Exhibit 99.1
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6711 Columbia Gateway Drive, Suite
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NEWS RELEASE |
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FOR IMMEDIATE RELEASE |
Contact: |
CORPORATE OFFICE PROPERTIES TRUST
REPORTS SECOND QUARTER 2006 RESULTS
COLUMBIA, MD August 2, 2006 - Corporate Office Properties Trust (NYSE: OFC) announced today financial and operating results for the quarter ended June 30, 2006.
· Earnings per diluted share (“EPS”) of $.13 for the second quarter 2006 compared to $.14 per diluted share for the second quarter 2005.
· 4.3% increase in Funds from Operations (“FFO”) per diluted share to $.49 or $25.2 million for second quarter 2006 compared to $.47 or $21.8 million for second quarter 2005.
· 11.6% increase in Adjusted Funds from Operations (“AFFO”) diluted to $18.9 million for second quarter 2006 as compared to $17.0 million for second quarter 2005.
· FFO payout ratio was 56.4% and AFFO payout ratio was 75.0% for second quarter 2006.
· $160.1 million in acquisitions for 1.0 million square feet plus 216 acres of land.
· 93.6% occupied and 95.0% leased for our wholly owned portfolio as of June 30, 2006.
· 1.3 million square feet under construction for a total projected cost of $263.0 million, 977,000 square feet under development for a total projected cost of $196.8 million and 727,000 square feet under redevelopment for a total projected cost of $84.5 million.
“We are pleased to report that during the quarter we continued to add to both our development and construction pipeline, adding 193,000 square feet that is under construction and 220,000 square feet that is under development,” stated Randall M. Griffin, President and Chief Executive Officer. “The Company leased 358,000 square feet of development during the quarter, a portion of which was at Washington Technology Park II, bringing its 1.5 million square foot portfolio in the Westfields Corporate Center to 100.0% leased. The Company also made strategic land acquisitions during the quarter which added approximately 1.8 million square feet of development to its pipeline,” he added.
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Financial Results
EPS for the quarter ended June 30, 2006 totaled $.13 per diluted share, or $5.5 million of net income available to common shareholders, as compared to $.14 per diluted share, or $5.5 million for the quarter ended June 30, 2005. Revenues from real estate operations for the quarter ended June 30, 2006 were $72.6 million, as compared to revenue for the quarter ended June 30, 2005 of $59.0 million.
Diluted FFO per share for the quarter ended June 30, 2006 increased 4.3% to $25.2 million, or $.49 per diluted share, as compared to $21.8 million, or $.47 per diluted share, for the quarter ended June 30, 2005.
FFO Payout ratio was 56.4% for second quarter 2006 compared to 53.1% for the comparable 2005 period.
Adjusted funds from operations (“AFFO”) diluted increased 11.6% to $18.9 million for second quarter 2006 as compared to $17.0 million for second quarter 2005. The Company’s AFFO payout ratio was 75.0% for second quarter 2006 compared to 68.2% for second quarter 2005.
As of June 30, 2006, the Company had a total market capitalization of $3.8 billion, with $1.4 billion in debt outstanding, equating to a 38.2% debt-to-total market capitalization ratio. Debt to undepreciated book value of real estate assets was 60.7% at quarter end. The Company’s total quarterly weighted average interest rate was 6.3% and 73.1% of total debt is subject to fixed interest rates. For the second quarter 2006, EBITDA Interest coverage ratio was 2.70x and EBITDA Fixed Charge coverage was 2.22x.
Operating Results
At June 30, 2006, the Company’s wholly owned portfolio of 170 office properties totaling 14.8 million square feet was 93.6% occupied and 95.0% leased.
The weighted average remaining lease term for the portfolio was 5.0 years and the average rental rate (including tenant reimbursements of operating costs) was $20.44 per square foot.
During the quarter, 239,000 square feet was renewed, equating to a 62.5% renewal rate, at an average committed capital cost of $2.16 per square foot.
For renewed and retenanted space of 427,000 square feet, total straight-line rent increased 12.6%, and total cash rent increased 5.3%. The average committed capital cost for renewed and retenanted space was $14.06 per square foot.
Same property cash NOI increased by 1.1% or $428,000 for the quarter compared to the quarter ended June 30, 2005. The primary drivers of the increase in cash NOI for the same office portfolio were higher rental revenues in the Northern/Central New Jersey region and improved occupancy and higher rental rates in the Baltimore/Washington Corridor. This increase was partially offset by a drop of $1.1 million in lease termination fees in the St. Mary’s and King George Counties region as compared to the second quarter of 2005 and by 97,000 square feet of vacancy in Pinnacle Towers, Tyson’s Corner, Virginia. The Company’s same office portfolio consists of 120 properties and represents 72.1% of our wholly owned portfolio as of June 30, 2006.
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The Company signed leases for 358,000 square feet of space in development properties during the quarter. Included in this total is a 193,000 square foot to be built property for Northrop Grumman Commonwealth Enterprise Solutions Center to house both the Virginia Information Technologies Agency (VITA) and Northrop Grumman operations and 146,000 square feet with Northrop Grumman at the Washington Technology Park II (WTP II) in the Westfields Corporate Center in Chantilly, Virginia. This lease brings WTP II to 100.0% leased.
Development Activity
At quarter end June 30, the Company’s development pipeline consisted of:
· Eleven buildings under construction totaling 1.3 million square feet for a total projected cost of $263.0 million, that are 64.3% leased.
· Eight buildings under development totaling 977,000 square feet for a total projected cost of $196.8 million.
· Four projects under redevelopment totaling 727,000 square feet for a total projected cost of $84.5 million.
