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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark one)
|X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES AND EXCHANGE ACT OF 1934
For the quarterly period ended MARCH 31, 2001
-----------------
or
| | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES AND
EXCHANGE ACT OF 1934
For the transition period from to
----------------- ----------------------------
Commission file number 0-20047
CORPORATE OFFICE PROPERTIES TRUST
(Exact name of registrant as specified in its charter)
MARYLAND 23-2947217
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
8815 CENTRE PARK DRIVE, SUITE 400, COLUMBIA MD 21045
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (410) 730-9092
----------------------------------------
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
|X| Yes No
On May 10, 2001, 20,601,037 shares of the Company's Common Shares of Beneficial
Interest, $0.01 par value, were issued.
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TABLE OF CONTENTS
FORM 10-Q
PAGE
----
PART I: FINANCIAL INFORMATION
Item 1: Financial Statements:
Consolidated Balance Sheets as of March 31, 2001
(unaudited) and December 31, 2000 3
Consolidated Statements of Operations for the
three months ended March 31, 2001 and 2000 (unaudited) 4
Consolidated Statements of Cash Flows for the three
months ended March 31, 2001 and 2000 (unaudited) 5
Notes to Consolidated Financial Statements 6
Item 2: Management's Discussion and Analysis of Financial Condition
and Results of Operations 19
Item 3: Quantitative and Qualitative Disclosures About Market Risk 26
PART II: OTHER INFORMATION
Item 1: Legal Proceedings 26
Item 2: Changes in Securities 27
Item 3: Defaults Upon Senior Securities 27
Item 4: Submission of Matters to a Vote of Security Holders 27
Item 5: Other Information 27
Item 6: Exhibits and Reports on Form 8-K 27
SIGNATURES 32
2
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CORPORATE OFFICE PROPERTIES TRUST AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
March 31, December 31,
2001 2000
(unaudited)
------------ ------------
ASSETS
Investment in real estate:
Operating properties, net $ 718,554 $ 711,413
Projects under construction or development 46,911 36,558
------------ ------------
Total commercial real estate properties, net 765,465 747,971
Investments in and advances to unconsolidated real estate joint ventures 6,877 3,616
------------ ------------
Investment in real estate 772,342 751,587
Cash and cash equivalents 3,806 4,981
Restricted cash 4,468 2,703
Accounts receivable, net 5,519 3,245
Investment in and advances to other unconsolidated entities 2,159 6,124
Deferred rent receivable 9,335 8,644
Deferred charges, net 15,550 12,905
Prepaid and other assets 6,726 4,501
Furniture, fixtures and equipment, net 1,807 147
------------ ------------
TOTAL ASSETS $ 821,712 $ 794,837
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Mortgage and other loans payable $ 478,913 $ 474,349
Accounts payable and accrued expenses 10,889 10,227
Rents received in advance and security deposits 4,236 3,883
Dividends and distributions payable 7,203 7,090
Fair value of derivatives 1,993 --
Other liabilities 10,243 --
------------ ------------
Total liabilities 513,477 495,549
------------ ------------
Minority interests:
Preferred Units in the Operating Partnership 24,367 24,367
Common Units in the Operating Partnership 79,792 81,069
Other consolidated partnerships 166 124
------------ ------------
Total minority interests 104,325 105,560
------------ ------------
Commitments and contingencies (Note 14)
Shareholders' equity:
Preferred Shares ($0.01 par value; 5,000,000 shares authorized);
1,025,000 designated as Series A Convertible Preferred Shares of
beneficial interest (1 share issued) -- --
1,725,000 designated as Series B Cumulative Redeemable Preferred Shares of
beneficial interest (1,250,000 shares issued with an
aggregate liquidation preference of $31,250) 13 12
544,000 designated as Series D Cumulative Convertible Redeemable Preferred
Shares of beneficial interest (544,000 issued with an
aggregate liquidation preference of $13,600 at March 31, 2001) 5 --
Common Shares of beneficial interest ($0.01 par value; 45,000,000
shares authorized, shares issued of 20,595,537 at March 31, 2001 and
20,575,936 at December 31, 2000) 206 206
Additional paid-in capital 221,683 209,388
Cumulative dividends in excess of net income (12,222) (11,064)
Value of unearned restricted Common Share grants (3,042) (3,399)
Treasury Shares, at cost (166,600 shares) (1,415) (1,415)
Accumulated other comprehensive loss (1,318) --
------------ ------------
Total shareholders' equity 203,910 193,728
------------ ------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 821,712 $ 794,837
============ ============
See accompanying notes to financial statements.
3
CORPORATE OFFICE PROPERTIES TRUST AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
For the three months ended
March 31,
---------------------------
2001 2000
-------- --------
Real Estate Operations:
Revenues
Rental revenue $ 25,619 $ 21,906
Tenant recoveries and other revenue 4,082 3,955
-------- --------
Revenue from real estate operations 29,701 25,861
-------- --------
Expenses
Property operating 8,466 7,608
Interest 8,194 6,934
Amortization of deferred financing costs 383 306
Depreciation and other amortization 4,900 3,873
-------- --------
Expenses from real estate operations 21,943 18,721
-------- --------
Earnings from real estate operations before equity in income
of unconsolidated real estate joint venture 7,758 7,140
Equity in income of unconsolidated real estate joint venture 30 --
-------- --------
Earnings from real estate operations 7,788 7,140
-------- --------
Service operations:
Revenues 1,040 --
Expenses (1,369) --
Equity in income of unconsolidated Service Companies -- 47
-------- --------
Earnings (losses) from service operations (329) 47
-------- --------
General and administrative expense (1,446) (1,348)
-------- --------
Income before minority interests, income taxes, extraordinary item
and cumulative effect of accounting change 6,013 5,839
Minority interests:
Common Units in the Operating Partnership (1,556) (1,634)
Preferred Units in the Operating Partnership (572) (548)
Other consolidated entities 4 (7)
-------- --------
Income before income taxes, extraordinary item and cumulative
effect of accounting change 3,889 3,650
Income tax benefit, net of minority interests 81 --
-------- --------
Income before extraordinary item and cumulative effect
of accounting change 3,970 3,650
Extraordinary item-loss on early retirement of debt, net of
minority interests (70) --
-------- --------
Income before cumulative effect of accounting change 3,900 3,650
Cumulative effect of accounting change, net of minority interests (174) --
-------- --------
NET INCOME 3,726 3,650
Preferred Share dividends (881) (1,120)
-------- --------
NET INCOME AVAILABLE TO COMMON SHAREHOLDERS $ 2,845 $ 2,530
======== ========
BASIC EARNINGS PER COMMON SHARE
Income before extraordinary item and cumulative effect of
accounting change $ 0.15 $ 0.15
Extraordinary item -- --
Cumulative effect of accounting change (0.01) --
-------- --------
Net income $ 0.14 $ 0.15
-------- --------
DILUTED EARNINGS PER COMMON SHARE
Income before extraordinary item and cumulative effect of
accounting change $ 0.15 $ 0.14
Extraordinary item -- --
Cumulative effect of accounting change (0.01) --
-------- --------
Net income $ 0.14 $ 0.14
======== ========
See accompanying notes to financial statements.
4
CORPORATE OFFICE PROPERTIES TRUST AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
(UNAUDITED)
For the three months ended March 31,
------------------------------------
2001 2000
-------- --------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 3,726 $ 3,650
Adjustments to reconcile net income to net cash
provided by operating activities:
Minority interests 2,040 2,189
Depreciation and other amortization 5,047 3,873
Amortization of deferred financing costs 383 306
Equity in income of unconsolidated entities (30) (47)
Extraordinary item - loss on early retirement of debt 106 --
Cumulative effect of accounting change 263 --
Increase in deferred rent receivable (691) (744)
Increase in accounts receivable, restricted cash and
prepaid and other assets (2,217) (697)
Increase in accounts payable, accrued expenses, rents
received in advance and security deposits (960) 2,970
Other 198 --
-------- --------
Net cash provided by operating activities 7,865 11,500
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of and additions to commercial real estate
properties (12,623) (14,316)
Investments in and advances to unconsolidated real estate
joint ventures (3,231) --
Cash from acquisition of Service Companies 568 --
Investments in and advances to other unconsolidated entities (564) (685)
Leasing commissions paid (1,328) (708)
Other (335) (92)
-------- --------
Net cash used in investing activities (17,513) (15,801)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from mortgage and other loans payable 46,090 10,331
Repayments of mortgage and other loans payable (41,566) (845)
Deferred financing costs paid (1,013) (331)
Increase in other liabilities 633 --
Purchase of Treasury Shares -- (52)
Net proceeds from issuance of Preferred Shares 11,894 --
Net proceeds from issuance of Common Shares 424 119
Net proceeds from issuance of share options 148 --
Dividends paid (4,771) (4,384)
Distributions paid (2,449) (2,044)
Other (917) --
-------- --------
Net cash provided by financing activities 8,473 2,794
-------- --------
Net decrease in cash and cash equivalents (1,175) (1,507)
CASH AND CASH EQUIVALENTS
Beginning of period 4,981 2,376
-------- --------
End of period $ 3,806 $ 869
======== ========
See accompanying notes to financial statements.
