ý | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended | June 30, 2018 |
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, investors 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 4, Fair Value Measurements of COPT and subsidiaries and COPLP and subsidiaries; and |
• | Note 15, 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, 2018 | December 31, 2017 | ||||||
Assets | |||||||
Properties, net: | |||||||
Operating properties, net | $ | 2,760,632 | $ | 2,737,611 | |||
Projects in development or held for future development | 422,905 | 403,494 | |||||
Total properties, net | 3,183,537 | 3,141,105 | |||||
Assets held for sale, net | 42,226 | 42,226 | |||||
Cash and cash equivalents | 8,472 | 12,261 | |||||
Investment in unconsolidated real estate joint venture | 40,806 | 41,787 | |||||
Accounts receivable (net of allowance for doubtful accounts of $811 and $607, respectively) | 23,656 | 31,802 | |||||
Deferred rent receivable (net of allowance of $423 and $364, respectively) | 89,606 | 86,710 | |||||
Intangible assets on real estate acquisitions, net | 50,586 | 59,092 | |||||
Deferred leasing costs (net of accumulated amortization of $29,546 and $29,560, respectively) | 48,183 | 48,322 | |||||
Investing receivables | 54,427 | 57,493 | |||||
Prepaid expenses and other assets, net | 70,863 | 74,407 | |||||
Total assets | $ | 3,612,362 | $ | 3,595,205 | |||
Liabilities and equity | |||||||
Liabilities: | |||||||
Debt, net | $ | 1,871,445 | $ | 1,828,333 | |||
Accounts payable and accrued expenses | 88,885 | 108,137 | |||||
Rents received in advance and security deposits | 24,905 | 25,648 | |||||
Dividends and distributions payable | 29,449 | 28,921 | |||||
Deferred revenue associated with operating leases | 10,783 | 11,682 | |||||
Deferred property sale | 43,377 | 43,377 | |||||
Capital lease obligation | 640 | 15,853 | |||||
Other liabilities | 9,849 | 41,822 | |||||
Total liabilities | 2,079,333 | 2,103,773 | |||||
Commitments and contingencies (Note 16) | |||||||
Redeemable noncontrolling interests | 24,544 | 23,125 | |||||
Equity: | |||||||
Corporate Office Properties Trust’s shareholders’ equity: | |||||||
Common Shares of beneficial interest ($0.01 par value; 150,000,000 shares authorized; shares issued and outstanding of 103,260,495 at June 30, 2018 and 101,292,299 at December 31, 2017) | 1,033 | 1,013 | |||||
Additional paid-in capital | 2,254,430 | 2,201,047 | |||||
Cumulative distributions in excess of net income | (822,270 | ) | (802,085 | ) | |||
Accumulated other comprehensive income | 9,012 | 2,167 | |||||
Total Corporate Office Properties Trust’s shareholders’ equity | 1,442,205 | 1,402,142 | |||||
Noncontrolling interests in subsidiaries: | |||||||
Common units in COPLP | 44,651 | 45,097 | |||||
Preferred units in COPLP | 8,800 | 8,800 | |||||
Other consolidated entities | 12,829 | 12,268 | |||||
Noncontrolling interests in subsidiaries | 66,280 | 66,165 | |||||
Total equity | 1,508,485 | 1,468,307 | |||||
Total liabilities, redeemable noncontrolling interests and equity | $ | 3,612,362 | $ | 3,595,205 |
For the Three Months Ended June 30, | For the Six Months Ended June 30, | ||||||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||||||
Revenues | |||||||||||||||
Rental revenue | $ | 101,121 | $ | 101,347 | $ | 201,955 | $ | 201,962 | |||||||
Tenant recoveries and other real estate operations revenue | 28,041 | 26,950 | 55,485 | 53,102 | |||||||||||
Construction contract and other service revenues | 17,581 | 23,138 | 44,779 | 36,172 | |||||||||||
Total revenues | 146,743 | 151,435 | 302,219 | 291,236 | |||||||||||
Expenses | |||||||||||||||
Property operating expenses | 49,446 | 48,628 | 100,397 | 97,147 | |||||||||||
