UNITED STATES

SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549

 

FORM 10-Q

 

(Mark one)

 

ý QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES AND EXCHANGE ACT OF 1934

 

For the quarterly period ended June 30, 2005

 

or

 

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES AND EXCHANGE ACT OF 1934

 

For the transition period from                                               to                                                           

 

Commission file number 1-14023

 

Corporate Office Properties Trust

(Exact name of registrant as specified in its charter)

 

Maryland

 

23-2947217

(State or other jurisdiction of
incorporation or organization)

 

(IRS Employer
Identification No.)

 

 

 

8815 Centre Park Drive, Suite 400, Columbia MD

 

21045

(Address of principal executive offices)

 

(Zip Code)

 

Registrant’s telephone number, including area code:  (410) 730-9092

 


 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

ý Yes   o No

 

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).  ýYes   o No

 

On August 1, 2005, 37,212,126 shares of the Company’s Common Shares of Beneficial Interest, $0.01 par value, were issued.

 

 



 

TABLE OF CONTENTS

 

FORM 10-Q

 

 

 

PAGE

PART I: FINANCIAL INFORMATION

 

 

 

 

Item 1:

Financial Statements:

 

 

Consolidated Balance Sheets as of June 30, 2005 (unaudited) and December 31, 2004 (unaudited)

3

 

Consolidated Statements of Operations for the three and six months ended June 30, 2005 and 2004 (unaudited)

4

 

Consolidated Statements of Cash Flows for the six months ended June 30, 2005 and 2004 (unaudited)

5

 

Notes to Consolidated Financial Statements

6

Item 2:

Management’s Discussion and Analysis of Financial Condition and Results of Operations

22

Item 3:

Quantitative and Qualitative Disclosures About Market Risk

39

Item 4:

Controls and Procedures

39

 

 

 

PART II: OTHER INFORMATION

 

 

 

 

Item 1:

Legal Proceedings

40

Item 2:

Unregistered Sales of Equity Securities and Use of Proceeds

40

Item 3:

Defaults Upon Senior Securities

40

Item 4:

Submission of Matters to a Vote of Security Holders

40

Item 5:

Other Information

41

Item 6:

Exhibits

41

 

 

 

SIGNATURES

42

 

2



 

PART I: FINANCIAL INFORMATION

ITEM 1. Financial Statements

 

Corporate Office Properties Trust and Subsidiaries

Consolidated Balance Sheets

(Dollars in thousands)

(unaudited)

 

 

 

June 30,
2005

 

December 31,
2004

 

Assets

 

 

 

 

 

Investment in real estate:

 

 

 

 

 

Operating properties, net

 

$

1,425,506

 

$

1,389,369

 

Properties held for sale, net

 

17,450

 

17,779

 

Projects under construction or development

 

246,657

 

136,152

 

Total commercial real estate properties, net

 

1,689,613

 

1,543,300

 

Investments in and advances to unconsolidated real estate joint ventures

 

1,233

 

1,201

 

Investment in real estate, net

 

1,690,846

 

1,544,501

 

Cash and cash equivalents

 

21,486

 

13,821

 

Restricted cash

 

15,982

 

12,617

 

Accounts receivable, net

 

13,613

 

16,771

 

Investment in other unconsolidated entity

 

1,621

 

1,621

 

Deferred rent receivable

 

29,291

 

26,282

 

Intangible assets on real estate acquisitions, net

 

66,354

 

67,560

 

Deferred charges, net

 

28,662

 

27,642

 

Prepaid and other assets

 

19,501

 

18,646

 

Furniture, fixtures and equipment, net

 

3,092

 

2,565

 

Total assets

 

$

1,890,448

 

$

1,732,026

 

Liabilities and shareholders’ equity

 

 

 

 

 

Liabilities:

 

 

 

 

 

Mortgage and other loans payable

 

$

1,177,779

 

$

1,022,688

 

Accounts payable and accrued expenses

 

53,984

 

46,307

 

Rents received in advance and security deposits

 

13,421

 

12,781

 

Dividends and distributions payable

 

14,834

 

14,713

 

Deferred revenue associated with acquired operating leases

 

8,092

 

7,247

 

Fair value of derivatives

 

4,188

 

 

Other liabilities

 

4,024

 

7,488

 

Total liabilities

 

1,276,322

 

1,111,224

 

Minority interests:

 

 

 

 

 

Common units in the Operating Partnership

 

87,439

 

88,355

 

Preferred units in the Operating Partnership

 

8,800

 

8,800

 

Other consolidated real estate joint ventures

 

861

 

1,723

 

Total minority interests

 

97,100

 

98,878

 

Commitments and contingencies (Note 19)

 

 

 

 

 

Shareholders’ equity:

 

 

 

 

 

Preferred Shares of beneficial interest ($0.01 par value; 15,000,000 shares authorized)
(Note 13)

 

67

 

67

 

Common Shares of beneficial interest ($0.01 par value; 75,000,000 shares authorized, shares issued of 37,191,370 at June 30, 2005 and 36,842,108 at December 31, 2004)

 

372

 

368

 

Additional paid-in capital

 

586,567

 

578,228

 

Cumulative distributions in excess of net income

 

(59,226

)

(51,358

)

Value of unearned restricted common share grants

 

(7,396

)

(5,381

)

Accumulated other comprehensive loss

 

(3,358

)

 

Total shareholders’ equity

 

517,026

 

521,924

 

Total liabilities and shareholders’ equity

 

$

1,890,448

 

$

1,732,026

 

 

See accompanying notes to consolidated financial statements.

