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 (sometimes also referred to as “Mission-Centric”). We also own a 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 (sometimes also referred to as “Urban-Centric”). As of December 31, 2016, we derived 87% of our core portfolio annualized revenue from Defense/IT Locations and 13% from our Regional Office Properties. As of December 31, 2016, our core portfolio of 152 office properties, including six owned through an unconsolidated joint venture, encompassed 16.3 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
Paul R. Adkins, EVP & COO	443-285-5453, stephanie.kelly@copt.com
Anthony Mifsud, EVP & CFO	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.

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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
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.

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Corporate Office Properties Trust

Selected Financial Summary Data

(in thousands, except per share data)

		Page		Three Months Ended																				Year Ended
SUMMARY OF RESULTS		Refer.		12/31/16				9/30/16				6/30/16				3/31/16				12/31/15				12/31/16				12/31/15
Net income (loss)		6		$	26,603			$	29,272			$	(48,316	)		$	8,096			$	62,617			$	15,655			$	188,878
NOI from real estate operations		14		$	81,734			$	82,010			$	85,783			$	81,212			$	85,979			$	330,739			$	324,580
Same Office Property NOI		16		$	63,861			$	61,924			$	61,896			$	59,788			$	61,914			$	247,469			$	243,525
Same Office Property Cash NOI		17		$	63,938			$	61,629			$	62,083			$	60,055			$	61,359			$	247,705			$	237,860
Adjusted EBITDA		10		$	76,781			$	76,834			$	79,625			$	74,906			$	79,718			$	308,146			$	299,867
Diluted AFFO avail. to common share and unit holders		9		$	40,717			$	37,998			$	42,937			$	36,835			$	31,592			$	158,487			$	146,698
Dividend per common share		N/A		$	0.275			$	0.275			$	0.275			$	0.275			$	0.275			$	1.100			$	1.100
Per share - diluted:
EPS		8		$	0.22			$	0.25			$	(0.54	)		$	0.03			$	0.59			$	(0.03	)		$	1.74
FFO - NAREIT		8		$	0.57			$	0.49			$	0.36			$	0.39			$	0.31			$	1.82			$	2.55
FFO - as adjusted for comparability		8		$	0.51			$	0.51			$	0.52			$	0.47			$	0.52			$	2.01			$	2.01
Numerators for diluted per share amounts:
Diluted EPS		6		$	20,976			$	23,642			$	(51,068	)		$	3,156			$	55,581			$	(3,294	)		$	169,787
Diluted FFO available to common share and unit holders		7		$	56,558			$	48,449			$	35,194			$	38,560			$	30,488			$	178,761			$	249,454
Diluted FFO available to common share and unit holders, as adjusted for comparability		7		$	50,219			$	50,461			$	50,630			$	46,007			$	50,858			$	197,317			$	195,824
Payout ratios:
Diluted FFO		N/A		49.5		%		55.6		%		76.6		%		69.8		%		88.3		%		60.9		%		43.1		%
Diluted FFO - as adjusted for comparability		N/A		55.7		%		53.4		%		53.2		%		58.5		%		52.9		%		55.1		%		54.9		%
Diluted AFFO		N/A		68.7		%		70.9		%		62.7		%		73.1		%		85.2		%		68.6		%		73.3		%
CAPITALIZATION
Total Market Capitalization		28		$	5,315,331			$	4,887,466			$	5,228,793			$	4,947,152			$	4,449,015
Total Equity Market Capitalization		28		$	3,395,102			$	2,996,247			$	3,116,093			$	2,788,272			$	2,351,785
Gross debt		29		$	1,950,229			$	1,921,219			$	2,112,700			$	2,158,880			$	2,097,230
Net debt to adjusted book		31		38.3		%		41.2		%		43.6		%		43.3		%		42.6		%		N/A				N/A
Net debt plus preferred equity to adjusted book		31		42.9		%		45.8		%		48.0		%		47.6		%		47.0		%		N/A				N/A
Adjusted EBITDA fixed charge coverage ratio		31		3.1		x		3.1		x		2.9		x		2.7		x		2.9		x		3.0		x		3.0		x
Net debt to in-place adjusted EBITDA ratio		31		5.7		x		6.3		x		6.6		x		7.0		x		6.5		x		N/A				N/A
Net debt plus pref. equity to in-place adj. EBITDA ratio		31		6.3		x		7.0		x		7.2		x		7.6		x		7.2		x		N/A				N/A
OTHER
Revenue from early termination of leases		N/A		$	794			$	437			$	338			$	712			$	400			$	2,281			$	1,823
Capitalized interest costs		N/A		$	1,419			$	1,242			$	1,309			$	1,753			$	1,510			$	5,723			$	7,151

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Corporate Office Properties Trust

Selected Portfolio Data

	12/31/16			9/30/16			6/30/16			3/31/16			12/31/15
	(1)
# of Operating Office Properties
Total Portfolio	164			168			181			179			177
Consolidated Portfolio	158			162			181			179			177
Core Portfolio	152			146			146			153			157
Same Office Properties	133			133			133			133			133
% Occupied
Total Portfolio	92.1	%		91.3	%		92.6	%		92.3	%		91.6	%
Consolidated Portfolio	91.6	%		90.8	%		92.6	%		92.3	%		91.6	%
Core Portfolio	92.9	%		93.0	%		92.3	%		91.6	%		92.7	%
Same Office Properties	91.5	%		91.3	%		90.9	%		90.6	%		91.5	%
% Leased
Total Portfolio	93.5	%		92.8	%		92.6	%		92.3	%		92.7	%
Consolidated Portfolio	93.1	%		92.4	%		92.6	%		92.3	%		92.7	%
Core Portfolio	94.4	%		94.4	%		93.8	%		93.3	%		93.9	%
Same Office Properties	92.8	%		93.1	%		92.6	%		92.4	%		92.8	%
Square Feet of Office Properties (in thousands)
Total Portfolio	17,190			17,488			18,402			18,250			18,053
Consolidated Portfolio	16,228			16,526			18,402			18,250			18,053
Core Portfolio	16,301			15,938			16,018			16,556			17,038
Same Office Properties	13,249			13,249			13,249			13,249			13,249
Wholesale Data Center (in megawatts (“MWs”))
Initial Stabilization Critical Load	19.25			19.25			19.25			19.25			19.25
MWs Leased (2)	14.86			15.81			15.81			16.81			17.81
MWs Operational	19.25			19.25			19.25			19.25			19.25

(1)	As of 12/31/2016, our total portfolio included 9 properties held for sale totaling 603,000 square feet that were 92.4% occupied and 94.0% 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 15.93 megawatts as of December 31, 2016. The leased megawatts reported above excludes approximately one megawatt contracted for use under management agreements.

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Corporate Office Properties Trust

Consolidated Balance Sheets

(dollars in thousands)

	12/31/16				9/30/16				6/30/16				3/31/16				12/31/15
Assets
Properties, net
Operating properties, net	$	2,671,831			$	2,632,069			$	2,782,330			$	2,863,262			$	2,920,529
Construction and redevelopment in progress, including land (1)	86,323				72,043				69,070				98,198				137,043
Land held (1)	315,208				324,226				318,327				317,971				292,176
Total properties, net	3,073,362				3,028,338				3,169,727				3,279,431				3,349,748
Assets held for sale	94,654				161,454				300,584				225,897				96,782
Cash and cash equivalents	209,863				47,574				13,317				62,489				60,310
Restricted cash and marketable securities	8,193				7,583				8,302				7,763				7,716
Investment in unconsolidated real estate joint venture	25,548				25,721				—				—				—
Accounts receivable, net	34,438				25,790				32,505				28,776				29,167
Deferred rent receivable, net	90,219				87,526				92,316				96,936				105,484
Intangible assets on real estate acquisitions, net	78,351				84,081				88,788				93,526				98,338
Deferred leasing costs, net	41,214				41,470				42,632				44,768				53,868
Investing receivables	52,279				51,119				50,162				48,998				47,875
Prepaid expenses and other assets, net	72,764				73,538				43,359				49,324				60,024
Total assets	$	3,780,885			$	3,634,194			$	3,841,692			$	3,937,908			$	3,909,312
Liabilities and equity
Liabilities:
Debt	$	1,904,001			$	1,873,836			$	2,094,486			$	2,140,212			$	2,077,752
Accounts payable and accrued expenses	108,682				112,306				92,848				78,597				91,755
Rents received in advance and security deposits	29,798				28,740				32,035				33,457				37,148
Dividends and distributions payable	31,335				30,225				30,219				30,217				30,178
Deferred revenue associated with operating leases	12,666				9,898				17,560				19,093				19,758
Interest rate derivatives	1,572				17,272				20,245				15,072				3,160
Redeemable preferred shares at liquidation preference (2)	26,583				—				—				—				—
Other liabilities	48,605				38,282				31,123				15,046				13,779
Total liabilities	2,163,242				2,110,559				2,318,516				2,331,694				2,273,530
Redeemable noncontrolling interests	22,979				22,848				22,473				22,333				19,218
Equity:
COPT’s shareholders’ equity:
Preferred shares at liquidation preference	172,500				199,083				199,083				199,083				199,083
Common shares	985				948				947				947				945
Additional paid-in capital	2,116,581				2,008,787				2,007,328				2,005,523				2,004,507
Cumulative distributions in excess of net income	(765,276		)		(759,262		)		(756,940		)		(679,935		)		(657,172		)
Accumulated other comprehensive loss	(1,731		)		(16,314		)		(17,712		)		(12,862		)		(2,838		)
Total COPT’s shareholders’ equity	1,523,059				1,433,242				1,432,706				1,512,756				1,544,525
Noncontrolling interests in subsidiaries
Common units in the Operating Partnership	49,228				46,757				47,550				51,031				52,359
Preferred units in the Operating Partnership	8,800				8,800				8,800				8,800				8,800
Other consolidated entities	13,577				11,988				11,647				11,294				10,880
Total noncontrolling interests in subsidiaries	71,605				67,545				67,997				71,125				72,039
Total equity	1,594,664				1,500,787				1,500,703				1,583,881				1,616,564
Total liabilities, redeemable noncontrolling interest and equity	$	3,780,885			$	3,634,194			$	3,841,692			$	3,937,908			$	3,909,312

(1)	Please refer to pages 24, 25 and 27 for detail.

(2)	We redeemed all of our Series K Preferred Shares effective January 21, 2017. Since we notified holders of such shares in December 2016 that we were redeeming the shares, we present the liquidation preference as a liability as of 12/31/16.

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Corporate Office Properties Trust

Consolidated Statements of Operations

(in thousands, except per share data)

	Three Months Ended																				Year Ended
	12/31/16				9/30/16				6/30/16				3/31/16				12/31/15				12/31/16				12/31/15
Revenues
Rental revenue	$	100,849			$	103,956			$	107,524			$	105,382			$	107,514			$	417,711			$	420,340
Tenant recoveries and other real estate operations revenue	27,150				26,998				26,400				27,705				26,963				108,253				98,724
Construction contract and other service revenues	13,992				11,149				12,003				11,220				8,848				48,364				106,402
Total revenues	141,991				142,103				145,927				144,307				143,325				574,328				625,466
Expenses
Property operating expenses	47,562				49,952				48,141				51,875				48,498				197,530				194,494
Depreciation and amortization associated with real estate operations	32,929				32,015				33,248				34,527				36,237				132,719				140,025
Construction contract and other service expenses	12,968				10,341				11,478				10,694				7,773				45,481				102,696
Impairment losses	1,554				27,699				69,692				2,446				19,744				101,391				23,289
General and administrative expenses	6,211				7,242				6,512				10,130				6,609				30,095				24,526
Leasing expenses	1,578				1,613				1,514				1,753				1,888				6,458				6,835
Business development expenses and land carry costs	1,747				1,716				2,363				2,418				2,521				8,244				13,507
Total operating expenses	104,549				130,578				172,948				113,843				123,270				521,918				505,372
Operating income	37,442				11,525				(27,021		)		30,464				20,055				52,410				120,094
Interest expense	(18,664		)		(18,301		)		(22,639		)		(23,559		)		(22,347		)		(83,163		)		(89,074		)
Interest and other income	1,567				1,391				1,330				1,156				1,300				5,444				4,517
(Loss) gain on early extinguishment of debt	(1,073		)		(59		)		5				17				(402		)		(1,110		)		85,275
Income (loss) from continuing operations before equity in income of unconsolidated entities and income taxes	19,272				(5,444		)		(48,325		)		8,078				(1,394		)		(26,419		)		120,812
Equity in income of unconsolidated entities	718				594				10				10				10				1,332				62
Income tax (expense) benefit	(272		)		21				(1		)		8				(46		)		(244		)		(199		)
Income (loss) from continuing operations	19,718				(4,829		)		(48,316		)		8,096				(1,430		)		(25,331		)		120,675
Discontinued operations	—				—				—				—				—				—				156
Income (loss) before gain on sales of real estate	19,718				(4,829		)		(48,316		)		8,096				(1,430		)		(25,331		)		120,831
Gain on sales of real estate	6,885				34,101				—				—				64,047				40,986				68,047
Net income (loss)	26,603				29,272				(48,316		)		8,096				62,617				15,655				188,878
Net (income) loss attributable to noncontrolling interests
Common units in the Operating Partnership	(793		)		(901		)		1,976				(127		)		(2,172		)		155				(6,403		)
Preferred units in the Operating Partnership	(165		)		(165		)		(165		)		(165		)		(165		)		(660		)		(660		)
Other consolidated entities	(912		)		(907		)		(914		)		(978		)		(916		)		(3,711		)		(3,515		)
Net income (loss) attributable to COPT	24,733				27,299				(47,419		)		6,826				59,364				11,439				178,300
Preferred share dividends	(3,640		)		(3,552		)		(3,553		)		(3,552		)		(3,553		)		(14,297		)		(14,210		)
Issuance costs associated with redeemed preferred shares	(17		)		—				—				—				—				(17		)		—
Net income (loss) attributable to COPT common shareholders	$	21,076			$	23,747			$	(50,972	)		$	3,274			$	55,811			$	(2,875	)		$	164,090
Common units in the Operating Partnership	—				—				—				—				—				—				6,403
Amount allocable to share-based compensation awards	(100		)		(105		)		(96		)		(118		)		(230		)		(419		)		(706		)
Numerator for diluted EPS	$	20,976			$	23,642			$	(51,068	)		$	3,156			$	55,581			$	(3,294	)		$	169,787

