EXHIBIT 99.1
 
 
Earnings Release & Supplemental Information — Unaudited
 
March 31, 2014
 
 
OVERVIEW:
Section I

 
INVESTING ACTIVITY:
Section IV

Earnings Release
i-ix

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

 
& Pre-Construction Summary
21

Equity Research Coverage
2

 
Summary of Construction Projects
22

Selected Financial Summary Data
3

 
Summary of Redevelopment Projects
23

Selected Portfolio Data
4

 
Summary of Land Held and Pre-Construction
24

 
 

 
 
 

FINANCIAL STATEMENTS:
Section II

 
CAPITALIZATION:
Section V

Quarterly Consolidated Balance Sheets
5

 
Quarterly Equity Analysis
25

Consolidated Statements of Operations
6-7

 
Debt Analysis
26-27

Consolidated Statements of FFO
8-9

 
Debt Maturity Schedule
28

Consolidated Reconciliations of AFFO
10

 
Consolidated Joint Ventures
29

 
 

 
 
 
PORTFOLIO INFORMATION:
Section III

 
RECONCILIATIONS & DEFINITIONS:
Section VI

Consolidated Office Properties by Region
11

 
Supplementary Reconciliations of Non-GAAP Measures
30-32

NOI from Real Estate Operations and Occupancy by Property Grouping
12

 
Definitions
33-37

Unstabilized Office Properties
13

 
 
 
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

 
 
 
Leasing - Core Office
17

 
 
 
Office Lease Expiration Analysis
18-19

 
 
 
Top 20 Office Tenants
20

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



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

COPT REPORTS FIRST QUARTER 2014 RESULTS

COLUMBIA, MD April 25, 2014 - Corporate Office Properties Trust (“COPT” or the “Company”) (NYSE: OFC) announced financial and operating results for the first quarter ended March 31, 2014.

“During the quarter, occupancy increased modestly in nearly all of our submarkets, reflecting strong demand by customers in our strategic tenant niche and the gradual yet broad-based, improvement in local economic conditions,” stated Roger A. Waesche, Jr., COPT’s President & Chief Executive Officer. “We are at a positive inflection point, and expect 2014 will be a rewarding year for shareholders,” he added.

Results:
Diluted earnings per share (“EPS”) was $0.00 for the quarter ended March 31, 2014 as compared to $0.11 in the first quarter of 2013. Per NAREIT’s definition, diluted funds from operations per share (“FFOPS”) for the first quarter of 2014 was $0.48 versus $0.45 reported in the first quarter of 2013. FFOPS, as adjusted for comparability, was $0.48 for the quarter ended March 31, 2014 as compared to $0.48 reported for the first quarter of 2013. Adjustments for comparability could encompass items such as acquisition costs, impairment losses and gains on non-operating properties (net of related tax adjustments), losses (gains) on early extinguishment of debt and write-offs of original issuance costs for redeemed preferred stock. Please refer to the reconciliation tables that appear later in this press release.

Operating Performance:
Portfolio Summary - At March 31, 2014, the Company’s portfolio of 183 operating office properties totaled 17.5 million square feet. The Company’s portfolio was 89.8% occupied and 91.1% leased as of March 31, 2014.

Same Office Performance - The Company’s same office portfolio for the quarter ended March 31, 2014 represents 88% of the rentable square feet of the portfolio and consists of 170 properties. The Company’s same office portfolio was 89.9% occupied at March 31, 2014, up 50 basis points from year end 2013 occupancy. As of the same date, our same office portfolio was 91.4% leased. For the first quarter ended March 31, 2014, the Company’s same office property cash NOI, excluding gross lease termination fees, was essentially flat as compared to the first quarter of 2013.

Leasing - COPT completed approximately 446,000 square feet of total leasing in core office properties during the quarter ended March 31, 2014, and achieved a 56% renewal rate. For the quarter ended March 31, 2014, total rent on renewed space increased 1.6% on a GAAP basis and decreased 6.9% on a cash basis.


i


Investment Activity:
At March 31, 2014, the Company had eight properties totaling 1.2 million square feet under construction for a total projected cost of $300.3 million, of which $126.1 million had been incurred. These eight projects were 50% pre-leased at March 31, 2014. As of the same date, COPT had four properties under redevelopment representing a total projected cost of $75.6 million, of which $39.7 million has been incurred. The four redevelopment properties totaled approximately 400,000 square feet that, at March 31, 2014, were 68% pre-leased.

Balance Sheet and Capital Transactions:
As of March 31, 2014, the Company’s debt to adjusted book ratio was 43.5% and its adjusted EBITDA fixed charge coverage ratio was 2.9x. Also, the Company’s weighted average interest rate was 4.3% for the quarter ended March 31, 2014 and 89% of the Company’s debt was subject to fixed interest rates, including the effect of interest rate swaps.

2014 FFO Guidance:
Management is raising the low-end of previously issued guidance for 2014 FFOPS, as adjusted for comparability, by $0.01, to a new range of $1.85-$1.92. Management is establishing guidance for second quarter 2014 FFOPS, as adjusted for comparability, of $0.43-$0.45. A reconciliation of projected diluted EPS to projected FFOPS for the quarter ending June 30, 2014 and the year ending December 31, 2014 is provided, as follows:
 
 
 
 
 
 
 
 
 
Quarter Ending
 
Year Ending
 
June 30, 2014
 
December 31, 2014
 
Low
 
High
 
Low
 
High
EPS
$
0.07

 
$
0.09

 
$
0.97

 
$
1.04

Real estate depreciation and amortization
0.32

 
0.32

 
1.44

 
1.44

FFOPS, NAREIT definition
0.39

 
0.41

 
2.41

 
2.48

Net operating income from properties to be conveyed (a)
(0.01
)
 
(0.01
)
 
(0.02
)
 
(0.02
)
Interest expense on loan secured by properties to be conveyed (a)
0.05

 
0.05

 
0.14

 
0.14

Net gains on early extinguishment of debt (b)

 

 
(0.68
)
 
(0.68
)
FFOPS, as adjusted for comparability
$
0.43

 
$
0.45

 
$
1.85

 
$
1.92

 
 
 
 
 
 
 
 

a.
The Company expects to transfer two operating properties in satisfaction of non-recourse secured indebtedness. These amounts represent the Company’s forecast of net operating income generated by these assets and interest expense (accrued at the default rate) from April 1st through year-end, and assuming a transfer date of December 31, 2014.
b.
Represents debt and accrued interest in excess of the book value of the assets to be conveyed.


ii


1Q 2014 Conference Call Information:
Management will discuss first quarter 2014 earnings results, as well as its 2014 guidance, on its conference call on April 25, 2014 at 12:00 p.m. Eastern Time, details of which are listed below:

Earnings Release Date:    Friday, April 25, 2014 at 6:00 a.m. Eastern Time
Conference Call Date:    Friday, April 25, 2014
Time:     12:00 p.m. Eastern Time
Telephone Number: (within the U.S.)    888-713-4213
Telephone Number: (outside the U.S.)    617-213-4865
Passcode:    65527969
    
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=PC84V8CXU

You may also pre-register in the Investor Relations section of the Company’s website at www.copt.com. Alternatively, you may be placed into the call by an operator by calling the number provided above at least 5 to 10 minutes before the start of the call.

A replay of this call will be available beginning Friday, April 25 at 4:00 p.m. Eastern Time through Friday, May 9 at midnight Eastern Time. To access the replay within the United States, please call 888-286-8010 and use passcode 50491518. To access the replay outside the United States, please call 617-801-6888 and use passcode 50491518.

The conference call 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 which are engaged in defense information technology and national security-related activities. As of March 31, 2014, COPT derived 73% of its annualized revenue from its strategic tenant niche properties and 23% from its regional office properties. The Company generally acquires, develops, manages and leases office and data center properties concentrated in large office parks primarily located near knowledge-based government demand drivers and/or in targeted markets or submarkets in the Greater Washington, DC/Baltimore region. As of March 31, 2014, the Company’s consolidated portfolio consisted of 183 office properties totaling 17.5 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 prolonged 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;
*
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, 2013.


iv



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


 
 
For the Three Months Ended March 31,
 
 
2014
 
2013
Revenues
 
 
 
 
Real estate revenues
 
$
124,877

 
$
111,957

Construction contract and other service revenues
 
21,790

 
14,262

Total revenues
 
146,667

 
126,219

Expenses
 
 
 
 
Property operating expenses
 
49,772

 
40,388

Depreciation and amortization associated with real estate operations
 
43,596

 
27,010

Construction contract and other service expenses
 
18,624

 
13,477

General and administrative expenses
 
6,158

 
5,984

Leasing expenses
 
1,985

 
1,836

Business development expenses and land carry costs
 
1,326

 
1,359

Total operating expenses
 
121,461

 
90,054

Operating income

25,206


36,165

Interest expense
 
(20,827
)
 
(20,290
)
Interest and other income
 
1,285

 
946

Loss on early extinguishment of debt
 

 
(5,184
)
Income from continuing operations before equity in income of unconsolidated entities and income taxes
 
5,664

 
11,637

Equity in income of unconsolidated entities
 
60

 
41

Income tax expense
 
(64
)
 
(16
)
Income from continuing operations
 
5,660

 
11,662

Discontinued operations
 
11

 
1,261

Income before gain on sales of real estate
 
5,671

 
12,923

Gain on sales of real estate, net of income taxes
 

 
2,354

Net income
 
5,671

 
15,277

Net (income) loss attributable to noncontrolling interests
 
 
 
 
Common units in the Operating Partnership
 
(16
)
 
(429
)
Preferred units in the Operating Partnership
 
(165
)
 
(165
)
Other consolidated entities
 
(749
)
 
337

Net income attributable to COPT
 
4,741

 
15,020

Preferred share dividends
 
(4,490
)
 
(6,106
)
Net income attributable to COPT common shareholders
 
$
251

 
$
8,914

 
 
 
 
 
Earnings per share (“EPS”) computation:
 
 
 
 
Numerator for diluted EPS:
 
 
 
 
Net income attributable to common shareholders
 
$
251

 
$
8,914

Amount allocable to restricted shares
 
(121
)
 
(118
)
Numerator for diluted EPS
 
$
130

 
$
8,796

 
 
 
 
 
Denominator:
 
 
 
 
Weighted average common shares - basic
 
87,080

 
81,397

Dilutive effect of share-based compensation awards
 
112

 
52

Weighted average common shares - diluted
 
87,192

 
81,449

Diluted EPS
 
$
0.00

 
$
0.11


v



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

 
 
For the Three Months Ended March 31,
 
 
2014
 
2013
Net income
 
$
5,671

 
$
15,277

Real estate-related depreciation and amortization
 
43,596

 
28,252

Impairment losses on previously depreciated operating properties
 
1

 
1,857

Loss on sales of previously depreciated operating properties
 
4

 

Funds from operations (“FFO”)
 
49,272

 
45,386

Noncontrolling interests - preferred units in the Operating Partnership
 
(165
)
 
(165
)
FFO allocable to other noncontrolling interests
 
(761
)
 
(727
)
Preferred share dividends
 
(4,490
)
 
(6,106
)
Basic and diluted FFO allocable to restricted shares
 
(205
)
 
(183
)
Basic and diluted FFO available to common share and common unit holders (“Basic and diluted FFO”)
 
43,651

 
38,205

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

 
(2,354
)
Loss on early extinguishment of debt
 
23

 
5,184

Diluted FFO available to common share and common unit holders, as adjusted for comparability
 
43,674

 
41,035

Straight line rent adjustments
 
760

 
(3,833
)
Amortization of intangibles included in net operating income
 
217

 
177

Share-based compensation, net of amounts capitalized
 
1,555

 
1,649

Amortization of deferred financing costs
 
1,167

 
1,528

Amortization of net debt discounts, net of amounts capitalized
 
171

 
628

Amortization of settled debt hedges
 
15

 
15

Recurring capital expenditures
 
(11,052
)
 
(5,308
)
Diluted adjusted funds from operations available to common share and common unit holders (“Diluted AFFO”)
 
$
36,507

 
$
35,891

Diluted FFO per share
 
$
0.48

 
$
0.45

Diluted FFO per share, as adjusted for comparability
 
$
0.48

 
$
0.48

Dividends/distributions per common share/unit
 
$
0.275

 
$
0.275




vi



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

 
 
March 31,
2014
 
December 31,
2013
Balance Sheet Data
 
 

 
 

Properties, net of accumulated depreciation
 
$
3,224,628

 
$
3,214,301

Total assets
 
3,605,897

 
3,629,952

Debt, net
 
1,931,831

 
1,927,703

Total liabilities
 
2,115,208

 
2,114,945

Redeemable noncontrolling interest
 
17,654

 
17,758

Equity
 
1,473,035

 
1,497,249

Debt to adjusted book
 
43.5
%
 
43.6
%
Debt to total market capitalization
 
41.7
%
 
44.3
%
 
 
 
 
 
Consolidated Property Data (as of period end)
 
 

 
 

Number of operating properties
 
183

 
183

Total net rentable square feet owned (in thousands)
 
17,473

 
17,370

Occupancy %
 
89.8
%
 
89.1
%
Leased %
 
91.1
%
 
90.3
%
 
 
 
 
 
 
For the Three Months Ended March 31,
2014
 
2013
Payout ratios
 

 
 

