Quarterly report pursuant to Section 13 or 15(d)

Information by Business Segment

v3.21.2
Information by Business Segment
 6 Months Ended
Jun. 30, 2021
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 our 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): 
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
Three Months Ended June 30, 2021
                  
Revenues from real estate operations $ 64,840  $ 14,712  $ 13,688  $ 8,445  $ 8,775  $ 8,070  $ 118,530  $ 16,884  $ 8,175  $ 834  $ 144,423 
Property operating expenses (21,714) (5,538) (7,506) (3,227) (2,968) (777) (41,730) (7,842) (4,629) (415) (54,616)
UJV NOI allocable to COPT
 —  —  —  —  —  973  973  —  —  —  973 
NOI from real estate operations $ 43,126  $ 9,174  $ 6,182  $ 5,218  $ 5,807  $ 8,266  $ 77,773  $ 9,042  $ 3,546  $ 419  $ 90,780 
Additions to long-lived assets $ 11,511  $ 1,022  $ —  $ 1,205  $ 3,053  $ —  $ 16,791  $ 4,089  $ 121  $ 9  $ 21,010 
Transfers from non-operating properties
 $ 784  $ 25  $ 49,218  $ —  $ 1,288  $ 1,017  $ 52,332  $ 38,000  $ —  $ —  $ 90,332 
Three Months Ended June 30, 2020
                    
Revenues from real estate operations $ 62,698  $ 14,447  $ 13,257  $ 8,119  $ 4,647  $ 7,076  $ 110,244  $ 15,162  $ 6,455  $ 677  $ 132,538 
Property operating expenses (20,859) (5,335) (7,785) (3,171) (1,612) (789) (39,551) (6,888) (3,463) (302) (50,204)
UJV NOI allocable to COPT
 —  —  —  —  —  1,725  1,725  —  —  —  1,725 
NOI from real estate operations $ 41,839  $ 9,112  $ 5,472  $ 4,948  $ 3,035  $ 8,012  $ 72,418  $ 8,274  $ 2,992  $ 375  $ 84,059 
Additions to long-lived assets $ 6,958  $ 3,204  $ —  $ 2,110  $ 146  $ —  $ 12,418  $ 4,445  $ 7,904  $ 103  $ 24,870 
Transfers from non-operating properties
 $ 3,975  $ 524  $ 145  $ —  $ 29,171  $ 49,964  $ 83,779  $ —  $ —  $ —  $ 83,779 
Six Months Ended June 30, 2021
                  
Revenues from real estate operations $ 131,286  $ 29,923  $ 26,243  $ 16,843  $ 17,028  $ 16,857  $ 238,180  $ 33,561  $ 16,265  $ 1,581  $ 289,587 
Property operating expenses (46,385) (11,414) (14,380) (6,660) (5,522) (1,859) (86,220) (15,506) (9,050) (814) (111,590)
UJV NOI allocable to COPT —  —  —  —  —  1,890  1,890  —  —  —  1,890 
NOI from real estate operations $ 84,901  $ 18,509  $ 11,863  $ 10,183  $ 11,506  $ 16,888  $ 153,850  $ 18,055  $ 7,215  $ 767  $ 179,887 
Additions to long-lived assets $ 18,392  $ 1,307  $ —  $ 1,757  $ 3,311  $ —  $ 24,767  $ 8,111  $ 349  $ 13  $ 33,240 
Transfers from non-operating properties $ 1,140  $ 113  $ 49,269  $ —  $ 14,205  $ 2,002  $ 66,729  $ 38,357  $ —  $ —  $ 105,086 
Segment assets at June 30, 2021
 $ 1,266,622  $ 385,050  $ 189,418  $ 174,633  $ 295,672  $ 353,797  $ 2,665,192  $ 538,518  $ 196,395  $ 3,453  $ 3,403,558 
Six Months Ended June 30, 2020
                  