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Corporate Office Properties Trust

Funds from Operations

(in thousands)

	Three Months Ended																				Year Ended
	12/31/16				9/30/16				6/30/16				3/31/16				12/31/15				12/31/16				12/31/15
Net income (loss)	$	26,603			$	29,272			$	(48,316	)		$	8,096			$	62,617			$	15,655			$	188,878
Real estate-related depreciation and amortization	32,929				32,015				33,248				34,527				36,237				132,719				140,025
Impairment losses on previously depreciated operating properties	1,518				25,857				55,124				847				331				83,346				4,110
Gain on sales of previously depreciated operating properties	312				(34,101		)		—				—				(64,047		)		(33,789		)		(64,062		)
Depreciation and amortization on unconsolidated real estate JV (1)	311				207				—				—				—				518				—
FFO - per NAREIT (2)(3)	61,673				53,250				40,056				43,470				35,138				198,449				268,951
Preferred share dividends	(3,640		)		(3,552		)		(3,553		)		(3,552		)		(3,553		)		(14,297		)		(14,210		)
Issuance costs associated with redeemed preferred shares	(17		)		—				—				—				—				(17		)		—
Noncontrolling interests - preferred units in the Operating Partnership	(165		)		(165		)		(165		)		(165		)		(165		)		(660		)		(660		)
FFO allocable to other noncontrolling interests (4)	(1,085		)		(894		)		(1,014		)		(1,027		)		(817		)		(4,020		)		(3,586		)
Basic and diluted FFO allocable to share-based compensation awards	(208		)		(190		)		(130		)		(166		)		(115		)		(694		)		(1,041		)
Basic and Diluted FFO available to common share and common unit holders (3)	56,558				48,449				35,194				38,560				30,488				178,761				249,454
Operating property acquisition costs	—				—				—				—				32				—				4,134
Gain on sales of non-operating properties	(7,197		)		—				—				—				—				(7,197		)		(3,985		)
Impairment losses on non-operating properties	36				1,842				14,568				1,599				19,413				18,045				19,413
(Gain) loss on interest rate derivatives	(725		)		(1,523		)		319				1,551				386				(378		)		386
Loss (gain) on early extinguishment of debt	1,073				59				(5		)		(17		)		402				1,110				(85,655		)
Issuance costs associated with redeemed preferred shares	17				—				—				—				—				17				—
Add: Negative FFO of properties conveyed to extinguish debt in default (5)	—				—				—				—				—				—				10,456
Demolition costs on redevelopment properties	—				—				370				208				225				578				1,396
Executive transition costs	431				1,639				247				4,137				—				6,454				—
Diluted FFO comparability adjustments allocable to share-based compensation awards	26				(5		)		(63		)		(31		)		(88		)		(73		)		225
Diluted FFO avail. to common share and common unit holders, as adj. for comparability (3)	$	50,219			$	50,461			$	50,630			$	46,007			$	50,858			$	197,317			$	195,824
(1) FFO adjustment pertaining to COPT’s share of an unconsolidated real estate joint venture reported on page 33.
(2) Please see reconciliation on page 35 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 32.
(5) Interest expense exceeded NOI from these properties by the amounts in the statement.

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Corporate Office Properties Trust

Diluted Share and Unit Computations

(in thousands)

	Three Months Ended																				Year Ended
	12/31/16				9/30/16				6/30/16				3/31/16				12/31/15				12/31/16				12/31/15
EPS Denominator:
Weighted average common shares - basic	95,066				94,433				94,300				94,203				94,164				94,502				93,914
Common units in the Operating Partnership	—				—				—				—				—				—				3,692
Dilutive effect of share-based compensation awards	76				81				—				95				—				—				61
Weighted average common shares - diluted	95,142				94,514				94,300				94,298				94,164				94,502				97,667
Diluted EPS	$	0.22			$	0.25			$	(0.54	)		$	0.03			$	0.59			$	(0.03	)		$	1.74
Weighted Average Shares for period ended:
Common Shares Outstanding	95,066				94,433				94,300				94,203				94,164				94,502				93,914
Dilutive effect of share-based compensation awards	76				81				117				95				—				92				61
Common Units	3,591				3,591				3,676				3,677				3,677				3,633				3,692
Denominator for diluted FFO per share and as adjusted for comparability	98,733				98,105				98,093				97,975				97,841				98,227				97,667
Weighted average common units	(3,591		)		(3,591		)		(3,676		)		(3,677		)		(3,677		)		(3,633		)		—
Anti-dilutive EPS effect of share-based compensation awards	—				—				(117		)		—				—				(92		)		—
Denominator for diluted EPS	95,142				94,514				94,300				94,298				94,164				94,502				97,667
Diluted FFO per share - NAREIT	$	0.57			$	0.49			$	0.36			$	0.39			$	0.31			$	1.82			$	2.55
Diluted FFO per share - as adjusted for comparability	$	0.51			$	0.51			$	0.52			$	0.47			$	0.52			$	2.01			$	2.01

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Corporate Office Properties Trust

Adjusted Funds from Operations

(in thousands)

	Three Months Ended																				Year Ended
	12/31/16				9/30/16				6/30/16				3/31/16				12/31/15				12/31/16				12/31/15
Diluted FFO available to common share and common unit holders, as adjusted for comparability	$	50,219			$	50,461			$	50,630			$	46,007			$	50,858			$	197,317			$	195,824
Straight line rent adjustments and lease incentive amortization	1,294				691				480				(965		)		(2,677		)		1,500				(13,497		)
Straight line rent adjustments on properties conveyed to extinguish debt in default	—				—				—				—				—				—				(115		)
Amortization of intangibles included in NOI	463				349				338				338				365				1,488				1,428
Share-based compensation, net of amounts capitalized	1,174				1,258				1,485				1,632				1,625				5,549				6,574
Amortization of deferred financing costs	1,093				1,126				1,178				1,176				1,127				4,573				4,466
Amortization of net debt discounts, net of amounts capitalized	336				332				325				319				317				1,312				1,166
Replacement capital expenditures (1)	(13,716		)		(16,120		)		(11,546		)		(11,720		)		(20,086		)		(53,102		)		(49,266		)
Diluted AFFO adjustments allocable to other noncontrolling interests (2)	42				42				47				48				63				179				118
Diluted AFFO adjustments on unconsolidated real estate JV (3)	(188		)		(141		)		—				—				—				(329		)		—
Diluted AFFO available to common share and common unit holders (“diluted AFFO”)	$	40,717			$	37,998			$	42,937			$	36,835			$	31,592			$	158,487			$	146,698
Replacement capital expenditures (1)
Tenant improvements and incentives	$	8,000			$	21,470			$	6,784			$	8,766			$	6,836			$	45,020			$	24,244
Building improvements	7,064				5,707				5,302				3,953				16,674				22,026				28,643
Leasing costs	1,387				5,182				1,613				1,183				3,518				9,365				8,504
Less: Excluded tenant improvements and incentives	871				(12,706		)		(885		)		(1,353		)		(393		)		(14,073		)		(1,438		)
Less: Excluded building improvements	(3,606		)		(3,533		)		(1,121		)		(557		)		(6,551		)		(8,817		)		(9,879		)
Less: Excluded leasing costs	—				—				(147		)		(272		)		2				(419		)		(808		)
Replacement capital expenditures	$	13,716			$	16,120			$	11,546			$	11,720			$	20,086			$	53,102			$	49,266
(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 32.
(3) AFFO adjustments pertaining to COPT’s share of an unconsolidated real estate joint venture reported on page 33.

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Corporate Office Properties Trust

Adjusted EBITDA

(in thousands)

	Three Months Ended																				Year Ended
	12/31/16				9/30/16				6/30/16				3/31/16				12/31/15				12/31/16				12/31/15
Net income (loss)	$	26,603			$	29,272			$	(48,316	)		$	8,096			$	62,617			$	15,655			$	188,878
Interest expense on continuing and discontinued operations	18,664				18,301				22,639				23,559				22,347				83,163				89,074
Income tax expense (benefit)	272				(21		)		1				(8		)		46				244				199
Depreciation of furniture, fixtures and equipment	512				513				524				602				597				2,151				2,206
Real estate-related depreciation and amortization	32,929				32,015				33,248				34,527				36,237				132,719				140,025
Impairment losses	1,554				27,699				69,692				2,446				19,744				101,391				23,523
Loss (gain) on early extinguishment of debt on continuing and discontinued operations	1,073				59				(5		)		(17		)		402				1,110				(85,655		)
Gain on sales of operating properties	312				(34,101		)		—				—				(64,047		)		(33,789		)		(64,062		)
Gain on sales of non-operational properties	(7,197		)		—				—				—				—				(7,197		)		(3,985		)
Net (gain) loss on investments in unconsolidated entities included in interest and other income	(117		)		27				(36		)		(23		)		6				(149		)		127
Business development expenses	1,167				1,016				1,261				1,379				1,512				4,823				4,775
Operating property acquisition costs	—				—				—				—				32				—				4,134
EBITDA from properties conveyed to extinguish debt in default	—				—				—				—				—				—				(768		)
Demolition costs on redevelopment properties	—				—				370				208				225				578				1,396
Adjustments from unconsolidated real estate JV (1)	578				415				—				—				—				993				—
Executive transition costs	431				1,639				247				4,137				—				6,454				—
Adjusted EBITDA	$	76,781			$	76,834			$	79,625			$	74,906			$	79,718			$	308,146			$	299,867
Proforma NOI adjustment for property changes within period	39				(2,469		)		109				471				(1,738		)
In-place adjusted EBITDA	$	76,820			$	74,365			$	79,734			$	75,377			$	77,980

(1) Includes COPT’s share of adjusted EBITDA adjustments in an unconsolidated real estate JV (see page 33).

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Corporate Office Properties Trust

Operating Office Properties by Segment (1) - 12/31/2016

(square feet in thousands)

		# of Properties			Operational Square Feet			Occupancy %			Leased  %
Core Portfolio: (2)
Defense IT Locations: (3)
Fort Meade/Baltimore Washington (“BW”) Corridor:
National Business Park		29			3,486			96.1	%		96.4	%
Howard County		35			2,756			91.9	%		94.3	%
Other		22			1,576			94.6	%		95.1	%
Total Fort Meade/BW Corridor		86			7,818			94.3	%		95.4	%
Northern Virginia (“NoVA”) Defense/IT		11			1,599			84.8	%		85.8	%
Lackland AFB (San Antonio, Texas)		7			953			100.0	%		100.0	%
Navy Support		21			1,258			72.7	%		81.3	%
Redstone Arsenal (Huntsville, Alabama)		7			642			96.4	%		100.0	%
Data Center Shells
Consolidated Properties		7			1,045			100.0	%		100.0	%
Unconsolidated JV Properties (4)		6			962			100.0	%		100.0	%
Total Defense/IT Locations		145			14,277			92.6	%		94.2	%
Regional Office (5)		7			2,024			95.1	%		95.3	%
Core Portfolio		152			16,301			92.9	%		94.4	%
Properties Held for Sale		9			603			92.4	%		94.0	%
Other Properties		3			286			44.0	%		44.0	%
Total Portfolio		164			17,190			92.1	%		93.5	%
Consolidated Properties		158			16,228			91.6	%		93.1	%

(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 33 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.

