COPT Reports Second Quarter 2011 Results
COLUMBIA, Md.--(BUSINESS WIRE)-- Corporate Office Properties Trust (COPT) (NYSE: OFC) today announced financial and operating results for the quarter ended June 30, 2011. Diluted loss per share was $0.42 for the quarter ended June 30, 2011 as compared to earnings per share of $0.07 for the quarter ended June 30, 2010. Excluding a non-cash impairment charge associated primarily with the Company's Strategic Reallocation Plan and operating property acquisition costs, funds from operations (FFO) per diluted share for the second quarter of 2011 was $0.57, a 6% increase from the $0.54 FFO per share reported in the second quarter of 2010. This increase was primarily attributable to the operations of properties acquired or placed into service in 2010, and to gains on other investments. Including the impairment charge, FFO per diluted share for the quarter ended June 30, 2011 was $0.02.
"Despite the challenging leasing environment presented by the tepid economic recovery, we modestly outperformed our expectations for the second quarter. We leased over a million square feet and same office cash net operating income (NOI), excluding gross lease termination fees, increased 10% sequentially over the first quarter of 2011," stated Randall M. Griffin, Chief Executive Officer of Corporate Office Properties Trust.
Portfolio Summary - At June 30, 2011, the Company's wholly-owned portfolio of 249 office properties totaled 20.2 million square feet. The weighted average remaining lease term for the portfolio was 4.9 years and the average rental rate (including tenant reimbursements) was $25.91 per square foot. The Company's wholly-owned portfolio was 87.3% occupied and 89.4% leased as of June 30, 2011.
Same Office Performance - The Company's same office portfolio for the quarter ended June 30, 2011 represents 81% of the rentable square feet of its consolidated portfolio and consists of 190 properties. For the quarter ended June 30, 2011, the Company's same office property cash NOI, excluding lease termination fees, increased 10% as compared to the first quarter of 2011 and decreased 0.6% as compared to the quarter ended June 30, 2010.
Leasing - For the quarter ended June 30, 2011, 768,000 square feet were renewed equating to an 89% renewal rate, at an average committed cost of $11.49 per square foot. Total rent on renewed space increased 1.7%, as measured from the straight-line rent in effect preceding the renewal date, and decreased 7.7% on a cash basis. For renewed and retenanted space of 911,000 square feet, total straight-line rent increased 2.1% and total rent on a cash basis decreased 7.3%. The average committed cost for renewed and retenanted space was $13.21 per square foot.
Construction - At June 30, 2011, the Company had properties totaling 1.2 million square feet under construction for a total projected cost of $271.9 million.
Acquisitions - The Company did not complete any acquisitions during the second quarter 2011.
Dispositions - The Company sold three buildings located in Commons Corporate Center in Hanover, Maryland, totaling 39,000 square feet for $3.8 million.
On May 25, the Company completed a public offering of 4,600,000 newly issued common shares. The offering generated net proceeds, before offering expenses, of approximately $145.7 million.
Balance Sheet and Financial Flexibility:
As of June 30, 2011, the Company had a total market capitalization of $4.9 billion, with $2.3 billion in debt outstanding, equating to a 47% debt-to-total market capitalization ratio. Also, the Company's weighted average interest rate was 4.9% for the quarter ended June 30, 2011 and 81% of the Company's debt was subject to fixed interest rates, including the effect of interest rate swaps.
For the second quarter 2011, the Company's adjusted EBITDA to interest expense coverage ratio was 3.10x, and the adjusted EBITDA fixed charge coverage ratio was 2.63x. Adjusting for construction in progress, the Company's adjusted debt-to-adjusted EBITDA ratio was 6.39x for the three months ended June 30, 2011.
Reconciliations of non-GAAP measures to the most directly comparable GAAP measures are included in the tables that follow the text of this press release.
