COPT Reports Full Year 2022 Results

EPS of $1.53 for Full Year;
FFO per Share, as Adjusted for Comparability, of $2.36

Core Portfolio 93% Occupied and 95% Leased

Placed 1.3 million SF of Developments into Service that were 99% Leased

1.5 million SF of Active Developments 89% Leased

Outstanding Leasing Achievement

Total Leasing of 3.0 million SF

Highest Annual Vacancy Leasing Achieved in 12 Years at 801,000 SF

Tenant Retention of 72%

COLUMBIA, Md.--(BUSINESS WIRE)-- Corporate Office Properties Trust (“COPT” or the “Company”) (NYSE: OFC) announced results for the fourth quarter and full year ended December 31, 2022.

Management Comments

Stephen E. Budorick, COPT’s President & Chief Executive Officer, commented, “Our Defense/IT investment strategy, which has concentrated our portfolio near priority U.S. defense installations, continues to produce strong results, and has proved resilient in the face of macro-economic headwinds impacting the office sector. The 3% growth in FFO per share, as adjusted for comparability generated in 2022, exceeded our initial guidance by $0.02 per share. We executed 801,000 square feet of vacancy leasing, the highest level in 12 years. We are off to a great start in terms of development leasing, having executed over 460,000 square feet already in 2023, consisting of two data center shell build-to-suits in Northern Virginia, and one build-to-suit building at Redstone Gateway. The outlook for defense spending remains favorable. The FY23 defense base budget that passed in December represents a 7.5% year-over-year increase, and is 15% higher than that of FY21, which drove leasing results in 2022. Given the timing of the appropriation, we expect this increase to fuel demand for space in our portfolio throughout 2024.”

He continued, “From a financing standpoint, we recently closed on two new 90%/10% JVs, which will fund the equity component of our expected development needs in 2023, assuring sufficient capital to fund development on a leverage neutral basis for the foreseeable future. Our balance sheet remains strong, evidenced by our solid debt service coverage ratios, with no large debt maturities until 2026.”

Financial Highlights

4th Quarter Financial Results:

  • Diluted earnings per share (“EPS”) was $0.45 for the quarter ended December 31, 2022 compared to $0.12 for the quarter ended December 31, 2021.
  • Diluted funds from operations per share (“FFOPS”), as calculated in accordance with Nareit’s definition, was $0.60 for the quarter ended December 31, 2022 compared to $0.21 for the quarter ended December 31, 2021.
  • FFOPS, as adjusted for comparability, was $0.60 for the quarter ended December 31, 2022 compared to $0.58 for the quarter ended December 31, 2021.

Full Year 2022 Financial Results:

  • EPS for the year ended December 31, 2022 was $1.53 as compared to $0.68 for 2021.
  • Per Nareit’s definition, FFOPS for 2022 was $2.35 as compared to $1.40 for 2021.
  • FFOPS, as adjusted for comparability, for 2022 was $2.36 as compared to $2.29 for 2021.

Operating Performance Highlights

Operating Portfolio Summary:

  • At December 31, 2022, the Company’s 22.8 million square foot core portfolio was 92.8% occupied and 95.3% leased.
  • During the quarter and the year, the Company placed into service 917,000 and 1.3 million square feet, respectively, of developments that were 99% leased at January 31, 2023.

Same-Property Performance:

  • At December 31, 2022, the Company’s 20.0 million square foot same-property portfolio was 92.4% occupied and 95.0% leased.
  • The Company’s same-property cash NOI decreased 0.5% and 0.9%, year-over-year for the three months and year ended December 31, 2022, respectively, compared to the same periods in 2021.

Leasing:

  • Total Square Feet Leased: For the quarter ended December 31, 2022, the Company leased 692,000 square feet, including 519,000 square feet of renewals and 173,000 square feet of vacancy leasing.
  • For the year ended December 31, 2022, the Company executed 3.0 million square feet of total leasing, including 1.7 million square feet of renewals, 801,000 square feet of vacancy leasing, and 476,000 square feet in development projects.
  • Tenant Retention Rates: During the quarter and year ended December 31, 2022, the Company renewed 72.2% and 72.1%, respectively, of expiring square feet.
  • Rent Spreads & Average Escalations on Renewing Leases: For the quarter and year ended December 31, 2022, straight-line rents on renewals increased 3.6% and 3.1%, respectively, and cash rents on renewed space increased 0.1% and decreased 2.0%, respectively. For the same time periods, annual escalations on renewing leases averaged 2.6% and 2.5%, respectively.
  • Lease Terms: In the quarter ended December 31, 2022, lease terms averaged 3.5 years on renewing leases and 9.8 years on vacancy leasing. For the year, lease terms averaged 3.6 years on renewing leases, 7.3 years on vacancy leasing, and 13.3 years on development leasing.

