10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-Q

(Mark one)

ý QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2015

or

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number 1-14023 (Corporate Office Properties Trust)

Commission file number 333-189188 (Corporate Office Properties, L.P.)

Corporate Office Properties Trust

Corporate Office Properties, L.P.

(Exact name of registrant as specified in its charter)

Corporate Office Properties Trust	Maryland	23-2947217
	(State or other jurisdiction of	(IRS Employer
	incorporation or organization)	Identification No.)
Corporate Office Properties, L.P.	Delaware	23-2930022
	(State or other jurisdiction of	(IRS Employer
	incorporation or organization)	Identification No.)

6711 Columbia Gateway Drive, Suite 300, Columbia, MD	21046
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code:  (443) 285-5400

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Corporate Office Properties Trust ý Yes   o No

Corporate Office Properties, L.P. ý Yes   o No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Corporate Office Properties Trust ý Yes   o No

Corporate Office Properties, L.P. ý Yes   o No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Corporate Office Properties Trust

Large accelerated filer ý	Accelerated filer o	Non-accelerated filer o	Smaller reporting company o
		(Do not check if a smaller reporting company)

Corporate Office Properties, L.P.

Large accelerated filer o	Accelerated filer o	Non-accelerated filer ý	Smaller reporting company o
		(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act)

Corporate Office Properties Trust o Yes   ý No

Corporate Office Properties, L.P. o Yes   ý No

As of October 16, 2015, 94,533,250 of Corporate Office Properties Trust’s Common Shares of Beneficial Interest, $0.01 par value, were issued and outstanding.

EXPLANATORY NOTE

This report combines the quarterly reports on Form 10-Q for the period ended September 30, 2015 of Corporate Office Properties Trust (“COPT”) and subsidiaries (collectively, the “Company”) and Corporate Office Properties, L.P. (“COPLP”) and subsidiaries (collectively, the “Operating Partnership”). Unless stated otherwise or the context otherwise requires, “we,” “our,” and “us” refer collectively to COPT, COPLP and their subsidiaries.

COPT is a real estate investment trust, or REIT, and the sole general partner of COPLP. As of September 30, 2015, COPT owned approximately 96.3% of the outstanding common units and approximately 95.5% of the outstanding preferred units in COPLP; the remaining common and preferred units in COPLP were owned by third parties. As the sole general partner of COPLP, COPT controls COPLP and can cause it to enter into major transactions including acquisitions, dispositions and refinancings and cause changes in its line of business, capital structure and distribution policies.

There are a few differences between the Company and the Operating Partnership which are reflected in this Form 10-Q. We believe it is important to understand the differences between the Company and the Operating Partnership in the context of how the Company and the Operating Partnership operate as an interrelated, consolidated company. COPT is a real estate investment trust, whose only material asset is its ownership of partnership interests of COPLP. As a result, COPT does not conduct business itself, other than acting as the sole general partner of COPLP, issuing public equity from time to time and guaranteeing certain debt of COPLP. COPT itself is not directly obligated under any indebtedness but guarantees some of the debt of COPLP. COPLP owns substantially all of the assets of COPT either directly or through its subsidiaries, conducts almost all of the operations of the business and is structured as a limited partnership with no publicly traded equity. Except for net proceeds from public equity issuances by COPT, which are contributed to COPLP in exchange for partnership units, COPLP generates the capital required by COPT’s business through COPLP’s operations, by COPLP’s direct or indirect incurrence of indebtedness or through the issuance of partnership units.

Noncontrolling interests and shareholders’ equity and partners’ capital are the main areas of difference between the consolidated financial statements of COPT and those of COPLP. The common limited partnership interests in COPLP not owned by COPT are accounted for as partners’ capital in COPLP’s consolidated financial statements and as noncontrolling interests in COPT’s consolidated financial statements. COPLP’s consolidated financial statements also reflect COPT’s noncontrolling interests in certain real estate partnerships, limited liability companies (“LLCs”), business trusts and corporations; the differences between shareholders’ equity, partners’ capital and noncontrolling interests result from the differences in the equity issued at the COPT and COPLP levels and in COPT’s noncontrolling interests in these real estate partnerships, LLCs, business trusts and corporations. The only other significant differences between the consolidated financial statements of COPT and those of COPLP are assets in connection with a non-qualified elective deferred compensation plan

(comprised primarily of mutual funds and equity securities) and the corresponding liability to the plan’s participants that are held directly by COPT.

We believe combining the quarterly reports on Form 10-Q of the Company and the Operating Partnership into this single report results in the following benefits:

• combined reports better reflect how management and the analyst community view the business as a single operating unit;

• combined reports enhance investors’ understanding of the Company and the Operating Partnership by enabling them to view the business as a whole and in the same manner as management;

• combined reports are more efficient for the Company and the Operating Partnership and result in savings in time, effort and expense; and

• combined reports are more efficient for investors by reducing duplicative disclosure and providing a single document for their review.

To help investors understand the significant differences between the Company and the Operating Partnership, this report presents the following separate sections for each of the Company and the Operating Partnership:

• consolidated financial statements;

• the following notes to the consolidated financial statements:

• Note 3, Fair Value Measurements of COPT and subsidiaries and COPLP and subsidiaries; and

• Note 16, Earnings per Share of COPT and subsidiaries and Earnings per Unit of COPLP and subsidiaries;

• “Item 2: Management’s Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources of COPT”; and

• “Item 2: Management’s Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources of COPLP.”

This report also includes separate sections under Part I, Item 4. Controls and Procedures and separate Exhibit 31 and Exhibit 32 certifications for each of COPT and COPLP to establish that the Chief Executive Officer and the Chief Financial Officer of each entity have made the requisite certifications and that COPT and COPLP are compliant with Rule 13a-15 and Rule 15d-14 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and 18 U.S.C. §1350.

TABLE OF CONTENTS

FORM 10-Q

		PAGE
PART I: FINANCIAL INFORMATION
Item 1:	Financial Statements:
Consolidated Financial Statements of Corporate Office Properties Trust
	Consolidated Balance Sheets as of September 30, 2015 and December 31, 2014 (unaudited)	3
	Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2015 and 2014 (unaudited)	4
	Consolidated Statements of Comprehensive Income for the Three and Nine Months Ended September 30, 2015 and 2014 (unaudited)	5
	Consolidated Statements of Equity for the Nine Months Ended September 30, 2015 and 2014 (unaudited)	6
	Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2015 and 2014 (unaudited)	7
Consolidated Financial Statements of Corporate Office Properties, L.P.
	Consolidated Balance Sheets as of September 30, 2015 and December 31, 2014 (unaudited)	9
	Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2015 and 2014 (unaudited)	10
	Consolidated Statements of Comprehensive Income for the Three and Nine Months Ended September 30, 2015 and 2014 (unaudited)	11
	Consolidated Statements of Equity for the Nine Months Ended September 30, 2015 and 2014 (unaudited)	12
	Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2015 and 2014 (unaudited)	13
Notes to Consolidated Financial Statements (unaudited)		15
Item 2:	Management’s Discussion and Analysis of Financial Condition and Results of Operations	37
Item 3:	Quantitative and Qualitative Disclosures About Market Risk	52
Item 4:	Controls and Procedures	53
PART II: OTHER INFORMATION
Item 1:	Legal Proceedings	54
Item 1A:	Risk Factors	54
Item 2:	Unregistered Sales of Equity Securities and Use of Proceeds	54
Item 3:	Defaults Upon Senior Securities	54
Item 4:	Mine Safety Disclosures	54
Item 5:	Other Information	54
Item 6:	Exhibits	55
SIGNATURES		56

2

PART I: FINANCIAL INFORMATION

ITEM 1. Financial Statements

Corporate Office Properties Trust and Subsidiaries

Consolidated Balance Sheets

(in thousands, except share data)

(unaudited)

	September 30, 2015			December 31, 2014
Assets
Properties, net:
Operating properties, net	$	2,932,843		$	2,751,488
Projects in development or held for future development	414,757			545,426
Total properties, net	3,347,600			3,296,914
Assets held for sale, net	150,572			14,339
Cash and cash equivalents	3,840			6,077
Restricted cash and marketable securities	9,286			9,069
Accounts receivable (net of allowance for doubtful accounts of $2,010 and $717, respectively)	19,962			26,901
Deferred rent receivable (net of allowance of $1,816 and $1,418, respectively)	103,064			95,910
Intangible assets on real estate acquisitions, net	106,174			43,854
Deferred leasing and financing costs, net	64,367			64,797
Investing receivables	46,821			52,147
Prepaid expenses and other assets, net	66,787			60,249
Total assets	$	3,918,473		$	3,670,257
Liabilities and equity
Liabilities:
Debt, net	$	2,121,240		$	1,920,057
Accounts payable and accrued expenses	98,551			123,035
Rents received in advance and security deposits	34,504			31,011
Dividends and distributions payable	30,182			29,862
Deferred revenue associated with operating leases	20,113			13,031
Interest rate derivatives	5,844			1,855
Other liabilities	8,524			12,105
Total liabilities	2,318,958			2,130,956
Commitments and contingencies (Note 17)
Redeemable noncontrolling interest	19,608			18,417
Equity:
Corporate Office Properties Trust’s shareholders’ equity:
Preferred Shares of beneficial interest at liquidation preference ($0.01 par value; 25,000,000 shares authorized; issued and outstanding of 7,431,667 at September 30, 2015 and December 31, 2014)	199,083			199,083
Common Shares of beneficial interest ($0.01 par value; 125,000,000 shares authorized, shares issued and outstanding of 94,533,670 at September 30, 2015 and 93,255,284 at December 31, 2014)	945			933
Additional paid-in capital	2,002,730			1,969,968
Cumulative distributions in excess of net income	(686,986		)	(717,264		)
Accumulated other comprehensive loss	(5,823		)	(1,297		)
Total Corporate Office Properties Trust’s shareholders’ equity	1,509,949			1,451,423
Noncontrolling interests in subsidiaries:
Common units in COPLP	50,992			51,534
Preferred units in COPLP	8,800			8,800
Other consolidated entities	10,166			9,127
Noncontrolling interests in subsidiaries	69,958			69,461
Total equity	1,579,907			1,520,884
Total liabilities, redeemable noncontrolling interest and equity	$	3,918,473		$	3,670,257

See accompanying notes to consolidated financial statements.

3

Corporate Office Properties Trust and Subsidiaries

Consolidated Statements of Operations

(in thousands, except per share data)

(unaudited)

	For the Three Months Ended September 30,						For the Nine Months Ended September 30,
	2015			2014			2015			2014
Revenues
Rental revenue	$	109,080		$	96,207		$	312,826		$	288,574
Tenant recoveries and other real estate operations revenue	24,606			22,069			71,761			70,538
Construction contract and other service revenues	17,058			34,739			97,554			80,390
Total revenues	150,744			153,015			482,141			439,502
Expenses
Property operating expenses	48,897			43,056			145,996			136,600
Depreciation and amortization associated with real estate operations	38,403			30,237			103,788			104,728
Construction contract and other service expenses	16,132			33,593			94,923			75,353
Impairment losses	2,307			66			3,545			1,368
General, administrative and leasing expenses	7,439			7,211			22,864			22,882
Business development expenses and land carry costs	5,573			1,430			10,986			4,107
Total operating expenses	118,751			115,593			382,102			345,038
Operating income	31,993			37,422			100,039			94,464
Interest expense	(24,121		)	(24,802		)	(66,727		)	(69,107		)
Interest and other income	692			1,191			3,217			3,775
Gain (loss) on early extinguishment of debt	85,745			(176		)	85,677			(446		)
Income from continuing operations before equity in income of unconsolidated entities and income taxes	94,309			13,635			122,206			28,686
Equity in income of unconsolidated entities	18			193			52			206
Income tax expense	(48		)	(101		)	(153		)	(257		)
Income from continuing operations	94,279			13,727			122,105			28,635
Discontinued operations	—			191			156			4
Income before gain on sales of real estate	94,279			13,918			122,261			28,639
Gain on sales of real estate	15			10,630			4,000			10,630
Net income	94,294			24,548			126,261			39,269
Net income attributable to noncontrolling interests:
Common units in COPLP	(3,357		)	(768		)	(4,231		)	(942		)
Preferred units in COPLP	(165		)	(165		)	(495		)	(495		)
Other consolidated entities	(972		)	(895		)	(2,599		)	(2,481		)
Net income attributable to COPT	89,800			22,720			118,936			35,351
Preferred share dividends	(3,552		)	(3,553		)	(10,657		)	(12,387		)
Issuance costs associated with redeemed preferred shares	—			—			—			(1,769		)
Net income attributable to COPT common shareholders	$	86,248		$	19,167		$	108,279		$	21,195
Net income attributable to COPT:
Income from continuing operations	$	89,800		$	22,537		$	118,783		$	35,342
Discontinued operations, net	—			183			153			9
Net income attributable to COPT	$	89,800		$	22,720		$	118,936		$	35,351
Basic earnings per common share (1)
Income from continuing operations	$	0.91		$	0.22		$	1.15		$	0.24
Discontinued operations	0.00			0.00			0.00			0.00
Net income attributable to COPT common shareholders	$	0.91		$	0.22		$	1.15		$	0.24
Diluted earnings per common share (1)
Income from continuing operations	$	0.91		$	0.22		$	1.15		$	0.24
Discontinued operations	0.00			0.00			0.00			0.00
Net income attributable to COPT common shareholders	$	0.91		$	0.22		$	1.15		$	0.24
Dividends declared per common share	$	0.275		$	0.275		$	0.825		$	0.825

(1) Basic and diluted earnings per common share are calculated based on amounts attributable to common shareholders of Corporate Office Properties Trust.

See accompanying notes to consolidated financial statements.

4

Corporate Office Properties Trust and Subsidiaries

Consolidated Statements of Comprehensive Income

(in thousands)

(unaudited)

	For the Three Months Ended September 30,						For the Nine Months Ended September 30,
	2015			2014			2015			2014
Net income	$	94,294		$	24,548		$	126,261		$	39,269
Other comprehensive (loss) income
Unrealized (losses) gains on interest rate derivatives	(3,638		)	1,015			(6,720		)	(4,738		)
Losses on interest rate derivatives included in interest expense	915			756			2,457			2,170
Equity in other comprehensive loss of equity method investee	—			—			(264		)	—
Other comprehensive (loss) income	(2,723		)	1,771			(4,527		)	(2,568		)
Comprehensive income	91,571			26,319			121,734			36,701
Comprehensive income attributable to noncontrolling interests	(4,453		)	(1,968		)	(7,324		)	(3,960		)
Comprehensive income attributable to COPT	$	87,118		$	24,351		$	114,410		$	32,741

See accompanying notes to consolidated financial statements.

5

Corporate Office Properties Trust and Subsidiaries

Consolidated Statements of Equity

(Dollars in thousands)

(unaudited)

	Preferred Shares			Common Shares		Additional Paid-in Capital			Cumulative Distributions in Excess of Net Income			Accumulated Other Comprehensive Income (Loss)			Noncontrolling Interests			Total
Balance at December 31, 2013 (87,394,512 common shares outstanding)	$	249,083		$	874	$	1,814,015		$	(641,868	)	$	3,480		$	71,665		$	1,497,249
Redemption of preferred shares (2,000,000 shares)	(50,000		)	—		1,769			(1,769		)	—			—			(50,000		)
Conversion of common units to common shares (117,149 shares)	—			1		1,544			—			—			(1,545		)	—
Costs associated with common shares issued to the public	—			—		(7		)	—			—			—			(7		)
Exercise of share options (57,888 shares)	—			—		1,359			—			—			—			1,359
Share-based compensation (142,182 shares issued, net of redemptions)	—			2		5,247			—			—			—			5,249
Redemption of vested equity awards	—			—		(1,389		)	—			—			—			(1,389		)
Adjustments to noncontrolling interests resulting from changes in ownership of COPLP	—			—		(248		)	—			—			248			—
Comprehensive income	—			—		—			35,351			(2,609		)	2,313			35,055
Dividends	—			—		—			(84,692		)	—			—			(84,692		)
Distributions to owners of common and preferred units in COPLP	—			—		—			—			—			(3,710		)	(3,710		)
Contributions from noncontrolling interests in other consolidated entities	—			—		—			—			—			3			3
Distributions to noncontrolling interests in other consolidated entities	—			—		—			—			—			(1,606		)	(1,606		)
Adjustment to arrive at fair value of redeemable noncontrolling interest	—			—		(7		)	—			—			—			(7		)
Balance at September 30, 2014 (87,711,731 common shares outstanding)	$	199,083		$	877	$	1,822,283		$	(692,978	)	$	871		$	67,368		$	1,397,504
Balance at December 31, 2014 (93,255,284 common shares outstanding)	$	199,083		$	933	$	1,969,968		$	(717,264	)	$	(1,297	)	$	69,461		$	1,520,884
Conversion of common units to common shares (160,160 shares)	—			2		2,149			—			—			(2,151		)	—
Common shares issued under at-the-market program (890,241 shares)	—			9		26,526			—			—			—			26,535
Exercise of share options (76,474 shares)	—			—		2,008			—			—			—			2,008
Share-based compensation (151,511 shares issued, net of redemptions)	—			1		5,599			—			—			—			5,600
Redemption of vested equity awards	—			—		(2,330		)	—			—			—			(2,330		)
Adjustments to noncontrolling interests resulting from changes in ownership of COPLP	—			—		(591		)	—			—			591			—
Comprehensive income	—			—		—			118,936			(4,526		)	5,634			120,044
Dividends	—			—		—			(88,658		)	—			—			(88,658		)
Distributions to owners of common and preferred units in COPLP	—			—		—			—			—			(3,530		)	(3,530		)
Distributions to noncontrolling interests in other consolidated entities	—			—		—			—			—			(47		)	(47		)
Adjustment to arrive at fair value of redeemable noncontrolling interest	—			—		(599		)	—			—			—			(599		)
Balance at September 30, 2015 (94,533,670 common shares outstanding)	$	199,083		$	945	$	2,002,730		$	(686,986	)	$	(5,823	)	$	69,958		$	1,579,907

See accompanying notes to consolidated financial statements.

6

Corporate Office Properties Trust and Subsidiaries

Consolidated Statements of Cash Flows

(in thousands)

(unaudited)

	For the Nine Months Ended September 30,
	2015			2014
Cash flows from operating activities
Revenues from real estate operations received	$	373,607		$	358,212
Construction contract and other service revenues received	104,817			62,170
Property operating expenses paid	(146,274		)	(141,489		)
Construction contract and other service expenses paid	(112,614		)	(58,218		)
General, administrative, leasing, business development and land carry costs paid	(29,620		)	(22,288		)
Interest expense paid	(46,278		)	(54,683		)
Payments in connection with early extinguishment of debt	(18		)	(104		)
Interest and other income received	4,130			448
Income taxes (paid) refunded	(8		)	200
Net cash provided by operating activities	147,742			144,248
Cash flows from investing activities
Acquisitions of operating properties and related intangible assets	(202,866		)	—
Construction, development and redevelopment	(174,434		)	(150,862		)
Tenant improvements on operating properties	(18,129		)	(17,754		)
Other capital improvements on operating properties	(12,610		)	(21,179		)
Proceeds from dispositions of properties	45,066			57,973
Investing receivables funded	(22		)	(3,610		)
Investing receivables payments received	5,114			10,278
Leasing costs paid	(8,603		)	(10,549		)
Increase in prepaid expenses and other assets associated with investing activities	(4,348		)	(1,260		)
Other	(457		)	(83		)
Net cash used in investing activities	(371,289		)	(137,046		)
Cash flows from financing activities
Proceeds from debt
Revolving Credit Facility	422,000			115,000
Unsecured senior notes	296,580			297,342
Other debt proceeds	50,000			11,569
Repayments of debt
Revolving Credit Facility	(418,000		)	(115,000		)
Scheduled principal amortization	(5,011		)	(4,914		)
Other debt repayments	(50,681		)	(183,059		)
Deferred financing costs paid	(5,377		)	(694		)
Net proceeds from issuance of common shares	28,567			1,352
Redemption of preferred shares	—			(50,000		)
Common share dividends paid	(77,641		)	(72,217		)
Preferred share dividends paid	(10,657		)	(13,179		)
Distributions paid to noncontrolling interests in COPLP	(3,581		)	(3,786		)
Redemption of vested equity awards	(2,330		)	(1,389		)
Other	(2,559		)	(2,582		)
Net cash provided by (used in) financing activities	221,310			(21,557		)
Net decrease in cash and cash equivalents	(2,237		)	(14,355		)
Cash and cash equivalents
Beginning of period	6,077			54,373
End of period	$	3,840		$	40,018

See accompanying notes to consolidated financial statements.

7

Corporate Office Properties Trust and Subsidiaries

Consolidated Statements of Cash Flows (continued)

(in thousands)

(unaudited)

	For the Nine Months Ended September 30,
	2015			2014
Reconciliation of net income to net cash provided by operating activities:
Net income	$	126,261		$	39,269
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and other amortization	105,397			106,619
Impairment losses	3,779			1,371
Amortization of deferred financing costs	3,339			3,646
Increase in deferred rent receivable	(11,939		)	(2,738		)
Amortization of net debt discounts	805			659
Gain on sales of real estate	(4,000		)	(10,654		)
Share-based compensation	4,949			4,563
(Gain) loss on early extinguishment of debt	(86,075		)	458
Other	1,922			(2,446		)
Operating changes in assets and liabilities:
Decrease in accounts receivable	6,526			6,815
Increase in restricted cash and marketable securities	(1,102		)	(2,591		)
Increase in prepaid expenses and other assets, net	(5,228		)	(26,553		)
(Decrease) increase in accounts payable, accrued expenses and other liabilities	(655		)	24,247
Increase in rents received in advance and security deposits	3,763			1,583
Net cash provided by operating activities	$	147,742		$	144,248
Supplemental schedule of non-cash investing and financing activities:
Decrease in accrued capital improvements, leasing and other investing activity costs	$	(11,722	)	$	(174	)
Debt assumed on acquisition of operating property	$	55,490		$	—
Other liabilities assumed on acquisition of operating properties	$	5,265		$	—
Decrease in property in connection with surrender of property in settlement of debt	$	(82,738	)	$	—
Decrease in debt in connection with surrender of property in settlement of debt	$	(150,000	)	$	—
Decrease in fair value of derivatives applied to accumulated other comprehensive loss and noncontrolling interests	$	(4,263	)	$	(2,613	)
Equity in other comprehensive loss of an equity method investee	$	(264	)	$	—
Dividends/distribution payable	$	30,182		$	28,344
Decrease in noncontrolling interests and increase in shareholders’ equity in connection with the conversion of common units into common shares	$	2,151		$	1,545
Adjustments to noncontrolling interests resulting from changes in COPLP ownership	$	591		$	248
Increase in redeemable noncontrolling interest and decrease in equity to carry redeemable noncontrolling interest at fair value	$	599		$	7

See accompanying notes to consolidated financial statements.

8

Corporate Office Properties, L.P. and Subsidiaries

Consolidated Balance Sheets

(in thousands, except unit data)

(unaudited)

	September 30, 2015			December 31, 2014
Assets
Properties, net:
Operating properties, net	$	2,932,843		$	2,751,488
Projects in development or held for future development	414,757			545,426
Total properties, net	3,347,600			3,296,914
Assets held for sale, net	150,572			14,339
Cash and cash equivalents	3,840			6,077
Restricted cash and marketable securities	3,787			3,187
Accounts receivable (net of allowance for doubtful accounts of $2,010 and $717, respectively)	19,962			26,901
Deferred rent receivable (net of allowance of $1,816 and $1,418, respectively)	103,064			95,910
Intangible assets on real estate acquisitions, net	106,174			43,854
Deferred leasing and financing costs, net	64,367			64,797
Investing receivables	46,821			52,147
Prepaid expenses and other assets, net	66,787			60,249
Total assets	$	3,912,974		$	3,664,375
Liabilities and equity
Liabilities:
Debt, net	$	2,121,240		$	1,920,057
Accounts payable and accrued expenses	98,551			123,035
Rents received in advance and security deposits	34,504			31,011
Distributions payable	30,182			29,862
Deferred revenue associated with operating leases	20,113			13,031
Interest rate derivatives	5,844			1,855
Other liabilities	3,025			6,223
Total liabilities	2,313,459			2,125,074
Commitments and contingencies (Note 17)
Redeemable noncontrolling interest	19,608			18,417
Equity:
Corporate Office Properties, L.P.’s equity:
Preferred units
General partner, preferred units outstanding of 7,431,667 at September 30, 2015 and December 31, 2014	199,083			199,083
Limited partner, 352,000 preferred units outstanding at September 30, 2015 and December 31, 2014	8,800			8,800
Common units, 94,533,670 and 93,255,284 held by the general partner and 3,677,391 and 3,837,551 held by limited partners at September 30, 2015 and December 31, 2014, respectively	1,367,904			1,305,219
Accumulated other comprehensive loss	(6,086		)	(1,381		)
Total Corporate Office Properties, L.P.’s equity	1,569,701			1,511,721
Noncontrolling interests in subsidiaries	10,206			9,163
Total equity	1,579,907			1,520,884
Total liabilities, redeemable noncontrolling interest and equity	$	3,912,974		$	3,664,375

See accompanying notes to consolidated financial statements.

9

Corporate Office Properties, L.P. and Subsidiaries

Consolidated Statements of Operations

(in thousands, except per unit data)

(unaudited)

	For the Three Months Ended September 30,						For the Nine Months Ended September 30,
	2015			2014			2015			2014
Revenues
Rental revenue	$	109,080		$	96,207		$	312,826		$	288,574
Tenant recoveries and other real estate operations revenue	24,606			22,069			71,761			70,538
Construction contract and other service revenues	17,058			34,739			97,554			80,390
Total revenues	150,744			153,015			482,141			439,502
Expenses
Property operating expenses	48,897			43,056			145,996			136,600
Depreciation and amortization associated with real estate operations	38,403			30,237			103,788			104,728
Construction contract and other service expenses	16,132			33,593			94,923			75,353
Impairment losses	2,307			66			3,545			1,368
General, administrative and leasing expenses	7,439			7,211			22,864			22,882
Business development expenses and land carry costs	5,573			1,430			10,986			4,107
Total operating expenses	118,751			115,593			382,102			345,038
Operating income	31,993			37,422			100,039			94,464
Interest expense	(24,121		)	(24,802		)	(66,727		)	(69,107		)
Interest and other income	692			1,191			3,217			3,775
Gain (loss) on early extinguishment of debt	85,745			(176		)	85,677			(446		)
Income from continuing operations before equity in income of unconsolidated entities and income taxes	94,309			13,635			122,206			28,686
Equity in income of unconsolidated entities	18			193			52			206
Income tax expense	(48		)	(101		)	(153		)	(257		)
Income from continuing operations	94,279			13,727			122,105			28,635
Discontinued operations	—			191			156			4
Income before gain on sales of real estate	94,279			13,918			122,261			28,639
Gain on sales of real estate	15			10,630			4,000			10,630
Net income	94,294			24,548			126,261			39,269
Net income attributable to noncontrolling interests in consolidated entities	(972		)	(897		)	(2,602		)	(2,471		)
Net income attributable to COPLP	93,322			23,651			123,659			36,798
Preferred unit distributions	(3,717		)	(3,718		)	(11,152		)	(12,882		)
Issuance costs associated with redeemed preferred units	—			—			—			(1,769		)
Net income attributable to COPLP common unitholders	$	89,605		$	19,933		$	112,507		$	22,147
Net income attributable to COPLP:
Income from continuing operations	$	93,322		$	23,460		$	123,500		$	36,789
Discontinued operations, net	—			191			159			9
Net income attributable to COPLP	$	93,322		$	23,651		$	123,659		$	36,798
Basic earnings per common unit (1)
Income from continuing operations	$	0.91		$	0.22		$	1.15		$	0.24
Discontinued operations	0.00			0.00			0.00			0.00
Net income attributable to COPLP common unitholders	$	0.91		$	0.22		$	1.15		$	0.24
Diluted earnings per common unit (1)
Income from continuing operations	$	0.91		$	0.22		$	1.15		$	0.24
Discontinued operations	0.00			0.00			0.00			0.00
Net income attributable to COPLP common unitholders	$	0.91		$	0.22		$	1.15		$	0.24
Distributions declared per common unit	$	0.275		$	0.275		$	0.825		$	0.825

(1) Basic and diluted earnings per common unit are calculated based on amounts attributable to common unitholders of Corporate Office Properties, L.P.

See accompanying notes to consolidated financial statements.

10

Corporate Office Properties, L.P. and Subsidiaries

Consolidated Statements of Comprehensive Income

(in thousands)

(unaudited)

	For the Three Months Ended September 30,						For the Nine Months Ended September 30,
	2015			2014			2015			2014
Net income	$	94,294		$	24,548		$	126,261		$	39,269
Other comprehensive (loss) income
Unrealized gains (losses) on interest rate derivatives	(3,638		)	1,015			(6,720		)	(4,738		)
Losses on interest rate derivatives included in interest expense	915			756			2,457			2,170
Equity in other comprehensive loss of equity method investee	—			—			(264		)	—
Other comprehensive (loss) income	(2,723		)	1,771			(4,527		)	(2,568		)
Comprehensive income	91,571			26,319			121,734			36,701
Comprehensive income attributable to noncontrolling interests	(1,035		)	(964		)	(2,780		)	(2,630		)
Comprehensive income attributable to COPLP	$	90,536		$	25,355		$	118,954		$	34,071

See accompanying notes to consolidated financial statements.

11

Corporate Office Properties, L.P. and Subsidiaries

Consolidated Statements of Equity

(Dollars in thousands)

(unaudited)

	Limited Partner Preferred Units				General Partner  Preferred Units					Common Units				Accumulated Other Comprehensive Income (Loss)			Noncontrolling Interests in Subsidiaries
	Units	Amount			Units		Amount			Units	Amount									Total Equity
Balance at December 31, 2013	352,000	$	8,800		9,431,667		$	249,083		91,372,212	$	1,226,318		$	3,605		$	9,443		$	1,497,249
Redemption of preferred units resulting from redemption of preferred shares	—	—			(2,000,000	)	(50,000		)	—	—			—			—			(50,000		)
Costs associated with common shares issued to the public	—	—			—		—			—	(7		)	—			—			(7		)
Issuance of common units resulting from exercise of share options	—	—			—		—			57,888	1,359			—			—			1,359
Share-based compensation (units net of redemption)	—	—			—		—			142,182	5,249			—			—			5,249
Redemptions of vested equity awards	—	—			—		—			—	(1,389		)	—			—			(1,389		)
Comprehensive income	—	495			—		12,387			—	23,916			(2,726		)	983			35,055
Distributions to owners of common and preferred units	—	(495		)	—		(12,387		)	—	(75,520		)	—			—			(88,402		)
Distributions to noncontrolling interests in subsidiaries	—	—			—		—			—	—			—			(1,606		)	(1,606		)
Contributions from noncontrolling interests in subsidiaries	—	—			—		—			—	—			—			3			3
Adjustment to arrive at fair value of redeemable noncontrolling interest	—	—			—		—			—	(7		)	—			—			(7		)
Balance at September 30, 2014	352,000	$	8,800		7,431,667		$	199,083		91,572,282	$	1,179,919		$	879		$	8,823		$	1,397,504
Balance at December 31, 2014	352,000	$	8,800		7,431,667		$	199,083		97,092,835	$	1,305,219		$	(1,381	)	$	9,163		$	1,520,884
Issuance of common units resulting from common shares issued under at-the-market program	—	—			—		—			890,241	26,535			—			—			26,535
Issuance of common units resulting from exercise of share options	—	—			—		—			76,474	2,008			—			—			2,008
Share-based compensation (units net of redemption)	—	—			—		—			151,511	5,600			—			—			5,600
Redemptions of vested equity awards	—	—			—		—			—	(2,330		)	—			—			(2,330		)
Comprehensive income	—	495			—		10,657			—	112,507			(4,705		)	1,090			120,044
Distributions to owners of common and preferred units	—	(495		)	—		(10,657		)	—	(81,036		)	—			—			(92,188		)
Distributions to noncontrolling interests in subsidiaries	—	—			—		—			—	—			—			(47		)	(47		)
Adjustment to arrive at fair value of redeemable noncontrolling interest	—	—			—		—			—	(599		)	—			—			(599		)
Balance at September 30, 2015	352,000	$	8,800		7,431,667		$	199,083		98,211,061	$	1,367,904		$	(6,086	)	$	10,206		$	1,579,907

See accompanying notes to consolidated financial statements.

12

Corporate Office Properties, L.P. and Subsidiaries

Consolidated Statements of Cash Flows

(in thousands)

(unaudited)

	For the Nine Months Ended September 30,
	2015			2014
Cash flows from operating activities
Revenues from real estate operations received	$	373,607		$	358,212
Construction contract and other service revenues received	104,817			62,170
Property operating expenses paid	(146,274		)	(141,489		)
Construction contract and other service expenses paid	(112,614		)	(58,218		)
General, administrative, leasing, business development and land carry costs paid	(29,620		)	(22,288		)
Interest expense paid	(46,278		)	(54,683		)
Payments in connection with early extinguishment of debt	(18		)	(104		)
Interest and other income received	4,130			448
Income taxes (paid) refunded	(8		)	200
Net cash provided by operating activities	147,742			144,248
Cash flows from investing activities
Acquisitions of operating properties and related intangible assets	(202,866		)	—
Construction, development and redevelopment	(174,434		)	(150,862		)
Tenant improvements on operating properties	(18,129		)	(17,754		)
Other capital improvements on operating properties	(12,610		)	(21,179		)
Proceeds from dispositions of properties	45,066			57,973
Investing receivables funded	(22		)	(3,610		)
Investing receivables payments received	5,114			10,278
Leasing costs paid	(8,603		)	(10,549		)
Increase in prepaid expenses and other assets associated with investing activities	(4,348		)	(1,260		)
Other	(457		)	(83		)
Net cash used in investing activities	(371,289		)	(137,046		)
Cash flows from financing activities
Proceeds from debt
Revolving Credit Facility	422,000			115,000
Unsecured senior notes	296,580			297,342
Other debt proceeds	50,000			11,569
Repayments of debt
Revolving Credit Facility	(418,000		)	(115,000		)
Scheduled principal amortization	(5,011		)	(4,914		)
Other debt repayments	(50,681		)	(183,059		)
Deferred financing costs paid	(5,377		)	(694		)
Net proceeds from issuance of common units	28,567			1,352
Redemption of preferred units	—			(50,000		)
Common unit distributions paid	(80,727		)	(75,508		)
Preferred unit distributions paid	(11,152		)	(13,674		)
Redemption of vested equity awards	(2,330		)	(1,389		)
Other	(2,559		)	(2,582		)
Net cash provided by (used in) financing activities	221,310			(21,557		)
Net decrease in cash and cash equivalents	(2,237		)	(14,355		)
Cash and cash equivalents
Beginning of period	6,077			54,373
End of period	$	3,840		$	40,018

See accompanying notes to consolidated financial statements.

13

Corporate Office Properties, L.P. and Subsidiaries

Consolidated Statements of Cash Flows (Continued)

(in thousands)

(unaudited)

	For the Nine Months Ended September 30,
	2015			2014
Reconciliation of net income to net cash provided by operating activities:
Net income	$	126,261		$	39,269
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and other amortization	105,397			106,619
Impairment losses	3,779			1,371
Amortization of deferred financing costs	3,339			3,646
Increase in deferred rent receivable	(11,939		)	(2,738		)
Amortization of net debt discounts	805			659
Gain on sales of real estate	(4,000		)	(10,654		)
Share-based compensation	4,949			4,563
(Gain) loss on early extinguishment of debt	(86,075		)	458
Other	1,922			(2,446		)
Operating changes in assets and liabilities:
Decrease in accounts receivable	6,526			6,815
Increase in restricted cash and marketable securities	(1,485		)	(2,558		)
Increase in prepaid expenses and other assets, net	(5,228		)	(26,553		)
(Decrease) increase in accounts payable, accrued expenses and other liabilities	(272		)	24,214
Increase in rents received in advance and security deposits	3,763			1,583
Net cash provided by operating activities	$	147,742		$	144,248
Supplemental schedule of non-cash investing and financing activities:
Decrease in accrued capital improvements, leasing and other investing activity costs	$	(11,722	)	$	(174	)
Debt assumed on acquisition of operating property	$	55,490		$	—
Other liabilities assumed on acquisition of operating properties	$	5,265		$	—
Decrease in property in connection with surrender of property in settlement of debt	$	(82,738	)	$	—
Decrease in debt in connection with surrender of property in settlement of debt	$	(150,000	)	$	—
Decrease in fair value of derivatives applied to accumulated other comprehensive loss and noncontrolling interests	$	(4,263	)	$	(2,613	)
Equity in other comprehensive loss of an equity method investee	$	(264	)	$	—
Distributions payable	$	30,182		$	28,344
Increase in redeemable noncontrolling interest and decrease in equity to carry redeemable noncontrolling interest at fair value	$	599		$	7

See accompanying notes to consolidated financial statements.

14

Corporate Office Properties Trust and Subsidiaries and Corporate Office Properties, L.P. and Subsidiaries

Notes to Consolidated Financial Statements

(unaudited)

1.    Organization

Corporate Office Properties Trust (“COPT”) and subsidiaries (collectively, the “Company”) is a fully-integrated and self-managed real estate investment trust (“REIT”). Corporate Office Properties, L.P. (“COPLP”) and subsidiaries (collectively, the “Operating Partnership”) is the entity through which COPT, the sole general partner of COPLP, conducts almost all of its operations and owns almost all of its assets. Unless otherwise expressly stated or the context otherwise requires, “we”, “us” and “our” as used herein refer to each of the Company and the Operating Partnership. We focus primarily on serving the specialized requirements of United States Government agencies and their contractors, most of whom are engaged in national security and information technology related activities. We generally acquire, develop, manage and lease office and data center properties concentrated in large office parks 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, 2015, our properties included the following:

• 183 operating office properties totaling 18.8 million square feet;

• 10 office properties under, or contractually committed for, construction or redevelopment that we estimate will total approximately 1.2 million square feet upon completion, including one partially operational property included above;

• 1,450 acres of land we control that we believe are potentially developable into approximately 17.7 million square feet; and

• a wholesale data center with a critical load of 19.25 megawatts.

COPLP owns real estate both directly and through subsidiary partnerships and limited liability companies (“LLCs”).  In addition to owning real estate, COPLP also owns subsidiaries that provide real estate services such as property management and construction and development services primarily for our properties but also for third parties. Some of these services are performed by a taxable REIT subsidiary (“TRS”).

Equity interests in COPLP are in the form of common and preferred units. As of September 30, 2015, COPT owned 96.3% of the outstanding COPLP common units (“common units”) and 95.5% of the outstanding COPLP preferred units (“preferred units”); the remaining common and preferred units in COPLP were owned by third parties. Common units in COPLP not owned by COPT carry certain redemption rights. The number of common units in COPLP owned by COPT is equivalent to the number of outstanding common shares of beneficial interest (“common shares”) of COPT, and the entitlement of all COPLP common units to quarterly distributions and payments in liquidation is substantially the same as those of COPT common shareholders. Similarly, in the case of each series of preferred units in COPLP held by COPT, there is a series of preferred shares of beneficial interest (“preferred shares”) in COPT that is equivalent in number and carries substantially the same terms as such series of COPLP preferred units. COPT’s common shares are publicly traded on the New York Stock Exchange (“NYSE”) under the ticker symbol “OFC”.

Because COPLP is managed by COPT, and COPT conducts substantially all of its operations through COPLP, we refer to COPT’s executive officers as COPLP’s executive officers, and although, as a partnership, COPLP does not have a board of trustees, we refer to COPT’s Board of Trustees as COPLP’s Board of Trustees.

2.Summary of Significant Accounting Policies

Basis of Presentation

The COPT consolidated financial statements include the accounts of COPT, the Operating Partnership, their subsidiaries and other entities in which COPT has a majority voting interest and control.  The COPLP consolidated financial statements include the accounts of COPLP, its subsidiaries and other entities in which COPLP has a majority voting interest and control.  We also consolidate certain entities when control of such entities can be achieved through means other than voting rights (“variable interest entities” or “VIEs”) if we are deemed to be the primary beneficiary of such entities.  We eliminate all significant intercompany balances and transactions in consolidation.

