UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
(Mark one)
x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2007
or
o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 1-14023
|
Maryland |
|
23-2947217 |
|
(State or other jurisdiction of |
|
(IRS Employer |
|
incorporation or organization) |
|
Identification No.) |
|
|
|
|
|
6711 Columbia Gateway Drive, Suite 300, Columbia MD |
|
21046 |
|
(Address of principal executive offices) |
|
(Zip Code) |
Registrant’s telephone number, including area code: (443) 285-5400
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
x Yes o No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):
|
Large accelerated filer x |
|
Accelerated filer o |
|
Non-accelerated filer o |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act) o Yes x No
On July 27, 2007, 47,163,665 of the Company’s Common Shares of Beneficial Interest, $0.01 par value, were issued.
TABLE OF CONTENTS
FORM 10-Q
2
Corporate Office Properties Trust and Subsidiaries
(Dollars in thousands)
(unaudited)
|
|
|
June 30, |
|
December 31, |
|
||
|
|
|
2007 |
|
2006 |
|
||
|
Assets |
|
|
|
|
|
||
|
Investment in real estate: |
|
|
|
|
|
||
|
Operating properties, net |
|
$ |
2,140,298 |
|
$ |
1,812,883 |
|
|
Property held for sale, net |
|
14,578 |
|
— |
|
||
|
Projects under construction or development |
|
369,697 |
|
298,427 |
|
||
|
Total commercial real estate properties, net |
|
2,524,573 |
|
2,111,310 |
|
||
|
Cash and cash equivalents |
|
15,123 |
|
7,923 |
|
||
|
Restricted cash |
|
20,482 |
|
52,856 |
|
||
|
Accounts receivable, net |
|
18,826 |
|
26,367 |
|
||
|
Deferred rent receivable |
|
47,579 |
|
41,643 |
|
||
|
Intangible assets on real estate acquisitions, net |
|
123,861 |
|
87,325 |
|
||
|
Deferred charges, net |
|
47,292 |
|
43,710 |
|
||
|
Prepaid and other assets |
|
56,993 |
|
48,467 |
|
||
|
Total assets |
|
$ |
2,854,729 |
|
$ |
2,419,601 |
|
|
|
|
|
|
|
|
||
|
Liabilities and shareholders’ equity |
|
|
|
|
|
||
|
Liabilities: |
|
|
|
|
|
||
|
Mortgage and other loans payable |
|
$ |
1,552,478 |
|
$ |
1,298,537 |
|
|
3.5% Exchangeable Senior Notes |
|
200,000 |
|
200,000 |
|
||
|
Accounts payable and accrued expenses |
|
61,531 |
|
68,190 |
|
||
|
Rents received in advance and security deposits |
|
26,547 |
|
20,237 |
|
||
|
Dividends and distributions payable |
|
20,754 |
|
19,164 |
|
||
|
Deferred revenue associated with acquired operating leases |
|
13,522 |
|
11,120 |
|
||
|
Distributions in excess of investment in unconsolidated real estate joint venture |
|
3,852 |
|
3,614 |
|
||
|
Other liabilities |
|
7,525 |
|
8,249 |
|
||
|
Total liabilities |
|
1,886,209 |
|
1,629,111 |
|
||
|
Minority interests: |
|
|
|
|
|
||
|
Common units in the Operating Partnership |
|
119,297 |
|
104,934 |
|
||
|
Preferred units in the Operating Partnership |
|
8,800 |
|
8,800 |
|
||
|
Other consolidated real estate joint ventures |
|
2,654 |
|
2,453 |
|
||
|
Total minority interests |
|
130,751 |
|
116,187 |
|
||
|
Commitments and contingencies (Note 20) |
|
|
|
|
|
||
|
Shareholders’ equity: |
|
|
|
|
|
||
|
Preferred Shares of beneficial interest ($0.01 par value; shares authorized of 15,000,000, issued and outstanding of 8,121,667 at June 30, 2007 and 7,590,000 at December 31, 2006 (Note 13)) |
|
81 |
|
76 |
|
||
|
Common Shares of beneficial interest ($0.01 par value; 75,000,000 shares authorized, shares issued and outstanding of 47,154,605 at June 30, 2007 and 42,897,639 at December 31, 2006) |
|
472 |
|
429 |
|
||
|
Additional paid-in capital |
|
944,818 |
|
758,032 |
|
||
|
Cumulative distributions in excess of net income |
|
(107,277 |
) |
(83,541 |
) |
||
|
Accumulated other comprehensive loss |
|
(325 |
) |
(693 |
) |
||
|
Total shareholders’ equity |
|
837,769 |
|
674,303 |
|
||
|
Total liabilities and shareholders’ equity |
|
$ |
2,854,729 |
|
$ |
2,419,601 |
|
See accompanying notes to consolidated financial statements.
3
Corporate Office Properties Trust and Subsidiaries
Consolidated Statements of Operations
(Dollars in thousands, except per share data)
(unaudited)
|
|
|
For the Three Months Ended |
|
For the Six Months |
|
||||||||
|
|
|
2007 |
|
2006 |
|
2007 |
|
2006 |
|
||||
|
Revenues |
|
|
|
|
|
|
|
|
|
||||
|
Rental revenue |
|
$ |
78,824 |
|
$ |
61,635 |
|
$ |
154,706 |
|
$ |
122,197 |
|
|
Tenant recoveries and other real estate operations revenue |
|
12,128 |
|
9,134 |
|
25,921 |
|
17,794 |
|
||||
|
Construction contract revenues |
|
10,620 |
|
12,156 |
|
19,311 |
|
26,700 |
|
||||
|
Other service operations revenues |
|
1,073 |
|
1,984 |
|
2,459 |
|
3,749 |
|
||||
|
Total revenues |
|
102,645 |
|
84,909 |
|
202,397 |
|
170,440 |
|
||||
|
Expenses |
|
|
|
|
|
|
|
|
|
||||
|
Property operating expenses |
|
29,038 |
|
21,640 |
|
60,786 |
|
42,701 |
|
||||
|
Depreciation and other amortization associated with real estate operations |
|
27,429 |
|
18,095 |
|
53,998 |
|
36,767 |
|
||||
|
Construction contract expenses |
|
10,136 |
|
11,643 |
|
18,619 |
|
25,669 |
|
||||
|
Other service operations expenses |
|
1,126 |
|
1,818 |
|
2,531 |
|
3,496 |
|
||||
|
General and administrative expenses |
|
5,085 |
|
3,705 |
|
9,699 |
|
7,668 |
|
||||
|
Total operating expenses |
|
72,814 |
|
56,901 |
|
145,633 |
|
116,301 |
|
||||
|
Operating income |
|
29,831 |
|
28,008 |
|
56,764 |
|
54,139 |
|
||||
|
Interest expense |
|
(20,541 |
) |
(17,132 |
) |
(40,417 |
) |
(34,161 |
) |
||||
|
Amortization of deferred financing costs |
|
(921 |
) |
(606 |
) |
(1,805 |
) |
(1,162 |
) |
||||
|