Investment Activity Highlights

  • Development Pipeline: The Company’s development pipeline consists of 10 properties totaling 1.5 million square feet that were 89% leased at January 31, 2023. These projects represent a total estimated investment of $487.5 million, of which $127.5 million has been spent.

Balance Sheet and Capital Transaction Highlights

  • On October 26, 2022, the Company entered into a credit agreement with a group of lenders for an aggregate of $725.0 million of available borrowings including: an unsecured revolving credit facility with a lender commitment of $600.0 million that replaced its existing Revolving Credit Facility; and a $125.0 million unsecured term loan, the proceeds of which were used to pay off the remaining $100.0 million outstanding under an existing unsecured term loan and pay down a portion of its Revolving Credit Facility.
  • On December 14, 2022, the Company sold two data center shells to a new, 90%/10% joint venture with entities affiliated with Blackstone, generating approximately $60 million of proceeds.
  • On January 10, 2023, the Company sold an additional three data center shells to a new, 90%/10% joint venture with entities affiliated with Blackstone, generating approximately $190 million of proceeds.
  • For the quarter ended December 31, 2022, the Company’s adjusted EBITDA fixed charge coverage ratio was 4.7x.
  • At December 31, 2022, the Company’s net debt to in-place adjusted EBITDA ratio was 6.3x and its net debt adjusted for fully-leased development to in-place adjusted EBITDA ratio was 6.1x.
  • At December 31, 2022, and including the effect of interest rate swaps, the Company’s weighted average effective interest rate on its consolidated debt portfolio was 3.15% with a weighted average maturity of 6.6 years; additionally, 85.1% of the Company’s debt was subject to fixed interest rates.

Associated Supplemental Presentation

Prior to the call, the Company will post a slide presentation to accompany management’s prepared remarks for its fourth quarter and full year 2022 conference call; the presentation can be viewed and downloaded from the ‘Financial Info – Financial Results’ section of COPT’s Investors website: https://investors.copt.com/financial-information/financial-results

2023 Guidance

The Company details its initial full year and first quarter guidance, with supporting assumptions, in a separate press release issued concurrently with this press release; that release can be found in the ‘News & Events – Press Releases’ section of COPT’s Investors website: https://investors.copt.com/news-events/press-releases

Conference Call Information

Management will discuss fourth quarter and full year 2022 results on its conference call tomorrow at 12:00 p.m. Eastern Time, details of which are listed below:

Conference Call Date:

Friday, February 10, 2023

Time:

12:00 p.m. Eastern Time

Participants must register for the conference call at the link below to receive the dial-in number and personal pin. Registering only takes a few moments and provides direct access to the conference call without waiting for an operator. You may register at any time, including up to and after the call start time:
https://register.vevent.com/register/BIc8139cc8ddaa47a4b273039144a05aea

The conference call will also be available via live webcast in the ‘News & Events – IR Calendar’ section of COPT’s Investors website: https://investors.copt.com/news-events/ir-calendar

Replay Information

A replay of the conference call will be immediately available via webcast only on COPT’s Investors website.

Definitions

For definitions of certain terms used in this press release, please refer to the information furnished in the Company’s Supplemental Information Package furnished on a Form 8-K which can be found on its website (www.copt.com). Reconciliations of non-GAAP measures to the most directly comparable GAAP measures are included in the attached tables.

About COPT

COPT is a REIT that owns, manages, leases, develops and selectively acquires office and data center properties. The majority of its portfolio is in locations that support the United States Government and its contractors, most of whom are engaged in national security, defense and information technology (“IT”) related activities servicing what the Company believes are growing, durable, priority missions (“Defense/IT Locations”). The Company also owns a portfolio of office properties located in select urban submarkets in the Greater Washington, DC/Baltimore region with durable Class-A office fundamentals and characteristics (“Regional Office Properties”). As of December 31, 2022, the Company derived 91% of its core portfolio annualized rental revenue from Defense/IT Locations and 9% from its Regional Office Properties. As of the same date and including 21 properties owned through unconsolidated joint ventures, COPT’s core portfolio of 192 properties encompassed 22.8 million square feet and was 95.3% leased.

