Table of Contents

 

 

 

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, 2009

 

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 has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). o Yes   o No

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

 

Large accelerated filer x

 

Accelerated filer o

 

 

 

Non-accelerated filer o

 

Smaller reporting company o

(Do not check if a smaller reporting company)

 

 

 

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

 

As of July 22, 2009, 58,016,093 of the Company’s Common Shares of Beneficial Interest, $0.01 par value, were issued and outstanding.

 

 

 



Table of Contents

 

TABLE OF CONTENTS

 

FORM 10-Q

 

 

 

PAGE

PART I: FINANCIAL INFORMATION

 

 

 

 

Item 1:

Financial Statements:

 

 

Consolidated Balance Sheets as of June 30, 2009 and December 31, 2008 (unaudited)

3

 

Consolidated Statements of Operations for the three and six months ended June 30, 2009 and 2008 (unaudited)

4

 

Consolidated Statements of Equity for the six months ended June 30, 2009 and 2008 (unaudited)

5

 

Consolidated Statements of Cash Flows for the six months ended June 30, 2009 and 2008 (unaudited)

6

 

Notes to Consolidated Financial Statements (unaudited)

7

Item 2:

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

24

Item 3:

Quantitative and Qualitative Disclosures About Market Risk

35

Item 4:

Controls and Procedures

36

 

 

 

PART II: OTHER INFORMATION

 

 

 

 

Item 1:

Legal Proceedings

36

Item 1A:

Risk Factors

36

Item 2:

Unregistered Sales of Equity Securities and Use of Proceeds

37

Item 3:

Defaults Upon Senior Securities

37

Item 4:

Submission of Matters to a Vote of Security Holders

37

Item 5:

Other Information

38

Item 6:

Exhibits

38

 

 

 

SIGNATURES

39

 

2



Table of Contents

 

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,

 

 

 

2009

 

2008

 

Assets

 

 

 

 

 

Properties, net:

 

 

 

 

 

Operating properties, net

 

$

2,340,574

 

$

2,283,870

 

Projects under construction or development

 

513,562

 

494,596

 

Total properties, net

 

2,854,136

 

2,778,466

 

Cash and cash equivalents

 

11,931

 

6,775

 

Restricted cash

 

17,879

 

13,745

 

Accounts receivable, net

 

13,776

 

13,684

 

Deferred rent receivable

 

67,137

 

64,131

 

Intangible assets on real estate acquisitions, net

 

81,090

 

91,848

 

Deferred charges, net

 

48,812

 

51,801

 

Prepaid expenses and other assets

 

103,914

 

93,789

 

Total assets

 

$

3,198,675

 

$

3,114,239

 

 

 

 

 

 

 

Liabilities and equity

 

 

 

 

 

Liabilities:

 

 

 

 

 

Mortgage and other loans payable

 

$

1,677,351

 

$

1,704,123

 

3.5% Exchangeable Senior Notes, net

 

154,362

 

152,628

 

Accounts payable and accrued expenses

 

142,734

 

93,625

 

Rents received in advance and security deposits

 

29,936

 

30,464

 

Dividends and distributions payable

 

27,057

 

25,794

 

Deferred revenue associated with acquired operating leases

 

8,926

 

10,816

 

Distributions in excess of investment in unconsolidated real estate joint venture

 

4,873

 

4,770

 

Other liabilities

 

7,029

 

9,596

 

Total liabilities

 

2,052,268

 

2,031,816

 

Commitments and contingencies (Note 15)

 

 

 

 

 

Equity:

 

 

 

 

 

Corporate Office Properties Trust’s shareholders’ equity:

 

 

 

 

 

Preferred Shares of beneficial interest with an aggregate liquidation preference of $216,333 ($0.01 par value; 15,000,000 shares authorized and 8,121,667 issued and outstanding at June 30, 2009 and December 31, 2008)

 

81

 

81

 

Common Shares of beneficial interest ($0.01 par value; 75,000,000 shares authorized, shares issued and outstanding of 58,016,683 at June 30, 2009 and 51,790,442 at December 31, 2008)

 

580

 

518

 

Additional paid-in capital

 

1,229,931

 

1,112,734

 

Cumulative distributions in excess of net income

 

(179,698

)

(162,572

)

Accumulated other comprehensive loss

 

(1,176

)

(4,749

)

Total Corporate Office Properties Trust’s shareholders’ equity

 

1,049,718

 

946,012

 

Noncontrolling interests in subsidiaries:

 

 

 

 

 

Common units in the Operating Partnership

 

76,873

 

117,356

 

Preferred units in the Operating Partnership

 

8,800

 

8,800

 

Other consolidated real estate joint ventures

 

11,016

 

10,255

 

Noncontrolling interests in subsidiaries

 

96,689

 

136,411

 

Total equity

 

1,146,407

 

1,082,423

 

Total liabilities and equity

 

$

3,198,675

 

$

3,114,239

 

 

See accompanying notes to consolidated financial statements.

 

3



Table of Contents

 

Corporate Office Properties Trust and Subsidiaries

Consolidated Statements of Operations

(Dollars in thousands, except per share data)

(unaudited)

 

 

 

For the Three Months

 

For the Six Months

 

 

 

Ended June 30,

 

Ended June 30,

 

 

 

2009

 

2008

 

2009

 

2008

 

Revenues

 

 

 

 

 

 

 

 

 

Rental revenue

 

$

88,326

 

$

83,154

 

$

177,848

 

$

164,864

 

Tenant recoveries and other real estate operations revenue

 

17,392

 

14,792

 

34,714

 

30,084

 

Construction contract revenues

 

102,753

 

21,899

 

177,292

 

32,035

 

Other service operations revenues

 

571

 

525

 

921

 

1,003

 

Total revenues

 

209,042

 

120,370

 

390,775

 

227,986

 

Expenses

 

 

 

 

 

 

 

 

 

Property operating expenses

 

37,162

 

33,957

 

76,195

 

68,499

 

Depreciation and other amortization associated with real estate operations

 

28,708

 

24,955

 

55,199

 

49,847

 

Construction contract expenses

 

100,647

 

21,472

 

173,545

 

31,377

 

Other service operations expenses

 

514

 

454

 

939

 

1,056

 