 We use the equity method of accounting when we own an interest in an entity and can exert significant influence over but cannot control the entity’s operations. We discontinue equity method accounting if our investment in an entity (and net advances) is reduced to zero unless we have guaranteed obligations of the entity or are otherwise committed to provide further financial support for the entity.

15

These interim financial statements should be read together with the consolidated financial statements and notes thereto as of and for the year ended December 31, 2014 included in our 2014 Annual Report on Form 10-K.  The unaudited consolidated financial statements include all adjustments that are necessary, in the opinion of management, to fairly present our financial position and results of operations.  All adjustments are of a normal recurring nature.  The consolidated financial statements have been prepared using the accounting policies described in our 2014 Annual Report on Form 10-K.

Recent Accounting Pronouncements

In May 2014, the Financial Accounting Standards Board (“FASB”) issued guidance regarding the recognition of revenue from contracts with customers. Under this guidance, an entity will recognize revenue to depict the transfer of goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. Additionally, this guidance requires improved disclosures regarding the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers. We are required to adopt this guidance for our annual and interim periods beginning January 1, 2018 using one of two methods: retrospective restatement for each reporting period presented at the time of adoption, or retrospectively with the cumulative effect of initially applying this guidance recognized at the date of initial application. We are currently assessing the financial impact of this guidance on our consolidated financial statements.

In January 2015, the FASB issued guidance regarding the presentation of extraordinary and unusual items in statements of operations. This guidance eliminates the concept of extraordinary items. However, the presentation and disclosure requirements for items that are either unusual in nature or infrequent in occurrence remain and will be expanded to include items that are both unusual in nature and infrequent in occurrence. This guidance is effective for periods beginning after December 15, 2015. We expect that the application of this guidance will have no effect on our reported consolidated financial statements.

In February 2015, the FASB issued guidance regarding amendments to the consolidation analysis. This guidance amends the criteria for determining which entities are considered variable interest entities (“VIE”), amends the criteria for determining if a service provider possesses a variable interest in a VIE and ends the deferral granted to investment companies for application of the VIE consolidation model. This guidance is effective for annual periods, and interim periods therein, beginning after December 15, 2015. We are currently assessing the financial impact of this guidance on our consolidated financial statements.

In April 2015, the FASB issued guidance that changes the presentation of debt issuance costs in financial statements. This guidance requires an entity to present such costs in the balance sheet as a direct deduction from the related debt liability rather than as an asset. Amortization of the costs will continue to be reported as interest expense. This guidance was further updated in August 2015 with respect to debt issuance costs of line-of-credit arrangements to note that it will be permissible for an entity to defer and present debt issuance costs as an asset and subsequently amortize the deferred debt issuance costs ratably over the term of a line-of-credit arrangement, regardless of whether there are any outstanding borrowings on the line-of-credit arrangement. This guidance is effective for annual reporting periods beginning after December 15, 2016. Early adoption is permitted. This guidance will be applied retrospectively to each prior period presented. We expect that the application of this guidance will not materially affect our consolidated financial statements.

In September 2015, the FASB issued guidance that eliminates the requirement to restate prior period financial statements for measurement period adjustments following a business combination.  The guidance requires that the cumulative impact of a measurement period adjustment (including the impact on prior periods) be recognized in the reporting period in which the adjustment is identified. The prior period impact of the adjustment should be either presented separately on the face of the statement of operations or disclosed in the notes. This guidance is effective for annual reporting periods beginning after December 15, 2015.  This guidance will be applied prospectively for measurement period adjustments that occur after the effective date.  We expect that the application of this guidance will not materially affect our consolidated financial statements.

3.Fair Value Measurements

For a description on how we estimate fair value, see Note 3 to the consolidated financial statements in our 2014 Annual Report on Form 10-K.

16

Recurring Fair Value Measurements

Our partner in a real estate joint venture has the right to require us to acquire its interest at fair value beginning in March 2020; accordingly, we classify the fair value of our partner’s interest as a redeemable noncontrolling interest in the mezzanine section of our consolidated balance sheet. In determining the fair value of our partner’s interest as of September 30, 2015, we used a discount rate of 15.5% which factored in risk appropriate to the level of future property development expected to be undertaken by the joint venture. A significant increase (decrease) in the discount rate used in determining the fair value would result in a significantly (lower) higher fair value. Given our reliance on the unobservable inputs, the valuations are classified in Level 3 of the fair value hierarchy. Please refer to Note 11 for a rollforward of the activity for redeemable noncontrolling interest.

The carrying values of cash and cash equivalents, restricted cash, accounts receivable, other assets (excluding investing receivables) and accounts payable and accrued expenses are reasonable estimates of their fair values because of the short maturities of these instruments.  As discussed in Note 7, we estimated the fair values of our investing receivables based on the discounted estimated future cash flows of the loans (categorized within Level 3 of the fair value hierarchy); the discount rates used approximate current market rates for loans with similar maturities and credit quality, and the estimated cash payments include scheduled principal and interest payments.  For our disclosure of debt fair values in Note 9, we estimated the fair value of our unsecured senior notes and exchangeable senior notes based on quoted market rates for publicly-traded debt (categorized within Level 2 of the fair value hierarchy) and estimated the fair value of our other debt based on the discounted estimated future cash payments to be made on such debt (categorized within Level 3 of the fair value hierarchy); the discount rates used approximate current market rates for loans, or groups of loans, with similar maturities and credit quality, and the estimated future payments include scheduled principal and interest payments.  Fair value estimates are made at a specific point in time, are subjective in nature and involve uncertainties and matters of significant judgment.  Settlement at such fair value amounts may not be possible and may not be a prudent management decision.

For additional fair value information, please refer to Note 7 for investing receivables, Note 9 for debt and Note 10 for interest rate derivatives. 

COPT and Subsidiaries

The table below sets forth financial assets and liabilities of COPT and its subsidiaries that are accounted for at fair value on a recurring basis as of September 30, 2015 and the hierarchy level of inputs used in measuring their respective fair values under applicable accounting standards (in thousands):

Description	Quoted Prices in Active Markets for Identical Assets(Level 1)		Significant Other Observable Inputs(Level 2)		Significant Unobservable Inputs(Level 3)		Total
Assets:
Marketable securities in deferred compensation plan (1)
Mutual funds	$	5,395	$	—	$	—	$	5,395
Other	104		—		—		104
Warrants to purchase common stock (2)	—		42		—		42
Total assets	$	5,499	$	42	$	—	$	5,541
Liabilities:
Deferred compensation plan liability (3)	$	—	$	5,499	$	—	$	5,499
Interest rate derivatives	—		5,844		—		5,844
Total liabilities	$	—	$	11,343	$	—	$	11,343
Redeemable noncontrolling interest	$	—	$	—	$	19,608	$	19,608

(1) Included in the line entitled “restricted cash and marketable securities” on COPT’s consolidated balance sheet.

(2) Included in the line entitled “prepaid expenses and other assets” on COPT’s consolidated balance sheet.

(3) Included in the line entitled “other liabilities” on COPT’s consolidated balance sheet.

17

COPLP and Subsidiaries

The table below sets forth financial assets and liabilities of COPLP and its subsidiaries that are accounted for at fair value on a recurring basis as of September 30, 2015 and the hierarchy level of inputs used in measuring their respective fair values under applicable accounting standards (in thousands):

Description	Quoted Prices in Active Markets for Identical Assets(Level 1)		Significant Other Observable Inputs(Level 2)		Significant Unobservable Inputs(Level 3)		Total
Assets:
Warrants to purchase common stock (1)	$	—	$	42	$	—	$	42
Liabilities:
Interest rate derivatives	$	—	$	5,844	$	—	$	5,844
Redeemable noncontrolling interest	$	—	$	—	$	19,608	$	19,608

(1) Included in the line entitled “prepaid expenses and other assets” on COPLP’s consolidated balance sheet.

Nonrecurring Fair Value Measurements

During the nine months ended September 30, 2015, we recognized the following impairment losses resulting from nonrecurring fair value measurements:

• $1.3 million primarily in the three months ended June 30, 2015 on a property in Northern Virginia that we sold on July 27, 2015 following receipt of an unsolicited offer. This property’s carrying value exceeded its fair value less costs to sell; and

• $2.3 million in the three months ended September 30, 2015 on three properties in the Greater Baltimore, Maryland (“Greater Baltimore”) region that we concluded no longer met our investment criteria during the period and whose carrying amounts exceeded their estimated fair values less costs to sell. These properties were reclassified as held for sale.

The table below sets forth the fair value hierarchy of the valuation technique we used to determine the fair values of these properties (dollars in thousands):

	Fair Values of Properties Held as of September 30, 2015
	Quoted Prices in				Significant
	Active Markets for		Significant Other		Unobservable
	Identical Assets		Observable Inputs		Inputs
Description	(Level 1)		(Level 2)		(Level 3)		Total
Assets:
Assets held for sale, net (1)	$	—	$	—	$	7,225	$	7,225

(1) Represents estimated fair values less costs to sell.

The table below sets forth quantitative information about significant unobservable inputs used for the Level 3 fair value measurements reported above as of September 30, 2015 (dollars in thousands):

Valuation Technique	Fair Values on  Measurement Date		Unobservable Input	Range (Weighted Average) (1)
Discounted cash flow	$	7,225	Discount rate	8.25%
			Terminal capitalization rate	7.75%
			Market rent growth rate	2.0%
			Expense growth rate	2.0%

(1) Only one value applied for these unobservable inputs.

During the nine months ended September 30, 2014, we recognized impairment losses totaling $1.4 million primarily in connection with certain of our operating properties in the Greater Baltimore region that were disposed of during the period. After shortening our expected holding period for these properties during the period, we determined that the carrying amount of the properties would not likely be recovered from the cash flows from the operations and sales of the properties over the shortened period.

18

4.Properties, Net

Operating properties, net consisted of the following (in thousands): 

	September 30, 2015			December 31, 2014
Land	$	466,701		$	439,355
Buildings and improvements	3,141,889			3,015,216
Less: Accumulated depreciation	(675,747		)	(703,083		)
Operating properties, net	$	2,932,843		$	2,751,488

During the nine months ended September 30, 2014, we recognized $12.9 million in additional depreciation expense resulting from our revision of the useful life of a property in Greater Philadelphia, Pennsylvania (“Greater Philadelphia”) that was removed from service for redevelopment.

Projects in development or held for future development consisted of the following (in thousands):

	September 30, 2015		December 31, 2014
Land	$	207,748	$	214,977
Development in progress, excluding land	207,009		330,449
Projects in development or held for future development	$	414,757	$	545,426

As of September 30, 2015, we had 18 operating properties in Greater Baltimore and one in Northern Virginia classified as held for sale. The table below sets forth the components of assets held for sale on our consolidated balance sheet for these properties (in thousands):

	September 30, 2015
Properties, net	$	142,817
Deferred rent receivable	3,998
Intangible assets on real estate acquisitions, net	799
Deferred leasing costs, net	2,053
Lease incentives, net	905
Assets held for sale, net	$	150,572

As of December 31, 2014, we had two land parcels in the Greater Baltimore region classified as held for sale with aggregate carrying amounts of $14.3 million that were sold during the nine months ended September 30, 2015.

2015 Acquisitions

In the nine months ended September 30, 2015, we acquired the following operating properties:

• 250 W. Pratt Street, a 367,000 square foot office property in Baltimore, Maryland that was 96.2% leased, for $61.9 million on March 19, 2015;

• 2600 Park Tower Drive, a 237,000 square foot office property in Vienna, Virginia (in the Northern Virginia region) that was 100% leased, for $80.5 million on April 15, 2015; and

• 100 Light Street, a 558,000 square foot office property in Baltimore, Maryland that was 93.5% leased, and its structured parking garage, 30 Light Street, for $121.2 million on August 7, 2015. In connection with that acquisition, we assumed a $55.0 million mortgage loan with a fair value at assumption of $55.5 million.

The table below sets forth the allocation of the aggregate acquisition costs of these properties (in thousands):

Land, operating properties	$	55,076
Building and improvements	139,520
Intangible assets on real estate acquisitions	75,846
Total assets	270,442
Below-market leases	(6,820		)
Total acquisition cost	$	263,622

19

Intangible assets recorded in connection with these acquisitions included the following (dollars in thousands):

			Weighted Average Amortization Period (in Years)
Tenant relationship value	$	31,208	12
In-place lease value	35,231		7
Above-market leases	6,720		4
Below-market cost arrangements	2,687		40
	$	75,846	10

These properties contributed revenues of $6.9 million for the three months ended September 30, 2015 and $11.2 million for the nine months ended September 30, 2015, and contributed net income from continuing operations of $487,000 for the three months ended September 30, 2015 and $697,000 for the nine months ended September 30, 2015. We expensed operating property acquisition costs of $2.7 million during the three months ended September 30, 2015 and $4.1 million during the nine months endedSeptember 30, 2015 that are included in business development expenses and land carry costs on our consolidated statements of operations.

We accounted for these acquisitions as business combinations. We included the results of operations for the acquisitions in our consolidated statements of operations from their respective purchase dates through September 30, 2015. The following table presents pro forma information for COPT and subsidiaries as if these acquisitions had occurred on January 1, 2014. This pro forma information also includes adjustments to reclassify the operating property acquisition costs disclosed above from the 2015 periods in which they were incurred to the nine months ended September 30, 2014. The pro forma financial information was prepared for comparative purposes only and is not necessarily indicative of what would have occurred had these acquisitions been made at that time or of results which may occur in the future (in thousands, except per shares amounts).

	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
	2015		2014		2015		2014
	(Unaudited)				(Unaudited)
Pro forma total revenues	$	152,736	$	162,085	$	498,657	$	467,224
Pro forma net income attributable to COPT common shareholders	$	88,836	$	19,683	$	112,941	$	19,266
Pro forma EPS:
Basic	$	0.94	$	0.22	$	1.20	$	0.22
Diluted	$	0.94	$	0.22	$	1.20	$	0.22

2015 Dispositions

In the nine months ended September 30, 2015, we completed the following dispositions of operating properties:

• 1550 Westbranch Drive, a 160,000 square foot office property in McLean, Virginia (in the Northern Virginia region) for $27.8 million on July 27, 2015; and

• 15000 and 15010 Conference Center Drive, two office properties in Chantilly, Virginia (in the Northern Virginia region) totaling 665,000 square feet. On August 28, 2015, ownership in these properties was transferred to the mortgage lender on a $150.0 million nonrecourse mortgage loan that was secured by the properties and we removed the debt obligation and accrued interest from our balance sheet. The properties had an estimated fair value of $99 million on the transfer date. Upon completion of this transfer, we recognized a gain on early extinguishment of debt of $84.8 million, representing the difference between the mortgage loan and accrued interest payable extinguished over the carrying value of the properties transferred as of the transfer date and related closing costs.

We also sold land during the nine months endedSeptember 30, 2015 for $18.1 million and recognized gains of $4.0 million on the sales.

20

2015 Construction Activities

During the nine months endedSeptember 30, 2015, we placed into service an aggregate of 897,000 square feet in seven newly constructed office properties located in Northern Virginia, San Antonio, Texas (“San Antonio”), Huntsville, Alabama (“Huntsville”) and the Baltimore/Washington Corridor, and 170,000 square feet in two properties redeveloped in Greater Philadelphia and St. Mary’s County, Maryland. As of September 30, 2015, we had six office properties under construction, or for which we were contractually committed to construct, that we estimate will total 1.0 million square feet upon completion (including one partially operational property), including four in Northern Virginia and two in the Baltimore/Washington Corridor. We also had four office properties under redevelopment that we estimate will total 156,000 square feet upon completion, all of which were located in the Baltimore/Washington Corridor.

5.Real Estate Joint Ventures

The table below sets forth information pertaining to our material investments in consolidated real estate joint ventures as of September 30, 2015 (dollars in thousands):

		Nominal
		Ownership		September 30, 2015				(1)
	Date	% as of		Total		Encumbered		Total
	Acquired	9/30/2015	Nature of Activity	Assets		Assets		Liabilities
LW Redstone Company, LLC	3/23/2010	85%	Development and operation of real estate (2)	$	144,906	$	64,395	$	39,093
M Square Associates, LLC	6/26/2007	50%	Development and operation of real estate (3)	58,840		48,301		38,117
				$	203,746	$	112,696	$	77,210

(1) Excludes amounts eliminated in consolidation.

(2) This joint venture’s properties are in Huntsville.

(3) This joint venture’s properties are in College Park, Maryland (in the Baltimore/Washington Corridor).

6.Intangible Assets on Real Estate Acquisitions, Net

Intangible assets on real estate acquisitions consisted of the following, excluding amounts for properties held for sale (in thousands):

	September 30, 2015						December 31, 2014
	Gross Carrying Amount		Accumulated Amortization		Net  Carrying Amount		Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount
In-place lease value	$	138,410	$	87,667	$	50,743	$	123,759	$	101,040	$	22,719
Tenant relationship value	63,117		22,525		40,592		42,301		28,492		13,809
Below-market cost arrangements	15,102		6,505		8,597		12,415		5,984		6,431
Above-market leases	13,844		7,987		5,857		8,659		8,159		500
Market concentration premium	1,333		948		385		1,333		938		395
	$	231,806	$	125,632	$	106,174	$	188,467	$	144,613	$	43,854

Amortization of the intangible asset categories set forth above totaled $11.9 million in the nine months endedSeptember 30, 2015 and $10.8 million in the nine months endedSeptember 30, 2014. The approximate weighted average amortization periods of the categories set forth above follow (excluding amounts for properties held for sale): in-place lease value: six years; tenant relationship value: 11 years; below-market cost arrangements: 35 years; above-market leases: four years; and market concentration premium: 27 years. The approximate weighted average amortization period for all of the categories combined is 10 years. Estimated amortization expense associated with the intangible asset categories set forth above through 2020 follows (excluding amounts for properties held for sale): $5.1 million for the three months ending December 31, 2015; $19.7 million for 2016; $17.1 million for 2017; $12.3 million for 2018; $9.3 million for 2019; and $7.3 million for 2020.

21

7.     Investing Receivables

Investing receivables, including accrued interest thereon, consisted of the following (in thousands):

	September 30, 2015		December 31, 2014
Notes receivable from the City of Huntsville	$	43,821	$	49,147
Other investing loans receivable	3,000		3,000
	$	46,821	$	52,147

Our notes receivable from the City of Huntsville funded infrastructure costs in connection with our LW Redstone Company, LLC joint venture (see Note 5) and carry an interest rate of 9.95%.

We did not have an allowance for credit losses in connection with our investing receivables as of September 30, 2015 or December 31, 2014.  The fair value of these receivables approximated their carrying amounts as of September 30, 2015 and December 31, 2014.

8.    Prepaid Expenses and Other Assets, Net

Prepaid expenses and other assets consisted of the following (in thousands):

	September 30, 2015		December 31, 2014
Prepaid expenses	$	28,655	$	20,570
Lease incentives, net	11,589		13,344
Furniture, fixtures and equipment, net	5,941		6,637
Construction contract costs incurred in excess of billings	4,722		6,656
Deferred tax asset, net (1)	4,015		4,002
Operating notes receivable	3,744		3,797
Equity method investments	1,626		2,368
Other assets	6,495		2,875
Prepaid expenses and other assets, net	$	66,787	$	60,249

(1) Includes a valuation allowance of $2.1 million.

Operating notes receivable reported above includes amounts due from tenants with remaining terms exceeding one year totaling $3.7 million as of September 30, 2015 and $3.6 million as of December 31, 2014; we carried allowances for estimated losses for $278,000 of the September 30, 2015 balance and $252,000 of the December 31, 2014 balance.

22

9.    Debt, Net

Our debt consisted of the following (dollars in thousands):

	Maximum
	Availability at		Carrying Value at					Scheduled Maturity
	September 30, 2015		September 30, 2015		December 31, 2014		Stated Interest Rates as of	as of
							September 30, 2015	September 30, 2015
Mortgage and Other Secured Loans:
Fixed rate mortgage loans (1)			$	288,217	$	387,139	3.96% - 7.87% (2)	2016-2024
Variable rate secured loan			36,249		36,877		LIBOR + 2.25% (3)	November 2015
Total mortgage and other secured loans			324,466		424,016
Revolving Credit Facility	$	800,000	87,000		83,000		LIBOR + 0.875% to 1.60% (4)	May 2019
Term Loan Facilities	(5)		520,000		520,000		LIBOR + 0.90% to 2.60% (6)	2016-2020
Unsecured Senior Notes
3.600% Senior Notes (7)			347,691		347,496		3.60%	May 2023
5.250% Senior Notes (8)			246,074		245,797		5.25%	February 2024
3.700% Senior Notes (9)			297,830		297,569		3.70%	June 2021
5.000% Senior Note (10)			296,646		—		5.00%	July 2025
Unsecured notes payable			1,533		1,607		0% (11)	2026
4.25% Exchangeable Senior Notes (12)			—		572		N/A	(12)
Total debt, net			$	2,121,240	$	1,920,057

(1)   Several of the fixed rate mortgages carry interest rates that were above or below market rates upon assumption and therefore were recorded at their fair value based on applicable effective interest rates.  The carrying values of these loans reflect net unamortized premiums totaling $24,000 as of September 30, 2015 and $42,000 as of December 31, 2014. Please refer to Note 4 for disclosure pertaining to the removal of a $150.0 million nonrecourse mortgage loan from our balance sheet on August 28, 2015.

(2) The weighted average interest rate on our fixed rate mortgage loans was 6.07% as of September 30, 2015.

(3)  The interest rate on the loan outstanding was 2.45% as of September 30, 2015.

(4) The weighted average interest rate on the Revolving Credit Facility was 1.48% as of September 30, 2015.

(5)   We have the ability to borrow an additional $380.0 million in the aggregate under these term loan facilities, provided that there is no default under the facilities and subject to the approval of the lenders.

(6)  The weighted average interest rate on these loans was 1.78% as of September 30, 2015.

(7) The carrying value of these notes included a principal amount of $350.0 millionand an unamortized discount totaling $2.3 millionas of September 30, 2015 and $2.5 million as of December 31, 2014.  The effective interest rate under the notes, including amortization of the issuance costs, was 3.70%. 

(8) The carrying value of these notes included a principal amount of $250.0 millionand an unamortized discount totaling $3.9 millionas of September 30, 2015 and $4.2 million as of December 31, 2014.  The effective interest rate under the notes, including amortization of the issuance costs, was 5.49%. 

(9) The carrying value of these notes included a principal amount of $300.0 millionand an unamortized discount totaling $2.2 millionas of September 30, 2015 and $2.4 million as of December 31, 2014.  The effective interest rate under the notes, including amortization of the issuance costs, was 3.85%. 

(10) Refer to the paragraph below for disclosure pertaining to these notes.

(11)  These notes carry interest rates that were below market rates upon assumption and therefore were recorded at their fair value based on applicable effective interest rates.  The carrying value of these notes reflects an unamortized discount totaling $578,000 as of September 30, 2015 and $654,000 as of December 31, 2014.

(12) On April 20, 2015, we redeemed these notes at 100% of their principal amount.

All debt is owed by the Operating Partnership. While COPT is not directly obligated by any debt, it has guaranteed the Operating Partnership’s Revolving Credit Facility, Term Loan Facilities and Unsecured Senior Notes.

On May 6, 2015, we entered into a credit agreement with a group of lenders for which KeyBanc Capital Markets and J.P. Morgan Securities LLC acted as joint lead arrangers and joint book runners, KeyBank National Association acted as administrative agent and JPMorgan Chase Bank, N.A. acted as syndication agent (the “Consolidated Credit Agreement”) to amend, restate and consolidate the terms of our Revolving Credit Facility and one of our term loan facilities. In addition to consolidating the terms of these loan facilities, the Consolidated Credit Agreement included the following provisions:

For the Revolving Credit Facility:

23

• an extension of the maturity date from July 14, 2017 to May 6, 2019, with the ability for us to further extend such maturity by twosix-month periods at our option, provided that there is no default under the facility and we pay an extension fee based on the total availability of the facility for each extension;

• changes to the interest terms of the facility such that the variable interest rate is based on LIBOR (customarily the 30-day rate) plus 0.875% to 1.600%, as determined by the credit ratings assigned to COPLP by Standard & Poor’s Ratings Services, Moody’s Investors Service, Inc. or Fitch Ratings Ltd. (collectively, the “Ratings Agencies”);

• changes to the quarterly fee carried by the facility. Such fee is based on the average daily amount of the lenders’ aggregate commitment multiplied by a per annum rate of 0.125% to 0.300%, as determined by the credit ratings assigned to COPLP by the Ratings Agencies; and

• certain changes to the financial covenants of the facility.

For the term loan facility:

• an increase in the loan amount from $250.0 million to $300.0 million, with a right for us to borrow up to an additional $200.0 million during the term for an aggregate maximum loan of $500.0 million, subject to certain conditions. We used the proceeds from the $50.0 million increase in the facility to repay a portion of another existing unsecured term loan;

• an extension of the maturity date of the loan from February 14, 2017 to May 6, 2020;

• changes to the interest terms of the facility such that the variable interest rate is based on LIBOR (customarily the 30-day rate) plus 0.900% to 1.850%, as determined by the credit ratings assigned to COPLP by the Ratings Agencies; and

• certain changes to the financial covenants of the facility.

On June 29, 2015, we issued a $300.0 million aggregate principal amount of 5.00% Senior Notes at an initial offering price of 99.510% of their face value. The proceeds from this issuance, after deducting underwriting discounts, but before other offering expenses, were $296.6 million. The notes mature on July 1, 2025. We may redeem the notes, in whole at any time or in part from time to time, at our option, at a redemption price equal to the greater of (1) the aggregate principal amount of the notes being redeemed and (2) the sum of the present values of the remaining scheduled payments of principal and interest thereon (not including any portion of such payments of interest accrued as of the date of redemption) discounted to its present value, on a semi-annual basis at an adjusted treasury rate plus 45 basis points, plus accrued and unpaid interest thereon to the date of redemption. The notes are unconditionally guaranteed by COPT. However, if this redemption occurs on or after three months prior to the maturity date, the redemption price will be equal to 100% of the principal amount of the notes being redeemed, plus accrued and unpaid interest thereon to, but not including, the redemption date. The carrying value of these notes reflects an unamortized discount totaling $3.4 million at September 30, 2015. The effective interest rate under the notes, including amortization of the issuance costs, was 5.15%.

We capitalized interest costs of $1.5 million in the three months ended September 30, 2015, $1.3 million in the three months ended September 30, 2014, $5.6 million in the nine months ended September 30, 2015 and $4.3 million in the nine months ended September 30, 2014.

The following table sets forth information pertaining to the fair value of our debt (in thousands): 

	September 30, 2015				December 31, 2014
	Carrying		Estimated		Carrying		Estimated
	Amount		Fair Value		Amount		Fair Value
Fixed-rate debt
Unsecured Senior Notes	$	1,188,241	$	1,212,120	$	890,862	$	901,599
Other fixed-rate debt	289,750		298,198		389,318		356,377
Variable-rate debt	643,249		644,243		639,877		642,091
	$	2,121,240	$	2,154,561	$	1,920,057	$	1,900,067

24

10.    Interest Rate Derivatives

The following table sets forth the key terms and fair values of our interest rate swap derivatives (dollars in thousands):

							Fair Value at
Notional Amount			Fixed Rate	Floating Rate Index	Effective Date	Expiration Date	September 30, 2015			December 31, 2014
$	36,249	(1)	3.8300%	One-Month LIBOR + 2.25%	11/2/2010	11/2/2015	$	(44	)	$	(400	)
100,000			0.8055%	One-Month LIBOR	9/2/2014	9/1/2016	(396		)	(317		)
100,000			0.8100%	One-Month LIBOR	9/2/2014	9/1/2016	(401		)	(324		)
100,000			1.6730%	One-Month LIBOR	9/1/2015	8/1/2019	(2,386		)	239
100,000			1.7300%	One-Month LIBOR	9/1/2015	8/1/2019	(2,617		)	35
100,000			0.8320%	One-Month LIBOR	1/3/2012	9/1/2015	—			(407		)
100,000			0.8320%	One-Month LIBOR	1/3/2012	9/1/2015	—			(407		)
							$	(5,844	)	$	(1,581	)

(1) The notional amount of this instrument is scheduled to amortize to $36.2 million.

Each of the one-month LIBOR interest rate swaps set forth in the table above was designated as a cash flow hedge of interest rate risk.

The table below sets forth the fair value of our interest rate derivatives as well as their classification on our consolidated balance sheets (in thousands):

	September 30, 2015				December 31, 2014
Derivatives	Balance Sheet Location	Fair Value			Balance Sheet Location	Fair Value
Interest rate swaps designated as cash flow hedges	Prepaid expenses and other assets	$	—		Prepaid expenses and other assets	$	274
Interest rate swaps designated as cash flow hedges	Interest rate derivatives	(5,844		)	Interest rate derivatives	(1,855		)

The table below presents the effect of our interest rate derivatives on our consolidated statements of operations and comprehensive income (in thousands):

	For the Three Months Ended September 30,					For the Nine Months Ended September 30,
	2015			2014		2015			2014
Amount of (loss) gain recognized in accumulated other comprehensive loss (“AOCL”) (effective portion)	$	(3,638	)	$	1,015	$	(6,720	)	$	(4,738	)
Amount of losses reclassified from AOCL into interest expense (effective portion)	915			756		2,457			2,170

Over the next 12 months, we estimate that approximately $3.5 million of losses will be reclassified from AOCL as an increase to interest expense.

We have agreements with each of our interest rate derivative counterparties that contain provisions under which, if we default or are capable of being declared in default on defined levels of our indebtedness, we could also be declared in default on our derivative obligations.  These agreements also incorporate the loan covenant provisions of our indebtedness with a lender affiliate of the derivative counterparties.  Failure to comply with the loan covenant provisions could result in our being declared in default on any derivative instrument obligations covered by the agreements.  As of September 30, 2015, the fair value of interest rate derivatives in a liability position related to these agreements was $5.9 million, excluding the effects of accrued interest and credit valuation adjustments. As of September 30, 2015, we had not posted any collateral related to these agreements.  We are not in default with any of these provisions.  If we breached any of these provisions, we could be required to settle our obligations under the agreements at their termination value of $6.3 million.

25

11.    Redeemable Noncontrolling Interest

The table below sets forth the activity for a redeemable noncontrolling interest in a consolidated real estate joint venture (in thousands):

	For the Nine Months Ended September 30,
	2015			2014
Beginning balance	$	18,417		$	17,758
Distributions to noncontrolling interest, net	(1,098		)	(976		)
Net income attributable to noncontrolling interest	1,690			1,647
Adjustment to arrive at fair value of interest	599			7
Ending balance	$	19,608		$	18,436

12.    Equity

During the nine months endedSeptember 30, 2015, COPT issued 890,241 common shares at a weighted average price of $30.29 per share under its at-the-market (“ATM”) stock offering program established in October 2012. Net proceeds from the shares issued totaled $26.6 million, after payment of $0.4 million in commissions to sales agents. These net proceeds were contributed to COPLP in exchange for 890,241 common units. COPT’s remaining capacity under the ATM Plan is an aggregate gross sales price of $84.0 million in common share sales.

During the nine months endedSeptember 30, 2015, certain COPLP limited partners redeemed 160,160 common units in COPLP for an equal number of common shares in COPT.

See Note 14 for disclosure of COPT common share and COPLP common unit activity pertaining to our share-based compensation plans.

26

13.    Information by Business Segment

We have ten reportable operating office property segments (comprised of: the Baltimore/Washington Corridor; Northern Virginia; San Antonio; Huntsville; Washington, DC — Capitol Riverfront; St. Mary’s and King George Counties; Greater Baltimore; Greater Philadelphia; Colorado Springs; and Other). In our 2015 quarterly reports on Form 10-Q, our Colorado Springs segment is, and will be, included in our Other segment as it is insignificant in the 2014 and 2015 reporting periods. We also have an operating wholesale data center segment. The table below reports segment financial information for our reportable segments (in thousands).  We measure the performance of our segments through the measure we define as NOI from real estate operations, which is derived by subtracting property operating expenses from revenues from real estate operations.

	Operating Office Property Segments
	Baltimore/ Washington Corridor		Northern Virginia		San Antonio			Huntsville		Washington, DC - Capitol Riverfront		St. Mary’s &  King George Counties		Greater Baltimore		Greater Philadelphia		Other			Operating Wholesale Data Center		Total
Three Months Ended September 30, 2015
Revenues from real estate operations	$	62,009	$	23,332	$	9,492		$	3,061	$	3,336	$	3,550	$	16,134	$	4,126	$	2,568		$	6,078	$	133,686
Property operating expenses	20,169		7,785		4,808			888		1,962		1,325		6,461		1,249		242			4,008		48,897
NOI from real estate operations	$	41,840	$	15,547	$	4,684		$	2,173	$	1,374	$	2,225	$	9,673	$	2,877	$	2,326		$	2,070	$	84,789
Additions to long-lived assets	$	7,943	$	1,749	$	—		$	175	$	1,098	$	986	$	128,933	$	246	$	(93	)	$	—	$	141,037
Transfers from non-operating properties	$	25,184	$	34,195	$	591		$	1,207	$	—	$	1,408	$	315	$	5,506	$	—		$	73,804	$	142,210
Three Months Ended September 30, 2014								—
Revenues from real estate operations	$	58,883	$	21,369	$	9,031		$	2,471	$	3,524	$	4,158	$	10,436	$	2,951	$	2,541		$	2,876	$	118,240
Property operating expenses	19,457		7,500		5,100			763		1,824		1,277		3,810		837		260			2,053		42,881
NOI from real estate operations	$	39,426	$	13,869	$	3,931		$	1,708	$	1,700	$	2,881	$	6,626	$	2,114	$	2,281		$	823	$	75,359
Additions to long-lived assets	$	7,248	$	5,898	$	—		$	455	$	458	$	5,189	$	3,021	$	625	$	(125	)	$	24	$	22,793
Transfers from non-operating properties	$	22,680	$	15,403	$	—		$	1,496	$	—	$	—	$	495	$	2,506	$	—		$	222	$	42,802
Nine Months Ended September 30, 2015
Revenues from real estate operations	$	184,412	$	69,474	$	28,867		$	8,165	$	10,091	$	11,246	$	40,508	$	11,236	$	7,659		$	12,933	$	384,591
Property operating expenses	63,291		25,593		15,398			2,605		5,837		4,238		16,367		3,565		655			8,441		145,990
NOI from real estate operations	$	121,121	$	43,881	$	13,469		$	5,560	$	4,254	$	7,008	$	24,141	$	7,671	$	7,004		$	4,492	$	238,601
Additions to long-lived assets	$	16,529	$	89,152	$	21		$	466	$	2,297	$	3,149	$	195,013	$	824	$	164		$	108	$	307,723
Transfers from non-operating properties	$	44,212	$	101,412	$	32,150		$	13,184	$	—	$	1,408	$	327	$	22,222	$	8		$	89,183	$	304,106
Segment assets at September 30, 2015	$	1,297,431	$	697,406	$	148,336		$	108,541	$	94,120	$	101,985	$	455,469	$	128,409	$	76,259		$	246,806	$	3,354,762
Nine Months Ended September 30, 2014
Revenues from real estate operations	$	177,452	$	67,235	$	26,268		$	7,430	$	10,989	$	12,676	$	32,956	$	8,657	$	7,668		$	7,769	$	359,100
Property operating expenses	62,402		24,124		14,391			2,275		5,343		4,070		13,786		3,281		1,195			5,622		136,489
NOI from real estate operations	$	115,050	$	43,111	$	11,877		$	5,155	$	5,646	$	8,606	$	19,170	$	5,376	$	6,473		$	2,147	$	222,611
Additions to long-lived assets	$	19,278	$	14,198	$	(6	)	$	3,296	$	999	$	6,971	$	5,275	$	724	$	(163	)	$	46	$	50,618
Transfers from non-operating properties	$	50,303	$	42,674	$	—		$	21,821	$	—	$	—	$	3,522	$	15,880	$	30		$	897	$	135,127
Segment assets at September 30, 2014	$	1,278,713	$	648,248	$	116,837		$	98,334	$	96,131	$	100,009	$	274,931	$	107,051	$	78,240		$	164,192	$	2,962,686

27

The following table reconciles our segment revenues to total revenues as reported on our consolidated statements of operations (in thousands):

	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
	2015		2014		2015			2014
Segment revenues from real estate operations	$	133,686	$	118,240	$	384,591		$	359,100
Construction contract and other service revenues	17,058		34,739		97,554			80,390
Less: Revenues from discontinued operations	—		36		(4		)	12
Total revenues	$	150,744	$	153,015	$	482,141		$	439,502

The following table reconciles our segment property operating expenses to property operating expenses as reported on our consolidated statements of operations (in thousands):

	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
	2015		2014		2015		2014
Segment property operating expenses	$	48,897	$	42,881	$	145,990	$	136,489
Less: Property operating expenses from discontinued operations	—		175		6		111
Total property operating expenses	$	48,897	$	43,056	$	145,996	$	136,600

As previously discussed, we provide real estate services such as property management and construction and development services primarily for our properties but also for third parties.  The primary manner in which we evaluate the operating performance of our service activities is through a measure we define as net operating income from service operations (“NOI from service operations”), which is based on the net of revenues and expenses from these activities.  Construction contract and other service revenues and expenses consist primarily of subcontracted costs that are reimbursed to us by the customer along with a management fee. The operating margins from these activities are small relative to the revenue.  We believe NOI from service operations is a useful measure in assessing both our level of activity and our profitability in conducting such operations. The table below sets forth the computation of our NOI from service operations (in thousands):

	For the Three Months Ended September 30,						For the Nine Months Ended September 30,
	2015			2014			2015			2014
Construction contract and other service revenues	$	17,058		$	34,739		$	97,554		$	80,390
Construction contract and other service expenses	(16,132		)	(33,593		)	(94,923		)	(75,353		)
NOI from service operations	$	926		$	1,146		$	2,631		$	5,037

28

The following table reconciles our NOI from real estate operations for reportable segments and NOI from service operations to income from continuing operations as reported on our consolidated statements of operations (in thousands):

	For the Three Months Ended September 30,						For the Nine Months Ended September 30,
	2015			2014			2015			2014
NOI from real estate operations	$	84,789		$	75,359		$	238,601		$	222,611
NOI from service operations	926			1,146			2,631			5,037
Interest and other income	692			1,191			3,217			3,775
Equity in income of unconsolidated entities	18			193			52			206
Income tax expense	(48		)	(101		)	(153		)	(257		)
Other adjustments:	—						—
Depreciation and other amortization associated with real estate operations	(38,403		)	(30,237		)	(103,788		)	(104,728		)
Impairment losses	(2,307		)	(66		)	(3,545		)	(1,368		)
General, administrative and leasing expenses	(7,439		)	(7,211		)	(22,864		)	(22,882		)
Business development expenses and land carry costs	(5,573		)	(1,430		)	(10,986		)	(4,107		)
Interest expense	(24,121		)	(24,802		)	(66,727		)	(69,107		)
Less: NOI from discontinued operations	—			(139		)	(10		)	(99		)
Gain (loss) on early extinguishment of debt	85,745			(176		)	85,677			(446		)
Income from continuing operations	$	94,279		$	13,727		$	122,105		$	28,635

The following table reconciles our segment assets to the consolidated total assets of COPT and subsidiaries (in thousands):

	September 30, 2015		September 30, 2014
Segment assets	$	3,354,762	$	2,962,686
Non-operating property assets	416,540		518,951
Other assets	147,171		198,551
Total COPT consolidated assets	$	3,918,473	$	3,680,188

The accounting policies of the segments are the same as those used to prepare our consolidated financial statements, except that discontinued operations are not presented separately for segment purposes.  In the segment reporting presented above, we did not allocate interest expense, depreciation and amortization, impairment losses, loss on early extinguishment of debt and gain on sales of real estate to our real estate segments since they are not included in the measure of segment profit reviewed by management.  We also did not allocate general and administrative expenses, business development expenses and land carry costs, interest and other income, equity in income of unconsolidated entities, income taxes and noncontrolling interests because these items represent general corporate or non-operating property items not attributable to segments.

