Filed pursuant to Rule 424(b)(2)

Registration Statement No. 333-71807

SUBJECT TO COMPLETION, DATED MARCH 23, 2001

The prospectus supplement relates to an effective registration statement under the Securities Act of 1933, as amended, but is not complete and may be changed. This prospectus supplement is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted.

PRELIMINARY PROSPECTUS SUPPLEMENT TO PROSPECTUS DATED NOVEMBER 1, 2000

1,200,000 Shares
Corporate Office Properties Trust

     % Series E Cumulative Redeemable Preferred Shares
(Liquidation Preference $25.00 Per Share)

    Corporate Office Properties Trust is a real estate investment trust which owns and operates suburban office properties in select Mid-Atlantic regions. As of December 31, 2000, we owned a total of 83 suburban office properties aggregating 6.5 million rentable square feet, which were 97.0% occupied with 55.3% of our total rental revenue derived from leases to investment-grade tenants.

    We will pay quarterly cumulative dividends, in arrears, on the Series E Preferred Shares from the date of original issue. These dividends will be payable on April 15, July 15, October 15 and January 15 of each year, when and as declared, beginning on July 15, 2001, at a yearly rate of   % of the $25.00 liquidation preference, or $          per Series E Preferred Share per year. We may not redeem the Series E Preferred Shares prior to July 15, 2006, except to preserve our status as a real estate investment trust. On or after July 15, 2006, we may, at our option, redeem the Series E Preferred Shares, in whole or from time to time in part, for cash at $25.00 per Series E Preferred Share plus any accrued and unpaid dividends through the date of redemption. The Series E Preferred Shares have no stated maturity, are not subject to any sinking fund and will remain outstanding indefinitely unless redeemed at our option.

    The underwriters have an option to purchase a maximum of 180,000 additional Series E Preferred Shares to cover over-allotments.

    We anticipate that the Series E Preferred Shares will be listed on the New York Stock Exchange under the symbol "OFC.E" We expect that trading on the New York Stock Exchange will commence within 30 days after initial delivery of the Series E Preferred Shares.

    Investing in the Series E Preferred Shares involves risks. See "Risk Factors" beginning on page 3 of the accompanying prospectus and in our Annual Report on Form 10-K to which we refer you in the section of this prospectus supplement called "Where You Can Find More Information."

(1)

Plus accrued dividends, if any, from April , 2001.

    Delivery of the Series E Preferred Shares in book entry form only will be made on or about April  , 2001.

    Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus supplement or the prospectus to which it relates is truthful or complete. Any representation to the contrary is a criminal offense.

Joint Book-Running Managers

The date of this prospectus supplement is  , 2001

TABLE OF CONTENTS

PROSPECTUS SUPPLEMENT

PROSPECTUS

    You should rely only on the information contained in this prospectus supplement and the accompanying prospectus or that is incorporated by reference in these documents. We have not authorized anyone to provide you with information that is different. This document may only be used where it is legal to sell these securities. The information in this document may only be accurate on the date of this document.

    We are providing information to you about our company and the Series E Preferred Shares in this prospectus supplement and the accompanying prospectus. This prospectus supplement is more specific than the accompanying prospectus. If the information in this prospectus supplement differs from that in the accompanying prospectus, you should rely on the information in this prospectus supplement.

    In connection with an underwritten offering, SEC rules permit underwriters to engage in transactions that stabilize the price of our Series E Preferred Shares being offered. These transactions may include purchases for the purpose of fixing or maintaining the price of our Series E Preferred Shares being offered at a level that is higher than the market would dictate in the absence of such transactions. See "Underwriting" in this prospectus supplement and "Plan of Distribution" in the accompanying prospectus.

    The terms "COPT," "Company," "we," "our" and "us" refer to Corporate Office Properties Trust and its subsidiaries, including Corporate Office Properties, L.P., Corporate Office Management, Inc. ("COMI"), Corporate Development Services, LLC ("CDS") and Corporate Realty Management, LLC, ("CRM") unless the context suggests otherwise. The term "you" refers to a prospective investor.