General and administrative expenses

 

5,834

 

5,934

 

11,377

 

11,704

 

Business development expenses

 

446

 

102

 

1,092

 

265

 

Total operating expenses

 

173,311

 

86,874

 

318,347

 

162,748

 

Operating income

 

35,731

 

33,496

 

72,428

 

65,238

 

Interest expense

 

(18,678

)

(21,162

)

(38,102

)

(43,077

)

Interest and other income

 

1,252

 

170

 

2,330

 

365

 

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

 

18,305

 

12,504

 

36,656

 

22,526

 

Equity in loss of unconsolidated entities

 

(202

)

(56

)

(317

)

(110

)

Income tax (expense) benefit

 

(52

)

107

 

(122

)

(5

)

Income from continuing operations

 

18,051

 

12,555

 

36,217

 

22,411

 

Discontinued operations

 

 

1,314

 

 

2,580

 

Income before gain on sales of real estate

 

18,051

 

13,869

 

36,217

 

24,991

 

Gain on sales of real estate, net of income taxes

 

 

41

 

 

1,100

 

Net income

 

18,051

 

13,910

 

36,217

 

26,091

 

Less net income attributable to noncontrolling interests:

 

 

 

 

 

 

 

 

 

Common units in the Operating Partnership

 

(1,272

)

(1,461

)

(3,076

)

(2,663

)

Preferred units in the Operating Partnership

 

(165

)

(165

)

(330

)

(330

)

Other

 

25

 

(122

)

(25

)

(222

)

Net income attributable to Corporate Office Properties Trust

 

16,639

 

12,162

 

32,786

 

22,876

 

Preferred share dividends

 

(4,026

)

(4,026

)

(8,051

)

(8,051

)

Net income attributable to Corporate Office Properties Trust common shareholders

 

$

12,613

 

$

8,136

 

$

24,735

 

$

14,825

 

Net income attributable to Corporate Office Properties Trust

 

 

 

 

 

 

 

 

 

Income from continuing operations

 

$

16,639

 

$

11,047

 

$

32,786

 

$

20,689

 

Discontinued operations

 

 

1,115

 

 

2,187

 

Net income attributable to Corporate Office Properties Trust

 

$

16,639

 

$

12,162

 

$

32,786

 

$

22,876

 

Basic earnings per common share (1)

 

 

 

 

 

 

 

 

 

Income from continuing operations

 

$

0.22

 

$

0.15

 

$

0.45

 

$

0.26

 

Discontinued operations

 

 

0.02

 

 

0.05

 

Net income

 

$

0.22

 

$

0.17

 

$

0.45

 

$

0.31

 

Diluted earnings per common share (1)

 

 

 

 

 

 

 

 

 

Income from continuing operations

 

$

0.22

 

$

0.15

 

$

0.44

 

$

0.26

 

Discontinued operations

 

 

0.02

 

 

0.04

 

Net income

 

$

0.22

 

$

0.17

 

$

0.44

 

$

0.30

 

Dividends declared per common share

 

$

0.3725

 

$

0.3400

 

$

0.7450

 

$

0.6800

 

 


(1)          Basic and diluted earnings per common share are calculated based on amounts attributable to common shareholders of Corporate Office Properties Trust.

 

See accompanying notes to consolidated financial statements.

 

4



Table of Contents

 

Corporate Office Properties Trust and Subsidiaries

Consolidated Statements of Equity

(Dollars in thousands)

(unaudited)

 

 

 

Preferred
Shares

 

Common
Shares

 

Additional
Paid-in
Capital

 

Cumulative
Distributions in
Excess of Net
Income

 

Accumulated
Other
Comprehensive
Loss

 

Noncontrolling Interests in Subsidiaries

 

Total

 

Balance at December 31, 2008 (51,790,442 common shares outstanding)

 

$

81

 

$

518

 

$

1,112,734

 

$

(162,572

)

$

(4,749

)

$

136,411

 

$

1,082,423

 

Conversion of common units to common shares (2,824,000 shares)

 

 

28

 

61,368

 

 

 

(61,396

)

 

Common shares issued to the public (2,990,000 shares)

 

 

30

 

71,795

 

 

 

 

71,825

 

Exercise of share options (153,177 shares)

 

 

2

 

1,855

 

 

 

 

1,857

 

Share-based compensation

 

 

2

 

5,248

 

 

 

 

5,250

 

Restricted common share redemptions (71,267 shares)

 

 

 

(1,752

)

 

 

 

(1,752

)

Adjustments to noncontrolling interests resulting from changes in ownership of Operating Partnership by COPT

 

 

 

(21,165

)

 

 

21,165

 

 

Increase in fair value of derivatives

 

 

 

 

 

3,573

 

650

 

4,223

 

Decrease in tax benefit from share-based compensation

 

 

 

(152

)

 

 

 

(152

)

Net income

 

 

 

 

32,786

 

 

3,431

 

36,217

 

Dividends

 

 

 

 

(49,912

)

 

 

(49,912

)

Distributions to owners of common and preferred units in the Operating Partnership

 

 

 

 

 

 

(4,308

)

(4,308

)

Net contributions and distributions to noncontrolling interests in other consolidated real estate joint ventures

 

 

 

 

 

 

736

 

736

 

Balance at June 30, 2009 (58,016,683 common shares outstanding)

 

$

81

 

$

580

 

$

1,229,931

 

$

(179,698

)

$

(1,176

)

$

96,689

 

$

1,146,407

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at December 31, 2007 (47,366,475 common shares outstanding)

 

$

81

 

$

474

 

$

971,459

 

$

(129,599

)

$

(2,372

)

$

129,437

 

$

969,480

 

Conversion of common units to common shares (15,242 shares)

 

 

1

 

419

 

 

 

(420

)

 

Exercise of share options (90,209 shares)

 

 

1

 

1,346

 

 

 

 

1,347

 

Share-based compensation

 

 

1

 

4,555

 

 

 

 

4,556

 

Restricted common share redemptions (40,892 shares)

 

 

 

(1,304

)

 

 

 

(1,304

)

Decrease in fair value of derivatives

 

 

 

 

 

(243

)

(41

)

(284

)

Increase in tax benefit from share-based compensation

 

 

 

1,053

 

 

 

 

1,053

 

Net income

 

 

 

 

22,876

 

 

3,215

 

26,091

 

Dividends

 

 

 

 

(40,422

)

 

 

(40,422

)

Distributions to owners of common and preferred units in the Operating Partnership

 

 

 

 

 

 

(5,872

)

(5,872

)

Net contributions and distributions to noncontrolling interests in other consolidated real estate joint ventures

 

 

 

 

 

 

2,868

 

2,868

 

Balance at June 30, 2008 (47,701,812 common shares outstanding)

 

$

81

 

$

477

 

$

977,528

 

$

(147,145

)

$

(2,615

)

$

129,187

 

$

957,513

 

 

See accompanying notes to consolidated financial statements.

