COLUMBIA, Md.--(BUSINESS WIRE)--COPT Defense Properties (“COPT Defense” or the “Company”) (NYSE: CDP) announced results for the fourth quarter and full year ended December 31, 2023.
Management Comments
Stephen E. Budorick, COPT Defense’s President & Chief Executive Officer, commented, “The performance of our Defense/IT investment strategy, which concentrates our portfolio near priority U.S. defense installations, continues to demonstrate operating strength, resulting in a solid earnings growth profile.
We achieved several key operating and financial performance milestones in 2023. Our Defense/IT Portfolio was 96.2% occupied and 97.2% leased at year end, which are the highest rates reported since we began disclosing the segment in 2015. Our sector leading tenant retention rate of 79.4% was the third highest figure in the last 20 years. Same property cash NOI increased 5.7%, the highest reported level in over 15 years, while cash rent spreads on renewals were the highest since 2008.
We attribute our continued strong performance to the strength in defense spending over the past few years, which has resulted in growing tenant demand in our Defense/IT Portfolio to support mission-critical national defense activities.
The outlook for defense spending remains favorable as the FY24 National Defense Authorization Act, which was passed in December and is awaiting Appropriation, calls for 3.3% year-over-year growth, which we believe will fuel demand for space in our portfolio through 2025.
We have generated FFO per share growth in each of the past 5 years, which amounts to a compound annual growth rate of 4.5% between 2019 to 2023. Looking forward, we expect FFO per share to increase 3.7% at the midpoint in 2024 and continue to anticipate compound annual growth of roughly 4% between 2023 to 2026.”
Financial Highlights
4th Quarter Financial Results:
- Diluted earnings per share (“EPS”) was $0.30 for the quarter ended December 31, 2023 as compared to $0.45 for the quarter ended December 31, 2022.
- Diluted funds from operations per share (“FFOPS”), as calculated in accordance with Nareit’s definition and as adjusted for comparability, was $0.62 for the quarter ended December 31, 2023 compared to $0.60 for the quarter ended December 31, 2022.
Full Year 2023 Financial Results:
- EPS for the year ended December 31, 2023 was $(0.67), which included a $252.8 million impairment charge for six operating properties in the Other segment and a parcel of land, located in Baltimore, Maryland, Northern Virginia and Washington, D.C., resulting from the Company’s quarterly portfolio review, as compared to $1.53 for 2022.
- Per Nareit’s definition, FFOPS for 2023 was $2.41 as compared to $2.35 for 2022.
- FFOPS, as adjusted for comparability, for 2023 was $2.42 as compared to $2.36 for 2022.
Operating Performance Highlights
Operating Portfolio Summary:
- At December 31, 2023, the Company’s 23.9 million square foot Total Portfolio was 94.2% occupied and 95.3% leased, which includes the 21.7 million square foot Defense/IT Portfolio that was 96.2% occupied and 97.2% leased.
- During the quarter and year ended December 31, 2023, the Company placed into service 379,000 and 848,000 square feet, respectively, of developments that were 100% and 98% leased, respectively, as of year end.
Same Property Performance:
- At December 31, 2023, the Company’s 20.6 million square foot same property portfolio was 93.4% occupied and 94.7% leased.
- The Company’s same property cash NOI increased 4.5% and 5.7% for the three months and year ended December 31, 2023, respectively, compared to the same periods in 2022.
Leasing:
- Total Square Feet Leased: For the quarter ended December 31, 2023, the Company leased 668,000 square feet, including 301,000 square feet of renewals, 115,000 square feet of vacancy leasing, and 252,000 square feet in development projects. For the year ended December 31, 2023, the Company executed 2.9 million square feet of total leasing, including 1.7 million square feet of renewals, 452,000 square feet of vacancy leasing, and 747,000 square feet in development projects.
- Tenant Retention Rates: During the quarter and year ended December 31, 2023, the Company renewed 68.9% and 79.7% in its Total Portfolio, respectively, of expiring square feet. During the quarter and year ended December 31, 2023, the Company renewed 77.6% and 85.7% in its Defense/IT Portfolio, respectively, of expiring square feet.
- Rent Spreads & Average Escalations on Renewing Leases: For the quarter and year ended December 31, 2023, straight-line rents on renewals increased 20.5% and 9.3%, respectively, and cash rents on renewed space increased 3.1% and 1.5%, respectively. For the same time periods, annual escalations on renewing leases averaged 2.5% and 2.6%, respectively.
- Lease Terms: In the quarter ended December 31, 2023, lease terms averaged 6.3 years on renewing leases, 9.3 years on vacancy leasing, and 14.6 years on development projects. For the year ended December 31, 2023, lease terms averaged 4.8 years on renewing leases, 8.2 years on vacancy leasing, and 14.4 years on development leasing.