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FORWARD-LOOKING STATEMENTS

    This prospectus supplement, the accompanying prospectus and our documents incorporated by reference herein and therein contain "forward-looking" statements, within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act as defined in the Private Securities Litigation Reform Act of 1995, that are based on our current expectations, estimates and projections about future events and financial trends affecting the financial condition of our business. Statements that are not historical facts, including statements about our beliefs and expectations, are forward-looking statements. These statements are not guarantees of future performance, events or results and involve potential risks and uncertainties. Accordingly, actual results may differ materially. We undertake no obligation to update forward-looking statements, whether as a result of new information, future events or otherwise.

    Important facts that may affect these expectations, estimates or projections include, but are not limited to: our ability to borrow on favorable terms; general economic and business conditions, which will, among other things affect office property demand and rents, tenant creditworthiness, interest rates and financing availability; adverse changes in the real estate markets including, among other things, competition with other companies; risks of real estate acquisition and development; governmental actions and initiatives; environmental requirements; and the other factors described in the accompanying prospectus beginning on page 3 under the heading "Risk Factors," and described under the same heading in our Annual Report on Form 10-K for the year ended December 31, 2000 which is referred to in the section of this prospectus supplement called "Where You Can Find More Information."

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PROSPECTUS SUPPLEMENT SUMMARY

    This summary highlights information contained elsewhere in this prospectus supplement, and may not contain all of the information investors should consider before investing in our Series E Preferred Shares. You should read the entire prospectus supplement and accompanying prospectus carefully, especially the "Risk Factors" sections beginning on page 3 of the accompanying prospectus and in our Annual Report on Form 10-K for the year ended December 31, 2000 identified in the section of this prospectus supplement called "Where You Can Find More Information." Unless otherwise indicated, all information in this prospectus supplement assumes that (i) all property and financial information is presented as of December 31, 2000, and (ii) the underwriters' over-allotment option to purchase up to 180,000 additional Series E Preferred Shares is not exercised.

Corporate Office Properties Trust

    We are a fully-integrated and self-managed real estate investment trust or "REIT." Important aspects of our company include:

    Suburban Office Focus.  We focus on the ownership, management, leasing, acquisition and development of suburban office properties. We believe suburban office properties exhibit among the strongest fundamentals of any real estate property type, and offer attractive investment opportunities. The three key factors driving the strong fundamentals of suburban office properties are (i) increasing rental rates, (ii) low vacancy rates, and (iii) a limited supply of new rentable office space.

    Geographic Focus.  Our strategy is to operate in select, demographically strong and growing regions, within the Mid-Atlantic region, where we believe we have achieved the critical mass necessary to maximize management efficiencies, operating synergies and competitive advantages through our acquisition, property management and development programs. We are among the largest suburban office owners in each of our core regions and the largest in the Northern Baltimore/Washington Corridor or the "B/W Corridor." The following table sets forth certain information, as of December 31, 2000, regarding our portfolio:

(1)

Contractual rental revenue plus expense reimbursements annualized as of December 31, 2000.

(2)

The B/W Corridor encompasses Anne Arundel and Howard Counties. Included in this region are six properties located outside of these counties, including three properties in suburban Washington, D.C., two properties in Timonium, Maryland and one property in Baltimore, Maryland.

    Corporate Tenants.  We focus on leasing our office properties to a diverse mix of companies in a wide range of industries, with an emphasis on large, high-quality companies that are financially sound market leaders in their respective fields with significant space requirements. To enhance the stability of our cash flow we typically structure our leases with terms ranging from three to ten years. Our average lease size is approximately 15,724 rentable square feet with a weighted average remaining lease term of

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4.6 years. The following table sets forth credit information, as of December 31, 2000, on certain of our tenants:

(1)

Based on Standard & Poor's Rating Corporation long-term unsecured debt rating for each tenant.

(2)

Contractual rental revenue plus expense reimbursements annualized as of December 31, 2000.

(3)

Based on total rental revenue.

(4)

Includes agencies of the U.S. Government.