 

5



Table of Contents

 

Corporate Office Properties Trust and Subsidiaries

Consolidated Statements of Cash Flows

(Dollars in thousands)

(unaudited)

 

 

 

For the Six Months Ended
June 30,

 

 

 

2009

 

2008

 

Cash flows from operating activities

 

 

 

 

 

Net income

 

$

36,217

 

$

26,091

 

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

 

 

 

Depreciation and other amortization

 

56,311

 

50,676

 

Amortization of deferred financing costs

 

2,033

 

1,661

 

Amortization of deferred market rental revenue

 

(997

)

(903

)

Amortization of net debt discounts

 

1,663

 

1,936

 

Gain on sales of real estate

 

 

(4,204

)

Share-based compensation

 

5,250

 

4,556

 

Excess income tax shortfall (benefit) from share-based compensation

 

152

 

(1,053

)

Other

 

(1,946

)

402

 

Changes in operating assets and liabilities:

 

 

 

 

 

Increase in deferred rent receivable

 

(3,006

)

(5,701

)

(Increase) decrease in accounts receivable

 

(92

)

1,379

 

(Increase) decrease in restricted cash and prepaid expenses and other assets

 

(4,681

)

3,380

 

Increase in accounts payable, accrued expenses and other liabilities

 

38,055

 

4,406

 

(Decrease) increase in rents received in advance and security deposits

 

(528

)

1,335

 

Net cash provided by operating activities

 

128,431

 

83,961

 

 

 

 

 

 

 

Cash flows from investing activities

 

 

 

 

 

Purchases of and additions to properties

 

(101,650

)

(149,699

)

Proceeds from sales of properties

 

65

 

28,304

 

Leasing costs paid

 

(6,282

)

(2,383

)

Other

 

(4,636

)

(2,504

)

Net cash used in investing activities

 

(112,503

)

(126,282

)

 

 

 

 

 

 

Cash flows from financing activities

 

 

 

 

 

Proceeds from mortgage and other loans payable

 

314,147

 

227,932

 

Repayments of mortgage and other loans payable

 

(340,848

)

(149,374

)

Deferred financing costs paid

 

(202

)

(2,250

)

Net proceeds from issuance of common shares

 

73,682

 

1,350

 

Dividends paid

 

(47,596

)

(40,309

)

Distributions paid

 

(5,361

)

(5,878

)

Excess income tax (shortfall) benefit from share-based compensation

 

(152

)

1,053

 

Restricted share redemptions

 

(1,752

)

(1,304

)

Other

 

(2,690

)

(680

)

Net cash (used in) provided by financing activities

 

(10,772

)

30,540

 

 

 

 

 

 

 

Net increase (decrease) in cash and cash equivalents

 

5,156

 

(11,781

)

Cash and cash equivalents

 

 

 

 

 

Beginning of period

 

6,775

 

24,638

 

End of period

 

$

11,931

 

$

12,857

 

 

See accompanying notes to consolidated financial statements.

 

6



Table of Contents

 

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”, “we” or “us”) is a fully-integrated and self-managed real estate investment trust (“REIT”) that focuses primarily on strategic customer relationships and specialized tenant requirements in the United States Government, defense information technology and data sectors.  We acquire, develop, manage and lease properties that are typically concentrated in large office parks primarily located adjacent to government demand drivers and/or in demographically strong markets possessing growth opportunities.  As of June 30, 2009, our investments in real estate included the following:

 

·                  243 wholly owned operating properties totaling 18.7 million square feet;

·                  16 wholly owned properties under construction or development that we estimate will total approximately 1.8 million square feet upon completion;

·                  wholly owned land parcels totaling 1,530 acres that we believe are potentially developable into approximately 13.1 million square feet; and

·                  partial ownership interests in a number of other real estate projects in operation, under development or redevelopment or held for future development.

 

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, 2009 follows:

 

Common Units

 

92

%

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

%

 

Three of our trustees also controlled, either directly or through ownership by other entities or family members, 7% of the Operating Partnership’s common units at that date.

 

In addition to owning interests in real estate, the Operating Partnership also owns 100% of a number of entities that provide real estate services such as property management, construction and development and heating and air conditioning services primarily for our properties but also for third parties.

 

2.                                      Summary of Significant Accounting Policies

 

Basis of Presentation

 

The consolidated financial statements include the accounts of COPT, the Operating Partnership, their subsidiaries and other entities in which we have a majority voting interest and control.  We also consolidate certain entities when control of such entities can be achieved through means other than voting rights (“variable interest entities” or “VIEs”) if we are deemed to be the primary beneficiary of such entities.  We eliminate all significant intercompany balances and transactions in consolidation.  We use the equity method of accounting when we own an interest in an entity and can exert significant influence over the entity’s operations but cannot control the entity’s operations.  We use the cost method of accounting when we own an interest in an entity and cannot exert significant influence over its operations.

 

In preparing the consolidated financial statements, we evaluated subsequent events occurring through July 31, 2009, the date the financial statements were issued.

 

7



Table of Contents

 

These interim financial statements should be read together with the financial statements and notes thereto as of and for the year ended December 31, 2008 included in our Current Report on Form 8-K filed on June 2, 2009.  The unaudited consolidated financial statements include all adjustments which are necessary, in the opinion of management, to fairly present our financial position and results of operations.  All adjustments are of a normal recurring nature.  The consolidated financial statements have been prepared using the accounting policies described in the financial statements included in our Current Report on Form 8-K filed on June 2, 2009.

