Exhibit 99.1
 
 
Earnings Release & Supplemental Information — Unaudited
 
June 30, 2013
 
 
OVERVIEW:
Section I

 
INVESTING ACTIVITY:
Section IV

Earnings Release
i-ix

 
Dispositions
22

Summary Description
1

 
Construction, Redevelopment, Wholesale Data Center and Land
 
Equity Research Coverage
2

 
& Pre-Construction Summary
23

Selected Financial Summary Data
3

 
Summary of Construction Projects
24

Selected Portfolio Data
4

 
Summary of Redevelopment Projects
25

 
 

 
Summary of Land Held and Pre-Construction
26

FINANCIAL STATEMENTS:
Section II

 
 
 

Quarterly Consolidated Balance Sheets
5

 
CAPITALIZATION:
Section V

Consolidated Statements of Operations
6-7

 
Quarterly Common Equity Analysis
27

Consolidated Statements of FFO
8-9

 
Quarterly Preferred Equity and Total Market Capitalization Analysis
28

Consolidated Reconciliations of AFFO
10

 
Dividend Analysis
29

 
 

 
Debt Analysis
30-32

PORTFOLIO INFORMATION:
Section III

 
Debt Maturity Schedule
33

Consolidated Office Properties by Region
11

 
Consolidated Joint Ventures
34

NOI from Real Estate Operations and Occupancy by Property Grouping
12

 
 
 
Unstabilized Office Properties
13

 
RECONCILIATIONS & DEFINITIONS:
Section VI

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

 
Supplementary Reconciliations of Non-GAAP Measures
35-37

Same Office Properties Average Occupancy Rates by Region
15

 
Definitions
38-42

Same Office Property Real Estate Revenues & NOI by Region
16

 
 
 
Office Leasing
17-18

 
 
 
Office Lease Expiration Analysis
19-20

 
 
 
Top 20 Office Tenants
21

 
 
 
 
 
 
 
 
 
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 SECOND QUARTER 2013 RESULTS


COLUMBIA, MD July 26, 2013 - Corporate Office Properties Trust (COPT or the Company) (NYSE: OFC) announced financial and operating results for the second quarter ended June 30, 2013.

“We had a strong second quarter and are on-track to exceed our leasing objectives for the year,” stated Roger A. Waesche, Jr., COPT’s President & Chief Executive Officer. “In light of the sequestration cuts kicking in on March 1 of this calendar year, we are particularly pleased with the strong level of development leasing we have achieved,” he added.

Results:
Diluted earnings per share (EPS) was ($0.16) for the quarter ended June 30, 2013 as compared to $0.10 in the second quarter of 2012. Diluted funds from operations per share (FFOPS), as adjusted for comparability, was $0.52 for the second quarter ended June 30, 2013, which represented a 3.7% decrease from the $0.54 reported for the second quarter of 2012. Adjustments for comparability encompass items such as acquisition costs, impairment losses and gains on non-operating properties, gains (losses) on early extinguishment of debt, derivative losses and write-offs of original issuance costs for redeemed preferred stock. Please refer to the reconciliation tables that appear later in this press release. Per NAREIT’s definition, FFOPS for the second quarter of 2013 was $0.25 versus $0.54 reported in the second quarter of 2012.

Operating Performance:
Portfolio Summary - At June 30, 2013, the Company’s consolidated portfolio of 210 operating office properties totaled 19.0 million square feet. The weighted average remaining lease term for the portfolio was 4.3 years and the average rental rate (including tenant reimbursements) was $28.21 per square foot. The Company’s consolidated portfolio was 88.2% occupied and 90.0% leased as of June 30, 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 June 30, 2013, COPT’s same office portfolio represents 86% of the rentable square feet of the portfolio and consists of 182 properties.

For the second quarter ended June 30, 2013, the Company’s same office property cash NOI, excluding gross lease termination fees, increased 1.6% as compared to the second quarter ended 2012. Including gross lease termination fees, same office property cash NOI for the second quarter ended June 30, 2013 increased 3.5% over the same period in 2012. The Company’s same office portfolio occupancy was 89.4% at the end of the second quarter of 2013, up 20 basis points from March 31, 2013.


i

Leasing - COPT completed a total of 1.1 million square feet of leasing for the quarter ended June 30, 2013. During this same period, the Company’s renewal rate was 80%, which is above the Company’s historical average of 65%-70%. Consistent with expectations, for the quarter ended June 30, 2013, total rent on renewed space increased 6.2% on a GAAP basis and decreased 2.2% on a cash basis.

Investment Activity:
Construction - At June 30, 2013, the Company had 11 properties totaling 1.5 million square feet under construction for a total projected cost of $313.5 million, of which $187.1 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 $32.4 million, of which $25.7 million has been incurred. As of June 30, 2013, the Company’s 11 properties under construction, on average, were 74% pre-leased, and its redevelopment property was 61% pre-leased.

Dispositions - In the second quarter of 2013, COPT sold one vacant property and land for $10.4 million. The property contained a total of 103,000 square feet.

Balance Sheet and Capital Transactions:
As of June 30, 2013, the Company had a total market capitalization of $4.6 billion, with $2.1 billion in debt outstanding, equating to a 45.1% debt-to-total market capitalization ratio. Also, the Company’s weighted average interest rate was 4.4% for the quarter ended June 30, 2013 and 80% of the Company’s debt was subject to fixed interest rates, including the effect of interest rate swaps.

During the quarter, 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 during the quarter, the Company redeemed all of its 3,390,000 outstanding 7.625% Series J Cumulative Redeemable Preferred Shares, at a price of $25 per share.

In May, the Company issued $350 million of 3.60% senior unsecured notes due May 15, 2023 at a price equal to 99.816% of the principal amount.

Also in May, the Company commenced a cash tender offer for any and all of the $186,273,000 outstanding principal amount of the 4.25% Exchangeable Senior Notes due on April 15, 2030. In June, the Company completed its tender offer for 99.7% of the Operating Partnership’s 4.25% Exchangeable Senior Notes due on April 15, 2030.


ii

2013 FFO Guidance:
Management is increasing its previously issued guidance for 2013 FFOPS, as adjusted for comparability, from the prior range of between $1.83 and $1.93 to a new range of between $1.92 and $1.97. The Company is establishing third quarter 2013 guidance of FFOPS, as adjusted for comparability, of between $0.47 and $0.49. A reconciliation of projected diluted EPS to projected FFOPS for the quarter ending September 30, 2013 and the year ending December 31, 2013 is provided, as follows:
 
Quarter Ending
 
Year Ending
 
September 30, 2013
 
December 31, 2013
 
Low
 
High
 
Low
 
High
EPS
$
0.15

 
$
0.17

 
$
0.21

 
$
0.26

Real estate depreciation and amortization
0.32

 
0.32

 
1.31

 
1.31

Impairments and exit costs on previously depreciated properties
—

 
—

 
0.10

 
0.10

FFOPS, NAREIT definition
0.47

 
0.49

 
1.62

 
1.67

Net losses on early extinguishment of debt
—

 
—

 
0.30

 
0.30

Gains on sales of non-operating properties
—

 
—

 
(0.03
)
 
(0.03
)
Issuance costs of redeemed preferred shares
—

 
—

 
0.03

 
0.03

FFOPS, as adjusted for comparability
$
0.47

 
$
0.49

 
$
1.92

 
$
1.97


Conference Call Information:
Management will discuss second quarter 2013 earnings results, as well as its 2013 guidance, on its conference call on July 26, 2013 at 12:00 p.m. Eastern Time, details of which are listed below:

Earnings Release Date:    Friday, July 26, 2013 at 6:00 a.m. Eastern Time

Conference Call Date:     Friday, July 26, 2013

Time:     12:00 p.m. Eastern Time

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

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

Passcode:    20403800

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=PTJMMLFPY

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, July 26 at 1:00 p.m. Eastern Time through Friday, August 9 at midnight Eastern Time. To access the replay within the United States, please call 888-286-8010; to access the replay outside the United States, please call 617-801-6888. The replay passcode for both numbers is 36959168.


iii

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 June 30, 2013, the Company’s consolidated portfolio consisted of 210 office properties totaling 19.0 million rentable square feet. COPT is an S&P MidCap 400 company.

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 June 30,
 
For the Six Months Ended June 30,
 
2013
 
2012
 
2013
 
2012
Revenues
 

 
 

 
 
 
 
Real estate revenues
$
119,729

 
$
110,669

 
$
236,087

 
$
220,869

Construction contract and other service revenues
20,795

 
16,995

 
35,057

 
38,529

Total revenues
140,524

 
127,664

 
271,144

 
259,398

Expenses
 

 
 

 
 
 
 
Property operating expenses
43,408

 
39,441

 
85,927

 
80,628

Depreciation and amortization associated with real estate operations
28,866

 
28,295

 
57,029

 
56,029

Construction contract and other service expenses
19,382

 
16,285

 
32,859

 
36,892

Impairment recoveries
—

 
—

 
—

 
(4,836
)
General and administrative expenses
4,992

 
7,741

 
10,976

 
15,469

Leasing expenses
1,591

 
1,110

 
3,427

 
2,951

Business development expenses and land carry costs
1,327

 
1,298

 
2,686

 
2,874

Total operating expenses
99,566

 
94,170

 
192,904

 
190,007

Operating income
40,958

 
33,494


78,240


69,391

Interest expense
(23,302
)
 
(24,239
)
 
(45,609
)
 
(48,670
)
Interest and other income
2,006

 
840

 
2,952

 
2,057

Loss on early extinguishment of debt
(21,470
)
 
(169
)
 
(26,654
)
 
(169
)
(Loss) income from continuing operations before equity in income (loss) of unconsolidated entities and income taxes
(1,808
)
 
9,926

 
8,929

 
22,609

Equity in income (loss) of unconsolidated entities
126

 
(187
)
 
167

 
(276
)
Income tax expense
(21
)
 
(17
)
 
(37
)
 
(221
)
(Loss) income from continuing operations
(1,703
)
 
9,722

 
9,059

 
22,112

Discontinued operations
(3,031
)
 
2,118

 
(870
)
 
(37
)
(Loss) income before gain on sales of real estate
(4,734
)
 
11,840

 
8,189

 
22,075

Gain on sales of real estate, net of income taxes
329

 
21

 
2,683

 
21

Net (loss) income
(4,405
)
 
11,861

 
10,872

 
22,096

Net loss (income) attributable to noncontrolling interests
 

 
 

 
 
 
 
Common units in the Operating Partnership
671

 
(422
)
 
242

 
(795
)
Preferred units in the Operating Partnership
(165
)
 
(165
)
 
(330
)
 
(330
)
Other consolidated entities
(1,466
)
 
31

 
(1,129
)
 
629

Net (loss) income attributable to COPT
(5,365
)
 
11,305

 
9,655

 
21,600

Preferred share dividends
(4,885
)
 
(4,167
)
 
(10,991
)
 
(8,192
)
Issuance costs associated with redeemed preferred shares
(2,904
)
 
—

 
(2,904
)
 
—

Net (loss) income attributable to COPT common shareholders
$
(13,154
)
 
$
7,138

 
$
(4,240
)
 
$
13,408

 
 
 
 
 
 
 
 
Earnings per share (“EPS”) computation:
 

 
 

 
 
 
 
Numerator for diluted EPS:
 

 
 

 
 
 
 
Net (loss) income attributable to common shareholders
$
(13,154
)
 
$
7,138

 
$
(4,240
)
 
$
13,408

Dilutive effect of common units in the Operating Partnership
(671
)
 
—

 
(242
)
 
—

Amount allocable to restricted shares
(102
)
 
(105
)
 
(220
)
 
(246
)
Numerator for diluted EPS
$
(13,927
)
 
$
7,033

 
$
(4,702
)
 
$
13,162

 
 
 
 
 
 
 
 
Denominator:
 

 
 

 
 
 
 
Weighted average common shares - basic
85,425

 
71,624

 
83,422

 
71,541

Dilutive effect of common units in the Operating Partnership
3,801

 
—

 
3,847

 
—

Dilutive effect of share-based compensation awards
—

 
25

 
—

 
35

Weighted average common shares - diluted
89,226

 
71,649

 
87,269

 
71,576

Diluted EPS
$
(0.16
)
 
$
0.10

 
$
(0.05
)
 
$
0.18


v


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

 
For the Three Months Ended June 30,
 
For the Six Months Ended June 30,
 
2013
 
2012
 
2013
 
2012
Net (loss) income
$
(4,405
)
 
$
11,861

 
$
10,872

 
$
22,096

Real estate-related depreciation and amortization
28,935

 
31,666

 
57,187

 
62,753

Impairment losses on previously depreciated operating properties
7,195

 
2,354

 
9,052

 
14,187

Gain on sales of previously depreciated operating properties
—

 
115

 
—

 
(4,023
)
Depreciation and amortization on unconsolidated real estate entities
—

 
119

 
—

 
233

Funds from operations (“FFO”)
31,725

 
46,115

 
77,111

 
95,246

Noncontrolling interests - preferred units in the Operating Partnership
(165
)
 
(165
)
 
(330
)
 
(330
)
FFO allocable to other noncontrolling interests
(1,270
)
 
(420
)
 
(1,997
)
 
(680
)
Preferred share dividends
(4,885
)
 
(4,167
)
 
(10,991
)
 
(8,192
)
Issuance costs associated with redeemed preferred shares
(2,904
)
 
—

 
(2,904
)
 
—

Basic and diluted FFO allocable to restricted shares
(89
)
 
(220
)
 
(272
)
 
(514
)
Basic and diluted FFO available to common share and common unit holders (“Basic and diluted FFO”)
22,412

 
41,143

 
60,617

 
85,530

Operating property acquisition costs
—

 
7

 
—

 
7

Gain on sales of non-operating properties
(329
)
 
(33
)
 
(2,683
)
 
(33
)
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
21,470

 
171

 
26,654

 
171

Issuance costs associated with redeemed preferred shares
2,904

 
—

 
2,904

 
—

Diluted FFO available to common share and common unit holders, as adjusted for comparability
46,457

 
41,288

 
87,492

 
81,102

Straight line rent adjustments
(2,011
)
 
(1,857
)
 
(5,844
)
 
(4,036
)
Amortization of intangibles included in net operating income
172

 
218

 
349

 
408

Share-based compensation, net of amounts capitalized
1,647

 
3,157

 
3,296

 
6,559

Amortization of deferred financing costs
1,443

 
1,597

 
2,971

 
3,169

Amortization of net debt discounts, net of amounts capitalized
556

 
682

 
1,184

 
1,345

Amortization of settled debt hedges
15

 
15

 
30

 
31

Recurring capital expenditures
(5,862
)
 
(6,074
)
 
(11,170
)
 
(7,949
)
Diluted adjusted funds from operations available to common share and common unit holders (“Diluted AFFO”)
$
42,417

 
$
39,026

 
$
78,308

 
$
80,629

Diluted FFO per share
$
0.25

 
$
0.54

 
$
0.69

 
$
1.13

Diluted FFO per share, as adjusted for comparability
$
0.52

 
$
0.54

 
$
1.00

 
$
1.07

Dividends/distributions per common share/unit
$
0.2750

 
$
0.2750

 
$
0.5500

 
$
0.5500




vi


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

 
 
June 30,
2013
 
December 31,
2012
Balance Sheet Data
 
 

 
 

Properties, net of accumulated depreciation
 
$
3,211,304

 
$
3,163,044

Total assets
 
3,699,635

 
3,653,759

Debt, net
 
2,093,106

 
2,019,168

Total liabilities
 
2,257,777

 
2,206,962

Redeemable noncontrolling interest
 
15,571

 
10,298

Equity
 
1,426,287

 
1,436,499

Debt to adjusted book
 
46.4
%
 
45.8
%
Debt to total market capitalization
 
45.1
%
 
45.0
%
 
 
 
 
 
Consolidated Property Data (as of period end)
 
 

 
 

Number of operating properties
 
210

 
208

Total net rentable square feet owned (in thousands)
 
