Exhibit 99.1


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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 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 September 30, 2016, we derived 86% of our core portfolio annualized revenue from Defense/IT Locations and 14% from our Regional Office Properties. As of September 30, 2016, our core portfolio of 146 office properties, including six owned through an unconsolidated joint venture, encompassed 15.9 million square feet and was 94.4% leased. As of the same date, we also owned a wholesale data center with a critical load of 19.25 megawatts in operations.
Management:
Investor Relations:
Stephen E. Budorick, President & CEO
Stephanie M. Krewson-Kelly, VP of IR
Anthony Mifsud, EVP & CFO
443-285-5453, stephanie.kelly@copt.com
 
Michelle Layne, Manager of IR
 
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, 2015.

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
BTIG
 
Tom Catherwood
 
212-738-6410
 
tcatherwood@btig.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
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
 
Jed Reagan
 
949-640-8780
 
jreagan@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
Robert W. Baird & Co., Inc.
 
Dave Rodgers
 
216-737-7341
 
drodgers@rwbaird.com
Stifel Financial Corp.
 
John Guinee
 
443-224-1307
 
jwguinee@stifel.com
SunTrust Robinson Humphrey, Inc.
 
Michael Lewis
 
212-319-5659
 
michael.lewis@suntrust.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)
 
 
Page
 
Three Months Ended
 
Nine Months Ended
SUMMARY OF RESULTS 
 
Refer.
 
9/30/16
 
6/30/16
 
3/31/16
 
12/31/15
 
9/30/15
 
9/30/16
 
9/30/15
Net income (loss)
 
6
 
$
29,272

 
$
(48,316
)
 
$
8,096

 
$
62,617

 
$
94,294

 
$
(10,948
)
 
$
126,261

NOI from real estate operations
 
14
 
$
82,010

 
$
85,783

 
$
81,212

 
$
85,979

 
$
84,789

 
$
249,005

 
$
238,601

Same Office Property NOI
 
16
 
$
61,295

 
$
61,264

 
$
59,280

 
$
61,322

 
$
61,589

 
$
181,839

 
$
179,753

Same Office Property Cash NOI
 
17
 
$
60,952

 
$
61,437

 
$
59,709

 
$
60,928

 
$
60,297

 
$
182,098

 
$
174,942

Adjusted EBITDA
 
10
 
$
76,834

 
$
79,625

 
$
74,906

 
$
79,718

 
$
78,932

 
$
231,365

 
$
220,149

Diluted AFFO avail. to common share and unit holders
 
9
 
$
37,998

 
$
42,937

 
$
36,835

 
$
31,592

 
$
36,570

 
$
117,770

 
$
115,106

Dividend per common share
 
N/A
 
$
0.275

 
$
0.275

 
$
0.275

 
$
0.275

 
$
0.275

 
$
0.825

 
$
0.825

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Per share - diluted:
 
 
 
 

 
 

 
 

 
 

 
 

 
 

 
 
EPS
 
8
 
$
0.25

 
$
(0.54
)
 
$
0.03

 
$
0.59

 
$
0.91

 
$
(0.26
)
 
$
1.15

FFO - NAREIT
 
8
 
$
0.49

 
$
0.36

 
$
0.39

 
$
0.31

 
$
1.32

 
$
1.25

 
$
2.24

FFO - as adjusted for comparability
 
8
 
$
0.51

 
$
0.52

 
$
0.47

 
$
0.52

 
$
0.52

 
$
1.50

 
$
1.49

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Numerators for diluted per share amounts:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Diluted EPS
 
6
 
$
23,642

 
$
(51,068
)
 
$
3,156

 
$
55,581

 
$
86,251

 
$
(24,270
)
 
$
112,035

Diluted FFO available to common share and unit holders
 
7
 
$
48,449

 
$
35,194

 
$
38,560

 
$
30,488

 
$
130,241

 
$
122,203

 
$
218,966

Diluted FFO available to common share and unit holders, as adjusted for comparability
 
7
 
$
50,461

 
$
50,630

 
$
46,007

 
$
50,858

 
$
50,684

 
$
147,098

 
$
144,966

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Payout ratios:
 
 
 
 

 
 

 
 

 
 

 
 

 
 

 
 
Diluted FFO
 
N/A
 
55.8
%
 
76.8
%
 
70.1
%
 
88.6
%
 
21.2
%
 
66.4
%
 
37.0
%
Diluted FFO - as adjusted for comparability
 
N/A
 
53.6
%
 
53.4
%
 
58.8
%
 
53.1
%
 
53.3
%
 
55.2
%
 
55.9
%
Diluted AFFO
 
N/A
 
71.2
%
 
63.0
%
 
73.4
%
 
85.5
%
 
73.9
%
 
68.9
%
 
70.4
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
CAPITALIZATION
 
 
 
 

 
 

 
 
 
 

 
 

 
 

 
 
Total Market Capitalization
 
29
 
$
4,887,466

 
$
5,228,793

 
$
4,947,152

 
$
4,449,015

 
$
4,406,333

 
 
 
 
Total Equity Market Capitalization
 
29
 
$
2,996,247

 
$
3,116,093

 
$
2,788,272

 
$
2,351,785

 
$
2,273,260

 
 
 
 
Gross debt
 
30
 
$
1,921,219

 
$
2,112,700

 
$
2,158,880

 
$
2,097,230

 
$
2,133,073

 
 
 
 
Net debt to adjusted book (1)
 
32
 
41.2
%
 
43.6
%
 
43.3
%
 
42.6
%
 
43.8
%
 
N/A

 
N/A

Net debt plus preferred equity to adjusted book (1)
 
32
 
45.8
%
 
48.0
%
 
47.6
%
 
47.0
%
 
48.0
%
 
N/A

 
N/A

Adjusted EBITDA fixed charge coverage ratio
 
32
 
3.1
x
 
2.9
x
 
2.7
x
 
2.9
x
 
2.9
x
 
2.9
x
 
3.0
x
Net debt to in-place adjusted EBITDA ratio
 
32
 
6.3
x
 
6.6
x
 
7.0
x
 
6.5
x
 
6.6
x
 
N/A

 
N/A

Net debt plus pref. equity to in-place adj. EBITDA ratio
 
32
 
7.0
x
 
7.2
x
 
7.6
x
 
7.2
x
 
7.3
x
 
N/A

 
N/A

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
OTHER
 
 
 
 

 
 

 
 

 
 

 
 

 
 

 
 
Revenue from early termination of leases
 
N/A
 
$
437

 
$
338

 
$
712

 
$
400

 
$
159

 
$
1,487

 
$
1,423

Capitalized interest costs
 
N/A
 
$
1,242

 
$
1,309

 
$
1,753

 
$
1,510

 
$
1,559

 
$
4,304

 
$
5,641


(1)
Effective this quarter, we commenced reporting for these ratios in lieu of debt to adjusted book. Please refer to to the section entitled “Definitions” for additional information regarding these ratios.

3

Corporate Office Properties Trust
Selected Portfolio Data
 
 
 
 
 
 
 
 
 
 
 
9/30/16
 
6/30/16
 
3/31/16
 
12/31/15
 
9/30/15
 
(1)
 
 
 
 
 
 
 
 
# of Operating Office Properties
 
 
 
 
 
 
 
 
 
Total Portfolio
168

 
181

 
179
 
177

 
183

Consolidated Portfolio
162

 
181

 
179
 
177

 
183

Core Portfolio
146

 
146

 
153
 
157

 
164

Same Office Properties
129

 
129

 
129
 
129

 
129

 
 
 
 
 
 
 
 
 
 
% Occupied
 
 
 
 
 
 
 
 
 
Total Portfolio
91.3
%
 
92.6
%
 
92.3
%
 
92.7
%
 
92.3
%
Consolidated Portfolio
90.8
%
 
92.6
%
 
92.3
%
 
92.7
%
 
92.3
%
Core Portfolio
93.0
%
 
92.3
%
 
91.6
%
 
92.7
%
 
91.3
%
Same Office Properties
91.4
%
 
91.1
%
 
90.7
%
 
91.6
%
 
91.3
%
 
 
 
 
 
 
 
 
 
 
% Leased
 
 
 
 
 
 
 
 
 
Total Portfolio
92.8
%
 
92.6
%
 
92.3
%
 
92.7
%
 
92.3
%
Consolidated Portfolio
92.4
%
 
92.6
%
 
92.3
%
 
92.7
%
 
92.3
%
Core Portfolio
94.4
%
 
93.8
%
 
93.3
%
 
93.9
%
 
92.1
%
Same Office Properties
93.2
%
 
92.7
%
 
92.5
%
 
93.0
%
 
92.0
%
 
 
 
 
 
 
 
 
 
 
Square Feet of Office Properties (in thousands)
 
 
 
 
 
 
 
 
 
Total Portfolio
17,488

 
18,402

 
18,250

 
18,053

 
18,825

Consolidated Portfolio
16,526

 
18,402

 
18,250

 
18,053

 
18,825

Core Portfolio
15,938

 
16,018

 
16,556

 
17,038

 
17,515

Same Office Properties
13,041

 
13,041

 
13,041

 
13,041

 
13,041

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

 
19.25

 
19.25

 
19.25

 
19.25

MWs Leased (2)
15.81

 
15.81

 
16.81

 
17.81

 
17.81

MWs Operational
19.25

 
19.25

 
19.25

 
19.25

 
19.25


(1)
As of 9/30/2016, our total portfolio included 19 properties held for sale totaling 1.3 million square feet that were 81.3% occupied and 84.0% leased. Our total portfolio and core portfolio included six properties owned through an unconsolidated joint venture totaling 962,000 square feet that were 100% occupied and leased.
(2)
Leased to tenants with further expansion rights of up to a combined 16.87 megawatts as of September 30, 2016.

4

Corporate Office Properties Trust
Consolidated Balance Sheets
(dollars in thousands)
 
9/30/16
 
6/30/16
 
3/31/16
 
12/31/15
 
9/30/15
Assets
 

 
 

 
 

 
 

 
 

Properties, net
 

 
 

 
 

 
 

 
 

Operating properties, net
$
2,632,069

 
$
2,782,330

 
$
2,863,262

 
$
2,920,529

 
$
2,932,843

Construction and redevelopment in progress, including land (1)
72,043

 
69,070

 
98,198

 
137,043

 
77,268

Land held (1)
324,226

 
318,327

 
317,971

 
292,176

 
337,489

Total properties, net
3,028,338

 
3,169,727

 
3,279,431

 
3,349,748

 
3,347,600

Assets held for sale
161,454

 
300,584

 
225,897

 
96,782

 
150,572

Cash and cash equivalents
47,574

 
13,317

 
62,489

 
60,310

 
3,840

Restricted cash and marketable securities
7,583

 
8,302

 
7,763

 
7,716

 
9,286

Investment in unconsolidated real estate joint venture
25,721

 
—

 
—

 
—

 
—

Accounts receivable, net
25,790

 
32,505

 
28,776

 
29,167

 
23,706

Deferred rent receivable, net
87,526

 
92,316

 
96,936

 
105,484

 
103,064

Intangible assets on real estate acquisitions, net
84,081

 
88,788

 
93,526

 
98,338

 
106,174

Deferred leasing costs, net
41,470

 
42,632

 
44,768

 
53,868

 
51,509

Investing receivables
51,119

 
50,162

 
48,998

 
47,875

 
46,821

Prepaid expenses and other assets, net
73,538

 
43,359

 
49,324

 
60,024

 
69,520

Total assets
$
3,634,194

 
$
3,841,692

 
$
3,937,908

 
$
3,909,312

 
$
3,912,092

Liabilities and equity
 

 
 

 
 

 
 

 
 

Liabilities:
 

 
 

 
 

 
 

 
 

Debt
$
1,873,836

 
$
2,094,486

 
$
2,140,212

 
$
2,077,752

 
$
2,114,859

Accounts payable and accrued expenses
112,306

 
92,848

 
78,597

 
91,755

 
98,551

Rents received in advance and security deposits
28,740

 
32,035

 
33,457

 
37,148

 
34,504

Dividends and distributions payable
30,225

 
30,219

 
30,217

 
30,178

 
30,182

Deferred revenue associated with operating leases
9,898

 
17,560

 
19,093

 
19,758

 
20,113

Interest rate derivatives
17,272

 
20,245

 
15,072

 
3,160

 
5,844

Other liabilities
38,282

 
31,123

 
15,046

 
13,779

 
8,524

Total liabilities
2,110,559

 
2,318,516

 
2,331,694

 
2,273,530

 
2,312,577

Redeemable noncontrolling interests
22,848

 
22,473

 
22,333

 
19,218

 
19,608

Equity:
 

 
 

 
 

 
 
 
 
COPT’s shareholders’ equity:
 

 
 

 
 

 
 
 
 
Preferred shares at liquidation preference
199,083

 
199,083

 
199,083

 
199,083

 
199,083

Common shares
948

 
947

 
947

 
945

 
945

Additional paid-in capital
2,008,787

 
2,007,328

 
2,005,523

 
2,004,507

 
2,002,730

Cumulative distributions in excess of net income
(759,262
)
 
(756,940
)
 
(679,935
)
 
(657,172
)
 
(686,986
)
Accumulated other comprehensive loss
(16,314
)
 
(17,712
)
 
(12,862
)
 
(2,838
)
 
(5,823
)
Total COPT’s shareholders’ equity
1,433,242

 
1,432,706

 
1,512,756

 
1,544,525

 
1,509,949

Noncontrolling interests in subsidiaries
 

 
 

 
 

 
 

 
 

Common units in the Operating Partnership
46,757

 
47,550

 
51,031

 
52,359

 
50,992

Preferred units in the Operating Partnership
8,800

 
8,800

 
8,800

 
8,800

 
8,800

Other consolidated entities
11,988

 
11,647

 
11,294

 
10,880

 
10,166

Total noncontrolling interests in subsidiaries
67,545

 
67,997

 
71,125

 
72,039

 
69,958

Total equity
1,500,787

 
1,500,703

 
1,583,881

 
1,616,564

 
1,579,907

Total liabilities, redeemable noncontrolling interest and equity
$
3,634,194

 
$
3,841,692

 
$
3,937,908

 
$
3,909,312

 
$
3,912,092

(1) Please refer to pages 24-26 and 28 for detail.
 
 
 
 
 
 
 
 
 

5

Corporate Office Properties Trust
Consolidated Statements of Operations
(in thousands, except per share data)
 
Three Months Ended
 
Nine Months Ended
 
9/30/16
 
6/30/16
 
3/31/16
 
12/31/15
 
9/30/15
 
9/30/16
 
9/30/15
Revenues
 

 
 

 
 

 
 

 
 

 
 
 
 
Rental revenue
$
103,956

 
$
107,524

 
$
105,382

 
$
107,514

 
$
109,080

 
$
316,862

 
$
312,826

Tenant recoveries and other real estate operations revenue
26,998

 
26,400

 
27,705

 
26,963

 
24,606

 
81,103

 
71,761

Construction contract and other service revenues
11,149

 
12,003

 
11,220

 
8,848

 
17,058

 
34,372

 
97,554

Total revenues
142,103

 
145,927

 
144,307

 
143,325

 
150,744

 
432,337

 
482,141

Expenses
 

 
 

 
 

 
 

 
 

 
 
 
 
Property operating expenses
49,952

 
48,141

 
51,875

 
48,498

 
48,897

 
149,968

 
145,996

Depreciation and amortization associated with real estate operations
32,015

 
33,248

 
34,527

 
36,237

 
38,403

 
99,790

 
103,788

Construction contract and other service expenses
10,341

 
11,478

 
10,694

 
7,773

 
16,132

 
32,513

 
94,923

Impairment losses
27,699

 
69,692

 
2,446

 
19,744

 
2,307

 
99,837

 
3,545

General and administrative expenses
7,242

 
6,512

 
10,130

 
6,609

 
5,783

 
23,884

 
17,917

Leasing expenses
1,613

 
1,514

 
1,753

 
1,888

 
1,656

 
4,880

 
4,947

Business development expenses and land carry costs
1,716

 
2,363

 
2,418

 
2,521

 
5,573

 
6,497

 
10,986

Total operating expenses
130,578

 
172,948

 
113,843

 
123,270

 
118,751

 
417,369

 
382,102

Operating income (loss)
11,525

 
(27,021
)
 
30,464

 
20,055

 
31,993

 
14,968

 
100,039

Interest expense
(18,301
)
 
(22,639
)
 
(23,559
)
 
(22,347
)
 
(24,121
)
 
(64,499
)
 
(66,727
)
Interest and other income
1,391

 
1,330

 
1,156

 
1,300

 
692

 
3,877

 
3,217

(Loss) gain on early extinguishment of debt
(59
)
 
5

 
17

 
(402
)
 
85,745

 
(37
)
 
85,677

(Loss) income from continuing operations before equity in income of unconsolidated entities and income taxes
(5,444
)
 
(48,325
)
 
8,078

 
(1,394
)
 
94,309

 
(45,691
)
 
122,206

Equity in income of unconsolidated entities
594

 
10

 
10

 
10

 
18

 
614

 
52

Income tax benefit (expense)
21

 
(1
)
 
8

 
(46
)
 
(48
)
 
28

 
(153
)
(Loss) income from continuing operations
(4,829
)
 
(48,316
)
 
8,096

 
(1,430
)
 
94,279

 
(45,049
)
 
122,105

Discontinued operations
—

 
—

 
—

 
—

 
—

 
—

 
156

(Loss) income before gain on sales of real estate
(4,829
)
 
(48,316
)
 
8,096

 
(1,430
)
 
94,279

 
(45,049
)
 
122,261

Gain on sales of real estate
34,101

 
—

 
—

 
64,047

 
15

 
34,101

 
4,000

Net income (loss)
29,272

 
(48,316
)
 
8,096

 
62,617

 
94,294

 
(10,948
)
 
126,261

Net (income) loss attributable to noncontrolling interests
 

 
 

 
 

 
 

 
 

 
 
 
 
Common units in the Operating Partnership
(901
)
 
1,976

 
(127
)
 
(2,172
)
 
(3,357
)
 
948

 
(4,231
)
Preferred units in the Operating Partnership
(165
)
 
(165
)
 
(165
)
 
(165
)
 
(165
)
 
(495
)
 
(495
)
Other consolidated entities
(907
)
 
(914
)
 
(978
)
 
(916
)
 
(972
)
 
(2,799
)
 
(2,599
)
Net income (loss) attributable to COPT
27,299

 
(47,419
)
 