5
CORPORATE OFFICE PROPERTIES TRUST AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
NOTE 1 ORGANIZATION
Corporate Office Properties Trust ("COPT") and subsidiaries (the "Company")
is a fully integrated and self-managed real estate investment trust ("REIT"). We
focus principally on the ownership, management, leasing, acquisition and
development of suburban office properties located in select submarkets in the
Mid-Atlantic region of the United States. COPT is qualified as a REIT as defined
in the Internal Revenue Code and is the successor to a corporation organized in
1988. As of March 31, 2001, our portfolio included 89 office properties,
including five owned through a joint venture.
We conduct almost all of our operations principally through our operating
partnership, Corporate Office Properties, L.P. (the "Operating Partnership"),
for which we are the managing general partner. The Operating Partnership owns
real estate both directly and through subsidiary partnerships and limited
liability companies ("LLCs"). The Operating Partnership also owns Corporate
Office Management, Inc. ("COMI") (together with its subsidiaries defined as the
"Service Companies"). Prior to January 1, 2001, the Operating Partnership owned
the principal economic interest in COMI but only owned 1% of COMI's voting stock
(see Note 7). A summary of our Operating Partnership's forms of ownership and
the percentage of those ownership forms owned by COPT as of March 31, 2001
follows:
% Owned by COPT
---------------
Common Units 66%
Series A Preferred Units 100%
Series B Preferred Units 100%
Series C Preferred Units 0%
Series D Preferred Units 100%
NOTE 2 BASIS OF PRESENTATION
These notes to our interim financial statements highlight significant
changes to the notes to the financial statements included in our 2000 Annual
Report on Form 10-K. As a result, these notes to our interim financial
statements should be read together with the financial statements and notes
thereto included in our 2000 Annual Report on Form 10-K. The interim financial
statements on the previous pages reflect all adjustments which we believe are
necessary for the fair presentation of our financial position and results of
operations for the interim periods presented. These adjustments are of a normal
recurring nature. The results of operations for such interim periods are not
necessarily indicative of the results for a full year.
We use three different accounting methods to report our investments in
entities: the consolidation method, the equity method and the cost method.
CONSOLIDATION METHOD
We use the consolidation method when we own the majority of the outstanding
voting interests in an entity and can control its operations. This means the
accounts of the entity are combined with our accounts. We eliminate balances and
transactions between companies when we consolidate these accounts. Our
consolidated financial statements include the accounts of:
o COPT;
o the Operating Partnership and its subsidiaries; and
o Corporate Office Properties Holdings, Inc. (we own 100%).
6
The Service Companies became a consolidated subsidiary of the Operating
Partnership effective January 1, 2001 (see Note 7). Prior to that date, we
accounted for our investment in the Service Companies using the equity method of
accounting (discussed below).
EQUITY METHOD
We use the equity method of accounting when we own an interest in an entity
and can exert significant influence over the entity's operations but cannot
control the entity's operations. Under the equity method, we report:
o our ownership interest in the entity's capital as an investment on our
Consolidated Balance Sheets and
o our percentage share of the earnings or losses from the entity in our
Consolidated Statements of Operations.
COST METHOD
We use the cost method of accounting when we own an interest in an entity
and cannot exert significant influence over the entity's operations. Under the
cost method, we report:
o the cost of our investment in the entity as an investment on our
Consolidated Balance Sheets and
o distributions to us of the entity's earnings in our Consolidated
Statements of Operations.
NOTE 3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
USE OF ESTIMATES IN THE PREPARATION OF FINANCIAL STATEMENTS
We make estimates and assumptions when preparing financial statements under
generally accepted accounting principles. These estimates and assumptions affect
various matters, including:
o our reported amounts of assets and liabilities in our Consolidated
Balance Sheets at the dates of the financial statements;
o our disclosure of contingent assets and liabilities at the dates of
the financial statements; and
o our reported amounts of revenues and expenses in our Consolidated
Statements of Operations during the reporting periods.
These estimates involve judgements with respect to, among other things,
future economic factors that are difficult to predict and are often beyond
management's control. As a result, actual amounts could differ from these
estimates.
ACCOUNTING FOR CERTAIN REAL ESTATE JOINT VENTURES
We contributed parcels of land into two real estate joint ventures. Each of
these joint ventures are engaged in the construction of an office building. In
exchange for the contributions of land, we received joint venture interests and
$9.6 million in cash. In each case, we have an option to acquire the joint
venture partners' interests for a pre-determined purchase price over a limited
period of time. We account for our interests in these joint ventures as follows:
o the costs associated with these land parcels at the time of their
respective contributions are reported as projects under construction
on our Consolidated Balance Sheets;
o the cash received from these joint ventures in connection with the
land contributions is reported as other liabilities on our
Consolidated Balance Sheets. These liabilities are being accreted
towards the pre-determined purchase price over the period in which we
have an option to acquire the joint venture partners' interests. We
also report interest expense in connection with the accretion of these
liabilities; and
o once construction of the buildings on these land parcels is complete
and operations commence, we will begin reporting 100% of the revenues
and expenses associated with these properties on our Consolidated
Statements of Operations.
We do not report ongoing construction costs and debt activity for these
projects relating to periods after the respective land contributions.
7
DERIVATIVES
We are exposed to the effect of interest rate changes in the normal course
of business. We use interest rate swap and interest rate cap agreements to
reduce the impact of such interest rate changes. Interest rate differentials
that arise under these contracts are recognized in interest expense over the
life of the respective contracts. We do not use such derivatives for trading or
speculative purposes. We also only enter into contracts with major financial
institutions based upon their credit ratings and other risk factors.
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133 ("SFAS 133"), "Accounting for Derivative
Instruments and Hedging Activities". We adopted this standard beginning January
1, 2001. SFAS 133 establishes accounting and reporting standards for derivative
financial instruments and for hedging activities. It requires that an entity
recognize all derivatives as assets or liabilities in the balance sheet at fair
value with the offset to:
o the accumulated other comprehensive loss component of shareholders'
equity ("AOCL"), net of the share attributable to minority interests,
for any derivatives designated as cash flow hedges to the extent such
derivatives are deemed effective;
o other revenue or expense on our Statement of Operations for any
derivatives designated as cash flow hedges to the extent such
derivatives are deemed ineffective; or
o other revenue or expense on our Statement of Operations for any
derivatives designated as fair value hedges.
We use standard market conventions and techniques such as discounted cash
flow analysis, option pricing models, replacement cost and termination cost in
computing the fair value of derivatives at each balance sheet date.
The following table sets forth derivative contracts we had in place as of
March 31, 2001 and their respective fair market values ("FMV"):
Notional
Nature of Amount One-Month Effective Expiration FMV at
Derivative (in millions) LIBOR base Date Date 3/31/01
---------- ------------- ---------- --------- ---------- --------
Interest rate cap $ 50.0 7.70% 5/25/00 5/31/02 $ 1
Interest rate cap 50.0 7.00% 9/13/00 10/13/01 --
Interest rate cap 25.0 7.00% 10/17/00 10/13/01 --
Interest rate swap 100.0 5.76% 1/2/01 1/2/03 (1,993)
-------
Total $(1,992)
=======
We have designated each of these derivatives as cash flow hedges. At March
31, 2001, the interest rate swap is effective while the interest rate caps are
not effective. At adoption on January 1, 2001, we reduced AOCL and minority
interests in total by $246 as a cumulative effect adjustment to recognize the
net fair value of our interest rate swap contract on that date. We also
recognized an unrealized loss of $263 ($174 net of minority interests' portion)
on the book value associated with these derivatives at January 1, 2001; this
loss is reported as a cumulative effect of an accounting change on our
Consolidated Statements of Operations.
During the three months ended March 31, 2001, we reduced AOCL and minority
interests in total by an additional $1,747 to recognize the decrease in the fair
value of the interest rate swap during that period. We also recognized an
unrealized loss of $5 to recognize the change in the fair value of the interest
rate caps; this loss is included in tenant recoveries and other revenue on the
Consolidated Statements of Operations.
Over time, the unrealized loss held in AOCL and minority interests
associated with our interest rate swap will be reclassified to earnings. Within
the next twelve months, we will reclassify to earnings an estimated $1.1 million
of the balances held in AOCL and minority interests.
MINORITY INTERESTS
As discussed previously, we consolidate the accounts of our Operating
Partnership and its subsidiaries into our financial statements. However, we do
not own 100% of the Operating Partnership. Our Operating Partnership also does
not own 11% of one of its subsidiary partnerships. In addition, COMI does not
own 20% of one of its subsidiaries. The amounts reported for minority interests
on our Consolidated Balance Sheets represent the portion of these consolidated
entities' equity that we do not own. The amounts reported for
8
minority interests on our Consolidated Statements of Operations represent the
portion of these consolidated entities' net income not allocated to us.
EARNINGS PER SHARE ("EPS")
We present both basic and diluted EPS. We compute basic EPS by dividing
income available to common shareholders by the weighted-average number of Common
Shares of beneficial interest ("Common Shares") outstanding during the period.
