EXHIBIT 99.1
 
 
Earnings Release & Supplemental Information — Unaudited
 
September 30, 2014
 
 
OVERVIEW:
Section I

 
INVESTING ACTIVITY:
Section IV

Earnings Release
i-ix

 
Dispositions
22

Summary Description
1

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

 
& Pre-Construction Summary
23

Selected Financial Summary Data
3

 
Summary of Construction Projects
24

Selected Portfolio Data
4

 
Summary of Redevelopment Projects
25

 
 

 
Summary of Land Held and Pre-Construction
26

FINANCIAL STATEMENTS:
Section II

 
 
 

Quarterly Consolidated Balance Sheets
5

 
CAPITALIZATION:
Section V

Consolidated Statements of Operations
6-7

 
Quarterly Equity Analysis
27

Consolidated Statements of FFO
8-9

 
Debt Analysis
28-29

Consolidated Reconciliations of AFFO
10

 
Debt Maturity Schedule
30

 
 

 
Consolidated Joint Ventures
31

PORTFOLIO INFORMATION:
Section III

 
 
 
Consolidated Office Properties by Region
11

 
RECONCILIATIONS & DEFINITIONS:
Section VI

NOI from Real Estate Operations and Occupancy by Property Grouping
12

 
Supplementary Reconciliations of Non-GAAP Measures
32-35

Unstabilized Office Properties
13

 
Definitions
36-41

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-Kelly
Michelle Layne
 
VP, Investor Relations
Investor Relations Specialist
 
443-285-5453
443-285-5452
 
stephanie.kelly@copt.com
michelle.layne@copt.com
 

COPT REPORTS THIRD QUARTER 2014 RESULTS


COLUMBIA, MD October 24, 2014 - Corporate Office Properties Trust (“COPT” or the “Company”) (NYSE: OFC) announced financial and operating results for the third quarter ended September 30, 2014.

“The Company had a strong third quarter and generated results that were at the high end of our guidance range,” stated Roger A. Waesche, Jr., COPT’s President & Chief Executive Officer. “Our overall portfolio is now 91.5% occupied, supply in each of our markets remains in-check, and demand for new, strategically located office space in our markets continues to build along multiple channels, including the rapidly growing Cybersecurity industry,” he added.

Results:
Diluted earnings per share (“EPS”) was $0.22 for the quarter ended September 30, 2014 as compared to $(0.09) in the third quarter of 2013. Per NAREIT’s definition, diluted funds from operations per share (“FFOPS”) for the third quarter of 2014 was $0.49 versus $0.48 reported in the third quarter of 2013. FFOPS, as adjusted for comparability, was $0.48 for the quarter ended September 30, 2014 as compared to $0.49 reported for the third 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:
Total Portfolio - At September 30, 2014, the Company’s total portfolio of 174 operating office properties totaled 16.9 million square feet that were 91.5% occupied and 93.0% leased.

Same Office Portfolio - The Company’s same office portfolio for the quarter ended September 30, 2014 represents 89% of the Company’s total square feet and consists of 161 properties. The Company’s same office portfolio was 92.1% occupied at September 30, 2014, up 150 basis points from the third quarter of 2013. For the third quarter ended September 30, 2014, the Company’s same office property cash NOI, excluding gross lease termination fees, increased 0.9% as compared to the third quarter of 2013.

Leasing - During the quarter ended September 30, 2014, COPT leased a total of 857,000 square feet of office space and achieved an 82% renewal rate. For the same period, rents on renewed space increased 6.8% on a GAAP basis and decreased 0.8% on a cash basis. For the nine months ended September 30, 2014, the Company leased 2.0 million square feet and achieved a 74% renewal rate. Rents on renewed space for the

i

nine months ended September 30, 2014, increased 5.6% on a GAAP basis and decreased 3.6% on a cash basis.

Investment Activity:
Developments - At September 30, 2014, the Company had six properties totaling 861,000 square feet under construction that were 55% leased. The properties’ total projected cost is $219.6 million, of which $123.3 million had been incurred.

Redevelopments - At September 30, 2014, COPT had four properties under redevelopment totaling approximately 276,000 square feet that were 40% leased.

Dispositions - The Company recycled $57 million of capital from non-strategic assets in the quarter. The dispositions included eight operating properties totaling 303,000 square feet for $29 million, and 235 acres of land for $28 million.

Balance Sheet and Capital Transactions:
As of September 30, 2014, the Company’s debt to adjusted book ratio was 42.8% and its adjusted EBITDA fixed charge coverage ratio was 2.7x. Also, the Company’s weighted average interest rate was 4.3% for the quarter ended September 30, 2014 and 94% of the Company’s debt was subject to fixed interest rates, including the effect of interest rate swaps.

2014 FFO Guidance:
Management is narrowing its previously issued guidance for 2014 FFOPS, as adjusted for comparability, from the prior range of $1.86-$1.90, to a new range of $1.87-$1.89. Management is affirming guidance for fourth quarter 2014 FFOPS, as adjusted for comparability, of $0.48-$0.50. A reconciliation of projected diluted EPS to projected FFOPS for the quarter and year ending December 31, 2014 is provided, as follows:
 
Three Months Ending
 
Year Ending
 
December 31, 2014
 
December 31, 2014
 
Low
 
High
 
Low
 
High
EPS
$
0.76

 
$
0.78

 
$
1.00

 
$
1.02

Real estate depreciation and amortization
0.35

 
0.35

 
1.49

 
1.49

Gains on sales of previously depreciated properties
—

 
—

 
(0.06
)
 
(0.06
)
Impairment losses on previously depreciated properties
—

 
—

 
0.02

 
0.02

FFOPS, NAREIT definition
1.11

 
1.13

 
2.45

 
2.47

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

 
0.05

 
0.15

 
0.15

Gains on sales of undepreciated properties
—

 
—

 
(0.05
)
 
(0.05
)
Executive transition costs
0.01

 
0.01

 
0.01

 
0.01

Net gains on extinguishment of debt (b)
(0.68
)
 
(0.68
)
 
(0.69
)
 
(0.69
)
Issuance cost of redeemed preferred shares
—

 
—

 
0.02

 
0.02

FFOPS, as adjusted for comparability
$
0.48

 
$
0.50

 
$
1.87

 
$
1.89

 
 
 
 
 
 
 
 

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

3Q 2014 Conference Call Information:
Management will discuss third quarter 2014 earnings results, as well as its 2014 guidance, on its conference call on October 24, 2014 at 12:00 p.m. Eastern Time, details of which are listed below:

Third Quarter 2014:
Earnings Release Date:    Friday, October 24, 2014 at 6:00 a.m. Eastern Time
Conference Call Date:    Friday, October 24, 2014
Time:     12:00 p.m. Eastern Time
Telephone Number: (within the U.S.)     888-679-8034
Telephone Number: (outside the U.S.)    617-213-4847
Passcode:    28439116

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=PC4N4YGVH

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

A replay of this call will be available beginning Friday, October 24 at 4:00 p.m. Eastern Time through Friday, November 7 at midnight Eastern Time. To access the replay within the United States, please call 888-286-8010 and use passcode 86010521. To access the replay outside the United States, please call 617-801-6888 and use passcode 86010521.

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 September 30, 2014, COPT derived 77% of its annualized revenue from its strategic tenant niche properties and 23% from its regional office properties. The Company generally acquires, develops, manages and leases office and data center properties concentrated in large office parks primarily located near knowledge-based government demand drivers and/or in targeted markets or submarkets in the Greater Washington, DC/Baltimore region. As of September 30, 2014, the Company’s consolidated portfolio consisted of 174 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 September 30,
 
For the Nine Months Ended September 30,
 
2014
 
2013
 
2014
 
2013
Revenues
 

 
 

 
 
 
 
Real estate revenues
$
118,276

 
$
114,821

 
$
359,112

 
$
342,510

Construction contract and other service revenues
34,739

 
16,991

 
80,390

 
52,048

Total revenues
153,015

 
131,812

 
439,502

 
394,558

Expenses
 

 
 

 
 
 
 
Property operating expenses
43,056

 
41,361

 
136,600

 
123,082

Depreciation and amortization associated with real estate operations
30,237

 
28,205

 
104,728

 
82,888

Construction contract and other service expenses
33,593

 
16,306

 
75,353

 
49,165

Impairment losses
66

 
5,857

 
1,368

 
5,857

General and administrative expenses
5,662

 
6,237

 
17,635

 
17,213

Leasing expenses
1,549

 
1,790

 
5,247

 
5,217

Business development expenses and land carry costs
1,430

 
1,383

 
4,107

 
4,069

Total operating expenses
115,593

 
101,139

 
345,038

 
287,491

Operating income
37,422

 
30,673


94,464


107,067

Interest expense
(24,802
)
 
(19,342
)
 
(69,107
)
 
(60,734
)
Interest and other income (loss)
1,191

 
(3
)
 
3,775

 
2,949

Loss on early extinguishment of debt
(176
)
 
(374
)
 
(446
)
 
(27,028
)
Income from continuing operations before equity in income of unconsolidated entities and income taxes
13,635

 
10,954

 
28,686

 
22,254

Equity in income of unconsolidated entities
193

 
44

 
206

 
211

Income tax expense
(101
)
 
(24
)
 
(257
)
 
(61
)
Income from continuing operations
13,727

 
10,974

 
28,635

 
22,404

Discontinued operations
191

 
(12,974
)
 
4

 
(16,215
)
Income (loss) before gain on sales of real estate
13,918

 
(2,000
)
 
28,639

 
6,189

Gain on sales of real estate, net of income taxes
10,630

 
—

 
10,630

 
2,683

Net income (loss)
24,548

 
(2,000
)
 
39,269

 
8,872

Net (income) loss attributable to noncontrolling interests
 

 
 

 
 
 
 
Common units in the Operating Partnership
(768
)
 
232

 
(942
)
 
474

Preferred units in the Operating Partnership
(165
)
 
(165
)
 
(495
)
 
(495
)
Other consolidated entities
(895
)
 
(1,031
)
 
(2,481
)
 
(2,160
)
Net income (loss) attributable to COPT
22,720

 
(2,964
)
 
35,351

 
6,691

Preferred share dividends
(3,553
)
 
(4,490
)
 
(12,387
)
 
(15,481
)
Issuance costs associated with redeemed preferred shares
—

 
—

 
(1,769
)
 
(2,904
)
Net income (loss) attributable to COPT common shareholders
$
19,167

 
$
(7,454
)
 
$
21,195

 
$
(11,694
)
 
 
 
 
 
 
 
 
Earnings per share (“EPS”) computation:
 

 
 

 
 
 
 
Numerator for diluted EPS:
 

 
 

 
 
 
 
Net income attributable to common shareholders
$
19,167

 
$
(7,454
)
 
$
21,195

 
$
(11,694
)
Amount allocable to restricted shares
(103
)
 
(97
)
 
(332
)
 
(317
)
Numerator for diluted EPS
$
19,064

 
$
(7,551
)
 
$
20,863

 
$
(12,011
)
 
 
 
 
 
 
 
 
Denominator:
 

 
 

 
 
 
 
Weighted average common shares - basic
87,290

 
86,760

 
87,196

 
84,547

Dilutive effect of share-based compensation awards
195

 
—

 
169

 
—

Weighted average common shares - diluted
87,485

 
86,760

 
87,365

 
84,547

Diluted EPS
$
0.22

 
$
(0.09
)
 
$
0.24

 
$
(0.14
)

v


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

 
For the Three Months Ended September 30,
 
For the Nine Months Ended September 30,
 
2014
 
2013
 
2014
 
2013
Net income (loss)
$
24,548

 
$
(2,000
)
 
$
39,269

 
$
8,872

Real estate-related depreciation and amortization
30,237

 
29,210

 
104,728

 
86,397

Impairment (recoveries) losses on previously depreciated operating properties
(7
)
 
22,074

 
1,322

 
31,126

Gain on sales of previously depreciated operating properties
(5,123
)
 
—

 
(5,119
)
 
—

Funds from operations (“FFO”)
49,655

 
49,284

 
140,200

 
126,395

Noncontrolling interests - preferred units in the Operating Partnership
(165
)
 
(165
)
 
(495
)
 
(495
)
FFO allocable to other noncontrolling interests
(830
)
 
(833
)
 
(2,349
)
 
(2,830
)
Preferred share dividends
(3,553
)
 
(4,490
)
 
(12,387
)
 
(15,481
)
Issuance costs associated with redeemed preferred shares
—

 
—

 
(1,769
)
 
(2,904
)
Basic and diluted FFO allocable to restricted shares
(191
)
 
(178
)
 
(542
)
 
(450
)
Basic and diluted FFO available to common share and common unit holders (“Basic and diluted FFO”)
44,916

 
43,618

 
122,658

 
104,235

Gain on sales of non-operating properties
(5,535
)
 
—

 
(5,535
)
 
(2,683
)
Impairment losses on other properties
49

 
—

 
49

 
—

Loss on early extinguishment of debt
176

 
374

 
562

 
27,028

Issuance costs associated with redeemed preferred shares
—

 
—

 
1,769

 
2,904

FFO on properties in default to be conveyed (1)
3,806

 
—

 
7,435

 
—

Diluted FFO comparability adjustments allocable to restricted shares
7

 
—

 
(19
)
 
—

Diluted FFO available to common share and common unit holders, as adjusted for comparability
43,419

 
43,992

 
126,919

 
131,484

Straight line rent adjustments
(456
)
 
(980
)
 
(1,441
)
 
(6,824
)
Straight line rent adjustments - properties in default to be conveyed
(96
)
 
—

 
(95
)
 
—

Amortization of intangibles included in net operating income
206

 
230

 
647

 
579

Share-based compensation, net of amounts capitalized
1,507

 
1,573

 
4,563

 
4,869

Amortization of deferred financing costs
1,357

 
1,321

 
3,646

 
4,292

Amortization of deferred financing costs - properties in default to be conveyed
(306
)
 
—

 
(333
)
 
—

Amortization of net debt discounts, net of amounts capitalized
259

 
(121
)
 
659

 
1,063

Amortization of settled debt hedges
16

 
16

 
46

 
46

Recurring capital expenditures
(16,929
)
 
(10,528
)
 
(41,566
)
 
(21,698
)
Diluted adjusted funds from operations available to common share and common unit holders (“Diluted AFFO”)
$
28,977

 
$
35,503

 
$
93,045

 
$
113,811

Diluted FFO per share
$
0.49

 
$
0.48

 
$
1.34

 
$
1.18

Diluted FFO per share, as adjusted for comparability
$
0.48

 
$
0.49

 
$
1.39

 
$
1.49

Dividends/distributions per common share/unit
$
0.275

 
$
0.275

 
$
0.825

 
$
0.825


(1) Interest expense exceeded net operating income from these properties by the amounts in the statement.


vi


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

 
 
September 30,
2014
 
December 31,
2013
Balance Sheet Data
 
 

 
 

Properties, net of accumulated depreciation
 
$
3,271,156

 
$
3,214,301

Total assets
 
3,680,188

 
3,629,952

Debt, net
 
2,049,992

 
1,927,703

Total liabilities
 
2,264,248

 
2,114,945

Redeemable noncontrolling interest
 
18,436

 
17,758

Equity
 
1,397,504

 
1,497,249

Debt to adjusted book
 
42.8
%
 
43.6
%
Debt to total market capitalization
 
44.4
%
 
44.3
%
 
 
 