The Company’s land inventory (wholly owned and joint venture) at quarter end totaled 787 acres that can support 9.8 million square feet of development.
During the quarter the Company placed 93,000 square feet of the 157,000 square feet at 306 Sentinel Drive (known as 306 NBP) into service. This building is 59.3% leased.
Acquisition Activity
During the quarter, the Company acquired the following:
· Three Class A office buildings containing a total of 325,000 square feet for $43.6 million. The office buildings are located in the north Interstate 25 submarket of Colorado Springs, south of the Company’s existing properties in the InterQuest Office Park. The office buildings are 89.2% leased.
· Two buildings containing a total of 76,000 square feet for $8.5 million. The office buildings are located at 1915 and 1925 Aerotech Drive in Colorado Springs, Colorado in close proximity to the Company’s Newport Centre property. The office buildings are 96.3% leased.
· A 611,000 square foot office building known as the Renaissance at Columbia Gateway for $78.0 million that is located in the Columbia Gateway Business Park in Columbia, Maryland. The building is 97.2% leased. The building is on a 37 acre parcel of land that can support future development of approximately 120,000 square feet.
· A 178 acre parcel of land, known as Clarks Hundred, for $26.6 million. This parcel of land can support 1.25 million square feet of development and represents an expansion of one of COPT’s core business parks, The National Business Park (NBP) in Annapolis Junction, Maryland.
· A 20 acre parcel of land for $1.1 million located in Colorado Springs, Colorado that can support approximately 300,000 square feet of development. The parcel of land is adjacent to the Company’s 64 acre Patriot Park Business Park.
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· A 13 acre parcel of land for $2.2 million located in the Aerotech Commerce Park in Colorado Springs, Colorado that can support approximately 120,000 square feet of development. The parcel of land is located along Powers Boulevard between the Company’s Newport Centre property and Patriot Park in the East submarket. It is also in close proximity to Peterson Air Force Base.
Financing and Capital Transactions
The Company completed the following transactions during the quarter:
· Issued 2,000,000 common shares, generating proceeds of $82.6 million before offering expenses. The Company used the net proceeds of the sale to repay borrowings under the unsecured revolving credit facility and subsequently to fund the redemption of all of its outstanding 10.25% Series E Cumulative Redeemable Preferred Shares.
· Executed swaps for an aggregate notional amount of $50.0 million at a fixed one month LIBOR rate of 5.232%, which commenced May 1, 2006 and expire May 1, 2009.
· Closed a $48.0 million construction loan facility maturing in June 2008 that will be used to fund construction costs of two buildings located at NBP.
Subsequent Events
Since June 30, 2006, the Company has:
· Increased the Company’s unsecured line of credit from $400.0 million to $500.0 million.
· Redeemed the 10.25% Series E Cumulative Redeemable Preferred Shares (NYSE: OFCPrE).
· Issued 3,390,000 shares of 7.625% Series J Cumulative Redeemable Preferred Shares (NYSE: OFCPrJ) at a price of $25.00 per share. Proceeds from the offering were used to repay a portion of indebtedness under the Company’s unsecured revolving credit facility.
· Sold two office buildings totaling 259,000 square feet within its New Jersey portfolio for $42.8 million. This sale consists of 695 Route 46, a joint venture property in which COPT owned a 20% interest and 710 Route 46, a wholly owned property.
Earnings Guidance
The Company’s 2006 EPS guidance of $.61 – $.67 per diluted share remains unchanged. The Company is updating its 2006 FFO guidance to a range of $1.99 – $2.05 per diluted share from $1.98 - $2.05 per diluted share. Both FFO and EPS guidance exclude the estimated $.08 charge to diluted FFO per share and $.09 charge to diluted EPS that the Company will incur for the Series E and Series F preferred share redemptions.
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Conference Call
The Company will hold an investor/analyst conference call:
Conference Call and Webcast Date: Thursday, August 3, 2006
Time: 4:00 p.m. EDT
Dial In Number: 800-946-0705
Confirmation Code for the call: 8400712
A replay of this call will be available beginning Thursday, August 3, 2006 at 9:00 p.m. EDT through Thursday, August 17, 2006 at midnight EDT. To access the replay, please call 888-203-1112 and use confirmation code 8400712.
The conference call will also be available via live webcast in the Investor Relations section of the Company’s website at www.copt.com. A replay of the conference call will be immediately available via webcast in the Investor Relations section of the Company’s website.
Definitions
Please refer to our Form 8-K or our website (www.copt.com) for definitions of certain terms used in this press release. Reconciliations of GAAP and non-GAAP measurements are included in the attached tables.
Company Information
Corporate Office Properties Trust (COPT) is a fully integrated, self-managed real estate investment trust (REIT) that focuses on the ownership, management, leasing, acquisition and development of suburban office properties located primarily in submarkets within the Greater Washington, DC region. As of June 30, 2006, the Company owned 189 office properties totaling 15.8 million rentable square feet, which includes 19 properties totaling 963,000 square feet held through joint ventures. The Company has implemented a core customer expansion strategy that is built around meeting, through acquisitions and development, the multi-location requirements of the Company’s existing strategic tenants. The Company’s property management services team provides comprehensive property and asset management to company owned properties and select third party clients. The Company’s development and construction services team provides a wide range of development and construction management services for company owned properties, as well as land planning, design/build services, consulting, and merchant development to select third party clients. 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;
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· 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;
· 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.
The Company undertakes no obligation to update or supplement any forward-looking statements. For further information, please refer to the Company’s filings with the Securities and Exchange Commission, particularly the section entitled “Risk Factors” in Item 1 of the Company’s Annual Report on Form 10-K for the year ended December 31, 2005.
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