Our computation of diluted EPS is similar except that:
o the denominator is increased to include the weighted average number of
potential additional Common Shares that would have been outstanding if
securities that are convertible into our Common Shares were converted
and
o the numerator is adjusted to add back any convertible preferred
dividends and any other changes in income or loss that would result
from the assumed conversion into Common Shares.
9
Our computation of diluted EPS does not assume conversion of securities into our
Common Shares if conversion of those securities would increase our diluted EPS
in a given period. A summary of the numerator and denominator for purposes of
basic and diluted EPS calculations is as follows (dollars and shares in
thousands, except per share data):
Three months ended March 31,
----------------------------
2001 2000
-------- --------
Numerator:
Net income available to Common Shareholders $ 2,845 $ 2,530
Add: Cumulative effect of accounting change, net 174 --
Add: Extraordinary item, net 70 --
-------- --------
Numerator for basic earnings per share before
extraordinary item and cumulative effect of
accounting change 3,089 2,530
Income on share options assumed converted (61) --
Add: Series D Preferred Share dividends 100 --
-------- --------
Numerator for diluted earnings per share before
extraordinary item and cumulative effect of
accounting change 3,128 2,530
Less: Extraordinary item, net (70) --
-------- --------
Numerator for diluted earnings per share for net income
before cumulative effect of accounting change 3,058 2,530
Less: Cumulative effect of accounting change, net (174) --
-------- --------
Numerator for diluted earnings per share for net income $ 2,884 $ 2,530
======== ========
Denominator (all weighted averages):
Common Shares - basic 19,982 17,352
Assumed conversion of share options 273 50
Assumed conversion of Common Unit warrants -- 476
Conversion of Series D Preferred Shares 878 --
-------- --------
Denominator for diluted earnings per share 21,133 17,878
======== ========
Basic earnings per Common Share
Income before extraordinary item and cumulative
effect of accounting change $ 0.15 $ 0.15
Extraordinary loss -- --
Cumulative effect of accounting change (0.01) --
-------- --------
Net income $ 0.14 $ 0.15
======== ========
Diluted earnings per Common Share
Income before extraordinary item and cumulative
effect of accounting change $ 0.15 $ 0.14
Extraordinary item -- --
Cumulative affect of accounting change (0.01) --
-------- --------
Net income $ 0.14 $ 0.14
======== ========
Our diluted EPS computation for the three months ended March 31, 2001 only
assumes conversion of share options and Series D Cumulative Convertible
Redeemable Preferred Shares of beneficial interest (the "Series D Preferred
Shares") because conversions of Preferred Units, Series A Convertible Preferred
Shares of beneficial interest (the "Series A Preferred Shares") and Common Units
would increase diluted EPS in that period. Our diluted EPS computation for the
three months ended March 31, 2000 only assumes conversion of share options and
Common Unit Warrants because conversions of Series A Convertible Preferred
Shares, Preferred Units and Common Units would increase diluted EPS in that
period.
10
RECLASSIFICATION
We reclassified certain amounts from prior periods to conform to the
current period presentation of our consolidated financial statements. These
reclassifications did not affect consolidated net income or shareholders'
equity.
RECENT ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133 ("SFAS 133"), "Accounting for Derivative
Instruments and Hedging Activities". We adopted this standard beginning January
1, 2001. SFAS 133 establishes accounting and reporting standards for derivative
financial instruments and for hedging activities. See section above entitled
"Derivatives" for further discussion on this pronouncement.
NOTE 4 COMMERCIAL REAL ESTATE PROPERTIES
Operating properties consisted of the following:
March 31, December 31,
2001 2000
--------- ------------
Land $ 140,620 $ 140,018
Buildings and improvements 615,586 604,666
--------- ---------
756,206 744,684
Less: accumulated depreciation (37,652) (33,271)
--------- ---------
$ 718,554 $ 711,413
========= =========
Projects we had under construction/development consisted of the following:
March 31, December 31,
2001 2000
--------- ------------
Land $24,683 $19,069
Construction in progress 22,228 17,489
------- -------
$46,911 $36,558
======= =======
2001 CONSTRUCTION/DEVELOPMENT
During the three months ended March 31, 2001, we completed the construction
of one office building totaling 78,460 square feet. The building is located in
the Baltimore/Washington Corridor.
As of March 31, 2001, we also had construction underway on four new
buildings and development underway on two parcels of land.
NOTE 5 INVESTMENTS IN UNCONSOLIDATED REAL ESTATE JOINT VENTURE
On February 1, 2001, we acquired an 80% interest in MOR Montpelier LLC, a
newly organized joint venture developing a parcel of land located in Columbia,
Maryland.
On March 7, 2001, we acquired a 40% interest in Airport Square Partners,
LLC, a newly organized joint venture. On March 21, 2001, this joint venture
acquired five office buildings located in the Baltimore/Washington Corridor for
$33,617 using cash from member capital contributions and proceeds from a $25,000
mortgage loan payable. We are acting as guarantor for the payment of 25% of this
mortgage loan payable, which amount is not to exceed $6,250.
11
Our investment in and advances to unconsolidated real estate joint ventures
are accounted for using the equity method of accounting and included the
following:
March 31, December 31,
2001 2000
--------- ------------
Gateway 67, LLC $3,697 $3,616
Airport Square Partners, LLC 2,290 --
MOR Montpelier LLC 890 --
------ ------
$6,877 $3,616
====== ======
NOTE 6 ACCOUNTS RECEIVABLE
Our accounts receivable are reported net of an allowance for bad debts of
$101 at March 31, 2001 and $74 at December 31, 2000.
NOTE 7 INVESTMENT IN AND ADVANCES TO OTHER UNCONSOLIDATED ENTITIES
From September 1998 through December 2000, the Operating Partnership owned
95% of the capital stock in COMI, including 1% of the voting common stock. COMI
provided us with asset management, managerial, financial and legal support
during that time period. On January 1, 2001, we acquired all of the stock in
COMI which we did not previously own for $26 and all of COMI's employees became
employees of the Operating Partnership. We also elected to have COMI treated as
a Taxable REIT Subsidiary under the REIT Moderization Act effective January 1,
2001.
We accounted for our investment in COMI and its subsidiaries using the
equity method of accounting through December 31, 2000. Since we own all of the
voting interests in COMI and control its operations effective January 1, 2001,
we began consolidating the accounts of COMI and its subsidiaries with our
accounts on that date.
On February 28, 2001, we acquired a 7.7% interest in Paragon Smart
Technologies, LLC ("Paragon"), an entity that provides a wide range of computer
consulting services to businesses. Paragon also provides broadband internet
access and companion services to commercial real estate owners in the
Baltimore/Washington Corridor. We account for our investment in Paragon using
the equity method of accounting.
Our investment in and advances to other unconsolidated entities included
the following:
March 31, December 31,
2001 2000
--------- ------------
Investment in MediTract, LLC $1,621 $1,621
Investment in Paragon 538 --
Total investment in Service Companies -- 4,503(1)
------ ------
Total $2,159 $6,124
====== ======
(1) Our total investment in the Service Companies at December 31, 2000 included
a $2,005 note receivable and $2,001 in advances receivable.
12
NOTE 8 DEFERRED CHARGES
Deferred charges consisted of the following:
March 31, December 31,
2001 2000
--------- ------------
Deferred leasing costs $ 12,128 $ 10,800
Deferred financing costs 6,914 6,108
Deferred other 1,975 --
-------- --------
21,017 16,908
Accumulated amortization (5,467) (4,003)
-------- --------
Deferred charges, net $ 15,550 $ 12,905
======== ========
NOTE 9 SHAREHOLDERS' EQUITY
In January 2001, we issued 544,000 Series D Preferred Shares to a foreign
trust at a price of $22.00 per share for proceeds totaling $11,968. These shares
are nonvoting and are redeemable for cash at $25.00 per share at our option on
or after January 25, 2006. These shares are also convertible by the holder on or
after January 1, 2004 into Common Shares on the basis 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. We
contributed the net proceeds to our Operating Partnership in exchange for
544,000 Series D Preferred Units. The Series D Preferred Units carry terms that
are substantially the same as the Series D Preferred Shares.
On December 16, 1999, we issued 471,875 Common Shares subject to forfeiture
restrictions to certain officers. The forfeiture restrictions of specified
percentages of these shares lapse annually through 2004 upon the Company's
attainment of defined earnings or shareholder return growth targets. These
shares may not be sold, transferred or encumbered while the forfeiture
restrictions are in place. Forfeiture restrictions lapsed on 48,437 of these
shares in 2001.
We issued 19,601 Common Shares in connection with the exercise of share
options in 2001.