14.    Share-Based Compensation

Performance Share Units (“PSUs”)

On March 5, 2015, our Board of Trustees granted 45,656 PSUs with an aggregate grant date fair value of $1.7 million to executives.  The PSUs have a performance period beginning on January 1, 2015 and concluding on the earlier of December 31, 2017 or the date of: (1) termination by us without cause, death or disability of the executive or constructive discharge of the executive (collectively, “qualified termination”); or (2) a sale event.  The number of PSUs earned (“earned PSUs”) at the end of the performance period will be determined based on the percentile rank of COPT’s total shareholder return relative to a peer group of companies, as set forth in the following schedule:

Percentile Rank	Earned PSUs Payout %
75th or greater	200% of PSUs granted
50th or greater	100% of PSUs granted
25th	50% of PSUs granted
Below 25th	0% of PSUs granted

If the percentile rank exceeds the 25th percentile and is between two of the percentile ranks set forth in the table above, then the percentage of the earned PSUs will be interpolated between the ranges set forth in the table above to reflect any performance

29

between the listed percentiles.  At the end of the performance period, we, in settlement of the award, will issue a number of fully-vested COPT common shares equal to the sum of:

• the number of earned PSUs in settlement of the award plan; plus

• the aggregate dividends that would have been paid with respect to the common shares issued in settlement of the earned PSUs through the date of settlement had such shares been issued on the grant date, divided by the share price on such settlement date, as defined under the terms of the agreement.

If a service period ends due to a sale event or qualified termination, the number of earned PSUs is prorated based on the portion of the service period that has elapsed.  If employment is terminated by the employee or by us for cause, all PSUs are forfeited.  PSUs do not carry voting rights.

We computed a grant date fair value of $36.76 per PSU using a Monte Carlo model, which included assumptions of, among other things, the following: baseline common share value of $29.28; expected volatility for COPT common shares of 19.9%; and a risk-free interest rate of 0.99%.  We are recognizing the grant date fair value in connection with these PSU awards over the period commencing on March 6, 2015 and ending on December 31, 2017.

With regard to the PSUs granted to our executives in prior years that were outstanding as of December 31, 2014 as described in our 2014 Annual Report on Form 10-K:

• the performance period for the PSUs granted to executives on March 1, 2012 ended on December 31, 2014. Based on COPT’s total shareholder return during the performance period relative to its peer group of companies, we issued 40,309 common shares in settlement of the PSUs on March 5, 2015; and

• we issued 15,289 common shares on March 5, 2015 to Mr. Stephen E. Riffee, our former Chief Financial Officer, upon his departure on February 3, 2015, in settlement of PSUs granted on March 1, 2013 and March 6, 2014.

Restricted Shares

During the nine months endedSeptember 30, 2015, certain employees were granted a total of 193,499 restricted common shares with an aggregate grant date fair value of $5.6 million (weighted average of $28.93 per share).  Restricted shares granted to employees vest based on increments and over periods of time set forth under the terms of the respective awards provided that the employees remain employed by us.  During the nine months endedSeptember 30, 2015, forfeiture restrictions lapsed on 163,145 previously issued common shares; these shares had a weighted average grant date fair value of $26.15 per share, and the aggregate intrinsic value of the shares on the vesting dates was $4.6 million.

Deferred Share Awards

During the nine months endedSeptember 30, 2015, nonemployee members of our Board of Trustees were granted a total of 24,056 deferred share awards with an aggregate grant date fair value of $642,000 ($26.70 per share). Deferred share awards vest on the first anniversary of the grant date, provided that the Trustee remains in his or her position. We settle deferred share awards by issuing an equivalent number of common shares upon vesting of the awards or a later date elected by the Trustee (generally upon cessation of being a Trustee). During the nine months endedSeptember 30, 2015, we issued 15,485 common shares in settlement of deferred share awards granted in 2014; these shares had a grant date fair value of $26.77 per share, and the aggregate intrinsic value of the shares on the settlement date was $413,000.

Options

During the nine months endedSeptember 30, 2015, 76,474 options to purchase common shares (“options”) were exercised.  The weighted average exercise price of these options was $26.27 per share, and the aggregate intrinsic value of the options exercised was $300,000.

30

15.    Income Taxes

We own a TRS that is subject to Federal and state income taxes.  Our TRS’s provision for income taxes consisted of the following (in thousands):

	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
	2015		2014		2015		2014
Deferred
Federal	$	39	$	83	$	125	$	215
State	9		18		28		42
Total income tax expense	$	48	$	101	$	153	$	257

Items in our TRS contributing to temporary differences that lead to deferred taxes include depreciation and amortization, share-based compensation, certain accrued compensation, compensation paid in the form of contributions to a deferred nonqualified compensation plan and net operating losses that are not deductible until future periods.

Our TRS’s combined Federal and state effective tax rate was 37.7% for the three and nine months endedSeptember 30, 2015 and 2014.

16.    Earnings Per Share (“EPS”) and Earnings Per Unit (“EPU”)

COPT and Subsidiaries EPS

We present both basic and diluted EPS.  We compute basic EPS by dividing net income available to common shareholders allocable to unrestricted common shares under the two-class method by the weighted average number of unrestricted common shares outstanding during the period.  Our computation of diluted EPS is similar except that:

• the denominator is increased to include: (1) the weighted average number of potential additional common shares that would have been outstanding if securities that are convertible into COPT common shares were converted; and (2) the effect of dilutive potential common shares outstanding during the period attributable to share-based compensation using the treasury stock or if-converted methods; and

• the numerator is adjusted to add back any changes in income or loss that would result from the assumed conversion into common shares that we added to the denominator.

31

Summaries of the numerator and denominator for purposes of basic and diluted EPS calculations are set forth below (in thousands, except per share data):

	For the Three Months Ended September 30,						For the Nine Months Ended September 30,
	2015			2014			2015			2014
Numerator:
Income from continuing operations	$	94,279		$	13,727		$	122,105		$	28,635
Gain on sales of real estate, net	15			10,630			4,000			10,630
Preferred share dividends	(3,552		)	(3,553		)	(10,657		)	(12,387		)
Issuance costs associated with redeemed preferred shares	—			—			—			(1,769		)
Income from continuing operations attributable to noncontrolling interests	(4,494		)	(1,820		)	(7,322		)	(3,923		)
Income from continuing operations attributable to share-based compensation awards	(369		)	(103		)	(475		)	(332		)
Numerator for basic EPS from continuing operations attributable to COPT common shareholders	85,879			18,881			107,651			20,854
Convertible preferred shares	372			—			—			—
Dilutive effect of common units in COPLP on diluted EPS from continuing operations	—			—			4,225			—
Numerator for diluted EPS from continuing operations attributable to COPT common shareholders	$	86,251		$	18,881		$	111,876		$	20,854
Numerator for basic EPS from continuing operations attributable to COPT common shareholders	$	85,879		$	18,881		$	107,651		$	20,854
Discontinued operations	—			191			156			4
Discontinued operations attributable to noncontrolling interests	—			(8		)	(3		)	5
Numerator for basic EPS on net income attributable to COPT common shareholders	85,879			19,064			107,804			20,863
Convertible preferred shares	372			—			—			—
Dilutive effect of common units in COPLP	—			—			4,231			—
Numerator for diluted EPS on net income attributable to COPT common shareholders	$	86,251		$	19,064		$	112,035		$	20,863
Denominator (all weighted averages):
Denominator for basic EPS (common shares)	94,153			87,290			93,830			87,196
Convertible preferred shares	434			—			—			—
Dilutive effect of common units	—			—			3,697			—
Dilutive effect of share-based compensation awards	21			195			82			169
Denominator for diluted EPS (common shares)	94,608			87,485			97,609			87,365
Basic EPS:
Income from continuing operations attributable to COPT common shareholders	$	0.91		$	0.22		$	1.15		$	0.24
Discontinued operations attributable to COPT common shareholders	0.00			0.00			0.00			0.00
Net income attributable to COPT common shareholders	$	0.91		$	0.22		$	1.15		$	0.24
Diluted EPS:
Income from continuing operations attributable to COPT common shareholders	$	0.91		$	0.22		$	1.15		$	0.24
Discontinued operations attributable to COPT common shareholders	0.00			0.00			0.00			0.00
Net income attributable to COPT common shareholders	$	0.91		$	0.22		$	1.15		$	0.24

32

Our diluted EPS computations do not include the effects of the following securities since the conversions of such securities would increase diluted EPS for the respective periods (in thousands):

	Weighted Average Shares Excluded from Denominator
	For the Three Months Ended September 30,		For the Nine Months Ended September 30,
	2015	2014	2015	2014
Conversion of common units	3,679	3,876	—	3,915
Conversion of Series I Preferred Units	176	176	176	176
Conversion of Series K Preferred Shares	—	434	434	434

The following share-based compensation securities were excluded from the computation of diluted EPS because their effects were antidilutive:

• weighted average restricted shares and deferred share awards for the three months ended September 30, 2015 and 2014 of 411,000 and 401,000, respectively, and for the nine months ended September 30, 2015 and 2014 of 412,000 and 404,000, respectively; and

• weighted average options for the three months ended September 30, 2015 and 2014 of 440,000 and 490,000, respectively, and for the nine months ended September 30, 2015 and 2014 of 480,000 and 495,000, respectively.

As discussed in Note 9, we had outstanding senior notes, which we redeemed in April 2015, with an exchange settlement feature, but such notes did not affect our diluted EPS reported above since the weighted average closing price of COPT’s common shares during each of the periods was less than the exchange prices per common share applicable for such periods.

COPLP and Subsidiaries EPU

We present both basic and diluted EPU.  We compute basic EPU by dividing net income available to common unitholders allocable to unrestricted common units under the two-class method by the weighted average number of unrestricted common units outstanding during the period.  Our computation of diluted EPU is similar except that:

• the denominator is increased to include: (1) the weighted average number of potential additional common units that would have been outstanding if securities that are convertible into our common units were converted; and (2) the effect of dilutive potential common units outstanding during the period attributable to share-based compensation using the treasury stock or if-converted methods; and

• the numerator is adjusted to add back any changes in income or loss that would result from the assumed conversion into common units that we added to the denominator.

33

Summaries of the numerator and denominator for purposes of basic and diluted EPU calculations are set forth below (in thousands, except per unit data):

	For the Three Months Ended September 30,						For the Nine Months Ended September 30,
	2015			2014			2015			2014
Numerator:
Income from continuing operations	$	94,279		$	13,727		$	122,105		$	28,635
Gain on sales of real estate, net	15			10,630			4,000			10,630
Preferred unit distributions	(3,717		)	(3,718		)	(11,152		)	(12,882		)
Issuance costs associated with redeemed preferred units	—			—			—			(1,769		)
Income from continuing operations attributable to noncontrolling interests	(972		)	(897		)	(2,605		)	(2,476		)
Income from continuing operations attributable to share-based compensation awards	(369		)	(103		)	(475		)	(332		)
Numerator for basic EPU from continuing operations attributable to COPLP common unitholders	89,236			19,639			111,873			21,806
Convertible preferred units	372			—			—			—
Numerator for diluted EPU from continuing operations attributable to COPLP common unitholders	$	89,608		$	19,639		$	111,873		$	21,806
Numerator for basic EPU from continuing operations attributable to COPLP common unitholders	$	89,236		$	19,639		$	111,873		$	21,806
Discontinued operations	—			191			156			4
Discontinued operations attributable to noncontrolling interests	—			—			3			5
Numerator for basic EPU on net income attributable to COPLP common unitholders	89,236			19,830			112,032			21,815
Convertible preferred units	372			—			—			—
Numerator for diluted EPU on net income attributable to COPLP common unitholders	$	89,608		$	19,830		$	112,032		$	21,815
Denominator (all weighted averages):
Denominator for basic EPU (common units)	97,832			91,166			97,527			91,111
Convertible preferred shares	434			—			—			—
Dilutive effect of share-based compensation awards	21			195			82			169
Denominator for basic and diluted EPU (common units)	98,287			91,361			97,609			91,280
Basic EPU:
Income from continuing operations attributable to COPLP common unitholders	$	0.91		$	0.22		$	1.15		$	0.24
Discontinued operations attributable to COPLP common unitholders	0.00			0.00			0.00			0.00
Net income attributable to COPLP common unitholders	$	0.91		$	0.22		$	1.15		$	0.24
Diluted EPU:
Income from continuing operations attributable to COPLP common unitholders	$	0.91		$	0.22		$	1.15		$	0.24
Discontinued operations attributable to COPLP common unitholders	0.00			0.00			0.00			0.00
Net income attributable to COPLP common unitholders	$	0.91		$	0.22		$	1.15		$	0.24

34

Our diluted EPU computations do not include the effects of the following securities since the conversions of such securities would increase diluted EPU for the respective periods (in thousands):

	Weighted Average Units Excluded from Denominator
	For the Three Months Ended September 30,		For the Nine Months Ended September 30,
	2015	2014	2015	2014
Conversion of Series I preferred units	176	176	176	176
Conversion of Series K preferred units	—	434	434	434

The following share-based compensation securities were excluded from the computation of diluted EPU because their effects were antidilutive:

• weighted average restricted units and deferred share awards for the three months ended September 30, 2015 and 2014 of 411,000 and 401,000, respectively, and for the nine months ended September 30, 2015 and 2014 of 412,000 and 404,000, respectively; and

• weighted average options for the three months ended September 30, 2015 and 2014 of 440,000 and 490,000, respectively, and for the nine months ended September 30, 2015 and 2014 of 480,000 and 495,000, respectively.

As discussed in Note 9, we had outstanding senior notes, which we redeemed in April 2015, with an exchange settlement feature, but such notes did not affect our diluted EPU reported above since the weighted average closing price of COPT’s common shares during each of the periods was less than the exchange prices per common share applicable for such periods.

17.    Commitments and Contingencies

Litigation

In the normal course of business, we are involved in legal actions arising from our ownership and administration of properties.  We establish reserves for specific legal proceedings when we determine that the likelihood of an unfavorable outcome is probable and the amount of loss can be reasonably estimated.  Management does not anticipate that any liabilities that may result from such proceedings will have a materially adverse effect on our financial position, operations or liquidity.  Our assessment of the potential outcomes of these matters involves significant judgment and is subject to change based on future developments.

Environmental

We are subject to various Federal, state and local environmental regulations related to our property ownership and operation.  We have performed environmental assessments of our properties, the results of which have not revealed any environmental liability that we believe would have a materially adverse effect on our financial position, operations or liquidity.

Tax Incremental Financing Obligation

In August 2010, Anne Arundel County, Maryland issued $30 million in tax incremental financing bonds to third-party investors in order to finance public improvements needed in connection with our project known as National Business Park North.  The real estate taxes on increases in assessed value of a development district encompassing National Business Park North are to be transferred to a special fund pledged to the repayment of the bonds.  We recognized a $2.2 million liability through September 30, 2015 representing our estimated obligation to fund through a special tax any future shortfalls between debt service on the bonds and real estate taxes available to repay the bonds.

35

Operating Leases

We are obligated as lessee under operating leases (mostly ground leases) with various expiration dates extending to the year 2100. Future minimum rental payments due under the terms of these operating leases as of September 30, 2015 follow (in thousands):

Year Ending December 31,
2015 (1)	$	289
2016	1,171
2017	1,096
2018	1,052
2019	1,036
Thereafter	86,999
	$	91,643

(1) Represents three months ending December 31, 2015.

Contractual Obligations

We had amounts remaining to be incurred under various contractual obligations as of September 30, 2015 that included the following:

• new development and redevelopment obligations of $97.9 million (including acquisitions of land);

• capital expenditures for operating properties of $41.9 million;

• third party construction and development of $8.1 million; and

• other purchase obligations of $4.0 million.

Environmental Indemnity Agreement

In connection with a lease and subsequent sale in 2008 and 2010 of three properties in Dayton, New Jersey, we agreed to provide certain environmental indemnifications. The prior owner of the properties, a Fortune 100 company that is responsible for groundwater contamination at such properties, previously agreed to indemnify us for (1) direct losses incurred in connection with the contamination and (2) its failure to perform remediation activities required by the State of New Jersey, up to the point that the state declares the remediation to be complete.  Under the environmental indemnification agreement, we agreed to the following:

• to indemnify the tenant against losses covered under the prior owner’s indemnity agreement if the prior owner fails to indemnify the tenant for such losses.  This indemnification is capped at $5.0 million in perpetuity after the State of New Jersey declares the remediation to be complete;

• to indemnify the tenant for consequential damages (e.g., business interruption) at one of the buildings in perpetuity and another of the buildings through 2025.  This indemnification is limited to $12.5 million; and

• to pay 50% of additional costs related to construction and environmental regulatory activities incurred by the tenant as a result of the indemnified environmental condition of the properties.  This indemnification is limited to $300,000 annually and $1.5 million in the aggregate.

18.    Subsequent Event

On October 27, 2015, we sold 13200 Woodland Park Road, a 397,000 square foot office property in Herndon, Virginia (in the Northern Virginia region) for $84.0 million, resulting in a gain on sale of approximately $42 million.

36

Item 2.Management’s Discussion and Analysis of Financial Condition and Results of Operations

Overview

During the nine months endedSeptember 30, 2015: 

• we finished the period with occupancy of our portfolio of operating office properties at 91.6%;

• we leased 11.25 megawatts in our wholesale data center. The center became 100% operational during the period and was 92.5% leased as of period end;

• we acquired:

◦ 250 W. Pratt Street, a 367,000 square foot property in Greater Baltimore that was 96.2% leased, for $61.9 million on March 19, 2015 primarily using borrowings from our Revolving Credit Facility;

◦ 2600 Park Tower Drive, a 237,000 square foot property in Northern Virginia that was 100% leased, for $80.5 million on April 15, 2015 primarily using borrowings from our Revolving Credit Facility; and

◦ 100 Light Street, a 558,000 square foot office property in Baltimore, Maryland that was 93.5% leased, and its structured parking garage, 30 Light Street, for $121.2 million on August 7, 2015. In connection with that acquisition, we assumed a $55.0 million mortgage loan, and funded the balance primarily using borrowings from our Revolving Credit Facility;

• we placed into service an aggregate of 1.1 million square feet in seven newly constructed properties and two redeveloped properties that were 97.0% leased as of September 30, 2015;

• we disposed of:

◦ a 160,000 square foot office property in Northern Virginia for $27.8 million on July 27, 2015. The net proceeds from this sale were used primarily to repay borrowings under our Revolving Credit Facility;

◦ two office properties in Northern Virgina totaling 665,000 square feet that secured a $150.0 million nonrecourse mortgage loan on August 28, 2015. Ownership in these properties was transferred to the mortgage lender and we removed the debt obligation and accrued interest from our balance sheet; and

◦ land for $18.1 million, using most of the resulting proceeds for general corporate purposes;

• we issued a $300.0 million aggregate principal amount of 5.00% Senior Notes on June 29, 2015 at an initial offering price of 99.510% of their face value. The proceeds from the issuance, after deducting underwriting discounts but before other offering expenses, were approximately $296.6 million. The net proceeds from this issuance were used primarily to repay borrowings under our Revolving Credit Facility; and

• COPT issued 890,241 common shares at a weighted average price of $30.29 per share under its at-the-market stock offering program established in October 2012. Net proceeds from the shares issued totaled $26.6 million. The net proceeds from the shares issued were contributed to COPLP in exchange for 890,241 common units, and used by COPLP for general corporate purposes.

Subsequent to September 30, 2015, we sold 13200 Woodland Park Road, a 397,000 square foot office property in Herndon, Virginia (in the Northern Virginia region) for $84.0 million. The net proceeds from this sale were used primarily to repay borrowings under our Revolving Credit Facility.

We discuss significant factors contributing to changes in our net income in the section below entitled “Results of Operations.” The results of operations discussion is combined for COPT and COPLP because there are no material differences in the results of operations between the two reporting entities.

In addition, the section below entitled “Liquidity and Capital Resources” includes discussions of, among other things:

• how we expect to generate cash for short and long-term capital needs; and

• our commitments and contingencies.

You should refer to our consolidated financial statements and the notes thereto as you read this section.

This section contains “forward-looking” statements, as defined in the Private Securities Litigation Reform Act of 1995, that are based on our current expectations, estimates and projections about future events and financial trends affecting the financial condition and operations of our business. 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 we cannot predict with accuracy and some of which we might not even anticipate. Although we believe that the expectations, estimates and projections reflected in such forward-looking statements are based on reasonable assumptions at the time made, we can give no assurance

37

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 our strategic customers;

• our 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 our joint venture partners may not fulfill their financial obligations as investors or may take actions that are inconsistent with our objectives;

• changes in our 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;

• our ability to satisfy and operate effectively under Federal income tax rules relating to real estate investment trusts and partnerships;

• the dilutive effects of issuing additional common shares;

• our ability to achieve projected results; and

• environmental requirements.

We undertake no obligation to update or supplement forward-looking statements.

Occupancy and Leasing

Office Properties

The tables below set forth occupancy information pertaining to our portfolio of operating office properties. All of our operating portfolio square footage, occupancy and leasing statistics included below and elsewhere in this Quarterly Report on Form 10-Q exclude the effect of the two properties (totaling 665,000 square feet) serving as collateral for debt that was in default; effective April 1, 2014, all cash flows from such properties belonged to the lender. On August 28, 2015, ownership in these properties was transferred to the mortgage lender and we removed the debt obligation and accrued interest from our balance sheet. These properties were 25.1% occupied as of the date we transferred ownership.

	September 30, 2015			December 31, 2014
Occupancy rates at period end
Total	91.6		%	90.9		%
Baltimore/Washington Corridor	94.1		%	93.4		%
Northern Virginia	90.0		%	86.8		%
San Antonio	97.1		%	96.6		%
Huntsville	95.7		%	80.8		%
Washington, DC - Capitol Riverfront	67.7		%	74.4		%
St. Mary’s and King George Counties	72.8		%	90.8		%
Greater Baltimore	89.2		%	86.8		%
Greater Philadelphia	100.0		%	96.2		%
Other	100.0		%	100.0		%
Average contractual annual rental rate per square foot at period end (1)	$	29.46		$	29.27

(1)  Includes estimated expense reimbursements.

38

	Rentable Square Feet		Occupied Square Feet
	(in thousands)
December 31, 2014	16,790		15,255
Square feet vacated upon lease expiration (1)	—		(488	)
Occupancy of previously vacated space in connection with new leases (2)	—		377
Square feet constructed or redeveloped	1,067		1,138
Acquisitions	1,162		1,118
Dispositions	(160	)	(160	)
Square feet removed from operations for redevelopment	(22	)	—
Other changes	(12	)	—
September 30, 2015	18,825		17,240

(1)  Includes lease terminations and space reductions occurring in connection with lease renewals.

(2) Excludes occupancy of vacant square feet acquired or developed.

During the nine months endedSeptember 30, 2015, we completed 1.8 million square feet of leasing, including 646,000 of construction and redevelopment space, and renewed 63.9% of the square footage of our lease expirations (including the effect of early renewals). Our changes in regional occupancy rates reflected in the table above included the following:

• increased occupancy in Northern Virginia due primarily to 580,000 newly constructed square feet placed in service that were 100% occupied;

• increased occupancy in Huntsville due primarily to a previously vacant 62,000 square foot property and a 69,000 square foot newly-constructed property placed in service during the period that were both 100% occupied at period end; and

• decreased occupancy in St. Mary’s and King George Counties due to our renewal of 55.5% of the square feet of our lease expirations in the region and a 29,000 square foot redeveloped property placed in service that was vacant at period end.

Occupancy of our Same Office Properties decreased from 90.5% as of December 31, 2014 to 90.3% as of September 30, 2015.

Wholesale Data Center Property

In February 2015, we leased 11.25 megawatts in our wholesale data center with occupancy that commenced in stages. The 19.25 megawatts center became 100% operational during the period. As of September 30, 2015, 17.8 of these megawatts were leased to tenants with further expansion rights of up to a combined 18.9 megawatts.

Results of Operations

We evaluate the operating performance of our properties using NOI from real estate operations, our segment performance measure derived by subtracting property operating expenses from revenues from real estate operations.  We view our NOI from real estate operations as comprising the following primary categories of operating properties:

• office properties owned and 100% operational throughout the current and prior year reporting periods, excluding properties held for future disposition.  We define these as changes from “Same Office Properties”;

• office properties acquired during the current and prior year reporting periods;

• constructed or redeveloped office properties placed into service that were not 100% operational throughout the current and prior year reporting periods;

• our wholesale data center;

• properties held for sale as of September 30, 2015; and

• property dispositions.

In addition to owning properties, we provide construction management and other services. The primary manner in which we evaluate the operating performance of our construction management and other service activities is through a measure we define as NOI from service operations, which is based on the net of the revenues and expenses from these activities.  The revenues and expenses from these activities consist primarily of subcontracted costs that are reimbursed to us by customers along with a management fee.  The operating margins from these activities are small relative to the revenue.  We believe NOI from service operations is a useful measure in assessing both our level of activity and our profitability in conducting such operations.

39

We believe that operating income, as reported on our consolidated statements of operations, is the most directly comparable generally accepted accounting principles (“GAAP”) measure for both NOI from real estate operations and NOI from service operations.  Since both of these measures exclude certain items includable in operating income, reliance on these measures has limitations; management compensates for these limitations by using the measures simply as supplemental measures that are considered alongside other GAAP and non-GAAP measures.

The table below reconciles NOI from real estate operations and NOI from service operations to operating income reported on the consolidated statements of operations of COPT and subsidiaries:

	For the Three Months Ended September 30,						For the Nine Months Ended September 30,
	2015			2014			2015			2014
	(in thousands)
NOI from real estate operations	$	84,789		$	75,359		$	238,601		$	222,611
NOI from service operations	926			1,146			2,631			5,037
Less: NOI from discontinued operations	—			(139		)	(10		)	(99		)
Depreciation and amortization associated with real estate operations	(38,403		)	(30,237		)	(103,788		)	(104,728		)
Impairment losses	(2,307		)	(66		)	(3,545		)	(1,368		)
General, administrative and leasing expenses	(7,439		)	(7,211		)	(22,864		)	(22,882		)
Business development expenses and land carry costs	(5,573		)	(1,430		)	(10,986		)	(4,107		)
Operating income	$	31,993		$	37,422		$	100,039		$	94,464

Comparison of Statements of Operations for the Three Months Ended September 30, 2015 and 2014

	For the Three Months Ended September 30,
	2015			2014			Variance
	(in thousands)
Revenues
Revenues from real estate operations	$	133,686		$	118,276		$	15,410
Construction contract and other service revenues	17,058			34,739			(17,681		)
Total revenues	150,744			153,015			(2,271		)
Expenses
Property operating expenses	48,897			43,056			5,841
Depreciation and amortization associated with real estate operations	38,403			30,237			8,166
Construction contract and other service expenses	16,132			33,593			(17,461		)
Impairment losses	2,307			66			2,241
General, administrative and leasing expenses	7,439			7,211			228
Business development expenses and land carry costs	5,573			1,430			4,143
Total operating expenses	118,751			115,593			3,158
Operating income	31,993			37,422			(5,429		)
Interest expense	(24,121		)	(24,802		)	681
Interest and other income	692			1,191			(499		)
Gain (loss) on early extinguishment of debt	85,745			(176		)	85,921
Equity in income of unconsolidated entities	18			193			(175		)
Income tax expense	(48		)	(101		)	53
Income from continuing operations	94,279			13,727			80,552
Discontinued operations	—			191			(191		)
Gain on sales of real estate	15			10,630			(10,615		)
Net income	$	94,294		$	24,548		$	69,746

40

NOI from Real Estate Operations
	For the Three Months Ended September 30,
	2015			2014			Variance
	(Dollars in thousands, except per square foot data)
Revenues
Same Office Properties revenues
Rental revenue, excluding lease termination revenue	$	81,156		$	80,992		$	164
Lease termination revenue	154			208			(54		)
Tenant recoveries and other real estate operations revenue	20,888			20,158			730
Same Office Properties total revenues	102,198			101,358			840
Constructed office properties placed in service	9,202			2,888			6,314
Acquired office properties	6,921			—			6,921
Wholesale data center	6,078			2,876			3,202
Properties held for sale	7,817			7,398			419
Dispositions	1,290			3,491			(2,201		)
Other	180			229			(49		)
	133,686			118,240			15,446
Property operating expenses
Same Office Properties	36,323			36,293			30
Constructed office properties placed in service	2,280			483			1,797
Acquired office properties	2,750			—			2,750
Wholesale data center	4,008			2,053			1,955
Properties held for sale	2,529			2,270			259
Dispositions	1,004			1,481			(477		)
Other	3			301			(298		)
	48,897			42,881			6,016
NOI from real estate operations
Same Office Properties	65,875			65,065			810
Constructed office properties placed in service	6,922			2,405			4,517
Acquired office properties	4,171			—			4,171
Wholesale data center	2,070			823			1,247
Properties held for sale	5,288			5,128			160
Dispositions	286			2,010			(1,724		)
Other	177			(72		)	249
	$	84,789		$	75,359		$	9,430
Same Office Properties rent statistics
Average occupancy rate	90.2		%	91.4		%	-1.2		%
Average straight-line rent per occupied square foot (1)	$	6.15		$	6.06		$	0.09

(1)  Includes minimum base rents, net of abatements, and lease incentives on a straight-line basis for the three-month periods set forth above.

Our Same Office Properties pool consisted of 147 office properties, comprising 77.6% of our total operating office square footage as of September 30, 2015 (83.4% excluding the effect of properties held for sale). This pool of properties changed from the pool used for purposes of comparing 2014 and 2013 in our 2014 Annual Report on Form 10-K due to the addition of eight properties placed in service and 100% operational by January 1, 2014 and the removal of 19 properties reclassified to held for sale in 2015, one property disposed of and one property reclassified as redevelopment in 2015.

Our NOI from constructed office properties placed in service included 14 properties placed in service in 2014 and 2015, and our NOI from acquired office properties included our acquisitions of 250 W. Pratt Street, 2600 Park Tower Drive and 100 and 30 Light Street.

The increase in NOI from our wholesale data center was attributable primarily to higher occupancy in the current period.

41

NOI from Service Operations

	For the Three Months Ended September 30,
	2015		2014		Variance
	(in thousands)
Construction contract and other service revenues	$	17,058	$	34,739	$	(17,681	)
Construction contract and other service expenses	16,132		33,593		(17,461		)
NOI from service operations	$	926	$	1,146	$	(220	)

Construction contract and other service revenue and expenses increased due primarily to a higher volume of construction activity in connection with several of our tenants. Construction contract activity is inherently subject to significant variability depending on the volume and nature of projects undertaken by us (primarily on behalf of tenants). Service operations are an ancillary component of our overall operations that should contribute little operating income relative to our real estate operations.

Depreciation and Amortization Expense

The increase in depreciation and amortization expense was attributable primarily to additional expense in the current period of $3.7 million from our office property acquisitions and $3.1 million from our revision of the useful lives of properties that were removed from service for redevelopment.

Business Development Expenses and Land Carry Costs

The increase in business development expenses and land carry costs was due primarily to additional expense in the current period of $2.7 million in acquisition costs expensed in connection with operating property acquisitions and $930,000 in demolition costs on a property undergoing redevelopment.

Gain on Early Extinguishment of Debt

We recognized a gain on early extinguishment of $85.7 million in the current period primarily in connection with our transfer of ownership in two properties serving as collateral for a $150.0 million nonrecourse mortgage loan to the mortgage lender and the removal of the debt obligation and accrued interest from our balance sheet.

Gain on Sales of Real Estate

We recognized gain on sales of real estate in the prior period of $5.5 million on a non-operating property and $5.1 million on operating properties in the Greater Baltimore region.

42

Comparison of Statements of Operations for the Nine Months Ended September 30, 2015 and 2014

	For the Nine Months Ended September 30,
	2015			2014			Variance
	(in thousands)
Revenues
Revenues from real estate operations	$	384,587		$	359,112		$	25,475
Construction contract and other service revenues	97,554			80,390			17,164
Total revenues	482,141			439,502			42,639
Expenses
Property operating expenses	145,996			136,600			9,396
Depreciation and amortization associated with real estate operations	103,788			104,728			(940		)
Construction contract and other service expenses	94,923			75,353			19,570
Impairment losses	3,545			1,368			2,177
General, administrative and leasing expenses	22,864			22,882			(18		)
Business development expenses and land carry costs	10,986			4,107			6,879
Total operating expenses	382,102			345,038			37,064
Operating income	100,039			94,464			5,575
Interest expense	(66,727		)	(69,107		)	2,380
Interest and other income	3,217			3,775			(558		)
Gain (loss) on early extinguishment of debt	85,677			(446		)	86,123
Equity in income of unconsolidated entities	52			206			(154		)
Income tax expense	(153		)	(257		)	104
Income from continuing operations	122,105			28,635			93,470
Discontinued operations	156			4			152
Gain on sales of real estate	4,000			10,630			(6,630		)
Net income	$	126,261		$	39,269		$	86,992

43

NOI from Real Estate Operations
	For the Nine Months Ended September 30,
	2015			2014			Variance
	(Dollars in thousands, except per square foot data)
Revenues
Same Office Properties revenues
Rental revenue, excluding lease termination revenue	$	242,872		$	241,820		$	1,052
Lease termination revenue	1,418			763			655
Tenant recoveries and other real estate operations revenue	62,765			63,657			(892		)
Same Office Properties total revenues	307,055			306,240			815
Constructed office properties placed in service	21,354			5,969			15,385
Acquired office properties	11,204			—			11,204
Wholesale data center	12,933			7,769			5,164
Properties held for sale	23,625			23,267			358
Dispositions	7,906			14,777			(6,871		)
Other	514			1,078			(564		)
	384,591			359,100			25,491
Property operating expenses
Same Office Properties	114,798			113,596			1,202
Constructed office properties placed in service	5,331			1,498			3,833
Acquired office properties	4,296			—			4,296
Wholesale data center	8,441			5,622			2,819
Properties held for sale	8,241			8,158			83
Dispositions	4,845			6,140			(1,295		)
Other	38			1,475			(1,437		)
	145,990			136,489			9,501
NOI from real estate operations
Same Office Properties	192,257			192,644			(387		)
Constructed office properties placed in service	16,023			4,471			11,552
Acquired office properties	6,908			—			6,908
Wholesale data center	4,492			2,147			2,345
Properties held for sale	15,384			15,109			275
Dispositions	3,061			8,637			(5,576		)
Other	476			(397		)	873
	$	238,601		$	222,611		$	15,990
Same Office Properties rent statistics
Average occupancy rate	90.4		%	90.8		%	-0.4		%
Average straight-line rent per occupied square foot (1)	$	18.35		$	18.20		$	0.15

(1)  Includes minimum base rents, net of abatements, and lease incentives on a straight-line basis for the nine-month periods set forth above.

Our NOI from constructed office properties placed in service included 14 properties placed in service in 2014 and 2015, and our NOI from acquired office properties included our acquisitions of 250 W. Pratt Street, 2600 Park Tower Drive and 100 and 30 Light Street.

The increase in NOI from our wholesale data center was attributable primarily to higher occupancy in the current period.

44

NOI from Service Operations

	For the Nine Months Ended September 30,
	2015		2014		Variance
	(in thousands)
Construction contract and other service revenues	$	97,554	$	80,390	$	17,164
Construction contract and other service expenses	94,923		75,353		19,570
NOI from service operations	$	2,631	$	5,037	$	(2,406	)

Construction contract and other service revenue and expenses increased due primarily to a higher volume of construction activity in connection with several of our tenants.

Depreciation and Amortization Expense

The change in depreciation and amortization expense included:

• additional expense in the current period of $6.2 million from our office property acquisitions and $4.4 million from our revision of the useful lives of properties that were removed from service for redevelopment; and

• additional expense in the prior period of $12.9 million from our revision of the useful life of a property that was removed from service for redevelopment.

Business Development Expenses and Land Carry Costs

The increase in business development expenses and land carry costs was due primarily to additional expense in the current period of $4.1 million in acquisition costs expensed in connection with operating property acquisitions and $1.2 million in demolition costs on properties undergoing redevelopment.

Gain on Early Extinguishment of Debt

We recognized a gain on early extinguishment of $85.7 million in the current period as described above for the three-month period.

Gain on Sales of Real Estate

We recognized gain on sales of real estate in the current period of $4.0 million pertaining to sales of land in the Greater Baltimore region and in the prior period due to the dispositions discussed above for the three-month period.

Funds from Operations

Funds from operations (“FFO”) is defined as net income computed using GAAP, excluding gains on sales of, and impairment losses on, previously depreciated operating properties, plus real estate-related depreciation and amortization. When multiple properties consisting of both operating and non-operating properties exist on a single tax parcel, we classify all of the gains on sales of, and impairment losses on, the tax parcel as all being for previously depreciated operating properties when most of the value of the parcel is associated with operating properties on the parcel. We believe that we use the National Association of Real Estate Investment Trusts (“NAREIT”) definition of FFO, although others may interpret the definition differently and, accordingly, our presentation of FFO may differ from those of other REITs.  We believe that FFO is useful to management and investors as a supplemental measure of operating performance because, by excluding gains related to sales of, and impairment losses on, previously depreciated operating properties, net of related tax benefit, and excluding real estate-related depreciation and amortization, FFO can help one compare our operating performance between periods.  In addition, since most equity REITs provide FFO information to the investment community, we believe that FFO is useful to investors as a supplemental measure for comparing our results to those of other equity REITs.  We believe that net income is the most directly comparable GAAP measure to FFO.

Since FFO excludes certain items includable in net income, reliance on the measure has limitations; management compensates for these limitations by using the measure simply as a supplemental measure that is weighed in the balance with other GAAP and non-GAAP measures. FFO is not necessarily an indication of our cash flow available to fund cash needs.  Additionally, it should not be used as an alternative to net income when evaluating our financial performance or to cash flow from operating, investing and financing activities when evaluating our liquidity or ability to make cash distributions or pay debt service.

45

Basic FFO available to common share and common unit holders (“Basic FFO”) is FFO adjusted to subtract (1) preferred share dividends, (2) issuance costs associated with redeemed preferred shares, (3) income attributable to noncontrolling interests through ownership of preferred units in the Operating Partnership or interests in other consolidated entities not owned by us, (4) depreciation and amortization allocable to noncontrolling interests in other consolidated entities and (5) Basic FFO allocable to restricted shares.  With these adjustments, Basic FFO represents FFO available to common shareholders and common unitholders.  Common units in the Operating Partnership are substantially similar to our common shares and are exchangeable into common shares, subject to certain conditions.  We believe that Basic FFO is useful to investors due to the close correlation of common units to common shares.  We believe that net income is the most directly comparable GAAP measure to Basic FFO.  Basic FFO has essentially the same limitations as FFO; management compensates for these limitations in essentially the same manner as described above for FFO.

Diluted FFO available to common share and common unit holders (“Diluted FFO”) is Basic FFO adjusted to add back any changes in Basic FFO that would result from the assumed conversion of securities that are convertible or exchangeable into common shares.  We believe that Diluted FFO is useful to investors because it is the numerator used to compute Diluted FFO per share, discussed below.  We believe that the numerator for diluted EPS is the most directly comparable GAAP measure to Diluted FFO.  Since Diluted FFO excludes certain items includable in the numerator to diluted EPS, reliance on the measure has limitations; management compensates for these limitations by using the measure simply as a supplemental measure that is weighed in the balance with other GAAP and non-GAAP measures.  Diluted FFO is not necessarily an indication of our cash flow available to fund cash needs.  Additionally, it should not be used as an alternative to net income when evaluating our financial performance or to cash flow from operating, investing and financing activities when evaluating our liquidity or ability to make cash distributions or pay debt service.

Diluted FFO available to common share and common unit holders, as adjusted for comparability is defined as Diluted FFO adjusted to exclude operating property acquisition costs; gains on sales of, and impairment losses on, properties other than previously depreciated operating properties, net of associated income tax; gain or loss on early extinguishment of debt; FFO associated with properties securing non-recourse debt on which we have defaulted and which we have extinguished, or expect to extinguish, via conveyance of such properties, including property NOI and interest expense (discussed further below); loss on interest rate derivatives; demolition costs on redevelopment properties; executive transition costs; and issuance costs associated with redeemed preferred shares.  We believe that the excluded items are not reflective of normal operations and, as a result, we believe that a measure that excludes these items is a useful supplemental measure in evaluating our operating performance.  The adjustment for FFO associated with properties securing non-recourse debt on which we have defaulted pertains to the periods subsequent to our default on one loan’s payment terms, which was the result of our decision to not support payments on the loan since the estimated fair value of the properties was less than the loan balance. While we continued as the legal owner of the properties during this period up until the transfer of ownership, all cash flows produced by them went directly to the lender and we did not fund any debt service shortfalls, which included incremental additional interest under the default rate of: $1.3 million in the three months ended September 30, 2015; $5.3 million in the nine months ended September 30, 2015; $1.9 million in the three months September 30, 2014; and $3.8 million in the nine months ended September 30, 2014. We believe that the numerator to diluted EPS is the most directly comparable GAAP measure to this non-GAAP measure.  This measure has essentially the same limitations as Diluted FFO, as well as the further limitation of not reflecting the effects of the excluded items; we compensate for these limitations in essentially the same manner as described above for Diluted FFO.

