ý | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended | March 31, 2015 |
o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from | to |
Corporate Office Properties Trust | Maryland | 23-2947217 | ||
(State or other jurisdiction of | (IRS Employer | |||
incorporation or organization) | Identification No.) | |||
Corporate Office Properties, L.P. | Delaware | 23-2930022 | ||
(State or other jurisdiction of | (IRS Employer | |||
incorporation or organization) | Identification No.) |
6711 Columbia Gateway Drive, Suite 300, Columbia, MD | 21046 | |
(Address of principal executive offices) | (Zip Code) |
Large accelerated filer ý | Accelerated filer o | Non-accelerated filer o | Smaller reporting company o | |||
(Do not check if a smaller reporting company) |
Large accelerated filer o | Accelerated filer o | Non-accelerated filer ý | Smaller reporting company o | |||
(Do not check if a smaller reporting company) |
• | combined reports better reflect how management and the analyst community view the business as a single operating unit; |
• | combined reports enhance investors’ understanding of the Company and the Operating Partnership by enabling them to view the business as a whole and in the same manner as management; |
• | combined reports are more efficient for the Company and the Operating Partnership and result in savings in time, effort and expense; and |
• | combined reports are more efficient for investors by reducing duplicative disclosure and providing a single document for their review. |
• | consolidated financial statements; |
• | the following notes to the consolidated financial statements: |
• | Note 3, Fair Value Measurements of COPT and subsidiaries and COPLP and subsidiaries; and |
• | Note 16, Earnings per Share of COPT and subsidiaries and Earnings per Unit of COPLP and subsidiaries; |
• | “Item 2: Management’s Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources of COPT”; and |
• | “Item 2: Management’s Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources of COPLP.” |
PAGE | ||
Consolidated Financial Statements of Corporate Office Properties Trust | ||
Consolidated Financial Statements of Corporate Office Properties, L.P. | ||
March 31, 2015 | December 31, 2014 | ||||||
Assets | |||||||
Properties, net: | |||||||
Operating properties, net | $ | 2,888,534 | $ | 2,751,488 | |||
Projects in development or held for future development | 489,618 | 545,426 | |||||
Total properties, net | 3,378,152 | 3,296,914 | |||||
Assets held for sale, net | — | 14,339 | |||||
Cash and cash equivalents | 4,429 | 6,077 | |||||
Restricted cash and marketable securities | 11,445 | 9,069 | |||||
Accounts receivable (net of allowance for doubtful accounts of $784 and $717, respectively) | 33,753 | 26,901 | |||||
Deferred rent receivable (net of allowance of $1,695 and $1,418, respectively) | 98,340 | 95,910 | |||||
Intangible assets on real estate acquisitions, net | 61,477 | 43,854 | |||||
Deferred leasing and financing costs, net | 65,245 | 64,797 | |||||
Investing receivables | 52,814 | 52,147 | |||||
Prepaid expenses and other assets | 71,500 | 60,249 | |||||
Total assets | $ | 3,777,155 | $ | 3,670,257 | |||
Liabilities and equity | |||||||
Liabilities: | |||||||
Debt, net | $ | 1,999,622 | $ | 1,920,057 | |||
Accounts payable and accrued expenses | 138,214 | 123,035 | |||||
Rents received in advance and security deposits | 31,551 | 31,011 | |||||
Dividends and distributions payable | 30,174 | 29,862 | |||||
Deferred revenue associated with operating leases | 14,697 | 13,031 | |||||
Interest rate derivatives | 4,282 | 1,855 | |||||
Other liabilities | 9,990 | 12,105 | |||||
Total liabilities | 2,228,530 | 2,130,956 | |||||
Commitments and contingencies (Note 17) | |||||||
Redeemable noncontrolling interest | 18,895 | 18,417 | |||||
Equity: | |||||||
Corporate Office Properties Trust’s shareholders’ equity: | |||||||
Preferred Shares of beneficial interest at liquidation preference ($0.01 par value; 25,000,000 shares authorized; issued and outstanding of 7,431,667 at March 31, 2015 and December 31, 2014) | 199,083 | 199,083 | |||||
Common Shares of beneficial interest ($0.01 par value; 125,000,000 shares authorized, shares issued and outstanding of 94,536,269 at March 31, 2015 and 93,255,284 at December 31, 2014) | 945 | 933 | |||||
