COPT Reports Third Quarter 2016 Results

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COLUMBIA, Md.--(BUSINESS WIRE)-- Corporate Office Properties Trust (“COPT” or the “Company”) (NYSE: OFC) announced financial and operating results for the third quarter ended September 30, 2016.

Management Comments

“As the third quarter demonstrated, we are executing well on all aspects of our 2016 plan, and key performance metrics were in-line with our guidance and expectations,” stated Stephen E. Budorick, COPT’s President & Chief Executive Officer. “Same office cash NOI grew 1.1% in the quarter and 4.1% for the first nine months of the year, and we have completed over $300 million of asset sales to date.” He added, “Demand throughout our portfolio is steady and provides solid momentum for 2017.”

Financial Highlights

3rd Quarter Financial Results:

  • Diluted earnings per share (“EPS”) was $0.25 for the quarter ended September 30, 2016 as compared to $0.91 for the third quarter of 2015.
  • Diluted funds from operations per share (“FFOPS”), as calculated in accordance with NAREIT’s definition, was $0.49 for the third quarter of 2016 as compared to $1.32 for the third quarter of 2015.
  • FFOPS, as adjusted for comparability, was $0.51 for the quarter ended September 30, 2016 and $0.52 for the third quarter of 2015.

Adjustments for comparability encompass items such as impairment losses and gains on non-operating properties, gains (losses) on early extinguishment of debt, derivative gains (losses), executive transition costs and write-offs of original issuance costs for redeemed preferred shares.

Operating Performance Highlights

Portfolio Summary:

  • At September 30, 2016, the Company’s core portfolio of 146 operating office properties were 93.0% occupied and 94.4% leased.
  • During the quarter, the Company placed 192,000 square feet of development in service that, at September 30, 2016, were 83% leased.
  • At September 30, 2016, the Company had approximately $161 million of assets held for sale composed of 19 operating properties that contain a total of 1.3 million square feet and 153 acres of non-strategic land.

Same Office Performance:

  • At September 30, 2016, COPT’s same office portfolio of 129 buildings was 91.4% occupied and 93.2% leased.
  • For the quarter ended September 30, 2016, the Company’s same office property cash NOI increased 1.1% as compared to the quarter ended September 30, 2015. For the nine months ended September 30, 2016, same office cash NOI grew 4.1% versus the comparable period in 2015.

Leasing:

  • Square Feet Leased ‒ For the quarter ended September 30, 2016, the Company leased a total of 741,000 square feet, including 26,000 square feet in development projects. During the first nine months of the year, we executed on 2.3 million square feet of leasing, including 571,000 square feet in development projects.
  • Renewal Rates ‒ During the three and nine months ended September 30, 2016, the Company renewed 83% and 79%, respectively, of expiring leases.
  • Rent Spreads on Renewing Leases ‒ In the quarter, the Company successfully executed early renewals on three large, non-defense tenant leases, representing 275,000 square feet, to assure long-term, steady cash flows from all three assets. The impact of these renewals was a decline in cash renewal rates in the third quarter. For the quarter ended September 30, 2016 and as compared to expiring rents, rents on renewed space decreased 2.2% on a GAAP basis and decreased 11.9% on a cash basis. For the nine months of 2016, GAAP rents on renewing leases increased 4.5% and cash rents decreased 5.7%. Excluding these three early renewals, cash renewal rents declined only 1.9% for the nine months ended September 30, 2016.
  • Lease Terms ‒ In the third quarter, lease terms averaged 7.6 years on the 597,000 square feet of renewing leases, and 7.0 years on the 144,000 square feet of development and other new leasing, for an average lease term of 7.5 years on all leasing completed in the quarter.

    For the nine months ended September 30, 2016, lease terms averaged 6.0 years on the 1.4 million square feet of renewing leases, and 8.5 years on the 938,000 square feet of development and other new leasing, for an average lease term of 7.0 years on all leasing completed in the nine months of the year.

