Exhibit 99.1

6711 Columbia Gateway Drive, Suite 300

Columbia, Maryland 21046

Telephone 443-285-5400

Facsimile 443-285-7650

www.copt.com

 

NYSE: OFC

GRAPHIC

FOR IMMEDIATE RELEASE

Contact:

 

Mary Ellen Fowler

 

Vice President and Treasurer

 

443-285-5450

 

maryellen.fowler@copt.com

 

CORPORATE OFFICE PROPERTIES TRUST

REPORTS THIRD QUARTER 2006 RESULTS

COLUMBIA, MD October 30, 2006 - Corporate Office Properties Trust (COPT) (NYSE: OFC) announced today financial and operating results for the quarter ended September 30, 2006.

Highlights

·                  Earnings per Share (“EPS”) diluted of $.33 for the third quarter of 2006 as compared to $.18 per diluted share for the third quarter of 2005. Net Income Available to Common Shareholders of $14.5 million for third quarter 2006 increased from $6.9 million for the comparable 2005 period. Included in third quarter 2006 net income is $12.7 million of gain on sales of real estate including amounts in income from discontinued operations, net of minority interests. Also included is an accounting charge of $1.8 million or ($.04) per share reflecting the issuance costs of the Series E preferred shares redeemed July 15, 2006. Without this accounting charge, earnings per share — diluted, as adjusted, would have been $.37 per share.

·                  Funds from Operations (“FFO”) per diluted share of $.46 for the third quarter 2006 down from $.47 per diluted share for third quarter 2005, representing a decrease of 2.1%. FFO diluted of $24.3 million for third quarter 2006, increased from $22.1 million for the comparable 2005 quarter. Included in the third quarter 2006 FFO was the accounting charge of $1.8 million or ($.04) per share for the Series E preferred share redemption. Without this charge, FFO per diluted share, as adjusted, would have been $.50 per share representing an increase of 6.5%. The Company also incurred approximately $250,000 of costs related to its headquarters move and write-offs of $217,000 for unamortized loan fees related to early repayment of long term and short term debt.

·                  $178.8 million in acquisitions including $49.8 million of land, so far this year.

·                  $88.3 million of dispositions including joint venture assets closed this year, toward the $100.0 million goal for 2006.




 

·                  94.0% occupied and 95.3% leased for the Company’s wholly owned portfolio as of September 30, 2006.

·                  1.2 million square feet in 10 buildings under construction that are currently 67.4% leased.

·                  Redeemed all 1,150,000 outstanding 10.25% Series E Preferred Shares on July 15, 2006.

·                  $200.0 million in convertible notes with 3.5% fixed rate coupon issued September 18, 2006.

·                  10.7% increase in quarterly common dividend from $.28 to $.31 per share.

“We continue to position the Company for the future, gaining significant land control in our core markets. Our most recent acquisition, the former Fort Ritchie United States Army base, is approved for up to 1.7 million square feet of office space and 673 residential units. We now have over 1,200 acres under control that can support up to 11.2 million square feet of office development,” stated Randall M. Griffin, President and Chief Executive Officer. “As reflected by our 2007 guidance, you will now start to see the impact of this development pipeline as we increasingly place projects into service,” he added.

Financial Results

EPS for the quarter ended September 30, 2006 totaled $.33 per diluted share, or $14.5 million of Net Income Available to Common Shareholders, as compared to $.18 per diluted share, or $6.9 million for the quarter ended September 30, 2005, representing an increase of 83.3% per share. Included in third quarter 2006 net income is $12.7 million of gain on sales of real estate including amounts in income from discontinued operations, net of minority interests. Also included is an accounting charge of $1.8 million reflecting the issuance costs of the Series E preferred shares redeemed July 15, 2006. Without this accounting charge, net income available to common shareholders — diluted, as adjusted, would have been $.37 per share.

Diluted FFO for the quarter ended September 30, 2006 totaled $24.3 million, or $.46 per diluted share, as compared to $22.1 million, or $.47 per diluted share, for the quarter ended September 30, 2005, representing a decrease of 2.1% per share. Included in the third quarter 2006 FFO was the accounting charge of $1.8 million for the Series E preferred share redemption. Without this charge, FFO per diluted share, as adjusted, would have been $.50 per share representing an increase of 6.5%. The Company also incurred costs of $250,000 related to its headquarters move and $217,000 of write-offs related to unamortized loan fees upon early repayment of long term and short term debt.

Diluted FFO payout ratio was 65.4% for third quarter 2006 compared to 60.6% for the comparable 2005 period.

