0
%
 
6.6

Lockheed Martin Corporation
 
6

 
136,016

 
0.8
%
 
3,855

 
0.8
%
 
4.9

The Johns Hopkins Institutions
 
5

 
141,122

 
0.9
%
 
3,800

 
0.8
%
 
3.8

Unisys Corporation
 
1

 
156,891

 
0.9
%
 
3,697

 
0.8
%
 
7.4

Subtotal Top 20 Office Tenants
 
168

 
9,765,286

 
59.0
%
 
297,753

 
64.5
%
 
4.5

All remaining tenants
 
523

 
6,775,498

 
41.0
%
 
164,103

 
35.5
%
 
4.2

Total/Weighted Average
 
691

 
16,540,784

 
100.0
%
 
$
461,856

 
100.0
%
 
4.4

 
(1)  Total Annualized Rental Revenue is the monthly contractual base rent as of December 31, 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)
 
Quarter Ended 3/31/12
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Operating Properties
 
 
 
 
 
 
 
 

 
 
 
 
 
 

White Marsh Portfolio Disposition
 
Greater Baltimore
 
White Marsh
 
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

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Quarter Ended 6/30/12
 
 
 
 
 
 
 
 
 
 
 
 
 
 
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

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Quarter Ended 9/30/12
 
 
 
 
 
 
 
 
 
 
 
 
 
 
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
Operating Property 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 12/31/12
(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
389,851

 
—

 
N/A

 
3,611,000

 
4,000,851

Northern Virginia
554,272

 
—

 
N/A

 
1,884,000

 
2,438,272

San Antonio
—

 
—

 
N/A

 
1,158,000

 
1,158,000

Huntsville, Alabama
424,974

 
—

 
N/A

 
4,173,000

 
4,597,974

St. Mary’s and King George Counties
—

 
—

 
N/A

 
109,000

 
109,000

Greater Baltimore
—

 
—

 
N/A

 
2,692,000

 
2,692,000

Suburban Maryland
—

 
—

 
N/A

 
1,510,000

 
1,510,000

Colorado Springs
—

 
—

 
N/A

 
2,570,000

 
2,570,000

Greater Philadelphia
—

 
296,763

 
N/A

 
604,000

 
900,763

Other
—

 
—

 
N/A

 
967,000

 
967,000

Total
1,369,097

 
296,763

 
N/A

 
19,278,000

 
20,943,860

 
Costs to date by region
Baltimore/Washington Corridor
$
56,009

 
$
—

 
$
—

 
$
90,420

 
$
146,429

Northern Virginia
69,942

 
—

 
—

 
74,526

 
144,468

San Antonio
—

 
—

 
—

 
23,522

 
23,522

Huntsville, Alabama
28,033

 
—

 
—

 
13,700

 
41,733

St. Mary’s and King George Counties
—

 
—

 
—

 
2,692

 
2,692

Greater Baltimore
—

 
—

 
—

 
80,552

 
80,552

Suburban Maryland
—

 
—

 
—

 
12,762

 
12,762

Colorado Springs
—

 
—

 
—

 
24,905

 
24,905

Greater Philadelphia
—

 
33,214

 
—

 
12,663

 
45,877

Wholesale Data Center
—

 
—

 
207,785

 
—

 
207,785

Other
—

 
—

 
—

 
6,350

 
6,350

Total
$
153,984

 
$
33,214

 
$
207,785

 
$
342,092

 
$
737,075

 
Costs to date by balance sheet line item
Operating properties
$
26,698

 
$
11,553

 
$
103,368

 
$
23,634

 
$
165,253

Projects in development or held for future development, including associated land costs
124,192

 
19,056

 
104,138

 
317,992

 
565,378

Assets held for sale
—

 
—

 
—

 
466

 
466

Deferred leasing costs
3,094

 
2,605

 
279

 
—

 
5,978

Total
$
153,984

 
$
33,214

 
$
207,785

 
$
342,092

 
$
737,075

(1) Represents construction projects as listed on page 24.
(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.

23

Corporate Office Properties Trust
Summary of Construction Projects as of 12/31/12 (1)
(dollars in thousands) 
 
 
 
Park/Submarket
Total Rentable Square Feet
Percentage Leased as of
as of 12/31/12 (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
12/31/2012
 
Government Demand Drivers
 
 
 

 
 

 

 

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

100%
$
22,790

$
15,673

$
—

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

100%
9,049

5,927

—

1Q 13
3Q 13
 
312 Sentinel Way
Annapolis Junction, Maryland
 
National Business Park
125,160

0%
36,653

16,366

4,100

3Q 13
3Q 14
 
Subtotal Government
 
 
240,367

46%
$
68,492

$
37,966

$
4,100

 
 
 
% of Total Demand Drivers
 
 
18
%
 
 

 

 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Defense IT Demand Drivers
 
 
 

 
 

 

 

 
 
