Exhibit 99.1

Supplemental Information

(Unaudited)

 

 

June 30, 2006

 

 

 

 

 

Corporate Office Properties Trust

Index to Supplemental Information (Unaudited)

June 30, 2006

Highlights and Discussion	Page
Reporting Period Highlights — Second Quarter 2006	1
Forward-Looking Statements	4
Financial Statements
Quarterly Selected Financial Summary Data	5
Quarterly Consolidated Balance Sheets	6
Quarterly Consolidated Statements of Operations	7
Quarterly Consolidated Reconciliations of Funds From Operations (FFO), Adjusted Funds From Operations
(AFFO) and Earnings per diluted share, as adjusted	8
Quarterly Consolidated Reconciliations of Earnings Before Interest, Income Taxes, Depreciation and Amortization
(EBITDA), Combined Net Operating Income (NOI), Discontinued Operations and Gain on Sales of Real Estate	9
Selected Financial Analyses
Quarterly Equity Analysis	10
Quarterly Debt Analysis	11
Quarterly Operating Ratios	12
Quarterly Dividend Analysis	13
Investor Composition and Analyst Coverage	14
Debt Maturity Schedule — June 30, 2006	15
Portfolio Summary
Property Summary by Region — June 30, 2006 — Wholly Owned Properties	16
Property Summary by Region — June 30, 2006 — Joint Venture Properties	21
Property Occupancy Rates by Region by Quarter — Wholly Owned Properties	22
Property Occupancy Rates by Region by Quarter — Joint Venture Properties	23
Top Twenty Office Tenants of Wholly Owned Properties as of June 30, 2006	24
Combined Real Estate Revenue and Combined Net Operating Income by Geographic Region by Quarter	25
Same Office Property Cash and GAAP Net Operating Income by Quarter	26
Average Occupancy Rates by Region for Same Office Properties	27
Office Lease Expiration Analysis by Year for Wholly Owned Properties	28
Quarterly Office Renewal Analysis for Wholly Owned Properties as of June 30, 2006	29
Year to Date Wholly Owned Acquisition Summary as of June 30, 2006	30
Year to Date Wholly Owned Disposition Summary as of June 30, 2006	31
Development Summary as of June 30, 2006	32
Year to Date Development Placed into Service as of June 30, 2006	34
Land Inventory as of June 30, 2006	35
Joint Venture Summary as of June 30, 2006	36
Reconciliations of Non GAAP Measurements	37

 

To Members of the Investment Community:

We prepared this supplemental information package to provide you with additional detail on our properties and operations.  The information in this package is unaudited, furnished to the Securities and Exchange Commission (“SEC”) and should be read in conjunction with our quarterly and annual reports.  If you have any questions or comments, please contact Ms. Mary Ellen Fowler, Vice President, Finance and Investor Relations at (443) 285-5450 or maryellen.fowler@copt.com.  Reconciliations between GAAP and non-GAAP measurements have been provided on page 37.  Refer to our Form 8-K for definitions of certain terms used herein.

Reporting Period Highlights — Second Quarter 2006

Financial Results

 

·                  Reported Net Income Available to Common Shareholders of $5,463,000 or $.13 per diluted share for the second quarter of 2006 as compared to $5,466,000 or $.14 per diluted share for the comparable 2005 period.

·                  Reported FFO — diluted of $25,181,000 or $.49 per share/unit for the second quarter of 2006 as compared to $21,834,000 or $.47 per share/unit for the comparable 2005 period, representing an increase of 4.3% per share/unit. 

·                  Reported AFFO — diluted of $18,946,000 for the second quarter of 2006 as compared to $16,981,000 for the comparable 2005 period, representing an increase of 11.6%. 

·                  Our FFO payout ratio was 56.4% for the second quarter of 2006 as compared to 53.1% for the comparable 2005 period.  Our AFFO payout ratio was 75.0% for the second quarter of 2006 as compared to 68.2% for the comparable 2005 period.

 

Financing Activity and Capital Transactions

·                  On April 17, 2006, we issued 1,750,000 common shares, generating proceeds of $72.3 million after payment of the underwriters’ discount but before offering expenses, or $41.31 per share.  The proceeds were used to pay down our unsecured revolving credit facility that will later be drawn upon and primarily used as follows: (i) $28.8 million to fund the planned redemption of all of our outstanding 10.25% Series E Cumulative Redeemable Preferred Shares which occurred on July 15, 2006; and (ii) $35.6 million to fund the planned redemption of all of our outstanding 9.875% Series F Cumulative Redeemable Preferred Shares on or after October 15, 2006.  On April 24, 2006, we issued an additional 250,000 common shares to cover the over-allotment, generating proceeds of $10.3 million, after payment of the underwriters’ discount but before offering expenses.

