Exhibit 99.1

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Corporate Office Properties Trust
Summary Description

The Company: Corporate Office Properties Trust (the “Company” or “COPT”) is a self-managed real estate investment trust (“REIT”). COPT is listed on the New York Stock Exchange under the symbol “OFC” and is an S&P MidCap 400 Company. We own, manage, lease, develop and selectively acquire office and data center properties. The majority of our portfolio is in locations that support the United States Government and its contractors, most of whom are engaged in national security, defense and information technology (“IT”) related activities servicing what we believe are growing, durable, priority missions; we refer to these properties as Defense/IT Locations. We also own a portfolio of office properties located in select urban/urban-like submarkets in the Greater Washington, DC/Baltimore region with durable Class-A office fundamentals and characteristics; these properties are included in a segment referred to as Regional Office Properties. As of September 30, 2019, we derived 88% of our core portfolio annualized rental revenue from Defense/IT Locations and 12% from Regional Office Properties. As of September 30, 2019, our core portfolio of 167 office and data center shell properties, including 13 owned through unconsolidated joint ventures, encompassed 18.8 million square feet and was 94.5% leased. As of the same date, we also owned a wholesale data center with a critical load of 19.25 megawatts that was 82.1% leased.
Management:
Investor Relations:
Stephen E. Budorick, President & CEO
Stephanie M. Krewson-Kelly, VP of IR
Paul R. Adkins, EVP & COO
443-285-5453, stephanie.kelly@copt.com
Anthony Mifsud, EVP & CFO
Michelle Layne, Manager of IR
 
443-285-5452, michelle.layne@copt.com
 
Corporate Credit Rating: Fitch: BBB- Stable; Moody’s: Baa3 Stable; and S&P: BBB- Positive

Disclosure Statement: This supplemental package contains forward-looking statements within the meaning of the Federal securities laws. Forward-looking statements can be identified by the use of words such as “may,” “will,” “should,” “could,” “believe,” “anticipate,” “expect,” “estimate,” “plan” or other comparable terminology.  Forward-looking statements are inherently subject to risks and uncertainties, many of which we cannot predict with accuracy and some of which we might not even anticipate.  Although we believe that the expectations, estimates and projections reflected in such forward-looking statements are based on reasonable assumptions at the time made, we can give no assurance that these expectations, estimates and projections will be achieved.  Future events and actual results may differ materially from those discussed in the forward-looking statements and we undertake no obligation to update or supplement any forward-looking statements.  The areas of risk that may affect these expectations, estimates and projections include, but are not limited to, those risks described in Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2018 and Quarterly Report on Form 10-Q for the quarter ended June 30, 2019. 

1


Corporate Office Properties Trust
Equity Research Coverage
 
Firm
 
Senior Analyst
 
Phone
 
Email
Bank of America Merrill Lynch
 
Jamie Feldman
 
646-855-5808
 
james.feldman@baml.com
BTIG
 
Tom Catherwood
 
212-738-6410
 
tcatherwood@btig.com
Capital One Securities
 
Chris Lucas
 
571-633-8151
 
christopher.lucas@capitalone.com
Citigroup Global Markets
 
Manny Korchman
 
212-816-1382
 
emmanuel.korchman@citi.com
Evercore ISI
 
Steve Sakwa
 
212-446-9462
 
steve.sakwa@evercoreisi.com
Green Street Advisors
 
Daniel Ismail
 
949-640-8780
 
dismail@greenst.com
Jefferies & Co.
 
Jonathan Petersen
 
212-284-1705
 
jpetersen@jefferies.com
JP Morgan
 
Tony Paolone
 
212-622-6682
 
anthony.paolone@jpmorgan.com
KeyBanc Capital Markets
 
Craig Mailman
 
917-368-2316
 
cmailman@key.com
Mizuho Securities USA Inc.
 
Haendel St. Juste
 
212-205-7860
 
haendel.st.juste@mizuhogroup.com
Raymond James
 
Bill Crow
 
727-567-2594
 
bill.crow@raymondjames.com
Robert W. Baird & Co., Inc.
 
Dave Rodgers
 
216-737-7341
 
drodgers@rwbaird.com
SMBC Nikko Securities America, Inc.
 
Rich Anderson
 
917-262-2795
 
randerson@smbcnikko-si.com
Stifel Financial Corp.
 
John Guinee
 
443-224-1307
 
jwguinee@stifel.com
SunTrust Robinson Humphrey, Inc.
 
Michael Lewis
 
212-319-5659
 
michael.lewis@suntrust.com
Wells Fargo Securities
 
Blaine Heck
 
443-263-6529
 
blaine.heck@wellsfargo.com
 
With the exception of Green Street Advisors, the above-listed firms are those whose analysts publish research material on the Company and whose estimates of our FFO per share can be tracked through Thomson’s First Call Corporation. Any opinions, estimates, or forecasts the above analysts make regarding COPT’s future performance are their own and do not represent the views, estimates, or forecasts of COPT’s management.

2


Corporate Office Properties Trust
Selected Financial Summary Data
(in thousands, except per share data)
 
 
Page
 
Three Months Ended
 
Nine Months Ended
SUMMARY OF RESULTS 
 
Refer.
 
9/30/19
 
6/30/19
 
3/31/19
 
12/31/18
 
9/30/18
 
9/30/19
 
9/30/18
Net income
 
6
 
$
23,246

 
$
109,563

 
$
22,318

 
$
18,456

 
$
20,322

 
$
155,127

 
$
60,187

NOI from real estate operations
 
13
 
$
82,621

 
$
86,136

 
$
83,764

 
$
80,738

 
$
80,854

 
$
252,521

 
$
240,298

Same Properties NOI
 
16
 
$
73,500

 
$
73,268

 
$
71,726

 
$
71,430

 
$
71,692

 
$
218,494

 
$
213,579

Same Properties cash NOI
 
17
 
$
72,792

 
$
73,436

 
$
70,886

 
$
71,011

 
$
72,406

 
$
217,114

 
$
210,468

Adjusted EBITDA
 
10
 
$
77,523

 
$
80,280

 
$
77,450

 
$
75,200

 
$
75,768

 
$
235,253

 
$
225,047

Diluted AFFO avail. to common share and unit holders
 
9
 
$
42,794

 
$
46,961

 
$
46,648

 
$
42,755

 
$
38,340

 
$
136,055

 
$
116,300

Dividend per common share
 
N/A
 
$
0.275

 
$
0.275

 
$
0.275

 
$
0.275

 
$
0.275

 
$
0.825

 
$
0.825

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Per share - diluted:
 
 
 
 

 
 

 
 

 
 

 
 

 
 

 
 
EPS
 
8
 
$
0.19

 
$
0.95

 
$
0.19

 
$
0.16

 
$
0.18

 
$
1.33

 
$
0.54

FFO - Nareit
 
8
 
$
0.51

 
$
0.52

 
$
0.50

 
$
0.49

 
$
0.50

 
$
1.53

 
$
1.51

FFO - as adjusted for comparability
 
8
 
$
0.51

 
$
0.52

 
$
0.50

 
$
0.50

 
$
0.50

 
$
1.53

 
$
1.51

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Numerators for diluted per share amounts:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Diluted EPS
 
6
 
$
21,139

 
$
107,512

 
$
20,773

 
$
16,906

 
$
18,583

 
$
148,538

 
$
54,933

Diluted FFO available to common share and unit holders
 
7
 
$
57,255

 
$
58,913

 
$
56,740

 
$
54,195

 
$
53,642

 
$
172,560

 
$
158,899

Diluted FFO available to common share and unit holders, as adjusted for comparability
 
7
 
$
57,430

 
$
59,222

 
$
56,788

 
$
54,974

 
$
53,938

 
$
173,092

 
$
159,617

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Payout ratios:
 
 
 
 

 
 

 
 

 
 

 
 

 
 

 
 
Diluted FFO
 
N/A
 
54.2
%
 
52.7
%
 
54.7
%
 
56.4
%
 
56.3
%
 
54.0
%
 
55.5
%
Diluted FFO - as adjusted for comparability
 
N/A
 
54.1
%
 
52.4
%
 
54.7
%
 
55.6
%
 
56.0
%
 
53.8
%
 
55.3
%
Diluted AFFO
 
N/A
 
72.6
%
 
66.1
%
 
66.6
%
 
71.5
%
 
78.8
%
 
68.5
%
 
75.8
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
CAPITALIZATION
 
 
 
 

 
 

 
 
 
 

 
 

 
 

 
 
Total Market Capitalization
 
29
 
$
5,259,182

 
$
4,794,853

 
$
4,992,411

 
$
4,193,726

 
$
5,119,467

 
 
 
 
Total Equity Market Capitalization
 
29
 
$
3,384,363

 
$
2,997,549

 
$
3,102,491

 
$
2,355,222

 
$
3,296,155

 
 
 
 
Gross debt
 
30
 
$
1,920,179

 
$
1,827,304

 
$
1,919,920

 
$
1,868,504

 
$
1,853,312

 
 
 
 
Net debt to adjusted book
 
32
 
37.3
%
 
36.1
%
 
38.8
%
 
38.9
%
 
39.2
%
 
N/A

 
N/A

Net debt plus preferred equity to adjusted book
 
32
 
37.5
%
 
36.2
%
 
39.0
%
 
39.1
%
 
39.4
%
 
N/A

 
N/A

Adjusted EBITDA fixed charge coverage ratio
 
32
 
3.7
x
 
3.7
x
 
3.6
x
 
3.6
x
 
3.6
x
 
3.7
x
 
3.6
x
Net debt to in-place adjusted EBITDA ratio
 
32
 
6.1
x
 
5.7
x
 
6.2
x
 
6.0
x
 
6.1
x
 
N/A

 
N/A

Net debt plus pref. equity to in-place adj. EBITDA ratio
 
32
 
6.1
x
 
5.7
x
 
6.2
x
 
6.0
x
 
6.1
x
 
N/A

 
N/A

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 



3


Corporate Office Properties Trust
Selected Portfolio Data (1)
 
 
 
 
 
 
 
 
 
 
 
9/30/19
 
6/30/19
 
3/31/19
 
12/31/18
 
9/30/18
Operating Office and Data Center Shell Properties
 
 
 
 
 
 
 
 
 
# of Properties
 
 
 
 
 
 
 
 
 
Total Portfolio
169

 
169

 
165
 
163

 
161

Consolidated Portfolio
156

 
156

 
159
 
157

 
155

Core Portfolio
167

 
167

 
163
 
161

 
159

Same Properties
150

 
150

 
150
 
150

 
150

 
 
 
 
 
 
 
 
 
 
% Occupied
 
 
 
 
 
 
 
 
 
Total Portfolio
92.7
%
 
92.7
%
 
92.6
%
 
93.0
%
 
92.1
%
Consolidated Portfolio
91.7
%
 
91.8
%
 
92.2
%
 
92.6
%
 
91.7
%
Core Portfolio
92.8
%
 
92.9
%
 
92.8
%
 
93.1
%
 
92.2
%
Same Properties
91.9
%
 
92.0
%
 
92.2
%
 
92.8
%
 
92.0
%
 
 
 
 
 
 
 
 
 
 
% Leased
 
 
 
 
 
 
 
 
 
Total Portfolio
94.3
%
 
93.9
%
 
93.5
%
 
93.9
%
 
93.9
%
Consolidated Portfolio
93.6
%
 
93.1
%
 
93.1
%
 
93.5
%
 
93.5
%
Core Portfolio
94.5
%
 
94.1
%
 
93.7
%
 
94.0
%
 
94.0
%
Same Properties
93.8
%
 
93.3
%
 
93.1
%
 
93.7
%
 
93.7
%
 
 
 
 
 
 
 
 
 
 
Square Feet (in thousands)
 
 
 
 
 
 
 
 
 
Total Portfolio
18,956

 
18,945

 
18,338

 
18,094

 
17,867

Consolidated Portfolio
16,818

 
16,807

 
17,374

 
17,132

 
16,905

Core Portfolio
18,799

 
18,788

 
18,181

 
17,937

 
17,710

Same Properties
16,343

 
16,343

 
16,343

 
16,343

 
16,343

 
 
 
 
 
 
 
 
 
 
Wholesale Data Center
 
 
 
 
 
 
 
 
 
Megawatts Operational
19.25

 
19.25

 
19.25

 
19.25

 
19.25

% Leased
82.1
%
 
82.1
%
 
87.6
%
 
87.6
%
 
87.6
%

(1)
Total and core portfolio and same properties include properties owned through unconsolidated real estate joint ventures (see page 34).

4


Corporate Office Properties Trust
Consolidated Balance Sheets
(dollars in thousands)
 
9/30/19
 
6/30/19
 
3/31/19
 
12/31/18
 
9/30/18
Assets
 

 
 

 
 

 
 

 
 

Properties, net:
 

 
 

 
 

 
 

 
 

Operating properties, net
$
2,713,900

 
$
2,719,585

 
$
2,865,829

 
$
2,847,265

 
$
2,796,577

Construction and redevelopment in progress, including land (1)
259,489

 
185,007

 
146,514

 
139,304

 
149,042

Land held (1)
285,434

 
289,780

 
290,659

 
264,057

 
261,808

Total properties, net
3,258,823

 
3,194,372

 
3,303,002

 
3,250,626

 
3,207,427

Property - operating right-of-use assets (2)
27,325

 
27,434

 
27,569

 

 

Property - finance right-of-use assets (2)
40,467

 
40,476

 
40,488

 

 

Assets held for sale, net
61,728

 
54,448

 

 

 
42,226

Cash and cash equivalents
34,005

 
46,282

 
7,780

 
8,066

 
9,492

Investment in unconsolidated real estate joint ventures
49,408

 
65,336

 
39,359

 
39,845

 
40,318

Accounts receivable
37,623

 
58,189

 
25,261

 
26,277

 
19,245

Deferred rent receivable
88,001

 
86,707

 
91,304

 
89,350

 
89,171

Intangible assets on real estate acquisitions, net
29,454

 
31,162

 
33,172

 
43,470

 
47,065

Deferred leasing costs, net
55,839

 
52,227

 
51,736

 
50,191

 
49,510

Investing receivables
72,114

 
70,656

 
69,390

 
56,982

 
55,688

Prepaid expenses and other assets, net
100,582

 
76,180

 
86,798

 
91,198

 
90,224

Total assets
$
3,855,369

 
$
3,803,469

 
$
3,775,859

 
$
3,656,005

 
$
3,650,366

Liabilities and equity
 

 
 

 
 

 
 

 
 

Liabilities:
 

 
 

 
 

 
 

 
 

Debt
$
1,862,301

 
$
1,784,362

 
$
1,876,149

 
$
1,823,909

 
$
1,808,030

Accounts payable and accrued expenses
141,242

 
152,196

 
112,076

 
92,855

 
90,224

Rents received in advance and security deposits
27,975

 
27,477

 
25,635

 
30,079

 
23,159

Dividends and distributions payable
31,345

 
31,346

 
31,346

 
30,856

 
30,483

Deferred revenue associated with operating leases
7,665

 
8,161

 
8,415

 
9,125

 
10,006

Deferred property sale

 

 

 

 
43,377

Property - operating lease liabilities (2)
16,686

 
16,640

 
16,619

 

 

Interest rate derivatives
34,825

 
23,547

 
11,894

 
5,459

 

Other liabilities
8,706

 
10,826

 
10,162

 
10,414

 
9,927

Total liabilities
2,130,745

 
2,054,555

 
2,092,296

 
2,002,697

 
2,015,206

Redeemable noncontrolling interests
28,677

 
29,803

 
27,385

 
26,260

 
25,431

Equity:
 

 
 

 
 

 
 
 
 
COPT’s shareholders’ equity:
 

 
 

 
 

 
 
 
 
Common shares
1,121

 
1,119

 
1,119

 
1,102

 
1,088

Additional paid-in capital
2,480,083

 
2,475,293

 
2,475,497

 
2,431,355

 
2,390,484

Cumulative distributions in excess of net income
(790,235
)
 
(780,667
)
 
(856,703
)
 
(846,808
)
 
(833,508
)
Accumulated other comprehensive (loss) income
(34,580
)
 
(23,465
)
 
(9,538
)
 
(238
)
 
10,108

Total COPT’s shareholders’ equity
1,656,389

 
1,672,280

 
1,610,375

 
1,585,411

 
1,568,172

Noncontrolling interests in subsidiaries:
 

 
 

 
 

 
 

 
 

Common units in the Operating Partnership
19,365

 
21,039

 
20,167

 
19,168

 
19,525

Preferred units in the Operating Partnership
8,800

 
8,800

 
8,800

 
8,800

 
8,800

Other consolidated entities
11,393

 
16,992

 
16,836

 
13,669

 
13,232

Total noncontrolling interests in subsidiaries
39,558

 
46,831

 
45,803

 
41,637

 
41,557

Total equity
1,695,947

 
1,719,111

 
1,656,178

 
1,627,048

 
1,609,729

Total liabilities, redeemable noncontrolling interests and equity
$
3,855,369

 
$
3,803,469

 
$
3,775,859

 
$
3,656,005

 
$
3,650,366

(1)
Refer to pages 25, 26 and 28 for detail.
(2)
Applicable to periods subsequent to 12/31/18 in connection with our adoption of lease accounting guidance effective 1/1/19 without adjustments to prior reporting periods.

