COLUMBIA, Md.--(BUSINESS WIRE)--Corporate Office Properties Trust (“COPT” or the “Company”) (NYSE: OFC) announced financial and operating results for the fourth quarter and full year ended December 31, 2017.
Management Comments
“Our strong fourth quarter topped off an excellent year of leasing achievement that included nearly one million square feet in the development portfolio and leasing over 400,000 square feet of vacant space in operating properties. As a result, our total portfolio occupancy increased 150 basis points during the year, to 93.6% at December 31, 2017,” stated Stephen E. Budorick, COPT’s President & Chief Executive Officer. “We exceeded our disposition goal and recycled capital through the sale of two assets located in non-core markets. Our portfolio is now essentially 100% strategic, so growth from our consistent pipeline of low-risk, accretive developments will no longer be offset by dilutive sales. Our new leasing pipeline remains strong with over one million square feet of new leasing prospects. We are confident that the continued bipartisan support in Congress to increase defense spending at a healthy pace will create an expanding set of growth opportunities on which we will capitalize.”
Financial Highlights
4th Quarter Financial Results:
- Diluted earnings per share (“EPS”) was $0.10 for the quarter ended December 31, 2017 as compared to $0.22 for the fourth quarter of 2016.
- Diluted funds from operations per share (“FFOPS”), as calculated in accordance with NAREIT’s definition, was $0.48 for the fourth quarter of 2017 as compared to $0.57 for the fourth quarter of 2016.
- FFOPS, as adjusted for comparability, was $0.53 for the quarter ended December 31, 2017 and $0.51 for the fourth quarter of 2016.
Full Year 2017 Financial Results:
- EPS for the year ended December 31, 2017 was $0.57 as compared to a diluted loss per share of $(0.03) for 2016.
- Per NAREIT’s definition, FFOPS for 2017 was $1.95 as compared to $1.82 for 2016.
- FFOPS, as adjusted for comparability, for 2017 was $2.03 as compared to $2.01 for 2016.
Adjustments for comparability exclude gains and losses from certain investing and financing activities and certain other items that the Company believes are not closely correlated to (or associated with) its operating performance.
Operating Performance Highlights
Portfolio Summary:
- At December 31, 2017, the Company’s core portfolio of 156 operating office and data center shell properties was 94.5% occupied and 95.1% leased.
- During the quarter, the Company placed 326,000 square feet of development into service that, at December 31, 2017, were 100% leased. During the year, the Company placed 1.2 million square feet into service that were 98% leased at year-end.
Same-Property Performance:
- At December 31, 2017, COPT’s same-property portfolio of 135 buildings was 92.8% occupied and 93.4% leased.
- For the quarter ended December 31, 2017, the Company’s same-property cash NOI increased 0.9% as compared to the quarter ended December 31, 2016. For the full year, same-property cash NOI grew 3.4% versus 2016.
Leasing: During 2017, the Company leased 3.2 million square feet, including 975,000 square feet of development leasing. Details are as follows:
- Square Feet Leased―For the quarter ended December 31, 2017, the Company leased 1.1 million total square feet, including 438,000 square feet of renewing leases, 199,000 square feet of new leases on vacant space, and 493,000 square feet in development projects. For the year ended December 31, 2017, the Company completed 3.2 million square feet of leasing, comprised of 1.8 million square feet of renewing leases, 431,000 square feet of vacancy leasing, and 975,000 square feet in development projects.
- Renewal Rates―During the fourth quarter, the Company renewed 86% of expiring Defense/IT leases, and 77% of total expiring leases. For the year, the Company renewed 92% of expiring Defense/IT leases and achieved an 80% renewal rate overall.
- Rent Spreads & Average Escalations on Renewing Leases―For the quarter ended December 31, 2017, rents on renewed space increased 5.4% on a GAAP basis and declined 4.6% on a cash basis; average escalations on renewing leases in the fourth quarter were 2.6%. For the year, GAAP rents on renewing leases increased 7.9% and cash rents decreased 1.4%. Average annual escalations on renewals completed during 2017 were 2.0%.
