ý | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended | September 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 |
Large accelerated filer ý | Accelerated filer o | Non-accelerated filer o | Smaller reporting company o | Emerging growth company o |
• | 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 | ||
September 30, 2018 | December 31, 2017 | ||||||
Assets | |||||||
Properties, net: | |||||||
Operating properties, net | $ | 2,796,577 | $ | 2,737,611 | |||
Projects in development or held for future development | 410,850 | 403,494 | |||||
Total properties, net | 3,207,427 | 3,141,105 | |||||
Assets held for sale, net | 42,226 | 42,226 | |||||
Cash and cash equivalents | 9,492 | 12,261 | |||||
Investment in unconsolidated real estate joint venture | 40,318 | 41,787 | |||||
Accounts receivable (net of allowance for doubtful accounts of $850 and $607, respectively) | 19,245 | 31,802 | |||||
Deferred rent receivable (net of allowance of $438 and $364, respectively) | 89,171 | 86,710 | |||||
Intangible assets on real estate acquisitions, net | 47,065 | 59,092 | |||||
Deferred leasing costs (net of accumulated amortization of $30,832 and $29,560, respectively) | 49,510 | 48,322 | |||||
Investing receivables | 55,688 | 57,493 | |||||
Interest rate derivatives | 10,875 | 3,073 | |||||
Prepaid expenses and other assets, net | 79,349 | 71,334 | |||||
Total assets | $ | 3,650,366 | $ | 3,595,205 | |||
Liabilities and equity | |||||||
Liabilities: | |||||||
Debt, net | $ | 1,808,030 | $ | 1,828,333 | |||
Accounts payable and accrued expenses | 90,224 | 108,137 | |||||
Rents received in advance and security deposits | 23,159 | 25,648 | |||||
Dividends and distributions payable | 30,483 | 28,921 | |||||
Deferred revenue associated with operating leases | 10,006 | 11,682 | |||||
Deferred property sale | 43,377 | 43,377 | |||||
Capital lease obligation | 660 | 15,853 | |||||
Other liabilities | 9,267 | 41,822 | |||||
Total liabilities | 2,015,206 | 2,103,773 | |||||
Commitments and contingencies (Note 16) | |||||||
Redeemable noncontrolling interests | 25,431 | 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 108,848,223 at September 30, 2018 and 101,292,299 at December 31, 2017) | 1,088 | 1,013 | |||||
Additional paid-in capital | 2,390,484 | 2,201,047 | |||||
Cumulative distributions in excess of net income | (833,508 | ) | (802,085 | ) | |||
Accumulated other comprehensive income | 10,108 | 2,167 | |||||
Total Corporate Office Properties Trust’s shareholders’ equity | 1,568,172 | 1,402,142 | |||||
Noncontrolling interests in subsidiaries: | |||||||
Common units in COPLP | 19,525 | 45,097 | |||||
Preferred units in COPLP | 8,800 | 8,800 | |||||
Other consolidated entities | 13,232 | 12,268 | |||||
Noncontrolling interests in subsidiaries | 41,557 | 66,165 | |||||
Total equity | 1,609,729 | 1,468,307 | |||||
Total liabilities, redeemable noncontrolling interests and equity | $ | 3,650,366 | $ | 3,595,205 |
For the Three Months Ended September 30, | For the Nine Months Ended September 30, | ||||||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||||||
Revenues | |||||||||||||||
Rental revenue | $ | 102,132 | $ | 102,275 | $ | 304,087 | $ | 304,237 | |||||||
Tenant recoveries and other real estate operations revenue | 26,856 | 24,956 | 82,341 | 78,058 | |||||||||||
Construction contract and other service revenues | 8,423 | 29,786 | 53,202 | 65,958 | |||||||||||
Total revenues | 137,411 | 157,017 | 439,630 | 448,253 | |||||||||||
Expenses | |||||||||||||||
Property operating expenses | 49,340 | 46,368 | 149,737 | 143,515 | |||||||||||