Depreciation and amortization associated with real estate operations | 33,190 | 32,793 | 66,702 | 65,852 | |||||||||||
Construction contract and other service expenses | 16,941 | 22,315 | 43,157 | 34,801 | |||||||||||
Impairment losses | — | 1,625 | — | 1,625 | |||||||||||
General, administrative and leasing expenses | 7,628 | 7,859 | 14,920 | 16,470 | |||||||||||
Business development expenses and land carry costs | 1,234 | 1,597 | 2,848 | 3,290 | |||||||||||
Total operating expenses | 108,439 | 114,817 | 228,024 | 219,185 | |||||||||||
Operating income | 38,304 | 36,618 | 74,195 | 72,051 | |||||||||||
Interest expense | (18,945 | ) | (19,163 | ) | (37,729 | ) | (38,157 | ) | |||||||
Interest and other income | 1,439 | 1,583 | 2,798 | 3,309 | |||||||||||
Loss on early extinguishment of debt | — | (513 | ) | — | (513 | ) | |||||||||
Income before equity in income of unconsolidated entities and income taxes | 20,798 | 18,525 | 39,264 | 36,690 | |||||||||||
Equity in income of unconsolidated entities | 373 | 370 | 746 | 747 | |||||||||||
Income tax expense | (63 | ) | (48 | ) | (118 | ) | (88 | ) | |||||||
Income before gain on sales of real estate | 21,108 | 18,847 | 39,892 | 37,349 | |||||||||||
Gain on sales of real estate | (23 | ) | 12 | (27 | ) | 4,250 | |||||||||
Net income | 21,085 | 18,859 | 39,865 | 41,599 | |||||||||||
Net income attributable to noncontrolling interests: | |||||||||||||||
Common units in COPLP | (608 | ) | (261 | ) | (1,152 | ) | (883 | ) | |||||||
Preferred units in COPLP | (165 | ) | (165 | ) | (330 | ) | (330 | ) | |||||||
Other consolidated entities | (878 | ) | (907 | ) | (1,799 | ) | (1,841 | ) | |||||||
Net income attributable to COPT | 19,434 | 17,526 | 36,584 | 38,545 | |||||||||||
Preferred share dividends | — | (3,039 | ) | — | (6,219 | ) | |||||||||
Issuance costs associated with redeemed preferred shares | — | (6,847 | ) | — | (6,847 | ) | |||||||||
Net income attributable to COPT common shareholders | $ | 19,434 | $ | 7,640 | $ | 36,584 | $ | 25,479 | |||||||
Earnings per common share: | |||||||||||||||
Net income attributable to COPT common shareholders - basic | $ | 0.19 | $ | 0.08 | $ | 0.36 | $ | 0.26 | |||||||
Net income attributable to COPT common shareholders - diluted | $ | 0.19 | $ | 0.08 | $ | 0.36 | $ | 0.26 | |||||||
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, | ||||||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||||||
Net income | $ | 21,085 | $ | 18,859 | $ | 39,865 | $ | 41,599 | |||||||
Other comprehensive income | |||||||||||||||
Unrealized gain (loss) on interest rate derivatives | 1,912 | (1,800 | ) | 6,588 | (1,576 | ) | |||||||||
(Gain) loss on interest rate derivatives recognized in interest expense | (47 | ) | 941 | 198 | 2,125 | ||||||||||
Equity in other comprehensive income of equity method investee | — | 39 | — | 39 | |||||||||||
Other comprehensive income (loss) | 1,865 | (820 | ) | 6,786 | 588 | ||||||||||
Comprehensive income | 22,950 | 18,039 | 46,651 | 42,187 | |||||||||||
Comprehensive income attributable to noncontrolling interests | (1,708 | ) | (1,306 | ) | (3,498 | ) | (3,074 | ) | |||||||
Comprehensive income attributable to COPT | $ | 21,242 | $ | 16,733 | $ | 43,153 | $ | 39,113 |
Preferred Shares | Common Shares | Additional Paid-in Capital | Cumulative Distributions in Excess of Net Income | Accumulated Other Comprehensive Income (Loss) | Noncontrolling Interests | Total | |||||||||||||||||||||
Balance at December 31, 2016 (98,498,651 common shares outstanding) | $ | 172,500 | $ | 985 | $ | 2,116,581 | $ | (747,825 | ) | $ | (1,731 | ) | $ | 72,267 | $ | 1,612,777 | |||||||||||
