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 the United States Government and its 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 June 30, 2017, we derived 87% of our core portfolio annualized revenue from Defense/IT Locations and 13% from our Regional Office Properties. As of June 30, 2017, our core portfolio of 153 office properties, including six owned through an unconsolidated joint venture, encompassed 16.6 million square feet and was 94.8% 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, 2016.

1


Corporate Office Properties Trust
Equity Research Coverage
 
Firm
 
Senior Analyst
 
Phone
 
Email
Bank of America Merrill Lynch
 
Jamie Feldman
 
646-855-5808
 
james.feldman@baml.com
BTIG
 
Tom Catherwood
 
212-738-6410
 
tcatherwood@btig.com
Capital One Securities
 
Chris Lucas
 
571-633-8151
 
christopher.lucas@capitalone.com
Citigroup Global Markets
 
Manny Korchman
 
212-816-1382
 
emmanuel.korchman@citi.com
Evercore ISI
 
Steve Sakwa
 
212-446-9462
 
steve.sakwa@evercoreisi.com
Green Street Advisors
 
Jed Reagan
 
949-640-8780
 
jreagan@greenstreetadvisors.com
Jefferies & Co.
 
Jonathan Petersen
 
212-284-1705
 
jpetersen@jefferies.com
JP Morgan
 
Tony Paolone
 
212-622-6682
 
anthony.paolone@jpmorgan.com
KeyBanc Capital Markets
 
Craig Mailman
 
917-368-2316
 
cmailman@key.com
Mizuho Securities USA Inc.
 
Richard Anderson
 
212-205-8445
 
richard.anderson@us.mizuho-sc.com
Raymond James
 
Bill Crow
 
727-567-2594
 
bill.crow@raymondjames.com
Robert W. Baird & Co., Inc.
 
Dave Rodgers
 
216-737-7341
 
drodgers@rwbaird.com
Stifel Financial Corp.
 
John Guinee
 
443-224-1307
 
jwguinee@stifel.com
SunTrust Robinson Humphrey, Inc.
 
Michael Lewis
 
212-319-5659
 
michael.lewis@suntrust.com
 
With the exception of Green Street Advisors, the above-listed firms are those whose analysts publish research material on the Company and whose estimates of our FFO per share can be tracked through Thomson’s First Call Corporation. Any opinions, estimates, or forecasts the above analysts make regarding COPT’s future performance are their own and do not represent the views, estimates, or forecasts of COPT’s management.

2


Corporate Office Properties Trust
Selected Financial Summary Data
(in thousands, except per share data)
 
 
Page
 
Three Months Ended
 
Six Months Ended
SUMMARY OF RESULTS 
 
Refer.
 
6/30/17
 
3/31/17
 
12/31/16
 
9/30/16
 
6/30/16
 
6/30/17
 
6/30/16
Net income (loss)
 
6
 
$
19,207

 
$
23,088

 
$
26,603

 
$
29,272

 
$
(48,316
)
 
$
42,295

 
$
(40,220
)
NOI from real estate operations
 
13
 
$
80,963

 
$
79,546

 
$
81,734

 
$
82,010

 
$
85,783

 
$
160,509

 
$
166,995

Same Office Property NOI
 
16
 
$
70,936

 
$
70,695

 
$
71,308

 
$
69,059

 
$
69,516

 
$
141,631

 
$
136,825

Same Office Property Cash NOI
 
17
 
$
71,313

 
$
70,433

 
$
71,280

 
$
68,581

 
$
69,485

 
$
141,746

 
$
136,601

Adjusted EBITDA
 
10
 
$
75,595

 
$
73,885

 
$
76,781

 
$
76,834

 
$
79,625

 
$
149,480

 
$
154,531

Diluted AFFO avail. to common share and unit holders
 
9
 
$
43,687

 
$
38,347

 
$
40,717

 
$
37,998

 
$
42,937

 
$
82,034

 
$
79,772

Dividend per common share
 
N/A
 
$
0.275

 
$
0.275

 
$
0.275

 
$
0.275

 
$
0.275

 
$
0.550

 
$
0.550

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Per share - diluted:
 
 
 
 

 
 

 
 

 
 

 
 

 
 

 
 
EPS
 
8
 
$
0.08

 
$
0.18

 
$
0.22

 
$
0.25

 
$
(0.54
)
 
$
0.26

 
$
(0.51
)
FFO - NAREIT
 
8
 
$
0.42

 
$
0.51

 
$
0.57

 
$
0.49

 
$
0.36

 
$
0.93

 
$
0.75

FFO - as adjusted for comparability
 
8
 
$
0.49

 
$
0.47

 
$
0.51

 
$
0.51

 
$
0.52

 
$
0.97

 
$
0.99

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Numerators for diluted per share amounts:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Diluted EPS
 
6
 
$
7,859

 
$
18,050

 
$
20,976

 
$
23,642

 
$
(51,068
)
 
$
25,909

 
$
(47,912
)
Diluted FFO available to common share and unit holders
 
7
 
$
42,767

 
$
51,900

 
$
56,558

 
$
48,449

 
$
35,194

 
$
94,667

 
$
73,754

Diluted FFO available to common share and unit holders, as adjusted for comparability
 
7
 
$
50,658

 
$
48,163

 
$
50,219

 
$
50,461

 
$
50,630

 
$
98,821

 
$
96,637

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Payout ratios:
 
 
 
 

 
 

 
 

 
 

 
 

 
 

 
 
Diluted FFO
 
N/A
 
65.9
%
 
54.2
%
 
49.5
%
 
55.6
%
 
76.6
%
 
59.5
%
 
73.0
%
Diluted FFO - as adjusted for comparability
 
N/A
 
55.6
%
 
58.5
%
 
55.7
%
 
53.4
%
 
53.2
%
 
57.0
%
 
55.7
%
Diluted AFFO
 
N/A
 
64.5
%
 
73.4
%
 
68.7
%
 
70.9
%
 
62.7
%
 
68.7
%
 
67.5
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
CAPITALIZATION
 
 
 
 

 
 

 
 
 
 

 
 

 
 

 
 
Total Market Capitalization
 
28
 
$
5,524,727

 
$
5,503,036

 
$
5,315,331

 
$
4,887,466

 
$
5,228,793

 
 
 
 
Total Equity Market Capitalization
 
28
 
$
3,612,511

 
$
3,583,815

 
$
3,395,102

 
$
2,996,247

 
$
3,116,093

 
 
 
 
Gross debt
 
29
 
$
1,942,216

 
$
1,949,221

 
$
1,950,229

 
$
1,921,219

 
$
2,112,700

 
 
 
 
Net debt to adjusted book
 
31
 
42.4
%
 
38.2
%
 
38.3
%
 
41.2
%
 
43.6
%
 
N/A

 
N/A

Net debt plus preferred equity to adjusted book
 
31
 
42.6
%
 
42.2
%
 
42.9
%
 
45.8
%
 
48.0
%
 
N/A

 
N/A

Adjusted EBITDA fixed charge coverage ratio
 
31
 
3.2
x
 
3.1
x
 
3.1
x
 
3.1
x
 
2.9
x
 
3.1
x
 
2.8
x
Net debt to in-place adjusted EBITDA ratio
 
31
 
6.4
x
 
5.9
x
 
5.7
x
 
6.3
x
 
6.6
x
 
N/A

 
N/A

Net debt plus pref. equity to in-place adj. EBITDA ratio
 
31
 
6.4
x
 
6.5
x
 
6.3
x
 
7.0
x
 
7.2
x
 
N/A

 
N/A

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
OTHER
 
 
 
 

 
 

 
 

 
 

 
 

 
 

 
 
Revenue from early termination of leases
 
N/A
 
$
467

 
$
612

 
$
794

 
$
437

 
$
338

 
$
1,079

 
$
1,050

Capitalized interest costs
 
N/A
 
$
1,611

 
$
1,531

 
$
1,419

 
$
1,242

 
$
1,309

 
$
3,142

 
$
3,062



3


Corporate Office Properties Trust
Selected Portfolio Data
 
 
 
 
 
 
 
 
 
 
 
6/30/17
 
3/31/17
 
12/31/16
 
9/30/16
 
6/30/16
 
(1)
 
 
 
 
 
 
 
 
# of Operating Office Properties
 
 
 
 
 
 
 
 
 
Total Portfolio
165

 
164

 
164
 
168

 
181

Consolidated Portfolio
159

 
158

 
158
 
162

 
181

Core Portfolio
153

 
152

 
152
 
146

 
146

Same Office Properties
137

 
137

 
137
 
137

 
137

 
 
 
 
 
 
 
 
 
 
% Occupied
 
 
 
 
 
 
 
 
 
Total Portfolio
93.0
%
 
92.4
%
 
92.1
%
 
91.3
%
 
92.6
%
Consolidated Portfolio
92.6
%
 
92.0
%
 
91.6
%
 
90.8
%
 
92.6
%
Core Portfolio
93.8
%
 
93.3
%
 
92.9
%
 
93.0
%
 
92.3
%
Same Office Properties
92.7
%
 
92.5
%
 
91.9
%
 
91.9
%
 
91.7
%
 
 
 
 
 
 
 
 
 
 
% Leased
 
 
 
 
 
 
 
 
 
Total Portfolio
94.0
%
 
93.3
%
 
93.5
%
 
92.8
%
 
92.6
%
Consolidated Portfolio
93.7
%
 
92.9
%
 
93.1
%
 
92.4
%
 
92.6
%
Core Portfolio
94.8
%
 
94.2
%
 
94.4
%
 
94.4
%
 
93.8
%
Same Office Properties
93.6
%
 
93.2
%
 
93.3
%
 
93.5
%
 
93.2
%
 
 
 
 
 
 
 
 
 
 
Square Feet of Office Properties (in thousands)
 
 
 
 
 
 
 
 
 
Total Portfolio
17,323

 
17,082

 
17,190

 
17,488

 
18,402

Consolidated Portfolio
16,361

 
16,121

 
16,228

 
16,526

 
18,402

Core Portfolio
16,568

 
16,347

 
16,301

 
15,938

 
16,018

Same Office Properties
14,699

 
14,699

 
14,699

 
14,699

 
14,699

 
 
 
 
 
 
 
 
 
 
Wholesale Data Center (in megawatts (“MWs”))
 
 
 
 
 
 
 
 
 
MWs Operational
19.25

 
19.25

 
19.25

 
19.25

 
19.25

MWs Leased (2)
16.86

 
14.86

 
14.86

 
15.81

 
15.81

(1)
As of 6/30/2017, our total portfolio included 9 properties held for sale totaling 469,000 square feet that were 95.4% occupied and 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 17.92 megawatts as of 6/30/2017.

4


Corporate Office Properties Trust
Consolidated Balance Sheets
(dollars in thousands)
 
6/30/17
 
3/31/17
 
12/31/16
 
9/30/16
 
6/30/16
Assets
 

 
 

 
 

 
 

 
 

Properties, net
 

 
 

 
 

 
 

 
 

Operating properties, net
$
2,688,174

 
$
2,670,157

 
$
2,671,831

 
$
2,632,069

 
$
2,782,330

Construction and redevelopment in progress, including land (1)
107,910

 
108,925

 
86,323

 
72,043

 
69,070

Land held (1)
338,475

 
313,932

 
315,208

 
324,226

 
318,327

Total properties, net
3,134,559

 
3,093,014

 
3,073,362

 
3,028,338

 
3,169,727

Assets held for sale
51,291

 
41,391

 
94,654

 
161,454

 
300,584

Cash and cash equivalents
10,606

 
226,470

 
209,863

 
47,574

 
13,317

Restricted cash and marketable securities
6,866

 
6,439

 
8,193

 
7,583

 
8,302

Investment in unconsolidated real estate joint venture
25,335

 
25,417

 
25,548

 
25,721

 

Accounts receivable, net
42,742

 
29,431

 
34,438

 
25,790

 
32,505

Deferred rent receivable, net
89,832

 
89,410

 
90,219

 
87,526

 
92,316

Intangible assets on real estate acquisitions, net
69,205

 
73,748

 
78,351

 
84,081

 
88,788

Deferred leasing costs, net
40,506

 
40,753

 
41,214

 
41,470

 
42,632

Investing receivables
54,598

 
53,570

 
52,279

 
51,119

 
50,162

Prepaid expenses and other assets, net
49,347

 
59,723

 
72,764

 
73,538

 
43,359

Total assets
$
3,574,887

 
$
3,739,366

 
$
3,780,885

 
$
3,634,194

 
$
3,841,692

Liabilities and equity
 

 
 

 
 

 
 

 
 

Liabilities:
 

 
 

 
 

 
 

 
 

Debt
$
1,897,734

 
$
1,903,657

 
$
1,904,001

 
$
1,873,836

 
$
2,094,486

Accounts payable and accrued expenses
95,267

 
83,107

 
108,682

 
112,306

 
92,848

Rents received in advance and security deposits
25,444

 
28,393

 
29,798

 
28,740

 
32,035

Dividends and distributions payable
28,462

 
31,131

 
31,335

 
30,225

 
30,219

Deferred revenue associated with operating leases
13,172

 
11,750

 
12,666

 
9,898

 
17,560

Interest rate derivatives
601

 
735

 
1,572

 
17,272

 
20,245

Redeemable preferred shares at liquidation preference (2)

 

 
26,583

 

 

Capital lease obligation
16,177

 

 

 

 

Other liabilities
55,475

 
55,049

 
48,605

 
38,282

 
31,123

Total liabilities
2,132,332

 
2,113,822

 
2,163,242

 
2,110,559

 
2,318,516

Redeemable noncontrolling interests
23,731

 
23,676

 
22,979

 
22,848

 
22,473

Equity:
 

 
 

 
 

 
 
 
 
COPT’s shareholders’ equity:
 

 
 

 
 

 
 
 
 
Preferred shares at liquidation preference

 
172,500

 
172,500

 
199,083

 
199,083

Common shares
995

 
994

 
985

 
948

 
947

Additional paid-in capital
2,146,119

 
2,136,369

 
2,116,581

 
2,008,787

 
2,007,328

Cumulative distributions in excess of net income
(793,828
)
 
(774,445
)
 
(765,276
)
 
(759,262
)
 
(756,940
)
Accumulated other comprehensive loss
(1,163
)
 
(370
)
 
(1,731
)
 
(16,314
)
 
(17,712
)
Total COPT’s shareholders’ equity
1,352,123

 
1,535,048

 
1,523,059

 
1,433,242

 
1,432,706

Noncontrolling interests in subsidiaries
 

 
 

 
 

 
 

 
 

Common units in the Operating Partnership
46,233

 
46,683

 
49,228

 
46,757

 
47,550

Preferred units in the Operating Partnership
8,800

 
8,800

 
8,800

 
8,800

 
8,800

Other consolidated entities
11,668

 
11,337

 
13,577

 
11,988

 
11,647

Total noncontrolling interests in subsidiaries
66,701

 
66,820

 
71,605

 
67,545

 
67,997

Total equity
1,418,824

 
1,601,868

 
1,594,664

 
1,500,787

 
1,500,703

Total liabilities, redeemable noncontrolling interest and equity
$
3,574,887

 
$
3,739,366

 
$
3,780,885

 
$
3,634,194

 
$
3,841,692

(1)
Please refer to pages 24, 25 and 27 for detail.
(2)
We redeemed all of our Series K Preferred Shares effective 1/21/17. 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.

