Exhibit 99.1
 
 
Earnings Release & Supplemental Information — Unaudited
 
March 31, 2013
 
 
OVERVIEW:
Section I

 
INVESTING ACTIVITY:
Section IV

Earnings Release
i-viii

 
Construction, Redevelopment, Wholesale Data Center and Land
 
Summary Description
1

 
& Pre-Construction Summary
21

Equity Research Coverage
2

 
Summary of Construction Projects
22

Selected Financial Summary Data
3

 
Summary of Redevelopment Projects
23

Selected Portfolio Data
4

 
Summary of Land Held and Pre-Construction
24

 
 

 
 
 

FINANCIAL STATEMENTS:
Section II

 
CAPITALIZATION:
Section V

Quarterly Consolidated Balance Sheets
5

 
Quarterly Common Equity Analysis
25

Consolidated Statements of Operations
6-7

 
Quarterly Preferred Equity and Total Market Capitalization Analysis
26

Consolidated Statements of FFO
8-9

 
Dividend Analysis
27

Consolidated Reconciliations of AFFO
10

 
Debt Analysis
28-30

 
 

 
Debt Maturity Schedule
31

PORTFOLIO INFORMATION:
Section III

 
Consolidated Joint Ventures
32

Consolidated Office Properties by Region
11

 
 
 
NOI from Real Estate Operations and Occupancy by Property Grouping
12

 
RECONCILIATIONS & DEFINITIONS:
Section VI

Unstabilized Office Properties
13

 
Supplementary Reconciliations of Non-GAAP Measures
33-35

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

 
Definitions
36-40

Same Office Properties Average Occupancy Rates by Region
15

 
 
 
Same Office Property Real Estate Revenues & NOI by Region
16

 
 
 
Office Leasing
17

 
 
 
Office Lease Expiration Analysis
18-19

 
 
 
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 FIRST QUARTER 2013 RESULTS


COLUMBIA, MD April 26, 2013 - Corporate Office Properties Trust (COPT or the Company) (NYSE: OFC) announced financial and operating results for the first quarter ended March 31, 2013.

“We had a solid first quarter and are on-track to achieve our leasing and strategic objectives for the year. The first quarter is normally the lightest in terms of leasing volume, however, we were pleased to see tenants more willing to sign longer-term leases,” stated Roger A. Waesche, Jr., COPT's President & Chief Executive Officer. “We also continue to improve our balance sheet strength and financial flexibility, as evidenced this month by the investment grade corporate ratings received from each of the three major U.S. ratings agencies,” he added.

Results:
Diluted earnings per share (EPS) was $0.11 for the quarter ended March 31, 2013 as compared to $0.09 in the first quarter of 2012. Diluted funds from operations per share (FFOPS), as adjusted for comparability, was $0.48 for the first quarter ended March 31, 2013, which represented a 9.4% decrease from the $0.53 reported for the first quarter of 2012. 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 first quarter of 2013 was $0.45 versus $0.59 reported in the first quarter of 2012.

Operating Performance:
Portfolio Summary - At March 31, 2013, the Company's consolidated portfolio of 210 operating office properties totaled 19.1 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 $27.97 per square foot. The Company's consolidated portfolio was 87.6% occupied and 89.3% leased as of March 31, 2013.

Same Office Performance - The Company's same office portfolio excludes properties identified for eventual sale, including those in its Strategic Reallocation Plan. For the quarter ended March 31, 2013, COPT's same office portfolio represents 86% of the rentable square feet of the portfolio and consists of 183 properties.

For the first quarter ended March 31, 2013, the Company's same office property cash NOI, excluding gross lease termination fees, increased 3.5% as compared to the first quarter ended 2012. Including gross lease termination fees, same office property cash NOI for the first quarter ended March 31, 2013 increased 4.5% over the same period in 2012. The Company's same office portfolio occupancy was 88.8% at the end of the first quarter of 2013, down 10 basis points from year end 2012.


i

Leasing - COPT completed a total of 756,000 square feet of leasing for the quarter ended March 31, 2013. During this same period, the Company's renewal rate was 57%, which reflected one anticipated tenant move-out in Maryland. Also consistent with expectations, for the quarter ended March 31, 2013, total rent on renewed space increased 3.5% on a GAAP basis and decreased 5.3% on a cash basis.

Investment Activity:
Construction - At March 31, 2013, the Company had nine properties totaling 1.1 million square feet under construction for a total projected cost of $243.7 million, of which $144.2 million had been incurred. As of the same date, COPT had one 183,400-square foot property under redevelopment for a total projected cost of $32.0 million, of which $21.8 million has been incurred. As of March 31, 2013, the Company's nine properties under construction were, on average, 62% pre-leased, and its redevelopment property was 61% pre-leased.

Balance Sheet and Capital Transactions:
As of March 31, 2013, the Company had a total market capitalization of $4.7 billion, with $2.0 billion in debt outstanding, equating to a 41.7% debt-to-total market capitalization ratio. Also, the Company's weighted average interest rate was 4.4% for the quarter ended March 31, 2013 and 79% of the Company's debt was subject to fixed interest rates, including the effect of interest rate swaps.

During the quarter, the Company repurchased $53.7 million of principal amount of Exchangeable Senior Notes for $56.4 million and recognized a loss of $5.3 million, including unamortized loan issuance costs.

In March, the Company completed a public offering of 4,485,000 newly issued common shares, which reflects the full exercise by the underwriter of its option to purchase 585,000 shares. The offering generated net proceeds of approximately $117.9 million.

Subsequent Events:
In April, the Company announced that it received investment grade corporate ratings with stable outlooks from each of the three major U.S. ratings agencies. COPT received a BBB- rating from Fitch Ratings, a Baa3 rating from Moody's Investors Service and a BBB- rating from Standard & Poor's Ratings Services.

Also in April, the Company redeemed all of its 3,390,000 outstanding 7.625% Series J Cumulative Redeemable Preferred Shares, at a price of $25.0424 per Series J Preferred Share, which includes accrued and unpaid dividends through April 22, 2013 which is the date of redemption.

2013 FFO Guidance:
Management is affirming its previously issued guidance for 2013 FFOPS, as adjusted for comparability, of between $1.83 and $1.93. The Company is establishing second quarter 2013 guidance of FFOPS, as adjusted for comparability, of between $0.46 and $0.48. A reconciliation of projected diluted EPS to projected FFOPS for the quarter ending June 30, 2013 and the year ending December 31, 2013 is provided, as follows:
 
Quarter Ending
 
Year Ending
 
June 30, 2013
 
December 31, 2013
 
Low
 
High
 
Low
 
High
FFOPS, as adjusted for comparability
$
0.46

 
$
0.48

 
$
1.83

 
$
1.93

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

 
—

 
0.03

 
0.03

Net losses on early extinguishment of debt
—

 
—

 
(0.06
)
 
(0.06
)
Issuance costs associated with redeemed preferred shares
(0.03
)
 
(0.03
)
 
(0.03
)
 
(0.03
)
FFOPS, NAREIT definition
0.43

 
0.45

 
1.77

 
1.87

Real estate depreciation and amortization
(0.35
)
 
(0.36
)
 
(1.35
)
 
(1.38
)
Impairments and exit costs on previously depreciated properties
—

 
—

 
(0.02
)
 
(0.02
)
EPS
$
0.08

 
$
0.09

 
$
0.40

 
$
0.47


ii


Conference Call Information:
Management will discuss first quarter 2013 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, April 26, 2013

Time:     12:00 p.m. Eastern Time

Telephone Number: (within the U.S.)     888-680-0865

Telephone Number: (outside the U.S.)    617-213-4853

Passcode:    38964583
        
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=PTE9HR9LF

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, April 26 at 1:00 p.m. Eastern Time through Friday, May 17 at midnight Eastern Time. To access the replay within the United States, please call 888-286-8010 and use passcode 74553156. To access the replay outside the United States, please call 617-801-6888 and use passcode 74553156.

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.

Company Information
COPT is an office REIT that focuses primarily on serving the specialized requirements of U.S. Government agencies and defense contractors, most of whom are engaged in defense information technology and national security-related activities. The Company generally acquires, develops, manages and leases office and data center properties concentrated in large office parks primarily located near knowledge-based government demand drivers and/or in targeted markets or submarkets in the Greater Washington, DC/Baltimore region. As of March 31, 2013, the Company's consolidated portfolio consisted of 210 office properties totaling 19.1 million rentable square feet. COPT is an S&P MidCap 400 company.


iii

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 the Company's strategic customers;
•
the Company's ability to borrow on favorable terms;
•
risks of real estate acquisition and development activities, including, among other things, risks that development projects may not be completed on schedule, that tenants may not take occupancy or pay rent or that development or operating costs may be greater than anticipated;
•
the Company's ability to sell properties included in its Strategic Reallocation Plan;
•
risks of investing through joint venture structures, including risks that the Company's joint venture partners may not fulfill their financial obligations as investors or may take actions that are inconsistent with the Company's objectives;
•
changes in the Company's plans for properties or views of market economic conditions or failure to obtain development rights, either of which could result in recognition of significant impairment losses;
•
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 effects 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, 2012.


iv


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


 
 
For the Three Months Ended March 31,
 
 
2013
 
2012
Revenues
 
 

 
 

Real estate revenues
 
$
116,735

 
$
110,661

Construction contract and other service revenues
 
14,262

 
21,534

Total revenues
 
130,997

 
132,195

Expenses
 
 

 
 

Property operating expenses
 
42,575

 
41,253

Depreciation and amortization associated with real estate operations
 
28,252

 
27,834

Construction contract and other service expenses
 
13,477

 
20,607

Impairment losses (recoveries)
 
1,857

 
(4,836
)
General and administrative expenses
 
5,984

 
7,728

Leasing expenses
 
1,836

 
1,841

Business development expenses and land carry costs
 
1,359

 
1,576

Total operating expenses
 
95,340

 
96,003

Operating income
 
35,657

 
36,192

Interest expense
 
(22,307
)
 
(24,431
)
Interest and other income
 
946

 
1,217

Loss on early extinguishment of debt
 
(5,184
)
 
—

Income from continuing operations before equity in loss of unconsolidated entities and income taxes
 
9,112

 
12,978

Equity in loss of unconsolidated entities
 
41

 
(89
)
Income tax expense
 
(16
)
 
(204
)
Income from continuing operations
 
9,137

 
12,685

Discontinued operations
 
3,786

 
(2,450
)
Income before gain on sales of real estate
 
12,923

 
10,235

Gain on sales of real estate, net of income taxes
 
2,354

 
—

Net income
 
15,277

 
10,235

Net (income) loss attributable to noncontrolling interests
 
 

 
 

Common units in the Operating Partnership
 
(429
)
 
(373
)
Preferred units in the Operating Partnership
 
(165
)
 
(165
)
Other consolidated entities
 
337

 
598

Net income attributable to COPT
 
15,020

 
10,295

Preferred share dividends
 
(6,106
)
 
(4,025
)
Net income attributable to COPT common shareholders
 
$
8,914

 
$
6,270

 
 
 
 
 
Earnings per share (“EPS”) computation:
 
 

 
 

Numerator for diluted EPS:
 
 

 
 

Net income attributable to common shareholders
 
$
8,914

 
$
6,270

Amount allocable to restricted shares
 
(118
)
 
(141
)
Numerator for diluted EPS
 
$
8,796

 
$
6,129

 
 
 
 
 
Denominator:
 
 

 
 

Weighted average common shares - basic
 
81,397

 
71,458

Dilutive effect of share-based compensation awards
 
52

 
44

Weighted average common shares - diluted
 
81,449

 
71,502

Diluted EPS
 
$
0.11

 
$
0.09


v


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

 
For the Three Months Ended March 31,
 
2013
 
2012
Net income
$
15,277

 
$
10,235

Real estate-related depreciation and amortization
28,252

 
31,087

Impairment losses on previously depreciated operating properties
1,857

 
11,833

Gain on sales of previously depreciated operating properties
—

 
(4,138
)
Depreciation and amortization on unconsolidated real estate entities
—

 
114

Funds from operations (“FFO”)
45,386

 
49,131

Noncontrolling interests - preferred units in the Operating Partnership
(165
)
 
(165
)
FFO allocable to other noncontrolling interests
(727
)
 
(260
)
Preferred share dividends
(6,106
)
 
(4,025
)
Basic and diluted FFO allocable to restricted shares
(183
)
 
(294
)
Basic and diluted FFO available to common share and common unit holders (“Basic and diluted FFO”)
38,205

 
44,387

Gain on sales of non-operating properties
(2,354
)
 
—

Impairment recoveries on non-operating properties
—

 
(5,246
)
Income tax expense on impairment recoveries on non-operating properties
—

 
673

Loss on early extinguishment of debt
5,184

 
—

Diluted FFO available to common share and common unit holders, as adjusted for comparability
41,035

 
39,814

Straight line rent adjustments
(3,833
)
 
(2,179
)
Amortization of intangibles included in net operating income
177

 
190

Share-based compensation, net of amounts capitalized
1,649

 
3,402

Amortization of deferred financing costs
1,528

 
1,572

Amortization of net debt discounts, net of amounts capitalized
628

 
663

Amortization of settled debt hedges
15

 
16

Recurring capital expenditures
(5,308
)
 