·                  On April 27, 2006, we executed swaps for an aggregate notional amount of $50.0 million at a fixed one-month LIBOR rate of 5.232%.  The swaps commenced May 1, 2006 and expire May 1, 2009.

·                  On June 23, 2006, we closed on a $48.0 million construction loan facility, which bears interest at either, the prime rate or LIBOR plus the applicable margin, based upon a pricing grid initially priced at LIBOR plus 1.5%.  We have borrowed $14.2 million as of June 30, 2006.  This facility matures in June 2008, unless a twelve-month extension option is exercised.  This facility will fund the construction of our development properties located at 302 Sentinel Drive and 320 Sentinel Drive (known as 302 NBP and 320 NBP, respectively).

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·                  As of June 30, 2006, our debt to market capitalization was 38.2% and our debt to undepreciated book value of real estate assets was 60.7%.  We achieved an EBITDA interest coverage ratio of 2.70x and an EBITDA fixed charge coverage ratio of 2.22x for this quarter.

Acquisitions

·                  On April 21, 2006, we acquired a 20-acre land parcel with approximately 300,000 developable square feet in Colorado Springs, Colorado, for $1.1 million. The parcel is adjacent to our 64-acre Patriot Park Business Park acquired in 2005.

·                  On May 18, 2006, we acquired three buildings containing 324,549 rentable square feet, located in Colorado Springs, Colorado for $43.6 million.

·                  On May 19, 2006, we acquired a 13-acre land parcel with approximately 120,000 developable square feet in Colorado Springs, Colorado, for $2.2 million.

·                  On June 8, 2006, we purchased two buildings containing 75,892 rentable square feet located in Colorado Springs, Colorado for $8.5 million.

·                  On June 29, 2006, we acquired the membership interests in an entity that owns a building with 611,379 rentable square feet including 319,330 square feet of office and 292,049 square feet of warehouse space on a 37-acre land parcel, located in the Columbia Gateway Business Park in Columbia, Maryland, for $78.0 million.  We assumed a $38.0 million loan bearing interest at a fixed rate of 5.93% per annum and maturing in May 2013.  The 37-acre land parcel contains a 5-acre site which can support future development of approximately 120,000 square feet.

·                  On June 29, 2006, we acquired the membership interests in an entity that owns a 178-acre land parcel located in the Baltimore/Washington Corridor, for $26.6 million.  We funded this acquisition with a $5.0 million borrowing under our unsecured revolving credit facility, $14.3 million in cash and issued 181,097 common units in our operating partnership valued by the parties at $7.3 million, or $40.31 per unit.  The land parcel can support up to 1.25 million rentable square feet and represents an expansion of our business park known as the National Business Park.

Development

·                  On April 4, 2006, we entered into a long-term ground sublease agreement with The UMBC Research Park Corporation on a 6-acre land parcel located in Baltimore County, Maryland, on which we plan to develop a 110,000 square foot building.

·                  During the quarter, we placed into service 93,324 square feet of the 157,396 rentable square feet at 306 Sentinel Drive (known as 306 NBP).  This building is 59.29% leased as of June 30, 2006.

·                  On June 16, 2006, we executed a long-term lease for approximately 193,000 square feet with Northrop Grumman Corporation for a multi-level office building to be built in Richmond, Virginia.  This building is under construction with anticipated occupancy in the second quarter of 2007.

·                  On June 29, 2006, we executed a ten-year lease for 145,959 square feet with Northrop Grumman Corporation at 15010 Conference Center Drive (known as WTP II), located in Chantilly, Virginia.  This building is being constructed with anticipated occupancy in the first quarter of 2007.  This building is now 100% leased.

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Operations

·                  Our wholly owned portfolio was 93.61% occupied and 94.97% leased as of June 30, 2006.  Our entire portfolio was 93.25% occupied and 94.54% leased as of June 30, 2006.

