Corporate Office Properties Trust Reports 2007 Fourth Quarter and Year End Results
COLUMBIA, Md.--(BUSINESS WIRE)--
Corporate Office Properties Trust (COPT) (NYSE:OFC) announced today financial and operating results for the full year and quarter ended December 31, 2007.
2007 Highlights
-- 17.3% increase in Diluted Funds from Operations ("Diluted
FFO") per share to $2.24 for the year ended 2007 from $1.91
for 2006, including the effect of a $3.9 million accounting
charge associated with the Series E and F preferred share
redemptions in 2006. Excluding this accounting charge, 2006
Diluted FFO per share would have been $1.99, as adjusted,
representing a year over year increase of 12.6%.
-- Earnings per diluted share ("Diluted EPS") of $.39 for the
year ended 2007 as compared to $.69 per diluted share for the
year ended 2006. Included in 2007 net income is a gain on
sales of real estate net of minority interests and income
taxes of approximately $4.8 million, as compared to $14.8
million in 2006 net income. Also included in 2006 net income
is an accounting charge of $3.9 million or $.09 per share
reflecting the write-off of initial issuance costs of the
Series E and F preferred share redemptions.
-- 21.5% increase in Adjusted Funds from Operations ("AFFO")
diluted to $90.8 million for the year ended 2007 as compared
to $74.7 million for the year ended 2006.
-- 57.5% Diluted FFO payout ratio, 79.3% Diluted AFFO payout
ratio for the year.
-- $378.6 million in acquisitions of 57 buildings totaling 2.4
million square feet and 314 acres of land which can support
2.7 million square feet of potential development.
-- $17.8 million in dispositions of operating properties,
representing 128,000 square feet and a gain of $3.9 million.
-- 617,000 square feet of development projects placed into
service, which includes 68,000 square feet placed into service
during 2006, that were 95.4% leased at December 31, 2007.
-- 92.6% occupied and 93.4% leased for our wholly-owned portfolio
as of December 31, 2007.
-- $194.0 million in equity raised through the issuance of 3.4
million common shares/units at an average deemed value of
$48.90 per share/unit, and $26.6 million net proceeds
generated from the issuance of 5.6% Series K convertible
preferred shares issued in connection with the Nottingham
acquisition.
-- 69.1% renewal rate on expiring leases for the year, 1.7
million square feet renewed with an average capital cost of
$5.93 per square foot.
-- 10% increase of quarterly common dividend in September 2007.
Fourth Quarter 2007 Highlights
-- 22.9% increase in Diluted FFO per share to $.59 for the fourth
quarter 2007 from $.48 for the fourth quarter 2006, including
the effect of a $2.1 million accounting charge associated with
the Series F preferred share redemption in 2006. Excluding
this accounting charge, fourth quarter 2006 Diluted FFO per
share would have been $.52, as adjusted, representing a year
over year increase of 13.5%.
-- Diluted EPS of $.12 for the fourth quarter 2007 as compared to
$.08 for the fourth quarter 2006. Included in fourth quarter
2006 net income is an accounting charge of $2.1 million or
$.05 per diluted share reflecting the write-off of initial
issuance costs of the Series F preferred share redemption.
-- 31.3% increase in Diluted AFFO to $23.2 million for the fourth
quarter 2007 as compared to $17.7 million for the fourth
quarter 2006.
-- 57.5% Diluted FFO payout ratio, 81.2% Diluted AFFO payout
ratio for the fourth quarter 2007.
-- 2.6 million square feet under construction, development and
redevelopment for a total projected cost of $467.4 million at
December 31, 2007.
-- 60.4% of leases expiring during the quarter were renewed, with
a 16.0% increase in total straight line rent for renewed
space.
-- 6.6% increase in same office property cash NOI, representing
162 properties and 81.3% of the portfolio.
"We had excellent FFO growth in 2007 and are well positioned for strong growth in 2008. We have conservatively planned for a recession in our guidance," stated Randall M. Griffin, President and Chief Executive Officer, Corporate Office Properties Trust. "The Company is fortunate to begin 2008 with strong financial flexibility, a healthy capital position and a development pipeline, heavily concentrated in the U.S. Government and Defense Information Technology sector," he stated.
Financial Results
Diluted FFO for the year ended December 31, 2007 totaled $125.3 million, or $2.24 per diluted share, as compared to $98.9 million, or $1.91 per diluted share, for the year ended December 31, 2006, representing a 17.3% increase on a per share basis. 2006 Diluted FFO included a $3.9 million accounting charge associated with the Series E and F preferred share redemptions. Excluding this accounting charge, 2006 Diluted FFO per share would have been $1.99, as adjusted, representing a year over year increase of 12.6%.
