EXHIBIT 99.1
 
 
Earnings Release & Supplemental Information — Unaudited
 
June 30, 2015
 
 
OVERVIEW:
Section I

 
INVESTING ACTIVITY:
Section IV

Earnings Release
i-x

 
Investment Activity
21

Summary Description
1

 
Construction, Redevelopment, Wholesale Data Center and Land
22

Equity Research Coverage
2

 
Summary of Construction Projects
23

Selected Financial Summary Data
3

 
Summary of Redevelopment Projects
24

Selected Consolidated Portfolio Data
4

 
Summary of Land Owned/Controlled
25

 
 

 
 
 
FINANCIAL STATEMENTS:
Section II

 
CAPITALIZATION:
Section V

Quarterly Consolidated Balance Sheets
5

 
Quarterly Equity Analysis
26

Consolidated Statements of Operations
6-7

 
Debt Analysis
27-28

Consolidated Statements of FFO
8-9

 
Debt Maturity Schedule
29

Consolidated Reconciliations of AFFO
10

 
Consolidated Joint Ventures
30

 
 

 
 
 
PORTFOLIO INFORMATION:
Section III

 
RECONCILIATIONS & DEFINITIONS:
Section VI

Consolidated Office Properties by Region
11

 
Supplementary Reconciliations of Non-GAAP Measures
31-33

NOI from Real Estate Operations and Occupancy by Property Grouping
12

 
Definitions
34-39

Real Estate Revenues & NOI from Real Estate Operations by Segment
13

 
 
 
Same Office Properties Average Occupancy Rates by Region
14

 
 
 
Same Office Property Real Estate Revenues & NOI by Region
15

 
 
 
Leasing - Total Office Portfolio
16-17

 
 
 
Lease Expiration Analysis
18-19

 
 
 
Top 20 Office Tenants
20

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


6711 Columbia Gateway Drive, Suite 300
Columbia, Maryland 21046
Telephone 443-285-5400
Facsimile 443-285-7650
www.copt.com
NYSE: OFC
 
 
 
NEWS RELEASE
 
 
 
FOR IMMEDIATE RELEASE
IR Contacts:
 
 
Stephanie Krewson-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 SECOND QUARTER 2015 RESULTS


COLUMBIA, MD July 28, 2015 - Corporate Office Properties Trust (“COPT” or the “Company”) (NYSE: OFC) announced financial and operating results for the second quarter ended June 30, 2015.

“Second quarter results exceeded the high end of our guidance due to favorable NOI and the timing of our $300 million Senior Notes offering. For the year, FFO per share is on track to grow by 7.5%,” stated Roger A. Waesche, Jr., COPT’s President & Chief Executive Officer. “During the quarter we opportunistically acquired a Class-A, Metro-served building for $81 million that is 100% leased to Strategic Tenants. The building is in an amenity-rich, supply-constrained submarket on the Northern Virginia side of the Washington, DC Beltway and evidences our commitment to increasing our concentration of urban and/or mass transit-served office buildings.”

Results:
Diluted funds from operations per share (“FFOPS”), as adjusted for comparability, was $0.52 for the quarter ended June 30, 2015 as compared to $0.44 reported for the second quarter of 2014.

Per NAREIT’s definition, FFOPS for the second quarter of 2015 was $0.48 versus $0.37 reported in the second quarter of 2014.

Diluted earnings per share (“EPS”) was $0.13 for the quarter ended June 30, 2015 as compared to $0.02 in the second quarter of 2014. Please refer to the reconciliation tables that appear later in this press release.

Operating Performance:
Portfolio Summary - At June 30, 2015, the Company’s portfolio of 179 operating office properties totaled 18.0 million square feet that were 92.0% occupied and 92.9% leased. During the quarter, the Company placed 7400 Redstone Gateway into service in Huntsville, Alabama. The 69,000 square foot project completes a 132,000 square foot facility that is 100% leased by DRS Technologies.

Same Office Performance - The Company’s same office portfolio for the quarter ended June 30, 2015 consisted of 160 properties encompassing 15.5 million square feet, or 86% of the total portfolio. The Company’s same office portfolio occupancy improved 50 basis points during the quarter, to 91.2% occupied and, at June 30, 2015, was 92.2% leased. For the second quarter ended June 30, 2015, the Company’s same office property cash NOI, which excludes gross lease termination fees and rent from tenant-funded landlord assets, increased 0.6% as compared to the second quarter of 2014.


i

Office Leasing - COPT completed a total of 490,000 square feet of leasing in the quarter ended June 30, 2015 and achieved a 74% renewal rate.

In the quarter, lease terms on renewals averaged 3.1 years; for development and other new leases they averaged 9.1 and 6.9 years, respectively.

For the quarter, total rent on renewed space increased 2.5% on a GAAP basis; on a cash basis, renewal rates declined 2.3% compared to the expiring rents.

Investment Activity:
Construction - At June 30, 2015, the Company had six properties totaling 1.0 million square feet under construction for a total projected cost of $219.3 million, of which $130.1 million had been invested. These six projects were 62% pre-leased at June 30, 2015. As of the same date, COPT had six properties under redevelopment representing a total projected cost of $63.9 million, of which $44.3 million has been invested. The six redevelopment properties totaled approximately 309,000 square feet that, at June 30, 2015, were 46% pre-leased.

Acquisitions - During the quarter, the Company acquired Metro Place II, a 237,000 square foot, Class-A office building that is 100% leased to customers in COPT’s Strategic Tenant Niche, for $81 million. The building is located at 2600 Park Tower Drive, a Metro-served, mixed-use and amenity-rich location within the Merrifield submarket of Northern Virginia.

Balance Sheet and Capital Transactions:
As of June 30, 2015, the Company’s debt to adjusted book ratio was 41.6%, its adjusted debt to in-place adjusted EBITDA ratio was 6.6x and its adjusted EBITDA fixed charge coverage ratio was 3.1x. The Company’s weighted average interest rate was 3.8% for the quarter ended June 30, 2015 and 94% of the Company’s debt was subject to fixed interest rates, including the effect of interest rate swaps.

During the quarter ended June 30, 2015:
•
On May 6, the Company amended the terms of its $800 million line of credit to: (1) extend the maturity date from July 14, 2017, to May 6, 2019 plus two six-month extension options; and (2) lower the interest rate spread over 30-day LIBOR and the facility fee to current market.
•
Also on May 6, the Company amended the terms of its $250 million Term Loan and repaid $50 million on its $150 million Term Loan. The $250 million dollar Term Loan, that was previously scheduled to mature on February 14, 2017, was increased by $50 million, to $300 million, the maturity date was extended to May 6, 2020 and the spread to LIBOR was lowered to current market.
•
In late June, the Company issued $300 million of 5.00% senior unsecured notes due July 1, 2025 at a price equal to 99.510% of the principal amount. The net proceeds from the offering were used to repay borrowings under its unsecured revolving credit facility and for general corporate purposes.


ii

2015 FFO Guidance:
Management is increasing its previously issued full year guidance for FFOPS, as adjusted for comparability, by $0.01 to $2.00-$2.04. Management is establishing guidance for FFOPS, as adjusted for comparability, of $0.51-$0.53 for the third quarter 2015 and $0.52-$0.54 for the fourth quarter 2015. Reconciliations of projected diluted EPS to projected FFOPS are provided as follows:
 
Three Months Ending
 
Three Months Ending
 
Year Ending
 
September 30, 2015
 
December 31, 2015
 
December 31, 2015
 
Low
 
High
 
Low
 
High
 
Low
 
High
EPS
$
0.11

 
$
0.13

 
$
0.11

 
$
0.13

 
$
1.26

 
$
1.30

Real estate depreciation and amortization
0.36

 
0.36

 
0.38

 
0.38

 
1.46

 
1.46

Impairment losses on previously depreciated properties
—

 
—

 
—

 
—

 
0.01

 
0.01

FFOPS, NAREIT definition
0.47

 
0.49

 
0.49

 
0.51

 
2.73

 
2.77

Operating property acquisition costs
0.01

 
0.01

 
—

 
—

 
0.02

 
0.02

Demolition costs on redevelopment properties
0.01

 
0.01

 
0.01

 
0.01

 
0.02

 
0.02

NOI from properties to be conveyed (a)
(0.01
)
 
(0.01
)
 
(0.01
)
 
(0.01
)
 
(0.04
)
 
(0.04
)
Interest expense on loan secured by properties to be conveyed (a)
0.03

 
0.03

 
0.03

 
0.03

 
0.12

 
0.12

Gains on sales of undepreciated properties
—

 
—

 
—

 
—

 
(0.04
)
 
(0.04
)
Net gains on early extinguishment of debt (b)
—

 
—

 
—

 
—

 
(0.81
)
 
(0.81
)
FFOPS, as adjusted for comparability
$
0.51

 
$
0.53

 
$
0.52

 
$
0.54

 
$
2.00

 
$
2.04

 
 
 
 
 
 
 
 
 
 
 
 
a.
The Company expects to transfer two operating properties in satisfaction of non-recourse secured indebtedness. These amounts represent the Company’s forecast of net operating income generated by these assets and interest expense (accrued at the default rate) in 2015, assuming a transfer date of December 31, 2015.
b.
Represents debt and accrued interest in excess of the book value of the assets to be conveyed.

Associated Supplemental Presentation:
The Company has posted a slide presentation to accompany management’s prepared remarks for its second quarter conference call, the details of which are provided below. You may access the slide presentation on the ‘Investors’ section of the website (www.copt.com). Please have the slides available to review during management’s comments.

2Q 2015 Conference Call Information:
Earnings Release Date:    Tuesday, July 28, 2015 at 6:00 a.m. Eastern Time

Conference Call Date:     Tuesday, July 28, 2015

Time:     12:00 p.m. Eastern Time

Telephone Number: (within the U.S.)    888-680-0890

Telephone Number: (outside the U.S.)    617-213-4857

Passcode:    92956617

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=PHTEJFBAM


iii

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, July 28 at 4:00 p.m. Eastern Time through Tuesday, August 11 at midnight Eastern Time. To access the replay within the United States, please call 888-286-8010 and use passcode 29841980. To access the replay outside the United States, please call 617-801-6888 and use passcode 29841980.

The conference call will also be available via live webcast in the Investor Relations section of the Company’s website at www.copt.com. A replay of the conference calls will be immediately available via webcast in the Investor Relations section of the Company’s website.

Definitions:
For definitions of certain terms used in this press release, please refer to the information furnished in our Supplemental Information Package filed as a Form 8-K which can be found on our website (www.copt.com). Reconciliations of non-GAAP measures to the most directly comparable GAAP measures are included in the attached tables.

Company Information
COPT is an office REIT that focuses primarily on serving the specialized requirements of U.S. Government agencies and defense contractors, most of which are engaged in defense information technology and national security-related activities. As of June 30, 2015, COPT derived 75% of its annualized revenue from its strategic tenant niche properties and 22% from its regional office properties. The Company generally acquires, develops, manages and leases office and data center properties concentrated in large office parks primarily located near knowledge-based government demand drivers and/or in targeted markets or submarkets in the Greater Washington, DC/Baltimore region. As of June 30, 2015, the Company’s consolidated portfolio consisted of 179 office properties totaling 18.0 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;

iv

*
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, 2014.


v


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


 
For the Three Months Ended June 30,
 
For the Six Months Ended June 30,
 
2015
 
2014
 
2015
 
2014
Revenues
 

 
 

 
 
 
 
Real estate revenues
$
128,191

 
$
115,959

 
$
250,901

 
$
240,836

Construction contract and other service revenues
42,172

 
23,861

 
80,496

 
45,651

Total revenues
170,363

 
139,820

 
331,397

 
286,487

Expenses
 

 
 

 
 
 
 
Property operating expenses
46,418

 
43,772

 
97,099

 
93,544

Depreciation and amortization associated with real estate operations
33,786

 
30,895

 
65,385

 
74,491

Construction contract and other service expenses
41,293

 
23,136

 
78,791

 
41,760

Impairment losses
1,238

 
1,302

 
1,238

 
1,302

General and administrative expenses
5,884

 
5,815

 
12,134

 
11,973

Leasing expenses
1,650

 
1,713

 
3,291

 
3,698

Business development expenses and land carry costs
2,623

 
1,351

 
5,413

 
2,677

Total operating expenses
132,892

 
107,984

 
263,351

 
229,445

Operating income
37,471

 
31,836


68,046


57,042

Interest expense
(21,768
)
 
(23,478
)
 
(42,606
)
 
(44,305
)
Interest and other income
1,242

 
1,299

 
2,525

 
2,584

Loss on early extinguishment of debt
(65
)
 
(270
)
 
(68
)
 
(270
)
Income from continuing operations before equity in income (loss) of unconsolidated entities and income taxes
16,880

 
9,387

 
27,897

 
15,051

Equity in income (loss) of unconsolidated entities
9

 
(47
)
 
34

 
13

Income tax expense
(50
)
 
(92
)
 
(105
)
 
(156
)
Income from continuing operations
16,839

 
9,248

 
27,826

 
14,908

Discontinued operations
394

 
(198
)
 
156

 
(187
)
Income before gain on sales of real estate
17,233

 
9,050

 
27,982

 
14,721

Gain on sales of real estate, net of income taxes
(1
)
 
—

 
3,985

 
—

Net income
17,232

 
9,050

 
31,967

 
14,721

Net income attributable to noncontrolling interests
 

 
 

 
 
 
 
Common units in the Operating Partnership
(476
)
 
(158
)
 
(874
)
 
(174
)
Preferred units in the Operating Partnership
(165
)
 
(165
)
 
(330
)
 
(330
)
Other consolidated entities
(810
)
 
(837
)
 
(1,627
)
 
(1,586
)
Net income attributable to COPT
15,781

 
7,890

 
29,136

 
12,631

Preferred share dividends
(3,553
)
 
(4,344
)
 
(7,105
)
 
(8,834
)
Issuance costs associated with redeemed preferred shares
—

 
(1,769
)
 
—

 
(1,769
)
Net income attributable to COPT common shareholders
$
12,228

 
$
1,777

 
$
22,031

 
$
2,028

 
 
 
 
 
 
 
 
Earnings per share (“EPS”) computation:
 

 
 

 
 
 
 
Numerator for diluted EPS:
 

 
 

 
 
 
 
Net income attributable to common shareholders
$
12,228

 
$
1,777

 
$
22,031

 
$
2,028

Amount allocable to share-based compensation awards
(113
)
 
(108
)
 
(235
)
 
(229
)
Numerator for diluted EPS
$
12,115

 
$
1,669

 
$
21,796

 
$
1,799

 
 
 
 
 
 
 
 
Denominator:
 

 
 

 
 
 
 
Weighted average common shares - basic
94,128

 
87,214

 
93,666

 
87,148

Dilutive effect of share-based compensation awards
35

 
201

 
114

 
156

Weighted average common shares - diluted
94,163

 
87,415

 
93,780

 
87,304

Diluted EPS
$
0.13

 
$
0.02

 
$
0.23

 
$
0.02


vi


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

 
For the Three Months Ended June 30,
 
For the Six Months Ended June 30,
 
2015
 
2014
 
2015
 
2014
Net income
$
17,232

 
$
9,050

 
$
31,967

 
$
14,721

Real estate-related depreciation and amortization
33,786

 
30,895

 
65,385

 
74,491

Impairment losses on previously depreciated operating properties
1,239

 
1,328

 
1,472

 
1,329

Gain on sales of previously depreciated operating properties
—

 
—

 
—

 
4

Funds from operations (“FFO”)
52,257

 
41,273

 
98,824

 
90,545

Noncontrolling interests - preferred units in the Operating Partnership
(165
)
 
(165
)
 
(330
)
 
(330
)
FFO allocable to other noncontrolling interests
(1,072
)
 
(758
)
 
(1,742
)
 
(1,519
)
Preferred share dividends
(3,553
)
 
(4,344
)
 
(7,105
)
 
(8,834
)
Issuance costs associated with redeemed preferred shares
—

 
(1,769
)
 
—

 
(1,769
)
Basic and diluted FFO allocable to share-based compensation awards
(202
)
 
(146
)
 
(385
)
 
(351
)
Basic and diluted FFO available to common share and common unit holders (“Basic and diluted FFO”)
47,265

 
34,091

 
89,262

 
77,742

Operating property acquisition costs
361

 
—

 
1,407

 
—

Gain on sales of non-operating properties
1

 
—

 
(3,985
)
 
—

(Gain) loss on early extinguishment of debt
(315
)
 
363

 
(312
)
 
386

Issuance costs associated with redeemed preferred shares
—

 
1,769

 
—

 
1,769

Add: Negative FFO of properties to be conveyed to extinguish debt in default (1)
3,419

 
3,629

 
7,690

 
3,629

Demolition costs on redevelopment properties
66

 
—

 
241

 
—

Diluted FFO comparability adjustments allocable to share-based compensation awards
(14
)
 
(26
)
 
(21
)
 
(26
)
Diluted FFO available to common share and common unit holders, as adjusted for comparability
50,783

 
39,826

 
94,282

 
83,500

Straight line rent adjustments
(3,788
)
 
(1,745
)
 
(5,059
)
 
(985
)
Straight line rent adjustments - properties in default to be conveyed
(24
)
 
1

 
(96
)
 