Investment Activity Highlights

Development & Redevelopment Projects:

  • The Company has five properties totaling 769,000 square feet under construction that, at September 30, 2016, were 89% pre-leased. The five projects have a total estimated cost of $149.7 million, of which $64.3 million has been incurred.
  • The Company also has two recently completed properties that total 352,000 square feet which are being held for the U.S. Government. In the third quarter ended September 30, 2016, the Company leased 15,000 square feet in The National Business Park to a U.S. Government tenant and expects further leasing progress in the coming quarters. The Company anticipates leasing the balance of the building during 2017.
  • Including these two U.S. Government projects, the Company’s construction pipeline totals 1.1 million square feet and is 63% leased.
  • COPT has 104,000 square feet in three properties under redevelopment, representing a total expected cost of $27.7 million, of which $20.3 million has been invested. The three projects were 19% leased at quarter end.

Dispositions: During the quarter, the Company closed on $285 million of sales detailed as follows:

  • $74 million from six data center properties contributed to a newly-formed, 50% unconsolidated joint venture with an institutional partner.
  • $143 million from four properties and land at the Arborcrest Campus in the Plymouth Meeting submarket of Philadelphia.
  • $17 million from six properties in the White Marsh submarket of Baltimore.
  • $51 million from five properties in the Airport Square / BWI South submarkets in the B/W Corridor.

Subsequent to the quarter, the Company sold another 151,000 square foot operating property in Northern Virginia and a parcel of non-strategic land for an aggregate of $14.1 million, bringing total assets to-date to $304 million, or 69% of the full year goal.

Balance Sheet and Capital Transaction Highlights

  • As of September 30, 2016, the Company’s net debt to adjusted book ratio was 41.2% and its net debt to in-place adjusted EBITDA ratio was 6.3x. For the quarter ended September 30, 2016, its adjusted EBITDA fixed charge coverage ratio was 3.1x.
  • The Company’s weighted average effective interest rate was 3.8% as of September 30, 2016; including the effect of interest rate swaps, 96% of the Company’s debt was subject to fixed interest rates and the debt portfolio had a weighted average maturity of 6.1 years.
  • Subsequent to the quarter, the Company used cash on hand and capacity on its line of credit to repay a $120 million term loan. As a result, the Company has no debt maturities until 2020.

2016 FFO Guidance Update

Management is narrowing its guidance range for full year FFOPS, as adjusted for comparability, of $2.00―$2.02. The Company also is maintaining its previously established guidance for the fourth quarter ending December 31, 2016, for FFOPS, as adjusted for comparability, of $0.50―$0.52. Reconciliations of projected diluted EPS to projected FFOPS are as follows:

   
Three Months Ending Year Ending
December 31, 2016 December 31, 2016
Low   High Low   High
 
EPS $ 0.24 $ 0.26 $ (0.02 ) $ -
Real estate depreciation and amortization 0.34 0.34 1.37 1.37
Impairment losses on operating properties - - 0.83 0.83
Gains on sales of operating properties   (0.01 )   (0.01 )   (0.36 )   (0.36 )
FFOPS, NAREIT definition 0.57 0.59 1.82 1.84
Executive transition costs - - 0.06 0.06
Impairment losses on non-operating properties - - 0.18 0.18
Gains on sales of non-operating properties (0.08 ) (0.08 ) (0.08 ) (0.08 )
Loss on interest rate derivatives and other   0.01     0.01     0.02     0.02  
FFOPS, as adjusted for comparability $ 0.50   $ 0.52   $ 2.00   $ 2.02  
 

Associated Supplemental Presentation

Prior to the call, the Company will post a slide presentation to accompany management’s prepared remarks for its third quarter 2016 conference call, the details of which are provided below. You may access the slide presentation on the ‘Investors’ section of the website (www.copt.com). Please have the slides available to review during management’s comments.