Gain on sale of non-real estate investment |
|
1,033 |
|
— |
|
1,033 |
|
— |
|
||||
|
Income from continuing operations before equity in loss of unconsolidated entities, income taxes and minority interests |
|
9,402 |
|
10,270 |
|
15,575 |
|
18,816 |
|
||||
|
Equity in loss of unconsolidated entities |
|
(57 |
) |
(32 |
) |
(151 |
) |
(55 |
) |
||||
|
Income tax expense |
|
(178 |
) |
(206 |
) |
(283 |
) |
(421 |
) |
||||
|
Income from continuing operations before minority interests |
|
9,167 |
|
10,032 |
|
15,141 |
|
18,340 |
|
||||
|
Minority interests in income from continuing operations |
|
|
|
|
|
|
|
|
|
||||
|
Common units in the Operating Partnership |
|
(825 |
) |
(1,095 |
) |
(1,133 |
) |
(1,921 |
) |
||||
|
Preferred units in the Operating Partnership |
|
(165 |
) |
(165 |
) |
(330 |
) |
(330 |
) |
||||
|
Other consolidated entities |
|
31 |
|
25 |
|
78 |
|
58 |
|
||||
|
Income from continuing operations |
|
8,208 |
|
8,797 |
|
13,756 |
|
16,147 |
|
||||
|
(Loss) income from discontinued operations, net of minority interests |
|
(492 |
) |
294 |
|
(493 |
) |
2,771 |
|
||||
|
Income before gain on sales of real estate |
|
7,716 |
|
9,091 |
|
13,263 |
|
18,918 |
|
||||
|
Gain on sales of real estate, net |
|
161 |
|
25 |
|
161 |
|
135 |
|
||||
|
Net income |
|
7,877 |
|
9,116 |
|
13,424 |
|
19,053 |
|
||||
|
Preferred share dividends |
|
(4,025 |
) |
(3,653 |
) |
(8,018 |
) |
(7,307 |
) |
||||
|
Net income available to common shareholders |
|
$ |
3,852 |
|
$ |
5,463 |
|
$ |
5,406 |
|
$ |
11,746 |
|
|
Basic earnings per common share |
|
|
|
|
|
|
|
|
|
||||
|
Income from continuing operations |
|
$ |
0.09 |
|
$ |
0.12 |
|
$ |
0.13 |
|
$ |
0.22 |
|
|
Discontinued operations |
|
(0.01 |
) |
0.01 |
|
(0.01 |
) |
0.07 |
|
||||
|
Net income available to common shareholders |
|
$ |
0.08 |
|
$ |
0.13 |
|
$ |
0.12 |
|
$ |
0.29 |
|
|
Diluted earnings per common share |
|
|
|
|
|
|
|
$ |
— |
|
|||
|
Income from continuing operations |
|
$ |
0.09 |
|
$ |
0.12 |
|
$ |
0.12 |
|
$ |
0.21 |
|
|
Discontinued operations |
|
(0.01 |
) |
0.01 |
|
(0.01 |
) |
0.07 |
|
||||
|
Net income available to common shareholders |
|
$ |
0.08 |
|
$ |
0.13 |
|
$ |
0.11 |
|
$ |
0.28 |
|
See accompanying notes to consolidated financial statements.
4
Corporate Office Properties Trust and Subsidiaries
Consolidated Statements of Cash Flows
(Dollars in thousands)
(unaudited)
|
|
|
For the Six Months Ended |
|
||||
|
|
|
2007 |
|
2006 |
|
||
|
Cash flows from operating activities |
|
|
|
|
|
||
|
Net income |
|
$ |
13,424 |
|
$ |
19,053 |
|
|
Adjustments to reconcile net income to net cash provided by operating activities: |
|
|
|
|
|
||
|
Minority interests |
|
1,325 |
|
2,835 |
|
||
|
Depreciation and other amortization |
|
54,055 |
|
38,087 |
|
||
|
Amortization of deferred financing costs |
|
1,805 |
|
1,168 |
|
||
|
Amortization of deferred market rental revenue |
|
(985 |
) |
(1,050 |
) |
||
|
Equity in loss of unconsolidated entities |
|
151 |
|
55 |
|
||
|
Gain on sales of real estate |
|
(183 |
) |
(2,563 |
) |
||
|
Gain on sale of non-real estate investment |
|
(1,033 |
) |
— |
|
||
|
Share-based compensation |
|
3,141 |
|
1,491 |
|
||
|
Changes in operating assets and liabilities: |
|
|
|
|
|
||
|
Increase in deferred rent receivable |
|
(5,936 |
) |
(4,586 |
) |
||
|
Decrease in accounts receivable |
|
7,541 |
|
160 |
|
||
|
(Increase) decrease in restricted cash and prepaid and other assets |
|
(10,274 |
) |
3,333 |
|
||
|
Decrease in accounts payable, accrued expenses and other liabilities |
|
(4,037 |
) |
(1,386 |
) |
||
|
Increase in rents received in advance and security deposits |
|
6,310 |
|
3,350 |
|
||
|
Other |
|
(370 |
) |
(156 |
) |
||
|
Net cash provided by operating activities |
|
64,934 |
|
59,791 |
|
||
|
Cash flows from investing activities |
|
|
|
|
|
||
|
Purchases of and additions to commercial real estate properties |
|
(243,936 |
) |
(186,597 |
) |
||
|
Proceeds from sales of properties |
|
— |
|
28,209 |
|
||
|
Proceeds from disposition of non-real estate investment |
|
2,526 |
|
— |
|
||
|
Investments in and advances to unconsolidated entities |
|
— |
|
(372 |
) |
||
|
Acquisition of partner interests in consolidated joint ventures |
|
(1,262 |
) |
(3,016 |
) |
||
|
Distributions from unconsolidated entities |
|
89 |
|
254 |
|
||
|
Leasing costs paid |
|
(8,164 |
) |
(4,232 |
) |
||
|
Decrease in restricted cash associated with investing activities |
|
14,838 |
|
4,978 |
|
||
|
Other |
|
(262 |
) |
(544 |
) |
||
|
Net cash used in investing activities |
|
(236,171 |
) |
(161,320 |
) |
||
|
Cash flows from financing activities |
|
|
|
|
|
||
|
Proceeds from mortgage and other loans payable |
|
431,495 |
|
234,748 |
|
||
|
Repayments of mortgage and other loans payable |
|
(216,352 |
) |
(187,660 |
) |
||
|
Deferred financing costs paid |
|
(1,556 |
) |
(756 |
) |
||
|
Distributions paid to partners in consolidated joint ventures |
|
— |
|
(787 |
) |
||
|
Net proceeds from issuance of common shares |
|
6,140 |
|
85,054 |
|
||
|
Dividends paid |
|
(35,523 |
) |
(29,632 |
) |
||
|
Distributions paid |
|
(5,505 |
) |
(5,091 |
) |
||
|
Other |
|
(262 |
) |
617 |
|
||
|
Net cash provided by financing activities |
|
178,437 |
|
96,493 |
|
||
|
Net increase (decrease) in cash and cash equivalents |
|
7,200 |
|
(5,036 |
) |
||
|
Cash and cash equivalents |
|
|
|
|
|
||
|
Beginning of period |
|
7,923 |
|
10,784 |
|
||
|
End of period |
|
$ |
15,123 |
|
$ |
5,748 |
|
See accompanying notes to consolidated financial statements.
