Annual report pursuant to Section 13 and 15(d)

Information by Business Segment

v3.22.4
Information by Business Segment
 12 Months Ended
Dec. 31, 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”); 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 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
Year Ended December 31, 2022
                  
Revenues from real estate operations $ 273,790  $ 73,985  $ 62,911  $ 32,754  $ 38,593  $ 35,722  $ 517,755  $ 59,316  $ 1,980  $ 7,327  $ 586,378 
Property operating expenses (97,727) (26,635) (32,301) (14,001) (15,600) (4,372) (190,636) (31,712) (979) (5,074) (228,401)
UJV NOI allocable to COPT —  —  —  —  —  4,327  4,327  —  —  —  4,327 
NOI from real estate operations $ 176,063  $ 47,350  $ 30,610  $ 18,753  $ 22,993  $ 35,677  $ 331,446  $ 27,604  $ 1,001  $ 2,253  $ 362,304 
Additions to long-lived assets $ 48,443  $ 11,102  $ —  $ 3,801  $ 3,405  $ —  $ 66,751  $ 37,625  $ (35) $ 185  $ 104,526 
Transfers from non-operating properties $ 69,771  $ 1,882  $ 1,290  $ 6,420  $ 158,831  $ 179,522  $ 417,716  $ 704  $ —  $ —  $ 418,420 
Segment assets at December 31, 2022
 $ 1,387,517  $ 488,277  $ 194,481  $ 169,119  $ 453,543  $ 462,471  $ 3,155,408  $ 550,059  $ —  $ 3,804  $ 3,709,271 
Year Ended December 31, 2021
                    
Revenues from real estate operations $ 262,120  $ 65,853  $ 57,756  $ 33,757  $ 35,727  $ 31,582  $ 486,795  $ 63,107  $ 30,490  $ 6,668  $ 587,060 
Property operating expenses (92,521) (24,785) (30,535) (13,617) (11,618) (4,086) (177,162) (31,056) (17,424) (4,577) (230,219)
UJV NOI allocable to COPT —  —  —  —  —  4,029  4,029  —  —  —  4,029 
NOI from real estate operations $ 169,599  $ 41,068  $ 27,221  $ 20,140  $ 24,109  $ 31,525  $ 313,662  $ 32,051  $ 13,066  $ 2,091  $ 360,870 
Additions to long-lived assets $ 45,647  $ 6,197  $ —  $ 4,193  $ 3,542  $ —  $ 59,579  $ 35,038  $ 1,680  $ 488  $ 96,785 
Transfers from non-operating properties $ 70,514  $ 90,050  $ 59,323  $ —  $ 22,739  $ 3,004  $ 245,630  $ 39,319  $ —  $ —  $ 284,949 
Segment assets at December 31, 2021
 $ 1,332,399  $ 489,582  $ 198,200  $ 170,985  $ 300,252  $ 350,098  $ 2,841,516  $ 537,268  $ 192,647  $ 4,031  $ 3,575,462 
Year Ended December 31, 2020
                    
Revenues from real estate operations $ 254,197  $ 61,685  $ 50,982  $ 32,869  $ 22,515  $ 29,139  $ 451,387  $ 56,759  $ 27,011  $ 3,568  $ 538,725 
Property operating expenses (85,032) (22,996) (29,055) (12,655) (8,119) (3,195) (161,052) (27,469) (13,543) (1,776) (203,840)
UJV NOI allocable to COPT —  —  —  —  —  6,951  6,951  —  —  —  6,951 
NOI from real estate operations $ 169,165  $ 38,689  $ 21,927  $ 20,214  $ 14,396  $ 32,895  $ 297,286  $ 29,290  $ 13,468  $ 1,792  $ 341,836 
Additions to long-lived assets $ 31,295  $ 12,314  $ —  $ 7,104  $ 2,905  $ —  $ 53,618  $ 16,538  $ 10,856  $ 467  $ 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  $ 411,780  $ 142,137  $ 178,897  $ 281,386  $ 419,929  $ 2,711,978  $ 471,356  $ 201,820  $ 3,824  $ 3,388,978 
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,
  2022 2021 2020
Segment revenues from real estate operations $ 586,378  $ 587,060  $ 538,725 
Construction contract and other service revenues 154,632  107,876  70,640 
Less: Revenues from discontinued operations (Note 4)
 (1,980) (30,490) (27,011)
Total revenues $ 739,030  $ 664,446  $ 582,354 

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 Years Ended December 31,
  2022 2021 2020
Segment property operating expenses $ 228,401  $ 230,219  $ 203,840 
Less: Property operating expenses from discontinued operations (Note 4)
 (971) (16,842) (13,044)
Total property operating expenses $ 227,430  $ 213,377  $ 190,796 

 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,
  2022 2021 2020
UJV NOI allocable to COPT $ 4,327  $ 4,029  $ 6,951 
Less: Income from UJVs allocable to COPT attributable to depreciation and amortization expense, interest expense and gain on extinguishment of debt (3,145) (2,930) (5,120)
Add: Equity in income (loss) of unconsolidated non-real estate entities 561  (6) (6)
Equity in income of unconsolidated entities $ 1,743  $ 1,093  $ 1,825 

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,
  2022 2021 2020
Construction contract and other service revenues $ 154,632  $ 107,876  $ 70,640 
Construction contract and other service expenses (149,963) (104,053) (67,615)
NOI from service operations $ 4,669  $ 3,823  $ 3,025 
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 Years Ended December 31,
  2022 2021 2020
NOI from real estate operations $ 362,304  $ 360,870  $ 341,836 
NOI from service operations 4,669  3,823  3,025 
Depreciation and other amortization associated with real estate operations (141,230) (137,543) (126,503)
General, administrative and leasing expenses (35,798) (36,127) (33,001)
Business development expenses and land carry costs (3,193) (4,647) (4,473)
Impairment losses —  —  (1,530)
Interest expense (61,174) (65,398) (67,937)
Interest and other income 9,341  7,879  8,574 
Credit loss (expense) recoveries (271) 1,128  933 
Gain on sales of real estate 19,250  65,590  30,209 
Gain on sale of investment in unconsolidated real estate joint venture —  —  29,416 
Loss on early extinguishment of debt (609) (100,626) (7,306)
Loss on interest rate derivatives —  —  (53,196)
Equity in income of unconsolidated entities 1,743  1,093  1,825 
UJV NOI allocable to COPT included in equity in income of unconsolidated entities (4,327) (4,029) (6,951)
Income tax expense (447) (145) (353)
Revenues from real estate operations from discontinued operations (Note 4)
 (1,980) (30,490) (27,011)
Property operating expenses from discontinued operations (Note 4)
 971  16,842  13,044 
Income from continuing operations $ 149,249  $ 78,220  $ 100,601 

The following table reconciles our segment assets to our consolidated total assets (in thousands): 
As of December 31,
2022 2021
Segment assets $ 3,709,271  $ 3,575,462 
Operating properties lease liabilities included in segment assets 28,759  29,342 
Non-operating property assets 301,002  449,144 
Other assets 218,243  208,504 
Total consolidated assets $ 4,257,275  $ 4,262,452 
 
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, 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 (expense) recoveries, income taxes and noncontrolling interests because these items represent general corporate or non-operating property items not attributable to segments.