ý | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended | June 30, 2017 |
o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from | to |
Corporate Office Properties Trust | Maryland | 23-2947217 | ||
(State or other jurisdiction of | (IRS Employer | |||
incorporation or organization) | Identification No.) | |||
Corporate Office Properties, L.P. | Delaware | 23-2930022 | ||
(State or other jurisdiction of | (IRS Employer | |||
incorporation or organization) | Identification No.) |
6711 Columbia Gateway Drive, Suite 300, Columbia, MD | 21046 | |
(Address of principal executive offices) | (Zip Code) |
Large accelerated filer ý | Accelerated filer o | Non-accelerated filer o | Smaller reporting company o | Emerging growth company o | |||
(Do not check if a smaller reporting company) |
Large accelerated filer ý | Accelerated filer o | Non-accelerated filer o | Smaller reporting company o | Emerging growth company o | |||
(Do not check if a smaller reporting company) |
• | combined reports better reflect how management and the analyst community view the business as a single operating unit; |
• | combined reports enhance investors’ understanding of the Company and the Operating Partnership by enabling them to view the business as a whole and in the same manner as management; |
• | combined reports are more efficient for the Company and the Operating Partnership and result in savings in time, effort and expense; and |
• | combined reports are more efficient for investors by reducing duplicative disclosure and providing a single document for their review. |
• | consolidated financial statements; |
• | the following notes to the consolidated financial statements: |
• | Note 3, Fair Value Measurements of COPT and subsidiaries and COPLP and subsidiaries; and |
• | Note 14, Earnings per Share of COPT and subsidiaries and Earnings per Unit of COPLP and subsidiaries; |
• | “Item 2: Management’s Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources of COPT”; and |
• | “Item 2: Management’s Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources of COPLP.” |
PAGE | ||
June 30, 2017 | December 31, 2016 | ||||||
Assets | |||||||
Properties, net: | |||||||
Operating properties, net | $ | 2,688,174 | $ | 2,671,831 | |||
Projects in development or held for future development | 446,385 | 401,531 | |||||
Total properties, net | 3,134,559 | 3,073,362 | |||||
Assets held for sale, net | 51,291 | 94,654 | |||||
Cash and cash equivalents | 10,606 | 209,863 | |||||
Restricted cash and marketable securities | 6,866 | 8,193 | |||||
Investment in unconsolidated real estate joint venture | 25,335 | 25,548 | |||||
Accounts receivable (net of allowance for doubtful accounts of $435 and $603, respectively) | 42,742 | 34,438 | |||||
Deferred rent receivable (net of allowance of $125 and $373, respectively) | 89,832 | 90,219 | |||||
Intangible assets on real estate acquisitions, net | 69,205 | 78,351 | |||||
Deferred leasing costs (net of accumulated amortization of $29,720 and $65,988, respectively) | 40,506 | 41,214 | |||||
Investing receivables | 54,598 | 52,279 | |||||
Prepaid expenses and other assets, net | 49,347 | 72,764 | |||||
Total assets | $ | 3,574,887 | $ | 3,780,885 | |||
Liabilities and equity | |||||||
Liabilities: | |||||||
Debt, net | $ | 1,897,734 | $ | 1,904,001 | |||
Accounts payable and accrued expenses | 95,267 | 108,682 | |||||
Rents received in advance and security deposits | 25,444 | 29,798 | |||||
Dividends and distributions payable | 28,462 | 31,335 | |||||
Deferred revenue associated with operating leases | 13,172 | 12,666 | |||||
Redeemable preferred shares of beneficial interest ($0.01 par value; 531,667 shares issued and outstanding at December 31, 2016 and none at June 30, 2017) | — | 26,583 | |||||
Capital lease obligation | 16,177 | — | |||||
Other liabilities | 56,076 | 50,177 | |||||
Total liabilities | 2,132,332 | 2,163,242 | |||||
Commitments and contingencies (Note 15) | |||||||
Redeemable noncontrolling interests | 23,731 | 22,979 | |||||
Equity: | |||||||
Corporate Office Properties Trust’s shareholders’ equity: | |||||||
Preferred Shares of beneficial interest at liquidation preference ($0.01 par value; 25,000,000 shares authorized, 6,900,000 shares issued and outstanding at December 31, 2016 and none at June 30, 2017) | — | 172,500 | |||||
Common Shares of beneficial interest ($0.01 par value; 125,000,000 shares authorized, shares issued and outstanding of 99,471,641 at June 30, 2017 and 98,498,651 at December 31, 2016) | 995 | 985 | |||||
Additional paid-in capital | 2,146,119 | 2,116,581 | |||||
