Corporate Office Properties Trust Reports 2006 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, 2006.
Shareholder Return
The Company's shareholders earned a total return of 46% for the year 2006, the sixth highest among all publicly traded office REITs. For the past five years, the Company's shareholders earned a total return of 426%, the second highest five year return among all publicly traded office REITs based on numbers compiled by NAREIT as of December 31, 2006. These return computations include the re-investment of dividends on the ex-dividend date and share price appreciation.
2006 Highlights
-- 9.5% increase in Earnings per Share ("EPS") diluted to $.69
for year ended 2006 from $.63 per share diluted for the year
ended 2005.
-- 2.7% increase in Funds from Operations ("FFO") per diluted
share to $1.91 for the year ended 2006 from $1.86 for 2005,
including the $.08 accounting charge for the write-off of
issuance costs from Series E and F preferred shares at
redemption. Excluding the $.08 accounting charge, 2006 FFO
would have been $1.99 per diluted share, as adjusted, or an
increase of 7.0%.
-- $180.1 million in acquisitions for 1.0 million square feet and
over 980 acres of land.
-- $88.3 million in dispositions, representing 689,000 square
feet.
-- 793,000 square feet of development projects placed into
service, that were 94.6% leased at December 31, 2006.
-- 92.8% occupied and 95.5% leased for our wholly-owned portfolio
as of December 31, 2006.
-- Redeemed all 1,150,000 outstanding 10.25% Series E preferred
shares and all 1,425,000 outstanding 9.875% Series F preferred
shares.
-- $164.7 million in equity raised through the issuance of 2.0
million common shares and 3,390,000 shares of 7.625% Series J
Cumulative Redeemable Preferred Shares.
-- $200.0 million in debt raised through the issuance of 3.5%
Exchangeable Senior Notes.
-- 55.4% renewal rate on expiring leases for the year, 1.1
million square feet renewed with an average capital cost of
$3.27 per square foot.
-- 60.3% Diluted FFO payout ratio, 79.9% Diluted Adjusted Funds
from Operations ("AFFO") payout ratio for the year.
-- 10.7% increase in quarterly common dividend during September
2006.
"We made great strides during 2006 and are now well positioned for strong growth in 2007. We strengthened our team, continued to increase our land control in strategic locations, leased close to 1.0 million square feet of development space and strengthened our financial position by substantially reducing our floating rate debt," stated Randall M. Griffin, President and CEO, Corporate Office Properties Trust.
Fourth Quarter 2006 Highlights
-- EPS diluted of $.08 for the fourth quarter of 2006 as compared
to $.16 per diluted share for the fourth quarter of 2005.
-- FFO per diluted share was $.48 for the fourth quarter 2006,
equal to the $.48 per diluted share earned for fourth quarter
2005. Included in FFO is a $.04 accounting charge for the
write off of issuance costs associated with the Series F
Preferred redemption. Without this accounting charge, FFO per
diluted share would have been $.52 for the fourth quarter
2006, or an increase of 8.3%.
-- Acquired 500 of the 591 acres at Fort Ritchie, the former
United States Army base located in Washington County, Maryland
for $5.0 million, adjusted pro rata for the property holdback.
The balance of the site will be acquired during 2007, and in
total can support 1.7 million square feet of office
development and 673 residential units.
-- 831,000 square feet under construction in 8 buildings that are
79.5% leased at December 31, 2006.
-- 1.3 million square feet under development in 13 buildings at
December 31, 2006.
-- Closed on a $146.5 million ten-year non-recourse loan, with
interest only payments at a fixed rate of 5.43%.
-- 4.6% increase in Same Property NOI on a cash basis,
representing 133 properties and 78.8% of the portfolio.
Financial Results
EPS for the year ended December 31, 2006 totaled $.69 per diluted share and net income available to common shareholders totaled $29.9 million, as compared to $.63 per diluted share, and $24.4 million net income available to common shareholders for the year ended December 31, 2005. Included in 2006 net income is approximately $14.8 million in gain on sale of real estate properties net of minority interests, compared to a gain on sale net of minority interests of $3.8 million in 2005. Also included in 2006 net income is an accounting charge of $3.9 million, or $.09 per share, for the write-off of initial issuance costs related to the Series E and F preferred share redemptions.
