EXHIBIT 99.1
 
 
Earnings Release & Supplemental Information — Unaudited
 
September 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 Equity Analysis
27

Consolidated Statements of FFO
8-9

 
Debt Analysis
28-29

Consolidated Reconciliations of AFFO
10

 
Debt Maturity Schedule
30

 
 

 
Consolidated Joint Ventures
31

PORTFOLIO INFORMATION:
Section III

 
 
 
Consolidated Office Properties by Region
11

 
RECONCILIATIONS & DEFINITIONS:
Section VI

NOI from Real Estate Operations and Occupancy by Property Grouping
12

 
Supplementary Reconciliations of Non-GAAP Measures
32-34

Unstabilized Office Properties
13

 
Definitions
35-39

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

 
 
 
Same Office Properties Average Occupancy Rates by Region
15

 
 
 
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 THIRD QUARTER 2013 RESULTS


COLUMBIA, MD October 25, 2013 - Corporate Office Properties Trust (“COPT” or the “Company”) (NYSE: OFC) announced financial and operating results for the third quarter ended September 30, 2013.

“Driven by strong NOI margins, third quarter results were at the high end of our expectations. We are increasing our prior guidance range for the fourth quarter and full year,” stated Roger A. Waesche, Jr., COPT’s President & Chief Executive Officer. “Looking ahead, we expect stable performance from our current same office portfolio in 2014 and anticipate that our development pipeline and property dispositions will add tremendous value for investors,” he added.

Results:
For the quarter ended September 30, 2013, the Company reported a diluted earnings per share (“EPS”) loss of $0.09 as compared to an EPS loss of $0.39 in the third quarter of 2012. Diluted funds from operations per share (“FFOPS”), as adjusted for comparability, was $0.49 for the third quarter ended September 30, 2013 as compared to $0.53 reported for the third quarter of 2012. The 7.5% year-over-year decrease reflects the Company’s successful portfolio repositioning and de-leveraging. 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 third quarter of 2013 was $0.48 versus $0.52 reported in the third quarter of 2012.

Operating Performance:
Portfolio Summary - At September 30, 2013, the Company’s consolidated portfolio of 210 operating office properties totaled 19.2 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 $28.26 per square foot. The Company’s consolidated portfolio was 88.5% occupied and 89.7% leased as of September 30, 2013.

Same Office Performance - The Company’s same office portfolio excludes properties identified for eventual disposition, including those in its Strategic Reallocation Plan. For the quarter ended September 30, 2013, COPT’s same office portfolio represents 76% of the rentable square feet of the portfolio and consists of 165 properties.

For the third quarter ended September 30, 2013, the Company’s same office property cash NOI, excluding gross lease termination fees, increased 2.4% as compared to the third quarter of 2012. The Company’s same office portfolio was 90.3% occupied and 91.5% leased as of September 30, 2013.


i

Leasing - COPT completed a total of 898,000 square feet of leasing for the quarter ended September 30, 2013. During this same period, the Company’s renewal rate was 72%. Consistent with expectations, for the quarter ended September 30, 2013, total rent on renewed space increased 4.4% on a GAAP basis and decreased 2.6% on a cash basis.

Investment Activity:
At September 30, 2013, the Company had nine properties totaling 1.3 million square feet under construction for a total projected cost of $234.0 million, of which $134.4 million had been incurred. As of the same date, COPT had 235,000 square feet in two properties under redevelopment for a total projected cost of $44.2 million, of which $30.5 million has been incurred. As of September 30, 2013, the Company’s nine properties under construction, on average, were 88% pre-leased, and its redevelopment properties were 51% pre-leased.

Balance Sheet and Capital Transactions:
As of September 30, 2013, the Company’s debt to adjusted book ratio was 46.6% and its fixed charge coverage ratio was 2.9x for the three months then ended. Also, the Company’s weighted average interest rate was 4.2% for the quarter ended September 30, 2013 and 90% of the Company’s debt was subject to fixed interest rates, including the effect of interest rate swaps.

In early July, the Company issued 1.5 million shares of common stock through its at-the-market (ATM) stock offering program. The average price per share was $26.05 and the net proceeds were $38.5 million.

During the quarter, the Company amended the terms of its $800 million line of credit to extend the maturity date from September 1, 2014, to July 14, 2017 plus a one-year extension option; and lowered the interest rate spread over 30-day LIBOR to 130 basis points. The Company also amended the terms of its $300 million and $250 million term loan agreements to grant additional extension options and lower the interest spread over LIBOR.

The Company also completed a registered exchange offer to exchange any and all of its outstanding 3.6% Senior Notes due 2023, which were issued in a private placement for an equal principal amount of new 3.6% Senior Notes due 2023 that have been registered under the Securities Act of 1933.

In September, the Company priced an offering of $250 million aggregate principal amount of 5.25% senior unsecured notes due February 15, 2024 at a price equal to 98.783% of the principal amount.

2013 FFO Guidance:
Management is increasing its previous guidance for the fourth quarter and full year 2013 FFOPS, as adjusted for comparability, from prior ranges of between $0.45-$0.48 and $1.92-$1.97, respectively, to new ranges of between $0.47-$0.49 and $1.96-$1.98. A reconciliation of projected diluted EPS to projected FFOPS for the quarter ending and the year ending December 31, 2013 is provided, as follows:
 
Quarter Ending
 
Year Ending
 
December 31, 2013
 
December 31, 2013
 
Low
 
High
 
Low
 
High
EPS
$
0.14

 
$
0.16

 
$
(0.01
)
 
$
0.01

Real estate depreciation and amortization
0.33

 
0.33

 
1.31

 
1.31

Impairments and exit costs on previously depreciated properties
—

 
—

 
0.35

 
0.35

FFOPS, NAREIT definition
0.47

 
0.49

 
1.65

 
1.67

Net losses on early extinguishment of debt
—

 
—

 
0.31

 
0.31

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

 
$
1.96

 
$
1.98



ii

Conference Call Information:
Management will discuss third quarter 2013 earnings results, as well as its 2013 guidance, on its conference call on October 25, 2013 at 12:00 p.m. Eastern Time, details of which are listed below:

Earnings Release Date:            Friday, October 25, 2013 at 6:00 a.m. Eastern Time

Conference Call Date:                Friday, October 25, 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:                      31730330

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=PXHEGMLBC

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, October 25 at 1:00 p.m. Eastern Time through Friday, November 8 at midnight Eastern Time. To access the replay within the United States, please call 888-286-8010 and use passcode 16654891. To access the replay outside the United States, please call 617-801-6888 and use passcode 16654891.

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:
For definitions of certain terms used in this press release, please refer to the information furnished in our Supplemental Information Package filed as a Form 8-K which can be found on our website (www.copt.com). 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 September 30, 2013, the Company’s consolidated portfolio consisted of 210 office properties totaling 19.2 million rentable square feet. COPT is an S&P MidCap 400 company.


iii

Forward-Looking Information
This press release may contain “forward-looking” statements, as defined in Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, that are based on the Company’s current expectations, estimates and projections about future events and financial trends affecting the Company. Forward-looking statements can be identified by the use of words such as “may,” “will,” “should,” “could,” “believe,” “anticipate,” “expect,” “estimate,” “plan” or other comparable terminology. Forward-looking statements are inherently subject to risks and uncertainties, many of which the Company cannot predict with accuracy and some of which the Company might not even anticipate. Accordingly, the Company can give no assurance that these expectations, estimates and projections will be achieved. Future events and actual results may differ materially from those discussed in the forward-looking statements.

Important factors that may affect these expectations, estimates, and projections include, but are not limited to:
*
general economic and business conditions, which will, among other things, affect office property and data center demand and rents, tenant creditworthiness, interest rates, financing availability and property values;
*
adverse changes in the real estate markets including, among other things, increased competition with other companies;
*
governmental actions and initiatives, including risks associated with the impact of a government shutdown or budgetary reductions or impasses, such as a reduction in rental revenues, non-renewal of leases, and/or a curtailment of demand for additional space by the Company's strategic customers;
*
the Company’s ability to borrow on favorable terms;
*
risks of real estate acquisition and development activities, including, among other things, risks that development projects may not be completed on schedule, that tenants may not take occupancy or pay rent or that development or operating costs may be greater than anticipated;
*
the Company’s ability to sell properties included in its Strategic Reallocation Plan;
*
risks of investing through joint venture structures, including risks that the Company’s joint venture partners may not fulfill their financial obligations as investors or may take actions that are inconsistent with the Company’s objectives;
*
changes in the Company’s plans for properties or views of market economic conditions or failure to obtain development rights, either of which could result in recognition of significant impairment losses;
*
the Company’s ability to satisfy and operate effectively under Federal income tax rules relating to real estate investment trusts and partnerships;
*
the Company's ability to achieve projected results;
*
the dilutive effects of issuing additional common shares; and
*
environmental requirements.

The Company undertakes no obligation to update or supplement any forward-looking statements. For further information, please refer to the Company’s filings with the Securities and Exchange Commission, particularly the section entitled “Risk Factors” in Item 1A of the Company’s Annual Report on Form 10-K for the year ended December 31, 2012.


iv


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


 
For the Three Months Ended September 30,
 
For the Nine Months Ended September 30,
 
2013
 
2012
 
2013
 
2012
Revenues
 

 
 

 
 
 
 
Real estate revenues
$
119,040

 
$
114,362

 
$
355,127

 
$
335,231

Construction contract and other service revenues
16,991

 
15,283

 
52,048

 
53,812

Total revenues
136,031

 
129,645

 
407,175

 
389,043

Expenses
 

 
 

 
 
 
 
Property operating expenses
43,482

 
41,474

 
129,409

 
122,102

Depreciation and amortization associated with real estate operations
29,210

 
28,604

 
86,239

 
84,633

Construction contract and other service expenses
16,306

 
14,410

 
49,165

 
51,302

Impairment losses
16,300

 
46,096

 
16,300

 
41,260

General and administrative expenses
6,237

 
5,062

 
17,213

 
20,531

Leasing expenses
1,790

 
1,315

 
5,217

 
4,266

Business development expenses and land carry costs
1,383

 
1,632

 
4,069

 
4,506

Total operating expenses
114,708

 
138,593

 
307,612

 
328,600

Operating income (loss)
21,323

 
(8,948
)

99,563


60,443

Interest expense
(21,242
)
 
(23,239
)
 
(66,851
)
 
(71,909
)
Interest and other (loss) income
(3
)
 
1,095

 
2,949

 
3,152

Loss on early extinguishment of debt
(374
)
 
(768
)
 
(27,028
)
 
(937
)
(Loss) income from continuing operations before equity in income (loss) of unconsolidated entities and income taxes
(296
)
 
(31,860
)
 
8,633

 
(9,251
)
Equity in income (loss) of unconsolidated entities
44

 
(246
)
 
211

 
(522
)
Income tax expense
(24
)
 
(106
)
 
(61
)
 
(327
)
(Loss) income from continuing operations
(276
)
 
(32,212
)
 
8,783

 
(10,100
)
Discontinued operations
(1,724
)
 
11,447

 
(2,594
)
 
11,410

(Loss) income before gain on sales of real estate
(2,000
)
 
(20,765
)
 
6,189

 
1,310

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

 
—

 
2,683

 
21

Net (loss) income
(2,000
)
 
(20,765
)
 
8,872

 
1,331

Net loss (income) attributable to noncontrolling interests
 

 
 

 
 
 
 
Common units in the Operating Partnership
232

 
1,533

 
474

 
738

Preferred units in the Operating Partnership
(165
)
 
(165
)
 
(495
)
 
(495
)
Other consolidated entities
(1,031
)
 
235

 
(2,160
)
 
864

Net (loss) income attributable to COPT
(2,964
)
 
(19,162
)
 
6,691

 
2,438

Preferred share dividends
(4,490
)
 
(6,546
)
 
(15,481
)
 
(14,738
)
Issuance costs associated with redeemed preferred shares
—

 
(1,827
)
 
(2,904
)
 
(1,827
)
Net loss attributable to COPT common shareholders
$
(7,454
)
 
$
(27,535
)
 
$
(11,694
)
 
$
(14,127
)
 
 
 
 
 
 
 
 
Earnings per share (“EPS”) computation:
 

 
 

 
 
 
 
Numerator for diluted EPS:
 

 
 

 
 
 
 
Net (loss) income attributable to common shareholders
$
(7,454
)
 
$
(27,535
)
 
$
(11,694
)
 
$
(14,127
)
Amount allocable to restricted shares
(97
)
 
(111
)
 
(317
)
 
(357
)
Numerator for diluted EPS
$
(7,551
)
 
$
(27,646
)
 
$
(12,011
)
 
$
(14,484
)
 
 
 
 
 
 
 
 
Denominator:
 

 
 

 
 
 
 
Weighted average common shares - basic and diluted
86,760

 
71,688

 
84,547

 
71,590

Diluted EPS
$
(0.09
)
 
$
(0.39
)
 
$
(0.14
)
 
$
(0.20
)

v


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

 
For the Three Months Ended September 30,
 
For the Nine Months Ended September 30,
 
2013
 
2012
 
2013
 
2012
Net (loss) income
$
(2,000
)
 
$
(20,765
)
 
$
8,872

 
$
1,331

Real estate-related depreciation and amortization
29,210

 
30,624

 
86,397

 
93,377

Impairment losses on previously depreciated operating properties
22,074

 
55,829

 
31,126

 
70,016

Gain on sales of previously depreciated operating properties
—

 
(16,913
)
 
—

 
(20,936
)
Depreciation and amortization on unconsolidated real estate entities
—

 
113

 
—

 
346

Funds from operations (“FFO”)
49,284

 
48,888

 
126,395

 
144,134

Noncontrolling interests - preferred units in the Operating Partnership
(165
)
 
(165
)
 
(495
)
 
(495
)
FFO allocable to other noncontrolling interests
(833
)
 
(571
)
 
(2,830
)
 
(1,251
)
Preferred share dividends
(4,490
)
 
(6,546
)
 
(15,481
)
 
(14,738
)
Issuance costs associated with redeemed preferred shares
—

 
(1,827
)
 
(2,904
)
 
(1,827
)
Basic and diluted FFO allocable to restricted shares
(178
)
 
(214
)
 
(450
)
 
(728
)
Basic and diluted FFO available to common share and common unit holders (“Basic and diluted FFO”)
43,618

 
39,565

 
104,235

 
125,095

Operating property acquisition costs
—

 
222

 
—

 
229

Gain on sales of non-operating properties
—

 
—

 
(2,683
)
 
(33
)
Impairment recoveries on non-operating properties
—

 
—

 
—

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

 
—

 
—

 
673

Loss (gain) on early extinguishment of debt
374

 
(970
)
 
27,028

 
(799
)
Issuance costs associated with redeemed preferred shares
—

 
1,827

 
2,904

 
1,827

Diluted FFO available to common share and common unit holders, as adjusted for comparability
43,992

 
40,644

 
131,484

 
121,746

Straight line rent adjustments
(980
)
 
(2,595
)
 
(6,824
)
 
(6,631
)
Amortization of intangibles included in net operating income
230

 
251

 
579

 
659

Share-based compensation, net of amounts capitalized
1,573

 
1,703

 
4,869

 
8,262

Amortization of deferred financing costs
1,321

 
1,527

 
4,292

 
4,696

Amortization of net debt discounts, net of amounts capitalized
(121
)
 
683

 
1,063

 
2,028

Amortization of settled debt hedges
16

 
15

 
46

 
46

Recurring capital expenditures
(10,528
)
 
(8,518
)
 
(21,698
)
 
(16,467
)
Diluted adjusted funds from operations available to common share and common unit holders (“Diluted AFFO”)
$
35,503