Cumulative distributions in excess of net income | (793,828 | ) | (765,276 | ) | |||
Accumulated other comprehensive loss | (1,163 | ) | (1,731 | ) | |||
Total Corporate Office Properties Trust’s shareholders’ equity | 1,352,123 | 1,523,059 | |||||
Noncontrolling interests in subsidiaries: | |||||||
Common units in COPLP | 46,233 | 49,228 | |||||
Preferred units in COPLP | 8,800 | 8,800 | |||||
Other consolidated entities | 11,668 | 13,577 | |||||
Noncontrolling interests in subsidiaries | 66,701 | 71,605 | |||||
Total equity | 1,418,824 | 1,594,664 | |||||
Total liabilities, redeemable noncontrolling interest and equity | $ | 3,574,887 | $ | 3,780,885 |
For the Three Months Ended June 30, | For the Six Months Ended June 30, | ||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
Revenues | |||||||||||||||
Rental revenue | $ | 101,347 | $ | 107,524 | $ | 201,962 | $ | 212,906 | |||||||
Tenant recoveries and other real estate operations revenue | 26,950 | 26,400 | 53,102 | 54,105 | |||||||||||
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, administrative and leasing expenses | 7,859 | 8,026 | 16,470 | 19,909 | |||||||||||
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 (loss) | 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 | ||||||||
Income (loss) before gain on sales of real estate | 19,195 | (48,316 | ) | 38,045 | (40,220 | ) | |||||||||
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 COPLP | (273 | ) | 1,976 | (907 | ) | 1,849 | |||||||||
Preferred units in COPLP | (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 common share: | |||||||||||||||
Net income (loss) attributable to COPT common shareholders - basic | $ | 0.08 | $ | (0.54 | ) | $ | 0.26 | $ | (0.51 | ) | |||||
Net income (loss) attributable to COPT common shareholders - diluted | $ | 0.08 | $ | (0.54 | ) | $ | 0.26 | $ | (0.51 | ) | |||||
Dividends declared per common share | $ | 0.275 | $ | 0.275 | $ | 0.550 | $ | 0.550 |
For the Three Months Ended June 30, | For the Six Months Ended June 30, | ||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
Net income (loss) | $ | 19,207 | $ | (48,316 | ) | $ | 42,295 | $ | (40,220 | ) | |||||
Other comprehensive income (loss) | |||||||||||||||
Unrealized loss on interest rate derivatives | (1,800 | ) | (5,704 | ) | (1,576 | ) | (16,988 | ) | |||||||
Loss on interest rate derivatives recognized in interest expense (effective portion) | 853 | 850 | 2,037 | 1,720 | |||||||||||
Loss on interest rate derivatives recognized in interest expense (ineffective portion) | 88 | — | 88 | — | |||||||||||
Equity in other comprehensive income (loss) of equity method investee | 39 | (184 | ) | 39 | (184 | ) | |||||||||
Other comprehensive (loss) income | (820 | ) | (5,038 | ) | 588 | (15,452 | ) | ||||||||
Comprehensive income (loss) | 18,387 | (53,354 | ) | 42,883 | (55,672 | ) | |||||||||
Comprehensive (income) loss attributable to noncontrolling interests | (1,318 | ) | 1,085 | (3,098 | ) | 205 | |||||||||
Comprehensive income (loss) attributable to COPT | $ | 17,069 | $ | (52,269 | ) | $ | 39,785 | $ | (55,467 | ) |
Preferred Shares | Common Shares | Additional Paid-in Capital | Cumulative Distributions in Excess of Net Income | Accumulated Other Comprehensive Loss | Noncontrolling Interests | Total | |||||||||||||||||||||
Balance at December 31, 2015 (94,531,512 common shares outstanding) | $ | 199,083 | $ | 945 | $ | 2,004,507 | $ | (657,172 | ) | $ | (2,838 | ) | $ | 72,039 | $ | 1,616,564 | |||||||||||
Conversion of common units to common shares (26,758 shares) | — | — | 371 | — | — | (371 | ) | — | |||||||||||||||||||
Costs associated with common shares issued to the public | — | — | (5 | ) | — | — | — | (5 | ) | ||||||||||||||||||
Share-based compensation (141,089 shares issued, net of redemptions) | — | 2 | 4,301 | — | — | — | 4,303 | ||||||||||||||||||||
Redemption of vested equity awards | — | — | (1,492 | ) | — | — | — | (1,492 | ) | ||||||||||||||||||
Adjustments to noncontrolling interests resulting from changes in ownership of COPLP | — | — | (5 | ) | — | — | 5 | — | |||||||||||||||||||
Comprehensive loss | — | — | — | (40,593 | ) | (14,874 | ) | (1,322 | ) | (56,789 | ) | ||||||||||||||||
Dividends | — | — | — | (59,175 | ) | — | — | (59,175 | ) | ||||||||||||||||||
Distributions to owners of common and preferred units in COPLP | — | — | — | — | — | (2,346 | ) | (2,346 | ) | ||||||||||||||||||
Distributions to noncontrolling interests in other consolidated entities | — | — | — | — | — | (8 | ) | (8 | ) | ||||||||||||||||||