For the quarter ended December 31, 2006, EPS totaled $.08 per diluted share and net income available to common shareholders totaled $3.7 million, as compared to $.16 per diluted share and $6.6 million net income available to common shareholders for the quarter ended December 31, 2005. Included in fourth quarter 2006 net income is an accounting charge of $2.1 million, or $.05 per share, for the write-off of initial offering costs related to the Series F preferred share redemption.
Diluted FFO for the year ended December 31, 2006 totaled $98.9 million, or $1.91 per diluted share, as compared to $88.8 million, or $1.86 per diluted share, for the year ended December 31, 2005, representing a 2.7% increase on a per share basis. 2006 FFO included an $.08 accounting charge for the write-off of issuance costs from Series E and F preferred share redemptions. Excluding the $.08 accounting charge, 2006 FFO would have been $1.99 per diluted share, as adjusted, or an increase of 7.0%.
The Company's diluted FFO for the three months ended December 31, 2006 totaled $25.1 million, or $.48 per diluted share, as compared to $23.8 million, or $.48 per diluted share, for the three months ended December 31, 2005, representing no change on a per share basis. Included in the FFO per diluted share is a $2.1 million accounting charge associated with the Series F preferred share redemption. Without this accounting charge, FFO per diluted share, as adjusted, would have been $0.52 per share, representing an increase of 8.3%.
Diluted FFO payout ratio was 60.3% for the year ended 2006 compared to 56.3% for the comparable 2005 period. The Company's diluted FFO payout ratio for the three months ended December 31, 2006 was 63.5%, as compared to 57.0% for the year ended 2005.
Diluted AFFO for the year ended December 31, 2006 totaled $74.7 million, as compared to $63.4 million for the year ended December 31, 2005, representing an increase of 17.8%. Diluted AFFO payout ratio was 79.9% for year ended 2006, compared to 78.8% for the year ended 2005.
Diluted AFFO for the three months ended December 31, 2006 totaled $17.7 million, as compared to $15.9 million for the three months ended December 31, 2005, representing a 11.3% increase. The Company's diluted AFFO payout ratio for the three months ended December 31, 2006 was 89.9%, as compared to 85.3% for the year ended 2005. 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, 2006 were $301.3 million, as compared to the year ended December 31, 2005 of $242.1 million. As of December 31, 2006, the Company had a total market capitalization of $4.3 billion, with $1.5 billion in debt outstanding, equating to a 34.9% debt-to-total market capitalization ratio. The Company's total quarterly weighted average interest rate was 6.0%. The Company had 88.3% of total debt subject to fixed interest rates.
For the fourth quarter 2006, EBITDA interest coverage ratio was 2.71x, and the EBITDA fixed charge ratio was 2.24x.
Operating Results
At December 31, 2006, the Company's wholly-owned portfolio of 170 office properties totaling 15.1 million square feet, was 92.8% occupied and 95.5% leased. The weighted average remaining lease term for the portfolio was 5.0 years and the average rental rate (including tenant reimbursements) was $20.90 per square foot.
During 2006, the Company leased 2.9 million square feet including 1.8 million square feet of renewed and retenanted space, 250,000 square feet of previously unoccupied space and 922,000 square feet of new development space.
For the year, the Company renewed 1.1 million square feet or 55.4% of leases expiring (based on square footage), at an average capital cost of $3.27 per square foot. For the 1.8 million square feet renewed and retenanted during the year, total rent increased 7.6% on a straight-line basis, as measured from the GAAP straight-line rent in effect preceding the renewal date. Total rent increased 0.5%, on a cash basis. The average capital cost for the renewed and retenanted space was $11.04 per square foot.
