UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ----------------- FORM 8-K ---------------- CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report (Date of earliest event reported): July 2, 2001 CORPORATE OFFICE PROPERTIES TRUST --------------------------------- (Exact name of registrant as specified in its charter) MARYLAND 0-20047 23-2947217 -------- ------- ---------- (State or other jurisdiction of (Commission (IRS Employer incorporation) File Number) Identification Number) 8815 CENTRE PARK DRIVE, SUITE 400 COLUMBIA, MARYLAND 21045 --------------------------------- (Address of principal executive offices) (410) 730-9092 -------------- (Registrant's telephone number, including area code) ITEM 5. OTHER EVENTS AIRPORT SQUARE PROPERTIES Through a series of transactions, the last occurring on August 3, 2001, Corporate Office Properties Trust (the "Company"), through affiliates of Corporate Office Properties, L.P. (the "Operating Partnership"), acquired six office buildings and a contiguous fitness center totaling approximately 412,000 square feet located in the Airport Square Business Park in Linthicum, Maryland (the "Airport Square Properties"). The Airport Square Properties were acquired for an aggregate cost of $45.3 million, including transaction costs. The Company paid the purchase price and transaction costs using $24.1 in borrowings under two mortgage loans payable, $13.2 million in borrowings under its existing secured revolving credit facility with Deutsche Banc Alex. Brown and cash reserves for the balance. The following schedule sets forth certain information relating to each of the buildings as of August 30, 2001:

Percentage Total of Rental Year Rentable Total Total Rental Revenue per Major Tenants Built/ Square Rental Revenue of Occupied (10% or more of Property Locations Renovated Feet Occupancy(1) Revenue(2) Occupied Sq.Ft.(3) Square Foot(4) Rentable Square Feet) - ----------------------------------------------------------------------------------------------------------------------------- 920 Elkridge Landing Rd. 1982 96,566 100.0% $ 1,346,798 21% $13.95 Ciena Corporation (100.0%) 880 Elkridge Landing Rd. 1981 91,534 100.0% 1,533,195 25% 16.75 Arbros Communications, Inc. (100%) 901 Elkridge Landing Rd. 1984 56,847 88.2% 752,158 12% 15.00 State of Maryland (59%); Institute for Operations Research and Management Sciences (15%); Powerize.com, Inc. (10%) 891 Elkridge Landing Rd. 1984 56,489 86.4% 877,341 14% 17.99 Medaphis Services Corp. (52%); Metropolitan Life Insur. Co. (26%) 938 Elkridge Landing Rd. 1984 52,988 100.0% 913,248 14% 17.23 U.S. Department of Defense (100%) 940 Elkridge Landing Rd. 1984 51,704 100.0% 777,432 12% 15.04 Cadmus Journal Services (100%) 870 Elkridge Landing Rd. 1981 5,627 100.0% 105,738 2% 18.79 U.S. Dept. of Defense (100%) -------- --------------------------- TOTAL/AVERAGE 411,755 96.5% $ 6,305,910 100% $15.87 ======== ===========================

(1) This percentage is based on all leases in effect as of August 30, 2001. (2) Total rental revenue is the monthly contractual base rent as of August 30, 2001 multiplied by 12 plus the estimated annualized expense reimbursements under existing leases. (3) This percentage is based on the property's rental revenue to the total rental revenue of the Airport Square Properties. (4) This represents the property's total rental revenue divided by its occupied square feet as of August 30, 2001. 2 The following schedule sets forth annual lease expirations for the Airport Square Properties as of August 30, 2001 assuming that none of the tenants exercise renewal options:

Total Rental Revenue Year of Number of Square Footage Percentage of Total Rental Percentage of Total of Expiring Leases Lease Leases of Leases Total Occupied Revenue of Expiring Rental Revenue Per Rentable Square Expiration(1) Expiring Expiring Square Feet Leases (2) Expiring (2) Foot (2) ---------------------------------------------------------------------------------------------------------------------------- (In thousands) 8/31/01- 12/31/01 1 5,921 1.5% $ 112 1.8% $19.00 2002 3 38,745 9.8% 660 10.4% 17.03 2003 4 15,320 3.9% 256 4.1% 16.70 2004 1 14,724 3.7% 281 4.5% 19.06 2005 2 73,121 18.4% 1,057 16.7% 14.46 2006 - - 0.0% - 0.0% - 2007 1 96,566 24.3% 1,347 21.4% 13.95 2008 - - 0.0% - 0.0% - 2009 1 8,431 2.1% 147 2.3% 17.43 2010 1 52,988 13.3% 913 14.5% 17.24 2011 1 91,534 23.0% 1,533 24.3% 16.75 - -------- ------- -------- ------ TOTAL/WEIGHTED 15 397,350 100.0% $ 6,306 100.0% $16.02 == ======== ======= ======== ====== AVERAGE

(1) The two government leases within this portfolio are subject to certain early termination provisions which are customary to government leases. The year of lease expiration was computed assuming such early termination rights will not be exercised. (2) Total rental revenue is the monthly contractual base rent as of August 30, 2001 multiplied by 12 plus the estimated annualized expense reimbursements under existing leases. GATEWAY 63 PROPERTIES On August 30, 2001, the Company, through the Operating Partnership, acquired four office buildings totaling approximately 187,000 square feet located in the Columbia Gateway Business Park in Columbia, Maryland (the "Gateway 63 Properties"). The Gateway 63 Properties were acquired for an aggregate cost of $23.8 million, including transaction costs. The Company paid the purchase price and transaction costs by assuming a $15.8 million mortgage loan payable, using $4.3 million in borrowings under its existing secured revolving credit facility with Deutsche Banc Alex. Brown, issuing 310,342 common units in the Operating Partnership valued at $3.3 million and using cash reserves for the balance. 3 The following schedule sets forth certain information relating to each of the buildings as of August 30, 2001:

Percentage of Total Rental Year Rentable Total Total Rental Revenue per Major Tenants Built/ Square Rental Revenue of Occupied (10% or more of Property Locations Renovated Feet Occupancy(1) Revenue(2) Occupied Sq.Ft.(3) Square Foot(4) Rentable Square Feet) - ------------------------------------------------------------------------------------------------------------------------ 7067 Columbia Gateway Dr. 2000 82,032 100.0% $1,148,448 39% $14.00 Corvis Corporation (100%) 7065 Columbia Gateway Dr. 2000 38,560 100.0% 612,718 21% 15.89 Corvis Corporation (100%) 7063 Columbia Gateway Dr. 2000 36,936 100.0% 575,832 19% 15.59 Corvis Corporation (100%) 7061 Columbia Gateway Dr. 2000 29,604 100.0% 636,486 21% 21.50 Manekin, LLC (83%) Visualtek Solutions, Inc. (17%) -------- ------------------------ TOTAL/AVERAGE 187,132 100.0% $2,973,484 100% $15.89 ======== ========================

(1) This percentage is based on all leases in effect as of August 30, 2001. (2) Total rental revenue is the monthly contractual base rent as of August 30, 2001 multiplied by 12 plus the estimated annualized expense reimbursements under existing leases. (3) This percentage is based on the property's rental revenue to the total rental revenue of the Gateway 63 Properties. (4) This represents the property's total rental revenue divided by the respective property's occupied square feet as of August 30, 2001. 4 The following schedule sets forth annual lease expirations as of August 30, 2001 for the Gateway 63 Properties assuming that none of the tenants exercise renewal options:

Number of Percentage of Percentage of Total Rental Revenue Year of Leases Square Footage Total Total Rental Total Rental of Expiring Leases Lease Expiring of Leases Occupied Revenue of Revenue Per Rentable Square Expiration Expiring Square Feet Expiring Leases(1) Expiring(1) Foot(1) ------------------------------------------------------------------------------------------------------------------- (in thousands) 8/31/01 - 12/31/01 - - 0.0% $ - 0.0% $ - 2002 - - 0.0% - 0.0% - 2003 - - 0.0% - 0.0% - 2004 - - 0.0% - 0.0% - 2005 2 29,604 15.8% 636 21.4% 21.50 2006 - - 0.0% - 0.0% - 2007 - - 0.0% - 0.0% - 2008 - - 0.0% - 0.0% - 2009 - - 0.0% - 0.0% - 2010 2 75,496 40.3% 1,189 40.0% 15.74 2011 1 82,032 43.9% 1,148 38.6% 14.00 ------ ----- ----- ----- TOTAL/WEIGHTED 5 187,132 100.0% $2,973 100.0% $ 16.30 AVERAGE = ======= ====== ====== ======

(1) Total rental revenue is the monthly contractual base rent as of August 30, 2001 multiplied by 12 plus the estimated annualized expense reimbursements under existing leases. ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS (a) Financial Statements of Businesses Acquired The financial statements of the Airport Square Properties and the Gateway 63 Properties are included herein. See pages F-14 through F-23. (b) Pro Forma Financial Information The pro forma condensed consolidating financial statements of the Company are included herein. See pages F-1 through F-13. (c) Exhibits

EXHIBIT NUMBER DESCRIPTION - -------------- ----------- 99.1 Purchase and Sale Agreement, dated February 28, 2001, between Aetna Life Insurance Company and COPT Acquisitions, Inc. 99.2 Contribution Agreement, dated June 1, 2001, between RA & DM, Inc., Manekin Investment Associates 3 LLC and Corporate Office Properties, L.P. 99.3 Computation of ratio of earnings to combined fixed charges and Preferred Share dividends.

5 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Company has duly caused this Report to be signed on its behalf by the undersigned hereunto duly authorized. Dated: September 5, 2001 CORPORATE OFFICE PROPERTIES TRUST By: /s/ Randall M. Griffin ------------------------- Name: Randall M. Griffin Title: President and Chief Operating Officer By: /s/ Roger A. Waesche, Jr. ------------------------- Name: Roger A. Waesche, Jr. Title: Chief Financial Officer 6 CORPORATE OFFICE PROPERTIES TRUST INDEX TO FINANCIAL STATEMENTS

I. PRO FORMA CONDENSED CONSOLIDATING FINANCIAL STATEMENTS OF THE COMPANY Pro Forma Condensed Consolidating Balance Sheet as of June 30, 2001 (unaudited) F-4 Pro Forma Condensed Consolidating Statement of Operations for the Year Ended December 31, 2000 (unaudited) F-5 Pro Forma Condensed Consolidating Statement of Operations for the Six Month Period Ended June 30, 2001 (unaudited) F-6 Notes and Management's Assumptions to Pro Forma Condensed Consolidating Financial Information F-7 II. AIRPORT SQUARE PROPERTIES Report of Independent Accountants F-14 Statement of Revenue and Certain Expenses for the Year Ended December 31, 2000 F-15 Statement of Revenue and Certain Expenses for the Six Months Ended June 30, 2001 F-16 Notes to Financial Statements F-17 III. GATEWAY 63 PROPERTIES Report of Independent Accountants F-19 Statement of Revenue and Certain Expenses for the Year Ended December 31, 2000 F-20 Statement of Revenue and Certain Expenses for the Six Months Ended June 30, 2001 F-21 Notes to Financial Statements F-22