A summary of the activity in the accumulated other comprehensive loss
component of shareholders' equity for the three months ended March 31, 2001
follows:
Balance, December 31, 2000 $ --
Cumulative effect adjustment on January 1, 2001 for unrealized loss on
interest rate swap, net of minority interests (163)
Unrealized loss on interest rate swap for three months ended March 31, 2001,
net of minority interests (1,155)
-------
Balance, March 31, 2001 $(1,318)
=======
13
NOTE 10 DIVIDENDS AND DISTRIBUTIONS
The following summarizes our dividends/distributions for the three months
ended March 31, 2001:
Dividend/
Distribution Total
Per Dividend/
Record Date Payable Date Share/Unit Distribution
----------- ------------ ------------- ------------
Series B Preferred Shares:
Fourth Quarter 2000 December 29, 2000 January 16, 2001 $ 0.625 $ 781
First Quarter 2001 March 31, 2001 April 16, 2001 $ 0.625 $ 781
Series D Preferred Shares:
First Quarter 2001 March 31, 2001 April 16, 2001 $0.2222 $ 121
Common Shares:
Fourth Quarter 2000 December 29, 2000 January 16, 2001 $ 0.20 $3,990
First Quarter 2001 March 31, 2001 April 16, 2001 $ 0.20 $4,003
Series C Preferred Units:
Fourth Quarter 2000 December 29, 2000 January 16, 2001 $0.5625 $ 572
First Quarter 2001 March 31, 2001 April 16, 2001 $0.5625 $ 572
Common Units:
Fourth Quarter 2000 December 29, 2000 January 16, 2001 $ 0.20 $1,878
First Quarter 2001 March 31, 2001 April 16, 2001 $ 0.20 $1,878
14
NOTE 11 SUPPLEMENTAL INFORMATION TO STATEMENTS OF CASH FLOWS
For the three months ended
March 31,
---------------------------
2001 2000
---- ----
Supplemental schedule of non-cash investing and
financing activities:
Acquisition of Service Companies:
Investments in and advances to other unconsolidated
entities $(4,529) $ --
Restricted cash 5 --
Accounts receivable, net 2,005 --
Deferred costs, net 1,537 --
Prepaid and other assets 1,033 --
Furniture, fixtures and equipment, net 1,603 --
Mortgage and other loans payable (40) --
Accounts payable and accrued expenses (2,106) --
Rents received in advance and security deposits (20) --
Other liabilities (10) --
Minority interest (46) --
------- -------
Cash from acquisition of Service Companies $ (568) $ --
======= =======
Debt assumed in connection with acquisitions $ -- $ 3,078
======= =======
Decrease in accrued capital improvements $ (348) $(1,246)
======= =======
Reclassification of other liabilities from projects under
construction or development (see Note 3) $ 9,600 $ --
======= =======
Dividends/distributions payable $ 7,203 $ 6,768
======= =======
Book value of derivatives reclassified from deferred
costs, net to fair value of derivatives $ 268 $ --
======= =======
Decrease in fair value of derivatives applied to
accumulated other comprehensive loss and minority
interests $ 1,993 $ --
======= =======
Adjustments to minority interests resulting from changes
in ownership of Operating Partnership by COPT $ (197) $ (600)
======= =======
Decrease in minority interests and increase in
shareholders' equity in connection with conversion of
Common Units into Common Shares $ -- $ 6,965
======= =======
NOTE 12 INCOME TAXES
Corporate Office Properties Trust elected to be treated as a REIT under
Sections 856 through 860 of the Internal Revenue Code. As a REIT, we generally
will not be subject to Federal income tax if we distribute at least 90% of our
REIT taxable income to our shareholders and satisfy certain other requirements
(see discussion below). If we fail to qualify as a REIT in any tax year, we will
be subject to Federal income tax on our taxable income at regular corporate
rates.
In December 1999, legislation containing the REIT Modernization Act was
signed into law. This law was effective January 1, 2001 and included the
following changes:
15
o REITs are now allowed to own up to 100% investments in the stock of a
taxable REIT subsidiary ("TRS"), subject to certain restrictions
relating to the size of such investments. TRSs can provide services to
REIT tenants and others without adversely impacting the income
requirements to which REITs are subject;
o REITs are no longer able to enter into new arrangements to own more
than 10% of the vote or value of the securities in a non-REIT C
corporation unless such C corporation elects to be treated as a TRS;
and
o the percentage of REIT taxable income that REITs are required to
distribute to shareholders was reduced from 95% to 90%.
On January 1, 2001, we acquired all of the stock in COMI which we did not
previously own. We also elected to have COMI treated as a TRS effective January
1, 2001. COMI is subject to Federal and state income taxes. COMI's provision for
income tax benefit for the three months ended March 31, 2001 consisted of the
following:
Current
Federal $ 97
State 21
----
118
----
Deferred
Federal 3
State 1
----
4
----
Total $122
====
Items contributing to temporary differences that lead to deferred taxes
include depreciation and amortization, certain accrued compensation and
compensation made in the form of contributions to a deferred nonqualified
compensation plan.
COMI's combined federal and state effective tax rate for the three months
ended March 31, 2001 was approximately 40%.
NOTE 13 INFORMATION BY BUSINESS SEGMENT
We have six segments: Baltimore/Washington Corridor office, Greater
Philadelphia office, Northern/Central New Jersey office, Greater Harrisburg
office, retail and service operations. Our office properties represent our
core-business. We manage our retail properties and service operations each as
single segments since they are considered outside of our core-business.
16
The table below reports segment financial information. Our retail and
service operations segments are not separately reported since they do not meet
the reporting thresholds. We measure the performance of our office property
segments based on total revenues less property operating expenses. Accordingly,
we do not report other expenses by segment in the table below.
Baltimore/ Northern/
Washington Greater Central New Greater
Corridor Philadelphia Jersey Harrisburg
Office Office Office Office Other Total
---------- ------------ ----------- ---------- ------- --------
Three months ended March 31, 2001:
Revenues from real estate operations $ 18,573 $ 2,506 $ 4,922 $ 2,789 $ 911 $ 29,701
Property operating expenses 5,958 20 1,894 594 -- 8,466
-------- -------- -------- -------- -------- --------
Income from real estate operations $ 12,615 $ 2,486 $ 3,028 $ 2,195 $ 911 $ 21,235
======== ======== ======== ======== ======== ========
Commercial real estate property
expenditures $ 19,381 $ 141 $ 1,657 $ 696 $ -- $ 21,875
======== ======== ======== ======== ======== ========
Segment assets at March 31, 2001 $493,589 $106,070 $119,849 $ 71,417 $ 30,787 $821,712
======== ======== ======== ======== ======== ========
Three months ended March 31, 2000:
Revenues from real estate operations $ 15,830 $ 2,506 $ 4,706 $ 2,395 $ 424 $ 25,861
Property operating expenses 5,149 29 1,786 583 61 7,608
-------- -------- -------- -------- -------- --------
Income from real estate operations $ 10,681 $ 2,477 $ 2,920 $ 1,812 $ 363 $ 18,253
======== ======== ======== ======== ======== ========
Commercial real estate property
expenditures $ 13,093 $ -- $ 2,669 $ 346 $ 40 $ 16,148
======== ======== ======== ======== ======== ========
Segment assets at March 31, 2000 $421,901 $107,143 $114,016 $ 70,966 $ 20,774 $734,800
======== ======== ======== ======== ======== ========
The following table reconciles our income from operations for reportable
segments to income before income taxes, extraordinary item and cumulative effect
of accounting change as reported in our Consolidated Statements of Operations.
Three Months Ended
March 31,
-------------------------
2001 2000
-------- --------
Income from operations for reportable segments $ 21,235 $ 18,253
Equity in income of unconsolidated real estate joint
venture 30 --
Earnings (losses) from service operations (329) 47
Less:
General and administrative (1,446) (1,348)
Interest (8,194) (6,934)
Amortization of deferred financing costs (383) (306)
Depreciation and other amortization (4,900) (3,873)
Minority interests (2,124) (2,189)
-------- --------
Income before income taxes, extraordinary item and
cumulative effect of accounting change $ 3,889 $ 3,650
======== ========
We did not allocate interest expense, amortization of deferred financing
costs and depreciation and other amortization to segments since they are not
included in the measure of segment profit reviewed by management. We also did
not allocate equity in income of unconsolidated real estate joint venture,
earnings (losses) from service operations, general and administrative and
minority interests since these items represent general corporate items not
attributable to segments.
NOTE 14 COMMITMENTS AND CONTINGENCIES
In the normal course of business, we are involved in legal actions arising
from our ownership and administration of properties. In management's opinion,
any liabilities that may result are not expected to have a materially adverse
effect on our financial position, operations or liquidity. We are subject to
various federal, state and local environmental regulations related to our
property ownership and operation. We have performed
17
environment assessments of our properties the results of which have not revealed
any environmental liability that we believe would have a materially adverse
effect on our financial position, operations or liquidity.
We are under contract to acquire three buildings located in Columbia,
Maryland totaling 141,530 square feet for approximately $15,200.
NOTE 15 PRO FORMA FINANCIAL INFORMATION (UNAUDITED)
We accounted for our 2000 and 2001 acquisitions and dispositions using the
purchase method of accounting. We included the results of operations for the
acquisitions in our Consolidated Statements of Operations from their respective
purchase dates through March 31, 2001.
We prepared the pro forma condensed consolidated financial information
presented below as if all of our 2000 and 2001 acquisitions had occurred on
January 1, 2000. Accordingly, we were required to make pro forma adjustments
where deemed necessary. The pro forma financial information is unaudited and is
not necessarily indicative of the results which actually would have occurred if
these acquisitions had occurred on January 1, 2000, nor does it intend to
represent our results of operations for future periods.