- Lease Terms―In the fourth quarter, lease terms averaged 4.6 years on renewing leases, 5.4 years on new leasing, and 10.1 years on development leasing, for a weighted average lease term of 7.1 years on all leasing. For the full year ended December 31, 2017, lease terms averaged 3.2 years on renewing leases, 5.8 years on new leasing, and 10.9 years on development leasing, for a weighted average lease term of 5.9 years on all leasing.
Investment Activity Highlights
Development & Redevelopment Projects:
- The Company has seven properties totaling 742,000 square feet under construction that, at December 31, 2017, were 73% leased. These projects have a total estimated cost of $165.3 million, of which $69.0 million has been incurred.
- The Company also has two completed properties that total 352,000 square feet which are being held for the U.S. Government and which currently are 6% leased. Including these two projects, the Company’s construction pipeline totals 1.1 million square feet and is 51% leased.
- COPT has one project under redevelopment totaling 22,000 square feet that is 73% leased. Excluding the project’s historical net basis of $622,000, the Company has invested $1.4 million of the $3.3 million total incremental cost planned.
Pre-Construction. The Company has one property under pre-construction at December 31, 2017. The project is expected to total 190,000 square feet, is 43% pre-leased, and is expected to cost $170 million. Construction is expected to commence during the second quarter of 2018.
Dispositions. During 2017, the Company completed $184 million of dispositions, including non-strategic land and 13 operating properties totaling 992,000 square feet that, on average, were 91.8% occupied at the time of sale.
Balance Sheet and Capital Transaction Highlights
- As of December 31, 2017, the Company’s net debt plus preferred equity to adjusted book ratio was 41.2% and its net debt plus preferred equity to in-place adjusted EBITDA ratio was 6.1x. For the quarter ended December 31, 2017, the Company’s adjusted EBITDA fixed charge coverage ratio was 3.7x.
- As of December 31, 2017 and including the effect of interest rate swaps, the Company’s weighted average effective interest rate was 4.1%. Additionally, 93% of the Company’s debt was subject to fixed interest rates and the debt portfolio had a weighted average maturity of 5.1 years.
- In January 2017, the Company redeemed all $26.6 million outstanding shares of its 5.600% Series K Convertible Preferred Shares. In June, the Company redeemed all $172.5 million of its 7.375% Series L Cumulative Preferred Shares.
- During the first half of the year, the Company issued 591,000 common shares at a weighted average price of $33.84 per share under its existing at-the-market (“ATM”) stock offering program, netting $19.7 million of proceeds. COPT’s remaining capacity under this ATM program is an aggregate gross sales price of $70.0 million in common share sales.
- In November 2017, the Company entered into a $285 million forward equity sale contract. In late December, COPT issued 1.7 million common shares pursuant to the agreement for $50 million of proceeds.
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 2017 conference call, the details of which are provided below. An accompanying slide presentation can be viewed on and downloaded from the ‘Investors’ section of the Company’s website (www.copt.com).
Conference Call Information
Management will discuss fourth quarter and full year 2017 results on its conference call tomorrow at 12:00 p.m. Eastern Time, details of which are listed below:
| Conference Call Date: | Friday, February 9, 2018 | ||
| Time: | 12:00 p.m. Eastern Time | ||
| Telephone Number (within the U.S.): | 855-463-9057 | ||
| Telephone Number (outside the U.S.): | 661-378-9894 | ||
| Passcode: | 8784659 | ||
The conference call will also be available via live webcast in the ‘Investors’ section of the Company’s website at www.copt.com.
Replay Information
A replay of this call will be available beginning at 3:00 p.m. Eastern Time on Friday, February 9, through 3:00 p.m. Eastern Time on Friday, February 23. To access the replay within the United States, please call 855-859-2056 and use passcode 8784659. To access the replay outside the United States, please call 404-537-3406 and use passcode 8784659. A replay of the conference call will also be available immediately after the call on the ‘Investors’ section of the Company’s website.