F-1 CORPORATE OFFICE PROPERTIES TRUST PRO FORMA CONDENSED CONSOLIDATING FINANCIAL INFORMATION Set forth below are the unaudited pro forma condensed consolidating balance sheet as of June 30, 2001, and the unaudited pro forma condensed consolidating statements of operations for the year ended December 31, 2000 and the six month period ended June 30, 2001, of Corporate Office Properties Trust and its consolidated affiliates, including Corporate Office Properties, L.P. (the "Operating Partnership"). Corporate Office Properties Trust and its consolidated affiliates, including the Operating Partnership, are collectively referred to herein as the "Company." The pro forma condensed consolidating financial information is presented as if the following transactions had been consummated on the earlier of the actual date of consummation or June 30, 2001, for balance sheet purposes, and at January 1, 2000, for purposes of the statements of operations: 2000 TRANSACTIONS: o The acquisition of an office building on April 18, 2000 ("7240 Parkway Drive") for $7,464,000 using $7,285,000 in proceeds from our Revolving Credit Facility with Deutsche Banc Alex. Brown (the "Revolving Credit Facility") and cash reserves for the balance. o The disposition of a retail property on June 19, 2000 ("Minot Retail") for $2,970,000 of which $2,432,000 was used to pay off a mortgage loan payable on the property and the balance applied to cash reserves. o The disposition of a retail property on November 10, 2000 ("Tred Avon") for $5,800,000 of which $2,756,000 was used to pay off a mortgage loan payable on the property, $2,000,000 to pay down our Revolving Credit Facility and the balance applied to cash reserves. o The disposition of an office building on December 28, 2000 ("3 Center Drive") for $2,790,000 of which $1,755,000 was used to pay off a mortgage loan payable on the property and the balance applied to cash reserves. The above transactions are collectively referred to herein as the "2000 Transactions." 2001 TRANSACTIONS: o On January 1, 2001, we acquired all of the stock in Corporate Office Management, Inc. ("COMI") that we did not previously own for $26,000. We accounted for this acquisition using the purchase method of accounting. Prior to January 1, 2001, we accounted for our investment in COMI and its subsidiaries using the equity method of accounting. 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. o The acquisition of two office buildings in Columbia, Maryland on May 14, 2001 (the "State Farm Properties") for $13,245,000 using $12,915,000 in proceeds from our Revolving Credit Facility and cash reserves for the balance. o The disposition of an office building located in Cranbury, New Jersey on June 18, 2001 ("19 Commerce Drive") for $11,525,000 of which $7,000,000 was used to pay off a mortgage loan F-2 payable on the property, $728,000 to pay other settlement and sales costs and the balance applied to cash reserves. o The acquisition of six office buildings in Linthicum, Maryland during 2001 (the "Airport Square Properties") for $45,301,000, including $3,551,000 already reflected in the June 30, 2001 historical balances, using $24,077,000 in proceeds from two mortgage loans payable, $13,200,000 in proceeds from our Revolving Credit Facility, $3,965,000 in proceeds from the sale of 19 Commerce Drive and cash reserves for the balance. o The acquisition of four office buildings in Columbia, Maryland on August 30, 2001 (the "Gateway 63 Properties") for $23,835,000 using $15,750,000 in proceeds from an assumed mortgage payable, $4,295,000 in proceeds from our Revolving Credit Facility, issuing 310,342 common units in our Operating Partnership valued at $3,259,000 to the seller and cash reserves for the balance. o The issuance of 544,000 Series D Cumulative Convertible Redeemable Preferred Shares of beneficial interest ("Series D Preferred Shares") on January 25, 2001 for net proceeds of $11,893,000, $8,245,000 of which was used to pay down the Revolving Credit Facility. o The issuance of 1,150,000 Series E Cumulative Redeemable Preferred Shares of beneficial interest ("Series E Preferred Shares") on April 6, 2001 for net proceeds of $26,950,000, all of which was used to pay down the Revolving Credit Facility. o The issuance of 1,000,000 Series F Cumulative Redeemable Preferred Shares of beneficial interest ("Series F Preferred Shares") expected to occur in September 2001 for net proceeds of $23,747,000, all of which is expected to be used to pay down the Revolving Credit Facility. The above transactions are collectively referred to herein as the "2001 Transactions." This pro forma condensed consolidating financial information should be read in conjunction with the historical financial statements of the Company and those of the Airport Square Properties and the Gateway 63 Properties. In management's opinion, all adjustments necessary to reflect the effects of the above transactions have been made. This pro forma condensed consolidating financial information is unaudited and is not necessarily indicative of what the Company's actual financial position would have been at June 30, 2001, nor does it purport to represent the future financial position and results of operations of the Company. F-3 CORPORATE OFFICE PROPERTIES TRUST PRO FORMA CONDENSED CONSOLIDATING BALANCE SHEET AS OF JUNE 30, 2001 (UNAUDITED) (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

Historical Airport Gateway 63 Preferred Pro Forma Consolidated Square Properties Offering Adjustments Pro Forma (A) Properties (C) (D) Consolidated (B) ASSETS Net investments in real estate $ 792,000 $ 41,750 $ 23,835 $ - $ - $ 857,585 Cash and cash equivalents 2,962 (508) (531) - - 1,923 Other assets 53,845 (3,965) - - - 49,880 ------------ ---------- ---------- --------- --------- ---------- Total assets $ 848,807 $ 37,277 $ 23,304 $ - $ - $ 909,388 ============ ========== ========== ========= ========= ========== LIABILITIES AND SHAREHOLDERS' EQUITY Liabilities Mortgage loans payable $ 475,999 $ 37,277 $ 20,045 $(23,747) $ - $ 509,574 Other liabilities 38,171 - - - - 38,171 ------------ ---------- ---------- --------- --------- ---------- Total liabilities 514,170 37,277 20,045 (23,747) - 547,745 ------------ ---------- ---------- --------- --------- ---------- Minority interests 103,491 - 2,847 - - 106,338 ------------ ---------- ---------- --------- --------- ---------- Shareholders' equity Preferred shares of beneficial interest 29 - - 10 - 39 Common shares of beneficial interest 207 - - - - 207 Additional paid-in capital 249,618 - 412 23,737 - 273,767 Other (18,708) - - - - (18,708) ------------ ---------- ---------- --------- --------- ---------- Total shareholders' equity 231,146 - 412 23,747 - 255,305 ------------ ---------- ---------- --------- --------- ---------- Total liabilities and shareholders' equity $ 848,807 $ 37,277 $ 23,304 $ - $ - $ 909,388 ============ ========== ========== ========= ========= ==========

See accompanying notes and management's assumptions to pro forma financial statements. F-4 CORPORATE OFFICE PROPERTIES TRUST PRO FORMA CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 2000 (UNAUDITED) (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