·                  Our same property cash NOI for the quarter ended June 30, 2006 increased by 1.1% or $428,000 as compared to the quarter ended June 30, 2005.  The primary drivers of the increase in cash NOI for our same office portfolio as compared to second quarter of 2005 were higher rental revenues in our Northern/Central New Jersey region and improved occupancy and higher rental rates in our Baltimore/Washington Corridor region.  This increase was partially offset by a drop of $1.1 million in lease termination fees in our St. Mary’s & King George Counties region as compared to the second quarter of 2005.  Our same office portfolio consists of 120 properties and represents 72.1% of our wholly owned portfolio as of June 30, 2006.

·                  Weighted average lease term of our wholly owned portfolio is 5.0 years as of June 30, 2006, with an average contractual rental rate (including tenant reimbursements of operating costs) of $20.44 per square foot.

·                  We renewed 239,255 square feet, or 62.52%, of our expiring office leases (based upon square footage) with an average committed cost of $2.16 per square foot during the second quarter.  For our renewed space only, we realized an increase in total rent of 7.90%, as measured from the GAAP straight-line rent in effect preceding the renewal date, and in increase of 1.20% in total cash rent.  For our renewed and retenanted space of approximately 427,044 square feet, we realized an increase in total rent of 12.61%, as measured from the GAAP straight-line rent in effect preceding the renewal date, and an increase of 5.34% in total cash rent.  We incurred an average committed cost of $14.06 per square foot for our renewed and retenanted space in the second quarter.

Subsequent Events

·                  On July 3, 2006, we exercised our right to increase our borrowing capacity under our unsecured line of credit from $400.0 million to $500.0 million.  We simultaneously repaid $60.2 million on two fixed rate loans with a weighted average interest rate of 7.80%.

·                  On July 15, 2006, we redeemed all of our 1,150,000 outstanding 10.25% Series E Cumulative Redeemable Preferred Shares at a price of $25 per share or $28,750,000 and recognized a $1.8 million non-cash reduction of net income available to common shareholders related to original issuance costs. We anticipate that the write-off of these original issuance costs will reduce our earnings per share for the year ending December 31, 2006 by $(.04) and our funds from operations-diluted for that period by $(.04) per share.

·                  On July 20, 2006, we issued 3,390,000 Series J Cumulative Redeemable Preferred Shares with a $25 per share par value and an annual dividend of 7.625%, generating net proceeds of $82.1 million after payment of the underwriters’ discount but before offering expenses.  We used the proceeds from this offering to repay borrowings under our unsecured revolving credit facility.

·                  On July 26, 2006, we simultaneously sold a wholly owned property containing 101,263 rentable square feet for $15.8 million and an adjacent property containing 157,394 rentable square feet for $27.0 million in which we owned a 20% interest.  Both properties are located in our Northern/Central New Jersey market.

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Forward-Looking Statements

This supplemental information contains “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 our current expectations, estimates and projections about future events and financial trends affecting us.  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 we cannot predict with accuracy and some of which we might not even anticipate.  Accordingly, we 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:

·                  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, 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 our joint venture partners may not fulfill their financial obligations as investors or may take actions that are inconsistent with our objectives;

·                  our ability to satisfy and operate effectively under federal income tax rules relating to real estate investment trusts and partnerships;

·                  governmental actions and initiatives; and

·                  environmental requirements.

We undertake 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, 2005.

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Quarterly Selected Financial Summary Data

(Dollars in thousands)

 

		2006						2005
		June 30			March 31			December 31			September 30			June 30
Revenues from Real Estate Operations		$	72,611		$	71,227		$	65,642		$	61,682		$	59,012
Total Revenues		86,751			87,536			79,531			91,466			77,476
Combined Net Operating Income		50,677			50,113			46,937			44,338			43,133
EBITDA		47,613			49,302			43,386			45,918			40,463
Net Income		9,116			9,937			10,282			10,589			9,120
Preferred Share dividends		(3,653		)	(3,654		)	(3,654		)	(3,654		)	(3,654		)
Net Income Available to Common Shareholders		$	5,463		$	6,283		$	6,628		$	6,935		$	5,466
Earnings per diluted share		$	0.13		$	0.15		$	0.16		$	0.18		$	0.14
Funds From Operations (FFO) — Diluted		$	25,181		$	24,350		$	23,804		$	22,126		$	21,834
FFO per diluted share		$	0.49		$	0.49		$	0.48		$	0.47		$	0.47
Adjusted FFO - Diluted		$	18,946		$	18,865		$	15,892		$	15,891		$	16,981
Payout Ratios:
Earnings Payout		217.0		%	179.2		%	167.0		%	158.1		%	171.6		%
FFO - Diluted		56.4		%	56.0		%	57.0		%	60.6		%	53.1		%
AFFO - Diluted		75.0		%	72.3		%	85.3		%	84.4		%	68.2		%
Total Dividends/Distributions		$	18,028		$	17,453		$	17,274		$	17,236		$	15,405

 

Note:  The above presentation does not separately report discontinued operations.