Diluted FFO per share is (1) Diluted FFO divided by (2) the sum of the (a) weighted average common shares outstanding during a period, (b) weighted average common units outstanding during a period and (c) weighted average number of potential additional common shares that would have been outstanding during a period if other securities that are convertible or exchangeable into common shares were converted or exchanged.  We believe that Diluted FFO per share is useful to investors because it provides investors with a further context for evaluating our FFO results in the same manner that investors use earnings per share (“EPS”) in evaluating net income available to common shareholders.  In addition, since most equity REITs provide Diluted FFO per share information to the investment community, we believe that Diluted FFO per share is a useful supplemental measure for comparing us to other equity REITs. We believe that diluted EPS is the most directly comparable GAAP measure to Diluted FFO per share. Diluted FFO per share has most of the same limitations as Diluted FFO (described above); management compensates for these limitations in essentially the same manner as described above for Diluted FFO.

Diluted FFO per share, as adjusted for comparability is (1) Diluted FFO, as adjusted for comparability divided by (2) the sum of the (a) weighted average common shares outstanding during a period, (b) weighted average common units outstanding during a period and (c) weighted average number of potential additional common shares that would have been outstanding during a period if other securities that are convertible or exchangeable into common shares were converted or exchanged.  We believe that this measure is useful to investors because it provides investors with a further context for evaluating our FFO

46

results.  We believe that diluted EPS is the most directly comparable GAAP measure to this per share measure.  This measure has most of the same limitations as Diluted FFO (described above) as well as the further limitation of not reflecting the effects of the excluded items; we compensate for these limitations in essentially the same manner as described above for Diluted FFO.

The computations for all of the above measures on a diluted basis assume the conversion of common units in COPLP but do not assume the conversion of other securities that are convertible into common shares if the conversion of those securities would increase per share measures in a given period.

We use measures called payout ratios as supplemental measures of our ability to make distributions to investors based on each of the following: FFO; Diluted FFO; and Diluted FFO, adjusted for comparability. These measures are defined as (1) the sum of (a) dividends on common shares and (b) distributions to holders of interests in COPLP and dividends on convertible preferred shares when such distributions and dividends are included in Diluted FFO divided by either (2) FFO, Diluted FFO or Diluted FFO, adjusted for comparability.

The table appearing on the following page sets forth the computation of the above stated measures for the three and nine months endedSeptember 30, 2015 and 2014, and provides reconciliations to the GAAP measures of COPT and subsidiaries associated with such measures: 

47

	For the Three Months Ended September 30,						For the Nine Months Ended September 30,
	2015			2014			2015			2014
	(Dollars and shares in thousands,  except per share data)
Net income	$	94,294		$	24,548		$	126,261		$	39,269
Add Real estate-related depreciation and amortization	38,403			30,237			103,788			104,728
Add: Impairment losses (recoveries) on previously depreciated operating properties	2,307			(7		)	3,779			1,322
Add: Gain on sales of previously depreciated operating properties	(15		)	(5,123		)	(15		)	(5,119		)
FFO	134,989			49,655			233,813			140,200
Less: Noncontrolling interests-preferred units in the Operating Partnership	(165		)	(165		)	(495		)	(495		)
Less: FFO allocable to other noncontrolling interests	(1,027		)	(830		)	(2,769		)	(2,349		)
Less: Preferred share dividends	(3,552		)	(3,553		)	(10,657		)	(12,387		)
Less: Issuance costs associated with redeemed preferred shares	—			—			—			(1,769		)
Basic and diluted FFO allocable to share-based compensation awards	(541		)	(191		)	(926		)	(542		)
Basic FFO available to common share and common unit holders	$	129,704		$	44,916		$	218,966		$	122,658
Dividends on dilutive convertible preferred shares	372			—			—			—
Distributions on dilutive preferred units in the Operating Partnership	165			—			—			—
Diluted FFO available to common share and common unit holders	$	130,241		$	44,916		$	218,966		$	122,658
Add: Operating property acquisition costs	2,695			—			4,102			—
Less: Gain on sales of non-operating properties	—			(5,535		)	(3,985		)	(5,535		)
Impairment losses on other properties	—			49			—			49
Add: (Gain) loss on early extinguishment of debt	(85,745		)	176			(86,057		)	562
Issuance costs associated with redeemed preferred shares	—			—			—			1,769
Add: Negative FFO of properties conveyed to extinguish debt in default	2,766			3,806			10,456			7,435
Add: Demolition costs on redevelopment properties	930			—			1,171			—
Less: Diluted FFO comparability adjustments allocable to share-based compensation awards	334			7			313			(19		)
Dividends and distributions on antidilutive preferred securities	(537		)	—			—			—
Diluted FFO available to common share and common unit holders, as adjusted for comparability	$	50,684		$	43,419		$	144,966		$	126,919
Weighted average common shares	94,153			87,290			93,830			87,196
Conversion of weighted average common units	3,679			3,876			3,697			3,915
Weighted average common shares/units - Basic FFO	97,832			91,166			97,527			91,111
Dilutive convertible preferred shares	434			—			—			—
Dilutive convertible preferred units in the Operating Partnership	176			—			—			—
Dilutive effect of share-based compensation awards	21			195			82			169
Weighted average common shares/units - Diluted FFO	98,463			91,361			97,609			91,280
Antidilutive preferred securities for diluted FFO, as adjusted for comparability	(610		)	—			—			—
Weighted average common shares/units - Diluted FFO, as adj. for comparability	97,853			91,361			97,609			91,280
Diluted FFO per share	$	1.32		$	0.49		$	2.24		$	1.34
Diluted FFO per share, as adjusted for comparability	$	0.52		$	0.48		$	1.49		$	1.39
Numerator for diluted EPS	$	86,251		$	19,064		$	112,035		$	20,863
Dilutive convertible preferred shares	(372		)	—			—			—
Add: Income allocable to noncontrolling interests-common units in the Operating Partnership	3,357			768			—			942
Add: Real estate-related depreciation and amortization	38,403			30,237			103,788			104,728
Add: Impairment losses on previously depreciated operating properties	2,307			(7		)	3,779			1,322
Add: Numerator for diluted EPS allocable to share-based compensation awards	369			103			475			332
Less: Depreciation and amortization allocable to noncontrolling interests in other consolidated entities	(187		)	(180		)	(560		)	(540		)
Add: Increase in noncontrolling interests unrelated to earnings	132			245			390			672
Less: Basic and diluted FFO allocable to share-based compensation awards	(541		)	(191		)	(926		)	(542		)
Less: Gain on sales of previously depreciated operating properties	(15		)	(5,123		)	(15		)	(5,119		)
Basic FFO available to common share and common unit holders	$	129,704		$	44,916		$	218,966		$	122,658
Denominator for diluted EPS	94,608			87,485			97,609			87,365
Weighted average common units	3,679			3,876			—			3,915
Convertible preferred units	176			—			—			—
Denominator for diluted FFO per share	98,463			91,361			97,609			91,280

48

Property Additions

The table below sets forth the major components of our additions to properties for the nine months endedSeptember 30, 2015 (in thousands):

Construction, development and redevelopment	$	164,798
Acquisition of operating properties	194,596
Tenant improvements on operating properties	17,819		(1)
Capital improvements on operating properties	12,568
	$	389,781

(1) Tenant improvement costs incurred on newly-constructed properties are classified in this table as construction, development and redevelopment.

Cash Flows

Net cash flow provided by operating activities increased $3.5 million when comparing the nine months endedSeptember 30, 2015 and 2014 due primarily to:

• a $10.6 million increase in cash flow from real estate operations due primarily to properties acquired and placed in service since the prior period; and

• an $8.4 million decrease in interest expense paid from the prior to the current period due in large part to: a $3.9 million decrease in interest paid on the $150.0 million nonrecourse loan that was in default (as discussed above) since we did not support payments on the loan in the current period; and a $1.5 million decrease due to a change in the timing of interest payments resulting from new debt requiring interest payments semi-annually rather than monthly; offset in part by

• a $11.7 million decrease in cash flow from construction contract and other services from the prior to the current period due in large part to the timing of cash payments and collections on third party construction projects.

Net cash flow used in investing activities increased $234.2 million when comparing the nine months endedSeptember 30, 2015 and 2014 due primarily to cash paid for operating property acquisitions in the current period.

Net cash flow provided by financing activities in the nine months endedSeptember 30, 2015 was $221.3 million, and included the following:

• net proceeds from debt borrowings of $294.9 million; and

• net proceeds from the issuance of common shares (or units) of $28.6 million; offset in part by

• dividends and/or distributions to equity holders of $91.9 million.

Net cash flow provided by financing activities in the nine months endedSeptember 30, 2014 was $21.6 million, and included the following:

• net proceeds from debt borrowings of $120.2 million; offset in part by

• dividends and/or distributions to equity holders of $89.2 million; and

• redemptions of preferred shares (or units) of $50.0 million.

Liquidity and Capital Resources of COPT

COPLP is the entity through which COPT, the sole general partner of COPLP, conducts almost all of its operations and owns almost all of its assets. COPT issues public equity from time to time, but does not otherwise generate any capital itself or conduct any business itself, other than incurring certain expenses in operating as a public company which are fully reimbursed by COPLP. COPT itself does not hold any indebtedness, and its only material asset is its ownership of partnership interests of COPLP. COPT’s principal funding requirement is the payment of dividends on its common and preferred shares. COPT’s principal source of funding for its dividend payments is distributions it receives from COPLP.

As of September 30, 2015, COPT owned 96.3% of the outstanding common units and 95.5% of the outstanding preferred units in COPLP; the remaining common and preferred units in COPLP were owned by third parties. As the sole general partner of COPLP, COPT has the full, exclusive and complete responsibility for COPLP’s day-to-day management and control.

The liquidity of COPT is dependent on COPLP’s ability to make sufficient distributions to COPT. The primary cash requirement of COPT is its payment of dividends to its shareholders. COPT also guarantees some of the Operating

49

Partnership’s debt, as discussed further in Note 9 of the notes to consolidated financial statements included elsewhere herein. If the Operating Partnership fails to fulfill certain of its debt requirements, which trigger COPT’s guarantee obligations, then COPT will be required to fulfill its cash payment commitments under such guarantees. However, COPT’s only significant asset is its investment in COPLP.

As discussed further below, we believe the Operating Partnership’s sources of working capital, specifically its cash flow from operations, and borrowings available under its unsecured line of credit, are adequate for it to make its distribution payments to COPT and, in turn, for COPT to make its dividend payments to its shareholders.

COPT’s short-term liquidity requirements consist primarily of funds to pay for future dividends expected to be paid to its shareholders. COPT periodically accesses the public equity markets to raise capital by issuing common and/or preferred shares.

For COPT to maintain its qualification as a REIT, it must pay dividends to its shareholders aggregating annually at least 90% of its ordinary taxable income. As a result of this distribution requirement, it cannot rely on retained earnings to fund its ongoing operations to the same extent that some other companies can. COPT may need to continue to raise capital in the equity markets to fund COPLP’s working capital needs, acquisitions and developments.

Liquidity and Capital Resources of COPLP

Our primary cash requirements are for operating expenses, debt service, development of new properties, improvements to existing properties and acquisitions.  We expect to continue to use cash flow provided by operations as the primary source to meet our short-term capital needs, including property operating expenses, general and administrative expenses, interest expense, scheduled principal amortization of debt, distributions to our security holders and improvements to existing properties.  As of September 30, 2015, we had $3.8 million in cash and cash equivalents.

Our senior unsecured debt is currently rated investment grade by the three major rating agencies. We aim to maintain an investment grade rating to enable us to use debt comprised of unsecured, primarily fixed-rate debt (including the effect of interest rate swaps) from public markets and banks. We also use secured nonrecourse debt from institutional lenders and banks, when appropriate. In addition, we periodically access the public equity markets to raise capital by issuing common and/or preferred shares.

We use our Revolving Credit Facility to initially finance much of our investing activities.  We subsequently pay down the facility using proceeds from long-term borrowings, equity issuances and property sales.  The lenders’ aggregate commitment under the facility is $800.0 million, with the ability for us to increase the lenders’ aggregate commitment to $1.3 billion, provided that there is no default under the facility and subject to the approval of the lenders. Amounts available under the facility are computed based on 60% of our unencumbered asset value, as defined in the loan agreement.  The Revolving Credit Facility matures in May 2019, and may be extended by two six-month periods at our option, provided that there is no default under the facility and we pay an extension fee of 0.075% of the total availability of the facility. As of September 30, 2015, the maximum borrowing capacity under this facility totaled $800.0 million, of which $698.2 million was available.

We believe that our liquidity and capital resources are adequate for our near-term and longer-term requirements without necessitating property sales.  We do, however, expect to sell properties and use the proceeds to repay borrowings and fund development costs.

50

The following table summarizes our contractual obligations as of September 30, 2015 (in thousands):

	For the Periods Ending December 31,
	2015		2016		2017		2018		2019		Thereafter		Total
Contractual obligations (1)
Debt (2)
Balloon payments due upon maturity	$	36,175	$	266,062	$	4,110	$	—	$	207,000	$	1,591,227	$	2,104,574
Scheduled principal payments	1,633		5,866		3,077		3,017		3,117		11,789		28,499
Interest on debt (3)	20,070		74,936		65,684		65,527		63,185		188,324		477,726
New development and redevelopment obligations (4)(5)	40,201		39,840		17,857		—		—		—		97,898
Third-party construction and development obligations (5)(6)	4,037		4,047		—		—		—		—		8,084
Capital expenditures for operating properties (5)(7)	11,144		27,261		3,463		—		—		—		41,868
Operating leases (8)	289		1,171		1,096		1,052		1,036		86,999		91,643
Other purchase obligations	579		1,726		866		446		332		92		4,041
Total contractual cash obligations	$	114,128	$	420,909	$	96,153	$	70,042	$	274,670	$	1,878,431	$	2,854,333

(1) The contractual obligations set forth in this table exclude property operations contracts that may be terminated with notice of one month or less.

(2) Represents scheduled principal amortization payments and maturities only and therefore excludes a net discount of $11.8 million. As of September 30, 2015, maturities include $36.2 million in 2015 that was extended to 2016 in October 2015 and $100.0 million in 2016 that may be extended to 2017 and $87.0 million in 2019 that may be extended to 2020, both subject to certain conditions.

(3) Represents interest costs for our outstanding debt as of September 30, 2015 for the terms of such debt.  For variable rate debt, the amounts reflected above used September 30, 2015 interest rates on variable rate debt in computing interest costs for the terms of such debt.

(4) Represents contractual obligations pertaining to new development and redevelopment activities, including land acquisitions.

(5) Due to the long-term nature of certain construction and development contracts and leases included in these lines, the amounts reported in the table represent our estimate of the timing for the related obligations being payable.

(6)   Represents contractual obligations pertaining to projects for which we are acting as construction manager on behalf of unrelated parties who are our clients.  We expect to be reimbursed in full for these costs by our clients.

(7) Represents contractual obligations pertaining to recurring and nonrecurring capital expenditures for our operating properties.  We expect to finance these costs primarily using cash flow from operations.

(8)  We expect to pay these items using cash flow from operations.

We expect to spend more than $60 million on construction and development costs and approximately $25 million on improvements to operating properties (including the commitments set forth in the table above) during the remainder of 2015.  We expect to fund the construction and development costs using cash on hand and borrowings under our Revolving Credit Facility.  We expect to use proceeds from the disposition of properties held for sale to repay future borrowings under our Revolving Credit Facility. We expect to fund improvements to existing operating properties using cash flow from operations.

Certain of our debt instruments require that we comply with a number of restrictive financial covenants, including maximum leverage ratio, unencumbered leverage ratio, minimum net worth, minimum fixed charge coverage, minimum unencumbered interest coverage ratio, minimum debt service and maximum secured indebtedness ratio.  As of September 30, 2015, we were in compliance with these financial covenants.

51

Off-Balance Sheet Arrangements

We had no material off-balance sheet arrangements during the nine months endedSeptember 30, 2015.

Inflation

Most of our tenants are obligated to pay their share of a building’s operating expenses to the extent such expenses exceed amounts established in their leases, which are based on historical expense levels.  Some of our tenants are obligated to pay their full share of a building’s operating expenses.  These arrangements somewhat reduce our exposure to increases in such costs resulting from inflation.

Recent Accounting Pronouncements

In May 2014, the Financial Accounting Standards Board (“FASB”) issued guidance regarding the recognition of revenue from contracts with customers. Under this guidance, an entity will recognize revenue to depict the transfer of goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. Additionally, this guidance requires improved disclosures regarding the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers. We are required to adopt this guidance for our annual and interim periods beginning January 1, 2018, using one of two methods: retrospective restatement for each reporting period presented at the time of adoption, or retrospectively with the cumulative effect of initially applying this guidance recognized at the date of initial application. We are currently assessing the financial impact of this guidance on our consolidated financial statements.

In January 2015, the FASB issued guidance regarding the presentation of extraordinary and unusual items in statements of operations. This guidance eliminates the concept of extraordinary items. However, the presentation and disclosure requirements for items that are either unusual or in nature or infrequent in occurrence remain and will be expanded to include items that are both unusual in nature and infrequent in occurrence. This guidance is effective for periods beginning after December 15, 2015. We expect that the application of this guidance will have no effect on our reported consolidated financial statements.

In February 2015, the FASB issued guidance regarding amendments to the consolidation analysis. This guidance amends the criteria for determining which entities are considered variable interest entities (“VIE”), amends the criteria for determining if a service provider possesses a variable interest in a VIE and ends the deferral granted to investment companies for application of the VIE consolidation model. This guidance is effective for annual periods, and interim periods therein, beginning after December 15, 2015. We are currently assessing the financial impact of this guidance on our consolidated financial statements.

In April 2015, the FASB issued guidance that changes the presentation of debt issuance costs in financial statements. This guidance requires an entity to present such costs in the balance sheet as a direct deduction from the related debt liability rather than as an asset. Amortization of the costs will continue to be reported as interest expense. This guidance was further updated in August 2015 with respect to debt issuance costs of line-of-credit arrangements to note that it will be permissible for an entity to defer and present debt issuance costs as an asset and subsequently amortize the deferred debt issuance costs ratably over the term of a line-of-credit arrangement, regardless of whether there are any outstanding borrowings on the line-of-credit arrangement. This guidance is effective for annual reporting periods beginning after December 15, 2016. Early adoption is permitted. This guidance will be applied retrospectively to each prior period presented. We expect that the application of this guidance will not materially affect our consolidated financial statements.

In September 2015, the FASB issued guidance that eliminates the requirement to restate prior period financial statements for measurement period adjustments following a business combination.  The guidance requires that the cumulative impact of a measurement period adjustment (including the impact on prior periods) be recognized in the reporting period in which the adjustment is identified. The prior period impact of the adjustment should be either presented separately on the face of the statement of operations or disclosed in the notes. This guidance is effective for annual reporting periods beginning after December 15, 2015.  This guidance will be applied prospectively for measurement period adjustments that occur after the effective date.  We expect that the application of this guidance will not materially affect our consolidated financial statements.

Item 3.Quantitative and Qualitative Disclosures about Market Risk

52

We are exposed to certain market risks, one of the most predominant of which is a change in interest rates.  Increases in interest rates can result in increased interest expense under our Revolving Credit Facility and other variable rate debt.  Increases in interest rates can also result in increased interest expense when our fixed rate debt matures and needs to be refinanced.

The following table sets forth as of September 30, 2015 our debt obligations and weighted average interest rates for fixed rate debt by expected maturity date (dollars in thousands):

	For the Periods Ending December 31,
	2015			2016			2017			2018			2019			Thereafter			Total
Debt:
Fixed rate debt (1)	$	1,560		$	171,929		$	7,186		$	3,017		$	3,117		$	1,303,015		$	1,489,824
Weighted average interest rate	6.37		%	7.18		%	5.06		%	4.52		%	4.51		%	4.31		%	4.65		%
Variable rate debt (2)	$	36,249		$	100,000		$	—		$	—		$	207,000		$	300,000		$	643,249
Weighted average interest rate (3)	2.43		%	1.69		%	—		%	—		%	1.95		%	1.59		%	1.77		%

(1)   Represents principal maturities only and therefore excludes net discounts of $11.8 million.

(2)  As of September 30, 2015, maturities include $36.2 million in 2015 that was extended to 2016 in October 2015 and $100.0 million in 2016 that may be extended to 2017 and $87.0 million in 2019 that may be extended to 2020, both subject to certain conditions.

(3)  The amounts reflected above used September 30, 2015 interest rates on variable rate debt.

The fair value of our debt was $2.2 billion as of September 30, 2015.  If interest rates had been 1% lower, the fair value of our fixed-rate debt would have increased by approximately $111 million as of September 30, 2015.

The following table sets forth information pertaining to interest rate swap contracts in place as of September 30, 2015 and December 31, 2014 and their respective fair values (dollars in thousands):

							Fair Value at
Notional Amount			Fixed Rate	Floating Rate Index	Effective Date	Expiration Date	September 30, 2015			December 31, 2014
$	36,249	(1)	3.8300%	One-Month LIBOR + 2.25%	11/2/2010	11/2/2015	$	(44	)	$	(400	)
100,000			0.8055%	One-Month LIBOR	9/2/2014	9/1/2016	(396		)	(317		)
100,000			0.8100%	One-Month LIBOR	9/2/2014	9/1/2016	(401		)	(324		)
100,000			1.6730%	One-Month LIBOR	9/1/2015	8/1/2019	(2,386		)	239
100,000			1.7300%	One-Month LIBOR	9/1/2015	8/1/2019	(2,617		)	35
100,000			0.8320%	One-Month LIBOR	1/3/2012	9/1/2015	—			(407		)
100,000			0.8320%	One-Month LIBOR	1/3/2012	9/1/2015	—			(407		)
							$	(5,844	)	$	(1,581	)

(1) The notional amount of this instrument is scheduled to amortize to $36.2 million.

Based on our variable-rate debt balances, including the effect of interest rate swap contracts, our interest expense would have increased by $2.0 million in the nine months endedSeptember 30, 2015 if the one-month LIBOR rate was 1% higher.

Item 4.Controls and Procedures

COPT

(a) Evaluation of Disclosure Controls and Procedures

The Company’s management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of its disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act) as of September 30, 2015.  Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures as of September 30, 2015 were functioning effectively to provide reasonable assurance that the information required to be disclosed by the Company in reports filed or submitted under the Securities Exchange Act of 1934 is (i) recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and (ii) accumulated and communicated to the Company’s management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

53

(b) Change in Internal Control over Financial Reporting

No change in the Company’s internal control over financial reporting occurred during the most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, its internal control over financial reporting.

COPLP

(a) Evaluation of Disclosure Controls and Procedures

The Operating Partnership’s management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of its disclosure controls and procedures (as defined in Rule 15d-15(e) under the Exchange Act) as of September 30, 2015.  Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that the Operating Partnership’s disclosure controls and procedures as of September 30, 2015 were functioning effectively to provide reasonable assurance that the information required to be disclosed by the Operating Partnership in reports filed or submitted under the Securities Exchange Act of 1934 is (i) recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and (ii) accumulated and communicated to the Operating Partnership’s management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

(b) Change in Internal Control over Financial Reporting

No change in the Operating Partnership’s internal control over financial reporting occurred during the most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, its internal control over financial reporting.

PART II

Item 1.Legal Proceedings

We are not currently involved in any material litigation nor, to our knowledge, is any material litigation currently threatened against the Company or the Operating Partnership (other than routine litigation arising in the ordinary course of business, substantially all of which is expected to be covered by liability insurance).

Item 1A.  Risk Factors

There have been no material changes to the risk factors included in our 2014 Annual Report on Form 10-K.

Item 2.Unregistered Sales of Equity Securities and Use of Proceeds

(a) During the three months ended September 30, 2015, 2,160 of COPLP’s common units were exchanged for 2,160 COPT common shares in accordance with COPLP’s Second Amended and Restated Limited Partnership Agreement, as amended.  The issuance of these common shares was effected in reliance upon the exemption from registration under Section 4(a)(2) of the Securities Act of 1933, as amended.

(b) Not applicable

(c) Not applicable

Item 3.Defaults Upon Senior Securities

(a) Not applicable

(b) Not applicable

Item 4.Mine Safety Disclosures

Not applicable

Item 5.Other Information

None

54

Item 6.Exhibits

(a) Exhibits:

EXHIBIT NO.	DESCRIPTION
12.1	COPT’s Statement regarding Computation of Earnings to Combined Fixed Charges and Preferred Share Dividends (filed herewith).
12.2	COPLP’s Statement regarding Computation of Consolidated Ratio of Earnings to Fixed Charges (filed herewith).
31.1	Certification of the Chief Executive Officer of Corporate Office Properties Trust required by Rule 13a-14(a) under the Securities Exchange Act of 1934, as amended (filed herewith).
31.2	Certification of the Chief Financial Officer of Corporate Office Properties Trust required by Rule 13a-14(a) under the Securities Exchange Act of 1934, as amended (filed herewith).
31.3	Certification of the Chief Executive Officer of Corporate Office Properties, L.P. required by Rule 15d-14(a) under the Securities Exchange Act of 1934, as amended (filed herewith).
31.4	Certification of the Chief Financial Officer of Corporate Office Properties, L.P. required by Rule 15d-14(a) under the Securities Exchange Act of 1934, as amended (filed herewith).
32.1	Certification of the Chief Executive Officer of Corporate Office Properties Trust required by Rule 13a-14(b) under the Securities Exchange Act of 1934, as amended. (This exhibit shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liability of that section. Further, this exhibit shall not be deemed to be incorporated by reference into any filing under the Securities Exchange Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended.) (Furnished herewith).
32.2	Certification of the Chief Financial Officer of Corporate Office Properties Trust required by Rule 13a-14(b) under the Securities Exchange Act of 1934, as amended. (This exhibit shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liability of that section. Further, this exhibit shall not be deemed to be incorporated by reference into any filing under the Securities Exchange Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended). (Furnished herewith).
32.3	Certification of the Chief Executive Officer of Corporate Office Properties, L.P. required by Rule 15d-14(b) under the Securities Exchange Act of 1934, as amended. (This exhibit shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liability of that section. Further, this exhibit shall not be deemed to be incorporated by reference into any filing under the Securities Exchange Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended.) (Furnished herewith).
32.4	Certification of the Chief Financial Officer of Corporate Office Properties, L.P. required by Rule 15d-14(b) under the Securities Exchange Act of 1934, as amended. (This exhibit shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liability of that section. Further, this exhibit shall not be deemed to be incorporated by reference into any filing under the Securities Exchange Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended). (Furnished herewith).
101.INS	XBRL Instance Document (filed herewith).
101.SCH	XBRL Taxonomy Extension Schema Document (filed herewith).
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document (filed herewith).
101.LAB	XBRL Extension Labels Linkbase (filed herewith).
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document (filed herewith).
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document (filed herewith).

55

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the undersigned Registrants have duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	CORPORATE OFFICE PROPERTIES TRUST		CORPORATE OFFICE PROPERTIES, L.P.
			By: Corporate Office Properties Trust,
			its General Partner
	/s/ Roger A. Waesche, Jr.		/s/ Roger A. Waesche, Jr.
	Roger A. Waesche, Jr.		Roger A. Waesche, Jr.
	President and Chief Executive Officer		President and Chief Executive Officer
	/s/ Anthony Mifsud		/s/ Anthony Mifsud
	Anthony Mifsud		Anthony Mifsud
	Executive Vice President and Chief Financial Officer		Executive Vice President and Chief Financial Officer
Dated:	November 4, 2015	Dated:	November 4, 2015

56

EX-12.1

EXHIBIT 12.1

Corporate Office Properties Trust

Ratio of Earnings to Combined Fixed Charges and Preferred Share Dividends

(Dollars in thousands)

	Nine Months Ended
	September 30, 2015
Earnings:
Income from continuing operations before equity in income of unconsolidated entities and income taxes	$	122,206
Gain on sales of real estate, excluding discontinued operations	4,000
Combined fixed charges and preferred share dividends (from below)	83,987
Amortization of capitalized interest	1,929
Distributed income of equity investees	361
Subtract:
Capitalized interest (from below)	(5,641		)
Preferred share dividends included in fixed charges	(10,657		)
Preferred unit distributions included in fixed charges	(495		)
Preferred distributions of other consolidated entities	(12		)
Total earnings	$	195,678
Combined Fixed Charges and Preferred Share Dividends:
Combined fixed charges and preferred share dividends:
Interest expense on continuing operations	$	66,727
Capitalized interest (internal and external)	5,641
Amortization of debt issuance costs-capitalized	8
Interest included in rental expense	447
Preferred share dividends	10,657
Preferred unit distributions	495
Preferred distributions of other consolidated entities	12
Total combined fixed charges and preferred share dividends	$	83,987
Ratio of earnings to combined fixed charges and preferred share dividends	2.33

EX-12.2

EXHIBIT 12.2

Corporate Office Properties, L.P.

Ratio of Earnings to Fixed Charges

(Dollars in thousands)

	Nine Months Ended
Earnings:	September 30, 2015
Income from continuing operations before equity in income of unconsolidated entities and income taxes	$	122,206
Gain on sales of real estate, excluding discontinued operations	4,000
Fixed charges (from below)	72,835
Amortization of capitalized interest	1,929
Distributed income of equity investees	361
Subtract:
Capitalized interest (from below)	(5,641		)
Preferred distributions of other consolidated entities	(12		)
Total earnings	$	195,678
Fixed charges:
Interest expense on continuing operations	$	66,727
Capitalized interest (internal and external)	5,641
Amortization of debt issuance costs-capitalized	8
Interest included in rental expense	447
Preferred distributions of other consolidated entities	12
Total fixed charges	$	72,835
Ratio of earnings to fixed charges	2.69

EX-31.1

EXHIBIT 31.1

CORPORATE OFFICE PROPERTIES TRUST

CERTIFICATIONS REQUIRED BY

RULE 13a-14(a) UNDER THE SECURITIES EXCHANGE ACT OF 1934

CERTIFICATIONS

I, Roger A. Waesche, Jr., certify that:

1. I have reviewed this quarterly report on Form 10-Q of Corporate Office Properties Trust;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:	November 4, 2015	/s/ Roger A. Waesche, Jr.
		Roger A. Waesche, Jr.
		President and Chief Executive Officer

EX-31.2

EXHIBIT 31.2

CORPORATE OFFICE PROPERTIES TRUST

CERTIFICATIONS REQUIRED BY

RULE 13a-14(a) UNDER THE SECURITIES EXCHANGE ACT OF 1934

CERTIFICATIONS

I, Anthony Mifsud, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Corporate Office Properties Trust;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. 

Date:	November 4, 2015	/s/ Anthony Mifsud
		Anthony Mifsud
		Chief Financial Officer

EX-31.3

EXHIBIT 31.3

CORPORATE OFFICE PROPERTIES, L.P.

CERTIFICATIONS REQUIRED BY

RULE 15d-14(a) UNDER THE SECURITIES EXCHANGE ACT OF 1934

CERTIFICATIONS

I, Roger A. Waesche, Jr., certify that:

1. I have reviewed this quarterly report on Form 10-Q of Corporate Office Properties, L.P.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:	November 4, 2015	/s/ Roger A. Waesche, Jr.
		Roger A. Waesche, Jr.
		President and Chief Executive Officer

EX-31.4

EXHIBIT 31.4

CORPORATE OFFICE PROPERTIES, L.P.

CERTIFICATIONS REQUIRED BY

RULE 15d-14(a) UNDER THE SECURITIES EXCHANGE ACT OF 1934

CERTIFICATIONS

I, Anthony Mifsud, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Corporate Office Properties, L.P.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. 

Date:	November 4, 2015	/s/ Anthony Mifsud
		Anthony Mifsud
		Chief Financial Officer

EX-32.1

EXHIBIT 32.1

CORPORATE OFFICE PROPERTIES TRUST

CERTIFICATIONS REQUIRED BY

RULE 13a-14(b) UNDER THE SECURITIES EXCHANGE ACT OF 1934

In connection with the Quarterly Report on Form 10-Q of Corporate Office Properties Trust (the “Company”) for the quarter ended September 30, 2015, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Roger A. Waesche, Jr., President and Chief Executive Officer of the Company, certify that to my knowledge:

(1)           The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2)           The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.

/s/ Roger A. Waesche, Jr.
Roger A. Waesche, Jr.
President and Chief Executive Officer
Date:	November 4, 2015

EX-32.2

EXHIBIT 32.2

CORPORATE OFFICE PROPERTIES TRUST

CERTIFICATIONS REQUIRED BY

RULE 13a-14(b) UNDER THE SECURITIES EXCHANGE ACT OF 1934

In connection with the Quarterly Report on Form 10-Q of Corporate Office Properties Trust (the “Company”) for the quarter ended September 30, 2015, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Anthony Mifsud, Chief Financial Officer of the Company, certify that to my knowledge:

(1)           The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2)           The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.

/s/ Anthony Mifsud
Anthony Mifsud
Chief Financial Officer
Date:	November 4, 2015

EX-32.3

EXHIBIT 32.3

CORPORATE OFFICE PROPERTIES, L.P.

CERTIFICATIONS REQUIRED BY

RULE 15d-14(b) UNDER THE SECURITIES EXCHANGE ACT OF 1934

In connection with the Quarterly Report on Form 10-Q of Corporate Office Properties, L.P. (the “Company”) for the quarter ended September 30, 2015, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Roger A. Waesche, Jr., President and Chief Executive Officer of the Company, certify that to my knowledge:

(1)           The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2)           The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.

/s/ Roger A. Waesche, Jr.
Roger A. Waesche, Jr.
President and Chief Executive Officer
Date:	November 4, 2015

EX-32.4

EXHIBIT 32.4

CORPORATE OFFICE PROPERTIES, L.P.

CERTIFICATIONS REQUIRED BY

RULE 15d-14(b) UNDER THE SECURITIES EXCHANGE ACT OF 1934

In connection with the Quarterly Report on Form 10-Q of Corporate Office Properties, L.P. (the “Company”) for the quarter ended September 30, 2015, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Anthony Mifsud, Chief Financial Officer of the Company, certify that to my knowledge:

(1)           The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2)           The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.

/s/ Anthony Mifsud
Anthony Mifsud
Chief Financial Officer
Date:	November 4, 2015

XML

Income Taxes (Tables)

9 Months Ended

Sep. 30, 2015

Income Tax Disclosure [Abstract]

Components of provision for income tax

Our TRS’s provision for income taxes consisted of the following (in thousands):

	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
	2015		2014		2015		2014
Deferred
Federal	$	39	$	83	$	125	$	215
State	9		18		28		42
Total income tax expense	$	48	$	101	$	153	$	257

XML

Real Estate Joint Ventures (Details) $ in Thousands	9 Months Ended
	Sep. 30, 2015 USD ($)
Consolidated real estate joint ventures
Investments in consolidated real estate joint ventures
Total Assets	$ 203,746
Encumbered Assets	112,696
Total Liabilities	$ 77,210
LW Redstone Company, LLC | Variable Interest Entity, Primary Beneficiary [Member]
Investments in consolidated real estate joint ventures
Ownership (as a percent)	85.00%
Total Assets	$ 144,906
Encumbered Assets	64,395
Total Liabilities	$ 39,093
M Square Associates, LLC | Variable Interest Entity, Primary Beneficiary [Member]
Investments in consolidated real estate joint ventures
Ownership (as a percent)	50.00%
Total Assets	$ 58,840
Encumbered Assets	48,301
Total Liabilities	$ 38,117

XML

Properties, Net (Details) - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2014	Sep. 30, 2015	Dec. 31, 2014
Investments in real estate
Operating properties, net		$ 2,932,843	$ 2,751,488
Greater Philadelphia
Investments in real estate
Depreciation expense on reclassified assets	$ 12,900
Operating properties, net
Investments in real estate
Less: accumulated depreciation		(675,747)	(703,083)
Operating properties, net | Land
Investments in real estate
Gross		466,701	439,355
Operating properties, net | Buildings and improvements
Investments in real estate
Gross		$ 3,141,889	$ 3,015,216

XML

Intangible Assets on Real Estate Acquisition, Net (Details) - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2015	Sep. 30, 2014	Dec. 31, 2014
Intangible assets on real estate acquisitions
Gross Carrying Amount	$ 231,806		$ 188,467
Accumulated Amortization	125,632		144,613
Net Carrying Amount	106,174		43,854
Amortization of intangible assets	$ 11,900	$ 10,800
Weighted average useful life	10 years
Estimated future amortization expense associated with the intangible asset categories for the next five years
Remainder of fiscal year	$ 5,100
2016	19,700
2017	17,100
2018	12,300
2019	9,300
2020	7,300
In-place lease value
Intangible assets on real estate acquisitions
Gross Carrying Amount	138,410		123,759
Accumulated Amortization	87,667		101,040
Net Carrying Amount	$ 50,743		22,719
Weighted average useful life	6 years
Tenant relationship value
Intangible assets on real estate acquisitions
Gross Carrying Amount	$ 63,117		42,301
Accumulated Amortization	22,525		28,492
Net Carrying Amount	$ 40,592		13,809
Weighted average useful life	11 years
Below-market cost arrangements
Intangible assets on real estate acquisitions
Gross Carrying Amount	$ 15,102		12,415
Accumulated Amortization	6,505		5,984
Net Carrying Amount	$ 8,597		6,431
Weighted average useful life	35 years
Above-market leases
Intangible assets on real estate acquisitions
Gross Carrying Amount	$ 13,844		8,659
Accumulated Amortization	7,987		8,159
Net Carrying Amount	$ 5,857		500
Weighted average useful life	4 years
Market concentration premium
Intangible assets on real estate acquisitions
Gross Carrying Amount	$ 1,333		1,333
Accumulated Amortization	948		938
Net Carrying Amount	$ 385		$ 395
Weighted average useful life	27 years

XML

Fair Value Measurements (Details 3) - Real Estate Investment Properties, Net - Fair value measurement on a nonrecurring basis $ in Thousands	Sep. 30, 2015 USD ($)
Assets and liabilities measured at fair value on a non-recurring basis
Assets	$ 7,225
Significant Unobservable Inputs (Level 3)
Assets and liabilities measured at fair value on a non-recurring basis
Assets	$ 7,225

XML

Prepaid Expenses and Other Assets, Net (Tables)

9 Months Ended

Sep. 30, 2015

Prepaid Expense and Other Assets [Abstract]

Schedule of prepaid expenses and other assets

Prepaid expenses and other assets consisted of the following (in thousands):

	September 30, 2015		December 31, 2014
Prepaid expenses	$	28,655	$	20,570
Lease incentives, net	11,589		13,344
Furniture, fixtures and equipment, net	5,941		6,637
Construction contract costs incurred in excess of billings	4,722		6,656
Deferred tax asset, net (1)	4,015		4,002
Operating notes receivable	3,744		3,797
Equity method investments	1,626		2,368
Other assets	6,495		2,875
Prepaid expenses and other assets, net	$	66,787	$	60,249

(1) Includes a valuation allowance of $2.1 million.