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. Although the Company believes that the expectations, estimates and projections reflected in such forward-looking statements are based on reasonable assumptions at the time made, 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 and the Company undertakes no obligation to update or supplement any forward-looking statements.

The areas of risk that may affect these expectations, estimates and projections include, but are not limited to, those risks described in Item 1A of the Company’s Annual Report on Form 10-K for the year ended December 31, 2021.

Source: Corporate Office Properties Trust

Corporate Office Properties Trust

Summary Financial Data

(unaudited)

(dollars and shares in thousands, except per share data)

 

 

For the Three Months
Ended December 31,

 

For the Years Ended
December 31,

 

2022

 

2021

 

2022

 

2021

Revenues

 

 

 

 

 

 

 

Lease revenue

$

150,022

 

 

$

141,892

 

 

$

580,169

 

 

$

553,668

 

Other property revenue

 

1,163

 

 

 

756

 

 

 

4,229

 

 

 

2,902

 

Construction contract and other service revenues

 

24,062

 

 

 

43,284

 

 

 

154,632

 

 

 

107,876

 

Total revenues

 

175,247

 

 

 

185,932

 

 

 

739,030

 

 

 

664,446

 

Operating expenses

 

 

 

 

 

 

 

Property operating expenses

 

58,470

 

 

 

56,459

 

 

 

227,430

 

 

 

213,377

 

Depreciation and amortization associated with real estate operations

 

36,907

 

 

 

34,504

 

 

 

141,230

 

 

 

137,543

 

Construction contract and other service expenses

 

23,454

 

 

 

42,089

 

 

 

149,963

 

 

 

104,053

 

General and administrative expenses

 

7,766

 

 

 

6,589

 

 

 

27,461

 

 

 

27,213

 

Leasing expenses

 

2,235

 

 

 

2,568

 

 

 

8,337

 

 

 

8,914

 

Business development expenses and land carry costs

 

1,157

 

 

 

1,088

 

 

 

3,193

 

 

 

4,647

 

Total operating expenses

 

129,989

 

 

 

143,297

 

 

 

557,614

 

 

 

495,747

 

Interest expense

 

(16,819

)

 

 

(16,217

)

 

 

(61,174

)

 

 

(65,398

)

Interest and other income

 

3,340

 

 

 

1,968

 

 

 

9,341

 

 

 

7,879

 

Credit loss recoveries (expense)

 

1,331

 

 

 

88

 

 

 

(271

)

 

 

1,128

 

Gain on sales of real estate

 

19,238

 

 

 

25,879

 

 

 

19,250

 

 

 

65,590

 

Loss on early extinguishment of debt

 

(267

)

 

 

(41,073

)

 

 

(609

)

 

 

(100,626

)

Income from continuing operations before equity in income of unconsolidated entities and income taxes

 

52,081

 

 

 

13,280

 

 

 

147,953

 

 

 

77,272

 

Equity in income of unconsolidated entities

 

229

 

 

 

314

 

 

 

1,743

 

 

 

1,093

 

Income tax expense

 

(223

)

 

 

(42

)

 

 

(447

)

 

 

(145

)

Income from continuing operations

 

52,087

 

 

 

13,552

 

 

 

149,249

 

 

 

78,220

 

Discontinued operations

 

 

 

 

1,413

 

 

 

29,573

 

 

 

3,358

 

Net Income

 

52,087

 

 

 

14,965

 

 

 

178,822

 

 

 

81,578

 

Net income attributable to noncontrolling interests:

 

 

 

 

 

 

 

Common units in the Operating Partnership (“OP”)

 

(775

)

 

 

(181

)

 

 

(2,603

)

 

 

(1,012

)

Other consolidated entities

 

(833

)

 

 

(1,076

)

 

 

(3,190

)

 

 

(4,025

)

Net income attributable to COPT common shareholders

$

50,479

 

 

$

13,708

 

 

$

173,029

 

 

$

76,541

 

 

 

 

 

 

 

 

 

Earnings per share (“EPS”) computation:

 

 

 

 

 

 

 

Numerator for diluted EPS:

 

 

 

 

 

 

 

Net income attributable to COPT common shareholders

$

50,479

 

 

$

13,708

 

 

$

173,029

 

 

$

76,541

 

Amount allocable to share-based compensation awards

 

(129

)

 

 

(116

)

 

 

(463

)