Investment Activity Highlights
- Development Pipeline: The Company’s development pipeline consists of five properties totaling 817,000 square feet that were 91% leased as of December 31, 2023. These projects represent a total estimated investment of $323.8 million, of which $84.4 million has been spent.
Balance Sheet and Capital Transaction Highlights
- For the quarter ended December 31, 2023, the Company’s adjusted EBITDA fixed charge coverage ratio was 4.4x.
- At December 31, 2023, the Company’s net debt to in-place adjusted EBITDA ratio was 6.1x and its net debt adjusted for fully-leased development to in-place adjusted EBITDA ratio was 6.0x.
- At December 31, 2023, and including the effect of interest rate swaps, the Company’s weighted average effective interest rate on its consolidated debt portfolio was 3.3% with a weighted average maturity of 5.7 years and, 100% 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 2023 conference call; the presentation can be viewed and downloaded from the ‘Financial Info – Financial Results’ section of COPT Defense’s Investors website: https://investors.copt.com/financial-information/financial-results
2024 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 Defense’s Investors website: https://investors.copt.com/news-events/press-releases
Conference Call Information
Management will discuss fourth quarter and full year 2023 results on its conference call tomorrow at 12:00 p.m. Eastern Time, details of which are listed below:
Conference Call Date: |
Friday, February 09, 2024 |
|
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/BIec6f0e6112cd459ab4eda8f3c55c2d22
The conference call will also be available via live webcast in the ‘News & Events – IR Calendar’ section of COPT Defense’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 Defense’s Investors website and will be maintained on the website for approximately 90 days after the conference call.
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 Defense
COPT Defense, an S&P MidCap 400 Company, is a self-managed REIT focused on owning, operating and developing properties in locations proximate to, or sometimes containing, key U.S. Government (“USG”) defense installations and missions (referred to as its Defense/IT Portfolio). The Company’s tenants include the USG and their defense contractors, who are primarily engaged in priority national security activities, and who generally require mission-critical and high security property enhancements. As of December 31, 2023, the Company’s Defense/IT Portfolio of 190 properties, including 24 owned through unconsolidated joint ventures, encompassed 21.7 million square feet and was 97.2% 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, 2022.
Source: COPT Defense Properties
COPT Defense Properties Summary Financial Data (unaudited) (dollars and shares in thousands, except per share data) |
|||||||||||||||
|
For the Three Months Ended
|
|
For the Years Ended
|
||||||||||||
|
2023 |
|
2022 |
|
2023 |
|
2022 |
||||||||
Revenues |
|
|
|
|
|
|
|
||||||||
Lease revenue |
$ |
160,337 |
|
|
$ |
150,022 |
|
|
$ |
619,847 |
|
|
$ |
580,169 |
|
Other property revenue |
|
1,225 |
|
|
|
1,163 |
|
|
|
4,956 |
|
|
|
4,229 |
|
Construction contract and other service revenues |
|
18,167 |
|
|
|
24,062 |
|
|
|
60,179 |
|
|
|
154,632 |
|
Total revenues |
|
179,729 |
|
|
|
175,247 |