For the quarter ended December 2006, 181,000 square feet was renewed, equating to a 34.3% renewal rate, at an average capital cost of $5.49 per square foot. Total rent on renewed space decreased 6.5% on a straight-line basis and 13.2% on a cash basis. For renewed and retenanted space of 291,000 square feet, total straight-line rent increased 1.0% and total rent on a cash basis decreased 4.6%. The average committed capital cost for renewed and retenanted space was $4.78 per square foot.
Same property Cash Net Operating Income increased 4.6% for fourth quarter 2006 as compared to the comparable 2005 period. The Company's same property portfolio consists of 133 buildings and represents 78.8% of the total square feet owned as of December 31, 2006.
Significant leases signed during the quarter total 417,000 square feet and include entire building leases for:
-- 60,000 square feet at 1055 North Newport Road and 75,000
square feet at 9965 Federal Drive in Colorado Springs,
Colorado;
-- 103,000 square feet at 201 Technology Park Drive in Lebanon,
Virginia;
-- 126,000 square feet at 320 Sentinel Drive (320 NBP) in
Annapolis Junction, Maryland; and
-- 54,000 square feet at 940 Elkridge Landing Road (Airport
Square VII) in Linthicum, Maryland.
In addition, the Company signed a 58,000 square foot lease with a large credit worthy tenant for the balance of the building at 15 West Gude Drive in Rockville, Maryland.
The Company recognized lease termination fees of $3.4 million for the quarter, net of write-offs of related straight-line rents and accretion of intangible assets and liabilities, as compared to $1.1 million in the fourth quarter of 2005.
Development Activity
At December 31, 2006, the Company's development pipeline consisted of:
-- Eight buildings under construction totaling 831,000 square
feet for a total projected cost of $194.0 million, that are
79.5% leased.
-- Thirteen buildings under development totaling 1.3 million
square feet for a total projected cost of $258.2 million.
-- Four projects under redevelopment totaling 740,000 square feet
for a total projected cost of $88.8 million.
The Company's land inventory (wholly owned and joint venture) at December 31, 2006 totaled 1.4 million acres that can support 12.4 million square feet of development.
During the year, the Company placed seven buildings into service, two of which were partially placed into service during 2005, for a total of 793,000 square feet, that were 94.6% leased.
Acquisition Activity
During the year, the Company acquired $180.1 million of property composed of $128.9 million for 7 buildings with a total of 1.1 million square feet, and $51.2 million in land composed of over 980 acres of land that can support 4.6 million square feet of office development. Included in these totals, are the following assets:
-- 400,000 square feet and 44 acres of land with 525,000
developable square feet in Colorado Springs, Colorado for
$58.0 million.
-- 31 acres of land with 375,000 developable square feet in San
Antonio, Texas for $7.2 million.
-- 611,000 square feet and 222 acres of land with 1.4 million
developable square feet in the Baltimore/Washington Corridor
for $106.7 million.
-- 500 acres of land with 1.7 million developable square feet of
office space and 673 residential units known as the former
Fort Ritchie United States Army base located in Cascade,
Washington County, Maryland for $5.0 million, adjusted pro
rata for the property holdback.
Disposition Activity
During the year, the Company sold 689,000 square feet in 8 buildings for $87.4 million, and 1.6 acres of land for $900,000. Included in these totals, are the following buildings:
-- 335,000 square feet in 3 buildings in the Company's New Jersey
portfolio, including 1 property held through a 20.0% joint
venture ownership for $33.8 million.
-- 142,000 square feet in 2 buildings in Suburban Maryland for
$17.0 million.
-- 212,000 square feet in 2 buildings in Suburban Baltimore for
$34.1 million.
Financing and Capital Transactions
The Company executed the following transactions during the year:
-- $82.6 million raised through issuance of 2.0 million common
shares.
-- Redeemed its 10.25% Series E Cumulative Redeemable Preferred
Shares and its 9.875% Series F Cumulative Redeemable Preferred
Shares and recognized a total of $3.9 million for the
write-off of original issuance costs related to these
redemptions.
-- $82.1 million raised through issuance of 7.625% Series J
Cumulative Redeemable Preferred Shares.
-- $200.0 million raised through issuance of 3.5% Exchangeable
Senior Notes.
