Quarterly report pursuant to Section 13 or 15(d)

Information by Business Segment

v3.22.2.2
Information by Business Segment
 9 Months Ended
Sep. 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 September 30, 2022
                  
Revenues from real estate operations $ 69,209  $ 18,611  $ 15,951  $ 8,253  $ 9,976  $ 9,069  $ 131,069  $ 14,739  $ —  $ 1,879  $ 147,687 
Property operating expenses (24,450) (6,776) (8,281) (3,665) (4,324) (1,116) (48,612) (7,764) —  (1,287) (57,663)
UJV NOI allocable to COPT —  —  —  —  —  1,072  1,072  —  —  —  1,072 
NOI from real estate operations $ 44,759  $ 11,835  $ 7,670  $ 4,588  $ 5,652  $ 9,025  $ 83,529  $ 6,975  $ —  $ 592  $ 91,096 
Additions to long-lived assets $ 9,076  $ 1,454  $ —  $ 734  $ 1,573  $ —  $ 12,837  $ 6,852  $ —  $ 13  $ 19,702 
Transfers from non-operating properties $ 1,039  $ 345  $ 129  $ 27  $ 267  $ 2,986  $ 4,793  $ 348  $ —  $ —  $ 5,141 
Three Months Ended September 30, 2021
                    
Revenues from real estate operations $ 66,029  $ 16,077  $ 14,519  $ 8,558  $ 9,144  $ 6,913  $ 121,240  $ 16,024  $ 7,717  $ 1,609  $ 146,590 
Property operating expenses (22,956) (6,330) (6,935) (3,454) (3,003) (657) (43,335) (8,045) (4,612) (1,198) (57,190)
UJV NOI allocable to COPT —  —  —  —  —  1,060  1,060  —  —  —  1,060 
NOI from real estate operations $ 43,073  $ 9,747  $ 7,584  $ 5,104  $ 6,141  $ 7,316  $ 78,965  $ 7,979  $ 3,105  $ 411  $ 90,460 
Additions to long-lived assets $ 10,671  $ 1,500  $ —  $ 897  $ 107  $ —  $ 13,175  $ 5,433  $ 1,141  $ 69  $ 19,818 
Transfers from non-operating properties $ 53,935  $ 87,986  $ 7,332  $ —  $ 5,519  $ 421  $ 155,193  $ 381  $ —  $ —  $ 155,574 
Nine Months Ended September 30, 2022
                  
Revenues from real estate operations $ 204,012  $ 55,290  $ 45,793  $ 24,507  $ 28,479  $ 25,714  $ 383,795  $ 43,942  $ 1,980  $ 5,476  $ 435,193 
Property operating expenses (73,733) (19,802) (22,873) (10,466) (11,690) (3,315) (141,879) (23,322) (975) (3,755) (169,931)
UJV NOI allocable to COPT —  —  —  —  —  3,232  3,232  —  —  —  3,232 
NOI from real estate operations $ 130,279  $ 35,488  $ 22,920  $ 14,041  $ 16,789  $ 25,631  $ 245,148  $ 20,620  $ 1,005  $ 1,721  $ 268,494 
Additions to long-lived assets $ 33,202  $ 6,184  $ —  $ 2,124  $ 2,032  $ —  $ 43,542  $ 14,746  $ (35) $ 79  $ 58,332 
Transfers from non-operating properties $ 7,176  $ 1,582  $ 1,068  $ 6,325  $ 20,380  $ 89,862  $ 126,393  $ 649  $ —  $ —  $ 127,042 
Segment assets at September 30, 2022
 $ 1,325,703  $ 487,032  $ 195,612  $ 170,574  $ 314,156  $ 436,908  $ 2,929,985  $ 534,838  $ —  $ 3,795  $ 3,468,618 
Nine Months Ended September 30, 2021
                  