(1,875
)
Diluted adjusted funds from operations available to common share and common unit holders (“Diluted AFFO”)
$
35,891

 
$
41,603

Diluted FFO per share
$
0.45

 
$
0.59

Diluted FFO per share, as adjusted for comparability
$
0.48

 
$
0.53

Dividends/distributions per common share/unit
$
0.2750

 
$
0.2750




vi


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

 
 
March 31,
2013
 
December 31,
2012
Balance Sheet Data
 
 

 
 

Properties, net of accumulated depreciation
 
$
3,189,973

 
$
3,163,044

Total assets
 
3,685,099

 
3,653,759

Debt, net
 
1,957,360

 
2,019,168

Total liabilities
 
2,134,200

 
2,206,962

Redeemable noncontrolling interest
 
10,356

 
10,298

Equity
 
1,540,543

 
1,436,499

Debt to adjusted book
 
45.8
%
 
47.8
%
Debt to total market capitalization
 
41.7
%
 
45.0
%
 
 
 
 
 
Consolidated Property Data (as of period end)
 
 

 
 

Number of operating properties
 
210

 
208

Total net rentable square feet owned (in thousands)
 
19,128

 
18,831

Occupancy %
 
87.6
%
 
87.8
%
Leased %
 
89.3
%
 
89.2
%
 
 
 
 
 
Reconciliation of total assets to denominator for debt to adjusted book
 
 

 
 

Total assets
 
$
3,685,099

 
$
3,653,759

Accumulated depreciation
 
576,299

 
555,975

Accumulated depreciation included in assets held for sale
 
12,201

 
12,201

Denominator for debt to adjusted book
 
$
4,273,599

 
$
4,221,935

 
For the Three Months Ended March 31,
2013
 
2012
Payout ratios
 

 
 

Diluted FFO
64.5
%
 
47.3
%
Diluted FFO, as adjusted for comparability
60.1
%
 
52.7
%
Diluted AFFO
68.7
%
 
50.5
%
Adjusted EBITDA interest coverage ratio
3.5
x
 
3.0
x
Adjusted EBITDA fixed charge coverage ratio
2.7
x
 
2.5
x
Debt to Adjusted EBITDA ratio (1)
6.9
x
 
8.7
x
 
 
 
 
Reconciliation of denominators for diluted EPS and diluted FFO per share
 
 
 
Denominator for diluted EPS
81,449

 
71,502

Weighted average common units
3,893

 
4,281

Denominator for diluted FFO per share
85,342

 
75,783

 
 
 
 
Reconciliation of FFO to FFO, as adjusted for comparability
 

 
 

FFO
$
45,386

 
$
49,131

Gain on sales of non-operating properties
(2,354
)
 
—

Impairment recoveries on non-operating properties, net of associated tax
—

 
(4,573
)
Loss on early extinguishment of debt, continuing and discontinued operations
5,184

 
—

FFO, as adjusted for comparability
$
48,216

 
$
44,558

(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).

vii


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

 
For the Three Months Ended March 31,
 
2013
 
2012
Reconciliation of common share dividends to dividends and distributions for payout ratios
 
 
 
Common share dividends
$
23,594

 
$
19,819

Common unit distributions
1,050

 
1,173

Dividends and distributions for payout ratios
$
24,644

 
$
20,992

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

 
 

Net income
$
15,277

 
$
10,235

Interest expense on continuing operations
22,307

 
24,431

Interest expense on discontinued operations
64

 
1,244

Income tax expense
16

 
204

Real estate-related depreciation and amortization
28,252

 
31,087

Depreciation of furniture, fixtures and equipment
530

 
618

Impairment losses
1,857

 
6,587

Loss on early extinguishment of debt on continuing and discontinued operations
5,184

 
—

Gain on sales of operating properties
—

 
(4,138
)
Gain on sales of non-operational properties
(2,354
)
 
—

Net gain on investments in unconsolidated entities included in interest and other income
(60
)
 
(450
)
Adjusted EBITDA
$
71,073

 
$
69,818

 
 
 
 
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
$
22,307

 
$
24,431

Interest expense from discontinued operations
64

 
1,244

Less: Amortization of deferred financing costs
(1,528
)
 
(1,572
)
Less: Amortization of net debt discount, net of amounts capitalized
(628
)
 
(663
)
Denominator for interest coverage-Adjusted EBITDA
20,215

 
23,440

Preferred share dividends
6,106

 
4,025

Preferred unit distributions
165

 
165

Denominator for fixed charge coverage-Adjusted EBITDA
$
26,486

 
$
27,630

 
 
 
 
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
$
2,291

 
$
666

Building improvements on operating properties
1,600

 
871

Leasing costs for operating properties
1,669

 
1,299

Less: Nonrecurring tenant improvements and incentives on operating properties
15

 
(561
)
Less: Nonrecurring building improvements on operating properties
(267
)
 
(407
)
Add: Recurring capital expenditures on operating properties held through joint ventures
—

 
7

Recurring capital expenditures
$
5,308

 
$
1,875

 
 
 
 

viii


Corporate Office Properties Trust
Summary Description
 
The Company: Corporate Office Properties Trust (the “Company” or “COPT”) is a self-managed office real estate investment trust (“REIT”). As of March 31, 2013, 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 March 31, 2013, 81% of the Company’s square footage was located in the Greater Washington, DC/Baltimore region. As of March 31, 2013, COPT’s operating portfolio of 210 office properties encompassed 19.1 million square feet and was 89.3% leased. As of the same date, COPT also owned one wholesale data center that was 24% leased.
 
Corporate Strategy: COPT’s customer strategy focuses on serving the specialized requirements of United States Government agencies and defense contractors, most of whom are engaged in defense information technology and national security related activities. These tenants’ missions generally pertain more to knowledge-based activities (such as cyber security, research and development and other highly technical defense and security areas) than to force structure (troops) and weapon system production. In order to support this customer strategy, COPT focuses on owning properties located near defense installations and other knowledge-based government demand drivers. COPT also focuses on owning properties in targeted markets or submarkets in the Greater Washington, DC/Baltimore region with strong growth attributes.
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
 
Corporate Credit Rating: BBB- (Fitch); Baa3 (Moody’s); and BBB- (S&P)

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, 2012.

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
SUMMARY OF RESULTS 
 
3/31/13
 
12/31/12
 
9/30/12
 
6/30/12
 
3/31/12
Same Office NOI
 
$
69,526

 
$
68,073

 
$
69,759

 
$
69,257

 
$
67,484

NOI from real estate operations
 
$
78,011

 
$
76,122

 
$
77,565

 
$
79,920

 
$
78,758

Adjusted EBITDA
 
$
71,073

 
$
70,178

 
$
72,042

 
$
71,696

 
$
69,818

Net income (loss) attributable to COPT common shareholders
 
$
8,914

 
$
12,433

 
$
(27,535
)
 
$
7,138

 
$
6,270

FFO - per NAREIT
 
$
45,386

 
$
47,825

 
$
48,888

 
$
46,115

 
$
49,131

FFO - as adjusted for comparability
 
$
48,216

 
$
49,724

 
$
49,967

 
$
46,260

 
$
44,558

Basic and diluted FFO available to common share and common unit holders
 
$
38,205

 
$
40,625

 
$
39,565

 
$
41,143

 
$
44,387

Diluted AFFO available to common share and common unit holders
 
$
35,891

 
$
15,860

 
$
33,710

 
$
39,026

 
$
41,603

Per share - diluted:
 
 

 
 

 
 

 
 

 
 

EPS
 
$
0.11

 
$
0.16

 
$
(0.39
)
 
$
0.10

 
$
0.09

FFO - NAREIT
 
$
0.45

 
$
0.49

 
$
0.52

 
$
0.54

 
$
0.59

FFO - as adjusted for comparability
 
$
0.48

 
$
0.51

 
$
0.53

 
$
0.54

 
$
0.53

Dividend per common share
 
$
0.2750

 
$
0.2750

 
$
0.2750

 
$
0.2750

 
$
0.2750

Payout ratios:
 
 

 
 

 
 

 
 

 
 

Diluted FFO
 
64.5
%
 
57.5
%
 
53.1
%
 
51.0
%
 
47.3
%
Diluted FFO - as adjusted for comparability
 
60.1
%
 
55.0
%
 
51.7
%
 
50.8
%
 
52.7
%
Diluted AFFO
 
68.7
%
 
147.4
%
 
62.3
%
 
53.8
%
 
50.5
%
Real estate operating margin
 
63.9
%
 
62.1
%
 
64.0
%
 
64.5
%
 
62.9
%
CAPITALIZATION
 
 

 
 

 
 
 
 

 
 

Debt, net
 
$
1,957,360

 
$
2,019,168

 
$
2,169,315

 
$
2,191,851

 
$
2,418,078

Debt to Total Market Capitalization
 
41.7
%
 
45.0
%
 
50.0
%
 
50.0
%
 
54.8
%
Debt to Adjusted Book
 
45.8
%
 
47.8
%
 
51.9
%
 
50.8
%
 
55.3
%
Adjusted EBITDA fixed charge coverage ratio
 
2.7
x
 
2.6
x
 
2.6
x
 
2.7
x
 
2.5
x
Debt to Adjusted EBITDA ratio
 
6.9
x
 
7.2
x
 
7.5
x
 
7.6
x
 
8.7
x
OTHER
 
 

 
 

 
 

 
 

 
 

Revenue from early termination of leases
 
$
835

 
$
583

 
$
543

 
$
350

 
$
395

Capitalized interest costs
 
$
2,440

 
$
3,109

 
$
3,390

 
$
3,595

 
$
3,809

 
 
 
 
 
 
 
 
 
 
 


3

Corporate Office Properties Trust
Selected Portfolio Data
 
 
 
 
 
 
 
 
 
 
 
 
3/31/13
 
12/31/12
 
9/30/12
 
6/30/12
 
3/31/12
 
# of Operating Office Properties
 

 
 

 
 

 
 

 
 

 
Wholly-owned
205

 
204

 
202

 
224

 
227

 
+ Consolidated JV (1)
5

 
4

 
4

 
4

 
4

 
Consolidated properties
210

 
208

 
206

 
228

 
231

 
% Occupied
 

 
 

 
 

 
 

 
 

 
Wholly-owned
87.3
%
 
87.6
%
 
88.1
%
 
87.6
%
 
87.6
%
 
+ Consolidated JV (1)
96.9
%
 
96.1
%
 
89.2
%
 
78.1
%
 
60.0
%
 
Consolidated properties
87.6
%
 
87.8
%
 
88.1
%
 
87.4
%
 
87.0
%
 
% Leased
 

 
 

 
 

 
 

 
 

 
Wholly-owned
89.1
%
 
89.1
%
 
89.8
%
 
89.2
%
 
89.2
%
 
+ Consolidated JV (1)
97.8
%
 
96.1
%
 
96.1
%
 
95.0
%
 
78.4
%
 
Consolidated properties
89.3
%
 
89.2
%
 
89.9
%
 
89.3
%
 
88.9
%
 
Square Feet of Office Properties (in thousands)
 

 
 

 
 

 
 

 
 

 
Wholly-owned
18,562

 
18,386

 
18,146

 
19,342

 
19,793

 
+ Consolidated JV Square Footage (1)
566

 
445

 
445

 
445

 
444

 
Consolidated Square Footage
19,128

 
18,831

 
18,591

 
19,787

 
20,237

 
 
 
 
 
 
 
 
 
 
 
 
Wholesale Data Center
 
 
 
 
 
 
 
 
 
 
Initial Stabilization Critical Load (in megawatts (“MWs”))
18

 
18

 
18

 
18

 
18

 
MWs Operational
9

 
6

 
6

 
6

 
3

 
MWs Leased
4.3

 
4

 
4

 
3

 
3

 
 
 
 
 
 
 
 
 
 
 
 

(1) See page 32 for detail regarding consolidated JVs.