-- Increased quarterly dividend 10.7% from $.28 to $.31 per
share.
-- Closed a $146.5 million, ten year non-recourse secured loan,
requiring interest only payments at a fixed rate of 5.43%
which matures in January 2017.
Subsequent Events
The Company executed the following transaction subsequent to year end:
-- Acquired 56 operating properties containing 2.4 million square
feet that were 84.9% occupied at closing and 187 acres of land
with a minimum of 2.0 million developable square feet for
$363.9 million, including approximately $1.4 million in
transaction costs. The buildings are located in Maryland in
the submarkets of White Marsh, Columbia, BWI, Towson and Hunt
Valley. The total price was funded through $182.4 million in
debt assumption and cash, with the seller receiving $154.9
million in the form of common shares issued at a deemed value
of $49.00 per share and $26.6 million in Series K convertible
preferred shares with a fixed coupon of 5.6%.
Earnings Guidance
The Company's 2007 guidance remains unchanged. The 2007 EPS guidance is $.39 to $.48 per diluted share and the 2007 FFO guidance is $2.18 to $2.27 per diluted share.
Conference Call
The Company will hold an investor/analyst conference call:
Conference Call and Webcast Date: Thursday, February 15, 2007
Time: 4:00 p.m. EST
Dial In Number: 800-500-0177
Confirmation Code for the call: 8663054
A replay of this call will be available beginning Thursday, February 15, 2007 at 10:00 p.m. EST through Thursday, March 1, 2007 at midnight EST. To access the replay, please call 888-203-1112 and use confirmation code 8663054.
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, 2006, the Company owned 188 office properties totaling 15.9 million rentable square feet, which included 18 properties totaling 805,000 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, 2005.
Corporate Office Properties Trust
Summary Financial Data
(unaudited)
(Amounts in thousands, except per share data)
Three Months Ended
December 31,
-------------------
2006 2005
--------- ---------
Revenues
Real estate revenues $81,467 $64,948
Service operations revenues 14,844 13,889
--------- ---------
Total revenues 96,311 78,837
--------- ---------
Expenses
Property operating expenses 25,806 19,313
Depreciation and other amortization associated
with real estate operations 20,081 15,106
Service operations expenses 14,220 13,595
General and administrative expenses 5,041 3,774
--------- ---------
Total operating expenses 65,148 51,788
--------- ---------
Operating income 31,163 27,049
Interest expense (18,885) (14,912)
Amortization of deferred financing costs (948) (729)
--------- ---------
Income from continuing operations before equity in
loss of unconsolidated entities, income taxes and
minority interests 11,330 11,408
Equity in loss of unconsolidated entities (52) (88)
Income tax expense (264) 265
--------- ---------
Income from continuing operations before minority
interests 11,014 11,585
Minority interests in income from continuing
operations (1,346) (1,592)
--------- ---------
Income from continuing operations 9,668 9,993
(Loss) income from discontinued operations, net of
minority interests (81) 268
--------- ---------
Income before gain on sales of real estate 9,587 10,261
Gain on sales of real estate, net - 21
--------- ---------
Net income 9,587 10,282
Preferred share dividends (3,790) (3,654)
Issuance costs associated with redeemed preferred
shares (2,067) -
--------- ---------
Net income available to common shareholders $3,730 $6,628
========= =========
Earnings per share "EPS" computation
Numerator: $3,730 $6,628
========= =========
Denominator:
Weighted average common shares - basic 42,439 39,297
Dilutive effect of share-based compensation awards 1,641 1,678
--------- ---------
Weighted average common shares - diluted 44,080 40,975
========= =========
EPS
Basic $0.09 $0.17
========= =========
Diluted $0.08 $0.16
========= =========