5


Corporate Office Properties Trust
Consolidated Statements of Operations
(in thousands, except per share data)
 
Three Months Ended
 
Nine Months Ended
 
9/30/19
 
6/30/19
 
3/31/19
 
12/31/18
 
9/30/18
 
9/30/19
 
9/30/18
Revenues
 

 
 

 
 

 
 

 
 

 
 
 
 
Lease revenue
$
129,461

 
$
131,415

 
$
130,903

 
$
129,596

 
$
127,691

 
$
391,779

 
$
382,731

Other property revenue
1,273

 
1,356

 
1,087

 
1,229

 
1,297

 
3,716

 
3,697

Construction contract and other service revenues
28,697

 
42,299

 
16,950

 
7,657

 
8,423

 
87,946

 
53,202

Total revenues
159,431

 
175,070

 
148,940

 
138,482

 
137,411

 
483,441

 
439,630

Operating expenses
 

 
 

 
 

 
 

 
 

 
 
 
 
Property operating expenses
49,714

 
47,886

 
49,445

 
51,298

 
49,340

 
147,045

 
149,737

Depreciation and amortization associated with real estate operations
34,692

 
34,802

 
34,796

 
36,219

 
34,195

 
104,290

 
100,897

Construction contract and other service expenses
27,802

 
41,002

 
16,326

 
7,111

 
8,058

 
85,130

 
51,215

Impairment losses
327

 

 

 
2,367

 

 
327

 

General and administrative expenses
6,105

 
7,650

 
6,719

 
5,105

 
5,796

 
20,474

 
17,724

Leasing expenses
1,824

 
1,736

 
2,032

 
1,976

 
1,103

 
5,592

 
4,095

Business development expenses and land carry costs
964

 
870

 
1,113

 
1,425

 
1,567

 
2,947

 
4,415

Total operating expenses
121,428

 
133,946

 
110,431

 
105,501

 
100,059

 
365,805

 
328,083

Interest expense
(17,126
)
 
(18,475
)
 
(18,674
)
 
(18,475
)
 
(19,181
)
 
(54,275
)
 
(56,910
)
Interest and other income
1,842

 
1,849

 
2,286

 
74

 
1,486

 
5,977

 
4,284

Gain on sales of real estate

 
84,469

 

 
2,367

 

 
84,469

 
(27
)
Loss on early extinguishment of debt

 

 

 
(258
)
 

 

 

Income before equity in income of unconsolidated entities and income taxes
22,719

 
108,967

 
22,121

 
16,689

 
19,657

 
153,807

 
58,894

Equity in income of unconsolidated entities
396

 
420

 
391

 
1,577

 
374

 
1,207

 
1,120

Income tax benefit (expense)
131

 
176

 
(194
)
 
190

 
291

 
113

 
173

Net income
23,246

 
109,563

 
22,318

 
18,456

 
20,322

 
155,127

 
60,187

Net income attributable to noncontrolling interests:
 

 
 

 
 

 
 

 
 

 
 
 
 
Common units in the Operating Partnership
(267
)
 
(1,339
)
 
(257
)
 
(210
)
 
(380
)
 
(1,863
)
 
(1,532
)
Preferred units in the Operating Partnership
(157
)
 
(165
)
 
(165
)
 
(165
)
 
(165
)
 
(487
)
 
(495
)
Other consolidated entities
(1,565
)
 
(1,268
)
 
(1,037
)
 
(1,061
)
 
(1,080
)
 
(3,870
)
 
(2,879
)
Net income attributable to COPT common shareholders
$
21,257

 
$
106,791

 
$
20,859

 
$
17,020

 
$
18,697

 
$
148,907

 
$
55,281

Distributions on dilutive convertible preferred units

 
165

 

 

 

 

 

Redeemable noncontrolling interests

 
902

 

 

 

 
100

 

Amount allocable to share-based compensation awards
(118
)
 
(346
)
 
(86
)
 
(114
)
 
(114
)
 
(469
)
 
(348
)
Numerator for diluted EPS
$
21,139

 
$
107,512

 
$
20,773

 
$
16,906

 
$
18,583

 
$
148,538

 
$
54,933




6


Corporate Office Properties Trust
Funds from Operations
(in thousands)
 
Three Months Ended
 
Nine Months Ended
 
9/30/19
 
6/30/19
 
3/31/19
 
12/31/18
 
9/30/18
 
9/30/19
 
9/30/18
Net income
$
23,246

 
$
109,563

 
$
22,318

 
$
18,456

 
$
20,322

 
$
155,127

 
$
60,187

Real estate-related depreciation and amortization
34,692

 
34,802

 
34,796

 
36,219

 
34,195

 
104,290

 
100,897

Impairment losses on real estate
327

 

 

 
2,367

 

 
327

 

Gain on sales of real estate

 
(84,469
)
 

 
(2,367
)
 

 
(84,469
)
 
27

Depreciation and amortization on unconsolidated real estate JVs (1)
790

 
566

 
566

 
565

 
564

 
1,922

 
1,691

FFO - per Nareit (2)(3)
59,055

 
60,462

 
57,680

 
55,240

 
55,081

 
177,197

 
162,802

Noncontrolling interests - preferred units in the Operating Partnership
(157
)
 
(165
)
 
(165
)
 
(165
)
 
(165
)
 
(487
)
 
(495
)
FFO allocable to other noncontrolling interests (4)
(1,429
)
 
(1,188
)
 
(971
)
 
(1,011
)
 
(1,060
)
 
(3,588
)
 
(2,757
)
Basic and diluted FFO allocable to share-based compensation awards
(248
)
 
(229
)
 
(185
)
 
(200
)
 
(214
)
 
(662
)
 
(651
)
Basic FFO available to common share and common unit holders (3)
57,221

 
58,880

 
56,359

 
53,864

 
53,642

 
172,460

 
158,899

Redeemable noncontrolling interests
34

 
33

 
381

 
331

 

 
100

 

Diluted FFO available to common share and common unit holders (3)
57,255

 
58,913

 
56,740

 
54,195

 
53,642

 
172,560

 
158,899

Loss on early extinguishment of debt

 

 

 
258

 

 

 

Demolition costs on redevelopment and nonrecurring improvements

 

 
44

 
163

 
251

 
44

 
299

Executive transition costs

 

 
4

 
371

 
46

 
4

 
422

Non-comparable professional and legal expenses
175

 
311

 

 

 

 
486

 

Diluted FFO comparability adjustments allocable to share-based compensation awards

 
(2
)
 

 
(13
)
 
(1
)
 
(2
)
 
(3
)
Diluted FFO avail. to common share and common unit holders, as adj. for comparability (3)
$
57,430

 
$
59,222

 
$
56,788

 
$
54,974

 
$
53,938

 
$
173,092

 
$
159,617


(1)
FFO adjustment pertaining to COPT’s share of unconsolidated real estate joint ventures reported on page 34.
(2)
See reconciliation on page 35 for components of FFO per Nareit.
(3)
Refer to the section entitled “Definitions” for a definition of this measure.
(4)
Pertains to noncontrolling interests in consolidated real estate joint ventures reported on page 33.

7


Corporate Office Properties Trust
Diluted Share and Unit Computations
(in thousands)
 
Three Months Ended
 
Nine Months Ended
 
9/30/19
 
6/30/19
 
3/31/19
 
12/31/18
 
9/30/18
 
9/30/19
 
9/30/18
EPS Denominator:
 

 
 

 
 

 
 

 
 

 
 
 
 
Weighted average common shares - basic
111,582

 
111,557

 
109,951

 
108,528

 
104,379

 
111,036

 
102,401

Dilutive effect of share-based compensation awards
361

 
310

 
267

 
45

 
231

 
313

 
165

Dilutive effect of forward equity sale agreements

 

 

 

 
178

 

 
60

Dilutive effect of redeemable noncontrolling interests

 
1,062

 

 

 

 
123

 

Dilutive convertible preferred units

 
176

 

 

 

 

 

Weighted average common shares - diluted
111,943

 
113,105

 
110,218

 
108,573

 
104,788

 
111,472

 
102,626

Diluted EPS
$
0.19

 
$
0.95

 
$
0.19

 
$
0.16

 
$
0.18

 
$
1.33

 
$
0.54

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Weighted Average Shares for period ended:
 

 
 

 
 

 
 

 
 

 
 

 
 

Common Shares Outstanding
111,582

 
111,557

 
109,951

 
108,528

 
104,379

 
111,036

 
102,401

Dilutive effect of share-based compensation awards
361

 
310

 
302

 
45

 
231

 
313

 
165

Dilutive effect of forward equity sale agreements

 

 

 

 
178

 

 
60

Common units
1,312

 
1,327

 
1,331

 
1,345

 
2,135

 
1,323

 
2,847

Redeemable noncontrolling interests
109

 
136

 
1,013

 
1,126

 

 
123

 

Denominator for diluted FFO per share and as adjusted for comparability
113,364

 
113,330

 
112,597

 
111,044

 
106,923

 
112,795

 
105,473

Weighted average common units
(1,312
)
 
(1,327
)
 
(1,331
)
 
(1,345
)
 
(2,135
)
 
(1,323
)
 
(2,847
)
Redeemable noncontrolling interests
(109
)
 
926

 
(1,013
)
 
(1,126
)
 

 

 

Anti-dilutive EPS effect of share-based compensation awards

 

 
(35
)
 

 

 

 

Dilutive convertible preferred units

 
176

 

 

 

 

 

Denominator for diluted EPS
111,943

 
113,105

 
110,218

 
108,573

 
104,788

 
111,472

 
102,626

Diluted FFO per share - Nareit
$
0.51

 
$
0.52

 
$
0.50

 
$
0.49

 
$
0.50

 
$
1.53

 
$
1.51

Diluted FFO per share - as adjusted for comparability
$
0.51

 
$
0.52

 
$
0.50

 
$
0.50

 
$
0.50

 
$
1.53

 
$
1.51






8


Corporate Office Properties Trust
Adjusted Funds from Operations
(in thousands)
 
Three Months Ended
 
Nine Months Ended
 
9/30/19
 
6/30/19
 
3/31/19
 
12/31/18
 
9/30/18
 
9/30/19
 
9/30/18
Diluted FFO available to common share and common unit holders, as adjusted for comparability
$
57,430

 
$
59,222

 
$
56,788

 
$
54,974

 
$
53,938

 
$
173,092

 
$
159,617

Straight line rent adjustments and lease incentive amortization
(515
)
 
1,051

 
(1,667
)
 
(46
)
 
582

 
(1,131
)
 
(1,441
)
Amortization of intangibles included in NOI
(59
)
 
(50
)
 
62

 
153

 
153

 
(47
)
 
740

Share-based compensation, net of amounts capitalized
1,697

 
1,623

 
1,673

 
1,601

 
1,557

 
4,993

 
4,592

Amortization of deferred financing costs
538

 
529

 
528

 
550

 
468

 
1,595

 
1,404

Amortization of net debt discounts, net of amounts capitalized
377

 
374

 
370

 
365

 
362

 
1,121

 
1,074

Accum. other comprehensive loss on derivatives amortized to expense
12

 
33

 
34

 
34

 
33

 
79

 
101

Replacement capital expenditures (1)
(16,752
)
 
(16,002
)
 
(11,173
)
 
(14,848
)
 
(18,803
)
 
(43,927
)
 
(49,936
)
Other diluted AFFO adjustments associated with real estate JVs (2)
66

 
181

 
33

 
(28
)
 
50

 
280

 
149

Diluted AFFO available to common share and common unit holders (“diluted AFFO”)
$
42,794

 
$
46,961

 
$
46,648

 
$
42,755

 
$
38,340

 
$
136,055

 
$
116,300

Replacement capital expenditures (1)
 

 
 

 
 

 
 

 
 

 
 
 
 
Tenant improvements and incentives
$
10,880

 
$
8,568

 
$
7,152

 
$
7,876

 
$
12,894

 
$
26,600

 
$
29,626

Building improvements
8,908

 
4,333

 
4,531

 
9,306

 
5,975

 
17,772

 
13,671

Leasing costs
2,722

 
2,761

 
3,182

 
3,800

 
2,945

 
8,665

 
6,047

Net (exclusions from) additions to tenant improvements and incentives
(2,156
)
 
1,759

 
(1,469
)
 
(2,131
)
 
(896
)
 
(1,866
)
 
3,708

Excluded building improvements
(3,602
)
 
(1,419
)
 
(2,223
)
 
(3,984
)
 
(2,134
)
 
(7,244
)
 
(3,089
)
Excluded leasing costs

 

 

 
(19
)
 
19

 

 
(27
)
Replacement capital expenditures
$
16,752

 
$
16,002

 
$
11,173

 
$
14,848

 
$
18,803

 
$
43,927

 
$
49,936

 
 
 
 
 
 
 
 
 
 
 
 
 
 
(1) Refer to the section entitled “Definitions” for a definition of this measure.
 
 
 
 
(2) AFFO adjustments pertaining to noncontrolling interests on consolidated joint ventures reported on page 33 and COPTs share of unconsolidated real estate joint ventures reported on page 34.
 
 
 
 

9


Corporate Office Properties Trust
EBITDAre and Adjusted EBITDA
(in thousands)
 
Three Months Ended
 
Nine Months Ended
 
9/30/19
 
6/30/19
 
3/31/19
 
12/31/18
 
9/30/18
 
9/30/19
 
9/30/18
Net income
$
23,246

 
$
109,563

 
$
22,318

 
$
18,456

 
$
20,322

 
$
155,127

 
$
60,187

Interest expense
17,126

 
18,475

 
18,674

 
18,475

 
19,181

 
54,275

 
56,910

Income tax (benefit) expense
(131
)
 
(176
)
 
194

 
(190
)
 
(291
)
 
(113
)
 
(173
)
Depreciation of furniture, fixtures and equipment
467

 
496

 
433

 
404

 
561

 
1,396

 
1,543

Real estate-related depreciation and amortization
34,692

 
34,802

 
34,796

 
36,219

 
34,195

 
104,290

 
100,897

Impairment losses on real estate
327

 

 

 
2,367

 

 
327

 

Gain on sales of real estate

 
(84,469
)
 

 
(2,367
)
 

 
(84,469
)
 
27

Adjustments from unconsolidated real estate JVs (1)
1,202

 
830

 
827

 
832

 
830

 
2,859

 
2,482

EBITDAre
76,929

 
79,521

 
77,242

 
74,196

 
74,798

 
$
233,692

 
$
221,873

Loss on early extinguishment of debt

 

 

 
258

 

 

 

Net gain on other investments

 
(12
)
 
(388
)
 
(449
)
 

 
(400
)
 

Business development expenses
419

 
460

 
548

 
661

 
673

 
1,427

 
2,453

Non-comparable professional and legal expenses
175

 
311

 

 

 

 
486

 

Demolition costs on redevelopment and nonrecurring improvements

 

 
44

 
163

 
251

 
44

 
299

Executive transition costs

 

 
4

 
371

 
46

 
4

 
422

Adjusted EBITDA
77,523

 
80,280

 
77,450

 
75,200

 
75,768

 
$
235,253

 
$
225,047

Proforma NOI adjustment for property changes within period

 
(1,981
)
 
252

 
2,052

 
166

 
 
 
 
In-place adjusted EBITDA
$
77,523

 
$
78,299

 
$
77,702

 
$
77,252

 
$
75,934

 
 
 
 

(1) Includes COPT’s share of adjusted EBITDA adjustments in unconsolidated real estate joint ventures (see page 34).

10



Corporate Office Properties Trust
Office and Data Center Shell Properties by Segment (1) - 9/30/19
(square feet in thousands)
 
 
# of
Properties
 
Operational
Square Feet
 
% Occupied
 
% Leased
Core Portfolio: (2)
 
 
 
 
 
 
 
 
Defense/IT Locations:
 
 
 
 
 
 
 
 
Fort Meade/Baltimore Washington (“BW”) Corridor:
 
 

 
 

 
 

 
 

National Business Park
 
31

 
3,825

 
90.7
%
 
91.1
%
Howard County
 
35

 
2,774

 
92.8
%
 
95.4
%
Other
 
22

 
1,624

 
93.6
%
 
95.9
%
Total Fort Meade/BW Corridor
 
88

 
8,223

 
92.0
%
 
93.5
%
Northern Virginia (“NoVA”) Defense/IT
 
13

 
1,993

 
82.3
%
 
86.8
%
Lackland AFB (San Antonio, Texas)
 
7

 
953

 
100.0
%
 
100.0
%
Navy Support
 
21

 
1,242

 
91.7
%
 
93.9
%
Redstone Arsenal (Huntsville, Alabama)
 
9

 
722

 
99.2
%
 
99.6
%
Data Center Shells:
 
 
 
 
 
 
 
 
Consolidated Properties
 
9

 
1,547

 
100.0
%
 
100.0
%
Unconsolidated JV Properties (3)
 
13

 
2,138

 
100.0
%
 
100.0
%
Total Defense/IT Locations
 
160

 
16,818

 
93.3
%
 
94.8
%
Regional Office
 
7

 
1,981

 
88.6
%
 
92.0
%
Core Portfolio
 
167

 
18,799

 
92.8
%
 
94.5
%
Other Properties
 
2

 
157

 
72.1
%
 
72.1
%
Total Portfolio
 
169

 
18,956

 
92.7
%
 
94.3
%
Consolidated Portfolio
 
156

 
16,818

 
91.7
%
 
93.6
%

(1)
This presentation sets forth Core Portfolio data by segment followed by data for the remainder of the portfolio.
(2)
Represents Defense/IT Locations and Regional Office properties.
(3)
See page 34 for additional disclosure regarding our unconsolidated real estate joint ventures.




11


Corporate Office Properties Trust
NOI from Real Estate Operations and Occupancy by Property Grouping - 9/30/19
(dollars and square feet in thousands)
 
 
As of Period End
 
 
 
 
 
 
# of Office and Data Center Shell
Properties
 
Operational Square Feet
 
% Occupied (1)
 
% Leased (1)
 
Annualized
Rental Revenue (2)
 
% of Total
Annualized
Rental Revenue (2)
 
NOI from Real Estate Operations
Property Grouping
 
 
 
 
 
 
 
Three Months Ended
 
Nine Months Ended
Core Portfolio:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Same Properties: (3)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Consolidated properties
 
142

 
15,222

 
91.6%
 
93.7%
 
$
465,874

 
92.8
%
 
$
71,905

 
$
213,680

Unconsolidated real estate JV (4)
 
6

 
964

 
100.0%
 
100.0%
 
5,619

 
1.1
%
 
1,214

 
3,638

Total Same Properties in Core Portfolio
 
148

 
16,186

 
92.1%
 
94.1%
 
471,493

 
94.0
%
 
73,119

 
217,318

Properties Placed in Service (5)
 
12

 
1,439

 
94.9%
 
94.9%
 
25,884

 
5.2
%
 
5,531

 
13,973

Properties contributed to uncons. real estate JV (4)(6)
 
7

 
1,174

 
100.0%
 
100.0%
 
1,612

 
0.3
%
 
394

 
6,625

Wholesale Data Center and Other
 
N/A

 
N/A

 
N/A
 
N/A
 
N/A

 
N/A

 
3,196

 
13,429

Total Core Portfolio
 
167

 
18,799

 
92.8%
 
94.5%
 
498,989

 
99.4
%
 
82,240

 
251,345

Other Properties (Same Properties)
 
2

 
157

 
72.1%
 
72.1%
 
2,774

 
0.6
%
 
381

 
1,176

Total Portfolio
 
169

 
18,956

 
92.7%
 
94.3%
 
$
501,763

 
100.0
%
 
$
82,621

 
$
252,521

Consolidated Portfolio
 
156

 
16,818

 
91.7%
 
93.6%
 
$
494,532

 
98.6
%
 
$
81,020

 
$
248,450

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
As of Period End
 
 
 
 
 
 
# of Office and Data Center Shell
Properties
 
Operational Square Feet
 
% Occupied (1)
 
% Leased (1)
 
Annualized
Rental Revenue (2)
 
% of Core
Annualized
Rental Revenue (2)
 
NOI from Real Estate Operations
Property Grouping
 
 
 
 
 
 
 
Three Months Ended
 
Nine Months Ended
Core Portfolio:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Defense/IT Locations (6)(7):
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Consolidated properties
 
147

 
14,680

 
92.4%
 
94.0%
 
$
434,164

 
87.0
%
 
$
69,284

 
$
211,047

Unconsolidated real estate JVs (4)
 
13

 
2,138

 
100.0%
 
100.0%
 
7,231

 
1.4
%
 
1,601

 
4,071

Total Defense/IT Locations
 
160

 
16,818

 
93.3%
 
94.8%
 
441,395

 
88.5
%
 
70,885

 
215,118

Regional Office
 
7

 
1,981

 
88.6%
 
92.0%
 
57,594

 
11.5
%
 
8,165

 
23,010

Wholesale Data Center and Other
 
N/A

 
N/A

 
N/A
 
N/A
 
N/A

 
N/A

 
3,190

 
13,217

Total Core Portfolio
 
167

 
18,799

 
92.8%
 
94.5%
 
$
498,989


100.0
%
 
$
82,240

 
$
251,345

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(1)
Percentages calculated based on operational square feet.
(2)
Excludes Annualized Rental Revenue from our wholesale data center, DC-6, of $23.5 million as of 9/30/19. With regard to properties owned through unconsolidated real estate joint ventures, we include the portion of Annualized Rental Revenue allocable to COPT’s ownership interest.
(3)
Includes office and data center shell properties stably owned and 100% operational since at least 1/1/18.
(4)
See page 34 for additional disclosure regarding our unconsolidated real estate joint ventures.
(5)
Newly constructed or redeveloped properties placed in service that were not fully operational by 1/1/18.
(6)
Includes seven data center shell properties in which we sold a 90% interest and retained a 10% interest through a newly-formed unconsolidated real estate joint venture on 6/20/19.
(7)
For the seven data center shell properties in which we sold a 90% interest and retained a 10% interest through a newly-formed unconsolidated real estate joint venture on 6/20/19, the activity associated with these properties through 6/19/19 is included in consolidated properties and the activity thereafter is included in unconsolidated real estate JVs.