 
$
33,710

 
$
113,811

 
$
114,339

Diluted FFO per share
$
0.48

 
$
0.52

 
$
1.18

 
$
1.65

Diluted FFO per share, as adjusted for comparability
$
0.49

 
$
0.53

 
$
1.49

 
$
1.60

Dividends/distributions per common share/unit
$
0.2750

 
$
0.2750

 
$
0.8250

 
$
0.8250




vi


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

 
 
September 30,
2013
 
December 31,
2012
Balance Sheet Data
 
 

 
 

Properties, net of accumulated depreciation
 
$
3,239,746

 
$
3,163,044

Total assets
 
3,755,588

 
3,653,759

Debt, net
 
2,135,031

 
2,019,168

Total liabilities
 
2,304,732

 
2,206,962

Redeemable noncontrolling interest
 
16,789

 
10,298

Equity
 
1,434,067

 
1,436,499

Debt to adjusted book
 
46.6
%
 
45.8
%
Debt to total market capitalization
 
47.4
%
 
45.0
%
 
 
 
 
 
Consolidated Property Data (as of period end)
 
 

 
 

Number of operating properties
 
210

 
208

Total net rentable square feet owned (in thousands)
 
19,204

 
18,831

Occupancy %
 
88.5
%
 
87.8
%
Leased %
 
89.7
%
 
89.2
%
 
 
 
 
 
Reconciliation of total assets to denominator for debt to adjusted book
 
 

 
 

Total assets
 
$
3,755,588

 
$
3,653,759

Accumulated depreciation
 
612,369

 
555,975

Accumulated depreciation included in assets held for sale
 
8,845

 
12,201

Accumulated amortization of real estate intangibles and deferred leasing costs
 
195,559

 
181,834

Accumulated amortization of real estate intangibles and deferred leasing costs included in assets held for sale
 
9,224

 
9,199

Denominator for debt to adjusted book
 
$
4,581,585

 
$
4,412,968

 
For the Three Months Ended September 30,
 
For the Nine Months Ended September 30,
2013
 
2012
 
2013
 
2012
Payout ratios
 

 
 

 
 

 
 

Diluted FFO
57.6
%
 
53.1
%
 
71.4
%
 
50.3
%
Diluted FFO, as adjusted for comparability
57.1
%
 
51.7
%
 
56.6
%
 
51.7
%
Diluted AFFO
70.7
%
 
62.3
%
 
65.4
%
 
55.1
%
Adjusted EBITDA interest coverage ratio
3.6
x
 
3.4
x
 
3.6
x
 
3.2
x
Adjusted EBITDA fixed charge coverage ratio
2.9
x
 
2.6
x
 
2.8
x
 
2.6
x
Debt to Adjusted EBITDA ratio (1)
7.4
x
 
7.5
x
 
7.3
x
 
7.6
x
 
 
 
 
 
 
 
 
Reconciliation of denominators for diluted EPS and diluted FFO per share
 
 

 
 
 
 
Denominator for diluted EPS
86,760

 
71,688

 
84,547

 
71,590

Weighted average common units
3,804

 
4,233

 
3,832

 
4,256

Anti-dilutive EPS effect of share-based compensation awards
45

 
73

 
63

 
48

Denominator for diluted FFO per share
90,609

 
75,994

 
88,442

 
75,894

 
 
 
 
 
 
 
 
Reconciliation of FFO to FFO, as adjusted for comparability
 

 
 

 
 

 
 

FFO, per NAREIT
$
49,284

 
$
48,888

 
$
126,395

 
$
144,134

Gain on sales of non-operating properties
—

 
—

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

 
—

 
—

 
(4,573
)
Operating property acquisition costs
—

 
222

 
—

 
229

Loss (gain) on early extinguishment of debt, continuing and discontinued operations
374

 
(970
)
 
27,028

 
(799
)
Issuance costs associated with redeemed preferred shares
—

 
1,827

 
2,904

 
1,827

FFO, as adjusted for comparability
$
49,658

 
$
49,967

 
$
153,644

 
$
140,785


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

 
 

 
 
 
 
Common share dividends
$
24,022

 
$
19,837

 
$
71,220

 
$
59,465

Common unit distributions
1,094

 
1,157

 
3,186

 
3,498

Dividends and distributions for payout ratios
$
25,116

 
$
20,994

 
$
74,406

 
$
62,963

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

 
 

 
 

 
 

Net (loss) income
$
(2,000
)
 
$
(20,765
)
 
$
8,872

 
$
1,331

Interest expense on continuing operations
21,242

 
23,239

 
66,851

 
71,909

Interest expense on discontinued operations
68

 
127

 
199

 
2,107

Income tax expense
24

 
106

 
61

 
327

Real estate-related depreciation and amortization
29,210

 
30,624

 
86,397

 
93,377

Depreciation of furniture, fixtures and equipment
502

 
624

 
1,559

 
1,871

Impairment losses
22,074

 
55,829

 
31,126

 
64,770

Loss (gain) on early extinguishment of debt on continuing and discontinued operations
374

 
(970
)
 
27,028

 
(799
)
Gain on sales of operating properties
—

 
(16,913
)
 
—

 
(20,936
)
Gain on sales of non-operational properties
—

 
—

 
(2,683
)
 
(33
)
Net loss (gain) on investments in unconsolidated entities included in interest and other income
1,006

 
(81
)
 
(15
)
 
(597
)
Operating property acquisition costs
—

 
222

 
—

 
229

Adjusted EBITDA
$
72,500

 
$
72,042

 
$
219,395

 
$
213,556

 
 
 
 
 
 
 
 
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
$
21,242

 
$
23,239

 
$
66,851

 
$
71,909

Interest expense from discontinued operations
68

 
127

 
199

 
2,107

Less: Amortization of deferred financing costs
(1,321
)
 
(1,527
)
 
(4,292
)
 
(4,696
)
Less: Amortization of net debt discount, net of amounts capitalized
121

 
(683
)
 
(1,063
)
 
(2,028
)
Denominator for interest coverage-Adjusted EBITDA
20,110

 
21,156

 
61,695

 
67,292

Preferred share dividends
4,490

 
6,546

 
15,481

 
14,738

Preferred unit distributions
165

 
165

 
495

 
495

Denominator for fixed charge coverage-Adjusted EBITDA
$
24,765

 
$
27,867

 
$
77,671

 
$
82,525

 
 
 
 
 
 
 
 

viii


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

 
For the Three Months Ended September 30,
 
For the Nine Months Ended September 30,
 
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
$
4,894

 
$
7,774

 
$
10,983

 
$
11,103

Building improvements on operating properties
4,857

 
4,646

 
8,995

 
6,813

Leasing costs for operating properties
2,260

 
947

 
5,114

 
5,109

Less: Nonrecurring tenant improvements and incentives on operating properties
(230
)
 
(3,852
)
 
(238
)
 
(4,510
)
Less: Nonrecurring building improvements on operating properties
(1,266
)
 
(940
)
 
(3,113
)
 
(1,919
)
Less: Nonrecurring leasing costs for operating properties
14

 
(130
)
 
(36
)
 
(209
)
Add: Recurring capital expenditures on operating properties held through joint ventures
(1
)
 
73

 
(7
)
 
80

Recurring capital expenditures
$
10,528

 
$
8,518

 
$
21,698

 
$
16,467

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

 
 

 
 

 
 

Same office property net operating income
$
64,601

 
$
63,968

 
$
193,324

 
$
189,762

Less: Straight-line rent adjustments
(1,029
)
 
(1,584
)
 
(3,149
)
 
(4,992
)
Less: Amortization of deferred market rental revenue
22

 
(17
)
 
(43
)
 
(95
)
Add: Amortization of above-market cost arrangements
320

 
371

 
958

 
1,095

Same office property cash net operating income
63,914

 
62,738

 
191,090

 
185,770

Less: Lease termination fees, gross
(306
)
 
(636
)
 
(1,280
)
 
(1,507
)
Same office property cash net operating income, excluding gross lease termination fees
$
63,608

 
$
62,102

 
$
189,810

 
$
184,263

 
 
 
 
 
 
 
 

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”). COPT is listed on the New York Stock Exchange under the symbol “OFC” and is a S&P MidCap 400 Company. As of September 30, 2013, COPT derived 64% of its annualized revenue from its strategic tenant niche properties and 21% from its regional office properties. COPT’s strategic tenant niche 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. COPT’s regional office properties are those held for long-term investment predominantly in the Greater Washington, DC/Baltimore region, excluding Strategic Tenant Niche Properties. As of September 30, 2013, COPT’s operating portfolio of 210 office properties encompassed 19.2 million square feet and was 89.7% leased. As of the same date, COPT also owned one wholesale data center that was 70% 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); All Stable Outlook

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@key.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
 
Nine Months Ended
SUMMARY OF RESULTS 
 
9/30/13
 
6/30/13
 
3/31/13
 
12/31/12
 
9/30/12
 
9/30/13
 
9/30/12
Same Office NOI
 
$
64,601

 
$
65,206

 
$
63,517

 
$
62,676

 
$
63,968

 
$
193,324

 
$
189,762

NOI from real estate operations
 
$
79,676

 
$
80,621

 
$
78,011

 
$
76,122

 
$
77,565

 
$
238,308

 
$
236,243

Adjusted EBITDA
 
$
72,500

 
$
75,822

 
$
71,073

 
$
70,178

 
$
72,042

 
$
219,395

 
$
213,556

Net (loss) income attributable to COPT common shareholders
 
$
(7,454
)
 
$
(13,154
)
 
$
8,914

 
$
12,433

 
$
(27,535
)
 
$
(11,694
)
 
$
(14,127
)
FFO - per NAREIT
 
$
49,284

 
$
31,725

 
$
45,386

 
$
47,825

 
$
48,888

 
$
126,395

 
$
144,134

FFO - as adjusted for comparability
 
$
49,658

 
$
55,770

 
$
48,216

 
$
49,724

 
$
49,967

 
$
153,644

 
$
140,785

Basic and diluted FFO available to common share and common unit holders
 
$
43,618

 
$
22,412

 
$
38,205

 
$
40,625

 
$
39,565

 
$
104,235

 
$
125,095

Diluted AFFO available to common share and common unit holders
 
$
35,503

 
$
42,417

 
$
35,891

 
$
15,860

 
$
33,710

 
$
113,811

 
$
114,339

Per share - diluted:
 
 

 
 

 
 

 
 

 
 

 
 

 
 
EPS
 
$
(0.09
)
 
$
(0.16
)
 
$
0.11

 
$
0.16

 
$
(0.39
)
 
$
(0.14
)
 
$
(0.20
)
FFO - NAREIT
 
$
0.48

 
$
0.25

 
$
0.45

 
$
0.49

 
$
0.52

 
$
1.18

 
$
1.65

FFO - as adjusted for comparability
 
$
0.49

 
$
0.52

 
$
0.48

 
$
0.51

 
$
0.53

 
$
1.49

 
$
1.60

Dividend per common share
 
$
0.2750

 
$
0.2750

 
$
0.2750

 
$
0.2750

 
$
0.2750

 
$
0.8250

 
$
0.8250

Payout ratios:
 
 

 
 

 
 

 
 

 
 

 
 

 
 
Diluted FFO
 
57.6
%
 
110.0
%
 
64.5
%
 
57.5
%
 
53.1
%
 
71.4
%
 
50.3
%
Diluted FFO - as adjusted for comparability
 
57.1
%
 
53.1
%
 
60.1
%
 
55.0
%
 
51.7
%
 
56.6
%
 
51.7
%
Diluted AFFO
 
70.7
%
 
58.1
%
 
68.7
%
 
147.4
%
 
62.3
%
 
65.4
%
 
55.1
%
Real estate operating margin
 
64.0
%
 
64.4
%
 
63.9
%
 
62.1
%
 
64.0
%
 
64.1
%
 
63.8
%
CAPITALIZATION
 
 

 
 

 
 
 
 

 
 

 
 

 
 
Total Market Capitalization
 
$
4,503,307

 
$
4,636,656

 
$
4,689,907

 
$
4,485,626

 
$
4,342,417

 
 
 
 
Total Equity Market Capitalization
 
$
2,368,276

 
$
2,543,550

 
$
2,732,547

 
$
2,466,458

 
$
2,173,102

 
 
 
 
Debt, net
 
$
2,135,031

 
$
2,093,106

 
$
1,957,360

 
$
2,019,168

 
$
2,169,315

 
 
 
 
Debt to Total Market Capitalization
 
47.4
%
 
45.1
%
 
41.7
%
 
45.0
%
 
50.0
%
 
 
 
 
Debt to Adjusted Book
 
46.6
%
 
46.4
%
 
43.8
%
 
45.8
%
 
49.8
%
 
 
 
 
Adjusted EBITDA interest coverage ratio
 
3.6

 
3.5

 
3.5

 
3.4

 
3.4

 
3.6

 
3.2

Adjusted EBITDA debt service coverage ratio
 
3.2

 
3.2

 
3.1

 
3.0

 
3.0

 
3.2

 
2.8

Adjusted EBITDA fixed charge coverage ratio
 
2.9
x
 
2.9
x
 
2.7
x
 
2.6
x
 
2.6
x
 
2.8
x
 
2.6
x
Debt to Adjusted EBITDA ratio
 
7.4
x
 
6.9
x
 
6.9
x
 
7.2
x
 
7.5
x
 
7.3
x
 
7.6
x
OTHER
 
 

 
 

 
 

 
 

 
 

 
 

 
 
Revenue from early termination of leases
 
$
891

 
$
1,280

 
$
835

 
$
583

 
$
543

 
$
3,006

 
$
1,288

Capitalized interest costs
 
$
2,215

 
$
2,088

 
$
2,440

 
$
3,109

 
$
3,390

 
$
6,743

 
$
10,794

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 


3

Corporate Office Properties Trust
Selected Portfolio Data
 
 
 
 
 
 
 
 
 
 
 
 
9/30/13
 
6/30/13
 
3/31/13
 
12/31/12
 
9/30/12
 
# of Operating Office Properties
 
 
 
 
 
 
 
 
 
 
Total Portfolio
210

 
210

 
210

 
208

 
206

 
Same Office Properties
165

 
165

 
165

 
165

 
165

 
 
 
 
 
 
 
 
 
 
 
 
% Occupied
 

 
 

 
 

 
 

 
 

 
Total Portfolio
88.5
%
 
88.2
%
 
87.6
%
 
87.8
%
 
88.1
%
 
Same Office Properties
90.3
%
 
90.8
%
 
90.3
%
 
89.5
%
 
89.0
%
 
 
 
 
 
 
 
 
 
 
 
 
% Leased
 

 
 

 
 

 
 

 
 

 
Total Portfolio
89.7
%
 
90.0
%
 
89.3
%
 
89.2
%
 
89.9
%
 
 
 
 
 
 
 
 
 
 
 
 
Square Feet of Office Properties (in thousands)
 

 
 

 
 

 
 

 
 

 
Total Portfolio
19,204

 
19,037

 
19,128

 
18,831

 
18,591

 
Same Office Properties
14,601

 
14,601

 
14,601

 
14,601

 
14,601

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

 
18

 
18

 
18

 
18

 
MWs Operational
9

 
9

 
9

 
6

 
6

 
MWs Leased
6.3

 
4.3

 
4.3

 
4

 
4

 
 
 
 
 
 
 
 
 
 
 
 








4

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

 
 

 
 

 
 

 
 

Properties, net
 

 
 

 
 

 
 

 
 