The Company's Diluted FFO for the quarter ended December 31, 2007 totaled $32.8 million, or $.59 per diluted share, as compared to $25.1 million, or $.48 per diluted share, for the quarter ended December 31, 2006, representing a 22.9% increase on a per share basis. Included in the fourth quarter 2006 FFO is a $2.1 million accounting charge associated with the Series F preferred share redemption. Excluding this accounting charge, fourth quarter 2006 Diluted FFO per share would have been $.52, as adjusted, representing a year over year increase of 13.5%.
EPS for the year ended December 31, 2007 totaled $.39 per diluted share, or $18.7 million of net income available for common shareholders, as compared to $.69 per diluted share, or $29.9 million for the year ended December 31, 2006. Included in 2007 net income is a gain on sales of real estate net of minority interests and income taxes of approximately $4.8 million, as compared to $14.8 million in 2006 net income. Also included in 2006 net income is an accounting charge of $3.9 million or $.09 per share reflecting the write-off of initial issuance costs of the Series E and F preferred share redemptions.
For the quarter ended December 31, 2007, EPS totaled $.12 per diluted, or $5.9 million of net income available to common shareholders, as compared to $.08 per diluted share and $3.7 million for the quarter ended December 31, 2006. Included in fourth quarter 2006 net income is an accounting charge of $2.1 million or $.05 per share reflecting the write-off of initial issuance costs of the Series F preferred share redemption.
Diluted FFO payout ratio was 57.5% for the year ended 2007 compared to 60.3% for the comparable 2006 period. The Company's diluted FFO payout ratio for the fourth quarter 2007 was 57.5%, as compared to 63.5% for the year ended 2006.
Diluted AFFO for the year ended December 31, 2007 totaled $90.8 million, as compared to $74.7 million for the year ended December 31, 2006, representing an increase of 21.5%. Diluted AFFO payout ratio was 79.3% for year ended 2007, compared to 79.9% for the year ended 2006.
Diluted AFFO for the quarter ended December 31, 2007 totaled $23.2 million, as compared to $17.7 million for the quarter ended December 31, 2006, representing a 31.3% increase. The Company's diluted AFFO payout ratio for the quarter ended December 31, 2007 was 81.2%, as compared to 89.9% for the year ended 2006. A reconciliation of non GAAP measures to the comparable GAAP measures are included in the tables that follow the text of this press release.
Revenues from real estate operations in continuing operations for the year ended December 31, 2007 were $368.9 million, as compared to the year ended December 31, 2006 of $293.6 million. As of December 31, 2007, the Company had a total market capitalization of $3.8 billion, with $1.8 billion in debt outstanding, equating to a 48.0% debt-to-total market capitalization ratio. The Company's weighted average interest rate for the quarter ended December 31, 2007, was 5.7%. As of December 31, 2007, 80.9% of total debt was subject to fixed interest rates. For the fourth quarter 2007, EBITDA interest coverage ratio was 2.95x, and the EBITDA fixed charge coverage ratio was 2.45x.
Operating Results
At December 31, 2007, the Company's wholly-owned portfolio of 228 office properties totaling 17.8 million square feet, was 92.6% occupied and 93.4% leased. The weighted average remaining lease term for the portfolio was 5.0 years and the average rental rate (including tenant reimbursements of operating costs) was $21.36 per square foot.
During 2007, the Company leased 2.6 million square feet including 2.2 million square feet of renewed and retenanted space, 238,000 square feet of previously unoccupied space and 104,000 square feet of new development space.
For the year, the Company renewed 1.7 million square feet or 69.1% of expiring leases (based on square footage), at an average capital cost of $5.93 per square foot. For the 2.2 million square feet renewed and retenanted during the year, total rent increased 7.3% on a straight-line basis, as measured from the GAAP straight-line rent in effect preceding the renewal date. Total rent increased 0.9% on a cash basis. The average capital cost for the renewed and retenanted space was $9.58 per square foot.
For the quarter ended December 2007, 301,000 square feet was renewed, equating to a 60.4% renewal rate, at an average capital cost of $3.98 per square foot. Total rent on renewed space increased 16.0% on a straight-line basis, as measured from the GAAP straight-line rent in effect preceding the renewal date. Total rent increased 7.4% on a cash basis. For renewed and retenanted space of 436,000 square feet, total straight-line rent increased 8.5% and total rent on a cash basis increased 0.2%. The average committed capital cost for renewed and retenanted space was $12.83 per square foot.