19,037

 
18,831

Occupancy %
 
88.2
%
 
87.8
%
Leased %
 
90.0
%
 
89.2
%
 
 
 
 
 
Reconciliation of total assets to denominator for debt to adjusted book
 
 

 
 

Total assets
 
$
3,699,635

 
$
3,653,759

Accumulated depreciation
 
597,783

 
555,975

Accumulated depreciation included in assets held for sale
 
12,201

 
12,201

Accumulated amortization of real estate intangibles and deferred leasing costs
 
189,330

 
181,834

Accumulated amortization of real estate intangibles and deferred leasing costs included in assets held for sale
 
9,216

 
9,199

Denominator for debt to adjusted book
 
$
4,508,165

 
$
4,412,968

 
For the Three Months Ended June 30,
 
For the Six Months Ended June 30,
2013
 
2012
 
2013
 
2012
Payout ratios
 

 
 

 
 

 
 

Diluted FFO
110.0
%
 
51.0
%
 
81.3
%
 
49.1
%
Diluted FFO, as adjusted for comparability
53.1
%
 
50.8
%
 
56.3
%
 
51.7
%
Diluted AFFO
58.1
%
 
53.8
%
 
62.9
%
 
52.1
%
Adjusted EBITDA interest coverage ratio
3.5
x
 
3.2
x
 
3.5
x
 
3.1
x
Adjusted EBITDA fixed charge coverage ratio
2.9
x
 
2.7
x
 
2.8
x
 
2.6
x
Debt to Adjusted EBITDA ratio (1)
6.9
x
 
7.6
x
 
7.1
x
 
7.7
x
 
 
 
 
 
 
 
 
Reconciliation of denominators for diluted EPS and diluted FFO per share
 
 

 
 
 
 
Denominator for diluted EPS
89,226

 
71,649

 
87,269

 
71,576

Weighted average common units
—

 
4,255

 
—

 
4,267

Anti-dilutive EPS effect of share-based compensation awards
96

 
—

 
74

 
—

Denominator for diluted FFO per share
89,322

 
75,904

 
87,343

 
75,843

 
 
 
 
 
 
 
 
Reconciliation of FFO to FFO, as adjusted for comparability
 

 
 

 
 

 
 

FFO
$
31,725

 
$
46,115

 
$
77,111

 
$
95,246

Gain on sales of non-operating properties
(329
)
 
(33
)
 
(2,683
)
 
(33
)
Impairment recoveries on non-operating properties, net of associated tax
—

 
—

 
—

 
(4,573
)
Operating property acquisition costs
—

 
7

 
—

 
7

Loss on early extinguishment of debt, continuing and discontinued operations
21,470

 
171

 
26,654

 
171

Issuance costs associated with redemption of preferred shares
2,904

 
—

 
2,904

 
—

FFO, as adjusted for comparability
$
55,770

 
$
46,260

 
$
103,986

 
$
90,818


(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 June 30,
 
For the Six Months Ended June 30,
 
2013
 
2012
 
2013
 
2012
Reconciliation of common share dividends to dividends and distributions for payout ratios
 

 
 

 
 
 
 
Common share dividends
$
23,604

 
$
19,809

 
$
47,198

 
$
39,628

Common unit distributions
1,042

 
1,168

 
2,092

 
2,341

Dividends and distributions for payout ratios
$
24,646

 
$
20,977

 
$
49,290

 
$
41,969

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

 
 

 
 

 
 

Net (loss) income
$
(4,405
)
 
$
11,861

 
$
10,872

 
$
22,096

Interest expense on continuing operations
23,302

 
24,239

 
45,609

 
48,670

Interest expense on discontinued operations
67

 
736

 
131

 
1,980

Income tax expense
21

 
17

 
37

 
221

Real estate-related depreciation and amortization
28,935

 
31,666

 
57,187

 
62,753

Depreciation of furniture, fixtures and equipment
527

 
629

 
1,057

 
1,247

Impairment losses
7,195

 
2,354

 
9,052

 
8,941

Loss on early extinguishment of debt on continuing and discontinued operations
21,470

 
171

 
26,654

 
171

Gain on sales of operating properties
—

 
115

 
—

 
(4,023
)
Gain on sales of non-operational properties
(329
)
 
(33
)
 
(2,683
)
 
(33
)
Net gain on investments in unconsolidated entities included in interest and other income
(961
)
 
(66
)
 
(1,021
)
 
(516
)
Operating property acquisition costs
—

 
7

 
—

 
7

Adjusted EBITDA
$
75,822

 
$
71,696

 
$
146,895

 
$
141,514

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

 
 

 
 

 
 

Interest expense from continuing operations
$
23,302

 
$
24,239

 
$
45,609

 
$
48,670

Interest expense from discontinued operations
67

 
736

 
131

 
1,980

Less: Amortization of deferred financing costs
(1,443
)
 
(1,597
)
 
(2,971
)
 
(3,169
)
Less: Amortization of net debt discount, net of amounts capitalized
(556
)
 
(682
)
 
(1,184
)
 
(1,345
)
Denominator for interest coverage-Adjusted EBITDA
21,370

 
22,696

 
41,585

 
46,136

Preferred share dividends
4,885

 
4,167

 
10,991

 
8,192

Preferred unit distributions
165

 
165

 
330

 
330

Denominator for fixed charge coverage-Adjusted EBITDA
$
26,420

 
$
27,028

 
$
52,906

 
$
54,658

 
 
 
 
 
 
 
 

viii


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

 
For the Three Months Ended June 30,
 
For the Six Months Ended June 30,
 
2013
 
2012
 
2013
 
2012
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
$
3,798

 
$
2,663

 
$
6,089

 
$
3,329

Building improvements on operating properties
2,538

 
1,296

 
4,138

 
2,167

Leasing costs for operating properties
1,185

 
2,863

 
2,854

 
4,162

Less: Nonrecurring tenant improvements and incentives on operating properties
(23
)
 
(97
)
 
(8
)
 
(658
)
Less: Nonrecurring building improvements on operating properties
(1,580
)
 
(572
)
 
(1,847
)
 
(979
)
Less: Nonrecurring leasing costs for operating properties
(50
)
 
(79
)
 
(50
)
 
(79
)
Add: Recurring capital expenditures on operating properties held through joint ventures
(6
)
 
—

 
(6
)
 
7

Recurring capital expenditures
$
5,862

 
$
6,074

 
$
11,170

 
$
7,949

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

 
 

 
 

 
 

Same office property net operating income
$
70,620

 
$
68,827

 
$
139,842

 
$
135,924

Less: Straight-line rent adjustments
(520
)
 
(1,128
)
 
(1,828
)
 
(3,362
)
Less: Amortization of deferred market rental revenue
(35
)
 
(38
)
 
(65
)
 
(100
)
Add: Amortization of above-market cost arrangements
319

 
371

 
638

 
724

Same office property cash net operating income
70,384

 
68,032

 
138,587

 
133,186

Less: Lease termination fees, gross
(1,681
)
 
(400
)
 
(2,877
)
 
(934
)
Same office property cash net operating income, excluding gross lease termination fees
$
68,703

 
$
67,632

 
$
135,710

 
$
132,252

 
 
 
 
 
 
 
 

ix


Corporate Office Properties Trust
Summary Description
 
The Company: Corporate Office Properties Trust (the “Company” or “COPT”) is a self-managed office real estate investment trust (“REIT”). As of June 30, 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 June 30, 2013, 81% of the Company’s square footage was located in the Greater Washington, DC/Baltimore region. As of June 30, 2013, COPT’s operating portfolio of 210 office properties encompassed 19.0 million square feet and was 90.0% 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, Manager of IR
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
 
Jim Sullivan
 
646-562-1380
 
james.sullivan@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
 
Six Months Ended
SUMMARY OF RESULTS 
 
6/30/13
 
3/31/13
 
12/31/12
 
9/30/12
 
6/30/12
 
6/30/13
 
6/30/12
Same Office NOI
 
$
70,620

 
$
69,222

 
$
67,646

 
$
69,325

 
$
68,827

 
$
139,842

 
$
135,924

NOI from real estate operations
 
$
80,621

 
$
78,011

 
$
76,122

 
$
77,565

 
$
79,920

 
$
158,632

 
$
158,678

Adjusted EBITDA
 
$
75,822

 
$
71,073

 
$
70,178

 
$
72,042

 
$
71,696

 
$
146,895

 
$
141,514

Net (loss) income attributable to COPT common shareholders
 
$
(13,154
)
 
$
8,914

 
$
12,433

 
$
(27,535
)
 
$
7,138

 
$
(4,240
)
 
$
13,408

FFO - per NAREIT
 
$
31,725

 
$
45,386

 
$
47,825

 
$
48,888

 
$
46,115

 
$
77,111

 
$
95,246

FFO - as adjusted for comparability
 
$
55,770

 
$
48,216

 
$
49,724

 
$
49,967

 
$
46,260

 
$
103,986

 
$
90,818

Basic and diluted FFO available to common share and common unit holders
 
$
22,412

 
$
38,205

 
$
40,625

 
$
39,565

 
$
41,143

 
$
60,617

 
$
85,530

Diluted AFFO available to common share and common unit holders
 
$
42,417

 
$
35,891

 
$
15,860

 
$
33,710

 
$
39,026

 
$
78,308

 
$
80,629

Per share - diluted:
 
 

 
 

 
 

 
 

 
 

 
 

 
 
EPS
 
$
(0.16
)
 
$
0.11

 
$
0.16

 
$
(0.39
)
 
$
0.10

 
$
(0.05
)
 
$
0.18

FFO - NAREIT
 
$
0.25

 
$
0.45

 
$
0.49

 
$
0.52

 
$
0.54

 
$
0.69

 
$
1.13

FFO - as adjusted for comparability
 
$
0.52

 
$
0.48

 
$
0.51

 
$
0.53

 
$
0.54

 
$
1.00

 
$
1.07

Dividend per common share
 
$
0.2750

 
$
0.2750

 
$
0.2750

 
$
0.2750

 
$
0.2750

 
$
0.5500

 
$
0.5500

Payout ratios:
 
 

 
 

 
 

 
 

 
 

 
 

 
 
Diluted FFO
 
110.0
%
 
64.5
%
 
57.5
%
 
53.1
%
 
51.0
%
 
81.3
%
 
49.1
%
Diluted FFO - as adjusted for comparability
 
53.1
%
 
60.1
%
 
55.0
%
 
51.7
%
 
50.8
%
 
56.3
%
 
51.7
%
Diluted AFFO
 
58.1
%
 
68.7
%
 
147.4
%
 
62.3
%
 
53.8
%
 
62.9
%
 
52.1
%
Real estate operating margin
 
64.4
%
 
63.9
%
 
62.1
%
 
64.0
%
 
64.5
%
 
64.1
%
 
63.7
%
CAPITALIZATION
 
 

 
 

 
 
 
 

 
 

 
 

 
 
Debt, net
 
$
2,093,106

 
$
1,957,360

 
$
2,019,168

 
$
2,169,315

 
$
2,191,851

 
 
 
 
Debt to Total Market Capitalization
 
45.1
%
 
41.7
%
 
45.0
%
 
50.0
%
 
50.0
%
 
 
 
 
Debt to Adjusted Book
 
46.4
%
 
43.8
%
 
45.8
%
 
49.8
%
 
48.6
%
 
 
 
 
Adjusted EBITDA fixed charge coverage ratio
 
2.9
x
 
2.7
x
 
2.6
x
 
2.6
x
 
2.7
x
 
2.8
x
 
2.6
x
Debt to Adjusted EBITDA ratio
 
6.9
x
 
6.9
x
 
7.2
x
 
7.5
x
 
7.6
x
 
7.1
x
 
7.7
x
OTHER
 
 

 
 

 
 

 
 

 
 

 
 

 
 
Revenue from early termination of leases
 
$
1,280

 
$
835

 
$
583

 
$
543

 
$
350

 
$
2,115

 
$
745

Capitalized interest costs
 
$
2,088

 
$
2,440

 
$
3,109

 
$
3,390

 
$
3,595

 
$
4,528

 
$
7,404

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 


3

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

 
 

 
 

 
 

 
 

 
Wholly-owned
205

 
205

 
204

 
202

 
224

 
+ Consolidated JV (1)
5

 
5

 
4

 
4

 
4

 
Consolidated properties
210

 
210

 
208

 
206

 
228

 
% Occupied
 

 
 

 
 

 
 

 
 

 
Wholly-owned
88.0
%
 
87.3
%
 
87.6
%
 
88.1
%
 
87.6
%
 
+ Consolidated JV (1)
97.8
%
 
96.9
%
 
96.1
%
 
89.2
%
 
78.1
%
 
Consolidated properties
88.2
%
 
87.6
%
 
87.8
%
 
88.1
%
 
87.4
%
 
% Leased
 

 
 

 
 

 
 

 
 

 
Wholly-owned
89.8
%
 
89.1
%
 
89.1
%
 
89.8
%
 
89.2
%
 
+ Consolidated JV (1)
97.8
%
 
97.8
%
 
96.1
%
 
96.1
%
 
95.0
%
 
Consolidated properties
90.0
%
 
89.3
%
 
89.2
%
 
89.9
%
 
89.3
%
 
Square Feet of Office Properties (in thousands)
 

 
 

 
 

 
 

 
 

 
Wholly-owned
18,471

 
18,562

 
18,386

 
18,146

 
19,342

 
+ Consolidated JV Square Footage (1)
566

 
566

 
445

 
445

 
445

 
Consolidated Square Footage
19,037

 
19,128

 
18,831

 
18,591

 
19,787

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

 
18

 
18

 
18

 
18

 
MWs Operational
9

 
9

 
6

 
6

 
6

 
MWs Leased
4.3

 
4.3

 
4

 
4

 
4

 
 
 
 
 
 
 
 
 
 
 
 

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






4

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

 
 

 
 

 
 

 
 

Properties, net
 

 
 

 
 

 
 

 
 

Operating properties, net
$
2,703,009

 
$
2,705,335

 
$
2,597,666

 
$
2,487,919

 
$
2,629,136

Construction and redevelopment in progress, including land (1)
189,079

 
160,311

 
247,386

 
271,798

 
243,220

Land held for future development and pre-construction costs (1)
319,216

 
324,327

 
317,992

 
342,797

 
360,236

Total properties, net
3,211,304

 
3,189,973

 
3,163,044

 
3,102,514

 
3,232,592

Assets held for sale
136,896

 
142,404

 
140,229

 
137,815

 
144,392

Cash and cash equivalents
9,196

 
23,509

 
10,594

 
5,009

 
4,702

Restricted cash and marketable securities
19,472

 
17,040

 
21,557

 
20,926

 
22,632

Accounts receivable, net
23,751

 
10,768

 
19,247

 
15,877

 
10,992

Deferred rent receivable
89,811

 
88,716

 
85,802

 
83,156

 
85,595

Intangible assets on real estate acquisitions, net
68,046

 
72,035

 
75,879

 
81,059

 
76,426

Deferred leasing and financing costs, net
57,488

 
59,856

 
59,952

 
58,753

 
63,861

Prepaid expenses and other assets
83,671

 
80,798

 
77,455

 
92,547

 
73,883

Total assets
$
3,699,635

 
$
3,685,099

 
$
3,653,759

 
$
3,597,656

 
$
3,715,075

Liabilities and equity
 

 
 

 
 

 
 

 
 

Liabilities:
 

 
 

 
 

 
 

 
 

Debt, net
$
2,093,106

 
$
1,957,360

 
$
2,019,168

 
$
2,169,315

 
$
2,191,851

Accounts payable and accrued expenses
84,181

 
90,645

 
97,922

 
87,390

 
84,733

Rents received in advance and security deposits
24,095

 
26,024

 
27,632

 
26,773

 
27,124

Dividends and distributions payable
28,602

 
29,947

 
28,698

 
26,954

 
24,695

Deferred revenue associated with operating leases
9,649

 
10,833

 
11,995

 
13,102

 
13,938

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

 
6,420

 
6,420

 
6,420

 
6,282

Interest rate derivatives
3,555

 
5,340

 
6,185

 
6,543

 
4,400

Other liabilities
8,169

 
7,631

 
8,942

 
10,938

 
8,703

Total liabilities
2,257,777

 
2,134,200

 
2,206,962

 
2,347,435

 
2,361,726

Commitments and contingencies


 


 


 


 


Redeemable noncontrolling interest
15,571

 
10,356

 
10,298

 
9,932

 
9,578

Equity:
 

 
 

 
 

 
 
 
 
COPT’s shareholders’ equity:
 

 
 

 
 

 
 
 
 
Preferred shares at liquidation preference
249,083

 
333,833

 
333,833

 
333,833

 
388,833

Common shares
858

 
858

 
809

 
722

 
721

Additional paid-in capital
1,772,470

 
1,772,255

 
1,653,672

 
1,451,416

 
1,447,781

Cumulative distributions in excess of net income
(668,892
)
 
(632,134
)
 
(617,455
)
 
(607,633
)
 
(560,262
)
Accumulated other comprehensive income (loss)
3,631

 
(4,410
)
 
(5,435
)
 
(5,688
)
 
(3,717
)
Total COPT’s shareholders’ equity
1,357,150

 
1,470,402

 
1,365,424

 
1,172,650

 
1,273,356

Noncontrolling interests in subsidiaries
 

 
 

 
 

 
 

 
 

Common units in the Operating Partnership
49,112

 
50,604

 
52,122

 
49,157

 
52,300

Preferred units in the Operating Partnership
8,800

 
8,800

 
8,800

 
8,800

 
8,800

Other consolidated entities
11,225

 
10,737

 
10,153

 
9,682

 
9,315

Total noncontrolling interests in subsidiaries
69,137

 
70,141

 
71,075

 
67,639

 
70,415

Total equity
1,426,287

 
1,540,543

 
1,436,499

 
1,240,289

 
1,343,771

Total liabilities, redeemable noncontrolling interest and equity
$
3,699,635

 
$
3,685,099

 
$
3,653,759

 
$
3,597,656

 
$
3,715,075

(1) Please refer to pages 23-26 for detail.
 