5


Corporate Office Properties Trust
Consolidated Statements of Operations
(in thousands, except per share data)
 
Three Months Ended
 
Six Months Ended
 
6/30/17
 
3/31/17
 
12/31/16
 
9/30/16
 
6/30/16
 
6/30/17
 
6/30/16
Revenues
 

 
 

 
 

 
 

 
 

 
 
 
 
Rental revenue
$
101,347

 
$
100,615

 
$
100,849

 
$
103,956

 
$
107,524

 
$
201,962

 
$
212,906

Tenant recoveries and other real estate operations revenue
26,950

 
26,152

 
27,150

 
26,998

 
26,400

 
53,102

 
54,105

Construction contract and other service revenues
23,138

 
13,034

 
13,992

 
11,149

 
12,003

 
36,172

 
23,223

Total revenues
151,435

 
139,801

 
141,991

 
142,103

 
145,927

 
291,236

 
290,234

Expenses
 

 
 

 
 

 
 

 
 

 
 
 
 
Property operating expenses
48,628

 
48,519

 
47,562

 
49,952

 
48,141

 
97,147

 
100,016

Depreciation and amortization associated with real estate operations
32,793

 
33,059

 
32,929

 
32,015

 
33,248

 
65,852

 
67,775

Construction contract and other service expenses
22,315

 
12,486

 
12,968

 
10,341

 
11,478

 
34,801

 
22,172

Impairment losses
1,625

 

 
1,554

 
27,699

 
69,692

 
1,625

 
72,138

General and administrative expenses
6,017

 
6,747

 
6,211

 
7,242

 
6,512

 
12,764

 
16,642

Leasing expenses
1,842

 
1,864

 
1,578

 
1,613

 
1,514

 
3,706

 
3,267

Business development expenses and land carry costs
1,597

 
1,693

 
1,747

 
1,716

 
2,363

 
3,290

 
4,781

Total operating expenses
114,817

 
104,368

 
104,549

 
130,578

 
172,948

 
219,185

 
286,791

Operating income
36,618

 
35,433

 
37,442

 
11,525

 
(27,021
)
 
72,051

 
3,443

Interest expense
(19,163
)
 
(18,994
)
 
(18,664
)
 
(18,301
)
 
(22,639
)
 
(38,157
)
 
(46,198
)
Interest and other income
1,583

 
1,726

 
1,567

 
1,391

 
1,330

 
3,309

 
2,486

(Loss) gain on early extinguishment of debt
(513
)
 

 
(1,073
)
 
(59
)
 
5

 
(513
)
 
22

Income (loss) before equity in income of unconsolidated entities and income taxes
18,525

 
18,165

 
19,272

 
(5,444
)
 
(48,325
)
 
36,690

 
(40,247
)
Equity in income of unconsolidated entities
718

 
725

 
718

 
594

 
10

 
1,443

 
20

Income tax (expense) benefit
(48
)
 
(40
)
 
(272
)
 
21

 
(1
)
 
(88
)
 
7

Income (loss) before gain on sales of real estate
19,195

 
18,850

 
19,718

 
(4,829
)
 
(48,316
)
 
38,045

 
(40,220
)
Gain on sales of real estate
12

 
4,238

 
6,885

 
34,101

 

 
4,250

 

Net income (loss)
19,207

 
23,088

 
26,603

 
29,272

 
(48,316
)
 
42,295

 
(40,220
)
Net (income) loss attributable to noncontrolling interests
 

 
 

 
 

 
 

 
 

 
 
 
 
Common units in the Operating Partnership
(273
)
 
(634
)
 
(793
)
 
(901
)
 
1,976

 
(907
)
 
1,849

Preferred units in the Operating Partnership
(165
)
 
(165
)
 
(165
)
 
(165
)
 
(165
)
 
(330
)
 
(330
)
Other consolidated entities
(907
)
 
(934
)
 
(912
)
 
(907
)
 
(914
)
 
(1,841
)
 
(1,892
)
Net income (loss) attributable to COPT
17,862

 
21,355

 
24,733

 
27,299

 
(47,419
)
 
39,217

 
(40,593
)
Preferred share dividends
(3,039
)
 
(3,180
)
 
(3,640
)
 
(3,552
)
 
(3,553
)
 
(6,219
)
 
(7,105
)
Issuance costs associated with redeemed preferred shares
(6,847
)
 

 
(17
)
 

 

 
(6,847
)
 

Net income (loss) attributable to COPT common shareholders
$
7,976

 
$
18,175

 
$
21,076

 
$
23,747

 
$
(50,972
)
 
$
26,151

 
$
(47,698
)
Amount allocable to share-based compensation awards
(117
)
 
(125
)
 
(100
)
 
(105
)
 
(96
)
 
(242
)
 
(214
)
Numerator for diluted EPS
$
7,859

 
$
18,050

 
$
20,976

 
$
23,642

 
$
(51,068
)
 
$
25,909

 
$
(47,912
)

6


Corporate Office Properties Trust
Funds from Operations
(in thousands)
 
Three Months Ended
 
Six Months Ended
 
6/30/17
 
3/31/17
 
12/31/16
 
9/30/16
 
6/30/16
 
6/30/17
 
6/30/16
Net income (loss)
$
19,207

 
$
23,088

 
$
26,603

 
$
29,272

 
$
(48,316
)
 
$
42,295

 
$
(40,220
)
Real estate-related depreciation and amortization
32,793

 
33,059

 
32,929

 
32,015

 
33,248

 
65,852

 
67,775

Impairment losses on previously depreciated operating properties
1,610

 

 
1,518

 
25,857

 
55,124

 
1,610

 
55,971

Gain on sales of previously depreciated operating properties
(12
)
 
(19
)
 
312

 
(34,101
)
 

 
(31
)
 

Depreciation and amortization on unconsolidated real estate JV (1)
311

 
311

 
311

 
207

 

 
622

 

FFO - per NAREIT (2)(3)
53,909

 
56,439

 
61,673

 
53,250

 
40,056

 
110,348

 
83,526

Preferred share dividends
(3,039
)
 
(3,180
)
 
(3,640
)
 
(3,552
)
 
(3,553
)
 
(6,219
)
 
(7,105
)
Issuance costs associated with redeemed preferred shares
(6,847
)
 

 
(17
)
 

 

 
(6,847
)
 

Noncontrolling interests - preferred units in the Operating Partnership
(165
)
 
(165
)
 
(165
)
 
(165
)
 
(165
)
 
(330
)
 
(330
)
FFO allocable to other noncontrolling interests (4)
(906
)
 
(978
)
 
(1,085
)
 
(894
)
 
(1,014
)
 
(1,884
)
 
(2,041
)
Basic and diluted FFO allocable to share-based compensation awards
(185
)
 
(216
)
 
(208
)
 
(190
)
 
(130
)
 
(401
)
 
(296
)
Basic and Diluted FFO available to common share and common unit holders (3)
42,767

 
51,900

 
56,558

 
48,449

 
35,194

 
94,667

 
73,754

Gain on sales of non-operating properties

 
(4,219
)
 
(7,197
)
 

 

 
(4,219
)
 

Impairment losses on non-operating properties
15

 

 
36

 
1,842

 
14,568

 
15

 
16,167

Loss (gain) on interest rate derivatives
444

 
(453
)
 
(725
)
 
(1,523
)
 
319

 
(9
)
 
1,870

Loss (gain) on early extinguishment of debt
513

 

 
1,073

 
59

 
(5
)
 
513

 
(22
)
Issuance costs associated with redeemed preferred shares
6,847

 

 
17

 

 

 
6,847

 

Demolition costs on redevelopment properties
72

 
222

 

 

 
370

 
294

 
578

Executive transition costs
31

 
699

 
431

 
1,639

 
247

 
730

 
4,384

Diluted FFO comparability adjustments allocable to share-based compensation awards
(31
)
 
14

 
26

 
(5
)
 
(63
)
 
(17
)
 
(94
)
Diluted FFO avail. to common share and common unit holders, as adj. for comparability (3)
$
50,658

 
$
48,163

 
$
50,219

 
$
50,461

 
$
50,630

 
$
98,821

 
$
96,637

 
 
 
 
 
 
 
 
 
 
 
 
 
 
(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 34 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.
 
 
 
 
 
 
 
 

7


Corporate Office Properties Trust
Diluted Share and Unit Computations
(in thousands)
 
Three Months Ended
 
Six Months Ended
 
6/30/17
 
3/31/17
 
12/31/16
 
9/30/16
 
6/30/16
 
6/30/17
 
6/30/16
EPS Denominator:
 

 
 

 
 

 
 

 
 

 
 
 
 
Weighted average common shares - basic
99,036

 
98,411

 
95,066

 
94,433

 
94,300

 
98,725

 
94,251

Dilutive effect of share-based compensation awards
160

 
155

 
76

 
81

 

 
158

 

Weighted average common shares - diluted
99,196

 
98,566

 
95,142

 
94,514

 
94,300

 
98,883

 
94,251

Diluted EPS
$
0.08

 
$
0.18

 
$
0.22

 
$
0.25

 
$
(0.54
)
 
$
0.26

 
$
(0.51
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Weighted Average Shares for period ended:
 

 
 

 
 

 
 

 
 

 
 

 
 

Common Shares Outstanding
99,036

 
98,411

 
95,066

 
94,433

 
94,300

 
98,725

 
94,251

Dilutive effect of share-based compensation awards
160

 
155

 
76

 
81

 
117

 
158

 
107

Common Units
3,405

 
3,446

 
3,591

 
3,591

 
3,676

 
3,425

 
3,676

Denominator for diluted FFO per share and as adjusted for comparability
102,601

 
102,012

 
98,733

 
98,105

 
98,093

 
102,308

 
98,034

Weighted average common units
(3,405
)
 
(3,446
)
 
(3,591
)
 
(3,591
)
 
(3,676
)
 
(3,425
)
 
(3,676
)
Anti-dilutive EPS effect of share-based compensation awards

 

 

 

 
(117
)
 

 
(107
)
Denominator for diluted EPS
99,196

 
98,566

 
95,142

 
94,514

 
94,300

 
98,883

 
94,251

Diluted FFO per share - NAREIT
$
0.42

 
$
0.51

 
$
0.57

 
$
0.49

 
$
0.36

 
$
0.93

 
$
0.75

Diluted FFO per share - as adjusted for comparability
$
0.49

 
$
0.47

 
$
0.51

 
$
0.51

 
$
0.52

 
$
0.97

 
$
0.99






8


Corporate Office Properties Trust
Adjusted Funds from Operations
(in thousands)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended
 
Six Months Ended
 
6/30/17
 
3/31/17
 
12/31/16
 
9/30/16
 
6/30/16
 
6/30/17
 
6/30/16
Diluted FFO available to common share and common unit holders, as adjusted for comparability
$
50,658

 
$
48,163

 
$
50,219

 
$
50,461

 
$
50,630

 
$
98,821

 
$
96,637

Straight line rent adjustments and lease incentive amortization
1,517

 
433

 
1,294

 
691

 
480

 
1,950

 
(485
)
Amortization of intangibles included in NOI
325

 
359

 
463

 
349

 
338

 
684

 
676

Share-based compensation, net of amounts capitalized
1,309

 
1,249

 
1,174

 
1,258

 
1,485

 
2,558

 
3,117

Amortization of deferred financing costs
922

 
1,009

 
1,093

 
1,126

 
1,178

 
1,931

 
2,354

Amortization of net debt discounts, net of amounts capitalized
343

 
339

 
336

 
332

 
325

 
682

 
644

Accum. other comprehensive loss on derivatives amortized to expense
36

 

 

 

 

 
36

 

Replacement capital expenditures (1)
(11,269
)
 
(13,049
)
 
(13,716
)
 
(16,120
)
 
(11,546
)
 
(24,318
)
 
(23,266
)
Diluted AFFO adjustments allocable to other noncontrolling interests (2)
25

 
26

 
42

 
42

 
47

 
51

 
95

Diluted AFFO adjustments on unconsolidated real estate JV (3)
(179
)
 
(182
)
 
(188
)
 
(141
)
 

 
(361
)
 

Diluted AFFO available to common share and common unit holders (“diluted AFFO”)
$
43,687

 
$
38,347

 
$
40,717

 
$
37,998

 
$
42,937

 
$
82,034

 
$
79,772

Replacement capital expenditures (1)
 

 
 

 
 

 
 

 
 

 
 
 
 
Tenant improvements and incentives
$
6,148

 
$
4,740

 
$
8,000

 
$
21,470

 
$
6,784

 
$
10,888

 
$
15,550

Building improvements
5,972

 
3,230

 
7,064

 
5,707

 
5,302

 
9,202

 
9,255

Leasing costs
1,666

 
1,151

 
1,387

 
5,182

 
1,613

 
2,817

 
2,796

Net additions to (exclusions from) tenant improvements and incentives
626

 
6,796

 
871

 
(12,706
)
 
(885
)
 
7,422

 
(2,238
)
Excluded building improvements
(3,143
)
 
(2,868
)
 
(3,606
)
 
(3,533
)
 
(1,121
)
 
(6,011
)
 
(1,678
)
Excluded leasing costs

 

 

 

 
(147
)
 

 
(419
)
Replacement capital expenditures
$
11,269

 
$
13,049

 
$
13,716

 
$
16,120

 
$
11,546

 
$
24,318

 
$
23,266

 
 
 
 
 
 
 
 
 
 
 
 
 
 
(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 COPTs share of an unconsolidated real estate joint venture reported on page 33.
 
 
 
 

9


Corporate Office Properties Trust
Adjusted EBITDA
(in thousands)
 
Three Months Ended
 
 
Six Months Ended
 
6/30/17
 
3/31/17
 
12/31/16
 
9/30/16
 
6/30/16
 
 
6/30/17
 
6/30/16
Net income (loss)
$
19,207

 
$
23,088

 
$
26,603

 
$
29,272

 
$
(48,316
)
 
 
$
42,295

 
$
(40,220
)
Interest expense
19,163

 
18,994

 
18,664

 
18,301

 
22,639

 
 
38,157

 
46,198

Income tax expense (benefit)
48

 
40

 
272

 
(21
)
 
1

 
 
88

 
(7
)
Depreciation of furniture, fixtures and equipment
585

 
511

 
512

 
513

 
524

 
 
1,096

 
1,126

Real estate-related depreciation and amortization
32,793

 
33,059

 
32,929

 
32,015

 
33,248

 
 
65,852

 
67,775

Impairment losses
1,625

 

 
1,554

 
27,699

 
69,692

 
 
1,625

 
72,138

Loss (gain) on early extinguishment of debt
513

 

 
1,073

 
59

 
(5
)
 
 
513

 
(22
)
Gain on sales of operating properties
(12
)
 
(19
)
 
312

 
(34,101
)
 

 
 
(31
)
 

Gain on sales of non-operational properties

 
(4,219
)
 
(7,197
)
 

 

 
 
(4,219
)
 

Net (gain) loss on investments in unconsolidated entities included in interest and other income

 

 
(117
)
 
27

 
(36
)
 
 

 
(59
)
Business development expenses
995

 
938

 
1,167

 
1,016

 
1,261

 
 
1,933

 
2,640

Demolition costs on redevelopment properties
72

 
222

 

 

 
370

 
 
294

 
578

Adjustments from unconsolidated real estate JV (1)
575

 
572

 
578

 
415

 

 
 
1,147

 

Executive transition costs
31

 
699

 
431

 
1,639

 
247

 
 
730

 
4,384

Adjusted EBITDA
$
75,595

 
$
73,885

 
$
76,781

 
$
76,834

 
$
79,625

 
 
$
149,480

 
$
154,531

Proforma NOI adjustment for property changes within period
421

 
(440
)
 
39

 
(2,469
)
 
109

 
 
 
 
 
In-place adjusted EBITDA
$
76,016

 
$
73,445

 
$
76,820

 
$
74,365

 
$
79,734

 
 
 
 
 

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


10



Corporate Office Properties Trust
Operating Office Properties by Segment (1) - 6/30/2017
(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
 
30

 
3,555

 
95.8
%
 
96.6
%
Howard County
 
35

 
2,750

 
93.1
%
 
96.0
%
Other
 
21

 
1,557

 
94.3
%
 
94.8
%
Total Fort Meade/BW Corridor
 
86

 
7,862

 
94.6
%
 
96.0
%
Northern Virginia (“NoVA”) Defense/IT
 
11

 
1,600

 
86.5
%
 
88.4
%
Lackland AFB (San Antonio, Texas)
 
7

 
953

 
100.0
%
 
100.0
%
Navy Support
 
21

 
1,256

 
81.9
%
 
82.8
%
Redstone Arsenal (Huntsville, Alabama)
 
7

 
651

 
98.7
%
 
99.0
%
Data Center Shells
 
 
 
 
 
 
 
 
Consolidated Properties
 
8

 
1,261

 
100.0
%
 
100.0
%
Unconsolidated JV Properties (4)
 
6

 
962

 
100.0
%
 
100.0
%
Total Defense/IT Locations
 
146

 
14,545

 
94.0
%
 
95.0
%
Regional Office (5)
 
7

 
2,023

 
92.5
%
 
93.4
%
Core Portfolio
 
153

 
16,568

 
93.8
%
 
94.8
%
Properties Held for Sale
 
9

 
469

 
95.4
%
 
95.4
%
Other Properties
 
3

 
286

 
44.0
%
 
44.0
%
Total Portfolio
 
165

 
17,323

 
93.0
%
 
94.0
%
Consolidated Properties
 
159

 
16,361

 
92.6
%
 
93.7
%

(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 the United States Government and its 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.