Depreciation and amortization associated with real estate operations | 34,195 | 34,438 | 100,897 | 100,290 | |||||||||||
Construction contract and other service expenses | 8,058 | 28,788 | 51,215 | 63,589 | |||||||||||
Impairment (recoveries) losses | — | (161 | ) | — | 1,464 | ||||||||||
General, administrative and leasing expenses | 6,899 | 7,368 | 21,819 | 23,838 | |||||||||||
Business development expenses and land carry costs | 1,567 | 1,277 | 4,415 | 4,567 | |||||||||||
Total operating expenses | 100,059 | 118,078 | 328,083 | 337,263 | |||||||||||
Operating income | 37,352 | 38,939 | 111,547 | 110,990 | |||||||||||
Interest expense | (19,181 | ) | (19,615 | ) | (56,910 | ) | (57,772 | ) | |||||||
Interest and other income | 1,486 | 1,508 | 4,284 | 4,817 | |||||||||||
Gain on sales of real estate | — | 1,188 | (27 | ) | 5,438 | ||||||||||
Loss on early extinguishment of debt | — | — | — | (513 | ) | ||||||||||
Income before equity in income of unconsolidated entities and income taxes | 19,657 | 22,020 | 58,894 | 62,960 | |||||||||||
Equity in income of unconsolidated entities | 374 | 371 | 1,120 | 1,118 | |||||||||||
Income tax benefit (expense) | 291 | (57 | ) | 173 | (145 | ) | |||||||||
Net income | 20,322 | 22,334 | 60,187 | 63,933 | |||||||||||
Net income attributable to noncontrolling interests: | |||||||||||||||
Common units in COPLP | (380 | ) | (693 | ) | (1,532 | ) | (1,576 | ) | |||||||
Preferred units in COPLP | (165 | ) | (165 | ) | (495 | ) | (495 | ) | |||||||
Other consolidated entities | (1,080 | ) | (897 | ) | (2,879 | ) | (2,738 | ) | |||||||
Net income attributable to COPT | 18,697 | 20,579 | 55,281 | 59,124 | |||||||||||
Preferred share dividends | — | — | — | (6,219 | ) | ||||||||||
Issuance costs associated with redeemed preferred shares | — | — | — | (6,847 | ) | ||||||||||
Net income attributable to COPT common shareholders | $ | 18,697 | $ | 20,579 | $ | 55,281 | $ | 46,058 | |||||||
Earnings per common share: | |||||||||||||||
Net income attributable to COPT common shareholders - basic | $ | 0.18 | $ | 0.21 | $ | 0.54 | $ | 0.46 | |||||||
Net income attributable to COPT common shareholders - diluted | $ | 0.18 | $ | 0.21 | $ | 0.54 | $ | 0.46 |
For the Three Months Ended September 30, | For the Nine Months Ended September 30, | ||||||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||||||
Net income | $ | 20,322 | $ | 22,334 | $ | 60,187 | $ | 63,933 | |||||||
Other comprehensive income | |||||||||||||||
Unrealized gain (loss) on interest rate derivatives | 1,325 | (301 | ) | 7,913 | (1,877 | ) | |||||||||
(Gain) loss on interest rate derivatives recognized in interest expense | (207 | ) | 615 | (9 | ) | 2,740 | |||||||||
Equity in other comprehensive income of equity method investee | — | — | — | 39 | |||||||||||
Other comprehensive income | 1,118 | 314 | 7,904 | 902 | |||||||||||
Comprehensive income | 21,440 | 22,648 | 68,091 | 64,835 | |||||||||||
Comprehensive income attributable to noncontrolling interests | (1,647 | ) | (1,765 | ) | (5,145 | ) | (4,839 | ) | |||||||
Comprehensive income attributable to COPT | $ | 19,793 | $ | 20,883 | $ | 62,946 | $ | 59,996 |
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 (337,000 shares) | — | 3 | 4,599 | — | — | (4,602 | ) | — | |||||||||||||||||||
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 (176,477 shares issued, net of redemptions) | — | 2 | 4,442 | — | — | — | 4,444 | ||||||||||||||||||||
Redemption of vested equity awards | — | — | (1,869 | ) | — | — | — | (1,869 | ) | ||||||||||||||||||
