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

SUBJECT TO COMPLETION, DATED SEPTEMBER 5, 2001

PRELIMINARY PROSPECTUS SUPPLEMENT TO PROSPECTUS DATED NOVEMBER 1, 2000

1,000,000 Shares
Corporate Office Properties Trust

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

    Corporate Office Properties Trust is a real estate investment trust which owns and operates suburban office properties in select Mid-Atlantic regions. As of June 30, 2001, we owned a total of 91 suburban office properties, including six properties owned through joint ventures, aggregating 7.0 million rentable square feet that were 96.9% occupied.

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

    The underwriters have an option to purchase a maximum of 150,000 additional Series F Preferred Shares to cover over-allotments.

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

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

(1)

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

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

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

Joint Book-Running Managers

The date of this prospectus supplement is       , 2001.

TABLE OF CONTENTS

PROSPECTUS SUPPLEMENT

PROSPECTUS

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

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

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

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

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FORWARD-LOOKING STATEMENTS

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

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

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PROSPECTUS SUPPLEMENT SUMMARY

    This summary highlights information contained elsewhere in this prospectus supplement, and may not contain all of the information investors should consider before investing in our Series F Preferred Shares. You should read the entire prospectus supplement and accompanying prospectus carefully, especially the "Risk Factors" sections beginning on page 3 of the accompanying prospectus and in our Annual Report on Form 10-K for the year ended December 31, 2000 identified in the section of this prospectus supplement called "Where You Can Find More Information." Unless otherwise indicated, information in this prospectus supplement is provided assuming that (i) all property and financial information is presented as of June 30, 2001, and (ii) the underwriters' over-allotment option to purchase up to 150,000 additional Series F Preferred Shares is not exercised.

Corporate Office Properties Trust

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

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

    Geographic Focus.  Our strategy is to operate in select, demographically strong and growing regions, within the Mid-Atlantic region, where we believe we have achieved the critical mass necessary to maximize management efficiencies, operating synergies and competitive advantages through our acquisition, property management and development programs. We are among the largest suburban office owners in each of our core regions and the largest in the Northern Baltimore/Washington Corridor or the "B/W Corridor." The following table sets forth certain information, as of June 30, 2001, regarding our portfolio:

(1)

Contractual rental revenue plus expense reimbursements annualized as of June 30, 2001.

(2)

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

(3)

Six properties totaling 358,379 rentable square feet were held through joint ventures as of June 30, 2001. On July 2, 2001, we purchased the remaining 60% interest in a joint venture which owned five properties totaling 314,594 rentable square feet.

    Corporate Tenants.  We focus on leasing our office properties to a diverse mix of companies in a wide range of industries, with an emphasis on large, high quality companies that are financially sound market leaders in their respective fields with significant space requirements. To enhance the stability of our cash flow, we typically structure our leases with terms ranging from three to ten years. Our average lease size is approximately 15,826 rentable square feet with a weighted average remaining lease term of 4.5 years.

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    Mid-Atlantic Management Experience.  Our company is led by Jay Shidler, Chairman of our Board of Trustees. Mr. Shidler and our six executive officers have an average of 22 years of property management, acquisition and development experience specifically within our core markets. We believe our extensive experience, market knowledge and network of industry contacts within the Mid-Atlantic region provide us with an important competitive advantage in establishing, maintaining and enhancing our prominence within our selected regions. Additionally, as a seasoned and prominent owner and operator, we believe we can effectively attract and retain high-quality tenants and efficiently accommodate tenant needs on a cost-effective basis. During the six month period ended June 30, 2001, our tenant retention rate was 82.6% (based on rentable square feet renewed) and our retenanting costs averaged $6.07 per square foot.