Definitions
For definitions of certain terms used in this press release, please refer to the information furnished in our Supplemental Information Package filed as a Form 8-K which can be found on our website (www.copt.com). Reconciliations of non-GAAP measures to the most directly comparable GAAP measures are included in the attached tables.
Company Information
COPT is an office REIT that owns, manages, leases, develops and selectively acquires office and data center properties 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 it believes are growing, durable, priority missions (“Defense/IT Locations”). The Company also owns a portfolio of office properties located in select urban/urban-like submarkets in the Greater Washington, DC/Baltimore region with durable Class-A office fundamentals and characteristics (“Regional Office Properties”). As of December 31, 2017, the Company derived 88% of core portfolio annualized revenue from Defense/IT Locations and 12% from its Regional Office Properties. As of December 31, 2017 and including six buildings owned through an unconsolidated joint venture, COPT’s core portfolio of 156 office and data center shell properties encompassed 17.1 million square feet and was 95.1% leased. As of the same date, the Company also owned one wholesale data center with a critical load of 19.25 megawatts.
Forward-Looking Information
This press release may contain “forward-looking” statements, as defined in Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, that are based on the Company’s current expectations, estimates and projections about future events and financial trends affecting the Company. Forward-looking statements can be identified by the use of words such as “may,” “will,” “should,” “could,” “believe,” “anticipate,” “expect,” “estimate,” “plan” or other comparable terminology. Forward-looking statements are inherently subject to risks and uncertainties, many of which the Company cannot predict with accuracy and some of which the Company might not even anticipate. Accordingly, the Company can give no assurance that these expectations, estimates and projections will be achieved. Future events and actual results may differ materially from those discussed in the forward-looking statements.
Important factors that may affect these expectations, estimates, and projections include, but are not limited to:
- general economic and business conditions, which will, among other things, affect office property and data center demand and rents, tenant creditworthiness, interest rates, financing availability and property values;
- adverse changes in the real estate markets including, among other things, increased competition with other companies;
- governmental actions and initiatives, including risks associated with the impact of a prolonged government shutdown or budgetary reductions or impasses, such as a reduction in rental revenues, non-renewal of leases, and/or a curtailment of demand for additional space by the Company's strategic customers;
- the Company’s ability to borrow on favorable terms;
- risks of real estate acquisition and development activities, including, among other things, risks that development projects may not be completed on schedule, that tenants may not take occupancy or pay rent or that development or operating costs may be greater than anticipated;
- risks of investing through joint venture structures, including risks that the Company’s joint venture partners may not fulfill their financial obligations as investors or may take actions that are inconsistent with the Company’s objectives;
- changes in the Company’s plans for properties or views of market economic conditions or failure to obtain development rights, either of which could result in recognition of significant impairment losses;
- the Company’s ability to satisfy and operate effectively under Federal income tax rules relating to real estate investment trusts and partnerships;
- possible adverse changes in tax laws;
- the Company's ability to achieve projected results;
- the dilutive effects of issuing additional common shares; and
- environmental requirements.
The Company undertakes no obligation to update or supplement any forward-looking statements. For further information, please refer to the Company’s filings with the Securities and Exchange Commission, particularly the section entitled “Risk Factors” in Item 1A of the Company’s Annual Report on Form 10-K for the year ended December 31, 2016.
