EXHIBIT 99.1
 
 
Earnings Release & Supplemental Information — Unaudited
 
June 30, 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
22

Equity Research Coverage
2

 
Summary of Construction Projects
23

Selected Financial Summary Data
3

 
Summary of Redevelopment Projects
24

Selected Portfolio Data
4

 
Summary of Land Held and Pre-Construction
25

 
 

 
 
 

FINANCIAL STATEMENTS:
Section II

 
CAPITALIZATION:
Section V

Quarterly Consolidated Balance Sheets
5

 
Quarterly Equity Analysis
26

Consolidated Statements of Operations
6-7

 
Debt Analysis
27-28

Consolidated Statements of FFO
8-9

 
Debt Maturity Schedule
29

Consolidated Reconciliations of AFFO
10

 
Consolidated Joint Ventures
30

 
 

 
 
 
PORTFOLIO INFORMATION:
Section III

 
RECONCILIATIONS & DEFINITIONS:
Section VI

Consolidated Office Properties by Region
11

 
Supplementary Reconciliations of Non-GAAP Measures
31-34

NOI from Real Estate Operations and Occupancy by Property Grouping
12

 
Definitions
35-40

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
17-18

 
 
 
Office Lease Expiration Analysis
19-20

 
 
 
Top 20 Office Tenants
21

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


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

COPT REPORTS SECOND QUARTER 2014 RESULTS

COLUMBIA, MD July 25, 2014 - Corporate Office Properties Trust (“COPT” or the “Company”) (NYSE: OFC) announced financial and operating results for the second quarter ended June 30, 2014.

“Second quarter results were at the high end of our guidance range, reflecting better expense management at the property level,” stated Roger A. Waesche, Jr., COPT’s President & Chief Executive Officer. “Based on leasing already executed, and the leasing momentum we are experiencing across the majority of our portfolio, we are highly confident that FFO per share will now trend higher, beginning with this third quarter,” he added.

Results:
Diluted earnings per share (“EPS”) was $0.02 for the quarter ended June 30, 2014 as compared to $(0.16) in the second quarter of 2013. Per NAREIT’s definition, diluted funds from operations per share (“FFOPS”) for the second quarter of 2014 was $0.37 versus $0.25 reported in the second quarter of 2013. FFOPS, as adjusted for comparability, was $0.44 for the quarter ended June 30, 2014 as compared to $0.52 reported for the second 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 June 30, 2014, the Company’s total portfolio of 180 operating office properties totaled 16.9 million square feet. The Company’s total portfolio was 89.3% occupied and 91.4% leased as of June 30, 2014. Excluding eight buildings held for sale at June 30, 2014, the Company’s core portfolio of 172 buildings contained 16.6 million square feet that were 90.0% occupied and 92.2% leased.

Same Office Performance - The Company’s same office portfolio for the quarter ended June 30, 2014 represents 91% of the Company’s core rentable square feet and consists of 161 properties. The Company’s same office portfolio was 90.8% occupied at June 30, 2014, up 20 basis points from the second quarter of 2013. For the second quarter ended June 30, 2014, the Company’s same office property cash NOI, excluding gross lease termination fees, decreased 0.4% as compared to the second quarter of 2013.

Leasing - COPT leased approximately 680,000 square feet of office space during the quarter ended June 30, 2014, achieving a 74% renewal rate. For the quarter ended June 30, 2014, rents on renewed space increased 5.9% on a GAAP basis and decreased 4.8% on a cash basis. For the six months ended June 30, 2014, the Company has leased 1.1 million square feet and achieved a 69% renewal rate.

i


Investment Activity:
Developments - At June 30, 2014, the Company had eight properties totaling 1.1 million square feet under construction for a total projected cost of $271.9 million, of which $131.6 million had been incurred. These eight projects were 50% pre-leased at July 24, 2014.

Redevelopments - As of the same date, COPT had four properties under redevelopment totaling approximately 276,000 square feet that, at June 30, 2014, were 40% pre-leased.

Dispositions - The Company had eight operating properties held for sale, totaling approximately 303,000 square feet that, at June 30, 2014, were 49.9% leased and 48.3% occupied.

Balance Sheet and Capital Transactions:
As of June 30, 2014, the Company’s debt to adjusted book ratio was 43.9% and its adjusted EBITDA fixed charge coverage ratio was 2.5x. Also, the Company’s weighted average interest rate was 4.2% for the quarter ended June 30, 2014 and 92% of the Company’s debt was subject to fixed interest rates, including the effect of interest rate swaps.

During the quarter, the Company issued $300 million of 3.70% senior unsecured notes due June 15, 2021 at a price equal to 99.739% of the principal amount. Also during the quarter, the Company redeemed all of its 2,000,000 outstanding 7.5% Series H Cumulative Redeemable Preferred Shares, at a price of $25.3230 per share, including accrued and unpaid dividends through the date of redemption.

2014 FFO Guidance:
Management is narrowing its previously issued guidance for 2014 FFOPS, as adjusted for comparability, from the prior range of $1.85-$1.92, to a new range of $1.86-$1.90. Management is establishing guidance for third quarter 2014 FFOPS, as adjusted for comparability, of $0.46-$0.48, and for the fourth quarter 2014 of $0.48-$0.50. A reconciliation of projected diluted EPS to projected FFOPS for the quarter ending September 30, 2014 and the quarter and year ending December 31, 2014 is provided, as follows:
 
 
 
 
 
 
 
 
 
 
 
 
 
Quarter Ending
 
Quarter Ending
 
Year Ending
 
September 30, 2014
 
December 31, 2014
 
December 31, 2014
 
Low
 
High
 
Low
 
High
 
Low
 
High
EPS
$
0.03

 
$
0.05

 
$
0.78

 
$
0.80

 
$
0.86

 
$
0.90

Real estate depreciation and amortization
0.34

 
0.34

 
0.34

 
0.34

 
1.50

 
1.50

Gains on sales of previously depreciated properties
0.05

 
0.05

 
—

 
—

 
0.05

 
0.05

Impairment losses on previously depreciated properties
—

 
—

 
—

 
—

 
(0.01
)
 
(0.01
)
FFOPS, NAREIT definition
0.42

 
0.44

 
1.12

 
1.14

 
2.40

 
2.44

NOI from properties to be conveyed (a)
(0.01
)
 
(0.01
)
 
(0.01
)
 
(0.01
)
 
(0.03
)
 
(0.03
)
Interest expense on loan secured by properties to be conveyed (a)
0.05

 
0.05

 
0.05

 
0.05

 
0.15

 
0.15

Net gains on early extinguishment of debt (b)
—

 
—

 
(0.68
)
 
(0.68
)
 
(0.68
)
 
(0.68
)
Issuance cost of redeemed preferred shares
—

 
—

 
—

 
—

 
0.02

 
0.02

FFOPS, as adjusted for comparability
$
0.46

 
$
0.48

 
$
0.48

 
$
0.50

 
$
1.86

 
$
1.90

 
 
 
 
 
 
 
 
 
 
 
 

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

2Q 2014 Conference Call Information:
Management will discuss second quarter 2014 earnings results, as well as its 2014 guidance, on its conference call on July 25, 2014 at 12:00 p.m. Eastern Time, details of which are listed below:

Second Quarter 2014:
Earnings Release Date:            Friday, July 25, 2014 at 6:00 a.m. Eastern Time
Conference Call Date:             Friday, July 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:                      91072056

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=PGHCVH47L

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

A replay of this call will be available beginning Friday, July 25 at 4:00 p.m. Eastern Time through Friday, August 8 at midnight Eastern Time. To access the replay within the United States, please call 888-286-8010 and use passcode 83203581. To access the replay outside the United States, please call 617-801-6888 and use passcode 83203581.

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 June 30, 2014, COPT derived 76% of its annualized revenue from its strategic tenant niche properties and 24% 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 June 30, 2014, the Company’s consolidated portfolio consisted of 180 office properties totaling 16.9 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 June 30,
 
For the Six Months Ended June 30,
 
2014
 
2013
 
2014
 
2013
Revenues
 

 
 

 
 
 
 
Real estate revenues
$
115,959

 
$
115,732

 
$
240,836

 
$
227,689

Construction contract and other service revenues
23,861

 
20,795

 
45,651

 
35,057

Total revenues
139,820

 
136,527

 
286,487

 
262,746

Expenses
 

 
 

 
 
 
 
Property operating expenses
43,772

 
41,333

 
93,544

 
81,721

Depreciation and amortization associated with real estate operations
30,895

 
27,673

 
74,491

 
54,683

Construction contract and other service expenses
23,136

 
19,382

 
41,760

 
32,859

Impairment losses
1,302

 
—

 
1,302

 
—

General and administrative expenses
5,815

 
4,992

 
11,973

 
10,976

Leasing expenses
1,713

 
1,591

 
3,698

 
3,427

Business development expenses and land carry costs
1,351

 
1,327

 
2,677

 
2,686

Total operating expenses
107,984

 
96,298

 
229,445

 
186,352

Operating income
31,836

 
40,229


57,042


76,394

Interest expense
(23,478
)
 
(21,102
)
 
(44,305
)
 
(41,392
)
Interest and other income
1,299

 
2,006

 
2,584

 
2,952

Loss on early extinguishment of debt
(270
)
 
(21,470
)
 
(270
)
 
(26,654
)
Income (loss) from continuing operations before equity in (loss) income of unconsolidated entities and income taxes
9,387

 
(337
)
 
15,051

 
11,300

Equity in (loss) income of unconsolidated entities
(47
)
 
126

 
13

 
167

Income tax expense
(92
)
 
(21
)
 
(156
)
 
(37
)
Income (loss) from continuing operations
9,248

 
(232
)
 
14,908

 
11,430

Discontinued operations
(198
)
 
(4,502
)
 
(187
)
 
(3,241
)
Income before gain on sales of real estate
9,050

 
(4,734
)
 
14,721

 
8,189

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

 
329

 
—

 
2,683

Net income (loss)
9,050

 
(4,405
)
 
14,721

 
10,872

Net (income) loss attributable to noncontrolling interests
 

 
 

 
 
 
 
Common units in the Operating Partnership
(158
)
 
671

 
(174
)
 
242

Preferred units in the Operating Partnership
(165
)
 
(165
)
 
(330
)
 
(330
)
Other consolidated entities
(837
)
 
(1,466
)
 
(1,586
)
 
(1,129
)
Net income (loss) attributable to COPT
7,890

 
(5,365
)
 
12,631

 
9,655

Preferred share dividends
(4,344
)
 
(4,885
)
 
(8,834
)
 
(10,991
)
Issuance costs associated with redeemed preferred shares
(1,769
)
 
(2,904
)
 
(1,769
)
 
(2,904
)
Net income (loss) attributable to COPT common shareholders
$
1,777

 
$
(13,154
)
 
$
2,028

 
$
(4,240
)
 
 
 
 
 
 
 
 
Earnings per share (“EPS”) computation:
 

 
 

 
 
 
 
Numerator for diluted EPS:
 

 
 

 
 
 
 
Net income attributable to common shareholders
$
1,777

 
$
(13,154
)
 
$
2,028

 
$
(4,240
)
Dilutive effect of common units in the Operating Partnership
—

 
(671
)
 
—

 
(242
)
Amount allocable to restricted shares
(108
)
 
(102
)
 
(229
)
 
(220
)
Numerator for diluted EPS
$
1,669

 
$
(13,927
)
 
$
1,799

 
$
(4,702
)
 
 
 
 
 
 
 
 
Denominator:
 

 
 

 
 
 
 
Weighted average common shares - basic
87,214

 
85,425

 
87,148

 
83,422

Dilutive effect of common units in the Operating Partnership
—

 
3,801

 
—

 
3,847

Dilutive effect of share-based compensation awards
201

 
—

 
156

 
—

Weighted average common shares - diluted
87,415

 
89,226

 
87,304

 
87,269

Diluted EPS
$
0.02

 
$
(0.16
)
 
$
0.02

 
$
(0.05
)

v


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

 
For the Three Months Ended June 30,
 
For the Six Months Ended June 30,
 
2014
 
2013
 
2014
 
2013
Net income (loss)
$
9,050

 
$
(4,405
)
 
$
14,721

 
$
10,872

Real estate-related depreciation and amortization
30,895

 
28,935

 
74,491

 
57,187

Impairment losses on previously depreciated operating properties
1,328

 
7,195

 
1,329

 
9,052

Loss on sales of previously depreciated operating properties
—

 
—

 
4

 
—

Funds from operations (“FFO”)
41,273

 
31,725

 
90,545

 
77,111

Noncontrolling interests - preferred units in the Operating Partnership
(165
)
 
(165
)
 
(330
)
 
(330
)
FFO allocable to other noncontrolling interests
(758
)
 
(1,270
)
 
(1,519
)
 
(1,997
)
Preferred share dividends
(4,344
)
 
(4,885
)
 
(8,834
)
 
(10,991
)
Issuance costs associated with redeemed preferred shares
(1,769
)
 
(2,904
)
 
(1,769
)
 
(2,904
)
Basic and diluted FFO allocable to restricted shares
(146
)
 
(89
)
 
(351
)
 
(272
)
Basic and diluted FFO available to common share and common unit holders (“Basic and diluted FFO”)
34,091

 
22,412

 
77,742

 
60,617

Gain on sales of non-operating properties
—

 
(329
)
 
—

 
(2,683
)
Loss on early extinguishment of debt
363

 
21,470

 
386

 
26,654

Issuance costs associated with redeemed preferred shares
1,769

 
2,904

 
1,769

 
2,904

FFO on properties in default to be conveyed
3,629

 
—

 
3,629

 
—

Diluted FFO comparability adjustments allocable to restricted shares
(26
)
 
—

 
(26
)
 
—

Diluted FFO available to common share and common unit holders, as adjusted for comparability
39,826

 
46,457

 
83,500

 
87,492

Straight line rent adjustments
(1,745
)
 
(2,011
)
 
(985
)
 
(5,844
)
Straight line rent adjustments - properties in default to be conveyed
1

 
—

 
1

 
—

Amortization of intangibles included in net operating income
224

 
172

 
441

 
349

Share-based compensation, net of amounts capitalized
1,501

 
1,647

 
3,056

 
3,296

Amortization of deferred financing costs
1,122

 
1,443

 
2,289

 
2,971

Amortization of deferred financing costs - properties in default to be conveyed
(27
)
 
—

 
(27
)
 
—

Amortization of net debt discounts, net of amounts capitalized
229

 
556

 
400

 
1,184

Amortization of settled debt hedges
15

 
15

 
30

 
30

Recurring capital expenditures
(13,585
)
 
(5,862
)
 
(24,637
)
 
(11,170
)
Diluted adjusted funds from operations available to common share and common unit holders (“Diluted AFFO”)
$
27,561

 
$
42,417

 
$
64,068

 
$
78,308

Diluted FFO per share
$
0.37

 
$
0.25

 
$
0.85

 
$
0.69

Diluted FFO per share, as adjusted for comparability
$
0.44

 
$
0.52

 
$
0.92

 
$
1.00

Dividends/distributions per common share/unit
$
0.275

 
$
0.275

 
$
0.550

 
$
0.550




vi


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

 
 
June 30,
2014
 
December 31,
2013
Balance Sheet Data
 
 

 
 

Properties, net of accumulated depreciation
 
$
3,254,242

 
$
3,214,301

Total assets
 
3,709,500

 
3,629,952

Debt, net
 
2,099,343

 
1,927,703

Total liabilities
 
2,290,819

 
2,114,945

Redeemable noncontrolling interest
 
18,901

 
17,758

Equity
 
1,399,780

 
1,497,249

Debt to adjusted book
 
43.9
%
 
43.6
%
Debt to total market capitalization
 
43.3
%
 
44.3
%
 
 
 
 
 
Core Portfolio Data (as of period end) (1)
 
 

 
 

Number of operating properties
 
172

 
177

Total net rentable square feet owned (in thousands)
 
16,620

 
16,045

Occupancy %
 
90.0
%
 
88.7
%
Leased %
 
92.2
%
 
90.0
%
 
 
 
 
 
 
For the Three Months Ended June 30,
 
For the Six Months Ended June 30,
2014
 
2013
 
2014
 
2013
Payout ratios
 

 
 

 
 

 
 