Three months ended March 31,
----------------------------
2001 2000
---------- ----------
Pro forma total revenues $ 30,741 $ 27,136
Pro forma net income available to Common Shareholders $ 2,845 $ 2,524
Pro forma earnings per Common Share
Basic $ 0.14 $ 0.15
Diluted $ 0.14 $ 0.15
NOTE 16 SUBSEQUENT EVENTS
In April 2001, we completed the sale of 1,150,000 Series E Cumulative
Redeemable Preferred Shares of beneficial interest ("Series E Preferred Shares)
to the public at a price of $25.00 per share. These shares are nonvoting and are
redeemable for cash at $25 per share at our option on or after July 15, 2006.
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 $2.5625 per share, which is equal to 10.25% of the
$25.00 per share redemption price. We contributed the net proceeds to our
Operating Partnership in exchange for 1,150,000 Series E Preferred Units. The
Series E Preferred Units carry terms that are substantially the same as the
Series E Preferred Shares.
18
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
In this section, we discuss our financial condition and results of
operations for the three months ended March 31, 2001. This section includes
discussions on:
o why various components of our Consolidated Statements of Operations
changed for the three months ended March 31, 2001 compared to the same
period in 2000;
o what our primary sources and uses of cash were in the three months
ended March 31, 2001;
o how we raised cash for acquisitions and other capital expenditures
during the three months ended March 31, 2001;
o how we intend to generate cash for future capital expenditures; and
o the computation of our funds from operations.
You should refer to our consolidated financial statements and accompanying
notes and operating data variance analysis set forth below as you read this
section.
This section contains "forward-looking" statements, 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 any 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 and financing
availability; interest rates; 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 our most recent
Annual Report on Form 10-K under the heading "Risk Factors".
19
CORPORATE OFFICE PROPERTIES TRUST
OPERATING DATA VARIANCE ANALYSIS
(DOLLARS FOR THIS TABLE ARE IN THOUSANDS, EXCEPT PER SHARE DATA)
Three Months Ended March 31,
-------------------------------------------------------
2001 2000 Variance %Change
---- ---- -------- -------
Real Estate Operations:
Revenues
Rental revenue $ 25,619 $ 21,906 $ 3,713 17%
Tenant recoveries and other revenue 4,082 3,955 127 3%
-------- -------- --------
Revenues from real estate operations 29,701 25,861 3,840 15%
-------- -------- --------
Expenses
Property operating 8,466 7,608 858 11%
Interest and amortization of deferred
financing costs 8,577 7,240 1,337 18%
Depreciation and other amortization 4,900 3,873 1,027 27%
-------- -------- --------
Expenses from real estate operations 21,943 18,721 3,222 17%
-------- -------- --------
Earnings from real estate operations before
equity in income of unconsolidated real
estate joint venture 7,758 7,140 618 9%
Equity in income of unconsolidated real estate
joint venture 30 -- 30 N/A
-------- -------- --------
Earnings from real estate operations 7,788 7,140 648 9%
Earnings (losses) from service operations (329) 47 (376) (800%)
General and administrative (1,446) (1,348) (98) 7%
-------- -------- --------
Income before minority interests, income
taxes, extraordinary item and cumulative
effect of accounting change 6,013 5,839 174 3%
Minority interests (2,124) (2,189) 65 (3%)
Income tax benefit, net 81 -- 81 N/A
Extraordinary item - loss on early retirement
of debt, net (70) -- (70) N/A
Cumulative effect of accounting change, net (174) -- (174) N/A
-------- -------- --------
Net income 3,726 3,650 76 2%
Preferred Share dividends (881) (1,120) 239 (21%)
-------- -------- --------
Net income available to Common Shareholders $ 2,845 $ 2,530 $ 315 12%
======== ======== ========
Basic earnings per Common Share
Income before extraordinary item and
cumulative effect of accounting change $ 0.15 $ 0.15 $ -- --
Net income $ 0.14 $ 0.15 $ (0.01) (7%)
Diluted earnings per Common Share
Income before extraordinary item and
cumulative effect of accounting change $ 0.15 $ 0.14 0.01 7%
Net income $ 0.14 $ 0.14 -- --
20
RESULTS OF OPERATIONS
COMPARISON OF THE THREE MONTHS ENDED MARCH 31, 2001 AND 2000
Our revenues from real estate operations increased $3.8 million or 15%, of
which $3.7 million was generated by rental revenue. Included in this change is
the following:
o $3.6 million increase attributable to two properties acquired and
seven newly-constructed properties placed in service during 2000 and
2001;
o $787,000 increase attributable to fees earned for other real estate
services;
o $151,000 decrease attributable to 76 office properties owned
throughout both reporting periods that includes the following:
o $961,000 decrease in tenant recoveries and other revenue due
primarily to a decrease in anticipated operating cost levels in
2001 compared to 2000 and a change in our tenant composition and
o $809,000 increase in rental revenue due primarily to additional
lease cancellation revenue, increased occupancy at certain of our
properties and increases in rental rates on renewed space; and
o $355,000 decrease attributable to properties sold during 2000.
Our expenses from real estate operations increased $3.2 million or 17% due
to the effects of the increases in property operating, interest expense and
amortization of deferred financing costs and depreciation and other amortization
described below.
Our property operating expenses increased $858,000 or 11%. Included in this
change is the following:
o $856,000 increase attributable to two properties acquired and seven
newly-constructed properties placed in service during 2000 and 2001;
o $86,000 increase attributable to 76 office properties owned throughout
both reporting periods; and
o $84,000 decrease attributable to properties sold during 2000.
Our interest expense and amortization of deferred financing costs increased
$1.3 million or 18% due primarily to a 17% increase in our average outstanding
debt balance resulting from our 2000 and 2001 acquisitions and construction
activity. Our depreciation and other amortization expense increased $1.0 million
or 27%, $658,000 of which is attributable to two properties acquired and seven
newly-constructed properties placed in service during 2000 and 2001.
Our earnings from service operations decreased $376,000 due in part to an
increase in the organizational infrastructure of certain of the Service
Companies in anticipation of future growth and the absence of our third party
property management business due to its sale in July 2000. Our general and
administrative expenses increased $98,000 or 7%.
As a result of the above factors, income before minority interests, income
taxes, extraordinary items and cumulative effect of accounting change increased
by $174,000 or 3%. The amounts reported for minority interests on our
Consolidated Statements of Operations represent primarily the portion of the
Operating Partnership's net income not allocated to us. Our income allocation to
minority interests decreased $65,000 or 3%. Our income tax benefit of $122,000
in 2001 was due to our losses from the service operations that reside in our
taxable REIT subsidiary.
Our income available to Common Shareholders increased $315,000 or 12% due
to the factors discussed above combined with a $239,000 decrease in Preferred
Share dividends, offset by a $70,000 increase in extraordinary losses on early
retirement of debt and a $174,000 loss due to the cumulative effect of an
accounting change resulting from our adoption of Statement of Financial
Accounting Standards No. 133 (discussed below). Our diluted earnings per share
on net income of $0.14 equaled that of the three months ended March 31, 2000.
21
LIQUIDITY AND CAPITAL RESOURCES
Cash provided from operations represented our primary source of liquidity
to fund dividends and distributions, pay debt service and fund working capital
requirements. We expect to continue to use cash provided by operations to meet
our short-term capital needs, including all property expenses, general and
administrative expenses, debt service, dividend and distribution requirements
and recurring capital improvements and leasing commissions. We do not anticipate
borrowing to meet these requirements.
We historically have financed our property acquisitions using a combination
of borrowings secured by our properties, proceeds from sales of properties and
the equity issuances of Common and Preferred Units in our Operating Partnership
and Common and Preferred Shares. We use our secured revolving credit facility
with Deutsche Banc Alex. Brown (the "Revolving Credit Facility") to finance much
of our investing and financing activities. We pay down our Revolving Credit
Facility using proceeds from long-term borrowings collateralized by our
properties as attractive financing conditions arise and equity issuances as
attractive equity market conditions arise. We also have a $50.0 million line of
credit with Prudential Securities Credit Corporation (the "Prudential Credit
Facility"). Amounts available under the Revolving Credit Facility and the
Prudential Credit Facility are generally computed based on 65% of the appraised
value of properties pledged as collateral. As of May 7, 2001, the maximum amount
available under our Revolving Credit Facility was $105.8 million, of which $50.3
million was unused. As of May 7, 2001, the maximum amount available under the
Prudential Credit Facility was $29.1 million all of which was borrowed.
As of March 31, 2001, we had $132.4 million in mortgage and other loans
payable maturing in 2001. Included in these 2001 loan maturities is a $91.0
million loan that may be extended for a one-year period, subject to certain
conditions. As of March 31, 2001, we were in compliance with the necessary
conditions for us to extend this loan. We expect to repay the remaining balance
of the 2001 loan maturities through a combination of borrowings from existing
credit facilities and new loans and cash from operations.