Same office property cash NOI increased 6.6% for fourth quarter 2007 as compared to the comparable 2006 period. The Company's same office portfolio consists of 162 buildings and represents 81.3% of its wholly owned portfolio as of December 31, 2007.
The Company recognized total lease termination fees of $4.1 million, net of write-offs of related straight-line rents and write-off of previously unamortized deferred market revenue for the year ended December 31, 2007, as compared to $5.7 million for the year ended December 21, 2006.
For the fourth quarter 2007, the Company recognized lease termination fees of $0.6 million, net of write-offs of related straight-line rents and accretion of intangible assets and liabilities, as compared to $3.4 million in the fourth quarter 2006.
Development Activity
At December 31, 2007, the Company's development pipeline consisted of:
-- Ten buildings under construction totaling 846,000 square feet
for a total projected cost of $162.2 million, that are 36.2%
leased.
-- Eleven buildings under development totaling 1.1 million square
feet for a total projected cost of $232.9 million.
-- Four projects under redevelopment totaling 625,000 square feet
for a total projected cost of $72.3 million.
The Company's land inventory (wholly owned and joint venture) at December 31, 2007 totaled 1,704 acres that can support 14.9 million square feet of development.
During the quarter, the Company signed a 75,000 square foot long-term lease with ITT Corporation, Systems Division for 655 Space Center Drive, known as Patriot Park VI, in Colorado Springs, Colorado.
During the year, the Company placed six buildings into service, including one building which contained 68,000 square feet placed into service during 2006, for a total of 617,000 square feet, that were 95.4% leased.
The Company was selected in 2007 as master developer for the 272 acre Colorado Springs Airport Mixed-Use Business Park. The business park is strategically located at the entrance of the Colorado Springs Airport and adjacent to the Peterson Air Force Base. The park can support approximately 3.5 million square feet of development of which 1.3 million square feet would be office development.
Acquisition Activity
During the year, the Company acquired 57 buildings totaling 2.4 million square feet and 314 acres of land which can support 2.7 million square feet of potential development for $378.6 million.
Included in these totals, are the following assets:
-- 56 operating properties containing 2.4 million square feet and
187 acres of land, developable into approximately 2.0 million
developable square feet for $362.5 million, plus approximately
$1.4 million in transaction costs.
-- 56 acres of land for $10.0 million that can support 800,000
square feet of office development. The site will be known as
NorthGate Business Park and is strategically located at the
north entrance to Aberdeen Proving Ground in Aberdeen,
Maryland.
Disposition Activity
During the year, the Company sold 128,000 square feet in four buildings for $17.8 million and realized a gain of $3.9 million. The buildings were located in the Company's New Jersey, White Marsh and BWI Airport submarkets. The Company also sold 16.5 acres of land for $8.7 million and realized a gain of $3.0 million (or an after-tax gain of $1.9 million). The land was located in White Marsh and Owings Mills, Maryland.
The Company also disposed of most of its investment in TractManager, Inc., as part of the TractManager, Inc. merger with Tudor Ventures and GE Healthcare Financial Services. The Company received $2.5 million and recognized a $1.0 million gain in connection with the disposition.
Financing and Capital Transactions
The Company executed the following transactions during the year:
-- $194.0 million in equity raised through the issuance of 3.4
million common shares/units at an average deemed value of
$48.90 per share/unit, and $26.6 million net proceeds
generated from the issuance of 5.6% Series K convertible
preferred shares issued in connection with the Nottingham
acquisition.
-- Increased borrowing capacity under the Company's unsecured
line of credit from $500.0 to $600.0 million and extended the
maturity date to September 30, 2011 which is subject to a one
year extension option. The Company achieved favorable interest
rate pricing ranging from 75 basis points to 125 basis points
over LIBOR, depending upon leverage ratio.
-- Closed a $150.0 million, ten year, 5.65% fixed interest rate
loan which requires interest only payments. The net proceeds
were used to primarily retire $120.5 million of existing
indebtedness.
-- Increased quarterly dividend 10% from $.31 to $.34 per share.
-- Executed a swap for an aggregate notional amount of $50.0
million at a fixed one month LIBOR rate of 4.33%, which
commenced October 23, 2007 and expires October 23, 2009.
Subsequent Events
The Company executed the following transactions subsequent to year end:
-- Disposed of a 142,000 square foot property located in Central
New Jersey for $17.0 million. After this sale, the Company
only owns 3 properties in Central New Jersey totaling 243,000
square feet.