|
|
|
684,982 |
|
|
|
739,030 |
|
Operating expenses |
|
|
|
|
|
|
|
||||||||
Property operating expenses |
|
64,577 |
|
|
|
58,470 |
|
|
|
247,385 |
|
|
|
227,430 |
|
Depreciation and amortization associated with real estate operations |
|
36,735 |
|
|
|
36,907 |
|
|
|
148,950 |
|
|
|
141,230 |
|
Construction contract and other service expenses |
|
17,167 |
|
|
|
23,454 |
|
|
|
57,416 |
|
|
|
149,963 |
|
Impairment losses |
|
— |
|
|
|
— |
|
|
|
252,797 |
|
|
|
— |
|
General and administrative expenses |
|
8,240 |
|
|
|
7,766 |
|
|
|
31,105 |
|
|
|
27,461 |
|
Leasing expenses |
|
2,308 |
|
|
|
2,235 |
|
|
|
8,932 |
|
|
|
8,337 |
|
Business development expenses and land carry costs |
|
797 |
|
|
|
1,157 |
|
|
|
2,732 |
|
|
|
3,193 |
|
Total operating expenses |
|
129,824 |
|
|
|
129,989 |
|
|
|
749,317 |
|
|
|
557,614 |
|
Interest expense |
|
(20,383 |
) |
|
|
(16,819 |
) |
|
|
(71,142 |
) |
|
|
(61,174 |
) |
Interest and other income, net |
|
5,659 |
|
|
|
4,671 |
|
|
|
12,587 |
|
|
|
9,070 |
|
Gain on sales of real estate |
|
— |
|
|
|
19,238 |
|
|
|
49,392 |
|
|
|
19,250 |
|
Loss on early extinguishment of debt |
|
— |
|
|
|
(267 |
) |
|
|
— |
|
|
|
(609 |
) |
Income (loss) from continuing operations before equity in (loss) income of unconsolidated entities and income taxes |
|
35,181 |
|
|
|
52,081 |
|
|
|
(73,498 |
) |
|
|
147,953 |
|
Equity in (loss) income of unconsolidated entities |
|
(240 |
) |
|
|
229 |
|
|
|
(261 |
) |
|
|
1,743 |
|
Income tax expense |
|
(121 |
) |
|
|
(223 |
) |
|
|
(588 |
) |
|
|
(447 |
) |
Income (loss) from continuing operations |
|
34,820 |
|
|
|
52,087 |
|
|
|
(74,347 |
) |
|
|
149,249 |
|
Discontinued operations |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
29,573 |
|
Net income (loss) |
|
34,820 |
|
|
|
52,087 |
|
|
|
(74,347 |
) |
|
|
178,822 |
|
Net (income) loss attributable to noncontrolling interests: |
|
|
|
|
|
|
|
||||||||
Common units in the Operating Partnership (“OP”) |
|
(576 |
) |
|
|
(775 |
) |
|
|
1,306 |
|
|
|
(2,603 |
) |
Other consolidated entities |
|
(592 |
) |
|
|
(833 |
) |
|
|
(428 |
) |
|
|
(3,190 |
) |
Net income (loss) attributable to common shareholders |
$ |
33,652 |
|
|
$ |
50,479 |
|
|
$ |
(73,469 |
) |
|
$ |
173,029 |
|
|
|
|
|
|
|
|
|
||||||||
Earnings per share (“EPS”) computation: |
|
|
|
|
|
|
|
||||||||
Numerator for diluted EPS: |
|
|
|
|
|
|
|
||||||||
Net income (loss) attributable to common shareholders |
$ |
33,652 |
|
|
$ |
50,479 |
|
|
$ |
(73,469 |
) |
|
$ |
173,029 |
|
Amount allocable to share-based compensation awards |
|
(100 |
) |
|
|
(129 |
) |
|
|
(1,199 |
) |
|
|
(463 |
) |
Redeemable noncontrolling interests |
|
— |
|
|
|
(60 |
) |
|
|
— |
|
|
|
(169 |
) |
Numerator for diluted EPS |
$ |
33,552 |
|
|
$ |
50,290 |
|
|
$ |
(74,668 |
) |
|
$ |
172,397 |
|
Denominator: |
|
|
|
|
|
|
|
||||||||
Weighted average common shares - basic |
|
112,199 |
|
|
|
112,096 |
|
|
|
112,178 |
|
|
|
112,073 |
|
Dilutive effect of share-based compensation awards |
|
432 |
|
|
|
435 |
|
|
|
— |
|
|
|
431 |
|
Dilutive effect of redeemable noncontrolling interests |
|
— |
|
|
|
102 |
|
|
|
— |
|
|
|
116 |
|
Weighted average common shares - diluted |
|
112,631 |
|
|
|
112,633 |
|
|
|
112,178 |
|
|
|
112,620 |
|
Diluted EPS |
$ |
0.30 |
|
|
$ |
0.45 |
|
|
$ |
(0.67 |
) |
|
$ |
1.53 |
|
COPT Defense Properties Summary Financial Data (unaudited) (in thousands, except per share data) |