4

Corporate Office Properties Trust
Quarterly Consolidated Balance Sheets
(dollars in thousands)
 
3/31/13
 
12/31/12
 
9/30/12
 
6/30/12
 
3/31/12
Assets
 

 
 

 
 

 
 

 
 

Properties, net
 

 
 

 
 

 
 

 
 

Operating properties, net
$
2,705,335

 
$
2,597,666

 
$
2,487,919

 
$
2,629,136

 
$
2,704,323

Construction and redevelopment in progress, including land (1)
160,311

 
247,386

 
271,798

 
243,220

 
282,476

Land held for future development and pre-construction costs (1)
324,327

 
317,992

 
342,797

 
360,236

 
351,492

Total properties, net
3,189,973

 
3,163,044

 
3,102,514

 
3,232,592

 
3,338,291

Assets held for sale
142,404

 
140,229

 
137,815

 
144,392

 
81,352

Cash and cash equivalents
23,509

 
10,594

 
5,009

 
4,702

 
7,987

Restricted cash and marketable securities
17,040

 
21,557

 
20,926

 
22,632

 
21,711

Accounts receivable, net
10,768

 
19,247

 
15,877

 
10,992

 
11,231

Deferred rent receivable
88,716

 
85,802

 
83,156

 
85,595

 
89,337

Intangible assets on real estate acquisitions, net
72,035

 
75,879

 
81,059

 
76,426

 
83,940

Deferred leasing and financing costs, net
59,856

 
59,952

 
58,753

 
63,861

 
66,987

Prepaid expenses and other assets
80,798

 
77,455

 
92,547

 
73,883

 
96,532

Total assets
$
3,685,099

 
$
3,653,759

 
$
3,597,656

 
$
3,715,075

 
$
3,797,368

Liabilities and equity
 

 
 

 
 

 
 

 
 

Liabilities:
 

 
 

 
 

 
 

 
 

Debt, net
$
1,957,360

 
$
2,019,168

 
$
2,169,315

 
$
2,191,851

 
$
2,418,078

Accounts payable and accrued expenses
90,645

 
97,922

 
87,390

 
84,733

 
93,156

Rents received in advance and security deposits
26,024

 
27,632

 
26,773

 
27,124

 
27,647

Dividends and distributions payable
29,947

 
28,698

 
26,954

 
24,695

 
24,544

Deferred revenue associated with operating leases
10,833

 
11,995

 
13,102

 
13,938

 
15,258

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

 
6,420

 
6,420

 
6,282

 
6,178

Interest rate derivatives
5,340

 
6,185

 
6,543

 
4,400

 
2,673

Other liabilities
7,631

 
8,942

 
10,938

 
8,703

 
9,038

Total liabilities
2,134,200

 
2,206,962

 
2,347,435

 
2,361,726

 
2,596,572

Commitments and contingencies


 


 


 


 


Redeemable noncontrolling interest
10,356

 
10,298

 
9,932

 
9,578

 
9,237

Equity:
 

 
 

 
 

 
 
 
 
COPT’s shareholders’ equity:
 

 
 

 
 

 
 
 
 
Preferred shares at liquidation preference
333,833

 
333,833

 
333,833

 
388,833

 
216,333

Common shares
858

 
809

 
722

 
721

 
720

Additional paid-in capital
1,772,255

 
1,653,672

 
1,451,416

 
1,447,781

 
1,451,981

Cumulative distributions in excess of net income
(632,134
)
 
(617,455
)
 
(607,633
)
 
(560,262
)
 
(547,591
)
Accumulated other comprehensive loss
(4,410
)
 
(5,435
)
 
(5,688
)
 
(3,717
)
 
(2,201
)
Total COPT’s shareholders’ equity
1,470,402

 
1,365,424

 
1,172,650

 
1,273,356

 
1,119,242

Noncontrolling interests in subsidiaries
 

 
 

 
 

 
 

 
 

Common units in the Operating Partnership
50,604

 
52,122

 
49,157

 
52,300

 
53,999

Preferred units in the Operating Partnership
8,800

 
8,800

 
8,800

 
8,800

 
8,800

Other consolidated entities
10,737

 
10,153

 
9,682

 
9,315

 
9,518

Total noncontrolling interests in subsidiaries
70,141

 
71,075

 
67,639

 
70,415

 
72,317

Total equity
1,540,543

 
1,436,499

 
1,240,289

 
1,343,771

 
1,191,559

Total liabilities, redeemable noncontrolling interest and equity
$
3,685,099

 
$
3,653,759

 
$
3,597,656

 
$
3,715,075

 
$
3,797,368

(1) Please refer to pages 21-23 for detail.
 
 
 
 
 
 
 
 
 

5

Corporate Office Properties Trust
Consolidated Statements of Operations
(in thousands, except per share data)
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended
 
3/31/13
 
12/31/12
 
9/30/12
 
6/30/12
 
3/31/12
Revenues
 

 
 

 
 

 
 

 
 

Rental revenue
$
95,295

 
$
94,562

 
$
92,783

 
$
90,450

 
$
89,859

Tenant recoveries and other real estate operations revenue
21,440

 
22,919

 
22,078

 
20,718

 
20,802

Construction contract and other service revenues
14,262

 
20,024

 
15,283

 
16,995

 
21,534

Total revenues
130,997

 
137,505

 
130,144

 
128,163

 
132,195

Expenses
 

 
 

 
 

 
 

 
 

Property operating expenses
42,575

 
44,887

 
41,517

 
39,504

 
41,253

Depreciation and amortization associated with real estate operations
28,252

 
28,560

 
28,698

 
28,388

 
27,834

Construction contract and other service expenses
13,477

 
19,274

 
14,410

 
16,285

 
20,607

Impairment losses (recoveries)
1,857

 
1,954

 
46,096

 
—

 
(4,836
)
General and administrative expenses
5,984

 
5,740

 
5,062

 
7,741

 
7,728

Leasing expenses
1,836

 
1,363

 
1,315

 
1,110

 
1,841

Business development expenses and land carry costs
1,359

 
1,205

 
1,632

 
1,298

 
1,576

Total operating expenses
95,340

 
102,983

 
138,730

 
94,326

 
96,003

Operating income (loss)
35,657

 
34,522

 
(8,586
)
 
33,837

 
36,192

Interest expense
(22,307
)
 
(22,715
)
 
(23,239
)
 
(24,239
)
 
(24,431
)
Interest and other income
946

 
4,020

 
1,095

 
840

 
1,217

Loss on early extinguishment of debt
(5,184
)
 
(6
)
 
(768
)
 
(169
)
 
—

Income (loss) from continuing operations before equity in income (loss) of unconsolidated entities and income taxes
9,112

 
15,821

 
(31,498
)
 
10,269

 
12,978

Equity in income (loss) of unconsolidated entities
41

 
(24
)
 
(246
)
 
(187
)
 
(89
)
Income tax expense
(16
)
 
(54
)
 
(106
)
 
(17
)
 
(204
)
Income (loss) from continuing operations
9,137

 
15,743

 
(31,850
)
 
10,065

 
12,685

Discontinued operations
3,786

 
3,267

 
11,085

 
1,775

 
(2,450
)
Income (loss) before gain on sales of real estate
12,923

 
19,010

 
(20,765
)
 
11,840

 
10,235

Gain on sales of real estate
2,354

 
—

 
—

 
21

 
—

Net income (loss)
15,277

 
19,010

 
(20,765
)
 
11,861

 
10,235

Net (income) loss attributable to noncontrolling interests
 

 
 

 
 

 
 

 
 

Common units in the Operating Partnership
(429
)
 
(651
)
 
1,533

 
(422
)
 
(373
)
Preferred units in the Operating Partnership
(165
)
 
(165
)
 
(165
)
 
(165
)
 
(165
)
Other consolidated entities
337

 
345

 
235

 
31

 
598

Net income (loss) attributable to COPT
15,020

 
18,539

 
(19,162
)
 
11,305

 
10,295

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

 
—

 
(1,827
)
 
—

 
—

Net income (loss) attributable to COPT common shareholders
$
8,914

 
$
12,433

 
$
(27,535
)
 
$
7,138

 
$
6,270

 
 
 
 
 
 
 
 
 
 

6

Corporate Office Properties Trust
Consolidated Statements of Operations (continued)
(in thousands, except per share data)
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended
 
3/31/13
 
12/31/12
 
9/30/12
 
6/30/12
 
3/31/12
For diluted EPS computations:
 

 
 

 
 

 
 

 
 

Numerator for diluted EPS
 

 
 

 
 

 
 

 
 

Net income (loss) attributable to common shareholders
$
8,914

 
$
12,433

 
$
(27,535
)
 
$
7,138

 
$
6,270

Amount allocable to restricted shares
(118
)
 
(112
)
 
(111
)
 
(105
)
 
(141
)
Numerator for diluted EPS
$
8,796

 
$
12,321

 
$
(27,646
)
 
$
7,033

 
$
6,129

Denominator:
 

 
 

 
 

 
 

 
 

Weighted average common shares - basic
81,397

 
79,004

 
71,688

 
71,624

 
71,458

Dilutive effect of share-based compensation awards
52

 
67

 
—

 
25

 
44

Weighted average common shares - diluted
81,449

 
79,071

 
71,688

 
71,649

 
71,502

Diluted EPS
$
0.11

 
$
0.16

 
$
(0.39
)
 
$
0.10

 
$
0.09


7

Corporate Office Properties Trust
Consolidated Statements of FFO
(in thousands, except per share data)
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended
 
3/31/13
 
12/31/12
 
9/30/12
 
6/30/12
 
3/31/12
NOI from real estate operations (1)
 

 
 

 
 

 
 

 
 

Real estate revenues
$
122,077

 
$
122,564

 
$
121,264

 
$
123,968

 
$
125,304

Real estate property operating expenses
(44,066
)
 
(46,442
)
 
(43,699
)
 
(44,048
)
 
(46,546
)
NOI from real estate operations (1) (2)
78,011

 
76,122

 
77,565

 
79,920

 
78,758

General and administrative expenses
(5,984
)
 
(5,740
)
 
(5,062
)
 
(7,741
)
 
(7,728
)
Leasing expenses (2)
(1,837
)
 
(1,363
)
 
(1,316
)
 
(1,112
)
 
(1,841
)
Business development expenses and land carry costs (2)
(1,359
)
 
(1,205
)
 
(1,632
)
 
(1,304
)
 
(1,594
)
NOI from construction contracts and other service operations
785

 
750

 
873

 
710

 
927

Impairment (losses) recoveries on non-operating properties
—

 
(1,893
)
 
—

 
—

 
5,246

Equity in income (loss) of unconsolidated entities
41

 
(24
)
 
(246
)
 
(187
)
 
(89
)
Depreciation and amortization on unconsolidated real estate entities
—

 
—

 
113

 
119

 
114

Interest and other income
946

 
4,020

 
1,095

 
840

 
1,217

(Loss) gain on early extinguishment of debt (2)
(5,184
)
 
(6
)
 
970

 
(171
)
 
—

Gain on sales of non-operating properties
2,354

 
—

 
—

 
33

 
—

Total interest expense (2)
(22,371
)
 
(22,782
)
 
(23,366
)
 
(24,975
)
 
(25,675
)
Income tax expense
(16
)
 
(54
)
 
(106
)
 
(17
)
 
(204
)
FFO - per NAREIT (1)
45,386

 
47,825

 
48,888

 
46,115

 
49,131

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

 
—

 
(1,827
)
 
—

 
—

Noncontrolling interests - preferred units in the Operating Partnership
(165
)
 
(165
)
 
(165
)
 
(165
)
 
(165
)
FFO allocable to other noncontrolling interests
(727
)
 
(738
)
 
(571
)
 
(420
)
 
(260
)
Basic and diluted FFO allocable to restricted shares
(183
)
 
(191
)
 
(214
)
 
(220
)
 
(294
)
Basic and diluted FFO available to common share and common unit holders (1)
38,205

 
40,625

 
39,565

 
41,143

 
44,387

Operating property acquisition costs
—

 
—

 
222

 
7

 
—

Gain on sales of non-operating properties, net of income taxes
(2,354
)
 
—

 
—

 
(33
)
 
—

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

 
1,893

 
—

 
—

 
(4,573
)
Loss (gain) on early extinguishment of debt (2)
5,184

 
6

 
(970
)
 
171

 
—

Issuance costs associated with redeemed preferred shares
—

 
—

 
1,827

 
—

 
—

Diluted FFO available to common share and common unit holders, as adjusted for comparability (1)
$
41,035

 
$
42,524

 
$
40,644

 
$
41,288

 
$
39,814

 
 
 
 
 
 
 
 
 
 
(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
 
3/31/13
 
12/31/12
 
9/30/12
 
6/30/12
 
3/31/12
Net income (loss)
$
15,277

 
$
19,010

 
$
(20,765
)
 
$
11,861

 
$
10,235

Real estate-related depreciation and amortization
28,252

 
28,560

 
30,624

 
31,666

 
31,087

Impairment losses on previously depreciated operating properties (1)
1,857

 
247

 
55,829

 
2,354

 
11,833

Gain on sales of previously depreciated operating properties
—

 
8

 
(16,913
)
 
115

 
(4,138
)
Depreciation and amortization on unconsolidated real estate entities
—

 
—

 
113

 
119

 
114

FFO - per NAREIT (2)
45,386

 
47,825

 
48,888

 
46,115

 
49,131

Operating property acquisition costs
—

 
—

 
222

 
7

 
—

Gain on sales of non-operating properties
(2,354
)
 
—

 
—

 
(33
)
 
—

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

 
1,893

 
—

 
—

 
(4,573
)
Loss (gain) on early extinguishment of debt, continuing and discontinued operations
5,184

 
6

 
(970
)
 
171

 
—

Issuance costs associated with redeemed preferred shares
—

 
—

 
1,827

 
—

 
—

FFO - as adjusted for comparability (2)
$
48,216

 
$
49,724

 
$
49,967

 
$
46,260

 
$
44,558

 
 
 
 
 
 
 
 
 
 
Weighted Average Shares for period ended:
 

 
 

 
 

 
 

 
 

Common Shares Outstanding
81,397

 
79,004

 
71,688

 
71,624

 
71,458

Dilutive effect of share-based compensation awards
52

 
67

 
73

 
25

 
44

Common Units
3,893

 
4,171

 
4,233

 
4,255

 
4,281

Denominator for FFO per share - diluted
85,342

 
83,242

 
75,994

 
75,904

 
75,783

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

 
—

 
(73
)
 
—

 
—

Weighted average common units
(3,893
)
 
(4,171
)
 
(4,233
)
 
(4,255
)
 
(4,281
)
Denominator for diluted EPS
81,449

 
79,071

 
71,688

 
71,649

 
71,502

 
 
 
 
 
 
 
 
 
 
(1) Please see reconciliations on pages 33 through 35.
 
