COPT Reports First Quarter 2011 Results and Launches Strategic Reallocation Plan

COLUMBIA, Md.--(BUSINESS WIRE)-- Corporate Office Properties Trust (COPT) (NYSE: OFC) today announced financial and operating results for the first quarter ended March 31, 2011. Diluted earnings per share was ($0.33) for the quarter ended March 31, 2011 as compared to $0.10 for the quarter ended March 31, 2010. Excluding a previously announced, non-cash impairment charge associated with the Company's Fort Ritchie investment, funds from operations (FFO) per diluted share for the first quarter of 2011 was $0.52, a 2% decline from the $0.53 FFO per share reported in the first quarter of 2010. Including the impairment charge, FFO per diluted share for the quarter ended March 31, 2011 was $0.13.

Strategic Reallocation Plan:

COPT's management also announced it is accelerating asset dispositions as part of a Strategic Reallocation Plan designed to increase its concentration of buildings serving the specialized needs of tenants in the U.S. Government and Defense Information Technology industries (Defense IT), and Data Centers catering to both sectors.

"By executing our Strategic Reallocation Plan, COPT will increase its percentage of real estate revenues serving our super core customers from 59% today, to 67% at the end of 2013," stated Randall M. Griffin, Chief Executive Officer of Corporate Office Properties Trust. "We also will decrease our exposure to traditional suburban office buildings, which will position us to better weather future economic downturns. In short, COPT will be an even stronger, more focused company that can deliver impressive earnings growth and shareholder returns."

Revised 2011 Guidance:

Management is revising its prior earnings and FFO guidance to reflect its updated outlook for the year and the near-term dilution it anticipates from assets to be sold as part of the Strategic Reallocation Plan. Details will be provided on its conference call today at 11:00 a.m. Eastern Time. Conference call details are provided later in this press release.

First Quarter 2011 Results:

For the first quarter ended March 31, 2011 - EPS was ($0.33) for the quarter ended March 31, 2011 as compared to $0.10 for the quarter ended March 31, 2010. Excluding a $27.7 million non-cash impairment charge associated with its investment in Fort Ritchie, FFO for the first quarter ended March 31, 2011 totaled $42.3 million, or $0.52 per diluted share. First quarter 2011 results represent a 2% decrease on a per share basis from the $0.53 per diluted share, or $38.2 million of FFO for the first quarter of 2010. Including the impairment charge, FFO per diluted share for the first quarter of 2011 was $0.13 versus $0.53 reported in the first quarter of 2010.

Operating Performance:

Portfolio Summary - At March 31, 2011, the Company's wholly-owned portfolio of 252 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 $25.75 per square foot. The Company's wholly-owned portfolio was 87.0% occupied and 89.2% leased as of March 31, 2011.

Same Office Performance - The Company's same office portfolio for the quarter ended March 31, 2011 represents 91% of the rentable square feet of its consolidated portfolio and consists of 241 properties. For the quarter ended March 31, 2011, the Company's same office property cash NOI decreased 5% as compared to the three months ended March 31, 2010.

Leasing - For the quarter ended March 31, 2011, 784,000 square feet were renewed equating to a 67% renewal rate, at an average committed cost of $10.69 per square foot. Total rent on renewed space increased 5.5% on a straight-line basis, as measured from the straight-line rent in effect preceding the renewal date, and remained flat on a cash basis. For renewed and retenanted space of 1.0 million square feet, total straight-line rent increased 4.3% and total rent on a cash basis remained flat. The average committed cost for renewed and retenanted space was $15.61 per square foot.

Investment Activity:

Developments - At March 31, 2011, the Company had properties totaling 3.1 million square feet under construction, development and redevelopment for a total projected cost of $672.8 million. The Company controlled land at March 31, 2011 of 2,265 acres that can support up to 21.8 million square feet of development.

Acquisitions - The Company did not complete any acquisitions during the first quarter 2011.

Balance Sheet and Financial Flexibility:

As of March 31, 2011, the Company had a total market capitalization of $5.2 billion, with $2.4 billion in debt outstanding, equating to a 46% debt-to-total market capitalization ratio. Also, the Company's weighted average interest rate was 4.9% for the quarter ended March 31, 2011 and 82% of its debt was subject to fixed interest rates as of March 31, 2011.

For the first quarter 2011, the Company's adjusted EBITDA to interest expense coverage ratio was 2.93x, and the adjusted EBITDA fixed charge coverage ratio was 2.49x. Adjusting for construction in progress, the Company's adjusted debt-to-adjusted EBITDA ratio was 7.23x as of March 31, 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.

Conference Call:

Supplemental presentation - COPT will be posting a supplemental presentation that discusses the Strategic Reallocation Plan approximately 15 minutes before its 11:00 a.m. Eastern Time conference call in the Investor Relations section of COPT's website, www.copt.com.