6,826

 
59,364

 
89,800

 
(13,294
)
 
118,936

Preferred share dividends
(3,552
)
 
(3,553
)
 
(3,552
)
 
(3,553
)
 
(3,552
)
 
(10,657
)
 
(10,657
)
Net income (loss) attributable to COPT common shareholders
$
23,747

 
$
(50,972
)
 
$
3,274

 
$
55,811

 
$
86,248

 
$
(23,951
)
 
$
108,279

Dividends on dilutive convertible preferred shares
—

 
—

 
—

 
—

 
372

 
—

 
—

Common units in the Operating Partnership
—

 
—

 
—

 
—

 
—

 
—

 
4,231

Amount allocable to share-based compensation awards
(105
)
 
(96
)
 
(118
)
 
(230
)
 
(369
)
 
(319
)
 
(475
)
Numerator for diluted EPS
$
23,642

 
$
(51,068
)
 
$
3,156

 
$
55,581

 
$
86,251

 
$
(24,270
)
 
$
112,035


6

Corporate Office Properties Trust
Funds from Operations
(in thousands)
 
Three Months Ended
 
Nine Months Ended
 
9/30/16
 
6/30/16
 
3/31/16
 
12/31/15
 
9/30/15
 
9/30/16
 
9/30/15
Net income (loss)
$
29,272

 
$
(48,316
)
 
$
8,096

 
$
62,617

 
$
94,294

 
$
(10,948
)
 
$
126,261

Real estate-related depreciation and amortization
32,015

 
33,248

 
34,527

 
36,237

 
38,403

 
99,790

 
103,788

Impairment losses on previously depreciated operating properties
25,857

 
55,124

 
847

 
331

 
2,307

 
81,828

 
3,779

Gain on sales of previously depreciated operating properties
(34,101
)
 
—

 
—

 
(64,047
)
 
(15
)
 
(34,101
)
 
(15
)
Depreciation and amortization on unconsolidated real estate JV (1)
207

 
—

 
—

 
—

 
—

 
207

 
—

FFO - per NAREIT (2)(3)
53,250

 
40,056

 
43,470

 
35,138

 
134,989

 
136,776

 
233,813

Preferred share dividends
(3,552
)
 
(3,553
)
 
(3,552
)
 
(3,553
)
 
(3,552
)
 
(10,657
)
 
(10,657
)
Noncontrolling interests - preferred units in the Operating Partnership
(165
)
 
(165
)
 
(165
)
 
(165
)
 
(165
)
 
(495
)
 
(495
)
FFO allocable to other noncontrolling interests (4)
(894
)
 
(1,014
)
 
(1,027
)
 
(817
)
 
(1,027
)
 
(2,935
)
 
(2,769
)
Basic and diluted FFO allocable to restricted shares
(190
)
 
(130
)
 
(166
)
 
(115
)
 
(541
)
 
(486
)
 
(926
)
Basic FFO available to common share and common unit holders (3)
48,449

 
35,194

 
38,560

 
30,488

 
129,704

 
122,203

 
218,966

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 (3)
48,449

 
35,194

 
38,560

 
30,488

 
130,241

 
122,203

 
218,966

Operating property acquisition costs
—

 
—

 
—

 
32

 
2,695

 
—

 
4,102

Gain on sales of non-operating properties
—

 
—

 
—

 
—

 
—

 
—

 
(3,985
)
Impairment losses on non-operating properties
1,842

 
14,568

 
1,599

 
19,413

 
—

 
18,009

 
—

(Gain) loss on interest rate derivatives
(1,523
)
 
319

 
1,551

 
386

 
—

 
347

 
—

Loss (gain) on early extinguishment of debt
59

 
(5
)
 
(17
)
 
402

 
(85,745
)
 
37

 
(86,057
)
Add: Negative FFO of properties conveyed to extinguish debt in default (5)
—

 
—

 
—

 
—

 
2,766

 
—

 
10,456

Demolition costs on redevelopment properties
—

 
370

 
208

 
225

 
930

 
578

 
1,171

Executive transition costs
1,639

 
247

 
4,137

 
—

 
—

 
6,023

 
—

Diluted FFO comparability adjustments allocable to restricted shares
(5
)
 
(63
)
 
(31
)
 
(88
)
 
334

 
(99
)
 
313

Dividends and distributions on antidilutive preferred securities (6)
—

 
—

 
—

 
—

 
(537
)
 
—

 
—

Diluted FFO avail. to common share and common unit holders, as adj. for comparability (3)
$
50,461

 
$
50,630

 
$
46,007

 
$
50,858

 
$
50,684

 
$
147,098

 
$
144,966

 
 
 
 
 
 
 
 
 
 
 
 
 
 
(1) FFO adjustment pertaining to COPT’s share of an unconsolidated real estate joint venture reported on page 34.
 
 
 
 
(2) Please see reconciliation on page 36 for components of FFO per NAREIT.
 
 
 
 
(3) Please refer to the section entitled “Definitions” for a definition of this measure.
 
 
 
 
 
 
 
 
 
 
(4) Pertains to noncontrolling interests in consolidated real estate joint ventures reported on page 33.
 
 
 
 
 
 
 
 
(5) Interest expense exceeded NOI from these properties by the amounts in the statement.
 
 
 
 
 
 
 
 
(6) These securities were dilutive for Diluted FFO purposes but antidilutive for Diluted FFO as adjusted for comparability purposes.
 
 
 
 

7

Corporate Office Properties Trust
Diluted Share and Unit Computations
(in thousands)
 
Three Months Ended
 
Nine Months Ended
 
9/30/16
 
6/30/16
 
3/31/16
 
12/31/15
 
9/30/15
 
9/30/16
 
9/30/15
EPS Denominator:
 

 
 

 
 

 
 

 
 

 
 
 
 
Weighted average common shares - basic
94,433

 
94,300

 
94,203

 
94,164

 
94,153

 
94,312

 
93,830

Dilutive convertible preferred shares
—

 
—

 
—

 
—

 
434

 
—

 
—

Common units in the Operating Partnership
—

 
—

 
—

 
—

 
—

 
—

 
3,697

Dilutive effect of share-based compensation awards
81

 
—

 
95

 
—

 
21

 
—

 
82

Weighted average common shares - diluted
94,514

 
94,300

 
94,298

 
94,164

 
94,608

 
94,312

 
97,609

Diluted EPS
$
0.25

 
$
(0.54
)
 
$
0.03

 
$
0.59

 
$
0.91

 
$
(0.26
)
 
$
1.15

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Weighted Average Shares for period ended:
 

 
 

 
 

 
 

 
 

 
 

 
 

Common Shares Outstanding
94,433

 
94,300

 
94,203

 
94,164

 
94,153

 
94,312

 
93,830

Dilutive effect of share-based compensation awards
81

 
117

 
95

 
—

 
21

 
98

 
82

Common Units
3,591

 
3,676

 
3,677

 
3,677

 
3,679

 
3,648

 
3,697

Dilutive convertible preferred shares (1)
—

 
—

 
—

 
—

 
434

 
—

 
—

Dilutive noncontrolling interests - preferred units in the Operating Partnership (1)
—

 
—

 
—

 
—

 
176

 
—

 
—

Denominator for diluted FFO per share
98,105

 
98,093

 
97,975

 
97,841

 
98,463

 
98,058

 
97,609

Antidilutive preferred securities for diluted FFO, as adjusted for comparability (1)
—

 
—

 
—

 
—

 
(610
)
 
—

 
—

Denominator for diluted FFO per share, as adjusted for comparability
98,105

 
98,093

 
97,975

 
97,841

 
97,853

 
98,058

 
97,609

Weighted average common units
(3,591
)
 
(3,676
)
 
(3,677
)
 
(3,677
)
 
(3,679
)
 
(3,648
)
 
—

Anti-dilutive EPS effect of share-based compensation awards
—

 
(117
)
 
—

 
—

 
—

 
(98
)
 
—

Dilutive convertible preferred shares
—

 
—

 
—

 
—

 
434

 
—

 
—

Denominator for diluted EPS
94,514

 
94,300

 
94,298

 
94,164

 
94,608

 
94,312

 
97,609

Diluted FFO per share - NAREIT
$
0.49

 
$
0.36

 
$
0.39

 
$
0.31

 
$
1.32

 
$
1.25

 
$
2.24

Diluted FFO per share - as adjusted for comparability
$
0.51

 
$
0.52

 
$
0.47

 
$
0.52

 
$
0.52

 
$
1.50

 
$
1.49


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



8

Corporate Office Properties Trust
Adjusted Funds from Operations
(in thousands)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended
 
Nine Months Ended
 
9/30/16
 
6/30/16
 
3/31/16
 
12/31/15
 
9/30/15
 
9/30/16
 
9/30/15
Diluted FFO available to common share and common unit holders, as adjusted for comparability
$
50,461

 
$
50,630

 
$
46,007

 
$
50,858

 
$
50,684

 
$
147,098

 
$
144,966

Straight line rent adjustments and lease incentive amortization
691

 
480

 
(965
)
 
(2,677
)
 
(5,625
)
 
206

 
(10,820
)
Straight line rent adjustments on properties conveyed to extinguish debt in default
—

 
—

 
—

 
—

 
(19
)
 
—

 
(115
)
Amortization of intangibles included in NOI
349

 
338

 
338

 
365

 
474

 
1,025

 
1,063

Share-based compensation, net of amounts capitalized
1,258

 
1,485

 
1,632

 
1,625

 
1,739

 
4,375

 
4,949

Amortization of deferred financing costs
1,126

 
1,178

 
1,176

 
1,127

 
1,203

 
3,480

 
3,339

Amortization of net debt discounts, net of amounts capitalized
332

 
325

 
319

 
317

 
321

 
976

 
849

Replacement capital expenditures (1)
(16,120
)
 
(11,546
)
 
(11,720
)
 
(20,086
)
 
(12,126
)
 
(39,386
)
 
(29,180
)
Diluted AFFO adjustments allocable to other noncontrolling interests (2)
42

 
47

 
48

 
63

 
(81
)
 
137

 
55

Diluted AFFO adjustments on unconsolidated real estate JV (3)
(141
)
 
—

 
—

 
—

 
—

 
(141
)
 
—

Diluted AFFO available to common share and common unit holders (“diluted AFFO”)
$
37,998

 
$
42,937

 
$
36,835

 
$
31,592

 
$
36,570

 
$
117,770

 
$
115,106

Replacement capital expenditures (1)
 

 
 

 
 

 
 

 
 

 
 
 
 
Tenant improvements and incentives
$
21,470

 
$
6,784

 
$
8,766

 
$
6,836

 
$
6,374

 
$
37,020

 
$
17,408

Building improvements
5,707

 
5,302

 
3,953

 
16,674

 
4,223

 
14,962

 
11,969

Leasing costs
5,182

 
1,613

 
1,183

 
3,518

 
2,547

 
7,978

 
4,986

Less: Excluded tenant improvements and incentives
(12,706
)
 
(885
)
 
(1,353
)
 
(393
)
 
205

 
(14,944
)
 
(1,045
)
Less: Excluded building improvements
(3,533
)
 
(1,121
)
 
(557
)
 
(6,551
)
 
(1,155
)
 
(5,211
)
 
(3,328
)
Less: Excluded leasing costs
—

 
(147
)
 
(272
)
 
2

 
(68
)
 
(419
)
 
(810
)
Replacement capital expenditures
$
16,120

 
$
11,546

 
$
11,720

 
$
20,086

 
$
12,126

 
$
39,386

 
$
29,180

 
 
 
 
 
 
 
 
 
 
 
 
 
 
(1) Please refer to the section entitled “Definitions” for a definition of this measure.
 
 
 
 
(2) AFFO adjustments pertaining to noncontrolling interests on consolidated joint ventures reported on page 33.
 
 
 
 
(3) AFFO adjustments pertaining to COPT’s share of an unconsolidated real estate joint venture reported on page 34.
 
 
 
 

9

Corporate Office Properties Trust
Adjusted EBITDA
(in thousands)
 
Three Months Ended
 
Nine Months Ended
 
9/30/16
 
6/30/16
 
3/31/16
 
12/31/15
 
9/30/15
 
9/30/16
 
9/30/15
Net income (loss)
$
29,272

 
$
(48,316
)
 
$
8,096

 
$
62,617

 
$
94,294

 
$
(10,948
)
 
$
126,261

Interest expense on continuing and discontinued operations
18,301

 
22,639

 
23,559

 
22,347

 
24,121

 
64,499

 
66,727

Income tax (benefit) expense
(21
)
 
1

 
(8
)
 
46

 
48

 
(28
)
 
153

Depreciation of furniture, fixtures and equipment
513

 
524

 
602

 
597

 
590

 
1,639

 
1,609

Real estate-related depreciation and amortization
32,015

 
33,248

 
34,527

 
36,237

 
38,403

 
99,790

 
103,788

Impairment losses
27,699

 
69,692

 
2,446

 
19,744

 
2,307

 
99,837

 
3,779

Loss (gain) on early extinguishment of debt on continuing and discontinued operations
59

 
(5
)
 
(17
)
 
402

 
(85,745
)
 
37

 
(86,057
)
Gain on sales of operating properties
(34,101
)
 
—

 
—

 
(64,047
)
 
(15
)
 
(34,101
)
 
(15
)
Gain on sales of non-operational properties
—

 
—

 
—

 
—

 
—

 
—

 
(3,985
)
Net loss (gain) on investments in unconsolidated entities included in interest and other income
27

 
(36
)
 
(23
)
 
6

 
98

 
(32
)
 
121

Business development expenses
1,016

 
1,261

 
1,379

 
1,512

 
1,221

 
3,656

 
3,263

Operating property acquisition costs
—

 
—

 
—

 
32

 
2,695

 
—

 
4,102

EBITDA from properties conveyed to extinguish debt in default
—

 
—

 
—

 
—

 
(15
)
 
—

 
(768
)
Demolition costs on redevelopment properties
—

 
370

 
208

 
225

 
930

 
578

 
1,171

Adjustments from unconsolidated real estate JV (1)
415

 
—

 
—

 
—

 
—

 
415

 
—

Executive transition costs
1,639

 
247

 
4,137

 
—

 
—

 
6,023

 
—

Adjusted EBITDA
$
76,834

 
$
79,625

 
$
74,906

 
$
79,718

 
$
78,932

 
$
231,365

 
$
220,149

Proforma NOI adjustment for property changes within period
(2,469
)
 
109

 
471

 
(1,738
)
 
1,309

 
 
 
 
In-place adjusted EBITDA
$
74,365

 
$
79,734

 
$
75,377

 
$
77,980

 
$
80,241

 
 
 
 

(1) Includes COPT’s share of adjusted EBITDA adjustments in an unconsolidated real estate JV (see page 34).


10


Corporate Office Properties Trust
Office Properties by Segment (1) - 9/30/2016
(square feet in thousands)
 
 
Operational Properties (5)
 
Construction/Redevelopment (7)
 
 
# of
Properties
 
Operational
Square Feet
 
Occupancy
%
 
Leased
 %
 
# of
Properties
 
Construction/Redevelopment Square Feet
 
Operational Square Feet (6)
 
Total
Square Feet
Core Portfolio: (2)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Defense IT Locations: (3)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Fort Meade/Baltimore Washington (“BW”) Corridor:
 
 

 
 

 
 

 
 

 
 

 
 

 
 
 
 
National Business Park
 
29

 
3,485

 
95.7
%
 
96.6
%
 
2

 
336

 


 
336

Howard County
 
35

 
2,752

 
91.6
%
 
93.6
%
 
1

 
18

 
4

 
22

Other
 
17

 
1,363

 
94.9
%
 
96.0
%
 
2

 
82

 


 
82

Total Fort Meade/BW Corridor
 
81

 
7,600

 
94.1
%
 
95.4
%
 
5

 
436

 
4

 
440

Northern Virginia (“NoVA”) Defense/IT
 
11

 
1,599

 
83.5
%
 
87.4
%
 
2

 
401

 


 
401

Lackland AFB (San Antonio, Texas)
 
7

 
953

 
100.0
%
 
100.0
%
 
—

 
—

 
—

 
—

Navy Support
 
21

 
1,261

 
73.6
%
 
78.1
%
 
—

 
—

 
—

 
—

Redstone Arsenal (Huntsville, Alabama)
 
7

 
642

 
100.0
%
 
100.0
%
 
1

 
8

 
11

 
19

Data Center Shells
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Consolidated Properties
 
6

 
897

 
100.0
%
 
100.0
%
 
2

 
365

 

 
365

Unconsolidated JV Properties (4)
 
6

 
962

 
100.0
%
 
100.0
%
 
 
 
 
 
 
 
 
Total Defense/IT Locations
 
139

 
13,914

 
92.5
%
 
94.1
%
 
10

 
1,210

 
15

 
1,225

Regional Office (5)
 
7

 
2,024

 
96.2
%
 
96.8
%
 
—

 
—

 
—

 
—

Core Portfolio
 
146

 
15,938

 
93.0
%
 
94.4
%
 
10

 
1,210

 
15

 
1,225

Properties Held for Sale
 
19

 
1,264

 
81.3
%
 
84.0
%
 
—

 
—

 
—

 
—

Other Properties
 
3

 
286

 
44.0
%
 
44.0
%
 
—

 
—

 
—

 
—

Total Portfolio
 
168

 
17,488

 
91.3
%
 
92.8
%
 
10

 
1,210

 
15

 
1,225

Consolidated Properties
 
162

 
16,526

 
90.8
%
 
92.4
%
 
10

 
1,210

 
15

 
1,225


(1)
This 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)
See page 34 for additional disclosure regarding an unconsolidated real estate joint venture.
(5)
Includes office properties located in select urban/urban-like submarkets within our regional footprint with durable Class-A office fundamentals and characteristics.
(6)
Number of properties includes buildings under construction or redevelopment once those buildings become partially operational. Operational square feet includes square feet in operations for two partially operational properties; NOI and cash NOI for these properties was $19,000 for the three months ended 9/30/16.
(7)
This schedule includes properties under, or contractually committed for, construction or redevelopment as of 9/30/16 and 310 Sentinel Way and NOVA Office B, properties that were complete but are held for future lease to the United States Government. Please refer to pages 25 and 26.