 

We reclassified certain amounts from the prior periods to conform to the current period presentation of our Consolidated Financial Statements with no effect on previously reported net income or equity.

 

Recent Accounting Pronouncements Resulting in Adjustments

 

As discussed further in our Current Report on Form 8-K dated June 2, 2009, we retrospectively adopted Statement of Financial Accounting Standards No. 160, “Noncontrolling Interests in Consolidated Financial Statements” (“SFAS 160”), FASB Staff Position No. APB 14-1, “Accounting for Convertible Debt Instruments That May Be Settled in Cash upon Conversion (Including Partial Cash Settlement)” (“FSP APB 14-1”) and EITF 03-6-1, “Determining Whether Instruments Granted in Share-Based Payment Transactions are Participating Securities” (EITF 03-6-1”).  This resulted in the recording of certain adjustments to amounts previously reported in our 2008 Annual Report on Form 10-K, including changes that affected our previously reported net income attributable to our common shareholders and earnings per common share.  Our Current Report on Form 8-K dated June 2, 2009 updated our 2008 Annual Report on Form 10-K for the effect of these adjustments.

 

Other Recent Accounting Pronouncements

 

In June 2009, the FASB issued Statement of Financial Accounting Standards No. 167, “Amendments to FASB Interpretation No. 46(R)” (“SFAS 167”), which amends FASB Interpretation No. 46 (revised December 2003) to address the elimination of the concept of a qualifying special purpose entity.  SFAS 167 also replaces the quantitative-based risks and rewards calculation for determining which enterprise has a controlling financial interest in a variable interest entity with an approach focused on identifying which enterprise has the power to direct the activities of a variable interest entity and the obligation to absorb losses of the entity or the right to receive benefits from the entity.  Additionally, SFAS 167 provides more timely and useful information about an enterprise’s involvement with a variable interest entity.  SFAS 167 will become effective on January 1, 2010.  We are currently evaluating the impact of this standard on our consolidated financial statements.

 

In June 2009, the FASB issued SFAS No. 168, “The FASB Accounting Standards CodificationTM and the Hierarchy of Generally Accepted Accounting Principles (as amended)” (“SFAS 168”), which establishes the FASB Accounting Standards Codification as the source of authoritative accounting principles recognized by the FASB to be applied in the preparation of financial statements in conformity with generally accepted accounting principles for nongovernmental entities.  SFAS 168 explicitly recognizes rules and interpretive releases of the Securities and Exchange Commission (“SEC”) under federal securities laws as authoritative GAAP for SEC registrants.  SFAS 168 became effective on July 1, 2009 and is not expected to have a material effect on our consolidated financial statements.

 

Fair Value of Financial Instruments

 

Under Statement of Financial Accounting Standards No. 157, “Fair Value Measurements” (“SFAS 157”), fair value is defined as the exit price, or the amount that would be received upon sale of an asset or paid to transfer a liability in an orderly transaction between market participants as of the measurement date.  SFAS 157 also establishes a hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available.  Observable inputs are inputs market participants would use in valuing the asset or liability developed based on market data obtained from sources independent of us.  Unobservable inputs are inputs that reflect our assumptions about the factors market participants would use in valuing the asset or liability developed based upon the best information available in the circumstances.  The hierarchy of these inputs is broken down into three levels: Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities; Level 2 inputs include (1) quoted prices for similar assets or liabilities in active markets, (2) quoted prices for identical or similar assets or liabilities in markets that are not active and (3) inputs (other than quoted prices) that are observable for the asset or liability, either directly or indirectly; and Level 3 inputs are unobservable inputs for the asset or liability. 

 

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Categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement.

 

The assets held in connection with our non-qualified elective deferred compensation plan and the corresponding liability to the participants are measured at fair value on a recurring basis on our consolidated balance sheet using quoted market prices.  The assets are treated as trading securities for accounting purposes and included in restricted cash on our consolidated balance sheet.  The offsetting liability is adjusted to fair value at the end of each accounting period based on the fair value of the plan assets and reported in other liabilities in our consolidated balance sheet.  The assets and corresponding liability of our non-qualified elective deferred compensation plan are classified in Level 1 of the fair value hierarchy.

 

The valuation of our derivatives is determined using widely accepted valuation techniques, including discounted cash flow analysis on the expected cash flows of each derivative.  This analysis reflects the contractual terms of the derivatives, including the period to maturity, and uses observable market-based inputs, including interest rate market data and implied volatilities in such interest rates.  While we determined that the majority of the inputs used to value our derivatives fall within Level 2 of the fair value hierarchy under SFAS 157, the credit valuation adjustments associated with our derivatives also utilize Level 3 inputs, such as estimates of current credit spreads to evaluate the likelihood of default.  However, as of June 30, 2009, we assessed the significance of the impact of the credit valuation adjustments on the overall valuation of our derivatives and determined that these adjustments are not significant.  As a result, we determined that our derivative valuations in their entirety are classified in Level 2 of the fair value hierarchy.

 

The table below sets forth our financial assets and liabilities that are accounted for at fair value on a recurring basis as of June 30, 2009:

 

 

 

Quoted Prices in

 

 

 

 

 

 

 

 

 

Active Markets for

 

Significant Other

 

Significant

 

 

 

 

 

Identical Assets

 

Observable Inputs

 

Unobservable Inputs

 

 

 

Description

 

(Level 1)

 

(Level 2)

 

(Level 3)

 

Total

 

Assets:

 

 

 

 

 

 

 

 

 

Deferred compensation plan assets (1)

 

$

5,520

 

$

 

$

 

$

5,520

 

Interest rate swap contracts (2)

 

 

789

 

 

789

 

Assets

 

$

5,520

 

$

789

 

$

 

$

6,309

 

 

 

 

 

 

 

 

 

 

 

Liabilities:

 

 

 

 

 

 

 

 

 

Deferred compensation plan liability (3)

 

$

5,520

 

$

 

$

 

$

5,520

 

Interest rate swap contracts (3)

 

 

1,666

 

 

1,666

 

Liabilities

 

$

5,520

 

$

1,666

 

$

 

$

7,186

 

 


(1) Included in the line entitled “restricted cash” on our Consolidated Balance Sheet.

(2) Included in the line entitled “prepaid and other assets” on our Consolidated Balance Sheet.

