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

 
INVESTING ACTIVITY:
Section IV

Earnings Release
i-ix

 
Dispositions
22

Summary Description
1

 
Construction, Redevelopment, Wholesale Data Center and Land Held
23

Equity Research Coverage
2

 
Summary of Construction Projects
24

Selected Financial Summary Data
3

 
Summary of Redevelopment Projects
25

Selected Consolidated Portfolio Data
4

 
Summary of Land Held
26

 
 

 
 
 
FINANCIAL STATEMENTS:
Section II

 
CAPITALIZATION:
Section V

Quarterly Consolidated Balance Sheets
5

 
Quarterly Equity Analysis
27

Consolidated Statements of Operations
6-7

 
Debt Analysis
28-29

Consolidated Statements of FFO
8-9

 
Debt Maturity Schedule
30

Consolidated Reconciliations of AFFO
10

 
Consolidated Joint Ventures
31

 
 

 
 
 
PORTFOLIO INFORMATION:
Section III

 
RECONCILIATIONS & DEFINITIONS:
Section VI

Consolidated Office Properties by Region
11

 
Supplementary Reconciliations of Non-GAAP Measures
32-35

NOI from Real Estate Operations and Occupancy by Property Grouping
12

 
Definitions
36-41

Unstabilized Office Properties
13

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

 
 
 
Same Office Properties Average Occupancy Rates by Region
15

 
 
 
Same Office Property Real Estate Revenues & NOI by Region
16

 
 
 
Leasing - Core Office
17-18

 
 
 
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 2014 RESULTS


COLUMBIA, MD February 10, 2015 - Corporate Office Properties Trust (“COPT” or the “Company”) (NYSE: OFC) announced financial and operating results for the fourth quarter and full year ended December 31, 2014.

“Fourth quarter and full year results topped off a strong year for our Company and were in line with our expectations,” stated Roger A. Waesche, Jr., COPT’s President & Chief Executive Officer. “During the year, we further honed our portfolio by investing in new development projects at multiple locations and by continuing to sell non-strategic assets. We also improved our capital position by accessing the public debt and equity markets.”

Results:
For the fourth quarter ended December 31, 2014 - Diluted earnings per share (“EPS”) was $0.01 for the quarter ended December 31, 2014 as compared to $0.94 for the fourth quarter of 2013. Diluted funds from operations per share (“FFOPS”), as calculated in accordance with NAREIT’s definition, was $0.34 for the fourth quarter of 2014 as compared to $1.21 for the fourth quarter of 2013. FFOPS, as adjusted for comparability, was $0.49 for the quarter ended December 31, 2014 as compared to $0.48 for the fourth quarter of 2013.

For the year ended December 31, 2014 - EPS was $0.25 for the year ended December 31, 2014 as compared to $0.83 for 2013. Per NAREIT’s definition, FFOPS for 2014 was $1.69 as compared to $2.40 for 2013. FFOPS for the full year 2014, as adjusted for comparability, was $1.88 as compared to $1.97 reported for 2013.

Adjustments for comparability encompass items such as acquisition costs, impairment losses and gains on non-operating properties (net of related tax adjustments), gains (losses) on early extinguishment of debt, derivative losses, executive transition costs and write-offs of original issuance costs for redeemed preferred shares.


i

Operating Performance:
Portfolio Summary - At December 31, 2014, the Company’s operating portfolio of 173 operating office properties totaled 16.8 million square feet that were 90.9% occupied and 92.4% leased.

Same Office Performance - At December 31, 2014, COPT’s same office portfolio represented 89.4% of the rentable square feet of the portfolio, consisted of 160 properties and was 91.3% occupied and 92.5% leased.

For the quarter ended December 31, 2014, the Company’s same office property cash NOI, excluding gross lease termination fees, increased 3.6% as compared to the quarter ended December 31, 2013. For the full year, same office property cash NOI, excluding gross lease termination fees, increased 1.3% as compared to 2013.

Leasing - COPT completed a total of 1.0 million and 3.0 million square feet of leasing, respectively, for the quarter and year ended December 31, 2014. During these same periods, the Company’s respective renewal rates were 63% and 70%.

In the fourth quarter, lease terms on renewals averaged 5.8 years and for development and other new leases averaged 11.5 years. During the full year, average lease terms on renewals were 5.0 years and on development and other new leases were 9.3 years.

For the quarter and year ended December 31, 2014, total rent on renewed space increased 9.7% and 7.3%, respectively, as measured on a GAAP basis; on a cash basis, renewal rates were flat in the fourth quarter of 2014 and declined 2.2% for the year as compared to the expiring rents.

During the fourth quarter, leasing highlights include:
•
long-term lease with a subsidiary of an investment-grade Fortune 500 company to deliver a 120,000 square foot shell building on land the Company owns in Ashburn, VA (Ashburn Crossing). This will be the third building of a three-building campus. The Company has commenced construction of the building in anticipation of a lease start date in the first quarter of 2015.
•
full-building lease on a 240,000 square foot, Class A office development in Northern Virginia. The project has been leased to a customer in the Company’s strategic tenant niche for a multi-year lease term. The lease start date is anticipated to be the second quarter of 2017.
•
lease for 0.3 mega watts at COPT DC-6 in Manassas, VA.

Investment Activity:
Developments - The Company has ten properties totaling 1.5 million square feet under construction for a total projected cost of $331.9 million, of which $172.4 million had been incurred which were 75% leased. COPT has 344,000 square feet in five properties under redevelopment which were 41% leased.

Dispositions - During 2014, the Company disposed of eight buildings aggregating 303,000 square feet and non-strategic land for $57.1 million.

Balance Sheet and Capital Transactions:
As of December 31, 2014, the Company’s debt to adjusted book ratio was 39.7%, adjusted debt to in-place adjusted EBITDA ratio was 6.3x, and, for the three months ended December 31, 2014, its adjusted EBITDA fixed charge coverage ratio was 2.8x. Also, the Company’s weighted average interest rate was 4.2% for the quarter ended December 31, 2014 and, including the effect of interest rate swaps, 89% of the Company’s debt was subject to fixed interest rates.

In May, the Company issued $300 million of 3.70% senior unsecured notes due June 15, 2021 at a price equal to 99.739% of the principal amount. Also in May, the Company redeemed all of its 2,000,000 outstanding

ii

7.5% Series H Cumulative Redeemable Preferred Shares, at a price of $25.3230 per share including accrued and unpaid dividends through the date of redemption.

In November, the Company completed its public offering of 5,520,000 newly issued common shares, which reflects the full exercise by the underwriter of its option to purchase 720,000 shares. The offering generated net proceeds of approximately $148.7 million, after the underwriting discount and offering-related expenses payable by the Company.

In early December, the Company, using primarily proceeds from the November common stock offering defeased $211.5 million of secured non-recourse debt.

Conference Call Information:
Management will discuss fourth quarter and full year 2014 earnings results, as well as its 2015 guidance, on its conference call today at 12:00 p.m. Eastern Time, details of which are listed below:

Earnings Release Date:    Tuesday, February 10, 2015 at 6:00 a.m. Eastern Time
Conference Call Date:     Tuesday, February 10, 2015
Time:     12:00 p.m. Eastern Time
Telephone Number: (within the U.S.)     888-713-4199
Telephone Number: (outside the U.S.)    617-213-4861
Passcode:    44019327

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=PL46J93RD

You may also pre-register in the Investors 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 Tuesday, February 10 at 4:00 p.m. Eastern Time through Tuesday, February 24 at midnight Eastern Time. To access the replay within the United States, please call 888-286-8010 and use passcode 70008103. To access the replay outside the United States, please call 617-801-6888 and use passcode 70008103.

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.

iii

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 December 31, 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 December 31, 2014, the Company’s consolidated portfolio consisted of 173 office properties totaling 16.8 million rentable square feet. COPT is an S&P MidCap 400 company.

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

Important factors that may affect these expectations, estimates, and projections include, but are not limited to:
*
general economic and business conditions, which will, among other things, affect office property and data center demand and rents, tenant creditworthiness, interest rates, financing availability and property values;
*
adverse changes in the real estate markets including, among other things, increased competition with other companies;
*
governmental actions and initiatives, including risks associated with the impact of a 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 December 31,
 
For the Year Ended December 31,
 
2014
 
2013
 
2014
 
2013
Revenues
 

 
 

 
 
 
 
Real estate revenues
$
120,613

 
$
118,487

 
$
479,725

 
$
460,997

Construction contract and other service revenues
26,358

 
10,315

 
106,748

 
62,363

Total revenues
146,971

 
128,802

 
586,473

 
523,360

Expenses
 

 
 

 
 
 
 
Property operating expenses
43,334

 
44,117

 
179,934

 
167,199

Depreciation and amortization associated with real estate operations
31,358

 
30,326

 
136,086

 
113,214

Construction contract and other service expenses
24,705

 
9,710

 
100,058

 
58,875

Impairment losses
48

 
—

 
1,416

 
5,857

General and administrative expenses
7,206

 
6,523

 
24,841

 
23,736

Leasing expenses
1,706

 
1,916

 
6,953

 
7,133

Business development expenses and land carry costs
1,466

 
1,367

 
5,573

 
5,436

Total operating expenses
109,823

 
93,959

 
454,861

 
381,450

Operating income
37,148

 
34,843


131,612


141,910

Interest expense
(23,286
)
 
(21,276
)
 
(92,393
)
 
(82,010
)
Interest and other income
1,148

 
885

 
4,923

 
3,834

Loss on early extinguishment of debt
(9,106
)
 
(2
)
 
(9,552
)
 
(27,030
)
Income from continuing operations before equity in income of unconsolidated entities and income taxes
5,904

 
14,450

 
34,590

 
36,704

Equity in income of unconsolidated entities
23

 
1,899

 
229

 
2,110

Income tax expense
(53
)
 
(1,917
)
 
(310
)
 
(1,978
)
Income from continuing operations
5,874

 
14,432

 
34,509

 
36,836

Discontinued operations
22

 
71,907

 
26

 
55,692

Income before gain on sales of real estate
5,896

 
86,339

 
34,535

 
92,528

Gain on sales of real estate, net of income taxes
41

 
6,333

 
10,671

 
9,016

Net income
5,937

 
92,672

 
45,206

 
101,544

Net income attributable to noncontrolling interests
 

 
 

 
 
 
 
Common units in the Operating Partnership
(64
)
 
(3,757
)
 
(1,006
)
 
(3,283
)
Preferred units in the Operating Partnership
(165
)
 
(165
)
 
(660
)
 
(660
)
Other consolidated entities
(804
)
 
(1,734
)
 
(3,285
)
 
(3,894
)
Net income attributable to COPT
4,904

 
87,016

 
40,255

 
93,707

Preferred share dividends
(3,552
)
 
(4,490
)
 
(15,939
)
 
(19,971
)
Issuance costs associated with redeemed preferred shares
—

 
—

 
(1,769
)
 
(2,904
)
Net income attributable to COPT common shareholders
$
1,352

 
$
82,526

 
$
22,547

 
$
70,832

 
 
 
 
 
 
 
 
Earnings per share (“EPS”) computation:
 

 
 

 
 
 
 
Numerator for diluted EPS:
 

 
 

 
 
 
 
Net income attributable to common shareholders
$
1,352

 
$
82,526

 
$
22,547

 
$
70,832

Amount allocable to restricted shares
(100
)
 
(348
)
 
(432
)
 
(414
)
Numerator for diluted EPS
$
1,252

 
$
82,178

 
$
22,115

 
$
70,418

 
 
 
 
 
 
 
 
Denominator:
 

 
 

 
 
 
 
Weighted average common shares - basic
90,752

 
87,010

 
88,092

 
85,167

Dilutive effect of share-based compensation awards
196

 
42

 
171

 
57

Weighted average common shares - diluted
90,948

 
87,052

 
88,263

 
85,224

Diluted EPS
$
0.01

 
$
0.94

 
$
0.25

 
$
0.83


v


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

 
For the Three Months Ended December 31,
 
For the Year Ended December 31,
 
2014
 
2013
 
2014
 
2013
Net income
$
5,937

 
$
92,672

 
$
45,206

 
$
101,544

Real estate-related depreciation and amortization
31,358

 
31,322

 
136,086

 
117,719

Impairment losses on previously depreciated operating properties
48

 
921

 
1,370

 
32,047

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

 
(9,004
)
 
(5,117
)
 
(9,004
)
Funds from operations (“FFO”)
37,345

 
115,911

 
177,545

 
242,306

Noncontrolling interests - preferred units in the Operating Partnership
(165
)
 
(165
)
 
(660
)
 
(660
)
FFO allocable to other noncontrolling interests
(867
)
 
(880
)
 
(3,216
)
 
(3,710
)
Preferred share dividends
(3,552
)
 
(4,490
)
 
(15,939
)
 
(19,971
)
Issuance costs associated with redeemed preferred shares
—

 
—

 
(1,769
)
 
(2,904
)
Basic and diluted FFO allocable to restricted shares
(123
)
 
(462
)
 
(665
)
 
(912
)
Basic and diluted FFO available to common share and common unit holders (“Basic and diluted FFO”)
32,638

 
109,914

 
155,296

 
214,149

Gain on sales of non-operating properties
(43
)
 
—

 
(5,578
)
 
(2,683
)
Impairment losses on other properties
—

 
—

 
49

 
—

Valuation allowance on tax asset associated with FFO comparability adjustments
—

 
1,855

 
—

 
1,855

Loss (gain) on early extinguishment of debt
9,106

 
(67,808
)
 
9,668

 
(40,780
)
Issuance costs associated with redeemed preferred shares
—

 
—

 
1,769

 
2,904

Add: Negative FFO of properties to be conveyed to extinguish debt in default (1)
3,493

 
—

 
10,928

 
—

Executive transition costs
1,056

 
—

 
1,056

 
—

Diluted FFO comparability adjustments allocable to restricted shares
(59
)
 
168

 
(78
)
 
168

Diluted FFO available to common share and common unit holders, as adjusted for comparability
46,191

 
44,129

 
173,110

 
175,613

Straight line rent adjustments
(379
)
 
3,157

 
(1,820
)
 
(3,667
)
Straight line rent adjustments - properties in default to be conveyed
(47
)
 
—

 
(142
)
 
—

Amortization of intangibles included in net operating income
208

 
224

 
855

 
803

Share-based compensation, net of amounts capitalized
1,504

 
1,661

 
6,067

 
6,530

Amortization of deferred financing costs
1,020

 
1,159

 
4,666

 
5,451

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

 
—

 
(333
)
 
—

Amortization of net debt discounts, net of amounts capitalized
261

 
(48
)
 
920

 
1,015

Amortization of settled debt hedges
11

 
15

 
57

 
61

Recurring capital expenditures
(8,633
)
 
(21,935
)
 
(50,199
)
 
(43,633
)
Diluted adjusted funds from operations available to common share and common unit holders (“Diluted AFFO”)
$
40,136

 
$
28,362

 
$
133,181

 
$
142,173

Diluted FFO per share
$
0.34

 
$
1.21

 
$
1.69

 
$
2.40

Diluted FFO per share, as adjusted for comparability
$
0.49

 
$
0.48

 
$
1.88

 
$
1.97

Dividends/distributions per common share/unit
$
0.275

 
$
0.275

 
$
1.100

 
$
1.100


(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)

 
 
December 31,
2014
 
December 31,
2013
Balance Sheet Data
 
 

 
 

Properties, net of accumulated depreciation
 
$
3,296,914

 
$
3,214,301

Total assets
 
3,670,257

 
3,629,952

Debt, net
 
1,920,057

 
1,927,703

Total liabilities
 
2,130,956

 
2,114,945

Redeemable noncontrolling interest
 
18,417

 
17,758

Equity
 
1,520,884

 
1,497,249

Debt to adjusted book
 
39.7
%
 
43.6
%
Debt to total market capitalization
 
39.3
%
 
44.3
%
 
 
 
 
 
Core Portfolio Data (as of period end) (1)
 
 

 
 

Number of operating properties
 
173

 
177

Total net rentable square feet owned (in thousands)
 