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Quarterly Consolidated Balance Sheets

(Dollars in thousands except per share data)

 

		2006						2005
		June 30			March 31			December 31			September 30			June 30
Assets
Investment in real estate:
Land - operational		$	337,866		$	314,550		$	314,720		$	268,583		$	274,531
Land - development		158,096			126,738			117,434			127,085			108,320
Construction in progress		152,099			140,607			138,183			147,184			138,337
Buildings and improvements		1,613,341			1,501,426			1,491,253			1,315,611			1,333,168
Investment in and advances to unconsolidated real estate joint ventures		1,509			1,439			1,451			1,447			1,233
Less: accumulated depreciation		(197,395		)	(183,920		)	(174,935		)	(163,381		)	(165,058		)
Net investment in real estate		2,065,516			1,900,840			1,888,106			1,696,529			1,690,531
Cash and cash equivalents		5,748			20,169			10,784			17,348			21,486
Restricted cash		21,073			23,793			21,476			15,083			15,982
Accounts receivable, net		15,446			16,729			15,606			12,298			13,613
Investment in and advances to other unconsolidated entities		1,621			1,621			1,621			1,621			1,621
Deferred rent receivable		36,638			34,247			32,579			30,222			29,291
Deferred charges, net		34,802			33,731			35,046			31,420			28,662
Intangible assets on real estate acquisitions, net		100,132			85,699			90,984			67,686			66,354
Prepaid and other assets		21,422			21,722			29,255			25,465			19,501
Fair value of derivatives		833			110			—			—			—
Furniture, fixtures and equipment, net		5,887			4,214			4,302			4,024			3,407
Total assets		$	2,309,118		$	2,142,875		$	2,129,759		$	1,901,696		$	1,890,448
Liabilities and shareholders’ equity
Liabilities:
Mortgage and other loans payable		$	1,433,718		$	1,360,638		$	1,348,351		$	1,124,299		$	1,177,779
Accounts payable and accrued expenses		46,040			42,792			41,693			38,795			53,984
Rents received in advance and security deposits		18,124			16,394			14,774			14,191			13,421
Deferred revenue associated with acquired operating leases		13,906			11,721			12,707			8,045			8,092
Distributions in excess of investment in unconsolidated real estate joint venture		3,067			3,010			3,081			2,519			—
Dividends and distributions payable		17,450			16,878			16,703			16,665			14,834
Fair value of derivatives		—			—			—			1,516			4,188
Other liabilities		5,135			5,314			4,727			4,619			4,024
Total liabilities		1,537,440			1,456,747			1,442,036			1,210,649			1,276,322
Minority interests:
Preferred units in the Operating Partnership		8,800			8,800			8,800			8,800			8,800
Common units in the Operating Partnership		105,452			92,903			95,014			98,433			87,439
Other consolidated real estate joint ventures		1,778			1,190			1,396			1,297			861
Total minority interests		116,030			102,893			105,210			108,530			97,100
Commitments and contingencies		—			—			—			—			—
Shareholders’ equity:
Preferred Shares ($0.01 par value; 15,000,000 authorized)		67			67			67			67			67
Common Shares of beneficial interest ($0.01 par value; 75,000,000 authorized, 42,373,505 shares issued as of June 30, 2006)		421			400			399			396			372
Additional paid-in capital		733,996			655,818			657,339			654,024			586,567
Cumulative distributions in excess of net income		(79,062		)	(72,670		)	(67,697		)	(63,256		)	(59,226		)
Value of unearned restricted common share grants		—			—			(7,113		)	(7,318		)	(7,396		)
Accumulated other comprehensive loss		226			(380		)	(482		)	(1,396		)	(3,358		)
Total shareholders’ equity		655,648			583,235			582,513			582,517			517,026
Total shareholders’ equity and minority interests		771,678			686,128			687,723			691,047			614,126
Total liabilities and shareholders’ equity		$	2,309,118		$	2,142,875		$	2,129,759		$	1,901,696		$	1,890,448