(3) Included in the line entitled “other liabilities” on our Consolidated Balance Sheet.

 

The carrying values of cash and cash equivalents, restricted cash, accounts receivables, other assets (excluding mortgage loans receivable) and accounts payable and accrued expenses are reasonable estimates of their fair values because of the short maturities of these instruments.  We estimated the fair values of our mortgage loans receivable by using discounted cash flow analyses based on an appropriate market rate for a similar type of instrument.  We estimated fair values of our debt based on quoted market prices for publicly-traded debt and on the discounted estimated future cash payments to be made for other debt; the discount rates used approximate current market rates for loans, or groups of loans, with similar maturities and credit quality, and the estimated future payments include scheduled principal and interest payments.  Fair value estimates are made at a specific point in time, are subjective in nature and involve uncertainties and matters of significant judgment.  Settlement of such fair value amounts may not be possible and may not be a prudent management decision.

 

Mortgage loans receivable are included in the line entitled prepaid and other assets on our consolidated balance sheets.  The following table sets forth information pertaining to the fair value of our mortgage loans receivable:

 

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June 30, 2009

 

December 31, 2008

 

Carrying Amount

 

$

31,119

 

$

29,380

 

Estimated Fair Value

 

30,039

 

28,951

 

 

For additional fair value information, please refer to Note 6 for debt and Note 7 for derivatives.

 

3.             Earnings Per Share (“EPS”)

 

We compute basic EPS by dividing net income available to common shareholders allocable to unrestricted common shares under the two-class method by the weighted average number of unrestricted 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 into common shares that we added to the denominator.

 

Summaries of the numerator and denominator for purposes of basic and diluted EPS calculations are 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,

 

 

 

2009

 

2008

 

2009

 

2008

 

Numerator:

 

 

 

 

 

 

 

 

 

Income from continuing operations

 

$

18,051

 

$

12,555

 

$

36,217

 

$

22,411

 

Add: Gain on sales of real estate, net

 

 

41

 

 

1,100

 

Less: Preferred share dividends

 

(4,026

)

(4,026

)

(8,051

)

(8,051

)

Less: Income from continuing operations attributable to noncontrolling interests

 

(1,412

)

(1,549

)

(3,431

)

(2,822

)

Less: Income from continuing operations attributable to restricted shares

 

(242

)

(166

)

(510

)

(336

)

Numerator for basic and diluted EPS from continuing operations attributable to COPT common shareholders

 

12,371

 

6,855

 

24,225

 

12,302

 

Add: Income from discontinued operations

 

 

1,314

 

 

2,580

 

Less: Income from discontinued operations attributable to noncontrolling interests

 

 

(199

)

 

(393

)

Numerator for basic and diluted EPS on net income attributable to COPT common shareholders

 

$

12,371

 

$

7,970

 

$

24,225

 

$

14,489

 

Denominator (all weighted averages):

 

 

 

 

 

 

 

 

 

Denominator for basic EPS (common shares)

 

56,637

 

47,110

 

54,296

 

47,055

 

Dilutive effect of stock option awards

 

546

 

790

 

522

 

746

 

Denominator for diluted EPS

 

57,183

 

47,900

 

54,818

 

47,801

 

 

 

 

 

 

 

 

 

 

 

Basic EPS:

 

 

 

 

 

 

 

 

 

Income from continuing operations attributable to COPT common shareholders

 

$

0.22

 

$

0.15

 

$

0.45

 

$

0.26

 

Income from discontinued operations attributable to COPT common shareholders

 

 

0.02

 

 

0.05

 

Net income attributable to COPT common shareholders

 

$

0.22

 

$

0.17

 

$

0.45

 

$

0.31

 

Diluted EPS:

 

 

 

 

 

 

 

 

 

Income from continuing operations attributable to COPT common shareholders

 

$

0.22

 

$

0.15

 

$

0.44

 

$

0.26

 

Income from discontinued operations attributable to COPT common shareholders

 

 

0.02

 

 

0.04

 

Net income attributable to COPT common shareholders

 

$

0.22

 

$

0.17

 

$

0.44

 

$

0.30

 

 

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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

 

 

 

For the Three Months
Ended June 30,

 

For the Six Months
Ended June 30,

 

 

 

2009

 

2008

 

2009

 

2008

 

Conversion of common units

 

5,483

 

8,151

 

6,363

 

8,153

 

Conversion of convertible preferred units

 

176

 

176

 

176

 

176

 

Conversion of convertible preferred shares

 

434

 

434

 

434

 

434

 

Anti-dilutive share-based compensation awards

 

524

 

348

 

641

 

468

 

 

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 each of the periods was less than the exchange price per common share applicable for such periods.

 

4.             Properties, net

 

Operating properties consisted of the following:

 

 

 

June 30,

 

December 31,

 

 

 

2009

 

2008

 

Land

 

$

429,064

 

$

423,985

 

Buildings and improvements

 

2,293,895

 

2,202,995

 

 

 

2,722,959

 

2,626,980

 

Less: accumulated depreciation

 

(382,385

)

(343,110

)

 

 

$

2,340,574

 

$

2,283,870

 

 

Projects we had under construction or development consisted of the following:

 

 

 

June 30,

 

December 31,

 

 

 

2009

 

2008

 

Land

 

$

219,775

 

$

220,863

 

Construction in progress

 

293,787

 

273,733

 

 

 

$

513,562

 

$

494,596

 

 

2009 Construction, Development and Redevelopment Activities

 

During the six months ended June 30, 2009, we had three properties (one each located in the Baltimore/Washington Corridor, Suburban Maryland and Colorado Springs, Colorado (“Colorado Springs”)) totaling 301,000 square feet become fully operational (85,000 of these square feet were placed into service in 2008).  We also placed into service 42,000 square feet in two partially operational properties (one each located in Colorado Springs and the Baltimore/Washington Corridor).

 

As of June 30, 2009, we had construction activities underway on four properties in the Baltimore/Washington Corridor (including one through a consolidated joint venture), three in Colorado Springs, two in San Antonio, Texas (“San Antonio”) and one each in Suburban Baltimore and Suburban Maryland (including one through a consolidated joint venture).  We also had development activities underway on four office properties in the Baltimore/Washington Corridor, two in Suburban Baltimore and one in San Antonio.  In addition, we had redevelopment underway on one property located in the Baltimore/Washington Corridor owned through a consolidated joint venture.