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Corporate Office Properties Trust

NOI from Real Estate Operations and Occupancy by Property Grouping

(dollars and square feet in thousands)

		12/31/16
		# 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 the Year Ended
Property Grouping								% Occupied (1)		% Leased (1)									12/31/16				12/31/16
Core Portfolio:
Same Office Properties (3)		130			12,963			92.5%		93.8%		$	388,476			82.3	%		$	63,211			$	245,149
Office Properties Placed in Service (4)		13			1,203			90.9%		95.5%		26,284				5.6	%		4,500				15,667
Acquired Office Properties (5)		3			1,173			94.1%		94.6%		33,586				7.1	%		5,257				21,011
Unconsolidated real estate JV (6)		6			962			100.0%		100.0%		5,233				1.1	%		1,297				2,305
Wholesale Data Center and Other		N/A			N/A			N/A		N/A		N/A				N/A			3,799				15,075
Total Core Portfolio		152			16,301			92.9%		94.4%		453,579				96.1	%		78,064				299,207
Office Properties Held for Sale (7)		9			603			92.4%		94.0%		14,962				3.1	%		2,717				9,499
Disposed Office Properties		N/A			N/A			N/A		N/A		N/A				N/A			303				19,713
Other Office Properties (Same Office)		3			286			44.0%		44.0%		3,678				0.8	%		650				2,320
Total Portfolio		164			17,190			92.1%		93.5%		$	472,219			100.0	%		$	81,734			$	330,739
Consolidated Properties		158			16,228			91.6%		93.1%		$	466,986			98.9	%		$	80,437			$	328,434
		12/31/16
		# 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 the Year Ended
Property Grouping								% Occupied (1)		% Leased (1)									12/31/16				12/31/16
Core Portfolio:
Defense/IT Locations
Consolidated properties		139			13,315			92.1%		93.8%		387,772				85.5	%		63,346				242,969
Unconsolidated real estate JV (6)		6			962			100.0%		100.0%		5,233				1.2	%		1,297				2,305
Total Defense/IT Locations		145			14,277			92.6%		94.2%		393,005				86.6	%		64,643				245,274
Regional Office		7			2,024			95.1%		95.3%		60,574				13.4	%		9,648				38,530
Wholesale Data Center and Other		N/A			N/A			N/A		N/A		N/A				N/A			3,773				15,403
Total Core Portfolio		152			16,301			92.9%		94.4%		$	453,579			100.0	%		$	78,064			$	299,207

(1)	Percentages calculated based on operational square feet.

(2)	Excludes Annualized Rental Revenue from our wholesale data center, DC-6, of $19.9 million as of 12/31/16. 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 12/31/16 totaled $81.2 million.

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Corporate Office Properties Trust

Consolidated Real Estate Revenues and NOI by Segment

(dollars in thousands)

	Three Months Ended																				Year Ended
	12/31/16				9/30/16				6/30/16				3/31/16				12/31/15				12/31/16				12/31/15
Consolidated real estate revenues
Defense/IT Locations:
Fort Meade/BW Corridor	$	60,473			$	61,460			$	60,912			$	62,509			$	61,683			$	245,354			$	244,274
NoVA Defense/IT	12,560				12,231				12,057				12,116				11,816				48,964				49,199
Lackland Air Force Base	12,395				12,532				11,651				10,225				12,233				46,803				39,659
Navy Support	7,033				7,232				6,998				6,934				6,840				28,197				28,177
Redstone Arsenal	3,560				3,189				3,191				3,116				3,063				13,056				11,228
Data Center Shells-Consolidated	5,043				5,175				7,288				6,330				5,930				23,836				21,746
Total Defense/IT locations	101,064				101,819				102,097				101,230				101,565				406,210				394,283
Regional Office	18,521				20,499				23,283				23,502				25,023				85,805				98,165
Wholesale Data Center	6,763				6,809				6,804				6,493				6,099				26,869				19,032
Other	1,651				1,827				1,740				1,862				1,790				7,080				7,588
Consolidated real estate revenues	$	127,999			$	130,954			$	133,924			$	133,087			$	134,477			$	525,964			$	519,068
NOI
Defense/IT Locations:
Fort Meade/BW Corridor	$	41,011			$	40,862			$	40,534			$	39,263			$	41,476			$	161,670			$	160,965
NoVA Defense/IT	8,046				7,769				7,750				7,575				7,829				31,140				29,092
Lackland Air Force Base	4,901				4,933				4,807				4,805				4,894				19,446				17,655
Navy Support	3,916				3,858				4,323				3,410				3,686				15,507				14,948
Redstone Arsenal	2,134				2,077				2,231				2,138				2,171				8,580				7,731
Data Center Shells
Consolidated properties	4,533				4,647				6,462				5,520				5,358				21,162				19,448
COPT’s share of unconsolidated real estate JV (1)	1,297				1,008				—				—				—				2,305				—
Total Defense/IT locations	65,838				65,154				66,107				62,711				65,414				259,810				249,839
Regional Office	11,133				12,344				14,562				13,671				15,608				51,710				62,000
Wholesale Data Center	3,880				3,492				4,153				3,832				4,138				15,357				8,630
Other	883				1,020				961				998				819				3,862				4,111
NOI from real estate operations	$	81,734			$	82,010			$	85,783			$	81,212			$	85,979			$	330,739			$	324,580

(1) See page 33 for additional disclosure regarding an unconsolidated real estate joint venture.

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Corporate Office Properties Trust

Cash NOI by Segment

(dollars in thousands)

	Three Months Ended																				Year Ended
	12/31/16				9/30/16				6/30/16				3/31/16				12/31/15				12/31/16				12/31/15
Cash NOI
Defense/IT Locations:
Fort Meade/BW Corridor	$	40,872			$	40,253			$	39,588			$	38,502			$	39,668			$	159,215			$	154,417
NoVA Defense/IT	7,766				7,234				7,614				7,922				8,045				30,536				25,878
Lackland Air Force Base	4,945				4,855				4,718				4,716				4,745				19,234				15,093
Navy Support	3,612				3,524				4,218				3,196				3,597				14,550				14,567
Redstone Arsenal	2,326				2,411				2,534				2,473				2,267				9,744				7,828
Data Center Shells
Consolidated properties	4,519				4,549				6,077				5,108				5,024				20,253				17,766
COPT’s share of unconsolidated real estate JV (1)	1,103				862				—				—				—				1,965				—
Total Defense/IT locations	65,143				63,688				64,749				61,917				63,346				255,497				235,549
Regional Office	10,967				12,480				14,152				13,000				15,031				50,599				59,210
Wholesale Data Center	3,833				3,439				4,052				3,728				4,011				15,052				8,994
Other	739				935				892				823				835				3,389				4,057
Cash NOI from real estate operations	$	80,682			$	80,542			$	83,845			$	79,468			$	83,223			$	324,537			$	307,810
Straight line rent adjustments and lease incentive amortization	(1,650		)		(1,086		)		(897		)		546				2,254				(3,087		)		11,858
Add: Amortization of deferred market rental revenue	(315		)		(201		)		(189		)		(190		)		(178		)		(895		)		(720		)
Less: Amortization of below-market cost arrangements	(244		)		(241		)		(241		)		(240		)		(284		)		(966		)		(1,089		)
Add: Lease termination fee, gross	938				471				417				980				417				2,806				2,373
Add: Cash NOI on tenant funded landlord assets	2,129				2,379				2,848				648				547				8,004				4,348
Cash NOI adjustments in unconsolidated real estate JV	194				146				—				—				—				340				—
NOI from real estate operations	$	81,734			$	82,010			$	85,783			$	81,212			$	85,979			$	330,739			$	324,580

(1)	See page 33 for additional disclosure regarding an unconsolidated real estate joint venture.

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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															Year Ended
							12/31/16			9/30/16			6/30/16			3/31/16			12/31/15			12/31/16			12/31/15
Core Portfolio:
Defense/IT Locations:
Fort Meade/BW Corridor	82			7,635			95.1	%		94.7	%		94.6	%		94.6	%		96.1	%		94.7	%		95.4	%
NoVA Defense/IT	9			1,203			78.7	%		76.4	%		74.1	%		74.5	%		75.9	%		76.0	%		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			1,231			74.9	%		75.2	%		74.6	%		74.0	%		73.9	%		74.7	%		76.7	%
Redstone Arsenal	5			563			98.6	%		99.4	%		98.8	%		97.5	%		95.7	%		98.6	%		91.0	%
Data Center Shells	3			451			100.0	%		100.0	%		100.0	%		100.0	%		100.0	%		100.0	%		100.0	%
Total Defense/IT Locations	125			11,875			92.0	%		91.6	%		91.2	%		91.1	%		92.1	%		91.5	%		91.7	%
Regional Office	5			1,088			95.9	%		98.2	%		98.8	%		97.5	%		96.0	%		97.6	%		94.8	%
Core Portfolio Same Office Properties	130			12,963			92.3	%		92.2	%		91.8	%		91.7	%		92.4	%		92.0	%		92.0	%
Other Same Office Properties	3			286			44.0	%		44.0	%		43.5	%		43.5	%		44.2	%		43.8	%		45.0	%
Total Same Office Properties	133			13,249			91.3	%		91.1	%		90.8	%		90.6	%		91.4	%		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
							12/31/16			9/30/16			6/30/16			3/31/16			12/31/15
Core Portfolio:
Defense/IT Locations:
Fort Meade/BW Corridor	82			7,635			95.3	%		94.7	%		94.5	%		94.5	%		96.1	%
NoVA Defense/IT	9			1,203			79.8	%		78.1	%		73.9	%		74.5	%		75.8	%
Lackland Air Force Base	6			792			100.0	%		100.0	%		100.0	%		100.0	%		100.0	%
Navy Support	20			1,231			74.3	%		75.3	%		76.4	%		73.4	%		73.8	%
Redstone Arsenal	5			563			95.9	%		100.0	%		98.8	%		98.8	%		96.7	%
Data Center Shells	3			451			100.0	%		100.0	%		100.0	%		100.0	%		100.0	%
Total Defense/IT Locations	125			11,875			92.1	%		91.8	%		91.3	%		91.0	%		92.2	%
Regional Office	5			1,088			97.2	%		97.8	%		99.3	%		98.0	%		96.3	%
Core Portfolio Same Office Properties	130			12,963			92.5	%		92.3	%		92.0	%		91.6	%		92.5	%
Other Same Office Properties	3			286			44.0	%		44.0	%		43.5	%		43.5	%		44.4	%
Total Same Office Properties	133			13,249			91.5	%		91.3	%		90.9	%		90.6	%		91.5	%

(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

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Corporate Office Properties Trust

Same Office Property Real Estate Revenues and NOI by Segment

(dollars in thousands)

	Three Months Ended																				Year Ended
	12/31/16				9/30/16				6/30/16				3/31/16				12/31/15				12/31/16				12/31/15
Same office property real estate revenues
Defense/IT Locations:
Fort Meade/BW Corridor	$	59,280			$	58,597			$	57,973			$	59,830			$	59,044			$	235,680			$	234,763
NoVA Defense/IT	7,229				6,650				6,500				6,755				6,666				27,134				26,876
Lackland Air Force Base	10,410				10,536				10,031				8,699				10,564				39,676				35,453
Navy Support	7,033				7,232				6,998				6,934				6,840				28,197				28,177
Redstone Arsenal	2,990				2,828				2,847				2,771				2,718				11,436				10,387
Data Center Shells	3,023				3,050				3,095				3,040				3,051				12,208				12,240
Total Defense/IT Locations	89,965				88,893				87,444				88,029				88,883				354,331				347,896
Regional Office	9,365				9,402				9,379				9,158				8,954				37,304				36,759
Other Properties	1,022				1,016				951				930				965				3,919				4,047
Same office property real estate revenues	$	100,352			$	99,311			$	97,774			$	98,117			$	98,802			$	395,554			$	388,702
Same office property NOI
Defense/IT Locations:
Fort Meade/BW Corridor	$	40,130			$	39,045			$	38,729			$	37,904			$	39,709			$	155,808			$	155,086
NoVA Defense/IT	4,489				4,119				3,969				4,000				4,158				16,577				16,198
Lackland Air Force Base	3,763				3,741				3,746				3,749				3,746				14,999				14,809
Navy Support	3,942				3,875				4,340				3,435				3,706				15,592				14,974
Redstone Arsenal	2,158				1,961				1,981				1,872				1,905				7,972				7,027
Data Center Shells	2,755				2,758				2,764				2,769				2,770				11,046				11,077
Total Defense/IT Locations	57,237				55,499				55,529				53,729				55,994				221,994				219,171
Regional Office	5,974				5,819				5,790				5,571				5,509				23,154				22,324
Other Properties	650				606				577				488				411				2,321				2,030
Same office property NOI	$	63,861			$	61,924			$	61,896			$	59,788			$	61,914			$	247,469			$	243,525