Adjustment to arrive at fair value of redeemable noncontrolling interests | — | — | (349 | ) | — | — | — | (349 | ) | ||||||||||||||||||
Balance at June 30, 2016 (94,699,359 common shares outstanding) | $ | 199,083 | $ | 947 | $ | 2,007,328 | $ | (756,940 | ) | $ | (17,712 | ) | $ | 67,997 | $ | 1,500,703 | |||||||||||
Balance at December 31, 2016 (98,498,651 common shares outstanding) | $ | 172,500 | $ | 985 | $ | 2,116,581 | $ | (765,276 | ) | $ | (1,731 | ) | $ | 71,605 | $ | 1,594,664 | |||||||||||
Redemption of preferred shares (6,900,000 shares) | (172,500 | ) | — | 6,847 | (6,847 | ) | — | — | (172,500 | ) | |||||||||||||||||
Conversion of common units to common shares (187,000 shares) | — | 2 | 2,562 | — | — | (2,564 | ) | — | |||||||||||||||||||
Common shares issued under at-the-market program (591,042 shares) | — | 6 | 19,662 | — | — | — | 19,668 | ||||||||||||||||||||
Exercise of share options (5,000 shares) | — | — | 150 | — | — | — | 150 | ||||||||||||||||||||
Share-based compensation (189,948 shares issued, net of redemptions) | — | 2 | 3,045 | — | — | — | 3,047 | ||||||||||||||||||||
Redemption of vested equity awards | — | — | (1,813 | ) | — | — | — | (1,813 | ) | ||||||||||||||||||
Adjustments to noncontrolling interests resulting from changes in ownership of COPLP | — | — | (514 | ) | — | — | 514 | — | |||||||||||||||||||
Comprehensive income | — | — | — | 39,217 | 568 | 1,958 | 41,743 | ||||||||||||||||||||
Dividends | — | — | — | (60,922 | ) | — | — | (60,922 | ) | ||||||||||||||||||
Distributions to owners of common and preferred units in COPLP | — | — | — | — | — | (2,202 | ) | (2,202 | ) | ||||||||||||||||||
Distributions to noncontrolling interests in other consolidated entities | — | — | — | — | — | (2,610 | ) | (2,610 | ) | ||||||||||||||||||
Adjustment to arrive at fair value of redeemable noncontrolling interests | — | — | (401 | ) | — | — | — | (401 | ) | ||||||||||||||||||
Balance at June 30, 2017 (99,471,641 common shares outstanding) | $ | — | $ | 995 | $ | 2,146,119 | $ | (793,828 | ) | $ | (1,163 | ) | $ | 66,701 | $ | 1,418,824 |
For the Six Months Ended June 30, | |||||||
2017 | 2016 | ||||||
Cash flows from operating activities | |||||||
Revenues from real estate operations received | $ | 255,302 | $ | 261,980 | |||
Construction contract and other service revenues received | 39,917 | 34,992 | |||||
Property operating expenses paid | (80,385 | ) | (87,005 | ) | |||
Construction contract and other service expenses paid | (31,996 | ) | (24,303 | ) | |||
General, administrative, leasing, business development and land carry costs paid | (20,315 | ) | (19,212 | ) | |||
Interest expense paid | (36,351 | ) | (41,179 | ) | |||
Lease incentives | (9,375 | ) | (996 | ) | |||
Other | 940 | 123 | |||||
Net cash provided by operating activities | 117,737 | 124,400 | |||||
Cash flows from investing activities | |||||||
Construction, development and redevelopment | (85,926 | ) | (75,339 | ) | |||
Tenant improvements on operating properties | (13,711 | ) | (14,862 | ) | |||
Other capital improvements on operating properties | (11,780 | ) | (16,007 | ) | |||
Proceeds from dispositions of properties | 54,798 | 5,448 | |||||
Leasing costs paid | (3,904 | ) | (3,434 | ) | |||
Other | 1,573 | (13 | ) | ||||
Net cash used in investing activities | (58,950 | ) | (104,207 | ) | |||
Cash flows from financing activities | |||||||
Proceeds from debt | |||||||
Revolving Credit Facility | 213,000 | 133,500 | |||||
Other debt proceeds | — | 45,000 | |||||
Repayments of debt | |||||||
Revolving Credit Facility | (19,000 | ) | (119,000 | ) | |||
Scheduled principal amortization | (1,913 | ) | (3,532 | ) | |||
Other debt repayments | (200,100 | ) | (40,498 | ) | |||
Net proceeds from issuance of common shares | 19,835 | (5 | ) | ||||
Redemption of preferred shares | (199,083 | ) | — | ||||
Common share dividends paid | (54,439 | ) | (52,021 | ) | |||
Preferred share dividends paid | (9,305 | ) | (7,105 | ) | |||
Distributions paid to noncontrolling interests in COPLP | (2,274 | ) | (2,362 | ) | |||
Distributions paid to redeemable noncontrolling interests | (781 | ) | (14,306 | ) | |||
Redemption of vested equity awards | (1,813 | ) | (1,492 | ) | |||
Other | (2,171 | ) | (5,365 | ) | |||
Net cash used in financing activities | (258,044 | ) | (67,186 | ) | |||
Net decrease in cash and cash equivalents | (199,257 | ) | (46,993 | ) | |||
Cash and cash equivalents | |||||||
Beginning of period | 209,863 | 60,310 | |||||
End of period | $ | 10,606 | $ | 13,317 |
For the Six Months Ended June 30, | |||||||
2017 | 2016 | ||||||