|||||||||||||||
|
For the Three Months Ended
|
|
For the Years Ended
|
||||||||||||
|
2023 |
|
2022 |
|
2023 |
|
2022 |
||||||||
Net income (loss) |
$ |
34,820 |
|
|
$ |
52,087 |
|
|
$ |
(74,347 |
) |
|
$ |
178,822 |
|
Real estate-related depreciation and amortization |
|
36,735 |
|
|
|
36,907 |
|
|
|
148,950 |
|
|
|
141,230 |
|
Impairment losses on real estate |
|
— |
|
|
|
— |
|
|
|
252,797 |
|
|
|
— |
|
Gain on sales of real estate from continuing and discontinued operations |
|
— |
|
|
|
(19,238 |
) |
|
|
(49,392 |
) |
|
|
(47,814 |
) |
Depreciation and amortization on unconsolidated real estate JVs |
|
805 |
|
|
|
526 |
|
|
|
3,217 |
|
|
|
2,101 |
|
Funds from operations (“FFO”) |
|
72,360 |
|
|
|
70,282 |
|
|
|
281,225 |
|
|
|
274,339 |
|
FFO allocable to other noncontrolling interests |
|
(972 |
) |
|
|
(1,227 |
) |
|
|
(3,978 |
) |
|
|
(4,795 |
) |
Basic FFO allocable to share-based compensation awards |
|
(513 |
) |
|
|
(360 |
) |
|
|
(1,940 |
) |
|
|
(1,433 |
) |
Basic FFO available to common share and common unit holders (“Basic FFO”) |
|
70,875 |
|
|
|
68,695 |
|
|
|
275,307 |
|
|
|
268,111 |
|
Redeemable noncontrolling interests |
|
— |
|
|
|
(27 |
) |
|
|
(58 |
) |
|
|
(34 |
) |
Diluted FFO adjustments allocable to share-based compensation awards |
|
38 |
|
|
|
28 |
|
|
|
150 |
|
|
|
109 |
|
Diluted FFO available to common share and common unit holders (“Diluted FFO”) |
|
70,913 |
|
|
|
68,696 |
|
|
|
275,399 |
|
|
|
268,186 |
|
Loss on early extinguishment of debt |
|
— |
|
|
|
267 |
|
|
|
— |
|
|
|
609 |
|
Gain on early extinguishment of debt on unconsolidated real estate JVs |
|
— |
|
|
|
(168 |
) |
|
|
— |
|
|
|
(168 |
) |
Executive transition costs |
|
188 |
|
|
|
— |
|
|
|
518 |
|
|
|
343 |
|
Diluted FFO comparability adjustments allocable to share-based compensation awards |
|
(1 |
) |
|
|
(1 |
) |
|
|
(4 |
) |
|
|
(5 |
) |
Diluted FFO available to common share and common unit holders, as adjusted for comparability |
|
71,100 |
|
|
|
68,794 |
|
|
|
275,913 |
|
|
|
268,965 |
|
Straight line rent adjustments and lease incentive amortization |
|
313 |
|
|
|
(3,043 |
) |
|
|
6,518 |
|
|
|
(8,825 |
) |
Amortization of intangibles and other assets included in net operating income (“NOI”) |
|
26 |
|
|
|
15 |
|
|
|
50 |
|
|
|
(258 |
) |
Share-based compensation, net of amounts capitalized |
|
2,318 |
|
|
|
2,247 |
|
|
|
8,544 |
|
|
|
8,700 |
|
Amortization of deferred financing costs |
|
681 |
|
|
|
619 |
|
|
|
2,580 |
|
|
|
2,297 |
|
Amortization of net debt discounts, net of amounts capitalized |
|
1,004 |
|
|
|
615 |
|
|
|
2,994 |
|
|
|
2,440 |
|
Replacement capital expenditures |
|
(21,498 |
) |
|
|
(43,283 |
) |
|
|
(93,494 |
) |
|
|
(95,886 |
) |
Other |
|
336 |
|
|
|
158 |
|
|
|
(84 |
) |
|
|
980 |
|
Diluted adjusted funds from operations available to common share and common unit holders (“Diluted AFFO”) |
$ |
54,280 |
|
|
$ |
26,122 |
|
|
$ |
203,021 |
|
|
$ |
178,413 |
|
Diluted FFO per share |
$ |
0.62 |
|
|
$ |
0.60 |
|
|
$ |
2.41 |
|
|
$ |
2.35 |
|
Diluted FFO per share, as adjusted for comparability |
$ |
0.62 |
|
|
$ |
0.60 |
|
|
$ |
2.42 |
|
|
$ |
2.36 |
|
Dividends/distributions per common share/unit |
$ |
0.285 |
|
|
$ |
0.275 |
|
|
$ |
1.140 |
|
|
$ |
1.100 |
|
COPT Defense Properties Summary Financial Data (unaudited) (Dollars and shares in thousands, except per share data) |