 
 
 
 
 
 
 
 

5

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

 
 

 
 

 
 

 
 

 
 
 
 
Rental revenue
$
97,266

 
$
94,920

 
$
94,066

 
$
92,287

 
$
89,954

 
$
192,186

 
$
179,347

Tenant recoveries and other real estate operations revenue
22,463

 
21,438

 
22,913

 
22,075

 
20,715

 
43,901

 
41,522

Construction contract and other service revenues
20,795

 
14,262

 
20,024

 
15,283

 
16,995

 
35,057

 
38,529

Total revenues
140,524

 
130,620

 
137,003

 
129,645

 
127,664

 
271,144

 
259,398

Expenses
 

 
 

 
 

 
 

 
 

 
 
 
 
Property operating expenses
43,408

 
42,519

 
44,837

 
41,474

 
39,441

 
85,927

 
80,628

Depreciation and amortization associated with real estate operations
28,866

 
28,163

 
28,468

 
28,604

 
28,295

 
57,029

 
56,029

Construction contract and other service expenses
19,382

 
13,477

 
19,274

 
14,410

 
16,285

 
32,859

 
36,892

Impairment losses (recoveries)
—

 
—

 
1,954

 
46,096

 
—

 
—

 
(4,836
)
General and administrative expenses
4,992

 
5,984

 
5,740

 
5,062

 
7,741

 
10,976

 
15,469

Leasing expenses
1,591

 
1,836

 
1,363

 
1,315

 
1,110

 
3,427

 
2,951

Business development expenses and land carry costs
1,327

 
1,359

 
1,205

 
1,632

 
1,298

 
2,686

 
2,874

Total operating expenses
99,566

 
93,338

 
102,841

 
138,593

 
94,170

 
192,904

 
190,007

Operating income (loss)
40,958

 
37,282

 
34,162

 
(8,948
)
 
33,494

 
78,240

 
69,391

Interest expense
(23,302
)
 
(22,307
)
 
(22,715
)
 
(23,239
)
 
(24,239
)
 
(45,609
)
 
(48,670
)
Interest and other income
2,006

 
946

 
4,020

 
1,095

 
840

 
2,952

 
2,057

Loss on early extinguishment of debt
(21,470
)
 
(5,184
)
 
(6
)
 
(768
)
 
(169
)
 
(26,654
)
 
(169
)
(Loss) income from continuing operations before equity in income (loss) of unconsolidated entities and income taxes
(1,808
)
 
10,737

 
15,461

 
(31,860
)
 
9,926

 
8,929

 
22,609

Equity in income (loss) of unconsolidated entities
126

 
41

 
(24
)
 
(246
)
 
(187
)
 
167

 
(276
)
Income tax expense
(21
)
 
(16
)
 
(54
)
 
(106
)
 
(17
)
 
(37
)
 
(221
)
(Loss) income from continuing operations
(1,703
)
 
10,762

 
15,383

 
(32,212
)
 
9,722

 
9,059

 
22,112

Discontinued operations
(3,031
)
 
2,161

 
3,627

 
11,447

 
2,118

 
(870
)
 
(37
)
(Loss) income before gain on sales of real estate
(4,734
)
 
12,923

 
19,010

 
(20,765
)
 
11,840

 
8,189

 
22,075

Gain on sales of real estate
329

 
2,354

 
—

 
—

 
21

 
2,683

 
21

Net (loss) income
(4,405
)
 
15,277

 
19,010

 
(20,765
)
 
11,861

 
10,872

 
22,096

Net loss (income) attributable to noncontrolling interests
 

 
 

 
 

 
 

 
 

 
 
 
 
Common units in the Operating Partnership
671

 
(429
)
 
(651
)
 
1,533

 
(422
)
 
242

 
(795
)
Preferred units in the Operating Partnership
(165
)
 
(165
)
 
(165
)
 
(165
)
 
(165
)
 
(330
)
 
(330
)
Other consolidated entities
(1,466
)
 
337

 
345

 
235

 
31

 
(1,129
)
 
629

Net (loss) income attributable to COPT
(5,365
)
 
15,020

 
18,539

 
(19,162
)
 
11,305

 
9,655

 
21,600

Preferred share dividends
(4,885
)
 
(6,106
)
 
(6,106
)
 
(6,546
)
 
(4,167
)
 
(10,991
)
 
(8,192
)
Issuance costs associated with redeemed preferred shares
(2,904
)
 
—

 
—

 
(1,827
)
 
—

 
(2,904
)
 
—

Net (loss) income attributable to COPT common shareholders
$
(13,154
)
 
$
8,914

 
$
12,433

 
$
(27,535
)
 
$
7,138

 
$
(4,240
)
 
$
13,408

 
 
 
 
 
 
 
 
 
 
 
 
 
 

6

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

 
 

 
 

 
 

 
 

 
 
 
 
Numerator for diluted EPS
 

 
 

 
 

 
 

 
 

 
 
 
 
Net (loss) income attributable to common shareholders
$
(13,154
)
 
$
8,914

 
$
12,433

 
$
(27,535
)
 
$
7,138

 
$
(4,240
)
 
$
13,408

Dilutive effect of common units in the Operating Partnership
(671
)
 
—

 
—

 
—

 
—

 
(242
)
 
—

Amount allocable to restricted shares
(102
)
 
(118
)
 
(112
)
 
(111
)
 
(105
)
 
(220
)
 
(246
)
Numerator for diluted EPS
$
(13,927
)
 
$
8,796

 
$
12,321

 
$
(27,646
)
 
$
7,033

 
$
(4,702
)
 
$
13,162

Denominator:
 

 
 

 
 

 
 

 
 

 
 
 
 
Weighted average common shares - basic
85,425

 
81,397

 
79,004

 
71,688

 
71,624

 
83,422

 
71,541

Dilutive effect of common units in the Operating Partnership
3,801

 
—

 
—

 
—

 
—

 
3,847

 
—

Dilutive effect of share-based compensation awards
—

 
52

 
67

 
—

 
25

 
—

 
35

Weighted average common shares - diluted
89,226

 
81,449

 
79,071

 
71,688

 
71,649

 
87,269

 
71,576

Diluted EPS
$
(0.16
)
 
$
0.11

 
$
0.16

 
$
(0.39
)
 
$
0.10

 
$
(0.05
)
 
$
0.18


7

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

 
 

 
 

 
 

 
 

 
 
 
 
Real estate revenues
$
125,275

 
$
122,077

 
$
122,564

 
$
121,264

 
$
123,968

 
$
247,352

 
$
249,272

Real estate property operating expenses
(44,654
)
 
(44,066
)
 
(46,442
)
 
(43,699
)
 
(44,048
)
 
(88,720
)
 
(90,594
)
NOI from real estate operations (1) (2)
80,621

 
78,011

 
76,122

 
77,565

 
79,920

 
158,632

 
158,678

General and administrative expenses
(4,992
)
 
(5,984
)
 
(5,740
)
 
(5,062
)
 
(7,741
)
 
(10,976
)
 
(15,469
)
Leasing expenses (2)
(1,591
)
 
(1,837
)
 
(1,363
)
 
(1,316
)
 
(1,112
)
 
(3,428
)
 
(2,953
)
Business development expenses and land carry costs (2)
(1,327
)
 
(1,359
)
 
(1,205
)
 
(1,632
)
 
(1,304
)
 
(2,686
)
 
(2,898
)
NOI from construction contracts and other service operations
1,413

 
785

 
750

 
873

 
710

 
2,198

 
1,637

Impairment (losses) recoveries on non-operating properties
—

 
—

 
(1,893
)
 
—

 
—

 
—

 
5,246

Equity in income (loss) of unconsolidated entities
126

 
41

 
(24
)
 
(246
)
 
(187
)
 
167

 
(276
)
Depreciation and amortization on unconsolidated real estate entities
—

 
—

 
—

 
113

 
119

 
—

 
233

Interest and other income
2,006

 
946

 
4,020

 
1,095

 
840

 
2,952

 
2,057

(Loss) gain on early extinguishment of debt (2)
(21,470
)
 
(5,184
)
 
(6
)
 
970

 
(171
)
 
(26,654
)
 
(171
)
Gain on sales of non-operating properties
329

 
2,354

 
—

 
—

 
33

 
2,683

 
33

Total interest expense (2)
(23,369
)
 
(22,371
)
 
(22,782
)
 
(23,366
)
 
(24,975
)
 
(45,740
)
 
(50,650
)
Income tax expense
(21
)
 
(16
)
 
(54
)
 
(106
)
 
(17
)
 
(37
)
 
(221
)
FFO - per NAREIT (1)
31,725

 
45,386

 
47,825

 
48,888

 
46,115

 
77,111

 
95,246

Preferred share dividends
(4,885
)
 
(6,106
)
 
(6,106
)
 
(6,546
)
 
(4,167
)
 
(10,991
)
 
(8,192
)
Issuance costs associated with redeemed preferred shares
(2,904
)
 
—

 
—

 
(1,827
)
 
—

 
(2,904
)
 
—

Noncontrolling interests - preferred units in the Operating Partnership
(165
)
 
(165
)
 
(165
)
 
(165
)
 
(165
)
 
(330
)
 
(330
)
FFO allocable to other noncontrolling interests
(1,270
)
 
(727
)
 
(738
)
 
(571
)
 
(420
)
 
(1,997
)
 
(680
)
Basic and diluted FFO allocable to restricted shares
(89
)
 
(183
)
 
(191
)
 
(214
)
 
(220
)
 
(272
)
 
(514
)
Basic and diluted FFO available to common share and common unit holders (1)
22,412

 
38,205

 
40,625

 
39,565

 
41,143

 
60,617

 
85,530

Operating property acquisition costs
—

 
—

 
—

 
222

 
7

 
—

 
7

Gain on sales of non-operating properties, net of income taxes
(329
)
 
(2,354
)
 
—

 
—

 
(33
)
 
(2,683
)
 
(33
)
Impairment losses (recoveries) on non-operating properties, net of associated tax
—

 
—

 
1,893

 
—

 
—

 
—

 
(4,573
)
Loss (gain) on early extinguishment of debt (2)
21,470

 
5,184

 
6

 
(970
)
 
171

 
26,654

 
171

Issuance costs associated with redeemed preferred shares
2,904

 
—

 
—

 
1,827

 
—

 
2,904

 
—

Diluted FFO available to common share and common unit holders, as adjusted for comparability (1)
$
46,457

 
$
41,035

 
$
42,524

 
$
40,644

 
$
41,288

 
$
87,492

 
$
81,102

 
 
 
 
 
 
 
 
 
 
 
 
 
 
(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
 
Six Months Ended
 
6/30/13
 
3/31/13
 
12/31/12
 
9/30/12
 
6/30/12
 
6/30/13
 
6/30/12
Net (loss) income
$
(4,405
)
 
$
15,277

 
$
19,010

 
$
(20,765
)
 
$
11,861

 
$
10,872

 
$
22,096

Real estate-related depreciation and amortization
28,935

 
28,252

 
28,560

 
30,624

 
31,666

 
57,187

 
62,753

Impairment losses on previously depreciated operating properties (1)
7,195

 
1,857

 
247

 
55,829

 
2,354

 
9,052

 
14,187

Gain on sales of previously depreciated operating properties
—

 
—

 
8

 
(16,913
)
 
115

 
—

 
(4,023
)
Depreciation and amortization on unconsolidated real estate entities
—

 
—

 
—

 
113

 
119

 
—

 
233

FFO - per NAREIT (2)
31,725

 
45,386

 
47,825

 
48,888

 
46,115

 
77,111

 
95,246

Operating property acquisition costs
—

 
—

 
—

 
222

 
7

 
—

 
7

Gain on sales of non-operating properties
(329
)
 
(2,354
)
 
—

 
—

 
(33
)
 
(2,683
)
 
(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
21,470

 
5,184

 
6

 
(970
)
 
171

 
26,654

 
171

Issuance costs associated with redeemed preferred shares
2,904

 
—

 
—

 
1,827

 
—

 
2,904

 
—

FFO - as adjusted for comparability (2)
$
55,770

 
$
48,216

 
$
49,724

 
$
49,967

 
$
46,260

 
$
103,986

 
$
90,818

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Weighted Average Shares for period ended:
 

 
 

 
 

 
 

 
 

 
 

 
 

Common Shares Outstanding
85,425

 
81,397

 
79,004

 
71,688

 
71,624

 
83,422

 
71,541

Dilutive effect of share-based compensation awards
96

 
52

 
67

 
73

 
25

 
74

 
35

Common Units
3,801

 
3,893

 
4,171

 
4,233

 
4,255

 
3,847

 
4,267

Denominator for FFO per share - diluted
89,322

 
85,342

 
83,242

 
75,994

 
75,904

 
87,343

 
75,843

Anti-dilutive EPS effect of share-based compensation awards
(96
)
 
—

 
—

 
(73
)
 
—

 
(74
)
 
—

Weighted average common units
—

 
(3,893
)
 
(4,171
)
 
(4,233
)
 
(4,255
)
 
—

 
(4,267
)
Denominator for diluted EPS
89,226

 
81,449

 
79,071

 
71,688

 
71,649

 
87,269

 
71,576

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

9

Corporate Office Properties Trust
Consolidated Reconciliations of AFFO
(in thousands, except per share data)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended
 
Six Months Ended
 
6/30/13
 
3/31/13
 
12/31/12
 
9/30/12
 
6/30/12
 
6/30/13
 
6/30/12
Diluted FFO available to common share and common unit holders, as adjusted for comparability
$
46,457

 
$
41,035

 
$
42,524

 
$
40,644

 
$
41,288

 
$
87,492

 
$
81,102

Straight line rent adjustments (1)
(2,011
)
 
(3,833
)
 
(3,385
)
 
(2,595
)
 
(1,857
)
 
(5,844
)
 