Reconciliation of net income (loss) to net cash provided by operating activities: | |||||||
Net income (loss) | $ | 42,295 | $ | (40,220 | ) | ||
Adjustments to reconcile net income (loss) to net cash provided by operating activities: | |||||||
Depreciation and amortization | 66,948 | 68,901 | |||||
Impairment losses | 1,618 | 72,138 | |||||
(Gain) loss on interest rate derivatives | (9 | ) | 1,870 | ||||
Amortization of deferred financing costs and net debt discounts | 2,613 | 2,998 | |||||
Decrease (increase) in deferred rent receivable | 669 | (1,276 | ) | ||||
Gain on sales of real estate | (4,250 | ) | — | ||||
Share-based compensation | 2,820 | 3,839 | |||||
Other | (2,548 | ) | (1,725 | ) | |||
Operating changes in assets and liabilities: | |||||||
Increase in accounts receivable | (8,304 | ) | (3,320 | ) | |||
Decrease (increase) in restricted cash and marketable securities | 1,826 | (389 | ) | ||||
Decrease in prepaid expenses and other assets, net | 20,800 | 11,303 | |||||
(Decrease) increase in accounts payable, accrued expenses and other liabilities | (2,387 | ) | 15,394 | ||||
Decrease in rents received in advance and security deposits | (4,354 | ) | (5,113 | ) | |||
Net cash provided by operating activities | $ | 117,737 | $ | 124,400 | |||
Supplemental schedule of non-cash investing and financing activities: | |||||||
(Decrease) increase in accrued capital improvements, leasing and other investing activity costs | $ | (4,927 | ) | $ | 1,604 | ||
Increase in property in connection with capital lease obligation | $ | 16,127 | $ | — | |||
Increase in property and redeemable noncontrolling interests in connection with property contributed in a joint venture | $ | — | $ | 22,600 | |||
Decrease in redeemable noncontrolling interests and increase in other liabilities in connection with distribution payable to redeemable noncontrolling interest | $ | — | $ | 6,675 | |||
Increase (decrease) in fair value of derivatives applied to accumulated other comprehensive loss and noncontrolling interests | $ | 513 | $ | (15,268 | ) | ||
Equity in other comprehensive income (loss) of an equity method investee | $ | 39 | $ | (184 | ) | ||
Dividends/distribution payable | $ | 28,462 | $ | 30,219 | |||
Decrease in noncontrolling interests and increase in shareholders’ equity in connection with the conversion of common units into common shares | $ | 2,564 | $ | 371 | |||
Adjustments to noncontrolling interests resulting from changes in COPLP ownership | $ | 514 | $ | 5 | |||
Increase in redeemable noncontrolling interest and decrease in equity to carry redeemable noncontrolling interest at fair value | $ | 401 | $ | 349 |
June 30, 2017 | December 31, 2016 | |||||||
Assets | ||||||||
Properties, net: | ||||||||
Operating properties, net | $ | 2,688,174 | $ | 2,671,831 | ||||
Projects in development or held for future development | 446,385 | 401,531 | ||||||
Total properties, net | 3,134,559 | 3,073,362 | ||||||
Assets held for sale, net | 51,291 | 94,654 | ||||||
Cash and cash equivalents | 10,606 | 209,863 | ||||||
Restricted cash and marketable securities | 2,721 | 2,756 | ||||||
Investment in unconsolidated real estate joint venture | 25,335 | 25,548 | ||||||
Accounts receivable (net of allowance for doubtful accounts of $435 and $603, respectively) | 42,742 | 34,438 | ||||||
Deferred rent receivable (net of allowance of $125 and $373, respectively) | 89,832 | 90,219 | ||||||
Intangible assets on real estate acquisitions, net | 69,205 | 78,351 | ||||||
Deferred leasing costs (net of accumulated amortization of $29,720 and $65,988, respectively) | 40,506 | 41,214 | ||||||
Investing receivables | 54,598 | 52,279 | ||||||
Prepaid expenses and other assets, net | 49,347 | 72,764 | ||||||
Total assets | $ | 3,570,742 | $ | 3,775,448 | ||||
Liabilities and equity | ||||||||
Liabilities: | ||||||||
Debt, net | $ | 1,897,734 | $ | 1,904,001 | ||||
Accounts payable and accrued expenses | 95,267 | 108,682 | ||||||
Rents received in advance and security deposits | 25,444 | 29,798 | ||||||
Distributions payable | 28,462 | 31,335 | ||||||
Deferred revenue associated with operating leases | 13,172 | 12,666 | ||||||
Redeemable preferred units of general partner, 531,667 units outstanding at December 31, 2016 and none at June 30, 2017 | — | 26,583 | ||||||
Capital lease obligation | 16,177 | — | — | |||||
Other liabilities | 51,931 | 44,740 | ||||||
Total liabilities | 2,128,187 | 2,157,805 | ||||||
Commitments and contingencies (Note 15) | ||||||||
Redeemable noncontrolling interests | 23,731 | 22,979 | ||||||
Equity: | ||||||||
