Exhibit 99.1

Supplemental Information
(Unaudited)

September 30, 2006

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Corporate Office Properties Trust
Index to Supplemental Information (Unaudited)
September 30, 2006

		Page
Highlights and Discussion
Reporting Period Highlights – Third Quarter 2006		1
Forward-Looking Statements		3
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 Gains 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 – September 30, 2006		15
Portfolio Summary
Property Summary by Region – September 30, 2006 – Wholly Owned Properties		16
Property Summary by Region – September 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 September 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 September 30, 2006		29
Year to Date Wholly Owned Acquisition Summary as of September 30, 2006		30
Year to Date Wholly Owned Disposition Summary as of September 30, 2006		31
Development Summary as of September 30, 2006		32
Year to Date Development Placed into Service as of September 30, 2006		34
Land Inventory as of September 30, 2006		35
Joint Venture Summary as of September 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 and Treasurer 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 – Third Quarter 2006

Financial Results

·      Reported Net Income Available to Common Shareholders of $14,451,000, or $.33 per diluted share, for the third quarter of 2006 as compared to $6,936,000, or $.18 per diluted share, for the comparable 2005 period.  Included in third quarter 2006 net income is $12.7 million of gain on sale of real estate, net of minority interests.  Also included is an accounting charge of $1.8 million, or $.04 per share, for the write-off of initial offering costs related to the Series E preferred share redemption.

·      Reported FFO – diluted of $24,329,000, or $.46 per share/unit, for the third quarter of 2006 as compared to $22,127,000, or $.47 per share/unit, for the comparable 2005 period, representing a decrease of 2.1% per share/unit.  Included in our FFO - diluted is a $1.8 million accounting charge associated with the Series E preferred share redemption.  Without this accounting charge, our FFO – diluted, as adjusted, would have been $.50 per share, representing an increase of 6.4%.

·      Reported AFFO – diluted of $19,173,000 for the third quarter of 2006 as compared to $15,892,000 for the comparable 2005 period, representing an increase of 20.6%. 

·      Our FFO payout ratio was 65.4% for the third quarter of 2006 as compared to 60.6% for the comparable 2005 period.  Our AFFO payout ratio was 83.0% for the third quarter of 2006 as compared to 84.4% for the comparable 2005 period. 

Financing Activity and Capital Transactions

·      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 $25.00 per share, or $28,750,000, and recognized a $1.8 million accounting charge to net income available to common shareholders related to original issuance costs. The accounting charge reduced our earnings per share for the quarter ended September 30, 2006 by ($.04) and our FFO-diluted for the same period by ($.04) per share.

·      On July 20, 2006, we issued 3,390,000 Series J Cumulative Redeemable Preferred Shares with a $25.00 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.

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·      On September 18, 2006, we issued $200,000,000 of 3.5% fixed rate, exchangeable senior notes which mature in September 2026.  The notes are senior unsecured obligations of our operating partnership (COPLP), which are fully guaranteed on a senior unsecured basis by COPT.  The notes may be exchanged at any time on or after September 20, 2011, and prior to that, only upon the occurrence of specific events.  We used the net proceeds to repay $134.0 million of borrowings outstanding under our $500.0 million unsecured revolving credit facility, $52.5 million of variable rate debt and retained $9.4 million for general corporate purposes.   In October, we borrowed under our unsecured revolving credit facility and repaid an additional $56.6 million of variable rate debt.

·      In September 2006, we increased our quarterly dividend by 10.7% to $.31 per share from $.28 per share.

·      During the third quarter we recognized a write-off of $217,000 in unamortized loan fees from early extinguishment of debt.

·      As of September 30, 2006, our ratio of debt to market capitalization was 35.7%, and our ratio of debt to undepreciated book value of real estate assets was 59.8%.  We achieved an EBITDA interest coverage ratio of 3.60x and an EBITDA fixed charge coverage ratio of 2.89x for this quarter.

Dispositions

·      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.

·      On August 9, 2006, we sold an office building containing 107,348 square feet in Hunt Valley, Maryland for $13.8 million.  We expect to use the proceeds from this sale for a future IRC section 1031 like-kind exchange.

·      On September 28, 2006, we sold an office building containing 104,203 square feet in Baltimore City, Maryland for $20.3 million.  We expect to use the proceeds from this sale for a future IRC section 1031 like-kind exchange.