16,790

 
16,045

Occupancy %
 
90.9
%
 
88.7
%
Leased %
 
92.4
%
 
90.0
%
 
 
 
 
 
 
For the Three Months Ended December 31,
 
For the Year Ended December 31,
2014
 
2013
 
2014
 
2013
Payout ratios
 

 
 

 
 

 
 

Diluted FFO
81.8
%
 
22.9
%
 
65.8
%
 
46.5
%
Diluted FFO, as adjusted for comparability
57.8
%
 
56.9
%
 
59.0
%
 
56.7
%
Diluted AFFO
66.5
%
 
88.6
%
 
76.7
%
 
70.0
%
Adjusted EBITDA interest coverage ratio
4.0
x
 
3.3
x
 
3.7
x
 
3.5
x
Adjusted EBITDA fixed charge coverage ratio
2.8
x
 
2.4
x
 
2.7
x
 
2.4
x
Adjusted debt to in-place adjusted EBITDA ratio (2)
6.3
x
 
6.8
x
 
N/A

 
N/A

 
 
 
 
 
 
 
 
Reconciliation of denominators for diluted EPS and diluted FFO per share
 
 

 
 
 
 
Denominator for diluted EPS
90,948

 
87,052

 
88,263

 
85,224

Weighted average common units
3,846

 
3,978

 
3,897

 
3,869

Denominator for diluted FFO per share
94,794

 
91,030

 
92,160

 
89,093

 
 
 
 
 
 
 
 
Reconciliation of FFO to FFO, as adjusted for comparability
 

 
 

 
 

 
 

FFO, per NAREIT
$
37,345

 
$
115,911

 
$
177,545

 
$
242,306

Gain on sales of non-operating properties
(43
)
 
—

 
(5,578
)
 
(2,683
)
Impairment losses on non-operating properties, net of associated tax
—

 
—

 
49

 
—

Valuation allowance on tax asset associated with FFO comparability adjustments
—

 
1,855

 
—

 
1,855

Loss (gain) on early extinguishment of debt, continuing and discontinued operations
9,106

 
(67,808
)
 
9,668

 
(40,780
)
Issuance costs associated with redeemed preferred shares
—

 
—

 
1,769

 
2,904

Add: Negative FFO of properties to be conveyed to extinguish debt in default
3,493

 
—

 
10,928

 
—

Executive transition costs
1,056

 
—

 
1,056

 
—

FFO, as adjusted for comparability
$
50,957

 
$
49,958

 
$
195,437

 
$
203,602


(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 December 31,
 
For the Year Ended December 31,
 
2014
 
2013
 
2014
 
2013
Reconciliation of common share dividends to dividends and distributions for payout ratios
 

 
 

 
 
 
 
Common share dividends
$
25,638

 
$
24,026

 
$
97,944

 
$
95,246

Common unit distributions
1,055

 
1,094

 
4,270

 
4,280

Dividends and distributions for payout ratios
$
26,693

 
$
25,120

 
$
102,214

 
$
99,526

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

 
 

 
 

 
 

Net income
$
5,937

 
$
92,672

 
$
45,206

 
$
101,544

Interest expense on continuing operations
23,286

 
21,276

 
92,393

 
82,010

Interest expense on discontinued operations
—

 
1,905

 
—

 
8,221

Income tax expense
53

 
1,917

 
310

 
1,978

Real estate-related depreciation and amortization
31,358

 
31,322

 
136,086

 
117,719

Depreciation of furniture, fixtures and equipment
513

 
495

 
2,404

 
2,054

Impairment losses
48

 
921

 
1,419

 
32,047

Loss (gain) on early extinguishment of debt on continuing and discontinued operations
9,106

 
(67,808
)
 
9,668

 
(40,780
)
Loss (gain) on sales of operating properties
2

 
(9,004
)
 
(5,117
)
 
(9,004
)
Gain on sales of non-operational properties
(43
)
 
—

 
(5,578
)
 
(2,683
)
Net (gain) loss on investments in unconsolidated entities included in interest and other income
(74
)
 
221

 
291

 
206

EBITDA of properties to be conveyed to extinguish debt in default
(828
)
 
—

 
(2,091
)
 
—

Executive transition costs
1,056

 
—

 
1,056

 
—

Adjusted EBITDA
$
70,414

 
$
73,917

 
$
276,047

 
$
293,312

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

 
(5,107
)
 
 
 
 
Adjusted and in-place adjusted EBITDA
$
70,414

 
$
68,810

 

 

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

 
 

 
 

 
 

Interest expense from continuing operations
$
23,286

 
$
21,276

 
$
92,393

 
$
82,010

Interest expense from discontinued operations
—

 
1,905

 
—

 
8,221

Less: Amortization of deferred financing costs
(1,020
)
 
(1,159
)
 
(4,666
)
 
(5,451
)
Less: Amortization of net debt discount, net of amounts capitalized
(261
)
 
48

 
(920
)
 
(1,015
)
Less: Interest exp. on debt in default to be extin. via conveyance of properties
(4,320
)
 
—

 
(12,684
)
 
—

Denominator for interest coverage-Adjusted EBITDA
17,685

 
22,070

 
74,123

 
83,765

Scheduled principal amortization
1,603

 
2,252

 
6,517

 
9,481

Capitalized interest
1,740

 
2,042

 
6,065

 
8,785

Preferred share dividends
3,552

 
4,490

 
15,939

 
19,971

Preferred unit distributions
165

 
165

 
660

 
660

Denominator for fixed charge coverage-Adjusted EBITDA
$
24,745

 
$
31,019

 
$
103,304

 
$
122,662

 
 
 
 
 
 
 
 

viii


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

 
For the Three Months Ended December 31,
 
For the Year Ended December 31,
 
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
$
7,239

 
$
6,430

 
$
29,651

 
$
17,413

Building improvements on operating properties
4,974

 
12,898

 
23,432

 
21,893

Leasing costs for operating properties
1,341

 
4,286

 
8,536

 
9,400

Less: Nonrecurring tenant improvements and incentives on operating properties
(1,747
)
 
—

 
(2,734
)
 
(238
)
Less: Nonrecurring building improvements on operating properties
(3,012
)
 
(1,381
)
 
(8,281
)
 
(4,494
)
Less: Nonrecurring leasing costs for operating properties
(162
)
 
(275
)
 
(405
)
 
(311
)
Add: Recurring capital expenditures on operating properties held through joint ventures
—

 
(23
)
 
—

 
(30
)
Recurring capital expenditures
$
8,633

 
$
21,935

 
$
50,199

 
$
43,633

 
 
 
 
 
 
 
 
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
$
68,861

 
$
66,162

 
$
269,593

 
$
267,742

Less: Straight-line rent adjustments
(1,857
)
 
(999
)
 
(3,798
)
 
(4,831
)
Less: Amortization of deferred market rental revenue
(2
)
 
1

 
17

 
(38
)
Add: Amortization of below-market cost arrangements
272

 
319

 
1,089

 
1,277

Same office property cash net operating income
67,274

 
65,483

 
266,901

 
264,150

Less: Lease termination fees, gross
(741
)
 
(1,249
)
 
(1,618
)
 
(2,270
)
Same office property cash net operating income, excluding gross lease termination fees
$
66,533

 
$
64,234

 
$
265,283

 
$
261,880

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

 
 

Total assets
 
$
3,670,257

 
$
3,629,952

Accumulated depreciation
 
703,083

 
597,649

Accumulated amortization of real estate intangibles and deferred leasing costs
 
214,611

 
193,142

Less: Adjusted book assoc. with properties to be conveyed to extinguish debt in default
 
(131,118
)
 
—

Adjusted book
 
$
4,456,833

 
$
4,420,743

 
 
 
 
 
Reconciliation of debt to adjusted debt
 
 
 
 
Debt, net
 
$
1,920,057

 
$
1,927,703

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

Numerator for debt to adjusted book ratio
 
1,770,057

 
1,927,703

Less: Cash and cash equivalents
 
(6,077
)
 
(54,373
)
Adjusted debt
 
$
1,763,980

 
$
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 December 31, 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 their 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 December 31, 2014, COPT’s core portfolio of 173 office properties encompassed 16.8 million square feet and was 92% leased. As of the same date, COPT also owned one wholesale data center that was 73% leased.
 
Corporate Strategy: COPT’s customer strategy focuses on serving the specialized requirements of United States Government agencies and their contractors, most of whom are engaged in national security and information technology 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
Anthony Mifsud, 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
Credit Suisse
 
Ian Weissman
 
917-846-3831
 
ian.weissman@credit-suisse.com
Evercore ISI
 
Steve Sakwa
 
212-446-9462
 
steve.sakwa@evercoreisi.com
Green Street Advisors
 
John Bejjani
 
949-640-8780
 
jbejjani@greenstreetadvisors.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
Mizuho Securities USA Inc.
 
Richard Anderson
 
212-205-8445
 
richard.anderson@us.mizuho-sc.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
 
Years Ended
SUMMARY OF RESULTS 
 
12/31/14
 
9/30/14
 
6/30/14
 
3/31/14
 
12/31/13
 
12/31/14
 
12/31/13
Same Office NOI
 
$
68,861

 
$
67,941

 
$
67,086

 
$
65,705

 
$
66,162

 
$
269,593

 
$
267,742

NOI from real estate operations
 
$
77,301

 
$
75,359

 
$
72,108

 
$
75,144

 
$
79,621

 
$
299,912

 
$
317,929

Adjusted EBITDA
 
$
70,414

 
$
69,122

 
$
65,800

 
$
70,711

 
$
73,917

 
$
276,047

 
$
293,312

Net income attributable to COPT common shareholders
 
$
1,352

 
$
19,167

 
$
1,777

 
$
251

 
$
82,526

 
$
22,547

 
$
70,832

FFO - per NAREIT
 
$
37,345

 
$
49,655

 
$
41,273

 
$
49,272

 
$
115,911

 
$
177,545

 
$
242,306

FFO - as adjusted for comparability
 
$
50,957

 
$
48,151

 
$
47,034

 
$
49,295

 
$
49,958

 
$
195,437

 
$
203,602

Basic and diluted FFO available to common share and common unit holders
 
$
32,638

 
$
44,916

 
$
34,091

 
$
43,651

 
$
109,914

 
$
155,296

 
$
214,149

Diluted FFO available to common share and common unit holders, as adjusted for comparability
 
$
46,191

 
$
43,419

 
$
39,826

 
$
43,674

 
$
44,129

 
$
173,110

 
$
175,613

Diluted AFFO avail. to common share and common unit holders
 
$
40,136

 
$
28,977

 
$
27,561

 
$
36,507

 
$
28,362

 
$
133,181

 
$
142,173

Per share - diluted:
 
 

 
 

 
 

 
 

 
 

 
 

 
 
EPS
 
$
0.01

 
$
0.22

 
$
0.02

 
$
0.00

 
$
0.94

 
$
0.25

 
$
0.83

FFO - NAREIT
 
$
0.34

 
$
0.49

 
$
0.37

 
$
0.48

 
$
1.21

 
$
1.69

 
$
2.40

FFO - as adjusted for comparability
 
$
0.49

 
$
0.48

 
$
0.44

 
$
0.48

 
$
0.48

 
$
1.88

 
$
1.97

Dividend per common share
 
$
0.275

 
$
0.275

 
$
0.275

 
$
0.275

 
$
0.275

 
$
1.100

 
$
1.100

Payout ratios:
 
 

 
 

 
 

 
 

 
 

 
 

 
 
Diluted FFO
 
81.8
%
 
56.0
%
 
73.8
%
 
57.7
%
 
22.9
%
 
65.8
%
 
46.5
%
Diluted FFO - as adjusted for comparability
 
57.8
%
 
58.0
%
 
63.2
%
 
57.6
%
 
56.9
%
 
59.0
%
 
56.7
%
Diluted AFFO
 
66.5
%
 
86.9
%
 
91.3
%
 
69.0
%
 
88.6
%
 
76.7
%
 
70.0
%
Rental revenue operating margin
 
79.0
%
 
78.3
%
 
76.4
%
 
76.7
%
 
77.6
%
 
77.6
%
 
78.5
%
CAPITALIZATION
 
 

 
 

 
 
 
 

 
 

 
 

 
 
Total Market Capitalization
 
$
4,882,468

 
$
4,613,107

 
$
4,853,704

 
$
4,627,913

 
$
4,350,189

 
 
 
 
Total Equity Market Capitalization
 
$
2,962,411

 
$
2,563,115

 
$
2,754,361

 
$
2,696,082

 
$
2,422,486

 
 
 
 
Debt, net
 
$
1,920,057

 
$
2,049,992

 
$
2,099,343

 
$
1,931,831

 
$
1,927,703

 
 
 
 
Debt to Total Market Capitalization
 
39.3
%
 
44.4
%
 
43.3
%
 
41.7
%
 
44.3
%
 
 
 
 
Debt to Adjusted book
 
39.7
%
 
42.8
%
 
43.9
%
 
43.5
%
 
43.6
%
 
 
 
 
Adjusted EBITDA interest coverage ratio
 
4.0
x
 
3.6
x
 
3.7
x
 
3.6
x
 
3.3
x
 
3.7
x
 
3.5
x
Adjusted EBITDA debt service coverage ratio
 
3.7
x
 
3.4
x
 
3.4
x
 
3.3
x
 
3.0
x
 
3.4
x
 
3.1
x
Adjusted EBITDA fixed charge coverage ratio
 
2.8
x
 
2.7
x
 
2.6
x
 
2.6
x
 
2.4
x
 
2.7
x
 
2.4
x
Adjusted debt to in-place adjusted EBITDA ratio
 
6.3
x
 
6.7
x
 
7.1
x
 
6.8
x
 
6.8
x
 
N/A

 
N/A

OTHER
 
 

 
 

 
 

 
 

 
 

 
 

 
 
Revenue from early termination of leases
 
$
611

 
$
239

 
$
72

 
$
1,112

 
$
1,676

 
$
2,034

 
$
4,682

Capitalized interest costs
 
$
1,740

 
$
1,314

 
$
1,422

 
$
1,589

 
$
2,042

 
$
6,065

 
$
8,785



3

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

 
 

 
 

 
 

 
 

 
# of Operating Office Properties
 
 
 
 
 
 
 
 
 
 
Total Portfolio
173

 
174

 
180

 
183

 
183

 
Core Portfolio
173

 
174

 
172

 
181

 
177

 
Same Office Properties
160

 
160

 
160

 
160

 
160

 
 
 
 
 
 
 
 
 
 
 
 
% Occupied
 
 
 
 
 
 
 
 
 
 
Total Portfolio
90.9
%
 
91.5
%
 
89.3
%
 
89.8
%
 
89.1
%
 
Core Portfolio
90.9
%
 
91.5
%
 
90.0
%
 
89.7
%
 
88.7
%
 
Same Office Properties
91.3
%
 
92.5
%
 
91.2
%
 
91.5
%
 
91.0
%
 
 
 
 
 
 
 
 
 
 
 
 
% Leased
 
 
 
 
 
 
 
 
 
 
Total Portfolio
92.4
%
 
93.0
%
 
91.4
%
 
91.1
%
 
90.3
%
 
Core Portfolio
92.4
%
 
93.0
%
 
92.2
%
 
91.0
%
 
90.0
%
 
Same Office Properties
92.5
%
 
93.7
%
 
93.3
%
 
93.0
%
 
92.3
%
 
 
 
 
 
 
 
 
 
 
 
 
Square Feet of Office Properties (in thousands)
 
 
 
 
 
 
 
 
 
 
Total Portfolio
16,790

 
16,863

 
16,923

 
17,473

 
17,370

 
Core Portfolio
16,790

 
16,863

 
16,620

 
16,808

 
16,045

 
Same Office Properties
15,019

 
15,019

 
15,019

 
15,019

 
15,019

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

 
18

 
18

 
18

 
18

 
MWs Operational
9

 
9

 
9

 
9

 
9

 
MWs Leased
6.56

 
6.26

 
6.26

 
6.26

 
6.26

 
 
 
 
 
 
 
 
 
 
 
 

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

 
 

 
 

 
 

 
 