    Mid-Atlantic Management Experience.  Our company is led by Jay Shidler, Chairman of our Board of Trustees. Mr. Shidler and our six executive officers have an average of 21 years of property management, acquisition and development experience specifically within our core markets. We believe our extensive experience, market knowledge and network of industry contacts within the Mid-Atlantic region provide us with an important competitive advantage in establishing, maintaining and enhancing our prominence within our selected regions. Additionally, as a seasoned and prominent owner and operator, we believe we can effectively attract and retain high-quality tenants and efficiently accommodate tenant needs on a cost-effective basis. During 2000, our tenant retention rate was 69.6% (based on rentable square feet renewed) and our re-tenanting costs averaged $9.28 per square foot.

    Debt Strategy.  Our financing policy is aimed at maintaining a flexible capital structure in order to facilitate consistent growth and performance through all market conditions. An important element of our policy is our debt strategy. We primarily utilize property-level mortgage debt as opposed to corporate unsecured debt. We believe the commercial mortgage debt market is a more mature and generally a more stable market for real estate companies, which provides us with greater access to capital on a more consistent basis and, generally, on more favorable terms. We seek to maintain, on a consolidated basis, a debt service coverage ratio (ratio of EBITDA (operating income before mortgage and other interest, income taxes, depreciation and amortization) to debt service (interest expense plus capitalized interest and scheduled principal amortization)) in excess of 1.6x, which we believe is generally consistent with the current minimum investment grade requirement for mortgages securing commercial real estate. We believe this ratio is appropriate for a seasoned portfolio of suburban office buildings. However, despite our current intention to maintain this policy, we are not obligated to do so. We may change this policy without shareholder consent. For the twelve month period ended December 31, 2000, our debt service coverage ratio was 1.9x.

    Management Ownership.  As of December 31, 2000 our executive officers and trustees owned a total of 27.6% of our equity interests, on a fully diluted basis, which we believe is among the highest management ownership positions within the public REIT industry. Furthermore, management's entire ownership position is in the form of common equity. As such, their dividend rights rank junior to the outstanding Series A Preferred Share, Series B Preferred Shares and Series D Preferred Shares and will rank junior to the Series E Preferred Shares.

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Historical Performance

    Since December 31, 1997 (the year ending immediately prior to our public offering and the listing of our common shares on the New York Stock Exchange in April 1998) we have achieved the following:

•

310.7% growth in our total assets from $193.5 million to $794.8 million;



•

60.0% increase in our quarterly dividends, from $0.125 per common share paid during the three month period ended December 31, 1997 to $0.20 per common share paid during the three month period ended December 31, 2000;



•

18.1% increase in our fixed charge coverage ratio from 1.5x to 1.7x; and



•

97.4%, weighted average year-end portfolio occupancy rate; a 80.6% weighted average tenant retention rate, based on square footage renewed between January 1, 1998 and December 31, 2000; and a 16.4% weighted average increase in total rental revenue for leases executed between January 1, 1998 and December 31, 2000 for renewed and retenanted square footage.

Recent Developments

    During 2000, we continued to implement our strategy of enhancing our market presence in our core Mid-Atlantic regions through our development and acquisition programs. We invested a total of $61.1 million in developing five office properties completed during 2000 and acquiring two office properties aggregating 604,260 rentable square feet. Five of these properties are located in the B/W Corridor region, one property is located in the Greater Harrisburg region and one property is located in the Northern/Central New Jersey region. As of December 31, 2000 the seven properties were 94.5% occupied. Additionally, we executed 145 leases, totaling 1.3 million rental square feet. We continued our strategy of focusing on leasing to high-quality tenants seeking large space requirements on a long-term basis. During 2000, we executed a number of significant leases, including, among others, a 150,000 square foot lease with Bookham Technology, Inc; a 150,000 square foot lease with Computer Sciences Corporation; a 61,250 square foot lease with Litton Tasc; a 35,248 square foot lease with Sun Microsystems, Inc.; a 27,414 square foot lease with Coca-Cola Company; and a 19,733 square foot lease with Ciena Corporation.