 

 

(417

)

Redeemable noncontrolling interests

 

(60

)

 

 

(46

)

 

 

(169

)

 

 

(128

)

Numerator for diluted EPS

$

50,290

 

 

$

13,546

 

 

$

172,397

 

 

$

75,996

 

Denominator:

 

 

 

 

 

 

 

Weighted average common shares - basic

 

112,096

 

 

 

111,990

 

 

 

112,073

 

 

 

111,960

 

Dilutive effect of share-based compensation awards

 

435

 

 

 

386

 

 

 

431

 

 

 

330

 

Dilutive effect of redeemable noncontrolling interests

 

102

 

 

 

124

 

 

 

116

 

 

 

128

 

Weighted average common shares - diluted

 

112,633

 

 

 

112,500

 

 

 

112,620

 

 

 

112,418

 

Diluted EPS

$

0.45

 

 

$

0.12

 

 

$

1.53

 

 

$

0.68

 

Corporate Office Properties Trust

Summary Financial Data

(unaudited)

(in thousands, except per share data)

 

 

For the Three Months
Ended December 31,

 

For the Years Ended
December 31,

 

2022

 

2021

 

2022

 

2021

Net income

$

52,087

 

 

$

14,965

 

 

$

178,822

 

 

$

81,578

 

Real estate-related depreciation and amortization

 

36,907

 

 

 

36,346

 

 

 

141,230

 

 

 

147,833

 

Gain on sales of real estate from continuing and discontinued operations

 

(19,238

)

 

 

(25,879

)

 

 

(47,814

)

 

 

(65,590

)

Depreciation and amortization on unconsolidated real estate JVs

 

526

 

 

 

526

 

 

 

2,101

 

 

 

1,981

 

Funds from operations (“FFO”)

 

70,282

 

 

 

25,958

 

 

 

274,339

 

 

 

165,802

 

FFO allocable to other noncontrolling interests

 

(1,227

)

 

 

(1,458

)

 

 

(4,795

)

 

 

(5,483

)

Basic FFO allocable to share-based compensation awards

 

(360

)

 

 

(149

)

 

 

(1,433

)

 

 

(777

)

Basic FFO available to common share and common unit holders (“Basic FFO”)

 

68,695

 

 

 

24,351

 

 

 

268,111

 

 

 

159,542

 

Redeemable noncontrolling interests

 

(27

)

 

 

(13

)

 

 

(34

)

 

 

(11

)

Diluted FFO adjustments allocable to share-based compensation awards

 

28

 

 

 

6

 

 

 

109

 

 

 

32

 

Diluted FFO available to common share and common unit holders (“Diluted FFO”)

 

68,696

 

 

 

24,344

 

 

 

268,186

 

 

 

159,563

 

Loss on early extinguishment of debt

 

267

 

 

 

41,073

 

 

 

609

 

 

 

100,626

 

Gain on early extinguishment of debt on unconsolidated real estate JVs

 

(168

)

 

 

 

 

 

(168

)

 

 

 

Loss on interest rate derivatives included in interest expense

 

 

 

 

221

 

 

 

 

 

 

221

 

Demolition costs on redevelopment and nonrecurring improvements

 

 

 

 

(8

)

 

 

 

 

 

423

 

Executive transition costs

 

 

 

 

 

 

 

343

 

 

 

 

Diluted FFO comparability adjustments allocable to share-based compensation awards

 

(1

)

 

 

(172

)

 

 

(5

)

 

 

(507

)

Diluted FFO available to common share and common unit holders, as adjusted for comparability

 

68,794

 

 

 

65,458

 

 

 

268,965

 

 

 

260,326

 

Straight line rent adjustments and lease incentive amortization

 

(3,043

)

 

 

(3,835

)

 

 

(8,825

)

 

 

(10,286

)

Amortization of intangibles and other assets included in net operating income (“NOI”)

 

15

 

 

 

40

 

 

 

(258

)

 

 

162

 

Share-based compensation, net of amounts capitalized

 

2,247

 

 

 

2,018

 

 

 

8,700

 

 

 

7,979

 

Amortization of deferred financing costs

 

619

 

 

 

640

 

 

 

2,297

 

 

 

2,980

 

Amortization of net debt discounts, net of amounts capitalized

 

615

 

 

 

615

 

 

 

2,440

 

 

 

2,244

 

Replacement capital expenditures

 

(43,283

)

 

 

(32,317

)

 

 