    Debt Strategy.  Our financing policy is aimed at maintaining a flexible capital structure in order to facilitate consistent growth and performance through all market conditions. An important element of our policy is our debt strategy. We primarily utilize property-level mortgage debt as opposed to corporate unsecured debt. We believe the commercial mortgage debt market is a more mature and generally a more stable market for real estate companies, which provides us with greater access to capital on a more consistent basis and, generally, on more favorable terms. We seek to maintain, on a consolidated basis, a debt service coverage ratio (ratio of EBITDA (operating income before mortgage and other interest, income taxes, depreciation and amortization) to debt service (interest expense plus capitalized interest and scheduled principal amortization)) in excess of 1.6x, which we believe is generally consistent with the current minimum investment grade requirement for mortgages securing commercial real estate. We believe this ratio is appropriate for a seasoned portfolio of suburban office buildings. However, despite our current intention to maintain this policy, we are not obligated to do so. We may change this policy without shareholder consent. For the six month period ended June 30, 2001, our debt service coverage ratio was 1.9x.

    Management Ownership.  As of June 30, 2001, our executive officers and trustees owned a total of 26.8% of our common equity interests on a fully diluted basis, which we believe is among the highest management ownership positions within the public REIT industry. Furthermore, management's entire ownership position is in the form of common equity. As such, their dividend rights rank junior to the outstanding Series A Preferred Share, Series B Preferred Shares, Series D Preferred Shares, and Series E Preferred Shares and will rank junior to the Series F Preferred Shares.

Historical Performance

    From December 31, 1997 (the year ending immediately prior to our public offering and the listing of our common shares on the New York Stock Exchange in April 1998) through June 30, 2001, we have achieved the following:

•

338.6% growth in our total assets from $193.5 million to $848.8 million;



•

60.0% increase in our quarterly dividends, from $0.125 per common share paid during the three month period ended December 31, 1997 to $0.20 per common share paid during the three month period ended June 30, 2001;



•

17.3% increase in our fixed charge coverage ratio (ratio of EBITDA to fixed charges (interest costs, amortization of debt issuance costs and distributions to preferred shareholders and unitholders)) from 1.5x to 1.7x; and



•

97.3% weighted average end of period portfolio occupancy rate; an 81.0% weighted average tenant retention rate, based on square footage renewed between January 1, 1998 and June 30, 2001; and a 17.9% weighted average increase in total rental revenue for leases executed between January 1, 1998 and June 30, 2001 for renewed and retenanted square footage.

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Recent Developments

    From January 1, 2001 through August 30, 2001, we continued to implement our strategy of enhancing our market presence in our core Mid-Atlantic regions through our development and acquisition programs. Through a combination of direct ownership and joint ventures, we invested a total of $99.7 million in developing two office properties completed during 2001 and acquiring 12 office properties and one redevelopment property aggregating 862,660 rentable square feet. All of these properties are located in the B/W Corridor and were 97.0% occupied as of August 30, 2001 (excluding a property with 30,855 rentable square feet that is currently being redeveloped). We also sold a property with 65,277 rentable square feet for $11.5 million. Additionally, we executed 71 leases totaling 489,000 square feet through June 30, 2001. We continued our strategy of focusing on leasing to high-quality tenants that have large space requirements on a long-term basis. Also during this period, we executed a number of significant leases, including, among others, two leases for an aggregate of 89,348 rentable square feet with the United States government; two leases for an aggregate of 44,909 rentable square feet with First Service Networks, Inc.; a lease for 46,400 rentable square feet with Lockheed Martin Corporation; and a lease for 29,741 rentable square feet with Titan Systems Corporation.

    In terms of financing and capital activity, from January 1, 2001 through August 30, 2001, we completed the following transactions:

•

sale of 544,000 shares of 4.00% Series D Cumulative Convertible Redeemable Preferred Shares ("Series D Preferred Shares") to a private investor in January, raising $11.9 million in total net proceeds. The Series D Preferred Shares are convertible after December 31, 2003, at the option of the holder, into common shares at a ratio of 2.2 common shares for each Series D Preferred Share, equating to $11.36 per common share. We can redeem the Series D Preferred Shares after January 24, 2006 for cash at $25.00 per share, plus accrued and unpaid dividends;



•

sale of 1,150,000 shares of 10.25% Series E Cumulative Redeemable Preferred Shares ("Series E Preferred Shares") through an underwritten public offering in April 2001, raising $27.0 million in total net proceeds. We can redeem the Series E Preferred Shares after July 14, 2006 for cash at $25.00 per share, plus accrued and unpaid dividends;