Adjusted Funds From Operations (“AFFO”) diluted totaled $19.2 million for third quarter 2006 as compared to $15.9 million for third quarter 2005, representing an increase of 20.6%. The Company’s diluted AFFO payout ratio was 83.0% for third quarter 2006 compared to 84.4% for third quarter 2005.

2




As of September 30, 2006, the Company had a total market capitalization of $3.9 billion, with $1.4 billion in debt outstanding, equating to a 35.7% debt-to-total market capitalization ratio. The Company’s total quarterly weighted average interest rate was 6.4%, and 83.8% of total debt was subject to fixed interest rates. For the third quarter 2006, EBITDA interest coverage ratio was 3.60x and EBITDA fixed charge coverage ratio was 2.89x.

Operating Results

At September 30, 2006, the Company’s wholly owned portfolio of 168 office properties totaling 14.6 million square feet, was 94.0% occupied and 95.3% leased.

The weighted average remaining lease term for the portfolio was 4.9 years and the average rental rate (including tenant reimbursements of operating costs) was $20.74 per square foot.

During the quarter, 239,000 square feet was renewed, equating to a 60.7% renewal rate, at an average capital cost of $3.53 per square foot. Total rent on renewed space increased 18.2% on a straight-line basis and 10.2% on a cash basis.

For renewed and retenanted space of 553,000 square feet, total straight-line rent increased 2.9% and total rent on cash basis decreased 3.4%. The average committed capital cost for renewed and retenanted space was $18.17 per square foot.

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

Significant leases signed during the quarter include 81,000 square feet with KSI Services, Inc. to retenant the former PwC space at Pinnacle Towers in McLean, Virginia. This lease brings Pinnacle Towers to 96.9% leased and brings COPT’s Northern Virginia portfolio to 99.3% leased.

The Company recognized lease termination fees of $1.3 million, net of write-offs of related straight-line rents and accretion of intangible assets and liabilities, as compared to $1.0 million in the third quarter of 2005.

Development Activity

At quarter end September 30, the Company’s development pipeline consisted of:

·                  Ten buildings under construction totaling 1.2 million square feet for a total projected cost of $252.9 million, that are 67.4% leased.

·                  Nine buildings under development totaling 1.0 million square feet for a total projected cost of $216.4 million.

·                  Four projects under redevelopment totaling 727,000 square feet for a total projected cost of $87.8 million.

3




The Company’s land inventory (wholly owned and joint venture) at quarter end totaled 752 acres that can support 9.5 million square feet of development.

During the quarter the Company placed a 50,000 square foot development property that is 100.0% leased into service. The building, known as Patriot Park View, is located at 745 Space Center Drive in Colorado Springs, Colorado.

Disposition Activity

During the quarter, the Company disposed of the following assets:

·                  Two office buildings totaling 259,000 square feet within its New Jersey portfolio for $42.8 million. This sale consisted of 695 Route 46, a joint venture property in which COPT owned a 20.0% interest and 710 Route 46, a wholly owned property.

·                  107,000 square foot office building in Hunt Valley, Maryland for $13.8 million.

·                  104,000 square foot office building in Baltimore City, Maryland for $20.3 million.

Financing and Capital Transactions

The Company completed the following transactions during the quarter:

·                  Increased its borrowing capacity under the Company’s unsecured line of credit from $400.0 million to $500.0 million and simultaneously repaid $60.2 million on two fixed rate loans with a weighted average interest rate of 7.8%.

·                  Redeemed all of its 1,150,000 outstanding 10.25% Series E Cumulative Redeemable Preferred Shares, at a price of $25.00.

·                  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.

·                  Issued $200.0 million of Exchangeable Senior Notes. The notes are interest only with a fixed rate of 3.5% and may be exchanged at any time on or after September 20, 2011. Interest is payable semi-annually commencing March 15, 2007 and the notes mature in 2026. In connection with this offering, the Company repaid $186.4 million of floating rate debt at an average interest rate of 6.7%.

·                  Early repayment of fixed and floating rate debt during the quarter generated a $217,000 write-off in unamortized loan fees.

·                  10.7% increase in quarterly common dividend from $.28 to $.31 per share.

Subsequent Events

Since September 30, 2006, the Company has:

4




 

·                  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, adjusted pro rata for the property holdback.