Diluted FFO
73.8
%
 
110.0
%
 
64.8
%
 
81.3
%
Diluted FFO, as adjusted for comparability
63.2
%
 
53.1
%
 
60.3
%
 
56.3
%
Diluted AFFO
91.3
%
 
58.1
%
 
78.6
%
 
62.9
%
Adjusted EBITDA interest coverage ratio
3.6
x
 
3.5
x
 
3.6
x
 
3.5
x
Adjusted EBITDA fixed charge coverage ratio
2.5
x
 
2.4
x
 
2.5
x
 
2.4
x
Adjusted debt to in-place adjusted EBITDA ratio (2)
7.1
x
 
6.9
x
 
N/A

 
N/A

 
 
 
 
 
 
 
 
Reconciliation of denominators for diluted EPS and diluted FFO per share
 
 

 
 
 
 
Denominator for diluted EPS
87,415

 
89,226

 
87,304

 
87,269

Weighted average common units
3,912

 
—

 
3,934

 
—

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

 
96

 
—

 
74

Denominator for diluted FFO per share
91,327

 
89,322

 
91,238

 
87,343

 
 
 
 
 
 
 
 
Reconciliation of FFO to FFO, as adjusted for comparability
 

 
 

 
 

 
 

FFO, per NAREIT
$
41,273

 
$
31,725

 
$
90,545

 
$
77,111

Gain on sales of non-operating properties
—

 
(329
)
 
—

 
(2,683
)
Loss on early extinguishment of debt, continuing and discontinued operations
363

 
21,470

 
386

 
26,654

Issuance costs associated with redeemed preferred shares
1,769

 
2,904

 
1,769

 
2,904

FFO from properties to be conveyed to extinguish debt in default
3,629

 
—

 
3,629

 
—

FFO, as adjusted for comparability
$
47,034

 
$
55,770

 
$
96,329

 
$
103,986


(1)
Represents operating properties held for long-term investment.
(2)
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 June 30,
 
For the Six Months Ended June 30,
 
2014
 
2013
 
2014
 
2013
Reconciliation of common share dividends to dividends and distributions for payout ratios
 

 
 

 
 
 
 
Common share dividends
$
24,103

 
$
23,604

 
$
48,194

 
$
47,198

Common unit distributions
1,072

 
1,042

 
2,153

 
2,092

Dividends and distributions for payout ratios
$
25,175

 
$
24,646

 
$
50,347

 
$
49,290

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

 
 

 
 

 
 

Net income (loss)
$
9,050

 
$
(4,405
)
 
$
14,721

 
$
10,872

Interest expense on continuing operations
23,478

 
21,102

 
44,305

 
41,392

Interest expense on discontinued operations
—

 
2,267

 
—

 
4,348

Income tax expense
92

 
21

 
156

 
37

Real estate-related depreciation and amortization
30,895

 
28,935

 
74,491

 
57,187

Depreciation of furniture, fixtures and equipment
843

 
527

 
1,348

 
1,057

Impairment losses
1,328

 
7,195

 
1,329

 
9,052

Loss on early extinguishment of debt on continuing and discontinued operations
363

 
21,470

 
386

 
26,654

Loss on sales of operating properties
—

 
—

 
4

 
—

Gain on sales of non-operational properties
—

 
(329
)
 
—

 
(2,683
)
Net loss (gain) on investments in unconsolidated entities included in interest and other income
282

 
(961
)
 
302

 
(1,021
)
EBITDA on properties in default to be conveyed
(531
)
 
—

 
(531
)
 
—

Adjusted EBITDA
$
65,800

 
$
75,822

 
$
136,511

 
$
146,895

Less: Net operating income from properties in quarter of disposition
—

 
(45
)
 
 
 
 
Adjusted and in-place adjusted EBITDA
$
65,800

 
$
75,777

 

 

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

 
 

 
 

 
 

Interest expense from continuing operations
$
23,478

 
$
21,102

 
$
44,305

 
$
41,392

Interest expense from discontinued operations
—

 
2,267

 
—

 
4,348

Less: Amortization of deferred financing costs
(1,122
)
 
(1,443
)
 
(2,289
)
 
(2,971
)
Less: Amortization of net debt discount, net of amounts capitalized
229

 
(556
)
 
400

 
(1,184
)
Less: Interest exp. on debt in default to be extin. via conveyance of properties
(4,133
)
 
—

 
(4,133
)
 
—

Denominator for interest coverage-Adjusted EBITDA
18,452

 
21,370

 
38,283

 
41,585

Scheduled principal amortization
1,582

 
2,491

 
3,437

 
5,003

Capitalized interest
1,422

 
2,088

 
3,011

 
4,528

Preferred share dividends
4,344

 
4,885

 
8,834

 
10,991

Preferred unit distributions
165

 
165

 
330

 
330

Denominator for fixed charge coverage-Adjusted EBITDA
$
25,965

 
$
30,999

 
$
53,895

 
$
62,437

 
 
 
 
 
 
 
 

viii


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

 
For the Three Months Ended June 30,
 
For the Six Months Ended June 30,
 
2014
 
2013
 
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
$
4,512

 
$
3,798

 
$
10,831

 
$
6,089

Building improvements on operating properties
6,357

 
2,538

 
10,339

 
4,138

Leasing costs for operating properties
2,790

 
1,185

 
4,318

 
2,854

Less: Nonrecurring tenant improvements and incentives on operating properties
483

 
(23
)
 
467

 
(8
)
Less: Nonrecurring building improvements on operating properties
(519
)
 
(1,580
)
 
(1,087
)
 
(1,847
)
Less: Nonrecurring leasing costs for operating properties
(38
)
 
(50
)
 
(231
)
 
(50
)
Add: Recurring capital expenditures on operating properties held through joint ventures
—

 
(6
)
 
—

 
(6
)
Recurring capital expenditures
$
13,585

 
$
5,862

 
$
24,637

 
$
11,170

 
 
 
 
 
 
 
 
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
$
67,056

 
$
67,939

 
$
132,717

 
$
134,269

Less: Straight-line rent adjustments
(938
)
 
(874
)
 
(1,480
)
 
(2,456
)
Less: Amortization of deferred market rental revenue
15

 
(34
)
 
23

 
(63
)
Add: Amortization of below-market cost arrangements
272

 
319

 
544

 
638

Same office property cash net operating income
66,405

 
67,350

 
131,804

 
132,388

Less: Lease termination fees, gross
(93
)
 
(750
)
 
(605
)
 
(974
)
Same office property cash net operating income, excluding gross lease termination fees
$
66,312

 
$
66,600

 
$
131,199

 
$
131,414

 
 
 
 
 
 
 
 
 
 
June 30,
2014
 
December 31,
2013
Reconciliation of total assets to adjusted book
 
 

 
 

Total assets
 
$
3,709,500

 
$
3,629,952

Accumulated depreciation
 
655,214

 
597,649

Accumulated depreciation included in assets held for sale
 
3,121

 
—

Accumulated amortization of real estate intangibles and deferred leasing costs
 
201,627

 
193,142

Accumulated amortization of real estate intangibles and deferred leasing costs included in assets held for sale
 
4,277

 
—

Less: Adjusted book assoc. with properties to be conveyed to extinguish debt in default
 
(130,921
)
 
—

Adjusted book
 
$
4,442,818

 
$
4,420,743

 
 
 
 
 
Reconciliation of debt to adjusted debt
 
 
 
 
Debt, net
 
$
2,099,343

 
$
1,927,703

Less: Debt in default to be extinguished via conveyance of properties
 
(150,000
)
 
—

Numerator for debt to adjusted book ratio
 
1,949,343

 
1,927,703

Less: Cash and cash equivalents
 
(76,216
)
 
(54,373
)
Adjusted debt
 
$
1,873,127

 
$
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 June 30, 2014, COPT derived 76% of its portfolio annualized revenue from its strategic tenant niche properties and 24% 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 June 30, 2014, COPT’s core portfolio of 172 office properties encompassed 16.6 million square feet and was 92.2% 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
 
John Bejjani
 
949-640-8780
 
jbejjani@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
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
 
Six Months Ended
SUMMARY OF RESULTS 
 
6/30/14
 
3/31/14
 
12/31/13
 
9/30/13
 
6/30/13
 
6/30/14
 
6/30/13
Same Office NOI
 
$
67,056

 
$
65,661

 
$
66,086

 
$
68,020

 
$
67,939

 
$
132,717

 
$
134,269

NOI from real estate operations
 
$
72,108

 
$
75,144

 
$
79,621

 
$
79,676

 
$
80,621

 
$
147,252

 
$
158,632

Adjusted EBITDA
 
$
65,800

 
$
70,711

 
$
73,917

 
$
72,500

 
$
75,822

 
$
136,511

 
$
146,895

Net income (loss) attributable to COPT common shareholders
 
$
1,777

 
$
251

 
$
82,526

 
$
(7,454
)
 
$
(13,154
)
 
$
2,028

 
$
(4,240
)
FFO - per NAREIT
 
$
41,273

 
$
49,272

 
$
115,911

 
$
49,284

 
$
31,725

 
$
90,545

 
$
77,111

FFO - as adjusted for comparability
 
$
47,034

 
$
49,295

 
$
49,958

 
$
49,658

 
$
55,770

 
$
96,329

 
$
103,986

Basic and diluted FFO available to common share and common unit holders
 
$
34,091

 
$
43,651

 
$
109,914

 
$
43,618

 
$
22,412

 
$
77,742

 
$
60,617

Diluted AFFO avail. to common share and common unit holders
 
$
27,561

 
$
36,507

 
$
28,362

 
$
35,503

 
$
42,417

 
$
64,068

 
$
78,308

Per share - diluted:
 
 

 
 

 
 

 
 

 
 

 
 

 
 
EPS
 
$
0.02

 
$
0.00

 
$
0.94

 
$
(0.09
)
 
$
(0.16
)
 
$
0.02

 
$
(0.05
)
FFO - NAREIT
 
$
0.37

 
$
0.48

 
$
1.21

 
$
0.48

 
$
0.25

 
$
0.85

 
$
0.69

FFO - as adjusted for comparability
 
$
0.44

 
$
0.48

 
$
0.48

 
$
0.49

 
$
0.52

 
$
0.92

 
$
1.00

Dividend per common share
 
$
0.2750

 
$
0.2750

 
$
0.2750

 
$
0.2750

 
$
0.2750

 
$
0.5500

 
$
0.5500

Payout ratios:
 
 

 
 

 
 

 
 

 
 

 
 

 
 
Diluted FFO
 
73.8
%
 
57.7
%
 
22.9
%
 
57.6
%
 
110.0
%
 
64.8
%
 
81.3
%
Diluted FFO - as adjusted for comparability
 
63.2
%
 
57.6
%
 
56.9
%
 
57.1
%
 
53.1
%
 
60.3
%
 
56.3
%
Diluted AFFO
 
91.3
%
 
69.0
%
 
88.6
%
 
70.7
%
 
58.1
%
 
78.6
%
 
62.9
%
Real estate revenue operating margin
 
62.2
%
 
60.2
%
 
62.8
%
 
64.0
%
 
64.4
%
 
61.1
%
 
64.1
%
Rental revenue operating margin
 
76.4
%
 
76.7
%
 
77.6
%
 
78.5
%
 
79.5
%
 
76.5
%
 
79.1
%
CAPITALIZATION
 
 

 
 

 
 
 
 

 
 

 
 

 
 
Total Market Capitalization
 
$
4,853,704

 
$
4,627,913

 
$
4,350,189

 
$
4,503,307

 
$
4,636,656

 
 
 
 
Total Equity Market Capitalization
 
$
2,754,361

 
$
2,696,082

 
$
2,422,486

 
$
2,368,276

 
$
2,543,550

 
 
 
 
Debt, net
 
$
2,099,343

 
$
1,931,831

 
$
1,927,703

 
$
2,135,031

 
$
2,093,106

 
 
 
 
Debt to Total Market Capitalization
 
43.3
%
 
41.7
%
 
44.3
%
 
47.4
%
 
45.1
%
 
 
 
 
Debt to Adjusted book
 
43.9
%
 
43.5
%
 
43.6
%
 
46.6
%
 
46.4
%
 
 
 
 
Adjusted EBITDA interest coverage ratio
 
3.6
x
 
3.6
x
 
3.3
x
 
3.6
x
 
3.5
x
 
3.6
x
 
3.5
x
Adjusted EBITDA debt service coverage ratio
 
3.3
x
 
3.3
x
 
3.0
x
 
3.2
x
 
3.2
x
 
3.3
x
 
3.2
x
Adjusted EBITDA fixed charge coverage ratio
 
2.5
x
 
2.5
x
 
2.4
x
 
2.5
x
 
2.4
x
 
2.5
x
 
2.4
x
Adjusted debt to in-place adjusted EBITDA ratio
 
7.1
x
 
6.8
x
 
6.8
x
 
7.3
x
 
6.9
x
 
N/A

 
N/A

OTHER
 
 

 
 

 
 

 
 

 
 

 
 

 
 
Revenue from early termination of leases
 
$
72

 
$
1,112

 
$
1,676

 
$
891

 
$
1,280

 
$
1,184

 
$
2,115

Capitalized interest costs
 
$
1,422

 
$
1,589

 
$
2,042

 
$
2,215

 
$
2,088

 
$
3,011

 
$
4,528

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 


3

Corporate Office Properties Trust
Selected Consolidated Portfolio Data (1)
 
 
 
 
 
 
 
 
 
 
 
 
6/30/14
 
3/31/14
 
12/31/13
 
9/30/13
 
6/30/13
 
 
 

 
 

 
 

 
 

 
 

 
# of Operating Office Properties
 
 
 
 
 
 
 
 
 
 
Total Portfolio
180

 
183

 
183

 
210

 
210

 
Core Portfolio
172

 
181

 
177

 
173

 
189

 
Same Office Properties
161

 
161

 
161

 
161

 
161

 
 
 
 
 
 
 
 
 
 
 
 
% Occupied
 

 
 

 
 

 
 

 
 

 
Total Portfolio
89.3
%
 
89.8
%
 
89.1
%
 
88.5
%
 
88.2
%
 
Core Portfolio
90.0
%
 
89.7
%
 
88.7
%
 
89.3
%
 
88.2
%
 
Same Office Properties
90.8
%
 
91.1
%
 
90.6
%
 
90.6
%
 
90.6
%
 
 
 
 
 
 
 
 
 
 
 
 
% Leased
 

 
 

 
 

 
 

 
 

 
Total Portfolio
91.4
%
 
91.1
%
 
90.3
%
 
89.7
%
 
90.0
%
 
Core Portfolio
92.2
%
 
91.0
%
 
90.0
%
 
90.4
%
 
90.0
%
 
Same Office Properties
92.9
%
 
92.6
%
 
91.9
%
 
91.8
%
 
92.0
%
 
 
 
 
 
 
 
 
 
 
 
 
Square Feet of Office Properties (in thousands)
 

 
 

 
 

 
 

 
 

 
Total Portfolio
16,923

 
17,473

 
17,370

 
19,204

 
19,037

 
Core Portfolio
16,620

 
16,808

 
16,045

 
15,627

 
17,197

 
Same Office Properties
15,085

 
15,085

 
15,085

 
15,085

 
15,085

 
 
 
 
 
 
 
 
 
 
 
 
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

 
6.3

 
4.3

 
 
 
 
 
 
 
 
 
 
 
 

(1)
Amounts reported exclude the effect of properties serving as collateral for debt which is in default that we expect to extinguish via conveyance of such properties. Effective April 1, 2014, all cash flows from such properties belong to the lender.