Adjustments to noncontrolling interests resulting from changes in ownership of COPLP | — | — | (589 | ) | — | — | 589 | — | |||||||||||||||||||
Comprehensive income | — | — | — | 59,124 | 872 | 3,119 | 63,115 | ||||||||||||||||||||
Dividends | — | — | — | (88,300 | ) | — | — | (88,300 | ) | ||||||||||||||||||
Distributions to owners of common and preferred units in COPLP | — | — | — | — | — | (3,262 | ) | (3,262 | ) | ||||||||||||||||||
Distributions to noncontrolling interests in other consolidated entities | — | — | — | — | — | (2,614 | ) | (2,614 | ) | ||||||||||||||||||
Adjustment to arrive at fair value of redeemable noncontrolling interests | — | — | 244 | — | — | — | 244 | ||||||||||||||||||||
Balance at September 30, 2017 (99,608,170 common shares outstanding) | $ | — | $ | 996 | $ | 2,150,067 | $ | (783,848 | ) | $ | (859 | ) | $ | 65,497 | $ | 1,431,853 | |||||||||||
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 (1,895,627 shares) | — | 19 | 27,263 | — | — | (27,282 | ) | — | |||||||||||||||||||
Common shares issued under forward equity sale agreements (4,527,000 shares) | — | 45 | 132,285 | — | — | — | 132,330 | ||||||||||||||||||||
Common shares issued under at-the-market program (991,664 shares) | — | 10 | 29,722 | — | — | — | 29,732 | ||||||||||||||||||||
Share-based compensation (141,633 shares issued, net of redemptions) | — | 1 | 5,178 | — | — | — | 5,179 | ||||||||||||||||||||
Redemption of vested equity awards | — | — | (1,611 | ) | — | — | — | (1,611 | ) | ||||||||||||||||||
Adjustments to noncontrolling interests resulting from changes in ownership of COPLP | — | — | (2,069 | ) | — | — | 2,069 | — | |||||||||||||||||||
Comprehensive income | — | — | — | 55,281 | 7,665 | 3,242 | 66,188 | ||||||||||||||||||||
Dividends | — | — | — | (86,428 | ) | — | — | (86,428 | ) | ||||||||||||||||||
Distributions to owners of common and preferred units in COPLP | — | — | — | — | — | (2,626 | ) | (2,626 | ) | ||||||||||||||||||
Distributions to noncontrolling interests in other consolidated entities | — | — | — | — | — | (11 | ) | (11 | ) | ||||||||||||||||||
Adjustment to arrive at fair value of redeemable noncontrolling interests | — | — | (1,331 | ) | — | — | — | (1,331 | ) | ||||||||||||||||||
Balance at September 30, 2018 (108,848,223 common shares outstanding) | $ | — | $ | 1,088 | $ | 2,390,484 | $ | (833,508 | ) | $ | 10,108 | $ | 41,557 | $ | 1,609,729 |
For the Nine Months Ended September 30, | |||||||
2018 | 2017 | ||||||
Cash flows from operating activities | |||||||
Revenues from real estate operations received | $ | 395,172 | $ | 389,206 | |||
Construction contract and other service revenues received | 27,450 | 72,682 | |||||
Property operating expenses paid | (150,039 | ) | (144,527 | ) | |||
Construction contract and other service expenses paid | (71,034 | ) | (57,189 | ) | |||
General, administrative, leasing, business development and land carry costs paid | (20,858 | ) | (27,066 | ) | |||
Interest expense paid | (55,611 | ) | (55,637 | ) | |||
Lease incentives paid | (5,985 | ) | (9,414 | ) | |||
Other | 2,572 | 1,373 | |||||
Net cash provided by operating activities | 121,667 | 169,428 | |||||
Cash flows from investing activities | |||||||
Construction, development and redevelopment | (105,852 | ) | (113,678 | ) | |||
Tenant improvements on operating properties | (27,962 | ) | (19,876 | ) | |||
Other capital improvements on operating properties | (13,357 | ) | (15,174 | ) | |||
Proceeds from dispositions of properties | — | 101,107 | |||||
Leasing costs paid | (6,277 | ) | (6,468 | ) | |||