•

issued 310,342 common units of our operating partnership as part of the purchase of four properties totaling 187,132 rentable square feet for $23.8 million;



•

obtained six fixed-rate, long-term mortgage loans totaling $129.4 million. These loans bear interest at a weighted average rate of 7.4% and have a weighted average term of 7.1 years. The proceeds of these loans were primarily used to refinance existing debt, including certain construction loans and amounts outstanding under our existing secured revolving credit facility (our "Credit Facility");



•

assumed two interim mortgage loans totaling $32.0 million in order to finance several acquisitions during this period. The $16.2 million loan bears interest at LIBOR plus 1.75% and matures in March 2002 and the remaining $15.8 million of this assumed debt bears interest at prime rate and matures in February 2003. We also borrowed $17.5 million under our Credit Facility to finance these acquisitions;



•

expanded our Credit Facility to $125.0 million and extended its maturity date for three years through March 2004. We utilized proceeds from our Credit Facility to repay our outstanding balance of $29.1 million under our loan with Prudential Securities Credit Corp. upon its maturity in June 2001. Borrowings under our Credit Facility continue to be limited to 65% of the appraised value of properties pledged as collateral;



•

received a loan commitment to borrow $12.0 million secured by three properties. Subject to completion of definitive documents, the loan will bear interest at a rate of LIBOR plus 1.75%

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and will mature nineteen months after closing of the loan, unless a one-year extension option is exercised; and

•

invested $8.1 million in six joint ventures, two of which own six operating properties totaling 358,379 rentable square feet, and four of which own development properties, including one building under development totaling 54,692 rentable square feet and two parcels of land held for future development. We also paid $6.9 million to acquire the remaining 60% interest in one of the joint ventures.

    Our objective is to increase cash flow and enhance the underlying value of these acquisitions by capitalizing on existing below market leases and expansion opportunities. In terms of our on-going development program, we currently have eight properties totaling 702,286 square feet under construction with an aggregate projected cost of $107.5 million, including four properties totaling 438,542 square feet with an aggregate projected cost of $62.9 million held through joint ventures. We also hold options to acquire an additional 73 acres, which can support approximately 600,000 square feet of new office development. Consistent with our long-standing strategy, all of our acquisition and development activity is focused in our core Mid-Atlantic regions, predominately in the B/W Corridor.

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The Offering

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

Risk Factors

    Investment in the Series F Preferred Shares involves certain risks. You should carefully consider the information under "Risk Factors" in the accompanying prospectus and in our Annual Report on Form 10-K for the year ended December 31, 2000 identified in the section of this prospectus supplement called "Where You Can Find More Information" and all other information included or incorporated by reference in this prospectus supplement and the accompanying prospectus.

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Summary Financial Data

    The following table contains summary financial data as of and for the six months ended June 30, 2001 and 2000 and as of and for the years ended December 31, 2000, 1999, 1998 and 1997, as derived from our unaudited financial statements for the six months ended June 30, 2001 and 2000 and from our audited financial statements for the years ended December 31, 2000, 1999, 1998 and 1997. Since this information is only a summary, you should refer to our consolidated financial statements and the notes thereto and the "Management's Discussion and Analysis of Financial Condition and Results of Operations," each as appearing in our Quarterly Report on Form 10-Q for the six months ended June 30, 2001 and 2000 and in our Annual Report on Form 10-K for the year ended December 31, 2000, incorporated by reference into this prospectus supplement, for additional information.

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(1)

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

(2)

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

(3)

Effective January 1, 2001, the service operations became a consolidated subsidiary of our operating partnership. Prior to that date, we accounted for our service operations using the equity method of accounting.

(4)

Certain prior period amounts have been reclassified to conform with the current presentation.

