EXHIBIT 99.1
 
 
Earnings Release & Supplemental Information — Unaudited
 
September 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

 
Office Property Construction and Redevelopment Placed in Service
25

 
 

 
Summary of Land Owned/Controlled
26

FINANCIAL STATEMENTS:
Section II

 
 
 
Quarterly Consolidated Balance Sheets
5

 
CAPITALIZATION:
Section V

Consolidated Statements of Operations
6-7

 
Quarterly Equity Analysis
27

Consolidated Statements of FFO
8-9

 
Debt Analysis
28-29

Consolidated Reconciliations of AFFO
10

 
Debt Maturity Schedule
30

 
 

 
Consolidated Joint Ventures
31

PORTFOLIO INFORMATION:
Section III

 
 
 
Consolidated Office Properties by Region
11

 
RECONCILIATIONS & DEFINITIONS:
Section VI

NOI from Real Estate Operations and Occupancy by Property Grouping
12

 
Supplementary Reconciliations of Non-GAAP Measures
32-34

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

 
Definitions
35-40

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 THIRD QUARTER 2015 RESULTS

COLUMBIA, MD October 29, 2015 - Corporate Office Properties Trust (“COPT” or the “Company”) (NYSE: OFC) announced financial and operating results for the third quarter ended September 30, 2015.

“Since our last call, our continued execution on allocating capital to grow our Strategic Niche and upgrade our Regional Office portfolio passed important milestones,” stated Roger A. Waesche, Jr., COPT’s President & Chief Executive Officer. “We placed 447,000 square feet of developments that are 93.5% leased into service, bringing our year-to-date total to 1.1 million square feet and 97% leased. We sold One Dulles Tower for $84 million earlier this week, increasing total dispositions this year to $130 million, and our portfolio is positioned to achieve 3% same office growth in 2016.”

Results:
Diluted funds from operations per share (“FFOPS”), as adjusted for comparability, was $0.52 for the quarter ended September 30, 2015 as compared to $0.48 reported for the third quarter of 2014.

Per NAREIT’s definition, FFOPS for the third quarter of 2015 was $1.32 versus $0.49 reported in the third quarter of 2014.

Diluted earnings per share (“EPS”) was $0.91 for the quarter ended September 30, 2015 as compared to $0.22 in the third quarter of 2014. Please refer to the reconciliation tables that appear later in this press release.

Operating Performance:
Portfolio Summary - At September 30, 2015, the Company’s operating portfolio of 183 office properties totaled 18.8 million square feet that were 91.6% occupied and 92.3% leased.

Same Office Performance - The Company’s same office portfolio for the quarter ended September 30, 2015 consisted of 147 properties encompassing 14.6 million square feet, or 83% of the core portfolio. The Company’s same office portfolio occupancy was 90.3% occupied and, at September 30, 2015, was 91.2% leased. For the third quarter ended September 30, 2015, the Company’s same office property cash NOI, which excludes gross lease termination fees and rent from tenant-funded landlord assets, increased 1.4% as compared to the third quarter of 2014.

Office Leasing - COPT completed a total of 751,000 square feet of leasing in the quarter ended September 30, 2015 and achieved a 59% renewal rate on the 561,000 square feet of leases that expired in the quarter.

In the quarter, lease terms on renewals averaged 4.8 years; for development and other new leases they averaged 10.0 and 5.4 years, respectively.

i


For the quarter, total rent on renewed space increased 2.1% on a GAAP basis; on a cash basis, renewal rates declined 4.1% compared to the expiring rents.

Investment Activity:
Development/Construction - For the nine months ended September 30, 2015, the Company placed in service 1.1 million square feet of developed and redeveloped properties that were 97% leased. At September 30, 2015, the Company had properties totaling 1.0 million square feet under construction for a total projected cost of $233.5 million, of which $105.6 million had been invested. These projects were 62% pre-leased at September 30, 2015. As of the same date, COPT had properties totaling 156,000 square feet under redevelopment representing a total projected cost of $38.7 million, of which $19.0 million had been invested.

Acquisitions - During the quarter, the Company acquired 100 Light Street, a 37-story office building containing 548,000 rentable square feet and 30 Light Street, the adjacent 560-space structured parking garage that contains 10,000 square feet of retail space, in downtown Baltimore for $121.2 million.

Dispositions - During the quarter, the Company completed the following:
•
Disposed of 1550 Westbranch Drive, a 152,000 rentable square foot building in McLean, Virginia, for $27.8 million. The building is 100% leased to The MITRE Corporation until October 2016.
•
Announced that the ownership of two operating properties, 15000 & 15010 Conference Center Drive in Northern Virginia, were transferred to the lender. As a result of this transfer, COPT removed $150 million of non-recourse secured indebtedness from its balance sheet. The Company also recognized an $86 million non-cash accounting gain on the extinguishment of debt in the third quarter.

Balance Sheet and Capital Transactions:
As of September 30, 2015, the Company’s debt to adjusted book ratio was 43.5%, its adjusted debt to in-place adjusted EBITDA ratio was 6.7x and its adjusted EBITDA fixed charge coverage ratio was 2.9x. The Company’s weighted average interest rate was 4.1% for the quarter ended September 30, 2015 and 90% of the Company’s debt was subject to fixed interest rates, including the effect of interest rate swaps.


ii

2015 FFO Guidance:
Management is narrowing its previously issued guidance ranges for full year and fourth quarter FFOPS, as adjusted for comparability, to $2.00-$2.02 and $0.51-$0.53, respectively. Reconciliations of projected diluted EPS to projected FFOPS are provided as follows:
 
 
Three Months Ending
 
Year Ending
 
 
December 31, 2015
 
December 31, 2015
 
 
Low
 
High
 
Low
 
High
EPS
 
$
0.52

 
$
0.54

 
$
1.67

 
$
1.69

Gains on sales of operating properties
 
(0.42
)
 
(0.42
)
 
(0.42
)
 
(0.42
)
Real estate depreciation and amortization
 
0.40

 
0.40

 
1.46

 
1.46

Impairment losses on previously depreciated properties
 
—

 
—

 
0.03

 
0.03

FFOPS, NAREIT definition
 
0.50

 
0.52

 
2.74

 
2.76

Operating property acquisition costs
 
—

 
—

 
0.04

 
0.04

Demolition costs on redevelopment properties
 
0.01

 
0.01

 
0.03

 
0.03

NOI from properties transferred (a)
 
—

 
—

 
(0.01
)
 
(0.01
)
Interest expense on loan secured by the properties transferred (a)
 
—

 
—

 
0.11

 
0.11

Gains on sales of undepreciated properties
 
—

 
—

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

 
—

 
(0.87
)
 
(0.87
)
FFOPS, as adjusted for comparability
 
$
0.51

 
$
0.53

 
$
2.00

 
$
2.02

 
 
 
 
 
 
 
 
 

a.
In the third quarter, the Company transferred two operating properties in satisfaction of non-recourse secured indebtedness. These amounts represent the Company's net operating income generated by these assets and interest expense (accrued at the default rate) in 2015 through the August 28, 2015 transfer date.
b.
Represents debt and accrued interest in excess of the book value of the assets conveyed.

Associated Supplemental Presentation:
The Company has posted a slide presentation to accompany management’s prepared remarks for its third 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.

3Q 2015 Conference Call Information:
Conference Call Date:        Thursday, October 29, 2015

Time:                  12:00 p.m. Eastern Time

Telephone Number: (within the U.S.)     888-679-8034

Telephone Number:    (outside the U.S.)    617-213-4847

Passcode:                  82881355

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=PBQFR9DVG


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.

Replay Information
A replay of this call will be available beginning Thursday, October 29 at 4:00 p.m. Eastern Time through Thursday, November 12 at midnight Eastern Time. To access the replay within the United States, please call 888-286-8010 and use passcode 93348081. To access the replay outside the United States, please call 617-801-6888 and use passcode 93348081.

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

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

Company Information
COPT is an office REIT that focuses primarily on serving the specialized requirements of U.S. Government agencies and defense contractors, most of which are engaged in defense information technology and national security-related activities. As of September 30, 2015, COPT derived 71% of its annualized revenue from its strategic tenant niche properties and 23% from its regional office properties. The Company generally acquires, develops, manages and leases office and data center properties concentrated in large office parks primarily located near knowledge-based government demand drivers and/or in targeted markets or submarkets in the Greater Washington, DC/Baltimore region. As of September 30, 2015, the Company’s consolidated portfolio consisted of 183 office properties totaling 18.8 million rentable square feet. COPT is an S&P MidCap 400 company.


iv

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

Important factors that may affect these expectations, estimates, and projections include, but are not limited to:
*
general economic and business conditions, which will, among other things, affect office property and data center demand and rents, tenant creditworthiness, interest rates, financing availability and property values;
*
adverse changes in the real estate markets including, among other things, increased competition with other companies;
*
governmental actions and initiatives, including risks associated with the impact of a prolonged government shutdown or budgetary reductions or impasses, such as a reduction in rental revenues, non-renewal of leases, and/or a curtailment of demand for additional space by the Company's strategic customers;
*
the Company’s ability to borrow on favorable terms;
*
risks of real estate acquisition and development activities, including, among other things, risks that development projects may not be completed on schedule, that tenants may not take occupancy or pay rent or that development or operating costs may be greater than anticipated;
*
risks of investing through joint venture structures, including risks that the Company’s joint venture partners may not fulfill their financial obligations as investors or may take actions that are inconsistent with the Company’s objectives;
*
changes in the Company’s plans for properties or views of market economic conditions or failure to obtain development rights, either of which could result in recognition of significant impairment losses;
*
the Company’s ability to satisfy and operate effectively under Federal income tax rules relating to real estate investment trusts and partnerships;
*
the Company's ability to achieve projected results;
*
the dilutive effects of issuing additional common shares; and
*
environmental requirements.

The Company undertakes no obligation to update or supplement any forward-looking statements. For further information, please refer to the Company’s filings with the Securities and Exchange Commission, particularly the section entitled “Risk Factors” in Item 1A of the Company’s Annual Report on Form 10-K for the year ended December 31, 2014.




v


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


 
For the Three Months Ended September 30,
 
For the Nine Months Ended September 30,
 
2015
 
2014
 
2015
 
2014
Revenues
 

 
 

 
 
 
 
Real estate revenues
$
133,686

 
$
118,276

 
$
384,587

 
$
359,112

Construction contract and other service revenues
17,058

 
34,739

 
97,554

 
80,390

Total revenues
150,744

 
153,015

 
482,141

 
439,502

Expenses
 

 
 

 
 
 
 
Property operating expenses
48,897

 
43,056

 
145,996

 
136,600

Depreciation and amortization associated with real estate operations
38,403

 
30,237

 
103,788

 
104,728

Construction contract and other service expenses
16,132

 
33,593

 
94,923

 
75,353

Impairment losses
2,307

 
66

 
3,545

 
1,368

General and administrative expenses
5,783

 
5,662

 
17,917

 
17,635

Leasing expenses
1,656

 
1,549

 
4,947

 
5,247

Business development expenses and land carry costs
5,573

 
1,430

 
10,986

 
4,107

Total operating expenses
118,751

 
115,593

 
382,102

 
345,038

Operating income
31,993

 
37,422


100,039


94,464

Interest expense
(24,121
)
 
(24,802
)
 
(66,727
)
 
(69,107
)
Interest and other income
692

 
1,191

 
3,217

 
3,775

Gain (loss) on early extinguishment of debt
85,745

 
(176
)
 
85,677

 
(446
)
Income from continuing operations before equity in income of unconsolidated entities and income taxes
94,309

 
13,635

 
122,206

 
28,686

Equity in income of unconsolidated entities
18

 
193

 
52

 
206

Income tax expense
(48
)
 
(101
)
 
(153
)
 
(257
)
Income from continuing operations
94,279

 
13,727

 
122,105

 
28,635

Discontinued operations
—

 
191

 
156

 
4

Income before gain on sales of real estate
94,279

 
13,918

 
122,261

 
28,639

Gain on sales of real estate, net of income taxes
15

 
10,630

 
4,000

 
10,630

Net income
94,294

 
24,548

 
126,261

 
39,269

Net income attributable to noncontrolling interests
 

 
 

 
 
 
 
Common units in the Operating Partnership (“OP”)
(3,357
)
 
(768
)
 
(4,231
)
 
(942
)
Preferred units in the OP
(165
)
 
(165
)
 
(495
)
 
(495
)
Other consolidated entities
(972
)
 
(895
)
 
(2,599
)
 
(2,481
)
Net income attributable to COPT
89,800

 
22,720

 
118,936

 
35,351

Preferred share dividends
(3,552
)
 
(3,553
)
 
(10,657
)
 
(12,387
)
Issuance costs associated with redeemed preferred shares
—

 
—

 
—

 
(1,769
)
Net income attributable to COPT common shareholders
$
86,248

 
$
19,167

 
$
108,279

 
$
21,195

Earnings per share (“EPS”) computation:
 

 
 

 
 
 
 
Numerator for diluted EPS:
 

 
 

 
 
 
 
Net income attributable to common shareholders
$
86,248

 
$
19,167

 
$
108,279

 
$
21,195

Dividends on dilutive convertible preferred shares
372

 
—

 
—

 
—

Common units in the OP
—

 
—

 
4,231

 
—

Amount allocable to share-based compensation awards
(369
)
 
(103
)
 
(475
)
 
(332
)
Numerator for diluted EPS
$
86,251

 
$
19,064

 
$
112,035

 
$
20,863

Denominator:
 

 
 

 
 
 
 
Weighted average common shares - basic
94,153

 
87,290

 
93,830

 
87,196

Dilutive convertible preferred shares
434

 
—

 
—

 
—

Common units in the OP
—

 
—

 
3,697

 
—

Dilutive effect of share-based compensation awards
21

 
195

 
82

 
169

Weighted average common shares - diluted
94,608

 
87,485

 
97,609

 
87,365

Diluted EPS
$
0.91

 
$
0.22

 
$
1.15

 
$
0.24


vi


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

 
For the Three Months Ended September 30,
 
For the Nine Months Ended September 30,
 
2015
 
2014
 
2015
 
2014
Net income
$
94,294

 
$
24,548

 
$
126,261

 
$
39,269

Real estate-related depreciation and amortization
38,403

 
30,237

 
103,788

 
104,728

Impairment losses on previously depreciated operating properties
2,307

 
(7
)
 
3,779

 
1,322

Gain on sales of previously depreciated operating properties
(15
)
 
(5,123
)
 
(15
)
 
(5,119
)
Funds from operations (“FFO”)
134,989

 
49,655

 
233,813

 
140,200

Noncontrolling interests - preferred units in the OP
(165
)
 
(165
)
 
(495
)
 
(495
)
FFO allocable to other noncontrolling interests
(1,027
)
 
(830
)
 
(2,769
)
 
(2,349
)
Preferred share dividends
(3,552
)
 
(3,553
)
 
(10,657
)
 
(12,387
)
Issuance costs associated with redeemed preferred shares
—

 
—

 
—

 
(1,769
)
Basic and diluted FFO allocable to share-based compensation awards
(541
)
 
(191
)
 
(926
)
 
(542
)
Basic FFO available to common share and common unit holders (“Basic FFO”)
129,704

 
44,916

 
218,966

 
122,658

Dividends on dilutive convertible preferred shares
372

 
—

 
—

 
—

Distributions on dilutive preferred units in the OP
165

 
—

 
—

 
—

Diluted FFO available to common share and common unit holders (“Diluted FFO”)
130,241

 
44,916

 
218,966

 
122,658

Operating property acquisition costs
2,695

 
—

 
4,102

 
—

Gain on sales of non-operating properties
—

 
(5,535
)
 
(3,985
)
 
(5,535
)
Impairment losses on other properties
—

 
49

 
—

 
49

(Gain) loss on early extinguishment of debt
(85,745
)
 
176

 
(86,057
)
 
562

Issuance costs associated with redeemed preferred shares
—

 
—

 
—

 
1,769

Add: Negative FFO of properties conveyed to extinguish debt in default (1)
2,766

 
3,806

 
10,456

 
7,435

Demolition costs on redevelopment properties
930

 
—

 
1,171

 
—

Diluted FFO comparability adjustments allocable to share-based compensation awards
334

 
7

 
313

 
(19
)
Dividends and distributions on antidilutive preferred securities (2)
(537
)
 
—

 
—

 
—

Diluted FFO available to common share and common unit holders, as adjusted for comparability
50,684

 
43,419

 
144,966

 
126,919

Straight line rent adjustments
(5,706
)
 
(456
)
 
(10,765
)
 
(1,441
)
Straight line rent adjustments - properties in default conveyed
(19
)
 