 

3



 

Corporate Office Properties Trust and Subsidiaries

Consolidated Statements of Operations

(Dollars in thousands, except per share data)

(unaudited)

 

 

 

For the Three Months
Ended June 30,

 

For the Six Months
Ended June 30,

 

 

 

2005

 

2004

 

2005

 

2004

 

Revenues

 

 

 

 

 

 

 

 

 

Rental revenue

 

$

53,601

 

$

48,339

 

$

106,031

 

$

90,825

 

Tenant recoveries and other real estate operations revenue

 

6,585

 

4,752

 

13,860

 

10,422

 

Construction contract revenues

 

17,445

 

5,233

 

33,173

 

11,370

 

Other service operations revenues

 

1,019

 

837

 

2,388

 

2,352

 

Total revenues

 

78,650

 

59,161

 

155,452

 

114,969

 

Expenses

 

 

 

 

 

 

 

 

 

Property operating

 

17,574

 

14,365

 

36,139

 

29,073

 

Depreciation and other amortization
associated with real estate operations

 

15,068

 

15,705

 

29,455

 

25,893

 

Construction contract expenses

 

17,223

 

4,979

 

32,120

 

10,797

 

Other service operations expenses

 

955

 

853

 

2,246

 

1,945

 

General and administrative expenses

 

3,166

 

2,487

 

6,442

 

4,773

 

Total operating expenses

 

53,986

 

38,389

 

106,402

 

72,481

 

Operating income

 

24,664

 

20,772

 

49,050

 

42,488

 

Interest expense

 

(13,728

)

(10,346

)

(26,911

)

(20,449

)

Amortization of deferred financing costs

 

(471

)

(500

)

(867

)

(1,359

)

Income from continuing operations before gain (loss) on sales of real estate, equity in loss of unconsolidated entities, income taxes and minority interests

 

10,465

 

9,926

 

21,272

 

20,680

 

Gain (loss) on sales of real estate

 

210

 

24

 

234

 

(198

)

Equity in loss of unconsolidated entities

 

 

 

 

(88

)

Income tax expense

 

(213

)

(30

)

(670

)

(230

)

Income from continuing operations before minority interests

 

10,462

 

9,920

 

20,836

 

20,164

 

Minority interests in income from continuing operations Common units in the Operating Partnership

 

(1,307

)

(1,203

)

(2,592

)

(2,571

)

Preferred units in the Operating Partnership

 

(165

)

 

(330

)

 

Other consolidated entities

 

15

 

(8

)

39

 

(8

)

Income from continuing operations

 

9,005

 

8,709

 

17,953

 

17,585

 

Income from discontinued operations, net of minority interests

 

115

 

134

 

207

 

251

 

Net income

 

9,120

 

8,843

 

18,160

 

17,836

 

Preferred share dividends

 

(3,654

)

(4,435

)

(7,308

)

(8,891

)

Net income available to common shareholders

 

$

5,466

 

$

4,408

 

$

10,852

 

$

8,945

 

Basic earnings per common share

 

 

 

 

 

 

 

 

 

 

 

Income from continuing operations

 

$

0.15

 

$

0.13

 

$

0.29

 

$

0.28

 

Discontinued operations

 

 

 

0.01

 

0.01

 

Net income

 

$

0.15

 

$

0.13

 

$

0.30

 

$

0.29

 

Diluted earnings per common share

 

 

 

 

 

 

 

 

 

 

 

Income from continuing operations

 

$

0.14

 

$

0.12

 

$

0.28

 

$

0.26

 

Discontinued operations

 

 

0.01

 

 

0.01

 

Net income

 

$

0.14

 

$

0.13

 

$

0.28

 

$

0.27

 

 

See accompanying notes to consolidated financial statements.

 

4



 

Corporate Office Properties Trust and Subsidiaries

Consolidated Statements of Cash Flows

(Dollars in thousands)

(unaudited)

 

 

 

For the Six Months Ended
June 30,

 

 

 

2005

 

2004

 

Cash flows from operating activities

 

 

 

 

 

Net income

 

$

18,160

 

$

17,836

 

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

 

 

 

Minority interests

 

2,934

 

2,654

 

Depreciation and other amortization

 

29,924

 

26,243

 

Amortization of deferred financing costs

 

867

 

1,359

 

Amortization of deferred market rental revenue

 

(261

)

(582

)

Equity in loss of unconsolidated entities

 

 

88

 

(Gain) loss on sales of real estate

 

(234

)

198

 

Changes in operating assets and liabilities:

 

 

 

 

 

Increase in deferred rent receivable

 

(3,009

)

(2,947

)

Decrease (increase) in accounts receivable, restricted cash and prepaid and other assets

 

235

 

(11,169

)

Increase in accounts payable, accrued expenses, rents received in advance and security deposits

 

9,854

 

3,892

 

Other

 

1,647

 

1,465

 

Net cash provided by operating activities

 

60,117

 

39,037

 

Cash flows from investing activities

 

 

 

 

 

Purchases of and additions to commercial real estate properties

 

(174,455

)

(114,393

)

Proceeds from sales of properties

 

2,545

 

 

Acquisition of minority interest in consolidated joint venture

 

(1,208

)

 

Investments in and advances to unconsolidated entities

 

(32

)

 

Leasing costs paid

 

(2,468

)

(3,909

)

Advances to certain real estate joint ventures

 

 

(515

)

Other

 

(1,593

)

793

 

Net cash used in investing activities

 

(177,211

)

(118,024

)

Cash flows from financing activities

 

 

 

 

 

Proceeds from mortgage and other loans payable

 

278,455

 

253,302

 

Repayments of mortgage and other loans payable

 

(123,154

)

(207,719

)

Deferred financing costs paid

 

(2,173

)

(1,992

)

Increase in other liabilities associated with financing activities

 

 

4,000

 

Net proceeds from issuance of common shares

 

2,252

 

61,746

 

Dividends paid

 

(25,933

)

(22,348

)

Distributions paid

 

(4,688

)

(4,166

)

Other

 

 

(1,115

)

Net cash provided by financing activities

 

124,759

 

81,708

 

Net increase in cash and cash equivalents

 

7,665

 

2,721

 

Cash and cash equivalents

 

 

 

 

 

Beginning of period

 

13,821

 

9,481

 

End of period

 

$

21,486

 

$

12,202

 

 

See accompanying notes to consolidated financial statements.

 

5



 

Corporate Office Properties Trust and Subsidiaries

 

Notes to Consolidated Financial Statements
(Dollars in thousands, except per share data)

(unaudited)

 

1.             Organization

 

Corporate Office Properties Trust (“COPT”) and subsidiaries (collectively, the “Company”) is a fully-integrated and self-managed real estate investment trust (“REIT”).  We focus on the ownership, management, leasing, acquisition and development of suburban office properties.  We typically focus our operations geographically in select submarkets that are attractive to our tenant base and in which we believe we can establish a critical mass of square footage.  At June 30, 2005, all of our operating properties were located in the Mid-Atlantic region of the United States, although in accordance with our strategy of focusing on submarkets that are attractive to our tenants, we do from time to time seek to expand our operations outside of that region, as evidenced by our acquisitions in 2005 of properties in San Antonio, Texas and Colorado Springs, Colorado.  COPT is qualified as a REIT as defined in the Internal Revenue Code of 1986 and is the successor to a corporation organized in 1988.  As of June 30, 2005, our portfolio included 147 office properties in operations, including two properties owned through joint ventures.