5
Corporate Office Properties Trust and Subsidiaries
Notes to Consolidated Financial Statements
(Dollars in thousands, except per share data)
(unaudited)
Corporate Office Properties Trust (“COPT”) and subsidiaries (collectively, the “Company”) is a fully-integrated and self-managed real estate investment trust (“REIT”) that focuses on the acquisition, development, ownership, management and leasing of primarily Class A suburban office properties in the Greater Washington, D.C. region and other select submarkets. We also have a core customer expansion strategy that is built on meeting, through acquisitions and development, the multi-location requirements of our strategic tenants. As of June 30, 2007, our investments in real estate included the following:
· 229 wholly owned operating properties in our portfolio totaling 17.7 million square feet;
· 21 wholly owned properties under construction or development that we estimate will total approximately 2.2 million square feet upon completion and one wholly owned office property totaling approximately 75,000 square feet that was under redevelopment;
· wholly owned land parcels totaling 1,362 acres that we believe are potentially developable into approximately 11.6 million square feet; and
· partial ownership interests in a number of other real estate projects in operations or under development or redevelopment.
We conduct almost all of our operations through our operating partnership, Corporate Office Properties, L.P. (the “Operating Partnership”), for which we are the managing general partner. The Operating Partnership owns real estate both directly and through subsidiary partnerships and limited liability companies (“LLCs”). A summary of our Operating Partnership’s forms of ownership and the percentage of those securities owned by COPT as of June 30, 2007 follows:
|
Common Units |
|
84% |
|
|
|
Series G Preferred Units |
|
100% |
|
|
|
Series H Preferred Units |
|
100% |
|
|
|
Series I Preferred Units |
|
0% |
|
|
|
Series J Preferred Units |
|
100% |
|
|
|
Series K Preferred Units |
|
100% |
|
(issued on January 9, 2007) |
Two of our trustees also controlled, either directly or through ownership by other entities or family members, 13% of the Operating Partnership’s common units.
In addition to owning interests in real estate, the Operating Partnership also owns 100% of Corporate Office Management, Inc. (“COMI”) and owns, either directly or through COMI, 100% of the consolidated subsidiaries that are set forth below (collectively defined as the “Service Companies”):
|
Entity Name |
|
Type of Service Business |
|
COPT Property Management Services, LLC (“CPM”) |
|
Real Estate Management |
|
COPT Development & Construction Services, LLC (“CDC”) |
|
Construction and Development |
|
Corporate Development Services, LLC (“CDS”) |
|
Construction and Development |
|
COPT Environmental Systems, LLC (“CES”) |
|
Heating and Air Conditioning |
Most of the services that CPM provides are for us. CDC, CDS and CES provide services to us and to third parties.
6
The accompanying unaudited interim Consolidated Financial Statements have been prepared in accordance with the rules and regulations for reporting on Form 10-Q. Accordingly, certain information and disclosures required by accounting principles generally accepted in the United States for complete Consolidated Financial Statements are not included herein. These interim financial statements should be read together with the financial statements and notes thereto included in our 2006 Annual Report on Form 10-K. The interim financial statements on the previous pages reflect all adjustments that we believe are necessary for the fair statement of our financial position and results of operations for the interim periods presented. These adjustments are of a normal recurring nature. The results of operations for such interim periods are not necessarily indicative of the results for a full year.
We present both basic and diluted EPS. We compute basic EPS by dividing net income available to common shareholders by the weighted average number of common shares of beneficial interest (“common shares”) outstanding during the period. Our computation of diluted EPS is similar except that:
· the denominator is increased to include: (1) the weighted average number of potential additional common shares that would have been outstanding if securities that are convertible into our common shares were converted; and (2) the effect of dilutive potential common shares outstanding during the period attributable to share-based compensation using the treasury stock method; and
· the numerator is adjusted to add back any changes in income or loss that would result from the assumed conversion of securities into common shares that were added to the denominator.
Our computation of diluted EPS does not assume conversion of securities into our common shares if conversion of those securities would increase our diluted EPS in a given period. A summary of the numerator and denominator for purposes of basic and diluted EPS calculations is set forth below (dollars and shares in thousands, except per share data):
|
|
|
For the Three Months |
|
For the Six Months |
|
||||||||
|
|
|
2007 |
|
2006 |
|
2007 |
|
2006 |
|
||||
|
Numerator: |
|
|
|
|
|
|
|
|
|
||||
|
Income from continuing operations |
|
$ |
8,208 |
|
$ |
8,797 |
|
$ |
13,756 |
|
$ |
16,147 |
|
|
Add: Gain on sales of real estate, net |
|
161 |
|
25 |
|
161 |
|
135 |
|
||||
|
Less: Preferred share dividends |
|
(4,025 |
) |
(3,653 |
) |
(8,018 |
) |
(7,307 |
) |
||||
|
Numerator for basic and diluted EPS from continuing operations |
|
4,344 |
|
5,169 |
|
5,899 |
|
8,975 |
|
||||
|
(Loss) income from discontinued operations, net |
|
(492 |
) |
294 |
|
(493 |
) |
2,771 |
|
||||
|
Numerator for basic and diluted EPS on net income available to common shareholders |
|
$ |
3,852 |
|
$ |
5,463 |
|
$ |
5,406 |
|
$ |
11,746 |
|
|
Denominator (all weighted averages): |
|
|
|
|
|
|
|
|
|
||||
|
Denominator for basic EPS (common shares) |
|
46,686 |
|
41,510 |
|
46,185 |
|
40,594 |
|
||||
|
Dilutive effect of share-based compensation awards |
|
1,105 |
|
1,721 |
|
1,305 |
|
1,801 |
|
||||
|
Denominator for diluted EPS |
|
47,791 |
|
43,231 |
|
47,490 |
|
42,395 |
|
||||
|
|
|
|
|
|
|
|
|
|
|
||||
|
Basic EPS: |
|
|
|
|
|
|
|
|
|
||||
|
Income from continuing operations |
|
$ |
0.09 |
|
$ |
0.12 |
|
$ |
0.13 |
|
$ |
0.22 |
|
|
(Loss) income from discontinued operations |
|
(0.01 |
) |
0.01 |
|
(0.01 |
) |
0.07 |
|
||||
|
Net income available to common shareholders |
|
$ |
0.08 |
|
$ |
0.13 |
|
$ |
0.12 |
|
$ |
0.29 |
|
|
Diluted EPS: |
|
|
|
|
|
|
|
|
|
||||
|
Income from continuing operations |
|
$ |
0.09 |
|
$ |
0.12 |
|
$ |
0.12 |
|
$ |
0.21 |
|
|
(Loss) income from discontinued operations |
|
(0.01 |
) |
0.01 |
|
(0.01 |
) |
0.07 |
|
||||
|
Net income available to common shareholders |
|
$ |
0.08 |
|
$ |
0.13 |
|
$ |
0.11 |
|
$ |
0.28 |
|
7
Our diluted EPS computations do not include the effects of the following securities since the conversions of such securities would increase diluted EPS for the respective periods:
|
|
|
Weighted Average Shares in Denominator |
|
||||||
|
|
|
For the Three Months |
|
For the Six Months |
|
||||
|
|
|
2007 |
|
2006 |
|
2007 |
|
2006 |
|
|
Conversion of weighted average common units |
|
8,313 |
|
8,465 |
|
8,361 |
|
8,493 |
|
|
Conversion of weighted average convertible preferred shares |
|
434 |
|
— |
|
415 |
|
— |
|
|
Conversion of weighted average convertible preferred units |
|
176 |
|
176 |
|
176 |
|
176 |
|
The 3.5% Exchangeable Senior Notes did not affect our diluted EPS reported above since the weighted average closing price of our common shares during the period over which the notes were outstanding was less than $54.30.