Other | 762 | 1,619 | |||||
Net cash used in investing activities | (152,686 | ) | (52,470 | ) | |||
Cash flows from financing activities | |||||||
Proceeds from debt | |||||||
Revolving Credit Facility | 208,000 | 268,000 | |||||
Other debt proceeds | 11,267 | — | |||||
Repayments of debt | |||||||
Revolving Credit Facility | (235,000 | ) | (98,000 | ) | |||
Scheduled principal amortization | (3,161 | ) | (3,028 | ) | |||
Other debt repayments | — | (200,000 | ) | ||||
Deferred financing costs paid | (3,413 | ) | — | ||||
Payments on capital lease obligation | (15,379 | ) | — | ||||
Net proceeds from issuance of common shares | 162,230 | 19,834 | |||||
Redemption of preferred shares | — | (199,083 | ) | ||||
Common share dividends paid | (84,349 | ) | (81,779 | ) | |||
Preferred share dividends paid | — | (9,305 | ) | ||||
Distributions paid to noncontrolling interests in COPLP | (3,169 | ) | (3,371 | ) | |||
Distributions paid to redeemable noncontrolling interests | (1,090 | ) | (7,860 | ) | |||
Redemption of vested equity awards | (1,611 | ) | (1,869 | ) | |||
Other | (5,205 | ) | (492 | ) | |||
Net cash provided by (used in) financing activities | 29,120 | (316,953 | ) | ||||
Net decrease in cash and cash equivalents and restricted cash | (1,899 | ) | (199,995 | ) | |||
Cash and cash equivalents and restricted cash | |||||||
Beginning of period | 14,831 | 212,619 | |||||
End of period | $ | 12,932 | $ | 12,624 |
For the Nine Months Ended September 30, | |||||||
2018 | 2017 | ||||||
Reconciliation of net income to net cash provided by operating activities: | |||||||
Net income | $ | 60,187 | $ | 63,933 | |||
Adjustments to reconcile net income to net cash provided by operating activities: | |||||||
Depreciation and amortization | 102,440 | 101,963 | |||||
Impairment losses | — | 1,457 | |||||
Amortization of deferred financing costs and net debt discounts | 2,478 | 3,514 | |||||
Increase in deferred rent receivable | (3,687 | ) | (545 | ) | |||
Gain on sales of real estate | 27 | (5,438 | ) | ||||
Share-based compensation | 4,735 | 4,092 | |||||
Other | (1,969 | ) | (2,969 | ) | |||
Changes in operating assets and liabilities: | |||||||
Decrease in accounts receivable | 12,404 | 7,498 | |||||
(Increase) decrease in prepaid expenses and other assets, net | (3,810 | ) | 4,718 | ||||
Decrease in accounts payable, accrued expenses and other liabilities | (48,649 | ) | (5,220 | ) | |||
Decrease in rents received in advance and security deposits | (2,489 | ) | (3,575 | ) | |||
Net cash provided by operating activities | $ | 121,667 | $ | 169,428 | |||
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 | $ | 9,492 | $ | 10,858 | |||
Restricted cash at end of period | 3,440 | 1,766 | |||||
Cash and cash equivalents and restricted cash at end of period | $ | 12,932 | $ | 12,624 | |||
Supplemental schedule of non-cash investing and financing activities: | |||||||
Increase in accrued capital improvements, leasing and other investing activity costs | $ | 3,550 | $ | 17,129 | |||
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 | $ | 7,802 | $ | 774 | |||
Equity in other comprehensive income of an equity method investee | $ | — | $ | 39 | |||
Dividends/distributions payable | $ | 30,483 | $ | 28,462 | |||
Decrease in noncontrolling interests and increase in shareholders’ equity in connection with the conversion of common units into common shares | $ | 27,282 | $ | 4,602 | |||
Adjustments to noncontrolling interests resulting from changes in COPLP ownership | $ | 2,069 | $ | 589 | |||