XML

Prepaid Expenses and Other Assets, Net (Details) - USD ($) $ in Thousands	Sep. 30, 2015	Dec. 31, 2014
Prepaid Expense and Other Assets [Abstract]
Prepaid expenses	$ 28,655	$ 20,570
Lease incentives, net	11,589	13,344
Furniture, fixtures and equipment, net	5,941	6,637
Construction contract costs incurred in excess of billings	4,722	6,656
Deferred tax asset, net	4,015	4,002
Operating notes receivable	3,744	3,797
Equity method investments	1,626	2,368
Other assets	6,495	2,875
Prepaid expenses and other assets, net	66,787	60,249
Long-term Operating Notes Receivable
Mortgage and Other Investing Receivables [Line Items]
Operating notes receivable	3,700	3,600
Allowances for estimated losses	278	252
Taxable REIT Subsidiary
Mortgage and Other Investing Receivables [Line Items]
Deferred tax assets, valuation allowance	$ 2,100	$ 2,100

XML

Commitments and Contingencies - Future Minimum Payments (Details) $ in Thousands	Sep. 30, 2015 USD ($)
Commitments and Contingencies Disclosure [Abstract]
2015	$ 289
2016	1,171
2017	1,096
2018	1,052
2019	1,036
Thereafter	86,999
Total	$ 91,643

XML

Commitments and Contingencies

9 Months Ended

Sep. 30, 2015

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies

Commitments and Contingencies

Litigation

In the normal course of business, we are involved in legal actions arising from our ownership and administration of properties.  We establish reserves for specific legal proceedings when we determine that the likelihood of an unfavorable outcome is probable and the amount of loss can be reasonably estimated.  Management does not anticipate that any liabilities that may result from such proceedings will have a materially adverse effect on our financial position, operations or liquidity.  Our assessment of the potential outcomes of these matters involves significant judgment and is subject to change based on future developments.

Environmental

We are subject to various Federal, state and local environmental regulations related to our property ownership and operation.  We have performed environmental assessments of our properties, the results of which have not revealed any environmental liability that we believe would have a materially adverse effect on our financial position, operations or liquidity.

Tax Incremental Financing Obligation

In August 2010, Anne Arundel County, Maryland issued $30 million in tax incremental financing bonds to third-party investors in order to finance public improvements needed in connection with our project known as National Business Park North.  The real estate taxes on increases in assessed value of a development district encompassing National Business Park North are to be transferred to a special fund pledged to the repayment of the bonds.  We recognized a $2.2 million liability through September 30, 2015 representing our estimated obligation to fund through a special tax any future shortfalls between debt service on the bonds and real estate taxes available to repay the bonds.

Operating Leases

We are obligated as lessee under operating leases (mostly ground leases) with various expiration dates extending to the year 2100. Future minimum rental payments due under the terms of these operating leases as of September 30, 2015 follow (in thousands):

Year Ending December 31,
2015 (1)	$	289
2016	1,171
2017	1,096
2018	1,052
2019	1,036
Thereafter	86,999
	$	91,643

(1) Represents three months ending December 31, 2015.

Contractual Obligations

We had amounts remaining to be incurred under various contractual obligations as of September 30, 2015 that included the following:

• new development and redevelopment obligations of $97.9 million (including acquisitions of land);

• capital expenditures for operating properties of $41.9 million;

• third party construction and development of $8.1 million; and

• other purchase obligations of $4.0 million.

Environmental Indemnity Agreement

In connection with a lease and subsequent sale in 2008 and 2010 of three properties in Dayton, New Jersey, we agreed to provide certain environmental indemnifications. The prior owner of the properties, a Fortune 100 company that is responsible for groundwater contamination at such properties, previously agreed to indemnify us for (1) direct losses incurred in connection with the contamination and (2) its failure to perform remediation activities required by the State of New Jersey, up to the point that the state declares the remediation to be complete.  Under the environmental indemnification agreement, we agreed to the following:

• to indemnify the tenant against losses covered under the prior owner’s indemnity agreement if the prior owner fails to indemnify the tenant for such losses.  This indemnification is capped at $5.0 million in perpetuity after the State of New Jersey declares the remediation to be complete;

• to indemnify the tenant for consequential damages (e.g., business interruption) at one of the buildings in perpetuity and another of the buildings through 2025.  This indemnification is limited to $12.5 million; and

• to pay 50% of additional costs related to construction and environmental regulatory activities incurred by the tenant as a result of the indemnified environmental condition of the properties.  This indemnification is limited to $300,000 annually and $1.5 million in the aggregate.

XML

Properties, Net (Details 3) $ in Thousands	Sep. 30, 2015 USD ($) Property	Dec. 31, 2014 USD ($) Property
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Assets held for sale, net	$ 150,572	$ 14,339
Greater Baltimore | Assets Held For Sale
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Number of properties, impairment loss recognized | Property		2
Assets held for sale, net		$ 14,300
2015 Assets Held For Sale
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Properties, net	142,817
Deferred rent receivable	3,998
Intangible assets on real estate acquisitions, net	799
Deferred leasing costs, net	2,053
Lease incentives, net	905
Assets held for sale, net	$ 150,572
2015 Assets Held For Sale | Greater Baltimore
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Number of properties, impairment loss recognized | Property	18
2015 Assets Held For Sale | Northern Virginia
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Number of properties, impairment loss recognized | Property	1

XML

Organization (Details) ft² in Thousands	Sep. 30, 2015 ft² a Property MW
Properties under or approved for redevelopment
Investments in real estate
Number of real estate properties	4
Area of real estate property | ft²	156
Operating office properties
Investments in real estate
Number of real estate properties	183
Area of real estate property | ft²	18,800
Office properties under, or contractually committed for, construction or approved for redevelopment
Investments in real estate
Number of real estate properties	10
Area of real estate property | ft²	1,200
Partially operational properties | Properties under or approved for redevelopment
Investments in real estate
Number of real estate properties	1
Land controlled for future development
Investments in real estate
Area of real estate property | a	1,450
Developable square feet | ft²	17,700
Wholesale Data Center
Investments in real estate
Represents the amount of the critical load of the property (in megawatts) | MW	19.25

XML

Information by Business Segment (Tables)

9 Months Ended

Sep. 30, 2015

Segment Reporting [Abstract]

Schedule of segment financial information for real estate operations

The table below reports segment financial information for our reportable segments (in thousands).  We measure the performance of our segments through the measure we define as NOI from real estate operations, which is derived by subtracting property operating expenses from revenues from real estate operations.

	Operating Office Property Segments
	Baltimore/ Washington Corridor		Northern Virginia		San Antonio			Huntsville		Washington, DC - Capitol Riverfront		St. Mary’s &  King George Counties		Greater Baltimore		Greater Philadelphia		Other			Operating Wholesale Data Center		Total
Three Months Ended September 30, 2015
Revenues from real estate operations	$	62,009	$	23,332	$	9,492		$	3,061	$	3,336	$	3,550	$	16,134	$	4,126	$	2,568		$	6,078	$	133,686
Property operating expenses	20,169		7,785		4,808			888		1,962		1,325		6,461		1,249		242			4,008		48,897
NOI from real estate operations	$	41,840	$	15,547	$	4,684		$	2,173	$	1,374	$	2,225	$	9,673	$	2,877	$	2,326		$	2,070	$	84,789
Additions to long-lived assets	$	7,943	$	1,749	$	—		$	175	$	1,098	$	986	$	128,933	$	246	$	(93	)	$	—	$	141,037
Transfers from non-operating properties	$	25,184	$	34,195	$	591		$	1,207	$	—	$	1,408	$	315	$	5,506	$	—		$	73,804	$	142,210
Three Months Ended September 30, 2014								—
Revenues from real estate operations	$	58,883	$	21,369	$	9,031		$	2,471	$	3,524	$	4,158	$	10,436	$	2,951	$	2,541		$	2,876	$	118,240
Property operating expenses	19,457		7,500		5,100			763		1,824		1,277		3,810		837		260			2,053		42,881
NOI from real estate operations	$	39,426	$	13,869	$	3,931		$	1,708	$	1,700	$	2,881	$	6,626	$	2,114	$	2,281		$	823	$	75,359
Additions to long-lived assets	$	7,248	$	5,898	$	—		$	455	$	458	$	5,189	$	3,021	$	625	$	(125	)	$	24	$	22,793
Transfers from non-operating properties	$	22,680	$	15,403	$	—		$	1,496	$	—	$	—	$	495	$	2,506	$	—		$	222	$	42,802
Nine Months Ended September 30, 2015
Revenues from real estate operations	$	184,412	$	69,474	$	28,867		$	8,165	$	10,091	$	11,246	$	40,508	$	11,236	$	7,659		$	12,933	$	384,591
Property operating expenses	63,291		25,593		15,398			2,605		5,837		4,238		16,367		3,565		655			8,441		145,990
NOI from real estate operations	$	121,121	$	43,881	$	13,469		$	5,560	$	4,254	$	7,008	$	24,141	$	7,671	$	7,004		$	4,492	$	238,601
Additions to long-lived assets	$	16,529	$	89,152	$	21		$	466	$	2,297	$	3,149	$	195,013	$	824	$	164		$	108	$	307,723
Transfers from non-operating properties	$	44,212	$	101,412	$	32,150		$	13,184	$	—	$	1,408	$	327	$	22,222	$	8		$	89,183	$	304,106
Segment assets at September 30, 2015	$	1,297,431	$	697,406	$	148,336		$	108,541	$	94,120	$	101,985	$	455,469	$	128,409	$	76,259		$	246,806	$	3,354,762
Nine Months Ended September 30, 2014
Revenues from real estate operations	$	177,452	$	67,235	$	26,268		$	7,430	$	10,989	$	12,676	$	32,956	$	8,657	$	7,668		$	7,769	$	359,100
Property operating expenses	62,402		24,124		14,391			2,275		5,343		4,070		13,786		3,281		1,195			5,622		136,489
NOI from real estate operations	$	115,050	$	43,111	$	11,877		$	5,155	$	5,646	$	8,606	$	19,170	$	5,376	$	6,473		$	2,147	$	222,611
Additions to long-lived assets	$	19,278	$	14,198	$	(6	)	$	3,296	$	999	$	6,971	$	5,275	$	724	$	(163	)	$	46	$	50,618
Transfers from non-operating properties	$	50,303	$	42,674	$	—		$	21,821	$	—	$	—	$	3,522	$	15,880	$	30		$	897	$	135,127
Segment assets at September 30, 2014	$	1,278,713	$	648,248	$	116,837		$	98,334	$	96,131	$	100,009	$	274,931	$	107,051	$	78,240		$	164,192	$	2,962,686

Schedule of reconciliation of segment revenues to total revenues

The following table reconciles our segment revenues to total revenues as reported on our consolidated statements of operations (in thousands):

	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
	2015		2014		2015			2014
Segment revenues from real estate operations	$	133,686	$	118,240	$	384,591		$	359,100
Construction contract and other service revenues	17,058		34,739		97,554			80,390
Less: Revenues from discontinued operations	—		36		(4		)	12
Total revenues	$	150,744	$	153,015	$	482,141		$	439,502

Schedule of reconciliation of segment property operating expenses to total property operating expenses

The following table reconciles our segment property operating expenses to property operating expenses as reported on our consolidated statements of operations (in thousands):

	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
	2015		2014		2015		2014
Segment property operating expenses	$	48,897	$	42,881	$	145,990	$	136,489
Less: Property operating expenses from discontinued operations	—		175		6		111
Total property operating expenses	$	48,897	$	43,056	$	145,996	$	136,600

Schedule of computation of net operating income from service operations

The table below sets forth the computation of our NOI from service operations (in thousands):

	For the Three Months Ended September 30,						For the Nine Months Ended September 30,
	2015			2014			2015			2014
Construction contract and other service revenues	$	17,058		$	34,739		$	97,554		$	80,390
Construction contract and other service expenses	(16,132		)	(33,593		)	(94,923		)	(75,353		)
NOI from service operations	$	926		$	1,146		$	2,631		$	5,037

Schedule of reconciliation of net operating income from real estate operations and service operations to (loss) income from continuing operations

The following table reconciles our NOI from real estate operations for reportable segments and NOI from service operations to income from continuing operations as reported on our consolidated statements of operations (in thousands):

	For the Three Months Ended September 30,						For the Nine Months Ended September 30,
	2015			2014			2015			2014
NOI from real estate operations	$	84,789		$	75,359		$	238,601		$	222,611
NOI from service operations	926			1,146			2,631			5,037
Interest and other income	692			1,191			3,217			3,775
Equity in income of unconsolidated entities	18			193			52			206
Income tax expense	(48		)	(101		)	(153		)	(257		)
Other adjustments:	—						—
Depreciation and other amortization associated with real estate operations	(38,403		)	(30,237		)	(103,788		)	(104,728		)
Impairment losses	(2,307		)	(66		)	(3,545		)	(1,368		)
General, administrative and leasing expenses	(7,439		)	(7,211		)	(22,864		)	(22,882		)
Business development expenses and land carry costs	(5,573		)	(1,430		)	(10,986		)	(4,107		)
Interest expense	(24,121		)	(24,802		)	(66,727		)	(69,107		)
Less: NOI from discontinued operations	—			(139		)	(10		)	(99		)
Gain (loss) on early extinguishment of debt	85,745			(176		)	85,677			(446		)
Income from continuing operations	$	94,279		$	13,727		$	122,105		$	28,635

Schedule of reconciliation of segment assets to total assets

The following table reconciles our segment assets to the consolidated total assets of COPT and subsidiaries (in thousands):

	September 30, 2015		September 30, 2014
Segment assets	$	3,354,762	$	2,962,686
Non-operating property assets	416,540		518,951
Other assets	147,171		198,551
Total COPT consolidated assets	$	3,918,473	$	3,680,188

XML

Properties, Net (Details 5) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2015	Sep. 30, 2014	Sep. 30, 2015	Sep. 30, 2014
Real Estate [Abstract]
Pro forma total revenues	$ 152,736	$ 162,085	$ 498,657	$ 467,224
Pro forma net income attributable to COPT common shareholders	$ 88,836	$ 19,683	$ 112,941	$ 19,266
Pro Forma EPS, Basic (in dollars per share)	$ 0.94	$ 0.22	$ 1.20	$ 0.22
Pro Forma EPS, Diluted (in dollars per share)	$ 0.94	$ 0.22	$ 1.20	$ 0.22

XML

Income Taxes (Details) - Taxable REIT Subsidiary - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2015	Sep. 30, 2014	Sep. 30, 2015	Sep. 30, 2014
Deferred
Federal	$ 39	$ 83	$ 125	$ 215
State	9	18	28	42
Total income tax expense	$ 48	$ 101	$ 153	$ 257
Effective tax rate (as a percent)	37.70%	37.70%	37.70%	37.70%

XML

Redeemable Noncontrolling Interests (Details) - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2015	Sep. 30, 2014
Redeemable Noncontrolling Interest [Roll Forward]
Beginning balance	$ 18,417	$ 17,758
Distributions to noncontrolling interest, net	(1,098)	(976)
Net income attributable to noncontrolling interest	1,690	1,647
Adjustment to arrive at fair value of interest	599	7
Ending balance	$ 19,608	$ 18,436

XML

Fair Value Measurements (Details 4) - Fair value measurement on a nonrecurring basis $ in Thousands	9 Months Ended
	Sep. 30, 2015 USD ($)
Real Estate Investment Properties, Net
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]
Assets	$ 7,225
Discounted Cash Flow Valuation Technique
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]
Discount rate	8.25%
Terminal capitalization	7.75%
Market rent growth rate	2.00%
Expense growth rate	2.00%
Significant Unobservable Inputs (Level 3) | Real Estate Investment Properties, Net
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]
Assets	$ 7,225
Significant Unobservable Inputs (Level 3) | Discounted Cash Flow Valuation Technique | Real Estate Investment Properties, Net
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]
Assets	$ 7,225

XML

Organization

9 Months Ended

Sep. 30, 2015

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Organization

Organization

Corporate Office Properties Trust (“COPT”) and subsidiaries (collectively, the “Company”) is a fully-integrated and self-managed real estate investment trust (“REIT”). Corporate Office Properties, L.P. (“COPLP”) and subsidiaries (collectively, the “Operating Partnership”) is the entity through which COPT, the sole general partner of COPLP, conducts almost all of its operations and owns almost all of its assets. Unless otherwise expressly stated or the context otherwise requires, “we”, “us” and “our” as used herein refer to each of the Company and the Operating Partnership. We focus primarily on serving the specialized requirements of United States Government agencies and their contractors, most of whom are engaged in national security and information technology related activities. We generally acquire, develop, manage and lease office and data center properties concentrated in large office parks 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, 2015, our properties included the following:

• 183 operating office properties totaling 18.8 million square feet;

• 10 office properties under, or contractually committed for, construction or redevelopment that we estimate will total approximately 1.2 million square feet upon completion, including one partially operational property included above;

• 1,450 acres of land we control that we believe are potentially developable into approximately 17.7 million square feet; and

• a wholesale data center with a critical load of 19.25 megawatts.

COPLP owns real estate both directly and through subsidiary partnerships and limited liability companies (“LLCs”).  In addition to owning real estate, COPLP also owns subsidiaries that provide real estate services such as property management and construction and development services primarily for our properties but also for third parties. Some of these services are performed by a taxable REIT subsidiary (“TRS”).

Equity interests in COPLP are in the form of common and preferred units. As of September 30, 2015, COPT owned 96.3% of the outstanding COPLP common units (“common units”) and 95.5% of the outstanding COPLP preferred units (“preferred units”); the remaining common and preferred units in COPLP were owned by third parties. Common units in COPLP not owned by COPT carry certain redemption rights. The number of common units in COPLP owned by COPT is equivalent to the number of outstanding common shares of beneficial interest (“common shares”) of COPT, and the entitlement of all COPLP common units to quarterly distributions and payments in liquidation is substantially the same as those of COPT common shareholders. Similarly, in the case of each series of preferred units in COPLP held by COPT, there is a series of preferred shares of beneficial interest (“preferred shares”) in COPT that is equivalent in number and carries substantially the same terms as such series of COPLP preferred units. COPT’s common shares are publicly traded on the New York Stock Exchange (“NYSE”) under the ticker symbol “OFC”.

Because COPLP is managed by COPT, and COPT conducts substantially all of its operations through COPLP, we refer to COPT’s executive officers as COPLP’s executive officers, and although, as a partnership, COPLP does not have a board of trustees, we refer to COPT’s Board of Trustees as COPLP’s Board of Trustees.

XML

Equity (Details) - USD ($) $ / shares in Units, $ in Millions	9 Months Ended
	Sep. 30, 2015	Sep. 30, 2014
Class of Stock [Line Items]
Number of operating partnerships units converted into common shares (in units)	160,160	117,149
Common Stock Issued to Public Under At-the-Market Program
Class of Stock [Line Items]
Shares issued to the public (in units/ shares)	890,241
Weighted average price per share of stock issued	$ 30.29
Net proceeds of stock issuance	$ 26.6
Commission costs	0.4
Common Shares
Class of Stock [Line Items]
Remaining capacity under ATM Plan	$ 84.0
Corporate Office Properties, L.P. | Common Shares
Class of Stock [Line Items]
Shares issued to the public (in units/ shares)	890,241

XML

Organization (Details 2) - Corporate Office Properties, L.P.	9 Months Ended
	Sep. 30, 2015
Common Units
Forms of ownership in Operating Partnership and ownership percentage by the entity
Percentage ownership in operating partnership	96.30%
Preferred Units
Forms of ownership in Operating Partnership and ownership percentage by the entity
Percentage ownership in operating partnership	95.50%

XML

Properties, Net (Tables)

9 Months Ended

Sep. 30, 2015

Real Estate [Abstract]

Schedule of operating properties, net

Operating properties, net consisted of the following (in thousands): 

	September 30, 2015			December 31, 2014
Land	$	466,701		$	439,355
Buildings and improvements	3,141,889			3,015,216
Less: Accumulated depreciation	(675,747		)	(703,083		)
Operating properties, net	$	2,932,843		$	2,751,488

Schedule of projects in development or held for future development

Projects in development or held for future development consisted of the following (in thousands):

	September 30, 2015		December 31, 2014
Land	$	207,748	$	214,977
Development in progress, excluding land	207,009		330,449
Projects in development or held for future development	$	414,757	$	545,426

Components of assets held for sale

The table below sets forth the components of assets held for sale on our consolidated balance sheet for these properties (in thousands):

	September 30, 2015
Properties, net	$	142,817
Deferred rent receivable	3,998
Intangible assets on real estate acquisitions, net	799
Deferred leasing costs, net	2,053
Lease incentives, net	905
Assets held for sale, net	$	150,572

Schedule of allocation of acquisition costs

The table below sets forth the allocation of the aggregate acquisition costs of these properties (in thousands):

Land, operating properties	$	55,076
Building and improvements	139,520
Intangible assets on real estate acquisitions	75,846
Total assets	270,442
Below-market leases	(6,820		)
Total acquisition cost	$	263,622

Schedule of intangible assets recorded in connection with acquisition

Intangible assets recorded in connection with these acquisitions included the following (dollars in thousands):

			Weighted Average Amortization Period (in Years)
Tenant relationship value	$	31,208	12
In-place lease value	35,231		7
Above-market leases	6,720		4
Below-market cost arrangements	2,687		40
	$	75,846	10

Pro Forma Results

The pro forma financial information was prepared for comparative purposes only and is not necessarily indicative of what would have occurred had these acquisitions been made at that time or of results which may occur in the future (in thousands, except per shares amounts).

	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
	2015		2014		2015		2014
	(Unaudited)				(Unaudited)
Pro forma total revenues	$	152,736	$	162,085	$	498,657	$	467,224
Pro forma net income attributable to COPT common shareholders	$	88,836	$	19,683	$	112,941	$	19,266
Pro forma EPS:
Basic	$	0.94	$	0.22	$	1.20	$	0.22
Diluted	$	0.94	$	0.22	$	1.20	$	0.22

XML

Fair Value Measurements (Tables)

9 Months Ended

Sep. 30, 2015

Fair Value Disclosures [Abstract]

Schedule of fair value assets and liabilities measured on recurring basis

The table below sets forth financial assets and liabilities of COPLP and its subsidiaries that are accounted for at fair value on a recurring basis as of September 30, 2015 and the hierarchy level of inputs used in measuring their respective fair values under applicable accounting standards (in thousands):

Description	Quoted Prices in Active Markets for Identical Assets(Level 1)		Significant Other Observable Inputs(Level 2)		Significant Unobservable Inputs(Level 3)		Total
Assets:
Warrants to purchase common stock (1)	$	—	$	42	$	—	$	42
Liabilities:
Interest rate derivatives	$	—	$	5,844	$	—	$	5,844
Redeemable noncontrolling interest	$	—	$	—	$	19,608	$	19,608

(1) Included in the line entitled “prepaid expenses and other assets” on COPLP’s consolidated balance sheet.

The table below sets forth financial assets and liabilities of COPT and its subsidiaries that are accounted for at fair value on a recurring basis as of September 30, 2015 and the hierarchy level of inputs used in measuring their respective fair values under applicable accounting standards (in thousands):

Description	Quoted Prices in Active Markets for Identical Assets(Level 1)		Significant Other Observable Inputs(Level 2)		Significant Unobservable Inputs(Level 3)		Total
Assets:
Marketable securities in deferred compensation plan (1)
Mutual funds	$	5,395	$	—	$	—	$	5,395
Other	104		—		—		104
Warrants to purchase common stock (2)	—		42		—		42
Total assets	$	5,499	$	42	$	—	$	5,541
Liabilities:
Deferred compensation plan liability (3)	$	—	$	5,499	$	—	$	5,499
Interest rate derivatives	—		5,844		—		5,844
Total liabilities	$	—	$	11,343	$	—	$	11,343
Redeemable noncontrolling interest	$	—	$	—	$	19,608	$	19,608

(1) Included in the line entitled “restricted cash and marketable securities” on COPT’s consolidated balance sheet.

(2) Included in the line entitled “prepaid expenses and other assets” on COPT’s consolidated balance sheet.

(3) Included in the line entitled “other liabilities” on COPT’s consolidated balance sheet.

Schedule of fair value hierarchy of impaired properties and other assets associated with such properties

The table below sets forth the fair value hierarchy of the valuation technique we used to determine the fair values of these properties (dollars in thousands):

	Fair Values of Properties Held as of September 30, 2015
	Quoted Prices in				Significant
	Active Markets for		Significant Other		Unobservable
	Identical Assets		Observable Inputs		Inputs
Description	(Level 1)		(Level 2)		(Level 3)		Total
Assets:
Assets held for sale, net (1)	$	—	$	—	$	7,225	$	7,225

(1) Represents estimated fair values less costs to sell.

Schedule of quantitative information about significant unobservable inputs used for Level 3 fair value measurements

The table below sets forth quantitative information about significant unobservable inputs used for the Level 3 fair value measurements reported above as of September 30, 2015 (dollars in thousands):

Valuation Technique	Fair Values on  Measurement Date		Unobservable Input	Range (Weighted Average) (1)
Discounted cash flow	$	7,225	Discount rate	8.25%
			Terminal capitalization rate	7.75%
			Market rent growth rate	2.0%
			Expense growth rate	2.0%

(1) Only one value applied for these unobservable inputs.

XML

Investing Receivables (Details) - USD ($) $ in Thousands	Sep. 30, 2015	Dec. 31, 2014
Accounts, Notes, Loans and Financing Receivable [Line Items]
Investing receivables	$ 46,821	$ 52,147
Notes Receivable from City of Huntsville
Accounts, Notes, Loans and Financing Receivable [Line Items]
Investing receivables	$ 43,821	49,147
Notes Receivable from City of Huntsville | LW Redstone Company, LLC
Accounts, Notes, Loans and Financing Receivable [Line Items]
Stated interest rate (as a percent)	9.95%
Other investing loans receivable
Accounts, Notes, Loans and Financing Receivable [Line Items]
Investing receivables	$ 3,000	$ 3,000

XML

Fair Value Measurements (Details) - USD ($) $ in Thousands	Sep. 30, 2015	Dec. 31, 2014	Sep. 30, 2014	Dec. 31, 2013
Liabilities:
Interest rate derivatives	$ 5,844	$ 1,855
Redeemable noncontrolling interest	19,608	18,417	$ 18,436	$ 17,758
Corporate Office Properties, L.P.
Liabilities:
Interest rate derivatives	5,844	$ 1,855
Fair value measurement on a recurring basis
Assets:
Warrants to purchase common stock	42
Assets	5,541
Liabilities:
Deferred compensation plan liability	5,499
Interest rate derivatives	5,844
Liabilities	11,343
Redeemable noncontrolling interest	19,608
Fair value measurement on a recurring basis | Mutual funds
Assets:
Marketable securities in deferred compensation plan	5,395
Fair value measurement on a recurring basis | Other
Assets:
Marketable securities in deferred compensation plan	104
Fair value measurement on a recurring basis | Quoted Prices in Active Markets for Identical Assets (Level 1)
Assets:
Assets	5,499
Fair value measurement on a recurring basis | Quoted Prices in Active Markets for Identical Assets (Level 1) | Mutual funds
Assets:
Marketable securities in deferred compensation plan	5,395
Fair value measurement on a recurring basis | Quoted Prices in Active Markets for Identical Assets (Level 1) | Other
Assets:
Marketable securities in deferred compensation plan	104
Fair value measurement on a recurring basis | Significant Other Observable Inputs (Level 2)
Assets:
Warrants to purchase common stock	42
Assets	42
Liabilities:
Deferred compensation plan liability	5,499
Interest rate derivatives	5,844
Liabilities	11,343
Fair value measurement on a recurring basis | Significant Unobservable Inputs (Level 3)
Liabilities:
Redeemable noncontrolling interest	19,608
Fair value measurement on a recurring basis | Corporate Office Properties, L.P.
Assets:
Warrants to purchase common stock	42
Liabilities:
Interest rate derivatives	5,844
Redeemable noncontrolling interest	19,608
Fair value measurement on a recurring basis | Corporate Office Properties, L.P. | Significant Other Observable Inputs (Level 2)
Assets:
Warrants to purchase common stock	42
Liabilities:
Interest rate derivatives	5,844
Fair value measurement on a recurring basis | Corporate Office Properties, L.P. | Significant Unobservable Inputs (Level 3)
Liabilities:
Redeemable noncontrolling interest	$ 19,608

XML

Real Estate Joint Ventures (Tables)

9 Months Ended

Sep. 30, 2015

Equity Method Investments and Joint Ventures [Abstract]

Schedule of information related to investments in consolidated real estate joint ventures

The table below sets forth information pertaining to our material investments in consolidated real estate joint ventures as of September 30, 2015 (dollars in thousands):

		Nominal
		Ownership		September 30, 2015				(1)
	Date	% as of		Total		Encumbered		Total
	Acquired	9/30/2015	Nature of Activity	Assets		Assets		Liabilities
LW Redstone Company, LLC	3/23/2010	85%	Development and operation of real estate (2)	$	144,906	$	64,395	$	39,093
M Square Associates, LLC	6/26/2007	50%	Development and operation of real estate (3)	58,840		48,301		38,117
				$	203,746	$	112,696	$	77,210

(1) Excludes amounts eliminated in consolidation.

(2) This joint venture’s properties are in Huntsville.

(3) This joint venture’s properties are in College Park, Maryland (in the Baltimore/Washington Corridor).

XML

Intangible Assets on Real Estate Acquisition, Net (Tables)

9 Months Ended

Sep. 30, 2015

Intangible Assets on Real Estate Acquisitions [Abstract]

Schedule of intangible assets on real estate acquisitions

Intangible assets on real estate acquisitions consisted of the following, excluding amounts for properties held for sale (in thousands):

	September 30, 2015						December 31, 2014
	Gross Carrying Amount		Accumulated Amortization		Net  Carrying Amount		Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount
In-place lease value	$	138,410	$	87,667	$	50,743	$	123,759	$	101,040	$	22,719
Tenant relationship value	63,117		22,525		40,592		42,301		28,492		13,809
Below-market cost arrangements	15,102		6,505		8,597		12,415		5,984		6,431
Above-market leases	13,844		7,987		5,857		8,659		8,159		500
Market concentration premium	1,333		948		385		1,333		938		395
	$	231,806	$	125,632	$	106,174	$	188,467	$	144,613	$	43,854

XML

Consolidated Statements of Cash Flows - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2015	Sep. 30, 2014
Cash flows from operating activities
Revenues from real estate operations received	$ 373,607	$ 358,212
Construction contract and other service revenues received	104,817	62,170
Property operating expenses paid	(146,274)	(141,489)
Construction contract and other service expenses paid	(112,614)	(58,218)
General, administrative, leasing, business development and land carry costs paid	(29,620)	(22,288)
Interest expense paid	(46,278)	(54,683)
Payments in connection with early extinguishment of debt	(18)	(104)
Interest and other income received	4,130	448
Income taxes (paid) refunded	(8)	200
Net cash provided by operating activities	147,742	144,248
Cash flows from investing activities
Acquisitions of operating properties and related intangible assets	(202,866)	0
Construction, development and redevelopment	(174,434)	(150,862)
Tenant improvements on operating properties	(18,129)	(17,754)
Other capital improvements on operating properties	(12,610)	(21,179)
Proceeds from dispositions of properties	45,066	57,973
Investing receivables funded	(22)	(3,610)
Investing receivables payments received	5,114	10,278
Leasing costs paid	(8,603)	(10,549)
Increase in prepaid expenses and other assets associated with investing activities	(4,348)	(1,260)
Other	(457)	(83)
Net cash used in investing activities	(371,289)	(137,046)
Proceeds from debt
Revolving Credit Facility	422,000	115,000
Unsecured senior notes	296,580	297,342
Other debt proceeds	50,000	11,569
Repayments of debt
Revolving Credit Facility	(418,000)	(115,000)
Scheduled principal amortization	(5,011)	(4,914)
Other debt repayments	(50,681)	(183,059)
Deferred financing costs paid	(5,377)	(694)
Net proceeds from issuance of common shares/units	28,567	1,352
Redemption of preferred shares/units	0	(50,000)
Common share/unit dividends/distributions paid	(77,641)	(72,217)
Preferred share/unit dividends/distributions paid	(10,657)	(13,179)
Distributions paid to noncontrolling interests in COPLP	(3,581)	(3,786)
Redemption of vested equity awards	(2,330)	(1,389)
Other	(2,559)	(2,582)
Net cash provided by (used in) financing activities	221,310	(21,557)
Net decrease in cash and cash equivalents	(2,237)	(14,355)
Cash and cash equivalents
Beginning of period	6,077	54,373
End of period	3,840	40,018
Reconciliation of net income to net cash provided by operating activities:
Net income	126,261	39,269
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and other amortization	105,397	106,619
Impairment losses	3,779	1,371
Amortization of deferred financing costs	3,339	3,646
Increase in deferred rent receivable	(11,939)	(2,738)
Amortization of net debt discounts	805	659
Gain on sales of real estate	(4,000)	(10,654)
Share-based compensation	4,949	4,563
(Gain) loss on early extinguishment of debt	(86,075)	458
Other	1,922	(2,446)
Operating changes in assets and liabilities:
Decrease in accounts receivable	6,526	6,815
Increase in restricted cash and marketable securities	(1,102)	(2,591)
Increase in prepaid expenses and other assets, net	(5,228)	(26,553)
(Decrease) increase in accounts payable, accrued expenses and other liabilities	(655)	24,247
Increase in rents received in advance and security deposits	3,763	1,583
Net cash provided by operating activities	147,742	144,248
Supplemental schedule of non-cash investing and financing activities:
Decrease in accrued capital improvements, leasing and other investing activity costs	(11,722)	(174)
Debt assumed on acquisition of operating property	55,490	0
Other liabilities assumed on acquisition of operating properties	5,265	0
Decrease in property in connection with surrender of property in settlement of debt	(82,738)	0
Decrease in debt in connection with surrender of property in settlement of debt	(150,000)	0
Decrease in fair value of derivatives applied to accumulated other comprehensive loss and noncontrolling interests	(4,263)	(2,613)
Equity in other comprehensive loss of an equity method investee	(264)	0
Dividends/distributions payable	30,182	28,344
Decrease in noncontrolling interests and increase in shareholders’ equity in connection with the conversion of common units into common shares	2,151	1,545
Adjustments to noncontrolling interests resulting from changes in COPLP ownership	591	248
Increase in redeemable noncontrolling interest and decrease in equity to carry redeemable noncontrolling interest at fair value	599	7
Corporate Office Properties, L.P.
Cash flows from operating activities
Revenues from real estate operations received	373,607	358,212
Construction contract and other service revenues received	104,817	62,170
Property operating expenses paid	(146,274)	(141,489)
Construction contract and other service expenses paid	(112,614)	(58,218)
General, administrative, leasing, business development and land carry costs paid	(29,620)	(22,288)
Interest expense paid	(46,278)	(54,683)
Payments in connection with early extinguishment of debt	(18)	(104)
Interest and other income received	4,130	448
Income taxes (paid) refunded	(8)	200
Net cash provided by operating activities	147,742	144,248
Cash flows from investing activities
Acquisitions of operating properties and related intangible assets	(202,866)	0
Construction, development and redevelopment	(174,434)	(150,862)
Tenant improvements on operating properties	(18,129)	(17,754)
Other capital improvements on operating properties	(12,610)	(21,179)
Proceeds from dispositions of properties	45,066	57,973
Investing receivables funded	(22)	(3,610)
Investing receivables payments received	5,114	10,278
Leasing costs paid	(8,603)	(10,549)
Increase in prepaid expenses and other assets associated with investing activities	(4,348)	(1,260)
Other	(457)	(83)
Net cash used in investing activities	(371,289)	(137,046)
Proceeds from debt
Revolving Credit Facility	422,000	115,000
Unsecured senior notes	296,580	297,342
Other debt proceeds	50,000	11,569
Repayments of debt
Revolving Credit Facility	(418,000)	(115,000)
Scheduled principal amortization	(5,011)	(4,914)
Other debt repayments	(50,681)	(183,059)
Deferred financing costs paid	(5,377)	(694)
Net proceeds from issuance of common shares/units	28,567	1,352
Redemption of preferred shares/units	0	(50,000)
Common share/unit dividends/distributions paid	(80,727)	(75,508)
Preferred share/unit dividends/distributions paid	(11,152)	(13,674)
Redemption of vested equity awards	(2,330)	(1,389)
Other	(2,559)	(2,582)
Net cash provided by (used in) financing activities	221,310	(21,557)
Net decrease in cash and cash equivalents	(2,237)	(14,355)
Cash and cash equivalents
Beginning of period	6,077	54,373
End of period	3,840	40,018
Reconciliation of net income to net cash provided by operating activities:
Net income	126,261	39,269
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and other amortization	105,397	106,619
Impairment losses	3,779	1,371
Amortization of deferred financing costs	3,339	3,646
Increase in deferred rent receivable	(11,939)	(2,738)
Amortization of net debt discounts	805	659
Gain on sales of real estate	(4,000)	(10,654)
Share-based compensation	4,949	4,563
(Gain) loss on early extinguishment of debt	(86,075)	458
Other	1,922	(2,446)
Operating changes in assets and liabilities:
Decrease in accounts receivable	6,526	6,815
Increase in restricted cash and marketable securities	(1,485)	(2,558)
Increase in prepaid expenses and other assets, net	(5,228)	(26,553)
(Decrease) increase in accounts payable, accrued expenses and other liabilities	(272)	24,214
Increase in rents received in advance and security deposits	3,763	1,583
Net cash provided by operating activities	147,742	144,248
Supplemental schedule of non-cash investing and financing activities:
Decrease in accrued capital improvements, leasing and other investing activity costs	(11,722)	(174)
Debt assumed on acquisition of operating property	55,490	0
Other liabilities assumed on acquisition of operating properties	5,265	0
Decrease in property in connection with surrender of property in settlement of debt	(82,738)	0
Decrease in debt in connection with surrender of property in settlement of debt	(150,000)	0
Decrease in fair value of derivatives applied to accumulated other comprehensive loss and noncontrolling interests	(4,263)	(2,613)
Equity in other comprehensive loss of an equity method investee	(264)	0
Dividends/distributions payable	30,182	28,344
Increase in redeemable noncontrolling interest and decrease in equity to carry redeemable noncontrolling interest at fair value	$ 599	$ 7

XML

Investing Receivables (Tables)

9 Months Ended

Sep. 30, 2015

Receivables [Abstract]

Schedule of investing receivables

Investing receivables, including accrued interest thereon, consisted of the following (in thousands):

	September 30, 2015		December 31, 2014
Notes receivable from the City of Huntsville	$	43,821	$	49,147
Other investing loans receivable	3,000		3,000
	$	46,821	$	52,147

XML

Earnings Per Share ("EPS") and Earnings Per Unit ("EPU") (Tables)

9 Months Ended

Sep. 30, 2015

Earnings Per Share [Line Items]

Summary of calculation of numerator and denominator in basic and diluted earnings per share

Summaries of the numerator and denominator for purposes of basic and diluted EPS calculations are set forth below (in thousands, except per share data):

	For the Three Months Ended September 30,						For the Nine Months Ended September 30,
	2015			2014			2015			2014
Numerator:
Income from continuing operations	$	94,279		$	13,727		$	122,105		$	28,635
Gain on sales of real estate, net	15			10,630			4,000			10,630
Preferred share dividends	(3,552		)	(3,553		)	(10,657		)	(12,387		)
Issuance costs associated with redeemed preferred shares	—			—			—			(1,769		)
Income from continuing operations attributable to noncontrolling interests	(4,494		)	(1,820		)	(7,322		)	(3,923		)
Income from continuing operations attributable to share-based compensation awards	(369		)	(103		)	(475		)	(332		)
Numerator for basic EPS from continuing operations attributable to COPT common shareholders	85,879			18,881			107,651			20,854
Convertible preferred shares	372			—			—			—
Dilutive effect of common units in COPLP on diluted EPS from continuing operations	—			—			4,225			—
Numerator for diluted EPS from continuing operations attributable to COPT common shareholders	$	86,251		$	18,881		$	111,876		$	20,854
Numerator for basic EPS from continuing operations attributable to COPT common shareholders	$	85,879		$	18,881		$	107,651		$	20,854
Discontinued operations	—			191			156			4
Discontinued operations attributable to noncontrolling interests	—			(8		)	(3		)	5
Numerator for basic EPS on net income attributable to COPT common shareholders	85,879			19,064			107,804			20,863
Convertible preferred shares	372			—			—			—
Dilutive effect of common units in COPLP	—			—			4,231			—
Numerator for diluted EPS on net income attributable to COPT common shareholders	$	86,251		$	19,064		$	112,035		$	20,863
Denominator (all weighted averages):
Denominator for basic EPS (common shares)	94,153			87,290			93,830			87,196
Convertible preferred shares	434			—			—			—
Dilutive effect of common units	—			—			3,697			—
Dilutive effect of share-based compensation awards	21			195			82			169
Denominator for diluted EPS (common shares)	94,608			87,485			97,609			87,365
Basic EPS:
Income from continuing operations attributable to COPT common shareholders	$	0.91		$	0.22		$	1.15		$	0.24
Discontinued operations attributable to COPT common shareholders	0.00			0.00			0.00			0.00
Net income attributable to COPT common shareholders	$	0.91		$	0.22		$	1.15		$	0.24
Diluted EPS:
Income from continuing operations attributable to COPT common shareholders	$	0.91		$	0.22		$	1.15		$	0.24
Discontinued operations attributable to COPT common shareholders	0.00			0.00			0.00			0.00
Net income attributable to COPT common shareholders	$	0.91		$	0.22		$	1.15		$	0.24

Schedule of securities excluded from computation of diluted earnings per share

Our diluted EPS computations do not include the effects of the following securities since the conversions of such securities would increase diluted EPS for the respective periods (in thousands):

	Weighted Average Shares Excluded from Denominator
	For the Three Months Ended September 30,		For the Nine Months Ended September 30,
	2015	2014	2015	2014
Conversion of common units	3,679	3,876	—	3,915
Conversion of Series I Preferred Units	176	176	176	176
Conversion of Series K Preferred Shares	—	434	434	434

Corporate Office Properties, L.P.