2011 Guidance and Conference Call Information:
Management will discuss second quarter earnings results and any adjustments to earnings and FFO guidance for 2011, if applicable, on its conference call today at 11:00 a.m. Eastern Time, details of which are listed below:
Conference Call Date: Thursday, July 28, 2011 Time: 11:00 a.m. Eastern Time Telephone Number: (within the U.S.) 888-679-8034 Telephone Number: (outside the U.S.) 617-213-4847 Passcode: 36436732
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. Pre-registration only takes a few moments and you may pre-register at anytime, including up to and after the call start time. To pre-register, please click on the below link:
You may also pre-register in the Investor Relations 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. A replay of this call will be available beginning Thursday, July 28 at 2:00 p.m. Eastern Time through Thursday, August 4 at midnight Eastern Time. To access the replay within in the United States, please call 888-286-8010 and use passcode 33182288. To access the replay outside the United States, please call 617-801-6888 and use passcode 33182288.
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 call will be immediately available via webcast in the Investor Relations section of the Company's website.
Please refer to the information furnished with our Form 8-K or our website (www.copt.com) for definitions of certain terms used in this press release. Reconciliations of non-GAAP measures to the most directly comparable GAAP measures are included in the attached tables.
Corporate Office Properties Trust (COPT) (NYSE: OFC) is a specialty office real estate investment trust (REIT) that focuses primarily on strategic customer relationships and specialized tenant requirements in the U.S. Government and Defense Information Technology sectors and Data Centers serving such sectors. The Company acquires, develops, manages and leases office and data center properties that are typically concentrated in large office parks primarily located adjacent to government demand drivers and/or in strong markets that we believe possess growth opportunities. As of June 30, 2011, the Company owned 269 office properties totaling 21.4 million rentable square feet, which includes 20 properties totaling 1.1 million square feet held through joint ventures. The Company's portfolio primarily consists of technically sophisticated buildings in visually appealing settings that are environmentally sensitive, sustainable and meet unique customer requirements. COPT is an S&P MidCap 400 company and more information can be found at www.copt.com.
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 demand and rents, tenant creditworthiness, interest rates and financing availability; -- adverse changes in the real estate markets including, among other things, increased competition with other companies; -- 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 our plans or views of market economic conditions or failure to obtain development rights, either of which could result in recognition of impairment losses; -- our ability to satisfy and operate effectively under Federal income tax rules relating to real estate investment trusts and partnerships; -- governmental actions and initiatives, including risks associated with the impact of a government shutdown such as a reduction in rental revenues or non-renewal of leases; -- the dilutive effect 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, 2010.