Conference Call Information

Management will discuss third quarter 2016 earnings results on its conference call tomorrow at 12:00 p.m. Eastern Time, details of which are listed below:

   
Earnings Release Date: Thursday, October 27, 2016 after market closes
Conference Call Date: Friday, October 28, 2016
Time: 12:00 p.m. Eastern Time
Telephone Number: (within the U.S.) 888-713-4218
Telephone Number: (outside the U.S.) 617-213-4870
Passcode: 86051712#
 

Please use the following link to pre-register and view important information about this conference call. Pre-registering is not mandatory but is recommended as it will provide you immediate entry into the call and will facilitate the timely start of the conference. To pre-register, please click on the below link: https://www.theconferencingservice.com/prereg/key.process?key=PAX84XXNT.

You may also pre-register in the Investors section of the Company’s website at www.copt.com. Alternatively, you may be placed into the call by an operator by calling the number provided above at least 5 to 10 minutes before the start of the call.

Replay Information

A replay of this call will be available beginning at 3:00 p.m. Eastern Time on Friday, October 28, through midnight Eastern Time on Friday, November 11. To access the replay within the United States, please call 888-286-8010 and use passcode 93348081. To access the replay outside the United States, please call 617-801-6888 and use passcode 93348081.

The conference call will also be available via live webcast in the Investor Relations section of the Company’s website at www.copt.com. A replay of the conference calls will be immediately available via webcast in the Investor Relations section of the Company’s website.

Definitions

For definitions of certain terms used in this press release, please refer to the information furnished in our Supplemental Information Package filed as a Form 8-K which can be found on our website (www.copt.com). Reconciliations of non-GAAP measures to the most directly comparable GAAP measures are included in the attached tables.

Company Information

COPT is an office REIT that owns, manages, develops and selectively acquires office and data center properties in locations that support United States Government agencies and their contractors, most of whom are engaged in national security, defense and information technology (“IT”) related activities servicing priority missions (“Defense/IT Locations”). We also own a complementary portfolio of traditional Class-A office properties located in select urban/urban-like submarkets within our regional footprint (“Regional Office Properties”). As of September 30, 2016, we derived 86% of core portfolio annualized revenue from Defense/IT Locations and 14% from our Regional Office Properties. As of September 30, 2016, our core portfolio of 146 office properties encompassed 15.9 million square feet and was 94.4% leased.

Forward-Looking Information

This press release may contain “forward-looking” statements, as defined in Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, that are based on the Company’s current expectations, estimates and projections about future events and financial trends affecting the Company. Forward-looking statements can be identified by the use of words such as “may,” “will,” “should,” “could,” “believe,” “anticipate,” “expect,” “estimate,” “plan” or other comparable terminology. Forward-looking statements are inherently subject to risks and uncertainties, many of which the Company cannot predict with accuracy and some of which the Company might not even anticipate. Accordingly, the Company can give no assurance that these expectations, estimates and projections will be achieved. Future events and actual results may differ materially from those discussed in the forward-looking statements.

Important factors that may affect these expectations, estimates, and projections include, but are not limited to:

  • general economic and business conditions, which will, among other things, affect office property and data center demand and rents, tenant creditworthiness, interest rates, financing availability and property values;
  • adverse changes in the real estate markets including, among other things, increased competition with other companies;
  • governmental actions and initiatives, including risks associated with the impact of a prolonged government shutdown or budgetary reductions or impasses, such as a reduction in rental revenues, non-renewal of leases, and/or a curtailment of demand for additional space by the Company's strategic customers;
  • the Company’s ability to borrow on favorable terms;
  • risks of real estate acquisition and development activities, including, among other things, risks that development projects may not be completed on schedule, that tenants may not take occupancy or pay rent or that development or operating costs may be greater than anticipated;
  • risks of investing through joint venture structures, including risks that the Company’s joint venture partners may not fulfill their financial obligations as investors or may take actions that are inconsistent with the Company’s objectives;
  • changes in the Company’s plans for properties or views of market economic conditions or failure to obtain development rights, either of which could result in recognition of significant impairment losses;
  • the Company’s ability to satisfy and operate effectively under Federal income tax rules relating to real estate investment trusts and partnerships;
  • the Company's ability to achieve projected results;
  • the dilutive effects of issuing additional common shares; and
  • environmental requirements.