 

We conduct almost all of our operations through our operating partnership, Corporate Office Properties, L.P. (the “Operating Partnership”), for which we are the managing general partner.  The Operating Partnership owns real estate both directly and through subsidiary partnerships and limited liability companies (“LLCs”).  A summary of our Operating Partnership’s forms of ownership and the percentage of those ownership forms owned by COPT as of June 30, 2005 follows:

 

 

 

% Owned
by COPT

 

Common Units

 

80

%

Series E Preferred Units

 

100

%

Series F Preferred Units

 

100

%

Series G Preferred Units

 

100

%

Series H Preferred Units

 

100

%

Series I Preferred Units

 

0

%

 

The Operating Partnership also owns 100% of Corporate Office Management, Inc. (“COMI”) (collectively with its subsidiaries defined as the “Service Companies”).  COMI’s consolidated subsidiaries are set forth below:

 

Entity Name

 

Type of Service Business

Corporate Realty Management, LLC (“CRM”)

 

Real Estate Management

Corporate Development Services, LLC (“CDS”)

 

Construction and Development

Corporate Cooling and Controls, LLC (“CC&C”)

 

Heating and Air Conditioning

 

COMI owns 100% of these entities.  Most of the services that CRM and CDS provide are for us.

 

2.                                      Basis of Presentation

 

The accompanying unaudited interim Consolidated Financial Statements have been prepared in accordance with the rules and regulations for reporting on Form 10-Q.  Accordingly, certain information and disclosures required by accounting principles generally accepted in the United States for complete Consolidated Financial Statements are not included herein.  These interim financial statements should be read together with the financial statements and notes thereto included in our 2004 Annual Report on Form 10-K.  The interim financial statements on the previous pages reflect all adjustments that we believe are necessary for the fair statement of our financial position and results of operations for the interim periods presented.  These adjustments are of a normal recurring nature.  The results of operations for such interim periods are not necessarily indicative of the results for a full year.

 

6



 

3.             Earnings Per Share (“EPS”)

 

A summary of the numerator and denominator for purposes of our basic and diluted EPS calculations is set forth below (dollars and shares in thousands, except per share data):

 

 

 

For the Three Months
Ended June 30,

 

For the Six Months
Ended June 30,

 

 

 

2005

 

2004

 

2005

 

2004

 

Numerator:

 

 

 

 

 

 

 

 

 

Income from continuing operations

 

$

9,005

 

$

8,709

 

$

17,953

 

$

17,585

 

Less: Preferred share dividends

 

(3,654

)

(4,435

)

(7,308

)

(8,891

)

Numerator for basic EPS from continuing operations

 

5,351

 

4,274

 

10,645

 

8,694

 

Add: Convertible preferred share dividends

 

 

 

 

21

 

Numerator for diluted EPS from continuing operations

 

5,351

 

4,274

 

10,645

 

8,715

 

Add: Income from discontinued operations, net

 

115

 

134

 

207

 

251

 

Less: Convertible preferred share dividends

 

 

 

 

(21

)

Numerator for basic EPS on net income available to common shareholders

 

5,466

 

4,408

 

10,852

 

8,945

 

Add: Convertible preferred share dividends

 

 

 

 

21

 

Numerator for diluted EPS on net income available to common shareholders

 

$

5,466

 

$

4,408

 

$

10,852

 

$

8,966

 

Denominator (all weighted averages):

 

 

 

 

 

 

 

 

 

Denominator for basic EPS (common shares)

 

36,692

 

32,743

 

36,624

 

31,278

 

Assumed conversion of share options

 

1,528

 

1,639

 

1,534

 

1,691

 

Assumed conversion of convertible preferred shares

 

 

 

 

270

 

Denominator for diluted EPS

 

38,220

 

34,382

 

38,158

 

33,239

 

 

 

 

 

 

 

 

 

 

 

Basic EPS:

 

 

 

 

 

 

 

 

 

Income from continuing operations

 

$

0.15

 

$

0.13

 

$

0.29

 

$

0.28

 

Income from discontinued operations

 

 

 

0.01

 

0.01

 

Net income available to common shareholders

 

$

0.15

 

$

0.13

 

$

0.30

 

$

0.29

 

Diluted EPS

 

 

 

 

 

 

 

 

 

Income from continuing operations

 

$

0.14

 

$

0.12

 

$

0.28

 

$

0.26

 

Income from discontinued operations

 

 

0.01

 

 

0.01

 

Net income available to common shareholders

 

$

0.14

 

$

0.13

 

$

0.28

 

$

0.27

 

 

Our diluted EPS computations do not include the effects of the following securities since the conversions of such securities would increase diluted EPS for the respective periods:  

 

 

 

Weighted Average Shares in Denominator

 

 

 

For the Three Months
Ended June 30,

 

For the Six Months
Ended June 30,

 

 

 

2005

 

2004

 

2005

 

2004

 

Conversion of weighted average common units

 

8,676

 

8,765

 

8,681

 

8,814

 

Conversion of weighted average convertible preferred units

 

176

 

 

176

 

 

Restricted common shares

 

147

 

162

 

149

 

168

 

Conversion of share options

 

 

 

 

5

 

 

7



 

4.             Share-Based Compensation

 

Expenses from share-based compensation are reflected in our Consolidated Statements of Operations as follows:

 

 

 

For the Three Months
Ended June 30,

 

For the Six Months
Ended June 30,

 

 

 

2005

 

2004

 

2005

 

2004

 

Increase in general and administrative expenses

 

$

510

 

$

401

 

$

923

 

$

760

 

Increase in construction contract and other service operations expenses

 

77

 

145

 

123

 

284

 

 

The following table summarizes our operating results as if we elected to account for our share-based compensation under the fair value provisions of Statement of Financial Accounting Standards No. 123, “Accounting for Stock-Based Compensation:”

 

 

 

For the Three Months
Ended June 30,

 

For the Six Months
Ended June 30,

 

 

 

2005

 

2004

 

2005

 

2004

 

Net income, as reported

 

$

9,120

 

$

8,843

 

$

18,160

 

$

17,836

 

Add: Share-based compensation expense, net of related tax effects and minority interests, included in the determination of net income

 

448

 

381

 

802

 

718

 

Less: Share-based compensation expense determined under the fair value based method, net of related tax effects and minority interests

 

(429

)

(316

)

(768

)

(595

)

Net income, pro forma

 

$

9,139

 

$

8,908

 

$

18,194

 

$

17,959

 

Basic EPS on net income available to common shareholders, as reported

 

$

0.15

 

$

0.13

 

$

0.30

 

$

0.29

 

Basic EPS on net income available to common shareholders, pro forma

 

$

0.15

 

$

0.14

 

$

0.30

 

$

0.29

 

Diluted EPS on net income available to common shareholders, as reported

 

$

0.14

 

$

0.13

 

$

0.28

 

$

0.27

 

Diluted EPS on net income available to common shareholders, pro forma

 

$

0.14

 

$

0.13

 

$

0.29

 

$

0.27

 

 

The share-based compensation expense under the fair value method, as reported in the above table, was computed using the Black-Scholes option-pricing model.