·                  Redeemed all of its 1,425,000 outstanding 9.875% Series F Cumulative Redeemable Preferred Shares at a price of $25.00, on October 15, 2006. The Company recognized a $2.1 million accounting charge to net income available to common shareholders related to the original issuance costs of the Series F. The Company projects that the accounting charge will reduce EPS for the quarter end and year ending December 2006 by ($.05) and FFO per share diluted by ($.04).

·                  Placed into service the 126,000 square foot development property at 322 Sentinel Drive (known as 322 NBP), that is 100.0% leased.

·                  Placed into service the 224,000 square foot development property at 15010 Conference Center Drive (known as WTP II), that is 100.0% leased.

·                  Executed a long term lease for a 60,000 square foot to be built office building located in Aerotech Commerce Park in Colorado Springs, Colorado.

Earnings Guidance

The Company has revised its EPS guidance from $.61 — $.67 to $.81 — $.83 per diluted share for 2006. The Company has also updated its 2006 FFO guidance to a range of $1.99 — $2.01 per diluted share from $1.99 - $2.05 per diluted share. With the estimated $.08 charge to diluted FFO per share and $.08 charge to diluted EPS that the Company has incurred for the Series E and Series F preferred share redemptions, 2006 FFO guidance is $1.91 to $1.93, and EPS guidance is $.72 - $.74. The Company’s 2007 EPS guidance is $.44 — $.53 per diluted share, excluding any potential gains or losses from building sales.  The 2007 FFO guidance is $2.18 — $2.27 per diluted share. The Company will discuss the assumptions for the 2007 guidance during the earnings conference call.

Conference Call

The Company will hold an investor/analyst conference call:

Conference Call and Webcast Date:  Tuesday, October 31, 2006

Time:  3:00 p.m. ET

Dial In Number:  800-500-0177

Confirmation Code for the call:  3083457

A replay of this call will be available beginning Tuesday, October 31, 2006 at 9:00 p.m. ET through Tuesday, November 14, 2006 at midnight ET. To access the replay, please call 888-203-1112 and use confirmation code 3083457.

5




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 8K 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 September 30, 2006, the Company owned 186 office properties totaling 15.4 million rentable square feet, which included 18 properties totaling 806,000 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;

·                  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;

6




·                  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.

 

7




Corporate Office Properties Trust

Summary Financial Data

(unaudited)

(Amounts in thousands, except per share data)

 

 

Three Months Ended 
September 30,

 

 

 

2006

 

2005

 

Revenues

 

 

 

 

 

Real estate revenues

 

$

78,136

 

$

61,008

 

Service operations revenues

 

14,791

 

29,784

 

Total revenues

 

92,927

 

90,792

 

Expenses

 

 

 

 

 

Property operating expenses

 

25,430

 

18,272

 

Depreciation and other amortization associated with real estate operations

 

21,680

 

17,522

 

Service operations expenses

 

13,960

 

29,326

 

General and administrative expenses

 

4,226

 

3,318

 

Total operating expenses

 

65,296

 

68,438

 

Operating income

 

27,631

 

22,354

 

Interest expense

 

(17,974

)

(13,894

)

Amortization of deferred financing costs

 

(736

)

(639

)

Income from continuing operations before equity in income of unconsolidated entities, income taxes and minority interests

 

8,921

 

7,821

 

Equity in income of unconsolidated entities

 

15

 

 

Income tax expense

 

(202

)

(263

)

Income from continuing operations before minority interests

 

8,734

 

7,558

 

Minority interests in income from continuing operations

 

(935

)

(898

)

Income from continuing operations

 

7,799

 

6,660

 

Income from discontinued operations, net of minority interests

 

12,191

 

3,870

 

Income before gain on sales of real estate

 

19,990

 

10,530

 

Gain on sales of real estate, net

 

597

 

59

 

Net income

 

20,587

 

10,589

 

Preferred share dividends

 

(4,307

)

(3,653

)

Issuance costs associated with redeemed preferred shares

 

(1,829

)

 

Net income available to common shareholders

 

$

14,451

 

$

6,936

 

 

 

 

 

 

 

Earnings per share “EPS” computation

 

 

 

 

 

Numerator:

 

$

14,451

 

$

6,936

 

 

 

 

 

 

 

Denominator:

 

 

 

 

 

Weighted average common shares - basic

 

42,197

 

36,913

 

Dilutive effect of share-based compensation awards

 

1,649

 

1,667

 

Weighted average common shares - diluted

 

43,846

 

38,580

 

 

 

 

 

 

 

EPS

 

 

 

 

 

Basic

 

$

0.34

 

$

0.19

 

Diluted

 

$

0.33

 

$

0.18

 

 