Operating properties, net
$
2,713,579

 
$
2,703,009

 
$
2,705,335

 
$
2,597,666

 
$
2,487,919

Construction and redevelopment in progress, including land (1)
174,117

 
189,079

 
160,311

 
247,386

 
271,798

Land held for future development and pre-construction costs (1)
352,050

 
319,216

 
324,327

 
317,992

 
342,797

Total properties, net
3,239,746

 
3,211,304

 
3,189,973

 
3,163,044

 
3,102,514

Assets held for sale
133,984

 
136,896

 
142,404

 
140,229

 
137,815

Cash and cash equivalents
27,318

 
9,196

 
23,509

 
10,594

 
5,009

Restricted cash and marketable securities
14,698

 
19,472

 
17,040

 
21,557

 
20,926

Accounts receivable, net
17,724

 
23,751

 
10,768

 
19,247

 
15,877

Deferred rent receivable
90,104

 
89,811

 
88,716

 
85,802

 
83,156

Intangible assets on real estate acquisitions, net
64,372

 
68,046

 
72,035

 
75,879

 
81,059

Deferred leasing and financing costs, net
63,246

 
57,488

 
59,856

 
59,952

 
58,753

Mortgage and other investing receivables
40,321

 
38,966

 
38,441

 
33,396

 
40,761

Prepaid expenses and other assets
64,075

 
44,705

 
42,357

 
44,059

 
51,786

Total assets
$
3,755,588

 
$
3,699,635

 
$
3,685,099

 
$
3,653,759

 
$
3,597,656

Liabilities and equity
 

 
 

 
 

 
 

 
 

Liabilities:
 

 
 

 
 

 
 

 
 

Debt, net
$
2,135,031

 
$
2,093,106

 
$
1,957,360

 
$
2,019,168

 
$
2,169,315

Accounts payable and accrued expenses
85,291

 
84,181

 
90,645

 
97,922

 
87,390

Rents received in advance and security deposits
28,539

 
24,095

 
26,024

 
27,632

 
26,773

Dividends and distributions payable
29,077

 
28,602

 
29,947

 
28,698

 
26,954

Deferred revenue associated with operating leases
8,545

 
9,649

 
10,833

 
11,995

 
13,102

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

 
6,420

 
6,420

 
6,420

 
6,420

Interest rate derivatives
3,595

 
3,555

 
5,340

 
6,185

 
6,543

Other liabilities
8,234

 
8,169

 
7,631

 
8,942

 
10,938

Total liabilities
2,304,732

 
2,257,777

 
2,134,200

 
2,206,962

 
2,347,435

Redeemable noncontrolling interest
16,789

 
15,571

 
10,356

 
10,298

 
9,932

Equity:
 

 
 

 
 

 
 
 
 
COPT’s shareholders’ equity:
 

 
 

 
 

 
 
 
 
Preferred shares at liquidation preference
249,083

 
249,083

 
333,833

 
333,833

 
333,833

Common shares
874

 
858

 
858

 
809

 
722

Additional paid-in capital
1,812,801

 
1,772,470

 
1,772,255

 
1,653,672

 
1,451,416

Cumulative distributions in excess of net income
(700,368
)
 
(668,892
)
 
(632,134
)
 
(617,455
)
 
(607,633
)
Accumulated other comprehensive income (loss)
2,925

 
3,631

 
(4,410
)
 
(5,435
)
 
(5,688
)
Total COPT’s shareholders’ equity
1,365,315

 
1,357,150

 
1,470,402

 
1,365,424

 
1,172,650

Noncontrolling interests in subsidiaries
 

 
 

 
 

 
 

 
 

Common units in the Operating Partnership
50,815

 
49,112

 
50,604

 
52,122

 
49,157

Preferred units in the Operating Partnership
8,800

 
8,800

 
8,800

 
8,800

 
8,800

Other consolidated entities
9,137

 
11,225

 
10,737

 
10,153

 
9,682

Total noncontrolling interests in subsidiaries
68,752

 
69,137

 
70,141

 
71,075

 
67,639

Total equity
1,434,067

 
1,426,287

 
1,540,543

 
1,436,499

 
1,240,289

Total liabilities, redeemable noncontrolling interest and equity
$
3,755,588

 
$
3,699,635

 
$
3,685,099

 
$
3,653,759

 
$
3,597,656

(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
 
Nine Months Ended
 
9/30/13
 
6/30/13
 
3/31/13
 
12/31/12
 
9/30/12
 
9/30/13
 
9/30/12
Revenues
 

 
 

 
 

 
 

 
 

 
 
 
 
Rental revenue
$
97,442

 
$
97,266

 
$
94,920

 
$
94,066

 
$
92,287

 
$
289,628

 
$
271,634

Tenant recoveries and other real estate operations revenue
21,598

 
22,463

 
21,438

 
22,913

 
22,075

 
65,499

 
63,597

Construction contract and other service revenues
16,991

 
20,795

 
14,262

 
20,024

 
15,283

 
52,048

 
53,812

Total revenues
136,031

 
140,524

 
130,620

 
137,003

 
129,645

 
407,175

 
389,043

Expenses
 

 
 

 
 

 
 

 
 

 
 
 
 
Property operating expenses
43,482

 
43,408

 
42,519

 
44,837

 
41,474

 
129,409

 
122,102

Depreciation and amortization associated with real estate operations
29,210

 
28,866

 
28,163

 
28,468

 
28,604

 
86,239

 
84,633

Construction contract and other service expenses
16,306

 
19,382

 
13,477

 
19,274

 
14,410

 
49,165

 
51,302

Impairment losses
16,300

 
—

 
—

 
1,954

 
46,096

 
16,300

 
41,260

General and administrative expenses
6,237

 
4,992

 
5,984

 
5,740

 
5,062

 
17,213

 
20,531

Leasing expenses
1,790

 
1,591

 
1,836

 
1,363

 
1,315

 
5,217

 
4,266

Business development expenses and land carry costs
1,383

 
1,327

 
1,359

 
1,205

 
1,632

 
4,069

 
4,506

Total operating expenses
114,708

 
99,566

 
93,338

 
102,841

 
138,593

 
307,612

 
328,600

Operating income (loss)
21,323

 
40,958

 
37,282

 
34,162

 
(8,948
)
 
99,563

 
60,443

Interest expense
(21,242
)
 
(23,302
)
 
(22,307
)
 
(22,715
)
 
(23,239
)
 
(66,851
)
 
(71,909
)
Interest and other (loss) income
(3
)
 
2,006

 
946

 
4,020

 
1,095

 
2,949

 
3,152

Loss on early extinguishment of debt
(374
)
 
(21,470
)
 
(5,184
)
 
(6
)
 
(768
)
 
(27,028
)
 
(937
)
(Loss) income from continuing operations before equity in income (loss) of unconsolidated entities and income taxes
(296
)
 
(1,808
)
 
10,737

 
15,461

 
(31,860
)
 
8,633

 
(9,251
)
Equity in income (loss) of unconsolidated entities
44

 
126

 
41

 
(24
)
 
(246
)
 
211

 
(522
)
Income tax expense
(24
)
 
(21
)
 
(16
)
 
(54
)
 
(106
)
 
(61
)
 
(327
)
(Loss) income from continuing operations
(276
)
 
(1,703
)
 
10,762

 
15,383

 
(32,212
)
 
8,783

 
(10,100
)
Discontinued operations
(1,724
)
 
(3,031
)
 
2,161

 
3,627

 
11,447

 
(2,594
)
 
11,410

(Loss) income before gain on sales of real estate
(2,000
)
 
(4,734
)
 
12,923

 
19,010

 
(20,765
)
 
6,189

 
1,310

Gain on sales of real estate
—

 
329

 
2,354

 
—

 
—

 
2,683

 
21

Net (loss) income
(2,000
)
 
(4,405
)
 
15,277

 
19,010

 
(20,765
)
 
8,872

 
1,331

Net loss (income) attributable to noncontrolling interests
 

 
 

 
 

 
 

 
 

 
 
 
 
Common units in the Operating Partnership
232

 
671

 
(429
)
 
(651
)
 
1,533

 
474

 
738

Preferred units in the Operating Partnership
(165
)
 
(165
)
 
(165
)
 
(165
)
 
(165
)
 
(495
)
 
(495
)
Other consolidated entities
(1,031
)
 
(1,466
)
 
337

 
345

 
235

 
(2,160
)
 
864

Net (loss) income attributable to COPT
(2,964
)
 
(5,365
)
 
15,020

 
18,539

 
(19,162
)
 
6,691

 
2,438

Preferred share dividends
(4,490
)
 
(4,885
)
 
(6,106
)
 
(6,106
)
 
(6,546
)
 
(15,481
)
 
(14,738
)
Issuance costs associated with redeemed preferred shares
—

 
(2,904
)
 
—

 
—

 
(1,827
)
 
(2,904
)
 
(1,827
)
Net (loss) income attributable to COPT common shareholders
$
(7,454
)
 
$
(13,154
)
 
$
8,914

 
$
12,433

 
$
(27,535
)
 
$
(11,694
)
 
$
(14,127
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 

6

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

 
 

 
 

 
 

 
 

 
 
 
 
Numerator for diluted EPS
 

 
 

 
 

 
 

 
 

 
 
 
 
Net (loss) income attributable to common shareholders
$
(7,454
)
 
$
(13,154
)
 
$
8,914

 
$
12,433

 
$
(27,535
)
 
$
(11,694
)
 
$
(14,127
)
Dilutive effect of common units in the Operating Partnership
—

 
(671
)
 
—

 
—

 
—

 
—

 
—

Amount allocable to restricted shares
(97
)
 
(102
)
 
(118
)
 
(112
)
 
(111
)
 
(317
)
 
(357
)
Numerator for diluted EPS
$
(7,551
)
 
$
(13,927
)
 
$
8,796

 
$
12,321

 
$
(27,646
)
 
$
(12,011
)
 
$
(14,484
)
Denominator:
 

 
 

 
 

 
 

 
 

 
 
 
 
Weighted average common shares - basic
86,760

 
85,425

 
81,397

 
79,004

 
71,688

 
84,547

 
71,590

Dilutive effect of common units in the Operating Partnership
—

 
3,801

 
—

 
—

 
—

 
—

 
—

Dilutive effect of share-based compensation awards
—

 
—

 
52

 
67

 
—

 
—

 
—

Weighted average common shares - diluted
86,760

 
89,226

 
81,449

 
79,071

 
71,688

 
84,547

 
71,590

Diluted EPS
$
(0.09
)
 
$
(0.16
)
 
$
0.11

 
$
0.16

 
$
(0.39
)
 
$
(0.14
)
 
$
(0.20
)

7

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

 
 

 
 

 
 

 
 

 
 
 
 
Real estate revenues
$
124,561

 
$
125,275

 
$
122,077

 
$
122,564

 
$
121,264

 
$
371,913

 
$
370,536

Real estate property operating expenses
(44,885
)
 
(44,654
)
 
(44,066
)
 
(46,442
)
 
(43,699
)
 
(133,605
)
 
(134,293
)
NOI from real estate operations (1) (2)
79,676

 
80,621

 
78,011

 
76,122

 
77,565

 
238,308

 
236,243

General and administrative expenses
(6,237
)
 
(4,992
)
 
(5,984
)
 
(5,740
)
 
(5,062
)
 
(17,213
)
 
(20,531
)
Leasing expenses (2)
(1,790
)
 
(1,591
)
 
(1,837
)
 
(1,363
)
 
(1,316
)
 
(5,218
)
 
(4,269
)
Business development expenses and land carry costs (2)
(1,383
)
 
(1,327
)
 
(1,359
)
 
(1,205
)
 
(1,632
)
 
(4,069
)
 
(4,530
)
NOI from construction contracts and other service operations
685

 
1,413

 
785

 
750

 
873

 
2,883

 
2,510

Impairment (losses) recoveries on non-operating properties
—

 
—

 
—

 
(1,893
)
 
—

 
—

 
5,246

Equity in income (loss) of unconsolidated entities
44

 
126

 
41

 
(24
)
 
(246
)
 
211

 
(522
)
Depreciation and amortization on unconsolidated real estate entities
—

 
—

 
—

 
—

 
113

 
—

 
346

Interest and other (loss) income
(3
)
 
2,006

 
946

 
4,020

 
1,095

 
2,949

 
3,152

(Loss) gain on early extinguishment of debt (2)
(374
)
 
(21,470
)
 
(5,184
)
 
(6
)
 
970

 
(27,028
)
 
799

Gain on sales of non-operating properties
—

 
329

 
2,354

 
—

 
—

 
2,683

 
33

Total interest expense (2)
(21,310
)
 
(23,369
)
 
(22,371
)
 
(22,782
)
 
(23,366
)
 
(67,050
)
 
(74,016
)
Income tax expense
(24
)
 
(21
)
 
(16
)
 
(54
)
 
(106
)
 
(61
)
 
(327
)
FFO - per NAREIT (1)
49,284

 
31,725

 
45,386

 
47,825

 
48,888

 
126,395

 
144,134

Preferred share dividends
(4,490
)
 
(4,885
)
 
(6,106
)
 
(6,106
)
 
(6,546
)
 
(15,481
)
 
(14,738
)
Issuance costs associated with redeemed preferred shares
—

 
(2,904
)
 
—

 
—

 
(1,827
)
 
(2,904
)
 
(1,827
)
Noncontrolling interests - preferred units in the Operating Partnership
(165
)
 
(165
)
 
(165
)
 
(165
)
 
(165
)
 
(495
)
 
(495
)
FFO allocable to other noncontrolling interests
(833
)
 
(1,270
)
 
(727
)
 
(738
)
 
(571
)
 
(2,830
)
 
(1,251
)
Basic and diluted FFO allocable to restricted shares
(178
)
 
(89
)
 
(183
)
 
(191
)
 
(214
)
 
(450
)
 
(728
)
Basic and diluted FFO available to common share and common unit holders (1)
43,618

 
22,412

 
38,205

 
40,625

 
39,565

 
104,235

 
125,095

Operating property acquisition costs
—

 
—

 
—

 
—

 
222

 
—

 
229

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

 
(329
)
 
(2,354
)
 
—

 
—

 
(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)
374

 
21,470

 
5,184

 
6

 
(970
)
 
27,028

 
(799
)
Issuance costs associated with redeemed preferred shares
—

 
2,904

 
—

 
—

 
1,827

 
2,904

 
1,827

Diluted FFO available to common share and common unit holders, as adjusted for comparability (1)
$
43,992

 
$
46,457

 
$
41,035

 
$
42,524

 
$
40,644

 
$
131,484

 
$
121,746

 
 
 
 
 
 
 
 
 
 
 
 
 
 
(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
 
Nine Months Ended
 
9/30/13
 
6/30/13
 
3/31/13
 
12/31/12
 
9/30/12
 
9/30/13
 
9/30/12
Net (loss) income
$
(2,000
)
 
$
(4,405
)
 
$
15,277

 
$
19,010

 
$
(20,765
)
 
$
8,872

 
$
1,331

Real estate-related depreciation and amortization
29,210

 
28,935

 
28,252

 
28,560

 
30,624

 
86,397

 
93,377

Impairment losses on previously depreciated operating properties (1)
22,074

 
7,195

 
1,857

 
247

 
55,829

 
31,126

 
70,016

Gain on sales of previously depreciated operating properties
—

 
—

 
—

 
8

 
(16,913
)
 
—

 
(20,936
)
Depreciation and amortization on unconsolidated real estate entities
—

 
—

 
—

 
—

 
113

 
—

 
346

FFO - per NAREIT (2)
49,284

 
31,725

 
45,386

 
47,825

 
48,888

 
126,395

 
144,134

Operating property acquisition costs
—

 
—

 
—

 
—

 
222

 
—

 
229

Gain on sales of non-operating properties
—

 
(329
)
 
(2,354
)
 
—

 
—

 
(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
374

 
21,470

 
5,184

 
6

 
(970
)
 
27,028

 
(799
)
Issuance costs associated with redeemed preferred shares
—

 
2,904

 
—

 
—

 
1,827

 
2,904

 
1,827

FFO - as adjusted for comparability (2)
$
49,658

 
$
55,770

 
$
48,216

 
$
49,724

 
$
49,967

 
$
153,644

 
$
140,785

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Weighted Average Shares for period ended:
 

 
 

 
 

 
 

 
 

 
 

 
 

Common Shares Outstanding
86,760

 
85,425

 
81,397

 
79,004

 
71,688

 
84,547

 
71,590

Dilutive effect of share-based compensation awards
45

 
96

 
52

 
67

 
73

 
63

 
48

Common Units
3,804

 
3,801

 
3,893

 
4,171

 
4,233

 
3,832

 
4,256

Denominator for FFO per share - diluted
90,609

 
89,322

 
85,342

 
83,242

 
75,994

 
88,442

 
75,894

Anti-dilutive EPS effect of share-based compensation awards
(45
)
 
(96
)
 
—

 
—

 
(73
)
 
(63
)
 
(48
)
Weighted average common units
(3,804
)
 
—

 
(3,893
)
 
(4,171
)
 
(4,233
)
 
(3,832
)
 
(4,256
)
Denominator for diluted EPS
86,760

 
89,226

 
81,449

 
79,071

 
71,688

 
84,547

 
71,590

 
 
 
 
 
 
 
 
 
 
 
 
 
 
(1) Please see reconciliations on pages 32 through 34.
 