(95,886

)

 

 

(70,973

)

Other

 

158

 

 

 

204

 

 

 

980

 

 

 

824

 

Diluted adjusted funds from operations available to common share and common unit holders (“Diluted AFFO”)

$

26,122

 

 

$

32,823

 

 

$

178,413

 

 

$

193,256

 

Diluted FFO per share

$

0.60

 

 

$

0.21

 

 

$

2.35

 

 

$

1.40

 

Diluted FFO per share, as adjusted for comparability

$

0.60

 

 

$

0.58

 

 

$

2.36

 

 

$

2.29

 

Dividends/distributions per common share/unit

$

0.275

 

 

$

0.275

 

 

$

1.10

 

 

$

1.10

 

Corporate Office Properties Trust

Summary Financial Data

(unaudited)

(Dollars and shares in thousands, except per share data)

 

 

December 31,
2022

 

December 31,
2021

Balance Sheet Data

 

 

 

Properties, net of accumulated depreciation

$

3,556,398

 

 

$

3,532,944

 

Total assets

$

4,257,275

 

 

$

4,262,452

 

Debt per balance sheet

$

2,231,794

 

 

$

2,272,304

 

Total liabilities

$

2,509,527

 

 

$

2,578,479

 

Redeemable noncontrolling interests

$

26,293

 

 

$

26,898

 

Total equity

$

1,721,455

 

 

$

1,657,075

 

Debt to assets

 

52.4

%

 

 

53.3

%

Net debt to adjusted book

 

39.8

%

 

 

40.5

%

 

 

 

 

Core Portfolio Data (as of period end)

 

 

 

Number of operating properties

 

192

 

 

 

184

 

Total operational square feet (in thousands)

 

22,849

 

 

 

21,553

 

% Occupied

 

92.8

%

 

 

92.6

%

% Leased

 

95.3

%

 

 

94.4

%

 

For the Three Months
Ended December 31,

 

For the Years Ended
December 31,

2022

 

2021

 

2022

 

2021

GAAP

 

 

 

 

 

 

 

Payout ratio:

 

 

 

 

 

 

 

Net income

60.3%

 

209.1%

 

70.2%

 

153.4%

Debt ratios:

 

 

 

 

 

 

 

Net income to interest expense ratio

3.1x

 

0.9x

 

2.9x

 

1.2x

Debt to net income ratio

10.7x

 

38.0x

 

N/A

 

N/A

Non-GAAP

 

 

 

 

 

 

 

Payout ratios:

 

 

 

 

 

 

 

Diluted FFO

45.5%

 

128.0%

 

46.6%

 

78.1%

Diluted FFO, as adjusted for comparability

45.4%

 

47.6%

 

46.5%

 

47.9%

Diluted AFFO

119.7%

 

95.0%

 

70.1%

 

64.5%

Debt ratios:

 

 

 

 

 

 

 

Adjusted EBITDA fixed charge coverage ratio

4.7x

 

4.9x

 

5.1x

 

4.7x

Net debt to in-place adjusted EBITDA ratio

6.3x

 

6.7x

 

N/A

 

N/A

Pro forma net debt to in-place adjusted EBITDA ratio (1)

6.0x

 

6.3x

 

N/A

 

N/A

Net debt adj. for fully-leased development to in-place adj. EBITDA ratio

6.1x

 

6.2x

 

N/A

 

N/A

Pro forma net debt adj. for fully-leased development to in-place adj. EDITDA ratio (1)

5.7x

 

5.8x

 

N/A

 

N/A

 

 

 

 

 

 

 

 

Reconciliation of denominators for per share measures

 

 

 

 

 

 

Denominator for diluted EPS

112,633

 

112,500

 

112,620

 

112,418

Weighted average common units

1,476

 

1,259

 

1,454

 

1,257

Denominator for diluted FFO per share and as adjusted for comparability

114,109

 

113,759

 

114,074

 

113,675

(1)

Includes adjustments associated with the following transactions: 12/31/22 includes the sale on 1/10/23 of a 90% interest in three data center shell properties; and 12/31/21 includes the sale on 1/25/22 of its wholesale data center.