The Company undertakes no obligation to update or supplement any forward-looking statements. For further information, please refer to the Company’s filings with the Securities and Exchange Commission, particularly the section entitled “Risk Factors” in Item 1A of the Company’s Annual Report on Form 10-K for the year ended December 31, 2015.

   
Corporate Office Properties Trust
Summary Financial Data
(unaudited)
(in thousands, except per share data)
 
For the Three Months For the Nine Months
Ended September 30, Ended September 30,
2016   2015 2016   2015
Revenues
Real estate revenues $ 130,954 $ 133,686 $ 397,965 $ 384,587
Construction contract and other service revenues 11,149   17,058   34,372   97,554  
Total revenues 142,103   150,744   432,337   482,141  
Expenses
Property operating expenses 49,952 48,897 149,968 145,996
Depreciation and amortization associated with real estate operations 32,015 38,403 99,790 103,788
Construction contract and other service expenses 10,341 16,132 32,513 94,923
Impairment losses 27,699 2,307 99,837 3,545
General and administrative expenses 7,242 5,783 23,884 17,917
Leasing expenses 1,613 1,656 4,880 4,947
Business development expenses and land carry costs 1,716   5,573   6,497   10,986  
Total operating expenses 130,578   118,751   417,369   382,102  
Operating income 11,525 31,993 14,968 100,039
Interest expense (18,301 ) (24,121 ) (64,499 ) (66,727 )
Interest and other income 1,391 692 3,877 3,217
(Loss) gain on early extinguishment of debt (59 ) 85,745   (37 ) 85,677  
(Loss) income from continuing operations before equity in income of unconsolidated entities and income taxes (5,444 ) 94,309 (45,691 ) 122,206
Equity in income of unconsolidated entities 594 18 614 52
Income tax benefit (expense) 21   (48 ) 28   (153 )
(Loss) income from continuing operations (4,829 ) 94,279 (45,049 ) 122,105
Discontinued operations —   —   —   156  
(Loss) income before gain on sales of real estate (4,829 ) 94,279 (45,049 ) 122,261
Gain on sales of real estate 34,101   15   34,101   4,000  
Net income (loss) 29,272 94,294 (10,948 ) 126,261
Net (income) loss attributable to noncontrolling interests
Common units in the Operating Partnership (“OP”) (901 ) (3,357 ) 948 (4,231 )
Preferred units in the OP (165 ) (165 ) (495 ) (495 )
Other consolidated entities (907 ) (972 ) (2,799 ) (2,599 )
Net income (loss) attributable to COPT 27,299 89,800 (13,294 ) 118,936
Preferred share dividends (3,552 ) (3,552 ) (10,657 ) (10,657 )
Net income (loss) attributable to COPT common shareholders $ 23,747   $ 86,248   $ (23,951 ) $ 108,279  
Earnings per share (“EPS”) computation:
Numerator for diluted EPS:
Net income (loss) attributable to common shareholders $ 23,747 $ 86,248 $ (23,951 ) $ 108,279
Dividends on dilutive convertible preferred shares — 372 — —
Common units in the OP — — — 4,231
Amount allocable to share-based compensation awards (105 ) (369 ) (319 ) (475 )
Numerator for diluted EPS $ 23,642   $ 86,251   $ (24,270 ) $ 112,035  
Denominator:
Weighted average common shares - basic 94,433 94,153 94,312 93,830
Dilutive convertible preferred shares — 434 — —
Common units in the OP — — — 3,697
Dilutive effect of share-based compensation awards 81   21   —   82  
Weighted average common shares - diluted 94,514   94,608   94,312   97,609  
Diluted EPS $ 0.25   $ 0.91   $ (0.26 ) $ 1.15  
   
Corporate Office Properties Trust
Summary Financial Data
(unaudited)
(in thousands, except per share data)
 