 
 
Core Portfolio Data (as of period end) (1)
 
 

 
 

Number of operating properties
 
174

 
177

Total net rentable square feet owned (in thousands)
 
16,863

 
16,045

Occupancy %
 
91.5
%
 
88.7
%
Leased %
 
93.0
%
 
90.0
%
 
 
 
 
 
 
For the Three Months Ended September 30,
 
For the Nine Months Ended September 30,
2014
 
2013
 
2014
 
2013
Payout ratios
 

 
 

 
 

 
 

Diluted FFO
56.0
%
 
57.6
%
 
61.6
%
 
71.4
%
Diluted FFO, as adjusted for comparability
58.0
%
 
57.1
%
 
59.5
%
 
56.6
%
Diluted AFFO
86.9
%
 
70.7
%
 
81.2
%
 
65.4
%
Adjusted EBITDA interest coverage ratio
3.6
x
 
3.6
x
 
3.6
x
 
3.6
x
Adjusted EBITDA fixed charge coverage ratio
2.7
x
 
2.5
x
 
2.6
x
 
2.4
x
Adjusted debt to in-place adjusted EBITDA ratio (2)
6.7
x
 
7.3
x
 
N/A

 
N/A

 
 
 
 
 
 
 
 
Reconciliation of denominators for diluted EPS and diluted FFO per share
 
 

 
 
 
 
Denominator for diluted EPS
87,485

 
86,760

 
87,365

 
84,547

Weighted average common units
3,876

 
3,804

 
3,915

 
3,832

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

 
45

 
—

 
63

Denominator for diluted FFO per share
91,361

 
90,609

 
91,280

 
88,442

 
 
 
 
 
 
 
 
Reconciliation of FFO to FFO, as adjusted for comparability
 

 
 

 
 

 
 

FFO, per NAREIT
$
49,655

 
$
49,284

 
$
140,200

 
$
126,395

Gain on sales of non-operating properties
(5,535
)
 
—

 
(5,535
)
 
(2,683
)
Impairment losses on non-operating properties, net of associated tax
49

 
—

 
49

 
—

Loss on early extinguishment of debt, continuing and discontinued operations
176

 
374

 
562

 
27,028

Issuance costs associated with redeemed preferred shares
—

 
—

 
1,769

 
2,904

FFO from properties to be conveyed to extinguish debt in default
3,806

 
—

 
7,435

 
—

FFO, as adjusted for comparability
$
48,151

 
$
49,658

 
$
144,480

 
$
153,644


(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 September 30,
 
For the Nine Months Ended September 30,
 
2014
 
2013
 
2014
 
2013
Reconciliation of common share dividends to dividends and distributions for payout ratios
 

 
 

 
 
 
 
Common share dividends
$
24,112

 
$
24,022

 
$
72,306

 
$
71,220

Common unit distributions
1,062

 
1,094

 
3,215

 
3,186

Dividends and distributions for payout ratios
$
25,174

 
$
25,116

 
$
75,521

 
$
74,406

 
 
 
 
 
 
 
 
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)
$
24,548

 
$
(2,000
)
 
$
39,269

 
$
8,872

Interest expense on continuing operations
24,802

 
19,342

 
69,107

 
60,734

Interest expense on discontinued operations
—

 
1,968

 
—

 
6,316

Income tax expense
101

 
24

 
257

 
61

Real estate-related depreciation and amortization
30,237

 
29,210

 
104,728

 
86,397

Depreciation of furniture, fixtures and equipment
543

 
502

 
1,891

 
1,559

Impairment losses
42

 
22,074

 
1,371

 
31,126

Loss on early extinguishment of debt on continuing and discontinued operations
176

 
374

 
562

 
27,028

Gain on sales of operating properties
(5,123
)
 
—

 
(5,119
)
 
—

Gain on sales of non-operational properties
(5,535
)
 
—

 
(5,535
)
 
(2,683
)
Net loss (gain) on investments in unconsolidated entities included in interest and other income
63

 
1,006

 
365

 
(15
)
EBITDA on properties in default to be conveyed
(732
)
 
—

 
(1,263
)
 
—

Adjusted EBITDA
$
69,122

 
$
72,500

 
$
205,633

 
$
219,395

Less: Net operating income from properties in quarter of disposition
(106
)
 
—

 
 
 
 
Adjusted and in-place adjusted EBITDA
$
69,016

 
$
72,500

 

 

 
 
 
 
 
 
 
 
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
$
24,802

 
$
19,342

 
$
69,107

 
$
60,734

Interest expense from discontinued operations
—

 
1,968

 
—

 
6,316

Less: Amortization of deferred financing costs
(1,357
)
 
(1,321
)
 
(3,646
)
 
(4,292
)
Less: Amortization of net debt discount, net of amounts capitalized
(259
)
 
121

 
(659
)
 
(1,063
)
Less: Interest exp. on debt in default to be extin. via conveyance of properties
(4,231
)
 
—

 
(8,364
)
 
—

Denominator for interest coverage-Adjusted EBITDA
18,955

 
20,110

 
56,438

 
61,695

Scheduled principal amortization
1,477

 
2,226

 
4,914

 
7,229

Capitalized interest
1,314

 
2,215

 
4,325

 
6,743

Preferred share dividends
3,553

 
4,490

 
12,387

 
15,481

Preferred unit distributions
165

 
165

 
495

 
495

Denominator for fixed charge coverage-Adjusted EBITDA
$
25,464

 
$
29,206

 
$
78,559

 
$
91,643

 
 
 
 
 
 
 
 

viii


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

 
For the Three Months Ended September 30,
 
For the Nine Months Ended September 30,
 
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
$
11,581

 
$
4,894

 
$
22,412

 
$
10,983

Building improvements on operating properties
8,119

 
4,857

 
18,458

 
8,995

Leasing costs for operating properties
2,877

 
2,260

 
7,195

 
5,114

Less: Nonrecurring tenant improvements and incentives on operating properties
(1,454
)
 
(230
)
 
(987
)
 
(238
)
Less: Nonrecurring building improvements on operating properties
(4,182
)
 
(1,266
)
 
(5,269
)
 
(3,113
)
Less: Nonrecurring leasing costs for operating properties
(12
)
 
14

 
(243
)
 
(36
)
Add: Recurring capital expenditures on operating properties held through joint ventures
—

 
(1
)
 
—

 
(7
)
Recurring capital expenditures
$
16,929

 
$
10,528

 
$
41,566

 
$
21,698

 
 
 
 
 
 
 
 
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
$
67,891

 
$
68,020

 
$
200,608

 
$
202,289

Less: Straight-line rent adjustments
(461
)
 
(1,241
)
 
(1,941
)
 
(3,697
)
Less: Amortization of deferred market rental revenue
(4
)
 
24

 
19

 
(39
)
Add: Amortization of below-market cost arrangements
273

 
320

 
817

 
958

Same office property cash net operating income
67,699

 
67,123

 
199,503

 
199,511

Less: Lease termination fees, gross
(272
)
 
(306
)
 
(877
)
 
(1,280
)
Same office property cash net operating income, excluding gross lease termination fees
$
67,427

 
$
66,817

 
$
198,626

 
$
198,231

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

 
 

Total assets
 
$
3,680,188

 
$
3,629,952

Accumulated depreciation
 
679,598

 
597,649

Accumulated amortization of real estate intangibles and deferred leasing costs
 
207,864

 
193,142

Less: Adjusted book assoc. with properties to be conveyed to extinguish debt in default
 
(130,346
)
 
—

Adjusted book
 
$
4,437,304

 
$
4,420,743

 
 
 
 
 
Reconciliation of debt to adjusted debt
 
 
 
 
Debt, net
 
$
2,049,992

 
$
1,927,703

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

Numerator for debt to adjusted book ratio
 
1,899,992

 
1,927,703

Less: Cash and cash equivalents
 
(40,018
)
 
(54,373
)
Adjusted debt
 
$
1,859,974

 
$
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 September 30, 2014, COPT derived 77% of its portfolio annualized revenue from its strategic tenant niche properties and 23% from its regional office properties. COPT’s strategic tenant niche properties are those held for long-term investment that are either located near defense installations and other knowledge-based government demand drivers, or otherwise occupied primarily by U.S. Government agencies and defense contractors. COPT’s regional office properties are those held for long-term investment predominantly in the Greater Washington, DC/Baltimore region, excluding Strategic Tenant Niche Properties. As of September 30, 2014, COPT’s core portfolio of 174 office properties encompassed 16.9 million square feet and was 93% 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-Kelly, VP of IR
Stephen E. Budorick, EVP & COO
443-285-5453, stephanie.kelly@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
Capital One Securities
 
Chris Lucas
 
571-633-8151
 
christopher.lucas@capitalone.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
SunTrust Robinson Humphrey, Inc.
 
Michael Lewis
 
212-319-5659
 
michael.lewis@suntrust.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
 
Nine Months Ended
SUMMARY OF RESULTS 
 
9/30/14
 
6/30/14
 
3/31/14
 
12/31/13
 
9/30/13
 
9/30/14
 
9/30/13
Same Office NOI
 
$
67,891

 
$
67,056

 
$
65,661

 
$
66,086

 
$
68,020

 
$
200,608

 
$
202,289

NOI from real estate operations
 
$
75,359

 
$
72,108

 
$
75,144

 
$
79,621

 
$
79,676

 
$
222,611

 
$
238,308

Adjusted EBITDA
 
$
69,122

 
$
65,800

 
$
70,711

 
$
73,917

 
$
72,500

 
$
205,633

 
$
219,395

Net income (loss) attributable to COPT common shareholders
 
$
19,167

 
$
1,777

 
$
251

 
$
82,526

 
$
(7,454
)
 
$
21,195

 
$
(11,694
)
FFO - per NAREIT
 
$
49,655

 
$
41,273

 
$
49,272

 
$
115,911

 
$
49,284

 
$
140,200

 
$
126,395

FFO - as adjusted for comparability
 
$
48,151

 
$
47,034

 
$
49,295

 
$
49,958

 
$
49,658

 
$
144,480

 
$
153,644

Basic and diluted FFO available to common share and common unit holders
 
$
44,916

 
$
34,091

 
$
43,651

 
$
109,914

 
$
43,618

 
$
122,658

 
$
104,235

Diluted AFFO avail. to common share and common unit holders
 
$
28,977

 
$
27,561

 
$
36,507

 
$
28,362

 
$
35,503

 
$
93,045

 
$
113,811

Per share - diluted:
 
 

 
 

 
 

 
 

 
 

 
 

 
 
EPS
 
$
0.22

 
$
0.02

 
$
0.00

 
$
0.94

 
$
(0.09
)
 
$
0.24

 
$
(0.14
)
FFO - NAREIT
 
$
0.49

 
$
0.37

 
$
0.48

 
$
1.21

 
$
0.48

 
$
1.34

 
$
1.18

FFO - as adjusted for comparability
 
$
0.48

 
$
0.44

 
$
0.48

 
$
0.48

 
$
0.49

 
$
1.39

 
$
1.49

Dividend per common share
 
$
0.2750

 
$
0.2750

 
$
0.2750

 
$
0.2750

 
$
0.2750

 
$
0.8250

 
$
0.8250

Payout ratios:
 
 

 
 

 
 

 
 

 
 

 
 

 
 
Diluted FFO
 
56.0
%
 
73.8
%
 
57.7
%
 
22.9
%
 
57.6
%
 
61.6
%
 
71.4
%
Diluted FFO - as adjusted for comparability
 
58.0
%
 
63.2
%
 
57.6
%
 
56.9
%
 
57.1
%
 
59.5
%
 
56.6
%
Diluted AFFO
 
86.9
%
 
91.3
%
 
69.0
%
 
88.6
%
 
70.7
%
 
81.2
%
 
65.4
%
Real estate revenue operating margin
 
63.7
%
 
62.2
%
 
60.2
%
 
62.8
%
 
64.0
%
 
62.0
%
 
64.1
%
Rental revenue operating margin
 
78.3
%
 
76.4
%
 
76.7
%
 
77.6
%
 
78.5
%
 
77.1
%
 
78.9
%
CAPITALIZATION
 
 

 
 

 
 
 
 

 
 

 
 

 
 
Total Market Capitalization
 
$
4,613,107

 
$
4,853,704

 
$
4,627,913

 
$
4,350,189

 
$
4,503,307

 
 
 
 
Total Equity Market Capitalization
 
$
2,563,115

 
$
2,754,361

 
$
2,696,082

 
$
2,422,486

 
$
2,368,276

 
 
 
 
Debt, net
 
$
2,049,992

 
$
2,099,343

 
$
1,931,831

 
$
1,927,703

 
$
2,135,031

 
 
 
 
Debt to Total Market Capitalization
 
44.4
%
 
43.3
%
 
41.7
%
 
44.3
%
 
47.4
%
 
 
 
 
Debt to Adjusted book
 
42.8
%
 
43.9
%
 
43.5
%
 
43.6
%
 
46.6
%
 
 
 
 
Adjusted EBITDA interest coverage ratio
 
3.6
x
 
3.7
x
 
3.6
x
 
3.3
x
 
3.6
x
 
3.6
x
 
3.6
x
Adjusted EBITDA debt service coverage ratio
 
3.4
x
 
3.4
x
 
3.3
x
 
3.0
x
 
3.2
x
 
3.4
x
 
3.2
x
Adjusted EBITDA fixed charge coverage ratio
 
2.7
x
 
2.6
x
 
2.6
x
 
2.4
x
 
2.5
x
 
2.6
x
 
2.4
x
Adjusted debt to in-place adjusted EBITDA ratio
 
6.7
x
 
7.1
x
 
6.8
x
 
6.8
x
 
7.3
x
 
N/A

 
N/A

OTHER
 
 

 
 

 
 

 
 

 
 

 
 

 
 
Revenue from early termination of leases
 
$
239

 
$
72

 
$
1,112

 
$
1,676

 
$
891

 
$
1,423

 
$
3,006

Capitalized interest costs
 
$
1,314

 
$
1,422

 
$
1,589

 
$
2,042

 
$
2,215

 
$
4,325

 
$
6,743

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 


3

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

 
 

 
 

 
 

 
 

 
# of Operating Office Properties
 
 
 
 
 
 
 
 
 
 
Total Portfolio
174

 
180

 
183

 
183

 
210

 
Core Portfolio
174

 
172

 
181

 
177

 
173

 
Same Office Properties
161

 
161

 
161

 
161

 
161

 
 
 
 
 
 
 
 
 
 
 
 
% Occupied
 
 
 
 
 
 
 
 
 
 
Total Portfolio
91.5
%
 
89.3
%
 
89.8
%
 
89.1
%
 
88.5
%
 
Core Portfolio
91.5
%
 
90.0
%
 
89.7
%
 
88.7
%
 
89.3
%
 
Same Office Properties
92.1
%
 
90.8
%
 
91.1
%
 
90.6
%
 
90.6
%
 
 
 
 
 
 
 
 
 
 
 