    In terms of financing activity, during 2000 we entered into the following transactions:

•

two fixed-rate, long-term mortgages totaling $25.7 million. These loans bear interest at a weighted average rate of 8.3% and have a weighted average maturity of 5.1 years. The proceeds from these loans were used primarily to repay certain construction loans;



•

five construction loan facilities totaling $49.9 million in connection with three development projects currently under construction and two recently completed development projects. These loan facilities each bear interest at a rate of LIBOR plus 1.75%. These loans have a weighted average maturity of 1.6 years, and certain of these loans may be extended, at our option, for one year, subject to customary conditions. As of December 31, 2000, the aggregate outstanding balance under these facilities was $18.4 million;



•

two interim mortgages totaling $11.5 million. These loans bear interest at a rate of LIBOR plus 1.75% with $7.0 million maturing in July 2001 and $4.5 million in July 2002;



•

three interest rate cap agreements that limit LIBOR interest rates from 7.0% to 7.7% on a total of $125.0 million of our floating rate debt. The terms of these agreements expire between October 2001 and May 2002;



•

one interest rate swap agreement that fixes LIBOR at 5.8% on a notional amount of $100.0 million of our floating rate debt. The term of this agreement expires in January 2003; and

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•

repurchase of 166,600 of our common shares at a weighted average price of $8.50 per common share.

    Subsequent to 2000, in March 2001, we acquired for $2.4 million a 40% interest in a joint venture which owns five office properties totaling 314,594 rentable square feet. In addition, we have entered into an agreement to acquire, subject to customary conditions, three office properties totaling 142,107 rentable square feet for an aggregate purchase price of approximately $15.9 million. Our objective is to increase cash flow and enhance the underlying value of these acquisitions by capitalizing on existing below market leases and expansion opportunities. In terms of our on-going development program, we currently have four office properties totaling 490,889 rentable square feet under construction with an aggregate projected cost of $82.6 million. We also have options to acquire an additional 73 acres, which can support approximately 600,000 rentable square feet of new office development. Consistent with our long-standing strategy, all of our acquisition and development activity is focused in our core Mid-Atlantic regions, predominately in our B/W Corridor region.

    In terms of financing activity during 2001 we have entered into the following transactions:

•

sold 544,000 4.0%, non-voting Series D Cumulative Redeemable Convertible Preferred Shares ("Series D Preferred Shares") to a private investor, raising $12.0 million in total gross proceeds. The Series D Preferred Shares are convertible after December 31, 2003, at the option of the holder, into common shares at a ratio of 2.2 common shares for each Series D Preferred Share, equating to $11.36 per common share. We can redeem the Series D Preferred Shares after January 24, 2006 for cash at $25.00 per share;



•

two fixed-rate, long-term mortgages totaling $39.6 million. These loans each bear interest at a rate of 7.9% and each matures in 2008;



•

a loan commitment to borrow $21.2 million secured by four properties. Subject to completion of definitive documents, the loan will bear interest at a rate of 7.3% and will mature in 2008. However, there can be no assurance that this transaction will be consummated; and

    In addition, Deutsche Banc Alex. Brown is in the process of arranging a renewal and expansion of our existing secured revolving credit facility (our "Credit Facility"). Subject to completion of definitive documents, the maximum borrowing amount under our Credit Facility will be increased from $100.0 million to $125.0 million and the maturity will be extended by three years through April 2004 on similar terms and conditions to the existing facility. With respect to our loan from Prudential Securities Credit Corp., which is scheduled to mature in June 2001, we intend to retire the $29.1 million outstanding balance under the loan with additional borrowings under our Credit Facility. However, there can be no assurance that these transactions will be consummated.

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The Offering

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    There has been no public market for the Series E Preferred Shares prior to this offering. As a result, we cannot be sure that the initial public offering price will be an accurate indication of the price at which the Series E Preferred Shares will trade in the public market after this offering or that there will be an active trading market for the Series E Preferred Shares. For additional information regarding the terms of the Series E Preferred Shares, see "Description of Series E Preferred Shares."