12


Corporate Office Properties Trust
Consolidated Real Estate Revenues and NOI by Segment
(dollars in thousands)
 
Three Months Ended
 
Nine Months Ended
 
9/30/19
 
6/30/19
 
3/31/19
 
12/31/18
 
9/30/18
 
9/30/19
 
9/30/18
Consolidated real estate revenues
 

 
 

 
 

 
 

 
 

 
 
 
 
Defense/IT Locations:
 
 
 
 
 
 
 
 
 
 
 
 
 
Fort Meade/BW Corridor
$
63,436

 
$
61,659

 
$
62,683

 
$
62,756

 
$
61,396

 
$
187,778

 
$
186,171

NoVA Defense/IT
13,551

 
13,912

 
14,831

 
13,879

 
13,960

 
42,294

 
39,639

Lackland Air Force Base
12,703

 
12,104

 
11,561

 
11,207

 
11,254

 
36,368

 
35,079

Navy Support
8,183

 
8,185

 
8,155

 
8,031

 
7,899

 
24,523

 
23,896

Redstone Arsenal
4,171

 
3,968

 
3,939

 
3,726

 
3,734

 
12,078

 
11,019

Data Center Shells-Consolidated
5,913

 
8,624

 
7,354

 
7,175

 
6,689

 
21,891

 
18,475

Total Defense/IT Locations
107,957

 
108,452

 
108,523

 
106,774

 
104,932

 
324,932

 
314,279

Regional Office
15,508

 
15,018

 
14,833

 
15,329

 
15,272

 
45,359

 
45,852

Wholesale Data Center
6,565

 
8,560

 
7,871

 
7,929

 
7,781

 
22,996

 
23,963

Other
704

 
741

 
763

 
793

 
1,003

 
2,208

 
2,334

Consolidated real estate revenues
$
130,734

 
$
132,771

 
$
131,990

 
$
130,825

 
$
128,988

 
$
395,495

 
$
386,428

 
 
 
 
NOI
 

 
 

 
 

 
 

 
 

 
 
 
 
Defense/IT Locations:
 
 
 
 
 
 
 
 
 
 
 
 
 
Fort Meade/BW Corridor
$
42,693

 
$
42,315

 
$
40,348

 
$
41,331

 
$
41,549

 
$
125,356

 
$
124,621

NoVA Defense/IT
8,586

 
9,218

 
9,539

 
8,699

 
8,442

 
27,343

 
24,489

Lackland Air Force Base
5,554

 
5,456

 
5,602

 
4,843

 
4,822

 
16,612

 
14,555

Navy Support
4,602

 
4,899

 
4,751

 
4,438

 
4,691

 
14,252

 
13,953

Redstone Arsenal
2,454

 
2,369

 
2,400

 
2,194

 
2,165

 
7,223

 
6,501

Data Center Shells:
 
 
 
 
 
 
 
 
 
 
 
 
 
Consolidated properties
5,395

 
7,865

 
7,001

 
6,117

 
6,115

 
20,261

 
16,308

COPT’s share of unconsolidated real estate JVs (1)
1,601

 
1,251

 
1,219

 
1,211

 
1,206

 
4,071

 
3,607

Total Defense/IT Locations
70,885

 
73,373

 
70,860

 
68,833

 
68,990

 
215,118

 
204,034

Regional Office
8,165

 
7,428

 
7,417

 
7,548

 
7,847

 
23,010

 
23,380

Wholesale Data Center
3,191

 
4,942

 
5,033

 
3,960

 
3,816

 
13,166

 
11,590

Other
380

 
393

 
454

 
397

 
201

 
1,227

 
1,294

NOI from real estate operations
$
82,621

 
$
86,136

 
$
83,764

 
$
80,738

 
$
80,854

 
$
252,521

 
$
240,298

 
 
 
 
 
 
 
 
 
 
 
 
 
 

(1)     See page 34 for additional disclosure regarding our unconsolidated real estate joint ventures.

13


Corporate Office Properties Trust
Cash NOI by Segment
(dollars in thousands)
 
Three Months Ended
 
Nine Months Ended
 
9/30/19
 
6/30/19
 
3/31/19
 
12/31/18
 
9/30/18
 
9/30/19
 
9/30/18
Cash NOI
 

 
 

 
 

 
 

 
 

 
 
 
 
Defense/IT Locations:
 
 
 
 
 
 
 
 
 
 
 
 
 
Fort Meade/BW Corridor
$
42,604

 
$
42,180

 
$
40,256

 
$
41,027

 
$
41,398

 
$
125,040

 
$
122,948

NoVA Defense/IT
8,064

 
8,771

 
8,757

 
8,773

 
9,394

 
25,592

 
23,924

Lackland Air Force Base
5,839

 
5,731

 
5,383

 
5,157

 
5,012

 
16,953

 
15,103

Navy Support
4,808

 
5,113

 
4,785

 
4,508

 
4,925

 
14,706

 
14,435

Redstone Arsenal
2,220

 
2,302

 
2,330

 
2,219

 
2,221

 
6,852

 
6,588

Data Center Shells:
 
 
 
 
 
 
 
 
 
 
 
 
 
Consolidated properties
4,857

 
7,247

 
6,462

 
5,688

 
5,630

 
18,566

 
14,682

COPT’s share of unconsolidated real estate JVs (1)
1,513

 
1,202

 
1,160

 
1,154

 
1,144

 
3,875

 
3,410

Total Defense/IT Locations
69,905

 
72,546

 
69,133

 
68,526

 
69,724

 
211,584

 
201,090

Regional Office
7,356

 
7,367

 
6,990

 
6,990

 
7,108

 
21,713

 
21,467

Wholesale Data Center
3,231

 
3,945

 
4,698

 
3,601

 
3,391

 
11,874

 
10,244

Other
380

 
465

 
525

 
435

 
236

 
1,370

 
1,378

Cash NOI from real estate operations
80,872

 
84,323

 
81,346

 
79,552

 
80,459

 
246,541

 
234,179

Straight line rent adjustments and lease incentive amortization
235

 
(1,274
)
 
1,505

 
(40
)
 
(669
)
 
466

 
873

Amortization of acquired above- and below-market rents
82

 
73

 
(40
)
 
(97
)
 
(98
)
 
115

 
(574
)
Amortization of below-market cost arrangements
(23
)
 
(23
)
 
(23
)
 
(56
)
 
(55
)
 
(69
)
 
(166
)
Lease termination fees, gross
841

 
2,458

 
521

 
906

 
830

 
3,820

 
2,756

Tenant funded landlord assets and lease incentives
526

 
530

 
396

 
416

 
325

 
1,452

 
3,033

Cash NOI adjustments in unconsolidated real estate JVs
88

 
49

 
59

 
57

 
62

 
196

 
197

NOI from real estate operations
$
82,621

 
$
86,136

 
$
83,764

 
$
80,738

 
$
80,854

 
$
252,521

 
$
240,298

 
 
 
 
 
 
 
 
 
 
 
 
 
 

(1)
See page 34 for additional disclosure regarding our unconsolidated real estate joint ventures.

14


Corporate Office Properties Trust
Same Properties (1) Average Occupancy Rates by Segment 
(square feet in thousands)
 
# of Properties
 
Operational Square Feet
 
Three Months Ended
 
Nine Months Ended
 
 
 
9/30/19
 
6/30/19
 
3/31/19
 
12/31/18
 
9/30/18
 
9/30/19
 
9/30/18
Core Portfolio:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Defense/IT Locations:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Fort Meade/BW Corridor
84

 
7,950

 
92.3
%
 
91.3
%
 
91.2
%
 
92.3
%
 
92.1
%
 
91.6
%
 
92.1
%
NoVA Defense/IT
13

 
1,993

 
83.9
%
 
88.5
%
 
91.3
%
 
85.8
%
 
82.9
%
 
87.9
%
 
82.9
%
Lackland Air Force Base
7

 
953

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

 
1,242

 
90.9
%
 
90.8
%
 
89.5
%
 
89.8
%
 
87.1
%
 
90.4
%
 
87.1
%
Redstone Arsenal
7

 
651

 
99.2
%
 
98.4
%
 
98.5
%
 
99.0
%
 
98.7
%
 
98.7
%
 
98.7
%
Data Center Shells:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Consolidated properties
3

 
452

 
100.0
%
 
100.0
%
 
100.0
%
 
100.0
%
 
100.0
%
 
100.0
%
 
100.0
%
COPT’s share of unconsolidated real estate JV (2)
6

 
964

 
100.0
%
 
100.0
%
 
100.0
%
 
100.0
%
 
100.0
%
 
100.0
%
 
100.0
%
Total Defense/IT Locations
141

 
14,205

 
92.6
%
 
92.6
%
 
92.9
%
 
92.7
%
 
92.0
%
 
92.7
%
 
92.0
%
Regional Office
7

 
1,981

 
88.6
%
 
88.9
%
 
88.1
%
 
89.3
%
 
88.3
%
 
88.5
%
 
88.3
%
Core Portfolio Same Properties
148

 
16,186

 
92.1
%
 
92.2
%
 
92.3
%
 
92.3
%
 
91.5
%
 
92.2
%
 
91.5
%
Other Same Properties
2

 
157

 
72.1
%
 
72.7
%
 
73.7
%
 
77.2
%
 
80.6
%
 
72.8
%
 
80.6
%
Total Same Properties
150

 
16,343

 
91.9
%
 
92.0
%
 
92.1
%
 
92.2
%
 
91.4
%
 
92.0
%
 
91.4
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

Same Properties (1) Period End Occupancy Rates by Segment 
(square feet in thousands)
 
# of Properties
 
Operational Square Feet
 
Three Months Ended
 
 
 
 
 
9/30/19
 
6/30/19
 
3/31/19
 
12/31/18
 
9/30/18
 
 
 
 
Core Portfolio:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Defense/IT Locations:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Fort Meade/BW Corridor
84

 
7,950

 
92.6
%
 
91.4
%
 
91.1
%
 
92.1
%
 
92.8
%
 
 
 
 
NoVA Defense/IT
13

 
1,993

 
82.3
%
 
87.6
%
 
91.7
%
 
91.3
%
 
83.8
%
 
 
 
 
Lackland Air Force Base
7

 
953

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

 
1,242

 
91.7
%
 
90.9
%
 
90.9
%
 
90.5
%
 
88.0
%
 
 
 
 
Redstone Arsenal
7

 
651

 
99.2
%
 
98.6
%
 
98.3
%
 
99.0
%
 
99.0
%
 
 
 
 
Data Center Shells:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Consolidated properties
3

 
452

 
100.0
%
 
100.0
%
 
100.0
%
 
100.0
%
 
100.0
%
 
 
 
 
COPT’s share of unconsolidated real estate JV (2)
6

 
964

 
100.0
%
 
100.0
%
 
100.0
%
 
100.0
%
 
100.0
%
 
 
 
 
Total Defense/IT Locations
141

 
14,205

 
92.6
%
 
92.6
%
 
93.0
%
 
93.5
%
 
92.6
%
 
 
 
 
Regional Office
7

 
1,981

 
88.6
%
 
89.3
%
 
88.3
%
 
89.2
%
 
89.0
%
 
 
 
 
Core Portfolio Same Properties
148

 
16,186

 
92.1
%
 
92.2
%
 
92.4
%
 
93.0
%
 
92.1
%
 
 
 
 
Other Same Properties
2

 
157

 
72.1
%
 
72.1
%
 
73.7
%
 
77.2
%
 
77.2
%
 
 
 
 
Total Same Properties
150

 
16,343

 
91.9
%
 
92.0
%
 
92.2
%
 
92.8
%
 
92.0
%
 
 
 
 

(1)
Includes office and data center shell properties stably owned and 100% operational since at least 1/1/18.
(2)
See page 34 for additional disclosure regarding our unconsolidated real estate joint ventures.


15


Corporate Office Properties Trust
Same Properties Real Estate Revenues and NOI by Segment
(dollars in thousands)
 
Three Months Ended
 
Nine Months Ended
 
9/30/19
 
6/30/19
 
3/31/19
 
12/31/18
 
9/30/18
 
9/30/19
 
9/30/18
Same Properties real estate revenues
 

 
 

 
 

 
 

 
 

 
 
 
 
Defense/IT Locations:
 
 
 
 
 
 
 
 
 
 
 
 
 
Fort Meade/BW Corridor
$
61,832

 
$
60,051

 
$
61,119

 
$
61,331

 
$
60,025

 
$
183,002

 
$
181,239

NoVA Defense/IT
13,551

 
13,912

 
14,831

 
13,879

 
13,960

 
42,294

 
39,629

Lackland Air Force Base
12,074

 
11,479

 
10,928

 
11,200

 
11,254

 
34,481

 
35,079

Navy Support
8,183

 
8,185

 
8,155

 
8,031

 
7,899

 
24,523

 
23,896

Redstone Arsenal
3,868

 
3,793

 
3,785

 
3,696

 
3,733

 
11,446

 
11,018

Data Center Shells
1,907

 
1,912

 
1,281

 
2,438

 
1,967

 
5,100

 
5,899

Total Defense/IT Locations
101,415

 
99,332

 
100,099

 
100,575

 
98,838

 
300,846

 
296,760

Regional Office
15,509

 
15,018

 
14,833

 
15,300

 
15,271

 
45,360

 
45,733

Other Properties
704

 
741

 
760

 
821

 
1,003

 
2,205

 
2,314

Same Properties real estate revenues
$
117,628

 
$
115,091

 
$
115,692

 
$
116,696

 
$
115,112

 
$
348,411

 
$
344,807

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Same Properties NOI
 

 
 

 
 

 
 

 
 

 
 
 
 
Defense/IT Locations:
 
 
 
 
 
 
 
 
 
 
 
 
 
Fort Meade/BW Corridor
$
41,672

 
$
41,279

 
$
39,380

 
$
40,378

 
$
40,440

 
$
122,331

 
$
120,582

NoVA Defense/IT
8,586

 
9,219

 
9,539

 
8,699

 
8,442

 
27,344

 
24,470

Lackland Air Force Base
4,936

 
4,841

 
4,972

 
4,837

 
4,822

 
14,749

 
14,555

Navy Support
4,602

 
4,899

 
4,751

 
4,438

 
4,691

 
14,252

 
13,953

Redstone Arsenal
2,236

 
2,264

 
2,321

 
2,171

 
2,165

 
6,821

 
6,501

Data Center Shells:
 
 
 
 
 
 
 
 
 
 
 
 
 
Consolidated properties
1,710

 
1,747

 
1,716

 
1,741

 
1,739

 
5,173

 
5,272

COPT’s share of unconsolidated real estate JV (1)
1,214

 
1,205

 
1,219

 
1,211

 
1,206

 
3,638

 
3,607

Total Defense/IT Locations
64,956

 
65,454

 
63,898

 
63,475

 
63,505

 
194,308

 
188,940

Regional Office
8,163

 
7,430

 
7,417

 
7,500

 
7,846

 
23,010

 
23,284

Other Properties
381

 
384

 
411

 
455

 
341

 
1,176

 
1,355

Same Properties NOI
$
73,500

 
$
73,268

 
$
71,726

 
$
71,430

 
$
71,692

 
$
218,494

 
$
213,579


(1)     See page 34 for additional disclosure regarding our unconsolidated real estate joint ventures.

16


Corporate Office Properties Trust
Same Properties Cash NOI by Segment
(dollars in thousands)
 
Three Months Ended
 
Nine Months Ended
 
9/30/19
 
6/30/19
 
3/31/19
 
12/31/18
 
9/30/18
 
9/30/19
 
9/30/18
Same Properties cash NOI
 

 
 

 
 

 
 

 
 

 
 
 
 
Defense/IT Locations:
 
 
 
 
 
 
 
 
 
 
 
 
 
Fort Meade/BW Corridor
$
41,841

 
$
41,393

 
$
39,419

 
$
40,126

 
$
40,609

 
$
122,653

 
$
119,466

NoVA Defense/IT
8,064

 
8,771

 
8,757

 
8,774

 
9,394

 
25,592

 
23,906

Lackland Air Force Base
5,266

 
5,161

 
5,293

 
5,157

 
5,012

 
15,720

 
15,103

Navy Support
4,808

 
5,113

 
4,785

 
4,508

 
4,924

 
14,706

 
14,435

Redstone Arsenal
2,291

 
2,359

 
2,391

 
2,224

 
2,221

 
7,041

 
6,587

Data Center Shells:
 
 
 
 
 
 
 
 
 
 
 
 
 
Consolidated properties
1,615

 
1,655

 
1,608

 
1,634

 
1,618

 
4,878

 
4,751

COPT’s share of unconsolidated real estate JV (1)
1,171

 
1,160

 
1,160

 
1,154

 
1,144

 
3,491

 
3,410

Total Defense/IT Locations
65,056

 
65,612

 
63,413

 
63,577

 
64,922

 
194,081

 
187,658

Regional Office
7,355

 
7,368

 
6,990

 
6,943

 
7,107

 
21,713

 
21,371

Other Properties
381

 
456

 
483

 
491

 
377

 
1,320

 
1,439

Same Properties cash NOI
72,792

 
73,436

 
70,886

 
71,011

 
72,406

 
217,114

 
210,468

Straight line rent adjustments and lease incentive amortization
(735
)
 
(1,071
)
 
(65
)
 
(800
)
 
(1,699
)
 
(1,871
)
 
(1,683
)
Amortization of acquired above- and below-market rents
82

 
73

 
(40
)
 
(97
)
 
(98
)
 
115

 
(574
)
Amortization of below-market cost arrangements
(23
)
 
(23
)
 
(23
)
 
(56
)
 
(56
)
 
(69
)
 
(166
)
Lease termination fees, gross
823

 
285

 
521

 
906

 
759

 
1,629

 
2,325

Tenant funded landlord assets and lease incentives
519

 
522

 
388

 
409

 
318

 
1,429

 
3,012

Cash NOI adjustments in unconsolidated real estate JV (1)
42

 
46

 
59

 
57

 
62

 
147

 
197

Same Properties NOI
$
73,500

 
$
73,268

 
$
71,726

 
$
71,430

 
$
71,692

 
$
218,494

 
$
213,579

Percentage change in total Same Properties cash NOI (2)
0.5
%
 
 
 
 
 
 
 
 
 
3.2
%
 
 
Percentage change in Defense/IT Locations Same Properties cash NOI (2)
0.2
%
 
 
 
 
 
 
 
 
 
3.4
%
 
 

(1)
See page 34 for additional disclosure regarding our unconsolidated real estate joint ventures.
(2)
Represents the change between the current period and the same period in the prior year.