 
% Leased
 
 
 
 
 
 
 
 
 
 
Total Portfolio
93.0
%
 
91.4
%
 
91.1
%
 
90.3
%
 
89.7
%
 
Core Portfolio
93.0
%
 
92.2
%
 
91.0
%
 
90.0
%
 
90.4
%
 
Same Office Properties
93.3
%
 
92.9
%
 
92.6
%
 
91.9
%
 
91.8
%
 
 
 
 
 
 
 
 
 
 
 
 
Square Feet of Office Properties (in thousands)
 
 
 
 
 
 
 
 
 
 
Total Portfolio
16,863

 
16,923

 
17,473

 
17,370

 
19,204

 
Core Portfolio
16,863

 
16,620

 
16,808

 
16,045

 
15,627

 
Same Office Properties
15,087

 
15,087

 
15,087

 
15,087

 
15,087

 
 
 
 
 
 
 
 
 
 
 
 
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

 
6.3

 
 
 
 
 
 
 
 
 
 
 
 

(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)
 
9/30/14
 
6/30/14
 
3/31/14
 
12/31/13
 
9/30/13
Assets
 

 
 

 
 

 
 

 
 

Properties, net
 

 
 

 
 

 
 

 
 

Operating properties, net
$
2,757,207

 
$
2,724,242

 
$
2,729,003

 
$
2,702,693

 
$
2,713,579

Construction and redevelopment in progress, including land (1)
167,618

 
168,996

 
159,468

 
160,436

 
174,117

Land held for future development and pre-construction costs (1)
346,331

 
361,004

 
336,157

 
351,172

 
352,050

Total properties, net
3,271,156

 
3,254,242

 
3,224,628

 
3,214,301

 
3,239,746

Assets held for sale
—

 
22,868

 
—

 
—

 
133,984

Cash and cash equivalents
40,018

 
76,216

 
18,374

 
54,373

 
27,318

Restricted cash and marketable securities
14,371

 
11,689

 
10,965

 
11,448

 
14,698

Accounts receivable, net
20,180

 
30,911

 
30,152

 
27,000

 
15,485

Deferred rent receivable, net
95,405

 
93,270

 
91,082

 
89,456

 
90,104

Intangible assets on real estate acquisitions, net
48,300

 
51,645

 
55,678

 
59,258

 
64,372

Deferred leasing and financing costs, net
65,009

 
65,251

 
65,855

 
66,267

 
63,246

Mortgage and other investing receivables
50,886

 
56,549

 
55,231

 
53,663

 
42,560

Prepaid expenses and other assets
74,863

 
46,859

 
53,932

 
54,186

 
64,075

Total assets
$
3,680,188

 
$
3,709,500

 
$
3,605,897

 
$
3,629,952

 
$
3,755,588

Liabilities and equity
 

 
 

 
 

 
 

 
 

Liabilities:
 

 
 

 
 

 
 

 
 

Debt, net
$
2,049,992

 
$
2,099,343

 
$
1,931,831

 
$
1,927,703

 
$
2,135,031

Accounts payable and accrued expenses
123,893

 
105,205

 
97,451

 
98,785

 
85,291

Rents received in advance and security deposits
33,075

 
27,520

 
28,267

 
31,492

 
28,539

Dividends and distributions payable
28,344

 
28,342

 
29,122

 
29,080

 
29,077

Deferred revenue associated with operating leases
13,420

 
12,355

 
12,281

 
10,369

 
8,545

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

 
—

 
—

 
—

 
6,420

Interest rate derivatives
2,236

 
3,236

 
3,196

 
3,309

 
3,595

Other liabilities
13,288

 
14,818

 
13,060

 
14,207

 
8,234

Total liabilities
2,264,248

 
2,290,819

 
2,115,208

 
2,114,945

 
2,304,732

Redeemable noncontrolling interest
18,436

 
18,901

 
17,654

 
17,758

 
16,789

Equity:
 

 
 

 
 

 
 
 
 
COPT’s shareholders’ equity:
 

 
 

 
 

 
 
 
 
Preferred shares at liquidation preference
199,083

 
199,083

 
249,083

 
249,083

 
249,083

Common shares
877

 
877

 
876

 
874

 
874

Additional paid-in capital
1,822,283

 
1,819,436

 
1,816,467

 
1,814,015

 
1,812,801

Cumulative distributions in excess of net income
(692,978
)
 
(688,033
)
 
(665,708
)
 
(641,868
)
 
(700,368
)
Accumulated other comprehensive income (loss)
871

 
(761
)
 
2,072

 
3,480

 
2,925

Total COPT’s shareholders’ equity
1,330,136

 
1,330,602

 
1,402,790

 
1,425,584

 
1,365,315

Noncontrolling interests in subsidiaries
 

 
 

 
 

 
 

 
 

Common units in the Operating Partnership
49,781

 
50,323

 
51,757

 
53,468

 
50,815

Preferred units in the Operating Partnership
8,800

 
8,800

 
8,800

 
8,800

 
8,800

Other consolidated entities
8,787

 
10,055

 
9,688

 
9,397

 
9,137

Total noncontrolling interests in subsidiaries
67,368

 
69,178

 
70,245

 
71,665

 
68,752

Total equity
1,397,504

 
1,399,780

 
1,473,035

 
1,497,249

 
1,434,067

Total liabilities, redeemable noncontrolling interest and equity
$
3,680,188

 
$
3,709,500

 
$
3,605,897

 
$
3,629,952

 
$
3,755,588

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

5

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

 
 

 
 

 
 

 
 

 
 
 
 
Rental revenue
$
96,207

 
$
94,332

 
$
98,035

 
$
96,700

 
$
94,641

 
$
288,574

 
$
280,911

Tenant recoveries and other real estate operations revenue
22,069

 
21,627

 
26,842

 
21,787

 
20,180

 
70,538

 
61,599

Construction contract and other service revenues
34,739

 
23,861

 
21,790

 
10,315

 
16,991

 
80,390

 
52,048

Total revenues
153,015

 
139,820

 
146,667

 
128,802

 
131,812

 
439,502

 
394,558

Expenses
 

 
 

 
 

 
 

 
 

 
 
 
 
Property operating expenses
43,056

 
43,772

 
49,772

 
44,117

 
41,361

 
136,600

 
123,082

Depreciation and amortization associated with real estate operations
30,237

 
30,895

 
43,596

 
30,326

 
28,205

 
104,728

 
82,888

Construction contract and other service expenses
33,593

 
23,136

 
18,624

 
9,710

 
16,306

 
75,353

 
49,165

Impairment losses
66

 
1,302

 
—

 
—

 
5,857

 
1,368

 
5,857

General and administrative expenses
5,662

 
5,815

 
6,158

 
6,523

 
6,237

 
17,635

 
17,213

Leasing expenses
1,549

 
1,713

 
1,985

 
1,916

 
1,790

 
5,247

 
5,217

Business development expenses and land carry costs
1,430

 
1,351

 
1,326

 
1,367

 
1,383

 
4,107

 
4,069

Total operating expenses
115,593

 
107,984

 
121,461

 
93,959

 
101,139

 
345,038

 
287,491

Operating income
37,422

 
31,836

 
25,206

 
34,843

 
30,673

 
94,464

 
107,067

Interest expense
(24,802
)
 
(23,478
)
 
(20,827
)
 
(21,276
)
 
(19,342
)
 
(69,107
)
 
(60,734
)
Interest and other income (loss)
1,191

 
1,299

 
1,285

 
885

 
(3
)
 
3,775

 
2,949

Loss on early extinguishment of debt
(176
)
 
(270
)
 
—

 
(2
)
 
(374
)
 
(446
)
 
(27,028
)
Income from continuing operations before equity in income (loss) of unconsolidated entities and income taxes
13,635

 
9,387

 
5,664

 
14,450

 
10,954

 
28,686

 
22,254

Equity in income (loss) of unconsolidated entities
193

 
(47
)
 
60

 
1,899

 
44

 
206

 
211

Income tax expense
(101
)
 
(92
)
 
(64
)
 
(1,917
)
 
(24
)
 
(257
)
 
(61
)
Income from continuing operations
13,727

 
9,248

 
5,660

 
14,432

 
10,974

 
28,635

 
22,404

Discontinued operations
191

 
(198
)
 
11

 
71,907

 
(12,974
)
 
4

 
(16,215
)
Income (loss) before gain on sales of real estate
13,918

 
9,050

 
5,671

 
86,339

 
(2,000
)
 
28,639

 
6,189

Gain on sales of real estate
10,630

 
—

 
—

 
6,333

 
—

 
10,630

 
2,683

Net income (loss)
24,548

 
9,050

 
5,671

 
92,672

 
(2,000
)
 
39,269

 
8,872

Net (income) loss attributable to noncontrolling interests
 

 
 

 
 

 
 

 
 

 
 
 
 
Common units in the Operating Partnership
(768
)
 
(158
)
 
(16
)
 
(3,757
)
 
232

 
(942
)
 
474

Preferred units in the Operating Partnership
(165
)
 
(165
)
 
(165
)
 
(165
)
 
(165
)
 
(495
)
 
(495
)
Other consolidated entities
(895
)
 
(837
)
 
(749
)
 
(1,734
)
 
(1,031
)
 
(2,481
)
 
(2,160
)
Net income (loss) attributable to COPT
22,720

 
7,890

 
4,741

 
87,016

 
(2,964
)
 
35,351

 
6,691

Preferred share dividends
(3,553
)
 
(4,344
)
 
(4,490
)
 
(4,490
)
 
(4,490
)
 
(12,387
)
 
(15,481
)
Issuance costs associated with redeemed preferred shares
—

 
(1,769
)
 
—

 
—

 
—

 
(1,769
)
 
(2,904
)
Net income (loss) attributable to COPT common shareholders
$
19,167

 
$
1,777

 
$
251

 
$
82,526

 
$
(7,454
)
 
$
21,195

 
$
(11,694
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 

6

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

 
 

 
 

 
 

 
 

 
 
 
 
Numerator for diluted EPS
 

 
 

 
 

 
 

 
 

 
 
 
 
Net income (loss) attributable to common shareholders
$
19,167

 
$
1,777

 
$
251

 
$
82,526

 
$
(7,454
)
 
$
21,195

 
$
(11,694
)
Amount allocable to restricted shares
(103
)
 
(108
)
 
(121
)
 
(348
)
 
(97
)
 
(332
)
 
(317
)
Numerator for diluted EPS
$
19,064

 
$
1,669

 
$
130

 
$
82,178

 
$
(7,551
)
 
$
20,863

 
$
(12,011
)
Denominator:
 

 
 

 
 

 
 

 
 

 
 
 
 
Weighted average common shares - basic
87,290

 
87,214

 
87,080

 
87,010

 
86,760

 
87,196

 
84,547

Dilutive effect of share-based compensation awards
195

 
201

 
112

 
42

 
—

 
169

 
—

Weighted average common shares - diluted
87,485

 
87,415

 
87,192

 
87,052

 
86,760

 
87,365

 
84,547

Diluted EPS
$
0.22

 
$
0.02

 
$
0.00

 
$
0.94

 
$
(0.09
)
 
$
0.24

 
$
(0.14
)

7

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

 
 

 
 

 
 

 
 

 
 
 
 
Real estate revenues
$
118,240

 
$
115,964

 
$
124,896

 
$
126,720

 
$
124,561

 
$
359,100

 
$
371,913

Real estate property operating expenses
(42,881
)
 
(43,856
)
 
(49,752
)
 
(47,099
)
 
(44,885
)
 
(136,489
)
 
(133,605
)
NOI from real estate operations
75,359

 
72,108

 
75,144

 
79,621

 
79,676

 
222,611

 
238,308

General and administrative expenses
(5,662
)
 
(5,815
)
 
(6,158
)
 
(6,523
)
 
(6,237
)
 
(17,635
)
 
(17,213
)
Leasing expenses (2)
(1,549
)
 
(1,713
)
 
(1,985
)
 
(1,919
)
 
(1,790
)
 
(5,247
)
 
(5,218
)
Business development expenses and land carry costs (2)
(1,430
)
 
(1,351
)
 
(1,326
)
 
(1,367
)
 
(1,383
)
 
(4,107
)
 
(4,069
)
NOI from construction contracts and other service operations
1,146

 
725

 
3,166

 
605

 
685

 
5,037

 
2,883

Impairment losses on non-operating properties
(49
)
 
—

 
—

 
—

 
—

 
(49
)
 
—

Equity in income (loss) of unconsolidated entities
193

 
(47
)
 
60

 
1,899

 
44

 
206

 
211

Interest and other income (loss)
1,191

 
1,299

 
1,285

 
885

 
(3
)
 
3,775

 
2,949

(Loss) gain on early extinguishment of debt (2)
(176
)
 
(363
)
 
(23
)
 
67,808

 
(374
)
 
(562
)
 
(27,028
)
Gain on sales of non-operating properties
5,535

 
—

 
—

 
—

 
—

 
5,535

 
2,683

Total interest expense (2)
(24,802
)
 
(23,478
)
 
(20,827
)
 
(23,181
)
 
(21,310
)
 
(69,107
)
 
(67,050
)
Income tax expense
(101
)
 
(92
)
 
(64
)
 
(1,917
)
 
(24
)
 
(257
)
 
(61
)
FFO - per NAREIT (1)
49,655

 
41,273

 
49,272

 
115,911

 
49,284

 
140,200

 
126,395

Preferred share dividends
(3,553
)
 
(4,344
)
 
(4,490
)
 
(4,490
)
 
(4,490
)
 
(12,387
)
 
(15,481
)
Issuance costs associated with redeemed preferred shares
—

 
(1,769
)
 
—

 
—

 
—

 
(1,769
)
 
(2,904
)
Noncontrolling interests - preferred units in the Operating Partnership
(165
)
 
(165
)
 
(165
)
 
(165
)
 
(165
)
 
(495
)
 
(495
)
FFO allocable to other noncontrolling interests
(830
)
 
(758
)
 
(761
)
 
(880
)
 
(833
)
 
(2,349
)
 
(2,830
)
Basic and diluted FFO allocable to restricted shares
(191
)
 
(146
)
 
(205
)
 
(462
)
 
(178
)
 
(542
)
 
(450
)
Basic and diluted FFO available to common share and common unit holders (1)
44,916

 
34,091

 
43,651

 
109,914

 
43,618

 
122,658

 
104,235

Gain on sales of non-operating properties, net of associated income tax
(5,535
)
 
—

 
—

 
—

 
—

 
(5,535
)
 
(2,683
)
Impairment losses on non-operating properties, net of associated tax
49

 
—

 
—

 
—

 
—

 
49

 
—

Valuation allowance on tax asset associated with FFO comparability adjustments
—

 
—

 
—

 
1,855

 
—

 
—

 
—

Loss (gain) on early extinguishment of debt (2)
176

 
363

 
23

 
(67,808
)
 
374

 
562

 
27,028

Issuance costs associated with redeemed preferred shares
—

 
1,769

 
—

 
—

 
—

 
1,769

 
2,904

FFO from properties to be conveyed to extinguish debt in default (3)
3,806

 
3,629

 
—

 
—

 
—

 
7,435

 
—

Diluted FFO comparability adjustments allocable to restricted shares
7

 
(26
)
 
—

 
168

 
—

 
(19
)
 
—

Diluted FFO available to common share and common unit holders, as adjusted for comparability (1)
$
43,419

 
$
39,826

 
$
43,674

 
$
44,129

 
$
43,992

 
$
126,919

 
$
131,484

 
 
 
 
 
 
 
 
 
 
 
 
 
 
(1) Please refer to the section entitled “Definitions” for a definition of this measure.
(2) Includes continuing and discontinued operations.
(3) Interest expense exceeded NOI from these properties by the amounts in the statement.

