ý | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended | September 30, 2016 |
o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from | to |
Corporate Office Properties Trust | Maryland | 23-2947217 | ||
(State or other jurisdiction of | (IRS Employer | |||
incorporation or organization) | Identification No.) | |||
Corporate Office Properties, L.P. | Delaware | 23-2930022 | ||
(State or other jurisdiction of | (IRS Employer | |||
incorporation or organization) | Identification No.) |
6711 Columbia Gateway Drive, Suite 300, Columbia, MD | 21046 | |
(Address of principal executive offices) | (Zip Code) |
Large accelerated filer ý | Accelerated filer o | Non-accelerated filer o | Smaller reporting company o | |||
(Do not check if a smaller reporting company) |
Large accelerated filer o | Accelerated filer o | Non-accelerated filer ý | Smaller reporting company o | |||
(Do not check if a smaller reporting company) |
• | combined reports better reflect how management and the analyst community view the business as a single operating unit; |
• | combined reports enhance investors’ understanding of the Company and the Operating Partnership by enabling them to view the business as a whole and in the same manner as management; |
• | combined reports are more efficient for the Company and the Operating Partnership and result in savings in time, effort and expense; and |
• | combined reports are more efficient for investors by reducing duplicative disclosure and providing a single document for their review. |
• | consolidated financial statements; |
• | the following notes to the consolidated financial statements: |
• | Note 3, Fair Value Measurements of COPT and subsidiaries and COPLP and subsidiaries; and |
• | Note 14, Earnings per Share of COPT and subsidiaries and Earnings per Unit of COPLP and subsidiaries; |
• | “Item 2: Management’s Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources of COPT”; and |
• | “Item 2: Management’s Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources of COPLP.” |
PAGE | ||
September 30, 2016 | December 31, 2015 | ||||||
Assets | |||||||
Properties, net: | |||||||
Operating properties, net | $ | 2,632,069 | $ | 2,920,529 | |||
Projects in development or held for future development | 396,269 | 429,219 | |||||
Total properties, net | 3,028,338 | 3,349,748 | |||||
Assets held for sale, net | 161,454 | 96,782 | |||||
Cash and cash equivalents | 47,574 | 60,310 | |||||
Restricted cash and marketable securities | 7,583 | 7,716 | |||||
Investment in unconsolidated real estate joint venture | 25,721 | — | |||||
Accounts receivable (net of allowance for doubtful accounts of $612 and $1,525, respectively) | 25,790 | 29,167 | |||||
Deferred rent receivable (net of allowance of $330 and $1,962, respectively) | 87,526 | 105,484 | |||||
Intangible assets on real estate acquisitions, net | 84,081 | 98,338 | |||||
Deferred leasing costs (net of accumulated amortization of $62,767 and $66,364, respectively) | 41,470 | 53,868 | |||||
Investing receivables | 51,119 | 47,875 | |||||
Prepaid expenses and other assets, net | 73,538 | 60,024 | |||||
Total assets | $ | 3,634,194 | $ | 3,909,312 | |||
Liabilities and equity | |||||||
Liabilities: | |||||||
Debt, net | $ | 1,873,836 | $ | 2,077,752 | |||
Accounts payable and accrued expenses | 112,306 | 91,755 | |||||
Rents received in advance and security deposits | 28,740 | 37,148 | |||||
Dividends and distributions payable | 30,225 | 30,178 | |||||
Deferred revenue associated with operating leases | 9,898 | 19,758 | |||||
Interest rate derivatives | 17,272 | 3,160 | |||||
Other liabilities | 38,282 | 13,779 | |||||
Total liabilities | 2,110,559 | 2,273,530 | |||||
Commitments and contingencies (Note 15) | |||||||
Redeemable noncontrolling interests | 22,848 | 19,218 | |||||
Equity: | |||||||
Corporate Office Properties Trust’s shareholders’ equity: | |||||||