-- Acquired a 45.0% interest in the M Square, LLC joint venture
located adjacent to the University of Maryland campus in
College Park, Maryland. The venture will develop, lease and
manage the office buildings totaling approximately 750,000
square feet. The venture has a 118,000 square foot building
located at 5825 University Research Court under construction.
-- Placed into service the entire 60,000 square foot property
located at 1055 North Newport Road in Colorado Springs,
Colorado which is 100.0% leased to SI International, Inc. for
a ten year term.
Earnings Guidance
The Company's 2008 EPS guidance has been revised from a range of $.58 to $.67 to a range of $.62 to $.69 per diluted share, including actual gains but excluding any potential gains or losses from the sale of previously depreciated operating properties.
The Company's 2008 FFO guidance has been revised from a range of $2.40 to $2.49 to a range of $2.41 to $2.49 per diluted share, representing FFO growth of 8% to 11% compared to 2007 actual results.
Conference Call
The Company will hold an investor/analyst conference call:
Conference Call and Webcast Date: Thursday, February 14, 2008
Time: 11:00 a.m. Eastern
Dial In Number: 866-203-2528
Confirmation Code for the call: 23558524
A replay of this call will be available beginning Thursday, February 14, 2008 at 1:00 p.m. Eastern through Thursday, February 28, 2008 at midnight Eastern. To access the replay, please call 888-286-8010 and use confirmation code 49624459.
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 our Form 8K or our website (www.copt.com) for definitions of certain terms used in this press release. Reconciliations of GAAP and non-GAAP measurements are included in the attached tables.
Company Information
Corporate Office Properties Trust (COPT) is a fully integrated, self-managed real estate investment trust (REIT) that focuses on the ownership, management, leasing, acquisition and development of suburban office properties located primarily in submarkets within the Greater Washington, DC region. As of December 31, 2007, the Company owned 246 office properties totaling 18.6 million rentable square feet, which includes 18 properties totaling 806,000 square feet held through joint ventures. The Company has implemented a core customer expansion strategy that is built around meeting, through acquisitions and development, the multi-location requirements of the Company's existing strategic tenants. The Company's property management services team provides comprehensive property and asset management to company owned properties and select third party clients. The Company's development and construction services team provides a wide range of development and construction management services for company owned properties, as well as land planning, design/build services, consulting, and merchant development to select third party clients. The Company's shares are traded on the New York Stock Exchange under the symbol OFC. More information on Corporate Office Properties Trust can be found on the Internet 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", "expect", "estimate" 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:
-- the Company's ability to borrow on favorable terms;
-- 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;
-- risk of real estate acquisition and development, 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;
-- 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 1 of the Company's Annual Report on Form 10-K for the year ended December 31, 2006.
Corporate Office Properties Trust
Summary Financial Data
(unaudited)
(Amounts in thousands, except per share data)
Three Months Ended
December 31,
-------------------
2007 2006
--------- ---------
Revenues
Real estate revenues $ 94,794 $ 77,491
Service operations revenues 8,498 14,844
--------- ---------
Total revenues 103,292 92,335
--------- ---------
Expenses
Property operating expenses 31,133 25,447
Depreciation and other amortization associated
with real estate operations 26,312 19,916
Service operations expenses 8,330 14,220
General and administrative expenses 5,402 5,042
--------- ---------
Total operating expenses 71,177 64,625
--------- ---------
Operating income 32,115 27,710
Interest expense (20,771) (18,625)
Amortization of deferred financing costs (970) (949)
--------- ---------
Income from continuing operations before equity in
loss of unconsolidated entities, income taxes and
minority interests 10,374 8,136
Equity in loss of unconsolidated entities (27) (52)
Income tax expense (89) (264)
--------- ---------
Income from continuing operations before minority
interests 10,258 7,820
Minority interests in income from continuing
operations (1,058) (797)
--------- ---------
Income from continuing operations 9,200 7,023