11

Corporate Office Properties Trust
NOI from Real Estate Operations and Occupancy by Property Grouping
(dollars and square feet in thousands)
 
 
9/30/16
 
 
 
 
 
 
# of
Operating Office Properties
 
Office Operational Square Feet
 
 
 
 
 
Office Property Annualized
Rental Revenue (2)
 
Percentage of Total Office
Annualized
Rental Revenue (2)
 
NOI from Real
Estate Operations
for Three Months Ended
 
NOI from Real
Estate Operations
for Nine Months Ended
Property Grouping
 
 
 
% Occupied (1)
 
% Leased (1)
 
 
 
9/30/16
 
9/30/16
Core Portfolio:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Same Office Properties (3)
 
126

 
12,755

 
92.5%
 
94.3%
 
$
380,062

 
80.6
%
 
$
60,689

 
$
180,168

Office Properties Placed in Service (4)
 
11

 
1,048

 
89.5%
 
89.5%
 
23,430

 
5.0
%
 
4,261

 
11,323

Acquired Office Properties (5)
 
3

 
1,173

 
95.5%
 
95.5%
 
33,935

 
7.2
%
 
4,890

 
15,754

Unconsolidated real estate JV (6)
 
6

 
962

 
100.0%
 
100.0%
 
5,233

 
1.1
%
 
1,008

 
1,008

Wholesale Data Center and Other
 
N/A

 
N/A

 
N/A
 
N/A
 
N/A

 
N/A

 
3,195

 
11,120

Total Core Portfolio
 
146

 
15,938

 
93.0%
 
94.4%
 
442,660

 
93.9
%
 
74,043

 
219,373

Office Properties Held for Sale (7)
 
19

 
1,264

 
81.3%
 
84.0%
 
25,256

 
5.3
%
 
4,161

 
11,519

Disposed Office Properties
 
N/A

 
N/A

 
N/A
 
N/A
 
N/A

 
N/A

 
3,200

 
16,442

Other Office Properties (Same Office)
 
3

 
286

 
44.0%
 
44.0%
 
3,641

 
0.8
%
 
606

 
1,671

Total Portfolio
 
168

 
17,488

 
91.3%
 
92.8%
 
$
471,557

 
100.0
%
 
$
82,010

 
$
249,005

Consolidated Properties
 
162

 
16,526

 
90.8%
 
92.4%
 
$
466,324

 
98.9
%
 
$
81,002

 
$
247,997

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
9/30/16
 
 
 
 
 
 
# of
Operating Office Properties
 
Office Operational Square Feet
 
 
 
 
 
Office Property Annualized
Rental Revenue (2)
 
Percentage of Core Portfolio
Annualized
Rental Revenue (2)
 
NOI from Real
Estate Operations
for Three Months Ended
 
NOI from Real
Estate Operations
for Nine Months Ended
Property Grouping
 
 
 
% Occupied (1)
 
% Leased (1)
 
 
 
9/30/16
 
9/30/16
Core Portfolio:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Defense/IT Locations
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Consolidated properties
 
133

 
12,952

 
91.9%
 
93.6%
 
374,965

 
84.7
%
 
60,155

 
177,853

Unconsolidated real estate JV (6)
 
6

 
962

 
100.0%
 
100.0%
 
5,233

 
1.2
%
 
1,008

 
1,008

Total Defense/IT Locations
 
139

 
13,914

 
92.5%
 
94.1%
 
380,198

 
85.9
%
 
61,163

 
178,861

Regional Office
 
7

 
2,024

 
96.2%
 
96.8%
 
62,462

 
14.1
%
 
9,336

 
28,882

Wholesale Data Center and Other
 
N/A

 
N/A

 
N/A
 
N/A
 
N/A

 
N/A

 
3,544

 
11,630

Total Core Portfolio
 
146

 
15,938

 
93.0%
 
94.4%
 
$
442,660


100.0
%
 
$
74,043

 
$
219,373

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(1)
Percentages calculated based on operational square feet.
(2)
Excludes Annualized Rental Revenue from our wholesale data center, DC-6, of $20.5 million as of 9/30/16. With regard to properties owned through unconsolidated real estate joint ventures, we include the portion of Annualized Rental Revenue allocable to COPT’s ownership interest.
(3)
Properties continually owned and 100% operational since at least 1/1/15, excluding properties disposed or held for sale.
(4)
Newly constructed or redeveloped properties placed in service that were not fully operational by 1/1/15.
(5)
Includes properties acquired in 2015.
(6)
Represents total information pertaining to properties owned through an unconsolidated real estate joint venture except for the amounts reported for Annualized Rental Revenue and NOI from real estate operations, which represent the portion allocable to COPT’s ownership interest. See page 34 for additional disclosure regarding this joint venture.
(7)
The carrying value of operating property assets held for sale as of 9/30/16 totaled $139.7 million.

12

Corporate Office Properties Trust
Consolidated Real Estate Revenues and NOI by Segment
(dollars in thousands)
 
Three Months Ended
 
Nine Months Ended
 
9/30/16
 
6/30/16
 
3/31/16
 
12/31/15
 
9/30/15
 
9/30/16
 
9/30/15
Consolidated real estate revenues
 

 
 

 
 

 
 

 
 

 
 
 
 
Defense/IT Locations:
 
 
 
 
 
 
 
 
 
 
 
 
 
Fort Meade/BW Corridor
$
61,460

 
$
60,912

 
$
62,509

 
$
61,683

 
$
61,400

 
$
184,881

 
$
182,591

NoVA Defense/IT
12,231

 
12,057

 
12,116

 
11,816

 
12,875

 
36,404

 
37,383

Lackland Air Force Base
12,532

 
11,651

 
10,225

 
12,233

 
9,018

 
34,408

 
27,426

Navy Support
7,232

 
6,998

 
6,934

 
6,840

 
6,886

 
21,164

 
21,337

Redstone Arsenal
3,189

 
3,191

 
3,116

 
3,063

 
3,061

 
9,496

 
8,165

Data Center Shells-Consolidated
5,175

 
7,288

 
6,330

 
5,930

 
5,665

 
18,793

 
15,816

Total Defense/IT locations
101,819

 
102,097

 
101,230

 
101,565

 
98,905

 
305,146

 
292,718

Regional Office
20,499

 
23,283

 
23,502

 
25,023

 
26,782

 
67,284

 
73,142

Wholesale Data Center
6,809

 
6,804

 
6,493

 
6,099

 
6,078

 
20,106

 
12,933

Other
1,827

 
1,740

 
1,862

 
1,790

 
1,921

 
5,429

 
5,798

Consolidated real estate revenues
$
130,954

 
$
133,924

 
$
133,087

 
$
134,477

 
$
133,686

 
$
397,965

 
$
384,591

 
 
 
 
NOI
 

 
 

 
 

 
 

 
 

 
 
 
 
Defense/IT Locations:
 
 
 
 
 
 
 
 
 
 
 
 
 
Fort Meade/BW Corridor
$
40,862

 
$
40,534

 
$
39,263

 
$
41,476

 
$
41,294

 
$
120,659

 
$
119,489

NoVA Defense/IT
7,769

 
7,750

 
7,575

 
7,829

 
7,725

 
23,094

 
21,263

Lackland Air Force Base
4,933

 
4,807

 
4,805

 
4,894

 
4,465

 
14,545

 
12,761

Navy Support
3,858

 
4,323

 
3,410

 
3,686

 
3,599

 
11,591

 
11,262

Redstone Arsenal
2,077

 
2,231

 
2,138

 
2,171

 
2,173

 
6,446

 
5,560

Data Center Shells
 
 
 
 
 
 
 
 
 
 
 
 
 
Consolidated properties
4,647

 
6,462

 
5,520

 
5,358

 
5,133

 
16,629

 
14,090

COPT’s share of unconsolidated real estate JV (1)
1,008

 
—

 
—

 
—

 
—

 
1,008

 
—

Total Defense/IT locations
65,154

 
66,107

 
62,711

 
65,414

 
64,389

 
193,972

 
184,425

Regional Office
12,344

 
14,562

 
13,671

 
15,608

 
17,186

 
40,577

 
46,392

Wholesale Data Center
3,492

 
4,153

 
3,832

 
4,138

 
2,070

 
11,477

 
4,492

Other
1,020

 
961

 
998

 
819

 
1,144

 
2,979

 
3,292

NOI from real estate operations
$
82,010

 
$
85,783

 
$
81,212

 
$
85,979

 
$
84,789

 
$
249,005

 
$
238,601

 
 
 
 
 
 
 
 
 
 
 
 
 
 
(1) See page 34 for additional disclosure regarding an unconsolidated real estate joint venture.
 

13

Corporate Office Properties Trust
Cash NOI by Segment
(dollars in thousands)
 
Three Months Ended
 
Nine Months Ended
 
9/30/16
 
6/30/16
 
3/31/16
 
12/31/15
 
9/30/15
 
9/30/16
 
9/30/15
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash NOI (1)
 

 
 

 
 

 
 

 
 

 
 
 
 
Defense/IT Locations:
 
 
 
 
 
 
 
 
 
 
 
 
 
Fort Meade/BW Corridor
$
40,253

 
$
39,588

 
$
38,502

 
$
39,668

 
$
39,841

 
$
118,343

 
$
114,749

NoVA Defense/IT
7,234

 
7,614

 
7,922

 
8,045

 
6,793

 
22,770

 
17,833

Lackland Air Force Base
4,855

 
4,718

 
4,716

 
4,745

 
3,680

 
14,289

 
10,348

Navy Support
3,524

 
4,218

 
3,196

 
3,597

 
3,565

 
10,938

 
10,970

Redstone Arsenal
2,411

 
2,534

 
2,473

 
2,267

 
1,881

 
7,418

 
5,561

Data Center Shells
 
 
 
 
 
 
 
 
 
 
 
 
 
Consolidated properties
4,549

 
6,077

 
5,108

 
5,024

 
4,802

 
15,734

 
12,742

COPT’s share of unconsolidated real estate JV (2)
862

 
—

 
—

 
—

 
—

 
862

 
—

Total Defense/IT locations
63,688

 
64,749

 
61,917

 
63,346

 
60,562

 
190,354

 
172,203

Regional Office
12,480

 
14,152

 
13,000

 
15,031

 
15,943

 
39,632

 
44,179

Wholesale Data Center
3,439

 
4,052

 
3,728

 
4,011

 
1,952

 
11,219

 
4,983

Other
935

 
892

 
823

 
835

 
1,117

 
2,650

 
3,222

Cash NOI from real estate operations (1)
$
80,542

 
$
83,845

 
$
79,468

 
$
83,223

 
$
79,574

 
$
243,855

 
$
224,587

Straight line rent adjustments and lease incentive amortization
(1,086
)
 
(897
)
 
546

 
2,254

 
5,217

 
(1,437
)
 
9,604

Add: Amortization of deferred market rental revenue
(201
)
 
(189
)
 
(190
)
 
(178
)
 
(293
)
 
(580
)
 
(542
)
Less: Amortization of below-market cost arrangements
(241
)
 
(241
)
 
(240
)
 
(284
)
 
(289
)
 
(722
)
 
(805
)
Add: Lease termination fee, gross
471

 
417

 
980

 
417

 
190

 
1,868

 
1,956

Add: Cash NOI on tenant funded landlord assets
2,379

 
2,848

 
648

 
547

 
390

 
5,875

 
3,801

Cash NOI adjustments in unconsolidated real estate JV
146

 
—

 
—

 
—

 
—

 
146

 
—

NOI from real estate operations
$
82,010

 
$
85,783

 
$
81,212

 
$
85,979

 
$
84,789

 
$
249,005

 
$
238,601

 
 
 
 
 
 
 
 
 
 
 
 
 
 
(1)
Effective in the current quarter, we changed our definition of Cash NOI used for the above segment presentation to exclude the effects of gross lease termination fees and revenue recognized as a result of tenant-funded landlord assets. As a result of this change, our definition is consistent with the definition of Cash NOI used for our Same Office Property presentation.
(2)
See page 34 for additional disclosure regarding an unconsolidated real estate joint venture.


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
 
Nine Months Ended
 
 
 
9/30/16
 
6/30/16
 
3/31/16
 
12/31/15
 
9/30/15
 
9/30/16
 
9/30/15
Core Portfolio:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Defense/IT Locations:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Fort Meade/BW Corridor
78

 
7,425

 
95.0
%
 
94.9
%
 
95.0
%
 
96.6
%
 
96.0
%
 
95.0
%
 
95.5
%
NoVA Defense/IT
9

 
1,203

 
76.4
%
 
74.1
%
 
74.5
%
 
75.9
%
 
75.4
%
 
75.0
%
 
75.9
%
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

 
75.2
%
 
74.6
%
 
74.0
%
 
73.9
%
 
73.3
%
 
74.6
%
 
77.7
%
Redstone Arsenal
5

 
563

 
99.4
%
 
98.8
%
 
97.5
%
 
95.7
%
 
94.5
%
 
98.6
%
 
89.5
%
Data Center Shells
3

 
451

 
100.0
%
 
100.0
%
 
100.0
%
 
100.0
%
 
100.0
%
 
100.0
%
 
100.0
%
Total Defense/IT Locations
121

 
11,667

 
91.7
%
 
91.4
%
 
91.3
%
 
92.4
%
 
91.8
%
 
91.5
%
 
91.8
%
Regional Office
5

 
1,088

 
98.2
%
 
98.8
%
 
97.5
%
 
96.0
%
 
95.1
%
 
98.2
%
 
94.4
%
Core Portfolio Same Office Properties
126

 
12,755

 
92.3
%
 
92.0
%
 
91.8
%
 
92.7
%
 
92.1
%
 
92.0
%
 
92.0
%
Other Same Office Properties
3

 
286

 
44.0
%
 
43.5
%
 
43.5
%
 
44.2
%
 
43.8
%
 
43.7
%
 
45.3
%
Total Same Office Properties
129

 
13,041

 
91.2
%
 
90.9
%
 
90.8
%
 
91.6
%
 
91.1
%
 
91.0
%
 
91.0
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Corporate Office Properties Trust
Same Office Properties (1) Period End Occupancy Rates by Segment 
(square feet in thousands)
 
Number of Buildings
 
Rentable Square Feet
 
 
 
 
 
 
 
9/30/16
 
6/30/16
 
3/31/16
 
12/31/15
 
9/30/15
 
 
 
 
Core Portfolio:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Defense/IT Locations:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Fort Meade/BW Corridor
78

 
7,425

 
95.1
%
 
94.8
%
 
94.8
%
 
96.5
%
 
96.3
%
 
 
 
 
NoVA Defense/IT
9

 
1,203

 
78.1
%
 
73.9
%
 
74.5
%
 
75.8
%
 
76.1
%
 
 
 
 
Lackland Air Force Base
6

 
792

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

 
1,233

 
75.3
%
 
76.4
%
 
73.4
%
 
73.8
%
 
73.1
%
 
 
 
 
Redstone Arsenal
5

 
563

 
100.0
%
 
98.8
%
 
98.8
%
 
96.7
%
 
95.2
%
 
 
 
 
Data Center Shells
3

 
451

 
100.0
%
 
100.0
%
 
100.0
%
 
100.0
%
 
100.0
%
 
 
 
 
Total Defense/IT Locations
121

 
11,667

 
92.0
%
 
91.5
%
 
91.2
%
 
92.4
%
 
92.1
%
 
 
 
 
Regional Office
5

 
1,088

 
97.8
%
 
99.3
%
 
98.0
%
 
96.3
%
 
95.2
%
 
 
 
 
Core Portfolio Same Office Properties
126

 
12,755

 
92.5
%
 
92.1
%
 
91.8
%
 
92.7
%
 
92.3
%
 
 
 
 
Other Same Office Properties
3

 
286

 
44.0
%
 
43.5
%
 
43.5
%
 
44.4
%
 
43.8
%
 
 
 
 
Total Same Office Properties
129

 
13,041

 
91.4
%
 
91.1
%
 
90.7
%
 
91.6
%
 
91.3
%
 
 
 
 

(1) Same office properties represent buildings continually owned and 100% operational since at least January 1, 2015, excluding properties disposed or held for sale.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

15

Corporate Office Properties Trust
Same Office Property Real Estate Revenues and NOI by Segment
(dollars in thousands)
 
Three Months Ended
 
Nine Months Ended
 
9/30/16
 
6/30/16
 
3/31/16
 
12/31/15
 
9/30/15
 
9/30/16
 
9/30/15
Same office property real estate revenues
 

 
 

 
 

 
 

 
 

 
 
 
 
Defense/IT Locations:
 
 
 
 
 
 
 
 
 
 
 
 
 
Fort Meade/BW Corridor
$
57,675

 
$
57,011

 
$
58,918

 
$
58,128

 
$
57,879

 
$
173,604

 
$
172,757

NoVA Defense/IT
6,650

 
6,500

 
6,755

 
6,666

 
6,668

 
19,905

 
20,210

Lackland Air Force Base
10,536

 
10,031

 
8,699

 
10,564

 
7,912

 
29,266

 
24,889

Navy Support
7,232

 
6,998

 
6,934

 
6,840

 
6,887

 
21,164

 
21,337

Redstone Arsenal
2,828

 
2,847

 
2,771

 
2,718

 
2,716

 
8,446

 
7,669

Data Center Shells
3,050

 
3,095

 
3,040

 
3,051

 
3,081

 
9,185

 
9,189

Total Defense/IT Locations
87,971

 
86,482

 
87,117

 
87,967

 
85,143

 
261,570

 
256,051

Regional Office
9,402

 
9,379

 
9,158

 
8,954

 
9,550

 
27,939

 
27,805

Other Properties
1,016

 
951

 
930

 
965

 
1,072

 
2,897

 
3,082

Same office property real estate revenues
$
98,389

 
$
96,812

 
$
97,205

 
$
97,886

 
$
95,765

 
$
292,406

 
$
286,938

Same office property NOI
 

 
 

 
 

 
 

 
 

 
 
 
 
Defense/IT Locations:
 
 
 
 
 
 
 
 
 
 
 
 
 