 

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Quarterly Consolidated Statements of Operations

(Dollars and units in thousands)

 

		2006						2005
		June 30			March 31			December 31			September 30			June 30
Revenues
Rental revenue		$	63,308		$	62,226		$	56,789		$	53,746		$	52,483
Tenant recoveries and other real estate operations revenue		9,303			9,001			8,853			7,936			6,529
Construction contract revenues		12,156			14,544			12,708			28,476			17,445
Other service operations revenues		1,984			1,765			1,181			1,308			1,019
Total Revenues		86,751			87,536			79,531			91,466			77,476
Expenses
Property operating		22,240			21,704			19,573			18,496			17,139
Depreciation and amortization associated with real estate operations		18,603			19,171			15,237			17,651			14,713
Construction contract expenses		11,643			14,026			12,341			28,074			17,223
Other service operations expenses		1,818			1,678			1,254			1,252			955
General and administrative expenses		3,706			3,963			3,773			3,318			3,166
Total Operating Expenses		58,010			60,542			52,178			68,791			53,196
Operating Income		28,741			26,994			27,353			22,675			24,280
Interest expense		(17,536		)	(17,481		)	(15,025		)	(14,027		)	(13,391		)
Amortization of deferred financing costs		(609		)	(559		)	(732		)	(642		)	(471		)
Income from continuing operations before equity in loss of unconsolidated entities, income taxes and minority interests		10,596			8,954			11,596			8,006			10,418
Equity in loss of unconsolidated entities		(32		)	(23		)	(88		)	—			—
Income tax (expense) benefit		(206		)	(215		)	265			(263		)	(213		)
Income from continuing operations before minority interests		10,358			8,716			11,773			7,743			10,205
Minority interest in income from continuing operations
Common units in the Operating Partnership		(1,153		)	(900		)	(1,489		)	(789		)	(1,256		)
Preferred units in the Operating Partnership		(165		)	(165		)	(165		)	(165		)	(165		)
Other consolidated entities		25			33			27			19			15
Income from continuing operations		9,065			7,684			10,146			6,808			8,799
Income from discontinued operations, net of minority interests		26			2,143			115			3,722			152
Income before gain on sales of real estate		9,091			9,827			10,261			10,530			8,951
Gain on sales of real estate		25			110			21			59			169
Net Income		9,116			9,937			10,282			10,589			9,120
Preferred share dividends		(3,653		)	(3,654		)	(3,654		)	(3,654		)	(3,654		)
Net Income Available to Common Shareholders		$	5,463		$	6,283		$	6,628		$	6,935		$	5,466
For EPS Computations:
Numerator for Dilutive EPS		$	5,463		$	6,283		$	6,628		$	6,935		$	5,466
Denominator:
Weighted Average Common Shares - Basic		41,510			39,668			39,297			36,913			36,692
Dilutive options		1,550			1,658			1,678			1,667			1,528
Dilutive restricted shares		152			184			—			—			—
Weighted Average Common Shares - Diluted		43,212			41,510			40,975			38,580			38,220
Earnings per diluted share		$	0.13		$	0.15		$	0.16		$	0.18		$	0.14

 

 

7

Quarterly Consolidated Reconciliations of Funds From Operations (FFO), Adjusted Funds From
Operations (AFFO) and Earnings per diluted share, as adjusted
(Dollars in thousands)