|||||||||||||
|
December 31,
|
|
December 31,
|
||||||||||
Balance Sheet Data |
|
|
|
||||||||||
Properties, net of accumulated depreciation |
$ |
3,503,678 |
|
|
$ |
3,556,398 |
|
||||||
Total assets |
$ |
4,246,966 |
|
|
$ |
4,257,275 |
|
||||||
Debt per balance sheet |
$ |
2,416,287 |
|
|
$ |
2,231,794 |
|
||||||
Total liabilities |
$ |
2,699,631 |
|
|
$ |
2,509,527 |
|
||||||
Redeemable noncontrolling interests |
$ |
23,580 |
|
|
$ |
26,293 |
|
||||||
Total equity |
$ |
1,523,755 |
|
|
$ |
1,721,455 |
|
||||||
Debt to assets |
|
56.9 |
% |
|
|
52.4 |
% |
||||||
Net debt to adjusted book |
|
40.6 |
% |
|
|
39.8 |
% |
||||||
|
|
|
|
||||||||||
Defense/IT Portfolio Data (as of period end) |
|
|
|
||||||||||
Number of operating properties |
|
190 |
|
|
|
186 |
|
||||||
Total operational square feet (in thousands) |
|
21,719 |
|
|
|
20,869 |
|
||||||
% Occupied |
|
96.2 |
% |
|
|
94.1 |
% |
||||||
% Leased |
|
97.2 |
% |
|
|
96.7 |
% |
||||||
|
For the Three Months Ended
|
For the Years Ended
|
|||||||||||
2023 |
|
2022 |
2023 |
2022 |
|||||||||
GAAP |
|
|
|
||||||||||
Payout ratio: |
|
|
|
||||||||||
Net income |
93.7 |
% |
|
60.3 |
% |
|
|
N/A |
|
|
|
70.2 |
% |
Debt ratios: |
|
|
|
|
|
|
|
||||||
Net income to interest expense ratio |
1.7x |
|
|
3.1x |
|
|
|
N/A |
|
|
|
2.9x |
|
Debt to net income ratio |
17.3x |
|
|
10.7x |
|
|
|
N/A |
|
|
|
N/A |
|
Non-GAAP |
|
|
|
|
|
|
|
||||||
Payout ratios: |
|
|
|
|
|
|
|
||||||
Diluted FFO |
45.7 |
% |
|
45.5 |
% |
|
|
47.1 |
% |
|
|
46.6 |
% |
Diluted FFO, as adjusted for comparability |
45.6 |
% |
|
45.4 |
% |
|
|
47.0 |
% |
|
|
46.5 |
% |
Diluted AFFO |
59.7 |
% |
|
119.7 |
% |
|
|
63.9 |
% |
|
|
70.1 |
% |
Debt ratios: |
|
|
|
|
|
|
|
||||||
Adjusted EBITDA fixed charge coverage ratio |
4.4x |
|
|
4.7x |
|
|
|
4.7x |
|
|
|
5.1x |
|
Net debt to in-place adjusted EBITDA ratio |
6.1x |
|
|
6.3x |
|
|
|
N/A |
|
|
|
N/A |
|
Pro forma net debt to in-place adjusted EBITDA ratio (1) |
N/A |
|
|
6.0x |
|
|
|
N/A |
|
|
|
N/A |
|
Net debt adj. for fully-leased development to in-place adj. EBITDA ratio |
6.0x |
|
|
6.1x |
|
|
|
N/A |
|
|
|
N/A |
|
Pro forma net debt adj. for fully-leased development to in-place adj. EBITDA ratio (1) |
N/A |
|
|
5.7x |
|
|
|
N/A |
|
|
|
N/A |
|
|
|
|
|
|
|
|
|
||||||
Reconciliation of denominators for per share measures |
|
|
|
|
|
|
|
||||||
Denominator for diluted EPS |
112,631 |
|
|
112,633 |
|
|
|
112,178 |
|
|
|
112,620 |
|
Weighted average common units |
1,514 |
|
|
1,476 |
|
|
|
1,509 |
|
|
|
1,454 |
|
Dilutive effect of additional share-based compensation awards |
— |
|
|
— |
|
|
|
424 |
|
|
|
— |
|
Redeemable noncontrolling interests |
— |
|
|
— |
|
|
|
38 |
|
|
|
— |
|
Denominator for diluted FFO per share and as adjusted for comparability |
114,145 |
|
|
114,109 |
|
|
|
114,149 |
|
|
|
114,074 |
|
| (1) | Includes, for the 12/31/22 period, adjustments associated with our sale on 1/10/23 of a 90% interest in three data center shell properties. |
COPT Defense Properties Summary Financial Data (unaudited) (in thousands) |
|||||||||||||||
|
For the Three Months Ended
|
|
For the Years Ended
|
||||||||||||
|
2023 |
|
2022 |
|
2023 |
|
2022 |
||||||||
Numerators for Payout Ratios |
|
|
|
|
|
|
|
||||||||
Dividends on unrestricted common and deferred shares |
$ |
31,998 |
|
|
$ |
30,844 |
|
|