Additional paid-in capital | 1,999,708 | 1,969,968 | |||||
Cumulative distributions in excess of net income | (733,459 | ) | (717,264 | ) | |||
Accumulated other comprehensive loss | (3,947 | ) | (1,297 | ) | |||
Total Corporate Office Properties Trust’s shareholders’ equity | 1,462,330 | 1,451,423 | |||||
Noncontrolling interests in subsidiaries: | |||||||
Common units in COPLP | 49,168 | 51,534 | |||||
Preferred units in COPLP | 8,800 | 8,800 | |||||
Other consolidated entities | 9,432 | 9,127 | |||||
Noncontrolling interests in subsidiaries | 67,400 | 69,461 | |||||
Total equity | 1,529,730 | 1,520,884 | |||||
Total liabilities, redeemable noncontrolling interest and equity | $ | 3,777,155 | $ | 3,670,257 |
For the Three Months Ended March 31, | |||||||
2015 | 2014 | ||||||
Revenues | |||||||
Rental revenue | $ | 98,238 | $ | 98,035 | |||
Tenant recoveries and other real estate operations revenue | 24,472 | 26,842 | |||||
Construction contract and other service revenues | 38,324 | 21,790 | |||||
Total revenues | 161,034 | 146,667 | |||||
Expenses | |||||||
Property operating expenses | 50,681 | 49,772 | |||||
Depreciation and amortization associated with real estate operations | 31,599 | 43,596 | |||||
Construction contract and other service expenses | 37,498 | 18,624 | |||||
General, administrative and leasing expenses | 7,891 | 8,143 | |||||
Business development expenses and land carry costs | 2,790 | 1,326 | |||||
Total operating expenses | 130,459 | 121,461 | |||||
Operating income | 30,575 | 25,206 | |||||
Interest expense | (20,838 | ) | (20,827 | ) | |||
Interest and other income | 1,283 | 1,285 | |||||
Loss on early extinguishment of debt | (3 | ) | — | ||||
Income from continuing operations before equity in income of unconsolidated entities and income taxes | 11,017 | 5,664 | |||||
Equity in income of unconsolidated entities | 25 | 60 | |||||
Income tax expense | (55 | ) | (64 | ) | |||
Income from continuing operations | 10,987 | 5,660 | |||||
Discontinued operations | (238 | ) | 11 | ||||
Income before gain on sales of real estate | 10,749 | 5,671 | |||||
Gain on sales of real estate | 3,986 | — | |||||
Net income | 14,735 | 5,671 | |||||
Net income attributable to noncontrolling interests: | |||||||
Common units in COPLP | (398 | ) | (16 | ) | |||
Preferred units in COPLP | (165 | ) | (165 | ) | |||
Other consolidated entities | (817 | ) | (749 | ) | |||
Net income attributable to COPT | 13,355 | 4,741 | |||||
Preferred share dividends | (3,552 | ) | (4,490 | ) | |||
Net income attributable to COPT common shareholders | $ | 9,803 | $ | 251 | |||
Net income attributable to COPT: | |||||||
Income from continuing operations | $ | 13,581 | $ | 4,728 | |||
Discontinued operations, net | (226 | ) | 13 | ||||
Net income attributable to COPT | $ | 13,355 | $ | 4,741 | |||
Basic earnings per common share (1) | |||||||
Income from continuing operations | $ | 0.10 | $ | 0.00 | |||
Discontinued operations | 0.00 | 0.00 | |||||
Net income attributable to COPT common shareholders | $ | 0.10 | $ | 0.00 | |||
Diluted earnings per common share (1) | |||||||
Income from continuing operations | $ | 0.10 | $ | 0.00 | |||
Discontinued operations | 0.00 | 0.00 | |||||
Net income attributable to COPT common shareholders | $ | 0.10 | $ | 0.00 | |||
Dividends declared per common share | $ | 0.275 | $ | 0.275 |
For the Three Months Ended March 31, | ||||||||
2015 | 2014 | |||||||
Net income | $ | 14,735 | $ | 5,671 | ||||
Other comprehensive loss | ||||||||
Unrealized losses on interest rate derivatives | (3,474 | ) | (2,123 | ) | ||||
Losses on interest rate derivatives included in interest expense | 773 | 695 | ||||||
Other comprehensive loss | (2,701 | ) | (1,428 | ) | ||||
Comprehensive income | 12,034 | 4,243 | ||||||
Comprehensive income attributable to noncontrolling interests | (1,329 | ) | (911 | ) | ||||
Comprehensive income attributable to COPT | $ | 10,705 | $ | 3,332 |
Preferred Shares | Common Shares | Additional Paid-in Capital | Cumulative Distributions in Excess of Net Income | Accumulated Other Comprehensive Income (Loss) | Noncontrolling Interests | Total | |||||||||||||||||||||
Balance at December 31, 2013 (87,394,512 common shares outstanding) | $ | 249,083 | $ | 874 | $ | 1,814,015 | $ | (641,868 | ) | $ | 3,480 | $ | 71,665 | $ | 1,497,249 | ||||||||||||
