Annual report pursuant to Section 13 and 15(d)

Information by Business Segment

v3.24.0.1
Information by Business Segment
 12 Months Ended
Dec. 31, 2023
Segment Reporting [Abstract]  
Information by Business Segment Information by Business Segment
We have the following reportable segments: Defense/IT Portfolio, which we referred to as Defense/IT Locations in our 2022 Annual Report on Form 10-K; Wholesale Data Center (the only property in which we sold on January 25, 2022); and Other. We also report on Defense/IT Portfolio sub-segments, which include the following: 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). In the third quarter of 2023, we retrospectively reclassified to our Other reportable segment a portfolio of office properties located in the Greater Washington, DC/Baltimore region that we previously reported as a separate reportable segment referred to as Regional Office.
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 Defense”). 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 Portfolio
  Fort Meade/BW Corridor NoVA Defense/IT Lackland Air Force Base Navy Support Redstone Arsenal Data Center Shells Total Defense/IT Portfolio
Wholesale
Data Center 		Other Total
Year Ended December 31, 2023
                
Revenues from real estate operations $ 290,061  $ 80,413  $ 67,254  $ 32,638  $ 55,131  $ 27,444  $ 552,941  $ —  $ 71,862  $ 624,803 
Property operating expenses (99,788) (31,593) (36,616) (14,614) (19,148) (2,703) (204,462) —  (42,923) (247,385)
UJV NOI allocable to COPT Defense —  —  —  —  —  6,659  6,659  —  —  6,659 
NOI from real estate operations $ 190,273  $ 48,820  $ 30,638  $ 18,024  $ 35,983  $ 31,400  $ 355,138  $ —  $ 28,939  $ 384,077 
Additions to long-lived assets $ 54,564  $ 19,041  $ 62  $ 5,785  $ 20,949  $ —  $ 100,401  $ —  $ 17,227  $ 117,628 
Transfers from non-operating properties $ 64,264  $ 4,136  $ 166  $ 2,651  $ 86,868  $ 115,052  $ 273,137  $ —  $ 2,671  $ 275,808 
Segment assets at December 31, 2023
 $ 1,446,164  $ 490,104  $ 188,847  $ 163,818  $ 554,803  $ 432,851  $ 3,276,587  $ —  $ 312,728  $ 3,589,315 
Year Ended December 31, 2022
                  
Revenues from real estate operations $ 273,790  $ 73,985  $ 62,911  $ 32,754  $ 38,593  $ 35,722  $ 517,755  $ 1,980  $ 66,643  $ 586,378 
Property operating expenses (97,727) (26,635) (32,301) (14,001) (15,600) (4,372) (190,636) (979) (36,786) (228,401)
UJV NOI allocable to COPT Defense —  —  —  —  —  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  $ 1,001  $ 29,857  $ 362,304 
Additions to long-lived assets $ 48,443  $ 11,102  $ —  $ 3,801  $ 3,405  $ —  $ 66,751  $ (35) $ 37,810  $ 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  $ —  $ 553,863  $ 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  $ 30,490  $ 69,775  $ 587,060 
Property operating expenses (92,521) (24,785) (30,535) (13,617) (11,618) (4,086) (177,162) (17,424) (35,633) (230,219)
UJV NOI allocable to COPT Defense —  —  —  —  —  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  $ 13,066  $ 34,142  $ 360,870 
Additions to long-lived assets $ 45,647  $ 6,197  $ —  $ 4,193  $ 3,542  $ —  $ 59,579  $ 1,680  $ 35,526  $ 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  $ 192,647  $ 541,299  $ 3,575,462 
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,
  2023 2022 2021
Segment revenues from real estate operations $ 624,803  $ 586,378  $ 587,060 
Construction contract and other service revenues 60,179  154,632  107,876 
Less: Revenues from discontinued operations (Note 4)
 —  (1,980) (30,490)
Total revenues $ 684,982  $ 739,030  $ 664,446 

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,
  2023 2022 2021
Segment property operating expenses $ 247,385  $ 228,401  $ 230,219 
Less: Property operating expenses from discontinued operations (Note 4)
 —  (971) (16,842)
Total property operating expenses $ 247,385  $ 227,430  $ 213,377 

 The following table reconciles UJV NOI allocable to COPT Defense to equity in (loss) income of unconsolidated entities as reported on our consolidated statements of operations (in thousands):
For the Years Ended December 31,
  2023 2022 2021
UJV NOI allocable to COPT Defense $ 6,659  $ 4,327  $ 4,029 
Less: Income from UJVs allocable to COPT Defense attributable to depreciation and amortization expense, interest expense and gain on early extinguishment of debt (6,917) (3,145) (2,930)
Add: Equity in (loss) income of unconsolidated non-real estate entities (3) 561  (6)
Equity in (loss) income of unconsolidated entities $ (261) $ 1,743  $ 1,093 

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,
  2023 2022 2021
Construction contract and other service revenues $ 60,179  $ 154,632  $ 107,876 
Construction contract and other service expenses (57,416) (149,963) (104,053)
NOI from service operations $ 2,763  $ 4,669  $ 3,823 
The following table reconciles our NOI from real estate operations for reportable segments and NOI from service operations to (loss) income from continuing operations as reported on our consolidated statements of operations (in thousands):
For the Years Ended December 31,
  2023 2022 2021
NOI from real estate operations $ 384,077  $ 362,304  $ 360,870 
NOI from service operations 2,763  4,669  3,823 
Depreciation and other amortization associated with real estate operations (148,950) (141,230) (137,543)
Impairment losses (252,797) —  — 
General, administrative, leasing and other expenses (42,769) (38,991) (40,774)
Interest expense (71,142) (61,174) (65,398)
Interest and other income, net 12,587  9,070  9,007 
Gain on sales of real estate 49,392  19,250  65,590 
Loss on early extinguishment of debt —  (609) (100,626)
Equity in (loss) income of unconsolidated entities (261) 1,743  1,093 
UJV NOI allocable to COPT Defense included in equity in (loss) income of unconsolidated entities (6,659) (4,327) (4,029)
Income tax expense (588) (447) (145)
Revenues from real estate operations from discontinued operations (Note 4)
 —  (1,980) (30,490)
Property operating expenses from discontinued operations (Note 4)
 —  971  16,842 
(Loss) income from continuing operations $ (74,347) $ 149,249  $ 78,220 

The following table reconciles our segment assets to our consolidated total assets (in thousands): 
As of December 31,
2023 2022
Segment assets $ 3,589,315  $ 3,709,271 
Operating properties lease liabilities included in segment assets 34,346  28,759 
Non-operating property assets 258,299  301,002 
Other assets 365,006  218,243 
Total consolidated assets $ 4,246,966  $ 4,257,275 
 
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, loss on early extinguishment of debt and equity in (loss) 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, leasing and other expenses, interest and other income, net, income taxes and noncontrolling interests because these items represent general corporate or non-operating property items not attributable to segments.