(96
)
 
(115
)
 
(95
)
Amortization of intangibles included in net operating income
474

 
206

 
1,063

 
647

Share-based compensation, net of amounts capitalized
1,739

 
1,507

 
4,949

 
4,563

Amortization of deferred financing costs
1,203

 
1,357

 
3,339

 
3,646

Amortization of deferred financing costs - properties in default conveyed
—

 
(306
)
 
—

 
(333
)
Amortization of net debt discounts, net of amounts capitalized
321

 
259

 
849

 
659

Amortization of settled debt hedges
—

 
16

 
—

 
46

Recurring capital expenditures
(12,126
)
 
(16,929
)
 
(29,180
)
 
(41,566
)
Diluted adjusted funds from operations available to common share and common unit holders (“Diluted AFFO”)
$
36,570

 
$
28,977

 
$
115,106

 
$
93,045

Diluted FFO per share
$
1.32

 
$
0.49

 
$
2.24

 
$
1.34

Diluted FFO per share, as adjusted for comparability
$
0.52

 
$
0.48

 
$
1.49

 
$
1.39

Dividends/distributions per common share/unit
$
0.275

 
$
0.275

 
$
0.825

 
$
0.825


(1) Interest expense exceeded net operating income from these properties by the amounts in the statement.
(2) These securities were dilutive for Diluted FFO purposes but antidilutive for Diluted FFO as adjusted for comparability purposes.


vii


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

 
 
September 30,
2015
 
December 31,
2014
Balance Sheet Data
 
 

 
 

Properties, net of accumulated depreciation
 
$
3,347,600

 
$
3,296,914

Total assets
 
3,918,473

 
3,670,257

Debt, net
 
2,121,240

 
1,920,057

Total liabilities
 
2,318,958

 
2,130,956

Redeemable noncontrolling interest
 
19,608

 
18,417

Equity
 
1,579,907

 
1,520,884

Debt to adjusted book
 
43.5
%
 
39.7
%
Debt to total market capitalization
 
48.3
%
 
39.3
%
 
 
 
 
 
Core Portfolio Data (as of period end) (1)
 
 

 
 

Number of operating properties
 
164

 
173

Total net rentable square feet owned (in thousands)
 
17,515

 
16,790

Occupancy %
 
91.3
%
 
90.9
%
Leased %
 
92.1
%
 
92.4
%
 
 
 
 
 
 
For the Three Months Ended September 30,
 
For the Nine Months Ended September 30,
2015
 
2014
 
2015
 
2014
Payout ratios
 

 
 

 
 

 
 

Diluted FFO
21.2
%
 
56.0
%
 
37.0
%
 
61.6
%
Diluted FFO, as adjusted for comparability
53.3
%
 
58.0
%
 
55.9
%
 
59.5
%
Diluted AFFO
73.9
%
 
86.9
%
 
70.4
%
 
81.2
%
Adjusted EBITDA interest coverage ratio
3.9
x
 
3.6
x
 
4.2
x
 
3.6
x
Adjusted EBITDA fixed charge coverage ratio
2.9
x
 
2.7
x
 
3.0
x
 
2.6
x
Adjusted debt to in-place adjusted EBITDA ratio (2)
6.7
x
 
6.7
x
 
N/A

 
N/A

 
 
 
 
 
 
 
 
Reconciliation of denominators for per share measures
 
 

 
 
 
 
Denominator for diluted EPS
94,608

 
87,485

 
97,609

 
87,365

Weighted average common units
3,679

 
3,876

 
—

 
3,915

Dilutive noncontrolling interests - preferred units in the OP
176

 
—

 
—

 
—

Denominator for diluted FFO per share
98,463

 
91,361

 
97,609

 
91,280

Antidilutive preferred securities for dilutive FFO, as adj. for comparability
(610
)
 
—

 
—

 
—

Denominator for diluted FFO per share, as adj. for comparability
97,853

 
91,361

 
97,609

 
91,280

 
 
 
 
 
 
 
 
Reconciliation of FFO to FFO, as adjusted for comparability
 

 
 

 
 

 
 

FFO, per NAREIT
$
134,989

 
$
49,655

 
$
233,813

 
$
140,200

Gain on sales of non-operating properties
—

 
(5,535
)
 
(3,985
)
 
(5,535
)
Impairment losses on non-operating properties, net of associated tax
—

 
49

 
—

 
49

Operating property acquisition costs
2,695

 
—

 
4,102

 
—

(Gain) loss on early extinguishment of debt, continuing and discontinued operations
(85,745
)
 
176

 
(86,057
)
 
562

Issuance costs associated with redeemed preferred shares
—

 
—

 
—

 
1,769

Add: Negative FFO of properties conveyed to extinguish debt in default
2,766

 
3,806

 
10,456

 
7,435

Demolition costs on redevelopment properties
930

 
—

 
1,171

 
—

FFO, as adjusted for comparability
$
55,635

 
$
48,151

 
$
159,500

 
$
144,480


(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 September 30,
 
For the Nine Months Ended September 30,
 
2015
 
2014
 
2015
 
2014
Reconciliation of common share dividends to dividends and distributions for payout ratios
 

 
 

 
 
 
 
Common share dividends
$
26,000

 
$
24,112

 
$
78,000

 
$
72,306

Common unit distributions
1,011

 
1,062

 
3,035

 
3,215

Dividends and distributions on dilutive preferred securities
537

 
—

 
—

 
—

Dividends and distributions for diluted FFO payout ratio
27,548

 
25,174

 
81,035

 
75,521

Dividends and distributions on antidilutive preferred securities (1)
(537
)
 
—

 
—

 
—

Dividends and distributions for other payout ratios
$
27,011

 
$
25,174

 
$
81,035

 
$
75,521

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

 
 

 
 

 
 

Net income
$
94,294

 
$
24,548

 
$
126,261

 
$
39,269

Interest expense on continuing operations
24,121

 
24,802

 
66,727

 
69,107

Income tax expense
48

 
101

 
153

 
257

Real estate-related depreciation and amortization
38,403

 
30,237

 
103,788

 
104,728

Depreciation of furniture, fixtures and equipment
590

 
543

 
1,609

 
1,891

Impairment losses
2,307

 
42

 
3,779

 
1,371

(Gain) loss on early extinguishment of debt on continuing and discontinued operations
(85,745
)
 
176

 
(86,057
)
 
562

Gain on sales of operating properties
(15
)
 
(5,123
)
 
(15
)
 
(5,119
)
Gain on sales of non-operational properties
—

 
(5,535
)
 
(3,985
)
 
(5,535
)
Net loss on investments in unconsolidated entities included in interest and other income
98

 
63

 
121

 
365

Operating property acquisition costs
2,695

 
—

 
4,102

 
—

EBITDA of properties conveyed to extinguish debt in default
(15
)
 
(732
)
 
(768
)
 
(1,263
)
Demolition costs on redevelopment properties
930

 
—

 
1,171

 
—

Adjusted EBITDA
$
77,711

 
$
69,122

 
$
216,886

 
$
205,633

Proforma net operating income adjustment for mid-period property changes
1,309

 
(12
)
 
 
 
 
In-place adjusted EBITDA
$
79,020

 
$
69,110

 

 

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

 
 

 
 

 
 

Interest expense
$
24,121

 
$
24,802

 
$
66,727

 
$
69,107

Less: Amortization of deferred financing costs
(1,203
)
 
(1,357
)
 
(3,339
)
 
(3,646
)
Less: Amortization of net debt discount, net of amounts capitalized
(321
)
 
(259
)
 
(849
)
 
(659
)
Less: Interest expense on debt in default extinguished via conveyance of properties
(2,781
)
 
(4,231
)
 
(11,224
)
 
(8,364
)
Denominator for interest coverage-Adjusted EBITDA
19,816

 
18,955

 
51,315

 
56,438

Scheduled principal amortization
1,692

 
1,477

 
5,011

 
4,914

Capitalized interest
1,559

 
1,314

 
5,641

 
4,325

Preferred share dividends
3,552

 
3,553

 
10,657

 
12,387

Preferred unit distributions
165

 
165

 
495

 
495

Denominator for fixed charge coverage-Adjusted EBITDA
$
26,784

 
$
25,464

 
$
73,119

 
$
78,559

 
 
 
 
 
 
 
 
(1) These securities were dilutive for Diluted FFO purposes but antidilutive for Diluted FFO as adjusted for comparability purposes.
 
 
 
 
 
 
 
 

ix


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

 
For the Three Months Ended September 30,
 
For the Nine Months Ended September 30,
 
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
$
6,374

 
$
11,581

 
$
17,408

 
$
22,412

Building improvements on operating properties
4,223

 
8,119

 
11,969

 
18,458

Leasing costs for operating properties
2,547

 
2,877

 
4,986

 
7,195

Less: Nonrecurring tenant improvements and incentives on operating properties
205

 
(1,454
)
 
(1,045
)
 
(987
)
Less: Nonrecurring building improvements on operating properties
(1,155
)
 
(4,182
)
 
(3,328
)
 
(5,269
)
Less: Nonrecurring leasing costs for operating properties
(68
)
 
(12
)
 
(810
)
 
(243
)
Recurring capital expenditures
$
12,126

 
$
16,929

 
$
29,180

 
$
41,566

 
 
 
 
 
 
 
 
Same office property cash NOI
$
64,603

 
$
63,706

 
$
187,329

 
$
187,098

Straight line rent adjustments
937

 
1,349

 
$
3,269

 
$
1,454

Add: Amortization of deferred market rental revenue
16

 
(15
)
 
70

 
(73
)
Less: Amortization of below-market cost arrangements
(256
)
 
(288
)
 
(751
)
 
(866
)
Add: Lease termination fee, gross
185

 
272

 
1,950

 
877

Add: Cash NOI on tenant-funded landlord assets
390

 
41

 
390

 
4,154

Same office property NOI
$
65,875

 
$
65,065

 
$
192,257

 
$
192,644

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

 
 

Total assets
 
$
3,918,473

 
$
3,670,257

Accumulated depreciation
 
675,747

 
703,083

Accumulated depreciation included in assets held for sale
 
65,872

 
—

Accumulated amortization of real estate intangibles and deferred leasing costs
 
189,571

 
214,611

Accumulated amortization of real estate intangibles and deferred leasing costs included in assets held for sale
 
26,260

 
—

Less: Adjusted book associated with properties conveyed to extinguish debt in default
 
—

 
(131,118
)
Adjusted book
 
$
4,875,923

 
$
4,456,833

 
 
 
 
 
Reconciliation of debt to adjusted debt
 
 
 
 
Debt, net
 
$
2,121,240

 
$
1,920,057

Less: Debt in default extinguished via conveyance of properties
 
—

 
(150,000
)
Numerator for debt to adjusted book ratio
 
2,121,240

 
1,770,057

Less: Cash and cash equivalents
 
(3,840
)
 
(6,077
)
Adjusted debt
 
$
2,117,400

 
$
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 September 30, 2015, COPT derived 71% of its portfolio annualized revenue from its strategic tenant niche properties and 23% from its regional office properties. COPT’s strategic tenant niche properties are those held for long-term investment that are either located near defense installations and other knowledge-based government demand drivers, or otherwise occupied primarily by U.S. Government agencies and their contractors. COPT’s regional office properties are those held for long-term investment predominantly in the Greater Washington, DC/Baltimore region, excluding Strategic Tenant Niche Properties. As of September 30, 2015, COPT’s core portfolio of 164 office properties encompassed 17.5 million square feet and was 92.1% leased. As of the same date, COPT also owned one wholesale data center with a critical load of 19.25 megawatts in operations, of which 17.8 were leased to tenants with further expansion rights of up to a combined 18.9 megawatts.
 
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
 
Manny Korchman
 
212-816-1382
 
emmanuel.korchman@citi.com
Cowen and Company
 
Tom Catherwood
 
646-562-1382
 
tom.catherwood@cowen.com
Credit Suisse
 
Derek vanDijkum
 
212-325-9752
 
derek.vandijkum@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
 
Nine Months Ended
SUMMARY OF RESULTS 
 
9/30/15
 
6/30/15
 
3/31/15
 
12/31/14
 
9/30/14
 
9/30/15
 
9/30/14
Same Office Property NOI
 
$
65,875

 
$
64,523

 
$
61,859

 
$
66,129

 
$
65,065

 
$
192,257

 
$
192,644

NOI from real estate operations
 
$
84,789

 
$
81,788

 
$
72,024

 
$
77,301

 
$
75,359

 
$
238,601

 
$
222,611

Adjusted EBITDA
 
$
77,711

 
$
73,820

 
$
65,355

 
$
70,414

 
$
69,122

 
$
216,886

 
$
205,633

Net income attributable to COPT common shareholders
 
$
86,248

 
$
12,228

 
$
9,803

 
$
1,352

 
$
19,167

 
$
108,279

 
$
21,195

FFO - per NAREIT
 
$
134,989

 
$
52,257

 
$
46,567

 
$
37,345

 
$
49,655

 
$
233,813

 
$
140,200

FFO - as adjusted for comparability
 
$
55,635

 
$
55,789

 
$
48,076

 
$
50,957

 
$
48,151

 
$
159,500

 
$
144,480

Diluted FFO available to common share and common unit holders
 
$
130,241

 
$
47,265

 
$
41,997

 
$
32,638

 
$
44,916

 
$
218,966

 
$
122,658

Diluted FFO available to common share and common unit holders, as adjusted for comparability
 
$
50,684

 
$
50,783

 
$
43,499

 
$
46,191

 
$
43,419

 
$
144,966

 
$
126,919

Diluted AFFO avail. to common share and common unit holders
 
$
36,570

 
$
40,812

 
$
37,724

 
$
40,136

 
$
28,977

 
$
115,106

 
$
93,045

Per share - diluted:
 
 

 
 

 
 

 
 

 
 

 
 

 
 
EPS
 
$
0.91

 
$
0.13

 
$
0.10

 
$
0.01

 
$
0.22

 
$
1.15

 
$
0.24

FFO - NAREIT
 
$
1.32

 
$
0.48

 
$
0.43

 
$
0.34

 
$
0.49

 
$
2.24

 
$
1.34

FFO - as adjusted for comparability
 
$
0.52

 
$
0.52

 
$
0.45

 
$
0.49

 
$
0.48

 
$
1.49

 
$
1.39

Dividend per common share
 
$
0.275

 
$
0.275

 
$
0.275

 
$
0.275

 
$
0.275

 
$
0.825

 
$
0.825

Payout ratios:
 
 

 
 

 
 

 
 

 
 

 
 

 
 
Diluted FFO
 
21.2
%
 
57.2
%
 
64.3
%
 
81.8
%
 
56.0
%
 
37.0
%
 
61.6
%
Diluted FFO - as adjusted for comparability
 
53.3
%
 
53.2
%
 
62.1
%
 
57.8
%
 
58.0
%
 
55.9
%
 
59.5
%
Diluted AFFO
 
73.9
%
 
66.2
%
 
71.6
%
 
66.5
%
 
86.9
%
 
70.4
%
 
81.2
%
Rental revenue operating margin
 
77.7
%
 
77.5
%
 
73.3
%
 
79.0
%
 
78.3
%
 
76.3
%
 
77.1
%
CAPITALIZATION
 
 

 
 

 
 
 
 

 
 

 
 

 
 
Total Market Capitalization
 
$
4,394,500

 
$
4,649,916

 
$
5,093,091

 
$
4,882,468

 
$
4,613,107

 
 
 
 
Total Equity Market Capitalization
 
$
2,273,260

 
$
2,519,746

 
$
3,093,469

 
$
2,962,411

 
$
2,563,115

 
 
 
 
Debt, net
 
$
2,121,240

 
$
2,130,170

 
$
1,999,622

 
$
1,920,057

 
$
2,049,992

 
 
 
 
Debt to Total Market Capitalization
 
48.3
%
 
45.8
%
 
39.3
%
 
39.3
%
 
44.4
%
 
 
 
 
Debt to Adjusted book
 
43.5
%
 
41.6
%
 
40.3
%
 
39.7
%
 
42.8
%
 
 
 
 
Adjusted EBITDA interest coverage ratio
 
3.9
x
 
4.6
x
 
4.2
x
 
4.0
x
 
3.6
x
 
4.2
x
 
3.6
x
Adjusted EBITDA debt service coverage ratio
 
3.6
x
 
4.2
x
 
3.8
x
 
3.7
x
 
3.4
x
 
3.9
x
 
3.4
x
Adjusted EBITDA fixed charge coverage ratio
 
2.9
x
 
3.1
x
 
2.9
x
 
2.8
x
 
2.7
x
 
3.0
x
 
2.6
x
Adjusted debt to in-place adjusted EBITDA ratio
 
6.7
x
 
6.5
x
 
6.9
x
 
6.3
x
 
6.7
x
 
N/A

 
N/A

OTHER
 
 