We expect to meet our long-term capital needs through a combination of cash
from operations, additional borrowings from existing credit facilities and new
loans and additional equity issuances of Common Shares, Preferred Shares, Common
Units and/or Preferred Units.
We are under contract to acquire three buildings located in Columbia,
Maryland totaling 141,530 square feet for approximately $15.2 million. We expect
this acquisition to occur in May 2001. The acquisition will initially be
financed using borrowings from our Revolving Credit Facility. We have no other
material contractual obligations as of March 31, 2001 for property acquisitions
or material capital costs other than the completion of construction and
development projects that were underway and tenant improvements and leasing
costs in the ordinary course of business.
22
Mortgage and other loans payable at March 31, 2001 consisted of the
following (dollars in thousands):
Deutsche Banc Alex. Brown, Term Credit Facility, LIBOR + 1.75%, maturing October 2001(1) $ 90,954
Teachers Insurance and Annuity Association of America, 6.89%, maturing November 2008 81,788
Deutsche Banc Alex. Brown, Revolving Credit Facility, LIBOR + 1.75%, maturing March 2004 74,000
Teachers Insurance and Annuity Association of America, 7.72%, maturing October 2006 58,818
Prudential Securities Credit Corp., LIBOR + 1.5%, maturing June 2001 29,091
Mutual of New York Life Insurance Company, 7.79%, maturing August 2004 27,276
State Farm Life Insurance Company, 7.9%, maturing April 2008 26,000
Transamerica Life Insurance and Annuity Company, 8.3%, maturing October 2005 17,542
IDS Life Insurance Company, 7.9%, maturing March 2008 13,600
Allfirst Bank, LIBOR + 1.75%, maturing May 2002 11,918
Teachers Insurance and Annuity Association of America, 8.35%, maturing October 2006 7,947
Provident Bank of Maryland, LIBOR + 1.75%, maturing July 2001(2) 7,000
Summit Bank, LIBOR + 1.75%, maturing February 2003 6,854
Allfirst Bank, LIBOR + 1.75%, maturing July 2002 (3) 6,500
Allfirst Bank, LIBOR + 1.75%, maturing May 2002 (4) 6,473
Aegon USA Realty Advisors, Inc., 8.29%, maturing May 2007 6,002
Provident Bank of Maryland, LIBOR + 1.75%, maturing July 2002 (5) 3,623
Bank of America, LIBOR + 1.75%, maturing September 2001 2,000
Seller loan, 8.0%, maturing May 2007 1,527
--------
$478,913
========
(1) May be extended for a one-year period, subject to certain conditions.
(2) Loan may be extended for a three-month period, subject to certain
conditions.
(3) May be extended for a one-year period, subject to certain conditions.
(4) Construction loan with a total commitment of $9,325.
(5) Construction loan with a total commitment of $11,855. Loan may be extended
for a one-year period subject to certain conditions.
INVESTING AND FINANCING ACTIVITIES FOR THE THREE MONTHS ENDED MARCH 31, 2001:
During the three months ended March 31, 2001, we completed the construction
of one office building totaling 78,460 square feet. Costs incurred on this
building through March 31, 2001 totaled $13.1 million. We have a $9.3 million
construction loan facility for this building of which $6.5 million was borrowed
through March 31, 2001. The balance of the costs was funded primarily using
proceeds from the Revolving Credit Facility and cash from operations.
As of March 31, 2001, we had construction activities underway on four new
buildings totaling 491,000 square feet that were 43% pre-leased. Estimated costs
upon completion for these projects total approximately $82.6 million. Costs
incurred on these buildings through March 31, 2001 totaled $30.9 million. We
have construction loan facilities in place totaling $61.9 million to finance the
construction of these projects. Borrowings under these facilities totaled $5.3
million at March 31, 2001. We also used borrowings from our Revolving Credit
Facility and proceeds from debt refinancings to fund these activities. In
addition, we used $9.6 million in contributions from joint venture partners to
finance the construction of two of these buildings.
As of March 31, 2001, we had development activities underway on two parcels
of land.
During the three months ended March 31, 2001, our investments in
unconsolidated real estate joint ventures increased by $3.2 million primarily
due to our investment in two new joint ventures, Airport Square Partners, LLC
and MOR Montpelier LLC.
During the three months ended March 31, 2001, we borrowed $46.1 million
under mortgages and other loans payable other than our Revolving Credit
Facility, the proceeds of which were used as follows:
23
o $32.3 million to repay other loans and
o the balance to finance construction activities and fund cash reserves.
In January 2001, we issued 544,000 Series D Preferred Shares to a foreign
trust at a price of $22.00 per share for proceeds totaling approximately $12.0
million. These shares are nonvoting and are redeemable for cash at $25.00 per
share at our option on or after January 25, 2006. These shares are also
convertible by the holder on or after January 1, 2004 into Common Shares on the
basis 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. We contributed the net proceeds to our Operating Partnership
in exchange for 544,000 Series D Preferred Units. The Series D Preferred Units
carry terms that are substantially the same as the Series D Preferred Shares.
The Operating Partnership used most of the proceeds to pay down the Revolving
Credit Facility.
INVESTING AND FINANCING ACTIVITIES SUBSEQUENT TO THE THREE MONTHS ENDED MARCH
31, 2001:
In April 2001, we obtained a $21.2 million mortgage loan payable from
Transamerica Occidental Life Insurance Company, $18.4 million of which was used
to repay variable rate loans maturing in 2002. The loan carries a fixed interest
rate of 7.3% and matures on May 1, 2008.
In April 2001, we completed the sale of 1,150,000 Series E Preferred Shares
to the public at a price of $25.00 per share. These shares are nonvoting and are
redeemable for cash at $25 per share at our option on or after July 15, 2006.
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 $2.5625 per share, which is equal to 10.25% of the
$25.00 per share redemption price. We contributed the net proceeds to our
Operating Partnership in exchange for 1,150,000 Series E Preferred Units. The
Series E Preferred Units carry terms that are substantially the same as the
Series E Preferred Shares. The Operating Partnership used most of the proceeds
to pay down our Revolving Credit Facility.
STATEMENT OF CASH FLOWS
We generated net cash flow from operating activities of $7.9 million for
the three months ended March 31, 2001, a decrease of $3.6 million from the three
months ended March 31, 2000. Our decrease in cash flows from operating
activities is due primarily to significant amounts due for tenant improvement
work as of March 31, 2001. Our net cash flow used in investing activities for
the three months ended March 31, 2001 increased $1.7 million from the three
months ended March 31, 2000 due primarily to $3.2 million invested in
unconsolidated real estate joint ventures during the three months ended March
31, 2001. Our net cash flow provided by financing activities for the three
months ended March 31, 2001 increased $5.7 million from the three months ended
March 31, 2000 due primarily to a $35.8 million increase in proceeds from
mortgage and other loans payable and an $11.9 million increase in proceeds from
the issuance of our Series D Preferred Shares offset by a $40.7 million increase
in repayments of mortgage and other loans payable.
FUNDS FROM OPERATIONS
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 generally
accepted accounting principles, 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
24
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. Our FFO for the three months ended March 31, 2001 and 2000 are
summarized in the following table:
(Dollar and shares for this table are in thousands)
For the three months
ended March 31,
----------------------
2001 2000
-------- --------
Income before minority interests, income taxes,
extraordinary item and cumulative effect of
accounting change $ 6,013 $ 5,839
Add: Real estate related depreciation and
amortization 4,805 3,850
Less: Preferred Unit distributions (572) (548)
Less: Preferred Share dividends (881) (1,120)
Less: Minority interests in other consolidated
entities 4 (7)
Add: Income tax benefit, gross 122 --
-------- --------
Funds from operations 9,491 8,014
Add: Preferred Unit distributions 572 548
Add: Convertible Preferred Share dividends 100 338
Income on share options assumed converted (61) --
-------- --------
Funds from operations assuming conversion of share
options, Common Unit warrants, Preferred Units
and Preferred Shares 10,102 8,900
Less: Straight line rent adjustments (690) (742)
Less: Recurring capital improvements (1,116) (729)
-------- --------
Adjusted funds from operations assuming conversion of
share options, Common Unit warrants, Preferred Units
and Preferred Shares $ 8,296 $ 7,429
======== ========
Weighted average Common Shares 19,982 17,352
Conversion of weighted average Common Units 9,388 10,281
-------- --------
Weighted average Common Shares/Units 29,370 27,633
Assumed conversion of share options 273 50
Assumed conversion of Common Unit warrants -- 476
Conversion of weighted average convertible
Preferred Shares 878 1,845
Conversion of weighted average Preferred Units 2,421 2,321
-------- --------
Weighted average Common Shares/Units assuming
conversion of share options, Common Unit warrants,
Preferred Units and Preferred Shares 32,942 32,325
======== ========
INFLATION
We have not been significantly impacted by inflation during the periods
presented in this report. This is mostly because of the relatively low inflation
rates in our markets. Most of our tenants are obligated to pay their share of a
building's operating expenses to the extent such expenses exceed amounts
established in their leases that are based on historical expense levels. In
addition, some of our tenants are obligated to pay their share of all of a
building's operating expenses. These arrangements reduce our exposure to
increases in such costs resulting from inflation.