4

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

 
 

 
 

 
 

 
 

Properties, net
 

 
 

 
 

 
 

 
 

Operating properties, net
$
2,724,242

 
$
2,729,003

 
$
2,702,693

 
$
2,713,579

 
$
2,703,009

Construction and redevelopment in progress, including land (1)
168,996

 
159,468

 
160,436

 
174,117

 
189,079

Land held for future development and pre-construction costs (1)
361,004

 
336,157

 
351,172

 
352,050

 
319,216

Total properties, net
3,254,242

 
3,224,628

 
3,214,301

 
3,239,746

 
3,211,304

Assets held for sale
22,868

 
—

 
—

 
133,984

 
136,896

Cash and cash equivalents
76,216

 
18,374

 
54,373

 
27,318

 
9,196

Restricted cash and marketable securities
11,689

 
10,965

 
11,448

 
14,698

 
19,472

Accounts receivable, net
30,911

 
30,152

 
27,000

 
15,485

 
22,511

Deferred rent receivable, net
93,270

 
91,082

 
89,456

 
90,104

 
89,811

Intangible assets on real estate acquisitions, net
51,645

 
55,678

 
59,258

 
64,372

 
68,046

Deferred leasing and financing costs, net
65,251

 
65,855

 
66,267

 
63,246

 
57,488

Mortgage and other investing receivables
56,549

 
55,231

 
53,663

 
42,560

 
40,206

Prepaid expenses and other assets
46,859

 
53,932

 
54,186

 
64,075

 
44,705

Total assets
$
3,709,500

 
$
3,605,897

 
$
3,629,952

 
$
3,755,588

 
$
3,699,635

Liabilities and equity
 

 
 

 
 

 
 

 
 

Liabilities:
 

 
 

 
 

 
 

 
 

Debt, net
$
2,099,343

 
$
1,931,831

 
$
1,927,703

 
$
2,135,031

 
$
2,093,106

Accounts payable and accrued expenses
105,205

 
97,451

 
98,785

 
85,291

 
84,181

Rents received in advance and security deposits
27,520

 
28,267

 
31,492

 
28,539

 
24,095

Dividends and distributions payable
28,342

 
29,122

 
29,080

 
29,077

 
28,602

Deferred revenue associated with operating leases
12,355

 
12,281

 
10,369

 
8,545

 
9,649

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

 
—

 
—

 
6,420

 
6,420

Interest rate derivatives
3,236

 
3,196

 
3,309

 
3,595

 
3,555

Other liabilities
14,818

 
13,060

 
14,207

 
8,234

 
8,169

Total liabilities
2,290,819

 
2,115,208

 
2,114,945

 
2,304,732

 
2,257,777

Redeemable noncontrolling interest
18,901

 
17,654

 
17,758

 
16,789

 
15,571

Equity:
 

 
 

 
 

 
 
 
 
COPT’s shareholders’ equity:
 

 
 

 
 

 
 
 
 
Preferred shares at liquidation preference
199,083

 
249,083

 
249,083

 
249,083

 
249,083

Common shares
877

 
876

 
874

 
874

 
858

Additional paid-in capital
1,819,436

 
1,816,467

 
1,814,015

 
1,812,801

 
1,772,470

Cumulative distributions in excess of net income
(688,033
)
 
(665,708
)
 
(641,868
)
 
(700,368
)
 
(668,892
)
Accumulated other comprehensive (loss) income
(761
)
 
2,072

 
3,480

 
2,925

 
3,631

Total COPT’s shareholders’ equity
1,330,602

 
1,402,790

 
1,425,584

 
1,365,315

 
1,357,150

Noncontrolling interests in subsidiaries
 

 
 

 
 

 
 

 
 

Common units in the Operating Partnership
50,323

 
51,757

 
53,468

 
50,815

 
49,112

Preferred units in the Operating Partnership
8,800

 
8,800

 
8,800

 
8,800

 
8,800

Other consolidated entities
10,055

 
9,688

 
9,397

 
9,137

 
11,225

Total noncontrolling interests in subsidiaries
69,178

 
70,245

 
71,665

 
68,752

 
69,137

Total equity
1,399,780

 
1,473,035

 
1,497,249

 
1,434,067

 
1,426,287

Total liabilities, redeemable noncontrolling interest and equity
$
3,709,500

 
$
3,605,897

 
$
3,629,952

 
$
3,755,588

 
$
3,699,635

(1) Please refer to pages 22-25 for detail.
 
 
 
 
 
 
 
 
 

5

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

 
 

 
 

 
 

 
 

 
 
 
 
Rental revenue
$
94,332

 
$
98,035

 
$
96,700

 
$
94,641

 
$
94,421

 
$
192,367

 
$
186,270

Tenant recoveries and other real estate operations revenue
21,627

 
26,842

 
21,787

 
20,180

 
21,311

 
48,469

 
41,419

Construction contract and other service revenues
23,861

 
21,790

 
10,315

 
16,991

 
20,795

 
45,651

 
35,057

Total revenues
139,820

 
146,667

 
128,802

 
131,812

 
136,527

 
286,487

 
262,746

Expenses
 

 
 

 
 

 
 

 
 

 
 
 
 
Property operating expenses
43,772

 
49,772

 
44,117

 
41,361

 
41,333

 
93,544

 
81,721

Depreciation and amortization associated with real estate operations
30,895

 
43,596

 
30,326

 
28,205

 
27,673

 
74,491

 
54,683

Construction contract and other service expenses
23,136

 
18,624

 
9,710

 
16,306

 
19,382

 
41,760

 
32,859

Impairment losses
1,302

 
—

 
—

 
5,857

 
—

 
1,302

 
—

General and administrative expenses
5,815

 
6,158

 
6,523

 
6,237

 
4,992

 
11,973

 
10,976

Leasing expenses
1,713

 
1,985

 
1,916

 
1,790

 
1,591

 
3,698

 
3,427

Business development expenses and land carry costs
1,351

 
1,326

 
1,367

 
1,383

 
1,327

 
2,677

 
2,686

Total operating expenses
107,984

 
121,461

 
93,959

 
101,139

 
96,298

 
229,445

 
186,352

Operating income
31,836

 
25,206

 
34,843

 
30,673

 
40,229

 
57,042

 
76,394

Interest expense
(23,478
)
 
(20,827
)
 
(21,276
)
 
(19,342
)
 
(21,102
)
 
(44,305
)
 
(41,392
)
Interest and other income (loss)
1,299

 
1,285

 
885

 
(3
)
 
2,006

 
2,584

 
2,952

Loss on early extinguishment of debt
(270
)
 
—

 
(2
)
 
(374
)
 
(21,470
)
 
(270
)
 
(26,654
)
Income (loss) from continuing operations before equity in (loss) income of unconsolidated entities and income taxes
9,387

 
5,664

 
14,450

 
10,954

 
(337
)
 
15,051

 
11,300

Equity in (loss) income of unconsolidated entities
(47
)
 
60

 
1,899

 
44

 
126

 
13

 
167

Income tax expense
(92
)
 
(64
)
 
(1,917
)
 
(24
)
 
(21
)
 
(156
)
 
(37
)
Income (loss) from continuing operations
9,248

 
5,660

 
14,432

 
10,974

 
(232
)
 
14,908

 
11,430

Discontinued operations
(198
)
 
11

 
71,907

 
(12,974
)
 
(4,502
)
 
(187
)
 
(3,241
)
Income (loss) before gain on sales of real estate
9,050

 
5,671

 
86,339

 
(2,000
)
 
(4,734
)
 
14,721

 
8,189

Gain on sales of real estate
—

 
—

 
6,333

 
—

 
329

 
—

 
2,683

Net income (loss)
9,050

 
5,671

 
92,672

 
(2,000
)
 
(4,405
)
 
14,721

 
10,872

Net (income) loss attributable to noncontrolling interests
 

 
 

 
 

 
 

 
 

 
 
 
 
Common units in the Operating Partnership
(158
)
 
(16
)
 
(3,757
)
 
232

 
671

 
(174
)
 
242

Preferred units in the Operating Partnership
(165
)
 
(165
)
 
(165
)
 
(165
)
 
(165
)
 
(330
)
 
(330
)
Other consolidated entities
(837
)
 
(749
)
 
(1,734
)
 
(1,031
)
 
(1,466
)
 
(1,586
)
 
(1,129
)
Net income (loss) attributable to COPT
7,890

 
4,741

 
87,016

 
(2,964
)
 
(5,365
)
 
12,631

 
9,655

Preferred share dividends
(4,344
)
 
(4,490
)
 
(4,490
)
 
(4,490
)
 
(4,885
)
 
(8,834
)
 
(10,991
)
Issuance costs associated with redeemed preferred shares
(1,769
)
 
—

 
—

 
—

 
(2,904
)
 
(1,769
)
 
(2,904
)
Net income (loss) attributable to COPT common shareholders
$
1,777

 
$
251

 
$
82,526

 
$
(7,454
)
 
$
(13,154
)
 
$
2,028

 
$
(4,240
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 

6

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

 
 

 
 

 
 

 
 

 
 
 
 
Numerator for diluted EPS
 

 
 

 
 

 
 

 
 

 
 
 
 
Net income (loss) attributable to common shareholders
$
1,777

 
$
251

 
$
82,526

 
$
(7,454
)
 
$
(13,154
)
 
$
2,028

 
$
(4,240
)
Dilutive effect of common units in the Operating Partnership
—

 
—

 
—

 
—

 
(671
)
 
—

 
(242
)
Amount allocable to restricted shares
(108
)
 
(121
)
 
(348
)
 
(97
)
 
(102
)
 
(229
)
 
(220
)
Numerator for diluted EPS
$
1,669

 
$
130

 
$
82,178

 
$
(7,551
)
 
$
(13,927
)
 
$
1,799

 
$
(4,702
)
Denominator:
 

 
 

 
 

 
 

 
 

 
 
 
 
Weighted average common shares - basic
87,214

 
87,080

 
87,010

 
86,760

 
85,425

 
87,148

 
83,422

Dilutive effect of common units in the Operating Partnership
—

 
—

 
—

 
—

 
3,801

 
—

 
3,847

Dilutive effect of share-based compensation awards
201

 
112

 
42

 
—

 
—

 
156

 
—

Weighted average common shares - diluted
87,415

 
87,192

 
87,052

 
86,760

 
89,226

 
87,304

 
87,269

Diluted EPS
$
0.02

 
$
0.00

 
$
0.94

 
$
(0.09
)
 
$
(0.16
)
 
$
0.02

 
$
(0.05
)

7

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

 
 

 
 

 
 

 
 

 
 
 
 
Real estate revenues
$
115,964

 
$
124,896

 
$
126,720

 
$
124,561

 
$
125,275

 
$
240,860

 
$
247,352

Real estate property operating expenses
(43,856
)
 
(49,752
)
 
(47,099
)
 
(44,885
)
 
(44,654
)
 
(93,608
)
 
(88,720
)
NOI from real estate operations
72,108

 
75,144

 
79,621

 
79,676

 
80,621

 
147,252

 
158,632

General and administrative expenses
(5,815
)
 
(6,158
)
 
(6,523
)
 
(6,237
)
 
(4,992
)
 
(11,973
)
 
(10,976
)
Leasing expenses (2)
(1,713
)
 
(1,985
)
 
(1,919
)
 
(1,790
)
 
(1,591
)
 
(3,698
)
 
(3,428
)
Business development expenses and land carry costs (2)
(1,351
)
 
(1,326
)
 
(1,367
)
 
(1,383
)
 
(1,327
)
 
(2,677
)
 
(2,686
)
NOI from construction contracts and other service operations
725

 
3,166

 
605

 
685

 
1,413

 
3,891

 
2,198

Equity in (loss) income of unconsolidated entities
(47
)
 
60

 
1,899

 
44

 
126

 
13

 
167

Interest and other income (loss)
1,299

 
1,285

 
885

 
(3
)
 
2,006

 
2,584

 
2,952

(Loss) gain on early extinguishment of debt (2)
(363
)
 
(23
)
 
67,808

 
(374
)
 
(21,470
)
 
(386
)
 
(26,654
)
Gain on sales of non-operating properties
—

 
—

 
—

 
—

 
329

 
—

 
2,683

Total interest expense (2)
(23,478
)
 
(20,827
)
 
(23,181
)
 
(21,310
)
 
(23,369
)
 
(44,305
)
 
(45,740
)
Income tax expense
(92
)
 
(64
)
 
(1,917
)
 
(24
)
 
(21
)
 
(156
)
 
(37
)
FFO - per NAREIT (1)
41,273

 
49,272

 
115,911

 
49,284

 
31,725

 
90,545

 
77,111

Preferred share dividends
(4,344
)
 
(4,490
)
 
(4,490
)
 
(4,490
)
 
(4,885
)
 
(8,834
)
 
(10,991
)
Issuance costs associated with redeemed preferred shares
(1,769
)
 
—

 
—

 
—

 
(2,904
)
 
(1,769
)
 
(2,904
)
Noncontrolling interests - preferred units in the Operating Partnership
(165
)
 
(165
)
 
(165
)
 
(165
)
 
(165
)
 
(330
)
 
(330
)
FFO allocable to other noncontrolling interests
(758
)
 
(761
)
 
(880
)
 
(833
)
 
(1,270
)
 
(1,519
)
 
(1,997
)
Basic and diluted FFO allocable to restricted shares
(146
)
 
(205
)
 
(462
)
 
(178
)
 
(89
)
 
(351
)
 
(272
)
Basic and diluted FFO available to common share and common unit holders (1)
34,091

 
43,651

 
109,914

 
43,618

 
22,412

 
77,742

 
60,617

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

 
—

 
—

 
—

 
(329
)
 
—

 
(2,683
)
Valuation allowance on tax asset associated with FFO comparability adjustments
—

 
—

 
1,855

 
—

 
—

 
—

 
—

Loss (gain) on early extinguishment of debt (2)
363

 
23

 
(67,808
)
 
374

 
21,470

 
386

 
26,654

Issuance costs associated with redeemed preferred shares
1,769

 
—

 
—

 
—

 
2,904

 
1,769

 
2,904

FFO from properties to be conveyed to extinguish debt in default
3,629

 
—

 
—

 
—

 
—

 
3,629

 
—

Diluted FFO comparability adjustments allocable to restricted shares
(26
)
 
—

 
168

 
—

 
—

 
(26
)
 
—

Diluted FFO available to common share and common unit holders, as adjusted for comparability (1)
$
39,826

 
$
43,674

 
$
44,129

 
$
43,992

 
$
46,457

 
$
83,500

 
$
87,492

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

8

Corporate Office Properties Trust
Consolidated Statements of FFO (continued)
(in thousands, except per share data)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended
 
Six Months Ended
 
6/30/14
 
3/31/14
 
12/31/13
 
9/30/13
 
6/30/13
 
6/30/14
 
6/30/13
Net income (loss)
$
9,050

 
$
5,671

 
$
92,672

 
$
(2,000
)
 
$
(4,405
)
 
$
14,721

 
$
10,872

Real estate-related depreciation and amortization
30,895

 
43,596

 
31,322

 
29,210

 
28,935

 
74,491

 
57,187

Impairment losses on previously depreciated operating properties (1)(2)
1,328

 
1

 
921

 
22,074

 
7,195

 
1,329

 
9,052

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

 
4

 
(9,004
)
 
—

 
—

 
4

 
—

FFO - per NAREIT (3)
41,273

 
49,272

 
115,911

 
49,284

 
31,725

 
90,545

 
77,111

Gain on sales of non-operating properties
—

 
—

 
—

 
—

 
(329
)
 
—

 
(2,683
)
Valuation allowance on tax asset associated with FFO comparability adjustments
—

 
—

 
1,855

 
—

 
—

 
—

 
—

Loss (gain) on early extinguishment of debt (2)
363

 
23

 
(67,808
)
 
374

 
21,470

 
386

 
26,654

Issuance costs associated with redeemed preferred shares
1,769

 
—

 
—

 
—

 
2,904

 
1,769

 
2,904

FFO from properties to be conveyed to extinguish debt in default
3,629

 
—

 
—

 
—

 
—

 
3,629

 
—

FFO - as adjusted for comparability (3)
$
47,034

 
$
49,295

 
$
49,958

 
$
49,658

 
$
55,770

 
$
96,329

 
$
103,986

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Weighted Average Shares for period ended:
 

 
 

 
 

 
 

 
 

 
 

 
 

Common Shares Outstanding
87,214

 
87,080

 
87,010

 
86,760

 
85,425

 
87,148

 
83,422

Dilutive effect of share-based compensation awards
201

 
112

 
42

 
45

 
96

 
156

 
74

Common Units
3,912

 
3,958

 
3,978

 
3,804

 
3,801

 
3,934

 
3,847

Denominator for FFO per share - diluted
91,327

 
91,150

 
91,030

 
90,609

 
89,322

 
91,238

 
87,343

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

 
—

 
—

 
(45
)
 
(96
)
 
—

 
(74
)
Weighted average common units
(3,912
)
 
(3,958
)
 
(3,978
)
 
(3,804
)
 
—

 
(3,934
)
 
—

Denominator for diluted EPS
87,415

 
87,192

 
87,052

 
86,760

 
89,226

 
87,304

 
87,269

 
 
 
 
 
 
 
 
 
 
 
 
 
 
(1) Please see reconciliations on pages 31 through 33.
 