Corporate Office Properties Trust Summary Financial Data (unaudited) (Amounts in thousands, except per share data) Three Months Ended Six Months Ended June 30, June 30, 2011 2010 2011 2010 Revenues Real estate revenues $ 118,543 $ 106,729 $ 238,701 $ 216,360 Construction contract and 28,097 26,065 49,125 63,430 other service revenues Total revenues 146,640 132,794 287,826 279,790 Expenses Property operating expenses 44,721 39,260 94,431 86,206 Depreciation and amortization associated with 31,440 28,720 62,830 55,531 real estate operations Construction contract and 26,909 25,402 47,527 61,801 other service expenses Impairment losses 38,290 - 66,032 - General and administrative 6,320 5,926 13,097 11,826 expenses Business development 588 465 1,076 620 expenses Total operating expenses 148,268 99,773 284,993 215,984 Operating (loss) income (1,628 ) 33,021 2,833 63,806 Interest expense (26,607 ) (25,576 ) (53,246 ) (48,068 ) Interest and other income 2,756 245 3,924 1,547 Loss on early extinguishment (25 ) - (25 ) - of debt (Loss) income from continuing operations before equity in loss of unconsolidated entities and (25,504 ) 7,690 (46,514 ) 17,285 income taxes Equity in loss of (94 ) (72 ) (64 ) (277 ) unconsolidated entities Income tax benefit (expense) 5,042 (7 ) 5,586 (48 ) (Loss) income from (20,556 ) 7,611 (40,992 ) 16,960 continuing operations Discontinued operations (5,467 ) 1,205 (6,298 ) 2,514 (Loss) income before gain on (26,023 ) 8,816 (47,290 ) 19,474 sales of real estate Gain on sales of real 16 335 2,717 352 estate, net of income taxes Net (loss) income (26,007 ) 9,151 (44,573 ) 19,826 Net loss (income) attributable to noncontrolling interests: Common units in the 1,887 (364 ) 3,366 (891 ) Operating Partnership Preferred units in the (165 ) (165 ) (330 ) (330 ) Operating Partnership Other consolidated entities 61 (156 ) (477 ) (201 ) Net (loss) income (24,224 ) 8,466 (42,014 ) 18,404 attributable to COPT Preferred share dividends (4,026 ) (4,026 ) (8,051 ) (8,051 ) Net (loss) income attributable to COPT common $ (28,250 ) $ 4,440 $ (50,065 ) $ 10,353 shareholders Earnings per share ("EPS") computation: Numerator for diluted EPS: Net (loss) income attributable to common $ (28,250 ) $ 4,440 $ (50,065 ) $ 10,353 shareholders Dilutive effect of common units in the Operating (1,887 ) - (3,366 ) - Partnership Amount allocable to (237 ) (250 ) (519 ) (540 ) restricted shares Numerator for diluted EPS $ (30,374 ) $ 4,190 $ (53,950 ) $ 9,813 Denominator: Weighted average common 68,446 58,489 67,399 58,169 shares - basic Dilutive effect of common 4,382 - 4,389 - units Dilutive effect of share-based compensation - 421 - 405 awards Weighted average common 72,828 58,910 71,788 58,574 shares - diluted Diluted EPS $ (0.42 ) $ 0.07 $ (0.75 ) $ 0.17
Corporate Office Properties Trust Summary Financial Data (unaudited) (Amounts in thousands, except per share data and ratios) Three Months Ended Six Months Ended June 30, June 30, 2011 2010 2011 2010 Net (loss) income $ (26,007 ) $ 9,151 $ (44,573 ) $ 19,826 Add: Real estate-related 32,049 29,548 65,069 57,151 depreciation and amortization Add: Depreciation and amortization on 115 171 234 346 unconsolidated real estate entities Less: Gain on sales of previously depreciated (150 ) - (150 ) (297 ) operating properties, net of income taxes Funds from operations ("FFO") 6,007 38,870 20,580 77,026 Noncontrolling interests - preferred units in the (165 ) (165 ) (330 ) (330 ) Operating Partnership Noncontrolling interests - 61 (156 ) (477 ) (201 ) other consolidated entities Preferred share dividends (4,026 ) (4,026 ) (8,051 ) (8,051 ) Depreciation and amortization allocable to noncontrolling interests in other consolidated entities (225 ) (297 ) (290 ) (579 ) Basic and diluted FFO allocable to restricted (237 ) (346 ) (519 ) (725 ) shares Basic and diluted FFO available to common share and common unit holders ("Basic and diluted FFO") 1,415 33,880 10,913 67,140 Straight line rent (2,611 ) (1,473 ) (6,523 ) (3,819 ) adjustments Amortization of acquisition intangibles included in net 227 (94 ) 388 (364 ) operating income Recurring capital (14,913 ) (7,080 ) (29,257 ) (13,291 ) expenditures Amortization of discount on Exchangeable Senior Notes, 1,582 1,488 3,140 2,270 net of amounts capitalized Impairment losses 44,605 - 72,347 - Income tax benefit from (4,598 ) - (4,598 ) - impairment losses Operating property 52 271 75 290 acquisition costs Loss on early