Revenues from real estate operations $ 197,315  $ 47,888  $ 40,762  $ 25,401  $ 26,172  $ 23,770  $ 361,308  $ 47,697  $ 22,255  $ 4,917  $ 436,177 
Property operating expenses (69,341) (18,583) (21,315) (10,114) (8,525) (2,516) (130,394) (22,712) (12,263) (3,411) (168,780)
UJV NOI allocable to COPT —  —  —  —  —  2,950  2,950  —  —  —  2,950 
NOI from real estate operations $ 127,974  $ 29,305  $ 19,447  $ 15,287  $ 17,647  $ 24,204  $ 233,864  $ 24,985  $ 9,992  $ 1,506  $ 270,347 
Additions to long-lived assets $ 29,063  $ 2,970  $ —  $ 2,654  $ 3,418  $ —  $ 38,105  $ 13,381  $ 1,490  $ 82  $ 53,058 
Transfers from non-operating properties $ 55,075  $ 88,099  $ 56,601  $ —  $ 19,724  $ 2,423  $ 221,922  $ 38,738  $ —  $ —  $ 260,660 
Segment assets at September 30, 2021
 $ 1,315,101  $ 487,973  $ 196,624  $ 172,381  $ 299,184  $ 353,340  $ 2,824,603  $ 520,184  $ 194,421  $ 3,663  $ 3,542,871 
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 September 30, For the Nine Months Ended September 30,
  2022 2021 2022 2021
Segment revenues from real estate operations $ 147,687  $ 146,590  $ 435,193  $ 436,177 
Construction contract and other service revenues 34,813  28,046  130,570  64,592 
Less: Revenues from discontinued operations (Note 4)
 —  (7,717) (1,980) (22,255)
Total revenues $ 182,500  $ 166,919  $ 563,783  $ 478,514 
 
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 September 30, For the Nine Months Ended September 30,
  2022 2021 2022 2021
Segment property operating expenses $ 57,663  $ 57,190  $ 169,931  $ 168,780 
Less: Property operating expenses from discontinued operations (Note 4)
 —  (4,462) (971) (11,862)
Total property operating expenses $ 57,663  $ 52,728  $ 168,960  $ 156,918 

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 September 30, For the Nine Months Ended September 30,
  2022 2021 2022 2021
UJV NOI allocable to COPT $ 1,072  $ 1,060  $ 3,232  $ 2,950 
Less: Income from UJV allocable to COPT attributable to depreciation and amortization expense and interest expense (762) (763) (2,280) (2,167)
Add: Equity in (loss) income of unconsolidated non-real estate entities (2) —  562  (4)
Equity in income of unconsolidated entities $ 308  $ 297  $ 1,514  $ 779 
 
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 September 30, For the Nine Months Ended September 30,
  2022 2021 2022 2021
Construction contract and other service revenues $ 34,813  $ 28,046  $ 130,570  $ 64,592 
Construction contract and other service expenses (33,555) (27,089) (126,509) (61,964)
NOI from service operations $ 1,258  $ 957  $ 4,061  $ 2,628 
The following table reconciles our NOI from real estate operations for reportable segments and NOI from service operations to income from continuing operations as reported on our consolidated statements of operations (in thousands):
For the Three Months Ended September 30, For the Nine Months Ended September 30,
  2022 2021 2022 2021
NOI from real estate operations $ 91,096  $ 90,460  $ 268,494  $ 270,347 
NOI from service operations 1,258  957  4,061  2,628 
Interest and other income 2,290  1,818  6,001  5,911 
Credit loss (expense) recoveries (1,693) 326  (1,602) 1,040 
Gain on sales of real estate 16  (32) 12  39,711 
Equity in income of unconsolidated entities 308  297  1,514  779 
Income tax expense (67) (47) (224) (103)
Depreciation and other amortization associated with real estate operations (35,247) (33,807) (104,323) (103,039)
General, administrative and leasing expenses (8,898) (9,342) (25,797) (26,970)
Business development expenses and land carry costs (552) (1,093) (2,036) (3,559)
Interest expense (15,123) (15,720) (44,355) (49,181)
UJV NOI allocable to COPT included in equity in income of unconsolidated entities (1,072) (1,060) (3,232) (2,950)
Revenues from real estate operations from discontinued operations (Note 4)
 —  (7,717) (1,980) (22,255)
Property operating expenses from discontinued operations (Note 4)
 —  4,462  971  11,862 
Loss on early extinguishment of debt —  (1,159) (342) (59,553)
Income from continuing operations $ 32,316  $ 28,343  $ 97,162  $ 64,668 
 
The following table reconciles our segment assets to our consolidated total assets (in thousands):
September 30,
2022		 September 30,
2021
Segment assets $ 3,468,618  $ 3,542,871 
Operating properties lease liabilities included in segment assets 29,088  29,644 
Non-operating property assets 531,838  385,025 
Other assets 239,785  193,598 
Total consolidated assets $ 4,269,329  $ 4,151,138 
 
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.