EXHIBIT 99.1





 




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. We own, manage, lease, develop and selectively acquire office and data center properties. The majority of our portfolio is in locations that support United States Government agencies and their contractors, most of whom are engaged in national security, defense and information technology (“IT”) related activities servicing what we believe are growing, durable priority missions; we refer to these properties as Defense/IT Locations. We also own a complementary portfolio of traditional office properties located in select urban/urban-like submarkets within our regional footprint with durable Class-A office fundamentals and characteristics; these properties are included in a segment referred to as Regional Office Properties. As of December 31, 2015, we derived 84% of our core portfolio annualized revenue from Defense/IT Locations and 16% from our Regional Office Properties. As of December 31, 2015, our core portfolio of 157 office properties encompassed 17.0 million square feet and was 93.9% leased. As of the same date, we 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.

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 van Dijkum
 
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
 
Years Ended
SUMMARY OF RESULTS 
 
12/31/15
 
9/30/15
 
6/30/15
 
3/31/15
 
12/31/14
 
12/31/15
 
12/31/14
Same Office Property NOI
 
$
65,052

 
$
65,656

 
$
64,328

 
$
61,565

 
$
65,903

 
$
256,601

 
$
257,743

Same Office Property Cash NOI
 
$
64,651

 
$
64,375

 
$
62,434

 
$
59,802

 
$
63,089

 
$
251,262

 
$
249,405

NOI from real estate operations
 
$
85,979

 
$
84,789

 
$
81,788

 
$
72,024

 
$
77,301

 
$
324,580

 
$
299,912

Adjusted EBITDA
 
$
79,718

 
$
78,932

 
$
75,001

 
$
66,216

 
$
71,083

 
$
299,867

 
$
278,727

Net income attributable to COPT common shareholders
 
$
55,811

 
$
86,248

 
$
12,228

 
$
9,803

 
$
1,352

 
$
164,090

 
$
22,547

FFO - per NAREIT
 
$
35,138

 
$
134,989

 
$
52,257

 
$
46,567

 
$
37,345

 
$
268,951

 
$
177,545

FFO - as adjusted for comparability
 
$
55,596

 
$
55,635

 
$
55,789

 
$
48,076

 
$
50,957

 
$
215,096

 
$
195,437

Diluted FFO available to common share and common unit holders
 
$
30,488

 
$
130,241

 
$
47,265

 
$
41,997

 
$
32,638

 
$
249,454

 
$
155,296

Diluted FFO available to common share and common unit holders, as adjusted for comparability
 
$
50,858

 
$
50,684

 
$
50,783

 
$
43,499

 
$
46,191

 
$
195,824

 
$
173,110

Diluted AFFO avail. to common share and common unit holders
 
$
31,592

 
$
36,570

 
$
40,812

 
$
37,724

 
$
40,136

 
$
146,698

 
$
133,181

Per share - diluted:
 
 

 
 

 
 

 
 

 
 

 
 

 
 
EPS
 
$
0.59

 
$
0.91

 
$
0.13

 
$
0.10

 
$
0.01

 
$
1.74

 
$
0.25

FFO - NAREIT
 
$
0.31

 
$
1.32

 
$
0.48

 
$
0.43

 
$
0.34

 
$
2.55

 
$
1.69

FFO - as adjusted for comparability
 
$
0.52

 
$
0.52

 
$
0.52

 
$
0.45

 
$
0.49

 
$
2.01

 
$
1.88

Dividend per common share
 
$
0.275

 
$
0.275

 
$
0.275

 
$
0.275

 
$
0.275

 
$
1.100

 
$
1.100

Payout ratios:
 
 

 
 

 
 

 
 

 
 

 
 

 
 
Diluted FFO
 
88.6
%
 
21.2
%
 
57.2
%
 
64.3
%
 
81.8
%
 
43.3
%
 
65.8
%
Diluted FFO - as adjusted for comparability
 
53.1
%
 
53.3
%
 
53.2
%
 
62.1
%
 
57.8
%
 
55.2
%
 
59.0
%
Diluted AFFO
 
85.5
%
 
73.9
%
 
66.2
%
 
71.6
%
 
66.5
%
 
73.7
%
 
76.7
%
Rental revenue operating margin
 
80.0
%
 
77.7
%
 
77.5
%
 
73.3
%
 
79.0
%
 
77.2
%
 
77.6
%
CAPITALIZATION
 
 

 
 

 
 
 
 

 
 

 
 

 
 
Total Market Capitalization
 
$
4,429,537

 
$
4,394,500

 
$
4,649,916

 
$
5,093,091

 
$
4,882,468

 
 
 
 
Total Equity Market Capitalization
 
$
2,351,785

 
$
2,273,260

 
$
2,519,746

 
$
3,093,469

 
$
2,962,411

 
 
 
 
Debt, net
 
$
2,077,752

 
$
2,114,859

 
$
2,123,308

 
$
1,994,118

 
$
1,914,036

 
 
 
 
Debt to Adjusted book
 
42.9
%
 
43.4
%
 
41.6
%
 
40.2
%
 
39.6
%
 
 
 
 
Adjusted EBITDA interest coverage ratio
 
3.9
x
 
4.0
x
 
4.7
x
 
4.3
x
 
4.0
x
 
4.2
x
 
3.8
x
Adjusted EBITDA debt service coverage ratio
 
3.6
x
 
3.7
x
 
4.2
x
 
3.9
x
 
3.7
x
 
3.8
x
 
3.5
x
Adjusted EBITDA fixed charge coverage ratio
 
2.9
x
 
2.9
x
 
3.2
x
 
2.9
x
 
2.9
x
 
3.0
x
 
2.7
x
Adjusted debt to in-place adjusted EBITDA ratio
 
6.5
x
 
6.6
x
 
6.4
x
 
6.8
x
 
6.2
x
 
N/A

 
N/A

OTHER
 
 

 
 

 
 

 
 

 
 

 
 

 
 
Revenue from early termination of leases
 
$
400

 
$
159

 
$
661

 
$
603

 
$
611

 
$
1,823

 
$
2,034

Capitalized interest costs
 
$
1,510

 
$
1,559

 
$
1,950

 
$
2,132

 
$
1,740

 
$
7,151

 
$
6,065



3


Corporate Office Properties Trust
Selected Consolidated Portfolio Data
 
 
 
 
 
 
 
 
 
 
 
12/31/15
 
9/30/15
 
6/30/15
 
3/31/15
 
12/31/14
 
 
 
 
 
(1)
 
(1)
 
(1)
# of Operating Office Properties
 
 
 
 
 
 
 
 
 
Total Portfolio
177

 
183

 
179
 
178

 
173

Core Portfolio
157

 
164

 
172
 
178

 
173

Same Office Properties
145

 
145

 
145
 
145

 
145

 
 
 
 
 
 
 
 
 
 
% Occupied
 
 
 
 
 
 
 
 
 
Total Portfolio
91.6
%
 
91.6
%
 
92.0
%
 
91.3
%
 
90.9
%
Core Portfolio
92.7
%
 
91.3
%
 
91.9
%
 
91.3
%
 
90.9
%
Same Office Properties
90.9
%
 
90.4
%
 
91.1
%
 
90.5
%
 
90.6
%
 
 
 
 
 
 
 
 
 
 
% Leased
 
 
 
 
 
 
 
 
 
Total Portfolio
92.7
%
 
92.3
%
 
92.9
%
 
92.4
%
 
92.4
%
Core Portfolio
93.9
%
 
92.1
%
 
92.8
%
 
92.4
%
 
92.4
%
Same Office Properties
92.3
%
 
91.3
%
 
92
%
 
91.8
%
 
92.2
%
 
 
 
 
 
 
 
 
 
 
Square Feet of Office Properties (in thousands)
 
 
 
 
 
 
 
 
 
Total Portfolio
18,053

 
18,825

 
17,987

 
17,706

 
16,790

Core Portfolio
17,038

 
17,515

 
17,403

 
17,706

 
16,790

Same Office Properties
14,490

 
14,490

 
14,490

 
14,490

 
14,490

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

 
19.25

 
19.25

 
19.25

 
18.00

MWs Leased (2)
17.81

 
17.81

 
17.81

 
17.81

 
6.56

MWs Operational
19.25

 
19.25

 
12.50

 
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 December 31, 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)
 
12/31/15
 
9/30/15
 
6/30/15
 
3/31/15
 
12/31/14
Assets
 

 
 

 
 

 
 

 
 

Properties, net
 

 
 

 
 

 
 

 
 

Operating properties, net
$
2,920,529

 
$
2,932,843

 
$
2,896,809

 
$
2,888,534

 
$
2,751,488

Construction and redevelopment in progress, including land (1)
137,043

 
77,268

 
192,815

 
161,637

 
222,146

Land held (1)
292,176

 
337,489

 
329,176

 
327,981

 
323,280

Total properties, net
3,349,748

 
3,347,600

 
3,418,800

 
3,378,152

 
3,296,914

Assets held for sale
96,782

 
150,572

 
77,013

 

 
14,339

Cash and cash equivalents
60,310

 
3,840

 
37,074

 
4,429

 
6,077

Restricted cash and marketable securities
7,716

 
9,286

 
10,121

 
11,445

 
9,069

Accounts receivable, net
29,167

 
23,706

 
20,118

 
37,382

 
30,698

Deferred rent receivable, net
105,484

 
103,064

 
101,488

 
98,340

 
95,910

Intangible assets on real estate acquisitions, net
98,338

 
106,174

 
81,728

 
61,477

 
43,854

Deferred leasing costs, net (2)
53,868

 
51,509

 
53,611

 
55,365

 
53,927

Investing receivables
47,875

 
46,821

 
45,766

 
52,814

 
52,147

Prepaid expenses and other assets, net (2)
60,024

 
69,520

 
58,340

 
72,247

 
61,301

Total assets
$
3,909,312

 
$
3,912,092

 
$
3,904,059

 
$
3,771,651

 
$
3,664,236

Liabilities and equity
 

 
 

 
 

 
 

 
 

Liabilities:
 

 
 

 
 

 
 

 
 

Debt, net (2)
$
2,077,752

 
$
2,114,859

 
$
2,123,308

 
$
1,994,118

 
$
1,914,036

Accounts payable and accrued expenses
91,755

 
98,551

 
155,989

 
138,214

 
123,035

Rents received in advance and security deposits
37,148

 
34,504

 
27,371

 
31,551

 
31,011

Dividends and distributions payable
30,178

 
30,182

 
30,178

 
30,174

 
29,862

Deferred revenue associated with operating leases
19,758

 
20,113

 
15,179

 
14,697

 
13,031

Interest rate derivatives
3,160

 
5,844

 
3,121

 
4,282

 
1,855

Other liabilities
13,779

 
8,524

 
11,866

 
9,990

 
12,105

Total liabilities
2,273,530

 
2,312,577

 
2,367,012

 
2,223,026

 
2,124,935

Redeemable noncontrolling interests
19,218

 
19,608

 
19,414

 
18,895

 
18,417

Equity:
 

 
 

 
 

 
 
 
 
COPT’s shareholders’ equity:
 

 
 

 
 

 
 
 
 
Preferred shares at liquidation preference
199,083

 
199,083

 
199,083

 
199,083

 
199,083

Common shares
945

 
945

 
946

 
945

 
933

Additional paid-in capital
2,004,507

 
2,002,730

 
2,000,775

 
1,999,708

 
1,969,968

Cumulative distributions in excess of net income
(657,172
)
 
(686,986
)
 
(747,234
)
 
(733,459
)
 
(717,264
)
Accumulated other comprehensive loss
(2,838
)
 
(5,823
)
 
(3,141
)
 
(3,947
)
 
(1,297
)
Total COPT’s shareholders’ equity
1,544,525

 
1,509,949

 
1,450,429

 
1,462,330

 
1,451,423

Noncontrolling interests in subsidiaries
 

 
 

 
 

 
 

 
 

Common units in the Operating Partnership
52,359

 
50,992

 
48,707

 
49,168

 
51,534

Preferred units in the Operating Partnership
8,800

 
8,800

 
8,800

 
8,800

 
8,800

Other consolidated entities
10,880

 
10,166

 
9,697

 
9,432

 
9,127

Total noncontrolling interests in subsidiaries
72,039

 
69,958

 
67,204

 
67,400

 
69,461

Total equity
1,616,564

 
1,579,907

 
1,517,633

 
1,529,730

 
1,520,884

Total liabilities, redeemable noncontrolling interest and equity
$
3,909,312

 
$
3,912,092

 
$
3,904,059

 
$
3,771,651

 
$
3,664,236

(1) Please refer to pages 23-25 and 27 for detail.
 
 
 
 
 
 
 
 
 
(2) Prior period amounts include retrospective adjustments to reclassify net deferred financing costs in connection with new accounting guidance adopted in the current period.

5


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

 
 

 
 

 
 

 
 

 
 
 
 
Rental revenue
$
107,514

 
$
109,080

 
$
105,508

 
$
98,238

 
$
97,822

 
$
420,340

 
$
386,396

Tenant recoveries and other real estate operations revenue
26,963

 
24,606

 
22,683

 
24,472

 
22,791

 
98,724

 
93,329

Construction contract and other service revenues
8,848

 
17,058

 
42,172

 
38,324

 
26,358

 
106,402

 
106,748

Total revenues
143,325

 
150,744

 
170,363

 
161,034

 
146,971

 
625,466

 
586,473

Expenses
 

 
 

 
 

 
 

 
 

 
 
 
 
Property operating expenses
48,498

 
48,897

 
46,418

 
50,681

 
43,334

 
194,494

 
179,934

Depreciation and amortization associated with real estate operations
36,237

 
38,403

 
33,786

 
31,599

 
31,358

 
140,025

 
136,086

Construction contract and other service expenses
7,773

 
16,132

 
41,293

 
37,498

 
24,705

 
102,696

 
100,058

Impairment losses
19,744

 
2,307

 
1,238

 

 
48

 
23,289

 
1,416

General and administrative expenses
6,609

 
5,783

 
5,884

 
6,250

 
7,206

 
24,526

 
24,841

Leasing expenses
1,888

 
1,656

 
1,650

 
1,641

 
1,706

 
6,835

 
6,953

Business development expenses and land carry costs
2,521

 
5,573

 
2,623

 
2,790

 
1,466

 
13,507

 
5,573

Total operating expenses
123,270

 
118,751

 
132,892

 
130,459

 
109,823

 
505,372

 
454,861

Operating income
20,055

 
31,993

 
37,471

 
30,575

 
37,148

 
120,094

 
131,612

Interest expense
(22,347
)
 
(24,121
)
 
(21,768
)
 
(20,838
)
 
(23,286
)
 
(89,074
)
 
(92,393
)
Interest and other income
1,300

 
692

 
1,242

 
1,283

 
1,148

 
4,517

 
4,923

(Loss) gain on early extinguishment of debt
(402
)
 
85,745

 
(65
)
 
(3
)
 
(9,106
)
 
85,275

 
(9,552
)
(Loss) income from continuing operations before equity in income of unconsolidated entities and income taxes
(1,394
)
 
94,309

 
16,880

 
11,017

 
5,904

 
120,812

 
34,590

Equity in income of unconsolidated entities
10

 
18

 
9

 
25

 
23

 
62

 
229

Income tax expense
(46
)
 
(48
)
 
(50
)
 
(55
)
 
(53
)
 
(199
)
 
(310
)
(Loss) income from continuing operations
(1,430
)
 
94,279

 
16,839

 
10,987

 
5,874

 
120,675

 
34,509

Discontinued operations

 

 
394

 
(238
)
 
22

 
156

 
26

(Loss) income before gain on sales of real estate
(1,430
)
 
94,279

 
17,233

 
10,749

 
5,896

 
120,831

 
34,535

Gain on sales of real estate
64,047

 
15

 
(1
)
 
3,986

 
41

 
68,047

 
10,671

Net income
62,617

 
94,294

 
17,232

 
14,735

 
5,937

 
188,878

 
45,206

Net income attributable to noncontrolling interests
 

 
 

 
 

 
 

 
 

 
 
 
 
Common units in the Operating Partnership
(2,172
)
 
(3,357
)
 
(476
)
 
(398
)
 
(64
)
 
(6,403
)
 