Fort Meade/BW Corridor
$
38,416

 
$
38,097

 
$
37,396

 
$
39,117

 
$
38,958

 
$
113,909

 
$
113,519

NoVA Defense/IT
4,119

 
3,969

 
4,000

 
4,158

 
4,093

 
12,088

 
12,040

Lackland Air Force Base
3,741

 
3,746

 
3,749

 
3,746

 
3,672

 
11,236

 
11,063

Navy Support
3,875

 
4,340

 
3,435

 
3,706

 
3,605

 
11,650

 
11,268

Redstone Arsenal
1,961

 
1,981

 
1,872

 
1,905

 
1,872

 
5,814

 
5,122

Data Center Shells
2,758

 
2,764

 
2,769

 
2,770

 
2,771

 
8,291

 
8,307

Total Defense/IT Locations
54,870

 
54,897

 
53,221

 
55,402

 
54,971

 
162,988

 
161,319

Regional Office
5,819

 
5,790

 
5,571

 
5,509

 
5,976

 
17,180

 
16,815

Other Properties
606

 
577

 
488

 
411

 
642

 
1,671

 
1,619

Same office property NOI
$
61,295

 
$
61,264

 
$
59,280

 
$
61,322

 
$
61,589

 
$
181,839

 
$
179,753



16



Corporate Office Properties Trust
Same Office Property Cash NOI (1) by Segment
(dollars in thousands)
 
Three Months Ended
 
Nine Months Ended
 
9/30/16
 
6/30/16
 
3/31/16
 
12/31/15
 
9/30/15
 
9/30/16
 
9/30/15
Same office property cash NOI
 

 
 

 
 

 
 

 
 

 
 
 
 
Defense/IT Locations:
 
 
 
 
 
 
 
 
 
 
 
 
 
Fort Meade/BW Corridor
$
38,322

 
$
37,907

 
$
37,114

 
$
38,222

 
$
38,245

 
$
113,343

 
$
109,825

NoVA Defense/IT
3,340

 
3,545

 
3,999

 
4,138

 
3,971

 
10,884

 
11,588

Lackland Air Force Base
3,742

 
3,748

 
3,751

 
3,748

 
3,574

 
11,241

 
10,768

Navy Support
3,542

 
4,234

 
3,221

 
3,617

 
3,570

 
10,997

 
10,975

Redstone Arsenal
2,312

 
2,307

 
2,229

 
2,118

 
1,887

 
6,848

 
5,526

Data Center Shells
2,915

 
2,890

 
2,883

 
2,877

 
2,865

 
8,688

 
8,514

Total Defense/IT Locations
54,173

 
54,631

 
53,197

 
54,720

 
54,112

 
162,001

 
157,196

Regional Office
6,218

 
6,252

 
6,042

 
5,801

 
5,547

 
18,512

 
16,113

Other Properties
561

 
554

 
470

 
407

 
638

 
1,585

 
1,633

Same office property cash NOI
$
60,952

 
$
61,437

 
$
59,709

 
$
60,928

 
$
60,297

 
$
182,098

 
$
174,942

Straight line rent adjustments and lease incentive amortization
(2,230
)
 
(3,172
)
 
(1,761
)
 
(338
)
 
965

 
(7,163
)
 
3,175

Add: Amortization of deferred market rental revenue
22

 
34

 
34

 
28

 
16

 
90

 
71

Less: Amortization of below-market cost arrangements
(218
)
 
(219
)
 
(218
)
 
(259
)
 
(264
)
 
(655
)
 
(775
)
Add: Lease termination fee, gross
390

 
336

 
953

 
416

 
185

 
1,679

 
1,950

Add: Cash NOI on tenant-funded landlord assets
2,379

 
2,848

 
563

 
547

 
390

 
5,790

 
390

Same office property NOI
$
61,295

 
$
61,264

 
$
59,280

 
$
61,322

 
$
61,589

 
$
181,839

 
$
179,753

Percentage change in same office property cash NOI (1)
1.1
%
 
 
 
 
 
 
 
 
 
4.1
%
 
 

(1)
Represents the change between the current period and the same period in the prior year.



17

Corporate Office Properties Trust
Leasing - Total Office Portfolio (1)
Quarter Ended September 30, 2016
(square feet in thousands)
 
Ft Meade/BW Corridor
 
NoVA Defense/IT
 
Navy Support
 
Regional Office
 
Total Office
Renewed Space
 

 
 

 
 
 
 

 
 

Leased Square Feet
79

 
213

 
71

 
234

 
597

Expiring Square Feet
120

 
213

 
85

 
302

 
720

Vacating Square Feet
41

 
—

 
13

 
68

 
123

Retention Rate (% based upon square feet)
65.6
 %
 
100.0
 %
 
84.4
 %
 
77.4
 %
 
82.9
 %
Statistics for Completed Leasing:
 
 
 
 
 
 
 
 
 
Average Committed Cost per Square Foot
$
27.86

 
$
14.86

 
$
11.21

 
$
71.58

 
$
38.36

Weighted Average Lease Term in Years
5.9

 
7.0

 
3.7

 
9.9

 
7.6

GAAP Rent Per Square Foot
 
 
 
 
 
 
 
 
 
Renewal GAAP Rent
$
29.37

 
$
32.10

 
$
28.31

 
$
35.51

 
$
32.62

Expiring GAAP Rent
$
28.06

 
$
30.84

 
$
30.76

 
$
38.18

 
$
33.34

Change in GAAP Rent
4.7
 %
 
4.1
 %
 
(8.0
)%
 
(7.0
)%
 
(2.2
)%
Cash Rent Per Square Foot
 
 
 
 
 
 
 
 
 
Renewal Cash Rent
$
29.11

 
$
31.22

 
$
28.26

 
$
35.36

 
$
32.21

Expiring Cash Rent
$
30.46

 
$
32.78

 
$
32.11

 
$
43.36

 
$
36.54

Change in Cash Rent
(4.4
)%
 
(4.8
)%
 
(12.0
)%
 
(18.5
)%
 
(11.9
)%
Average escalations per year
2.5
 %
 
2.3
 %
 
2.1
 %
 
2.3
 %
 
2.3
 %
New Leases
 
 
 
 
 
 
 
 
 
Development and Redevelopment Space
 
 
 
 
 
 
 
 
 
Leased Square Feet
19

 
7

 
—

 
—

 
26

Statistics for Completed Leasing:
 
 
 
 
 
 
 
 
 
Average Committed Cost per Square Foot
$
71.64

 
$
100.40

 
$
—

 
$
—

 
$
79.36

Weighted Average Lease Term in Years
8.5

 
11.4

 
—

 
—

 
9.3

GAAP Rent Per Square Foot
$
28.43

 
$
32.11

 
$
—

 
$
—

 
$
29.42

Cash Rent Per Square Foot
$
25.56

 
$
30.73

 
$
—

 
$
—

 
$
26.95

Other New Leases (2)
 
 
 
 
 
 
 
 
 
Leased Square Feet
25

 
12

 
56

 
25

 
118

Statistics for Completed Leasing:
 
 
 
 
 
 
 
 
 
Average Committed Cost per Square Foot
$
39.65

 
$
74.35

 
$
57.92

 
$
40.87

 
$
51.98

Weighted Average Lease Term in Years
5.4

 
7.4

 
6.9

 
6.3

 
6.5

GAAP Rent Per Square Foot
$
25.28

 
$
28.16

 
$
33.80

 
$
28.47

 
$
30.30

Cash Rent Per Square Foot
$
25.11

 
$
27.66

 
$
37.20

 
$
28.40

 
$
31.81

Total Square Feet Leased
123

 
231

 
128

 
259

 
741

Average escalations per year
2.7
 %
 
2.3
 %
 
1.0
 %
 
2.3
 %
 
2.2
 %
(1)
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 9 in the period such costs are incurred.
(2) Other New Leases includes acquired first generation space and vacated second generation space.


18

Corporate Office Properties Trust
Leasing - Total Office Portfolio (1)
Nine Months Ended September 30, 2016
(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
652

 
295

 
120

 
1

 
—

 
263

 
23

 
1,353

Expiring Square Feet
874

 
351

 
134

 
1

 
—

 
332

 
32

 
1,725

Vacating Square Feet
222

 
56

 
14

 
—

 
—

 
69

 
10

 
371

Retention Rate (% based upon square feet)
74.6
 %
 
84.0
 %
 
89.3
 %
 
100.0
%
 
—
%
 
79.2
 %
 
70.1
%
 
78.5
 %
Statistics for Completed Leasing:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Average Committed Cost per Square Foot
$
12.30

 
$
11.37

 
$
10.52

 
$
6.14

 
$
—

 
$
67.92

 
$
—

 
$
22.52

Weighted Average Lease Term in Years
5.6

 
5.6

 
3.1

 
0.5

 
—

 
9.4

 
1.0

 
6.0

GAAP Rent Per Square Foot
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Renewal GAAP Rent
$
33.90

 
$
31.41

 
$
27.23

 
$
27.08

 
$
—

 
$
35.04

 
$
22.85

 
$
32.80

Expiring GAAP Rent
$
30.59

 
$
29.68

 
$
29.77

 
$
26.55

 
$
—

 
$
37.04

 
$
20.79

 
$
31.40

Change in GAAP Rent
10.8
 %
 
5.9
 %
 
(8.5
)%
 
2.0
%
 
—
%
 
(5.4
)%
 
9.9
%
 
4.5
 %
Cash Rent Per Square Foot
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Renewal Cash Rent
$
32.43

 
$
30.30

 
$
27.18

 
$
25.50

 
$
—

 
$
34.76

 
$
22.85

 
$
31.78

Expiring Cash Rent
$
32.50

 
$
31.25

 
$
30.79

 
$
25.00

 
$
—

 
$
41.75

 
$
22.85

 
$
33.70

Change in Cash Rent
(0.2
)%
 
(3.0
)%
 
(11.7
)%
 
2.0
%
 
—
%
 
(16.7
)%
 
—
%
 
(5.7
)%
Average escalations per year
2.8
 %
 
2.3
 %
 
2.1
 %
 
—
%
 
—
%
 
2.3
 %
 
—
%
 
2.5
 %
New Leases
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Development and Redevelopment Space
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Leased Square Feet
23

 
35

 
—

 
—

 
513

 
—

 
—

 
571

Statistics for Completed Leasing:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Average Committed Cost per Square Foot
$
64.53

 
$
89.01

 
$
—

 
$
—

 
$
—

 
$
—

 
$
—

 
$
8.10

Weighted Average Lease Term in Years
7.3

 
10.2

 
—

 
—

 
10.0

 
—

 
—

 
9.9

GAAP Rent Per Square Foot
$
28.43

 
$
34.24

 
$
—

 
$
—

 
$
13.57

 
$
—

 
$
—

 
$
15.44

Cash Rent Per Square Foot
$
26.02

 
$
32.58

 
$
—

 
$
—

 
$
12.45

 
$
—

 
$
—

 
$
14.24

Other New Leases (2)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Leased Square Feet
173

 
50

 
89

 
7

 
—

 
42

 
6

 
367

Statistics for Completed Leasing:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Average Committed Cost per Square Foot
$
34.81

 
$
58.90

 
$
47.65

 
$
56.66

 
$
—

 
$
40.75

 
$
36.57

 
$
42.31

Weighted Average Lease Term in Years
6.6

 
6.2

 
5.6

 
6.2

 
—

 
7.4

 
3.8

 
6.3

GAAP Rent Per Square Foot
$
28.74

 
$
26.24

 
$
32.05

 
$
25.18

 
$
—

 
$
28.88

 
$
21.09

 
$
29.01

Cash Rent Per Square Foot
$
27.95

 
$
25.86

 
$
34.29

 
$
23.40

 
$
—

 
$
28.15

 
$
20.49

 
$
29.00

Total Square Feet Leased
848

 
380

 
209

 
8

 
513

 
304

 
29

 
2,292

Average escalations per year
2.8
 %
 
2.4
 %
 
1.3
 %
 
2.8
%
 
2.3
%
 
2.3
 %
 
1.6
%
 
2.4
 %
Average escalations excl. data center shells
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2.5
 %
(1)
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 9 in the period such costs are incurred.
(2) Other New Leases includes acquired first generation space and vacated second generation space.

19

Corporate Office Properties Trust
Lease Expiration Analysis as of 9/30/16 (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 (3)
 
Annual Rental Revenue of Expiring Leases per Occupied Square Foot
 
Core Portfolio
 
 
 
 
 
 
 
 
 
 
 
Ft Meade/BW Corridor
 
14
 
283

 
$
9,926

 
2.2
%
 
$35.12
 
NoVA Defense/IT
 
5
 
35

 
654

 
0.1
%
 
18.48

 
Navy Support
 
4
 
57

 
1,048

 
0.2
%
 
18.27

 
Regional Office
 
10
 
96

 
3,426

 
0.8
%
 
35.70

 
2016
 
33
 
471

 
15,054

 
3.4
%
 
31.94

 
Ft Meade/BW Corridor
 
38
 
1,164

 
37,615

 
8.5
%
 
32.33

 
NoVA Defense/IT
 
3
 
28

 
1,118

 
0.3
%
 
39.45

 
Navy Support
 
16
 
135

 
2,760

 
0.6
%
 
20.37

 
Redstone Arsenal
 
1
 
2

 
34

 
—
%
 
19.89

 
Regional Office
 
11
 
114

 
3,949

 
0.9
%
 
34.59

 
2017
 
69
 
1,443

 
45,476

 
10.3
%
 
31.51

 
Ft Meade/BW Corridor
 
44
 
985

 
33,160

 
7.5
%
 
33.67

 
NoVA Defense/IT
 
5
 
206

 
7,630

 
1.7
%
 
37.11

 
Navy Support
 
17
 
181

 
5,320

 
1.2
%
 
29.47

 
Redstone Arsenal
 
3
 
251

 
6,478

 
1.5
%
 
25.78

 
Data Center Shells-Consolidated properties
 
1
 
155

 
2,498

 
0.6
%
 
16.11

 
Regional Office
 
9
 
126

 
4,049

 
0.9
%
 
32.21

 
2018
 
79
 
1,904

 
59,135

 
13.4
%
 
31.07

 
Ft Meade/BW Corridor
 
43
 
1,477

 
48,097

 
10.9
%
 
32.56

 
NoVA Defense/IT
 
6
 
258

 
9,798

 
2.2
%
 
37.99

 
Navy Support
 
10
 
59

 
1,596

 
0.4
%
 
26.88

 
Redstone Arsenal
 
4
 
71

 
1,465

 
0.3
%
 
20.63

 
Regional Office
 
11
 
169

 
4,637

 
1.0
%
 
27.39

 
2019
 
74
 
2,034

 
65,593

 
14.8
%
 
32.24

 
Ft Meade/BW Corridor
 
38
 
1,049

 
34,135

 
7.7
%
 
32.54

 
NoVA Defense/IT
 
4
 
121

 
3,272

 
0.7
%
 
26.94

 
Lackland Air Force Base
 
2
 
250

 
9,092

 
2.1
%
 
36.32

 
Navy Support
 
17
 
175

 
7,012

 
1.6
%
 
40.14

 
Redstone Arsenal
 
3
 
141

 
2,984

 
0.7
%
 
21.22

 
Regional Office
 
11
 
67

 
2,017

 
0.5
%
 
29.96

 
2020
 
75
 
1,803

 
58,512

 
13.2
%
 
32.45

 
Thereafter
 
 
 
 
 
 
 
 
 
 
 
Consolidated Properties
 
172
 
6,199

 
193,657

 
43.7
%
 
28.51

 
Unconsolidated JV Properties
 
6
 
962

 
5,233

 
1.2
%
 
10.88

 
Core Portfolio
 
508
 
14,816

 
$
442,660

 
100.0
%
 
$29.88
 

20

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 (3)
 
Annual Rental Revenue of Expiring Leases per Occupied Square Foot
 
Core Portfolio
 
508
 
14,816

 
$
442,660

 
100.0
%
 
$29.88
 
Office Properties Held for Sale and Other
 
 
 
 
 
 
 
 
 
 
 
Ft Meade/BW Corridor
 
19
 
231

 
5,095

 
17.6
%
 
22.05

 
NoVA Defense/IT
 
14
 
306

 
8,559

 
29.6
%
 
27.94

 
Regional Office
 
27
 
353

 
8,371

 
29.0
%
 
23.71

 
Other
 
16
 
263

 
6,872

 
23.8
%
 
26.12

 
Office Properties Held for Sale and Other Total Average
 
76
 
1,153

 
28,897

 
100.0
%
 
25.05

 
Total Portfolio
 
584
 
$
15,969

 
$
471,557

 
 
 
$29.53
 
Consolidated Portfolio
 
578
 
15,007

 
$
466,324

 
 
 
 
 
Unconsolidated JV Properties
 
6
 
962

 
$
5,233

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

Note: As of September 30, 2016, the weighted average lease term is 4.9 years for the Core Portfolio, 4.8 for the Total Portfolio and 4.6 for the Consolidated 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)
2017
1
9

2.00

$
2,280

2018
2
1

0.26

536

2019
1
6

1.00

2,274

2020
2
19

11.45

13,871

2022
1
6

1.00

1,559

 
 
 

15.71

$
20,519


(1)
This expiration analysis reflects occupied space of our total portfolio (including consolidated and unconsolidated properties) and includes the effect of early renewals completed on existing leases but excludes the effect of new tenant leases on square feet yet to commence as of September 30, 2016 of 266,000 for the portfolio, including 232,000 for the Core Portfolio. With regard to properties owned through unconsolidated real estate joint ventures, the amounts reported above reflect 100% of the properties’ square footage but only reflect the portion of Annualized Rental Revenue that was allocable to COPT’s ownership interest.
(2)
A number of our leases are subject to certain early termination provisions.  The year of lease expiration was computed assuming no exercise of such early termination rights.
(3)
Total Annualized Rental Revenue is the monthly contractual base rent as of September 30, 2016 multiplied by 12 plus the estimated annualized expense reimbursements under existing leases. The amounts reported above for Annualized Rental Revenue include the portion of properties owned through an unconsolidated real estate joint venture that was allocable to COPT’s ownership interest.


21

Corporate Office Properties Trust
Top 20 Office Tenants as of 9/30/16 (1)
(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 (2)
 
Percentage
of Total
Annualized 
Rental Revenue (2)
 
Weighted
Average
Remaining Lease Term (3)
United States Government
(4)
61

 
3,760

 
23.5
%
 
$
141,192

 
29.9
%
 
4.7

Northrop Grumman Corporation
 
8

 
757

 
4.7
%
 
22,509

 
4.8
%
 
3.7

The Boeing Company
 
11

 
685

 
4.3
%
 
20,204

 
4.3
%
 
2.8

General Dynamics Corporation
 
7

 
528

 
3.3
%
 
19,536

 
4.1
%
 
4.8

Vadata Inc.
(1)
9

 
1,408

 
8.8
%
 
12,040

 
2.6
%
 
8.6

Computer Sciences Corporation
 
3

 
279

 
1.7
%
 
10,811

 
2.3
%
 
2.4

CareFirst, Inc.
 
