| Information by Business Segment |
Information by Business Segment
We have the following reportable segments: Defense/IT Locations; Regional Office; Wholesale Data Center; and Other. We also report on Defense/IT Locations sub-segments, which include the following: Fort George G. Meade and the Baltimore/Washington Corridor (referred to herein as “Fort Meade/BW Corridor”); Northern Virginia Defense/IT Locations; Lackland Air Force Base (in San Antonio); locations serving the U.S. Navy (“Navy Support Locations”), which included properties proximate to the Washington Navy Yard, the Naval Air Station Patuxent River in Maryland and the Naval Surface Warfare Center Dahlgren Division in Virginia; Redstone Arsenal (in Huntsville); and data center shells (properties leased to tenants to be operated as data centers in which the tenants generally fund the costs for the power, fiber connectivity and data center infrastructure).
We measure the performance of our segments through the measure we define as net operating income from real estate operations (“NOI from real estate operations”), which includes: real estate revenues and property operating expenses; and the net of revenues and property operating expenses of real estate operations owned through unconsolidated real estate joint ventures (“UJVs”) that is allocable to COPT’s ownership interest (“UJV NOI allocable to COPT”). Amounts reported for segment assets represent long-lived assets associated with consolidated operating properties (including the carrying value of properties, right-of-use assets, net of related lease liabilities, intangible assets, deferred leasing costs, deferred rents receivable and lease incentives) and the carrying value of investments in UJVs owning operating properties. Amounts reported as additions to long-lived assets represent additions to existing consolidated operating properties, excluding transfers from non-operating properties, which we report separately.The table below reports segment financial information for our reportable segments (in thousands):
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Operating Property Segments |
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Defense/Information Technology Locations |
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Fort Meade/BW Corridor |
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Northern Virginia Defense/IT |
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Lackland Air Force Base |
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Navy Support Locations |
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Redstone Arsenal |
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Data Center Shells |
|
Total Defense/IT Locations |
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Regional Office |
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Wholesale
Data Center |
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Other |
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Total |
Three Months Ended September 30, 2019 |
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Revenues from real estate operations |
$ |
63,436 |
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|
$ |
13,551 |
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|
$ |
12,703 |
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|
$ |
8,183 |
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|
$ |
4,171 |
|
|
$ |
5,913 |
|
|
$ |
107,957 |
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$ |
15,508 |
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$ |
6,565 |
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$ |
704 |
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|
$ |
130,734 |
|
Property operating expenses |
(20,743 |
) |
|
(4,965 |
) |
|
(7,149 |
) |
|
(3,581 |
) |
|
(1,717 |
) |
|
(518 |
) |
|
(38,673 |
) |
|
(7,343 |
) |
|
(3,374 |
) |
|
(324 |
) |
|
(49,714 |
) |
UJV NOI allocable to COPT |
— |
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|
— |
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|
— |
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|
— |
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|
— |
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|
1,601 |
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|
1,601 |
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|
— |
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|
— |
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|
— |
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|
1,601 |
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NOI from real estate operations |
$ |
42,693 |
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$ |
8,586 |
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$ |
5,554 |
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$ |
4,602 |
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$ |
2,454 |
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$ |
6,996 |
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$ |
70,885 |
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$ |
8,165 |
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$ |
3,191 |
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$ |
380 |
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$ |
82,621 |
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Additions to long-lived assets |
$ |
10,770 |
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$ |
2,922 |
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$ |
— |
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$ |
2,003 |
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$ |
446 |
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$ |
— |
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$ |
16,141 |
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$ |
6,339 |
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$ |
61 |
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$ |
19 |