 

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Table of Contents

 

5.                                      Real Estate Joint Ventures

 

During the six months ended June 30, 2009, 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

 

 

 

 

 

 

 

Maximum

 

June 30,

 

December 31,

 

Date

 

 

 

Nature of

 

Exposure

 

2009

 

2008

 

Acquired

 

Ownership

 

Activity

 

to Loss (1)

 

$

(4,873

)(2)

$

(4,770

)(2)

9/29/2005

 

20

%

Operates 16 buildings

 

$

 

 


(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 (see Note 15).

(2)          The carrying amount of our investment in this joint venture was lower than our share of the equity in the joint venture by $5,196 at June 30, 2009 and December 31, 2008 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.

 

The following table sets forth condensed balance sheets for this unconsolidated joint venture:

 

 

 

June 30,

 

December 31,

 

 

 

2009

 

2008

 

Properties, net

 

$

61,742

 

$

62,308

 

Other assets

 

7,331

 

7,530

 

Total assets

 

$

69,073

 

$

69,838

 

 

 

 

 

 

 

Liabilities (primarily debt)

 

$

67,473

 

$

67,725

 

Owners’ equity

 

1,600

 

2,113

 

Total liabilities and owners’ equity

 

$

69,073

 

$

69,838

 

 

The following table sets forth condensed statements of operations for this unconsolidated joint venture:

 

 

 

For the Three Months
Ended June 30,

 

For the Six Months
Ended June 30,

 

 

 

2009

 

2008

 

2009

 

2008

 

Revenues

 

$

2,313

 

$

2,413

 

$

4,733

 

$

4,796

 

Property operating expenses

 

(836

)

(876

)

(1,671

)

(1,701

)

Interest expense

 

(980

)

(980

)

(1,949

)

(1,960

)

Depreciation and amortization expense

 

(816

)

(830

)

(1,627

)

(1,660

)

Net loss

 

$

(319

)

$

(273

)

$

(514

)

$

(525

)

 

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Table of Contents

 

The table below sets forth information pertaining to our investments in consolidated joint ventures at June 30, 2009:

 

 

 

 

 

Ownership

 

 

 

Total

 

Pledged

 

 

 

Date

 

% at

 

Nature of

 

Assets at

 

Assets at

 

 

 

Acquired

 

6/30/2009

 

Activity

 

6/30/2009

 

6/30/2009

 

M Square Associates, LLC

 

6/26/2007

 

45.0

%

Developing land parcels (1)

 

$

48,944

 

$

 

Arundel Preserve #5, LLC

 

7/2/2007

 

50.0

%

Developing land parcel (2)

 

29,204

 

28,475

 

COPT Opportunity Invest I, LLC

 

12/20/2005

 

92.5

%

Redeveloping one property (3)

 

28,600

 

 

COPT-FD Indian Head, LLC

 

10/23/2006

 

75.0

%

Developing land parcel (4)

 

6,919

 

 

MOR Forbes 2 LLC

 

12/24/2002

 

50.0

%

Operates one building (5)

 

4,653

 

 

 

 

 

 

 

 

 

 

$

 118,320

 

$

28,475

 

 


(1)

This joint venture is developing land parcels located in College Park, Maryland. We own a 90% interest in Enterprise Campus Developer, LLC, which in turn owns a 50% interest in M Square.

(2)

This joint venture is developing a land parcel located in Hanover, Maryland.

(3)

This joint venture owns a property in the Baltimore/Washington Corridor region.

(4)

This joint venture’s property is located in Charles County, Maryland (located in our “Other” business segment).

(5)

This joint venture’s property is located in Lanham, Maryland (located in the Suburban Maryland region).

 

Our commitments and contingencies pertaining to our real estate joint ventures are disclosed in Note 15.

 

6.             Debt

 

Our debt consisted of the following:

 

 

 

Maximum

 

 

 

 

 

 

 

Scheduled

 

 

Principal

 

Carrying Value at

 

 

 

Maturity

 

 

Amount at

 

June 30,

 

December 31,

 

Stated Interest Rates

 

Dates at

 

 

June 30, 2009

 

2009

 

2008

 

at June 30, 2009

 

June 30, 2009

Mortgage and other loans payable:

 

 

 

 

 

 

 

 

 

 

Revolving Credit Facility

 

$

600,000

 

$

357,000

 

$

392,500

 

LIBOR + 0.75% to 1.25% (1)

 

September 30, 2011 (2)

 

 

 

 

 

 

 

 

 

 

 

Mortgage and Other Secured Loans

 

 

 

 

 

 

 

 

 

 

Fixed rate mortgage loans (3)

 

N/A

 

932,287

 

967,617

 

5.20% - 7.94% (4)

 

2009 - 2034 (5)

Revolving Construction Facility

 

225,000

 

99,161

 

81,267

 

LIBOR + 1.60% to 2.00% (6)

 

May 2, 2011 (2)

Other variable rate secured loans

 

N/A

 

271,400

 

221,400

 

LIBOR + 2.25% to 3.00% (7)

 

2012-2014 (2)

Other construction loan facilities

 

23,400

 

16,753

 

40,589

 

LIBOR + 2.75% (8)

 

2011 (2)

Total mortgage and other secured loans

 

 

 

1,319,601

 

1,310,873

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Note payable

 

 

 

 

 

 

 

 

 

 

Unsecured seller note

 

N/A

 

750

 

750

 

5.95%

 

2016

Total mortgage and other loans payable

 

 

 

1,677,351

 

1,704,123

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

3.5% Exchangeable Senior Notes

 

N/A

 

154,362

 

152,628

 

3.50%

 

September 2026 (9)

Total debt

 

 

 

$

 1,831,713

 

$

 1,856,751

 

 

 

 

 


(1)

The interest rate on the Revolving Credit Facility was 1.11% at June 30, 2009.

(2)

Includes loans that may be extended for a one-year period at our option, subject to certain conditions.

(3)

Several of the fixed rate mortgages carry interest rates that were above or below market rates upon assumption and therefore were recorded at their fair value based on applicable effective interest rates. The carrying values of these loans reflect unamortized premiums totaling $430 at June 30, 2009 and $501 at December 31, 2008.