 
 

 
 

 
 

 
 

 
 

 
 
Revenue from early termination of leases
 
$
159

 
$
661

 
$
603

 
$
611

 
$
239

 
$
1,423

 
$
1,423

Capitalized interest costs
 
$
1,559

 
$
1,950

 
$
2,132

 
$
1,740

 
$
1,314

 
$
5,641

 
$
4,325



3

Corporate Office Properties Trust
Selected Consolidated Portfolio Data
 
 
 
 
 
 
 
 
 
 
 
9/30/15
 
6/30/15
 
3/31/15
 
12/31/14
 
9/30/14
 
 
 
(1)
 
(1)
 
(1)
 
(1)
# of Operating Office Properties
 
 
 
 
 
 
 
 
 
Total Portfolio
183

 
179

 
178
 
173

 
174

Core Portfolio
164

 
172

 
178
 
173

 
174

Same Office Properties
147

 
147

 
147
 
147

 
147

 
 
 
 
 
 
 
 
 
 
% Occupied
 
 
 
 
 
 
 
 
 
Total Portfolio
91.6
%
 
92.0
%
 
91.3
%
 
90.9
%
 
91.5
%
Core Portfolio
91.3
%
 
91.9
%
 
91.3
%
 
90.9
%
 
91.5
%
Same Office Properties
90.3
%
 
90.9
%
 
90.4
%
 
90.5
%
 
91.9
%
 
 
 
 
 
 
 
 
 
 
% Leased
 
 
 
 
 
 
 
 
 
Total Portfolio
92.3
%
 
92.9
%
 
92.4
%
 
92.4
%
 
93.0
%
Core Portfolio
92.1
%
 
92.8
%
 
92.4
%
 
92.4
%
 
93.0
%
Same Office Properties
91.2
%
 
91.9
%
 
91.6
%
 
92.1
%
 
93.4
%
 
 
 
 
 
 
 
 
 
 
Square Feet of Office Properties (in thousands)
 
 
 
 
 
 
 
 
 
Total Portfolio
18,825

 
17,987

 
17,706

 
16,790

 
16,863

Core Portfolio
17,515

 
17,403

 
17,706

 
16,790

 
16,863

Same Office Properties
14,609

 
14,609

 
14,609

 
14,609

 
14,609

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

 
19.25

 
19.25

 
18

 
18

MWs Leased (2)
17.81

 
17.81

 
17.81

 
6.56

 
6.26

MWs Operational
19.25

 
12.50

 
9

 
9

 
9


(1)
Amounts reported exclude the effect of properties serving as collateral for debt which was in default that we extinguished via conveyance of such properties on August 28, 2015. Effective April 1, 2014, all cash flows from such properties belong to the lender.
(2)
Leased megawatts as of September 30, 2015 included 17.81 in operations, which were leased to tenants with further expansion rights of up to a combined 18.88 megawatts.

4

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

 
 

 
 

 
 

 
 

Properties, net
 

 
 

 
 

 
 

 
 

Operating properties, net
$
2,932,843

 
$
2,896,809

 
$
2,888,534

 
$
2,751,488

 
$
2,757,207

Construction and redevelopment in progress, including land (1)
77,268

 
192,815

 
161,637

 
222,146

 
167,618

Land held (1)
337,489

 
329,176

 
327,981

 
323,280

 
346,331

Total properties, net
3,347,600

 
3,418,800

 
3,378,152

 
3,296,914

 
3,271,156

Assets held for sale
150,572

 
77,013

 
—

 
14,339

 
—

Cash and cash equivalents
3,840

 
37,074

 
4,429

 
6,077

 
40,018

Restricted cash and marketable securities
9,286

 
10,121

 
11,445

 
9,069

 
14,371

Accounts receivable, net
19,962

 
16,181

 
33,753

 
26,901

 
20,180

Deferred rent receivable, net
103,064

 
101,488

 
98,340

 
95,910

 
95,405

Intangible assets on real estate acquisitions, net
106,174

 
81,728

 
61,477

 
43,854

 
48,300

Deferred leasing and financing costs, net
64,367

 
67,613

 
65,245

 
64,797

 
65,009

Investing receivables
46,821

 
45,766

 
52,814

 
52,147

 
50,886

Prepaid expenses and other assets
66,787

 
55,137

 
71,500

 
60,249

 
74,863

Total assets
$
3,918,473

 
$
3,910,921

 
$
3,777,155

 
$
3,670,257

 
$
3,680,188

Liabilities and equity
 

 
 

 
 

 
 

 
 

Liabilities:
 

 
 

 
 

 
 

 
 

Debt, net
$
2,121,240

 
$
2,130,170

 
$
1,999,622

 
$
1,920,057

 
$
2,049,992

Accounts payable and accrued expenses
98,551

 
155,989

 
138,214

 
123,035

 
123,893

Rents received in advance and security deposits
34,504

 
27,371

 
31,551

 
31,011

 
33,075

Dividends and distributions payable
30,182

 
30,178

 
30,174

 
29,862

 
28,344

Deferred revenue associated with operating leases
20,113

 
15,179

 
14,697

 
13,031

 
13,420

Interest rate derivatives
5,844

 
3,121

 
4,282

 
1,855

 
2,236

Other liabilities
8,524

 
11,866

 
9,990

 
12,105

 
13,288

Total liabilities
2,318,958

 
2,373,874

 
2,228,530

 
2,130,956

 
2,264,248

Redeemable noncontrolling interest
19,608

 
19,414

 
18,895

 
18,417

 
18,436

Equity:
 

 
 

 
 

 
 
 
 
COPT’s shareholders’ equity:
 

 
 

 
 

 
 
 
 
Preferred shares at liquidation preference
199,083

 
199,083

 
199,083

 
199,083

 
199,083

Common shares
945

 
946

 
945

 
933

 
877

Additional paid-in capital
2,002,730

 
2,000,775

 
1,999,708

 
1,969,968

 
1,822,283

Cumulative distributions in excess of net income
(686,986
)
 
(747,234
)
 
(733,459
)
 
(717,264
)
 
(692,978
)
Accumulated other comprehensive (loss) income
(5,823
)
 
(3,141
)
 
(3,947
)
 
(1,297
)
 
871

Total COPT’s shareholders’ equity
1,509,949

 
1,450,429

 
1,462,330

 
1,451,423

 
1,330,136

Noncontrolling interests in subsidiaries
 

 
 

 
 

 
 

 
 

Common units in the Operating Partnership
50,992

 
48,707

 
49,168

 
51,534

 
49,781

Preferred units in the Operating Partnership
8,800

 
8,800

 
8,800

 
8,800

 
8,800

Other consolidated entities
10,166

 
9,697

 
9,432

 
9,127

 
8,787

Total noncontrolling interests in subsidiaries
69,958

 
67,204

 
67,400

 
69,461

 
67,368

Total equity
1,579,907

 
1,517,633

 
1,529,730

 
1,520,884

 
1,397,504

Total liabilities, redeemable noncontrolling interest and equity
$
3,918,473

 
$
3,910,921

 
$
3,777,155

 
$
3,670,257

 
$
3,680,188

(1) Please refer to pages 22-24 and 26 for detail.
 
 
 
 
 
 
 
 
 

5

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

 
 

 
 

 
 

 
 

 
 
 
 
Rental revenue
$
109,080

 
$
105,508

 
$
98,238

 
$
97,822

 
$
96,207

 
$
312,826

 
$
288,574

Tenant recoveries and other real estate operations revenue
24,606

 
22,683

 
24,472

 
22,791

 
22,069

 
71,761

 
70,538

Construction contract and other service revenues
17,058

 
42,172

 
38,324

 
26,358

 
34,739

 
97,554

 
80,390

Total revenues
150,744

 
170,363

 
161,034

 
146,971

 
153,015

 
482,141

 
439,502

Expenses
 

 
 

 
 

 
 

 
 

 
 
 
 
Property operating expenses
48,897

 
46,418

 
50,681

 
43,334

 
43,056

 
145,996

 
136,600

Depreciation and amortization associated with real estate operations
38,403

 
33,786

 
31,599

 
31,358

 
30,237

 
103,788

 
104,728

Construction contract and other service expenses
16,132

 
41,293

 
37,498

 
24,705

 
33,593

 
94,923

 
75,353

Impairment losses
2,307

 
1,238

 
—

 
48

 
66

 
3,545

 
1,368

General and administrative expenses
5,783

 
5,884

 
6,250

 
7,206

 
5,662

 
17,917

 
17,635

Leasing expenses
1,656

 
1,650

 
1,641

 
1,706

 
1,549

 
4,947

 
5,247

Business development expenses and land carry costs
5,573

 
2,623

 
2,790

 
1,466

 
1,430

 
10,986

 
4,107

Total operating expenses
118,751

 
132,892

 
130,459

 
109,823

 
115,593

 
382,102

 
345,038

Operating income
31,993

 
37,471

 
30,575

 
37,148

 
37,422

 
100,039

 
94,464

Interest expense
(24,121
)
 
(21,768
)
 
(20,838
)
 
(23,286
)
 
(24,802
)
 
(66,727
)
 
(69,107
)
Interest and other income
692

 
1,242

 
1,283

 
1,148

 
1,191

 
3,217

 
3,775

Gain (loss) on early extinguishment of debt
85,745

 
(65
)
 
(3
)
 
(9,106
)
 
(176
)
 
85,677

 
(446
)
Income from continuing operations before equity in income of unconsolidated entities and income taxes
94,309

 
16,880

 
11,017

 
5,904

 
13,635

 
122,206

 
28,686

Equity in income of unconsolidated entities
18

 
9

 
25

 
23

 
193

 
52

 
206

Income tax expense
(48
)
 
(50
)
 
(55
)
 
(53
)
 
(101
)
 
(153
)
 
(257
)
Income from continuing operations
94,279

 
16,839

 
10,987

 
5,874

 
13,727

 
122,105

 
28,635

Discontinued operations
—

 
394

 
(238
)
 
22

 
191

 
156

 
4

Income before gain on sales of real estate
94,279

 
17,233

 
10,749

 
5,896

 
13,918

 
122,261

 
28,639

Gain on sales of real estate
15

 
(1
)
 
3,986

 
41

 
10,630

 
4,000

 
10,630

Net income
94,294

 
17,232

 
14,735

 
5,937

 
24,548

 
126,261

 
39,269

Net income attributable to noncontrolling interests
 

 
 

 
 

 
 

 
 

 
 
 
 
Common units in the Operating Partnership
(3,357
)
 
(476
)
 
(398
)
 
(64
)
 
(768
)
 
(4,231
)
 
(942
)
Preferred units in the Operating Partnership
(165
)
 
(165
)
 
(165
)
 
(165
)
 
(165
)
 
(495
)
 
(495
)
Other consolidated entities
(972
)
 
(810
)
 
(817
)
 
(804
)
 
(895
)
 
(2,599
)
 
(2,481
)
Net income attributable to COPT
89,800

 
15,781

 
13,355

 
4,904

 
22,720

 
118,936

 
35,351

Preferred share dividends
(3,552
)
 
(3,553
)
 
(3,552
)
 
(3,552
)
 
(3,553
)
 
(10,657
)
 
(12,387
)
Issuance costs associated with redeemed preferred shares
—

 
—

 
—

 
—

 
—

 
—

 
(1,769
)
Net income attributable to COPT common shareholders
$
86,248

 
$
12,228

 
$
9,803

 
$
1,352

 
$
19,167

 
$
108,279

 
$
21,195

 
 
 
 
 
 
 
 
 
 
 
 
 
 

6

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

 
 

 
 

 
 

 
 

 
 
 
 
Numerator for diluted EPS
 

 
 

 
 

 
 

 
 

 
 
 
 
Net income attributable to common shareholders
$
86,248

 
$
12,228

 
$
9,803

 
$
1,352

 
$
19,167

 
$
108,279

 
$
21,195

Dividends on dilutive convertible preferred shares
372

 
—

 
—

 
—

 
—

 
—

 
—

Common units in the Operating Partnership
—

 
—

 
—

 
—

 
—

 
4,231

 
—

Amount allocable to share-based compensation awards
(369
)
 
(113
)
 
(122
)
 
(100
)
 
(103
)
 
(475
)
 
(332
)
Numerator for diluted EPS
$
86,251

 
$
12,115

 
$
9,681

 
$
1,252

 
$
19,064

 
$
112,035

 
$
20,863

Denominator:
 

 
 

 
 

 
 

 
 

 
 
 
 
Weighted average common shares - basic
94,153

 
94,128

 
93,199

 
90,752

 
87,290

 
93,830

 
87,196

Dilutive convertible preferred shares
434

 
—

 
—

 
—

 
—

 
—

 
—

Common units in the Operating Partnership
—

 
—

 
—

 
—

 
—

 
3,697

 
—

Dilutive effect of share-based compensation awards
21

 
35

 
198

 
196

 
195

 
82

 
169

Weighted average common shares - diluted
94,608

 
94,163

 
93,397

 
90,948

 
87,485

 
97,609

 
87,365

Diluted EPS
$
0.91

 
$
0.13

 
$
0.10

 
$
0.01

 
$
0.22

 
$
1.15

 
$
0.24


7

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

 
 

 
 

 
 

 
 

 
 
 
 
Real estate revenues
$
133,686

 
$
128,195

 
$
122,710

 
$
120,611

 
$
118,240

 
$
384,591

 
$
359,100

Real estate property operating expenses
(48,897
)
 
(46,407
)
 
(50,686
)
 
(43,310
)
 
(42,881
)
 
(145,990
)
 
(136,489
)
NOI from real estate operations
84,789

 
81,788

 
72,024

 
77,301

 
75,359

 
238,601

 
222,611

General and administrative expenses
(5,783
)
 
(5,884
)
 
(6,250
)
 
(7,206
)
 
(5,662
)
 
(17,917
)
 
(17,635
)
Leasing expenses
(1,656
)
 
(1,650
)
 
(1,641
)
 
(1,706
)
 
(1,549
)
 
(4,947
)
 
(5,247
)
Business development expenses and land carry costs
(5,573
)
 
(2,623
)
 
(2,790
)
 
(1,466
)
 
(1,430
)
 
(10,986
)
 
(4,107
)
NOI from construction contracts and other service operations
926

 
879

 
826

 
1,653

 
1,146

 
2,631

 
5,037

Impairment losses on non-operating properties
—

 
—

 
—

 
—

 
(49
)
 
—

 
(49
)
Equity in income of unconsolidated entities
18

 
9

 
25

 
23

 
193

 
52

 
206

Interest and other income
692

 
1,242

 
1,283

 
1,148

 
1,191

 
3,217

 
3,775

Gain (loss) on early extinguishment of debt
85,745

 
315

 
(3
)
 
(9,106
)
 
(176
)
 
86,057

 
(562
)
Gain on sales of non-operating properties
—

 
(1
)
 
3,986

 
43

 
5,535

 
3,985

 
5,535

Total interest expense
(24,121
)
 
(21,768
)
 
(20,838
)
 
(23,286
)
 
(24,802
)
 
(66,727
)
 
(69,107
)
Income tax expense
(48
)
 
(50
)
 
(55
)
 
(53
)
 
(101
)
 
(153
)
 
(257
)
FFO - per NAREIT (1)
134,989

 
52,257

 
46,567

 
37,345

 
49,655

 
233,813

 
140,200

Preferred share dividends
(3,552
)
 
(3,553
)
 
(3,552
)
 
(3,552
)
 
(3,553
)
 
(10,657
)
 
(12,387
)
Issuance costs associated with redeemed preferred shares
—

 
—

 
—

 
—

 
—

 
—

 
(1,769
)
Noncontrolling interests - preferred units in the Operating Partnership
(165
)
 
(165
)
 
(165
)
 
(165
)
 
(165
)
 
(495
)
 
(495
)
FFO allocable to other noncontrolling interests
(1,027
)
 
(1,072
)
 
(670
)
 
(867
)
 
(830
)
 
(2,769
)
 
(2,349
)
Basic and diluted FFO allocable to restricted shares
(541
)
 
(202
)
 
(183
)
 
(123
)
 
(191
)
 
(926
)
 
(542
)
Basic FFO available to common share and common unit holders (1)
129,704

 
47,265

 
41,997

 
32,638

 
44,916

 
218,966

 
122,658

Dividends on dilutive convertible preferred shares
372

 
—

 
—

 
—

 
—

 
—

 
—

Distributions on dilutive preferred units in the Operating Partnership
165

 
—

 
—

 
—

 
—

 
—

 
—

Diluted FFO available to common share and common unit holders (1)
130,241

 
47,265

 
41,997

 
32,638

 
44,916

 
218,966

 
122,658

Operating property acquisition costs
2,695

 
361

 
1,046

 
—

 
—

 
4,102

 
—

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

 
1

 
(3,986
)
 
(43
)
 
(5,535
)
 
(3,985
)
 
(5,535
)
Impairment losses on non-operating properties, net of associated income tax
—

 
—

 
—

 
—

 
49

 
—

 
49

(Gain) loss on early extinguishment of debt (1)
(85,745
)
 
(315
)
 
3

 
9,106

 
176

 
(86,057
)
 
562

Issuance costs associated with redeemed preferred shares
—

 
—

 
—

 
—

 
—

 
—

 
1,769

Add: Negative FFO of properties conveyed to extinguish debt in default (2)
2,766

 
3,419

 
4,271

 
3,493

 
3,806

 
10,456

 
7,435

Demolition costs on redevelopment properties
930

 
66

 
175

 
—

 
—

 
1,171

 
—

Executive transition costs
—

 
—

 
—

 
1,056

 
—

 
—

 
—

Diluted FFO comparability adjustments allocable to restricted shares
334

 
(14
)
 
(7
)
 
(59
)
 
7

 
313

 
(19
)
Dividends and distributions on antidilutive preferred securities (3)
(537
)
 
—

 
—

 
—

 
—

 
—

 
—

Diluted FFO avail. to common share and common unit holders, as adj. for comparability (1)
$
50,684

 
$
50,783

 
$
43,499

 
$
46,191

 
$
43,419

 
$
144,966

 
$
126,919

(1) Please refer to the section entitled “Definitions” for a definition of this measure.
 