 
420 National Business Parkway
   Jessup, Maryland
 
National Business Park
137,322

0%
35,482

18,043

—

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

49%
72,717

58,143

23,364

3Q 12
3Q 13
 
1000 Redstone Gateway
Huntsville, Alabama
 
Huntsville
121,105

100%
22,945

19,055

—

1Q 12
1Q 13
 
1100 Redstone Gateway
Huntsville, Alabama
 
Huntsville
121,347

100%
21,677

1,396

—

1Q 14
1Q 14
 
1200 Redstone Gateway
Huntsville, Alabama
 
Huntsville
121,088

100%
24,813

3,052

—

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

0%
8,231

4,530

—

4Q 12
4Q 13
 
Subtotal Defense IT Demand Drivers
 
 
801,568

59%
$
185,865

$
104,219

$
23,364

 
 
 
% of Total Demand Drivers
 
 
59
%
 
 

 

 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Market Demand Drivers
 
 
 
 
 
 
 
 
 
 
Ashburn Crossing - DC-8
    Ashburn, Virginia
 
Ashburn
200,000

100%
22,526

7,490

—

4Q 13
4Q 13
 
Ashburn Crossing - DC-9 Ashburn, Virginia
 
Ashburn
115,000

100%
11,832

4,309

—

2Q 15
2Q 15
 
Subtotal Market Demand
 
 
315,000

100%
$
34,358

$
11,799

$
—

 
 
 
% of Total Demand Drivers
 
 
23
%
 
 

 

 

 
 
 
Total Under Construction
 
 
1,356,935

67%
$
288,715

$
153,984

$
27,464

 
 
(1)
Includes properties under active construction and properties that we were contractually committed to construct.
(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,” 83,987 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.

24

Corporate Office Properties Trust
Summary of Redevelopment Projects as of 12/31/12
(dollars in thousands) 
 
 
 
 
 
 
 
 
 
 
 
 
Park/Submarket
Total Rentable Square Feet
Percentage Leased as of
as of 12/31/12 (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
 
12/31/2012
Market Demand Drivers
 
 
 

 
 

 

 

 
 
751 Arbor Way (Hillcrest I)
Blue Bell, Pennsylvania
(3)
Greater Philadelphia
113,297

51%
$
21,416

$
19,138

$
12,206

1Q 12
1Q 13
721 Arbor Way (Hillcrest II)
Blue Bell, Pennsylvania
 
Greater Philadelphia
183,466

59%
31,095

14,076

—

2Q 13
2Q 14
Total Under Redevelopment
296,763

56%
$
52,511

$
33,214

$
12,206

 
 
 
(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,” 53,735 square feet are operational.



25

Corporate Office Properties Trust
Wholesale Data Center as of 12/31/12
(dollars in thousands) 
 
Gross 
Building Area
 
Raised Floor Square Footage (1)
 
Initial Stabilization Critical Load (in MWs) (2)
 
Critical Load Used
 
Critical Load Leased
 
Initial Stabilization Critical Load
Leased %
 
MW Operational
 
Anticipated Total Cost (3)
 
Cost to date
 
 
 
 
 
 
 
Property and Location
 
 
 
 
 
 
COPT DC-6
9651 Hornbaker Road
Manassas, Virginia
233,000
 
100,000
 
18
 
3.25

 
4

 
22%
 
6
 
$
275,230

 
$
207,785



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

1.00

$
2,098

2020
1
19,023

2.00

4,232

2022
1
5,604

0.25

391

 
 
 

3.25

$
6,721

 
(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 12/31/12 (1)
Location
Acres
 
Estimated Developable Square Feet
 
Costs to Date as of 12/31/12 (3)
Strategic Land
 
 
 
 
 
Baltimore/Washington Corridor
 

 
 

 
 
National Business Park
186

 
1,792,000

 
 
Columbia Gateway
22

 
520,000

 
 
Airport Square
5

 
84,000

 
 
Arundel Preserve
84

up to
1,150,000

 
 
Subtotal
297

 
3,546,000

 
 
Northern Virginia
 

 
 

 
 
Westfields Corporate Center
23

 
400,000

 
 
Westfields Park Center
33

 
400,000

 
 
Woodland Park
5

 
225,000

 
 
Patriot Ridge
11

 
739,000

 
 
Ashburn Crossing
10

 
120,000

 
 
Subtotal
82

 
1,884,000

 
 
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
49

 
1,340,000

 
 
Suburban Maryland
49

 
510,000

 
 
Total strategic land held and pre-construction
1,042

 
12,720,000

 
$
244,943

 
 
 
 
 
 
Non-Strategic Land
 
 
 
 
 
Baltimore/Washington Corridor
7

 
65,000

 
 
Greater Baltimore
138

 
1,352,000

 
 
Suburban Maryland
107

 
1,000,000

 
 
Colorado Springs
175

 
2,570,000

 
 
Greater Philadelphia, Pennsylvania
8

 
604,000

 
 
Other (2)
217

 
967,000

 
 
Total non-strategic land held
652

 
6,558,000

 
97,149

 
 
 
 
 
 
Total land held and pre-construction
1,694

 
19,278,000

 
$
342,092

 
 
 
 
 
 
(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.
(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 (in thousands).