Diluted FFO
57.7
%
 
64.5
%
Diluted FFO, as adjusted for comparability
57.6
%
 
60.1
%
Diluted AFFO
69.0
%
 
68.7
%
Adjusted EBITDA interest coverage ratio
3.6
x
 
3.5
x
Adjusted EBITDA fixed charge coverage ratio
2.9
x
 
2.7
x
Adjusted debt to in-place adjusted EBITDA ratio (1)
6.8
x
 
6.8
x
 
 
 
 
Reconciliation of denominators for diluted EPS and diluted FFO per share
 
 

Denominator for diluted EPS
87,192

 
81,449

Weighted average common units
3,958

 
3,893

Denominator for diluted FFO per share
91,150

 
85,342

 
 
 
 
Reconciliation of FFO to FFO, as adjusted for comparability
 

 
 

FFO, per NAREIT
$
49,272

 
$
45,386

Gain on sales of non-operating properties

 
(2,354
)
Loss on early extinguishment of debt, continuing and discontinued operations
23

 
5,184

FFO, as adjusted for comparability
$
49,295

 
$
48,216


(1)
Represents debt as of period end divided by in-place adjusted EBITDA for the period, as annualized (i.e. three month periods are multiplied by four).

vii



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

 
For the Three Months Ended March 31,
 
2014
 
2013
Reconciliation of common share dividends to dividends and distributions for payout ratios
 

 
 

Common share dividends
$
24,091

 
$
23,594

Common unit distributions
1,081

 
1,050

Dividends and distributions for payout ratios
$
25,172

 
$
24,644

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

 
 

Net income
$
5,671

 
$
15,277

Interest expense on continuing operations
20,827

 
20,290

Interest expense on discontinued operations

 
2,081

Income tax expense
64

 
16

Real estate-related depreciation and amortization
43,596

 
28,252

Depreciation of furniture, fixtures and equipment
505

 
530

Impairment losses
1

 
1,857

Loss on early extinguishment of debt on continuing and discontinued operations
23

 
5,184

Loss on sales of operating properties
4

 

Gain on sales of non-operational properties

 
(2,354
)
Net loss (gain) on investments in unconsolidated entities included in interest and other income
20

 
(60
)
Adjusted and in-place adjusted EBITDA
$
70,711

 
$
71,073

 
 
 
 
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
$
20,827

 
$
20,290

Interest expense from discontinued operations

 
2,081

Less: Amortization of deferred financing costs
(1,167
)
 
(1,528
)
Less: Amortization of net debt discount, net of amounts capitalized
171

 
(628
)
Denominator for interest coverage-Adjusted EBITDA
19,831

 
20,215

Preferred share dividends
4,490

 
6,106

Preferred unit distributions
165

 
165

Denominator for fixed charge coverage-Adjusted EBITDA
$
24,486

 
$
26,486

 
 
 
 

viii



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

 
For the Three Months Ended March 31,
 
2014
 
2013
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
$
6,319

 
$
2,291

Building improvements on operating properties
3,982

 
1,600

Leasing costs for operating properties
1,528

 
1,669

Less: Nonrecurring tenant improvements and incentives on operating properties
(16
)
 
15

Less: Nonrecurring building improvements on operating properties
(568
)
 
(267
)
Less: Nonrecurring leasing costs for operating properties
(193
)
 

Recurring capital expenditures
$
11,052

 
$
5,308

 
 
 
 
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
$
65,789

 
$
66,628

Less: Straight-line rent adjustments
(537
)
 
(1,588
)
Less: Amortization of deferred market rental revenue
8

 
(29
)
Add: Amortization of above-market cost arrangements
272

 
319

Same office property cash net operating income
65,532

 
65,330

Less: Lease termination fees, gross
(512
)
 
(224
)
Same office property cash net operating income, excluding gross lease termination fees
$
65,020

 
$
65,106

 
 
 
 
 
 
March 31,
2014
 
December 31,
2013
Reconciliation of total assets to denominator for debt to adjusted book
 
 

 
 

Total assets
 
$
3,605,897

 
$
3,629,952

Accumulated depreciation
 
635,178

 
597,649

Accumulated amortization of real estate intangibles and deferred leasing costs
 
199,500

 
193,142

Denominator for debt to adjusted book
 
$
4,440,575

 
$
4,420,743

 
 
 
 
 
Reconciliation of debt to numerator for adjusted debt to in-place adjusted EBITDA ratio
 
 
 
 
Debt, net
 
$
1,931,831

 
$
1,927,703

Less: Cash and cash equivalents
 
(18,374
)
 
(54,373
)
Numerator for adjusted debt to in-place adjusted EBITDA ratio
 
$
1,913,457

 
$
1,873,330


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 March 31, 2014, COPT derived 73% of its annualized revenue from its strategic tenant niche properties and 23% 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 March 31, 2014, COPT’s operating portfolio of 183 office properties encompassed 17.5 million square feet and was 91.1% 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 prolonged 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; 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, 2013.

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
Citigroup Global Markets
 
Emmanuel Korchman
 
212-816-1382
 
emmanuel.korchman@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
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, the above-listed firms are those whose analysts publish research material on the Company and whose estimates of our FFO per share can be tracked through Thomson’s First Call Corporation. Any opinions, estimates, or forecasts the above analysts make regarding COPT’s future performance are their own and do not represent the views, estimates, or forecasts of COPT’s management.

2


Corporate Office Properties Trust
Selected Financial Summary Data
(in thousands, except per share data)
 
 
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended
SUMMARY OF RESULTS 
 
3/31/14
 
12/31/13
 
9/30/13
 
6/30/13
 
3/31/13
Same Office NOI
 
$
65,789

 
$
66,352

 
$
68,320

 
$
68,313

 
$
66,628

NOI from real estate operations
 
$
75,144

 
$
79,621

 
$
79,676

 
$
80,621

 
$
78,011

Adjusted EBITDA
 
$
70,711

 
$
73,917

 
$
72,500

 
$
75,822

 
$
71,073

Net income (loss) attributable to COPT common shareholders
 
$
251

 
$
82,526

 
$
(7,454
)
 
$
(13,154
)
 
$
8,914

FFO - per NAREIT
 
$
49,272

 
$
115,911

 
$
49,284

 
$
31,725

 
$
45,386

FFO - as adjusted for comparability
 
$
49,295

 
$
49,958

 
$
49,658

 
$
55,770

 
$
48,216

Basic and diluted FFO available to common share and common unit holders
 
$
43,651

 
$
109,914

 
$
43,618

 
$
22,412

 
$
38,205

Diluted AFFO available to common share and common unit holders
 
$
36,507

 
$
28,362

 
$
35,503

 
$
42,417

 
$
35,891

Per share - diluted:
 
 

 
 

 
 

 
 

 
 

EPS
 
$
0.00

 
$
0.94

 
$
(0.09
)
 
$
(0.16
)
 
$
0.11

FFO - NAREIT
 
$
0.48

 
$
1.21

 
$
0.48

 
$
0.25

 
$
0.45

FFO - as adjusted for comparability
 
$
0.48

 
$
0.48

 
$
0.49

 
$
0.52

 
$
0.48

Dividend per common share
 
$
0.2750

 
$
0.2750

 
$
0.2750

 
$
0.2750

 
$
0.2750

Payout ratios:
 
 

 
 

 
 

 
 

 
 

Diluted FFO
 
57.7
%
 
22.9
%
 
57.6
%
 
110.0
%
 
64.5
%
Diluted FFO - as adjusted for comparability
 
57.6
%
 
56.9
%
 
57.1
%
 
53.1
%
 
60.1
%
Diluted AFFO
 
69.0
%
 
88.6
%
 
70.7
%
 
58.1
%
 
68.7
%
Real estate revenue operating margin
 
60.2
%
 
62.8
%
 
64.0
%
 
64.4
%
 
63.9
%
Rental revenue operating margin
 
76.7
%
 
77.6
%
 
78.5
%
 
79.5
%
 
78.6
%
CAPITALIZATION
 
 

 
 

 
 
 
 

 
 

Total Market Capitalization
 
$
4,627,913

 
$
4,350,189

 
$
4,503,307

 
$
4,636,656

 
$
4,689,907

Total Equity Market Capitalization
 
$
2,696,082

 
$
2,422,486

 
$
2,368,276

 
$
2,543,550

 
$
2,732,547

Debt, net
 
$
1,931,831

 
$
1,927,703

 
$
2,135,031

 
$
2,093,106

 
$
1,957,360

Debt to Total Market Capitalization
 
41.7
%
 
44.3
%
 
47.4
%
 
45.1
%
 
41.7
%
Debt to Adjusted book
 
43.5
%
 
43.6
%
 
46.6
%
 
46.4
%
 
43.8
%
Adjusted EBITDA interest coverage ratio
 
3.6
x
 
3.3
x
 
3.6
x
 
3.5
x
 
3.5
x
Adjusted EBITDA debt service coverage ratio
 
3.3
x
 
3.0
x
 
3.2
x
 
3.2
x
 
3.1
x
Adjusted EBITDA fixed charge coverage ratio
 
2.9
x
 
2.8
x
 
2.9
x
 
2.9
x
 
2.7
x
Adjusted debt to in-place adjusted EBITDA ratio
 
6.8
x
 
6.8
x
 
7.3
x
 
6.9
x
 
6.8
x
OTHER
 
 

 
 

 
 

 
 

 
 

Revenue from early termination of leases
 
$
1,112

 
$
1,676

 
$
891

 
$
1,280

 
$
835

Capitalized interest costs
 
$
1,589

 
$
2,042

 
$
2,215

 
$
2,088

 
$
2,440

 
 
 
 
 
 
 
 
 
 
 


3


Corporate Office Properties Trust
Selected Portfolio Data
 
 
 
 
 
 
 
 
 
 
 
 
3/31/14
 
12/31/13
 
9/30/13
 
6/30/13
 
3/31/13
 
 
 

 
 

 
 

 
 

 
 

 
# of Operating Office Properties
 
 
 
 
 
 
 
 
 
 
Total Portfolio
183

 
183

 
210

 
210

 
210

 
Same Office Properties
170

 
170

 
170

 
170

 
170

 
 
 
 
 
 
 
 
 
 
 
 
% Occupied
 

 
 

 
 

 
 

 
 

 
Total Portfolio
89.8
%
 
89.1
%
 
88.5
%
 
88.2
%
 
87.6
%
 
Same Office Properties
89.9
%
 
89.4
%
 
89.7
%
 
89.6
%
 
89.1
%
 
 
 
 
 
 
 
 
 
 
 
 
% Leased
 

 
 

 
 

 
 

 
 

 
Total Portfolio
91.1
%
 
90.3
%
 
89.7
%
 
90.0
%
 
89.3
%
 
Same Office Properties
91.4
%
 
90.7
%
 
90.8
%
 
91.0
%
 
90.4
%
 
 
 
 
 
 
 
 
 
 
 
 
Square Feet of Office Properties (in thousands)
 

 
 

 
 

 
 

 
 

 
Total Portfolio
17,473

 
17,370

 
19,204

 
19,037

 
19,128

 
Same Office Properties
15,446

 
15,446

 
15,446

 
15,446

 
15,446

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

 
18

 
18

 
18

 
18

 
MWs Operational
9

 
9

 
9

 
9

 
9

 
MWs Leased
6.3

 
6.3

 
6.3

 
4.3

 
4.3

 
 
 
 
 
 
 
 
 
 
 
 








4


Corporate Office Properties Trust
Quarterly Consolidated Balance Sheets
(dollars in thousands)
 
3/31/14
 
12/31/13
 
9/30/13
 
6/30/13
 
3/31/13
Assets
 

 
 

 
 

 
 

 
 

Properties, net
 

 
 

 
 

 
 

 
 

Operating properties, net
$
2,729,003

 
$
2,702,693

 
$
2,713,579

 
$
2,703,009

 
$
2,705,335

Construction and redevelopment in progress, including land (1)
159,468

 
160,436

 
174,117

 
189,079

 
160,311

Land held for future development and pre-construction costs (1)
336,157

 
351,172

 
352,050

 
319,216

 
324,327

Total properties, net
3,224,628

 
3,214,301

 
3,239,746

 
3,211,304

 
3,189,973

Assets held for sale

 

 
133,984

 
136,896

 
142,404

Cash and cash equivalents
18,374

 
54,373

 
27,318

 
9,196

 
23,509

Restricted cash and marketable securities
10,965

 
11,448

 
14,698

 
19,472

 
17,040

Accounts receivable, net
30,152

 
27,000

 
15,485

 
22,511

 
10,503

Deferred rent receivable, net
91,082

 
89,456

 
90,104

 
89,811

 
88,716

Intangible assets on real estate acquisitions, net
55,678

 
59,258

 
64,372

 
68,046

 
72,035

Deferred leasing and financing costs, net
65,855

 
66,267

 
63,246

 
57,488

 
59,856

Mortgage and other investing receivables
55,231

 
53,663

 
42,560

 
40,206

 
38,706

Prepaid expenses and other assets
53,932

 
54,186

 
64,075

 
44,705

 
42,357

Total assets
$
3,605,897

 
$
3,629,952

 
$
3,755,588

 
$
3,699,635

 
$
3,685,099

Liabilities and equity
 

 
 

 
 

 
 

 
 

Liabilities:
 

 
 