Properties, net
 

 
 

 
 

 
 

 
 

Operating properties, net
$
2,751,488

 
$
2,757,207

 
$
2,724,242

 
$
2,729,003

 
$
2,702,693

Construction and redevelopment in progress, including land (1)
222,146

 
167,618

 
168,996

 
159,468

 
160,436

Land held for future development (1)
323,280

 
346,331

 
361,004

 
336,157

 
351,172

Total properties, net
3,296,914

 
3,271,156

 
3,254,242

 
3,224,628

 
3,214,301

Assets held for sale
14,339

 
—

 
22,868

 
—

 
—

Cash and cash equivalents
6,077

 
40,018

 
76,216

 
18,374

 
54,373

Restricted cash and marketable securities
9,069

 
14,371

 
11,689

 
10,965

 
11,448

Accounts receivable, net
26,901

 
20,180

 
30,911

 
30,152

 
27,000

Deferred rent receivable, net
95,910

 
95,405

 
93,270

 
91,082

 
89,456

Intangible assets on real estate acquisitions, net
43,854

 
48,300

 
51,645

 
55,678

 
59,258

Deferred leasing and financing costs, net
64,797

 
65,009

 
65,251

 
65,855

 
66,267

Mortgage and other investing receivables
52,147

 
50,886

 
56,549

 
55,231

 
53,663

Prepaid expenses and other assets
60,249

 
74,863

 
46,859

 
53,932

 
54,186

Total assets
$
3,670,257

 
$
3,680,188

 
$
3,709,500

 
$
3,605,897

 
$
3,629,952

Liabilities and equity
 

 
 

 
 

 
 

 
 

Liabilities:
 

 
 

 
 

 
 

 
 

Debt, net
$
1,920,057

 
$
2,049,992

 
$
2,099,343

 
$
1,931,831

 
$
1,927,703

Accounts payable and accrued expenses
123,035

 
123,893

 
105,205

 
97,451

 
98,785

Rents received in advance and security deposits
31,011

 
33,075

 
27,520

 
28,267

 
31,492

Dividends and distributions payable
29,862

 
28,344

 
28,342

 
29,122

 
29,080

Deferred revenue associated with operating leases
13,031

 
13,420

 
12,355

 
12,281

 
10,369

Interest rate derivatives
1,855

 
2,236

 
3,236

 
3,196

 
3,309

Other liabilities
12,105

 
13,288

 
14,818

 
13,060

 
14,207

Total liabilities
2,130,956

 
2,264,248

 
2,290,819

 
2,115,208

 
2,114,945

Redeemable noncontrolling interest
18,417

 
18,436

 
18,901

 
17,654

 
17,758

Equity:
 

 
 

 
 

 
 
 
 
COPT’s shareholders’ equity:
 

 
 

 
 

 
 
 
 
Preferred shares at liquidation preference
199,083

 
199,083

 
199,083

 
249,083

 
249,083

Common shares
933

 
877

 
877

 
876

 
874

Additional paid-in capital
1,969,968

 
1,822,283

 
1,819,436

 
1,816,467

 
1,814,015

Cumulative distributions in excess of net income
(717,264
)
 
(692,978
)
 
(688,033
)
 
(665,708
)
 
(641,868
)
Accumulated other comprehensive income (loss)
(1,297
)
 
871

 
(761
)
 
2,072

 
3,480

Total COPT’s shareholders’ equity
1,451,423

 
1,330,136

 
1,330,602

 
1,402,790

 
1,425,584

Noncontrolling interests in subsidiaries
 

 
 

 
 

 
 

 
 

Common units in the Operating Partnership
51,534

 
49,781

 
50,323

 
51,757

 
53,468

Preferred units in the Operating Partnership
8,800

 
8,800

 
8,800

 
8,800

 
8,800

Other consolidated entities
9,127

 
8,787

 
10,055

 
9,688

 
9,397

Total noncontrolling interests in subsidiaries
69,461

 
67,368

 
69,178

 
70,245

 
71,665

Total equity
1,520,884

 
1,397,504

 
1,399,780

 
1,473,035

 
1,497,249

Total liabilities, redeemable noncontrolling interest and equity
$
3,670,257

 
$
3,680,188

 
$
3,709,500

 
$
3,605,897

 
$
3,629,952

(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
 
Years Ended
 
12/31/14
 
9/30/14
 
6/30/14
 
3/31/14
 
12/31/13
 
12/31/14
 
12/31/13
Revenues
 

 
 

 
 

 
 

 
 

 
 
 
 
Rental revenue
$
97,822

 
$
96,207

 
$
94,332

 
$
98,035

 
$
96,700

 
$
386,396

 
$
377,611

Tenant recoveries and other real estate operations revenue
22,791

 
22,069

 
21,627

 
26,842

 
21,787

 
93,329

 
83,386

Construction contract and other service revenues
26,358

 
34,739

 
23,861

 
21,790

 
10,315

 
106,748

 
62,363

Total revenues
146,971

 
153,015

 
139,820

 
146,667

 
128,802

 
586,473

 
523,360

Expenses
 

 
 

 
 

 
 

 
 

 
 
 
 
Property operating expenses
43,334

 
43,056

 
43,772

 
49,772

 
44,117

 
179,934

 
167,199

Depreciation and amortization associated with real estate operations
31,358

 
30,237

 
30,895

 
43,596

 
30,326

 
136,086

 
113,214

Construction contract and other service expenses
24,705

 
33,593

 
23,136

 
18,624

 
9,710

 
100,058

 
58,875

Impairment losses
48

 
66

 
1,302

 
—

 
—

 
1,416

 
5,857

General and administrative expenses
7,206

 
5,662

 
5,815

 
6,158

 
6,523

 
24,841

 
23,736

Leasing expenses
1,706

 
1,549

 
1,713

 
1,985

 
1,916

 
6,953

 
7,133

Business development expenses and land carry costs
1,466

 
1,430

 
1,351

 
1,326

 
1,367

 
5,573

 
5,436

Total operating expenses
109,823

 
115,593

 
107,984

 
121,461

 
93,959

 
454,861

 
381,450

Operating income
37,148

 
37,422

 
31,836

 
25,206

 
34,843

 
131,612

 
141,910

Interest expense
(23,286
)
 
(24,802
)
 
(23,478
)
 
(20,827
)
 
(21,276
)
 
(92,393
)
 
(82,010
)
Interest and other income
1,148

 
1,191

 
1,299

 
1,285

 
885

 
4,923

 
3,834

Loss on early extinguishment of debt
(9,106
)
 
(176
)
 
(270
)
 
—

 
(2
)
 
(9,552
)
 
(27,030
)
Income from continuing operations before equity in income (loss) of unconsolidated entities and income taxes
5,904

 
13,635

 
9,387

 
5,664

 
14,450

 
34,590

 
36,704

Equity in income (loss) of unconsolidated entities
23

 
193

 
(47
)
 
60

 
1,899

 
229

 
2,110

Income tax expense
(53
)
 
(101
)
 
(92
)
 
(64
)
 
(1,917
)
 
(310
)
 
(1,978
)
Income from continuing operations
5,874

 
13,727

 
9,248

 
5,660

 
14,432

 
34,509

 
36,836

Discontinued operations
22

 
191

 
(198
)
 
11

 
71,907

 
26

 
55,692

Income before gain on sales of real estate
5,896

 
13,918

 
9,050

 
5,671

 
86,339

 
34,535

 
92,528

Gain on sales of real estate
41

 
10,630

 
—

 
—

 
6,333

 
10,671

 
9,016

Net income
5,937

 
24,548

 
9,050

 
5,671

 
92,672

 
45,206

 
101,544

Net income attributable to noncontrolling interests
 

 
 

 
 

 
 

 
 

 
 
 
 
Common units in the Operating Partnership
(64
)
 
(768
)
 
(158
)
 
(16
)
 
(3,757
)
 
(1,006
)
 
(3,283
)
Preferred units in the Operating Partnership
(165
)
 
(165
)
 
(165
)
 
(165
)
 
(165
)
 
(660
)
 
(660
)
Other consolidated entities
(804
)
 
(895
)
 
(837
)
 
(749
)
 
(1,734
)
 
(3,285
)
 
(3,894
)
Net income attributable to COPT
4,904

 
22,720

 
7,890

 
4,741

 
87,016

 
40,255

 
93,707

Preferred share dividends
(3,552
)
 
(3,553
)
 
(4,344
)
 
(4,490
)
 
(4,490
)
 
(15,939
)
 
(19,971
)
Issuance costs associated with redeemed preferred shares
—

 
—

 
(1,769
)
 
—

 
—

 
(1,769
)
 
(2,904
)
Net income attributable to COPT common shareholders
$
1,352

 
$
19,167

 
$
1,777

 
$
251

 
$
82,526

 
$
22,547

 
$
70,832

 
 
 
 
 
 
 
 
 
 
 
 
 
 

6

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

 
 

 
 

 
 

 
 

 
 
 
 
Numerator for diluted EPS
 

 
 

 
 

 
 

 
 

 
 
 
 
Net income attributable to common shareholders
$
1,352

 
$
19,167

 
$
1,777

 
$
251

 
$
82,526

 
$
22,547

 
$
70,832

Amount allocable to restricted shares
(100
)
 
(103
)
 
(108
)
 
(121
)
 
(348
)
 
(432
)
 
(414
)
Numerator for diluted EPS
$
1,252

 
$
19,064

 
$
1,669

 
$
130

 
$
82,178

 
$
22,115

 
$
70,418

Denominator:
 

 
 

 
 

 
 

 
 

 
 
 
 
Weighted average common shares - basic
90,752

 
87,290

 
87,214

 
87,080

 
87,010

 
88,092

 
85,167

Dilutive effect of share-based compensation awards
196

 
195

 
201

 
112

 
42

 
171

 
57

Weighted average common shares - diluted
90,948

 
87,485

 
87,415

 
87,192

 
87,052

 
88,263

 
85,224

Diluted EPS
$
0.01

 
$
0.22

 
$
0.02

 
$
0.00

 
$
0.94

 
$
0.25

 
$
0.83


7

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

 
 

 
 

 
 

 
 

 
 
 
 
Real estate revenues
$
120,611

 
$
118,240

 
$
115,964

 
$
124,896

 
$
126,720

 
$
479,711

 
$
498,633

Real estate property operating expenses
(43,310
)
 
(42,881
)
 
(43,856
)
 
(49,752
)
 
(47,099
)
 
(179,799
)
 
(180,704
)
NOI from real estate operations
77,301

 
75,359

 
72,108

 
75,144

 
79,621

 
299,912

 
317,929

General and administrative expenses
(7,206
)
 
(5,662
)
 
(5,815
)
 
(6,158
)
 
(6,523
)
 
(24,841
)
 
(23,736
)
Leasing expenses (2)
(1,706
)
 
(1,549
)
 
(1,713
)
 
(1,985
)
 
(1,919
)
 
(6,953
)
 
(7,137
)
Business development expenses and land carry costs (2)
(1,466
)
 
(1,430
)
 
(1,351
)
 
(1,326
)
 
(1,367
)
 
(5,573
)
 
(5,436
)
NOI from construction contracts and other service operations
1,653

 
1,146

 
725

 
3,166

 
605

 
6,690

 
3,488

Impairment losses on non-operating properties
—

 
(49
)
 
—

 
—

 
—

 
(49
)
 
—

Equity in income (loss) of unconsolidated entities
23

 
193

 
(47
)
 
60

 
1,899

 
229

 
2,110

Interest and other income
1,148

 
1,191

 
1,299

 
1,285

 
885

 
4,923

 
3,834

(Loss) gain on early extinguishment of debt (2)
(9,106
)
 
(176
)
 
(363
)
 
(23
)
 
67,808

 
(9,668
)
 
40,780

Gain on sales of non-operating properties
43

 
5,535

 
—

 
—

 
—

 
5,578

 
2,683

Total interest expense (2)
(23,286
)
 
(24,802
)
 
(23,478
)
 
(20,827
)
 
(23,181
)
 
(92,393
)
 
(90,231
)
Income tax expense
(53
)
 
(101
)
 
(92
)
 
(64
)
 
(1,917
)
 
(310
)
 
(1,978
)
FFO - per NAREIT (1)
37,345

 
49,655

 
41,273

 
49,272

 
115,911

 
177,545

 
242,306

Preferred share dividends
(3,552
)
 
(3,553
)
 
(4,344
)
 
(4,490
)
 
(4,490
)
 
(15,939
)
 
(19,971
)
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
)
 
(660
)
 
(660
)
FFO allocable to other noncontrolling interests
(867
)
 
(830
)
 
(758
)
 
(761
)
 
(880
)
 
(3,216
)
 
(3,710
)
Basic and diluted FFO allocable to restricted shares
(123
)
 
(191
)
 
(146
)
 
(205
)
 
(462
)
 
(665
)
 
(912
)
Basic and diluted FFO available to common share and common unit holders (1)
32,638

 
44,916

 
34,091

 
43,651

 
109,914

 
155,296

 
214,149

Gain on sales of non-operating properties, net of associated income tax
(43
)
 
(5,535
)
 
—

 
—

 
—

 
(5,578
)
 
(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

 
—

 
1,855

Loss (gain) on early extinguishment of debt (2)
9,106

 
176

 
363

 
23

 
(67,808
)
 
9,668

 
(40,780
)
Issuance costs associated with redeemed preferred shares
—

 
—

 
1,769

 
—

 
—

 
1,769

 
2,904

Add: Negative FFO of properties to be conveyed to extinguish debt in default (3)
3,493

 
3,806

 
3,629

 
—

 
—

 
10,928

 
—

Executive transition costs
1,056

 
—

 
—

 
—

 
—

 
1,056

 
—

Diluted FFO comparability adjustments allocable to restricted shares
(59
)
 
7

 
(26
)
 
—

 
168

 
(78
)
 
168

Diluted FFO available to common share and common unit holders, as adjusted for comparability (1)
$
46,191

 
$
43,419

 
$
39,826

 
$
43,674

 
$
44,129

 
$
173,110

 
$
175,613

 
 
 
 
 
 
 
 
 
 
 
 
 
 
(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
 
Years Ended
 
12/31/14
 
9/30/14
 
6/30/14
 
3/31/14
 
12/31/13
 
12/31/14
 
12/31/13
Net income
$
5,937

 
$
24,548

 
$
9,050

 
$
5,671

 
$
92,672

 
$
45,206

 
$
101,544

Real estate-related depreciation and amortization
31,358

 
30,237

 
30,895

 
43,596

 
31,322

 
136,086

 
117,719

Impairment losses (recoveries) on previously depreciated operating properties (1)(2)
48

 
(7
)
 
1,328

 
1

 
921

 
1,370

 
32,047

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

 
(5,123
)
 
—

 
4

 
(9,004
)
 
(5,117
)
 
(9,004
)
FFO - per NAREIT (3)
37,345

 
49,655

 
41,273

 
49,272

 
115,911

 
177,545

 
242,306

Gain on sales of non-operating properties
(43
)
 
(5,535
)
 
—

 
—

 
—

 
(5,578
)
 
(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

 
—

 
1,855

Loss (gain) on early extinguishment of debt (2)
9,106

 
176

 
363

 
23

 
(67,808
)
 
9,668

 
(40,780
)
Issuance costs associated with redeemed preferred shares
—

 
—

 
1,769

 
—

 
—

 
1,769

 
2,904

Add: Negative FFO of properties to be conveyed to extinguish debt in default
3,493

 
3,806

 
3,629

 
—

 
—

 
10,928

 
—

Executive transition costs
1,056

 
—

 
—

 
—

 
—

 
1,056

 
—

FFO - as adjusted for comparability (3)
$
50,957

 
$
48,151

 
$
47,034

 
$
49,295

 
$
49,958

 
$
195,437

 
$
203,602

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Weighted Average Shares for period ended:
 

 
 

 
 

 
 

 
 

 
 

 
 