Historical 2000 State Farm 19 Commerce Airport Gateway 63 Consolidated Transactions COMI Properties Drive Square Properties (A) (B) (C) (D) (E) Properties (G) (F) REVENUES: Rental revenue $ 93,309 $ (638) $ - $ 1,698 $ (1,401) $ 4,748 $ 1,004 Tenant recoveries and other revenue 15,684 (232) - 558 (27) 374 83 Service operation revenue - - 4,040 - - - - ---------- --------- --------- --------- --------- --------- ---------- Total revenues 108,993 (870) 4,040 2,256 (1,428) 5,122 1,087 ---------- --------- --------- --------- --------- --------- ---------- EXPENSES: Property operating 31,235 (189) - 898 (413) 1,800 153 General and administrative 4,867 (5) - - - - - Interest 30,454 - - - - - - Depreciation and Amortization 18,359 - - - - - - Service operation expenses - - 4,254 - - - - ---------- --------- --------- --------- --------- --------- ---------- Total expenses 84,915 (194) 4,254 898 (413) 1,800 153 ---------- -------- -------- -------- -------- -------- --------- Gain (loss) on sale of Properties 107 (107) - - - - - Equity in loss of unconsolidated subsidiary (310) - - - - - - ---------- --------- --------- --------- --------- --------- ---------- Income (loss) before minority interests and income taxes 23,875 (783) (214) 1,358 (1,015) 3,322 934 Minority interests Preferred Units (2,240) - - - - - - Other partnerships (26) - (51) - - - - Common Units (6,322) - - - - - - ---------- --------- --------- --------- --------- --------- ---------- Net income (loss) from continuing operations before income taxes 15,287 (783) (265) 1,358 (1,015) 3,322 934 Income taxes - - (61) - - - - ---------- -------- -------- -------- -------- -------- --------- Net income (loss) from continuing operations 15,287 (783) (326) 1,358 (1,015) 3,322 934 Preferred share dividends (3,802) - - - - - - ---------- --------- --------- --------- --------- --------- ---------- Net income (loss) from continuing operations available to Common Shareholders $ 11,485 $ (783) $ (326) $ 1,358 $ (1,015) $ 3,322 $ 934 ========== ========= ========= ========= ========= ========= ========== Earnings per share: Basic $ 0.61 ========== Earnings per share: Diluted $ 0.60 ========== Weighted average number of shares: Basic 18,818 ========== Diluted 19,213 ========== Preferred Offerings Pro Forma Pro Forma (H) Adjustments Consolidated REVENUES: Rental revenue $ - $ - $ 98,720 Tenant recoveries and other revenue - (217)(I) 16,223 Service operation revenue - - 4,040 --------- --------- --------- Total revenues - (217) 118,983 --------- --------- --------- EXPENSES: Property operating - - 33,484 General and administrative - - 4,862 Interest (4,805) 3,792 (J) 29,441 Depreciation and Amortization - 1,380 (K) 19,739 Service operation expenses - (217)(I) 4,037 --------- --------- ----------- Total expenses (4,805) 4,955 91,563 -------- --------- ----------- Gain (loss) on sale of Properties - - - Equity in loss of unconsolidated subsidiary - 310 (L) - --------- --------- ---------- Income (loss) before minority interests and income taxes 4,805 (4,862) 27,420 Minority interests Preferred Units - (48) (M) (2,288) Other partnerships - - (77) Common Units - 934 (N) (5,388) --------- --------- --------- Net income (loss) from continuing operations before income taxes 4,805 (3,976) 19,667 Income taxes - - (61) -------- --------- --------- Net income (loss) from continuing operations 4,805 (3,976) 19,606 Preferred share dividends (5,991) - (9,793) --------- --------- --------- Net income (loss) from continuing operations available to Common Shareholders $ (1,186) $ (3,976) $ 9,813 ========= ========= =========== Earnings per share: Basic $ 0.52 =========== Earnings per share: Diluted $ 0.51 =========== Weighted average number of shares: Basic 18,818 =========== Diluted 20,410 ===========

See accompanying notes and management's assumptions to pro forma financial statements. CORPORATE OFFICE PROPERTIES TRUST PRO FORMA CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS FOR THE SIX MONTH PERIOD ENDED JUNE 30, 2001 (UNAUDITED) (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

Historical State Farm 19 Commerce Airport Gateway 63 Consolidated Properties Drive Square Properties (A) (D) (E) Properties (G) (F) REVENUES: Rental revenue $ 51,579 $ 611 $ (779) $ 3,101 $ 1,584 Tenant recoveries and other revenue 7,033 (50) (4) 235 196 Service operation revenues 2,176 - - - - ------------ ---------- ---------- ---------- ---------- Total revenues 60,788 561 (783) 3,336 1,780 ------------ ---------- ---------- ---------- ---------- EXPENSES: Property operating 17,024 322 (204) 934 253 General and administrative 2,775 - - - - Interest 15,956 - - - - Depreciation and amortization 10,786 - - - - Service operation expenses 2,244 - - - - ------------ ---------- ---------- ---------- ---------- Total expenses 48,785 322 (204) 934 253 ------------ ---------- ---------- ---------- ---------- Gain (loss) on sale of properties 1,596 - (1,596) - - Equity in income of unconsolidated subsidiaries 36 - - - - ------------ ---------- ---------- ---------- ---------- Income (loss) before minority interests and income taxes 13,635 239 (2,175) 2,402 1,527 Minority interests Preferred Units (1,144) - - - - Other partnerships (54) - - - - Common Units (3,372) - - - - ------------ ---------- ---------- ---------- ---------- Income (loss) from continuing operations before income taxes 9,065 239 (2,175) 2,402 1,527 Income tax benefit 52 - - - - ------------ ---------- ---------- ---------- ---------- Net income (loss) from continuing operations 9,117 239 (2,175) 2,402 1,527 Preferred share dividends (2,494) - - - - ----------- ---------- ---------- ---------- ---------- Net income (loss) from continuing operations available to Common Shareholders $ 6,623 $ 239 $ (2,175) $ 2,402 $ 1,527 ========== ========== ========== ========== ========== Earnings per share: Basic $ 0.33 =========== Earnings per share: Diluted $ 0.32 =========== Weighted average number of shares: Basic 20,034 =========== Diluted 21,359 =========== Preferred Offerings Pro Forma (H) Adjustments Total REVENUES: Rental revenue $ - $ - $ 56,096 Tenant recoveries and other revenue - - 7,410 Service operation revenues - - 2,176 ---------- --------- --------- Total revenues - - 65,682 ---------- --------- --------- EXPENSES: Property operating - - 18,329 General and administrative - - 2,775 Interest (1,381) 2,202 (J) 16,777 Depreciation and amortization - 612 (K) 11,398 Service operation expenses - - 2,244 ---------- --------- --------- Total expenses (1,381) 2,814 51,523 ---------- --------- --------- Gain (loss) on sale of properties - - - Equity in income of unconsolidated subsidiaries - (133)(O) (97) ---------- --------- --------- Income (loss) before minority interests and income taxes 1,381 (2,947) 14,062 Minority interests Preferred Units - - (1,144) Other partnerships - - (54) Common Units - 576(N) (2,796) ---------- --------- --------- Income (loss) from continuing operations before income taxes 1,381 (2,371) 10,068 Income tax benefit - - 52 ---------- ------------ --------- Net income (loss) from continuing operations 1,381 (2,371) 10,120 Preferred share distributions (2,064) - (4,558) ---------- --------- --------- Net income (loss) from continuing operations available to Common Shareholders $ (683) $ (2,371) $ 5,562 ========== ======== ========= Earnings per share: Basic $ 0.28 ========= Earnings per share: Diluted $ 0.27 ========= Weighted average number of shares: Basic 20,034 ========== Diluted 21,518 ==========