(4)

The weighted average interest rate on these loans was 5.68% at June 30, 2009.

(5)

A loan with a balance of $4,701 at June 30, 2009 that matures in 2034 may be repaid in March 2014, subject to certain conditions.

(6)

The weighted average interest rate on this loan was 2.00% at June 30, 2009.

(7)

The loans in this category at June 30, 2009 are subject to floor interest rates ranging from 4.25% to 5.5%.

(8)

The interest rate on this loan was 3.07% at June 30, 2009.

(9)

As described further in our 2008 Annual Report on Form 10-K, the notes have an exchange settlement feature that provides that they may, under certain circumstances, be exchangeable for cash (up to the principal amount of the notes) and, with respect to any excess exchange value, may be exchangeable into (at our option) cash, our common shares or a combination of cash and our common shares at an exchange rate (subject to adjustment) of 18.8266 shares per one thousand dollar principal amount of the notes (exchange rate is as of June 30, 2009 and is equivalent to an exchange price of $53.12 per common share). The carrying value of these notes included a principal amount of $162,500 and an unamortized discount totaling $8,138 at June 30, 2009 and $9,872 at December 31, 2008. The

 

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effective interest rate under the notes, including amortization of the discount, was 5.97%. The table below sets forth interest expense recognized on these notes before deductions for amounts capitalized:

 

 

 

For the Three Months
Ended June 30,

 

For the Six Months Ended
June 30,

 

 

 

2009

 

2008

 

2009

 

2008

 

Interest expense at stated interest rate

 

$

 1,422

 

$

 1,750

 

$

 2,844

 

$

 3,500

 

Interest expense associated with amortization of discount

 

874

 

1,013

 

1,734

 

2,011

 

Total

 

$

 2,296

 

$

 2,763

 

$

 4,578

 

$

 5,511

 

 

We capitalized interest costs of $3,985 in the three months ended June 30, 2009, $4,533 in the three months ended June 30, 2008, $8,484 in the six months ended June 30, 2009 and $9,298 in the six months ended June 30, 2008.

 

The following table sets forth information pertaining to the fair value of our debt:

 

 

 

June 30, 2009

 

December 31, 2008

 

 

 

Carrying

 

Estimated

 

Carrying

 

Estimated

 

 

 

Amount

 

Fair Value

 

Amount

 

Fair Value

 

Fixed-rate debt

 

$

 1,087,399

 

$

 998,101

 

$

 1,120,995

 

$

 1,010,127

 

Variable-rate debt

 

744,314

 

710,239

 

735,756

 

702,092

 

 

 

$

 1,831,713

 

$

 1,708,340

 

$

 1,856,751

 

$

 1,712,219

 

 

7.             Derivatives

 

We are exposed to certain risks arising from changes in market conditions.  These changes in market conditions may adversely affect our financial performance.  We use derivative financial instruments to assist in managing our exposure to these changes in market conditions.  Specifically, we enter into derivative financial instruments to manage exposures that arise from business activities that result in the payment of future known and uncertain cash amounts, the value of which are determined by interest rates.  Our derivative financial instruments are used to manage differences in the amount, timing, and duration of our known or expected cash payments related to our borrowings.

 

Our primary objectives in using interest rate derivatives are to add stability to interest expense and to manage exposure to interest rate movements. To accomplish this objective, we primarily use interest rate swaps as part of our interest rate risk management strategy.  Interest rate swaps designated as cash flow hedges involve the receipt of variable-rate amounts from a counterparty in exchange for our making fixed-rate payments over the life of the agreements without exchange of the underlying notional amount.  During 2009, these derivatives were used to hedge the variable cash flows associated with both existing and future variable-rate debt.  We defer the effective portion of the changes in fair value of the designated cash flow hedges to accumulated other comprehensive loss (“AOCL”) and reclassify such deferrals to interest expense as interest expense is recognized on the hedged forecasted transactions.  We recognize directly in interest expense the ineffective portion of the change in fair value of interest rate derivatives.  We do not use derivatives for trading or speculative purposes and do not have any derivatives that are not designated as hedges as of June 30, 2009.

 

As of June 30, 2009, we had four outstanding interest rate derivatives that were designated as cash flow hedges of interest rate risk with an aggregate notional value of $370,000.  All four derivative instruments were interest rate swaps.  Under one of these interest rate derivatives, we are hedging our exposure to the variability in future cash flows for forecasted transactions over the period ending January 1, 2010.  The table below sets forth the fair value of our derivative financial instruments as well as their classification on our Consolidated Balance Sheet as of June 30, 2009:

 

Derivatives Designated as Hedging

 

June 30, 2009

 

Instruments Under SFAS 133

 

Balance Sheet Location

 

Fair Value

 

Interest Rate Swaps

 

Prepaid and other assets

 

$

 789

 

Interest Rate Swaps

 

Other liabilities

 

(1,666

)

 

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The table below presents the effect of our interest rate swaps on our Consolidated Statements of Operations and comprehensive income for the three and six months ended June 30, 2009:

 

 

 

For the Three

 

For the Six

 

 

 

Months Ended

 

Months Ended

 

 

 

June 30, 2009

 

June 30, 2009

 

Amount of gain recognized in AOCL (effective portion)

 

1,658

 

277

 

Amount of loss reclassified from AOCL into interest expense (effective portion)

 

(1,647

)

(3,946

)

Amount of gain (loss) recognized in interest expense (ineffective portion and amount excluded from effectiveness testing)

 

51

 

(228

)

 

Over the next 12 months, we estimate that approximately $3,304 will be reclassified from AOCL as an increase to interest expense.

 

We have agreements with each of our derivative counterparties that contain provisions under which if we default or are capable of being declared in default on any of our indebtedness, we could also be declared in default on our derivative obligations.

 

We have agreements with our derivative counterparties that incorporate the loan covenant provisions of our indebtedness with a lender affiliate of the derivative counterparties.  Failure to comply with the loan covenant provisions would result in our being in default on any derivative instrument obligations covered by the agreements.