Earnings Per Share [Line Items]

Summary of calculation of numerator and denominator in basic and diluted earnings per share

Summaries of the numerator and denominator for purposes of basic and diluted EPU calculations are set forth below (in thousands, except per unit data):

	For the Three Months Ended September 30,						For the Nine Months Ended September 30,
	2015			2014			2015			2014
Numerator:
Income from continuing operations	$	94,279		$	13,727		$	122,105		$	28,635
Gain on sales of real estate, net	15			10,630			4,000			10,630
Preferred unit distributions	(3,717		)	(3,718		)	(11,152		)	(12,882		)
Issuance costs associated with redeemed preferred units	—			—			—			(1,769		)
Income from continuing operations attributable to noncontrolling interests	(972		)	(897		)	(2,605		)	(2,476		)
Income from continuing operations attributable to share-based compensation awards	(369		)	(103		)	(475		)	(332		)
Numerator for basic EPU from continuing operations attributable to COPLP common unitholders	89,236			19,639			111,873			21,806
Convertible preferred units	372			—			—			—
Numerator for diluted EPU from continuing operations attributable to COPLP common unitholders	$	89,608		$	19,639		$	111,873		$	21,806
Numerator for basic EPU from continuing operations attributable to COPLP common unitholders	$	89,236		$	19,639		$	111,873		$	21,806
Discontinued operations	—			191			156			4
Discontinued operations attributable to noncontrolling interests	—			—			3			5
Numerator for basic EPU on net income attributable to COPLP common unitholders	89,236			19,830			112,032			21,815
Convertible preferred units	372			—			—			—
Numerator for diluted EPU on net income attributable to COPLP common unitholders	$	89,608		$	19,830		$	112,032		$	21,815
Denominator (all weighted averages):
Denominator for basic EPU (common units)	97,832			91,166			97,527			91,111
Convertible preferred shares	434			—			—			—
Dilutive effect of share-based compensation awards	21			195			82			169
Denominator for basic and diluted EPU (common units)	98,287			91,361			97,609			91,280
Basic EPU:
Income from continuing operations attributable to COPLP common unitholders	$	0.91		$	0.22		$	1.15		$	0.24
Discontinued operations attributable to COPLP common unitholders	0.00			0.00			0.00			0.00
Net income attributable to COPLP common unitholders	$	0.91		$	0.22		$	1.15		$	0.24
Diluted EPU:
Income from continuing operations attributable to COPLP common unitholders	$	0.91		$	0.22		$	1.15		$	0.24
Discontinued operations attributable to COPLP common unitholders	0.00			0.00			0.00			0.00
Net income attributable to COPLP common unitholders	$	0.91		$	0.22		$	1.15		$	0.24

Schedule of securities excluded from computation of diluted earnings per share

Our diluted EPU computations do not include the effects of the following securities since the conversions of such securities would increase diluted EPU for the respective periods (in thousands):

	Weighted Average Units Excluded from Denominator
	For the Three Months Ended September 30,		For the Nine Months Ended September 30,
	2015	2014	2015	2014
Conversion of Series I preferred units	176	176	176	176
Conversion of Series K preferred units	—	434	434	434

XML

Properties, Net (Details 6) ft² in Thousands, $ in Thousands			3 Months Ended		9 Months Ended
	Aug. 28, 2015 USD ($) ft² Property	Jul. 27, 2015 USD ($) ft²	Sep. 30, 2015 USD ($) ft² Property	Sep. 30, 2014 USD ($)	Sep. 30, 2015 USD ($) ft² Property	Sep. 30, 2014 USD ($)
Construction and Redevelopment Activities
Gain (loss) on early extinguishment of debt | $			$ 85,745	$ (176)	$ 85,677	$ (446)
Newly constructed properties placed in service
Construction and Redevelopment Activities
Square feet of properties placed in service | ft²					897
Number of real estate properties			7		7
Properties under construction or contractually committed for construction
Construction and Redevelopment Activities
Square footage of real estate properties (in square feet) | ft²			1,000		1,000
Number of real estate properties			6		6
Number of partially operational real estate properties			1		1
Properties under or approved for redevelopment
Construction and Redevelopment Activities
Square footage of real estate properties (in square feet) | ft²			156		156
Number of real estate properties			4		4
Northern Virginia | Properties under construction or contractually committed for construction
Construction and Redevelopment Activities
Number of real estate properties			4		4
Greater Philadelphia and St. Mary's County, Maryland | Newly redeveloped properties placed in service
Construction and Redevelopment Activities
Square feet of properties placed in service | ft²					170
Number of real estate properties			2		2
Baltimore and Washington Corridor | Properties under construction or contractually committed for construction
Construction and Redevelopment Activities
Number of real estate properties			2		2
Operating properties, net | 1550 Westbranch Drive | Northern Virginia
Construction and Redevelopment Activities
Square footage of real estate properties (in square feet) | ft²		160
Transaction value of operating property disposition | $		$ 27,800
Operating properties, net | 15000 and 15010 Conference Center Drive | Northern Virginia
Construction and Redevelopment Activities
Square footage of real estate properties (in square feet) | ft²	665
Number of properties disposed	2
Debt settled through the surrender of real estate assets | $	$ 150,000
Fair value of real estate disposed in settlement of debt | $	99,000
Gain (loss) on early extinguishment of debt | $	$ 84,800
Non-operating properties
Construction and Redevelopment Activities
Sale price of land | $					$ 18,100
Gain on sale | $					$ 4,000

XML

Subsequent Event (Details) ft² in Thousands, $ in Thousands		9 Months Ended
	Oct. 27, 2015 USD ($) ft²	Sep. 30, 2015 USD ($)	Sep. 30, 2014 USD ($)
Subsequent Event [Line Items]
Gain on sale		$ 4,000	$ 10,654
Subsequent Event | Northern Virginia | 13200 Woodland Park Rd
Subsequent Event [Line Items]
Square footage of real estate properties (in square feet) | ft²	397
Transaction value of operating property disposition	$ 84,000
Gain on sale	$ 42,000

XML

Consolidated Balance Sheets - USD ($) $ in Thousands	Sep. 30, 2015	Dec. 31, 2014
Properties, net:
Operating properties, net	$ 2,932,843	$ 2,751,488
Projects in development or held for future development	414,757	545,426
Total properties, net	3,347,600	3,296,914
Assets held for sale, net	150,572	14,339
Cash and cash equivalents	3,840	6,077
Restricted cash and marketable securities	9,286	9,069
Accounts receivable (net of allowance for doubtful accounts of $2,010 and $717, respectively)	19,962	26,901
Deferred rent receivable (net of allowance of $1,816 and $1,418, respectively)	103,064	95,910
Intangible assets on real estate acquisitions, net	106,174	43,854
Deferred leasing and financing costs, net	64,367	64,797
Investing receivables	46,821	52,147
Prepaid expenses and other assets, net	66,787	60,249
Total assets	3,918,473	3,670,257
Liabilities:
Debt, net	2,121,240	1,920,057
Accounts payable and accrued expenses	98,551	123,035
Rents received in advance and security deposits	34,504	31,011
Dividends and distributions payable	30,182	29,862
Deferred revenue associated with operating leases	20,113	13,031
Interest rate derivatives	5,844	1,855
Other liabilities	8,524	12,105
Total liabilities	$ 2,318,958	$ 2,130,956
Commitments and contingencies
Redeemable noncontrolling interest	$ 19,608	$ 18,417
Corporate Office Properties Trust’s shareholders’ equity:
Preferred Shares of beneficial interest at liquidation preference ($0.01 par value; 25,000,000 shares authorized; issued and outstanding of 7,431,667 at September 30, 2015 and December 31, 2014)	199,083	199,083
Common Shares of beneficial interest	945	933
Additional paid-in capital	2,002,730	1,969,968
Cumulative distributions in excess of net income	(686,986)	(717,264)
Accumulated other comprehensive loss	(5,823)	(1,297)
Total Corporate Office Properties Trust’s shareholders’ equity	1,509,949	1,451,423
Noncontrolling interests in subsidiaries:
Common units in COPLP	50,992	51,534
Preferred units in COPLP	8,800	8,800
Other consolidated entities	10,166	9,127
Noncontrolling interests in subsidiaries	69,958	69,461
Total equity	1,579,907	1,520,884
Total liabilities, redeemable noncontrolling interest and equity	3,918,473	3,670,257
Corporate Office Properties, L.P.
Properties, net:
Operating properties, net	2,932,843	2,751,488
Projects in development or held for future development	414,757	545,426
Total properties, net	3,347,600	3,296,914
Assets held for sale, net	150,572	14,339
Cash and cash equivalents	3,840	6,077
Restricted cash and marketable securities	3,787	3,187
Accounts receivable (net of allowance for doubtful accounts of $2,010 and $717, respectively)	19,962	26,901
Deferred rent receivable (net of allowance of $1,816 and $1,418, respectively)	103,064	95,910
Intangible assets on real estate acquisitions, net	106,174	43,854
Deferred leasing and financing costs, net	64,367	64,797
Investing receivables	46,821	52,147
Prepaid expenses and other assets, net	66,787	60,249
Total assets	3,912,974	3,664,375
Liabilities:
Debt, net	2,121,240	1,920,057
Accounts payable and accrued expenses	98,551	123,035
Rents received in advance and security deposits	34,504	31,011
Dividends and distributions payable	30,182	29,862
Deferred revenue associated with operating leases	20,113	13,031
Interest rate derivatives	5,844	1,855
Other liabilities	3,025	6,223
Total liabilities	$ 2,313,459	$ 2,125,074
Commitments and contingencies
Redeemable noncontrolling interest	$ 19,608	$ 18,417
Corporate Office Properties Trust’s shareholders’ equity:
Common Shares of beneficial interest	1,367,904	1,305,219
Accumulated other comprehensive loss	(6,086)	(1,381)
Total Corporate Office Properties Trust’s shareholders’ equity	1,569,701	1,511,721
Noncontrolling interests in subsidiaries:
Noncontrolling interests in subsidiaries	10,206	9,163
Total equity	1,579,907	1,520,884
Total liabilities, redeemable noncontrolling interest and equity	3,912,974	3,664,375
General Partner | Corporate Office Properties, L.P.
Corporate Office Properties Trust’s shareholders’ equity:
Preferred partners' capital accounts	199,083	199,083
Limited Partner | Corporate Office Properties, L.P.
Corporate Office Properties Trust’s shareholders’ equity:
Preferred partners' capital accounts	$ 8,800	$ 8,800

XML

Fair Value Measurements (Details 2) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2015 USD ($) Property	Sep. 30, 2014 USD ($)	Sep. 30, 2015 USD ($)	Sep. 30, 2014 USD ($)
Assets and liabilities measured at fair value on a non-recurring basis
Impairment losses	$ 2,307	$ 66	$ 3,545	$ 1,368
Redeemable Non-Controlling Interest | Fair value measurement on a recurring basis | Significant Unobservable Inputs (Level 3)
Assets and liabilities measured at fair value on a non-recurring basis
Fair value inputs, discount rate			15.50%
Real Estate Investment Properties, Net | Fair value measurement on a nonrecurring basis
Assets and liabilities measured at fair value on a non-recurring basis
Impairment losses				$ 1,400
Northern Virginia | Real Estate Investment Properties, Net | Fair value measurement on a nonrecurring basis
Assets and liabilities measured at fair value on a non-recurring basis
Impairment losses			$ 1,300
Greater Baltimore | Real Estate Investment Properties, Net | Fair value measurement on a nonrecurring basis
Assets and liabilities measured at fair value on a non-recurring basis
Impairment losses	$ 2,300
Number of properties, impairment loss recognized | Property	3

XML

Consolidated Statements of Equity - USD ($) $ in Thousands	Total	Preferred Shares	Common Shares	Additional Paid-in Capital	Cumulative Distributions in Excess of Net Income	Accumulated Other Comprehensive Income (Loss)	Noncontrolling Interests	Corporate Office Properties, L.P.	Corporate Office Properties, L.P. Common Shares	Corporate Office Properties, L.P. Accumulated Other Comprehensive Income (Loss)	Corporate Office Properties, L.P. Noncontrolling Interests	Corporate Office Properties, L.P. Limited Partner	Corporate Office Properties, L.P. Limited Partner Preferred Shares	Corporate Office Properties, L.P. General Partner	Corporate Office Properties, L.P. General Partner Preferred Shares
Balance (COPT: 87,394,512 shares and 93,255,284 shares as of December 31, 2013 and 2014, respectively) at Dec. 31, 2013	$ 1,497,249	$ 249,083	$ 874	$ 1,814,015	$ (641,868)	$ 3,480	$ 71,665	$ 1,497,249	$ 1,226,318	$ 3,605	$ 9,443		$ 8,800		$ 249,083
Balance (preferred units) at Dec. 31, 2013													352,000		9,431,667
Balance (in units/ shares) at Dec. 31, 2013	87,394,512								91,372,212
Increase (Decrease) in Shareholders' Equity
Redemption of preferred shares (in units/shares)															(2,000,000)
Redemption of preferred shares (in units/shares) (2,000,000 shares)	$ (50,000)	(50,000)		1,769	(1,769)			(50,000)							$ (50,000)
Conversion of common units to common shares (COPT: 117,149 shares and 160,160 shares for the nine months ended September 30, 2014 and 2015, respectively)	0		1	1,544			(1,545)
Costs associated with common shares issued to the public	$ (7)			(7)				(7)	$ (7)
Exercise of share options (in units/shares)	57,888								57,888
Exercise of share options (COPT: 57,888 shares and 76,474 shares for the nine months ended September 30, 2014 and 2015, respectively)	$ 1,359		0	1,359				1,359	$ 1,359
Share-based compensation issuance, net of redemptions (in units/shares)	142,182								142,182
Share-based compensation issuance, net of redemptions (COPT: 142,182 and 151,511 shares issued, net of redemptions for the nine months ended September 30, 2014 and 2015, respectively)	$ 5,249		2	5,247				5,249	$ 5,249
Redemption of vested equity awards (in units/shares)									0
Redemption of vested equity awards	(1,389)			(1,389)				(1,389)	$ (1,389)
Adjustments to noncontrolling interests resulting from changes in ownership of COPLP	0			(248)			248
Comprehensive income	35,055				35,351	(2,609)	2,313	35,055	23,916	(2,726)	983		$ 495		12,387
Dividends / Distributions to owners of common and preferred units	(84,692)				(84,692)			(88,402)	(75,520)				$ (495)		$ (12,387)
Distributions to owners of common and preferred units in COPLP	(3,710)						(3,710)
Distributions to noncontrolling interests in subsidiaries	(1,606)						(1,606)	(1,606)			(1,606)
Contributions from noncontrolling interests in subsidiaries	3			0			3	3			3
Adjustment to arrive at fair value of redeemable noncontrolling interest	$ (7)			(7)				(7)	$ (7)
Balance (in units/ shares) at Sep. 30, 2014	87,711,731								91,572,282
Balance (preferred units) at Sep. 30, 2014													352,000		7,431,667
Balance (COPT: 87,711,731 shares and 94,533,670 shares as of September 30, 2014 and 2015, respectively) at Sep. 30, 2014	$ 1,397,504	199,083	877	1,822,283	(692,978)	871	67,368	1,397,504	$ 1,179,919	879	8,823		$ 8,800		$ 199,083
Balance (COPT: 87,394,512 shares and 93,255,284 shares as of December 31, 2013 and 2014, respectively) at Dec. 31, 2014	$ 1,520,884	199,083	933	1,969,968	(717,264)	(1,297)	69,461	1,520,884	$ 1,305,219	(1,381)	9,163		$ 8,800		$ 199,083
Balance (preferred units) at Dec. 31, 2014												352,000	352,000	7,431,667	7,431,667
Balance (in units/ shares) at Dec. 31, 2014	93,255,284								97,092,835			3,837,551		93,255,284
Increase (Decrease) in Shareholders' Equity
Conversion of common units to common shares (COPT: 117,149 shares and 160,160 shares for the nine months ended September 30, 2014 and 2015, respectively)	$ 0		2	2,149			(2,151)
Issuance of common units resulting from common shares issued under at-the-market program (in units)									890,241
Issuance of common units resulting from common shares issued under at-the-market program (COPT: 890,241 shares for the nine months ended September 30, 2015)	$ 26,535		9	26,526				26,535	$ 26,535
Exercise of share options (in units/shares)	76,474								76,474
Exercise of share options (COPT: 57,888 shares and 76,474 shares for the nine months ended September 30, 2014 and 2015, respectively)	$ 2,008			2,008				2,008	$ 2,008
Share-based compensation issuance, net of redemptions (in units/shares)	151,511								151,511
Share-based compensation issuance, net of redemptions (COPT: 142,182 and 151,511 shares issued, net of redemptions for the nine months ended September 30, 2014 and 2015, respectively)	$ 5,600		1	5,599				5,600	$ 5,600
Redemption of vested equity awards (in units/shares)									0
Redemption of vested equity awards	(2,330)			(2,330)				(2,330)	$ (2,330)
Adjustments to noncontrolling interests resulting from changes in ownership of COPLP	0			(591)			591
Comprehensive income	120,044				118,936	(4,526)	5,634	120,044	112,507	(4,705)	1,090		$ 495		$ 10,657
Dividends / Distributions to owners of common and preferred units	(88,658)				(88,658)			(92,188)	(81,036)				$ (495)		$ (10,657)
Distributions to owners of common and preferred units in COPLP	(3,530)						(3,530)
Distributions to noncontrolling interests in subsidiaries	(47)						(47)	(47)			(47)
Adjustment to arrive at fair value of redeemable noncontrolling interest	$ (599)			(599)				(599)	$ (599)
Balance (in units/ shares) at Sep. 30, 2015	94,533,670								98,211,061.000			3,677,391		94,533,670
Balance (preferred units) at Sep. 30, 2015												352,000	352,000	7,431,667	7,431,667
Balance (COPT: 87,711,731 shares and 94,533,670 shares as of September 30, 2014 and 2015, respectively) at Sep. 30, 2015	$ 1,579,907	$ 199,083	$ 945	$ 2,002,730	$ (686,986)	$ (5,823)	$ 69,958	$ 1,579,907	$ 1,367,904	$ (6,086)	$ 10,206		$ 8,800		$ 199,083

XML

Debt, Net (Details 2) - USD ($) $ in Thousands	Sep. 30, 2015	Dec. 31, 2014
Carrying amount and estimated fair value of debt
Carrying Value	$ 2,121,240	$ 1,920,057
Carrying Amount
Carrying amount and estimated fair value of debt
Variable-rate debt	643,249	639,877
Carrying Value	2,121,240	1,920,057
Carrying Amount | Unsecured senior notes
Carrying amount and estimated fair value of debt
Fixed-rate debt	1,188,241	890,862
Carrying Amount | Other fixed-rate debt
Carrying amount and estimated fair value of debt
Fixed-rate debt	289,750	389,318
Total Estimated Fair Value
Carrying amount and estimated fair value of debt
Variable-rate debt	644,243	642,091
Carrying Value	2,154,561	1,900,067
Total Estimated Fair Value | Unsecured senior notes
Carrying amount and estimated fair value of debt
Fixed-rate debt	1,212,120	901,599
Total Estimated Fair Value | Other fixed-rate debt
Carrying amount and estimated fair value of debt
Fixed-rate debt	$ 298,198	$ 356,377

XML

Interest Rate Derivatives (Tables)

9 Months Ended

Sep. 30, 2015

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Schedule of key terms and fair values of interest rate swap derivatives

The following table sets forth the key terms and fair values of our interest rate swap derivatives (dollars in thousands):

							Fair Value at
Notional Amount			Fixed Rate	Floating Rate Index	Effective Date	Expiration Date	September 30, 2015			December 31, 2014
$	36,249	(1)	3.8300%	One-Month LIBOR + 2.25%	11/2/2010	11/2/2015	$	(44	)	$	(400	)
100,000			0.8055%	One-Month LIBOR	9/2/2014	9/1/2016	(396		)	(317		)
100,000			0.8100%	One-Month LIBOR	9/2/2014	9/1/2016	(401		)	(324		)
100,000			1.6730%	One-Month LIBOR	9/1/2015	8/1/2019	(2,386		)	239
100,000			1.7300%	One-Month LIBOR	9/1/2015	8/1/2019	(2,617		)	35
100,000			0.8320%	One-Month LIBOR	1/3/2012	9/1/2015	—			(407		)
100,000			0.8320%	One-Month LIBOR	1/3/2012	9/1/2015	—			(407		)
							$	(5,844	)	$	(1,581	)

(1) The notional amount of this instrument is scheduled to amortize to $36.2 million.

Schedule of fair value and balance sheet classification of interest rate derivatives

The table below sets forth the fair value of our interest rate derivatives as well as their classification on our consolidated balance sheets (in thousands):

	September 30, 2015				December 31, 2014
Derivatives	Balance Sheet Location	Fair Value			Balance Sheet Location	Fair Value
Interest rate swaps designated as cash flow hedges	Prepaid expenses and other assets	$	—		Prepaid expenses and other assets	$	274
Interest rate swaps designated as cash flow hedges	Interest rate derivatives	(5,844		)	Interest rate derivatives	(1,855		)

Schedule of effect of interest rate derivatives on consolidated statements of operations and comprehensive income

The table below presents the effect of our interest rate derivatives on our consolidated statements of operations and comprehensive income (in thousands):

	For the Three Months Ended September 30,					For the Nine Months Ended September 30,
	2015			2014		2015			2014
Amount of (loss) gain recognized in accumulated other comprehensive loss (“AOCL”) (effective portion)	$	(3,638	)	$	1,015	$	(6,720	)	$	(4,738	)
Amount of losses reclassified from AOCL into interest expense (effective portion)	915			756		2,457			2,170

XML

Information by Business Segment (Details 3) - USD ($) $ in Thousands	Sep. 30, 2015	Dec. 31, 2014	Sep. 30, 2014
Reconciliation of segment assets to total assets
Assets	$ 3,918,473	$ 3,670,257	$ 3,680,188
Segment assets
Reconciliation of segment assets to total assets
Assets	3,354,762		2,962,686
Non-operating property assets
Reconciliation of segment assets to total assets
Assets	416,540		518,951
Other assets
Reconciliation of segment assets to total assets
Assets	$ 147,171		$ 198,551

XML

Share-Based Compensation

9 Months Ended

Sep. 30, 2015

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Share-Based Compensation

Share-Based Compensation

Performance Share Units (“PSUs”)

On March 5, 2015, our Board of Trustees granted 45,656 PSUs with an aggregate grant date fair value of $1.7 million to executives.  The PSUs have a performance period beginning on January 1, 2015 and concluding on the earlier of December 31, 2017 or the date of: (1) termination by us without cause, death or disability of the executive or constructive discharge of the executive (collectively, “qualified termination”); or (2) a sale event.  The number of PSUs earned (“earned PSUs”) at the end of the performance period will be determined based on the percentile rank of COPT’s total shareholder return relative to a peer group of companies, as set forth in the following schedule:

Percentile Rank	Earned PSUs Payout %
75th or greater	200% of PSUs granted
50th or greater	100% of PSUs granted
25th	50% of PSUs granted
Below 25th	0% of PSUs granted

If the percentile rank exceeds the 25th percentile and is between two of the percentile ranks set forth in the table above, then the percentage of the earned PSUs will be interpolated between the ranges set forth in the table above to reflect any performance between the listed percentiles.  At the end of the performance period, we, in settlement of the award, will issue a number of fully-vested COPT common shares equal to the sum of:

• the number of earned PSUs in settlement of the award plan; plus

• the aggregate dividends that would have been paid with respect to the common shares issued in settlement of the earned PSUs through the date of settlement had such shares been issued on the grant date, divided by the share price on such settlement date, as defined under the terms of the agreement.

If a service period ends due to a sale event or qualified termination, the number of earned PSUs is prorated based on the portion of the service period that has elapsed.  If employment is terminated by the employee or by us for cause, all PSUs are forfeited.  PSUs do not carry voting rights.

We computed a grant date fair value of $36.76 per PSU using a Monte Carlo model, which included assumptions of, among other things, the following: baseline common share value of $29.28; expected volatility for COPT common shares of 19.9%; and a risk-free interest rate of 0.99%.  We are recognizing the grant date fair value in connection with these PSU awards over the period commencing on March 6, 2015 and ending on December 31, 2017.

With regard to the PSUs granted to our executives in prior years that were outstanding as of December 31, 2014 as described in our 2014 Annual Report on Form 10-K:

• the performance period for the PSUs granted to executives on March 1, 2012 ended on December 31, 2014. Based on COPT’s total shareholder return during the performance period relative to its peer group of companies, we issued 40,309 common shares in settlement of the PSUs on March 5, 2015; and

• we issued 15,289 common shares on March 5, 2015 to Mr. Stephen E. Riffee, our former Chief Financial Officer, upon his departure on February 3, 2015, in settlement of PSUs granted on March 1, 2013 and March 6, 2014.

Restricted Shares

During the nine months endedSeptember 30, 2015, certain employees were granted a total of 193,499 restricted common shares with an aggregate grant date fair value of $5.6 million (weighted average of $28.93 per share).  Restricted shares granted to employees vest based on increments and over periods of time set forth under the terms of the respective awards provided that the employees remain employed by us.  During the nine months endedSeptember 30, 2015, forfeiture restrictions lapsed on 163,145 previously issued common shares; these shares had a weighted average grant date fair value of $26.15 per share, and the aggregate intrinsic value of the shares on the vesting dates was $4.6 million.

Deferred Share Awards

During the nine months endedSeptember 30, 2015, nonemployee members of our Board of Trustees were granted a total of 24,056 deferred share awards with an aggregate grant date fair value of $642,000 ($26.70 per share). Deferred share awards vest on the first anniversary of the grant date, provided that the Trustee remains in his or her position. We settle deferred share awards by issuing an equivalent number of common shares upon vesting of the awards or a later date elected by the Trustee (generally upon cessation of being a Trustee). During the nine months endedSeptember 30, 2015, we issued 15,485 common shares in settlement of deferred share awards granted in 2014; these shares had a grant date fair value of $26.77 per share, and the aggregate intrinsic value of the shares on the settlement date was $413,000.

Options

During the nine months endedSeptember 30, 2015, 76,474 options to purchase common shares (“options”) were exercised.  The weighted average exercise price of these options was $26.27 per share, and the aggregate intrinsic value of the options exercised was $300,000.

XML

Redeemable Noncontrolling Interest (Tables)

9 Months Ended

Sep. 30, 2015

Noncontrolling Interest [Abstract]

Schedule of activity for redeemable noncontrolling interest

The table below sets forth the activity for a redeemable noncontrolling interest in a consolidated real estate joint venture (in thousands):

	For the Nine Months Ended September 30,
	2015			2014
Beginning balance	$	18,417		$	17,758
Distributions to noncontrolling interest, net	(1,098		)	(976		)
Net income attributable to noncontrolling interest	1,690			1,647
Adjustment to arrive at fair value of interest	599			7
Ending balance	$	19,608		$	18,436

XML

Earnings Per Share ("EPS") and Earnings Per Unit ("EPU")

9 Months Ended

Sep. 30, 2015

Earnings Per Share [Abstract]

Earnings Per Share (“EPS”) and Earnings Per Unit (“EPU”)

Earnings Per Share (“EPS”) and Earnings Per Unit (“EPU”)

COPT and Subsidiaries EPS

We present both basic and diluted EPS.  We compute basic EPS by dividing net income available to common shareholders allocable to unrestricted common shares under the two-class method by the weighted average number of unrestricted common shares outstanding during the period.  Our computation of diluted EPS is similar except that:

• the denominator is increased to include: (1) the weighted average number of potential additional common shares that would have been outstanding if securities that are convertible into COPT common shares were converted; and (2) the effect of dilutive potential common shares outstanding during the period attributable to share-based compensation using the treasury stock or if-converted methods; and

• the numerator is adjusted to add back any changes in income or loss that would result from the assumed conversion into common shares that we added to the denominator.

Summaries of the numerator and denominator for purposes of basic and diluted EPS calculations are set forth below (in thousands, except per share data):

	For the Three Months Ended September 30,						For the Nine Months Ended September 30,
	2015			2014			2015			2014
Numerator:
Income from continuing operations	$	94,279		$	13,727		$	122,105		$	28,635
Gain on sales of real estate, net	15			10,630			4,000			10,630
Preferred share dividends	(3,552		)	(3,553		)	(10,657		)	(12,387		)
Issuance costs associated with redeemed preferred shares	—			—			—			(1,769		)
Income from continuing operations attributable to noncontrolling interests	(4,494		)	(1,820		)	(7,322		)	(3,923		)
Income from continuing operations attributable to share-based compensation awards	(369		)	(103		)	(475		)	(332		)
Numerator for basic EPS from continuing operations attributable to COPT common shareholders	85,879			18,881			107,651			20,854
Convertible preferred shares	372			—			—			—
Dilutive effect of common units in COPLP on diluted EPS from continuing operations	—			—			4,225			—
Numerator for diluted EPS from continuing operations attributable to COPT common shareholders	$	86,251		$	18,881		$	111,876		$	20,854
Numerator for basic EPS from continuing operations attributable to COPT common shareholders	$	85,879		$	18,881		$	107,651		$	20,854
Discontinued operations	—			191			156			4
Discontinued operations attributable to noncontrolling interests	—			(8		)	(3		)	5
Numerator for basic EPS on net income attributable to COPT common shareholders	85,879			19,064			107,804			20,863
Convertible preferred shares	372			—			—			—
Dilutive effect of common units in COPLP	—			—			4,231			—
Numerator for diluted EPS on net income attributable to COPT common shareholders	$	86,251		$	19,064		$	112,035		$	20,863
Denominator (all weighted averages):
Denominator for basic EPS (common shares)	94,153			87,290			93,830			87,196
Convertible preferred shares	434			—			—			—
Dilutive effect of common units	—			—			3,697			—
Dilutive effect of share-based compensation awards	21			195			82			169
Denominator for diluted EPS (common shares)	94,608			87,485			97,609			87,365
Basic EPS:
Income from continuing operations attributable to COPT common shareholders	$	0.91		$	0.22		$	1.15		$	0.24
Discontinued operations attributable to COPT common shareholders	0.00			0.00			0.00			0.00
Net income attributable to COPT common shareholders	$	0.91		$	0.22		$	1.15		$	0.24
Diluted EPS:
Income from continuing operations attributable to COPT common shareholders	$	0.91		$	0.22		$	1.15		$	0.24
Discontinued operations attributable to COPT common shareholders	0.00			0.00			0.00			0.00
Net income attributable to COPT common shareholders	$	0.91		$	0.22		$	1.15		$	0.24

Our diluted EPS computations do not include the effects of the following securities since the conversions of such securities would increase diluted EPS for the respective periods (in thousands):

	Weighted Average Shares Excluded from Denominator
	For the Three Months Ended September 30,		For the Nine Months Ended September 30,
	2015	2014	2015	2014
Conversion of common units	3,679	3,876	—	3,915
Conversion of Series I Preferred Units	176	176	176	176
Conversion of Series K Preferred Shares	—	434	434	434

The following share-based compensation securities were excluded from the computation of diluted EPS because their effects were antidilutive:

• weighted average restricted shares and deferred share awards for the three months ended September 30, 2015 and 2014 of 411,000 and 401,000, respectively, and for the nine months ended September 30, 2015 and 2014 of 412,000 and 404,000, respectively; and

• weighted average options for the three months ended September 30, 2015 and 2014 of 440,000 and 490,000, respectively, and for the nine months ended September 30, 2015 and 2014 of 480,000 and 495,000, respectively.

As discussed in Note 9, we had outstanding senior notes, which we redeemed in April 2015, with an exchange settlement feature, but such notes did not affect our diluted EPS reported above since the weighted average closing price of COPT’s common shares during each of the periods was less than the exchange prices per common share applicable for such periods.

COPLP and Subsidiaries EPU

We present both basic and diluted EPU.  We compute basic EPU by dividing net income available to common unitholders allocable to unrestricted common units under the two-class method by the weighted average number of unrestricted common units outstanding during the period.  Our computation of diluted EPU is similar except that:

• the denominator is increased to include: (1) the weighted average number of potential additional common units that would have been outstanding if securities that are convertible into our common units were converted; and (2) the effect of dilutive potential common units outstanding during the period attributable to share-based compensation using the treasury stock or if-converted methods; and

• the numerator is adjusted to add back any changes in income or loss that would result from the assumed conversion into common units that we added to the denominator.

Summaries of the numerator and denominator for purposes of basic and diluted EPU calculations are set forth below (in thousands, except per unit data):

	For the Three Months Ended September 30,						For the Nine Months Ended September 30,
	2015			2014			2015			2014
Numerator:
Income from continuing operations	$	94,279		$	13,727		$	122,105		$	28,635
Gain on sales of real estate, net	15			10,630			4,000			10,630
Preferred unit distributions	(3,717		)	(3,718		)	(11,152		)	(12,882		)
Issuance costs associated with redeemed preferred units	—			—			—			(1,769		)
Income from continuing operations attributable to noncontrolling interests	(972		)	(897		)	(2,605		)	(2,476		)
Income from continuing operations attributable to share-based compensation awards	(369		)	(103		)	(475		)	(332		)
Numerator for basic EPU from continuing operations attributable to COPLP common unitholders	89,236			19,639			111,873			21,806
Convertible preferred units	372			—			—			—
Numerator for diluted EPU from continuing operations attributable to COPLP common unitholders	$	89,608		$	19,639		$	111,873		$	21,806
Numerator for basic EPU from continuing operations attributable to COPLP common unitholders	$	89,236		$	19,639		$	111,873		$	21,806
Discontinued operations	—			191			156			4
Discontinued operations attributable to noncontrolling interests	—			—			3			5
Numerator for basic EPU on net income attributable to COPLP common unitholders	89,236			19,830			112,032			21,815
Convertible preferred units	372			—			—			—
Numerator for diluted EPU on net income attributable to COPLP common unitholders	$	89,608		$	19,830		$	112,032		$	21,815
Denominator (all weighted averages):
Denominator for basic EPU (common units)	97,832			91,166			97,527			91,111
Convertible preferred shares	434			—			—			—
Dilutive effect of share-based compensation awards	21			195			82			169
Denominator for basic and diluted EPU (common units)	98,287			91,361			97,609			91,280
Basic EPU:
Income from continuing operations attributable to COPLP common unitholders	$	0.91		$	0.22		$	1.15		$	0.24
Discontinued operations attributable to COPLP common unitholders	0.00			0.00			0.00			0.00
Net income attributable to COPLP common unitholders	$	0.91		$	0.22		$	1.15		$	0.24
Diluted EPU:
Income from continuing operations attributable to COPLP common unitholders	$	0.91		$	0.22		$	1.15		$	0.24
Discontinued operations attributable to COPLP common unitholders	0.00			0.00			0.00			0.00
Net income attributable to COPLP common unitholders	$	0.91		$	0.22		$	1.15		$	0.24

Our diluted EPU computations do not include the effects of the following securities since the conversions of such securities would increase diluted EPU for the respective periods (in thousands):

	Weighted Average Units Excluded from Denominator
	For the Three Months Ended September 30,		For the Nine Months Ended September 30,
	2015	2014	2015	2014
Conversion of Series I preferred units	176	176	176	176
Conversion of Series K preferred units	—	434	434	434

The following share-based compensation securities were excluded from the computation of diluted EPU because their effects were antidilutive:

• weighted average restricted units and deferred share awards for the three months ended September 30, 2015 and 2014 of 411,000 and 401,000, respectively, and for the nine months ended September 30, 2015 and 2014 of 412,000 and 404,000, respectively; and

• weighted average options for the three months ended September 30, 2015 and 2014 of 440,000 and 490,000, respectively, and for the nine months ended September 30, 2015 and 2014 of 480,000 and 495,000, respectively.

As discussed in Note 9, we had outstanding senior notes, which we redeemed in April 2015, with an exchange settlement feature, but such notes did not affect our diluted EPU reported above since the weighted average closing price of COPT’s common shares during each of the periods was less than the exchange prices per common share applicable for such periods.

XML

Earnings Per Share ("EPS") and Earnings Per Unit ("EPU") (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands		3 Months Ended		9 Months Ended
		Sep. 30, 2015	Sep. 30, 2014	Sep. 30, 2015	Sep. 30, 2014
Numerator:
Income from continuing operations		$ 94,279	$ 13,727	$ 122,105	$ 28,635
Gain on sales of real estate, net		15	10,630	4,000	10,630
Preferred share/unit dividends/distributions		(3,552)	(3,553)	(10,657)	(12,387)
Issuance costs associated with redeemed preferred shares/unit		0	0	0	(1,769)
Income from continuing operations attributable to noncontrolling interests		(4,494)	(1,820)	(7,322)	(3,923)
Income from continuing operations attributable to share-based compensation awards		(369)	(103)	(475)	(332)
Numerator for basic EPS from continuing operations attributable to COPT common shareholders		85,879	18,881	107,651	20,854
Convertible preferred shares/units		372	0	0	0
Dilutive effect of common shares/units in COPT on diluted EPS from continuing operations		0	0	4,225	0
Numerator for diluted EPS from continuing operations attributable to COPT common shareholders		86,251	18,881	111,876	20,854
Discontinued operations		0	191	156	4
Discontinued operations attributable to noncontrolling interests		0	(8)	(3)	5
Numerator for basic EPS on net income attributable to COPT common shareholders		85,879	19,064	107,804	20,863
Dilutive effect of common shares/units in COPT		0		4,231	0
Numerator for diluted EPS on net income attributable to COPT common shareholders		$ 86,251	$ 19,064	$ 112,035	$ 20,863
Denominator (all weighted averages):
Denominator for basic EPS (common shares)		94,153	87,290	93,830	87,196
Convertible preferred shares (shares)		434	0	0	0
Dilutive effect of common units (shares)		0		3,697	0
Dilutive effect of share-based compensation awards (shares)		21	195	82	169
Denominator for diluted EPS (common shares)		94,608	87,485	97,609	87,365
Basic EPS:
Income from continuing operations (in dollars per share/unit)	[1]	$ 0.91	$ 0.22	$ 1.15	$ 0.24
Discontinued operations (in dollars per share/unit)	[1]	0.00	0.00	0.00	0.00
Net income attributable to COPT common shareholders (in dollars per share/unit)	[1]	0.91	0.22	1.15	0.24
Diluted EPS:
Income from continuing operations (in dollars per share/unit)	[1]	0.91	0.22	1.15	0.24
Discontinued operations (in dollars per share/unit)	[1]	0.00	0.00	0.00	0.00
Net income attributable to COPT common shareholders (in dollars per share/unit)	[1]	$ 0.91	$ 0.22	$ 1.15	$ 0.24
Corporate Office Properties, L.P.
Numerator:
Income from continuing operations		$ 94,279	$ 13,727	$ 122,105	$ 28,635
Gain on sales of real estate, net		15	10,630	4,000	10,630
Preferred share/unit dividends/distributions		(3,717)	(3,718)	(11,152)	(12,882)
Issuance costs associated with redeemed preferred shares/unit		0	0	0	(1,769)
Income from continuing operations attributable to noncontrolling interests		(972)	(897)	(2,605)	(2,476)
Income from continuing operations attributable to share-based compensation awards		(369)	(103)	(475)	(332)
Numerator for basic EPS from continuing operations attributable to COPT common shareholders		89,236	19,639	111,873	21,806
Convertible preferred shares/units		372	0	0	0
Numerator for diluted EPS from continuing operations attributable to COPT common shareholders		89,608	19,639	111,873	21,806
Discontinued operations		0	191	156	4
Discontinued operations attributable to noncontrolling interests		0	0	3	5
Numerator for basic EPS on net income attributable to COPT common shareholders		89,236	19,830	112,032	21,815
Numerator for diluted EPS on net income attributable to COPT common shareholders		$ 89,608	$ 19,830	$ 112,032	$ 21,815
Denominator (all weighted averages):
Denominator for basic EPS (common shares)		97,832	91,166	97,527	91,111
Convertible preferred shares (shares)		434	0	0	0
Dilutive effect of share-based compensation awards (shares)		21	195	82	169
Denominator for diluted EPS (common shares)		98,287	91,361	97,609	91,280
Basic EPS:
Income from continuing operations (in dollars per share/unit)	[2]	$ 0.91	$ 0.22	$ 1.15	$ 0.24
Discontinued operations (in dollars per share/unit)	[2]	0.00	0.00	0.00	0.00
Net income attributable to COPT common shareholders (in dollars per share/unit)	[2]	0.91	0.22	1.15	0.24
Diluted EPS:
Income from continuing operations (in dollars per share/unit)	[2]	0.91	0.22	1.15	0.24
Discontinued operations (in dollars per share/unit)	[2]	0.00	0.00	0.00	0.00
Net income attributable to COPT common shareholders (in dollars per share/unit)	[2]	$ 0.91	$ 0.22	$ 1.15	$ 0.24

[1] Basic and diluted earnings per common share are calculated based on amounts attributable to common shareholders of Corporate Office Properties Trust.