Common Shares Outstanding
90,752

 
87,290

 
87,214

 
87,080

 
87,010

 
88,092

 
85,167

Dilutive effect of share-based compensation awards
196

 
195

 
201

 
112

 
42

 
171

 
57

Common Units
3,846

 
3,876

 
3,912

 
3,958

 
3,978

 
3,897

 
3,869

Denominator for FFO per share - diluted
94,794

 
91,361

 
91,327

 
91,150

 
91,030

 
92,160

 
89,093

Weighted average common units
(3,846
)
 
(3,876
)
 
(3,912
)
 
(3,958
)
 
(3,978
)
 
(3,897
)
 
(3,869
)
Denominator for diluted EPS
90,948

 
87,485

 
87,415

 
87,192

 
87,052

 
88,263

 
85,224

 
 
 
 
 
 
 
 
 
 
 
 
 
 
(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
 
Years Ended
 
12/31/14
 
9/30/14
 
6/30/14
 
3/31/14
 
12/31/13
 
12/31/14
 
12/31/13
Diluted FFO available to common share and common unit holders, as adjusted for comparability
$
46,191

 
$
43,419

 
$
39,826

 
$
43,674

 
$
44,129

 
$
173,110

 
$
175,613

Straight line rent adjustments (1)
(379
)
 
(456
)
 
(1,745
)
 
760

 
3,157

 
(1,820
)
 
(3,667
)
Straight line rent adjustments on properties to be conveyed to extinguish debt in default
(47
)
 
(96
)
 
1

 
—

 
—

 
(142
)
 
—

Amortization of intangibles included in NOI
208

 
206

 
224

 
217

 
224

 
855

 
803

Share-based compensation, net of amounts capitalized
1,504

 
1,507

 
1,501

 
1,555

 
1,661

 
6,067

 
6,530

Amortization of deferred financing costs
1,020

 
1,357

 
1,122

 
1,167

 
1,159

 
4,666

 
5,451

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
261

 
259

 
229

 
171

 
(48
)
 
920

 
1,015

Amortization of settled debt hedges
11

 
16

 
15

 
15

 
15

 
57

 
61

Recurring capital expenditures on properties to be held
(8,633
)
 
(16,929
)
 
(13,585
)
 
(11,052
)
 
(21,935
)
 
(50,199
)
 
(43,633
)
Diluted AFFO available to common share and common unit holders (“diluted AFFO”)
$
40,136

 
$
28,977

 
$
27,561

 
$
36,507

 
$
28,362

 
$
133,181

 
$
142,173

Recurring capital expenditures
 

 
 

 
 

 
 

 
 

 
 
 
 
Tenant improvements and incentives on operating properties
$
7,239

 
$
11,581

 
$
4,512

 
$
6,319

 
$
6,430

 
$
29,651

 
$
17,413

Building improvements on operating properties
4,974

 
8,119

 
6,357

 
3,982

 
12,898

 
23,432

 
21,893

Leasing costs for operating properties
1,341

 
2,877

 
2,790

 
1,528

 
4,286

 
8,536

 
9,400

Less: Nonrecurring tenant improvements and incentives on operating properties
(1,747
)
 
(1,454
)
 
483

 
(16
)
 
—

 
(2,734
)
 
(238
)
Less: Nonrecurring building improvements on operating properties
(3,012
)
 
(4,182
)
 
(519
)
 
(568
)
 
(1,381
)
 
(8,281
)
 
(4,494
)
Less: Nonrecurring leasing costs for operating properties
(162
)
 
(12
)
 
(38
)
 
(193
)
 
(275
)
 
(405
)
 
(311
)
Add: Recurring capital expenditures on operating properties held through joint ventures
—

 
—

 
—

 
—

 
(23
)
 
—

 
(30
)
Recurring capital expenditures
$
8,633

 
$
16,929

 
$
13,585

 
$
11,052

 
$
21,935

 
$
50,199

 
$
43,633

 
 
 
 
 
 
 
 
 
 
 
 
 
 
(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 - December 31, 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

 
95.7
%
 
97.0
%
 
1

 
191,464

Columbia Gateway
 
27

 
2,141,654

 
91.3
%
 
91.9
%
 
1

 
52,000

Airport Square/bwtech
 
14

 
1,090,111

 
86.4
%
 
88.2
%
 
2

 
123,902

Commons/Parkway
 
10

 
431,246

 
91.1
%
 
91.1
%
 
—

 
—

Other
 
11

 
1,119,849

 
98.2
%
 
98.5
%
 
1

 
119,980

Subtotal
 
91

 
8,267,931

 
93.4
%
 
94.4
%
 
5

 
487,346

Northern Virginia:
 
 

 
 

 
 

 
 

 
 

 
 

Westfields Corporate Center (1)
 
7

 
769,035

 
75.5
%
 
79.4
%
 
—

 
—

Patriot Ridge
 
1

 
239,272

 
51.3
%
 
51.3
%
 
—

 
—

Herndon, Tysons Corner and Merrifield
 
9

 
1,701,754

 
92.6
%
 
95.0
%
 
—

 
—

Other
 
3

 
543,765

 
100.0
%
 
100.0
%
 
6

 
980,330

Subtotal (1)
 
20

 
3,253,826

 
86.8
%
 
88.9
%
 
6

 
980,330

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

 
562,757

 
80.8
%
 
94.9
%
 
1

 
69,191

Washington, DC- Capital Riverfront (Maritime)
 
2

 
360,326

 
74.4
%
 
74.4
%
 
—

 
—

St. Mary’s & King George Counties
 
18

 
874,408

 
90.8
%
 
91.4
%
 
1

 
27,122

Greater Baltimore:
 
 

 
 

 
 

 
 

 
 

 
 

White Marsh and Rt 83 Corridor
 
20

 
984,186

 
93.2
%
 
94.0
%
 
—

 
—

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

 
86.8
%
 
87.2
%
 
—

 
—

Greater Philadelphia, Pennsylvania
 
3

 
513,347

 
96.2
%
 
99.1
%
 
1

 
140,765

Other
 
2

 
295,842

 
100.0
%
 
100.0
%
 
—

 
—

Total (1)
 
173

 
16,790,386

 
90.9
%
 
92.4
%
 
15

 
1,865,220

 
(1)
Amounts reported exclude the effect of two properties (totaling 665,000 square feet that were 36.1% occupied and 36.4% 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 as of December 31, 2014 and two additional properties to be constructed that became 100% leased in February 2015. 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 12/31/14
 
 
 
 
 
 
# of
Operating Office Properties
 
Office Operational Square Feet
 
 
 
 
 
Office Property Annualized
Rental Revenue (2)
 
Percentage of Total Office
Annualized
Rental Revenue
 
NOI from Real
Estate Operations
for Three Months Ended
 
NOI from Real
Estate Operations
for Year Ended
Property Grouping
 
 
 
% Occupied (1)
 
% Leased (1)
 
 
 
12/31/14
 
12/31/14
Same Office Properties (3)
 
 

 
 

 
 
 
 
 
 

 
 

 
 

 
 

Stabilized properties
 
157

 
14,628

 
92.6%
 
93.8%
 
$
408,622

 
91.5
%
 
$
67,973

 
$
267,296

Unstabilized properties (4)
 
3

 
391

 
42.6%
 
44.5%
 
5,627

 
1.3
%
 
888

 
2,297

Total Same Office Properties
 
160

 
15,019

 
91.3%
 
92.5%
 
414,249

 
92.8
%
 
68,861

 
269,593

Office Properties Placed in Service (5)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Stabilized properties
 
10

 
1,330

 
98.8%
 
100.0%
 
23,882

 
5.3
%
 
5,181

 
16,362

Unstabilized properties (4)
 
3

 
441

 
50.5%
 
64.7%
 
8,453

 
1.9
%
 
1,394

 
4,590

Other, including Wholesale Data Center
 
—

 
—

 
—%
 
—%
 
N/A

 
N/A

 
984

 
2,836

Total Core Portfolio
 
173

 
16,790

 
90.9%
 
92.4%
 
446,584

 
100.0
%
 
76,420

 
293,381

Office Properties to be Conveyed (6)
 
N/A

 
N/A

 
N/A
 
N/A
 
N/A

 
N/A

 
828

 
5,665

Disposed Office Properties
 
N/A

 
N/A

 
N/A
 
N/A
 
N/A

 
N/A

 
53

 
866

Total Portfolio (7)
 
173

 
16,790

 
90.9%
 
92.4%
 
$
446,584

 
100.0
%
 
$
77,301

 
$
299,912

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Core Portfolio
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Demand Driver Adjacent (8)
 
83

 
8,745

 
89.7%
 
91.5%
 
$
258,508

 
57.9
%
 
$
43,664

 
$
170,681

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

 
3,644

 
96.3%
 
96.3%
 
83,798

 
18.8
%
 
15,361

 
59,532

Total Strategic Tenant Niche
 
115

 
12,389

 
91.6%
 
92.9%
 
342,306

 
76.6
%
 
59,025

 
230,213

Regional Office (10)
 
58

 
4,401

 
88.7%
 
90.8%
 
104,278

 
23.4
%
 
16,410

 
60,207

Other, including Wholesale Data Center
 
N/A

 
N/A

 
N/A
 
N/A
 
N/A

 
N/A

 
985

 
2,961

Total Core Portfolio
 
173

 
16,790

 
90.9%
 
92.4%
 
$
446,584

 
100.0
%
 
$
76,420

 
$
293,381

(1)
Percentages calculated based on operational square feet.
(2)
Excludes annualized rental revenue from our wholesale data center, DC-6, of $9.95 million as of 12/31/14.
(3)
Properties held for long-term investment owned and 100% operational since at least 1/1/13.
(4)
Properties with first generation operational space less than 90% occupied at 12/31/14, as detailed on page 13.
(5)
Newly constructed or redeveloped properties placed in service that were not fully operational by 1/1/13.
(6)
Properties serving as collateral for debt which is in default. In connection with loan default proceedings, we expect to transfer title to the properties and be relieved of the debt obligation plus accrued interest. Includes two properties totaling 665,000 square feet that were 36.1% occupied and 36.4% leased with annualized rental revenue of $6.8 million as of 12/31/14.
(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) - December 31, 2014  
 
 
 
 
 
 
 
 
 
Property Grouping
Operational Square Feet
 
Average Occupancy % for Quarter Ended
 
Occupancy %
 
Leased %
 
Same Office Properties (2) 
 
 
 
 
 
 
 
 
3120 Fairview Park Drive
183,566
 
58.0%
 
61.4%
 
65.6%
 
206 Research Blvd
128,119
 
0%
 
0%
 
0%
 
210 Research Blvd
79,596
 
67.6%
 
67.6%
 
67.6%
 
Total Unstabilized Same Office Properties
391,281
 
41.0%
 
42.6%
 
44.5%
 
Office Properties Placed in Service (3) 
 
 
 
 
 
 
 
 
7770 Backlick Road
239,272
 
51.3%
 
51.3%
 
51.3%
 
420 National Business Parkway
139,056
 
69.4%
 
71.7%
 
71.7%
 
  7200 Redstone Gateway
62,405
 
0.0%
 
0.0%
 
100.0%
 
Total Unstabilized Office Properties Placed in Service
440,733
 
49.8%
 
50.5%
 
64.7%
 
Total Unstabilized Office Properties
832,014
 
45.6%
 
46.8%
 
55.2%
 
 
(1) Properties with first generation operational space less than 90% occupied at 12/31/14. Excludes our wholesale data center, DC-6.
(2) Properties owned and 100% operational since 1/1/13.
(3) Newly constructed or redeveloped properties placed in service that were not fully operational by 1/1/13.


13

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

 
 

 
 

 
 

 
 

 
 
 
 
Baltimore/Washington Corridor
$
58,739

 
$
58,883

 
$
57,456

 
$
61,113

 
$
60,011

 
$
236,191

 
$
237,869

Northern Virginia
22,028

 
21,369

 
20,898

 
24,968

 
23,018

 
89,263

 
92,010

San Antonio
10,109

 
9,031

 
8,758

 
8,479

 
9,041

 
36,377

 
33,060

Huntsville
3,016

 
2,471

 
2,404

 
2,555

 
1,591

 
10,446

 
5,050

Washington, DC - Capitol Riverfront
3,610

 
3,524

 
3,831

 
3,634

 
4,147

 
14,599

 
16,863

St. Mary’s and King George Counties
4,060

 
4,158

 
4,202

 
4,316

 
4,213

 
16,736

 
16,568

Greater Baltimore
10,635

 
10,436

 
11,024

 
11,496

 
10,407

 
43,591

 
42,653

Greater Philadelphia
3,272

 
2,951

 
2,366

 
3,340

 
3,395

 
11,929

 
11,924

Colorado Springs
(7
)
 
—

 
(12
)
 
18

 
5,568

 
(1
)
 
25,290

Other
2,488

 
2,541

 
2,545

 
2,576

 
2,504

 
10,150

 
10,075

Wholesale Data Center
2,661

 
2,876

 
2,492

 
2,401

 
2,825

 
10,430

 
7,271

Real estate revenues
$
120,611

 
$
118,240

 
$
115,964

 
$
124,896

 
$
126,720

 
$
479,711

 
$
498,633

 
 
 
 
NOI
 

 
 

 
 

 
 

 
 

 
 
 
 
Baltimore/Washington Corridor
$
40,009

 
$
39,426

 
$
38,108

 
$
37,516

 
$
38,880

 
$
155,059

 
$
157,315

Northern Virginia
14,620

 
13,869

 
13,247

 
15,995

 
15,065

 
57,731

 
60,037

San Antonio
3,938

 
3,931

 
3,941

 
4,005

 
3,837

 
15,815

 
15,429

Huntsville
2,225

 
1,708

 
1,545

 
1,902

 
1,183

 
7,380

 
3,768

Washington, DC - Capitol Riverfront
1,645

 
1,700

 
2,077

 
1,869

 
2,072

 
7,291

 
9,019

St. Mary’s and King George Counties
2,862

 
2,881

 
2,913

 
2,812

 
2,900

 
11,468

 
11,540

Greater Baltimore
6,643

 
6,626

 
6,524

 
6,020

 
6,232

 
25,813

 
26,070

Greater Philadelphia
2,167

 
2,114

 
1,222

 
2,040

 
2,446

 
7,543

 
8,493

Colorado Springs
(14
)
 
(3
)
 
(23
)
 
27

 
3,549

 
(13
)
 
16,288

Other
2,209

 
2,284

 
1,943

 
2,245

 
2,312

 
8,681

 
9,059

Wholesale Data Center
997

 
823

 
611

 
713

 
1,145

 
3,144

 
911

NOI from real estate operations
$
77,301

 
$
75,359

 
$
72,108

 
$
75,144

 
$
79,621

 
$
299,912

 
$
317,929

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash NOI
 

 
 

 
 

 
 

 
 

 
 
 
 
Baltimore/Washington Corridor
$
40,125

 
$
38,114

 
$
36,993

 
$
36,709

 
$
37,195

 
$
151,941

 
$
152,574

Northern Virginia (1)
14,994

 
16,159

 
14,124

 
18,921

 
19,580

 
64,198

 
64,965

San Antonio
3,838

 
3,733

 
3,737

 
3,796

 
3,628

 
15,104

 
14,117

Huntsville
2,280

 
1,917

 
1,881

 
1,908

 
1,337

 
7,986

 
4,317

Washington, DC - Capitol Riverfront
1,681

 
1,775

 
2,149

 
1,932

 
2,175

 
7,537

 
9,417

St. Mary’s and King George Counties
2,769

 
2,491

 
2,598

 
2,877

 
2,946

 
10,735

 
11,601

Greater Baltimore
6,770

 
6,614

 
6,483

 
5,994

 
6,365

 
25,861

 
26,384

Greater Philadelphia
1,952

 
1,641

 
601

 
1,414

 
1,788

 
5,608

 
7,067

Colorado Springs
(14
)
 
(3
)
 
(23
)
 
27

 
3,501

 
(13
)
 
15,306

Other
2,160

 
2,220

 
1,848

 
2,149

 
2,211

 
8,377

 
8,556

Wholesale Data Center
984

 
807

 
573

 
677

 
2,489

 
3,041

 
1,285

Cash NOI from real estate operations
$
77,539

 
$
75,468

 
$
70,964

 
$
76,404

 
$
83,215

 
$
300,375

 
$
315,589

Straight line rent adjustments
56

 
182

 
1,453

 
(954
)
 
(3,296
)
 
737

 
3,413

Add: Amortization of deferred market rental revenue
4

 
6

 
(12
)
 
(5
)
 
36

 
(7
)
 
234

Less: Amortization of below-market cost arrangements
(298
)
 
(297
)
 
(297
)
 
(301
)
 
(334
)
 
(1,193
)
 
(1,307
)
NOI from real estate operations
$
77,301

 
$
75,359

 
$
72,108

 
$
75,144

 
$
79,621

 
$
299,912

 
$
317,929

*     Includes continuing and discontinued operations.
(1)
Cash NOI attributable to properties serving as collateral for debt that are expected to be conveyed in order to extinguish such debt totaled $880,000 for the three months ended December 31, 2014 and $6.1 million for the year ended December 31, 2014.