$ |
127,978 |
|
|
$ |
123,367 |
|
Distributions on unrestricted common units |
|
430 |
|
|
|
406 |
|
|
|
1,725 |
|
|
|
1,623 |
|
Dividends and distributions on restricted shares and units |
|
209 |
|
|
|
134 |
|
|
|
828 |
|
|
|
567 |
|
Total dividends and distributions for GAAP payout ratio |
|
32,637 |
|
|
|
31,384 |
|
|
|
130,531 |
|
|
|
125,557 |
|
Dividends and distributions on antidilutive shares and units |
|
(212 |
) |
|
|
(121 |
) |
|
|
(835 |
) |
|
|
(516 |
) |
Dividends and distributions for non-GAAP payout ratios |
$ |
32,425 |
|
|
$ |
31,263 |
|
|
$ |
129,696 |
|
|
$ |
125,041 |
|
|
|
|
|
|
|
|
|
||||||||
Reconciliation of net income (loss) to earnings before interest, income taxes, depreciation and amortization for real estate (“EBITDAre”), adjusted EBITDA and in-place adjusted EBITDA |
|
|
|
|
|
|
|
||||||||
Net income (loss) |
$ |
34,820 |
|
|
$ |
52,087 |
|
|
$ |
(74,347 |
) |
|
$ |
178,822 |
|
Interest expense |
|
20,383 |
|
|
|
16,819 |
|
|
|
71,142 |
|
|
|
61,174 |
|
Income tax expense |
|
121 |
|
|
|
223 |
|
|
|
588 |
|
|
|
447 |
|
Real estate-related depreciation and amortization |
|
36,735 |
|
|
|
36,907 |
|
|
|
148,950 |
|
|
|
141,230 |
|
Other depreciation and amortization |
|
619 |
|
|
|
602 |
|
|
|
2,445 |
|
|
|
2,363 |
|
Impairment losses on real estate |
|
— |
|
|
|
— |
|
|
|
252,797 |
|
|
|
— |
|
Gain on sales of real estate from continuing and discontinued operations |
|
— |
|
|
|
(19,238 |
) |
|
|
(49,392 |
) |
|
|
(47,814 |
) |
Adjustments from unconsolidated real estate JVs |
|
1,911 |
|
|
|
1,033 |
|
|
|
6,917 |
|
|
|
3,313 |
|
EBITDAre |
|
94,589 |
|
|
|
88,433 |
|
|
|
359,100 |
|
|
|
339,535 |
|
Credit loss (recoveries) expense |
|
(1,288 |
) |
|
|
(1,331 |
) |
|
|
(611 |
) |
|
|
271 |
|
Business development expenses |
|
445 |
|
|
|
794 |
|
|
|
1,393 |
|
|
|
1,891 |
|
Executive transition costs |
|
188 |
|
|
|
387 |
|
|
|
824 |
|
|
|
730 |
|
Loss on early extinguishment of debt |
|
— |
|
|
|
267 |
|
|
|
— |
|
|
|
609 |
|
Gain on early extinguishment of debt on unconsolidated real estate JVs |
|
— |
|
|
|
(168 |
) |
|
|
— |
|
|
|
(168 |
) |
Net gain on other investments |
|
— |
|
|
|
(595 |
) |
|
|
(25 |
) |
|
|
(1,159 |
) |
Adjusted EBITDA |
|
93,934 |
|
|
|
87,787 |
|
|
$ |
360,681 |
|
|
$ |
341,709 |
|
Pro forma NOI adjustment for property changes within period |
|
1,341 |
|
|
|
2,704 |
|
|
|
|
|
||||
Change in collectability of deferred rental revenue |
|
(198 |
) |
|
|
— |
|
|
|
|
|
||||
In-place adjusted EBITDA |
$ |
95,077 |
|
|
$ |
90,491 |
|
|
|
|
|
||||
Pro forma NOI adjustment from subsequent event transactions |
|
N/A |
|
|
|
(2,903 |
) |
|
|
|
|
||||
Pro forma in-place adjusted EBITDA |
$ |
95,077 |
|
|
$ |
87,588 |
|
|
|
|
|
||||
|
|
|
|
|
|
|
|
||||||||
Reconciliations of tenant improvements and incentives, building improvements and leasing costs for operating properties to replacement capital expenditures |
|
|
|
|
|
|
|
||||||||
Tenant improvements and incentives |
$ |
7,850 |
|
|
$ |
33,439 |
|
|
$ |
74,912 |
|
|
$ |
62,952 |
|
Building improvements |
|
14,762 |
|
|
|
8,468 |
|
|
|
25,976 |
|
|
|
29,528 |
|
Leasing costs |
|
2,440 |
|
|
|
4,389 |
|
|
|
9,634 |
|
|
|
11,480 |
|
Net (exclusions from) additions to tenant improvements and incentives |
|
(189 |
) |
|
|
(75 |
) |
|
|
(12,170 |
) |
|
|
2,150 |
|
Excluded building improvements and leasing costs |
|