[2] Basic and diluted earnings per common unit are calculated based on amounts attributable to common unitholders of Corporate Office Properties, L.P.

XML

Consolidated Statements of Equity (Parenthetical) - shares	9 Months Ended
	Sep. 30, 2015	Sep. 30, 2014	Dec. 31, 2014	Dec. 31, 2013
Balance (in units/ shares)	94,533,670	87,711,731	93,255,284	87,394,512
Conversion of common units to common shares (in units/ shares)	160,160	117,149
Exercise of share options (in units/shares)	76,474	57,888
Share-based compensation issuance, net of redemptions (in units/shares)	151,511	142,182
Common Shares
Issuance of common units resulting from common shares issued under at-the-market program (in units)	890,241
Preferred Shares
Redemption of preferred shares (in units/shares)		2,000,000

XML

Consolidated Balance Sheets (Parenthetical) - USD ($) $ in Thousands	Sep. 30, 2015	Dec. 31, 2014
Allowance for doubtful accounts - AR	$ 2,010	$ 717
Allowance - Deferred rent receivable	$ 1,816	$ 1,418
Preferred Shares of beneficial interest, par value (in dollars per share)	$ 0.01	$ 0.01
Preferred Shares of beneficial interest, shares authorized	25,000,000	25,000,000
Preferred Shares of beneficial interest, shares issued	7,431,667	7,431,667
Preferred Shares of beneficial interest, shares outstanding	7,431,667	7,431,667
Common Shares of beneficial interest, par value (in dollars per share)	$ 0.01	$ 0.01
Common Shares of beneficial interest, shares authorized	125,000,000	125,000,000
Common Stock, Shares, Issued	94,533,670	93,255,284
Common Shares of beneficial interest, shares outstanding	94,533,670	93,255,284
Corporate Office Properties, L.P.
Allowance for doubtful accounts - AR	$ 2,010	$ 717
Allowance - Deferred rent receivable	$ 1,816	$ 1,418
Corporate Office Properties, L.P. | General Partner
Common Shares of beneficial interest, shares outstanding	94,533,670	93,255,284
Preferred Units, Outstanding	7,431,667	7,431,667
Corporate Office Properties, L.P. | Limited Partner
Common Shares of beneficial interest, shares outstanding	3,677,391	3,837,551
Preferred Units, Outstanding	352,000	352,000

XML

Debt, Net

9 Months Ended

Sep. 30, 2015

Debt Disclosure [Abstract]

Debt, Net

Debt, Net

Our debt consisted of the following (dollars in thousands):

	Maximum
	Availability at		Carrying Value at					Scheduled Maturity
	September 30, 2015		September 30, 2015		December 31, 2014		Stated Interest Rates as of	as of
							September 30, 2015	September 30, 2015
Mortgage and Other Secured Loans:
Fixed rate mortgage loans (1)			$	288,217	$	387,139	3.96% - 7.87% (2)	2016-2024
Variable rate secured loan			36,249		36,877		LIBOR + 2.25% (3)	November 2015
Total mortgage and other secured loans			324,466		424,016
Revolving Credit Facility	$	800,000	87,000		83,000		LIBOR + 0.875% to 1.60% (4)	May 2019
Term Loan Facilities	(5)		520,000		520,000		LIBOR + 0.90% to 2.60% (6)	2016-2020
Unsecured Senior Notes
3.600% Senior Notes (7)			347,691		347,496		3.60%	May 2023
5.250% Senior Notes (8)			246,074		245,797		5.25%	February 2024
3.700% Senior Notes (9)			297,830		297,569		3.70%	June 2021
5.000% Senior Note (10)			296,646		—		5.00%	July 2025
Unsecured notes payable			1,533		1,607		0% (11)	2026
4.25% Exchangeable Senior Notes (12)			—		572		N/A	(12)
Total debt, net			$	2,121,240	$	1,920,057

(1)   Several of the fixed rate mortgages carry interest rates that were above or below market rates upon assumption and therefore were recorded at their fair value based on applicable effective interest rates.  The carrying values of these loans reflect net unamortized premiums totaling $24,000 as of September 30, 2015 and $42,000 as of December 31, 2014. Please refer to Note 4 for disclosure pertaining to the removal of a $150.0 million nonrecourse mortgage loan from our balance sheet on August 28, 2015.

(2) The weighted average interest rate on our fixed rate mortgage loans was 6.07% as of September 30, 2015.

(3)  The interest rate on the loan outstanding was 2.45% as of September 30, 2015.

(4) The weighted average interest rate on the Revolving Credit Facility was 1.48% as of September 30, 2015.

(5)   We have the ability to borrow an additional $380.0 million in the aggregate under these term loan facilities, provided that there is no default under the facilities and subject to the approval of the lenders.

(6)  The weighted average interest rate on these loans was 1.78% as of September 30, 2015.

(7) The carrying value of these notes included a principal amount of $350.0 millionand an unamortized discount totaling $2.3 millionas of September 30, 2015 and $2.5 million as of December 31, 2014.  The effective interest rate under the notes, including amortization of the issuance costs, was 3.70%. 

(8) The carrying value of these notes included a principal amount of $250.0 millionand an unamortized discount totaling $3.9 millionas of September 30, 2015 and $4.2 million as of December 31, 2014.  The effective interest rate under the notes, including amortization of the issuance costs, was 5.49%. 

(9) The carrying value of these notes included a principal amount of $300.0 millionand an unamortized discount totaling $2.2 millionas of September 30, 2015 and $2.4 million as of December 31, 2014.  The effective interest rate under the notes, including amortization of the issuance costs, was 3.85%. 

(10) Refer to the paragraph below for disclosure pertaining to these notes.

(11)  These notes carry interest rates that were below market rates upon assumption and therefore were recorded at their fair value based on applicable effective interest rates.  The carrying value of these notes reflects an unamortized discount totaling $578,000 as of September 30, 2015 and $654,000 as of December 31, 2014.

(12) On April 20, 2015, we redeemed these notes at 100% of their principal amount.

All debt is owed by the Operating Partnership. While COPT is not directly obligated by any debt, it has guaranteed the Operating Partnership’s Revolving Credit Facility, Term Loan Facilities and Unsecured Senior Notes.

On May 6, 2015, we entered into a credit agreement with a group of lenders for which KeyBanc Capital Markets and J.P. Morgan Securities LLC acted as joint lead arrangers and joint book runners, KeyBank National Association acted as administrative agent and JPMorgan Chase Bank, N.A. acted as syndication agent (the “Consolidated Credit Agreement”) to amend, restate and consolidate the terms of our Revolving Credit Facility and one of our term loan facilities. In addition to consolidating the terms of these loan facilities, the Consolidated Credit Agreement included the following provisions:

For the Revolving Credit Facility:

• an extension of the maturity date from July 14, 2017 to May 6, 2019, with the ability for us to further extend such maturity by twosix-month periods at our option, provided that there is no default under the facility and we pay an extension fee based on the total availability of the facility for each extension;

• changes to the interest terms of the facility such that the variable interest rate is based on LIBOR (customarily the 30-day rate) plus 0.875% to 1.600%, as determined by the credit ratings assigned to COPLP by Standard & Poor’s Ratings Services, Moody’s Investors Service, Inc. or Fitch Ratings Ltd. (collectively, the “Ratings Agencies”);

• changes to the quarterly fee carried by the facility. Such fee is based on the average daily amount of the lenders’ aggregate commitment multiplied by a per annum rate of 0.125% to 0.300%, as determined by the credit ratings assigned to COPLP by the Ratings Agencies; and

• certain changes to the financial covenants of the facility.

For the term loan facility:

• an increase in the loan amount from $250.0 million to $300.0 million, with a right for us to borrow up to an additional $200.0 million during the term for an aggregate maximum loan of $500.0 million, subject to certain conditions. We used the proceeds from the $50.0 million increase in the facility to repay a portion of another existing unsecured term loan;

• an extension of the maturity date of the loan from February 14, 2017 to May 6, 2020;

• changes to the interest terms of the facility such that the variable interest rate is based on LIBOR (customarily the 30-day rate) plus 0.900% to 1.850%, as determined by the credit ratings assigned to COPLP by the Ratings Agencies; and

• certain changes to the financial covenants of the facility.

On June 29, 2015, we issued a $300.0 million aggregate principal amount of 5.00% Senior Notes at an initial offering price of 99.510% of their face value. The proceeds from this issuance, after deducting underwriting discounts, but before other offering expenses, were $296.6 million. The notes mature on July 1, 2025. We may redeem the notes, in whole at any time or in part from time to time, at our option, at a redemption price equal to the greater of (1) the aggregate principal amount of the notes being redeemed and (2) the sum of the present values of the remaining scheduled payments of principal and interest thereon (not including any portion of such payments of interest accrued as of the date of redemption) discounted to its present value, on a semi-annual basis at an adjusted treasury rate plus 45 basis points, plus accrued and unpaid interest thereon to the date of redemption. The notes are unconditionally guaranteed by COPT. However, if this redemption occurs on or after three months prior to the maturity date, the redemption price will be equal to 100% of the principal amount of the notes being redeemed, plus accrued and unpaid interest thereon to, but not including, the redemption date. The carrying value of these notes reflects an unamortized discount totaling $3.4 million at September 30, 2015. The effective interest rate under the notes, including amortization of the issuance costs, was 5.15%.

We capitalized interest costs of $1.5 million in the three months ended September 30, 2015, $1.3 million in the three months ended September 30, 2014, $5.6 million in the nine months ended September 30, 2015 and $4.3 million in the nine months ended September 30, 2014.

The following table sets forth information pertaining to the fair value of our debt (in thousands): 

	September 30, 2015				December 31, 2014
	Carrying		Estimated		Carrying		Estimated
	Amount		Fair Value		Amount		Fair Value
Fixed-rate debt
Unsecured Senior Notes	$	1,188,241	$	1,212,120	$	890,862	$	901,599
Other fixed-rate debt	289,750		298,198		389,318		356,377
Variable-rate debt	643,249		644,243		639,877		642,091
	$	2,121,240	$	2,154,561	$	1,920,057	$	1,900,067

XML

Document and Entity Information - shares	9 Months Ended
	Sep. 30, 2015	Oct. 16, 2015
Entity Information [Line Items]
Entity Registrant Name	CORPORATE OFFICE PROPERTIES TRUST
Entity Central Index Key	0000860546
Document Type	10-Q
Document Period End Date	Sep. 30, 2015
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Entity Filer Category	Large Accelerated Filer
Entity Common Stock, Shares Outstanding		94,533,250
Document Fiscal Year Focus	2015
Document Fiscal Period Focus	Q3
Corporate Office Properties, L.P.
Entity Information [Line Items]
Entity Registrant Name	CORPORATE OFFICE PROPERTIES, L.P.
Entity Central Index Key	0001577966
Document Type	10-Q
Document Period End Date	Sep. 30, 2015
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Entity Filer Category	Non-accelerated Filer
Document Fiscal Year Focus	2015
Document Fiscal Period Focus	Q3

XML

Interest Rate Derivatives

9 Months Ended

Sep. 30, 2015

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Interest Rate Derivatives

Interest Rate Derivatives

The following table sets forth the key terms and fair values of our interest rate swap derivatives (dollars in thousands):

							Fair Value at
Notional Amount			Fixed Rate	Floating Rate Index	Effective Date	Expiration Date	September 30, 2015			December 31, 2014
$	36,249	(1)	3.8300%	One-Month LIBOR + 2.25%	11/2/2010	11/2/2015	$	(44	)	$	(400	)
100,000			0.8055%	One-Month LIBOR	9/2/2014	9/1/2016	(396		)	(317		)
100,000			0.8100%	One-Month LIBOR	9/2/2014	9/1/2016	(401		)	(324		)
100,000			1.6730%	One-Month LIBOR	9/1/2015	8/1/2019	(2,386		)	239
100,000			1.7300%	One-Month LIBOR	9/1/2015	8/1/2019	(2,617		)	35
100,000			0.8320%	One-Month LIBOR	1/3/2012	9/1/2015	—			(407		)
100,000			0.8320%	One-Month LIBOR	1/3/2012	9/1/2015	—			(407		)
							$	(5,844	)	$	(1,581	)

(1) The notional amount of this instrument is scheduled to amortize to $36.2 million.

Each of the one-month LIBOR interest rate swaps set forth in the table above was designated as a cash flow hedge of interest rate risk.

The table below sets forth the fair value of our interest rate derivatives as well as their classification on our consolidated balance sheets (in thousands):

	September 30, 2015				December 31, 2014
Derivatives	Balance Sheet Location	Fair Value			Balance Sheet Location	Fair Value
Interest rate swaps designated as cash flow hedges	Prepaid expenses and other assets	$	—		Prepaid expenses and other assets	$	274
Interest rate swaps designated as cash flow hedges	Interest rate derivatives	(5,844		)	Interest rate derivatives	(1,855		)

The table below presents the effect of our interest rate derivatives on our consolidated statements of operations and comprehensive income (in thousands):

	For the Three Months Ended September 30,					For the Nine Months Ended September 30,
	2015			2014		2015			2014
Amount of (loss) gain recognized in accumulated other comprehensive loss (“AOCL”) (effective portion)	$	(3,638	)	$	1,015	$	(6,720	)	$	(4,738	)
Amount of losses reclassified from AOCL into interest expense (effective portion)	915			756		2,457			2,170

Over the next 12 months, we estimate that approximately $3.5 million of losses will be reclassified from AOCL as an increase to interest expense.

We have agreements with each of our interest rate derivative counterparties that contain provisions under which, if we default or are capable of being declared in default on defined levels of our indebtedness, we could also be declared in default on our derivative obligations.  These agreements also incorporate the loan covenant provisions of our indebtedness with a lender affiliate of the derivative counterparties.  Failure to comply with the loan covenant provisions could result in our being declared in default on any derivative instrument obligations covered by the agreements.  As of September 30, 2015, the fair value of interest rate derivatives in a liability position related to these agreements was $5.9 million, excluding the effects of accrued interest and credit valuation adjustments. As of September 30, 2015, we had not posted any collateral related to these agreements.  We are not in default with any of these provisions.  If we breached any of these provisions, we could be required to settle our obligations under the agreements at their termination value of $6.3 million.

XML

Consolidated Statements of Operations - USD ($) $ in Thousands		3 Months Ended		9 Months Ended
		Sep. 30, 2015	Sep. 30, 2014	Sep. 30, 2015	Sep. 30, 2014
Revenues
Rental revenue		$ 109,080	$ 96,207	$ 312,826	$ 288,574
Tenant recoveries and other real estate operations revenue		24,606	22,069	71,761	70,538
Construction contract and other service revenues		17,058	34,739	97,554	80,390
Total revenues		150,744	153,015	482,141	439,502
Expenses
Property operating expenses		48,897	43,056	145,996	136,600
Depreciation and amortization associated with real estate operations		38,403	30,237	103,788	104,728
Construction contract and other service expenses		16,132	33,593	94,923	75,353
Impairment losses		2,307	66	3,545	1,368
General, administrative and leasing expenses		7,439	7,211	22,864	22,882
Business development expenses and land carry costs		5,573	1,430	10,986	4,107
Total operating expenses		118,751	115,593	382,102	345,038
Operating income		31,993	37,422	100,039	94,464
Interest expense		(24,121)	(24,802)	(66,727)	(69,107)
Interest and other income		692	1,191	3,217	3,775
Gain (loss) on early extinguishment of debt		85,745	(176)	85,677	(446)
Income from continuing operations before equity in income of unconsolidated entities and income taxes		94,309	13,635	122,206	28,686
Equity in income of unconsolidated entities		18	193	52	206
Income tax expense		(48)	(101)	(153)	(257)
Income from continuing operations		94,279	13,727	122,105	28,635
Discontinued operations		0	191	156	4
Income before gain on sales of real estate		94,279	13,918	122,261	28,639
Gain on sales of real estate		15	10,630	4,000	10,630
Net income		94,294	24,548	126,261	39,269
Net income attributable to noncontrolling interests:
Common units in COPLP		(3,357)	(768)	(4,231)	(942)
Preferred units in COPLP		(165)	(165)	(495)	(495)
Other consolidated entities		(972)	(895)	(2,599)	(2,481)
Net income attributable to COPT		89,800	22,720	118,936	35,351
Preferred share/unit dividends/distributions		(3,552)	(3,553)	(10,657)	(12,387)
Issuance costs associated with redeemed preferred shares/unit		0	0	0	(1,769)
Net income attributable to COPT common shareholders		86,248	19,167	108,279	21,195
Net income attributable to COPT:
Income from continuing operations		89,800	22,537	118,783	35,342
Discontinued operations, net		0	183	153	9
Net income attributable to COPT		$ 89,800	$ 22,720	$ 118,936	$ 35,351
Basic earnings per common share
Income from continuing operations (in dollars per share/unit)	[1]	$ 0.91	$ 0.22	$ 1.15	$ 0.24
Discontinued operations (in dollars per share/unit)	[1]	0.00	0.00	0.00	0.00
Net income attributable to COPT common shareholders (in dollars per share/unit)	[1]	0.91	0.22	1.15	0.24
Diluted earnings per common share
Income from continuing operations (in dollars per share/unit)	[1]	0.91	0.22	1.15	0.24
Discontinued operations (in dollars per share/unit)	[1]	0.00	0.00	0.00	0.00
Net income attributable to COPT common shareholders (in dollars per share/unit)	[1]	0.91	0.22	1.15	0.24
Dividends declared per common share/unit		$ 0.2750	$ 0.2750	$ 0.825	$ 0.825
Corporate Office Properties, L.P.
Revenues
Rental revenue		$ 109,080	$ 96,207	$ 312,826	$ 288,574
Tenant recoveries and other real estate operations revenue		24,606	22,069	71,761	70,538
Construction contract and other service revenues		17,058	34,739	97,554	80,390
Total revenues		150,744	153,015	482,141	439,502
Expenses
Property operating expenses		48,897	43,056	145,996	136,600
Depreciation and amortization associated with real estate operations		38,403	30,237	103,788	104,728
Construction contract and other service expenses		16,132	33,593	94,923	75,353
Impairment losses		2,307	66	3,545	1,368
General, administrative and leasing expenses		7,439	7,211	22,864	22,882
Business development expenses and land carry costs		5,573	1,430	10,986	4,107
Total operating expenses		118,751	115,593	382,102	345,038
Operating income		31,993	37,422	100,039	94,464
Interest expense		(24,121)	(24,802)	(66,727)	(69,107)
Interest and other income		692	1,191	3,217	3,775
Gain (loss) on early extinguishment of debt		85,745	(176)	85,677	(446)
Income from continuing operations before equity in income of unconsolidated entities and income taxes		94,309	13,635	122,206	28,686
Equity in income of unconsolidated entities		18	193	52	206
Income tax expense		(48)	(101)	(153)	(257)
Income from continuing operations		94,279	13,727	122,105	28,635
Discontinued operations		0	191	156	4
Income before gain on sales of real estate		94,279	13,918	122,261	28,639
Gain on sales of real estate		15	10,630	4,000	10,630
Net income		94,294	24,548	126,261	39,269
Net income attributable to noncontrolling interests:
Net income attributable to noncontrolling interests in consolidated entities		(972)	(897)	(2,602)	(2,471)
Net income attributable to COPT		93,322	23,651	123,659	36,798
Preferred share/unit dividends/distributions		(3,717)	(3,718)	(11,152)	(12,882)
Issuance costs associated with redeemed preferred shares/unit		0	0	0	(1,769)
Net income attributable to COPT common shareholders		89,605	19,933	112,507	22,147
Net income attributable to COPT:
Income from continuing operations		93,322	23,460	123,500	36,789
Discontinued operations, net		0	191	159	9
Net income attributable to COPT		$ 93,322	$ 23,651	$ 123,659	$ 36,798
Basic earnings per common share
Income from continuing operations (in dollars per share/unit)	[2]	$ 0.91	$ 0.22	$ 1.15	$ 0.24
Discontinued operations (in dollars per share/unit)	[2]	0.00	0.00	0.00	0.00
Net income attributable to COPT common shareholders (in dollars per share/unit)	[2]	0.91	0.22	1.15	0.24
Diluted earnings per common share
Income from continuing operations (in dollars per share/unit)	[2]	0.91	0.22	1.15	0.24
Discontinued operations (in dollars per share/unit)	[2]	0.00	0.00	0.00	0.00
Net income attributable to COPT common shareholders (in dollars per share/unit)	[2]	0.91	0.22	1.15	0.24
Dividends declared per common share/unit		$ 0.275	$ 0.275	$ 0.825	$ 0.825

[1] Basic and diluted earnings per common share are calculated based on amounts attributable to common shareholders of Corporate Office Properties Trust.

[2] Basic and diluted earnings per common unit are calculated based on amounts attributable to common unitholders of Corporate Office Properties, L.P.

XML

Properties, Net

9 Months Ended

Sep. 30, 2015

Real Estate [Abstract]

Properties, Net

Properties, Net

Operating properties, net consisted of the following (in thousands): 

	September 30, 2015			December 31, 2014
Land	$	466,701		$	439,355
Buildings and improvements	3,141,889			3,015,216
Less: Accumulated depreciation	(675,747		)	(703,083		)
Operating properties, net	$	2,932,843		$	2,751,488

During the nine months ended September 30, 2014, we recognized $12.9 million in additional depreciation expense resulting from our revision of the useful life of a property in Greater Philadelphia, Pennsylvania (“Greater Philadelphia”) that was removed from service for redevelopment.

Projects in development or held for future development consisted of the following (in thousands):

	September 30, 2015		December 31, 2014
Land	$	207,748	$	214,977
Development in progress, excluding land	207,009		330,449
Projects in development or held for future development	$	414,757	$	545,426

As of September 30, 2015, we had 18 operating properties in Greater Baltimore and one in Northern Virginia classified as held for sale. The table below sets forth the components of assets held for sale on our consolidated balance sheet for these properties (in thousands):

	September 30, 2015
Properties, net	$	142,817
Deferred rent receivable	3,998
Intangible assets on real estate acquisitions, net	799
Deferred leasing costs, net	2,053
Lease incentives, net	905
Assets held for sale, net	$	150,572

As of December 31, 2014, we had two land parcels in the Greater Baltimore region classified as held for sale with aggregate carrying amounts of $14.3 million that were sold during the nine months ended September 30, 2015.

2015 Acquisitions

In the nine months ended September 30, 2015, we acquired the following operating properties:

• 250 W. Pratt Street, a 367,000 square foot office property in Baltimore, Maryland that was 96.2% leased, for $61.9 million on March 19, 2015;

• 2600 Park Tower Drive, a 237,000 square foot office property in Vienna, Virginia (in the Northern Virginia region) that was 100% leased, for $80.5 million on April 15, 2015; and

• 100 Light Street, a 558,000 square foot office property in Baltimore, Maryland that was 93.5% leased, and its structured parking garage, 30 Light Street, for $121.2 million on August 7, 2015. In connection with that acquisition, we assumed a $55.0 million mortgage loan with a fair value at assumption of $55.5 million.

The table below sets forth the allocation of the aggregate acquisition costs of these properties (in thousands):

Land, operating properties	$	55,076
Building and improvements	139,520
Intangible assets on real estate acquisitions	75,846
Total assets	270,442
Below-market leases	(6,820		)
Total acquisition cost	$	263,622

Intangible assets recorded in connection with these acquisitions included the following (dollars in thousands):

			Weighted Average Amortization Period (in Years)
Tenant relationship value	$	31,208	12
In-place lease value	35,231		7
Above-market leases	6,720		4
Below-market cost arrangements	2,687		40
	$	75,846	10

These properties contributed revenues of $6.9 million for the three months ended September 30, 2015 and $11.2 million for the nine months ended September 30, 2015, and contributed net income from continuing operations of $487,000 for the three months ended September 30, 2015 and $697,000 for the nine months ended September 30, 2015. We expensed operating property acquisition costs of $2.7 million during the three months ended September 30, 2015 and $4.1 million during the nine months endedSeptember 30, 2015 that are included in business development expenses and land carry costs on our consolidated statements of operations.

We accounted for these acquisitions as business combinations. We included the results of operations for the acquisitions in our consolidated statements of operations from their respective purchase dates through September 30, 2015. The following table presents pro forma information for COPT and subsidiaries as if these acquisitions had occurred on January 1, 2014. This pro forma information also includes adjustments to reclassify the operating property acquisition costs disclosed above from the 2015 periods in which they were incurred to the nine months ended September 30, 2014. The pro forma financial information was prepared for comparative purposes only and is not necessarily indicative of what would have occurred had these acquisitions been made at that time or of results which may occur in the future (in thousands, except per shares amounts).

	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
	2015		2014		2015		2014
	(Unaudited)				(Unaudited)
Pro forma total revenues	$	152,736	$	162,085	$	498,657	$	467,224
Pro forma net income attributable to COPT common shareholders	$	88,836	$	19,683	$	112,941	$	19,266
Pro forma EPS:
Basic	$	0.94	$	0.22	$	1.20	$	0.22
Diluted	$	0.94	$	0.22	$	1.20	$	0.22

2015 Dispositions

In the nine months ended September 30, 2015, we completed the following dispositions of operating properties:

• 1550 Westbranch Drive, a 160,000 square foot office property in McLean, Virginia (in the Northern Virginia region) for $27.8 million on July 27, 2015; and

• 15000 and 15010 Conference Center Drive, two office properties in Chantilly, Virginia (in the Northern Virginia region) totaling 665,000 square feet. On August 28, 2015, ownership in these properties was transferred to the mortgage lender on a $150.0 million nonrecourse mortgage loan that was secured by the properties and we removed the debt obligation and accrued interest from our balance sheet. The properties had an estimated fair value of $99 million on the transfer date. Upon completion of this transfer, we recognized a gain on early extinguishment of debt of $84.8 million, representing the difference between the mortgage loan and accrued interest payable extinguished over the carrying value of the properties transferred as of the transfer date and related closing costs.

We also sold land during the nine months endedSeptember 30, 2015 for $18.1 million and recognized gains of $4.0 million on the sales.

2015 Construction Activities

During the nine months endedSeptember 30, 2015, we placed into service an aggregate of 897,000 square feet in seven newly constructed office properties located in Northern Virginia, San Antonio, Texas (“San Antonio”), Huntsville, Alabama (“Huntsville”) and the Baltimore/Washington Corridor, and 170,000 square feet in two properties redeveloped in Greater Philadelphia and St. Mary’s County, Maryland. As of September 30, 2015, we had six office properties under construction, or for which we were contractually committed to construct, that we estimate will total 1.0 million square feet upon completion (including one partially operational property), including four in Northern Virginia and two in the Baltimore/Washington Corridor. We also had four office properties under redevelopment that we estimate will total 156,000 square feet upon completion, all of which were located in the Baltimore/Washington Corridor.

XML

Fair Value Measurements

9 Months Ended

Sep. 30, 2015

Fair Value Disclosures [Abstract]

Fair Value Measurements

Fair Value Measurements

For a description on how we estimate fair value, see Note 3 to the consolidated financial statements in our 2014 Annual Report on Form 10-K.

Recurring Fair Value Measurements

Our partner in a real estate joint venture has the right to require us to acquire its interest at fair value beginning in March 2020; accordingly, we classify the fair value of our partner’s interest as a redeemable noncontrolling interest in the mezzanine section of our consolidated balance sheet. In determining the fair value of our partner’s interest as of September 30, 2015, we used a discount rate of 15.5% which factored in risk appropriate to the level of future property development expected to be undertaken by the joint venture. A significant increase (decrease) in the discount rate used in determining the fair value would result in a significantly (lower) higher fair value. Given our reliance on the unobservable inputs, the valuations are classified in Level 3 of the fair value hierarchy. Please refer to Note 11 for a rollforward of the activity for redeemable noncontrolling interest.

The carrying values of cash and cash equivalents, restricted cash, accounts receivable, other assets (excluding investing receivables) and accounts payable and accrued expenses are reasonable estimates of their fair values because of the short maturities of these instruments.  As discussed in Note 7, we estimated the fair values of our investing receivables based on the discounted estimated future cash flows of the loans (categorized within Level 3 of the fair value hierarchy); the discount rates used approximate current market rates for loans with similar maturities and credit quality, and the estimated cash payments include scheduled principal and interest payments.  For our disclosure of debt fair values in Note 9, we estimated the fair value of our unsecured senior notes and exchangeable senior notes based on quoted market rates for publicly-traded debt (categorized within Level 2 of the fair value hierarchy) and estimated the fair value of our other debt based on the discounted estimated future cash payments to be made on such debt (categorized within Level 3 of the fair value hierarchy); the discount rates used approximate current market rates for loans, or groups of loans, with similar maturities and credit quality, and the estimated future payments include scheduled principal and interest payments.  Fair value estimates are made at a specific point in time, are subjective in nature and involve uncertainties and matters of significant judgment.  Settlement at such fair value amounts may not be possible and may not be a prudent management decision.

For additional fair value information, please refer to Note 7 for investing receivables, Note 9 for debt and Note 10 for interest rate derivatives. 

COPT and Subsidiaries

The table below sets forth financial assets and liabilities of COPT and its subsidiaries that are accounted for at fair value on a recurring basis as of September 30, 2015 and the hierarchy level of inputs used in measuring their respective fair values under applicable accounting standards (in thousands):

Description	Quoted Prices in Active Markets for Identical Assets(Level 1)		Significant Other Observable Inputs(Level 2)		Significant Unobservable Inputs(Level 3)		Total
Assets:
Marketable securities in deferred compensation plan (1)
Mutual funds	$	5,395	$	—	$	—	$	5,395
Other	104		—		—		104
Warrants to purchase common stock (2)	—		42		—		42
Total assets	$	5,499	$	42	$	—	$	5,541
Liabilities:
Deferred compensation plan liability (3)	$	—	$	5,499	$	—	$	5,499
Interest rate derivatives	—		5,844		—		5,844
Total liabilities	$	—	$	11,343	$	—	$	11,343
Redeemable noncontrolling interest	$	—	$	—	$	19,608	$	19,608

(1) Included in the line entitled “restricted cash and marketable securities” on COPT’s consolidated balance sheet.

(2) Included in the line entitled “prepaid expenses and other assets” on COPT’s consolidated balance sheet.

(3) Included in the line entitled “other liabilities” on COPT’s consolidated balance sheet.

COPLP and Subsidiaries

The table below sets forth financial assets and liabilities of COPLP and its subsidiaries that are accounted for at fair value on a recurring basis as of September 30, 2015 and the hierarchy level of inputs used in measuring their respective fair values under applicable accounting standards (in thousands):

Description	Quoted Prices in Active Markets for Identical Assets(Level 1)		Significant Other Observable Inputs(Level 2)		Significant Unobservable Inputs(Level 3)		Total
Assets:
Warrants to purchase common stock (1)	$	—	$	42	$	—	$	42
Liabilities:
Interest rate derivatives	$	—	$	5,844	$	—	$	5,844
Redeemable noncontrolling interest	$	—	$	—	$	19,608	$	19,608

(1) Included in the line entitled “prepaid expenses and other assets” on COPLP’s consolidated balance sheet.

Nonrecurring Fair Value Measurements

During the nine months ended September 30, 2015, we recognized the following impairment losses resulting from nonrecurring fair value measurements:

• $1.3 million primarily in the three months ended June 30, 2015 on a property in Northern Virginia that we sold on July 27, 2015 following receipt of an unsolicited offer. This property’s carrying value exceeded its fair value less costs to sell; and

• $2.3 million in the three months ended September 30, 2015 on three properties in the Greater Baltimore, Maryland (“Greater Baltimore”) region that we concluded no longer met our investment criteria during the period and whose carrying amounts exceeded their estimated fair values less costs to sell. These properties were reclassified as held for sale.

The table below sets forth the fair value hierarchy of the valuation technique we used to determine the fair values of these properties (dollars in thousands):

	Fair Values of Properties Held as of September 30, 2015
	Quoted Prices in				Significant
	Active Markets for		Significant Other		Unobservable
	Identical Assets		Observable Inputs		Inputs
Description	(Level 1)		(Level 2)		(Level 3)		Total
Assets:
Assets held for sale, net (1)	$	—	$	—	$	7,225	$	7,225

(1) Represents estimated fair values less costs to sell.

The table below sets forth quantitative information about significant unobservable inputs used for the Level 3 fair value measurements reported above as of September 30, 2015 (dollars in thousands):

Valuation Technique	Fair Values on  Measurement Date		Unobservable Input	Range (Weighted Average) (1)
Discounted cash flow	$	7,225	Discount rate	8.25%
			Terminal capitalization rate	7.75%
			Market rent growth rate	2.0%
			Expense growth rate	2.0%

(1) Only one value applied for these unobservable inputs.

During the nine months ended September 30, 2014, we recognized impairment losses totaling $1.4 million primarily in connection with certain of our operating properties in the Greater Baltimore region that were disposed of during the period. After shortening our expected holding period for these properties during the period, we determined that the carrying amount of the properties would not likely be recovered from the cash flows from the operations and sales of the properties over the shortened period.

XML

Income Taxes

9 Months Ended

Sep. 30, 2015

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

We own a TRS that is subject to Federal and state income taxes.  Our TRS’s provision for income taxes consisted of the following (in thousands):

	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
	2015		2014		2015		2014
Deferred
Federal	$	39	$	83	$	125	$	215
State	9		18		28		42
Total income tax expense	$	48	$	101	$	153	$	257

Items in our TRS contributing to temporary differences that lead to deferred taxes include depreciation and amortization, share-based compensation, certain accrued compensation, compensation paid in the form of contributions to a deferred nonqualified compensation plan and net operating losses that are not deductible until future periods.

Our TRS’s combined Federal and state effective tax rate was 37.7% for the three and nine months endedSeptember 30, 2015 and 2014.

XML

Redeemable Noncontrolling Interest

9 Months Ended

Sep. 30, 2015

Noncontrolling Interest [Abstract]

Redeemable Noncontrolling Interest

Redeemable Noncontrolling Interest

The table below sets forth the activity for a redeemable noncontrolling interest in a consolidated real estate joint venture (in thousands):

	For the Nine Months Ended September 30,
	2015			2014
Beginning balance	$	18,417		$	17,758
Distributions to noncontrolling interest, net	(1,098		)	(976		)
Net income attributable to noncontrolling interest	1,690			1,647
Adjustment to arrive at fair value of interest	599			7
Ending balance	$	19,608		$	18,436

XML

Investing Receivables

9 Months Ended

Sep. 30, 2015

Receivables [Abstract]

Investing Receivables

Investing Receivables

Investing receivables, including accrued interest thereon, consisted of the following (in thousands):

	September 30, 2015		December 31, 2014
Notes receivable from the City of Huntsville	$	43,821	$	49,147
Other investing loans receivable	3,000		3,000
	$	46,821	$	52,147

Our notes receivable from the City of Huntsville funded infrastructure costs in connection with our LW Redstone Company, LLC joint venture (see Note 5) and carry an interest rate of 9.95%.

We did not have an allowance for credit losses in connection with our investing receivables as of September 30, 2015 or December 31, 2014.  The fair value of these receivables approximated their carrying amounts as of September 30, 2015 and December 31, 2014.

XML

Interest Rate Derivatives (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2015	Sep. 30, 2014	Sep. 30, 2015	Sep. 30, 2014	Dec. 31, 2014
Effect of interest rate derivatives on consolidated statements of operations and comprehensive income
Amount of (loss) gain recognized in accumulated other comprehensive loss (“AOCL”) (effective portion)	$ (3,638)	$ 1,015	$ (6,720)	$ (4,738)
Interest Expense
Effect of interest rate derivatives on consolidated statements of operations and comprehensive income
Amount of losses reclassified from AOCL into interest expense (effective portion)	915	$ 756	2,457	$ 2,170
Interest rate swaps
Effect of interest rate derivatives on consolidated statements of operations and comprehensive income
Approximate loss amount to be reclassified from AOCI to interest expense over the next 12 months	3,500		3,500
Interest rate derivatives in liability position, fair value	5,900		5,900
Termination value to settle obligations under interest rate derivative agreements	6,300		6,300
Interest rate swaps | Prepaid expenses and other current assets
Fair value of interest rate derivatives and balance sheet classification
Interest rate derivatives	0		0		$ 274
Interest rate swaps | Interest rate derivatives
Fair value of interest rate derivatives and balance sheet classification
Fair value of Interest rate swaps classified as interest rate derivatives	(5,844)		(5,844)		(1,855)
Designated
Fair values of interest rate swap derivatives
Fair value of interest rate swaps	(5,844)		(5,844)		(1,581)
Designated | Interest rate swap, effective date November 2, 2010
Fair values of interest rate swap derivatives
Notional Amount	$ 36,249		$ 36,249
Fixed rate (as a percent)	3.83%		3.83%
Fair value of interest rate swaps	$ (44)		$ (44)		(400)
Notional amount of interest rate derivatives after scheduled amortization	$ 36,200		$ 36,200
Designated | Interest rate swap, effective date November 2, 2010 | London Interbank Offered Rate (LIBOR)
Fair values of interest rate swap derivatives
Derivative, basis spread on variable rate	2.25%		2.25%
Designated | Interest rate swap, effective date September 2, 2014, swap one
Fair values of interest rate swap derivatives
Notional Amount	$ 100,000		$ 100,000
Fixed rate (as a percent)	0.8055%		0.8055%
Fair value of interest rate swaps	$ (396)		$ (396)		(317)
Designated | Interest rate swap, effective date September 2, 2014, swap two
Fair values of interest rate swap derivatives
Notional Amount	$ 100,000		$ 100,000
Fixed rate (as a percent)	0.81%		0.81%
Fair value of interest rate swaps	$ (401)		$ (401)		(324)
Designated | Interest rate swap, effective date September 1, 2015, swap one
Fair values of interest rate swap derivatives
Notional Amount	$ 100,000		$ 100,000
Fixed rate (as a percent)	1.673%		1.673%
Fair value of interest rate swaps	$ (2,386)		$ (2,386)		239
Designated | Interest rate swap, effective date September 1, 2015, swap two
Fair values of interest rate swap derivatives
Notional Amount	$ 100,000		$ 100,000
Fixed rate (as a percent)	1.73%		1.73%
Fair value of interest rate swaps	$ (2,617)		$ (2,617)		35
Designated | Interest rate swap, effective date January 3, 2012, swap three
Fair values of interest rate swap derivatives
Notional Amount	$ 100,000		$ 100,000
Fixed rate (as a percent)	0.832%		0.832%
Fair value of interest rate swaps	$ 0		$ 0		(407)
Designated | Interest rate swap, effective date January 3, 2012, swap four
Fair values of interest rate swap derivatives
Notional Amount	$ 100,000		$ 100,000
Fixed rate (as a percent)	0.832%		0.832%
Fair value of interest rate swaps	$ 0		$ 0		$ (407)

XML

Real Estate Joint Ventures

9 Months Ended

Sep. 30, 2015

Equity Method Investments and Joint Ventures [Abstract]

Real Estate Joint Ventures

Real Estate Joint Ventures

The table below sets forth information pertaining to our material investments in consolidated real estate joint ventures as of September 30, 2015 (dollars in thousands):

		Nominal
		Ownership		September 30, 2015				(1)
	Date	% as of		Total		Encumbered		Total
	Acquired	9/30/2015	Nature of Activity	Assets		Assets		Liabilities
LW Redstone Company, LLC	3/23/2010	85%	Development and operation of real estate (2)	$	144,906	$	64,395	$	39,093
M Square Associates, LLC	6/26/2007	50%	Development and operation of real estate (3)	58,840		48,301		38,117
				$	203,746	$	112,696	$	77,210

(1) Excludes amounts eliminated in consolidation.