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Summary Financial Data

    The following table contains summary financial data as of and for the years ended December 31, 2000, 1999, 1998 and 1997, as derived from our audited financial statements. Since this information is only a summary, you should refer to our consolidated financial statements and the notes thereto and the "Management's Discussion and Analysis of Financial Condition and Results of Operations," each as appearing in our Annual Report on Form 10-K for the year ended December 31, 2000, incorporated by reference into this prospectus supplement, for additional information.

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(1)

Reflects a non-recurring expense of $637 associated with our reformation as a Maryland real estate investment trust during the first quarter of 1998.

(2)

Reflects non-recurring expense of $1,353 associated with the termination of an advisory agreement during the fourth quarter of 1997.

(3)

The service companies consist of COMI and its subsidiaries.

(4)

We consider Funds from Operations ("FFO") to be meaningful to investors as a measure of the financial performance of an equity REIT when considered with the financial data presented under generally accepted accounting principles ("GAAP"). Under the National Association of Real Estate Investment Trusts' ("NAREIT") definition, FFO means net income (loss) computed using GAAP, excluding gains (or losses) from debt restructuring and sales of property, plus real estate-related depreciation and amortization and after adjustments for unconsolidated partnerships and joint ventures. Further, if the conversion of securities into common shares is dilutive, we exclude any GAAP income allocated to these securities in computing FFO. The FFO we present may not be comparable to the FFO of other REITs since they may interpret the current NAREIT definition of FFO differently or they may not use the current NAREIT definition of FFO. FFO is not the same as cash generated from operating activities or net income determined in accordance with GAAP. FFO is not necessarily an indication of our cash flow available to fund cash needs. Additionally, it should not be used as an alternative to net income when evaluating our financial performance or to cash flow from operating, investing and financing when evaluating our liquidity or ability to make cash distributions or pay debt service.

(5)

We compute adjusted funds from operations—diluted by subtracting straight-line rent adjustments and recurring capital improvements from FFO—diluted.

(6)

We compute payout ratio by dividing total common and convertible preferred share dividends and total distributions reported for the year by FFO—diluted.

(7)

We compute interest coverage by dividing earnings before interest, depreciation and amortization by interest expense. We compute earnings before interest, depreciation and amortization by subtracting property operating and general and administrative expenses from the sum of total revenues and equity in income of the service companies.

(8)

The amounts reported for 1998 and 1997 are restated from amounts previously reported due to a change in NAREIT's definition of FFO.

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CAPITALIZATION

    The following table sets forth our capitalization as of December 31, 2000: (i) on a historical basis; (ii) as adjusted for our January 25, 2001 issuance of Series D Preferred Shares and the application of the net proceeds thereof; and (iii) as further adjusted assuming the sale of Series E Preferred Shares and the application of the net proceeds of this offering as described under "Use of Proceeds." This information set forth in the following table should be read in conjunction with, and is qualified in its entirety by, the consolidated financial statements and the notes thereto in our Annual Report on Form 10-K for the year ended December 31, 2000 incorporated by reference herein:

(footnotes on following page)

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(1)

This table excludes the following transactions. Subsequent to December 31, 2000, we closed a $13,600, seven-year, 7.9% mortgage and repaid $9,046 of indebtedness under our term facility with an affiliate of Deutsche Banc Alex. Brown (our "Term Facility") and all of the then outstanding Mellon Bank loan ($3,983). In addition, we closed on a $26,000, seven-year, 7.9% mortgage and paid off our then outstanding construction loans from Bank of America ($10,160) and Allfirst ($9,204). In March 2001, we received a commitment for a $21,200, seven-year, 7.3% mortgage with AEGON USA Realty Advisors, Inc. to refinance the then outstanding balances of the $11,993 and $6,350 Allfirst loans. On March 21, 2001, we acquired for $2,412 a 40% interest in a joint venture which owns 314,594 square feet of office properties.

(2)

On January 25, 2001, we issued the Series D Preferred Shares to a private investor at a price of $22.00 per share for gross proceeds totaling $11,968. These shares are nonvoting and redeemable for cash at $25.00 per share at our option on or after January 25, 2006. These shares are also convertible, at the option of the holder, on or after January 1, 2004 into common shares at a rate of 2.2 common shares for each Series D Preferred Share. Holders of these shares are entitled to cumulative dividends, payable quarterly (as and if declared by the Board of Trustees). Dividends accrue from the date of issue at the annual rate of $1.00 per share, which is equal to 4% of the $25.00 per share redemption price.