8

Corporate Office Properties Trust
Consolidated Statements of FFO (continued)
(in thousands, except per share data)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended
 
Nine Months Ended
 
9/30/14
 
6/30/14
 
3/31/14
 
12/31/13
 
9/30/13
 
9/30/14
 
9/30/13
Net income (loss)
$
24,548

 
$
9,050

 
$
5,671

 
$
92,672

 
$
(2,000
)
 
$
39,269

 
$
8,872

Real estate-related depreciation and amortization
30,237

 
30,895

 
43,596

 
31,322

 
29,210

 
104,728

 
86,397

Impairment (recoveries) losses on previously depreciated operating properties (1)(2)
(7
)
 
1,328

 
1

 
921

 
22,074

 
1,322

 
31,126

(Gain) loss on sales of previously depreciated operating properties (2)
(5,123
)
 
—

 
4

 
(9,004
)
 
—

 
(5,119
)
 
—

FFO - per NAREIT (3)
49,655

 
41,273

 
49,272

 
115,911

 
49,284

 
140,200

 
126,395

Gain on sales of non-operating properties
(5,535
)
 
—

 
—

 
—

 
—

 
(5,535
)
 
(2,683
)
Impairment losses on non-operating properties, net of associated tax
49

 
—

 
—

 
—

 
—

 
49

 
—

Valuation allowance on tax asset associated with FFO comparability adjustments
—

 
—

 
—

 
1,855

 
—

 
—

 
—

Loss (gain) on early extinguishment of debt (2)
176

 
363

 
23

 
(67,808
)
 
374

 
562

 
27,028

Issuance costs associated with redeemed preferred shares
—

 
1,769

 
—

 
—

 
—

 
1,769

 
2,904

FFO from properties to be conveyed to extinguish debt in default
3,806

 
3,629

 
—

 
—

 
—

 
7,435

 
—

FFO - as adjusted for comparability (3)
$
48,151

 
$
47,034

 
$
49,295

 
$
49,958

 
$
49,658

 
$
144,480

 
$
153,644

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Weighted Average Shares for period ended:
 

 
 

 
 

 
 

 
 

 
 

 
 

Common Shares Outstanding
87,290

 
87,214

 
87,080

 
87,010

 
86,760

 
87,196

 
84,547

Dilutive effect of share-based compensation awards
195

 
201

 
112

 
42

 
45

 
169

 
63

Common Units
3,876

 
3,912

 
3,958

 
3,978

 
3,804

 
3,915

 
3,832

Denominator for FFO per share - diluted
91,361

 
91,327

 
91,150

 
91,030

 
90,609

 
91,280

 
88,442

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

 
—

 
—

 
—

 
(45
)
 
—

 
(63
)
Weighted average common units
(3,876
)
 
(3,912
)
 
(3,958
)
 
(3,978
)
 
(3,804
)
 
(3,915
)
 
(3,832
)
Denominator for diluted EPS
87,485

 
87,415

 
87,192

 
87,052

 
86,760

 
87,365

 
84,547

 
 
 
 
 
 
 
 
 
 
 
 
 
 
(1) Please see reconciliations on pages 32 through 34.
 
 
 
 
 
 
 
 
 
 
 
 
 
(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
 
Nine Months Ended
 
9/30/14
 
6/30/14
 
3/31/14
 
12/31/13
 
9/30/13
 
9/30/14
 
9/30/13
Diluted FFO available to common share and common unit holders, as adjusted for comparability
$
43,419

 
$
39,826

 
$
43,674

 
$
44,129

 
$
43,992

 
$
126,919

 
$
131,484

Straight line rent adjustments (1)
(456
)
 
(1,745
)
 
760

 
3,157

 
(980
)
 
(1,441
)
 
(6,824
)
Straight line rent adjustments on properties to be conveyed to extinguish debt in default
(96
)
 
1

 
—

 
—

 
—

 
(95
)
 
—

Amortization of intangibles included in NOI
206

 
224

 
217

 
224

 
230

 
647

 
579

Share-based compensation, net of amounts capitalized
1,507

 
1,501

 
1,555

 
1,661

 
1,573

 
4,563

 
4,869

Amortization of deferred financing costs
1,357

 
1,122

 
1,167

 
1,159

 
1,321

 
3,646

 
4,292

Amortization of deferred financing costs on debt in default to be extinguished via conveyance of properties
(306
)
 
(27
)
 
—

 
—

 
—

 
(333
)
 
—

Amortization of net debt discounts, net of amounts capitalized
259

 
229

 
171

 
(48
)
 
(121
)
 
659

 
1,063

Amortization of settled debt hedges
16

 
15

 
15

 
15

 
16

 
46

 
46

Recurring capital expenditures on properties to be held
(16,929
)
 
(13,585
)
 
(11,052
)
 
(21,935
)
 
(10,528
)
 
(41,566
)
 
(21,698
)
Diluted AFFO available to common share and common unit holders (“diluted AFFO”)
$
28,977

 
$
27,561

 
$
36,507

 
$
28,362

 
$
35,503

 
$
93,045

 
$
113,811

Recurring capital expenditures
 

 
 

 
 

 
 

 
 

 
 
 
 
Tenant improvements and incentives on operating properties
$
11,581

 
$
4,512

 
$
6,319

 
$
6,430

 
$
4,894

 
$
22,412

 
$
10,983

Building improvements on operating properties
8,119

 
6,357

 
3,982

 
12,898

 
4,857

 
18,458

 
8,995

Leasing costs for operating properties
2,877

 
2,790

 
1,528

 
4,286

 
2,260

 
7,195

 
5,114

Less: Nonrecurring tenant improvements and incentives on operating properties
(1,454
)
 
483

 
(16
)
 
—

 
(230
)
 
(987
)
 
(238
)
Less: Nonrecurring building improvements on operating properties
(4,182
)
 
(519
)
 
(568
)
 
(1,381
)
 
(1,266
)
 
(5,269
)
 
(3,113
)
Less: Nonrecurring leasing costs for operating properties
(12
)
 
(38
)
 
(193
)
 
(275
)
 
14

 
(243
)
 
(36
)
Add: Recurring capital expenditures on operating properties held through joint ventures
—

 
—

 
—

 
(23
)
 
(1
)
 
—

 
(7
)
Recurring capital expenditures
$
16,929

 
$
13,585

 
$
11,052

 
$
21,935

 
$
10,528

 
$
41,566

 
$
21,698

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

10


 Corporate Office Properties Trust
Consolidated Office Properties by Region - September 30, 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
Baltimore/Washington Corridor:
 
 

 
 

 
 

 
 

 
 

 
 

National Business Park
 
29

 
3,485,071

 
97.9
%
 
98.1
%
 
1

 
191,464

Columbia Gateway
 
27

 
2,141,654

 
90.1
%
 
91.4
%
 
1

 
52,000

Airport Square/bwtech
 
15

 
1,158,014

 
80.2
%
 
81.8
%
 
—

 
56,452

Commons/Parkway
 
10

 
431,246

 
86.5
%
 
91.3
%
 
1

 
—

Other
 
11

 
1,119,849

 
98.5
%
 
98.5
%
 
1

 
119,980

Subtotal
 
92

 
8,335,834

 
92.9
%
 
93.8
%
 
4

 
419,896

Northern Virginia:
 
 

 
 

 
 

 
 

 
 

 
 

Westfields Corporate Center (1)
 
7

 
769,171

 
95.8
%
 
98.6
%
 
—

 
—

Patriot Ridge
 
1

 
239,272

 
51.3
%
 
51.3
%
 
—

 
—

Herndon, Tysons Corner and Merrifield
 
9

 
1,701,754

 
91.4
%
 
94.5
%
 
—

 
—

Other
 
3

 
548,768

 
100.0
%
 
100.0
%
 
2

 
320,330

Subtotal (1)
 
20

 
3,258,965

 
90.9
%
 
93.2
%
 
2

 
320,330

San Antonio, Texas
 
 

 
 

 
 

 
 

 
 

 
 

Sentry Gateway
 
6

 
792,454

 
100.0
%
 
100.0
%
 
1

 
160,466

Other
 
2

 
120,054

 
73.8
%
 
73.8
%
 
—

 
—

Subtotal
 
8

 
912,508

 
96.6
%
 
96.6
%
 
1

 
160,466

Huntsville
 
5

 
562,719

 
88.4
%
 
99.5
%
 
1

 
69,191

Washington, DC- Capital Riverfront (Maritime)
 
2

 
360,326

 
72.6
%
 
73.5
%
 
—

 
—

St. Mary’s & King George Counties
 
18

 
874,408

 
91.2
%
 
92.3
%
 
1

 
27,122

Greater Baltimore:
 
 

 
 

 
 

 
 

 
 

 
 

White Marsh and Rt 83 Corridor
 
20

 
984,186

 
90.4
%
 
93.2
%
 
—

 
—

Canton Crossing-Baltimore City
 
1

 
480,348

 
97.9
%
 
97.9
%
 
—

 
—

North Gate Business Park
 
3

 
284,907

 
46.0
%
 
46.0
%
 
—

 
—

Subtotal
 
24

 
1,749,441

 
85.2
%
 
86.8
%
 
—

 
—

Greater Philadelphia, Pennsylvania
 
3

 
513,347

 
96.2
%
 
97.6
%
 
1

 
140,765

Other
 
2

 
295,842

 
100.0
%
 
100.0
%
 
—

 
—

Total (1)
 
174

 
16,863,390

 
91.5
%
 
93.0
%
 
10

 
1,137,770

 
(1)
Amounts reported exclude the effect of two properties (totaling 665,000 square feet that were 37.8% occupied and 37.8% 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 24 and 25.



11

Corporate Office Properties Trust
NOI from Real Estate Operations and Occupancy by Property Grouping
(dollars and square feet in thousands)
 
 
As of 9/30/14
 
 
 
 
 
 
# 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 Nine Months Ended
Property Grouping
 
 
 
% Occupied (1)
 
% Leased (1)
 
 
 
9/30/14
 
9/30/14
Same Office Properties (3)
 
 

 
 

 
 
 
 
 
 

 
 

 
 

 
 

Stabilized properties
 
158

 
14,696

 
93.5%
 
94.6%
 
$
412,531

 
91.8
%
 
$
67,388

 
$
199,199

Unstabilized properties (4)
 
3

 
391

 
37.1%
 
42.9%
 
4,881

 
1.1
%
 
503

 
1,409

Total Same Office Properties
 
161

 
15,087

 
92.1%
 
93.3%
 
417,412

 
92.9
%
 
67,891

 
200,608

Office Properties Placed in Service (5)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Stabilized properties
 
10

 
1,335

 
98.8%
 
99.4%
 
23,881

 
5.3
%
 
4,326

 
11,181

Unstabilized properties (4)
 
3

 
441

 
49.4%
 
64.7%
 
8,238

 
1.8
%
 
1,307

 
3,196

Other, including Wholesale Data Center
 
—

 
—

 
—%
 
—%
 
—

 
N/A

 
822

 
1,976

Total Core Portfolio
 
174

 
16,863

 
91.5%
 
93.0%
 
449,531

 
100.0
%
 
74,346

 
216,961

Office Properties to be Conveyed (6)
 
N/A

 
N/A

 
N/A
 
N/A
 
N/A

 
N/A

 
732

 
4,837

Disposed Office Properties
 
N/A

 
N/A

 
N/A
 
N/A
 
N/A

 
N/A

 
281

 
813

Total Portfolio (7)
 
174

 
16,863

 
91.5%
 
93.0%
 
$
449,531

 
100.0
%
 
$
75,359

 
$
222,611

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Core Portfolio
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Demand Driver Adjacent (8)
 
83

 
8,745

 
92.8%
 
94.0%
 
$
265,570

 
59.1
%
 
$
42,998

 
$
127,017

U.S. Government/Defense Contractor (9)
 
32

 
3,649

 
96.0%
 
96.3%
 
82,344

 
18.3
%
 
15,254

 
44,171

Total Strategic Tenant Niche
 
115

 
12,394

 
93.7%
 
94.7%
 
347,914

 
77.4
%
 
58,252

 
171,188

Regional Office (10)
 
59

 
4,469

 
85.3%
 
88.4%
 
101,617

 
22.6
%
 
15,272

 
43,797

Other, including Wholesale Data Center
 
N/A

 
N/A

 
N/A
 
N/A
 
N/A

 
N/A

 
822

 
1,976

Total Core Portfolio
 
174

 
16,863

 
91.5%
 
93.0%
 
$
449,531

 
100.0
%
 
$
74,346

 
$
216,961

(1)
Percentages calculated based on operational square feet.
(2)
Excludes annualized rental revenue from our wholesale data center, DC-6, of $9.4 million as of 9/30/14.
(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 9/30/14, as detailed on page 13.
(5)
Newly constructed or redeveloped properties placed in service that were not fully operational by 1/1/13.
(6)
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 37.8% occupied and 37.8% leased with annualized rental revenue of $7.0 million as of 9/30/14.
(7)
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.
(8)
Office properties held for long-term investment located near defense installations and other knowledge-based government demand drivers.
(9)
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.
(10)
Regional office properties held for long-term investment predominantly in the Greater Washington, DC/Baltimore region, excluding Strategic Tenant Niche Properties.

12

Corporate Office Properties Trust
Unstabilized Office Properties (1) - September 30, 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%
 
62.0%
 
206 Research Blvd
128,119
 
0%
 
0%
 
0%
 
210 Research Blvd
79,596
 
59.2%
 
67.6%
 
67.6%
 
Total Unstabilized Same Office Properties
391,281
 
35.4%
 
37.1%
 
42.9%
 
Office Properties Placed in Service (3) 
 
 
 
 
 
 
 
 
7770 Backlick Road
239,272
 
51.3%
 
51.3%
 
51.3%
 
420 National Business Parkway
139,056
 
68.3%
 
68.3%
 
71.7%
 
  7200 Redstone Gateway
62,366
 
0.0%
 
0.0%
 
100.0%
 
Total Unstabilized Office Properties Placed in Service
440,694
 
49.4%
 
49.4%
 
64.7%
 
Total Unstabilized Office Properties
831,975
 
42.8%
 
43.6%
 
54.4%
 
 
(1) Properties with first generation operational space less than 90% occupied at 9/30/14. 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.