1

Amortization of intangibles included in net operating income
478

 
224

 
589

 
441

Share-based compensation, net of amounts capitalized
1,658

 
1,501

 
3,210

 
3,056

Amortization of deferred financing costs
1,146

 
1,122

 
2,136

 
2,289

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

 
(27
)
 
—

 
(27
)
Amortization of net debt discounts, net of amounts capitalized
264

 
229

 
528

 
400

Amortization of settled debt hedges
—

 
15

 
—

 
30

Recurring capital expenditures
(9,705
)
 
(13,585
)
 
(17,054
)
 
(24,637
)
Diluted adjusted funds from operations available to common share and common unit holders (“Diluted AFFO”)
$
40,812

 
$
27,561

 
$
78,536

 
$
64,068

Diluted FFO per share
$
0.48

 
$
0.37

 
$
0.92

 
$
0.85

Diluted FFO per share, as adjusted for comparability
$
0.52

 
$
0.44

 
$
0.97

 
$
0.92

Dividends/distributions per common share/unit
$
0.275

 
$
0.275

 
$
0.550

 
$
0.550


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


vii


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

 
 
June 30,
2015
 
December 31,
2014
Balance Sheet Data
 
 

 
 

Properties, net of accumulated depreciation
 
$
3,418,800

 
$
3,296,914

Total assets
 
3,910,921

 
3,670,257

Debt, net
 
2,130,170

 
1,920,057

Total liabilities
 
2,373,874

 
2,130,956

Redeemable noncontrolling interest
 
19,414

 
18,417

Equity
 
1,517,633

 
1,520,884

Debt to adjusted book
 
41.6
%
 
39.7
%
Debt to total market capitalization
 
45.8
%
 
39.3
%
 
 
 
 
 
Core Portfolio Data (as of period end) (1)
 
 

 
 

Number of operating properties
 
172

 
173

Total net rentable square feet owned (in thousands)
 
17,403

 
16,790

Occupancy %
 
91.9
%
 
90.9
%
Leased %
 
92.8
%
 
92.4
%
 
 
 
 
 
 
For the Three Months Ended June 30,
 
For the Six Months Ended June 30,
2015
 
2014
 
2015
 
2014
Payout ratios
 

 
 

 
 

 
 

Diluted FFO
57.2
%
 
73.8
%
 
60.5
%
 
64.8
%
Diluted FFO, as adjusted for comparability
53.2
%
 
63.2
%
 
57.3
%
 
60.3
%
Diluted AFFO
66.2
%
 
91.3
%
 
68.8
%
 
78.6
%
Adjusted EBITDA interest coverage ratio
4.6
x
 
3.7
x
 
4.4
x
 
3.6
x
Adjusted EBITDA fixed charge coverage ratio
3.1
x
 
2.6
x
 
3.0
x
 
2.6
x
Adjusted debt to in-place adjusted EBITDA ratio (2)
6.6
x
 
7.1
x
 
N/A

 
N/A

 
 
 
 
 
 
 
 
Reconciliation of denominators for diluted EPS and diluted FFO per share
 
 

 
 
 
 
Denominator for diluted EPS
94,163

 
87,415

 
93,780

 
87,304

Weighted average common units
3,680

 
3,912

 
3,706

 
3,934

Denominator for diluted FFO per share
97,843

 
91,327

 
97,486

 
91,238

 
 
 
 
 
 
 
 
Reconciliation of FFO to FFO, as adjusted for comparability
 

 
 

 
 

 
 

FFO, per NAREIT
$
52,257

 
$
41,273

 
$
98,824

 
$
90,545

Gain on sales of non-operating properties
1

 
—

 
(3,985
)
 
—

Operating property acquisition costs
361

 
—

 
1,407

 
—

(Gain) loss on early extinguishment of debt, continuing and discontinued operations
(315
)
 
363

 
(312
)
 
386

Issuance costs associated with redeemed preferred shares
—

 
1,769

 
—

 
1,769

Add: Negative FFO of properties to be conveyed to extinguish debt in default
3,419

 
3,629

 
7,690

 
3,629

Demolition costs on redevelopment properties
66

 
—

 
241

 
—

FFO, as adjusted for comparability
$
55,789

 
$
47,034

 
$
103,865

 
$
96,329


(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).

viii


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

 
For the Three Months Ended June 30,
 
For the Six Months Ended June 30,
 
2015
 
2014
 
2015
 
2014
Reconciliation of common share dividends to dividends and distributions for payout ratios
 

 
 

 
 
 
 
Common share dividends
$
26,002

 
$
24,103

 
$
52,000

 
$
48,194

Common unit distributions
1,012

 
1,072

 
2,024

 
2,153

Dividends and distributions for payout ratios
$
27,014

 
$
25,175

 
$
54,024

 
$
50,347

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

 
 

 
 

 
 

Net income
$
17,232

 
$
9,050

 
$
31,967

 
$
14,721

Interest expense on continuing operations
21,768

 
23,478

 
42,606

 
44,305

Income tax expense
50

 
92

 
105

 
156

Real estate-related depreciation and amortization
33,786

 
30,895

 
65,385

 
74,491

Depreciation of furniture, fixtures and equipment
527

 
843

 
1,019

 
1,348

Impairment losses
1,239

 
1,328

 
1,472

 
1,329

(Gain) loss on early extinguishment of debt on continuing and discontinued operations
(315
)
 
363

 
(312
)
 
386

Gain on sales of operating properties
—

 
—

 
—

 
4

Gain on sales of non-operational properties
1

 
—

 
(3,985
)
 
—

Net loss on investments in unconsolidated entities included in interest and other income
(52
)
 
282

 
23

 
302

Operating property acquisition costs
361

 
—

 
1,407

 
—

EBITDA of properties to be conveyed to extinguish debt in default
(843
)
 
(531
)
 
(753
)
 
(531
)
Demolition costs on redevelopment properties
66

 
—

 
241

 
—

Adjusted EBITDA
$
73,820

 
$
65,800

 
$
139,175

 
$
136,511

Proforma net operating income adjustment from property in quarter of acquisition
253

 
—

 
 
 
 
In-place adjusted EBITDA
$
74,073

 
$
65,800

 

 

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

 
 

 
 

 
 

Interest expense
$
21,768

 
$
23,478

 
$
42,606

 
$
44,305

Less: Amortization of deferred financing costs
(1,146
)
 
(1,122
)
 
(2,136
)
 
(2,289
)
Less: Amortization of net debt discount, net of amounts capitalized
(264
)
 
(229
)
 
(528
)
 
(400
)
Less: Interest exp. on debt in default to be extin. via conveyance of properties
(4,261
)
 
(4,133
)
 
(8,443
)
 
(4,133
)
Denominator for interest coverage-Adjusted EBITDA
16,097

 
17,994

 
31,499

 
37,483

Scheduled principal amortization
1,670

 
1,582

 
3,319

 
3,437

Capitalized interest
1,950

 
1,422

 
4,082

 
3,011

Preferred share dividends
3,553

 
4,344

 
7,105

 
8,834

Preferred unit distributions
165

 
165

 
330

 
330

Denominator for fixed charge coverage-Adjusted EBITDA
$
23,435

 
$
25,507

 
$
46,335

 
$
53,095

 
 
 
 
 
 
 
 

ix


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

 
For the Three Months Ended June 30,
 
For the Six Months Ended June 30,
 
2015
 
2014
 
2015
 
2014
Reconciliations of tenant improvements and incentives, capital improvements and leasing costs for operating properties to recurring capital expenditures
 
 
 
 
 
 
 
Tenant improvements and incentives on operating properties
$
6,644

 
$
4,512

 
$
11,034

 
$
10,831

Building improvements on operating properties
4,445

 
6,357

 
7,648

 
10,339

Leasing costs for operating properties
1,485

 
2,790

 
2,439

 
4,318

Less: Nonrecurring tenant improvements and incentives on operating properties
(986
)
 
483

 
(1,250
)
 
467

Less: Nonrecurring building improvements on operating properties
(1,200
)
 
(519
)
 
(2,075
)
 
(1,087
)
Less: Nonrecurring leasing costs for operating properties
(683
)
 
(38
)
 
(742
)
 
(231
)
Recurring capital expenditures
$
9,705

 
$
13,585

 
$
17,054

 
$
24,637

 
 
 
 
 
 
 
 
Same office property cash NOI
$
66,807

 
$
66,425

 
$
130,839

 
$
131,053

Straight line rent adjustments
664

 
744

 
$
1,376

 
$
(632
)
Add: Amortization of deferred market rental revenue
4

 
(44
)
 
31

 
(82
)
Less: Amortization of below-market cost arrangements
(250
)
 
(288
)
 
(495
)
 
(578
)
Add: Lease termination fee, gross
1,012

 
93

 
1,765

 
605

Add: Cash NOI on tenant-funded landlord assets
—

 
928

 
—

 
4,113

Same office property NOI
$
68,237

 
$
67,858

 
$
133,516

 
$
134,479

 
 
 
 
 
 
 
 
 
 
June 30,
2015
 
December 31,
2014
Reconciliation of total assets to adjusted book
 
 

 
 

Total assets
 
$
3,910,921

 
$
3,670,257

Accumulated depreciation
 
723,470

 
703,083

Accumulated depreciation included in assets held for sale
 
24,930

 
—

Accumulated amortization of real estate intangibles and deferred leasing costs
 
211,522

 
214,611

Accumulated amortization of real estate intangibles and deferred leasing costs included in assets held for sale
 
15,271

 
—

Less: Adjusted book assoc. with properties to be conveyed to extinguish debt in default
 
(130,471
)
 
(131,118
)
Adjusted book
 
$
4,755,643

 
$
4,456,833

 
 
 
 
 
Reconciliation of debt to adjusted debt
 
 
 
 
Debt, net
 
$
2,130,170

 
$
1,920,057

Less: Debt in default to be extinguished via conveyance of properties
 
(150,000
)
 
(150,000
)
Numerator for debt to adjusted book ratio
 
1,980,170

 
1,770,057

Less: Cash and cash equivalents
 
(37,074
)
 
(6,077
)
Adjusted debt
 
$
1,943,096

 
$
1,763,980


x


Corporate Office Properties Trust
Summary Description
 
The Company: Corporate Office Properties Trust (the “Company” or “COPT”) is a self-managed office real estate investment trust (“REIT”). COPT is listed on the New York Stock Exchange under the symbol “OFC” and is a S&P MidCap 400 Company. As of June 30, 2015, COPT derived 75% of its portfolio annualized revenue from its strategic tenant niche properties and 22% 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 June 30, 2015, COPT’s core portfolio of 172 office properties encompassed 17.4 million square feet and was 92.8% leased. As of the same date, COPT also owned one wholesale data center which upon completion is expected to have a critical load of 19.25 megawatts; this data center had 12.50 megawatts in operations, of which 11.06 were leased, and 6.75 megawatts under development that were 100% 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, 2014.

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
 
Tom Catherwood
 
646-562-1382
 
tom.catherwood@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.
 
Jonathan Petersen
 
212-284-1705
 
jpetersen@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
 
Six Months Ended
SUMMARY OF RESULTS 
 
6/30/15
 
3/31/15
 
12/31/14
 
9/30/14
 
6/30/14
 
6/30/15
 
6/30/14
Same Office Property NOI
 
$
68,237

 
$
65,279

 
$
69,715

 
$
68,649

 
$
67,858

 
$
133,516

 
$
134,479

NOI from real estate operations
 
$
81,788

 
$
72,024

 
$
77,301

 
$
75,359

 
$
72,108

 
$
153,812

 
$
147,252

Adjusted EBITDA
 
$
73,820

 
$
65,355

 
$
70,414

 
$
69,122

 
$
65,800

 
$
139,175

 
$
136,511

Net income attributable to COPT common shareholders
 
$
12,228

 
$
9,803

 
$
1,352

 
$
19,167

 
$
1,777

 
$
22,031

 
$
2,028

FFO - per NAREIT
 
$
52,257

 
$
46,567

 
$
37,345

 
$
49,655

 
$
41,273

 
$
98,824

 
$
90,545

FFO - as adjusted for comparability
 
$
55,789

 
$
48,076

 
$
50,957

 
$
48,151

 
$
47,034

 
$
103,865

 
$
96,329

Basic and diluted FFO available to common share and common unit holders
 
$
47,265

 
$
41,997

 
$
32,638

 
$
44,916

 
$
34,091

 
$
89,262

 
$
77,742

Diluted FFO available to common share and common unit holders, as adjusted for comparability
 
$
50,783

 
$
43,499

 
$
46,191

 
$
43,419

 
$
39,826

 
$
94,282

 
$
83,500

Diluted AFFO avail. to common share and common unit holders
 
$
40,812

 
$
37,724

 
$
40,136

 
$
28,977

 
$
27,561

 
$
78,536

 
$
64,068

Per share - diluted:
 
 

 
 

 
 

 
 

 
 

 
 

 
 
EPS
 
$
0.13

 
$
0.10

 
$
0.01

 
$
0.22

 
$
0.02

 
$
0.23

 
$
0.02

FFO - NAREIT
 
$
0.48

 
$
0.43

 
$
0.34

 
$
0.49

 
$
0.37

 
$
0.92

 
$
0.85

FFO - as adjusted for comparability
 
$
0.52

 
$
0.45

 
$
0.49

 
$
0.48

 
$
0.44

 
$
0.97

 
$
0.92

Dividend per common share
 
$
0.275

 
$
0.275

 
$
0.275

 
$
0.275

 
$
0.275

 
$
0.550

 
$
0.550

Payout ratios:
 
 

 
 

 
 

 
 

 
 

 
 

 
 
Diluted FFO
 
57.2
%
 
64.3
%
 
81.8
%
 
56.0
%
 
73.8
%
 
60.5
%
 
64.8
%
Diluted FFO - as adjusted for comparability
 
53.2
%
 
62.1
%
 
57.8
%
 
58.0
%
 
63.2
%
 
57.3
%
 
60.3
%
Diluted AFFO
 
66.2
%
 
71.6
%
 
66.5
%
 
86.9
%
 
91.3
%
 
68.8
%
 
78.6
%
Rental revenue operating margin
 
77.5
%
 
73.3
%
 
79.0
%
 
78.3
%
 
76.4
%
 
75.5
%
 
76.5
%
CAPITALIZATION
 
 

 
 

 
 
 
 

 
 

 
 

 
 
Total Market Capitalization
 
$
4,649,916

 
$
5,093,091

 
$
4,882,468

 
$
4,613,107

 
$
4,853,704

 
 
 
 
Total Equity Market Capitalization
 
$
2,519,746

 
$
3,093,469

 
$
2,962,411

 
$
2,563,115

 
$
2,754,361

 
 
 
 
Debt, net
 
$
2,130,170

 
$
1,999,622

 
$
1,920,057

 
$
2,049,992

 
$
2,099,343

 
 
 
 
Debt to Total Market Capitalization
 
45.8
%
 
39.3
%
 
39.3
%
 
44.4
%
 
43.3
%
 
 
 
 
Debt to Adjusted book
 
41.6
%
 
40.3
%
 
39.7
%
 
42.8
%
 
43.9
%
 
 
 
 
Adjusted EBITDA interest coverage ratio
 
4.6
x
 
4.2
x
 
4.0
x
 
3.6
x
 
3.7
x
 
4.4
x
 
3.6
x
Adjusted EBITDA debt service coverage ratio
 
4.2
x
 
3.8
x
 
3.7
x
 
3.4
x
 
3.4
x
 
4.0
x
 
3.3
x
Adjusted EBITDA fixed charge coverage ratio
 
3.1
x
 
2.9
x
 
2.8
x
 
2.7
x
 
2.6
x
 
3.0
x
 
2.6
x
Adjusted debt to in-place adjusted EBITDA ratio
 
6.6
x
 
7.0
x
 
6.3
x
 
6.7
x
 
7.1
x
 
N/A

 
N/A

OTHER
 
 

 
 

 
 

 
 

 
 

 
 

 
 
Revenue from early termination of leases
 
$
661

 
$
603

 
$
611

 
$
239

 
$
72

 
$
1,264

 
$
1,184

Capitalized interest costs
 
$
1,950

 
$
2,132

 
$
1,740

 
$
1,314

 
$
1,422

 
$
4,082

 
$
3,011



3

Corporate Office Properties Trust
Selected Consolidated Portfolio Data (1)
 
 
 
 
 
 
 
 
 
 
 
6/30/15
 
3/31/15
 
12/31/14
 
9/30/14
 
6/30/14
 
 

 
 

 
 

 
 

 
 

# of Operating Office Properties
 
 
 
 
 
 
 
 
 
Total Portfolio
179

 
178

 
173
 
174

 
180

Core Portfolio
172

 
178

 
173
 
174

 
172

Same Office Properties
160

 
160

 
160
 
160

 
160

 
 
 
 
 
 
 
 
 
 
% Occupied
 
 
 
 
 
 
 
 
 
Total Portfolio
92.0
%
 
91.3
%
 
90.9
%
 
91.5
%
 
89.3
%
Core Portfolio
91.9
%
 
91.3
%
 
90.9
%
 
91.5
%
 
90.0
%
Same Office Properties
91.2
%
 
90.7
%
 
90.8
%
 
91.9
%
 
90.6
%
 
 
 
 
 
 
 
 
 
 
% Leased
 
 
 
 
 
 
 
 
 
Total Portfolio
92.9
%
 
92.4
%
 
92.4
%
 
93.0
%
 
91.4
%
Core Portfolio
92.8
%
 
92.4
%
 
92.4
%
 
93.0
%
 
92.2
%
Same Office Properties
92.2
%
 
91.8
%
 
92.3
%
 
93.5
%
 
92.6
%
 
 
 
 
 
 
 
 
 
 
Square Feet of Office Properties (in thousands)
 
 
 
 
 
 
 
 
 
Total Portfolio
17,987

 
17,706

 
16,790

 
16,863

 
16,923

Core Portfolio
17,403

 
17,706

 
16,790

 
16,863

 
16,620

Same Office Properties
15,502

 
15,502

 
15,502

 
15,502

 
15,502

 
 
 
 
 
 
 
 
 
 
Wholesale Data Center
 
 
 
 
 
 
 
 
 
Initial Stabilization Critical Load (in megawatts (“MWs”))
19.25

 
19.25

 
18

 
18

 
18

MWs Leased (2)
17.81

 
17.81

 
6.56

 
6.26

 
6.26

MWs Operational
12.50

 
9

 
9

 
9

 
9


(1)
Amounts reported exclude the effect of properties serving as collateral for debt which is in default that we expect to extinguish via conveyance of such properties. Effective April 1, 2014, all cash flows from such properties belong to the lender.
(2)
Leased megawatts as of June 30, 2015 included 11.06 in operations, which were leased to tenants with further expansion rights of up to a combined 12.12 megawatts, and 6.75 under development and expected to be in operations later in 2015.