Corporate Office Properties Trust

Summary Financial Data

(unaudited)

(in thousands)

 

 

For the Three Months
Ended December 31,

 

For the Years Ended
December 31,

 

2022

 

2021

 

2022

 

2021

Numerators for Payout Ratios

 

 

 

 

 

 

 

GAAP:

 

 

 

 

 

 

 

Common share dividends - unrestricted shares and deferred shares

$

30,844

 

 

$

30,814

 

 

$

123,367

 

 

$

123,243

 

Common share dividends - restricted shares and deferred shares

 

70

 

 

 

80

 

 

 

307

 

 

 

324

 

Common unit distributions - unrestricted units

 

406

 

 

 

346

 

 

 

1,623

 

 

 

1,387

 

Common unit distributions - restricted units

 

64

 

 

 

53

 

 

 

260

 

 

 

208

 

Total dividends and distributions for GAAP payout ratio

$

31,384

 

 

$

31,293

 

 

$

125,557

 

 

$

125,162

 

Non-GAAP:

 

 

 

 

 

 

 

Common share dividends - unrestricted shares and deferred shares

$

30,844

 

 

$

30,814

 

 

$

123,367

 

 

$

123,243

 

Common unit distributions - unrestricted units

 

406

 

 

 

346

 

 

 

1,623

 

 

 

1,387

 

Common unit distributions - dilutive restricted units

 

13

 

 

 

7

 

 

 

51

 

 

 

25

 

Dividends and distributions for non-GAAP payout ratios

$

31,263

 

 

$

31,167

 

 

$

125,041

 

 

$

124,655

 

 

 

 

 

 

 

 

 

Reconciliation of net income to earnings before interest, income taxes, depreciation and amortization for real estate (“EBITDAre”), adjusted EBITDA, in-place adjusted EBITDA and pro forma in-place adjusted EBITDA

 

 

 

 

 

 

 

Net income

$

52,087

 

 

$

14,965

 

 

$

178,822

 

 

$

81,578

 

Interest expense

 

16,819

 

 

 

16,217

 

 

 

61,174

 

 

 

65,398

 

Income tax expense

 

223

 

 

 

42

 

 

 

447

 

 

 

145

 

Real estate-related depreciation and amortization from continuing and discontinued operations

 

36,907

 

 

 

36,346

 

 

 

141,230

 

 

 

147,833

 

Other depreciation and amortization

 

602

 

 

 

622

 

 

 

2,363

 

 

 

2,811

 

Gain on sales of real estate from continuing and discontinued operations

 

(19,238

)

 

 

(25,879

)

 

 

(47,814

)

 

 

(65,590

)

Adjustments from unconsolidated real estate JVs

 

1,033

 

 

 

763

 

 

 

3,313

 

 

 

2,930

 

EBITDAre

 

88,433

 

 

 

43,076

 

 

 

339,535

 

 

 

235,105

 

Loss on early extinguishment of debt

 

267

 

 

 

41,073

 

 

 

609

 

 

 

100,626

 

Gain on early extinguishment of debt on unconsolidated real estate JVs

 

(168

)

 

 

 

 

 

(168

)

 

 

 

Net gain on other investments

 

(595

)

 

 

 

 

 

(1,159

)

 

 

(63

)

Credit loss (recoveries) expense

 

(1,331

)

 

 

(88

)

 

 

271

 

 

 

(1,128

)

Business development expenses

 

794

 

 

 

628

 

 

 

1,891

 

 

 

2,233

 

Demolition costs on redevelopment and nonrecurring improvements

 

 

 

 

(8

)

 

 

 

 

 

423

 

Executive transition costs

 

387

 

 

 

 

 

 

730

 

 

 

 

Adjusted EBITDA

 

87,787

 

 

 

84,681

 

 

$

341,709

 

 

$

337,196

 

Pro forma NOI adjustment for property changes within period

 

2,704

 

 

 

 

 

 

 

 

Other

 

 

 

 

1,578

 

 

 

 

 

In-place adjusted EBITDA

 

90,491

 

 

 

86,259

 

 

 

 

 

Pro forma NOI adjustment from subsequent event transactions

 

(2,903

)

 

 

(3,074

)

 

 

 

 

Pro forma in-place adjusted EBITDA

$

87,588

 

 

$

83,185

 

 

 

 

 

 

 

 

 

 

 

 

 

Reconciliations of tenant improvements and incentives, building improvements and leasing costs for operating properties to replacement capital expenditures

 

 

 

 

 

 

 

Tenant improvements and incentives

$

33,439

 

 

$

19,724

 

 

$

62,952

 

 

$

43,820

 

Building improvements

 

8,468

 

 

 

17,778

 

 

 

29,528

 

 

 

35,970

 