 
 
 
 
 
 
 
 
 
 
 
 
(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
 
Nine Months Ended
 
9/30/13
 
6/30/13
 
3/31/13
 
12/31/12
 
9/30/12
 
9/30/13
 
9/30/12
Diluted FFO available to common share and common unit holders, as adjusted for comparability
$
43,992

 
$
46,457

 
$
41,035

 
$
42,524

 
$
40,644

 
$
131,484

 
$
121,746

Straight line rent adjustments (1)
(980
)
 
(2,011
)
 
(3,833
)
 
(3,385
)
 
(2,595
)
 
(6,824
)
 
(6,631
)
Amortization of intangibles included in NOI
230

 
172

 
177

 
221

 
251

 
579

 
659

Share-based compensation, net of amounts capitalized
1,573

 
1,647

 
1,649

 
1,720

 
1,703

 
4,869

 
8,262

Amortization of deferred financing costs
1,321

 
1,443

 
1,528

 
1,547

 
1,527

 
4,292

 
4,696

Amortization of net debt discounts, net of amounts capitalized
(121
)
 
556

 
628

 
693

 
683

 
1,063

 
2,028

Amortization of settled debt hedges
16

 
15

 
15

 
16

 
15

 
46

 
46

Recurring capital expenditures on properties to be held
(10,528
)
 
(5,862
)
 
(5,308
)
 
(27,476
)
 
(8,518
)
 
(21,698
)
 
(16,467
)
Diluted AFFO available to common share and common unit holders (“diluted AFFO”)
$
35,503

 
$
42,417

 
$
35,891

 
$
15,860

 
$
33,710

 
$
113,811

 
$
114,339

Recurring capital expenditures
 

 
 

 
 

 
 

 
 

 
 
 
 
Tenant improvements and incentives on operating properties
$
4,894

 
$
3,798

 
$
2,291

 
$
10,713

 
$
7,774

 
$
10,983

 
$
11,103

Building improvements on operating properties
4,857

 
2,538

 
1,600

 
18,049

 
4,646

 
8,995

 
6,813

Leasing costs for operating properties
2,260

 
1,185

 
1,669

 
1,381

 
947

 
5,114

 
5,109

Less: Nonrecurring tenant improvements and incentives on operating properties
(230
)
 
(23
)
 
15

 
(283
)
 
(3,852
)
 
(238
)
 
(4,510
)
Less: Nonrecurring building improvements on operating properties
(1,266
)
 
(1,580
)
 
(267
)
 
(2,226
)
 
(940
)
 
(3,113
)
 
(1,919
)
Less: Nonrecurring leasing costs for operating properties
14

 
(50
)
 
—

 
—

 
(130
)
 
(36
)
 
(209
)
Add: Recurring capital expenditures on operating properties held through joint ventures
(1
)
 
(6
)
 
—

 
(158
)
 
73

 
(7
)
 
80

Recurring capital expenditures
$
10,528

 
$
5,862

 
$
5,308

 
$
27,476

 
$
8,518

 
$
21,698

 
$
16,467

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

10


 Corporate Office Properties Trust
Consolidated Office Properties by Region - September 30, 2013 (2)
 
 
Operational Properties (1)
 
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

 
3,223,141

 
99.6
%
 
99.6
%
 
2

 
264,216

 
—

 
264,216

Columbia Gateway
 
27

 
2,141,651

 
86.6
%
 
90.4
%
 
1

 
52,000

 
—

 
52,000

Airport Square/bwtech
 
25

 
1,837,100

 
75.5
%
 
77.2
%
 
—

 
—

 
—

 
—

Commons/Parkway
 
10

 
431,585

 
81.6
%
 
81.6
%
 
—

 
—

 
—

 
—

Other
 
9

 
877,779

 
99.4
%
 
99.4
%
 
—

 
—

 
—

 
—

Subtotal
 
98

 
8,511,256

 
90.2
%
 
91.5
%
 
3

 
316,216

 
—

 
316,216

Northern Virginia:
 
 

 
 

 
 

 
 

 
 

 
 

 
 
 
 
Westfields Corporate Center
 
9

 
1,433,003

 
92.3
%
 
94.2
%
 
—

 
—

 
—

 
—

Patriot Ridge
 
1

 
239,272

 
47.2
%
 
48.4
%
 
—

 
—

 
—

 
—

Herndon, Tysons Corner and Merrifield
 
9

 
1,704,601

 
88.6
%
 
89.6
%
 
—

 
—

 
—

 
—

Other
 
—

 
—

 
—
%
 
—
%
 
4

 
708,068

 
—

 
708,068

Subtotal
 
19

 
3,376,876

 
87.2
%
 
88.6
%
 
4

 
708,068

 
—

 
708,068

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

 
90.9
%
 
90.9
%
 
—

 
—

 
—

 
—

St. Mary’s & King George Counties
 
19

 
903,916

 
89.6
%
 
89.6
%
 
—

 
—

 
—

 
—

Greater Baltimore:
 
 

 
 

 
 

 
 

 
 

 
 

 


 
—

White Marsh and Rt 83 Corridor
 
28

 
1,287,005

 
83.6
%
 
84.2
%
 
—

 
—

 
—

 
—

Canton Crossing-Baltimore City
 
1

 
480,745

 
90.8
%
 
97.4
%
 
—

 
—

 
—

 
—

North Gate Business Park
 
3

 
284,884

 
37.9
%
 
37.9
%
 
—

 
—

 
—

 
—

Subtotal
 
32

 
2,052,634

 
79.0
%
 
80.9
%
 
—

 
—

 
—

 
—

Suburban Maryland
 
3

 
297,936

 
95.7
%
 
95.7
%
 
—

 
—

 
—

 
—

Colorado Springs
 
21

 
1,574,274

 
82.6
%
 
84.4
%
 
—

 
—

 
—

 
—

Greater Philadelphia, Pennsylvania
 
4

 
660,165

 
93.7
%
 
93.7
%
 
1

 
71,554

 
111,862

 
183,416

Other (3)
 
2

 
295,842

 
100.0
%
 
100.0
%
 
—

 
—

 
—

 
—

Total
 
210

 
19,203,887

 
88.5
%
 
89.7
%
 
11

 
1,399,761

 
111,862

 
1,511,623

 
(1)
Number of properties includes buildings under construction or redevelopment once those buildings become partially operational. Operational square feet includes square feet in operations for partially operational properties; our one partially operational property had NOI of $492,000 and cash NOI of ($117,000) for the three months ended 9/30/13.
(2)
This schedule includes properties under, or contractually committed for, construction or approved for redevelopment. Please refer to pages 24 and 25.
(3)
For purposes of this summary, Huntsville is reported as a separate region. Other presentations within this package include Huntsville in our “Other” region.

11

Corporate Office Properties Trust
NOI from Real Estate Operations and Occupancy by Property Grouping
(dollars and square feet in thousands)
 
 
As of 9/30/13
 
 
 
 
 
 
# of
Operating Office Properties
 
Office Operational Square Feet
 
 
 
 
 
Office Property Annualized
Rental Revenue (2)
 
Percentage of Total Office
Annualized
Rental Revenue
 
NOI from Real
Estate Operations
for Three Months Ended
 
NOI from Real
Estate Operations
for Nine Months Ended
Property Grouping
 
 
 
% Occupied (1)
 
% Leased (1)
 
 
 
9/30/13
 
9/30/13
Same Office Properties (3)
 
 

 
 

 
 
 
 
 
 

 
 

 
 

 
 

Stabilized properties
 
163

 
14,338

 
91.1%
 
92.4%
 
$
383,808

 
79.9
%
 
$
63,950

 
$
191,489

Unstabilized properties (4)
 
2

 
263

 
45.7%
 
45.7%
 
4,295

 
0.9
%
 
651

 
1,835

Total Same Office Properties
 
165

 
14,601

 
90.3%
 
91.5%
 
388,103

 
80.8
%
 
64,601

 
193,324

Office Properties Placed in Service (5)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Stabilized properties
 
5

 
457

 
98.4%
 
98.4%
 
13,113

 
2.7
%
 
2,343

 
4,966

Unstabilized properties (4)
 
2

 
367

 
30.8%
 
31.5%
 
4,844

 
1.0
%
 
697

 
2,320

Acquired Office Properties (6)
 
1

 
202

 
100.0%
 
100.0%
 
6,048

 
1.3
%
 
1,114

 
3,380

Other
 
N/A

 
N/A

 
N/A
 
N/A
 
N/A

 
N/A

 
(832
)
 
(368
)
Total Core Portfolio
 
173

 
15,627

 
89.3%
 
90.4%
 
412,108

 
85.8
%
 
67,923

 
203,622

Office Properties Held for Sale (7)
 
17

 
1,232

 
89.0%
 
90.2%
 
21,875

 
4.6
%
 
3,836

 
11,340

Office Properties to be Conveyed (8)
 
16

 
1,685

 
79.1%
 
81.0%
 
33,782

 
7.0
%
 
5,567

 
16,832

Greater Philadelphia
 
4

 
660

 
93.7%
 
93.7%
 
12,538

 
2.6
%
 
2,334

 
6,047

Disposed Office Properties
 
N/A

 
N/A

 
N/A
 
N/A
 
N/A

 
N/A

 
16

 
467

Total Portfolio
 
210

 
19,204

 
88.5%
 
89.7%
 
$
480,303

 
100.0
%
 
$
79,676

 
$
238,308

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Core Portfolio
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Demand Driver Adjacent (9)
 
79

 
8,209

 
93.1%
 
93.3%
 
$
247,385

 
60.0
%
 
$
41,897

 
$
122,757

U.S. Government/Defense Contractor (10)
 
29

 
2,594

 
90.9%
 
92.0%
 
62,079

 
15.1
%
 
11,417

 
35,025

Total Strategic Tenant Niche
 
108

 
10,803

 
92.6%
 
93.0%
 
309,464

 
75.1
%
 
53,314

 
157,782

Regional Office (11)
 
65

 
4,824

 
81.8%
 
84.7%
 
102,643

 
24.9
%
 
15,441

 
46,208

Other
 
N/A

 
N/A

 
N/A
 
N/A
 
N/A

 
N/A

 
(832
)
 
(368
)
Total Core Portfolio
 
173

 
15,627

 
89.3%
 
90.4%
 
$
412,108

 
100.0
%
 
$
67,923

 
$
203,622

(1)
Percentages calculated based on operational square feet.
(2)
Excludes annualized rental revenue from our wholesale data center, DC-6, of $7.6 million as of 9/30/13.
(3)
Properties held for long-term investment owned and 100% operational since at least 1/1/12.
(4)
Properties with first generation operational space less than 90% occupied at 9/30/13, as detailed on page 13.
(5)
Newly constructed or redeveloped properties placed in service that were not fully operational by 1/1/12.
(6)
Acquired properties that were not owned and fully operational by 1/1/12.
(7)
The carrying value of operating property assets held for sale at 9/30/13 totaled $133,984.
(8)
Properties serving as collateral for debt that are expected to be conveyed to the lenders in order to extinguish such debt.
(9)
Office properties held for long-term investment located near defense installations and other knowledge-based government demand drivers.
(10)
Office properties held for long-term investment not located near Strategic Tenant Locations that were otherwise at least 50% leased as of most recent year end by United States Government agencies or defense contractors.
(11)
Regional office properties held for long-term investment predominantly in the Greater Washington, DC/Baltimore region, excluding Strategic Tenant Niche Properties.

12

Corporate Office Properties Trust
Unstabilized Office Properties (1) - September 30, 2013  
 
 
 
 
 
 
 
Property Grouping
Operational Square Feet
 
Occupancy %
 
Leased %
 
Same Office Properties (2) 
 
 
 

 
 

 
3120 Fairview Park Drive
183,671
 
48.8
%
 
48.8
%
 
210 Research Blvd
79,573
 
38.6
%
 
38.6
%
 
Total Unstabilized Same Office Properties
263,244
 
45.7
%
 
45.7
%
 
Office Properties Placed in Service (3) 
 
 
 

 
 

 
7770 Backlick Road
239,272
 
47.2
%
 
48.4
%
 
206 Research Blvd
128,119
 
0.0
%
 
0.0
%
 
Total Unstabilized Office Properties Placed in Service
367,391
 
30.8
%
 
31.5
%
 
Total Unstabilized Office Properties, Excluding Properties Held for Sale
630,635
 
37.0
%
 
37.5
%
 
Unstabilized Properties Held for Sale (2 Properties)
160,842
 
51.1
%
 
59.9
%
 
751 Arbor Way (Greater Philadelphia)
113,297
 
63.4
%
 
63.4
%
 
Total Unstabilized Office Properties
904,774
 
42.8
%
 
44.7
%
 
 
(1) Properties with first generation operational space less than 90% occupied at 9/30/13. Excludes our wholesale data center, DC-6.
(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, NOI and Cash NOI* by Segment
(dollars in thousands)
 
Three Months Ended
 
Nine Months Ended
 
9/30/13
 
6/30/13
 
3/31/13
 
12/31/12
 
9/30/12
 
9/30/13
 
9/30/12
Real estate revenues
 

 
 

 
 

 
 

 
 

 
 
 
 
Baltimore/Washington Corridor
$
57,226

 
$
57,387

 
$
56,436

 
$
57,233

 
$
55,799

 
$
171,049

 
$
167,726

Northern Virginia
23,062

 
22,988

 
22,942

 
21,600

 
20,363

 
68,992

 
57,974

San Antonio
7,898

 
8,364

 
7,757

 
8,455

 
8,125

 
24,019

 
23,563

Washington, DC - Capitol Riverfront
4,295

 
4,177

 
4,244

 
4,182

 
4,389

 
12,716

 
12,515

St. Mary’s and King George Counties
4,270

 
4,093

 
3,992

 
3,956

 
4,085

 
12,355

 
12,436

Greater Baltimore
10,703

 
10,824

 
10,719

 
10,662

 
11,918

 
32,246

 
41,954

Suburban Maryland
2,332

 
2,253

 
2,224

 
2,336

 
2,371

 
6,809

 
12,680

Colorado Springs
6,622

 
6,519

 
6,733

 
6,309

 
6,278

 
19,874

 
18,880

Greater Philadelphia
3,258

 
2,784

 
2,487

 
2,527

 
2,541

 
8,529

 
7,171

Other
3,819

 
3,869

 
3,190

 
3,317

 
3,589

 
10,878

 
10,977

Wholesale Data Center
1,076

 
2,017

 
1,353

 
1,987

 
1,806

 
4,446

 
4,660

Real estate revenues
$
124,561

 
$
125,275

 
$
122,077

 
$
122,564

 
$
121,264

 
$
371,913

 
$
370,536

 
 