4

Corporate Office Properties Trust
Quarterly Consolidated Balance Sheets
(dollars in thousands)
 
6/30/15
 
3/31/15
 
12/31/14
 
9/30/14
 
6/30/14
Assets
 

 
 

 
 

 
 

 
 

Properties, net
 

 
 

 
 

 
 

 
 

Operating properties, net
$
2,896,809

 
$
2,888,534

 
$
2,751,488

 
$
2,757,207

 
$
2,724,242

Construction and redevelopment in progress, including land (1)
192,815

 
161,637

 
222,146

 
167,618

 
168,996

Land held (1)
329,176

 
327,981

 
323,280

 
346,331

 
361,004

Total properties, net
3,418,800

 
3,378,152

 
3,296,914

 
3,271,156

 
3,254,242

Assets held for sale
77,013

 
—

 
14,339

 
—

 
22,868

Cash and cash equivalents
37,074

 
4,429

 
6,077

 
40,018

 
76,216

Restricted cash and marketable securities
10,121

 
11,445

 
9,069

 
14,371

 
11,689

Accounts receivable, net
16,181

 
33,753

 
26,901

 
20,180

 
30,911

Deferred rent receivable, net
101,488

 
98,340

 
95,910

 
95,405

 
93,270

Intangible assets on real estate acquisitions, net
81,728

 
61,477

 
43,854

 
48,300

 
51,645

Deferred leasing and financing costs, net
67,613

 
65,245

 
64,797

 
65,009

 
65,251

Investing receivables
45,766

 
52,814

 
52,147

 
50,886

 
56,549

Prepaid expenses and other assets
55,137

 
71,500

 
60,249

 
74,863

 
46,859

Total assets
$
3,910,921

 
$
3,777,155

 
$
3,670,257

 
$
3,680,188

 
$
3,709,500

Liabilities and equity
 

 
 

 
 

 
 

 
 

Liabilities:
 

 
 

 
 

 
 

 
 

Debt, net
$
2,130,170

 
$
1,999,622

 
$
1,920,057

 
$
2,049,992

 
$
2,099,343

Accounts payable and accrued expenses
155,989

 
138,214

 
123,035

 
123,893

 
105,205

Rents received in advance and security deposits
27,371

 
31,551

 
31,011

 
33,075

 
27,520

Dividends and distributions payable
30,178

 
30,174

 
29,862

 
28,344

 
28,342

Deferred revenue associated with operating leases
15,179

 
14,697

 
13,031

 
13,420

 
12,355

Interest rate derivatives
3,121

 
4,282

 
1,855

 
2,236

 
3,236

Other liabilities
11,866

 
9,990

 
12,105

 
13,288

 
14,818

Total liabilities
2,373,874

 
2,228,530

 
2,130,956

 
2,264,248

 
2,290,819

Redeemable noncontrolling interest
19,414

 
18,895

 
18,417

 
18,436

 
18,901

Equity:
 

 
 

 
 

 
 
 
 
COPT’s shareholders’ equity:
 

 
 

 
 

 
 
 
 
Preferred shares at liquidation preference
199,083

 
199,083

 
199,083

 
199,083

 
199,083

Common shares
946

 
945

 
933

 
877

 
877

Additional paid-in capital
2,000,775

 
1,999,708

 
1,969,968

 
1,822,283

 
1,819,436

Cumulative distributions in excess of net income
(747,234
)
 
(733,459
)
 
(717,264
)
 
(692,978
)
 
(688,033
)
Accumulated other comprehensive (loss) income
(3,141
)
 
(3,947
)
 
(1,297
)
 
871

 
(761
)
Total COPT’s shareholders’ equity
1,450,429

 
1,462,330

 
1,451,423

 
1,330,136

 
1,330,602

Noncontrolling interests in subsidiaries
 

 
 

 
 

 
 

 
 

Common units in the Operating Partnership
48,707

 
49,168

 
51,534

 
49,781

 
50,323

Preferred units in the Operating Partnership
8,800

 
8,800

 
8,800

 
8,800

 
8,800

Other consolidated entities
9,697

 
9,432

 
9,127

 
8,787

 
10,055

Total noncontrolling interests in subsidiaries
67,204

 
67,400

 
69,461

 
67,368

 
69,178

Total equity
1,517,633

 
1,529,730

 
1,520,884

 
1,397,504

 
1,399,780

Total liabilities, redeemable noncontrolling interest and equity
$
3,910,921

 
$
3,777,155

 
$
3,670,257

 
$
3,680,188

 
$
3,709,500

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

5

Corporate Office Properties Trust
Consolidated Statements of Operations
(in thousands, except per share data)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended
 
Six Months Ended
 
6/30/15
 
3/31/15
 
12/31/14
 
9/30/14
 
6/30/14
 
6/30/15
 
6/30/14
Revenues
 

 
 

 
 

 
 

 
 

 
 
 
 
Rental revenue
$
105,508

 
$
98,238

 
$
97,822

 
$
96,207

 
$
94,332

 
$
203,746

 
$
192,367

Tenant recoveries and other real estate operations revenue
22,683

 
24,472

 
22,791

 
22,069

 
21,627

 
47,155

 
48,469

Construction contract and other service revenues
42,172

 
38,324

 
26,358

 
34,739

 
23,861

 
80,496

 
45,651

Total revenues
170,363

 
161,034

 
146,971

 
153,015

 
139,820

 
331,397

 
286,487

Expenses
 

 
 

 
 

 
 

 
 

 
 
 
 
Property operating expenses
46,418

 
50,681

 
43,334

 
43,056

 
43,772

 
97,099

 
93,544

Depreciation and amortization associated with real estate operations
33,786

 
31,599

 
31,358

 
30,237

 
30,895

 
65,385

 
74,491

Construction contract and other service expenses
41,293

 
37,498

 
24,705

 
33,593

 
23,136

 
78,791

 
41,760

Impairment losses
1,238

 
—

 
48

 
66

 
1,302

 
1,238

 
1,302

General and administrative expenses
5,884

 
6,250

 
7,206

 
5,662

 
5,815

 
12,134

 
11,973

Leasing expenses
1,650

 
1,641

 
1,706

 
1,549

 
1,713

 
3,291

 
3,698

Business development expenses and land carry costs
2,623

 
2,790

 
1,466

 
1,430

 
1,351

 
5,413

 
2,677

Total operating expenses
132,892

 
130,459

 
109,823

 
115,593

 
107,984

 
263,351

 
229,445

Operating income
37,471

 
30,575

 
37,148

 
37,422

 
31,836

 
68,046

 
57,042

Interest expense
(21,768
)
 
(20,838
)
 
(23,286
)
 
(24,802
)
 
(23,478
)
 
(42,606
)
 
(44,305
)
Interest and other income
1,242

 
1,283

 
1,148

 
1,191

 
1,299

 
2,525

 
2,584

Loss on early extinguishment of debt
(65
)
 
(3
)
 
(9,106
)
 
(176
)
 
(270
)
 
(68
)
 
(270
)
Income from continuing operations before equity in income (loss) of unconsolidated entities and income taxes
16,880

 
11,017

 
5,904

 
13,635

 
9,387

 
27,897

 
15,051

Equity in income (loss) of unconsolidated entities
9

 
25

 
23

 
193

 
(47
)
 
34

 
13

Income tax expense
(50
)
 
(55
)
 
(53
)
 
(101
)
 
(92
)
 
(105
)
 
(156
)
Income from continuing operations
16,839

 
10,987

 
5,874

 
13,727

 
9,248

 
27,826

 
14,908

Discontinued operations
394

 
(238
)
 
22

 
191

 
(198
)
 
156

 
(187
)
Income before gain on sales of real estate
17,233

 
10,749

 
5,896

 
13,918

 
9,050

 
27,982

 
14,721

Gain on sales of real estate
(1
)
 
3,986

 
41

 
10,630

 
—

 
3,985

 
—

Net income
17,232

 
14,735

 
5,937

 
24,548

 
9,050

 
31,967

 
14,721

Net income attributable to noncontrolling interests
 

 
 

 
 

 
 

 
 

 
 
 
 
Common units in the Operating Partnership
(476
)
 
(398
)
 
(64
)
 
(768
)
 
(158
)
 
(874
)
 
(174
)
Preferred units in the Operating Partnership
(165
)
 
(165
)
 
(165
)
 
(165
)
 
(165
)
 
(330
)
 
(330
)
Other consolidated entities
(810
)
 
(817
)
 
(804
)
 
(895
)
 
(837
)
 
(1,627
)
 
(1,586
)
Net income attributable to COPT
15,781

 
13,355

 
4,904

 
22,720

 
7,890

 
29,136

 
12,631

Preferred share dividends
(3,553
)
 
(3,552
)
 
(3,552
)
 
(3,553
)
 
(4,344
)
 
(7,105
)
 
(8,834
)
Issuance costs associated with redeemed preferred shares
—

 
—

 
—

 
—

 
(1,769
)
 
—

 
(1,769
)
Net income attributable to COPT common shareholders
$
12,228

 
$
9,803

 
$
1,352

 
$
19,167

 
$
1,777

 
$
22,031

 
$
2,028

 
 
 
 
 
 
 
 
 
 
 
 
 
 

6

Corporate Office Properties Trust
Consolidated Statements of Operations (continued)
(in thousands, except per share data)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended
 
Six Months Ended
 
6/30/15
 
3/31/15
 
12/31/14
 
9/30/14
 
6/30/14
 
6/30/15
 
6/30/14
For diluted EPS computations:
 

 
 

 
 

 
 

 
 

 
 
 
 
Numerator for diluted EPS
 

 
 

 
 

 
 

 
 

 
 
 
 
Net income attributable to common shareholders
$
12,228

 
$
9,803

 
$
1,352

 
$
19,167

 
$
1,777

 
$
22,031

 
$
2,028

Amount allocable to share-based compensation awards
(113
)
 
(122
)
 
(100
)
 
(103
)
 
(108
)
 
(235
)
 
(229
)
Numerator for diluted EPS
$
12,115

 
$
9,681

 
$
1,252

 
$
19,064

 
$
1,669

 
$
21,796

 
$
1,799

Denominator:
 

 
 

 
 

 
 

 
 

 
 
 
 
Weighted average common shares - basic
94,128

 
93,199

 
90,752

 
87,290

 
87,214

 
93,666

 
87,148

Dilutive effect of share-based compensation awards
35

 
198

 
196

 
195

 
201

 
114

 
156

Weighted average common shares - diluted
94,163

 
93,397

 
90,948

 
87,485

 
87,415

 
93,780

 
87,304

Diluted EPS
$
0.13

 
$
0.10

 
$
0.01

 
$
0.22

 
$
0.02

 
$
0.23

 
$
0.02


7

Corporate Office Properties Trust
Consolidated Statements of FFO
(in thousands, except per share data)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended
 
Six Months Ended
 
6/30/15
 
3/31/15
 
12/31/14
 
9/30/14
 
6/30/14
 
6/30/15
 
6/30/14
NOI from real estate operations (1) (2)
 

 
 

 
 

 
 

 
 

 
 
 
 
Real estate revenues
$
128,195

 
$
122,710

 
$
120,611

 
$
118,240

 
$
115,964

 
$
250,905

 
$
240,860

Real estate property operating expenses
(46,407
)
 
(50,686
)
 
(43,310
)
 
(42,881
)
 
(43,856
)
 
(97,093
)
 
(93,608
)
NOI from real estate operations
81,788

 
72,024

 
77,301

 
75,359

 
72,108

 
153,812

 
147,252

General and administrative expenses
(5,884
)
 
(6,250
)
 
(7,206
)
 
(5,662
)
 
(5,815
)
 
(12,134
)
 
(11,973
)
Leasing expenses (2)
(1,650
)
 
(1,641
)
 
(1,706
)
 
(1,549
)
 
(1,713
)
 
(3,291
)
 
(3,698
)
Business development expenses and land carry costs (2)
(2,623
)
 
(2,790
)
 
(1,466
)
 
(1,430
)
 
(1,351
)
 
(5,413
)
 
(2,677
)
NOI from construction contracts and other service operations
879

 
826

 
1,653

 
1,146

 
725

 
1,705

 
3,891

Impairment losses on non-operating properties
—

 
—

 
—

 
(49
)
 
—

 
—

 
—

Equity in income (loss) of unconsolidated entities
9

 
25

 
23

 
193

 
(47
)
 
34

 
13

Interest and other income
1,242

 
1,283

 
1,148

 
1,191

 
1,299

 
2,525

 
2,584

Gain (loss) on early extinguishment of debt (2)
315

 
(3
)
 
(9,106
)
 
(176
)
 
(363
)
 
312

 
(386
)
Gain on sales of non-operating properties
(1
)
 
3,986

 
43

 
5,535

 
—

 
3,985

 
—

Total interest expense (2)
(21,768
)
 
(20,838
)
 
(23,286
)
 
(24,802
)
 
(23,478
)
 
(42,606
)
 
(44,305
)
Income tax expense
(50
)
 
(55
)
 
(53
)
 
(101
)
 
(92
)
 
(105
)
 
(156
)
FFO - per NAREIT (1)
52,257

 
46,567

 
37,345

 
49,655

 
41,273

 
98,824

 
90,545

Preferred share dividends
(3,553
)
 
(3,552
)
 
(3,552
)
 
(3,553
)
 
(4,344
)
 
(7,105
)
 
(8,834
)
Issuance costs associated with redeemed preferred shares
—

 
—

 
—

 
—

 
(1,769
)
 
—

 
(1,769
)
Noncontrolling interests - preferred units in the Operating Partnership
(165
)
 
(165
)
 
(165
)
 
(165
)
 
(165
)
 
(330
)
 
(330
)
FFO allocable to other noncontrolling interests
(1,072
)
 
(670
)
 
(867
)
 
(830
)
 
(758
)
 
(1,742
)
 
(1,519
)
Basic and diluted FFO allocable to restricted shares
(202
)
 
(183
)
 
(123
)
 
(191
)
 
(146
)
 
(385
)
 
(351
)
Basic and diluted FFO available to common share and common unit holders (1)
47,265

 
41,997

 
32,638

 
44,916

 
34,091

 
89,262

 
77,742

Operating property acquisition costs
361

 
1,046

 
—

 
—

 
—

 
1,407

 
—

Gain on sales of non-operating properties, net of associated income tax
1

 
(3,986
)
 
(43
)
 
(5,535
)
 
—

 
(3,985
)
 
—

Impairment losses on non-operating properties, net of associated income tax
—

 
—

 
—

 
49

 
—

 
—

 
—

(Gain) loss on early extinguishment of debt (2)
(315
)
 
3

 
9,106

 
176

 
363

 
(312
)
 
386

Issuance costs associated with redeemed preferred shares
—

 
—

 
—

 
—

 
1,769

 
—

 
1,769

Add: Negative FFO of properties to be conveyed to extinguish debt in default (3)
3,419

 
4,271

 
3,493

 
3,806

 
3,629

 
7,690

 
3,629

Demolition costs on redevelopment properties
66

 
175

 
—

 
—

 
—

 
241

 
—

Executive transition costs
—

 
—

 
1,056

 
—

 
—

 
—

 
—

Diluted FFO comparability adjustments allocable to restricted shares
(14
)
 
(7
)
 
(59
)
 
7

 
(26
)
 
(21
)
 
(26
)
Diluted FFO available to common share and common unit holders, as adjusted for comparability (1)
$
50,783

 
$
43,499

 
$
46,191

 
$
43,419

 
$
39,826

 
$
94,282

 
$
83,500

(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
 
Six Months Ended
 
6/30/15
 
3/31/15
 
12/31/14
 
9/30/14
 
6/30/14
 
6/30/15
 
6/30/14
Net income
$
17,232

 
$
14,735

 
$
5,937

 
$
24,548

 
$
9,050

 
$
31,967

 
$
14,721

Real estate-related depreciation and amortization
33,786

 
31,599

 
31,358

 
30,237

 
30,895

 
65,385

 
74,491

Impairment losses (recoveries) on previously depreciated operating properties (1)(2)
1,239

 
233

 
48

 
(7
)
 
1,328

 
1,472

 
1,329

Gain on sales of previously depreciated operating properties (2)
—

 
—

 
2

 
(5,123
)
 
—

 
—

 
4

FFO - per NAREIT (3)
52,257

 
46,567

 
37,345

 
49,655

 
41,273

 
98,824

 
90,545

Operating property acquisition costs
361

 
1,046

 
—

 
—

 
—

 
1,407

 
—

Gain on sales of non-operating properties, net of associated income tax
1

 
(3,986
)
 
(43
)
 
(5,535
)
 
—

 
(3,985
)
 
—

Impairment losses on non-operating properties, net of associated income tax
—

 
—

 
—

 
49

 
—

 
—

 
—

(Gain) loss on early extinguishment of debt (2)
(315
)
 
3

 
9,106

 
176

 
363

 
(312
)
 
386

Issuance costs associated with redeemed preferred shares
—

 
—

 
—

 
—

 
1,769

 
—

 
1,769

Add: Negative FFO of properties to be conveyed to extinguish debt in default
3,419

 
4,271

 
3,493

 
3,806

 
3,629

 
7,690

 
3,629

Demolition costs on redevelopment properties
66

 
175

 
—

 
—

 
—

 
241

 
—

Executive transition costs
—

 
—

 
1,056

 
—

 
—

 
—

 
—

FFO - as adjusted for comparability (3)
$
55,789

 
$
48,076

 
$
50,957

 
$
48,151

 
$
47,034

 
$
103,865

 
$
96,329

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Weighted Average Shares for period ended:
 

 
 

 
 

 
 

 
 

 
 

 
 

Common Shares Outstanding
94,128

 
93,199

 
90,752

 
87,290

 
87,214

 
93,666

 
87,148

Dilutive effect of share-based compensation awards
35

 
198

 
196

 
195

 
201

 
114

 
156

Common Units
3,680

 
3,732

 
3,846

 
3,876

 
3,912

 
3,706

 
3,934

Denominator for FFO per share - diluted
97,843

 
97,129

 
94,794

 
91,361

 
91,327

 
97,486

 
91,238

Weighted average common units
(3,680
)
 
(3,732
)
 
(3,846
)
 
(3,876
)
 
(3,912
)
 
(3,706
)
 
(3,934
)
Denominator for diluted EPS
94,163

 
93,397

 
90,948

 
87,485

 
87,415

 
93,780

 
87,304

 
 
 
 
 
 
 
 
 
 
 
 
 
 
(1) Please see reconciliations on pages 31 through 33.
 