 
 
 
 
 
 
 
 
 
 
 
 
(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
 
Six Months Ended
 
6/30/14
 
3/31/14
 
12/31/13
 
9/30/13
 
6/30/13
 
6/30/14
 
6/30/13
Diluted FFO available to common share and common unit holders, as adjusted for comparability
$
39,826

 
$
43,674

 
$
44,129

 
$
43,992

 
$
46,457

 
$
83,500

 
$
87,492

Straight line rent adjustments (1)
(1,745
)
 
760

 
3,157

 
(980
)
 
(2,011
)
 
(985
)
 
(5,844
)
Straight line rent adjustments on properties to be conveyed to extinguish debt in default
1

 
—

 
—

 
—

 
—

 
1

 
—

Amortization of intangibles included in NOI
224

 
217

 
224

 
230

 
172

 
441

 
349

Share-based compensation, net of amounts capitalized
1,501

 
1,555

 
1,661

 
1,573

 
1,647

 
3,056

 
3,296

Amortization of deferred financing costs
1,122

 
1,167

 
1,159

 
1,321

 
1,443

 
2,289

 
2,971

Amortization of deferred financing costs on debt in default to be extinguished via conveyance of properties
(27
)
 
—

 
—

 
—

 
—

 
(27
)
 
—

Amortization of net debt discounts, net of amounts capitalized
229

 
171

 
(48
)
 
(121
)
 
556

 
400

 
1,184

Amortization of settled debt hedges
15

 
15

 
15

 
16

 
15

 
30

 
30

Recurring capital expenditures on properties to be held
(13,585
)
 
(11,052
)
 
(21,935
)
 
(10,528
)
 
(5,862
)
 
(24,637
)
 
(11,170
)
Diluted AFFO available to common share and common unit holders (“diluted AFFO”)
$
27,561

 
$
36,507

 
$
28,362

 
$
35,503

 
$
42,417

 
$
64,068

 
$
78,308

Recurring capital expenditures
 

 
 

 
 

 
 

 
 

 
 
 
 
Tenant improvements and incentives on operating properties
$
4,512

 
$
6,319

 
$
6,430

 
$
4,894

 
$
3,798

 
$
10,831

 
$
6,089

Building improvements on operating properties
6,357

 
3,982

 
12,898

 
4,857

 
2,538

 
10,339

 
4,138

Leasing costs for operating properties
2,790

 
1,528

 
4,286

 
2,260

 
1,185

 
4,318

 
2,854

Less: Nonrecurring tenant improvements and incentives on operating properties
483

 
(16
)
 
—

 
(230
)
 
(23
)
 
467

 
(8
)
Less: Nonrecurring building improvements on operating properties
(519
)
 
(568
)
 
(1,381
)
 
(1,266
)
 
(1,580
)
 
(1,087
)
 
(1,847
)
Less: Nonrecurring leasing costs for operating properties
(38
)
 
(193
)
 
(275
)
 
14

 
(50
)
 
(231
)
 
(50
)
Add: Recurring capital expenditures on operating properties held through joint ventures
—

 
—

 
(23
)
 
(1
)
 
(6
)
 
—

 
(6
)
Recurring capital expenditures
$
13,585

 
$
11,052

 
$
21,935

 
$
10,528

 
$
5,862

 
$
24,637

 
$
11,170

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

10


 Corporate Office Properties Trust
Consolidated Office Properties by Region - June 30, 2014 (1)
 
 
Operational Properties
 
Construction/Redevelopment (2)
Property Region and Business Park/Submarket
 
# of
Properties
 
Operational
Square Feet
 
Occupancy
%
 
Leased
 %
 
# of
Properties
 
Construction/Redevelopment Square Feet
 
 
Total
Square Feet
Baltimore/Washington Corridor:
 
 

 
 

 
 

 
 

 
 

 
 

 
 
 
National Business Park
 
28

 
3,359,911

 
97.0
%
 
97.8
%
 
2

 
316,624

 
 
316,624

Columbia Gateway
 
27

 
2,141,654

 
86.7
%
 
91.3
%
 
1

 
52,000

 
 
52,000

Airport Square/bwtech
 
15

 
1,158,062

 
80.1
%
 
81.4
%
 
—

 
—

 
 
—

Commons/Parkway
 
10

 
431,245

 
87.6
%
 
88.9
%
 
1

 
56,452

 
 
56,452

Other
 
11

 
1,119,849

 
99.2
%
 
99.2
%
 
1

 
119,980

 
 
119,980

Subtotal
 
91

 
8,210,721

 
91.7
%
 
93.5
%
 
5

 
545,056

 
 
545,056

Northern Virginia:
 
 

 
 

 
 

 
 

 
 

 
 

 
 
 
Westfields Corporate Center (1)
 
7

 
767,269

 
92.8
%
 
95.7
%
 
—

 
—

 
 
—

Patriot Ridge
 
1

 
239,272

 
51.3
%
 
51.3
%
 
—

 
—

 
 
—

Herndon, Tysons Corner and Merrifield
 
9

 
1,701,754

 
89.5
%
 
92.6
%
 
—

 
—

 
 
—

Other
 
2

 
433,768

 
100.0
%
 
100.0
%
 
3

 
430,330

 
 
430,330

Subtotal (1)
 
19

 
3,142,063

 
88.9
%
 
91.3
%
 
3

 
430,330

 
 
430,330

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

 
562,076

 
81.5
%
 
88.8
%
 
1

 
69,191

 
 
69,191

Washington, DC- Capital Riverfront (Maritime)
 
2

 
360,326

 
75.7
%
 
76.3
%
 
—

 
—

 
 
—

St. Mary’s & King George Counties
 
18

 
874,460

 
93.2
%
 
93.2
%
 
1

 
27,122

 
 
27,122

Greater Baltimore:
 
 

 
 

 
 

 
 

 
 

 
 

 
 
—

White Marsh and Rt 83 Corridor
 
28

 
1,286,638

 
80.1
%
 
82.5
%
 
—

 
—

 
 
—

Canton Crossing-Baltimore City
 
1

 
480,348

 
97.9
%
 
97.9
%
 
—

 
—

 
 
—

North Gate Business Park
 
3

 
284,907

 
37.9
%
 
45.4
%
 
—

 
—

 
 
—

Subtotal
 
32

 
2,051,893

 
78.4
%
 
80.9
%
 
—

 
—

 
 
—

Greater Philadelphia, Pennsylvania
 
3

 
513,347

 
88.9
%
 
97.3
%
 
1

 
140,765

 
 
140,765

Other
 
2

 
295,842

 
100.0
%
 
100.0
%
 
—

 
—

 
 
—

Total (1)
 
180

 
16,923,236

 
89.3
%
 
91.4
%
 
12

 
1,372,930

 
 
1,372,930

 
(1)
Amounts reported exclude the effect of two properties (totaling 665,000 square feet that were 38.9% occupied and 38.9% leased) serving as collateral for debt which is in default that we expect to extinguish via conveyance of such properties. Effective April 1, 2014, all cash flows from such properties belong to the lender.
(2)
This schedule includes properties under, or contractually committed for, construction or redevelopment. Please refer to pages 23 and 24.



11

Corporate Office Properties Trust
NOI from Real Estate Operations and Occupancy by Property Grouping
(dollars and square feet in thousands)
 
 
As of 6/30/14
 
 
 
 
 
 
# 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
 
NOI from Real
Estate Operations
for Six Months Ended
Property Grouping
 
 
 
% Occupied (1)
 
% Leased (1)
 
 
 
6/30/14
 
6/30/14
Same Office Properties (3)
 
 

 
 

 
 
 
 
 
 

 
 

 
 

 
 

Stabilized properties
 
157

 
14,580

 
92.6%
 
94.3%
 
$
404,982

 
92.1
%
 
$
66,303

 
$
131,398

Unstabilized properties (4)
 
4

 
505

 
38.5%
 
54.4%
 
6,134

 
1.3
%
 
753

 
1,319

Total Same Office Properties
 
161

 
15,085

 
90.8%
 
92.9%
 
411,116

 
93.5
%
 
67,056

 
132,717

Office Properties Placed in Service (5)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Stabilized properties
 
8

 
1,095

 
98.6%
 
99.1%
 
18,861

 
4.3
%
 
3,359

 
6,859

Unstabilized properties (4)
 
3

 
440

 
42.9%
 
49.5%
 
7,226

 
1.6
%
 
953

 
1,889

Other, including Wholesale Data Center
 
—

 
—

 
—%
 
—%
 
—

 
N/A

 
(78
)
 
1,173

Total Core Portfolio
 
172

 
16,620

 
90.0%
 
92.2%
 
437,203

 
99.4
%
 
71,290

 
142,638

Office Properties Held for Sale (6)
 
8

 
303

 
48.3%
 
49.9%
 
2,498

 
0.6
%
 
366

 
549

Office Properties to be Conveyed (7)
 
N/A

 
N/A

 
N/A
 
N/A
 
N/A

 
N/A

 
531

 
4,105

Disposed Office Properties
 
N/A

 
N/A

 
N/A
 
N/A
 
N/A

 
N/A

 
(79
)
 
(40
)
Total Portfolio (8)
 
180

 
16,923

 
89.3%
 
91.4%
 
$
439,701

 
100.0
%
 
$
72,108

 
$
147,252

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Core Portfolio
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Demand Driver Adjacent (9)
 
82

 
8,618

 
91.7%
 
93.1%
 
$
257,503

 
58.6
%
 
$
42,193

 
$
84,019

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

 
3,100

 
93.6%
 
95.6%
 
75,528

 
17.2
%
 
13,163

 
26,534

Total Strategic Tenant Niche
 
111

 
11,718

 
92.2%
 
93.7%
 
333,031

 
75.7
%
 
55,356

 
110,553

Regional Office (11)
 
61

 
4,902

 
84.8%
 
88.5%
 
104,172

 
23.7
%
 
16,012

 
30,912

Other, including Wholesale Data Center
 
N/A

 
N/A

 
N/A
 
N/A
 
N/A

 
N/A

 
(78
)
 
1,173

Total Core Portfolio
 
172

 
16,620

 
90.0%
 
92.2%
 
$
437,203

 
99.4
%
 
$
71,290

 
$
142,638

(1)
Percentages calculated based on operational square feet.
(2)
Excludes annualized rental revenue from our wholesale data center, DC-6, of $9.3 million as of 6/30/14.
(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 6/30/14, as detailed on page 13.
(5)
Newly constructed or redeveloped properties placed in service that were not fully operational by 1/1/13.
(6)
The carrying value of operating property assets held for sale as of 6/30/14 totaled $22.9 million.
(7)
Properties serving as collateral for debt which is in default. We have commenced the process of conveying the properties to the lenders in order to extinguish such debt. Includes two properties totaling 665,000 square feet that were 38.9% occupied and 38.9% leased with annualized rental revenue of $7.0 million as of 6/30/14.
(8)
Total portfolio amounts exclude the effect of office properties to be conveyed for all reported amounts except for NOI from real estate operations. Effective April 1, 2014, all cash flows from such properties belong to the lender.
(9)
Office properties held for long-term investment located near defense installations and other knowledge-based government demand drivers.
(10)
Office properties held for long-term investment not located near Strategic Tenant Locations that were otherwise at least 50% leased as of most recent year end by United States Government agencies or defense contractors.
(11)
Regional office properties held for long-term investment predominantly in the Greater Washington, DC/Baltimore region, excluding Strategic Tenant Niche Properties.


12

Corporate Office Properties Trust
Unstabilized Office Properties (1) - June 30, 2014  
 
 
 
 
 
 
 
 
 
Property Grouping
Operational Square Feet
 
Average Occupancy % for Quarter Ended
 
Occupancy %
 
Leased %
 
Same Office Properties (2) 
 
 
 
 
 
 
 
 
3120 Fairview Park Drive
183,566
 
49.8%
 
49.8%
 
61.4%
 
206 Research Blvd
128,119
 
0%
 
0%
 
0%
 
210 Research Blvd
79,596
 
38.6%
 
38.6%
 
65.7%
 
751 Arbor Way
113,295
 
63.5%
 
63.5%
 
96.4%
 
Total Unstabilized Same Office Properties
504,576
 
38.5%
 
38.5%
 
54.4%
 
Office Properties Placed in Service (3) 
 
 
 
 
 
 
 
 
7770 Backlick Road
239,272
 
51.3%
 
51.3%
 
51.3%
 
420 National Business Parkway
139,056
 
44.5%
 
47.4%
 
68.3%
 
  7200 Redstone Gateway
61,724
 
0.0%
 
0.0%
 
0.0%
(4)
Total Unstabilized Office Properties Placed in Service
440,052
 
41.7%
 
42.9%
 
49.5%
 
Total Unstabilized Office Properties
944,628
 
39.9%
 
40.5%
 
52.1%
 
 
(1) Properties with first generation operational space less than 90% occupied at 6/30/14. 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.
(4) In July 2014, we leased 100% of this property.



13

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

 
 

 
 

 
 

 
 

 
 
 
 
Baltimore/Washington Corridor
$
57,456

 
$
61,113

 
$
60,011

 
$
59,558

 
$
59,640

 
$
118,569

 
$
118,300

Northern Virginia
20,898

 
24,968

 
23,018

 
23,062

 
22,988

 
45,866

 
45,930

San Antonio
8,758

 
8,479

 
9,041

 
7,898

 
8,364

 
17,237

 
16,121

Huntsville
2,404

 
2,555

 
1,591

 
1,360

 
1,359

 
4,959

 
2,099

Washington, DC - Capitol Riverfront
3,831

 
3,634

 
4,147

 
4,295

 
4,177

 
7,465

 
8,421

St. Mary’s and King George Counties
4,202

 
4,316

 
4,213

 
4,270

 
4,093

 
8,518

 
8,085

Greater Baltimore
11,024

 
11,496

 
10,407

 
10,703

 
10,824

 
22,520

 
21,543

Greater Philadelphia
2,366

 
3,340

 
3,395

 
3,258

 
2,784

 
5,706

 
5,271

Colorado Springs
(12
)
 
18

 
5,568

 
6,571

 
6,469

 
6

 
13,151

Other
2,545

 
2,576

 
2,504

 
2,510

 
2,560

 
5,121

 
5,061

Wholesale Data Center
2,492

 
2,401

 
2,825

 
1,076

 
2,017

 
4,893

 
3,370

Real estate revenues
$
115,964

 
$
124,896

 
$
126,720

 
$
124,561

 
$
125,275

 
$
240,860

 
$
247,352

 
 
 
 
NOI
 

 
 

 
 

 
 

 
 

 
 
 
 
Baltimore/Washington Corridor
$
38,108

 
$
37,516

 
$
38,880

 
$
39,916

 
$
39,912

 
$
75,624

 
$
78,519

Northern Virginia
13,247

 
15,995

 
15,065

 
15,063

 
14,784

 
29,242

 
29,909

San Antonio
3,941

 
4,005

 
3,837

 
3,837

 
3,886

 
7,946

 
7,755

Huntsville
1,545

 
1,902

 
1,183

 
978

 
1,049

 
3,447

 
1,607

Washington, DC - Capitol Riverfront
2,077

 
1,869

 
2,072

 
2,349

 
2,303

 
3,946

 
4,598

St. Mary’s and King George Counties
2,913

 
2,812

 
2,900

 
2,971

 
2,870

 
5,725

 
5,669

Greater Baltimore
6,524

 
6,020

 
6,232

 
6,560

 
6,727

 
12,544

 
13,278

Greater Philadelphia
1,222

 
2,040

 
2,446

 
2,334

 
2,064

 
3,262

 
3,713

Colorado Springs
(23
)
 
27

 
3,549

 
4,210

 
4,284

 
4

 
8,529

Other
1,943

 
2,245

 
2,312

 
2,228

 
2,243

 
4,188

 
4,519

Wholesale Data Center
611

 
713

 
1,145

 
(770
)
 
499

 
1,324

 
536

NOI from real estate operations
$
72,108

 
$
75,144

 
$
79,621

 
$
79,676

 
$
80,621

 
$
147,252

 
$
158,632

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash NOI
 

 
 

 
 

 
 

 
 

 
 
 
 
Baltimore/Washington Corridor
$
36,993

 
$
36,709

 
$
37,195

 
$
38,609

 
$
39,244

 
$
73,702

 
$
76,770

Northern Virginia (1)
14,124

 
18,921

 
19,580

 
15,620

 
14,937

 
33,045

 
29,765

San Antonio
3,737

 
3,796

 
3,628

 
3,534

 
3,532

 
7,533

 
6,955

Huntsville
1,881

 
1,908

 
1,337

 
1,174

 
1,233

 
3,789

 
1,806

Washington, DC - Capitol Riverfront
2,149

 
1,932

 
2,175

 
2,459

 
2,405

 
4,081

 
4,783

St. Mary’s and King George Counties
2,598

 
2,877

 
2,946

 
2,993

 
2,891

 
5,475

 
5,662

Greater Baltimore
6,483

 
5,994

 
6,365

 
6,671

 
6,783

 
12,477

 
13,348

Greater Philadelphia
601

 
1,414

 
1,788

 
1,746

 
1,879

 
2,015

 
3,533

Colorado Springs
(23
)
 
27

 
3,501

 
3,992

 
3,950

 
4

 
7,813

Other
1,848

 
2,149

 
2,211

 
2,114

 
2,099

 
3,997

 
4,231

Wholesale Data Center
573

 
677

 
2,489

 
168

 
34

 
1,250

 
(1,372
)
Cash NOI from real estate operations
$
70,964

 
$
76,404

 
$
83,215

 
$
79,080

 
$
78,987

 
$
147,368

 
$
153,294

Straight line rent adjustments
1,453

 
(954
)
 
(3,296
)
 
894

 
1,874

 
499

 
5,815

Add: Amortization of deferred market rental revenue
(12
)
 
(5
)
 
36

 
29

 
87

 
(17
)
 
169

Less: Amortization of below-market cost arrangements
(297
)
 
(301
)
 
(334
)
 
(327
)
 
(327
)
 
(598
)
 
(646
)
NOI from real estate operations
$
72,108

 
$
75,144

 
$
79,621

 
$
79,676

 
$
80,621

 
$
147,252

 
$
158,632

*     Includes continuing and discontinued operations.
(1)
Cash NOI attributable to properties serving as collateral for debt that are expected to be conveyed to the lenders in order to extinguish such debt totaled $535,000 for the three months ended June 30, 2014 and $4.4 million for the year ended June 30, 2014.