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 | — | — | — | 38,545 | 568 | 1,934 | 41,047 | ||||||||||||||||||||
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 | $ | (777,049 | ) | $ | (1,163 | ) | $ | 67,339 | $ | 1,436,241 | |||||||||||
Balance at December 31, 2017 (101,292,299 common shares outstanding) | $ | — | $ | 1,013 | $ | 2,201,047 | $ | (802,085 | ) | $ | 2,167 | $ | 66,165 | $ | 1,468,307 | ||||||||||||
Cumulative effect of accounting change for adoption of hedge accounting guidance | — | — | — | (276 | ) | 276 | — | — | |||||||||||||||||||
Balance at December 31, 2017, as adjusted | — | 1,013 | 2,201,047 | (802,361 | ) | 2,443 | 66,165 | 1,468,307 | |||||||||||||||||||
Conversion of common units to common shares (53,817 shares) | — | 1 | 760 | — | — | (761 | ) | — | |||||||||||||||||||
Common shares issued under forward equity sale agreements (1,777,000 shares) | — | 18 | 52,209 | — | — | — | 52,227 | ||||||||||||||||||||
Share-based compensation (137,379 shares issued, net of redemptions) | — | 1 | 3,399 | — | — | — | 3,400 | ||||||||||||||||||||
Redemption of vested equity awards | — | — | (1,525 | ) | — | — | — | (1,525 | ) | ||||||||||||||||||
Adjustments to noncontrolling interests resulting from changes in ownership of COPLP | — | — | (702 | ) | — | — | 702 | — | |||||||||||||||||||
Comprehensive income | — | — | — | 36,584 | 6,569 | 2,269 | 45,422 | ||||||||||||||||||||
Dividends | — | — | — | (56,493 | ) | — | — | (56,493 | ) | ||||||||||||||||||
Distributions to owners of common and preferred units in COPLP | — | — | — | — | — | (2,088 | ) | (2,088 | ) | ||||||||||||||||||
Distributions to noncontrolling interests in other consolidated entities | — | — | — | — | — | (7 | ) | (7 | ) | ||||||||||||||||||
Adjustment to arrive at fair value of redeemable noncontrolling interests | — | — | (758 | ) | — | — | — | (758 | ) | ||||||||||||||||||
Balance at June 30, 2018 (103,260,495 common shares outstanding) | $ | — | $ | 1,033 | $ | 2,254,430 | $ | (822,270 | ) | $ | 9,012 | $ | 66,280 | $ | 1,508,485 |
For the Six Months Ended June 30, | |||||||
2018 | 2017 | ||||||
Cash flows from operating activities | |||||||
Revenues from real estate operations received | $ | 262,602 | $ | 254,392 | |||
Construction contract and other service revenues received | 18,411 | 39,917 | |||||
Property operating expenses paid | (83,642 | ) | (79,683 | ) | |||
Construction contract and other service expenses paid | (62,624 | ) | (31,996 | ) | |||
General, administrative, leasing, business development and land carry costs paid | (15,148 | ) | (20,315 | ) | |||
Interest expense paid | (36,155 | ) | (36,351 | ) | |||
Lease incentives paid | (4,825 | ) | (9,375 | ) | |||
Other | 2,093 | 940 | |||||
Net cash provided by operating activities | 80,712 | 117,529 | |||||
Cash flows from investing activities | |||||||
Construction, development and redevelopment | (67,749 | ) | (85,926 | ) | |||
Tenant improvements on operating properties | (18,352 | ) | (13,711 | ) | |||
Other capital improvements on operating properties | (8,584 | ) | (11,780 | ) | |||
Proceeds from dispositions of properties | — | 54,798 | |||||
Leasing costs paid | (3,838 | ) | (3,904 | ) | |||
Other | 1,715 | 1,746 | |||||
Net cash used in investing activities | (96,808 | ) | (58,777 | ) | |||
Cash flows from financing activities | |||||||
Proceeds from debt | |||||||
Revolving Credit Facility | 153,000 | 213,000 | |||||
Repayments of debt | |||||||
Revolving Credit Facility | (109,000 | ) | (19,000 | ) | |||
Scheduled principal amortization | (2,101 | ) | (2,013 | ) | |||
Other debt repayments | — | (200,000 | ) | ||||
Payments on capital lease obligation | (15,379 | ) | — | ||||