Corporate Office Properties Trust
Summary Financial Data
(unaudited)
(Amounts in thousands, except per share data and ratios)
Three Months Ended
December 31,
-------------------
2006 2005
--------- ---------
Net income $9,587 $10,282
Add: Real estate-related depreciation and
amortization 19,768 15,410
Add: Depreciation and amortization on
unconsolidated real estate entities 345 182
Less: Depreciation and amortization allocable to
minority interests in other consolidated entities (41) (29)
Add (less): Loss (gain) on sales of real estate,
excluding development portion 71 (14)
Less: Issuance costs associated with redeemed
preferred shares (2,067) -
--------- ---------
Funds from operations ("FFO") 27,663 25,831
Add: Minority interests-common units in the
Operating Partnership 1,204 1,520
Less: Preferred share dividends (3,790) (3,654)
--------- ---------
Funds from Operations - basic ("Basic FFO") 25,077 23,697
Add: Restricted common share dividends - 107
--------- ---------
Funds from Operations - diluted ("Diluted FFO") 25,077 23,804
Less: Straight-line rent adjustments (2,484) (2,292)
Less: Recurring capital expenditures (6,387) (5,226)
Less: Amortization of deferred market rental
revenue (578) (394)
Add: Issuance costs associated with redeemed
preferred shares 2,067 -
--------- ---------
Adjusted Funds from Operations - diluted ("Diluted
AFFO") $17,695 $15,892
========= =========
Weighted average shares
Weighted average common shares 42,439 39,297
Conversion of weighted average common units 8,495 8,688
--------- ---------
Weighted average common shares/units - basic FFO
per share 50,934 47,985
Dilutive effect of share-based compensation
awards 1,641 1,902
--------- ---------
Weighted average common shares/units - diluted
FFO per share 52,575 49,887
========= =========
Diluted FFO per common share $0.48 $0.48
========= =========
Dividends/distributions per common share/unit $0.31 $0.28
========= =========
Earnings payout ratio 356.4% 167.0%
========= =========
Diluted FFO payout ratio 63.5% 57.0%
========= =========
Diluted AFFO payout ratio 89.9% 85.3%
========= =========
EBITDA interest coverage ratio 2.71x 2.82x
========= =========
EBITDA fixed charge coverage ratio 2.24x 2.26x
========= =========
Reconciliation of denominators for diluted EPS and
diluted FFO per share
Denominator for diluted EPS 44,080 40,975
Weighted average common units 8,495 8,688
Dilutive effect of additional share-based
compensation awards - 224
--------- ---------
Denominator for diluted FFO per share 52,575 49,887
========= =========
Corporate Office Properties Trust
Summary Financial Data
(unaudited)
(Amounts in thousands, except per share data)
Year Ended
December 31,
-------------------
2006 2005
--------- ---------
Revenues
Real estate revenues $301,319 $242,073
Service operations revenues 60,084 79,234
--------- ---------
Total revenues 361,403 321,307
--------- ---------
Expenses
Property operating expenses 94,504 72,253
Depreciation and other amortization associated
with real estate operations 78,712 61,049
Service operations expenses 57,345 77,287
General and administrative expenses 16,936 13,534
--------- ---------
Total operating expenses 247,497 224,123
--------- ---------
Operating income 113,906 97,184
Interest expense (71,378) (54,872)
Amortization of deferred financing costs (2,847) (2,229)
--------- ---------
Income from continuing operations before equity in
loss of unconsolidated entities, income taxes and
minority interests 39,681 40,083
Equity in loss of unconsolidated entities (92) (88)
Income tax expense (887) (668)
--------- ---------
Income from continuing operations before minority
interests 38,702 39,327
Minority interests in income from continuing
operations (4,584) (5,245)
--------- ---------
Income from continuing operations 34,118 34,082
Income from discontinued operations, net of
minority interests 14,377 4,681
--------- ---------
Income before gain on sales of real estate 48,495 38,763