 
 

 
 

 
 

Debt, net
$
1,931,831

 
$
1,927,703

 
$
2,135,031

 
$
2,093,106

 
$
1,957,360

Accounts payable and accrued expenses
97,451

 
98,785

 
85,291

 
84,181

 
90,645

Rents received in advance and security deposits
28,267

 
31,492

 
28,539

 
24,095

 
26,024

Dividends and distributions payable
29,122

 
29,080

 
29,077

 
28,602

 
29,947

Deferred revenue associated with operating leases
12,281

 
10,369

 
8,545

 
9,649

 
10,833

Distributions received in excess of investment in unconsolidated real estate joint venture

 

 
6,420

 
6,420

 
6,420

Interest rate derivatives
3,196

 
3,309

 
3,595

 
3,555

 
5,340

Other liabilities
13,060

 
14,207

 
8,234

 
8,169

 
7,631

Total liabilities
2,115,208

 
2,114,945

 
2,304,732

 
2,257,777

 
2,134,200

Redeemable noncontrolling interest
17,654

 
17,758

 
16,789

 
15,571

 
10,356

Equity:
 

 
 

 
 

 
 
 
 
COPT’s shareholders’ equity:
 

 
 

 
 

 
 
 
 
Preferred shares at liquidation preference
249,083

 
249,083

 
249,083

 
249,083

 
333,833

Common shares
876

 
874

 
874

 
858

 
858

Additional paid-in capital
1,816,467

 
1,814,015

 
1,812,801

 
1,772,470

 
1,772,255

Cumulative distributions in excess of net income
(665,708
)
 
(641,868
)
 
(700,368
)
 
(668,892
)
 
(632,134
)
Accumulated other comprehensive income (loss)
2,072

 
3,480

 
2,925

 
3,631

 
(4,410
)
Total COPT’s shareholders’ equity
1,402,790

 
1,425,584

 
1,365,315

 
1,357,150

 
1,470,402

Noncontrolling interests in subsidiaries
 

 
 

 
 

 
 

 
 

Common units in the Operating Partnership
51,757

 
53,468

 
50,815

 
49,112

 
50,604

Preferred units in the Operating Partnership
8,800

 
8,800

 
8,800

 
8,800

 
8,800

Other consolidated entities
9,688

 
9,397

 
9,137

 
11,225

 
10,737

Total noncontrolling interests in subsidiaries
70,245

 
71,665

 
68,752

 
69,137

 
70,141

Total equity
1,473,035

 
1,497,249

 
1,434,067

 
1,426,287

 
1,540,543

Total liabilities, redeemable noncontrolling interest and equity
$
3,605,897

 
$
3,629,952

 
$
3,755,588

 
$
3,699,635

 
$
3,685,099

(1) Please refer to pages 21-24 for detail.
 
 
 
 
 
 
 
 
 

5


Corporate Office Properties Trust
Consolidated Statements of Operations
(in thousands, except per share data)
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended
 
3/31/14
 
12/31/13
 
9/30/13
 
6/30/13
 
3/31/13
Revenues
 

 
 

 
 

 
 

 
 

Rental revenue
$
98,035

 
$
96,700

 
$
94,641

 
$
94,421

 
$
91,849

Tenant recoveries and other real estate operations revenue
26,842

 
21,787

 
20,180

 
21,311

 
20,108

Construction contract and other service revenues
21,790

 
10,315

 
16,991

 
20,795

 
14,262

Total revenues
146,667

 
128,802

 
131,812

 
136,527

 
126,219

Expenses
 

 
 

 
 

 
 

 
 

Property operating expenses
49,772

 
44,117

 
41,361

 
41,333

 
40,388

Depreciation and amortization associated with real estate operations
43,596

 
30,326

 
28,205

 
27,673

 
27,010

Construction contract and other service expenses
18,624

 
9,710

 
16,306

 
19,382

 
13,477

Impairment losses

 

 
5,857

 

 

General and administrative expenses
6,158

 
6,523

 
6,237

 
4,992

 
5,984

Leasing expenses
1,985

 
1,916

 
1,790

 
1,591

 
1,836

Business development expenses and land carry costs
1,326

 
1,367

 
1,383

 
1,327

 
1,359

Total operating expenses
121,461

 
93,959

 
101,139

 
96,298

 
90,054

Operating income
25,206

 
34,843

 
30,673

 
40,229

 
36,165

Interest expense
(20,827
)
 
(21,276
)
 
(19,342
)
 
(21,102
)
 
(20,290
)
Interest and other income (loss)
1,285

 
885

 
(3
)
 
2,006

 
946

Loss on early extinguishment of debt

 
(2
)
 
(374
)
 
(21,470
)
 
(5,184
)
Income (loss) from continuing operations before equity in income of unconsolidated entities and income taxes
5,664

 
14,450

 
10,954

 
(337
)
 
11,637

Equity in income of unconsolidated entities
60

 
1,899

 
44

 
126

 
41

Income tax expense
(64
)
 
(1,917
)
 
(24
)
 
(21
)
 
(16
)
Income (loss) from continuing operations
5,660

 
14,432

 
10,974

 
(232
)
 
11,662

Discontinued operations
11

 
71,907

 
(12,974
)
 
(4,502
)
 
1,261

Income (loss) before gain on sales of real estate
5,671

 
86,339

 
(2,000
)
 
(4,734
)
 
12,923

Gain on sales of real estate

 
6,333

 

 
329

 
2,354

Net income (loss)
5,671

 
92,672

 
(2,000
)
 
(4,405
)
 
15,277

Net (income) loss attributable to noncontrolling interests
 

 
 

 
 

 
 

 
 

Common units in the Operating Partnership
(16
)
 
(3,757
)
 
232

 
671

 
(429
)
Preferred units in the Operating Partnership
(165
)
 
(165
)
 
(165
)
 
(165
)
 
(165
)
Other consolidated entities
(749
)
 
(1,734
)
 
(1,031
)
 
(1,466
)
 
337

Net income (loss) attributable to COPT
4,741

 
87,016

 
(2,964
)
 
(5,365
)
 
15,020

Preferred share dividends
(4,490
)
 
(4,490
)
 
(4,490
)
 
(4,885
)
 
(6,106
)
Issuance costs associated with redeemed preferred shares

 

 

 
(2,904
)
 

Net income (loss) attributable to COPT common shareholders
$
251

 
$
82,526

 
$
(7,454
)
 
$
(13,154
)
 
$
8,914

 
 
 
 
 
 
 
 
 
 

6


Corporate Office Properties Trust
Consolidated Statements of Operations (continued)
(in thousands, except per share data)
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended
 
3/31/14
 
12/31/13
 
9/30/13
 
6/30/13
 
3/31/13
For diluted EPS computations:
 

 
 

 
 

 
 

 
 

Numerator for diluted EPS
 

 
 

 
 

 
 

 
 

Net income (loss) attributable to common shareholders
$
251

 
$
82,526

 
$
(7,454
)
 
$
(13,154
)
 
$
8,914

Dilutive effect of common units in the Operating Partnership

 

 

 
(671
)
 

Amount allocable to restricted shares
(121
)
 
(348
)
 
(97
)
 
(102
)
 
(118
)
Numerator for diluted EPS
$
130

 
$
82,178

 
$
(7,551
)
 
$
(13,927
)
 
$
8,796

Denominator:
 

 
 

 
 

 
 

 
 

Weighted average common shares - basic
87,080

 
87,010

 
86,760

 
85,425

 
81,397

Dilutive effect of common units in the Operating Partnership

 

 

 
3,801

 

Dilutive effect of share-based compensation awards
112

 
42

 

 

 
52

Weighted average common shares - diluted
87,192

 
87,052

 
86,760

 
89,226

 
81,449

Diluted EPS
$
0.00

 
$
0.94

 
$
(0.09
)
 
$
(0.16
)
 
$
0.11


7


Corporate Office Properties Trust
Consolidated Statements of FFO
(in thousands, except per share data)
 
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended
 
 
3/31/14
 
12/31/13
 
9/30/13
 
6/30/13
 
3/31/13
 
NOI from real estate operations (1) (2)
 

 
 

 
 

 
 

 
 

 
Real estate revenues
$
124,896

 
$
126,720

 
$
124,561

 
$
125,275

 
$
122,077

 
Real estate property operating expenses
(49,752
)
 
(47,099
)
 
(44,885
)
 
(44,654
)
 
(44,066
)
 
NOI from real estate operations
75,144

 
79,621

 
79,676

 
80,621

 
78,011

 
General and administrative expenses
(6,158
)
 
(6,523
)
 
(6,237
)
 
(4,992
)
 
(5,984
)
 
Leasing expenses (2)
(1,985
)
 
(1,919
)
 
(1,790
)
 
(1,591
)
 
(1,837
)
 
Business development expenses and land carry costs (2)
(1,326
)
 
(1,367
)
 
(1,383
)
 
(1,327
)
 
(1,359
)
 
NOI from construction contracts and other service operations
3,166

 
605

 
685

 
1,413

 
785

 
Equity in income of unconsolidated entities
60

 
1,899

 
44

 
126

 
41

 
Interest and other income (loss)
1,285

 
885

 
(3
)
 
2,006

 
946

 
(Loss) gain on early extinguishment of debt (2)
(23
)
 
67,808

 
(374
)
 
(21,470
)
 
(5,184
)
 
Gain on sales of non-operating properties

 

 

 
329

 
2,354

 
Total interest expense (2)
(20,827
)
 
(23,181
)
 
(21,310
)
 
(23,369
)
 
(22,371
)
 
Income tax expense
(64
)
 
(1,917
)
 
(24
)
 
(21
)
 
(16
)
 
FFO - per NAREIT (1)
49,272

 
115,911

 
49,284

 
31,725

 
45,386

 
Preferred share dividends
(4,490
)
 
(4,490
)
 
(4,490
)
 
(4,885
)
 
(6,106
)
 
Issuance costs associated with redeemed preferred shares

 

 

 
(2,904
)
 

 
Noncontrolling interests - preferred units in the Operating Partnership
(165
)
 
(165
)
 
(165
)
 
(165
)
 
(165
)
 
FFO allocable to other noncontrolling interests
(761
)
 
(880
)
 
(833
)
 
(1,270
)
 
(727
)
 
Basic and diluted FFO allocable to restricted shares
(205
)
 
(462
)
 
(178
)
 
(89
)
 
(183
)
 
Basic and diluted FFO available to common share and common unit holders (1)
43,651

 
109,914

 
43,618

 
22,412

 
38,205

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

 

 

 
(329
)
 
(2,354
)
 
Valuation allowance on tax asset associated with FFO comparability adjustments

 
1,855

 

 

 

 
Loss (gain) on early extinguishment of debt (2)
23

 
(67,808
)
 
374

 
21,470

 
5,184

 
Issuance costs associated with redeemed preferred shares

 

 

 
2,904

 

 
Diluted FFO comparability adjustments allocable to restricted shares

 
168

 

 

 

 
Diluted FFO available to common share and common unit holders, as adjusted for comparability (1)
$
43,674

 
$
44,129

 
$
43,992

 
$
46,457

 
$
41,035

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

8


Corporate Office Properties Trust
Consolidated Statements of FFO (continued)
(in thousands, except per share data)
 
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended
 
 
3/31/14
 
12/31/13
 
9/30/13
 
6/30/13
 
3/31/13
 
Net income (loss)
$
5,671

 
$
92,672

 
$
(2,000
)
 
$
(4,405
)
 
$
15,277

 
Real estate-related depreciation and amortization
43,596

 
31,322

 
29,210

 
28,935

 
28,252

 
Impairment losses on previously depreciated operating properties (1)(2)
1

 
921

 
22,074

 
7,195

 
1,857

 
Loss (gain) on sales of previously depreciated operating properties (2)
4

 
(9,004
)
 

 

 

 
FFO - per NAREIT (3)
49,272

 
115,911

 
49,284

 
31,725

 
45,386

 
Gain on sales of non-operating properties

 

 

 
(329
)
 
(2,354
)
 
Valuation allowance on tax asset associated with FFO comparability adjustments

 
1,855

 

 

 

 
Loss (gain) on early extinguishment of debt (2)
23

 
(67,808
)
 
374

 
21,470

 
5,184

 
Issuance costs associated with redeemed preferred shares

 

 

 
2,904

 

 
FFO - as adjusted for comparability (3)
$
49,295

 
$
49,958

 
$
49,658

 
$
55,770

 
$
48,216

 
 
 
 
 
 
 
 
 
 
 
 
Weighted Average Shares for period ended:
 

 
 

 
 

 
 

 
 

 
Common Shares Outstanding
87,080

 
87,010

 
86,760

 
85,425

 
81,397

 
Dilutive effect of share-based compensation awards
112

 
42

 
45

 
96

 
52

 
Common Units
3,958

 
3,978

 
3,804

 
3,801

 
3,893

 
Denominator for FFO per share - diluted
91,150

 
91,030

 
90,609

 
89,322

 
85,342

 
Anti-dilutive EPS effect of share-based compensation awards

 

 
(45
)
 
(96
)
 

 
Weighted average common units
(3,958
)
 
(3,978
)
 
(3,804
)
 

 
(3,893
)
 
Denominator for diluted EPS
87,192

 
87,052

 
86,760

 
89,226

 
81,449

 
 
 
 
 
 
 
 
 
 
 
 
(1) Please see reconciliations on pages 30 through 32.
 