Management will discuss first quarter earnings results, the details of its Strategic Reallocation Plan and its revised earnings and FFO guidance for 2011 on its conference call today at 11:00 a.m. Eastern Time, details of which are listed below:


Conference Call Date:                  Thursday, April 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:                              18057385



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=PG9V4G73R

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, April 28 at 2:00 p.m. Eastern Time through Thursday, May 5 at midnight Eastern Time. To access the replay within in the United States, please call 888-286-8010 and use passcode 96513809. To access the replay outside the United States, please call 617-801-6888 and use passcode 96513809.

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 March 31, 2011, the Company owned 272 office properties totaling 21.3 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; 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

                                                        March 31,

                                                        2011         2010

Revenues

Real estate revenues                                    $ 122,367    $ 112,228

Construction contract and other service revenues          21,028       37,365

Total revenues                                            143,395      149,593

Expenses

Property operating expenses                               50,905       48,135

Depreciation and amortization associated with real        33,020       27,596
estate operations

Construction contract and other service expenses          20,618       36,399

Impairment loss                                           27,742       -

General and administrative expenses                       6,777        5,900

Business development expenses                             488          155

Total operating expenses                                  139,550      118,185

Operating income                                          3,845        31,408

Interest expense                                          (26,928 )    (22,638 )

Interest and other income                                 1,168        1,302

(Loss) income from continuing operations before equity
in income (loss) of unconsolidated entities and income    (21,915 )    10,072
taxes

Equity in income (loss) of unconsolidated entities        30           (205    )

Income tax benefit (expense)                              544          (41     )

(Loss) income from continuing operations                  (21,341 )    9,826

Discontinued operations                                   74           832

(Loss) income before gain on sales of real estate         (21,267 )    10,658

Gain on sales of real estate, net of income taxes         2,701        17

Net (loss) income                                         (18,566 )    10,675

Less net (loss) income attributable to noncontrolling
interests

Common units in the Operating Partnership                 1,479        (527    )

Preferred units in the Operating Partnership              (165    )    (165    )

Other consolidated entities                               (538    )    (45     )

Net (loss) income attributable to COPT                    (17,790 )    9,938

Preferred share dividends                                 (4,025  )    (4,025  )

Net (loss) income attributable to COPT common           $ (21,815 )  $ 5,913
shareholders

Earnings per share "EPS" computation:

Numerator for diluted EPS:

Net (loss) income attributable to common shareholders   $ (21,815 )  $ 5,913

Amount allocable to restricted shares                     (282    )    (290    )

Numerator for diluted EPS                                 (22,097 )    5,623

Denominator:

Weighted average common shares - basic                    66,340       57,844

Dilutive effect of share-based compensation awards        -            364

Weighted average common shares - diluted                  66,340       58,208

Diluted EPS                                             $ (0.33   )  $ 0.10




Corporate Office Properties Trust

Summary Financial Data

(unaudited)

(Amounts in thousands, except per share data and ratios)

                                                         Three Months Ended

                                                         March 31,

                                                         2011         2010

Net (loss) income                                        $ (18,566 )  $ 10,675

Add: Real estate-related depreciation and amortization     33,020       27,603

Add: Depreciation and amortization on unconsolidated       119          175
real estate entities

Less: Gain on sales of previously depreciated operating    -            (297   )
properties, net of income taxes

Funds from operations ("FFO")                              14,573       38,156

Less: Noncontrolling interests - preferred units in the    (165    )    (165   )
Operating Partnership

Less: Noncontrolling interests - other consolidated        (538    )    (45    )
entities

Less: Preferred share dividends                            (4,025  )    (4,025 )

Less: Depreciation and amortization allocable to
noncontrolling interests in other

consolidated entities                                      (65     )    (282   )

Less: Basic and diluted FFO allocable to restricted        (282    )    (379   )
shares

Basic and diluted FFO available to common share and        9,498        33,260
common unit holders ("Basic and diluted FFO")

Less: Straight line rent adjustments                       (3,912  )    (2,346 )

Less: Amortization of acquisition intangibles included     161          (270   )
in net operating income

Less: Recurring capital expenditures                       (14,344 )    (6,211 )

Add: Amortization of discount on Exchangeable Senior       1,558        782
Notes, net of amounts capitalized

Add: Impairment loss                                       27,742       -

Add: Operating property acquisition costs                  23           19

Diluted adjusted funds from operations available to      $ 20,726     $ 25,234
common share and common unit holders ("Diluted AFFO")

Weighted average shares

Weighted average common shares                             66,340       57,844

Conversion of weighted average common units                4,396        5,017

Weighted average common shares/units - basic FFO per       70,736       62,861
share