(1,006
)
Preferred units in the Operating Partnership
(165
)
 
(165
)
 
(165
)
 
(165
)
 
(165
)
 
(660
)
 
(660
)
Other consolidated entities
(916
)
 
(972
)
 
(810
)
 
(817
)
 
(804
)
 
(3,515
)
 
(3,285
)
Net income attributable to COPT
59,364

 
89,800

 
15,781

 
13,355

 
4,904

 
178,300

 
40,255

Preferred share dividends
(3,553
)
 
(3,552
)
 
(3,553
)
 
(3,552
)
 
(3,552
)
 
(14,210
)
 
(15,939
)
Issuance costs associated with redeemed preferred shares

 

 

 

 

 

 
(1,769
)
Net income attributable to COPT common shareholders
$
55,811

 
$
86,248

 
$
12,228

 
$
9,803

 
$
1,352

 
$
164,090

 
$
22,547

 
 
 
 
 
 
 
 
 
 
 
 
 
 

6


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

 
 

 
 

 
 

 
 

 
 
 
 
Numerator for diluted EPS
 

 
 

 
 

 
 

 
 

 
 
 
 
Net income attributable to common shareholders
$
55,811

 
$
86,248

 
$
12,228

 
$
9,803

 
$
1,352

 
$
164,090

 
$
22,547

Dividends on dilutive convertible preferred shares

 
372

 

 

 

 

 

Common units in the Operating Partnership

 

 

 

 

 
6,403

 

Amount allocable to share-based compensation awards
(230
)
 
(369
)
 
(113
)
 
(122
)
 
(100
)
 
(706
)
 
(432
)
Numerator for diluted EPS
$
55,581

 
$
86,251

 
$
12,115

 
$
9,681

 
$
1,252

 
$
169,787

 
$
22,115

Denominator:
 

 
 

 
 

 
 

 
 

 
 
 
 
Weighted average common shares - basic
94,164

 
94,153

 
94,128

 
93,199

 
90,752

 
93,914

 
88,092

Dilutive convertible preferred shares

 
434

 

 

 

 

 

Common units in the Operating Partnership

 

 

 

 

 
3,692

 

Dilutive effect of share-based compensation awards

 
21

 
35

 
198

 
196

 
61

 
171

Weighted average common shares - diluted
94,164

 
94,608

 
94,163

 
93,397

 
90,948

 
97,667

 
88,263

Diluted EPS
$
0.59

 
$
0.91

 
$
0.13

 
$
0.10

 
$
0.01

 
$
1.74

 
$
0.25


7


Corporate Office Properties Trust
Consolidated Statements of FFO
(in thousands)
 
Three Months Ended
 
Years Ended
 
12/31/15
 
9/30/15
 
6/30/15
 
3/31/15
 
12/31/14
 
12/31/15
 
12/31/14
Net income
$
62,617

 
$
94,294

 
$
17,232

 
$
14,735

 
$
5,937

 
$
188,878

 
$
45,206

Real estate-related depreciation and amortization
36,237

 
38,403

 
33,786

 
31,599

 
31,358

 
140,025

 
136,086

Impairment losses on previously depreciated operating properties (1)(2)
331

 
2,307

 
1,239

 
233

 
48

 
4,110

 
1,370

Gain on sales of previously depreciated operating properties (2)
(64,047
)
 
(15
)
 

 

 
2

 
(64,062
)
 
(5,117
)
FFO - per NAREIT (3)
35,138

 
134,989

 
52,257

 
46,567

 
37,345

 
268,951

 
177,545

Operating property acquisition costs
32

 
2,695

 
361

 
1,046

 

 
4,134

 

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

 

 
1

 
(3,986
)
 
(43
)
 
(3,985
)
 
(5,578
)
Impairment losses on non-operating properties, net of associated income tax
19,413

 

 

 

 

 
19,413

 
49

Valuation allowance on tax asset associated with FFO comparability adjustments

 

 

 

 

 

 

Loss on interest rate derivatives
386

 

 

 

 

 
386

 

Loss (gain) on early extinguishment of debt (2)
402

 
(85,745
)
 
(315
)
 
3

 
9,106

 
(85,655
)
 
9,668

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

 
10,456

 
10,928

Demolition costs on redevelopment properties
225

 
930

 
66

 
175

 

 
1,396

 

Executive transition costs

 

 

 

 
1,056

 

 
1,056

FFO - as adjusted for comparability (3)
$
55,596

 
$
55,635

 
$
55,789

 
$
48,076

 
$
50,957

 
$
215,096

 
$
195,437

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Weighted Average Shares for period ended:
 

 
 

 
 

 
 

 
 

 
 

 
 

Common Shares Outstanding
94,164

 
94,153

 
94,128

 
93,199

 
90,752

 
93,914

 
88,092

Dilutive effect of share-based compensation awards

 
21

 
35

 
198

 
196

 
61

 
171

Common Units
3,677

 
3,679

 
3,680

 
3,732

 
3,846

 
3,692

 
3,897

Dilutive convertible preferred shares (4)

 
434

 

 

 

 

 

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

 
176

 

 

 

 

 

Denominator for diluted FFO per share
97,841

 
98,463

 
97,843

 
97,129

 
94,794

 
97,667

 
92,160

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

 
(610
)
 

 

 

 

 

Denominator for diluted FFO per share, as adjusted for comparability
97,841

 
97,853

 
97,843

 
97,129

 
94,794

 
97,667

 
92,160

Weighted average common units
(3,677
)
 
(3,679
)
 
(3,680
)
 
(3,732
)
 
(3,846
)
 

 
(3,897
)
Dilutive convertible preferred shares

 
434

 

 

 

 

 

Denominator for diluted EPS
94,164

 
94,608

 
94,163

 
93,397

 
90,948

 
97,667

 
88,263

 
 
 
 
 
 
 
 
 
 
 
 
 
 
(1) Please see reconciliations on pages 33 through 35.
 
 
 
 
 
 
 
 
 
 
 
 
 
(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.
 
 
 
 

8


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

 
 

 
 

 
 

 
 

 
 
 
 
Real estate revenues
$
134,477

 
$
133,686

 
$
128,195

 
$
122,710

 
$
120,611

 
$
519,068

 
$
479,711

Real estate property operating expenses
(48,498
)
 
(48,897
)
 
(46,407
)
 
(50,686
)
 
(43,310
)
 
(194,488
)
 
(179,799
)
NOI from real estate operations
85,979

 
84,789

 
81,788

 
72,024

 
77,301

 
324,580

 
299,912

General and administrative expenses
(6,609
)
 
(5,783
)
 
(5,884
)
 
(6,250
)
 
(7,206
)
 
(24,526
)
 
(24,841
)
Leasing expenses
(1,888
)
 
(1,656
)
 
(1,650
)
 
(1,641
)
 
(1,706
)
 
(6,835
)
 
(6,953
)
Business development expenses and land carry costs
(2,521
)
 
(5,573
)
 
(2,623
)
 
(2,790
)
 
(1,466
)
 
(13,507
)
 
(5,573
)
NOI from construction contracts and other service operations
1,075

 
926

 
879

 
826

 
1,653

 
3,706

 
6,690

Impairment losses on non-operating properties
(19,413
)
 

 

 

 

 
(19,413
)
 
(49
)
Equity in income of unconsolidated entities
10

 
18

 
9

 
25

 
23

 
62

 
229

Interest and other income
1,300

 
692

 
1,242

 
1,283

 
1,148

 
4,517

 
4,923

(Loss) gain on early extinguishment of debt
(402
)
 
85,745

 
315

 
(3
)
 
(9,106
)
 
85,655

 
(9,668
)
Gain on sales of non-operating properties

 

 
(1
)
 
3,986

 
43

 
3,985

 
5,578

Total interest expense
(22,347
)
 
(24,121
)
 
(21,768
)
 
(20,838
)
 
(23,286
)
 
(89,074
)
 
(92,393
)
Income tax expense
(46
)
 
(48
)
 
(50
)
 
(55
)
 
(53
)
 
(199
)
 
(310
)
FFO - per NAREIT (1)
35,138

 
134,989

 
52,257

 
46,567

 
37,345

 
268,951

 
177,545

Preferred share dividends
(3,553
)
 
(3,552
)
 
(3,553
)
 
(3,552
)
 
(3,552
)
 
(14,210
)
 
(15,939
)
Issuance costs associated with redeemed preferred shares

 

 

 

 

 

 
(1,769
)
Noncontrolling interests - preferred units in the Operating Partnership
(165
)
 
(165
)
 
(165
)
 
(165
)
 
(165
)
 
(660
)
 
(660
)
FFO allocable to other noncontrolling interests
(817
)
 
(1,027
)
 
(1,072
)
 
(670
)
 
(867
)
 
(3,586
)
 
(3,216
)
Basic and diluted FFO allocable to restricted shares
(115
)
 
(541
)
 
(202
)
 
(183
)
 
(123
)
 
(1,041
)
 
(665
)
Basic FFO available to common share and common unit holders (1)
30,488

 
129,704

 
47,265

 
41,997

 
32,638

 
249,454

 
155,296

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)
30,488

 
130,241

 
47,265

 
41,997

 
32,638

 
249,454

 
155,296

Operating property acquisition costs
32

 
2,695

 
361

 
1,046

 

 
4,134

 

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

 

 
1

 
(3,986
)
 
(43
)
 
(3,985
)
 
(5,578
)
Impairment losses on non-operating properties, net of associated income tax
19,413

 

 

 

 

 
19,413

 
49

Loss on interest rate derivatives
386

 

 

 

 

 
386

 

Loss (gain) on early extinguishment of debt (1)
402

 
(85,745
)
 
(315
)
 
3

 
9,106

 
(85,655
)
 
9,668

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

 
10,456

 
10,928

Demolition costs on redevelopment properties
225

 
930

 
66

 
175

 

 
1,396

 

Executive transition costs

 

 

 

 
1,056

 

 
1,056

Diluted FFO comparability adjustments allocable to restricted shares
(88
)
 
334

 
(14
)
 
(7
)
 
(59
)
 
225

 
(78
)
Dividends and distributions on antidilutive preferred securities (3)

 
(537
)
 

 

 

 

 

Diluted FFO avail. to common share and common unit holders, as adj. for comparability (1)
$
50,858

 
$
50,684

 
$
50,783

 
$
43,499

 
$
46,191

 
$
195,824

 
$
173,110

(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.
 
 
 
 

9


Corporate Office Properties Trust
Consolidated Reconciliations of AFFO
(in thousands)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended
 
Years Ended
 
12/31/15
 
9/30/15
 
6/30/15
 
3/31/15
 
12/31/14
 
12/31/15
 
12/31/14
Diluted FFO available to common share and common unit holders, as adjusted for comparability
$
50,858

 
$
50,684

 
$
50,783

 
$
43,499

 
$
46,191

 
$
195,824

 
$
173,110

Straight line rent adjustments (1)
(2,614
)
 
(5,706
)
 
(3,788
)
 
(1,271
)
 
(379
)
 
(13,379
)
 
(1,820
)
Straight line rent adjustments on properties conveyed to extinguish debt in default

 
(19
)
 
(24
)
 
(72
)
 
(47
)
 
(115
)
 
(142
)
Amortization of intangibles included in NOI
365

 
474

 
478

 
111

 
208

 
1,428

 
855

Share-based compensation, net of amounts capitalized
1,625

 
1,739

 
1,658

 
1,552

 
1,504

 
6,574

 
6,067

Amortization of deferred financing costs
1,127

 
1,203

 
1,146

 
990

 
1,020

 
4,466

 
4,666

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

 

 

 

 

 

 
(333
)
Amortization of net debt discounts, net of amounts capitalized
317

 
321

 
264

 
264

 
261

 
1,166

 
920

Amortization of settled debt hedges

 

 

 

 
11

 

 
57

Recurring capital expenditures on properties to be held
(20,086
)
 
(12,126
)
 
(9,705
)
 
(7,349
)
 
(8,633
)
 
(49,266
)
 
(50,199
)
Diluted AFFO available to common share and common unit holders (“diluted AFFO”)
$
31,592

 
$
36,570

 
$
40,812

 
$
37,724

 
$
40,136

 
$
146,698

 
$
133,181

Recurring capital expenditures
 

 
 

 
 

 
 

 
 

 
 
 
 
Tenant improvements and incentives on operating properties
$
6,836

 
$
6,374

 
$
6,644

 
$
4,390

 
$
7,239

 
$
24,244

 
$
29,651

Building improvements on operating properties
16,674

 
4,223

 
4,543

 
3,203

 
4,974

 
28,643

 
23,432

Leasing costs for operating properties
3,518

 
2,547

 
1,485

 
954

 
1,341

 
8,504

 
8,536

Less: Nonrecurring tenant improvements and incentives on operating properties
(393
)
 
205

 
(986
)
 
(264
)
 
(1,747
)
 
(1,438
)
 
(2,734
)
Less: Nonrecurring building improvements on operating properties
(6,551
)
 
(1,155
)
 
(1,298
)
 
(875
)
 
(3,012
)
 
(9,879
)
 
(8,281
)
Less: Nonrecurring leasing costs for operating properties
2

 
(68
)
 
(683
)
 
(59
)
 
(162
)
 
(808
)
 
(405
)
Recurring capital expenditures
$
20,086

 
$
12,126

 
$
9,705

 
$
7,349

 
$
8,633

 
$
49,266

 
$
50,199

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

10


Corporate Office Properties Trust
Consolidated Reconciliations of Adjusted EBITDA
(in thousands)
 
Three Months Ended
 
Years Ended
 
12/31/15
 
9/30/15
 
6/30/15
 
3/31/15
 
12/31/14
 
12/31/15
 
12/31/14
Net income
$
62,617

 
$
94,294

 
$
17,232

 
$
14,735

 
$
5,937

 
$
188,878

 
$
45,206

Interest expense on continuing and discontinued operations
22,347

 
24,121

 
21,768

 
20,838

 
23,286

 
89,074

 
92,393

Income tax expense
46

 
48

 
50

 
55

 
53

 
199

 
310

Depreciation of furniture, fixtures and equipment
597

 
590

 
527

 
492

 
513

 
2,206

 
2,404

Real estate-related depreciation and amortization
36,237

 
38,403

 
33,786

 
31,599

 
31,358

 
140,025

 
136,086

Impairment losses
19,744

 
2,307

 
1,239

 
233

 
48

 
23,523

 
1,419

Loss (gain) on early extinguishment of debt on continuing and discont. operations
402

 
(85,745
)
 
(315
)
 
3

 
9,106

 
(85,655
)
 
9,668

Gain on sales of operating properties
(64,047
)
 
(15
)
 

 

 
2

 
(64,062
)
 
(5,117
)
Gain on sales of non-operational properties

 

 
1

 
(3,986
)
 
(43
)
 
(3,985
)
 
(5,578
)
Net loss (gain) on investments in unconsolidated entities included in interest and other income
6

 
98

 
(52
)
 
75

 
(74
)
 
127

 
291

Business development expenses
1,512

 
1,221

 
1,181

 
861

 
669

 
4,775

 
2,680

Operating property acquisition costs
32

 
2,695

 
361

 
1,046

 

 
4,134

 

EBITDA from properties conveyed to extinguish debt in default

 
(15
)
 
(843
)
 
90

 
(828
)
 
(768
)
 
(2,091
)
Demolition costs on redevelopment properties
225

 
930

 
66

 
175

 

 
1,396

 

Executive transition costs

 

 

 

 
1,056

 

 
1,056

Adjusted EBITDA
$
79,718

 
$
78,932

 
$
75,001

 
$
66,216

 
$
71,083

 
$
299,867

 
$
278,727

Add back:
 

 
 

 
 

 
 

 
 

 
 

 
 

General, administrative and leasing expenses on continuing and discontinued operations
8,497

 
7,439

 
7,534

 
7,891

 
8,912

 
31,361

 
31,794

Land carry costs
752

 
727

 
1,015

 
708

 
797

 
3,202

 
2,893

Depreciation of FF&E
(597
)
 
(590
)
 
(527
)
 
(492
)
 
(513
)
 
(2,206
)
 
(2,404
)
Income from construction contracts and other service operations
(1,075
)
 
(926
)
 