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Corporate Office Properties Trust

Same Office Property Cash NOI (1) by Segment

(dollars in thousands)

	Three Months Ended																				Year Ended
	12/31/16				9/30/16				6/30/16				3/31/16				12/31/15				12/31/16				12/31/15
Same office property cash NOI
Defense/IT Locations:
Fort Meade/BW Corridor	$	40,220			$	38,999			$	38,553			$	37,460			$	38,653			$	155,232			$	150,037
NoVA Defense/IT	3,987				3,340				3,545				3,999				4,138				14,871				15,726
Lackland Air Force Base	3,868				3,742				3,748				3,751				3,748				15,109				14,516
Navy Support	3,637				3,542				4,234				3,221				3,617				14,634				14,592
Redstone Arsenal	2,365				2,312				2,307				2,229				2,118				9,213				7,644
Data Center Shells	2,927				2,915				2,890				2,883				2,877				11,615				11,391
Total Defense/IT Locations	57,004				54,850				55,277				53,543				55,151				220,674				213,906
Regional Office	6,388				6,218				6,252				6,042				5,801				24,900				21,914
Other Properties	546				561				554				470				407				2,131				2,040
Same office property cash NOI	$	63,938			$	61,629			$	62,083			$	60,055			$	61,359			$	247,705			$	237,860
Straight line rent adjustments and lease incentive amortization	(1,829		)		(2,278		)		(3,186		)		(1,599		)		(177		)		(8,892		)		3,297
Add: Amortization of deferred market rental revenue	(1		)		22				34				34				28				89				99
Less: Amortization of below-market cost arrangements	(218		)		(218		)		(219		)		(218		)		(259		)		(873		)		(1,034		)
Add: Lease termination fee, gross	601				390				336				953				416				2,280				2,366
Add: Cash NOI on tenant-funded landlord assets	1,370				2,379				2,848				563				547				7,160				937
Same office property NOI	$	63,861			$	61,924			$	61,896			$	59,788			$	61,914			$	247,469			$	243,525
Percentage change in same office property cash NOI (1)	4.2		%																		4.1		%

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

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Corporate Office Properties Trust

Leasing - Total Office Portfolio (1)

Quarter Ended December 31, 2016

(square feet in thousands)

	Defense/IT Locations																												As Adjusted (3)
	Ft Meade/BW Corridor				NoVA Defense/IT				Navy Support				Redstone Arsenal				Data Center Shells				Regional Office				Total Office				Ft Meade/BW Corridor				Total Office
Renewed Space
Leased Square Feet	122				—				32				—				—				11				165				247				290
Expiring Square Feet	154				24				52				23				—				40				293				279				419
Vacating Square Feet	32				24				20				23				—				29				129				32				129
Retention Rate (% based upon square feet)	79.3		%		—		%		61.3		%		—		%		—		%		26.7		%		56.1		%		88.6		%		69.3		%
Statistics for Completed Leasing:
Average Committed Cost per Square Foot	$	10.79			$	—			$	0.40			$	—			$	—			$	13.11			$	8.91			$	15.47			$	13.71
Weighted Average Lease Term in Years	4.9				—				1.3				—				—				5.2				4.2				7.5				6.7
GAAP Rent Per Square Foot
Renewal GAAP Rent	$	22.37			$	—			$	10.46			$	—			$	—			$	28.29			$	20.43			$	34.78			$	31.85
Expiring GAAP Rent	$	25.93			$	—			$	9.97			$	—			$	—			$	30.06			$	23.08			$	31.56			$	29.11
Change in GAAP Rent	(13.7		)%		—		%		4.9		%		—		%		—		%		(5.9		)%		(11.5		)%		10.2		%		9.4		%
Cash Rent Per Square Foot
Renewal Cash Rent	$	22.08			$	—			$	10.57			$	—			$	—			$	28.48			$	20.24			$	32.57			$	29.98
Expiring Cash Rent	$	26.80			$	—			$	10.71			$	—			$	—			$	30.86			$	23.92			$	33.54			$	30.91
Change in Cash Rent	(17.6		)%		—		%		(1.4		)%		—		%		—		%		(7.7		)%		(15.4		)%		(2.9		)%		(3.0		)%
Average escalations per year	2.7		%		—		%		0.8		%		—		%		—		%		2.9		%		2.6		%		2.9		%		2.9		%
New Leases
Development and Redevelopment Space
Leased Square Feet	29				—				27				—				216				—				272				29				272
Statistics for Completed Leasing:
Average Committed Cost per Square Foot	$	78.35			$	—			$	19.80			$	—			$	—			$	—			$	10.30			$	78.35			$	10.30
Weighted Average Lease Term in Years	7.3				—				5.0				—				10.5				—				9.6				7.3				9.6
GAAP Rent Per Square Foot	$	26.76			$	—			$	11.45			$	—			$	15.35			$	—			$	16.17			$	26.76			$	16.17
Cash Rent Per Square Foot	$	26.00			$	—			$	12.00			$	—			$	14.64			$	—			$	15.58			$	26.00			$	15.58
Other New Leases (2)
Leased Square Feet	24				—				33				23				—				16				96				24				96
Statistics for Completed Leasing:
Average Committed Cost per Square Foot	$	24.00			$	—			$	36.40			$	40.15			$	—			$	73.34			$	40.21			$	24.00			$	40.21
Weighted Average Lease Term in Years	3.7				—				5.6				7.0				—				9.3				6.1				3.7				6.1
GAAP Rent Per Square Foot	$	31.82			$	—			$	22.44			$	24.17			$	—			$	34.08			$	27.08			$	31.82			$	27.08
Cash Rent Per Square Foot	$	31.26			$	—			$	22.98			$	23.00			$	—			$	33.11			$	26.69			$	31.26			$	26.69
Total Square Feet Leased	175				—				93				23				216				26				533				300				658
Average escalations per year	2.7		%		—		%		2.2		%		2.8		%		2.3		%		2.7		%		2.4		%		2.9		%		2.5		%
Average escalations excl. data center shells																									2.6		%						2.8		%

(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.

(3) Includes a lease in holdover status as of December 31, 2016 that was expected to be renewed in the fourth quarter of 2016 but was actually executed in January 2017.

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Corporate Office Properties Trust

Leasing - Total Office Portfolio (1)

Year Ended December 31, 2016

(square feet in thousands)

	Defense/IT Locations																																As Adjusted (3)
	Ft Meade/BW Corridor				NoVA Defense/IT				Navy Support				Redstone Arsenal				Data Center Shells				Regional Office				Other				Total Office				Ft Meade/BW Corridor				Total Office
Renewed Space
Leased Square Feet	774				295				152				1				—				273				23				1,518				899				1,644
Expiring Square Feet	1,027				375				187				25				—				372				32				2,018				1,153				2,144
Vacating Square Feet	254				80				35				23				—				98				10				500				254				500
Retention Rate (% based upon square feet)	75.3		%		78.6		%		81.4		%		5.4		%		—		%		73.6		%		70.1		%		75.2		%		78.0		%		76.7		%
Statistics for Completed Leasing:
Average Committed Cost per Square Foot	$	12.06			$	11.37			$	8.38			$	6.14			$	—			$	65.78			$	—			$	21.05			$	13.17			$	20.97
Weighted Average Lease Term in Years	5.5				5.6				2.7				0.5				—				9.3				1.0				5.8				6.1				6.2
GAAP Rent Per Square Foot
Renewal GAAP Rent	$	32.09			$	31.41			$	23.69			$	27.08			$	—			$	34.78			$	22.85			$	31.46			$	34.14			$	32.63
Expiring GAAP Rent	$	29.85			$	29.68			$	25.59			$	26.55			$	—			$	36.77			$	20.79			$	30.50			$	30.86			$	31.00
Change in GAAP Rent	7.5		%		5.9		%		(7.4		)%		2.0		%		—		%		(5.4		)%		9.9		%		3.1		%		10.7		%		5.3		%
Cash Rent Per Square Foot
Renewal Cash Rent	$	30.80			$	30.30			$	23.67			$	25.50			$	—			$	34.52			$	22.85			$	30.53			$	32.47			$	31.47
Expiring Cash Rent	$	31.63			$	31.25			$	26.54			$	25.00			$	—			$	41.33			$	22.85			$	32.66			$	32.81			$	33.22
Change in Cash Rent	(2.6		)%		(3.0		)%		(10.8		)%		2.0		%		—		%		(16.5		)%		—		%		(6.5		)%		(1.1		)%		(5.3		)%
Average escalations per year	2.8		%		2.3		%		1.9		%		—		%		—		%		2.3		%		—		%		2.5		%		2.9		%		2.6		%
New Leases
Development and Redevelopment Space
Leased Square Feet	52				35				27				—				728				—				—				843				52				843
Statistics for Completed Leasing:
Average Committed Cost per Square Foot	$	72.20			$	89.01			$	19.80			$	—			$	—			$	—			$	—			$	8.81			$	72.20			$	8.81
Weighted Average Lease Term in Years	7.3				10.2				5.0				—				10.1				—				—				9.8				7.3				9.8
GAAP Rent Per Square Foot	$	27.50			$	34.24			$	11.45			$	—			$	14.09			$	—			$	—			$	15.68			$	27.50			$	15.68
Cash Rent Per Square Foot	$	26.01			$	32.58			$	12.00			$	—			$	13.10			$	—			$	—			$	14.67			$	26.01			$	14.67
Other New Leases (2)
Leased Square Feet	197				50				122				30				—				57				6				463				197				463
Statistics for Completed Leasing:
Average Committed Cost per Square Foot	$	33.50			$	58.90			$	44.58			$	43.97			$	—			$	49.61			$	36.57			$	41.87			$	33.50			$	41.87
Weighted Average Lease Term in Years	6.2				6.2				5.6				6.8				—				7.9				3.8				6.3				6.2				6.3
GAAP Rent Per Square Foot	$	29.11			$	26.24			$	29.43			$	24.40			$	—			$	30.30			$	21.09			$	28.61			$	29.11			$	28.61
Cash Rent Per Square Foot	$	28.35			$	25.86			$	31.21			$	23.09			$	—			$	29.50			$	20.49			$	28.52			$	28.35			$	28.52
Total Square Feet Leased	1,023				380				302				32				728				331				29				2,824				1,149				2,950
Average escalations per year	2.8		%		2.4		%		1.6		%		2.8		%		2.3		%		2.4		%		1.6		%		2.4		%		2.8		%		2.4		%
Average escalations excl. data center shells																													2.5		%						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.

(3) Includes a lease in holdover status as of December 31, 2016 that was expected to be renewed in the fourth quarter of 2016 but was actually executed in January 2017.

19

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Corporate Office Properties Trust

Lease Expiration Analysis as of 12/31/16 (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		40		888			$	30,870			6.8	%		$34.78
NoVA Defense/IT		7		38			1,200				0.3	%		31.30
Navy Support		18		141			2,887				0.6	%		20.41
Redstone Arsenal		1		2			34				—	%		19.89
Regional Office		10		154			5,323				1.2	%		34.64
2017		76		1,223			40,314				8.9	%		32.97
Ft Meade/BW Corridor		53		1,383			45,537				10.0	%		32.92
NoVA Defense/IT		4		163			6,256				1.4	%		38.36
Navy Support		17		190			5,049				1.1	%		26.58
Redstone Arsenal		3		251			6,482				1.4	%		25.80
Data Center Shells-Consolidated properties		1		155			2,498				0.6	%		16.11
Regional Office		14		140			4,572				1.0	%		32.73
2018		92		2,282			70,394				15.5	%		30.84
Ft Meade/BW Corridor		44		1,505			48,850				10.8	%		32.45
NoVA Defense/IT		5		286			10,692				2.4	%		37.42
Navy Support		13		79			2,150				0.5	%		27.23
Redstone Arsenal		3		48			1,060				0.2	%		22.15
Regional Office		11		158			4,371				1.0	%		27.58
2019		76		2,076			67,123				14.8	%		32.33
Ft Meade/BW Corridor		41		1,015			32,188				7.1	%		31.70
NoVA Defense/IT		6		136			3,814				0.8	%		28.01
Lackland Air Force Base		2		250			9,745				2.1	%		38.93
Navy Support		16		171			6,976				1.5	%		40.80
Redstone Arsenal		1		11			217				—	%		19.48
Regional Office		11		67			2,047				0.5	%		30.40
2020		77		1,650			54,987				12.1	%		33.30
Ft Meade/BW Corridor		37		860			28,038				6.2	%		32.62
NoVA Defense/IT		10		153			4,132				0.9	%		27.03
Navy Support		15		167			5,059				1.1	%		30.34
Redstone Arsenal		6		161			3,465				0.8	%		21.52
Regional Office		9		119			3,332				0.7	%		27.91
2021		77		1,460			44,026				9.7	%		30.16
Thereafter
Consolidated Properties		130		5,495			171,502				37.8	%		31.21
Unconsolidated JV Properties		6		962			5,233				1.2	%		10.88
Core Portfolio		534		15,148			$	453,579			100.0	%		$29.94

20

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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		534		15,148			$	453,579			100.0	%		$29.94
Office Properties Held for Sale and Other
NoVA Defense/IT		12		166			5,911				31.7	%		35.57
Regional Office		20		328			7,809				41.9	%		23.83
Other		14		189			4,920				26.4	%		26.03
Office Properties Held for Sale and Other Total Average		46		683			18,640				100.0	%		27.30
Total Portfolio		580		15,831			$	472,219						$30.16
Consolidated Portfolio		574		14,869			$	466,986
Unconsolidated JV Properties		6		962			$	5,233

Note: As of 12/31/16, the weighted average lease term is 4.8 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		1.00		$	1,620
2018	2	1		0.26		539
2019	1	6		1.00		2,274
2020	1	17		11.25		13,426
2021	1	2		0.35		532
2022	1	6		1.00		1,559
				14.86		$	19,950

(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 12/31/16 of 245,000 for the portfolio, including 236,000 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 12/31/16 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.