 
 
 
 
 
 
 
 
 
 
 
 
(2) Includes continuing and discontinued operations.
 
 
 
 
 
 
 
 
 
 
 
 
 
(3) Please refer to the section entitled “Definitions” for a definition of this measure.
 
 
 
 
 
 
 
 
 
 

9

Corporate Office Properties Trust
Consolidated Reconciliations of AFFO
(in thousands, except per share data)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended
 
Six Months Ended
 
6/30/15
 
3/31/15
 
12/31/14
 
9/30/14
 
6/30/14
 
6/30/15
 
6/30/14
Diluted FFO available to common share and common unit holders, as adjusted for comparability
$
50,783

 
$
43,499

 
$
46,191

 
$
43,419

 
$
39,826

 
$
94,282

 
$
83,500

Straight line rent adjustments (1)
(3,788
)
 
(1,271
)
 
(379
)
 
(456
)
 
(1,745
)
 
(5,059
)
 
(985
)
Straight line rent adjustments on properties to be conveyed to extinguish debt in default
(24
)
 
(72
)
 
(47
)
 
(96
)
 
1

 
(96
)
 
1

Amortization of intangibles included in NOI
478

 
111

 
208

 
206

 
224

 
589

 
441

Share-based compensation, net of amounts capitalized
1,658

 
1,552

 
1,504

 
1,507

 
1,501

 
3,210

 
3,056

Amortization of deferred financing costs
1,146

 
990

 
1,020

 
1,357

 
1,122

 
2,136

 
2,289

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

 
—

 
—

 
(306
)
 
(27
)
 
—

 
(27
)
Amortization of net debt discounts, net of amounts capitalized
264

 
264

 
261

 
259

 
229

 
528

 
400

Amortization of settled debt hedges
—

 
—

 
11

 
16

 
15

 
—

 
30

Recurring capital expenditures on properties to be held
(9,705
)
 
(7,349
)
 
(8,633
)
 
(16,929
)
 
(13,585
)
 
(17,054
)
 
(24,637
)
Diluted AFFO available to common share and common unit holders (“diluted AFFO”)
$
40,812

 
$
37,724

 
$
40,136

 
$
28,977

 
$
27,561

 
$
78,536

 
$
64,068

Recurring capital expenditures
 

 
 

 
 

 
 

 
 

 
 
 
 
Tenant improvements and incentives on operating properties
$
6,644

 
$
4,390

 
$
7,239

 
$
11,581

 
$
4,512

 
$
11,034

 
$
10,831

Building improvements on operating properties
4,445

 
3,203

 
4,974

 
8,119

 
6,357

 
7,648

 
10,339

Leasing costs for operating properties
1,485

 
954

 
1,341

 
2,877

 
2,790

 
2,439

 
4,318

Less: Nonrecurring tenant improvements and incentives on operating properties
(986
)
 
(264
)
 
(1,747
)
 
(1,454
)
 
483

 
(1,250
)
 
467

Less: Nonrecurring building improvements on operating properties
(1,200
)
 
(875
)
 
(3,012
)
 
(4,182
)
 
(519
)
 
(2,075
)
 
(1,087
)
Less: Nonrecurring leasing costs for operating properties
(683
)
 
(59
)
 
(162
)
 
(12
)
 
(38
)
 
(742
)
 
(231
)
Recurring capital expenditures
$
9,705

 
$
7,349

 
$
8,633

 
$
16,929

 
$
13,585

 
$
17,054

 
$
24,637

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

10


 Corporate Office Properties Trust
Consolidated Office Properties by Region - June 30, 2015
 
 
Operational Properties (1)
 
Construction/Redevelopment (2)
Property Region and Business Park/Submarket
 
# of
Properties
 
Operational
Square Feet
 
Occupancy
%
 
Leased
 %
 
# of
Properties
 
Construction/Redevelopment Square Feet
 
Operational Square Feet (1)
 
Total
Square Feet
Baltimore/Washington Corridor:
 
 

 
 

 
 

 
 

 
 

 
 

 
 
 
 
National Business Park
 
29

 
3,485,071

 
96.8
%
 
97.0
%
 
1

 
191,464

 
—

 
191,464

Columbia Gateway
 
26

 
2,119,064

 
92.3
%
 
93.7
%
 
2

 
73,931

 
—

 
73,931

Airport Square/bwtech
 
14

 
1,089,752

 
87.9
%
 
89.1
%
 
2

 
67,450

 
—

 
67,450

Commons/Parkway
 
10

 
431,246

 
91.1
%
 
93.1
%
 
—

 
—

 
—

 
—

Other
 
11

 
1,120,004

 
99.0
%
 
99.8
%
 
1

 
119,980

 
—

 
119,980

Subtotal
 
90

 
8,245,137

 
94.5
%
 
95.3
%
 
6

 
452,825

 
—

 
452,825

Northern Virginia:
 
 

 
 

 
 

 
 

 
 

 
 

 
 
 
 
Westfields Corporate Center (3)
 
7

 
769,035

 
78.6
%
 
78.6
%
 
—

 
—

 
—

 
—

Patriot Ridge
 
1

 
239,272

 
51.3
%
 
51.3
%
 
—

 
—

 
—

 
—

Herndon, Tysons Corner and Merrifield
 
10

 
1,938,561

 
94.0
%
 
96.4
%
 
—

 
—

 
—

 
—

Other
 
5

 
823,731

 
100.0
%
 
100.0
%
 
4

 
701,030

 
—

 
701,030

Subtotal (3)
 
23

 
3,770,599

 
89.5
%
 
90.7
%
 
4

 
701,030

 
—

 
701,030

San Antonio, Texas
 
 

 
 

 
 

 
 

 
 

 
 

 
 
 
 
Sentry Gateway
 
7

 
953,015

 
100.0
%
 
100.0
%
 
—

 
—

 
—

 
—

Other
 
2

 
120,054

 
73.8
%
 
73.8
%
 
—

 
—

 
—

 
—

Subtotal
 
9

 
1,073,069

 
97.1
%
 
97.1
%
 
—

 
—

 
—

 
—

Huntsville
 
6

 
631,850

 
93.9
%
 
95.7
%
 
—

 
—

 


 
—

Washington, DC- Capital Riverfront (Maritime)
 
2

 
360,080

 
70.6
%
 
72.9
%
 
—

 
—

 
—

 
—

St. Mary’s & King George Counties
 
18

 
872,740

 
80.2
%
 
81.3
%
 
1

 
27,122

 
—

 
27,122

Greater Baltimore:
 
 

 
 

 
 

 
 

 
 

 
 

 
 
 


White Marsh and Rt 83 Corridor
 
20

 
984,186

 
93.5
%
 
95.1
%
 
—

 
—

 
—

 
—

Downtown Baltimore
 
2

 
844,900

 
97.1
%
 
97.8
%
 
—

 
—

 
—

 
—

North Gate Business Park
 
3

 
284,907

 
46.7
%
 
48.2
%
 
—

 
—

 
—

 
—

Subtotal
 
25

 
2,113,993

 
88.6
%
 
89.9
%
 
—

 
—

 
—

 
—

Greater Philadelphia, Pennsylvania
 
4

 
624,017

 
99.8
%
 
100.0
%
 
1

 
30,095

 
110,670

 
140,765

Other
 
2

 
295,842

 
100.0
%
 
100.0
%
 
—

 
—

 
—

 
—

Total (3)
 
179

 
17,987,327

 
92.0
%
 
92.9
%
 
12

 
1,211,072

 
110,670

 
1,321,742

 
(1)
Number of properties includes buildings under construction or redevelopment once those buildings become partially operational. Operational square feet includes square feet in operations for partially operational properties; NOI for this property was $658,000 and cash NOI was ($23,000) for the three months ended 6/30/15.
(2)
This schedule includes properties under, or contractually committed for, construction or redevelopment as of June 30, 2015. Please refer to pages 23 and 24.
(3)
Amounts reported exclude the effect of two properties (totaling 665,000 square feet that were 25.4% leased and occupied) 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.




11

Corporate Office Properties Trust
NOI from Real Estate Operations and Occupancy by Property Grouping
(dollars and square feet in thousands)
 
 
As of 6/30/15
 
 
 
 
 
 
# of
Operating Office Properties
 
Office Operational Square Feet
 
 
 
 
 
Office Property Annualized
Rental Revenue (2)
 
Percentage of Total Office
Annualized
Rental Revenue
 
NOI from Real
Estate Operations
for Three Months Ended
 
NOI from Real
Estate Operations
for Six Months Ended
Property Grouping
 
 
 
% Occupied (1)
 
% Leased (1)
 
 
 
6/30/15
 
6/30/15
Same Office Properties (3)
 
160

 
15,502

 
91.2%
 
92.2%
 
$
425,748

 
89.6
%
 
$
68,237

 
$
133,516

Office Properties Placed in Service (4)
 
10

 
1,299

 
97.0%
 
97.5%
 
31,452

 
6.4
%
 
5,391

 
9,076

Acquired Office Properties (5)
 
2

 
602

 
97.6%
 
98.5%
 
18,186

 
3.7
%
 
2,565

 
2,735

Wholesale Data Center and Other
 
—

 
—

 
—%
 
—%
 
N/A

 
N/A

 
2,052

 
2,747

Total Core Portfolio
 
172

 
17,403

 
91.9%
 
92.8%
 
475,386

 
97.0
%
 
78,245

 
148,074

Office Properties Held for Sale (6)
 
7

 
584

 
95.8%
 
97.2%
 
14,935

 
3.0
%
 
2,693

 
4,972

Office Properties to be Conveyed (7)
 
N/A

 
N/A

 
N/A
 
N/A
 
N/A

 
N/A

 
843

 
753

Disposed Office Properties
 
N/A

 
N/A

 
N/A
 
N/A
 
N/A

 
N/A

 
7

 
13

Total Portfolio (8)
 
179

 
17,987

 
92.0%
 
92.9%
 
$
490,321

 
100.0
%
 
$
81,788

 
$
153,812

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Core Portfolio
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Demand Driver Adjacent (9)
 
86

 
9,210

 
90.6%
 
91.0%
 
$
278,507

 
56.8
%
 
$
44,393

 
$
85,624

U.S. Government/Defense Contractor (10)
 
33

 
3,764

 
96.1%
 
96.1%
 
86,982

 
17.7
%
 
15,579

 
30,111

Total Strategic Tenant Niche
 
119

 
12,974

 
92.2%
 
92.5%
 
365,489

 
74.5
%
 
59,972

 
115,735

Regional Office (11)
 
53

 
4,429

 
90.8%
 
93.5%
 
109,897

 
22.4
%
 
16,222

 
29,593

Other, including Wholesale Data Center
 
N/A

 
N/A

 
N/A
 
N/A
 
N/A

 
N/A

 
2,051

 
2,746

Total Core Portfolio
 
172

 
17,403

 
91.9%
 
92.8%
 
$
475,386

 
97.0
%
 
$
78,245

 
$
148,074

(1)
Percentages calculated based on operational square feet.
(2)
Excludes annualized rental revenue from our wholesale data center, DC-6, of $16.6 million as of 6/30/15.
(3)
Properties held for long-term investment owned and 100% operational since at least 1/1/14.
(4)
Newly constructed or redeveloped properties placed in service that were not fully operational by 1/1/14.
(5)
Includes properties acquired in March and April of 2015.
(6)
The carrying value of operating property assets held for sale as of 6/30/15 totaled $77.0 million.
(7)
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 25.4% leased and occupied with annualized rental revenue of $3.8 million as of 6/30/15.
(8)
Total portfolio amounts exclude the effect of office properties to be conveyed for all reported amounts except for NOI from real estate operations. Effective April 1, 2014, all cash flows from such properties belong to the lender.
(9)
Office properties held for long-term investment located near defense installations and other knowledge-based government demand drivers.
(10)
Office properties held for long-term investment not located near Strategic Tenant Locations that were otherwise at least 50% leased as of most recent year end by United States Government agencies or defense contractors.
(11)
Regional office properties held for long-term investment predominantly in the Greater Washington, DC/Baltimore region, excluding Strategic Tenant Niche Properties.

12

Corporate Office Properties Trust
Real Estate Revenues, NOI and Cash NOI* by Segment
(dollars in thousands)
 
Three Months Ended
 
Six Months Ended
 
6/30/15
 
3/31/15
 
12/31/14
 
9/30/14
 
6/30/14
 
6/30/15
 
6/30/14
Real estate revenues
 

 
 

 
 

 
 

 
 

 
 
 
 
Baltimore/Washington Corridor
$
60,611

 
$
61,792

 
$
58,739

 
$
58,883

 
$
57,456

 
$
122,403

 
$
118,569

Northern Virginia
24,393

 
21,749

 
22,028

 
21,369

 
20,898

 
46,142

 
45,866

San Antonio
10,204

 
9,171

 
10,109

 
9,031

 
8,758

 
19,375

 
17,237

Huntsville
2,658

 
2,446

 
3,016

 
2,471

 
2,404

 
5,104

 
4,959

Washington, DC - Capitol Riverfront
3,391

 
3,364

 
3,610

 
3,524

 
3,831

 
6,755

 
7,465

St. Mary’s and King George Counties
3,795

 
3,901

 
4,060

 
4,158

 
4,202

 
7,696

 
8,518

Greater Baltimore
12,889

 
11,485

 
10,635

 
10,436

 
11,024

 
24,374

 
22,520

Greater Philadelphia
3,886

 
3,224

 
3,272

 
2,951

 
2,366

 
7,110

 
5,706

Other
2,548

 
2,543

 
2,481

 
2,541

 
2,533

 
5,091

 
5,127

Wholesale Data Center
3,820

 
3,035

 
2,661

 
2,876

 
2,492

 
6,855

 
4,893

Real estate revenues
$
128,195

 
$
122,710

 
$
120,611

 
$
118,240

 
$
115,964

 
$
250,905

 
$
240,860

 
 
 
 
NOI
 

 
 

 
 

 
 

 
 

 
 
 
 
Baltimore/Washington Corridor
$
41,072

 
$
38,209

 
$
40,009

 
$
39,426

 
$
38,108

 
$
79,281

 
$
75,624

Northern Virginia
15,706

 
12,628

 
14,620

 
13,869

 
13,247

 
28,334

 
29,242

San Antonio
4,589

 
4,196

 
3,938

 
3,931

 
3,941

 
8,785

 
7,946

Huntsville
1,770

 
1,617

 
2,225

 
1,708

 
1,545

 
3,387

 
3,447

Washington, DC - Capitol Riverfront
1,330

 
1,550

 
1,645

 
1,700

 
2,077

 
2,880

 
3,946

St. Mary’s and King George Counties
2,466

 
2,317

 
2,862

 
2,881

 
2,913

 
4,783

 
5,725

Greater Baltimore
7,980

 
6,488

 
6,643

 
6,626

 
6,524

 
14,468

 
12,544

Greater Philadelphia
2,945

 
1,849

 
2,167

 
2,114

 
1,222

 
4,794

 
3,262

Other
2,331

 
2,347

 
2,195

 
2,281

 
1,920

 
4,678

 
4,192

Wholesale Data Center
1,599

 
823

 
997

 
823

 
611

 
2,422

 
1,324

NOI from real estate operations
$
81,788

 
$
72,024

 
$
77,301

 
$
75,359

 
$
72,108

 
$
153,812

 
$
147,252

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash NOI
 

 
 

 
 

 
 

 
 

 
 
 
 
Baltimore/Washington Corridor
$
42,331

 
$
38,047

 
$
40,125

 
$
38,114

 
$
36,993

 
$
80,378

 
$
73,702

Northern Virginia (1)
13,704

 
12,580

 
14,994

 
16,159

 
14,124

 
26,284

 
33,045

San Antonio
3,419

 
3,738

 
3,838

 
3,733

 
3,737

 
7,157

 
7,533

Huntsville
1,832

 
1,848

 
2,280

 
1,917

 
1,881

 
3,680

 
3,789

Washington, DC - Capitol Riverfront
1,172

 
1,539

 
1,681

 
1,775

 
2,149

 
2,711

 
4,081

St. Mary’s and King George Counties
2,407

 
2,293

 
2,769

 
2,491

 
2,598

 
4,700

 
5,475

Greater Baltimore
7,478

 
6,474

 
6,770

 
6,614

 
6,483

 
13,952

 
12,477

Greater Philadelphia
2,076

 
1,630

 
1,952

 
1,641

 
601

 
3,706

 
2,015

Other
2,287

 
2,304

 
2,146

 
2,217

 
1,825

 
4,591

 
4,001

Wholesale Data Center
2,206

 
825

 
984

 
807

 
573

 
3,031

 
1,250

Cash NOI from real estate operations
$
78,912

 
$
71,278

 
$
77,539

 
$
75,468

 
$
70,964

 
$
150,190

 
$
147,368

Straight line rent adjustments
3,446

 
941

 
56

 
182

 
1,453

 
4,387

 
499

Add: Amortization of deferred market rental revenue
(308
)
 
59

 
4

 
6

 
(12
)
 
(249
)
 
(17
)
Less: Amortization of below-market cost arrangements
(262
)
 
(254
)
 
(298
)
 
(297
)
 
(297
)
 
(516
)
 
(598
)
NOI from real estate operations
$
81,788

 
$
72,024

 
$
77,301

 
$
75,359

 
$
72,108

 
$
153,812

 
$
147,252

*     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 $867,000 for the three months ended June 30, 2015 and $853,000 for the six months ended June 30, 2015.