17


Corporate Office Properties Trust
Leasing - Office and Data Center Shell Portfolio (1)
Quarter Ended 9/30/19
(square feet in thousands)
 
Defense/IT Locations
 
 
 
 
 
Ft Meade/BW Corridor
 
NoVA Defense/IT
 
Navy Support
 
Redstone Arsenal
 
Data Center Shells
 
Total Defense/IT Locations
 
Regional Office
 
 Total
Renewed Space
 

 
 

 
 
 
 

 
 
 
 
 
 

 
 

Leased Square Feet
490

 

 
60

 
29

 

 
579

 
14

 
592

Expiring Square Feet
533

 
57

 
85

 
29

 

 
704

 
119

 
823

Vacating Square Feet
43

 
57

 
25

 

 

 
125

 
106

 
231

Retention Rate (% based upon square feet)
92.0
 %
 
%
 
70.3
 %
 
100.0
 %
 
%
 
82.2
 %
 
11.4
 %
 
71.9
 %
Statistics for Completed Leasing:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Per Annum Average Committed Cost per Square Foot (2)
$
1.79

 
$

 
$
3.91

 
$
2.84

 
$

 
$
2.06

 
$
3.89

 
$
2.10

Weighted Average Lease Term in Years
3.9

 

 
2.5

 
3.0

 

 
3.7

 
4.5

 
3.8

Average Rent Per Square Foot
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Renewal Average Rent
$
36.66

 
$

 
$
19.37

 
$
21.52

 
$

 
$
34.12

 
$
37.05

 
$
34.19

Expiring Average Rent
$
37.40

 
$

 
$
19.35

 
$
23.77

 
$

 
$
34.86

 
$
30.50

 
$
34.76

Change in Average Rent
(2.0
)%
 
%
 
0.1
 %
 
(9.5
)%
 
%
 
(2.1
)%
 
21.5
 %
 
(1.6
)%
Cash Rent Per Square Foot
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Renewal Cash Rent
$
36.78

 
$

 
$
19.17

 
$
23.25

 
$

 
$
34.28

 
$
35.27

 
$
34.30

Expiring Cash Rent
$
39.31

 
$

 
$
20.49

 
$
24.92

 
$

 
$
36.65

 
$
35.56

 
$
36.62

Change in Cash Rent
(6.5
)%
 
%
 
(6.4
)%
 
(6.7
)%
 
%
 
(6.5
)%
 
(0.8
)%
 
(6.3
)%
Average Escalations Per Year
2.2
 %
 
%
 
2.5
 %
 
2.5
 %
 
%
 
2.2
 %
 
2.8
 %
 
2.2
 %
New Leases
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Development and Redevelopment Space
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Leased Square Feet
15

 
348

 

 
8

 
504

 
875

 

 
875

Statistics for Completed Leasing:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Per Annum Average Committed Cost per Square Foot (2)
$
11.11

 
$
2.55

 
$

 
$
15.21

 
$

 
$
1.35

 
$

 
$
1.35

Weighted Average Lease Term in Years
6.6

 
12.0

 

 
5.3

 
15.0

 
13.6

 

 
13.6

Average Rent Per Square Foot
$
30.46

 
$
41.46

 
$

 
$
23.17

 
$
21.72

 
$
29.74

 
$

 
$
29.74

Cash Rent Per Square Foot
$
28.35

 
$
41.46

 
$

 
$
23.00

 
$
19.02

 
$
28.15

 
$

 
$
28.15

Vacant Space (3)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Leased Square Feet
118

 
92

 
21

 
3

 

 
233

 
18

 
251

Statistics for Completed Leasing:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Per Annum Average Committed Cost per Square Foot (2)
$
4.02

 
$
9.22

 
$
6.13

 
$
25.62

 
$

 
$
6.51

 
$
11.01

 
$
6.84

Weighted Average Lease Term in Years
3.9

 
8.7

 
4.0

 
5.3

 

 
5.8

 
5.7

 
5.8

Average Rent Per Square Foot
$
29.59

 
$
31.95

 
$
25.37

 
$
24.64

 
$

 
$
30.09

 
$
31.72

 
$
30.21

Cash Rent Per Square Foot
$
31.44

 
$
30.71

 
$
25.37

 
$
24.50

 
$

 
$
30.53

 
$
30.23

 
$
30.51

Total Square Feet Leased
623

 
440

 
80

 
40

 
504

 
1,687

 
32

 
1,719

Average Escalations Per Year
2.3
 %
 
0.2
%
 
2.6
 %
 
2.6
 %
 
2.3
%
 
1.6
 %
 
2.8
 %
 
1.6
 %
Average Escalations Excl. Data Center Shells
 
 
 
 
 
 
 
 
 
 
 
 
 
 
1.0
 %
(1)
Activity is exclusive of owner occupied space and leases with less than a one-year term. Weighted average lease term is based on the lease term determined in accordance with GAAP. Committed costs for leasing are reported above in the period of lease execution. Actual capital expenditures for leasing are reported on page 9 in the period such costs are incurred.
(2)
Committed costs include tenant improvements and leasing commissions and exclude free rent concession.
(3)
Vacant space includes acquired first generation space, vacated second generation space and leases executed on developed and redeveloped space previously placed in service.

18


Corporate Office Properties Trust
Leasing - Office and Data Center Shell Portfolio (1)
Nine Months Ended 9/30/19
(square feet in thousands)
 
Defense/IT Locations
 
 
 
 
 
 
 
Ft Meade/BW Corridor
 
NoVA Defense/IT
 
Navy Support
 
Redstone Arsenal
 
Data Center Shells
 
Total Defense/IT Locations
 
Regional Office
 
Other
 
Total
Renewed Space
 

 
 

 
 
 
 

 
 
 
 
 
 

 
 
 
 

Leased Square Feet
913

 
11

 
281

 
276

 

 
1,481

 
41

 
20

 
1,542

Expiring Square Feet
1,096

 
160

 
326

 
276

 

 
1,858

 
161

 
26

 
2,044

Vacating Square Feet
183

 
149

 
45

 

 

 
377

 
120

 
6

 
502

Retention Rate (% based upon square feet)
83.3
 %
 
7.1
 %
 
86.3
 %
 
100.0
%
 
%
 
79.7
 %
 
25.7
 %
 
78.4
%
 
75.4
 %
Statistics for Completed Leasing:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Per Annum Average Committed Cost per Square Foot (2)
$
2.46

 
$
1.31

 
$
4.46

 
$
0.84

 
$

 
$
2.53

 
$
2.65

 
$
1.60

 
$
2.52

Weighted Average Lease Term in Years
4.0

 
5.3

 
3.4

 
1.3

 

 
3.4

 
2.8

 
1.1

 
3.4

Average Rent Per Square Foot
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Renewal Average Rent
$
34.93

 
$
31.58

 
$
30.44

 
$
22.03

 
$

 
$
31.65

 
$
37.76

 
$
24.92

 
$
31.73

Expiring Average Rent
$
35.51

 
$
35.00

 
$
30.94

 
$
21.79

 
$

 
$
32.09

 
$
34.19

 
$
23.55

 
$
32.03

Change in Average Rent
(1.6
)%
 
(9.8
)%
 
(1.6
)%
 
1.1
%
 
%
 
(1.4
)%
 
10.4
 %
 
5.8
%
 
(1.0
)%
Cash Rent Per Square Foot
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Renewal Cash Rent
$
34.85

 
$
32.29

 
$
30.72

 
$
22.18

 
$

 
$
31.69

 
$
36.73

 
$
24.90

 
$
31.74

Expiring Cash Rent
$
37.30

 
$
38.43

 
$
32.53

 
$
21.91

 
$

 
$
33.54

 
$
36.97

 
$
24.58

 
$
33.51

Change in Cash Rent
(6.6
)%
 
(16.0
)%
 
(5.6
)%
 
1.2
%
 
%
 
(5.5
)%
 
(0.6
)%
 
1.3
%
 
(5.3
)%
Average Escalations Per Year
2.4
 %
 
2.5
 %
 
2.6
 %
 
2.6
%
 
%
 
2.4
 %
 
2.9
 %
 
3.0
%
 
2.4
 %
New Leases
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Development and Redevelopment Space
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Leased Square Feet
119

 
348

 

 
435

 
1,164

 
2,066

 

 

 
2,066

Statistics for Completed Leasing:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Per Annum Average Committed Cost per Square Foot (2)
$
10.42

 
$
2.55

 
$

 
$
5.45

 
$

 
$
2.18

 
$

 
$

 
$
2.18

Weighted Average Lease Term in Years
6.9

 
12.0

 

 
8.3

 
15.1

 
12.7

 

 

 
12.7

Average Rent Per Square Foot
$
28.18

 
$
41.46

 
$

 
$
18.51

 
$
21.64

 
$
24.70

 
$

 
$

 
$
24.70

Cash Rent Per Square Foot
$
27.17

 
$
41.46

 
$

 
$
17.80

 
$
18.94

 
$
22.97

 
$

 
$

 
$
22.97

Vacant Space (3)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Leased Square Feet
343

 
103

 
68

 
6

 

 
520

 
98

 
4

 
622

Statistics for Completed Leasing:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Per Annum Average Committed Cost per Square Foot (2)
$
4.85

 
$
9.42

 
$
5.54

 
$
20.29

 
$

 
$
6.03

 
$
9.79

 
$
0.88

 
$
6.59

Weighted Average Lease Term in Years
4.6

 
8.6

 
4.7

 
5.6

 

 
5.4

 
9.1

 
2.0

 
6.0

Average Rent Per Square Foot
$
28.69

 
$
31.51

 
$
24.40

 
$
25.47

 
$

 
$
28.65

 
$
33.76

 
$
21.83

 
$
29.41

Cash Rent Per Square Foot
$
29.48

 
$
30.36

 
$
24.90

 
$
24.76

 
$

 
$
29.00

 
$
32.27

 
$
21.50

 
$
29.47

Total Square Feet Leased
1,375

 
462

 
349

 
717

 
1,164

 
4,067

 
140

 
24

 
4,230

Average Escalations Per Year
2.5
 %
 
0.3
 %
 
2.6
 %
 
2.9
%
 
2.3
%
 
2.1
 %
 
2.4
 %
 
3.0
%
 
2.1
 %
Average Escalations Excl. Data Center Shells
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
1.9
 %
(1)
Activity is exclusive of owner occupied space and leases with less than a one-year term. Weighted average lease term is based on the lease term determined in accordance with GAAP. Committed costs for leasing are reported above in the period of lease execution. Actual capital expenditures for leasing are reported on page 9 in the period such costs are incurred.
(2)
Committed costs include tenant improvements and leasing commissions and exclude free rent concession.
(3)
Vacant space includes acquired first generation space, vacated second generation space and leases executed on developed and redeveloped space previously placed in service.


19


Corporate Office Properties Trust
Lease Expiration Analysis as of 9/30/19 (1)
(dollars and square feet in thousands, except per square foot amounts)

Office and Data Center Shells
Segment of Lease and Year of Expiration (2)
 
Square Footage of Leases Expiring
 
Annualized Rental
Revenue of Expiring Leases (3)
 
% of Core/Total
Annualized 
Rental
Revenue
Expiring (3)(4)
 
Annualized Rental
Revenue of
Expiring
Leases per
Occupied Sq. Foot
 
 
 
 
 
 
 
 
 
Core Portfolio
 
 
 
 
 
 
 
 
Ft Meade/BW Corridor
 
253

 
$
7,506

 
1.5
%
 
$
29.26

Navy Support
 
13

 
251

 
0.1
%
 
19.13

Data Center Shells-Consolidated properties
 
155

 
2,729

 
0.5
%
 
17.60

Regional Office
 
38

 
998

 
0.2
%
 
26.55

2019
 
459

 
11,484

 
2.3
%
 
24.81

Ft Meade/BW Corridor
 
931

 
33,037

 
6.6
%
 
35.49

NoVA Defense/IT
 
166

 
4,938

 
1.0
%
 
29.74

Lackland Air Force Base
 
250

 
11,633

 
2.3
%
 
46.53

Navy Support
 
172

 
4,944

 
1.0
%
 
28.82

Redstone Arsenal
 
11

 
247

 
%
 
22.16

Regional Office
 
80

 
2,600

 
0.5
%
 
32.52

2020
 
1,610

 
57,399

 
11.4
%
 
35.66

Ft Meade/BW Corridor
 
1,030

 
35,867

 
7.2
%
 
34.82

NoVA Defense/IT
 
108

 
3,124

 
0.6
%
 
29.03

Navy Support
 
279

 
7,615

 
1.5
%
 
27.32

Redstone Arsenal
 
397

 
8,796

 
1.8
%
 
22.16

Regional Office
 
38

 
1,227

 
0.2
%
 
32.06

2021
 
1,852

 
56,629

 
11.3
%
 
30.58

Ft Meade/BW Corridor
 
794

 
27,088

 
5.4
%
 
34.13

NoVA Defense/IT
 
135

 
4,513

 
0.9
%
 
33.33

Navy Support
 
173

 
4,545

 
0.9
%
 
26.32

Redstone Arsenal
 
33

 
838

 
0.2
%
 
25.30

Regional Office
 
492

 
16,698

 
3.3
%
 
33.95

2022
 
1,627

 
53,682

 
10.8
%
 
33.00

Ft Meade/BW Corridor
 
1,343

 
46,032

 
9.2
%
 
34.28

NoVA Defense/IT
 
144

 
4,668

 
0.9
%
 
32.32

Navy Support
 
161

 
5,119

 
1.0
%
 
31.78

Redstone Arsenal
 
7

 
167

 
%
 
24.01

Regional Office
 
139

 
4,139

 
0.8
%
 
29.70

2023
 
1,794

 
60,125

 
12.0
%
 
33.50

Thereafter
 
 
 
 
 
 
 
 
Consolidated Properties
 
7,972

 
252,439

 
50.7
%
 
31.34

Unconsolidated JV Properties
 
2,138

 
7,231

 
1.4
%
 
12.80

Core Portfolio
 
17,452

 
$
498,989

 
100.0
%
 
$
29.59


20


Segment of Lease and Year of Expiration (2)
 
Square Footage of Leases Expiring
 
Annualized Rental
Revenue of Expiring Leases (3)
 
% of Core/Total
Annualized 
Rental
Revenue
Expiring (3)(4)
 
Annualized Rental
Revenue of
Expiring
Leases per
Occupied Sq. Foot
 
 
 
 
 
 
 
 
 
Core Portfolio
 
17,452

 
$
498,989

 
99.4
%
 
$
29.59

Other Properties
 
113

 
2,774

 
0.6
%
 
24.44

Total Portfolio
 
17,565

 
$
501,763

 
100.0
%
 
$
29.56

Consolidated Portfolio
 
15,427

 
$
494,532

 
 
 
 
Unconsolidated JV Properties
 
2,138

 
$
7,231

 
 
 
 
 
 
 
 
 
 
 
 
 

Note: As of 9/30/19, the weighted average lease term is 5.0 years for the Core Portfolio and Total Portfolio and 4.9 years for the Consolidated Portfolio.

Wholesale Data Center
Year of Expiration
 
Critical Load(MW)
 
Annualized Rental
Revenue of
Expiring Leases (3)
2019
 
1.00

 
$
1,732

2020
 
12.55

 
17,312

2021
 
0.15

 
368

2022
 
1.11

 
2,104

2023
 
1.00

 
1,691

Thereafter
 

 
243

 
 
15.81

 
$
23,450


(1)
This expiration analysis reflects occupied space of our total portfolio (including consolidated and unconsolidated properties) and includes the effect of early renewals completed on existing leases but excludes the effect of new tenant leases on square feet yet to commence as of 9/30/19 of 310,000 for the Core Portfolio. With regard to properties owned through unconsolidated real estate joint ventures, the amounts reported above reflect 100% of the properties’ square footage but only reflect the portion of Annualized Rental Revenue that was allocable to COPT’s ownership interest.
(2)
A number of our leases are subject to certain early termination provisions.  The year of lease expiration is based on the lease term determined in accordance with GAAP.
(3)
Total Annualized Rental Revenue is the monthly contractual base rent as of 9/30/19 (ignoring free rent then in effect) multiplied by 12 plus the estimated annualized expense reimbursements under existing leases. The amounts reported above for Annualized Rental Revenue include the portion of properties owned through unconsolidated real estate joint ventures that was allocable to COPT’s ownership interest.
(4)
Amounts reported represent the percentage of our Core Portfolio for components of such portfolio while other amounts represent the percentage of our total portfolio.

21


Corporate Office Properties Trust
2020 Core Portfolio Quarterly Lease Expiration Analysis as of 9/30/19 (1)
(dollars and square feet in thousands, except per square foot amounts)
Segment of Lease and Quarter of Expiration (2)
 
Square Footage of Leases Expiring
 
Annualized Rental
Revenue of Expiring Leases (3)
 
% of Core Annualized 
Rental Revenue Expiring (3)(4)
 
Annualized Rental Revenue of Expiring Leases per Occupied Sq. Foot
Core Portfolio
 
 
 
 
 
 
 
 
Ft Meade/BW Corridor
 
191

 
$
8,111

 
1.6
%
 
$
42.36

Navy Support
 
17

 
528

 
0.1
%
 
30.52

Regional Office
 
3

 
88

 
%
 
26.86

Q1 2020
 
211

 
8,727

 
1.7
%
 
41.15

Ft Meade/BW Corridor
 
318

 
10,731

 
2.2
%
 
33.71

NoVA Defense/IT
 
56

 
1,699

 
0.3
%
 
30.14

Navy Support
 
20

 
566

 
0.1
%
 
28.64

Regional Office
 
29

 
924

 
0.2
%
 
32.21

Q2 2020
 
423

 
13,920

 
2.8
%
 
32.89

Ft Meade/BW Corridor
 
340

 
11,219

 
2.2
%
 
33.02

NoVA Defense/IT
 
13

 
400

 
0.1
%
 
31.26

Navy Support
 
88

 
2,457

 
0.5
%
 
28.06

Regional Office
 
20

 
568

 
0.1
%
 
28.56

Q3 2020
 
461

 
14,644

 
2.9
%
 
31.83

Ft Meade/BW Corridor
 
82

 
2,976

 
0.6
%
 
36.66
NoVA Defense/IT
 
97

 
2,839

 
0.6
%
 
29.31

Lackland Air Force Base
 
250

 
11,633

 
2.3
%
 
46.53

Navy Support
 
47

 
1,393

 
0.3
%
 
29.68

Redstone Arsenal
 
11

 
247

 
%
 
22.16

Regional Office
 
28

 
1,020

 
0.2
%
 
36.30

Q4 2020
 
515

 
20,108

 
4.0
%
 
39.10

 
 
 
 
 
 
 
 
 
 
 
1,610

 
$
57,399

 
11.4
%
 
$
35.66


(1)
This expiration analysis reflects occupied space of our total portfolio (including consolidated and unconsolidated properties) and includes the effect of early renewals completed on existing leases but excludes the effect of new tenant leases on square feet yet to commence as of 9/30/19.
(2)
A number of our leases are subject to certain early termination provisions.  The period of lease expiration is based on the lease term determined in accordance with GAAP.
(3)
Total Annualized Rental Revenue is the monthly contractual base rent as of 9/30/19 (ignoring free rent then in effect) multiplied by 12 plus the estimated annualized expense reimbursements under existing leases.
(4)
Amounts reported represent the percentage of our Core Portfolio.

22


Corporate Office Properties Trust
Top 20 Tenants as of 9/30/19 (1)
(dollars and square feet in thousands)
Tenant
 
Total
Annualized
Rental Revenue (2)
 
%
of Total
Annualized 
Rental Revenue (2)
 
Occupied Square Feet in Office and Data Center Shells
 
Weighted
Average
Remaining Lease Term in Office and Data Center Shells (3)
United States Government
(4)
$
180,185

 
34.3
%
 
4,388

 
4.9

VADATA, Inc.
 
41,905

 
8.0
%
 
3,530

 
8.4

General Dynamics Corporation
 
26,697

 
5.1
%
 
725

 
3.9

The Boeing Company
 
16,791

 
3.2
%
 
609

 
2.0

CACI International Inc
 
12,455

 
2.4
%
 
320

 
4.8

Northrop Grumman Corporation
 
11,617

 
2.2
%
 
422

 
2.2

Booz Allen Hamilton, Inc.
 
10,957

 
2.1
%
 
298

 
2.0

CareFirst Inc.
 
10,816

 
2.1
%
 
312

 
3.4

Wells Fargo & Company
 
6,712

 
1.3
%
 
176

 
9.0

AT&T Corporation
 
6,600

 
1.3
%
 
317

 
5.7

University of Maryland
 
6,349

 
1.2
%
 
215

 
5.4

Miles and Stockbridge, PC
 
5,702

 
1.1
%
 
160

 
8.0

Kratos Defense and Security Solutions
 
5,245

 
1.0
%
 
131

 
0.6

Science Applications International Corp.
 
5,098

 
1.0
%
 
136

 
2.5

The Raytheon Company
 
5,079

 
1.0
%
 
136

 
1.8

Jacobs Engineering Group Inc.
 
5,028

 
1.0
%
 
165

 
6.3

Transamerica Life Insurance Company
 
4,889

 
0.9
%
 
140

 
2.3

The MITRE Corporation
 
3,870

 
0.7
%
 
118

 
4.9

Mantech International Corp.
 