 
 
 
 
 
 
 
 
 
 
 
(2) Interest expense exceeded NOI from these properties by the amounts in the statement.
 
 
 
 
 
 
 
 
 
 
 
 
 
(3) These securities were dilutive for Diluted FFO purposes but antidilutive for Diluted FFO as adjusted for comparability purposes.
 
 
 
 

8

Corporate Office Properties Trust
Consolidated Statements of FFO (continued)
(in thousands, except per share data)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended
 
Nine Months Ended
 
9/30/15
 
6/30/15
 
3/31/15
 
12/31/14
 
9/30/14
 
9/30/15
 
9/30/14
Net income
$
94,294

 
$
17,232

 
$
14,735

 
$
5,937

 
$
24,548

 
$
126,261

 
$
39,269

Real estate-related depreciation and amortization
38,403

 
33,786

 
31,599

 
31,358

 
30,237

 
103,788

 
104,728

Impairment losses (recoveries) on previously depreciated operating properties (1)(2)
2,307

 
1,239

 
233

 
48

 
(7
)
 
3,779

 
1,322

Gain on sales of previously depreciated operating properties (2)
(15
)
 
—

 
—

 
2

 
(5,123
)
 
(15
)
 
(5,119
)
FFO - per NAREIT (3)
134,989

 
52,257

 
46,567

 
37,345

 
49,655

 
233,813

 
140,200

Operating property acquisition costs
2,695

 
361

 
1,046

 
—

 
—

 
4,102

 
—

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

 
1

 
(3,986
)
 
(43
)
 
(5,535
)
 
(3,985
)
 
(5,535
)
Impairment losses on non-operating properties, net of associated income tax
—

 
—

 
—

 
—

 
49

 
—

 
49

(Gain) loss on early extinguishment of debt (2)
(85,745
)
 
(315
)
 
3

 
9,106

 
176

 
(86,057
)
 
562

Issuance costs associated with redeemed preferred shares
—

 
—

 
—

 
—

 
—

 
—

 
1,769

Add: Negative FFO of properties conveyed to extinguish debt in default
2,766

 
3,419

 
4,271

 
3,493

 
3,806

 
10,456

 
7,435

Demolition costs on redevelopment properties
930

 
66

 
175

 
—

 
—

 
1,171

 
—

Executive transition costs
—

 
—

 
—

 
1,056

 
—

 
—

 
—

FFO - as adjusted for comparability (3)
$
55,635

 
$
55,789

 
$
48,076

 
$
50,957

 
$
48,151

 
$
159,500

 
$
144,480

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Weighted Average Shares for period ended:
 

 
 

 
 

 
 

 
 

 
 

 
 

Common Shares Outstanding
94,153

 
94,128

 
93,199

 
90,752

 
87,290

 
93,830

 
87,196

Dilutive effect of share-based compensation awards
21

 
35

 
198

 
196

 
195

 
82

 
169

Common Units
3,679

 
3,680

 
3,732

 
3,846

 
3,876

 
3,697

 
3,915

Dilutive convertible preferred shares (4)
434

 
—

 
—

 
—

 
—

 
—

 
—

Dilutive noncontrolling interests - preferred units in the Operating Partnership (4)
176

 
—

 
—

 
—

 
—

 
—

 
—

Denominator for diluted FFO per share
98,463

 
97,843

 
97,129

 
94,794

 
91,361

 
97,609

 
91,280

Antidilutive preferred securities for diluted FFO, as adjusted for comparability (4)
(610
)
 
—

 
—

 
—

 
—

 
—

 
—

Denominator for diluted FFO per share, as adjusted for comparability
97,853

 
97,843

 
97,129

 
94,794

 
91,361

 
97,609

 
91,280

Weighted average common units
(3,679
)
 
(3,680
)
 
(3,732
)
 
(3,846
)
 
(3,876
)
 
—

 
(3,915
)
Dilutive convertible preferred shares
434

 
—

 
—

 
—

 
—

 
—

 
—

Denominator for diluted EPS
94,608

 
94,163

 
93,397

 
90,948

 
87,485

 
97,609

 
87,365

 
 
 
 
 
 
 
 
 
 
 
 
 
 
(1) Please see reconciliations on pages 32 through 34.
 
 
 
 
 
 
 
 
 
 
 
 
 
(2) Includes continuing and discontinued operations.
 
 
 
 
 
 
 
 
 
 
 
 
 
(3) Please refer to the section entitled “Definitions” for a definition of this measure.
 
 
 
 
 
 
 
 
 
 
(4) These securities were dilutive for Diluted FFO purposes but antidilutive for Diluted FFO as adjusted for comparability purposes.
 
 
 
 

9

Corporate Office Properties Trust
Consolidated Reconciliations of AFFO
(in thousands, except per share data)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended
 
Nine Months Ended
 
9/30/15
 
6/30/15
 
3/31/15
 
12/31/14
 
9/30/14
 
9/30/15
 
9/30/14
Diluted FFO available to common share and common unit holders, as adjusted for comparability
$
50,684

 
$
50,783

 
$
43,499

 
$
46,191

 
$
43,419

 
$
144,966

 
$
126,919

Straight line rent adjustments (1)
(5,706
)
 
(3,788
)
 
(1,271
)
 
(379
)
 
(456
)
 
(10,765
)
 
(1,441
)
Straight line rent adjustments on properties conveyed to extinguish debt in default
(19
)
 
(24
)
 
(72
)
 
(47
)
 
(96
)
 
(115
)
 
(95
)
Amortization of intangibles included in NOI
474

 
478

 
111

 
208

 
206

 
1,063

 
647

Share-based compensation, net of amounts capitalized
1,739

 
1,658

 
1,552

 
1,504

 
1,507

 
4,949

 
4,563

Amortization of deferred financing costs
1,203

 
1,146

 
990

 
1,020

 
1,357

 
3,339

 
3,646

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

 
—

 
—

 
—

 
(306
)
 
—

 
(333
)
Amortization of net debt discounts, net of amounts capitalized
321

 
264

 
264

 
261

 
259

 
849

 
659

Amortization of settled debt hedges
—

 
—

 
—

 
11

 
16

 
—

 
46

Recurring capital expenditures on properties to be held
(12,126
)
 
(9,705
)
 
(7,349
)
 
(8,633
)
 
(16,929
)
 
(29,180
)
 
(41,566
)
Diluted AFFO available to common share and common unit holders (“diluted AFFO”)
$
36,570

 
$
40,812

 
$
37,724

 
$
40,136

 
$
28,977

 
$
115,106

 
$
93,045

Recurring capital expenditures
 

 
 

 
 

 
 

 
 

 
 
 
 
Tenant improvements and incentives on operating properties
$
6,374

 
$
6,644

 
$
4,390

 
$
7,239

 
$
11,581

 
$
17,408

 
$
22,412

Building improvements on operating properties
4,223

 
4,543

 
3,203

 
4,974

 
8,119

 
11,969

 
18,458

Leasing costs for operating properties
2,547

 
1,485

 
954

 
1,341

 
2,877

 
4,986

 
7,195

Less: Nonrecurring tenant improvements and incentives on operating properties
205

 
(986
)
 
(264
)
 
(1,747
)
 
(1,454
)
 
(1,045
)
 
(987
)
Less: Nonrecurring building improvements on operating properties
(1,155
)
 
(1,298
)
 
(875
)
 
(3,012
)
 
(4,182
)
 
(3,328
)
 
(5,269
)
Less: Nonrecurring leasing costs for operating properties
(68
)
 
(683
)
 
(59
)
 
(162
)
 
(12
)
 
(810
)
 
(243
)
Recurring capital expenditures
$
12,126

 
$
9,705

 
$
7,349

 
$
8,633

 
$
16,929

 
$
29,180

 
$
41,566

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

10


 Corporate Office Properties Trust
Consolidated Office Properties by Region - September 30, 2015
(square feet in thousands)
 
 
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

 
97.2
%
 
97.4
%
 
1

 
191

 
—

 
191

Columbia Gateway
 
26

 
2,119

 
93.0
%
 
93.9
%
 
2

 
74

 
—

 
74

Airport Square/bwtech
 
14

 
1,090

 
85.6
%
 
85.9
%
 
2

 
82

 
—

 
82

Commons/Parkway
 
10

 
431

 
81.5
%
 
85.7
%
 
—

 
—

 
—

 
—

Other
 
12

 
1,208

 
99.3
%
 
100.0
%
 
1

 
31

 
88

 
120

Subtotal
 
91

 
8,333

 
94.1
%
 
94.8
%
 
6

 
379

 
88

 
467

Northern Virginia:
 
 

 
 

 
 

 
 

 
 

 
 

 
 
 
 
Westfields Corporate Center
 
7

 
762

 
77.5
%
 
78.5
%
 
—

 
—

 
—

 
—

Patriot Ridge
 
1

 
239

 
51.3
%
 
51.3
%
 
—

 
—

 
—

 
—

Herndon, Tysons Corner and Merrifield
 
9

 
1,778

 
94.2
%
 
96.8
%
 
—

 
—

 
—

 
—

Other
 
7

 
1,124

 
100.0
%
 
100.0
%
 
4

 
699

 
—

 
699

Subtotal
 
24

 
3,902

 
90.0
%
 
91.4
%
 
4

 
699

 
—

 
699

San Antonio, Texas
 
 

 
 

 
 

 
 

 
 

 
 

 
 
 
 
Sentry Gateway
 
7

 
953

 
100.0
%
 
100.0
%
 
—

 
—

 
—

 
—

Other
 
2

 
120

 
73.8
%
 
73.8
%
 
—

 
—

 
—

 
—

Subtotal
 
9

 
1,073

 
97.1
%
 
97.1
%
 
—

 
—

 
—

 
—

Huntsville
 
6

 
632

 
95.7
%
 
95.7
%
 
—

 
—

 


 
—

Washington, DC- Capital Riverfront (Maritime)
 
2

 
360

 
67.7
%
 
69.1
%
 
—

 
—

 
—

 
—

St. Mary’s & King George Counties
 
19

 
902

 
72.8
%
 
74.8
%
 
—

 
—

 
—

 
—

Greater Baltimore:
 
 

 
 

 
 

 
 

 
 

 
 

 
 
 


White Marsh and Rt 83 Corridor
 
20

 
984

 
92.8
%
 
92.8
%
 
—

 
—

 
—

 
—

Downtown Baltimore
 
3

 
1,403

 
96.4
%
 
96.5
%
 
—

 
—

 
—

 
—

North Gate Business Park
 
3

 
286

 
43.8
%
 
45.3
%
 
—

 
—

 
—

 
—

Subtotal
 
26

 
2,673

 
89.2
%
 
89.5
%
 
—

 
—

 
—

 
—

Greater Philadelphia, Pennsylvania
 
4

 
654

 
100.0
%
 
100.0
%
 
—

 
—

 
—

 
—

Other
 
2

 
296

 
100.0
%
 
100.0
%
 
—

 
—

 
—

 
—

Total
 
183

 
18,825

 
91.6
%
 
92.3
%
 
10

 
1,078

 
88

 
1,166

 
(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 a partially operational property; NOI for this property was $387,000 and cash NOI was ($49,000) for the three months ended 9/30/15.
(2)
This schedule includes properties under, or contractually committed for, construction or redevelopment as of September 30, 2015. Please refer to pages 23 and 24.





11

Corporate Office Properties Trust
NOI from Real Estate Operations and Occupancy by Property Grouping
(dollars and square feet in thousands)
 
 
9/30/15
 
 
 
 
 
 
# 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 Nine Months Ended
Property Grouping
 
 
 
% Occupied (1)
 
% Leased (1)
 
 
 
9/30/15
 
9/30/15
Same Office Properties (3)
 
147

 
14,609

 
90.3%
 
91.2%
 
$
401,312

 
79.0
%
 
$
65,875

 
$
192,257

Office Properties Placed in Service (4)
 
14

 
1,746

 
96.1%
 
96.5%
 
40,265

 
7.9
%
 
6,922

 
16,023

Acquired Office Properties (5)
 
3

 
1,160

 
96.5%
 
96.6%
 
32,863

 
6.5
%
 
4,171

 
6,908

Wholesale Data Center and Other
 
N/A

 
N/A

 
N/A
 
N/A
 
N/A

 
N/A

 
2,247

 
4,968

Total Core Portfolio
 
164

 
17,515

 
91.3%
 
92.1%
 
474,440

 
93.4
%
 
79,215

 
220,156

Office Properties Held for Sale (6)
 
19

 
1,310

 
95.6%
 
95.6%
 
33,412

 
6.6
%
 
5,288

 
15,384

Disposed Office Properties
 
N/A

 
N/A

 
N/A
 
N/A
 
N/A

 
N/A

 
286

 
3,061

Total Portfolio
 
183

 
18,825

 
91.6%
 
92.3%
 
$
507,852

 
100.0
%
 
$
84,789

 
$
238,601

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Core Portfolio
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Demand Driver Adjacent (7)
 
88

 
9,321

 
90.0%
 
90.4%
 
$
283,543

 
55.8
%
 
$
45,375

 
$
131,025

U.S. Government/Defense Contractor (8)
 
33

 
3,656

 
93.9%
 
94.2%
 
74,551

 
14.7
%
 
14,061

 
40,138

Total Strategic Tenant Niche
 
121

 
12,977

 
91.1%
 
91.5%
 
358,094

 
70.5
%
 
59,436

 
171,163

Regional Office (9)
 
43

 
4,538

 
91.9%
 
93.8%
 
116,346

 
22.9
%
 
17,532

 
44,025

Other, including Wholesale Data Center
 
N/A

 
N/A

 
N/A
 
N/A
 
N/A

 
N/A

 
2,247

 
4,968

Total Core Portfolio
 
164

 
17,515

 
91.3%
 
92.1%
 
$
474,440

 
93.4
%
 
$
79,215

 
$
220,156

(1)
Percentages calculated based on operational square feet.
(2)
Excludes annualized rental revenue from our wholesale data center, DC-6, of $24.6 million as of 9/30/15.
(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, April and August of 2015.
(6)
The carrying value of operating property assets held for sale as of 9/30/15 totaled $150.6 million.
(7)
Office properties held for long-term investment located near defense installations and other knowledge-based government demand drivers.
(8)
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.
(9)
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
 
Nine Months Ended
 
9/30/15
 
6/30/15
 
3/31/15
 
12/31/14
 
9/30/14
 
9/30/15
 
9/30/14
Real estate revenues
 

 
 

 
 

 
 

 
 

 
 
 
 