 

5.             Recent Accounting Pronouncements

 

In December 2004, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards No. 153, “Exchanges of Nonmonetary Assets, an amendment of APB Opinion No. 29” (“SFAS 153”).  The Accounting Principles Board’s Opinion No. 29, “Accounting for Nonmonetary Transactions” (“APB 29”) is based on the principle that exchanges of nonmonetary assets should be measured based on the fair value of the assets exchanged.  However, the guidance in APB 29 included certain exceptions to that principle.  SFAS 153 amends APB 29 to eliminate the exception for nonmonetary exchanges of similar productive assets and replaces it with a general exception for exchanges of nonmonetary assets that do not have commercial substance.  Under SFAS 153, a nonmonetary exchange has commercial substance if the future cash flows of the entity are expected to change significantly as a result of the exchange.  SFAS 153 will be effective for us for nonmonetary asset exchanges occurring after December 31, 2005.  We are reviewing the provisions of SFAS 153 and assessing the impact it will have on us upon adoption.

 

In March 2005, the FASB issued Interpretation No. 47, “Accounting for Conditional Asset Retirement Obligations-an interpretation of FASB Statement No. 143” (“FIN 47”).  FIN 47 clarifies that the term “conditional asset retirement obligation” as used in FASB Statement No. 143, “Accounting for Asset Retirement Obligations,”

 

8



 

refers to an unconditional obligation to perform an asset retirement activity in which the timing and (or) method of settlement are conditional upon future events that may or may not be within the entity’s control.  The fair value of liabilities related to such obligations should be recognized when incurred and reasonably estimable.  Uncertainty about the timing and (or) method of settlement of a conditional asset retirement obligation should be factored into the measurement of the liability when sufficient information exists. Statement 143 acknowledges that in some cases, sufficient information may not be available to reasonably estimate the fair value of an asset retirement obligation.  This Interpretation also clarifies when an entity would have sufficient information to reasonably estimate the fair value of an asset retirement obligation.  FIN 47 is effective no later than December 31, 2005.  We are reviewing the provisions of FIN 47 and assessing the impact it will have on us upon adoption.

 

In December 2004, the FASB issued Statement of Financial Accounting Standards No. 123(R), “Share-Based Payment” (“SFAS 123(R)”).  The statement establishes standards for the accounting for transactions in which an entity exchanges its equity instruments for goods or services, focusing primarily on accounting for transactions in which an entity obtains employee services in share-based payment transactions.  The statement will require us to measure the cost of employee services received in exchange for an award of equity instruments based generally on the fair value of the award on the grant date; such cost will be recognized over the period during which the employee is required to provide service in exchange for the award (generally the vesting period).  No compensation cost is recognized for equity instruments for which employees do not render the requisite service.  SFAS 123(R) was to be effective for us in June 2005 for applicability to all awards granted, modified, repurchased or cancelled after July 1, 2005; the statement also was to require that we recognize compensation cost on or after July 1, 2005 for the portion of outstanding awards for which the requisite service has not yet been rendered, based on the fair value of those awards on the date of grant.  In April 2005, the Securities and Exchange Commission (the “SEC”) extended the effective date of SFAS 123(R) to the beginning of our next fiscal year (January 1, 2006).  The SEC’s new rule does not change the accounting required by SFAS 123(R); it changes only the dates for compliance with the standard.  We are reviewing the provisions of SFAS 123(R) and assessing the impact it will have on us upon adoption.

 

In March 2005, the SEC issued Staff Accounting Bulletin No. 107 (“SAB 107”).  SAB 107 expresses the SEC staff’s views regarding the interaction between SFAS 123(R) and certain SEC rules and regulations and provides the SEC staff’s views regarding the valuation of share-based payment arrangements for public companies.  In particular, it provides guidance in a number of areas, including share-based payment transactions with nonemployees, valuation methods, the classification of compensation expense, non-GAAP measures, capitalization of compensation costs related to share-based payment arrangements, the accounting for income tax effects of share-based payment arrangements upon adoption of SFAS 123(R), the modification of employee share options prior to adoption of SFAS 123(R) and certain disclosure requirements.  We are reviewing the provisions of SAB 107 and assessing the impact it will have on us upon our adoption of SFAS 123(R).

 

6.             Commercial Real Estate Properties

 

Operating properties consisted of the following:

 

 

 

June 30,
2005

 

December 31,
2004

 

Land

 

$

270,861

 

$

264,631

 

Buildings and improvements

 

1,316,239

 

1,263,340

 

 

 

1,587,100

 

1,527,971

 

Less: accumulated depreciation

 

(161,594

)

(138,602

)

 

 

$

1,425,506

 

$

1,389,369

 

 

As of June 30, 2005, we were under contract to sell three of our properties located in the Northern/Central New Jersey region.  As a result, these properties were classified as held for sale.  The components associated with these properties at June 30, 2005 included the following:

 

9



 

 

 

June 30,
2005

 

December 31,
2004

 

Land

 

$

3,670

 

$

3,696

 

Buildings and improvements

 

17,287

 

17,197

 

 

 

20,957

 

20,893

 

Less: accumulated depreciation

 

(3,507

)

(3,114

)

 

 

$

17,450

 

$

17,779

 

 

Projects we had under construction or pre-construction consisted of the following:

 

 

 

June 30,
2005

 

December 31,
2004

 

Land

 

$

108,320

 

$

74,190

 

Construction in progress

 

138,337

 

61,962

 

 

 

$

246,657

 

$

136,152

 

 

2005 Acquisitions

 

We acquired the following office properties during the six months ended June 30, 2005:

 

Project Name

 

Location

 

Date of
Acquisition

 

Number of
Buildings

 

Total
Rentable
Square Feet

 

Initial Cost

 

1 Sony Place (1)

 

San Antonio, TX

 

3/30/2005

 

2

 

468,994

 

$

30,720

 

Rockville Corporate Center

 

Rockville, MD (2)

 

4/7/2005

 

2

 

221,702

 

37,617

 

 

 

 

 

 

 

 

 

690,696

 

$

68,337

 

 


(1)          The buildings in this project are initially undergoing redevelopment that is expected to be completed by the fourth quarter of 2005.