13

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

 
 

 
 

 
 

 
 

 
 
 
 
Baltimore/Washington Corridor
$
58,883

 
$
57,456

 
$
61,113

 
$
60,011

 
$
59,558

 
$
177,452

 
$
177,858

Northern Virginia
21,369

 
20,898

 
24,968

 
23,018

 
23,062

 
67,235

 
68,992

San Antonio
9,031

 
8,758

 
8,479

 
9,041

 
7,898

 
26,268

 
24,019

Huntsville
2,471

 
2,404

 
2,555

 
1,591

 
1,360

 
7,430

 
3,459

Washington, DC - Capitol Riverfront
3,524

 
3,831

 
3,634

 
4,147

 
4,295

 
10,989

 
12,716

St. Mary’s and King George Counties
4,158

 
4,202

 
4,316

 
4,213

 
4,270

 
12,676

 
12,355

Greater Baltimore
10,436

 
11,024

 
11,496

 
10,407

 
10,703

 
32,956

 
32,246

Greater Philadelphia
2,951

 
2,366

 
3,340

 
3,395

 
3,258

 
8,657

 
8,529

Colorado Springs
—

 
(12
)
 
18

 
5,568

 
6,571

 
6

 
19,722

Other
2,541

 
2,545

 
2,576

 
2,504

 
2,510

 
7,662

 
7,571

Wholesale Data Center
2,876

 
2,492

 
2,401

 
2,825

 
1,076

 
7,769

 
4,446

Real estate revenues
$
118,240

 
$
115,964

 
$
124,896

 
$
126,720

 
$
124,561

 
$
359,100

 
$
371,913

 
 
 
 
NOI
 

 
 

 
 

 
 

 
 

 
 
 
 
Baltimore/Washington Corridor
$
39,426

 
$
38,108

 
$
37,516

 
$
38,880

 
$
39,916

 
$
115,050

 
$
118,435

Northern Virginia
13,869

 
13,247

 
15,995

 
15,065

 
15,063

 
43,111

 
44,972

San Antonio
3,931

 
3,941

 
4,005

 
3,837

 
3,837

 
11,877

 
11,592

Huntsville
1,708

 
1,545

 
1,902

 
1,183

 
978

 
5,155

 
2,585

Washington, DC - Capitol Riverfront
1,700

 
2,077

 
1,869

 
2,072

 
2,349

 
5,646

 
6,947

St. Mary’s and King George Counties
2,881

 
2,913

 
2,812

 
2,900

 
2,971

 
8,606

 
8,640

Greater Baltimore
6,626

 
6,524

 
6,020

 
6,232

 
6,560

 
19,170

 
19,838

Greater Philadelphia
2,114

 
1,222

 
2,040

 
2,446

 
2,334

 
5,376

 
6,047

Colorado Springs
(3
)
 
(23
)
 
27

 
3,549

 
4,210

 
1

 
12,739

Other
2,284

 
1,943

 
2,245

 
2,312

 
2,228

 
6,472

 
6,747

Wholesale Data Center
823

 
611

 
713

 
1,145

 
(770
)
 
2,147

 
(234
)
NOI from real estate operations
$
75,359

 
$
72,108

 
$
75,144

 
$
79,621

 
$
79,676

 
$
222,611

 
$
238,308

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash NOI
 

 
 

 
 

 
 

 
 

 
 
 
 
Baltimore/Washington Corridor
$
38,114

 
$
36,993

 
$
36,709

 
$
37,195

 
$
38,609

 
$
111,816

 
$
115,379

Northern Virginia (1)
16,159

 
14,124

 
18,921

 
19,580

 
15,620

 
49,204

 
45,385

San Antonio
3,733

 
3,737

 
3,796

 
3,628

 
3,534

 
11,266

 
10,489

Huntsville
1,917

 
1,881

 
1,908

 
1,337

 
1,174

 
5,706

 
2,980

Washington, DC - Capitol Riverfront
1,775

 
2,149

 
1,932

 
2,175

 
2,459

 
5,856

 
7,242

St. Mary’s and King George Counties
2,491

 
2,598

 
2,877

 
2,946

 
2,993

 
7,966

 
8,655

Greater Baltimore
6,614

 
6,483

 
5,994

 
6,365

 
6,671

 
19,091

 
20,019

Greater Philadelphia
1,641

 
601

 
1,414

 
1,788

 
1,746

 
3,656

 
5,279

Colorado Springs
(3
)
 
(23
)
 
27

 
3,501

 
3,992

 
1

 
11,805

Other
2,220

 
1,848

 
2,149

 
2,211

 
2,114

 
6,217

 
6,345

Wholesale Data Center
807

 
573

 
677

 
2,489

 
168

 
2,057

 
(1,204
)
Cash NOI from real estate operations
$
75,468

 
$
70,964

 
$
76,404

 
$
83,215

 
$
79,080

 
$
222,836

 
$
232,374

Straight line rent adjustments
182

 
1,453

 
(954
)
 
(3,296
)
 
894

 
681

 
6,709

Add: Amortization of deferred market rental revenue
6

 
(12
)
 
(5
)
 
36

 
29

 
(11
)
 
198

Less: Amortization of below-market cost arrangements
(297
)
 
(297
)
 
(301
)
 
(334
)
 
(327
)
 
(895
)
 
(973
)
NOI from real estate operations
$
75,359

 
$
72,108

 
$
75,144

 
$
79,621

 
$
79,676

 
$
222,611

 
$
238,308

*     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 $832,000 for the three months ended September 30, 2014 and $5.2 million for the nine months ended September 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
 
Nine Months Ended
 
 
 
9/30/14
 
6/30/14
 
3/31/14
 
12/31/13
 
9/30/13
 
9/30/14
 
9/30/13
Baltimore Washington Corridor
88

 
7,956,411

 
92.7
%
 
92.1
%
 
92.5
%
 
92.3
%
 
92.4
%
 
92.5
%
 
92.2
%
Northern Virginia
16

 
2,470,925

 
92.2
%
 
90.6
%
 
90.5
%
 
89.7
%
 
89.9
%
 
91.1
%
 
88.9
%
San Antonio
8

 
912,508

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

 
137,049

 
88.7
%
 
80.4
%
 
85.0
%
 
83.0
%
 
83.0
%
 
84.7
%
 
83.0
%
Washington, DC - Capitol Riverfront
2

 
360,326

 
72.6
%
 
75.9
%
 
76.4
%
 
76.4
%
 
90.9
%
 
75.0
%
 
89.0
%
St. Mary’s and King George Counties
18

 
874,408

 
91.7
%
 
92.9
%
 
92.1
%
 
89.2
%
 
90.3
%
 
92.2
%
 
87.8
%
Greater Baltimore
24

 
1,749,441

 
84.8
%
 
83.6
%
 
82.9
%
 
82.5
%
 
82.7
%
 
83.8
%
 
82.7
%
Greater Philadelphia
2

 
329,964

 
98.4
%
 
87.5
%
 
87.5
%
 
87.5
%
 
84.6
%
 
91.1
%
 
83.7
%
Other
2

 
295,842

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

 
15,086,874

 
91.6
%
 
90.8
%
 
90.9
%
 
90.4
%
 
90.8
%
 
91.1
%
 
90.3
%
Total Same Office Properties occupancy as of period end
 
 

 
92.1
%
 
90.8
%
 
91.1
%
 
90.6
%
 
90.6
%
 
92.1
%
 
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
 
Nine Months Ended
 
9/30/14
 
6/30/14
 
3/31/14
 
12/31/13
 
9/30/13
 
9/30/14
 
9/30/13
Office Properties:
 

 
 

 
 

 
 

 
 

 
 
 
 
Baltimore/Washington Corridor
$
56,831

 
$
56,268

 
$
60,005

 
$
56,595

 
$
56,119

 
$
173,104

 
$
167,962

Northern Virginia
16,560

 
16,394

 
17,025

 
16,432

 
16,772

 
49,979

 
49,703

San Antonio
9,031

 
8,758

 
8,479

 
9,041

 
7,898

 
26,268

 
24,019

Huntsville
733

 
669

 
792

 
713

 
759

 
2,194

 
2,226

Washington, DC - Capitol Riverfront
3,524

 
3,831

 
3,634

 
4,147

 
4,295

 
10,989

 
12,716

St. Mary’s and King George Counties
4,158

 
4,202

 
4,316

 
4,189

 
4,186

 
12,676

 
12,109

Greater Baltimore
10,175

 
10,270

 
10,777

 
9,774

 
10,013

 
31,222

 
30,077

Greater Philadelphia
1,956

 
1,813

 
1,979

 
1,846

 
1,768

 
5,748

 
5,197

Other
2,441

 
2,443

 
2,477

 
2,405

 
2,409

 
7,361

 
7,268

Real estate revenues
$
105,409

 
$
104,648

 
$
109,484

 
$
105,142

 
$
104,219

 
$
319,541

 
$
311,277

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

 
 

 
 

 
 

 
 

 
 
 
 
Baltimore/Washington Corridor
$
37,827

 
$
37,432

 
$
36,793

 
$
36,936

 
$
37,980

 
$
112,052

 
$
113,050

Northern Virginia
11,082

 
10,800

 
10,539

 
10,609

 
10,949

 
32,421

 
32,202

San Antonio
3,931

 
3,941

 
4,005

 
3,837

 
3,837

 
11,877

 
11,592

Huntsville
504

 
452

 
555

 
500

 
554

 
1,511

 
1,666

Washington, DC - Capitol Riverfront
1,700

 
2,076

 
1,869

 
2,072

 
2,349

 
5,645

 
6,947

St. Mary’s and King George Counties
2,883

 
2,931

 
2,839

 
2,898

 
2,903

 
8,653

 
8,445

Greater Baltimore
6,466

 
6,111

 
5,807

 
5,886

 
6,182

 
18,384

 
18,566

Greater Philadelphia
1,311

 
1,126

 
1,070

 
1,167

 
1,083

 
3,507

 
3,277

Other
2,187

 
2,187

 
2,184

 
2,181

 
2,183

 
6,558

 
6,544

Same office property NOI
67,891

 
67,056

 
65,661

 
66,086

 
68,020

 
200,608

 
202,289

Straight line rent adjustments
(461
)
 
(938
)
 
(542
)
 
(999
)
 
(1,241
)
 
(1,941
)
 
(3,697
)
Less: Amortization of deferred market rental revenue
(4
)
 
15

 
8

 
1

 
24

 
19

 
(39
)
Add: Amortization of below-market cost arrangements
273

 
272

 
272

 
319

 
320

 
817

 
958

Same office property cash NOI
67,699

 
66,405

 
65,399

 
65,407

 
67,123

 
199,503

 
199,511

Less: Lease termination fees, gross
(272
)
 
(93
)
 
(512
)
 
(1,249
)
 
(306
)
 
(877
)
 
(1,280
)
Same office property cash NOI, excluding gross lease termination fees
$
67,427

 
$
66,312

 
$
64,887

 
$
64,158

 
$
66,817

 
$
198,626

 
$
198,231

Percentage change in same office property cash NOI (1)
0.9
%
 
 
 
 
 
 
 
 
 
—
 %
 
 
Percentage change in same office property cash NOI, excluding gross lease termination fees (1)
0.9
%
 
 
 
 
 
 
 
 
 
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
Quarter Ended September 30, 2014
 
Baltimore/
Washington
Corridor
 
Northern
Virginia
 
San Antonio
 
Huntsville
 
Washington DC-Capital Riverfront
 
St. Mary’s & King George Counties
 
Greater
Baltimore
 
Greater
Philadelphia
 
Total
Office
Renewed Space
 

 
 

 
 

 
 
 
 

 
 
 
 

 
 
 
 

Leased Square Feet
334,319

 
5,252

 
—

 
—

 
—

 
38,049

 
6,034

 
—

 
383,654

Expiring Square Feet
369,956

 
14,646

 
—

 
—

 
11,495

 
52,392

 
18,235

 
—

 
466,724

Vacated Square Feet
35,637

 
9,394

 
—

 
—

 
11,495

 
14,343

 
12,201

 
—

 
83,070

Retention Rate (% based upon square feet)
90.37
 %
 
35.86
 %
 
—
%
 
—
%
 
—
%
 
72.62
%
 
33.09
 %
 
0.00
%
 
82.20
 %
Statistics for Completed Leasing:
 
 
 
 
 
 
 
 

 
 
 
 
 
 
 
 
Average Committed Cost per Square Foot
$
21.21

 
$
12.51

 
$
—

 
$
—

 
$
—

 
$
—

 
$
16.69

 
$
—

 
$
18.91

Weighted Average Lease Term in Years
5.1

 
5.3

 
—

 
—

 
—

 
1.0

 
5.1

 
—

 
4.7

GAAP Rent Per Square Foot
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
        Renewal GAAP Rent
$
28.25

 
$
35.18

 
$
—

 
$
—

 
$
—

 
$
28.33

 
$
22.29

 
$
—

 
$
28.26

        Expiring GAAP Rent
$
26.18

 
$
35.84

 
$
—

 
$
—

 
$
—

 
$
28.16

 
$
23.40

 
$
—

 
$
26.47

        Change in GAAP Rent
7.91
 %
 
(1.84
)%
 
—
%
 
—
%
 
—
%
 
0.63
%
 
(4.75
)%
 
0.00
%
 
6.78
 %
Cash Rent Per Square Foot
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
        Renewal Cash Rent
$
27.45

 
$
35.00

 
$
—

 
$
—

 
$
—

 
$
28.33

 
$
21.58

 
$
—

 
$
27.55

        Expiring Cash Rent
$
27.59

 
$
38.58

 
$
—

 
$
—

 
$
—

 
$
28.33

 
$
24.45

 
$
—

 
$
27.76

        Change in Cash Rent
(0.52
)%
 
(9.29
)%
 
—
%
 
—
%
 
—
%
 
—
%
 
(11.76
)%
 
0.00
%
 
(0.79
)%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
New Leases
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Development and Redevelopment Space
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Leased Square Feet
4,804

 
1,123

 
160,561

 
131,557

 
—

 
—

 
—

 
1,463

 
299,508

Statistics for Completed Leasing:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Average Committed Cost per Square Foot
$
65.10

 
$
108.90

 
$
68.25

 
$
61.45

 
$
—

 
$
—

 
$
—

 
$
76.03

 
$
65.40

Weighted Average Lease Term in Years
7.0

 
10.3

 
10.0

 
10.0

 
—

 
—

 
—

 
6.7

 
9.9

GAAP Rent Per Square Foot
$
39.22

 
$
25.97

 
$
31.91

 
$
17.61

 
$
—

 
$
—

 
$
—

 
$
24.49

 
$
25.69

Cash Rent Per Square Foot
$
36.50

 
$
14.27

 
$
28.33

 
$
16.59

 
$
—

 
$
—

 
$
—

 
$
22.66

 
$
23.22

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Other New Leases (1)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Leased Square Feet
86,775

 
55,137

 
—

 
2,730

 
877

 
9,017

 
19,378

 
—

 
173,914

Statistics for Completed Leasing:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Average Committed Cost per Square Foot
$
37.39

 
$
50.74

 
$
—

 
$
22.59

 
$
183.72

 
$
37.58

 
$
31.84

 
$
—

 
$
41.52

Weighted Average Lease Term in Years
6.7

 
6.5

 
—

 
5.0

 
5.5

 
5.0

 
10.3

 
—

 
6.9

GAAP Rent Per Square Foot
$
28.97

 
$
26.11

 
$
—

 
$
17.31

 
$
37.28

 
$
24.86

 
$
16.99

 
$
—

 
$
26.37

Cash Rent Per Square Foot
$
27.32

 
$
26.60

 
$
—

 
$
17.75

 
$
38.00

 
$
24.53

 
$
16.74

 
$
—

 
$
25.67

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total Square Feet Leased
425,898