 
 
NOI
 

 
 

 
 

 
 

 
 

 
 
 
 
Baltimore/Washington Corridor
$
38,446

 
$
38,403

 
$
37,170

 
$
36,615

 
$
37,265

 
$
114,019

 
$
111,049

Northern Virginia
15,063

 
14,784

 
15,125

 
13,767

 
13,248

 
44,972

 
36,704

San Antonio
3,837

 
3,886

 
3,869

 
3,954

 
3,853

 
11,592

 
11,565

Washington, DC - Capitol Riverfront
2,349

 
2,303

 
2,295

 
2,112

 
2,465

 
6,947

 
7,030

St. Mary’s and King George Counties
2,971

 
2,870

 
2,799

 
2,735

 
2,844

 
8,640

 
8,912

Greater Baltimore
6,560

 
6,727

 
6,551

 
6,656

 
7,379

 
19,838

 
26,043

Suburban Maryland
1,470

 
1,509

 
1,437

 
1,398

 
1,330

 
4,416

 
7,323

Colorado Springs
4,251

 
4,324

 
4,285

 
3,780

 
3,846

 
12,860

 
12,126

Greater Philadelphia
2,334

 
2,064

 
1,649

 
1,816

 
1,878

 
6,047

 
5,320

Other
3,165

 
3,252

 
2,794

 
2,739

 
2,903

 
9,211

 
8,889

Wholesale Data Center
(770
)
 
499

 
37

 
550

 
554

 
(234
)
 
1,282

NOI from real estate operations
$
79,676

 
$
80,621

 
$
78,011

 
$
76,122

 
$
77,565

 
$
238,308

 
$
236,243

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash NOI
 

 
 

 
 

 
 

 
 

 
 
 
 
Baltimore/Washington Corridor
$
37,424

 
$
37,881

 
$
36,258

 
$
36,179

 
$
36,312

 
$
111,563

 
$
107,976

Northern Virginia
15,620

 
14,937

 
14,828

 
12,433

 
13,468

 
45,385

 
37,419

San Antonio
3,534

 
3,532

 
3,423

 
3,620

 
3,427

 
10,489

 
10,294

Washington, DC - Capitol Riverfront
2,459

 
2,405

 
2,378

 
2,183

 
2,523

 
7,242

 
7,145

St. Mary’s and King George Counties
2,993

 
2,891

 
2,771

 
2,765

 
2,928

 
8,655

 
8,998

Greater Baltimore
6,671

 
6,783

 
6,565

 
6,655

 
7,143

 
20,019

 
25,532

Suburban Maryland
1,185

 
1,363

 
1,268

 
1,183

 
1,094

 
3,816

 
6,755

Colorado Springs
4,033

 
3,990

 
3,904

 
3,447

 
3,716

 
11,927

 
11,852

Greater Philadelphia
1,746

 
1,879

 
1,654

 
1,729

 
1,678

 
5,279

 
4,065

Other
3,247

 
3,292

 
2,664

 
2,626

 
2,789

 
9,203

 
9,464

Wholesale Data Center
168

 
34

 
(1,406
)
 
53

 
78

 
(1,204
)
 
607

Cash NOI from real estate operations
$
79,080

 
$
78,987

 
$
74,307

 
$
72,873

 
$
75,156

 
$
232,374

 
$
230,107

Add: Straight line rent adjustments
894

 
1,874

 
3,941

 
3,530

 
2,720

 
6,709

 
6,958

Add: Amortization of deferred market rental revenue
29

 
87

 
82

 
90

 
60

 
198

 
273

Less: Amortization of above-market cost arrangements
(327
)
 
(327
)
 
(319
)
 
(371
)
 
(371
)
 
(973
)
 
(1,095
)
NOI from real estate operations
$
79,676

 
$
80,621

 
$
78,011

 
$
76,122

 
$
77,565

 
$
238,308

 
$
236,243


* Includes continuing and discontinued operations.

14

Corporate Office Properties Trust
Same Office Properties (1) Average Occupancy Rates by Region 
 
Number of Buildings
 
Rentable Square Feet
 
Three Months Ended
 
Nine Months Ended
 
 
 
9/30/13
 
6/30/13
 
3/31/13
 
12/31/12
 
9/30/12
 
9/30/13
 
9/30/12
Baltimore Washington Corridor
85

 
7,553,168

 
91.4
%
 
92.3
%
 
91.7
%
 
90.6
%
 
89.4
%
 
91.8
%
 
88.9
%
Northern Virginia
15

 
2,271,204

 
89.0
%
 
87.4
%
 
87.3
%
 
86.1
%
 
85.2
%
 
87.9
%
 
85.4
%
San Antonio
8

 
912,508

 
96.6
%
 
96.6
%
 
96.4
%
 
96.5
%
 
96.5
%
 
96.5
%
 
96.9
%
Washington, DC - Capitol Riverfront
2

 
360,326

 
90.9
%
 
88.1
%
 
88.1
%
 
89.0
%
 
89.0
%
 
89.0
%
 
88.7
%
St. Mary’s and King George Counties
19

 
903,916

 
90.6
%
 
87.5
%
 
86.4
%
 
85.5
%
 
85.5
%
 
88.2
%
 
87.1
%
Greater Baltimore
31

 
1,924,515

 
84.5
%
 
84.7
%
 
84.1
%
 
83.8
%
 
85.9
%
 
84.4
%
 
85.7
%
Suburban Maryland
2

 
242,070

 
96.9
%
 
96.9
%
 
94.9
%
 
94.9
%
 
94.1
%
 
96.2
%
 
92.2
%
Other
3

 
432,891

 
94.6
%
 
94.6
%
 
94.6
%
 
96.4
%
 
100.0
%
 
94.6
%
 
100.0
%
Total Office
165

 
14,600,598

 
90.6
%
 
90.6
%
 
90.0
%
 
89.3
%
 
88.8
%
 
90.4
%
 
88.7
%
Total Same Office Properties occupancy as of period end
 
 

 
90.3
%
 
90.8
%
 
90.3
%
 
89.5
%
 
89.0
%
 
90.3
%
 
89.0
%

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

 
 

 
 

 
 

 
 

 
 
 
 
Baltimore/Washington Corridor
$
51,909

 
$
53,028

 
$
51,779

 
$
52,518

 
$
50,938

 
$
156,716

 
$
150,951

Northern Virginia
15,205

 
14,974

 
14,794

 
14,740

 
14,657

 
44,973

 
43,751

San Antonio
7,898

 
8,364

 
7,757

 
8,455

 
8,125

 
24,019

 
23,569

Washington, DC - Capitol Riverfront
4,296

 
4,176

 
4,244

 
4,182

 
4,389

 
12,716

 
12,515

St. Mary’s and King George Counties
4,269

 
4,094

 
3,992

 
3,956

 
4,084

 
12,355

 
12,436

Greater Baltimore
10,698

 
10,821

 
10,656

 
10,640

 
10,942

 
32,175

 
32,518

Suburban Maryland
2,154

 
2,086

 
2,090

 
2,132

 
2,105

 
6,330

 
6,225

Other
3,168

 
3,205

 
3,121

 
3,276

 
3,474

 
9,494

 
10,285

Real estate revenues
$
99,597

 
$
100,748

 
$
98,433

 
$
99,899

 
$
98,714

 
$
298,778

 
$
292,250

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

 
 

 
 

 
 

 
 

 
 
 
 
Baltimore/Washington Corridor
$
34,902

 
$
35,806

 
$
34,298

 
$
33,600

 
$
33,983

 
$
105,006

 
$
100,254

Northern Virginia
9,835

 
9,459

 
9,528

 
9,498

 
9,625

 
28,822

 
28,348

San Antonio
3,837

 
3,886

 
3,869

 
3,954

 
3,853

 
11,592

 
11,619

Washington, DC - Capitol Riverfront
2,349

 
2,303

 
2,295

 
2,112

 
2,464

 
6,947

 
7,029

St. Mary’s and King George Counties
2,971

 
2,870

 
2,799

 
2,735

 
2,844

 
8,640

 
8,911

Greater Baltimore
6,640

 
6,805

 
6,631

 
6,683

 
6,807

 
20,076

 
20,505

Suburban Maryland
1,331

 
1,340

 
1,361

 
1,296

 
1,315

 
4,032

 
3,992

Other
2,736

 
2,737

 
2,736

 
2,798

 
3,077

 
8,209

 
9,104

Same office property NOI
64,601

 
65,206

 
63,517

 
62,676

 
63,968

 
193,324

 
189,762

Add (less): Straight line rent adjustments
(1,029
)
 
(717
)
 
(1,403
)
 
(1,417
)
 
(1,584
)
 
(3,149
)
 
(4,992
)
Less: Amortization of deferred market rental revenue
22

 
(35
)
 
(30
)
 
(39
)
 
(17
)
 
(43
)
 
(95
)
Add: Amortization of above-market cost arrangements
320

 
319

 
319

 
371

 
371

 
958

 
1,095

Same office property cash NOI
63,914

 
64,773

 
62,403

 
61,591

 
62,738

 
191,090

 
185,770

Less: Lease termination fees, gross
(306
)
 
(750
)
 
(224
)
 
(524
)
 
(636
)
 
(1,280
)
 
(1,507
)
Same office property cash NOI, excluding gross lease termination fees
$
63,608

 
$
64,023

 
$
62,179

 
$
61,067

 
$
62,102

 
$
189,810

 
$
184,263

Percentage change in same office property cash NOI (1)
1.9
%
 
 
 
 
 
 
 
 
 
2.9
%
 
 
Percentage change in same office property cash NOI, excluding gross lease termination fees (1)
2.4
%
 
 
 
 
 
 
 
 
 
3.0
%
 
 
 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 September 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
 
Total
Office
Renewed Space
 

 
 

 
 

 
 
 
 

 
 

 
 

 
 

 
 

Leased Square Feet
231,533

 
163,192

 
4,563

 
3,832

 
86,020

 
14,782

 
10,884

 
—

 
514,806

Expiring Square Feet
411,197

 
163,192

 
4,563

 
7,771

 
102,939

 
14,782

 
12,824

 
—

 
717,268

Vacated Square Feet
179,664

 
—

 
—

 
3,939

 
16,919

 
—

 
1,940

 
—

 
202,462

Retention Rate (% based upon square feet)
56.31
%
 
100.00
 %
 
100.00
%
 
49.31
%
 
83.56
 %
 
100.00
 %
 
84.87
 %
 
0.00
%
 
71.77
 %
Statistics for Completed Leasing:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Average Committed Cost per Square Foot
$
1.47

 
$
2.96

 
$
2.70

 
$
0.74

 
$
14.03

 
$
5.88

 
$
2.89

 
$
—

 
$
4.20

Weighted Average Lease Term in Years
1.4

 
2.0

 
1.2

 
1.0

 
5.0

 
5.0

 
3.0

 
—

 
2.3

GAAP Rent Per Square Foot
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
        Renewal GAAP Rent
$
38.87

 
$
34.24

 
$
46.44

 
$
24.67

 
$
27.37

 
$
39.17

 
$
27.57

 
$
—

 
$
35.21

        Expiring GAAP Rent
$
36.92

 
$
32.92

 
$
45.32

 
$
23.95

 
$
27.34

 
$
34.08

 
$
27.23

 
$
—

 
$
33.74

        Change in GAAP Rent
5.29
%
 
3.99
 %
 
2.47
%
 
3.01
%
 
0.13
 %
 
14.95
 %
 
1.27
 %
 
0.00
%
 
4.35
 %
Cash Rent Per Square Foot
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
        Renewal Cash Rent
$
38.76

 
$
33.77

 
$
46.44

 
$
24.67

 
$
25.54

 
$
37.04

 
$
27.61

 
$
—

 
$
34.65

        Expiring Cash Rent
$
38.75

 
$
34.14

 
$
45.32

 
$
23.95

 
$
30.26

 
$
37.89

 
$
28.80

 
$
—

 
$
35.58

        Change in Cash Rent
0.02
%
 
(1.10
)%
 
2.47
%
 
3.01
%
 
(15.57
)%
 
(2.23
)%
 
(4.14
)%
 
0.00
%
 
(2.63
)%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
New Leases
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Development and Redevelopment Space
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Leased Square Feet
125,160

 
—

 
—

 
—

 
—

 
—

 
1,394

 
7,189

 
133,743

Statistics for Completed Leasing:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Average Committed Cost per Square Foot
$
71.31

 
$
—

 
$
—

 
$
—

 
$
—

 
$
—

 
$
15.00

 
$
59.88

 
$
70.11

Weighted Average Lease Term in Years
10.0

 
—

 
—

 
—

 
—

 
—

 
7.3

 
6.6

 
9.8

GAAP Rent Per Square Foot
$
28.75

 
$
—

 
$
—

 
$
—

 
$
—

 
$
—

 
$
23.63

 
$
22.69

 
$
28.37

Cash Rent Per Square Foot
$
29.31

 
$
—

 
$
—

 
$
—

 
$
—

 
$
—

 
$
22.73

 
$
23.00

 
$
28.91

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Other New Leases (2)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Leased Square Feet
137,426

 
44,203

 
—

 
—

 
53,346

 
—

 
14,163

 
—

 
249,138

Statistics for Completed Leasing:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Average Committed Cost per Square Foot
$
29.51

 
$
47.13

 
$
—

 
$
—

 
$
39.99

 
$
—

 
$
73.79

 
$
—

 
$
37.40

Weighted Average Lease Term in Years
6.6

 
5.9

 
—

 
—

 
6.8

 
—

 
5.0

 
—

 
6.4

GAAP Rent Per Square Foot
$
24.79

 
$
26.35

 
$
—

 
$
—

 
$
24.96

 
$
—

 
$
29.30

 
$
—

 
$
25.36

Cash Rent Per Square Foot
$
22.49

 
$
26.47

 
$
—

 
$
—

 
$
22.52

 
$
—

 
$
29.30

 
$
—

 
$
23.59

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total Square Feet Leased
494,119

 
207,395

 
4,563

 
3,832

 
139,366

 
14,782

 
26,441

 
7,189

 
897,687

(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 or 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)
Nine Months Ended September 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
925,341

 
186,147

 
7,912

 
100,806

 
118,884

 
56,282

 
39,962

 
—

 
—

 
1,435,334

Expiring Square Feet
1,354,855

 
247,020

 
11,124

 
123,262

 
144,756

 
56,282

 
156,548

 
—

 
—

 
2,093,847

Vacated Square Feet
429,514

 
60,873

 
3,212

 
22,456

 
25,872

 
—

 
116,586

 
—

 
—

 
658,513

Retention Rate (% based upon square feet)
68.30
 %
 
75.36
 %
 
71.13
 %
 
81.78
 %
 
82.13
 %
 
100.00
 %
 
25.53
 %
 
0.00
%
 
0.00
%
 
68.55
 %
Statistics for Completed Leasing:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Average Committed Cost per Square Foot
$
6.87

 
$
4.87

 
$
5.12

 
$
3.87

 
$
10.54

 
$
1.54

 
$
18.07

 
$
—

 
$
—

 
$
6.80

Weighted Average Lease Term in Years
3.6

 
3.0

 
3.6

 
1.6

 
3.9

 
6.5

 
4.3

 
—

 
—

 
3.5

GAAP Rent Per Square Foot
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
        Renewal GAAP Rent
$
32.13