(4,036
)
Amortization of intangibles included in NOI
172

 
177

 
221

 
251

 
218

 
349

 
408

Share-based compensation, net of amounts capitalized
1,647

 
1,649

 
1,720

 
1,703

 
3,157

 
3,296

 
6,559

Amortization of deferred financing costs
1,443

 
1,528

 
1,547

 
1,527

 
1,597

 
2,971

 
3,169

Amortization of net debt discounts, net of amounts capitalized
556

 
628

 
693

 
683

 
682

 
1,184

 
1,345

Amortization of settled debt hedges
15

 
15

 
16

 
15

 
15

 
30

 
31

Recurring capital expenditures on properties to be held
(5,862
)
 
(5,308
)
 
(27,476
)
 
(8,518
)
 
(6,074
)
 
(11,170
)
 
(7,949
)
Diluted AFFO available to common share and common unit holders (“diluted AFFO”)
$
42,417

 
$
35,891

 
$
15,860

 
$
33,710

 
$
39,026

 
$
78,308

 
$
80,629

Recurring capital expenditures
 

 
 

 
 

 
 

 
 

 
 
 
 
Tenant improvements and incentives on operating properties
$
3,798

 
$
2,291

 
$
10,713

 
$
7,774

 
$
2,663

 
$
6,089

 
$
3,329

Building improvements on operating properties
2,538

 
1,600

 
18,049

 
4,646

 
1,296

 
4,138

 
2,167

Leasing costs for operating properties
1,185

 
1,669

 
1,381

 
947

 
2,863

 
2,854

 
4,162

Less: Nonrecurring tenant improvements and incentives on operating properties
(23
)
 
15

 
(283
)
 
(3,852
)
 
(97
)
 
(8
)
 
(658
)
Less: Nonrecurring building improvements on operating properties
(1,580
)
 
(267
)
 
(2,226
)
 
(940
)
 
(572
)
 
(1,847
)
 
(979
)
Less: Nonrecurring leasing costs for operating properties
(50
)
 
—

 
—

 
(130
)
 
(79
)
 
(50
)
 
(79
)
Add: Recurring capital expenditures on operating properties held through joint ventures
(6
)
 
—

 
(158
)
 
73

 
—

 
(6
)
 
7

Recurring capital expenditures
$
5,862

 
$
5,308

 
$
27,476

 
$
8,518

 
$
6,074

 
$
11,170

 
$
7,949

 
 
 
 
 
 
 
 
 
 
 
 
 
 
(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 - June 30, 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

 
264,216

 
—

 
264,216

Columbia Gateway
 
28

 
2,182,108

 
88.1
%
 
89.1
%
 
—

 
—

 
—

 
—

Airport Square/bwtech
 
25

 
1,837,100

 
80.3
%
 
80.3
%
 
—

 
—

 
—

 
—

Commons/Parkway
 
10

 
432,409

 
68.0
%
 
81.3
%
 
—

 
—

 
—

 
—

Other
 
8

 
851,840

 
89.3
%
 
99.8
%
 
1

 
25,939

 
—

 
25,939

Subtotal
 
98

 
8,526,692

 
89.1
%
 
91.8
%
 
3

 
290,155

 
—

 
290,155

Northern Virginia:
 
 

 
 

 
 

 
 

 
 

 
 

 
 
 
 
Westfields Corporate Center
 
9

 
1,432,188

 
91.7
%
 
93.6
%
 
—

 
—

 
—

 
—

Patriot Ridge
 
1

 
109,257

 
100.0
%
 
100.0
%
 
1

 
130,015

 
109,257

 
239,272

Herndon, Tysons Corner, Merrifield and Ashburn
 
9

 
1,704,639

 
88.3
%
 
88.7
%
 
2

 
315,000

 
—

 
315,000

Other
 
—

 
—

 
—
%
 
—
%
 
2

 
395,300

 
—

 
395,300

Subtotal
 
19

 
3,246,084

 
90.2
%
 
91.3
%
 
5

 
840,315

 
109,257

 
949,572

San Antonio, Texas
 
 

 
 

 
 

 
 

 
 

 
 

 
 
 
 
Sentry Gateway
 
6

 
792,454

 
100.0
%
 
100.0
%
 
—

 
—

 
—

 
—

Other
 
2

 
120,054

 
73.8
%
 
73.8
%
 
—

 
—

 
—

 
—

Subtotal
 
8

 
912,508

 
96.6
%
 
96.6
%
 
—

 
—

 
—

 
—

Huntsville (3)
 
2

 
258,154

 
91.0
%
 
91.0
%
 
3

 
303,923

 
—

 
303,923

Washington, DC- Capital Riverfront (Maritime)
 
2

 
360,326

 
88.1
%
 
88.1
%
 
—

 
—

 
—

 
—

St. Mary’s & King George Counties
 
19

 
903,961

 
88.1
%
 
91.0
%
 
—

 
—

 
—

 
—

Greater Baltimore:
 
 

 
 

 
 

 
 

 
 

 
 

 


 
—

White Marsh and Rt 83 Corridor
 
28

 
1,287,006

 
83.5
%
 
83.5
%
 
—

 
—

 
—

 
—

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

 
79.5
%
 
79.5
%
 
—

 
—

 
—

 
—

Suburban Maryland
 
3

 
297,936

 
95.7
%
 
95.7
%
 
—

 
—

 
—

 
—

Colorado Springs
 
21

 
1,577,510

 
81.1
%
 
83.1
%
 
—

 
—

 
—

 
—

Greater Philadelphia, Pennsylvania
 
4

 
605,314

 
90.9
%
 
93.2
%
 
1

 
126,405

 
57,011

 
183,416

Other (3)
 
2

 
295,842

 
100.0
%
 
100.0
%
 
—

 
—

 
—

 
—

Total
 
210

 
19,037,233

 
88.2
%
 
90.0
%
 
12

 
1,560,798

 
166,268

 
1,727,066

 
(1)
Number of properties includes buildings under construction once those buildings become partially operational. Operational square feet includes square feet in operations for partially operational properties.
(2)
This schedule includes properties under active construction or redevelopment and properties that we were contractually committed to construct. Please refer to pages 24 and 25.
(3)     For purposes of this summary, Huntsville is reported as a separate region. Other presentations within this package include Huntsville in our “Other” region.

11

Corporate Office Properties Trust
NOI from Real Estate Operations and Occupancy by Property Grouping
(dollars and square feet in thousands)
 
 
As of 6/30/13
 
 
 
 
 
 
# of
Operating Properties
 
Operational Square Feet
 
 
 
 
 
Annualized
Rental Revenue
 
Percentage of Total
Annualized
Rental Revenue
 
NOI from Real
Estate Operations
for Three Months Ended
 
NOI from Real
Estate Operations
for Six Months Ended
Property Grouping
 
 
 
% Occupied (1)
 
% Leased (1)
 
 
 
6/30/13
 
6/30/13
Same Office Properties (2)
 
 

 
 

 
 
 
 
 
 

 
 

 
 

 
 

Stabilized properties
 
180

 
16,064

 
90.1%
 
91.1%
 
$
418,650

 
88.3
%
 
$
70,048

 
$
138,659

Unstabilized properties (3)
 
2

 
263

 
43.3%
 
45.7%
 
4,086

 
0.9
%
 
572

 
1,183

Total Same Office Properties
 
182

 
16,327

 
89.4%
 
90.3%
 
422,736

 
89.2
%
 
70,620

 
139,842

Office Properties Placed in Service (4)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Stabilized properties
 
2

 
230

 
100.0%
 
100.0%
 
7,705

 
1.6
%
 
1,339

 
2,403

Unstabilized properties (3)
 
4

 
438

 
33.7%
 
69.0%
 
5,303

 
1.1
%
 
938

 
1,843

Acquired Office Properties (5)
 
1

 
202

 
100.0%
 
100.0%
 
6,048

 
1.3
%
 
1,092

 
2,266

Other
 
N/A

 
N/A

 
N/A
 
N/A
 
N/A

 
N/A

 
511

 
610

Subtotal
 
189

 
17,197

 
88.2%
 
90.0%
 
441,792

 
93.2
%
 
74,500

 
146,964

Office Properties Held for Sale (6)
 
17

 
1,235

 
87.1%
 
88.5%
 
21,357

 
4.5
%
 
3,945

 
7,504

Greater Philadelphia
 
4

 
605

 
90.9%
 
93.2%
 
10,800

 
2.3
%
 
2,064

 
3,713

Disposed Office Properties
 
N/A

 
N/A

 
N/A
 
N/A
 
N/A

 
N/A

 
112

 
451

Total Portfolio
 
210

 
19,037

 
88.2%
 
90.0%
 
$
473,949

 
100.0
%
 
$
80,621

 
$
158,632

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Strategic Tenant Properties (7)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Strategic Tenant Locations
 
80

 
8,717

 
92.2%
 
94.6%
 
$
258,683

 
54.6
%
 
$
44,106

 
$
87,601

Strategic Tenants
 
35

 
2,991

 
94.3%
 
94.5%
 
73,512

 
15.5
%
 
13,470

 
26,774

Total Strategic Tenant Properties
 
115

 
11,708

 
92.7%
 
94.6%
 
$
332,195

 
70.1
%
 
$
57,576

 
$
114,375

 
(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 6/30/13, 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 6/30/13 totaled $136,896.
(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) - June 30, 2013  
 
 
 
 
 
 
 
Property Grouping
Operational Square Feet
 
Occupancy %
 
Leased %
 
Same Office Properties (2) 
 
 
 

 
 

 
3120 Fairview Park Drive
183,671
 
45.3
%
 
48.8
%
 
210 Research Blvd
79,573
 
38.6
%
 
38.6
%
 
Total Unstabilized Same Office Properties
263,244
 
43.3
%
 
45.7
%
 
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
700,821
 
37.3
%
 
60.3
%
 
Unstabilized Properties Held for Sale (3 Properties)
309,576
 
68.3
%
 
73.6
%
 
751 Arbor Way (Greater Philadelphia)
113,297
 
51.2
%
 
63.4
%
 
Total Unstabilized Office Properties
1,123,694
 
47.2
%
 
64.3
%
 
 
(1) Properties with first generation operational space less than 90% occupied at 6/30/13.
(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
 
Six Months Ended
 
 
6/30/13
 
3/31/13
 
12/31/12
 
9/30/12
 
6/30/12
 
6/30/13
 
6/30/12
 
Office Properties:
 

 
 

 
 

 
 

 
 

 
 
 
 
 
Baltimore/Washington Corridor
$
57,387

 
$
56,436

 
$
57,233

 
$
55,799

 
$
55,677

 
$
113,823

 
$
111,927

 
Northern Virginia
22,988

 
22,942

 
21,600

 
20,363

 
19,051

 
45,930

 
37,611

 
San Antonio
8,364

 
7,757

 
8,455

 
8,125

 
7,830

 
16,121

 
15,438

 
Washington, DC - Capitol Riverfront
4,177

 
4,244

 
4,182

 
4,389

 
4,232

 
8,421

 
8,126

 
St. Mary’s and King George Counties
4,093

 
3,992

 
3,956

 
4,085

 
4,139

 
8,085

 
8,351

 
Greater Baltimore
10,824

 
10,719

 
10,662

 
11,918

 
14,664

 
21,543

 
30,036

 
Suburban Maryland
2,253

 
2,224

 
2,336

 
2,371

 
4,560

 
4,477

 
10,309

 
Colorado Springs
6,519

 
6,733

 
6,309

 
6,278

 
6,149

 
13,252

 
12,602

 
Greater Philadelphia
2,784

 
2,487

 
2,527

 
2,541

 
2,458

 
5,271

 
4,630

 
Other
3,869

 
3,190

 
3,317

 
3,589

 
3,770

 
7,059

 
7,388

 
Wholesale Data Center
2,017

 
1,353

 
1,987

 
1,806

 
1,438

 
3,370

 
2,854

 
Real estate revenues
$
125,275

 
$
122,077

 
$
122,564

 
$
121,264

 
$
123,968

 
$
247,352

 
$
249,272

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

 
 

 
 

 
 

 
 

 
 
 
 
 
Baltimore/Washington Corridor
$
38,403

 
$
37,170

 
$
36,615

 
$
37,265

 
$
37,208

 
$
75,573

 
$
73,784

 
Northern Virginia
14,784

 
15,125

 
13,767

 
13,248

 
12,126

 
29,909

 
23,456

 
San Antonio
3,886

 
3,869

 
3,954

 
3,853

 
3,866

 
7,755

 
7,712

 
Washington, DC - Capitol Riverfront
2,303

 
2,295

 
2,112

 
2,465

 
2,556

 
4,598

 
4,565

 
St. Mary’s and King George Counties
2,870

 
2,799

 
2,735

 
2,844

 
3,068

 
5,669

 
6,068

 
Greater Baltimore
6,727

 
6,551

 
6,656

 
7,379

 
9,053

 
13,278

 
18,664

 
Suburban Maryland
1,509

 
1,437

 
1,398

 
1,330

 
2,703

 
2,946

 
5,993

 
Colorado Springs
4,324

 
4,285

 
3,780

 
3,846

 
4,134

 
8,609

 
8,280

 
Greater Philadelphia
2,064

 
1,649

 
1,816

 
1,878

 
1,783

 
3,713

 
3,442

 
Other
3,252

 
2,794

 
2,739

 
2,903

 
3,056

 
6,046

 
5,986

 
Wholesale Data Center
499

 
37

 
550

 
554

 
367

 
536

 
728

 
NOI from real estate operations
$
80,621

 
$
78,011

 
$
76,122

 
$
77,565

 
$
79,920

 
$
158,632

 
$
158,678


*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
 
Six Months Ended
 
 
 
6/30/13
 
3/31/13
 
12/31/12
 
9/30/12
 
6/30/12
 
6/30/13
 
6/30/12
Baltimore Washington Corridor
95

 
8,217,234

 
90.6
%
 
90.1
%
 
89.3
%
 
88.1
%
 
88.2
%
 
90.4
%
 
87.8
%
Northern Virginia
17

 
2,934,990

 
88.7
%
 
88.5
%
 
88.1
%
 
86.6
%
 
87.0
%
 
88.6
%
 
86.6
%
San Antonio
8

 
912,508

 
96.6
%
 
96.4
%
 
96.5
%
 
96.5
%
 
96.5
%
 
96.5
%
 
97.1
%
Washington, DC - Capitol Riverfront
2

 
360,326

 
88.1
%
 
88.1
%
 
89.0
%
 
89.0
%
 
89.0
%
 
88.1
%
 
88.6
%
St. Mary’s and King George Counties
19

 
903,961

 
87.5
%
 
86.4
%
 
85.5
%
 
85.5
%
 
87.7
%
 
87.0
%
 
88.0
%
Greater Baltimore
31

 
1,924,787

 
84.7
%
 
84.1
%
 
83.8
%
 
85.9
%
 
85.9
%
 
84.4
%
 
85.5
%
Suburban Maryland
2

 
242,070

 
96.9
%
 
94.9
%
 
94.9
%
 
94.1
%
 
92.5
%
 
95.9
%
 
91.2
%
Colorado Springs
5

 
398,043

 
70.3
%
 
74.0
%
 
72.9
%
 
74.9
%
 
74.5
%
 
72.2
%
 
74.6
%
Other
3

 
432,891

 
94.6
%
 
94.6
%
 
96.4
%
 
100.0
%
 
100.0
%
 
94.6
%
 
100.0
%
Total Office
182

 
16,326,810

 
89.4
%
 
89.0
%
 
88.5
%
 
88.0
%
 
88.2
%
 
89.2
%
 
87.9
%
Total Same Office Properties occupancy as of period end
 
 

 
89.4
%
 
89.2
%
 
88.8
%
 
88.3
%
 
88.0
%
 
89.4
%
 
88.0
%

(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
 
Six Months Ended
 
6/30/13
 
3/31/13
 
12/31/12
 
9/30/12
 
6/30/12
 
6/30/13
 
6/30/12
Office Properties:
 

 
 

 
 

 
 

 
 

 
 
 
 