(2)          Located in the Suburban Maryland region.

 

The table below sets forth the allocation of the acquisition costs of these properties:

 

 

 

1 Sony Place

 

Rockville
Corporate
Center

 

Total

 

Land, operating properties

 

$

 

$

6,222

 

$

6,222

 

Land, construction or development

 

10,962

 

 

10,962

 

Building and improvements

 

 

28,925

 

28,925

 

Construction in progress

 

19,758

 

 

19,758

 

Intangible assets on real estate acquisitions

 

 

4,004

 

4,004

 

Total assets

 

30,720

 

39,151

 

69,871

 

Deferred revenue associated with acquired operating leases

 

 

(1,534

)

(1,534

)

Total acquisition cost

 

$

30,720

 

$

37,617

 

$

68,337

 

 

We also acquired the following during the six months ended June 30, 2005:

 

                  a 19 acre parcel of land located in Chantilly, Virginia that is adjacent to existing properties we own for $7,141 on January 27, 2005 (Chantilly, Virginia is located in the Northern Virginia region).  We expect to develop this land parcel in the future;

                  a 39 acre parcel of land located in Dahlgren, Virginia that is adjacent to one of our office properties for $1,227 on March 16, 2005 (Dahlgren, Virginia is located in the St. Mary’s and King George Counties region).  We expect to develop this land parcel in the future;

 

10



 

                  a 16 acre parcel of land adjacent to the two office properties we acquired in San Antonio, Texas for $3,013 on March 30, 2005.  We expect to operate this land parcel as part of the campus that includes the two acquired office properties;

                  a 10 acre parcel of land adjacent to the Rockville Corporate Center for $6,234 on April 7, 2005.  We expect to develop this land parcel in the future; and

                  a 27 acre parcel of land adjacent to the two office properties we acquired in San Antonio, Texas for $5,893 on June 14, 2005.  We expect to develop this land parcel in the future.

 

In 2004, we sold a land parcel in Columbia, Maryland and a land parcel in Linthicum, Maryland for an aggregate of $9,600.  We issued to the buyer a $5,600 mortgage loan; the balance of the acquisition was in the form of cash from the buyer.  The buyer in this transaction had an option to contribute the two land parcels into our Operating Partnership between January 1, 2005 and February 28, 2005 in exchange for extinguishment of the $5,600 mortgage loan with us and common units in our Operating Partnership; the buyer exercised its option in February 2005 and, as a result, on April 18, 2005, the debt from us was essentially extinguished and the buyer received 142,776 common units in the Operating Partnership valued at $3,697.  We accounted for the 2004 transaction using the financing method of accounting; as a result, the 2004 sale transaction was not recorded as a sale and the $4,000 in net proceeds received from the buyer was recorded as a liability prior to the contribution of the land parcels back into the Operating Partnership in April 2005.

 

We financed our acquisitions primarily using borrowings from our revolving credit facility and a new mortgage loan.

 

2005 Construction and Pre-Construction Activities

 

As of June 30, 2005, we had construction underway on seven new buildings in the Baltimore/Washington Corridor, one in Northern Virginia and one in St. Mary’s County, Maryland.  We also had pre-construction activities underway on two new buildings located in the Baltimore/Washington Corridor and one building in King George County and redevelopment underway on two existing buildings in San Antonio, Texas.  We financed a significant portion of our construction activities using borrowings from new and existing construction loans and our revolving credit facility.

 

2005 Dispositions

 

On June 10, 2005, we sold a four acre parcel of land located in Columbia, Maryland for $2,571.  We recognized a gain of $186 on this sale.

 

7.                                      Real Estate Joint Ventures

 

Our investments in and advances to unconsolidated real estate joint ventures accounted for using the equity method of accounting included the following:

 

 

 

Balance at

 

 

 

 

 

 

 

Total

 

Maximum

 

 

 

June 30,
2005

 

December 31,
2004

 

Date
Acquired

 

Ownership

 

Nature of
Activity

 

Assets at
6/30/2005

 

Exposure
to Loss (1)

 

Route 46 Partners, LLC

 

$

1,233

 

$

1,201

 

3/14/2003

 

20

%

Operating building (2)

 

$

23,061

 

$

1,647

 

 


(1)

Derived from the sum of our investment balance and maximum additional unilateral capital contributions or loans required from us. Not reported above are additional amounts that we and our partner are required to fund when needed by this joint venture; these funding requirements are proportional to our respective ownership percentages.

 

 

(2)

This joint venture’s property is located in Fairfield, NJ.

 

The following table sets forth a condensed balance sheet for Route 46 Partners, LLC as of June 30, 2005:

 

11



 

Commercial real estate property

 

$

21,326

 

Other assets

 

1,735

 

Total assets

 

$

23,061

 

 

 

 

 

Liabilities

 

$

14,641

 

Owners’ equity

 

8,420

 

Total liabilities and owners’ equity

 

$

23,061

 

 

Our joint venture partner in Route 46 Partners, LLC has preference in receiving distributions of cash flows for a defined return.  Once our partner receives its defined return, we are entitled to receive distributions for a defined return.  We did not recognize income from our investment in Route 46 Partners, LLC in the six months ended June 30, 2005 and 2004 since the income earned by the entity in those periods did not exceed our partner’s defined return.

 

Our investments in consolidated real estate joint ventures included the following:

 

 

 

Date
Acquired

 

Ownership
% at
6/30/05

 

Nature of
Activity

 

Total
Assets at
6/30/05

 

Collateralized
Assets at
6/30/05

 

MOR Forbes 2 LLC

 

12/24/02

 

50

%

Operating building (1)

 

$

4,623

 

$

4,051

 

MOR Montpelier 3 LLC

 

2/21/02

 

50

%

Developing land parcel (2)

 

1,377

 

 

 

 

 

 

 

 

 

 

$

6,000

 

$

4,051

 

 


(1)  This joint venture’s property is located in Lanham, Maryland (located in the Suburban Maryland region).

(2)  This joint venture’s property is located in Laurel, Maryland (located in the Suburban Maryland region).

 

From April 4, 2001 until June 9, 2005, we owned an 80% interest in Gateway 70 LLC, a consolidated joint venture developing two land parcels in Columbia, Maryland.  On June 9, 2005, we acquired the remaining 20% interest in Gateway 70 LLC not previously owned by us for $1,208.