Dilutive effect of share-based compensation awards         261          364

Weighted average common shares/units - diluted FFO per     70,997       63,225
share

Diluted FFO per share                                    $ 0.13       $ 0.53

Diluted FFO per share, as adjusted for comparability     $ 0.52       $ 0.53

Dividends/distributions per common share/unit            $ 0.4125     $ 0.3925

Diluted FFO payout ratio, as adjusted for comparability    79.2    %    75.2   %

Diluted AFFO payout ratio                                  142.4   %    99.2   %

Adjusted EBITDA interest coverage ratio                  2.93x        2.97x

Adjusted EBITDA fixed charge coverage ratio              2.49x        2.47x

Debt to Adjusted EBITDA ratio (1)                        8.66x        8.54x

Adjusted debt to Adjusted EBITDA ratio (2)               7.23x        7.25x

Reconciliation of denominators for diluted EPS and
diluted FFO per share

Denominator for diluted EPS                                66,340       58,208

Weighted average common units                              4,396        5,017

Anti-dilutive EPS effect of share-based compensation       261          -
awards

Denominator for diluted FFO per share                      70,997       63,225




(1)  Represents debt divided by Adjusted EBITDA for the three month period
     multiplied by four.

     Represents debt adjusted to subtract construction in progress as of period
(2)  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)

                                                    March 31,      December 31,

                                                    2011           2010

Balance Sheet Data (in thousands) (as of period
end)

Properties, net of accumulated depreciation         $ 3,468,771    $ 3,445,455

Total assets                                          3,865,809      3,844,517

Debt, net                                             2,396,795      2,323,681

Total liabilities                                     2,594,151      2,521,379

Beneficiaries' equity                                 1,271,658      1,323,138

Debt to total assets                                  62.0      %    60.4      %

Debt to undepreciated book value of real estate       58.4      %    57.2      %
assets

Debt to total market capitalization                   46.0      %    46.1      %

Property Data (wholly owned office properties)

(as of period end)

Number of operating properties owned                  252            252

Total net rentable square feet owned (in              20,183         19,990
thousands)

Occupancy                                             87.0      %    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 total assets                $ 3,865,809    $ 3,844,517

Assets other than assets included in properties,      (397,038  )    (399,062  )
net

Accumulated depreciation on real estate assets        526,825        503,032

Intangible assets on real estate acquisitions, net    106,444        113,735

Denominator for debt to undepreciated book value    $ 4,102,040    $ 4,062,222
of real estate assets

                                                    Three Months Ended

                                                    March 31,

                                                    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         $ 13,270       $ 4,071
operating properties

Total capital improvements on operating properties    1,990          870

Total leasing costs on operating properties           2,736          1,338

Less: Nonrecurring tenant improvements and            (2,448    )    (77       )
incentives on operating properties

Less: Nonrecurring capital improvements on            (610      )    (60       )
operating properties

Less: Nonrecurring leasing costs incurred on          (616      )    54
operating properties

Add: Recurring capital expenditures on operating      22             15
properties held through joint ventures

Recurring capital expenditures                      $ 14,344       $ 6,211




Corporate Office Properties Trust

Summary Financial Data

(unaudited)

(Dollars in thousands)

                                                    Three Months Ended

                                                    March 31,

                                                    2011           2010

Reconciliation of common share dividends to
dividends and distributions for payout ratios

Common share dividends                              $ 27,704       $ 23,160

Common unit distributions                             1,809          1,867

Dividends and distributions for payout ratios       $ 29,513       $ 25,027

Reconciliation of FFO to FFO, as adjusted for
comparability

FFO                                                 $ 14,573       $ 38,156

Impairment loss                                       27,742         -

Operating property acquisition costs                  23             19

FFO, as adjusted for comparability                  $ 42,338       $ 38,175

Reconciliation of diluted FFO to diluted FFO
available to common share and common unit holders,
as adjusted for comparability

Diluted FFO                                         $ 9,498        $ 33,260

Impairment loss                                       27,742         -

Operating property acquisition costs                  23             19

Diluted FFO available to common share and common    $ 37,263       $ 33,279
unit holders, as adjusted for comparability

Reconciliation of GAAP net income to adjusted
earnings before interest, income taxes,
depreciation and amortization ("Adjusted EBITDA")

Net income                                          $ (18,566   )  $ 10,675

Interest expense on continuing operations             26,928         22,638

Interest expense on discontinued operations           -              65

Income tax (benefit) expense                          (544      )    52

Real estate-related depreciation and amortization     33,020         27,603

Depreciation of furniture, fixtures and equipment     625            650

Impairment loss                                       27,742         -

Adjusted EBITDA                                     $ 69,205       $ 61,683

Reconciliation of interest expense from continuing
operations to the denominators for interest
coverage-Adjusted EBITDA and fixed charge
coverage-Adjusted EBITDA