 
 
 
 
 
 
 
 
 
(2) Includes continuing and discontinued operations.
 
 
 
 
 
 
 
 
 
 
(3) Please refer to the section entitled “Definitions” for a definition of this measure.

9


Corporate Office Properties Trust
Consolidated Reconciliations of AFFO
(in thousands, except per share data)
 
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended
 
 
3/31/14
 
12/31/13
 
9/30/13
 
6/30/13
 
3/31/13
 
Diluted FFO available to common share and common unit holders, as adjusted for comparability
$
43,674

 
$
44,129

 
$
43,992

 
$
46,457

 
$
41,035

 
Straight line rent adjustments (1)
760

 
3,157

 
(980
)
 
(2,011
)
 
(3,833
)
 
Amortization of intangibles included in NOI
217

 
224

 
230

 
172

 
177

 
Share-based compensation, net of amounts capitalized
1,555

 
1,661

 
1,573

 
1,647

 
1,649

 
Amortization of deferred financing costs
1,167

 
1,159

 
1,321

 
1,443

 
1,528

 
Amortization of net debt discounts, net of amounts capitalized
171

 
(48
)
 
(121
)
 
556

 
628

 
Amortization of settled debt hedges
15

 
15

 
16

 
15

 
15

 
Recurring capital expenditures on properties to be held
(11,052
)
 
(21,935
)
 
(10,528
)
 
(5,862
)
 
(5,308
)
 
Diluted AFFO available to common share and common unit holders (“diluted AFFO”)
$
36,507

 
$
28,362

 
$
35,503

 
$
42,417

 
$
35,891

 
Recurring capital expenditures
 

 
 

 
 

 
 

 
 

 
Tenant improvements and incentives on operating properties
$
6,319

 
$
6,430

 
$
4,894

 
$
3,798

 
$
2,291

 
Building improvements on operating properties
3,982

 
12,898

 
4,857

 
2,538

 
1,600

 
Leasing costs for operating properties
1,528

 
4,286

 
2,260

 
1,185

 
1,669

 
Less: Nonrecurring tenant improvements and incentives on operating properties
(16
)
 

 
(230
)
 
(23
)
 
15

 
Less: Nonrecurring building improvements on operating properties
(568
)
 
(1,381
)
 
(1,266
)
 
(1,580
)
 
(267
)
 
Less: Nonrecurring leasing costs for operating properties
(193
)
 
(275
)
 
14

 
(50
)
 

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

 
(23
)
 
(1
)
 
(6
)
 

 
Recurring capital expenditures
$
11,052

 
$
21,935

 
$
10,528

 
$
5,862

 
$
5,308

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

10



 Corporate Office Properties Trust
Consolidated Office Properties by Region - March 31, 2014
 
 
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
 
28

 
3,257,962

 
99.4
%
 
99.4
%
 
3

 
418,573

 
37,107

 
455,680

Columbia Gateway
 
27

 
2,141,653

 
88.7
%
 
91.7
%
 
1

 
52,000

 

 
52,000

Airport Square/bwtech
 
16

 
1,214,409

 
75.5
%
 
75.5
%
 

 

 

 

Commons/Parkway
 
10

 
431,245

 
80.3
%
 
86.6
%
 

 

 

 

Other
 
11

 
1,119,849

 
98.9
%
 
99.2
%
 
1

 
119,980

 

 
119,980

Subtotal
 
92

 
8,165,118

 
92.0
%
 
93.1
%
 
5

 
590,553

 
37,107

 
627,660

Northern Virginia:
 
 

 
 

 
 

 
 

 
 

 
 

 
 
 
 
Westfields Corporate Center
 
9

 
1,431,833

 
94.7
%
 
95.0
%
 

 

 

 

Patriot Ridge
 
1

 
239,272

 
51.3
%
 
51.3
%
 

 

 

 

Herndon, Tysons Corner and Merrifield
 
9

 
1,703,606

 
88.8
%
 
91.6
%
 

 

 

 

Other
 
2

 
433,768

 
100.0
%
 
100.0
%
 
3

 
428,600

 

 
428,600

Subtotal
 
21

 
3,808,479

 
89.9
%
 
91.3
%
 
3

 
428,600

 

 
428,600

San Antonio, Texas
 
 

 
 

 
 

 
 

 
 

 
 

 
 
 
 
Sentry Gateway
 
6

 
792,454

 
100.0
%
 
100.0
%
 
1

 
160,466

 

 
160,466

Other
 
2

 
120,054

 
73.8
%
 
73.8
%
 

 

 

 

Subtotal
 
8

 
912,508

 
96.6
%
 
96.6
%
 
1

 
160,466

 

 
160,466

Huntsville
 
5

 
562,077

 
85.6
%
 
86.5
%
 

 

 

 

Washington, DC- Capital Riverfront (Maritime)
 
2

 
360,326

 
76.4
%
 
76.4
%
 

 

 

 

St. Mary’s & King George Counties
 
18

 
874,460

 
93.4
%
 
94.4
%
 
1

 
27,122

 

 
27,122

Greater Baltimore:
 
 

 
 

 
 

 
 

 
 

 
 

 
 
 

White Marsh and Rt 83 Corridor
 
28

 
1,286,470

 
80.4
%
 
80.6
%
 

 

 

 

Canton Crossing-Baltimore City
 
1

 
480,348

 
97.2
%
 
98.9
%
 

 

 

 

North Gate Business Park
 
3

 
284,884

 
37.9
%
 
44.8
%
 

 

 

 

Subtotal
 
32

 
2,051,702

 
78.4
%
 
79.9
%
 

 

 

 

Greater Philadelphia, Pennsylvania
 
3

 
442,053

 
90.6
%
 
98.3
%
 
2

 
212,059

 
112,089

 
324,148

Other
 
2

 
295,842

 
100.0
%
 
100.0
%
 

 

 

 

Total
 
183

 
17,472,565

 
89.8
%
 
91.1
%
 
12

 
1,418,800

 
149,196

 
1,567,996

 
(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 two partially operational properties had NOI of $654,000 and cash NOI of $35,000 for the three months ended 3/31/14.
(2)
This schedule includes properties under, or contractually committed for, construction or redevelopment. Please refer to pages 22 and 23.



11


Corporate Office Properties Trust
NOI from Real Estate Operations and Occupancy by Property Grouping
(dollars and square feet in thousands)
 
 
As of 3/31/14
 
 
 
 
# 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
Property Grouping
 
 
 
% Occupied (1)
 
% Leased (1)
 
 
 
3/31/14
Same Office Properties (3)
 
 

 
 

 
 
 
 
 
 

 
 

 
 

Stabilized properties
 
166

 
14,941

 
91.7%
 
92.7%
 
$
405,707

 
89.5
%
 
$
65,223

Unstabilized properties (4)
 
4

 
505

 
38.5%
 
52.8%
 
6,128

 
1.3
%
 
566

Total Same Office Properties
 
170

 
15,446

 
89.9%
 
91.4%
 
411,835

 
90.8
%
 
65,789

Office Properties Placed in Service (5)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Stabilized properties
 
9

 
1,061

 
100.0%
 
100.0%
 
18,773

 
4.1
%
 
3,771

Unstabilized properties (4)
 
2

 
301

 
40.8%
 
40.8%
 
4,988

 
1.1
%
 
665

Other, including Wholesale Data Center
 

 

 
—%
 
—%
 

 
N/A

 
1,306

Total Core Portfolio
 
181

 
16,808

 
89.7%
 
91.0%
 
435,596

 
96.0
%
 
71,531

Office Properties to be Conveyed (6)
 
2

 
665

 
93.7%
 
93.7%
 
17,960

 
4.0
%
 
3,574

Disposed Office Properties
 
N/A

 
N/A

 
—%
 
—%
 
N/A

 
N/A

 
39

Total Portfolio
 
183

 
17,473

 
89.8%
 
91.1%
 
$
453,556

 
100.0
%
 
$
75,144

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Core Portfolio
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Demand Driver Adjacent (7)
 
82

 
8,516

 
93.2%
 
93.6%
 
$
255,321

 
56.3
%
 
$
41,826

U.S. Government/Defense Contractor (8)
 
29

 
3,100

 
93.9%
 
94.8%
 
75,739

 
16.7
%
 
13,371

Total Strategic Tenant Niche
 
111

 
11,616

 
93.3%
 
93.9%
 
331,060

 
73.0
%
 
55,197

Regional Office (9)
 
70

 
5,192

 
81.5%
 
84.5%
 
104,536

 
23.0
%
 
15,028

Other, including Wholesale Data Center
 
N/A

 
N/A

 
—%
 
—%
 
N/A

 
N/A

 
1,306

Total Core Portfolio
 
181

 
16,808

 
89.7%
 
91.0%
 
$
435,596

 
96.0
%
 
$
71,531

(1)
Percentages calculated based on operational square feet.
(2)
Excludes annualized rental revenue from our wholesale data center, DC-6, of $8.2 million as of 3/31/14.
(3)
Properties held for long-term investment owned and 100% operational since at least 1/1/13.
(4)
Properties with first generation operational space less than 90% occupied at 3/31/14, as detailed on page 13.
(5)
Newly constructed or redeveloped properties placed in service that were not fully operational by 1/1/13.
(6)
Properties serving as collateral for debt that are expected to be conveyed to the lenders in order to extinguish such debt.
(7)
Office properties held for long-term investment located near defense installations and other knowledge-based government demand drivers.
(8)
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.
(9)
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) - March 31, 2014  
 
 
 
 
 
 
 
 
 
Property Grouping
Operational Square Feet
 
Average Occupancy % for Quarter Ended 3/31/2014
 
Occupancy % as of 3/31/2014
 
Leased % as of 3/31/2014
 
Same Office Properties (2) 
 
 
 
 
 
 
 
 
3120 Fairview Park Drive
183,566
 
49.8%
 
49.8%
 
60.0%
 
206 Research Blvd
128,119
 
0%
 
0%
 
0%
 
210 Research Blvd
79,573
 
38.6%
 
38.6%
 
63.4%
 
751 Arbor Way
113,295
 
63.5%
 
63.5%
 
93.3%
 
Total Unstabilized Same Office Properties
504,553
 
38.5%
 
38.5%
 
52.8%
 
Office Properties Placed in Service (3) 
 
 
 
 
 
 
 
 
7770 Backlick Road
239,272
 
50.9%
 
51.3%
 
51.3%
 
  7200 Redstone Gateway
61,724
 
0.0%
 
0.0%
 
0.0%
 
Total Unstabilized Office Properties Placed in Service
300,996
 
40.5%
 
40.8%
 
40.8%
 
Total Unstabilized Office Properties
805,549
 
39.2%
 
39.3%
 
48.3%
 
 
(1) Properties with first generation operational space less than 90% occupied at 3/31/14. Excludes our wholesale data center, DC-6.
(2) Properties owned and 100% operational since 1/1/13.
(3) Newly constructed or redeveloped properties placed in service that were not fully operational by 1/1/13.



13


Corporate Office Properties Trust
Real Estate Revenues, NOI and Cash NOI* by Segment
(dollars in thousands)
 
Three Months Ended
 
3/31/14
 
12/31/13
 
9/30/13
 
6/30/13
 
3/31/13
Real estate revenues
 

 
 

 
 

 
 

 
 

Baltimore/Washington Corridor
$
61,113

 
$
60,011

 
$
59,558

 
$
59,640

 
$
58,660

Northern Virginia
24,968

 
23,018

 
23,062

 
22,988

 
22,942

San Antonio
8,479

 
9,041

 
7,898

 
8,364

 
7,757

Huntsville
2,555

 
1,591

 
1,360

 
1,359

 
740

Washington, DC - Capitol Riverfront
3,634

 
4,147

 
4,295

 
4,177

 
4,244

St. Mary’s and King George Counties
4,316

 
4,213

 
4,270

 
4,093

 
3,992

Greater Baltimore
11,496

 
10,407

 
10,703

 
10,824

 
10,719

Greater Philadelphia
3,340

 
3,395

 
3,258

 
2,784

 
2,487

Colorado Springs
18

 
5,568

 
6,571

 
6,469

 
6,682

Other
2,576

 
2,504

 
2,510

 
2,560

 
2,501

Wholesale Data Center
2,401

 
2,825

 
1,076

 
2,017

 
1,353

Real estate revenues
$
124,896

 
$
126,720

 
$
124,561

 
$
125,275

 
$
122,077

 
 
NOI
 

 
 

 
 

 
 

 
 

Baltimore/Washington Corridor
$
37,516

 
$
38,880

 
$
39,916

 
$
39,912

 
$
38,607

Northern Virginia
15,995

 
15,065

 
15,063

 
14,784

 
15,125

San Antonio
4,005

 
3,837

 
3,837

 
3,886

 
3,869

Huntsville
1,902

 
1,183

 
978

 
1,049

 
558

Washington, DC - Capitol Riverfront
1,869

 
2,072

 
2,349

 
2,303

 
2,295

St. Mary’s and King George Counties
2,812

 
2,900

 
2,971

 
2,870

 
2,799

Greater Baltimore
6,020

 
6,232

 
6,560

 
6,727

 
6,551

Greater Philadelphia
2,040

 
2,446

 
2,334

 
2,064

 
1,649

Colorado Springs
27

 
3,549

 
4,210

 
4,284

 
4,245

Other
2,245

 
2,312

 
2,228

 
2,243

 
2,276

Wholesale Data Center
713

 
1,145

 
(770
)
 