Net proceeds from issuance of common shares | 52,277 | 19,835 | |||||
Redemption of preferred shares | — | (199,083 | ) | ||||
Common share dividends paid | (55,950 | ) | (54,439 | ) | |||
Preferred share dividends paid | — | (9,305 | ) | ||||
Distributions paid to noncontrolling interests in COPLP | (2,110 | ) | (2,274 | ) | |||
Redemption of vested equity awards | (1,525 | ) | (1,813 | ) | |||
Other | (5,370 | ) | (2,952 | ) | |||
Net cash provided by (used in) financing activities | 13,842 | (258,044 | ) | ||||
Net decrease in cash and cash equivalents and restricted cash | (2,254 | ) | (199,292 | ) | |||
Cash and cash equivalents and restricted cash | |||||||
Beginning of period | 14,831 | 212,619 | |||||
End of period | $ | 12,577 | $ | 13,327 |
For the Six Months Ended June 30, | |||||||
2018 | 2017 | ||||||
Reconciliation of net income to net cash provided by operating activities: | |||||||
Net income | $ | 39,865 | $ | 41,599 | |||
Adjustments to reconcile net income to net cash provided by operating activities: | |||||||
Depreciation and amortization | 67,684 | 66,948 | |||||
Impairment losses | — | 1,618 | |||||
Amortization of deferred financing costs and net debt discounts | 1,648 | 2,613 | |||||
(Increase) decrease in deferred rent receivable | (3,470 | ) | 669 | ||||
Gain on sales of real estate | 27 | (4,250 | ) | ||||
Share-based compensation | 3,132 | 2,820 | |||||
Other | (777 | ) | (1,861 | ) | |||
Changes in operating assets and liabilities: | |||||||
Decrease (increase) in accounts receivable | 8,050 | (8,304 | ) | ||||
Decrease in prepaid expenses and other assets, net | 14,718 | 22,418 | |||||
Decrease in accounts payable, accrued expenses and other liabilities | (49,422 | ) | (2,387 | ) | |||
Decrease in rents received in advance and security deposits | (743 | ) | (4,354 | ) | |||
Net cash provided by operating activities | $ | 80,712 | $ | 117,529 | |||
Reconciliation of cash and cash equivalents and restricted cash: | |||||||
Cash and cash equivalents at beginning of period | $ | 12,261 | $ | 209,863 | |||
Restricted cash at beginning of period | 2,570 | 2,756 | |||||
Cash and cash equivalents and restricted cash at beginning of period | $ | 14,831 | $ | 212,619 | |||
Cash and cash equivalents at end of period | $ | 8,472 | $ | 10,606 | |||
Restricted cash at end of period | 4,105 | 2,721 | |||||
Cash and cash equivalents and restricted cash at end of period | $ | 12,577 | $ | 13,327 | |||
Supplemental schedule of non-cash investing and financing activities: | |||||||
Increase (decrease) in accrued capital improvements, leasing and other investing activity costs | $ | 2,909 | $ | (4,927 | ) | ||
Increase in property in connection with capital lease obligation | $ | — | $ | 16,127 | |||
Increase in fair value of derivatives applied to accumulated other comprehensive income and noncontrolling interests | $ | 6,719 | $ | 513 | |||
Equity in other comprehensive income of an equity method investee | $ | — | $ | 39 | |||
Dividends/distributions payable | $ | 29,449 | $ | 28,462 | |||
Decrease in noncontrolling interests and increase in shareholders’ equity in connection with the conversion of common units into common shares | $ | 761 | $ | 2,564 | |||
Adjustments to noncontrolling interests resulting from changes in COPLP ownership | $ | 702 | $ | 514 | |||
Increase in redeemable noncontrolling interests and decrease in equity to carry redeemable noncontrolling interests at fair value | $ | 758 | $ | 401 |
June 30, 2018 | December 31, 2017 | ||||||
Assets | |||||||
Properties, net: | |||||||
Operating properties, net | $ | 2,760,632 | $ | 2,737,611 | |||
Projects in development or held for future development | 422,905 | 403,494 | |||||