25
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We are exposed to certain market risks, the most predominant of which is
changes in interest rates. Increases in interest rates can result in increased
interest expense under our Revolving Credit Facility and our other mortgage
loans payable carrying variable interest rate terms. Increases in interest rates
can also result in increased interest expense when our loans payable carrying
fixed interest rate terms mature and need to be refinanced. Our debt strategy
favors long-term, fixed rate, secured debt over variable-rate debt to minimize
the risk of short-term increases in interest rates. As of March 31, 2001, 50% of
our mortgage and other loans payable balance carried fixed interest rates. We
also use interest rate swap and interest rate cap agreements to reduce the
impact of interest rate changes.
The following table sets forth our long-term debt obligations, principal
cash flows by scheduled maturity, weighted average interest rates and estimated
fair market value ("FMV") at March 31, 2001 (dollars in thousands):
For the Period Ended December 31,
-----------------------------------------------------------
2001(1) 2002(2) 2003 2004 2005 Thereafter Total FMV
-------- ------- ------ ------- ------- ---------- -------- --------
Long term debt:
Fixed rate $ 2,896 $ 4,163 $4,486 $30,379 $20,918 $177,658 $240,500 $255,133
Average interest rate 7.50% 7.51% 7.51% 7.52% 7.53% 7.30%
Variable rate $129,497 $28,545 $6,371 $74,000 $ -- $ -- $238,413 $238,413
Average interest rate 6.98% 7.03% 7.03% 7.03% -- --
(1) Includes $91.0 million maturity in October that may be extended for a
one-year period, subject to certain conditions.
(2) Includes $10.1 million in maturities in July that may be extended for
one-year terms, subject to certain conditions.
The following table sets forth derivative contracts we had in place as of
March 31, 2001 and their respective fair market values ("FMV"):
Notional FMV at
Nature of Amount One-Month Effective Expiration 3/31/01
Derivative (in millions) LIBOR base Date Date (in thousands)
---------- ------------- ---------- --------- ---------- --------------
Interest rate cap $ 50.0 7.70% 5/25/00 5/31/02 $ 1
Interest rate cap 50.0 7.00% 9/13/00 10/13/01 --
Interest rate cap 25.0 7.00% 10/17/00 10/13/01 --
Interest rate swap 100.0 5.76% 1/2/01 1/2/03 (1,993)
-------
Total $(1,992)
=======
Based on our variable rate debt balances, during the three months ended
March 31, 2001, our interest expense would have increased $383,000 if interests
rates were 1% higher.
PART II
ITEM 1. LEGAL PROCEEDINGS
We are not currently involved in any material litigation nor, to the best
of our knowledge, is any material litigation currently threatened against us
(other than routine litigation arising in the ordinary course of business,
substantially all of which is expected to be covered by liability insurance).
26
ITEM 2. CHANGES IN SECURITIES
a. N/A
b. N/A
c. In January 2001, we issued 544,000 Series D Preferred Shares. The
issuance of these Preferred Shares to a single investor was exempt
from registration under Section 4(2) of the Securities Act of 1933, as
amended.
d. N/A
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
N/A
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
N/A
ITEM 5. OTHER INFORMATION
N/A
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
EXHIBIT
NO. DESCRIPTION
------- -----------
2.1.1 Contribution Agreement between the Company and the
Operating Partnership and certain Constellation affiliates
(filed as Exhibit A of the Company's Schedule 14A
Information on June 26, 1998 and incorporated herein by
reference).
2.1.2 First Amendment to Contribution Agreement, dated July 16,
1998, between Constellation Properties, Inc. and certain
entities controlled by Constellation Properties, Inc.
(filed with the Company's Current Report on Form 8-K on
October 13, 1998 and incorporated herein by reference).
2.1.3 Second Amendment to Contribution Agreement, dated
September 28, 1998, between Constellation Properties, Inc.
and certain entities controlled by Constellation
Properties, Inc. (filed with the Company's Current Report
on Form 8-K on October 13, 1998 and incorporated herein by
reference).
2.2 Service Company Asset Contribution Agreement between the
Company and the Operating Partnership and certain
Constellation affiliates (filed as Exhibit B of the
Company's Schedule 14A Information on June 26, 1998 and
incorporated herein by reference).
2.3 Contribution Agreement, dated February 24, 1999, between
the Operating Partnership and John Parsinen, John D.
Parsinen, Jr., Enterprise Nautical, Inc. and Vernon Beck
(filed with the Company's Quarterly Report on Form 10-Q on
May 14, 1999 and incorporated herein by reference).
27
EXHIBIT
NO. DESCRIPTION
------- -----------
2.4 Agreement to Sell Partnership Interests, dated August 12,
1999, between Gateway Shannon Development Corporation,
Clay W. Hamlin, III and COPT Acquisitions, Inc. (filed
with the Company's Quarterly Report on Form 10-Q on
November 8, 1999 and incorporated herein by reference).
2.5 Agreement of Purchase and Sale, dated July 21, 1999,
between First Industrial Financing Partnership, L.P. and
COPT Acquisitions, Inc. (filed with the Company's
Quarterly Report on Form 10-Q on November 8, 1999 and
incorporated herein by reference).
2.6.1 Contract of Sale, dated August 9, 1999, between Jolly
Acres Limited Partnership and the Operating Partnership
(filed with the Company's Annual Report on Form 10-K on
March 22, 2001 and incorporated herein by reference).
2.6.2 Amendment to Contract of Sale, dated April 28, 2000,
between Jolly Acres Limited Partnership and the Operating
Partnership (filed with the Company's Annual Report on
Form 10-K on March 22, 2001 and incorporated herein by
reference).
2.7 Contract of Sale, dated March 14, 2000, between Arbitrage
Land Limited Partnership, Jolly Acres Limited Partnership
and the Operating Partnership (filed with the Company's
Annual Report on Form 10-K on March 22, 2001 and
incorporated herein by reference).
3.1 Amended and Restated Declaration of Trust of Registrant
(filed with the Registrant's Registration Statement on
Form S-4 (Commission File No. 333-45649) and incorporated
herein by reference).
3.2 Bylaws of Registrant (filed with the Registrant's
Registration Statement on Form S-4 (Commission File No.
333-45649) and incorporated herein by reference).
4.1 Form of certificate for the Registrant's Common Shares of
Beneficial Interest, $0.01 par value per share (filed with
the Registrant's Registration Statement on Form S-4
(Commission File No. 333-45649) and incorporated herein by
reference).
4.2 Amended and Restated Registration Rights Agreement, dated
March 16, 1998, for the benefit of certain shareholders of
the Company (filed with the Company's Quarterly Report on
Form 10-Q on August 12, 1998 and incorporated herein by
reference).
4.3 Articles Supplementary of Corporate Office Properties
Trust Series A Convertible Preferred Shares, dated
September 28, 1998 (filed with the Company's Current
Report on Form 8-K on October 13, 1998 and incorporated
herein by reference).
4.4.1 Second Amended and Restated Limited Partnership Agreement
of the Operating Partnership, dated December 7, 1999
(filed with the Company's Annual Report on Form 10-K on
March 16, 2000 and incorporated herein by reference).
4.4.2 First Amendment to Second Amended and Restated Limited
Partnership Agreement of the Operating Partnership, dated
December 21, 1999 (filed with the Company's Annual Report
on Form 10-K on March 16, 2000 and incorporated herein by
reference).
4.4.3 Second Amendment to Second Amended and Restated Limited
Partnership Agreement of the Operating Partnership, dated
December 21, 1999 (filed with the Company's Post Effective
Amendment No. 2 to Form S-3 dated November 1, 2000
(Registration
28
EXHIBIT
NO. DESCRIPTION
------- -----------
Statement No. 333-71807) and incorporated herein by
reference).
4.4.4 Third Amendment to Second Amended and Restated Limited
Partnership Agreement of the Operating Partnership, dated
September 29, 2000 (filed with the Company's Post
Effective Amendment No. 2 to Form S-3 dated November 1,
2000 (Registration Statement No. 333-71807) and
incorporated herein by reference).
4.5 Articles Supplementary of Corporate Office Properties
Trust Series B Convertible Preferred Shares, dated July 2,
1999 (filed with the Company's Current Report on Form 8-K
on July 7, 1999 and incorporated herein by reference).
4.6.1 Contribution Rights Agreement, dated June 23, 1999,
between the Operating Partnership and United Properties
Group, Incorporated (filed with the Company's Quarterly
Report on Form 10-Q on August 13, 1999 and incorporated
herein by reference).
4.6.2 Contribution Agreement, dated December 21, 1999, between
United Properties Group, Incorporated and COPT
Acquisitions, Inc. (filed with the Company's Annual Report
on Form 10-K on March 16, 2000 and incorporated herein by
reference).
4.7 Articles Supplementary of Corporate Office Properties
Trust Series D Cumulative Convertible Redeemable Preferred
Shares, dated January 25, 2001 (filed with the Company's
Annual Report on Form 10-K on March 22, 2001 and
incorporated herein by reference).