For the Three Months For the Nine Months
Ended September 30, Ended September 30,
2016   2015 2016   2015
Net income (loss) $ 29,272 $ 94,294 $ (10,948 ) $ 126,261
Real estate-related depreciation and amortization 32,015 38,403 99,790 103,788
Impairment losses on previously depreciated operating properties 25,857 2,307 81,828 3,779
Gain on sales of previously depreciated operating properties (34,101 ) (15 ) (34,101 ) (15 )
Depreciation and amortization on unconsolidated real estate entities 207   —   207   —  
Funds from operations (“FFO”) 53,250 134,989 136,776 233,813
Noncontrolling interests - preferred units in the OP (165 ) (165 ) (495 ) (495 )
FFO allocable to other noncontrolling interests (894 ) (1,027 ) (2,935 ) (2,769 )
Preferred share dividends (3,552 ) (3,552 ) (10,657 ) (10,657 )
Basic and diluted FFO allocable to share-based compensation awards (190 ) (541 ) (486 ) (926 )
Basic FFO available to common share and common unit holders (“Basic FFO”) 48,449 129,704 122,203 218,966
Dividends on dilutive convertible preferred shares — 372 — —
Distributions on dilutive preferred units in the OP —   165   —   —  
Diluted FFO available to common share and common unit holders (“Diluted FFO”) 48,449 130,241 122,203 218,966
Operating property acquisition costs — 2,695 — 4,102
Gain on sales of non-operating properties — — — (3,985 )
Impairment losses on other properties 1,842 — 18,009 —
(Gain) loss on interest rate derivatives (1,523 ) — 347 —
Loss (gain) on early extinguishment of debt 59 (85,745 ) 37 (86,057 )
Add: Negative FFO of properties conveyed to extinguish debt in default (1) — 2,766 — 10,456
Demolition costs on redevelopment properties — 930 578 1,171
Executive transition costs 1,639 — 6,023 —
Diluted FFO comparability adjustments allocable to share-based compensation awards (5 ) 334 (99 ) 313
Dividends and distributions on antidilutive preferred securities (2) —   (537 ) —   —  
Diluted FFO available to common share and common unit holders, as adjusted for comparability 50,461 50,684 147,098 144,966
Straight line rent adjustments 691 (5,625 ) 206 (10,820 )
Straight line rent adjustments - properties in default conveyed — (19 ) — (115 )
Amortization of intangibles included in net operating income 349 474 1,025 1,063
Share-based compensation, net of amounts capitalized 1,258 1,739 4,375 4,949
Amortization of deferred financing costs 1,126 1,203 3,480 3,339
Amortization of net debt discounts, net of amounts capitalized 332 321 976 849
Replacement capital expenditures (16,120 ) (12,126 ) (39,386 ) (29,180 )
Diluted AFFO adjustments allocable to other noncontrolling interests 42 (81 ) 137 55
Diluted AFFO adjustments on unconsolidated real estate JV (141 ) —   (141 ) —  
Diluted adjusted funds from operations available to common share and common unit holders (“Diluted AFFO”) $ 37,998   $ 36,570   $ 117,770   $ 115,106  
Diluted FFO per share $ 0.49 $ 1.32 $ 1.25 $ 2.24
Diluted FFO per share, as adjusted for comparability $ 0.51 $ 0.52 $ 1.50 $ 1.49
Dividends/distributions per common share/unit $ 0.275 $ 0.275 $ 0.825 $ 0.825
 
(1) Interest expense exceeded net operating income from these properties by the amounts in the statement.
   
Corporate Office Properties Trust
Summary Financial Data
(unaudited)
(Dollars and shares in thousands, except per share data)
 
September 30,
2016 		December 31,
2015
Balance Sheet Data
Properties, net of accumulated depreciation $ 3,028,338 $ 3,349,748
Total assets 3,634,194 3,909,312
Debt, per balance sheet 1,873,836 2,077,752
Total liabilities 2,110,559 2,273,530
Redeemable noncontrolling interest 22,848 19,218
Equity 1,500,787 1,616,564
Net debt to adjusted book 41.2 % 42.6 %
 
Core Portfolio Data (as of period end) (1)
Number of operating properties 146 157
Total net rentable square feet owned (in thousands) 15,938 17,038
Occupancy % 93.0 % 92.7 %
Leased % 94.4 % 93.9 %
   