(879
)
 
(826
)
 
(1,653
)
 
(3,706
)
 
(6,690
)
Interest and other income, excluding net loss/gain on investments in unconsolidated entities
(1,306
)
 
(790
)
 
(1,190
)
 
(1,358
)
 
(1,074
)
 
(4,644
)
 
(5,214
)
Equity in income of unconsolidated entities
(10
)
 
(18
)
 
(9
)
 
(25
)
 
(23
)
 
(62
)
 
(229
)
NOI from properties conveyed to extinguish debt in default

 
15

 
843

 
(90
)
 
828

 
768

 
2,091

Executive transition costs

 

 

 

 
(1,056
)
 

 
(1,056
)
NOI from real estate operations
$
85,979

 
$
84,789

 
$
81,788

 
$
72,024

 
$
77,301

 
$
324,580

 
$
299,912

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Adjusted EBITDA
$
79,718

 
$
78,932

 
$
75,001

 
$
66,216

 
$
71,083

 
 
 
 
Proforma NOI adjustment for mid-period property changes
(1,738
)
 
1,309

 
509

 
1,573

 

 
 
 
 
In-place adjusted EBITDA
$
77,980

 
$
80,241

 
$
75,510

 
$
67,789

 
$
71,083

 
 
 
 

11



Corporate Office Properties Trust
Consolidated Office Properties by Segment (1) - 12/31/2015
(square feet in thousands)
 
 
Operational Properties (5)
 
Construction/Redevelopment (6)
 
 
# of
Properties
 
Operational
Square Feet
 
Occupancy
%
 
Leased
 %
 
# of
Properties
 
Construction/Redevelopment Square Feet
 
Operational Square Feet (5)
 
Total
Square Feet
Core Portfolio: (2)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Defense IT Locations: (3)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Fort Meade/Baltimore Washington (“BW”) Corridor:
 
 

 
 

 
 

 
 

 
 

 
 

 
 
 
 
National Business Park
 
29

 
3,485

 
97.4
%
 
98.3
%
 
2

 
336

 

 
336

Howard County
 
33

 
2,695

 
94.6
%
 
95.0
%
 
2

 
74

 

 
74

Other
 
28

 
1,998

 
89.5
%
 
89.7
%
 
3

 
114

 
88

 
202

Total Fort Meade/BW Corridor
 
90

 
8,178

 
94.5
%
 
95.1
%
 
7

 
524

 
88

 
612

Northern Virginia (“NoVA”) Defense/IT
 
13

 
1,934

 
81.9
%
 
87.1
%
 
2

 
401

 

 
401

Lackland AFB (San Antonio, Texas)
 
7

 
953

 
100.0
%
 
100.0
%
 

 

 

 

Navy Support
 
21

 
1,262

 
72.1
%
 
73.9
%
 

 

 

 

Redstone Arsenal (Huntsville, Alabama)
 
6

 
632

 
97.0
%
 
98.9
%
 
1

 
19

 

 
19

Data Center Shells
 
9

 
1,415

 
100.0
%
 
100.0
%
 
3

 
447

 

 
447

Total Defense/IT Locations
 
146

 
14,374

 
91.9
%
 
93.1
%
 
13

 
1,391

 
88

 
1,479

Regional Office (4)
 
11

 
2,664

 
97.1
%
 
98.0
%
 

 

 

 

Core Portfolio
 
157

 
17,038

 
92.7
%
 
93.9
%
 
13

 
1,391

 
88

 
1,479

Properties Held for Sale
 
15

 
658

 
84.7
%
 
85.2
%
 

 

 

 

Other Properties
 
5

 
357

 
51.8
%
 
51.8
%
 

 

 

 

Total Portfolio
 
177

 
18,053

 
91.6
%
 
92.7
%
 
13

 
1,391

 
88

 
1,479


(1)
The above presentation sets forth Core Portfolio data by segment followed by data for the remainder of the portfolio.
(2)
Represents Defense/IT Locations and Regional Office properties excluding properties held for sale.
(3)
Includes properties in locations that support United States Government agencies and their contractors, most of whom are engaged in national security, defense and IT related activities servicing what we believe are growing, durable priority missions.
(4)
Includes traditional office properties located in select urban/urban-like submarkets within our regional footprint with durable Class-A office fundamentals and characteristics, as well as other properties supporting general commercial office tenants.
(5)
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 $573,000 and cash NOI was $91,000 for the three months ended 12/31/15.
(6)
This schedule includes properties under, or contractually committed for, construction or redevelopment as of 12/31/15 and an additional property (DC-17) that became 100% leased on 1/8/16. Please refer to pages 24 and 25.



12


Corporate Office Properties Trust
NOI from Real Estate Operations and Occupancy by Property Grouping
(dollars and square feet in thousands)
 
 
12/31/15
 
 
 
 
 
 
# 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 Year Ended
Property Grouping
 
 
 
% Occupied (1)
 
% Leased (1)
 
 
 
12/31/15
 
12/31/15
Core Portfolio:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Same Office Properties (3)
 
140

 
14,133

 
91.9%
 
93.3%
 
$
398,155

 
81.5
%
 
$
64,437

 
$
253,739

Office Properties Placed in Service (4)
 
14

 
1,746

 
96.5%
 
96.7%
 
40,430

 
8.3
%
 
7,867

 
23,891

Acquired Office Properties (5)
 
3

 
1,159

 
96.7%
 
96.7%
 
32,960

 
6.7
%
 
5,050

 
11,957

Wholesale Data Center and Other
 
N/A

 
N/A

 
N/A
 
N/A
 
N/A

 
N/A

 
4,220

 
9,188

Total Core Portfolio
 
157

 
17,038

 
92.7%
 
93.9%
 
471,545

 
96.5
%
 
81,574

 
298,775

Office Properties Held for Sale (6)
 
15

 
658

 
84.7%
 
85.2%
 
12,251

 
2.5
%
 
2,020

 
7,681

Disposed Office Properties
 
N/A

 
N/A

 
N/A
 
N/A
 
NA

 
N/A

 
1,770

 
15,262

Other Office Properties (Same Office)
 
5

 
357

 
51.8%
 
51.8%
 
4,866

 
1.0
%
 
615

 
2,862

Total Portfolio
 
177

 
18,053

 
91.6%
 
92.7%
 
$
488,662

 
100.0
%
 
$
85,979

 
$
324,580

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
12/31/15
 
 
 
 
 
 
# of
Operating Office Properties
 
Office Operational Square Feet
 
 
 
 
 
Office Property Annualized
Rental Revenue (2)
 
Percentage of Core Portfolio
Annualized
Rental Revenue
 
NOI from Real
Estate Operations
for Three Months Ended
 
NOI from Real
Estate Operations
for Year Ended
Property Grouping
 
 
 
% Occupied (1)
 
% Leased (1)
 
 
 
12/31/15
 
12/31/15
Core Portfolio:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Defense/IT Locations
 
146

 
14,374

 
91.9%
 
93.1%
 
394,974

 
83.8
%
 
65,414

 
249,057

Regional Office
 
11

 
2,664

 
97.1%
 
98.0%
 
76,571

 
16.2
%
 
12,001

 
40,729

Wholesale Data Center and Other
 
N/A

 
N/A

 
N/A
 
N/A
 
NA

 
NA

 
4,159

 
8,989

Total Core Portfolio
 
157

 
17,038

 
92.7%
 
93.9%
 
$
471,545

 
100.0
%
 
$
81,574

 
$
298,775

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(1)
Percentages calculated based on operational square feet.
(2)
Excludes annualized rental revenue from our wholesale data center, DC-6, of $21,939 as of 12/31/15.
(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 12/31/15 totaled $78,882.


13


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

 
 

 
 

 
 

 
 

 
 
 
 
Defense/IT Locations:
 
 
 
 
 
 
 
 
 
 
 
 
 
Fort Meade/BW Corridor
$
61,683

 
$
61,400

 
$
60,007

 
$
61,184

 
$
58,133

 
$
244,274

 
$
233,764

NoVA Defense/IT
11,816

 
12,875

 
13,462

 
11,046

 
11,280

 
49,199

 
48,313

Lackland Air Force Base
12,233

 
9,018

 
9,743

 
8,665

 
9,635

 
39,659

 
34,463

Navy Support
6,840

 
6,886

 
7,186

 
7,265

 
7,670

 
28,177

 
31,335

Redstone Arsenal
3,063

 
3,061

 
2,658

 
2,446

 
3,016

 
11,228

 
10,446

Data Center Shells
5,930

 
5,665

 
5,037

 
5,114

 
4,900

 
21,746

 
18,421

Total Defense/IT locations
101,565

 
98,905

 
98,093

 
95,720

 
94,634

 
394,283

 
376,742

Regional Office
25,023

 
26,782

 
24,400

 
21,960

 
21,371

 
98,165

 
85,025

Wholesale Data Center
6,099

 
6,078

 
3,820

 
3,035

 
2,661

 
19,032

 
10,430

Other
1,790

 
1,921

 
1,882

 
1,995

 
1,945

 
7,588

 
7,514

Real estate revenues
$
134,477

 
$
133,686

 
$
128,195

 
$
122,710

 
$
120,611

 
$
519,068

 
$
479,711

 
 
 
 
NOI
 

 
 

 
 

 
 

 
 

 
 
 
 
Defense/IT Locations:
 
 
 
 
 
 
 
 
 
 
 
 
 
Fort Meade/BW Corridor
$
41,476

 
$
41,294

 
$
40,527

 
$
37,668

 
$
39,472

 
$
160,965

 
$
152,940

NoVA Defense/IT
7,829

 
7,725

 
8,108

 
5,430

 
7,022

 
29,092

 
29,242

Lackland Air Force Base
4,894

 
4,465

 
4,394

 
3,902

 
3,713

 
17,655

 
14,786

Navy Support
3,686

 
3,599

 
3,796

 
3,867

 
4,507

 
14,948

 
18,759

Redstone Arsenal
2,171

 
2,173

 
1,770

 
1,617

 
2,225

 
7,731

 
7,380

Data Center Shells
5,358

 
5,133

 
4,538

 
4,419

 
4,231

 
19,448

 
16,149

Total Defense/IT locations
65,414

 
64,389

 
63,133

 
56,903

 
61,170

 
249,839

 
239,256

Regional Office
15,608

 
17,186

 
15,994

 
13,212

 
14,037

 
62,000

 
53,598

Wholesale Data Center
4,138

 
2,070

 
1,599

 
823

 
997

 
8,630

 
3,144

Other
819

 
1,144

 
1,062

 
1,086

 
1,097

 
4,111

 
3,914

NOI from real estate operations
$
85,979

 
$
84,789

 
$
81,788

 
$
72,024

 
$
77,301

 
$
324,580

 
$
299,912

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash NOI
 

 
 

 
 

 
 

 
 

 
 
 
 
Defense/IT Locations:
 
 
 
 
 
 
 
 
 
 
 
 
 
Fort Meade/BW Corridor
$
40,475

 
$
40,414

 
$
41,727

 
$
37,458

 
$
39,541

 
$
160,074

 
$
149,644

NoVA Defense/IT
8,070

 
6,804

 
6,448

 
4,665

 
7,196

 
25,987

 
29,766

Lackland Air Force Base
4,745

 
3,680

 
3,222

 
3,446

 
3,613

 
15,093

 
14,097

Navy Support
3,597

 
3,565

 
3,579

 
3,832

 
4,450

 
14,573

 
18,272

Redstone Arsenal
2,267

 
1,881

 
1,832

 
1,848

 
2,280

 
7,828

 
7,986

Data Center Shells
5,024

 
4,802

 
3,831

 
4,525

 
4,161

 
18,182

 
20,827

Total Defense/IT locations
64,178

 
61,146

 
60,639

 
55,774

 
61,241

 
241,737

 
240,592

Regional Office
15,161

 
15,939

 
14,966

 
13,622

 
14,208

 
59,688

 
52,986

Wholesale Data Center
4,011

 
1,952

 
2,206

 
825

 
984

 
8,994

 
3,041

Other
837

 
1,117

 
1,101

 
1,057

 
1,106

 
4,112

 
3,756

Cash NOI from real estate operations
$
84,187

 
$
80,154

 
$
78,912

 
$
71,278

 
$
77,539

 
$
314,531

 
$
300,375

Straight line rent adjustments
2,254

 
5,217

 
3,446

 
941

 
56

 
11,858

 
737

Add: Amortization of deferred market rental revenue
(178
)
 
(293
)
 
(308
)
 
59

 
4

 
(720
)
 
(7
)
Less: Amortization of below-market cost arrangements
(284
)
 
(289
)
 
(262
)
 
(254
)
 
(298
)
 
(1,089
)
 
(1,193
)
NOI from real estate operations
$
85,979

 
$
84,789

 
$
81,788

 
$
72,024

 
$
77,301

 
$
324,580

 
$
299,912

*     Includes continuing and discontinued operations.

14


Corporate Office Properties Trust
Same Office Properties (1) Average Occupancy Rates by Segment 
(square feet in thousands)
 
Number of Buildings
 
Rentable Square Feet
 
Three Months Ended
 
Years Ended
 
 
 
12/31/15
 
9/30/15
 
6/30/15
 
3/31/15
 
12/31/14
 
12/31/15
 
12/31/14
Core Portfolio:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Defense/IT Locations:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Fort Meade/BW Corridor
87

 
7,826

 
94.7
%
 
94.2
%
 
94.5
%
 
93.9
%
 
93.7
%
 
94.3
%
 
93.5
%
NoVA Defense/IT
11

 
1,537

 
77.2
%
 
76.5
%
 
76.7
%
 
76.1
%
 
81.9
%
 
76.6
%
 
83.0
%
Lackland Air Force Base
6

 
792

 
100.0
%
 
100.0
%
 
100.0
%
 
100.0
%
 
100.0
%
 
100.0
%
 
100.0
%
Navy Support
20

 
1,233

 
73.9
%
 
73.3
%
 
77.8
%
 
82.0
%
 
86.1
%
 
76.7
%
 
86.9
%
Redstone Arsenal
4

 
442

 
94.5
%
 
93.0
%
 
87.4
%
 
79.4
%
 
78.8
%
 
88.6
%
 
80.6
%
Data Center Shells
5

 
885

 
100.0
%
 
100.0
%
 
100.0
%
 
100.0
%
 
100.0
%
 
100.0
%
 
100.0
%
Total Defense/IT Locations
133

 
12,715

 
91.2
%
 
90.8
%
 
91.2
%
 
90.9
%
 
91.8
%
 
91.0
%
 
92.0
%
Regional Office
7

 
1,418

 
96.9
%
 
96.3
%
 
95.7
%
 
94.8
%
 
95.2
%
 
95.9
%
 
92.0
%
Core Portfolio Same Office Properties
140

 
14,133

 
91.8
%
 
91.3
%
 
91.6
%
 
91.3
%
 
92.2
%
 
91.5
%
 
92.0
%
Other Same Office Properties
5

 
357

 
51.6
%
 
52.6
%
 
57.0
%
 
56.8
%
 
56.8
%
 
54.5
%
 
52.8
%
Total Same Office Properties
145

 
14,490

 
90.8
%
 
90.4
%
 
90.8
%
 
90.4
%
 
91.3
%
 
90.6
%
 
91.1
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Corporate Office Properties Trust
Same Office Properties (1) Period End Occupancy Rates by Segment 
(square feet in thousands)
 
Number of Buildings
 
Rentable Square Feet
 
 
 
 
 
 
 
12/31/15
 
9/30/15
 
6/30/15
 
3/31/15
 
12/31/14
 
 
 
 
Core Portfolio:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Defense/IT Locations:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Fort Meade/BW Corridor
87

 
7,826

 
94.7
%
 
94.2
%
 
94.7
%
 
94.0
%
 
93.9
%
 
 
 
 
NoVA Defense/IT
11

 
1,537

 
77.3
%
 
77.3
%
 
77.4
%
 
76.1
%
 
75.7
%
 
 
 
 
Lackland Air Force Base
6

 
792

 
100.0
%
 
100.0
%
 
100.0
%
 
100.0
%
 
100.0
%
 
 
 
 
Navy Support
20

 
1,233

 
73.8
%
 
73.1
%
 
77.4
%
 
81.9
%
 
86.0
%
 
 
 