3,828

 
0.7
%
 
135

 
4.4

IBM Corporation
 
3,644

 
0.7
%
 
178

 
0.1

Subtotal Top 20 Tenants
 
373,467

 
71.1
%
 
12,611

 
5.4

All remaining tenants
 
151,746

 
28.9
%
 
4,954

 
4.1

Total/Weighted Average
 
$
525,213

 
100.0
%
 
17,565

 
5.0


(1)
Includes Annualized Rental Revenue (“ARR”) in our portfolio of operating office and data center shells and our wholesale data center. For properties owned through unconsolidated real estate joint ventures, includes COPT’s share of those properties’ ARR of $7.2 million (see page 34 for additional information).
(2)
Total ARR is the monthly contractual base rent as of 9/30/19, multiplied by 12, plus the estimated annualized expense reimbursements under existing leases. With regard to properties owned through unconsolidated real estate joint ventures, the amounts reported above reflect 100% of the properties’ square footage but only reflect the portion of ARR that was allocable to COPT’s ownership interest.
(3)
Weighted average remaining lease term is based on the lease term determined in accordance with GAAP for our office and data center shell properties (i.e., excluding the effect of our wholesale data center leases). The weighting of the lease term was computed based on occupied square feet.
(4)
Substantially all of our government leases are subject to early termination provisions which are customary in government leases. As of 9/30/19, $5.3 million in ARR (or 2.9% of our ARR from the United States Government and 1.0% of our total ARR) was through the General Services Administration (GSA).



23



Corporate Office Properties Trust
Property Dispositions
(dollars and square feet in thousands)
Property
 
Property Segment
 
Location
 
# of Properties
 
Operational Square Feet
 
Transaction
Date
 
% Occupied on Transaction Date
 
Transaction 
Price
 
Quarter Ended 6/30/19
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
90% interest in DC 15, 16, 17, 18, 19, 20 and 23
 
Data Center Shells
 
Northern Virginia
 
7

 
1,174

 
6/20/19
 
100.0%
 
$
238,500

(1)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

(1)
We sold a 90% interest in these properties based on an aggregate property value of $265.0 million and retained a 10% interest in the properties through a newly-formed joint venture. On 7/1/19, the joint venture obtained $153.6 million in non-recourse mortgage loans on the properties from which we received a distribution of additional net proceeds of $15.2 million.



24


Corporate Office Properties Trust
Summary of Construction Projects as of 9/30/19 (1)
(dollars and square feet in thousands) 
 
 
 
 
Total Rentable Square Feet
% Leased as of 10/9/19
as of 9/30/19 (2)
Actual or Anticipated Shell Completion Date
 Anticipated Operational Date (3)
 
Anticipated Total Cost
Cost to Date
Cost to Date Placed in Service
 
 
Property and Segment
Location
 
Fort Meade/BW Corridor:
 
 
 
 
 
 
 
 
 
 
4600 River Road
College Park, Maryland
 
102

0%
$
30,509

$
5,883

$

3Q 20
3Q 21
 
 
 
 
 
 
 
 
 
 
 
 
Redstone Arsenal:
 
 
 
 
 
 
 
 
4100 Market Street (4)
Huntsville, Alabama
 
36

100%
8,508

7,827

6,617

4Q 18
4Q 19
 
8800 Redstone Gateway
Huntsville, Alabama
 
76

100%
18,411

14,735


4Q 19
4Q 19
 
7500 Advanced Gateway
Huntsville, Alabama
 
113

100%
18,073

1,722


2Q 20
2Q 20
 
7600 Advanced Gateway
Huntsville, Alabama
 
126

100%
14,998

869


2Q 20
2Q 20
 
100 Secured Gateway
Huntsville, Alabama
 
250

16%
54,050

14,541


2Q 20
2Q 21
 
8600 Advanced Gateway
Huntsville, Alabama
 
100

80%
24,393

1,003


4Q 20
4Q 21
 
Subtotal / Average
 
 
701

67%
138,433

40,697

6,617

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Data Center Shells:
 
 
 
 
 
 
 
 
 
 
Oak Grove B
Northern Virginia
 
216

100%
47,895

31,102


1Q 20
1Q 20
 
P2 A
Northern Virginia
 
230

100%
54,270

33,311


1Q 20
1Q 20
 
Oak Grove A
Northern Virginia
 
216

100%
48,295

17,638


2Q 20
2Q 20
 
P2 B
Northern Virginia
 
274

100%
64,636

26,944


3Q 20
3Q 20
 
P2 C
Northern Virginia
 
230

100%
51,120

17,948


1Q 21
1Q 21
 
Subtotal / Average
 
 
1,166

100%
266,216

126,943


 
 
 
 
 
 
 
 
 
 
 
 
 
 
NoVA Defense/IT:
 
 
 
 
 
 
 
 
 
 
NOVA Office C
Chantilly, Virginia
 
348

100%
106,219

19,534


2Q 22
2Q 22
 
 
 
 
 
 
 
 
 
 
 
 
Regional Office:
 
 
 
 
 
 
 
 
 
 
2100 L Street
Washington, DC
 
190

43%
174,000

111,467


1Q 20
1Q 21
 
Total Under Construction
 
 
2,507

82%
$
715,377

$
304,524

$
6,617

 
 

(1)
Includes properties under, or contractually committed for, construction as of 9/30/19.
(2)
Cost includes land, construction, leasing costs and allocated portion of structured parking and other shared infrastructure, if applicable.
(3)
Anticipated operational date is the earlier of the estimated date when leases have commenced on 100% of a property’s space or one year from the cessation of major construction activities.
(4)
Although classified as under construction, 28,000 square feet were operational as of 9/30/19.

25


Corporate Office Properties Trust
Summary of Redevelopment Projects as of 9/30/19
(dollars and square feet in thousands) 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Property Segment
Total Rentable Square Feet
% Leased as of 9/30/19
as of 9/30/19 (1)
Actual or Anticipated Completion Date
 Anticipated Operational Date (2)
 
 
Historical Basis, Net
Incremental Redevelopment Cost
Anticipated Total Cost
 Cost to Date
Cost to Date Placed in Service
 
 
Property and Location
 
6950 Columbia Gateway
Columbia, Maryland (3)
 
Ft Meade/BW Corridor
106

80%
$
10,000

$
15,907

$
25,907

$
22,448

$
11,312

2Q 19
2Q 20
 

(1)
Cost includes land, construction, leasing costs and allocated portion of shared infrastructure.
(2)
Anticipated operational date is the earlier of the estimated date when leases have commenced on 100% of a property’s space or one year from the cessation of major construction activities.
(3)
Although classified as under redevelopment, 10,000 square feet were operational as of 9/30/19.


26


Corporate Office Properties Trust
Construction and Redevelopment Placed in Service as of 9/30/19
(square feet in thousands)
 
 
 
Total Property
 
Square Feet Placed in Service
Space Placed in Service % Leased as of 9/30/19
 
Property Segment
% Leased as of 9/30/19
Rentable Square Feet
 
Prior Year
2019
Property and Location
1st Quarter
2nd Quarter
3rd Quarter
Total 2019
5801 University Research Court
College Park, Maryland
Ft Meade/BW Corridor
100%
71

 
60

11



11

100%
IN 1
Northern Virginia
Data Center Shells
100%
149

 

149



149

100%
4100 Market Street
Huntsville, Alabama
Redstone Arsenal
100%
36

 

21


7

28

100%
MP 1
Northern Virginia
Data Center Shells
100%
216

 


216


216

100%
DC 23
Northern Virginia (1)
Data Center Shells
100%
149

 


149


149

100%
IN 2
Northern Virginia
Data Center Shells
100%
216

 


216


216

100%
4000 Market Street
Huntsville, Alabama
Redstone Arsenal
100%
43

 
18


15

10

25

100%
6950 Columbia Gateway
Columbia, Maryland
Ft Meade/BW Corridor
80%
106

 


10


10

100%
Total Construction/Redevelopment Placed in Service
98%
986

 
78

181

606

17

804

100%

(1)
Subsequent to being placed in service, we sold a 90% interest in this property by contributing it into a newly-formed, unconsolidated joint venture on 6/20/19.

27


Corporate Office Properties Trust
Summary of Land Owned/Controlled as of 9/30/19 (1)
Location
Acres
 
Estimated Developable Square Feet (in thousands)
 
Carrying Amount
Land owned/controlled for future development
 
 
 
 
 
Defense/IT Locations:
 

 
 

 
 
Fort Meade/BW Corridor:
 
 
 
 
 
National Business Park
196

 
2,106

 
 
Howard County
19

 
290

 
 
Other
126

 
1,338

 
 
Total Fort Meade/BW Corridor
341

 
3,734

 
 
NoVA Defense/IT
52

 
1,618

 
 
Lackland AFB
49

 
785

 
 
Navy Support
44

 
109

 
 
Redstone Arsenal (2)
375

 
3,367

 
 
Data Center Shells
30

 
676

 
 
Total Defense/IT Locations
891

 
10,289

 
 
Regional Office
10

 
900

 
 
Total land owned/controlled for future development
901

 
11,189

 
$
281,386

 
 
 
 
 
 
Other land owned/controlled
150

 
1,638

 
4,197

Land held, net
1,051

 
12,827

 
$
285,583


(1)
This land inventory schedule includes properties under ground lease to us and excludes all properties listed as construction or redevelopment as detailed on pages 25 and 26. The costs associated with the land included on this summary are reported on our consolidated balance sheet in the line entitled “land held.”
(2)
This land is controlled under a long-term master lease agreement to LW Redstone Company, LLC, a consolidated joint venture (see page 33). As this land is developed in the future, the joint venture will execute site-specific leases under the master lease agreement. Rental payments will commence under the site-specific leases as cash rents under tenant leases commence at the respective properties.


28


Corporate Office Properties Trust
Capitalization Overview
(dollars, shares and units in thousands)


 
 
Wtd. Avg. Maturity (Years)
 
Stated Rate
 
Effective Rate
(1)(2)
 
Gross Debt Balance at
 
 
 
 
 
9/30/19
Debt
 
 
 
 
 
 
Secured debt
 
4.3

 
4.17
%
 
4.07
%
 
$
203,508

Unsecured debt
 
3.7

 
4.00
%
 
4.09
%
 
1,671,311

Total Consolidated Debt
3.8

 
4.02
%
 
4.09
%
 
$
1,874,819

 
 
 
 
 
 
 
 
 
Fixed rate debt (2)
 
3.9

 
4.30
%
 
4.22
%
 
$
1,619,749

Variable rate debt
 
3.3

 
3.32
%
 
3.25
%
 
255,070

Total Consolidated Debt
 
 
 
 
 
 
 
$
1,874,819

 
 
 
 
 
 
 
 
 
Preferred Equity
 
 
Redeemable
 
 
 
3.5% Series I Convertible Preferred Units (3)
 
Jan-20

 
 
 
$
8,800

 
 
 
 
 
 
 
 
 
Common Equity (4)
 
 
 
 
 
 
 
 
Common Shares
 
 
 
 
 
 
 
112,059

Common Units
 
 
 
 
 
 
 
1,291

Total Common Shares and Units
 
 
 
 
 
113,350

 
 
 
 
 
 
 
 
 
Closing Common Share Price on 9/30/19
 
 
 
$
29.78

Common Equity Market Capitalization
 
 
 
$
3,375,563

 
 
 
 
 
Total Equity Market Capitalization
 
 
 
$
3,384,363

 
 
 
 
 
Total Market Capitalization
 
 
 
$
5,259,182

 
 
 
 
 
(1) Excludes the effect of deferred financing cost amortization.
(2) Includes the effect of interest rate swaps with notional amounts of $273.7 million that hedge the risk of changes in interest rates on variable rate debt.
(3) 352,000 units outstanding with a liquidation preference of $25 per unit, and convertible into 176,000 common units. Effective 9/23/19, the priority annual cumulative return on these units was reduced from 7.5% to 3.5%.
(4) Excludes unvested share-based compensation awards subject to market conditions.

 
 
Investment Grade Ratings & Outlook
 
Latest Affirmation
 
Fitch
 
BBB-
Stable
 
10/7/19
 
Moodys
 
Baa3
Stable
 
11/20/18
 
Standard & Poors
BBB-
Positive
 
6/21/19
chart-4c4eb4d5247a5090bb7a03.jpgchart-66286202f19f59b39b1a03.jpg

29


Corporate Office Properties Trust
Summary of Outstanding Debt as of 9/30/19
(dollars in thousands)
Unsecured Debt
Stated Rate
 
Amount Outstanding
Maturity Date
 
 
Secured Debt
Stated Rate
 
Amount Outstanding
Balloon Payment Due Upon Maturity
Maturity Date
 
Revolving Credit Facility
L + 1.10%

 
$
220,000

Mar-23
(1)(2)
 
7200 & 7400 Redstone Gateway (3)
L + 1.85%

 
$
12,538

$
12,132

Oct-20
 
Senior Unsecured Notes
 
 
 
 
 
 
7740 Milestone Parkway
3.96
%
 
17,463

15,902

Feb-23
 
3.70% due 2021
3.70
%
 
$
300,000

Jun-21
 
 
100 & 30 Light Street
4.32
%
 
51,787

47,676

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

May-23
 
 
1000, 1200 and 1100 Redstone
 
 
 
 
 
 
5.25% due 2024
5.25
%
 
250,000

Feb-24
 
 
Gateway (3)
4.47
%
(4)
33,142

27,649

Jun-24
 
5.00% due 2025
5.00
%
 
300,000

Jul-25
 
 
M-Square:
 
 
 
 
 
 
Subtotal - Senior Unsecured Notes
4.32
%
 
$
1,200,000

 
 
 
5825 & 5850 University Research
 
 
 
 
 
 
 
 
 
 
 
 
 
Court (3)
3.82
%
 
42,309

35,603

Jun-26
 
Unsecured Bank Term Loans
 
 
 
 
 
 
5801 University Research Court (2)(3)
L+1.45%

 
11,200

10,020

Aug-26
 
2022 Maturity
L + 1.25%

 
$
250,000

Dec-22
(2)
 
2100 L Street (2)(3)
L + 2.35%

 
35,069

35,069

Sept-22
(5)
Other Unsecured Debt
0.00
%
 
1,311

May-26
 
 
Total Secured Debt
4.17
%
 
$
203,508

 
 
 
Total Unsecured Debt
4.00
%
 
$
1,671,311

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Debt Summary
 
 
 
 
 
 
 
 
 
 
 
 
 
Total Unsecured Debt
4.00
%
 
$
1,671,311

 
 
 
 
 
 
 
 
 
 
Total Secured Debt
4.17
%
 
203,508

 
 
 
 
 
 
 
 
 
 
Consolidated Debt
4.02
%
 
$
1,874,819

 
 
 
 
 
 
 
 
 
 
Net discounts and deferred
 
 
 
 
 
 
 
 
 
 
 
 
 
financing costs
 
 
(12,518
)
 
 
 
 
 
 
 
 
 
 
Debt, per balance sheet
 
 
$
1,862,301

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Consolidated Debt
 
 
$
1,874,819

 
 
 
 
 
 
 
 
 
 
COPT’s share of unconsolid. JV gross debt (6)
 
45,360

 
 
 
 
 
 
 
 
 
 
Gross debt
 
 
$
1,920,179

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(1)
The Company’s $800 million Revolving Credit Facility matures in March 2023 and may be extended for two six-month periods, at our option.
(2)
Pre-payable anytime without penalty.
(3)
These properties are owned through consolidated joint ventures.
(4)
Represents the weighted average rate of three loans on the properties.
(5)
The loan maturity may be extended by one year, provided certain conditions are met.
(6)
See page 34 for additional disclosure regarding our unconsolidated real estate joint ventures.

30


Corporate Office Properties Trust
Summary of Outstanding Debt as of 9/30/19 (continued)

chart-0f9adede918e5af38b3a03.jpg
chart-950c7179957c5398b56.jpgchart-8fdffa25045f5538bc6a03.jpg
(1) Revolving Credit Facility maturity of $220.0 million scheduled for 2023 is presented assuming our exercise of two six-month extension options.
(2) Includes the effect of interest rate swaps in effect that hedge the risk of changes in interest rates on variable rate debt.

31


Corporate Office Properties Trust
Debt Analysis
(dollars and square feet in thousands)
 
 
 
 
 
As of and for Three Months Ended
 
 
 
As of and for Three Months Ended
Senior Note Covenants (1)
 
Required
 
9/30/19
 
Line of Credit & Term Loan Covenants (1)
Required
 
9/30/19
Total Debt / Total Assets
 
< 60%
 
38.3%
 
Total Debt / Total Assets
< 60%
 
34.9%
Secured Debt / Total Assets
 
< 40%
 
4.4%
 
Secured Debt / Total Assets
< 40%
 
4.1%
Debt Service Coverage
 
> 1.5x
 
4.1x
 
Adjusted EBITDA / Fixed Charges
> 1.5x
 
3.7x
Unencumbered Assets / Unsecured Debt
 
> 150%
 
263.7%
 
Unsecured Debt / Unencumbered Assets
< 60%
 
34.3%
 
 
 
 
 
 
 
Unencumbered Adjusted NOI / Unsecured Interest Expense
> 1.75x
 
4.1x
 
 
 
 
 
 
 
 
 
 
 
 
Debt Ratios
 
Source
 
 
 
Unencumbered Portfolio Analysis
 
 
 
Gross debt
 
 
p. 30
 
$
1,920,179

 
# of unencumbered properties
146

Adjusted book
 
p. 37
 
$
5,049,884

 
% of total portfolio
86
%
Net debt / adjusted book ratio
 
 
 
37.3
%

Unencumbered square feet in-service
 
15,315

Net debt plus pref. equity / adj. book ratio
 
 
 
37.5
%
 
% of total portfolio
 
81
%
Net debt
 
 
p. 37
 
$
1,885,669

 
NOI from unencumbered real estate operations
 
$
74,235

Net debt plus preferred equity
 
 
p. 37
 
$
1,894,469

 
% of total NOI from real estate operations
 
90
%
In-place adjusted EBITDA
 
p. 10
 
$
77,523

 
Adjusted EBITDA from unencumbered real estate operations
 
$
69,299

Net debt / in-place adjusted EBITDA ratio
6.1
x
 
% of total adjusted EBITDA from real estate operations
 
89
%
Net debt plus pref. equity / in-place adj. EBITDA ratio
6.1
x
 
Unencumbered adjusted book
 
$
4,483,856

Denominator for debt service coverage
 
p. 36
 
$
17,709

 
% of total adjusted book
 
89
%
Denominator for fixed charge coverage
 
p. 36
 
$
20,793

 
 
 


Adjusted EBITDA
 
p. 10
 
$
77,523

 
 
 
 
Adjusted EBITDA debt service coverage ratio
 
 
4.4
x
 
 
 
 
Adjusted EBITDA fixed charge coverage ratio
 
 
3.7
x
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(1) The covenants are calculated as defined in the applicable agreements, and the calculations differ between those agreements.


32


Corporate Office Properties Trust
Consolidated Real Estate Joint Ventures as of 9/30/19
(dollars and square feet in thousands)

Operating Properties
Operational
Square Feet
% Occupied
% Leased
NOI for the Three Months Ended 9/30/19 (1)
NOI for the Nine Months Ended 9/30/19 (1)
Total Assets (2)
Venture Level Debt
% COPT Owned
Suburban Maryland:
 

 
 
 
 
 

 

 
M Square Associates, LLC (3 properties)
313

97.2%
97.2%
$
1,669

$
4,918

$
71,059

$
53,509

50%
Huntsville, Alabama:
 
 
 
 
 
 
 
 
LW Redstone Company, LLC (8 properties)
585

99.5%
100.0%
2,046

5,922

102,148

45,680

85%
Total/Average
898

98.7%
99.0%
$
3,715

$
10,840

$
173,207

$
99,189

 
 
        
Non-operating Properties
Estimated Developable Square Feet
 
 
Total Assets (2)
Venture Level Debt
% COPT Owned
Suburban Maryland:
 

 
 
 

 

 
M Square Research Park
450

 
 
$
13,603

$

50%
Huntsville, Alabama:
 

 
 
 

 

 
Redstone Gateway (3)
4,040

 
 
117,766


85%
Washington, DC:
 
 
 
 
 
 
Stevens Place
190

 
 
111,994

35,070

95%
Total
4,680

 
 
$
243,363

$
35,070

 
 
(1)
Represents NOI of the joint venture operating properties before allocation to joint venture partners.
(2)
Total assets includes the assets of the consolidated joint venture plus any outside investment basis.
(3)
Total assets include $58.0 million due from the City of Huntsville (including accrued interest) in connection with infrastructure costs funded by the joint venture.

