Annual report pursuant to Section 13 and 15(d)

Information by Business Segment

v3.25.0.1
Information by Business Segment
 12 Months Ended
Dec. 31, 2024
Segment Reporting [Abstract]  
Information by Business Segment Information by Business Segment
We organize our portfolio of operating properties into reportable segments based primarily on their location and secondarily on their physical characteristics and use. 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 Meade/BW Corridor; 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). In the fourth quarter of 2024, we retrospectively reclassified to our Other reportable segment a property that we sold in January 2022 and previously reported as a separate reportable segment referred to as Wholesale Data Center.

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 other segment items, which is comprised of: 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”). Property operating expenses represent costs associated with operating our properties, including property taxes, ground rents, utilities, property management, insurance, repairs and exterior and interior maintenance, as well as associated labor and indirect costs.

FASB guidance on segment reporting uses the term chief operating decision maker to define a function responsible for allocating resources to and assessing the performance of the segments of a public entity. Our President and Chief Executive Officer served as our chief operating decision maker for each of the periods included herein. Our chief operating decision maker uses budget to actual comparisons of:

>NOI from real estate operations to assess the performance of our segments; and
>operating expense information on a consolidated basis and for our Same Property pool (defined as our properties stably owned and 100% operational throughout both the current and prior year) to manage expenses associated with operating our properties.

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 $36.0 million, $38.3 million and $20.0 million as of December 31, 2024, 2023 and 2022, 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
Year Ended December 31, 2024
              
Revenues from real estate operations $ 314,411  $ 86,034  $ 67,837  $ 32,628  $ 69,317  $ 37,190  $ 607,417  $ 70,300  $ 677,717 
Other segment items:
Property operating expenses (107,128) (36,059) (37,169) (15,146) (24,185) (6,124) (225,811) (40,190) (266,001)
UJV NOI allocable to COPT Defense —  —  —  —  —  7,217  7,217  —  7,217 
Total other segment items (107,128) (36,059) (37,169) (15,146) (24,185) 1,093  (218,594) (40,190) (258,784)
NOI from real estate operations $ 207,283  $ 49,975  $ 30,668  $ 17,482  $ 45,132  $ 38,283  $ 388,823  $ 30,110  $ 418,933 
Additions to long-lived assets $ 64,023  $ 27,205  $ 17,098  $ 10,128  $ 7,253  $ —  $ 125,707  $ 20,078  $ 145,785 
Transfers from non-operating properties $ 3,910  $ 1,016  $ 10  $ 352  $ 60,872  $ 65,314  $ 131,474  $ 5,456  $ 136,930 
Segment assets at December 31, 2024
 $ 1,445,236  $ 494,881  $ 199,166  $ 162,855  $ 601,430  $ 488,429  $ 3,391,997  $ 318,650  $ 3,710,647 
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 
Other segment items:
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 
Total other segment items (99,788) (31,593) (36,616) (14,614) (19,148) 3,956  (197,803) (42,923) (240,726)
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  $ 430,075  $ 3,273,811  $ 312,728  $ 3,586,539 
Year Ended December 31, 2022
                
Revenues from real estate operations $ 273,790  $ 73,985  $ 62,911  $ 32,754  $ 38,593  $ 35,722  $ 517,755  $ 68,623  $ 586,378 
Other segment items:
Property operating expenses (97,727) (26,635) (32,301) (14,001) (15,600) (4,372) (190,636) (37,765) (228,401)
UJV NOI allocable to COPT Defense —  —  —  —  —  4,327  4,327  —  4,327 
Total other segment items (97,727) (26,635) (32,301) (14,001) (15,600) (45) (186,309) (37,765) (224,074)
NOI from real estate operations $ 176,063  $ 47,350  $ 30,610  $ 18,753  $ 22,993  $ 35,677  $ 331,446  $ 30,858  $ 362,304 
Additions to long-lived assets $ 48,443  $ 11,102  $ —  $ 3,801  $ 3,405  $ —  $ 66,751  $ 37,775  $ 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  $ 461,011  $ 3,153,948  $ 553,863  $ 3,707,811 
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,
  2024 2023 2022
Segment revenues from real estate operations $ 677,717  $ 624,803  $ 586,378 
Construction contract and other service revenues 75,550  60,179  154,632 
Less: Revenues from discontinued operations (Note 4)
 —  —  (1,980)
Total revenues $ 753,267  $ 684,982  $ 739,030 

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,
  2024 2023 2022
Segment property operating expenses $ 266,001  $ 247,385  $ 228,401 
Less: Property operating expenses from discontinued operations (Note 4)
 —  —  (971)
Total property operating expenses $ 266,001  $ 247,385  $ 227,430 

 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 Years Ended December 31,
  2024 2023 2022
UJV NOI allocable to COPT Defense $ 7,217  $ 6,659  $ 4,327 
Less: Income from UJVs allocable to COPT Defense attributable to depreciation and amortization expense, interest expense and gain on early extinguishment of debt (6,820) (6,917) (3,145)
Add: Equity in (loss) income of unconsolidated non-real estate entities —  (3) 561 
Equity in income (loss) of unconsolidated entities $ 397  $ (261) $ 1,743 

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,
  2024 2023 2022
Construction contract and other service revenues $ 75,550  $ 60,179  $ 154,632 
Construction contract and other service expenses (73,265) (57,416) (149,963)
NOI from service operations $ 2,285  $ 2,763  $ 4,669 
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 Years Ended December 31,
  2024 2023 2022
NOI from real estate operations $ 418,933  $ 384,077  $ 362,304 
NOI from service operations 2,285  2,763  4,669 
Depreciation and other amortization associated with real estate operations (153,640) (148,950) (141,230)
Impairment losses —  (252,797) — 
General, administrative, leasing and other expenses (47,038) (42,769) (38,991)
Interest expense (82,151) (71,142) (61,174)
Interest and other income, net 12,661  12,587  9,070 
Gain on sales of real estate —  49,392  19,250 
Loss on early extinguishment of debt —  —  (609)
Equity in income (loss) of unconsolidated entities 397  (261) 1,743 
UJV NOI allocable to COPT Defense included in equity in income (loss) of unconsolidated entities (7,217) (6,659) (4,327)
Income tax expense (288) (588) (447)
Revenues from real estate operations from discontinued operations (Note 4)
 —  —  (1,980)
Property operating expenses from discontinued operations (Note 4)
 —  —  971 
Income (loss) from continuing operations $ 143,942  $ (74,347) $ 149,249 

The following table reconciles our segment assets to our consolidated total assets (in thousands): 
As of December 31,
2024 2023
Segment assets $ 3,710,647  $ 3,586,539 
Operating properties lease liabilities included in segment assets 49,631  34,346 
Investment in UJV deficit balance included in segment assets 3,409  2,776 
Non-operating property assets 277,147  258,299 
Other assets 213,357  365,006 
Total consolidated assets $ 4,254,191  $ 4,246,966 
 
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 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.