Exhibit 99.1
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6711 Columbia Gateway Drive, Suite 300 |
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FOR IMMEDIATE RELEASE |
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Contact: |
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Mary Ellen Fowler |
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Vice President and Treasurer |
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443-285-5450 |
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maryellen.fowler@copt.com |
CORPORATE OFFICE PROPERTIES TRUST
REPORTS STRONG SECOND QUARTER 2007 RESULTS
COLUMBIA, MD July 31, 2007 - Corporate Office Properties Trust (COPT) (NYSE: OFC) announced today financial and operating results for the quarter ended June 30, 2007.
Highlights
· Earnings per diluted share (“EPS”) of $.08 for the second quarter 2007 compared to $.13 per diluted share for the second quarter 2006, representing a 38.5% decrease per share. Included in second quarter 2007 is a $9.3 million increase in depreciation and amortization associated with real estate operations, as compared to the second quarter 2006, contributing to the significant decline in EPS. The acquisition of the Nottingham portfolio generated depreciation and amortization of $6.2 million, representing the majority of the $9.3 million increase in depreciation and amortization. During the second quarter 2007, a $1.0 million gain from the sale of a non-real estate investment, TractManager, Inc., was recognized.
· 16.3% increase in Funds from Operations (“FFO”) per diluted share to $.57 or $31.8 million for second quarter 2007 compared to $.49 or $25.2 million for second quarter 2006.
· 14.1% increase in Adjusted Funds from Operations (“AFFO”) diluted to $21.6 million for second quarter 2007 as compared to $18.9 million for second quarter 2006.
· 54.0% Diluted FFO payout ratio, 79.5% Diluted AFFO payout ratio for the quarter.
· $14.0 million acquisition of the remaining 50.0% undivided interest in a 132 acre land parcel that can support 1.75 million square feet of office development in Colorado Springs, Colorado.
· 92.7% occupied and 93.3% leased for our wholly owned portfolio as of June 30, 2007.
· 3.1 million square feet under construction, development and redevelopment for a total projected cost of $569.7 million.
· 69.3% of leases expiring during the quarter were renewed, with a 5.7% increase in total straight line rent for renewed space.
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“We are pleased with our strong FFO growth for the quarter,” stated Randall M. Griffin, President and Chief Executive Officer. “We placed 247,000 square feet of 100% leased development into service this quarter, almost half of the anticipated square feet to be placed into service by year end. We continue to see positive leasing activity and we are adding projects to our construction and development pipelines,” he added.
Financial Results
EPS for the quarter ended June 30, 2007 totaled $.08 per diluted share, or $3.9 million of net income available to common shareholders, as compared to $.13 per diluted share, or $5.5 million for the quarter ended June 30, 2006. Included in the second quarter 2007 is a $9.3 million increase in depreciation and amortization associated with real estate operations, as compared to the second quarter 2006, contributing to the significant decline in EPS. The acquisition of the Nottingham portfolio generated depreciation and amortization of $6.2 million, the primary driver of the $9.3 million increase. During the second quarter 2007, the Company recognized a $1.0 million gain from the sale of a non-real estate investment, TractManager, Inc., as described below.
Diluted FFO per share for the quarter ended June 30, 2007 increased 16.3% to $31.8 million, or $.57 per diluted share, as compared to $25.2 million, or $.49 per diluted share, for the quarter ended June 30, 2006. Included in FFO is a $1.0 million gain from the sale of TractManager, Inc. The Company’s Diluted FFO payout ratio was 54.0% for second quarter 2007 compared to 56.4% for the comparable 2006 period.
Diluted AFFO for the quarter ended June 30, 2007 increased 14.1% to $21.6 million, as compared to $18.9 million for the quarter ended June 30, 2006. The Company’s AFFO Payout ratio was 79.5% for second quarter 2007 compared to 75.0% for the comparable 2006 period.
As of June 30, 2007, the Company had a total market capitalization of $4.3 billion, with $1.8 billion in debt outstanding, equating to a 41.2% debt-to-total market capitalization ratio. The Company’s total quarterly weighted average interest rate was 5.9% and 83.4% of total debt is subject to fixed interest rates. For the second quarter 2007, EBITDA Interest coverage ratio was 2.77x and EBITDA Fixed Charge coverage was 2.31x.