extinguishment 25 - 25 - of debt Diluted adjusted funds from operations available to common share and common unit holders ("Diluted AFFO") $ 25,784 $ 26,992 $ 46,510 $ 52,226 Recurring capital expenditures on properties 2,475 8,130 included in Strategic Reallocation Plan Diluted AFFO, as adjusted for recurring capital expenditures on properties included in Strategic Reallocation $ 28,259 $ 54,640 Plan Weighted average shares Weighted average common 68,446 58,489 67,399 58,169 shares Conversion of weighted 4,382 4,558 4,389 4,786 average common units Weighted average common shares/units - basic FFO per 72,828 63,047 71,788 62,955 share Dilutive effect of share-based compensation 151 421 205 405 awards Weighted average common shares/units - diluted FFO 72,979 63,468 71,993 63,360 per share Diluted FFO per share $ 0.02 $ 0.53 $ 0.15 $ 1.06 Diluted FFO per share, as $ 0.57 $ 0.54 $ 1.09 $ 1.06 adjusted for comparability Dividends/distributions per $ 0.4125 $ 0.3925 $ 0.8250 $ 0.7850 common share/unit Payout ratios Diluted FFO, as adjusted for 75.8 % 73.2 % 77.4 % 74.2 % comparability Diluted AFFO 121.9 % 92.6 % 131.1 % 95.8 % Diluted AFFO, as adjusted for recurring capital expenditures on properties 111.3 % N/A 111.6 % N/A included in Strategic Reallocation Plan Adjusted EBITDA interest 3.10x 2.85x 3.02x 2.90x coverage ratio Adjusted EBITDA fixed charge 2.63x 2.41x 2.56x 2.44x coverage ratio Debt to Adjusted EBITDA ratio 7.87x 8.36x N/A N/A (1) Adjusted debt to Adjusted 6.39x 7.14x N/A N/A EBITDA ratio (2) Reconciliation of denominators for diluted EPS and diluted FFO per share Denominator for diluted EPS 72,828 58,910 71,788 58,574 Weighted average common units - 4,558 - 4,786 Anti-dilutive EPS effect of share-based compensation 151 - 205 - awards Denominator for diluted FFO 72,979 63,468 71,993 63,360 per share (1) Represents debt divided by Adjusted EBITDA for the three month period multiplied by four. (2) Represents debt adjusted to subtract construction in progress as of period end divided by Adjusted EBITDA for the three month period multiplied by four.
Corporate Office Properties Trust Summary Financial Data (unaudited) (Dollars and shares in thousands, except per share data) June 30, December 31, 2011 2010 Balance Sheet Data (in thousands) (as of period end) Properties, net of $ 3,472,861 $ 3,445,455 accumulated depreciation Total assets 3,868,230 3,844,517 Debt, net 2,299,416 2,323,681 Total liabilities 2,514,858 2,521,379 Beneficiaries' equity 1,353,372 1,323,138 Debt to total assets 59.4 % 60.4 % Debt to undepreciated book value of real estate 56.0 % 57.2 % assets Debt to total market 47.0 % 46.1 % capitalization Property Data (wholly owned office properties) (as of period end) Number of operating 249 252 properties owned Total net rentable square 20,244 19,990 feet owned (in thousands) Occupancy 87.3 % 88.2 % Reconciliation of denominator for debt to total assets to denominator for debt to undepreciated book value of real estate assets Denominator for debt to $ 3,868,230 $ 3,844,517 total assets Assets other than assets included in properties, (395,369 ) (399,062 ) net Accumulated depreciation 534,407 503,032 on real estate assets Intangible assets on real 99,917 113,735 estate acquisitions, net Denominator for debt to undepreciated book value $ 4,107,185 $ 4,062,222 of real estate assets Three Months Ended Six Months Ended June 30, June 30, 2011 2010 2011 2010 Reconciliation of tenant improvements and incentives, capital improvements and leasing costs for operating properties to recurring capital expenditures Total tenant improvements and incentives on $ 11,116 $ 4,630 $ 24,386 $ 8,701 operating properties Total capital improvements 2,426 1,524 4,416 2,394 on operating properties Total leasing costs on 3,388 1,350 6,124 2,688 operating properties Less: Nonrecurring tenant improvements and (875 ) (136 ) (3,323 ) (213 ) incentives on operating properties Less: Nonrecurring capital improvements on operating (820 ) (293 ) (1,430 ) (353 ) properties Less: Nonrecurring leasing costs for operating (347 ) (3 ) (963 ) 51 properties Add: Recurring capital expenditures on operating 25 8 47 23 properties held through joint ventures Recurring capital $ 14,913 $ 7,080 $ 29,257 $ 13,291 expenditures