Increase (decrease) in redeemable noncontrolling interests and decrease (increase) in equity to carry redeemable noncontrolling interests at fair value | $ | 1,331 | $ | (244 | ) |
September 30, 2018 | December 31, 2017 | ||||||
Assets | |||||||
Properties, net: | |||||||
Operating properties, net | $ | 2,796,577 | $ | 2,737,611 | |||
Projects in development or held for future development | 410,850 | 403,494 | |||||
Total properties, net | 3,207,427 | 3,141,105 | |||||
Assets held for sale, net | 42,226 | 42,226 | |||||
Cash and cash equivalents | 9,492 | 12,261 | |||||
Investment in unconsolidated real estate joint venture | 40,318 | 41,787 | |||||
Accounts receivable (net of allowance for doubtful accounts of $850 and $607, respectively) | 19,245 | 31,802 | |||||
Deferred rent receivable (net of allowance of $438 and $364, respectively) | 89,171 | 86,710 | |||||
Intangible assets on real estate acquisitions, net | 47,065 | 59,092 | |||||
Deferred leasing costs (net of accumulated amortization of $30,832 and $29,560, respectively) | 49,510 | 48,322 | |||||
Investing receivables | 55,688 | 57,493 | |||||
Interest rate derivatives | 10,875 | 3,073 | |||||
Prepaid expenses and other assets, net | 75,003 | 66,718 | |||||
Total assets | $ | 3,646,020 | $ | 3,590,589 | |||
Liabilities and equity | |||||||
Liabilities: | |||||||
Debt, net | $ | 1,808,030 | $ | 1,828,333 | |||
Accounts payable and accrued expenses | 90,224 | 108,137 | |||||
Rents received in advance and security deposits | 23,159 | 25,648 | |||||
Distributions payable | 30,483 | 28,921 | |||||
Deferred revenue associated with operating leases | 10,006 | 11,682 | |||||
Deferred property sale | 43,377 | 43,377 | |||||
Capital lease obligation | 660 | 15,853 | |||||
Other liabilities | 4,921 | 37,206 | |||||
Total liabilities | 2,010,860 | 2,099,157 | |||||
Commitments and contingencies (Note 16) | |||||||
Redeemable noncontrolling interests | 25,431 | 23,125 | |||||
Equity: | |||||||
Corporate Office Properties, L.P.’s equity: | |||||||
Preferred units held by limited partner, 352,000 preferred units outstanding at September 30, 2018 and December 31, 2017 | 8,800 | 8,800 | |||||
Common units, 108,848,223 and 101,292,299 held by the general partner and 1,355,251 and 3,250,878 held by limited partners at September 30, 2018 and December 31, 2017, respectively | 1,577,299 | 1,445,022 | |||||
Accumulated other comprehensive income | 10,353 | 2,173 | |||||
Total Corporate Office Properties, L.P.’s equity | 1,596,452 | 1,455,995 | |||||
Noncontrolling interests in subsidiaries | 13,277 | 12,312 | |||||
Total equity | 1,609,729 | 1,468,307 | |||||
Total liabilities, redeemable noncontrolling interests and equity | $ | 3,646,020 | $ | 3,590,589 |
For the Three Months Ended September 30, | For the Nine Months Ended September 30, | ||||||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||||||
Revenues | |||||||||||||||
Rental revenue | $ | 102,132 | $ | 102,275 | $ | 304,087 | $ | 304,237 | |||||||
Tenant recoveries and other real estate operations revenue | 26,856 | 24,956 | 82,341 | 78,058 | |||||||||||
Construction contract and other service revenues | 8,423 | 29,786 | 53,202 | 65,958 | |||||||||||
Total revenues | 137,411 | 157,017 | 439,630 | 448,253 | |||||||||||
Expenses | |||||||||||||||
Property operating expenses | 49,340 | 46,368 | 149,737 | 143,515 | |||||||||||
Depreciation and amortization associated with real estate operations | 34,195 | 34,438 | 100,897 | 100,290 | |||||||||||
Construction contract and other service expenses | 8,058 | 28,788 | 51,215 | 63,589 | |||||||||||