8




Corporate Office Properties Trust

Summary  Financial Data

(unaudited)

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

 

 

Three Months Ended
September 30,

 

 

 

2006

 

2005

 

 

 

 

 

 

 

Net income

 

$

20,587

 

$

10,589

 

Add: Real estate-related depreciation and amortization

 

21,305

 

17,848

 

Add: Depreciation and amortization on unconsolidated real estate entities

 

362

 

 

 

 

 

 

 

 

Less: Depreciation and amortization allocable to minority interests in other consolidated entities

 

(36

)

(23

)

Add (less): Loss (gain) on sales of real estate, excluding development portion

 

(15,262

)

(4,360

)

Less: Issuance costs associated with redeemed preferred shares

 

(1,829

)

 

Funds from operations (“FFO”)

 

25,127

 

24,054

 

Add: Minority interests-common units in the Operating Partnership

 

3,509

 

1,726

 

Less: Preferred share dividends

 

(4,307

)

(3,653

)

Funds from Operations - basic and diluted (“Basic and Diluted FFO”)

 

24,329

 

22,127

 

Less: Straight-line rent adjustments

 

(2,819

)

(1,519

)

Less: Recurring capital expenditures

 

(3,890

)

(4,945

)

Less: Amortization of deferred market rental revenue

 

(276

)

229

 

Add: Issuance costs associated with redeemed preferred shares

 

1,829

 

 

Adjusted Funds from Operations - diluted (“Diluted AFFO”)

 

$

19,173

 

$

15,892

 

 

 

 

 

 

 

Weighted average shares

 

 

 

 

 

Weighted average common shares

 

42,197

 

36,913

 

Conversion of weighted average common units

 

8,562

 

8,758

 

Weighted average common shares/units - basic FFO per share

 

50,759

 

45,671

 

Dilutive effect of share-based compensation awards

 

1,649

 

1,667

 

Weighted average common shares/units - diluted FFO per share

 

52,408

 

47,338

 

 

 

 

 

 

 

Diluted FFO per common share

 

$

0.46

 

$

0.47

 

Dividends/distributions per common share/unit

 

$

0.31

 

$

0.28

 

Earnings payout ratio

 

91.8

%

158.1

%

Diluted FFO payout ratio

 

65.4

%

60.6

%

Diluted AFFO payout ratio

 

83.0

%

84.4

%

EBITDA interest coverage ratio

 

3.60

x

3.17

x

EBITDA fixed charge coverage ratio

 

2.89

x

2.51

x

 

 

 

 

 

 

Reconciliation of denominators for diluted EPS and diluted FFO per share

 

 

 

 

 

Denominator for diluted EPS

 

43,846

 

38,580

 

Weighted average common units

 

8,562

 

8,758

 

Denominator for diluted FFO per share

 

52,408

 

47,338

 

 

 

9




Corporate Office Properties Trust
Summary Financial Data
(unaudited)
(Amounts in thousands, except per share data)

 

Nine Months Ended 
September 30,

 

 

 

2006

 

2005

 

Revenues

 

 

 

 

 

Real estate revenues

 

$

219,852

 

$

177,125

 

Service operations revenues

 

45,240

 

65,345

 

Total revenues

 

265,092

 

242,470

 

Expenses

 

 

 

 

 

Property operating expenses

 

68,698

 

52,940

 

Depreciation and other amortization associated with real estate operations

 

58,631

 

45,943

 

Service operations expenses

 

43,125

 

63,692

 

General and administrative expenses

 

11,895

 

9,760

 

Total operating expenses

 

182,349

 

172,335

 

Operating income

 

82,743

 

70,135

 

Interest expense

 

(52,493

)

(39,960

)

Amortization of deferred financing costs

 

(1,899

)

(1,500

)

Income from continuing operations before equity in loss of unconsolidated entities, income taxes and minority interests

 

28,351

 

28,675

 

Equity in loss of unconsolidated entities

 

(40

)

 

Income tax expense

 

(623

)

(933

)

Income from continuing operations before minority interests

 

27,688

 

27,742

 

Minority interests in income from continuing operations

 

(3,238

)

(3,653

)

Income from continuing operations

 

24,450

 

24,089

 

Income from discontinued operations, net of minority interests

 

14,458

 

4,413

 

Income before gain on sales of real estate

 

38,908

 

28,502

 

Gain on sales of real estate, net

 

732

 

247

 

Net income

 

39,640

 

28,749

 

Preferred share dividends

 

(11,614

)

(10,961

)

Issuance costs associated with redeemed preferred shares

 