See accompanying notes and management's assumptions to pro forma financial statements. F-6 CORPORATE OFFICE PROPERTIES TRUST NOTES AND MANAGEMENT'S ASSUMPTIONS TO PRO FORMA CONDENSED CONSOLIDATING FINANCIAL INFORMATION (DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS) 1. BASIS OF PRESENTATION: Corporate Office Properties Trust (the "Company") is a self-administered Maryland real estate investment trust. As of June 30, 2001, the Company's portfolio included 91 properties, including six owned through joint ventures. These pro forma condensed consolidating financial statements should be read in conjunction with the historical financial statements and notes thereto of the Company, the Airport Square Properties and the Gateway 63 Properties. In management's opinion, all adjustments necessary to reflect the effects of the 2000 Transactions and the 2001 Transactions have been made. This pro forma condensed consolidating financial information is unaudited and is not necessarily indicative of what the Company's actual financial position would have been at June 30, 2001, nor does it purport to represent the future financial position and results of operations of the Company. 2. ADJUSTMENTS TO PRO FORMA CONDENSED CONSOLIDATING BALANCE SHEET: (A) Reflects the historical consolidated balance sheet of the Company as of June 30, 2001. (B) Reflects the acquisition of the Airport Square Properties from unrelated parties using: (i) $24,077 in proceeds from two mortgage loans payable; (ii) $13,200 in proceeds from our Revolving Credit Facility; (iii) $3,965 in proceeds from the sale of 19 Commerce Drive; and (iv) $508 in cash payments. (C) Reflects the acquisition of the Gateway 63 Properties from an unrelated party using: (i) a $15,750 mortgage loan payable assumed; (ii) $4,295 in loan proceeds from our Revolving Credit Facility; (iii) issuing 310,342 common units in our operating partnership valued at $3,259; and (iv) $531 in cash payments. This transaction also resulted in a $412 increase to paid-in capital and a corresponding decrease to minority interests resulting from the change in ownership of our Operating Partnership. (D) Reflects the issuance of 1,000,000 Series F Preferred Shares expected to occur in September 2001 for net proceeds of $23,747, all of which is expected to be used to pay down the Revolving Credit Facility. 3. ADJUSTMENTS TO PRO FORMA CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS: (A) Reflects the historical consolidated operations of the Company. F-7 (B) The pro forma adjustments associated with the 2000 Transactions are set forth in the table below.

7240 Minot Tred Avon 3 Center Parkway Retail (ii) (iii) Drive (iv) Total Drive (i) Revenues Rental income $ 361 $ (149) $ (600) $ (250) $ (638) Tenant recoveries and other revenue 4 - (145) (91) (232) ---------- --------- ---------- ---------- --------- Total revenues 365 (149) (745) (341) (870) ---------- --------- ---------- ---------- --------- Expenses Property operating 116 (2) (215) (88) (189) General and administrative - (1) (4) - (5) Interest - - - - - Depreciation and amortization - - - - - ---------- --------- ---------- ---------- --------- Total expenses 116 (3) (219) (88) (194) ---------- --------- ---------- ---------- --------- Gain (loss) on sale of properties - (57) 94 (144) (107) ---------- --------- ---------- ---------- --------- Income (loss) before minority interests and income taxes $ 249 $ (203) $ (432) $ (397) $ (783) ========== ========= ========== ========== =========

(i) Reflects the effects of the historical operations of 7240 Parkway Drive prior to its acquisition on April 18, 2000. (ii) Reflects the effects of the historical operations of Minot Retail prior to its disposition on June 19, 2000. (iii)Reflects the effects of the historical operations of Tred Avon prior to its disposition on November 10, 2000. (iv) Reflects the effects of the historical operations of 3 Center Drive prior to its disposition on December 28, 2000. (C) Reflects the effects of the historical operations of COMI and its subsidiaries, net of relevant elimination entries, prior to our purchase of the interests that we did not previously own on January 1, 2001. (D) Reflects the effects of the historical operations of the State Farm Properties prior to their acquisition on May 14, 2001. (E) Reflects the effects of the historical operations of 19 Commerce Drive prior to its disposition on June 18, 2001. (F) Reflects the effects of the historical operations of the Airport Square Properties for the periods presented. (G) Reflects the effects of the historical operations of the Gateway 63 Properties for the periods presented. F-8 (H) Reflects the effects of the issuance of the Series D Preferred Shares, Series E Preferred Shares and Series F Preferred Shares as if such issuances and the resulting repayments of debt occurred at the beginning of the respective reporting periods.

FOR THE SIX FOR THE YEAR MONTH PERIOD ENDED ENDED DECEMBER 31, JUNE 30, 2000 2001 ---- ---- INTEREST EXPENSE: Series D Preferred Share issuance - $8,245 of proceeds used to pay down the Revolving Credit Facility, bearing interest on the outstanding balance at LIBOR plus 175 basis points, assuming a LIBOR rate of 6.4% per annum for 2000 and 5.34% per annum for the six months ended June 30, 2001. $ (672) $ (48) Series E Preferred Share issuance - $26,950 of the proceeds used to pay down the Revolving Credit Facility, bearing interest on the outstanding balance at LIBOR plus 175 basis points, assuming a LIBOR rate of 6.4% per annum for 2000 and 5.34% per annum for the six months ended June 30, 2001. (2,199) (498) Series F Preferred Share issuance - $23,747 of the proceeds used to pay down the Revolving Credit Facility, bearing interest on the outstanding balance at LIBOR plus 175 basis points, assuming a LIBOR rate of 6.4% per annum for 2000 and 5.34% per annum for the six months ended June 30, 2001. (1,934) (835) ------------ ------------ Total $ (4,805) $ (1,381) ============ ===========