Conversion of common units to common shares (48,498 shares) | — | — | 651 | — | — | (651 | ) | — | |||||||||||||||||||
Exercise of share options (26,614 shares) | — | — | 568 | — | — | — | 568 | ||||||||||||||||||||
Share-based compensation (125,307 shares issued, net of redemptions) | — | 2 | 1,854 | — | — | — | 1,856 | ||||||||||||||||||||
Redemption of vested equity awards | — | — | (1,092 | ) | — | — | — | (1,092 | ) | ||||||||||||||||||
Adjustments to noncontrolling interests resulting from changes in ownership of COPLP | — | — | (69 | ) | — | — | 69 | — | |||||||||||||||||||
Comprehensive income | — | — | — | 4,741 | (1,408 | ) | 408 | 3,741 | |||||||||||||||||||
Dividends | — | — | — | (28,581 | ) | — | — | (28,581 | ) | ||||||||||||||||||
Distributions to owners of common and preferred units in COPLP | — | — | — | — | — | (1,246 | ) | (1,246 | ) | ||||||||||||||||||
Adjustment to arrive at fair value of redeemable noncontrolling interest | — | — | 540 | — | — | — | 540 | ||||||||||||||||||||
Balance at March 31, 2014 (87,594,931 common shares outstanding) | $ | 249,083 | $ | 876 | $ | 1,816,467 | $ | (665,708 | ) | $ | 2,072 | $ | 70,245 | $ | 1,473,035 | ||||||||||||
Balance at December 31, 2014 (93,255,284 common shares outstanding) | $ | 199,083 | $ | 933 | $ | 1,969,968 | $ | (717,264 | ) | $ | (1,297 | ) | $ | 69,461 | $ | 1,520,884 | |||||||||||
Conversion of common units to common shares (158,000 shares) | — | 2 | 2,120 | — | — | (2,122 | ) | — | |||||||||||||||||||
Common shares issued under at-the-market program (890,241 shares) | — | 9 | 26,526 | — | — | — | 26,535 | ||||||||||||||||||||
Exercise of share options (70,374 shares) | — | — | 1,845 | — | — | — | 1,845 | ||||||||||||||||||||
Share-based compensation (162,370 shares issued, net of redemptions) | — | 1 | 1,828 | — | — | — | 1,829 | ||||||||||||||||||||
Redemption of vested equity awards | — | — | (2,031 | ) | — | — | — | (2,031 | ) | ||||||||||||||||||
Adjustments to noncontrolling interests resulting from changes in ownership of COPLP | — | — | (475 | ) | — | — | 475 | — | |||||||||||||||||||
Comprehensive income | — | — | — | 13,355 | (2,650 | ) | 767 | 11,472 | |||||||||||||||||||
Dividends | — | — | — | (29,550 | ) | — | — | (29,550 | ) | ||||||||||||||||||
Distributions to owners of common and preferred units in COPLP | — | — | — | — | — | (1,177 | ) | (1,177 | ) | ||||||||||||||||||
Distributions to noncontrolling interests in other consolidated entities | — | — | — | — | — | (4 | ) | (4 | ) | ||||||||||||||||||
Adjustment to arrive at fair value of redeemable noncontrolling interest | — | — | (73 | ) | — | — | — | (73 | ) | ||||||||||||||||||
Balance at March 31, 2015 (94,536,269 common shares outstanding) | $ | 199,083 | $ | 945 | $ | 1,999,708 | $ | (733,459 | ) | $ | (3,947 | ) | $ | 67,400 | $ | 1,529,730 |
For the Three Months Ended March 31, | |||||||
2015 | 2014 | ||||||
Cash flows from operating activities | |||||||
Revenues from real estate operations received | $ | 117,521 | $ | 116,386 | |||
Construction contract and other service revenues received | 19,968 | 17,289 | |||||
Property operating expenses paid | (42,768 | ) | (42,739 | ) | |||
Construction contract and other service expenses paid | (27,853 | ) | (11,397 | ) | |||
General, administrative, leasing, business development and land carry costs paid | (12,728 | ) | (9,906 | ) | |||
Interest expense paid | (12,795 | ) | (18,403 | ) | |||
Payments in connection with early extinguishment of debt | (3 | ) | (101 | ) | |||
Interest and other income received | 556 | 217 | |||||
Income taxes (paid) refunded | (8 | ) | 192 | ||||
Net cash provided by operating activities | 41,890 | 51,538 | |||||
Cash flows from investing activities | |||||||
Acquisitions of operating properties | (56,622 | ) | — | ||||
Construction, development and redevelopment | (62,057 | ) | (42,625 | ) | |||
Tenant improvements on operating properties | (5,520 | ) | (4,357 | ) | |||
Other capital improvements on operating properties | (3,720 | ) | (9,115 | ) | |||
Proceeds from dispositions of properties | 17,424 | 220 | |||||
Leasing costs paid | (1,935 | ) | (4,422 | ) | |||
Increase in prepaid expenses and other assets associated with investing activities | (5,782 | ) | (450 | ) | |||
Other | (174 | ) | (106 | ) | |||
Net cash used in investing activities | (118,386 | ) | (60,855 | ) | |||
