Quarterly report pursuant to Section 13 or 15(d)

Information by Business Segment

v3.24.3
Information by Business Segment
 9 Months Ended
Sep. 30, 2024
Segment Reporting [Abstract]  
Information by Business Segment Information by Business Segment
We have the following reportable segments: Defense/IT Portfolio; and Other. We also report on Defense/IT Portfolio 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, Texas); 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, Alabama); 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 (“UJV” or “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, net of deficit investment balances reported in “other liabilities” (which were included in our data center shells sub-segment and totaled $36.4 million and $39.2 million as of September 30, 2024 and 2023, respectively). In the third quarter of 2024, we retrospectively changed our segment assets definition to include deficit investment balances 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 Other Total
Three Months Ended September 30, 2024
              
Revenues from real estate operations $ 80,056  $ 22,083  $ 16,879  $ 8,068  $ 18,332  $ 9,029  $ 154,447  $ 18,116  $ 172,563 
Property operating expenses (27,929) (9,252) (9,160) (4,084) (6,463) (1,554) (58,442) (10,439) (68,881)
UJV NOI allocable to COPT Defense —  —  —  —  —  1,844  1,844  —  1,844 
NOI from real estate operations $ 52,127  $ 12,831  $ 7,719  $ 3,984  $ 11,869  $ 9,319  $ 97,849  $ 7,677  $ 105,526 
Additions to long-lived assets $ 14,101  $ 5,357  $ 17,034  $ 3,520  $ 1,521  $ —  $ 41,533  $ 4,040  $ 45,573 
Transfers from non-operating properties $ 418  $ 16  $ —  $ 66  $ 25,846  $ 406  $ 26,752  $ 141  $ 26,893 
Three Months Ended September 30, 2023
              
Revenues from real estate operations $ 73,350  $ 20,333  $ 16,193  $ 8,190  $ 13,768  $ 6,811  $ 138,645  $ 17,962  $ 156,607 
Property operating expenses (25,216) (7,900) (8,567) (3,933) (4,948) (678) (51,242) (10,546) (61,788)
UJV NOI allocable to COPT Defense —  —  —  —  —  1,675  1,675  —  1,675 
NOI from real estate operations $ 48,134  $ 12,433  $ 7,626  $ 4,257  $ 8,820  $ 7,808  $ 89,078  $ 7,416  $ 96,494 
Additions to long-lived assets $ 7,057  $ 4,639  $ —  $ 1,201  $ 8,566  $ —  $ 21,463  $ 4,567  $ 26,030 
Transfers from non-operating properties $ 983  $ 95  $ 51  $ 1  $ 63,025  $ 58,405  $ 122,560  $ 102  $ 122,662 
Nine Months Ended September 30, 2024
            
Revenues from real estate operations $ 235,839  $ 64,110  $ 49,737  $ 24,534  $ 52,157  $ 27,086  $ 453,463  $ 52,848  $ 506,311 
Property operating expenses (80,456) (27,444) (26,645) (11,343) (17,976) (4,588) (168,452) (30,585) (199,037)
UJV NOI allocable to COPT Defense —  —  —  —  —  5,319  5,319  —  5,319 
NOI from real estate operations $ 155,383  $ 36,666  $ 23,092  $ 13,191  $ 34,181  $ 27,817  $ 290,330  $ 22,263  $ 312,593 
Additions to long-lived assets $ 48,161  $ 19,762  $ 17,034  $ 6,049  $ 2,545  $ —  $ 93,551  $ 14,496  $ 108,047 
Transfers from non-operating properties $ 2,658  $ 1,011  $ 9  $ 106  $ 60,119  $ 3,891  $ 67,794  $ 1,884  $ 69,678 
Segment assets at September 30, 2024
 $ 1,447,217  $ 492,912  $ 200,968  $ 161,007  $ 602,573  $ 427,972  $ 3,332,649  $ 314,806  $ 3,647,455 
Nine Months Ended September 30, 2023
            