Income from discontinued operations, net 368 2,564
--------- ---------
Income before gain on sales of real estate 9,568 9,587
Gain on sales of real estate, net 361 -
--------- ---------
Net income 9,929 9,587
Preferred share dividends (4,025) (3,790)
Issuance costs associated with redeemed preferred
shares - (2,067)
--------- ---------
Net income available to common shareholders $ 5,904 $ 3,730
========= =========
Earnings per share "EPS" computation
Numerator: $ 5,904 $ 3,730
========= =========
Denominator:
Weighted average common shares - basic 46,947 42,439
Dilutive effect of share-based compensation awards 914 1,641
--------- ---------
Weighted average common shares - diluted 47,861 44,080
========= =========
EPS
Basic $ 0.13 $ 0.09
========= =========
Diluted $ 0.12 $ 0.08
========= =========
Corporate Office Properties Trust
Summary Financial Data
(unaudited)
(Amounts in thousands, except per share data and ratios)
Three Months Ended
December 31,
-------------------
2007 2006
--------- ---------
Net income $ 9,929 $ 9,587
Add: Real estate-related depreciation and
amortization 26,607 19,768
Add: Depreciation and amortization on
unconsolidated real estate entities 163 345
Less: Depreciation and amortization allocable to
minority interests in other consolidated entities (51) (41)
(Less) add: (Gain) loss on sales of real estate,
net of taxes, excluding development portion (1,049) 71
--------- ---------
Funds from operations ("FFO") 35,599 29,730
Add: Minority interests-common units in the
Operating Partnership 1,258 1,204
Less: Preferred share dividends (4,025) (3,790)
Less: Issuance costs associated with redeemed
preferred shares - (2,067)
--------- ---------
Funds from Operations - basic and diluted ("Basic
and Diluted FFO") 32,832 25,077
Less: Straight-line rent adjustments (2,680) (2,484)
Less: Recurring capital expenditures (6,504) (6,387)
Less: Amortization of deferred market rental
revenue (416) (578)
Add: Issuance costs associated with redeemed
preferred shares - 2,067
--------- ---------
Adjusted Funds from Operations - diluted ("Diluted
AFFO") $ 23,232 $ 17,695
========= =========
Weighted average shares
Weighted average common shares 46,947 42,439
Conversion of weighted average common units 8,167 8,495
--------- ---------
Weighted average common shares/units - basic FFO
per share 55,114 50,934
Dilutive effect of share-based compensation
awards 914 1,641
--------- ---------
Weighted average common shares/units - diluted
FFO per share 56,028 52,575
========= =========
Diluted FFO per common share $ 0.59 $ 0.48
========= =========
Dividends/distributions per common share/unit $ 0.34 $ 0.31
========= =========
Earnings payout ratio 272.6% 356.4%
========= =========
Diluted FFO payout ratio 57.5% 63.5%
========= =========
Diluted AFFO payout ratio 81.2% 89.9%
========= =========
EBITDA interest coverage ratio 2.95x 2.71x
========= =========
EBITDA fixed charge coverage ratio 2.45x 2.24x
========= =========
Reconciliation of denominators for diluted EPS and
diluted FFO per share
Denominator for diluted EPS 47,861 44,080
Weighted average common units 8,167 8,495
--------- ---------
Denominator for diluted FFO per share 56,028 52,575
========= =========
Corporate Office Properties Trust
Summary Financial Data
(unaudited)
(Amounts in thousands, except per share data)
Year Ended
December 31,
-------------------
2007 2006
--------- ---------
Revenues
Real estate revenues $368,949 $293,578
Service operations revenues 41,225 60,084
--------- ---------
Total revenues 410,174 353,662
--------- ---------
Expenses
Property operating expenses 123,282 92,907
Depreciation and other amortization associated
with real estate operations 106,331 78,054
Service operations expenses 39,793 57,345
General and administrative expenses 20,523 16,936
--------- ---------
Total operating expenses 289,929 245,242
--------- ---------
Operating income 120,245 108,420
Interest expense (82,032) (70,260)
Amortization of deferred financing costs (3,676) (2,847)
Gain on sale of non-real estate investment 1,033 -
--------- ---------
Income from continuing operations before equity in
loss of unconsolidated entities, income taxes and
minority interests 35,570 35,313
Equity in loss of unconsolidated entities (224) (92)
Income tax expense (569) (887)
--------- ---------
Income from continuing operations before minority
interests 34,777 34,334
Minority interests in income from continuing
operations (3,398) (3,826)
--------- ---------
Income from continuing operations 31,379 30,508
Income from discontinued operations, net 1,845 17,987
--------- ---------
Income before gain on sales of real estate 33,224 48,495
Gain on sales of real estate, net 1,560 732
--------- ---------
Net income 34,784 49,227
Preferred share dividends (16,068) (15,404)
Issuance costs associated with redeemed preferred