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 December 31, 2012:
Insiders
638

 
3,413

 
—

 
4,051

 
4.73
%
Non-insiders
80,315

 
655

 
610

 
81,580

 
95.27
%
 
80,953

 
4,068

 
610

 
85,631

 
100.00
%
 
COMMON EQUITY - End of Quarter
12/31/12
 
9/30/12
 
6/30/12
 
3/31/12
 
12/31/11
Unrestricted Common Shares
80,518

 
71,730

 
71,652

 
71,558

 
71,363

Restricted Common Shares
435

 
428

 
433

 
480

 
648

Common Shares
80,953

 
72,158

 
72,085

 
72,038

 
72,011

Common Units
4,068

 
4,207

 
4,247

 
4,267

 
4,302

Total
85,021

 
76,365

 
76,332

 
76,305

 
76,313

End of Quarter Common Share Price
$
24.98

 
$
23.97

 
$
23.51

 
$
23.21

 
$
21.26

Market Value of Common Shares/Units
$
2,123,825


$
1,830,469

 
$
1,794,565

 
$
1,771,045

 
$
1,622,417

Common Shares Trading Volume
 

 
 

 
 

 
 

 
 

Average Daily Volume (Shares)
758

 
528

 
588

 
809

 
842

Average Daily Volume
$
18,916

 
$
12,246

 
$
13,303

 
$
19,218

 
$
18,604

As a Percentage of Weighted Average Common Shares
1.0
%
 
0.7
%
 
0.8
%
 
1.1
%
 
1.2
%
Common Share Price Range
 

 
 

 
 

 
 

 
 

Quarterly High
$
26.12

 
$
25.61

 
$
24.05

 
$
25.48

 
$
25.96

Quarterly Low
$
23.22

 
$
21.36

 
$
21.13

 
$
20.58

 
$
19.35

Quarterly Average
$
24.94

 
$
23.18

 
$
22.64

 
$
23.76

 
$
22.11



28

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

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

 
172,500

 
—

 
—

Total Nonconvertible Preferred Equity
307,250

 
307,250

 
362,250

 
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

 
$
342,633

 
$
397,633

 
$
225,133

 
$
225,133

CAPITALIZATION
 

 
 

 
 

 
 

 
 

Liquidation Value of Preferred Shares/Units
$
342,633

 
$
342,633

 
$
397,633

 
$
225,133

 
$
225,133

Market Value of Common Shares/Units
2,123,825

 
1,830,469

 
1,794,565

 
1,771,045

 
1,622,417

Total Equity Market Capitalization
2,466,458

 
2,173,102

 
2,192,198

 
1,996,178

 
1,847,550

Total Debt
2,019,168

 
2,169,315

 
2,191,851

 
2,418,078

 
2,426,303

Total Market Capitalization
$
4,485,626

 
$
4,342,417

 
$
4,384,049

 
$
4,414,256

 
$
4,273,853


29

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

 
 

 
 

 
 

 
 

 
 
 
 
Dividends per share/unit
$
0.2750

 
$
0.2750

 
$
0.2750

 
$
0.2750

 
$
0.4125

 
$
1.1000

 
$
1.6500

Dividend Yield at Quarter End
4.40
%

4.59
%

4.68
%
 
4.74
%
 
7.76
 %
 
4.40
%
 
7.76
%
Common Dividend Payout Ratios
 

 
 

 
 

 
 

 
 

 
 

 
 

Diluted FFO Payout
57.5
%
 
53.1
%
 
51.0
%
 
47.3
%
 
(118.6
)%
 
52.1
%
 
233.5
%
Diluted FFO Payout, as adjusted for comparability
55.0
%
 
51.7
%
 
50.8
%
 
52.7
%
 
73.3
 %
 
52.6
%
 
78.4
%
Diluted AFFO Payout
151.1
%
 
61.1
%
 
57.3
%
 
52.4
%
 
123.1
 %
 
68.3
%
 
111.4
%
Diluted AFFO Payout, excluding recurring capital expenditures on properties in disposition plans
147.4
%
 
62.3
%
 
53.8
%
 
50.5
%
 
91.5
 %
 
66.3
%
 
92.5
%
Dividend Coverage - Diluted FFO
1.74
x
 
1.88
x
 
1.96
x
 
2.11
x
 
(0.84
)x
 
1.92
x
 
0.43
x
Dividend Coverage - Diluted FFO, as adjusted for comparability
1.82
x
 
1.94
x
 
1.97
x
 
1.90
x
 
1.36
x
 
1.90
x
 
1.28
x
Dividend Coverage - Diluted AFFO
0.66
x
 
1.64
x
 
1.74
x
 
1.91
x
 
0.81
x
 
1.46
x
 
0.90
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
N/A
 
$
0.20000

 
$
0.50000

 
$
0.50000

 
$
0.50000

 
 

 
 

Preferred Share Dividend Yield
N/A
 
8.000
%
 
8.000
%
 
8.000
%
 
8.000
 %
 
 