For the Three Months For the Nine Months
Ended September 30, Ended September 30,
2016   2015 2016   2015
Payout ratios
Diluted FFO 55.8 % 21.2 % 66.4 % 37.0 %
Diluted FFO, as adjusted for comparability 53.6 % 53.3 % 55.2 % 55.9 %
Diluted AFFO 71.2 % 73.9 % 68.9 % 70.4 %
Adjusted EBITDA fixed charge coverage ratio 3.1 x 2.9 x 2.9 x 3.0 x
Net debt to in-place adjusted EBITDA ratio (2) 6.3 x 6.6 x N/A N/A
 
Reconciliation of denominators for per share measures
Denominator for diluted EPS 94,514 94,608 94,312 97,609
Weighted average common units 3,591 3,679 3,648 —
Dilutive noncontrolling interests - preferred units in the OP — 176 — —
Anti-dilutive EPS effect of share-based compensation awards —   —   98   —  
Denominator for diluted FFO per share 98,105 98,463 98,058 97,609
Antidilutive preferred securities for dilutive FFO, as adj. for comparability —   (610 ) —   —  
Denominator for diluted FFO per share, as adj. for comparability 98,105   97,853   98,058   97,609  
 
(1) Represents Defense/IT Locations and Regional Office properties excluding properties held for sale, and includes six properties owned through an unconsolidated joint venture totaling 962,000 square feet that were 100% occupied and leased.
(2) Represents net debt as of period end divided by in-place adjusted EBITDA for the period, as annualized (i.e. three month periods are multiplied by four).
   
Corporate Office Properties Trust
Summary Financial Data
(unaudited)
(Dollars in thousands)
 
For the Three Months For the Nine Months
Ended September 30, Ended September 30,
2016   2015 2016   2015
Reconciliation of common share dividends to dividends and distributions for payout ratios
Common share dividends $ 26,068 $ 26,000 $ 78,139 $ 78,000
Common unit distributions 988 1,011 3,003 3,035
Dividends and distributions on dilutive preferred securities —   537   —   —  
Dividends and distributions for diluted FFO payout ratio 27,056 27,548 81,142 81,035
Dividends and distributions on antidilutive preferred securities (1) —   (537 ) —   —  
Dividends and distributions for other payout ratios $ 27,056   $ 27,011   $ 81,142   $ 81,035  
 
Reconciliation of GAAP net income to adjusted earnings before interest, income taxes, depreciation and amortization (“Adjusted EBITDA”) and in-place adjusted EBITDA
Net income (loss) $ 29,272 $ 94,294 $ (10,948 ) $ 126,261
Interest expense on continuing operations 18,301 24,121 64,499 66,727
Income tax (benefit) expense (21 ) 48 (28 ) 153
Real estate-related depreciation and amortization 32,015 38,403 99,790 103,788
Depreciation of furniture, fixtures and equipment 513 590 1,639 1,609
Impairment losses 27,699 2,307 99,837 3,779
Loss (gain) on early extinguishment of debt on continuing and discontinued operations 59 (85,745 ) 37 (86,057 )
Gain on sales of operating properties (34,101 ) (15 ) (34,101 ) (15 )
Gain on sales of non-operational properties — — — (3,985 )
Net loss (gain) on investments in unconsolidated entities included in interest and other income 27 98 (32 ) 121
Business development expenses 1,016 1,221 3,656 3,263
Operating property acquisition costs — 2,695 — 4,102
EBITDA from properties conveyed to extinguish debt in default — (15 ) — (768 )
Demolition costs on redevelopment properties — 930 578 1,171
Adjustments from unconsolidated real estate JV 415 — 415 —
Executive transition costs 1,639   —   6,023   —  
Adjusted EBITDA $ 76,834 $ 78,932 $ 231,365   $ 220,149  
Proforma net operating income adjustment for property changes within period (2,469 ) 1,309  
In-place adjusted EBITDA $ 74,365   $ 80,241  
 