 
61,512

 
160,561

 
134,287

 
877

 
47,066

 
25,412

 
1,463

 
857,076

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(1)     Other New Leases includes acquired first generation space and vacated second generation space.
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
Nine Months Ended September 30, 2014
 
Baltimore/
Washington
Corridor
 
Northern
Virginia
 
San Antonio
 
Huntsville
 
Washington DC-Capital Riverfront
 
St. Mary’s & King George Counties
 
Greater
Baltimore
 
Greater
Philadelphia
 
Total
Office
Renewed Space
 

 
 

 
 

 
 
 
 

 
 
 
 

 
 
 
 

Leased Square Feet
749,496

 
46,863

 
—

 
—

 
—

 
70,793

 
98,031

 
—

 
965,183

Expiring Square Feet
902,372

 
112,801

 
—

 
23,299

 
14,289

 
109,267

 
149,473

 
—

 
1,311,501

Vacated Square Feet
152,876

 
65,938

 
—

 
23,299

 
14,289

 
38,474

 
51,442

 
—

 
346,318

Retention Rate (% based upon square feet)
83.06
 %
 
41.54
 %
 
0.00
%
 
0.00
%
 
0.00
%
 
64.79
 %
 
65.58
 %
 
0.00
%
 
73.59
 %
Statistics for Completed Leasing:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Average Committed Cost per Square Foot
$
17.48

 
$
23.69

 
$
—

 
$
—

 
$
—

 
$
4.78

 
$
9.35

 
$
—

 
$
16.03

Weighted Average Lease Term in Years
5.0

 
5.3

 
—

 
—

 
—

 
1.9

 
2.6

 
—

 
4.5

GAAP Rent Per Square Foot
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
        Renewal GAAP Rent
$
30.30

 
$
29.53

 
$
—

 
$
—

 
$
—

 
$
26.72

 
$
20.50

 
$
—

 
$
29.01

        Expiring GAAP Rent
$
28.29

 
$
30.25

 
$
—

 
$
—

 
$
—

 
$
26.42

 
$
20.63

 
$
—

 
$
27.47

        Change in GAAP Rent
7.10
 %
 
(2.39
)%
 
—
%
 
0.00
%
 
0.00
%
 
1.14
 %
 
(0.62
)%
 
0.00
%
 
5.58
 %
Cash Rent Per Square Foot
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
        Renewal Cash Rent
$
29.28

 
$
27.70

 
$
—

 
$
—

 
$
—

 
$
26.51

 
$
19.49

 
$
—

 
$
28.01

        Expiring Cash Rent
$
30.20

 
$
32.48

 
$
—

 
$
—

 
$
—

 
$
26.87

 
$
20.15

 
$
—

 
$
29.05

        Change in Cash Rent
(3.04
)%
 
(14.74
)%
 
—
%
 
0.00
%
 
—
%
 
(1.34
)%
 
(3.27
)%
 
0.00
%
 
(3.58
)%
New Leases
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Development and Redevelopment Space
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Leased Square Feet
122,297

 
22,466

 
160,561

 
131,557

 
—

 
—

 
—

 
50,747

 
487,628

Statistics for Completed Leasing:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Average Committed Cost per Square Foot
$
69.98

 
$
94.04

 
$
68.25

 
$
61.45

 
$
—

 
$
—

 
$
—

 
$
74.73

 
$
68.71

Weighted Average Lease Term in Years
9.1

 
10.4

 
10.0

 
10.0

 
—

 
—

 
—

 
9.8

 
9.8

GAAP Rent Per Square Foot
$
32.21

 
$
31.22

 
$
31.91

 
$
17.61

 
$
—

 
$
—

 
$
—

 
$
23.50

 
$
27.22

Cash Rent Per Square Foot
$
30.30

 
$
29.27

 
$
28.33

 
$
16.59

 
$
—

 
$
—

 
$
—

 
$
23.81

 
$
25.23

Other New Leases (1)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Leased Square Feet
263,245

 
135,368

 
—

 
37,130

 
2,998

 
17,751

 
73,881

 
—

 
530,373

Statistics for Completed Leasing:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Average Committed Cost per Square Foot
$
42.26

 
$
49.21

 
$
—

 
$
16.91

 
$
78.35

 
$
29.13

 
$
33.06

 
$
—

 
$
40.74

Weighted Average Lease Term in Years
6.9

 
7.0

 
—

 
5.0

 
5.5

 
4.2

 
7.7

 
—

 
6.8

GAAP Rent Per Square Foot
$
25.50

 
$
25.53

 
$
—

 
$
16.88

 
$
37.29

 
$
23.22

 
$
19.75

 
$
—

 
$
24.09

Cash Rent Per Square Foot
$
24.97

 
$
24.51

 
$
—

 
$
17.28

 
$
38.00

 
$
22.99

 
$
19.29

 
$
—

 
$
23.53

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total Square Feet Leased
1,135,038

 
204,697

 
160,561

 
168,687

 
2,998

 
88,544

 
171,912

 
50,747

 
1,983,184

(1)     Other New Leases includes acquired first generation space and vacated second generation space.
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. 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 63.0% if the effect of the Greater Philadelphia property vacancy were included. Weighted average lease term was calculated assuming no exercise of any existing early termination rights.

18

Corporate Office Properties Trust
Lease Expiration Analysis as of 9/30/14 (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
Office Properties
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Baltimore/Washington Corridor
 
20

 
456,661

 
$
17,228

 
3.8
%
 
$
37.73

 
 
12

 
432,925

 
$
16,803

 
4.8
%
 
$
38.81

Northern Virginia
 
12

 
208,389

 
6,403

 
1.4
%
 
30.73

 
 
7

 
173,028

 
5,448

 
1.6
%
 
31.49

Huntsville
 
1

 
90,335

 
2,649

 
0.6
%
 
29.32

 
 
1

 
90,335

 
2,649

 
0.8
%
 
29.32

Washington, DC-Capitol Riverfront
 
3

 
14,620

 
696

 
0.2
%
 
47.61

 
 
3

 
14,620

 
696

 
0.2
%
 
47.61

St. Mary’s and King George Cos.
 
9

 
143,357

 
2,206

 
0.5
%
 
15.39

 
 
9

 
143,357

 
2,206

 
0.6
%
 
15.39

Greater Baltimore
 
5

 
31,131

 
603

 
0.1
%
 
19.37

 
 
1

 
1,485

 
—

 
0.0
%
 
—

2014
 
50

 
944,493

 
29,785

 
6.6
%
 
31.54

 
 
33

 
855,750

 
27,802

 
8.0
%
 
32.49

Baltimore/Washington Corridor
 
44

 
815,551

 
25,026

 
5.6
%
 
30.69

 
 
22

 
669,372

 
21,553

 
6.2
%
 
32.20

Northern Virginia
 
5

 
468,438

 
15,989

 
3.6
%
 
34.13

 
 
2

 
459,394

 
15,678

 
4.5
%
 
34.13

Washington, DC-Capitol Riverfront
 
7

 
41,092

 
2,073

 
0.5
%
 
50.45

 
 
7

 
41,092

 
2,073

 
0.6
%
 
50.45

St. Mary’s and King George Cos.
 
23

 
300,918

 
6,649

 
1.5
%
 
22.10

 
 
23

 
300,918

 
6,649

 
1.9
%
 
22.10

Greater Baltimore
 
13

 
93,759

 
2,387

 
0.5
%
 
25.46

 
 
4

 
20,968

 
726

 
0.2
%
 
34.62

2015
 
92

 
1,719,758

 
52,124

 
11.6
%
 
30.31

 
 
58

 
1,491,744

 
46,679
 
13.4
%
 
31.29

Baltimore/Washington Corridor
 
33

 
777,382

 
22,872

 
5.1
%
 
29.42

 
 
21

 
732,157

 
21,629

 
6.2
%
 
29.54

Northern Virginia
 
14

 
324,984

 
9,997

 
2.2
%
 
30.76

 
 
9

 
283,467

 
8,516

 
2.4
%
 
30.04

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

 
2,107

 
0.5
%
 
18.69

 
 
11

 
112,707

 
2,107

 
0.6
%
 
18.69

Greater Baltimore
 
20

 
240,457

 
6,770

 
1.5
%
 
28.15

 
 
—

 
—

 
—

 
0.0
%
 
—

Greater Philadelphia
 
2

 
5,934

 
89

 
—
%
 
15.00

 
 
—

 
—

 
—

 
0.0
%
 
—

2016
 
82

 
1,495,684

 
43,527

 
9.7
%
 
29.10

 
 
43

 
1,162,551

 
33,944

 
9.8
%
 
29.20

Baltimore/Washington Corridor
 
45

 
1,348,245

 
40,462

 
9.0
%
 
30.01

 
 
26

 
998,877

 
31,523

 
9.1
%
 
31.56

Northern Virginia
 
12

 
301,757

 
9,864

 
2.2
%
 
32.69

 
 
3

 
206,221

 
6,526

 
1.9
%
 
31.65

Huntsville
 
1

 
1,711

 
34

 
—
%
 
19.87

 
 
1

 
1,711

 
34

 
0.0
%
 
19.87

St. Mary’s and King George Cos.
 
3

 
15,950

 
395

 
0.1
%
 
24.76

 
 
3

 
15,950

 
395

 
0.1
%
 
24.76

Greater Baltimore
 
15

 
195,023

 
4,383

 
1.0
%
 
22.47

 
 
2

 
3,174

 
88

 
0.0
%
 
27.73

2017
 
77

 
1,867,494

 
55,271

 
12.3
%
 
29.60

 
 
35

 
1,225,933

 
38,566

 
11.1
%
 
31.46


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
 
42

 
1,113,853

 
33,544

 
7.5
%
 
30.12

 
 
29

 
965,107

 
29,267

 
8.4
%
 
30.33

Northern Virginia
 
12

 
371,412

 
12,089

 
2.7
%
 
32.55

 
 
8

 
174,429

 
3,745

 
1.1
%
 
21.47

San Antonio
 
1

 
45,935

 
657

 
0.1
%
 
14.30

 
 
—

 
—

 
—

 
0.0
%
 
—

Huntsville
 
2

 
242,216

 
5,325

 
1.2
%
 
21.98

 
 
2

 
242,216

 
5,325

 
1.5
%
 
21.98

Washington, DC-Capitol Riverfront
 
3

 
61,649

 
2,858

 
0.6
%
 
46.36

 
 
3

 
61,649

 
2,858

 
0.8
%
 
46.36

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

 
4,000

 
0.9
%
 
29.66

 
 
—

 
—

 
—

 
0.0
%
 
—

Greater Philadelphia
 
1

 
4,228

 
107

 
—
%
 
25.31

 
 
—

 
—

 
—

 
0.0
%
 
—

2018
 
69

 
1,983,431

 
58,776

 
13.1
%
 
29.63

 
 
44

 
1,452,665

 
41,391

 
11.9
%
 
28.49

Thereafter
 
231

 
7,417,579

 
210,048

 
46.7
%
 
28.32

 
 
120

 
5,429,093

 
159,532

 
45.9
%
 
29.38

Total/Strategic Tenant Niche Total/Avg.
 
601
 
15,428,439

 
$
449,531

 
100.0
%
 
$
29.14

 
 
333

 
11,617,736

 
$
347,914

 
100.0
%
 
$
29.95

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Note:  As of September 30, 2014, the weighted average lease term is 4.5 years for the Core Office Properties, 4.4 years for the Strategic Tenant Niche Properties and 4.5 for the total portfolio.

Wholesale Data Center Lease Expiration Analysis
Year of Lease Expiration
Number of Leases Expiring
Raised Floor Square Footage (000's)
Critical Load Used (MW)
Total
Annual Rental
Revenue of
Expiring Leases (3)(000's)
2016
1
9

1.00

$
1,140

2018
2
1

0.26

529

2019
1
6

1.00

2,184

2020
1
11

2.00

4,623

2022
1
6

0.60

923

 
 
 

4.86

$
9,398

(1)
This presentation excludes 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 September 30, 2014 of 258,640 for the portfolio, including 117,681 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 September 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 9/30/14 (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)
59

 
3,385,317

 
21.9
%
 
$
120,734

 
26.9
%
 
5.0

Booz Allen Hamilton, Inc.
 
8

 
778,834

 
5.0
%
 
26,183

 
5.8
%
 
1.7

Northrop Grumman Corporation
 
9

 
797,177

 
5.2
%
 
22,504

 
5.0
%
 
5.6

General Dynamics Corporation
 
7

 
527,725

 
3.4
%
 
18,644

 
4.1
%
 
3.4

The Boeing Company
 
11

 
642,776

 
4.2
%
 
17,106

 
3.8
%
 
3.9

Computer Sciences Corporation
 
3

 
346,437

 
2.2
%
 
12,285

 
2.7
%
 
3.6

CareFirst, Inc.
 
3

 
300,360

 
1.9
%
 
9,732

 
2.2
%
 
6.4

The MITRE Corporation
 
5

 
290,288

 
1.9
%
 
9,322

 
2.1
%
 
3.3

The Aerospace Corporation
 
3

 
254,869

 
1.7
%
 
7,809

 
1.7
%
 
2.2

Wells Fargo & Company
 
2

 
171,534

 
1.1
%
 
7,542

 
1.7
%
 
4.3

Vadata Inc.
 
3

 
548,768

 
3.6
%
 
5,857

 
1.3
%
 
9.9

AT&T Corporation
 
3

 
307,579

 
2.0
%
 
5,668

 
1.3
%
 
4.6

L-3 Communications Holdings, Inc.
 
2

 
166,568

 
1.1
%
 
5,662

 
1.3
%
 
4.8

Science Applications International Corp.
 
4

 
133,577

 
0.9
%
 
4,560

 
1.0
%
 
4.9

Kratos Defense and Security Solutions
 
1

 
131,451

 
0.9
%
 
4,253

 
0.9
%
 
5.6

TASC Inc.
 