Gain on sales of real estate, net 732 268
--------- ---------
Net income 49,227 39,031
Preferred share dividends (15,404) (14,615)
Issuance costs associated with redeemed preferred
shares (3,896) -
--------- ---------
Net income available to common shareholders $29,927 $24,416
========= =========
Earnings per share "EPS" computation
Numerator: $29,927 $24,416
========= =========
Denominator:
Weighted average common shares - basic 41,463 37,371
Dilutive effect of share-based compensation awards 1,799 1,626
--------- ---------
Weighted average common shares - diluted 43,262 38,997
========= =========
EPS
Basic $0.72 $0.65
========= =========
Diluted $0.69 $0.63
========= =========
Corporate Office Properties Trust
Summary Financial Data
(unaudited)
(Amounts in thousands, except per share data and ratios)
Year Ended
December 31,
-------------------
2006 2005
--------- ---------
Net income $49,227 $39,031
Add: Real estate-related depreciation and
amortization 78,631 62,850
Add: Depreciation and amortization on
unconsolidated real estate entities 910 182
Less: Depreciation and amortization allocable to
minority interests in other consolidated entities (163) (114)
Less: Gain on sales of real estate, excluding
development portion (17,644) (4,422)
Less: Issuance costs associated with redeemed
preferred shares (3,896) -
--------- ---------
Funds from operations ("FFO") 107,065 97,527
Add: Minority interests-common units in the
Operating Partnership 7,276 5,889
Less: Preferred share dividends (15,404) (14,615)
--------- ---------
Funds from Operations - basic and diluted ("Basic
and Diluted FFO") 98,937 88,801
Less: Straight-line rent adjustments (9,740) (6,763)
Less: Recurring capital expenditures (16,510) (18,198)
Less: Amortization of deferred market rental
revenue (1,904) (426)
Add: Issuance costs associated with redeemed
preferred shares 3,896 -
--------- ---------
Adjusted Funds from Operations - diluted ("Diluted
AFFO") $74,679 $63,414
========= =========
Weighted average shares
Weighted average common shares 41,463 37,371
Conversion of weighted average common units 8,511 8,702
--------- ---------
Weighted average common shares/units - basic FFO
per share 49,974 46,073
Dilutive effect of share-based compensation
awards 1,799 1,626
--------- ---------
Weighted average common shares/units - diluted
FFO per share 51,773 47,699
========= =========
Diluted FFO per common share $1.91 $1.86
========= =========
Dividends/distributions per common share/unit $1.18 $1.07
========= =========
Earnings payout ratio 166.0% 166.9%
========= =========
Diluted FFO payout ratio 60.3% 56.3%
========= =========
Diluted AFFO payout ratio 79.9% 78.8%
========= =========
Reconciliation of denominators for diluted EPS and
diluted FFO per share
Denominator for diluted EPS 43,262 38,997
Weighted average common units 8,511 8,702
--------- ---------
Denominator for diluted FFO per share 51,773 47,699
========= =========
Corporate Office Properties Trust
Summary Financial Data
(unaudited)
(Dollars and shares in thousands, except per share data)
December 31, December 31,
2006 2005
------------ ------------
Balance Sheet Data (in thousands) (as of
period end):
Investment in real estate, net of accumulated
depreciation $2,111,310 $1,888,106
Total assets 2,425,883 2,129,759
Loans payable 1,498,537 1,348,351
Total liabilities 1,635,393 1,442,036
Minority interests 116,187 105,210
Beneficiaries' equity 674,303 582,513
Debt to Total Assets 61.8% 63.3%
Debt to Undepreciated Book Value of Real
Estate Assets 62.0% 62.6%
Debt to Total Market Capitalization 34.9% 41.5%
Property Data (wholly owned properties)
(as of period end):
Number of operating properties owned 170 165
Total net rentable square feet owned (in
thousands) 15,050 13,708
Occupancy 92.8% 94.0%
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 $2,425,883 $2,129,759
Assets other than assets included in
investment in real estate (314,573) (241,653)