2

 
300

 
1.9
%
 
10,422

 
2.2
%
 
6.4

Booz Allen Hamilton, Inc.
 
6

 
294

 
1.8
%
 
9,994

 
2.1
%
 
4.5

Wells Fargo & Company
 
3

 
190

 
1.2
%
 
8,353

 
1.8
%
 
10.8

CACI Technologies, Inc.
 
3

 
225

 
1.4
%
 
7,285

 
1.5
%
 
4.0

AT&T Corporation
 
3

 
308

 
1.9
%
 
6,019

 
1.3
%
 
2.6

The Raytheon Company
 
6

 
168

 
1.1
%
 
5,967

 
1.3
%
 
2.4

KEYW Corporation
 
2

 
211

 
1.3
%
 
5,895

 
1.3
%
 
7.2

Science Applications International Corp.
 
4

 
146

 
0.9
%
 
5,122

 
1.1
%
 
4.2

Miles & Stockbridge, PC
 
2

 
156

 
1.0
%
 
5,052

 
1.1
%
 
11.0

Transamerica Life Insurance Company
 
2

 
159

 
1.0
%
 
4,815

 
1.0
%
 
5.2

Harris Corporation
 
6

 
170

 
1.1
%
 
4,710

 
1.0
%
 
5.5

University of Maryland
 
3

 
172

 
1.1
%
 
4,692

 
1.0
%
 
4.8

Kratos Defense and Security Solutions
 
1

 
131

 
0.8
%
 
4,638

 
1.0
%
 
3.6

The Mitre Corporation
 
4

 
122

 
0.8
%
 
4,267

 
0.9
%
 
3.2

Subtotal Top 20 Office Tenants
 
146

 
10,168

 
63.7
%
 
313,523

 
66.5
%
 
5.2

All remaining tenants
 
438

 
5,801

 
36.3
%
 
158,034

 
33.5
%
 
4.2

Total/Weighted Average
 
584

 
15,969

 
100.0
%
 
$
471,557

 
100.0
%
 
4.8

 
(1)  Includes Annualized Rental Revenue in six properties owned through an unconsolidated JV of $5.23 million (see page 34 for additional information).
(2)  Total Annualized Rental Revenue is the monthly contractual base rent as of 9/30/16, multiplied by 12, plus the estimated annualized expense reimbursements under existing leases. With regard to properties owned through unconsolidated real estate joint ventures, the amounts reported above reflect 100% of the properties’ square footage but only reflect the portion of Annualized Rental Revenue that was allocable to COPT’s ownership interest.
(3)  A number of our leases are subject to certain early termination provisions.  The year of lease expiration was computed assuming no exercise of such early termination rights. The weighting of the lease term was computed using Total Rental Revenue.
(4)  Substantially all of our government leases are subject to early termination provisions which are customary in government leases. The weighted average remaining lease term was computed assuming no exercise of such early termination rights. As of 9/30/16, $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).

22


Corporate Office Properties Trust
Property Dispositions
(dollars in thousands)
 
 
Property Segment/Subsegment
 
Business Park/Submarket
 
Number of Buildings
 
Square Feet
 
Transaction
Date
 
Occupancy on Transaction Date
 
Transaction 
Price
 
Quarter Ended 3/31/16
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Colorado Springs Land
 
N/A
 
N/A
 
N/A

 
N/A

 
Various
 
N/A
 
$
5,701

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Quarter Ended 9/30/16
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
50% interest in DC8, 9, 10, 11, 12 and 14
 
Data Center Shells
 
Ashburn and Prince William County
 
6

 
962

 
7/21/2016
 
100.0%
 
73,821

(1)
Arborcrest Corporate Campus properties
 
Regional Office
 
Greater Philadelphia
 
4

 
654

 
8/4/2016
 
100.0%
 
142,800

 
8003 Corporate Drive
 
Regional Office
 
White Marsh
 
1

 
18

 
8/17/2016
 
100.0%
 
2,400

 
1341 and 1343 Ashton Road
 
Fort Meade/BW Corridor
 
BWI South
 
2

 
25

 
9/9/2016
 
60.7%
 
2,900

 
8007, 8013, 8015, 8019 and 8023-8027 Corporate Drive
 
Regional Office
 
White Marsh
 
5

 
130

 
9/21/2016
 
77.8%
 
14,513

 
1302, 1304 and 1306 Concourse Drive
 
Fort Meade/BW Corridor
 
Airport Square
 
3

 
299

 
9/29/2016
 
83.1%
 
48,100

 
Subtotal - Quarter Ended 9/30/16
 
 
 
21

 
2,088

 
 
 
 
 
284,534

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Subsequent to 9/30/16 (through 10/26/16)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2900 Towerview Road
 
NoVA Defense/IT
 
Route 28 South
 
1

 
151

 
10/19/2016
 
100.0%
 
12,100

 
Colorado Springs Land
 
N/A
 
N/A
 
N/A

 
N/A

 
10/26/2016
 
N/A
 
2,000

 
Subtotal - Subsequent to 9/30/16 (through 10/26/16)
 
 
 
1

 
151

 
 
 
 
 
14,100

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Year to Date Dispositions through 10/26/16
 
 
 
22

 
2,239

 
 
 
 
 
$
304,335

 

(1) We sold a 50% interest in these six data centers by contributing them into a newly-formed joint venture for an aggregate property value of $147.6 million. We obtained $60 million in non-recourse mortgage loans on the properties immediately prior to contributing the properties and received the net proceeds.

23

Corporate Office Properties Trust
Construction, Redevelopment and Land Owned/Controlled as of 9/30/16
(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
336

 
104

 
4,175

 
4,615

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
365

 
—

 
422

 
787

Subtotal Defense/IT Locations
1,121

 
104

 
11,437

 
12,662

Regional Office
—

 
—

 
1,089

 
1,089

Other
—

 
—

 
1,578

 
1,578

Total
1,121

 
104

 
14,104

 
15,329

 
Costs to date by region
Defense/IT Locations:
 
 
 
 
 
 
 
Fort Meade/BW Corridor
$
62,889

 
$
20,346

 
$
133,997

 
$
217,232

NoVA Defense/IT
44,072

 
—

 
92,890

 
136,962

Lackland Air Force Base
—

 
—

 
20,197

 
20,197

Navy Support
—

 
—

 
2,590

 
2,590

Redstone Arsenal
4,578

 
—

 
18,417

 
22,995

Data Center Shells
23,475

 
—

 
9,838

 
33,313

Subtotal Defense/IT Locations
135,014

 
20,346

 
277,929

 
433,289

Regional Office
—

 
—

 
64,591

 
64,591

Other
—

 
—

 
29,319

 
29,319

Total
$
135,014

 
$
20,346

 
$
371,839

 
$
527,199

 
 
 
 
 
 
 
 
Reconciliation to amounts included in projects in development or held for future development, including land costs, as reported on consolidated balance sheet
 
 
 
 
 
 
 
Operating properties
(73,779
)
 
(6,216
)
 
(25,833
)
 
(105,828
)
Assets held for sale
—

 
—

 
(21,780
)
 
(21,780
)
Deferred leasing costs and other assets
(3,017
)
 
(305
)
 
—

 
(3,322
)
Projects in development or held for future development, including associated land costs (4)
$
58,218

 
$
13,825

 
$
324,226

 
$
396,269

(1) 
Represents construction projects as listed on page 25.
(2) 
Represents redevelopment projects as listed on page 26.
(3)
Represents our land owned/controlled as listed on page 28.
(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”.

24

Corporate Office Properties Trust
Summary of Construction Projects as of 9/30/16 (1)
(dollars and square feet in thousands) 
 
 
Property Segment
 
Park/Submarket
Total Rentable Square Feet
Percentage Leased as of 9/30/16
as of 9/30/16 (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
 
Under Construction
 
 
 
 
 
 
 
 
 
 
 
Bethlehem Technology Park - DC19 Manassas, Virginia
Data Center Shells
 
Manassas
149

100%
21,608

16,468

—

4Q 16
4Q 16
 
Bethlehem Technology Park - DC20 Manassas, Virginia
Data Center Shells
 
Manassas
216

100%
29,913

7,007

—

2Q 17
2Q 17
 
2100 Rideout Road
Huntsville, Alabama (4)
Redstone Arsenal
 
Redstone Gateway
19

58%
5,123

4,578

3,100

2Q 16
2Q 17
 
NOVA Office D
Northern Virginia
NoVA Defense/IT
 
Other
240

100%
49,344

12,768

—

3Q 17
3Q 17
 
540 National Business Parkway
Annapolis Junction, Maryland
Ft. Meade/BW Corridor
 
National Bus. Park
145

49%
43,712

23,514

—

1Q 17
1Q 18
 
Total Under Construction
 
 
 
769

89%
$
149,700

$
64,335

$
3,100

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Held for Lease to Government
 
 
 
 
 
 
 
 
 
 
 
310 Sentinel Way
Annapolis Junction, Maryland
Ft Meade/BW Corridor
 
National Bus. Park
191

8%
54,352

39,375

39,375

(1)
(1)
 
NOVA Office B
Northern Virginia
NoVA Defense/IT
 
Other
161

0%
41,500

31,304

31,304

(1)
(1)
 
Total Held for Lease to Government
 
 
352

4%
$
95,852

$
70,679

$
70,679

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total Construction Projects
 
 
1,121

63%
$
245,552

$
135,014

$
73,779

 
 
 
 
 
 
 
 
 
 
 
 
 
 

(1)
Includes properties under, or contractually committed for, construction as of 9/30/16 and 310 Sentinel Way and NOVA Office B, two properties that were complete but held for future lease to the United States Government.
(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, 11,000 square feet were operational as of 9/30/16; NOI and cash NOI for this property was $22,000 for the three months ended 9/30/16.



25

Corporate Office Properties Trust
Summary of Redevelopment Projects as of 9/30/16
(dollars and square feet in thousands) 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Property Segment
Park/Submarket
Total Rentable Square Feet
Percentage Leased as of 9/30/16 (2)
as of 9/30/16 (1)
Actual or Anticipated Shell Completion Date
 Anticipated Operational Date (3)
 
 
Historical Basis, Net
Incremental Redevelopment Cost
Anticipated Total Cost
 Cost to Date
Cost to Date Placed in Service
 
 
Property and Location
 
7134 Columbia Gateway Drive
Columbia, Maryland (4)
 
Ft Meade/BW Corridor
Howard Co. Perimeter
22

38%
$
1,703

$
2,547

$
4,250

$
3,659

$
2,213

1Q 16
1Q 17
1201 Winterson Rd (AS13)
Linthicum, Maryland
 
Ft Meade/BW Corridor
Airport Square
68

0%
2,959

12,892

15,851

10,876

2,959

1Q 16
1Q 17
Airport Landing (2)
Linthicum, Maryland
 
Ft Meade/BW Corridor
Airport Square
 
 
 
 
 
 
 
 
 
Retail Buildings
 
 
 
14

56%
785

6,401

7,186

5,369

785

4Q 16
4Q 17
Pad Site
 
 
 
N/A

100%
259

183

442

442

259

4Q 16
4Q 16
Total Under Redevelopment
104

19%
$
5,706

$
22,023

$
27,729

$
20,346

$
6,216

 
 
 
(1)
Cost includes construction, leasing costs and allocated portion of shared infrastructure.
(2)
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 14,000 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.
(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 redevelopment, 4,000 square feet were operational as of 9/30/16; NOI and cash NOI for this property was $(3,000) for the three months ended 9/30/16.




26

Corporate Office Properties Trust
Office Property Construction and Redevelopment Placed in Service as of 9/30/16
(square feet in thousands)
 
 
 
 
Total Property
 
 
 
 
 
 
% Leased as of 9/30/16
Rentable Square Feet
 
Space Placed in Service % Leased as of 9/30/16
 
Property Segment
Park/Submarket
 
Square Feet Placed in Service in 2016
Property and Location
Prior Year
1st Quarter
2nd Quarter
3rd Quarter
Total 2016
Patriot Point - DC15
Ashburn, Virginia
Data Center Shells
Ashburn
100%
149

—

149

—

—

149

100%
Patriot Point - DC16
Ashburn, Virginia
Data Center Shells
Ashburn
100%
149

—

—

149

—

149

100%
6708 Alexander Bell Drive
Columbia, Maryland
Ft Meade/BW Corridor
Howard Co. Perimeter
0%
51

—

51

—

—

51

0%
7134 Columbia Gateway Drive Columbia, Maryland
Ft Meade/BW Corridor
Howard Co. Perimeter
36%
22

—

—

4

—

4

100%
Patriot Point - DC17
Ashburn, Virginia
Data Center Shells
Ashburn
100%
149

—

—

—

149

149

100%
7880 Milestone Parkway Hanover, Maryland
Ft Meade/BW Corridor
Arundel Preserve
73%
120

88

—

—

32

32

73%
2100 Rideout Road
    Huntsville, Alabama
Redstone Arsenal
Redstone Gateway
58%
19

—

—

—

11

11

100%
Total Construction/Redevelopment Placed Into Service
84%
659

88

200

153

192

545

87%




27

Corporate Office Properties Trust
Summary of Land Owned/Controlled as of 9/30/16 (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
428

 
4,084

 
 
Data Center Shells
42

 
422

 
 
Total Defense/IT Locations
1,049

 
11,437

 
 
Regional Office
10

 
1,089

 
 
Total land owned/controlled for future development
1,059

 
12,526

 
$
316,687

 
 
 
 
 
 
Other land owned/controlled
146

 
1,578

 
7,539

Land held for sale
153

 
2,122

 
21,780

 
 
 
 
 
 
Land owned/controlled
1,358

 
16,226

 
$
346,006

Land held for sale
(153
)
 
(2,122
)
 
(21,780
)
Land held, net
1,205

 
14,104

 
$
324,226

 
 
 
 
 
 
(1)
This land inventory schedule excludes all properties listed as construction or redevelopment as detailed on pages 25 and 26, 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 24 (in thousands).
(3)
Includes land owned under a long-term master lease agreement to LW Redstone Company, a consolidated joint venture (see page 33). 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.

28

Corporate Office Properties Trust
Capitalization Overview
(dollars, shares and units in thousands)


 
 
Wtd. Avg.
 
 
 
 
 
Gross Debt
 
 
Maturity
 
Stated
 
Effective
 
Balance at
 
 
(Years)
 
Rate
 
Rate (1)
 
9/30/2016
Debt
 
 
 
 
 
 
Secured debt
 
7.4

 
4.05
%
 
4.00
%
 
$
169,308

Unsecured debt
 
6.0

 
3.66
%
 
3.78
%
 
1,721,911

Total Consolidated Debt
6.1

 
3.70
%
 
3.80
%
 
$
1,891,219

 
 
 
 
 
 
 
 
 
Fixed rate debt (2)
 
6.9

 
4.30
%
 
4.44
%
 
$
1,821,219

Variable rate debt
 
3.9

 
2.17
%
 
2.17
%
 
70,000

Total Consolidated Debt
 
 
 
 
 
 
 
$
1,891,219

 
 
 
 
 
 
 
 
 
Preferred Equity
 
 
Redeemable
 
 
 
5.6% Series K Convertible Preferred Shares (3)
Jan-17

 
 
 
$
26,583

7.375% Series L Redeemable Preferred Shares
 
Jun-17

 
 
 
172,500

7.5% Series I Convertible Preferred Units (4)
 
Sep-19

 
 
 
8,800

Total Preferred Equity
 
 
 
 
 
$
207,883

 
 
 
 
 
 
 
 
 
Common Equity
 
 
 
 
 
 
 
 
Common Shares
 
 
 
 
 
 
 
94,765

Common Units
 
 
 
 
 
 
 
3,590

Total Common Shares and Units
 
 
 
 
 
98,355

 
 
 
 
 
 
 
 
 
Closing Common Share Price on 9/30/16
 
 
 
$
28.35

Common Equity Market Capitalization
 
 
 
$
2,788,364

 
 
 
 
 
Total Equity Market Capitalization
 
 
 
$
2,996,247

 
 
 
 
 
Total Market Capitalization
 
 
 
$
4,887,466

 
(1) Excludes the effect of deferred financing cost amortization.
(2) Includes the effect of interest rate swaps that hedge the risk of changes in interest rates on variable rate debt.
(3) 532,000 shares outstanding with a liquidation preference of $50 per share, and convertible into 434,000 common units.
(4) 352,000 units outstanding with a liquidation preference of $25 per unit, and convertible into 176,000 common units.