Cash flows from financing activities | |||||||
Proceeds from debt | |||||||
Revolving Credit Facility | 150,000 | — | |||||
Other debt proceeds | — | 5,700 | |||||
Repayments of debt | |||||||
Revolving Credit Facility | (69,000 | ) | — | ||||
Scheduled principal amortization | (1,649 | ) | (1,855 | ) | |||
Other debt repayments | (50 | ) | (50 | ) | |||
Net proceeds from issuance of common shares | 28,404 | 568 | |||||
Common share dividends paid | (25,646 | ) | (24,036 | ) | |||
Preferred share dividends paid | (3,552 | ) | (4,490 | ) | |||
Distributions paid to noncontrolling interests in COPLP | (1,217 | ) | (1,253 | ) | |||
Redemption of vested equity awards | (2,031 | ) | (1,092 | ) | |||
Other | (411 | ) | (174 | ) | |||
Net cash provided by (used in) financing activities | 74,848 | (26,682 | ) | ||||
Net decrease in cash and cash equivalents | (1,648 | ) | (35,999 | ) | |||
Cash and cash equivalents | |||||||
Beginning of period | 6,077 | 54,373 | |||||
End of period | $ | 4,429 | $ | 18,374 |
For the Three Months Ended March 31, | |||||||
2015 | 2014 | ||||||
Reconciliation of net income to net cash provided by operating activities: | |||||||
Net income | $ | 14,735 | $ | 5,671 | |||
Adjustments to reconcile net income to net cash provided by operating activities: | |||||||
Depreciation and other amortization | 32,091 | 44,101 | |||||
Impairment losses | 233 | 1 | |||||
Amortization of deferred financing costs | 990 | 1,167 | |||||
(Increase) decrease in deferred rent receivable | (1,746 | ) | 398 | ||||
Amortization of net debt discounts | 264 | 171 | |||||
(Gain) loss on sales of real estate | (3,986 | ) | 4 | ||||
Share-based compensation | 1,552 | 1,555 | |||||
Loss on early extinguishment of debt | — | (78 | ) | ||||
Other | (640 | ) | (1,032 | ) | |||
Operating changes in assets and liabilities: | |||||||
Increase in accounts receivable | (6,918 | ) | (1,769 | ) | |||
(Increase) decrease in restricted cash and marketable securities | (1,577 | ) | 283 | ||||
Increase in prepaid expenses and other assets | (6,352 | ) | (494 | ) | |||
Increase in accounts payable, accrued expenses and other liabilities | 12,704 | 4,785 | |||||
Increase (decrease) in rents received in advance and security deposits | 540 | (3,225 | ) | ||||
Net cash provided by operating activities | $ | 41,890 | $ | 51,538 | |||
Supplemental schedule of non-cash investing and financing activities: | |||||||
Decrease in accrued capital improvements, leasing and other investing activity costs | $ | (3,897 | ) | $ | (7,985 | ) | |
Liabilities assumed on acquisition of operating properties | $ | 5,265 | $ | — | |||
Decrease in fair value of derivatives applied to accumulated other comprehensive loss and noncontrolling interests | $ | (2,701 | ) | $ | (1,443 | ) | |
Dividends/distribution payable | $ | 30,174 | $ | 29,122 | |||
Decrease in noncontrolling interests and increase in shareholders’ equity in connection with the conversion of common units into common shares | $ | 2,122 | $ | 651 | |||
Adjustments to noncontrolling interests resulting from changes in COPLP ownership | $ | 475 | $ | 69 | |||
Increase (decrease) in redeemable noncontrolling interest and decrease (increase) in equity to carry redeemable noncontrolling interest at fair value | $ | 73 | $ | (540 | ) |
March 31, 2015 | December 31, 2014 | ||||||
Assets | |||||||
Properties, net: | |||||||
Operating properties, net | $ | 2,888,534 | $ | 2,751,488 | |||
Projects in development or held for future development | 489,618 | 545,426 | |||||
Total properties, net | 3,378,152 | 3,296,914 | |||||
Assets held for sale, net | — | 14,339 | |||||
Cash and cash equivalents | 4,429 | 6,077 | |||||
Restricted cash and marketable securities | 5,509 | 3,187 | |||||
Accounts receivable (net of allowance for doubtful accounts of $784 and $717, respectively) | 33,753 | 26,901 | |||||
Deferred rent receivable (net of allowance of $1,695 and $1,418, respectively) | 98,340 | 95,910 | |||||
Intangible assets on real estate acquisitions, net | 61,477 | 43,854 | |||||
Deferred leasing and financing costs, net | 65,245 | 64,797 | |||||
Investing receivables | 52,814 | 52,147 | |||||
Prepaid expenses and other assets | 71,500 | 60,249 | |||||
Total assets | $ | 3,771,219 | $ | 3,664,375 | |||
Liabilities and equity | |||||||
Liabilities: | |||||||