 

On April 11, 2005, we executed a contribution agreement that formed a joint venture relationship with a limited partnership to develop up to 1.8 million square feet of office space on 63 acres of land located in Hanover, Maryland (located in the Baltimore/Washington Corridor).  Under the contribution agreement, we agreed to fund up to $2,200 in pre-construction costs associated with the property.  As we and the joint venture partner agree to proceed with the construction of buildings in the future, we would make additional cash capital contributions into newly-formed entities and our joint venture partner would contribute land into such entities.  We will have a 50% interest in this joint venture relationship.

 

Our commitments and contingencies pertaining to our real estate joint ventures are disclosed in Note 19.

 

8.             Investment in Other Unconsolidated Entity

 

Our investment in an unconsolidated non-real estate entity is set forth below:

 

 

 

June 30,
2005

 

December 31,
2004

 

Date
Acquired

 

Ownership
% at
6/30/2005

 

Investment
Accounting
Method

 

TractManager, Inc. (1)

 

$

1,621

 

$

1,621

 

Various 2000

 

5

%

Cost

 

 


(1)

 

TractManager, Inc. has developed an Internet-based contract imaging and management system for sale to real estate owners and healthcare providers.

 

 

12



 

9.             Intangible Assets on Real Estate Acquisitions

 

Intangible assets on real estate acquisitions consisted of the following:

 

 

 

June 30,
2005

 

December 31,
2004

 

Lease-up value

 

$

68,165

 

$

65,638

 

Lease to market value

 

9,595

 

9,595

 

Lease cost portion of deemed cost avoidance

 

9,053

 

8,700

 

Market concentration premium

 

1,333

 

1,333

 

Tenant relationship value

 

1,148

 

 

Subtotal

 

89,294

 

85,266

 

Accumulated amortization

 

(22,940

)

(17,706

)

Intangible assets on real estate acquisitions, net

 

$

66,354

 

$

67,560

 

 

10.          Deferred Charges

 

Deferred charges consisted of the following:

 

 

 

June 30,
2005

 

December 31,
2004

 

Deferred leasing costs

 

$

34,991

 

$

33,302

 

Deferred financing costs

 

19,282

 

16,996

 

Goodwill

 

1,853

 

1,853

 

Deferred other

 

155

 

155

 

 

 

56,281

 

52,306

 

Accumulated amortization

 

(27,619

)

(24,664

)

Deferred charges, net

 

$

28,662

 

$

27,642

 

 

11.          Accounts Receivable

 

Our accounts receivable are reported net of an allowance for bad debts of $287 at June 30, 2005 and $490 at December 31, 2004.

 

12.          Derivatives

 

The following table sets forth our derivative contracts and their respective fair values:

 

Nature of Derivative

 

Notional
Amount in
(millions)

 

One-Month
LIBOR base

 

Effective
Date

 

Expiration
Date

 

Fair Value at
June 30, 2005

 

Fair Value at
December 31,
2004

 

Interest rate swap

 

$

50.0

 

2.3075

%

1/2/2003

 

1/3/2005

 

$

 

$

 

Forward starting swap

 

73.4

 

5.0244

%

7/15/2005

 

7/15/2015

 

(4,188

)

 

 

 

 

 

 

 

 

 

 

 

$

(4,188

)

$

 

 

We designated each of these derivatives as cash flow hedges.  The first swap noted above hedged the risk of changes in interest rates on certain of our one-month LIBOR-based variable rate borrowings.  On April 7, 2005, we entered into the forward starting swap to lock in the 10-year LIBOR swap rate in contemplation of our obtaining a long-term, fixed rate financing later in 2005.  We expect to cash settle the swap at the time we lock the rate on a long-term, fixed rate financing.  If the 10-year LIBOR swap rate is below 5.0244% at the time we cash settle the swap, we would be required to make a payment to the swap counter-party; if the 10-year LIBOR swap rate is above 5.0244% at the time we cash settle the swap, we would receive a payment from the swap counter-party.  The amount that we either pay or receive would be equal to the present value of the basis point differential between

 

13



 

5.0244% and the 10-year LIBOR swap rate at the time we cash settle the swap.  As of June 30, 2005, the forward starting swap is considered a highly effective cash flow hedge under Statement of Financial Accounting Standards No. 133, “Accounting for Derivative Instruments and Hedging Activities,” as amended.

 

The table below sets forth our accounting application of changes in derivative fair values:

 

 

 

For the Six Months
Ended June 30,

 

 

 

2005

 

2004

 

(Decrease) increase in fair value applied to AOCL (1) and minority interests

 

$

(4,188

)

$

284

 

Increase in fair value recognized as gain (2)

 

$

 

$

77

 

 


(1)               AOCL is defined as accumulated other comprehensive loss.

 

(2)               Represents hedge ineffectiveness and is included in interest expense on our Consolidated Statements of Operations.

 

13.          Shareholders’ Equity

 

Preferred Shares

 

Preferred shares of beneficial interest (“preferred shares”) consisted of the following:

 

 

 

June 30,
2005

 

December 31,
2004

 

1,265,000 designated as Series E Cumulative Redeemable Preferred Shares of beneficial interest (1,150,000 shares issued with an aggregate liquidation preference of $28,750)

 

11

 

11

 

1,425,000 designated as Series F Cumulative Redeemable Preferred Shares of beneficial interest (1,425,000 shares issued with an aggregate liquidation preference of $35,625)

 

14

 

14

 

2,200,000 designated as Series G Cumulative Redeemable Preferred Shares of beneficial interest (2,200,000 shares issued with an aggregate liquidation preference of $55,000)

 

22

 

22

 

2,000,000 designated as Series H Cumulative Redeemable Preferred Shares of beneficial interest (2,000,000 shares issued with an aggregate liquidation preference of $50,000)

 

20

 

20

 

Total preferred shares

 

$

67

 

$

67

 

 

Common Shares

 

During the six months ended June 30, 2005, we issued 130,975 common shares of beneficial interest (“common shares”) to certain employees.  All of these shares are subject to forfeiture restrictions that lapse annually throughout their respective terms provided that the employees remain employed by us.  During the same period, forfeiture restrictions lapsed on 136,056 common shares previously issued to employees.

 

We issued 216,389 common shares upon the exercise of share options during the six months ended June 30, 2005.  During the same period, we converted 12,320 common units in our Operating Partnership into common shares on the basis of one common share for each common unit.

