Annual report pursuant to Section 13 and 15(d)

Information by Business Segment

v3.20.4
Information by Business Segment
 12 Months Ended
Dec. 31, 2020
Segment Reporting [Abstract]  
Information by Business Segment Information by Business SegmentWe 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 (“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 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):
Operating Property Segments
Defense/Information Technology Locations
  Fort Meade/BW Corridor Northern Virginia Defense/IT Lackland Air Force Base Navy Support Locations Redstone Arsenal Data Center Shells Total Defense/IT Locations Regional Office Operating
Wholesale
Data Center		 Other Total
Year Ended December 31, 2020
                  
Revenues from real estate operations $ 254,197  $ 57,817  $ 50,982  $ 32,869  $ 22,515  $ 29,139  $ 447,519  $ 60,627  $ 27,788  $ 2,791  $ 538,725 
Property operating expenses (85,032) (21,321) (29,055) (12,655) (8,119) (3,195) (159,377) (29,144) (14,171) (1,148) (203,840)
UJV NOI allocable to COPT —  —  —  —  —  6,951  6,951  —  —  —  6,951 
NOI from real estate operations $ 169,165  $ 36,496  $ 21,927  $ 20,214  $ 14,396  $ 32,895  $ 295,093  $ 31,483  $ 13,617  $ 1,643  $ 341,836 
Additions to long-lived assets $ 31,295  $ 11,620  $ —  $ 7,104  $ 2,905  $ —  $ 52,924  $ 17,232  $ 11,158  $ 165  $ 81,479 
Transfers from non-operating properties
 $ 21,859  $ 2,557  $ 456  $ —  $ 138,122  $ 230,277  $ 393,271  $ 83,091  $ —  $ —  $ 476,362 
Segment assets at December 31, 2020
 $ 1,277,849  $ 392,714  $ 142,137  $ 178,897  $ 281,386  $ 419,929  $ 2,692,912  $ 490,422  $ 202,089  $ 3,555  $ 3,388,978 
Year Ended December 31, 2019
                    
Revenues from real estate operations $ 252,781  $ 55,742  $ 51,140  $ 32,659  $ 16,593  $ 26,571  $ 435,486  $ 59,611  $ 29,405  $ 2,961  $ 527,463 
Property operating expenses (82,815) (19,779) (29,042) (13,579) (6,626) (1,962) (153,803) (29,682) (13,213) (1,445) (198,143)
UJV NOI allocable to COPT —  —  —  —  —  5,705  5,705  —  —  —  5,705 
NOI from real estate operations $ 169,966  $ 35,963  $ 22,098  $ 19,080  $ 9,967  $ 30,314  $ 287,388  $ 29,929  $ 16,192  $ 1,516  $ 335,025 
Additions to long-lived assets $ 34,618  $ 9,326  $ —  $ 8,912  $ 1,548  $ —  $ 54,404  $ 20,925  $ 893  $ 128  $ 76,350 
Transfers from non-operating properties
 $ 18,606  $ 4,548  $ 10,781  $ —  $ 33,606  $ 159,472  $ 227,013  $ —  $ (1,012) $ —  $ 226,001 
Segment assets at December 31, 2019
 $ 1,280,656  $ 396,914  $ 146,592  $ 184,257  $ 138,501  $ 279,099  $ 2,426,019  $ 392,319  $ 202,935  $ 3,685  $ 3,024,958 
Year Ended December 31, 2018
                    