F-9

PREFERRED SHARE DIVIDENDS: Series D Preferred Share issuance - 544,000 shares issued with an aggregate liquidation preference of $13,600, paying dividends at a yearly rate of 4% of such liquidation preference. $ 544 $ 36 Series E Preferred Share issuance- 1,150,000 shares issued with an aggregate liquidation preference of $28,750, paying dividends at a yearly rate of 10.25% of such liquidation preference. 2,947 778 Series F Preferred Share issuance- 1,000,000 shares issued with an aggregate liquidation preference of $25,000, paying dividends at a yearly rate of 10% of such liquidation preference. 2,500 1,250 ------------ ------------ Total $ 5,991 $ 2,064 ============ ============

(I) Adjustment to reverse interest income recognized by the Company from COMI and the associated expense recognized by COMI due to COMI being a consolidated subsidiary effective January 1, 2001. (J) Pro forma adjustments are reflected below for additional interest expense resulting from acquisitions activity. Pro forma adjustments are also reflected below for decreases in historical interest expense resulting from property dispositions. Pro forma adjustments below associated with our Revolving Credit Facility, which bears interest at LIBOR plus 175 basis points, assumes a LIBOR rate of 6.4% per annum for the year ended December 31, 2000 and 5.34% per annum for the six months ended June 30, 2001.

FOR THE SIX FOR THE YEAR MONTH PERIOD ENDED ENDED ADJUSTMENT TO INTEREST EXPENSE, NET OF DECEMBER 31, JUNE 30, RELATED HISTORICAL AMOUNTS, AS A RESULT OF: 2000 2001 ------------------------------------------- ---- ---- Proceeds borrowed under the Revolving Credit Facility of $7,285 in connection with the acquisition of 7240 Parkway Drive. $ 175 $ - Debt repaid in connection with the sale of Minot Retail in the amount of $2,432, bearing interest at 8% per annum. (93) - Debt repaid in connection with the sale of Tred Avon consisting of: (i) $2,756 mortgage loan payable on the property with an interest rate of LIBOR plus 1.75% and (ii) $2,000 under the Revolving Credit Facility. (335) - F-10 Debt repaid under the Revolving Credit Facility in connection with the sale of 3 Center Drive in the amount of $1,755. (142) - Proceeds borrowed under the Revolving Credit Facility of $12,915 in connection with the acquisition of the State Farm Properties. 1,051 336 Debt repaid in connection with the sale of 19 Commerce Drive consisting of: (i) a $7,000 mortgage loan payable on the property with an interest rate of LIBOR plus 1.75% and (ii) $4,550 on the Revolving Credit Facility. (382) (224) Proceeds from debt in connection with the acquisition of the Airport Square Properties consisting of: (i) $16,215 borrowed under a mortgage loan payable bearing interest at LIBOR plus 1.75 basis points; (ii) $13,200 borrowed under the Revolving Credit Facility; and (iii) $7,862 borrowed under a mortgage loan payable bearing interest at 7.18% per annum. 2,961 1,314 Proceeds from debt in connection with the acquisition of the Gateway 63 Properties consisting of: (i) $15,750 mortgage loan payable assumed bearing interest at the Prime rate; and (ii) $4,295 borrowed under the Revolving Credit Facility. 557 776 ------------ ------------ $ 3,792 $ 2,202 ========= ============

(K) Pro forma depreciation expense adjustments are reflected on acquisitions based on a useful life of 40 years on the portion of the acquisition attributable to the building. Pro forma amortization expense adjustments are reflected assuming pro forma deferred financing fees are amortized over the life of the related loans. Pro forma depreciation and amortization expense adjustments on dispositions are reflected based on historical amounts.

FOR THE SIX FOR THE YEAR MONTH PERIOD ADJUSTMENT TO DEPRECIATION AND ENDED ENDED AMORTIZATION EXPENSE, NET OF RELATED DECEMBER 31, JUNE 30, HISTORICAL AMOUNTS, AS A RESULT OF: 2000 2001 ----------------------------------- ---- ---- DEPRECIATION EXPENSE: 7240 Parkway Drive $ 44 $ - Minot Retail (31) - Tred Avon (105) - 3 Center Drive (51) - F-11 State Farm Properties 132 110 19 Commerce Drive (158) (109) Airport Square Properties 905 453 Gateway 63 Properties 471 235 AMORTIZATION OF DEFERRED FINANCING FEES RELATED TO: Minot Retail (1) - Tred Avon (31) - 19 Commerce Drive - (85) Airport Square Properties 205 8 --------------- ------------ $ 1,380 $ 612 ============ ============

(L) Adjustment to reverse income recorded for the Operating Partnership's investment in COMI under the equity method of accounting during 2000. (M) Adjustment for distributions on additional Preferred Units issued in connection with a 1999 property acquisition. (N) Adjustment for minority interests' share of pro forma adjustments made to the Operating Partnership. (O) Adjustment to reverse income recorded for our investment in certain of the Airport Square Properties under the equity method of accounting during 2001. 4. ESTIMATED TWELVE-MONTH PRO FORMA STATEMENT OF TAXABLE NET OPERATING INCOME AND OPERATING FUNDS AVAILABLE The following unaudited statement is a pro forma estimate for a twelve-month period of taxable income and operating funds available for the Company. The unaudited pro forma statement is based on the Company's historical operating results for the year ended December 31, 2000 adjusted as if the following transactions had occurred on January 1, 2000: (i) the acquisition of 7240 Parkway Drive, (ii) the acquisition of the State Farm Properties, (iii) the acquistion of the Airport Properties as reported herein, and (iv) the acquistion of the Gateway 63 Properties as reported herein. This estimated twelve-month pro forma statement of taxable net operating income and operating funds available is based upon the historical results of operations of the Company for the year ended December 31, 2000. This information should be read in conjunction with the proforma condensed balance sheet and the pro forma condensed statement of operations of the Company set forth elsewhere herein and the historical financial statements and notes thereto of the Company included in the Corporate Office Properties Trust Form 10-K for the year ended December 31, 2000, the Airport Square Properties Statement of Revenue and Certain Expenses and the Gateway 63 Properties Statement of Revenue and Certain Expenses included in their Form 8-K. F-12