14

Corporate Office Properties Trust
Same Office Properties (1) Average Occupancy Rates by Region 
 
Number of Buildings
 
Rentable Square Feet
 
Three Months Ended
 
Years Ended
 
 
 
12/31/14
 
9/30/14
 
6/30/14
 
3/31/14
 
12/31/13
 
12/31/14
 
12/31/13
Baltimore Washington Corridor
87

 
7,888,508

 
93.5
%
 
93.5
%
 
92.9
%
 
93.3
%
 
93.1
%
 
93.3
%
 
92.6
%
Northern Virginia
16

 
2,470,789

 
91.2
%
 
92.2
%
 
90.6
%
 
90.5
%
 
89.7
%
 
91.1
%
 
89.1
%
San Antonio
8

 
912,508

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

 
137,048

 
77.2
%
 
88.7
%
 
80.4
%
 
85.0
%
 
83.0
%
 
82.8
%
 
83.0
%
Washington, DC - Capitol Riverfront
2

 
360,326

 
73.8
%
 
72.6
%
 
75.9
%
 
76.4
%
 
76.4
%
 
74.7
%
 
85.9
%
St. Mary’s and King George Counties
18

 
874,408

 
91.1
%
 
91.7
%
 
92.9
%
 
92.1
%
 
89.2
%
 
92.0
%
 
88.1
%
Greater Baltimore
24

 
1,749,441

 
86.0
%
 
84.8
%
 
83.6
%
 
82.9
%
 
82.5
%
 
84.3
%
 
82.6
%
Greater Philadelphia
2

 
329,964

 
98.8
%
 
98.4
%
 
87.5
%
 
87.5
%
 
87.5
%
 
93.0
%
 
84.6
%
Other
2

 
295,842

 
100.0
%
 
100.0
%
 
100.0
%
 
100.0
%
 
100.0
%
 
100.0
%
 
100.0
%
Total Same Office Properties
160

 
15,018,834

 
91.9
%
 
92.1
%
 
91.2
%
 
91.3
%
 
90.8
%
 
91.6
%
 
90.5
%
Total Same Office Properties occupancy as of period end
 
 

 
91.3
%
 
92.5
%
 
91.2
%
 
91.5
%
 
91.0
%
 
91.3
%
 
91.0
%

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

 
 

 
 

 
 

 
 

 
 
 
 
Baltimore/Washington Corridor
$
56,272

 
$
56,831

 
$
56,268

 
$
60,005

 
$
56,595

 
$
229,376

 
$
223,665

Northern Virginia
16,790

 
16,560

 
16,394

 
17,025

 
16,432

 
66,769

 
66,135

San Antonio
10,109

 
9,031

 
8,758

 
8,479

 
9,041

 
36,377

 
33,060

Huntsville
566

 
733

 
669

 
792

 
713

 
2,760

 
2,939

Washington, DC - Capitol Riverfront
3,610

 
3,524

 
3,831

 
3,634

 
4,147

 
14,599

 
16,863

St. Mary’s and King George Counties
4,060

 
4,158

 
4,202

 
4,316

 
4,189

 
16,736

 
16,298

Greater Baltimore
10,620

 
10,175

 
10,270

 
10,777

 
9,774

 
41,842

 
39,851

Greater Philadelphia
2,293

 
1,956

 
1,813

 
1,979

 
1,846

 
8,041

 
7,043

Other
2,392

 
2,441

 
2,443

 
2,477

 
2,405

 
9,753

 
9,673

Real estate revenues
$
106,712

 
$
105,409

 
$
104,648

 
$
109,484

 
$
105,142

 
$
426,253

 
$
415,527

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

 
 

 
 

 
 

 
 

 
 
 
 
Baltimore/Washington Corridor
$
38,246

 
$
37,877

 
$
37,462

 
$
36,837

 
$
37,012

 
$
150,422

 
$
149,353

Northern Virginia
11,516

 
11,082

 
10,800

 
10,539

 
10,609

 
43,937

 
42,811

San Antonio
3,939

 
3,931

 
3,941

 
4,005

 
3,837

 
15,816

 
15,429

Huntsville
342

 
504

 
452

 
555

 
500

 
1,853

 
2,166

Washington, DC - Capitol Riverfront
1,646

 
1,700

 
2,076

 
1,869

 
2,072

 
7,291

 
9,019

St. Mary’s and King George Counties
2,867

 
2,883

 
2,931

 
2,839

 
2,898

 
11,520

 
11,343

Greater Baltimore
6,612

 
6,466

 
6,111

 
5,807

 
5,886

 
24,996

 
24,452

Greater Philadelphia
1,510

 
1,311

 
1,126

 
1,070

 
1,167

 
5,017

 
4,444

Other
2,183

 
2,187

 
2,187

 
2,184

 
2,181

 
8,741

 
8,725

Same office property NOI
68,861

 
67,941

 
67,086

 
65,705

 
66,162

 
269,593

 
267,742

Straight line rent adjustments
(1,857
)
 
(461
)
 
(938
)
 
(542
)
 
(999
)
 
(3,798
)
 
(4,831
)
Less: Amortization of deferred market rental revenue
(2
)
 
(4
)
 
15

 
8

 
1

 
17

 
(38
)
Add: Amortization of below-market cost arrangements
272

 
273

 
272

 
272

 
319

 
1,089

 
1,277

Same office property cash NOI
67,274

 
67,749

 
66,435

 
65,443

 
65,483

 
266,901

 
264,150

Less: Lease termination fees, gross
(741
)
 
(272
)
 
(93
)
 
(512
)
 
(1,249
)
 
(1,618
)
 
(2,270
)
Same office property cash NOI, excluding gross lease termination fees
$
66,533

 
$
67,477

 
$
66,342

 
$
64,931

 
$
64,234

 
$
265,283

 
$
261,880

Percentage change in same office property cash NOI (1)
2.7
%
 
 
 
 
 
 
 
 
 
1.0
%
 
 
Percentage change in same office property cash NOI, excluding gross lease termination fees (1)
3.6
%
 
 
 
 
 
 
 
 
 
1.3
%
 
 
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 December 31, 2014
 
Baltimore/
Washington
Corridor
 
Northern
Virginia
 
Huntsville
 
Washington DC-Capital Riverfront
 
St. Mary’s & King George Counties
 
Greater
Baltimore
 
Greater
Philadelphia
 
Total
Office
Renewed Space
 

 
 

 
 
 
 

 
 
 
 

 
 
 
 

Leased Square Feet
468,611

 
25,577

 
29,240

 
—

 
—

 
17,897

 
—

 
541,325

Expiring Square Feet
557,054

 
173,238

 
79,849

 
—

 
25,962

 
17,897

 
—

 
854,000

Vacated Square Feet
88,443

 
147,661

 
50,609

 
—

 
25,962

 
—

 
—

 
312,675

Retention Rate (% based upon square feet)
84.12
%
 
14.76
 %
 
36.62
 %
 
—
%
 
—
%
 
100.00
%
 
0.00
%
 
63.39
 %
Statistics for Completed Leasing:
 
 
 
 
 
 

 
 
 
 
 
 
 
 
Average Committed Cost per Square Foot
$
14.25

 
$
16.01

 
$
18.57

 
$
—

 
$
—

 
$
1.91

 
$
—

 
$
14.16

Weighted Average Lease Term in Years
6.2

 
3.4

 
5.0

 
—

 
—

 
1.9

 
—

 
5.8

GAAP Rent Per Square Foot
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
        Renewal GAAP Rent
$
39.31

 
$
29.33

 
$
23.09

 
$
—

 
$
—

 
$
20.14

 
$
—

 
$
37.33

        Expiring GAAP Rent
$
35.34

 
$
30.28

 
$
25.51

 
$
—

 
$
—

 
$
19.25

 
$
—

 
$
34.04

        Change in GAAP Rent
11.24
%
 
(3.15
)%
 
(9.48
)%
 
—
%
 
—
%
 
4.64
%
 
0.00
%
 
9.67
 %
Cash Rent Per Square Foot
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
        Renewal Cash Rent
$
37.84

 
$
32.50

 
$
21.75

 
$
—

 
$
—

 
$
19.87

 
$
—

 
$
36.12

        Expiring Cash Rent
$
37.53

 
$
32.84

 
$
27.03

 
$
—

 
$
—

 
$
19.87

 
$
—

 
$
36.16

        Change in Cash Rent
0.82
%
 
(1.03
)%
 
(19.53
)%
 
—
%
 
—
%
 
—
%
 
0.00
%
 
(0.10
)%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
New Leases
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Development and Redevelopment Space
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Leased Square Feet
—

 
366,447

 
—

 
—

 
—

 
—

 
38,624

 
405,071

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

 
$
7.14

 
$
—

 
$
—

 
$
—

 
$
—

 
$
64.89

 
$
12.64

Weighted Average Lease Term in Years
—

 
13.3

 
—

 
—

 
—

 
—

 
5.9

 
12.6

GAAP Rent Per Square Foot
$
—

 
$
16.68

 
$
—

 
$
—

 
$
—

 
$
—

 
$
25.00

 
$
17.47

Cash Rent Per Square Foot
$
—

 
$
16.32

 
$
—

 
$
—

 
$
—

 
$
—

 
$
24.07

 
$
17.06

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Other New Leases (1)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Leased Square Feet
20,777

 
18,947

 
17,074

 
3,331

 
15,445

 
7,585

 
—

 
83,159

Statistics for Completed Leasing:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Average Committed Cost per Square Foot
$
50.81

 
$
49.33

 
$
19.75

 
$
58.39

 
$
20.63

 
$
9.08

 
$
—

 
$
34.99

Weighted Average Lease Term in Years
6.7

 
6.7

 
6.0

 
6.0

 
3.2

 
5.7

 
—

 
5.8

GAAP Rent Per Square Foot
$
22.76

 
$
26.96

 
$
19.41

 
$
37.25

 
$
18.46

 
$
20.09

 
$
—

 
$
22.57

Cash Rent Per Square Foot
$
22.06

 
$
27.72

 
$
19.50

 
$
39.00

 
$
19.19

 
$
19.27

 
$
—

 
$
22.71

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total Square Feet Leased
489,388

 
410,971

 
46,314

 
3,331

 
15,445

 
25,482

 
38,624

 
1,029,555

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(1)     Other New Leases includes acquired first generation space and vacated second generation space.
Notes: No expiration, renewal or retenanting activity transpired in our San Antonio region.
Activity is exclusive of owner occupied space and leases with less than a one-year term. Weighted average lease term was calculated assuming no exercise of any existing early termination rights.
Committed costs for leasing are reported above in the period of lease execution. Actual capital expenditures for leasing are reported on page 10 in the period such costs are incurred.

17

Corporate Office Properties Trust
Leasing - Core Office
Year Ended December 31, 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
1,218,107

 
72,440

 
—

 
29,240

 
—

 
70,793

 
115,928

 
—

 
1,506,508

Expiring Square Feet
1,459,426

 
286,039

 
—

 
103,148

 
14,289

 
135,229

 
167,370

 
—

 
2,165,501

Vacated Square Feet
241,319

 
213,599

 
—

 
73,908

 
14,289

 
64,436

 
51,442

 
—

 
658,993

Retention Rate (% based upon square feet)
83.46
 %
 
25.33
 %
 
0.00
%
 
28.35
 %
 
0.00
%
 
52.35
 %
 
69.26
 %
 
0.00
%
 
69.57
 %
Statistics for Completed Leasing:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Average Committed Cost per Square Foot
$
16.24

 
$
20.98

 
$
—

 
$
18.57

 
$
—

 
$
4.78

 
$
8.20

 
$
—

 
$
15.36

Weighted Average Lease Term in Years
5.4

 
4.7

 
—

 
5.0

 
—

 
1.9

 
2.5

 
—

 
5.0

GAAP Rent Per Square Foot
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
        Renewal GAAP Rent
$
33.77

 
$
29.46

 
$
—

 
$
23.09

 
$
—

 
$
26.72

 
$
20.44

 
$
—

 
$
32.00

        Expiring GAAP Rent
$
31.00

 
$
30.26

 
$
—

 
$
25.51

 
$
—

 
$
26.42

 
$
20.41

 
$
—

 
$
29.83

        Change in GAAP Rent
8.91
 %
 
(2.66
)%
 
—
%
 
(9.48
)%
 
0.00
%
 
1.14
 %
 
0.14
 %
 
0.00
%
 
7.26
 %
Cash Rent Per Square Foot
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
        Renewal Cash Rent
$
32.57

 
$
29.39

 
$
—

 
$
21.75

 
$
—

 
$
26.51

 
$
19.55

 
$
—

 
$
30.92

        Expiring Cash Rent
$
33.02

 
$
32.61

 
$
—

 
$
27.03

 
$
—

 
$
26.87

 
$
20.10

 
$
—

 
$
31.60

        Change in Cash Rent
(1.35
)%
 
(9.86
)%
 
—
%
 
(19.53
)%
 
—
%
 
(1.34
)%
 
(2.77
)%
 
0.00
%
 
(2.15
)%
New Leases
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Development and Redevelopment Space
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Leased Square Feet
122,297

 
388,913

 
160,561

 
131,557

 
—

 
—

 
—

 
89,371

 
892,699

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

 
$
12.16

 
$
68.25

 
$
61.45

 
$
—

 
$
—

 
$
—

 
$
70.48

 
$
43.27

Weighted Average Lease Term in Years
9.1

 
13.1

 
10.0

 
10.0

 
—

 
—

 
—

 
8.1

 
11.1

GAAP Rent Per Square Foot
$
32.21

 
$
17.52

 
$
31.91

 
$
17.61

 
$
—

 
$
—

 
$
—

 
$
24.15

 
$
22.80

Cash Rent Per Square Foot
$
30.30

 
$
17.07

 
$
28.33

 
$
16.59

 
$
—

 
$
—

 
$
—

 
$
23.92

 
$
21.52

Other New Leases (1)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Leased Square Feet
284,022

 
154,315

 
—

 
54,204

 
6,329

 
33,196

 
81,466

 
—

 
613,532

Statistics for Completed Leasing:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Average Committed Cost per Square Foot
$
42.89

 
$
49.22

 
$
—

 
$
17.80

 
$
67.85

 
$
25.17

 
$
30.83

 
$
—

 
$
39.96

Weighted Average Lease Term in Years
6.9

 
7.0

 
—

 
5.3

 
5.8

 
3.7

 
7.5

 
—

 
6.7

GAAP Rent Per Square Foot
$
25.30

 
$
25.70

 
$
—

 
$
17.68

 
$
37.27

 
$
21.00

 
$
19.78

 
$
—

 
$
23.89

Cash Rent Per Square Foot
$
24.76

 
$
24.90

 
$
—

 
$
17.98

 
$
38.53

 
$
21.22

 
$
19.29

 
$
—

 
$
23.42

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total Square Feet Leased
1,624,426

 
615,668

 
160,561

 
215,001

 
6,329

 
103,989

 
197,394

 
89,371

 
3,012,739

(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 63.2% if the effect of the Greater Philadelphia property vacancy were included.
Committed costs for leasing are reported above in the period of lease execution. Actual capital expenditures for leasing are reported on page 10 in the period such costs are incurred.