499

 
37

NOI from real estate operations
$
75,144

 
$
79,621

 
$
79,676

 
$
80,621

 
$
78,011

 
 
 
 
 
 
 
 
 
 
Cash NOI
 

 
 

 
 

 
 

 
 

Baltimore/Washington Corridor
$
36,709

 
$
37,195

 
$
38,609

 
$
39,244

 
$
37,526

Northern Virginia (1)
18,921

 
19,580

 
15,620

 
14,937

 
14,828

San Antonio
3,796

 
3,628

 
3,534

 
3,532

 
3,423

Huntsville
1,908

 
1,337

 
1,174

 
1,233

 
573

Washington, DC - Capitol Riverfront
1,932

 
2,175

 
2,459

 
2,405

 
2,378

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

 
2,946

 
2,993

 
2,891

 
2,771

Greater Baltimore
5,994

 
6,365

 
6,671

 
6,783

 
6,565

Greater Philadelphia
1,414

 
1,788

 
1,746

 
1,879

 
1,654

Colorado Springs
27

 
3,501

 
3,992

 
3,950

 
3,863

Other
2,149

 
2,211

 
2,114

 
2,099

 
2,132

Wholesale Data Center
677

 
2,489

 
168

 
34

 
(1,406
)
Cash NOI from real estate operations
$
76,404

 
$
83,215

 
$
79,080

 
$
78,987

 
$
74,307

Straight line rent adjustments
(954
)
 
(3,296
)
 
894

 
1,874

 
3,941

Add: Amortization of deferred market rental revenue
(5
)
 
36

 
29

 
87

 
82

Less: Amortization of above-market cost arrangements
(301
)
 
(334
)
 
(327
)
 
(327
)
 
(319
)
NOI from real estate operations
$
75,144

 
$
79,621

 
$
79,676

 
$
80,621

 
$
78,011

*     Includes continuing and discontinued operations.
(1)
For the three months ended 3/31/14, $3.9 million in Cash NOI was attributable to properties serving as collateral for debt that are expected to be conveyed to the lenders in order to extinguish such debt.

14


Corporate Office Properties Trust
Same Office Properties (1) Average Occupancy Rates by Region 
 
Number of Buildings
 
Rentable Square Feet
 
Three Months Ended
 
 
 
3/31/14
 
12/31/13
 
9/30/13
 
6/30/13
 
3/31/13
Baltimore Washington Corridor
89

 
8,012,804

 
91.9
%
 
91.7
%
 
91.7
%
 
91.8
%
 
91.1
%
Northern Virginia
16

 
2,470,875

 
90.5
%
 
89.7
%
 
89.9
%
 
88.5
%
 
88.3
%
San Antonio
8

 
912,508

 
96.6
%
 
96.6
%
 
96.6
%
 
96.6
%
 
96.4
%
Huntsville
1

 
137,049

 
85.0
%
 
83.0
%
 
83.0
%
 
83.0
%
 
83.1
%
Washington, DC - Capitol Riverfront
2

 
360,326

 
76.4
%
 
76.4
%
 
90.9
%
 
88.1
%
 
88.1
%
St. Mary’s and King George Counties
18

 
874,460

 
92.1
%
 
89.2
%
 
90.3
%
 
87.1
%
 
85.9
%
Greater Baltimore
32

 
2,051,702

 
77.6
%
 
77.9
%
 
79.2
%
 
79.4
%
 
78.8
%
Greater Philadelphia
2

 
329,964

 
87.5
%
 
87.5
%
 
84.6
%
 
83.2
%
 
83.2
%
Other
2

 
295,842

 
100.0
%
 
100.0
%
 
100.0
%
 
100.0
%
 
100.0
%
Total Same Office Properties
170

 
15,445,530

 
89.7
%
 
89.3
%
 
89.9
%
 
89.4
%
 
88.9
%
Total Same Office Properties occupancy as of period end
 
 

 
89.9
%
 
89.4
%
 
89.7
%
 
89.6
%
 
89.1
%

(1)  Same office properties represent buildings owned and 100% operational since at least January 1, 2013, excluding properties held for future disposition.




15


Corporate Office Properties Trust
Same Office Property Real Estate Revenues by Region (dollars in thousands)
 
Three Months Ended
 
3/31/14
 
12/31/13
 
9/30/13
 
6/30/13
 
3/31/13
Office Properties:
 

 
 

 
 

 
 

 
 

Baltimore/Washington Corridor
$
60,005

 
$
56,595

 
$
56,119

 
$
56,564

 
$
55,279

Northern Virginia
17,025

 
16,432

 
16,772

 
16,532

 
16,399

San Antonio
8,479

 
9,041

 
7,898

 
8,364

 
7,757

Huntsville
792

 
713

 
759

 
746

 
721

Washington, DC - Capitol Riverfront
3,634

 
4,147

 
4,295

 
4,177

 
4,244

St. Mary’s and King George Counties
4,316

 
4,189

 
4,186

 
4,012

 
3,911

Greater Baltimore
11,483

 
10,397

 
10,698

 
10,821

 
10,656

Greater Philadelphia
1,979

 
1,846

 
1,768

 
1,721

 
1,708

Other
2,477

 
2,405

 
2,409

 
2,459

 
2,400

Real estate revenues
$
110,190

 
$
105,765

 
$
104,904

 
$
105,396

 
$
103,075

 
Same Office Property NOI by Region (dollars in thousands)
 
Three Months Ended
 
3/31/14
 
12/31/13
 
9/30/13
 
6/30/13
 
3/31/13
Office Properties:
 

 
 

 
 

 
 

 
 

Baltimore/Washington Corridor
$
36,738

 
$
36,887

 
$
37,937

 
$
38,238

 
$
36,738

Northern Virginia
10,539

 
10,609

 
10,949

 
10,551

 
10,702

San Antonio
4,005

 
3,837

 
3,837

 
3,886

 
3,869

Huntsville
555

 
500

 
554

 
550

 
562

Washington, DC - Capitol Riverfront
1,869

 
2,072

 
2,349

 
2,303

 
2,295

St. Mary’s and King George Counties
2,839

 
2,898

 
2,903

 
2,810

 
2,732

Greater Baltimore
5,990

 
6,201

 
6,525

 
6,680

 
6,470

Greater Philadelphia
1,070

 
1,167

 
1,083

 
1,108

 
1,086

Other
2,184

 
2,181

 
2,183

 
2,187

 
2,174

Same office property NOI
65,789

 
66,352

 
68,320

 
68,313

 
66,628

Straight line rent adjustments
(537
)
 
(995
)
 
(1,248
)
 
(873
)
 
(1,588
)
Less: Amortization of deferred market rental revenue
8

 
1

 
24

 
(34
)
 
(29
)
Add: Amortization of above-market cost arrangements
272

 
319

 
320

 
319

 
319

Same office property cash NOI
65,532

 
65,677

 
67,416

 
67,725

 
65,330

Less: Lease termination fees, gross
(512
)
 
(1,249
)
 
(306
)
 
(750
)
 
(224
)
Same office property cash NOI, excluding gross lease termination fees
$
65,020

 
$
64,428

 
$
67,110

 
$
66,975

 
$
65,106

Percentage change in same office property cash NOI (1)
0.3
 %
 
 
 
 
 
 
 
 
Percentage change in same office property cash NOI, excluding gross lease termination fees (1)
(0.1
)%
 
 
 
 
 
 
 
 
 Note:
Same office properties represent buildings owned and 100% operational since at least January 1, 2013, 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
Leasing - Core Office (1)
Quarter Ended March 31, 2014
 
Baltimore/
Washington
Corridor
 
Northern
Virginia
 
St. Mary’s & King George Counties
 
Greater
Baltimore
 
Greater
Philadelphia
 
Total
Office
Renewed Space
 

 
 

 
 
 
 

 
 
 
 

Leased Square Feet
65,152

 
41,611

 
3,984

 
33,354

 

 
144,101

Expiring Square Feet
109,769

 
72,678

 
17,218

 
57,270

 

 
256,935

Vacated Square Feet
44,617

 
31,067

 
13,234

 
23,916

 

 
112,834

Retention Rate (% based upon square feet)
59.35
 %
 
57.25
 %
 
23.14
%
 
58.24
 %
 
0.00
%
 
56.08
 %
Statistics for Completed Leasing:
 
 
 
 
 
 
 
 
 
 
 
Average Committed Cost per Square Foot
$
5.50

 
$
25.11

 
$
17.50

 
$
15.68

 
$

 
$
13.85

Weighted Average Lease Term in Years
3.6

 
5.3

 
3.0

 
3.0

 

 
4.0

GAAP Rent Per Square Foot
 
 
 
 
 
 
 
 
 
 
 
        Renewal GAAP Rent
$
31.44

 
$
28.82

 
$
24.11

 
$
19.98

 
$

 
$
27.83

        Expiring GAAP Rent
$
30.37

 
$
29.55

 
$
21.37

 
$
19.58

 
$

 
$
27.39

        Change in GAAP Rent
3.53
 %
 
(2.48
)%
 
12.81
%
 
2.01
 %
 
0.00
%
 
1.61
 %
Cash Rent Per Square Foot
 
 
 
 
 
 
 
 
 
 
 
        Renewal Cash Rent
$
30.93

 
$
26.77

 
$
23.40

 
$
19.33

 
$

 
$
26.84

        Expiring Cash Rent
$
31.98

 
$
31.71

 
$
23.40

 
$
19.69

 
$

 
$
28.82

        Change in Cash Rent
(3.30
)%
 
(15.57
)%
 
0.01
%
 
(1.81
)%
 
0.00
%
 
(6.89
)%
 
 
 
 
 
 
 
 
 
 
 
 
New Leases
 
 
 
 
 
 
 
 
 
 
 
Development and Redevelopment Space
 
 
 
 
 
 
 
 
 
 
 
Leased Square Feet
117,493

 
18,679

 

 

 
39,669

 
175,841

Statistics for Completed Leasing:
 
 
 
 
 
 
 
 
 
 
 
Average Committed Cost per Square Foot
$
70.18

 
$
95.80

 
$

 
$

 
$
75.36

 
$
74.07

Weighted Average Lease Term in Years
9.2

 
11.1

 

 

 
10.6

 
9.7

GAAP Rent Per Square Foot
$
31.93

 
$
31.75

 
$

 
$

 
$
23.58

 
$
30.02

Cash Rent Per Square Foot
$
30.04

 
$
30.00

 
$

 
$

 
$
24.00

 
$
28.68

 
 
 
 
 
 
 
 
 
 
 
 
Other New Leases (2)
 
 
 
 
 
 
 
 
 
 
 
Leased Square Feet
70,082

 
34,622

 
8,734

 
12,938

 

 
126,376

Statistics for Completed Leasing:
 
 
 
 
 
 
 
 
 
 
 
Average Committed Cost per Square Foot
$
34.24

 
$
52.85

 
$
20.40

 
$
28.89

 
$

 
$
37.84

Weighted Average Lease Term in Years
8.7

 
5.8

 
3.4

 
4.7

 

 
7.1

GAAP Rent Per Square Foot
$
18.48

 
$
24.81

 
$
21.52

 
$
22.58

 
$

 
$
20.85

Cash Rent Per Square Foot
$
17.64

 
$
24.08

 
$
21.39

 
$
22.69

 
$

 
$
20.18

 
 
 
 
 
 
 
 
 
 
 
 
Total Square Feet Leased
252,727

 
94,912

 
12,718

 
46,292

 
39,669

 
446,318

 
 
 
 
 
 
 
 
 
 
 
 
(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, Huntsville or Washington DC-Capital Riverfront regions.
Activity is exclusive of owner occupied space and leases with less than a one-year term. Retention rate includes early renewals and excludes the effect of a 219,000 square foot property vacated in Greater Philadelphia that was removed from service for redevelopment; our renewal rate would be 33.0% if the effect of the Greater Philadelphia property vacancy were included. Weighted average lease term was calculated assuming no exercise of any existing early termination rights.

17



Corporate Office Properties Trust
Lease Expiration Analysis as of 3/31/14 (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 Tenant Properties Annualized Rental Revenue Expiring
 
Annual Rental Revenue of Expiring Leases per Occupied Square Foot
Core Office Properties
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Baltimore/Washington Corridor
 
33

 
831,141

 
$
29,089

 
6.7
%
 
$
35.00

 
 
17

 
763,469

 
$
27,470

 
8.3
%
 
$
35.98

Northern Virginia
 
12

 
235,326

 
6,459

 
1.5
%
 
27.45

 
 
9

 
212,493

 
5,816

 
1.8
%
 
27.37

Huntsville
 
2

 
117,944

 
3,382

 
0.8
%
 
28.67

 
 
2

 
117,944

 
3,382

 
1.0
%
 
28.67

Washington, DC-Capitol Riverfront
 
7

 
23,613

 
1,205

 
0.3
%
 
51.03

 
 
7

 
23,613

 
1,205

 
0.4
%
 
51.03

St. Mary’s and King George Cos.
 