Operating Results
At June 30, 2007, the Company’s wholly owned portfolio of 229 office properties totaling 17.7 million square feet was 92.7% occupied and 93.3% 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 $21.09 per square foot.
During the quarter, 476,000 square feet was renewed, equating to a 69.3% renewal rate, at an average committed capital cost of $4.91 per square foot. Total rent on renewed space increased 5.7% on a straight line basis and decreased 1.1% on a cash basis. For renewed and retenanted space of 612,000 square feet, total straight-line rent increased 6.1%, and total cash rent increased 0.5%. The average capital cost for renewed and retenanted space was $7.55 per square foot.
Same property cash NOI increased by 2.9%, or $1.3 million for the quarter compared to the quarter ended June 30, 2006. Same office property cash NOI was positively impacted by an increase in occupancy, primarily in our Northern Virginia region. The Company’s same office portfolio consists of 157 properties and represents 74.4% of our wholly owned portfolio as of June 30, 2007.
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The Company recognized lease termination fees of $708,000 for the quarter, net of write-offs of related straight line rents and the write-off of previously unamortized deferred market revenue, as compared to $665,000 in the second quarter 2006.
Development Activity
At quarter end June 30, the Company’s development pipeline consisted of:
· Ten buildings under construction totaling 1.0 million square feet for a total projected cost of $211.7 million, that are 48.5% leased.
· Twelve buildings under development totaling 1.3 million square feet for a total projected cost of $265.8 million.
· Three projects under redevelopment totaling 741,000 square feet for a total projected cost of $92.2 million.
The Company’s land inventory (wholly owned and joint venture) at quarter end totaled 1,576 acres that can support 13.9 million square feet of development.
During the quarter, the Company placed two buildings totaling 247,000 square feet into service. The largest building is a 193,000 square foot development property fully leased through June 2022 to the Northrop Grumman Corporation. The building will house the Virginia Information Technologies Agency (VITA) and Northrop Grumman operations.
Acquisition Activity
During the quarter, the Company acquired the remaining 50.0% undivided interest in 132 acres of land that can support 1.75 million square feet of office development in Colorado Springs, Colorado for $14.0 million. In connection with this transaction, 262,165 common units were issued by the Company’s operating partnership and were valued at $12.5 million, or $47.68 per unit.
Disposition Activity
During the quarter, the Company disposed of most of its investment in TractManager, Inc., as part of their merger with Tudor Ventures and GE Healthcare Financial Services. The Company received $2.5 million and recognized a $1.0 million gain in connection with the disposition. TractManager, Inc. is an entity that developed an Internet-based contract imaging and management system for sale to real estate owners and healthcare providers. The Company will continue to use the cost method of accounting for its $128,000 remaining investment.
Financing and Capital Transactions
During the quarter, the Company closed a $150.0 million, 5.65% fixed interest rate loan which matures on June 1, 2017 and requires interest only payments. $120.5 million of the loan proceeds were used to retire existing indebtedness scheduled to mature June 2007. The remaining proceeds and cash reserves were used to repay $30.0 million of borrowings outstanding under the Company’s unsecured revolving credit facility.
Earnings Guidance
The Company has revised its 2007 EPS guidance from $.37 – $.44 to $.34 – $.39 per diluted share. The Company has also updated its 2007 FFO guidance to a range of $2.20 – $2.25 per diluted share from $2.18 – $2.25 per diluted share.
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Conference Call
The Company will hold an investor/analyst conference call:
Conference Call and Webcast Date: Wednesday, August 1, 2007
Time: 11:00 a.m. Eastern Time
Dial In Number: 866-713-8566
Passcode: 97519594
A replay of this call will be available beginning Wednesday, August 1, 2007 at 2:00 p.m. Eastern Time through Wednesday, August 15, 2007 at midnight Eastern Time. To access the replay, please call 888-286-8010 and use passcode 18361175.
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, 2007, the Company owned 247 office properties totaling 18.5 million rentable square feet, which includes 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;
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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, 2006.
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