 
 

Quarter End Recorded Book Value
N/A
 
$
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

 
$
0.4609

 
$
0.0205

 
N/A
 
N/A
 
 
 
 
Preferred Share Dividend Yield
7.375
%
 
7.375
%
 
7.375
%
 
N/A
 
N/A
 
 
 
 
Quarter End Recorded Book Value
$
25.00

 
$
25.00

 
$
25.00

 
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)
 
12/31/2012
 
 
 
 
 
 
 
 
 
 
 
Stated Rate
 
GAAP 
Effective Rate
 
 
 
 
 
 
 
 
 
 
 
 
 
12/31/2012
 
9/30/2012
 
6/30/2012
 
3/31/2012
 
12/31/2011
Debt Outstanding
 
 
 
 
 

 
 

 
 

 
 

 
 

Fixed rate
 
 
 
 
 

 
 

 
 

 
 

 
 

Secured debt
6.01%
 
5.93%
 
$
948,414

 
$
978,461

 
$
1,009,164

 
$
1,049,204

 
$
1,052,421

Exchangeable Senior Notes
4.25%
 
6.05%
 
230,934

 
230,000

 
229,081

 
228,175

 
227,283

Other Unsecured Debt
0.00%
 
6.50%
 
1,788

 
1,809

 
5,106

 
5,078

 
5,050

Total fixed rate debt
5.64%
 
5.96%
 
1,181,136

 
1,210,270

 
1,243,351

 
1,282,457

 
1,284,754

Variable rate
 
 
 
 
 

 
 

 
 

 
 

 
 

Secured debt
2.46%
 
2.46%
 
$
38,475

 
$
38,671

 
$
38,844

 
$
39,027

 
$
39,213

Unsecured Revolving Credit Facility (1)
0.00%
 
0.00%
 
—

 
80,000

 
195,000

 
396,000

 
662,000

Construction Loans
2.66%
 
2.66%
 
29,557

 
70,374

 
64,656

 
50,594

 
40,336

Other Unsecured Debt
2.17%
 
2.17%
 
770,000

 
770,000

 
650,000

 
650,000

 
400,000

Total variable rate debt
2.20%
 
2.20%
 
$
838,032

 
$
959,045

 
$
948,500

 
$
1,135,621

 
$
1,141,549

Total debt outstanding
 
 
 
 
$
2,019,168

 
$
2,169,315

 
$
2,191,851

 
$
2,418,078

 
$
2,426,303

Variable Rate Loans Subject to Interest Rate Swaps (2)
 
 
 
 
$
438,475

 
$
438,671

 
$
438,844

 
$
659,027

 
$
659,213

% of Fixed Rate Loans (2)
 
 
 
 
80
%
 
76
%
 
77
%
 
80
%
 
80
%
% of Variable Rate Loans (2)
 
 
 
 
20
%
 
24
%
 
23
%
 
20
%
 
20
%
 
 
 
 
 
100
%
 
100
%
 
100
%
 
100
%
 
100
%
Recourse debt
 
 
 
 
$
1,063,613

 
$
1,163,079

 
$
1,157,860

 
$
1,350,311

 
$
1,359,343

Nonrecourse debt
 
 
 
 
955,555

 
1,006,236

 
1,033,991

 
1,067,767

 
1,066,960

Total debt outstanding
 
 
 
 
$
2,019,168

 
$
2,169,315

 
$
2,191,851

 
$
2,418,078

 
$
2,426,303

 
(1) As of December 31, 2012, our borrowing capacity under the facility was $800.0 million, of which $792.3 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
 
Year Ended
 
12/31/12
 
9/30/12
 
6/30/12
 
3/31/12
 
12/31/11
 
12/31/12
 
12/31/11
Average Stated Interest Rates
 

 
 

 
 

 
 

 
 

 
 
 
 
Fixed rate
 

 
 

 
 

 
 

 
 

 
 
 
 
Secured debt
6.1
%
 
6.1
%
 
6.0
%
 
6.1
%
 
6.0
%
 
6.1
%
 
6.0
%
Exchangeable Senior Notes
4.3
%
 
4.3
%
 
4.3
%
 
4.3
%
 
4.3
%
 
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
%
 
5.7
%
 
5.7
%
 
5.5
%
Variable rate
 

 
 

 
 

 
 

 
 

 
 

 
 