33


Corporate Office Properties Trust
Unconsolidated Real Estate Joint Ventures as of 9/30/19
(dollars and square feet in thousands) 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Joint venture information
DC Shell JV formed 7/21/16
 
DC Shell JV formed 6/20/19
 
 
 
 
 
 
 
 
 
 
 
 
COPT ownership %
50
%
 
10
%
 
 
 
 
 
 
 
 
 
 
 
 
COPT’s investment
$
38,273

 
$
11,135

 
 
 
 
 
 
 
 
 
 
 
 
# of Properties
6

 
7

 
 
 
 
 
 
 
 
 
 
 
 
Square Feet
964

 
1,174

 
 
 
 
 
 
 
 
 
 
 
 
% Occupied
100
%
 
100
%
 
 
 
 
 
 
 
 
 
 
 
 
COPT’s share of annualized rental revenue
$
5,619

 
$
1,612

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance sheet information
DC Shell JV formed 7/21/16
 
DC Shell JV formed 6/20/19
 
Total
 
COPT’s Share (1)
 
 
 
 
 
 
 
 
Operating properties, net
$
121,714

 
$
244,232

 
$
365,946

 
$
85,280

 
 
 
 
 
 
 
 
Total assets
$
136,758

 
$
270,909

 
$
407,667

 
$
95,470

 
 
 
 
 
 
 
 
Debt
$
59,682

 
$
152,336

 
$
212,018

 
$
45,075

 
 
 
 
 
 
 
 
Total liabilities
$
60,211

 
$
159,561

 
$
219,772

 
$
46,061

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended 9/30/19
 
Nine Months Ended 9/30/19
Operating information
DC Shell JV formed 7/21/16
 
DC Shell JV formed 6/20/19
 
Total
 
COPT’s Share (1)
 
DC Shell JV formed 7/21/16
 
DC Shell JV formed 6/20/19
 
Total
 
COPT’s Share (1)
Revenue
$
2,884

 
$
4,321

 
$
7,205

 
$
1,874

 
$
8,824

 
$
4,828

 
$
13,652

 
$
4,895

Operating expenses
(457
)
 
(443
)
 
(900
)
 
(273
)
 
(1,548
)
 
(495
)
 
(2,043
)
 
(824
)
NOI and EBITDA
2,427

 
3,878

 
6,305

 
1,601

 
7,276

 
4,333

 
11,609

 
4,071

Interest expense
(533
)
 
(1,461
)
 
(1,994
)
 
(412
)
 
(1,582
)
 
(1,461
)
 
(3,043
)
 
(937
)
Depreciation and amortization
(1,133
)
 
(2,238
)
 
(3,371
)
 
(790
)
 
(3,397
)
 
(2,238
)
 
(5,635
)
 
(1,922
)
Net income
$
761

 
$
179

 
$
940

 
$
399

 
$
2,297

 
$
634

 
$
2,931

 
$
1,212

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
NOI (per above)
$
2,427

 
$
3,878

 
$
6,305

 
$
1,601

 
$
7,276

 
$
4,333

 
$
11,609

 
$
4,071

Tenant funded landlord assets

 

 

 

 
(32
)
 

 
(32
)
 
(16
)
Straight line rent adjustments
(85
)
 
(300
)
 
(385
)
 
(72
)
 
(262
)
 
(337
)
 
(599
)
 
(164
)
Amortization of acquired above- and below-market rents

 
(157
)
 
(157
)
 
(16
)
 

 
(157
)
 
(157
)
 
(16
)
Cash NOI
$
2,342

 
$
3,421

 
$
5,763

 
$
1,513

 
$
6,982

 
$
3,839

 
$
10,821

 
$
3,875

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

(1) Represents the portion allocable to our ownership interest.


34



Corporate Office Properties Trust
Supplementary Reconciliations of Non-GAAP Measures
(dollars in thousands)
 
Three Months Ended
 
Nine Months Ended
 
9/30/19
 
6/30/19
 
3/31/19
 
12/31/18
 
9/30/18
 
9/30/19
 
9/30/18
NOI from real estate operations (1)
 

 
 

 
 

 
 

 
 

 
 
 
 
Real estate revenues (2)
$
130,734

 
$
132,771

 
$
131,990

 
$
130,825

 
$
128,988

 
$
395,495

 
$
386,428

Property operating expenses (2)
(49,714
)
 
(47,886
)
 
(49,445
)
 
(51,298
)
 
(49,340
)
 
(147,045
)
 
(149,737
)
COPT’s share of NOI in unconsolidated real estate JVs (3)
1,601

 
1,251

 
1,219

 
1,211

 
1,206

 
4,071

 
3,607

NOI from real estate operations
82,621

 
86,136

 
83,764

 
80,738

 
80,854

 
252,521

 
240,298

General and administrative expenses
(6,105
)
 
(7,650
)
 
(6,719
)
 
(5,105
)
 
(5,796
)
 
(20,474
)
 
(17,724
)
Leasing expenses
(1,824
)
 
(1,736
)
 
(2,032
)
 
(1,976
)
 
(1,103
)
 
(5,592
)
 
(4,095
)
Business development expenses and land carry costs
(964
)
 
(870
)
 
(1,113
)
 
(1,425
)
 
(1,567
)
 
(2,947
)
 
(4,415
)
NOI from construction contracts and other service operations
895

 
1,297

 
624

 
546

 
365

 
2,816

 
1,987

Equity in (loss) income of unconsolidated non-real estate entities
(3
)
 
(1
)
 
(1
)
 
1,198

 
(2
)
 
(5
)
 
(5
)
Interest and other income
1,842

 
1,849

 
2,286

 
74

 
1,486

 
5,977

 
4,284

Loss on early extinguishment of debt

 

 

 
(258
)
 

 

 

Interest expense
(17,126
)
 
(18,475
)
 
(18,674
)
 
(18,475
)
 
(19,181
)
 
(54,275
)
 
(56,910
)
COPT’s share of interest expense of unconsolidated real estate JVs (3)
(412
)
 
(264
)
 
(261
)
 
(267
)
 
(266
)
 
(937
)
 
(791
)
Income tax benefit (expense)
131

 
176

 
(194
)
 
190

 
291

 
113

 
173

FFO - per Nareit (1)
$
59,055

 
$
60,462

 
$
57,680

 
$
55,240

 
$
55,081

 
$
177,197

 
$
162,802

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Real estate revenues
 
 
 
 
 
 
 
 
 
 
 
 
 
Lease revenue
 
 
 
 
 
 
 
 
 
 
 
 
 
Fixed contractual payments
$
102,389

 
$
104,193

 
$
104,644

 
$
102,900

 
$
101,577

 
$
311,226

 
$
302,040

Variable lease payments
 
 
 
 
 
 
 
 
 
 
 
 
 
Lease termination fees
841

 
2,458

 
521

 
906

 
830

 
3,820

 
2,756

Other variable lease payments (4)
26,231

 
24,764

 
25,738

 
25,790

 
25,284

 
76,733

 
77,935

Lease revenue
129,461

 
131,415

 
130,903

 
129,596

 
127,691

 
391,779

 
382,731

Other property revenue
1,273

 
1,356

 
1,087

 
1,229

 
1,297

 
3,716

 
3,697

Real estate revenues
$
130,734

 
$
132,771

 
$
131,990

 
$
130,825

 
$
128,988

 
$
395,495

 
$
386,428

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Provision for credit losses (recoveries) (2)
$
39

 
$
(2
)
 
$
70

 
$
39

 
$
39

 
$
107

 
$
300

(1)
Refer to section entitled “Definitions” for a definition of this measure.
(2)
Provision for credit losses is included in real estate revenues in 2019 and property operating expenses in prior periods.
(3)
See page 34 for a schedule of the related components.
(4)
Represents primarily lease revenue associated with property operating expense reimbursements from tenants.

35


Corporate Office Properties Trust
Supplementary Reconciliations of Non-GAAP Measures (continued)
(dollars in thousands)
 
Three Months Ended
 
Nine Months Ended
 
9/30/19
 
6/30/19
 
3/31/19
 
12/31/18
 
9/30/18
 
9/30/19
 
9/30/18
Total interest expense
$
17,126

 
$
18,475

 
$
18,674

 
$
18,475

 
$
19,181

 
$
54,275

 
$
56,910

Less: Amortization of deferred financing costs
(538
)
 
(529
)
 
(528
)
 
(550
)
 
(468
)
 
(1,595
)
 
(1,404
)
Less: Amortization of net debt discounts, net of amounts capitalized
(377
)
 
(374
)
 
(370
)
 
(365
)
 
(362
)
 
(1,121
)
 
(1,074
)
Less: Accum. other comprehensive loss on derivatives amortized to expense
(12
)
 
(33
)
 
(34
)
 
(34
)
 
(33
)
 
(79
)
 
(101
)
COPT’s share of interest expense of unconsolidated real estate JVs, excluding deferred financing costs
403

 
258

 
255

 
260

 
261

 
916

 
774

Denominator for interest coverage
16,602

 
17,797

 
17,997

 
17,786

 
18,579

 
52,396

 
55,105

Scheduled principal amortization
1,107

 
1,095

 
1,098

 
1,079

 
1,060

 
3,300

 
3,161

Denominator for debt service coverage
17,709

 
18,892

 
19,095

 
18,865

 
19,639

 
55,696

 
58,266

Capitalized interest
2,927

 
2,388

 
2,004

 
1,748

 
1,410

 
7,319

 
4,181

Preferred unit distributions
157

 
165

 
165

 
165

 
165

 
487

 
495

Denominator for fixed charge coverage
$
20,793

 
$
21,445

 
$
21,264

 
$
20,778

 
$
21,214

 
$
63,502

 
$
62,942

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Preferred unit distributions
$
157

 
$
165

 
$
165

 
$
165

 
$
165

 
$
487

 
$
495

Common share dividends - unrestricted shares and deferred shares
30,721

 
30,693

 
30,685

 
30,206

 
29,821

 
92,099

 
86,079

Common share dividends - restricted shares and deferred shares
103

 
63

 
68

 
114

 
114

 
234

 
348

Common unit distributions - unrestricted units
338

 
365

 
365

 
367

 
373

 
1,068

 
2,131

Common unit distributions - restricted units
22

 
23

 
20

 

 

 
65

 

Total dividends/distributions
$
31,341

 
$
31,309

 
$
31,303

 
$
30,852

 
$
30,473

 
$
93,953

 
$
89,053

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Common share dividends - unrestricted shares and deferred shares
$
30,721

 
$
30,693

 
$
30,685

 
$
30,206

 
$
29,821

 
$
92,099

 
$
86,079

Common unit distributions - unrestricted units
338

 
365

 
365

 
367

 
373

 
1,068

 
2,131

Dividends and distributions for payout ratios
$
31,059

 
$
31,058

 
$
31,050

 
$
30,573

 
$
30,194

 
$
93,167

 
$
88,210

 
 
 
 
 
 
 
 
 
 
 
 
 
 

36


Corporate Office Properties Trust
Supplementary Reconciliations of Non-GAAP Measures (continued)
(dollars in thousands)
 
Three Months Ended
 
 
 
 
 
9/30/19
 
6/30/19
 
3/31/19
 
12/31/18
 
9/30/18
 
 
 
 
Total assets
$
3,855,369

 
$
3,803,469

 
$
3,775,859

 
$
3,656,005

 
$
3,650,366

 
 
 
 
Accumulated depreciation
979,353

 
949,111

 
927,266

 
897,903

 
867,659

 
 
 
 
Accumulated depreciation included in assets held for sale
1,397

 
1,397

 

 

 

 
 
 
 
Accumulated amort. of real estate intangibles and deferred leasing costs
212,222

 
210,183

 
208,973

 
204,882

 
200,229

 
 
 
 
Accumulated amortization of real estate intangibles and deferred leasing costs included in assets held for sale
4

 
4

 

 

 

 
 
 
 
COPT’s share of liabilities of unconsolidated real estate JVs
46,061

 
30,588

 
30,156

 
29,917

 
30,103

 
 
 
 
COPT’s share of accumulated depreciation and amortization of unconsolidated real estate JVs
7,376

 
6,578

 
6,012

 
5,446

 
4,881

 
 
 
 
Less: Property - operating lease liabilities
(16,686
)
 
(16,640
)
 
(16,619
)
 

 

 
 
 
 
Less: Property - finance lease liabilities
(702
)
 
(712
)
 
(716
)
 
(660
)
 
(660
)
 
 
 
 
Less: Disposed property included in assets held for sale

 

 

 

 
(42,226
)
 
 
 
 
Less: Cash and cash equivalents
(34,005
)
 
(46,282
)
 
(7,780
)
 
(8,066
)
 
(9,492
)
 
 
 
 
Less: COPT’s share of cash of unconsolidated real estate JVs
(505
)
 
(406
)
 
(377
)
 
(293
)
 
(444
)
 
 
 
 
Adjusted book
$
5,049,884

 
$
4,937,290

 
$
4,922,774

 
$
4,785,134

 
$
4,700,416

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Gross debt (page 30)
$
1,920,179

 
$
1,827,304

 
$
1,919,920

 
$
1,868,504

 
$
1,853,312

 


 


Less: Cash and cash equivalents
(34,005
)
 
(46,282
)
 
(7,780
)
 
(8,066
)
 
(9,492
)
 


 


Less: COPT’s share of cash of unconsolidated real estate JVs
(505
)
 
(406
)
 
(377
)
 
(293
)
 
(444
)
 
 
 
 
Net debt
$
1,885,669

 
$
1,780,616

 
$
1,911,763

 
$
1,860,145

 
$
1,843,376

 


 


Preferred equity
8,800

 
8,800

 
8,800

 
8,800

 
8,800

 
 
 
 
Net debt plus preferred equity
$
1,894,469

 
$
1,789,416

 
$
1,920,563

 
$
1,868,945

 
$
1,852,176

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 



37



Corporate Office Properties Trust
Definitions

Non-GAAP Measures

We believe that the measures defined below that are not determined in accordance with generally accepted accounting principles (“GAAP”) are helpful to investors in measuring our performance and comparing it to that of other real estate investment trusts (“REITs”).  Since these measures exclude certain items includable in their respective most comparable GAAP measures, reliance on the measures has limitations; management compensates for these limitations by using the measures simply as supplemental measures that are weighed in balance with other GAAP and non-GAAP measures.  These measures should not be used as an alternative to the respective most comparable GAAP measures when evaluating our financial performance or to cash flow from operating, investing and financing activities when evaluating our liquidity or ability to make cash distributions or pay debt service.
 
Adjusted book
Defined as total assets presented on our consolidated balance sheet, net of lease liabilities associated with property right-of-use assets, and excluding the effect of cash and cash equivalents, accumulated depreciation on real estate properties, accumulated amortization of intangible assets on real estate acquisitions, accumulated amortization of deferred leasing costs, disposed properties included in assets held for sale, unconsolidated real estate joint ventures (“JVs”) cash and cash equivalents, liabilities and accumulated depreciation and amortization (of real estate intangibles and deferred leasing costs) allocable to our ownership interest in the JVs and the effect of properties serving as collateral for debt in default that we extinguished (or intend to extinguish) via conveyance of such properties.

Adjusted earnings before interest, income taxes, depreciation and amortization (“Adjusted EBITDA”) 
Adjusted EBITDA is net income adjusted for the effects of interest expense, depreciation and amortization, impairment losses, gain on sales of real estate, gain or loss on early extinguishment of debt, net gain or loss on other investments, operating property acquisition costs, income taxes, business development expenses, demolition costs on redevelopment and nonrecurring improvements, executive transition costs and certain other expenses that we believe are not closely correlated with our operating performance.  Adjusted EBITDA also includes adjustments to net income for the effects of the items noted above pertaining to unconsolidated real estate JVs that were allocable to our ownership interest in the JV. While EBITDA (earnings before interest, taxes, depreciation and amortization) is a universally-defined supplemental measure, Adjusted EBITDA incorporates additional adjustments for gains and losses from investing and financing activities and certain other items that we believe are not closely correlated to (or associated with) our operating performance. We believe that adjusted EBITDA is a useful supplemental measure for assessing our un-levered performance.  We believe that net income is the most directly comparable GAAP measure to this non-GAAP measure.
 
Amortization of acquisition intangibles included in NOI 
Represents the amortization of intangible asset and liability categories that is included in net operating income, including amortization of above- or below-market leases and above- or below-market cost arrangements.

Basic FFO available to common share and common unit holders (“Basic FFO”) 
This measure is FFO adjusted to subtract (1) preferred share dividends, (2) income attributable to noncontrolling interests through ownership of preferred units in Corporate Office Properties, L.P. (the “Operating Partnership”) or interests in other consolidated entities not owned by us, (3) depreciation and amortization allocable to noncontrolling interests in other consolidated entities, (4) Basic FFO allocable to share-based compensation awards and (5) issuance costs associated with redeemed preferred shares.  With these adjustments, Basic FFO represents FFO available to common shareholders and holders of common units in the Operating Partnership (“common units”).  Common units are substantially similar to our common shares of beneficial interest (“common shares”) and are exchangeable into common shares, subject to certain conditions.  We believe that Basic FFO is useful to investors due to the close correlation of common units to common shares.  We believe that net income is the most directly comparable GAAP measure to this non-GAAP measure.


38



Corporate Office Properties Trust
Definitions

Cash net operating income (“Cash NOI”) 
Defined as NOI from real estate operations adjusted to eliminate the effects of: straight-line rental adjustments, amortization of tenant incentives, amortization of acquisition intangibles included in FFO and NOI (including above- and below-market leases and above- or below-market cost arrangements), lease termination fees from tenants to terminate their lease obligations prior to the end of the agreed upon lease terms and rental revenue recognized under GAAP resulting from landlord assets and lease incentives funded by tenants.  Cash NOI also includes adjustments to NOI from real estate operations for the effects of the items noted above pertaining to unconsolidated real estate JVs that were allocable to our ownership interest in the JVs. Under GAAP, rental revenue is recognized evenly over the term of tenant leases (through straight-line rental adjustments and amortization of tenant incentives), which, given the long term nature of our leases, does not align with the economics of when tenant payments are due to us under the arrangements.  Also under GAAP, when a property is acquired, we allocate the acquisition to certain intangible components, which are then amortized into NOI over their estimated lives, even though the resulting revenue adjustments are not reflective of our lease economics.  In addition, revenue from lease termination fees and tenant-funded landlord improvements, absent an adjustment from us, would result in large one-time lump sum amounts in Cash NOI that we do not believe are reflective of a property’s long-term value.  We believe that Cash NOI is a useful supplemental measure of operating performance for a REIT’s operating real estate because it makes adjustments to NOI for the above stated items to be more reflective of the economics of when tenant payments are due to us under our leases and the value of our properties.  As is the case with NOI, the measure is useful in our opinion in evaluating and comparing the performance of geographic segments, Same Properties groupings and individual properties.  We believe that NOI from real estate operations, our segment performance measure, is the most directly comparable GAAP measure to this non-GAAP measure.