Baltimore/Washington Corridor
$
62,009

 
$
60,611

 
$
61,792

 
$
58,739

 
$
58,883

 
$
184,412

 
$
177,452

Northern Virginia
23,332

 
24,393

 
21,749

 
22,028

 
21,369

 
69,474

 
67,235

San Antonio
9,492

 
10,204

 
9,171

 
10,109

 
9,031

 
28,867

 
26,268

Huntsville
3,061

 
2,658

 
2,446

 
3,016

 
2,471

 
8,165

 
7,430

Washington, DC - Capitol Riverfront
3,336

 
3,391

 
3,364

 
3,610

 
3,524

 
10,091

 
10,989

St. Mary’s and King George Counties
3,550

 
3,795

 
3,901

 
4,060

 
4,158

 
11,246

 
12,676

Greater Baltimore
16,134

 
12,889

 
11,485

 
10,635

 
10,436

 
40,508

 
32,956

Greater Philadelphia
4,126

 
3,886

 
3,224

 
3,272

 
2,951

 
11,236

 
8,657

Other
2,568

 
2,548

 
2,543

 
2,481

 
2,541

 
7,659

 
7,668

Wholesale Data Center
6,078

 
3,820

 
3,035

 
2,661

 
2,876

 
12,933

 
7,769

Real estate revenues
$
133,686

 
$
128,195

 
$
122,710

 
$
120,611

 
$
118,240

 
$
384,591

 
$
359,100

 
 
 
 
NOI
 

 
 

 
 

 
 

 
 

 
 
 
 
Baltimore/Washington Corridor
$
41,840

 
$
41,072

 
$
38,209

 
$
40,009

 
$
39,426

 
$
121,121

 
$
115,050

Northern Virginia
15,547

 
15,706

 
12,628

 
14,620

 
13,869

 
43,881

 
43,111

San Antonio
4,684

 
4,589

 
4,196

 
3,938

 
3,931

 
13,469

 
11,877

Huntsville
2,173

 
1,770

 
1,617

 
2,225

 
1,708

 
5,560

 
5,155

Washington, DC - Capitol Riverfront
1,374

 
1,330

 
1,550

 
1,645

 
1,700

 
4,254

 
5,646

St. Mary’s and King George Counties
2,225

 
2,466

 
2,317

 
2,862

 
2,881

 
7,008

 
8,606

Greater Baltimore
9,673

 
7,980

 
6,488

 
6,643

 
6,626

 
24,141

 
19,170

Greater Philadelphia
2,877

 
2,945

 
1,849

 
2,167

 
2,114

 
7,671

 
5,376

Other
2,326

 
2,331

 
2,347

 
2,195

 
2,281

 
7,004

 
6,473

Wholesale Data Center
2,070

 
1,599

 
823

 
997

 
823

 
4,492

 
2,147

NOI from real estate operations
$
84,789

 
$
81,788

 
$
72,024

 
$
77,301

 
$
75,359

 
$
238,601

 
$
222,611

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash NOI
 

 
 

 
 

 
 

 
 

 
 
 
 
Baltimore/Washington Corridor
$
41,021

 
$
42,331

 
$
38,047

 
$
40,125

 
$
38,114

 
$
121,399

 
$
111,816

Northern Virginia
14,544

 
13,704

 
12,580

 
14,994

 
16,159

 
40,828

 
49,204

San Antonio
3,908

 
3,419

 
3,738

 
3,838

 
3,733

 
11,065

 
11,266

Huntsville
1,881

 
1,832

 
1,848

 
2,280

 
1,917

 
5,561

 
5,706

Washington, DC - Capitol Riverfront
1,478

 
1,172

 
1,539

 
1,681

 
1,775

 
4,189

 
5,856

St. Mary’s and King George Counties
2,087

 
2,407

 
2,293

 
2,769

 
2,491

 
6,787

 
7,966

Greater Baltimore
8,912

 
7,478

 
6,474

 
6,770

 
6,614

 
22,864

 
19,091

Greater Philadelphia
2,057

 
2,076

 
1,630

 
1,952

 
1,641

 
5,763

 
3,656

Other
2,314

 
2,287

 
2,304

 
2,146

 
2,217

 
6,905

 
6,218

Wholesale Data Center
1,952

 
2,206

 
825

 
984

 
807

 
4,983

 
2,057

Cash NOI from real estate operations
$
80,154

 
$
78,912

 
$
71,278

 
$
77,539

 
$
75,468

 
$
230,344

 
$
222,836

Straight line rent adjustments
5,217

 
3,446

 
941

 
56

 
182

 
9,604

 
681

Add: Amortization of deferred market rental revenue
(293
)
 
(308
)
 
59

 
4

 
6

 
(542
)
 
(11
)
Less: Amortization of below-market cost arrangements
(289
)
 
(262
)
 
(254
)
 
(298
)
 
(297
)
 
(805
)
 
(895
)
NOI from real estate operations
$
84,789

 
$
81,788

 
$
72,024

 
$
77,301

 
$
75,359

 
$
238,601

 
$
222,611

*     Includes continuing and discontinued operations.


13

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

 
7,980

 
94.3
%
 
94.6
%
 
94.0
%
 
93.8
%
 
93.9
%
 
94.3
%
 
93.6
%
Northern Virginia
17

 
2,578

 
84.3
%
 
84.2
%
 
83.4
%
 
87.1
%
 
88.0
%
 
84.0
%
 
87.0
%
San Antonio
8

 
913

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

 
442

 
93.0
%
 
87.4
%
 
79.4
%
 
78.8
%
 
82.4
%
 
86.6
%
 
81.2
%
Washington, DC - Capitol Riverfront
2

 
360

 
69.1
%
 
70.9
%
 
71.1
%
 
73.8
%
 
72.6
%
 
70.3
%
 
75.0
%
St. Mary’s and King George Counties
18

 
873

 
75.0
%
 
80.6
%
 
86.4
%
 
91.1
%
 
91.7
%
 
80.7
%
 
92.2
%
Greater Baltimore (2)
6

 
838

 
78.6
%
 
80.5
%
 
80.4
%
 
80.4
%
 
79.6
%
 
79.8
%
 
77.1
%
Greater Philadelphia
2

 
330

 
100.0
%
 
99.0
%
 
98.8
%
 
98.8
%
 
98.4
%
 
99.3
%
 
91.1
%
Other
2

 
296

 
100.0
%
 
100.0
%
 
100.0
%
 
100.0
%
 
100.0
%
 
100.0
%
 
100.0
%
Total Same Office Properties
147

 
14,609

 
90.2
%
 
90.6
%
 
90.3
%
 
91.2
%
 
91.4
%
 
90.4
%
 
90.8
%
Total Same Office Properties occupancy as of period end
 
 

 
90.3
%
 
90.9
%
 
90.4
%
 
90.5
%
 
91.9
%
 
90.3
%
 
91.9
%

(1)    Same office properties represent buildings owned and 100% operational since at least January 1, 2014, excluding properties held for future disposition.
(2)    The Greater Baltimore same office properties average occupancy rate for the three months ended 9/30/15 was comprised of the following:
•one property in Downtown Baltimore totaling 480,000 rentable square feet with an average occupancy rate of 97.9%;
•three properties in North Gate Business Park totaling 286,000 rentable square feet with an average occupancy rate of 43.8%; and
•two properties in White Marsh totaling 72,000 rentable square feet with an average occupancy rate of 87.6.%.





14


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

 
 

 
 

 
 

 
 

 
 
 
 
Baltimore/Washington Corridor
$
59,574

 
$
58,839

 
$
60,056

 
$
57,144

 
$
57,601

 
$
178,469

 
$
175,349

Northern Virginia
14,333

 
14,342

 
14,398

 
15,316

 
14,898

 
43,073

 
45,009

San Antonio
8,387

 
9,130

 
8,813

 
10,109

 
9,031

 
26,330

 
26,268

Huntsville
2,111

 
1,951

 
1,799

 
1,856

 
2,005

 
5,861

 
5,968

Washington, DC - Capitol Riverfront
3,336

 
3,391

 
3,364

 
3,610

 
3,524

 
10,091

 
10,989

St. Mary’s and King George Counties
3,551

 
3,794

 
3,901

 
4,060

 
4,158

 
11,246

 
12,676

Greater Baltimore
6,268

 
5,734

 
6,166

 
6,053

 
5,744

 
18,168

 
16,872

Greater Philadelphia
2,166

 
2,112

 
2,171

 
2,293

 
1,956

 
6,449

 
5,748

Other
2,472

 
2,450

 
2,446

 
2,392

 
2,441

 
7,368

 
7,361

Same office property real estate revenues
$
102,198

 
$
101,743

 
$
103,114

 
$
102,833

 
$
101,358

 
$
307,055

 
$
306,240

 
 
 
 
 
 
Same office property NOI
 

 
 

 
 

 
 

 
 

 
 
 
 
Baltimore/Washington Corridor
$
39,938

 
$
39,512

 
$
37,123

 
$
38,831

 
$
38,376

 
$
116,573

 
$
113,931

Northern Virginia
9,686

 
9,114

 
8,723

 
10,470

 
9,885

 
27,523

 
28,899

San Antonio
3,891

 
3,885

 
3,996

 
3,939

 
3,931

 
11,772

 
11,877

Huntsville
1,442

 
1,266

 
1,140

 
1,230

 
1,386

 
3,848

 
4,099

Washington, DC - Capitol Riverfront
1,374

 
1,330

 
1,550

 
1,646

 
1,700

 
4,254

 
5,645

St. Mary’s and King George Counties
2,230

 
2,440

 
2,343

 
2,867

 
2,883

 
7,013

 
8,653

Greater Baltimore
3,604

 
3,341

 
3,544

 
3,453

 
3,406

 
10,489

 
9,475

Greater Philadelphia
1,486

 
1,401

 
1,231

 
1,510

 
1,311

 
4,118

 
3,507

Other
2,224

 
2,234

 
2,209

 
2,183

 
2,187

 
6,667

 
6,558

Same office property NOI
65,875

 
64,523

 
61,859

 
66,129

 
65,065

 
192,257

 
192,644

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Same office property cash NOI (1)
 

 
 

 
 

 
 

 
 

 
 
 
 
Baltimore/Washington Corridor
$
39,843

 
$
38,598

 
$
36,294

 
$
37,118

 
$
37,708

 
$
114,735

 
$
110,745

Northern Virginia
9,014

 
8,518

 
8,279

 
9,748

 
9,854

 
25,811

 
27,737

San Antonio
3,802

 
3,788

 
3,896

 
3,838

 
3,733

 
11,486

 
11,266

Huntsville
1,294

 
1,242

 
1,231

 
1,268

 
1,476

 
3,767

 
4,428

Washington, DC - Capitol Riverfront
1,479

 
1,167

 
1,534

 
1,636

 
1,729

 
4,180

 
5,807

St. Mary’s and King George Counties
2,091

 
2,385

 
2,319

 
2,645

 
2,493

 
6,795

 
8,010

Greater Baltimore
3,317

 
3,431

 
3,252

 
3,546

 
3,346

 
10,000

 
9,276

Greater Philadelphia
1,505

 
1,265

 
1,078

 
1,334

 
1,195

 
3,848

 
3,381

Other
2,258

 
2,238

 
2,211

 
2,181

 
2,172

 
6,707

 
6,448

Same office property cash NOI (1)
$
64,603

 
$
62,632

 
$
60,094

 
$
63,314

 
$
63,706

 
$
187,329

 
$
187,098

Straight line rent adjustments
937

 
1,114

 
1,218

 
2,294

 
1,349

 
3,269

 
1,454

Add: Amortization of deferred market rental revenue
16

 
15

 
39

 
(16
)
 
(15
)
 
70

 
(73
)
Less: Amortization of below-market cost arrangements
(256
)
 
(250
)
 
(245
)
 
(288
)
 
(288
)
 
(751
)
 
(866
)
Add: Lease termination fee, gross
185

 
1,012

 
753

 
741

 
272

 
1,950

 
877

Add: Cash NOI on tenant-funded landlord assets
390

 
—

 
—

 
84

 
41

 
390

 
4,154

Same office property NOI
$
65,875

 
$
64,523

 
$
61,859

 
$
66,129

 
$
65,065

 
$
192,257

 
$
192,644

Percentage change in same office property cash NOI (2)
1.41
%
 
 
 
 
 
 
 
 
 
0.12
%
 
 
(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 September 30, 2015
(square feet in thousands)
 
Baltimore/
Washington
Corridor
 
Northern
Virginia
 
San Antonio
 
Huntsville
 
Washington DC-Capital Riverfront
 
St. Mary’s & King George Counties
 
Greater
Baltimore
 
Total
Office
Renewed Space
 

 
 

 
 

 
 
 
 

 
 
 
 

 
 

Leased Square Feet
176

 
57

 
32

 
—

 
26

 
25

 
14

 
329

Expiring Square Feet
300

 
69

 
32

 
—

 
38

 
75

 
47

 
561

Vacated Square Feet
124

 
12

 
—

 
—

 
11

 
50

 
34

 
232

Retention Rate (% based upon square feet)
58.6
 %
 
82.4
 %
 
100.0
%
 
—
%
 
70.0
 %
 
33.3
 %
 
28.5
 %
 
58.7
 %
Statistics for Completed Leasing:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Average Committed Cost per Square Foot
$
16.63

 
$
24.93

 
$
6.66

 
$
—

 
$
14.38

 
$
3.13

 
$
12.89

 
$
15.75

Weighted Average Lease Term in Years
5.4

 
4.9

 
2.9

 
—

 
3.9

 
2.7

 
5.3

 
4.8

GAAP Rent Per Square Foot
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
        Renewal GAAP Rent
$
22.51

 
$
26.90

 
$
20.96

 
$
—

 
$
45.38

 
$
22.94

 
$
25.90

 
$
25.12

        Expiring GAAP Rent
$
21.81

 
$
26.81

 
$
17.29

 
$
—

 
$
47.39

 
$
24.44

 
$
25.03

 
$
24.62

        Change in GAAP Rent
3.2
 %
 
0.4
 %
 
21.3
%
 
—
%
 
(4.3
)%
 
(6.1
)%
 
3.5
 %
 
2.1
 %
Cash Rent Per Square Foot
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
        Renewal Cash Rent
$
22.71

 
$
28.81

 
$
19.89

 
$
—

 
$
46.23

 
$
23.82

 
$
25.75

 
$
25.58

        Expiring Cash Rent
$
23.70

 
$
31.13

 
$
18.09

 
$
—

 
$
47.96

 
$
25.38

 
$
27.98

 
$
26.69

        Change in Cash Rent
(4.2
)%
 
(7.5
)%
 
10.0
%
 
—
%
 
(3.6
)%
 
(6.1
)%
 
(8.0
)%
 
(4.1
)%
New Leases
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Development and Redevelopment Space
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Leased Square Feet
—

 
300

 
—

 
—

 
—

 
—

 
—

 
300

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

 
$
2.14

 
$
—

 
$
—

 
$
—

 
$
—

 
$
—

 
$
2.14

Weighted Average Lease Term in Years
—

 
10.0

 
—

 
—

 
—

 
—

 
—

 
10.0

GAAP Rent Per Square Foot
$
—

 
$
18.13

 
$
—

 
$
—

 
$
—

 
$
—

 
$
—

 
$
18.13

Cash Rent Per Square Foot
$
—

 
$
16.61

 
$
—

 
$
—

 
$
—

 
$
—

 
$
—

 
$
16.61

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Other New Leases (1)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Leased Square Feet
84

 
12

 
—

 
9

 
5

 
10

 
2

 
122

Statistics for Completed Leasing:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Average Committed Cost per Square Foot
$
40.99

 
$
73.58

 
$
—

 
$
3.78

 
$
32.97

 
$
22.75

 
$
10.98

 
$
39.07

Weighted Average Lease Term in Years
5.5

 
7.4

 
—

 
3.0

 
4.5

 
5.0

 
3.9

 
5.4

GAAP Rent Per Square Foot
$
24.08

 
$
26.78

 
$
—

 
$
21.02

 
$
35.50

 
$
21.44

 
$
25.97

 
$
24.40

Cash Rent Per Square Foot
$
23.85

 
$
25.87

 
$
—

 
$
20.50

 
$
38.00

 
$
20.83

 
$
26.25

 
$
24.17

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total Square Feet Leased
260

 
368

 
32

 
9

 
31

 
35

 
15

 
751

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(1)     Other New Leases includes acquired first generation space and vacated second generation space.
Notes: No expiration, renewal or retenanting activity transpired in our Greater Philadelphia 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.