 
 
 
 
 
 
 
 
(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
 
3/31/13
 
12/31/12
 
9/30/12
 
6/30/12
 
3/31/12
Diluted FFO available to common share and common unit holders, as adjusted for comparability
$
41,035

 
$
42,524

 
$
40,644

 
$
41,288

 
$
39,814

Straight line rent adjustments (1)
(3,833
)
 
(3,385
)
 
(2,595
)
 
(1,857
)
 
(2,179
)
Amortization of intangibles included in NOI
177

 
221

 
251

 
218

 
190

Share-based compensation, net of amounts capitalized
1,649

 
1,720

 
1,703

 
3,157

 
3,402

Amortization of deferred financing costs
1,528

 
1,547

 
1,527

 
1,597

 
1,572

Amortization of net debt discounts, net of amounts capitalized
628

 
693

 
683

 
682

 
663

Amortization of settled debt hedges
15

 
16

 
15

 
15

 
16

Recurring capital expenditures on properties to be held
(5,308
)
 
(27,476
)
 
(8,518
)
 
(6,074
)
 
(1,875
)
Diluted AFFO available to common share and common unit holders (“diluted AFFO”)
$
35,891

 
$
15,860

 
$
33,710

 
$
39,026

 
$
41,603

Recurring capital expenditures
 

 
 

 
 

 
 

 
 

Tenant improvements and incentives on operating properties
$
2,291

 
$
10,713

 
$
7,774

 
$
2,663

 
$
666

Building improvements on operating properties
1,600

 
18,049

 
4,646

 
1,296

 
871

Leasing costs for operating properties
1,669

 
1,381

 
947

 
2,863

 
1,299

Less: Nonrecurring tenant improvements and incentives on operating properties
15

 
(283
)
 
(3,852
)
 
(97
)
 
(561
)
Less: Nonrecurring building improvements on operating properties
(267
)
 
(2,226
)
 
(940
)
 
(572
)
 
(407
)
Less: Nonrecurring leasing costs for operating properties
—

 
—

 
(130
)
 
(79
)
 
—

Add: Recurring capital expenditures on operating properties held through joint ventures
—

 
(158
)
 
73

 
—

 
7

Recurring capital expenditures
$
5,308

 
$
27,476

 
$
8,518

 
$
6,074

 
$
1,875

 
 
 
 
 
 
 
 
 
 
(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 - March 31, 2013 (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

 
3,223,235

 
97.6
%
 
99.7
%
 
2

 
262,482

 
—

 
262,482

Columbia Gateway
 
28

 
2,221,456

 
86.6
%
 
87.3
%
 
—

 
—

 
—

 
—

Airport Square/bwtech
 
26

 
1,940,891

 
78.4
%
 
78.4
%
 
—

 
—

 
—

 
—

Commons/Parkway
 
10

 
432,410

 
68.0
%
 
74.4
%
 
—

 
—

 
—

 
—

Other
 
8

 
851,840

 
89.3
%
 
99.8
%
 
1

 
25,939

 
—

 
25,939

Subtotal
 
99

 
8,669,832

 
88.2
%
 
90.5
%
 
3

 
288,421

 
—

 
288,421

Northern Virginia:
 
 

 
 

 
 

 
 

 
 

 
 

 
 
 
 
Westfields Corporate Center
 
9

 
1,434,692

 
91.0
%
 
92.3
%
 
—

 
—

 
—

 
—

Patriot Ridge
 
1

 
109,257

 
100.0
%
 
100.0
%
 
1

 
130,015

 
109,257

 
239,272

Herndon, Tysons Corner, Merrifield and Ashburn
 
9

 
1,704,704

 
87.8
%
 
88.8
%
 
2

 
315,000

 
—

 
315,000

Subtotal
 
19

 
3,248,653

 
89.6
%
 
90.7
%
 
3

 
445,015

 
109,257

 
554,272

San Antonio, Texas
 
 

 
 

 
 

 
 

 
 

 
 

 
 
 
 
Sentry Gateway
 
6

 
792,454

 
100.0
%
 
100.0
%
 
—

 
—

 
—

 
—

Other
 
2

 
122,639

 
72.3
%
 
72.3
%
 
—

 
—

 
—

 
—

Subtotal
 
8

 
915,093

 
96.3
%
 
96.3
%
 
—

 
—

 
—

 
—

Huntsville (3)
 
2

 
258,154

 
91.0
%
 
91.0
%
 
3

 
303,869

 
—

 
303,869

Washington, DC- Capital Riverfront (Maritime)
 
2

 
360,326

 
88.1
%
 
90.9
%
 
—

 
—

 
—

 
—

St. Mary’s & King George Counties
 
19

 
903,550

 
87.2
%
 
89.9
%
 
—

 
—

 
—

 
—

Greater Baltimore:
 
 

 
 

 
 

 
 

 
 

 
 

 


 
—

White Marsh and Rt 83 Corridor
 
28

 
1,287,006

 
82.6
%
 
82.7
%
 
—

 
—

 
—

 
—

Canton Crossing-Baltimore City
 
1

 
481,016

 
93.4
%
 
93.4
%
 
—

 
—

 
—

 
—

North Gate Business Park
 
3

 
284,884

 
37.9
%
 
37.9
%
 
—

 
—

 
—

 
—

Subtotal
 
32

 
2,052,906

 
78.9
%
 
79.0
%
 
—

 
—

 
—

 
—

Suburban Maryland
 
3

 
297,936

 
94.1
%
 
95.7
%
 
—

 
—

 
—

 
—

Colorado Springs
 
21

 
1,577,510

 
81.3
%
 
85.1
%
 
—

 
—

 
—

 
—

Greater Philadelphia, Pennsylvania
 
3

 
548,303

 
89.9
%
 
89.9
%
 
1

 
183,416

 
—

 
183,416

Other (3)
 
2

 
295,842

 
100.0
%
 
100.0
%
 
—

 
—

 
—

 
—

Total
 
210

 
19,128,105

 
87.6
%
 
89.3
%
 
10

 
1,220,721

 
109,257

 
1,329,978

 
(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 22 and 23.
(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 3/31/13
 
 
 
 
# of
Operating Properties
 
Operational Square Feet
 
 
 
 
 
Annualized
Rental Revenue
 
Percentage of Total
Annualized
Rental Revenue
 
NOI from Real
Estate Operations
for Three Months Ended
Property Grouping
 
 
 
% Occupied (1)
 
% Leased (1)
 
 
 
3/31/13
Same Office Properties (2)
 
 

 
 

 
 
 
 
 
 

 
 

 
 

Stabilized properties
 
181

 
16,212

 
89.6%
 
90.3%
 
$
415,843

 
88.8
%
 
$
68,915

Unstabilized properties (3)
 
2

 
263

 
43.3%
 
43.3%
 
4,047

 
0.9
%
 
611

Total Same Office Properties
 
183

 
16,475

 
88.8%
 
89.6%
 
419,890

 
89.7
%
 
69,526

Office Properties Placed in Service (4)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Stabilized properties
 
2

 
230

 
100.0%
 
100.0%
 
6,900

 
1.5
%
 
1,064

Unstabilized properties (3)
 
4

 
438

 
33.7%
 
69.0%
 
5,174

 
1.1
%
 
906

Acquired Office Properties (5)
 
1

 
202

 
100.0%
 
100.0%
 
5,907

 
1.3
%
 
1,174

Other
 
N/A

 
N/A

 
N/A
 
N/A
 
N/A

 
N/A

 
98

Subtotal
 
190

 
17,345

 
87.7%
 
89.3%
 
437,871

 
93.5
%
 
72,768

Office Properties Held for Sale (6)
 
17

 
1,235

 
84.3%
 
89.2%
 
20,804

 
4.4
%
 
3,559

Greater Philadelphia
 
3

 
548

 
89.9%
 
89.9%
 
9,488

 
2.0
%
 
1,649

Disposed Office Properties
 
N/A

 
N/A

 
N/A
 
N/A
 
N/A

 
N/A

 
35

Total Portfolio
 
210

 
19,128

 
87.6%
 
89.3%
 
$
468,163

 
100.0
%
 
$
78,011

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Strategic Tenant Properties (7)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Strategic Tenant Locations
 
80

 
8,719

 
91.9%
 
94.4%
 
$
254,606

 
54.4
%
 
$
43,495

Strategic Tenants
 
36

 
3,096

 
92.2%
 
92.2%
 
74,042

 
15.8
%
 
13,304

Total Strategic Tenant Properties
 
116

 
11,815

 
92.0%
 
93.8%
 
$
328,648

 
70.2
%
 
$
56,799

 
(1)     Percentages calculated based on operational square feet.
(2)     Properties held for long-term investment owned and 100% operational since at least 1/1/12.
(3)     Properties with first generation operational space less than 90% occupied at 3/31/13, as detailed on page 13.
(4)     Newly constructed or redeveloped properties placed in service that were not fully operational by 1/1/12.
(5)     Acquired properties that were not owned and fully operational by 1/1/12.
(6)     The carrying value of operating property assets held for sale at 3/31/13 totaled $141,251.
(7)
Office properties held for long-term investment located near defense installations and other knowledge-based government demand drivers (“Strategic Tenant Locations”), or that were otherwise at least 50% leased as of most recent year end by United States Government agencies or defense contractors (“Strategic Tenants”).



12

Corporate Office Properties Trust
Unstabilized Office Properties (1) - March 31, 2013  
 
 
 
 
 
 
 
Property Grouping
Operational Square Feet
 
Occupancy %
 
Leased %
 
Same Office Properties (2) 
 
 
 

 
 

 
3120 Fairview Park Drive
183,736
 
45.3
%
 
45.3
%
 
210 Research Blvd
79,573
0.386

38.6
%
 
38.6
%
 
Total Unstabilized Same Office Properties
263,309
 
43.3
%
 
43.3
%
 
Office Properties Placed in Service (3) 
 
 
 

 
 

 
206 Research Blvd
128,119
 
0.0
%
 
0.0
%
 
430 National Business Parkway
110,136
 
86.1
%
 
93.2
%
 
410 National Business Parkway
110,054
 
47.7
%
 
100.0
%
 
7205 Riverwood Drive
89,268
 
0.0
%
 
100.0
%
 
Total Unstabilized Office Properties Placed in Service
437,577
 
33.7
%
 
69.0
%
 
Total Unstabilized Office Properties, Excluding Properties Held for Sale
700,886
 
37.3
%
 
59.3
%
 
Unstabilized Properties Held for Sale (3 Properties)
309,576
 
55.3
%
 
72.3
%
 
751 Arbor Way (Greater Philadelphia)
113,297
 
51.2
%
 
51.2
%
 
Total Unstabilized Office Properties
1,123,759
 
43.6
%
 
62.1
%
 
 
(1) Properties with first generation operational space less than 90% occupied at 3/31/13.
(2) Properties owned and 100% operational since 1/1/12.
(3) Newly constructed or redeveloped properties placed in service that were not fully operational by 1/1/12.





13

Corporate Office Properties Trust
Real Estate Revenues* by Segment
(dollars in thousands)
 
 
Three Months Ended
 
 
3/31/13
 
12/31/12
 
9/30/12
 
6/30/12
 
3/31/12
 
Office Properties:
 

 
 

 
 

 
 

 
 

 
Baltimore/Washington Corridor
$
56,436

 
$
57,233

 
$
55,799

 
$
55,677

 
$
56,250

 
Northern Virginia
22,942

 
21,600

 
20,363

 
19,051

 
18,560

 
San Antonio
7,757

 
8,455

 
8,125

 
7,830

 
7,608

 
Washington, DC - Capitol Riverfront
4,244

 
4,182

 
4,389

 
4,232

 
3,894

 
St. Mary’s and King George Counties
3,992

 
3,956

 
4,085

 
4,139

 
4,212

 
Greater Baltimore
10,719

 
10,662

 
11,918

 
14,664

 
15,372

 
Suburban Maryland
2,224

 
2,336

 
2,371

 
4,560

 
5,749

 
Colorado Springs
6,733

 
6,309

 
6,278

 
6,149

 
6,453

 
Greater Philadelphia
2,487

 
2,527

 
2,541

 
2,458

 
2,172

 
Other
3,190

 
3,317

 
3,589

 
3,770

 
3,618

 
Wholesale Data Center
1,353

 
1,987

 
1,806

 
1,438

 
1,416

 
Real estate revenues
$
122,077

 
$
122,564

 
$
121,264

 
$
123,968

 
$
125,304

 
NOI from Real Estate Operations* by Segment
(dollars in thousands)
 
 
 
 
 
 
Three Months Ended
 
 
3/31/13
 
12/31/12
 
9/30/12
 
6/30/12
 
3/31/12
 
Office Properties:
 

 
 

 
 

 
 

 
 