Leasing costs

 

4,389

 

 

 

5,863

 

 

 

11,480

 

 

 

12,736

 

Net (exclusions from) additions to tenant improvements and incentives

 

(75

)

 

 

(5,093

)

 

 

2,150

 

 

 

(4,704

)

Excluded building improvements and leasing costs

 

(2,938

)

 

 

(5,955

)

 

 

(10,224

)

 

 

(16,849

)

Replacement capital expenditures

$

43,283

 

 

$

32,317

 

 

$

95,886

 

 

$

70,973

Corporate Office Properties Trust

Summary Financial Data

(unaudited)

(in thousands)

 

 

For the Three Months
Ended December 31,

 

For the Years Ended
December 31,

 

2022

 

2021

 

2022

 

2021

Reconciliation of interest expense to the denominator for fixed charge coverage-Adjusted EBITDA

 

 

 

 

 

 

 

Interest expense

$

16,819

 

 

$

16,217

 

 

$

61,174

 

 

$

65,398

 

Less: Amortization of deferred financing costs

 

(619

)

 

 

(640

)

 

 

(2,297

)

 

 

(2,980

)

Less: Amortization of net debt discounts, net of amounts capitalized

 

(615

)

 

 

(615

)

 

 

(2,440

)

 

 

(2,244

)

Less: Loss on interest rate derivatives included in interest expense

 

 

 

 

(221

)

 

 

 

 

 

(221

)

COPT’s share of interest expense of unconsolidated real estate JVs, excluding amortizations of deferred financing costs and net debt premium and loss on interest rate derivatives

 

423

 

 

 

237

 

 

 

1,123

 

 

 

943

 

Scheduled principal amortization

 

864

 

 

 

950

 

 

 

3,333

 

 

 

3,860

 

Capitalized interest

 

1,835

 

 

 

1,192

 

 

 

6,709

 

 

 

6,467

 

Denominator for fixed charge coverage-Adjusted EBITDA

$

18,707

 

 

$

17,120

 

 

$

67,602

 

 

$

71,223

 

 

 

 

 

 

 

 

 

Reconciliation of net income to NOI from real estate operations, same properties NOI from real estate operations and same properties cash NOI from real estate operations

 

 

 

 

 

 

 

Net income

$

52,087

 

 

$

14,965

 

 

$

178,822

 

 

$

81,578

 

Construction contract and other service revenues

 

(24,062

)

 

 

(43,284

)

 

 

(154,632

)

 

 

(107,876

)

Depreciation and other amortization associated with real estate operations

 

36,907

 

 

 

34,504

 

 

 

141,230

 

 

 

137,543

 

Construction contract and other service expenses

 

23,454

 

 

 

42,089

 

 

 

149,963

 

 

 

104,053

 

General and administrative expenses

 

7,766

 

 

 

6,589

 

 

 

27,461

 

 

 

27,213

 

Leasing expenses

 

2,235

 

 

 

2,568

 

 

 

8,337

 

 

 

8,914

 

Business development expenses and land carry costs

 

1,157

 

 

 

1,088

 

 

 

3,193

 

 

 

4,647

 

Interest expense

 

16,819

 

 

 

16,217

 

 

 

61,174

 

 

 

65,398

 

Interest and other income

 

(3,340

)

 

 

(1,968

)

 

 

(9,341

)

 

 

(7,879

)

Credit loss (recoveries) expense

 

(1,331

)

 

 

(88

)

 

 

271

 

 

 

(1,128

)

Gain on sales of real estate from continuing operations

 

(19,238

)

 

 

(25,879

)

 

 

(19,250

)

 

 

(65,590

)

Loss on early extinguishment of debt

 

267

 

 

 

41,073

 

 

 

609

 

 

 

100,626

 

Equity in income of unconsolidated entities

 

(229

)

 

 

(314

)

 

 

(1,743

)

 

 

(1,093

)

Unconsolidated real estate JVs NOI allocable to COPT included in equity in income of unconsolidated entities

 

1,095

 

 

 

1,079

 

 

 

4,327

 

 

 

4,029

 

Income tax expense

 

223

 

 

 

42

 

 

 

447

 

 

 

145

 

Discontinued operations

 

 

 

 

(1,413

)

 

 

(29,573

)

 

 

(3,358

)

Revenues from real estate operations from discontinued operations

 

 

 

 

8,235

 

 

 

1,980

 

 

 

30,490

 

Property operating expenses from discontinued operations

 