 
Redstone Arsenal
4

 
442

 
95.8
%
 
93.8
%
 
91.3
%
 
79.4
%
 
75.6
%
 
 
 
 
Data Center Shells
5

 
885

 
100.0
%
 
100.0
%
 
100.0
%
 
100.0
%
 
100.0
%
 
 
 
 
Total Defense/IT Locations
133

 
12,715

 
91.3
%
 
90.9
%
 
91.5
%
 
90.9
%
 
91.1
%
 
 
 
 
Regional Office
7

 
12,715

 
91.3
%
 
96.3
%
 
95.9
%
 
95.4
%
 
95.2
%
 
 
 
 
Core Portfolio Same Office Properties
140

 
14,133

 
91.9
%
 
91.4
%
 
91.9
%
 
91.4
%
 
91.5
%
 
 
 
 
Other Same Office Properties
5

 
357

 
51.8
%
 
51.3
%
 
57.4
%
 
56.8
%
 
56.8
%
 
 
 
 
Total Same Office Properties
145

 
14,490

 
90.9
%
 
90.4
%
 
91.1
%
 
90.5
%
 
90.6
%
 
 
 
 

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

15


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

 
 

 
 

 
 

 
 

 
 
 
 
Defense/IT Locations:
 
 
 
 
 
 
 
 
 
 
 
 
 
Fort Meade/BW Corridor
$
58,931

 
$
58,965

 
$
58,234

 
$
59,448

 
$
56,538

 
$
235,578

 
$
230,067

NoVA Defense/IT
8,450

 
8,359

 
8,381

 
8,516

 
9,170

 
33,706

 
36,950

Lackland Air Force Base
10,564

 
7,912

 
8,670

 
8,307

 
9,634

 
35,453

 
34,462

Navy Support
6,840

 
6,887

 
7,185

 
7,265

 
7,670

 
28,177

 
31,335

Redstone Arsenal
2,113

 
2,111

 
1,951

 
1,799

 
1,856

 
7,974

 
7,824

Data Center Shells
4,390

 
4,423

 
4,350

 
4,530

 
4,525

 
17,693

 
17,817

Total Defense/IT Locations
91,288

 
88,657

 
88,771

 
89,865

 
89,393

 
358,581

 
358,455

Regional Office
11,025

 
11,716

 
11,189

 
11,349

 
11,587

 
45,279

 
43,491

Other Properties
1,246

 
1,349

 
1,322

 
1,395

 
1,379

 
5,312

 
5,214

Same office property real estate revenues
$
103,559

 
$
101,722

 
$
101,282

 
$
102,609

 
$
102,359

 
$
409,172

 
$
407,160

Same office property NOI
 

 
 

 
 

 
 

 
 

 
 
 
 
Defense/IT Locations:
 
 
 
 
 
 
 
 
 
 
 
 
 
Fort Meade/BW Corridor
$
39,354

 
$
39,391

 
$
38,967

 
$
36,575

 
$
38,295

 
$
154,287

 
$
150,615

NoVA Defense/IT
5,378

 
5,281

 
5,176

 
4,923

 
6,194

 
20,758

 
23,577

Lackland Air Force Base
3,746

 
3,672

 
3,689

 
3,702

 
3,712

 
14,809

 
14,785

Navy Support
3,706

 
3,604

 
3,770

 
3,893

 
4,513

 
14,973

 
18,811

Redstone Arsenal
1,470

 
1,442

 
1,266

 
1,140

 
1,230

 
5,318

 
5,329

Data Center Shells
3,959

 
3,980

 
3,959

 
3,938

 
3,935

 
15,836

 
15,665

Total Defense/IT Locations
57,613

 
57,370

 
56,827

 
54,171

 
57,879

 
225,981

 
228,782

Regional Office
6,824

 
7,463

 
6,730

 
6,741

 
7,170

 
27,758

 
25,984

Other Properties
615

 
823

 
771

 
653

 
854

 
2,862

 
2,977

Same office property NOI
$
65,052

 
$
65,656

 
$
64,328

 
$
61,565

 
$
65,903

 
$
256,601

 
$
257,743

Same office property cash NOI (1)
 

 
 

 
 

 
 

 
 

 
 
 
 
Defense/IT Locations:
 
 
 
 
 
 
 
 
 
 
 
 
 
Fort Meade/BW Corridor
$
38,906

 
$
39,237

 
$
37,994

 
$
35,698

 
$
36,535

 
$
151,835

 
$
145,537

NoVA Defense/IT
5,229

 
5,023

 
4,915

 
4,678

 
5,833

 
19,845

 
23,181

Lackland Air Force Base
3,748

 
3,573

 
3,591

 
3,603

 
3,614

 
14,515

 
14,098

Navy Support
3,617

 
3,570

 
3,552

 
3,853

 
4,281

 
14,592

 
18,098

Redstone Arsenal
1,521

 
1,294

 
1,242

 
1,231

 
1,268

 
5,288

 
5,696

Data Center Shells
3,802

 
3,793

 
3,770

 
3,727

 
3,701

 
15,092

 
14,567

Total Defense/IT Locations
56,823

 
56,490

 
55,064

 
52,790

 
55,232

 
221,167

 
221,177

Regional Office
7,208

 
7,052

 
6,543

 
6,366

 
6,974

 
27,169

 
25,231

Other Properties
620

 
833

 
827

 
646

 
883

 
2,926

 
2,997

Same office property cash NOI
$
64,651

 
$
64,375

 
$
62,434

 
$
59,802

 
$
63,089

 
$
251,262

 
$
249,405

Straight line rent adjustments
(339
)
 
946

 
1,117

 
1,216

 
2,293

 
2,940

 
3,725

Add: Amortization of deferred market rental revenue
28

 
16

 
15

 
39

 
(16
)
 
98

 
(89
)
Less: Amortization of below-market cost arrangements
(251
)
 
(256
)
 
(250
)
 
(245
)
 
(288
)
 
(1,002
)
 
(1,154
)
Add: Lease termination fee, gross
416

 
185

 
1,012

 
753

 
741

 
2,366

 
1,618

Add: Cash NOI on tenant-funded landlord assets
547

 
390

 

 

 
84

 
937

 
4,238

Same office property NOI
$
65,052

 
$
65,656

 
$
64,328

 
$
61,565

 
$
65,903

 
$
256,601

 
$
257,743

Percentage change in same office property cash NOI (2)
2.48
%
 
 
 
 
 
 
 
 
 
0.74
%
 
 
(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.

16


Corporate Office Properties Trust
Leasing - Total Office Portfolio
Quarter Ended December 31, 2015
(square feet in thousands)
 
Ft Meade/BW Corridor
 
NoVA Defense/IT
 
Navy Support
 
Redstone Arsenal
 
Regional Office
 
Other
 
 Total Office
Renewed Space
 

 
 

 
 
 
 

 
 

 
 
 
 

Leased Square Feet
331

 
26

 
39

 

 
24

 

 
419

Expiring Square Feet
346

 
28

 
53

 

 
41

 

 
468

Vacated Square Feet
15

 
2

 
13

 

 
17

 

 
48

Retention Rate (% based upon square feet)
95.6
%
 
92.4
 %
 
74.6
 %
 
%
 
57.5
 %
 
0.0
%
 
89.7
 %
Statistics for Completed Leasing:
 
 
 
 
 
 
 
 
 
 
 
 
 
Average Committed Cost per Square Foot
$
14.15

 
$
18.63

 
$
18.26

 
$

 
$
7.97

 
$

 
$
14.46

Weighted Average Lease Term in Years
4.6

 
7.0

 
4.4

 

 
3.3

 

 
4.7

GAAP Rent Per Square Foot
 
 
 
 
 
 
 
 
 
 
 
 
 
Renewal GAAP Rent
$
31.96

 
$
30.81

 
$
27.86

 
$

 
$
27.06

 
$

 
$
31.23

Expiring GAAP Rent
$
27.03

 
$
28.98

 
$
30.19

 
$

 
$
27.24

 
$

 
$
27.46

Change in GAAP Rent
18.3
%
 
6.3
 %
 
(7.7
)%
 
%
 
(0.7
)%
 
0.00
%
 
13.8
 %
Cash Rent Per Square Foot
 
 
 
 
 
 
 
 
 
 
 
 
 
Renewal Cash Rent
$
30.70

 
$
30.00

 
$
28.34

 
$

 
$
26.63

 
$

 
$
30.20

Expiring Cash Rent
$
30.46

 
$
31.44

 
$
32.38

 
$

 
$
26.70

 
$

 
$
30.48

Change in Cash Rent
0.8
%
 
(4.6
)%
 
(12.5
)%
 
%
 
(0.3
)%
 
0.00
%
 
(0.9
)%
Average escalations per year
3.0
%
 
2.8
 %
 
2.7
 %
 
%
 
0.6
 %
 
%
 
2.8
 %
New Leases
 
 
 
 
 
 
 
 
 
 
 
 
 
Development and Redevelopment Space
 
 
 
 
 
 
 
 
 
 
 
 
 
Leased Square Feet
89

 

 

 

 

 

 
89

Statistics for Completed Leasing:
 
 
 
 
 
 
 
 
 
 
 
 
 
Average Committed Cost per Square Foot
$
68.86

 
$

 
$

 
$

 
$

 
$

 
$
68.86

Weighted Average Lease Term in Years
9.7

 

 

 

 

 

 
9.7

GAAP Rent Per Square Foot
$
37.92

 
$

 
$

 
$

 
$

 
$

 
$
37.92

Cash Rent Per Square Foot
$
34.71

 
$

 
$

 
$

 
$

 
$

 
$
34.71

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Other New Leases (1)
 
 
 
 
 
 
 
 
 
 
 
 
 
Leased Square Feet
26

 
69

 
21

 
20

 
15

 
7

 
158

Statistics for Completed Leasing:
 
 
 
 
 
 
 
 
 
 
 
 
 
Average Committed Cost per Square Foot
$
54.24

 
$
73.02

 
$
45.77

 
$
54.28

 
$
46.04

 
$
2.57

 
$
58.20

Weighted Average Lease Term in Years
7.0

 
9.6

 
4.7

 
5.2

 
4.7

 
2.0

 
7.2

GAAP Rent Per Square Foot
$
29.59

 
$
27.28

 
$
34.20

 
$
22.74

 
$
28.91

 
$
26.90

 
$
28.14

Cash Rent Per Square Foot
$
28.38

 
$
26.51

 
$
34.80

 
$
22.28

 
$
29.37

 
$
26.50

 
$
27.65

Total Square Feet Leased
446

 
95

 
60

 
20

 
39

 
7

 
666

Average escalations per year
2.8
%
 
2.6
 %
 
2.7
 %
 
2.8
%
 
1.5
 %
 
3.0
%
 
2.7
 %
(1)     Other New Leases includes acquired first generation space and vacated second generation space.
Notes: No expiration, renewal or retenanting activity transpired in our Lackland Air Force Base and Data Center Shells segments.
Activity is exclusive of owner occupied space and leases with less than a one-year term. Weighted average lease term was calculated assuming no exercise of any existing early termination rights. Committed costs for leasing are reported above in the period of lease execution. Actual capital expenditures for leasing are reported on page 10 in the period such costs are incurred.

17


Corporate Office Properties Trust
Leasing - Total Office Portfolio
Year Ended December 31, 2015
(square feet in thousands)
 
Ft Meade/BW Corridor
 
NoVA Defense/IT
 
Navy Support
 
Redstone Arsenal
 
Data Center Shells
 
Regional Office
 
Other
 
Total
Office
Renewed Space
 

 
 

 
 
 
 

 
 
 
 

 
 
 
 

Leased Square Feet
627

 
84

 
267

 

 

 
246

 
34

 
1,258

Expiring Square Feet
813

 
126

 
454

 
11

 

 
321

 
56

 
1,781

Vacated Square Feet
186

 
41

 
188

 
11

 

 
75

 
22

 
523

Retention Rate (% based upon square feet)
77.1
 %
 
67.1
 %
 
58.7
 %
 
0.0
%
 
%
 
76.7
 %
 
60.7
%
 
70.6
 %
Statistics for Completed Leasing:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Average Committed Cost per Square Foot
$
13.22

 
$
20.81

 
$
9.05

 
$

 
$

 
$
12.22

 
$
10.76

 
$
12.58

Weighted Average Lease Term in Years
4.5

 
5.6

 
3.3

 

 

 
4.6

 
3.1

 
4.3

GAAP Rent Per Square Foot
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Renewal GAAP Rent
$
27.72

 
$
27.82

 
$
25.09

 
$

 
$

 
$
28.05

 
$
21.43

 
$
27.06

Expiring GAAP Rent
$
24.73

 
$
27.37

 
$
26.03

 
$

 
$

 
$
26.78

 
$
18.59

 
$
25.42

Change in GAAP Rent
12.1
 %
 
1.7
 %
 
(3.6
)%
 
0.0
%
 
%
 
4.8
 %
 
15.3
%
 
6.5
 %
Cash Rent Per Square Foot
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Renewal Cash Rent
$
27.10

 
$
28.79

 
$
25.42

 
$

 
$

 
$
27.32

 
$
20.43

 
$
26.72

Expiring Cash Rent
$
27.40

 
$
31.01

 
$
27.09

 
$

 
$

 
$
27.78

 
$
19.65

 
$
27.44

Change in Cash Rent
(1.1
)%
 
(7.2
)%
 
(6.2
)%
 
%
 
%
 
(1.7
)%
 
3.9
%
 
(2.6
)%
Average escalations per year
2.8
 %
 
2.7
 %
 
2.8
 %
 
%
 
%
 
2.6
 %
 
3.2
%
 
2.7
 %
New Leases
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Development and Redevelopment Space
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Leased Square Feet
104

 
28

 

 

 
597

 
4

 
2

 
735

Statistics for Completed Leasing:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Average Committed Cost per Square Foot
$
63.25

 
$
98.91

 
$

 
$

 
$
1.34

 
$
62.38

 
$
60.92

 
$
14.27

Weighted Average Lease Term in Years
9.0

 
11.8

 

 

 
10.0

 
6.7

 
5.3

 
9.9

GAAP Rent Per Square Foot
$
36.46

 
$
35.57

 
$

 
$

 
$
16.53

 
$
26.07

 
$
27.18

 
$
20.15

Cash Rent Per Square Foot
$
33.59

 
$
31.17

 
$

 
$

 
$
15.11

 
$
25.17

 
$
27.00

 
$
18.42

Other New Leases (1)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Leased Square Feet
231

 
83

 
63

 
40

 

 
91

 
7

 
515

Statistics for Completed Leasing:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Average Committed Cost per Square Foot
$
39.58

 
$
70.49

 
$
35.41

 
$
33.01

 
$

 
$
42.15

 
$
2.57

 
$
43.49

Weighted Average Lease Term in Years
6.0

 
8.9

 
5.3

 
4.7

 

 
6.4

 
2.0

 
6.3

GAAP Rent Per Square Foot
$
25.05

 
$
27.26

 
$
29.43

 
$
21.51

 
$

 
$
26.02

 
$
26.90

 
$
25.86

Cash Rent Per Square Foot
$
24.53

 
$
26.70

 
$
29.78

 
$
20.62

 
$

 
$
25.30

 
$
26.50

 
$
25.38

Total Square Feet Leased
962

 
195

 
329

 
40

 
597

 
341

 
43

 
2,508

Average escalations per year
2.7
 %
 
2.7
 %
 
2.8
 %
 
3.6
%
 
2.3
%
 
2.7
 %
 
3.1
%
 
2.5
 %
(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.