Corporate Office Properties, L.P.’s equity: | ||||||||
Preferred units | ||||||||
General partner, 6,900,000 preferred units outstanding at December 31, 2016 and none at June 30, 2017 | — | 172,500 | ||||||
Limited partner, 352,000 preferred units outstanding at June 30, 2017 and December 31, 2016 | 8,800 | 8,800 | ||||||
Common units, 99,471,641 and 98,498,651 held by the general partner and 3,403,391 and 3,590,391 held by limited partners at June 30, 2017 and December 31, 2016, respectively | 1,399,578 | 1,401,597 | ||||||
Accumulated other comprehensive loss | (1,266 | ) | (1,854 | ) | ||||
Total Corporate Office Properties, L.P.’s equity | 1,407,112 | 1,581,043 | ||||||
Noncontrolling interests in subsidiaries | 11,712 | 13,621 | ||||||
Total equity | 1,418,824 | 1,594,664 | ||||||
Total liabilities, redeemable noncontrolling interest and equity | $ | 3,570,742 | $ | 3,775,448 |
For the Three Months Ended June 30, | For the Six Months Ended June 30, | ||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
Revenues | |||||||||||||||
Rental revenue | $ | 101,347 | $ | 107,524 | $ | 201,962 | $ | 212,906 | |||||||
Tenant recoveries and other real estate operations revenue | 26,950 | 26,400 | 53,102 | 54,105 | |||||||||||
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, administrative and leasing expenses | 7,859 | 8,026 | 16,470 | 19,909 | |||||||||||
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 (loss) | 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 | ||||||||
Income (loss) before gain on sales of real estate | 19,195 | (48,316 | ) | 38,045 | (40,220 | ) | |||||||||
Gain on sales of real estate | 12 | — | 4,250 | — | |||||||||||
Net income (loss) | 19,207 | (48,316 | ) | 42,295 | (40,220 | ) | |||||||||
Net income attributable to noncontrolling interests in consolidated entities | (907 | ) | (911 | ) | (1,841 | ) | (1,890 | ) | |||||||
Net income (loss) attributable to COPLP | 18,300 | (49,227 | ) | 40,454 | (42,110 | ) | |||||||||
Preferred unit distributions | (3,204 | ) | (3,718 | ) | (6,549 | ) | (7,435 | ) | |||||||
Issuance costs associated with redeemed preferred units | (6,847 | ) | — | (6,847 | ) | — | |||||||||
Net income (loss) attributable to COPLP common unitholders | $ | 8,249 | $ | (52,945 | ) | $ | 27,058 | $ | (49,545 | ) | |||||
Earnings per common unit: | |||||||||||||||
Net income (loss) attributable to COPLP common unitholders - basic | $ | 0.08 | $ | (0.54 | ) | $ | 0.26 | $ | (0.51 | ) | |||||
Net income (loss) attributable to COPLP common unitholders - diluted | $ | 0.08 | $ | (0.54 | ) | $ | 0.26 | $ | (0.51 | ) | |||||
Distributions declared per common unit | $ | 0.275 | $ | 0.275 | $ | 0.550 | $ | 0.550 |
For the Three Months Ended June 30, | For the Six Months Ended June 30, | ||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
Net income (loss) | $ | 19,207 | $ | (48,316 | ) | $ | 42,295 | $ | (40,220 | ) | |||||
Other comprehensive income (loss) | |||||||||||||||
Unrealized loss on interest rate derivatives | (1,800 | ) | (5,704 | ) | (1,576 | ) | (16,988 | ) | |||||||
Loss on interest rate derivatives recognized in interest expense (effective portion) | 853 | 850 | 2,037 | 1,720 | |||||||||||
Loss on interest rate derivatives recognized in interest expense (ineffective portion) | 88 | — | 88 | — | |||||||||||
Equity in other comprehensive income (loss) of equity method investee | 39 | (184 | ) | 39 | (184 | ) | |||||||||
Other comprehensive (loss) income | (820 | ) | (5,038 | ) | 588 | (15,452 | ) | ||||||||
Comprehensive income (loss) | 18,387 | (53,354 | ) | 42,883 | (55,672 | ) | |||||||||
Comprehensive income attributable to noncontrolling interests | (907 | ) | (911 | ) | (1,841 | ) | (1,890 | ) | |||||||
Comprehensive income (loss) attributable to COPLP | $ | 17,480 | $ | (54,265 | ) | $ | 41,042 | $ | (57,562 | ) |
Limited Partner Preferred Units | General Partner Preferred Units | Common Units | Accumulated Other Comprehensive Income (Loss) | Noncontrolling Interests in Subsidiaries | ||||||||||||||||||||||||||||
Units | Amount | Units | Amount | Units | Amount | Total Equity | ||||||||||||||||||||||||||
Balance at December 31, 2015 | 352,000 | $ | 8,800 | 7,431,667 | $ | 199,083 | 98,208,903 | $ | 1,400,745 | $ | (2,985 | ) | $ | 10,921 | $ | 1,616,564 | ||||||||||||||||
Costs associated with common shares issued to the public | — | — | — | — | — | (5 | ) | — | — | (5 | ) | |||||||||||||||||||||
Share-based compensation (units net of redemption) | — | — | — | — | 141,089 | 4,303 | — | — | 4,303 | |||||||||||||||||||||||