Estimate of Taxable Net Operating Income - ----------------------------------------- Historical earnings from operations, exclusive of depreciation and amortization and Preferred Share dividends (1) $ 33,646 Historical earnings from operations, exclusive of depreciation and amortization (2) 7240 Parkway Drive 46 State Farm Properties 192 Airport Square Properties 226 Gateway 63 Properties 236 Estimated tax basis depreciation and amortization (3) Historical tax basis depreciation and amortization (16,671) 7240 Parkway Drive (45) State Farm Properties (136) Airport Square Properties (929) Gateway 63 Properties (483) Other historical tax adjustments (3,365) -------- Pro Forma taxable operating income before dividends deduction 12,717 Dividends deduction (4) (18,917) -------- Excess of dividends over pro forma taxable operating income $ (6,200) ======== Estimate of Pro Forma Operating Funds Available (5) - --------------------------------------------------- Pro Forma taxable operating income before dividends deduction $ 12,717 Add pro forma tax basis depreciation and amortization 18,264 -------- Estimate of pro forma operating funds available $ 30,981 ========

(1) The historical earnings from operations represents the Company's net income from continuing operations as adjusted for depreciation and amortization for the year ended December 31, 2000 reflected in the historical financial statements. (2) The historical earnings from operations represents the pro forma results of 7240 Parkway Drive, the State Farm Properties, the Airport Square Properties and the Gateway 63 Properties reported net of related interest and minority interest expense. (3) The estimated tax basis depreciation reported is based upon the historic gross depreciation and amortization as reported in income tax returns filed by the Company and its consolidated subsidiaries. Adjustments are provided for 7240 Parkway Drive, the State Farm Properties, the Airport Square Properties and the Gateway 63 Properties based upon the original purchase price allocated to the buildings, depreciated on a straight-line basis over 39 year lives. (4) The dividends deduction is based on the historical dividends reported for the year ended December 31, 2000. (5) Operating funds available does not represent cash generated from operating activities in accordance with generally accepted accounting principles and is not necessarily indicative of cash available to fund cash needs. F-13 REPORT OF INDEPENDENT ACCOUNTANTS To Airport Square Properties We have audited the accompanying statement of revenue and certain expenses of the Airport Square Properties (the "Properties") as described in Note 1 for the year ended December 31, 2000. This historical statement is the responsibility of the Properties' management; our responsibility is to express an opinion on this historical statement based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the historical statement is free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the historical statement. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the historical statement. We believe that our audit provides a reasonable basis for our opinion. The accompanying historical statement was prepared for the purpose of complying with the rules and regulations of the Securities and Exchange Commission (for inclusion on Form 8-K of Corporate Office Properties Trust as described in Note 2, and is not intended to be a complete presentation of the Properties' revenue and expenses. In our opinion, the historical statement referred to above presents fairly, in all material respects, the revenue and certain expenses described in Note 2, of the Airport Square Properties for the year ended December 31, 2000, in conformity with accounting principles generally accepted in the United States of America. /s/ PricewaterhouseCoopers LLP PricewaterhouseCoopers LLP Baltimore, Maryland September 4, 2001 F-14 AIRPORT SQUARE PROPERTIES STATEMENT OF REVENUE AND CERTAIN EXPENSES FOR THE YEAR ENDED DECEMBER 31, 2000 - ------------------------------------------------------------------------------- Revenue Base rents $4,748,064 Tenant reimbursements 373,916 ---------- Total revenue 5,121,980 ---------- Certain expenses Property operating expenses Utilities 451,701 Property taxes 304,472 Cleaning 198,765 Management fees 139,962 Other operating expenses 178,496 ---------- Total property operating 1,273,396 Repairs and maintenance 526,731 ---------- Total certain expenses 1,800,127 ---------- Revenues in excess of certain expenses $3,321,853 ========== The accompanying notes are an integral part of these financial statements. F-15 AIRPORT SQUARE PROPERTIES STATEMENT OF REVENUE AND CERTAIN EXPENSES FOR THE SIX MONTHS ENDED JUNE 30, 2001 (UNAUDITED) - ------------------------------------------------------------------------------- Revenue Base rents $3,101,017 Tenant reimbursements 235,226 ---------- Total revenue 3,336,243 ---------- Certain expenses Property operating expenses Utilities 209,835 Property taxes 173,083 Cleaning 118,233 Management fees 78,616 Other operating expenses 111,058 ---------- Total property operating 690,825 Repairs and maintenance 243,828 ---------- Total certain expenses 934,653 ---------- Revenues in excess of certain expenses $2,401,590 ========== The accompanying notes are an integral part of these financial statements. F-16 AIRPORT SQUARE PROPERTIES NOTES TO FINANCIAL STATEMENTS - ------------------------------------------------------------------------------- 1. BUSINESS The accompanying statement of revenue and certain expenses relates to the operations of Airport Square Properties (the "Properties"), consisting of the revenue and certain expenses of six buildings totaling 411,755 square feet located in Linthicum, Maryland. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES BASIS OF PRESENTATION The accompanying combined statement of revenue and certain expenses was prepared for the purpose of complying with the rules and regulations of the Securities and Exchange Commission in contemplation of Corporate Office Properties Trust acquiring the Properties. The statement is not representative of the actual operations of the Properties for the period presented nor indicative of future operations as certain expenses, primarily depreciation, amortization, and interest expense, which may not be comparable to the expenses expected to be incurred by Corporate Office Properties Trust in future operations of the Properties, have been excluded. REVENUE AND EXPENSE RECOGNITION Revenue is recognized on a straight-line basis over the terms of the relate lease. Expenses are recognized in the period in which they are incurred. USED OF ESTIMATES The preparation of this historical statement in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of revenue and expenses during the reporting period. Actual results may differ from these estimates. MAJOR TENANTS During 2000, 56% of the Properties' total rental revenue was earned from 3 major tenants, each of which amounted to over 10% of total rental revenue. Rental revenue earned from these 3 tenants for the year ended December 31, 2000 was approximately $1,420,000, $730,000 and $508,000, respectively. F-17 AIRPORT SQUARE PROPERTIES NOTES TO FINANCIAL STATEMENTS - ------------------------------------------------------------------------------- 3. RENTALS The Properties have entered into non-cancelable tenant leases, with expiration dates ranging from January 2000 to April 2011. Such leases provide that tenants will share in operating expenses and real estate taxes on a pro rata basis, as defined in the leases. Future minimum rentals as of December 31, 2000, to be received under these tenant leases are as follows: 2001 $ 5,535,544 2002 5,305,256 2003 4,645,510 2004 4,595,415 2005 3,396,884 Thereafter 11,627,620 ----------- $35,106,229 =========== Amounts in this schedule of future minimum rentals includes $622,500 of future rents associated with a tenant that declared bankruptcy subsequent to the year ended December 31, 2000. 