Accumulated depreciation on real estate
assets 219,574 174,935
Intangible assets on real estate
acquisitions, net 87,325 90,984
------------ ------------
Denominator for debt to undepreciated book
value of real estate assets $2,418,209 $2,154,025
============ ============
Three Months Ended Year Ended
December 31, December 31,
------------------- -------------------
2006 2005 2006 2005
--------- --------- --------- ---------
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 $9,907 $6,146 $20,649 $30,452
Total capital improvements on
operating properties 3,844 2,944 11,779 9,782
Total leasing costs on
operating properties 2,827 3,743 8,610 9,843
Less: Nonrecurring tenant
improvements and incentives on
operating properties (7,489) (4,872) (13,862) (21,505)
Less: Nonrecurring capital
improvements on operating
properties (1,364) (954) (5,418) (4,522)
Less: Nonrecurring leasing
costs incurred on operating
properties (2,171) (1,969) (6,388) (6,040)
Add: Recurring improvements on
operating properties held
through joint ventures 833 188 1,140 188
--------- --------- --------- ---------
Recurring capital expenditures $6,387 $5,226 $16,510 $18,198
========= ========= ========= =========
Corporate Office Properties Trust
Summary Financial Data
(unaudited)
(Dollars in thousands)
Three Months Ended Year Ended
December 31, December 31,
------------------- -------------------
2006 2005 2006 2005
--------- --------- --------- ---------
Reconciliation of dividends for
Earnings Payout Ratio to
dividends and distributions
for FFO & AFFO Payout Ratio
Common share dividends for
earnings payout ratio $13,292 $11,069 $49,670 $40,755
Common unit distributions 2,622 2,386 9,996 9,222
Common share dividends on
restricted shares - 107 - -
--------- --------- --------- ---------
Dividends and distributions for
FFO & AFFO payout ratio $15,914 $13,562 $59,666 $49,977
========= ========= ========= =========
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 $3,730 $6,628 $29,927 $24,416
Add: Issuance costs associated
with redeemed preferred shares 2,067 - 3,896 -
--------- --------- --------- ---------
Numerator for diluted EPS, as
adjusted $5,797 $6,628 $33,823 $24,416
========= ========= ========= =========
Numerator for diluted FFO, as
reported $25,077 $23,804 $98,937 $88,801
Add: Issuance costs associated
with redeemed preferred shares 2,067 - 3,896 -
--------- --------- -------------------
Numerator for diluted FFO, as
adjusted $27,144 $23,804 $102,833 $88,801
========= ========= ===================
Reconciliation of GAAP net
income to earnings before
interest, income taxes,
depreciation and amortization
("EBITDA")
Net income $9,587 $10,282
Interest expense on continuing
operations 18,885 14,912
Interest expense on
discontinued operations - 462
Income tax expense (benefit) 264 (264)
Real estate-related
depreciation and amortization 19,768 15,410
Amortization of deferred
financing costs-continuing
operations 948 729
Amortization of deferred
financing costs-discontinued
operations 1 3
Other depreciation and
amortization 313 194
Minority interests 1,329 1,658
--------- ---------
EBITDA $51,095 $43,386
========= =========
Reconciliation of interest
expense from continuing
operations to the denominators
for interest coverage-EBITDA
and fixed charge coverage-
EBITDA
Interest expense from
continuing operations $18,885 $14,912
Interest expense from
discontinued operations - 462
--------- ---------
Denominator for interest
coverage-EBITDA 18,885 15,374
Preferred share dividends 3,790 3,654
Preferred unit distributions 165 165
--------- ---------
Denominator for fixed charge
coverage-EBITDA $22,840 $19,193
========= =========
Reconciliation of same property
net operating income to same
property cash net operating
income
Same property net operating
income $46,246 $45,398
Less: Straight-line rent
adjustments (1,021) (1,969)
Less: Amortization of deferred
market rental revenue (207) (394)
--------- ---------