Total properties, net | 3,183,537 | 3,141,105 | |||||
Assets held for sale, net | 42,226 | 42,226 | |||||
Cash and cash equivalents | 8,472 | 12,261 | |||||
Investment in unconsolidated real estate joint venture | 40,806 | 41,787 | |||||
Accounts receivable (net of allowance for doubtful accounts of $811 and $607, respectively) | 23,656 | 31,802 | |||||
Deferred rent receivable (net of allowance of $423 and $364, respectively) | 89,606 | 86,710 | |||||
Intangible assets on real estate acquisitions, net | 50,586 | 59,092 | |||||
Deferred leasing costs (net of accumulated amortization of $29,546 and $29,560, respectively) | 48,183 | 48,322 | |||||
Investing receivables | 54,427 | 57,493 | |||||
Prepaid expenses and other assets, net | 66,669 | 69,791 | |||||
Total assets | $ | 3,608,168 | $ | 3,590,589 | |||
Liabilities and equity | |||||||
Liabilities: | |||||||
Debt, net | $ | 1,871,445 | $ | 1,828,333 | |||
Accounts payable and accrued expenses | 88,885 | 108,137 | |||||
Rents received in advance and security deposits | 24,905 | 25,648 | |||||
Distributions payable | 29,449 | 28,921 | |||||
Deferred revenue associated with operating leases | 10,783 | 11,682 | |||||
Deferred property sale | 43,377 | 43,377 | |||||
Capital lease obligation | 640 | 15,853 | |||||
Other liabilities | 5,655 | 37,206 | |||||
Total liabilities | 2,075,139 | 2,099,157 | |||||
Commitments and contingencies (Note 16) | |||||||
Redeemable noncontrolling interests | 24,544 | 23,125 | |||||
Equity: | |||||||
Corporate Office Properties, L.P.’s equity: | |||||||
Preferred units held by limited partner, 352,000 preferred units outstanding at June 30, 2018 and December 31, 2017 | 8,800 | 8,800 | |||||
Common units, 103,260,495 and 101,292,299 held by the general partner and 3,197,061 and 3,250,878 held by limited partners at June 30, 2018 and December 31, 2017, respectively | 1,477,575 | 1,445,022 | |||||
Accumulated other comprehensive income | 9,235 | 2,173 | |||||
Total Corporate Office Properties, L.P.’s equity | 1,495,610 | 1,455,995 | |||||
Noncontrolling interests in subsidiaries | 12,875 | 12,312 | |||||
Total equity | 1,508,485 | 1,468,307 | |||||
Total liabilities, redeemable noncontrolling interests and equity | $ | 3,608,168 | $ | 3,590,589 |
For the Three Months Ended June 30, | For the Six Months Ended June 30, | ||||||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||||||
Revenues | |||||||||||||||
Rental revenue | $ | 101,121 | $ | 101,347 | $ | 201,955 | $ | 201,962 | |||||||
Tenant recoveries and other real estate operations revenue | 28,041 | 26,950 | 55,485 | 53,102 | |||||||||||
Construction contract and other service revenues | 17,581 | 23,138 | 44,779 | 36,172 | |||||||||||
Total revenues | 146,743 | 151,435 | 302,219 | 291,236 | |||||||||||
Expenses | |||||||||||||||
Property operating expenses | 49,446 | 48,628 | 100,397 | 97,147 | |||||||||||
Depreciation and amortization associated with real estate operations | 33,190 | 32,793 | 66,702 | 65,852 | |||||||||||
Construction contract and other service expenses | 16,941 | 22,315 | 43,157 | 34,801 | |||||||||||
Impairment losses | — | 1,625 | — | 1,625 | |||||||||||
General, administrative and leasing expenses | 7,628 | 7,859 | 14,920 | 16,470 | |||||||||||
Business development expenses and land carry costs | 1,234 | 1,597 | 2,848 | 3,290 | |||||||||||
Total operating expenses | 108,439 | 114,817 | 228,024 | 219,185 | |||||||||||
Operating income | 38,304 | 36,618 | 74,195 | 72,051 | |||||||||||
Interest expense | (18,945 | ) | (19,163 | ) | (37,729 | ) | (38,157 | ) | |||||||
Interest and other income | 1,439 | 1,583 | 2,798 | 3,309 | |||||||||||
Loss on early extinguishment of debt | — | (513 | ) | — | (513 | ) | |||||||||