4. UNAUDITED INTERIM STATEMENT The statement of revenue and certain expenses for the six months ended June 30, 2001 is unaudited. As a result, this interim statement should be read in conjunction with the statement and notes included in the December 31, 2000 statement of revenue and certain expenses. The interim statement reflects all adjustments which we believe are necessary for the fair presentation of our statement of revenue and certain expenses for the interim period presented. These adjustments are of a normal recurring nature. The statement of revenue and certain expenses for such interim period is not necessarily indicative of the results for a full year. F-18 REPORT OF INDEPENDENT ACCOUNTANTS To Gateway 63 Properties We have audited the accompanying statement of revenue and certain expenses of the Gateway 63 Properties (the "Properties") as described in Note 1 for the year ended December 31, 2000. This historical statement is the responsibility of the Properties' management; our responsibility is to express an opinion on this historical statement based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the historical statement is free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the historical statement. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the historical statement. We believe that our audit provides a reasonable basis for our opinion. The accompanying historical statement was prepared for the purpose of complying with the rules and regulations of the Securities and Exchange Commission (for inclusion on Form 8-K of Corporate Office Properties Trust) as described in Note 2, and is not intended to be a complete presentation of the Properties' revenue and expenses. In our opinion, the historical statement referred to above presents fairly, in all material respects, the revenue and certain expenses described in Note 2, of the Gateway 63 Properties for the year ended December 31, 2000, in conformity with accounting principles generally accepted in the United States of America. /s/ PricewaterhouseCoopers LLP PricewaterhouseCoopers LLP Baltimore, Maryland September 4, 2001 F-19 GATEWAY 63 PROPERTIES STATEMENT OF REVENUE AND CERTAIN EXPENSES FOR THE YEAR ENDED DECEMBER 31, 2000 - ------------------------------------------------------------------------------- Revenue Base rents $1,004,400 Tenant reimbursements 82,998 Miscellaneous income -- ---------- Total revenue 1,087,398 ---------- Certain expenses Property operating expenses Property taxes 50,176 Management fees 24,808 Utilities 22,396 Other operating expenses 8,994 ---------- Total property operating 106,374 Repairs and maintenance 46,821 ---------- Total certain expenses 153,195 ---------- Revenue in excess of certain expenses $ 934,203 ========== The accompanying notes are an integral part of these financial statements. F-20 GATEWAY 63 PROPERTIES STATEMENT OF REVENUE AND CERTAIN EXPENSES FOR THE SIX MONTHS ENDED JUNE 30, 2001 (UNAUDITED) - ------------------------------------------------------------------------------- Revenue Base rents $1,583,799 Tenant reimbursements 196,231 Miscellaneous income 60 ---------- Total revenue 1,780,090 ---------- Certain expenses Property operating expenses Property taxes 106,066 Management fees 39,715 Utilities 30,750 Other operating expenses 3,572 ---------- Total property operating 180,103 Repairs and maintenance 73,341 ---------- Total certain expenses 253,444 ---------- Revenue in excess of certain expenses $1,526,646 ========== The accompanying notes are an integral part of these financial statements. F-21 GATEWAY 63 PROPERTIES NOTES TO FINANCIAL STATEMENTS - ------------------------------------------------------------------------------- 1. BUSINESS The accompanying statement of revenue and certain expenses relates to the operations of Gateway 63 Properties (the "Properties"), consisting of the revenue and certain expenses of four buildings totaling 187,132 square feet located in Columbia, Maryland. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES BASIS OF PRESENTATION The accompanying combined statement of revenue and certain expenses was prepared for the purpose of complying with the rules and regulations of the Securities and Exchange Commission in contemplation of Corporate Office Properties Trust acquiring the Properties. The statement is not representative of the actual operations of the Properties for the period presented nor indicative of future operations as certain expenses, primarily depreciation, amortization, and interest expense, which may not be comparable to the expenses expected to be incurred by Corporate Office Properties Trust in future operations of the Properties, have been excluded. REVENUE AND EXPENSE RECOGNITION Revenue is recognized on a straight-line basis over the terms of the relate lease. Expenses are recognized in the period in which they are incurred. USED OF ESTIMATES The preparation of this historical statement in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of revenue and expenses during the reporting period. Actual results may differ from these estimates. MAJOR TENANTS During 2000, 97% of the Properties' total rental revenue was earned from 2 major tenants, each of which amounted to over 10% of total rental revenue. Rental revenue earned from these 2 tenants for the year ended December 31, 2000 was approximately $787,011 and $183,478, respectively. 3. RENTALS The Properties have entered into non-cancelable tenant leases, with expiration dates ranging from 2005 to 2011. Such leases provide that tenants will share in operating expenses and real estate taxes on a pro rata basis, as defined in the leases. Future minimum rentals as of December 31, 2000, to be received under these tenant leases are as follows: 2001 $ 2,735,483 2002 3,030,145 2003 3,073,196 2004 3,153,316 2005 3,080,615 Thereafter 14,443,605 ----------- $29,516,360 =========== F-22 GATEWAY 63 PROPERTIES NOTES TO FINANCIAL STATEMENTS - ------------------------------------------------------------------------------- 4. UNAUDITED INTERIM STATEMENT The statement of revenue and certain expenses for the six months ended June 30, 2001 is unaudited. As a result, this interim statement should be read in conjunction with the statement and notes included in the December 31, 2000 statement of revenue and certain expenses. The interim statement reflects all adjustments which we believe are necessary for the fair presentation of our statement of revenue and certain expenses for the interim period presented. These adjustments are of a normal recurring nature. The statement of revenue and certain expenses for such interim period is not necessarily indicative of the results for a full year. F-23