Baltimore/Washington Corridor
$
55,821

 
$
54,641

 
$
55,463

 
$
54,028

 
$
52,873

 
$
110,462

 
$
106,391

Northern Virginia
20,261

 
19,945

 
19,333

 
19,181

 
19,051

 
40,206

 
37,612

San Antonio
8,364

 
7,757

 
8,455

 
8,125

 
7,830

 
16,121

 
15,443

Washington, DC - Capitol Riverfront
4,177

 
4,244

 
4,182

 
4,389

 
4,232

 
8,421

 
8,126

St. Mary’s and King George Counties
4,094

 
3,992

 
3,956

 
4,084

 
4,139

 
8,086

 
8,351

Greater Baltimore
10,821

 
10,656

 
10,640

 
10,942

 
10,623

 
21,477

 
21,576

Suburban Maryland
2,086

 
2,090

 
2,132

 
2,105

 
2,069

 
4,176

 
4,120

Colorado Springs
1,254

 
1,589

 
1,471

 
1,537

 
1,524

 
2,843

 
3,150

Other
3,205

 
3,121

 
3,276

 
3,474

 
3,493

 
6,326

 
6,812

Real estate revenues
$
110,083

 
$
108,035

 
$
108,908

 
$
107,865

 
$
105,834

 
$
218,118

 
$
211,581

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

 
 

 
 

 
 

 
 

 
 
 
 
Baltimore/Washington Corridor
$
37,277

 
$
35,817

 
$
35,145

 
$
35,920

 
$
35,165

 
$
73,094

 
$
69,847

Northern Virginia
12,851

 
12,877

 
12,194

 
12,248

 
12,122

 
25,728

 
23,451

San Antonio
3,886

 
3,869

 
3,954

 
3,852

 
3,864

 
7,755

 
7,766

Washington, DC - Capitol Riverfront
2,303

 
2,295

 
2,112

 
2,465

 
2,556

 
4,598

 
4,565

St. Mary’s and King George Counties
2,869

 
2,799

 
2,735

 
2,844

 
3,068

 
5,668

 
6,068

Greater Baltimore
6,805

 
6,631

 
6,683

 
6,807

 
6,682

 
13,436

 
13,698

Suburban Maryland
1,340

 
1,361

 
1,296

 
1,315

 
1,357

 
2,701

 
2,677

Colorado Springs
552

 
837

 
729

 
797

 
924

 
1,389

 
1,825

Other
2,737

 
2,736

 
2,798

 
3,077

 
3,089

 
5,473

 
6,027

Same office property NOI
70,620

 
69,222

 
67,646

 
69,325

 
68,827

 
139,842

 
135,924

Add (less): Straight-line rent adjustments
(520
)
 
(1,308
)
 
(1,451
)
 
(1,620
)
 
(1,128
)
 
(1,828
)
 
(3,362
)
Less: Amortization of deferred market rental revenue
(35
)
 
(30
)
 
(38
)
 
(21
)
 
(38
)
 
(65
)
 
(100
)
Add: Amortization of above-market cost arrangements
319

 
319

 
371

 
371

 
371

 
638

 
724

Same office property cash NOI
70,384

 
68,203

 
66,528

 
68,055

 
68,032

 
138,587

 
133,186

Less: Lease termination fees, gross
(1,681
)
 
(1,196
)
 
(617
)
 
(649
)
 
(400
)
 
(2,877
)
 
(934
)
Same office property cash NOI, excluding gross lease termination fees
$
68,703

 
$
67,007

 
$
65,911

 
$
67,406

 
$
67,632

 
$
135,710

 
$
132,252

Percentage change in same office property cash NOI (1)
3.5
%
 
 
 
 
 
 
 
 
 
4.1
%
 
 
Percentage change in same office property cash NOI, excluding gross lease termination fees (1)
1.6
%
 
 
 
 
 
 
 
 
 
2.6
%
 
 
 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 June 30, 2013
 
Baltimore/
Washington
Corridor
 
Northern
Virginia
 
Washington DC-Capital Riverfront
 
St. Mary’s & King George Counties
 
Greater
Baltimore
 
Colorado
Springs
 
Greater
Philadelphia
 
Total
Office
Renewed Space
 

 
 

 
 

 
 
 
 

 
 

 
 

 
 

Leased Square Feet
335,860

 
20,341

 
1,183

 
83,287

 
7,423

 
16,302

 
—

 
464,396

Expiring Square Feet
395,649

 
28,797

 
1,183

 
85,222

 
7,423

 
61,955

 
—

 
580,229

Vacated Square Feet
59,789

 
8,456

 
—

 
1,935

 
—

 
45,653

 
—

 
115,833

Retention Rate (% based upon square feet)
84.89
 %
 
70.64
 %
 
100.00
%
 
97.73
 %
 
100.00
 %
 
26.31
 %
 
0.00
%
 
80.04
 %
Statistics for Completed Leasing:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Average Committed Cost per Square Foot
$
8.60

 
$
19.17

 
$
1.02

 
$
1.31

 
$
—

 
$
14.93

 
$
—

 
$
7.82

Weighted Average Lease Term in Years
3.5

 
10.3

 
1.0

 
1.3

 
1.1

 
5.0

 
—

 
3.4

GAAP Rent Per Square Foot
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
        Renewal GAAP Rent
$
29.27

 
$
27.33

 
$
51.65

 
$
23.79

 
$
17.50

 
$
25.45

 
$
—

 
$
27.94

        Expiring GAAP Rent
$
27.01

 
$
30.20

 
$
48.75

 
$
23.24

 
$
16.86

 
$
25.59

 
$
—

 
$
26.31

        Change in GAAP Rent
8.39
 %
 
(9.51
)%
 
5.95
%
 
2.38
 %
 
3.8
 %
 
(0.55
)%
 
0.00
%
 
6.17
 %
Cash Rent Per Square Foot
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
        Renewal Cash Rent
$
28.47

 
$
25.00

 
$
51.65

 
$
23.81

 
$
17.50

 
$
24.45

 
$
—

 
$
27.22

        Expiring Cash Rent
$
28.86

 
$
30.82

 
$
50.17

 
$
23.81

 
$
17.63

 
$
26.59

 
$
—

 
$
27.84

        Change in Cash Rent
(1.35
)%
 
(18.89
)%
 
2.95
%
 
(0.03
)%
 
(0.70
)%
 
(8.06
)%
 
0.00
%
 
(2.20
)%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
New Leases
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Development and Redevelopment Space
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Leased Square Feet
37,107

 
405,461

 
—

 
—

 
—

 
4,235

 
13,932

 
460,735

Statistics for Completed Leasing:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Average Committed Cost per Square Foot
$
49.62

 
$
18.51

 
$
—

 
$
—

 
$
—

 
$
55.00

 
$
66.01

 
$
22.78

Weighted Average Lease Term in Years
7.7

 
9.9

 
—

 
—

 
—

 
5.6

 
7.5

 
9.6

GAAP Rent Per Square Foot
$
40.65

 
$
22.09

 
$
—

 
$
—

 
$
—

 
$
22.45

 
$
23.59

 
$
23.63

Cash Rent Per Square Foot
$
37.00

 
$
21.62

 
$
—

 
$
—

 
$
—

 
$
21.43

 
$
23.50

 
$
22.91

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Other New Leases (2)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Leased Square Feet
68,609

 
18,252

 
—

 
32,792

 
10,364

 
2,947

 
—

 
132,964

Statistics for Completed Leasing:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Average Committed Cost per Square Foot
$
40.10

 
$
18.03

 
$
—

 
$
5.12

 
$
8.35

 
$
0.25

 
$
—

 
$
25.09

Weighted Average Lease Term in Years
7.1

 
5.7

 
—

 
3.3

 
2.9

 
2.8

 
—

 
5.5

GAAP Rent Per Square Foot
$
21.22

 
$
27.12

 
$
—

 
$
10.21

 
$
21.26

 
$
21.80

 
$
—

 
$
19.33

Cash Rent Per Square Foot
$
20.42

 
$
26.24

 
$
—

 
$
10.70

 
$
20.65

 
$
21.27

 
$
—

 
$
18.86

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total Square Feet Leased
441,576

 
444,054

 
1,183

 
116,079

 
17,787

 
23,484

 
13,932

 
1,058,095

(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, Suburban Maryland and Huntsville regions.
Activity is exclusive of owner occupied space and leases with less than a one-year term. Retention rate includes early renewals.


17

Corporate Office Properties Trust
Office Leasing (1)
Six Months Ended June 30, 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
693,808

 
22,955

 
3,349

 
96,974

 
32,864

 
41,500

 
29,078

 
—

 
—

 
920,528

Expiring Square Feet
943,658

 
83,828

 
6,561

 
115,491

 
41,817

 
41,500

 
143,724

 
—

 
—

 
1,376,579

Vacated Square Feet
249,850

 
60,873

 
3,212

 
18,517

 
8,953

 
—

 
114,646

 
—

 
—

 
456,051

Retention Rate (% based upon square feet)
73.52
 %
 
27.38
 %
 
51.04
 %
 
83.97
 %
 
78.59
%
 
100.00
 %
 
20.23
 %
 
0.00
%
 
0.00
%
 
66.87
 %
Statistics for Completed Leasing:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Average Committed Cost per Square Foot
$
8.68

 
$
18.48

 
$
8.41

 
$
4.00

 
$
1.42

 
$
—

 
$
23.75

 
$
—

 
$
—

 
$
8.25

Weighted Average Lease Term in Years
4.3

 
9.7

 
6.8

 
1.6

 
1.1

 
7.0

 
4.7

 
—

 
—

 
4.2

GAAP Rent Per Square Foot
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
        Renewal GAAP Rent
$
29.89

 
$
27.42

 
$
42.78

 
$
23.81

 
$
20.81

 
$
27.50

 
$
23.62

 
$
—

 
$
—

 
$
28.60

        Expiring GAAP Rent
$
28.11

 
$
30.15

 
$
41.37

 
$
23.18

 
$
20.22

 
$
29.84

 
$
22.14

 
$
—

 
$
—

 
$
27.30

        Change in GAAP Rent
6.33
 %
 
(9.06
)%
 
3.41
 %
 
2.72
 %
 
2.96
%
 
(7.82
)%
 
6.67
 %
 
0.00
%
 
0.00
%
 
4.79
 %
Cash Rent Per Square Foot
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
        Renewal Cash Rent
$
28.90

 
$
25.28

 
$
40.24

 
$
23.68

 
$
20.81

 
$
26.00

 
$
22.68

 
$
—

 
$
—

 
$
27.69

        Expiring Cash Rent
$
29.70

 
$
31.00

 
$
44.76

 
$
23.84

 
$
20.39

 
$
33.01

 
$
23.14

 
$
—

 
$
—

 
$
28.78

        Change in Cash Rent
(2.68
)%
 
(18.43
)%
 
(10.11
)%
 
(0.67
)%
 
2.09
%
 
(21.23
)%
 
(2.00
)%
 
0.00
%
 
0.00
%
 
(3.79
)%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
New Leases
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Development and Redevelopment Space
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Leased Square Feet (2)
102,633

 
405,461

 
—

 
—

 
—

 
4,853

 
28,322

 
18,327

 
6,029

 
565,625

Statistics for Completed Leasing:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Average Committed Cost per Square Foot
$
65.87

 
$
18.51

 
$
—

 
$
—

 
$
—

 
$
53.05

 
$
58.43

 
$
68.86

 
$
45.63

 
$
31.32

Weighted Average Lease Term in Years
8.9

 
9.9

 
—

 
—

 
—

 
5.0

 
6.5

 
7.4

 
5.0

 
9.4

GAAP Rent Per Square Foot
$
39.13

 
$
22.09

 
$
—

 
$
—

 
$
—

 
$
30.26

 
$
29.44

 
$
23.60

 
$
18.75

 
$
25.63

Cash Rent Per Square Foot
$
35.03

 
$
21.62

 
$
—

 
$
—

 
$
—

 
$
28.50

 
$
24.58

 
$
23.14

 
$
17.75

 
$
24.27

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Other New Leases (3)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Leased Square Feet
133,648

 
51,953

 
—

 
39,267

 
17,208

 
—

 
85,797

 
—

 
—

 
327,873

Statistics for Completed Leasing:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Average Committed Cost per Square Foot
$
42.37

 
$
31.86

 
$
—

 
$
6.51

 
$
13.83

 
$
—

 
$
13.11

 
$
—

 
$
—

 
$
27.26

Weighted Average Lease Term in Years
7.4

 
7.8

 
—

 
3.3

 
3.3

 
—

 
4.4

 
—

 
—

 
6.0

GAAP Rent Per Square Foot
$
23.13

 
$
27.92

 
$
—

 
$
11.49

 
$
19.45

 
$
—

 
$
13.59

 
$
—

 
$
—

 
$
19.81

Cash Rent Per Square Foot
$
22.12

 
$
24.82

 
$
—

 
$
11.84

 
$
19.04

 
$
—

 
$
15.45

 
$
—

 
$
—

 
$
19.41

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total Square Feet Leased
930,089

 
480,369

 
3,349

 
136,241

 
50,072

 
46,353

 
143,197

 
18,327

 
6,029

 
1,814,026

(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 region.
Activity is exclusive of owner occupied space and leases with less than a one-year term. Retention rate includes early renewals.


18

Corporate Office Properties Trust
Lease Expiration Analysis as of 6/30/13 (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
 
39

 
967,004

 
$
31,875

 
6.7
%
 
$
32.96

 
 
18

 
852,503

 
$
29,296

 
8.8
%
 
$
34.37

Northern Virginia
 
7

 
57,918

 
1,217

 
0.3
%
 
21.01

 
 
4

 
31,066

 
541

 
0.2
%
 
17.41

Washington, DC-Capitol Riverfront
 
3

 
112,946

 
5,016

 
1.1
%
 
44.41

 
 
3

 
112,946

 
5,016

 
1.5
%
 
44.41

St. Mary’s and King George Cos.
 
7

 
77,053

 
1,084

 
0.2
%
 
14.06

 
 
7

 
77,053

 
1,084

 
0.3
%
 
14.06

Greater Baltimore
 
11

 
47,163

 
984

 
0.2
%
 
20.87

 
 
—

 
—

 
—

 
0.0
%
 
—

Suburban Maryland
 
1

 
4,000

 
57

 
0.0
%
 
14.16

 
 
—

 
—

 
—

 
0.0
%
 
—

Colorado Springs
 
6

 
20,329

 
505

 
0.1
%
 
24.82

 
 
—

 
—

 
—

 
0.0
%
 
—

Greater Philadelphia
 
2

 
5,928

 
89

 
—
%
 
15.00

 
 
—

 
—

 
—

 
0.0
%
 
—

2013
 
76

 
1,292,341

 
40,826

 
8.6
%
 
31.59

 
 
32

 
1,073,568

 
35,937

 
10.8
%
 
33.47

Baltimore/Washington Corridor
 
39

 
719,550

 
21,187

 
4.5
%
 
29.44

 
 
18

 
553,438

 
17,396

 
5.2
%
 
31.43

Northern Virginia
 
13

 
857,994

 
27,405

 
5.8
%
 
31.94

 
 
10

 
785,967

 
24,921

 
7.5
%
 
31.71

Washington, DC-Capitol Riverfront
 
7

 
71,364

 
3,312

 
0.7
%
 
46.41

 
 
7

 
71,364

 
3,312

 
1.0
%
 
46.41

St. Mary’s and King George Cos.
 
20

 
272,578

 
5,312

 
1.1
%
 
19.49

 
 
20

 
272,578

 
5,312

 
1.6
%
 
19.49

Greater Baltimore
 
27

 
155,071

 
2,909

 
0.6
%
 
18.76

 
 
—

 
—

 
—

 
0.0
%
 
—

Suburban Maryland
 
2

 
19,261

 
668

 
0.1
%
 
34.70

 
 
2

 
19,261

 
668

 
0.2
%
 
34.70

Colorado Springs
 
8

 
143,905

 
2,815

 
0.6
%
 
19.56

 
 
1

 
22,814

 
532

 
0.2
%
 
23.30

Greater Philadelphia
 
1

 
218,337

 
2,958

 
0.6
%
 
13.55

 
 
—

 
—

 
—

 
0.0
%
 
—

Other
 
1

 
113,692

 
3,004

 
0.6
%
 
26.42

 
 
1

 
113,692

 
3,004

 
0.9
%
 
26.42

2014
 
118
 
2,571,752

 
69,569

 
14.7
%
 
27.05

 
 
59

 
1,839,114

 
55,144
 
16.6
%
 
29.98

Baltimore/Washington Corridor
 
50

 
1,173,680

 
33,718

 
7.1
%
 
28.73

 
 
24

 
909,252

 
27,061

 
8.1
%
 
29.76

Northern Virginia
 
11

 
659,366

 
21,275

 
4.5
%
 
32.27

 
 
8

 
644,338

 
20,701

 
6.2
%
 
32.13

Washington, DC-Capitol Riverfront
 
4

 
32,092

 
1,559

 
0.3
%
 
48.57

 
 
4

 
32,092

 
1,559

 
0.5
%
 
48.57

St. Mary’s and King George Cos.
 