Preferred Shares of beneficial interest at liquidation preference ($0.01 par value; 25,000,000 shares authorized, shares issued and outstanding of 7,431,667 at September 30, 2016 and December 31, 2015) | 199,083 | 199,083 | |||||
Common Shares of beneficial interest ($0.01 par value; 125,000,000 shares authorized, shares issued and outstanding of 94,764,786 at September 30, 2016 and 94,531,512 at December 31, 2015) | 948 | 945 | |||||
Additional paid-in capital | 2,008,787 | 2,004,507 | |||||
Cumulative distributions in excess of net income | (759,262 | ) | (657,172 | ) | |||
Accumulated other comprehensive loss | (16,314 | ) | (2,838 | ) | |||
Total Corporate Office Properties Trust’s shareholders’ equity | 1,433,242 | 1,544,525 | |||||
Noncontrolling interests in subsidiaries: | |||||||
Common units in COPLP | 46,757 | 52,359 | |||||
Preferred units in COPLP | 8,800 | 8,800 | |||||
Other consolidated entities | 11,988 | 10,880 | |||||
Noncontrolling interests in subsidiaries | 67,545 | 72,039 | |||||
Total equity | 1,500,787 | 1,616,564 | |||||
Total liabilities, redeemable noncontrolling interest and equity | $ | 3,634,194 | $ | 3,909,312 |
For the Three Months Ended September 30, | For the Nine Months Ended September 30, | ||||||||||||||
2016 | 2015 | 2016 | 2015 | ||||||||||||
Revenues | |||||||||||||||
Rental revenue | $ | 103,956 | $ | 109,080 | $ | 316,862 | $ | 312,826 | |||||||
Tenant recoveries and other real estate operations revenue | 26,998 | 24,606 | 81,103 | 71,761 | |||||||||||
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, administrative and leasing expenses | 8,855 | 7,439 | 28,764 | 22,864 | |||||||||||
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 COPLP | (901 | ) | (3,357 | ) | 948 | (4,231 | ) | ||||||||
Preferred units in COPLP | (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 | ||||||
Net income (loss) attributable to COPT: | |||||||||||||||
Income (loss) from continuing operations | $ | 27,299 | $ | 89,800 | $ | (13,294 | ) | $ | 118,783 | ||||||
Discontinued operations, net | — | — | — | 153 | |||||||||||
Net income (loss) attributable to COPT | $ | 27,299 | $ | 89,800 | $ | (13,294 | ) | $ | 118,936 | ||||||
Basic earnings per common share (1) | |||||||||||||||
Income (loss) from continuing operations | $ | 0.25 | $ | 0.91 | $ | (0.26 | ) | $ | 1.15 | ||||||
Discontinued operations | 0.00 | 0.00 | 0.00 | 0.00 | |||||||||||
Net income (loss) attributable to COPT common shareholders | $ | 0.25 | $ | 0.91 | $ | (0.26 | ) | $ | 1.15 | ||||||
Diluted earnings per common share (1) | |||||||||||||||
Income (loss) from continuing operations | $ | 0.25 | $ | 0.91 | $ | (0.26 | ) | $ | 1.15 | ||||||
Discontinued operations | 0.00 | 0.00 | 0.00 | 0.00 | |||||||||||
Net income (loss) attributable to COPT common shareholders | $ | 0.25 | $ | 0.91 | $ | (0.26 | ) | $ | 1.15 | ||||||
Dividends declared per common share | $ | 0.275 | $ | 0.275 | $ | 0.825 | $ | 0.825 |
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 | ||||||
Other comprehensive income (loss) | |||||||||||||||
Unrealized gain (loss) on interest rate derivatives | 407 | (3,638 | ) | (16,581 | ) | (6,720 | ) | ||||||||
Losses on interest rate derivatives included in interest expense | 1,043 | 915 | 2,763 | 2,457 | |||||||||||
Equity in other comprehensive loss of equity method investee | — | — | (184 | ) | (264 | ) | |||||||||
Other comprehensive income (loss) | 1,450 | (2,723 | ) | (14,002 | ) | (4,527 | ) | ||||||||
Comprehensive income (loss) | 30,722 | 91,571 | (24,950 | ) | 121,734 | ||||||||||
Comprehensive income attributable to noncontrolling interests | (2,025 | ) | (4,453 | ) | (1,820 | ) | (7,324 | ) | |||||||
Comprehensive income (loss) attributable to COPT | $ | 28,697 | $ | 87,118 | $ | (26,770 | ) | $ | 114,410 |
Preferred Shares | Common Shares | Additional Paid-in Capital | Cumulative Distributions in Excess of Net Income | Accumulated Other Comprehensive Loss | Noncontrolling Interests | Total | |||||||||||||||||||||