18


Corporate Office Properties Trust
Lease Expiration Analysis as of 12/31/15 (1)
(dollars and square feet in thousands, except per square foot amounts)
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
 
Core Portfolio
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Ft Meade/BW Corridor
 
47
 
873

 
28,890

 
6.1
%
 
$33.1
 
NoVA Defense/IT
 
9
 
73

 
1,599

 
0.3
%
 
21.79

 
Navy Support
 
20
 
208

 
4,820

 
1.0
%
 
23.22

 
Regional Office
 
19
 
167

 
4,656

 
1.0
%
 
27.94

 
2016
 
95
 
1,321

 
39,965

 
8.5
%
 
30.27

 
Ft Meade/BW Corridor
 
46
 
1,346

 
42,346

 
9.0
%
 
31.46

 
NoVA Defense/IT
 
4
 
226

 
7,443

 
1.6
%
 
32.88

 
Navy Support
 
8
 
72

 
1,307

 
0.3
%
 
18.17

 
Redstone Arsenal
 
1
 
2

 
34

 
%
 
19.89

 
Regional Office
 
14
 
132

 
4,456

 
0.9
%
 
33.74

 
2017
 
73
 
1,778

 
55,586

 
11.8
%
 
31.26

 
Ft Meade/BW Corridor
 
51
 
1,017

 
33,906

 
7.2
%
 
33.34

 
NoVA Defense/IT
 
10
 
357

 
10,622

 
2.3
%
 
29.71

 
Navy Support
 
16
 
171

 
4,945

 
1.0
%
 
28.89

 
Redstone Arsenal
 
3
 
251

 
6,362

 
1.3
%
 
25.32

 
Data Center Shells
 
1
 
155

 
2,449

 
0.5
%
 
15.80

 
Regional Office
 
13
 
370

 
14,087

 
3.0
%
 
38.09

 
2018
 
94
 
2,321

 
72,371

 
15.3
%
 
31.17

 
Ft Meade/BW Corridor
 
49
 
1,476

 
46,381

 
9.8
%
 
31.42

 
NoVA Defense/IT
 
9
 
340

 
12,788

 
2.7
%
 
37.57

 
Navy Support
 
8
 
42

 
1,151

 
0.2
%
 
27.35

 
Redstone Arsenal
 
4
 
71

 
1,433

 
0.3
%
 
20.17

 
Regional Office
 
16
 
189

 
5,017

 
1.1
%
 
26.59

 
2019
 
86
 
2,118

 
66,770

 
14.2
%
 
31.52

 

19


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
 
Ft Meade/BW Corridor
 
50
 
1,249

 
37,968

 
8.1
%
 
30.40

 
NoVA Defense/IT
 
7
 
124

 
3,462

 
0.7
%
 
27.83

 
Lackland Air Force Base
 
2
 
250

 
9,092

 
1.9
%
 
36.32

 
Navy Support
 
15
 
170

 
6,758

 
1.4
%
 
39.74

 
Redstone Arsenal
 
3
 
141

 
2,918

 
0.6
%
 
20.76

 
Regional Office
 
14
 
261

 
6,838

 
1.5
%
 
26.16

 
2020
 
91
 
2,195

 
67,036

 
14.2
%
 
30.53

 
Thereafter
 
141
 
6,059

 
169,817

 
36.0
%
 
28.03

 
Core Portfolio
 
580
 
15,792

 
471,545

 
100.0
%
 
29.86

 
 
 
 
 
 
 
 
 
 
 
 
 
Office Properties Held for Sale and Other
 
 
 
 
 
 
 
 
 
 
 
Regional Office (Held for Sale)
 
44
 
469

 
10,426

 
60.9
%
 
22.22

 
Other
 
16
 
274

 
6,691

 
39.1
%
 
24.45

 
Office Properties Held for Sale and Other Total Average
 
60
 
743

 
17,117

 
100.0
%
 
23.04

 
Total Portfolio
 
640
 
16,535

 
488,662

 
 
 
29.55

 
 
 
 
 
 
 
 
 
 
 
 
 

Note: As of December 31, 2015, the weighted average lease term is 4.9 years for the Core Portfolio and 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
2
22

2.00

$
4,320

2018
2
1

0.26

527

2019
1
6

1.00

2,228

2020
2
19

13.38

13,343

2022
1
6

1.00

1,521

 
 
 

17.64

$
21,939


(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 December 31, 2015 of 209 for the portfolio, including 205 for the Core Portfolio.
(2)
A number of our leases are subject to certain early termination provisions.  The year of lease expiration was computed assuming no exercise of such early termination rights.
(3)
Total Annualized Rental Revenue is the monthly contractual base rent as of December 31, 2015 multiplied by 12 plus the estimated annualized expense reimbursements under existing leases.


20


Corporate Office Properties Trust
Top 20 Office Tenants as of 12/31/15
(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)
63

 
3,800

 
23.0
%
 
$
141,497

 
29.0
%
 
4.8

Northrop Grumman Corporation
 
9

 
764

 
4.6
%
 
22,403

 
4.6
%
 
4.4

The Boeing Company
 
12

 
739

 
4.5
%
 
21,842

 
4.5
%
 
3.3

General Dynamics Corporation
 
7

 
528

 
3.2
%
 
19,163

 
3.9
%
 
2.3

Computer Sciences Corporation
 
3

 
279

 
1.7
%
 
10,632

 
2.2
%
 
3.2

Vadata Inc.
 
6

 
964

 
5.8
%
 
10,530

 
2.2
%
 
8.9

CareFirst, Inc.
 
2

 
300

 
1.8
%
 
10,401

 
2.1
%
 
5.9

Booz Allen Hamilton, Inc.
 
6

 
280

 
1.7
%
 
9,547

 
2.0
%
 
5.2

Wells Fargo & Company
 
3

 
190

 
1.1
%
 
8,144

 
1.7
%
 
3.0

Harris Corporation
 
8

 
218

 
1.3
%
 
6,441

 
1.3
%
 
4.7

AT&T Corporation
 
3

 
308

 
1.9
%
 
5,886

 
1.2
%
 
3.3

KEYW Corporation
 
2

 
211

 
1.3
%
 
5,803

 
1.2
%
 
8.0

Raytheon Company
 
6

 
168

 
1.0
%
 
5,781

 
1.2
%
 
3.2

Science Applications International Corp.
 
5

 
151

 
0.9
%
 
5,410

 
1.1
%
 
4.8

L-3 Communications Holdings, Inc.
 
1

 
159

 
1.0
%
 
5,390

 
1.1
%
 
3.8

Miles & Stockbridge, PC
 
2

 
157

 
0.9
%
 
4,916

 
1.0
%
 
11.7

Transamerica Life Insurance Company
 
1

 
158

 
1.0
%
 
4,591

 
0.9
%
 
6.0

University of Maryland
 
3

 
172

 
1.0
%
 
4,543

 
0.9
%
 
5.6

Engility Holdings, Inc.
 
3

 
118

 
0.7
%
 
4,458

 
0.9
%
 
1.8

Kratos Defense and Security Solutions
 
1

 
131

 
0.8
%
 
4,401

 
0.9
%
 
4.3

Subtotal Top 20 Office Tenants
 
146

 
9,795

 
59.2
%
 
311,779

 
63.8
%
 
5.0

All remaining tenants
 
494

 
6,740

 
40.8
%
 
176,883

 
36.2
%
 
4.8

Total/Weighted Average
 
640

 
16,535

 
100.0
%
 
$
488,662

 
100.0
%
 
4.9

 
(1)  Total Annualized Rental Revenue is the monthly contractual base rent as of 12/31/15, 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. As of 12/31/15, $2.5 million in annualized rental revenue (or 1.8% of our annualized rental revenue from the United States Government) was through the General Services Administration (GSA).


21



Corporate Office Properties Trust
Investment Activity
(dollars and square feet in thousands)
Location
 
Property Segment
 
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
 
Regional Office
 
Baltimore City
 
1

 
367

 
3/19/2015
 
96.2%
 
$
61,802

Quarter Ended June 30, 2015
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2600 Park Tower Drive
 
NoVA Defense/IT
 
Other Northern Virginia
 
1

 
237

 
4/15/2015
 
100.0%
 
80,504

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

 
558

(1)
8/7/2015
 
93.5%
 
121,231

Total - Year Ended December 31, 2015
 
 
 
3

 
1,162

 
 
 
 
 
$
263,537

 
 
 
 
 
 
 
 
 
 
 
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
 
Regional Office
 
Tysons Corner
 
1

 
160

 
7/27/2015
 
100.0%
 
27,800

15000 and 15010 Conference Center Drive (2)
 
NoVA Defense/IT
 
Westfields Corporate Center
 
2

 
665

 
8/28/2015
 
25.1%
 
167,335

Subtotal - Quarter Ended September 30, 2015
 
 
 
3

 
825

 
 
 
 
 
195,135

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
13200 Woodland Park Road
 
Regional Office
 
Herndon
 
1

 
397

 
10/27/2015
 
100.0%
 
84,000

9900, 9910 and 9920 Franklin Square Drive
 
Regional Office
 
White Marsh
 
3

 
135

 
11/9/2015
 
100.0%
 
24,150

9690 Deereco Road and 375 W. Padonia Road
 
Regional Office
 
Hunt Valley/RTE 83 Corridor
 
2

 
240

 
12/17/2015
 
100.0%
 
44,500

Subtotal - Quarter Ended December 31, 2015
 
 
 
6

 
772

 
 
 
 
 
152,650

Total - Year Ended December 31, 2015
 
 
 
9

 
1,597

 
 
 
 
 
$
365,860


(1)
30 Light Street is a 560-space structured parking garage adjacent to 100 Light Street, including 10 square feet included above.
(2)
Ownership in these properties was transferred to the mortgage lender on a $150,000 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.

22


Corporate Office Properties Trust
Construction, Redevelopment and Land Owned/Controlled as of 12/31/15
(dollars and square feet in thousands)
 
Construction
Projects (1)
 
Redevelopment
Projects (2)
 
Land Owned/Controlled (3)
 
Total
Segment
Rentable Square Feet
Defense/IT Locations:
 
 
 
 
 
 
 
Fort Meade/BW Corridor
456

 
156

 
4,175

 
4,787

NoVA Defense/IT
401

 

 
1,614

 
2,015

Lackland Air Force Base

 

 
1,033

 
1,033

Navy Support

 

 
109

 
109

Redstone Arsenal
19

 

 
4,084

 
4,103

Data Center Shells
447

 

 

 
447

Subtotal Defense/IT Locations
1,323

 
156

 
11,015

 
12,494

Regional Office

 

 
1,613

 
1,613

Other

 

 
3,278

 
3,278

Total
1,323

 
156

 
15,906

 
17,385

 
Costs to date by region
Defense/IT Locations:
 
 
 
 
 
 
 
Fort Meade/BW Corridor
$
80,830

 
$
21,688

 
$
124,538

 
$
227,056

NoVA Defense/IT
38,809

 

 
83,890

 
122,699

Lackland Air Force Base

 

 
20,201

 
20,201

Navy Support

 

 
2,588

 
2,588

Redstone Arsenal
2,677

 

 
14,249

 
16,926

Data Center Shells
42,510

 

 

 
42,510

Subtotal Defense/IT Locations
164,826

 
21,688

 
245,466

 
431,980

Regional Office

 

 
45,200

 
45,200

Other

 

 
51,699

 
51,699

Total
$
164,826

 
$
21,688

 
$
342,365

 
$
528,879

 
 
 
 
 
 
 
 
Reconciliation to amounts included in projects in development or held for future development, including land costs, as reported on consolidated balance sheet
 
 
 
 
 
 
 
Operating properties
(37,372
)
 
(8,540
)
 
(32,289
)
 
(78,201
)
Assets held for sale

 

 
(17,900
)
 
(17,900
)
Deferred leasing costs and other assets
(3,407
)
 
(152
)
 

 
(3,559
)
Projects in development or held for future development, including associated land costs (4)
$
124,047

 
$
12,996

 
$
292,176

 
$
429,219

(1) 
Represents construction projects as listed on page 24.
(2) 
Represents redevelopment projects as listed on page 25.
(3)
Represents our land owned/controlled as listed on page 27.
(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”.

23


Corporate Office Properties Trust
Summary of Construction Projects as of 12/31/15 (1)
(dollars and square feet in thousands) 
 
 
Property Segment
 
Park/Submarket
Total Rentable Square Feet
Percentage Leased as of 1/8/16
as of 12/31/15 (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
 
310 Sentinel Way
Annapolis Junction, Maryland
Ft Meade/BW Corridor
 
National Bus. Park
191

0%
$
54,352

$
38,838

$
9,191

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

100%
29,750

19,482


1Q 16
1Q 16
 
Patriot Point - DC16
   Ashburn, Virginia
Data Center Shells
 
Ashburn
149

100%
29,840

16,478


2Q 16
2Q 16
 
NOVA Office B
   Northern Virginia
NoVA Defense/IT
 
Other
161

0%
41,500

30,336

3,320

2Q 15
2Q 16
 
7880 Milestone Parkway (4)
Hanover, Maryland
Ft Meade/BW Corridor
 
Arundel Preserve
120

74%
31,535

29,356

24,861

3Q 15
3Q 16
 
Patriot Point - DC - 17 Ashburn, Virginia
Data Center Shells
 
Ashburn
149

100%
22,670

6,550


3Q 16
3Q 16
 
2100 Redstone Gateway Huntsville, Alabama
Redstone Arsenal
 
Redstone Gateway
19

58%
5,033

2,677


2Q 16
2Q 17
 
540 National Business Parkway Annapolis Junction, Maryland
Ft. Meade/BW Corridor
 
National Bus. Park
145

49%
43,712

12,636


4Q 16
4Q 17
 
NOVA Office D
   Northern Virginia
NoVA Defense/IT
 
Other
240

100%
46,525

8,473


1Q 18
1Q 18
 
Total Under Construction
 
 
 
1,323

65%
$
304,917

$
164,826

$
37,372

 
 

(1)
Includes properties under active construction and properties that we were contractually committed to construct as of 12/31/15 and an additional property (DC-17) that became 100% leased on 1/8/16.
(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 square feet were operational as of 12/31/15; NOI for this property was $573 and cash NOI was $91 for the three months ended 12/31/15.



24


Corporate Office Properties Trust
Summary of Redevelopment Projects as of 12/31/15
(dollars and square feet in thousands) 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Property Segment
Park/Submarket
Total Rentable Square Feet
Percentage Leased as of 12/31/15 (3)
as of 12/31/15 (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
 
6708 Alexander Bell Drive
Columbia, Maryland
 
Ft Meade/BW Corridor
Howard Co. Perimeter
52

0%
$
2,662

$
8,646

$
11,308

$
7,918

$
2,662

1Q 15
1Q 16
7134 Columbia Gateway Drive
Columbia, Maryland
 
Ft Meade/BW Corridor
Howard Co. Perimeter
22

0%
1,755

2,394

4,149

1,923

1,755

1Q 16
1Q 17
1201 Winterson Rd (AS 13)
Linthicum, Maryland
 
Ft Meade/BW Corridor
Airport Square
68

0%
3,079

12,772

15,851

10,100

3,079

1Q 16
1Q 17
Airport Landing (3)
Linthicum, Maryland
 
Ft Meade/BW Corridor
Airport Square
 
 
 
 
 
 
 
 
 
Retail Buildings
 
 
 
14

56%
785

5,598

6,383

1,488

785

3Q 16
3Q 17
Pad Site
 
 
 
N/A

100%
259

405

664

259

259

4Q 16
4Q 16
Total Under Redevelopment
156

8%
$
8,540

$
29,815

$
38,355

$
21,688

$
8,540

 
 
 
(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 Airport Landing 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 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.