18

Corporate Office Properties Trust
Lease Expiration Analysis as of 12/31/14 (1)
 
 
Core Office Properties/Total Portfolio
 
Strategic Tenant Niche Properties Only
Year and Region of Lease (2)
 
Number of Leases Expiring
 
Square Footage of Leases Expiring
 
Annual Rental
Revenue of Expiring Leases (3) (000's)
 
Percentage
of Total Annualized 
Rental Revenue Expiring
 
Annual Rental Revenue of Expiring Leases per Occupied Square Foot
 
 
Number of Leases Expiring
 
Square Footage of Leases Expiring
 
Annual Rental
Revenue of Expiring Leases (3) (000's)
 
Percentage of Strategic Tenant Properties Annualized Rental Revenue Expiring
 
Annual Rental Revenue of Expiring Leases per Occupied Square Foot
Office Properties
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Baltimore/Washington Corridor
 
49

 
751,813

 
$
22,877

 
5.1
%
 
$
30.43

 
 
23

 
599,055

 
$
19,554

 
5.7
%
 
$
32.64

Northern Virginia
 
15

 
471,026

 
16,547

 
3.7
%
 
35.13

 
 
6

 
423,596

 
15,189

 
4.4
%
 
35.86

Huntsville
 
1

 
7,638

 
145

 
—
%
 
18.98

 
 
1

 
7,638

 
145

 
0.0
%
 
18.98

Washington, DC-Capitol Riverfront
 
10

 
55,712

 
2,776

 
0.6
%
 
49.83

 
 
10

 
55,712

 
2,776

 
0.8
%
 
49.83

St. Mary’s and King George Cos.
 
30

 
420,427

 
7,657

 
1.7
%
 
18.21

 
 
30

 
420,427

 
7,657

 
2.2
%
 
18.21

Greater Baltimore
 
15

 
113,069

 
2,778

 
0.6
%
 
24.57

 
 
4

 
22,453

 
721

 
0.2
%
 
32.11

2015
 
120

 
1,819,685

 
52,780

 
11.8
%
 
29.01

 
 
74

 
1,528,881

 
46,042

 
13.5
%
 
30.11

Baltimore/Washington Corridor
 
36

 
796,622

 
23,493

 
5.3
%
 
29.49

 
 
21

 
725,977

 
21,536

 
6.3
%
 
29.66

Northern Virginia
 
14

 
324,999

 
9,820

 
2.2
%
 
30.22

 
 
9

 
283,482

 
8,328

 
2.4
%
 
29.38

Washington, DC-Capitol Riverfront
 
2

 
34,220

 
1,734

 
0.4
%
 
50.67

 
 
2

 
34,220

 
1,734

 
0.5
%
 
50.67

St. Mary’s and King George Cos.
 
11

 
112,707

 
2,135

 
0.5
%
 
18.94

 
 
11

 
112,707

 
2,135

 
0.6
%
 
18.94

Greater Baltimore
 
20

 
198,270

 
5,505

 
1.2
%
 
27.77

 
 
—

 
—

 
—

 
0.0
%
 
—

Greater Philadelphia
 
2

 
5,934

 
89

 
—
%
 
15.00

 
 
—

 
—

 
—

 
0.0
%
 
—

2016
 
85

 
1,472,752

 
42,776

 
9.6
%
 
29.04

 
 
43

 
1,156,386

 
33,733
 
9.9
%
 
29.17

Baltimore/Washington Corridor
 
47

 
1,359,121

 
41,399

 
9.3
%
 
30.46

 
 
27

 
1,006,022

 
32,256

 
9.4
%
 
32.06

Northern Virginia
 
11

 
298,732

 
9,785

 
2.2
%
 
32.76

 
 
3

 
206,221

 
6,526

 
1.9
%
 
31.65

Huntsville
 
1

 
1,697

 
34

 
—
%
 
20.04

 
 
1

 
1,697

 
34

 
0.0
%
 
20.04

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
 
16

 
202,589

 
4,545

 
1.0
%
 
22.43

 
 
2

 
3,174

 
89

 
0.0
%
 
28.04

Greater Philadelphia
 
1

 
4,808

 
133

 
—
%
 
27.66

 
 
—

 
—

 
—

 
0.0
%
 
—

2017
 
79

 
1,882,897

 
56,291

 
12.6
%
 
29.90

 
 
36

 
1,233,064

 
39,300

 
11.5
%
 
31.87

Baltimore/Washington Corridor
 
46

 
1,212,337

 
37,138

 
8.3
%
 
30.63

 
 
31

 
1,055,375

 
32,664

 
9.5
%
 
30.95

Northern Virginia
 
13

 
423,262

 
12,996

 
2.9
%
 
30.70

 
 
9

 
226,279

 
4,645

 
1.4
%
 
20.53

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

 
1.6
%
 
21.98

Washington, DC-Capitol Riverfront
 
3

 
61,649

 
2,872

 
0.6
%
 
46.59

 
 
3

 
61,649

 
2,872

 
0.8
%
 
46.59

St. Mary’s and King George Cos.
 
3

 
21,842

 
435

 
0.1
%
 
19.92

 
 
3

 
21,842

 
435

 
0.1
%
 
19.92

Greater Baltimore
 
6

 
134,874

 
4,013

 
0.9
%
 
29.75

 
 
—

 
—

 
—

 
0.0
%
 
—

Greater Philadelphia
 
1

 
4,228

 
107

 
—
%
 
25.31

 
 
—

 
—

 
—

 
0.0
%
 
—

2018
 
75

 
2,146,343

 
63,543

 
14.2
%
 
29.61

 
 
48

 
1,607,361

 
45,941

 
13.4
%
 
28.58


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
 
45

 
1,394,715

 
41,513

 
9.3
%
 
29.76

 
 
27

 
1,108,382

 
34,786

 
10.2
%
 
31.38

Northern Virginia
 
13

 
318,751

 
11,016

 
2.5
%
 
34.56

 
 
6

 
200,268

 
6,965

 
2.0
%
 
34.78

Huntsville
 
4

 
82,165

 
1,641

 
0.4
%
 
19.97

 
 
4

 
82,165

 
1,642

 
0.5
%
 
19.98

Washington, DC-Capitol Riverfront
 
1

 
7,091

 
348

 
0.1
%
 
49.08

 
 
1

 
7,091

 
348

 
0.1
%
 
49.08

St. Mary’s and King George Cos.
 
6

 
32,784

 
738

 
0.2
%
 
22.51

 
 
6

 
32,784

 
739

 
0.2
%
 
22.54

Greater Baltimore
 
12

 
124,875

 
3,270

 
0.7
%
 
26.19

 
 
2

 
49,123

 
1,447

 
0.4
%
 
29.46

Greater Philadelphia
 
4

 
17,434

 
429

 
0.1
%
 
24.61

 
 
—

 
—

 
—

 
0.0
%
 
—

2019
 
85

 
1,977,815

 
58,955

 
13.2
%
 
29.81

 
 
46

 
1,479,813

 
45,927

 
13.4
%
 
31.04

Thereafter
 
164

 
5,955,867

 
172,239

 
38.6
%
 
28.92

 
 
83

 
4,346,402

 
131,363

 
38.4
%
 
30.22

Total/Strategic Tenant Niche Total/Avg.
 
608
 
15,255,359

 
$
446,584

 
100.0
%
 
$
29.27

 
 
330

 
11,351,907

 
$
342,306

 
100.0
%
 
$
30.15

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Note:  As of December 31, 2014, the weighted average lease term is 4.7 years for the Core Office Properties/Total Portfolio and 4.6 years for the Strategic Tenant Niche Properties.

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

1.00

$
1,140

2018
2
1

0.26

528

2019
1
6

1.00

2,184

2020
2
11

2.00

4,623

2022
1
6

1.00

1,475

 
 
 

5.26

$
9,950

(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 December 31, 2014 of 256,646 for the portfolio, including 162,279 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 December 31, 2014 multiplied by 12 plus the estimated annualized expense reimbursements under existing leases.


20

Corporate Office Properties Trust
Top 20 Office Tenants as of 12/31/14 (1)
(Based on Annualized Rental Revenue of
office properties, dollars in thousands)
Tenant
 
Number of Leases
 
Total
Occupied Square Feet
 
Percentage of
Total
Occupied Square Feet
 
Total
Annualized
Rental Revenue (2)
 
Percentage
of Total
Annualized 
Rental Revenue
 
Weighted
Average
Remaining Lease Term (3)
United States Government
(4)
58

 
3,393,401

 
22.2
%
 
$
123,117

 
27.6
%
 
5.6

Booz Allen Hamilton, Inc.
 
7

 
710,297

 
4.7
%
 
23,927

 
5.4
%
 
1.6

Northrop Grumman Corporation
 
9

 
784,599

 
5.1
%
 
22,397

 
5.0
%
 
5.4

General Dynamics Corporation
 
7

 
527,725

 
3.5
%
 
18,736

 
4.2
%
 
3.3

The Boeing Company
 
11

 
642,776

 
4.2
%
 
17,171

 
3.8
%
 
3.8

Computer Sciences Corporation
 
3

 
296,430

 
1.9
%
 
10,606

 
2.4
%
 
4.4

CareFirst, Inc.
 
3

 
300,360

 
2.0
%
 
9,970

 
2.2
%
 
7.0

The MITRE Corporation
 
5

 
290,288

 
1.9
%
 
9,322

 
2.1
%
 
3.0

Wells Fargo & Company
 
2

 
171,534

 
1.1
%
 
7,542

 
1.7
%
 
4.0

Vadata Inc.
 
3

 
543,765

 
3.6
%
 
5,857

 
1.3
%
 
9.6

AT&T Corporation
 
3

 
307,579

 
2.0
%
 
5,668

 
1.3
%
 
4.4

L-3 Communications Holdings, Inc.
 
2

 
166,568

 
1.1
%
 
5,449

 
1.2
%
 
4.6

Science Applications International Corp.
 
4

 
126,577

 
0.8
%
 
4,338

 
1.0
%
 
4.5

Kratos Defense and Security Solutions
 
1

 
131,451

 
0.9
%
 
4,253

 
1.0
%
 
5.3

TASC Inc.
 
3

 
107,996

 
0.7
%
 
4,097

 
0.9
%
 
4.1

Raytheon Company
 
4

 
116,701

 
0.8
%
 
4,031

 
0.9
%
 
2.4

ITT Exelis
 
4

 
143,692

 
0.9
%
 
4,028

 
0.9
%
 
4.9

KEYW Corporation
 
2

 
144,443

 
0.9
%
 
3,778

 
0.8
%
 
6.5

The Johns Hopkins Insitutions
 
5

 
144,171

 
0.9
%
 
3,734

 
0.8
%
 
3.6

Unisys Corporation
 
1

 
156,891

 
1.0
%
 
3,715

 
0.8
%
 
5.4

Subtotal Top 20 Office Tenants
 
137

 
9,207,244

 
60.4
%
 
291,736

 
65.3
%
 
4.8

All remaining tenants
 
471

 
6,048,115

 
39.6
%
 
154,848

 
34.7
%
 
4.5

Total/Weighted Average
 
608

 
15,255,359

 
100.0
%
 
$
446,584

 
100.0
%
 
4.7

 
(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 December 31, 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 - Year Ended 12/31/14
 
 
 
 
 
8

 
302,958

 
 
 
 
 
$
57,105



22

Corporate Office Properties Trust
Construction, Redevelopment, Wholesale Data Center and Land Held as of 12/31/14
(dollars in thousands)
 
Construction
Projects (1)
 
Redevelopment
Projects (2)
 
Wholesale Data
Center
 
Land Held (3)
 
Total
Segment
Rentable Square Feet
Baltimore/Washington Corridor
311,444

 
175,902

 
N/A

 
4,235,000

 
4,722,346

Northern Virginia
980,330

 
—

 
N/A

 
1,860,000

 
2,840,330

San Antonio
160,466

 
—

 
N/A

 
1,033,000

 
1,193,466

Huntsville, Alabama
69,191

 
—

 
N/A

 
4,103,000

 
4,172,191

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
1,521,431

 
343,789

 
N/A

 
18,320,000

 
20,185,220

 
Costs to date by region
Baltimore/Washington Corridor
$
54,253

 
$
15,313

 
$
—

 
$
128,740

 
$
198,306

Northern Virginia
88,174

 
—

 
—

 
86,386

 
174,560

San Antonio
25,157

 
—

 
—

 
20,186

 
45,343

Huntsville, Alabama
4,841

 
—

 
—

 
14,087

 
18,928

St. Mary’s and King George Counties
—

 
2,689

 
—

 
2,588

 
5,277

Greater Baltimore
—

 
—

 
—

 
65,296

 
65,296

Greater Philadelphia
—

 
13,211

 
—

 
16,723

 
29,934

Colorado Springs
—

 
—

 
—

 
24,262

 
24,262

Wholesale Data Center
—

 
—

 
215,303

 
—

 
215,303

Other
—

 
—

 
—

 
9,244

 
9,244

Total
$
172,425

 
$
31,213

 
$
215,303

 
$
367,512

 
$
786,453

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

 
(15,268
)
 
(173,013
)
 
(29,893
)
 
(218,174
)
Assets held for sale
—

 
—

 
—

 
(14,339
)
 
(14,339
)
Deferred leasing costs and other assets
(4,571
)
 
(3,134
)
 
(809
)
 
—

 
(8,514
)
Projects in development or held for future development, including associated land costs (4)
$
167,854

 
$
12,811

 
$
41,481

 
$
323,280

 
$
545,426

(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 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.”

23

Corporate Office Properties Trust
Summary of Construction Projects as of 12/31/14 (1)
(dollars in thousands) 
 
 
 
Park/Submarket
Total Rentable Square Feet
Percentage Leased as of
as of 12/31/14 (2)
Actual or Anticipated Shell Completion Date
 Anticipated Operational Date (3)
 
Anticipated Total Cost
Cost to Date
 
 
Property and Location
2/6/2015
 
NOVA Office A
   Northern Virginia
 
Other
159,300

100%
$
44,560

$
44,067

4Q 14
1Q 15
 
Sentry Gateway - Z
   San Antonio, Texas
 
San Antonio
160,466

100%
34,715

25,157

4Q 14
1Q 15
 
Ashburn Crossing - DC10
   Ashburn, Virginia
 
Ashburn
120,000

100%
16,275

12,815

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

100%
10,008

4,841

2Q 15
3Q 15
 
Southpoint Manassas - DC12
   Manassas, Virginia
 
Other
150,000

100%
24,750

—

4Q 15
4Q 15
 
Southpoint Manassas - DC14
   Manassas, Virginia
 
Other
150,000

100%
24,750

—

4Q15
4Q 15
 
310 Sentinel Way
Annapolis Junction, Maryland
 
National Business Park
191,464

0%
57,300

36,324

1Q 15
1Q 16
 
NOVA Office B
   Northern Virginia
 
Other
161,030

0%
41,500

22,927

1Q 15
1Q 16
 
7880 Milestone Parkway
Hanover, Maryland
 
Arundel Preserve
119,980

74%
31,535

17,929

3Q 15
3Q 16
 
NOVA Office D
   Northern Virginia
 
Other
240,000

100%
46,525

8,365

2Q 17
2Q 17
 
Total Under Construction
 
 
1,521,431

75%
$
331,918

$
172,425

 
 

(1)
Includes properties under active construction and properties that we were contractually committed to construct as of December 31, 2014 and two additional properties (DC12 and DC14) that became 100% leased in February 2015.
(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 12/31/14
(dollars in thousands) 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Park/Submarket
Total Rentable Square Feet
Percentage Leased as of
as of 12/31/14 (1)
Actual or Anticipated Shell Completion Date
 Anticipated Operational Date (2)
 
 
Historical Basis, Net
Incremental Redevelopment Cost
Anticipated Total Cost
 Cost to Date
Cost to Date Placed in Service
 