 
Baltimore/Washington Corridor
$
37,170

 
$
36,615

 
$
37,265

 
$
37,208

 
$
36,576

 
Northern Virginia
15,125

 
13,767

 
13,248

 
12,126

 
11,330

 
San Antonio
3,869

 
3,954

 
3,853

 
3,866

 
3,846

 
Washington, DC - Capitol Riverfront
2,295

 
2,112

 
2,465

 
2,556

 
2,009

 
St. Mary’s and King George Counties
2,799

 
2,735

 
2,844

 
3,068

 
3,000

 
Greater Baltimore
6,551

 
6,656

 
7,379

 
9,053

 
9,611

 
Suburban Maryland
1,437

 
1,398

 
1,330

 
2,703

 
3,290

 
Colorado Springs
4,285

 
3,780

 
3,846

 
4,134

 
4,146

 
Greater Philadelphia
1,649

 
1,816

 
1,878

 
1,783

 
1,659

 
Other
2,794

 
2,739

 
2,903

 
3,056

 
2,930

 
Wholesale Data Center
37

 
550

 
554

 
367

 
361

 
NOI from real estate operations
$
78,011

 
$
76,122

 
$
77,565

 
$
79,920

 
$
78,758


*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
 
 
 
3/31/13
 
12/31/12
 
9/30/12
 
6/30/12
 
3/31/12
Baltimore Washington Corridor
96

 
8,360,374

 
90.0
%
 
89.4
%
 
88.2
%
 
88.3
%
 
87.6
%
Northern Virginia
17

 
2,937,559

 
88.5
%
 
88.1
%
 
86.6
%
 
87.0
%
 
86.1
%
San Antonio
8

 
915,429

 
96.4
%
 
96.5
%
 
96.5
%
 
96.5
%
 
97.6
%
Washington, DC - Capitol Riverfront
2

 
360,326

 
88.1
%
 
89.0
%
 
89.0
%
 
89.0
%
 
88.3
%
St. Mary’s and King George Counties
19

 
903,550

 
86.4
%
 
85.5
%
 
85.5
%
 
87.7
%
 
88.2
%
Greater Baltimore
31

 
1,924,787

 
84.1
%
 
83.8
%
 
85.9
%
 
85.9
%
 
85.2
%
Suburban Maryland
2

 
242,070

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

 
398,043

 
74.0
%
 
72.9
%
 
74.9
%
 
74.5
%
 
74.7
%
Other
3

 
432,891

 
94.6
%
 
96.4
%
 
100.0
%
 
100.0
%
 
100.0
%
Total Office
183

 
16,474,693

 
88.9
%
 
88.6
%
 
88.1
%
 
88.3
%
 
87.7
%
Total Same Office Properties occupancy as of period end
 
 

 
88.8
%
 
88.9
%
 
88.3
%
 
88.1
%
 
87.8
%

(1)  Same office properties represent buildings owned and 100% operational since at least January 1, 2012, 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
 
3/31/13
 
12/31/12
 
9/30/12
 
6/30/12
 
3/31/12
Office Properties:
 

 
 

 
 

 
 

 
 

Baltimore/Washington Corridor
$
55,019

 
$
55,964

 
$
54,527

 
$
53,372

 
$
53,979

Northern Virginia
19,945

 
19,333

 
19,181

 
19,051

 
18,560

San Antonio
7,757

 
8,455

 
8,125

 
7,830

 
7,614

Washington, DC - Capitol Riverfront
4,244

 
4,182

 
4,389

 
4,232

 
3,894

St. Mary’s and King George Counties
3,992

 
3,956

 
4,085

 
4,139

 
4,212

Greater Baltimore
10,656

 
10,640

 
10,942

 
10,623

 
10,953

Suburban Maryland
2,090

 
2,132

 
2,105

 
2,069

 
2,051

Colorado Springs
1,589

 
1,471

 
1,537

 
1,524

 
1,627

Other
3,121

 
3,277

 
3,474

 
3,493

 
3,319

Real estate revenues
$
108,413

 
$
109,410

 
$
108,365

 
$
106,333

 
$
106,209

 
Same Office Property NOI by Region (dollars in thousands)
 
Three Months Ended
 
3/31/13
 
12/31/12
 
9/30/12
 
6/30/12
 
3/31/12
Office Properties:
 

 
 

 
 

 
 

 
 

Baltimore/Washington Corridor
$
36,121

 
$
35,572

 
$
36,354

 
$
35,595

 
$
35,069

Northern Virginia
12,877

 
12,194

 
12,248

 
12,122

 
11,330

San Antonio
3,869

 
3,954

 
3,853

 
3,864

 
3,902

Washington, DC - Capitol Riverfront
2,295

 
2,112

 
2,465

 
2,556

 
2,009

St. Mary’s and King George Counties
2,799

 
2,735

 
2,843

 
3,068

 
3,000

Greater Baltimore
6,631

 
6,683

 
6,807

 
6,682

 
7,016

Suburban Maryland
1,361

 
1,296

 
1,315

 
1,357

 
1,319

Colorado Springs
837

 
729

 
797

 
924

 
901

Other
2,736

 
2,798

 
3,077

 
3,089

 
2,938

Same office property NOI
69,526

 
68,073

 
69,759

 
69,257

 
67,484

Add (less): Straight-line rent adjustments
(1,308
)
 
(1,451
)
 
(1,620
)
 
(1,128
)
 
(2,204
)
Less: Amortization of deferred market rental revenue
(30
)
 
(38
)
 
(21
)
 
(38
)
 
(62
)
Add: Amortization of above-market cost arrangements
319

 
371

 
371

 
371

 
353

Same office property cash NOI
68,507

 
66,955

 
68,489

 
68,462

 
65,571

Less: Lease termination fees, gross
(1,196
)
 
(617
)
 
(649
)
 
(400
)
 
(534
)
Same office property cash NOI, excluding gross lease termination fees
$
67,311

 
$
66,338

 
$
67,840

 
$
68,062

 
$
65,037

Percentage change in same office property cash NOI (1)
4.5
%
 
 
 
 
 
 
 
 
Percentage change in same office property cash NOI, excluding gross lease termination fees (1)
3.5
%
 
 
 
 
 
 
 
 
 Note:  Same office properties represent buildings owned and 100% operational since at least January 1, 2012, excluding properties held for future disposition.
(1) Represents the change between the current period and the same period in the prior year.

16

Corporate Office Properties Trust
Office Leasing (1)
Quarter Ended March 31, 2013
 
Baltimore/
Washington
Corridor
 
Northern
Virginia
 
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
357,948

 
2,614

 
2,166

 
13,687

 
25,441

 
41,500

 
12,776

 
—

 
—

 
456,132

Expiring Square Feet
548,009

 
55,031

 
5,378

 
30,269

 
34,394

 
41,500

 
81,769

 
—

 
—

 
796,350

Vacated Square Feet
190,061

 
52,417

 
3,212

 
16,582

 
8,953

 
—

 
68,993

 
—

 
—

 
340,218

Retention Rate (% based upon square feet)
65.32
 %
 
4.75
 %
 
40.28
 %
 
45.22
 %
 
73.97
%
 
100.00
 %
 
15.62
%
 
0.00
%
 
0.00
%
 
57.28
 %
Statistics for Completed Leasing:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Average Committed Cost per Square Foot
$
8.75

 
$
13.13

 
$
12.45

 
$
20.35

 
$
1.84

 
$
—

 
$
35.00

 
$
—

 
$
—

 
$
8.70

Weighted Average Lease Term in Years
5.0

 
5.0

 
10.0

 
3.3

 
1.1

 
7.0

 
4.4

 
—

 
—

 
4.9

GAAP Rent Per Square Foot
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
        Renewal GAAP Rent
$
30.46

 
$
28.17

 
$
37.94

 
$
23.92

 
$
21.78

 
$
27.50

 
$
21.29

 
$
—

 
$
—

 
$
29.28

        Expiring GAAP Rent
$
29.14

 
$
29.82

 
$
37.34

 
$
22.81

 
$
21.19

 
$
29.84

 
$
17.75

 
$
—

 
$
—

 
$
24.00

        Change in GAAP Rent
4.53
 %
 
(5.54
)%
 
1.6
 %
 
4.84
 %
 
2.77
%
 
(7.82
)%
 
19.94
%
 
0.00
%
 
0.00
%
 
3.47
 %
Cash Rent Per Square Foot
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
        Renewal Cash Rent
$
29.31

 
$
27.50

 
$
34.00

 
$
22.89

 
$
21.78

 
$
26.00

 
$
20.42

 
$
—

 
$
—

 
$
28.16

        Expiring Cash Rent
$
30.49

 
$
32.36

 
$
41.81

 
$
23.98

 
$
21.19

 
$
33.01

 
$
18.74

 
$
—

 
$
—

 
$
29.74

        Change in Cash Rent
(3.87
)%
 
(15.01
)%
 
(18.68
)%
 
(4.55
)%
 
2.77
%
 
(21.23
)%
 
8.98
%
 
0.00
%
 
0.00
%
 
(5.32
)%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
New Leases
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Development and Redevelopment Space
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Leased Square Feet
65,526

 
—

 
—

 
—

 
—

 
4,853

 
24,087

 
4,395

 
6,029

 
104,890

Statistics for Completed Leasing:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Average Committed Cost per Square Foot
$
75.07

 
$
—

 
$
—

 
$
—

 
$
—

 
$
53.05

 
$
59.03

 
$
77.91

 
$
45.63

 
$
68.80

Weighted Average Lease Term in Years
9.6

 
—

 
—

 
—

 
—

 
5.0

 
6.6

 
7.2

 
5.0

 
8.4

GAAP Rent Per Square Foot
$
38.27

 
$
—

 
$
—

 
$
—

 
$
—

 
$
30.26

 
$
30.67

 
$
23.65

 
$
18.75

 
$
34.42

Cash Rent Per Square Foot
$
33.92

 
$
—

 
$
—

 
$
—

 
$
—

 
$
28.50

 
$
25.14

 
$
22.00

 
$
17.75

 
$
30.22

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Other New Leases (2)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Leased Square Feet
65,039

 
33,701

 
—

 
6,475

 
6,844

 
—

 
82,850

 
—

 
—

 
194,909

Statistics for Completed Leasing:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Average Committed Cost per Square Foot
$
44.77

 
$
39.34

 
$
—

 
$
13.59

 
$
22.14

 
$
—

 
$
13.57

 
$
—

 
$
—

 
$
28.74

Weighted Average Lease Term in Years
7.7

 
8.9

 
—

 
3.1

 
4.0

 
—

 
4.4

 
—

 
—

 
6.3

GAAP Rent Per Square Foot
$
25.14

 
$
28.35

 
$
—

 
$
18.00

 
$
16.72

 
$
—

 
$
13.30

 
$
—

 
$
—

 
$
20.13

Cash Rent Per Square Foot
$
23.91

 
$
24.05

 
$
—

 
$
17.65

 
$
16.61

 
$
—

 
$
15.24

 
$
—

 
$
—

 
$
19.78

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total Square Feet Leased
488,513

 
36,315

 
2,166

 
20,162

 
32,285

 
46,353

 
119,713

 
4,395

 
6,029

 
755,931

(1) This presentation reflects consolidated properties.
(2) 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.
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
Lease Expiration Analysis as of 3/31/13 (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
 
51

 
1,266,192

 
$
39,659

 
8.5
%
 
$
31.32

 
 
24

 
1,095,649

 
$
35,873

 
10.9
%
 
$
32.74

Northern Virginia
 
14

 
92,195

 
2,232

 
0.5
%
 
24.21

 
 
6

 
52,506

 
1,168

 
0.4
%
 
22.24

Washington, DC-Capitol Riverfront
 
4

 
114,110

 
5,075

 
1.1
%
 
44.47

 
 
4

 
114,110

 
5,075

 
1.5
%
 
44.47

St. Mary’s and King George Cos.
 
13

 
164,057

 
3,092

 
0.7
%
 
18.85

 
 
13

 
164,057

 
3,092

 
0.9
%
 
18.85

Greater Baltimore
 
14

 
54,574

 
1,122

 
0.2
%
 
20.55

 
 
—

 
—

 
—

 
0.0
%
 
—

Suburban Maryland
 
1

 
4,000

 
57

 
0.0
%
 
14.16

 
 
—

 
—

 
—

 
0.0
%
 
—

Colorado Springs
 
10

 
64,776

 
1,377

 
0.3
%
 
21.26

 
 
—

 
—

 
—

 
0.0
%
 
—

2013
 
107

 
1,759,904

 
52,613

 
11.2
%
 
29.90

 
 
47

 
1,426,322

 
45,207

 
13.8
%
 
31.70

Baltimore/Washington Corridor
 
39

 
704,415

 
21,294

 
4.5
%
 
30.23

 
 
19

 
571,905

 
18,049

 
5.5
%
 
31.56

Northern Virginia
 
12

 
854,421

 
27,219

 
5.8
%
 
31.86

 
 
9

 
782,394

 
24,711

 
7.5
%
 
31.58

Washington, DC-Capitol Riverfront
 
6

 
70,200

 
3,207

 
0.7
%
 
45.68

 
 
6

 
70,200

 
3,207

 
1.0
%
 
45.68

St. Mary’s and King George Cos.
 