25


Corporate Office Properties Trust
Office Property Construction and Redevelopment Place in Service as of 12/31/15
(square feet in thousands)
 
 
 
 
Rentable Square Feet of Property
 
 
 
 
 
Space Placed in Service Percentage Leased as of 12/31/15
 
 
 
Square Feet Placed in Service
 
 
 
Property Segment
 
Year 2015
 
Property and Location
Park/Submarket
1st Quarter
2nd Quarter
3rd Quarter
4th Quarter
Total
Ashburn Crossing - DC10
Ashburn, Virginia
Data Center Shells
Ashburn
121

121




121

100%
NOVA Office A
Ashburn, Virginia
NoVA Defense/IT
Ashburn
159

159




159

100%
Sentry Gateway - Z
San Antonio, Texas
Lackland Air Force Base
San Antonio
160

160




160

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

111


30


141

100%
7400 Redstone
Huntsville, Alabama
Redstone Arsenal
Huntsville
69


69



69

100%
7880 Milestone Parkway
Hanover, Maryland
Ft Meade/BW Corridor
Arundel Preserve
120



88


88

100%
Southpoint Manassas DC12
Manassas, Virginia
Data Center Shells
Other
Northern Virginia
150



150


150

100%
Southpoint Manassas DC14
Manassas, Virginia
Data Center Shells
Other
Northern Virginia
150



150


150

100%
44417 Pecan Court
St. Marys County, Maryland
Navy Support
St. Marys County
29



29


29

0%
Total Construction/Redevelopment Placed Into Service
551

69

447


1,067

97%

26


Corporate Office Properties Trust
Summary of Land Owned/Controlled as of 12/31/15 (1)
Location
Acres
 
Estimated Developable Square Feet (in thousands)
 
Costs to Date (2)
Land Owned/Controlled for Future Development
 
 
 
 
 
Defense IT Locations:
 

 
 

 
 
Fort Meade/BW Corridor:
 
 
 
 
 
National Business Park
233

 
1,956

 
 
Howard County
27

 
590

 
 
Other
143

 
1,629

 
 
Total Fort Meade/BW Corridor
403

 
4,175

 
 
NoVA Defense/IT
64

 
1,614

 
 
Lackland AFB
68

 
1,033

 
 
Navy Support
44

 
109

 
 
Redstone Arsenal (3)
428

 
4,084

 
 
Total Defense/IT Locations
1,007

 
11,015

 
 
Regional Office
52

 
1,613

 
 
Total land owned/controlled for future development
1,059

 
12,628

 
$
258,377

 
 
 
 
 
 
Other land owned/controlled
282

 
3,278

 
33,799

Land held for sale
98

 
1,675

 
17,900

 
 
 
 
 
 
Land owned/controlled
1,439

 
17,581

 
$
310,076

Land held for sale
(98
)
 
(1,675
)
 
(17,900
)
Land held, net
1,341

 
15,906

 
$
292,176

 
 
 
 
 
 
(1)
This land inventory schedule excludes all properties listed as construction or redevelopment as detailed on pages 24 and 25, and includes properties under ground lease to us.
(2)
Represents total costs to date included in “projects in development or held for future development, including associated land costs,” as reported on page 23 (in thousands).
(3)
Includes land owned under a long-term master lease agreement to LW Redstone Company, a consolidated joint venture (see page 32). 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 $14,200 as of 12/31/15.

27



Corporate Office Properties Trust
Quarterly Equity Analysis
(dollars, shares and units in thousands, except per share amounts)
SHAREHOLDER CLASSIFICATION
Common Shares
 
Common Units
 
As if Converted
Preferred
Shares/Units
 
Total
 
Diluted
Ownership % of Total
As of December 31, 2015:
Insiders
581

 
309

 

 
890

 
0.90
%
Non-insiders
93,951

 
3,368

 
610

 
97,929

 
99.10
%
Total
94,532

 
3,677

 
610

 
98,819

 
100.00
%
COMMON EQUITY - End of Quarter
12/31/15
 
9/30/15
 
6/30/15
 
3/31/15
 
12/31/14
Unrestricted Common Shares
94,154

 
94,145

 
94,133

 
94,097

 
92,865

Restricted Common Shares
378

 
389

 
397

 
439

 
390

Common Shares
94,532

 
94,534

 
94,530

 
94,536

 
93,255

Common Units
3,677

 
3,677

 
3,680

 
3,680

 
3,838

Total
98,209

 
98,211

 
98,210

 
98,216

 
97,093

End of Quarter Common Share Price
$
21.83

 
$
21.03

 
$
23.54

 
$
29.38

 
$
28.37

Market Value of Common Shares/Units
$
2,143,902

 
$
2,065,377

 
$
2,311,863

 
$
2,885,586

 
$
2,754,528

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
2,143,902

 
2,065,377

 
2,311,863

 
2,885,586

 
2,754,528

Total Equity Market Capitalization
$
2,351,785

 
$
2,273,260

 
$
2,519,746

 
$
3,093,469

 
$
2,962,411

(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.

28


Corporate Office Properties Trust
Debt Analysis as of December 31, 2015
(dollars in thousands)
 
Stated Rate
 
GAAP 
Effective Rate
 
Weighted Average Maturity (in Years)
 
Maximum Availability
 
Outstanding Balance
 
Carrying Value
 
Average Stated Interest Rates for Three Months Ended 12/31/15 (1)
 
 
 
 
 
Debt Outstanding
 
 
 
 
 
 
 
 
 

 
 

 
 
 
 
Fixed rate
 
 
 
 
 
 
 
 
 

 
 

 
 
 
 
Secured debt
6.08%
 
6.04%
 
3.5
 
 
 
$
281,702

 
$
281,208

 
6.1%
 
 
Senior Unsecured Notes
4.32%
 
4.47%
 
7.6
 
 
 
1,200,000

 
1,185,842

 
4.3%
 
 
Other Unsecured Debt
0.00%
 
6.50%
 
10.3
 
 
 
2,061

 
1,508

 
0.0%
 
 
Total fixed rate debt
4.65%
 
4.77%
 
6.8
 
 
 
$
1,483,763

 
$
1,468,558

 
4.7%
 
 
Variable rate
 
 
 
 
 
 
 
 
 

 
 

 
 
 
 
Secured debt
2.20%
 
2.20%
 
1.6
 


 
$
49,967

 
$
49,792

 
2.3%
 
 
Unsecured Revolving Credit Facility
1.59%
 
1.59%
 
3.3
 
$
800,000

 
43,500

 
43,500

 
1.4%
 
 
Unsecured Term Loans
1.92%
 
1.92%
 
4.7
 


 
520,000

 
515,902

 
1.8%
 
 
Total variable rate debt
1.92%
 
1.92%
 
4.3
 


 
$
613,467

 
$
609,194

 
2.9%
(1)(2)
 
Total Consolidated Debt outstanding
3.85%
 
3.94%
 
6.1
 
 
 
$
2,097,230

 
$
2,077,752

 
4.1%
(1)(2)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Variable Rate Loans Subject to Interest Rate Swaps (1)
 
 
 
 
 
 
 
 
$
413,941

 
 
 
1.0%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
% of Fixed Rate Loans (1)
 
 
 
 
 
 
 
 
90.5
%
 
 
 
 
 
 
% of Variable Rate Loans (1)
 
 
 
 
 
 
 
 
9.5
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
100.0
%
 


 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Recourse debt
 
 
 
 
 
 
 
 
$
1,859,129

 
$
1,839,685

 
 
 
 
Nonrecourse debt
 
 
 
 
 
 
 
 
238,101

 
238,067

 
 
 
 
Total Consolidated Debt outstanding
 
 
 
 
 
 
 
 
$
2,097,230

 
$
2,077,752

 
 
 
 
 
(1)
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.
(2) Includes facility commitment fees incurred for our Unsecured Revolving Credit Facility.



29


Corporate Office Properties Trust
Debt Analysis  (continued)
(dollars in thousands)
 
 
 
 
 
December 31, 2015
 
 
Secured debt
$
331,000

 
 
Unsecured debt
1,746,752

 
 
Numerator for debt to adjusted book ratio
$
2,077,752

 
 
Less: Cash and cash equivalents
(60,310
)
 
 
Numerator for adjusted debt to in-place adjusted EBITDA ratio
$
2,017,442

 
 
 
 
 
 
Unencumbered adjusted book
$
4,270,416

 
 
Encumbered adjusted book
570,538

 
 
Total adjusted book
$
4,840,954

 
 
 
 
 
 
# of Operating Office Properties
 
 
 
Unencumbered
158

 
 
Encumbered
19

 
 
Total
177

 
 
 
 
 
 
Square Feet of Office Properties (in thousands)
 
 
 
Unencumbered
15,398

 
 
Encumbered
2,655

 
 
Total
18,053

 
 
 
 
 
 
 
Three Months Ended 12/31/15
 
 
NOI from unencumbered real estate operations
$
72,091

 
 
NOI from encumbered real estate operations
13,888

 
 
Total NOI from real estate operations
$
85,979

 
 
 
 
 
 
Unencumbered adjusted EBITDA
$
65,848

 
 
Encumbered adjusted EBITDA (1)
13,870

 
 
Total adjusted EBITDA (1)
$
79,718

 
 
 
 
 
 
Debt ratios (coverage ratios excluding capitalized interest) — All coverage computations include discontinued operations
Three Months Ended 12/31/15
 
 
Adjusted EBITDA debt service coverage ratio
3.6x
 
 
Adjusted EBITDA fixed charge coverage ratio
2.9x
 
 
Adjusted debt to in-place adjusted EBITDA ratio
6.5x
 
 
 
 
 
 
 
As of and for Three Months Ended 12/31/15
Unsecured Senior Notes Covenants
Actual
 
Required
Total Debt / Total Assets
44.3%
 
Less than 60%
Secured Debt / Total Assets
7.0%
 
Less than 40%
Debt Service Coverage
3.2x
 
Greater than 1.5x
Unencumbered Assets / Unsecured Debt
236.1%
 
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.

30


Corporate Office Properties Trust
Debt Maturity Schedule
(dollars in thousands) 
 
 
 
GAAP
 
 
 
 
 
 
 
 
 
Stated
 
Effective
 
 
 
 
 
 
 
 
 
Rate
 
Rate
 
2016
2017
2018
2019
2020
Thereafter
Total
Unsecured Debt
 
 
 
 
 
 
 
 
 
 

Unsecured Revolving Credit Facility (1)
LIBOR + 1.20%
 
1.59%
 
$

$

$

$
43,500

$

$

$
43,500

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
 
 
 
 
 
 
 
 
 
 
 
2019 maturities
LIBOR + 2.10%
 
2.34%
 



120,000



120,000

2020 maturities
LIBOR + 1.40%
 
1.65%
 




300,000


300,000

2022 maturities (2)
LIBOR + 1.80%
 
2.23%
 





100,000

100,000

2026 maturities
0.00%
 
6.50%
 
200

200

200

200

200

1,061

2,061

Total Other Unsecured Debt
 
 
 
 
200

200

200

120,200

300,200

101,061

522,061

 
 
 
 
 
 
 
 
 
 
 
 
Total Unsecured Debt
 
 
 
 
$
200

$
200

$
200

$
163,700

$
300,200

$
1,301,061

$
1,765,561

Secured Debt
 
 
 
 
 
 
 
 
 
 
 
Fixed Rate Secured Debt
 
 
 
 
 
 
 
 
 
 
 
 2016 maturities
7.22%
 
7.21%
 
$
169,343

$

$

$


$

$
169,343

 2019 maturities
7.87%
 
6.76%
 
356

385

417

412



1,570

 Thereafter
4.31%
 
4.24%
 
1,829

2,298

2,400

2,506

2,614

99,142

110,789

Total Fixed Rate Secured Debt
 
 
 
 
171,528

2,683

2,817

2,918

2,614

99,142

281,702

 
 
 
 
 
 
 
 
 
 
 
 
Variable Rate Secured Debt
 
 
 
 
 
 
 
 
 
 
 
 2016 maturities
LIBOR + 2.0%
 
2.24%
 
36,026






36,026

 2020 maturities
LIBOR + 1.85%
 
2.09%
 
355

369

383

396

12,438


13,941

Variable Rate Secured Debt

 
 
 
36,381

369

383

396

12,438


49,967

 
 
 
 
 
 
 
 
 
 
 
 
Total Secured Debt
 
 
 
 
$
207,909

$
3,052

$
3,200

$
3,314

$
15,052

$
99,142

$
331,669

 
 
 
 
 
 
 
 
 
 
 
 
Total Debt
 
 
 
 
$
208,109

$
3,252

$
3,400

$
167,014

$
315,252

$
1,400,203

$
2,097,230

 
 
 
 
 
 
 
 
 
 
 
 
Fixed Rate Debt
4.65%
 
4.77%
 
$
171,728

$
2,883

$
3,017

$
3,118

$
2,814

$
1,300,203

$
1,483,763

Variable Rate Debt
1.92%
 
1.92%
 
36,381

369

383

163,896

312,438

100,000

613,467

Total Debt
 
 
 
 
$
208,109

$
3,252

$
3,400

$
167,014

$
315,252

$
1,400,203

$
2,097,230

 
 
 
 
 
 
 
 
 
 
 
 
Balloon Payments
 
 
 
 
$
201,713

$

$

$
163,500

$
312,132

$
1,391,229

$
2,068,574

Scheduled Principal Amortization
 
 
 
 
6,396

3,252

3,400

3,514

3,120

8,974

28,656

Total Debt
 
 
 
 
$
208,109

$
3,252

$
3,400

$
167,014

$
315,252

$
1,400,203

$
2,097,230

 
 
 
 
 
 
 
Net debt discounts and deferred financing costs
(19,478
)
 
 
 
 
 
 
 
Numerator for debt to adjusted book
$
2,077,752

 
 
 
 
 
 
 
 
 
(1)
Matures in May 2019, and may be extended by two six-month periods at our option, subject to certain conditions.
(2)
An additional $150,000 in borrowings is available to be drawn under this loan through September 2016.


31


Corporate Office Properties Trust
Consolidated Joint Ventures as of 12/31/15
(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%
$
53,469

$
36,026

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

100.0%
100.0%
85,757

50,742

85%
Total/Average
737

100.0%
100.0%
$
139,226

$
86,768

 
NOI of Operating Properties for the Three Months Ended 12/31/15 (2)
$
3,271

 
 
 

 

 
NOI of Operating Properties for the Year Ended 12/31/15 (2)
$
12,037

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

 
 
 

 

 
M Square Research Park
525

 
 
$
2,986

$

50%
Huntsville, Alabama:
 

 
 
 

 

 
Redstone Gateway (3)
4,084

 
 
61,855


85%
Washington, DC:
 
 
 
 
 
 
Stevens Place
185

 
 
5,284


95%
Total
4,794

 
 
$
70,125

$

 
 
(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 ventures.
(2)
Represents gross NOI of the joint venture operating properties before allocation to joint venture partners.
(3)
Total assets include $44.9 million due from the City of Huntsville (including accrued interest) in connection with infrastructure costs funded by the joint venture.