(3,365 |
) |
|
|
(2,938 |
) |
|
|
(4,858 |
) |
|
|
(10,224 |
) |
Replacement capital expenditures |
$ |
21,498 |
|
|
$ |
43,283 |
|
|
$ |
93,494 |
|
|
$ |
95,886 |
|
COPT Defense Properties Summary Financial Data (unaudited) (in thousands) |
|||||||||||||||
|
For the Three Months Ended
|
|
For the Years Ended
|
||||||||||||
|
2023 |
|
2022 |
|
2023 |
|
2022 |
||||||||
Reconciliation of interest expense to the denominator for fixed charge coverage-Adjusted EBITDA |
|
|
|
|
|
|
|
||||||||
Interest expense |
$ |
20,383 |
|
|
$ |
16,819 |
|
|
$ |
71,142 |
|
|
$ |
61,174 |
|
Less: Amortization of deferred financing costs |
|
(681 |
) |
|
|
(619 |
) |
|
|
(2,580 |
) |
|
|
(2,297 |
) |
Less: Amortization of net debt discounts, net of amounts capitalized |
|
(1,004 |
) |
|
|
(615 |
) |
|
|
(2,994 |
) |
|
|
(2,440 |
) |
COPT Defense’s share of interest expense of unconsolidated real estate JVs, excluding amortization of deferred financing costs and net debt premium and loss on interest rate derivatives |
|
819 |
|
|
|
423 |
|
|
|
3,188 |
|
|
|
1,123 |
|
Scheduled principal amortization |
|
763 |
|
|
|
864 |
|
|
|
3,052 |
|
|
|
3,333 |
|
Capitalized interest |
|
1,028 |
|
|
|
1,835 |
|
|
|
4,479 |
|
|
|
6,709 |
|
Denominator for fixed charge coverage-Adjusted EBITDA |
$ |
21,308 |
|
|
$ |
18,707 |
|
|
$ |
76,287 |
|
|
$ |
67,602 |
|
|
|
|
|
|
|
|
|
||||||||
Reconciliation of net income (loss) to NOI from real estate operations, same property NOI from real estate operations and same property cash NOI from real estate operations |
|
|
|
|
|
|
|
||||||||
Net income (loss) |
$ |
34,820 |
|
|
$ |
52,087 |
|
|
$ |
(74,347 |
) |
|
$ |
178,822 |
|
Construction contract and other service revenues |
|
(18,167 |
) |
|
|
(24,062 |
) |
|
|
(60,179 |
) |
|
|
(154,632 |
) |
Depreciation and other amortization associated with real estate operations |
|
36,735 |
|
|
|
36,907 |
|
|
|
148,950 |
|
|
|
141,230 |
|
Construction contract and other service expenses |
|
17,167 |
|
|
|
23,454 |
|
|
|
57,416 |
|
|
|
149,963 |
|
Impairment losses |
|
— |
|
|
|
— |
|
|
|
252,797 |
|
|
|
— |
|
General and administrative expenses |
|
8,240 |
|
|
|
7,766 |
|
|
|
31,105 |
|
|
|
27,461 |
|
Leasing expenses |
|
2,308 |
|
|
|
2,235 |
|
|
|
8,932 |
|
|
|
8,337 |
|
Business development expenses and land carry costs |
|
797 |
|
|
|
1,157 |
|
|
|
2,732 |
|
|
|
3,193 |
|
Interest expense |
|
20,383 |
|
|
|
16,819 |
|
|
|
71,142 |
|
|
|
61,174 |
|
Interest and other income, net |
|
(5,659 |
) |
|
|
(4,671 |
) |
|
|
(12,587 |
) |
|
|
(9,070 |
) |
Gain on sales of real estate from continuing operations |
|
— |
|
|
|
(19,238 |
) |
|
|
(49,392 |
) |
|
|
(19,250 |
) |
Loss on early extinguishment of debt |
|
— |
|
|
|
267 |
|
|
|
— |
|
|
|
609 |
|
Equity in loss (income) of unconsolidated entities |
|
240 |
|
|
|
(229 |
) |
|
|
261 |
|
|
|
(1,743 |
) |
Unconsolidated real estate JVs NOI allocable to COPT Defense included in equity in (loss) income of unconsolidated entities |
|
1,671 |
|
|
|
1,095 |
|
|
|
6,659 |
|
|
|
4,327 |
|
Income tax expense |
|
121 |
|
|
|
223 |
|
|
|
588 |
|
|
|
447 |
|
Discontinued operations |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(29,573 |
) |
Revenues from real estate operations from discontinued operations |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
1,980 |
|
