Exhibit 99.1
|
Corporate Office Properties Trust |
|
Contact: |
|
8815 Centre Park Drive, Suite 400 |
|
Mary Ellen Fowler |
|
Columbia, Maryland 21045 |
|
Vice President |
|
Telephone 410-730-9092 |
|
Finance and Investor Relations |
|
Facsimile 410-740-1174 |
|
410-992-7324 |
|
Website www.copt.com |
|
maryellen.fowler@copt.com |
|
|
|
|
|
NEWS RELEASE |
|
For Immediate Release |
CORPORATE OFFICE PROPERTIES TRUST REPORTS 14%
INCREASE IN FFO PER SHARE DILUTED AND 20% INCREASE
IN EPS DILUTED FOR THIRD QUARTER 2003
COLUMBIA, MD OCTOBER 29, 2003 - Corporate Office Properties Trust (NYSE: OFC) announced today financial and operating results for the quarter ended September 30, 2003.
Highlights
• 20% per share increase in Earnings per Share (“EPS”) diluted to $0.18 for third quarter 2003 compared to $0.15 per share for third quarter 2002.
• 13.9% increase in Funds from Operations (“FFO”) per diluted share to $0.41 for third quarter 2003 from $0.36 for third quarter 2002, as adjusted for the effects of SFAS 141 and SFAS 145. Excluding the effects of SFAS 141, the Company’s diluted FFO per share would have been $0.41 for the third quarter of 2003 as compared to $0.35 for the comparable 2002 period, representing an increase of 17.1% per share.
• $53.2 million in equity raised through the issuance of 2.2 million Series G preferred shares with an annual dividend of 8%.
• $75.5 million in acquisitions completed during the third quarter, and $165 million year-to-date.
• 6.82% increase in quarterly common dividend (53.9% FFO payout ratio).
• 91.7% occupied and 92.2% leased as of September 30, 2003.
“During the third quarter, we continued to advance the Company on a number of important fronts,” stated Clay W. Hamlin, III, Chief Executive Officer. “We enhanced our market presence in Northern Virginia with a $75 million acquisition, bringing our total acquisitions to $165 million year to date. We’ve funded our investment activity predominantly through issuing common and preferred equity, totaling $133 million. As a result, we’ve strengthened our balance sheet and financial flexibility. Additionally, in light of our ongoing strong performance, we raised our
common dividend in the third quarter by 6.8%. Notwithstanding the increased dividend, our payout ratios remain very conservative.”
Financial Results
EPS for the quarter ended September 30, 2003 totaled $0.18 per diluted share and net income available to common shareholders totaled $5.4 million, as compared to $0.15 per diluted share, and $3.6 million net income available to common shareholders for the quarter ended September 30, 2002.
Diluted FFO for the quarter ended September 30, 2003 totaled $16.7 million, or $0.41 per diluted share, as compared to $13.4 million, or $0.36 per diluted share, for the quarter ended September 30, 2002, representing a 13.9% increase on a per share basis. The Company recorded $347,000 and $366,000 of SFAS 141 revenues for the quarters ended September 30, 2003 and September 30, 2002, respectively. Excluding the effects of SFAS 141, diluted FFO per share would have been $0.41 per share for the third quarter of 2003 as compared to $0.35 per share for the comparable 2002 period, representing an increase of 17.1% per share. Our net Earnings Payout ratio was 125.3% for the three months ended September 30, 2003 as compared to 140.8% for the comparable 2002 period. Diluted FFO Payout ratio was 53.9% for third quarter 2003 compared to 58.9% for the comparable 2002 period. Diluted AFFO Payout ratio was 75.4% for third quarter 2003, compared to 75.1% for the comparable 2002 period. A reconciliation of non GAAP measures to the comparable GAAP measures are included in the tables that follow the text of this press release.
As of September 30, 2003, the Company had a total market capitalization of $1.6 billion, with $759 million in debt outstanding, equating to a 46.5% debt-to-total market capitalization ratio. Total Debt to Undepreciated Book Value was 59.0% at quarter end. The Company’s total quarterly weighted average interest rate was 5.7%, and 78% of total debt was subject to fixed interest rates, including interest rate swaps. For the third quarter 2003, EBITDA interest coverage ratio was 3.0x, and the EBITDA fixed charge ratio was 2.3x.
Operating Results
At September 30, 2003, the Company’s portfolio of 118 office properties totaling 9.9 million square feet, including three joint venture properties, was 91.7% occupied and 92.2% leased. The weighted average remaining lease term for our portfolio was 4.9 years and the average rental rate (including tenant reimbursements) was $19.74 per square foot.
During the quarter, the Company renewed 370,068 square feet or 87.2% of leases expiring (based on square footage), at an average capital cost of $4.51 per square foot. The largest leases renewed included The Aerospace Corporation for 134,000 square feet, the U.S. Government for 97,000 square feet, and Booz Allen Hamilton for 45,000 square feet.
During the quarter, the Company signed leases to retenant space totaling 156,336 square feet. The major leases signed included EVI for 39,000 square feet (in former Corvis space), Titan Corporation for 31,000 square feet, Booz Allen Hamilton for 27,000 square feet and the U.S. Government for 23,000 square feet.