(5)

We consider Funds from Operations ("FFO") to be meaningful to investors as a measure of the financial performance of an equity REIT when considered with the financial data presented under generally accepted accounting principles ("GAAP"). Under the National Association of Real Estate Investment Trusts' ("NAREIT") definition, FFO means net income (loss) computed using GAAP, excluding gains (or losses) from debt restructuring and sales of property, plus real estate-related depreciation and amortization and after adjustments for unconsolidated partnerships and joint ventures, although we have included gains from the sales of properties to the extent such gains related to redevelopment services provided. FFO-diluted adjusts FFO assuming conversion of share options, Common Unit warrants, Preferred Units and Preferred Shares into common shares. However, our computation of FFO-diluted does not assume conversion of securities into our common shares if conversion of those securities would increase our earnings per share in a given period. The FFO we present may not be comparable to the FFO of other REITs since they may interpret the current NAREIT definition of FFO differently or they may not use the current NAREIT definition of FFO. FFO is not the same as cash generated from operating activities or net income determined in accordance with GAAP. FFO is not necessarily an indication of our cash flow available to fund cash needs. Additionally, it should not be used as an alternative to net income when evaluating our financial performance or to cash flow from operating, investing and financing activities when evaluating our liquidity or ability to make cash distributions or pay debt service.

(6)

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

(7)

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

(8)

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

(9)

We compute interest coverage by dividing earnings before interest, depreciation and amortization by interest expense. We compute earnings before interest, depreciation and amortization by subtracting property operating and general and administrative expenses from the sum of total revenues, equity in income of unconsolidated real estate joint ventures and earnings (losses) from service operations.

(10)

Amounts reported for June 30, 2001 include six properties totaling 358,379 rentable square feet held through joint ventures.

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CAPITALIZATION

    The following table sets forth our capitalization as of June 30, 2001: (i) on a historical basis, (ii) as adjusted for our acquisitions of the Gateway 63 portfolio, which includes four properties with 187,132 rentable square feet, on August 30, 2001, of Airport Square I, which includes one building with 97,161 rentable square feet, on August 3, 2001, and of the remaining 60% interest in the Airport Square joint venture, which owns five properties totaling 314,594 rentable square feet, on July 2, 2001 (collectively, the "Acquisitions"), and (iii) as further adjusted assuming the sale of the Series F Preferred Shares and the application of the net proceeds of this offering as described under "Use of Proceeds." The information set forth in the following table should be read in conjunction with the consolidated financial statements and the notes thereto in our Annual Report on Form 10-K for the year ended December 31, 2000, and our Quarterly Reports on Form 10-Q for the periods ended June 30, 2001 and March 31, 2001, each of which are incorporated by reference herein:

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(1)

This table does not give effect to (i) our closing of a $16,000, six-year, 7.14% mortgage subsequent to June 30, 2001 and the repayment of $15,030 of indebtedness under our Credit Facility, or (ii) a commitment from Allfirst Bank to loan $12,000 secured by three properties. Subject to the completion of definitive documents, this loan will bear interest at a rate of LIBOR plus 1.75% and will mature nineteen months following the closing of the loan, unless a one-year extension option is exercised. There can be no assurance that this loan transaction will be consummated.

(2)

In connection with the Acquisitions, we issued 310,342 Common Units of our operating partnership valued at $10.50 per unit. We also assumed $39,818 of debt and borrowed $17,495 under our Credit Facility. Of the assumed debt, $16,215 bears interest at LIBOR plus 1.75% and matures in March 2002, unless a six-month extension option is exercised. Another $15,750 of assumed debt bears interest at prime rate and matures in February 2003. Subject to certain conditions regarding future tenant improvements, we also have the right to borrow an additional $2,000 under the mortgage loan in connection with the $15,750 of assumed debt. The remaining $7,853 of assumed debt bears interest at 7.18% and matures in August 2009. In addition, adjustments relating to the Acquisitions reflect a decrease of $412 in minority interests and a corresponding increase in additional paid-in capital to reflect the change in ownership in our operating partnership.

(3)

Excludes 150,000 Series F Preferred Shares that may be issuable upon exercise of the underwriters' over-allotment option.

(4)

Excludes (i) 11,727,689 common shares that may be exercisable under certain circumstances upon conversion or redemption of outstanding common and preferred units and (ii) 2,991,020 common shares underlying options issued under our option plan and incentive plan outstanding as of August 30, 2001.