 

Comprehensive Income

 

A summary of the activity in the AOCL component of shareholders’ equity for the six months ended June 30, 2005 follows:

 

14



 

Beginning balance

 

$

 

Unrealized loss on derivatives, net of minority interests

 

(3,358

)

Ending balance

 

$

(3,358

)

 

The table below sets forth our comprehensive income:

 

 

 

For the Three Months
Ended June 30,

 

For the Six Months Ended
June 30,

 

 

 

2005

 

2004

 

2005

 

2004

 

Net income

 

$

9,120

 

$

8,843

 

$

18,160

 

$

17,836

 

Unrealized (loss) gain on derivatives, net of minority interests

 

(3,358

)

245

 

(3,358

)

211

 

Total comprehensive income

 

$

5,762

 

$

9,088

 

$

14,802

 

$

18,047

 

 

14.          Dividends and Distributions

 

The following table summarizes our dividends and distributions when either the payable dates or record dates occurred during the six months ended June 30, 2005:

 

 

 

Record Date

 

Payable Date

 

Dividend/
Distribution Per
Share/Unit

 

Total
Dividend/
Distribution

 

Series E Preferred Shares:

 

 

 

 

 

 

 

 

 

Fourth Quarter 2004

 

December 31, 2004

 

January 14, 2005

 

$

0.6406

 

$

737

 

First Quarter 2005

 

March 31, 2005

 

April 15, 2005

 

$

0.6406

 

$

737

 

Second Quarter 2005

 

June 30, 2005

 

July 15, 2005

 

$

0.6406

 

$

737

 

 

 

 

 

 

 

 

 

 

 

Series F Preferred Shares:

 

 

 

 

 

 

 

 

 

Fourth Quarter 2004

 

December 31, 2004

 

January 14, 2005

 

$

0.6172

 

$

880

 

First Quarter 2005

 

March 31, 2005

 

April 15, 2005

 

$

0.6172

 

$

880

 

Second Quarter 2005

 

June 30, 2005

 

July 15, 2005

 

$

0.6172

 

$

880

 

 

 

 

 

 

 

 

 

 

 

Series G Preferred Shares:

 

 

 

 

 

 

 

 

 

Fourth Quarter 2004

 

December 31, 2004

 

January 14, 2005

 

$

0.5000

 

$

1,100

 

First Quarter 2005

 

March 31, 2005

 

April 15, 2005

 

$

0.5000

 

$

1,100

 

Second Quarter 2005

 

June 30, 2005

 

July 15, 2005

 

$

0.5000

 

$

1,100

 

 

 

 

 

 

 

 

 

 

 

Series H Preferred Shares:

 

 

 

 

 

 

 

 

 

Fourth Quarter 2004

 

December 31, 2004

 

January 14, 2005

 

$

0.4688

 

$

938

 

First Quarter 2005

 

March 31, 2005

 

April 15, 2005

 

$

0.4688

 

$

938

 

Second Quarter 2005

 

June 30, 2005

 

July 15, 2005

 

$

0.4688

 

$

938

 

 

 

 

 

 

 

 

 

 

 

Common Shares:

 

 

 

 

 

 

 

 

 

Fourth Quarter 2004

 

December 31, 2004

 

January 14, 2005

 

$

0.2550

 

$

9,288

 

First Quarter 2005

 

March 31, 2005

 

April 15, 2005

 

$

0.2550

 

$

9,339

 

Second Quarter 2005

 

June 30, 2005

 

July 15, 2005

 

$

0.2550

 

$

9,381

 

 

 

 

 

 

 

 

 

 

 

Series I Preferred Units:

 

 

 

 

 

 

 

 

 

Fourth Quarter 2004

 

December 31, 2004

 

January 14, 2005

 

$

0.4688

 

$

165

 

First Quarter 2005

 

March 31, 2005

 

April 15, 2005

 

$

0.4688

 

$

165

 

Second Quarter 2005

 

June 30, 2005

 

July 15, 2005

 

$

0.4688

 

$

165

 

 

 

 

 

 

 

 

 

 

 

Common Units:

 

 

 

 

 

 

 

 

 

Fourth Quarter 2004

 

December 31, 2004

 

January 14, 2005

 

$

0.2550

 

$

2,179

 

First Quarter 2005

 

March 31, 2005

 

April 15, 2005

 

$

0.2550

 

$

2,179

 

Second Quarter 2005

 

June 30, 2005

 

July 15, 2005

 

$

0.2550

 

$

2,205

 

 

15



 

15.          Supplemental Information to Statements of Cash Flows

 

 

 

For the Six Months
Ended June 30,

 

 

 

2005

 

2004

 

Supplemental schedule of non-cash investing and financing activities:

 

 

 

 

 

 

 

 

 

 

 

Consolidation of real estate joint ventures in connection with adoption of FASB

 

 

 

 

 

Interpretation FIN 46(R), “Consolidation of Variable Interest Entities”:

 

 

 

 

 

 

 

Operating properties

 

$

 

$

2,176

 

Projects under construction or development

 

 

17,959

 

Investments in and advances to unconsolidated real estate joint ventures

 

 

(3,957

)

Restricted cash

 

 

10

 

Accounts receivable, net

 

 

145

 

Deferred rent receivable

 

 

7

 

Deferred charges, net

 

 

1,026

 

Prepaid and other assets

 

 

(3,263

)

Mortgage and other loans payable

 

 

(10,171

)

Accounts payable and accrued expenses

 

 

(2,737

)

Rents received in advance and security deposits

 

 

(347

)

Other liabilities

 

 

4,650

 

Minority interests-other consolidated real estate entities

 

 

(5,498

)

Net adjustment

 

$

 

$

 

Adjustment to purchase of commercial real estate properties by acquiring joint venture interests:

 

 

 

 

 

Operating properties

 

$

 

$

(83

)

Investments in and advances to unconsolidated real estate joint ventures

 

 

83

 

Net adjustment

 

$

 

$

 

Debt assumed in connection with acquisitions

 

$

 

$

25,637

 

(Decrease) increase in accrued capital improvements and leasing costs

 

$

(1,099

)

$

9,146

 

Amortization of discounts and premiums on mortgage loans to commercial real estate properties

 

$

135

 

$

318

 

Accretion of other liability to commercial real estate properties

 

$

 

$

147

 

(Decrease) increase in fair value of derivatives applied to AOCL and minority interests

 

$

(4,188

)

$

284

 

Issuance of common units in the Operating Partnership in connection with contribution of properties accounted for under the financing method of accounting

 

$

3,687

 

$

 

Adjustments to minority interests resulting from changes in ownership of Operating Partnership by COPT

 

$

(1,708

)

$

9,093

 

Dividends/distribution payable

 

$

14,834

 

$

13,668

 

Decrease in minority interests and increase in shareholders’ equity in connection with the conversion of common units into common shares

 

$

324

 

$

2,626

 

Conversion of preferred shares adjusted to common shares and paid in capital

 

$

 

$

12

 

Issuance of restricted shares

 

$

3,481

 

$

2,271

 

 

16



 

16.          Information by Business Segment

 

We have eight primary office property segments: Baltimore/Washington Corridor, Northern Virginia, Greater Philadelphia, St. Mary’s and King George Counties, Northern/Central New Jersey, Suburban Maryland, Greater Harrisburg and San Antonio, Texas.