11


Corporate Office Properties Trust
NOI from Real Estate Operations and Occupancy by Property Grouping
(dollars and square feet in thousands)
 
 
6/30/2017
 
 
 
 
 
 
# 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 Six Months Ended
Property Grouping
 
 
 
% Occupied (1)
 
% Leased (1)
 
 
 
6/30/17
 
6/30/17
Core Portfolio:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Same Office Properties (3)
 
134

 
14,413

 
93.7%
 
94.6%
 
$
441,438

 
92.1
%
 
$
70,170

 
$
140,122

Office Properties Placed in Service (4)
 
12

 
1,168

 
89.7%
 
93.1%
 
18,589

 
3.9
%
 
3,479

 
5,737

Unconsolidated real estate JV (5)
 
6

 
962

 
100.0%
 
100.0%
 
5,268

 
1.1
%
 
1,294

 
2,592

Wholesale Data Center and Other
 
1

 
25

 
100.0%
 
100.0%
 
564

 
N/A

 
3,509

 
6,722

Total Core Portfolio
 
153

 
16,568

 
93.8%
 
94.8%
 
465,859

 
97.2
%
 
78,452

 
155,173

Office Properties Held for Sale (6)
 
9

 
469

 
95.4%
 
95.4%
 
9,588

 
2.0
%
 
1,727

 
3,298

Disposed Office Properties
 
N/A

 
N/A

 
N/A
 
N/A
 
N/A

 
N/A

 
18

 
529

Other Office Properties (Same Office)
 
3

 
286

 
44.0%
 
44.0%
 
3,620

 
0.8
%
 
766

 
1,509

Total Portfolio
 
165

 
17,323

 
93.0%
 
94.0%
 
$
479,067

 
100.0
%
 
$
80,963

 
$
160,509

Consolidated Properties
 
159

 
16,361

 
92.6%
 
93.7%
 
$
473,799

 
98.9
%
 
$
79,669

 
$
157,917

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
6/30/2017
 
 
 
 
 
 
# 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 Six Months Ended
Property Grouping
 
 
 
% Occupied (1)
 
% Leased (1)
 
 
 
6/30/17
 
6/30/17
Core Portfolio:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Defense/IT Locations
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Consolidated properties
 
140

 
13,583

 
93.5%
 
94.7%
 
400,817

 
86.0
%
 
64,432

 
126,966

Unconsolidated real estate JV (5)
 
6

 
962

 
100.0%
 
100.0%
 
5,268

 
1.1
%
 
1,294

 
2,592

Total Defense/IT Locations
 
146

 
14,545

 
94.0%
 
95.0%
 
406,085

 
87.2
%
 
65,726

 
129,558

Regional Office
 
7

 
2,023

 
92.5%
 
93.4%
 
59,774

 
12.8
%
 
9,169

 
18,718

Wholesale Data Center and Other
 
N/A

 
N/A

 
N/A
 
N/A
 
N/A

 
N/A

 
3,557

 
6,897

Total Core Portfolio
 
153

 
16,568

 
93.8%
 
94.8%
 
$
465,859


100.0
%
 
$
78,452

 
$
155,173

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(1)
Percentages calculated based on operational square feet.
(2)
Excludes Annualized Rental Revenue from our wholesale data center, DC-6, of $21.9 million as of 6/30/17. 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 1/1/2016, excluding properties disposed or held for sale.
(4)
Newly constructed or redeveloped properties placed in service that were not fully operational by 1/1/2016.
(5)
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 33 for additional disclosure regarding this joint venture.
(6)
The carrying value of operating property assets held for sale as of 6/30/17 totaled $47.5 million.


12


Corporate Office Properties Trust
Consolidated Real Estate Revenues and NOI by Segment
(dollars in thousands)
 
Three Months Ended
 
Six Months Ended
 
6/30/17
 
3/31/17
 
12/31/16
 
9/30/16
 
6/30/16
 
6/30/17
 
6/30/16
Consolidated real estate revenues
 

 
 

 
 

 
 

 
 

 
 
 
 
Defense/IT Locations:
 
 
 
 
 
 
 
 
 
 
 
 
 
Fort Meade/BW Corridor
$
61,284

 
$
60,855

 
$
60,473

 
$
61,460

 
$
60,912

 
$
122,139

 
$
123,421

NoVA Defense/IT
11,095

 
11,707

 
12,560

 
12,231

 
12,057

 
22,802

 
24,173

Lackland Air Force Base
13,029

 
11,634

 
12,395

 
12,532

 
11,651

 
24,663

 
21,876

Navy Support
7,449

 
7,010

 
7,033

 
7,232

 
6,998

 
14,459

 
13,932

Redstone Arsenal
3,624

 
3,460

 
3,560

 
3,189

 
3,191

 
7,084

 
6,307

Data Center Shells-Consolidated
5,800

 
5,522

 
5,043

 
5,175

 
7,288

 
11,322

 
13,618

Total Defense/IT locations
102,281

 
100,188

 
101,064

 
101,819

 
102,097

 
202,469

 
203,327

Regional Office
17,462

 
18,276

 
18,521

 
20,499

 
23,283

 
35,738

 
46,785

Wholesale Data Center
7,033

 
6,770

 
6,763

 
6,809

 
6,804

 
13,803

 
13,297

Other
1,521

 
1,533

 
1,651

 
1,827

 
1,740

 
3,054

 
3,602

Consolidated real estate revenues
$
128,297

 
$
126,767

 
$
127,999

 
$
130,954

 
$
133,924

 
$
255,064

 
$
267,011

 
 
 
 
NOI
 

 
 

 
 

 
 

 
 

 
 
 
 
Defense/IT Locations:
 
 
 
 
 
 
 
 
 
 
 
 
 
Fort Meade/BW Corridor
$
41,155

 
$
40,335

 
$
41,011

 
$
40,862

 
$
40,534

 
$
81,490

 
$
79,797

NoVA Defense/IT
6,876

 
7,255

 
8,046

 
7,769

 
7,750

 
14,131

 
15,325

Lackland Air Force Base
4,899

 
4,832

 
4,901

 
4,933

 
4,807

 
9,731

 
9,612

Navy Support
4,424

 
3,801

 
3,916

 
3,858

 
4,323

 
8,225

 
7,733

Redstone Arsenal
2,133

 
2,089

 
2,134

 
2,077

 
2,231

 
4,222

 
4,369

Data Center Shells
 
 
 
 
 
 
 
 
 
 
 
 
 
Consolidated properties
5,223

 
4,863

 
4,533

 
4,647

 
6,462

 
10,086

 
11,982

COPT’s share of unconsolidated real estate JV (1)
1,294

 
1,298

 
1,297

 
1,008

 

 
2,592

 

Total Defense/IT locations
66,004

 
64,473

 
65,838

 
65,154

 
66,107

 
130,477

 
128,818

Regional Office
10,380

 
10,790

 
11,133

 
12,344

 
14,562

 
21,170

 
28,233

Wholesale Data Center
3,532

 
3,405

 
3,880

 
3,492

 
4,153

 
6,937

 
7,985

Other
1,047

 
878

 
883

 
1,020

 
961

 
1,925

 
1,959

NOI from real estate operations
$
80,963

 
$
79,546

 
$
81,734

 
$
82,010

 
$
85,783

 
$
160,509

 
$
166,995

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

13


Corporate Office Properties Trust
Cash NOI by Segment
(dollars in thousands)
 
Three Months Ended
 
Six Months Ended
 
6/30/17
 
3/31/17
 
12/31/16
 
9/30/16
 
6/30/16
 
6/30/17
 
6/30/16
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash NOI
 

 
 

 
 

 
 

 
 

 
 
 
 
Defense/IT Locations:
 
 
 
 
 
 
 
 
 
 
 
 
 
Fort Meade/BW Corridor
$
40,550

 
$
40,481

 
$
40,872

 
$
40,253

 
$
39,588

 
$
81,031

 
$
78,090

NoVA Defense/IT
7,195

 
7,046

 
7,766

 
7,234

 
7,614

 
14,241

 
15,536

Lackland Air Force Base
4,943

 
4,876

 
4,945

 
4,855

 
4,718

 
9,819

 
9,434

Navy Support
4,462

 
3,866

 
3,612

 
3,524

 
4,218

 
8,328

 
7,414

Redstone Arsenal
2,411

 
2,422

 
2,326

 
2,411

 
2,534

 
4,833

 
5,007

Data Center Shells
 
 
 
 
 
 
 
 
 
 
 
 
 
Consolidated properties
5,172

 
4,823

 
4,519

 
4,549

 
6,077

 
9,995

 
11,185

COPT’s share of unconsolidated real estate JV (1)
1,109

 
1,110

 
1,103

 
862

 

 
2,219

 

Total Defense/IT locations
65,842

 
64,624

 
65,143

 
63,688

 
64,749

 
130,466

 
126,666

Regional Office
10,179

 
9,916

 
10,967

 
12,480

 
14,152

 
20,095

 
27,152

Wholesale Data Center
3,211

 
3,382

 
3,833

 
3,439

 
4,052

 
6,593

 
7,780

Other
839

 
624

 
739

 
935

 
892

 
1,463

 
1,715

Cash NOI from real estate operations
$
80,071

 
$
78,546

 
$
80,682

 
$
80,542

 
$
83,845

 
$
158,617

 
$
163,313

Straight line rent adjustments and lease incentive amortization
(1,832
)
 
(775
)
 
(1,650
)
 
(1,086
)
 
(897
)
 
(2,607
)
 
(351
)
Amortization of acquired above- and below-market rents
(270
)
 
(303
)
 
(315
)
 
(201
)
 
(189
)
 
(573
)
 
(379
)
Amortization of below-market cost arrangements
(149
)
 
(149
)
 
(244
)
 
(241
)
 
(241
)
 
(298
)
 
(481
)
Lease termination fees, gross
517

 
706

 
938

 
471

 
417

 
1,223

 
1,397

Tenant funded landlord assets
2,441

 
1,333

 
2,129

 
2,379

 
2,848

 
3,774

 
3,496

Cash NOI adjustments in unconsolidated real estate JV
185

 
188

 
194

 
146

 

 
373

 

NOI from real estate operations
$
80,963

 
$
79,546

 
$
81,734

 
$
82,010

 
$
85,783

 
$
160,509

 
$
166,995

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



14


Corporate Office Properties Trust
Same Office Properties (1) Average Occupancy Rates by Segment 
(square feet in thousands)
 
Number of Buildings
 
Rentable Square Feet
 
Three Months Ended
 
Six Months Ended
 
 
 
6/30/17
 
3/31/17
 
12/31/16
 
9/30/16
 
6/30/16
 
6/30/17
 
6/30/16
Core Portfolio:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Defense/IT Locations:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Fort Meade/BW Corridor
79

 
7,498

 
96.0
%
 
95.9
%
 
95.5
%
 
95.2
%
 
95.1
%
 
96.0
%
 
95.1
%
NoVA Defense/IT
11

 
1,600

 
86.3
%
 
85.9
%
 
84.0
%
 
82.3
%
 
80.5
%
 
86.1
%
 
80.7
%
Lackland Air Force Base
7

 
953

 
100.0
%
 
100.0
%
 
100.0
%
 
100.0
%
 
100.0
%
 
100.0
%
 
100.0
%
Navy Support
21

 
1,256

 
80.9
%
 
77.2
%
 
73.3
%
 
73.6
%
 
73.0
%
 
79.0
%
 
72.6
%
Redstone Arsenal
6

 
632

 
100.0
%
 
97.6
%
 
98.8
%
 
99.5
%
 
98.9
%
 
98.8
%
 
98.3
%
Data Center Shells
3

 
451

 
100.0
%
 
100.0
%
 
100.0
%
 
100.0
%
 
100.0
%
 
100.0
%
 
100.0
%
Total Defense/IT Locations
127

 
12,390

 
93.9
%
 
93.3
%
 
92.5
%
 
92.1
%
 
91.7
%
 
93.6
%
 
91.7
%
Regional Office
7

 
2,023

 
92.8
%
 
93.5
%
 
94.4
%
 
96.5
%
 
97.5
%
 
93.2
%
 
97.1
%
Core Portfolio Same Office Properties
134

 
14,413

 
93.7
%
 
93.3
%
 
92.7
%
 
92.7
%
 
92.5
%
 
93.5
%
 
92.4
%
Other Same Office Properties
3

 
286

 
44.0
%
 
44.0
%
 
44.0
%
 
44.0
%
 
43.5
%
 
44.0
%
 
43.5
%
Total Same Office Properties
137

 
14,699

 
92.7
%
 
92.3
%
 
91.8
%
 
91.8
%
 
91.6
%
 
92.5
%
 
91.5
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Corporate Office Properties Trust
Same Office Properties (1) Period End Occupancy Rates by Segment 
(square feet in thousands)
 
Number of Buildings
 
Rentable Square Feet
 
 
 
 
 
 
 
6/30/17
 
3/31/17
 
12/31/16
 
9/30/16
 
6/30/16
 
 
 
 
Core Portfolio:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Defense/IT Locations:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Fort Meade/BW Corridor
79

 
7,498

 
95.8
%
 
96.0
%
 
95.8
%
 
95.2
%
 
95.0
%
 
 
 
 
NoVA Defense/IT
11

 
1,600

 
86.5
%
 
85.9
%
 
84.8
%
 
83.5
%
 
80.3
%
 
 
 
 
Lackland Air Force Base
7

 
953

 
100.0
%
 
100.0
%
 
100.0
%
 
100.0
%
 
100.0
%
 
 
 
 
Navy Support
21

 
1,256

 
81.9
%
 
78.1
%
 
72.7
%
 
73.6
%
 
74.7
%
 
 
 
 
Redstone Arsenal
6

 
632

 
100.0
%
 
100.0
%
 
96.3
%
 
100.0
%
 
98.9
%
 
 
 
 
Data Center Shells
3

 
451

 
100.0
%
 
100.0
%
 
100.0
%
 
100.0
%
 
100.0
%
 
 
 
 
Total Defense/IT Locations
127

 
12,390

 
93.9
%
 
93.5
%
 
92.5
%
 
92.3
%
 
91.8
%
 
 
 
 
Regional Office
7

 
2,023

 
92.5
%
 
92.8
%
 
95.1
%
 
96.2
%
 
97.7
%
 
 
 
 
Core Portfolio Same Office Properties
134

 
14,413

 
93.7
%
 
93.4
%
 
92.9
%
 
92.9
%
 
92.6
%
 
 
 
 
Other Same Office Properties
3

 
286

 
44.0
%
 
44.0
%
 
44.0
%
 
44.0
%
 
43.5
%
 
 
 
 
Total Same Office Properties
137

 
14,699

 
92.7
%
 
92.5
%
 
91.9
%
 
91.9
%
 
91.7
%
 
 
 
 

(1) Same office properties represent buildings continually owned and 100% operational since at least 1/1/2016, excluding properties disposed or held for sale.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