| Corporate Office Properties Trust | ||||||||||||||||
| Summary Financial Data | ||||||||||||||||
| (unaudited) | ||||||||||||||||
| (in thousands, except per share data) | ||||||||||||||||
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For the Three Months |
For the Year Ended |
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| 2017 | 2016 | 2017 | 2016 | |||||||||||||
| Revenues | ||||||||||||||||
| Real estate revenues | $ | 127,685 | $ | 127,999 | $ | 509,980 | $ | 525,964 | ||||||||
| Construction contract and other service revenues | 36,882 | 13,992 | 102,840 | 48,364 | ||||||||||||
| Total revenues | 164,567 | 141,991 | 612,820 | 574,328 | ||||||||||||
| Expenses | ||||||||||||||||
| Property operating expenses | 47,449 | 47,562 | 190,964 | 197,530 | ||||||||||||
| Depreciation and amortization associated with real estate operations | 33,938 | 32,929 | 134,228 | 132,719 | ||||||||||||
| Construction contract and other service expenses | 36,029 | 12,968 | 99,618 | 45,481 | ||||||||||||
| Impairment losses | 13,659 | 1,554 | 15,123 | 101,391 | ||||||||||||
| General and administrative expenses | 5,552 | 6,211 | 24,008 | 30,095 | ||||||||||||
| Leasing expenses | 1,447 | 1,578 | 6,829 | 6,458 | ||||||||||||
| Business development expenses and land carry costs | 1,646 | 1,747 | 6,213 | 8,244 | ||||||||||||
| Total operating expenses | 139,720 | 104,549 | 476,983 | 521,918 | ||||||||||||
| Operating income | 24,847 | 37,442 | 135,837 | 52,410 | ||||||||||||
| Interest expense | (19,211 | ) | (18,664 | ) | (76,983 | ) | (83,163 | ) | ||||||||
| Interest and other income | 1,501 | 1,567 | 6,318 | 5,444 | ||||||||||||
| Loss on early extinguishment of debt | — | (1,073 | ) | (513 | ) | (1,110 | ) | |||||||||
| Income (loss) before equity in income of unconsolidated entities and income taxes | 7,137 | 19,272 | 64,659 | (26,419 | ) | |||||||||||
| Equity in income of unconsolidated entities | 720 | 718 | 2,882 | 1,332 | ||||||||||||
| Income tax expense | (953 | ) | (272 | ) | (1,098 | ) | (244 | ) | ||||||||
| Gain on sales of real estate | 4,452 | 6,885 | 9,890 | 40,986 | ||||||||||||
| Net income | 11,356 | 26,603 | 76,333 | 15,655 | ||||||||||||
| Net (income) loss attributable to noncontrolling interests | ||||||||||||||||
| Common units in the Operating Partnership (“OP”) | (325 | ) | (793 | ) | (1,936 | ) | 155 | |||||||||
| Preferred units in the OP | (165 | ) | (165 | ) | (660 | ) | (660 | ) | ||||||||
| Other consolidated entities | (908 | ) | (912 | ) | (3,646 | ) | (3,711 | ) | ||||||||
| Net income attributable to COPT | 9,958 | 24,733 | 70,091 | 11,439 | ||||||||||||
| Preferred share dividends | — | (3,640 | ) | (6,219 | ) | (14,297 | ) | |||||||||
| Issuance costs associated with redeemed preferred shares | — | (17 | ) | (6,847 | ) | (17 | ) | |||||||||
| Net income (loss) attributable to COPT common shareholders | $ | 9,958 | $ | 21,076 | $ | 57,025 | $ | (2,875 | ) | |||||||
| Earnings per share (“EPS”) computation: | ||||||||||||||||
| Numerator for diluted EPS: | ||||||||||||||||
| Net income attributable to common shareholders | $ | 9,958 | $ | 21,076 | $ | 57,025 | $ | (2,875 | ) | |||||||
| Amount allocable to share-based compensation awards | (112 | ) | (100 | ) | (449 | ) | (419 | ) | ||||||||
| Numerator for diluted EPS | $ | 9,846 | $ | 20,976 | $ | 56,576 | $ | (3,294 | ) | |||||||
| Denominator: | ||||||||||||||||
| Weighted average common shares - basic | 99,304 | 95,066 | 98,969 | 94,502 | ||||||||||||