·      We recognized aggregate gains of $12.7 million, net of minority interests, from the sale of the above properties, including $7.1 million of gain, net of minority interests, related to the sale of the Baltimore City, Maryland property.

Development

·      During the third quarter, we placed into service the 50,000 square foot development property located at 745 Space Center Drive (known as Patriot Park View).  This building is 100% leased to a large, creditworthy tenant.

Operations

·      Our wholly owned portfolio was 93.98% occupied and 95.26% leased, as of September 30, 2006.  Our entire portfolio was 93.73% occupied and 94.95% leased, as of September 30, 2006.

·      Our same office property cash NOI for the quarter ended September 30, 2006 increased by 0.6%, or $231,000, as compared to the quarter ended September 30, 2005.  Our same office portfolio consists of 120 properties and represents 73.7% of our wholly owned portfolio, as of September 30, 2006.

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·      Weighted average lease term of our wholly owned portfolio is 4.9 years, as of September 30, 2006, with an average contractual rental rate (including tenant reimbursements of operating costs) of $20.74 per square foot.

·      We renewed 239,266 square feet, or 60.73%, of our expiring office leases (based upon square footage) with an average committed cost of $3.53 per square foot during the third quarter.  For our renewed space only, we realized an increase in total rent of 18.19%, as measured from the GAAP straight-line rent in effect preceding the renewal date, and an increase of 10.18% in total cash rent.  For our renewed and retenanted space of approximately 553,376 square feet, we realized an increase in total rent of 2.90%, as measured from the GAAP straight-line rent in effect preceding the renewal date.  We incurred an average committed cost of $18.17 per square foot for our renewed and retenanted space in the third quarter.

·      We recognized $1.3 million in lease termination fees, net of write-offs of related straight-line rents and accretion of intangible assets and liabilities (i.e., SFAS 141 revenues) in the quarter ended September 30, 2006, as compared to $1.0 million in the quarter ended September 30, 2005.

·      On August 23, 2006, we executed a long-term lease for 81,186 square feet with KSI Services, Inc. at 1751 Pinnacle Drive in the Tysons Corner submarket bringing our Pinnacle Towers project to 96.90% leased.

Subsequent Events

·      On October 5, 2006, we acquired approximately 500 acres of the 591-acre former Fort Ritchie United States Army base located in Cascade, Washington County, Maryland, for $5.0 million.  This price was reduced proportionately for deferral of 91 acres.  This site has an existing portfolio of useable buildings totaling approximately 400,000 square feet and an approved plan for 1.7 million square feet of office space and 673 residential units.

·      On October 15, 2006, we redeemed all of our 1,425,000 outstanding 9.875% Series F Cumulative Redeemable Preferred Shares at a price of $25.00 per share, or $35,625,000, and recognized a $2.1 million accounting charge to net income available to common shareholders related to original issuance costs.  We anticipate that the accounting charge will reduce our earnings per share for the year ending December 31, 2006 by ($.05) and our funds from operations-diluted for that period by ($.04) per share.

·      During the fourth quarter, we placed into service the 125,568 square foot development property at 322 Sentinel Drive (known as 322 NBP).

·      During the fourth quarter, we placed into service the 223,610 square foot development property at 15010 Conference Center Drive (known as WTP II).

·      In October 2006, we executed a long-term lease for the entire 59,763 square foot office building to be built in Aerotech Commerce Park in Colorado Springs, Colorado.

 

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.

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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
		September 30			June 30			March 31			December 31			September 30
Revenues from Real Estate Operations		$	78,136		$	71,549		$	70,167		$	64,948		$	61,008
Total Revenues		92,927			85,689			86,476			78,837			90,792
Combined Net Operating Income		53,331			50,680			50,112			46,938			44,339
EBITDA		65,379			47,614			49,301			43,386			45,919
Net Income		20,587			9,116			9,937			10,282			10,589
Preferred Share dividends		(4,307		)	(3,653		)	(3,654		)	(3,654		)	(3,653		)
Issuance costs associated with redeemed preferred shares		(1,829		)	—			—			—			—
Net Income Available to Common Shareholders		$	14,451		$	5,463		$	6,283		$	6,628		$	6,936
Earnings per diluted share		$	0.33		$	0.13		$	0.15		$	0.16		$	0.18
Earnings per diluted share, as adjusted for issuance costs associated with redeemed preferred shares		$	0.37		$	0.13		$	0.15		$	0.16		$	0.18
Funds From Operations (FFO) - Diluted		$	24,329		$	25,181		$	24,350		$	23,804		$	22,127
FFO per diluted share		$	0.46		$	0.49		$	0.49		$	0.48		$	0.47
FFO per diluted share, as adjusted for issuance costs associated with redeemed preferred shares		$	0.50		$	0.49		$	0.49		$	0.48		$	0.47
Adjusted FFO - Diluted		$	19,173		$	18,946		$	18,865		$	15,892		$	15,892
Payout Ratios:
Earnings Payout		91.8		%	217.0		%	179.2		%	167.0		%	158.1		%
FFO - Diluted		65.4		%	56.4		%	56.0		%	57.0		%	60.6		%
AFFO - Diluted		83.0		%	75.0		%	72.3		%	85.3		%	84.4		%
Total Dividends/Distributions		$	20,380		$	18,028		$	17,453		$	17,274		$	17,236