15


Corporate Office Properties Trust
Same Office Property Real Estate Revenues and NOI by Segment
(dollars in thousands)
 
Three Months Ended
 
Six Months Ended
 
6/30/17
 
3/31/17
 
12/31/16
 
9/30/16
 
6/30/16
 
6/30/17
 
6/30/16
Same office property real estate revenues
 

 
 

 
 

 
 

 
 

 
 
 
 
Defense/IT Locations:
 
 
 
 
 
 
 
 
 
 
 
 
 
Fort Meade/BW Corridor
$
58,895

 
$
59,441

 
$
58,910

 
$
58,299

 
$
57,627

 
$
118,336

 
$
117,139

NoVA Defense/IT
11,096

 
11,004

 
11,019

 
10,188

 
10,052

 
22,100

 
20,326

Lackland Air Force Base
13,029

 
11,634

 
12,395

 
12,532

 
11,651

 
24,663

 
21,876

Navy Support
7,449

 
7,010

 
7,033

 
7,232

 
6,998

 
14,459

 
13,932

Redstone Arsenal
3,246

 
3,158

 
3,297

 
3,131

 
3,149

 
6,404

 
6,223

Data Center Shells
3,045

 
3,043

 
3,023

 
3,050

 
3,095

 
6,088

 
6,135

Total Defense/IT Locations
96,760

 
95,290

 
95,677

 
94,432

 
92,572

 
192,050

 
185,631

Regional Office
15,777

 
16,563

 
16,375

 
16,582

 
16,556

 
32,340

 
32,917

Other Properties
1,146

 
1,203

 
1,022

 
1,015

 
951

 
2,349

 
1,880

Same office property real estate revenues
$
113,683

 
$
113,056

 
$
113,074

 
$
112,029

 
$
110,079

 
$
226,739

 
$
220,428

Same office property NOI
 

 
 

 
 

 
 

 
 

 
 
 
 
Defense/IT Locations:
 
 
 
 
 
 
 
 
 
 
 
 
 
Fort Meade/BW Corridor
$
39,537

 
$
39,792

 
$
39,950

 
$
38,892

 
$
38,534

 
$
79,329

 
$
76,325

NoVA Defense/IT
7,051

 
6,959

 
7,100

 
6,495

 
6,325

 
14,010

 
12,702

Lackland Air Force Base
4,899

 
4,832

 
4,902

 
4,937

 
4,803

 
9,731

 
9,608

Navy Support
4,424

 
3,801

 
3,916

 
3,858

 
4,323

 
8,225

 
7,732

Redstone Arsenal
2,332

 
2,262

 
2,390

 
2,179

 
2,214

 
4,594

 
4,317

Data Center Shells
2,760

 
2,759

 
2,755

 
2,758

 
2,764

 
5,519

 
5,533

Total Defense/IT Locations
61,003

 
60,405

 
61,013

 
59,119

 
58,963

 
121,408

 
116,217

Regional Office
9,167

 
9,547

 
9,645

 
9,334

 
9,976

 
18,714

 
19,543

Other Properties
766

 
743

 
650

 
606

 
577

 
1,509

 
1,065

Same office property NOI
$
70,936

 
$
70,695

 
$
71,308

 
$
69,059

 
$
69,516

 
$
141,631

 
$
136,825



16




Corporate Office Properties Trust
Same Office Property Cash NOI (1) by Segment
(dollars in thousands)
 
Three Months Ended
 
Six Months Ended
 
6/30/17
 
3/31/17
 
12/31/16
 
9/30/16
 
6/30/16
 
6/30/17
 
6/30/16
Same office property cash NOI
 

 
 

 
 

 
 

 
 

 
 
 
 
Defense/IT Locations:
 
 
 
 
 
 
 
 
 
 
 
 
 
Fort Meade/BW Corridor
$
39,461

 
$
39,965

 
$
39,849

 
$
38,658

 
$
38,173

 
$
79,426

 
$
75,372

NoVA Defense/IT
7,369

 
6,989

 
7,044

 
6,095

 
6,327

 
14,358

 
13,087

Lackland Air Force Base
4,943

 
4,876

 
4,946

 
4,858

 
4,714

 
9,819

 
9,430

Navy Support
4,462

 
3,866

 
3,612

 
3,524

 
4,218

 
8,328

 
7,414

Redstone Arsenal
2,620

 
2,603

 
2,590

 
2,524

 
2,528

 
5,223

 
4,976

Data Center Shells
2,951

 
2,937

 
2,927

 
2,915

 
2,890

 
5,888

 
5,773

Total Defense/IT Locations
61,806

 
61,236

 
60,968

 
58,574

 
58,850

 
123,042

 
116,052

Regional Office
8,956

 
8,698

 
9,767

 
9,446

 
10,081

 
17,654

 
19,525

Other Properties
551

 
499

 
545

 
561

 
554

 
1,050

 
1,024

Same office property cash NOI
$
71,313

 
$
70,433

 
$
71,280

 
$
68,581

 
$
69,485

 
$
141,746

 
$
136,601

Straight line rent adjustments and lease incentive amortization
(1,106
)
 
(262
)
 
(1,389
)
 
(1,849
)
 
(2,724
)
 
(1,368
)
 
(3,618
)
Amortization of acquired above- and below-market rents
(270
)
 
(303
)
 
(315
)
 
(202
)
 
(190
)
 
(573
)
 
(380
)
Amortization of below-market cost arrangements
(146
)
 
(146
)
 
(239
)
 
(239
)
 
(239
)
 
(292
)
 
(478
)
Lease termination fees, gross
517

 
706

 
601

 
389

 
336

 
1,223

 
1,289

Tenant funded landlord assets
628

 
267

 
1,370

 
2,379

 
2,848

 
895

 
3,411

Same office property NOI
$
70,936

 
$
70,695

 
$
71,308

 
$
69,059

 
$
69,516

 
$
141,631

 
$
136,825

Percentage change in same office property cash NOI (1)
2.6
%
 
 
 
 
 
 
 
 
 
3.8
%
 
 

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



17


Corporate Office Properties Trust
Leasing - Total Office Portfolio (1)
Quarter Ended June 30, 2017
(square feet in thousands)
 
Defense/IT Locations
 
 
 
 
 
 
 
Ft Meade/BW Corridor
 
NoVA Defense/IT
 
Navy Support
 
Data Center Shells
 
Total Defense/IT Locations
 
Regional Office
 
Other
 
Total Office
Renewed Space
 

 
 

 
 
 
 
 
 
 
 

 
 
 
 

Leased Square Feet
175

 
12

 
100

 

 
287

 
4

 
2

 
293

Expiring Square Feet
210

 
12

 
105

 

 
327

 
16

 
2

 
345

Vacating Square Feet
35

 

 
5

 

 
40

 
12

 

 
53

Retention Rate (% based upon square feet)
83.4
 %
 
100.0
%
 
95.0
 %
 
%
 
87.7
 %
 
23.7
 %
 
100.0
 %
 
84.8
 %
Statistics for Completed Leasing:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Average Committed Cost per Square Foot (2)
$
12.04

 
$
34.31

 
$
9.20

 
$

 
$
11.97

 
$
18.39

 
$

 
$
11.97

Weighted Average Lease Term in Years
4.3

 
3.0

 
2.7

 

 
3.7

 
5.7

 
3.0

 
3.7

Average Rent Per Square Foot
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Renewal Average Rent
$
32.69

 
$
31.59

 
$
24.49

 
$

 
$
29.80

 
$
28.17

 
$
24.45

 
$
29.74

Expiring Average Rent
$
29.31

 
$
30.14

 
$
23.25

 
$

 
$
27.24

 
$
27.34

 
$
24.02

 
$
27.22

Change in Average Rent
11.6
 %
 
4.8
%
 
5.4
 %
 
%
 
9.4
 %
 
3.0
 %
 
1.8
 %
 
9.3
 %
Cash Rent Per Square Foot
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Renewal Cash Rent
$
31.92

 
$
30.83

 
$
24.12

 
$

 
$
29.17

 
$
28.00

 
$
23.50

 
$
29.11

Expiring Cash Rent
$
31.93

 
$
30.77

 
$
24.77

 
$

 
$
29.40

 
$
30.72

 
$
26.37

 
$
29.39

Change in Cash Rent
 %
 
0.2
%
 
(2.6
)%
 
%
 
(0.8
)%
 
(8.9
)%
 
(10.9
)%
 
(1.0
)%
Average escalations per year
2.1
 %
 
2.8
%
 
1.5
 %
 
%
 
1.9
 %
 
2.8
 %
 
4.0
 %
 
2.0
 %
New Leases
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Development and Redevelopment Space
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Leased Square Feet
28

 

 

 
297

 
325

 

 

 
325

Statistics for Completed Leasing:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Average Committed Cost per Square Foot (2)
$
71.61

 
$

 
$

 
$

 
$
6.15

 
$

 
$

 
$
6.15

Weighted Average Lease Term in Years
7.9

 

 

 
12.0

 
11.6

 

 

 
11.6

Average Rent Per Square Foot
$
31.73

 
$

 
$

 
$
18.44

 
$
19.58

 
$

 
$

 
$
19.58

Cash Rent Per Square Foot
$
30.06

 
$

 
$

 
$
16.47

 
$
17.64

 
$

 
$

 
$
17.64

Other New Leases (3)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Leased Square Feet
41

 
21

 
11

 

 
73

 
5

 

 
78

Statistics for Completed Leasing:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Average Committed Cost per Square Foot (2)
$
64.00

 
$
78.36

 
$
28.07

 
$

 
$
62.95

 
$
50.00

 
$

 
$
62.12

Weighted Average Lease Term in Years
7.6

 
5.2

 
4.7

 

 
6.5

 
10.4

 

 
6.7

Average Rent Per Square Foot
$
30.54

 
$
29.30

 
$
20.45

 
$

 
$
28.72

 
$
31.91

 
$

 
$
28.92

Cash Rent Per Square Foot
$
29.14

 
$
29.45

 
$
20.07

 
$

 
$
27.91

 
$
29.00

 
$

 
$
27.98

Total Square Feet Leased
245

 
33

 
110

 
297

 
685

 
9

 
2

 
696

Average escalations per year
2.2
 %
 
2.8
%
 
1.7
 %
 
2.3
%
 
2.2
 %
 
2.8
 %
 
4.0
 %
 
2.2
 %
Average escalations excl. data center shells
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2.2
 %
(1)
Activity is exclusive of owner occupied space and leases with less than a one-year term. Weighted average lease term is based on the non-cancelable term of tenant leases determined in accordance with GAAP. 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) Committed costs include tenant improvements and leasing commissions and exclude free rent concession.
(3) Other New Leases includes acquired first generation space and vacated second generation space.


18


Corporate Office Properties Trust
Leasing - Total Office Portfolio (1)
Six Months Ended June 30, 2017
(square feet in thousands)
 
Defense/IT Locations
 
 
 
 
 
 
 
As Adjusted (4)
 
Ft Meade/BW Corridor
 
NoVA Defense/IT
 
Navy Support
 
Redstone Arsenal
 
Data Center Shells
 
Total Defense/IT Locations
 
Regional Office
 
Other
 
Total
Office
 
Ft Meade/BW Corridor
 
Total Office
Renewed Space
 

 
 

 
 
 
 

 
 
 
 
 
 

 
 
 
 

 
 
 
 
Leased Square Feet
350

 
12

 
120

 

 

 
482

 
15

 
37

 
534

 
224

 
408

Expiring Square Feet
390

 
15

 
126

 

 

 
531

 
161

 
43

 
735

 
264

 
609

Vacating Square Feet
40

 
3

 
5

 

 

 
48

 
146

 
6

 
200

 
40

 
200

Retention Rate (% based upon square feet)
89.8
%
 
79.7
%
 
95.8
 %
 
%
 
%
 
90.9
%
 
9.1
 %
 
85.9
 %
 
72.7
%
 
84.9
%
 
67.1
 %
Statistics for Completed Leasing:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Average Committed Cost per Square Foot (2)
$
13.43

 
$
34.31

 
$
7.61

 
$

 
$

 
$
12.48

 
$
40.66

 
$
0.34

 
$
12.41

 
$
9.75

 
$
10.08

Weighted Average Lease Term in Years
6.0

 
3.0

 
2.4

 

 

 
5.0

 
5.4

 
1.2

 
4.7

 
3.7

 
3.1

Average Rent Per Square Foot
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Renewal Average Rent
$
36.63

 
$
31.59

 
$
24.73

 
$

 
$

 
$
33.53

 
$
27.57

 
$
18.86

 
$
32.35

 
$
30.92

 
$
27.90

Expiring Average Rent
$
31.11

 
$
30.14

 
$
23.57

 
$

 
$

 
$
29.20

 
$
25.19

 
$
18.53

 
$
28.35

 
$
27.80

 
$
25.68

Change in Average Rent
17.7
%
 
4.8
%
 
4.9
 %
 
%
 
%
 
14.8
%
 
9.5
 %
 
1.8
 %
 
14.1
%
 
11.2
%
 
8.6
 %
Cash Rent Per Square Foot
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Renewal Cash Rent
$
34.78

 
$
30.83

 
$
24.42

 
$

 
$

 
$
32.10

 
$
27.26

 
$
18.82

 
$
31.04

 
$
30.32

 
$
27.44

Expiring Cash Rent
$
33.79

 
$
30.77

 
$
24.83

 
$

 
$

 
$
31.48

 
$
27.98

 
$
19.62

 
$
30.55

 
$
30.27

 
$
27.63

Change in Cash Rent
3.0
%
 
0.2
%
 
(1.7
)%
 
%
 
%
 
2.0
%
 
(2.6
)%
 
(4.1
)%
 
1.6
%
 
0.2
%
 
(0.7
)%
Average escalations per year
2.6
%
 
2.8
%
 
1.4
 %
 
%
 
%
 
2.4
%
 
2.8
 %
 
0.5
 %
 
2.4
%
 
2.0
%
 
1.8
 %
New Leases
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Development and Redevelopment Space
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Leased Square Feet
76

 
8

 

 
2

 
297

 
383

 

 

 
383

 
76

 
383

Statistics for Completed Leasing:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Average Committed Cost per Square Foot (2)
$
61.39

 
$
95.08

 
$

 
$
1.76

 
$

 
$
14.26

 
$

 
$

 
$
14.26

 
$
61.39

 
$
14.26

Weighted Average Lease Term in Years
7.2

 
7.5

 

 
3.0

 
12.0

 
10.9

 

 

 
10.9

 
7.2

 
10.9

Average Rent Per Square Foot
$
28.97

 
$
39.06

 
$

 
$
29.31

 
$
18.44

 
$
21.03

 
$

 
$

 
$
21.03

 
$
28.97

 
$
21.03

Cash Rent Per Square Foot
$
28.18

 
$
38.00

 
$

 
$
29.31

 
$
16.47

 
$
19.32

 
$

 
$

 
$
19.32

 
$
28.18

 
$
19.32

Other New Leases (3)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Leased Square Feet
65

 
27

 
26

 

 

 
118

 
20

 
6

 
144

 
65

 
144

Statistics for Completed Leasing:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Average Committed Cost per Square Foot (2)
$
56.71

 
$
77.79

 
$
28.90

 
$

 
$

 
$
55.41

 
$
57.76

 
$
1.42

 
$
53.45

 
$
56.71

 
$
53.45

Weighted Average Lease Term in Years
6.9

 
5.7

 
4.1

 

 

 
6.0

 
6.6

 
1.8

 
5.9

 
6.9

 
5.9

Average Rent Per Square Foot
$
31.88

 
$
29.04

 
$
21.59

 
$

 
$

 
$
28.96

 
$
29.81

 
$
19.30

 
$
28.67

 
$
31.88

 
$
28.67

Cash Rent Per Square Foot
$
30.61

 
$
29.04

 
$
21.60

 
$

 
$

 
$
28.27

 
$
29.07

 
$
22.00

 
$
28.12

 
$
30.61

 
$
28.12

Total Square Feet Leased
491

 
47

 
146

 
2

 
297

 
983

 
35

 
43

 
1,062

 
365

 
936

Average escalations per year
2.5
%
 
2.8
%
 
1.8
 %
 
3.0
%
 
2.3
%
 
2.4
%
 
2.8
 %
 
1.0
 %
 
2.4
%
 
2.2
%
 
2.2
 %
Average escalations excl. data center shells
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2.5
%
 
 
 
2.2
 %
(1)
Activity is exclusive of owner occupied space and leases with less than a one-year term. Weighted average lease term is based on the non-cancelable term of tenant leases determined in accordance with GAAP. 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) Committed costs include tenant improvements and leasing commissions and exclude rent concessions.
(3) Other New Leases includes acquired first generation space and vacated second generation space.
(4) Excludes a lease in holdover status as of 12/31/16 and executed in January 2017 that we included in our 2016 reporting on an as adjusted basis.