17

 
251,610

 
5,167

 
1.1
%
 
20.54

 
 
17

 
251,610

 
5,167

 
1.6
%
 
20.54

Greater Baltimore
 
16

 
173,480

 
4,441

 
0.9
%
 
25.60

 
 
5

 
49,231

 
1,526

 
0.5
%
 
31.00

Colorado Springs
 
12

 
176,989

 
3,099

 
0.7
%
 
17.51

 
 
—

 
—

 
—

 
0.0
%
 
—

2015
 
110

 
2,467,217

 
69,259

 
14.6
%
 
28.07

 
 
58

 
1,886,523

 
56,014

 
16.9
%
 
29.69

Baltimore/Washington Corridor
 
39

 
1,009,665

 
27,340

 
5.8
%
 
27.08

 
 
19

 
654,391

 
18,742

 
5.6
%
 
28.64

Northern Virginia
 
15

 
187,664

 
5,204

 
1.1
%
 
27.73

 
 
8

 
141,084

 
3,594

 
1.1
%
 
25.47

Washington, DC-Capitol Riverfront
 
3

 
37,493

 
1,775

 
0.4
%
 
47.34

 
 
3

 
37,493

 
1,775

 
0.5
%
 
47.34

St. Mary’s and King George Cos.
 
9

 
83,792

 
1,761

 
0.4
%
 
21.02

 
 
9

 
83,792

 
1,761

 
0.5
%
 
21.02

Greater Baltimore
 
20

 
240,919

 
6,632

 
1.4
%
 
27.53

 
 
—

 
—

 
—

 
0.0
%
 
—

Colorado Springs
 
5

 
131,631

 
3,030

 
0.6
%
 
23.02

 
 
—

 
—

 
—

 
0.0
%
 
—

2016
 
91

 
1,691,164

 
45,743

 
9.7
%
 
27.05

 
 
39

 
916,760

 
25,872

 
7.8
%
 
28.22


19

 
 
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

 
1,223,448

 
34,964

 
7.4
%
 
28.58

 
 
24

 
859,791

 
25,874

 
7.8
%
 
30.09

Northern Virginia
 
16

 
335,247

 
10,443

 
2.2
%
 
31.15

 
 
6

 
236,512

 
7,149

 
2.2
%
 
30.23

St. Mary’s and King George Cos.
 
1

 
4,788

 
125

 
—
%
 
26.02

 
 
1

 
4,788

 
125

 
0.0
%
 
26.02

Greater Baltimore
 
19

 
268,186

 
5,841

 
1.2
%
 
21.78

 
 
2

 
3,174

 
84

 
0.0
%
 
26.46

Suburban Maryland
 
3

 
29,057

 
453

 
0.1
%
 
15.59

 
 
1

 
9,155

 
256

 
0.1
%
 
28.00

Colorado Springs
 
18

 
145,923

 
3,062

 
0.6
%
 
20.99

 
 
—

 
—

 
—

 
0.0
%
 
—

Greater Philadelphia
 
1

 
4,805

 
129

 
—
%
 
26.74

 
 
—

 
—

 
—

 
0.0
%
 
—

2017
 
103

 
2,011,454

 
55,016

 
11.6
%
 
27.35

 
 
34

 
1,113,420

 
33,488

 
10.1
%
 
30.08

Thereafter
 
211

 
6,765,295

 
193,536

 
40.8
%
 
28.61

 
 
101

 
4,029,237

 
125,740

 
37.9
%
 
31.21

Total / Average
 
709

 
16,799,223

 
$
473,949

 
100.0
%
 
$
28.21

 
 
323

 
10,858,622

 
$
332,195

 
100.0
%
 
$
30.59

Note:  As of June 30, 2013, the weighted average lease term is 4.3 years for the consolidated portfolio and 4.2 years 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
2
1

0.16

$
521

2019
1
7

1.00

2,410

2020
1
19

2.00

4,284

2022
1
6

0.35

541

 
 
 

3.51

$
7,756


(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 June 30, 2013 of 338,175 for the portfolio, including 216,081 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 June 30, 2013 multiplied by 12 plus the estimated annualized expense reimbursements under existing leases.


20

Corporate Office Properties Trust
Top 20 Office Tenants as of 6/30/13
(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

 
3,404,013

 
20.3
%
 
$
114,396

 
24.1
%
 
5.0

Northrop Grumman Corporation
 
12

 
1,076,634

 
6.4
%
 
29,432

 
6.2
%
 
5.9

Booz Allen Hamilton, Inc.
 
10

 
802,916

 
4.8
%
 
26,291

 
5.5
%
 
2.9

Computer Sciences Corporation
 
7

 
692,729

 
4.1
%
 
22,098

 
4.7
%
 
1.1

General Dynamics Corporation
 
9

 
547,870

 
3.3
%
 
18,700

 
3.9
%
 
4.3

The Boeing Company
 
7

 
321,107

 
1.9
%
 
9,149

 
1.9
%
 
3.2

The MITRE Corporation
 
4

 
286,553

 
1.7
%
 
8,972

 
1.9
%
 
3.5

CareFirst, Inc.
 
3

 
268,770

 
1.6
%
 
8,792

 
1.9
%
 
7.5

The Aerospace Corporation
 
3

 
254,869

 
1.5
%
 
8,085

 
1.7
%
 
1.6

Wells Fargo & Company
 
4

 
202,674

 
1.2
%
 
8,081

 
1.7
%
 
5.1

ITT Exelis
 
6

 
299,129

 
1.8
%
 
7,474

 
1.6
%
 
2.8

Kratos Defense and Security Solutions
 
5

 
253,634

 
1.5
%
 
7,245

 
1.5
%
 
6.6

L-3 Communications Holdings, Inc.
 
3

 
214,236

 
1.3
%
 
6,537

 
1.4
%
 
1.1

AT&T Corporation
 
4

 
317,570

 
1.9
%
 
5,839

 
1.2
%
 
5.8

Raytheon Company
 
7

 
162,919

 
1.0
%
 
5,071

 
1.1
%
 
2.1

Science Applications International Corp.
 
4

 
133,577

 
0.8
%
 
4,327

 
0.9
%
 
6.2

Lockheed Martin Corporation
 
6

 
135,978

 
0.8
%
 
3,892

 
0.8
%
 
4.4

The Johns Hopkins Institutions
 
5

 
141,122

 
0.8
%
 
3,802

 
0.8
%
 
3.4

Unisys Corporation
 
1

 
156,891

 
0.9
%
 
3,697

 
0.8
%
 
6.9

KEYW Corporation
 
2

 
144,846

 
0.9
%
 
3,648

 
0.8
%
 
8.0

Subtotal Top 20 Office Tenants
 
166

 
9,818,037

 
58.4
%
 
305,528

 
64.5
%
 
4.4

All remaining tenants
 
543

 
6,981,186

 
41.6
%
 
168,421

 
35.5
%
 
4.2

Total/Weighted Average
 
709

 
16,799,223

 
100.0
%
 
$
473,949

 
100.0
%
 
4.3

 
(1)  Total Annualized Rental Revenue is the monthly contractual base rent as of June 30, 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.


21


Corporate Office Properties Trust
Dispositions
Location
 
Property Region
 
Business Park/Submarket
 
Number of Buildings
 
Square Feet
 
Transaction
Date
 
Occupancy on Transaction Date
 
Transaction 
Price
(in thousands)
 
Quarter and Six Months Ended 6/30/13
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Operating Properties
 
 
 
 
 
 
 
 
 
 
 
 
 
 
920 Elkridge Landing Road
 
Baltimore/Washington Corridor
 
Airport Square
 
1

 
103,000

 
6/25/13
 
0.0
%
 
$
6,900

Land
 
 
 
 
 
N/A

 
N/A

 
4/4/13
 
N/A

 
3,500

Total
 
 
 
 
 
1

 
103,000

 
 
 
 
 
$
10,400



22

Corporate Office Properties Trust
Construction, Redevelopment, Wholesale Data Center and Land and Pre-Construction as of 6/30/13
(dollars in thousands)
 
Construction
Projects (1)
 
Redevelopment
Projects (2)
 
Wholesale Data
Center
 
Land and
Pre-Construction (3)
 
Total
 
Rentable Square Feet
Baltimore/Washington Corridor
290,155

 
—

 
N/A

 
3,911,000

 
4,201,155

Northern Virginia
949,572

 
—

 
N/A

 
1,802,000

 
2,751,572

San Antonio
—

 
—

 
N/A

 
1,158,000

 
1,158,000

Huntsville, Alabama
303,923

 
—

 
N/A

 
4,173,000

 
4,476,923

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
1,543,650

 
183,416

 
N/A

 
19,496,000

 
21,223,066

 
Costs to date by region
Baltimore/Washington Corridor
$
54,218

 
$
—

 
$
—

 
$
91,325

 
$
145,543

Northern Virginia
105,232

 
—

 
—

 
76,585

 
181,817

San Antonio
—

 
—

 
—

 
23,554

 
23,554

Huntsville, Alabama
27,623

 
—

 
—

 
13,541

 
41,164

St. Mary’s and King George Counties
—

 
—

 
—

 
2,692

 
2,692

Greater Baltimore
—

 
—

 
—

 
77,805

 
77,805

Suburban Maryland
—

 
—

 
—

 
13,414

 
13,414

Colorado Springs
—

 
—

 
—

 
24,906

 
24,906

Greater Philadelphia
—

 
25,676

 
—

 
12,746

 
38,422

Wholesale Data Center
—

 
—

 
211,773

 
—

 
211,773

Other
—

 
—

 
—

 
6,436

 
6,436

Total
$
187,073

 
$
25,676

 
$
211,773

 
$
343,004

 
$
767,526

 
Costs to date by balance sheet line item
Operating properties
$
41,432

 
$
16,639

 
$
170,114

 
$
23,322

 
$
251,507

Projects in development or held for future development, including associated land costs
140,672

 
7,069

 
41,338

 
319,216

 
508,295

Assets held for sale
—

 
—

 
—

 
466

 
466

Deferred leasing costs
4,969

 
1,968

 
321

 
—

 
7,258

Total
$
187,073

 
$
25,676

 
$
211,773

 
$
343,004

 
$
767,526

(1) Represents construction projects as listed on page 24.
(2) Represents redevelopment projects as listed on page 25.
(3) Represents our land held for future development and pre-construction as listed on page 26.

23

Corporate Office Properties Trust
Summary of Construction Projects as of 6/30/13 (1)
(dollars in thousands) 
 
 
 
Park/Submarket
Total Rentable Square Feet
Percentage Leased as of
as of 6/30/13 (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
6/30/2013
 
312 Sentinel Way
Annapolis Junction, Maryland
 
National Business Park
125,160

0%
$
36,550

$
24,402

$
4,100

3Q 13
3Q 14
 
420 National Business Parkway
Jessup, Maryland
 
National Business Park
139,056

27%
34,832

22,939

—

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

100%
9,049

6,877

—

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

48%
73,085

67,565

38,394

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

100%
22,206

9,542

—

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

100%
12,769

4,867

—

2Q 15
2Q 15
 
15395 John Marshall Hwy Haymarket, Virginia
 
Other
236,000

100%
26,000

17,680

—

1Q 14
1Q 14
 
NOVA Office A
   Northern Virginia
 
Other
159,300

100%
44,560

5,578

—

4Q 14
1Q 15
 
1100 Redstone Gateway
Huntsville, Alabama
 
Huntsville
121,111

100%
21,724

8,951

—

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

100%
24,910

13,857

—

4Q 13
4Q 13
 
7200 Redstone Gateway
    Huntsville, Alabama
 
Huntsville
61,724

10%
7,784

4,815

—

4Q 12
4Q 13
 
Total Under Construction
 
 
1,543,650

74%
$
313,469

$
187,073

$
42,494

 
 

(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.



24

Corporate Office Properties Trust
Summary of Redevelopment Projects as of 6/30/13
(dollars in thousands) 
 
 
 
 
 
 
 
 
 
 
 
 
Park/Submarket
Total Rentable Square Feet
Percentage Leased as of
as of 6/30/13 (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
 
6/30/2013
721 Arbor Way (Hillcrest II)
Blue Bell, Pennsylvania
(3)
Greater Philadelphia
183,416

61%
$
32,369

$
25,676

$
17,523

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.
(3) Although classified as “Under Redevelopment,” 57,011 square feet are operational.





25

Corporate Office Properties Trust
Summary of Land and Pre-Construction as of 6/30/13 (1)
Location
Acres
 
Estimated Developable Square Feet (in thousands)
 
Costs to Date as of 6/30/13 (3)
Strategic Land
 
 
 
 
 
Baltimore/Washington Corridor
 

 
 

 
 
National Business Park
200

 
2,092

 
 
Columbia Gateway
22

 
520

 
 
Airport Square
5

 
84

 
 
Arundel Preserve
84

up to
1,150

 
 
Subtotal
311

 
3,846

 
 
Northern Virginia
71

 
1,800

 
 
San Antonio, Texas
78

 
1,158

 
 
Huntsville, Alabama
443

 
4,173

 
 
St. Mary’s & King George Counties
44

 
109

 
 
Greater Baltimore
49

 
1,340

 
 
Suburban Maryland
49

 
510

 
 
Total strategic land held and pre-construction
1,045

 
12,936

 
$
248,570

 
 
 
 
 
 
Non-Strategic Land
 
 
 
 
 
Baltimore/Washington Corridor
7

 
65

 
 
Greater Baltimore
128

 
1,352

 
 
Suburban Maryland
107

 
1,000

 
 
Colorado Springs
175

 
2,570

 
 
Greater Philadelphia, Pennsylvania
8

 
604

 
 
Other (2)
217

 
967

 
 
Total non-strategic land held
642

 
6,558

 
94,434

 
 
 
 
 
 
Total land held and pre-construction
1,687

 
19,494

 
$
343,004

 
 
 
 
 
 
(1)
This land inventory schedule excludes all properties listed as construction or redevelopment as detailed on pages 24 and 25, and includes properties under ground lease to us.
(2)
This land is being put back to the jurisdictional county per a development agreement described under “Consolidated Joint Ventures.”
(3)
Represents total costs to date, as reported on page 23 (in thousands).