(1,829

)

 

Net income available to common shareholders

 

$

26,197

 

$

17,788

 

Earnings per share “EPS” computation

 

 

 

 

 

Numerator:

 

$

26,197

 

$

17,788

 

Denominator:

 

 

 

 

 

Weighted average common shares—basic

 

41,134

 

36,721

 

Dilutive effect of share-based compensation awards

 

1,785

 

1,595

 

Weighted average common shares—diluted

 

42,919

 

38,316

 

EPS

 

 

 

 

 

Basic

 

$

0.64

 

$

0.48

 

Diluted

 

$

0.61

 

$

0.46

 

 

10




Corporate Office Properties Trust
Summary Financial Data
(unaudited)
(Amounts in thousands, except per share data and ratios)

 

Nine Months Ended
September 30,

 

 

 

2006

 

2005

 

Net income

 

$

39,640

 

$

28,749

 

Add: Real estate-related depreciation and amortization

 

58,863

 

47,440

 

Add: Depreciation and amortization on unconsolidated real estate entities

 

565

 

 

Less: Depreciation and amortization allocable to minority interests in other consolidated entities

 

(122

)

(85

)

Less: Gain on sales of real estate, excluding development portion

 

(17,715

)

(4,408

)

Less: Issuance costs associated with redeemed preferred shares

 

(1,829

)

 

Funds from operations (“FFO”)

 

79,402

 

71,696

 

Add: Minority interests-common units in the Operating Partnership

 

6,072

 

4,369

 

Less: Preferred share dividends

 

(11,614

)

(10,961

)

Funds from Operations - basic and diluted (“Basic and Diluted FFO”)

 

73,860

 

65,104

 

Less: Straight-line rent adjustments

 

(7,256

)

(4,471

)

Less: Recurring capital expenditures

 

(10,123

)

(12,972

)

Less: Amortization of deferred market rental revenue

 

(1,326

)

(32

)

Add: Issuance costs associated with redeemed preferred shares

 

1,829

 

 

Adjusted Funds from Operations - diluted (“Diluted AFFO”)

 

$

56,984

 

$

47,629

 

Weighted average shares

 

 

 

 

 

Weighted average common shares

 

41,134

 

36,721

 

Conversion of weighted average common units

 

8,516

 

8,707

 

Weighted average common shares/units - basic FFO per share

 

49,650

 

45,428

 

Dilutive effect of share-based compensation awards

 

1,785

 

1,595

 

Weighted average common shares/units - diluted FFO per share

 

51,435

 

47,023

 

Diluted FFO per common share

 

$

1.44

 

$

1.38

 

Dividends/distributions per common share/unit

 

$

0.870

 

$

0.790

 

Earnings payout ratio

 

138.9

%

166.9

%

Diluted FFO payout ratio

 

59.2

%

56.1

%

Diluted AFFO payout ratio

 

76.8

%

76.7

%

Reconciliation of denominators for diluted EPS and diluted FFO per share

 

 

 

 

 

Denominator for diluted EPS

 

42,919

 

38,316

 

Weighted average common units

 

8,516

 

8,707

 

Denominator for diluted FFO per share

 

51,435

 

47,023

 

 

11




Corporate Office Properties Trust
Summary Financial Data
(unaudited)
(Dollars and shares in thousands, except per share data)

 

 

September 30,
2006

 

December 31,
2005

 

Balance Sheet Data (in thousands) (as of period end):

 

 

 

 

 

Investment in real estate, net of accumulated depreciation

 

$

2,055,686

 

$

1,888,106

 

Total assets

 

2,355,922

 

2,129,759

 

Loans payable

 

1,406,682

 

1,348,351

 

Total liabilities

 

1,523,997

 

1,442,036

 

Minority interests

 

117,772

 

105,210

 

Beneficiaries’ equity

 

714,153

 

582,513

 

Debt to Total Assets

 

59.7

%

63.3

%

Debt to Undepreciated Book Value of Real Estate Assets

 

59.8

%

62.6

%

Debt to Total Market Capitalization

 

35.7

%

41.5

%

Property Data (wholly owned properties) (as of period end):

 

 

 

 

 

Number of operating properties owned

 

168

 

165

 

Total net rentable square feet owned (in thousands)

 

14,590

 

13,708

 

Occupancy

 

94.0

%

94.0

%

Reconciliation of denominator for debt to total assets to denominator for debt to undepreciated book value of real estate assets

 

 

 

 

 

Denominator for debt to total assets

 

$

2,355,922

 