 
 
Investment Grade Ratings & Outlook:
Latest Affirmation
 
Fitch
 
BBB-
Stable
10/4/16
 
Moody’s
 
Baa3
Stable
7/28/16
 
Standard & Poor’s
BBB-
Stable
5/24/16
copt093020_chart-33979.jpgcopt093020_chart-35112.jpg


29


Corporate Office Properties Trust
Summary of Outstanding Debt as of 9/30/16
(dollars in thousands)
 
 
 
 
 
 
 
 
 
 
 
Balloon
 
 
 
 
 
 
 
 
 
 
 
 
Payment
 
 
Stated
 
Amount
Maturity
 
 
 
Stated
 
Amount
Due Upon
Maturity
Unsecured Debt
Rate
 
Outstanding
Date
 
 
Secured Debt
Rate
 
Outstanding
Maturity
Date
Revolving Credit Facility
L + 1.20%

 
$
—

May-19
(1)(2)
 
7015 Albert Einstein Drive
7.87
%
 
$
1,306

$
—

Nov-19
Senior Unsecured Notes
 
 
 
 
 
 
7200 Redstone Gateway (6)
L + 1.85%

 
13,676

12,132

Oct-20
3.70% due 2021
3.70
%
 
$
300,000

Jun-21
 
 
7740 Milestone Parkway
3.96
%
 
18,702

15,902

Feb-23
3.60% due 2023
3.60
%
 
350,000

May-23
 
 
100 & 30 Light Street
4.32
%
 
54,699

47,676

Jun-23
5.25% due 2024
5.25
%
 
250,000

Feb-24
 
 
1000, 1200 and 1100 Redstone
 
 
 
 
 
5.00% due 2025
5.00
%
 
300,000

Jul-25
 
 
Gateway (6)
4.47
%
(7)
36,117

27,649

Jun-24
Subtotal - Senior Unsecured Notes
4.32
%
 
$
1,200,000

 
 
 
M Square (5825 & 5850
 
 
 
 
 
Unsecured Bank Term Loans
 
 
 
 
 
 
University Research Court)(6)
3.82
%
 
44,808

35,603

Jun-26
2019 Maturity
L + 2.1%

 
$
120,000

Aug-19
(3)
 
Total Secured Debt
4.05
%
 
$
169,308

 
 
2020 Maturity
L + 1.4%

 
300,000

May-20
(2)
 
 
 
 
 
 
 
2022 Maturity (5)
L + 1.8%

 
100,000

Dec-22
(4)
 
 
 
 
 
 
 
Subtotal - Term Loans
2.17
%
 
520,000

 
 
 
 
 
 
 
 
 
Other Unsecured Debt
—
%
 
1,911

May-26
 
 
 
 
 
 
 
 
Total Unsecured Debt
3.66
%
 
$
1,721,911

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Debt Summary
 
 
 
 
 
 
 
 
 
 
 
 
Total Unsecured Debt
3.66
%
 
$
1,721,911

 
 
 
 
 
 
 
 
 
Total Secured Debt
4.05
%
 
169,308

 
 
 
 
 
 
 
 
 
Consolidated Debt
3.70
%
 
$
1,891,219

 
 
 
 
 
 
 
 
 
Net discounts and deferred
 
 
 
 
 
 
 
 
 
 
 
 
financing costs
 
 
(17,383
)
 
 
 
 
 
 
 
 
 
Debt, per balance sheet
 
 
$
1,873,836

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Consolidated Debt
 
 
$
1,891,219

 
 
 
 
 
 
 
 
 
COPT's share of unconsolidated JV debt (8)
 
30,000

 
 
 
 
 
 
 
 
 
Gross debt
 
 
$
1,921,219

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(1)
The Company’s $800 million line of credit matures in May 2019 and may be extended for two six-month periods, at our option.
(2)
Pre-payable anytime without penalty.
(3)
On October 12, 2016, we repaid this loan.
(4)
Pre-payable beginning December 2017 without penalty.
(5)
An additional $150.0 million in borrowings is available to be drawn under this loan through December 2016.
(6)
These properties are owned through consolidated joint ventures.
(7)
Represents the weighted average rate of three loans on the properties.
(8)
See page 34 for additional disclosure regarding an unconsolidated real estate joint venture.

30

Corporate Office Properties Trust
Summary of Outstanding Debt as of 9/30/16 (continued)
_____________________________________________________________________________________________________________
copt093020_chart-34557.jpg
copt093020_chart-38293.jpgcopt093020_chart-39173.jpg

(1) Includes the effect of interest rate swaps in effect that hedge the risk of changes in interest rates on variable rate debt.
(2) On October 12, 2016, we repaid a $120.0 million term loan that was scheduled to mature in August 2019 primarily using cash on hand and proceeds from our Revolving Credit Facility.

31

Corporate Office Properties Trust
Debt Analysis
(dollars, shares and units in thousands, except per share amounts)
 
 
 
 
 
As of and for Three
 
 
 
 
 
As of and for Three
 
 
 
 
 
Months Ended
 
Line of Credit &
 
Months Ended
Senior Note Covenants (1)
 
Required
 
9/30/2016
 
Term Loan Covenants (1)
Required
 
9/30/2016
Total Debt / Total Assets
 
< 60%
 
42.3%
 
Total Debt / Total Assets
< 60%
 
36.3%
Secured Debt / Total Assets
 
< 40%
 
3.8%
 
Secured Debt / Total Assets
< 40%
 
3.4%
Debt Service Coverage
 
> 1.5x
 
3.4x
 
Adjusted EBITDA / Fixed Charges
> 1.5x
 
3.1x
Unencumbered Assets / Unsecured Debt
 
> 150%
 
239.1%
 
Unsecured Debt / Unencumbered Assets
< 60%
 
36.0%
 
 
 
 
 
 
 
Unencumbered Adjusted NOI / Unsecured Interest Expense
> 1.75x
 
3.9x
 
 
 
 
 
 
 
 
 
 
 
 
Debt Ratios (2)
 
Source
 
 
 
Unencumbered Portfolio Analysis
 
 
 
Gross debt
 
 
p. 30
 
$
1,921,219

 
# of unencumbered properties
152

Adjusted book
 
p. 38
 
$
4,543,861

 
% of total portfolio
94
%
Net debt / adjusted book ratio
 
 
 
41.2
%

Unencumbered square feet in-service
 
15,009

Net debt plus pref. equity / adj. book ratio
 
 
 
45.8
%
 
% of total portfolio
 
91
%
Net debt
 
 
p. 38
 
$
1,873,201

 
NOI from unencumbered real estate operations
 
$
75,686

In-place adjusted EBITDA
 
p. 10
 
$
74,365

 
% of total NOI from real estate operations
 
92
%
Net debt / in-place adjusted EBITDA ratio
6.3
x
 
Adjusted EBITDA from unencumbered real estate operations
 
$
70,494

Net debt plus pref. equity / in-place adj. EBITDA ratio
7.0
x
 
% of total adjusted EBITDA from real estate operations
 
92
%
Denominator for debt service coverage
 
p. 37
 
$
19,492

 
Unencumbered adjusted book
 
$
4,142,579

Denominator for fixed charges
 
p. 37
 
$
24,451

 
% of total adjusted book
 
91
%
Adjusted EBITDA
 
p. 10
 
$
76,834

 
 
 
 
Adjusted EBITDA debt service coverage ratio
 
 
3.9
x
 
 
 
 
Adjusted EBITDA fixed charge coverage ratio
 
 
3.1
x
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(1)     The covenants are calculated as defined in the applicable agreements, and the calculations differ between those agreements.
(2)     All coverage computations include discontinued operations.


32

Corporate Office Properties Trust
Consolidated Real Estate Joint Ventures as of 9/30/16
(dollars and square feet in thousands) 
    
Operating Properties
Operational
Square Feet
Occupancy %
Leased %
NOI for Three Months Ended 9/30/16 (2)
NOI for Nine Months Ended 9/30/16 (2)
Total Assets (1)
Venture Level Debt
% COPT Owned
Suburban Maryland:
 

 
 
 
 
 

 

 
M Square Associates, LLC (2 properties)
242

100.0%
100.0%
$
1,380

$
4,127

$
58,481

$
44,808

50%
Huntsville, AL:
 
 
 
 
 
 
 
 
LW Redstone Company, LLC (6 properties)
505

100.0%
100.0%
1,785

5,415

90,964

49,793

85%
Total/Average
747

100.0%
100.0%
$
3,165

$
9,542

$
149,445

$
94,601

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

 
 
 

 

 
M Square Research Park
525

 
 
$
7,572

$
—

50%
Huntsville, Alabama:
 

 
 
 

 

 
Redstone Gateway (3)
4,084

 
 
66,204

—

85%
Washington, DC:
 
 
 
 
 
 
Stevens Place
189

 
 
40,282

—

95%
Total
4,798

 
 
$
114,058

$
—

 
 
(1)  Total assets includes the total assets recorded on the books of the consolidated joint venture plus any outside investment basis.
(2)
Represents gross NOI of the joint venture operating properties before allocation to joint venture partners.
(3)
Total assets include $48.1 million due from the City of Huntsville (including accrued interest) in connection with infrastructure costs funded by the joint venture.

33

Corporate Office Properties Trust
Unconsolidated Real Estate Joint Venture as of 9/30/16
(dollars and square feet in thousands) 

 
 
Data Center Shells
Joint venture information
 
 
 
COPT ownership %
50
%
 
 
Investment in unconsolidated real estate joint venture
$
25,721

 
 
Number of properties
6

 
 
Square feet
962

 
 
Percentage occupied
100
%
 
 
 
 
 
COPT’s Share (1)
Balance sheet information
 
 
 
Operating properties, net
$
129,192

 
$
64,596

Total Assets
$
148,398

 
$
74,199

Debt
$
59,542

 
$
29,771

 
 
 
 
 
 
 
 
Operating information
Three Months Ended 9/30/16 (2)
Revenue
$
2,269

 
$
1,167

Operating expenses
(319
)
 
(159
)
NOI and EBITDA
1,950

 
1,008

Interest expense
(416
)
 
(208
)
Depreciation and amortization
(582
)
 
(207
)
Net income
$
952

 
$
593

 
 
 
 
NOI (per above)
$
1,950

 
$
1,008

Straight line rent adjustments
(163
)
 
(146
)
Cash NOI
$
1,787

 
$
862

 
 
 
 

(1) COPT's share represents the portion allocable to our ownership interest.
(2) Represents activity commencing upon the formation of the joint venture on July 21, 2016.



34

Corporate Office Properties Trust
Supplementary Reconciliations of Non-GAAP Measures
(dollars in thousands)
 
Three Months Ended
 
Nine Months Ended
 
9/30/16
 
6/30/16
 
3/31/16
 
12/31/15
 
9/30/15
 
9/30/16
 
9/30/15
GAAP revenues from real estate operations from continuing operations
$
130,954

 
$
133,924

 
$
133,087

 
$
134,477

 
$
133,686

 
$
397,965

 
$
384,587

Revenues from discontinued operations
—

 
—

 
—

 
—

 
—

 
—

 
4

Real estate revenues
$
130,954

 
$
133,924

 
$
133,087

 
$
134,477

 
$
133,686

 
$
397,965

 
$
384,591

 
 
 
 
 
 
 
 
 
 
 
 
 
 
GAAP property operating expenses from continuing operations
$
49,952

 
$
48,141

 
$
51,875

 
$
48,498

 
$
48,897

 
$
149,968

 
$
145,996

Property operating expenses from discontinued operations
—

 
—

 
—

 
—

 
—

 
—

 
(6
)
Real estate property operating expenses
$
49,952

 
$
48,141

 
$
51,875

 
$
48,498

 
$
48,897

 
$
149,968

 
$
145,990

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Discontinued Operations
 

 
 

 
 

 
 

 
 

 
 

 
 

Revenues from real estate operations
$
—

 
$
—

 
$
—

 
$
—

 
$
—

 
$
—

 
$
4

Property operating expenses
—

 
—

 
—

 
—

 
—

 
—

 
6

Gain on early extinguishment of debt
—

 
—

 
—

 
—

 
—

 
—

 
380

Impairment losses
—

 
—

 
—

 
—

 
—

 
—

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

 
—

 
—

 
—

 
—

 
—

 
—

Discontinued operations
$
—

 
$
—

 
$
—

 
$
—

 
$
—

 
$
—

 
$
156

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Gain on sales of real estate, net, per statements of operations
$
34,101

 
$
—

 
$
—

 
$
64,047

 
$
15

 
$
34,101

 
$
4,000

Gain on sales of non-operating properties
—

 
—

 
—

 
—

 
—

 
—

 
(3,985
)
Gain on sales of operating properties
$
34,101

 
$
—

 
$
—

 
$
64,047

 
$
15

 
$
34,101

 
$
15

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Impairment losses, per statements of operations
$
27,699

 
$
69,692

 
$
2,446

 
$
19,744

 
$
2,307

 
$
99,837

 
$
3,545

Impairment losses on discontinued operations
—

 
—

 
—

 
—

 
—

 
—

 
234

Total impairment losses
$
27,699

 
$
69,692

 
$
2,446

 
$
19,744

 
$
2,307

 
$
99,837

 
$
3,779

Impairment losses on previously depreciated operating properties
(25,857
)
 
(55,124
)
 
(847
)
 
(331
)
 
(2,307
)
 
(81,828
)
 
(3,779
)
Impairment losses on non-operating properties
$
1,842

 
$
14,568

 
$
1,599

 
$
19,413

 
$
—

 
$
18,009

 
$
—


35


Corporate Office Properties Trust
Supplementary Reconciliations of Non-GAAP Measures (continued)
(dollars in thousands)
 
Three Months Ended
 
Nine Months Ended
 
9/30/16
 
6/30/16
 
3/31/16
 
12/31/15
 
9/30/15
 
9/30/16
 
9/30/15
NOI from real estate operations (1)
 

 
 

 
 

 
 

 
 

 
 
 
 
Real estate revenues
$
130,954

 
$
133,924

 
$
133,087

 
$
134,477

 
$
133,686

 
$
397,965

 
$
384,591

Real estate property operating expenses
(49,952
)
 
(48,141
)
 
(51,875
)
 
(48,498
)
 
(48,897
)
 
(149,968
)
 
(145,990
)
COPT’s share of NOI in unconsolidated real estate JV (2)
1,008

 
—

 
—

 
—

 
—

 
1,008

 
—

NOI from real estate operations
82,010

 
85,783

 
81,212

 
85,979

 
84,789

 
249,005

 
238,601

General and administrative expenses
(7,242
)
 
(6,512
)
 
(10,130
)
 
(6,609
)
 
(5,783
)
 
(23,884
)
 
(17,917
)
Leasing expenses
(1,613
)
 
(1,514
)
 
(1,753
)
 
(1,888
)
 
(1,656
)
 
(4,880
)
 
(4,947
)
Business development expenses and land carry costs
(1,716
)
 
(2,363
)
 
(2,418
)
 
(2,521
)
 
(5,573
)
 
(6,497
)
 
(10,986
)
NOI from construction contracts and other service operations
808

 
525

 
526

 
1,075

 
926

 
1,859

 
2,631

Impairment losses on non-operating properties
(1,842
)
 
(14,568
)
 
(1,599
)
 
(19,413
)
 
—

 
(18,009
)
 
—

Equity in income of unconsolidated non-real estate entities
1

 
10

 
10

 
10

 
18

 
21

 
52

Interest and other income
1,391

 
1,330

 
1,156

 
1,300

 
692

 
3,877

 
3,217

Gain (loss) on early extinguishment of debt
(59
)
 
5

 
17

 
(402
)
 
85,745

 
(37
)
 
86,057

Gain on sales of non-operating properties
—

 
—

 
—

 
—

 
—

 
—

 
3,985

Interest expense
(18,301
)
 
(22,639
)
 
(23,559
)
 
(22,347
)
 
(24,121
)
 
(64,499
)
 
(66,727
)
COPT’s share of interest expense of unconsolidated real estate JV
(208
)
 
—

 
—

 
—

 
—

 
(208
)
 
—

Income tax expense
21

 
(1
)
 
8

 
(46
)
 
(48
)
 
28

 
(153
)
FFO - per NAREIT (1)
$
53,250

 
$
40,056

 
$
43,470

 
$
35,138

 
$
134,989

 
$
136,776

 
$
233,813

 
 
 
 
 
 
 
 
 
 
 
 
 
 
(1) Please refer to the section entitled “Definitions” for a definition of this measure.
 
 
 
 
(2) See page 34 for a schedule of the related components.
 
 
 
 

36

Corporate Office Properties Trust
Supplementary Reconciliations of Non-GAAP Measures (continued)
(dollars in thousands)
 
Three Months Ended
 
Nine Months Ended
 
9/30/16
 
6/30/16
 
3/31/16
 
12/31/15
 
9/30/15
 
9/30/16
 
9/30/15
Total interest expense
$
18,301

 
$
22,639

 
$
23,559

 
$
22,347

 
$
24,121

 
$
64,499

 
$
66,727

Less: Amortization of deferred financing costs
(1,126
)
 
(1,178
)
 
(1,176
)
 
(1,127
)
 
(1,203
)
 
(3,480
)
 
(3,339
)
Less: Amortization of net debt discounts and prem., net of amounts capitalized
(332
)
 
(325
)
 
(319
)
 
(317
)
 
(321
)
 
(976
)
 
(849
)
Less: Gain (loss) on interest rate derivatives
1,523

 
(319
)
 
(1,551
)
 
(386
)
 
—

 
(347
)
 
—

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

 
—

 
—

 
—

 
(2,781
)
 
—

 
(11,224
)
COPT’s share of interest expense of unconsolidated real estate JV, excluding deferred financing costs
204

 
—

 
—

 
—

 
—

 
204

 
—

Denominator for interest coverage
18,570

 
20,817

 
20,513

 
20,517

 
19,816

 
59,900

 
51,315

Scheduled principal amortization
922

 
1,732

 
1,800

 
1,717

 
1,692

 
4,454

 
5,011

Denominator for debt service coverage
19,492

 
22,549

 
22,313

 
22,234

 
21,508

 
64,354

 
56,326

Capitalized interest
1,242

 
1,309

 
1,753

 
1,510

 
1,559

 
4,304

 
5,641

Preferred share dividends - redeemable non-convertible
3,552

 
3,553

 
3,552

 
3,553

 
3,552

 
10,657

 
10,657

Preferred unit distributions
165

 
165

 
165

 
165

 
165

 
495

 
495

Denominator for fixed charge coverage
$
24,451

 
$
27,576

 
$
27,783

 
$
27,462

 
$
26,784

 
$
79,810

 
$
73,119

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Preferred share dividends
$
3,552

 
$
3,553

 
$
3,552

 
$
3,553

 
$
3,552

 
$
10,657

 
$
10,657

Preferred unit distributions
165

 
165

 
165

 
165

 
165

 
495

 
495

Common share dividends
26,068

 
26,034

 
26,037

 
25,998

 
26,000

 
78,139

 
78,000

Common unit distributions
988

 
1,004

 
1,011

 
1,011

 
1,011

 
3,003

 
3,035

Total dividends/distributions
$
30,773

 
$
30,756

 
$
30,765

 
$
30,727

 
$
30,728

 
$
92,294

 
$
92,187

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Common share dividends
$
26,068

 
$
26,034

 
$
26,037

 
$
25,998

 
$
26,000

 
$
78,139

 
$
78,000

Common unit distributions
988

 
1,004

 
1,011

 
1,011

 
1,011

 
3,003

 
3,035

Dividends and distributions on dilutive preferred securities
—

 
—

 
—

 
—

 
537

 
—

 
—

Dividends and distributions for diluted FFO payout ratio
27,056

 
27,038

 
27,048

 
27,009

 
27,548

 
81,142

 
81,035

Dividends and distributions on antidilutive preferred securities
—

 
—

 
—

 
—

 
(537
)
 
—

 
—

Dividends and distributions for other payout ratios
$
27,056

 
$
27,038

 
$
27,048

 
$
27,009

 
$
27,011

 
$
81,142

 
$
81,035

 
 
 
 
 
 
 
 
 
 
 
 
 
 

37

Corporate Office Properties Trust
Supplementary Reconciliations of Non-GAAP Measures (continued)
(dollars in thousands)
 
Three Months Ended
 
 
 
 
 
9/30/16
 
6/30/16
 
3/31/16
 
12/31/15
 
9/30/15
 
 
 
 
Total Assets
$
3,634,194

 
$
3,841,692

 
$
3,937,908

 
$
3,909,312

 
$
3,912,092

 
 
 
 
Accumulated depreciation
681,476

 
678,827

 
713,283

 
700,363

 
675,747

 
 
 
 
Accumulated depreciation included in assets held for sale
22,938

 
76,653

 
33,143

 
18,317

 
65,872

 
 
 
 
Accumulated amort. of real estate intangibles and deferred leasing costs
201,414

 
199,038

 
198,552

 
195,506

 
189,571

 
 
 
 
Accumulated amortization of real estate intangibles and deferred leasing costs included in assets held for sale
21,469

 
27,206

 
20,655

 
17,456

 
26,260

 
 
 
 
COPT’s share of liabilities of unconsolidated real estate JV
30,013

 
—

 
—

 
—

 
—

 
 
 
 
COPT’s share of accumulated depreciation and amortization of unconsolidated real estate JV
375

 
—

 
—

 
—

 
—

 
 
 
 
Less: Cash and cash equivalents
(47,574
)
 
(13,317
)
 
(62,489
)
 
(60,310
)
 
(3,840
)
 
 
 
 
COPT’s share of cash of unconsolidated real estate JV
(444
)
 
—

 
—

 
—

 
—

 
 
 
 
Adjusted book
$
4,543,861

 
$
4,810,099

 
$
4,841,052

 
$
4,780,644

 
$
4,865,702

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Gross debt (page 30)
$
1,921,219

 
$
2,112,700

 
$
2,158,880

 
$
2,097,230

 
$
2,133,073

 


 


Less: Cash and cash equivalents
(47,574
)
 
(13,317
)
 
(62,489
)
 
(60,310
)
 
(3,840
)
 


 


COPT’s share of cash of unconsolidated real estate JV
(444
)
 
—

 
—

 
—

 
—

 
 
 
 
Net debt
$
1,873,201

 
$
2,099,383

 
$
2,096,391

 
$
2,036,920

 
$
2,129,233

 


 


Preferred equity
207,883

 
207,883

 
207,883

 
207,883

 
207,883

 
 
 
 
Net debt plus preferred equity
$
2,081,084

 
$
2,307,266

 
$
2,304,274

 
$
2,244,803

 
$
2,337,116

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 


38


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 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 cash and cash equivalents, accumulated depreciation on real estate properties, accumulated amortization of intangible assets on real estate acquisitions, accumulated amortization of deferred leasing costs, unconsolidated real estate joint venture cash and cash equivalents, liabilities and accumulated depreciation and amortization (of real estate intangibles and deferred leasing costs) allocable to our ownership interest in the joint venture and the effect of properties serving as collateral for debt in default that we extinguished (or intend to extinguish) via conveyance of such properties.