Balance at December 31, 2014 (93,255,284 common shares outstanding) | $ | 199,083 | $ | 933 | $ | 1,969,968 | $ | (717,264 | ) | $ | (1,297 | ) | $ | 69,461 | $ | 1,520,884 | |||||||||||
Conversion of common units to common shares (160,160 shares) | — | 2 | 2,149 | — | — | (2,151 | ) | — | |||||||||||||||||||
Common shares issued under at-the-market program (890,241 shares) | — | 9 | 26,526 | — | — | — | 26,535 | ||||||||||||||||||||
Exercise of share options (76,474 shares) | — | — | 2,008 | — | — | — | 2,008 | ||||||||||||||||||||
Share-based compensation (151,511 shares issued, net of redemptions) | — | 1 | 5,599 | — | — | — | 5,600 | ||||||||||||||||||||
Redemption of vested equity awards | — | — | (2,330 | ) | — | — | — | (2,330 | ) | ||||||||||||||||||
Adjustments to noncontrolling interests resulting from changes in ownership of COPLP | — | — | (591 | ) | — | — | 591 | — | |||||||||||||||||||
Comprehensive income | — | — | — | 118,936 | (4,526 | ) | 5,634 | 120,044 | |||||||||||||||||||
Dividends | — | — | — | (88,658 | ) | — | — | (88,658 | ) | ||||||||||||||||||
Distributions to owners of common and preferred units in COPLP | — | — | — | — | — | (3,530 | ) | (3,530 | ) | ||||||||||||||||||
Distributions to noncontrolling interests in other consolidated entities | — | — | — | — | — | (47 | ) | (47 | ) | ||||||||||||||||||
Adjustment to arrive at fair value of redeemable noncontrolling interest | — | — | (599 | ) | — | — | — | (599 | ) | ||||||||||||||||||
Balance at September 30, 2015 (94,533,670 common shares outstanding) | $ | 199,083 | $ | 945 | $ | 2,002,730 | $ | (686,986 | ) | $ | (5,823 | ) | $ | 69,958 | $ | 1,579,907 | |||||||||||
Balance at December 31, 2015 (94,531,512 common shares outstanding) | $ | 199,083 | $ | 945 | $ | 2,004,507 | $ | (657,172 | ) | $ | (2,838 | ) | $ | 72,039 | $ | 1,616,564 | |||||||||||
Conversion of common units to common shares (87,000 shares) | — | 1 | 1,166 | — | — | (1,167 | ) | — | |||||||||||||||||||
Costs associated with common shares issued to the public | — | — | (5 | ) | — | — | — | (5 | ) | ||||||||||||||||||
Share-based compensation (146,274 shares issued, net of redemptions) | — | 2 | 6,175 | — | — | — | 6,177 | ||||||||||||||||||||
Redemption of vested equity awards | — | — | (2,179 | ) | — | — | — | (2,179 | ) | ||||||||||||||||||
Adjustments to noncontrolling interests resulting from changes in ownership of COPLP | — | — | (42 | ) | — | — | 42 | — | |||||||||||||||||||
Comprehensive loss | — | — | — | (13,294 | ) | (13,476 | ) | 141 | (26,629 | ) | |||||||||||||||||
Dividends | — | — | — | (88,796 | ) | — | — | (88,796 | ) | ||||||||||||||||||
Distributions to owners of common and preferred units in COPLP | — | — | — | — | — | (3,498 | ) | (3,498 | ) | ||||||||||||||||||
Distributions to noncontrolling interests in other consolidated entities | — | — | — | — | — | (12 | ) | (12 | ) | ||||||||||||||||||
Adjustment to arrive at fair value of redeemable noncontrolling interest | — | — | (516 | ) | — | — | — | (516 | ) | ||||||||||||||||||
Tax loss from share-based compensation | — | — | (319 | ) | — | — | — | (319 | ) | ||||||||||||||||||
Balance at September 30, 2016 (94,764,786 common shares outstanding) | $ | 199,083 | $ | 948 | $ | 2,008,787 | $ | (759,262 | ) | $ | (16,314 | ) | $ | 67,545 | $ | 1,500,787 |
For the Nine Months Ended September 30, | |||||||
2016 | 2015 | ||||||
Cash flows from operating activities | |||||||
Revenues from real estate operations received | $ | 391,511 | $ | 373,607 | |||
Construction contract and other service revenues received | 54,399 | 104,817 | |||||
Property operating expenses paid | (154,203 | ) | (146,274 | ) | |||
Construction contract and other service expenses paid | (33,169 | ) | (112,614 | ) | |||
General, administrative, leasing, business development and land carry costs paid | (27,879 | ) | (29,620 | ) | |||