32



Corporate Office Properties Trust
Supplementary Reconciliations of Non-GAAP Measures
(dollars in thousands)
 
Three Months Ended
 
Years Ended
 
12/31/15
 
9/30/15
 
6/30/15
 
3/31/15
 
12/31/14
 
12/31/15
 
12/31/14
GAAP revenues from real estate operations from continuing operations
$
134,477

 
$
133,686

 
$
128,191

 
$
122,710

 
$
120,613

 
$
519,064

 
$
479,725

Revenues from discontinued operations

 

 
4

 

 
(2
)
 
4

 
(14
)
Real estate revenues
$
134,477

 
$
133,686

 
$
128,195

 
$
122,710

 
$
120,611

 
$
519,068

 
$
479,711

 
 
 
 
 
 
 
 
 
 
 
 
 
 
GAAP property operating expenses from continuing operations
$
48,498

 
$
48,897

 
$
46,418

 
$
50,681

 
$
43,334

 
$
194,494

 
$
179,934

Property operating expenses from discontinued operations

 

 
(11
)
 
5

 
(24
)
 
(6
)
 
(135
)
Real estate property operating expenses
$
48,498

 
$
48,897

 
$
46,407

 
$
50,686

 
$
43,310

 
$
194,488

 
$
179,799

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Discontinued Operations
 

 
 

 
 

 
 

 
 

 
 

 
 

Revenues from real estate operations
$

 
$

 
$
4

 
$

 
$
(2
)
 
$
4

 
$
(14
)
Property operating expenses

 

 
11

 
(5
)
 
24

 
6

 
135

Gain (loss) on early extinguishment of debt

 

 
380

 

 

 
380

 
(116
)
Impairment (losses) recoveries

 

 
(1
)
 
(233
)
 

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

 

 

 

 

 

 
24

Discontinued operations
$

 
$

 
$
394

 
$
(238
)
 
$
22

 
$
156

 
$
26

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Gain on sales of real estate, net, per statements of operations
$
64,047

 
$
15

 
$
(1
)
 
$
3,986

 
$
41

 
$
68,047

 
$
10,671

Gain on sales of real estate from discontinued operations

 

 

 

 

 

 
24

Gain on sales of real estate from continuing and discont. operations
64,047

 
15

 
(1
)
 
3,986

 
41

 
68,047

 
10,695

Gain on sales of non-operating properties

 

 
1

 
(3,986
)
 
(43
)
 
(3,985
)
 
(5,578
)
Gain on sales of operating properties
$
64,047

 
$
15

 
$

 
$

 
$
(2
)
 
$
64,062

 
$
5,117

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Impairment losses, per statements of operations
$
19,744

 
$
2,307

 
$
1,238

 
$

 
$
48

 
$
23,289

 
$
1,416

Impairment losses on discontinued operations

 

 
1

 
233

 

 
234

 
3

Total impairment losses
$
19,744

 
$
2,307

 
$
1,239

 
$
233

 
$
48

 
$
23,523

 
$
1,419

Impairment losses on previously depreciated operating properties
(331
)
 
(2,307
)
 
(1,239
)
 
(233
)
 
(48
)
 
(4,110
)
 
(1,370
)
Impairment losses on non-operating properties
$
19,413

 
$

 
$

 
$

 
$

 
$
19,413

 
$
49


33


Corporate Office Properties Trust
Supplementary Reconciliations of Non-GAAP Measures (continued)
(dollars in thousands)
 
Three Months Ended
 
Years Ended
 
12/31/15
 
9/30/15
 
6/30/15
 
3/31/15
 
12/31/14
 
12/31/15
 
12/31/14
Total interest expense
$
22,347

 
$
24,121

 
$
21,768

 
$
20,838

 
$
23,286

 
$
89,074

 
$
92,393

Less: Amortization of deferred financing costs
(1,127
)
 
(1,203
)
 
(1,146
)
 
(990
)
 
(1,020
)
 
(4,466
)
 
(4,666
)
Less: Amortization of net debt discounts and prem., net of amounts capitalized
(317
)
 
(321
)
 
(264
)
 
(264
)
 
(261
)
 
(1,166
)
 
(920
)
Less: Loss on interest rate derivatives
(386
)
 

 

 

 

 
(386
)
 

Less: Interest expense on debt in default extinguished via conveyance of properties

 
(2,781
)
 
(4,261
)
 
(4,182
)
 
(4,320
)
 
(11,224
)
 
(12,684
)
Denominator for interest coverage
20,517

 
19,816

 
16,097

 
15,402

 
17,685

 
71,832

 
74,123

Scheduled principal amortization
1,717

 
1,692

 
1,670

 
1,649

 
1,603

 
6,728

 
6,517

Denominator for debt service coverage
22,234

 
21,508

 
17,767

 
17,051

 
19,288

 
78,560

 
80,640

Capitalized interest
1,510

 
1,559

 
1,950

 
2,132

 
1,740

 
7,151

 
6,065

Preferred share dividends - redeemable non-convertible
3,553

 
3,552

 
3,553

 
3,552

 
3,552

 
14,210

 
15,939

Preferred unit distributions
165

 
165

 
165

 
165

 
165

 
660

 
660

Denominator for fixed charge coverage
$
27,462

 
$
26,784

 
$
23,435

 
$
22,900

 
$
24,745

 
$
100,581

 
$
103,304

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Preferred share dividends
$
3,553

 
$
3,552

 
$
3,553

 
$
3,552

 
$
3,552

 
$
14,210

 
$
15,939

Preferred unit distributions
165

 
165

 
165

 
165

 
165

 
660

 
660

Common share dividends
25,998

 
26,000

 
26,002

 
25,998

 
25,638

 
103,998

 
97,944

Common unit distributions
1,011

 
1,011

 
1,012

 
1,012

 
1,055

 
4,046

 
4,270

Total dividends/distributions
$
30,727

 
$
30,728

 
$
30,732

 
$
30,727

 
$
30,410

 
$
122,914

 
$
118,813

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Common share dividends
$
25,998

 
$
26,000

 
$
26,002

 
$
25,998

 
$
25,638

 
$
103,998

 
$
97,944

Common unit distributions
1,011

 
1,011

 
1,012

 
1,012

 
1,055

 
4,046

 
4,270

Dividends and distributions on dilutive preferred securities

 
537

 

 

 

 

 

Dividends and distributions for diluted FFO payout ratio
27,009

 
27,548

 
27,014

 
27,010

 
26,693

 
108,044

 
102,214

Dividends and distributions on antidilutive preferred securities

 
(537
)
 

 

 

 

 

Dividends and distributions for other payout ratios
$
27,009

 
$
27,011

 
$
27,014

 
$
27,010

 
$
26,693

 
$
108,044

 
$
102,214

 
 
 
 
 
 
 
 
 
 
 
 
 
 

34


Corporate Office Properties Trust
Supplementary Reconciliations of Non-GAAP Measures (continued)
(dollars in thousands)
 
Three Months Ended
 
 
 
 
 
12/31/15
 
9/30/15
 
6/30/15
 
3/31/15
 
12/31/14
 
 
 
 
Total Assets
$
3,909,312

 
$
3,912,092

 
$
3,904,059

 
$
3,771,651

 
$
3,664,236

 
 
 
 
Accumulated depreciation
700,363

 
675,747

 
723,470

 
724,539

 
703,083

 
 
 
 
Accumulated depreciation included in assets held for sale
18,317

 
65,872

 
24,930

 

 

 
 
 
 
Accumulated amort. of real estate intangibles and deferred leasing costs
195,506

 
189,571

 
211,522

 
219,437

 
214,611

 
 
 
 
Accumulated amortization of real estate intangibles and deferred leasing costs included in assets held for sale
17,456

 
26,260

 
15,271

 

 

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

 

 
(130,471
)
 
(131,623
)
 
(131,118
)
 
 
 
 
Adjusted book
$
4,840,954

 
$
4,869,542

 
$
4,748,781

 
$
4,584,004

 
$
4,450,812

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Debt, net
$
2,077,752

 
$
2,114,859

 
$
2,123,308

 
$
1,994,118

 
$
1,914,036

 
 
 
 
Less: Debt in default extinguished via conveyance of properties

 

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


 
 
Numerator for debt to adjusted book ratio
2,077,752

 
2,114,859

 
1,973,308

 
1,844,118

 
1,764,036

 
 
 
 
Less: Cash and cash equivalents
(60,310
)
 
(3,840
)
 
(37,074
)
 
(4,429
)
 
(6,077
)
 
 
 
 
Adjusted debt
$
2,017,442

 
$
2,111,019

 
$
1,936,234

 
$
1,839,689

 
$
1,757,959

 


 



35



Corporate Office Properties Trust
Definitions

Non-GAAP Measures

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


36



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

37



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

38



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, gains or losses on interest rate derivatives 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, gains or losses on interest rate derivatives 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, gains on losses on interest rate derivatives 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.

39



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. 

40



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 — Represents Defense/IT Locations and Regional Office properties excluding properties held for sale.

Defense/IT Locations — Represents properties in locations that support United States Government agencies and their contractors, most of whom are engaged in national security, defense and IT related activities servicing what we believe are growing, durable priority missions.

First Generation Space — Newly constructed or redeveloped space that has never been occupied.
 
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 Properties — Includes traditional office properties located in select urban/urban-like submarkets within our regional footprint with durable Class-A office fundamentals and characteristics, as well as other properties supporting general commercial office tenants.

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.
 
Total Portfolio — Operating properties, excluding the effect of properties serving as collateral for debt which is in default that we expect to extinguish via property conveyance.

41


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 2015 RESULTS

COLUMBIA, MD February 12, 2016 - Corporate Office Properties Trust (“COPT” or the “Company”) (NYSE: OFC) announced financial and operating results for the fourth quarter and full year ended December 31, 2015.

Management Comments

“Fourth quarter and full year results topped off a year of significant achievement for the Company,” stated Roger A. Waesche, Jr., COPT’s President & Chief Executive Officer. “During the year, we further honed our portfolio by investing in development projects at multiple strategic locations and upgraded our portfolio by recycling suburban office assets into urban locations. As a result of these tactics, we now derive 84% of our core portfolio’s annualized revenue from locations that are tied to national defense. We are off to a strong start in 2016, and will continue recycling capital from suburban assets in order to grow our Defense IT locations and to further strengthen our balance sheet.”

Financial Highlights

4th Quarter Financial Results:
Diluted earnings per share (“EPS”) was $0.59 for the quarter ended December 31, 2015 as compared to $0.01 for the fourth quarter of 2014.
Diluted funds from operations per share (“FFOPS”), as calculated in accordance with NAREIT’s definition, was $0.31 for the fourth quarter of 2015 as compared to $0.34 for the fourth quarter of 2014.
FFOPS, as adjusted for comparability, was $0.52 for the quarter ended December 31, 2015 as compared to $0.49 for the fourth quarter of 2014, a 6.1% increase.

Full Year 2015 Financial Results:
EPS was $1.74 for the year ended December 31, 2015 as compared to $0.25 for 2014.
Per NAREIT’s definition, FFOPS for 2015 was $2.55 as compared to $1.69 for 2014.
FFOPS for the full year 2015, as adjusted for comparability, was $2.01 as compared to $1.88 reported for 2014, a 6.9% increase.

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


i


Operating Performance Highlights

Portfolio Summary:
At December 31, 2015, the Company’s core portfolio of 157 operating office properties totaled 17.0 million square feet that were 92.7% occupied and 93.9% leased.
At year end, the Company had 15 operating properties and 98 acres of land held for sale. The held for sale properties total 658,000 square feet and, at December 31, 2015, were 84.7% occupied.

Same Office Performance:
At December 31, 2015, COPT’s same office portfolio represented 85% of the core portfolio’s rentable square feet, consisted of 145 properties that were 90.9% occupied and 92.3% leased.
For the quarter ended December 31, 2015, the Company’s same office property cash NOI increased 2.5% as compared to the quarter ended December 31, 2014.
For the full year, same office property cash NOI increased 0.7% as compared to 2014.

Leasing:
Square Feet Leased - For the year and quarter ended December 31, 2015, the Company completed 2.5 million and 666,000 square feet of leasing, respectively. For the year, the Company completed 735,000 square feet of development leasing, modestly exceeding expectations.

On January 8, 2016, the Company executed a 149,000 square foot build-to-suit in Northern Virginia with a Defense /IT customer. Including this 100% pre-leased project, which was out for signature at the end of 4Q15, the Company completed 884,000 square feet of development leasing in 2015.

Strong Renewal Rates - During the year and fourth quarter, the Company renewed 71% and 90% of expiring leases, respectively, which exceeded expectations.

Rent Spreads Met Expectations - For the year and the quarter ended December 31, 2015, GAAP rent on renewed space increased 6.5% and 13.8%, respectively; on a cash basis, renewal rates declined by 2.6% for the year and by only 0.9% in the fourth quarter, as compared to the expiring rents.

Lease Term Lengthening - For the full year, lease terms averaged 4.3 years on renewals and 8.4 years on development and other new leases, for an average term of 6.3 years on all leasing completed during the year. In the fourth quarter, lease terms on 419,000 square feet of renewals averaged 4.7 years and 8.1 years on 247,000 square feet of development and other new leasing, for an average lease term of 6.0 years in the quarter.

Investment Activity Highlights

Development & Redevelopment Projects:
The Company has nine properties totaling 1.3 million square feet under construction that, at December 31, 2015, were 65% pre-leased. The nine projects have a total estimated cost of $304.9 million, of which $164.8 million has been incurred.
COPT has 156,000 square feet in four properties under redevelopment, representing a total expected cost of $38.4 million, of which $21.7 million has been invested. The four projects were 8% leased at year end 2015.

Acquisitions:
During 2015, the Company acquired three buildings, including an associated free-standing structured parking garage, totaling 1.2 million square feet for $263.5 million.


ii


Dispositions:
During 2015, the Company disposed of nine buildings aggregating 1.6 million square feet and non-strategic land for $365.9 million. This total included the disposition of two properties in Northern Virginia that collateralized a $150 million loan that was extinguished in exchange for title to the properties.
During the fourth quarter, the Company completed the following $153 million of asset sales:
The disposition of 13200 Woodland Park Road in Herndon, Virginia, for $84.0 million. The building contains approximately 397,000 rentable square feet and was 100% leased to Booz Allen Hamilton Inc. until December 31, 2015.
The disposition of 9900, 9910 and 9920 Franklin Square Drive in the White Marsh submarket of Greater Baltimore, Maryland, for $24 million. The three properties contained roughly 135,000 rentable square feet that were 100% occupied.
The disposition of 9690 Deereco Road and 375 W. Padonia Road in Timonium, a suburban submarket of Greater Baltimore, Maryland, for $44.5 million. The properties contained 240,000 rentable square feet that were 100% occupied at the time of sale.

Balance Sheet and Capital Transaction Highlights

As of December 31, 2015, the Company’s debt to adjusted book ratio was 42.9%, adjusted debt to in-place adjusted EBITDA ratio was 6.5x, and, for the quarter ended December 31, 2015, its adjusted EBITDA fixed charge coverage ratio was 2.9x.
The Company’s weighted average interest rate was 4.1% for the quarter ended December 31, 2015 and, including the effect of interest rate swaps, 90% of the Company’s debt was subject to fixed interest rates and the debt portfolio has a weighted average maturity of 6.1 years.
During the year ended December 31, 2015:
The Company issued $26.6 million of common equity from its ATM facility at an average gross price of $30.29.
In May, the Company amended the terms of its $800 million line of credit to: (1) extend the maturity date from July 2017, to May 2019 plus two six-month extension options; and (2) lower the interest rate spread and the facility fee to current market.

Also in May, the Company amended the terms of its $250 million Term Loan that was previously scheduled to mature on February 2017. The Company increased the Term Loan balance by $50 million, to $300 million, extended the maturity date to May 2020 and lowered the interest rate.
In late June, the Company issued $300 million of 5.00% senior unsecured notes due July 2025.
In December, the Company entered into a new 7-year $250 million Term Loan and used $100 million of proceeds to retire the $100 million Term Loan that was scheduled to mature in 2016. Through the new Term Loan’s delayed draw feature, the Company will use the remaining $150 million to retire a $162.5 million secured loan that is prepayable at par in July 2016.


iii


2016 FFO Guidance:
Management is maintaining its previously issued guidance ranges for full year FFOPS, as adjusted for comparability, of $1.95-$2.05, and establishing guidance for the first quarter ending March 31, 2016 at a range of $0.46-$0.48. Reconciliations of projected diluted EPS to projected FFOPS are provided as follows:
 
 
Three Months Ending
 
Year Ending
 
 
March 31, 2016
 
December 31, 2016
 
 
Low
 
High
 
Low
 
High
EPS
 
$
0.03

 
$
0.05

 
$
0.42

 
$
0.52

Real estate depreciation and amortization
 
0.40

 
0.40

 
1.60

 
1.60

Gains on sales of operating properties
 

 

 
(0.10
)
 
(0.10
)
FFOPS, NAREIT definition
 
0.43

 
0.45

 
1.92

 
2.02

Executive transition costs
 
0.03

 
0.03

 
0.03

 
0.03

FFOPS, as adjusted for comparability
 
$
0.46

 
$
0.48

 
$
1.95

 
$
2.05

 
 
 
 
 
 
 
 
 

Associated Supplemental Presentation

The Company has posted a slide presentation to accompany management’s prepared remarks for its fourth quarter and full year 2015 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.

Conference Call Information

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

Earnings Release Date:    Friday, February 12, 2016 at 6:00 a.m. Eastern Time

Conference Call Date:    Friday, February 12, 2016

Time:     12:00 p.m. Eastern Time

Telephone Number: (within the U.S.)     888-713-4205

Telephone Number: (outside the U.S.)    617-213-4862

Passcode:    47665945#

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. To pre-register, please click on the below link:
https://www.theconferencingservice.com/prereg/key.process?key=PX64ACELX

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

A replay of this call will be available beginning Friday, February 12, at 4:00 p.m. Eastern Time through Friday, February 26, 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.

iv


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 owns, manages, develops and selectively acquires office and data center properties in locations that support United States Government agencies and their contractors, most of whom are engaged in national security, defense and information technology (“IT”) related activities servicing priority missions (“Defense/IT Locations”). We also own a complementary portfolio of traditional Class-A office properties located in select urban/urban-like submarkets within our regional footprint (“Regional Office Properties”). As of December 31, 2015, we derived 84% of core portfolio annualized revenue from Defense/IT Locations and 16% from our Regional Office Properties. As of December 31, 2015, our core portfolio of 157 office properties encompassed 17.0 million square feet and was 93.9% leased.