14

Corporate Office Properties Trust
Same Office Properties (1) Average Occupancy Rates by Region 
 
Number of Buildings
 
Rentable Square Feet
 
Three Months Ended
 
Six Months Ended
 
 
 
6/30/14
 
3/31/14
 
12/31/13
 
9/30/13
 
6/30/13
 
6/30/14
 
6/30/13
Baltimore Washington Corridor
88

 
7,956,458

 
92.1
%
 
92.5
%
 
92.3
%
 
92.4
%
 
92.4
%
 
92.3
%
 
92.1
%
Northern Virginia
16

 
2,469,023

 
90.6
%
 
90.5
%
 
89.7
%
 
89.9
%
 
88.5
%
 
90.6
%
 
88.4
%
San Antonio
8

 
912,508

 
96.6
%
 
96.6
%
 
96.6
%
 
96.6
%
 
96.6
%
 
96.6
%
 
96.5
%
Huntsville
1

 
137,048

 
80.4
%
 
85.0
%
 
83.0
%
 
83.0
%
 
83.0
%
 
82.7
%
 
83.0
%
Washington, DC - Capitol Riverfront
2

 
360,326

 
75.9
%
 
76.4
%
 
76.4
%
 
90.9
%
 
88.1
%
 
76.2
%
 
88.1
%
St. Mary’s and King George Counties
18

 
874,460

 
92.9
%
 
92.1
%
 
89.2
%
 
90.3
%
 
87.1
%
 
92.5
%
 
86.5
%
Greater Baltimore
24

 
1,748,935

 
83.6
%
 
82.9
%
 
82.5
%
 
82.7
%
 
82.9
%
 
83.2
%
 
82.7
%
Greater Philadelphia
2

 
329,964

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

 
295,842

 
100.0
%
 
100.0
%
 
100.0
%
 
100.0
%
 
100.0
%
 
100.0
%
 
100.0
%
Total Same Office Properties
161

 
15,084,564

 
90.8
%
 
90.9
%
 
90.4
%
 
90.8
%
 
90.4
%
 
90.8
%
 
90.1
%
Total Same Office Properties occupancy as of period end
 
 

 
90.8
%
 
91.1
%
 
90.6
%
 
90.6
%
 
90.6
%
 
90.8
%
 
90.6
%

(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
 
Six Months Ended
 
6/30/14
 
3/31/14
 
12/31/13
 
9/30/13
 
6/30/13
 
6/30/14
 
6/30/13
Office Properties:
 

 
 

 
 

 
 

 
 

 
 
 
 
Baltimore/Washington Corridor
$
56,268

 
$
60,005

 
$
56,595

 
$
56,119

 
$
56,564

 
$
116,273

 
$
111,843

Northern Virginia
16,394

 
17,025

 
16,432

 
16,772

 
16,532

 
33,419

 
32,931

San Antonio
8,758

 
8,479

 
9,041

 
7,898

 
8,364

 
17,237

 
16,121

Huntsville
669

 
792

 
713

 
759

 
746

 
1,461

 
1,467

Washington, DC - Capitol Riverfront
3,831

 
3,634

 
4,147

 
4,295

 
4,177

 
7,465

 
8,421

St. Mary’s and King George Counties
4,202

 
4,316

 
4,189

 
4,186

 
4,012

 
8,518

 
7,923

Greater Baltimore
10,270

 
10,777

 
9,774

 
10,013

 
10,082

 
21,047

 
20,064

Greater Philadelphia
1,813

 
1,979

 
1,846

 
1,768

 
1,721

 
3,792

 
3,429

Other
2,443

 
2,477

 
2,405

 
2,409

 
2,459

 
4,920

 
4,859

Real estate revenues
$
104,648

 
$
109,484

 
$
105,142

 
$
104,219

 
$
104,657

 
$
214,132

 
$
207,058

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

 
 

 
 

 
 

 
 

 
 
 
 
Baltimore/Washington Corridor
$
37,432

 
$
36,793

 
$
36,936

 
$
37,980

 
$
38,276

 
$
74,225

 
$
75,070

Northern Virginia
10,800

 
10,539

 
10,609

 
10,949

 
10,551

 
21,339

 
21,253

San Antonio
3,941

 
4,005

 
3,837

 
3,837

 
3,886

 
7,946

 
7,755

Huntsville
452

 
555

 
500

 
554

 
550

 
1,007

 
1,112

Washington, DC - Capitol Riverfront
2,076

 
1,869

 
2,072

 
2,349

 
2,303

 
3,945

 
4,598

St. Mary’s and King George Counties
2,931

 
2,839

 
2,898

 
2,903

 
2,810

 
5,770

 
5,542

Greater Baltimore
6,111

 
5,807

 
5,886

 
6,182

 
6,268

 
11,918

 
12,384

Greater Philadelphia
1,126

 
1,070

 
1,167

 
1,083

 
1,108

 
2,196

 
2,194

Other
2,187

 
2,184

 
2,181

 
2,183

 
2,187

 
4,371

 
4,361

Same office property NOI
67,056

 
65,661

 
66,086

 
68,020

 
67,939

 
132,717

 
134,269

Straight line rent adjustments
(938
)
 
(542
)
 
(999
)
 
(1,241
)
 
(874
)
 
(1,480
)
 
(2,456
)
Less: Amortization of deferred market rental revenue
15

 
8

 
1

 
24

 
(34
)
 
23

 
(63
)
Add: Amortization of below-market cost arrangements
272

 
272

 
319

 
320

 
319

 
544

 
638

Same office property cash NOI
66,405

 
65,399

 
65,407

 
67,123

 
67,350

 
131,804

 
132,388

Less: Lease termination fees, gross
(93
)
 
(512
)
 
(1,249
)
 
(306
)
 
(750
)
 
(605
)
 
(974
)
Same office property cash NOI, excluding gross lease termination fees
$
66,312

 
$
64,887

 
$
64,158

 
$
66,817

 
$
66,600

 
$
131,199

 
$
131,414

Percentage change in same office property cash NOI (1)
(1.4
)%
 
 
 
 
 
 
 
 
 
(0.4
)%
 
 
Percentage change in same office property cash NOI, excluding gross lease termination fees (1)
(0.4
)%
 
 
 
 
 
 
 
 
 
(0.2
)%
 
 
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 June 30, 2014
 
Baltimore/
Washington
Corridor
 
Northern
Virginia
 
Huntsville
 
Washington DC-Capital Riverfront
 
St. Mary’s & King George Counties
 
Greater
Baltimore
 
Greater
Philadelphia
 
Total
Office
Renewed Space
 

 
 

 
 
 
 

 
 
 
 

 
 
 
 

Leased Square Feet
350,025

 
—

 
—

 
—

 
28,760

 
58,643

 
—

 
437,428

Expiring Square Feet
422,647

 
25,477

 
23,299

 
2,794

 
39,657

 
73,968

 
—

 
587,842

Vacated Square Feet
72,622

 
25,477

 
23,299

 
2,794

 
10,897

 
15,325

 
—

 
150,414

Retention Rate (% based upon square feet)
82.82
 %
 
—
%
 
—
%
 
—
%
 
72.52
 %
 
79.28
 %
 
0.00
%
 
74.41
 %
Statistics for Completed Leasing:
 
 
 
 
 
 

 
 
 
 
 
 
 
 
Average Committed Cost per Square Foot
$
16.15

 
$
—

 
$
—

 
$
—

 
$
9.35

 
$
5.00

 
$
—

 
$
14.21

Weighted Average Lease Term in Years
5.1

 
—

 
—

 
—

 
2.9

 
2.1

 
—

 
4.6

GAAP Rent Per Square Foot
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
        Renewal GAAP Rent
$
32.04

 
$
—

 
$
—

 
$
—

 
$
24.96

 
$
20.61

 
$
—

 
$
30.05

        Expiring GAAP Rent
$
29.92

 
$
—

 
$
—

 
$
—

 
$
24.83

 
$
20.93

 
$
—

 
$
28.38

        Change in GAAP Rent
7.1
 %
 
—
%
 
—
%
 
—
%
 
0.51
 %
 
(1.55
)%
 
0.00
%
 
5.87
 %
Cash Rent Per Square Foot
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
        Renewal Cash Rent
$
30.73

 
$
—

 
$
—

 
$
—

 
$
24.54

 
$
19.36

 
$
—

 
$
28.80

        Expiring Cash Rent
$
32.36

 
$
—

 
$
—

 
$
—

 
$
25.42

 
$
19.97

 
$
—

 
$
30.24

        Change in Cash Rent
(5.05
)%
 
—
%
 
—
%
 
—
%
 
(3.49
)%
 
(3.02
)%
 
0.00
%
 
(4.78
)%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
New Leases
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Development and Redevelopment Space
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Leased Square Feet
—

 
2,664

 
—

 
—

 
—

 
—

 
9,615

 
12,279

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

 
$
75.47

 
$
—

 
$
—

 
$
—

 
$
—

 
$
71.93

 
$
72.70

Weighted Average Lease Term in Years
—

 
5.4

 
—

 
—

 
—

 
—

 
7.4

 
6.9

GAAP Rent Per Square Foot
$
—

 
$
29.73

 
$
—

 
$
—

 
$
—

 
$
—

 
$
23.02

 
$
24.48

Cash Rent Per Square Foot
$
—

 
$
30.50

 
$
—

 
$
—

 
$
—

 
$
—

 
$
23.22

 
$
24.80

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Other New Leases (2)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Leased Square Feet
106,388

 
45,609

 
34,400

 
2,121

 
—

 
41,565

 
—

 
230,083

Statistics for Completed Leasing:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Average Committed Cost per Square Foot
$
51.52

 
$
44.58

 
$
16.45

 
$
34.79

 
$
—

 
$
34.94

 
$
—

 
$
41.75

Weighted Average Lease Term in Years
6.0

 
8.6

 
5.0

 
5.5

 
—

 
7.4

 
—

 
6.6

GAAP Rent Per Square Foot
$
27.37

 
$
25.36

 
$
16.85

 
$
37.29

 
$
—

 
$
20.15

 
$
—

 
$
24.18

Cash Rent Per Square Foot
$
27.88

 
$
22.30

 
$
17.24

 
$
38.00

 
$
—

 
$
19.42

 
$
—

 
$
23.75

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total Square Feet Leased
456,413

 
48,273

 
34,400

 
2,121

 
28,760

 
100,208

 
9,615

 
679,790

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(1) This presentation reflects consolidated properties.
(2) Other New Leases includes acquired first generation space and vacated second generation space.
Notes:  No expiration, renewal or retenanting activity transpired in our San Antonio region.
Activity is exclusive of owner occupied space and leases with less than a one-year term. Weighted average lease term was calculated assuming no exercise of any existing early termination rights.

17

Corporate Office Properties Trust
Leasing - Core Office (1)
Six Months Ended June 30, 2014
 
Baltimore/
Washington
Corridor
 
Northern
Virginia
 
Huntsville
 
Washington DC-Capital Riverfront
 
St. Mary’s & King George Counties
 
Greater
Baltimore
 
Greater
Philadelphia
 
Total
Office
Renewed Space
 

 
 

 
 
 
 

 
 
 
 

 
 
 
 

Leased Square Feet
415,177

 
41,611

 
—

 
—

 
32,744

 
91,997

 
—

 
581,529

Expiring Square Feet
532,416

 
98,155

 
23,299

 
2,794

 
56,875

 
131,238

 
—

 
844,777

Vacated Square Feet
117,239

 
56,544

 
23,299

 
2,794

 
24,131

 
39,241

 
—

 
263,248

Retention Rate (% based upon square feet)
77.98
 %
 
42.39
 %
 
0.00
%
 
0.00
%
 
57.57
 %
 
70.10
 %
 
0.00
%
 
68.84
 %
Statistics for Completed Leasing:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Average Committed Cost per Square Foot
$
14.48

 
$
25.11

 
$
—

 
$
—

 
$
10.34

 
$
8.87

 
$
—

 
$
14.12

Weighted Average Lease Term in Years
4.9

 
5.3

 
—

 
—

 
2.9

 
2.5

 
—

 
4.4

GAAP Rent Per Square Foot
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
        Renewal GAAP Rent
$
31.95

 
$
28.82

 
$
—

 
$
—

 
$
24.85

 
$
20.38

 
$
—

 
$
29.50

        Expiring GAAP Rent
$
29.99

 
$
29.55

 
$
—

 
$
—

 
$
24.41

 
$
20.45

 
$
—

 
$
28.13

        Change in GAAP Rent
6.53
 %
 
(2.48
)%
 
0.00
%
 
0.00
%
 
1.82
 %
 
(0.31
)%
 
0.00
%
 
4.84
 %
Cash Rent Per Square Foot
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
        Renewal Cash Rent
$
30.76

 
$
26.77

 
$
—

 
$
—

 
$
24.40

 
$
19.35

 
$
—

 
$
28.31

        Expiring Cash Rent
$
32.30

 
$
31.71

 
$
—

 
$
—

 
$
25.18

 
$
19.87

 
$
—

 
$
29.89

        Change in Cash Rent
(4.78
)%
 
(15.57
)%
 
0.00
%
 
—
%
 
(3.10
)%
 
(2.58
)%
 
0.00
%
 
(5.29
)%
New Leases
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Development and Redevelopment Space
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Leased Square Feet
117,493

 
21,343

 
—

 
—

 
—

 
—

 
49,284

 
188,120

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

 
$
93.26

 
$
—

 
$
—

 
$
—

 
$
—

 
$
74.69

 
$
73.98

Weighted Average Lease Term in Years
9.2

 
10.4

 
—

 
—

 
—

 
—

 
9.9

 
9.5

GAAP Rent Per Square Foot
$
31.93

 
$
31.49

 
$
—

 
$
—

 
$
—

 
$
—

 
$
23.47

 
$
29.66

Cash Rent Per Square Foot
$
30.04

 
$
30.06

 
$
—

 
$
—

 
$
—

 
$
—

 
$
23.85

 
$
28.42

Other New Leases (2)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Leased Square Feet
176,470

 
80,231

 
34,400

 
2,121

 
8,734

 
54,503

 
—

 
356,459

Statistics for Completed Leasing:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Average Committed Cost per Square Foot
$
44.66

 
$
48.15

 
$
16.45

 
$
34.79

 
$
20.40

 
$
33.50

 
$
—

 
$
40.36

Weighted Average Lease Term in Years
7.1

 
7.4

 
5.0

 
5.5

 
3.4

 
6.8

 
—

 
6.8

GAAP Rent Per Square Foot
$
23.84

 
$
25.13

 
$
16.85

 
$
37.29

 
$
21.52

 
$
20.72

 
$
—

 
$
23.00

Cash Rent Per Square Foot
$
23.81

 
$
23.07

 
$
17.24

 
$
38.00

 
$
21.39

 
$
20.19

 
$
—

 
$
22.48

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total Square Feet Leased
709,140

 
143,185

 
34,400

 
2,121

 
41,478

 
146,500

 
49,284

 
1,126,108

(1) This presentation reflects consolidated properties.
(2) Other New Leases includes acquired first generation space and vacated second generation space.
Notes:  No expiration, renewal or retenanting activity transpired in our San Antonio region.
Activity is exclusive of owner occupied space and leases with less than a one-year term. Retention rate includes early renewals 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 54.7% 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.