| Dilutive effect of forward equity sale agreements and share-based compensation awards | 283 | 76 | 186 | — | ||||||||||||
| Weighted average common shares - diluted | 99,587 | 95,142 | 99,155 | 94,502 | ||||||||||||
| Diluted EPS | $ | 0.10 | $ | 0.22 | $ | 0.57 | $ | (0.03 | ) | |||||||
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| (unaudited) | ||||||||||||||||
| (in thousands, except per share data) | ||||||||||||||||
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For the Three Months |
For the Year Ended |
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| 2017 | 2016 | 2017 | 2016 | |||||||||||||
| Net income | $ | 11,356 | $ | 26,603 | $ | 76,333 | $ | 15,655 | ||||||||
| Real estate-related depreciation and amortization | 33,938 | 32,929 | 134,228 | 132,719 | ||||||||||||
| Impairment losses on previously depreciated operating properties | 9,004 | 1,518 | 10,455 | 83,346 | ||||||||||||
| Gain on sales of previously depreciated operating properties | (4,452 | ) | 312 | (4,491 | ) | (33,789 | ) | |||||||||
| Depreciation and amortization on unconsolidated real estate JV | 311 | 311 | 1,243 | 518 | ||||||||||||
| Funds from operations (“FFO”) | 50,157 | 61,673 | 217,768 | 198,449 | ||||||||||||
| Preferred share dividends | — | (3,640 | ) | (6,219 | ) | (14,297 | ) | |||||||||
| Noncontrolling interests - preferred units in the OP | (165 | ) | (165 | ) | (660 | ) | (660 | ) | ||||||||
| FFO allocable to other noncontrolling interests | (874 | ) | (1,085 | ) | (3,675 | ) | (4,020 | ) | ||||||||
| Issuance costs associated with redeemed preferred shares | — | (17 | ) | (6,847 | ) | (17 | ) | |||||||||
| Basic and diluted FFO allocable to share-based compensation awards | (198 | ) | (208 | ) | (814 | ) | (694 | ) | ||||||||
| Basic and Diluted FFO available to common share and common unit holders (“Diluted FFO”) | 48,920 | 56,558 | 199,553 | 178,761 | ||||||||||||
| Gain on sales of non-operating properties | — | (7,197 | ) | (5,399 | ) | (7,197 | ) | |||||||||
| Impairment losses on non-operating properties | 4,655 | 36 | 4,668 | 18,045 | ||||||||||||
| Income tax expense associated with FFO comparability adjustments | 800 | — | 800 | — | ||||||||||||
| Gain on interest rate derivatives | (191 | ) | (725 | ) | (234 | ) | (378 | ) | ||||||||
| Loss on early extinguishment of debt | — | 1,073 | 513 | 1,110 | ||||||||||||
| Issuance costs associated with redeemed preferred shares | — | 17 | 6,847 | 17 | ||||||||||||
| Demolition costs on redevelopment properties | — | — | 294 | 578 | ||||||||||||
| Executive transition costs | — | 431 | 732 | 6,454 | ||||||||||||
| Diluted FFO comparability adjustments allocable to share-based compensation awards | (23 | ) | 26 | (35 | ) | (73 | ) | |||||||||
| Diluted FFO available to common share and common unit holders, as adjusted for comparability | 54,161 | 50,219 | 207,739 | 197,317 | ||||||||||||
| Straight line rent adjustments and lease incentive amortization | (1,343 | ) | 1,294 | 46 | 1,500 | |||||||||||
| Amortization of intangibles included in net operating income | 342 | 463 | 1,344 | 1,488 | ||||||||||||
| Share-based compensation, net of amounts capitalized | 1,523 | 1,174 | 5,353 | 5,549 | ||||||||||||
| Amortization of deferred financing costs | 443 | 1,093 | 2,928 | 4,573 | ||||||||||||
| Amortization of net debt discounts, net of amounts capitalized | 350 | 336 | 1,379 | 1,312 | ||||||||||||
| Accum. other comprehensive loss on derivatives amortized to expense | 54 | — | 143 | — | ||||||||||||