Secured debt
2.5
%
 
2.6
%
 
2.5
%
 
2.6
%
 
2.5
%
 
2.5
%
 
4.1
%
Unsecured Revolving Credit Facility
2.3
%
 
2.3
%
 
2.3
%
 
2.3
%
 
2.3
%
 
2.3
%
 
1.6
%
Construction Loans
2.8
%
 
2.8
%
 
2.7
%
 
2.8
%
 
3.0
%
 
2.8
%
 
2.1
%
Other Unsecured Debt
2.2
%
 
2.2
%
 
2.2
%
 
2.2
%
 
2.2
%
 
2.2
%
 
2.1
%
Interest rate swaps (1)
0.6
%
 
0.6
%
 
0.7
%
 
0.9
%
 
1.1
%
 
0.7
%
 
1.1
%
Total variable rate debt (1)(2)
2.9
%
 
2.8
%
 
2.8
%
 
2.9
%
 
2.7
%
 
2.8
%
 
2.9
%
Total debt outstanding (2)
4.5
%
 
4.4
%
 
4.3
%
 
4.3
%
 
4.3
%
 
4.4
%
 
4.5
%
Debt ratios (coverage ratios excluding capitalized interest) — All coverage computations include the effect of discontinued operations
NOI interest coverage ratio
3.7x

 
3.7x

 
3.5x

 
3.4x

 
3.5x

 
3.6x

 
3.3x

Adjusted EBITDA interest coverage ratio
3.4x

 
3.4x

 
3.2x

 
3.0x

 
3.2x

 
3.2x

 
3.0x

NOI debt service coverage ratio
3.3x

 
3.2x

 
3.1x

 
3.0x

 
3.0x

 
3.1x

 
2.9x

Adjusted EBITDA debt service coverage ratio
3.0x

 
3.0x

 
2.8x

 
2.6x

 
2.8x

 
2.9x

 
2.6x

NOI fixed charge coverage ratio
2.8x

 
2.8x

 
3.0x

 
2.9x

 
2.9x

 
2.9x

 
2.8x

Adjusted EBITDA fixed charge coverage ratio
2.6x

 
2.6x

 
2.7x

 
2.5x

 
2.7x

 
2.6x

 
2.6x

Debt to Adjusted EBITDA ratio
7.2x

 
7.5x

 
7.6x

 
8.7x

 
8.5x

 
7.1x

 
8.6x

Adjusted debt to Adjusted EBITDA ratio
6.0x

 
6.2x

 
6.3x

 
7.2x

 
7.0x

 
6.0x

 
7.1x

 
(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.
(2) Includes fees incurred on unused borrowing capacity of Unsecured Revolving Credit Facility.

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
January - March
$
2,466

 
$
—

 
N/A
 
$
205

 
$
—

 
N/A
 
$
—

 
$
2,671

May - June
2,338

 
33,510

 
5.93%
 
183

 
17,548

(1)
2.97%
 
—

 
53,579

July - September
2,301

 
5,679

 
6.44%
 
193

 
931

 
2.75%
 
—

 
9,104

October - December
1,951

 
53,621

 
5.20%
 
203

 
—

 
N/A
 
—

 
55,775

Total 2013
$
9,056

 
$
92,810

 
5.54%
 
$
784

 
$
18,479

 
2.96%
 
$
—

 
$
121,129

2014
$
5,845

 
$
151,681

(2)
 
 
$
815

 
$
—

 
 
 
$
—

(3
)
$
158,341

2015
4,848

 
343,000

(4)
 
 
700

 
447,254

(5)
 
 
—

 
795,802

2016
4,037

 
274,605

 
 
 
—

 
—

 
 
 
—

 
278,642

2017
778

 
300,610

 
 
 
—

 
250,000

 
 
 
—

 
551,388

Thereafter
2,479

 
11

 
 
 
—

 
120,000

 
 
 
—

 
122,490

 
$
27,043

 
$
1,162,717

 
 
 
$
2,299

 
$
835,733

 
 
 
$
—

 
$
2,027,792

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net discount
 
(8,624
)
 
 
 
 
 
 
 
 
 
 
 
 
 
Total Debt
 
$
2,019,168

Interest Rate Hedges at 12/31/12
 
Notional Amount
 
Fixed Rate
 
Floating Rate Index
 
Effective Date
 
Expiration Date
$
38,475

(6
)
3.8300
%
 
One-Month LIBOR + 2.25%
 
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)
May be extended by one year at our option, subject to certain conditions.
(2)
We have $71.2 million of fixed debt maturing in 2034 that, if not prepaid in 2014, becomes much more expensive and restrictive. Therefore, the above table reflects the $69.2 million in maturities on this debt in 2014.
(3)
Our Revolving Credit Facility matures in September 2014 and may be extended by one year at our option, subject to certain conditions.
(4)
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.
(5)
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.
(6)
The notional amount is scheduled to amortize to $36.2 million.