 
Property and Location
 
12/31/2014
731 Arbor Way (Hillcrest III)
Blue Bell, Pennsylvania
 
Greater Philadelphia
140,765

100%
$
2,850

$
25,182

$
28,032

$
13,211

$
2,850

1Q 15
2Q 15
44417 Pecan Court
California, Maryland
 
St. Mary's County
27,122

0%
1,424

3,953

5,377

2,689

1,424

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

0%
2,756

8,713

11,469

6,713

2,756

1Q 15
1Q 16
1201 Winterson Rd (AS 13)
Linthicum, Maryland
 
Airport Square
67,450

0%
4,514

12,249

16,763

4,813

4,514

3Q 15
3Q 16
921 Elkridge Landing Rd (AS 5)
Linthicum, Maryland
 
Airport Square
56,452

0%
3,724

TBD

 TBD

3,787

3,724

TBD
TBD
Total Under Redevelopment (3)
343,789

41%
$
15,268

$
50,097

$
61,641

$
31,213

$
15,268

 
 
 
(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 12/31/14 (1)
Location
Acres
 
Estimated Developable Square Feet (in thousands)
 
Costs to Date (2)
Land Held for Future Development
 
 
 
 
 
Baltimore/Washington Corridor
 

 
 

 
 
National Business Park
193

 
1,976

 
 
Arundel Preserve
83

 
960

 
 
Columbia Gateway
27

 
630

 
 
M Square
49

 
525

 
 
Airport Square
5

 
84

 
 
Subtotal
357

 
4,175

 
 
Northern Virginia
71

 
1,860

 
 
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
1,065

 
13,478

 
$
277,719

 
 
 
 
 
 
Other Land
 
 
 
 
 
Baltimore/Washington Corridor
6

 
60

 
 
Greater Baltimore
115

 
1,242

 
 
Colorado Springs, Colorado
171

 
2,540

 
 
Other
107

 
1,000

 
 
Total other land held
399

 
4,842

 
$
59,900

 
 
 
 
 
 
Land held
1,464

 
18,320

 
$
337,619

Land held for sale
(56
)
 
(632
)
 
(14,339
)
Land held, net
1,408

 
17,688

 
$
323,280

 
 
 
 
 
 
(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 December 31, 2014:
Insiders
619

 
317

 
—

 
936

 
0.96
%
Non-insiders
92,636

 
3,521

 
610

 
96,767

 
99.04
%
Total
93,255

 
3,838

 
610

 
97,703

 
100.00
%
COMMON EQUITY - End of Quarter
12/31/14
 
9/30/14
 
6/30/14
 
3/31/14
 
12/31/13
Unrestricted Common Shares
92,865

 
87,306

 
87,256

 
87,162

 
87,017

Restricted Common Shares
390

 
406

 
412

 
433

 
377

Common Shares
93,255

 
87,712

 
87,668

 
87,595

 
87,394

Common Units
3,838

 
3,860

 
3,899

 
3,929

 
3,978

Total
97,093

 
91,572

 
91,567

 
91,524

 
91,372

End of Quarter Common Share Price
$
28.37

 
$
25.72

 
$
27.81

 
$
26.64

 
$
23.69

Market Value of Common Shares/Units
$
2,754,528

 
$
2,355,232

 
$
2,546,478

 
$
2,438,199

 
$
2,164,603

PREFERRED EQUITY - End of Quarter
 

 
 

 
 

 
 

 
 

Nonconvertible Preferred Equity - liquidation preference
 

 
 

 
 

 
 

 
 

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

 
$
—

 
$
—

 
$
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

 
172,500

 
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

 
$
207,883

 
$
257,883

 
$
257,883

CAPITALIZATION
 

 
 

 
 

 
 

 
 

Liquidation Preference of Preferred Shares/Units
$
207,883

 
$
207,883

 
$
207,883

 
$
257,883

 
$
257,883

Market Value of Common Shares/Units
2,754,528

 
2,355,232

 
2,546,478

 
2,438,199

 
2,164,603

Total Equity Market Capitalization
$
2,962,411

 
$
2,563,115

 
$
2,754,361

 
$
2,696,082

 
$
2,422,486

(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 December 31, 2014
(dollars in thousands)
 
Stated Rate
 
GAAP 
Effective Rate
 
Weighted Average Maturity (in Years)
 
Maximum Availability
 
Outstanding Balance
 
Average Stated Interest Rates for Three Months Ended 12/31/14
 
 
 
 
Debt Outstanding
 
 
 
 
 
 
 
 
 

 
 
 
Fixed rate
 
 
 
 
 
 
 
 
 

 
 
 
Secured debt (1)
6.16%
 
6.16%
 
3.1
 
 
 
$
387,139

 
6.0%
 
Senior Unsecured Notes
4.09%
 
4.24%
 
7.9
 
 
 
890,862

 
4.1%
 
Exchangeable Senior Notes
4.25%
 
6.05%
 
0.3
 
 
 
572

 
4.3%
 
Other Unsecured Debt
0.00%
 
6.50%
 
11.3
 
 
 
1,607

 
—%
 
Total fixed rate debt (1)
4.71%
 
4.83%
 
6.5
 
 
 
$
1,280,180

 
4.8%
 
Variable rate
 
 
 
 
 
 
 
 
 

 
 
 
Secured debt
2.41%
 
2.41%
 
0.8
 


 
$
36,877

 
2.4%
 
Unsecured Revolving Credit Facility
1.46%
 
1.46%
 
2.5
 
$
800,000

 
83,000

 
1.5%
 
Unsecured Term Loans
1.80%
 
1.80%
 
2.3
 


 
520,000

 
1.8%
 
Total variable rate debt
1.79%
 
1.79%
 
2.2
 


 
$
639,877

 
2.8%
(2)(3)
Total consolidated debt outstanding
3.74%
 
3.81%
 
5.1
 
 
 
$
1,920,057

 
4.2%
(2)(3)
 
 
 
 
 
 
 
 
 
 
 
 
 
Variable Rate Loans Subject to Interest Rate Swaps (2)
 
 
 
 
 
 
 
 
$
436,877

 
0.7%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
% of Fixed Rate Loans (2)
 
 
 
 
 
 
 
 
89.4
%
 
 
 
% of Variable Rate Loans (2)
 
 
 
 
 
 
 
 
10.6
%
 
 
 
 
 
 
 
 
 
 
 
 
100.0
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Recourse debt
 
 
 
 
 
 
 
 
$
1,550,519

 
 
 
Nonrecourse debt
 
 
 
 
 
 
 
 
369,538

 
 
 
Total consolidated debt outstanding
 
 
 
 
 
 
 
 
$
1,920,057

 
 
 
 
(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)
 
 
 
 
 
December 31, 2014
 
 
Secured debt
$
424,016

 
 
Unsecured debt
1,496,041

 
 
Debt in default to be extinguished via conveyance of properties
(150,000
)
 
 
Numerator for debt to adjusted book ratio
$
1,770,057

 
 
 
 
 
 
Unencumbered adjusted book
$
4,024,931

 
 
Encumbered adjusted book
431,902

 
 
Total adjusted book (1)
$
4,456,833

 
 
 
 
 
 
# of Operating Office Properties (1)
 
 
 
Unencumbered
156

 
 
Encumbered
17

 
 
Total (1)
173

 
 
 
 
 
 
Square Feet of Office Properties (in thousands) (1)
 
 
 
Unencumbered
14,766

 
 
Encumbered
2,024

 
 
Total (1)
16,790

 
 
 
 
 
 
 
Three Months Ended 12/31/14
 
 
Unencumbered NOI from real estate operations
$
64,831

 
 
Encumbered NOI from real estate operations
11,642

 
 
NOI from properties to be conveyed to extinguish debt in default
828

 
 
Total NOI from real estate operations
$
77,301

 
 
 
 
 
 
Unencumbered adjusted EBITDA
$
58,777

 
 
Encumbered adjusted EBITDA (1)
11,637

 
 
Total adjusted EBITDA (1)
$
70,414

 
 
 
 
 
 
Debt ratios (coverage ratios excluding capitalized interest) — All coverage computations include discontinued operations
Three Months Ended 12/31/14
 
 
Adjusted EBITDA debt service coverage ratio
3.7x
 
 
Adjusted EBITDA fixed charge coverage ratio
2.8x
 
 
Adjusted debt to in-place adjusted EBITDA ratio
6.3x
 
 
 
 
 
 
 
As of and for Three Months Ended 12/31/14
Unsecured Senior Notes Covenants
Actual
 
Required
Total Debt / Total Assets
42.5%
 
Less than 60%
Secured Debt / Total Assets
8.5%
 
Less than 40%
Debt Service Coverage
3.3x
 
Greater than 1.5x
Unencumbered Assets / Unsecured Debt
257.6%
 
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
 
2015
2016
2017
2018
2019
Thereafter
Total
Unsecured Debt
 
 
 
 
 
 
 
 
 
 

Unsecured Revolving Credit Facility (1)
LIBOR + 1.30%
 
1.46%
 
$
—

$
—

$
83,000

$
—


$
—

$
83,000

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%
 
200

200

200

200

200

1,261

2,261

Total Other Unsecured Debt
 
 
 
 
150,200

200

250,200

200

120,200

1,261

522,261

 
 
 
 
 
 
 
 
 
 
 
 
Total Unsecured Debt
 
 
 
 
$
150,775

$
200

$
333,200

$
200

$
120,200

$
901,261

$
1,505,836

Secured Debt
 
 
 
 
 
 
 
 
 
 
 
Fixed Rate Secured Debt
 
 
 
 
 
 
 
 
 
 
 
 2015 maturities (3)
5.65%
 
5.65%
 
$
150,000

$
—

$
—

$
—

$
—

$
—

$
150,000

 2016 maturities
7.22%
 
7.21%
 
4,128

169,343

—

—

—

—

173,471

 2017 maturities
5.45%
 
5.85%
 
189

200

4,302

—

—

—

4,691

 Thereafter
4.41%
 
4.38%
 
1,576

1,656

1,745

1,836

1,894

50,228

58,935

Total Fixed Rate Secured Debt
 
 
 
 
155,893

171,199

6,047

1,836

1,894

50,228

387,097

Variable Rate Secured Debt
LIBOR + 2.25%
 
2.41%
 
36,877

—

—

—

—

—

36,877

Total Secured Debt
 
 
 
 
$
192,770

$
171,199

$
6,047

$
1,836

$
1,894

$
50,228

$
423,974

 
 
 
 
 
 
 
 
 
 
 
 
Total Debt
 
 
 
 
$
343,545

$
171,399

$
339,247

$
2,036

$
122,094

$
951,489

$
1,929,810

 
 
 
 
 
 
 
 
 
 
 
 
Fixed Rate Debt
4.71%
 
4.83%
 
$
156,668

$
171,399

$
6,247

$
2,036

$
2,094

$
951,489

$
1,289,933

Variable Rate Debt
1.79%
 
1.79%
 
186,877

—

333,000

—

120,000

—

639,877

Total Debt
 
 
 
 
$
343,545

$
171,399

$
339,247

$
2,036

$
122,094

$
951,489

$
1,929,810

 
 
 
 
 
 
 
 
 
 
 
 
Balloon Payments

 

 
$
336,751

$
166,062

$
337,110

$
—

$
120,000

$
943,562

$
1,903,485

Scheduled Principal Amortization

 

 
6,794

5,337

2,137

2,036

2,094

7,927

26,325

Total Debt
 
 
 
 
$
343,545

$
171,399

$
339,247

$
2,036

$
122,094

$
951,489

$
1,929,810

 
 
 
 
 
 
 
 
 
Net discount
(9,753
)
 
 
 
 
 
 
 
 
 
Consolidated debt
$
1,920,057

(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. This loan was originally due to mature in 2017 prior to being accelerated by the lender in July 2014. In connection with loan default proceedings, we expect to transfer title to the properties and be relieved of the debt obligation plus accrued interest in the first quarter of 2015.

30

Corporate Office Properties Trust
Consolidated Joint Ventures as of 12/31/14
(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%
 
$
56,131

$
36,877

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

85.4%
 
75,389

37,678

85%
Total/Average
668

89.5%
 
$
131,520

$
74,555

 
NOI of Operating Properties for the Three Months Ended 12/31/14 (2)
$
3,231

 
 
 

 

 
NOI of Operating Properties for the Year Ended 12/31/14 (2)
$
10,882

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

 
 

 

 
M Square Research Park
525

 
$
3,283

$
—

50%
Huntsville, Alabama:
 

 
 

 

 
Redstone Gateway
4,103

 
68,145

—

85%
Total
4,628

 
$
71,428

$
—

 
 
(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
 
Years Ended
 
12/31/14
 
9/30/14
 
6/30/14
 
3/31/14
 
12/31/13
 
12/31/14
 
12/31/13
Net income
$
5,937

 
$
24,548

 
$
9,050

 
$
5,671

 
$
92,672

 
$
45,206

 
$
101,544

Interest expense on continuing and discontinued operations
23,286

 
24,802

 
23,478

 
20,827

 
23,181

 
92,393

 
90,231

Income tax expense
53

 
101

 
92

 
64

 
1,917

 
310

 
1,978

Depreciation of furniture, fixtures and equipment (FF&E)
513

 
543

 
843

 
505

 
495

 
2,404

 
2,054

Real estate-related depreciation and amortization
31,358

 
30,237

 
30,895

 
43,596

 
31,322

 
136,086

 
117,719

Impairment losses
48

 
42

 
1,328

 
1

 
921

 
1,419

 
32,047

Loss (gain) on early extinguishment of debt on continuing and discontinued operations
9,106

 
176

 
363

 
23

 
(67,808
)
 
9,668

 
(40,780
)
Loss (gain) on sales of operating properties
2

 
(5,123
)
 
—

 
4

 
(9,004
)
 
(5,117
)
 
(9,004
)
Gain on sales of non-operational properties
(43
)
 
(5,535
)
 
—

 
—

 
—

 
(5,578
)
 
(2,683
)
Net (gain) loss on investments in unconsolidated entities included in interest and other income
(74
)
 
63

 
282

 
20

 
221

 
291

 
206

EBITDA from properties to be conveyed to extinguish debt in default
(828
)
 
(732
)
 
(531
)
 
—

 
—

 
(2,091
)
 
—

Executive transition costs
1,056

 
—

 
—

 
—

 
—

 
1,056

 
—

Adjusted EBITDA
$
70,414

 
$
69,122

 
$
65,800

 
$
70,711

 
$
73,917

 
$
276,047

 
$
293,312

Add back:
 

 
 

 
 

 
 

 
 

 
 

 
 

General, administrative and leasing expenses on continuing and discontinued operations
8,912

 
7,211

 
7,528

 
8,143

 
8,442

 
31,794

 
30,873

Business development expenses and land carry costs on continuing and discontinued operations, excluding operating property acquisition costs
1,466

 
1,430

 
1,351

 
1,326

 
1,367

 
5,573

 
5,436

Depreciation of FF&E
(513
)
 
(543
)
 
(843
)
 
(505
)
 
(495
)
 
(2,404
)
 
(2,054
)
Income from construction contracts and other service operations
(1,653
)
 
(1,146
)
 
(725
)
 
(3,166
)
 
(605
)
 
(6,690
)
 
(3,488
)
Interest and other income, excluding net loss/gain on investments in unconsolidated entities
(1,074
)
 
(1,254
)
 
(1,581
)
 
(1,305
)
 
(1,106
)
 
(5,214
)
 
(4,040
)
Equity in (income) loss of unconsolidated entities
(23
)
 
(193
)
 
47

 
(60
)
 
(1,899
)
 
(229
)
 
(2,110
)
NOI from properties to be conveyed to extinguish debt in default
828

 
732

 
531

 
—

 
—

 
2,091

 
—

Executive transition costs
(1,056
)
 
—

 
—

 
—

 
—

 
(1,056
)
 
—

NOI from real estate operations
$
77,301

 
$
75,359

 
$
72,108

 
$
75,144

 
$
79,621

 
$
299,912

 
$
317,929

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Adjusted EBITDA
$
70,414

 
$
69,122

 
$
65,800

 
$
70,711

 
$
73,917

 
 
 
 
Less: NOI from properties in quarter of disposition
—

 
(106
)
 
—

 
—

 
(5,107
)
 
 
 