Debt, net | $ | 1,999,622 | $ | 1,920,057 | |||
Accounts payable and accrued expenses | 138,214 | 123,035 | |||||
Rents received in advance and security deposits | 31,551 | 31,011 | |||||
Distributions payable | 30,174 | 29,862 | |||||
Deferred revenue associated with operating leases | 14,697 | 13,031 | |||||
Interest rate derivatives | 4,282 | 1,855 | |||||
Other liabilities | 4,054 | 6,223 | |||||
Total liabilities | 2,222,594 | 2,125,074 | |||||
Commitments and contingencies (Note 17) | |||||||
Redeemable noncontrolling interest | 18,895 | 18,417 | |||||
Equity: | |||||||
Corporate Office Properties, L.P.’s equity: | |||||||
Preferred units | |||||||
General partner, preferred units outstanding of 7,431,667 at March 31, 2015 and December 31, 2014 | 199,083 | 199,083 | |||||
Limited partner, 352,000 preferred units outstanding at March 31, 2015 and December 31, 2014 | 8,800 | 8,800 | |||||
Common units, 94,536,269 and 93,255,284 held by the general partner and 3,679,551 and 3,837,551 held by limited partners at March 31, 2015 and December 31, 2014, respectively | 1,316,514 | 1,305,219 | |||||
Accumulated other comprehensive loss | (4,137 | ) | (1,381 | ) | |||
Total Corporate Office Properties, L.P.’s equity | 1,520,260 | 1,511,721 | |||||
Noncontrolling interests in subsidiaries | 9,470 | 9,163 | |||||
Total equity | 1,529,730 | 1,520,884 | |||||
Total liabilities, redeemable noncontrolling interest and equity | $ | 3,771,219 | $ | 3,664,375 |
For the Three Months Ended March 31, | |||||||
2015 | 2014 | ||||||
Revenues | |||||||
Rental revenue | $ | 98,238 | $ | 98,035 | |||
Tenant recoveries and other real estate operations revenue | 24,472 | 26,842 | |||||
Construction contract and other service revenues | 38,324 | 21,790 | |||||
Total revenues | 161,034 | 146,667 | |||||
Expenses | |||||||
Property operating expenses | 50,681 | 49,772 | |||||
Depreciation and amortization associated with real estate operations | 31,599 | 43,596 | |||||
Construction contract and other service expenses | 37,498 | 18,624 | |||||
General, administrative and leasing expenses | 7,891 | 8,143 | |||||
Business development expenses and land carry costs | 2,790 | 1,326 | |||||
Total operating expenses | 130,459 | 121,461 | |||||
Operating income | 30,575 | 25,206 | |||||
Interest expense | (20,838 | ) | (20,827 | ) | |||
Interest and other income | 1,283 | 1,285 | |||||
Loss on early extinguishment of debt | (3 | ) | — | ||||
Income from continuing operations before equity in income of unconsolidated entities and income taxes | 11,017 | 5,664 | |||||
Equity in income of unconsolidated entities | 25 | 60 | |||||
Income tax expense | (55 | ) | (64 | ) | |||
Income from continuing operations | 10,987 | 5,660 | |||||
Discontinued operations | (238 | ) | 11 | ||||
Income before gain on sales of real estate | 10,749 | 5,671 | |||||
Gain on sales of real estate | 3,986 | — | |||||
Net income | 14,735 | 5,671 | |||||
Net income attributable to noncontrolling interests in consolidated entities | (818 | ) | (737 | ) | |||
Net income attributable to COPLP | 13,917 | 4,934 | |||||
Preferred unit distributions | (3,717 | ) | (4,655 | ) | |||
Net income attributable to COPLP common unitholders | $ | 10,200 | $ | 279 | |||
Net income attributable to COPLP: | |||||||
Income from continuing operations | $ | 14,152 | $ | 4,921 | |||
Discontinued operations, net | (235 | ) | 13 | ||||
Net income attributable to COPLP | $ | 13,917 | $ | 4,934 | |||
Basic earnings per common unit (1) | |||||||
Income from continuing operations | $ | 0.10 | $ | 0.00 | |||
Discontinued operations | 0.00 | 0.00 | |||||
Net income attributable to COPLP common unitholders | $ | 0.10 | $ | 0.00 | |||
Diluted earnings per common unit (1) | |||||||
Income from continuing operations | $ | 0.10 | $ | 0.00 | |||
Discontinued operations | 0.00 | 0.00 | |||||
Net income attributable to COPLP common unitholders | $ | 0.10 | $ | 0.00 | |||
Distributions declared per common unit | $ | 0.275 | $ | 0.275 |
For the Three Months Ended March 31, | ||||||||
2015 | 2014 | |||||||
Net income | $ | 14,735 | $ | 5,671 | ||||
Other comprehensive loss | ||||||||
Unrealized losses on interest rate derivatives | (3,474 | ) | (2,123 | ) | ||||
Losses on interest rate derivatives included in interest expense | 773 | 695 | ||||||