18

Corporate Office Properties Trust
Lease Expiration Analysis as of 6/30/14 (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
 
26

 
505,691

 
$
18,129

 
4.1
%
 
$
35.85

 
 
12

 
432,114

 
$
16,478

 
4.9
%
 
$
38.13

Northern Virginia
 
11

 
201,356

 
5,995

 
1.4
%
 
29.77

 
 
7

 
173,028

 
5,353

 
1.6
%
 
30.94

Huntsville
 
2

 
94,616

 
2,649

 
0.6
%
 
28.00

 
 
2

 
94,616

 
2,649

 
0.8
%
 
28.00

Washington, DC-Capitol Riverfront
 
6

 
26,846

 
1,347

 
0.3
%
 
50.18

 
 
6

 
26,846

 
1,347

 
0.4
%
 
50.18

St. Mary’s and King George Cos.
 
15

 
201,358

 
3,711

 
0.8
%
 
18.43

 
 
15

 
201,358

 
3,711

 
1.1
%
 
18.43

Greater Baltimore
 
9

 
47,562

 
1,049

 
0.2
%
 
22.06

 
 
—

 
—

 
—

 
0.0
%
 
—

Greater Philadelphia
 
2

 
5,934

 
89

 
—
%
 
15.00

 
 
—

 
—

 
—

 
0.0
%
 
—

2014
 
71

 
1,083,363

 
32,969

 
7.5
%
 
30.43

 
 
42

 
927,962

 
29,538

 
8.9
%
 
31.83

Baltimore/Washington Corridor
 
46

 
1,023,543

 
31,558

 
7.2
%
 
30.83

 
 
22

 
820,799

 
26,498

 
8.0
%
 
32.28

Northern Virginia
 
7

 
480,868

 
16,445

 
3.8
%
 
34.20

 
 
3

 
464,791

 
15,822

 
4.8
%
 
34.04

Washington, DC-Capitol Riverfront
 
6

 
39,928

 
2,001

 
0.5
%
 
50.12

 
 
6

 
39,928

 
2,001

 
0.6
%
 
50.12

St. Mary’s and King George Cos.
 
19

 
259,775

 
5,525

 
1.3
%
 
21.27

 
 
19

 
259,775

 
5,525

 
1.7
%
 
21.27

Greater Baltimore
 
12

 
84,985

 
2,047

 
0.5
%
 
24.09

 
 
3

 
12,194

 
450

 
0.1
%
 
36.90

2015
 
90

 
1,889,099

 
57,576

 
13.2
%
 
30.48

 
 
53

 
1,597,487

 
50,296
 
15.1
%
 
31.48

Baltimore/Washington Corridor
 
36

 
897,355

 
24,867

 
5.7
%
 
27.71

 
 
22

 
734,226

 
21,250

 
6.4
%
 
28.94

Northern Virginia
 
14

 
333,011

 
9,955

 
2.3
%
 
29.89

 
 
9

 
291,494

 
8,475

 
2.5
%
 
29.07

Washington, DC-Capitol Riverfront
 
2

 
34,220

 
1,692

 
0.4
%
 
49.44

 
 
2

 
34,220

 
1,692

 
0.5
%
 
49.44

St. Mary’s and King George Cos.
 
11

 
112,707

 
2,103

 
0.5
%
 
18.66

 
 
11

 
112,707

 
2,103

 
0.6
%
 
18.66

Greater Baltimore
 
20

 
240,457

 
6,762

 
1.5
%
 
28.12

 
 
—

 
—

 
—

 
0.0
%
 
—

2016
 
83

 
1,617,750

 
45,379

 
10.4
%
 
28.05

 
 
44

 
1,172,647

 
33,520

 
10.1
%
 
28.58

Baltimore/Washington Corridor
 
43

 
1,194,890

 
35,133

 
8.0
%
 
29.40

 
 
24

 
845,522

 
26,108

 
7.8
%
 
30.88

Northern Virginia
 
12

 
301,757

 
9,825

 
2.2
%
 
32.56

 
 
3

 
206,221

 
6,510

 
2.0
%
 
31.57

St. Mary’s and King George Cos.
 
3

 
18,946

 
398

 
0.1
%
 
21.01

 
 
3

 
18,946

 
398

 
0.1
%
 
21.01

Greater Baltimore
 
14

 
193,000

 
4,262

 
1.0
%
 
22.08

 
 
2

 
3,174

 
88

 
0.0
%
 
27.73

Greater Philadelphia
 
1

 
4,808

 
131

 
—
%
 
27.25

 
 
—

 
—

 
—

 
0.0
%
 
—

2017
 
73

 
1,713,401

 
49,749

 
11.4
%
 
29.04

 
 
32

 
1,073,863

 
33,104

 
9.9
%
 
30.83


19

 
 
Core Office Properties/Total Portfolio
 
Strategic Tenant Niche Properties Only
Year and Region of Lease (2)
 
Number of Leases Expiring
 
Square Footage of Leases Expiring
 
Annual Rental
Revenue of Expiring Leases (3) (000's)
 
Percentage
of Total Annualized 
Rental Revenue Expiring
 
Annual Rental Revenue of Expiring Leases per Occupied Square Foot
 
 
Number of Leases Expiring
 
Square Footage of Leases Expiring
 
Annual Rental
Revenue of Expiring Leases (3) (000's)
 
Percentage of Strategic Tenant Properties Annualized Rental Revenue Expiring
 
Annual Rental Revenue of Expiring Leases per Occupied Square Foot
Baltimore/Washington Corridor
 
41

 
1,097,814

 
33,181

 
7.6
%
 
30.22

 
 
29

 
951,422

 
28,985

 
8.7
%
 
30.46

Northern Virginia
 
13

 
371,412

 
11,887

 
2.7
%
 
32.00

 
 
9

 
174,429

 
3,558

 
1.1
%
 
20.40

San Antonio
 
1

 
45,935

 
657

 
0.2
%
 
14.30

 
 
—

 
—

 
—

 
0.0
%
 
—

Huntsville
 
2

 
242,216

 
5,325

 
1.2
%
 
21.98

 
 
2

 
242,216

 
5,325

 
1.6
%
 
21.98

Washington, DC-Capitol Riverfront
 
3

 
61,649

 
2,831

 
0.6
%
 
45.92

 
 
3

 
61,649

 
2,831

 
0.9
%
 
45.92

St. Mary’s and King George Cos.
 
2

 
9,264

 
196

 
—
%
 
21.16

 
 
2

 
9,264

 
196

 
0.1
%
 
21.16

Greater Baltimore
 
6

 
134,874

 
4,003

 
0.9
%
 
29.68

 
 
—

 
—

 
—

 
0.0
%
 
—

Greater Philadelphia
 
1

 
4,228

 
107

 
—
%
 
25.31

 
 
—

 
—

 
—

 
0.0
%
 
—

2018
 
69

 
1,967,392

 
58,187

 
13.3
%
 
29.58

 
 
45

 
1,438,980

 
40,895

 
12.3
%
 
28.42

Thereafter
 
198

 
6,693,452

 
193,343

 
44.2
%
 
28.89

 
 
106

 
4,594,935

 
145,678

 
43.7
%
 
31.70

Core/Strategic Tenant Niche Total/Avg.
 
584
 
14,964,457

 
$
437,203

 
100.0
%
 
$
29.22

 
 
322

 
10,805,874

 
$
333,031

 
100.0
%
 
$
30.82

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Properties Not Held For Long Term Investment
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Greater Baltimore
 
25

 
146,185

 
2,498

 
100.0
%
 
17.09

 
 
 
 
 
 
 
 
 
 
 
Properties Not Held For Long Term Investment Total/Avg.
 
25

 
146,185

 
$
2,498

 
100.0
%
 
$
17.09

 
 
 
 
 
 
 
 
 
 
 
Total Portfolio
 
609

 
15,110,642

 
$
439,701

 
 
 
$
29.10

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Note:  As of June 30, 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 4.6 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

1.00

$
1,140

2018
2
1

0.26

528

2019
1
6

1.00

2,184

2020
1
11

2.00

4,515

2022
1
6

0.60

923

 
 
 

4.86

$
9,290

(1)
This presentation reflects consolidated properties, excluding the effect of two properties serving as collateral for debt which is in default that we expect to extinguish via conveyance of such properties (effective April 1, 2014, all cash flows from such properties belong to the lender). This expiration analysis reflects occupied space and includes the effect of early renewals completed on existing leases but excludes the effect of new tenant leases on square feet yet to commence as of June 30, 2014 of 361,710 for the portfolio, including 178,864 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 June 30, 2014 multiplied by 12 plus the estimated annualized expense reimbursements under existing leases.


20

Corporate Office Properties Trust
Top 20 Office Tenants as of 6/30/14 (1)
(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 (2)
 
Percentage
of Total
Annualized 
Rental Revenue
 
Weighted
Average
Remaining Lease Term (3)
United States Government
(4)
58

 
3,246,353

 
21.5
%
 
$
115,823

 
26.3
%
 
5.1

Booz Allen Hamilton, Inc.
 
8

 
778,834

 
5.2
%
 
26,060

 
5.9
%
 
1.9

Northrop Grumman Corporation
 
9

 
777,470

 
5.1
%
 
21,766

 
5.0
%
 
5.8

General Dynamics Corporation
 
7

 
527,725

 
3.5
%
 
18,603

 
4.2
%
 
3.7

The Boeing Company
 
11

 
642,776

 
4.3
%
 
16,924

 
3.8
%
 
4.1

Computer Sciences Corporation
 
3

 
346,437

 
2.3
%
 
12,108

 
2.8
%
 
2.7

CareFirst, Inc.
 
3

 
300,360

 
2.0
%
 
9,732

 
2.2
%
 
6.7

The MITRE Corporation
 
5

 
290,288

 
1.9
%
 
9,201

 
2.1
%
 
3.6

The Aerospace Corporation
 
3

 
254,869

 
1.7
%
 
7,715

 
1.8
%
 
2.5

Wells Fargo & Company
 
2

 
171,534

 
1.1
%
 
7,542

 
1.7
%
 
4.5

L-3 Communications Holdings, Inc
 
2

 
166,568

 
1.1
%
 
5,662

 
1.3
%
 
5.1

AT&T Corporation
 
3

 
307,579

 
2.0
%
 
5,593

 
1.3
%
 
4.8

Vadata Inc
 
2

 
433,768

 
2.9
%
 
4,552

 
1.0
%
 
10.2

Science Applications International Corp.
 
4

 
133,577

 
0.9
%
 
4,522

 
1.0
%
 
5.2

Kratos Defense and Security Solutions
 
1

 
131,451

 
0.9
%
 
4,253

 
1.0
%
 
5.8

Raytheon Company
 
5

 
122,968

 
0.8
%
 
4,186

 
1.0
%
 
1.6

ITT Exelis
 
4

 
147,053

 
1.0
%
 
4,172

 
0.9
%
 
5.4

TASC Inc.
 
3

 
107,996

 
0.7
%
 
4,024

 
0.9
%
 
4.6

KEYW Corporation
 
2

 
144,443

 
1.0
%
 
3,778

 
0.9
%
 
7.0

The Johns Hopkins Institutions
 
5

 
144,171

 
1.0
%
 
3,720

 
0.8
%
 
4.1

Subtotal Top 20 Office Tenants
 
140

 
9,176,220

 
60.7
%
 
289,936

 
65.9
%
 
4.6

All remaining tenants
 
469

 
5,934,422

 
39.3
%
 
149,765

 
34.1
%
 
4.6

Total/Weighted Average
 
609

 
15,110,642

 
100.0
%
 
$
439,701

 
100.0
%
 
4.6

 
(1)  Amounts reported exclude the effect of properties serving as collateral for debt which is in default that we expect to extinguish via conveyance of such properties. Effective April 1, 2014, all cash flows from such properties belong to the lender.
(2)  Total Annualized Rental Revenue is the monthly contractual base rent as of June 30, 2014, multiplied by 12, plus the estimated annualized expense reimbursements under existing leases.
(3)  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.
(4)  Substantially all of our government leases are subject to early termination provisions which are customary in government leases. The weighted average remaining lease term was computed assuming no exercise of such early termination rights.


21


Corporate Office Properties Trust
Construction, Redevelopment, Wholesale Data Center and Land and Pre-Construction as of 6/30/14
(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
505,795

 
108,452

 
N/A

 
4,235,000

 
4,849,247

Northern Virginia
430,330

 
—

 
N/A

 
2,200,000

 
2,630,330

San Antonio
160,466

 
—

 
N/A

 
1,033,000

 
1,193,466

Huntsville, Alabama
—

 
—

 
N/A

 
4,103,000

 
4,103,000

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
—

 
140,765

 
N/A

 
720,000

 
860,765

Colorado Springs
—

 
—

 
N/A

 
2,540,000

 
2,540,000

Other
—

 
—

 
N/A

 
1,967,000

 
1,967,000

Total
1,096,591

 
276,339

 
N/A

 
19,737,000

 
21,109,930

 
Costs to date by region
Baltimore/Washington Corridor
$
59,775

 
$
7,882

 
$
—

 
$
122,004

 
$
189,661

Northern Virginia
54,172

 
—

 
—

 
98,493

 
152,665

San Antonio
17,639

 
—

 
—

 
20,186

 
37,825

Huntsville, Alabama
—

 
—

 
—

 
13,467

 
13,467

St. Mary’s and King George Counties
—

 
2,155

 
—

 
2,588

 
4,743

Greater Baltimore
—

 
—

 
—

 
78,278

 
78,278

Greater Philadelphia
—

 
6,100

 
—

 
16,414

 
22,514

Colorado Springs
—

 
—

 
—

 
24,262

 
24,262

Wholesale Data Center
—

 
—

 
216,747

 
—

 
216,747

Other
—

 
—

 
—

 
15,651

 
15,651

Total
$
131,586

 
$
16,137

 
$
216,747

 
$
391,343

 
$
755,813

 
 
 
 
 
 
 
 
 
 
Reconciliation to amounts included in projects in development or held for future development, including land costs, as reported on consolidated balance sheet
 
 
 
 
 
 
 
 
 
Operating properties
(4,100
)
 
(10,891
)
 
(174,740
)
 
(29,893
)
 
(219,624
)
Deferred leasing costs
(2,644
)
 
(2,430
)
 
(669
)
 
(446
)
 
(6,189
)
Projects in development or held for future development, including associated land costs (4)
$
124,842

 
$
2,816

 
$
41,338

 
$
361,004

 
$
530,000

(1) Represents construction projects as listed on page 23.
(2) Represents redevelopment projects as listed on page 24.
(3) Represents our land held for future development and pre-construction as listed on page 25.
(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.”