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FINANCIAL RATIOS

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

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

Calculation of Interest and Debt Service Coverage Ratios

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

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USE OF PROCEEDS

    We intend to contribute the net proceeds from the sale of the Series F Preferred Shares, expected to be approximately $     million after payment of our expenses related to this offering and underwriting discounts and commissions, or $     million if the underwriters' over-allotment option is exercised in full, to our operating partnership in exchange for a preferred interest in our operating partnership. The economic terms of this preferred interest will be substantially equivalent to the economic terms of the Series F Preferred Shares. Our operating partnership intends to use a portion of the amount received from us to repay outstanding indebtedness under our Credit Facility. An affiliate of McDonald Investments Inc., one of the underwriters, is a participating lender under our Credit Facility. At June 30, 2001, there was $53.2 million of outstanding indebtedness under our Credit Facility, bearing interest at a weighted average interest rate of 6.3% and maturing in March 2004.

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THE COMPANY

History

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

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

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

    In September 1998, we acquired the property portfolio and management operations of Constellation Real Estate Group, Inc. ("Constellation"), the wholly-owned real estate subsidiary of Baltimore Gas and Electric ("BGE"). Constellation's portfolio consisted principally of (i) 12 suburban office properties totaling 1.2 million rentable square feet, predominantly located in the B/W Corridor and (ii) options to purchase an aggregate 91 acres of land which can support approximately 1.7 million rentable square feet of new office development. The consideration paid in the acquisition of the Constellation portfolio was valued at $186.8 million, and involved the issuance to BGE of 7,030,793 common shares, valued at $10.50 per common share, and 984,308 5.5% Series A Convertible Preferred Shares, valued at $25.00 per share. In addition, we added several key executive officers, including Randall Griffin as our President and Chief Operating Officer and Roger Waesche as a Senior Vice President and our Chief Financial Officer, and two BGE nominees to our Board of Trustees. In September 2000, BGE converted 984,307 Series A Convertible Preferred Shares into 1,845,378 Common Shares. As of June 30, 2001, BGE owned a total of 26.5% of our equity on a fully-diluted basis.

    From September 28, 1998 through June 30, 2001, we have continued to strategically expand our portfolio and enhance our market presence, predominantly in the B/W Corridor, through our acquisition and development program. During this period, we invested a total of $341.9 million in acquiring 45 wholly-owned properties and developing eight properties aggregating 3.1 million rentable square feet. In addition, we invested $4.5 million in two joint ventures, including a 40% interest in a joint venture owning five operating properties totaling 314,594 rentable square feet and an 80% interest in a joint venture owning a newly constructed property with 43,785 rentable square feet. We also expanded our development activities by investing $7.5 million in four joint ventures owning two parcels of land and are developing three properties totaling 199,042 rentable square feet. We also have options to acquire an additional 73 acres, which can support approximately 600,000 rentable square feet of new office development. As of June 30, 2001, we owned 91 suburban office properties in select Mid-Atlantic regions, including the six operating properties owned through joint ventures, totaling 7.0 million rentable square feet.

    From July 1, 2001 through August, 30, 2001, we invested $35.3 million in the B/W Corridor in connection with the acquisition of five operating properties totaling 284,293 rentable square feet and another $6.9 million to acquire the remaining 60% interest in the joint venture owning five operating

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properties totaling 314,594 rentable square feet, resulting in our 100% ownership of these properties. As of August 30, 2001, we owned 96 suburban office properties, including one operating property held through a joint venture, totaling 7.2 million rentable square feet.

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

Corporate Objectives and Strategies

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

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

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

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

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

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

    Property Development Strategies.  We balance our acquisition program through selective development and expansion of suburban office properties as market conditions and leasing opportunities support favorable risk-adjusted returns. We pursue development opportunities principally in response to the needs of existing and prospective new tenants. We develop sites that are in close

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proximity to our existing properties. We believe developing such sites enhances our ability to effectively meet tenant needs and efficiently provide critical tenant services.

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

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

Financing Policy

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

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

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

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Property Summary Data

    The following table provides certain information about our properties as of June 30, 2001:

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