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Corporate Office Properties Trust

Top 20 Office Tenants as of 12/31/16 (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)	60			3,779			23.9	%		$	146,560			31.0	%		4.5
Northrop Grumman Corporation		8			758			4.8	%		22,714				4.8	%		4.0
The Boeing Company		11			685			4.3	%		20,219				4.3	%		2.6
General Dynamics Corporation		7			528			3.3	%		19,373				4.1	%		4.6
Vadata Inc.	(1)	10			1,556			9.8	%		13,904				2.9	%		8.5
CareFirst, Inc.		2			313			2.0	%		11,069				2.3	%		6.1
Computer Sciences Corporation		3			279			1.8	%		10,913				2.3	%		2.2
Booz Allen Hamilton, Inc.		5			268			1.7	%		9,336				2.0	%		4.4
CACI Technologies, Inc.		3			225			1.4	%		7,447				1.6	%		3.7
Wells Fargo & Company		5			190			1.2	%		7,232				1.5	%		10.5
AT&T Corporation		3			308			1.9	%		6,019				1.3	%		2.3
KEYW Corporation		2			211			1.3	%		5,958				1.3	%		7.0
The Raytheon Company		5			161			1.0	%		5,759				1.2	%		2.3
Miles & Stockbridge, PC		2			156			1.0	%		5,052				1.1	%		10.7
Transamerica Life Insurance Company		2			159			1.0	%		4,815				1.0	%		5.0
Harris Corporation		6			170			1.1	%		4,782				1.0	%		5.3
University of Maryland		3			172			1.1	%		4,692				1.0	%		4.6
Science Applications International Corp.		4			131			0.8	%		4,647				1.0	%		3.9
Kratos Defense and Security Solutions		1			131			0.8	%		4,638				1.0	%		3.3
The Mitre Corporation		4			122			0.8	%		4,267				0.9	%		3.0
Subtotal Top 20 Office Tenants		146			10,302			65.1	%		319,396				67.6	%		5.0
All remaining tenants		434			5,530			34.9	%		152,823				32.4	%		4.2
Total/Weighted Average		580			15,831			100.0	%		$	472,219			100.0	%		4.8

(1)  Includes Annualized Rental Revenue (“ARR”) in six properties owned through an unconsolidated JV of $5.23 million (see page 33 for additional information).

(2)  Total ARR is the monthly contractual base rent as of 12/31/16, 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 ARR 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 12/31/16, $2.5 million in ARR (or 1.7% of our ARR from the United States Government and 0.5% of our total ARR) was through the General Services Administration (GSA).

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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
Quarter Ended 12/31/16
2900 Towerview Road		NoVA Defense/IT		Route 28 South		1			151			10/19/2016		100.0%		12,100
4940 Campbell Boulevard		Regional Office		White Marsh		1			50			11/17/2016		76.9%		5,200
1560 A and B Cable Ranch Road		Other		San Antonio		2			120			11/30/2016		61.8%		10,300
White Marsh Land		N/A		N/A		N/A			N/A			12/1/2016		N/A		12,150
1331 Ashton Road		Fort Meade/BW Corridor		BWI South		1			29			12/19/2016		100.0%		2,625
900 Elkridge Landing Road		Fort Meade/BW Corridor		Airport Square		1			101			12/22/2016		25.6%		7,800
Colorado Springs Land		N/A		N/A		N/A			N/A			Various		N/A		3,925
Subtotal - Quarter Ended 12/31/16						6			451							54,100
Total 2016 Dispositions						27			2,539							$	344,335

(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.

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Corporate Office Properties Trust

Summary of Construction Projects as of 12/31/16 (1)

(dollars and square feet in thousands) 

		Property Segment		Park/Submarket	Total Rentable Square Feet		Percentage Leased as of 12/31/16	as of 12/31/16 (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
	2100 Rideout Road Huntsville, Alabama (4)	Redstone Arsenal		Redstone Gateway	19		58%	$	5,295		$	4,656		$	2,958		2Q 16	2Q 17
	Bethlehem Technology Park - DC20 Manassas, Virginia	Data Center Shells		Manassas	216		100%	29,913			15,828			—			2Q 17	2Q 17
	Bethlehem Technology Park - DC18 Manassas, Virginia	Data Center Shells		Manassas	216		100%	34,800			7,900			—			3Q 17	3Q 17
	NOVA Office D Northern Virginia	NoVA Defense/IT		Other	240		100%	49,344			19,355			—			3Q 17	3Q 17
	540 National Business Parkway Annapolis Junction, Maryland	Ft. Meade/BW Corridor		National Bus. Park	145		49%	43,712			29,413			—			1Q 17	1Q 18
	5801 University Research Court College Park, Maryland	Ft. Meade/BW Corridor		College Park	71		0%	18,544			1,964			—			4Q 17	4Q 18
	Total Under Construction				907		83%	$	181,608		$	79,116		$	2,958
	Held for Lease to Government
	310 Sentinel Way Annapolis Junction, Maryland	Ft Meade/BW Corridor		National Bus. Park	191		8%	54,352			39,438			39,438			(1)	(1)
	NOVA Office B Northern Virginia	NoVA Defense/IT		Other	161		0%	41,500			31,172			31,172			(1)	(1)
	Total Held for Lease to Government				352		4%	$	95,852		$	70,610		$	70,610
	Total Construction Projects				1,259		61%	$	277,460		$	149,726		$	73,568

(1)	Includes properties under, or contractually committed for, construction as of 12/31/16 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 earlier of 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 12/31/16.

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Corporate Office Properties Trust

Summary of Redevelopment Projects as of 12/31/16

(dollars and square feet in thousands) 

		Property Segment	Park/Submarket	Total Rentable Square Feet		Percentage Leased as of 1/31/17	as of 12/31/16 (1)															Actual or Anticipated Shell Completion Date	Anticipated Operational Date (2)
							Historical Basis, Net			Incremental Redevelopment Cost			Anticipated Total Cost			Cost to Date			Cost to Date Placed in Service
Property and Location
7134 Columbia Gateway Drive Columbia, Maryland (3)		Ft Meade/BW Corridor	Howard Co. Perimeter	22		38%	$	1,675		$	2,575		$	4,250		$	3,863		$	2,790		1Q 16	1Q 17
1201 Winterson Rd (AS13) Linthicum, Maryland		Ft Meade/BW Corridor	Airport Square	68		61%	2,919			12,424			15,343			10,949			2,919			1Q 16	1Q 17
Airport Landing Retail Bldgs. (4) Linthicum, Maryland		Ft Meade/BW Corridor	Airport Square	14		56%	785			6,401			7,186			5,907			1,689			4Q 16	4Q 17
Total Under Redevelopment				104		55%	$	5,379		$	21,400		$	26,779		$	20,719		$	7,398

 

(1)	Cost includes construction, leasing costs and allocated portion of shared infrastructure.

(2)	Anticipated operational date is the earlier of the estimated date when leases have commenced on 100% of a property’s space or one year from the cessation of major construction activities.

(3)	Although classified as under redevelopment, 8,000 square feet were operational as of 12/31/16; NOI for this property was $20,000 and cash NOI was $19,000 for the three months ended 12/31/16.

(4)

The redevelopment of Airport Landing involved 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: the newly constructed retail buildings reported above totaling 14,000 square feet, 2,000 square feet of which were operational as of 12/31/16; and a 1.2 acre retail pad site that was placed in service in December 2016 as reported on page 26.

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Corporate Office Properties Trust

Office Property Construction and Redevelopment Placed in Service as of 12/31/16

(square feet in thousands)

 

			Total Property															Space Placed in Service % Leased as of 12/31/16
	Property Segment	Park/Submarket	% Leased as of 12/31/16					Square Feet Placed in Service in 2016
Property and Location				Rentable Square Feet		Prior Year		1st Quarter		2nd Quarter		3rd Quarter		4th 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	57%	51		—		51		—		—		—		51		57%
7134 Columbia Gateway Drive Columbia, Maryland	Ft Meade/BW Corridor	Howard Co. Perimeter	37%	22		—		—		4		—		4		8		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%
Bethlehem Technology Park - DC19     Manassas, Virginia	Data Center Shells	Manassas	100%	149		—		—		—		—		149		149		100%
Airport Landing Retail Buildings Linthicum, Maryland	Ft Meade/BW Corridor	Airport Square	57%	14		—		—		—		—		2		2		100%
Airport Landing Pad Site Linthicum, Maryland	Ft Meade/BW Corridor	Airport Square	100%	*		—		—		—		—		*		*		100%
Total Construction/Redevelopment Placed Into Service			90%	822		88		200		153		192		155		700		93%

*	This represents a 1.2 acre retail pad site under ground lease for 20 years to a national food service provider that was placed in service in December 2016.

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Corporate Office Properties Trust

Summary of Land Owned/Controlled as of 12/31/16 (1)

Location	Acres			Estimated Developable Square Feet (in thousands)			Costs to Date
Land Owned/Controlled for Future Development
Defense IT Locations:
Fort Meade/BW Corridor:
National Business Park	233			1,956
Howard County	27			590
Other	133			1,494
Total Fort Meade/BW Corridor	393			4,040
NoVA Defense/IT	64			1,614
Lackland AFB	68			1,033
Navy Support	44			109
Redstone Arsenal (2)	428			4,084
Data Center Shells	21			206
Total Defense/IT Locations	1,018			11,086
Regional Office	10			1,089
Total land owned/controlled for future development	1,028			12,175			$	306,091
Other land owned/controlled	152			1,638			9,117
Land held for sale	47			725			13,492
Land owned/controlled	1,227			14,538			$	328,700
Land held for sale	(47	)		(725	)		(13,492		)
Land held, net	1,180			13,813			$	315,208

(1)	This land inventory schedule excludes all properties listed as construction or redevelopment as detailed on pages 24 and 25, and includes properties under ground lease to us.

(2)	Includes land owned under a long-term master lease agreement to LW Redstone Company, a consolidated joint venture (see page 32). As this land is developed in the future, the joint venture will execute site-specific leases under the master lease agreement. Rental payments will commence under the site-specific leases as cash rents under tenant leases commence at the respective properties.