22

 
246,061

 
4,779

 
1.1
%
 
19.42

 
 
22

 
246,061

 
4,779

 
1.4
%
 
19.42

Greater Baltimore
 
16

 
73,645

 
1,464

 
0.3
%
 
19.88

 
 

 

 

 
0.0
%
 

Greater Philadelphia
 
2

 
5,934

 
89

 
%
 
15.00

 
 

 

 

 
0.0
%
 

2014
 
94

 
1,533,664

 
46,467

 
10.7
%
 
30.30

 
 
57

 
1,363,580

 
42,652

 
12.9
%
 
31.28

Baltimore/Washington Corridor
 
44

 
1,067,323

 
32,494

 
7.5
%
 
30.44

 
 
21

 
817,696

 
26,264

 
7.9
%
 
32.12

Northern Virginia
 
7

 
480,868

 
16,441

 
3.8
%
 
34.19

 
 
3

 
464,791

 
15,822

 
4.8
%
 
34.04

Washington, DC-Capitol Riverfront
 
5

 
36,655

 
1,819

 
0.4
%
 
49.62

 
 
5

 
36,655

 
1,819

 
0.5
%
 
49.62

St. Mary’s and King George Cos.
 
17

 
241,141

 
5,049

 
1.2
%
 
20.94

 
 
17

 
241,141

 
5,049

 
1.5
%
 
20.94

Greater Baltimore
 
17

 
101,321

 
2,458

 
0.6
%
 
24.26

 
 
4

 
21,680

 
656

 
0.2
%
 
30.26

2015
 
90

 
1,927,308

 
58,261

 
13.4
%
 
30.23

 
 
50

 
1,581,963

 
49,610
 
15.0
%
 
31.36

Baltimore/Washington Corridor
 
36

 
897,355

 
24,914

 
5.7
%
 
27.76

 
 
22

 
734,226

 
21,344

 
6.4
%
 
29.07

Northern Virginia
 
14

 
333,011

 
9,896

 
2.3
%
 
29.72

 
 
9

 
291,494

 
8,445

 
2.6
%
 
28.97

Washington, DC-Capitol Riverfront
 
3

 
37,493

 
1,864

 
0.4
%
 
49.72

 
 
3

 
37,493

 
1,864

 
0.6
%
 
49.72

St. Mary’s and King George Cos.
 
10

 
109,128

 
2,008

 
0.5
%
 
18.40

 
 
10

 
109,128

 
2,008

 
0.6
%
 
18.40

Greater Baltimore
 
23

 
251,262

 
6,926

 
1.6
%
 
27.56

 
 

 

 

 
0.0
%
 

2016
 
86

 
1,628,249

 
45,608

 
10.5
%
 
28.01

 
 
44

 
1,172,341

 
33,661

 
10.2
%
 
28.71

Baltimore/Washington Corridor
 
44

 
1,213,559

 
35,267

 
8.1
%
 
29.06

 
 
24

 
845,522

 
25,921

 
7.8
%
 
30.66

Northern Virginia
 
13

 
304,956

 
9,780

 
2.2
%
 
32.07

 
 
3

 
206,221

 
6,367

 
1.9
%
 
30.87

St. Mary’s and King George Cos.
 
3

 
15,950

 
393

 
0.1
%
 
24.64

 
 
3

 
15,950

 
393

 
0.1
%
 
24.64

Greater Baltimore
 
21

 
248,261

 
5,113

 
1.2
%
 
20.60

 
 
2

 
3,174

 
86

 
0.0
%
 
27.10

Greater Philadelphia
 
1

 
4,808

 
131

 
%
 
27.25

 
 

 

 

 
0.0
%
 

2017
 
82

 
1,787,534

 
50,684

 
11.6
%
 
28.35

 
 
32

 
1,070,867

 
32,767

 
9.9
%
 
30.60


18


 
 
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 Tenant Properties Annualized Rental Revenue Expiring
 
Annual Rental Revenue of Expiring Leases per Occupied Square Foot
Baltimore/Washington Corridor
 
40

 
1,082,802

 
32,785

 
7.5
%
 
30.28

 
 
28

 
936,410

 
28,607

 
8.6
%
 
30.55

Northern Virginia
 
12

 
357,990

 
11,867

 
2.7
%
 
33.15

 
 
8

 
161,007

 
3,552

 
1.1
%
 
22.06

San Antonio
 
1

 
45,935

 
634

 
0.1
%
 
13.80

 
 

 

 

 
0.0
%
 

Huntsville
 
2

 
242,216

 
5,270

 
1.2
%
 
21.76

 
 
2

 
242,216

 
5,270

 
1.6
%
 
21.76

Washington, DC-Capitol Riverfront
 
3

 
61,649

 
2,826

 
0.6
%
 
45.84

 
 
3

 
61,649

 
2,826

 
0.9
%
 
45.84

St. Mary’s and King George Cos.
 
2

 
9,264

 
193

 
%
 
20.83

 
 
2

 
9,264

 
193

 
0.1
%
 
20.83

Greater Baltimore
 
7

 
136,804

 
4,052

 
0.9
%
 
29.62

 
 

 

 

 
0.0
%
 

Greater Philadelphia
 
1

 
4,228

 
107

 
%
 
25.31

 
 

 

 

 
0.0
%
 

2018
 
68

 
1,940,888

 
57,734

 
13.3
%
 
29.75

 
 
43

 
1,410,546

 
40,448

 
12.2
%
 
28.68

Thereafter
 
178

 
6,254,217

 
176,842

 
40.6
%
 
28.28

 
 
95

 
4,243,437

 
131,922

 
39.8
%
 
31.09

Core/Strategic Tenant Niche Total/Avg.
 
598
 
15,071,860

 
$
435,596

 
100.0
%
 
$
28.90

 
 
321

 
10,842,734

 
$
331,060

 
100.0
%
 
$
30.53

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Properties Not Held For Long Term Investment
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Northern Virginia
 
17

 
622,784

 
17,960

 
100.0
%
 
$
28.84

 
 
 
 
 
 
 
 
 
 
 
Total Portfolio
 
615

 
15,694,644

 
$
453,556

 
 
 
$
28.90

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Note:  As of March 31, 2014, the weighted average lease term is 4.6 years for the Core Office Properties, 4.4 years for the Strategic Tenant Niche Properties and 4.5 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)
2016
1
9

0.20

$
228

2018
2
1

0.26

520

2019
1
6

1.00

2,184

2020
1
11

2.00

4,515

2022
1
6

0.50

785

 
 
 

3.96

$
8,232

(1)
This presentation reflects consolidated properties.  This expiration analysis reflects occupied space and includes the effect of early renewals completed on existing leases but excludes the effect of new tenant leases on square feet yet to commence as of March 31, 2014 of 226,102 for the portfolio, including 68,601 for the Strategic Tenant Niche Properties.
(2)
A number of our leases are subject to certain early termination provisions.  The year of lease expiration was computed assuming no exercise of such early termination rights.
(3)
Total Annualized Rental Revenue is the monthly contractual base rent as of March 31, 2014 multiplied by 12 plus the estimated annualized expense reimbursements under existing leases.


19


Corporate Office Properties Trust
Top 20 Office Tenants as of 3/31/14
(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 Government
(3)
57

 
3,242,951

 
20.6
%
 
$
112,737

 
24.9
%
 
5.1

Northrop Grumman Corporation
 
10

 
925,599

 
5.9
%
 
26,537

 
5.9
%
 
4.9

Booz Allen Hamilton, Inc.
 
8

 
778,834

 
5.0
%
 
26,039

 
5.7
%
 
2.2

Computer Sciences Corporation
 
6

 
640,600

 
4.1
%
 
20,195

 
4.5
%
 
1.9

General Dynamics Corporation
 
7

 
527,725

 
3.4
%
 
18,440

 
4.1
%
 
3.9

The Boeing Company
 
8

 
559,367

 
3.6
%
 
14,007

 
3.1
%
 
3.4

CareFirst, Inc.
 
3

 
300,360

 
1.9
%
 
9,725

 
2.1
%
 
6.9

The MITRE Corporation
 
5

 
290,288

 
1.8
%
 
9,201

 
2.0
%
 
3.9

The Aerospace Corporation
 
3

 
254,869

 
1.6
%
 
7,703

 
1.7
%
 
2.8

Wells Fargo & Company
 
2

 
171,534

 
1.1
%
 
7,542

 
1.7
%
 
4.8

L-3 Communications Holdings, Inc
 
2

 
166,568

 
1.1
%
 
5,920

 
1.3
%
 
0.5

AT&T Corporation
 
3

 
307,579

 
2.0
%
 
5,546

 
1.2
%
 
5.1

ITT Exelis
 
5

 
195,161

 
1.2
%
 
5,329

 
1.2
%
 
1.1

Amazon
 
2

 
433,768

 
2.8
%
 
4,552

 
1.0
%
 
10.4

Science Applications International Corp.
 
4

 
133,577

 
0.8
%
 
4,465

 
1.0
%
 
9.7

Raytheon Company
 
5

 
122,968

 
0.8
%
 
4,139

 
0.9
%
 
1.9

Kratos Defense and Security Solutions
 
1

 
131,451

 
0.8
%
 
4,129

 
0.9
%
 
6.1

TASC Inc.
 
3

 
107,996

 
0.7
%
 
4,024

 
0.9
%
 
4.8

The Johns Hopkins Institutions
 
6

 
145,799

 
0.9
%
 
3,759

 
0.8
%
 
4.3

Unisys Corporation
 
1

 
156,891

 
1.0
%
 
3,697

 
0.8
%
 
6.2

Subtotal Top 20 Office Tenants
 
141

 
9,593,885

 
61.0
%
 
297,686

 
65.6
%
 
4.4

All remaining tenants
 
474

 
6,125,011

 
39.0
%
 
155,870

 
34.4
%
 
4.6

Total/Weighted Average
 
615

 
15,718,896

 
100.0
%
 
$
453,556

 
100.0
%
 
4.5

 
(1)  Total Annualized Rental Revenue is the monthly contractual base rent as of March 31, 2014, multiplied by 12, plus the estimated annualized expense reimbursements under existing leases.
(2)  A number of our leases are subject to certain early termination provisions.  The year of lease expiration was computed assuming no exercise of such early termination rights. The weighting of the lease term was computed using Total Rental Revenue.
(3)  Substantially all of our government leases are subject to early termination provisions which are customary in government leases. The weighted average remaining lease term was computed assuming no exercise of such early termination rights.


20



Corporate Office Properties Trust
Construction, Redevelopment, Wholesale Data Center and Land and Pre-Construction as of 3/31/14
(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
575,660

 
52,000

 
N/A

 
4,165,000

 
4,792,660

Northern Virginia
428,600

 

 
N/A

 
2,200,000

 
2,628,600

San Antonio
160,466

 

 
N/A

 
1,033,000

 
1,193,466

Huntsville, Alabama

 

 
N/A

 
4,173,000

 
4,173,000

St. Mary’s and King George Counties

 
27,122

 
N/A

 
109,000

 
136,122

Greater Baltimore

 

 
N/A

 
2,830,000

 
2,830,000

Greater Philadelphia

 
324,148

 
N/A

 
720,000

 
1,044,148

Colorado Springs

 

 
N/A

 
2,540,000

 
2,540,000

Other

 

 
N/A

 
1,967,000

 
1,967,000

Total
1,164,726

 
403,270

 
N/A

 
19,737,000

 
21,304,996

 
Costs to date by region
Baltimore/Washington Corridor
$
74,237

 
$
3,991

 
$

 
$
95,346

 
$
173,574

Northern Virginia
38,009

 

 

 
98,258

 
136,267

San Antonio
13,877

 

 

 
20,186

 
34,063

Huntsville, Alabama

 

 

 
13,765

 
13,765

St. Mary’s and King George Counties

 
1,991

 

 
2,587

 
4,578

Greater Baltimore

 

 

 
79,965

 
79,965

Greater Philadelphia

 
33,681

 

 
16,308

 
49,989

Colorado Springs

 

 

 
24,306

 
24,306

Wholesale Data Center

 

 
215,958

 

 
215,958

Other

 

 

 
15,660

 
15,660

Total
$
126,123

 
$
39,663

 
$
215,958

 
$
366,381

 
$
748,125

 
 
 
 
 
 
 
 
 
 
Reconciliation to amounts included in projects in development or held for future development, including land costs, as reported on consolidated balance sheet
 
 
 
 
 
 
 
 
 
Operating properties
(13,151
)
 
(26,301
)
 
(173,501
)
 
(29,893
)
 
(242,846
)
Deferred leasing costs
(3,208
)
 
(5,446
)
 
(669
)
 
(331
)
 
(9,654
)
Projects in development or held for future development, including associated land costs (4)
$
109,764

 
$
7,916

 
$
41,788

 
$
336,157

 
$
495,625

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

21


Corporate Office Properties Trust
Summary of Construction Projects as of 3/31/14 (1)
(dollars in thousands) 
 
 
 
Park/Submarket
Total Rentable Square Feet (4)
Percentage Leased as of
as of 3/31/14 (2)
Actual or Anticipated Shell Completion Date
 Anticipated Operational Date (3)
 
Anticipated Total Cost
Cost to Date
Cost to Date Placed in Service
 
 
Property and Location
3/31/2014
 
420 National Business Parkway
Jessup, Maryland
(4)
National Business Park
139,056

69%
$
33,525

$
26,952

$
9,211

2Q 13
2Q 14
 
312 Sentinel Way
Annapolis Junction, Maryland
 
National Business Park
125,160

100%
36,523

25,697

4,100

3Q 13
3Q 14
 
Ashburn Crossing - DC-9
Ashburn, Virginia
 
Ashburn
110,000

100%
15,612

10,342


3Q 14
3Q 14
 
310 Sentinel Way
Annapolis Junction, Maryland
 
National Business Park
191,464

0%
57,300

13,382


4Q 14
4Q 15
 
NOVA Office A
   Northern Virginia
 
Other
159,300

100%
44,560

21,012


4Q 14
1Q 15
 
8100 Potranco Road
   San Antonio, Texas
 
San Antonio
160,466

0%
39,700

13,877


4Q 14
4Q 15
 
NOVA Office B
   Northern Virginia
 
Other
159,300

0%
41,500

6,655


1Q 15
3Q 15
 
7880 Milestone Parkway
Hanover, Maryland
 
Arundel Preserve
119,980

74%
31,535

8,206


3Q 15
3Q 16
 
Total Under Construction
 
 
1,164,726

50%
$
300,255

$
126,123

$
13,311

 
 

(1)
Includes properties under active construction and properties that we were contractually committed to construct.
(2)
Cost includes land, construction, leasing costs and allocated portion of structured parking and other shared infrastructure, if applicable.
(3)
Anticipated operational date is the estimated date when leases have commenced on 100% of a property’s space or one year from the cessation of major construction activities.
(4) Although classified as “Under Construction,” 37,107 square feet are operational as of 3/31/14; this partially operational property had NOI of $272,000 and cash NOI of $246,000 for the three months ended 3/31/2014.