In June 2006, the FASB issued Interpretation No. 48, “Accounting for Uncertainty in Income Taxes - - an interpretation of FASB Statement No. 109” (“FIN 48”). FIN 48 clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements in accordance with FASB Statement No. 109, “Accounting for Income Taxes.” FIN 48 prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. FIN 48 also provides guidance on de-recognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. FIN 48 is effective for fiscal years beginning after December 15, 2006. Our adoption of FIN 48 did not have a material effect on our financial position, results of operations or cash flows.
In September 2006, the FASB issued Statement of Financial Accounting Standards No. 157, “Fair Value Measurements” (“SFAS 157”). SFAS 157 defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles and expands disclosures about fair value measurements. The Statement does not require any new fair value measurements but does apply under other accounting pronouncements that require or permit fair value measurements. The changes to current practice resulting from the Statement relate to the definition of fair value, the methods used to measure fair value and the expanded disclosures about fair value measurements. SFAS 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007, and interim periods within those fiscal years, with earlier application encouraged. We do not expect that the adoption of this Statement will have a material effect on our financial position, results of operations or cash flows.
In February 2007, the FASB issued Statement of Financial Accounting Standards No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities” (“SFAS 159”). SFAS 159 permits entities to choose to measure many financial assets and financial liabilities at fair value. Unrealized gains and losses on items for which the fair value option has been elected are reported in earnings. SFAS 159 is effective for fiscal years beginning after November 15, 2007. We are currently assessing the impact of SFAS 159 on our consolidated financial position and results of operations.
Operating properties consisted of the following:
|
|
June 30, |
|
December 31, |
|
|||
|
|
|
2007 |
|
2006 |
|
||
|
Land |
|
$ |
411,938 |
|
$ |
343,098 |
|
|
Buildings and improvements |
|
1,980,661 |
|
1,689,359 |
|
||
|
|
|
2,392,599 |
|
2,032,457 |
|
||
|
Less: accumulated depreciation |
|
(252,301 |
) |
(219,574 |
) |
||
|
|
|
$ |
2,140,298 |
|
$ |
1,812,883 |
|
As of June 30, 2007, 429 Ridge Road, an office property located in Dayton, New Jersey that we were under contract to sell for $17,000, was classified as held for sale (Dayton, New Jersey is located in the Northern/Central
8
New Jersey Region). We expect to complete the sale of this property by January 2008. The components associated with 429 Ridge Road as of June 30, 2007 included the following:
|
|
June 30, |
|
||
|
|
|
2007 |
|
|
|
Land |
|
$ |
2,932 |
|
|
Buildings and improvements |
|
14,593 |
|
|
|
|
|
17,525 |
|
|
|
Less: accumulated depreciation |
|
(2,947 |
) |
|
|
|
|
$ |
14,578 |
|
Projects we had under construction or development consisted of the following:
|
|
June 30, |
|
December 31, |
|
|||
|
|
|
2007 |
|
2006 |
|
||
|
Land |
|
$ |
205,887 |
|
$ |
153,436 |
|
|
Construction in progress |
|
163,810 |
|
144,991 |
|
||
|
|
|
$ |
369,697 |
|
$ |
298,427 |
|
2007 Acquisitions
On January 9 and 10, 2007, we completed a series of transactions that resulted in the acquisition of 56 operating properties totaling approximately 2.4 million square feet and land parcels totaling 187 acres. We refer to these transactions collectively as the Nottingham Acquisition. All of the acquired properties are located in Maryland, with 36 of the operating properties, totaling 1.6 million square feet, and land parcels totaling 175 acres, located in White Marsh, Maryland (located in the Suburban Baltimore region) and the remaining properties and land parcels located in other regions in Northern Baltimore County and the Baltimore/Washington Corridor. We believe that the land parcels can support at least 2.0 million developable square feet. We completed the Nottingham Acquisition for an aggregate cost of $366,830. The table below sets forth the allocation of the acquisition costs of the Nottingham Acquisition:
|
Land, operating properties |
|
$ |
70,250 |
|
|
Land, construction or development |
|
37,813 |
|
|
|
Building and improvements |
|
210,242 |
|
|
|
Intangible assets on real estate acquisitions |
|
53,214 |
|
|
|
Total assets |
|
371,519 |
|
|
|
Deferred revenue associated with acquired operating leases |
|
(4,689 |
) |
|
|
Total acquisition cost |
|
$ |
366,830 |
|
Intangible assets recorded in connection with the Nottingham Acquisition include the following:
|
|
|
|
Weighted |
|
||
|
|
|
|
|
Average |
|
|
|
|
|
|
|
Amortization |
|
|
|
|
|
|
|
Period (in Years) |
|
|
|
Tenant relationship value |
|
$ |
25,778 |
|
8 |
|
|
Lease-up value |
|
19,425 |
|
4 |
|
|
|
Lease cost portion of deemed cost avoidance |
|
4,206 |
|
5 |
|
|
|
Lease to market value |
|
3,805 |
|
4 |
|
|
|
|
|
$ |
53,214 |
|
6 |
|
On April 6, 2007, we purchased for $13,586 the remaining 50% undivided interest in a 132-acre parcel of land located in Colorado Springs, Colorado that we believe can support approximately 1.75 million developable square feet of office space.
9
2007 Construction and Development Activities
During the six months ended June 30, 2007, we had one property totaling 193,000 square feet located in Chesterfield County, Virginia become fully operational and placed into service 21,363 square feet in a partially operational property located in the Baltimore/Washington Corridor (operational space in this property totaled 89,559 square feet at June 30, 2007).
As of June 30, 2007, we had construction underway on five new buildings in the Baltimore/Washington Corridor (including the partially operational property discussed above and one property owned through a joint venture formed in July 2007 in which we have a 50% interest), two in Colorado Springs, Colorado, two in Suburban Baltimore and one in Southwest Virginia. We also had development activities underway on five new buildings located in the Baltimore/Washington Corridor, three in Colorado Springs, Colorado, two in Suburban Maryland and one each in Suburban Baltimore and King George County, Virginia. In addition, we had redevelopment underway on one wholly owned existing building located in Colorado Springs, Colorado and three buildings owned by a joint venture (two are located in Northern Virginia and the other in the Baltimore/Washington Corridor).
6. Real Estate Joint Ventures
During the six months ended June 30, 2007, we had an investment in one unconsolidated real estate joint venture accounted for using the equity method of accounting. Information pertaining to this joint venture investment is set forth below.
|
|
|
Investment Balance at |
|
|
|
|
|
|
|
Total |
|
Maximum |
|
||||||
|
|
|
June 30, |
|
December 31, |
|
Date |
|
|
|
Nature of |
|
Assets at |
|
Exposure |
|
||||
|
|
|
2007 |
|
2006 |
|
Acquired |
|
Ownership |
|
Activity |
|
6/30/2007 |
|
to Loss (1) |
|
||||
|
Harrisburg Corporate Gateway Partners, L.P. |
|
$ |
(3,852 |
)(2) |
$ |
(3,614 |
)(2) |
9/29/2005 |
|
20 |
% |
Operates 16 buildings (3) |
|
$ |
74,249 |
|
$ |
— |
|
(1) Derived from the sum of our investment balance and maximum additional unilateral capital contributions or loans required from us. Not reported above are additional amounts that we and our partner are required to fund when needed by this joint venture; these funding requirements are proportional to our respective ownership percentages. Also not reported above are additional unilateral contributions or loans from us, the amounts of which are uncertain, which we would be required to make if certain contingent events occur.