Same property cash net
operating income $45,018 $43,035
========= =========
Corporate Office Properties Trust
Summary Financial Data
(unaudited)
(Amounts in thousands, except per share data)
Year Ending
December 31, 2007
-------------------
Reconciliation of projected EPS-diluted to
projected diluted FFO per share Low High
--------- ---------
Reconciliation of numerators
---------------------------------------------------
Numerator for projected EPS-diluted $18,600 $22,800
Real estate-related depreciation and amortization 99,335 99,335
Minority interests-common units 3,612 4,427
--------- ---------
Numerator for projected diluted FFO per share $121,547 $126,562
========= =========
Reconciliation of denominators
---------------------------------------------------
Denominator for projected EPS-diluted 47,388 47,388
Weighted average common units 8,459 8,459
--------- ---------
Denominator for projected diluted FFO per share 55,847 55,847
========= =========
Projected EPS - diluted $0.39 $0.48
========= =========
Projected diluted FFO per share $2.18 $2.27
========= =========
Top Twenty Office Tenants of Wholly Owned Properties as of December
31, 2006 (1)
(Dollars in thousands)
Percentage of
Total Total
Number of Occupied Occupied
Tenant Leases Square Feet Square Feet
-------------------------- ------------- ------------ -------------
United States of America (5) 45 2,182,610 15.6%
Booz Allen Hamilton, Inc. 10 779,936 5.6%
Northrop Grumman
Corporation 15 538,967 3.9%
Computer Sciences
Corporation (6) 4 454,645 3.3%
Unisys Corporation (7) 4 760,145 5.4%
L-3 Communications
Holdings, Inc. (6) 4 221,635 1.6%
General Dynamics
Corporation 9 278,239 2.0%
AT&T Corporation (6) 9 324,373 2.3%
The Aerospace Corporation 2 221,785 1.6%
Wachovia Corporation 5 188,994 1.4%
The Boeing Company (6) 4 143,480 1.0%
Ciena Corporation 3 221,609 1.6%
Science Applications
International Corp. 12 170,839 1.2%
Lockheed Martin
Corporation 6 163,685 1.2%
Magellan Health Services,
Inc. 3 142,199 1.0%
BAE Systems PLC (6) 7 212,339 1.5%
Merck & Co., Inc. (Unisys)(7) 1 219,065 1.6%
Wyle Laboratories, Inc. 4 174,792 1.3%
Harris Corporation 4 84,040 0.6%
EDO Corporation 6 98,812 0.7%
Subtotal Top 20 Office
Tenants 157 7,582,189 54.3%
All remaining tenants 492 6,380,653 45.7%
-----------------------------------------
Total/Weighted Average 649 13,962,842 100.0%
=========================================
Percentage
Total of Total Weighted
Annualized Annualized Average
Rental Rental Remaining
Tenant Revenue (2) (3) Revenue Lease Term (4)
-------------------------- --------------- ---------- --------------
United States of America (5) $47,584 16.3% 6.6
Booz Allen Hamilton, Inc. 20,145 6.9% 7.2
Northrop Grumman
Corporation 12,375 4.2% 2.6
Computer Sciences
Corporation (6) 11,076 3.8% 4.4
Unisys Corporation (7) 8,665 3.0% 2.7
L-3 Communications
Holdings, Inc. (6) 8,621 3.0% 7.0
General Dynamics
Corporation 7,037 2.4% 3.0
AT&T Corporation (6) 6,758 2.3% 1.4
The Aerospace Corporation 6,240 2.1% 7.9
Wachovia Corporation 6,131 2.1% 11.4
The Boeing Company (6) 3,975 1.4% 3.0
Ciena Corporation 3,558 1.2% 3.7
Science Applications
International Corp. 3,193 1.1% 0.3
Lockheed Martin
Corporation 2,953 1.0% 2.5
Magellan Health Services,
Inc. 2,910 1.0% 3.9
BAE Systems PLC (6) 2,795 1.0% 3.8
Merck & Co., Inc. (Unisys)(7) 2,466 0.8% 2.5
Wyle Laboratories, Inc. 2,399 0.8% 5.6
Harris Corporation 2,295 0.8% 3.6
EDO Corporation 2,209 0.8% 6.6
Subtotal Top 20 Office
Tenants 163,384 56.0% 5.3
All remaining tenants 128,380 44.0% 4.5
--------------------------
Total/Weighted Average $291,763 100.0% 5.0
==========================
(1) Table excludes owner occupied leasing activity which represents 142,958 square feet with a weighted average remaining lease term of 6.1, as of December 31, 2006. (2) Total Annualized Rental Revenue is the monthly contractual base rent as of December 31, 2006, 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 14, 2007