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COPT Reports Third Quarter 2013 Results

The conference calls will also be available via live webcast in the Investor Relations section of the Company’s website at www.copt.com. A replay of the conference calls will be immediately available via webcast in the Investor Relations 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 focuses primarily on serving the specialized requirements of U.S. Government agencies and defense contractors, most of whom are engaged in defense information technology and national security-related activities. The Company generally acquires, develops, manages and leases office and data center properties concentrated in large office parks primarily located near knowledge-based government demand drivers and/or in targeted markets or submarkets in the Greater Washington, DC/Baltimore region. As of September 30, 2013, the Company’s consolidated portfolio consisted of 210 office properties totaling 19.2 million rentable square feet. COPT is an S&P MidCap 400 company.

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 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;
  • the Company’s ability to sell properties included in its Strategic Reallocation Plan;
  • 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;
  • 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, 2012.

   
Corporate Office Properties Trust
Summary Financial Data
(unaudited)
(in thousands, except per share data)
 

For the Three Months Ended September 30,

For the Nine Months Ended September 30,

2013   2012 2013   2012
Revenues
Real estate revenues $ 119,040 $ 114,362 $ 355,127 $ 335,231
Construction contract and other service revenues 16,991   15,283   52,048   53,812  
Total revenues 136,031   129,645   407,175   389,043  
Expenses
Property operating expenses 43,482 41,474 129,409 122,102
Depreciation and amortization associated with real estate operations 29,210 28,604 86,239 84,633
Construction contract and other service expenses 16,306 14,410 49,165 51,302
Impairment losses 16,300 46,096 16,300 41,260
General and administrative expenses 6,237 5,062 17,213 20,531
Leasing expenses 1,790 1,315 5,217 4,266
Business development expenses and land carry costs 1,383   1,632   4,069   4,506  
Total operating expenses 114,708   138,593   307,612   328,600  
Operating income (loss) 21,323 (8,948 ) 99,563 60,443
Interest expense (21,242 ) (23,239 ) (66,851 ) (71,909 )
Interest and other (loss) income (3 ) 1,095 2,949 3,152
Loss on early extinguishment of debt (374 ) (768 ) (27,028 ) (937 )
(Loss) income from continuing operations before equity in income (loss) of unconsolidated entities and income taxes (296 ) (31,860 ) 8,633 (9,251 )
Equity in income (loss) of unconsolidated entities 44 (246 ) 211 (522 )
Income tax expense (24 ) (106 ) (61 ) (327 )
(Loss) income from continuing operations (276 ) (32,212 ) 8,783 (10,100 )
Discontinued operations (1,724 ) 11,447   (2,594 ) 11,410  
(Loss) income before gain on sales of real estate (2,000 ) (20,765 ) 6,189 1,310
Gain on sales of real estate, net of income taxes     2,683   21  
Net (loss) income (2,000 ) (20,765 ) 8,872 1,331
Net loss (income) attributable to noncontrolling interests
Common units in the Operating Partnership 232 1,533 474 738
Preferred units in the Operating Partnership (165 ) (165 ) (495 ) (495 )
Other consolidated entities (1,031 ) 235   (2,160 ) 864  
Net (loss) income attributable to COPT (2,964 ) (19,162 ) 6,691 2,438
Preferred share dividends (4,490 ) (6,546 ) (15,481 ) (14,738 )
Issuance costs associated with redeemed preferred shares   (1,827 ) (2,904 ) (1,827 )
Net loss attributable to COPT common shareholders $ (7,454 ) $ (27,535 ) $ (11,694 ) $ (14,127 )
 
Earnings per share (“EPS”) computation:
Numerator for diluted EPS:
Net (loss) income attributable to common shareholders $ (7,454 ) $ (27,535 ) $ (11,694 ) $ (14,127 )
Amount allocable to restricted shares (97 ) (111 ) (317 ) (357 )
Numerator for diluted EPS $ (7,551 ) $ (27,646 ) $ (12,011 ) $ (14,484 )
 
Denominator:
Weighted average common shares - basic and diluted 86,760   71,688   84,547   71,590  
Diluted EPS $ (0.09 ) $ (0.39 ) $ (0.14 ) $ (0.20 )
 
   
Corporate Office Properties Trust
Summary Financial Data
(unaudited)
(in thousands, except per share data)
 

For the Three Months Ended September 30,

For the Nine Months Ended September 30,

2013   2012 2013   2012
Net (loss) income $ (2,000 ) $ (20,765 ) $ 8,872 $ 1,331
Real estate-related depreciation and amortization 29,210 30,624 86,397 93,377
Impairment losses on previously depreciated operating properties 22,074 55,829 31,126 70,016
Gain on sales of previously depreciated operating properties (16,913 ) (20,936 )
Depreciation and amortization on unconsolidated real estate entities   113     346  
Funds from operations (“FFO”) 49,284 48,888 126,395 144,134

