Quarterly report pursuant to Section 13 or 15(d)

Information by Business Segment

v3.22.2
Information by Business Segment
 6 Months Ended
Jun. 30, 2022
Segment Reporting [Abstract]  
Information by Business Segment Information by Business SegmentWe have the following reportable segments: Defense/IT Locations; Regional Office; Wholesale Data Center (the only property in which we sold on January 25, 2022); 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 (“NoVA Defense/IT”); Lackland Air Force Base (in San Antonio); locations serving the U.S. Navy (“Navy Support”), 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). Our segment reporting included below reflects our retrospective reclassification of: certain activities to our Other reportable segment from our Wholesale Data Center reportable segment in the fourth quarter of 2021; and two properties to our NoVA Defense/IT sub-segment from our Regional Office segment in the first quarter of 2022.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/IT Locations
  Fort Meade/BW Corridor NoVA Defense/IT Lackland Air Force Base Navy Support Redstone Arsenal Data Center Shells Total Defense/IT Locations Regional Office Wholesale
Data Center		 Other Total
Three Months Ended June 30, 2022
                  
Revenues from real estate operations $ 67,589  $ 18,103  $ 15,129  $ 8,085  $ 9,308  $ 9,140  $ 127,354  $ 14,121  $ —  $ 1,771  $ 143,246 
Property operating expenses (23,499) (6,157) (7,520) (3,330) (3,631) (1,189) (45,326) (7,628) 50  (1,212) (54,116)
UJV NOI allocable to COPT —  —  —  —  —  1,080  1,080  —  —  —  1,080 
NOI from real estate operations $ 44,090  $ 11,946  $ 7,609  $ 4,755  $ 5,677  $ 9,031  $ 83,108  $ 6,493  $ 50  $ 559  $ 90,210 
Additions to long-lived assets $ 12,341  $ 2,541  $ —  $ 650  $ 224  $ —  $ 15,756  $ 3,561  $ 16  $ 65  $ 19,398 
Transfers from non-operating properties $ 768  $ 918  $ 521  $ (78) $ 20,037  $ 5,673  $ 27,839  $ 30  $ —  $ —  $ 27,869 
Three Months Ended June 30, 2021
                    
Revenues from real estate operations $ 64,840  $ 15,626  $ 13,688  $ 8,445  $ 8,775  $ 8,070  $ 119,444  $ 15,970  $ 7,204  $ 1,805  $ 144,423 
Property operating expenses (21,714) (5,917) (7,506) (3,227) (2,968) (777) (42,109) (7,463) (3,828) (1,216) (54,616)
UJV NOI allocable to COPT —  —  —  —  —  973  973  —  —  —  973 
NOI from real estate operations $ 43,126  $ 9,709  $ 6,182  $ 5,218  $ 5,807  $ 8,266  $ 78,308  $ 8,507  $ 3,376  $ 589  $ 90,780 
Additions to long-lived assets $ 11,511  $ 1,172  $ —  $ 1,205  $ 3,053  $ —  $ 16,941  $ 3,939  $ 121  $ 9  $ 21,010 
Transfers from non-operating properties $ 784  $ 25  $ 49,218  $ —  $ 1,288  $ 1,017  $ 52,332  $ 38,000  $ —  $ —  $ 90,332 
Six Months Ended June 30, 2022
                  
Revenues from real estate operations $ 134,803  $ 36,679  $ 29,842  $ 16,254  $ 18,503  $ 16,645  $ 252,726  $ 29,203  $ 1,980  $ 3,597  $ 287,506 
Property operating expenses (49,283) (13,026) (14,592) (6,801) (7,366) (2,199) (93,267) (15,558) (975) (2,468) (112,268)
UJV NOI allocable to COPT —  —  —  —  —  2,160  2,160  —  —  —  2,160 
NOI from real estate operations $ 85,520  $ 23,653  $ 15,250  $ 9,453  $ 11,137  $ 16,606  $ 161,619  $ 13,645  $ 1,005  $ 1,129  $ 177,398 
Additions to long-lived assets $ 24,126  $ 4,730  $ —  $ 1,390  $ 459  $ —  $ 30,705  $ 7,894  $ (35) $ 66  $ 38,630 
Transfers from non-operating properties $ 6,137  $ 1,237  $ 939  $ 6,298  $ 20,113  $ 86,876  $ 121,600  $ 301  $ —  $ —  $ 121,901 
Segment assets at June 30, 2022
 $ 1,331,828  $ 488,597  $ 196,723  $ 172,873  $ 316,008  $ 435,252  $ 2,941,281  $ 534,257  $ —  $ 3,878  $ 3,479,416 
Six Months Ended June 30, 2021
                  