Other comprehensive loss | (2,701 | ) | (1,428 | ) | ||||
Comprehensive income | 12,034 | 4,243 | ||||||
Comprehensive income attributable to noncontrolling interests | (873 | ) | (782 | ) | ||||
Comprehensive income attributable to COPLP | $ | 11,161 | $ | 3,461 |
Limited Partner Preferred Units | General Partner Preferred Units | Common Units | Accumulated Other Comprehensive Income (Loss) | Noncontrolling Interests in Subsidiaries | ||||||||||||||||||||||||||||
Units | Amount | Units | Amount | Units | Amount | Total Equity | ||||||||||||||||||||||||||
Balance at December 31, 2013 | 352,000 | $ | 8,800 | 9,431,667 | $ | 249,083 | 91,372,212 | $ | 1,226,318 | $ | 3,605 | $ | 9,443 | $ | 1,497,249 | |||||||||||||||||
Issuance of common units resulting from exercise of share options | — | — | — | — | 26,614 | 568 | — | — | 568 | |||||||||||||||||||||||
Share-based compensation (units net of redemption) | — | — | — | — | 125,307 | 1,856 | — | — | 1,856 | |||||||||||||||||||||||
Redemptions of vested equity awards | — | — | — | — | — | (1,092 | ) | — | — | (1,092 | ) | |||||||||||||||||||||
Comprehensive income | — | 165 | — | 4,490 | — | 279 | (1,472 | ) | 279 | 3,741 | ||||||||||||||||||||||
Distributions to owners of common and preferred units | — | (165 | ) | — | (4,490 | ) | — | (25,172 | ) | — | — | (29,827 | ) | |||||||||||||||||||
Adjustment to arrive at fair value of redeemable noncontrolling interest | — | — | — | — | — | 540 | — | — | 540 | |||||||||||||||||||||||
Balance at March 31, 2014 | 352,000 | $ | 8,800 | 9,431,667 | $ | 249,083 | 91,524,133 | $ | 1,203,297 | $ | 2,133 | $ | 9,722 | $ | 1,473,035 | |||||||||||||||||
Balance at December 31, 2014 | 352,000 | $ | 8,800 | 7,431,667 | $ | 199,083 | 97,092,835 | $ | 1,305,219 | $ | (1,381 | ) | $ | 9,163 | $ | 1,520,884 | ||||||||||||||||
Issuance of common units resulting from common shares issued under at-the-market program | — | — | — | — | 890,241 | 26,535 | — | — | 26,535 | |||||||||||||||||||||||
Issuance of common units resulting from exercise of share options | — | — | — | — | 70,374 | 1,845 | — | — | 1,845 | |||||||||||||||||||||||
Share-based compensation (units net of redemption) | — | — | — | — | 162,370 | 1,829 | — | — | 1,829 | |||||||||||||||||||||||
Redemptions of vested equity awards | — | — | — | — | — | (2,031 | ) | — | — | (2,031 | ) | |||||||||||||||||||||
Comprehensive income | — | 165 | — | 3,552 | — | 10,200 | (2,756 | ) | 311 | 11,472 | ||||||||||||||||||||||
Distributions to owners of common and preferred units | — | (165 | ) | — | (3,552 | ) | — | (27,010 | ) | — | — | (30,727 | ) | |||||||||||||||||||
Distributions to noncontrolling interests in subsidiaries | — | — | — | — | — | — | — | (4 | ) | (4 | ) | |||||||||||||||||||||
Adjustment to arrive at fair value of redeemable noncontrolling interest | — | — | — | — | — | (73 | ) | — | — | (73 | ) | |||||||||||||||||||||
Balance at March 31, 2015 | 352,000 | $ | 8,800 | 7,431,667 | $ | 199,083 | 98,215,820 | $ | 1,316,514 | $ | (4,137 | ) | $ | 9,470 | $ | 1,529,730 |
For the Three Months Ended March 31, | |||||||
2015 | 2014 | ||||||
Cash flows from operating activities | |||||||
Revenues from real estate operations received | $ | 117,521 | $ | 116,386 | |||
Construction contract and other service revenues received | 19,968 | 17,289 | |||||
Property operating expenses paid | (42,768 | ) | (42,739 | ) | |||
Construction contract and other service expenses paid | (27,853 | ) | (11,397 | ) | |||
General, administrative, leasing, business development and land carry costs paid | (12,728 | ) | (9,906 | ) | |||
Interest expense paid | (12,795 | ) | (18,403 | ) | |||
Payments in connection with early extinguishment of debt | (3 | ) | (101 | ) | |||
Interest and other income received | 556 | 217 | |||||
Income taxes (paid) refunded | (8 | ) | 192 | ||||
Net cash provided by operating activities | 41,890 | 51,538 | |||||
Cash flows from investing activities | |||||||
Acquisitions of operating properties | (56,622 | ) | — | ||||
Construction, development and redevelopment | (62,057 | ) | (42,625 | ) | |||
Tenant improvements on operating properties | (5,520 | ) | (4,357 | ) | |||
Other capital improvements on operating properties | (3,720 | ) | (9,115 | ) | |||
Proceeds from dispositions of properties | 17,424 | 220 | |||||
Leasing costs paid | (1,935 | ) | (4,422 | ) | |||