Redemptions of vested equity awards | — | — | — | — | — | (1,492 | ) | — | — | (1,492 | ) | |||||||||||||||||||||
Comprehensive loss | — | 330 | — | 7,105 | — | (49,545 | ) | (15,452 | ) | 773 | (56,789 | ) | ||||||||||||||||||||
Distributions to owners of common and preferred units | — | (330 | ) | — | (7,105 | ) | — | (54,086 | ) | — | — | (61,521 | ) | |||||||||||||||||||
Distributions to noncontrolling interests in subsidiaries | — | — | — | — | — | — | — | (8 | ) | (8 | ) | |||||||||||||||||||||
Adjustment to arrive at fair value of redeemable noncontrolling interest | — | — | — | — | — | (349 | ) | — | — | (349 | ) | |||||||||||||||||||||
Balance at June 30, 2016 | 352,000 | $ | 8,800 | 7,431,667 | $ | 199,083 | 98,349,992 | $ | 1,299,571 | $ | (18,437 | ) | $ | 11,686 | $ | 1,500,703 | ||||||||||||||||
Balance at December 31, 2016 | 352,000 | $ | 8,800 | 6,900,000 | $ | 172,500 | 102,089,042 | $ | 1,401,597 | $ | (1,854 | ) | $ | 13,621 | $ | 1,594,664 | ||||||||||||||||
Redemption of preferred units resulting from redemption of preferred shares | — | — | (6,900,000 | ) | (172,500 | ) | — | — | — | — | (172,500 | ) | ||||||||||||||||||||
Issuance of common units resulting from common shares issued under COPT at-the-market program | — | — | — | — | 591,042 | 19,668 | — | — | 19,668 | |||||||||||||||||||||||
Issuance of common units resulting from exercise of share options | — | — | — | — | 5,000 | 150 | — | — | 150 | |||||||||||||||||||||||
Share-based compensation (units net of redemption) | — | — | — | — | 189,948 | 3,047 | — | — | 3,047 | |||||||||||||||||||||||
Redemptions of vested equity awards | — | — | — | — | — | (1,813 | ) | — | — | (1,813 | ) | |||||||||||||||||||||
Comprehensive income | — | 330 | — | 6,219 | — | 33,905 | 588 | 701 | 41,743 | |||||||||||||||||||||||
Distributions to owners of common and preferred units | — | (330 | ) | — | (6,219 | ) | — | (56,575 | ) | — | — | (63,124 | ) | |||||||||||||||||||
Distributions to noncontrolling interests in subsidiaries | — | — | — | — | — | — | — | (2,610 | ) | (2,610 | ) | |||||||||||||||||||||
Adjustment to arrive at fair value of redeemable noncontrolling interest | — | — | — | — | — | (401 | ) | — | — | (401 | ) | |||||||||||||||||||||
Balance at June 30, 2017 | 352,000 | $ | 8,800 | — | $ | — | 102,875,032 | $ | 1,399,578 | $ | (1,266 | ) | $ | 11,712 | $ | 1,418,824 |
For the Six Months Ended June 30, | |||||||
2017 | 2016 | ||||||
Cash flows from operating activities | |||||||
Revenues from real estate operations received | $ | 255,302 | $ | 261,980 | |||
Construction contract and other service revenues received | 39,917 | 34,992 | |||||
Property operating expenses paid | (80,385 | ) | (87,005 | ) | |||
Construction contract and other service expenses paid | (31,996 | ) | (24,303 | ) | |||
General, administrative, leasing, business development and land carry costs paid | (20,315 | ) | (19,212 | ) | |||
Interest expense paid | (36,351 | ) | (41,179 | ) | |||
Lease incentives | (9,375 | ) | (996 | ) | |||
Other | 940 | 123 | |||||
Net cash provided by operating activities | 117,737 | 124,400 | |||||
Cash flows from investing activities | |||||||
Construction, development and redevelopment | (85,926 | ) | (75,339 | ) | |||
Tenant improvements on operating properties | (13,711 | ) | (14,862 | ) | |||
Other capital improvements on operating properties | (11,780 | ) | (16,007 | ) | |||
Proceeds from dispositions of properties | 54,798 | 5,448 | |||||
Leasing costs paid | (3,904 | ) | (3,434 | ) | |||
Other | 1,573 | (13 | ) | ||||
Net cash used in investing activities | (58,950 | ) | (104,207 | ) | |||
Cash flows from financing activities | |||||||
Proceeds from debt | |||||||
Revolving Credit Facility | 213,000 | 133,500 | |||||
Other debt proceeds | — | 45,000 | |||||
Repayments of debt | |||||||
Revolving Credit Facility | (19,000 | ) | (119,000 | ) | |||
Scheduled principal amortization | (1,913 | ) | (3,532 | ) | |||
Other debt repayments | (200,100 | ) | (40,498 | ) | |||
Net proceeds from issuance of common units | 19,835 | (5 | ) | ||||
Redemption of preferred units | (199,083 | ) | — | ||||
Common unit distributions paid | (56,383 | ) | (54,053 | ) | |||
Preferred unit distributions paid | (9,635 | ) | (7,435 | ) | |||
Redemption of vested equity awards | (1,813 | ) | (1,492 | ) | |||
Distributions paid to redeemable noncontrolling interests | (781 | ) | (14,306 | ) | |||
Other | (2,171 | ) | (5,365 | ) | |||
Net cash used in financing activities | (258,044 | ) | (67,186 | ) | |||
Net decrease in cash and cash equivalents | (199,257 | ) | (46,993 | ) | |||