2
For renewed and retenanted space of 526,404 square feet, the Company achieved a 13.9% increase in straight-line base rent and a 10.8% increase in straight-line total rent, as measured from the GAAP straight-line rent in effect preceding the renewal date. On a cash basis for renewed and retenanted space, base rent increased 3.3% and total rent increased 2.3%. The average capital cost for all renewed and retenanted space was $8.48 per square foot.
Same property Cash Net Operating Income increased by 6.5% and same property GAAP Net Operating Income increased 7.8%, for third quarter 2003 as compared to the comparable 2002 period. The increase is primarily due to higher lease termination fees ($748,000) and increased rental income ($520,000).
The Company recognized $554,000 of fee income after tax associated with third party construction management and tenant design services for the quarter ending September 30, 2003.
Development Activity
The Company commenced construction on an 88,094 square foot office building (known as Greens III) in The Westfields Corporate Center, Chantilly, Virginia. This building is 100% pre-leased to The Aerospace Corporation for a ten-year term. Including this project, the Company has four buildings totaling 420,594 square feet under construction that are 65% pre-leased.
Acquisition Activity
In July 2003, the Company acquired 433,814 square feet through the $75.5 million purchase of a five building portfolio located in Herndon and Chantilly, Virginia. The five buildings were 96.3% leased at the date of acquisition with an average lease term of 5.8 years. With this acquisition, the Company’s Northern Virginia portfolio now totals approximately 1.6 million square feet of office space.
Financing and Capital Transactions
The Company executed the following transactions during the quarter:
• Sold 2,200,000 Series G preferred shares at $25.00 per share generating net proceeds of $53.2 million on August 11, 2003. The annual dividend for Series G preferred shares is 8%.
• Raised the quarterly common dividend by 6.82% to $.235 per share from $.22 per share.
• Executed a loan commitment for a non-recourse financing of $52.0 million at a 5.36% fixed rate for a seven-year term.
Conference Call
The Company will hold an investor/analyst conference call:
Conference Call and Webcast Date: October 30, 2003
Time: 4:00 p.m. EST
Dial In Number: (800) 967-7184
Confirmation Code for the call: 615332
3
A replay of the conference call will begin at 7:00 p.m. EST and will be available through Friday November 28, 2003, midnight EST. The telephone number for the replay is (888) 203-1112. You will then need to enter the confirmation code. The live webcast may be accessed under the Investor Relations section of the Company’s website at www.copt.com through January 30, 2004.
Company Information
Corporate Office Properties Trust is a fully integrated, self-managed, real estate investment trust which focuses on the ownership, management, leasing, acquisition and development of suburban office properties located in select Mid-Atlantic submarkets. The Company currently owns 118 office properties totaling 9.9 million rentable square feet, including three properties held through joint ventures. Corporate Development Services, the Company’s development company, provides a wide range of development and construction management services. In addition, Corporate Office Services provides land planning, design/build services, consulting and merchant development to third party entities. The Company’s shares are traded on the New York Stock Exchange under the symbol OFC. More information on Corporate Office Properties Trust can be found on the Internet at www.copt.com.
Forward-Looking Information
This press release may contain “forward-looking” statements, as defined in Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, that are based on the Company’s current expectations, estimates and projections about future events and financial trends affecting the Company. Forward-looking statements can be identified by the use of words such as “may”, “will”, “should”, “expect”, “estimate” or other comparable terminology. Forward-looking statements are inherently subject to risks and uncertainties, many of which the Company cannot predict with accuracy and some of which the Company might not even anticipate. Accordingly, the Company can give no assurance that these expectations, estimates and projections will be achieved. Future events and actual results may differ materially from those discussed in the forward-looking statements.
Important factors that may affect these expectations, estimates, and projections include, but are not limited to:
• the Company’s 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, increased competition with other companies;
• risk of real estate acquisition and development, including, among other things, risks that development projects may not be completed on schedule, that tenants may not take occupancy or pay rent or that development or operating costs may be greater than anticipated;
• risks of investing through joint venture structures, including risks that the Company’s joint venture partners may not fulfill their financial obligations as investors or may take actions that are inconsistent with the Company’s objectives;
• governmental actions and initiatives;
• and environmental requirements.
The Company undertakes no obligation to update or supplement any forward-looking statements. For further information, please refer to our filings with the Securities and Exchange Commission, particularly the section entitled “Risk Factors” in Item 1 of our Annual Report on Form 10-K for the year ended December 31, 2002.