Interest expense from continuing operations         $ 26,928       $ 22,638

Interest expense from discontinued operations         -              65

Less: Amortization of deferred financing costs        (1,759    )    (1,126    )

Less: Amortization of discount on Exchangeable        (1,558    )    (782      )
Senior Notes, net of amounts capitalized

Denominator for interest coverage-Adjusted EBITDA     23,611         20,795

Preferred share dividends                             4,025          4,025

Preferred unit distributions                          165            165

Denominator for fixed charge coverage-Adjusted      $ 27,801       $ 24,985
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 operating income           $ 62,123       $ 64,935

Less: Straight-line rent adjustments                  (3,136    )    (2,293    )

Less: Amortization of deferred market rental          (278      )    (605      )
revenue

Same office property cash net operating income      $ 58,709       $ 62,037

Less: Lease termination fees, gross                   (157      )    (278      )

Same office property cash net operating income,     $ 58,552       $ 61,759
excluding gross lease termination fees

Reconciliation of debt, net to denominator for
adjusted debt to Adjusted EBITDA ratio

Debt, net                                           $ 2,396,795    $ 2,107,131

Less: Construction in progress                        (396,170  )    (317,283  )

Denominator for adjusted debt to Adjusted EBITDA    $ 2,000,625    $ 1,789,848
ratio





First Quarter
2011

Top 20 Tenants

(Based on Annualized Rental Revenue of wholly owned office properties, dollars in
thousands)

                                         Percentage  Total       Percentage  Weighted
                                         of

                             Total       Total       Annualized  of Total    Average

                     Number  Occupied    Occupied    Rental      Annualized  Remaining
                     of                                          Rental

Tenant               Leases  Square      Square      Revenue     Revenue     Lease
                             Feet        Feet        (2)                     Term (3)

United States   (4)  77      3,165,508   18.0%       $95,956     21.2%       5.9
of America

Northrop
Grumman         (5)  16      1,204,210   6.9%        31,957      7.1%        6.5
Corporation

Booz Allen           9       806,288     4.6%        24,627      5.5%        4.9
Hamilton, Inc.

Computer
Sciences        (5)  6       609,715     3.5%        18,539      4.1%        2.9
Corporation

ITT             (5)  9       332,490     1.9%        8,162       1.8%        3.9
Corporation

The MITRE            4       267,087     1.5%        7,880       1.7%        5.6
Corporation

Wells Fargo &   (5)  6       216,374     1.2%        7,780       1.7%        7.2
Company

The Aerospace        3       238,610     1.4%        7,631       1.7%        3.9
Corporation

L-3
Communications  (5)  4       258,192     1.5%        7,521       1.7%        3.0
Holdings, Inc.

CareFirst,           2       222,610     1.3%        7,247       1.6%        5.5
Inc.

Integral        (5)  4       241,627     1.4%        6,249       1.4%        8.9
Systems, Inc.

Comcast         (5)  7       308,332     1.8%        6,156       1.4%        2.5
Corporation

The Boeing      (5)  6       196,939     1.1%        5,974       1.3%        3.5
Company

AT&T            (5)  4       317,570     1.8%        5,408       1.2%        7.7
Corporation

Ciena                5       270,557     1.5%        5,074       1.1%        2.0
Corporation

General
Dynamics        (5)  6       208,264     1.2%        4,601       1.0%        2.4
Corporation

Raytheon             6       164,404     0.9%        4,402       1.0%        3.0
Company

Unisys               1       156,695     0.9%        4,143       0.9%        9.2
Corporation

The Johns
Hopkins         (5)  5       141,403     0.8%        3,634       0.8%        5.6
Institutions

Merck & Co.,         2       225,894     1.3%        2,949       0.7%        1.3
Inc.

Subtotal Top
20 Office            182     9,552,769   54.4%       265,890     58.8%       5.3
Tenants

All remaining        713     7,998,604   45.6%       185,971     41.2%       4.2
tenants

Total/Weighted       895     17,551,373  100.0%      $451,861    100.0%      4.9
Average




     Table excludes owner occupied leasing activity which represents 173,085
(1)  square feet with total annualized rental revenue of $4.0 million, and a
     weighted average remaining lease term of 4.9 years as of March 31, 2011.

     Total Annualized Rental Revenue is the monthly contractual base rent as of
(2)  March 31, 2011, multiplied by 12, plus the estimated annualized expense
     reimbursements under existing office leases.

(3)  The weighting of the lease term was computed using Total Rental Revenue.

     Many of our government leases are subject to early termination provisions
(4)  which are customary to government leases. The weighted average remaining
     lease term was computed assuming no exercise of such early termination
     rights.

(5)  Includes affiliated organizations or agencies.




    Source: Corporate Office Properties Trust (COPT)