Revenues from real estate operations $ 215,303  $ 60,003  $ 49,393  $ 24,233  $ 40,160  $ 19,790  $ 408,882  $ 54,359  $ 463,241 
Property operating expenses (73,924) (23,155) (26,463) (10,992) (14,334) (2,015) (150,883) (31,925) (182,808)
UJV NOI allocable to COPT Defense —  —  —  —  —  4,988  4,988  —  4,988 
NOI from real estate operations $ 141,379  $ 36,848  $ 22,930  $ 13,241  $ 25,826  $ 22,763  $ 262,987  $ 22,434  $ 285,421 
Additions to long-lived assets $ 42,838  $ 14,994  $ 62  $ 2,269  $ 17,339  $ —  $ 77,502  $ 12,572  $ 90,074 
Transfers from non-operating properties $ 11,392  $ 582  $ 96  $ 2,651  $ 81,352  $ 63,653  $ 159,726  $ 129  $ 159,855 
Segment assets at September 30, 2023
 $ 1,397,107  $ 486,561  $ 190,344  $ 163,630  $ 548,201  $ 380,366  $ 3,166,209  $ 310,828  $ 3,477,037 
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,
  2024 2023 2024 2023
Segment revenues from real estate operations $ 172,563  $ 156,607  $ 506,311  $ 463,241 
Construction contract and other service revenues 16,662  11,949  63,523  42,012 
Total revenues $ 189,225  $ 168,556  $ 569,834  $ 505,253 
 
The following table reconciles UJV NOI allocable to COPT Defense to equity in income (loss) 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,
  2024 2023 2024 2023
UJV NOI allocable to COPT Defense $ 1,844  $ 1,675  $ 5,319  $ 4,988 
Less: Income from UJV allocable to COPT Defense attributable to depreciation and amortization expense and interest expense (1,759) (1,743) (5,139) (5,006)
Add: Equity in loss of unconsolidated non-real estate entities —  —  —  (3)
Equity in income (loss) of unconsolidated entities $ 85  $ (68) $ 180  $ (21)
 
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,
  2024 2023 2024 2023
Construction contract and other service revenues $ 16,662  $ 11,949  $ 63,523  $ 42,012 
Construction contract and other service expenses (16,127) (11,493) (61,746) (40,249)
NOI from service operations $ 535  $ 456  $ 1,777  $ 1,763 

The following table reconciles our NOI from real estate operations for reportable segments and NOI from service operations to net income (loss) as reported on our consolidated statements of operations (in thousands):
For the Three Months Ended September 30, For the Nine Months Ended September 30,
  2024 2023 2024 2023
NOI from real estate operations $ 105,526  $ 96,494  $ 312,593  $ 285,421 
NOI from service operations 535  456  1,777  1,763 
Depreciation and other amortization associated with real estate operations (38,307) (37,620) (114,819) (112,215)
Impairment losses —  (252,797) —  (252,797)
General, administrative, leasing and other expenses (11,416) (10,576) (35,195) (31,424)
Interest expense (20,376) (17,798) (61,760) (50,759)
Interest and other income, net 3,324  2,529  10,330  6,928 
Gain on sales of real estate —  —  —  49,392 
Equity in income (loss) of unconsolidated entities 85  (68) 180  (21)
UJV NOI allocable to COPT Defense included in equity in income (loss) of unconsolidated entities (1,844) (1,675) (5,319) (4,988)
Income tax expense (130) (152) (312) (467)
Net income (loss) $ 37,397  $ (221,207) $ 107,475  $ (109,167)
 
The following table reconciles our segment assets to our consolidated total assets (in thousands):
September 30,
2024		 September 30,
2023
Segment assets $ 3,647,455  $ 3,477,037 
Operating properties lease liabilities included in segment assets 34,012  33,360 
Investment in UJV deficit balance included in segment assets 3,370  2,327 
Non-operating property assets 314,729  324,168 
Other assets 234,736  402,365 
Total consolidated assets $ 4,234,302  $ 4,239,257 
 
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 and equity in income (loss) 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.