Financial Tables Attached
4
Corporate Office Properties Trust
Summary Financial Data
(Unaudited)
(all amounts in thousands except per share data)
|
|
|
Three
Months Ended |
|
||||
|
|
|
2003 |
|
2002 |
|
||
|
Real Estate Operations |
|
|
|
|
|
||
|
Revenues |
|
|
|
|
|
||
|
Rental revenue |
|
$ |
40,210 |
|
$ |
33,769 |
|
|
Tenant recoveries and other revenue |
|
5,238 |
|
4,296 |
|
||
|
Revenue from real estate operations |
|
45,448 |
|
38,065 |
|
||
|
Expenses |
|
|
|
|
|
||
|
Property operating |
|
13,075 |
|
11,994 |
|
||
|
Interest |
|
10,436 |
|
10,489 |
|
||
|
Depreciation and amortization |
|
10,235 |
|
7,916 |
|
||
|
Expenses from real estate operations |
|
33,746 |
|
30,399 |
|
||
|
Earnings from real estate operations before equity in income of unconsolidated real estate joint ventures |
|
11,702 |
|
7,666 |
|
||
|
Equity in income of unconsolidated real estate joint ventures |
|
95 |
|
138 |
|
||
|
Earnings from real estate operations |
|
11,797 |
|
7,804 |
|
||
|
Income from service operations |
|
742 |
|
15 |
|
||
|
General and administrative expenses |
|
(1,937 |
) |
(815 |
) |
||
|
Income before gain on sales of real estate, minority interests, income taxes and discontinued operations |
|
10,602 |
|
7,004 |
|
||
|
Gain on sales of real estate |
|
23 |
|
796 |
|
||
|
Income before minority interests, income taxes and discontinued operations |
|
10,625 |
|
7,800 |
|
||
|
Minority interests |
|
(1,833 |
) |
(1,897 |
) |
||
|
Income before income taxes and discontinued operations |
|
8,792 |
|
5,903 |
|
||
|
Income tax expense, net |
|
(221 |
) |
(9 |
) |
||
|
Income before discontinued operations |
|
8,571 |
|
5,894 |
|
||
|
Income from discontinued operations, net |
|
11 |
|
268 |
|
||
|
Net income |
|
8,582 |
|
6,162 |
|
||
|
Preferred share dividends |
|
(3,157 |
) |
(2,533 |
) |
||
|
Net income available to common shareholders |
|
$ |
5,425 |
|
$ |
3,629 |
|
|
Earnings per share (“EPS”) computation: |
|
|
|
|
|
||
|
Numerator: |
|
|
|
|
|
||
|
Net income available to common shareholders |
|
$ |
5,425 |
|
$ |
3,629 |
|
|
Dividends on convertible preferred shares |
|
136 |
|
136 |
|
||
|
Income on dilutive options |
|
¾ |
|
(6 |
) |
||
|
Numerator for dilutive EPS |
|
$ |
5,561 |
|
$ |
3,759 |
|
|
Denominator: |
|
|
|
|
|
||
|
Weighted average common shares-basic |
|
28,832 |
|
23,029 |
|
||
|
Dilutive options |
|
1,480 |
|
923 |
|
||
|
Preferred shares |
|
1,197 |
|
1,197 |
|
||
|
Weighted average common shares-diluted |
|
31,509 |
|
25,149 |
|
||
|
Earnings per common share |
|
|
|
|
|
||
|
Basic |
|
$ |
0.19 |
|
$ |
0.16 |
|
|
Diluted (1) |
|
$ |
0.18 |
|
$ |
0.15 |
|
5
Corporate Office Properties Trust
Summary Financial Data
(Unaudited)
(all amounts in thousands except per share data and ratios)
|
|
|
Three
Months Ended |
|
||||
|
|
|
2003 |
|
2002 |
|
||
|
Net income |
|
$ |
8,582 |
|
$ |
6,162 |
|
|
Add: Real estate related depreciation and amortization |
|
9,337 |
|
7,384 |
|
||
|
Depreciation and amortization on unconsolidated real estate entities |
|
86 |
|
40 |
|
||
|
Add: Minority interests-common units in the Operating Partnership |
|
1,763 |
|
1,541 |
|
||
|
Less: Preferred share dividends |
|
(3,157 |
) |
(2,533 |
) |
||
|
Less: Gain on sales of real estate, excluding development portion (2) |
|
(23 |
) |
(19 |
) |
||
|
Funds from Operations – basic (“Basic FFO”) |
|
16,588 |
|
12,575 |
|
||
|
Add: Preferred Unit distributions |
|
¾ |
|
572 |
|
||
|
Add: Convertible preferred share dividends |
|
136 |
|
136 |
|
||
|
Add: Restricted common share dividends |
|
¾ |
|
71 |
|
||
|
Add: Expense associated with dilutive options |
|
1 |
|
3 |
|
||
|
Funds from Operations – diluted (“Diluted FFO”) |
|
16,725 |
|
13,357 |
|
||
|
Less: Straight line rent adjustments |
|
(1,293 |
) |
(867 |
) |
||
|
Less: Recurring capital improvements |
|
(3,122 |
) |
(1,649 |
) |
||
|
Less: Amortization of origination value of leases on acquired properties |
|
(347 |
) |
(366 |
) |
||
|
Adjusted Funds from Operations – diluted (“Diluted AFFO”) |
|
$ |
11,963 |
|
$ |
10,475 |
|
|
Basic weighted average shares |
|
|
|
|
|
||
|
Weighted average common shares |
|
28,832 |
|
23,029 |
|
||
|
Weighted average common units |
|
8,909 |
|
9,149 |
|
||
|
Basic weighted average common shares/units |
|
37,741 |
|
32,178 |
|
||
|
Conversion of preferred units |
|
¾ |
|
2,421 |
|
||
|
Conversion of weighted average conv. preferred shares |
|
1,197 |
|
1,197 |
|
||
|
Assumed conversion of share options |
|
1,480 |
|
978 |
|
||
|
Restricted common shares |
|
¾ |
|
317 |
|
||
|
Diluted weighted average common shares |
|
40,418 |
|
37,091 |
|
||
|
Diluted FFO per common share |
|
$ |
0.41 |
|
$ |
0.36 |
|
|
Dividends/distributions per common share/unit |
|
$ |
0.235 |
|
$ |
0.220 |
|
|
Earnings payout ratio |
|
125 |
% |
141 |
% |
||
|
Diluted FFO payout ratio |
|
54 |
% |
59 |
% |
||
|
Diluted AFFO payout ratio |
|
75 |
% |
75 |
% |
||
(1) The effect of the conversion of preferred units, common units and restricted common shares is antidilutive in calculating dilutive earnings per share for the three months ended September 30, 2003 and 2002.