 

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
		September 30			June 30			March 31			December 31			September 30
Assets
Investment in real estate:
Land - operational		$	334,430		$	337,866		$	314,550		$	314,720		$	268,583
Land - development		155,232			158,096			126,738			117,434			127,085
Construction in progress		160,128			152,099			140,607			138,183			147,184
Buildings and improvements		1,611,425			1,613,341			1,501,426			1,491,253			1,315,611
Investment in and advances to unconsolidated real estate joint ventures		—			1,509			1,439			1,451			1,447
Less: accumulated depreciation		(205,529		)	(197,395		)	(183,920		)	(174,935		)	(163,381		)
Net investment in real estate		2,055,686			2,065,516			1,900,840			1,888,106			1,696,529
Cash and cash equivalents		10,810			5,748			20,169			10,784			17,348
Restricted cash		51,784			21,073			23,793			21,476			15,083
Accounts receivable, net		26,778			15,446			16,729			15,606			12,298
Investment in and advances to other unconsolidated entities		1,621			1,621			1,621			1,621			1,621
Deferred rent receivable		39,033			36,638			34,247			32,579			30,222
Deferred charges, net		40,091			34,802			33,731			35,046			31,420
Intangible assets on real estate acquisitions, net		92,061			100,132			85,699			90,984			67,686
Prepaid and other assets		27,684			21,422			21,722			29,255			25,465
Fair value of derivatives		—			833			110			—			—
Furniture, fixtures and equipment, net		10,374			5,887			4,214			4,302			4,024
Total assets		$	2,355,922		$	2,309,118		$	2,142,875		$	2,129,759		$	1,901,696
Liabilities and shareholders’ equity
Liabilities:
Mortgage and other loans payable		$	1,206,682		$	1,433,718		$	1,360,638		$	1,348,351		$	1,124,299
3.5% Exchangeable senior notes		200,000			—			—			—			—
Accounts payable and accrued expenses		55,487			46,040			42,792			41,693			38,795
Rents received in advance and security deposits		20,842			18,124			16,394			14,774			14,191
Deferred revenue associated with acquired operating leases		12,074			13,906			11,721			12,707			8,045
Distributions in excess of investment in unconsolidated real estate joint venture		3,103			3,067			3,010			3,081			2,519
Dividends and distributions payable		19,810			17,450			16,878			16,703			16,665
Fair value of derivatives		473			—			—			—			1,516
Other liabilities		5,526			5,135			5,314			4,727			4,619
Total liabilities		1,523,997			1,537,440			1,456,747			1,442,036			1,210,649
Minority interests:
Preferred units in the Operating Partnership		8,800			8,800			8,800			8,800			8,800
Common units in the Operating Partnership		107,212			105,452			92,903			95,014			98,433
Other consolidated real estate joint ventures		1,760			1,778			1,190			1,396			1,297
Total minority interests		117,772			116,030			102,893			105,210			108,530
Commitments and contingencies		—			—			—			—			—
Shareholders’ equity:
Preferred Shares ($0.01 par value; 15,000,000 authorized)		90			67			67			67			67
Common Shares of beneficial interest ($0.01 par value; 75,000,000 authorized, 42,810,978 shares issued as of September 30, 2006)		425			421			400			399			396
Additional paid-in capital		790,525			733,996			655,818			657,339			654,024
Cumulative distributions in excess of net income		(76,046		)	(79,062		)	(72,670		)	(67,697		)	(63,256		)
Value of unearned restricted common share grants		—			—			—			(7,113		)	(7,318		)
Accumulated other comprehensive (loss)/gain		(841		)	226			(380		)	(482		)	(1,396		)
Total shareholders’ equity		714,153			655,648			583,235			582,513			582,517
Total shareholders’ equity and minority interests		831,925			771,678			686,128			687,723			691,047
Total liabilities and shareholders’ equity		$	2,355,922		$	2,309,118		$	2,142,875		$	2,129,759		$	1,901,696