(3)

In connection with this offering, our Board of Trustees authorized 2,000,000 Series E Preferred Shares.

(4)

Excludes 180,000 Series E Preferred Shares that may be issuable upon exercise of the underwriters' over-allotment option.

(5)

Excludes (i) 11,808,208 common shares that may be issued under certain circumstances upon conversion or redemption of outstanding common and preferred units and (ii) 2,330,018 common shares underlying options issued under our option plan and incentive plan outstanding as of December 31, 2000. Subsequent to December 31, 2000, we granted an additional 510,548 stock options under our option plan and incentive plan, with an average exercise price equal to $9.77.

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FINANCIAL RATIOS

Calculation of Ratio of Earnings to Combined Fixed Charges and Preferred Share Dividends

    The following financial ratio measures our ability to repay interest, any preferred share dividends and Series C Preferred Unit distributions from our earnings. Earnings were computed by adding fixed charges (excluding preferred share dividends and capitalized interest) and minority interest of holders of common units in our operating partnership to net income. Fixed charges consist of interest costs, amortization of debt issuance costs and distributions to preferred shareholders and unitholders. This information is given (i) on a historical basis; (ii) as adjusted for our January 25, 2001 issuance of Series D Preferred Shares and the application of the net proceeds thereof; and (iii) as further adjusted assuming the sale of the Series E Preferred Shares and the application of the net proceeds of this offering as described under "Use of Proceeds."

Calculation of Interest and Debt Service Coverage Ratios

    The following table presents financial ratios which measure our ability to repay interest and principal from EBITDA (earnings before mortgage and other interest, income taxes, depreciation and amortization). This information is given (i) on a historical basis; (ii) as adjusted for our January 25, 2001 issuance of Series D Preferred Shares and the application of the net proceeds thereof; and (iii) as further adjusted assuming the sale of the Series E Preferred Shares and the application of the net proceeds of this offering as described under "Use of Proceeds."

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USE OF PROCEEDS

    We intend to contribute the net proceeds from the sale of the Series E Preferred Shares, expected to be approximately $    million after payment of our expenses related to this offering and underwriting discounts and commissions, or $    million if the underwriters' over-allotment option is exercised in full, to our operating partnership in exchange for a preferred interest in our operating partnership. The economic terms of this preferred interest will be substantially equivalent to the economic terms of the Series E Preferred Shares. Our operating partnership intends to use a portion of the amount received from us to repay $28.6 million of outstanding indebtedness under our Credit Facility. An affiliate of Deutsche Banc Alex. Brown, one of the underwriters in this offering, is the lead administrative agent under our Credit Facility. At December 31, 2000, there was outstanding indebtedness of $82.2 million under our Credit Facility, bearing interest at a weighted average interest rate of 8.4% and maturing in May 2001. We have entered into a commitment with an affiliate of Deutsche Banc Alex. Brown whereby we expect the maturity of our Credit Facility to be extended for three years. However, there can be no assurance that this will occur. Our operating partnership will use the remaining net proceeds, if any, for general operating purposes.

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THE COMPANY

History

    Our predecessor company was formed in 1988 as Royale Investments, Inc. to own and acquire retail properties and subsequently became an externally advised REIT. In October 1997, as part of a series of transactions, Royale Investments, Inc. acquired the Mid-Atlantic suburban office operations of The Shidler Group, a nationally recognized private real estate investment company. As a result of these transactions, we relocated our headquarters from Minneapolis to Philadelphia and became internally administered. At that time, Jay Shidler became our Chairman of the Board and Clay Hamlin became our Chief Executive Officer. In January 1998, we changed our name to Corporate Office Properties Trust, Inc., and in March 1998, we were reformed as a Maryland real estate investment trust and changed our name to Corporate Office Properties Trust.