Increase in prepaid expenses and other assets associated with investing activities | (5,782 | ) | (450 | ) | |||
Other | (174 | ) | (106 | ) | |||
Net cash used in investing activities | (118,386 | ) | (60,855 | ) | |||
Cash flows from financing activities | |||||||
Proceeds from debt | |||||||
Revolving Credit Facility | 150,000 | — | |||||
Other debt proceeds | — | 5,700 | |||||
Repayments of debt | |||||||
Revolving Credit Facility | (69,000 | ) | — | ||||
Scheduled principal amortization | (1,649 | ) | (1,855 | ) | |||
Other debt repayments | (50 | ) | (50 | ) | |||
Net proceeds from issuance of common units | 28,404 | 568 | |||||
Common unit distributions paid | (26,698 | ) | (25,124 | ) | |||
Preferred unit distributions paid | (3,717 | ) | (4,655 | ) | |||
Redemption of vested equity awards | (2,031 | ) | (1,092 | ) | |||
Other | (411 | ) | (174 | ) | |||
Net cash provided by (used in) financing activities | 74,848 | (26,682 | ) | ||||
Net decrease in cash and cash equivalents | (1,648 | ) | (35,999 | ) | |||
Cash and cash equivalents | |||||||
Beginning of period | 6,077 | 54,373 | |||||
End of period | $ | 4,429 | $ | 18,374 |
For the Three Months Ended March 31, | |||||||
2015 | 2014 | ||||||
Reconciliation of net income to net cash provided by operating activities: | |||||||
Net income | $ | 14,735 | $ | 5,671 | |||
Adjustments to reconcile net income to net cash provided by operating activities: | |||||||
Depreciation and other amortization | 32,091 | 44,101 | |||||
Impairment losses | 233 | 1 | |||||
Amortization of deferred financing costs | 990 | 1,167 | |||||
(Increase) decrease in deferred rent receivable | (1,746 | ) | 398 | ||||
Amortization of net debt discounts | 264 | 171 | |||||
(Gain) loss on sales of real estate | (3,986 | ) | 4 | ||||
Share-based compensation | 1,552 | 1,555 | |||||
Loss on early extinguishment of debt | — | (78 | ) | ||||
Other | (640 | ) | (1,032 | ) | |||
Operating changes in assets and liabilities: | |||||||
Increase in accounts receivable | (6,918 | ) | (1,769 | ) | |||
(Increase) decrease in restricted cash and marketable securities | (1,523 | ) | 381 | ||||
Increase in prepaid expenses and other assets | (6,352 | ) | (494 | ) | |||
Increase in accounts payable, accrued expenses and other liabilities | 12,650 | 4,687 | |||||
Increase (decrease) in rents received in advance and security deposits | 540 | (3,225 | ) | ||||
Net cash provided by operating activities | $ | 41,890 | $ | 51,538 | |||
Supplemental schedule of non-cash investing and financing activities: | |||||||
Decrease in accrued capital improvements, leasing and other investing activity costs | $ | (3,897 | ) | $ | (7,985 | ) | |
Liabilities assumed on acquisition of operating properties | $ | 5,265 | $ | — | |||
Decrease in fair value of derivatives applied to accumulated other comprehensive loss and noncontrolling interests | $ | (2,701 | ) | $ | (1,443 | ) | |
Distributions payable | $ | 30,174 | $ | 29,122 | |||
Increase (decrease) in redeemable noncontrolling interest and decrease (increase) in equity to carry redeemable noncontrolling interest at fair value | $ | 73 | $ | (540 | ) |
• | 178 operating office properties totaling 17.7 million square feet (excluding two properties serving as collateral for a nonrecourse mortgage loan in default, as discussed further in the Management’s Discussion and Analysis of Financial Condition and Results of Operations section of this Quarterly Report on Form 10-Q); |
• | 12 office properties under, or contractually committed for, construction or redevelopment that we estimate will total approximately 1.4 million square feet upon completion, including one partially operational property included above; |
• | 1,402 acres of land we control that we believe are potentially developable into approximately 17.6 million square feet; and |
• | a partially operational, wholesale data center which upon completion and stabilization is expected to have a critical load of 19.25 megawatts. |
Description | Quoted Prices in Active Markets for Identical Assets(Level 1) | Significant Other Observable Inputs(Level 2) | Significant Unobservable Inputs(Level 3) | Total | ||||||||||||
Assets: | ||||||||||||||||
Marketable securities in deferred compensation plan (1) | ||||||||||||||||
Mutual funds | $ | 5,826 | $ | — | $ | — | $ | 5,826 | ||||||||