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$ |
22,560 |
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Transfers from non-operating properties |
$ |
1,381 |
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$ |
118 |
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$ |
2,120 |
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$ |
— |
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$ |
4,152 |
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$ |
9,483 |
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$ |
17,254 |
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$ |
— |
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$ |
(1,012 |
) |
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$ |
— |
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$ |
16,242 |
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Three Months Ended September 30, 2018 |
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Revenues from real estate operations |
$ |
61,396 |
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$ |
13,960 |
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$ |
11,254 |
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$ |
7,899 |
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$ |
3,734 |
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$ |
6,689 |
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$ |
104,932 |
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$ |
15,272 |
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$ |
7,781 |
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$ |
1,003 |
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$ |
128,988 |
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Property operating expenses |
(19,847 |
) |
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(5,518 |
) |
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(6,432 |
) |
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(3,208 |
) |
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(1,569 |
) |
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(574 |
) |
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(37,148 |
) |
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(7,425 |
) |
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(3,965 |
) |
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(802 |
) |
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(49,340 |
) |
UJV NOI allocable to COPT |
— |
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— |
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— |
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— |
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— |
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|
1,206 |
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|
1,206 |
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— |
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— |
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|
— |
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|
1,206 |
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NOI from real estate operations |
$ |
41,549 |
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$ |
8,442 |
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$ |
4,822 |
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$ |
4,691 |
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$ |
2,165 |
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$ |
7,321 |
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$ |
68,990 |
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$ |
7,847 |
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$ |
3,816 |
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$ |
201 |
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$ |
80,854 |
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Additions to long-lived assets |
$ |
11,211 |
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$ |
2,305 |
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$ |
— |
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$ |
1,758 |
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$ |
33 |
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$ |
— |
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$ |
15,307 |
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$ |
5,670 |
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$ |
370 |
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$ |
(88 |
) |
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$ |
21,259 |
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Transfers from non-operating properties |
$ |
14,698 |
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$ |
1,550 |
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$ |
— |
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$ |
(17 |
) |
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$ |
13 |
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$ |
30,286 |
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$ |
46,530 |
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$ |
— |
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$ |
155 |
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$ |
— |
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$ |
46,685 |
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Nine Months Ended September 30, 2019 |
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Revenues from real estate operations |
$ |
187,778 |
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$ |
42,294 |
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$ |
36,368 |
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$ |
24,523 |
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$ |
12,078 |
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$ |
21,891 |
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$ |
324,932 |
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$ |
45,359 |