14

 
186,819

 
3,375

 
0.7
%
 
18.07

 
 
14

 
186,819

 
3,375

 
1.0
%
 
18.07

Greater Baltimore
 
23

 
141,783

 
2,643

 
0.6
%
 
18.64

 
 
—

 
—

 
—

 
0.0
%
 
—

Suburban Maryland
 
2

 
19,261

 
668

 
0.1
%
 
34.70

 
 
2

 
19,261

 
668

 
0.2
%
 
34.70

Colorado Springs
 
8

 
162,937

 
3,342

 
0.7
%
 
20.51

 
 
1

 
22,814

 
532

 
0.2
%
 
23.30

Other
 
1

 
113,692

 
3,004

 
0.6
%
 
26.42

 
 
1

 
113,692

 
3,004

 
0.9
%
 
26.42

2014
 
105
 
2,253,528

 
64,752

 
13.8
%
 
28.73

 
 
52

 
1,767,085

 
53,545

 
16.3
%
 
30.30

Baltimore/Washington Corridor
 
54

 
1,230,691

 
35,155

 
7.5
%
 
28.57

 
 
26

 
945,574

 
28,267

 
8.6
%
 
29.89

Northern Virginia
 
12

 
662,842

 
21,363

 
4.6
%
 
32.23

 
 
9

 
647,814

 
20,792

 
6.3
%
 
32.10

Washington, DC-Capitol Riverfront
 
4

 
32,092

 
1,548

 
0.3
%
 
48.24

 
 
4

 
32,092

 
1,548

 
0.5
%
 
48.24

St. Mary’s and King George Cos.
 
16

 
248,871

 
4,955

 
1.1
%
 
19.91

 
 
16

 
248,871

 
4,955

 
1.5
%
 
19.91

Greater Baltimore
 
16

 
173,480

 
4,441

 
0.9
%
 
25.60

 
 
5

 
49,231

 
1,526

 
0.5
%
 
31.00

Colorado Springs
 
11

 
175,528

 
3,009

 
0.6
%
 
17.14

 
 
—

 
—

 
—

 
0.0
%
 
—

Greater Philadelphia
 
1

 
218,337

 
2,958

 
0.6
%
 
13.55

 
 
—

 
—

 
—

 
0.0
%
 
—

2015
 
114

 
2,741,841

 
73,429

 
15.7
%
 
26.78

 
 
60

 
1,923,582

 
57,089

 
17.4
%
 
29.68

Baltimore/Washington Corridor
 
35

 
980,214

 
26,206

 
5.6
%
 
26.74

 
 
16

 
626,805

 
17,736

 
5.4
%
 
28.30

Northern Virginia
 
14

 
186,433

 
5,208

 
1.1
%
 
27.94

 
 
8

 
141,084

 
3,657

 
1.1
%
 
25.92

Washington, DC-Capitol Riverfront
 
3

 
37,493

 
1,770

 
0.4
%
 
47.21

 
 
3

 
37,493

 
1,770

 
0.5
%
 
47.21

St. Mary’s and King George Cos.
 
8

 
79,975

 
1,722

 
0.4
%
 
21.53

 
 
8

 
79,975

 
1,722

 
0.5
%
 
21.53

Greater Baltimore
 
19

 
238,648

 
6,585

 
1.4
%
 
27.59

 
 
—

 
—

 
—

 
0.0
%
 
—

Colorado Springs
 
5

 
131,631

 
3,030

 
0.6
%
 
23.02

 
 
—

 
—

 
—

 
0.0
%
 
—

2016
 
84

 
1,654,394

 
44,522

 
9.5
%
 
26.91

 
 
35

 
885,357

 
24,885

 
7.6
%
 
28.11


18

 
 
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
 
45

 
1,226,915

 
34,924

 
7.5
%
 
28.46

 
 
24

 
859,791

 
25,754

 
7.8
%
 
29.95

Northern Virginia
 
12

 
330,826

 
10,176

 
2.2
%
 
30.76

 
 
6

 
236,512

 
7,008

 
2.1
%
 
29.63

St. Mary’s and King George Cos.
 
1

 
4,274

 
123

 
—
%
 
28.66

 
 
1

 
4,274

 
123

 
0.0
%
 
28.66

Greater Baltimore
 
19

 
266,092

 
5,693

 
1.2
%
 
21.40

 
 
2

 
3,174

 
82

 
0.0
%
 
25.93

Suburban Maryland
 
3

 
29,057

 
452

 
0.1
%
 
15.55

 
 
1

 
9,155

 
256

 
0.1
%
 
28.00

Colorado Springs
 
19

 
157,569

 
3,197

 
0.7
%
 
20.29

 
 
—

 
—

 
—

 
0.0
%
 
—

Greater Philadelphia
 
1

 
4,805

 
129

 
—
%
 
26.74

 
 
—

 
—

 
—

 
0.0
%
 
—

2017
 
100

 
2,019,538

 
54,693

 
11.7
%
 
27.08

 
 
34

 
1,112,906

 
33,223

 
10.1
%
 
29.85

Thereafter
 
191

 
6,319,498

 
178,154

 
38.1
%
 
28.19

 
 
93

 
3,750,528

 
114,699

 
34.8
%
 
30.58

Total / Average
 
701
 
16,748,703

 
$
468,163

 
100.0
%
 
$
27.97

 
 
321

 
10,865,780

 
$
328,648

 
100.0
%
 
$
30.25

Note:  As of March 31, 2013, the weighted average lease term is 4.4 years for the consolidated portfolio and 4.2 for the Strategic Tenant Properties.

Wholesale Data Center Lease Expiration Analysis
Year of Lease Expiration
Number of Leases Expiring
Raised Floor Square Footage (000's)
Critical Load Used (MW)
Total
Annual Rental
Revenue of
Expiring Leases (3)(000's)
2018
1
1

0.11

$
222

2019
1
7

1.00

2,140

2020
1
19

2.00

4,258

2022
1
6

0.25

391

 
 
 

3.36

$
7,011


(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 March 31, 2013 of 343,629 for the portfolio, including 221,097 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 March 31, 2013 multiplied by 12 plus the estimated annualized expense reimbursements under existing leases.


19

Corporate Office Properties Trust
Top 20 Office Tenants as of 3/31/13
(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)
64

 
3,404,930

 
20.3
%
 
$
112,280

 
24.0
%
 
5.0

Northrop Grumman Corporation
 
12

 
1,076,634

 
6.4
%
 
29,129

 
6.2
%
 
5.7

Booz Allen Hamilton, Inc.
 
10

 
802,916

 
4.8
%
 
26,368

 
5.6
%
 
3.1

Computer Sciences Corporation
 
7

 
692,729

 
4.1
%
 
22,062

 
4.7
%
 
1.3

General Dynamics Corporation
 
10

 
560,045

 
3.3
%
 
18,621

 
4.0
%
 
4.5

The MITRE Corporation
 
4

 
286,553

 
1.7
%
 
8,972

 
1.9
%
 
3.8

The Boeing Company
 
7

 
320,890

 
1.9
%
 
8,442

 
1.8
%
 
3.2

CareFirst, Inc.
 
3

 
268,770

 
1.6
%
 
8,327

 
1.8
%
 
7.7

Wells Fargo & Company
 
4

 
202,674

 
1.2
%
 
8,075

 
1.7
%
 
5.4

The Aerospace Corporation
 
3

 
254,869

 
1.5
%
 
8,073

 
1.7
%
 
1.9

ITT Exelis
 
6

 
299,129

 
1.8
%
 
7,474

 
1.6
%
 
3.1

Kratos Defense and Security Solutions
 
5

 
251,792

 
1.5
%
 
7,117

 
1.5
%
 
6.8

L-3 Communications Holdings, Inc.
 
3

 
214,236

 
1.3
%
 
6,515

 
1.4
%
 
1.4

AT&T Corporation
 
4

 
317,570

 
1.9
%
 
5,787

 
1.2
%
 
6.1

Raytheon Company
 
7

 
162,919

 
1.0
%
 
5,018

 
1.1
%
 
2.2

Science Applications International Corp.
 
4

 
133,408

 
0.8
%
 
4,360

 
0.9
%
 
6.4

Lockheed Martin Corporation
 
6

 
135,978

 
0.8
%
 
3,878

 
0.8
%
 
4.6

The Johns Hopkins Institutions
 
5

 
141,122

 
0.8
%
 
3,811

 
0.8
%
 
3.6

Unisys Corporation
 
1

 
156,891

 
0.9
%
 
3,698

 
0.8
%
 
7.2

TASC Inc.
 
2

 
103,303

 
0.6
%
 
3,575

 
0.8
%
 
0.9

Subtotal Top 20 Office Tenants
 
167

 
9,787,358

 
58.4
%
 
301,582

 
64.4
%
 
4.4

All remaining tenants
 
534

 
6,961,345

 
41.6
%
 
166,581

 
35.6
%
 
4.3

Total/Weighted Average
 
701

 
16,748,703

 
100.0
%
 
$
468,163

 
100.0
%
 
4.4

 
(1)  Total Annualized Rental Revenue is the monthly contractual base rent as of March 31, 2013, 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
Construction, Redevelopment, Wholesale Data Center and Land and Pre-Construction as of 3/31/13
(dollars in thousands)
 
Construction
Projects (1)
 
Redevelopment
Projects (2)
 
Wholesale Data
Center
 
Land and
Pre-Construction (3)
 
Total
 
Rentable Square Feet
Baltimore/Washington Corridor
288,421

 
—

 
N/A

 
3,611,000

 
3,899,421

Northern Virginia
554,272

 
—

 
N/A

 
1,884,000

 
2,438,272

San Antonio
—

 
—

 
N/A

 
1,158,000

 
1,158,000

Huntsville, Alabama
303,869

 
—

 
N/A

 
4,173,000

 
4,476,869

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
—

 
183,416

 
N/A

 
604,000

 
787,416

Other
—

 
—

 
N/A

 
967,000

 
967,000

Total
1,146,562

 
183,416

 
N/A

 
19,278,000

 
20,607,978

 
Costs to date by region
Baltimore/Washington Corridor
$
49,703

 
$
—

 
$
—

 
$
91,340

 
$
141,043

Northern Virginia
76,541

 
—

 
—

 
79,565

 
156,106

San Antonio
—

 
—

 
—

 
23,539

 
23,539

Huntsville, Alabama
17,999

 
—

 
—

 
13,542

 
31,541

St. Mary’s and King George Counties
—

 
—

 
—

 
2,692

 
2,692

Greater Baltimore
—

 
—

 
—

 
81,056

 
81,056

Suburban Maryland
—

 
—

 
—

 
13,329

 
13,329

Colorado Springs
—

 
—

 
—

 
24,905

 
24,905

Greater Philadelphia
—

 
21,779

 
—

 
12,725

 
34,504

Wholesale Data Center
—

 
—

 
209,514

 
—

 
209,514

Other
—

 
—

 
—

 
6,115

 
6,115

Total
$
144,243

 
$
21,779

 
$
209,514

 
$
348,808

 
$
724,344

 
Costs to date by balance sheet line item
Operating properties
$
41,008

 
$
—

 
$
167,855

 
$
23,320

 
$
232,183

Projects in development or held for future development, including associated land costs
99,191

 
19,782

 
41,338

 
324,327

 
484,638

Assets held for sale
—

 
—

 
—

 
466

 
466

Deferred leasing costs
4,044

 
1,997

 
321

 
—

 
6,362

Total
$
144,243

 
$
21,779

 
$
209,514

 
$
348,113

 
$
723,649

(1) Represents construction projects as listed on page 22.
(2) Represents redevelopment projects as listed on page 23.
(3) Represents our land held for future development and pre-construction as listed on page 24.

21

Corporate Office Properties Trust
Summary of Construction Projects as of 3/31/13 (1)
(dollars in thousands) 
 
 
 
Park/Submarket
Total Rentable Square Feet
Percentage Leased as of
as of 3/31/13 (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
3/31/2013
 
312 Sentinel Way
Annapolis Junction, Maryland
 
National Business Park
125,160

0%
$
36,653

$
21,046

$
4,100

3Q 13
3Q 14
 
420 National Business Parkway
Jessup, Maryland
 
National Business Park
137,322

0%
35,482

21,924

—

2Q 13
2Q 14
 
7175 Riverwood Road
Columbia, Maryland
 
Howard Co. Perimeter
25,939

100%
9,049

6,733

—

1Q 13
3Q 13
 
7770 Backlick Rd (Patriot Ridge)
   Springfield, Virginia
(4)
Springfield
239,272

49%
73,018

63,243

37,970

3Q 12
3Q 13
 
Ashburn Crossing - DC-8 Ashburn, Virginia
 
Ashburn
200,000

100%
22,526

8,490

—

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

100%
12,771

4,808

—

2Q 15
2Q 15
 
1100 Redstone Gateway
Huntsville, Alabama
 
Huntsville
121,347

100%
21,637

4,684

—

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

100%
24,371

8,536

—

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

10%
8,204

4,779

—

4Q 12
4Q 13
 
Total Under Construction
 
 
1,146,562

62%
$
243,711

$
144,243

$
42,070

 
 
(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,” 109,257 square feet are operational.



22

Corporate Office Properties Trust
Summary of Redevelopment Projects as of 3/31/13
(dollars in thousands) 
 
 
 
 
 
 
 
 
 
 
 
 
Park/Submarket
Total Rentable Square Feet
Percentage Leased as of
as of 3/31/13 (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
 
3/31/2013
721 Arbor Way (Hillcrest II)
Blue Bell, Pennsylvania
 
Greater Philadelphia
183,416

61%
$
31,990

$
21,779

$
—

2Q 13
2Q 14
 
(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.