 

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Quarterly Consolidated Statements of Operations

(Dollars and units in thousands)

		2006									2005
		September 30			June 30			March 31			December 31			September 30
Revenues
Rental revenue		$	66,550		$	62,344		$	61,272		$	56,203		$	53,182
Tenant recoveries and other real estate operations revenue		11,586			9,205			8,895			8,745			7,826
Construction contract revenues		13,219			12,156			14,544			12,708			28,476
Other service operations revenues		1,572			1,984			1,765			1,181			1,308
Total Revenues		92,927			85,689			86,476			78,837			90,792
Expenses
Property operating		25,430			21,914			21,354			19,313			18,272
Depreciation and amortization associated with real estate operations		21,680			18,189			18,762			15,106			17,522
Construction contract expenses		12,465			11,643			14,026			12,341			28,073
Other service operations expenses		1,495			1,818			1,678			1,254			1,253
General and administrative expenses		4,226			3,706			3,963			3,774			3,318
Total Operating Expenses		65,296			57,270			59,783			51,788			68,438
Operating Income		27,631			28,419			26,693			27,049			22,354
Interest expense		(17,974		)	(17,298		)	(17,221		)	(14,912		)	(13,894		)
Amortization of deferred financing costs		(736		)	(606		)	(557		)	(729		)	(639		)
Income from continuing operations before equity in income (loss) of  unconsolidated entities, income taxes and minority interests		8,921			10,515			8,915			11,408			7,821
Equity in income (loss) of unconsolidated entities		15			(32		)	(23		)	(88		)	—
Income tax (expense) benefit		(202		)	(206		)	(215		)	265			(263		)
Income from continuing operations before minority interests		8,734			10,277			8,677			11,585			7,558
Minority interest in income from continuing operations
Common units in the Operating Partnership		(808		)	(1,138		)	(893		)	(1,454		)	(752		)
Preferred units in the Operating Partnership		(165		)	(165		)	(165		)	(165		)	(165		)
Other consolidated entities		38			25			33			27			19
Income from continuing operations		7,799			8,999			7,652			9,993			6,660
Income from discontinued operations, net of minority interests		12,191			92			2,175			268			3,870
Income before gain on sales of real estate		19,990			9,091			9,827			10,261			10,530
Gain on sales of real estate, net of minority interests		597			25			110			21			59
Net Income		20,587			9,116			9,937			10,282			10,589
Preferred share dividends		(4,307		)	(3,653		)	(3,654		)	(3,654		)	(3,653		)
Issuance costs associated with redeemed preferred shares		(1,829		)	—			—			—			—
Net Income Available to Common Shareholders		$	14,451		$	5,463		$	6,283		$	6,628		$	6,936
For EPS Computations:
Numerator for Dilutive EPS		$	14,451		$	5,463		$	6,283		$	6,628		$	6,936
Denominator:
Weighted Average Common Shares - Basic		42,197			41,510			39,668			39,297			36,913
Dilutive effect of share-based compensation awards		1,649			1,721			1,842			1,678			1,667
Weighted Average Common Shares - Diluted		43,846			43,231			41,510			40,975			38,580
Earnings per diluted share		$	0.33		$	0.13		$	0.15		$	0.16		$	0.18

 