16

Corporate Office Properties Trust
Leasing - Total Office Portfolio
Nine Months Ended September 30, 2015
(square feet in thousands)
 
Baltimore/
Washington
Corridor
 
Northern
Virginia
 
San Antonio
 
Huntsville
 
Washington DC-Capital Riverfront
 
St. Mary’s & King George Counties
 
Greater
Baltimore
 
Greater
Philadelphia
 
Total
Office
Renewed Space
 

 
 

 
 

 
 
 
 

 
 
 
 

 
 
 
 

Leased Square Feet
296

 
69

 
32

 
—

 
42

 
185

 
215

 
—

 
839

Expiring Square Feet
467

 
139

 
32

 
11

 
67

 
334

 
263

 
—

 
1,314

Vacated Square Feet
170

 
70

 
—

 
11

 
25

 
149

 
48

 
—

 
475

Retention Rate (% based upon square feet)
63.5
 %
 
49.5
 %
 
100.0
%
 
0.0
%
 
62.2
 %
 
55.5
 %
 
81.6
 %
 
0.0
%
 
63.9
 %
Statistics for Completed Leasing:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Average Committed Cost per Square Foot
$
12.17

 
$
23.92

 
$
6.66

 
$
—

 
$
18.61

 
$
4.95

 
$
12.13

 
$
—

 
$
11.64

Weighted Average Lease Term in Years
4.4

 
4.9

 
2.9

 
—

 
4.0

 
2.8

 
4.7

 
—

 
4.1

GAAP Rent Per Square Foot
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
        Renewal GAAP Rent
$
22.98

 
$
26.97

 
$
20.96

 
$
—

 
$
43.98

 
$
20.24

 
$
28.07

 
$
—

 
$
24.98

        Expiring GAAP Rent
$
22.17

 
$
27.13

 
$
17.29

 
$
—

 
$
47.88

 
$
20.22

 
$
26.68

 
$
—

 
$
24.40

        Change in GAAP Rent
3.7
 %
 
(0.6
)%
 
21.3
%
 
0.0
%
 
(8.1
)%
 
0.1
 %
 
5.2
 %
 
0.0
%
 
2.4
 %
Cash Rent Per Square Foot
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
        Renewal Cash Rent
$
23.08

 
$
28.42

 
$
19.89

 
$
—

 
$
44.65

 
$
20.46

 
$
27.29

 
$
—

 
$
24.97

        Expiring Cash Rent
$
23.99

 
$
30.87

 
$
18.09

 
$
—

 
$
48.85

 
$
21.07

 
$
27.88

 
$
—

 
$
25.92

        Change in Cash Rent
(3.8
)%
 
(7.9
)%
 
10.0
%
 
0.0
%
 
(8.6
)%
 
(2.9
)%
 
(2.1
)%
 
0.0
%
 
(3.7
)%
New Leases
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Development and Redevelopment Space
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Leased Square Feet
15

 
625

 
—

 
—

 
—

 
—

 
2

 
4

 
646

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

 
$
5.68

 
$
—

 
$
—

 
$
—

 
$
—

 
$
60.92

 
$
62.38

 
$
6.74

Weighted Average Lease Term in Years
5.1

 
10.1

 
—

 
—

 
—

 
—

 
5.3

 
6.7

 
9.9

GAAP Rent Per Square Foot
$
27.85

 
$
17.37

 
$
—

 
$
—

 
$
—

 
$
—

 
$
27.18

 
$
26.07

 
$
17.70

Cash Rent Per Square Foot
$
26.91

 
$
15.83

 
$
—

 
$
—

 
$
—

 
$
—

 
$
27.00

 
$
25.17

 
$
16.17

Other New Leases (1)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Leased Square Feet
205

 
51

 
—

 
20

 
15

 
27

 
39

 
—

 
357

Statistics for Completed Leasing:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Average Committed Cost per Square Foot
$
37.71

 
$
50.08

 
$
—

 
$
11.99

 
$
49.49

 
$
19.59

 
$
36.21

 
$
—

 
$
36.98

Weighted Average Lease Term in Years
5.9

 
7.0

 
—

 
4.2

 
4.9

 
5.9

 
6.1

 
—

 
5.9

GAAP Rent Per Square Foot
$
24.47

 
$
27.35

 
$
—

 
$
20.30

 
$
38.34

 
$
20.80

 
$
23.61

 
$
—

 
$
24.85

Cash Rent Per Square Foot
$
24.04

 
$
26.72

 
$
—

 
$
18.98

 
$
39.47

 
$
20.53

 
$
22.77

 
$
—

 
$
24.37

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total Square Feet Leased
516

 
745

 
32

 
20

 
57

 
212

 
256

 
4

 
1,842

(1)     Other New Leases includes acquired first generation space and vacated second generation space.
Activity is exclusive of owner occupied space and leases with less than a one-year term. Weighted average lease term was calculated assuming no exercise of any existing early termination rights. 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 9/30/15 (1)
(dollars and square feet in thousands, except per square foot amounts)
 
 
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)
 
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)
 
Percentage of Strategic Tenant Properties Annualized Rental Revenue Expiring
 
Annual Rental Revenue of Expiring Leases per Occupied Square Foot
Office Properties
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Baltimore/Washington Corridor
 
20

 
494

 
$
16,297

 
3.4
%
 
$
33.00

 
 
7

 
427

 
$
15,008

 
4.2
%
 
$
35.11

Northern Virginia
 
5

 
15

 
139

 
—
%
 
9.26

 
 
3

 
7

 
67

 
0.0
%
 
9.78

San Antonio
 
0

 
14

 
212

 
—
%
 
14.79

 
 
—

 
—

 
—

 
0.0
%
 
—

Washington, DC-Capitol Riverfront
 
3

 
6

 
304

 
0.1
%
 
50.36

 
 
3

 
6

 
304

 
0.1
%
 
50.36

St. Mary’s and King George Cos.
 
6

 
80

 
1,898

 
0.4
%
 
23.61

 
 
6

 
80

 
1,898

 
0.5
%
 
23.61

Greater Baltimore
 
6

 
15

 
465

 
0.1
%
 
30.91

 
 
3

 
11

 
369

 
0.1
%
 
33.25

2015
 
40

 
624

 
19,315

 
4.1
%
 
30.95

 
 
22

 
531

 
17,646

 
4.9
%
 
33.23

Baltimore/Washington Corridor
 
37

 
608

 
20,462

 
4.3
%
 
33.65

 
 
22

 
545

 
18,715

 
5.2
%
 
34.31

Northern Virginia
 
12

 
124

 
3,559

 
0.8
%
 
28.72

 
 
6

 
79

 
1,999

 
0.6
%
 
25.34

Washington, DC-Capitol Riverfront
 
3

 
42

 
2,132

 
0.4
%
 
51.14

 
 
3

 
42

 
2,132

 
0.6
%
 
51.14

St. Mary’s and King George Cos.
 
14

 
135

 
2,673

 
0.6
%
 
19.81

 
 
14

 
135

 
2,673

 
0.7
%
 
19.81

Greater Baltimore
 
11

 
105

 
2,775

 
0.6
%
 
26.45

 
 
—

 
—

 
—

 
0.0
%
 
—

Greater Philadelphia
 
2

 
6

 
89

 
—
%
 
15.00

 
 
—

 
—

 
—

 
0.0
%
 
—

2016
 
79

 
1,019

 
31,690

 
6.7
%
 
31.10

 
 
45

 
801

 
25,519
 
7.1
%
 
31.86

Baltimore/Washington Corridor
 
46

 
1,346

 
42,036

 
8.9
%
 
31.23

 
 
27

 
1,006

 
32,945

 
9.2
%
 
32.74

Northern Virginia
 
13

 
322

 
10,704

 
2.3
%
 
33.25

 
 
4

 
226

 
7,443

 
2.1
%
 
32.88

Huntsville
 
1

 
2

 
34

 
—
%
 
20.04

 
 
1

 
2

 
34

 
0.0
%
 
20.04

Washington, DC-Capitol Riverfront
 
1

 
1

 
79

 
—
%
 
52.91

 
 
1

 
1

 
79

 
0.0
%
 
52.91

St. Mary’s and King George Cos.
 
5

 
64

 
1,096

 
0.2
%
 
17.05

 
 
5

 
64

 
1,096

 
0.3
%
 
17.05

Greater Baltimore
 
7

 
62

 
1,612

 
0.3
%
 
25.95

 
 
2

 
3

 
91

 
0.0
%
 
28.67

Greater Philadelphia
 
1

 
5

 
136

 
—
%
 
28.29

 
 
—

 
—

 
—

 
0.0
%
 
—

2017
 
74

 
1,802

 
55,697

 
11.7
%
 
30.91

 
 
40

 
1,303

 
41,688

 
11.6
%
 
31.99

Baltimore/Washington Corridor
 
49

 
1,198

 
36,909

 
7.8
%
 
30.82

 
 
32

 
1,033

 
32,131

 
9.0
%
 
31.12

Northern Virginia
 
17

 
571

 
19,484

 
4.1
%
 
34.12

 
 
11

 
371

 
10,972

 
3.1
%
 
29.55

Huntsville
 
3

 
251

 
6,349

 
1.3
%
 
25.27

 
 
3

 
251

 
6,349

 
1.8
%
 
25.27

Washington, DC-Capitol Riverfront
 
3

 
46

 
2,206

 
0.5
%
 
47.87

 
 
3

 
46

 
2,206

 
0.6
%
 
47.87

St. Mary’s and King George Cos.
 
12

 
122

 
2,657

 
0.6
%
 
21.69

 
 
12

 
122

 
2,657

 
0.7
%
 
21.69

Greater Baltimore
 
8

 
197

 
6,107

 
1.3
%
 
31.02

 
 
—

 
—

 
—

 
0.0
%
 
—

Greater Philadelphia
 
1

 
4

 
109

 
—
%
 
25.78

 
 
—

 
—

 
—

 
0.0
%
 
—

2018
 
93

 
2,390

 
73,821

 
15.6
%
 
30.89

 
 
61

 
1,824

 
54,315

 
15.2
%
 
29.78


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)
 
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)
 
Percentage of Strategic Tenant Properties Annualized Rental Revenue Expiring
 
Annual Rental Revenue of Expiring Leases per Occupied Square Foot
Baltimore/Washington Corridor
 
47

 
1,383

 
42,584

 
9.0
%
 
30.79

 
 
30

 
1,132

 
36,303

 
10.1
%
 
32.07

Northern Virginia
 
13

 
376

 
13,641

 
2.9
%
 
36.24

 
 
6

 
258

 
9,515

 
2.7
%
 
36.89

Huntsville
 
4

 
71

 
1,417

 
0.3
%
 
19.99

 
 
4

 
71

 
1,417

 
0.4
%
 
19.99

Washington, DC-Capitol Riverfront
 
1

 
7

 
355

 
0.1
%
 
50.06

 
 
1

 
7

 
355

 
0.1
%
 
50.06

St. Mary’s and King George Cos.
 
7

 
35

 
796

 
0.2
%
 
22.76

 
 
7

 
35

 
796

 
0.2
%
 
22.76

Greater Baltimore
 
11

 
187

 
5,175

 
1.1
%
 
27.73

 
 
2

 
51

 
1,559

 
0.4
%
 
30.46

Greater Philadelphia
 
4

 
17

 
435

 
0.1
%
 
24.95

 
 
—

 
—

 
—

 
0.0
%
 
—

2019
 
87

 
2,076

 
64,403

 
13.6
%
 
31.02

 
 
50

 
1,554

 
49,945

 
13.9
%
 
32.14

Thereafter
 
219

 
8,077

 
229,514

 
48.4
%
 
28.42

 
 
118

 
5,804

 
168,981

 
47.2
%
 
29.12

Core/Strategic Tenant Niche Total/Avg.
 
592
 
15,987

 
$
474,440

 
100.0
%
 
$
29.68

 
 
336

 
11,817

 
$
358,094

 
100.0
%
 
$
30.30

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Properties Not Held For Long Term Investment
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Northern Virginia
 
2

 
397

 
13,820

 
41.4
%
 
$
34.77

 
 
 
 
 
 
 
 
 
 
 
Greater Baltimore
 
71

 
855

 
19,592

 
58.6
%
 
22.91

 
 
 
 
 
 
 
 
 
 
 
Properties Not Held For Long Term Investment Total/Avg.
 
73

 
1,253

 
$
33,412

 
100.0
%
 
$
26.67

 
 
 
 
 
 
 
 
 
 
 
Total Portfolio
 
665

 
17,240

 
$
507,852

 
 
 
$
29.46

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Note: 
As of September 30, 2015, the weighted average lease term is 4.9 years for the Core Office Properties, 4.7 years for the Strategic Tenant Niche Properties and 4.7 years for the Total Portfolio.

Wholesale Data Center Lease Expiration Analysis
Year of Lease Expiration
Number of Leases Expiring
Raised Floor Square Footage
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

527

2019
1
6

1.00

2,228

2020
3
30

13.35

18,058

2022
1
6

1.00

1,521

 
 
 

17.61

$
24,614

(1)
This expiration analysis reflects occupied space and includes the effect of early renewals completed on existing leases but excludes the effect of new tenant leases on square feet yet to commence as of September 30, 2015 of 140,000 for the portfolio, including 52,000 for the Strategic Tenant Niche Properties.
(2)
A number of our leases are subject to certain early termination provisions.  The year of lease expiration was computed assuming no exercise of such early termination rights.
(3)
Total Annualized Rental Revenue is the monthly contractual base rent as of September 30, 2015 multiplied by 12 plus the estimated annualized expense reimbursements under existing leases.


19

Corporate Office Properties Trust
Top 20 Office Tenants as of 9/30/15
(Based on Annualized Rental Revenue of
office properties, dollars and square feet in thousands)
Tenant
 
Number of Leases
 
Total
Occupied Square Feet
 
Percentage of
Total
Occupied Square Feet
 
Total
Annualized
Rental Revenue (1)
 
Percentage
of Total
Annualized 
Rental Revenue
 
Weighted
Average
Remaining Lease Term (2)
United States Government
(3)
65

 
3,815

 
22.1
%
 
$
140,560

 
27.7
%
 
5.3

Booz Allen Hamilton, Inc.
 
7

 
674

 
3.9
%
 
23,367

 
4.6
%
 
1.1

Northrop Grumman Corporation
 
9

 
764

 
4.4
%
 
22,462

 
4.4
%
 
4.9

The Boeing Company
 
12

 
739

 
4.3
%
 
21,832

 
4.3
%
 
3.4

General Dynamics Corporation
 
7

 
528

 
3.1
%
 
19,069

 
3.8
%
 
2.6

Vadata Inc.
 
6

 
964

 
5.6
%
 
10,656

 
2.1
%
 
9.1

Computer Sciences Corporation
 
3

 
279

 
1.6
%
 
10,531

 
2.1
%
 
3.6

CareFirst, Inc.
 
2

 
300

 
1.7
%
 
10,094

 
2.0
%
 
6.3

Wells Fargo & Company
 
3

 
190

 
1.1
%
 
8,144

 
1.6
%
 
3.3

Harris Corporation
 
7

 
210

 
1.2
%
 
6,047

 
1.2
%
 
2.9

AT&T Corporation
 
3

 
308

 
1.8
%
 
5,886

 
1.2
%
 
3.8

KEYW Corporation
 
2

 
211

 
1.2
%
 
5,803

 
1.1
%
 
8.3

Raytheon Company
 
6

 
168

 
1.0
%
 
5,776

 
1.1
%
 
2.4

Science Applications International Corp.
 
5

 
151

 
0.9
%
 
5,410

 
1.1
%
 
4.5

L-3 Communications Holdings, Inc.
 
1

 
159

 
0.9
%
 
5,246

 
1.0
%
 
4.0

Miles & Stockbridge, PC
 
2

 
157

 
0.9
%
 
4,916

 
1.0
%
 
11.9

University of Maryland
 
4

 
172

 
1.0
%
 
4,543

 
0.9
%
 
5.7

Engility Holdings, Inc.
 