23

Corporate Office Properties Trust
Summary of Land and Pre-Construction as of 3/31/13 (1)
Location
Acres
 
Estimated Developable Square Feet
 
Costs to Date as of 3/31/13 (3)
Strategic Land
 
 
 
 
 
Baltimore/Washington Corridor
 

 
 

 
 
National Business Park
200

 
2,092,000

 
 
Columbia Gateway
22

 
520,000

 
 
Airport Square
5

 
84,000

 
 
Arundel Preserve
84

up to
1,150,000

 
 
Subtotal
311

 
3,846,000

 
 
Northern Virginia
 

 
 

 
 
Westfields Corporate Center
23

 
400,000

 
 
Westfields Park Center
33

 
475,000

 
 
Woodland Park
5

 
225,000

 
 
Patriot Ridge
11

 
739,000

 
 
Ashburn Crossing
10

 
120,000

 
 
Subtotal
82

 
1,959,000

 
 
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
1,056

 
13,095,000

 
$
251,443

 
 
 
 
 
 
Non-Strategic Land
 
 
 
 
 
Baltimore/Washington Corridor
7

 
65,000

 
 
Greater Baltimore
133

 
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
647

 
6,558,000

 
96,670

 
 
 
 
 
 
Total land held and pre-construction
1,703

 
19,653,000

 
$
348,113

 
 
 
 
 
 
(1)
This land inventory schedule excludes all properties listed as construction or redevelopment as detailed on pages 22 and 23, 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 21 (in thousands).

24


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 March 31, 2013:
Insiders
634

 
3,183

 
—

 
3,817

 
4.23
%
Non-insiders
85,124

 
636

 
610

 
86,370

 
95.77
%
 
85,758

 
3,819

 
610

 
90,187

 
100.00
%
 
COMMON EQUITY - End of Quarter
3/31/13
 
12/31/12
 
9/30/12
 
6/30/12
 
3/31/12
Unrestricted Common Shares
85,369

 
80,518

 
71,730

 
71,652

 
71,558

Restricted Common Shares
389

 
435

 
428

 
433

 
480

Common Shares
85,758

 
80,953

 
72,158

 
72,085

 
72,038

Common Units
3,819

 
4,068

 
4,207

 
4,247

 
4,267

Total
89,577

 
85,021

 
76,365

 
76,332

 
76,305

End of Quarter Common Share Price
$
26.68

 
$
24.98

 
$
23.97

 
$
23.51

 
$
23.21

Market Value of Common Shares/Units
$
2,389,914


$
2,123,825

 
$
1,830,469

 
$
1,794,565

 
$
1,771,045

Common Shares Trading Volume
 

 
 

 
 

 
 

 
 

Average Daily Volume (Shares)
653

 
758

 
528

 
588

 
809

Average Daily Volume
$
17,215

 
$
18,916

 
$
12,246

 
$
13,303

 
$
19,218

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

 
 

 
 

 
 

 
 

Quarterly High
$
27.52

 
$
26.12

 
$
25.61

 
$
24.05

 
$
25.48

Quarterly Low
$
24.75

 
$
23.22

 
$
21.36

 
$
21.13

 
$
20.58

Quarterly Average
$
26.36

 
$
24.94

 
$
23.18

 
$
22.64

 
$
23.76



25

Corporate Office Properties Trust
Quarterly Preferred Equity and Total Market Capitalization Analysis
(dollars and shares in thousands, except per share amounts)
 
3/31/13
 
12/31/12
 
9/30/12
 
6/30/12
 
3/31/12
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

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

 
172,500

 
—

Total Nonconvertible Preferred Equity
307,250

 
307,250

 
307,250

 
362,250

 
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

 
$
342,633

 
$
397,633

 
$
225,133

CAPITALIZATION
 

 
 

 
 

 
 

 
 

Liquidation Value of Preferred Shares/Units
$
342,633

 
$
342,633

 
$
342,633

 
$
397,633

 
$
225,133

Market Value of Common Shares/Units
2,389,914

 
2,123,825

 
1,830,469

 
1,794,565

 
1,771,045

Total Equity Market Capitalization
2,732,547

 
2,466,458

 
2,173,102

 
2,192,198

 
1,996,178

Total Debt
1,957,360

 
2,019,168

 
2,169,315

 
2,191,851

 
2,418,078

Total Market Capitalization
$
4,689,907

 
$
4,485,626

 
$
4,342,417

 
$
4,384,049

 
$
4,414,256


26

Corporate Office Properties Trust
Dividend Analysis
 
Three Months Ended
 
3/31/13
 
12/31/12
 
9/30/12
 
6/30/12
 
3/31/12
Common Share Dividends
 

 
 

 
 

 
 

 
 

Dividends per share/unit
$
0.2750

 
$
0.2750

 
$
0.2750

 
$
0.2750

 
$
0.2750

Dividend Yield at Quarter End
4.12
%

4.40
%

4.59
%
 
4.68
%
 
4.74
%
Common Dividend Payout Ratios
 

 
 

 
 

 
 

 
 

Diluted FFO Payout
64.5
%
 
57.5
%
 
53.1
%
 
51.0
%
 
47.3
%
Diluted FFO Payout, as adjusted for comparability
60.1
%
 
55.0
%
 
51.7
%
 
50.8
%
 
52.7
%
Diluted AFFO Payout
68.7
%
 
147.4
%
 
62.3
%
 
53.8
%
 
50.5
%
Dividend Coverage - Diluted FFO
1.55
x
 
1.74
x
 
1.88
x
 
1.96
x
 
2.11
x
Dividend Coverage - Diluted FFO, as adjusted for comparability
1.67
x
 
1.82
x
 
1.94
x
 
1.97
x
 
1.90
x
Dividend Coverage - Diluted AFFO
1.46
x
 
0.68
x
 
1.61
x
 
1.86
x
 
1.98
x
Series I Preferred Unit Distributions- 7.5%
 

 
 

 
 

 
 

 
 

Preferred Unit Distributions Per Unit
$
0.46875

 
$
0.46875

 
$
0.46875

 
$
0.46875

 
$
0.46875

Series G Preferred Share Dividends - 8.0% (1)
 

 
 

 
 

 
 

 
 

Preferred Share Dividends Per Share
N/A
 
N/A

 
$
0.20000

 
$
0.50000

 
$
0.50000

Series H Preferred Share Dividends - 7.5%
 

 
 

 
 

 
 

 
 

Preferred Share Dividends Per Share
$
0.46875

 
$
0.46875

 
$
0.46875

 
$
0.46875

 
$
0.46875

Series J Preferred Share Dividends - 7.625% (2)
 

 
 

 
 

 
 

 
 

Preferred Share Dividends Per Share
$
0.47656

 
$
0.47656

 
$
0.47656

 
$
0.47656

 
$
0.47656

Series K Preferred Share Dividends - 5.6%
 

 
 

 
 

 
 

 
 

Preferred Share Dividends Per Share
$
0.70000

 
$
0.70000

 
$
0.70000

 
$
0.70000

 
$
0.70000

Series L Preferred Share Dividends - 7.375% (3)
 
 
 
 
 
 
 
 
 
Preferred Share Dividends Per Share
$
0.4609

 
$
0.4609

 
$
0.4609

 
$0.02
 
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)
Theses shares were redeemed on April 22, 2013.
(3)
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.

27

Corporate Office Properties Trust
Debt Analysis
(dollars in thousands)
 
3/31/2013
 
 
 
 
 
 
 
 
 
 
 
Stated Rate
 
GAAP 
Effective Rate
 
 
 
 
 
 
 
 
 
 
 
 
 
3/31/2013
 
12/31/2012
 
9/30/2012
 
6/30/2012
 
3/31/2012
Debt Outstanding
 
 
 
 
 

 
 

 
 

 
 

 
 

Fixed rate
 
 
 
 
 

 
 

 
 

 
 

 
 

Secured debt
5.97%
 
5.88%
 
$
931,952

 
$
948,414

 
$
978,461

 
$
1,009,164

 
$
1,049,204

Exchangeable Senior Notes (1)
4.25%
 
6.05%
 
179,972

 
230,934

 
230,000

 
229,081

 
228,175

Other Unsecured Debt
0.00%
 
6.50%
 
1,766

 
1,788

 
1,809

 
5,106

 
5,078

Total fixed rate debt
5.67%
 
5.91%
 
1,113,690

 
1,181,136

 
1,210,270

 
1,243,351

 
1,282,457

Variable rate
 
 
 
 
 

 
 

 
 

 
 

 
 

Secured debt
2.45%
 
2.45%
 
$
38,270

 
$
38,475

 
$
38,671

 
$
38,844

 
$
39,027

Unsecured Revolving Credit Facility (2)
0.00%
 
0.00%
 
—

 
—

 
80,000

 
195,000

 
396,000

Construction Loans
2.51%
 
2.51%
 
35,400

 
29,557

 
70,374

 
64,656

 
50,594

Other Unsecured Debt
1.93%
 
1.93%
 
770,000

 
770,000

 
770,000

 
650,000

 
650,000

Total variable rate debt
1.98%
 
1.98%
 
$
843,670

 
$
838,032

 
$
959,045

 
$
948,500

 
$
1,135,621

Total debt outstanding
 
 
 
 
$
1,957,360

 
$
2,019,168

 
$
2,169,315

 
$
2,191,851

 
$
2,418,078

Variable Rate Loans Subject to Interest Rate Swaps (3)
 
 
 
 
$
438,270

 
$
438,475

 
$
438,671

 
$
438,844

 
$
659,027

% of Fixed Rate Loans (3)
 
 
 
 
79
%
 
80
%
 
76
%
 
77
%
 
80
%
% of Variable Rate Loans (3)
 
 
 
 
21
%
 
20
%
 
24
%
 
23
%
 
20
%
 
 
 
 
 
100
%
 
100
%
 
100
%
 
100
%
 
100
%
Recourse debt
 
 
 
 
$
1,008,374

 
$
1,063,613

 
$
1,163,079

 
$
1,157,860

 
$
1,350,311

Nonrecourse debt
 
 
 
 
948,986

 
955,555

 
1,006,236

 
1,033,991

 
1,067,767

Total debt outstanding
 
 
 
 
$
1,957,360

 
$
2,019,168

 
$
2,169,315

 
$
2,191,851

 
$
2,418,078

 
(1) During the three months ended March 31, 2013, we repurchased a $53.7 million aggregate principal amount of the notes for $56.4 million from which we recognized a loss of $5.3 million, including unamortized loan issuance costs.
(2) As of March 31, 2013, our borrowing capacity under the facility was $800.0 million, of which $792.3 million was available.
(3) 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.

28

Corporate Office Properties Trust
Debt Analysis  (continued)
 
Three Months Ended
 
3/31/13
 
12/31/12
 
9/30/12
 
6/30/12
 
3/31/12
Average Stated Interest Rates
 

 
 

 
 

 
 

 
 

Fixed rate
 

 
 

 
 

 
 

 
 

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

 
 

 
 

 
 

 
 

Secured debt
2.5
%
 
2.5
%
 
2.6
%
 
2.5
%
 
2.6
%
Unsecured Revolving Credit Facility
2.2
%
 
2.3
%
 
2.3
%
 
2.3
%
 
2.3
%
Construction Loans
2.6
%
 
2.8
%
 
2.8
%
 
2.7
%
 
2.8
%
Other Unsecured Debt
2.2
%
 
2.2
%
 
2.2
%
 
2.2
%
 
2.2
%
Interest rate swaps (1)
0.6
%
 
0.6
%
 
0.6
%
 
0.7
%
 
0.9
%
Total variable rate debt (1)(2)
2.8
%
 
2.9
%
 
2.8
%
 
2.8
%
 
2.9
%
Total debt outstanding (2)
4.4
%
 
4.5
%
 
4.4
%
 
4.3
%
 
4.3
%
Debt ratios (coverage ratios excluding capitalized interest) — All coverage computations include the effect of discontinued operations
NOI interest coverage ratio
3.9x

 
3.7x

 
3.7x

 
3.5x

 
3.4x

Adjusted EBITDA interest coverage ratio
3.5x

 
3.4x

 
3.4x

 
3.2x

 
3.0x

NOI debt service coverage ratio
3.4x

 
3.3x

 
3.2x

 
3.1x

 
3.0x

Adjusted EBITDA debt service coverage ratio
3.1x

 
3.0x

 
3.0x

 
2.8x

 
2.6x

NOI fixed charge coverage ratio
2.9x

 
2.8x

 
2.8x

 
3.0x

 
2.9x

Adjusted EBITDA fixed charge coverage ratio
2.7x

 
2.6x

 
2.6x

 
2.7x

 
2.5x

Debt to Adjusted EBITDA ratio
6.9x

 
7.2x

 
7.5x

 
7.6x

 
8.7x

Adjusted debt to Adjusted EBITDA ratio
6.0x

 
6.0x

 
6.2x

 
6.3x

 
7.2x

 
(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.