COPT’s share of NOI from unconsolidated real estate JVs
Represents the net of revenues and property operating expenses of real estate operations owned through unconsolidated JVs that are allocable to COPT’s ownership interest. This measure is included in the computation of NOI, our segment performance measure, as discussed below.

Diluted adjusted funds from operations available to common share and common unit holders (“Diluted AFFO”) 
Defined as Diluted FFO, as adjusted for comparability, adjusted for the following: (1) the elimination of the effect of (a) noncash rental revenues and property operating expenses (comprised of straight-line rental adjustments, which includes the amortization of recurring tenant incentives, and amortization of acquisition intangibles included in FFO and NOI, both of which are described under “Cash NOI” above), (b) share-based compensation, net of amounts capitalized, (c) amortization of deferred financing costs, (d) amortization of debt discounts and premiums and (e) amortization of settlements of debt hedges; and (2) replacement capital expenditures (defined below).  Diluted AFFO also includes adjustments to Diluted FFO, as adjusted for comparability for the effects of the items noted above pertaining to unconsolidated real estate JVs that were allocable to our ownership interest in the JVs. We believe that Diluted AFFO is a useful supplemental measure of operating performance for a REIT because it incorporates adjustments for: certain revenue and expenses that are not associated with cash to or from us during the period; and certain capital expenditures for operating properties incurred during the period that do require cash outlays.  We believe that net income is the most directly comparable GAAP measure to this non-GAAP measure.

Diluted FFO available to common share and common unit holders (“Diluted FFO”) 
Diluted FFO is Basic FFO adjusted to add back any changes in Basic FFO that would result from the assumed conversion of securities that are convertible or exchangeable into common shares.  The computation of Diluted FFO assumes the conversion of common units but does not assume the conversion of other securities that are convertible into common shares if the conversion of those securities would increase Diluted FFO per share in a given period.  We believe that Diluted FFO is useful to investors because it is the numerator used to compute Diluted FFO per share, discussed below.  We believe that net income is the most directly comparable GAAP measure to this non-GAAP measure.

39



Corporate Office Properties Trust
Definitions

 
Diluted FFO available to common share and common unit holders, as adjusted for comparability (“Diluted FFO, as adjusted for comparability”)
Defined as Diluted FFO or FFO adjusted to exclude: operating property acquisition costs; gain or loss on early extinguishment of debt; FFO associated with properties that secured non-recourse debt on which we defaulted and, subsequently, extinguished via conveyance of such properties (including property NOI, interest expense and gains on debt extinguishment); loss on interest rate derivatives; demolition costs on redevelopment and nonrecurring improvements; executive transition costs, accounting charges for original issuance costs associated with redeemed preferred shares and certain other expenses that we believe are not closely correlated with our operating performance.  Diluted FFO, as adjusted for comparability also includes adjustments to Diluted FFO for the effects of the items noted above pertaining to unconsolidated real estate JVs that were allocable to our ownership interest in the JVs. We believe this to be a useful supplemental measure alongside Diluted FFO as it excludes gains and losses from certain investing and financing activities and certain other items that we believe are not closely correlated to (or associated with) our operating performance. The adjustment for FFO associated with properties securing non-recourse debt on which we defaulted pertains to the periods subsequent to our default on the loan’s payment terms, which was the result of our decision to not support payments on the loan since the estimated fair value of the properties was less than the loan balance. While we continued as the legal owner of the properties during this period, all cash flows produced by them went directly to the lender and we did not fund any debt service shortfalls, which included incremental additional interest under the default rate. We believe that net income is the most directly comparable GAAP measure to this non-GAAP measure.
 
Diluted FFO per share 
Diluted FFO per share is (1) Diluted FFO divided by (2) the sum of the (a) weighted average common shares outstanding during a period, (b) weighted average common units outstanding during a period and (c) weighted average number of potential additional common shares that would have been outstanding during a period if other securities that are convertible or exchangeable into common shares were converted or exchanged.  The computation of Diluted FFO per share assumes the conversion of common units but does not assume the conversion of other securities that are convertible into common shares if the conversion of those securities would increase Diluted FFO per share in a given period.  We believe that Diluted FFO per share is useful to investors because it provides investors with a further context for evaluating our FFO results in the same manner that investors use earnings per share (“EPS”) in evaluating net income available to common shareholders.  We believe that diluted EPS is the most directly comparable GAAP measure to this non-GAAP measure.
 
Diluted FFO per share, as adjusted for comparability 
Defined as (1) Diluted FFO available to common share and common unit holders, as adjusted for comparability divided by (2) the sum of the (a) weighted average common shares outstanding during a period, (b) weighted average common units outstanding during a period and (c) weighted average number of potential additional common shares that would have been outstanding during a period if other securities that are convertible or exchangeable into common shares were converted or exchanged.  The computation of this measure assumes the conversion of common units but does not assume the conversion of other securities that are convertible into common shares if the conversion of those securities would increase the per share measure in a given period.  We believe this to be a useful supplemental measure alongside Diluted FFO per share as it excludes gains and losses from investing and financing activities and certain other items that we believe are not closely correlated to (or associated with) our operating performance. We believe that diluted EPS is the most directly comparable GAAP measure to this non-GAAP measure.
 
Earnings before interest, income taxes, depreciation and amortization for real estate (“EBITDAre”) 
Defined as net income adjusted for the effects of interest expense, depreciation and amortization, gains on sales and impairment losses of real estate and income taxes. EBITDAre also includes adjustments to net income for the effects of the items noted above pertaining to unconsolidated real estate JVs that were allocable to our ownership interest in the JVs. While EBITDA (earnings before interest, taxes, depreciation and amortization) is a universally-defined supplemental measure, EBITDAre incorporates additional adjustments for gains and losses from investing activities related to our investments in operating properties. We believe that EBITDAre is a useful supplemental measure for assessing our un-levered performance. We believe that net income is the most directly comparable GAAP measure to this non-GAAP measure.


40



Corporate Office Properties Trust
Definitions

Funds from operations (“FFO” or “FFO per Nareit”)
Defined as net income computed using GAAP, excluding gains on sales and impairment losses of real estate and real estate-related depreciation and amortization. FFO also includes adjustments to net income for the effects of the items noted above pertaining to unconsolidated real estate JVs that were allocable to our ownership interest in the JVs. We believe that we use the National Association of Real Estate Investment Trust’s (“Nareit”) definition of FFO, although others may interpret the definition differently and, accordingly, our presentation of FFO may differ from those of other REITs.  We believe that FFO is useful to management and investors as a supplemental measure of operating performance because, by excluding gains related to sales of, and impairment losses on, real estate and excluding real estate-related depreciation and amortization, FFO can help one compare our operating performance between periods.  We believe that net income is the most directly comparable GAAP measure to this non-GAAP measure.

Gross debt
Defined as total consolidated outstanding debt, which is debt reported per our balance sheet adjusted to exclude net discounts and premiums and deferred financing costs, as further adjusted to include outstanding debt of unconsolidated real estate JVs that were allocable to our ownership interest in the JVs.

In-place adjusted EBITDA
Defined as Adjusted EBITDA, as further adjusted for: (1) the removal of NOI pertaining to properties in the quarterly periods in which such properties were disposed or removed from service; and (2) the addition of pro forma adjustments to NOI for (a) properties acquired or placed in service subsequent to the commencement of a quarter made in order to reflect a full quarter of ownership/operations and (b) significant mid-quarter occupancy changes associated with properties recently placed in service with no occupancy. The measure also includes adjustments to Adjusted EBITDA for the effects of the items noted above pertaining to unconsolidated real estate JVs that were allocable to our ownership interest in the JVs. We believe that in-place adjusted EBITDA is a useful supplemental measure of performance for assessing our un-levered performance, as further adjusted for changes in operating properties subsequent to the commencement of a quarter.  We believe that net income is the most directly comparable GAAP measure to this non-GAAP measure.

Net debt
Defined as Gross debt (total outstanding debt reported per our balance sheet as adjusted to exclude net discounts and premiums and deferred financing costs), as adjusted to subtract cash and cash equivalents as of the end of the period and debt in default that was extinguished via conveyance of properties. The measure also includes adjustments to Gross debt for the effects of the items noted above pertaining to unconsolidated real estate JVs that were allocable to our ownership interest in the JVs.

Net debt plus preferred equity
Defined as Net debt plus the total liquidation preference of our outstanding preferred equity.

Net debt to Adjusted book and Net debt plus preferred equity to Adjusted book
These measures divide either Net debt or Net debt plus preferred equity (defined above) by Adjusted book (defined above).

Net debt to in-place adjusted EBITDA ratio and Net debt plus preferred equity to in-place adjusted EBITDA ratio
Defined as Net debt or Net debt plus preferred equity (as defined above) divided by in-place adjusted EBITDA (defined above) for the three month period that is annualized by multiplying by four.


41



Corporate Office Properties Trust
Definitions

Net operating income from real estate operations (“NOI”)
NOI, which is our segment performance measure, includes: consolidated real estate revenues; consolidated property operating expenses; and the net of revenues and property operating expenses of real estate operations owned through unconsolidated real estate JVs that are allocable to COPT’s ownership interest in the JVs. We believe that NOI is an important supplemental measure of operating performance for a REIT’s operating real estate because it provides a measure of the core real estate operations that is unaffected by depreciation, amortization, financing and general, administrative and leasing expenses; we believe this measure is particularly useful in evaluating the performance of geographic segments, Same Properties groupings and individual properties. 

NOI debt service coverage ratio and Adjusted EBITDA debt service coverage ratio 
These measures divide either NOI from real estate operations or Adjusted EBITDA by the sum of interest expense (excluding amortization of deferred financing costs and amortization of debt discounts and premiums, net of amounts capitalized, gains or losses on interest rate derivatives and interest expense on debt in default to be extinguished via conveyance of properties) and scheduled principal amortization on mortgage loans.
 
NOI fixed charge coverage ratio and Adjusted EBITDA fixed charge coverage ratio 
These measures divide either NOI from real estate operations or Adjusted EBITDA by the sum of (1) interest expense (excluding amortization of deferred financing costs and amortization of debt discounts and premiums, net of amounts capitalized, gains or losses on interest rate derivatives and interest expense on debt in default to be extinguished via conveyance of properties), (2) scheduled principal amortization on mortgage loans, (3) capitalized interest, (4) dividends on preferred shares and (5) distributions on preferred units in the Operating Partnership not owned by us.
 
NOI interest coverage ratio and Adjusted EBITDA interest coverage ratio 
These measures divide either NOI from real estate operations or Adjusted EBITDA by interest expense (excluding amortization of deferred financing costs and amortization of debt discounts and premiums, net of amounts capitalized, gains on losses on interest rate derivatives and interest expense on debt in default to be extinguished via conveyance of properties).

Payout ratios based on: Diluted FFO; Diluted FFO, as adjusted for comparability; and Diluted AFFO 
These payout ratios are defined as (1) the sum of dividends on unrestricted common shares and distributions to holders of interests in the Operating Partnership (excluding unvested share-based compensation awards) and dividends on convertible preferred shares when such distributions and dividends are included in Diluted FFO divided by (2) the respective non-GAAP measures on which the payout ratios are based.

Replacement capital expenditures 
Replacement capital expenditures are defined as tenant improvements and incentives, building improvements and leasing costs incurred during the period for operating properties that are not (1) items contemplated prior to the acquisition of a property, (2) improvements associated with the expansion of a building or its improvements, (3) renovations to a building which change the underlying classification of the building (for example, from industrial to office or Class C office to Class B office), (4) capital improvements that represent the addition of something new to the property rather than the replacement of something (for example, the addition of a new heating and air conditioning unit that is not replacing one that was previously there) or (5) replacements of significant components of a building after the building has reached the end of its original useful life. Replacement capital expenditures excludes expenditures of operating properties included in disposition plans during the period that were already sold or are held for future disposition. For cash tenant incentives not due to the tenant for a period exceeding three months past the date on which such incentives were incurred, we recognize such incentives as replacement capital expenditures in the periods such incentives are due to the tenant. Replacement capital expenditures, which is included in the computation of Diluted AFFO, is intended to represent non-transformative capital expenditures of existing properties held for long-term investment. We believe that the excluded expenditures are more closely associated with our investing activities than the performance of our operating portfolio.


42



Corporate Office Properties Trust
Definitions

Same Properties NOI and Same Properties cash NOI
Defined as NOI, or Cash NOI, from real estate operations of Same Properties.  We believe that these are important supplemental measures of operating performance of Same Properties for the same reasons discussed above for NOI from real estate operations and Cash NOI.

Other Definitions
 
Acquisition Costs — Transaction costs expensed in connection with executed or anticipated acquisitions of operating properties.
 
Annualized Rental Revenue — The monthly contractual base rent as of the reporting date multiplied by 12, plus the estimated annualized expense reimbursements under existing leases for occupied space. With regard to properties owned through unconsolidated real estate JVs, we include the portion of Annualized Rental Revenue allocable to COPT’s ownership interest.

Average escalations — Leasing statistic used to report average increase in rental rates over lease terms for leases with a term of greater than one-year.
 
Construction Properties — Properties under, or contractually committed for, construction.

Core Portfolio — Represents Defense/IT Locations and Regional Office properties.

Defense/IT Locations — Represents properties in locations that support the United States Government and its contractors, most of whom are engaged in national security, defense and IT related activities servicing what we believe are growing, durable, priority missions.

First Generation Space — Newly-constructed or redeveloped space that has never been occupied.
 
Operational Space — The portion of a property in operations (excludes portion under construction or redevelopment).

Redevelopment Properties — Properties previously in operations on which activities to substantially renovate such properties were underway or approved.

Regional Office Properties — Includes office properties located in select urban/urban-like submarkets in the Greater Washington, DC/Baltimore region with durable Class-A office fundamentals and characteristics.

Same Properties — Operating office and data center shell properties stably owned and 100% operational since at least 1/1/18.
 
Second Generation Space — Space leased that has been previously occupied.
 
Total Portfolio — Operating properties, including ones owned through unconsolidated real estate JVs.

43


logo2dtd021015a01a13.jpg
6711 Columbia Gateway Drive, Suite 300
Columbia, Maryland 21046
Telephone 443-285-5400
Facsimile 443-285-7650
www.copt.com
NYSE: OFC
 
 
 
NEWS RELEASE
 
 
 
FOR IMMEDIATE RELEASE
IR Contacts:
 
 
Stephanie Krewson-Kelly
Michelle Layne
 
443-285-5453
443-285-5452
 
stephanie.kelly@copt.com
michelle.layne@copt.com

COPT Reports Third Quarter 2019 Results
__________________________________________________________

EPS of $0.19 Exceeded & FFO per Share of $0.51 Met High-End of Guidance
Achieved Same-Property Cash NOI Growth of 0.5% in 3Q19 and 3.2% in First Nine Months
Core Portfolio 92.8% Occupied & 94.5% Leased
804,000 SF of 100% Leased Developments Placed into Service through 9/30/19
2.6 Million SF Under Construction are 82% Leased; Should Drive Outsized FFO Growth in 2021
__________________________________________________________

Record Leasing Volumes
1.7 Million & 4.2 Million SF of Total Leasing Completed, Respectively, in 3Q19 & First Nine Months
Record U.S. Government Total Leasing Volume of 546,000 SF in First Nine Months
622,000 SF of Vacancy Leasing in First Nine Months Exceeds 2018’s Entire Annual Volume
164,000 SF of U.S. Government Leasing in Operating Portfolio Sets New Annual Record
Solid Tenant Retention of 72% in 3Q19 & 75% in First Nine Months
Development Leasing of 875,000 SF in 3Q19; Record 2.1 Million SF Year-to-Date
Raising 2019 Development Leasing Goal Further, to 2.2 Million SF
__________________________________________________________

Tightening Full-Year FFO per Share Guidance to $2.02-$2.04
Establishing 4Q19 FFO per Share Guidance of $0.49-$0.51
__________________________________________________________

COLUMBIA, MD October 28, 2019-Corporate Office Properties Trust (“COPT” or the “Company”) (NYSE: OFC) announced financial and operating results for the third quarter ended September 30, 2019.

Management Comments

Stephen E. Budorick, COPT’s President & Chief Executive Officer, commented, “Third quarter FFO per share met the high-end of our guidance, and the strengthening demand taking place throughout our Defense/IT locations continued to support record-levels of leasing, both for new developments and within our operating portfolio. Our 2.1 million square feet of development leasing through the third quarter is 68% greater than our prior full-year record set in 2012, and our 622,000 square feet of vacancy leasing this year is on-pace to set a new annual record.” He continued, “We expect to finish the year with strength, and for leasing momentum to carry into 2020.”

Financial Highlights

3rd Quarter Financial Results:
Diluted earnings per share (“EPS”) was $0.19 for the quarter ended September 30, 2019 as compared to $0.18 for the third quarter of 2018.

i



Diluted funds from operations per share (“FFOPS”), as calculated in accordance with Nareit’s definition and as adjusted for comparability, was $0.51 for the third quarter of 2019 as compared to $0.50 for third quarter 2018 results.

Operating Performance Highlights

Operating Portfolio Summary:
At September 30, 2019, the Company’s core portfolio of 167 operating office and data center shell properties was 92.8% occupied and 94.5% leased.

During the quarter, the Company placed portions of two developments aggregating 17,000 square feet into service that were 100% leased. During the nine months ended September 30, 2019, the Company placed 804,000 square feet into service in properties that were 100% leased.

Same-Property Performance:
At September 30, 2019, COPT’s same-property portfolio of 150 buildings was 91.9% occupied and 93.8% leased.

For the quarter and nine months ended September 30, 2019, the Company’s same-property cash NOI increased 0.5% and 3.2%, respectively, over the prior year’s comparable periods.

Leasing:
Total Square Feet Leased-For the quarter ended September 30, 2019, the Company leased 1.7 million total square feet, including 592,000 square feet of renewals, 251,000 square feet of new leases on vacant space, and 875,000 square feet in development projects.

During the nine months ended September 30, 2019, the Company leased 4.2 million total square feet, including 1.5 million square feet of renewals, 622,000 square feet of new leases on vacant space, and 2.1 million square feet in development projects.

Renewal Rates-During the quarter and nine months ended September 30, 2019, the Company respectively renewed 71.9% and 75.4% of total expiring leases.

Cash Rent Spreads & Average Escalations on Renewing Leases-For the quarter and nine months ended September 30, 2019, cash rents on renewed space decreased 6.3% and 5.3%, respectively. For the same time periods, average annual escalations on renewing leases were 2.2% and 2.4%, respectively.

Lease Terms-In the third quarter, lease terms averaged 3.8 years on renewing leases, 5.8 years on new leasing of vacant space, and 13.6 years on development leasing. For the nine months, lease terms averaged 3.4 years on renewing leases, 6.0 years on new leasing of vacant space, and 12.7 years on development leasing.

Investment Activity Highlights

Development & Redevelopment Projects:
Construction Pipeline-At October 9, 2019, the Company’s construction pipeline consisted of 14 properties totaling 2.5 million square feet that were 82% leased. These projects have a total estimated cost of $715.4 million, of which $304.5 million has been incurred.

Redevelopment-At September 30, 2019, one project was under redevelopment totaling 106,000 square feet that was 80% leased. The Company has invested $22.4 million of the $25.9 million anticipated total cost.


ii


Balance Sheet and Capital Transaction Highlights

As of September 30, 2019, the Company’s net debt plus preferred equity to adjusted book ratio was 37.5% and its net debt plus preferred equity to in-place adjusted EBITDA ratio was 6.1x. For the same period, the Company’s adjusted EBITDA fixed charge coverage ratio was 3.7x.

As of September 30, 2019, and including the effect of interest rate swaps, the Company’s weighted average effective interest rate was 4.1%; additionally, 86.4% of the Company’s debt was subject to fixed interest rates and the consolidated debt portfolio had a weighted average maturity of 3.8 years.