(2) Gains from sales of newly-developed properties less accumulated depreciation, if any, required under GAAP are included in FFO on the basis that development services are the primary revenue generating activity; we believe that inclusion of these development gains is in compliance with the NAREIT definition of FFO, although others may interpret the definition differently.
6
Corporate Office Properties Trust
Summary Financial Data
(Unaudited)
(all amounts in thousands except per share data)
|
|
|
Nine
Months Ended |
|
||||
|
|
|
2003 |
|
2002 |
|
||
|
Real Estate Operations |
|
|
|
|
|
||
|
Revenues |
|
|
|
|
|
||
|
Rental revenue |
|
$ |
112,921 |
|
$ |
97,328 |
|
|
Tenant recoveries and other revenue |
|
14,923 |
|
11,634 |
|
||
|
Revenue from real estate operations |
|
127,844 |
|
108,962 |
|
||
|
Expenses |
|
|
|
|
|
||
|
Property operating |
|
37,830 |
|
31,896 |
|
||
|
Interest |
|
30,608 |
|
28,072 |
|
||
|
Depreciation and amortization |
|
28,692 |
|
23,734 |
|
||
|
Expenses from real estate operations |
|
97,130 |
|
83,702 |
|
||
|
Earnings from real estate operations before equity in (loss) income of unconsolidated real estate joint ventures |
|
30,714 |
|
25,260 |
|
||
|
Equity in (loss) income of unconsolidated real estate joint ventures |
|
(91 |
) |
134 |
|
||
|
Earnings from real estate operations |
|
30,623 |
|
25,394 |
|
||
|
Income (losses) from service operations |
|
580 |
|
(179 |
) |
||
|
General and administrative expenses |
|
(5,651 |
) |
(4,925 |
) |
||
|
Income before gain on sales of real estate, minority interests, income taxes and discontinued operations |
|
25,552 |
|
20,290 |
|
||
|
Gain on sales of real estate |
|
448 |
|
1,742 |
|
||
|
Income before minority interests, income taxes and discontinued operations |
|
26,000 |
|
22,032 |
|
||
|
Minority interests |
|
(5,435 |
) |
(5,603 |
) |
||
|
Income before income taxes and discontinued operations |
|
20,565 |
|
16,429 |
|
||
|
Income tax (expense) benefit, net |
|
(181 |
) |
43 |
|
||
|
Income before discontinued operations |
|
20,384 |
|
16,472 |
|
||
|
Income from discontinued operations, net |
|
2,423 |
|
869 |
|
||
|
Net income |
|
22,807 |
|
17,341 |
|
||
|
Preferred share dividends |
|
(8,224 |
) |
(7,600 |
) |
||
|
Repurchase of preferred units in excess of recorded book value |
|
(11,224 |
) |
¾ |
|
||
|
Net income available to common shareholders |
|
$ |
3,359 |
|
$ |
9,741 |
|
|
Earnings per share (“EPS”) computation: |
|
|
|
|
|
||
|
Numerator: |
|
|
|
|
|
||
|
Net income available to common shareholders |
|
$ |
3,359 |
|
$ |
9,741 |
|
|
Dividends on convertible preferred shares |
|
¾ |
|
408 |
|
||
|
Numerator for dilutive EPS |
|
$ |
3,359 |
|
$ |
10,149 |
|
|
Denominator: |
|
|
|
|
|
||
|
Weighted average common shares-basic |
|
25,886 |
|
22,215 |
|
||
|
Dilutive options |
|
1,257 |
|
873 |
|
||
|
Preferred shares |
|
¾ |
|
1,197 |
|
||
|
Weighted average common shares-diluted |
|
27,143 |
|
24,285 |
|
||
|
Earnings per common share |
|
|
|
|
|
||
|
Basic |
|
$ |
0.13 |
|
$ |
0.44 |
|
|
Diluted (1) |
|
$ |
0.12 |
|
$ |
0.42 |
|
7
Corporate Office Properties Trust
Summary Financial Data
(Unaudited)
(all amounts in thousands except per share data and ratios)
|
|
|
Nine
Months Ended |
|
||||
|
|
|
2003 |
|
2002 |
|
||
|
Net income |
|
$ |
22,807 |
|
$ |
17,341 |
|
|
Add: Real estate related depreciation and amortization |
|
26,389 |
|
22,066 |
|
||
|
Depreciation and amortization on unconsolidated real estate entities |
|
183 |
|
126 |
|
||
|
Add: Minority interests-common units in the Operating Partnership |
|
5,334 |
|
4,367 |
|
||
|
Less: Preferred share dividends |
|
(8,224 |
) |