19


Corporate Office Properties Trust
Lease Expiration Analysis as of 6/30/17 (1)
(dollars and square feet in thousands, except per square foot amounts)
Year and Segment of Lease (2)
 
Number of Leases Expiring
 
Square Footage of Leases Expiring
 
Annual Rental
Revenue of Expiring Leases (3)
 
Percentage
of Core/Total Annualized 
Rental Revenue Expiring (3)(4)
 
Annual Rental Revenue of Expiring Leases per Occupied Square Foot
 
Core Portfolio
 
 
 
 
 
 
 
 
 
 
 
Ft Meade/BW Corridor
 
24
 
634

 
$
22,014

 
4.7
%
 
$34.72
 
NoVA Defense/IT
 
6
 
31

 
914

 
0.2
%
 
29.24

 
Navy Support
 
9
 
31

 
751

 
0.2
%
 
24.04

 
Redstone Arsenal
 
1
 
5

 
131

 
%
 
26.03

 
Regional Office
 
5
 
57

 
1,704

 
0.4
%
 
29.86

 
2017
 
45
 
758

 
25,514

 
5.5
%
 
33.63

 
Ft Meade/BW Corridor
 
55
 
1,420

 
46,485

 
10.0
%
 
32.74

 
NoVA Defense/IT
 
6
 
171

 
6,996

 
1.5
%
 
40.82

 
Navy Support
 
28
 
390

 
11,493

 
2.5
%
 
29.43

 
Redstone Arsenal
 
4
 
253

 
6,635

 
1.4
%
 
26.23

 
Data Center Shells-Consolidated properties
 
1
 
155

 
2,547

 
0.5
%
 
16.44

 
Regional Office
 
16
 
171

 
6,232

 
1.3
%
 
36.50

 
2018
 
110
 
2,560

 
80,388

 
17.3
%
 
31.40

 
Ft Meade/BW Corridor
 
49
 
1,624

 
53,492

 
11.5
%
 
32.93

 
NoVA Defense/IT
 
7
 
342

 
12,628

 
2.7
%
 
36.88

 
Navy Support
 
12
 
114

 
3,399

 
0.7
%
 
29.88

 
Redstone Arsenal
 
2
 
43

 
965

 
0.2
%
 
22.53

 
Regional Office
 
11
 
160

 
4,456

 
1.0
%
 
27.78

 
2019
 
81
 
2,283

 
74,940

 
16.1
%
 
32.82

 
Ft Meade/BW Corridor
 
44
 
989

 
32,483

 
7.0
%
 
32.85

 
NoVA Defense/IT
 
5
 
133

 
3,754

 
0.8
%
 
28.24

 
Lackland Air Force Base
 
2
 
250

 
10,132

 
2.2
%
 
40.48

 
Navy Support
 
17
 
98

 
3,140

 
0.7
%
 
32.05

 
Redstone Arsenal
 
1
 
11

 
219

 
%
 
19.64

 
Regional Office
 
11
 
67

 
2,071

 
0.4
%
 
30.76

 
2020
 
80
 
1,548

 
51,799

 
11.1
%
 
33.45

 
Ft Meade/BW Corridor
 
36
 
784

 
26,278

 
5.6
%
 
33.53

 
NoVA Defense/IT
 
8
 
104

 
2,823

 
0.6
%
 
27.16

 
Navy Support
 
15
 
166

 
5,108

 
1.1
%
 
30.83

 
Redstone Arsenal
 
6
 
161

 
3,549

 
0.8
%
 
22.04

 
Regional Office
 
7
 
115

 
3,367

 
0.7
%
 
29.27

 
2021
 
72
 
1,330

 
41,125

 
8.8
%
 
30.94

 
Thereafter
 
 
 
 
 
 
 
 
 
 
 
Consolidated Properties
 
165
 
6,096

 
186,825

 
40.1
%
 
30.65

 
Unconsolidated JV Properties
 
6
 
962

 
5,268

 
1.1
%
 
10.96

 
Core Portfolio
 
559
 
15,537

 
$
465,859

 
97.2
%
 
$29.98
 

20


Year and Segment of Lease (2)
 
Number of Leases Expiring
 
Square Footage of Leases Expiring
 
Annual Rental
Revenue of Expiring Leases (3)
 
Percentage
of Core/Total Annualized 
Rental Revenue Expiring (3)(4)
 
Annual Rental Revenue of Expiring Leases per Occupied Square Foot
 
Core Portfolio
 
559
 
15,537

 
$
465,859

 
97.2
%
 
$29.98
 
Office Properties Held for Sale and Other
 
 
 
 
 
 
 
 
 
 
 
Ft Meade/BW Corridor
 
2
 
57

 
1,194

 
0.2
%
 
20.97

 
Regional Office
 
20
 
328

 
7,149

 
1.5
%
 
21.81

 
Other
 
13
 
189

 
4,865

 
1.0
%
 
25.74

 
Office Properties Held for Sale and Other Total Average
 
35
 
574

 
13,208

 
2.7
%
 
23.02

 
Total Portfolio
 
594
 
16,111

 
$
479,067

 
99.9
%
 
$30.06
 
Consolidated Portfolio
 
588
 
15,149

 
$
473,799

 
 
 
 
 
Unconsolidated JV Properties
 
6
 
962

 
$
5,268

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

Note: As of 6/30/17, the weighted average lease term is 4.5 years for the Core Portfolio, 4.5 for the Total Portfolio and 4.3 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

548

2019
1
6

1.00

2,321

2020
1
17

11.55

13,884

2021
1
2

0.05

87

2022
2
17

3.00

3,395

 
 
 

16.86

$
21,855


(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 6/30/17 of 175,000 for the total portfolio and 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 is based on the non-cancelable term of tenant leases determined in accordance with GAAP.
(3)
Total Annualized Rental Revenue is the monthly contractual base rent as of 6/30/17 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.
(4)
Amounts reported represent the percentage of our Core Portfolio for components of such portfolio while other amounts represent the percentage of our total portfolio.

21


Corporate Office Properties Trust
Top 20 Office Tenants as of 6/30/17 (1)
(Based on Annualized Rental Revenue of
office properties, dollars and square feet in thousands)
Tenant
 
Number of Leases
 
Total
Occupied Square Feet
 
Percentage of
Total
Occupied Square Feet
 
Total
Annualized
Rental Revenue (2)
 
Percentage
of Total
Annualized 
Rental Revenue (2)
 
Weighted
Average
Remaining Lease Term (3)
United States Government
(4)
61

 
3,824

 
23.7
%
 
$
148,999

 
31.1
%
 
4.3

Northrop Grumman Corporation
 
8

 
758

 
4.7
%
 
22,222

 
4.6
%
 
3.5

The Boeing Company
 
11

 
684

 
4.2
%
 
20,903

 
4.4
%
 
2.1

Vadata Inc.
(1)
11

 
1,772

 
11.0
%
 
16,634

 
3.5
%
 
8.3

General Dynamics Corporation
 
6

 
466

 
2.9
%
 
16,629

 
3.5
%
 
4.2

CareFirst, Inc.
 
2

 
313

 
1.9
%
 
11,351

 
2.4
%
 
5.6

Computer Sciences Corporation
 
3

 
279

 
1.7
%
 
11,119

 
2.3
%
 
1.0

Booz Allen Hamilton, Inc.
 
6

 
291

 
1.8
%
 
10,156

 
2.1
%
 
4.1

Wells Fargo & Company
 
5

 
222

 
1.4
%
 
8,494

 
1.8
%
 
8.8

CACI Technologies, Inc.
 
3

 
224

 
1.4
%
 
7,301

 
1.5
%
 
3.4

AT&T Corporation
 
3

 
308

 
1.9
%
 
6,130

 
1.3
%
 
1.8

KEYW Corporation
 
2

 
211

 
1.3
%
 
6,041

 
1.3
%
 
6.5

The Raytheon Company
 
5

 
161

 
1.0
%
 
5,888

 
1.2
%
 
2.1

Miles & Stockbridge, PC
 
2

 
160

 
1.0
%
 
5,430

 
1.1
%
 
10.2

Transamerica Life Insurance Company
 
2

 
159

 
1.0
%
 
4,870

 
1.0
%
 
4.5

University of Maryland
 
3

 
172

 
1.1
%
 
4,860

 
1.0
%
 
4.1

Kratos Defense and Security Solutions
 
1

 
131

 
0.8
%
 
4,830

 
1.0
%
 
2.8

Science Applications International Corp.
 
3

 
131

 
0.8
%
 
4,725

 
1.0
%
 
2.9

The Mitre Corporation
 
4

 
122

 
0.8
%
 
4,295

 
0.9
%
 
2.4

Accenture Federal Services LLC
 
5

 
128

 
0.8
%
 
3,709

 
0.8
%
 
2.3

Subtotal Top 20 Office Tenants
 
146

 
10,518

 
65.3
%
 
324,586

 
67.8
%
 
4.7

All remaining tenants
 
448

 
5,593

 
34.7
%
 
154,481

 
32.2
%
 
4.0

Total/Weighted Average
 
594

 
16,111

 
100.0
%
 
$
479,067

 
100.0
%
 
4.5


(1) 
Includes Annualized Rental Revenue (“ARR”) in six properties owned through an unconsolidated JV of $5.3 million (see page 33 for additional information).
(2) 
Total ARR is the monthly contractual base rent as of 6/30/17, 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.  Weighted average lease term is based on the non-cancelable term of tenant leases determined in accordance with GAAP. 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. As of 6/30/17, $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).

22



Corporate Office Properties Trust
Property Dispositions
(dollars and square feet in thousands)
 
 
Property Segment/Subsegment
 
Business Park/Submarket
 
Number of Buildings
 
Square Feet
 
Transaction
Date
 
Occupancy on Transaction Date
 
Transaction 
Price
 
 
 
 
 
 
 
 
 
 
 
 
 
Property Dispositions
 
Quarter Ended 3/31/17
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Herndon, Virginia Land
 
N/A
 
N/A
 
N/A

 
N/A

 
1/12/2017
 
N/A
 
$
14,325

 
3120 Fairview Park Drive
 
NoVA Defense/IT
 
Merrifield
 
1

 
190

 
2/15/2017
 
87.2%
 
39,000

 
Subtotal - Quarter Ended 3/31/17
 
 
 
 
 

 

 
 
 
 
 
53,325

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Quarter Ended 6/30/17
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
1334 Ashton Road
 
Fort Meade/BW Corridor
 
BWI South
 
1

 
37

 
6/9/2017
 
40.7%
 
2,300

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Year to Date Dispositions through 6/30/17
 
 
 
2

 
227

 
 
 
 
 
$
55,625

 

23


Corporate Office Properties Trust
Summary of Construction Projects as of 6/30/17 (1)
(dollars and square feet in thousands) 
 
 
Property Segment
 
Park/Submarket
Total Rentable Square Feet
Percentage Leased as of 6/30/17
as of 6/30/2017 (2)
Actual or Anticipated Shell Completion Date
 Anticipated Operational Date (3)
 
Anticipated Total Cost
Cost to Date
Cost to Date Placed in Service
 
 
Property and Location
 
Under Construction
 
 
 
 
 
 
 
 
 
 
 
Bethlehem Technology Park - DC18 Manassas, Virginia
Data Center Shells
 
Manassas
216

100%
$
31,179

$
26,709

$

3Q 17
3Q 17
 
NoVA Office D
Northern Virginia
NoVA Defense/IT
 
Other
240

100%
49,344

37,727


3Q 17
3Q 17
 
Paragon Park - DC 21 Sterling, Virginia
Data Center Shells
 
Other NoVA
149

100%
31,385

13,534


4Q 17
4Q 17
 
540 National Business Parkway
Annapolis Junction, Maryland (4)
Ft. Meade/BW Corridor
 
National Bus. Park
145

49%
43,712

30,632

16,721

1Q 17
1Q 18
 
Paragon Park - DC 22 Sterling, Virginia
Data Center Shells
 
Other NoVA
149

100%
31,770

11,226


1Q 18
1Q 18
 
5801 University Research Court College Park, Maryland
Ft. Meade/BW Corridor
 
College Park
71

0%
19,414

5,057


1Q 18
1Q 19
 
Total Under Construction
 
 
 
970

85%
$
206,804

$
124,885

$
16,721

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

12%
54,352

39,470

39,470

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

0%
41,500

31,171

31,171

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

6%
$
95,852

$
70,641

$
70,641

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total Construction Projects
 
 
1,322

64%
$
302,656

$
195,526

$
87,362

 
 
 
 
 
 
 
 
 
 
 
 
 
 
(1)
Includes properties under, or contractually committed for, construction as of 6/30/17 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, 71,000 square feet were operational as of 6/30/17.



24


Corporate Office Properties Trust
Summary of Redevelopment Projects as of 6/30/17
(dollars and square feet in thousands) 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Property Segment
Park/Submarket
Total Rentable Square Feet
Percentage Leased as of 6/30/17
as of 6/30/2017 (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
 
Airport Landing Retail Bldgs. (3)
Linthicum, Maryland
 
Ft Meade/BW Corridor
Airport Square
14

100%
$
785

$
6,401

$
7,186

$
6,357

$
3,935

4Q 16
4Q 17
7142 Columbia Gateway (4)
Columbia, Maryland
 
Ft Meade/BW Corridor
Howard Co. Perimeter
22

0%
622

3,173

3,795

632

622

1Q18
1Q19
Total Under Redevelopment
36

39%
$
1,407

$
9,574

$
10,981

$
6,989

$
4,557

 
 
 
(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 6/30/17.
(4)
A portion of this property is undergoing redevelopment (22,000 of the 47,000 square feet).






25


Corporate Office Properties Trust
Office Property Construction and Redevelopment Placed in Service as of 6/30/17
(square feet in thousands)
 
 
 
 
Total Property
 
Square Feet Placed in Service in 2017
Space Placed in Service % Leased as of 6/30/17
 
Property Segment
Park/Submarket
% Leased as of 6/30/17
 
 
Property and Location
Rentable Square Feet
Prior Year
1st Quarter
2nd Quarter
Total 2017
7134 Columbia Gateway Drive Columbia, Maryland
Ft Meade/BW Corridor
Howard Co. Perimeter
100%
22

8

14


14

100%
1201 Winterson Road
Linthicum, Maryland
Ft Meade/BW Corridor
Airport Square
72%
68


68


68

72%
Airport Landing Retail Buildings
Linthicum, Maryland
Ft Meade/BW Corridor
Airport Square
100%
14

2

4

2

6

100%
Bethlehem Technology Park - DC20 Manassas, Virginia
Data Center Shells
Manassas
100%
216



216

216

100%
540 National Business Parkway
Annapolis Junction, Maryland
Ft. Meade/BW Corridor
National Bus. Park
49%
145



71

71

100%
2100 Rideout Road
Huntsville, Alabama
Redstone Arsenal
Redstone Gateway
66%
19

11


8

8

66%
Total Construction/Redevelopment Placed Into Service
79%
484

21

86

297

383

94%





26


Corporate Office Properties Trust
Summary of Land Owned/Controlled as of 6/30/17 (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
196

 
2,106

 
 
Howard County
27

 
590

 
 
Other
133

 
1,494

 
 
Total Fort Meade/BW Corridor
356

 
4,190

 
 
NoVA Defense/IT
59

 
1,614

 
 
Lackland AFB
68

 
1,033

 
 
Navy Support
44

 
109

 
 
Redstone Arsenal (2)
428

 
4,084

 
 
Data Center Shells
21

 
355

 
 
Total Defense/IT Locations
976

 
11,385

 
 
Regional Office
11

 
1,089

 
 
Total land owned/controlled for future development
987

 
12,474

 
$
329,358

 
 
 
 
 
 
Other land owned/controlled
152

 
1,638

 
9,117

Land held for sale
42

 
500

 
3,753

 
 
 
 
 
 
Land owned/controlled
1,181

 
14,612

 
$
342,228

Land held for sale
(42
)
 
(500
)
 
(3,753
)
Land held, net
1,139

 
14,112

 
$
338,475

 
 
 
 
 
 
(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.