		2006						2005
		June 30			March 31			December 31			September 30			June 30
Net Income		$	9,116		$	9,937		$	10,282		$	10,589		$	9,120
Combined real estate related depreciation and other amortization		18,490			19,068			15,410			17,848			15,087
Depreciation and amortization of unconsolidated real estate entities		109			94			182			—			—
Depreciation and amortization allocable to minority interests in other consol. entities		(44		)	(42		)	(29		)	(23		)	(30		)
Loss/(gain) on sales of real estate properties, excluding development		6			(2,459		)	(14		)	(4,360		)	(24		)
Funds From Operations (FFO)		27,677			26,598			25,831			24,054			24,153
Minority interest - common units, gross		1,157			1,406			1,520			1,726			1,335
Preferred share dividends		(3,653		)	(3,654		)	(3,654		)	(3,654		)	(3,654		)
Funds From Operations (FFO) — Basic		25,181			24,350			23,697			22,126			21,834
Restricted share dividends		—			—			107			—			—
Funds From Operations (FFO) — Diluted		$	25,181		$	24,350		$	23,804		$	22,126		$	21,834
Straight line rent adjustments		(2,315		)	(2,122		)	(2,292		)	(1,519		)	(1,369		)
Amortization of deferred market rental revenue		(495		)	(555		)	(394		)	229			(191		)
Recurring capital expenditures		(3,425		)	(2,808		)	(5,226		)	(4,945		)	(3,293		)
Adjusted Funds from Operations - Diluted		$	18,946		$	18,865		$	15,892		$	15,891		$	16,981
Preferred dividends - redeemable non-convertible		3,653			3,654			3,654			3,653			3,654
Preferred distributions		165			165			165			165			165
Common distributions		2,357			2,374			2,386			2,452			2,205
Common dividends		11,853			11,260			11,069			10,966			9,381
Total Dividends/Distributions		$	18,028		$	17,453		$	17,274		$	17,236		$	15,405
Denominator for earnings per share - Diluted		43,212			41,510			40,975			38,580			38,220
Restricted shares		—			—			224			—			—
Common units		8,465			8,520			8,688			8,758			8,676
Denominator for funds from operations per share - Diluted		51,677			50,030			49,887			47,338			46,896

 

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Quarterly Consolidated Reconciliations of Earnings Before Interest, Income Taxes, Depreciation and Amortization (EBITDA),
Combined Net Operating Income (NOI), Discontinued Operations and Gain on Sales of Real Estate
(Dollars in thousands)

		2006						2005
		June 30			March 31			December 31			September 30			June 30
Net Income		$	9,116		$	9,937		$	10,282		$	10,589		$	9,120
Combined interest expense		17,636			17,715			15,374			14,496			13,916
Amortization of deferred financing costs		609			559			732			641			471
Income tax (expense) benefit , gross		206			215			(265		)	294			213
Depreciation of furniture, fixtures and equipment		259			270			195			178			171
Combined real estate related depreciation and other amortization		18,490			19,068			15,410			17,848			15,087
Minority interest - preferred units		165			165			165			165			165
Minority interest - other consolidated entities		(25		)	(33		)	(27		)	(19		)	(15		)
Minority interest - common units, gross		1,157			1,406			1,520			1,726			1,335
Earnings Before Interest, Income Taxes, Depreciation and Amortization (EBITDA)		$	47,613		$	49,302		$	43,386		$	45,918		$	40,463
Addback:
General and administrative		3,706			3,963			3,773			3,318			3,166
(Income) from service operations		(679		)	(605		)	(294		)	(458		)	(286		)
Loss/(gain) on sales of depreciated real estate properties		6			(2,459		)	(14		)	(4,360		)	(24		)
Merchant sales and real estate services		—			(111		)	(2		)	(80		)	(186		)
Equity in loss of unconsolidated entities		31			23			88			—			—
Combined Net Operating Income (NOI)		$	50,677		$	50,113		$	46,937		$	44,338		$	43,133
Discontinued Operations:
Revenues from real estate operations		$	467		$	953		$	1,381		$	1,986		$	2,029
Property operating expenses		(156		)	(364		)	(512		)	(832		)	(769		)
Depreciation and amortization		(146		)	(168		)	(368		)	(376		)	(545		)
Interest		(101		)	(233		)	(349		)	(470		)	(525		)
(Loss)/gain on sales of real estate		(32		)	2,435			(11		)	4,335			—
Income from discontinued operations		32			2,623			141			4,643			190
Minority interests in discontinued operations		(6		)	(480		)	(27		)	(921		)	(38		)
Income from discontinued operations, net of minority interests		$	26		$	2,143		$	114		$	3,722		$	152
Gain on sales of real estate, net, per statement of operations		$	25		$	110		$	21		$	59		$	169
Add income taxes and minority interest		—			25			6			46			41
(Loss)/gain on sales of real estate from discontinued operations		(32		)	2,435			(11		)	4,335			—
Combined (loss)/gain on sales of real estate		(7		)	2,570			16			4,440			210
Merchant sales and real estate services		1			(111		)	(2		)	(80		)	(186		)
(Loss)/gain on sales of depreciated real estate properties		$	(6	)	$	2,459		$	14		$	4,360		$	24

 

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Quarterly Equity Analysis
(Amounts in thousands except per share data, share prices and ratios)