(7,600 |
) |
||
|
Less: Gain on sales of real estate, excluding development portion (2) |
|
(2,874 |
) |
(112 |
) |
||
|
Funds from Operations – basic (“Basic FFO”) |
|
43,615 |
|
36,188 |
|
||
|
Add: Preferred Unit distributions |
|
1,049 |
|
1,716 |
|
||
|
Add: Convertible preferred share dividends |
|
408 |
|
408 |
|
||
|
Add: Restricted common share dividends |
|
¾ |
|
208 |
|
||
|
Add: Expense associated with dilutive options |
|
10 |
|
36 |
|
||
|
Funds from Operations – diluted (“Diluted FFO”) |
|
45,082 |
|
38,556 |
|
||
|
Less: Straight line rent adjustments |
|
(3,779 |
) |
(2,072 |
) |
||
|
Less: Recurring capital improvements |
|
(7,742 |
) |
(4,649 |
) |
||
|
Less: Amortization of origination value of leases on acquired properties |
|
(1,465 |
) |
(1,916 |
) |
||
|
Adjusted Funds from Operations – diluted (“Diluted AFFO”) |
|
$ |
32,096 |
|
$ |
29,919 |
|
|
Basic weighted average shares |
|
|
|
|
|
||
|
Weighted average common shares |
|
25,886 |
|
22,215 |
|
||
|
Weighted average common units |
|
8,954 |
|
9,381 |
|
||
|
Basic weighted average common shares/units |
|
34,840 |
|
31,596 |
|
||
|
Conversion of preferred units |
|
1,472 |
|
2,421 |
|
||
|
Conversion of weighted average conv. preferred shares |
|
1,197 |
|
1,197 |
|
||
|
Assumed conversion of share options |
|
1,302 |
|
935 |
|
||
|
Restricted common shares |
|
¾ |
|
317 |
|
||
|
Diluted weighted average common shares |
|
38,811 |
|
36,466 |
|
||
|
Diluted FFO per common share |
|
$ |
1.16 |
|
$ |
1.06 |
|
|
Dividends/distributions per common share/unit |
|
$ |
0.675 |
|
$ |
0.640 |
|
|
Earnings payout ratio |
|
544 |
% |
150 |
% |
||
|
Diluted FFO payout ratio |
|
57 |
% |
59 |
% |
||
|
Diluted AFFO payout ratio |
|
80 |
% |
77 |
% |
||
(1) The effect of the conversion of preferred units, common units and restricted common shares is antidilutive in calculating diluted earnings per share for the nine months ended September 30, 2003 and 2002. The effect of the conversion of the convertible preferred shares is also antidilutive in calculating diluted earnings per share for the nine months ended September 30, 2003.
(2) Gains from sales of newly-developed properties less accumulated depreciation, if any, required under GAAP are included in FFO on the basis that development services are the primary revenue generating activity; we believe that inclusion of these development gains is in compliance with the NAREIT definition of FFO, although others may interpret the definition differently.
8
Corporate Office Properties Trust
Summary Financial Data
(Unaudited)
|
|
|
September
30, |
|
December
31, |
|
||
|
Balance Sheet Data (in thousands) (as of period end): |
|
|
|
|
|
||
|
Real estate investments, net of accumulated depreciation |
|
$ |
1,190,492 |
|
$ |
1,067,536 |
|
|
Total assets |
|
1,299,978 |
|
1,138,229 |
|
||
|
Mortgages payable |
|
759,298 |
|
705,056 |
|
||
|
Total liabilities |
|
815,527 |
|
748,846 |
|
||
|
Minority interests |
|
80,411 |
|
100,886 |
|
||
|
Beneficiaries’ equity |
|
404,040 |
|
288,497 |
|
||
|
|
|
|
|
|
|
||
|
Debt to Undepreciated Book Value |
|
59.0 |
% |
61.5 |
% |
||
|
Debt to Total Assets |
|
58.4 |
% |
61.9 |
% |
||
|
Debt to Total Market Capitalization |
|
46.5 |
% |
54.4 |
% |
||
|
Interest Coverage for the Quarter Ended (on EBITDA) |
|
3.00 |
|
2.55 |
|
||
|
|
|
|
|
|
|
||
|
Property Data, including joint ventures (as of period end): |
|
|
|
|
|
||
|
Number of operating properties owned |
|
118 |
|
110 |
|
||
|
Total net rentable square feet owned (in thousands) |
|
9,912 |
|
8,942 |
|
||
|
Occupancy |
|
91.7 |
% |
93.0 |
% |
||
|
|
|
|
|
|
|
||
|
Common share price (as of period end): |