$

2,129,759

 

Assets other than assets included in investment in real estate

 

(300,236

)

(241,653

)

Accumulated depreciation on real estate assets

 

205,529

 

174,935

 

Intangible assets on real estate acquisitions, net

 

92,061

 

90,984

 

Denominator for debt to undepreciated book value of real estate assets

 

$

2,353,276

 

$

2,154,025

 

 

 

Three Months Ended
September 30,

     

Nine Months Ended
September 30,

 

 

 

2006

 

2005

 

2006

 

2005

 

Reconciliation of tenant improvements and incentives, capital improvements and leasing costs for operating properties to recurring capital expenditures

 

 

 

 

 

 

 

 

 

Total tenant improvements and incentives on operating properties

 

$

4,552

 

$

3,484

 

$

10,742

 

$

24,306

 

Total capital improvements on operating properties

 

2,276

 

2,760

 

7,935

 

6,838

 

Total leasing costs on operating properties

 

3,416

 

3,017

 

5,783

 

4,652

 

Less: Nonrecurring tenant improvements and incentives on operating properties

 

(3,340

)

(1,199

)

(6,373

)

(16,633

)

Less: Nonrecurring capital improvements on operating properties

 

(467

)

(1,047

)

(4,054

)

(3,568

)

Less: Nonrecurring leasing costs incurred on operating properties

 

(2,783

)

(2,070

)

(4,217

)

(2,623

)

Add: Recurring improvements on operating properties held through joint ventures

 

236

 

 

307

 

 

Recurring capital expenditures

 

$

3,890

 

$

4,945

 

$

10,123

 

$

12,972

 

 

12




 

Corporate Office Properties Trust
Summary Financial Data
(unaudited)
(Dollars in thousands)

 

 

Three Months Ended
September 30,

 

Nine Months Ended
September 30,

 

 

 

2006

 

2005

 

2006

 

2005

 

Reconciliation of dividends for Earnings Payout Ratio to dividends and distributions for FFO & AFFO Payout Ratio

 

 

 

 

 

 

 

 

 

Common share dividends for earnings payout ratio

 

$

13,265

 

$

10,966

 

$

36,378

 

$

29,686

 

Common unit distributions

 

2,643

 

2,452

 

7,374

 

6,836

 

Dividends and distributions for FFO & AFFO payout ratio

 

$

15,908

 

$

13,418

 

$

43,752

 

$

36,522

 

Reconciliation of numerators for diluted EPS and diluted FFO as reported to numerators for diluted EPS and diluted FFO excluding issuance costs associated with redeemed preferred shares

 

 

 

 

 

 

 

 

 

Numerator for diluted EPS, as reported

 

$

14,451

 

$

6,936

 

$

26,197

 

$

17,788

 

Add: Issuance costs associated with redeemed preferred shares

 

1,829

 

 

1,829

 

 

Numerator for diluted EPS, as adjusted

 

$

16,280

 

$

6,936

 

$

28,026

 

$

17,788

 

Numerator for diluted FFO, as reported

 

$

24,329

 

$

22,127

 

$

73,860

 

$

65,104

 

Add: Issuance costs associated with redeemed preferred shares

 

1,829

 

 

1,829

 

 

Numerator for diluted FFO, as adjusted

 

$

26,158

 

$

22,127

 

$

75,689

 

$

65,104

 

Reconciliation of GAAP net income to earnings before interest, income taxes, depreciation and amortization (“EBITDA”)

 

 

 

 

 

 

 

 

 

Net income

 

$

20,587

 

$

10,589

 

 

 

 

 

Interest expense on continuing operations

 

17,974

 

13,894

 

 

 

 

 

Interest expense on discontinued operations

 

210

 

602

 

 

 

 

 

Income tax expense

 

202

 

294

 

 

 

 

 

Real estate-related depreciation and amortization

 

21,305

 

17,848

 

 

 

 

 

Amortization of deferred financing costs-continuing operations

 

736

 

639

 

 

 

 

 

Amortization of deferred financing costs-discontinued operations

 

128

 

2

 

 

 

 

 

Other depreciation and amortization

 

601

 

179

 

 

 

 

 

Minority interests

 

3,636

 

1,872

 

 

 

 

 

EBITDA

 

$

65,379

 

$

45,919

 

 

 

 

 

Reconciliation of interest expense from continuing operations to the denominators for interest coverage-EBITDA and fixed charge coverage-EBITDA

 

 

 

 

 

 

 

 

 

Interest expense from continuing operations

 