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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
		September 30			June 30			March 31			December 31			September 30
Net Income		$	20,587		$	9,116		$	9,937		$	10,282		$	10,589
Issuance costs associated with redeemed preferred shares		(1,829		)	—			—			—			—
Combined real estate related depreciation and other amortization		21,305			18,490			19,068			15,410			17,848
Depreciation and amortization of unconsolidated real estate entities		362			109			94			182			—
Depreciation and amortization allocable to minority interests in other consol. entities		(36		)	(44		)	(42		)	(29		)	(23		)
(Gain)/loss on sales of real estate properties, excluding development		(15,262		)	6			(2,459		)	(14		)	(4,360		)
Funds From Operations (FFO)		25,127			27,677			26,598			25,831			24,054
Minority interest - common units, gross		3,509			1,157			1,406			1,520			1,726
Preferred share dividends		(4,307		)	(3,653		)	(3,654		)	(3,654		)	(3,653		)
Funds From Operations (FFO) - Basic		24,329			25,181			24,350			23,697			22,127
Restricted share dividends		—			—			—			107			—
Funds From Operations (FFO) -Diluted		$	24,329		$	25,181		$	24,350		$	23,804		$	22,127
Straight line rent adjustments		(2,819		)	(2,315		)	(2,122		)	(2,292		)	(1,519		)
Amortization of deferred market rental revenue		(276		)	(495		)	(555		)	(394		)	229
Issuance costs associated with redeemed preferred shares		1,829			—			—			—			—
Recurring capital expenditures		(3,890		)	(3,425		)	(2,808		)	(5,226		)	(4,945		)
Adjusted Funds From Operations - Diluted		$	19,173		$	18,946		$	18,865		$	15,892		$	15,892
Preferred dividends - redeemable non-convertible		4,307			3,653			3,654			3,654			3,653
Preferred distributions		165			165			165			165			165
Common distributions		2,643			2,357			2,374			2,386			2,452
Common dividends		13,265			11,853			11,260			11,069			10,966
Total Dividends/Distributions		$	20,380		$	18,028		$	17,453		$	17,274		$	17,236
Denominator for earnings per share - Diluted		43,846			43,231			41,510			40,975			38,580
Restricted shares		—			—			—			224			—
Common units		8,562			8,465			8,520			8,688			8,758
Denominator for funds from operations per share - Diluted		52,408			51,696			50,030			49,887			47,338
Funds From Operations (FFO) - Diluted		$	24,329		$	25,181		$	24,350		$	23,804		$	22,127
Issuance costs associated with redeemed Series E Preferred Shares		1,829			n/a			n/a			n/a			n/a
FFO - Diluted, as adjusted for issuance costs associated with redeemed preferred shares		$	26,158		$	25,181		$	24,350		$	23,804		$	22,127
Numerator for Dilutive EPS Computation		$	14,451		$	5,463		$	6,283		$	6,628		$	6,936
Issuance costs associated with redeemed Series E Preferred Shares		1,829			n/a			n/a			n/a			n/a
Numerator for Dilutive EPS Computation, as adjusted		$	16,280		$	5,463		$	6,283		$	6,628		$	6,936
Earnings per diluted share, as adjusted for issuance costs associated with redeemed preferred shares		$	0.37		$	0.13		$	0.15		$	0.16		$	0.18

 

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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 Gains on Sales of Real Estate

(Dollars in thousands)

		2006									2005
		September 30			June 30			March 31			December 31			September 30
Net Income		$	20,587		$	9,116		$	9,937		$	10,282		$	10,589
Combined interest expense		18,184			17,636			17,715			15,374			14,496
Amortization of deferred financing costs		864			609			559			732			641
Income tax expense (benefit), gross		202			206			215			(264		)	294
Depreciation of furniture, fixtures and equipment		601			260			269			194			179
Combined real estate related depreciation and other amortization		21,305			18,490			19,068			15,410			17,848
Minority interest - preferred units		165			165			165			165			165
Minority interest - other consolidated entities		(38		)	(25		)	(33		)	(27		)	(19		)
Minority interest - common units, gross		3,509			1,157			1,406			1,520			1,726
Earnings Before Interest, Income Taxes, Depreciation and Amortization (EBITDA)		$	65,379		$	47,614		$	49,301		$	43,386		$	45,919
Addback:
General and administrative		4,226			3,706			3,963			3,774			3,318
(Income) from service operations		(831		)	(679		)	(605		)	(294		)	(458		)
(Gain)/loss on sales of depreciated real estate properties		(15,262		)	6			(2,459		)	(14		)	(4,360		)
Merchant sales and real estate services		(166		)	1			(111		)	(2		)	(80		)
Equity in (income)/loss of unconsolidated entities		(15		)	32			23			88			—
Combined Net Operating Income (NOI)		$	53,331		$	50,680		$	50,112		$	46,938		$	44,339
Discontinued Operations:
Revenues from real estate operations		$	922		$	1,529		$	2,012		$	2,076		$	2,659
Property operating expenses		(297		)	(484		)	(713		)	(773		)	(1,056		)
Depreciation and amortization		(226		)	(561		)	(575		)	(498		)	(505		)
Amortization of deferred financing costs		(128		)	(3		)	(2		)	(3		)	(2		)
Interest		(210		)	(338		)	(494		)	(462		)	(602		)
Gain/(loss) on sales of real estate		14,699			(32		)	2,435			(11		)	4,335
Income from discontinued operations		14,760			111			2,663			329			4,829
Minority interests in discontinued operations		(2,569		)	(19		)	(488		)	(61		)	(959		)
Income from discontinued operations, net of minority interests		$	12,191		$	92		$	2,175		$	268		$	3,870
Gain on sales of real estate, net, per statements of operations		$	597		$	25		$	110		$	21		$	59
Add income taxes and minority interest		132			—			25			6			46
Gain/(loss) on sales of real estate from discontinued operations		14,699			(32		)	2,435			(11		)	4,335
Combined gain/(loss) on sales of real estate		15,248			(7		)	2,570			16			4,440
Merchant sales and real estate services		(166		)	1			(111		)	(2		)	(80		)
Gain/(loss) on sales of depreciated real estate properties		$	15,262		$	(6	)	$	2,459		$	14		$	4,360