Interest expense paid | (61,662 | ) | (46,278 | ) | |||
Interest and other income received | 472 | 4,130 | |||||
Other | 504 | (26 | ) | ||||
Net cash provided by operating activities | 169,973 | 147,742 | |||||
Cash flows from investing activities | |||||||
Construction, development and redevelopment | (121,297 | ) | (174,434 | ) | |||
Acquisitions of operating properties and related intangible assets | — | (202,866 | ) | ||||
Tenant improvements on operating properties | (26,055 | ) | (18,129 | ) | |||
Other capital improvements on operating properties | (22,063 | ) | (12,610 | ) | |||
Proceeds from dispositions of properties | 210,661 | 45,066 | |||||
Proceeds from partial sale of properties, net of related debt | 43,686 | — | |||||
Investing receivables payments received | — | 5,114 | |||||
Leasing costs paid | (6,024 | ) | (8,603 | ) | |||
Other | (991 | ) | (4,827 | ) | |||
Net cash provided by (used in) investing activities | 77,917 | (371,289 | ) | ||||
Cash flows from financing activities | |||||||
Proceeds from debt | |||||||
Revolving Credit Facility | 362,500 | 422,000 | |||||
Unsecured senior notes | — | 296,580 | |||||
Other debt proceeds | 105,000 | 50,000 | |||||
Repayments of debt | |||||||
Revolving Credit Facility | (406,000 | ) | (418,000 | ) | |||
Scheduled principal amortization | (4,454 | ) | (5,011 | ) | |||
Other debt repayments | (203,056 | ) | (50,681 | ) | |||
Deferred financing costs paid | (825 | ) | (5,377 | ) | |||
Net proceeds from issuance of common shares | (46 | ) | 28,567 | ||||
Common share dividends paid | (78,072 | ) | (77,641 | ) | |||
Preferred share dividends paid | (10,657 | ) | (10,657 | ) | |||
Distributions paid to noncontrolling interests in COPLP | (3,476 | ) | (3,581 | ) | |||
Distributions paid to redeemable noncontrolling interests | (14,329 | ) | — | ||||
Redemption of vested equity awards | (2,179 | ) | (2,330 | ) | |||
Other | (5,032 | ) | (2,559 | ) | |||
Net cash (used in) provided by financing activities | (260,626 | ) | 221,310 | ||||
Net decrease in cash and cash equivalents | (12,736 | ) | (2,237 | ) | |||
Cash and cash equivalents | |||||||
Beginning of period | 60,310 | 6,077 | |||||
End of period | $ | 47,574 | $ | 3,840 |
For the Nine Months Ended September 30, | |||||||
2016 | 2015 | ||||||
Reconciliation of net (loss) income to net cash provided by operating activities: | |||||||
Net (loss) income | $ | (10,948 | ) | $ | 126,261 | ||
Adjustments to reconcile net (loss) income to net cash provided by operating activities: | |||||||
Depreciation and other amortization | 101,429 | 105,397 | |||||
Impairment losses | 99,797 | 3,779 | |||||
Losses on interest rate derivatives | 347 | — | |||||
Amortization of deferred financing costs and net debt discounts | 4,456 | 4,144 | |||||
Increase in deferred rent receivable | (930 | ) | (11,939 | ) | |||
Gain on sales of real estate | (34,101 | ) | (4,000 | ) | |||
Share-based compensation | 5,637 | 4,949 | |||||
Loss (gain) on early extinguishment of debt | 34 | (86,075 | ) | ||||
Other | (2,761 | ) | 1,922 | ||||
Operating changes in assets and liabilities: | |||||||
Decrease in accounts receivable | 3,658 | 6,526 | |||||
Decrease (increase) in restricted cash and marketable securities | 18 | (1,102 | ) | ||||
Increase in prepaid expenses and other assets, net | (19,778 | ) | (5,228 | ) | |||
Increase (decrease) in accounts payable, accrued expenses and other liabilities | 31,523 | (655 | ) | ||||
(Decrease) increase in rents received in advance and security deposits | (8,408 | ) | 3,763 | ||||
Net cash provided by operating activities | $ | 169,973 | $ | 147,742 | |||
Supplemental schedule of non-cash investing and financing activities: | |||||||
Increase (decrease) in accrued capital improvements, leasing and other investing activity costs | $ | 9,963 | $ | (11,722 | ) | ||
Increase in property and redeemable noncontrolling interests in connection with property contributed in a joint venture | $ | 22,600 | $ | — | |||