(2) The carrying amount of our investment in this joint venture was lower than our share of the equity in the joint venture by $4,718 at June 30, 2007 and $5,072 at December 31, 2006 due to our deferral of gain on the contribution by us of real estate into the joint venture upon its formation. A difference will continue to exist to the extent the nature of our continuing involvement in the joint venture remains the same.
(3) This joint venture’s properties are located in Greater Harrisburg, Pennsylvania.
The following table sets forth condensed balance sheets for Harrisburg Corporate Gateway Partners, L.P.:
|
|
June 30, |
|
December 31, |
|
|||
|
|
|
2007 |
|
2006 |
|
||
|
Commercial real estate property |
|
$ |
71,834 |
|
$ |
72,688 |
|
|
Other assets |
|
2,415 |
|
3,207 |
|
||
|
Total assets |
|
$ |
74,249 |
|
$ |
75,895 |
|
|
|
|
|
|
|
|
||
|
Liabilities |
|
$ |
67,918 |
|
$ |
67,350 |
|
|
Owners’ equity |
|
6,331 |
|
8,545 |
|
||
|
Total liabilities and owners’ equity |
|
$ |
74,249 |
|
$ |
75,895 |
|
The following table sets forth combined condensed statements of operations for the two unconsolidated real estate joint ventures we owned from January 1, 2006 through June 30, 2007, which included Harrisburg Corporate Gateway Partners, L.P. and Route 46 Partners, a joint venture that was dissolved on July 26, 2006:
10
|
|
For the Three Months |
|
For the Six Months |
|
|||||||||
|
|
|
2007 |
|
2006 |
|
2007 |
|
2006 |
|
||||
|
Revenues |
|
$ |
2,426 |
|
$ |
3,254 |
|
$ |
4,870 |
|
$ |
6,458 |
|
|
Property operating expenses |
|
(876 |
) |
(1,082 |
) |
(1,836 |
) |
(2,187 |
) |
||||
|
Interest expense |
|
(980 |
) |
(1,189 |
) |
(2,118 |
) |
(2,351 |
) |
||||
|
Depreciation and amortization expense |
|
(855 |
) |
(993 |
) |
(1,722 |
) |
(1,905 |
) |
||||
|
Net income |
|
$ |
(285 |
) |
$ |
(10 |
) |
$ |
(806 |
) |
$ |
15 |
|
Activity related to consolidated joint ventures during the six months ended June 30, 2007 included the following:
· as of December 31, 2006, we owned a 50% interest in Commons Office 6-B, LLC, an entity developing a land parcel in Hanover, Maryland. We acquired the remaining 50% interest in this entity for $1,262 on May 24, 2007; and
· on June 26, 2007, we completed the formation of Enterprise Campus Developers, LLC, an entity in which we own a 90% interest. This entity was created to develop and construct one or more office buildings on land parcels located in College Park, Maryland as part of a separate joint venture to be formed with another party. At June 30, 2007, development and construction activities were underway in anticipation of the entity’s membership into this future joint venture.
The table below sets forth information pertaining to our investments in consolidated joint ventures at June 30, 2007:
|
|
|
|
|
Ownership |
|
|
|
Total |
|
Collateralized |
|
||
|
|
|
Date |
|
% at |
|
Nature of |
|
Assets at |
|
Assets at |
|
||
|
|
|
Acquired |
|
6/30/2007 |
|
Activity |
|
6/30/2007 |
|
6/30/2007 |
|
||
|
COPT Opportunity Invest I, LLC |
|
12/20/2005 |
|
92.5% |
|
Redeveloping three properties (1) |
|
$ |
47,910 |
|
$ |
— |
|
|
Enterprise Campus Developers, LLC |
|
6/26/2007 |
|
90.0% |
|
Developing land parcels (2) |
|
11,401 |
|
— |
|
||
|
MOR Forbes 2 LLC |
|
12/24/2002 |
|
50.0% |
|
Operates one building (3) |
|
4,264 |
|
— |
|
||
|
COPT-FD Indian Head, LLC |
|
10/23/2006 |
|
75.0% |
|
Developing land parcel (4) |
|
3,029 |
|
— |
|
||
|
|
|
|
|
|
|
|
|
$ |
66,604 |
|
$ |
— |
|
(1) This joint venture owns two properties in the Northern Virginia region and one in the Baltimore/Washington Corridor region.
(2) This joint venture is developing land parcels located in College Park, Maryland (located in the Suburban Maryland region).
(3) This joint venture’s property is located in Lanham, Maryland (located in the Suburban Maryland region).
(4) This joint venture’s property is located in Charles County, Maryland (located in our “other” business segment).
Our commitments and contingencies pertaining to our real estate joint ventures are disclosed in Note 20.
Intangible assets on real estate acquisitions consisted of the following:
|
|
|
June 30, 2007 |
|
December 31, 2006 |
|
||||||||||||||
|
|
|
Gross Carrying |
|
Accumulated |
|
Net Carrying |
|
Gross Carrying |
|
Accumulated |
|
Net Carrying |
|
||||||
|
|
|
Amount |
|
Amortization |
|
Amount |
|
Amount |
|
Amortization |
|
Amount |
|
||||||
|
Lease-up value |
|
$ |
125,144 |
|
$ |
49,210 |
|
$ |
75,934 |
|
$ |
105,719 |
|
$ |
38,279 |
|
$ |
67,440 |
|
|
Tenant relationship value |
|
35,149 |
|
4,117 |
|
31,032 |
|
9,371 |
|
1,178 |
|
8,193 |
|
||||||
|
Lease cost portion of deemed cost avoidance |
|
17,086 |
|
7,307 |
|
9,779 |
|
12,880 |
|
5,819 |
|
7,061 |
|
||||||
|
Lease to market value |
|
14,428 |
|
8,481 |
|
5,947 |
|
10,623 |
|
7,178 |
|
3,445 |
|
||||||
|
Market concentration premium |
|
1,333 |
|
164 |
|
1,169 |
|
1,333 |
|
147 |
|
1,186 |
|
||||||
|
|
|
$ |
193,140 |
|
$ |
69,279 |
|
$ |
123,861 |
|
$ |
139,926 |
|
$ |
52,601 |
|
$ |
87,325 |
|
Amortization of the intangible asset categories set forth above totaled $16,678 in the six months ended June 30, 2007 and $7,608 in the six months ended June 30, 2006. The approximate weighted average amortization periods
11
of the categories set forth above follow: lease-up value: nine years; tenant relationship value: eight years; lease cost portion of deemed cost avoidance: six years; lease to market value: four years; and market concentration premium: 35 years. The approximate weighted average amortization period for all of the categories combined is nine years. Estimated amortization expense associated with the intangible asset categories set forth above for the six months ended December 31, 2007 is $12.5 million, for 2008 is $21.7 million, for 2009 is $19.1 million, for 2010 is $14.8 million, for 2011 is $11.8 million and for 2012 is $9.5 million.