 

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Quarterly Equity Analysis

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

		2006									2005
		September 30			June 30			March 31			December 31			September 30
Common Equity - End of Quarter
Common Shares		42,811			42,374			40,244			39,927			39,558
Common Units		8,525			8,595			8,480			8,523			8,765
Total		51,336			50,969			48,724			48,450			48,323
End of Quarter Common Share Price		$	44.76		$	42.08		$	45.74		$	35.54		$	34.95
Market Value of Common Shares/Units		$	2,297,799		$	2,144,776		$	2,228,636		$	1,721,913		$	1,688,889
Common Shares Trading Volume
Average Daily Volume (Shares)		338			284			189			172			164
Average Daily Volume (Dollars in thousands)		$	15,199.34		$	11,606.66		$	7,838.86		$	6,026.90		$	5,391.59
As a Percentage of Weighted Average Common Shares		0.8		%	0.7		%	0.5		%	0.4		%	0.4		%
Common Share Price Range
Quarterly High		$	47.54		$	45.74		$	46.12		$	37.15		$	35.68
Quarterly Low		$	40.65		$	37.32		$	34.91		$	32.50		$	29.27
Quarterly Average		$	44.92		$	40.83		$	41.41		$	35.13		$	32.98
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
Redeemable Series F Shares Outstanding (2)		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
Redeemable Series J Shares Outstanding (3)		3,390			—			—			—			—
Total Nonconvertible Preferred Equity		9,015			6,775			6,775			6,775			6,775
Total Convertible Preferred Equity		352			352			352			352			352
Total Preferred Equity		9,367			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		$	234,175		$	178,175		$	178,175		$	178,175		$	178,175
Weighted Average Shares:
Common Shares Outstanding		42,197			41,510			39,668			39,297			36,913
Dilutive effect of share-based compensation awards		1,649			1,721			1,842			1,902			1,667
Common Units		8,562			8,465			8,520			8,688			8,758
Denominator for funds from operations per share - diluted		52,408			51,696			50,030			49,887			47,338
Capitalization
Recorded Book Value of Preferred Shares		$	234,175		$	178,175		$	178,175		$	178,175		$	178,175
Market Value of Common Shares/Units		2,297,799			2,144,776			2,228,636			1,721,913			1,688,889
Total Equity Market Capitalization		$	2,531,974		$	2,322,951		$	2,406,811		$	1,900,088		$	1,867,064
Total Debt		$	1,406,682		$	1,433,718		$	1,360,638		$	1,348,351		$	1,124,299
Total Market Capitalization		$	3,938,656		$	3,756,669		$	3,767,449		$	3,248,439		$	2,991,363
Debt to Total Market Capitalization		35.7		%	38.2		%	36.1		%	41.5		%	37.6		%
Debt to Total Assets		59.7		%	62.1		%	63.5		%	63.3		%	59.1		%
Debt to Undepreciated Book Value of Real Estate Assets		59.8		%	60.7		%	62.7		%	62.6		%	58.3		%

 

(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.

(2)  We redeemed all of the outstanding Series F Preferred Shares on October 15, 2006 for 35,625,000 or $25.00 per share par value.

(3)  We issued 3,390,000 Series J Cumulative Redeemable Preferred Shares with a $25.00 per share par value on July 20, 2006.