| Replacement capital expenditures | (23,475 | ) | (13,716 | ) | (63,026 | ) | (53,102 | ) | ||||||||
| Other diluted AFFO adjustments associated with real estate JVs | (135 | ) | (146 | ) | (593 | ) | (150 | ) | ||||||||
| Diluted adjusted funds from operations available to common share and common unit holders (“Diluted AFFO”) | $ | 31,920 | $ | 40,717 | $ | 155,313 | $ | 158,487 | ||||||||
| Diluted FFO per share | $ | 0.48 | $ | 0.57 | $ | 1.95 | $ | 1.82 | ||||||||
| Diluted FFO per share, as adjusted for comparability | $ | 0.53 | $ | 0.51 | $ | 2.03 | $ | 2.01 | ||||||||
| Dividends/distributions per common share/unit | $ | 0.275 | $ | 0.275 | $ | 1.100 | $ | 1.100 | ||||||||
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| Summary Financial Data | ||||||||
| (unaudited) | ||||||||
| (Dollars and shares in thousands, except per share data) | ||||||||
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December 31, |
December 31, |
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| Balance Sheet Data | ||||||||
| Properties, net of accumulated depreciation | $ | 3,141,105 | $ | 3,073,362 | ||||
| Total assets | 3,578,484 | 3,780,885 | ||||||
| Debt, per balance sheet | 1,828,333 | 1,904,001 | ||||||
| Total liabilities | 2,103,773 | 2,163,242 | ||||||
| Redeemable noncontrolling interest | 23,125 | 22,979 | ||||||
| Equity | 1,451,586 | 1,594,664 | ||||||
| Net debt to adjusted book | 41.0 | % | 38.3 | % | ||||
| Core Portfolio Data (as of period end) (1) | ||||||||
| Number of operating properties | 156 | 152 | ||||||
| Total net rentable square feet owned (in thousands) | 17,059 | 16,301 | ||||||
| Occupancy % | 94.5 | % | 92.9 | % | ||||
| Leased % | 95.1 | % | 94.4 | % | ||||
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For the Three Months |
For the Year Ended |
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| 2017 | 2016 | 2017 | 2016 | |||||||||
| Payout ratios | ||||||||||||
| Diluted FFO | 58.5 | % | 49.5 | % | 56.7 | % | 60.9 | % | ||||
| Diluted FFO, as adjusted for comparability | 52.9 | % | 55.7 | % | 54.5 | % | 55.1 | % | ||||
| Diluted AFFO | 89.7 | % | 68.7 | % | 72.9 | % | 68.6 | % | ||||
| Adjusted EBITDA fixed charge coverage ratio | 3.7 | x | 3.1 | x | 3.4 | x | 3.0 | x | ||||
| Net debt to in-place adjusted EBITDA ratio (2) | 6.1 | x | 5.7 | x | N/A | N/A | ||||||
| Net debt plus preferred equity to in-place adjusted EBITDA ratio (3) | 6.1 | x | 6.3 | x | N/A | N/A | ||||||
| Reconciliation of denominators for per share measures | ||||||||||||
| Denominator for diluted EPS | 99,587 | 95,142 | 99,155 | 94,502 | ||||||||
| Weighted average common units | 3,252 | 3,591 | 3,362 | 3,633 | ||||||||
| Anti-dilutive EPS effect of share-based compensation awards | — | — | — | 92 | ||||||||
| Denominator for diluted FFO per share and as adjusted for comparability | 102,839 | 98,733 | 102,517 | 98,227 | ||||||||
| (1) | Represents Defense/IT Locations and Regional Office properties, and includes six properties owned through an unconsolidated joint venture totaling 962,000 square feet that were 100% occupied and leased. | |
| (2) | Represents net debt as of period end divided by in-place adjusted EBITDA for the period, as annualized (i.e. three month periods are multiplied by four). | |
| (3) | Represents net debt plus the total liquidation preference of preferred equity as of period end divided by in-place adjusted EBITDA for the period, as annualized (i.e. three month periods are multiplied by four). | |