Adjusted earnings before interest, income taxes, depreciation and amortization (“Adjusted EBITDA”) 
Adjusted EBITDA is net income (loss) adjusted for the effects of interest expense, depreciation and amortization, impairment losses, gain on sales of properties, gain or loss on early extinguishment of debt, net gain on unconsolidated entities, operating property acquisition costs, loss on interest rate derivatives, income taxes, 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.  Adjusted EBITDA also includes adjustments to net income for the effects of the items noted above pertaining to an unconsolidated real estate JV that was allocable to our ownership interest in the JV. While EBITDA (earnings before interest, taxes, depreciation and amortization) is a universally-defined supplemental measure, Adjusted EBITDA incorporates additional adjustments for gains and losses from investing and financing activities and certain other items that we believe are not closely correlated to (or associated with) our operating performance. We believe that adjusted EBITDA is a useful supplemental measure 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.


39


Corporate Office Properties Trust
Definitions

Cash net operating income (“Cash NOI”) 
Defined as NOI from real estate operations adjusted to eliminate the effects of: straight-line rental adjustments, amortization of tenant incentives, amortization of acquisition intangibles included in FFO and NOI (including above- and below-market leases and above- or below-market cost arrangements), lease termination fees from tenants to terminate their lease obligations prior to the end of the agreed upon lease terms and rental revenue recognized under GAAP resulting from landlord assets funded by tenants.  Cash NOI also includes adjustments to NOI from real estate operations for the effects of the items noted above pertaining to an unconsolidated real estate JV that were allocable to our ownership interest in the JV. Under GAAP, rental revenue is recognized evenly over the term of tenant leases (through straight-line rental adjustments and amortization of tenant incentives), which, given the long term nature of our leases, does not align with the economics of when tenant payments are due to us under the arrangements.  Also under GAAP, when a property is acquired, we allocate the acquisition to certain intangible components, which are then amortized into NOI over their estimated lives, even though the resulting revenue adjustments are not reflective of our lease economics.  In addition, revenue from lease termination fees and tenant-funded landlord improvements, absent an adjustment from us, would result in large one-time lump sum amounts in Cash NOI that we do not believe are reflective of a property’s long-term value.  We believe that Cash NOI is a useful supplemental measure of operating performance for a REIT’s operating real estate because it makes adjustments to NOI for the above stated items to be more reflective of the economics of when tenant payments are due to us under our leases and the value of our properties.  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 operating income, as reported on our consolidated statements of operations, is the most directly comparable GAAP measure to Cash NOI.

COPT’s share of NOI from unconsolidated real estate joint venture (“JV”)
Represents the net of revenues and property operating expenses of real estate operations owned through an unconsolidated JV that is allocable to COPT’s ownership interest. This measure is included in the computation of NOI, our segment performance measure, as discussed below.

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” above), (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) replacement capital expenditures (defined below).  Diluted AFFO also includes adjustments to Diluted FFO, as adjusted for comparability for the effects of the items noted above pertaining to an unconsolidated real estate JV that were allocable to our ownership interest in the JV. We believe that Diluted AFFO is a useful supplemental measure of operating performance for a REIT because it incorporates adjustments for: certain revenue and expenses that are not associated with cash to or from us during the period; and certain capital expenditures for operating properties incurred during the period that do require cash outlays.  We believe that net income 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 net income is the most directly comparable GAAP measure to Diluted FFO.

40


Corporate Office Properties Trust
Definitions

 
Diluted FFO available to common share and common unit holders, as adjusted for comparability (“Diluted FFO, as adjusted for comparability”)
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; 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 (including separation related compensation and replacement recruitment costs for Vice President level positions and above); and accounting charges for original issuance costs associated with redeemed preferred shares.  Diluted FFO, as adjusted for comparability also includes adjustments to Diluted FFO for the effects of the items noted above pertaining to an unconsolidated real estate JV that were allocable to our ownership interest in the JV. We believe this to be a useful supplemental measure alongside Diluted FFO as it excludes gains and losses from certain investing and financing activities and certain other items that we believe are not closely correlated to (or associated with) our 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 net income 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.  We believe this to be a useful supplemental measure alongside Diluted FFO per share as it excludes gains and losses from investing and financing activities and certain other items that we believe are not closely correlated to (or associated with) 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

41


Corporate Office Properties Trust
Definitions

operating properties on the parcel. FFO also includes adjustments to net income for the effects of the items noted above pertaining to an unconsolidated real estate JV that were allocable to our ownership interest in the JV. 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.

Gross debt
Defined as total consolidated outstanding debt, which is debt reported per our balance sheet adjusted to exclude net discounts and premiums and deferred financing costs, as further adjusted to include outstanding debt of an unconsolidated real estate JV that were allocable to our ownership interest in the JV.

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 of ownership/operations. The measure also includes adjustments to Adjusted EBITDA for the effects of the items noted above pertaining to an unconsolidated real estate JV that were allocable to our ownership interest in the JV. 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 debt
Defined as Gross debt (total outstanding debt debt reported per our balance sheet as adjusted to exclude net discounts and premiums and deferred financing costs), 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. The measure also includes adjustments to Gross debt for the effects of the items noted above pertaining to an unconsolidated real estate JV that were allocable to our ownership interest in the JV.

Net debt plus preferred equity
Defined as Net debt plus the total liquidation preference of our outstanding preferred equity.

Net debt to Adjusted book and Net debt plus preferred equity to Adjusted book
These measures divide either Net debt or Net debt plus preferred equity by Adjusted book.

Net debt to in-place adjusted EBITDA ratio
Defined as net debt (as defined above) divided by in-place adjusted EBITDA (defined above) for the three month period that is annualized by multiplying by four.

Net operating income from real estate operations (“NOI”)
NOI, which is our segment performance measure, includes: consolidated real estate revenues from continuing and discontinued operations; consolidated property operating expenses from continuing and discontinued real estate operations; and the net of revenues and property operating expenses of real estate operations owned through an unconsolidated real estate JV that is allocable to COPT’s ownership interest in the JV. 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 operating income, as reported on our consolidated statements of operations, is the most directly comparable GAAP measure to NOI.


42


Corporate Office Properties Trust
Definitions

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.

Replacement capital expenditures 
Replacement capital expenditures are defined as tenant improvements and incentives, building improvements and leasing costs incurred during the period 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). Replacement capital expenditures excludes expenditures of operating properties included in disposition plans during the period that were already sold or are held for future disposition. The measure also includes replacement capital expenditures of an unconsolidated real estate JV that were allocable to our ownership interest in the JV. For cash tenant incentives not due to the tenant for a period exceeding three months past the date on which such incentives were incurred, we recognize such incentives as replacement capital expenditures in the periods such incentives are due to the tenant. Replacement capital expenditures, which is included in the computation of Diluted AFFO, is intended to represent non-transformative capital expenditures of existing properties held for long-term investment. We believe that the excluded expenditures are more closely associated with our investing activities than the performance of our operating portfolio.

Same office property NOI and Same Office Cash NOI
Defined as NOI, or Cash NOI, from real estate operations of Same Office Properties.  We believe that these are important supplemental measures of operating performance of Same Office Properties for the same reasons discussed above for NOI from real estate operations and Cash NOI.

43


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. With regard to properties owned through unconsolidated real estate joint ventures, we include the portion of Annualized Rental Revenue allocable to COPT’s ownership interest.
 
Construction Properties — Properties under, or contractually committed for, construction. Also includes newly-constructed properties that are complete but held for future lease to the United States Government.

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 continually owned and 100% operational since at least January 1, 2015, excluding properties held for future disposition and properties under redevelopment.
 
Second Generation Space — Space leased that has been previously occupied.
 
Total Portfolio — Operating properties, including ones owned through an unconsolidated joint venture.

44

logo2dtd021015a01a03.jpg
6711 Columbia Gateway Drive, Suite 300
Columbia, Maryland 21046
Telephone 443-285-5400
Facsimile 443-285-7650
www.copt.com
NYSE: OFC
 
 
 
NEWS RELEASE
 
 
 
FOR IMMEDIATE RELEASE
IR Contacts:
 
 
Stephanie Krewson-Kelly
Michelle Layne
 
VP, Investor Relations
Investor Relations Specialist
 
443-285-5453
443-285-5452
 
stephanie.kelly@copt.com
michelle.layne@copt.com


COPT REPORTS THIRD QUARTER 2016 RESULTS

COLUMBIA, MD October 27, 2016 - Corporate Office Properties Trust (“COPT” or the “Company”) (NYSE: OFC) announced financial and operating results for the third quarter ended September 30, 2016.

Management Comments

“As the third quarter demonstrated, we are executing well on all aspects of our 2016 plan, and key performance metrics were in-line with our guidance and expectations,” stated Stephen E. Budorick, COPT’s President & Chief Executive Officer. “Same office cash NOI grew 1.1% in the quarter and 4.1% for the first nine months of the year, and we have completed over $300 million of asset sales to date.” He added, “Demand throughout our portfolio is steady and provides solid momentum for 2017.”

Financial Highlights

3rd Quarter Financial Results:
•
Diluted earnings per share (“EPS”) was $0.25 for the quarter ended September 30, 2016 as compared to $0.91 for the third quarter of 2015.
•
Diluted funds from operations per share (“FFOPS”), as calculated in accordance with NAREIT’s definition, was $0.49 for the third quarter of 2016 as compared to $1.32 for the third quarter of 2015.
•
FFOPS, as adjusted for comparability, was $0.51 for the quarter ended September 30, 2016 and $0.52 for the third quarter of 2015.

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

Operating Performance Highlights

Portfolio Summary:
•
At September 30, 2016, the Company’s core portfolio of 146 operating office properties were 93.0% occupied and 94.4% leased.
•
During the quarter, the Company placed 192,000 square feet of development in service that, at September 30, 2016, were 83% leased.
•
At September 30, 2016, the Company had approximately $161 million of assets held for sale composed of 19 operating properties that contain a total of 1.3 million square feet and 153 acres of non-strategic land.


i

Same Office Performance:
•
At September 30, 2016, COPT’s same office portfolio of 129 buildings was 91.4% occupied and 93.2% leased.
•
For the quarter ended September 30, 2016, the Company’s same office property cash NOI increased 1.1% as compared to the quarter ended September 30, 2015. For the nine months ended September 30, 2016, same office cash NOI grew 4.1% versus the comparable period in 2015.

Leasing:
•
Square Feet Leased - For the quarter ended September 30, 2016, the Company leased a total of 741,000 square feet, including 26,000 square feet in development projects. During the first nine months of the year, we executed on 2.3 million square feet of leasing, including 571,000 square feet in development projects.

•
Renewal Rates - During the three and nine months ended September 30, 2016, the Company renewed 83% and 79%, respectively, of expiring leases.

•
Rent Spreads on Renewing Leases - In the quarter, the Company successfully executed early renewals on three large, non-defense tenant leases, representing 275,000 square feet, to assure long-term, steady cash flows from all three assets. The impact of these renewals was a decline in cash renewal rates in the third quarter. For the quarter ended September 30, 2016 and as compared to expiring rents, rents on renewed space decreased 2.2% on a GAAP basis and decreased 11.9% on a cash basis. For the nine months of 2016, GAAP rents on renewing leases increased 4.5% and cash rents decreased 5.7%. Excluding these three early renewals, cash renewal rents declined only 1.9% for the nine months ended September 30, 2016.

•
Lease Terms - In the third quarter, lease terms averaged 7.6 years on the 597,000 square feet of renewing leases, and 7.0 years on the 144,000 square feet of development and other new leasing, for an average lease term of 7.5 years on all leasing completed in the quarter.

For the nine months ended September 30, 2016, lease terms averaged 6.0 years on the 1.4 million square feet of renewing leases, and 8.5 years on the 938,000 square feet of development and other new leasing, for an average lease term of 7.0 years on all leasing completed in the nine months of the year.

Investment Activity Highlights

Development & Redevelopment Projects:
•
The Company has five properties totaling 769,000 square feet under construction that, at September 30, 2016, were 89% pre-leased. The five projects have a total estimated cost of $149.7 million, of which $64.3 million has been incurred.
•
The Company also has two recently completed properties that total 352,000 square feet which are being held for the U.S. Government. In the third quarter ended September 30, 2016, the Company leased 15,000 square feet in The National Business Park to a U.S. Government tenant and expects further leasing progress in the coming quarters. The Company anticipates leasing the balance of the building during 2017.
•
Including these two U.S. Government projects, the Company’s construction pipeline totals 1.1 million square feet and is 63% leased.
•
COPT has 104,000 square feet in three properties under redevelopment, representing a total expected cost of $27.7 million, of which $20.3 million has been invested. The three projects were 19% leased at quarter end.


ii

Dispositions: During the quarter, the Company closed on $285 million of sales detailed as follows:
•
$74 million from six data center properties contributed to a newly-formed, 50% unconsolidated joint venture with an institutional partner.
•
$143 million from four properties and land at the Arborcrest Campus in the Plymouth Meeting submarket of Philadelphia.
•
$17 million from six properties in the White Marsh submarket of Baltimore.
•
$51 million from five properties in the Airport Square / BWI South submarkets in the B/W Corridor.

Subsequent to the quarter, the Company sold another 151,000 square foot operating property in Northern Virginia and a parcel of non-strategic land for an aggregate of $14.1 million, bringing total assets to-date to $304 million, or 69% of the full year goal.

Balance Sheet and Capital Transaction Highlights

•
As of September 30, 2016, the Company’s net debt to adjusted book ratio was 41.2% and its net debt to in-place adjusted EBITDA ratio was 6.3x. For the quarter ended September 30, 2016, its adjusted EBITDA fixed charge coverage ratio was 3.1x.
•
The Company’s weighted average effective interest rate was 3.8% as of September 30, 2016; including the effect of interest rate swaps, 96% of the Company’s debt was subject to fixed interest rates and the debt portfolio had a weighted average maturity of 6.1 years.
•
Subsequent to the quarter, the Company used cash on hand and capacity on its line of credit to repay a $120 million term loan. As a result, the Company has no debt maturities until 2020.

2016 FFO Guidance Update

Management is narrowing its guidance range for full year FFOPS, as adjusted for comparability, of $2.00-$2.02. The Company also is maintaining its previously established guidance for the fourth quarter ending December 31, 2016, for FFOPS, as adjusted for comparability, of $0.50-$0.52. Reconciliations of projected diluted EPS to projected FFOPS are as follows:
 
 
 
 
 
 
 
 
 
 
 
Three Months Ending
 
Year Ending
 
 
December 31, 2016
 
December 31, 2016
 
 
Low
 
High
 
Low
 
High
EPS
 
$
0.24

 
$
0.26

 
$
(0.02
)
 
$
—

Real estate depreciation and amortization
 
0.34

 
0.34

 
1.37

 
1.37

Impairment losses on operating properties
 
—

 
—

 
0.83

 
0.83

Gains on sales of operating properties
 
(0.01
)
 
(0.01
)
 
(0.36
)
 
(0.36
)
FFOPS, NAREIT definition
 
0.57

 
0.59

 
1.82

 
1.84

Executive transition costs
 
—

 
—

 
0.06

 
0.06

Impairment losses on non-operating properties
 
—

 
—

 
0.18

 
0.18

Gains on sales of non-operating properties
 
(0.08
)
 
(0.08
)
 
(0.08
)
 
(0.08
)
Loss on interest rate derivatives and other
 
0.01

 
0.01

 
0.02

 
0.02

FFOPS, as adjusted for comparability
 
$
0.50

 
$
0.52

 
$
2.00

 
$
2.02

 
 
 
 
 
 
 
 
 

Associated Supplemental Presentation

Prior to the call, the Company will post a slide presentation to accompany management’s prepared remarks for its third quarter 2016 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.


iii

Conference Call Information

Management will discuss third quarter 2016 earnings results on its conference call tomorrow at 12:00 p.m. Eastern Time, details of which are listed below:

Earnings Release Date: Thursday, October 27, 2016 after market closes
Conference Call Date:     Friday, October 28, 2016
Time: 12:00 p.m. Eastern Time
Telephone Number: (within the U.S.) 888-713-4218
Telephone Number: (outside the U.S.) 617-213-4870
Passcode: 86051712#

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=PAX84XXNT 
 

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

Replay Information

A replay of this call will be available beginning at 3:00 p.m. Eastern Time on Friday, October 28, through midnight Eastern Time on Friday, November 11. To access the replay within the United States, please call 888-286-8010 and use passcode 93348081. To access the replay outside the United States, please call 617-801-6888 and use passcode 93348081.