33

Corporate Office Properties Trust
Consolidated Joint Ventures as of 12/31/12
(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

100.0%
 
$
37,364

$
17,548

50%
Suburban Maryland:
 

 
 
 

 

 
MOR Forbes 2 LLC
56

90.9%
 
3,879

—

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

94.9%
 
56,307

38,475

50%
Total/Average
445

96.1%
 
$
97,550

$
56,023

 
NOI of Operating Properties for Three Months Ended 12/31/12 (2)
$
2,335

 
 
 

 

 
NOI of Operating Properties for Year Ended 12/31/12 (2)
$
7,183

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

 
 

 

 
Arundel Preserve
1,382

 
$
6,728

$
—

50%
Suburban Maryland:
 

 
 

 

 
Indian Head Technology Center
 

 
 

 

 
Business Park (3)
967

 
6,436

—

75%
M Square Research Park
510

 
4,491

—

50%
Huntsville, Alabama:
 

 
 

 

 
Redstone Gateway
4,422

 
76,295

11,078

85%
Total
7,281

 
$
93,950

$
11,078

 
 
(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)
Represents gross NOI of the joint venture operating properties before allocation to joint venture partners.
(3)
During 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
Supplementary Reconciliations of Non-GAAP Measures
(in thousands)
 
Three Months Ended
 
Year Ended
 
12/31/12
 
9/30/12
 
6/30/12
 
3/31/12
 
12/31/11
 
12/31/12
 
12/31/11
Net income (loss)
$
19,010

 
$
(20,765
)
 
$
11,861

 
$
10,235

 
$
(91,102
)
 
$
20,341

 
$
(127,576
)
Interest expense on continuing and discontinued operations
22,782

 
23,366

 
24,975

 
25,675

 
24,914

 
96,798

 
104,301

Income tax expense (benefit)
54

 
106

 
17

 
204

 
(38
)
 
381

 
(6,710
)
Depreciation of furniture, fixtures and equipment (FF&E)
610

 
624

 
629

 
618

 
601

 
2,481

 
2,463

Real estate-related depreciation and amortization
28,560

 
30,624

 
31,666

 
31,087

 
33,030

 
121,937

 
134,131

Impairment losses
2,140

 
55,829

 
2,354

 
6,587

 
78,674

 
66,910

 
151,021

Loss (gain) on early extinguishment of debt on continuing and discontinued operations
6

 
(970
)
 
171

 
—

 
3

 
(793
)
 
2,023

Gain on sales of operating properties
8

 
(16,913
)
 
115

 
(4,138
)
 
(3,362
)
 
(20,928
)
 
(4,811
)
Non-operational property sales
—

 
—

 
(33
)
 
—

 
—

 
(33
)
 
(2,717
)
Net gain on investments in unconsolidated entities included in interest and other income
(2,992
)
 
(81
)
 
(66
)
 
(450
)
 
(771
)
 
(3,589
)
 
(1,820
)
Operating property acquisition costs
—

 
222

 
7

 
 
 
4

 
229

 
156

Loss on interest rate derivatives
—

 
—

 
—

 
—

 
29,805

 
—

 
29,805

Adjusted EBITDA
$
70,178

 
$
72,042

 
$
71,696

 
$
69,818

 
$
71,758

 
$
283,734

 
$
280,266

Add back:
 

 
 

 
 

 
 

 
 

 
 

 
 

General, administrative and leasing expenses on continuing and discontinued operations
7,103

 
6,378

 
8,853

 
9,569

 
7,314

 
31,903

 
30,326

Business development expenses and land carry costs on continuing and discontinued operations, excluding operating property acquisition costs
1,205

 
1,410

 
1,297

 
1,594

 
1,815

 
5,506

 
6,041

Depreciation of FF&E
(610
)
 
(624
)
 
(629
)
 
(618
)
 
(601
)
 
(2,481
)
 
(2,463
)
Income from construction contracts and other service operations
(750
)
 
(873
)
 
(710
)
 
(927
)
 
(550
)
 
(3,260
)
 
(2,706
)
Interest and other (income) loss, excluding net gain on investments in unconsolidated entities
(1,028
)
 
(1,014
)
 
(774
)
 
(767
)
 
(1,150
)
 
(3,583
)
 
(3,783
)
Equity in loss of unconsolidated entities
24

 
246

 
187

 
89

 
108

 
546

 
331

NOI from real estate operations
$
76,122

 
$
77,565

 
$
79,920

 
$
78,758

 
$
78,694

 
$
312,365

 
$
308,012

 
 
 
 
 
 
 
 
 
 
 
 
 
 

35

Corporate Office Properties Trust
Supplementary Reconciliations of Non-GAAP Measures (continued)
(dollars in thousands)
 
Three Months Ended
 
Year Ended
 
12/31/12
 
9/30/12
 
6/30/12
 
3/31/12
 
12/31/11
 
12/31/12
 
12/31/11
Discontinued Operations
 

 
 

 
 

 
 

 
 

 
 

 
 

Revenues from real estate operations
$
5,083

 
$
6,403

 
$
12,800

 
$
14,643

 
$
15,973

 
$
38,929

 
$
67,336

Property operating expenses
(1,555
)
 
(2,182
)
 
(4,544
)
 
(5,293
)
 
(6,237
)
 
(13,574
)
 
(25,423
)
Depreciation and amortization
—

 
(1,926
)
 
(3,278
)
 
(3,253
)
 
(4,124
)
 
(8,457
)
 
(21,020
)
General, administrative and leasing expenses
—

 
(1
)
 
(2
)
 
—

 
—

 
(3
)
 
(12
)
Business development expenses and land carry costs
—

 
—

 
(6
)
 
(18
)
 
(19
)
 
(24
)
 