$

17,974

 

$

13,894

 

 

 

 

 

Interest expense from discontinued operations

 

210

 

602

 

 

 

 

 

Denominator for interest coverage-EBITDA

 

18,184

 

14,496

 

 

 

 

 

Preferred share dividends

 

4,307

 

3,653

 

 

 

 

 

Preferred unit distributions

 

165

 

165

 

 

 

 

 

Denominator for fixed charge coverage-EBITDA

 

$

22,656

 

$

18,314

 

 

 

 

 

Reconciliation of same property net operating income to same property cash net operating income

 

 

 

 

 

 

 

 

 

Same property net operating income

 

$

40,330

 

$

39,983

 

 

 

 

 

Less: Straight-line rent adjustments

 

(1,330

)

(1,355

)

 

 

 

 

Less: Amortization of deferred market rental revenue

 

126

 

267

 

 

 

 

 

Same property cash net operating income

 

$

39,126

 

$

38,895

 

 

 

 

 

 

13




Corporate Office Properties Trust
Summary Financial Data
(unaudited)
(Amounts in thousands, except per share data)

 

 

Year Ending
December 31, 2006

 

Year Ending
December 31, 2007

 

Reconciliation of projected EPS-diluted to projected diluted

 

 

 

 

 

 

 

 

 

FFO per share

 

Low

 

High

 

Low

 

High

 

Reconciliation of numerators

 

 

 

 

 

 

 

 

 

Numerator for projected EPS-diluted

 

$

31,200

 

$

32,100

 

$

19,550

 

$

23,500

 

Gain on sales of real estate, excluding development portion

 

(18,054

)

(18,054

)

 

 

Real estate-related depreciation and amortization

 

78,986

 

78,986

 

90,597

 

90,597

 

Minority interests-common units

 

6,682

 

6,875

 

4,093

 

4,919

 

Numerator for projected diluted FFO per share

 

$

98,814

 

$

99,907

 

$

114,240

 

$

119,016

 

 

 

 

 

 

 

 

 

 

 

Reconciliation of denominators

 

 

 

 

 

 

 

 

 

Denominator for projected EPS-diluted

 

43,183

 

43,183

 

43,975

 

43,975

 

Weighted average common units

 

8,518

 

8,518

 

8,525

 

8,525

 

Denominator for projected diluted FFO per share

 

51,701

 

51,701

 

52,500

 

52,500

 

 

 

 

 

 

 

 

 

 

 

Projected EPS - diluted

 

$

0.72

 

$

0.74

 

$

0.44

 

$

0.53

 

Projected diluted FFO per share

 

$

1.91

 

$

1.93

 

$

2.18

 

$

2.27

 

 

 

 

 

 

 

 

 

 

 

This projection includes the impact on EPS - diluted and diluted FFO per share from the write-off of issuance costs associated with the redemptions of our  Series E and Series F Preferred Shares.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Change in projected EPS-diluted and projected diluted FFO per share due to redemption of Series E and Series F Preferred Shares

 

 

 

 

 

 

 

 

 

Numerator for projected EPS-diluted

 

$

31,200

 

$

32,100

 

 

 

 

 

Issuance costs associated with redemption of preferred shares

 

3,896

 

3,896

 

 

 

 

 

Numerator for projected EPS-diluted, as adjusted

 

$

35,096

 

$

35,996

 

 

 

 

 

Denominator for projected EPS-diluted

 

43,183

 

43,183

 

 

 

 

 

Projected EPS - diluted, as adjusted for redemption of preferred shares

 

$

0.81

 

$

0.83

 

 

 

 

 

Projected EPS - diluted

 

0.72

 

0.74

 

 

 

 

 

Change in projected EPS-diluted for redemption of preferred shares

 

$

0.09

 

$

0.09

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Numerator for projected diluted FFO per share

 

$

98,814

 

$

99,907

 

 

 

 

 

Issuance costs associated with redemption of preferred shares

 

3,896

 

3,896

 

 

 

 

 

Numerator for projected diluted FFO per share, as adjusted

 

$

102,710

 

$

103,803

 

 

 

 

 

Denominator for projected diluted FFO per share

 

51,701

 

51,701

 

 

 

 

 

Projected diluted FFO per share, as adjusted for redemption of preferred shares

 

$

1.99

 

$

2.01

 

 

 

 

 

Projected diluted FFO per share

 

1.91

 

1.93

 

 

 

 

 

Change in projected diluted FFO per share for redemption of preferred shares

 

$

0.08

 

$

0.08

 

 