13

Corporate Office Properties Trust
Same Office Properties (1) Average Occupancy Rates by Region 
 
Number of Buildings
 
Rentable Square Feet
 
Three Months Ended
 
Six Months Ended
 
 
 
6/30/15
 
3/31/15
 
12/31/14
 
9/30/14
 
6/30/14
 
6/30/15
 
6/30/14
Baltimore Washington Corridor
88

 
7,980,921

 
94.6
%
 
94.0
%
 
93.8
%
 
93.9
%
 
93.3
%
 
94.3
%
 
93.5
%
Northern Virginia
18

 
2,983,152

 
86.3
%
 
85.6
%
 
88.8
%
 
89.6
%
 
88.3
%
 
86.0
%
 
88.3
%
San Antonio
8

 
912,508

 
96.6
%
 
96.6
%
 
96.6
%
 
96.6
%
 
96.6
%
 
96.6
%
 
96.6
%
Huntsville
4

 
441,646

 
87.4
%
 
79.4
%
 
78.8
%
 
82.4
%
 
79.9
%
 
83.4
%
 
80.6
%
Washington, DC - Capitol Riverfront
2

 
360,080

 
70.9
%
 
71.1
%
 
73.8
%
 
72.6
%
 
75.9
%
 
71.0
%
 
76.2
%
St. Mary’s and King George Counties
18

 
872,740

 
80.6
%
 
86.4
%
 
91.1
%
 
91.7
%
 
92.9
%
 
83.5
%
 
92.5
%
Greater Baltimore
18

 
1,325,163

 
84.7
%
 
84.4
%
 
83.8
%
 
81.7
%
 
79.6
%
 
84.6
%
 
78.7
%
Greater Philadelphia
2

 
329,964

 
99.0
%
 
98.8
%
 
98.8
%
 
98.4
%
 
87.5
%
 
98.9
%
 
87.5
%
Other
2

 
295,842

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

 
15,502,016

 
90.9
%
 
90.6
%
 
91.3
%
 
91.4
%
 
90.5
%
 
90.7
%
 
90.6
%
Total Same Office Properties occupancy as of period end
 
 

 
91.2
%
 
90.7
%
 
90.8
%
 
91.9
%
 
90.6
%
 
91.2
%
 
90.6
%

(1)  Same office properties represent buildings owned and 100% operational since at least January 1, 2014, excluding properties held for future disposition.




14


Corporate Office Properties Trust
Same Office Property Real Estate Revenues, NOI and Cash NOI(1) by Region
(dollars in thousands)
 
Three Months Ended
 
Six Months Ended
 
6/30/15
 
3/31/15
 
12/31/14
 
9/30/14
 
6/30/14
 
6/30/15
 
6/30/14
Same office property real estate revenues
 

 
 

 
 

 
 

 
 

 
 
 
 
Baltimore/Washington Corridor
$
58,839

 
$
60,056

 
$
57,144

 
$
57,601

 
$
56,988

 
$
118,895

 
$
117,748

Northern Virginia
17,329

 
17,315

 
18,268

 
17,864

 
17,765

 
34,644

 
36,063

San Antonio
9,130

 
8,813

 
10,109

 
9,031

 
8,758

 
17,943

 
17,237

Huntsville
1,951

 
1,799

 
1,856

 
2,005

 
1,938

 
3,750

 
3,963

Washington, DC - Capitol Riverfront
3,391

 
3,364

 
3,610

 
3,524

 
3,831

 
6,755

 
7,465

St. Mary’s and King George Counties
3,794

 
3,901

 
4,060

 
4,158

 
4,202

 
7,695

 
8,518

Greater Baltimore
8,156

 
8,776

 
8,328

 
7,907

 
7,792

 
16,932

 
15,765

Greater Philadelphia
2,112

 
2,171

 
2,293

 
1,956

 
1,813

 
4,283

 
3,792

Other
2,450

 
2,446

 
2,392

 
2,441

 
2,443

 
4,896

 
4,920

Same office property real estate revenues
$
107,152

 
$
108,641

 
$
108,060

 
$
106,487

 
$
105,530

 
$
215,793

 
$
215,471

 
 
 
 
 
 
Same office property NOI
 

 
 

 
 

 
 

 
 

 
 
 
 
Baltimore/Washington Corridor
$
39,512

 
$
37,123

 
$
38,831

 
$
38,376

 
$
38,031

 
$
76,635

 
$
75,555

Northern Virginia
11,179

 
10,647

 
12,504

 
11,951

 
11,720

 
21,826

 
23,147

San Antonio
3,885

 
3,996

 
3,939

 
3,931

 
3,941

 
7,881

 
7,946

Huntsville
1,266

 
1,140

 
1,230

 
1,386

 
1,227

 
2,406

 
2,713

Washington, DC - Capitol Riverfront
1,330

 
1,550

 
1,646

 
1,700

 
2,076

 
2,880

 
3,945

St. Mary’s and King George Counties
2,440

 
2,343

 
2,867

 
2,883

 
2,931

 
4,783

 
5,770

Greater Baltimore
4,990

 
5,040

 
5,005

 
4,924

 
4,619

 
10,030

 
8,836

Greater Philadelphia
1,401

 
1,231

 
1,510

 
1,311

 
1,126

 
2,632

 
2,196

Other
2,234

 
2,209

 
2,183

 
2,187

 
2,187

 
4,443

 
4,371

Same office property NOI
68,237

 
65,279

 
69,715

 
68,649

 
67,858

 
133,516

 
134,479

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Same office property cash NOI (1)
 

 
 

 
 

 
 

 
 

 
 
 
 
Baltimore/Washington Corridor
$
38,598

 
$
36,294

 
$
37,118

 
$
37,708

 
$
36,998

 
$
74,892

 
$
73,037

Northern Virginia
11,062

 
10,771

 
12,185

 
12,324

 
11,671

 
21,833

 
22,821

San Antonio
3,788

 
3,896

 
3,838

 
3,733

 
3,737

 
7,684

 
7,533

Huntsville
1,242

 
1,231

 
1,268

 
1,476

 
1,444

 
2,473

 
2,952

Washington, DC - Capitol Riverfront
1,167

 
1,534

 
1,636

 
1,729

 
2,146

 
2,701

 
4,078

St. Mary’s and King George Counties
2,385

 
2,319

 
2,645

 
2,493

 
2,616

 
4,704

 
5,517

Greater Baltimore
5,062

 
4,698

 
5,025

 
4,843

 
4,524

 
9,760

 
8,653

Greater Philadelphia
1,265

 
1,078

 
1,334

 
1,195

 
1,149

 
2,343

 
2,186

Other
2,238

 
2,211

 
2,181

 
2,172

 
2,140

 
4,449

 
4,276

Same office property cash NOI (1)
$
66,807

 
$
64,032

 
$
67,230

 
$
67,673

 
$
66,425

 
$
130,839

 
$
131,053

Straight line rent adjustments
664

 
712

 
1,976

 
978

 
744

 
1,376

 
(632
)
Add: Amortization of deferred market rental revenue
4

 
27

 
(28
)
 
(27
)
 
(44
)
 
31

 
(82
)
Less: Amortization of below-market cost arrangements
(250
)
 
(245
)
 
(288
)
 
(288
)
 
(288
)
 
(495
)
 
(578
)
Add: Lease termination fee, gross
1,012

 
753

 
741

 
272

 
93

 
1,765

 
605

Add: Cash NOI on tenant-funded landlord assets
—

 
—

 
84

 
41

 
928

 
—

 
4,113

Same office property NOI
$
68,237

 
$
65,279

 
$
69,715

 
$
68,649

 
$
67,858

 
$
133,516

 
$
134,479

Percentage change in same office property cash NOI (2)
0.58
%
 
 
 
 
 
 
 
 
 
(0.16
)%
 
 
(1)
In addition to excluding the effects of noncash rental revenues and property operating expenses, same office property cash NOI also excludes the effects of gross lease termination fees and revenue recognized as a result of tenant-funded landlord assets.
(2)
Represents the change between the current period and the same period in the prior year.

15

Corporate Office Properties Trust
Leasing - Total Office Portfolio
Quarter Ended June 30, 2015
 
Baltimore/
Washington
Corridor
 
Northern
Virginia
 
Huntsville
 
Washington DC-Capital Riverfront
 
St. Mary’s & King George Counties
 
Greater
Baltimore
 
Total
Office
Renewed Space
 

 
 

 
 
 
 

 
 
 
 

 
 

Leased Square Feet
73,403

 
4,418

 
—

 
—

 
115,643

 
111,820

 
305,284

Expiring Square Feet
96,502

 
11,723

 
11,285

 
2,462

 
175,055

 
113,448

 
410,475

Vacated Square Feet
23,099

 
7,305

 
11,285

 
2,462

 
59,412

 
1,628

 
105,191

Retention Rate (% based upon square feet)
76.06
%
 
37.69
 %
 
—
%
 
—
%
 
66.06
 %
 
98.56
 %
 
74.37
 %
Statistics for Completed Leasing:
 
 
 
 
 
 
 
 
 
 
 
 
 
Average Committed Cost per Square Foot
$
2.83

 
$
25.10

 
$
—

 
$
—

 
$
4.96

 
$
16.08

 
$
8.81

Weighted Average Lease Term in Years
2.4

 
4.8

 
—

 
—

 
2.8

 
3.8

 
3.1

GAAP Rent Per Square Foot
 
 
 
 
 
 
 
 
 
 
 
 
 
        Renewal GAAP Rent
$
24.14

 
$
29.04

 
$
—

 
$
—

 
$
19.14

 
$
25.97

 
$
22.99

        Expiring GAAP Rent
$
22.71

 
$
31.25

 
$
—

 
$
—

 
$
18.59

 
$
25.85

 
$
22.42

        Change in GAAP Rent
6.3
%
 
(7.1
)%
 
—
%
 
—
%
 
3.0
 %
 
0.5
 %
 
2.5
 %
Cash Rent Per Square Foot
 
 
 
 
 
 
 
 
 
 
 
 
 
        Renewal Cash Rent
$
24.37

 
$
28.50

 
$
—

 
$
—

 
$
19.15

 
$
25.66

 
$
22.92

        Expiring Cash Rent
$
24.35

 
$
32.58

 
$
—

 
$
—

 
$
19.36

 
$
26.76

 
$
23.46

        Change in Cash Rent
0.1
%
 
(12.5
)%
 
—
%
 
—
%
 
(1.1
)%
 
(4.1
)%
 
(2.3
)%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
New Leases
 
 
 
 
 
 
 
 
 
 
 
 
 
Development and Redevelopment Space
 
 
 
 
 
 
 
 
 
 
 
 
 
Leased Square Feet
15,011

 
23,534

 
—

 
—

 
—

 
1,694

 
40,239

Statistics for Completed Leasing:
 
 
 
 
 
 
 
 
 
 
 
 
 
Average Committed Cost per Square Foot
$
29.93

 
$
100.42

 
$
—

 
$
—

 
$
—

 
$
60.92

 
$
72.46

Weighted Average Lease Term in Years
5.1

 
12.0

 
—

 
—

 
—

 
5.3

 
9.1

GAAP Rent Per Square Foot
$
27.85

 
$
36.44

 
$
—

 
$
—

 
$
—

 
$
27.18

 
$
32.84

Cash Rent Per Square Foot
$
26.91

 
$
31.25

 
$
—

 
$
—

 
$
—

 
$
27.00

 
$
29.45

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Other New Leases (1)
 
 
 
 
 
 
 
 
 
 
 
 
 
Leased Square Feet
68,599

 
34,159

 
—

 
8,183

 
9,481

 
23,905

 
144,327

Statistics for Completed Leasing:
 
 
 
 
 
 
 
 
 
 
 
 
 
Average Committed Cost per Square Foot
$
52.50

 
$
42.06

 
$
—

 
$
63.19

 
$
16.73

 
$
27.29

 
$
44.11

Weighted Average Lease Term in Years
7.1

 
7.1

 
—

 
5.2

 
7.9

 
6.5

 
6.9

GAAP Rent Per Square Foot
$
21.35

 
$
27.75

 
$
—

 
$
37.31

 
$
20.59

 
$
22.39

 
$
23.89

Cash Rent Per Square Foot
$
20.68

 
$
27.09

 
$
—

 
$
38.00

 
$
21.03

 
$
21.38

 
$
23.32

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total Square Feet Leased
157,013

 
62,111

 
—

 
8,183

 
125,124

 
137,419

 
489,850

 
 
 
 
 
 
 
 
 
 
 
 
 
 
(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 and Greater Philadelphia regions.
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.