22


Corporate Office Properties Trust
Summary of Redevelopment Projects as of 3/31/14
(dollars in thousands) 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Park/Submarket
Total Rentable Square Feet
Percentage Leased as of
as of 3/31/14 (1)
Actual or Anticipated Shell Completion Date
 Anticipated Operational Date (2)
 
 
Historical Basis, Net
Incremental Redevelopment Cost
Anticipated Total Cost
 Cost to Date
Cost to Date Placed in Service
 
 
Property and Location
 
3/31/2014
721 Arbor Way (Hillcrest II)
Blue Bell, Pennsylvania
(3)
Greater Philadelphia
183,383

89%
$
3,438

$
28,466

$
31,904

$
27,729

$
20,252

2Q 13
2Q 14
44417 Pecan Court
California, Maryland
 
St. Mary's County
27,122

0%
1,730

3,953

5,683

1,991

1,730

3Q 14
3Q 15
6708 Alexander Bell Drive
Columbia, Maryland
 
Howard Co. Perimeter
52,000

0%
3,442

7,924

11,366

3,991

3,442

4Q 14
4Q 15
731 Arbor Way (Hillcrest III)
Blue Bell, Pennsylvania
 
Greater Philadelphia
140,765

79%
2,850

23,750

26,600

5,952

2,850

1Q 15
1Q 16
Total Under Redevelopment (4)
403,270

68%
$
11,460

$
64,093

$
75,553

$
39,663

$
28,274

 
 
 
(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,” 112,089 square feet are operational; this partially operational property had NOI of $382,000 and cash NOI of ($211,000) for the three months ended 3/31/2014.
(4) Excludes 785 Jolly Road property in Greater Philadelphia, which was removed from service for redevelopment in March 2014. This property will be reported on Summary of Land Held included on page 24 until its redevelopment plan is finalized and market demand supports commencement.




23


Corporate Office Properties Trust
Summary of Land Held as of 3/31/14 (1)
Location
Acres
 
Estimated Developable Square Feet (in thousands)
 
Costs to Date (2)
Land Held for Future Development
 
 
 
 
 
Baltimore/Washington Corridor
 

 
 

 
 
National Business Park
193

 
1,976

 
 
Arundel Preserve (3)
83

 
960

 
 
Columbia Gateway
22

 
560

 
 
M Square
49

 
525

 
 
Airport Square
5

 
84

 
 
Subtotal
352

 
4,105

 
 
Northern Virginia
92

 
2,200

 
 
San Antonio, Texas
69

 
1,033

 
 
Huntsville, Alabama
440

 
4,173

 
 
St. Mary’s & King George Counties
44

 
109

 
 
Greater Baltimore
49

 
1,478

 
 
Greater Philadelphia, Pennsylvania (4)
41

 
720

 
 
Total land held for future development
1,087

 
13,818

 
$
255,096

 
 
 
 
 
 
Other Land
 
 
 
 
 
Baltimore/Washington Corridor
6

 
60

 
 
Greater Baltimore
128

 
1,352

 
 
Colorado Springs, Colorado
171

 
2,540

 
 
Other (5)
324

 
1,967

 
 
Total other land held
629

 
5,919

 
81,061

 
 
 
 
 
 
Land held
1,716

 
19,737

 
$
336,157

 
 
 
 
 
 
(1)
This land inventory schedule excludes all properties listed as construction or redevelopment as detailed on pages 22 and 23, and includes properties under ground lease to us.
(2)
Represents total costs to date included in “projects in development or held for future development,” as reported on page 21 (in thousands).
(3)
This land includes approximately 56 acres under contract to be purchased by us.
(4)
Includes 785 Jolly Road property in Greater Philadelphia, which was removed from service for redevelopment in March 2014. This property will be reported as land held until its redevelopment plan is finalized and market demand supports commencement.
(5)
This land includes 217 acres that are being put back to the jurisdictional county per a development agreement described under “Consolidated Joint Ventures.”


24



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 March 31, 2014:
Insiders
736

 
3,072

 

 
3,808

 
4.13
%
Non-insiders
86,859

 
857

 
610

 
88,326

 
95.87
%
Total
87,595

 
3,929

 
610

 
92,134

 
100.00
%
COMMON EQUITY - End of Quarter
3/31/14
 
12/31/13
 
9/30/13
 
6/30/13
 
3/31/13
Unrestricted Common Shares
87,162

 
87,017

 
86,998

 
85,461

 
85,369

Restricted Common Shares
433

 
377

 
383

 
384

 
389

Common Shares
87,595

 
87,394

 
87,381

 
85,845

 
85,758

Common Units
3,929

 
3,978

 
3,978

 
3,789

 
3,819

Total
91,524

 
91,372

 
91,359

 
89,634

 
89,577

End of Quarter Common Share Price
$
26.64

 
$
23.69

 
$
23.10

 
$
25.50

 
$
26.68

Market Value of Common Shares/Units
$
2,438,199

 
$
2,164,603

 
$
2,110,393

 
$
2,285,667

 
$
2,389,914

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

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

 
222,500

 
222,500

 
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

 
$
257,883

 
$
257,883

 
$
342,633

CAPITALIZATION
 

 
 

 
 

 
 

 
 

Liquidation Preference of Preferred Shares/Units
$
257,883

 
$
257,883

 
$
257,883

 
$
257,883

 
$
342,633

Market Value of Common Shares/Units
2,438,199

 
2,164,603

 
2,110,393

 
2,285,667

 
2,389,914

Total Equity Market Capitalization
$
2,696,082

 
$
2,422,486

 
$
2,368,276

 
$
2,543,550

 
$
2,732,547

(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.

25


Corporate Office Properties Trust
Debt Analysis as of March 31, 2014
(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 3/31/14
 
 
 
 
Debt Outstanding
 
 
 
 
 
 
 
 
 

 
 
 
Fixed rate
 
 
 
 
 
 
 
 
 

 
 
 
Secured debt
6.12%
 
6.12%
 
2.7
 
(1)
 
$
679,260

 
6.1%
 
Senior Unsecured Notes
4.28%
 
4.44%
 
9.4
 
 
 
592,838

 
4.3%
 
Exchangeable Senior Notes
4.25%
 
6.05%
 
1.0
 
 
 
565

 
4.3%
 
Other Unsecured Debt
0.00%
 
6.50%
 
12.1
 
 
 
1,677

 
—%
 
Total fixed rate debt
5.26%
 
5.34%
 
5.8
 
 
 
$
1,274,340

 
5.2%
 
Variable rate
 
 
 
 
 
 
 
 
 

 
 
 
Secured debt
2.41%
 
2.41%
 
1.6
 


 
$
37,491

 
2.4%
 
Unsecured Revolving Credit Facility
1.42%
 
1.42%
 
3.3
 
$
800,000

 

 
—%
 
Unsecured Term Loans
1.78%
 
1.78%
 
2.8
 


 
620,000

 
1.8%
 
Total variable rate debt
1.81%
 
1.81%
 
2.7
 


 
$
657,491

 
2.6%
(2)(3)
Total consolidated debt outstanding
4.08%
 
4.14%
 
4.8
 
 
 
$
1,931,831

 
4.3%
(2)(3)
 
 
 
 
 
 
 
 
 
 
 
 
 
Variable Rate Loans Subject to Interest Rate Swaps (2)
 
 
 
 
 
 
 
 
$
437,491

 
0.6%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
% of Fixed Rate Loans (2)
 
 
 
 
 
 
 
 
88.6
%
 
 
 
% of Variable Rate Loans (2)
 
 
 
 
 
 
 
 
11.4
%
 
 
 
 
 
 
 
 
 
 
 
 
100.0
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Recourse debt
 
 
 
 
 
 
 
 
$
1,278,520

 
 
 
Nonrecourse debt
 
 
 
 
 
 
 
 
653,311

 
 
 
Total consolidated debt outstanding
 
 
 
 
 
 
 
 
$
1,931,831

 
 
 
 
(1) Includes $19.8 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 fees incurred for our Unsecured Revolving Credit Facility.



26


Corporate Office Properties Trust
Debt Analysis  (continued)
(dollars in thousands)
 
 
 
 
 
March 31, 2014
 
 
Secured debt
$
716,751

 
 
Unsecured debt
1,215,080

0.386

 
Total consolidated debt outstanding
$
1,931,831

 
 
 
 
 
 
Unencumbered adjusted book
$
3,502,575

 
 
Encumbered adjusted book
938,000

 
 
Total adjusted book
$
4,440,575

 
 
 
 
 
 
# of Operating Office Properties
 
 
 
Unencumbered
141

 
 
Encumbered
42

 
 
Total
183

 
 
 
 
 
 
Square Feet of Office Properties (in thousands)
 
 
 
Unencumbered
12,937

 
 
Encumbered
4,536

 
 
Total
17,473

 
 
 
 
 
 
 
Three Months Ended 3/31/14
 
 
Unencumbered NOI from real estate operations
$
52,360

 
 
Encumbered NOI from real estate operations
22,784

 
 
Total NOI from real estate operations
$
75,144

 
 
 
 
 
 
Unencumbered adjusted EBITDA
$
47,930

 
 
Encumbered adjusted EBITDA
22,781

 
 
Total adjusted EBITDA
$
70,711

 
 
 
 
 
 
Debt ratios (coverage ratios excluding capitalized interest) — All coverage computations include discontinued operations
Three Months Ended 3/31/14
 
 
Adjusted EBITDA debt service coverage ratio
3.3x
 
 
Adjusted EBITDA fixed charge coverage ratio
2.9x
 
 
Adjusted debt to in-place adjusted EBITDA ratio
6.8x
 
 
 
 
 
 
 
As of and for Three Months Ended 3/31/14
Unsecured Senior Notes Covenants
Actual
 
Required
Total Debt / Total Assets
45.3%
 
Less than 60%
Secured Debt / Total Assets
16.2%
 
Less than 40%
Debt Service Coverage
3.3x
 
Greater than 1.5x
Unencumbered Assets / Unsecured Debt
269.2%
 
Greater than 150%

27


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

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

Unsecured Revolving Credit Facility (1)
LIBOR + 1.30%
 
1.42%
 
$

$

$

$

$

$

$

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%
 
1.66%
 

250,000





250,000

2017 maturities (1)
LIBOR + 1.50%
 
1.66%
 



250,000



250,000

2019 maturities
LIBOR + 2.10%
 
2.26%
 





120,000

120,000

2026 maturities
0.00%
 
—%
 
150

200

200

200

200

1,461

2,411

Total Other Unsecured Debt
 
 
 
 
150

250,200

200

250,200

200

121,461

622,411

 
 
 
 
 
 
 
 
 
 
 
 
Total Unsecured Debt
 
 
 
 
$
150

$
250,775

$
200

$
250,200

$
200

$
721,461

$
1,222,986

Secured Debt
 
 
 
 
 
 
 
 
 
 
 
Fixed Rate Secured Debt
 
 
 
 
 
 
 
 
 
 
 
 2014 maturities
7.25%
 
7.25%
 
$
83,059

$

$

$

$

$

$
83,059

 2015 maturities
5.53%
 
5.53%
 

103,000





103,000

 2016 maturities
6.59%
 
6.58%
 
2,907

4,128

277,886




284,921

 2017 maturities
5.64%
 
5.66%
 
135

189

200

154,302



154,826

 Thereafter
4.40%
 
4.35%
 
714

1,000

1,053

1,113

1,174

48,338

53,392

Total Fixed Rate Secured Debt
 
 
 
 
86,815

108,317

279,139

155,415

1,174

48,338

679,198

Variable Rate Secured Debt
LIBOR + 2.25%
 
2.41%
 
614

36,877





37,491

Total Secured Debt
 
 
 
 
$
87,429

$
145,194

$
279,139

$
155,415

$
1,174

$
48,338

$
716,689

 
 
 
 
 
 
 
 
 
 
 
 
Total Debt
 
 
 
 
$
87,579

$
395,969

$
279,339

$
405,615

$
1,374

$
769,799

$
1,939,675

 
 
 
 
 
 
 
 
 
 
 
 
Fixed Rate Debt
5.26%
 
5.34%
 
$
86,965

$
109,092

$
279,339

$
155,615

$
1,374

$
649,799

$
1,282,184

Variable Rate Debt
1.82%
 
1.82%
 
614

286,877


250,000


120,000

657,491

Total Debt
 
 
 
 
$
87,579

$
395,969

$
279,339

$
405,615

$
1,374

$
769,799

$
1,939,675

 
 
 
 
 
 
 
 
 
 
 
 
Balloon Payments

 

 
$
82,458

$
389,751

$
274,605

$
404,110

$

$
763,945

$
1,914,869

Scheduled Principal Amortization

 

 
5,121

6,218

4,734

1,505

1,374

5,854

24,806

Total Debt
 
 
 
 
$
87,579

$
395,969

$
279,339

$
405,615

$
1,374

$
769,799

$
1,939,675

 
 
 
 
 
 
 
 
 
Net discount
(7,844
)
 
 
 
 
 
 
 
 
 
Consolidated debt
$
1,931,831

(1) Matures in 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.