Reconciliation of interest expense to the denominators for fixed charge coverage-Adjusted EBITDA
Interest expense $ 18,301 $ 24,121 $ 64,499 $ 66,727
Less: Amortization of deferred financing costs (1,126 ) (1,203 ) (3,480 ) (3,339 )
Less: Amortization of net debt discount, net of amounts capitalized (332 ) (321 ) (976 ) (849 )
Less: Gain (loss) on interest rate derivatives 1,523 — (347 ) —
Less: Interest expense on debt in default extinguished via conveyance of properties — (2,781 ) — (11,224 )
COPT’s share of interest expense of unconsolidated real estate JV, excluding deferred financing costs 204 — 204 —
Scheduled principal amortization 922 1,692 4,454 5,011
Capitalized interest 1,242 1,559 4,304 5,641
Preferred share dividends 3,552 3,552 10,657 10,657
Preferred unit distributions 165   165   495   495  
Denominator for fixed charge coverage-Adjusted EBITDA $ 24,451   $ 26,784   $ 79,810   $ 73,119  
       
Corporate Office Properties Trust
Summary Financial Data
(unaudited)
(Dollars in thousands)
 
For the Three Months For the Nine Months
Ended September 30, Ended September 30,

2016

2015

2016

2015

Reconciliations of tenant improvements and incentives, capital improvements and leasing costs for operating properties to replacement capital expenditures
Tenant improvements and incentives $ 21,470 $ 6,374 $ 37,020 $ 17,408
Building improvements 5,707 4,223 14,962 11,969
Leasing costs 5,182 2,547 7,978 4,986
Less: Excluded tenant improvements and incentives (12,706 ) 205 (14,944 ) (1,045 )
Less: Excluded building improvements (3,533 ) (1,155 ) (5,211 ) (3,328 )
Less: Excluded leasing costs —   (68 ) (419 ) (810 )
Replacement capital expenditures $ 16,120   $ 12,126   $ 39,386   $ 29,180  
 
Same office property cash NOI $ 60,952 $ 60,297 $ 182,098 $ 174,942
Straight line rent adjustments (2,230 ) 965 (7,163 ) 3,175
Add: Amortization of deferred market rental revenue 22 16 90 71
Less: Amortization of below-market cost arrangements (218 ) (264 ) (655 ) (775 )
Add: Lease termination fee, gross 390 185 1,679 1,950
Add: Cash NOI on tenant-funded landlord assets 2,379   390   5,790   390  
Same office property NOI $ 61,295   $ 61,589   $ 181,839   $ 179,753  
   

September 30,
2016

December 31,
2015
Reconciliation of total assets to adjusted book
Total assets $ 3,634,194 $ 3,909,312
Accumulated depreciation 681,476 700,363
Accumulated depreciation included in assets held for sale 22,938 18,317
Accumulated amortization of real estate intangibles and deferred leasing costs 201,414 195,506
Accumulated amortization of real estate intangibles and deferred leasing costs included in assets held for sale 21,469 17,456
COPT’s share of liabilities of unconsolidated real estate JV 30,013 —
COPT’s share of accumulated depreciation and amortization of unconsolidated real estate JV 375 —
Less: Cash and cash equivalents (47,574 ) (60,310 )
COPT’s share of cash of unconsolidated real estate JV (444 ) —  
Adjusted book $ 4,543,861   $ 4,780,644  
 
Reconciliation of debt outstanding to net debt
Debt outstanding (excluding net debt discounts and deferred financing costs) $ 1,921,219 $ 2,097,230
Less: Cash and cash equivalents (47,574 ) (60,310 )
COPT’s share of cash of unconsolidated real estate JV (444 ) —  
Net debt $ 1,873,201   $ 2,036,920  

Corporate Office Properties Trust
IR Contacts:
Stephanie Krewson-Kelly, 443-285-5453
stephanie.kelly@copt.com
or
Michelle Layne, 443-285-5452
michelle.layne@copt.com

Source: Corporate Office Properties Trust

Released October 27, 2016