16

Corporate Office Properties Trust
Leasing - Total Office Portfolio
Year Ended June 30, 2015
 
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
120,492

 
11,924

 
—

 
15,525

 
160,629

 
201,381

 
—

 
509,951

Expiring Square Feet
166,496

 
70,044

 
11,285

 
29,669

 
259,710

 
215,888

 
—

 
753,092

Vacated Square Feet
46,004

 
58,120

 
11,285

 
14,144

 
99,081

 
14,507

 
—

 
243,141

Retention Rate (% based upon square feet)
72.37
 %
 
17.02
 %
 
0.00
%
 
52.33
 %
 
61.85
 %
 
93.28
 %
 
0.00
%
 
67.71
 %
Statistics for Completed Leasing:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Average Committed Cost per Square Foot
$
5.68

 
$
19.14

 
$
—

 
$
25.77

 
$
5.23

 
$
12.08

 
$
—

 
$
8.99

Weighted Average Lease Term in Years
3.0

 
5.1

 
—

 
4.1

 
2.9

 
4.7

 
—

 
3.7

GAAP Rent Per Square Foot
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
        Renewal GAAP Rent
$
23.65

 
$
27.32

 
$
—

 
$
41.62

 
$
19.82

 
$
28.22

 
$
—

 
$
24.88

        Expiring GAAP Rent
$
22.69

 
$
28.65

 
$
—

 
$
48.71

 
$
19.56

 
$
26.79

 
$
—

 
$
24.25

        Change in GAAP Rent
4.3
 %
 
(4.6
)%
 
0.0
%
 
(14.6
)%
 
1.3
 %
 
5.3
 %
 
0.0
%
 
2.6
 %
Cash Rent Per Square Foot
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
        Renewal Cash Rent
$
23.62

 
$
26.61

 
$
—

 
$
41.96

 
$
19.94

 
$
27.39

 
$
—

 
$
24.58

        Expiring Cash Rent
$
24.41

 
$
29.62

 
$
—

 
$
50.36

 
$
20.40

 
$
27.87

 
$
—

 
$
25.42

        Change in Cash Rent
(3.2
)%
 
(10.2
)%
 
0.0
%
 
(16.7
)%
 
(2.2
)%
 
(1.7
)%
 
0.0
%
 
(3.3
)%
New Leases
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Development and Redevelopment Space
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Leased Square Feet
15,011

 
325,101

 
—

 
—

 
—

 
1,694

 
4,033

 
345,839

Statistics for Completed Leasing:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Average Committed Cost per Square Foot
$
29.93

 
$
8.94

 
$
—

 
$
—

 
$
—

 
$
60.92

 
$
62.38

 
$
10.73

Weighted Average Lease Term in Years
5.1

 
10.2

 
—

 
—

 
—

 
5.3

 
6.7

 
9.9

GAAP Rent Per Square Foot
$
27.85

 
$
16.67

 
$
—

 
$
—

 
$
—

 
$
27.18

 
$
26.07

 
$
17.32

Cash Rent Per Square Foot
$
26.91

 
$
15.11

 
$
—

 
$
—

 
$
—

 
$
27.00

 
$
25.17

 
$
15.80

Other New Leases (1)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Leased Square Feet
121,107

 
39,061

 
11,150

 
9,824

 
16,940

 
37,310

 
—

 
235,392

Statistics for Completed Leasing:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Average Committed Cost per Square Foot
$
35.43

 
$
43.02

 
$
18.65

 
$
57.99

 
$
17.74

 
$
37.52

 
$
—

 
$
35.90

Weighted Average Lease Term in Years
6.2

 
6.8

 
5.3

 
5.1

 
6.4

 
6.2

 
—

 
6.2

GAAP Rent Per Square Foot
$
24.75

 
$
27.52

 
$
19.72

 
$
39.81

 
$
20.43

 
$
23.49

 
$
—

 
$
25.09

Cash Rent Per Square Foot
$
24.17

 
$
26.97

 
$
17.75

 
$
40.23

 
$
20.35

 
$
22.59

 
$
—

 
$
24.48

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total Square Feet Leased
256,610

 
376,086

 
11,150

 
25,349

 
177,569

 
240,385

 
4,033

 
1,091,182

(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
Lease Expiration Analysis as of 6/30/15 (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
 
40

 
683,455

 
$
21,621

 
4.5
%
 
$
31.63

 
 
20

 
570,317

 
$
19,144

 
5.2
%
 
$
33.57

Northern Virginia
 
10

 
439,343

 
14,918

 
3.1
%
 
33.96

 
 
5

 
426,311

 
14,698

 
4.0
%
 
34.48

Washington, DC-Capitol Riverfront
 
7

 
30,173

 
1,569

 
0.3
%
 
52.00

 
 
7

 
30,173

 
1,569

 
0.4
%
 
52.00

St. Mary’s and King George Cos.
 
13

 
150,815

 
3,120

 
0.7
%
 
20.69

 
 
13

 
150,815

 
3,120

 
0.9
%
 
20.69

Greater Baltimore
 
13

 
65,243

 
1,693

 
0.4
%
 
25.95

 
 
6

 
22,453

 
736

 
0.2
%
 
32.78

2015
 
83

 
1,369,029

 
42,921

 
9.0
%
 
31.35

 
 
51

 
1,200,069

 
39,267

 
10.7
%
 
32.72

Baltimore/Washington Corridor
 
41

 
846,459

 
25,826

 
5.4
%
 
30.51

 
 
25

 
778,071

 
23,842

 
6.5
%
 
30.64

Northern Virginia
 
12

 
157,024

 
4,594

 
1.0
%
 
29.26

 
 
7

 
115,507

 
3,087

 
0.8
%
 
26.73

Huntsville
 
1

 
9,045

 
172

 
—
%
 
19.02

 
 
1

 
9,045

 
172

 
0.0
%
 
19.02

Washington, DC-Capitol Riverfront
 
2

 
34,220

 
1,740

 
0.4
%
 
50.85

 
 
2

 
34,220

 
1,740

 
0.5
%
 
50.85

St. Mary’s and King George Cos.
 
13

 
131,274

 
2,583

 
0.5
%
 
19.68

 
 
13

 
131,274

 
2,583

 
0.7
%
 
19.68

Greater Baltimore
 
10

 
61,050

 
1,934

 
0.4
%
 
31.68

 
 
—

 
—

 
—

 
0.0
%
 
—

Greater Philadelphia
 
2

 
5,934

 
89

 
—
%
 
15.00

 
 
—

 
—

 
—

 
0.0
%
 
—

2016
 
81

 
1,245,006

 
36,938

 
7.8
%
 
29.67

 
 
48

 
1,068,117

 
31,424
 
8.6
%
 
29.42

Baltimore/Washington Corridor
 
46

 
1,340,291

 
41,757

 
8.8
%
 
31.16

 
 
27

 
1,006,238

 
32,807

 
9.0
%
 
32.60

Northern Virginia
 
12

 
318,909

 
10,681

 
2.2
%
 
33.49

 
 
4

 
226,398

 
7,417

 
2.0
%
 
32.76

Huntsville
 
1

 
1,697

 
34

 
—
%
 
20.04

 
 
1

 
1,697

 
34

 
0.0
%
 
20.04

St. Mary’s and King George Cos.
 
4

 
62,606

 
1,052

 
0.2
%
 
16.80

 
 
4

 
62,606

 
1,052

 
0.3
%
 
16.80

Greater Baltimore
 
11

 
93,215

 
2,266

 
0.5
%
 
24.31

 
 
2

 
3,174

 
91

 
0.0
%
 
28.67

Greater Philadelphia
 
1

 
4,808

 
134

 
—
%
 
27.87

 
 
—

 
—

 
—

 
0.0
%
 
—

2017
 
75

 
1,821,526

 
55,924

 
11.8
%
 
30.70

 
 
38

 
1,300,113

 
41,401

 
11.3
%
 
31.84

Baltimore/Washington Corridor
 
48

 
1,196,031

 
36,931

 
7.8
%
 
30.88

 
 
31

 
1,031,120

 
32,160

 
8.8
%
 
31.19

Northern Virginia
 
16

 
558,953

 
19,107

 
4.0
%
 
34.18

 
 
12

 
361,970

 
10,686

 
2.9
%
 
29.52

San Antonio
 
1

 
45,935

 
678

 
0.1
%
 
14.76

 
 
—

 
—

 
—

 
0.0
%
 
—

Huntsville
 
2

 
242,216

 
6,177

 
1.3
%
 
25.50

 
 
2

 
242,216

 
6,177

 
1.7
%
 
25.50

Washington, DC-Capitol Riverfront
 
3

 
61,649

 
2,941

 
0.6
%
 
47.71

 
 
3

 
61,649

 
2,941

 
0.8
%
 
47.71

St. Mary’s and King George Cos.
 
10

 
110,486

 
2,386

 
0.5
%
 
21.60

 
 
10

 
110,486

 
2,386

 
0.7
%
 
21.60

Greater Baltimore
 
10

 
204,966

 
6,272

 
1.3
%
 
30.60

 
 
—

 
—

 
—

 
0.0
%
 
—

Greater Philadelphia
 
1

 
4,228

 
109

 
—
%
 
25.78

 
 
—

 
—

 
—

 
0.0
%
 
—

2018
 
91

 
2,424,464

 
74,601

 
15.7
%
 
30.77

 
 
58

 
1,807,441

 
54,350

 
14.9
%
 
30.07


18

 
 
Core Office Properties/Total Portfolio
 
Strategic Tenant Niche Properties Only
Year and Region of Lease (2)
 
Number of Leases Expiring
 
Square Footage of Leases Expiring
 
Annual Rental
Revenue of Expiring Leases (3) (000's)
 
Percentage
of Total Annualized 
Rental Revenue Expiring
 
Annual Rental Revenue of Expiring Leases per Occupied Square Foot
 
 
Number of Leases Expiring
 
Square Footage of Leases Expiring
 
Annual Rental
Revenue of Expiring Leases (3) (000's)
 
Percentage of Strategic Tenant Properties Annualized Rental Revenue Expiring
 
Annual Rental Revenue of Expiring Leases per Occupied Square Foot
Baltimore/Washington Corridor
 
44

 
1,359,422

 
41,341

 
8.7
%
 
30.41

 
 
27

 
1,108,382

 
35,136

 
9.6
%
 
31.70

Northern Virginia
 
14

 
380,285

 
13,735

 
2.9
%
 
36.12

 
 
7

 
261,845

 
9,622

 
2.6
%
 
36.75

Huntsville
 
4

 
70,880

 
1,400

 
0.3
%
 
19.75

 
 
4

 
70,880

 
1,400

 
0.4
%
 
19.75

Washington, DC-Capitol Riverfront
 
1

 
7,091

 
355

 
0.1
%
 
50.06

 
 
1

 
7,091

 
355

 
0.1
%
 
50.06

St. Mary’s and King George Cos.
 
7

 
34,976

 
784

 
0.2
%
 
22.42

 
 
7

 
34,976

 
784

 
0.2
%
 
22.42

Greater Baltimore
 
10

 
133,812

 
3,528

 
0.7
%
 
26.37

 
 
2

 
51,183

 
1,513

 
0.4
%
 
29.56

Greater Philadelphia
 
4

 
17,434

 
432

 
0.1
%
 
24.78

 
 
—

 
—

 
—

 
0.0
%
 
—

2019
 
84

 
2,003,900

 
61,575

 
13.0
%
 
30.73

 
 
48

 
1,534,357

 
48,810

 
13.4
%
 
31.81

Thereafter
 
205

 
7,122,409

 
203,427

 
42.8
%
 
28.56

 
 
100

 
5,052,984

 
150,237

 
41.1
%
 
29.73

Total/Strategic Tenant Niche Total/Avg.
 
619
 
15,986,334

 
$
475,386

 
100.0
%
 
$
29.74

 
 
343

 
11,963,081

 
$
365,489

 
100.0
%
 
$
30.55

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Properties Not Held For Long Term Investment
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Northern Virginia
 
1

 
160,461

 
5,342

 
35.8
%
 
$
33.29

 
 
 
 
 
 
 
 
 
 
 
Greater Baltimore
 
31

 
399,616

 
9,593

 
64.2
%
 
24.01

 
 
 
 
 
 
 
 
 
 
 
Properties Not Held For Long Term Investment Total/Avg.
 
32

 
560,077

 
$
14,935

 
100.0
%
 
$
26.67

 
 
 
 
 
 
 
 
 
 
 
Total Portfolio
 
651

 
16,546,411

 
$
490,321

 
 
 
$
29.63

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Note:  As of June 30, 2015, the weighted average lease term is 4.6 years for the Core Office Properties/Total Portfolio and 4.2 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(MW)
Total
Annual Rental
Revenue of
Expiring Leases (3)(000's)
2016
1
9

2.00

$
2,280

2018
2
1

0.26

537

2019
1
6

1.00

2,184

2020
3
30

6.60

10,049

2022
1
6

1.00

1,521

 
 
 

10.86

$
16,571

(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 June 30, 2015 of 167,643 for the portfolio, including 40,499 for the Strategic Tenant Niche Properties.
(2)
A number of our leases are subject to certain early termination provisions.  The year of lease expiration was computed assuming no exercise of such early termination rights.
(3)
Total Annualized Rental Revenue is the monthly contractual base rent as of June 30, 2015 multiplied by 12 plus the estimated annualized expense reimbursements under existing leases.


19

Corporate Office Properties Trust
Top 20 Office Tenants as of 6/30/15 (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)
63

 
3,776,203

 
22.8
%
 
$
135,725

 
27.7
%
 
5.5

Booz Allen Hamilton, Inc.
 
8

 
710,297

 
4.3
%
 
24,235

 
4.9
%
 
1.3

Northrop Grumman Corporation
 
9

 
763,776

 
4.6
%
 
22,225

 
4.5
%
 
5.1

The Boeing Company
 
13

 
752,693

 
4.5
%
 
22,218

 
4.5
%
 
3.3

General Dynamics Corporation
 
7

 
527,725

 
3.2
%
 
19,069

 
3.9
%
 
2.9

Computer Sciences Corporation
 
3

 
279,158

 
1.7
%
 
10,531

 
2.1
%
 
3.8

CareFirst, Inc.
 
2

 
300,154

 
1.8
%
 
10,094

 
2.1
%
 
6.5

The MITRE Corporation
 
6

 
290,288

 
1.8
%
 
9,645

 
2.0
%
 
2.6

Wells Fargo & Company
 
3

 
190,325

 
1.2
%
 
8,144

 
1.7
%
 
3.5

Vadata Inc.
 
4

 
664,431

 
4.0
%
 
7,156

 
1.5
%
 
9.0

Harris Coporation
 
7

 
209,888

 
1.3
%
 
6,037

 
1.2
%
 
3.1

Raytheon Company
 
6

 
168,205

 
1.0
%
 
5,878

 
1.2
%
 
2.6

AT&T Corporation
 
3

 
307,579

 
1.9
%
 
5,815

 
1.2
%
 
3.9

Science Applications International Corp.
 
5

 
158,406

 
1.0
%
 
5,785

 
1.2
%
 
3.7

Engility Holdings, Inc.
 
5

 
149,000

 
0.9
%
 
5,698

 
1.2
%
 
2.1

L-3 Communications Holdings, Inc.
 
1

 
158,786

 
1.0
%
 
5,246

 
1.1
%
 
4.3

Kratos Defense and Security Solutions
 
1

 
131,451

 
0.8
%
 
4,402

 
0.9
%
 
4.8

University of Maryland
 
4

 
162,912

 
1.0
%
 
4,256

 
0.9
%
 
6.2

The Johns Hopkins Institutions
 
6

 
148,091

 
0.9
%
 
3,911

 
0.8
%
 
3.2

KEYW Corporation
 
2

 
144,443

 
0.9
%
 
3,907

 
0.8
%
 
6.0

Subtotal Top 20 Office Tenants
 
158

 
9,993,811

 
60.4
%
 
319,977

 
65.3
%
 
4.5

All remaining tenants
 
493

 
6,552,600

 
39.6
%
 
170,344

 
34.7
%
 
4.7

Total/Weighted Average
 
651

 
16,546,411

 
100.0
%
 
$
490,321

 
100.0
%
 
4.6

 
(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 June 30, 2015, 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.


20


Corporate Office Properties Trust
Investment Activity
Location
 
Property Region
 
Business Park/Submarket
 
Number of Buildings
 
Square Feet
 
Transaction
Date
 
Occupancy on Transaction Date
 
Transaction 
Price
(in thousands)
Operating Property Acquisitions
Quarter Ended March 31,2015
 
 
 
 
 
 
 
 
 
 
 
 
 
 
250 West Pratt Street
 
Greater Baltimore
 
Baltimore City
 
1

 
366,921

 
3/19/2015
 
96.2%
 
$
61,887

Quarter Ended June 30, 2015
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2600 Park Tower Drive
 
Northern Virginia
 
Other Northern Virginia
 
1

 
237,023

 
4/15/2015
 
100.0%
 
80,504

Total - Six Months Ended June 30, 2015
 
 
 
 
 
2

 
603,944

 
 
 
 
 
$
142,391

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Property Dispositions
Quarter Ended March 31,2015
 
 
 
 
 
 
 
 
 
 
 
 
 
 
White Marsh Land
 
 
 
 
 
N/A
 
N/A
 
Various
 
 
 
$
17,900

Other Land
 
 
 
 
 
N/A
 
N/A
 
Various
 
 
 
175

Subtotal - Quarter Ended March 31, 2015
 
 
 
 
 
 
 
 
 
 
 
 
 
18,075

Total - Six Months Ended June 30, 2015
 
 
 
 
 
 
 
 
 
 
 
 
 
$
18,075





21

Corporate Office Properties Trust
Construction, Redevelopment, Wholesale Data Center and Land Owned/Controlled as of 6/30/15
(dollars in thousands)
 
Construction
Projects (1)
 
Redevelopment
Projects (2)
 
Wholesale Data
Center
 
Land Owned/Controlled (3)
 
Total
Segment
Rentable Square Feet
Baltimore/Washington Corridor
311,444

 
141,381

 
N/A

 
4,320,000

 
4,772,825

Northern Virginia
701,030

 
—

 
N/A

 
1,839,000

 
2,540,030

San Antonio
—

 
—

 
N/A

 
1,033,000

 
1,033,000

Huntsville, Alabama
—

 
—

 
N/A

 
4,103,000

 
4,103,000

St. Mary’s and King George Counties
—

 
27,122

 
N/A

 
109,000

 
136,122

Greater Baltimore
—

 
—

 
N/A

 
1,510,000

 
1,510,000

Other Maryland
—

 
—

 
N/A

 
1,000,000

 
1,000,000

Greater Philadelphia
—

 
140,765

 
N/A

 
713,000

 
853,765

Other Land Owned/Controlled
—

 
—

 
N/A

 
3,118,000

 
3,118,000

Total
1,012,474

 
309,268

 
N/A

 
17,745,000

 
19,066,742

 
Costs to date by region
Baltimore/Washington Corridor
$
67,875

 
$
18,351

 
$
—

 
$
133,033

 
$
219,259

Northern Virginia
62,187

 
—

 
—

 
88,483

 
150,670

San Antonio
—

 
—

 
—

 
20,194

 
20,194

Huntsville, Alabama
—

 
—

 
—

 
14,515

 
14,515

St. Mary’s and King George Counties
—

 
2,770

 
—

 
2,588

 
5,358

Greater Baltimore


 


 
—

 
34,190

 
34,190

Other Maryland
—

 
—

 
—

 
9,279

 
9,279

Greater Philadelphia
—

 
23,136

 
—

 
17,333

 
40,469

Other Land Owned/Controlled
—

 
—

 
—

 
41,688

 
41,688

Wholesale Data Center
—

 
—

 
257,831

 
—

 
257,831

Total
$
130,062

 
$
44,257

 
$
257,831

 
$
361,303

 
$
793,453

 
 
 
 
 
 
 
 
 
 
Reconciliation to amounts included in projects in development or held for future development, including land costs, as reported on consolidated balance sheet
 
 
 
 
 
 
 
 
 
Operating properties
(12,445
)
 
(28,986
)
 
(187,882
)
 
(32,127
)
 
(261,440
)
Deferred leasing costs and other assets
(3,055
)
 
(3,436
)
 
(3,531
)
 
—

 
(10,022
)
Projects in development or held for future development, including associated land costs (4)
$
114,562

 
$
11,835

 
$
66,418

 
$
329,176

 
$
521,991

(1) Represents construction projects as listed on page 23.
(2) Represents redevelopment projects as listed on page 24.
(3) Represents our land owned/controlled as listed on page 25.
(4) Represents total of costs included in lines on our consolidated balance sheet entitled “construction and redevelopment in progress, including land” and “land owned/controlled”.