3

 
118

 
0.7
%
 
4,409

 
0.9
%
 
2.5

Kratos Defense and Security Solutions
 
1

 
131

 
0.8
%
 
4,402

 
0.9
%
 
4.6

The MITRE Corporation
 
4

 
122

 
0.7
%
 
4,139

 
0.8
%
 
4.2

Subtotal Top 20 Office Tenants
 
152

 
10,159

 
58.9
%
 
323,292

 
63.7
%
 
4.7

All remaining tenants
 
513

 
7,080

 
41.1
%
 
184,560

 
36.3
%
 
4.8

Total/Weighted Average
 
665

 
17,240

 
100.0
%
 
$
507,852

 
100.0
%
 
4.7

 
(1)  Total Annualized Rental Revenue is the monthly contractual base rent as of September 30, 2015, multiplied by 12, plus the estimated annualized expense reimbursements under existing leases.
(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. The weighting of the lease term was computed using Total Rental Revenue.
(3)  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
(dollars and square feet in thousands)
Location
 
Property Region
 
Business Park/Submarket
 
Number of Buildings
 
Square Feet
 
Transaction
Date
 
Occupancy on Transaction Date
 
Transaction 
Price
Operating Property Acquisitions
Quarter Ended March 31,2015
 
 
 
 
 
 
 
 
 
 
 
 
 
 
250 West Pratt Street
 
Greater Baltimore
 
Baltimore City
 
1

 
367

 
3/19/2015
 
96.2%
 
$
61,887

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

 
237

 
4/15/2015
 
100.0%
 
80,504

Quarter Ended September 30, 2015
 
 
 
 
 
 
 
 
 
 
 
 
 
 
100 and 30 Light Street
 
Greater Baltimore
 
Baltimore City
 
1

 
558

(1)
8/7/2015
 
93.5%
 
121,231

Total - Nine Months Ended September 30, 2015
 
 
 
3

 
1,162

 
 
 
 
 
$
263,622

 
 
 
 
 
 
 
 
 
 
 
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

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Quarter Ended September 30, 2015
 
 
 
 
 
 
 
 
 
 
 
 
 
 
1550 Westbranch Drive
 
Northern Virginia
 
Tysons Corner
 
1
 
160

 
7/27/2015
 
100.0%
 
27,800

15000 and 15010 Conference Center Drive (2)
 
Northern Virginia
 
Westfields Corporate Center
 
2
 
665

 
8/28/2015
 
25.1%
 
167,335

Subtotal - Quarter Ended September 30, 2015
 
 
 
3
 
825

 
 
 
 
 
195,135

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total - Nine Months Ended September 30, 2015
 
 
 
3
 
825

 
 
 
 
 
$
213,210


(1)
30 Light Street is a 560-space structured parking garage adjacent to 100 Light Street, including 10,000 square feet included above.
(2)
Ownership in these properties was transferred to the mortgage lender on a $150.0 million nonrecourse mortgage loan that was secured by the properties. The debt obligation and accrued interest were removed from our balance sheet. The transaction price represents the amount of debt and accrued interest extinguished.

21

Corporate Office Properties Trust
Construction, Redevelopment and Land Owned/Controlled as of 9/30/15
(dollars and square feet in thousands)
 
Construction
Projects (1)
 
Redevelopment
Projects (2)
 
Land Owned/Controlled (3)
 
Total
Segment
Rentable Square Feet
Baltimore/Washington Corridor
311

 
156

 
4,320

 
4,787

Northern Virginia
699

 
—

 
1,839

 
2,538

San Antonio
—

 
—

 
1,033

 
1,033

Huntsville, Alabama
—

 
—

 
4,103

 
4,103

St. Mary’s and King George Counties
—

 
—

 
109

 
109

Greater Baltimore


 


 
1,510

 
1,510

Other Maryland
—

 
—

 
1,000

 
1,000

Greater Philadelphia
—

 
—

 
713

 
713

Other Land Owned/Controlled
—

 
—

 
3,118

 
3,118

Total
1,010

 
156

 
17,745

 
18,911

 
Costs to date by region
Baltimore/Washington Corridor
$
67,505

 
$
19,016

 
$
135,712

 
$
222,233

Northern Virginia
38,066

 
—

 
91,252

 
129,318

San Antonio
—

 
—

 
20,201

 
20,201

Huntsville, Alabama
—

 
—

 
14,658

 
14,658

St. Mary’s and King George Counties
—

 
—

 
2,588

 
2,588

Greater Baltimore
—

 
—

 
34,612

 
34,612

Other Maryland
—

 
—

 
9,284

 
9,284

Greater Philadelphia
—

 
—

 
17,533

 
17,533

Other Land Owned/Controlled
—

 
—

 
43,882

 
43,882

Total
$
105,571

 
$
19,016

 
$
369,722

 
$
494,309

 
 
 
 
 
 
 
 
Reconciliation to amounts included in projects in development or held for future development, including land costs, as reported on consolidated balance sheet
 
 
 
 
 
 
 
Operating properties
(36,911
)
 
(8,625
)
 
(32,233
)
 
(77,769
)
Deferred leasing costs and other assets
(1,783
)
 
—

 
—

 
(1,783
)
Projects in development or held for future development, including associated land costs (4)
$
66,877

 
$
10,391

 
$
337,489

 
$
414,757

(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 26.
(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 9/30/15 (1)
(dollars and square feet in thousands) 
 
 
 
Park/Submarket
Total Rentable Square Feet
Percentage Leased as of
as of 9/30/15 (2)
Actual or Anticipated Shell Completion Date
 Anticipated Operational Date (3)
 
Anticipated Total Cost
Cost to Date
Cost to Date Placed in Service
 
 
Property and Location
9/30/2015
 
310 Sentinel Way
Annapolis Junction, Maryland
 
National Business Park
191

0%
$
54,352

$
38,380

$
9,191

1Q 15
1Q 16
 
Patriot Point - DC15
   Ashburn, Virginia
 
Ashburn
149

100%
29,750

—

 
Q1 16
Q1 16
 
Patriot Point - DC16
   Ashburn, Virginia
 
Ashburn
149

100%
29,840

—

—

Q2 16
Q2 16
 
NOVA Office B
   Northern Virginia
 
Other
161

0%
41,500

29,628

3,320

2Q 15
2Q 16
 
7880 Milestone Parkway (4)
Hanover, Maryland
 
Arundel Preserve
120

74%
31,535

29,125

24,400

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

100%
46,525

8,438

—

3Q 17
3Q 17
 
Total Under Construction
 
 
1,010

62%
$
233,502

$
105,571

$
36,911

 
 

(1)
Includes properties under active construction and properties that we were contractually committed to construct as of September 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.
(4)
Although classified as under construction, 88,000 square feet were operational as of 9/30/15; NOI for this property was $387,000 and cash NOI was ($49,000) for the three months ended 9/30/15.



23

Corporate Office Properties Trust
Summary of Redevelopment Projects as of 9/30/15
(dollars and square feet in thousands) 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Park/Submarket
Total Rentable Square Feet
Percentage Leased as of
as of 9/30/15 (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
 
9/30/2015 (3)
6708 Alexander Bell Drive
Columbia, Maryland
 
Howard Co. Perimeter
52

0%
$
2,685

$
8,784

$
11,469

$
7,831

$
2,685

1Q 15
1Q 16
7134 Columbia Gateway Drive
Columbia, Maryland
 
Howard Co. Perimeter
22

0%
1,778

2,371

4,149

1,847

1,778

Q1 16
Q4 16
1201 Winterson Rd (AS 13)
Linthicum, Maryland
 
Airport Square
68

0%
3,118

12,933

16,051

8,024

3,118

4Q 15
4Q 16
Airport Square 5 (3)
Linthicum, Maryland
 
Airport Square
 
 
 
 
 
 
 
 
 
Retail Buildings
 
 
14

0%
785

5,598

6,383

1,055

785

3Q 16
3Q 17
Pad Site
 
 
N/A

100%
259

405

664

259

259

4Q 16
4Q 16
Total Under Redevelopment
156

3%
$
8,625

$
30,091

$
38,716

$
19,016

$
8,625

 
 
 
(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) The redevelopment of 921 Elkridge Landing (Airport Square 5) involves the demolition of the existing office property to develop a retail center to serve the submarket. Upon completion, the project’s retail amenities will include: newly constructed retail property totaling 14,200 square feet; and a 1.2 acre retail pad site already under ground lease for 20 years to a national food service provider. The total percentage leased reported above for redevelopment projects was calculated by including the square footage of the building to be constructed on the pad site by the lessee.



24

Corporate Office Properties Trust
Office Property Construction and Redevelopment Place in Service as of 9/30/15
(square feet in thousands)
 
 
 
 
Rentable Square Feet of Property
 
 
 
 
Space Placed in Service Percentage Leased as of 9/30/15
 
 
 
Square Feet Placed in Service
 
 
 
 
Year 2015
 
Property and Location
 
Park/Submarket
1st Quarter
2nd Quarter
3rd Quarter
Total
Ashburn Crossing - DC10
Ashburn, Virginia
 
Ashburn
121

121

—

—

121

100%
NOVA Office A
Ashburn, Virginia
 
Ashburn
159

159

—

—

159

100%
Sentry Gateway - Z
San Antonio, Texas
 
San Antonio
160

160

—

—

160

100%
731 Arbor Way (Hillcrest III)
Blue Bell, Pennsylvania
 
Philadelphia
141

111

—

30

141

100%
7400 Redstone
Huntsville, Alabama
 
Huntsville
69

—

69

—

69

100%
7880 Milestone Parkway
Hanover, Maryland
 
Arundel Preserve
120

—

—

88

88

100%
Southpoint Manassas DC12
Manassas, Virginia
 
Other
Northern Virginia
150

—

—

150

150

100%
Southpoint Manassas DC14
Manassas, Virginia
 
Other
Northern Virginia
150

—

—

150

150

100%
44417 Pecan Court
St. Mary’s County, Maryland
 
St. Mary’s County
29

—

—

29

29

0%
Total Construction/Redevelopment Placed Into Service
551

69

447

1,067

97%

25

Corporate Office Properties Trust
Summary of Land Owned/Controlled as of 9/30/15 (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

 
$
293,607

 
 
 
 
 
 
Other land owned/controlled
209

 
3,118

 
43,882

 
 
 
 
 
 
Land owned/controlled
1,450

 
17,745

 
$
337,489

 
 
 
 
 
 
(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 cash rents under tenant leases commence at the respective properties. The costs incurred on this land totaled $14.7 million as of 9/30/15.

26


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

 
309

 
—

 
910

 
0.92
%
Non-insiders
93,933

 
3,368

 
610

 
97,911

 
99.08
%
Total
94,534

 
3,677

 
610

 
98,821

 
100.00
%
COMMON EQUITY - End of Quarter
9/30/15
 
6/30/15
 
3/31/15
 
12/31/14
 
9/30/14
Unrestricted Common Shares
94,145

 
94,133

 
94,097

 
92,865

 
87,306

Restricted Common Shares
389

 
397

 
439

 
390

 
406

Common Shares
94,534

 
94,530

 
94,536

 
93,255

 
87,712

Common Units
3,677

 
3,680

 
3,680

 
3,838

 
3,860

Total
98,211

 
98,210

 
98,216

 
97,093

 
91,572

End of Quarter Common Share Price
$
21.03

 
$
23.54

 
$
29.38

 
$
28.37

 
$
25.72

Market Value of Common Shares/Units
$
2,065,377

 
$
2,311,863

 
$
2,885,586

 
$
2,754,528

 
$
2,355,232

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
2,065,377

 
2,311,863

 
2,885,586

 
2,754,528

 
2,355,232

Total Equity Market Capitalization
$
2,273,260

 
$
2,519,746

 
$
3,093,469

 
$
2,962,411

 
$
2,563,115

(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.

27

Corporate Office Properties Trust
Debt Analysis as of September 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 9/30/15 (1)
 
 
 
 
 
Debt Outstanding
 
 
 
 
 
 
 
 
 

 
 
 
 
Fixed rate
 
 
 
 
 
 
 
 
 

 
 
 
 
Secured debt
6.07%
 
6.03%
 
3.7
 
 
 
$
288,217

 
6.1%
(1)
 
Senior Unsecured Notes
4.32%
 
4.47%
 
7.8
 
 
 
1,188,241

 
4.3%
 
 
Other Unsecured Debt
0.00%
 
6.50%
 
10.6
 
 
 
1,533

 
0.0%
 
 
Total fixed rate debt
4.65%
 
4.78%
 
7.0
 
 
 
$
1,477,991

 
4.6%
(1)
 
Variable rate
 
 
 
 
 
 
 
 
 

 
 
 
 
Secured debt
2.45%
 
2.45%
 
0.1
 


 
$
36,249

 
2.4%
 
 
Unsecured Revolving Credit Facility
1.48%
 
1.48%
 
3.6
 
$
800,000

 
87,000

 
1.4%
 
 
Unsecured Term Loans
1.78%
 
1.78%
 
3.6
 


 
520,000

 
1.8%
 
 
Total variable rate debt
1.78%
 
1.78%
 
3.4
 


 
$
643,249

 
2.8%
(2)(3)
 
Total Consolidated Debt outstanding
3.78%
 
3.87%
 
5.9
 
 
 
$
2,121,240

 
4.1%
(2)(3)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Variable Rate Loans Subject to Interest Rate Swaps (2)
 
 
 
 
 
 
 
 
$
436,249

 
0.8%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
% of Fixed Rate Loans (2)
 
 
 
 
 
 
 
 
90.2
%
 
 
 
 
% of Variable Rate Loans (2)
 
 
 
 
 
 
 
 
9.8
%
 
 
 
 
 
 
 
 
 
 
 
 
 
100.0
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Recourse debt
 
 
 
 
 
 
 
 
$
1,850,532

 
 
 
 
Nonrecourse debt
 
 
 
 
 
 
 
 
270,708

 
 
 
 
Total Consolidated Debt outstanding
 
 
 
 
 
 
 
 
$
2,121,240

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



28

Corporate Office Properties Trust
Debt Analysis  (continued)
(dollars in thousands)
 
 
 
 
 
September 30, 2015
 
 
Secured debt
$
324,466

 
 
Unsecured debt
1,796,774

 
 
Numerator for debt to adjusted book ratio
$
2,121,240

 
 
 
 
 
 
Unencumbered adjusted book
$
4,314,886

 
 
Encumbered adjusted book
561,037

 
 
Total adjusted book
$
4,875,923

 
 
 
 
 
 
# of Operating Office Properties
 
 
 
Unencumbered
165

 
 
Encumbered
18

 
 
Total
183

 
 
 
 
 
 
Square Feet of Office Properties (in thousands)
 
 
 
Unencumbered
16,243

 
 
Encumbered
2,582

 
 
Total
18,825

 
 
 
 
 
 
 
Three Months Ended 9/30/15
 
 
NOI from unencumbered real estate operations
$
72,257

 
 
NOI from encumbered real estate operations
12,517

 
 
NOI from properties conveyed to extinguish debt in default
15

 
 
Total NOI from real estate operations
$
84,789

 
 
 
 
 
 
Unencumbered adjusted EBITDA
$
65,195

 
 
Encumbered adjusted EBITDA (1)
12,516

 
 
Total adjusted EBITDA (1)
$
77,711

 
 
 
 
 
 
Debt ratios (coverage ratios excluding capitalized interest) — All coverage computations include discontinued operations
Three Months Ended 9/30/15
 
 
Adjusted EBITDA debt service coverage ratio
3.6x
 
 
Adjusted EBITDA fixed charge coverage ratio
2.9x
 
 
Adjusted debt to in-place adjusted EBITDA ratio
6.7x
 
 
 
 
 
 
 
As of and for Three Months Ended 9/30/15
Unsecured Senior Notes Covenants
Actual
 
Required
Total Debt / Total Assets
44.8%
 
Less than 60%
Secured Debt / Total Assets
6.8%
 
Less than 40%
Debt Service Coverage
3.4x
 
Greater than 1.5x
Unencumbered Assets / Unsecured Debt
232.2%
 
Greater than 150%
(1)
Except for Unsecured Senior Notes Covenants, amounts exclude the effect of properties that served as collateral for debt in default that we extinguished via conveyance of such properties.