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

Definitions

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

Company Information

COPT is an office REIT that 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 September 30, 2016, we derived 86% of core portfolio annualized revenue from Defense/IT Locations and 14% from our Regional Office Properties. As of September 30, 2016, our core portfolio of 146 office properties encompassed 15.9 million square feet and was 94.4% leased.


iv

Forward-Looking Information

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

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

The Company undertakes no obligation to update or supplement any forward-looking statements. For further information, please refer to the Company’s filings with the Securities and Exchange Commission, particularly the section entitled “Risk Factors” in Item 1A of the Company’s Annual Report on Form 10-K for the year ended December 31, 2015.




v


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


 
For the Three Months Ended September 30,
 
For the Nine Months
Ended September 30,
 
2016
 
2015
 
2016
 
2015
Revenues
 

 
 

 
 
 
 
Real estate revenues
$
130,954

 
$
133,686

 
$
397,965

 
$
384,587

Construction contract and other service revenues
11,149

 
17,058

 
34,372

 
97,554

Total revenues
142,103

 
150,744

 
432,337

 
482,141

Expenses
 

 
 

 
 
 
 
Property operating expenses
49,952

 
48,897

 
149,968

 
145,996

Depreciation and amortization associated with real estate operations
32,015

 
38,403

 
99,790

 
103,788

Construction contract and other service expenses
10,341

 
16,132

 
32,513

 
94,923

Impairment losses
27,699

 
2,307

 
99,837

 
3,545

General and administrative expenses
7,242

 
5,783

 
23,884

 
17,917

Leasing expenses
1,613

 
1,656

 
4,880

 
4,947

Business development expenses and land carry costs
1,716

 
5,573

 
6,497

 
10,986

Total operating expenses
130,578

 
118,751

 
417,369

 
382,102

Operating income
11,525

 
31,993


14,968


100,039

Interest expense
(18,301
)
 
(24,121
)
 
(64,499
)
 
(66,727
)
Interest and other income
1,391

 
692

 
3,877

 
3,217

(Loss) gain on early extinguishment of debt
(59
)
 
85,745

 
(37
)
 
85,677

(Loss) income from continuing operations before equity in income of unconsolidated entities and income taxes
(5,444
)
 
94,309

 
(45,691
)
 
122,206

Equity in income of unconsolidated entities
594

 
18

 
614

 
52

Income tax benefit (expense)
21

 
(48
)
 
28

 
(153
)
(Loss) income from continuing operations
(4,829
)
 
94,279

 
(45,049
)
 
122,105

Discontinued operations
—

 
—

 
—

 
156

(Loss) income before gain on sales of real estate
(4,829
)
 
94,279

 
(45,049
)
 
122,261

Gain on sales of real estate
34,101

 
15

 
34,101

 
4,000

Net income (loss)
29,272

 
94,294

 
(10,948
)
 
126,261

Net (income) loss attributable to noncontrolling interests
 

 
 

 
 
 
 
Common units in the Operating Partnership (“OP”)
(901
)
 
(3,357
)
 
948

 
(4,231
)
Preferred units in the OP
(165
)
 
(165
)
 
(495
)
 
(495
)
Other consolidated entities
(907
)
 
(972
)
 
(2,799
)
 
(2,599
)
Net income (loss) attributable to COPT
27,299

 
89,800

 
(13,294
)
 
118,936

Preferred share dividends
(3,552
)
 
(3,552
)
 
(10,657
)
 
(10,657
)
Net income (loss) attributable to COPT common shareholders
$
23,747

 
$
86,248

 
$
(23,951
)
 
$
108,279

Earnings per share (“EPS”) computation:
 

 
 

 
 
 
 
Numerator for diluted EPS:
 

 
 

 
 
 
 
Net income (loss) attributable to common shareholders
$
23,747

 
$
86,248

 
$
(23,951
)
 
$
108,279

Dividends on dilutive convertible preferred shares
—

 
372

 
—

 
—

Common units in the OP
—

 
—

 
—

 
4,231

Amount allocable to share-based compensation awards
(105
)
 
(369
)
 
(319
)
 
(475
)
Numerator for diluted EPS
$
23,642

 
$
86,251

 
$
(24,270
)
 
$
112,035

Denominator:
 

 
 

 
 
 
 
Weighted average common shares - basic
94,433

 
94,153

 
94,312

 
93,830

Dilutive convertible preferred shares
—

 
434

 
—

 
—

Common units in the OP
—

 
—

 
—

 
3,697

Dilutive effect of share-based compensation awards
81

 
21

 
—

 
82

Weighted average common shares - diluted
94,514

 
94,608

 
94,312

 
97,609

Diluted EPS
$
0.25

 
$
0.91

 
$
(0.26
)
 
$
1.15


vi


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

 
For the Three Months Ended September 30,
 
For the Nine Months Ended September 30,
 
2016
 
2015
 
2016
 
2015
Net income (loss)
$
29,272

 
$
94,294

 
$
(10,948
)
 
$
126,261

Real estate-related depreciation and amortization
32,015

 
38,403

 
99,790

 
103,788

Impairment losses on previously depreciated operating properties
25,857

 
2,307

 
81,828

 
3,779

Gain on sales of previously depreciated operating properties
(34,101
)
 
(15
)
 
(34,101
)
 
(15
)
Depreciation and amortization on unconsolidated real estate entities
207

 
—

 
207

 
—

Funds from operations (“FFO”)
53,250

 
134,989

 
136,776

 
233,813

Noncontrolling interests - preferred units in the OP
(165
)
 
(165
)
 
(495
)
 
(495
)
FFO allocable to other noncontrolling interests
(894
)
 
(1,027
)
 
(2,935
)
 
(2,769
)
Preferred share dividends
(3,552
)
 
(3,552
)
 
(10,657
)
 
(10,657
)
Basic and diluted FFO allocable to share-based compensation awards
(190
)
 
(541
)
 
(486
)
 
(926
)
Basic FFO available to common share and common unit holders (“Basic FFO”)
48,449

 
129,704

 
122,203

 
218,966

Dividends on dilutive convertible preferred shares
—

 
372

 
—

 
—

Distributions on dilutive preferred units in the OP
—

 
165

 
—

 
—

Diluted FFO available to common share and common unit holders (“Diluted FFO”)
48,449

 
130,241

 
122,203

 
218,966

Operating property acquisition costs
—

 
2,695

 
—

 
4,102

Gain on sales of non-operating properties
—

 
—

 
—

 
(3,985
)
Impairment losses on other properties
1,842

 
—

 
18,009

 
—

(Gain) loss on interest rate derivatives
(1,523
)
 
—

 
347

 
—

Loss (gain) on early extinguishment of debt
59

 
(85,745
)
 
37

 
(86,057
)
Add: Negative FFO of properties conveyed to extinguish debt in default (1)
—

 
2,766

 
—

 
10,456

Demolition costs on redevelopment properties
—

 
930

 
578

 
1,171

Executive transition costs
1,639

 
—

 
6,023

 
—

Diluted FFO comparability adjustments allocable to share-based compensation awards
(5
)
 
334

 
(99
)
 
313

Dividends and distributions on antidilutive preferred securities (2)
—

 
(537
)
 
—

 
—

Diluted FFO available to common share and common unit holders, as adjusted for comparability
50,461

 
50,684

 
147,098

 
144,966

Straight line rent adjustments
691

 
(5,625
)
 
206

 
(10,820
)
Straight line rent adjustments - properties in default conveyed
—

 
(19
)
 
—

 
(115
)
Amortization of intangibles included in net operating income
349

 
474

 
1,025

 
1,063

Share-based compensation, net of amounts capitalized
1,258

 
1,739

 
4,375

 
4,949

Amortization of deferred financing costs
1,126

 
1,203

 
3,480

 
3,339

Amortization of net debt discounts, net of amounts capitalized
332

 
321

 
976

 
849

Replacement capital expenditures
(16,120
)
 
(12,126
)
 
(39,386
)
 
(29,180
)
Diluted AFFO adjustments allocable to other noncontrolling interests
42

 
(81
)
 
137

 
55

Diluted AFFO adjustments on unconsolidated real estate JV
(141
)
 
—

 
(141
)
 
—

Diluted adjusted funds from operations available to common share and common unit holders (“Diluted AFFO”)
$
37,998

 
$
36,570

 
$
117,770

 
$
115,106

Diluted FFO per share
$
0.49

 
$
1.32

 
$
1.25

 
$
2.24

Diluted FFO per share, as adjusted for comparability
$
0.51

 
$
0.52

 
$
1.50

 
$
1.49

Dividends/distributions per common share/unit
$
0.275

 
$
0.275

 
$
0.825

 
$
0.825


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

vii


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

 
 
September 30,
2016
 
December 31,
2015
Balance Sheet Data
 
 

 
 

Properties, net of accumulated depreciation
 
$
3,028,338

 
$
3,349,748

Total assets
 
3,634,194

 
3,909,312

Debt, per balance sheet
 
1,873,836

 
2,077,752

Total liabilities
 
2,110,559

 
2,273,530

Redeemable noncontrolling interest
 
22,848

 
19,218

Equity
 
1,500,787

 
1,616,564

Net debt to adjusted book
 
41.2
%
 
42.6
%
 
 
 
 
 
Core Portfolio Data (as of period end) (1)
 
 

 
 

Number of operating properties
 
146

 
157

Total net rentable square feet owned (in thousands)
 
15,938

 
17,038

Occupancy %
 
93.0
%
 
92.7
%
Leased %
 
94.4
%
 
93.9
%
 
 
 
 
 
 
For the Three Months Ended September 30,
 
For the Nine Months Ended September 30,
2016
 
2015
 
2016
 
2015
Payout ratios
 

 
 

 
 

 
 

Diluted FFO
55.8
%
 
21.2
%
 
66.4
%
 
37.0
%
Diluted FFO, as adjusted for comparability
53.6
%
 
53.3
%
 
55.2
%
 
55.9
%
Diluted AFFO
71.2
%
 
73.9
%
 
68.9
%
 
70.4
%
Adjusted EBITDA fixed charge coverage ratio
3.1
x
 
2.9
x
 
2.9
x
 
3.0
x
Net debt to in-place adjusted EBITDA ratio (2)
6.3
x
 
6.6
x
 
N/A

 
N/A

 
 
 
 
 
 
 
 
Reconciliation of denominators for per share measures
 
 

 
 
 
 
Denominator for diluted EPS
94,514

 
94,608

 
94,312

 
97,609

Weighted average common units
3,591

 
3,679

 
3,648

 
—

Dilutive noncontrolling interests - preferred units in the OP
—

 
176

 
—

 
—

Anti-dilutive EPS effect of share-based compensation awards
—

 
—

 
98

 
—

Denominator for diluted FFO per share
98,105

 
98,463

 
98,058

 
97,609

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

 
(610
)
 
—

 
—

Denominator for diluted FFO per share, as adj. for comparability
98,105

 
97,853

 
98,058

 
97,609

 
 
 
 
 
 
 
 

(1)
Represents Defense/IT Locations and Regional Office properties excluding properties held for sale, and includes six properties owned through an unconsolidated joint venture totaling 962,000 square feet that were 100% occupied and leased.
(2)
Represents net debt as of period end divided by in-place adjusted EBITDA for the period, as annualized (i.e. three month periods are multiplied by four).

viii


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

 
For the Three Months Ended September 30,
 
For the Nine Months Ended September 30,
 
2016
 
2015
 
2016
 
2015
Reconciliation of common share dividends to dividends and distributions for payout ratios
 

 
 

 
 
 
 
Common share dividends
$
26,068

 
$
26,000

 
$
78,139

 
$
78,000

Common unit distributions
988

 
1,011

 
3,003

 
3,035

Dividends and distributions on dilutive preferred securities
—

 
537

 
—

 
—

Dividends and distributions for diluted FFO payout ratio
27,056

 
27,548

 
81,142

 
81,035

Dividends and distributions on antidilutive preferred securities (1)
—

 
(537
)
 
—

 
—

Dividends and distributions for other payout ratios
$
27,056

 
$
27,011

 
$
81,142

 
$
81,035

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

 
 

 
 

 
 

Net income (loss)
$
29,272

 
$
94,294

 
$
(10,948
)
 
$
126,261

Interest expense on continuing operations
18,301

 
24,121

 
64,499

 
66,727

Income tax (benefit) expense
(21
)
 
48

 
(28
)
 
153

Real estate-related depreciation and amortization
32,015

 
38,403

 
99,790

 
103,788

Depreciation of furniture, fixtures and equipment
513

 
590

 
1,639

 
1,609

Impairment losses
27,699

 
2,307

 
99,837

 
3,779

Loss (gain) on early extinguishment of debt on continuing and discontinued operations
59

 
(85,745
)
 
37

 
(86,057
)
Gain on sales of operating properties
(34,101
)
 
(15
)
 
(34,101
)
 
(15
)
Gain on sales of non-operational properties
—

 
—

 
—

 
(3,985
)
Net loss (gain) on investments in unconsolidated entities included in interest and other income
27

 
98

 
(32
)
 
121

Business development expenses
1,016

 
1,221

 
3,656

 
3,263

Operating property acquisition costs
—

 
2,695

 
—

 
4,102

EBITDA from properties conveyed to extinguish debt in default
—

 
(15
)
 
—

 
(768
)
Demolition costs on redevelopment properties
—

 
930

 
578

 
1,171

Adjustments from unconsolidated real estate JV
415

 
—

 
415

 
—

Executive transition costs
1,639

 
—

 
6,023

 
—

Adjusted EBITDA
$
76,834

 
$
78,932

 
$
231,365

 
$
220,149

Proforma net operating income adjustment for property changes within period
(2,469
)
 
1,309

 
 
 
 
In-place adjusted EBITDA
$
74,365

 
$
80,241

 

 

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

 
 

 
 

 
 

Interest expense
$
18,301

 
$
24,121

 
$
64,499

 
$
66,727

Less: Amortization of deferred financing costs
(1,126
)
 
(1,203
)
 
(3,480
)
 
(3,339
)
Less: Amortization of net debt discount, net of amounts capitalized
(332
)
 
(321
)
 
(976
)
 
(849
)
Less: Gain (loss) on interest rate derivatives
1,523

 
—

 
(347
)
 
—

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

 
(2,781
)
 
—

 
(11,224
)
COPT’s share of interest expense of unconsolidated real estate JV, excluding deferred financing costs
204

 
—

 
204

 
—

Scheduled principal amortization
922

 
1,692

 
4,454

 
5,011

Capitalized interest
1,242

 
1,559

 
4,304

 
5,641

Preferred share dividends
3,552

 
3,552

 
10,657

 
10,657

Preferred unit distributions
165

 
165

 
495

 
495

Denominator for fixed charge coverage-Adjusted EBITDA
$
24,451

 
$
26,784

 
$
79,810

 
$
73,119

 
 
 
 
 
 
 
 

ix


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

 
For the Three Months Ended September 30,
 
For the Nine Months Ended September 30,
 
2016
 
2015
 
2016
 
2015
Reconciliations of tenant improvements and incentives, capital improvements and leasing costs for operating properties to replacement capital expenditures
 
 
 
 
 
 
 
Tenant improvements and incentives
$
21,470

 
$
6,374

 
$
37,020

 
$
17,408

Building improvements
5,707

 
4,223

 
14,962

 
11,969

Leasing costs
5,182

 
2,547

 
7,978

 
4,986

Less: Excluded tenant improvements and incentives
(12,706
)
 
205

 
(14,944
)
 
(1,045
)
Less: Excluded building improvements
(3,533
)
 
(1,155
)
 
(5,211
)
 
(3,328
)
Less: Excluded leasing costs
—

 
(68
)
 
(419
)
 
(810
)
Replacement capital expenditures
$
16,120

 
$
12,126

 
$
39,386

 
$
29,180

 
 
 
 
 
 
 
 
Same office property cash NOI
$
60,952

 
$
60,297

 
$
182,098

 
$
174,942

Straight line rent adjustments
(2,230
)
 
965

 
(7,163
)
 
3,175

Add: Amortization of deferred market rental revenue
22

 
16

 
90

 
71

Less: Amortization of below-market cost arrangements
(218
)
 
(264
)
 
(655
)
 
(775
)
Add: Lease termination fee, gross
390

 
185

 
1,679

 
1,950

Add: Cash NOI on tenant-funded landlord assets
2,379

 
390

 
5,790

 
390

Same office property NOI
$
61,295

 
$
61,589

 
$
181,839

 
$
179,753

 
 
 
 
 
 
 
 
 
 
September 30,
2016
 
December 31,
2015
Reconciliation of total assets to adjusted book
 
 

 
 

Total assets
 
$
3,634,194

 
$
3,909,312

Accumulated depreciation
 
681,476

 
700,363

Accumulated depreciation included in assets held for sale
 
22,938

 
18,317

Accumulated amortization of real estate intangibles and deferred leasing costs
 
201,414

 
195,506

Accumulated amortization of real estate intangibles and deferred leasing costs included in assets held for sale
 
21,469

 
17,456

COPT’s share of liabilities of unconsolidated real estate JV
 
30,013

 
—

COPT’s share of accumulated depreciation and amortization of unconsolidated real estate JV
 
375

 
—

Less: Cash and cash equivalents
 
(47,574
)
 
(60,310
)
COPT’s share of cash of unconsolidated real estate JV
 
(444
)
 
—

Adjusted book
 
$
4,543,861

 
$
4,780,644

 
 
 
 
 
Reconciliation of debt outstanding to net debt
 
 
 
 
Debt outstanding (excluding net debt discounts and deferred financing costs)
 
$
1,921,219

 
$
2,097,230

Less: Cash and cash equivalents
 
(47,574
)
 
(60,310
)
COPT’s share of cash of unconsolidated real estate JV
 
(444
)
 
—

Net debt
 
$
1,873,201

 
$
2,036,920


x