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$ |
22,996 |
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$ |
2,208 |
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$ |
395,495 |
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Property operating expenses |
(62,422 |
) |
|
(14,951 |
) |
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(19,756 |
) |
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(10,271 |
) |
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(4,855 |
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(1,630 |
) |
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(113,885 |
) |
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(22,349 |
) |
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(9,830 |
) |
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(981 |
) |
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(147,045 |
) |
UJV NOI allocable to COPT |
— |
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|
— |
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|
— |
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|
— |
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|
— |
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|
4,071 |
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|
4,071 |
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|
— |
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|
— |
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|
— |
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|
4,071 |
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NOI from real estate operations |
$ |
125,356 |
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$ |
27,343 |
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$ |
16,612 |
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$ |
14,252 |
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$ |
7,223 |
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$ |
24,332 |
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$ |
215,118 |
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$ |
23,010 |
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$ |
13,166 |
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|
$ |
1,227 |
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|
$ |
252,521 |
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Additions to long-lived assets |
$ |
22,204 |
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|
$ |
6,072 |
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|
$ |
— |
|
|
$ |
7,948 |
|
|
$ |
1,282 |
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|
$ |
— |
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|
$ |
37,506 |
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|
$ |
15,198 |
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|
$ |
312 |
|
|
$ |
63 |
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|
$ |
53,079 |
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Transfers from non-operating properties |
$ |
7,759 |
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$ |
4,647 |
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$ |
10,456 |
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|
$ |
— |
|
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$ |
13,363 |
|
|
$ |
122,115 |
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|
$ |
158,340 |
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|
$ |
— |
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|
$ |
(1,012 |
) |
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$ |
— |
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|
$ |
157,328 |
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Segment assets at September 30, 2019 |
$ |
1,271,668 |
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$ |
398,137 |
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$ |
147,505 |
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$ |
186,243 |
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|
$ |
118,839 |
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$ |
298,675 |
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$ |
2,421,067 |
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$ |
393,747 |
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|
$ |
205,550 |
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|
$ |
3,708 |
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|
$ |
3,024,072 |
|
Nine Months Ended September 30, 2018 |
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|
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|
|
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Revenues from real estate operations |
$ |
186,171 |
|
|
$ |
39,639 |
|
|
$ |
35,079 |
|
|
$ |
23,896 |
|
|
$ |
11,019 |
|
|
$ |
18,475 |
|
|
$ |
314,279 |
|
|
$ |
45,852 |
|
|
$ |
23,963 |
|
|
$ |
2,334 |
|
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$ |
386,428 |
|
Property operating expenses |
(61,550 |
) |
|
(15,150 |
) |
|
(20,524 |
) |
|
(9,943 |
) |
|
(4,518 |
) |
|
(2,167 |
) |
|
(113,852 |
) |
|
(22,472 |
) |
|
(12,373 |
) |
|
(1,040 |
) |
|
(149,737 |
) |
UJV NOI allocable to COPT |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
3,607 |
|
|
3,607 |
|
|
— |
|
|
— |
|
|
— |
|
|
3,607 |
|
NOI from real estate operations |
$ |
124,621 |
|
|
$ |
24,489 |
|
|
$ |
14,555 |
|
|
$ |
13,953 |
|
|
$ |
6,501 |
|
|
$ |
19,915 |
|
|
$ |
204,034 |
|
|
$ |
23,380 |
|
|
$ |
11,590 |
|
|
$ |
1,294 |
|
|
$ |
240,298 |
|
Additions to long-lived assets |
$ |
26,483 |
|
|
$ |
5,431 |
|
|
$ |
— |
|
|
$ |
4,316 |
|
|
$ |
463 |
|
|
$ |
— |
|
|
$ |
36,693 |
|
|
$ |
14,915 |
|
|
$ |
487 |
|
|
$ |
227 |
|
|
$ |
52,322 |
|
Transfers from non-operating properties |
$ |
34,919 |
|
|
$ |
2,243 |
|
|
$ |
— |
|
|
$ |
(17 |
) |
|
$ |
483 |
|
|
$ |
61,075 |
|
|
$ |
98,703 |
|
|
$ |
— |
|
|
$ |
2,300 |
|
|
$ |
— |
|
|
$ |
101,003 |
|
Segment assets at September 30, 2018 |
$ |
1,280,837 |
|
|
$ |
394,066 |
|
|
$ |
126,047 |
|
|
$ |
189,406 |
|
|
$ |