29

Corporate Office Properties Trust
Debt Analysis  (continued)
(dollars in thousands)
 
 
 
 
March 31, 2013
 
Secured debt
$1,005,622
 
Unsecured debt
951,738
 
Total debt outstanding
$1,957,360
 
 
 
 
Unencumbered adjusted book
$2,937,846
 
Encumbered adjusted book
1,335,753
 
Total adjusted book
$4,273,599
 
 
 
 
# of Operating Office Properties
 
 
Unencumbered
145
 
Encumbered
65
 
Total
210
 
 
 
 
Square Feet of Office Properties (in thousands)
 
 
Unencumbered
12,593
 
Encumbered
6,535
 
Total
19,128
 
 
 
 
 
Three Months Ended
 
 
March 31, 2013
 
Unencumbered NOI from real estate operations
$47,645
 
Encumbered NOI from real estate operations
30,366
 
Total NOI from real estate operations
$78,011
 
 
 
 
Unencumbered adjusted EBITDA
$40,990
 
Encumbered adjusted EBITDA
30,083
 
Total adjusted EBITDA
$71,073
 
 
 
 


30

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
May - June
$
2,358

 
$
—

 
N/A
 
$
183

 
$
—

 
N/A
 
—

 
$
2,541

July - September
2,385

 
5,679

 
6.44%
 
193

 
21,130

(1)
2.75%
 
—

 
29,387

October - December
2,038

 
53,621

 
5.20%
 
203

 
—

 
N/A
 
—

 
55,862

Total 2013
$
6,781

 
$
59,300

 
5.32%
 
$
579

 
$
21,130

 
2.75%
 
$
—

 
$
87,790

2014
$
6,201

 
$
151,681

(2)
 
 
$
815

 
$
—

 
 
 
$
—

(3)
$
158,697

2015
5,216

 
289,273

(4)
 
 
700

 
450,446

(5)
 
 
—

 
745,635

2016
4,420

 
274,605

 
 
 
—

 
—

 
 
 
—

 
279,025

2017
1,179

 
300,610

 
 
 
—

 
250,000

 
 
 
—

 
551,789

Thereafter
4,780

 
15,913

 
 
 
—

 
120,000

 
 
 
—

 
140,693

 
$
28,577

 
$
1,091,382

 
 
 
$
2,094

 
$
841,576

 
 
 
$
—

 
$
1,963,629

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net discount
 
(6,269
)
 
 
 
 
 
 
 
 
 
 
 
 
 
Total Debt
 
$
1,957,360

Interest Rate Hedges at 3/31/13
 
Notional Amount
 
Fixed Rate
 
Floating Rate Index
 
Effective Date
 
Expiration Date
$
38,270

(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 $70.8 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 $186.3 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.

31

Corporate Office Properties Trust
Consolidated Joint Ventures as of 3/31/13
(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, LLC (1 property)
147

100.0%
 
$
37,773

$
19,967

50%
Suburban Maryland:
 

 
 
 

 

 
MOR Forbes 2 LLC
56

90.9%
 
3,926

—

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

94.9%
 
55,205

38,270

50%
Hunstville, AL:
 
 
 
 
 
 
LW Redstone Company, LLC (1 property)
121

100.0%
 
24,378

14,270

85%
Total/Average
566

96.9%
 
$
121,282

$
72,507

 
NOI of Operating Properties for Three Months Ended 3/31/13 (2)
$
2,293

 
 
 

 

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

 
 

 

 
Arundel Preserve
1,150

 
$
6,506

$
—

50%
Suburban Maryland:
 

 
 

 

 
Indian Head Technology Center
 

 
 

 

 
Business Park (3)
967

 
6,447

—

75%
M Square Research Park
510

 
5,854

—

50%
Huntsville, Alabama:
 

 
 

 

 
Redstone Gateway
4,477

 
71,069

—

85%
Total
7,104

 
$
89,876

$
—

 
 
(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.

32


Corporate Office Properties Trust
Supplementary Reconciliations of Non-GAAP Measures
(in thousands)
 
Three Months Ended
 
3/31/13
 
12/31/12
 
9/30/12
 
6/30/12
 
3/31/12
Net income (loss)
$
15,277

 
$
19,010

 
$
(20,765
)
 
$
11,861

 
$
10,235

Interest expense on continuing and discontinued operations
22,371

 
22,782

 
23,366

 
24,975

 
25,675

Income tax expense
16

 
54

 
106

 
17

 
204

Depreciation of furniture, fixtures and equipment (FF&E)
530

 
610

 
624

 
629

 
618

Real estate-related depreciation and amortization
28,252

 
28,560

 
30,624

 
31,666

 
31,087

Impairment losses
1,857

 
2,140

 
55,829

 
2,354

 
6,587

Loss (gain) on early extinguishment of debt on continuing and discontinued operations
5,184

 
6

 
(970
)
 
171

 
—

Gain on sales of operating properties
—

 
8

 
(16,913
)
 
115

 
(4,138
)
Non-operational property sales
(2,354
)
 
—

 
—

 
(33
)
 
—

Net gain on investments in unconsolidated entities included in interest and other income
(60
)
 
(2,992
)
 
(81
)
 
(66
)
 
(450
)
Operating property acquisition costs
—

 
—

 
222

 
7

 
—

Adjusted EBITDA
$
71,073

 
$
70,178

 
$
72,042

 
$
71,696

 
$
69,818

Add back:
 

 
 

 
 

 
 

 
 

General, administrative and leasing expenses on continuing and discontinued operations
7,821

 
7,103

 
6,378

 
8,853

 
9,569

Business development expenses and land carry costs on continuing and discontinued operations, excluding operating property acquisition costs
1,359

 
1,205

 
1,410

 
1,297

 
1,594

Depreciation of FF&E
(530
)
 
(610
)
 
(624
)
 
(629
)
 
(618
)
Income from construction contracts and other service operations
(785
)
 
(750
)
 
(873
)
 
(710
)
 
(927
)
Interest and other income, excluding net gain on investments in unconsolidated entities
(886
)
 
(1,028
)
 
(1,014
)
 
(774
)
 
(767
)
Equity in (income) loss of unconsolidated entities
(41
)
 
24

 
246

 
187

 
89

NOI from real estate operations
$
78,011

 
$
76,122

 
$
77,565

 
$
79,920

 
$
78,758

 
 
 
 
 
 
 
 
 
 

33

Corporate Office Properties Trust
Supplementary Reconciliations of Non-GAAP Measures (continued)
(dollars in thousands)
 
Three Months Ended
 
3/31/13
 
12/31/12
 
9/30/12
 
6/30/12
 
3/31/12
Discontinued Operations
 

 
 

 
 

 
 

 
 

Revenues from real estate operations
$
5,342

 
$
5,083

 
$
6,403

 
$
12,800

 
$
14,643

Property operating expenses
(1,491
)
 
(1,555
)
 
(2,182
)
 
(4,544
)
 
(5,293
)
Depreciation and amortization
—

 
—

 
(1,926
)
 
(3,278
)
 
(3,253
)
General, administrative and leasing expenses
(1
)
 
—

 
(1
)
 
(2
)
 
—

Business development expenses and land carry costs
—

 
—

 
—

 
(6
)
 
(18
)
Interest
(64
)
 
(67
)
 
(127
)
 
(736
)
 
(1,244
)
Gain (loss) on early extinguishment of debt
—

 
—

 
1,738

 
(2
)
 
—

Impairment losses
—

 
(186
)
 
(9,733
)
 
(2,354
)
 
(11,423
)
Gain on sales of depreciated real estate properties
—

 
(8
)
 
16,913

 
(103
)
 
4,138

Discontinued operations
$
3,786

 
$
3,267

 
$
11,085

 
$
1,775

 
$
(2,450
)
GAAP revenues from real estate operations from continuing operations
$
116,735

 
$
117,481

 
$
114,861

 
$
111,168

 
$
110,661

Revenues from discontinued operations
5,342

 
5,083

 
6,403

 
12,800

 
14,643

Real estate revenues
$
122,077

 
$
122,564

 
$
121,264

 
$
123,968

 
$
125,304

GAAP property operating expenses from continuing operations
$
42,575

 
$
44,887

 
$
41,517

 
$
39,504

 
$
41,253

Property operating expenses from discontinued operations
1,491

 
1,555

 
2,182

 
4,544

 
5,293

Real estate property operating expenses
$
44,066

 
$
46,442

 
$
43,699

 
$
44,048

 
$
46,546

Gain on sales of real estate, net, per statements of operations
$
2,354

 
$
—

 
$
—

 
$
21

 
$
—

Gain on sales of real estate from discontinued operations
—

 
(8
)
 
16,913

 
(103
)
 
4,138

Gain on sales of real estate from continuing and discontinued operations
2,354

 
(8
)
 
16,913

 
(82
)
 
4,138

Less: Gain on sales of non-operating properties
(2,354
)
 
—

 
—

 
(33
)
 
—

Gain on sales of operating properties
$
—

 
$
(8
)
 
$
16,913

 
$
(115
)
 
$
4,138

Impairment losses, per statements of operations
$
1,857

 
$
1,954

 
$
46,096

 
$
—

 
$
(4,836
)
Impairment losses on discontinued operations
—

 
186

 
9,733

 
2,354

 
11,423

Total impairment losses
1,857

 
2,140

 
55,829

 
2,354

 
6,587

Less: Impairment losses on previously depreciated operating properties
(1,857
)
 
(247
)
 
(55,829
)
 
(2,354
)
 
(11,833
)
Impairment losses (recoveries) on non-operating properties
—

 
1,893

 
—

 
—

 
(5,246
)
Less: Income tax expense from impairments on non-operating properties
—

 
—

 
—

 
—

 
673

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

 
$
1,893

 
$
—

 
$
—

 
$
(4,573
)


34

Corporate Office Properties Trust
Supplementary Reconciliations of Non-GAAP Measures (continued)
(dollars in thousands)
 
Three Months Ended
 
3/31/13
 
12/31/12
 
9/30/12
 
6/30/12
 
3/31/12
Depreciation and amortization associated with real estate operations from continuing operations
$
28,252

 
$
28,560

 
$
28,698

 
$
28,388

 
$
27,834

Depreciation and amortization from discontinued operations
—

 
—

 
1,926

 
3,278

 
3,253

Real estate-related depreciation and amortization
$
28,252

 
$
28,560

 
$
30,624

 
$
31,666

 
$
31,087

Interest expense from continuing operations
$
22,307

 
$
22,715

 
$
23,239

 
$
24,239

 
$
24,431

Interest expense from discontinued operations
64

 
67

 
127

 
736

 
1,244

Total interest expense
22,371

 
22,782

 
23,366

 
24,975

 
25,675

Less: Amortization of deferred financing costs
(1,528
)
 
(1,547
)
 
(1,527
)
 
(1,597
)
 
(1,572
)
Less: Amortization of net debt discounts and premiums, net of amounts capitalized
(628
)
 
(693
)
 
(683
)
 
(682
)
 
(663
)
Denominator for interest coverage
20,215

 
20,542

 
21,156

 
22,696

 
23,440

Scheduled principal amortization
2,512

 
2,590

 
2,791

 
3,096

 
3,207

Denominator for debt service coverage
22,727

 
23,132

 
23,947

 
25,792

 
26,647

Scheduled principal amortization
(2,512
)
 
(2,590
)
 
(2,791
)
 
(3,096
)
 
(3,207
)
Preferred share dividends - redeemable non-convertible
6,106

 
6,106

 
6,546

 
4,167

 
4,025

Preferred unit distributions
165

 
165

 
165

 
165

 
165

Denominator for fixed charge coverage
$
26,486

 
$
26,813

 
$
27,867

 
$
27,028

 
$
27,630

Preferred share dividends
$
6,106

 
$
6,106

 
$
6,546

 
$
4,167

 
$
4,025

Preferred unit distributions
165

 
165

 
165

 
165

 
165

Common share dividends
23,594

 
22,255

 
19,837

 
19,809

 
19,819

Common unit distributions
1,050

 
1,119

 
1,157

 
1,168

 
1,173

Total dividends/distributions
$
30,915

 
$
29,645

 
$
27,705

 
$
25,309

 
$
25,182

Common share dividends
$
23,594

 
$
22,255

 
$
19,837

 
$
19,809

 
$
19,819

Common unit distributions
1,050

 
1,119

 
1,157

 
1,168

 
1,173

Dividends and distributions for payout ratios
$
24,644

 
$
23,374

 
$
20,994

 
$
20,977

 
$
20,992

Total Assets
$
3,685,099

 
$
3,653,759

 
$
3,597,656

 
$
3,715,075

 
$
3,797,368

Accumulated depreciation
576,299

 
555,975

 
565,724

 
562,345

 
570,242

Accumulated depreciation included in assets held for sale
12,201

 
12,201

 
12,669

 
34,234

 
5,840

Denominator for debt to adjusted book
$
4,273,599

 
$
4,221,935

 
$
4,176,049

 
$
4,311,654

 
$
4,373,450


35


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 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 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.


36


Corporate Office Properties Trust
Definitions

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 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.

37


Corporate Office Properties Trust
Definitions

 
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.
 

38


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.
 

39


Corporate Office Properties Trust
Definitions

Other Definitions
 
Acquisition Costs — Transaction costs expensed in connection with executed or anticipated acquisitions of operating properties.
 
Annualized Rental Revenue — The monthly contractual base rent as of the reporting date multiplied by 12, plus the estimated annualized expense reimbursements under existing office leases.
 
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, 2012, 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.


40