shares - (3,896)
--------- ---------
Net income available to common shareholders $ 18,716 $ 29,927
========= =========
Earnings per share "EPS" computation
Numerator: $ 18,716 $ 29,927
========= =========
Denominator:
Weighted average common shares - basic 46,527 41,463
Dilutive effect of share-based compensation awards 1,103 1,799
--------- ---------
Weighted average common shares - diluted 47,630 43,262
========= =========
EPS
Basic $ 0.40 $ 0.72
========= =========
Diluted $ 0.39 $ 0.69
========= =========
Corporate Office Properties Trust
Summary Financial Data
(unaudited)
(Amounts in thousands, except per share data and ratios)
Year Ended
December 31,
-------------------
2007 2006
--------- ---------
Net income $ 34,784 $ 49,227
Add: Real estate-related depreciation and
amortization 106,260 78,631
Add: Depreciation and amortization on
unconsolidated real estate entities 666 910
Less: Depreciation and amortization allocable to
minority interests in other consolidated entities (188) (163)
Less: Gain on sales of real estate, net of taxes,
excluding development portion (3,827) (17,644)
--------- ---------
Funds from operations ("FFO") 137,695 110,961
Add: Minority interests-common units in the
Operating Partnership 3,682 7,276
Less: Preferred share dividends (16,068) (15,404)
Less: Issuance costs associated with redeemed
preferred shares - (3,896)
--------- ---------
Funds from Operations - basic and diluted ("Basic
and Diluted FFO") 125,309 98,937
Less: Straight-line rent adjustments (11,722) (9,740)
Less: Recurring capital expenditures (20,835) (16,510)
Less: Amortization of deferred market rental
revenue (1,985) (1,904)
Add: Issuance costs associated with redeemed
preferred shares - 3,896
--------- ---------
Adjusted Funds from Operations - diluted ("Diluted
AFFO") $ 90,767 $ 74,679
========= =========
Weighted average shares
Weighted average common shares 46,527 41,463
Conversion of weighted average common units 8,296 8,511
--------- ---------
Weighted average common shares/units - basic FFO
per share 54,823 49,974
Dilutive effect of share-based compensation
awards 1,103 1,799
--------- ---------
Weighted average common shares/units - diluted
FFO per share 55,926 51,773
========= =========
Diluted FFO per common share $ 2.24 $ 1.91
========= =========
Dividends/distributions per common share/unit $ 1.30 $ 1.18
========= =========
Earnings payout ratio 327.7% 166.0%
========= =========
Diluted FFO payout ratio 57.5% 60.3%
========= =========
Diluted AFFO payout ratio 79.3% 79.9%
========= =========
Reconciliation of denominators for diluted EPS and
diluted FFO per share
Denominator for diluted EPS 47,630 43,262
Weighted average common units 8,296 8,511
--------- ---------
Denominator for diluted FFO per share 55,926 51,773
========= =========
Corporate Office Properties Trust
Summary Financial Data
(unaudited)
(Dollars and shares in thousands, except per share data)
December 31, December 31,
2007 2006
------------ ------------
Balance Sheet Data (in
thousands) (as of
period end):
Investment in real
estate, net of
accumulated
depreciation $2,603,472 $2,111,310
Total assets 2,931,853 2,419,601
Debt 1,825,842 1,498,537
Total liabilities 1,979,116 1,629,111
Minority interests 130,095 116,187
Beneficiaries' equity 822,642 674,303
Debt to Total Assets 62.3% 61.9%
Debt to Undepreciated
Book Value of Real
Estate Assets 60.9% 62.0%
Debt to Total Market
Capitalization 48.0% 34.9%
Property Data (wholly
owned properties)(as of
period end):
Number of operating
properties owned 228 170
Total net rentable
square feet owned (in
thousands) 17,832 15,050
Occupancy 92.6% 92.8%
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 $2,931,853 $2,419,601
Assets other than assets
included in investment
in real estate (328,381) (308,291)
Accumulated depreciation
on real estate assets 288,387 219,574
Intangible assets on
real estate
acquisitions, net 108,661 87,325
------------ ------------
Denominator for debt to
undepreciated book
value of real estate
assets $3,000,520 $2,418,209
============ ============
Three Months Ended Year Ended
December 31, December 31,
------------------------- -------------------
2007 2006 2007 2006
------------ ------------ --------- ---------
Reconciliation of tenant
improvements and
incentives, capital
improvements and
leasing costs for
operating properties to
recurring capital
expenditures
Total tenant
improvements and
incentives on operating
properties $ 2,692 $ 9,907 $ 21,487 $ 20,649
Total capital
improvements on
operating properties 4,748 3,844 11,230 11,779
Total leasing costs on
operating properties 1,850 2,827 7,562 8,610
Less: Nonrecurring
tenant improvements and
incentives on operating
properties (811) (7,489) (12,192) (13,862)
Less: Nonrecurring
capital improvements on
operating properties (1,442) (1,364) (4,494) (5,418)