 

As of June 30, 2009, the fair value of derivatives in a liability position related to these agreements was $1,307, excluding the effects of accrued interest.  As of June 30, 2009, we had not posted any collateral related to these agreements.  We are not in default with any of these provisions.  If we breached any of these provisions, we would be required to settle our obligations under the agreements at their termination value of $1,682.

 

8.             Shareholders’ Equity

 

Common Shares

 

In April 2009, we issued 2.99 million common shares in an underwritten public offering made in conjunction with our inclusion in the S&P MidCap 400 Index effective April 1, 2009.  The shares were issued at a public offering price of $24.35 per share for net proceeds of $72,078 after underwriting discounts but before offering expenses.

 

During the six months ended June 30, 2009, we converted 2,824,000 common units in our Operating Partnership into common shares on the basis of one common share for each common unit.

 

See Note 12 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 component of shareholders’ equity:

 

 

 

For the Six Months Ended
June 30,

 

 

 

2009

 

2008

 

Beginning balance

 

$

 (4,749

)

$

 (2,372

)

Amount of gain (loss) recognized in AOCL (effective portion)

 

277

 

(1,450

)

Amount of loss reclassified from AOCL to income

 

3,946

 

1,166

 

Adjustment to AOCL attributable to noncontrolling interests

 

(650

)

41

 

Ending balance

 

$

 (1,176

)

$

 (2,615

)

 

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The table below sets forth total comprehensive income and total comprehensive income attributable to COPT:

 

 

 

For the Three Months
Ended June 30,

 

For the Six Months
Ended June 30,

 

 

 

2009

 

2008

 

2009

 

2008

 

Net income

 

$

 18,051

 

$

 13,910

 

$

 36,217

 

$

 26,091

 

Amount of gain (loss) recognized in AOCL (effective portion)

 

1,658

 

1,230

 

277

 

(1,450

)

Amount of loss reclassified from AOCL to income

 

1,647

 

838

 

3,946

 

1,166

 

Total comprehensive income

 

21,356

 

15,978

 

40,440

 

25,807

 

Net income attributable to noncontrolling interests

 

(1,412

)

(1,748

)

(3,431

)

(3,215

)

Other comprehensive income attributable to noncontrolling interests

 

(300

)

(315

)

(416

)

44

 

Total comprehensive income attributable to COPT

 

$

 19,644

 

$

 13,915

 

$

 36,593

 

$

 22,636

 

 

9.             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, 2009:

 

 

 

Record Date

 

Payable Date

 

Dividend/
Distribution Per
Share/Unit

 

Series G Preferred Shares:

 

 

 

 

 

 

 

Fourth Quarter 2008

 

December 31, 2008

 

January 15, 2009

 

$

0.5000

 

First Quarter 2009

 

March 31, 2009

 

April 15, 2009

 

$

0.5000

 

Second Quarter 2009

 

June 30, 2009

 

July 15, 2009

 

$

0.5000

 

 

 

 

 

 

 

 

 

Series H Preferred Shares:

 

 

 

 

 

 

 

Fourth Quarter 2008

 

December 31, 2008

 

January 15, 2009

 

$

0.4688

 

First Quarter 2009

 

March 31, 2009

 

April 15, 2009

 

$

0.4688

 

Second Quarter 2009

 

June 30, 2009

 

July 15, 2009

 

$

0.4688

 

 

 

 

 

 

 

 

 

Series J Preferred Shares:

 

 

 

 

 

 

 

Fourth Quarter 2008

 

December 31, 2008

 

January 15, 2009

 

$

0.4766

 

First Quarter 2009

 

March 31, 2009

 

April 15, 2009

 

$

0.4766

 

Second Quarter 2009

 

June 30, 2009

 

July 15, 2009

 

$

0.4766

 

 

 

 

 

 

 

 

 

Series K Preferred Shares:

 

 

 

 

 

 

 

Fourth Quarter 2008

 

December 31, 2008

 

January 15, 2009

 

$

0.7000

 

First Quarter 2009

 

March 31, 2009

 

April 15, 2009

 

$

0.7000

 

Second Quarter 2009

 

June 30, 2009

 

July 15, 2009

 

$

0.7000

 

 

 

 

 

 

 

 

 

Common Shares:

 

 

 

 

 

 

 

Fourth Quarter 2008

 

December 31, 2008

 

January 15, 2009

 

$

0.3725

 

First Quarter 2009

 

March 31, 2009

 

April 15, 2009

 

$

0.3725

 

Second Quarter 2009

 

June 30, 2009

 

July 15, 2009

 

$

0.3725

 

 

 

 

 

 

 

 

 

Series I Preferred Units:

 

 

 

 

 

 

 

Fourth Quarter 2008

 

December 31, 2008

 

January 15, 2009

 

$

0.4688

 

First Quarter 2009

 

March 31, 2009

 

April 15, 2009

 

$

0.4688

 

Second Quarter 2009

 

June 30, 2009

 

July 15, 2009

 

$

0.4688

 

 

 

 

 

 

 

 

 

Common Units:

 

 

 

 

 

 

 

Fourth Quarter 2008

 

December 31, 2008

 

January 15, 2009

 

$

0.3725

 

First Quarter 2009

 

March 31, 2009

 

April 15, 2009

 

$

0.3725

 

Second Quarter 2009

 

June 30, 2009

 

July 15, 2009

 

$

0.3725

 

 

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10.          Supplemental Information to Statements of Cash Flows

 

 

 

For the Six Months Ended
 June 30,

 

 

 

2009

 

2008

 

Supplemental schedule of non-cash investing and financing activities:

 

 

 

 

 

 

 

 

 

 

 

Increase in accrued capital improvements, leasing, and acquisition costs

 

$

11,971

 

$

2,176

 

Consolidation of real estate joint venture:

 

 

 

 

 

Real estate assets

 

$

 

$

14,208

 

Prepaid and other assets

 

 

(10,859

)

Noncontrolling interests

 

 

(3,349

)

Net adjustment

 

$

 

$

 

Proceeds from sale of property invested in restricted cash

 

$

 

$

5,103

 

Increase (decrease) in fair value of derivatives applied to AOCL and noncontrolling interests

 

$

4,225

 

$

(315

)

Dividends/distribution payable

 

$

27,057

 

$

22,548

 

 

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11.          Information by Business Segment