22

Corporate Office Properties Trust
Summary of Construction Projects as of 6/30/14 (1)
(dollars in thousands) 
 
 
 
Park/Submarket
Total Rentable Square Feet
Percentage Leased as of
as of 6/30/14 (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
7/24/2014
 
312 Sentinel Way
Annapolis Junction, Maryland
 
National Business Park
125,160

100%
$
36,523

$
26,010

$
4,100

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

100%
15,800

13,887

—

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

0%
57,300

23,294

—

1Q 15
1Q 16
 
NOVA Office A
   Northern Virginia
 
Other
159,300

100%
44,560

28,048

—

4Q 14
2Q 15
 
8100 Potranco Road
   San Antonio, Texas
 
San Antonio
160,466

0%
34,715

17,639

—

4Q 14
4Q 15
 
NOVA Office B
   Northern Virginia
 
Other
161,030

0%
41,500

12,237

—

1Q 15
3Q 15
 
7400 Redstone Gateway
Huntsville, Alabama
 
Huntsville
69,191

100%
9,997

323

—

2Q 15
3Q 15
 
7880 Milestone Parkway
Hanover, Maryland
 
Arundel Preserve
119,980

74%
31,535

10,148

—

3Q 15
3Q 16
 
Total Under Construction
 
 
1,096,591

50%
$
271,930

$
131,586

$
4,100

 
 

(1)
Includes properties under active construction and properties that we were contractually committed to construct.
(2)
Cost includes land, construction, leasing costs and allocated portion of structured parking and other shared infrastructure, if applicable.
(3)
Anticipated operational date is the estimated date when leases have commenced on 100% of a property’s space or one year from the cessation of major construction activities.



23

Corporate Office Properties Trust
Summary of Redevelopment Projects as of 6/30/14
(dollars in thousands) 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Park/Submarket
Total Rentable Square Feet
Percentage Leased as of
as of 6/30/14 (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
 
6/30/2014
44417 Pecan Court
California, Maryland
 
St. Mary's County
27,122

0%
$
1,453

$
3,953

$
5,406

$
2,155

$
1,453

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

0%
2,799

7,924

10,723

4,093

2,799

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

79%
2,850

25,131

26,600

6,100

2,850

1Q 15
1Q 16
921 Elkridge Landing Road
Linthicum, Maryland
 
Airport Square
56,452

—%
3,789

TBD

 TBD

3,789

3,789

TBD
TBD
Total Under Redevelopment (3)
276,339

40%
$
10,891

$
37,008

$
42,729

$
16,137

$
10,891

 
 
 
(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) 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 25 until its redevelopment plan is finalized and market demand supports commencement.




24

Corporate Office Properties Trust
Summary of Land Held as of 6/30/14 (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
83

 
960

 
 
Columbia Gateway
27

 
630

 
 
M Square
49

 
525

 
 
Airport Square
5

 
84

 
 
Subtotal
357

 
4,175

 
 
Northern Virginia
92

 
2,200

 
 
San Antonio, Texas
69

 
1,033

 
 
Huntsville, Alabama
434

 
4,103

 
 
St. Mary’s & King George Counties
44

 
109

 
 
Greater Baltimore
49

 
1,478

 
 
Greater Philadelphia, Pennsylvania (3)
41

 
720

 
 
Total land held for future development
1,086

 
13,818

 
$
281,871

 
 
 
 
 
 
Other Land
 
 
 
 
 
Baltimore/Washington Corridor
6

 
60

 
 
Greater Baltimore
127

 
1,352

 
 
Colorado Springs, Colorado
171

 
2,540

 
 
Other (4)
324

 
1,967

 
 
Total other land held
628

 
5,919

 
79,133

 
 
 
 
 
 
Land held
1,714

 
19,737

 
$
361,004

 
 
 
 
 
 
(1)
This land inventory schedule excludes all properties listed as construction or redevelopment as detailed on pages 23 and 24, 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 22 (in thousands).
(3)
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.
(4)
This land includes 217 acres that are being put back to the jurisdictional county per a development agreement described under “Consolidated Joint Ventures.”


25


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 June 30, 2014:
Insiders
627

 
322

 
—

 
949

 
1.03
%
Non-insiders
87,041

 
3,577

 
610

 
91,228

 
98.97
%
Total
87,668

 
3,899

 
610

 
92,177

 
100.00
%
COMMON EQUITY - End of Quarter
6/30/14
 
3/31/14
 
12/31/13
 
9/30/13
 
6/30/13
Unrestricted Common Shares
87,256

 
87,162

 
87,017

 
86,998

 
85,461

Restricted Common Shares
412

 
433

 
377

 
383

 
384

Common Shares
87,668

 
87,595

 
87,394

 
87,381

 
85,845

Common Units
3,899

 
3,929

 
3,978

 
3,978

 
3,789

Total
91,567

 
91,524

 
91,372

 
91,359

 
89,634

End of Quarter Common Share Price
$
27.81

 
$
26.64

 
$
23.69

 
$
23.10

 
$
25.50

Market Value of Common Shares/Units
$
2,546,478

 
$
2,438,199

 
$
2,164,603

 
$
2,110,393

 
$
2,285,667

PREFERRED EQUITY - End of Quarter
 

 
 

 
 

 
 

 
 

Nonconvertible Preferred Equity - liquidation preference
 

 
 

 
 

 
 

 
 

Redeemable Series H Shares - 7.5% (1)
$
—

 
$
50,000

 
$
50,000

 
$
50,000

 
$
50,000

Redeemable Series L Shares Outstanding - 7.375%
172,500

 
172,500

 
172,500

 
172,500

 
172,500

Total Nonconvertible Preferred Equity
172,500

 
222,500

 
222,500

 
222,500

 
222,500

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
$
207,883

 
$
257,883

 
$
257,883

 
$
257,883

 
$
257,883

CAPITALIZATION
 

 
 

 
 

 
 

 
 

Liquidation Preference of Preferred Shares/Units
$
207,883

 
$
257,883

 
$
257,883

 
$
257,883

 
$
257,883

Market Value of Common Shares/Units
2,546,478

 
2,438,199

 
2,164,603

 
2,110,393

 
2,285,667

Total Equity Market Capitalization
$
2,754,361

 
$
2,696,082

 
$
2,422,486

 
$
2,368,276

 
$
2,543,550

(1) These shares were redeemed on June 16, 2014.
(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.

26

Corporate Office Properties Trust
Debt Analysis as of June 30, 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 6/30/14
 
 
 
 
Debt Outstanding
 
 
 
 
 
 
 
 
 

 
 
 
Fixed rate
 
 
 
 
 
 
 
 
 

 
 
 
Secured debt (1)
5.95%
 
5.95%
 
2.8
 
(2)
 
$
599,448

 
6.0%
 
Senior Unsecured Notes
4.09%
 
4.24%
 
8.4
 
 
 
890,386

 
4.2%
 
Exchangeable Senior Notes
4.25%
 
6.05%
 
0.8
 
 
 
567

 
4.3%
 
Other Unsecured Debt
0.00%
 
6.50%
 
11.8
 
 
 
1,654

 
—%
 
Total fixed rate debt (1)
4.83%
 
4.93%
 
6.2
 
 
 
$
1,492,055

 
5.0%
 
Variable rate
 
 
 
 
 
 
 
 
 

 
 
 
Secured debt
2.40%
 
2.40%
 
1.3
 


 
$
37,288

 
2.4%
 
Unsecured Revolving Credit Facility
1.46%
 
1.46%
 
3.0
 
$
800,000

 
—

 
1.5%
 
Unsecured Term Loans
1.78%
 
1.78%
 
2.7
 


 
570,000

 
1.8%
 
Total variable rate debt
1.82%
 
1.82%
 
2.6
 


 
$
607,288

 
2.6%
(3)(4)
Total consolidated debt outstanding
3.96%
 
4.03%
 
5.1
 
 
 
$
2,099,343

 
4.2%
(3)(4)
 
 
 
 
 
 
 
 
 
 
 
 
 
Variable Rate Loans Subject to Interest Rate Swaps (2)
 
 
 
 
 
 
 
 
$
437,288

 
0.6%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
% of Fixed Rate Loans (2)
 
 
 
 
 
 
 
 
91.9
%
 
 
 
% of Variable Rate Loans (2)
 
 
 
 
 
 
 
 
8.1
%
 
 
 
 
 
 
 
 
 
 
 
 
100.0
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Recourse debt
 
 
 
 
 
 
 
 
$
1,515,458

 
 
 
Nonrecourse debt
 
 
 
 
 
 
 
 
583,885

 
 
 
Total consolidated debt outstanding
 
 
 
 
 
 
 
 
$
2,099,343

 
 
 
 
(1)
Excludes incremental additional interest associated with default rate on debt in default that we expect to extinguish via conveyance of properties.
(2) Includes $24.2 million balance on construction loans with maximum available borrowings of $26.2 million.
(3) Includes the effect of interest rate swaps in effect during certain of the periods set forth above that hedge the risk of changes in interest rates on certain of our one-month LIBOR-based variable rate debt.
(4) Includes facility commitment fees incurred for our Unsecured Revolving Credit Facility.



27

Corporate Office Properties Trust
Debt Analysis  (continued)
(dollars in thousands)
 
 
 
 
 
June 30, 2014
 
 
Secured debt
$
636,736

 
 
Unsecured debt
1,462,607

0.386

 
Debt in default to be extinguished via conveyance of properties
(150,000
)
 
 
Numerator for debt to adjusted book ratio
$
1,949,343

 
 
 
 
 
 
Unencumbered adjusted book
$
3,763,741

 
 
Encumbered adjusted book
679,077

 
 
Total adjusted book (1)
$
4,442,818

 
 
 
 
 
 
# of Operating Office Properties (1)
 
 
 
Unencumbered
145

 
 
Encumbered
35

 
 
Total (1)
180

 
 
 
 
 
 
Square Feet of Office Properties (in thousands) (1)
 
 
 
Unencumbered
13,645

 
 
Encumbered
3,278

 
 
Total (1)
16,923

 
 
 
 
 
 
 
Three Months Ended 6/30/14
 
 
Unencumbered NOI from real estate operations
$
55,625

 
 
Encumbered NOI from real estate operations
15,952

 
 
NOI from properties to be conveyed to extinguish debt in default
531

 
 
Total NOI from real estate operations
$
72,108

 
 
 
 
 
 
Unencumbered adjusted EBITDA
$
49,885

 
 
Encumbered adjusted EBITDA (1)
15,915

 
 
Total adjusted EBITDA (1)
$
65,800

 
 
 
 
 
 
Debt ratios (coverage ratios excluding capitalized interest) — All coverage computations include discontinued operations
Three Months Ended 6/30/14
 
 
Adjusted EBITDA debt service coverage ratio
3.3x
 
 
Adjusted EBITDA fixed charge coverage ratio
2.5x
 
 
Adjusted debt to in-place adjusted EBITDA ratio
7.1x
 
 
 
 
 
 
 
As of and for Three Months Ended 6/30/14
Unsecured Senior Notes Covenants
Actual
 
Required
Total Debt / Total Assets
47.8%
 
Less than 60%
Secured Debt / Total Assets
13.9%
 
Less than 40%
Debt Service Coverage
3.0x
 
Greater than 1.5x
Unencumbered Assets / Unsecured Debt
241.5%
 
Greater than 150%
(1)
Except for Unsecured Senior Notes Covenants, amounts exclude the effect of properties serving as collateral for debt which is in default that we expect to extinguish via conveyance of such properties.

28

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%
 
1.46%
 
$
—

$
—

$
—

$
—

$
—

$
—

$
—

Senior Unsecured Notes
 
 
 
 
 
 
 
 
 
 
 
Due 6/15/21
3.70%
 
3.85%
 
—

—

—

—

—

300,000

300,000

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
 
 
 
 
—

—

—

—

—

900,000

900,000

 
 
 
 
 
 
 
 
 
 
 
 
Exchangeable Senior Notes
4.25%
 
6.05%
 
—

575

—

—

—

—

575

Other Unsecured Debt
 
 
 
 
 
 
 
 
 
 
 
2015 maturities (2)
LIBOR + 1.50%
 
1.66%
 
—

200,000

—

—

—

—

200,000

2017 maturities (1)
LIBOR + 1.50%
 
1.66%
 
—

—

—

250,000

—

—

250,000

2019 maturities
LIBOR + 2.10%
 
2.25%
 
—

—

—

—

—

120,000

120,000

2026 maturities
0.00%
 
—%
 
100

200

200

200

200

1,461

2,361

Total Other Unsecured Debt
 
 
 
 
100

200,200

200

250,200

200

121,461

572,361

 
 
 
 
 
 
 
 
 
 
 
 
Total Unsecured Debt
 
 
 
 
$
100

$
200,775

$
200

$
250,200

$
200

$
1,021,461

$
1,472,936

Secured Debt
 
 
 
 
 
 
 
 
 
 
 
Fixed Rate Secured Debt
 
 
 
 
 
 
 
 
 
 
 
 2015 maturities
5.53%
 
5.53%
 
$
—

$
103,000

$
—

$
—

$
—

$
—

$
103,000

 2016 maturities
6.59%
 
6.58%
 
1,955

4,128

277,886

—

—

—

283,969

 2017 maturities (3)
5.64%
 
5.66%
 
91

189

200

154,302

—

—

154,782

 Thereafter
4.41%
 
4.37%
 
480

1,000

1,053

1,113

1,174

52,821

57,641

Total Fixed Rate Secured Debt
 
 
 
 
2,526

108,317

279,139

155,415

1,174

52,821

599,392

Variable Rate Secured Debt
LIBOR + 2.25%
 
2.40%
 
411

36,877

—

—

—

—

37,288

Total Secured Debt
 
 
 
 
$
2,937

$
145,194

$
279,139

$
155,415

$
1,174

$
52,821

$
636,680

 
 
 
 
 
 
 
 
 
 
 
 
Total Debt
 
 
 
 
$
3,037

$
345,969

$
279,339

$
405,615

$
1,374

$
1,074,282

$
2,109,616

 
 
 
 
 
 
 
 
 
 
 
 
Fixed Rate Debt
4.83%
 
4.93%
 
$
2,626

$
109,092

$
279,339

$
155,615

$
1,374

$
954,282

$
1,502,328

Variable Rate Debt
1.82%
 
1.82%
 
411

236,877

—

250,000

—

120,000

607,288

Total Debt
 
 
 
 
$
3,037

$
345,969

$
279,339

$
405,615

$
1,374

$
1,074,282

$
2,109,616

 
 
 
 
 
 
 
 
 
 
 
 
Balloon Payments

 

 
$
—

$
339,751

$
274,605

$
404,110

$
—

$
1,068,428

$
2,086,894

Scheduled Principal Amortization

 

 
3,037

6,218

4,734

1,505

1,374

5,854

22,722

Total Debt
 
 
 
 
$
3,037

$
345,969

$
279,339

$
405,615

$
1,374

$
1,074,282

$
2,109,616

 
 
 
 
 
 
 
 
 
Net discount
(10,273
)
 
 
 
 
 
 
 
 
 
Consolidated debt
$
2,099,343

(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.
(3)
Excludes incremental additional interest assoc. with default rate. In July 2014, the maturity of the $150.0 million debt in default was accelerated to 2014 by the lender.

29

Corporate Office Properties Trust
Consolidated Joint Ventures as of 6/30/14
(dollars and square feet in thousands) 
Operating Properties
Operational
Square Feet
Occupancy
 
Total Assets (1)
Venture Level Debt
% COPT Owned
Suburban Maryland:
 

 
 
 

 

 
M Square Associates, LLC (2 properties)
242

96.9%
 
$
55,851

$
37,288

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

85.5%
 
75,589

36,051

85%
Total/Average
667

89.6%
 
$
131,440

$
73,339

 
NOI of Operating Properties for the Three Months Ended 6/30/14 (2)
$
2,785

 
 
 

 

 
NOI of Operating Properties for the Six Months Ended 6/30/14 (2)
$
5,384

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

 
 

 

 
Indian Head Technology Center
 

 
 

 

 
Business Park (3)
967

 
$
6,436

$
—

75%
M Square Research Park
525

 
4,408

—

50%
Huntsville, Alabama:
 

 
 

 

 
Redstone Gateway
4,103

 
60,501

—

85%
Total
5,595

 
$
71,345

$
—

 
 
(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.