27


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)
 
6/30/2017
Debt
 
 
 
 
 
 
Secured debt
 
6.7

 
4.09
%
 
4.06
%
 
$
166,455

Unsecured debt
 
5.3

 
3.78
%
 
4.10
%
 
1,745,761

Total Consolidated Debt
5.5

 
3.81
%
 
4.06
%
 
$
1,912,216

 
 
 
 
 
 
 
 
 
Fixed rate debt (2)
 
6.2

 
4.30
%
 
4.24
%
 
$
1,718,216

Variable rate debt
 
3.7

 
2.63
%
 
2.39
%
 
194,000

Total Consolidated Debt
 
 
 
 
 
 
 
$
1,912,216

 
 
 
 
 
 
 
 
 
Preferred Equity
 
 
Redeemable
 
 
 
7.375% Series L Redeemable Pref. Shares
 
(3)
 
 
 
$

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

 
 
 
8,800

Total Preferred Equity
 
 
 
 
 
$
8,800

 
 
 
 
 
 
 
 
 
Common Equity
 
 
 
 
 
 
 
 
Common Shares
 
 
 
 
 
 
 
99,472

Common Units
 
 
 
 
 
 
 
3,403

Total Common Shares and Units
 
 
 
 
 
102,875

 
 
 
 
 
 
 
 
 
Closing Common Share Price on 6/30/17
 
 
 
$
35.03

Common Equity Market Capitalization
 
 
 
$
3,603,711

 
 
 
 
 
Total Equity Market Capitalization
 
 
 
$
3,612,511

 
 
 
 
 
Total Market Capitalization
 
 
 
$
5,524,727

 
(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) We redeemed our Series L Preferred Shares effective on 6/27/17.
(4) 352,000 units outstanding with a liquidation preference of $25 per unit, and convertible into 176,000 common units.

 
 
Investment Grade Ratings & Outlook:
Latest Affirmation
 
Fitch
 
BBB-
Stable
7/19/17
 
Moodys
 
Baa3
Stable
7/28/16
 
Standard & Poors
BBB-
Stable
5/26/17
copt063020_chart-01335.jpgcopt063020_chart-02785.jpg

28



Corporate Office Properties Trust
Summary of Outstanding Debt as of 6/30/17
(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%

 
$
194,000

May-19
(1)(2)
 
7015 Albert Einstein Drive
7.87
%
 
$
1,025

$

Nov-19
Senior Unsecured Notes
 
 
 
 
 
 
7200 Redstone Gateway (4)
L + 1.85%

 
13,402

12,132

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

Jun-21
 
 
7740 Milestone Parkway
3.96
%
 
18,405

15,902

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

May-23
 
 
100 & 30 Light Street
4.32
%
 
54,006

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)
35,410

27,649

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

 
 
 
M Square (5825 & 5850
 
 
 
 
 
 
 
 
 
 
 
 
University Research Court) (4)
3.82
%
 
44,207

35,603

Jun-26
Unsecured Bank Term Loans
 
 
 
 
 
 
Total Secured Debt
4.09
%
 
$
166,455

 
 
2020 Maturity
L + 1.40%

 
100,000

May-20
(2)
 
 
 
 
 
 
 
2022 Maturity
L + 1.80%

 
250,000

Dec-22
(3)
 
 
 
 
 
 
 
Subtotal - Term Loans
2.75
%
 
350,000

 
 
 
 
 
 
 
 
 
Other Unsecured Debt
%
 
1,761

May-26
 
 
 
 
 
 
 
 
Total Unsecured Debt
3.78
%
 
$
1,745,761

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Debt Summary
 
 
 
 
 
 
 
 
 
 
 
 
Total Unsecured Debt
3.78
%
 
$
1,745,761

 
 
 
 
 
 
 
 
 
Total Secured Debt
4.09
%
 
166,455

 
 
 
 
 
 
 
 
 
Consolidated Debt
3.81
%
 
$
1,912,216

 
 
 
 
 
 
 
 
 
Net discounts and deferred
 
 
 
 
 
 
 
 
 
 
 
 
financing costs
 
 
(14,482
)
 
 
 
 
 
 
 
 
 
Debt, per balance sheet
 
 
$
1,897,734

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Consolidated Debt
 
 
$
1,912,216

 
 
 
 
 
 
 
 
 
COPT’s share of unconsolid. JV gross debt (6)
 
30,000

 
 
 
 
 
 
 
 
 
Gross debt
 
 
$
1,942,216

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(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 in 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.

29


Corporate Office Properties Trust
Summary of Outstanding Debt as of 6/30/17 (continued)
_____________________________________________________________________________________________________________
copt063020_chart-01750.jpg
copt063020_chart-05022.jpgcopt063020_chart-05845.jpg
(1) Revolving Credit Facility maturity of $194.0 million scheduled for 2019 is presented assuming our exercise of two six-month extension options.
(2) Includes the effect of interest rate swaps in effect that hedge the risk of changes in interest rates on variable rate debt.

30


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
 
6/30/2017
 
Term Loan Covenants (1)
Required
 
6/30/2017
Total Debt / Total Assets
 
< 60%
 
43.6%
 
Total Debt / Total Assets
< 60%
 
36.8%
Secured Debt / Total Assets
 
< 40%
 
3.8%
 
Secured Debt / Total Assets
< 40%
 
3.3%
Debt Service Coverage
 
> 1.5x
 
3.7x
 
Adjusted EBITDA / Fixed Charges
> 1.5x
 
3.2x
Unencumbered Assets / Unsecured Debt
 
> 150%
 
230.5%
 
Unsecured Debt / Unencumbered Assets
< 60%
 
36.8%
 
 
 
 
 
 
 
Unencumbered Adjusted NOI / Unsecured Interest Expense
> 1.75x
 
4.2x
 
 
 
 
 
 
 
 
 
 
 
 
Debt Ratios (2)
 
Source
 
 
 
Unencumbered Portfolio Analysis
 
 
 
Gross debt
 
 
p. 29
 
$
1,942,216

 
# of unencumbered properties
149

Adjusted book
 
p. 36
 
$
4,552,362

 
% of total portfolio
90
%
Net debt / adjusted book ratio
 
 
 
42.4
%

Unencumbered square feet in-service
 
14,843

Net debt plus pref. equity / adj. book ratio
 
 
 
42.6
%
 
% of total portfolio
 
86
%
Net debt
 
 
p. 36
 
$
1,931,233

 
NOI from unencumbered real estate operations
 
$
73,952

In-place adjusted EBITDA
 
p. 10
 
$
76,016

 
% of total NOI from real estate operations
 
91
%
Net debt / in-place adjusted EBITDA ratio
6.4
x
 
Adjusted EBITDA from unencumbered real estate operations
 
$
68,574

Net debt plus pref. equity / in-place adj. EBITDA ratio
6.4
x
 
% of total adjusted EBITDA from real estate operations
 
91
%
Denominator for debt service coverage
 
p. 35
 
$
18,631

 
Unencumbered adjusted book
 
$
4,146,697

Denominator for fixed charges
 
p. 35
 
$
23,446

 
% of total adjusted book
 
91
%
Adjusted EBITDA
 
p. 10
 
$
75,595

 
 
 
 
Adjusted EBITDA debt service coverage ratio
 
 
4.1
x
 
 
 
 
Adjusted EBITDA fixed charge coverage ratio
 
 
3.2
x
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(1)     The covenants are calculated as defined in the applicable agreements, and the calculations differ between those agreements.


31


Corporate Office Properties Trust
Consolidated Real Estate Joint Ventures as of 6/30/17
(dollars and square feet in thousands) 
    
Operating Properties
Operational
Square Feet
Occupancy %
Leased %
NOI for Three Months Ended 6/30/17 (2)
NOI for the Six Months Ended 6/30/17 (2)
Total Assets (1)
Venture Level Debt
% COPT Owned
Suburban Maryland:
 

 
 
 
 
 

 

 
M Square Associates, LLC (2 properties)
242

100.0%
100.0%
$
1,379

$
2,779

$
55,234

$
44,207

50%
Huntsville, AL:
 
 
 
 
 
 
 
 
LW Redstone Company, LLC (6 properties)
514

98.3%
98.7%
1,776

3,601

86,937

48,812

85%
Total/Average
756

98.8%
99.1%
$
3,155

$
6,380

$
142,171

$
93,019

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

 
 
 

 

 
M Square Research Park
525

 
 
$
12,555

$

50%
Huntsville, Alabama:
 

 
 
 

 

 
Redstone Gateway (3)
4,084

 
 
70,687


85%
Washington, DC:
 
 
 
 
 
 
Stevens Place
189

 
 
62,382


95%
Total
4,798

 
 
$
145,624

$

 
 
(1)  Total assets includes the assets 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 $51.6 million due from the City of Huntsville (including accrued interest) in connection with infrastructure costs funded by the joint venture.

32


Corporate Office Properties Trust
Unconsolidated Real Estate Joint Venture as of 6/30/17
(dollars and square feet in thousands) 
 
 
 
 
 
 
 
Joint venture information
 
 
 
 
 
 
 
COPT ownership %
50
%
 
 
 
 
 
 
Investment in unconsolidated real estate joint venture
$
25,335

 
 
 
 
 
 
Number of properties
6

 
 
 
 
 
 
Square feet
962

 
 
 
 
 
 
Percentage occupied
100
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance sheet information
Venture
 
COPT’s Share (1)
 
 
 
 
Operating properties, net
$
127,189

 
$
63,595

 
 
 
 
Total Assets
$
145,279

 
$
72,640

 
 
 
 
Debt
$
59,577

 
$
29,789

 
 
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended 6/30/17
 
Six Months Ended 6/30/17
Operating information
Venture
 
COPT’s Share (1)
 
Venture
 
COPT’s Share (1)
Revenue
$
2,929

 
$
1,512

 
$
5,901

 
$
3,046

Operating expenses
(436
)
 
(218
)
 
(908
)
 
(454
)
NOI and EBITDA
2,493

 
1,294

 
4,993

 
2,592

Interest expense
(526
)
 
(264
)
 
(1,049
)
 
(525
)
Depreciation and amortization
(872
)
 
(311
)
 
(1,747
)
 
(622
)
Net income
$
1,095

 
$
719

 
$
2,197

 
$
1,445

 
 
 
 
 
 
 
 
NOI (per above)
$
2,493

 
$
1,294

 
$
4,993

 
$
2,592

Straight line rent adjustments
(275
)
 
(185
)
 
(554
)
 
(373
)
Cash NOI
$
2,218

 
$
1,109

 
$
4,439

 
$
2,219

 
 
 
 
 
 
 
 

(1) COPT’s share represents the portion allocable to our ownership interest.





33


Corporate Office Properties Trust
Supplementary Reconciliations of Non-GAAP Measures
(dollars in thousands)
 
Three Months Ended
 
Six Months Ended
 
6/30/17
 
3/31/17
 
12/31/16
 
9/30/16
 
6/30/16
 
6/30/17
 
6/30/16
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Gain on sales of real estate, net, per statements of operations
$
12

 
$
4,238

 
$
6,885

 
$
34,101

 
$

 
$
4,250

 
$

Gain on sales of non-operating properties

 
(4,219
)
 
(7,197
)
 

 

 
(4,219
)
 

Gain (loss) on sales of operating properties
$
12

 
$
19

 
$
(312
)
 
$
34,101

 
$

 
$
31

 
$

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Impairment losses, per statements of operations
$
1,625

 
$

 
$
1,554

 
$
27,699

 
$
69,692

 
$
1,625

 
$
72,138

Impairment losses on previously depreciated operating properties
(1,610
)
 

 
(1,518
)
 
(25,857
)
 
(55,124
)
 
(1,610
)
 
(55,971
)
Impairment losses on non-operating properties
$
15

 
$

 
$
36

 
$
1,842

 
$
14,568

 
$
15

 
$
16,167

 
 
 
 
 
 
 
 
 
 
 
 
 
 
NOI from real estate operations (1)
 

 
 

 
 

 
 

 
 

 
 
 
 
Real estate revenues
$
128,297

 
$
126,767

 
$
127,999

 
$
130,954

 
$
133,924

 
$
255,064

 
$
267,011

Real estate property operating expenses
(48,628
)
 
(48,519
)
 
(47,562
)
 
(49,952
)
 
(48,141
)
 
(97,147
)
 
(100,016
)
COPT’s share of NOI in unconsolidated real estate JV (2)
1,294

 
1,298

 
1,297

 
1,008

 

 
2,592

 

NOI from real estate operations
80,963

 
79,546

 
81,734

 
82,010

 
85,783

 
160,509

 
166,995

General and administrative expenses
(6,017
)
 
(6,747
)
 
(6,211
)
 
(7,242
)
 
(6,512
)
 
(12,764
)
 
(16,642
)
Leasing expenses
(1,842
)
 
(1,864
)
 
(1,578
)
 
(1,613
)
 
(1,514
)
 
(3,706
)
 
(3,267
)
Business development expenses and land carry costs
(1,597
)
 
(1,693
)
 
(1,747
)
 
(1,716
)
 
(2,363
)
 
(3,290
)
 
(4,781
)
NOI from construction contracts and other service operations
823

 
548

 
1,024

 
808

 
525

 
1,371

 
1,051

Impairment losses on non-operating properties
(15
)
 

 
(36
)
 
(1,842
)
 
(14,568
)
 
(15
)
 
(16,167
)
Equity in (loss) income of unconsolidated non-real estate entities
(1
)
 
(1
)
 
(1
)
 
1

 
10

 
(2
)
 
20

Interest and other income
1,583

 
1,726

 
1,567

 
1,391

 
1,330

 
3,309

 
2,486

(Loss) gain on early extinguishment of debt
(513
)
 

 
(1,073
)
 
(59
)
 
5

 
(513
)
 
22

Gain on sales of non-operating properties

 
4,219

 
7,197

 

 

 
4,219

 

Interest expense
(19,163
)
 
(18,994
)
 
(18,664
)
 
(18,301
)
 
(22,639
)
 
(38,157
)
 
(46,198
)
COPT’s share of interest expense of unconsolidated real estate JV
(264
)
 
(261
)
 
(267
)
 
(208
)
 

 
(525
)
 

Income tax (expense) benefit
(48
)
 
(40
)
 
(272
)
 
21

 
(1
)
 
(88
)
 
7

FFO - per NAREIT (1)
$
53,909

 
$
56,439

 
$
61,673

 
$
53,250

 
$
40,056

 
$
110,348

 
$
83,526

 
 
 
 
 
 
 
 
 
 
 
 
 
 
(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.
 
