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.
Operating Performance:
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.
Investment Activity:
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.
Capital Raises:
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:
https://www.theconferencingservice.com/prereg/key.process?key=PAL8ATKPJ
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.
Definitions:
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.
Company Information
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.
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 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