Noncontrolling interests - preferred units in the Operating Partnership

(165 ) (165 ) (495 ) (495 )
FFO allocable to other noncontrolling interests (833 ) (571 ) (2,830 ) (1,251 )
Preferred share dividends (4,490 ) (6,546 ) (15,481 ) (14,738 )
Issuance costs associated with redeemed preferred shares (1,827 ) (2,904 ) (1,827 )
Basic and diluted FFO allocable to restricted shares (178 ) (214 ) (450 ) (728 )
Basic and diluted FFO available to common share and common unit holders (“Basic and diluted FFO”) 43,618 39,565 104,235 125,095
Operating property acquisition costs 222 229
Gain on sales of non-operating properties (2,683 ) (33 )
Impairment recoveries on non-operating properties (5,246 )
Income tax expense on impairment recoveries on non-operating properties 673
Loss (gain) on early extinguishment of debt 374 (970 ) 27,028 (799 )
Issuance costs associated with redeemed preferred shares   1,827   2,904   1,827  
Diluted FFO available to common share and common unit holders, as adjusted for comparability 43,992 40,644 131,484 121,746
Straight line rent adjustments (980 ) (2,595 ) (6,824 ) (6,631 )
Amortization of intangibles included in net operating income 230 251 579 659
Share-based compensation, net of amounts capitalized 1,573 1,703 4,869 8,262
Amortization of deferred financing costs 1,321 1,527 4,292 4,696
Amortization of net debt discounts, net of amounts capitalized (121 ) 683 1,063 2,028
Amortization of settled debt hedges 16 15 46 46
Recurring capital expenditures (10,528 ) (8,518 ) (21,698 ) (16,467 )
Diluted adjusted funds from operations available to common share and common unit holders (“Diluted AFFO”) $ 35,503   $ 33,710   $ 113,811   $ 114,339  
Diluted FFO per share $ 0.48 $ 0.52 $ 1.18 $ 1.65
Diluted FFO per share, as adjusted for comparability $ 0.49 $ 0.53 $ 1.49 $ 1.60
Dividends/distributions per common share/unit $ 0.2750 $ 0.2750 $ 0.8250 $ 0.8250
 
   
Corporate Office Properties Trust
Summary Financial Data
(unaudited)
(Dollars and shares in thousands, except per share data)
 

September 30, 2013

December 31, 2012

Balance Sheet Data
Properties, net of accumulated depreciation $ 3,239,746 $ 3,163,044
Total assets 3,755,588 3,653,759
Debt, net 2,135,031 2,019,168
Total liabilities 2,304,732 2,206,962
Redeemable noncontrolling interest 16,789 10,298
Equity 1,434,067 1,436,499
Debt to adjusted book 46.6 % 45.8 %
Debt to total market capitalization 47.4 % 45.0 %
 
Consolidated Property Data (as of period end)
Number of operating properties 210 208
Total net rentable square feet owned (in thousands) 19,204 18,831
Occupancy % 88.5 % 87.8 %
Leased % 89.7 % 89.2 %
 
Reconciliation of total assets to denominator for debt to adjusted book
Total assets $ 3,755,588 $ 3,653,759
Accumulated depreciation 612,369 555,975
Accumulated depreciation included in assets held for sale 8,845 12,201
Accumulated amortization of real estate intangibles and deferred leasing costs 195,559 181,834
Accumulated amortization of real estate intangibles and deferred leasing costs included in assets held for sale 9,224   9,199  
Denominator for debt to adjusted book $ 4,581,585   $ 4,412,968  
 
   

For the Three Months Ended September 30,

For the Nine Months Ended September 30,

2013   2012 2013   2012
Payout ratios
Diluted FFO 57.6 % 53.1 % 71.4 % 50.3 %
Diluted FFO, as adjusted for comparability 57.1 % 51.7 % 56.6 % 51.7 %
Diluted AFFO 70.7 % 62.3 % 65.4 % 55.1 %
Adjusted EBITDA interest coverage ratio 3.6x 3.4x 3.6x 3.2x
Adjusted EBITDA fixed charge coverage ratio 2.9x 2.6x 2.8x 2.6x
Debt to Adjusted EBITDA ratio (1) 7.4x 7.5x 7.3x 7.6x
 

Reconciliation of denominators for diluted EPS and diluted FFO per share

Denominator for diluted EPS 86,760 71,688 84,547 71,590
Weighted average common units 3,804 4,233 3,832 4,256
Anti-dilutive EPS effect of share-based compensation awards 45   73   63   48  
Denominator for diluted FFO per share 90,609   75,994   88,442   75,894  
 