105,315 |
|
|
$ |
359,653 |
|
|
$ |
2,455,324 |
|
|
$ |
396,624 |
|
|
$ |
219,041 |
|
|
$ |
3,997 |
|
|
$ |
3,074,986 |
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The following table reconciles our segment revenues to total revenues as reported on our consolidated statements of operations (in thousands):
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended September 30, |
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For the Nine Months Ended September 30, |
|
2019 |
|
2018 |
|
2019 |
|
2018 |
Segment revenues from real estate operations |
$ |
130,734 |
|
|
$ |
128,988 |
|
|
$ |
395,495 |
|
|
$ |
386,428 |
|
Construction contract and other service revenues |
28,697 |
|
|
8,423 |
|
|
87,946 |
|
|
53,202 |
|
Total revenues |
$ |
159,431 |
|
|
$ |
137,411 |
|
|
$ |
483,441 |
|
|
$ |
439,630 |
|
The following table reconciles UJV NOI allocable to COPT to equity in income of unconsolidated entities as reported on our consolidated statements of operations (in thousands):
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|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended September 30, |
|
For the Nine Months Ended September 30, |
|
2019 |
|
2018 |
|
2019 |
|
2018 |
UJV NOI allocable to COPT |
$ |
1,601 |
|
|
$ |
1,206 |
|
|
$ |
4,071 |
|
|
$ |
3,607 |
|
Less: Income from UJV allocable to COPT attributable to depreciation and amortization expense and interest expense |
(1,202 |
) |
|
(830 |
) |
|
(2,859 |
) |
|
(2,482 |
) |
Add: Equity in loss of unconsolidated non-real estate entities |
(3 |
) |
|
(2 |
) |
|
(5 |
) |
|
(5 |
) |
Equity in income of unconsolidated entities |
$ |
396 |
|
|
$ |
374 |
|
|
$ |
1,207 |
|
|
$ |
1,120 |
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As previously discussed, we provide real estate services such as property management and construction and development services primarily for our properties but also for third parties. The primary manner in which we evaluate the operating performance of our service activities is through a measure we define as net operating income from service operations (“NOI from service operations”), which is based on the net of revenues and expenses from these activities. Construction contract and other service revenues and expenses consist primarily of subcontracted costs that are reimbursed to us by the customer along with a management fee. The operating margins from these activities are small relative to the revenue. We believe NOI from service operations is a useful measure in assessing both our level of activity and our profitability in conducting such operations. The table below sets forth the computation of our NOI from service operations (in thousands):
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended September 30, |
|
For the Nine Months Ended September 30, |
|
2019 |
|
2018 |
|
2019 |
|
2018 |
Construction contract and other service revenues |
$ |
28,697 |
|
|
$ |
8,423 |
|
|
$ |
87,946 |
|
|
$ |
53,202 |
|
Construction contract and other service expenses |
(27,802 |
) |
|
(8,058 |
) |
|
(85,130 |
) |
|
(51,215 |
) |
NOI from service operations |
$ |
895 |
|
|
$ |
365 |
|
|
$ |
2,816 |
|
|
$ |
1,987 |
|
The following table reconciles our NOI from real estate operations for reportable segments and NOI from service operations to net income as reported on our consolidated statements of operations (in thousands):
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended September 30, |
|
For the Nine Months Ended September 30, |
|
2019 |
|
2018 |
|
2019 |
|
2018 |
NOI from real estate operations |
$ |
82,621 |
|
|
$ |
80,854 |
|
|
$ |
252,521 |
|
|
$ |
240,298 |
|
NOI from service operations |
895 |
|
|
365 |
|
|
2,816 |
|
|
1,987 |
|
Interest and other income |
1,842 |
|
|
1,486 |
|
|
5,977 |
|
|
4,284 |
|
Gain on sales of real estate |
— |
|
|
— |
|
|
84,469 |
|
|
(27 |
) |
Equity in income of unconsolidated entities |
396 |
|
|
374 |
|
|
1,207 |
|
|
1,120 |
|
Income tax benefit |
131 |
|
|
291 |
|
|
113 |
|
|
173 |
|
Depreciation and other amortization associated with real estate operations |
(34,692 |
) |
|
(34,195 |
) |
|
(104,290 |
) |
|
(100,897 |
) |
Impairment losses |
(327 |
) |
|
— |
|
|
(327 |
) |
|
— |
|
General, administrative and leasing expenses |
(7,929 |
) |
|
(6,899 |
) |
|
(26,066 |
) |
|
(21,819 |
) |
Business development expenses and land carry costs |
(964 |
) |
|
(1,567 |
) |
|
(2,947 |
) |
|
(4,415 |
) |
Interest expense |
(17,126 |
) |
|
(19,181 |
) |
|
(54,275 |
) |
|
(56,910 |
) |
Less: UJV NOI allocable to COPT included in equity in income of unconsolidated entities |
(1,601 |
) |
|
(1,206 |
) |
|
(4,071 |
) |
|
(3,607 |
) |
Net income |
$ |
23,246 |
|
|
$ |
20,322 |
|
|
$ |
155,127 |
|
|
$ |
60,187 |
|
The following table reconciles our segment assets to the consolidated total assets of COPT and subsidiaries (in thousands):
|
|
|
|
|
|
|
|
|
|
September 30,
2019 |
|
September 30,
2018 |
Segment assets |
$ |
3,024,072 |
|
|
$ |
3,074,986 |
|
Operating properties lease liabilities included in segment assets |
16,645 |
|
|
— |
|
Non-operating property assets |
597,301 |
|
|
420,109 |
|
Other assets |
217,351 |
|
|
155,271 |
|
Total COPT consolidated assets |
$ |
3,855,369 |
|
|
$ |
3,650,366 |
|
The accounting policies of the segments are the same as those used to prepare our consolidated financial statements. In the segment reporting presented above, we did not allocate interest expense, depreciation and amortization, gain on sales of real estate and equity in income of unconsolidated entities not included in NOI to our real estate segments since they are not included in the measure of segment profit reviewed by management. We also did not allocate general, administrative and leasing expenses, business development expenses and land carry costs, interest and other income, income taxes and noncontrolling interests because these items represent general corporate or non-operating property items not attributable to segments.
|