22

Corporate Office Properties Trust
Summary of Construction Projects as of 6/30/15 (1)
(dollars in thousands) 
 
 
 
Park/Submarket
Total Rentable Square Feet
Percentage Leased as of
as of 6/30/15 (2)
Actual or Anticipated Shell Completion Date
 Anticipated Operational Date (3)
 
Anticipated Total Cost
Cost to Date
 
 
Property and Location
6/30/2015
 
Southpoint Manassas - DC12
   Manassas, Virginia
 
Other
150,000

100%
$
22,700

$
14,375

Q3 15
Q3 15
 
Southpoint Manassas - DC14
   Manassas, Virginia
 
Other
150,000

100%
22,700

11,707

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

0%
54,352

37,784

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

0%
41,500

27,684

2Q 15
2Q 16
 
7880 Milestone Parkway
Hanover, Maryland
 
Arundel Preserve
119,980

74%
31,535

30,091

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

100%
46,525

8,421

3Q 17
3Q 17
 
Total Under Construction
 
 
1,012,474

62%
$
219,312

$
130,062

 
 

(1)
Includes properties under active construction and properties that we were contractually committed to construct as of June 30, 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.



23

Corporate Office Properties Trust
Summary of Redevelopment Projects as of 6/30/15
(dollars in thousands) 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Park/Submarket
Total Rentable Square Feet
Percentage Leased as of
as of 6/30/15 (1)
Actual or Anticipated Shell Completion Date
 Anticipated Operational Date (2)
 
 
Historical Basis, Net
Incremental Redevelopment Cost
Anticipated Total Cost
 Cost to Date
Cost to Date Placed in Service
 
 
Property and Location
 
6/30/2015
731 Arbor Way (Hillcrest III)
Blue Bell, Pennsylvania (3)
 
Greater Philadelphia
140,765

100%
$
2,850

$
23,474

$
26,324

$
23,136

$
17,868

1Q 15
3Q 15
44417 Pecan Court
California, Maryland
 
St. Mary's County
27,122

0%
1,393

3,953

5,346

2,770

1,393

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

0%
2,709

8,760

11,469

7,654

2,709

1Q 15
1Q 16
7134 Columbia Gateway Drive
Columbia, Maryland
 
Howard Co. Perimeter
21,931

0%
2,392

2,321

4,713

2,468

2,392

4Q15
2Q16
1201 Winterson Rd (AS 13)
Linthicum, Maryland
 
Airport Square
67,450

0%
3,158

12,893

16,051

4,432

3,158

4Q 15
4Q 16
921 Elkridge Landing Rd (AS 5)
Linthicum, Maryland
 
Airport Square
TBD

0%
3,659

TBD

TBD

3,797

3,659

TBD
TBD
Total Under Redevelopment
309,268

46%
$
16,161

$
51,401

$
63,903

$
44,257

$
31,179

 
 
 
(1) Cost includes construction, leasing costs and allocated portion of shared infrastructure.
(2) Anticipated operational date is the estimated date when leases have commenced on 100% of a property’s space or one year from the cessation of major construction activities.
(3) Although classified as under redevelopment, 110,670 square feet were operational as of 6/30/15; NOI for this property was $658,000 and cash NOI was ($23,000) for the three months ended 6/30/15.




24

Corporate Office Properties Trust
Summary of Land Owned/Controlled as of 6/30/15 (1)
Location
Acres
 
Estimated Developable Square Feet (in thousands)
 
Costs to Date (2)
Land Owned/Controlled for Future Development
 
 
 
 
 
Baltimore/Washington Corridor
 

 
 

 
 
National Business Park
241

 
2,101

 
 
Arundel Preserve
90

 
1,020

 
 
Columbia Gateway
27

 
590

 
 
M Square
49

 
525

 
 
Airport Square
4

 
84

 
 
Subtotal
411

 
4,320

 
 
Northern Virginia
69

 
1,839

 
 
San Antonio, Texas
69

 
1,033

 
 
Huntsville, Alabama (3)
432

 
4,103

 
 
St. Mary’s & King George Counties
44

 
109

 
 
Greater Baltimore
68

 
1,510

 
 
Other Maryland
107

 
1,000

 
 
Greater Philadelphia, Pennsylvania
41

 
713

 
 
Total land owned/controlled for future development
1,241

 
14,627

 
$
287,488

 
 
 
 
 
 
Other land owned/controlled
209

 
3,118

 
41,688

 
 
 
 
 
 
Land owned/controlled
1,450

 
17,745

 
$
329,176

 
 
 
 
 
 
(1)
This land inventory schedule excludes all properties listed as construction or redevelopment as detailed on pages 23 and 24, and includes properties under ground lease to us.
(2)
Represents total costs to date included in “projects in development or held for future development, including associated land costs,” as reported on page 22 (in thousands).
(3)
Includes land owned under a long-term master lease agreement to LW Redstone Company, a consolidated joint venture (see page 30). As this land is developed in the future, the joint venture will execute site-specific leases under the master lease agreement. Rental payments will commence under the site-specific leases as tenant leases commence at the respective properties. The costs incurred on this land totaled $14.5 million as of 6/30/15.

25


Corporate Office Properties Trust
Quarterly Equity Analysis
(dollars, shares and units in thousands, except per share amounts)
SHAREHOLDER CLASSIFICATION
Common Shares
 
Common Units
 
As if Converted
Preferred
Shares/Units
 
Total
 
Diluted
Ownership % of Total
As of June 30, 2015:
Insiders
601

 
309

 
—

 
910

 
0.92
%
Non-insiders
93,929

 
3,371

 
610

 
97,910

 
99.08
%
Total
94,530

 
3,680

 
610

 
98,820

 
100.00
%
COMMON EQUITY - End of Quarter
6/30/15
 
3/31/15
 
12/31/14
 
9/30/14
 
6/30/14
Unrestricted Common Shares
94,133

 
94,097

 
92,865

 
87,306

 
87,256

Restricted Common Shares
397

 
439

 
390

 
406

 
412

Common Shares
94,530

 
94,536

 
93,255

 
87,712

 
87,668

Common Units
3,680

 
3,680

 
3,838

 
3,860

 
3,899

Total
98,210

 
98,216

 
97,093

 
91,572

 
91,567

End of Quarter Common Share Price
$
23.54

 
$
29.38

 
$
28.37

 
$
25.72

 
$
27.81

Market Value of Common Shares/Units
$
2,311,863

 
$
2,885,586

 
$
2,754,528

 
$
2,355,232

 
$
2,546,478

PREFERRED EQUITY - End of Quarter
 

 
 

 
 

 
 

 
 

Nonconvertible Preferred Equity - liquidation preference
 

 
 

 
 

 
 

 
 

Redeemable Series L Shares Outstanding - 7.375%
$
172,500

 
$
172,500

 
$
172,500

 
$
172,500

 
$
172,500

Convertible Preferred Equity - liquidation preference
 

 
 

 
 

 
 

 
 

Convertible Series I Units - 7.5% (1)
8,800

 
8,800

 
8,800

 
8,800

 
8,800

Convertible Series K Shares - 5.6% (2)
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

 
$
207,883

 
$
207,883

CAPITALIZATION
 

 
 

 
 

 
 

 
 

Liquidation Preference of Preferred Shares/Units
$
207,883

 
$
207,883

 
$
207,883

 
$
207,883

 
$
207,883

Market Value of Common Shares/Units
2,311,863

 
2,885,586

 
2,754,528

 
2,355,232

 
2,546,478

Total Equity Market Capitalization
$
2,519,746

 
$
3,093,469

 
$
2,962,411

 
$
2,563,115

 
$
2,754,361

(1) 352 units outstanding with a liquidation preference of $25 per unit, and convertible into 176 common units.
(2) 532 shares outstanding with a liquidation preference of $50 per share, and convertible into 434 shares.

26

Corporate Office Properties Trust
Debt Analysis as of June 30, 2015
(dollars in thousands)
 
Stated Rate
 
GAAP 
Effective Rate
 
Weighted Average Maturity (in Years)
 
Maximum Availability
 
Outstanding Balance
 
Average Stated Interest Rates for Three Months Ended 6/30/15
 
 
 
 
Debt Outstanding
 
 
 
 
 
 
 
 
 

 
 
 
Fixed rate
 
 
 
 
 
 
 
 
 

 
 
 
Secured debt (1)
6.16%
 
6.15%
 
2.6
 
 
 
$
384,227

 
6.2%
 
Senior Unsecured Notes
4.32%
 
4.47%
 
8.1
 
 
 
1,187,928

 
4.1%
 
Other Unsecured Debt
0.00%
 
6.50%
 
10.8
 
 
 
1,558

 
0.0%
 
Total fixed rate debt (1)
4.76%
 
4.88%
 
6.8
 
 
 
$
1,573,713

 
4.7%
 
Variable rate
 
 
 
 
 
 
 
 
 

 
 
 
Secured debt
2.43%
 
2.43%
 
0.3
 


 
$
36,457

 
2.4%
 
Unsecured Revolving Credit Facility
1.37%
 
1.37%
 
3.9
 
$
800,000

 
—

 
1.4%
 
Unsecured Term Loans
1.77%
 
1.77%
 
3.9
 


 
520,000

 
1.8%
 
Total variable rate debt
1.81%
 
1.81%
 
3.6
 


 
$
556,457

 
2.4%
(2)(3)
Total consolidated debt outstanding
3.99%
 
4.08%
 
5.9
 
 
 
$
2,130,170

 
3.8%
(2)(3)
 
 
 
 
 
 
 
 
 
 
 
 
 
Variable Rate Loans Subject to Interest Rate Swaps (2)
 
 
 
 
 
 
 
 
$
436,457

 
0.7%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
% of Fixed Rate Loans (2)
 
 
 
 
 
 
 
 
94.4
%
 
 
 
% of Variable Rate Loans (2)
 
 
 
 
 
 
 
 
5.6
%
 
 
 
 
 
 
 
 
 
 
 
 
100.0
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Recourse debt
 
 
 
 
 
 
 
 
$
1,763,530

 
 
 
Nonrecourse debt
 
 
 
 
 
 
 
 
366,640

 
 
 
Total consolidated debt outstanding
 
 
 
 
 
 
 
 
$
2,130,170

 
 
 
 
(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.



27

Corporate Office Properties Trust
Debt Analysis  (continued)
(dollars in thousands)
 
 
 
 
 
June 30, 2015
 
 
Secured debt
$
420,684

 
 
Unsecured debt
1,709,486

 
 
Debt in default to be extinguished via conveyance of properties
(150,000
)
 
 
Numerator for debt to adjusted book ratio
$
1,980,170

 
 
 
 
 
 
Unencumbered adjusted book
$
4,322,917

 
 
Encumbered adjusted book
432,726

 
 
Total adjusted book (1)
$
4,755,643

 
 
 
 
 
 
# of Operating Office Properties (1)
 
 
 
Unencumbered
162

 
 
Encumbered
17

 
 
Total (1)
179

 
 
 
 
 
 
Square Feet of Office Properties (in thousands) (1)
 
 
 
Unencumbered
15,963

 
 
Encumbered
2,024

 
 
Total (1)
17,987

 
 
 
 
 
 
 
Three Months Ended 6/30/15
 
 
Unencumbered NOI from real estate operations
$
70,038

 
 
Encumbered NOI from real estate operations
10,907

 
 
NOI from properties to be conveyed to extinguish debt in default
843

 
 
Total NOI from real estate operations
$
81,788

 
 
 
 
 
 
Unencumbered adjusted EBITDA
$
62,914

 
 
Encumbered adjusted EBITDA (1)
10,906

 
 
Total adjusted EBITDA (1)
$
73,820

 
 
 
 
 
 
Debt ratios (coverage ratios excluding capitalized interest) — All coverage computations include discontinued operations
Three Months Ended 6/30/15
 
 
Adjusted EBITDA debt service coverage ratio
4.2x
 
 
Adjusted EBITDA fixed charge coverage ratio
3.1x
 
 
Adjusted debt to in-place adjusted EBITDA ratio
6.6x
 
 
 
 
 
 
 
As of and for Three Months Ended 6/30/15
Unsecured Senior Notes Covenants
Actual
 
Required
Total Debt / Total Assets
43.8%
 
Less than 60%
Secured Debt / Total Assets
7.7%
 
Less than 40%
Debt Service Coverage
2.8x
 
Greater than 1.5x
Unencumbered Assets / Unsecured Debt
244.9%
 
Greater than 150%
(1)
Except for Unsecured Senior Notes Covenants, amounts exclude the effect of properties serving as collateral for debt which is in default that we expect to extinguish via conveyance of such properties.

28

Corporate Office Properties Trust
Debt Maturity Schedule (1)
(dollars in thousands) 
 
 
 
GAAP
 
 
 
 
 
 
 
 
 
Stated
 
Effective
 
 
 
 
 
 
 
 
 
Rate
 
Rate
 
2015
2016
2017
2018
2019
Thereafter
Total
Unsecured Debt
 
 
 
 
 
 
 
 
 
 

Unsecured Revolving Credit Facility (2)
LIBOR + 1.20%
 
1.37%
 
$
—

$
—

$
—

$
—

$
—

$
—

$
—

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

Due 7/1/25
5.00%
 
5.15%
 
—

—

—

—

—

300,000

300,000

Total Senior Unsecured Notes
 
 
 
 
—

—

—

—

—

1,200,000

1,200,000

 
 
 
 
 
 
 
 
 
 
 
 
Other Unsecured Debt
 
 
 
 
 
 
 
 
 
 
 
2016 maturities (3)
LIBOR + 1.50%
 
1.69%
 
—

100,000

—

—

—

—

100,000

2019 maturities
LIBOR + 2.10%
 
2.28%
 
—

—

—

—

120,000

—

120,000

2020 maturities
LIBOR + 1.40%
 
1.59%
 
—

—

—

—

—

300,000

300,000

2026 maturities
0.00%
 
0.00%
 
100

200

200

200

200

1,261

2,161

Total Other Unsecured Debt
 
 
 
 
100

100,200

200

200

120,200

301,261

522,161

 
 
 
 
 
 
 
 
 
 
 
 
Total Unsecured Debt
 
 
 
 
$
100

$
100,200

$
200

$
200

$
120,200

$
1,501,261

$
1,722,161

Secured Debt
 
 
 
 
 
 
 
 
 
 
 
Fixed Rate Secured Debt (1)
 
 
 
 
 
 
 
 
 
 
 
 2016 maturities
7.22%
 
7.21%
 
$
2,102

$
169,343

$
—

$
—

$
—

$
—

$
171,445

 2017 maturities
5.45%
 
5.85%
 
96

200

4,302

—

—

—

4,598

 Thereafter
4.40%
 
4.37%
 
796

1,656

1,745

1,836

1,894

50,228

58,155

Total Fixed Rate Secured Debt
 
 
 
 
2,994

171,199

6,047

1,836

1,894

50,228

234,198

Variable Rate Secured Debt
LIBOR + 2.25%
 
2.43%
 
36,457

—

—

—

—

—

36,457

Total Secured Debt
 
 
 
 
$
39,451

$
171,199

$
6,047

$
1,836

$
1,894

$
50,228

$
270,655

 
 
 
 
 
 
 
 
 
 
 
 
Total Debt (1)
 
 
 
 
$
39,551

$
271,399

$
6,247

$
2,036

$
122,094

$
1,551,489

$
1,992,816

 
 
 
 
 
 
 
 
 
 
 
 
Fixed Rate Debt
4.67%
 
4.80%
 
$
3,094

$
171,399

$
6,247

$
2,036

$
2,094

$
1,251,489

$
1,436,359

Variable Rate Debt
1.81%
 
1.81%
 
36,457

100,000

—

—

120,000

300,000

556,457

Total Debt
 
 
 
 
$
39,551

$
271,399

$
6,247

$
2,036

$
122,094

$
1,551,489

$
1,992,816

 
 
 
 
 
 
 
 
 
 
 
 
Balloon Payments

 

 
$
36,175

$
266,062

$
4,110

$
—

$
120,000

$
1,543,551

$
1,969,898

Scheduled Principal Amortization

 

 
3,376

5,337

2,137

2,036

2,094

7,938

22,918

Total Debt
 
 
 
 
$
39,551

$
271,399

$
6,247

$
2,036

$
122,094

$
1,551,489

$
1,992,816

 
 
 
 
 
 
 
 
Net discount
 
(12,646
)
 
 
 
 
 
 
 
 
Numerator for debt to adjusted book
$
1,980,170

 
 
 
 
 
 
 
 
Debt in default to be extinguished (1)
150,000

 
 
 
 
 
 
 
 
Consolidated debt
$
2,130,170

(1)
Maturities exclude $150.0 million nonrecourse mortgage that we expect to extinguish by conveying the collateral to the lender.
(2)
Matures in May 2019, and may be extended by two six-month periods at our option, subject to certain conditions.
(3)
Matures in March 2016, and may be extended by three six-month periods at our option, subject to certain conditions.