Deferred charges consisted of the following:
|
|
June 30, |
|
December 31, |
|
|||
|
|
|
2007 |
|
2006 |
|
||
|
Deferred leasing costs |
|
$ |
58,875 |
|
$ |
52,263 |
|
|
Deferred financing costs |
|
29,915 |
|
28,275 |
|
||
|
Goodwill |
|
1,853 |
|
1,853 |
|
||
|
Deferred other |
|
155 |
|
155 |
|
||
|
|
|
90,798 |
|
82,546 |
|
||
|
Accumulated amortization |
|
(43,506 |
) |
(38,836 |
) |
||
|
Deferred charges, net |
|
$ |
47,292 |
|
$ |
43,710 |
|
Our accounts receivable are reported net of an allowance for bad debts of $326 at June 30, 2007 and $252 at December 31, 2006.
Prepaid and other assets consisted of the following:
|
|
June 30, |
|
December 31, |
|
|||
|
|
|
2007 |
|
2006 |
|
||
|
Construction contract costs incurred in excess of billings |
|
$ |
31,817 |
|
$ |
18,324 |
|
|
Furniture, fixtures and equipment |
|
10,448 |
|
10,495 |
|
||
|
Prepaid expenses |
|
5,762 |
|
9,059 |
|
||
|
Other assets |
|
8,966 |
|
10,589 |
|
||
|
Prepaid and other assets |
|
$ |
56,993 |
|
$ |
48,467 |
|
12
Our debt consisted of the following:
|
|
|
Maximum |
|
|
|
|
|
|
|
Scheduled |
|
|||
|
|
|
Principal Amount |
|
Carrying Value at |
|
|
|
Maturity |
|
|||||
|
|
|
Under Debt at |
|
June 30, |
|
December 31, |
|
Stated Interest Rates at |
|
Dates at |
|
|||
|
|
|
June 30, 2007 |
|
2007 |
|
2006 |
|
June 30, 2007 |
|
June 30, 2007 |
|
|||
|
Mortgage and other loans payable: |
|
|
|
|
|
|
|
|
|
|
|
|||
|
Revolving Credit Facility |
|
|
|
|
|
|
|
|
|
|
|
|||
|
Wachovia Bank, N.A. Revolving Credit Facility |
|
$ |
500,000 |
|
$ |
267,000 |
|
$ |
185,000 |
|
LIBOR + 1.15% to 1.55% |
|
March 2008 (1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
|
Mortgage Loans |
|
|
|
|
|
|
|
|
|
|
|
|||
|
Fixed rate mortgage loans (2) |
|
N/A |
|
1,159,654 |
|
1,020,619 |
|
5.20% - 8.75% (3) |
|
2007 - 2034 (4) |
|
|||
|
Variable rate construction loan facilities |
|
111,500 |
|
88,966 |
|
56,079 |
|
LIBOR + 1.40% to 1.50% |
|
2007 - 2008 (5) |
|
|||
|
Other variable rate mortgage loans |
|
N/A |
|
34,500 |
|
34,500 |
|
LIBOR + 1.20% to 1.50% |
|
2007 (6) |
|
|||
|
Total mortgage loans |
|
|
|
1,283,120 |
|
1,111,198 |
|
|
|
|
|
|||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
|
Note payable |
|
|
|
|
|
|
|
|
|
|
|
|||
|
Unsecured seller notes |
|
N/A |
|
2,358 |
|
2,339 |
|
0% - 5.95% |
|
2007-2008 |
|
|||
|
Total mortgage and other loans payable |
|
|
|
1,552,478 |
|
1,298,537 |
|
|
|
|
|
|||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
|
3.5% Exchangeable Senior Notes |
|
N/A |
|
200,000 |
|
200,000 |
|
3.50% |
|
September 2026 (7) |
|
|||
|
Total debt |
|
|
|
$ |
1,752,478 |
|
$ |
1,498,537 |
|
|
|
|
|
|
(1) The Revolving Credit Facility may be extended for a one-year period, subject to certain conditions.
(2) Several of the fixed rate mortgages carry interest rates that were above or below market rates upon assumption and therefore are recorded at their fair value based on applicable effective interest rates. The carrying values of these loans reflect net premiums totaling $702 at June 30, 2007 and $210 at December 31, 2006.
(3) The weighted average interest rate on these loans was 5.96% at June 30, 2007.
(4) A loan with a balance of $4,857 at June 30, 2007 that matures in 2034 may be repaid in March 2014, subject to certain conditions.
(5) At June 30, 2007, $74,099 in loans scheduled to mature in 2008 may be extended by us for a one-year period, subject to certain conditions.
(6) At June 30, 2007, a $34,500 loan scheduled to mature in 2007 may be extended by us for a one-year period, subject to certain conditions.
(7) Refer to our 2006 Annual Report on Form 10-K for descriptions of provisions for early redemption and repurchase of these notes.
We capitalized interest costs of $8,906 in the six months ended June 30, 2007 and $6,665 in the six months ended June 30, 2006.
12. Derivatives
The following table sets forth our derivative contracts at June 30, 2007 and their respective fair values:
|
|
|
|
|
|
|
|
|
|
Fair Value at |
|
||||||
|
|
|
Notional |
|
One-Month |
|
Effective |
|
Expiration |
|
June 30, |
|
December 31, |
|
|||
|
Nature of Derivative |
|
Amount |
|
LIBOR base |
|
Date |
|
Date |
|
2007 |
|
2006 |
|
|||
|
Interest rate swap |
|
$ |
50,000 |
|
5.0360 |
% |
3/28/2006 |
|
3/30/2009 |
|
$ |
141 |
|
$ |
(42 |
) |
|
Interest rate swap |
|
25,000 |
|
5.2320 |
% |
5/1/2006 |
|
5/1/2009 |
|
(14 |
) |
(133 |
) |
|||
|
Interest rate swap |
|
25,000 |
|
5.2320 |
% |
5/1/2006 |
|
5/1/2009 |
|
(14 |
) |
(133 |
) |
|||
|
|
|
|
|
|
|
|
|
|
|
$ |
113 |
|
$ |
(308 |
) |
|
These amounts are included on the Consolidated Balance Sheets as prepaid and other assets as of June 30, 2007 and other liabilities as of December 31, 2006.
We designated these derivatives as cash flow hedges. These contracts hedge the risk of changes in interest rates on certain of our one-month LIBOR-based variable rate borrowings until their respective maturities.