 
 
 

34


Corporate Office Properties Trust
Supplementary Reconciliations of Non-GAAP Measures (continued)
(dollars in thousands)
 
Three Months Ended
 
Six Months Ended
 
6/30/17
 
3/31/17
 
12/31/16
 
9/30/16
 
6/30/16
 
6/30/17
 
6/30/16
Total interest expense
$
19,163

 
$
18,994

 
$
18,664

 
$
18,301

 
$
22,639

 
$
38,157

 
$
46,198

Less: Amortization of deferred financing costs
(922
)
 
(1,009
)
 
(1,093
)
 
(1,126
)
 
(1,178
)
 
(1,931
)
 
(2,354
)
Less: Amortization of net debt discounts and prem., net of amounts capitalized
(343
)
 
(339
)
 
(336
)
 
(332
)
 
(325
)
 
(682
)
 
(644
)
Less: Accum. other comprehensive loss on derivatives amortized to expense
(36
)
 

 

 

 

 
(36
)
 

(Loss) gain on interest rate derivatives
(444
)
 
453

 
725

 
1,523

 
(319
)
 
9

 
(1,870
)
COPT’s share of interest expense of unconsolidated real estate JV, excluding deferred financing costs
258

 
255

 
261

 
204

 

 
513

 

Denominator for interest coverage
17,676

 
18,354

 
18,221

 
18,570

 
20,817

 
36,030

 
41,330

Scheduled principal amortization
955

 
958

 
941

 
922

 
1,732

 
1,913

 
3,532

Denominator for debt service coverage
18,631

 
19,312

 
19,162

 
19,492

 
22,549

 
37,943

 
44,862

Capitalized interest
1,611

 
1,531

 
1,419

 
1,242

 
1,309

 
3,142

 
3,062

Preferred share dividends - redeemable non-convertible
3,039

 
3,180

 
3,640

 
3,552

 
3,553

 
6,219

 
7,105

Preferred unit distributions
165

 
165

 
165

 
165

 
165

 
330

 
330

Denominator for fixed charge coverage
$
23,446

 
$
24,188

 
$
24,386

 
$
24,451

 
$
27,576

 
$
47,634

 
$
55,359

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Preferred share dividends
$
3,039

 
$
3,180

 
$
3,640

 
$
3,552

 
$
3,553

 
$
6,219

 
$
7,105

Preferred unit distributions
165

 
165

 
165

 
165

 
165

 
330

 
330

Common share dividends - unrestricted shares
27,241

 
27,219

 
26,991

 
25,963

 
25,938

 
54,460

 
51,857

Common share dividends - restricted shares
117

 
125

 
100

 
105

 
96

 
242

 
214

Common unit distributions
936

 
936

 
987

 
988

 
1,004

 
1,872

 
2,015

Total dividends/distributions
$
31,498

 
$
31,625

 
$
31,883

 
$
30,773

 
$
30,756

 
$
63,123

 
$
61,521

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Common share dividends - unrestricted shares
$
27,241

 
$
27,219

 
$
26,991

 
$
25,963

 
$
25,938

 
$
54,460

 
$
51,857

Common unit distributions
936

 
936

 
987

 
988

 
1,004

 
1,872

 
2,015

Dividends and distributions for payout ratios
$
28,177

 
$
28,155

 
$
27,978

 
$
26,951

 
$
26,942

 
$
56,332

 
$
53,872

 
 
 
 
 
 
 
 
 
 
 
 
 
 

35


Corporate Office Properties Trust
Supplementary Reconciliations of Non-GAAP Measures (continued)
(dollars in thousands)
 
Three Months Ended
 
 
 
 
 
6/30/17
 
3/31/17
 
12/31/16
 
9/30/16
 
6/30/16
 
 
 
 
Total Assets
$
3,574,887

 
$
3,739,366

 
$
3,780,885

 
$
3,634,194

 
$
3,841,692

 
 
 
 
Accumulated depreciation
755,208

 
732,371

 
706,385

 
681,476

 
678,827

 
 
 
 
Accumulated depreciation included in assets held for sale
8,148

 
7,104

 
9,566

 
22,938

 
76,653

 
 
 
 
Accumulated amort. of real estate intangibles and deferred leasing costs
183,199

 
218,336

 
210,692

 
201,414

 
199,038

 
 
 
 
Accumulated amortization of real estate intangibles and deferred leasing costs included in assets held for sale
9,951

 
9,259

 
11,575

 
21,469

 
27,206

 
 
 
 
COPT’s share of liabilities of unconsolidated real estate JV
29,888

 
30,037

 
29,873

 
30,013

 

 
 
 
 
COPT’s share of accumulated depreciation and amortization of unconsolidated real estate JV
2,064

 
1,501

 
938

 
375

 

 
 
 
 
Less: Cash and cash equivalents
(10,606
)
 
(226,470
)
 
(209,863
)
 
(47,574
)
 
(13,317
)
 
 
 
 
COPT’s share of cash of unconsolidated real estate JV
(377
)
 
(370
)
 
(283
)
 
(444
)
 

 
 
 
 
Adjusted book
$
4,552,362

 
$
4,511,134

 
$
4,539,768

 
$
4,543,861

 
$
4,810,099

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Gross debt (page 29)
$
1,942,216

 
$
1,949,221

 
$
1,950,229

 
$
1,921,219

 
$
2,112,700

 


 


Less: Cash and cash equivalents
(10,606
)
 
(226,470
)
 
(209,863
)
 
(47,574
)
 
(13,317
)
 


 


COPT’s share of cash of unconsolidated real estate JV
(377
)
 
(370
)
 
(283
)
 
(444
)
 

 
 
 
 
Net debt
$
1,931,233

 
$
1,722,381

 
$
1,740,083

 
$
1,873,201

 
$
2,099,383

 


 


Preferred equity
8,800

 
181,300

 
207,883

 
207,883

 
207,883

 
 
 
 
Net debt plus preferred equity
$
1,940,033

 
$
1,903,681

 
$
1,947,966

 
$
2,081,084

 
$
2,307,266

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 


36



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.


37



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.

38



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

39



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 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; consolidated property operating expenses; 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.


40



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 (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.
 
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 (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, (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 (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.

41



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 the United States Government and its 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 1/1/16, excluding properties disposed or held for sale.
 
Second Generation Space — Space leased that has been previously occupied.
 
Total Portfolio — Operating properties, including ones owned through an unconsolidated joint venture.

42


logo2dtd021015a01a05.jpg
6711 Columbia Gateway Drive, Suite 300
Columbia, Maryland 21046
Telephone 443-285-5400
Facsimile 443-285-7650
www.copt.com
NYSE: OFC
 
 
 
NEWS RELEASE
 
 
 
FOR IMMEDIATE RELEASE
IR Contacts:
 
 
Stephanie Krewson-Kelly
Michelle Layne
 
443-285-5453
443-285-5452
 
stephanie.kelly@copt.com
michelle.layne@copt.com


COPT REPORTS SECOND QUARTER 2017 RESULTS

COLUMBIA, MD July 27, 2017 - Corporate Office Properties Trust (“COPT” or the “Company”) (NYSE: OFC) announced financial and operating results for the second quarter ended June 30, 2017.

Management Comments

“Our FFO per share, as adjusted for comparability, in the second quarter of $0.49 was at the high end of our guidance due primarily to the timing of certain operating expenses that boosted same office NOI. We have strong visibility on the remaining quarters and, are narrowing our guidance for the full year but maintaining the original mid-point of $2.04. Our second quarter same office cash NOI increase of 2.6% represents our ninth consecutive quarter of increases, and equates to 3.8% growth for the first half of the year,” stated Stephen E. Budorick, COPT’s President & Chief Executive Officer.

“In May, the fiscal 2017 federal budget was signed into law, giving the Department of Defense (“DOD”) a base discretionary budget (“Base Budget”) of $532 billion, a 2% increase over 2016’s Base Budget. The Administration’s Base Budget request for fiscal 2018 of $575 billion would represent an 8% increase over the current year and is slightly higher than the defense industry expectations for average annual growth of 5% through 2021. By unanimous and nearly unanimous votes, the Senate and the House Armed Services Committees, respectively, recommended substantial increases to the DOD’s Base Budget beyond the Administration’s requested level, which evidences bipartisan support for such growth. Given our portfolio’s unique geographic alignment with DOD spending priorities, we believe we are well positioned to benefit from incremental space requirements related to mission growth at our Defense/IT installations,” added Mr. Budorick.

Financial Highlights

2nd Quarter Financial Results:
Diluted earnings (loss) per share (“EPS”) was $0.08 for the quarter ended June 30, 2017 as compared to ($0.54) for the second quarter of 2016.
Diluted funds from operations per share (“FFOPS”), as calculated in accordance with NAREIT’s definition, was $0.42 for the second quarter of 2017 as compared to $0.36 for the second quarter of 2016.
FFOPS, as adjusted for comparability, was $0.49 for the quarter ended June 30, 2017 as compared to $0.52 for the second quarter of 2016.


i


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), and write-offs of original issuance costs for redeemed preferred shares.

Operating Performance Highlights

Portfolio Summary:
At June 30, 2017, the Company’s core portfolio of 153 operating office properties was 93.8% occupied and 94.8% leased.
During the quarter, the Company placed 297,000 square feet of development into service that was 97% leased.
At June 30, 2017, the Company had nine operating properties and land held for sale with an aggregate book value of $51.3 million. The buildings contain a total of 469,000 square feet that were 95.4% occupied and leased at June 30, 2017.

Same Office Performance:
At June 30, 2017, COPT’s same office portfolio of 137 buildings was 92.7% occupied and 93.6% leased.
For the quarter and six months ended June 30, 2017, the Company’s same office property cash NOI increased 2.6% and 3.8%, respectively, over the prior year’s comparable periods.

Leasing: For the six months ended June 30, 2017, the Company leased a total of 936,000 square feet. The 383,000 square feet of development leasing through June 30, 2017, represents approximately half of the Company’s goal of leasing 700,000 square feet in development projects during the year.

Detail on the Company’s second quarter leasing results are as follows:

Square Feet Leased - For the three months ended June 30, 2017, the Company leased a total of 696,000 square feet composed of 293,000 square feet of renewing leases, 78,000 square feet of new leases on previously vacant space, and 325,000 square feet in development projects. The bulk of the development leasing in the quarter consisted of two build-to-suit projects totaling 297,000 square feet.

Renewal Rates & Rent Spreads on Renewing Leases - During the second quarter, the Company renewed 85% of expiring leases; rents on renewed space increased 9.3% on a GAAP basis and decreased 1.0% on a cash basis.

Lease Terms - In the second quarter, lease terms averaged 3.7 years on renewing space, 6.7 years on vacant space, and 11.6 years on development leasing, for a weighted average lease term of 7.7 years on all leasing.

Wholesale Data Center Leasing - During the quarter ended June 30, 2017, the Company leased 2.0 megawatts (“MW”) in its COPT DC-6 data center, which is now 87.6% leased.

Investment Activity Highlights

Development & Redevelopment Projects:
As of June 30, 2017, the Company has six properties under construction totaling 970,000 square feet that were 85% leased.
The Company also has two completed development properties held-for-lease to the U.S. Government. These buildings total 352,000 square feet and currently are 6% leased. Including these two projects,

ii


the Company’s construction pipeline totals 1.3 million square feet, is 64% leased, and represents a total estimated cost of $302.7 million.
COPT also has two projects under redevelopment that total 36,000 square feet and represent a total expected cost of $11.0 million. These projects were 39% leased as of June 30, 2017.

Dispositions:
During the quarter, the Company sold one 37,000 square foot suburban office property for $2.3 million.

Balance Sheet and Capital Transaction Highlights

As of June 30, 2017, the Company’s net debt plus preferred equity to adjusted book ratio was 42.6% and its net debt plus preferred equity to in-place adjusted EBITDA ratio was 6.4x. For the same period, the Company’s adjusted EBITDA fixed charge coverage ratio was 3.2x.
As of June 30, 2017 and including the effect of interest rate swaps, the Company’s weighted average effective interest rate was 4.1%; additionally, 90% of the Company’s debt was subject to fixed interest rates and the debt portfolio had a weighted average maturity of 5.5 years.
Effective June 27, 2017, the Company redeemed all of the outstanding shares of its 7.375% Series L Cumulative Preferred Shares (the “Series L Preferred Shares”) at a price of $25.00 per share, or $172.5 million in the aggregate, plus accrued and unpaid dividends thereon up to but not including the date of redemption.
The Company repaid $200 million of the $300 million balance on a term loan scheduled to mature in 2020.
Also during the quarter, COPT issued 44,260 common shares at a weighted average price of $33.19 per share under its existing at-the-market (“ATM”) stock offering program, generating net proceeds totaling $1.4 million. For the six months ended June 30, 2017, the Company realized $19.7 million of net proceeds from the ATM issuance.

2017 Guidance
Management is narrowing its previously issued guidance range for full year EPS and FFOPS, as adjusted for comparability, to revised ranges of $0.62-$0.66 and $2.02-$2.06, respectively. Management also is establishing EPS and FFOPS, as adjusted for comparability, guidance for the third quarter ending September 30, 2017 at ranges of $0.17-$0.19 and $0.51-$0.53, respectively, and also for the fourth quarter ending December 31, 2017, at ranges of $0.19-$0.21 and $0.54-$0.56, respectively. Reconciliations of projected diluted EPS to projected FFOPS are as follows:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Quarter Ending
 
Quarter Ending
 
Year Ending
 
 
September 30, 2017
 
December 31, 2017
 
December 31, 2017
 
 
Low
 
High
 
Low
 
High
 
Low
 
High
EPS
 
$
0.17

 
$
0.19

 
$
0.19

 
$
0.21

 
$
0.62

 
$
0.66

Real estate depreciation and amortization
 
0.34

 
0.34

 
0.35

 
0.35

 
1.34

 
1.34

Impairment losses on previously depreciated operating properties
 

 

 

 

 
0.02

 
0.02

FFOPS, NAREIT definition
 
0.51

 
0.53

 
0.54

 
0.56

 
1.98

 
2.02

Original issuance costs of redeemed preferred shares
 

 

 

 

 
0.07

 
0.07

Gains on sales of non-operating properties and other
 

 

 

 

 
(0.03
)
 
(0.03
)
FFOPS, as adjusted for comparability
 
$
0.51

 
$
0.53

 
$
0.54

 
$
0.56

 
$
2.02

 
$
2.06



iii


Associated Supplemental Presentation
Prior to the call, the Company will post a slide presentation to accompany management’s prepared remarks for its second quarter 2017 conference call, the details of which are provided below. The accompanying slide presentation can be viewed on and downloaded from the ‘Investors’ section of the Company’s website (www.copt.com).

Conference Call Information
Management will discuss second quarter 2017 earnings results on its conference call tomorrow at 12:00 p.m. Eastern Time, details of which are listed below:

Conference Call Date:     Friday, July 28, 2017
Time:12:00 p.m. Eastern Time
Telephone Number: (within the U.S.) 855-463-9057
Telephone Number: (outside the U.S.) 661-378-9894
Passcode: 47698579

Replay Information
A replay of this call will be available beginning at 4:00 p.m. Eastern Time on Friday, July 28, through 4:00 p.m. Eastern Time on Friday, August 11. To access the replay within the United States, please call 855-859-2056 and use passcode 47698579. To access the replay outside the United States, please call 404-537-3406 and use passcode 47698579.