		2006						2005
		June 30			March 31			December 31			September 30			June 30
Common Equity - End of Quarter
Common Shares		42,374			40,244			39,927			39,558			37,191
Common Units		8,595			8,480			8,523			8,765			8,675
Total		50,969			48,724			48,450			48,323			45,866
End of Quarter Common Share Price		$	42.08		$	45.74		$	35.54		$	34.95		$	29.45
Market Value of Common Shares/Units		$	2,144,776		$	2,228,636		$	1,721,913		$	1,688,889		$	1,350,754
Common Shares Trading Volume
Average Daily Volume (Shares)		284			189			172			164			145
Average Daily Volume (Dollars in thousands)		$	11,606.66		$	7,838.86		$	6,026.90		$	5,391.59		$	4,031.40
As a Percentage of Weighted Average Common Shares		0.7		%	0.5		%	0.4		%	0.4		%	0.4		%
Common Share Price Range
Quarterly High		$	45.74		$	46.12		$	37.15		$	35.68		$	29.78
Quarterly Low		$	37.32		$	34.91		$	32.50		$	29.27		$	25.39
Quarterly Average		$	40.83		$	41.41		$	35.13		$	32.98		$	27.71
Convertible Preferred Equity - End of Quarter
Convertible Series I Preferred Units Outstanding		352			352			352			352			352
Conversion Ratio		0.5000			0.5000			0.5000			0.5000			0.5000
Common Shares Issued Assuming Conversion		176			176			176			176			176
Nonconvertible Preferred Equity - End of Quarter
Redeemable Series E Shares Outstanding (1)		1,150			1,150			1,150			1,150			1,150
Redeemable Series F Shares Outstanding		1,425			1,425			1,425			1,425			1,425
Redeemable Series G Shares Outstanding		2,200			2,200			2,200			2,200			2,200
Redeemable Series H Shares Outstanding		2,000			2,000			2,000			2,000			2,000
Total Nonconvertible Preferred Equity		6,775			6,775			6,775			6,775			6,775
Total Convertible Preferred Equity		352			352			352			352			352
Total Preferred Equity		7,127			7,127			7,127			7,127			7,127
Preferred Share Recorded Book Value		$	25.00		$	25.00		$	25.00		$	25.00		$	25.00
Recorded Book Value of Preferred Equity		$	178,175		$	178,175		$	178,175		$	178,175		$	178,175
Weighted Average Shares:
Common Shares Outstanding		41,510			39,668			39,297			36,913			36,692
Restricted shares		152			184			224			—			—
Dilutive options		1,550			1,658			1,678			1,667			1,528
Common Units		8,465			8,520			8,688			8,758			8,676
Denominator for funds from operations per share - diluted		51,677			50,030			49,887			47,338			46,896
Capitalization
Recorded Book Value of Preferred Shares		$	178,175		$	178,175		$	178,175		$	178,175		$	178,175
Market Value of Common Shares/Units		2,144,776			2,228,636			1,721,913			1,688,889			1,350,754
Total Equity Market Capitalization		$	2,322,951		$	2,406,811		$	1,900,088		$	1,867,064		$	1,528,929
Total Debt		$	1,433,718		$	1,360,638		$	1,348,351		$	1,124,299		$	1,177,779
Total Market Capitalization		$	3,756,669		$	3,767,449		$	3,248,439		$	2,991,363		$	2,706,708
Debt to Total Market Capitalization		38.2		%	36.1		%	41.5		%	37.6		%	43.5		%
Debt to Total Assets		62.1		%	63.5		%	63.3		%	59.1		%	62.3		%
Debt to Undepreciated Book Value of Real Estate Assets		60.7		%	62.7		%	62.6		%	58.3		%	61.3		%

(1)             We redeemed all of the outstanding Series E Preferred Shares on July 15, 2006 for $28,750,000 or $25.00 per share par value.