Decrease in redeemable noncontrolling interests and increase in other liabilities in connection with distribution payable to redeemable noncontrolling interest | $ | 6,683 | $ | — | |||
Non-cash changes from partial sale of properties, net of debt: | |||||||
Decrease in properties, net | $ | (114,597 | ) | $ | — | ||
Increase in investment in unconsolidated real estate joint venture | $ | 25,680 | $ | — | |||
Decrease in debt | $ | 59,534 | $ | — | |||
Other net decreases in assets and liabilities | $ | 3,619 | $ | — | |||
Debt assumed on acquisition of operating property | $ | — | $ | 55,490 | |||
Other liabilities assumed on acquisition of operating properties | $ | — | $ | 5,265 | |||
Decrease in property in connection with surrender of property in settlement of debt | $ | — | $ | (82,738 | ) | ||
Decrease in debt in connection with surrender of property in settlement of debt | $ | — | $ | (150,000 | ) | ||
Decrease in fair value of derivatives applied to accumulated other comprehensive loss and noncontrolling interests | $ | (13,817 | ) | $ | (4,263 | ) | |
Equity in other comprehensive loss of an equity method investee | $ | (184 | ) | $ | (264 | ) | |
Dividends/distribution payable | $ | 30,225 | $ | 30,182 | |||
Decrease in noncontrolling interests and increase in shareholders’ equity in connection with the conversion of common units into common shares | $ | 1,167 | $ | 2,151 | |||
Adjustments to noncontrolling interests resulting from changes in COPLP ownership | $ | 42 | $ | 591 | |||
Increase in redeemable noncontrolling interest and decrease in equity to carry redeemable noncontrolling interest at fair value | $ | 516 | $ | 599 |
September 30, 2016 | December 31, 2015 | ||||||
Assets | |||||||
Properties, net: | |||||||
Operating properties, net | $ | 2,632,069 | $ | 2,920,529 | |||
Projects in development or held for future development | 396,269 | 429,219 | |||||
Total properties, net | 3,028,338 | 3,349,748 | |||||
Assets held for sale, net | 161,454 | 96,782 | |||||
Cash and cash equivalents | 47,574 | 60,310 | |||||
Restricted cash and marketable securities | 2,333 | 1,953 | |||||
Investment in unconsolidated real estate joint venture | 25,721 | — | |||||
Accounts receivable (net of allowance for doubtful accounts of $612 and $1,525, respectively) | 25,790 | 29,167 | |||||
Deferred rent receivable (net of allowance of $330 and $1,962, respectively) | 87,526 | 105,484 | |||||
Intangible assets on real estate acquisitions, net | 84,081 | 98,338 | |||||
Deferred leasing costs (net of accumulated amortization of $62,767 and $66,364, respectively) | 41,470 | 53,868 | |||||
Investing receivables | 51,119 | 47,875 | |||||
Prepaid expenses and other assets, net | 73,538 | 60,024 | |||||
Total assets | $ | 3,628,944 | $ | 3,903,549 | |||
Liabilities and equity | |||||||
Liabilities: | |||||||
Debt, net | $ | 1,873,836 | $ | 2,077,752 | |||
Accounts payable and accrued expenses | 112,306 | 91,755 | |||||
Rents received in advance and security deposits | 28,740 | 37,148 | |||||
Distributions payable | 30,225 | 30,178 | |||||
Deferred revenue associated with operating leases | 9,898 | 19,758 | |||||
Interest rate derivatives | 17,272 | 3,160 | |||||
Other liabilities | 33,032 | 8,016 | |||||
Total liabilities | 2,105,309 | 2,267,767 | |||||
Commitments and contingencies (Note 15) | |||||||
Redeemable noncontrolling interests | 22,848 | 19,218 | |||||
Equity: | |||||||
Corporate Office Properties, L.P.’s equity: | |||||||
Preferred units | |||||||
General partner, preferred units outstanding of 7,431,667 at September 30, 2016 and December 31, 2015 | 199,083 | 199,083 | |||||
Limited partner, 352,000 preferred units outstanding at September 30, 2016 and December 31, 2015 | 8,800 | 8,800 | |||||