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 call 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 the Company’s Supplemental Information Package furnished on a Form 8-K which can be found on its 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 the United States Government and its contractors, most of whom are engaged in national security, defense and information technology (“IT”) related activities servicing priority missions (“Defense/IT Locations”). The Company also owns a portfolio of office properties located in select urban/urban-like submarkets within its regional footprint with durable Class-A office fundamentals and characteristics (“Regional Office Properties”). As of June 30, 2017, the Company derived 87% of core portfolio annualized revenue from Defense/IT Locations and 13% from its Regional Office Properties. As of June 30, 2017, and including six buildings that are owned through an unconsolidated joint venture, its core portfolio of 153 office properties, encompassed 16.6 million square feet and was 94.8% leased. As of the same date, it also owned one wholesale data center with a critical load of 19.25 megawatts.


iv


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

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

The Company undertakes no obligation to update or supplement any forward-looking statements. For further information, please refer to the Company’s filings with the Securities and Exchange Commission, particularly the section entitled “Risk Factors” in Item 1A of the Company’s Annual Report on Form 10-K for the year ended December 31, 2016.


v



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


 
For the Three Months Ended June 30,
 
For the Six Months Ended June 30,
 
2017
 
2016
 
2017
 
2016
Revenues
 

 
 

 
 
 
 
Real estate revenues
$
128,297

 
$
133,924

 
$
255,064

 
$
267,011

Construction contract and other service revenues
23,138

 
12,003

 
36,172

 
23,223

Total revenues
151,435

 
145,927

 
291,236

 
290,234

Expenses
 

 
 

 
 
 
 
Property operating expenses
48,628

 
48,141

 
97,147

 
100,016

Depreciation and amortization associated with real estate operations
32,793

 
33,248

 
65,852

 
67,775

Construction contract and other service expenses
22,315

 
11,478

 
34,801

 
22,172

Impairment losses
1,625

 
69,692

 
1,625

 
72,138

General and administrative expenses
6,017

 
6,512

 
12,764

 
16,642

Leasing expenses
1,842

 
1,514

 
3,706

 
3,267

Business development expenses and land carry costs
1,597

 
2,363

 
3,290

 
4,781

Total operating expenses
114,817

 
172,948

 
219,185

 
286,791

Operating income
36,618

 
(27,021
)

72,051


3,443

Interest expense
(19,163
)
 
(22,639
)
 
(38,157
)
 
(46,198
)
Interest and other income
1,583

 
1,330

 
3,309

 
2,486

(Loss) gain on early extinguishment of debt
(513
)
 
5

 
(513
)
 
22

Income (loss) before equity in income of unconsolidated entities and income taxes
18,525

 
(48,325
)
 
36,690

 
(40,247
)
Equity in income of unconsolidated entities
718

 
10

 
1,443

 
20

Income tax (expense) benefit
(48
)
 
(1
)
 
(88
)
 
7

Gain on sales of real estate
12

 

 
4,250

 

Net income (loss)
19,207

 
(48,316
)
 
42,295

 
(40,220
)
Net (income) loss attributable to noncontrolling interests
 

 
 

 
 
 
 
Common units in the Operating Partnership (“OP”)
(273
)
 
1,976

 
(907
)
 
1,849

Preferred units in the OP
(165
)
 
(165
)
 
(330
)
 
(330
)
Other consolidated entities
(907
)
 
(914
)
 
(1,841
)
 
(1,892
)
Net income (loss) attributable to COPT
17,862

 
(47,419
)
 
39,217

 
(40,593
)
Preferred share dividends
(3,039
)
 
(3,553
)
 
(6,219
)
 
(7,105
)
Issuance costs associated with redeemed preferred shares
(6,847
)
 

 
(6,847
)
 

Net income (loss) attributable to COPT common shareholders
$
7,976

 
$
(50,972
)
 
$
26,151

 
$
(47,698
)
Earnings per share (“EPS”) computation:
 

 
 

 
 
 
 
Numerator for diluted EPS:
 

 
 

 
 
 
 
Net income attributable to common shareholders
$
7,976

 
$
(50,972
)
 
$
26,151

 
$
(47,698
)
Amount allocable to share-based compensation awards
(117
)
 
(96
)
 
(242
)
 
(214
)
Numerator for diluted EPS
$
7,859

 
$
(51,068
)
 
$
25,909

 
$
(47,912
)
Denominator:
 

 
 

 
 
 
 
Weighted average common shares - basic
99,036

 
94,300

 
98,725

 
94,251

Dilutive effect of share-based compensation awards
160

 

 
158

 

Weighted average common shares - diluted
99,196

 
94,300

 
98,883

 
94,251

Diluted EPS
$
0.08

 
$
(0.54
)
 
$
0.26

 
$
(0.51
)

vi



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

 
For the Three Months Ended June 30,
 
For the Six Months Ended June 30,
 
2017
 
2016
 
2017
 
2016
Net income
$
19,207

 
$
(48,316
)
 
$
42,295

 
$
(40,220
)
Real estate-related depreciation and amortization
32,793

 
33,248

 
65,852

 
67,775

Impairment losses on previously depreciated operating properties
1,610

 
55,124

 
1,610

 
55,971

Gain on sales of previously depreciated operating properties
(12
)
 

 
(31
)
 

Depreciation and amortization on unconsolidated real estate JV
311

 

 
622

 

Funds from operations (“FFO”)
53,909

 
40,056

 
110,348

 
83,526

Preferred share dividends
(3,039
)
 
(3,553
)
 
(6,219
)
 
(7,105
)
Noncontrolling interests - preferred units in the OP
(165
)
 
(165
)
 
(330
)
 
(330
)
FFO allocable to other noncontrolling interests
(906
)
 
(1,014
)
 
(1,884
)
 
(2,041
)
Issuance costs associated with redeemed preferred shares
(6,847
)
 

 
(6,847
)
 

Basic and diluted FFO allocable to share-based compensation awards
(185
)
 
(130
)
 
(401
)
 
(296
)
Basic and Diluted FFO available to common share and common unit holders (“Diluted FFO”)
42,767

 
35,194

 
94,667

 
73,754

Gain on sales of non-operating properties

 

 
(4,219
)
 

Impairment losses on non-operating properties
15

 
14,568

 
15

 
16,167

Loss (gain) on interest rate derivatives
444

 
319

 
(9
)
 
1,870

Loss (gain) on early extinguishment of debt
513

 
(5
)
 
513

 
(22
)
Issuance costs associated with redeemed preferred shares
6,847

 

 
6,847

 

Demolition costs on redevelopment properties
72

 
370

 
294

 
578

Executive transition costs
31

 
247

 
730

 
4,384

Diluted FFO comparability adjustments allocable to share-based compensation awards
(31
)
 
(63
)
 
(17
)
 
(94
)
Diluted FFO available to common share and common unit holders, as adjusted for comparability
50,658

 
50,630

 
98,821

 
96,637

Straight line rent adjustments and lease incentive amortization
1,517

 
480

 
1,950

 
(485
)
Amortization of intangibles included in net operating income
325

 
338

 
684

 
676

Share-based compensation, net of amounts capitalized
1,309

 
1,485

 
2,558

 
3,117

Amortization of deferred financing costs
922

 
1,178

 
1,931

 
2,354

Amortization of net debt discounts, net of amounts capitalized
343

 
325

 
682

 
644

Accum. other comprehensive loss on derivatives amortized to expense
36

 

 
36

 

Replacement capital expenditures
(11,269
)
 
(11,546
)
 
(24,318
)
 
(23,266
)
Diluted AFFO adjustments allocable to other noncontrolling interests
25

 
47

 
51

 
95

Diluted AFFO adjustments on unconsolidated real estate JV
(179
)
 

 
(361
)
 

Diluted adjusted funds from operations available to common share and common unit holders (“Diluted AFFO”)
$
43,687

 
$
42,937

 
$
82,034

 
$
79,772

Diluted FFO per share
$
0.42

 
$
0.36

 
$
0.93

 
$
0.75

Diluted FFO per share, as adjusted for comparability
$
0.49

 
$
0.52

 
$
0.97

 
$
0.99

Dividends/distributions per common share/unit
$
0.275

 
$
0.275

 
$
0.550

 
$
0.550



vii



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

 
 
June 30,
2017
 
December 31,
2016
Balance Sheet Data
 
 

 
 

Properties, net of accumulated depreciation
 
$
3,134,559

 
$
3,073,362

Total assets
 
3,574,887

 
3,780,885

Debt, per balance sheet
 
1,897,734

 
1,904,001

Total liabilities
 
2,132,332

 
2,163,242

Redeemable noncontrolling interest
 
23,731

 
22,979

Equity
 
1,418,824

 
1,594,664

Net debt to adjusted book
 
42.4
%
 
38.3
%
 
 
 
 
 
Core Portfolio Data (as of period end) (1)
 
 

 
 

Number of operating properties
 
153

 
152

Total net rentable square feet owned (in thousands)
 
16,568

 
16,301

Occupancy %
 
93.8
%
 
92.9
%
Leased %
 
94.8
%
 
94.4
%
 
 
 
 
 
 
For the Three Months Ended June 30,
 
For the Six Months Ended June 30,
2017
 
2016
 
2017
 
2016
Payout ratios
 

 
 

 
 

 
 

Diluted FFO
65.9
%
 
76.6
%
 
59.5
%
 
73.0
%
Diluted FFO, as adjusted for comparability
55.6
%
 
53.2
%
 
57.0
%
 
55.7
%
Diluted AFFO
64.5
%
 
62.7
%
 
68.7
%
 
67.5
%
Adjusted EBITDA fixed charge coverage ratio
3.2
x
 
2.9
x
 
3.1
x
 
2.8
x
Net debt to in-place adjusted EBITDA ratio (2)
6.4
x
 
6.6
x
 
N/A

 
N/A

Net debt plus preferred equity to in-place adjusted EBITDA ratio (3)
6.4
x
 
7.2
x
 
N/A

 
N/A

 
 
 
 
 
 
 
 
Reconciliation of denominators for per share measures
 
 

 
 
 
 
Denominator for diluted EPS
99,196

 
94,300

 
98,883

 
94,251

Weighted average common units
3,405

 
3,676

 
3,425

 
3,676

Anti-dilutive EPS effect of share-based compensation awards

 
117

 

 
107

Denominator for diluted FFO per share and as adjusted for comparability
102,601

 
98,093

 
102,308

 
98,034

 
 
 
 
 
 
 
 

(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).
(3)
Represents net debt plus the total liquidation preference of preferred equity as of period end divided by in-place adjusted EBITDA for the period, as annualized (i.e. three month periods are multiplied by four).


viii



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

 
For the Three Months Ended June 30,
 
For the Six Months Ended June 30,
 
2017
 
2016
 
2017
 
2016
Reconciliation of common share dividends to dividends and distributions for payout ratios
 

 
 

 
 
 
 
Common share dividends - unrestricted shares
$
27,241

 
$
25,938

 
$
54,460

 
$
51,857

Common unit distributions
936

 
1,004

 
1,872

 
2,015

Dividends and distributions for payout ratios
$
28,177

 
$
26,942

 
$
56,332

 
$
53,872

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

 
 

 
 

 
 

Net income (loss)
$
19,207

 
$
(48,316
)
 
$
42,295

 
$
(40,220
)
Interest expense
19,163

 
22,639

 
38,157

 
46,198

Income tax expense (benefit)
48

 
1

 
88

 
(7
)
Real estate-related depreciation and amortization
32,793

 
33,248

 
65,852

 
67,775

Depreciation of furniture, fixtures and equipment
585

 
524

 
1,096

 
1,126

Impairment losses
1,625

 
69,692

 
1,625

 
72,138

Loss (gain) on early extinguishment of debt
513

 
(5
)
 
513

 
(22
)
Gain on sales of operating properties
(12
)
 

 
(31
)
 

Gain on sales of non-operational properties

 

 
(4,219
)
 

Net gain on investments in unconsolidated entities included in interest and other income

 
(36
)
 

 
(59
)
Business development expenses
995

 
1,261

 
1,933

 
2,640

Demolition costs on redevelopment properties
72

 
370

 
294

 
578

Adjustments from unconsolidated real estate JV
575

 

 
1,147

 

Executive transition costs
31

 
247

 
730

 
4,384

Adjusted EBITDA
$
75,595

 
$
79,625

 
$
149,480

 
$
154,531

Proforma net operating income adjustment for property changes within period
421

 
109

 
 
 
 
In-place adjusted EBITDA
$
76,016

 
$
79,734

 

 

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

 
 

 
 

 
 

Interest expense
$
19,163

 
$
22,639

 
$
38,157

 
$
46,198

Less: Amortization of deferred financing costs
(922
)
 
(1,178
)
 
(1,931
)
 
(2,354
)
Less: Amortization of net debt discounts, net of amounts capitalized
(343
)
 
(325
)
 
(682
)
 
(644
)
Less: Accum. other comprehensive loss on derivatives amortized to expense
(36
)
 

 
(36
)
 

Less: (Loss) gain on interest rate derivatives
(444
)
 
(319
)
 
9

 
(1,870
)
COPT’s share of interest expense of unconsolidated real estate JV, excluding deferred financing costs
258

 

 
513

 

Scheduled principal amortization
955

 
1,732

 
1,913

 
3,532

Capitalized interest
1,611

 
1,309

 
3,142

 
3,062

Preferred share dividends
3,039

 
3,553

 
6,219

 
7,105

Preferred unit distributions
165

 
165

 
330

 
330

Denominator for fixed charge coverage-Adjusted EBITDA
$
23,446

 
$
27,576

 
$
47,634

 
$
55,359

 
 
 
 
 
 
 
 

ix



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

 
For the Three Months Ended June 30,
 
For the Six Months Ended June 30,
 
2017
 
2016
 
2017
 
2016
Reconciliations of tenant improvements and incentives, capital improvements and leasing costs for operating properties to replacement capital expenditures
 
 
 
 
 
 
 
Tenant improvements and incentives
$
6,148

 
$
6,784

 
$
10,888

 
$
15,550

Building improvements
5,972

 
5,302

 
9,202

 
9,255

Leasing costs
1,666

 
1,613

 
2,817

 
2,796

Net additions to (exclusions from) tenant improvements and incentives
626

 
(885
)
 
7,422

 
(2,238
)
Excluded building improvements
(3,143
)
 
(1,121
)
 
(6,011
)
 
(1,678
)
Excluded leasing costs

 
(147
)
 

 
(419
)
Replacement capital expenditures
$
11,269

 
$
11,546

 
$
24,318

 
$
23,266

 
 
 
 
 
 
 
 
Same office property cash NOI
$
71,313

 
$
69,485

 
$
141,746

 
$
136,601

Straight line rent adjustments and lease incentive amortization
(1,106
)
 
(2,724
)
 
(1,368
)
 
(3,618
)
Amortization of acquired above- and below-market rents
(270
)
 
(190
)
 
(573
)
 
(380
)
Amortization of below-market cost arrangements
(146
)
 
(239
)
 
(292
)
 
(478
)
Lease termination fee, gross
517

 
336

 
1,223

 
1,289

Tenant funded landlord assets
628

 
2,848

 
895

 
3,411

Same office property NOI
$
70,936

 
$
69,516

 
$
141,631

 
$
136,825

 
 
 
 
 
 
 
 
 
 
June 30,
2017
 
December 31,
2016
Reconciliation of total assets to adjusted book
 
 

 
 

Total assets
 
$
3,574,887

 
$
3,780,885

Accumulated depreciation
 
755,208

 
706,385

Accumulated depreciation included in assets held for sale
 
8,148

 
9,566

Accumulated amortization of real estate intangibles and deferred leasing costs
 
183,199

 
210,692

Accumulated amortization of real estate intangibles and deferred leasing costs included in assets held for sale
 
9,951

 
11,575

COPT’s share of liabilities of unconsolidated real estate JV
 
29,888

 
29,873

COPT’s share of accumulated depreciation and amortization of unconsolidated real estate JV
 
2,064

 
938

Less: Cash and cash equivalents
 
(10,606
)
 
(209,863
)
COPT’s share of cash of unconsolidated real estate JV
 
(377
)
 
(283
)
Adjusted book
 
$
4,552,362

 
$
4,539,768

 
 
 
 
 
Reconciliation of debt outstanding to net debt and net debt plus preferred equity
 
 
 
 
Debt outstanding (excluding net debt discounts and deferred financing costs)
 
$
1,942,216

 
$
1,950,229

Less: Cash and cash equivalents
 
(10,606
)
 
(209,863
)
COPT’s share of cash of unconsolidated real estate JV
 
(377
)
 
(283
)
Net debt
 
$
1,931,233

 
$
1,740,083

Preferred equity
 
8,800

 
207,883

Net debt plus preferred equity
 
$
1,940,033

 
$
1,947,966


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