Impairment (recoveries) losses | — | (161 | ) | — | 1,464 | ||||||||||
General, administrative and leasing expenses | 6,899 | 7,368 | 21,819 | 23,838 | |||||||||||
Business development expenses and land carry costs | 1,567 | 1,277 | 4,415 | 4,567 | |||||||||||
Total operating expenses | 100,059 | 118,078 | 328,083 | 337,263 | |||||||||||
Operating income | 37,352 | 38,939 | 111,547 | 110,990 | |||||||||||
Interest expense | (19,181 | ) | (19,615 | ) | (56,910 | ) | (57,772 | ) | |||||||
Interest and other income | 1,486 | 1,508 | 4,284 | 4,817 | |||||||||||
Gain on sales of real estate | — | 1,188 | (27 | ) | 5,438 | ||||||||||
Loss on early extinguishment of debt | — | — | — | (513 | ) | ||||||||||
Income before equity in income of unconsolidated entities and income taxes | 19,657 | 22,020 | 58,894 | 62,960 | |||||||||||
Equity in income of unconsolidated entities | 374 | 371 | 1,120 | 1,118 | |||||||||||
Income tax benefit (expense) | 291 | (57 | ) | 173 | (145 | ) | |||||||||
Net income | 20,322 | 22,334 | 60,187 | 63,933 | |||||||||||
Net income attributable to noncontrolling interests in consolidated entities | (1,080 | ) | (897 | ) | (2,879 | ) | (2,738 | ) | |||||||
Net income attributable to COPLP | 19,242 | 21,437 | 57,308 | 61,195 | |||||||||||
Preferred unit distributions | (165 | ) | (165 | ) | (495 | ) | (6,714 | ) | |||||||
Issuance costs associated with redeemed preferred units | — | — | — | (6,847 | ) | ||||||||||
Net income attributable to COPLP common unitholders | $ | 19,077 | $ | 21,272 | $ | 56,813 | $ | 47,634 | |||||||
Earnings per common unit: | |||||||||||||||
Net income attributable to COPLP common unitholders - basic | $ | 0.18 | $ | 0.21 | $ | 0.54 | $ | 0.46 | |||||||
Net income attributable to COPLP common unitholders - diluted | $ | 0.18 | $ | 0.21 | $ | 0.54 | $ | 0.46 |
For the Three Months Ended September 30, | For the Nine Months Ended September 30, | ||||||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||||||
Net income | $ | 20,322 | $ | 22,334 | $ | 60,187 | $ | 63,933 | |||||||
Other comprehensive income | |||||||||||||||
Unrealized gain (loss) on interest rate derivatives | 1,325 | (301 | ) | 7,913 | (1,877 | ) | |||||||||
(Gain) loss on interest rate derivatives recognized in interest expense | (207 | ) | 615 | (9 | ) | 2,740 | |||||||||
Equity in other comprehensive income of equity method investee | — | — | — | 39 | |||||||||||
Other comprehensive income | 1,118 | 314 | 7,904 | 902 | |||||||||||
Comprehensive income | 21,440 | 22,648 | 68,091 | 64,835 | |||||||||||
Comprehensive income attributable to noncontrolling interests | (1,080 | ) | (897 | ) | (2,879 | ) | (2,738 | ) | |||||||
Comprehensive income attributable to COPLP | $ | 20,360 | $ | 21,751 | $ | 65,212 | $ | 62,097 |
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) | — | — | — | — | 176,477 | 4,444 | — | — | 4,444 | |||||||||||||||||||||||
Redemptions of vested equity awards | — | — | — | — | — | (1,869 | ) | — | — | (1,869 | ) | |||||||||||||||||||||
Comprehensive income | — | 495 | — | 6,219 | — | 54,481 | 902 | 1,018 | 63,115 | |||||||||||||||||||||||
Distributions to owners of common and preferred units | — | (495 | ) | — | (6,219 | ) | — | (84,848 | ) | — | — | (91,562 | ) | |||||||||||||||||||
Distributions to noncontrolling interests in subsidiaries | — | — | — | — | — | — | — | (2,614 | ) | (2,614 | ) | |||||||||||||||||||||
Adjustment to arrive at fair value of redeemable noncontrolling interests | — | — | — | — | — | 244 | — | — | 244 | |||||||||||||||||||||||