Other | 110 | — | — | 110 | ||||||||||||
Warrants to purchase common stock (2) | — | 89 | — | 89 | ||||||||||||
Total assets | $ | 5,936 | $ | 89 | $ | — | $ | 6,025 | ||||||||
Liabilities: | ||||||||||||||||
Deferred compensation plan liability (3) | $ | — | $ | 5,936 | $ | — | $ | 5,936 | ||||||||
Interest rate derivatives | — | 4,282 | — | 4,282 | ||||||||||||
Total liabilities | $ | — | $ | 10,218 | $ | — | $ | 10,218 | ||||||||
Redeemable noncontrolling interest | $ | — | $ | — | $ | 18,895 | $ | 18,895 |
Description | Quoted Prices in Active Markets for Identical Assets(Level 1) | Significant Other Observable Inputs(Level 2) | Significant Unobservable Inputs(Level 3) | Total | ||||||||||||
Assets: | ||||||||||||||||
Warrants to purchase common stock (1) | $ | — | $ | 89 | $ | — | $ | 89 | ||||||||
Liabilities: | ||||||||||||||||
Interest rate derivatives | $ | — | $ | 4,282 | $ | — | $ | 4,282 | ||||||||
Redeemable noncontrolling interest | $ | — | $ | — | $ | 18,895 | $ | 18,895 |
March 31, 2015 | December 31, 2014 | ||||||
Land | $ | 455,639 | $ | 439,355 | |||
Buildings and improvements | 3,157,434 | 3,015,216 | |||||
Less: Accumulated depreciation | (724,539 | ) | (703,083 | ) | |||
Operating properties, net | $ | 2,888,534 | $ | 2,751,488 |
March 31, 2015 | December 31, 2014 | ||||||
Land | $ | 219,852 | $ | 214,977 | |||
Construction in progress, excluding land | 269,766 | 330,449 | |||||
Projects in development or held for future development | $ | 489,618 | $ | 545,426 |
Land, operating properties | $ | 8,057 | ||
Building and improvements | 34,740 | |||
Intangible assets on real estate acquisitions | 20,183 | |||
Total assets | 62,980 | |||
Below-market leases | (1,093 | ) | ||
Total acquisition cost | $ | 61,887 |
Weighted Average Amortization Period (in Years) | |||||
Tenant relationship value | $ | 7,252 | 11 | ||
In-place lease value | 10,218 | 7 | |||
Above-market leases | 2,713 | 4 | |||
$ | 20,183 | 8 |
Nominal | ||||||||||||||||||
Ownership | March 31, 2015 | (1) | ||||||||||||||||
Date | % as of | Total | Encumbered | Total | ||||||||||||||
Acquired | 3/31/2015 | Nature of Activity | Assets | Assets | Liabilities | |||||||||||||
LW Redstone Company, LLC | 3/23/2010 | 85% | Operates four buildings and developing others (2) | $ | 149,098 | $ | 65,934 | $ | 43,314 | |||||||||
M Square Associates, LLC | 6/26/2007 | 50% | Operates two buildings and developing others (3) | 59,671 | 48,480 | 38,700 | ||||||||||||
$ | 208,769 | $ | 114,414 | $ | 82,014 |
(1) | Excludes amounts eliminated in consolidation. |
(2) | This joint venture’s properties are in Huntsville, Alabama. |
(3) | This joint venture’s properties are in College Park, Maryland (in the Baltimore/Washington Corridor). |
March 31, 2015 | December 31, 2014 | |||||||||||||||||||||||
Gross Carrying Amount | Accumulated Amortization | Net Carrying Amount | Gross Carrying Amount | Accumulated Amortization | Net Carrying Amount | |||||||||||||||||||
In-place lease value | $ | 133,395 | $ | 102,019 | $ | 31,376 | $ | 123,759 | $ | 101,040 | $ | 22,719 | ||||||||||||
Tenant relationship value | 49,552 | 29,265 | 20,287 | 42,301 | 28,492 | 13,809 | ||||||||||||||||||
Below-market cost arrangements | 12,415 | 6,154 | 6,261 | 12,415 | 5,984 | 6,431 | ||||||||||||||||||
Above-market leases | 11,372 | 8,211 | 3,161 | 8,659 | 8,159 | 500 | ||||||||||||||||||
Market concentration premium | 1,333 | 941 | 392 | 1,333 | 938 | 395 | ||||||||||||||||||
$ | 208,067 | $ | 146,590 | $ | 61,477 | $ | 188,467 | $ | 144,613 | $ | 43,854 |
March 31, 2015 | December 31, 2014 | ||||||
Notes receivable from the City of Huntsville | $ | 49,814 | $ | 49,147 | |||
Other investing loans receivable | 3,000 | 3,000 | |||||
$ | 52,814 | $ | 52,147 |
March 31, 2015 | December 31, 2014 | ||||||
Construction contract costs incurred in excess of billings | $ | 19,136 | $ | 6,656 | |||
Prepaid expenses | 14,862 | 20,570 | |||||
Lease incentives, net | 13,183 | 13,344 | |||||
Furniture, fixtures and equipment, net | 6,349 | 6,637 | |||||
Deposit on acquisitions | 5,066 | 516 | |||||
Deferred tax asset, net (1) | 3,946 | 4,002 | |||||
Operating notes receivable | 3,629 | 3,797 | |||||
Equity method investments | 2,390 | 2,368 | |||||
Other assets | 2,939 | 2,359 | |||||
Prepaid expenses and other assets | $ | 71,500 | $ | 60,249 |