Revenues from real estate operations $ 131,286  $ 31,811  $ 26,243  $ 16,843  $ 17,028  $ 16,857  $ 240,068  $ 31,673  $ 14,538  $ 3,308  $ 289,587 
Property operating expenses (46,385) (12,253) (14,380) (6,660) (5,522) (1,859) (87,059) (14,667) (7,651) (2,213) (111,590)
UJV NOI allocable to COPT —  —  —  —  —  1,890  1,890  —  —  —  1,890 
NOI from real estate operations $ 84,901  $ 19,558  $ 11,863  $ 10,183  $ 11,506  $ 16,888  $ 154,899  $ 17,006  $ 6,887  $ 1,095  $ 179,887 
Additions to long-lived assets $ 18,392  $ 1,470  $ —  $ 1,757  $ 3,311  $ —  $ 24,930  $ 7,948  $ 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  $ 403,442  $ 189,418  $ 174,633  $ 295,672  $ 353,797  $ 2,683,584  $ 520,126  $ 196,209  $ 3,639  $ 3,403,558 
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,
  2022 2021 2022 2021
Segment revenues from real estate operations $ 143,246  $ 144,423  $ 287,506  $ 289,587 
Construction contract and other service revenues 42,557  19,988  95,757  36,546 
Less: Revenues from discontinued operations (Note 4)
 —  (7,204) (1,980) (14,538)
Total revenues $ 185,803  $ 157,207  $ 381,283  $ 311,595 
 
The following table reconciles our segment property operating expenses to property operating expenses as reported on our consolidated statements of operations (in thousands):

For the Three Months Ended June 30, For the Six Months Ended June 30,
  2022 2021 2022 2021
Segment property operating expenses $ 54,116  $ 54,616  $ 112,268  $ 111,590 
Less: Property operating expenses from discontinued operations (Note 4)
 —  (3,702) (971) (7,400)
Total property operating expenses $ 54,116  $ 50,914  $ 111,297  $ 104,190 

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,
  2022 2021 2022 2021
UJV NOI allocable to COPT $ 1,080  $ 973  $ 2,160  $ 1,890 
Less: Income from UJV allocable to COPT attributable to depreciation and amortization expense and interest expense (760) (711) (1,518) (1,404)
Add: Equity in (loss) income of unconsolidated non-real estate entities (2) (2) 564  (4)
Equity in income of unconsolidated entities $ 318  $ 260  $ 1,206  $ 482 
 
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,
  2022 2021 2022 2021
Construction contract and other service revenues $ 42,557  $ 19,988  $ 95,757  $ 36,546 
Construction contract and other service expenses (41,304) (19,082) (92,954) (34,875)
NOI from service operations $ 1,253  $ 906  $ 2,803  $ 1,671 
The following table reconciles our NOI from real estate operations for reportable segments and NOI from service operations to income (loss) from continuing operations as reported on our consolidated statements of operations (in thousands):
For the Three Months Ended June 30, For the Six Months Ended June 30,
  2022 2021 2022 2021
NOI from real estate operations $ 90,210  $ 90,780  $ 177,398  $ 179,887 
NOI from service operations 1,253  906  2,803  1,671 
Interest and other income 1,818  2,228  3,711  4,093 
Credit loss (expense) recoveries (225) (193) 91  714 
Gain on sales of real estate (19) 40,233  (4) 39,743 
Equity in income of unconsolidated entities 318  260  1,206  482 
Income tax expense (4) (24) (157) (56)
Depreciation and other amortization associated with real estate operations (34,812) (34,732) (69,076) (69,232)
General, administrative and leasing expenses (8,355) (9,222) (16,899) (17,628)
Business development expenses and land carry costs (701) (1,372) (1,484) (2,466)
Interest expense (14,808) (15,942) (29,232) (33,461)
UJV NOI allocable to COPT included in equity in income of unconsolidated entities (1,080) (973) (2,160) (1,890)
Revenues from real estate operations from discontinued operations (Note 4)
 —  (7,204) (1,980) (14,538)
Property operating expenses from discontinued operations (Note 4)
 —  3,702  971  7,400 
Loss on early extinguishment of debt —  (25,228) (342) (58,394)
Income from continuing operations $ 33,595  $ 43,219  $ 64,846  $ 36,325 
 
The following table reconciles our segment assets to our consolidated total assets (in thousands): 
June 30,
2022		 June 30,
2021
Segment assets $ 3,479,416  $ 3,403,558 
Operating properties lease liabilities included in segment assets 29,412  29,927 
Non-operating property assets 469,380  441,048 
Other assets 206,985  177,499 
Total consolidated assets $ 4,185,193  $ 4,052,032 
 
The accounting policies of the segments are the same as those used to prepare our consolidated financial statements, except that discontinued operations are not presented separately for segment purposes.  In the segment reporting presented above, we did not allocate interest expense, depreciation and amortization, 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.