29

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

Unsecured Revolving Credit Facility (1)
LIBOR + 1.20%
 
1.48%
 
$
—

$
—

$
—

$
—

$
87,000

$
—

$
87,000

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

—

—

—

—

300,000

300,000

Due 5/15/23
3.60%
 
3.70%
 
—

—

—

—

—

350,000

350,000

Due 2/15/24
5.25%
 
5.49%
 
—

—

—

—

—

250,000

250,000

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 (2)
LIBOR + 1.50%
 
1.70%
 
—

100,000

—

—


—

100,000

2019 maturities
LIBOR + 2.10%
 
2.30%
 
—

—

—

—

120,000

—

120,000

2020 maturities
LIBOR + 1.40%
 
1.60%
 
—

—

—

—

—

300,000

300,000

2026 maturities
0.00%
 
0.00%
 
50

200

200

200

200

1,261

2,111

Total Other Unsecured Debt
 
 
 
 
50

100,200

200

200

120,200

301,261

522,111

 
 
 
 
 
 
 
 
 
 
 
 
Total Unsecured Debt
 
 
 
 
$
50

$
100,200

$
200

$
200

$
207,200

$
1,501,261

$
1,809,111

Secured Debt
 
 
 
 
 
 
 
 
 
 
 
Fixed Rate Secured Debt
 
 
 
 
 
 
 
 
 
 
 
 2016 maturities
7.22%
 
7.21%
 
$
1,061

$
169,343

$
—

$
—

$
—

$
—

$
170,404

 2017 maturities
5.45%
 
5.85%
 
48

200

4,302

—

—

—

4,550

 Thereafter
4.36%
 
4.27%
 
401

2,186

2,684

2,817

2,917

101,754

112,759

Total Fixed Rate Secured Debt
 
 
 
 
1,510

171,729

6,986

2,817

2,917

101,754

287,713

Variable Rate Secured Debt (3)
LIBOR + 2.25%
 
2.45%
 
36,249

—

—

—

—

—

36,249

Total Secured Debt
 
 
 
 
$
37,759

$
171,729

$
6,986

$
2,817

$
2,917

$
101,754

$
323,962

 
 
 
 
 
 
 
 
 
 
 
 
Total Debt
 
 
 
 
$
37,809

$
271,929

$
7,186

$
3,017

$
210,117

$
1,603,015

$
2,133,073

 
 
 
 
 
 
 
 
 
 
 
 
Fixed Rate Debt
4.65%
 
4.78%
 
$
1,560

$
171,929

$
7,186

$
3,017

$
3,117

$
1,303,015

$
1,489,824

Variable Rate Debt
1.78%
 
1.78%
 
36,249

100,000

—

—

207,000

300,000

643,249

Total Debt
 
 
 
 
$
37,809

$
271,929

$
7,186

$
3,017

$
210,117

$
1,603,015

$
2,133,073

 
 
 
 
 
 
 
 
 
 
 
 
Balloon Payments

 

 
$
36,175

$
266,062

$
4,110

$
—

$
207,000

$
1,591,227

$
2,104,574

Scheduled Principal Amortization

 

 
1,633

5,866

3,077

3,017

3,117

11,789

28,499

Total Debt
 
 
 
 
$
37,808

$
271,928

$
7,187

$
3,017

$
210,117

$
1,603,016

$
2,133,073

 
 
 
 
 
 
 
 
Net discount
 
(11,833
)
 
 
 
 
 
 
 
 
Numerator for debt to adjusted book
$
2,121,240

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

(1)
Matures in May 2019, and may be extended by two six-month periods at our option, subject to certain conditions.
(2)
Matures in March 2016, and may be extended by three six-month periods at our option, subject to certain conditions.
(3)
In October 2015, the maturity of this $36.2 million loan was extended to May 2016. The effect of this extension is not reflected in the above presentation.



30

Corporate Office Properties Trust
Consolidated Joint Ventures as of 9/30/15
(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%
$
55,343

$
36,249

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

100.0%
100.0%
86,408

37,023

85%
Total/Average
737

100.0%
100.0%
$
141,751

$
73,272

 
NOI of Operating Properties for the Three Months Ended 9/30/15 (2)
$
3,470

 
 
 

 

 
NOI of Operating Properties for the Nine Months Ended 9/30/15 (2)
$
8,766

 
 
 
 
 
 
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

 
58,498

—

85%
Total
4,628

 
$
61,995

$
—

 
 
(1)  Total assets includes the total assets recorded on the books of the consolidated joint venture plus any outside investment basis related to the applicable joint venture and related joint ventures (formed and to be formed).
(2)
Represents gross NOI of the joint venture operating properties before allocation to joint venture partners.

31


Corporate Office Properties Trust
Supplementary Reconciliations of Non-GAAP Measures
(in thousands)
 
Three Months Ended
 
Nine Months Ended
 
9/30/15
 
6/30/15
 
3/31/15
 
12/31/14
 
9/30/14
 
9/30/15
 
9/30/14
Net income
$
94,294

 
$
17,232

 
$
14,735

 
$
5,937

 
$
24,548

 
$
126,261

 
$
39,269

Interest expense on continuing and discontinued operations
24,121

 
21,768

 
20,838

 
23,286

 
24,802

 
66,727

 
69,107

Income tax expense
48

 
50

 
55

 
53

 
101

 
153

 
257

Depreciation of furniture, fixtures and equipment
590

 
527

 
492

 
513

 
543

 
1,609

 
1,891

Real estate-related depreciation and amortization
38,403

 
33,786

 
31,599

 
31,358

 
30,237

 
103,788

 
104,728

Impairment losses
2,307

 
1,239

 
233

 
48

 
42

 
3,779

 
1,371

(Gain) loss on early extinguishment of debt on continuing and discont. operations
(85,745
)
 
(315
)
 
3

 
9,106

 
176

 
(86,057
)
 
562

Gain on sales of operating properties
(15
)
 
—

 
—

 
2

 
(5,123
)
 
(15
)
 
(5,119
)
Gain on sales of non-operational properties
—

 
1

 
(3,986
)
 
(43
)
 
(5,535
)
 
(3,985
)
 
(5,535
)
Net loss (gain) on investments in unconsolidated entities included in interest and other income
98

 
(52
)
 
75

 
(74
)
 
63

 
121

 
365

Operating property acquisition costs
2,695

 
361

 
1,046

 
—

 
—

 
4,102

 
—

EBITDA from properties conveyed to extinguish debt in default
(15
)
 
(843
)
 
90

 
(828
)
 
(732
)
 
(768
)
 
(1,263
)
Demolition costs on redevelopment properties
930

 
66

 
175

 
—

 
—

 
1,171

 
—

Executive transition costs
—

 
—

 
—

 
1,056

 
—

 
—

 
—

Adjusted EBITDA
$
77,711

 
$
73,820

 
$
65,355

 
$
70,414

 
$
69,122

 
$
216,886

 
$
205,633

Add back:
 

 
 

 
 

 
 

 
 

 
 

 
 

General, administrative and leasing expenses on continuing and discontinued operations
7,439

 
7,534

 
7,891

 
8,912

 
7,211

 
22,864

 
22,882

Business development expenses and land carry costs on continuing and discontinued operations, excluding operating property acquisition costs and demolition costs on redevelopment properties
1,948

 
2,196

 
1,569

 
1,466

 
1,430

 
5,713

 
4,107

Depreciation of FF&E
(590
)
 
(527
)
 
(492
)
 
(513
)
 
(543
)
 
(1,609
)
 
(1,891
)
Income from construction contracts and other service operations
(926
)
 
(879
)
 
(826
)
 
(1,653
)
 
(1,146
)
 
(2,631
)
 
(5,037
)
Interest and other income, excluding net loss/gain on investments in unconsolidated entities
(790
)
 
(1,190
)
 
(1,358
)
 
(1,074
)
 
(1,254
)
 
(3,338
)
 
(4,140
)
Equity in (income) loss of unconsolidated entities
(18
)
 
(9
)
 
(25
)
 
(23
)
 
(193
)
 
(52
)
 
(206
)
NOI from properties conveyed to extinguish debt in default
15

 
843

 
(90
)
 
828

 
732

 
768

 
1,263

Executive transition costs
—

 
—

 
—

 
(1,056
)
 
—

 
—

 
—

NOI from real estate operations
$
84,789

 
$
81,788

 
$
72,024

 
$
77,301

 
$
75,359

 
$
238,601

 
$
222,611

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Adjusted EBITDA
$
77,711

 
$
73,820

 
$
65,355

 
$
70,414

 
$
69,122

 
 
 
 
Proforma NOI adjustment for mid-period property changes
1,309

 
509

 
1,573

 
—

 
(12
)
 
 
 
 
In-place adjusted EBITDA
$
79,020

 
$
74,329

 
$
66,928

 
$
70,414

 
$
69,110

 


 


 
 
 
 
 
 
 
 
 
 
 
 
 
 

32

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

 
 

 
 

 
 

 
 

 
 

 
 

Revenues from real estate operations
$
—

 
$
4

 
$
—

 
$
(2
)
 
$
(36
)
 
$
4

 
$
(12
)
Property operating expenses
—

 
11

 
(5
)
 
24

 
175

 
6

 
111

Gain (loss) on early extinguishment of debt
—

 
380

 
—

 
—

 
—

 
380

 
(116
)
Impairment (losses) recoveries
—

 
(1
)
 
(233
)
 
—

 
24

 
(234
)
 
(3
)
Gain on sales of depreciated real estate properties
—

 
—

 
—

 
—

 
28

 
—

 
24

Discontinued operations
$
—

 
$
394

 
$
(238
)
 
$
22

 
$
191

 
$
156

 
$
4

GAAP revenues from real estate operations from continuing operations
$
133,686

 
$
128,191

 
$
122,710

 
$
120,613

 
$
118,276

 
$
384,587

 
$
359,112

Revenues from discontinued operations
—

 
4

 
—

 
(2
)
 
(36
)
 
4

 
(12
)
Real estate revenues
$
133,686

 
$
128,195

 
$
122,710

 
$
120,611

 
$
118,240

 
$
384,591

 
$
359,100

GAAP property operating expenses from continuing operations
$
48,897

 
$
46,418

 
$
50,681

 
$
43,334

 
$
43,056

 
$
145,996

 
$
136,600

Property operating expenses from discontinued operations
—

 
(11
)
 
5

 
(24
)
 
(175
)
 
(6
)
 
(111
)
Real estate property operating expenses
$
48,897

 
$
46,407

 
$
50,686

 
$
43,310

 
$
42,881

 
$
145,990

 
$
136,489

Gain on sales of real estate, net, per statements of operations
$
15

 
$
(1
)
 
$
3,986

 
$
41

 
$
10,630

 
$
4,000

 
$
10,630

Gain on sales of real estate from discontinued operations
—

 
—

 
—

 
—

 
28

 
—

 
24

Gain on sales of real estate from continuing and discont. operations
15

 
(1
)
 
3,986

 
41

 
10,658

 
4,000

 
10,654

Gain on sales of non-operating properties
—

 
1

 
(3,986
)
 
(43
)
 
(5,535
)
 
(3,985
)
 
(5,535
)
Gain on sales of operating properties
$
15

 
$
—

 
$
—

 
$
(2
)
 
$
5,123

 
$
15

 
$
5,119

Impairment losses, per statements of operations
$
2,307

 
$
1,238

 
$
—

 
$
48

 
$
66

 
$
3,545

 
$
1,368

Impairment losses (recoveries) on discontinued operations
—

 
1

 
233

 
—

 
(24
)
 
234

 
3

Total impairment losses
$
2,307

 
$
1,239

 
$
233

 
$
48

 
$
42

 
$
3,779

 
$
1,371

Impairment (losses) recoveries on previously depreciated operating properties
(2,307
)
 
(1,239
)
 
(233
)
 
(48
)
 
7

 
(3,779
)
 
(1,322
)
Impairment losses on non-operating properties
$
—

 
$
—

 
$
—

 
$
—

 
$
49

 
$
—

 
$
49


33

Corporate Office Properties Trust
Supplementary Reconciliations of Non-GAAP Measures (continued)
(dollars in thousands)
 
Three Months Ended
 
Nine Months Ended
 
9/30/15
 
6/30/15
 
3/31/15
 
12/31/14
 
9/30/14
 
9/30/15
 
9/30/14
Total interest expense
$
24,121

 
$
21,768

 
$
20,838

 
$
23,286

 
$
24,802

 
$
66,727

 
$
69,107

Less: Amortization of deferred financing costs
(1,203
)
 
(1,146
)
 
(990
)
 
(1,020
)
 
(1,357
)
 
(3,339
)
 
(3,646
)
Less: Amortization of net debt discounts and prem., net of amounts capitalized
(321
)
 
(264
)
 
(264
)
 
(261
)
 
(259
)
 
(849
)
 
(659
)
Less: Interest expense on debt in default extinguished via conveyance of properties
(2,781
)
 
(4,261
)
 
(4,182
)
 
(4,320
)
 
(4,231
)
 
(11,224
)
 
(8,364
)
Denominator for interest coverage
19,816

 
16,097

 
15,402

 
17,685

 
18,955

 
51,315

 
56,438

Scheduled principal amortization
1,692

 
1,670

 
1,649

 
1,603

 
1,477

 
5,011

 
4,914

Denominator for debt service coverage
21,508

 
17,767

 
17,051

 
19,288

 
20,432

 
56,326

 
61,352

Capitalized interest
1,559

 
1,950

 
2,132

 
1,740

 
1,314

 
5,641

 
4,325

Preferred share dividends - redeemable non-convertible
3,552

 
3,553

 
3,552

 
3,552

 
3,553

 
10,657

 
12,387

Preferred unit distributions
165

 
165

 
165

 
165

 
165

 
495

 
495

Denominator for fixed charge coverage
$
26,784

 
$
23,435

 
$
22,900

 
$
24,745

 
$
25,464

 
$
73,119

 
$
78,559

Preferred share dividends
$
3,552

 
$
3,553

 
$
3,552

 
$
3,552

 
$
3,553

 
$
10,657

 
$
12,387

Preferred unit distributions
165

 
165

 
165

 
165

 
165

 
495

 
495

Common share dividends
26,000

 
26,002

 
25,998

 
25,638

 
24,112

 
78,000

 
72,306

Common unit distributions
1,011

 
1,012

 
1,012

 
1,055

 
1,062

 
3,035

 
3,215

Total dividends/distributions
$
30,728

 
$
30,732

 
$
30,727

 
$
30,410

 
$
28,892

 
$
92,187

 
$
88,403

Common share dividends
$
26,000

 
$
26,002

 
$
25,998

 
$
25,638

 
$
24,112

 
$
78,000

 
$
72,306

Common unit distributions
1,011

 
1,012

 
1,012

 
1,055

 
1,062

 
3,035

 
3,215

Dividends and distributions on dilutive preferred securities
537

 
—

 
—

 
—

 
—

 
—

 
—

Dividends and distributions for diluted FFO payout ratio
27,548

 
27,014

 
27,010

 
26,693

 
25,174

 
81,035

 
75,521

Dividends and distributions on antidilutive preferred securities
(537
)
 
—

 
—

 
—

 
—

 
—

 
—

Dividends and distributions for other payout ratios
$
27,011

 
$
27,014

 
$
27,010

 
$
26,693

 
$
25,174

 
$
81,035

 
$
75,521

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total Assets
$
3,918,473

 
$
3,910,921

 
$
3,777,155

 
$
3,670,257

 
$
3,680,188

 
$
3,918,473

 
$
3,680,188

Accumulated depreciation
675,747

 
723,470

 
724,539

 
703,083

 
679,598

 
675,747

 
679,598

Accumulated depreciation included in assets held for sale
65,872

 
24,930

 
—

 
—

 
—

 
65,872

 
—

Accumulated amort. of real estate intangibles and deferred leasing costs
189,571

 
211,522

 
219,437

 
214,611

 
207,864

 
189,571

 
207,864

Accumulated amortization of real estate intangibles and deferred leasing costs included in assets held for sale
26,260

 
15,271

 
—

 
—

 
—

 
26,260

 
—

Less: Adj. book assoc. with properties conveyed to extinguish debt in default
—

 
(130,471
)
 
(131,623
)
 
(131,118
)
 
(130,346
)
 
—

 
(130,346
)
Adjusted book
$
4,875,923

 
$
4,755,643

 
$
4,589,508

 
$
4,456,833

 
$
4,437,304

 
$
4,875,923

 
$
4,437,304

Debt, net
$
2,121,240

 
$
2,130,170

 
$
1,999,622

 
$
1,920,057

 
$
2,049,992

 
 
 
 
Less: Debt in default extinguished via conveyance of properties
—

 
(150,000
)
 
(150,000
)
 
(150,000
)
 
(150,000
)
 


 
 
Numerator for debt to adjusted book ratio
2,121,240

 
1,980,170

 
1,849,622

 
1,770,057

 
1,899,992

 
 
 
 
Less: Cash and cash equivalents
(3,840
)
 
(37,074
)
 
(4,429
)
 
(6,077
)
 
(40,018
)
 
 
 
 
Adjusted debt
$
2,117,400

 
$
1,943,096

 
$
1,845,193

 
$
1,763,980

 
$
1,859,974

 


 



34


Corporate Office Properties Trust
Definitions

Non-GAAP Measures

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


35


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 that was 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 that secured non-recourse debt on which we defaulted and, subsequently, extinguished via conveyance of such 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 that excludes these items is a

36


Corporate Office Properties Trust
Definitions

useful supplemental measure in evaluating operating performance.  The adjustment for FFO associated with properties securing non-recourse debt on which we 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 or placed into service subsequent to the commencement of a quarter made in order to reflect a full quarter

37


Corporate Office Properties Trust
Definitions

of ownership/operations. We believe that in-place adjusted EBITDA is a useful supplemental measure of performance for assessing our un-levered performance, as further adjusted for changes in operating properties subsequent to the commencement of a quarter.  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.


38


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. 

39


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.

40