Income before equity in income of unconsolidated entities and income taxes | 20,798 | 18,525 | 39,264 | 36,690 | |||||||||||
Equity in income of unconsolidated entities | 373 | 370 | 746 | 747 | |||||||||||
Income tax expense | (63 | ) | (48 | ) | (118 | ) | (88 | ) | |||||||
Income before gain on sales of real estate | 21,108 | 18,847 | 39,892 | 37,349 | |||||||||||
Gain on sales of real estate | (23 | ) | 12 | (27 | ) | 4,250 | |||||||||
Net income | 21,085 | 18,859 | 39,865 | 41,599 | |||||||||||
Net income attributable to noncontrolling interests in consolidated entities | (878 | ) | (907 | ) | (1,799 | ) | (1,841 | ) | |||||||
Net income attributable to COPLP | 20,207 | 17,952 | 38,066 | 39,758 | |||||||||||
Preferred unit distributions | (165 | ) | (3,204 | ) | (330 | ) | (6,549 | ) | |||||||
Issuance costs associated with redeemed preferred units | — | (6,847 | ) | — | (6,847 | ) | |||||||||
Net income attributable to COPLP common unitholders | $ | 20,042 | $ | 7,901 | $ | 37,736 | $ | 26,362 | |||||||
Earnings per common unit: | |||||||||||||||
Net income attributable to COPLP common unitholders - basic | $ | 0.19 | $ | 0.08 | $ | 0.36 | $ | 0.26 | |||||||
Net income attributable to COPLP common unitholders - diluted | $ | 0.19 | $ | 0.08 | $ | 0.36 | $ | 0.26 | |||||||
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, | ||||||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||||||
Net income | $ | 21,085 | $ | 18,859 | $ | 39,865 | $ | 41,599 | |||||||
Other comprehensive income | |||||||||||||||
Unrealized gain (loss) on interest rate derivatives | 1,912 | (1,800 | ) | 6,588 | (1,576 | ) | |||||||||
(Gain) loss on interest rate derivatives recognized in interest expense | (47 | ) | 941 | 198 | 2,125 | ||||||||||
Equity in other comprehensive income of equity method investee | — | 39 | — | 39 | |||||||||||
Other comprehensive income (loss) | 1,865 | (820 | ) | 6,786 | 588 | ||||||||||
Comprehensive income | 22,950 | 18,039 | 46,651 | 42,187 | |||||||||||
Comprehensive income attributable to noncontrolling interests | (878 | ) | (907 | ) | (1,799 | ) | (1,841 | ) | |||||||
Comprehensive income attributable to COPLP | $ | 22,072 | $ | 17,132 | $ | 44,852 | $ | 40,346 |
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, 2016 | 352,000 | $ | 8,800 | 6,900,000 | $ | 172,500 | 102,089,042 | $ | 1,419,710 | $ | (1,854 | ) | $ | 13,621 | $ | 1,612,777 | ||||||||||||||||
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 | — | 33,209 | 588 | 701 | 41,047 | |||||||||||||||||||||||
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 interests | — | — | — | — | — | (401 | ) | — | — | (401 | ) | |||||||||||||||||||||
Balance at June 30, 2017 | 352,000 | $ | 8,800 | — | $ | — | 102,875,032 | $ | 1,416,995 | $ | (1,266 | ) | $ | 11,712 | $ | 1,436,241 | ||||||||||||||||
Balance at December 31, 2017 | 352,000 | $ | 8,800 | — | $ | — | 104,543,177 | $ | 1,445,022 | $ | 2,173 | $ | 12,312 | $ | 1,468,307 | |||||||||||||||||
Cumulative effect of accounting change for adoption of hedge accounting guidance | — | — | — | — | — | (276 | ) | 276 | — | — | ||||||||||||||||||||||
Balance at December 31, 2017, as adjusted | 352,000 | 8,800 | — | — | 104,543,177 | 1,444,746 | 2,449 | 12,312 | 1,468,307 | |||||||||||||||||||||||
Issuance of common units resulting from common shares issued under COPT forward equity sale agreements | — | — | — | — | 1,777,000 | 52,227 | — | — | 52,227 | |||||||||||||||||||||||
Share-based compensation (units net of redemption) | — | — | — | — | 137,379 | 3,400 | — | — | 3,400 | |||||||||||||||||||||||
Redemptions of vested equity awards | — | — | — | — | — | (1,525 | ) | — | — | (1,525 | ) | |||||||||||||||||||||