Less: Nonrecurring
leasing costs incurred
on operating properties (575) (2,171) (2,856) (6,388)
Add: Recurring
improvements on
operating properties
held through joint
ventures 42 833 98 1,140
------------ ------------ --------- ---------
Recurring capital
expenditures $ 6,504 $ 6,387 $ 20,835 $ 16,510
============ ============ ========= =========
Corporate Office Properties Trust
Summary Financial Data
(unaudited)
(Dollars in thousands)
Three Months Ended Year Ended
December 31, December 31,
------------------ -----------------
2007 2006 2007 2006
--------- -------- -------- --------
Reconciliation of dividends for
Earnings Payout Ratio to
dividends and distributions for
FFO & AFFO Payout Ratio
Common share dividends for
earnings payout ratio $16,097 $13,292 $ 61,331 $ 49,670
Common unit distributions 2,777 2,622 10,682 9,996
--------- -------- -------- --------
Dividends and distributions for
FFO & AFFO payout ratio $18,874 $15,914 $ 72,013 $ 59,666
========= ======== ======== ========
Reconciliation of numerators for
diluted EPS and diluted FFO as
reported to numerators for
diluted EPS and diluted FFO
excluding issuance costs
associated with redeemed
preferred shares
Numerator for diluted EPS, as
reported $ 5,904 $ 3,730 $ 18,716 $ 29,927
Add: Issuance costs associated
with redeemed preferred shares - 2,067 - 3,896
--------- -------- -------- --------
Numerator for diluted EPS, as
adjusted $ 5,904 $ 5,797 $ 18,716 $ 33,823
========= ======== ======== ========
Numerator for diluted FFO, as
reported $32,832 $25,077 $125,309 $ 98,937
Add: Issuance costs associated
with redeemed preferred shares - 2,067 - 3,896
--------- -------- -------- --------
Numerator for diluted FFO, as
adjusted $32,832 $27,144 $125,309 $102,833
========= ======== ======== ========
Reconciliation of GAAP net income
to earnings before interest,
income taxes, depreciation and
amortization ("EBITDA")
Net income $ 9,929 $ 9,587
Interest expense on continuing
operations 20,771 18,625
Interest expense on discontinued
operations 28 260
Income tax expense 1,201 264
Real estate-related depreciation
and amortization 26,607 19,768
Amortization of deferred
financing costs-continuing
operations 970 949
Other depreciation and
amortization 358 313
Minority interests 1,391 1,329
--------- --------
EBITDA $61,255 $51,095
========= ========
Reconciliation of interest
expense from continuing
operations to the denominators
for interest coverage-EBITDA and
fixed charge coverage-EBITDA
Interest expense from continuing
operations $20,771 $18,625
Interest expense from
discontinued operations 28 260
--------- --------
Denominator for interest
coverage-EBITDA 20,799 18,885
Preferred share dividends 4,025 3,790
Preferred unit distributions 165 165
--------- --------
Denominator for fixed charge
coverage-EBITDA $24,989 $22,840
========= ========
Reconciliation of same property
net operating income to same
property cash net operating
income and same property cash
net operating income, adjusted
for lease termination fees
Same property net operating
income $52,504 $50,348
Less: Straight-line rent
adjustments (1,596) (2,493)
Less: Amortization of deferred
market rental revenue (417) (490)
--------- --------
Same property cash net operating
income 50,491 47,365
Less: Lease termination fees,
gross (200) (798)
--------- --------
Same property cash net operating
income, adjusted for lease
termination fees $50,291 46,567
--------- --------
Corporate Office Properties Trust
Summary Financial Data
(unaudited)
(Amounts in thousands, except per share data)
Reconciliation of projected EPS-diluted to
projected diluted FFO per share
Year Ending
December 31, 2008
-------------------
Low High
--------- ---------
Reconciliation of numerators
--------------------------------------------------
Numerator for projected EPS-diluted $ 29,793 $ 33,520
Less: Gain on sales of real estate, net of taxes,
excluding development portion (1) (1,258) (1,258)
Real estate-related depreciation and amortization
(2) 101,983 101,983
Minority interests-common units 5,382 6,055
--------- ---------
Numerator for projected diluted FFO per share $135,900 $140,300
========= =========
Reconciliation of denominators
--------------------------------------------------
Denominator for projected EPS-diluted 48,257 48,257
Weighted average common units 8,168 8,168
--------- ---------
Denominator for projected diluted FFO per share 56,425 56,425
========= =========
Projected EPS - diluted $ 0.62 $ 0.69
========= =========
Projected diluted FFO per share $ 2.41 $ 2.49
========= =========
(1) Reconciliation excludes any potential gains or losses from the sale of previously depreciated operating properties. (2) The estimate of real estate-related depreciation and amortization excludes any impact of potential write-offs resulting from lease terminations.