(75
)
Interest
(67
)
 
(127
)
 
(736
)
 
(1,244
)
 
(1,553
)
 
(2,174
)
 
(6,079
)
Gain (loss) on early extinguishment of debt
—

 
1,738

 
(2
)
 
—

 
—

 
1,736

 
(384
)
Impairment losses
(186
)
 
(9,733
)
 
(2,354
)
 
(11,423
)
 
(38,179
)
 
(23,696
)
 
(67,543
)
Gain on sales of depreciated real estate properties
(8
)
 
16,913

 
(103
)
 
4,138

 
3,358

 
20,940

 
4,796

Discontinued operations
$
3,267

 
$
11,085

 
$
1,775

 
$
(2,450
)
 
$
(30,781
)
 
$
13,677

 
$
(48,404
)
GAAP revenues from real estate operations from continuing operations
$
117,481

 
$
114,861

 
$
111,168

 
$
110,661

 
$
111,483

 
$
454,171

 
$
428,496

Revenues from discontinued operations
5,083

 
6,403

 
12,800

 
14,643

 
15,973

 
38,929

 
67,336

Real estate revenues
$
122,564

 
$
121,264

 
$
123,968

 
$
125,304

 
$
127,456

 
$
493,100

 
$
495,832

GAAP property operating expenses from continuing operations
$
44,887

 
$
41,517

 
$
39,504

 
$
41,253

 
$
42,525

 
$
167,161

 
$
162,397

Property operating expenses from discontinued operations
1,555

 
2,182

 
4,544

 
5,293

 
6,237

 
13,574

 
25,423

Real estate property operating expenses
$
46,442

 
$
43,699

 
$
44,048

 
$
46,546

 
$
48,762

 
$
180,735

 
$
187,820

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

 
$
—

 
$
21

 
$
—

 
$
4

 
$
21

 
$
2,732

Gain on sales of real estate from discontinued operations
(8
)
 
16,913

 
(103
)
 
4,138

 
3,358

 
20,940

 
4,796

Gain on sales of real estate from continuing and discontinued operations
(8
)
 
16,913

 
(82
)
 
4,138

 
3,362

 
20,961

 
7,528

Less: Gain on sales of non-operating properties
—

 
—

 
(33
)
 
—

 
—

 
(33
)
 
(2,717
)
Gain on sales of operating properties
$
(8
)
 
$
16,913

 
$
(115
)
 
$
4,138

 
$
3,362

 
$
20,928

 
$
4,811

Impairment losses, per statements of operations
$
1,954

 
$
46,096

 
$
—

 
$
(4,836
)
 
$
40,495

 
$
43,214

 
$
83,478

Impairment losses on discontinued operations
186

 
9,733

 
2,354

 
11,423

 
38,179

 
23,696

 
67,543

Total impairment losses
2,140

 
55,829

 
2,354

 
6,587

 
78,674

 
66,910

 
151,021

Less: Impairment losses on previously depreciated operating properties
(247
)
 
(55,829
)
 
(2,354
)
 
(11,833
)
 
(39,481
)
 
(70,263
)
 
(70,512
)
Impairment losses (recoveries) on non-operating properties
1,893

 
—

 
—

 
(5,246
)
 
39,193

 
(3,353
)
 
80,509

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

 
—

 
—

 
673

 
452

 
673

 
(4,775
)
Impairment losses (recoveries) on non-operating properties, net of tax
$
1,893

 
$
—

 
$
—

 
$
(4,573
)
 
$
39,645

 
$
(2,680
)
 
$
75,734



36

Corporate Office Properties Trust
Supplementary Reconciliations of Non-GAAP Measures (continued)
(dollars in thousands)
 
Three Months Ended
 
Year Ended
 
12/31/12
 
9/30/12
 
6/30/12
 
3/31/12
 
12/31/11
 
12/31/12
 
12/31/11
Depreciation and amortization associated with real estate operations from continuing operations
$
28,560

 
$
28,698

 
$
28,388

 
$
27,834

 
$
28,906

 
$
113,480

 
$
113,111

Depreciation and amortization from discontinued operations
—

 
1,926

 
3,278

 
3,253

 
4,124

 
8,457

 
21,020

Real estate-related depreciation and amortization
$
28,560

 
$
30,624

 
$
31,666

 
$
31,087

 
$
33,030

 
$
121,937

 
$
134,131

Interest expense from continuing operations
$
22,715

 
$
23,239

 
$
24,239

 
$
24,431

 
$
23,361

 
$
94,624

 
$
98,222

Interest expense from discontinued operations
67

 
127

 
736

 
1,244

 
1,553

 
2,174

 
6,079

Total interest expense
22,782

 
23,366

 
24,975

 
25,675

 
24,914

 
96,798

 
104,301

Less: Amortization of deferred financing costs
(1,547
)
 
(1,527
)
 
(1,597
)
 
(1,572
)
 
(1,506
)
 
(6,243
)
 
(6,596
)
Less: Amortization of net debt discounts and premiums, net of amounts capitalized
(693
)
 