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Quarterly Debt Analysis

(Dollars in thousands)

		2006									2005
		September 30			June 30			March 31			December 31			September 30
Debt Outstanding
Mortgage Loans		$	913,354		$	1,030,648		$	997,410		$	1,005,113		$	787,684
Construction Loans		93,328			100,070			84,228			70,238			97,615
Unsecured Revolving Credit Facility		200,000			303,000			279,000			273,000			239,000
Exchangeable Senior Notes (1)		200,000			—			—			—			—
		$	1,406,682		$	1,433,718		$	1,360,638		$	1,348,351		$	1,124,299
Average Outstanding Balance
Mortgage Loans		$	951,798		$	994,927		$	998,726		$	862,700		$	777,209
Construction Loans		103,538			86,257			76,799			96,793			83,608
Unsecured Revolving Credit Facility		324,236			247,678			284,171			239,537			352,022
Exchangeable Senior Notes (1)		28,261			—			—			—			—
		$	1,407,833		$	1,328,862		$	1,359,696		$	1,199,030		$	1,212,839
Interest Rate Structure
Fixed-Mortgage Loans		$	878,854		$	947,848		$	914,610		$	922,313		$	710,484
Fixed-Exchangeable Senior Notes (1)		200,000			—			—			—			—
Variable		227,828			385,870			396,028			426,038			340,415
Variable Subject to Interest Rate Protection (2) (3) (4)		100,000			100,000			50,000			—			73,400
		$	1,406,682		$	1,433,718		$	1,360,638		$	1,348,351		$	1,124,299
% of Fixed Rate Loans (5)		83.80		%	73.09		%	70.89		%	68.40		%	69.72		%
% of Variable Rate Loans (2) (3) (4)		16.20		%	26.91		%	29.11		%	31.60		%	30.28		%
		100.00		%	100.00		%	100.00		%	100.00		%	100.00		%
Average Contract Interest Rates
Mortgage & Construction Loans		6.24		%	6.30		%	6.24		%	6.25		%	6.23		%
Unsecured Revolving Credit Facility		6.83		%	6.23		%	5.85		%	5.09		%	4.83		%
Exchangeable Senior Notes (1)		3.50		%	n/a			n/a			n/a			n/a
Total Weighted Average		6.35		%	6.28		%	6.13		%	5.97		%	5.76		%
Coverage Ratios (excluding capitalized interest) — All coverage computations include the effect of discontinued operations
Interest Coverage - Combined NOI		2.95		x	2.87		x	2.83		x	3.05		x	3.06		x
Interest Coverage - EBITDA		3.60		x	2.70		x	2.78		x	2.82		x	3.17		x
Debt Service Coverage - Combined NOI		2.42		x	2.33		x	1.98		x	2.45		x	2.43		x
Debt Service Coverage - EBITDA		2.97		x	2.19		x	1.95		x	2.26		x	2.52		x
Fixed Charge Coverage - Combined NOI		2.35		x	2.36		x	2.33		x	2.45		x	2.42		x
Fixed Charge Coverage - EBITDA		2.89		x	2.22		x	2.29		x	2.26		x	2.51		x

 

(1)   On September 18, 2006, we issued $200.0 million in exchangeable senior notes. The notes bear interest at a fixed interest rate of 3.5%, with interest payable semi-annually beginning March 15, 2007, and mature in September 2026.

(2)   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.

(3)   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 on the same day and expires March 30, 2009.

(4)   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.

(5)   Includes interest rate protection agreements.

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Quarterly Operating Ratios

(Dollars in thousands except per share data and ratios)

		2006									2005
		September 30			June 30			March 31			December 31			September 30
OPERATING RATIOS — All computations include the effect of discontinued operations
Net Income as a % of Combined Real Estate Revenues (Net Income / Combined Real Estate Revenues)		26.04		%	12.47		%	13.77		%	15.34		%	16.63		%
Combined NOI as a % of Combined Real Estate Revenues (Combined NOI / Combined Real Estate Revenues)		67.46		%	69.35		%	69.43		%	70.03		%	69.64		%
EBITDA as a % of Combined Real Estate Revenues (EBITDA / Combined Real Estate Revenues)		82.70		%	65.16		%	68.30		%	64.73		%	72.12		%
G&A as a % of Net Income (G&A / Net Income)		20.53		%	40.65		%	39.88		%	36.70		%	31.33		%
G&A as a % of Combined Real Estate Revenues (G&A / Combined Real Estate Revenues)		5.35		%	5.07		%	5.49		%	5.63		%	5.21		%
G&A as a % of EBITDA (G&A / EBITDA)		6.46		%	7.78		%	8.04		%	8.70		%	7.23		%
Recurring Capital Expenditures		$	3,890		$	3,425		$	2,808		$	5,226		$	4,945
Recurring Capital Expenditures per average square foot of wholly owned properties		$	0.26		$	0.24		$	0.21		$	0.41		$	0.41
Recurring Capital Expenditures as a % of NOI (Combined NOI)		7.29		%	6.76		%	5.60		%	11.13		%	11.15		%