Common units, 94,764,786 and 94,531,512 held by the general partner and 3,590,391 and 3,677,391 held by limited partners at September 30, 2016 and December 31, 2015, respectively | 1,297,858 | 1,400,745 | |||||
Accumulated other comprehensive loss | (16,987 | ) | (2,985 | ) | |||
Total Corporate Office Properties, L.P.’s equity | 1,488,754 | 1,605,643 | |||||
Noncontrolling interests in subsidiaries | 12,033 | 10,921 | |||||
Total equity | 1,500,787 | 1,616,564 | |||||
Total liabilities, redeemable noncontrolling interest and equity | $ | 3,628,944 | $ | 3,903,549 |
For the Three Months Ended September 30, | For the Nine Months Ended September 30, | ||||||||||||||
2016 | 2015 | 2016 | 2015 | ||||||||||||
Revenues | |||||||||||||||
Rental revenue | $ | 103,956 | $ | 109,080 | $ | 316,862 | $ | 312,826 | |||||||
Tenant recoveries and other real estate operations revenue | 26,998 | 24,606 | 81,103 | 71,761 | |||||||||||
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, administrative and leasing expenses | 8,855 | 7,439 | 28,764 | 22,864 | |||||||||||
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 | 29,272 | 94,294 | (10,948 | ) | 126,261 | ||||||||||
Net income attributable to noncontrolling interests in consolidated entities | (913 | ) | (972 | ) | (2,803 | ) | (2,602 | ) | |||||||
Net income (loss) attributable to COPLP | 28,359 | 93,322 | (13,751 | ) | 123,659 | ||||||||||
Preferred unit distributions | (3,717 | ) | (3,717 | ) | (11,152 | ) | (11,152 | ) | |||||||
Net income (loss) attributable to COPLP common unitholders | $ | 24,642 | $ | 89,605 | $ | (24,903 | ) | $ | 112,507 | ||||||
Net income (loss) attributable to COPLP: | |||||||||||||||
Income (loss) from continuing operations | $ | 28,359 | $ | 93,322 | $ | (13,751 | ) | $ | 123,500 | ||||||
Discontinued operations, net | — | — | — | 159 | |||||||||||
Net income (loss) attributable to COPLP | $ | 28,359 | $ | 93,322 | $ | (13,751 | ) | $ | 123,659 | ||||||
Basic earnings per common unit (1) | |||||||||||||||
Income (loss) from continuing operations | $ | 0.25 | $ | 0.91 | $ | (0.26 | ) | $ | 1.15 | ||||||
Discontinued operations | 0.00 | 0.00 | 0.00 | 0.00 | |||||||||||
Net income (loss) attributable to COPLP common unitholders | $ | 0.25 | $ | 0.91 | $ | (0.26 | ) | $ | 1.15 | ||||||
Diluted earnings per common unit (1) | |||||||||||||||
Income (loss) from continuing operations | $ | 0.25 | $ | 0.91 | $ | (0.26 | ) | $ | 1.15 | ||||||
Discontinued operations | 0.00 | 0.00 | 0.00 | 0.00 | |||||||||||
Net income (loss) attributable to COPLP common unitholders | $ | 0.25 | $ | 0.91 | $ | (0.26 | ) | $ | 1.15 | ||||||
Distributions declared per common unit | $ | 0.275 | $ | 0.275 | $ | 0.825 | $ | 0.825 |
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 | ||||||
Other comprehensive income (loss) | |||||||||||||||
Unrealized gain (loss) on interest rate derivatives | 407 | (3,638 | ) | (16,581 | ) | (6,720 | ) | ||||||||
Losses on interest rate derivatives included in interest expense | 1,043 | 915 | 2,763 | 2,457 | |||||||||||
Equity in other comprehensive loss of equity method investee | — | — | (184 | ) | (264 | ) | |||||||||
Other comprehensive income (loss) | 1,450 | (2,723 | ) | (14,002 | ) | (4,527 | ) | ||||||||
Comprehensive income (loss) | 30,722 | 91,571 | (24,950 | ) | 121,734 | ||||||||||
Comprehensive income attributable to noncontrolling interests | (913 | ) | (1,035 | ) | (2,803 | ) | (2,780 | ) | |||||||
Comprehensive income (loss) attributable to COPLP | $ | 29,809 | $ | 90,536 | $ | (27,753 | ) | $ | 118,954 |
Limited Partner Preferred Units | General Partner Preferred Units | Common Units | Accumulated Other Comprehensive Income (Loss) | Noncontrolling Interests in Subsidiaries | ||||||||||||||||||||||||||||
Units | Amount | Units | Amount | Units | Amount | Total Equity | ||||||||||||||||||||||||||
Balance at December 31, 2014 | 352,000 | $ | 8,800 | 7,431,667 | $ | 199,083 | 97,092,835 | $ | 1,305,219 | $ | (1,381 | ) | $ | 9,163 | $ | 1,520,884 | ||||||||||||||||