4.8 Registration Rights Agreement, dated January 25, 2001,
for the benefit of Barony Trust Limited (filed with the
Company's Annual Report on Form 10-K on March 22, 2001 and
incorporated herein by reference).
4.9 Articles Supplementary of Corporate Office Properties
Trust Series E Cumulative Redeemable Preferred Shares,
dated April 3, 2001 (filed with the Registrant's Current
Report on Form 8-K on April 4, 2001 and incorporated
herein by reference).
10.1 Employment Agreement, dated December 16, 1999, between
Corporate Office Management, Inc., COPT and Clay W.
Hamlin, III (filed with the Company's Annual Report on
Form 10-K on March 16, 2000 and incorporated herein by
reference).
10.2 Employment Agreement, dated December 16, 1999, between
Corporate Office Management, Inc., COPT and Randall M.
Griffin (filed with the Company's Annual Report on Form
10-K on March 16, 2000 and incorporated herein by
reference).
10.3 Employment Agreement, dated December 16, 1999, between
Corporate Office Management, Inc., COPT and Roger A.
Waesche, Jr. (filed with the Company's Annual Report on
Form 10-K on March 16, 2000 and incorporated herein by
reference).
10.4 Employment Agreement, dated December 16, 1999, between
Corporate Development Services, LLC, COPT and Dwight
Taylor (filed with the Company's Annual Report on Form
10-K on March 16, 2000 and incorporated herein by
reference).
10.5 Employment Agreement, dated December 16, 1999, between
Corporate Realty Management, LLC, COPT and Michael D.
Kaiser (filed with the Company's Annual Report on Form
10-K on March 16, 2000 and incorporated herein by
reference).
29
EXHIBIT
NO. DESCRIPTION
------- -----------
10.6 Restricted Share Agreement, dated December 16, 1999,
between Corporate Office Properties Trust and Randall M.
Griffin (filed with the Company's Annual Report on Form
10-K on March 16, 2000 and incorporated herein by
reference).
10.7 Restricted Share Agreement, dated December 16, 1999,
between Corporate Office Properties Trust and Roger A.
Waesche, Jr. (filed with the Company's Annual Report on
Form 10-K on March 16, 2000 and incorporated herein by
reference).
10.8 Restricted Share Agreement, dated December 16, 1999,
between Corporate Office Properties Trust and Dwight
Taylor (filed with the Company's Annual Report on Form
10-K on March 16, 2000 and incorporated herein by
reference).
10.9 Restricted Share Agreement, dated December 16, 1999,
between Corporate Office Properties Trust and Michael D.
Kaiser (filed with the Company's Annual Report on Form
10-K on March 16, 2000 and incorporated herein by
reference).
10.10.1 Corporate Office Properties Trust 1998 Long Term Incentive
Plan (filed with the Registrant's Registration Statement
on Form S-4 (Commission File No. 333-45649) and
incorporated herein by reference).
10.10.2 Amendment No. 1 to Corporate Office Properties Trust 1998
Long Term Incentive Plan (filed with the Company's
Quarterly Report on Form 10-Q on August 13, 1999 and
incorporated herein by reference).
10.11 Stock Option Plan for Directors (filed with Royale
Investments, Inc.'s Form 10-KSB for the year ended
December 31, 1993 (Commission File No. 0-20047) and
incorporated herein by reference).
10.12 Senior Secured Credit Agreement, dated October 13, 1997,
(filed with the Company's Current Report on Form 8-K on
October 29, 1997, and incorporated herein by reference).
10.13 Senior Secured Revolving Credit Agreement, dated May 28,
1998, between the Company, the Operating Partnership, Any
Mortgaged Property Subsidiary and Bankers Trust Company
(filed with the Company's Current Report on Form 8-K on
June 10, 1998 and incorporated herein by reference).
10.14 Promissory Note, dated October 22, 1998, between Teachers
Insurance and Annuity Association of America and the
Operating Partnership (filed with the Company's Quarterly
Report on Form 10-Q on November 13, 1998 and incorporated
herein by reference).
10.15 Indemnity Deed of Trust, Assignment of Leases and Rents
and Security Agreement, dated October 22, 1998, by
affiliates of the Operating Partnership for the benefit of
Teachers Insurance and Annuity Association of America
(filed with the Company's Quarterly Report on Form 10-Q on
November 13, 1998 and incorporated herein by reference).
10.16 Promissory Note, dated September 30, 1999, between
Teachers Insurance and Annuity Association of America and
the Operating Partnership (filed with the Company's
Quarterly Report on Form 10-Q on November 8, 1999 and
incorporated herein by reference).
10.17 Indemnity Deed of Trust, Assignment of Leases and Rents
and Security Agreement, dated
30
EXHIBIT
NO. DESCRIPTION
------- -----------
September 30, 1999, by affiliates of the Operating
Partnership for the benefit of Teachers Insurance and
Annuity Association of America (filed with the Company's
Quarterly Report on Form 10-Q on November 8, 1999 and
incorporated herein by reference).
10.18 Revolving Credit Agreement, dated December 29, 1999,
between Corporate Office Properties, L.P. and Prudential
Securities Credit Corp. (filed with the Company's Annual
Report on Form 10-K on March 16, 2000 and incorporated
herein by reference).
10.19 Letter Agreement for Interest Rate Swap Transaction, dated
December 26, 2000, between Corporate Office Properties,
L.P. and Deutsche Bank AG (filed with the Company's Annual
Report on Form 10-K on March 22, 2001 and incorporated
herein by reference).
10.20 Lease Agreement between Blue Bell Investment Company, L.P.
and Unisys Corporation dated March 12, 1997 with respect
to lot A (filed with the Registrant's Registration
Statement on Form S-4 (Commission File No. 333-45649) and
incorporated herein by reference).
10.21 Lease Agreement between Blue Bell Investment Company, L.P.
and Unisys Corporation, dated March 12, 1997, with respect
to lot B (filed with the Registrant's Registration
Statement on Form S-4 (Commission File No. 333-45649) and
incorporated herein by reference).
10.22 Lease Agreement between Blue Bell Investment Company, L.P.
and Unisys Corporation, dated March 12, 1997, with respect
to lot C (filed with the Registrant's Registration
Statement on Form S-4 (Commission File No. 333-45649) and
incorporated herein by reference).
10.23 Project Consulting and Management Agreement, dated
September 28, 1998, between Constellation Properties, Inc.
and COMI (filed with the Company's Current Report on Form
8-K on October 13, 1998 and incorporated herein by
reference).
10.24 Agreement for Services, dated September 28, 1998, between
the Company and Corporate Office Management, Inc. (filed
with the Company's Annual Report on Form 10-K on March 30,
1999 and incorporated herein by reference).
10.25.1 Lease Agreement, dated September 28,1998, between St.
Barnabas Limited Partnership and Constellation Properties,
Inc. (filed with the Company's Annual Report on Form 10-K
on March 30, 1999 and incorporated herein by reference).
10.25.2 Fourth Amendment to Agreement of Lease, dated June 12,
2000, between St. Barnabas, LLC and Constellation Real
Estate, Inc. (filed with the Company's Annual Report on
Form 10-K on March 22, 2001 and incorporated herein by
reference).
10.26.1 Lease Agreement, dated August 3, 1998, between
Constellation Real Estate, Inc. and Constellation
Properties, Inc. (filed with the Company's Annual Report
on Form 10-K on March 30, 1999 and incorporated herein by
reference).
10.26.2 First Amendment to Lease, dated December 30, 1998, between
Three Centre Park, LLC and Constellation Properties, Inc.
(filed with the Company's Annual Report on Form 10-K on
March 30, 1999 and incorporated herein by reference).
10.27 Option agreement, dated March 1998, between Corporate
Office Properties, L.P. and Blue
31
EXHIBIT
NO. DESCRIPTION
------- -----------
Bell Land, L.P. (filed with the Company's Annual Report on
Form 10-K on March 16, 2000 and incorporated herein by
reference).
10.28 Option agreement, dated March 1998, between Corporate
Office Properties, L.P. and Comcourt Land, L.P. (filed
with the Company's Annual Report on Form 10-K on March 16,
2000 and incorporated herein by reference).
10.29 Option Agreement, dated September 28, 1998, between Jolly
Acres Limited Partnership, Arbitrage Land Limited
Partnership and the Operating Partnership (filed with the
Company's Current Report on Form 8-K on October 13, 1998
and incorporated herein by reference).
c. We filed the following Current Reports on Form 8-K in the first
quarter of the year ended December 31, 2001:
Item 7 and Item 9 dated January 31, 2001 that was filed in connection
with our release of earnings on January 31, 2001. We also through this filing
made available certain additional information pertaining to our properties and
operations as of and for the period ended December 31, 2000.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
CORPORATE OFFICE PROPERTIES TRUST
Date: May 14, 2001 By: /s/ Randall M. Griffin
-------------------------------
Randall M. Griffin
President and Chief Operating Officer
Date: May 14, 2001 By: /s/ Roger A. Waesche, Jr.
--------------------------------
Roger A. Waesche, Jr.
Senior Vice President and Chief Financial
Officer
32