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Quarterly Debt Analysis
(Dollars in thousands)

		2006						2005
		June 30			March 31			December 31			September 30			June 30
Debt Outstanding
Mortgage Loans		$	1,030,648		$	997,410		$	1,005,113		$	787,684		$	769,408
Construction Loans		100,070			84,228			70,238			97,615			72,371
Unsecured Revolving Credit Facility		303,000			279,000			273,000			239,000			336,000
		$	1,433,718		$	1,360,638		$	1,348,351		$	1,124,299		$	1,177,779
Average Outstanding Balance
Mortgage Loans		$	994,927		$	998,726		$	862,700		$	777,209		$	829,493
Construction Loans		86,257			76,799			96,793			83,608			58,167
Unsecured Revolving Credit Facility		247,678			284,171			239,537			352,022			271,201
		$	1,328,862		$	1,359,696		$	1,199,030		$	1,212,839		$	1,158,861
Interest Rate Structure
Fixed		$	947,848		$	914,610		$	922,313		$	710,484		$	724,369
Variable		385,870			396,028			426,038			340,415			380,010
Variable Subject to Interest Rate Protection (1) (2) (3)		100,000			50,000			—			73,400			73,400
		$	1,433,718		$	1,360,638		$	1,348,351		$	1,124,299		$	1,177,779
% of Fixed Rate Loans (4)		73.09		%	70.89		%	68.40		%	69.72		%	67.74		%
% of Variable Rate Loans (3)		26.91		%	29.11		%	31.60		%	30.28		%	32.26		%
		100.00		%	100.00		%	100.00		%	100.00		%	100.00		%
Average Contract Interest Rates
Mortgage & Construction Loans		6.30		%	6.24		%	6.26		%	6.23		%	6.17		%
Unsecured Revolving Credit Facility		6.23		%	5.85		%	5.09		%	4.83		%	4.51		%
Total Weighted Average		6.28		%	6.13		%	5.90		%	5.76		%	5.74		%
Coverage Ratios (excluding capitalized interest) — All coverage computations include the effect of discontinued operations
Interest Coverage - Combined NOI		2.87x			2.83x			3.05x			3.06x			3.10x
Interest Coverage - EBITDA		2.70x			2.78x			2.82x			3.17x			2.91x
Debt Service Coverage - Combined NOI		2.33x			1.98x			2.45x			2.43x			2.44x
Debt Service Coverage - EBITDA		2.19x			1.95x			2.26x			2.52x			2.29x
Fixed Charge Coverage - Combined NOI		2.36x			2.33x			2.45x			2.42x			2.43x
Fixed Charge Coverage - EBITDA		2.22x			2.29x			2.26x			2.51x			2.28x

(1)             On April 7, 2005, we entered into a $73.4 million notional amount forward swap at a fixed rate of 5.0244% which commenced in July 2005.  We terminated this forward swap in October 2005 and paid $603,000.

(2)             On March 28, 2006, we entered into a $50.0 million notional amount swap at a fixed one-month LIBOR rate of 5.036%, which commenced March 28, 2006 and expires March 30, 2009.

(3)             On April 27, 2006, we entered into two notional amount swaps aggregating $50.0 million at a fixed one-month LIBOR rate of 5.232%, which commenced May 1, 2006 and expire May 1, 2009.

(4)             Includes interest rate protection agreements.

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Quarterly Operating Ratios
(Dollars in thousands except per share data and ratios)

		2006						2005
		June 30			March 31			December 31			September 30			June 30
OPERATING RATIOS—All computations inclue the effect of discontinued operations
Net Income as a % of Combined Real Estate Revenues
(Net Income / Combined Real Estate Revenues)		12.47		%	13.77		%	15.34		%	16.63		%	14.94		%
Combined NOI as a % of Combined Real Estate Revenues
(Combined NOI / Combined Real Estate Revenues)		69.35		%	69.43		%	70.03		%	69.64		%	70.66		%
EBITDA as a % of Combined Real Estate Revenues
(EBITDA / Combined Real Estate Revenues)		65.15		%	68.30		%	64.73		%	72.12		%	66.29		%
G&A as a % of Net Income
(G&A / Net Income)		40.65		%	39.88		%	36.70		%	31.33		%	34.71		%
G&A as a % of Combined Real Estate Revenues
(G&A / Combined Real Estate Revenues)		5.07		%	5.49		%	5.63		%	5.21		%	5.19		%
G&A as a % of EBITDA
(G&A / EBITDA)		7.78		%	8.04		%	8.70		%	7.23		%	7.82		%
Recurring Capital Expenditures		$	3,425		$	2,808		$	5,226		$	4,945		$	3,293
Recurring Capital Expenditures per average square foot of wholly owned properties		$	0.24		$	0.21		$	0.41		$	0.41		$	0.27
Recurring Capital Expenditures as a % of NOI (Combined NOI)		6.76		%	5.60		%	11.13		%	11.15		%	7.63		%

 

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