Cash and cash equivalents | |||||||
Beginning of period | 209,863 | 60,310 | |||||
End of period | $ | 10,606 | $ | 13,317 |
For the Six Months Ended June 30, | |||||||
2017 | 2016 | ||||||
Reconciliation of net income (loss) to net cash provided by operating activities: | |||||||
Net income (loss) | $ | 42,295 | $ | (40,220 | ) | ||
Adjustments to reconcile net income (loss) to net cash provided by operating activities: | |||||||
Depreciation and amortization | 66,948 | 68,901 | |||||
Impairment losses | 1,618 | 72,138 | |||||
(Gain) loss on interest rate derivatives | (9 | ) | 1,870 | ||||
Amortization of deferred financing costs and net debt discounts | 2,613 | 2,998 | |||||
Decrease (increase) in deferred rent receivable | 669 | (1,276 | ) | ||||
Gain on sales of real estate | (4,250 | ) | — | ||||
Share-based compensation | 2,820 | 3,839 | |||||
Other | (2,548 | ) | (1,725 | ) | |||
Operating changes in assets and liabilities: | |||||||
Increase in accounts receivable | (8,304 | ) | (3,320 | ) | |||
Decrease (increase) in restricted cash and marketable securities | 534 | (1,106 | ) | ||||
Decrease in prepaid expenses and other assets, net | 20,800 | 11,303 | |||||
(Decrease) increase in accounts payable, accrued expenses and other liabilities | (1,095 | ) | 16,111 | ||||
Decrease in rents received in advance and security deposits | (4,354 | ) | (5,113 | ) | |||
Net cash provided by operating activities | $ | 117,737 | $ | 124,400 | |||
Supplemental schedule of non-cash investing and financing activities: | |||||||
(Decrease) increase in accrued capital improvements, leasing and other investing activity costs | $ | (4,927 | ) | $ | 1,604 | ||
Increase in property in connection with capital lease obligation | $ | 16,127 | $ | — | |||
Increase in property and redeemable noncontrolling interests in connection with property contributed in a joint venture | $ | — | $ | 22,600 | |||
Decrease in redeemable noncontrolling interests and increase in other liabilities in connection with distribution payable to redeemable noncontrolling interest | $ | — | $ | 6,675 | |||
Increase (decrease) in fair value of derivatives applied to accumulated other comprehensive loss and noncontrolling interests | $ | 513 | $ | (15,268 | ) | ||
Equity in other comprehensive income (loss) of an equity method investee | $ | 39 | $ | (184 | ) | ||
Distributions payable | $ | 28,462 | $ | 30,219 | |||
Increase in redeemable noncontrolling interest and decrease in equity to carry redeemable noncontrolling interest at fair value | $ | 401 | $ | 349 |
• | 165 operating office properties totaling 17.3 million square feet, including 14 triple-net leased, single-tenant data center properties. We owned six of these properties through an unconsolidated real estate joint venture; |
• | ten office properties under construction or redevelopment that we estimate will total approximately 1.4 million square feet upon completion, including three partially operational properties and two properties completed but held for future lease to the United States Government; |
• | 987 acres of land we controlled for future development that we believe could be developed into approximately 12.5 million square feet and an additional 194 acres of other land; and |
• | a wholesale data center with a critical load of 19.25 megawatts. |
• | Construction contract revenue: We reviewed our historical construction management arrangements and related contracts. Based on this review, we believe that we will account for these arrangements using the percentage of completion method, which is the method we have used in most cases historically. We do not currently believe that the resulting effect of the change will be material. |
• | Sales of real estate: The new guidance requires recognition of a sale of real estate and resulting gain or loss when control transfers and the buyer has the ability to direct use of, or obtain substantially all of the remaining benefit from, the asset (which generally will occur on the closing date); the factor of continuing involvement is no longer a specific consideration for the timing of recognition. The new guidance eliminates the need to consider adequacy of buyer investment, which was replaced by additional judgments regarding collectability and intent and/or ability to pay. The new guidance also requires an entity to derecognize nonfinancial assets and in substance non financial assets once it transfers control of such assets. When an entity transfers its controlling interest in a nonfinancial asset, but retains a noncontrolling ownership interest, the entity is required to measure any non-controlling interest it receives or retains at fair value and recognize a full gain or loss on the transaction; as a result, sales and partial sales of real estate assets will now be subject to the same derecognition |