The table below sets forth our accounting application of changes in derivative fair values:
13
|
|
For the Three |
|
For the Six |
|
|||||||||
|
|
|
June 30, |
|
June 30, |
|
||||||||
|
|
|
2007 |
|
2006 |
|
2007 |
|
2006 |
|
||||
|
Increase in fair value applied to accumulated other comprehensive loss and minority interests |
|
$ |
669 |
|
$ |
723 |
|
$ |
421 |
|
$ |
833 |
|
Preferred Shares
Preferred shares of beneficial interest (“preferred shares”) consisted of the following:
|
|
|
June 30, |
|
December 31, |
|
||
|
|
|
2007 |
|
2006 |
|
||
|
2,200,000 designated as Series G Cumulative Redeemable Preferred Shares of beneficial interest (2,200,000 shares issued with an aggregate liquidation preference of $55,000) |
|
$ |
22 |
|
$ |
22 |
|
|
2,000,000 designated as Series H Cumulative Redeemable Preferred Shares of beneficial interest (2,000,000 shares issued with an aggregate liquidation preference of $50,000) |
|
20 |
|
20 |
|
||
|
3,390,000 designated as Series J Cumulative Redeemable Preferred Shares of beneficial interest (3,390,000 shares issued with an aggregate liquidation preference of $84,750) |
|
34 |
|
34 |
|
||
|
531,667 designated as Series K Cumulative Redeemable Convertible Preferred Shares of beneficial interest (531,667 shares issued with an aggregate liquidation preference of $26,583) |
|
5 |
|
— |
|
||
|
Total preferred shares |
|
$ |
81 |
|
$ |
76 |
|
|
|
|
|
|
|
|
||
We issued the Series K Cumulative Redeemable Convertible Preferred Shares of beneficial interest (the “Series K Preferred Shares”) in the Nottingham Acquisition at a value of, and liquidation preference equal to, $50 per share. The Series K Preferred Shares are nonvoting, redeemable for cash at $50 per share at our option on or after January 9, 2017, and are convertible, subject to certain conditions, into common shares on the basis of 0.8163 common shares for each preferred share, in accordance with the terms of the Articles Supplementary describing the Series K Preferred Shares. Holders of the Series K Preferred Shares are entitled to cumulative dividends, payable quarterly (as and if declared by our Board of Trustees). Dividends accrue from the date of issue at the annual rate of $2.80 per share, which is equal to 5.6% of the $50 per share liquidation preference.
Common Shares
In connection with the Nottingham Acquisition in January 2007, we issued 3,161,000 common shares at a value of $49.57 per share.
During the six months ended June 30, 2007, we converted 401,621 common units in our Operating Partnership into common shares on the basis of one common share for each common unit.
See Note 17 for disclosure of common share activity pertaining to our share-based compensation plans.
Accumulated Other Comprehensive Loss
The table below sets forth activity in the accumulated other comprehensive loss or income component of shareholders’ equity:
14
|
|
For the Six Months |
|
|||||
|
|
|
2007 |
|
2006 |
|
||
|
Beginning balance |
|
$ |
(693 |
) |
$ |
(482 |
) |
|
Unrealized gain on derivatives, net of minority interests |
|
342 |
|
683 |
|
||
|
Realized loss on derivatives, net of minority interests |
|
26 |
|
25 |
|
||
|
Ending balance |
|
$ |
(325 |
) |
$ |
226 |
|
The table below sets forth our comprehensive income:
|
|
|
For the Three Months |
|
For the Six Months |
|
||||||||
|
|
|
Ended June 30, |
|
Ended June 30, |
|
||||||||
|
|
|
2007 |
|
2006 |
|
2007 |
|
2006 |
|
||||
|
Net income |
|
$ |
7,877 |
|
$ |
9,116 |
|
$ |
13,424 |
|
$ |
19,053 |
|
|
Unrealized gain on derivatives, net of minority interests |
|
565 |
|
593 |
|
342 |
|
683 |
|
||||
|
Realized loss on derivatives, net of minority interests |
|
13 |
|
13 |
|
26 |
|
25 |
|
||||
|
Total comprehensive income |
|
$ |
8,455 |
|
$ |
9,722 |
|
$ |
13,792 |
|
$ |
19,761 |
|
15
The following table summarizes our dividends and distributions when either the payable dates or record dates occurred during the six months ended June 30, 2007:
|
|
|
Record Date |
|
Payable Date |
|
Dividend/ |
|
Total Dividend/ |
|
||
|
Series G Preferred Shares: |
|
|
|
|
|
|
|
|
|
||
|
Fourth Quarter 2006 |
|
December 29, 2006 |
|
January 17, 2007 |
|
$ |
0.5000 |
|
$ |
1,100 |
|
|
First Quarter 2007 |
|
March 30, 2007 |
|
April 17, 2007 |
|
$ |
0.5000 |
|
$ |
1,100 |
|
|
Second Quarter 2007 |
|
June 29, 2007 |
|
July 17, 2007 |
|
$ |
0.5000 |
|
$ |
1,100 |
|
|
|
|
|
|
|
|
|
|
|
|
||
|
Series H Preferred Shares: |
|
|
|
|
|
|
|
|
|
||
|
Fourth Quarter 2006 |
|
December 29, 2006 |
|
January 17, 2007 |
|
$ |
0.4688 |
|
$ |
938 |
|
|
First Quarter 2007 |
|
March 30, 2007 |
|
April 17, 2007 |
|
$ |
0.4688 |
|
$ |
938 |
|
|
Second Quarter 2007 |
|
June 29, 2007 |
|
July 17, 2007 |
|
$ |
0.4688 |
|
$ |
938 |
|
|
|
|
|
|
|
|
|
|
|
|
||
|
Series J Preferred Shares: |
|
|
|
|
|
|
|
|
|
||
|
Fourth Quarter 2006 |
|
December 29, 2006 |
|
January 17, 2007 |
|
$ |
0.4766 |
|
$ |
1,616 |
|
|
First Quarter 2007 |
|
March 30, 2007 |
|
April 17, 2007 |
|
$ |
0.4766 |
|
$ |
1,616 |
|
|
Second Quarter 2007 |
|
June 29, 2007 |
|
July 17, 2007 |
|
$ |
0.4766 |
|
$ |
1,616 |
|
|
|
|
|
|
|
|
|
|
|
|
||
|
Series K Preferred Shares: |
|
|
|
|
|
|
|
|
|
||
|
First Quarter 2007 |
|
March 30, 2007 |
|
April 17, 2007 |
|
$ |
0.7466 |
|
$ |
397 |
|
|
Second Quarter 2007 |
|
June 29, 2007 |
|
July 17, 2007 |
|
$ |
0.7000 |
|
$ |
372 |
|
|
|
|
|
|
|
|
|
|
|
|
||
|
Common Shares: |
|
|
|
|
|
|
|
|
|
||
|
Fourth Quarter 2006 |
|
December 29, 2006 |
|
January 17, 2007 |
|
$ |
0.3100 |
|
$ |
13,292 |
|
|
First Quarter 2007 |
|
March 30, 2007 |
|
April 17, 2007 |
|
$ |
0.3100 |
|
$ |
14,529 |
|
|
Second Quarter 2007 |
|
June 29, 2007 |
|
July 17, 2007 |
|
$ |
0.3100 |
|
$ |
14,613 |
|
|
|
|
|
|
|
|
|
|
|
|
||
|
Series I Preferred Units: |
|
|
|
|
|
|
|
|
|
||
|
Fourth Quarter 2006 |
|
December 29, 2006 |
|
January 17, 2007 |
|
$ |
0.4688 |
|
$ |
165 |
|
|
First Quarter 2007 |
|
March 30, 2007 |
|
April 17, 2007 |
|
$ |
0.4688 |
|
$ |
165 |
|
|
Second Quarter 2007 |
|
June 29, 2007 |
|
July 17, 2007 |
|
$ |