3

 
107,996

 
0.7
%
 
4,049

 
0.9
%
 
4.3

ITT Exelis
 
4

 
143,692

 
0.9
%
 
4,043

 
0.9
%
 
5.2

Raytheon Company
 
4

 
116,701

 
0.8
%
 
4,031

 
0.9
%
 
1.4

KEYW Corporation
 
2

 
144,443

 
0.9
%
 
3,778

 
0.8
%
 
6.7

The Johns Hopkins Institutions
 
5

 
144,171

 
0.9
%
 
3,719

 
0.8
%
 
3.9

Subtotal Top 20 Office Tenants
 
141

 
9,440,263

 
61.2
%
 
297,481

 
66.2
%
 
4.5

All remaining tenants
 
460

 
5,988,176

 
38.8
%
 
152,050

 
33.8
%
 
4.7

Total/Weighted Average
 
601

 
15,428,439

 
100.0
%
 
$
449,531

 
100.0
%
 
4.5

 
(1)  Amounts reported exclude leases at 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 September 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
Dispositions
Location
 
Property Region
 
Business Park/Submarket
 
Number of Buildings
 
Square Feet
 
Transaction
Date
 
Occupancy on Transaction Date
 
Transaction 
Price
(in thousands)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Quarter Ended 9/30/14
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Operating Properties
 
 
 
 
 
 
 
 
 
 
 
 
 
 
4969 and 4979 Mercantile Road
 
Greater Baltimore
 
White Marsh
 
2

 
96,721

 
7/14/14
 
0.0
%
 
$
5,960

9930 and 9940 Franklin Square
 
Greater Baltimore
 
White Marsh
 
2

 
71,992

 
7/30/14
 
62.5
%
 
10,475

5020, 5022, 5024 and 5026 Campbell Boulevard
 
Greater Baltimore
 
White Marsh
 
4

 
134,245

 
8/4/14
 
76.9
%
 
12,400

Land
 
 
 
 
 
N/A

 
N/A

 
Various
 
 
 
28,270

Subtotal - Quarter Ended 9/30/14
 
 
 
 
 
8

 
302,958

 
 
 
 
 
57,105

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total - Nine Months Ended 9/30/14
 
 
 
 
 
8

 
302,958

 
 
 
 
 
$
57,105



22

Corporate Office Properties Trust
Construction, Redevelopment, Wholesale Data Center and Land and Pre-Construction as of 9/30/14
(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
380,635

 
108,452

 
N/A

 
4,235,000

 
4,724,087

Northern Virginia
320,330

 
—

 
N/A

 
2,200,000

 
2,520,330

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

 
2,720,000

 
2,720,000

Greater Philadelphia
—

 
140,765

 
N/A

 
720,000

 
860,765

Colorado Springs
—

 
—

 
N/A

 
2,540,000

 
2,540,000

Other
—

 
—

 
N/A

 
1,000,000

 
1,000,000

Total
861,431

 
276,339

 
N/A

 
18,660,000

 
19,797,770

 
Costs to date by region
Baltimore/Washington Corridor
$
45,661

 
$
9,081

 
$
—

 
$
125,766

 
$
180,508

Northern Virginia
57,676

 
—

 
—

 
98,749

 
156,425

San Antonio
19,969

 
—

 
—

 
20,186

 
40,155

Huntsville, Alabama
—

 
—

 
—

 
13,792

 
13,792

St. Mary’s and King George Counties
—

 
2,667

 
—

 
2,588

 
5,255

Greater Baltimore
—

 
—

 
—

 
65,117

 
65,117

Greater Philadelphia
—

 
6,769

 
—

 
16,546

 
23,315

Colorado Springs
—

 
—

 
—

 
24,262

 
24,262

Wholesale Data Center
—

 
—

 
216,817

 
—

 
216,817

Other
—

 
—

 
—

 
9,218

 
9,218

Total
$
123,306

 
$
18,517

 
$
216,817

 
$
376,224

 
$
734,864

 
 
 
 
 
 
 
 
 
 
Reconciliation to amounts included in projects in development or held for future development, including land costs, as reported on consolidated balance sheet
 
 
 
 
 
 
 
 
 
Operating properties
—

 
(10,826
)
 
(174,810
)
 
(29,893
)
 
(215,529
)
Deferred leasing costs and other assets
(2,117
)
 
(2,600
)
 
(669
)
 
—

 
(5,386
)
Projects in development or held for future development, including associated land costs (4)
$
121,189

 
$
5,091

 
$
41,338

 
$
346,331

 
$
513,949

(1) Represents construction projects as listed on page 24.
(2) Represents redevelopment projects as listed on page 25.
(3) Represents our land held for future development and pre-construction as listed on page 26.
(4) Represents total of costs included in lines on our consolidated balance sheet entitled “construction and redevelopment in progress, including land” and “land held for future development and pre-construction costs.”

23

Corporate Office Properties Trust
Summary of Construction Projects as of 9/30/14 (1)
(dollars in thousands) 
 
 
 
Park/Submarket
Total Rentable Square Feet
Percentage Leased as of
as of 9/30/14 (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
9/30/2014
 
310 Sentinel Way
Annapolis Junction, Maryland
 
National Business Park
191,464

0%
$
57,300

$
31,456

$
—

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

100%
44,560

38,201

—

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

100%
34,715

19,969

—

4Q 14
2Q 15
 
NOVA Office B
   Northern Virginia
 
Other
161,030

0%
41,500

19,475

—

1Q 15
1Q 16
 
7400 Redstone Gateway
Huntsville, Alabama
 
Huntsville
69,191

100%
9,997

1,369

—

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

74%
31,535

12,836

—

3Q 15
3Q 16
 
Total Under Construction
 
 
861,431

55%
$
219,607

$
123,306

$
—

 
 

(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.



24

Corporate Office Properties Trust
Summary of Redevelopment Projects as of 9/30/14
(dollars in thousands) 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Park/Submarket
Total Rentable Square Feet
Percentage Leased as of
as of 9/30/14 (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
 
9/30/2014
44417 Pecan Court
California, Maryland
 
St. Mary's County
27,122

0%
$
1,439

$
3,953

$
5,392

$
2,667

$
1,439

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

0%
2,780

8,713

11,493

5,321

2,780

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

79%
2,850

25,182

28,032

6,769

2,850

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

0%
3,760

TBD

 TBD

3,760

3,756

TBD
TBD
Total Under Redevelopment (3)
276,339

40%
$
10,829

$
37,848

$
44,917

$
18,517

$
10,825

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




25

Corporate Office Properties Trust
Summary of Land Held as of 9/30/14 (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

 
$
286,508

 
 
 
 
 
 
Other Land
 
 
 
 
 
Baltimore/Washington Corridor
6

 
60

 
 
Greater Baltimore
110

 
1,242

 
 
Colorado Springs, Colorado
171

 
2,540

 
 
Other
107

 
1,000

 
 
Total other land held
394

 
4,842

 
$
59,823

 
 
 
 
 
 
Land held
1,480

 
18,660

 
$
346,331

 
 
 
 
 
 
(1)
This land inventory schedule excludes all properties listed as construction or redevelopment as detailed on pages 24 and 25, and includes properties under ground lease to us.
(2)
Represents total costs to date included in “projects in development or held for future development,” as reported on page 23 (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.


26


Corporate Office Properties Trust
Quarterly Equity Analysis
(dollars, shares and units in thousands, except per share amounts)
SHAREHOLDER CLASSIFICATION
Common Shares
 
Common Units
 
As if Converted
Preferred
Shares/Units
 
Total
 
Diluted
Ownership % of Total
As of September 30, 2014:
Insiders
622

 
319

 
—

 
941

 
1.02
%
Non-insiders
87,090

 
3,541

 
610

 
91,241

 
98.98
%
Total
87,712

 
3,860

 
610

 
92,182

 
100.00
%
COMMON EQUITY - End of Quarter
9/30/14
 
6/30/14
 
3/31/14
 
12/31/13
 
9/30/13
Unrestricted Common Shares
87,306

 
87,256

 
87,162

 
87,017

 
86,998

Restricted Common Shares
406

 
412

 
433

 
377

 
383

Common Shares
87,712

 
87,668

 
87,595

 
87,394

 
87,381

Common Units
3,860

 
3,899

 
3,929

 
3,978

 
3,978

Total
91,572

 
91,567

 
91,524

 
91,372

 
91,359

End of Quarter Common Share Price
$
25.72

 
$
27.81

 
$
26.64

 
$
23.69

 
$
23.10

Market Value of Common Shares/Units
$
2,355,232

 
$
2,546,478

 
$
2,438,199

 
$
2,164,603

 
$
2,110,393

PREFERRED EQUITY - End of Quarter
 

 
 

 
 

 
 

 
 

Nonconvertible Preferred Equity - liquidation preference
 

 
 

 
 

 
 

 
 

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

 
$
—

 
$
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

 
172,500

 
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

 
$
207,883

 
$
257,883

 
$
257,883

 
$
257,883

CAPITALIZATION
 

 
 

 
 

 
 

 
 

Liquidation Preference of Preferred Shares/Units
$
207,883

 
$
207,883

 
$
257,883

 
$
257,883

 
$
257,883

Market Value of Common Shares/Units
2,355,232

 
2,546,478

 
2,438,199

 
2,164,603

 
2,110,393

Total Equity Market Capitalization
$
2,563,115

 
$
2,754,361

 
$
2,696,082

 
$
2,422,486

 
$
2,368,276

(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.

27

Corporate Office Properties Trust
Debt Analysis as of September 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 9/30/14
 
 
 
 
Debt Outstanding
 
 
 
 
 
 
 
 
 

 
 
 
Fixed rate
 
 
 
 
 
 
 
 
 

 
 
 
Secured debt (1)
5.95%
 
5.94%
 
2.6
 
 
 
$
600,082

 
5.9%
 
Senior Unsecured Notes
4.09%
 
4.24%
 
8.2
 
 
 
890,622

 
4.1%
 
Exchangeable Senior Notes
4.25%
 
6.05%
 
0.5
 
 
 
570

 
4.3%
 
Other Unsecured Debt
0.00%
 
6.50%
 
11.6
 
 
 
1,631

 
—%
 
Total fixed rate debt (1)
4.83%
 
4.93%
 
5.9
 
 
 
$
1,492,905

 
4.9%
 
Variable rate
 
 
 
 
 
 
 
 
 

 
 
 
Secured debt
2.41%
 
2.41%
 
1.1
 


 
$
37,087

 
2.4%
 
Unsecured Revolving Credit Facility
1.47%
 
1.47%
 
2.8
 
$
800,000

 
—

 
—%
 
Unsecured Term Loans
1.80%
 
1.80%
 
2.5
 


 
520,000

 
1.8%
 
Total variable rate debt
1.84%
 
1.84%
 
2.5
 


 
$
557,087

 
2.8%
(2)(3)
Total consolidated debt outstanding
4.02%
 
4.09%
 
5.0
 
 
 
$
2,049,992

 
4.3%
(2)(3)
 
 
 
 
 
 
 
 
 
 
 
 
 
Variable Rate Loans Subject to Interest Rate Swaps (2)
 
 
 
 
 
 
 
 
$
437,087

 
0.7%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
% of Fixed Rate Loans (2)
 
 
 
 
 
 
 
 
94.1
%
 
 
 
% of Variable Rate Loans (2)
 
 
 
 
 
 
 
 
5.9
%
 
 
 
 
 
 
 
 
 
 
 
 
100.0
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Recourse debt
 
 
 
 
 
 
 
 
$
1,467,492

 
 
 
Nonrecourse debt
 
 
 
 
 
 
 
 
582,500

 
 
 
Total consolidated debt outstanding
 
 
 
 
 
 
 
 
$
2,049,992

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



28

Corporate Office Properties Trust
Debt Analysis  (continued)
(dollars in thousands)
 
 
 
 
 
September 30, 2014
 
 
Secured debt
$
637,169

 
 
Unsecured debt
1,412,823

 
 
Debt in default to be extinguished via conveyance of properties
(150,000
)
 
 
Numerator for debt to adjusted book ratio
$
1,899,992

 
 
 
 
 
 
Unencumbered adjusted book
$
3,753,866

 
 
Encumbered adjusted book
683,438

 
 
Total adjusted book (1)
$
4,437,304

 
 
 
 
 
 
# of Operating Office Properties (1)
 
 
 
Unencumbered
139

 
 
Encumbered
35

 
 
Total (1)
174

 
 
 
 
 
 
Square Feet of Office Properties (in thousands) (1)
 
 
 
Unencumbered
13,585

 
 
Encumbered
3,278

 
 
Total (1)
16,863

 
 
 
 
 
 
 
Three Months Ended 9/30/14
 
 
Unencumbered NOI from real estate operations
$
58,801

 
 
Encumbered NOI from real estate operations
15,826

 
 
NOI from properties to be conveyed to extinguish debt in default
732

 
 
Total NOI from real estate operations
$
75,359

 
 
 
 
 
 
Unencumbered adjusted EBITDA
$
53,332

 
 
Encumbered adjusted EBITDA (1)
15,790

 
 
Total adjusted EBITDA (1)
$
69,122

 
 
 
 
 
 
Debt ratios (coverage ratios excluding capitalized interest) — All coverage computations include discontinued operations
Three Months Ended 9/30/14
 
 
Adjusted EBITDA debt service coverage ratio
3.4x
 
 
Adjusted EBITDA fixed charge coverage ratio
2.7x
 
 
Adjusted debt to in-place adjusted EBITDA ratio
6.7x
 
 
 
 
 
 
 
As of and for Three Months Ended 9/30/14
Unsecured Senior Notes Covenants
Actual
 
Required
Total Debt / Total Assets
46.4%
 
Less than 60%
Secured Debt / Total Assets
13.6%
 
Less than 40%
Debt Service Coverage
296.2x
 
Greater than 1.5x
Unencumbered Assets / Unsecured Debt
249.5%
 
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.

29

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%
 
1.47%
 
$
—

$
—

$
—

$
—

$
—

$
—

$
—

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%
 
—

150,000

—

—

—

—

150,000

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

—

—

250,000

—

—

250,000

2019 maturities
LIBOR + 2.10%
 
2.26%
 
—

—

—

—

—

120,000

120,000

2026 maturities
0.00%
 
0.00%
 
50

200

200

200

200

1,461

2,311

Total Other Unsecured Debt
 
 
 
 
50

150,200

200

250,200

200

121,461

522,311

 
 
 
 
 
 
 
 
 
 
 
 
Total Unsecured Debt
 
 
 
 
$
50

$
150,775

$
200

$
250,200

$
200

$
1,021,461

$
1,422,886

Secured Debt
 
 
 
 
 
 
 
 
 
 
 
Fixed Rate Secured Debt
 
 
 
 
 
 
 
 
 
 
 
 2014 maturities (3)
5.65%
 
5.65%
 
$
150,000

$
—

$
—

$
—

$
—

$
—

$
150,000

 2015 maturities
5.53%
 
5.53%
 
—

103,000

—

—

—

—

103,000

 2016 maturities
6.59%
 
6.58%
 
986

4,128

277,886

—

—

—

283,000

 2017 maturities
5.45%
 
5.85%
 
46

189

200

4,302

—

—

4,737

 Thereafter
4.42%
 
4.38%
 
362

1,576

1,656

1,745

1,836

52,121

59,296

Total Fixed Rate Secured Debt
 
 
 
 
151,394

108,893

279,742

6,047

1,836

52,121

600,033

Variable Rate Secured Debt
LIBOR + 2.25%
 
2.41%
 
210

36,877

—

—

—

—

37,087

Total Secured Debt
 
 
 
 
$
151,604

$
145,770

$
279,742

$
6,047

$
1,836

$
52,121

$
637,120

 
 
 
 
 
 
 
 
 
 
 
 
Total Debt
 
 
 
 
$
151,654

$
296,545

$
279,942

$
256,247

$
2,036

$
1,073,582

$
2,060,006

 
 
 
 
 
 
 
 
 
 
 
 
Fixed Rate Debt
4.83%
 
4.93%
 
$
151,444

$
109,668

$
279,942

$
6,247

$
2,036

$
953,582

$
1,502,919

Variable Rate Debt
1.84%
 
1.84%
 
210

186,877

—

250,000

—

120,000

557,087

Total Debt
 
 
 
 
$
151,654

$
296,545

$
279,942

$
256,247

$
2,036

$
1,073,582

$
2,060,006

 
 
 
 
 
 
 
 
 
 
 
 
Balloon Payments

 

 
$
150,000

$
289,751

$
274,605

$
254,110

$
—

$
1,063,561

$
2,032,027

Scheduled Principal Amortization

 

 
1,654

6,794

5,337

2,137

2,036

10,021

27,979

Total Debt
 
 
 
 
$
151,654

$
296,545

$
279,942

$
256,247

$
2,036

$
1,073,582

$
2,060,006

 
 
 
 
 
 
 
 
 
Net discount
(10,014
)
 
 
 
 
 
 
 
 
 
Consolidated debt
$
2,049,992

(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 from 2017 to 2014 by the lender. We expect the lender to foreclose on the properties securing the loan in the fourth quarter of 2014.