Issuance of common units resulting from common shares issued under at-the-market program | — | — | — | — | 890,241 | 26,535 | — | — | 26,535 | |||||||||||||||||||||||
Issuance of common units resulting from exercise of share options | — | — | — | — | 76,474 | 2,008 | — | — | 2,008 | |||||||||||||||||||||||
Share-based compensation (units net of redemption) | — | — | — | — | 151,511 | 5,600 | — | — | 5,600 | |||||||||||||||||||||||
Redemptions of vested equity awards | — | — | — | — | — | (2,330 | ) | — | — | (2,330 | ) | |||||||||||||||||||||
Comprehensive income | — | 495 | — | 10,657 | — | 112,507 | (4,705 | ) | 1,090 | 120,044 | ||||||||||||||||||||||
Distributions to owners of common and preferred units | — | (495 | ) | — | (10,657 | ) | — | (81,036 | ) | — | — | (92,188 | ) | |||||||||||||||||||
Distributions to noncontrolling interests in subsidiaries | — | — | — | — | — | — | — | (47 | ) | (47 | ) | |||||||||||||||||||||
Adjustment to arrive at fair value of redeemable noncontrolling interest | — | — | — | — | — | (599 | ) | — | — | (599 | ) | |||||||||||||||||||||
Balance at September 30, 2015 | 352,000 | $ | 8,800 | 7,431,667 | $ | 199,083 | 98,211,061 | $ | 1,367,904 | $ | (6,086 | ) | $ | 10,206 | $ | 1,579,907 | ||||||||||||||||
Balance at December 31, 2015 | 352,000 | $ | 8,800 | 7,431,667 | $ | 199,083 | 98,208,903 | $ | 1,400,745 | $ | (2,985 | ) | $ | 10,921 | $ | 1,616,564 | ||||||||||||||||
Costs associated with common shares issued to the public | — | — | — | — | — | (5 | ) | — | — | (5 | ) | |||||||||||||||||||||
Share-based compensation (units net of redemption) | — | — | — | — | 146,274 | 6,177 | — | — | 6,177 | |||||||||||||||||||||||
Redemptions of vested equity awards | — | — | — | — | — | (2,179 | ) | — | — | (2,179 | ) | |||||||||||||||||||||
Comprehensive loss | — | 495 | — | 10,657 | — | (24,903 | ) | (14,002 | ) | 1,124 | (26,629 | ) | ||||||||||||||||||||
Distributions to owners of common and preferred units | — | (495 | ) | — | (10,657 | ) | — | (81,142 | ) | — | — | (92,294 | ) | |||||||||||||||||||
Distributions to noncontrolling interests in subsidiaries | — | — | — | — | — | — | — | (12 | ) | (12 | ) | |||||||||||||||||||||
Adjustment to arrive at fair value of redeemable noncontrolling interest | — | — | — | — | — | (516 | ) | — | — | (516 | ) | |||||||||||||||||||||
Tax loss from share-based compensation | — | — | — | — | — | (319 | ) | — | — | (319 | ) | |||||||||||||||||||||
Balance at September 30, 2016 | 352,000 | $ | 8,800 | 7,431,667 | $ | 199,083 | 98,355,177 | $ | 1,297,858 | $ | (16,987 | ) | $ | 12,033 | $ | 1,500,787 |
For the Nine Months Ended September 30, | |||||||
2016 | 2015 | ||||||
Cash flows from operating activities | |||||||
Revenues from real estate operations received | $ | 391,511 | $ | 373,607 | |||
Construction contract and other service revenues received | 54,399 | 104,817 | |||||
Property operating expenses paid | (154,203 | ) | (146,274 | ) | |||
Construction contract and other service expenses paid | (33,169 | ) | (112,614 | ) | |||
General, administrative, leasing, business development and land carry costs paid | (27,879 | ) | (29,620 | ) | |||
Interest expense paid | (61,662 | ) | (46,278 | ) | |||
Interest and other income received | 472 | 4,130 | |||||
Other | 504 | (26 | ) | ||||
Net cash provided by operating activities | 169,973 | 147,742 | |||||
Cash flows from investing activities | |||||||
Construction, development and redevelopment | (121,297 | ) | (174,434 | ) | |||
Acquisitions of operating properties and related intangible assets | — | (202,866 | ) | ||||
Tenant improvements on operating properties | (26,055 | ) | (18,129 | ) | |||
Other capital improvements on operating properties | (22,063 | ) | (12,610 | ) | |||
Proceeds from dispositions of properties | 210,661 | 45,066 | |||||
Proceeds from partial sale of properties, net of related debt | 43,686 | — | |||||