Reconciliation of FFO to FFO, as adjusted for comparability
FFO, per NAREIT $ 49,284 $ 48,888 $ 126,395 $ 144,134
Gain on sales of non-operating properties (2,683 ) (33 )
Impairment recoveries on non-operating properties, net of associated tax (4,573 )
Operating property acquisition costs 222 229
Loss (gain) on early extinguishment of debt, continuing and discontinued operations 374 (970 ) 27,028 (799 )
Issuance costs associated with redeemed preferred shares   1,827   2,904   1,827  
FFO, as adjusted for comparability $ 49,658   $ 49,967   $ 153,644   $ 140,785  
 

(1) Represents debt as of period end divided by 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)
 

For the Three Months Ended September 30,

For the Nine Months Ended September 30,

2013   2012 2013   2012
Reconciliation of common share dividends to dividends and distributions for payout ratios
Common share dividends $ 24,022 $ 19,837 $ 71,220 $ 59,465
Common unit distributions 1,094   1,157   3,186   3,498  
Dividends and distributions for payout ratios $ 25,116   $ 20,994   $ 74,406   $ 62,963  
 
Reconciliation of GAAP net (loss) income to adjusted earnings before interest, income taxes, depreciation and amortization (“Adjusted EBITDA”)
Net (loss) income $ (2,000 ) $ (20,765 ) $ 8,872 $ 1,331
Interest expense on continuing operations 21,242 23,239 66,851 71,909
Interest expense on discontinued operations 68 127 199 2,107
Income tax expense 24 106 61 327
Real estate-related depreciation and amortization 29,210 30,624 86,397 93,377
Depreciation of furniture, fixtures and equipment 502 624 1,559 1,871
Impairment losses 22,074 55,829 31,126 64,770
Loss (gain) on early extinguishment of debt on continuing and discontinued operations 374 (970 ) 27,028 (799 )
Gain on sales of operating properties (16,913 ) (20,936 )
Gain on sales of non-operational properties (2,683 ) (33 )
Net loss (gain) on investments in unconsolidated entities included in interest and other income 1,006 (81 ) (15 ) (597 )
Operating property acquisition costs   222     229  
Adjusted EBITDA $ 72,500   $ 72,042   $ 219,395   $ 213,556  
 
Reconciliation of interest expense from continuing operations to the denominators for interest coverage-Adjusted EBITDA and fixed charge coverage-Adjusted EBITDA
Interest expense from continuing operations $ 21,242 $ 23,239 $ 66,851 $ 71,909
Interest expense from discontinued operations 68 127 199 2,107
Less: Amortization of deferred financing costs (1,321 ) (1,527 ) (4,292 ) (4,696 )
Less: Amortization of net debt discount, net of amounts capitalized 121   (683 ) (1,063 ) (2,028 )
Denominator for interest coverage-Adjusted EBITDA 20,110 21,156 61,695 67,292
Preferred share dividends 4,490 6,546 15,481 14,738
Preferred unit distributions 165   165   495   495  
Denominator for fixed charge coverage-Adjusted EBITDA $ 24,765   $ 27,867   $ 77,671   $ 82,525  
 
       
Corporate Office Properties Trust
Summary Financial Data
(unaudited)
(Dollars in thousands)
 
Reconciliations of tenant improvements and incentives, capital improvements and leasing costs for operating properties to recurring capital expenditures
Tenant improvements and incentives on operating properties $ 4,894 $ 7,774 $ 10,983 $ 11,103
Building improvements on operating properties 4,857 4,646 8,995 6,813
Leasing costs for operating properties 2,260 947 5,114 5,109
Less: Nonrecurring tenant improvements and incentives on operating properties (230 ) (3,852 ) (238 ) (4,510 )
Less: Nonrecurring building improvements on operating properties (1,266 ) (940 ) (3,113 ) (1,919 )
Less: Nonrecurring leasing costs for operating properties 14 (130 ) (36 ) (209 )
Add: Recurring capital expenditures on operating properties held through joint ventures (1 ) 73   (7 ) 80  
Recurring capital expenditures $ 10,528   $ 8,518   $ 21,698   $ 16,467  
 
Reconciliation of same office property net operating income to same office property cash net operating income and same office property cash net operating income, excluding gross lease termination fees
Same office property net operating income $ 64,601 $ 63,968 $ 193,324 $ 189,762
Less: Straight-line rent adjustments (1,029 ) (1,584 ) (3,149 ) (4,992 )
Less: Amortization of deferred market rental revenue 22 (17 ) (43 ) (95 )
Add: Amortization of above-market cost arrangements 320   371   958   1,095  
Same office property cash net operating income 63,914 62,738 191,090 185,770
Less: Lease termination fees, gross (306 ) (636 ) (1,280 ) (1,507 )
Same office property cash net operating income, excluding gross lease termination fees $ 63,608   $ 62,102   $ 189,810   $ 184,263  
 




Stock quotes in this article: OFC 

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