    Our reformation as a Maryland real estate investment trust completed the conversion of The Shidler Group's privately-owned Mid-Atlantic suburban office operations into a public REIT operating format. This transformation resulted from our vision and desire to create a growth-oriented real estate company focused on suburban office properties.

    In April 1998, we completed a public offering of our common shares, which generated $72.7 million of net proceeds from the issuance of 7,500,000 common shares. In connection with this offering, we listed our common shares on the NYSE, where they trade under the symbol "OFC."

    In September 1998, we acquired the property portfolio and management operations of Constellation Real Estate Group, Inc. ("Constellation"), the wholly-owned real estate subsidiary of Baltimore Gas and Electric ("BGE"). Constellation's portfolio consisted principally of (i) 12 suburban office properties totaling 1.2 million rentable square feet, predominantly located in the B/W Corridor and (ii) options to purchase an aggregate 91 acres of land which can support approximately 1.7 million rentable square feet of new office development. The consideration paid in the acquisition of the Constellation portfolio was valued at $186.8 million, and involved the issuance to BGE of 7,030,793 common shares, valued at $10.50 per common share, and 984,308 5.5% Series A Convertible Preferred Shares, valued at $25.00 per share. In addition, we added several key executive officers, including Randall Griffin as our President and Chief Operating Officer and Roger Waesche as a Senior Vice President and our Chief Financial Officer, and two BGE nominees to our Board of Trustees. In September 2000, BGE converted 984,307 Series A Convertible Preferred Shares into 1,845,378 Common Shares. As of December 31, 2000, BGE owned a total of 27.6% of our equity on a fully-diluted basis.

    Since our acquisition of Constellation, we have continued to strategically expand our portfolio and enhance our market presence, predominately in the B/W Corridor market, through our acquisition and development program. Since September 1998 through December 31, 2000, we have invested a total of $314.3 million in acquiring 43 properties and developing seven properties aggregating 2.9 million rentable square feet. As of December 31, 2000, we owned 83 suburban office properties totaling 6.5 million rentable square feet diversified across four select Mid-Atlantic regions. We also have options to acquire an additional 73 acres, which can support approximately 600,000 rentable square feet of new office development.

    We are a fully-integrated and self-managed real estate company with approximately 150 employees focused on the ownership, management, leasing, acquisition and development of suburban office properties. Our executive offices are located at 8815 Centre Park Drive, Suite 400, Columbia, Maryland 21045 and our telephone number is (410) 730-9092.

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Corporate Objectives and Strategies

    Our primary objectives are to achieve sustainable long-term growth in funds from operations per share and to maximize long-term shareholder value. We seek to achieve these objectives by implementing our focused operating and growth strategies. Key elements of our strategy include:

    Suburban Office Focus.  We focus on the ownership, management, leasing, acquisition and development of suburban office properties. We believe suburban properties exhibit among the strongest fundamentals of any real estate property type, and suburban office properties offer us very attractive investment opportunities. The three key factors driving the strong fundamentals of suburban office properties are (i) increasing rental rates, (ii) low vacancy rates, and (iii) a limited supply of new rentable office space.

    Geographic Focus.  We focus on operating in select, demographically strong and growing regions, primarily within the Mid-Atlantic. By concentrating our operations to these regions, we believe we have achieved the critical mass necessary to maximize management efficiencies, operating synergies and competitive advantages through our acquisition, property management and development programs. By focusing within regions where our management has extensive experience and market knowledge, we believe we can achieve regional prominence that will lead to better operating results.

    Office Park Focus.  We focus on owning and operating properties located in established suburban corporate office parks. We believe the suburban office park environment generally attracts longer-term tenants, including high-quality companies seeking to attract and retain quality work forces, because these parks are typically situated along major transportation routes with easy access to support services, amenities and residential communities.

    Corporate Tenants.  To enhance the stability of our cash flow, we typically structure our leases with terms ranging from three to ten years. We focus on leasing to large, high-quality companies with significant space requirements. We believe this strategy enables us to establish long-term relationships with quality tenants and, coupled with our geographic and submarket focus, enhances our ability to become the low-cost provider and the landlord of choice in our targeted markets.