|
$ |
18.51 |
|
$ |
14.03 |
|
|
|
|
Three
Months Ended |
|
||||
|
|
|
2003 |
|
2002 |
|
||
|
Reconciliation of FFO diluted as reported to FFO diluted excluding the effects of amortization of origination value of leases on acquired properties |
|
|
|
|
|
||
|
Numerator for FFO diluted as reported |
|
$ |
16,725 |
|
$ |
13,357 |
|
|
Less: Amortization of origination value of leases on acquired properties |
|
(347 |
) |
(366 |
) |
||
|
Numerator for FFO-diluted excluding effects of SFAS 141 |
|
16,378 |
|
12,991 |
|
||
|
|
|
Three
Months Ended |
|
||||
|
|
|
2003 |
|
2002 |
|
||
|
Reconciliation of GAAP net income to earnings before interest, income taxes, depreciation and amortization (“EBITDA”) |
|
|
|
|
|
||
|
Net income |
|
$ |
8,582 |
|
$ |
6,162 |
|
|
Interest expense on continuing operations |
|
10,436 |
|
10,489 |
|
||
|
Interest expense on discontinued operations |
|
¾ |
|
74 |
|
||
|
Income tax expense, gross |
|
297 |
|
11 |
|
||
|
Depreciation and amortization on real estate operations |
|
9,337 |
|
7,384 |
|
||
|
Amortization of deferred financing costs |
|
773 |
|
559 |
|
||
|
Other depreciation and amortization |
|
124 |
|
120 |
|
||
|
Gain on sales of real estate, excluding redevelopment portion |
|
(23 |
) |
(19 |
) |
||
|
Minority interests, gross |
|
1,763 |
|
2,009 |
|
||
|
EBITDA |
|
$ |
31,289 |
|
$ |
26,789 |
|
9
Corporate Office Properties Trust
Summary Financial Data
(Unaudited)
(Dollars in thousands)
|
|
|
Three
Months Ended |
|
Nine Months
Ended |
|
||||||||
|
|
|
2003 |
|
2002 |
|
2003 |
|
2002 |
|
||||
|
|
|
|
|
|
|
|
|
|
|
||||
|
Reconciliation of dividends for Earnings Payout Ratio to dividends and distributions for FFO & AFFO Payout Ratio |
|
|
|
|
|
|
|
|
|
||||
|
Common share dividends for Earnings Payout Ratio |
|
$ |
6,798 |
|
$ |
5,108 |
|
$ |
18,259 |
|
$ |
14,618 |
|
|
Convertible preferred share dividends |
|
136 |
|
136 |
|
408 |
|
408 |
|
||||
|
Common unit distributions |
|
2,085 |
|
1,978 |
|
6,031 |
|
5,944 |
|
||||
|
Common share dividends on restricted shares |
|
¾ |
|
71 |
|
¾ |
|
208 |
|
||||
|
Convertible preferred unit distributions |
|
¾ |
|
572 |
|
1,049 |
|
1,716 |
|
||||
|
Dividends and distributions for FFO & AFFO Payout Ratio |
|
$ |
9,019 |
|
$ |
7,865 |
|
$ |
25,747 |
|
$ |
22,894 |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
Reconciliation of same property net operating income to same property cash net operating income |
|
|
|
|
|
|
|
|
|
||||
|
Same property net operating income |
|
$ |
25,170 |
|
$ |
23,343 |
|
|
|
|
|
||
|
Less: Straight line rent adjustments |
|
(216 |
) |
(240 |
) |
|
|
|
|
||||
|
Less: Amortization of origination value of leases
on |
|
(590 |
) |
(232 |
) |
|
|
|
|
||||
|
Same property cash net operating income |
|
$ |
24,364 |
|
$ |
22,871 |
|
|
|
|
|
||
|
|
|
|
|
|
|
|
|
|
|
||||
|
Reconciliation of interest expense from continuing operations to the denominators for interest coverage-EBITDA and fixed charge coverage-EBITDA |
|
|
|
|
|
|
|
|
|
||||
|
Interest expense from continuing operations |
|
$ |
10,436 |
|
$ |
10,489 |
|
|
|
|
|
||
|
Interest expense from discontinued operations |
|
¾ |
|
74 |
|
|
|
|
|
||||
|
Denominator for interest coverage-EBITDA |
|
10,436 |
|
10,563 |
|
|
|
|
|
||||
|
Preferred share dividends |
|
3,157 |
|
2,533 |
|
|
|
|
|
||||
|
Preferred unit distributions |
|
¾ |
|
572 |
|
|
|
|
|
||||
|
Denominator for fixed charge coverage-EBITDA |
|
$ |
13,593 |
|
$ |
13,668 |
|
|
|
|
|
||
|
|
|
|
|
|
|
|
|
|
|
||||
|
Reconciliation of denominator for debt to total assets to denominator for debt to undepreciated book value of real estate assets |
|
|
|