26


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 June 30, 2013:
Insiders
655

 
3,151

 
—

 
3,806

 
4.22
%
Non-insiders
85,190

 
638

 
610

 
86,438

 
95.78
%
Total
85,845

 
3,789

 
610

 
90,244

 
100.00
%
 
COMMON EQUITY - End of Quarter
6/30/13
 
3/31/13
 
12/31/12
 
9/30/12
 
6/30/12
Unrestricted Common Shares
85,461

 
85,369

 
80,518

 
71,730

 
71,652

Restricted Common Shares
384

 
389

 
435

 
428

 
433

Common Shares
85,845

 
85,758

 
80,953

 
72,158

 
72,085

Common Units
3,789

 
3,819

 
4,068

 
4,207

 
4,247

Total
89,634

 
89,577

 
85,021

 
76,365

 
76,332

End of Quarter Common Share Price
$
25.50

 
$
26.68

 
$
24.98

 
$
23.97

 
$
23.51

Market Value of Common Shares/Units
$
2,285,667


$
2,389,914

 
$
2,123,825

 
$
1,830,469

 
$
1,794,565

Common Shares Trading Volume
 

 
 

 
 

 
 

 
 

Average Daily Volume (Shares)
588

 
653

 
758

 
528

 
588

Average Daily Volume
$
16,205

 
$
17,215

 
$
18,916

 
$
12,246

 
$
13,303

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

 
 

 
 

 
 

 
 

Quarterly High
$
29.95

 
$
27.52

 
$
26.12

 
$
25.61

 
$
24.05

Quarterly Low
$
23.81

 
$
24.75

 
$
23.22

 
$
21.36

 
$
21.13

Quarterly Average
$
27.57

 
$
26.36

 
$
24.94

 
$
23.18

 
$
22.64



27

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

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

Redeemable Series L Shares Outstanding - 7.375%
172,500

 
172,500

 
172,500

 
172,500

 
172,500

Total Nonconvertible Preferred Equity
222,500

 
307,250

 
307,250

 
307,250

 
362,250

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
$
257,883

 
$
342,633

 
$
342,633

 
$
342,633

 
$
397,633

CAPITALIZATION
 

 
 

 
 

 
 

 
 

Liquidation Value of Preferred Shares/Units
$
257,883

 
$
342,633

 
$
342,633

 
$
342,633

 
$
397,633

Market Value of Common Shares/Units
2,285,667

 
2,389,914

 
2,123,825

 
1,830,469

 
1,794,565

Total Equity Market Capitalization
2,543,550

 
2,732,547

 
2,466,458

 
2,173,102

 
2,192,198

Total Debt
2,093,106

 
1,957,360

 
2,019,168

 
2,169,315

 
2,191,851

Total Market Capitalization
$
4,636,656

 
$
4,689,907

 
$
4,485,626

 
$
4,342,417

 
$
4,384,049


28

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

 
 

 
 

 
 

 
 

 
 
 
 
Dividends per share/unit
$
0.2750

 
$
0.2750

 
$
0.2750

 
$
0.2750

 
$
0.2750

 
$
0.5500

 
$
0.5500

Dividend Yield at Quarter End
4.31
%

4.12
%

4.40
%
 
4.59
%
 
4.68
%
 
4.31
%
 
4.68
%
Common Dividend Payout Ratios
 

 
 

 
 

 
 

 
 

 
 

 
 

Diluted FFO Payout
110.0
%
 
64.5
%
 
57.5
%
 
53.1
%
 
51.0
%
 
81.3
%
 
49.1
%
Diluted FFO Payout, as adjusted for comparability
53.1
%
 
60.1
%
 
55.0
%
 
51.7
%
 
50.8
%
 
56.3
%
 
51.7
%
Diluted AFFO Payout
58.1
%
 
68.7
%
 
147.4
%
 
62.3
%
 
53.8
%
 
62.9
%
 
52.1
%
Dividend Coverage - Diluted FFO
0.91
x
 
1.55
x
 
1.74
x
 
1.88
x
 
1.96
x
 
1.23
x
 
2.04
x
Dividend Coverage - Diluted FFO, as adjusted for comparability
1.88
x
 
1.67
x
 
1.82
x
 
1.94
x
 
1.97
x
 
1.78
x
 
1.93
x
Dividend Coverage - Diluted AFFO
1.72
x
 
1.46
x
 
0.68
x
 
1.61
x
 
1.86
x
 
1.59
x
 
1.92
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

 
N/A

 
$
0.20000

 
$
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
$
0.11650

 
$
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

 
$
0.4609

 
$
0.02

 
 
 
 

(1)    These shares were redeemed on August 6, 2012. The dividends reported represents the quarterly dividends prorated for the number of days the shares were outstanding.
(2)
These shares were redeemed on April 22, 2013. The dividends reported represents the quarterly dividends prorated for the number of days the shares were outstanding.
(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.

29

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

 
 

 
 

 
 

 
 

Fixed rate
 
 
 
 
 

 
 

 
 

 
 

 
 

Secured debt
5.99%
 
5.88%
 
$
887,595

 
$
931,952

 
$
948,414

 
$
978,461

 
$
1,009,164

Senior Unsecured Notes (1)
3.60%
 
3.70%
 
347,121

 
—

 
—

 
—

 
—

Exchangeable Senior Notes (2)
4.25%
 
6.05%
 
558

 
179,972

 
230,934

 
230,000

 
229,081

Other Unsecured Debt
0.00%
 
6.50%
 
1,745

 
1,766

 
1,788

 
1,809

 
5,106

Total fixed rate debt
5.30%
 
5.27%
 
1,237,019

 
1,113,690

 
1,181,136

 
1,210,270

 
1,243,351

Variable rate
 
 
 
 
 

 
 

 
 

 
 

 
 

Secured debt
2.44%
 
2.44%
 
$
38,087

 
$
38,270

 
$
38,475

 
$
38,671

 
$
38,844

Unsecured Revolving Credit Facility (3)
1.92%
 
1.92%
 
148,000

 
—

 
—

 
80,000

 
195,000

Construction Loans
N/A
 
N/A
 
—

 
35,400

 
29,557

 
70,374

 
64,656

Other Unsecured Debt
1.93%
 
1.93%
 
670,000

 
770,000

 
770,000

 
770,000

 
650,000

Total variable rate debt
1.95%
 
1.95%
 
$
856,087

 
$
843,670

 
$
838,032

 
$
959,045

 
$
948,500

Total debt outstanding
 
 
 
 
$
2,093,106

 
$
1,957,360

 
$
2,019,168

 
$
2,169,315

 
$
2,191,851

Variable Rate Loans Subject to Interest Rate Swaps (4)
 
 
 
 
$
438,087

 
$
438,270

 
$
438,475

 
$
438,671

 
$
438,844

% of Fixed Rate Loans (4)
 
 
 
 
80
%
 
79
%
 
80
%
 
76
%
 
77
%
% of Variable Rate Loans (4)
 
 
 
 
20
%
 
21
%
 
20
%
 
24
%
 
23
%
 
 
 
 
 
100
%
 
100
%
 
100
%
 
100
%
 
100
%
Recourse debt
 
 
 
 
$
1,211,324

 
$
1,008,374

 
$
1,063,613

 
$
1,163,079

 
$
1,157,860

Nonrecourse debt
 
 
 
 
881,782

 
948,986

 
955,555

 
1,006,236

 
1,033,991

Total debt outstanding
 
 
 
 
$
2,093,106

 
$
1,957,360

 
$
2,019,168

 
$
2,169,315

 
$
2,191,851

 
(1) On May 6, 2013, we issued a $350.0 million aggregate principal amount of 3.600% Senior Notes due 2023 at an initial offering price of 99.816% of their face value. The notes mature on May 15, 2023.
(2) During the three months ended June 30, 2013, we repurchased a $185.7 million aggregate principal amount of the notes for $198.7 million on which we recognized a loss of $20.6 million, including unamortized loan issuance costs. During the three months ended March 31, 2013, we repurchased a $53.7 million aggregate principal amount of the notes for $56.4 million on which we recognized a loss of $5.3 million, including unamortized loan issuance costs.
(3) As of June 30, 2013, our borrowing capacity under the facility was $800.0 million, of which $650.9 million was available.
(4) 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.

30

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

 
 

 
 

 
 

 
 

 
 
 
 
Fixed rate
 

 
 

 
 

 
 

 
 

 
 
 
 
Secured debt
6.0
%
 
6.0
%
 
6.1
%
 
6.1
%
 
6.0
%
 
6.0
%
 
6.0
%
Senior Unsecured Notes
3.6
%
 
N/A

 
N/A

 
N/A

 
N/A

 
3.6
%
 
N/A

Exchangeable Senior Notes
4.3
%
 
4.3
%
 
4.3
%
 
4.3
%
 
4.3
%
 
4.3
%
 
4.3
%
Other Unsecured Debt
0.0
%
 
0.0
%
 
0.0
%
 
0.0
%
 
0.0
%
 
0.0
%
 
0.0
%
Total fixed rate debt
5.4
%
 
5.7
%
 
5.7
%
 
5.7
%
 
5.7
%
 
5.5
%
 
5.7
%
Variable rate
 

 
 

 
 

 
 

 
 

 
 

 
 

Secured debt
2.5
%
 
2.5
%
 
2.5
%
 
2.6
%
 
2.5
%
 
2.5
%
 
2.5
%
Unsecured Revolving Credit Facility
2.1
%
 
2.2
%
 
2.3
%
 
2.3
%
 
2.3
%
 
2.2
%
 
2.3
%
Construction Loans
2.5
%
 
2.6
%
 
2.8
%
 
2.8
%
 
2.7
%
 
2.6
%
 
2.8
%
Other Unsecured Debt
2.0
%
 
2.2
%
 
2.2
%
 
2.2
%
 
2.2
%
 
2.1
%
 
2.2
%
Interest rate swaps (1)
0.6
%
 
0.6
%
 
0.6
%
 
0.6
%
 
0.7
%
 
0.6
%
 
0.8
%
Total variable rate debt (1)(2)
2.7
%
 
2.8
%
 
2.9
%
 
2.8
%
 
2.8
%
 
2.7
%
 
2.7
%
Total debt outstanding (2)
4.4
%
 
4.4
%
 
4.5
%
 
4.4
%
 
4.3
%
 
4.4
%
 
4.3
%
Debt ratios (coverage ratios excluding capitalized interest) — All coverage computations include the effect of discontinued operations
Adjusted EBITDA debt service coverage ratio
3.2x

 
3.1x

 
3.0x

 
3.0x

 
2.8x

 
3.2x

 
2.7x

Adjusted EBITDA fixed charge coverage ratio
2.9x

 
2.7x

 
2.6x

 
2.6x

 
2.7x

 
2.8x

 
2.6x

Debt to Adjusted EBITDA ratio
6.9x

 
6.9x

 
7.2x

 
7.5x

 
7.6x

 
7.1x

 
7.7x

 
(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.

31

Corporate Office Properties Trust
Debt Analysis  (continued)
(dollars in thousands)
 
 
 
 
 
June 30, 2013
 
 
Secured debt
$
925,682

 
 
Unsecured debt
1,167,424

0.386

 
Total debt outstanding
$
2,093,106

 
 
 
 
 
 
Unencumbered adjusted book
$
3,298,889

 
 
Encumbered adjusted book
1,209,276

 
 
Total adjusted book
$
4,508,165

 
 
 
 
 
 
# of Operating Office Properties
 
 
 
Unencumbered
148

 
 
Encumbered
62

 
 
Total
210

 
 
 
 
 
 
Square Feet of Office Properties (in thousands)
 
 
 
Unencumbered
13,057

 
 
Encumbered
5,980

 
 
Total
19,037

 
 
 
 
 
 
 
Three Months
 
 
 
Ended
 
 
 
June 30, 2013
 
 
Unencumbered NOI from real estate operations
$
52,921

 
 
Encumbered NOI from real estate operations
27,700

 
 
Total NOI from real estate operations
$
80,621

 
 
 
 
 
 
Unencumbered adjusted EBITDA
$
48,441

 
 
Encumbered adjusted EBITDA
27,381

 
 
Total adjusted EBITDA
$
75,822

 
 
 
 
 
 
Unsecured Senior Notes Covenants
Actual
 
Required
Total Debt / Total Assets
45.7
%
 
Less than 60%
Secured Debt / Total Assets
18.6
%
 
Less than 40%
Debt Service Coverage
3.2
x
 
Greater than 1.5x
Unencumbered Assets / Unsecured Debt
267.7
%
 
Greater than 150%
 
 
 
 


32

Corporate Office Properties Trust
Debt Maturity Schedule
(dollars in thousands) 
 
Fixed Rate Debt
 
Variable Rate Debt
 
 
 
Annual Amortization
of Monthly
Payments
 
Balloon
Payments Due
on Maturity
 
Stated Interest Rate 
of Amounts
Maturing
 
Annual Amortization
of Monthly
Payments
 
Balloon
Payments Due
on Maturity
 
Stated Interest Rate 
of Amounts
Maturing
 
Revolving
Credit
Facility
 
Total
Scheduled
Payments
July - September
$
2,083

 
$
5,679

 
6.44%
 
$
193

 
$
—

 
N/A
 
$
—

 
$
7,955

October - December
2,109

 
—

 
N/A
 
203

 
—

 
N/A
 
—

 
2,312

Total 2013
$
4,192

 
$
5,679

 
6.44%
 
$
396

 
$
—

 
N/A
 
$
—

 
$
10,267

2014
$
6,489

 
$
151,681

(1)
 
 
$
815

 
$
—

 
 
 
$
148,000

(2)
$
306,985

2015
5,517

 
103,575

 
 
 
701

 
336,176

(3
)
 
 
—

 
445,969

2016
4,734

 
274,605

 
 
 
—

 
—

 
 
 
—

 
279,339

2017
1,505

 
300,610

 
 
 
—

 
250,000

(4
)
 
 
—

 
552,115

Thereafter
7,228

 
374,195

 
 
 
—

 
120,000

 
 
 
—

 
501,423

Total
$
29,665

 
$
1,210,345

 
 
 
$
1,912

 
$
706,176

 
 
 
$
148,000

 
$
2,096,098

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net discount
 
(2,992
)
 
 
 
 
 
 
 
 
 
 
 
 
 
Total Debt
 
$
2,093,106

Interest Rate Hedges at 6/30/13
 
Notional Amount
 
Fixed Rate
 
Floating Rate Index
 
Effective Date
 
Expiration Date
$
38,087

(5
)
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
 
(1)
We have $70.4 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.
(2)
On July 16, 2013, we entered into an amendment to our Revolving Credit Facility that extended the maturity date of the facility from September 2014 to July 2017, with the option for us to extend such maturity by one year, subject to certain conditions.
(3)
Includes $300.0 million pertaining to a term credit agreement that matures in September 2015, with the option for us to extend such maturity by two one-year periods, subject to certain conditions.
(4)
This $250.0 million maturity may be extended by one year at our option, subject to certain conditions.
(5)
The notional amount is scheduled to amortize to $36.2 million.