 
$
33.40

 
$
44.89

 
$
23.84

 
$
25.56

 
$
30.57

 
$
24.70

 
$
—

 
$
—

 
$
30.97

        Expiring GAAP Rent
$
30.31

 
$
32.58

 
$
43.65

 
$
23.21

 
$
25.37

 
$
30.95

 
$
23.53

 
$
—

 
$
—

 
$
29.61

        Change in GAAP Rent
6.01
 %
 
2.50
 %
 
2.85
 %
 
2.73
 %
 
0.75
 %
 
(1.24
)%
 
4.97
 %
 
0.00
%
 
0.00
%
 
4.61
 %
Cash Rent Per Square Foot
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
        Renewal Cash Rent
$
31.37

 
$
32.72

 
$
43.82

 
$
23.71

 
$
24.24

 
$
28.90

 
$
24.02

 
$
—

 
$
—

 
$
30.18

        Expiring Cash Rent
$
31.96

 
$
33.75

 
$
45.09

 
$
23.84

 
$
27.53

 
$
34.29

 
$
24.68

 
$
—

 
$
—

 
$
31.22

        Change in Cash Rent
(1.86
)%
 
(3.06
)%
 
(2.82
)%
 
(0.53
)%
 
(11.95
)%
 
(15.72
)%
 
(2.68
)%
 
0.00
%
 
0.00
%
 
(3.32
)%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
New Leases
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Development and Redevelopment Space
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Leased Square Feet (2)
227,793

 
405,461

 
—

 
—

 
—

 
4,853

 
29,716

 
25,516

 
6,029

 
699,368

Statistics for Completed Leasing:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Average Committed Cost per Square Foot
$
68.86

 
$
18.51

 
$
—

 
$
—

 
$
—

 
$
53.05

 
$
56.39

 
$
66.33

 
$
45.63

 
$
38.74

Weighted Average Lease Term in Years
9.5

 
9.9

 
—

 
—

 
—

 
5.0

 
6.5

 
7.2

 
5.0

 
9.5

GAAP Rent Per Square Foot
$
33.43

 
$
22.09

 
$
—

 
$
—

 
$
—

 
$
30.26

 
$
29.17

 
$
23.34

 
$
18.75

 
$
26.16

Cash Rent Per Square Foot
$
31.89

 
$
21.62

 
$
—

 
$
—

 
$
—

 
$
28.50

 
$
24.49

 
$
23.10

 
$
17.75

 
$
25.16

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Other New Leases (3)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Leased Square Feet
271,074

 
96,156

 
—

 
39,267

 
70,554

 
—

 
99,960

 
—

 
—

 
577,011

Statistics for Completed Leasing:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Average Committed Cost per Square Foot
$
35.85

 
$
38.88

 
$
—

 
$
6.51

 
$
33.61

 
$
—

 
$
21.71

 
$
—

 
$
—

 
$
31.64

Weighted Average Lease Term in Years
7.0

 
6.9

 
—

 
3.3

 
6.0

 
—

 
4.5

 
—

 
—

 
6.2

GAAP Rent Per Square Foot
$
23.97

 
$
27.20

 
$
—

 
$
11.49

 
$
23.62

 
$
—

 
$
15.82

 
$
—

 
$
—

 
$
22.20

Cash Rent Per Square Foot
$
22.31

 
$
25.58

 
$
—

 
$
11.84

 
$
21.67

 
$
—

 
$
17.41

 
$
—

 
$
—

 
$
21.21

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total Square Feet Leased
1,424,208

 
687,764

 
7,912

 
140,073

 
189,438

 
61,135

 
169,638

 
25,516

 
6,029

 
2,711,713

(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 9/30/13 (1)
 
 
Core Office Properties/Total Portfolio
 
Strategic Tenant Niche 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
Core Office Properties
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Baltimore/Washington Corridor
 
21

 
580,528

 
$
19,901

 
4.8
%
 
34.28
 
 
11

 
552,506

 
$
19,138

 
6.2
%
 
$
34.64

Northern Virginia
 
5

 
52,377

 
722

 
0.2
%
 
13.78

 
 
2

 
25,525

 
391

 
0.1
%
 
15.32

Washington, DC-Capitol Riverfront
 
2

 
108,383

 
4,809

 
1.2
%
 
44.37

 
 
2

 
108,383

 
4,809

 
1.6
%
 
44.37

St. Mary’s and King George Cos.
 
4

 
57,422

 
1,412

 
0.3
%
 
24.59

 
 
4

 
57,422

 
1,412

 
0.5
%
 
24.59

Greater Baltimore
 
8

 
24,401

 
398

 
0.1
%
 
16.31

 
 
—

 
—

 
—

 
0.0
%
 
—

2013
 
40

 
823,111

 
27,242

 
6.6
%
 
33.10

 
 
19

 
743,836

 
25,750

 
8.3
%
 
34.62

Baltimore/Washington Corridor
 
31

 
744,033

 
25,124

 
6.1
%
 
33.77

 
 
15

 
653,588

 
22,707

 
7.3
%
 
34.74

Northern Virginia
 
9

 
322,922

 
10,662

 
2.6
%
 
33.02

 
 
7

 
262,201

 
8,465

 
2.7
%
 
32.28

Washington, DC-Capitol Riverfront
 
7

 
71,364

 
3,339

 
0.8
%
 
46.79

 
 
7

 
71,364

 
3,339

 
1.1
%
 
46.79

St. Mary’s and King George Cos.
 
21

 
276,157

 
4,919

 
1.2
%
 
17.81

 
 
21

 
276,157

 
4,919

 
1.6
%
 
17.81

Greater Baltimore
 
28

 
168,016

 
3,077

 
0.7
%
 
18.31

 
 
—

 
—

 
—

 
0.0
%
 
—

Suburban Maryland
 
2

 
19,261

 
668

 
0.2
%
 
34.68

 
 
2

 
19,261

 
668

 
0.2
%
 
34.68

Other
 
1

 
113,692

 
3,050

 
0.7
%
 
26.83

 
 
1

 
113,692

 
3,050

 
1.0
%
 
26.83

2014
 
99

 
1,715,445

 
50,839

 
12.3
%
 
29.64

 
 
53

 
1,396,263

 
43,148
 
13.9
%
 
30.90

Baltimore/Washington Corridor
 
44

 
1,070,840

 
32,124

 
7.8
%
 
30.00

 
 
21

 
831,792

 
25,782

 
8.3
%
 
31.00

Northern Virginia
 
7

 
517,343

 
17,544

 
4.3
%
 
33.91

 
 
4

 
502,315

 
16,969

 
5.5
%
 
33.78

Washington, DC-Capitol Riverfront
 
5

 
36,655

 
1,776

 
0.4
%
 
48.45

 
 
5

 
36,655

 
1,776

 
0.6
%
 
48.45

St. Mary’s and King George Cos.
 
17

 
252,840

 
5,235

 
1.3
%
 
20.70

 
 
17

 
252,840

 
5,235

 
1.7
%
 
20.70

Greater Baltimore
 
15

 
115,668

 
3,113

 
0.8
%
 
26.91

 
 
5

 
49,231

 
1,534

 
0.5
%
 
31.16

2015
 
88

 
1,993,346

 
59,792

 
14.5
%
 
30.00

 
 
52

 
1,672,833

 
51,296

 
16.6
%
 
30.66

Baltimore/Washington Corridor
 
35

 
888,000

 
24,271

 
5.9
%
 
27.33

 
 
18

 
578,603

 
16,758

 
5.4
%
 
28.96

Northern Virginia
 
16

 
338,493

 
9,832

 
2.4
%
 
29.05

 
 
9

 
294,250

 
8,297

 
2.7
%
 
28.20

Washington, DC-Capitol Riverfront
 
3

 
37,493

 
1,775

 
0.4
%
 
47.34

 
 
3

 
37,493

 
1,775

 
0.6
%
 
47.34

St. Mary’s and King George Cos.
 
10

 
109,130

 
1,938

 
0.5
%
 
17.76

 
 
10

 
109,130

 
1,938

 
0.6
%
 
17.76

Greater Baltimore
 
20

 
240,919

 
6,639

 
1.6
%
 
27.56

 
 
—

 
—

 
—

 
0.0
%
 
—

2016
 
84

 
1,614,035

 
44,455

 
10.8
%
 
27.54

 
 
40

 
1,019,476

 
28,768

 
9.3
%
 
28.22


19

 
 
Core Office Properties/Total Portfolio
 
Strategic Tenant Niche 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
 
41

 
1,201,149

 
34,505

 
8.4
%
 
28.73

 
 
23

 
846,115

 
25,670

 
8.3
%
 
30.34

Northern Virginia
 
12

 
299,091

 
9,427

 
2.3
%
 
31.52

 
 
2

 
200,356

 
6,110

 
2.0
%
 
30.50

St. Mary’s and King George Cos.
 
1

 
4,788

 
125

 
—
%
 
26.11

 
 
1

 
4,788

 
125

 
0.0
%
 
26.11

Greater Baltimore
 
19

 
243,504

 
4,962

 
1.2
%
 
20.38

 
 
2

 
3,174

 
84

 
0.0
%
 
26.47

Suburban Maryland
 
1

 
9,155

 
264

 
0.1
%
 
28.84

 
 
1

 
9,155

 
264

 
0.1
%
 
28.84

2017
 
74

 
1,757,687

 
49,283

 
12.0
%
 
28.04

 
 
29

 
1,063,588

 
32,253

 
10.4
%
 
30.32

Thereafter
 
189

 
6,044,354

 
180,500

 
43.8
%
 
29.86

 
 
106

 
4,105,723

 
128,249

 
41.4
%
 
31.24

Core/Strategic Tenant Niche Total/Avg.
 
574
 
13,947,978

 
$
412,108

 
100.0
%
 
$
29.55

 
 
299

 
10,001,719

 
$
309,464

 
100.0
%
 
$
30.94

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Properties Not Held For Long Term Investment
 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Baltimore/Washington Corridor
 
29

 
470,435

 
11,354

 
16.7
%
 
24.14

 
 
 
 
 
 
 
 
 
 
 
Northern Virginia
 
17

 
607,579

 
17,696

 
25.9
%
 
29.13

 
 
 
 
 
 
 
 
 
 
 
Suburban Maryland
 
6

 
50,794

 
677

 
1.0
%
 
13.33

 
 
 
 
 
 
 
 
 
 
 
Colorado Springs
 
73

 
1,300,326

 
25,930

 
38.0
%
 
19.94

 
 
 
 
 
 
 
 
 
 
 
Greater Philadelphia
 
16

 
618,740

 
12,538

 
18.4
%
 
20.26

 
 
 
 
 
 
 
 
 
 
 
Properties Not Held For Long Term Investment Total/Avg.
 
141

 
3,047,874

 
$
68,195

 
100.0
%
 
$
22.37

 
 
 
 
 
 
 
 
 
 
 
Total Portfolio
 
715

 
16,995,852

 
$
480,303

 
 
 
$
28.26

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Note:  As of September 30, 2013, the weighted average lease term is 4.4 years for the Core Office Properties, 4.2 years for the Strategic Tenant Niche Properties and 4.3 for the total portfolio.

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

0.21

$
445

2019
1
6

1.00

2,141

2020
1
11

2.00

4,430

2022
1
6

0.45

616

 
 
 

3.66

$
7,631


(1)
This presentation reflects consolidated properties.  This expiration analysis reflects occupied space and includes the effect of early renewals completed on existing leases but excludes the effect of new tenant leases on square feet yet to commence as of September 30, 2013 of 227,0221 for the portfolio, including 39,721 for the Strategic Tenant Niche Properties.
(2)
Many of our government leases are subject to certain early termination provisions which are customary to government leases.  The year of lease expiration was computed assuming no exercise of such early termination rights.
(3)
Total Annualized Rental Revenue is the monthly contractual base rent as of September 30, 2013 multiplied by 12 plus the estimated annualized expense reimbursements under existing leases.


20

Corporate Office Properties Trust
Top 20 Office Tenants as of 9/30/13
(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)
67

 
3,525,167

 
20.7
%
 
$
117,298

 
24.4
%
 
5.0

Northrop Grumman Corporation
 
11

 
1,067,709

 
6.3
%
 
29,444

 
6.1
%
 
5.2

Booz Allen Hamilton, Inc.
 
10

 
802,916

 
4.7
%
 
26,302

 
5.5
%
 
2.6

Computer Sciences Corporation
 
7

 
692,729

 
4.1
%
 
22,270

 
4.6
%
 
0.8

General Dynamics Corporation
 
9

 
547,870

 
3.2
%
 
18,704

 
3.9
%
 
4.0

The Boeing Company
 
6

 
317,168

 
1.9
%
 
9,197

 
1.9
%
 
2.9

The MITRE Corporation
 
5

 
290,288

 
1.7
%
 
9,074

 
1.9
%
 
4.4

CareFirst, Inc.
 
3

 
270,918

 
1.6
%
 
8,792

 
1.8
%
 
7.3

The Aerospace Corporation
 
3

 
254,869

 
1.5
%
 
8,177

 
1.7
%
 
1.4

Wells Fargo & Company
 
4

 
202,674

 
1.2
%
 
8,090

 
1.7
%
 
4.9

ITT Exelis
 
6

 
299,129

 
1.8
%
 
7,536

 
1.6
%
 
2.6

Kratos Defense and Security Solutions
 
5

 
253,634

 
1.5
%
 
7,179

 
1.5
%
 
6.3

AT&T Corporation
 
4

 
317,570

 
1.9
%
 
5,916

 
1.2
%
 
5.6

L-3 Communications Holdings, Inc
 
2

 
166,568

 
1.0
%
 
5,783

 
1.2
%
 
1.0

Raytheon Company
 
7

 
162,919

 
1.0
%
 
5,155

 
1.1
%
 
1.9

Science Applications International Corp.
 
4

 
133,577

 
0.8
%
 
4,364

 
0.9
%
 
5.9

Lockheed Martin Corporation
 
6

 
135,978

 
0.8
%
 
3,913

 
0.8
%
 
4.1

The Johns Hopkins Institutions
 
5

 
140,974

 
0.8
%
 
3,789

 
0.8
%
 
4.9

KEYW Corporation
 
2

 
144,443

 
0.8
%
 
3,723

 
0.8
%
 
7.7

Unisys Corporation
 
1

 
156,891

 
0.9
%
 
3,697

 
0.8
%
 
6.7

Subtotal Top 20 Office Tenants
 
167

 
9,883,991

 
58.2
%
 
308,403

 
64.2
%
 
4.2

All remaining tenants
 
548

 
7,111,861

 
41.8
%
 
171,900

 
35.8
%
 
4.3

Total/Weighted Average
 
715

 
16,995,852

 
100.0
%
 
$
480,303

 
100.0
%
 
4.3

 
(1)  Total Annualized Rental Revenue is the monthly contractual base rent as of September 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)
 
Nine Months Ended 9/30/13
 
 
 
 
 
 
 
 
 
 
 
 
 
 
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 9/30/13
(dollars in thousands)
 
Construction
Projects (1)
 
Redevelopment
Projects (2)
 
Wholesale Data
Center
 
Land and
Pre-Construction (3)
 
Total
Segment
Rentable Square Feet
Baltimore/Washington Corridor
264,216

 
52,000

 
N/A

 
3,955,000

 
4,271,216

Northern Virginia
708,068

 
—

 
N/A

 
2,435,000

 
3,143,068

San Antonio
—

 
—

 
N/A

 
1,193,000

 
1,193,000

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

 
2,830,000

 
2,830,000

Suburban Maryland
—

 
—

 
N/A

 
1,525,000

 
1,525,000

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
1,276,207

 
235,416

 
N/A

 
20,361,000

 
21,872,623

 
Costs to date by region
Baltimore/Washington Corridor
$
49,713

 
$
3,769

 
$
—

 
$
101,075

 
$
154,557

Northern Virginia
52,039

 
—

 
—

 
98,602

 
150,641

San Antonio
—

 
—

 
—

 
23,967

 
23,967

Huntsville, Alabama
32,629

 
—

 
—

 
13,715

 
46,344

St. Mary’s and King George Counties
—

 
—

 
—

 
2,587

 
2,587

Greater Baltimore
—

 
—

 
—

 
78,267

 
78,267

Suburban Maryland
—

 
—

 
—

 
13,459

 
13,459

Colorado Springs
—

 
—

 
—

 
24,906

 
24,906

Greater Philadelphia
—

 
26,754

 
—

 
12,824

 
39,578

Wholesale Data Center
—

 
—

 
214,487

 
—

 
214,487

Other
—

 
—

 
—

 
6,436

 
6,436

Total
$
134,381

 
$
30,523

 
$
214,487

 
$
375,838

 
$
755,229

 
 
 
 
 
 
 
 
 
 
Reconciliation to amounts included in projects in development or held for future development, including land costs, as reported on consolidated balance sheet
 
 
 
 
 
 
 
 
 
Operating properties
(4,100
)
 
(22,187
)
 
(172,480
)
 
(23,322
)
 
(222,089
)
Assets held for sale
—

 
—

 
—

 
(466
)
 
(466
)
Deferred leasing costs
(3,778
)
 
(2,060
)
 
(669
)
 
—

 
(6,507
)
Projects in development or held for future development, including associated land costs (4)
$
126,503

 
$
6,276

 
$
41,338

 
$
352,050

 
$
526,167

(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.
(4) Represents total of costs included in lines on our consolidated balance sheet entitled “construction and redevelopment in progress, including land” and “land held for future development and pre-construction costs.”