Revenues from real estate operations $ 127,136  $ 28,125  $ 25,333  $ 16,460  $ 9,323  $ 12,653  $ 219,030  $ 30,622  $ 13,627  $ 1,375  $ 264,654 
Property operating expenses (42,081) (10,520) (14,580) (6,456) (3,459) (1,446) (78,542) (14,425) (6,696) (540) (100,203)
UJV NOI allocable to COPT —  —  —  —  —  3,438  3,438  —  —  —  3,438 
NOI from real estate operations $ 85,055  $ 17,605  $ 10,753  $ 10,004  $ 5,864  $ 14,645  $ 143,926  $ 16,197  $ 6,931  $ 835  $ 167,889 
Additions to long-lived assets $ 14,633  $ 5,895  $ —  $ 3,868  $ 316  $ —  $ 24,712  $ 7,802  $ 8,782  $ 168  $ 41,464 
Transfers from non-operating properties $ 4,513  $ 780  $ 160  $ —  $ 30,307  $ 106,196  $ 141,956  $ —  $ —  $ —  $ 141,956 
Segment assets at June 30, 2020
 $ 1,271,790  $ 394,363  $ 144,253  $ 181,744  $ 167,161  $ 382,749  $ 2,542,060  $ 389,058  $ 205,711  $ 3,710  $ 3,140,539 
The following table reconciles our segment revenues to total revenues as reported on our consolidated statements of operations (in thousands):
For the Three Months Ended June 30, For the Six Months Ended June 30,
  2021 2020 2021 2020
Segment revenues from real estate operations $ 144,423  $ 132,538  $ 289,587  $ 264,654 
Construction contract and other service revenues 19,988  12,236  36,546  25,917 
Total revenues $ 164,411  $ 144,774  $ 326,133  $ 290,571 
 
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 Three Months Ended June 30, For the Six Months Ended June 30,
  2021 2020 2021 2020
UJV NOI allocable to COPT
 $ 973  $ 1,725  $ 1,890  $ 3,438 
Less: Income from UJV allocable to COPT attributable to depreciation and amortization expense and interest expense
 (711) (1,270) (1,404) (2,540)
Add: Equity in loss of unconsolidated non-real estate entities (2) (1) (4) (3)
Equity in income of unconsolidated entities
 $ 260  $ 454  $ 482  $ 895 
 
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 Three Months Ended June 30, For the Six Months Ended June 30,
  2021 2020 2021 2020
Construction contract and other service revenues $ 19,988  $ 12,236  $ 36,546  $ 25,917 
Construction contract and other service expenses (19,082) (11,711) (34,875) (24,832)
NOI from service operations $ 906  $ 525  $ 1,671  $ 1,085 
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 Three Months Ended June 30, For the Six Months Ended June 30,
  2021 2020 2021 2020
NOI from real estate operations $ 90,780  $ 84,059  $ 179,887  $ 167,889 
NOI from service operations 906  525  1,671  1,085 
Interest and other income 2,228  2,282  4,093  3,487 
Credit loss (expense) recoveries (193) (615) 714  (1,304)
Gain on sales of real estate 40,233  —  39,743  5 
Equity in income of unconsolidated entities 260  454  482  895 
Income tax expense (24) (30) (56) (79)
Depreciation and other amortization associated with real estate operations (37,555) (33,612) (74,876) (66,208)
General, administrative and leasing expenses (9,222) (8,158) (17,628) (15,644)
Business development expenses and land carry costs (1,372) (1,262) (2,466) (2,380)
Interest expense (15,942) (16,797) (33,461) (33,637)
UJV NOI allocable to COPT included in equity in income of unconsolidated entities (973) (1,725) (1,890) (3,438)
Loss on early extinguishment of debt (25,228) —  (58,394) — 
Net income $ 43,898  $ 25,121  $ 37,819  $ 50,671 
 
The following table reconciles our segment assets to our consolidated total assets (in thousands): 
June 30,
2021		 June 30,
2020
Segment assets $ 3,403,558  $ 3,140,539 
Operating properties lease liabilities included in segment assets 29,927  19,073 
Non-operating property assets 441,048  679,207 
Other assets 177,499  172,506 
Total consolidated assets $ 4,052,032  $ 4,011,325 
 
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, loss on early extinguishment of debt 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 (expense) recoveries, income taxes and noncontrolling interests because these items represent general corporate or non-operating property items not attributable to segments.