Investing receivables payments received | — | 5,114 | |||||
Leasing costs paid | (6,024 | ) | (8,603 | ) | |||
Other | (991 | ) | (4,827 | ) | |||
Net cash provided by (used in) investing activities | 77,917 | (371,289 | ) | ||||
Cash flows from financing activities | |||||||
Proceeds from debt | |||||||
Revolving Credit Facility | 362,500 | 422,000 | |||||
Unsecured senior notes | — | 296,580 | |||||
Other debt proceeds | 105,000 | 50,000 | |||||
Repayments of debt | |||||||
Revolving Credit Facility | (406,000 | ) | (418,000 | ) | |||
Scheduled principal amortization | (4,454 | ) | (5,011 | ) | |||
Other debt repayments | (203,056 | ) | (50,681 | ) | |||
Deferred financing costs paid | (825 | ) | (5,377 | ) | |||
Net proceeds from issuance of common units | (46 | ) | 28,567 | ||||
Common unit distributions paid | (81,053 | ) | (80,727 | ) | |||
Preferred unit distributions paid | (11,152 | ) | (11,152 | ) | |||
Redemption of vested equity awards | (2,179 | ) | (2,330 | ) | |||
Distributions paid to redeemable noncontrolling interests | (14,329 | ) | — | ||||
Other | (5,032 | ) | (2,559 | ) | |||
Net cash (used in) provided by financing activities | (260,626 | ) | 221,310 | ||||
Net decrease in cash and cash equivalents | (12,736 | ) | (2,237 | ) | |||
Cash and cash equivalents | |||||||
Beginning of period | 60,310 | 6,077 | |||||
End of period | $ | 47,574 | $ | 3,840 |
For the Nine Months Ended September 30, | |||||||
2016 | 2015 | ||||||
Reconciliation of net (loss) income to net cash provided by operating activities: | |||||||
Net (loss) income | $ | (10,948 | ) | $ | 126,261 | ||
Adjustments to reconcile net (loss) income to net cash provided by operating activities: | |||||||
Depreciation and other amortization | 101,429 | 105,397 | |||||
Impairment losses | 99,797 | 3,779 | |||||
Losses on interest rate derivatives | 347 | — | |||||
Amortization of deferred financing costs and net debt discounts | 4,456 | 4,144 | |||||
Increase in deferred rent receivable | (930 | ) | (11,939 | ) | |||
Gain on sales of real estate | (34,101 | ) | (4,000 | ) | |||
Share-based compensation | 5,637 | 4,949 | |||||
Loss (gain) on early extinguishment of debt | 34 | (86,075 | ) | ||||
Other | (2,761 | ) | 1,922 | ||||
Operating changes in assets and liabilities: | |||||||
Decrease in accounts receivable | 3,658 | 6,526 | |||||
Increase in restricted cash and marketable securities | (495 | ) | (1,485 | ) | |||
Increase in prepaid expenses and other assets, net | (19,778 | ) | (5,228 | ) | |||
Increase (decrease) in accounts payable, accrued expenses and other liabilities | 32,036 | (272 | ) | ||||
(Decrease) increase in rents received in advance and security deposits | (8,408 | ) | 3,763 | ||||
Net cash provided by operating activities | $ | 169,973 | $ | 147,742 | |||
Supplemental schedule of non-cash investing and financing activities: | |||||||
Increase (decrease) in accrued capital improvements, leasing and other investing activity costs | $ | 9,963 | $ | (11,722 | ) | ||
Increase in property and redeemable noncontrolling interests in connection with property contributed in a joint venture | $ | 22,600 | $ | — | |||
Decrease in redeemable noncontrolling interests and increase in other liabilities in connection with distribution payable to redeemable noncontrolling interest | $ | 6,683 | $ | — | |||
Non-cash changes from partial sale of properties, net of debt: | |||||||
Decrease in properties, net | $ | (114,597 | ) | $ | — | ||
Increase in investment in unconsolidated real estate joint venture | $ | 25,680 | $ | — | |||
Decrease in debt | $ | 59,534 | $ | — | |||
Other net decreases in assets and liabilities | $ | 3,619 | $ | — | |||
Debt assumed on acquisition of operating property | $ | — | $ | 55,490 | |||
Other liabilities assumed on acquisition of operating properties | $ | — | $ | 5,265 | |||
Decrease in property in connection with surrender of property in settlement of debt |