(683
)
 
(682
)
 
(663
)
 
(634
)
 
(2,721
)
 
(4,680
)
Denominator for interest coverage
20,542

 
21,156

 
22,696

 
23,440

 
22,774

 
87,834

 
93,025

Scheduled principal amortization
2,590

 
2,791

 
3,096

 
3,207

 
3,108

 
11,684

 
13,755

Denominator for debt service coverage
23,132

 
23,947

 
25,792

 
26,647

 
25,882

 
99,518

 
106,780

Scheduled principal amortization
(2,590
)
 
(2,791
)
 
(3,096
)
 
(3,207
)
 
(3,108
)
 
(11,684
)
 
(13,755
)
Preferred share dividends - redeemable non-convertible
6,106

 
6,546

 
4,167

 
4,025

 
4,026

 
20,844

 
16,102

Preferred unit distributions
165

 
165

 
165

 
165

 
165

 
660

 
660

Denominator for fixed charge coverage
$
26,813

 
$
27,867

 
$
27,028

 
$
27,630

 
$
26,965

 
$
109,338

 
$
109,787

Preferred share dividends
$
6,106

 
$
6,546

 
$
4,167

 
$
4,025

 
$
4,026

 
$
20,844

 
$
16,102

Preferred unit distributions
165

 
165

 
165

 
165

 
165

 
660

 
660

Common share dividends
22,255

 
19,837

 
19,809

 
19,819

 
29,693

 
81,720

 
116,717

Common unit distributions
1,119

 
1,157

 
1,168

 
1,173

 
1,775

 
4,617

 
7,173

Total dividends/distributions
$
29,645

 
$
27,705

 
$
25,309

 
$
25,182

 
$
35,659

 
$
107,841

 
$
140,652

Common share dividends
$
22,255

 
$
19,837

 
$
19,809

 
$
19,819

 
$
29,693

 
$
81,720

 
$
116,717

Common unit distributions
1,119

 
1,157

 
1,168

 
1,173

 
1,775

 
4,617

 
7,173

Dividends and distributions for payout ratios
$
23,374

 
$
20,994

 
$
20,977

 
$
20,992

 
$
31,468

 
$
86,337

 
$
123,890

Total Assets
$
3,653,759

 
$
3,597,656

 
$
3,715,075

 
$
3,797,368

 
$
3,863,555

 
$
3,653,759

 
$
3,863,555

Accumulated depreciation
555,975

 
565,724

 
562,345

 
570,242

 
559,679

 
555,975

 
559,679

Accumulated depreciation included in assets held for sale
12,201

 
12,669

 
34,234

 
5,840

 
17,922

 
12,201

 
17,922

Denominator for debt to adjusted book
$
4,221,935

 
$
4,176,049

 
$
4,311,654

 
$
4,373,450

 
$
4,441,156

 
$
4,221,935

 
$
4,441,156

Debt, net
$
2,019,168

 
$
2,169,315

 
$
2,191,851

 
$
2,418,078

 
$
2,426,303

 
$
2,019,168

 
$
2,426,303

Less: Construction in progress on assets held for sale
—

 
—

 
(1,220
)
 
(75
)
 
(12,277
)
 
—

 
(12,277
)
Less: Construction in progress
(329,054
)
 
(394,361
)
 
(380,879
)
 
(408,883
)
 
(409,086
)
 
(329,054
)
 
(409,086
)
Adjusted debt for adjusted debt to adjusted EBITDA ratio
$
1,690,114

 
$
1,774,954

 
$
1,809,752

 
$
2,009,120

 
$
2,004,940

 
$
1,690,114

 
$
2,004,940


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 income (loss) 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, net gain on unconsolidated entities, operating property acquisition costs, 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 income (loss) 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

38


Corporate Office Properties Trust
Definitions

geographic segments, same-office property groupings and individual properties.  We believe that net (loss) income is the most directly comparable GAAP measure to Cash 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); recurring capital expenditures excludes expenditures of operating properties included in disposition plans during the period that were already sold or are held for future disposition.  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 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.
 
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

39


Corporate Office Properties Trust
Definitions

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 income (loss) 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, administrative and leasing 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).
 
Real Estate Operating Margin 
Defined as real estate revenue divided by NOI from real estate operations.

Payout ratios based on: Diluted FFO; Diluted FFO, as adjusted for comparability; and Diluted AFFO 
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.
 

41


Corporate Office Properties Trust
Definitions

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.
 
Construction Properties — Properties under active construction and properties that we were contractually committed to construct.

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, DC/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).

Pre-Construction Properties — 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.

Redevelopment Properties — Properties previously in operations on which activities to substantially renovate such properties are underway.
 
Same Office Properties — Operating office properties owned and 100% operational since at least 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 — Office properties held for long-term investment located near defense installations and other knowledge-based government demand drivers, or that were otherwise at least 50% leased as of most recent year end by United States Government agencies or defense contractors.

Unstabilized Properties — Properties with first generation operational space less than 90% occupied at period end.


42