| Corporate Office Properties Trust | ||||||||||||||||
| Summary Financial Data | ||||||||||||||||
| (unaudited) | ||||||||||||||||
| (Dollars in thousands) | ||||||||||||||||
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For the Three Months |
For the Year Ended |
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| 2017 | 2016 | 2017 | 2016 | |||||||||||||
| Reconciliation of common share dividends to dividends and distributions for payout ratios | ||||||||||||||||
| Common share dividends - unrestricted shares | $ | 27,747 | $ | 26,991 | $ | 109,489 | $ | 104,811 | ||||||||
| Common unit distributions | 894 | 987 | 3,661 | 3,990 | ||||||||||||
| Dividends and distributions for payout ratios | $ | 28,641 | $ | 27,978 | $ | 113,150 | $ | 108,801 | ||||||||
| Reconciliation of GAAP net income to adjusted earnings before interest, income taxes, depreciation and amortization (“Adjusted EBITDA”) and in-place adjusted EBITDA | ||||||||||||||||
| Net income | $ | 11,356 | $ | 26,603 | $ | 76,333 | $ | 15,655 | ||||||||
| Interest expense | 19,211 | 18,664 | 76,983 | 83,163 | ||||||||||||
| Income tax expense | 953 | 272 | 1,098 | 244 | ||||||||||||
| Real estate-related depreciation and amortization | 33,938 | 32,929 | 134,228 | 132,719 | ||||||||||||
| Depreciation of furniture, fixtures and equipment | 600 | 512 | 2,273 | 2,151 | ||||||||||||
| Impairment losses | 13,659 | 1,554 | 15,123 | 101,391 | ||||||||||||
| Loss on early extinguishment of debt | — | 1,073 | 513 | 1,110 | ||||||||||||
| Gain on sales of operating properties | (4,452 | ) | 312 | (4,491 | ) | (33,789 | ) | |||||||||
| Gain on sales of non-operational properties | — | (7,197 | ) | (5,399 | ) | (7,197 | ) | |||||||||
| Net gain on investments in unconsolidated entities included in interest and other income | — | (117 | ) | — | (149 | ) | ||||||||||
| Business development expenses | 1,116 | 1,167 | 3,786 | 4,823 | ||||||||||||
| Demolition costs on redevelopment properties | — | — | 294 | 578 | ||||||||||||
| Adjustments from unconsolidated real estate JV | 577 | 578 | 2,301 | 993 | ||||||||||||
| Executive transition costs | — | 431 | 732 | 6,454 | ||||||||||||
| Adjusted EBITDA | $ | 76,958 | $ | 76,781 | $ | 303,774 | $ | 308,146 | ||||||||
| Proforma net operating income adjustment for property changes within period | (578 | ) | 39 | |||||||||||||
| In-place adjusted EBITDA | $ | 76,380 | $ | 76,820 | ||||||||||||
| Reconciliation of interest expense to the denominators for fixed charge coverage-Adjusted EBITDA | ||||||||||||||||
| Interest expense | $ | 19,211 | $ | 18,664 | $ | 76,983 | $ | 83,163 | ||||||||
| Less: Amortization of deferred financing costs | (443 | ) | (1,093 | ) | (2,928 | ) | (4,573 | ) | ||||||||
| Less: Amortization of net debt discounts and prem., net of amounts capitalized | (350 | ) | (336 | ) | (1,379 | ) | (1,312 | ) | ||||||||
| Less: Accum. other comprehensive loss on derivatives amortized to expense | (54 | ) | — | (143 | ) | — | ||||||||||
| Gain on interest rate derivatives | 191 | 725 | 234 | 378 | ||||||||||||
| COPT’s share of interest expense of unconsolidated real estate JV, excluding deferred financing costs | 260 | 261 | 1,034 | 465 | ||||||||||||
| Scheduled principal amortization | 984 | 941 | 3,862 | 5,395 | ||||||||||||
| Capitalized interest | 1,032 | 1,419 | 5,229 | 5,723 | ||||||||||||
| Preferred share dividends | — | 3,640 | 6,219 | 14,297 | ||||||||||||