|
|
|
|
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
|
September
30, |
|
December
31, |
|
|
|
|
|
||||
|
Denominator for debt to total assets |
|
$ |
1,299,978 |
|
$ |
1,138,229 |
|
|
|
|
|
||
|
Assets other than assets included in investment in real estate |
|
(109,486 |
) |
(70,693 |
) |
|
|
|
|
||||
|
Accumulated depreciated on real estate assets |
|
96,538 |
|
78,069 |
|
|
|
|
|
||||
|
Demominator for debt to undepreciated book value of real estate assets |
|
$ |
1,287,030 |
|
$ |
1,145,605 |
|
|
|
|
|
||
10
Top Twenty Office Tenants as of September 30, 2003
(Dollars and square feet in thousands)
|
Tenant |
|
|
|
Number |
|
Total |
|
Percentage
of |
|
Total |
|
Percentage |
|
Weighted |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
United States of America |
|
(3) |
|
26 |
|
1,141,439 |
|
12.6 |
% |
$ |
22,121 |
|
12.7 |
% |
5.0 |
|
|
Computer Sciences Corporation |
|
(4) |
|
5 |
|
468,632 |
|
5.2 |
% |
11,133 |
|
6.4 |
% |
6.9 |
|
|
|
AT&T Local Services |
|
(4) |
|
7 |
|
451,498 |
|
5.0 |
% |
9,228 |
|
5.3 |
% |
4.8 |
|
|
|
VeriSign, Inc. |
|
|
|
2 |
|
404,665 |
|
4.5 |
% |
8,985 |
|
5.2 |
% |
10.8 |
|
|
|
Unisys |
|
(5) |
|
3 |
|
741,284 |
|
8.2 |
% |
7,745 |
|
4.4 |
% |
5.8 |
|
|
|
General Dynamics Government Corp. |
|
|
|
6 |
|
254,692 |
|
2.8 |
% |
5,917 |
|
3.4 |
% |
5.0 |
|
|
|
Booz Allen Hamilton |
|
|
|
7 |
|
210,499 |
|
2.3 |
% |
4,607 |
|
2.6 |
% |
2.9 |
|
|
|
Northrop Grumman Corporation |
|
|
|
4 |
|
192,206 |
|
2.1 |
% |
4,398 |
|
2.5 |
% |
4.0 |
|
|
|
Ciena Corporation |
|
|
|
4 |
|
278,749 |
|
3.1 |
% |
3,905 |
|
2.2 |
% |
2.7 |
|
|
|
The Boeing Company |
|
(4) |
|
7 |
|
148,099 |
|
1.6 |
% |
3,665 |
|
2.1 |
% |
5.5 |
|
|
|
The Aerospace Corporation |
|
|
|
1 |
|
133,691 |
|
1.5 |
% |
3,361 |
|
1.9 |
% |
11.2 |
|
|
|
Magellan Health Services, Inc. |
|
|
|
2 |
|
150,622 |
|
1.7 |
% |
3,302 |
|
1.9 |
% |
1.4 |
|
|
|
Commonwealth of Pennsylvania |
|
(4) |
|
5 |
|
181,290 |
|
2.0 |
% |
2,656 |
|
1.5 |
% |
5.4 |
|
|
|
Merck & Co., Inc. |
|
(5) |
|
1 |
|
219,065 |
|
2.4 |
% |
2,326 |
|
1.3 |
% |
5.8 |
|
|
|
Johns Hopkins University |
|
(4) |
|
6 |
|
102,057 |
|
1.1 |
% |
2,282 |
|
1.3 |
% |
3.9 |
|
|
|
CareFirst, Inc. and Subsidiaries |
|
(4) |
|
3 |
|
94,223 |
|
1.0 |
% |
2,166 |
|
1.2 |
% |
4.3 |
|
|
|
Usinternetworking, Inc. |
|
|
|
1 |
|
155,000 |
|
1.7 |
% |
1,935 |
|
1.1 |
% |
14.5 |
|
|
|
BAAN U.S.A., Inc. |
|
|
|
2 |
|
65,701 |
|
0.7 |
% |
1,737 |
|
1.0 |
% |
5.8 |
|
|
|
Omniplex World Services |
|
|
|
1 |
|
69,710 |
|
0.8 |
% |
1,633 |
|
0.9 |
% |
7.3 |
|
|
|
Comcast Corporation |
|
|
|
1 |
|
98,897 |
|
1.1 |
% |
1,577 |
|
0.9 |
% |
6.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subtotal Top 20 Office Tenants |
|
|
|
94 |
|
5,562,019 |
|
61.2 |
% |
104,681 |
|
60.1 |
% |
5.8 |
|
|
|
All remaining tenants |
|
|
|
395 |
|
3,531,399 |
|
38.8 |
% |
69,453 |
|
39.9 |
% |
3.5 |
|
|
|
Total/Weighted Average |
|
|
|
489 |
|
9,093,418 |
|
100.0 |
% |
$ |
174,134 |
|
100.0 |
% |
4.9 |
|
(1) Total Annualized Rental Revenue is the monthly contractual base rent as of September 30, 2003 multiplied by 12 plus the estimated annualized expense reimbursements under existing office leases.
(2) The weighting of the lease term was computed using Total Rental Revenue.
(3) Many of our government leases are subject to early termination provisions which are customary to government leases. The weighted average remaining lease term was computed assuming no exercise of such early termination rights.
(4) Includes affiliated organizations or agencies.
(5) Merck & Co., Inc. subleases 219,065 rentable square feet from Unisys’ 960,349 leased rentable square feet.