 
In-place adjusted EBITDA
$
70,414

 
$
69,016

 
$
65,800

 
$
70,711

 
$
68,810

 


 


 
 
 
 
 
 
 
 
 
 
 
 
 
 

32

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

 
 

 
 

 
 

 
 

 
 

 
 

Revenues from real estate operations
$
(2
)
 
$
(36
)
 
$
5

 
$
19

 
$
8,233

 
$
(14
)
 
$
37,636

Property operating expenses
24

 
175

 
(84
)
 
20

 
(2,982
)
 
135

 
(13,505
)
Depreciation and amortization
—

 
—

 
—

 
—

 
(996
)
 
—

 
(4,505
)
General, administrative and leasing expenses
—

 
—

 
—

 
—

 
(3
)
 
—

 
(4
)
Interest
—

 
—

 
—

 
—

 
(1,905
)
 
—

 
(8,221
)
(Loss) gain on early extinguishment of debt
—

 
—

 
(93
)
 
(23
)
 
67,810

 
(116
)
 
67,810

Impairment recoveries (losses)
—

 
24

 
(26
)
 
(1
)
 
(921
)
 
(3
)
 
(26,190
)
Gain (loss) on sales of depreciated real estate properties
—

 
28

 
—

 
(4
)
 
2,671

 
24

 
2,671

Discontinued operations
$
22

 
$
191

 
$
(198
)
 
$
11

 
$
71,907

 
$
26

 
$
55,692

GAAP revenues from real estate operations from continuing operations
$
120,613

 
$
118,276

 
$
115,959

 
$
124,877

 
$
118,487

 
$
479,725

 
$
460,997

Revenues from discontinued operations
(2
)
 
(36
)
 
5

 
19

 
8,233

 
(14
)
 
37,636

Real estate revenues
$
120,611

 
$
118,240

 
$
115,964

 
$
124,896

 
$
126,720

 
$
479,711

 
$
498,633

GAAP property operating expenses from continuing operations
$
43,334

 
$
43,056

 
$
43,772

 
$
49,772

 
$
44,117

 
$
179,934

 
$
167,199

Property operating expenses from discontinued operations
(24
)
 
(175
)
 
84

 
(20
)
 
2,982

 
(135
)
 
13,505

Real estate property operating expenses
$
43,310

 
$
42,881

 
$
43,856

 
$
49,752

 
$
47,099

 
$
179,799

 
$
180,704

Gain on sales of real estate, net, per statements of operations
$
41

 
$
10,630

 
$
—

 
$
—

 
$
6,333

 
$
10,671

 
$
9,016

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

 
28

 
—

 
(4
)
 
2,671

 
24

 
2,671

Gain (loss) on sales of real estate from continuing and discont. operations
41

 
10,658

 
—

 
(4
)
 
9,004

 
10,695

 
11,687

Less: Gain on sales of non-operating properties
(43
)
 
(5,535
)
 
—

 
—

 
—

 
(5,578
)
 
(2,683
)
(Loss) gain on sales of operating properties
$
(2
)
 
$
5,123

 
$
—

 
$
(4
)
 
$
9,004

 
$
5,117

 
$
9,004

Impairment losses, per statements of operations
$
48

 
$
66

 
$
1,302

 
$
—

 
$
—

 
$
1,416

 
$
5,857

Impairment (recoveries) losses on discontinued operations
—

 
(24
)
 
26

 
1

 
921

 
3

 
26,190

Total impairment losses
$
48

 
$
42

 
$
1,328

 
$
1

 
$
921

 
$
1,419

 
$
32,047

Impairment (losses) recoveries on previously depreciated operating properties
(48
)
 
7

 
(1,328
)
 
(1
)
 
(921
)
 
(1,370
)
 
(32,047
)
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
 
Years Ended
 
12/31/14
 
9/30/14
 
6/30/14
 
3/31/14
 
12/31/13
 
12/31/14
 
12/31/13
Depreciation and amortization associated with real estate operations from continuing operations
$
31,358

 
$
30,237

 
$
30,895

 
$
43,596

 
$
30,326

 
$
136,086

 
$
113,214

Depreciation and amortization from discontinued operations
—

 
—

 
—

 
—

 
996

 
—

 
4,505

Real estate-related depreciation and amortization
$
31,358

 
$
30,237

 
$
30,895

 
$
43,596

 
$
31,322

 
$
136,086

 
$
117,719

Interest expense from continuing operations
$
23,286

 
$
24,802

 
$
23,478

 
$
20,827

 
$
21,276

 
$
92,393

 
$
82,010

Interest expense from discontinued operations
—

 
—

 
—

 
—

 
1,905

 
—

 
8,221

Total interest expense
23,286

 
24,802

 
23,478

 
20,827

 
23,181

 
92,393

 
90,231

Less: Amortization of deferred financing costs
(1,020
)
 
(1,357
)
 
(1,122
)
 
(1,167
)
 
(1,159
)
 
(4,666
)
 
(5,451
)
Less: Amortization of net debt discounts and prem., net of amounts capitalized
(261
)
 
(259
)
 
(229
)
 
(171
)
 
48

 
(920
)
 
(1,015
)
Less: Interest exp. on debt in default to be exting. via conveyance of properties
(4,320
)
 
(4,231
)
 
(4,133
)
 
—

 
—

 
(12,684
)
 
—

Denominator for interest coverage
17,685

 
18,955

 
17,994

 
19,489

 
22,070

 
74,123

 
83,765

Scheduled principal amortization
1,603

 
1,477

 
1,582

 
1,855

 
2,252

 
6,517

 
9,481

Denominator for debt service coverage
19,288

 
20,432

 
19,576

 
21,344

 
24,322

 
80,640

 
93,246

Capitalized interest
1,740

 
1,314

 
1,422

 
1,589

 
2,042

 
6,065

 
8,785

Preferred share dividends - redeemable non-convertible
3,552

 
3,553

 
4,344

 
4,490

 
4,490

 
15,939

 
19,971

Preferred unit distributions
165

 
165

 
165

 
165

 
165

 
660

 
660

Denominator for fixed charge coverage
$
24,745

 
$
25,464

 
$
25,507

 
$
27,588

 
$
31,019

 
$
103,304

 
$
122,662

Preferred share dividends
$
3,552

 
$
3,553

 
$
4,344

 
$
4,490

 
$
4,490

 
$
15,939

 
$
19,971

Preferred unit distributions
165

 
165

 
165

 
165

 
165

 
660

 
660

Common share dividends
25,638

 
24,112

 
24,103

 
24,091

 
24,026

 
97,944

 
95,246

Common unit distributions
1,055

 
1,062

 
1,072

 
1,081

 
1,094

 
4,270

 
4,280

Total dividends/distributions
$
30,410

 
$
28,892

 
$
29,684

 
$
29,827

 
$
29,775

 
$
118,813

 
$
120,157

Common share dividends
$
25,638

 
$
24,112

 
$
24,103

 
$
24,091

 
$
24,026

 
$
97,944

 
$
95,246

Common unit distributions
1,055

 
1,062

 
1,072

 
1,081

 
1,094

 
4,270

 
4,280

Dividends and distributions for payout ratios
$
26,693

 
$
25,174

 
$
25,175

 
$
25,172

 
$
25,120

 
$
102,214

 
$
99,526

 
 
 
 
 
 
 
 
 
 
 
 
 
 

34

Corporate Office Properties Trust
Supplementary Reconciliations of Non-GAAP Measures (continued)
(dollars in thousands)
 
Three Months Ended
 
Years Ended
 
12/31/14
 
9/30/14
 
6/30/14
 
3/31/14
 
12/31/13
 
12/31/14
 
12/31/13
Total Assets
$
3,670,257

 
$
3,680,188

 
$
3,709,500

 
$
3,605,897

 
$
3,629,952

 
$
3,670,257

 
$
3,629,952

Accumulated depreciation
703,083

 
679,598

 
655,214

 
635,178

 
597,649

 
703,083

 
597,649

Accumulated depreciation included in assets held for sale
—

 
—

 
3,121

 
—

 
—

 
—

 
—

Accumulated amort. of real estate intangibles and deferred leasing costs
214,611

 
207,864

 
201,627

 
199,500

 
193,142

 
214,611

 
193,142

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

 
—

 
4,277

 
—

 
—

 
—

 
—

Less: Adj. book assoc. with properties to be conveyed to exting. debt in default
(131,118
)
 
(130,346
)
 
(130,921
)
 
—

 
—

 
(131,118
)
 
—

Adjusted book
$
4,456,833

 
$
4,437,304

 
$
4,442,818

 
$
4,440,575

 
$
4,420,743

 
$
4,456,833

 
$
4,420,743

Debt, net
$
1,920,057

 
$
2,049,992

 
$
2,099,343

 
$
1,931,831

 
$
1,927,703

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

 
—

 


 
 
Numerator for debt to adjusted book ratio
1,770,057

 
1,899,992

 
1,949,343

 
1,931,831

 
1,927,703

 
 
 
 
Less: Cash and cash equivalents
(6,077
)
 
(40,018
)
 
(76,216
)
 
(18,374
)
 
(54,373
)
 
 
 
 
Adjusted debt
$
1,763,980

 
$
1,859,974

 
$
1,873,127

 
$
1,913,457

 
$
1,873,330

 


 



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, income taxes and executive transition 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.  We believe that adjusted EBITDA is a useful supplemental measure of performance for assessing our un-levered performance.  We believe that net income (loss) is the most directly comparable GAAP measure to adjusted EBITDA.
 
Amortization of acquisition intangibles included in NOI 
Represents the amortization of intangible asset and liability categories that is included in net operating income, including amortization of above- or below-market leases and above- or below-market cost arrangements.

Basic FFO available to common share and common unit holders (“Basic FFO”) 
This measure is FFO adjusted to subtract (1) preferred share dividends, (2) income attributable to noncontrolling interests through ownership of preferred units in Corporate Office Properties, L.P. (the “Operating Partnership”) or interests in other consolidated entities not owned by us, (3) depreciation and amortization allocable to noncontrolling interests in other consolidated entities, (4) Basic FFO allocable to restricted shares and (5) issuance costs associated with redeemed preferred shares.  With these adjustments, Basic FFO represents FFO available to common shareholders and holders of common units in the Operating Partnership (“common units”).  Common units are substantially similar to our common shares of beneficial interest (“common shares”) and are exchangeable into common shares, subject to certain conditions.  We believe that Basic FFO is useful to investors due to the close correlation of common units to common shares.  We believe that net (loss) income is the most directly comparable GAAP measure to Basic FFO.
 
Cash net operating income (“Cash NOI”) 
Defined as NOI from real estate operations adjusted to eliminate the effects of noncash rental revenues and property operating expenses (comprised of straight-line rental adjustments, which includes the amortization of tenant incentives, and amortization of acquisition intangibles included in FFO and NOI).  Under GAAP, rental revenue is recognized evenly over the term of tenant leases.  Many leases provide for contractual rent increases and the effect of accounting under GAAP for such leases is to

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Corporate Office Properties Trust
Definitions

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

Cash NOI, excluding gross lease termination fees 
Defined as Cash NOI adjusted to eliminate the effects of lease termination fees paid by tenants to terminate their lease obligations prior to the end of the agreed lease terms.  Lease termination fees are often recognized as revenue in large one-time lump sum amounts upon the termination of tenant leases.  We believe that Cash NOI adjusted for lease termination fees is a useful supplemental measure of operating performance in evaluating same-office property groupings because it provides a means of evaluating the effect that lease terminations had on the performance of the property groupings.  We believe that net (loss) income is the most directly comparable GAAP measure to Cash NOI, excluding gross lease termination fees.
 
Adjusted debt to in-place adjusted EBITDA ratio
Defined as adjusted debt (as defined above) divided by in-place adjusted EBITDA (defined below) for the three month period that is annualized by multiplying by four.
 
Debt to Adjusted book 
Defined as debt, as adjusted to subtract debt in default to be extinguished via conveyance of properties, divided by Adjusted book (defined above).
 
Diluted adjusted funds from operations available to common share and common unit holders (“Diluted AFFO”) 
Defined as Diluted FFO, as adjusted for comparability, adjusted for the following: (1) the elimination of the effect of (a) noncash rental revenues and property operating expenses (comprised of straight-line rental adjustments, which includes the amortization of recurring tenant incentives, and amortization of acquisition intangibles included in FFO and NOI, both of which are described under “Cash NOI” below), (b) share-based compensation, net of amounts capitalized, (c) amortization of deferred financing costs, (d) amortization of debt discounts and premiums and (e) amortization of settlements of debt hedges; and (2) recurring capital expenditures.  Recurring capital expenditures are defined as tenant improvements and incentives, building improvements and leasing costs for operating properties that are not (1) items contemplated prior to the acquisition of a property, (2) improvements associated with the expansion of a building or its improvements, (3) renovations to a building which change the underlying classification of the building (for example, from industrial to office or Class C office to Class B office) or (4) capital improvements that represent the addition of something new to the property rather than the replacement of something (for example, the addition of a new heating and air conditioning unit that is not replacing one that was previously there); recurring capital expenditures excludes expenditures of operating properties included in disposition plans during the period that were already sold or are held for future disposition.  We believe that Diluted AFFO is an important supplemental measure of liquidity for an equity REIT because it provides management and investors with an indication of our ability to incur and service debt and to fund dividends and other cash needs.  We believe that the numerator to diluted EPS is the most directly comparable GAAP measure to Diluted AFFO.

Diluted FFO available to common share and common unit holders (“Diluted FFO”) 
Diluted FFO is Basic FFO adjusted to add back any changes in Basic FFO that would result from the assumed conversion of securities that are convertible or exchangeable into common shares.  The computation of Diluted FFO assumes the conversion of common units in the Operating Partnership but does not assume the conversion of other securities that are convertible into common shares if the conversion of those securities would increase Diluted FFO per share in a given period.  We believe that Diluted FFO is useful to investors because it is the numerator used to compute Diluted FFO per share, discussed below.  We believe that the numerator to diluted EPS is the most directly comparable GAAP measure to Diluted FFO.
 

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Corporate Office Properties Trust
Definitions

Diluted FFO available to common share and common unit holders, as adjusted for comparability (“Diluted FFO, as adjusted for comparability”) and FFO, as adjusted for comparability 
Defined as Diluted FFO or FFO adjusted to exclude: operating property acquisition costs: gains on sales of, and impairment losses on, properties other than previously depreciated operating properties, net of associated income tax; gain or loss on early extinguishment of debt; FFO associated with properties securing non-recourse debt on which we have defaulted and which we have extinguished, or expect to extinguish, via conveyance of those properties (including property NOI, interest expense and gains on debt extinguishment); loss on interest rate derivatives; 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.  The adjustment for FFO associated with properties securing non-recourse debt on which we have defaulted pertains to the periods subsequent to our default on the loan’s payment terms, which was the result of our decision to not support payments on the loan since the estimated fair value of the properties was less than the loan balance. While we continued as the legal owner of the properties during this period, all cash flows produced by them went directly to the lender and we did not fund any debt service shortfalls, which included incremental additional interest under the default rate. 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

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Corporate Office Properties Trust
Definitions

investors as a supplemental measure of operating performance because, by excluding gains related to sales of, and impairment losses on, previously depreciated operating properties and excluding real estate-related depreciation and amortization, FFO can help one compare our operating performance between periods.  We believe that net (loss) income is the most directly comparable GAAP measure to FFO.
 
Net operating income (“NOI”) from real estate operations 
NOI is real estate revenues from continuing and discontinued operations reduced by total property expenses associated with real estate operations, including discontinued operations; total property expenses, as used in this definition, do not include depreciation, amortization or interest expense associated with real estate operations.  We believe that NOI is an important supplemental measure of operating performance for a REIT’s operating real estate because it provides a measure of the core real estate operations 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.


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Corporate Office Properties Trust
Definitions

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

Same office property NOI 
Defined as NOI from real estate operations of Same Office Properties.  We believe that Same Office Property NOI is an important supplemental measure of operating performance of Same Office Properties for the same reasons discussed above for NOI from real estate operations.
 

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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 and properties under redevelopment.
 
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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