Top Twenty Office Tenants of Wholly Owned Properties as of December
31, 2007 (1)
(Dollars in thousands)
Percentage of
Total Total
Number of Occupied Occupied
Tenant Leases Square Feet Square Feet
----------------------- ------------ -------------- --------------
United States of
America (5) 62 2,485,800 15.1%
Northrop Grumman
Corporation (6) 17 1,045,442 6.3%
Booz Allen Hamilton,
Inc. 8 714,233 4.3%
Computer Sciences
Corporation (6) 4 454,645 2.8%
Unisys Corporation (7) 4 760,145 4.6%
L-3 Communications
Holdings, Inc. (6) 3 211,493 1.3%
General Dynamics
Corporation 9 284,415 1.7%
The Aerospace
Corporation 2 231,785 1.4%
Wachovia Corporation (6) 4 183,577 1.1%
Comcast Corporation 11 342,266 2.1%
AT&T Corporation (6) 9 337,052 2.0%
The Boeing Company (6) 4 143,480 0.9%
ITT Corporation (6) 7 168,853 1.0%
Ciena Corporation 3 221,609 1.3%
Science Applications
International Corp. 12 170,839 1.0%
BAE Systems PLC (6) 7 212,339 1.3%
The Johns Hopkins
University 4 129,735 0.8%
Merck & Co., Inc.
(Unisys) (7) 2 227,273 1.4%
Magellan Health
Services, Inc. 2 113,727 0.7%
Wyle Laboratories, Inc. 4 174,792 1.1%
Subtotal Top 20 Office
Tenants 178 8,613,500 52.2%
All remaining tenants 757 7,896,467 47.8%
------------------------------------------
Total/Weighted Average 935 16,509,967 100.0%
==========================================
Total Weighted
Annualized Percentage Average
Rental of Total Remaining
Revenue (2) Annualized Rental Lease Term
Tenant (3) Revenue (4)
---------------------- ------------- ----------------- -----------
United States of
America (5) $ 57,395 16.3% 6.4
Northrop Grumman
Corporation (6) 26,199 7.4% 7.5
Booz Allen Hamilton,
Inc. 19,568 5.5% 6.5
Computer Sciences
Corporation (6) 11,446 3.2% 3.4
Unisys Corporation (7) 8,843 2.5% 1.7
L-3 Communications
Holdings, Inc. (6) 8,613 2.4% 6.2
General Dynamics
Corporation 7,249 2.1% 2.2
The Aerospace
Corporation 6,867 1.9% 6.9
Wachovia Corporation (6) 6,614 1.9% 10.6
Comcast Corporation 6,095 1.7% 4.1
AT&T Corporation (6) 6,041 1.7% 4.8
The Boeing Company (6) 4,085 1.2% 3.7
ITT Corporation (6) 4,019 1.1% 4.8
Ciena Corporation 3,675 1.0% 4.2
Science Applications
International Corp. 3,243 0.9% 1.1
BAE Systems PLC (6) 2,880 0.8% 3.0
The Johns Hopkins
University 2,863 0.8% 8.1
Merck & Co., Inc.
(Unisys) (7) 2,675 0.8% 1.5
Magellan Health
Services, Inc. 2,478 0.7% 3.6
Wyle Laboratories,
Inc. 2,475 0.7% 4.7
Subtotal Top 20 Office
Tenants 193,321 54.8% 5.7
All remaining tenants 159,288 45.2% 4.1
--------------------------------
Total/Weighted Average $ 352,609 100.0% 5.0
================================
(1) Table excludes owner occupied leasing activity which represents 145,701 square feet with a weighted average remaining lease term of 7.3 years as of December 31, 2007. (2) Total Annualized Rental Revenue is the monthly contractual base rent as of December 31, 2007, multiplied by 12, plus the estimated annualized expense reimbursements under existing office leases. (3) Order of tenants is based on Annualized Rent. (4) The weighting of the lease term was computed using Total Rental Revenue. (5) Many of our government leases are subject to early termination provisions which are customary to government leases. The weighted average remaining lease term was computed assuming no exercise of such early termination rights. (6) Includes affiliated organizations or agencies. (7) Merck & Co., Inc. subleases 219,065 rentable square feet from Unisys' 960,349 leased rentable square feet in our Greater Philadelphia region.
Source: Corporate Office Properties Trust
Released February 13, 2008