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Corporate Office Properties Trust

Capitalization Overview

(dollars, shares and units in thousands)

		Wtd. Avg.						Effective			Gross Debt
		Maturity			Stated			Rate			Balance at
		(Years)			Rate			(1)(2)			12/31/2016
Debt
Secured debt		7.2			4.05	%		4.06	%		$	168,368
Unsecured debt		5.9			3.66	%		4.08	%		1,751,861
Total Consolidated Debt		6.1			3.69	%		4.08	%		$	1,920,229
Fixed rate debt (2)		6.7			4.30	%		4.18	%		$	1,820,229
Variable rate debt		4.5			2.23	%		2.23	%		100,000
Total Consolidated Debt											$	1,920,229
Preferred Equity				Redeemable
5.6% Series K Convertible Pref. Shares (3)					(4)						$	26,583
7.375% Series L Redeemable Pref. Shares					Jun-17						172,500
7.5% Series I Convertible Preferred Units (5)					Sep-19						8,800
Total Preferred Equity											$	207,883
Common Equity
Common Shares											98,499
Common Units											3,590
Total Common Shares and Units											102,089
Closing Common Share Price on 12/31/16											$	31.22
Common Equity Market Capitalization											$	3,187,219
Total Equity Market Capitalization											$	3,395,102
Total Market Capitalization											$	5,315,331
(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) We redeemed all of our Series K Preferred Shares effective on 1/21/17.
(5) 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

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Corporate Office Properties Trust

Summary of Outstanding Debt as of 12/31/16

(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	%		$	1,214		$	—		Nov-19
Senior Unsecured Notes										7200 Redstone Gateway (4)	L + 1.85%			13,586			12,132			Oct-20
3.70% due 2021	3.70	%		$	300,000		Jun-21			7740 Milestone Parkway	3.96	%		18,604			15,902			Feb-23
3.60% due 2023	3.60	%		350,000			May-23			100 & 30 Light Street	4.32	%		54,471			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 (4)	4.47	%	(5)	35,883			27,649			Jun-24
Subtotal - Senior Unsecured Notes	4.32	%		$	1,200,000					M Square (5825 & 5850
Unsecured Bank Term Loans										University Research Court)(4)	3.82	%		44,610			35,603			Jun-26
										Total Secured Debt	4.05	%		$	168,368
2020 Maturity	L + 1.4%			300,000			May-20	(2)
2022 Maturity	L + 1.8%			250,000			Dec-22	(3)
Subtotal - Term Loans	2.23	%		550,000
Other Unsecured Debt	—	%		1,861			May-26
Total Unsecured Debt	3.66	%		$	1,751,861
Debt Summary
Total Unsecured Debt	3.66	%		$	1,751,861
Total Secured Debt	4.05	%		168,368
Consolidated Debt	3.69	%		$	1,920,229
Net discounts and deferred
financing costs				(16,228		)
Debt, per balance sheet				$	1,904,001
Consolidated Debt				$	1,920,229
COPT’s share of unconsolid. JV gross debt (6)				30,000
Gross debt				$	1,950,229

(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)	Pre-payable beginning December 2017 without penalty.

(4)	These properties are owned through consolidated joint ventures.

(5)	Represents the weighted average rate of three loans on the properties.

(6)	See page 33 for additional disclosure regarding an unconsolidated real estate joint venture.

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Corporate Office Properties Trust

Summary of Outstanding Debt as of 12/31/16 (continued)

_____________________________________________________________________________________________________________

(1) Includes the effect of interest rate swaps in effect that hedge the risk of changes in interest rates on variable rate debt.

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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		12/31/2016				Term Loan Covenants (1)		Required		12/31/2016
Total Debt / Total Assets			< 60%		41.6%				Total Debt / Total Assets		< 60%		35.5%
Secured Debt / Total Assets			< 40%		3.7%				Secured Debt / Total Assets		< 40%		3.2%
Debt Service Coverage			> 1.5x		3.5x				Adjusted EBITDA / Fixed Charges		> 1.5x		3.1x
Unencumbered Assets / Unsecured Debt			> 150%		243.3%				Unsecured Debt / Unencumbered Assets		< 60%		36.6%
									Unencumbered Adjusted NOI / Unsecured Interest Expense		> 1.75x		4.2x
Debt Ratios (2)			Source						Unencumbered Portfolio Analysis
Gross debt			p. 29		$	1,950,229			# of unencumbered properties				148
Adjusted book			p. 37		$	4,539,768			% of total portfolio				94		%
Net debt / adjusted book ratio					38.3		%		Unencumbered square feet in-service				14,710
Net debt plus pref. equity / adj. book ratio					42.9		%		% of total portfolio				91		%
Net debt			p. 37		$	1,740,083			NOI from unencumbered real estate operations				$	75,167
In-place adjusted EBITDA			p. 10		$	76,820			% of total NOI from real estate operations				92		%
Net debt / in-place adjusted EBITDA ratio					5.7		x		Adjusted EBITDA from unencumbered real estate operations				$	70,213
Net debt plus pref. equity / in-place adj. EBITDA ratio					6.3		x		% of total adjusted EBITDA from real estate operations				91		%
Denominator for debt service coverage			p. 36		$	19,162			Unencumbered adjusted book				$	4,135,432
Denominator for fixed charges			p. 36		$	24,386			% of total adjusted book				91		%
Adjusted EBITDA			p. 10		$	76,781
Adjusted EBITDA debt service coverage ratio					4.0		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.

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Corporate Office Properties Trust

Consolidated Real Estate Joint Ventures as of 12/31/16

(dollars and square feet in thousands) 

    

Operating Properties	Operational Square Feet		Occupancy %	Leased %	NOI for Three Months Ended 12/31/16 (2)			NOI for the Year Ended 12/31/16 (2)			Total Assets (1)			Venture Level Debt			% COPT Owned
Suburban Maryland:
M Square Associates, LLC (2 properties)	242		100.0%	100.0%	$	1,391		$	5,518		$	59,300		$	44,610		50%
Huntsville, AL:
LW Redstone Company, LLC (6 properties)	505		100.0%	100.0%	1,808			7,223			89,071			49,470			85%
Total/Average	747		100.0%	100.0%	$	3,199		$	12,741		$	148,371		$	94,080

 

Non-operational Properties	Estimated Developable Square Feet				Total Assets (1)			Venture Level Debt			% COPT Owned
Suburban Maryland:
M Square Research Park	525				$	9,600		$	—		50%
Huntsville, Alabama:
Redstone Gateway (3)	4,084				67,674			—			85%
Washington, DC:
Stevens Place	189				40,925			—			95%
Total	4,798				$	118,199		$	—

 

(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 $49.3 million due from the City of Huntsville (including accrued interest) in connection with infrastructure costs funded by the joint venture.

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Corporate Office Properties Trust

Unconsolidated Real Estate Joint Venture as of 12/31/16

(dollars and square feet in thousands) 

 

Joint venture information
COPT ownership %	50		%
Investment in unconsolidated real estate joint venture	$	25,548
Number of properties	6
Square feet	962
Percentage occupied	100		%
					COPT’s Share (1)
Balance sheet information
Operating properties, net	$	128,525			$	64,263
Total Assets	$	147,067			$	73,534
Debt	$	59,553			$	29,777							COPT’s Share (1)
Operating information	Three Months Ended 12/31/16								Year Ended 12/31/16 (2)
Revenue	$	2,913			$	1,504			$	5,182			$	2,671
Operating expenses	(414		)		(207		)		(733		)		(366		)
NOI and EBITDA	2,499				1,297				4,449				2,305
Interest expense	(534		)		(267		)		(950		)		(475		)
Depreciation and amortization	(874		)		(311		)		(1,456		)		(518		)
Net income	$	1,091			$	719			$	2,043			$	1,312
NOI (per above)	$	2,499			$	1,297			$	4,449			$	2,305
Straight line rent adjustments	(196		)		(194		)		(359		)		(340		)
Cash NOI	$	2,303			$	1,103			$	4,090			$	1,965

(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.

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Corporate Office Properties Trust Supplementary Reconciliations of Non-GAAP Measures (dollars in thousands)
	Three Months Ended																				Year Ended
	12/31/16				9/30/16				6/30/16				3/31/16				12/31/15				12/31/16				12/31/15
GAAP revenues from real estate operations from continuing operations	$	127,999			$	130,954			$	133,924			$	133,087			$	134,477			$	525,964			$	519,064
Revenues from discontinued operations	—				—				—				—				—				—				4
Real estate revenues	$	127,999			$	130,954			$	133,924			$	133,087			$	134,477			$	525,964			$	519,068
GAAP property operating expenses from continuing operations	$	47,562			$	49,952			$	48,141			$	51,875			$	48,498			$	197,530			$	194,494
Property operating expenses from discontinued operations	—				—				—				—				—				—				(6		)
Real estate property operating expenses	$	47,562			$	49,952			$	48,141			$	51,875			$	48,498			$	197,530			$	194,488
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	$	6,885			$	34,101			$	—			$	—			$	64,047			$	40,986			$	68,047
Gain on sales of non-operating properties	(7,197		)		—				—				—				—				(7,197		)		(3,985		)
Gain on sales of operating properties	$	(312	)		$	34,101			$	—			$	—			$	64,047			$	33,789			$	64,062
Impairment losses, per statements of operations	$	1,554			$	27,699			$	69,692			$	2,446			$	19,744			$	101,391			$	23,289
Impairment losses on discontinued operations	—				—				—				—				—				—				234
Total impairment losses	$	1,554			$	27,699			$	69,692			$	2,446			$	19,744			$	101,391			$	23,523
Impairment losses on previously depreciated operating properties	(1,518		)		(25,857		)		(55,124		)		(847		)		(331		)		(83,346		)		(4,110		)
Impairment losses on non-operating properties	$	36			$	1,842			$	14,568			$	1,599			$	19,413			$	18,045			$	19,413

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Corporate Office Properties Trust Supplementary Reconciliations of Non-GAAP Measures (continued) (dollars in thousands)
	Three Months Ended																				Year Ended
	12/31/16				9/30/16				6/30/16				3/31/16				12/31/15				12/31/16				12/31/15
NOI from real estate operations (1)
Real estate revenues	$	127,999			$	130,954			$	133,924			$	133,087			$	134,477			$	525,964			$	519,068
Real estate property operating expenses	(47,562		)		(49,952		)		(48,141		)		(51,875		)		(48,498		)		(197,530		)		(194,488		)
COPT’s share of NOI in unconsolidated real estate JV (2)	1,297				1,008				—				—				—				2,305				—
NOI from real estate operations	81,734				82,010				85,783				81,212				85,979				330,739				324,580
General and administrative expenses	(6,211		)		(7,242		)		(6,512		)		(10,130		)		(6,609		)		(30,095		)		(24,526		)
Leasing expenses	(1,578		)		(1,613		)		(1,514		)		(1,753		)		(1,888		)		(6,458		)		(6,835		)
Business development expenses and land carry costs	(1,747		)		(1,716		)		(2,363		)		(2,418		)		(2,521		)		(8,244		)		(13,507		)
NOI from construction contracts and other service operations	1,024				808				525				526				1,075				2,883				3,706
Impairment losses on non-operating properties	(36		)		(1,842		)		(14,568		)		(1,599		)		(19,413		)		(18,045		)		(19,413		)
Equity in income of unconsolidated non-real estate entities	(1		)		1				10				10				10				20				62
Interest and other income	1,567				1,391				1,330				1,156				1,300				5,444				4,517
(Loss) gain on early extinguishment of debt	(1,073		)		(59		)		5				17				(402		)		(1,110		)		85,655
Gain on sales of non-operating properties	7,197				—				—				—				—				7,197				3,985
Interest expense	(18,664		)		(18,301		)		(22,639		)		(23,559		)		(22,347		)		(83,163		)		(89,074		)
COPT’s share of interest expense of unconsolidated real estate JV	(267		)		(208		)		—				—				—				(475		)		—
Income tax (expense) benefit	(272		)		21				(1		)		8				(46		)		(244		)		(199		)
FFO - per NAREIT (1)	$	61,673			$	53,250			$	40,056			$	43,470			$	35,138			$	198,449			$	268,951
(1) Please refer to the section entitled “Definitions” for a definition of this measure.
(2) See page 33 for a schedule of the related components.