Comprehensive income | — | 330 | — | — | — | 37,736 | 6,786 | 570 | 45,422 | |||||||||||||||||||||||
Distributions to owners of common and preferred units | — | (330 | ) | — | — | — | (58,251 | ) | — | — | (58,581 | ) | ||||||||||||||||||||
Distributions to noncontrolling interests in subsidiaries | — | — | — | — | — | — | — | (7 | ) | (7 | ) | |||||||||||||||||||||
Adjustment to arrive at fair value of redeemable noncontrolling interests | — | — | — | — | — | (758 | ) | — | — | (758 | ) | |||||||||||||||||||||
Balance at June 30, 2018 | 352,000 | $ | 8,800 | — | $ | — | 106,457,556 | $ | 1,477,575 | $ | 9,235 | $ | 12,875 | $ | 1,508,485 |
For the Six Months Ended June 30, | |||||||
2018 | 2017 | ||||||
Cash flows from operating activities | |||||||
Revenues from real estate operations received | $ | 262,602 | $ | 254,392 | |||
Construction contract and other service revenues received | 18,411 | 39,917 | |||||
Property operating expenses paid | (83,642 | ) | (79,683 | ) | |||
Construction contract and other service expenses paid | (62,624 | ) | (31,996 | ) | |||
General, administrative, leasing, business development and land carry costs paid | (15,148 | ) | (20,315 | ) | |||
Interest expense paid | (36,155 | ) | (36,351 | ) | |||
Lease incentives paid | (4,825 | ) | (9,375 | ) | |||
Other | 2,093 | 940 | |||||
Net cash provided by operating activities | 80,712 | 117,529 | |||||
Cash flows from investing activities | |||||||
Construction, development and redevelopment | (67,749 | ) | (85,926 | ) | |||
Tenant improvements on operating properties | (18,352 | ) | (13,711 | ) | |||
Other capital improvements on operating properties | (8,584 | ) | (11,780 | ) | |||
Proceeds from dispositions of properties | — | 54,798 | |||||
Leasing costs paid | (3,838 | ) | (3,904 | ) | |||
Other | 1,715 | 1,746 | |||||
Net cash used in investing activities | (96,808 | ) | (58,777 | ) | |||
Cash flows from financing activities | |||||||
Proceeds from debt | |||||||
Revolving Credit Facility | 153,000 | 213,000 | |||||
Repayments of debt | |||||||
Revolving Credit Facility | (109,000 | ) | (19,000 | ) | |||
Scheduled principal amortization | (2,101 | ) | (2,013 | ) | |||
Other debt repayments | — | (200,000 | ) | ||||
Payments on capital lease obligation | (15,379 | ) | — | ||||
Net proceeds from issuance of common units | 52,277 | 19,835 | |||||
Redemption of preferred units | — | (199,083 | ) | ||||
Common unit distributions paid | (57,730 | ) | (56,383 | ) | |||
Preferred unit distributions paid | (330 | ) | (9,635 | ) | |||
Redemption of vested equity awards | (1,525 | ) | (1,813 | ) | |||
Other | (5,370 | ) | (2,952 | ) | |||
Net cash provided by (used in) financing activities | 13,842 | (258,044 | ) | ||||
Net decrease in cash and cash equivalents and restricted cash | (2,254 | ) | (199,292 | ) | |||
Cash and cash equivalents and restricted cash | |||||||
Beginning of period | 14,831 | 212,619 | |||||
End of period | $ | 12,577 | $ | 13,327 |
For the Six Months Ended June 30, | |||||||
2018 | 2017 | ||||||
Reconciliation of net income to net cash provided by operating activities: | |||||||
Net income | $ | 39,865 | $ | 41,599 | |||
Adjustments to reconcile net income to net cash provided by operating activities: | |||||||
Depreciation and amortization | 67,684 | 66,948 | |||||
Impairment losses | — | 1,618 | |||||
Amortization of deferred financing costs and net debt discounts | 1,648 | 2,613 | |||||
(Increase) decrease in deferred rent receivable | (3,470 | ) | 669 | ||||
Gain on sales of real estate | 27 | (4,250 | ) | ||||
Share-based compensation | 3,132 | 2,820 | |||||
Other | (777 | ) | (1,861 | ) | |||