    Acquisition Strategies.  We pursue the acquisition of suburban office properties through our three-part acquisition strategy. This strategy includes targeting: (i) entity acquisitions of significant portfolios along with their management to establish prominent ownership positions in new regions and enhance our management infrastructure; (ii) portfolio purchases to enhance our existing regional positions as well as enter selective new regions; and (iii) opportunistic acquisitions of individual properties in our existing regions. We seek to make acquisitions at attractive yields and below replacement costs. We also seek to increase cash flow and enhance the underlying value of each acquisition through repositioning the properties and capitalizing on existing below market leases and expansion opportunities.

    Property Development Strategies.  We balance our acquisition program through selective development and expansion of suburban office properties as market conditions and leasing opportunities support favorable risk-adjusted returns. We pursue development opportunities principally in response to the needs of existing and prospective new tenants. We develop sites that are in close proximity to our existing properties. We believe developing such sites enhances our ability to effectively meet tenant needs and efficiently provide critical tenant services.

    Tenant Services.  We seek to capitalize on our geographic focus and critical mass of properties in our core regions by providing high level, comprehensive services to our tenants. We conduct our tenant services activities through our investment in COMI. We believe that providing such services is an integral part of our ability to achieve consistently high levels of tenant satisfaction and retention.

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    Internal Growth Strategies.  We aggressively manage our portfolio to maximize the operating performance of each property through: (i) proactive property management and leasing, (ii) achieving operating efficiencies through increasing economies of scale, (iii) renewing tenant leases and re-tenanting at increased rents where market conditions permit and (iv) expanding our tenant and real estate service capabilities. These strategies are designed to promote tenant satisfaction, resulting in higher tenant retention and the attraction of new tenants.

Financing Policy

    We pursue a capitalization strategy aimed at maintaining a flexible capital structure in order to facilitate consistent growth and performance through all real estate and economic market conditions. Key components of our policy include:

    Debt Strategy.  We primarily utilize property-level mortgage debt as opposed to corporate unsecured debt. We believe the commercial mortgage debt market is a more mature and generally a more stable market for real estate companies, which provides us with greater access to capital on a more consistent basis and, generally, on more favorable terms. Additionally, we seek to utilize long-term, fixed-rate debt, which we believe enhances the stability of our cash flow. On a consolidated basis, we seek to maintain a debt service coverage ratio in excess of 1.6x, which we believe is generally consistent with the current minimum investment grade requirement for mortgages securing commercial real estate. We believe this ratio is appropriate for a seasoned portfolio of suburban office buildings. However, despite our current intention to maintain this policy, we are not obligated to do so. We may change this policy without shareholder consent.

    Equity Strategy.  We seek to maximize the benefits of our operating partnership organizational structure by emphasizing the issuance of our operating partnership units as an equity source to finance our property acquisition program. This strategy provides prospective property sellers the ability to defer taxable gains by receiving our units in lieu of cash and reduces the need for us to access the equity and debt markets.

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Property Summary Data

    The following table provides certain information about our properties as of December 31, 2000:

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(1)

This percentage is based upon all signed leases and tenants occupancy as of December 31, 2000.

(2)

Contractual rental revenue plus expense reimbursements annualized as of December 31, 2000.

(3)

This total rent per occupied square foot is the property's total rental revenue divided by that property's occupied square feet as of December 31, 2000.

(4)

The B/W Corridor encompasses Anne Arundel and Howard Counties. Included in this region are six properties located outside of these counties, including three properties in suburban Washington, D.C., two properties in Timonium, Maryland and one property in Baltimore, Maryland.

(5)

This property contains 26,051 square feet which was not delivered as of December 31, 2000 due to construction of initial tenant fit-out. Accordingly, occupancy has been measured on the 91,839 square feet delivered as of December 31, 2000 which is 100% occupied.

(6)

This property is under construction and will contain 78,460 square feet of which 35,248 square feet was occupied as of December 31, 2000. As substantial occupancy was not achieved for this property as of the year end, this building is still considered under development. However, occupancy rates include the 35,248 square feet at year end.

(7)

100% occupancy of this property is anticipated in April 2001.