11
Reclassifications and Definitions
|
Reclassifications |
|
Funds from operations as reported for 2002 changed due to our reclassification of certain items in connection with our accounting under Statement of Financial Accounting Standards No. 141 “Business Combinations” or (“SFAS 141”). Funds from operations for 1999 through 2002 changed due to our reclassification of losses on early retirement of debt in connection with our adoption of Statement of Financial Accounting Standards No. 145, “Rescission of FASB Statements No. 4, 44 and 64, Amendment of FASB Statement No. 13 and Technical Corrections” on January 1, 2003. |
|
|
|
|
|
NAREIT |
|
National Association of Real Estate Investment Trusts. |
|
|
|
|
|
GAAP |
|
Generally accepted accounting principles. |
|
|
|
|
|
Funds from Operations (FFO) |
|
Under NAREIT’s definition, FFO means net income (loss) computed using GAAP, excluding gains (or losses) from sales of real estate, plus real estate-related depreciation and amortization and after adjustments for unconsolidated partnerships and joint ventures. Gains from sales of newly-developed properties less accumulated depreciation, if any, required under GAAP are included in FFO on the basis that development services are the primary revenue generating activity; we believe that the inclusion of these development gains is in compliance with the NAREIT definition of FFO, although others may interpret the definition differently. Additionally, the repurchase of the Series C preferred units in excess of recorded book value was a transaction not contemplated in the NAREIT definition of FFO; we believe that the exclusion of such amount is appropriate. 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. |
|
|
|
|
|
Basic FFO |
|
Basic FFO is FFO adjusted to (1) subtract preferred share dividends and (2) add back GAAP net income allocated to common units in Corporate Office Properties, L.P. (the “Operating Partnership”) not owned by the Company. With these adjustments, Basic FFO represents FFO available to common shareholders and common unitholders. |
|
|
|
|
|
Diluted FFO |
|
Diluted FFO is Basic FFO adjusted to add back any convertible preferred share dividends and any other changes in Basic FFO that would result from the assumed conversion of securities that are convertible or exchangeable into common shares. However, the computation of Diluted FFO does not assume conversion of securities that are convertible into common shares if the conversion of those securities would increase Diluted FFO per share in a given period. Diluted FFO is the numerator used to compute diluted FFO per share. |
|
|
|
|
|
Diluted FFO excluding SFAS 141 |
|
Diluted FFO adjusted to eliminate the amortization of the value assigned to in-place operating leases of acquired properties in connection with SFAS 141. |
|
|
|
|
|
Diluted Adjusted Funds from Operations (AFFO) |
|
Diluted AFFO is Diluted FFO, adjusted to eliminate the effect of noncash rental revenues (comprised of straight-line rental adjustments and the amortization of the value assigned to in-place operating leases of acquired properties in connection with SFAS 141) and recurring capital expenditures. |
|
|
|
|
|
Net Operating Income (“NOI”) |
|
Total rental revenue reduced by total property expenses associated with real estate operations; total property expenses, as used in this definition, does not include depreciation, amortization or interest expense associated with real estate operations. |
|
|
|
|
|
Cash Net Operating Income |
|
Net Operating Income adjusted to remove the effect of straight-line rents and SFAS 141 revenues, which are non cash revenue items. |
|
|
|
|
|
Earnings Before Interest, Income Taxes and Depreciation and Amortization (EBITDA) |
|
EBITDA is net income adjusted for the effects of interest expense, depreciation and amortization, income taxes, gain on sales of real estate (excluding sales of non-operating properties and development services provided on operating properties), minority interests and preferred share dividends. |
|
|
|
|
|
Interest Coverage – EBITDA |
|
EBITDA divided by interest expense on continuing and discontinued operations. |
|
|
|
|
|
Fixed Charge Coverage – EBITDA |
|
EBITDA divided by the sum of (1) interest expense on continuing and discontinued operations, (2) dividends on preferred shares and (3) distributions on preferred units in Corporate Office Properties, L.P. not owned by the Company. |
|
|
|
|
|
Earnings Payout Ratio |
|
Total dividends on common shares divided by net income (loss) available to common shareholders. |
|
|
|
|
|
Diluted FFO Payout Ratio |
|
Diluted FFO Payout Ratio is defined as (1) the sum of (A) dividends on common shares and convertible preferred shares and (B) distributions to holders of common units and convertible preferred units in the Operating Partnership not owned by the Company divided by (2) Diluted FFO. |
|
|
|
|
|
Diluted AFFO Payout Ratio |
|
Diluted AFFO Payout Ratio is defined as (1) the sum of (A) dividends on common shares and convertible preferred shares and (B) distributions to holders of common units and convertible preferred units in the Operating Partnership not owned by the Company divided by (2) Diluted AFFO assuming conversion of share options, common unit warrants, preferred units and preferred shares. |
|
|
|
|
|
Debt to Undepreciated Book Value of Real Estate Assets |
|
Mortgage loans payable divided by gross investment in real estate as computed by adding accumulated depreciation to the net investment in real estate as presented on our balance sheet. |
12
|
Base rent – straight-line or straight-line rent |
|
Contractual minimum rent under leases recorded into rental revenue using the average contractual rent over the lease term in accordance with GAAP. |
|
|
|
|
|
Total rent – straight-line |
|
Contractual minimum rent under leases recorded into rental revenue using the average contractual rent over the lease term in accordance with GAAP, plus estimated operating expense reimbursements, or total rent. |
|
|
|
|
|
Base rent – cash |
|
Contractual minimum rent under leases remitted by the replacement tenant at lease commencement or the predecessor tenant at date of lease expiration. |
|
|
|
|
|
Total rent – cash |
|
Contractual minimum rent under leases, plus estimated operating expense reimbursements, or total rent, as remitted by the replacement tenant at lease commencement or the predecessor tenant at date of lease expiration. |
13