• | Real estate revenue associated with executory costs and other non-lease components: Once the new guidance setting forth principles for the recognition, measurement, presentation and disclosure of leases (discussed below) goes into effect, we believe that the new revenue standard may apply to executory costs and other components of revenue due under leases that are deemed to be non-lease components (such as common area maintenance and provision of utilities), even when the revenue for such activities is not separately stipulated in the lease. In that case, then revenue from these items previously recognized on a straight-line basis under current lease guidance would be recognized under the new revenue guidance as the related services are delivered. As a result, while the total revenue recognized over time would not differ under the new guidance, the recognition pattern could be different. We are in the process of evaluating the significance of the difference in the recognition pattern that would result from this change. |
• | Real estate leases in which we are the lessor: |
◦ | Balance sheet reporting: We believe that we will apply an approach under the new guidance that is similar to the current accounting for operating leases, in which we will continue to recognize the underlying leased asset as property on our balance sheet. |
◦ | Deferral of compensation-related lease costs: Under the new lease guidance, lessors may only capitalize their incremental direct costs of leasing. As a result, we believe that we will no longer be able to defer the recognition of compensation-related costs in connection with new or extended tenant leases (refer to amounts reported in our 2016 Annual Report on Form 10-K for amounts deferred in 2014, 2015 and 2016). |
◦ | Lease revenue reporting: As discussed in further detail above in connection with the new revenue guidance, we believe that the new revenue standard may apply to executory costs and other components of revenue deemed to be non-lease components (such as common area maintenance and provision of utilities), even when the revenue for such activities is not separately stipulated in the lease. In that case, we would need to separate the lease components of revenue due under leases from the non-lease components. Under the new guidance, we would continue to recognize the lease components of lease revenue on a straight-line basis over our respective lease terms as we do under prior guidance. However, we would recognize the non-lease components under the new revenue guidance as the related services are delivered. As discussed above, we are in the process of evaluating the significance of the difference in the recognition pattern that would result from this change. |
• | Leases in which we are the lessee: |
◦ | Our most significant leases as lessee are ground leases we have for certain properties; as of June 30, 2017, our future minimum rental payments under these leases totaled $90.4 million, with various expiration dates extending to the year 2100. While we are still in the process of evaluating these leases under the new guidance, we believe that we will be required to recognize a right-of-use asset and a lease liability for the present value of these minimum lease payments. We believe that these leases most likely will be classified as finance leases under the new guidance; as a result, the interest component of each lease payment would be recorded as interest expense and the right-of-use asset would be amortized into expense using the straight-line method over the life of the lease. |
Description | Quoted Prices in Active Markets for Identical Assets(Level 1) | Significant Other Observable Inputs(Level 2) | Significant Unobservable Inputs(Level 3) | Total | ||||||||||||
Assets: | ||||||||||||||||
Marketable securities in deferred compensation plan (1) | ||||||||||||||||
Mutual funds | $ | 4,074 | $ | — | $ | — | $ | 4,074 | ||||||||
Other | 71 | — | — | 71 | ||||||||||||
Interest rate derivatives (2) | — | 117 | — | 117 | ||||||||||||
Total assets | $ | 4,145 | $ | 117 | $ | — | $ | 4,262 | ||||||||
Liabilities: | ||||||||||||||||
Deferred compensation plan liability (3) | $ | — | $ | 4,145 | $ | — | $ | 4,145 | ||||||||
Interest rate derivatives (3) | — | 601 | — | 601 | ||||||||||||
Total liabilities | $ | — | $ |