 

The table below reports segment financial information.  Our segment entitled “Other” includes assets and operations not specifically associated with the other defined segments, including elimination entries required in consolidation.  We measure the performance of our segments based on total revenues less property operating expenses, a measure we define as net operating income (“NOI”).  We believe that NOI is an important supplemental measure of operating performance for a REIT’s operating real estate because it provides a measure of the core operations that is unaffected by depreciation, amortization, financing and general and administrative expenses; this measure is particularly useful in our opinion in evaluating the performance of geographic segments, same-office property groupings and individual properties.

 

 

 

Baltimore/
Washington
Corridor

 

Northern
Virginia

 

Greater
Philadelphia

 

St. Mary’s &
King George
Counties

 

Northern/
Central New

Jersey

 

Suburban
Maryland

 

Greater
Harrisburg

 

San Antonio

 

Other

 

Total

 

Three Months Ended June 30, 2005:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenues

 

$

29,087

 

$

14,384

 

$

2,507

 

$

3,933

 

$

3,179

 

$

3,133

 

$

2,167

 

$

 

$

2,651

 

$

61,041

 

Property operating expenses

 

8,538

 

4,782

 

37

 

645

 

1,524

 

1,081

 

663

 

 

638

 

17,908

 

NOI

 

$

20,549

 

$

9,602

 

$

2,470

 

$

3,288

 

$

1,655

 

$

2,052

 

$

1,504

 

$

 

$

2,013

 

$

43,133

 

Commercial real estate property expenditures

 

$

25,857

 

$

11,239

 

$

209

 

$

1,209

 

$

361

 

$

41,879

 

$

52

 

$

6,356

 

$

717

 

$

87,879

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended June 30, 2004:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenues

 

$

25,021

 

$

13,289

 

$

2,507

 

$

1,662

 

$

4,661

 

$

2,358

 

$

2,168

 

$

 

$

2,226

 

$

53,892

 

Property operating expenses

 

7,611

 

3,074

 

39

 

359

 

1,241

 

785

 

759

 

 

779

 

14,647

 

NOI

 

$

17,410

 

$

10,215

 

$

2,468

 

$

1,303

 

$

3,420

 

$

1,573

 

$

1,409

 

$

 

$

1,447

 

$

39,245

 

Commercial real estate property expenditures

 

$

14,329

 

$

15,478

 

$

172

 

$

6,767

 

$

516

 

$

898

 

$

69

 

$

 

$

15,558

 

$

53,787

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Six Months Ended June 30, 2005:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenues

 

$

58,766

 

$

28,803

 

$

5,013

 

$

6,811

 

$

7,050

 

$

5,587

 

$

4,411

 

$

 

$

5,227

 

$

121,668

 

Property operating expenses

 

17,947

 

9,797

 

73

 

1,351

 

3,033

 

2,170

 

1,407

 

 

1,048

 

36,826

 

NOI

 

$

40,819

 

$

19,006

 

$

4,940

 

$

5,460

 

$

4,017

 

$

3,417

 

$

3,004

 

$

 

$

4,179

 

$

84,842

 

Commercial real estate property expenditures

 

$

48,906

 

$

33,632

 

$

416

 

$

3,954

 

$

502

 

$

42,222

 

$

161

 

$

40,448

 

$

1,817

 

$

172,058

 

Segment assets at June 30, 2005

 

$

807,965

 

$

446,684

 

$

100,230

 

$

98,520

 

$

83,083

 

$

114,015

 

$

66,973

 

$

40,448

 

$

132,530

 

$

1,890,448

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Six Months Ended June 30, 2004:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenues

 

$

50,299

 

$

24,175

 

$

5,013

 

$

1,786

 

$

9,340

 

$

3,913

 

$

4,411

 

$

 

$

3,926

 

$

102,863

 

Property operating expenses

 

15,736

 

6,386

 

79

 

392

 

2,727

 

1,383

 

1,501

 

 

1,482

 

29,686

 

NOI

 

$

34,563

 

$

17,789

 

$

4,934

 

$

1,394

 

$

6,613

 

$

2,530

 

$

2,910

 

$

 

$

2,444

 

$

73,177

 

Commercial real estate property expenditures

 

$

44,090

 

$

18,542

 

$

351

 

$

55,298

 

$

749

 

$

27,387

 

$

264

 

$

 

$

15,917

 

$

162,598

 

Segment assets at June 30, 2004

 

$

718,058

 

$

281,381

 

$

101,444

 

$

59,429

 

$

83,546

 

$

70,714

 

$

68,376

 

$

 

$

107,741

 

$

1,490,689

 

 

17



 

The following table reconciles our segment revenues to total revenues as reported on our Consolidated Statements of Operations:

 

 

 

For the Three Months
Ended June 30,

 

For the Six Months
Ended June 30,

 

 

 

2005

 

2004

 

2005

 

2004

 

Segment revenues

 

$

61,041

 

$

53,892

 

$

121,668

 

$

102,863

 

Construction contract revenues

 

17,445

 

5,233

 

33,173

 

11,370

 

Other service operations revenues

 

1,019

 

837

 

2,388

 

2,352

 

Less: Revenues from discontinued operations

 

(855

)

(801

)

(1,777

)

(1,616

)

Total revenues

 

$

78,650

 

$

59,161

 

$

155,452

 

$

114,969

 

 

The following table reconciles our segment property operating expenses to property operating expenses as reported on our Consolidated Statements of Operations:

 

 

 

For the Three Months
Ended June 30,

 

For the Six Months
Ended June 30,

 

 

 

2005

 

2004

 

2005

 

2004

 

Segment property operating expenses

 

$

17,908

 

$

14,647

 

$