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Corporate Office Properties Trust Supplementary Reconciliations of Non-GAAP Measures (continued) (dollars in thousands)
	Three Months Ended																				Year Ended
	12/31/16				9/30/16				6/30/16				3/31/16				12/31/15				12/31/16				12/31/15
Total interest expense	$	18,664			$	18,301			$	22,639			$	23,559			$	22,347			$	83,163			$	89,074
Less: Amortization of deferred financing costs	(1,093		)		(1,126		)		(1,178		)		(1,176		)		(1,127		)		(4,573		)		(4,466		)
Less: Amortization of net debt discounts and prem., net of amounts capitalized	(336		)		(332		)		(325		)		(319		)		(317		)		(1,312		)		(1,166		)
Less: Gain (loss) on interest rate derivatives	725				1,523				(319		)		(1,551		)		(386		)		378				(386		)
Less: Interest expense on debt in default extinguished via conveyance of properties	—				—				—				—				—				—				(11,224		)
COPT’s share of interest expense of unconsolidated real estate JV, excluding deferred financing costs	261				204				—				—				—				465				—
Denominator for interest coverage	18,221				18,570				20,817				20,513				20,517				78,121				71,832
Scheduled principal amortization	941				922				1,732				1,800				1,717				5,395				6,728
Denominator for debt service coverage	19,162				19,492				22,549				22,313				22,234				83,516				78,560
Capitalized interest	1,419				1,242				1,309				1,753				1,510				5,723				7,151
Preferred share dividends - redeemable non-convertible	3,640				3,552				3,553				3,552				3,553				14,297				14,210
Preferred unit distributions	165				165				165				165				165				660				660
Denominator for fixed charge coverage	$	24,386			$	24,451			$	27,576			$	27,783			$	27,462			$	104,196			$	100,581
Preferred share dividends	$	3,640			$	3,552			$	3,553			$	3,552			$	3,553			$	14,297			$	14,210
Preferred unit distributions	165				165				165				165				165				660				660
Common share dividends - unrestricted shares	26,991				25,963				25,938				25,919				25,895				104,811				103,552
Common share dividends - restricted shares	100				105				96				118				103				419				446
Common unit distributions	987				988				1,004				1,011				1,011				3,990				4,046
Total dividends/distributions	$	31,883			$	30,773			$	30,756			$	30,765			$	30,727			$	124,177			$	122,914
Common share dividends - unrestricted shares	$	26,991			$	25,963			$	25,938			$	25,919			$	25,895			$	104,811			$	103,552
Common unit distributions	987				988				1,004				1,011				1,011				3,990				4,046
Dividends and distributions for payout ratios	$	27,978			$	26,951			$	26,942			$	26,930			$	26,906			$	108,801			$	107,598

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Corporate Office Properties Trust Supplementary Reconciliations of Non-GAAP Measures (continued) (dollars in thousands)
	Three Months Ended
	12/31/16				9/30/16				6/30/16				3/31/16				12/31/15
Total Assets	$	3,780,885			$	3,634,194			$	3,841,692			$	3,937,908			$	3,909,312
Accumulated depreciation	706,385				681,476				678,827				713,283				700,363
Accumulated depreciation included in assets held for sale	9,566				22,938				76,653				33,143				18,317
Accumulated amort. of real estate intangibles and deferred leasing costs	210,692				201,414				199,038				198,552				195,506
Accumulated amortization of real estate intangibles and deferred leasing costs included in assets held for sale	11,575				21,469				27,206				20,655				17,456
COPT’s share of liabilities of unconsolidated real estate JV	29,873				30,013				—				—				—
COPT’s share of accumulated depreciation and amortization of unconsolidated real estate JV	938				375				—				—				—
Less: Cash and cash equivalents	(209,863		)		(47,574		)		(13,317		)		(62,489		)		(60,310		)
COPT’s share of cash of unconsolidated real estate JV	(283		)		(444		)		—				—				—
Adjusted book	$	4,539,768			$	4,543,861			$	4,810,099			$	4,841,052			$	4,780,644
Gross debt (page 29)	$	1,950,229			$	1,921,219			$	2,112,700			$	2,158,880			$	2,097,230
Less: Cash and cash equivalents	(209,863		)		(47,574		)		(13,317		)		(62,489		)		(60,310		)
COPT’s share of cash of unconsolidated real estate JV	(283		)		(444		)		—				—				—
Net debt	$	1,740,083			$	1,873,201			$	2,099,383			$	2,096,391			$	2,036,920
Preferred equity	207,883				207,883				207,883				207,883				207,883
Net debt plus preferred equity	$	1,947,966			$	2,081,084			$	2,307,266			$	2,304,274			$	2,244,803

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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.

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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.

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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 unrestricted 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

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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 (as defined above) by Adjusted book.

Net debt to in-place adjusted EBITDA ratio and Net debt plus preferred equity to in-place adjusted EBITDA ratio

Defined as Net debt or Net debt plus preferred equity (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.

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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 unrestricted 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.

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Corporate Office Properties Trust

Definitions

Other Definitions

 

Acquisition Costs — Transaction costs expensed in connection with executed or anticipated acquisitions of operating properties.

 

Annualized Rental Revenue — The monthly contractual base rent as of the reporting date multiplied by 12, plus the estimated annualized expense reimbursements under existing leases for occupied space. 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.

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	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 4Q AND FULL YEAR 2016 RESULTS

COLUMBIA, MD February 9, 2017 - Corporate Office Properties Trust (“COPT” or the “Company”) (NYSE: OFC) announced financial and operating results for the fourth quarter and full year ended December 31, 2016.

Management Comments

“We executed well on all aspects of our 2016 plan, achieving or slightly exceeding our guidance for key earnings and leverage metrics,” stated Stephen E. Budorick, COPT’s President & Chief Executive Officer. “We also implemented important changes to our portfolio, balance sheet and organization that position us to capitalize on the rising demand for efficient, secure real estate solutions throughout our Defense/IT locations. The federal government is signaling broad support for increased investment in cybersecurity and national security-related defense initiatives, and our portfolio and personnel are uniquely aligned to provide real estate solutions for government and defense contractor tenants supporting these missions.”

Financial Highlights

4^th Quarter Financial Results:

•	Diluted earnings per share (“EPS”) was $0.22 for the quarter ended December 31, 2016 as compared to $0.59 for the fourth quarter of 2015.

•	Diluted funds from operations per share (“FFOPS”), as calculated in accordance with NAREIT’s definition, was $0.57 for the fourth quarter of 2016 as compared to $0.31 for the fourth quarter of 2015.

•	FFOPS, as adjusted for comparability, was $0.51 for the quarter ended December 31, 2016 and $0.52 for the fourth quarter of 2015.

Full Year 2016 Financial Results:

•	Diluted loss per share was $(0.03) for the year ended December 31, 2016 as compared to EPS of $1.74 for 2015.

•	Per NAREIT’s definition, FFOPS for 2016 was $1.82 as compared to $2.55 for 2015.

•	FFOPS, as adjusted for comparability, for 2016 and for 2015 was $2.01.

Adjustments for comparability encompass items such as gains and impairment losses 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.

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Operating Performance Highlights

Portfolio Summary:

•	At December 31, 2016, the Company’s core portfolio of 152 operating office properties was 92.9% occupied and 94.4% leased.

•	During the quarter, the Company placed 155,000 square feet of development into service that, at December 31, 2016, were 100% leased; during the year, the Company placed 700,000 square feet into service that were 93% leased at year-end.

•	At year end, the Company had approximately $95 million of assets held for sale composed of nine operating properties that contain a total of 603,000 square feet and 47 acres of non-strategic land.

Same Office Performance:

•	At December 31, 2016, COPT’s same office portfolio of 133 buildings was 91.5% occupied and 92.8% leased.

•	For the quarter ended December 31, 2016, the Company’s same office property cash NOI increased 4.2% as compared to the quarter ended December 31, 2015. For the full year, same office property cash NOI grew 4.1% versus 2015.

Leasing: In December 2016, the Company executed a lease for a 125,000 square foot, full-building renewal with the U.S. Government. This lease was executed by the customer in January and therefore is not reflected in our year-end leasing statistics. Had the lease been executed in December, the Company’s leasing results for the fourth quarter and year ended December 31, 2016 would have been as follows:

•

Square Feet Leased-For the quarter ended December 31, 2016, the Company leased 658,000 total square feet, including 290,000 square feet of renewing leases, 96,000 square feet of new leases on previously vacant space, and 272,000 square feet in development projects. For the year ended December 31, 2016, the Company completed 3.0 million square feet of leasing, composed of 1.6 million square feet of renewing leases, 463,000 square feet of vacancy leasing, and 843,000 square feet in development projects.

•	Renewal Rates & Rent Spreads on Renewing Leases-During the fourth quarter and for the year, the Company renewed 69% and 77%, respectively, of expiring leases. For the quarter ended December 31, 2016, rents on renewed space increased 9.4% on a GAAP basis and declined 3.0% on a cash basis. For the year, GAAP rents on renewing leases increased 5.3% and cash rents decreased 5.3%.

•

Lease Terms-In the fourth quarter, lease terms averaged 6.7 years on renewing leases, 9.6 years on development leasing, 6.1 years on vacancy leasing, for a weighted average lease term of 7.8 years on all leasing. For the full year ended December 31, 2016, lease terms averaged 6.2 years on renewing leases, 9.8 years on development leasing and 6.3 years on vacancy leasing, for a weighted average lease term of 7.2 years.

Investment Activity Highlights

Development & Redevelopment Projects:

•	The Company has six properties totaling 907,000 square feet under construction that, at December 31, 2016, were 83% leased. These projects have a total estimated cost of $181.6 million, of which $79.1 million has been incurred.

•	The Company also has two completed properties that total 352,000 square feet which are being held for the U.S. Government and which currently are 4% leased. Including these two projects, the Company’s construction pipeline totals 1.3 million square feet and is 61% leased.

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•	COPT has 104,000 square feet in three properties under redevelopment, representing a total expected cost of $26.8 million, of which $20.7 million has been invested. The three projects were 55% leased as of January 31, 2017.

Dispositions:

•	During 2016, the Company completed $271 million of dispositions, including the sale of 21 operating properties totaling 1.6 million square feet that were 85.9% occupied for $249 million, and $22 million of non-strategic land.

•	The Company also sold a 50% interest in six triple-net leased, single-tenant data center properties with an aggregate value of $148 million by contributing them into a newly-formed joint venture.

•	The combined value of these transactions was $344 million.

Balance Sheet and Capital Transaction Highlights

•	As of December 31, 2016, the Company’s net debt plus preferred equity to adjusted book ratio was 42.9% and its net debt plus preferred equity to in-place adjusted EBITDA ratio was 6.3x. For the quarter ended December 31, 2016, the Company’s adjusted EBITDA fixed charge coverage ratio was 3.1x.

•	As of December 31, 2016 and including the effect of interest rate swaps, the Company’s weighted average effective interest rate was 4.1%; additionally, 95% of the Company’s debt was subject to fixed interest rates and the debt portfolio had a weighted average maturity of 6.1 years.

•	During the fourth quarter ended December 31, 2016, the Company issued $110 million of common shares through its At-the-Market (“ATM”) program at an average gross price of $29.56 per share. Earlier in the quarter, the Company retired its $120 million Term Loan, which was due in 2019, and now has no debt maturities until 2020.

•	In January 2017, the Company used $26.6 million of cash on-hand to redeem all outstanding shares of its Series K Convertible Preferred.

2017 FFO Guidance

Management is maintaining its previously issued guidance range for full year 2017 FFOPS, as adjusted for comparability, of $2.00-$2.08, and is establishing guidance for the first quarter ending March 31, 2017 at a range of $0.44 -$0.46. Reconciliations of projected diluted EPS to projected FFOPS are as follows:

		Three Months Ending								Year Ending
		March 31, 2017								December 31, 2017
		Low				High				Low				High
EPS		$	0.14			$	0.16			$	0.59			$	0.67
Real estate depreciation and amortization		0.35				0.35				1.40				1.40
FFOPS, NAREIT definition		0.49				0.51				1.99				2.07
Original issuance costs of redeemed preferred shares		—				—				0.07				0.07
Gains on sales of non-operating properties		(0.05		)		(0.05		)		(0.06		)		(0.06		)
FFOPS, as adjusted for comparability		$	0.44			$	0.46			$	2.00			$	2.08

Associated Supplemental Presentation

Prior to the call, the Company will post a slide presentation to accompany management’s prepared remarks for its fourth quarter and full year 2016 conference call, the details of which are provided below. An accompanying slide presentation can be viewed on and downloaded from the ‘Investors’ section of the Company’s website (www.copt.com).

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Conference Call Information

Management will discuss fourth quarter and full year 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, February 9, 2017 after the market close

Conference Call Date:        Friday, February 10, 2017

Time:                  12:00 p.m. Eastern Time

Telephone Number: (within the U.S.)     888-268-4181

Telephone Number: (outside the U.S.)    617-597-5486

Passcode:                  78416731#

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=P3CMC7QQA

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 6:00 p.m. Eastern Time on Friday, February 10, through midnight Eastern Time on Friday, February 24. To access the replay within the United States, please call 888-286-8010 and use passcode 35538878. To access the replay outside the United States, please call 617-801-6888 and use passcode 35538878.

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 portfolio of Class-A office properties located in select urban/urban-like submarkets within our regional footprint (“Regional Office Properties”). As of December 31, 2016, we derived 87% of core portfolio annualized revenue from Defense/IT Locations and 13% from our Regional Office Properties. As of December 31, 2016, our core portfolio of 152 office properties encompassed 16.3 million square feet and was 94.4% leased.

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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.