Balance at September 30, 2017 | 352,000 | $ | 8,800 | — | $ | — | 102,861,561 | $ | 1,411,980 | $ | (952 | ) | $ | 12,025 | $ | 1,431,853 | ||||||||||||||||
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 | — | — | — | — | 4,527,000 | 132,330 | — | — | 132,330 | |||||||||||||||||||||||
Issuance of common units resulting from common shares issued under COPT at-the-market program | — | — | — | — | 991,664 | 29,732 | — | — | 29,732 | |||||||||||||||||||||||
Share-based compensation (units net of redemption) | — | — | — | — | 141,633 | 5,179 | — | — | 5,179 | |||||||||||||||||||||||
Redemptions of vested equity awards | — | — | — | — | — | (1,611 | ) | — | — | (1,611 | ) | |||||||||||||||||||||
Comprehensive income | — | 495 | — | — | — | 56,813 | 7,904 | 976 | 66,188 | |||||||||||||||||||||||
Distributions to owners of common and preferred units | — | (495 | ) | — | — | — | (88,559 | ) | — | — | (89,054 | ) | ||||||||||||||||||||
Distributions to noncontrolling interests in subsidiaries | — | — | — | — | — | — | — | (11 | ) | (11 | ) | |||||||||||||||||||||
Adjustment to arrive at fair value of redeemable noncontrolling interests | — | — | — | — | — | (1,331 | ) | — | — | (1,331 | ) | |||||||||||||||||||||
Balance at September 30, 2018 | 352,000 | $ | 8,800 | — | $ | — | 110,203,474 | $ | 1,577,299 | $ | 10,353 | $ | 13,277 | $ | 1,609,729 |
For the Nine Months Ended September 30, | |||||||
2018 | 2017 | ||||||
Cash flows from operating activities | |||||||
Revenues from real estate operations received | $ | 395,172 | $ | 389,206 | |||
Construction contract and other service revenues received | 27,450 | 72,682 | |||||
Property operating expenses paid | (150,039 | ) | (144,527 | ) | |||
Construction contract and other service expenses paid | (71,034 | ) | (57,189 | ) | |||
General, administrative, leasing, business development and land carry costs paid | (20,858 | ) | (27,066 | ) | |||
Interest expense paid | (55,611 | ) | (55,637 | ) | |||
Lease incentives paid | (5,985 | ) | (9,414 | ) | |||
Other | 2,572 | 1,373 | |||||
Net cash provided by operating activities | 121,667 | 169,428 | |||||
Cash flows from investing activities | |||||||
Construction, development and redevelopment | (105,852 | ) | (113,678 | ) | |||
Tenant improvements on operating properties | (27,962 | ) | (19,876 | ) | |||
Other capital improvements on operating properties | (13,357 | ) | (15,174 | ) | |||
Proceeds from dispositions of properties | — | 101,107 | |||||
Leasing costs paid | (6,277 | ) | (6,468 | ) | |||
Other | 762 | 1,619 | |||||
Net cash used in investing activities | (152,686 | ) | (52,470 | ) | |||
Cash flows from financing activities | |||||||
Proceeds from debt | |||||||
Revolving Credit Facility | 208,000 | 268,000 | |||||
Other debt proceeds | 11,267 | — | |||||
Repayments of debt | |||||||
Revolving Credit Facility | (235,000 | ) | (98,000 | ) | |||
Scheduled principal amortization | (3,161 | ) | (3,028 | ) | |||
Other debt repayments | — | (200,000 | ) | ||||
Deferred financing costs paid | (3,413 | ) | — | ||||
Payments on capital lease obligation | (15,379 | ) | — | ||||
Net proceeds from issuance of common units | 162,230 | 19,834 | |||||
Redemption of preferred units | — | (199,083 | ) | ||||
Common unit distributions paid | (87,023 | ) | (84,655 | ) | |||
Preferred unit distributions paid | (495 | ) | (9,800 | ) | |||
Distributions paid to redeemable noncontrolling interests | (1,090 | ) | (7,860 | ) | |||
Redemption of vested equity awards | (1,611 | ) | (1,869 | ) | |||
Other | (5,205 | ) | (492 | ) | |||