Revenues from real estate operations $ 248,927  $ 53,518  $ 46,286  $ 31,927  $ 14,745  $ 25,650  $ 421,053  $ 61,181  $ 31,892  $ 3,127  $ 517,253 
Property operating expenses (82,975) (20,330) (26,888) (13,536) (6,050) (3,225) (153,004) (30,253) (16,342) (1,436) (201,035)
UJV NOI allocable to COPT —  —  —  —  —  4,818  4,818  —  —  —  4,818 
NOI from real estate operations $ 165,952  $ 33,188  $ 19,398  $ 18,391  $ 8,695  $ 27,243  $ 272,867  $ 30,928  $ 15,550  $ 1,691  $ 321,036 
Additions to long-lived assets $ 38,612  $ 7,956  $ —  $ 6,535  $ 573  $ —  $ 53,676  $ 19,730  $ 856  $ 480  $ 74,742 
Transfers from non-operating properties
 $ 35,648  $ 10,231  $ 14,718  $ (116) $ 4,167  $ 99,191  $ 163,839  $ —  $ 2,304  $ —  $ 166,143 
Segment assets at December 31, 2018
 $ 1,279,571  $ 399,339  $ 139,731  $ 188,911  $ 108,010  $ 353,165  $ 2,468,727  $ 395,380  $ 216,640  $ 4,115  $ 3,084,862 
The following table reconciles our segment revenues to total revenues as reported on our consolidated statements of operations (in thousands):
For the Years Ended December 31,
  2020 2019 2018
Segment revenues from real estate operations $ 538,725  $ 527,463  $ 517,253 
Construction contract and other service revenues 70,640  113,763  60,859 
Total revenues $ 609,365  $ 641,226  $ 578,112 
 

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):
For the Years Ended December 31,
  2020 2019 2018
UJV NOI allocable to COPT
 $ 6,951  $ 5,705  $ 4,818 
Less: Income from UJV allocable to COPT attributable to depreciation and amortization expense and interest expense
 (5,120) (4,065) (3,314)
Add: Equity in (loss) income of unconsolidated non-real estate entities (6) (7) 1,193 
Equity in income of unconsolidated entities
 $ 1,825  $ 1,633  $ 2,697 

As previously discussed, we provide real estate services such as property management, development and construction 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):
For the Years Ended December 31,
  2020 2019 2018
Construction contract and other service revenues $ 70,640  $ 113,763  $ 60,859 
Construction contract and other service expenses (67,615) (109,962) (58,326)
NOI from service operations $ 3,025  $ 3,801  $ 2,533 
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):
For the Years Ended December 31,
  2020 2019 2018
NOI from real estate operations $ 341,836  $ 335,025  $ 321,036 
NOI from service operations 3,025  3,801  2,533 
Interest and other income 8,574  7,894  4,358 
Credit loss recoveries 933  —  — 
Gain on sales of real estate 30,209  105,230  2,340 
Gain on sale of investment in unconsolidated real estate joint venture 29,416  —  — 
Equity in income of unconsolidated entities 1,825  1,633  2,697 
Income tax (expense) benefit (353) 217  363 
Depreciation and other amortization associated with real estate operations (138,193) (137,069) (137,116)
Impairment losses (1,530) (329) (2,367)
General, administrative and leasing expenses (33,001) (35,402) (28,900)
Business development expenses and land carry costs (4,473) (4,239) (5,840)
Interest expense (67,937) (71,052) (75,385)
UJV NOI allocable to COPT included in equity in income of unconsolidated entities (6,951) (5,705) (4,818)
Loss on early extinguishment of debt (7,306) —  (258)
Loss on interest rate derivatives (53,196) —  — 
Net income $ 102,878  $ 200,004  $ 78,643 

The following table reconciles our segment assets to the consolidated total assets of COPT and subsidiaries (in thousands):
 
As of December 31,
2020 2019
Segment assets $ 3,388,978  $ 3,024,958 
Operating properties lease liabilities included in segment assets 30,721  17,317 
Non-operating property assets 466,991  621,630 
Other assets 190,333  190,548 
Total COPT consolidated assets $ 4,077,023  $ 3,854,453 
 
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, impairment losses, gain on sales of real estate, gain on sale of investment in unconsolidated real estate joint venture, loss on early extinguishment of debt, loss on interest rate derivatives 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, credit loss recoveries (expense), income taxes and noncontrolling interests because these items represent general corporate or non-operating property items not attributable to segments.