 

 

 

 

14




 

Top Twenty Office Tenants of Wholly Owned Properties as of September 30, 2006 (1)
(Dollars in thousands)

 

 

 

 

 

 

 

 

 

 

Percentage

 

 

 

 

 

 

 

 

 

Percentage

 

Total

 

of Total

 

Weighted

 

 

 

 

 

Total

 

of Total

 

Annualized

 

Annualized

 

Average

 

 

 

Number of

 

Occupied

 

Occupied

 

Rental

 

Rental

 

Remaining

 

Tenant

 

Leases

 

Square Feet

 

Square Feet

 

Revenue(2)(3)

 

Revenue

 

Lease Term(4)

 

United States of America(5)

 

44

 

2,060,177

 

15.0

%

$

43,702

 

15.4

%

6.5

 

Booz Allen Hamilton, Inc.

 

9

 

680,815

 

5.0

%

17,533

 

6.2

%

7.2

 

Northrop Grumman Corporation

 

15

 

538,967

 

3.9

%

12,308

 

4.3

%

2.0

 

Computer Sciences Corporation(6)

 

4

 

454,645

 

3.3

%

11,076

 

3.9

%

4.7

 

L-3 Communications Holdings, Inc(6)

 

5

 

239,153

 

1.7

%

8,906

 

3.1

%

6.9

 

Unisys Corporation(7)

 

4

 

760,145

 

5.5

%

8,665

 

3.0

%

3.0

 

AT&T Corporation(6)

 

9

 

361,451

 

2.6

%

7,733

 

2.7

%

2.3

 

General Dynamics Corporation

 

9

 

278,239

 

2.0

%

7,037

 

2.5

%

3.2

 

The Aerospace Corporation

 

2

 

221,785

 

1.6

%

6,207

 

2.2

%

8.2

 

Wachovia Corporation

 

5

 

188,994

 

1.4

%

6,118

 

2.2

%

11.7

 

The Boeing Company(6)

 

4

 

143,480

 

1.0

%

3,962

 

1.4

%

2.8

 

Ciena Corporation

 

3

 

221,609

 

1.6

%

3,558

 

1.3

%

4.0

 

Science Applications International Corp.

 

12

 

170,839

 

1.2

%

3,189

 

1.1

%

0.5

 

VeriSign, Inc.(8)

 

1

 

99,121

 

0.7

%

3,144

 

1.1

%

0.0

 

Magellan Health Services, Inc.

 

2

 

142,199

 

1.0

%

2,910

 

1.0

%

4.8

 

Lockheed Martin Corporation

 

6

 

160,577

 

1.2

%

2,860

 

1.0

%

2.7

 

BAE Systems PLC(6)

 

7

 

212,339

 

1.5

%

2,788

 

1.0

%

4.1

 

Merck & Co., Inc. (Unisys)(7)

 

1

 

219,065

 

1.6

%

2,466

 

0.9

%

2.8

 

Wyle Laboratories, Inc.

 

4

 

174,792

 

1.3

%

2,399

 

0.8

%

5.8

 

Harris Corporation

 

4

 

84,040

 

0.6

%

2,271

 

0.8

%

3.8

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Subtotal Top 20 Office Tenants

 

150

 

7,412,432

 

54.1

%

158,833

 

55.8

%

5.2

 

All remaining tenants

 

490

 

6,298,660

 

45.9

%

125,585

 

44.2

%

4.5

 

Total/Weighted Average

 

640

 

13,711,092

 

100.0

%

$

284,419

 

100.0

%

4.9

 


(1)             Table excludes owner occupied leasing activity which represents 136,951 square feet with a weighted average remaining lease term of  6.3 as of September 30, 2006.

(2)             Total Annualized Rental Revenue is the monthly contractual base rent as of September 30, 2006 multiplied by 12 plus the estimated annualized expense reimbursements under existing office leases.

(3)             Order of tenants is based on Annualized Rent.

(4)             The weighting of the lease term was computed using Total Rental Revenue.

(5)             Many of our government leases are subject to early termination provisions which are customary to government leases. The weighted average remaining lease term was computed assuming no exercise of such early termination rights.

(6)             Includes affiliated organizations or agencies.

(7)             Merck & Co., Inc. subleases 219,065 rentable square feet from Unisys’ 960,349 leased rentable square feet in our Greater Philadelphia region.

(8)             This tenant will be vacating in the fourth quarter of 2006; however, its entire square footage has already been retenanted to our second-largest tenant, Booz Allen Hamilton, Inc.

15