UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549

FORM 10-Q

(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

Corporate Office Properties Trust
(Exact name of registrant as specified in its charter)

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

 

PAGE

PART I: FINANCIAL INFORMATION

 

 

 

 

 

Item 1:

Financial Statements:

 

 

 

Consolidated Balance Sheets as of June 30, 2007 and December 31, 2006 (unaudited)

 

3

 

Consolidated Statements of Operations for the three and six months ended June 30, 2007 and 2006 (unaudited)

 

4

 

Consolidated Statements of Cash Flows for the six months ended June 30, 2007 and 2006 (unaudited)

 

5

 

Notes to Consolidated Financial Statements

 

6

Item 2:

Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

25

Item 3:

Quantitative and Qualitative Disclosures About Market Risk

 

43

Item 4:

Controls and Procedures

 

43

 

 

 

 

PART II: OTHER INFORMATION

 

 

 

 

 

 

Item 1:

Legal Proceedings

 

44

Item 1A:

Risk Factors

 

44

Item 2:

Unregistered Sales of Equity Securities and Use of Proceeds

 

44

Item 3:

Defaults Upon Senior Securities

 

44

Item 4:

Submission of Matters to a Vote of Security Holders

 

45

Item 5:

Other Information

 

45

Item 6:

Exhibits

 

45

 

 

 

SIGNATURES

 

46

 

2




PART I: FINANCIAL INFORMATION

ITEM 1. Financial Statements

Corporate Office Properties Trust and Subsidiaries

Consolidated Balance Sheets

(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
June 30,

 

For the Six Months
Ended June 30,

 

 

 

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
June 30,

 

 

 

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)

1.             Organization

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




2.                                      Basis of Presentation

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.

3.                                      Earnings Per Share (“EPS”)

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
Ended June 30,

 

For the Six Months
Ended June 30,

 

 

 

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
Ended June 30,

 

For the Six Months
Ended June 30,

 

 

 

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.

4.             Recent Accounting Pronouncements

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.

5.             Commercial Real Estate Properties

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
Ended June 30,

 

For the Six Months 
Ended June 30,

 

 

 

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.

7.             Intangible Assets on Real Estate Acquisitions

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.

8.             Deferred Charges

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

 

 

9.             Accounts Receivable

Our accounts receivable are reported net of an allowance for bad debts of $326 at June 30, 2007 and $252 at December 31, 2006.

10.          Prepaid and Other Assets

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




11.          Debt

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
Months Ended

 

For the Six
Months Ended

 

 

 

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

 

 

13.          Shareholders’ Equity

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
Ended June 30,

 

 

 

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




14.          Dividends and Distributions

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/
Distribution Per
Share/Unit

 

Total Dividend/
Distribution

 

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




15.          Supplemental Information to Statements of Cash Flows

 

 

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




16.          Information by Business Segment

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/
Washington
Corridor

 

Northern 
Virginia

 

Suburban
Baltimore

 

Colorado
Springs

 

Suburban 
Maryland

 

Greater
Philadelphia

 

St. Mary’s &
King George
Counties

 

San
Antonio

 

Northern/
Central New
Jersey

 

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