During the third quarter, the Company’s joint venture with Blackstone Real Estate Income Trust, Inc. (“BREIT”) placed $154 million of mortgage debt on its seven data center shells. The mortgage debt matures in July 2029, is interest-only for the term, and bears interest at 3.64%. COPT received its 10% share of the mortgage proceeds.

2019 Guidance
Management is updating its previously issued guidance range of $1.52-$1.56 for full year EPS to a new range of $1.53-$1.55. The Company is tightening its previously issued guidance range for full year FFOPS, as adjusted for comparability, of $2.01-$2.05, to a new range of $2.02-$2.04.

Management also is establishing EPS and FFOPS, as adjusted for comparability, guidance for the fourth quarter ending December 31, 2019 at ranges of $0.30-$0.32 and $0.49-$0.51, respectively. Reconciliations of projected diluted EPS to projected FFOPS are as follows:
Reconciliation of EPS to FFOPS, per Nareit and As Adjusted for Comparability
 
Quarter ending
 
Year ending
 
December 31, 2019
 
December 31, 2019
 
 
Low
 
High
 
Low
 
High
EPS
 
$
0.30

 
$
0.32

 
$
1.53

 
$
1.55

Real estate depreciation and amortization
 
0.35

 
0.35

 
1.40

 
1.40

Gain on sales of real estate
 
(0.16
)
 
(0.16
)
 
(0.91
)
 
(0.91
)
FFOPS, Nareit definition and as adjusted for comparability
 
$
0.49

 
$
0.51

 
$
2.02

 
$
2.04

 
 
 
 
 
 
 
 
 

Updated Full-Year Guidance Assumptions-As a reminder, Management expects to complete the sale of two additional data center shells to the BREIT joint venture during 4Q19 to fund additional development. Management is updating the following assumptions for its full-year guidance:

Development Leasing Objective. Management is increasing its development leasing goal for the year, from the previously elevated target of 2.0 million square feet, to a new target of 2.2 million square feet.

Same-Property Cash NOI Growth. Management is increasing and tightening its previously increased guidance for full-year same-property cash NOI growth, from the prior range of 2.75%-3.25% to the new range of 3.25%-3.5%. The increase reflects expense management improvements at the property level.

Same-Property Year-End Occupancy. The Company is adjusting its expectation for same-property occupancy at year end from the prior range of 92%-93%, to 91.5%-92.0%. The decrease reflects expected occupancy dates on approximately 50,000 square feet of new tenancy slipping from late 4Q19 into 1Q20.

Associated Supplemental Presentation
Prior to the call, the Company will post a slide presentation to accompany management’s prepared remarks for its third quarter 2019 conference call, the details of which are provided below. The accompanying slide presentation can be viewed on and downloaded from the ‘Latest Updates’ section of COPT’s Investors website: https://investors.copt.com/


iii


Conference Call Information
Management will discuss third quarter 2019 results on its conference call tomorrow at 12:00 p.m. Eastern Time, details of which are listed below:

Conference Call Date: Tuesday, October 29, 2019
Time: 12:00 p.m. Eastern Time
Telephone Number: (within the U.S.) 855-463-9057
Telephone Number: (outside the U.S.) 661-378-9894
Passcode: 3489935

The conference call will also be available via live webcast in the ‘Latest Updates’ section of COPT’s Investors website: https://investors.copt.com/

Replay Information
A replay of the conference call will be available immediately via webcast on COPT’s Investors website. Additionally, a telephonic replay of this call will be available beginning at 3:00 p.m. Eastern Time on Tuesday, October 29 through 2:00 p.m. Eastern Time on Tuesday, November 12. To access the replay within the United States, please call 855-859-2056; to access it from outside the United States, please call 404-537-3406. In either case, use passcode 3489935.

Definitions
For definitions of certain terms used in this press release, please refer to the information furnished in the Company’s Supplemental Information Package furnished on a Form 8-K which can be found on its website (www.copt.com). Reconciliations of non-GAAP measures to the most directly comparable GAAP measures are included in the attached tables.

Company Information
COPT is a REIT that owns, manages, leases, develops and selectively acquires office and data center properties in locations that support the United States Government and its contractors, most of whom are engaged in national security, defense and information technology (“IT”) related activities servicing what it believes are growing, durable, priority missions (“Defense/IT Locations”). The Company also owns a portfolio of office properties located in select urban/urban-like submarkets in the Greater Washington, DC/Baltimore region with durable Class-A office fundamentals and characteristics (“Regional Office Properties”). As of September 30, 2019, the Company derived 88% of its core portfolio annualized revenue from Defense/IT Locations and 12% from its Regional Office Properties. As of the same date and including 13 buildings owned through unconsolidated joint ventures, COPT’s core portfolio of 167 office and data center shell properties encompassed 18.8 million square feet and was 94.5% leased; the Company also owned one wholesale data center with a critical load of 19.25 megawatts.

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

The areas of risk that may affect these expectations, estimates and projections include, but are not limited to, those risks described in Item 1A of the Company’s Annual Report on Form 10-K for the year ended December 31, 2018 and Quarterly Report on Form 10-Q for the quarter ended June 30, 2019.


iv



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


 
For the Three Months Ended September 30,
 
For the Nine Months Ended September 30,
 
2019
 
2018
 
2019
 
2018
Revenues
 

 
 

 
 
 
 
Revenues from real estate operations
$
130,734

 
$
128,988

 
$
395,495

 
$
386,428

Construction contract and other service revenues
28,697

 
8,423

 
87,946

 
53,202

Total revenues
159,431

 
137,411

 
483,441

 
439,630

Operating expenses
 

 
 

 
 
 
 
Property operating expenses
49,714

 
49,340

 
147,045

 
149,737

Depreciation and amortization associated with real estate operations
34,692

 
34,195

 
104,290

 
100,897

Construction contract and other service expenses
27,802

 
8,058

 
85,130

 
51,215

Impairment losses
327

 

 
327

 

General and administrative expenses
6,105

 
5,796

 
20,474

 
17,724

Leasing expenses
1,824

 
1,103

 
5,592

 
4,095

Business development expenses and land carry costs
964

 
1,567

 
2,947

 
4,415

Total operating expenses
121,428

 
100,059

 
365,805

 
328,083

Interest expense
(17,126
)
 
(19,181
)
 
(54,275
)
 
(56,910
)
Interest and other income
1,842

 
1,486

 
5,977

 
4,284

Gain on sales of real estate

 

 
84,469

 
(27
)
Income before equity in income of unconsolidated entities and income taxes
22,719

 
19,657

 
153,807

 
58,894

Equity in income of unconsolidated entities
396

 
374

 
1,207

 
1,120

Income tax benefit
131

 
291

 
113

 
173

Net income
23,246

 
20,322

 
155,127

 
60,187

Net income attributable to noncontrolling interests:
 

 
 

 
 
 
 
Common units in the Operating Partnership (“OP”)
(267
)
 
(380
)
 
(1,863
)
 
(1,532
)
Preferred units in the OP
(157
)
 
(165
)
 
(487
)
 
(495
)
Other consolidated entities
(1,565
)
 
(1,080
)
 
(3,870
)
 
(2,879
)
Net income attributable to COPT common shareholders
$
21,257

 
$
18,697

 
$
148,907

 
$
55,281

 
 
 
 
 
 
 
 
Earnings per share (“EPS”) computation:
 

 
 

 
 
 
 
Numerator for diluted EPS:
 

 
 

 
 
 
 
Net income attributable to COPT common shareholders
$
21,257

 
$
18,697

 
$
148,907

 
$
55,281

Redeemable noncontrolling interests

 

 
100

 

Amount allocable to share-based compensation awards
(118
)
 
(114
)
 
(469
)
 
(348
)
Numerator for diluted EPS
$
21,139

 
$
18,583

 
$
148,538

 
$
54,933

Denominator:
 

 
 

 
 
 
 
Weighted average common shares - basic
111,582

 
104,379

 
111,036

 
102,401

Dilutive effect of share-based compensation awards
361

 
231

 
313

 
165

Dilutive effect of redeemable noncontrolling interests

 

 
123

 

Dilutive effect of forward equity sale agreements

 
178

 

 
60

Weighted average common shares - diluted
111,943

 
104,788

 
111,472

 
102,626

Diluted EPS
$
0.19

 
$
0.18

 
$
1.33

 
$
0.54


v



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

 
For the Three Months Ended September 30,
 
For the Nine Months Ended September 30,
 
2019
 
2018
 
2019
 
2018
Net income
$
23,246

 
$
20,322

 
$
155,127

 
$
60,187

Real estate-related depreciation and amortization
34,692

 
34,195

 
104,290

 
100,897

Impairment losses on real estate
327

 

 
327

 

Gain on sales of real estate

 

 
(84,469
)
 
27

Depreciation and amortization on unconsolidated real estate JVs
790

 
564

 
1,922

 
1,691

Funds from operations (“FFO”)
59,055

 
55,081

 
177,197

 
162,802

Noncontrolling interests - preferred units in the OP
(157
)
 
(165
)
 
(487
)
 
(495
)
FFO allocable to other noncontrolling interests
(1,429
)
 
(1,060
)
 
(3,588
)
 
(2,757
)
Basic and diluted FFO allocable to share-based compensation awards
(248
)
 
(214
)
 
(662
)
 
(651
)
Basic FFO available to common share and common unit holders (“Basic FFO”)
57,221

 
53,642

 
172,460

 
158,899

Redeemable noncontrolling interests
34

 

 
100

 

Diluted FFO available to common share and common unit holders (“Diluted FFO”)
57,255

 
53,642

 
172,560

 
158,899

Demolition costs on redevelopment and nonrecurring improvements

 
251

 
44

 
299

Executive transition costs

 
46

 
4

 
422

Non-comparable professional and legal expenses
175

 

 
486

 

Diluted FFO comparability adjustments allocable to share-based compensation awards

 
(1
)
 
(2
)
 
(3
)
Diluted FFO available to common share and common unit holders, as adjusted for comparability
57,430

 
53,938

 
173,092

 
159,617

Straight line rent adjustments and lease incentive amortization
(515
)
 
582

 
(1,131
)
 
(1,441
)
Amortization of intangibles included in net operating income
(59
)
 
153

 
(47
)
 
740

Share-based compensation, net of amounts capitalized
1,697

 
1,557

 
4,993

 
4,592

Amortization of deferred financing costs
538

 
468

 
1,595

 
1,404

Amortization of net debt discounts, net of amounts capitalized
377

 
362

 
1,121

 
1,074

Accum. other comprehensive loss on derivatives amortized to expense
12

 
33

 
79

 
101

Replacement capital expenditures
(16,752
)
 
(18,803
)
 
(43,927
)
 
(49,936
)
Other diluted AFFO adjustments associated with real estate JVs
66

 
50

 
280

 
149

Diluted adjusted funds from operations available to common share and common unit holders (“Diluted AFFO”)
$
42,794

 
$
38,340

 
$
136,055

 
$
116,300

Diluted FFO per share
$
0.51

 
$
0.50

 
$
1.53

 
$
1.51

Diluted FFO per share, as adjusted for comparability
$
0.51

 
$
0.50

 
$
1.53

 
$
1.51

Dividends/distributions per common share/unit
$
0.275

 
$
0.275

 
$
0.825

 
$
0.825



vi



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

 
September 30,
2019
 
December 31,
2018
Balance Sheet Data
 

 
 

Properties, net of accumulated depreciation
$
3,258,823

 
$
3,250,626

Total assets
3,855,369

 
3,656,005

Debt, per balance sheet
1,862,301

 
1,823,909

Total liabilities
2,130,745

 
2,002,697

Redeemable noncontrolling interest
28,677

 
26,260

Equity
1,695,947

 
1,627,048

Net debt to adjusted book
37.3
%
 
38.9
%
 
 
 
 
Core Portfolio Data (as of period end) (1)
 

 
 

Number of operating properties
167

 
161

Total net rentable square feet owned (in thousands)
18,799

 
17,937

% Occupied
92.8
%
 
93.1
%
% Leased
94.5
%
 
94.0
%
 
 
 
 
 
For the Three Months Ended September 30,
 
For the Nine Months Ended September 30,
2019
 
2018
 
2019
 
2018
Payout ratios
 

 
 

 
 

 
 

Diluted FFO
54.2
%
 
56.3
%
 
54.0
%
 
55.5
%
Diluted FFO, as adjusted for comparability
54.1
%
 
56.0
%
 
53.8
%
 
55.3
%
Diluted AFFO
72.6
%
 
78.8
%
 
68.5
%
 
75.8
%
Adjusted EBITDA fixed charge coverage ratio
3.7
x
 
3.6
x
 
3.7
x
 
3.6
x
Net debt to in-place adjusted EBITDA ratio (2)
6.1
x
 
6.1
x
 
N/A

 
N/A

Net debt plus preferred equity to in-place adjusted EBITDA ratio (3)
6.1
x
 
6.1
x
 
N/A

 
N/A

 
 
 
 
 
 
 
 
Reconciliation of denominators for per share measures
 
 

 
 
 
 
Denominator for diluted EPS
111,943

 
104,788

 
111,472

 
102,626

Weighted average common units
1,312

 
2,135

 
1,323

 
2,847

Redeemable noncontrolling interests
109

 

 

 

Denominator for diluted FFO per share and as adjusted for comparability
113,364

 
106,923

 
112,795

 
105,473

 
 
 
 
 
 
 
 

(1)
Represents Defense/IT Locations and Regional Office properties.
(2)
Represents net debt as of period end divided by in-place adjusted EBITDA for the period, as annualized (i.e. three month periods are multiplied by four).
(3)
Represents net debt plus the total liquidation preference of preferred equity as of period end divided by in-place adjusted EBITDA for the period, as annualized (i.e. three month periods are multiplied by four).


vii



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

 
For the Three Months Ended September 30,
 
For the Nine Months Ended September 30,
 
2019
 
2018
 
2019
 
2018
Reconciliation of common share dividends to dividends and distributions for payout ratios
 

 
 

 
 
 
 
Common share dividends - unrestricted shares and deferred shares
$
30,721

 
$
29,821

 
$
92,099

 
$
86,079

Common unit distributions - unrestricted units
338

 
373

 
1,068

 
2,131

Dividends and distributions for payout ratios
$
31,059

 
$
30,194

 
$
93,167

 
$
88,210

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

 
 

 
 

 
 

Net income
$
23,246

 
$
20,322

 
$
155,127

 
$
60,187

Interest expense
17,126

 
19,181

 
54,275

 
56,910

Income tax benefit
(131
)
 
(291
)
 
(113
)
 
(173
)
Depreciation of furniture, fixtures and equipment
467

 
561

 
1,396

 
1,543

Real estate-related depreciation and amortization
34,692

 
34,195

 
104,290

 
100,897

Impairment losses on real estate
327

 

 
327

 

Gain on sales of real estate

 

 
(84,469
)
 
27

Adjustments from unconsolidated real estate JVs
1,202

 
830

 
2,859

 
2,482

EBITDAre
76,929

 
74,798

 
233,692

 
221,873

Net gain on other investments

 

 
(400
)
 

Business development expenses
419

 
673

 
1,427

 
2,453

Non-comparable professional and legal expenses
175

 

 
486

 

Demolition costs on redevelopment and nonrecurring improvements

 
251

 
44

 
299

Executive transition costs

 
46

 
4

 
422

Adjusted EBITDA
77,523

 
75,768

 
$
235,253

 
$
225,047

Proforma net operating income adjustment for property changes within period

 
166

 
 
 
 
In-place adjusted EBITDA
$
77,523

 
$
75,934

 

 

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

 
 

 
 

 
 

Interest expense
$
17,126

 
$
19,181

 
$
54,275

 
$
56,910

Less: Amortization of deferred financing costs
(538
)
 
(468
)
 
(1,595
)
 
(1,404
)
Less: Amortization of net debt discounts, net of amounts capitalized
(377
)
 
(362
)
 
(1,121
)
 
(1,074
)
Less: Accum. other comprehensive loss on derivatives amortized to expense
(12
)
 
(33
)
 
(79
)
 
(101
)
COPT’s share of interest expense of unconsolidated real estate JVs, excluding deferred financing costs
403

 
261

 
916

 
774

Scheduled principal amortization
1,107

 
1,060

 
3,300

 
3,161

Capitalized interest
2,927

 
1,410

 
7,319

 
4,181

Preferred unit distributions
157

 
165

 
487

 
495

Denominator for fixed charge coverage-Adjusted EBITDA
$
20,793

 
$
21,214

 
$
63,502

 
$
62,942

 
 
 
 
 
 
 
 

viii



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

 
For the Three Months Ended September 30,
 
For the Nine Months Ended September 30,
 
2019
 
2018
 
2019
 
2018
Reconciliations of tenant improvements and incentives, building improvements and leasing costs for operating properties to replacement capital expenditures
 
 
 
 
 
 
 
Tenant improvements and incentives
$
10,880

 
$
12,894

 
$
26,600

 
$
29,626

Building improvements
8,908

 
5,975

 
17,772

 
13,671

Leasing costs
2,722

 
2,945

 
8,665

 
6,047

Net (exclusions from) additions to tenant improvements and incentives
(2,156
)
 
(896
)
 
(1,866
)
 
3,708

Excluded building improvements
(3,602
)
 
(2,134
)
 
(7,244
)
 
(3,089
)
Excluded leasing costs

 
19

 

 
(27
)
Replacement capital expenditures
$
16,752

 
$
18,803

 
$
43,927

 
$
49,936

 
 
 
 
 
 
 
 
Same Properties cash NOI
$
72,792

 
$
72,406

 
$
217,114

 
$
210,468

Straight line rent adjustments and lease incentive amortization
(735
)
 
(1,699
)
 
(1,871
)
 
(1,683
)
Amortization of acquired above- and below-market rents
82

 
(98
)
 
115

 
(574
)
Amortization of below-market cost arrangements
(23
)
 
(56
)
 
(69
)
 
(166
)
Lease termination fees, gross
823

 
759

 
1,629

 
2,325

Tenant funded landlord assets and lease incentives
519

 
318

 
1,429

 
3,012

Cash NOI adjustments in unconsolidated real estate JV
42

 
62

 
147

 
197

Same Properties NOI
$
73,500

 
$
71,692

 
$
218,494

 
$
213,579

 
 
 
 
 
 
 
 
 
September 30,
2019
 
December 31,
2018
Reconciliation of total assets to adjusted book
 

 
 

Total assets
$
3,855,369

 
$
3,656,005

Accumulated depreciation
979,353

 
897,903

Accumulated depreciation included in assets held for sale
1,397

 

Accumulated amortization of real estate intangibles and deferred leasing costs
212,222

 
204,882

Accumulated amortization of real estate intangibles and deferred leasing costs included in assets held for sale
4

 

COPT’s share of liabilities of unconsolidated real estate JVs
46,061

 
29,917

COPT’s share of accumulated depreciation and amortization of unconsolidated real estate JVs
7,376

 
5,446

Less: Property - operating lease liabilities
(16,686
)
 

Less: Property - finance lease liabilities
(702
)
 
(660
)
Less: Cash and cash equivalents
(34,005
)
 
(8,066
)
Less: COPT’s share of cash of unconsolidated real estate JVs
(505
)
 
(293
)
Adjusted book
$
5,049,884

 
$
4,785,134

 
 
 
 
Reconciliation of debt outstanding to net debt and net debt plus preferred equity
 
 
 
Debt outstanding (excluding net debt discounts and deferred financing costs)
$
1,920,179

 
$
1,868,504

Less: Cash and cash equivalents
(34,005
)
 
(8,066
)
Less: COPT’s share of cash of unconsolidated real estate JVs
(505
)
 
(293
)
Net debt
$
1,885,669

 
$
1,860,145

Preferred equity
8,800

 
8,800

Net debt plus preferred equity
$
1,894,469

 
$
1,868,945


ix