28


Corporate Office Properties Trust
Consolidated Joint Ventures as of 3/31/14
(dollars and square feet in thousands) 
Operating Properties
Operational
Square Feet
Occupancy
 
Total Assets (1)
Property Level Debt
% COPT Owned
Suburban Maryland:
 

 
 
 

 

 
M Square Associates, LLC (2 properties)
242

96.9%
 
$
54,762

$
37,491

50%
Huntsville, AL:
 
 
 
 
 
 
LW Redstone Company, LLC (4 properties)
425

85.5%
 
76,064

31,639

85%
Total/Average
667

89.6%
 
$
130,826

$
69,130

 
NOI of Operating Properties for Three Months Ended 3/31/14 (2)
$
2,599

 
 
 

 

 
 
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

 
$
6,436

$

75%
M Square Research Park
525

 
5,966


50%
Huntsville, Alabama:
 

 
 

 

 
Redstone Gateway
4,173

 
59,167


85%
Total
5,665

 
$
71,569

$

 
 
(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.

29



Corporate Office Properties Trust
Supplementary Reconciliations of Non-GAAP Measures
(in thousands)
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended
 
3/31/14
 
12/31/13
 
9/30/13
 
6/30/13
 
3/31/13
Net income (loss)
$
5,671

 
$
92,672

 
$
(2,000
)
 
$
(4,405
)
 
$
15,277

Interest expense on continuing and discontinued operations
20,827

 
23,181

 
21,310

 
23,369

 
22,371

Income tax expense
64

 
1,917

 
24

 
21

 
16

Depreciation of furniture, fixtures and equipment (FF&E)
505

 
495

 
502

 
527

 
530

Real estate-related depreciation and amortization
43,596

 
31,322

 
29,210

 
28,935

 
28,252

Impairment losses
1

 
921

 
22,074

 
7,195

 
1,857

Loss (gain) on early extinguishment of debt on continuing and discontinued operations
23

 
(67,808
)
 
374

 
21,470

 
5,184

Loss (gain) on sales of operating properties
4

 
(9,004
)
 

 

 

Gain on sales of non-operational properties

 

 

 
(329
)
 
(2,354
)
Net loss (gain) on investments in unconsolidated entities included in interest and other income
20

 
221

 
1,006

 
(961
)
 
(60
)
Adjusted EBITDA
$
70,711

 
$
73,917

 
$
72,500

 
$
75,822

 
$
71,073

Add back:
 

 
 

 
 

 
 

 
 

General, administrative and leasing expenses on continuing and discontinued operations
8,143

 
8,442

 
8,027

 
6,583

 
7,821

Business development expenses and land carry costs on continuing and discontinued operations, excluding operating property acquisition costs
1,326

 
1,367

 
1,383

 
1,327

 
1,359

Depreciation of FF&E
(505
)
 
(495
)
 
(502
)
 
(527
)
 
(530
)
Income from construction contracts and other service operations
(3,166
)
 
(605
)
 
(685
)
 
(1,413
)
 
(785
)
Interest and other income, excluding net loss/gain on investments in unconsolidated entities
(1,305
)
 
(1,106
)
 
(1,003
)
 
(1,045
)
 
(886
)
Equity in income of unconsolidated entities
(60
)
 
(1,899
)
 
(44
)
 
(126
)
 
(41
)
NOI from real estate operations
$
75,144

 
$
79,621

 
$
79,676

 
$
80,621

 
$
78,011

 
 
 
 
 
 
 
 
 
 
Adjusted EBITDA
$
70,711

 
$
73,917

 
$
72,500

 
$
75,822

 
$
71,073

NOI from properties in quarter of disposition

 
(5,107
)
 

 
(45
)
 

In-place adjusted EBITDA
$
70,711

 
$
68,810

 
$
72,500

 
$
75,777

 
$
71,073

 
 
 
 
 
 
 
 
 
 

30


Corporate Office Properties Trust
Supplementary Reconciliations of Non-GAAP Measures (continued)
(dollars in thousands)
 
Three Months Ended
 
3/31/14
 
12/31/13
 
9/30/13
 
6/30/13
 
3/31/13
Discontinued Operations
 

 
 

 
 

 
 

 
 

Revenues from real estate operations
$
19

 
$
8,233

 
$
9,740

 
$
9,543

 
$
10,120

Property operating expenses
20

 
(2,982
)
 
(3,524
)
 
(3,321
)
 
(3,678
)
Depreciation and amortization

 
(996
)
 
(1,005
)
 
(1,262
)
 
(1,242
)
General, administrative and leasing expenses

 
(3
)
 

 

 
(1
)
Interest

 
(1,905
)
 
(1,968
)
 
(2,267
)
 
(2,081
)
(Loss) gain on early extinguishment of debt
(23
)
 
67,810

 

 

 

Impairment losses
(1
)
 
(921
)
 
(16,217
)
 
(7,195
)
 
(1,857
)
(Loss) gain on sales of depreciated real estate properties
(4
)
 
2,671

 

 

 

Discontinued operations
$
11

 
$
71,907

 
$
(12,974
)
 
$
(4,502
)
 
$
1,261

GAAP revenues from real estate operations from continuing operations
$
124,877

 
$
118,487

 
$
114,821

 
$
115,732

 
$
111,957

Revenues from discontinued operations
19

 
8,233

 
9,740

 
9,543

 
10,120

Real estate revenues
$
124,896

 
$
126,720

 
$
124,561

 
$
125,275

 
$
122,077

GAAP property operating expenses from continuing operations
$
49,772

 
$
44,117

 
$
41,361

 
$
41,333

 
$
40,388

Property operating expenses from discontinued operations
(20
)
 
2,982

 
3,524

 
3,321

 
3,678

Real estate property operating expenses
$
49,752

 
$
47,099

 
$
44,885

 
$
44,654

 
$
44,066

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

 
$
6,333

 
$

 
$
329

 
$
2,354

(Loss) gain on sales of real estate from discontinued operations
(4
)
 
2,671

 

 

 

(Loss) gain on sales of real estate from continuing and discontinued operations
(4
)
 
9,004

 

 
329

 
2,354

Less: Gain on sales of non-operating properties

 

 

 
(329
)
 
(2,354
)
(Loss) gain on sales of operating properties
$
(4
)
 
$
9,004

 
$

 
$

 
$

Impairment losses, per statements of operations
$

 
$

 
$
5,857

 
$

 
$

Impairment losses on discontinued operations
1

 
921

 
16,217

 
7,195

 
1,857

Total impairment losses on previously depreciated operating properties
$
1

 
$
921

 
$
22,074

 
$
7,195

 
$
1,857



31


Corporate Office Properties Trust
Supplementary Reconciliations of Non-GAAP Measures (continued)
(dollars in thousands)
 
Three Months Ended
 
3/31/14
 
12/31/13
 
9/30/13
 
6/30/13
 
3/31/13
Depreciation and amortization associated with real estate operations from continuing operations
$
43,596

 
$
30,326

 
$
28,205

 
$
27,673

 
$
27,010

Depreciation and amortization from discontinued operations

 
996

 
1,005

 
1,262

 
1,242

Real estate-related depreciation and amortization
$
43,596

 
$
31,322

 
$
29,210

 
$
28,935

 
$
28,252

Interest expense from continuing operations
$
20,827

 
$
21,276

 
$
19,342

 
$
21,102

 
$
20,290

Interest expense from discontinued operations

 
1,905

 
1,968

 
2,267

 
2,081

Total interest expense
20,827

 
23,181

 
21,310

 
23,369

 
22,371

Less: Amortization of deferred financing costs
(1,167
)
 
(1,159
)
 
(1,321
)
 
(1,443
)
 
(1,528
)
Less: Amortization of net debt discounts and premiums, net of amounts capitalized
171

 
48

 
121

 
(556
)
 
(628
)
Denominator for interest coverage
19,831

 
22,070

 
20,110

 
21,370

 
20,215

Scheduled principal amortization
1,855

 
2,252

 
2,226

 
2,491

 
2,512

Denominator for debt service coverage
21,686

 
24,322

 
22,336

 
23,861

 
22,727

Scheduled principal amortization
(1,855
)
 
(2,252
)
 
(2,226
)
 
(2,491
)
 
(2,512
)
Preferred share dividends - redeemable non-convertible
4,490

 
4,490

 
4,490

 
4,885

 
6,106

Preferred unit distributions
165

 
165

 
165

 
165

 
165

Denominator for fixed charge coverage
$
24,486

 
$
26,725

 
$
24,765

 
$
26,420

 
$
26,486

Preferred share dividends
$
4,490

 
$
4,490

 
$
4,490

 
$
4,885

 
$
6,106

Preferred unit distributions
165

 
165

 
165

 
165

 
165

Common share dividends
24,091

 
24,026

 
24,022

 
23,604

 
23,594

Common unit distributions
1,081

 
1,094

 
1,094

 
1,042

 
1,050

Total dividends/distributions
$
29,827

 
$
29,775

 
$
29,771

 
$
29,696

 
$
30,915

Common share dividends
$
24,091

 
$
24,026

 
$
24,022

 
$
23,604

 
$
23,594

Common unit distributions
1,081

 
1,094

 
1,094

 
1,042

 
1,050

Dividends and distributions for payout ratios
$
25,172

 
$
25,120

 
$
25,116

 
$
24,646

 
$
24,644

Total Assets
$
3,605,897

 
$
3,629,952

 
$
3,755,588

 
$
3,699,635

 
$
3,685,099

Accumulated depreciation
635,178

 
597,649

 
612,369

 
597,783

 
576,299

Accumulated depreciation included in assets held for sale

 

 
8,845

 
12,201

 
12,201

Accumulated amort. of real estate intangibles and deferred leasing costs
199,500

 
193,142

 
195,559

 
189,330

 
184,097

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

 

 
9,224

 
9,216

 
9,208

Denominator for debt to adjusted book
$
4,440,575

 
$
4,420,743

 
$
4,581,585

 
$
4,508,165

 
$
4,466,904

Debt, net
$
1,931,831

 
$
1,927,703

 
$
2,135,031

 
$
2,093,106

 
$
1,957,360

Less: Cash and cash equivalents
(18,374
)
 
(54,373
)
 
(27,318
)
 
(9,196
)
 
(23,509
)
Numerator for adjusted debt to in-place adjusted EBITDA ratio
$
1,913,457

 
$
1,873,330

 
$
2,107,713

 
$
2,083,910

 
$
1,933,851


32



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 NOI 
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

33



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.
 
Adjusted debt to in-place adjusted EBITDA ratio
Defined as (1) debt, as adjusted to subtract cash and cash equivalents as of the end of the period, divided by (2) in-place adjusted EBITDA (defined below) 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; FFO associated with properties securing non-recourse debt on

34



Corporate Office Properties Trust
Definitions

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

Funds from operations (“FFO” or “FFO per NAREIT”) 
Defined as net 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.
 
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

35



Corporate Office Properties Trust
Definitions

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).
 
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.

Real estate revenue operating margin 
Defined as NOI from real estate operations divided by real estate revenue, including continuing and discontinued operations.

In-place adjusted EBITDA
Defined as Adjusted EBITDA, as further adjusted for: (1) the removal of NOI pertaining to properties in the quarterly periods in which such properties were sold; and (2) the addition of pro forma adjustments to NOI for properties acquired subsequent to the commencement of a quarter made in order to reflect a full quarter of ownership. We believe that in-place adjusted EBITDA is a useful supplemental measure of performance for assessing our un-levered performance, as further adjusted for changes in our ownership of operating properties.  We believe that net income (loss) is the most directly comparable GAAP measure to in-place adjusted EBITDA.

Recurring Capital Expenditures 
Definition is included above in the definition for Diluted AFFO.
 
Rental revenue operating margin 
Defined as NOI from real estate operations divided by real estate rental revenue, including continuing and discontinued operations.

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.
 

36



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, 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, 2013, 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.

37