 

 

 

(4,980

)

 

 

(971

)

 

 

(16,842

)

NOI from real estate operations

 

93,810

 

 

 

90,523

 

 

 

362,304

 

 

 

360,870

 

Non-Same Properties NOI from real estate operations

 

(11,845

)

 

 

(9,475

)

 

 

(38,298

)

 

 

(31,598

)

Same Properties NOI from real estate operations

 

81,965

 

 

 

81,048

 

 

 

324,006

 

 

 

329,272

 

Straight line rent adjustments and lease incentive amortization

 

2,556

 

 

 

2,715

 

 

 

8,602

 

 

 

3,854

 

Amortization of acquired above- and below-market rents

 

(131

)

 

 

(100

)

 

 

(844

)

 

 

(396

)

Lease termination fees, net

 

(1,026

)

 

 

893

 

 

 

(2,237

)

 

 

(2,416

)

Tenant funded landlord assets and lease incentives

 

(895

)

 

 

(1,649

)

 

 

(5,596

)

 

 

(3,469

)

Cash NOI adjustments in unconsolidated real estate JVs

 

(68

)

 

 

(87

)

 

 

(301

)

 

 

(375

)

Same Properties Cash NOI from real estate operations

$

82,401

 

 

$

82,820

 

 

$

323,630

 

 

$

326,470

 

Corporate Office Properties Trust

Summary Financial Data

(unaudited)

(in thousands)

 

 

 

December 31,
2022

 

December 31,
2021

Reconciliation of total assets to adjusted book

 

 

 

 

Total assets

 

$

4,257,275

 

 

$

4,262,452

 

Accumulated depreciation

 

 

1,267,434

 

 

 

1,152,523

 

Accumulated depreciation included in assets held for sale

 

 

6,014

 

 

 

82,385

 

Accumulated amortization of intangibles on property acquisitions and deferred leasing costs

 

 

222,779

 

 

 

215,925

 

Accumulated amortization of intangibles on property acquisitions and deferred leasing costs included in assets held for sale

 

 

 

 

 

4,547

 

COPT’s share of liabilities of unconsolidated real estate JVs

 

 

52,404

 

 

 

27,312

 

COPT’s share of accumulated depreciation and amortization of unconsolidated real estate JVs

 

 

6,078

 

 

 

3,744

 

Less: Property - operating lease liabilities

 

 

(28,759

)

 

 

(29,342

)

Less: Cash and cash equivalents

 

 

(12,337

)

 

 

(13,262

)

Less: COPT’s share of cash of unconsolidated real estate JVs

 

 

(456

)

 

 

(434

)

Adjusted book

 

$

5,770,432

 

 

$

5,705,850

 

 

 

December 31,
2022

 

December 31,
2021

Reconciliation of debt to net debt, net debt adjusted for fully-leased development and pro forma net debt adjusted for fully-leased development

 

 

 

 

Debt per balance sheet

 

$

2,231,794

 

 

$

2,272,304

 

Net discounts and deferred financing costs

 

 

23,160

 

 

 

25,982

 

COPT’s share of unconsolidated JV gross debt

 

 

52,100

 

 

 

26,250

 

Gross debt

 

$

2,307,054

 

 

$

2,324,536

 

Less: Cash and cash equivalents

 

 

(12,337

)

 

 

(13,262

)

Less: COPT’s share of cash of unconsolidated real estate JVs

 

 

(456

)

 

 

(434

)

Net debt

 

$

2,294,261

 

 

$

2,310,840

 

Costs incurred on fully-leased development properties

 

 

(95,972

)

 

 

(162,884

)

Net debt adjusted for fully-leased development

 

$

2,198,289

 

 

$

2,147,956

 

 

 

 

 

 

Net debt

 

$

2,294,261

 

 

$

2,310,840

 

Pro forma debt adjustments from subsequent event transaction proceeds

 

 

(189,000

)

 

 

(216,000

)

Pro forma net debt

 

$

2,105,261

 

 

$

2,094,840

 

Costs incurred on fully-leased development properties

 

 

(95,972

)

 

 

(162,884

)

Pro forma net debt adjusted for fully-leased development

 

$

2,009,289

 

 

$

1,931,956

 

 

IR Contacts:

Venkat Kommineni, CFA
443-285-5587
venkat.kommineni@copt.com

Michelle Layne
443-285-5452
michelle.layne@copt.com

Source: Corporate Office Properties Trust