33

Corporate Office Properties Trust
Consolidated Joint Ventures as of 6/30/13
(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%
 
$
38,152

$
19,883

50%
Suburban Maryland:
 

 
 
 

 

 
MOR Forbes 2 LLC
56

90.9%
 
4,040

—

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

94.9%
 
54,877

38,087

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

100.0%
 
24,360

12,100

85%
Total/Average
566

96.9%
 
$
121,429

$
70,070

 
NOI of Operating Properties for Three Months Ended 6/30/13 (2)
$
2,831

 
 
 

 

 
NOI of Operating Properties for Six Months Ended 6/30/13 (2)
$
5,124

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

 
 

 

 
Arundel Preserve
1,150

 
$
6,826

$
—

50%
Suburban Maryland:
 

 
 

 

 
Indian Head Technology Center
 

 
 

 

 
Business Park (3)
967

 
6,447

—

75%
M Square Research Park
510

 
5,962

—

50%
Huntsville, Alabama:
 

 
 

 

 
Redstone Gateway
4,477

 
82,655

—

85%
Total
7,104

 
$
101,890

$
—

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

34


Corporate Office Properties Trust
Supplementary Reconciliations of Non-GAAP Measures
(in thousands)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended
 
Six Months Ended
 
6/30/13
 
3/31/13
 
12/31/12
 
9/30/12
 
6/30/12
 
6/30/13
 
6/30/12
Net (loss) income
$
(4,405
)
 
$
15,277

 
$
19,010

 
$
(20,765
)
 
$
11,861

 
$
10,872

 
$
22,096

Interest expense on continuing and discontinued operations
23,369

 
22,371

 
22,782

 
23,366

 
24,975

 
45,740

 
50,650

Income tax expense
21

 
16

 
54

 
106

 
17

 
37

 
221

Depreciation of furniture, fixtures and equipment (FF&E)
527

 
530

 
610

 
624

 
629

 
1,057

 
1,247

Real estate-related depreciation and amortization
28,935

 
28,252

 
28,560

 
30,624

 
31,666

 
57,187

 
62,753

Impairment losses
7,195

 
1,857

 
2,140

 
55,829

 
2,354

 
9,052

 
8,941

Loss (gain) on early extinguishment of debt on continuing and discontinued operations
21,470

 
5,184

 
6

 
(970
)
 
171

 
26,654

 
171

Gain on sales of operating properties
—

 
—

 
8

 
(16,913
)
 
115

 
—

 
(4,023
)
Non-operational property sales
(329
)
 
(2,354
)
 
—

 
—

 
(33
)
 
(2,683
)
 
(33
)
Net gain on investments in unconsolidated entities included in interest and other income
(961
)
 
(60
)
 
(2,992
)
 
(81
)
 
(66
)
 
(1,021
)
 
(516
)
Operating property acquisition costs
—

 
—

 
—

 
222

 
7

 
—

 
7

Adjusted EBITDA
$
75,822

 
$
71,073

 
$
70,178

 
$
72,042

 
$
71,696

 
$
146,895

 
$
141,514

Add back:
 

 
 

 
 

 
 

 
 

 
 

 
 

General, administrative and leasing expenses on continuing and discontinued operations
6,583

 
7,821

 
7,103

 
6,378

 
8,853

 
14,404

 
18,422

Business development expenses and land carry costs on continuing and discontinued operations, excluding operating property acquisition costs
1,327

 
1,359

 
1,205

 
1,410

 
1,297

 
2,686

 
2,891

Depreciation of FF&E
(527
)
 
(530
)
 
(610
)
 
(624
)
 
(629
)
 
(1,057
)
 
(1,247
)
Income from construction contracts and other service operations
(1,413
)
 
(785
)
 
(750
)
 
(873
)
 
(710
)
 
(2,198
)
 
(1,637
)
Interest and other income, excluding net gain on investments in unconsolidated entities
(1,045
)
 
(886
)
 
(1,028
)
 
(1,014
)
 
(774
)
 
(1,931
)
 
(1,541
)
Equity in (income) loss of unconsolidated entities
(126
)
 
(41
)
 
24

 
246

 
187

 
(167
)
 
276

NOI from real estate operations
$
80,621

 
$
78,011

 
$
76,122

 
$
77,565

 
$
79,920

 
$
158,632

 
$
158,678

 
 
 
 
 
 
 
 
 
 
 
 
 
 

35

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

 
 

 
 

 
 

 
 

 
 

 
 

Revenues from real estate operations
$
5,546

 
$
5,719

 
$
5,585

 
$
6,902

 
$
13,299

 
$
11,265

 
$
28,403

Property operating expenses
(1,246
)
 
(1,547
)
 
(1,605
)
 
(2,225
)
 
(4,607
)
 
(2,793
)
 
(9,966
)
Depreciation and amortization
(69
)
 
(89
)
 
(92
)
 
(2,020
)
 
(3,371
)
 
(158
)
 
(6,724
)
General, administrative and leasing expenses
—

 
(1
)
 
—

 
(1
)
 
(2
)
 
(1
)
 
(2
)
Business development expenses and land carry costs
—

 
—

 
—

 
—

 
(6
)
 
—

 
(24
)
Interest
(67
)
 
(64
)
 
(67
)
 
(127
)
 
(736
)
 
(131
)
 
(1,980
)
Gain (loss) on early extinguishment of debt
—

 
—

 
—

 
1,738

 
(2
)
 
—

 
(2
)
Impairment losses
(7,195
)
 
(1,857
)
 
(186
)
 
(9,733
)
 
(2,354
)
 
(9,052
)
 
(13,777
)
Gain on sales of depreciated real estate properties
—

 
—

 
(8
)
 
16,913

 
(103
)
 
—

 
4,035

Discontinued operations
$
(3,031
)
 
$
2,161

 
$
3,627

 
$
11,447

 
$
2,118

 
$
(870
)
 
$
(37
)
GAAP revenues from real estate operations from continuing operations
$
119,729

 
$
116,358

 
$
116,979

 
$
114,362

 
$
110,669

 
$
236,087

 
$
220,869

Revenues from discontinued operations
5,546

 
5,719

 
5,585

 
6,902

 
13,299

 
11,265

 
28,403

Real estate revenues
$
125,275

 
$
122,077

 
$
122,564

 
$
121,264

 
$
123,968

 
$
247,352

 
$
249,272

GAAP property operating expenses from continuing operations
$
43,408

 
$
42,519

 
$
44,837

 
$
41,474

 
$
39,441

 
$
85,927

 
$
80,628

Property operating expenses from discontinued operations
1,246

 
1,547

 
1,605

 
2,225

 
4,607

 
2,793

 
9,966

Real estate property operating expenses
$
44,654

 
$
44,066

 
$
46,442

 
$
43,699

 
$
44,048

 
$
88,720

 
$
90,594

Gain on sales of real estate, net, per statements of operations
$
329

 
$
2,354

 
$
—

 
$
—

 
$
21

 
$
2,683

 
$
21

Gain on sales of real estate from discontinued operations
—

 
—

 
(8
)
 
16,913

 
(103
)
 
—

 
4,035

Gain on sales of real estate from continuing and discontinued operations
329

 
2,354

 
(8
)
 
16,913

 
(82
)
 
2,683

 
4,056

Less: Gain on sales of non-operating properties
(329
)
 
(2,354
)
 
—

 
—

 
(33
)
 
(2,683
)
 
(33
)
Gain on sales of operating properties
$
—

 
$
—

 
$
(8
)
 
$
16,913

 
$
(115
)
 
$
—

 
$
4,023

Impairment losses, per statements of operations
$
—

 
$
—

 
$
1,954

 
$
46,096

 
$
—

 
$
—

 
$
(4,836
)
Impairment losses on discontinued operations
7,195

 
1,857

 
186

 
9,733

 
2,354

 
9,052

 
13,777

Total impairment losses
7,195

 
1,857

 
2,140

 
55,829

 
2,354

 
9,052

 
8,941

Less: Impairment losses on previously depreciated operating properties
(7,195
)
 
(1,857
)
 
(247
)
 
(55,829
)
 
(2,354
)
 
(9,052
)
 
(14,187
)
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
)


36

Corporate Office Properties Trust
Supplementary Reconciliations of Non-GAAP Measures (continued)
(dollars in thousands)
 
Three Months Ended
 
Six Months Ended
 
6/30/13
 
3/31/13
 
12/31/12
 
9/30/12
 
6/30/12
 
6/30/13
 
6/30/12
Depreciation and amortization associated with real estate operations from continuing operations
$
28,866

 
$
28,163

 
$
28,468

 
$
28,604

 
$
28,295

 
$
57,029

 
$
56,029

Depreciation and amortization from discontinued operations
69

 
89

 
92

 
2,020

 
3,371

 
158

 
6,724

Real estate-related depreciation and amortization
$
28,935

 
$
28,252

 
$
28,560

 
$
30,624

 
$
31,666

 
$
57,187

 
$
62,753

Interest expense from continuing operations
$
23,302

 
$
22,307

 
$
22,715

 
$
23,239

 
$
24,239

 
$
45,609

 
$
48,670

Interest expense from discontinued operations
67

 
64

 
67

 
127

 
736

 
131

 
1,980

Total interest expense
23,369

 
22,371

 
22,782

 
23,366

 
24,975

 
45,740

 
50,650

Less: Amortization of deferred financing costs
(1,443
)
 
(1,528
)
 
(1,547
)
 
(1,527
)
 
(1,597
)
 
(2,971
)
 
(3,169
)
Less: Amortization of net debt discounts and premiums, net of amounts capitalized
(556
)
 
(628
)
 
(693
)
 
(683
)
 
(682
)
 
(1,184
)
 
(1,345
)
Denominator for interest coverage
21,370

 
20,215

 
20,542

 
21,156

 
22,696

 
41,585

 
46,136

Scheduled principal amortization
2,491

 
2,512

 
2,590

 
2,791

 
3,096

 
5,003

 
6,303

Denominator for debt service coverage
23,861

 
22,727

 
23,132

 
23,947

 
25,792

 
46,588

 
52,439

Scheduled principal amortization
(2,491
)
 
(2,512
)
 
(2,590
)
 
(2,791
)
 
(3,096
)
 
(5,003
)
 
(6,303
)
Preferred share dividends - redeemable non-convertible
4,885

 
6,106

 
6,106

 
6,546

 
4,167

 
10,991

 
8,192

Preferred unit distributions
165

 
165

 
165

 
165

 
165

 
330

 
330

Denominator for fixed charge coverage
$
26,420

 
$
26,486

 
$
26,813

 
$
27,867

 
$
27,028

 
$
52,906

 
$
54,658

Preferred share dividends
$
4,885

 
$
6,106

 
$
6,106

 
$
6,546

 
$
4,167

 
$
10,991

 
$
8,192

Preferred unit distributions
165

 
165

 
165

 
165

 
165

 
330

 
330

Common share dividends
23,604

 
23,594

 
22,255

 
19,837

 
19,809

 
47,198

 
39,628

Common unit distributions
1,042

 
1,050

 
1,119

 
1,157

 
1,168

 
2,092

 
2,341

Total dividends/distributions
$
29,696

 
$
30,915

 
$
29,645

 
$
27,705

 
$
25,309

 
$
60,611

 
$
50,491

Common share dividends
$
23,604

 
$
23,594

 
$
22,255

 
$
19,837

 
$
19,809

 
$
47,198

 
$
39,628

Common unit distributions
1,042

 
1,050

 
1,119

 
1,157

 
1,168

 
2,092

 
2,341

Dividends and distributions for payout ratios
$
24,646

 
$
24,644

 
$
23,374

 
$
20,994

 
$
20,977

 
$
49,290

 
$
41,969

Total Assets
$
3,699,635

 
$
3,685,099

 
$
3,653,759

 
$
3,597,656

 
$
3,715,075

 
$
3,699,635

 
$
3,715,075

Accumulated depreciation
597,783

 
576,299

 
555,975

 
565,724

 
562,345

 
597,783

 
562,345

Accumulated depreciation included in assets held for sale
12,201

 
12,201

 
12,201

 
12,669

 
34,234

 
12,201

 
34,234

Accumulated amort. of real estate intangibles and deferred leasing costs
189,330

 
184,097

 
181,834

 
174,466

 
177,691

 
189,330

 
177,691

Accumulated amortization of real estate intangibles and deferred leasing costs included in assets held for sale
9,216

 
9,208

 
9,199

 
9,191

 
22,787

 
9,216

 
22,787

Denominator for debt to adjusted book
$
4,508,165

 
$
4,466,904

 
$
4,412,968

 
$
4,359,706

 
$
4,512,132

 
$
4,508,165

 
$
4,512,132


37


Corporate Office Properties Trust
Definitions

Non-GAAP Measures

We believe that the measures defined below that are not determined in accordance with generally accepted accounting principles (“GAAP”) are helpful to investors in measuring our performance and comparing it to that of other real estate investment trusts (“REITs”).  Since these measures exclude certain items includable in their respective most comparable GAAP measures, reliance on the measures has limitations; management compensates for these limitations by using the measures simply as supplemental measures that are weighed in balance with other GAAP and non-GAAP measures.  These measures are not necessarily indications of our cash flow available to fund cash needs.  Additionally, they should not be used as an alternative to the respective most comparable GAAP measures when evaluating our financial performance or to cash flow from operating, investing and financing activities when evaluating our liquidity or ability to make cash distributions or pay debt service.
 
Adjusted Book
Defined as total assets presented on our consolidated balance sheet excluding the effect of accumulated depreciation on real estate properties, accumulated amortization of intangible assets on real estate acquisitions and accumulated amortization of deferred leasing costs.

Adjusted Earnings Before Interest, Income Taxes, Depreciation and Amortization (“Adjusted EBITDA”) 
Adjusted EBITDA is net income (loss) adjusted for the effects of interest expense, depreciation and amortization, impairment losses, gain on sales of properties, gain or loss on early extinguishment of debt, net gain on unconsolidated entities, operating property acquisition costs, loss on interest rate derivatives and income taxes.  We believe that adjusted EBITDA is a useful supplemental measure of performance for assessing our un-levered performance.  We believe that net income (loss) is the most directly comparable GAAP measure to adjusted EBITDA.
 
Amortization of Acquisition Intangibles Included in Net Operating Income 
Represents the amortization of intangible asset and liability categories that is included in net operating income, including amortization of above- or below-market leases and above- or below-market cost arrangements.

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

38


Corporate Office Properties Trust
Definitions

geographic segments, same-office property groupings and individual properties.  We believe that net (loss) income is the most directly comparable GAAP measure to Cash NOI.

Cash NOI, excluding gross lease termination fees 
Defined as Cash NOI adjusted to eliminate the effects of lease termination fees paid by tenants to terminate their lease obligations prior to the end of the agreed lease terms.  Lease termination fees are often recognized as revenue in large one-time lump sum amounts upon the termination of tenant leases.  We believe that Cash NOI adjusted for lease termination fees is a useful supplemental measure of operating performance in evaluating same-office property groupings because it provides a means of evaluating the effect that lease terminations had on the performance of the property groupings.  We believe that net (loss) income is the most directly comparable GAAP measure to Cash NOI, excluding gross lease termination fees.
 
Debt to Adjusted EBITDA ratio 
Defined as debt divided by Adjusted EBITDA for the three month period that is annualized by multiplying by four.
 
Debt to Adjusted Book 
Defined as the carrying value of our debt divided by Adjusted Book.
 
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

39


Corporate Office Properties Trust
Definitions

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

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

40


Corporate Office Properties Trust
Definitions

Net operating income (“NOI”) from real estate operations 
NOI is real estate revenues from continuing and discontinued operations reduced by total property expenses associated with real estate operations, including discontinued operations; total property expenses, as used in this definition, do not include depreciation, amortization or interest expense associated with real estate operations.  We believe that NOI is an important supplemental measure of operating performance for a REIT’s operating real estate because it provides a measure of the core real estate operations that is unaffected by depreciation, amortization, financing and general, administrative and leasing expenses; we believe this measure is particularly useful in evaluating the performance of geographic segments, same-office property groupings and individual properties.  We believe that net (loss) income is the most directly comparable GAAP measure to NOI.
 
NOI Debt Service Coverage Ratio and Adjusted EBITDA Debt Service Coverage Ratio 
These measures divide either NOI from real estate operations or Adjusted EBITDA by the sum of interest expense on continuing and discontinued operations (excluding amortization of deferred financing costs and amortization of debt discounts and premiums, net of amounts capitalized) and scheduled principal amortization on mortgage loans for continuing and discontinued operations.
 
NOI Fixed Charge Coverage Ratio and Adjusted EBITDA Fixed Charge Coverage Ratio 
These measures divide either NOI from real estate operations or Adjusted EBITDA by the sum of (1) interest expense on continuing and discontinued operations (excluding amortization of deferred financing costs and amortization of debt discounts and premiums, net of amounts capitalized), (2) dividends on preferred shares and (3) distributions on preferred units in the Operating Partnership not owned by us.
 
NOI Interest Coverage Ratio and Adjusted EBITDA Interest Coverage Ratio 
These measures divide either NOI from real estate operations or Adjusted EBITDA by interest expense on continuing and discontinued operations (excluding amortization of deferred financing costs and amortization of debt discounts and premiums, net of amounts capitalized).
 
Real Estate Operating Margin 
Defined as real estate revenue divided by NOI from real estate operations.

Payout ratios based on: Diluted FFO; Diluted FFO, as adjusted for comparability; and Diluted AFFO 
These payout ratios are defined as (1) the sum of (a) dividends on common shares and (b) distributions to holders of interests in the Operating Partnership and dividends on convertible preferred shares when such distributions and dividends are included in Diluted FFO divided by (2) the respective non-GAAP measures on which the payout ratios are based.

Recurring Capital Expenditures 
Definition is included above in the definition for Diluted AFFO.
 
Same Office Property NOI 
Defined as NOI from real estate operations of Same Office Properties.  We believe that Same Office Property NOI is an important supplemental measure of operating performance of Same Office Properties for the same reasons discussed above for NOI from real estate operations.
 

41


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.


42