 

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Quarterly Dividend Analysis

		2006									2005
		September 30			June 30			March 31			December 31			September 30
Common Share Dividends
Dividends per share/unit		$	0.310		$	0.280		$	0.280		$	0.280		$	0.280
Increase over prior quarter		10.7		%	0.0		%	0.0		%	0.0		%	9.8		%
Common Dividend Payout Ratios
Payout - Earnings		91.8		%	217.0		%	179.2		%	167.0		%	158.1		%
Payout - FFO - Diluted		65.4		%	56.4		%	56.0		%	57.0		%	60.6		%
Payout - AFFO - Diluted		83.0		%	75.0		%	72.3		%	85.3		%	84.4		%
Dividend Coverage - FFO - Diluted		1.53		x	1.77		x	1.79		x	1.76		x	1.65		x
Dividend Coverage - AFFO - Diluted		1.21		x	1.33		x	1.38		x	1.17		x	1.18		x
Common Dividend Yields
Dividend Yield		2.77		%	2.66		%	2.45		%	3.15		%	3.20		%
Series I Preferred Unit Distributions
Preferred Unit Distributions Per Unit		$	0.46875		$	0.46875		$	0.46875		$	0.46875		$	0.46875
Preferred Unit Distributions Yield		7.500		%	7.500		%	7.500		%	7.500		%	7.500		%
Quarter End Recorded Book Value		$	25.00		$	25.00		$	25.00		$	25.00		$	25.00
Series E Preferred Share Dividends (1)
Preferred Share Dividends Per Share		n/a			$	0.64063		$	0.64063		$	0.64063		$	0.64063
Preferred Share Dividend Yield		n/a			10.250		%	10.250		%	10.250		%	10.250		%
Quarter End Recorded Book Value		n/a			$	25.00		$	25.00		$	25.00		$	25.00
Series F Preferred Share Dividends (2)
Preferred Share Dividends Per Share		$	0.61719		$	0.61719		$	0.61719		$	0.61719		$	0.61719
Preferred Share Dividend Yield		9.875		%	9.875		%	9.875		%	9.875		%	9.875		%
Quarter End Recorded Book Value		$	25.00		$	25.00		$	25.00		$	25.00		$	25.00
Series G Preferred Share Dividends
Preferred Share Dividends Per Share		$	0.50000		$	0.50000		$	0.50000		$	0.50000		$	0.50000
Preferred Share Dividend Yield		8.000		%	8.000		%	8.000		%	8.000		%	8.000		%
Quarter End Recorded Book Value		$	25.00		$	25.00		$	25.00		$	25.00		$	25.00
Series H Preferred Share Dividends
Preferred Share Dividends Per Share		$	0.46875		$	0.46875		$	0.46875		$	0.46875		$	0.46875
Preferred Share Dividend Yield		7.500		%	7.500		%	7.500		%	7.500		%	7.500		%
Quarter End Recorded Book Value		$	25.00		$	25.00		$	25.00		$	25.00		$	25.00
Series J Preferred Share Dividends (3)
Preferred Share Dividends Per Share		$	0.47656		n/a			n/a			n/a			n/a
Preferred Share Dividend Yield		7.625		%	n/a			n/a			n/a			n/a
Quarter End Recorded Book Value		$	25.00		n/a			n/a			n/a			n/a

 

(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 and paid a prorated dividend of $0.09965 for the third quarter of 2006.

(2)   We redeemed all of the outstanding Series F Preferred Shares on October 15, 2006 for $35,625,000 or $25.00 per share par value.

(3)   We issued 3,390,000 Series J Cumulative Redeemable Preferred Shares with a $25.00 per share par value on July 20, 2006 and paid a prorated dividend of $0.45009 on October 15, 2006.

 

13