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 December 31, 2015
 
For the Year Ended December 31,
 
2015
 
2014
 
2015
 
2014
Revenues
 

 
 

 
 
 
 
Real estate revenues
$
134,477

 
$
120,613

 
$
519,064

 
$
479,725

Construction contract and other service revenues
8,848

 
26,358

 
106,402

 
106,748

Total revenues
143,325

 
146,971

 
625,466

 
586,473

Expenses
 

 
 

 
 
 
 
Property operating expenses
48,498

 
43,334

 
194,494

 
179,934

Depreciation and amortization associated with real estate operations
36,237

 
31,358

 
140,025

 
136,086

Construction contract and other service expenses
7,773

 
24,705

 
102,696

 
100,058

Impairment losses
19,744

 
48

 
23,289

 
1,416

General and administrative expenses
6,609

 
7,206

 
24,526

 
24,841

Leasing expenses
1,888

 
1,706

 
6,835

 
6,953

Business development expenses and land carry costs
2,521

 
1,466

 
13,507

 
5,573

Total operating expenses
123,270

 
109,823

 
505,372

 
454,861

Operating income
20,055

 
37,148


120,094


131,612

Interest expense
(22,347
)
 
(23,286
)
 
(89,074
)
 
(92,393
)
Interest and other income
1,300

 
1,148

 
4,517

 
4,923

(Loss) gain on early extinguishment of debt
(402
)
 
(9,106
)
 
85,275

 
(9,552
)
(Loss) income from continuing operations before equity in income of unconsolidated entities and income taxes
(1,394
)
 
5,904

 
120,812

 
34,590

Equity in income of unconsolidated entities
10

 
23

 
62

 
229

Income tax expense
(46
)
 
(53
)
 
(199
)
 
(310
)
(Loss) income from continuing operations
(1,430
)
 
5,874

 
120,675

 
34,509

Discontinued operations

 
22

 
156

 
26

(Loss) income before gain on sales of real estate
(1,430
)
 
5,896

 
120,831

 
34,535

Gain on sales of real estate, net of income taxes
64,047

 
41

 
68,047

 
10,671

Net income
62,617

 
5,937

 
188,878

 
45,206

Net income attributable to noncontrolling interests
 

 
 

 
 
 
 
Common units in the Operating Partnership (“OP”)
(2,172
)
 
(64
)
 
(6,403
)
 
(1,006
)
Preferred units in the OP
(165
)
 
(165
)
 
(660
)
 
(660
)
Other consolidated entities
(916
)
 
(804
)
 
(3,515
)
 
(3,285
)
Net income attributable to COPT
59,364

 
4,904

 
178,300

 
40,255

Preferred share dividends
(3,553
)
 
(3,552
)
 
(14,210
)
 
(15,939
)
Issuance costs associated with redeemed preferred shares

 

 

 
(1,769
)
Net income attributable to COPT common shareholders
$
55,811

 
$
1,352

 
$
164,090

 
$
22,547

Earnings per share (“EPS”) computation:
 

 
 

 
 
 
 
Numerator for diluted EPS:
 

 
 

 
 
 
 
Net income attributable to common shareholders
$
55,811

 
$
1,352

 
$
164,090

 
$
22,547

Common units in the OP

 

 
6,403

 

Amount allocable to share-based compensation awards
(230
)
 
(100
)
 
(706
)
 
(432
)
Numerator for diluted EPS
$
55,581

 
$
1,252

 
$
169,787

 
$
22,115

Denominator:
 

 
 

 
 
 
 
Weighted average common shares - basic
94,164

 
90,752

 
93,914

 
88,092

Common units in the OP

 

 
3,692

 

Dilutive effect of share-based compensation awards

 
196

 
61

 
171

Weighted average common shares - diluted
94,164

 
90,948

 
97,667

 
88,263

Diluted EPS
$
0.59

 
$
0.01

 
$
1.74

 
$
0.25


vi



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

 
For the Three Months Ended December 31, 2015
 
For the Year Ended December 31,
 
2015
 
2014
 
2015
 
2014
Net income
$
62,617

 
$
5,937

 
$
188,878

 
$
45,206

Real estate-related depreciation and amortization
36,237

 
31,358

 
140,025

 
136,086

Impairment losses on previously depreciated operating properties
331

 
48

 
4,110

 
1,370

Gain on sales of previously depreciated operating properties
(64,047
)
 
2

 
(64,062
)
 
(5,117
)
Funds from operations (“FFO”)
35,138

 
37,345

 
268,951

 
177,545

Noncontrolling interests - preferred units in the OP
(165
)
 
(165
)
 
(660
)
 
(660
)
FFO allocable to other noncontrolling interests
(817
)
 
(867
)
 
(3,586
)
 
(3,216
)
Preferred share dividends
(3,553
)
 
(3,552
)
 
(14,210
)
 
(15,939
)
Issuance costs associated with redeemed preferred shares

 

 

 
(1,769
)
Basic and diluted FFO allocable to share-based compensation awards
(115
)
 
(123
)
 
(1,041
)
 
(665
)
Basic and diluted FFO available to common share and common unit holders (“Diluted FFO”)
30,488

 
32,638

 
249,454

 
155,296

Operating property acquisition costs
32

 

 
4,134

 

Gain on sales of non-operating properties

 
(43
)
 
(3,985
)
 
(5,578
)
Impairment losses on other properties
19,413

 

 
19,413

 
49

Loss on interest rate derivatives
386

 

 
386

 

Loss (gain) on early extinguishment of debt
402

 
9,106

 
(85,655
)
 
9,668

Issuance costs associated with redeemed preferred shares

 

 

 
1,769

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

 
3,493

 
10,456

 
10,928

Demolition costs on redevelopment properties
225

 

 
1,396

 

Executive transition costs

 
1,056

 

 
1,056

Diluted FFO comparability adjustments allocable to share-based compensation awards
(88
)
 
(59
)
 
225

 
(78
)
Diluted FFO available to common share and common unit holders, as adjusted for comparability
50,858

 
46,191

 
195,824

 
173,110

Straight line rent adjustments
(2,614
)
 
(379
)
 
(13,379
)
 
(1,820
)
Straight line rent adjustments - properties in default conveyed

 
(47
)
 
(115
)
 
(142
)
Amortization of intangibles included in net operating income
365

 
208

 
1,428

 
855

Share-based compensation, net of amounts capitalized
1,625

 
1,504

 
6,574

 
6,067

Amortization of deferred financing costs
1,127

 
1,020

 
4,466

 
4,666

Amortization of deferred financing costs - properties in default conveyed

 

 

 
(333
)
Amortization of net debt discounts, net of amounts capitalized
317

 
261

 
1,166

 
920

Amortization of settled debt hedges

 
11

 

 
57

Recurring capital expenditures
(20,086
)
 
(8,633
)
 
(49,266
)
 
(50,199
)
Diluted adjusted funds from operations available to common share and common unit holders (“Diluted AFFO”)
$
31,592

 
$
40,136

 
$
146,698

 
$
133,181

Diluted FFO per share
$
0.31

 
$
0.34

 
$
2.55

 
$
1.69

Diluted FFO per share, as adjusted for comparability
$
0.52

 
$
0.49

 
$
2.01

 
$
1.88

Dividends/distributions per common share/unit
$
0.275

 
$
0.275

 
$
1.100

 
$
1.100


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

vii



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

 
 
December 31,
2015
 
December 31,
2014
Balance Sheet Data
 
 

 
 

Properties, net of accumulated depreciation
 
$
3,349,748

 
$
3,296,914

Total assets
 
3,909,312

 
3,664,236

Debt, net
 
2,077,752

 
1,914,036

Total liabilities
 
2,273,530

 
2,124,935

Redeemable noncontrolling interest
 
19,218

 
18,417

Equity
 
1,616,564

 
1,520,884

Debt to adjusted book
 
42.9
%
 
39.6
%
 
 
 
 
 
Core Portfolio Data (as of period end) (1)
 
 

 
 

Number of operating properties
 
157

 
173

Total net rentable square feet owned (in thousands)
 
17,038

 
16,790

Occupancy %
 
92.7
%
 
90.9
%
Leased %
 
93.9
%
 
92.4
%
 
 
 
 
 
 
For the Three Months Ended December 31, 2015
 
For the Year Ended December 31,
2015
 
2014
 
2015
 
2014
Payout ratios
 

 
 

 
 

 
 

Diluted FFO
88.6
%
 
81.8
%
 
43.3
%
 
65.8
%
Diluted FFO, as adjusted for comparability
53.1
%
 
57.8
%
 
55.2
%
 
59.0
%
Diluted AFFO
85.5
%
 
66.5
%
 
73.7
%
 
76.7
%
Adjusted EBITDA interest coverage ratio
3.9
x
 
4.0
x
 
4.2
x
 
3.8
x
Adjusted EBITDA fixed charge coverage ratio
2.9
x
 
2.9
x
 
3.0
x
 
2.7
x
Adjusted debt to in-place adjusted EBITDA ratio (2)
6.5
x
 
6.2
x
 
N/A

 
N/A

 
 
 
 
 
 
 
 
Reconciliation of denominators for per share measures
 
 

 
 
 
 
Denominator for diluted EPS
94,164

 
90,948

 
97,667

 
88,263

Weighted average common units
3,677

 
3,846

 

 
3,897

Denominator for diluted FFO per share
97,841

 
94,794

 
97,667

 
92,160

 
 
 
 
 
 
 
 
Reconciliation of FFO to FFO, as adjusted for comparability
 

 
 

 
 

 
 

FFO, per NAREIT
$
35,138

 
$
37,345

 
$
268,951

 
$
177,545

Gain on sales of non-operating properties

 
(43
)
 
(3,985
)
 
(5,578
)
Impairment losses on non-operating properties, net of associated tax
19,413

 

 
19,413

 
49

Operating property acquisition costs
32

 

 
4,134

 

Loss on interest rate derivatives
386

 

 
386

 

Loss (gain) on early extinguishment of debt, continuing and discontinued operations
402

 
9,106

 
(85,655
)
 
9,668

Issuance costs associated with redeemed preferred shares

 

 

 
1,769

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

 
3,493

 
10,456

 
10,928

Demolition costs on redevelopment properties
225

 

 
1,396

 

Executive transition costs

 
1,056

 

 
1,056

FFO, as adjusted for comparability
$
55,596

 
$
50,957

 
$
215,096

 
$
195,437


(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 December 31, 2015
 
For the Year Ended December 31,
 
2015
 
2014
 
2015
 
2014
Reconciliation of common share dividends to dividends and distributions for payout ratios
 

 
 

 
 
 
 
Common share dividends
$
25,998

 
$
25,638

 
$
103,998

 
$
97,944

Common unit distributions
1,011

 
1,055

 
4,046

 
4,270

Dividends and distributions for payout ratios
$
27,009

 
$
26,693

 
$
108,044

 
$
102,214

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

 
 

 
 

 
 

Net income
$
62,617

 
$
5,937

 
$
188,878

 
$
45,206

Interest expense on continuing operations
22,347

 
23,286

 
89,074

 
92,393

Income tax expense
46

 
53

 
199

 
310

Real estate-related depreciation and amortization
36,237

 
31,358

 
140,025

 
136,086

Depreciation of furniture, fixtures and equipment
597

 
513

 
2,206

 
2,404

Impairment losses
19,744

 
48

 
23,523

 
1,419

Loss (gain) on early extinguishment of debt on continuing and discontinued operations
402

 
9,106

 
(85,655
)
 
9,668

Gain on sales of operating properties
(64,047
)
 
2

 
(64,062
)
 
(5,117
)
Gain on sales of non-operational properties

 
(43
)
 
(3,985
)
 
(5,578
)
Net loss on investments in unconsolidated entities included in interest and other income
6

 
(74
)
 
127

 
291

Business development expenses
1,512

 
669

 
4,775

 
2,680

Operating property acquisition costs
32

 

 
4,134

 

EBITDA of properties conveyed to extinguish debt in default

 
(828
)
 
(768
)
 
(2,091
)
Demolition costs on redevelopment properties
225

 

 
1,396

 

Executive transition costs

 
1,056

 

 
1,056

Adjusted EBITDA
$
79,718

 
$
71,083

 
$
299,867

 
$
278,727

Proforma net operating income adjustment for mid-period property changes
(1,738
)
 

 
 
 
 
In-place adjusted EBITDA
$
77,980

 
$
71,083

 

 

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

 
 

 
 

 
 

Interest expense
$
22,347

 
$
23,286

 
$
89,074

 
$
92,393

Less: Amortization of deferred financing costs
(1,127
)
 
(1,020
)
 
(4,466
)
 
(4,666
)
Less: Amortization of net debt discount, net of amounts capitalized
(317
)
 
(261
)
 
(1,166
)
 
(920
)
Less: Loss on interest rate derivatives
(386
)
 

 
(386
)
 

Less: Interest expense on debt in default extinguished via conveyance of properties

 
(4,320
)
 
(11,224
)
 
(12,684
)
Denominator for interest coverage-Adjusted EBITDA
20,517

 
17,685

 
71,832

 
74,123

Scheduled principal amortization
1,717

 
1,603

 
6,728

 
6,517

Capitalized interest
1,510

 
1,740

 
7,151

 
6,065

Preferred share dividends
3,553

 
3,552

 
14,210

 
15,939

Preferred unit distributions
165

 
165

 
660

 
660

Denominator for fixed charge coverage-Adjusted EBITDA
$
27,462

 
$
24,745

 
$
100,581

 
$
103,304

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

ix



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

 
For the Three Months Ended December 31, 2015
 
For the Year Ended December 31,
 
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
$
6,836

 
$
7,239

 
$
24,244

 
$
29,651

Building improvements on operating properties
16,674

 
4,974

 
28,643

 
23,432

Leasing costs for operating properties
3,518

 
1,341

 
8,504

 
8,536

Less: Nonrecurring tenant improvements and incentives on operating properties
(393
)
 
(1,747
)
 
(1,438
)
 
(2,734
)
Less: Nonrecurring building improvements on operating properties
(6,551
)
 
(3,012
)
 
(9,879
)
 
(8,281
)
Less: Nonrecurring leasing costs for operating properties
2

 
(162
)
 
(808
)
 
(405
)
Recurring capital expenditures
$
20,086

 
$
8,633

 
$
49,266

 
$
50,199

 
 
 
 
 
 
 
 
Same office property cash NOI
$
64,651

 
$
63,089

 
$
251,262

 
$
249,405

Straight line rent adjustments
(339
)
 
2,293

 
2,940

 
3,725

Add: Amortization of deferred market rental revenue
28

 
(16
)
 
98

 
(89
)
Less: Amortization of below-market cost arrangements
(251
)
 
(288
)
 
(1,002
)
 
(1,154
)
Add: Lease termination fee, gross
416

 
741

 
2,366

 
1,618

Add: Cash NOI on tenant-funded landlord assets
547

 
84

 
937

 
4,238

Same office property NOI
$
65,052

 
$
65,903

 
$
256,601

 
$
257,743

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

 
 

Total assets
 
$
3,909,312

 
$
3,664,236

Accumulated depreciation
 
700,363

 
703,083

Accumulated depreciation included in assets held for sale
 
18,317

 

Accumulated amortization of real estate intangibles and deferred leasing costs
 
195,506

 
214,611

Accumulated amortization of real estate intangibles and deferred leasing costs included in assets held for sale
 
17,456

 

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

 
(131,118
)
Adjusted book
 
$
4,840,954

 
$
4,450,812

 
 
 
 
 
Reconciliation of debt to adjusted debt
 
 
 
 
Debt, net
 
$
2,077,752

 
$
1,914,036

Less: Debt in default extinguished via conveyance of properties
 

 
(150,000
)
Numerator for debt to adjusted book ratio
 
2,077,752

 
1,764,036

Less: Cash and cash equivalents
 
(60,310
)
 
(6,077
)
Adjusted debt
 
$
2,017,442

 
$
1,757,959


x