23

Corporate Office Properties Trust
Summary of Construction Projects as of 9/30/13 (1)
(dollars in thousands) 
 
 
 
Park/Submarket
Total Rentable Square Feet (4)
Percentage Leased as of
as of 9/30/13 (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
9/30/2013
 
312 Sentinel Way
Annapolis Junction, Maryland
 
National Business Park
125,160

100%
$
36,523

$
25,210

$
4,100

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

27%
34,716

24,503

—

2Q 13
2Q 14
 
Ashburn Crossing - DC-8 Ashburn, Virginia
 
Ashburn
200,000

100%
25,340

19,560

—

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

100%
12,769

7,016

—

2Q 15
2Q 15
 
15395 John Marshall Hwy Haymarket, Virginia
 
Other
233,768

100%
26,000

18,016

—

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

100%
44,560

7,447

—

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

100%
21,549

12,203

—

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

100%
24,224

15,491

—

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

10%
8,357

4,935

—

4Q 12
4Q 13
 
Total Under Construction
 
 
1,276,207

88%
$
234,038

$
134,381

$
4,100

 
 

(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) No square feet were partially operational in these projects as of 9/30/13.



24

Corporate Office Properties Trust
Summary of Redevelopment Projects as of 9/30/13
(dollars in thousands) 
 
 
 
 
 
 
 
 
 
 
 
 
Park/Submarket
Total Rentable Square Feet
Percentage Leased as of
as of 9/30/13 (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
 
9/30/2013
 
 
 
 
 
 
 
 
 
 
721 Arbor Way (Hillcrest II)
Blue Bell, Pennsylvania
(3)
Greater Philadelphia
183,416

65%
$
32,597

$
26,754

$
20,501

2Q 13
2Q 14
6708 Alexander Bell Drive
Columbia, Maryland
 
Howard Co. Perimeter
52,000

0%
11,621

3,769

3,769

4Q 14
4Q 15
Total Under Redevelopment
235,416

51%
$
44,218

$
30,523

$
24,270

 
 
 
(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 “Redevelopment,” 111,862 square feet are operational; this partially operational property had NOI of $492,000 and cash NOI of ($117,000) for the three months ended 9/30/13
.





25

Corporate Office Properties Trust
Summary of Land and Pre-Construction as of 9/30/13 (1)
Location
Acres
 
Estimated Developable Square Feet (in thousands)
 
Costs to Date as of 9/30/13 (4)
Strategic Land
 
 
 
 
 
Baltimore/Washington Corridor
 

 
 

 
 
National Business Park
200

 
2,166

 
 
Columbia Gateway
22

 
560

 
 
Airport Square
5

 
84

 
 
Arundel Preserve (2)
89

 
1,080

 
 
Subtotal
316

 
3,890

 
 
Northern Virginia
103

 
2,435

 
 
San Antonio, Texas
78

 
1,193

 
 
Huntsville, Alabama
440

 
4,173

 
 
St. Mary’s & King George Counties
44

 
109

 
 
Greater Baltimore
49

 
1,478

 
 
Suburban Maryland
49

 
525

 
 
Total strategic land held and pre-construction
1,079

 
13,803

 
$
257,605

 
 
 
 
 
 
Non-Strategic Land
 
 
 
 
 
Baltimore/Washington Corridor
7

 
65

 
 
Greater Baltimore
128

 
1,352

 
 
Suburban Maryland
107

 
1,000

 
 
Colorado Springs, Colorado
175

 
2,570

 
 
Greater Philadelphia, Pennsylvania
8

 
604

 
 
Other (3)
217

 
967

 
 
Total non-strategic land held
642

 
6,558

 
94,445

 
 
 
 
 
 
Total land held and pre-construction
1,721

 
20,361

 
$
352,050

 
 
 
 
 
 
(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 includes approximately 56 acres under contract to be purchased.
(3)
This land is being put back to the jurisdictional county per a development agreement described under “Consolidated Joint Ventures.”
(4)
Represents total costs to date included in “projects in development or held for future development,” as reported on page 23 (in thousands).

26


Corporate Office Properties Trust
Quarterly Equity Analysis
(dollars, shares and units in thousands, except per share amounts)
SHAREHOLDER CLASSIFICATION
Common Shares
 
Common Units
 
As if Converted
Preferred
Shares/Units
 
Total
 
Diluted
Ownership % of Total
As of September 30, 2013:
Insiders
656

 
3,121

 
—

 
3,777

 
4.11
%
Non-insiders
86,725

 
857

 
610

 
88,192

 
95.89
%
Total
87,381

 
3,978

 
610

 
91,969

 
100.00
%
COMMON EQUITY - End of Quarter
9/30/13
 
6/30/13
 
3/31/13
 
12/31/12
 
9/30/12
Unrestricted Common Shares
86,998

 
85,461

 
85,369

 
80,518

 
71,730

Restricted Common Shares
383

 
384

 
389

 
435

 
428

Common Shares
87,381

 
85,845

 
85,758

 
80,953

 
72,158

Common Units
3,978

 
3,789

 
3,819

 
4,068

 
4,207

Total
91,359

 
89,634

 
89,577

 
85,021

 
76,365

End of Quarter Common Share Price
$
23.10

 
$
25.50

 
$
26.68

 
$
24.98

 
$
23.97

Market Value of Common Shares/Units
$
2,110,393

 
$
2,285,667

 
$
2,389,914

 
$
2,123,825

 
$
1,830,469

PREFERRED EQUITY - End of Quarter
 

 
 

 
 

 
 

 
 

Nonconvertible Preferred Equity - liquidation preference
 

 
 

 
 

 
 

 
 

Redeemable Series H Shares - 7.5%
50,000

 
50,000

 
50,000

 
50,000

 
50,000

Redeemable Series J Shares - 7.625% (1)
—

 
—

 
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

 
222,500

 
307,250

 
307,250

 
307,250

Convertible Preferred Equity - liquidation preference
 

 
 

 
 

 
 

 
 

Convertible Series I Units - 7.5% (2)
8,800

 
8,800

 
8,800

 
8,800

 
8,800

Convertible Series K Shares - 5.6% (3)
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

 
$
257,883

 
$
342,633

 
$
342,633

 
$
342,633

CAPITALIZATION
 

 
 

 
 

 
 

 
 

Liquidation Preference of Preferred Shares/Units
$
257,883

 
$
257,883

 
$
342,633

 
$
342,633

 
$
342,633

Market Value of Common Shares/Units
2,110,393

 
2,285,667

 
2,389,914

 
2,123,825

 
1,830,469

Total Equity Market Capitalization
$
2,368,276

 
$
2,543,550

 
$
2,732,547

 
$
2,466,458

 
$
2,173,102

(1) These shares were redeemed on April 22, 2013.
(2) 352 units outstanding with a liquidation preference of $25 per unit, and convertible into 176 common units.
(3) 532 shares outstanding with a liquidation preference of $50 per share, and convertible into 434 shares.

27

Corporate Office Properties Trust
Debt Analysis as of September 30, 2013
(dollars in thousands)
 
Stated Rate
 
GAAP 
Effective Rate
 
Weighted Average Maturity (in Years)
 
Maximum Availability
 
Outstanding Balance
 
Average Stated Interest Rates for Three Months Ended 9/30/13
 
 
 
 
Debt Outstanding
 
 
 
 
 
 
 
 
 

 
 
 
Fixed rate
 
 
 
 
 
 
 
 
 

 
 
 
Secured debt
5.98%
 
5.87%
 
2.8
 
(1)
 
$
882,311

 
6.1%
 
Senior Unsecured Notes
4.28%
 
4.44%
 
9.9
 
 
 
592,543

 
3.8%
 
Exchangeable Senior Notes
4.25%
 
6.05%
 
1.6
 
 
 
560

 
4.3%
 
Other Unsecured Debt
0.00%
 
6.50%
 
12.6
 
 
 
1,723

 
—%
 
Total fixed rate debt
5.28%
 
5.30%
 
5.7
 
 
 
$
1,477,137

 
5.3%
 
Variable rate
 
 
 
 
 
 
 
 
 

 
 
 
Secured debt
2.43%
 
2.43%
 
2.1
 


 
$
37,894

 
2.5%
 
Unsecured Revolving Credit Facility
1.45%
 
1.45%
 
3.8
 
$
800,000

 
—

 
1.6%
 
Construction Loans
N/A
 
N/A
 
N/A
 
N/A
 
—

 
—%
 
Other Unsecured Debt
1.80%
 
1.80%
 
3.3
 


 
620,000

 
1.9%
 
Total variable rate debt
1.84%
 
1.84%
 
3.2
 


 
$
657,894

 
2.4%
(2)(3)
Total consolidated debt outstanding
4.23%
 
4.23%
 
4.9
 
 
 
$
2,135,031

 
4.2%
(2)(3)
 
 
 
 
 
 
 
 
 
 
 
 
 
Variable Rate Loans Subject to Interest Rate Swaps (2)
 
 
 
 
 
 
 
 
$
437,894

 
0.6%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
% of Fixed Rate Loans (2)
 
 
 
 
 
 
 
 
89.7
%
 
 
 
% of Variable Rate Loans (2)
 
 
 
 
 
 
 
 
10.3
%
 
 
 
 
 
 
 
 
 
 
 
 
100.0
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Recourse debt
 
 
 
 
 
 
 
 
$
1,261,324

 
 
 
Nonrecourse debt
 
 
 
 
 
 
 
 
873,707

 
 
 
Total consolidated debt outstanding
 
 
 
 
 
 
 
 
$
2,135,031

 
 
 
 
(1) Includes $2.7 million balance on construction loans with maximum available borrowings of $26.2 million.
(2) Includes the effect of interest rate swaps in effect during certain of the periods set forth above that hedge the risk of changes in interest rates on certain of our one-month LIBOR-based variable rate debt.
(3) Includes facility commitment and unused borrowing capacity fees incurred for our Unsecured Revolving Credit Facility.



28

Corporate Office Properties Trust
Debt Analysis  (continued)
(dollars in thousands)
 
 
 
 
 
September 30, 2013
 
 
Secured debt
$
920,205

 
 
Unsecured debt
1,214,826

0.386

 
Total consolidated debt outstanding
$
2,135,031

 
 
 
 
 
 
Unencumbered adjusted book
$
3,391,371

 
 
Encumbered adjusted book
1,190,214

 
 
Total adjusted book
$
4,581,585

 
 
 
 
 
 
# of Operating Office Properties
 
 
 
Unencumbered
152

 
 
Encumbered
58

 
 
Total
210

 
 
 
 
 
 
Square Feet of Office Properties (in thousands)
 
 
 
Unencumbered
13,329

 
 
Encumbered
5,875

 
 
Total
19,204

 
 
 
 
 
 
 
Three Months Ended 9/30/13
 
 
Unencumbered NOI from real estate operations
$
51,713

 
 
Encumbered NOI from real estate operations
27,963

 
 
Total NOI from real estate operations
$
79,676

 
 
 
 
 
 
Unencumbered adjusted EBITDA
$
44,765

 
 
Encumbered adjusted EBITDA
27,735

 
 
Total adjusted EBITDA
$
72,500

 
 
 
 
 
 
Debt ratios (coverage ratios excluding capitalized interest) — All coverage computations include discontinued operations
Three Months Ended 9/30/13
 
Nine Months Ended 9/30/13
Adjusted EBITDA debt service coverage ratio
3.2x
 
3.2x
Adjusted EBITDA fixed charge coverage ratio
2.9x
 
2.8x
Debt to Adjusted EBITDA ratio
7.4x
 
7.3x
 
 
 
 
 
As of and for Three Months Ended 9/30/13
Unsecured Senior Notes Covenants
Actual
 
Required
Total Debt / Total Assets
46.5%
 
Less than 60%
Secured Debt / Total Assets
18.8%
 
Less than 40%
Debt Service Coverage
2.9x
 
Greater than 1.5x
Unencumbered Assets / Unsecured Debt
265.0%
 
Greater than 150%

29

Corporate Office Properties Trust
Debt Maturity Schedule
(dollars in thousands) 

 
 
 
GAAP
 
 
 
 
 
 
 
 
 
 
Stated
 
Effective
 
 
 
 
 
 
 
 
 
 
Rate
 
Rate
 
2013
2014
2015
2016
2017
2018
Thereafter
Total
Unsecured Debt
 
 
 
 
 
 
 
 
 
 
 

Unsecured Revolving Credit Facility (1)(2)
LIBOR + 1.30%
 
1.45%
 
$
—

$
—

$
—

$
—

$
—

$
—

$
—

$
—

Senior Unsecured Notes
 
 
 
 
 
 
 
 
 
 
 
 
Due 5/15/23
3.60%
 
3.70%
 
—

—

—

—

—

—

350,000

350,000

Due 2/15/24
5.25%
 
5.49%
 
—

—

—

—

—

—

250,000

250,000

Total Senior Unsecured Notes
 
 
 
 
$
—

$
—

$
—

$
—

$
—

$
—

$
600,000

$
600,000

 
 
 
 
 
 
 
 
 
 
 
 
 
Exchangeable Senior Notes
4.25%
 
6.05%
 
$
—

$
—

$
575

$
—

$
—

$
—

$
—

$
575

Other Unsecured Debt
 
 
 
 
 
 
 
 
 
 
 
 
2015 maturities (2)
LIBOR + 1.50%
 
1.69%
 
$
—

$
—

$
250,000

$
—

$
—

$
—

$
—

$
250,000

2017 maturities (3)
LIBOR + 1.50%
 
1.69%
 
—

—

—

—

250,000

—

—

250,000

2019 maturities
LIBOR + 2.10%
 
2.28%
 
—

—

—

—

—

—

120,000

120,000

2026 maturities
—%
 
—%
 
50

200

200

200

200

200

1,461

2,511

Total Other Unsecured Debt
 
 
 
 
$
50

$
200

$
250,200

$
200

$
250,200

$
200

$
121,461

$
622,511

 
 
 
 
 
 
 
 
 
 
 
 
 
Total Unsecured Debt
 
 
 
 
$
50

$
200

$
250,775

$
200

$
250,200

$
200

$
721,461

$
1,223,086

Fixed Rate Secured Debt
 
 
 