0.4688 |
|
$ |
165 |
|
|
|
|
|
|
|
|
|
|
|
|
||
|
Common Units: |
|
|
|
|
|
|
|
|
|
||
|
Fourth Quarter 2006 |
|
December 29, 2006 |
|
January 17, 2007 |
|
$ |
0.3100 |
|
$ |
2,622 |
|
|
First Quarter 2007 |
|
March 30, 2007 |
|
April 17, 2007 |
|
$ |
0.3100 |
|
$ |
2,554 |
|
|
Second Quarter 2007 |
|
June 29, 2007 |
|
July 17, 2007 |
|
$ |
0.3100 |
|
$ |
2,574 |
|
16
|
|
|
For the Six Months Ended |
|
||||
|
|
|
June 30, |
|
||||
|
|
|
2007 |
|
2006 |
|
||
|
Supplemental schedule of non-cash investing and financing activities: |
|
|
|
|
|
||
|
|
|
|
|
|
|
||
|
Debt assumed in connection with acquisition of properties |
|
$ |
38,848 |
|
$ |
37,484 |
|
|
(Decrease) increase in accrued capital improvements, leasing, and acquisition costs |
|
$ |
(3,057 |
) |
$ |
6,557 |
|
|
Amortization of discounts and premiums on mortgage loans to commercial real estate properties |
|
$ |
275 |
|
$ |
87 |
|
|
Increase in fair value of derivatives applied to AOCL and minority interests |
|
$ |
421 |
|
$ |
833 |
|
|
Issuance of common shares in connection with acquisition of properties |
|
$ |
156,691 |
|
$ |
— |
|
|
Issuance of preferred shares in connection with acquisition of properties |
|
$ |
26,583 |
|
$ |
— |
|
|
Restricted cash used in connection with acquisition of properties |
|
$ |
20,122 |
|
$ |
— |
|
|
Issuance of common units in the Operating Partnership in connection with acqusitions of interests in properties |
|
$ |
12,125 |
|
$ |
7,497 |
|
|
Reclassification of operating asset to investment in consolidated real estate joint venture |
|
$ |
10,341 |
|
$ |
— |
|
|
Consolidation of real estate joint venture: |
|
|
|
|
|
||
|
Real estate assets |
|
$ |
39 |
|
$ |
— |
|
|
Prepaid and other assets |
|
1,021 |
|
— |
|
||
|
Minority interest |
|
(1,060 |
) |
— |
|
||
|
Net adjustment |
|
$ |
— |
|
$ |
— |
|
|
Adjustments to minority interests resulting from changes in ownership of Operating Partnership by COPT |
|
$ |
25,167 |
|
$ |
9,643 |
|
|
Dividends/distribution payable |
|
$ |
20,754 |
|
$ |
17,450 |
|
|
Decrease in minority interests and increase in shareholders’ equity in connection with the conversion of common units into common shares |
|
$ |
18,958 |
|
$ |
4,691 |
|
|
Increase in accrued furniture, fixtures and equipment |
|
$ |
19 |
|
$ |
1,584 |
|
17
As of June 30, 2007, we had nine primary office property segments: Baltimore/Washington Corridor; Northern Virginia; Suburban Baltimore; Colorado Springs, Suburban Maryland; Greater Philadelphia; St. Mary’s and King George Counties; San Antonio; and Northern/Central New Jersey.
The table below reports segment financial information. Our segment entitled “Other” includes assets and operations not specifically associated with the other defined segments, including corporate assets, investments in unconsolidated entities and elimination entries required in consolidation. We measure the performance of our segments based on total revenues less property operating expenses, a measure we define as net operating income (“NOI”). We believe that NOI is an important supplemental measure of operating performance for a REIT’s operating real estate because it provides a measure of the core operations that is unaffected by depreciation, amortization, financing and general and administrative expenses; this measure is particularly useful in our opinion in evaluating the performance of geographic segments, same-office property groupings and individual properties.
|
|
|
Baltimore/ |
|
Northern |
|
Suburban |
|
Colorado |
|
Suburban |
|
Greater |
|
St. Mary’s & |
|
San |
|
Northern/ |
|
Other |
|
Total |
|
|
|||||||||||
|
Three Months Ended June 30, 2007 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
Revenues |
|
$ |
43,622 |
|
$ |
18,254 |
|
$ |
13,448 |
|
$ |
3,695 |
|
$ |
3,943 |
|
$ |
2,507 |
|
$ |
3,029 |
|
$ |
1,863 |
|
$ |
1,006 |
|
$ |
(197 |
) |
$ |
91,170 |
|
|
|
Property operating expenses |
|
13,336 |
|
6,483 |
|
4,954 |
|
1,192 |
|
1,652 |
|
29 |
|
739 |
|
386 |
|
387 |
|
136 |
|
29,294 |
|
|
|||||||||||
|
NOI |
|
$ |
30,286 |
|
$ |
11,771 |
|
$ |
8,494 |
|
$ |
2,503 |
|
$ |
2,291 |
|
$ |
2,478 |
|
$ |
2,290 |
|
$ |
1,477 |
|
$ |
619 |
|
$ |
(333 |
) |
$ |
61,876 |
|
|
|
Additions to commercial real estate properties |
|
$ |
18,902 |
|
$ |
6,019 |
|
$ |
4,178 |
|
$ |
20,564 |
|
$ |
1,412 |
|
$ |
300 |
|
$ |
214 |
|
$ |
40 |
|
$ |
11 |
|
$ |
17,360 |
|
$ |
69,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
Three Months Ended June 30, 2006 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
Revenues |
|
$ |
34,797 |
|
$ |
15,796 |
|
$ |
7,230 |
|
$ |
1,963 |
|
$ |
3,785 |
|
$ |
2,506 |
|
$ |
3,037 |
|
$ |
1,797 |
|
$ |
2,386 |
|
$ |
(219 |
) |
$ |
73,078 |
|
|
|
Property operating expenses |
|
10,134 |
|
5,804 |
|
2,932 |
|
616 |
|
1,265 |
|
40 |
|
704 |
|
319 |
|
823 |
|
(239 |
) |
22,398 |
|
|
|||||||||||
|
NOI |
|
$ |
24,663 |
|
$ |
9,992 |
|
$ |
4,298 |
|
$ |
1,347 |
|
$ |
2,520 |
|
$ |
2,466 |
|
$ |
2,333 |
|
$ |
1,478 |
|
$ |
1,563 |
|
$ |
20 |
|
$ |
50,680 |
|
|
|
Additions to commercial real estate properties |
|
$ |
118,873 |
|
$ |
3,765 |
|
$ |
883 |
|
$ |
51,770 |
|
$ |
830 |
|
$ |
277 |
|
$ |
659 |
|
$ |
906 |
|
$ |
534 |
|
$ |
(390 |
) |
$ |
178,107 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
Six Months Ended June 30, 2007 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
Revenues |
|
$ |
87,459 |
|
$ |
35,426 |
|
$ |
26,529 |
|
$ |
7,290 |
|
$ |
7,910 |
|
$ |
5,013 |
|
$ |
6,127 |
|
$ |
3,644 |
|
$ |
2,792 |
|
$ |
(625 |
) |
$ |
181,565 |
|
|
|
Property operating expenses |
|
27,862 |
|
12,811 |
|
10,725 |
|
2,472 |
|
3,315 |
|
62 |
|
1,510 |
|
745 |
|
1,084 |
|
732 |
|
61,318 |
|
|
|||||||||||
|
NOI |
|
$ |
59,597 |
|
$ |
22,615 |
|
$ |
15,804 |
|
$ |
4,818 |
|
$ |
4,595 |
|
$ |
4,951 |
|
$ |
4,617 |
|
$ |
2,899 |
|
$ |
1,708 |
|
$ |
(1,357 |
) |
$ |
120,247 |
|
|
|
Additions to commercial real estate properties |
|
$ |
96,017 |
|
$ |
16,871 |
|
$ |
265,912 |
|
$ |
24,367 |
|
$ |
1,908 |
|
|||||||||||||||||||