| Preferred unit distributions | 165 | 165 | 660 | 660 | ||||||||||||
| Denominator for fixed charge coverage-Adjusted EBITDA | $ | 20,996 | $ | 24,386 | $ | 89,771 | $ | 104,196 | ||||||||
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| Summary Financial Data | ||||||||||||||||
| (unaudited) | ||||||||||||||||
| (Dollars in thousands) | ||||||||||||||||
|
For the Three Months |
For the Year Ended |
|||||||||||||||
| 2017 | 2016 | 2017 | 2016 | |||||||||||||
| Reconciliations of tenant improvements and incentives, capital improvements and leasing costs for operating properties to replacement capital expenditures | ||||||||||||||||
| Tenant improvements and incentives | $ | 14,804 | $ | 8,000 | $ | 37,034 | $ | 45,020 | ||||||||
| Building improvements | 9,241 | 7,064 | 22,308 | 22,026 | ||||||||||||
| Leasing costs | 3,242 | 1,387 | 8,487 | 9,365 | ||||||||||||
| Net (exclusions from) additions to tenant improvements and incentives | (2,929 | ) | 871 | 2,984 | (14,073 | ) | ||||||||||
| Excluded building improvements | (853 | ) | (3,606 | ) | (7,757 | ) | (8,817 | ) | ||||||||
| Excluded leasing costs | (30 | ) | — | (30 | ) | (419 | ) | |||||||||
| Replacement capital expenditures | $ | 23,475 | $ | 13,716 | $ | 63,026 | $ | 53,102 | ||||||||
| Same property cash NOI | $ | 69,607 | $ | 68,973 | $ | 276,440 | $ | 267,306 | ||||||||
| Straight line rent adjustments and lease incentive amortization | (1,635 | ) | (1,288 | ) | (4,551 | ) | (6,561 | ) | ||||||||
| Amortization of acquired above- and below-market rents | (287 | ) | (315 | ) | (1,123 | ) | (897 | ) | ||||||||
| Amortization of below-market cost arrangements | (146 | ) | (239 | ) | (585 | ) | (956 | ) | ||||||||
| Lease termination fee, gross | 828 | 601 | 2,911 | 2,279 | ||||||||||||
| Tenant funded landlord assets | 276 | 1,370 | 1,119 | 7,160 | ||||||||||||
| Same property NOI | $ | 68,643 | $ | 69,102 | $ | 274,211 | $ | 268,331 | ||||||||
|
December 31, |
December 31, |
|||||||
| Reconciliation of total assets to adjusted book | ||||||||
| Total assets | $ | 3,578,484 | $ | 3,780,885 | ||||
| Accumulated depreciation | 786,193 | 706,385 | ||||||
| Accumulated depreciation included in assets held for sale | — | 9,566 | ||||||
| Accumulated amortization of real estate intangibles and deferred leasing costs | 193,151 | 210,692 | ||||||
| Accumulated amortization of real estate intangibles and deferred leasing costs included in assets held for sale | — | 11,575 | ||||||
| COPT’s share of liabilities of unconsolidated real estate JV | 29,908 | 29,873 | ||||||
| COPT’s share of accumulated depreciation and amortization of unconsolidated real estate JV | 3,189 | 938 | ||||||
| Less: Disposed property included in assets held for sale | (42,226 | ) | — | |||||
| Less: Cash and cash equivalents | (12,261 | ) | (209,863 | ) | ||||
| COPT’s share of cash of unconsolidated real estate JV | (371 | ) | (283 | ) | ||||
| Adjusted book | $ | 4,536,067 | $ | 4,539,768 | ||||
| Reconciliation of debt outstanding to net debt and net debt plus preferred equity | ||||||||
| Debt outstanding (excluding net debt discounts and deferred financing costs) | $ | 1,872,167 | $ | 1,950,229 | ||||
| Less: Cash and cash equivalents | (12,261 | ) | (209,863 | ) | ||||
| COPT’s share of cash of unconsolidated real estate JV | (371 | ) | (283 | ) | ||||
| Net debt | $ | 1,859,535 | $ | 1,740,083 | ||||
| Preferred equity | 8,800 | 207,883 | ||||||
| Net debt plus preferred equity | $ | 1,868,335 | $ | 1,947,966 | ||||