 
 
 
 
 
 
 
 
 
 2014 maturities
6.41%
 
5.79%
 
$
867

$
153,001

$
—

$
—

$
—

$
—

$
—

$
153,868

 2015 maturities
5.60%
 
5.53%
 
—

—

103,000

—

—

—

—

103,000

 2016 maturities
6.57%
 
6.19%
 
918

3,842

4,128

277,886

—

—

—

286,774

 2017 maturities
5.54%
 
5.66%
 
43

179

189

200

300,802

—

—

301,413

 Thereafter
4.17%
 
4.24%
 
230

949

1,000

1,053

1,113

1,174

31,257

36,776

Total Fixed Rate Secured Debt
 
 
 
 
2,058

157,971

108,317

279,139

301,915

1,174

31,257

881,831

Variable Rate Secured Debt
LIBOR + 2.25%
 
2.43%
 
203

814

36,877

—

—

—

—

37,894

Total Secured Debt
 
 
 
 
$
2,261

$
158,785

$
145,194

$
279,139

$
301,915

$
1,174

$
31,257

$
919,725

 
 
 
 
 
 
 
 
 
 
 
 
 
Total Debt
 
 
 
 
$
2,311

$
158,985

$
395,969

$
279,339

$
552,115

$
1,374

$
752,718

$
2,142,811

 
 
 
 
 
 
 
 
 
 
 
 
 
Fixed Rate Debt
5.29%
 
5.30%
 
$
2,108

$
158,171

$
109,092

$
279,339

$
302,115

$
1,374

$
632,718

$
1,484,917

Variable Rate Debt
1.84%
 
1.84%
 
203

814

286,877

—

250,000

—

120,000

657,894

Total Debt
 
 
 
 
$
2,311

$
158,985

$
395,969

$
279,339

$
552,115

$
1,374

$
752,718

$
2,142,811

 
 
 
 
 
 
 
 
 
 
 
 
 
Balloon Payments

 

 
$
—

$
151,681

$
389,751

$
274,605

$
550,610

$
—

$
746,864

$
2,113,511

Scheduled Principal Amortization

 

 
2,311

7,304

6,218

4,734

1,505

1,374

5,854

29,300

Total Debt
 
 
 
 
$
2,311

$
158,985

$
395,969

$
279,339

$
552,115

$
1,374

$
752,718

$
2,142,811

 
 
 
 
 
 
 
 
 
 
Net discount
(7,780
)
 
 
 
 
 
 
 
 
 
 
Consolidated debt
$
2,135,031

(1) Matures in July 2017, and may be extended by one-year at our option, subject to certain conditions.
(2) May be extended by two one-year periods at our option, subject to certain conditions.
(3) May be extended by one-year at our option, subject to certain conditions.

30

Corporate Office Properties Trust
Consolidated Joint Ventures as of 9/30/13
(dollars and square feet in thousands) 
Operating Properties
Operational
Square Feet
Occupancy
 
Total Assets (1)
Property Level Debt
% COPT Owned
Suburban Maryland:
 

 
 
 

 

 
MOR Forbes 2 LLC
56

90.9%
 
$
4,132

$
—

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

96.9%
 
55,656

37,894

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

100.0%
 
24,016

12,030

85%
Total/Average
419

97.0%
 
$
83,804

$
49,924

 
NOI of Operating Properties for Three Months Ended 9/30/13 (2)
$
1,896

 
 
 

 

 
NOI of Operating Properties for Nine Months Ended 9/30/13 (2)
$
5,375

 
 
 
 
 
 
Non-operational Properties
Estimated Developable Square Feet
 
Total Assets (1)
Property Level Debt
% COPT Owned
Suburban Maryland:
 

 
 

 

 
Indian Head Technology Center
 

 
 

 

 
Business Park (3)
967

 
$
6,447

$
—

75%
M Square Research Park
525

 
5,223

—

50%
Huntsville, Alabama:
 

 
 

 

 
Redstone Gateway
4,477

 
90,125

2,669

85%
Total
5,969

 
$
101,795

$
2,669

 
 
(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.

31


Corporate Office Properties Trust
Supplementary Reconciliations of Non-GAAP Measures
(in thousands)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended
 
Nine Months Ended
 
9/30/13
 
6/30/13
 
3/31/13
 
12/31/12
 
9/30/12
 
9/30/13
 
9/30/12
Net (loss) income
$
(2,000
)
 
$
(4,405
)
 
$
15,277

 
$
19,010

 
$
(20,765
)
 
$
8,872

 
$
1,331

Interest expense on continuing and discontinued operations
21,310

 
23,369

 
22,371

 
22,782

 
23,366

 
67,050

 
74,016

Income tax expense
24

 
21

 
16

 
54

 
106

 
61

 
327

Depreciation of furniture, fixtures and equipment (FF&E)
502

 
527

 
530

 
610

 
624

 
1,559

 
1,871

Real estate-related depreciation and amortization
29,210

 
28,935

 
28,252

 
28,560

 
30,624

 
86,397

 
93,377

Impairment losses
22,074

 
7,195

 
1,857

 
2,140

 
55,829

 
31,126

 
64,770

Loss (gain) on early extinguishment of debt on continuing and discontinued operations
374

 
21,470

 
5,184

 
6

 
(970
)
 
27,028

 
(799
)
Gain on sales of operating properties
—

 
—

 
—

 
8

 
(16,913
)
 
—

 
(20,936
)
Non-operational property sales
—

 
(329
)
 
(2,354
)
 
—

 
—

 
(2,683
)
 
(33
)
Net loss (gain) on investments in unconsolidated entities included in interest and other income
1,006

 
(961
)
 
(60
)
 
(2,992
)
 
(81
)
 
(15
)
 
(597
)
Operating property acquisition costs
—

 
—

 
—

 
—

 
222

 
—

 
229

Adjusted EBITDA
$
72,500

 
$
75,822

 
$
71,073

 
$
70,178

 
$
72,042

 
$
219,395

 
$
213,556

Add back:
 

 
 

 
 

 
 

 
 

 
 

 
 

General, administrative and leasing expenses on continuing and discontinued operations
8,027

 
6,583

 
7,821

 
7,103

 
6,378

 
22,431

 
24,800

Business development expenses and land carry costs on continuing and discontinued operations, excluding operating property acquisition costs
1,383

 
1,327

 
1,359

 
1,205

 
1,410

 
4,069

 
4,301

Depreciation of FF&E
(502
)
 
(527
)
 
(530
)
 
(610
)
 
(624
)
 
(1,559
)
 
(1,871
)
Income from construction contracts and other service operations
(685
)
 
(1,413
)
 
(785
)
 
(750
)
 
(873
)
 
(2,883
)
 
(2,510
)
Interest and other income, excluding net loss/gain on investments in unconsolidated entities
(1,003
)
 
(1,045
)
 
(886
)
 
(1,028
)
 
(1,014
)
 
(2,934
)
 
(2,555
)
Equity in (income) loss of unconsolidated entities
(44
)
 
(126
)
 
(41
)
 
24

 
246

 
(211
)
 
522

NOI from real estate operations
$
79,676

 
$
80,621

 
$
78,011

 
$
76,122

 
$
77,565

 
$
238,308

 
$
236,243

 
 
 
 
 
 
 
 
 
 
 
 
 
 

32

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

 
 

 
 

 
 

 
 

 
 

 
 

Revenues from real estate operations
$
5,521

 
$
5,546

 
$
5,719

 
$
5,585

 
$
6,902

 
$
16,786

 
$
35,305

Property operating expenses
(1,403
)
 
(1,246
)
 
(1,547
)
 
(1,605
)
 
(2,225
)
 
(4,196
)
 
(12,191
)
Depreciation and amortization
—

 
(69
)
 
(89
)
 
(92
)
 
(2,020
)
 
(158
)
 
(8,744
)
General, administrative and leasing expenses
—

 
—

 
(1
)
 
—

 
(1
)
 
(1
)
 
(3
)
Business development expenses and land carry costs
—

 
—

 
—

 
—

 
—

 
—

 
(24
)
Interest
(68
)
 
(67
)
 
(64
)
 
(67
)
 
(127
)
 
(199
)
 
(2,107
)
Gain on early extinguishment of debt
—

 
—

 
—

 
—

 
1,738

 
—

 
1,736

Impairment losses
(5,774
)
 
(7,195
)
 
(1,857
)
 
(186
)
 
(9,733
)
 
(14,826
)
 
(23,510
)
(Loss) gain on sales of depreciated real estate properties
—

 
—

 
—

 
(8
)
 
16,913

 
—

 
20,948

Discontinued operations
$
(1,724
)
 
$
(3,031
)
 
$
2,161

 
$
3,627

 
$
11,447

 
$
(2,594
)
 
$
11,410

GAAP revenues from real estate operations from continuing operations
$
119,040

 
$
119,729

 
$
116,358

 
$
116,979

 
$
114,362

 
$
355,127

 
$
335,231

Revenues from discontinued operations
5,521

 
5,546

 
5,719

 
5,585

 
6,902

 
16,786

 
35,305

Real estate revenues
$
124,561

 
$
125,275

 
$
122,077

 
$
122,564

 
$
121,264

 
$
371,913

 
$
370,536

GAAP property operating expenses from continuing operations
$
43,482

 
$
43,408

 
$
42,519

 
$
44,837

 
$
41,474

 
$
129,409

 
$
122,102

Property operating expenses from discontinued operations
1,403

 
1,246

 
1,547

 
1,605

 
2,225

 
4,196

 
12,191

Real estate property operating expenses
$
44,885

 
$
44,654

 
$
44,066

 
$
46,442

 
$
43,699

 
$
133,605

 
$
134,293

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

 
$
329

 
$
2,354

 
$
—

 
$
—

 
$
2,683

 
$
21

(Loss) gain on sales of real estate from discontinued operations
—

 
—

 
—

 
(8
)
 
16,913

 
—

 
20,948

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

 
329

 
2,354

 
(8
)
 
16,913

 
2,683

 
20,969

Less: Gain on sales of non-operating properties
—

 
(329
)
 
(2,354
)
 
—

 
—

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

 
$
—

 
$
—

 
$
(8
)
 
$
16,913

 
$
—

 
$
20,936

Impairment losses, per statements of operations
$
16,300

 
$
—

 
$
—

 
$
1,954

 
$
46,096

 
$
16,300

 
$
41,260

Impairment losses on discontinued operations
5,774

 
7,195

 
1,857

 
186

 
9,733

 
14,826

 
23,510

Total impairment losses
22,074

 
7,195

 
1,857

 
2,140

 
55,829

 
31,126

 
64,770

Less: Impairment losses on previously depreciated operating properties
(22,074
)
 
(7,195
)
 
(1,857
)
 
(247
)
 
(55,829
)
 
(31,126
)
 
(70,016
)
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
)


33

Corporate Office Properties Trust
Supplementary Reconciliations of Non-GAAP Measures (continued)
(dollars in thousands)
 
Three Months Ended
 
Nine Months Ended
 
9/30/13
 
6/30/13
 
3/31/13
 
12/31/12
 
9/30/12
 
9/30/13
 
9/30/12
Depreciation and amortization associated with real estate operations from continuing operations
$
29,210

 
$
28,866

 
$
28,163

 
$
28,468

 
$
28,604

 
$
86,239

 
$
84,633

Depreciation and amortization from discontinued operations
—

 
69

 
89

 
92

 
2,020

 
158

 
8,744

Real estate-related depreciation and amortization
$
29,210

 
$
28,935

 
$
28,252

 
$
28,560

 
$
30,624

 
$
86,397

 
$
93,377

Interest expense from continuing operations
$
21,242

 
$
23,302

 
$
22,307

 
$
22,715

 
$
23,239

 
$
66,851

 
$
71,909

Interest expense from discontinued operations
68

 
67

 
64

 
67

 
127

 
199

 
2,107

Total interest expense
21,310

 
23,369

 
22,371

 
22,782

 
23,366

 
67,050

 
74,016

Less: Amortization of deferred financing costs
(1,321
)
 
(1,443
)
 
(1,528
)
 
(1,547
)
 
(1,527
)
 
(4,292
)
 
(4,696
)
Less: Amortization of net debt discounts and premiums, net of amounts capitalized
121

 
(556
)
 
(628
)
 
(693
)
 
(683
)
 
(1,063
)
 
(2,028
)
Denominator for interest coverage
20,110

 
21,370

 
20,215

 
20,542

 
21,156

 
61,695

 
67,292

Scheduled principal amortization
2,226

 
2,491

 
2,512

 
2,590

 
2,791

 
7,229

 
9,094

Denominator for debt service coverage
22,336

 
23,861

 
22,727

 
23,132

 
23,947

 
68,924

 
76,386

Scheduled principal amortization
(2,226
)
 
(2,491
)
 
(2,512
)
 
(2,590
)
 
(2,791
)
 
(7,229
)
 
(9,094
)
Preferred share dividends - redeemable non-convertible
4,490

 
4,885

 
6,106

 
6,106

 
6,546

 
15,481

 
14,738

Preferred unit distributions
165

 
165

 
165

 
165

 
165

 
495

 
495

Denominator for fixed charge coverage
$
24,765

 
$
26,420

 
$
26,486

 
$
26,813

 
$
27,867

 
$
77,671

 
$
82,525

Preferred share dividends
$
4,490

 
$
4,885

 
$
6,106

 
$
6,106

 
$
6,546

 
$
15,481

 
$
14,738

Preferred unit distributions
165

 
165

 
165

 
165

 
165

 
495

 
495

Common share dividends
24,022

 
23,604

 
23,594

 
22,255

 
19,837

 
71,220

 
59,465

Common unit distributions
1,094

 
1,042

 
1,050

 
1,119

 
1,157

 
3,186

 
3,498

Total dividends/distributions
$
29,771

 
$
29,696

 
$
30,915

 
$
29,645

 
$
27,705

 
$
90,382

 
$
78,196

Common share dividends
$
24,022

 
$
23,604

 
$
23,594

 
$
22,255

 
$
19,837

 
$
71,220

 
$
59,465

Common unit distributions
1,094

 
1,042

 
1,050

 
1,119

 
1,157

 
3,186

 
3,498

Dividends and distributions for payout ratios
$
25,116

 
$
24,646

 
$
24,644

 
$
23,374

 
$
20,994

 
$
74,406

 
$
62,963

Total Assets
$
3,755,588

 
$
3,699,635

 
$
3,685,099

 
$
3,653,759

 
$
3,597,656

 
$
3,755,588

 
$
3,597,656

Accumulated depreciation
612,369

 
597,783

 
576,299

 
555,975

 
565,724

 
612,369

 
565,724

Accumulated depreciation included in assets held for sale
8,845

 
12,201

 
12,201

 
12,201

 
12,669

 
8,845

 
12,669

Accumulated amort. of real estate intangibles and deferred leasing costs
195,559

 
189,330

 
184,097

 
181,834

 
174,466

 
195,559

 
174,466

Accumulated amortization of real estate intangibles and deferred leasing costs included in assets held for sale
9,224

 
9,216

 
9,208

 
9,199

 
9,191

 
9,224

 
9,191

Denominator for debt to adjusted book
$
4,581,585

 
$
4,508,165

 
$
4,466,904

 
$
4,412,968

 
$
4,359,706

 
$
4,581,585

 
$
4,359,706


34


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

35


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

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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.
 

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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.
 

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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.

Core Portfolio — Operating properties held for long-term investment.

Demand Driver Adjacent Properties — Office properties held for long-term investment located near defense installations and other knowledge-based government demand drivers.

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 were underway or approved.

Regional Office — Regional office properties held for long-term investment predominantly in the Greater Washington, DC/Baltimore region, excluding Strategic Tenant Niche Properties.

 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 Niche 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.

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