30

Corporate Office Properties Trust
Consolidated Joint Ventures as of 9/30/14
(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%
 
$
55,666

$
37,087

50%
Huntsville, AL:
 
 
 
 
 
 
LW Redstone Company, LLC (4 properties)
426

85.4%
 
76,229

37,870

85%
Total/Average
668

89.5%
 
$
131,895

$
74,957

 
NOI of Operating Properties for the Three Months Ended 9/30/14 (2)
$
2,267

 
 
 

 

 
NOI of Operating Properties for the Nine Months Ended 9/30/14 (2)
$
7,651

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

 
 

 

 
M Square Research Park
525

 
$
4,450

$
—

50%
Huntsville, Alabama:
 

 
 

 

 
Redstone Gateway
4,103

 
63,085

—

85%
Total
4,628

 
$
67,535

$
—

 
 
(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.


31


Corporate Office Properties Trust
Supplementary Reconciliations of Non-GAAP Measures
(in thousands)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended
 
Nine Months Ended
 
9/30/14
 
6/30/14
 
3/31/14
 
12/31/13
 
9/30/13
 
9/30/14
 
9/30/13
Net income (loss)
$
24,548

 
$
9,050

 
$
5,671

 
$
92,672

 
$
(2,000
)
 
$
39,269

 
$
8,872

Interest expense on continuing and discontinued operations
24,802

 
23,478

 
20,827

 
23,181

 
21,310

 
69,107

 
67,050

Income tax expense
101

 
92

 
64

 
1,917

 
24

 
257

 
61

Depreciation of furniture, fixtures and equipment (FF&E)
543

 
843

 
505

 
495

 
502

 
1,891

 
1,559

Real estate-related depreciation and amortization
30,237

 
30,895

 
43,596

 
31,322

 
29,210

 
104,728

 
86,397

Impairment losses
42

 
1,328

 
1

 
921

 
22,074

 
1,371

 
31,126

Loss (gain) on early extinguishment of debt on continuing and discontinued operations
176

 
363

 
23

 
(67,808
)
 
374

 
562

 
27,028

(Gain) loss on sales of operating properties
(5,123
)
 
—

 
4

 
(9,004
)
 
—

 
(5,119
)
 
—

Gain on sales of non-operational properties
(5,535
)
 
—

 
—

 
—

 
—

 
(5,535
)
 
(2,683
)
Net loss (gain) on investments in unconsolidated entities included in interest and other income
63

 
282

 
20

 
221

 
1,006

 
365

 
(15
)
EBITDA from properties to be conveyed to extinguish debt in default
(732
)
 
(531
)
 
—

 
—

 
—

 
(1,263
)
 
—

Adjusted EBITDA
$
69,122

 
$
65,800

 
$
70,711

 
$
73,917

 
$
72,500

 
$
205,633

 
$
219,395

Add back:
 

 
 

 
 

 
 

 
 

 
 

 
 

General, administrative and leasing expenses on continuing and discontinued operations
7,211

 
7,528

 
8,143

 
8,442

 
8,027

 
22,882

 
22,431

Business development expenses and land carry costs on continuing and discontinued operations, excluding operating property acquisition costs
1,430

 
1,351

 
1,326

 
1,367

 
1,383

 
4,107

 
4,069

Depreciation of FF&E
(543
)
 
(843
)
 
(505
)
 
(495
)
 
(502
)
 
(1,891
)
 
(1,559
)
Income from construction contracts and other service operations
(1,146
)
 
(725
)
 
(3,166
)
 
(605
)
 
(685
)
 
(5,037
)
 
(2,883
)
Interest and other income, excluding net loss/gain on investments in unconsolidated entities
(1,254
)
 
(1,581
)
 
(1,305
)
 
(1,106
)
 
(1,003
)
 
(4,140
)
 
(2,934
)
Equity in (income) loss of unconsolidated entities
(193
)
 
47

 
(60
)
 
(1,899
)
 
(44
)
 
(206
)
 
(211
)
NOI from properties to be conveyed to extinguish debt in default
732

 
531

 
—

 
—

 
—

 
1,263

 
—

NOI from real estate operations
$
75,359

 
$
72,108

 
$
75,144

 
$
79,621

 
$
79,676

 
$
222,611

 
$
238,308

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Adjusted EBITDA
$
69,122

 
$
65,800

 
$
70,711

 
$
73,917

 
$
72,500

 
 
 
 
Less: NOI from properties in quarter of disposition
(106
)
 
—

 
—

 
(5,107
)
 
—

 
 
 
 
In-place adjusted EBITDA
$
69,016

 
$
65,800

 
$
70,711

 
$
68,810

 
$
72,500

 


 


 
 
 
 
 
 
 
 
 
 
 
 
 
 

32

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

 
 

 
 

 
 

 
 

 
 

 
 

Revenues from real estate operations
$
(36
)
 
$
5

 
$
19

 
$
8,233

 
$
9,740

 
$
(12
)
 
$
29,403

Property operating expenses
175

 
(84
)
 
20

 
(2,982
)
 
(3,524
)
 
111

 
(10,523
)
Depreciation and amortization
—

 
—

 
—

 
(996
)
 
(1,005
)
 
—

 
(3,509
)
General, administrative and leasing expenses
—

 
—

 
—

 
(3
)
 
—

 
—

 
(1
)
Interest
—

 
—

 
—

 
(1,905
)
 
(1,968
)
 
—

 
(6,316
)
(Loss) gain on early extinguishment of debt
—

 
(93
)
 
(23
)
 
67,810

 
—

 
(116
)
 
—

Impairment recoveries (losses)
24

 
(26
)
 
(1
)
 
(921
)
 
(16,217
)
 
(3
)
 
(25,269
)
Gain (loss) on sales of depreciated real estate properties
28

 
—

 
(4
)
 
2,671

 
—

 
24

 
—

Discontinued operations
$
191

 
$
(198
)
 
$
11

 
$
71,907

 
$
(12,974
)
 
$
4

 
$
(16,215
)
GAAP revenues from real estate operations from continuing operations
$
118,276

 
$
115,959

 
$
124,877

 
$
118,487

 
$
114,821

 
$
359,112

 
$
342,510

Revenues from discontinued operations
(36
)
 
5

 
19

 
8,233

 
9,740

 
(12
)
 
29,403

Real estate revenues
$
118,240

 
$
115,964

 
$
124,896

 
$
126,720

 
$
124,561

 
$
359,100

 
$
371,913

GAAP property operating expenses from continuing operations
$
43,056

 
$
43,772

 
$
49,772

 
$
44,117

 
$
41,361

 
$
136,600

 
$
123,082

Property operating expenses from discontinued operations
(175
)
 
84

 
(20
)
 
2,982

 
3,524

 
(111
)
 
10,523

Real estate property operating expenses
$
42,881

 
$
43,856

 
$
49,752

 
$
47,099

 
$
44,885

 
$
136,489

 
$
133,605

Gain on sales of real estate, net, per statements of operations
$
10,630

 
$
—

 
$
—

 
$
6,333

 
$
—

 
$
10,630

 
$
2,683

Gain (loss) on sales of real estate from discontinued operations
28

 
—

 
(4
)
 
2,671

 
—

 
24

 
—

Gain (loss) on sales of real estate from continuing and discont. operations
10,658

 
—

 
(4
)
 
9,004

 
—

 
10,654

 
2,683

Less: Gain on sales of non-operating properties
(5,535
)
 
—

 
—

 
—

 
—

 
(5,535
)
 
(2,683
)
Gain (loss) on sales of operating properties
$
5,123

 
$
—

 
$
(4
)
 
$
9,004

 
$
—

 
$
5,119

 
$
—

Impairment losses, per statements of operations
$
66

 
$
1,302

 
$
—

 
$
—

 
$
5,857

 
$
1,368

 
$
5,857

Impairment (recoveries) losses on discontinued operations
(24
)
 
26

 
1

 
921

 
16,217

 
3

 
25,269

Total impairment losses
$
42

 
$
1,328

 
$
1

 
$
921

 
$
22,074

 
$
1,371

 
$
31,126

Impairment recoveries (losses) on previously depreciated operating properties
7

 
(1,328
)
 
(1
)
 
(921
)
 
(22,074
)
 
(1,322
)
 
(31,126
)
Impairment losses on non-operating properties
$
49

 
$
—

 
$
—

 
$
—

 
$
—

 
$
49

 
$
—


33

Corporate Office Properties Trust
Supplementary Reconciliations of Non-GAAP Measures (continued)
(dollars in thousands)
 
Three Months Ended
 
Nine Months Ended
 
9/30/14
 
6/30/14
 
3/31/14
 
12/31/13
 
9/30/13
 
9/30/14
 
9/30/13
Depreciation and amortization associated with real estate operations from continuing operations
$
30,237

 
$
30,895

 
$
43,596

 
$
30,326

 
$
28,205

 
$
104,728

 
$
82,888

Depreciation and amortization from discontinued operations
—

 
—

 
—

 
996

 
1,005

 
—

 
3,509

Real estate-related depreciation and amortization
$
30,237

 
$
30,895

 
$
43,596

 
$
31,322

 
$
29,210

 
$
104,728

 
$
86,397

Interest expense from continuing operations
$
24,802

 
$
23,478

 
$
20,827

 
$
21,276

 
$
19,342

 
$
69,107

 
$
60,734

Interest expense from discontinued operations
—

 
—

 
—

 
1,905

 
1,968

 
—

 
6,316

Total interest expense
24,802

 
23,478

 
20,827

 
23,181

 
21,310

 
69,107

 
67,050

Less: Amortization of deferred financing costs
(1,357
)
 
(1,122
)
 
(1,167
)
 
(1,159
)
 
(1,321
)
 
(3,646
)
 
(4,292
)
Less: Amortization of net debt discounts and prem., net of amounts capitalized
(259
)
 
(229
)
 
(171
)
 
48

 
121

 
(659
)
 
(1,063
)
Less: Interest exp. on debt in default to be exting. via conveyance of properties
(4,231
)
 
(4,133
)
 
—

 
—

 
—

 
(8,364
)
 
—

Denominator for interest coverage
18,955

 
17,994

 
19,489

 
22,070

 
20,110

 
56,438

 
61,695

Scheduled principal amortization
1,477

 
1,582

 
1,855

 
2,252

 
2,226

 
4,914

 
7,229

Denominator for debt service coverage
20,432

 
19,576

 
21,344

 
24,322

 
22,336

 
61,352

 
68,924

Capitalized interest
1,314

 
1,422

 
1,589

 
2,042

 
2,215

 
4,325

 
6,743

Preferred share dividends - redeemable non-convertible
3,553

 
4,344

 
4,490

 
4,490

 
4,490

 
12,387

 
15,481

Preferred unit distributions
165

 
165

 
165

 
165

 
165

 
495

 
495

Denominator for fixed charge coverage
$
25,464

 
$
25,507

 
$
27,588

 
$
31,019

 
$
29,206

 
$
78,559

 
$
91,643

Preferred share dividends
$
3,553

 
$
4,344

 
$
4,490

 
$
4,490

 
$
4,490

 
$
12,387

 
$
15,481

Preferred unit distributions
165

 
165

 
165

 
165

 
165

 
495

 
495

Common share dividends
24,112

 
24,103

 
24,091

 
24,026

 
24,022

 
72,306

 
71,220

Common unit distributions
1,062

 
1,072

 
1,081

 
1,094

 
1,094

 
3,215

 
3,186

Total dividends/distributions
$
28,892

 
$
29,684

 
$
29,827

 
$
29,775

 
$
29,771

 
$
88,403

 
$
90,382

Common share dividends
$
24,112

 
$
24,103

 
$
24,091

 
$
24,026

 
$
24,022

 
$
72,306

 
$
71,220

Common unit distributions
1,062

 
1,072

 
1,081

 
1,094

 
1,094

 
3,215

 
3,186

Dividends and distributions for payout ratios
$
25,174

 
$
25,175

 
$
25,172

 
$
25,120

 
$
25,116

 
$
75,521

 
$
74,406

 
 
 
 
 
 
 
 
 
 
 
 
 
 

34

Corporate Office Properties Trust
Supplementary Reconciliations of Non-GAAP Measures (continued)
(dollars in thousands)
 
Three Months Ended
 
Nine Months Ended
 
9/30/14
 
6/30/14
 
3/31/14
 
12/31/13
 
9/30/13
 
9/30/14
 
9/30/13
Total Assets
$
3,680,188

 
$
3,709,500

 
$
3,605,897

 
$
3,629,952

 
$
3,755,588

 
$
3,680,188

 
$
3,755,588

Accumulated depreciation
679,598

 
655,214

 
635,178

 
597,649

 
612,369

 
679,598

 
612,369

Accumulated depreciation included in assets held for sale
—

 
3,121

 
—

 
—

 
8,845

 
—

 
8,845

Accumulated amort. of real estate intangibles and deferred leasing costs
207,864

 
201,627

 
199,500

 
193,142

 
195,559

 
207,864

 
195,559

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

 
4,277

 
—

 
—

 
9,224

 
—

 
9,224

Less: Adj. book assoc. with properties to be conveyed to exting. debt in default
(130,346
)
 
(130,921
)
 
—

 
—

 
—

 
(130,346
)
 
—

Adjusted book
$
4,437,304

 
$
4,442,818

 
$
4,440,575

 
$
4,420,743

 
$
4,581,585

 
$
4,437,304

 
$
4,581,585

Debt, net
$
2,049,992

 
$
2,099,343

 
$
1,931,831

 
$
1,927,703

 
$
2,135,031

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

 
—

 
—

 


 
 
Numerator for debt to adjusted book ratio
1,899,992

 
1,949,343

 
1,931,831

 
1,927,703

 
2,135,031

 
 
 
 
Less: Cash and cash equivalents
(40,018
)
 
(76,216
)
 
(18,374
)
 
(54,373
)
 
(27,318
)
 
 
 
 
Adjusted debt
$
1,859,974

 
$
1,873,127

 
$
1,913,457

 
$
1,873,330

 
$
2,107,713

 


 



35


Corporate Office Properties Trust
Definitions

Non-GAAP Measures

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

36


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; executive transition costs; 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 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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