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Corporate Office Properties Trust

Summary Financial Data

(unaudited)

(in thousands, except per share data)

	For the Three Months Ended December 31,								For the Year Ended December 31,
	2016				2015				2016				2015
Revenues
Real estate revenues	$	127,999			$	134,477			$	525,964			$	519,064
Construction contract and other service revenues	13,992				8,848				48,364				106,402
Total revenues	141,991				143,325				574,328				625,466
Expenses
Property operating expenses	47,562				48,498				197,530				194,494
Depreciation and amortization associated with real estate operations	32,929				36,237				132,719				140,025
Construction contract and other service expenses	12,968				7,773				45,481				102,696
Impairment losses	1,554				19,744				101,391				23,289
General and administrative expenses	6,211				6,609				30,095				24,526
Leasing expenses	1,578				1,888				6,458				6,835
Business development expenses and land carry costs	1,747				2,521				8,244				13,507
Total operating expenses	104,549				123,270				521,918				505,372
Operating income	37,442				20,055				52,410				120,094
Interest expense	(18,664		)		(22,347		)		(83,163		)		(89,074		)
Interest and other income	1,567				1,300				5,444				4,517
(Loss) gain on early extinguishment of debt	(1,073		)		(402		)		(1,110		)		85,275
Income (loss) from continuing operations before equity in income of unconsolidated entities and income taxes	19,272				(1,394		)		(26,419		)		120,812
Equity in income of unconsolidated entities	718				10				1,332				62
Income tax expense	(272		)		(46		)		(244		)		(199		)
Income (loss) from continuing operations	19,718				(1,430		)		(25,331		)		120,675
Discontinued operations	—				—				—				156
Income (loss) before gain on sales of real estate	19,718				(1,430		)		(25,331		)		120,831
Gain on sales of real estate	6,885				64,047				40,986				68,047
Net income	26,603				62,617				15,655				188,878
Net (income) loss attributable to noncontrolling interests
Common units in the Operating Partnership (“OP”)	(793		)		(2,172		)		155				(6,403		)
Preferred units in the OP	(165		)		(165		)		(660		)		(660		)
Other consolidated entities	(912		)		(916		)		(3,711		)		(3,515		)
Net income attributable to COPT	24,733				59,364				11,439				178,300
Preferred share dividends	(3,640		)		(3,553		)		(14,297		)		(14,210		)
Issuance costs associated with redeemed preferred shares	(17		)		—				(17		)		—
Net income (loss) attributable to COPT common shareholders	$	21,076			$	55,811			$	(2,875	)		$	164,090
Earnings per share (“EPS”) computation:
Numerator for diluted EPS:
Net income (loss) attributable to common shareholders	$	21,076			$	55,811			$	(2,875	)		$	164,090
Common units in the OP	—				—				—				6,403
Amount allocable to share-based compensation awards	(100		)		(230		)		(419		)		(706		)
Numerator for diluted EPS	$	20,976			$	55,581			$	(3,294	)		$	169,787
Denominator:
Weighted average common shares - basic	95,066				94,164				94,502				93,914
Common units in the OP	—				—				—				3,692
Dilutive effect of share-based compensation awards	76				—				—				61
Weighted average common shares - diluted	95,142				94,164				94,502				97,667
Diluted EPS	$	0.22			$	0.59			$	(0.03	)		$	1.74

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Corporate Office Properties Trust

Summary Financial Data

(unaudited)

(in thousands, except per share data)

	For the Three Months Ended December 31,								For the Year Ended December 31,
	2016				2015				2016				2015
Net income	$	26,603			$	62,617			$	15,655			$	188,878
Real estate-related depreciation and amortization	32,929				36,237				132,719				140,025
Impairment losses on previously depreciated operating properties	1,518				331				83,346				4,110
Gain on sales of previously depreciated operating properties	312				(64,047		)		(33,789		)		(64,062		)
Depreciation and amortization on unconsolidated real estate entities	311				—				518				—
Funds from operations (“FFO”)	61,673				35,138				198,449				268,951
Noncontrolling interests - preferred units in the OP	(165		)		(165		)		(660		)		(660		)
FFO allocable to other noncontrolling interests	(1,085		)		(817		)		(4,020		)		(3,586		)
Preferred share dividends	(3,640		)		(3,553		)		(14,297		)		(14,210		)
Issuance costs associated with redeemed preferred shares	(17		)		—				(17		)		—
Basic and diluted FFO allocable to share-based compensation awards	(208		)		(115		)		(694		)		(1,041		)
Basic and Diluted FFO available to common share and common unit holders (“Diluted FFO”)	56,558				30,488				178,761				249,454
Operating property acquisition costs	—				32				—				4,134
Gain on sales of non-operating properties	(7,197		)		—				(7,197		)		(3,985		)
Impairment losses on non-operating properties	36				19,413				18,045				19,413
(Gain) loss on interest rate derivatives	(725		)		386				(378		)		386
Loss (gain) on early extinguishment of debt	1,073				402				1,110				(85,655		)
Issuance costs associated with redeemed preferred shares	17				—				17				—
Add: Negative FFO of properties conveyed to extinguish debt in default (1)	—				—				—				10,456
Demolition costs on redevelopment properties	—				225				578				1,396
Executive transition costs	431				—				6,454				—
Diluted FFO comparability adjustments allocable to share-based compensation awards	26				(88		)		(73		)		225
Diluted FFO available to common share and common unit holders, as adjusted for comparability	50,219				50,858				197,317				195,824
Straight line rent adjustments	1,294				(2,677		)		1,500				(13,497		)
Straight line rent adjustments - properties in default conveyed	—				—				—				(115		)
Amortization of intangibles included in net operating income	463				365				1,488				1,428
Share-based compensation, net of amounts capitalized	1,174				1,625				5,549				6,574
Amortization of deferred financing costs	1,093				1,127				4,573				4,466
Amortization of net debt discounts, net of amounts capitalized	336				317				1,312				1,166
Replacement capital expenditures	(13,716		)		(20,086		)		(53,102		)		(49,266		)
Diluted AFFO adjustments allocable to other noncontrolling interests	42				63				179				118
Diluted AFFO adjustments on unconsolidated real estate JV	(188		)		—				(329		)		—
Diluted adjusted funds from operations available to common share and common unit holders (“Diluted AFFO”)	$	40,717			$	31,592			$	158,487			$	146,698
Diluted FFO per share	$	0.57			$	0.31			$	1.82			$	2.55
Diluted FFO per share, as adjusted for comparability	$	0.51			$	0.52			$	2.01			$	2.01
Dividends/distributions per common share/unit	$	0.275			$	0.275			$	1.100			$	1.100

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

vii

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Corporate Office Properties Trust

Summary Financial Data

(unaudited)

(Dollars and shares in thousands, except per share data)

		December 31, 2016				December 31, 2015
Balance Sheet Data
Properties, net of accumulated depreciation		$	3,073,362			$	3,349,748
Total assets		3,780,885				3,909,312
Debt, per balance sheet		1,904,001				2,077,752
Total liabilities		2,163,242				2,273,530
Redeemable noncontrolling interest		22,979				19,218
Equity		1,594,664				1,616,564
Net debt to adjusted book		38.3		%		42.6		%
Core Portfolio Data (as of period end) (1)
Number of operating properties		152				157
Total net rentable square feet owned (in thousands)		16,301				17,038
Occupancy %		92.9		%		92.7		%
Leased %		94.4		%		93.9		%

	For the Three Months Ended December 31,						For the Year Ended December 31,
	2016			2015			2016			2015
Payout ratios
Diluted FFO	49.5	%		88.3	%		60.9	%		43.1	%
Diluted FFO, as adjusted for comparability	55.7	%		52.9	%		55.1	%		54.9	%
Diluted AFFO	68.7	%		85.2	%		68.6	%		73.3	%
Adjusted EBITDA fixed charge coverage ratio	3.1	x		2.9	x		3.0	x		3.0	x
Net debt to in-place adjusted EBITDA ratio (2)	5.7	x		6.5	x		N/A			N/A
Reconciliation of denominators for per share measures
Denominator for diluted EPS	95,142			94,164			94,502			97,667
Weighted average common units	3,591			3,677			3,633			—
Anti-dilutive EPS effect of share-based compensation awards	—			—			92			—
Denominator for diluted FFO per share and as adjusted for comparability	98,733			97,841			98,227			97,667

(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

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Corporate Office Properties Trust

Summary Financial Data

(unaudited)

(Dollars in thousands)

	For the Three Months Ended December 31,								For the Year Ended December 31,
	2016				2015				2016				2015
Reconciliation of common share dividends to dividends and distributions for payout ratios
Common share dividends - unrestricted shares	$	26,991			$	25,895			$	104,811			$	103,552
Common unit distributions	987				1,011				3,990				4,046
Dividends and distributions for payout ratios	$	27,978			$	26,906			$	108,801			$	107,598
Reconciliation of GAAP net income to adjusted earnings before interest, income taxes, depreciation and amortization (“Adjusted EBITDA”) and in-place adjusted EBITDA
Net income	$	26,603			$	62,617			$	15,655			$	188,878
Interest expense on continuing operations	18,664				22,347				83,163				89,074
Income tax expense	272				46				244				199
Real estate-related depreciation and amortization	32,929				36,237				132,719				140,025
Depreciation of furniture, fixtures and equipment	512				597				2,151				2,206
Impairment losses	1,554				19,744				101,391				23,523
Loss (gain) on early extinguishment of debt on continuing and discontinued operations	1,073				402				1,110				(85,655		)
Gain on sales of operating properties	312				(64,047		)		(33,789		)		(64,062		)
Gain on sales of non-operational properties	(7,197		)		—				(7,197		)		(3,985		)
Net (gain) loss on investments in unconsolidated entities included in interest and other income	(117		)		6				(149		)		127
Business development expenses	1,167				1,512				4,823				4,775
Operating property acquisition costs	—				32				—				4,134
EBITDA from properties conveyed to extinguish debt in default	—				—				—				(768		)
Demolition costs on redevelopment properties	—				225				578				1,396
Adjustments from unconsolidated real estate JV	578				—				993				—
Executive transition costs	431				—				6,454				—
Adjusted EBITDA	$	76,781			$	79,718			$	308,146			$	299,867
Proforma net operating income adjustment for property changes within period	39				(1,738		)
In-place adjusted EBITDA	$	76,820			$	77,980
Reconciliation of interest expense to the denominators for fixed charge coverage-Adjusted EBITDA
Interest expense	$	18,664			$	22,347			$	83,163			$	89,074
Less: Amortization of deferred financing costs	(1,093		)		(1,127		)		(4,573		)		(4,466		)
Less: Amortization of net debt discount, net of amounts capitalized	(336		)		(317		)		(1,312		)		(1,166		)
Less: Gain (loss) on interest rate derivatives	725				(386		)		378				(386		)
Less: Interest expense on debt in default extinguished via conveyance of properties	—				—				—				(11,224		)
COPT’s share of interest expense of unconsolidated real estate JV, excluding deferred financing costs	261				—				465				—
Scheduled principal amortization	941				1,717				5,395				6,728
Capitalized interest	1,419				1,510				5,723				7,151
Preferred share dividends	3,640				3,553				14,297				14,210
Preferred unit distributions	165				165				660				660
Denominator for fixed charge coverage-Adjusted EBITDA	$	24,386			$	27,462			$	104,196			$	100,581

ix

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Corporate Office Properties Trust

Summary Financial Data

(unaudited)

(Dollars in thousands)

	For the Three Months Ended December 31,								For the Year Ended December 31,
	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	$	8,000			$	6,836			$	45,020			$	24,244
Building improvements	7,064				16,674				22,026				28,643
Leasing costs	1,387				3,518				9,365				8,504
Less: Excluded tenant improvements and incentives	871				(393		)		(14,073		)		(1,438		)
Less: Excluded building improvements	(3,606		)		(6,551		)		(8,817		)		(9,879		)
Less: Excluded leasing costs	—				2				(419		)		(808		)
Replacement capital expenditures	$	13,716			$	20,086			$	53,102			$	49,266
Same office property cash NOI	$	63,938			$	61,359			$	247,705			$	237,860
Straight line rent adjustments and lease incentive amortization	(1,829		)		(177		)		(8,892		)		3,297
Add: Amortization of deferred market rental revenue	(1		)		28				89				99
Less: Amortization of below-market cost arrangements	(218		)		(259		)		(873		)		(1,034		)
Add: Lease termination fee, gross	601				416				2,280				2,366
Add: Cash NOI on tenant-funded landlord assets	1,370				547				7,160				937
Same office property NOI	$	63,861			$	61,914			$	247,469			$	243,525

		December 31, 2016				December 31, 2015
Reconciliation of total assets to adjusted book
Total assets		$	3,780,885			$	3,909,312
Accumulated depreciation		706,385				700,363
Accumulated depreciation included in assets held for sale		9,566				18,317
Accumulated amortization of real estate intangibles and deferred leasing costs		210,692				195,506
Accumulated amortization of real estate intangibles and deferred leasing costs included in assets held for sale		11,575				17,456
COPT’s share of liabilities of unconsolidated real estate JV		29,873				—
COPT’s share of accumulated depreciation and amortization of unconsolidated real estate JV		938				—
Less: Cash and cash equivalents		(209,863		)		(60,310		)
COPT’s share of cash of unconsolidated real estate JV		(283		)		—
Adjusted book		$	4,539,768			$	4,780,644
Reconciliation of debt outstanding to net debt
Debt outstanding (excluding net debt discounts and deferred financing costs)		$	1,950,229			$	2,097,230
Less: Cash and cash equivalents		(209,863		)		(60,310		)
COPT’s share of cash of unconsolidated real estate JV		(283		)		—
Net debt		$	1,740,083			$	2,036,920

x