Net cash provided by (used in) financing activities | 29,120 | (316,953 | ) | ||||
Net decrease in cash and cash equivalents and restricted cash | (1,899 | ) | (199,995 | ) | |||
Cash and cash equivalents and restricted cash | |||||||
Beginning of period | 14,831 | 212,619 | |||||
End of period | $ | 12,932 | $ | 12,624 |
For the Nine Months Ended September 30, | |||||||
2018 | 2017 | ||||||
Reconciliation of net income to net cash provided by operating activities: | |||||||
Net income | $ | 60,187 | $ | 63,933 | |||
Adjustments to reconcile net income to net cash provided by operating activities: | |||||||
Depreciation and amortization | 102,440 | 101,963 | |||||
Impairment losses | — | 1,457 | |||||
Amortization of deferred financing costs and net debt discounts | 2,478 | 3,514 | |||||
Increase in deferred rent receivable | (3,687 | ) | (545 | ) | |||
Gain on sales of real estate | 27 | (5,438 | ) | ||||
Share-based compensation | 4,735 | 4,092 | |||||
Other | (1,969 | ) | (2,969 | ) | |||
Operating changes in assets and liabilities: | |||||||
Decrease in accounts receivable | 12,404 | 7,498 | |||||
(Increase) decrease in prepaid expenses and other assets, net | (4,080 | ) | 3,688 | ||||
Decrease in accounts payable, accrued expenses and other liabilities | (48,379 | ) | (4,190 | ) | |||
Decrease in rents received in advance and security deposits | (2,489 | ) | (3,575 | ) | |||
Net cash provided by operating activities | $ | 121,667 | $ | 169,428 | |||
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 | $ | 9,492 | $ | 10,858 | |||
Restricted cash at end of period | 3,440 | 1,766 | |||||
Cash and cash equivalents and restricted cash at end of period | $ | 12,932 | $ | 12,624 | |||
Supplemental schedule of non-cash investing and financing activities: | |||||||
Increase in accrued capital improvements, leasing and other investing activity costs | $ | 3,550 | $ | 17,129 | |||
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 | $ | 7,802 | $ | 774 | |||
Equity in other comprehensive income of an equity method investee | $ | — | $ | 39 | |||
Distributions payable | $ | 30,483 | $ | 28,462 | |||
Increase (decrease) in redeemable noncontrolling interests and decrease (increase) in equity to carry redeemable noncontrolling interests at fair value | $ | 1,331 | $ | (244 | ) |
• | 161 properties totaling 17.9 million square feet comprised of 15.1 million square feet in 144 office properties and 2.7 million square feet in 17 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; |
• | 11 properties under construction or redevelopment (six office properties and five data center shells) that we estimate will total approximately 1.4 million square feet upon completion, including two partially-operational properties; and |
• | approximately 900 acres of land controlled for future development that we believe could be developed into approximately 11.9 million square feet and 150 acres of other land. |
As Previously Reported | Impact of Adoption | As Adjusted | ||||||||||
Net cash provided by operating activities | $ | 170,678 | $ | (1,250 | ) | $ | 169,428 | |||||
Net cash used in investing activities | $ | (52,730 | ) | $ | 260 | $ | (52,470 | ) | ||||
Net decrease in cash and cash equivalents and restricted cash | $ | (199,005 | ) | $ | (990 | ) | $ | (199,995 | ) | |||
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 | $ | 10,858 | $ | 1,766 | $ | 12,624 |
As of December 31, 2017 | As of September 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 | $ | 25,194 | $ | 17,069 | $ | 42,263 | $ | 25,548 | $ | 18,113 |