Corporate Office Properties Trust Summary Financial Data (unaudited) (Dollars in thousands) Three Months Ended Six Months Ended June 30, June 30, 2011 2010 2011 2010 Reconciliation of common share dividends to dividends and distributions for payout ratios Common share dividends $ 29,632 $ 23,259 $ 57,336 $ 46,419 Common unit 1,808 1,749 3,617 3,616 distributions Dividends and distributions for payout $ 31,440 $ 25,008 $ 60,953 $ 50,035 ratios Reconciliation of FFO to FFO, as adjusted for comparability FFO $ 6,007 $ 38,870 $ 20,580 $ 77,026 Impairment losses, net 40,007 - 67,749 - of related tax benefit Operating property 52 271 75 290 acquisition costs Loss on early 25 - 25 - extinguishment of debt FFO, as adjusted for $ 46,091 $ 39,141 $ 88,429 $ 77,316 comparability Reconciliation of diluted FFO to diluted FFO available to common share and common unit holders, as adjusted for comparability Diluted FFO $ 1,415 $ 33,880 $ 10,913 $ 67,140 Impairment losses, net 40,007 - 67,749 - of related tax benefit Operating property 52 271 75 290 acquisition costs Loss on early 25 - 25 - extinguishment of debt Diluted FFO available to common share and common unit holders, as adjusted for $ 41,499 $ 34,151 $ 78,762 $ 67,430 comparability Reconciliation of GAAP net (loss) income to adjusted earnings before interest, income taxes, depreciation and amortization ("Adjusted EBITDA") Net (loss) income $ (26,007 ) $ 9,151 $ (44,573 ) $ 19,826 Interest expense on 26,607 25,576 53,246 48,068 continuing operations Interest expense on 223 345 512 556 discontinued operations Income tax (benefit) (5,042 ) 7 (5,586 ) 59 expense Real estate-related depreciation and 32,049 29,548 65,069 57,151 amortization Depreciation of furniture, fixtures and 623 632 1,248 1,282 equipment Impairment losses 44,605 - 72,347 - Adjusted EBITDA $ 73,058 $ 65,259 $ 142,263 $ 126,942 Reconciliation of interest expense from continuing operations to the denominators for interest coverage-Adjusted EBITDA and fixed charge coverage-Adjusted EBITDA Interest expense from $ 26,607 $ 25,576 $ 53,246 $ 48,068 continuing operations Interest expense from 223 345 512 556 discontinued operations Less: Amortization of (1,702 ) (1,495 ) (3,461 ) (2,621 ) deferred financing costs Less: Amortization of discount on Exchangeable (1,582 ) (1,488 ) (3,140 ) (2,270 ) Senior Notes, net of amounts capitalized Denominator for interest 23,546 22,938 47,157 43,733 coverage-Adjusted EBITDA Preferred share 4,026 4,026 8,051 8,051 dividends Preferred unit 165 165 330 330 distributions Denominator for fixed charge coverage-Adjusted $ 27,737 $ 27,129 $ 55,538 $ 52,114 EBITDA Reconciliation of same office property net operating income to same office property cash net operating income and same office property cash net operating income, excluding gross lease termination fees Same office property net $ 62,961 $ 64,263 $ 122,021 $ 125,023 operating income Less: Straight-line rent (1,581 ) (1,511 ) (4,662 ) (3,842 ) adjustments Less: Amortization of deferred market rental (193 ) (281 ) (432 ) (736 ) revenue Same office property cash net operating $ 61,187 $ 62,471 $ 116,927 $ 120,445 income Less: Lease termination (46 ) (976 ) (183 ) (1,066 ) fees, gross Same office property cash net operating income, excluding gross lease termination $ 61,141 $ 61,495 $ 116,744 $ 119,379 fees Reconciliation of debt, net to denominator for adjusted debt to Adjusted EBITDA ratio Debt, net $ 2,299,416 $ 2,182,375 Less: Construction in progress, including held (430,608 ) (319,846 ) for sale properties Denominator for adjusted debt to Adjusted EBITDA $ 1,868,808 $ 1,862,529 ratio
Source: Corporate Office Properties Trust (COPT)
Released July 28, 2011