Property operating expenses from discontinued operations |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(971 |
) |
NOI from real estate operations |
|
98,656 |
|
|
|
93,810 |
|
|
|
384,077 |
|
|
|
362,304 |
|
Non-Same Property NOI from real estate operations |
|
(11,705 |
) |
|
|
(9,015 |
) |
|
|
(39,244 |
) |
|
|
(27,991 |
) |
Same Property NOI from real estate operations |
|
86,951 |
|
|
|
84,795 |
|
|
|
344,833 |
|
|
|
334,313 |
|
Straight line rent adjustments and lease incentive amortization |
|
7,947 |
|
|
|
319 |
|
|
|
25,631 |
|
|
|
(2,729 |
) |
Amortization of acquired above- and below-market rents |
|
(121 |
) |
|
|
(131 |
) |
|
|
(536 |
) |
|
|
(844 |
) |
Lease termination fees, net |
|
(717 |
) |
|
|
(1,026 |
) |
|
|
(3,745 |
) |
|
|
(2,237 |
) |
Tenant funded landlord assets and lease incentives |
|
(7,501 |
) |
|
|
(1,068 |
) |
|
|
(25,244 |
) |
|
|
(5,915 |
) |
Cash NOI adjustments in unconsolidated real estate JVs |
|
(58 |
) |
|
|
(81 |
) |
|
|
(267 |
) |
|
|
(358 |
) |
Same Property Cash NOI from real estate operations |
$ |
86,501 |
|
|
$ |
82,808 |
|
|
$ |
340,672 |
|
|
$ |
322,230 |
|
COPT Defense Properties Summary Financial Data (unaudited) (in thousands) |
||||||||
|
|
December 31,
|
|
December 31,
|
||||
Reconciliation of total assets to adjusted book |
|
|
|
|
||||
Total assets |
|
$ |
4,246,966 |
|
|
$ |
4,257,275 |
|
Accumulated depreciation |
|
|
1,400,162 |
|
|
|
1,267,434 |
|
Accumulated depreciation included in assets held for sale |
|
|
— |
|
|
|
6,014 |
|
Accumulated amortization of intangibles on property acquisitions and deferred leasing costs |
|
|
228,484 |
|
|
|
222,779 |
|
COPT Defense’s share of liabilities of unconsolidated real estate JVs |
|
|
60,583 |
|
|
|
52,404 |
|
COPT Defense’s share of accumulated depreciation and amortization of unconsolidated real estate JVs |
|
|
9,528 |
|
|
|
6,078 |
|
Less: Property - operating lease liabilities |
|
|
(33,931 |
) |
|
|
(28,759 |
) |
Less: Property - finance lease liabilities |
|
|
(415 |
) |
|
|
— |
|
Less: Cash and cash equivalents |
|
|
(167,820 |
) |
|
|
(12,337 |
) |
Less: COPT Defense’s share of cash of unconsolidated real estate JVs |
|
|
(852 |
) |
|
|
(456 |
) |
Adjusted book |
|
$ |
5,742,705 |
|
|
$ |
5,770,432 |
|
|
|
December 31,
|
|
December 31,
|
||||
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 |
|
$ |
2,416,287 |
|
|
$ |
2,231,794 |
|
Net discounts and deferred financing costs |
|
|
28,713 |
|
|
|
23,160 |
|
COPT Defense’s share of unconsolidated JV gross debt |
|
|
52,613 |
|
|
|
52,100 |
|
Gross debt |
|
|
2,497,613 |
|
|
|
2,307,054 |
|
Less: Cash and cash equivalents |
|
|
(167,820 |
) |
|
|
(12,337 |
) |
Less: COPT Defense’s share of cash of unconsolidated real estate JVs |
|
|
(852 |
) |
|
|
(456 |
) |
Net debt |
|
|
2,328,941 |
|
|
|
2,294,261 |
|
Costs incurred on fully-leased development properties |
|
|
(53,914 |
) |
|
|
(95,972 |
) |
Net debt adjusted for fully-leased development |
|
$ |
2,275,027 |
|
|
$ |
2,198,289 |
|
|
|
|
|
|
||||
Net debt |
|
$ |
2,328,941 |
|
|
$ |
2,294,261 |
|
Pro forma debt adjustments from subsequent event transaction proceeds |
|
|
N/A |
|
|
|
(189,000 |
) |
Pro forma net debt |
|
|
2,328,941 |
|
|
|
2,105,261 |
|
Costs incurred on fully-leased development properties |
|
|
(53,914 |
) |
|
|
(95,972 |
) |
Pro forma net debt adjusted for fully-leased development |
|
$ |
2,275,027 |
|
|
$ |
2,009,289 |
|