29

Corporate Office Properties Trust
Consolidated Joint Ventures as of 6/30/15
(dollars and square feet in thousands) 
Operating Properties
Operational
Square Feet
Occupancy %
Leased %
Total Assets (1)
Venture Level Debt
% COPT Owned
Suburban Maryland:
 

 
 
 

 

 
M Square Associates, LLC (2 properties)
242

100.0%
100.0%
$
55,342

$
36,457

50%
Huntsville, AL:
 
 
 
 
 
 
LW Redstone Company, LLC (5 properties)
495

100.0%
100.0%
85,470

37,244

85%
Total/Average
737

100.0%
100.0%
$
140,812

$
73,701

 
NOI of Operating Properties for the Three Months Ended 6/30/15 (2)
$
2,690

 
 
 

 

 
NOI of Operating Properties for the Six Months Ended 6/30/15 (2)
$
5,296

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

 
 

 

 
M Square Research Park
525

 
$
3,497

$
—

50%
Huntsville, Alabama:
 

 
 

 

 
Redstone Gateway
4,103

 
57,317

—

85%
Total
4,628

 
$
60,814

$
—

 
 
(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.

30


Corporate Office Properties Trust
Supplementary Reconciliations of Non-GAAP Measures
(in thousands)
 
Three Months Ended
 
Six Months Ended
 
6/30/15
 
3/31/15
 
12/31/14
 
9/30/14
 
6/30/14
 
6/30/15
 
6/30/14
Net income
$
17,232

 
$
14,735

 
$
5,937

 
$
24,548

 
$
9,050

 
$
31,967

 
$
14,721

Interest expense on continuing and discontinued operations
21,768

 
20,838

 
23,286

 
24,802

 
23,478

 
42,606

 
44,305

Income tax expense
50

 
55

 
53

 
101

 
92

 
105

 
156

Depreciation of furniture, fixtures and equipment
527

 
492

 
513

 
543

 
843

 
1,019

 
1,348

Real estate-related depreciation and amortization
33,786

 
31,599

 
31,358

 
30,237

 
30,895

 
65,385

 
74,491

Impairment losses
1,239

 
233

 
48

 
42

 
1,328

 
1,472

 
1,329

(Gain) loss on early extinguishment of debt on continuing and discont. operations
(315
)
 
3

 
9,106

 
176

 
363

 
(312
)
 
386

Gain on sales of operating properties
—

 
—

 
2

 
(5,123
)
 
—

 
—

 
4

Gain on sales of non-operational properties
1

 
(3,986
)
 
(43
)
 
(5,535
)
 
—

 
(3,985
)
 
—

Net loss (gain) on investments in unconsolidated entities included in interest and other income
(52
)
 
75

 
(74
)
 
63

 
282

 
23

 
302

Operating property acquisition costs
361

 
1,046

 
—

 
—

 
—

 
1,407

 
—

EBITDA from properties to be conveyed to extinguish debt in default
(843
)
 
90

 
(828
)
 
(732
)
 
(531
)
 
(753
)
 
(531
)
Demolition costs on redevelopment properties
66

 
175

 
—

 
—

 
—

 
241

 
—

Executive transition costs
—

 
—

 
1,056

 
—

 
—

 
—

 
—

Adjusted EBITDA
$
73,820

 
$
65,355

 
$
70,414

 
$
69,122

 
$
65,800

 
$
139,175

 
$
136,511

Add back:
 

 
 

 
 

 
 

 
 

 
 

 
 

General, administrative and leasing expenses on continuing and discontinued operations
7,534

 
7,891

 
8,912

 
7,211

 
7,528

 
15,425

 
15,671

Business development expenses and land carry costs on continuing and discontinued operations, excluding operating property acquisition costs and demolition costs on redevelopment properties
2,196

 
1,569

 
1,466

 
1,430

 
1,351

 
3,765

 
2,677

Depreciation of FF&E
(527
)
 
(492
)
 
(513
)
 
(543
)
 
(843
)
 
(1,019
)
 
(1,348
)
Income from construction contracts and other service operations
(879
)
 
(826
)
 
(1,653
)
 
(1,146
)
 
(725
)
 
(1,705
)
 
(3,891
)
Interest and other income, excluding net loss/gain on investments in unconsolidated entities
(1,190
)
 
(1,358
)
 
(1,074
)
 
(1,254
)
 
(1,581
)
 
(2,548
)
 
(2,886
)
Equity in (income) loss of unconsolidated entities
(9
)
 
(25
)
 
(23
)
 
(193
)
 
47

 
(34
)
 
(13
)
NOI from properties to be conveyed to extinguish debt in default
843

 
(90
)
 
828

 
732

 
531

 
753

 
531

Executive transition costs
—

 
—

 
(1,056
)
 
—

 
—

 
—

 
—

NOI from real estate operations
$
81,788

 
$
72,024

 
$
77,301

 
$
75,359

 
$
72,108

 
$
153,812

 
$
147,252

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Adjusted EBITDA
$
73,820

 
$
65,355

 
$
70,414

 
$
69,122

 
$
65,800

 
 
 
 
Proforma NOI adjustments from properties in quarter of acquisition (disposition)
253

 
737

 
—

 
(106
)
 
—

 
 
 
 
In-place adjusted EBITDA
$
74,073

 
$
66,092

 
$
70,414

 
$
69,016

 
$
65,800

 


 


 
 
 
 
 
 
 
 
 
 
 
 
 
 

31

Corporate Office Properties Trust
Supplementary Reconciliations of Non-GAAP Measures (continued)
(dollars in thousands)
 
Three Months Ended
 
Six Months Ended
 
6/30/15
 
3/31/15
 
12/31/14
 
9/30/14
 
6/30/14
 
6/30/15
 
6/30/14
Discontinued Operations
 

 
 

 
 

 
 

 
 

 
 

 
 

Revenues from real estate operations
$
4

 
$
—

 
$
(2
)
 
$
(36
)
 
$
5

 
$
4

 
$
24

Property operating expenses
11

 
(5
)
 
24

 
175

 
(84
)
 
6

 
(64
)
Gain (loss) on early extinguishment of debt
380

 
—

 
—

 
—

 
(93
)
 
380

 
(116
)
Impairment (losses) recoveries
(1
)
 
(233
)
 
—

 
24

 
(26
)
 
(234
)
 
(27
)
Gain on sales of depreciated real estate properties
—

 
—

 
—

 
28

 
—

 
—

 
(4
)
Discontinued operations
$
394

 
$
(238
)
 
$
22

 
$
191

 
$
(198
)
 
$
156

 
$
(187
)
GAAP revenues from real estate operations from continuing operations
$
128,191

 
$
122,710

 
$
120,613

 
$
118,276

 
$
115,959

 
$
250,901

 
$
240,836

Revenues from discontinued operations
4

 
—

 
(2
)
 
(36
)
 
5

 
4

 
24

Real estate revenues
$
128,195

 
$
122,710

 
$
120,611

 
$
118,240

 
$
115,964

 
$
250,905

 
$
240,860

GAAP property operating expenses from continuing operations
$
46,418

 
$
50,681

 
$
43,334

 
$
43,056

 
$
43,772

 
$
97,099

 
$
93,544

Property operating expenses from discontinued operations
(11
)
 
5

 
(24
)
 
(175
)
 
84

 
(6
)
 
64

Real estate property operating expenses
$
46,407

 
$
50,686

 
$
43,310

 
$
42,881

 
$
43,856

 
$
97,093

 
$
93,608

Gain on sales of real estate, net, per statements of operations
$
(1
)
 
$
3,986

 
$
41

 
$
10,630

 
$
—

 
$
3,985

 
$
—

Gain on sales of real estate from discontinued operations
—

 
—

 
—

 
28

 
—

 
—

 
(4
)
Gain on sales of real estate from continuing and discont. operations
(1
)
 
3,986

 
41

 
10,658

 
—

 
3,985

 
(4
)
Gain on sales of non-operating properties
1

 
(3,986
)
 
(43
)
 
(5,535
)
 
—

 
(3,985
)
 
—

Gain on sales of operating properties
$
—

 
$
—

 
$
(2
)
 
$
5,123

 
$
—

 
$
—

 
$
(4
)
Impairment losses, per statements of operations
$
1,238

 
$
—

 
$
48

 
$
66

 
$
1,302

 
$
1,238

 
$
1,302

Impairment losses (recoveries) on discontinued operations
1

 
233

 
—

 
(24
)
 
26

 
234

 
27

Total impairment losses
$
1,239

 
$
233

 
$
48

 
$
42

 
$
1,328

 
$
1,472

 
$
1,329

Impairment (losses) recoveries on previously depreciated operating properties
(1,239
)
 
(233
)
 
(48
)
 
7

 
(1,328
)
 
(1,472
)
 
(1,329
)
Impairment losses on non-operating properties
$
—

 
$
—

 
$
—

 
$
49

 
$
—

 
$
—

 
$
—


32

Corporate Office Properties Trust
Supplementary Reconciliations of Non-GAAP Measures (continued)
(dollars in thousands)
 
Three Months Ended
 
Six Months Ended
 
6/30/15
 
3/31/15
 
12/31/14
 
9/30/14
 
6/30/14
 
6/30/15
 
6/30/14
Total interest expense
$
21,768

 
$
20,838

 
$
23,286

 
$
24,802

 
$
23,478

 
$
42,606

 
$
44,305

Less: Amortization of deferred financing costs
(1,146
)
 
(990
)
 
(1,020
)
 
(1,357
)
 
(1,122
)
 
(2,136
)
 
(2,289
)
Less: Amortization of net debt discounts and prem., net of amounts capitalized
(264
)
 
(264
)
 
(261
)
 
(259
)
 
(229
)
 
(528
)
 
(400
)
Less: Interest exp. on debt in default to be exting. via conveyance of properties
(4,261
)
 
(4,182
)
 
(4,320
)
 
(4,231
)
 
(4,133
)
 
(8,443
)
 
(4,133
)
Denominator for interest coverage
16,097

 
15,402

 
17,685

 
18,955

 
17,994

 
31,499

 
37,483

Scheduled principal amortization
1,670

 
1,649

 
1,603

 
1,477

 
1,582

 
3,319

 
3,437

Denominator for debt service coverage
17,767

 
17,051

 
19,288

 
20,432

 
19,576

 
34,818

 
40,920

Capitalized interest
1,950

 
2,132

 
1,740

 
1,314

 
1,422

 
4,082

 
3,011

Preferred share dividends - redeemable non-convertible
3,553

 
3,552

 
3,552

 
3,553

 
4,344

 
7,105

 
8,834

Preferred unit distributions
165

 
165

 
165

 
165

 
165

 
330

 
330

Denominator for fixed charge coverage
$
23,435

 
$
22,900

 
$
24,745

 
$
25,464

 
$
25,507

 
$
46,335

 
$
53,095

Preferred share dividends
$
3,553

 
$
3,552

 
$
3,552

 
$
3,553

 
$
4,344

 
$
7,105

 
$
8,834

Preferred unit distributions
165

 
165

 
165

 
165

 
165

 
330

 
330

Common share dividends
26,002

 
25,998

 
25,638

 
24,112

 
24,103

 
52,000

 
48,194

Common unit distributions
1,012

 
1,012

 
1,055

 
1,062

 
1,072

 
2,024

 
2,153

Total dividends/distributions
$
30,732

 
$
30,727

 
$
30,410

 
$
28,892

 
$
29,684

 
$
61,459

 
$
59,511

Common share dividends
$
26,002

 
$
25,998

 
$
25,638

 
$
24,112

 
$
24,103

 
$
52,000

 
$
48,194

Common unit distributions
1,012

 
1,012

 
1,055

 
1,062

 
1,072

 
2,024

 
2,153

Dividends and distributions for payout ratios
$
27,014

 
$
27,010

 
$
26,693

 
$
25,174

 
$
25,175

 
$
54,024

 
$
50,347

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total Assets
$
3,910,921

 
$
3,777,155

 
$
3,670,257

 
$
3,680,188

 
$
3,709,500

 
$
3,910,921

 
$
3,709,500

Accumulated depreciation
723,470

 
724,539

 
703,083

 
679,598

 
655,214

 
723,470

 
655,214

Accumulated depreciation included in assets held for sale
24,930

 
—

 
—

 
—

 
3,121

 
24,930

 
3,121

Accumulated amort. of real estate intangibles and deferred leasing costs
211,522

 
219,437

 
214,611

 
207,864

 
201,627

 
211,522

 
201,627

Accumulated amortization of real estate intangibles and deferred leasing costs included in assets held for sale
15,271

 
—

 
—

 
—

 
4,277

 
15,271

 
4,277

Less: Adj. book assoc. with properties to be conveyed to exting. debt in default
(130,471
)
 
(131,623
)
 
(131,118
)
 
(130,346
)
 
(130,921
)
 
(130,471
)
 
(130,921
)
Adjusted book
$
4,755,643

 
$
4,589,508

 
$
4,456,833

 
$
4,437,304

 
$
4,442,818

 
$
4,755,643

 
$
4,442,818

Debt, net
$
2,130,170

 
$
1,999,622

 
$
1,920,057

 
$
2,049,992

 
$
2,099,343

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


 
 
Numerator for debt to adjusted book ratio
1,980,170

 
1,849,622

 
1,770,057

 
1,899,992

 
1,949,343

 
 
 
 
Less: Cash and cash equivalents
(37,074
)
 
(4,429
)
 
(6,077
)
 
(40,018
)
 
(76,216
)
 
 
 
 
Adjusted debt
$
1,943,096

 
$
1,845,193

 
$
1,763,980

 
$
1,859,974

 
$
1,873,127

 


 



33


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 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.

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, demolition costs on redevelopment properties 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 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 income is the most directly comparable GAAP measure to Basic FFO.


34


Corporate Office Properties Trust
Definitions

Cash net operating income (“Cash NOI”) 
Defined as NOI from real estate operations adjusted to eliminate the effects of noncash rental revenues and property operating expenses (comprised of straight-line rental adjustments, which includes the amortization of tenant incentives, and amortization of acquisition intangibles included in FFO and NOI).  Under GAAP, rental revenue is recognized evenly over the term of tenant leases.  Many leases provide for contractual rent increases and the effect of accounting under GAAP for such leases is to accelerate the recognition of lease revenue.  Since some leases provide for periods under the lease in which rental concessions are provided to tenants, the effect of accounting under GAAP is to allocate rental revenue to such periods.  Also under GAAP, when a property is acquired, we allocate the acquisition to certain intangible components (including above- and below-market leases and above- or below-market cost arrangements), which are then amortized into FFO and NOI over their estimated lives.  We believe that Cash NOI is an important supplemental measure of operating performance for a REIT’s operating real estate because it makes adjustments to NOI for the above stated items that are not associated with cash to us.  As is the case with NOI, the measure is useful in our opinion in evaluating and comparing the performance of geographic segments, same-office property groupings and individual properties.  We believe that net income is the most directly comparable GAAP measure to Cash NOI.

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.
 
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; demolition costs on redevelopment properties; 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

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Corporate Office Properties Trust
Definitions

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 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 computed using GAAP, excluding gains on sales of, and impairment losses on, previously depreciated operating properties and real estate-related depreciation and amortization.  When multiple properties consisting of both operating and non-operating properties exist on a single tax parcel, we classify all of the gains on sales of, and impairment losses on, the tax parcel as all being for previously depreciated operating properties when most of the value of the parcel is associated with operating properties on the parcel. We believe that we use the National Association of Real Estate Investment Trust’s (“NAREIT”) definition of FFO, although others may interpret the definition differently and, accordingly, our presentation of FFO may differ from those of other REITs.  We believe that FFO is useful to management and investors as a supplemental measure of operating performance because, by excluding gains related to sales of, and impairment losses on, previously depreciated operating properties and excluding real estate-related depreciation and amortization, FFO can help one compare our operating performance between periods.  We believe that net income is the most directly comparable GAAP measure to FFO.

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

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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 is the most directly comparable GAAP measure to in-place adjusted EBITDA.
 
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 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.

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.


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Corporate Office Properties Trust
Definitions

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.

Same office property cash NOI 
Defined as cash NOI attributable to same office properties with additional adjustments to eliminate the effects of: (1) lease termination fees paid by tenants to terminate their lease obligations prior to the end of the agreed upon lease terms; and (2) rental revenue recognized under GAAP resulting from landlord assets funded by tenants.  Lease termination fees and tenant-funded landlord improvements are often recognized as revenue in large one-time lump sum amounts.  We believe that cash NOI attributable to same office properties with additional adjustments to eliminate the effects of these amounts is a useful supplemental measure of operating performance in evaluating same-office property groupings.  We believe that net income is the most directly comparable GAAP measure to Same office property cash NOI. 

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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 leases for occupied space.
 
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, 2014, 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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