30


Corporate Office Properties Trust
Supplementary Reconciliations of Non-GAAP Measures
(in thousands)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended
 
Six Months Ended
 
6/30/14
 
3/31/14
 
12/31/13
 
9/30/13
 
6/30/13
 
6/30/14
 
6/30/13
Net income (loss)
$
9,050

 
$
5,671

 
$
92,672

 
$
(2,000
)
 
$
(4,405
)
 
$
14,721

 
$
10,872

Interest expense on continuing and discontinued operations
23,478

 
20,827

 
23,181

 
21,310

 
23,369

 
44,305

 
45,740

Income tax expense
92

 
64

 
1,917

 
24

 
21

 
156

 
37

Depreciation of furniture, fixtures and equipment (FF&E)
843

 
505

 
495

 
502

 
527

 
1,348

 
1,057

Real estate-related depreciation and amortization
30,895

 
43,596

 
31,322

 
29,210

 
28,935

 
74,491

 
57,187

Impairment losses
1,328

 
1

 
921

 
22,074

 
7,195

 
1,329

 
9,052

Loss (gain) on early extinguishment of debt on continuing and discontinued operations
363

 
23

 
(67,808
)
 
374

 
21,470

 
386

 
26,654

Loss (gain) on sales of operating properties
—

 
4

 
(9,004
)
 
—

 
—

 
4

 
—

Gain on sales of non-operational properties
—

 
—

 
—

 
—

 
(329
)
 
—

 
(2,683
)
Net loss (gain) on investments in unconsolidated entities included in interest and other income
282

 
20

 
221

 
1,006

 
(961
)
 
302

 
(1,021
)
EBITDA from properties to be conveyed to extinguish debt in default
(531
)
 
—

 
—

 
—

 
—

 
(531
)
 
—

Adjusted EBITDA
$
65,800

 
$
70,711

 
$
73,917

 
$
72,500

 
$
75,822

 
$
136,511

 
$
146,895

Add back:
 

 
 

 
 

 
 

 
 

 
 

 
 

General, administrative and leasing expenses on continuing and discontinued operations
7,528

 
8,143

 
8,442

 
8,027

 
6,583

 
15,671

 
14,404

Business development expenses and land carry costs on continuing and discontinued operations, excluding operating property acquisition costs
1,351

 
1,326

 
1,367

 
1,383

 
1,327

 
2,677

 
2,686

Depreciation of FF&E
(843
)
 
(505
)
 
(495
)
 
(502
)
 
(527
)
 
(1,348
)
 
(1,057
)
Income from construction contracts and other service operations
(725
)
 
(3,166
)
 
(605
)
 
(685
)
 
(1,413
)
 
(3,891
)
 
(2,198
)
Interest and other income, excluding net loss/gain on investments in unconsolidated entities
(1,581
)
 
(1,305
)
 
(1,106
)
 
(1,003
)
 
(1,045
)
 
(2,886
)
 
(1,931
)
Equity in income of unconsolidated entities
47

 
(60
)
 
(1,899
)
 
(44
)
 
(126
)
 
(13
)
 
(167
)
NOI from properties to be conveyed to extinguish debt in default
531

 
—

 
—

 
—

 
—

 
531

 
—

NOI from real estate operations
$
72,108

 
$
75,144

 
$
79,621

 
$
79,676

 
$
80,621

 
$
147,252

 
$
158,632

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Adjusted EBITDA
$
65,800

 
$
70,711

 
$
73,917

 
$
72,500

 
$
75,822

 
 
 
 
NOI from properties in quarter of disposition
—

 
—

 
(5,107
)
 
—

 
(45
)
 
 
 
 
In-place adjusted EBITDA
$
65,800

 
$
70,711

 
$
68,810

 
$
72,500

 
$
75,777

 


 


 
 
 
 
 
 
 
 
 
 
 
 
 
 

31

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

 
 

 
 

 
 

 
 

 
 

 
 

Revenues from real estate operations
$
5

 
$
19

 
$
8,233

 
$
9,740

 
$
9,543

 
$
24

 
$
19,663

Property operating expenses
(84
)
 
20

 
(2,982
)
 
(3,524
)
 
(3,321
)
 
(64
)
 
(6,999
)
Depreciation and amortization
—

 
—

 
(996
)
 
(1,005
)
 
(1,262
)
 
—

 
(2,504
)
General, administrative and leasing expenses
—

 
—

 
(3
)
 
—

 
—

 
—

 
(1
)
Interest
—

 
—

 
(1,905
)
 
(1,968
)
 
(2,267
)
 
—

 
(4,348
)
(Loss) gain on early extinguishment of debt
(93
)
 
(23
)
 
67,810

 
—

 
—

 
(116
)
 
—

Impairment losses
(26
)
 
(1
)
 
(921
)
 
(16,217
)
 
(7,195
)
 
(27
)
 
(9,052
)
(Loss) gain on sales of depreciated real estate properties
—

 
(4
)
 
2,671

 
—

 
—

 
(4
)
 
—

Discontinued operations
$
(198
)
 
$
11

 
$
71,907

 
$
(12,974
)
 
$
(4,502
)
 
$
(187
)
 
$
(3,241
)
GAAP revenues from real estate operations from continuing operations
$
115,959

 
$
124,877

 
$
118,487

 
$
114,821

 
$
115,732

 
$
240,836

 
$
227,689

Revenues from discontinued operations
5

 
19

 
8,233

 
9,740

 
9,543

 
24

 
19,663

Real estate revenues
$
115,964

 
$
124,896

 
$
126,720

 
$
124,561

 
$
125,275

 
$
240,860

 
$
247,352

GAAP property operating expenses from continuing operations
$
43,772

 
$
49,772

 
$
44,117

 
$
41,361

 
$
41,333

 
$
93,544

 
$
81,721

Property operating expenses from discontinued operations
84

 
(20
)
 
2,982

 
3,524

 
3,321

 
64

 
6,999

Real estate property operating expenses
$
43,856

 
$
49,752

 
$
47,099

 
$
44,885

 
$
44,654

 
$
93,608

 
$
88,720

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

 
$
—

 
$
6,333

 
$
—

 
$
329

 
$
—

 
$
2,683

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

 
(4
)
 
2,671

 
—

 
—

 
(4
)
 
—

(Loss) gain on sales of real estate from continuing and discont. operations
—

 
(4
)
 
9,004

 
—

 
329

 
(4
)
 
2,683

Less: Gain on sales of non-operating properties
—

 
—

 
—

 
—

 
(329
)
 
—

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

 
$
(4
)
 
$
9,004

 
$
—

 
$
—

 
$
(4
)
 
$
—

Impairment losses, per statements of operations
$
1,302

 
$
—

 
$
—

 
$
5,857

 
$
—

 
$
1,302

 
$
—

Impairment losses on discontinued operations
26

 
1

 
921

 
16,217

 
7,195

 
27

 
9,052

Total impairment losses
$
1,328

 
$
1

 
$
921

 
$
22,074

 
$
7,195

 
$
1,329

 
$
9,052

Less: Impairment losses on previously depreciated operating properties
(1,328
)
 
(1
)
 
(921
)
 
(22,074
)
 
(7,195
)
 
(1,329
)
 
(9,052
)
Impairment losses on non-operating properties
$
—

 
$
—

 
$
—

 
$
—

 
$
—

 
$
—

 
$
—


32

Corporate Office Properties Trust
Supplementary Reconciliations of Non-GAAP Measures (continued)
(dollars in thousands)
 
Three Months Ended
 
Six Months Ended
 
6/30/14
 
3/31/14
 
12/31/13
 
9/30/13
 
6/30/13
 
6/30/14
 
6/30/13
Depreciation and amortization associated with real estate operations from continuing operations
$
30,895

 
$
43,596

 
$
30,326

 
$
28,205

 
$
27,673

 
$
74,491

 
$
54,683

Depreciation and amortization from discontinued operations
—

 
—

 
996

 
1,005

 
1,262

 
—

 
2,504

Real estate-related depreciation and amortization
$
30,895

 
$
43,596

 
$
31,322

 
$
29,210

 
$
28,935

 
$
74,491

 
$
57,187

Interest expense from continuing operations
$
23,478

 
$
20,827

 
$
21,276

 
$
19,342

 
$
21,102

 
$
44,305

 
$
41,392

Interest expense from discontinued operations
—

 
—

 
1,905

 
1,968

 
2,267

 
—

 
4,348

Total interest expense
23,478

 
20,827

 
23,181

 
21,310

 
23,369

 
44,305

 
45,740

Less: Amortization of deferred financing costs
(1,122
)
 
(1,167
)
 
(1,159
)
 
(1,321
)
 
(1,443
)
 
(2,289
)
 
(2,971
)
Less: Amortization of net debt discounts and prem., net of amounts capitalized
229

 
171

 
48

 
121

 
(556
)
 
400

 
(1,184
)
Less: Interest exp. on debt in default to be exting. via conveyance of properties
(4,133
)
 
—

 
—

 
—

 
—

 
(4,133
)
 
—

Denominator for interest coverage
18,452

 
19,831

 
22,070

 
20,110

 
21,370

 
38,283

 
41,585

Scheduled principal amortization
1,582

 
1,855

 
2,252

 
2,226

 
2,491

 
3,437

 
5,003

Denominator for debt service coverage
20,034

 
21,686

 
24,322

 
22,336

 
23,861

 
41,720

 
46,588

Capitalized interest
1,422

 
1,589

 
2,042

 
2,215

 
2,088

 
3,011

 
4,528

Preferred share dividends - redeemable non-convertible
4,344

 
4,490

 
4,490

 
4,490

 
4,885

 
8,834

 
10,991

Preferred unit distributions
165

 
165

 
165

 
165

 
165

 
330

 
330

Denominator for fixed charge coverage
$
25,965

 
$
27,930

 
$
31,019

 
$
29,206

 
$
30,999

 
$
53,895

 
$
62,437

Preferred share dividends
$
4,344

 
$
4,490

 
$
4,490

 
$
4,490

 
$
4,885

 
$
8,834

 
$
10,991

Preferred unit distributions
165

 
165

 
165

 
165

 
165

 
330

 
330

Common share dividends
24,103

 
24,091

 
24,026

 
24,022

 
23,604

 
48,194

 
47,198

Common unit distributions
1,072

 
1,081

 
1,094

 
1,094

 
1,042

 
2,153

 
2,092

Total dividends/distributions
$
29,684

 
$
29,827

 
$
29,775

 
$
29,771

 
$
29,696

 
$
59,511

 
$
60,611

Common share dividends
$
24,103

 
$
24,091

 
$
24,026

 
$
24,022

 
$
23,604

 
$
48,194

 
$
47,198

Common unit distributions
1,072

 
1,081

 
1,094

 
1,094

 
1,042

 
2,153

 
2,092

Dividends and distributions for payout ratios
$
25,175

 
$
25,172

 
$
25,120

 
$
25,116

 
$
24,646

 
$
50,347

 
$
49,290

 
 
 
 
 
 
 
 
 
 
 
 
 
 

33

Corporate Office Properties Trust
Supplementary Reconciliations of Non-GAAP Measures (continued)
(dollars in thousands)
 
Three Months Ended
 
Six Months Ended
 
6/30/14
 
3/31/14
 
12/31/13
 
9/30/13
 
6/30/13
 
6/30/14
 
6/30/13
Total Assets
$
3,709,500

 
$
3,605,897

 
$
3,629,952

 
$
3,755,588

 
$
3,699,635

 
$
3,709,500

 
$
3,699,635

Accumulated depreciation
655,214

 
635,178

 
597,649

 
612,369

 
597,783

 
655,214

 
597,783

Accumulated depreciation included in assets held for sale
3,121

 
—

 
—

 
8,845

 
12,201

 
3,121

 
12,201

Accumulated amort. of real estate intangibles and deferred leasing costs
201,627

 
199,500

 
193,142

 
195,559

 
189,330

 
201,627

 
189,330

Accumulated amortization of real estate intangibles and deferred leasing costs included in assets held for sale
4,277

 
—

 
—

 
9,224

 
9,216

 
4,277

 
9,216

Less: Adj. book assoc. with properties to be conveyed to exting. debt in default
(130,921
)
 
—

 
—

 
—

 
—

 
(130,921
)
 
—

Adjusted book
$
4,442,818

 
$
4,440,575

 
$
4,420,743

 
$
4,581,585

 
$
4,508,165

 
$
4,442,818

 
$
4,508,165

Debt, net
$
2,099,343

 
$
1,931,831

 
$
1,927,703

 
$
2,135,031

 
$
2,093,106

 
 
 
 
Less: Debt in default to be extinguished via conveyance of properties
(150,000
)
 
—

 
—

 
—

 
—

 


 
 
Numerator for debt to adjusted book ratio
1,949,343

 
1,931,831

 
1,927,703

 
2,135,031

 
2,093,106

 
 
 
 
Less: Cash and cash equivalents
(76,216
)
 
(18,374
)
 
(54,373
)
 
(27,318
)
 
(9,196
)
 
 
 
 
Adjusted debt
$
1,873,127

 
$
1,913,457

 
$
1,873,330

 
$
2,107,713

 
$
2,083,910

 


 



34


Corporate Office Properties Trust
Definitions

Non-GAAP Measures

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

Adjusted debt
Defined as the carrying value of our debt, as adjusted to subtract cash and cash equivalents as of the end of the period and debt in default to be extinguished via conveyance of properties.

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, and excluding the effect of properties serving as collateral for debt which is in default that we expect to extinguish via conveyance of such properties.  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

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Corporate Office Properties Trust
Definitions

accelerate the recognition of lease revenue.  Since some leases provide for periods under the lease in which rental concessions are provided to tenants, the effect of accounting under GAAP is to allocate rental revenue to such periods.  Also under GAAP, when a property is acquired, we allocate the acquisition to certain intangible components (including above- and below-market leases and above- or below-market cost arrangements), which are then amortized into FFO and NOI over their estimated lives.  We believe that Cash NOI is an important supplemental measure of operating performance for a REIT’s operating real estate because it makes adjustments to NOI for the above stated items that are not associated with cash to us.  As is the case with NOI, the measure is useful in our opinion in evaluating and comparing the performance of geographic segments, same-office property groupings and individual properties.  We believe that net (loss) income is the most directly comparable GAAP measure to Cash NOI.

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 adjusted debt (as defined above) divided by in-place adjusted EBITDA (defined below) for the three month period that is annualized by multiplying by four.
 
Debt to Adjusted book 
Defined as debt, as adjusted to subtract debt in default to be extinguished via conveyance of properties, divided by Adjusted book (defined above).
 
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.
 

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Corporate Office Properties Trust
Definitions

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 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.
 

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Corporate Office Properties Trust
Definitions

Net operating income (“NOI”) from real estate operations 
NOI is real estate revenues from continuing and discontinued operations reduced by total property expenses associated with real estate operations, including discontinued operations; total property expenses, as used in this definition, do not include depreciation, amortization or interest expense associated with real estate operations.  We believe that NOI is an important supplemental measure of operating performance for a REIT’s operating real estate because it provides a measure of the core real estate operations that is unaffected by depreciation, amortization, financing and general, administrative and leasing expenses; we believe this measure is particularly useful in evaluating the performance of geographic segments, same-office property groupings and individual properties.  We believe that net (loss) income is the most directly comparable GAAP measure to NOI.
 
NOI debt service coverage ratio and Adjusted EBITDA debt service coverage ratio 
These measures divide either NOI from real estate operations or Adjusted EBITDA by the sum of interest expense on continuing and discontinued operations (excluding amortization of deferred financing costs and amortization of debt discounts and premiums, net of amounts capitalized, and interest expense on debt in default to be extinguished via conveyance of properties) 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, and interest expense on debt in default to be extinguished via conveyance of properties), (2) scheduled principal amortization on mortgage loans for continuing and discontinued operations, (3) capitalized interest, (4) dividends on preferred shares and (5) 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, and interest expense on debt in default to be extinguished via conveyance of properties).
 
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.
 

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Corporate Office Properties Trust
Definitions

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.
 

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Corporate Office Properties Trust
Definitions

Other Definitions
 
Acquisition Costs — Transaction costs expensed in connection with executed or anticipated acquisitions of operating properties.
 
Annualized Rental Revenue — The monthly contractual base rent as of the reporting date multiplied by 12, plus the estimated annualized expense reimbursements under existing office leases.
 
Construction Properties — Properties under active construction and properties that we were contractually committed to construct.

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

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

First Generation Space — Newly constructed or redeveloped space that has never been occupied.

Greater Washington, DC/Baltimore Region — Includes counties that comprise the Baltimore/Washington Corridor, Northern Virginia, Greater Baltimore, 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.

Total Portfolio — Operating properties, excl. the effect of properties serving as collateral for debt which is in default that we expect to extinguish via property conveyance.

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

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