Operating changes in assets and liabilities: | |||||||
Decrease (increase) in accounts receivable | 8,050 | (8,304 | ) | ||||
Decrease in prepaid expenses and other assets, net | 14,296 | 21,126 | |||||
Decrease in accounts payable, accrued expenses and other liabilities | (49,000 | ) | (1,095 | ) | |||
Decrease in rents received in advance and security deposits | (743 | ) | (4,354 | ) | |||
Net cash provided by operating activities | $ | 80,712 | $ | 117,529 | |||
Reconciliation of cash and cash equivalents and restricted cash: | |||||||
Cash and cash equivalents at beginning of period | $ | 12,261 | $ | 209,863 | |||
Restricted cash at beginning of period | 2,570 | 2,756 | |||||
Cash and cash equivalents and restricted cash at beginning of period | $ | 14,831 | $ | 212,619 | |||
Cash and cash equivalents at end of period | $ | 8,472 | $ | 10,606 | |||
Restricted cash at end of period | 4,105 | 2,721 | |||||
Cash and cash equivalents and restricted cash at end of period | $ | 12,577 | $ | 13,327 | |||
Supplemental schedule of non-cash investing and financing activities: | |||||||
Increase (decrease) in accrued capital improvements, leasing and other investing activity costs | $ | 2,909 | $ | (4,927 | ) | ||
Increase in property in connection with capital lease obligation | $ | — | $ | 16,127 | |||
Increase in fair value of derivatives applied to accumulated other comprehensive income and noncontrolling interests | $ | 6,719 | $ | 513 | |||
Equity in other comprehensive income of an equity method investee | $ | — | $ | 39 | |||
Distributions payable | $ | 29,449 | $ | 28,462 | |||
Increase in redeemable noncontrolling interests and decrease in equity to carry redeemable noncontrolling interests at fair value | $ | 758 | $ | 401 |
• | 159 properties totaling 17.7 million square feet comprised of 143 office properties and 16 single-tenant data center shell properties (“data center shells”). We owned six of these data center shells through an unconsolidated real estate joint venture; |
• | a wholesale data center with a critical load of 19.25 megawatts; |
• | nine properties under construction or redevelopment (five office properties and four data center shells) that we estimate will total approximately 1.0 million square feet upon completion, including one partially-operational property; and |
• | approximately 1,000 acres of land controlled for future development that we believe could be developed into approximately 12.3 million square feet and 150 acres of other land. |
As Previously Reported | Impact of Adoption | As Adjusted | ||||||||||
Net cash provided by operating activities | $ | 117,737 | $ | (208 | ) | $ | 117,529 | |||||
Net cash used in investing activities | $ | (58,950 | ) | $ | 173 | $ | (58,777 | ) | ||||
Net decrease in cash and cash equivalents and restricted cash | $ | (199,257 | ) | $ | (35 | ) | $ | (199,292 | ) | |||
Beginning of period cash and cash equivalents and restricted cash | $ | 209,863 | $ | 2,756 | $ | 212,619 | ||||||
End of period cash and cash equivalents and restricted cash | $ | 10,606 | $ | 2,721 | $ | 13,327 |
As of December 31, 2017 | As of June 30, 2017 | As of December 31, 2016 | ||||||||||||||||||||||||||||||||||
Consolidated Balance Sheets | As Previously Reported | Impact of Adoption | As Adjusted | As Previously Reported | Impact of Adoption | As Adjusted | As Previously Reported | Impact of Adoption | As Adjusted | |||||||||||||||||||||||||||
Investment in unconsolidated real estate joint venture | $ | 25,066 | $ | 16,721 | $ | 41,787 | $ | 25,335 | $ | 17,417 | $ | 42,752 | $ | 25,548 | $ | 18,113 | $ | 43,661 | ||||||||||||||||||
Cumulative distributions in excess of net income | $ | (818,190 | ) | $ | 16,105 | $ |