(2) This joint venture’s properties are in Huntsville.

(3) This joint venture’s properties are in College Park, Maryland (in the Baltimore/Washington Corridor).

XML

Intangible Assets on Real Estate Acquisition, Net

9 Months Ended

Sep. 30, 2015

Intangible Assets on Real Estate Acquisitions [Abstract]

Intangible Assets on Real Estate Acquisition, Net

Intangible Assets on Real Estate Acquisitions, Net

Intangible assets on real estate acquisitions consisted of the following, excluding amounts for properties held for sale (in thousands):

	September 30, 2015						December 31, 2014
	Gross Carrying Amount		Accumulated Amortization		Net  Carrying Amount		Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount
In-place lease value	$	138,410	$	87,667	$	50,743	$	123,759	$	101,040	$	22,719
Tenant relationship value	63,117		22,525		40,592		42,301		28,492		13,809
Below-market cost arrangements	15,102		6,505		8,597		12,415		5,984		6,431
Above-market leases	13,844		7,987		5,857		8,659		8,159		500
Market concentration premium	1,333		948		385		1,333		938		395
	$	231,806	$	125,632	$	106,174	$	188,467	$	144,613	$	43,854

Amortization of the intangible asset categories set forth above totaled $11.9 million in the nine months endedSeptember 30, 2015 and $10.8 million in the nine months endedSeptember 30, 2014. The approximate weighted average amortization periods of the categories set forth above follow (excluding amounts for properties held for sale): in-place lease value: six years; tenant relationship value: 11 years; below-market cost arrangements: 35 years; above-market leases: four years; and market concentration premium: 27 years. The approximate weighted average amortization period for all of the categories combined is 10 years. Estimated amortization expense associated with the intangible asset categories set forth above through 2020 follows (excluding amounts for properties held for sale): $5.1 million for the three months ending December 31, 2015; $19.7 million for 2016; $17.1 million for 2017; $12.3 million for 2018; $9.3 million for 2019; and $7.3 million for 2020.

XML

Prepaid Expenses and Other Assets, Net

9 Months Ended

Sep. 30, 2015

Prepaid Expense and Other Assets [Abstract]

Prepaid Expenses and Other Assets, Net

Prepaid Expenses and Other Assets, Net

Prepaid expenses and other assets consisted of the following (in thousands):

	September 30, 2015		December 31, 2014
Prepaid expenses	$	28,655	$	20,570
Lease incentives, net	11,589		13,344
Furniture, fixtures and equipment, net	5,941		6,637
Construction contract costs incurred in excess of billings	4,722		6,656
Deferred tax asset, net (1)	4,015		4,002
Operating notes receivable	3,744		3,797
Equity method investments	1,626		2,368
Other assets	6,495		2,875
Prepaid expenses and other assets, net	$	66,787	$	60,249

(1) Includes a valuation allowance of $2.1 million.

Operating notes receivable reported above includes amounts due from tenants with remaining terms exceeding one year totaling $3.7 million as of September 30, 2015 and $3.6 million as of December 31, 2014; we carried allowances for estimated losses for $278,000 of the September 30, 2015 balance and $252,000 of the December 31, 2014 balance.

XML

Information by Business Segment (Details 2) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2015	Sep. 30, 2014	Sep. 30, 2015	Sep. 30, 2014
Reconciliation of segment revenues to total revenues
Segment revenues from real estate operations	$ 133,686	$ 118,240	$ 384,591	$ 359,100
Construction contract and other service revenues	17,058	34,739	97,554	80,390
Less: Revenues from discontinued operations	0	36	(4)	12
Total revenues	150,744	153,015	482,141	439,502
Reconciliation of segment property operating expenses to property operating expenses
Segment property operating expenses	48,897	42,881	145,990	136,489
Less: Property operating expenses from discontinued operations	0	175	6	111
Total property operating expenses	48,897	43,056	145,996	136,600
Computation of net operating income from service operations
Construction contract and other service revenues	17,058	34,739	97,554	80,390
Construction contract and other service expenses	(16,132)	(33,593)	(94,923)	(75,353)
NOI from service operations	926	1,146	2,631	5,037
Reconciliation of NOI from real estate operations and NOI from service operations to (loss) income from continuing operations
NOI from real estate operations	84,789	75,359	238,601	222,611
NOI from service operations	926	1,146	2,631	5,037
Interest and other income	692	1,191	3,217	3,775
Equity in income of unconsolidated entities	18	193	52	206
Income tax expense	(48)	(101)	(153)	(257)
Other adjustments:
Depreciation and other amortization associated with real estate operations	(38,403)	(30,237)	(103,788)	(104,728)
Impairment losses	(2,307)	(66)	(3,545)	(1,368)
General, administrative and leasing expenses	(7,439)	(7,211)	(22,864)	(22,882)
Business development expenses and land carry costs	(5,573)	(1,430)	(10,986)	(4,107)
Interest expense	(24,121)	(24,802)	(66,727)	(69,107)
Less: NOI from discontinued operations	0	(139)	(10)	(99)
Gain (loss) on early extinguishment of debt	85,745	(176)	85,677	(446)
Income from continuing operations	$ 94,279	$ 13,727	$ 122,105	$ 28,635

XML

Share-Based Compensation (Details) $ / shares in Units, $ in Thousands		9 Months Ended
	Mar. 05, 2015 USD ($) shares	Sep. 30, 2015 USD ($) Percentile_Rank $ / shares shares	Sep. 30, 2014 shares
Options
Exercised (in shares)		76,474	57,888
Performance share units
Assumptions used to value stock awards
Weighted average grant date fair value (in dollars per share) | $ / shares		$ 36.76
Baseline value per common share (in dollars per share) | $ / shares		$ 29.28
Expected volatility of common shares (as a percent)		19.90%
Risk-free interest rate (as a percent)		0.99%
Restricted shares
Share-Based Compensation
Stock awards granted (in shares or units)		193,499
Aggregate grant date fair value | $		$ 5,600
Assumptions used to value stock awards
Weighted average grant date fair value (in dollars per share) | $ / shares		$ 28.93
Other Share-based Compensation Additional Disclosures
Shares vested (in shares)		163,145
Weighted average fair value of shares vested (in dollars per share) | $ / shares		$ 26.15
Aggregate intrinsic value of awards upon vesting | $		$ 4,600
Deferred shares
Share-Based Compensation
Stock awards granted (in shares or units)		24,056
Aggregate grant date fair value | $		$ 642
Assumptions used to value stock awards
Weighted average grant date fair value (in dollars per share) | $ / shares		$ 26.70
Other Share-based Compensation Additional Disclosures
Shares vested (in shares)		15,485
Weighted average fair value of shares vested (in dollars per share) | $ / shares		$ 26.77
Aggregate intrinsic value of awards upon vesting | $		$ 413
Options
Options
Exercised (in shares)		76,474
Weighted average exercise price (in dollars per share) | $ / shares		$ 26.27
Aggregate intrinsic value of options exercised (in dollars) | $		$ 300
2014 PSU Grants | Performance share units
Share-Based Compensation
Stock awards granted (in shares or units)	45,656
Aggregate grant date fair value | $	$ 1,700
Potential earned PSUs payout for defined levels of performance under awards
Earned PSUs payout (as a percent of PSUs granted) on 75th or greater percentile rank		200.00%
Earned PSUs payout (as a percent of PSUs granted) on 50th percentile rank		100.00%
Earned PSUs payout (as a percent of PSUs granted) on 25th percentile rank		50.00%
Performance share units granted on percentile rank below 25th (as a percent)		0.00%
The number of percentile ranks to fall between to earn interpolated PSUs between such percentile ranks, conditioned on the percentile rank exceeding 25% | Percentile_Rank		2
2012 PSU Grants | Performance share units
Assumptions used to value stock awards
Shares issued for awards vested in period	40,309
2013 PSU Grants | Performance share units | Former Chief Financial Officer
Assumptions used to value stock awards
Shares issued for awards vested in period	15,289

XML

Information by Business Segment (Details) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2015 USD ($) segment	Sep. 30, 2014 USD ($)	Sep. 30, 2015 USD ($) segment	Sep. 30, 2014 USD ($)	Dec. 31, 2014 USD ($)
Segment Reporting [Abstract]
Number of primary office property segments | segment	10		10
Segment financial information for real estate operations
Revenues from real estate operations	$ 133,686	$ 118,240	$ 384,591	$ 359,100
Property operating expenses	48,897	42,881	145,990	136,489
NOI from real estate operations	84,789	75,359	238,601	222,611
Segment assets	3,918,473	3,680,188	3,918,473	3,680,188	$ 3,670,257
Operating Segment Total
Segment financial information for real estate operations
Revenues from real estate operations	133,686	118,240	384,591	359,100
Property operating expenses	48,897	42,881	145,990	136,489
NOI from real estate operations	84,789	75,359	238,601	222,611
Additions to long-lived assets	141,037	22,793	307,723	50,618
Transfers from non-operating properties	142,210	42,802	304,106	135,127
Segment assets	3,354,762	2,962,686	3,354,762	2,962,686
Baltimore and Washington Corridor
Segment financial information for real estate operations
Revenues from real estate operations	62,009	58,883	184,412	177,452
Property operating expenses	20,169	19,457	63,291	62,402
NOI from real estate operations	41,840	39,426	121,121	115,050
Additions to long-lived assets	7,943	7,248	16,529	19,278
Transfers from non-operating properties	25,184	22,680	44,212	50,303
Segment assets	1,297,431	1,278,713	1,297,431	1,278,713
Northern Virginia
Segment financial information for real estate operations
Revenues from real estate operations	23,332	21,369	69,474	67,235
Property operating expenses	7,785	7,500	25,593	24,124
NOI from real estate operations	15,547	13,869	43,881	43,111
Additions to long-lived assets	1,749	5,898	89,152	14,198
Transfers from non-operating properties	34,195	15,403	101,412	42,674
Segment assets	697,406	648,248	697,406	648,248
San Antonio
Segment financial information for real estate operations
Revenues from real estate operations	9,492	9,031	28,867	26,268
Property operating expenses	4,808	5,100	15,398	14,391
NOI from real estate operations	4,684	3,931	13,469	11,877
Additions to long-lived assets	0	0	21	(6)
Transfers from non-operating properties	591	0	32,150	0
Segment assets	148,336	116,837	148,336	116,837
Huntsville
Segment financial information for real estate operations
Revenues from real estate operations	3,061	2,471	8,165	7,430
Property operating expenses	888	763	2,605	2,275
NOI from real estate operations	2,173	1,708	5,560	5,155
Additions to long-lived assets	175	455	466	3,296
Transfers from non-operating properties	1,207	1,496	13,184	21,821
Segment assets	108,541	98,334	108,541	98,334
Washington, DC - Capitol Riverfront
Segment financial information for real estate operations
Revenues from real estate operations	3,336	3,524	10,091	10,989
Property operating expenses	1,962	1,824	5,837	5,343
NOI from real estate operations	1,374	1,700	4,254	5,646
Additions to long-lived assets	1,098	458	2,297	999
Transfers from non-operating properties	0	0	0	0
Segment assets	94,120	96,131	94,120	96,131
St. Mary's and King George Counties
Segment financial information for real estate operations
Revenues from real estate operations	3,550	4,158	11,246	12,676
Property operating expenses	1,325	1,277	4,238	4,070
NOI from real estate operations	2,225	2,881	7,008	8,606
Additions to long-lived assets	986	5,189	3,149	6,971
Transfers from non-operating properties	1,408	0	1,408	0
Segment assets	101,985	100,009	101,985	100,009
Greater Baltimore
Segment financial information for real estate operations
Revenues from real estate operations	16,134	10,436	40,508	32,956
Property operating expenses	6,461	3,810	16,367	13,786
NOI from real estate operations	9,673	6,626	24,141	19,170
Additions to long-lived assets	128,933	3,021	195,013	5,275
Transfers from non-operating properties	315	495	327	3,522
Segment assets	455,469	274,931	455,469	274,931
Greater Philadelphia
Segment financial information for real estate operations
Revenues from real estate operations	4,126	2,951	11,236	8,657
Property operating expenses	1,249	837	3,565	3,281
NOI from real estate operations	2,877	2,114	7,671	5,376
Additions to long-lived assets	246	625	824	724
Transfers from non-operating properties	5,506	2,506	22,222	15,880
Segment assets	128,409	107,051	128,409	107,051
Other
Segment financial information for real estate operations
Revenues from real estate operations	2,568	2,541	7,659	7,668
Property operating expenses	242	260	655	1,195
NOI from real estate operations	2,326	2,281	7,004	6,473
Additions to long-lived assets	(93)	(125)	164	(163)
Transfers from non-operating properties	0	0	8	30
Segment assets	76,259	78,240	76,259	78,240
Wholesale Data Center
Segment financial information for real estate operations
Revenues from real estate operations	6,078	2,876	12,933	7,769
Property operating expenses	4,008	2,053	8,441	5,622
NOI from real estate operations	2,070	823	4,492	2,147
Additions to long-lived assets	0	24	108	46
Transfers from non-operating properties	73,804	222	89,183	897
Segment assets	$ 246,806	$ 164,192	$ 246,806	$ 164,192

XML

Debt, Net (Tables)

9 Months Ended

Sep. 30, 2015

Debt Disclosure [Abstract]

Schedule of debt

Our debt consisted of the following (dollars in thousands):

	Maximum
	Availability at		Carrying Value at					Scheduled Maturity
	September 30, 2015		September 30, 2015		December 31, 2014		Stated Interest Rates as of	as of
							September 30, 2015	September 30, 2015
Mortgage and Other Secured Loans:
Fixed rate mortgage loans (1)			$	288,217	$	387,139	3.96% - 7.87% (2)	2016-2024
Variable rate secured loan			36,249		36,877		LIBOR + 2.25% (3)	November 2015
Total mortgage and other secured loans			324,466		424,016
Revolving Credit Facility	$	800,000	87,000		83,000		LIBOR + 0.875% to 1.60% (4)	May 2019
Term Loan Facilities	(5)		520,000		520,000		LIBOR + 0.90% to 2.60% (6)	2016-2020
Unsecured Senior Notes
3.600% Senior Notes (7)			347,691		347,496		3.60%	May 2023
5.250% Senior Notes (8)			246,074		245,797		5.25%	February 2024
3.700% Senior Notes (9)			297,830		297,569		3.70%	June 2021
5.000% Senior Note (10)			296,646		—		5.00%	July 2025
Unsecured notes payable			1,533		1,607		0% (11)	2026
4.25% Exchangeable Senior Notes (12)			—		572		N/A	(12)
Total debt, net			$	2,121,240	$	1,920,057

(1)   Several of the fixed rate mortgages carry interest rates that were above or below market rates upon assumption and therefore were recorded at their fair value based on applicable effective interest rates.  The carrying values of these loans reflect net unamortized premiums totaling $24,000 as of September 30, 2015 and $42,000 as of December 31, 2014. Please refer to Note 4 for disclosure pertaining to the removal of a $150.0 million nonrecourse mortgage loan from our balance sheet on August 28, 2015.

(2) The weighted average interest rate on our fixed rate mortgage loans was 6.07% as of September 30, 2015.

(3)  The interest rate on the loan outstanding was 2.45% as of September 30, 2015.

(4) The weighted average interest rate on the Revolving Credit Facility was 1.48% as of September 30, 2015.

(5)   We have the ability to borrow an additional $380.0 million in the aggregate under these term loan facilities, provided that there is no default under the facilities and subject to the approval of the lenders.

(6)  The weighted average interest rate on these loans was 1.78% as of September 30, 2015.

(7) The carrying value of these notes included a principal amount of $350.0 millionand an unamortized discount totaling $2.3 millionas of September 30, 2015 and $2.5 million as of December 31, 2014.  The effective interest rate under the notes, including amortization of the issuance costs, was 3.70%. 

(8) The carrying value of these notes included a principal amount of $250.0 millionand an unamortized discount totaling $3.9 millionas of September 30, 2015 and $4.2 million as of December 31, 2014.  The effective interest rate under the notes, including amortization of the issuance costs, was 5.49%. 

(9) The carrying value of these notes included a principal amount of $300.0 millionand an unamortized discount totaling $2.2 millionas of September 30, 2015 and $2.4 million as of December 31, 2014.  The effective interest rate under the notes, including amortization of the issuance costs, was 3.85%. 

(10) Refer to the paragraph below for disclosure pertaining to these notes.

(11)  These notes carry interest rates that were below market rates upon assumption and therefore were recorded at their fair value based on applicable effective interest rates.  The carrying value of these notes reflects an unamortized discount totaling $578,000 as of September 30, 2015 and $654,000 as of December 31, 2014.

(12) On April 20, 2015, we redeemed these notes at 100% of their principal amount.

Schedule of the fair value of debt

The following table sets forth information pertaining to the fair value of our debt (in thousands): 

	September 30, 2015				December 31, 2014
	Carrying		Estimated		Carrying		Estimated
	Amount		Fair Value		Amount		Fair Value
Fixed-rate debt
Unsecured Senior Notes	$	1,188,241	$	1,212,120	$	890,862	$	901,599
Other fixed-rate debt	289,750		298,198		389,318		356,377
Variable-rate debt	643,249		644,243		639,877		642,091
	$	2,121,240	$	2,154,561	$	1,920,057	$	1,900,067

XML

Properties, Net (Details 4) ft² in Thousands, $ in Thousands				3 Months Ended	9 Months Ended
	Aug. 07, 2015 USD ($) ft²	Apr. 15, 2015 USD ($) ft²	Mar. 19, 2015 USD ($) ft²	Sep. 30, 2015 USD ($)	Sep. 30, 2015 USD ($)
Business Acquisition [Line Items]
Weighted average useful life					10 years
Tenant relationship value
Business Acquisition [Line Items]
Weighted average useful life					11 years
Below-market cost arrangements
Business Acquisition [Line Items]
Weighted average useful life					35 years
2015 Acquisitions
Business Acquisition [Line Items]
Land				$ 55,076	$ 55,076
Building and improvements				139,520	139,520
Intangible assets on real estate acquisitions				75,846	75,846
Total assets				270,442	270,442
Below-market leases				(6,820)	(6,820)
Total acquisition cost				263,622	263,622
Finite-lived intangible assets acquired					$ 75,846
Weighted average useful life					10 years
Revenues				6,900	$ 11,200
Contributions to net income from continuing operations				487	697
Operating property acquisition costs				$ 2,700	4,100
2015 Acquisitions | Tenant relationship value
Business Acquisition [Line Items]
Finite-lived intangible assets acquired					$ 31,208
Weighted average useful life					12 years
2015 Acquisitions | In-place lease value
Business Acquisition [Line Items]
Finite-lived intangible assets acquired					$ 35,231
Weighted average useful life					7 years
2015 Acquisitions | Above market leases
Business Acquisition [Line Items]
Finite-lived intangible assets acquired					$ 6,720
Weighted average useful life					4 years
2015 Acquisitions | Below-market cost arrangements
Business Acquisition [Line Items]
Finite-lived intangible assets acquired					$ 2,687
Weighted average useful life					40 years
250 W Pratt St | Baltimore, Maryland
Business Acquisition [Line Items]
Square footage of real estate properties (in square feet) | ft²			367
Acquired property percentage leased			96.20%
Total acquisition cost			$ 61,900
2600 Park Tower Drive | Northern Virginia
Business Acquisition [Line Items]
Square footage of real estate properties (in square feet) | ft²		237
Acquired property percentage leased		100.00%
Total acquisition cost		$ 80,500
100 and 30 Light Street | Baltimore, Maryland
Business Acquisition [Line Items]
Square footage of real estate properties (in square feet) | ft²	558
Acquired property percentage leased	93.50%
Total acquisition cost	$ 121,200
Business Combination, Recognized Identifiable Assets Acquired and Liabilities Assumed, Liabilities	55,000
Estimated fair value	$ 55,500

XML

Information by Business Segment

9 Months Ended

Sep. 30, 2015

Segment Reporting [Abstract]

Information by Business Segment

Information by Business Segment

We have ten reportable operating office property segments (comprised of: the Baltimore/Washington Corridor; Northern Virginia; San Antonio; Huntsville; Washington, DC — Capitol Riverfront; St. Mary’s and King George Counties; Greater Baltimore; Greater Philadelphia; Colorado Springs; and Other). In our 2015 quarterly reports on Form 10-Q, our Colorado Springs segment is, and will be, included in our Other segment as it is insignificant in the 2014 and 2015 reporting periods. We also have an operating wholesale data center segment. The table below reports segment financial information for our reportable segments (in thousands).  We measure the performance of our segments through the measure we define as NOI from real estate operations, which is derived by subtracting property operating expenses from revenues from real estate operations.

	Operating Office Property Segments
	Baltimore/ Washington Corridor		Northern Virginia		San Antonio			Huntsville		Washington, DC - Capitol Riverfront		St. Mary’s &  King George Counties		Greater Baltimore		Greater Philadelphia		Other			Operating Wholesale Data Center		Total
Three Months Ended September 30, 2015
Revenues from real estate operations	$	62,009	$	23,332	$	9,492		$	3,061	$	3,336	$	3,550	$	16,134	$	4,126	$	2,568		$	6,078	$	133,686
Property operating expenses	20,169		7,785		4,808			888		1,962		1,325		6,461		1,249		242			4,008		48,897
NOI from real estate operations	$	41,840	$	15,547	$	4,684		$	2,173	$	1,374	$	2,225	$	9,673	$	2,877	$	2,326		$	2,070	$	84,789
Additions to long-lived assets	$	7,943	$	1,749	$	—		$	175	$	1,098	$	986	$	128,933	$	246	$	(93	)	$	—	$	141,037
Transfers from non-operating properties	$	25,184	$	34,195	$	591		$	1,207	$	—	$	1,408	$	315	$	5,506	$	—		$	73,804	$	142,210
Three Months Ended September 30, 2014								—
Revenues from real estate operations	$	58,883	$	21,369	$	9,031		$	2,471	$	3,524	$	4,158	$	10,436	$	2,951	$	2,541		$	2,876	$	118,240
Property operating expenses	19,457		7,500		5,100			763		1,824		1,277		3,810		837		260			2,053		42,881
NOI from real estate operations	$	39,426	$	13,869	$	3,931		$	1,708	$	1,700	$	2,881	$	6,626	$	2,114	$	2,281		$	823	$	75,359
Additions to long-lived assets	$	7,248	$	5,898	$	—		$	455	$	458	$	5,189	$	3,021	$	625	$	(125	)	$	24	$	22,793
Transfers from non-operating properties	$	22,680	$	15,403	$	—		$	1,496	$	—	$	—	$	495	$	2,506	$	—		$	222	$	42,802
Nine Months Ended September 30, 2015
Revenues from real estate operations	$	184,412	$	69,474	$	28,867		$	8,165	$	10,091	$	11,246	$	40,508	$	11,236	$	7,659		$	12,933	$	384,591
Property operating expenses	63,291		25,593		15,398			2,605		5,837		4,238		16,367		3,565		655			8,441		145,990
NOI from real estate operations	$	121,121	$	43,881	$	13,469		$	5,560	$	4,254	$	7,008	$	24,141	$	7,671	$	7,004		$	4,492	$	238,601
Additions to long-lived assets	$	16,529	$	89,152	$	21		$	466	$	2,297	$	3,149	$	195,013	$	824	$	164		$	108	$	307,723
Transfers from non-operating properties	$	44,212	$	101,412	$	32,150		$	13,184	$	—	$	1,408	$	327	$	22,222	$	8		$	89,183	$	304,106
Segment assets at September 30, 2015	$	1,297,431	$	697,406	$	148,336		$	108,541	$	94,120	$	101,985	$	455,469	$	128,409	$	76,259		$	246,806	$	3,354,762
Nine Months Ended September 30, 2014
Revenues from real estate operations	$	177,452	$	67,235	$	26,268		$	7,430	$	10,989	$	12,676	$	32,956	$	8,657	$	7,668		$	7,769	$	359,100
Property operating expenses	62,402		24,124		14,391			2,275		5,343		4,070		13,786		3,281		1,195			5,622		136,489
NOI from real estate operations	$	115,050	$	43,111	$	11,877		$	5,155	$	5,646	$	8,606	$	19,170	$	5,376	$	6,473		$	2,147	$	222,611
Additions to long-lived assets	$	19,278	$	14,198	$	(6	)	$	3,296	$	999	$	6,971	$	5,275	$	724	$	(163	)	$	46	$	50,618
Transfers from non-operating properties	$	50,303	$	42,674	$	—		$	21,821	$	—	$	—	$	3,522	$	15,880	$	30		$	897	$	135,127
Segment assets at September 30, 2014	$	1,278,713	$	648,248	$	116,837		$	98,334	$	96,131	$	100,009	$	274,931	$	107,051	$	78,240		$	164,192	$	2,962,686

The following table reconciles our segment revenues to total revenues as reported on our consolidated statements of operations (in thousands):

	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
	2015		2014		2015			2014
Segment revenues from real estate operations	$	133,686	$	118,240	$	384,591		$	359,100
Construction contract and other service revenues	17,058		34,739		97,554			80,390
Less: Revenues from discontinued operations	—		36		(4		)	12
Total revenues	$	150,744	$	153,015	$	482,141		$	439,502

The following table reconciles our segment property operating expenses to property operating expenses as reported on our consolidated statements of operations (in thousands):

	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
	2015		2014		2015		2014
Segment property operating expenses	$	48,897	$	42,881	$	145,990	$	136,489
Less: Property operating expenses from discontinued operations	—		175		6		111
Total property operating expenses	$	48,897	$	43,056	$	145,996	$	136,600

As previously discussed, we provide real estate services such as property management and construction and development services primarily for our properties but also for third parties.  The primary manner in which we evaluate the operating performance of our service activities is through a measure we define as net operating income from service operations (“NOI from service operations”), which is based on the net of revenues and expenses from these activities.  Construction contract and other service revenues and expenses consist primarily of subcontracted costs that are reimbursed to us by the customer along with a management fee. The operating margins from these activities are small relative to the revenue.  We believe NOI from service operations is a useful measure in assessing both our level of activity and our profitability in conducting such operations. The table below sets forth the computation of our NOI from service operations (in thousands):

	For the Three Months Ended September 30,						For the Nine Months Ended September 30,
	2015			2014			2015			2014
Construction contract and other service revenues	$	17,058		$	34,739		$	97,554		$	80,390
Construction contract and other service expenses	(16,132		)	(33,593		)	(94,923		)	(75,353		)
NOI from service operations	$	926		$	1,146		$	2,631		$	5,037

The following table reconciles our NOI from real estate operations for reportable segments and NOI from service operations to income from continuing operations as reported on our consolidated statements of operations (in thousands):

	For the Three Months Ended September 30,						For the Nine Months Ended September 30,
	2015			2014			2015			2014
NOI from real estate operations	$	84,789		$	75,359		$	238,601		$	222,611
NOI from service operations	926			1,146			2,631			5,037
Interest and other income	692			1,191			3,217			3,775
Equity in income of unconsolidated entities	18			193			52			206
Income tax expense	(48		)	(101		)	(153		)	(257		)
Other adjustments:	—						—
Depreciation and other amortization associated with real estate operations	(38,403		)	(30,237		)	(103,788		)	(104,728		)
Impairment losses	(2,307		)	(66		)	(3,545		)	(1,368		)
General, administrative and leasing expenses	(7,439		)	(7,211		)	(22,864		)	(22,882		)
Business development expenses and land carry costs	(5,573		)	(1,430		)	(10,986		)	(4,107		)
Interest expense	(24,121		)	(24,802		)	(66,727		)	(69,107		)
Less: NOI from discontinued operations	—			(139		)	(10		)	(99		)
Gain (loss) on early extinguishment of debt	85,745			(176		)	85,677			(446		)
Income from continuing operations	$	94,279		$	13,727		$	122,105		$	28,635

The following table reconciles our segment assets to the consolidated total assets of COPT and subsidiaries (in thousands):

	September 30, 2015		September 30, 2014
Segment assets	$	3,354,762	$	2,962,686
Non-operating property assets	416,540		518,951
Other assets	147,171		198,551
Total COPT consolidated assets	$	3,918,473	$	3,680,188

The accounting policies of the segments are the same as those used to prepare our consolidated financial statements, except that discontinued operations are not presented separately for segment purposes.  In the segment reporting presented above, we did not allocate interest expense, depreciation and amortization, impairment losses, loss on early extinguishment of debt and gain on sales of real estate to our real estate segments since they are not included in the measure of segment profit reviewed by management.  We also did not allocate general and administrative expenses, business development expenses and land carry costs, interest and other income, equity in income of unconsolidated entities, income taxes and noncontrolling interests because these items represent general corporate or non-operating property items not attributable to segments.

XML

Subsequent Event

9 Months Ended

Sep. 30, 2015

Subsequent Events [Abstract]

Subsequent Event

Subsequent Event

On October 27, 2015, we sold 13200 Woodland Park Road, a 397,000 square foot office property in Herndon, Virginia (in the Northern Virginia region) for $84.0 million, resulting in a gain on sale of approximately $42 million.

XML

Properties, Net (Details 2) - USD ($) $ in Thousands	Sep. 30, 2015	Dec. 31, 2014
Properties
Projects in development or held for future development	$ 414,757	$ 545,426
Projects in development or held for future development | Land in development or held for future development
Properties
Projects in development or held for future development	207,748	214,977
Projects in development or held for future development | Construction in progress, excluding land
Properties
Projects in development or held for future development	$ 207,009	$ 330,449

XML

Commitments and Contingencies (Tables)

9 Months Ended

Sep. 30, 2015

Commitments and Contingencies Disclosure [Abstract]

Future minimum rental payments for operating leases

Future minimum rental payments due under the terms of these operating leases as of September 30, 2015 follow (in thousands):

Year Ending December 31,
2015 (1)	$	289
2016	1,171
2017	1,096
2018	1,052
2019	1,036
Thereafter	86,999
	$	91,643

(1) Represents three months ending December 31, 2015

XML

Consolidated Statements of Comprehensive Income - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2015	Sep. 30, 2014	Sep. 30, 2015	Sep. 30, 2014
Net income	$ 94,294	$ 24,548	$ 126,261	$ 39,269
Other comprehensive (loss) income
Unrealized (losses) gains on interest rate derivatives	(3,638)	1,015	(6,720)	(4,738)
Equity in other comprehensive loss of equity method investee	0	0	(264)	0
Other comprehensive (loss) income	(2,723)	1,771	(4,527)	(2,568)
Comprehensive income	91,571	26,319	121,734	36,701
Comprehensive income attributable to noncontrolling interests	(4,453)	(1,968)	(7,324)	(3,960)
Comprehensive income attributable to COPT	87,118	24,351	114,410	32,741
Interest Expense
Other comprehensive (loss) income
Losses on interest rate derivatives included in interest expense	915	756	2,457	2,170
Corporate Office Properties, L.P.
Net income	94,294	24,548	126,261	39,269
Other comprehensive (loss) income
Unrealized (losses) gains on interest rate derivatives	(3,638)	1,015	(6,720)	(4,738)
Equity in other comprehensive loss of equity method investee	0	0	(264)	0
Other comprehensive (loss) income	(2,723)	1,771	(4,527)	(2,568)
Comprehensive income	91,571	26,319	121,734	36,701
Comprehensive income attributable to noncontrolling interests	(1,035)	(964)	(2,780)	(2,630)
Comprehensive income attributable to COPT	90,536	25,355	118,954	34,071
Corporate Office Properties, L.P. | Interest Expense
Other comprehensive (loss) income
Losses on interest rate derivatives included in interest expense	$ 915	$ 756	$ 2,457	$ 2,170

XML

Summary of Significant Accounting Policies

9 Months Ended

Sep. 30, 2015

Accounting Policies [Abstract]

Summary of Significant Accounting Policies

Summary of Significant Accounting Policies

Basis of Presentation

The COPT consolidated financial statements include the accounts of COPT, the Operating Partnership, their subsidiaries and other entities in which COPT has a majority voting interest and control.  The COPLP consolidated financial statements include the accounts of COPLP, its subsidiaries and other entities in which COPLP has a majority voting interest and control.  We also consolidate certain entities when control of such entities can be achieved through means other than voting rights (“variable interest entities” or “VIEs”) if we are deemed to be the primary beneficiary of such entities.  We eliminate all significant intercompany balances and transactions in consolidation.

 We use the equity method of accounting when we own an interest in an entity and can exert significant influence over but cannot control the entity’s operations. We discontinue equity method accounting if our investment in an entity (and net advances) is reduced to zero unless we have guaranteed obligations of the entity or are otherwise committed to provide further financial support for the entity.

These interim financial statements should be read together with the consolidated financial statements and notes thereto as of and for the year ended December 31, 2014 included in our 2014 Annual Report on Form 10-K.  The unaudited consolidated financial statements include all adjustments that are necessary, in the opinion of management, to fairly present our financial position and results of operations.  All adjustments are of a normal recurring nature.  The consolidated financial statements have been prepared using the accounting policies described in our 2014 Annual Report on Form 10-K.

Recent Accounting Pronouncements

In May 2014, the Financial Accounting Standards Board (“FASB”) issued guidance regarding the recognition of revenue from contracts with customers. Under this guidance, an entity will recognize revenue to depict the transfer of goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. Additionally, this guidance requires improved disclosures regarding the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers. We are required to adopt this guidance for our annual and interim periods beginning January 1, 2018 using one of two methods: retrospective restatement for each reporting period presented at the time of adoption, or retrospectively with the cumulative effect of initially applying this guidance recognized at the date of initial application. We are currently assessing the financial impact of this guidance on our consolidated financial statements.

In January 2015, the FASB issued guidance regarding the presentation of extraordinary and unusual items in statements of operations. This guidance eliminates the concept of extraordinary items. However, the presentation and disclosure requirements for items that are either unusual in nature or infrequent in occurrence remain and will be expanded to include items that are both unusual in nature and infrequent in occurrence. This guidance is effective for periods beginning after December 15, 2015. We expect that the application of this guidance will have no effect on our reported consolidated financial statements.

In February 2015, the FASB issued guidance regarding amendments to the consolidation analysis. This guidance amends the criteria for determining which entities are considered variable interest entities (“VIE”), amends the criteria for determining if a service provider possesses a variable interest in a VIE and ends the deferral granted to investment companies for application of the VIE consolidation model. This guidance is effective for annual periods, and interim periods therein, beginning after December 15, 2015. We are currently assessing the financial impact of this guidance on our consolidated financial statements.

In April 2015, the FASB issued guidance that changes the presentation of debt issuance costs in financial statements. This guidance requires an entity to present such costs in the balance sheet as a direct deduction from the related debt liability rather than as an asset. Amortization of the costs will continue to be reported as interest expense. This guidance was further updated in August 2015 with respect to debt issuance costs of line-of-credit arrangements to note that it will be permissible for an entity to defer and present debt issuance costs as an asset and subsequently amortize the deferred debt issuance costs ratably over the term of a line-of-credit arrangement, regardless of whether there are any outstanding borrowings on the line-of-credit arrangement. This guidance is effective for annual reporting periods beginning after December 15, 2016. Early adoption is permitted. This guidance will be applied retrospectively to each prior period presented. We expect that the application of this guidance will not materially affect our consolidated financial statements.

In September 2015, the FASB issued guidance that eliminates the requirement to restate prior period financial statements for measurement period adjustments following a business combination.  The guidance requires that the cumulative impact of a measurement period adjustment (including the impact on prior periods) be recognized in the reporting period in which the adjustment is identified. The prior period impact of the adjustment should be either presented separately on the face of the statement of operations or disclosed in the notes. This guidance is effective for annual reporting periods beginning after December 15, 2015.  This guidance will be applied prospectively for measurement period adjustments that occur after the effective date.  We expect that the application of this guidance will not materially affect our consolidated financial statements.

XML

Debt, Net (Details)				3 Months Ended		9 Months Ended
	Jun. 29, 2015 USD ($)	May. 06, 2015 USD ($) extensions	Apr. 20, 2015	Sep. 30, 2015 USD ($)	Sep. 30, 2014 USD ($)	Sep. 30, 2015 USD ($)	Sep. 30, 2014 USD ($)	Aug. 28, 2015 USD ($)	May. 05, 2015 USD ($)	Dec. 31, 2014 USD ($)
Debt
Carrying Value				$ 2,121,240,000		$ 2,121,240,000				$ 1,920,057,000
Interest costs capitalized				1,500,000	$ 1,300,000	5,600,000	$ 4,300,000
Line of Credit | Revolving Credit Facility
Debt
Number of extensions | extensions		2
Term of extension option		6 months
Line of Credit | Revolving Credit Facility | Minimum
Debt
Commitment fee (as a percent)		0.125%
Line of Credit | Revolving Credit Facility | Minimum | London Interbank Offered Rate (LIBOR)
Debt
Variable rate, spread (as a percent)		0.875%
Line of Credit | Revolving Credit Facility | Maximum
Debt
Commitment fee (as a percent)		0.30%
Line of Credit | Revolving Credit Facility | Maximum | London Interbank Offered Rate (LIBOR)
Debt
Variable rate, spread (as a percent)		1.60%
Line of Credit | Term Loan Facilities
Debt
Maximum availability		$ 300,000,000							$ 250,000,000
Increase to maximum borrowing capacity		200,000,000
Aggregate maximum borrowing capacity		500,000,000
Proceeds from issuance of debt		$ 50,000,000
Line of Credit | Term Loan Facilities | Minimum | London Interbank Offered Rate (LIBOR)
Debt
Variable rate, spread (as a percent)		0.90%
Line of Credit | Term Loan Facilities | Maximum | London Interbank Offered Rate (LIBOR)
Debt
Variable rate, spread (as a percent)		1.85%
Mortgage and Other Secured Loans:
Debt
Carrying Value				324,466,000		324,466,000				424,016,000
Fixed rate mortgage loans
Debt
Carrying Value				288,217,000		$ 288,217,000				387,139,000
Stated interest rates, low end of range (as a percent)						3.96%
Stated interest rates, high end of range (as a percent)						7.87%
Unamortized premium included in carrying value				$ 24,000		$ 24,000				42,000
Debt settled through the surrender of real estate assets								$ 150,000,000
Weighted-average interest rate excluding incremental rate on default rate				6.07%		6.07%
Variable rate secured loans
Debt
Carrying Value				$ 36,249,000		$ 36,249,000				36,877,000
Description of variable rate basis						LIBOR
Stated interest rate (as a percent)				2.45%		2.45%
Variable rate secured loans | London Interbank Offered Rate (LIBOR)
Debt
Variable rate, spread (as a percent)						2.25%
Variable rate secured loans | Revolving Credit Facility
Debt
Weighted average interest rate (as a percent)				1.48%		1.48%
Revolving Credit Facility
Debt
Carrying Value				$ 87,000,000		$ 87,000,000				83,000,000
Description of variable rate basis						LIBOR
Revolving Credit Facility | Minimum | London Interbank Offered Rate (LIBOR)
Debt
Variable rate, spread (as a percent)						0.875%
Revolving Credit Facility | Maximum | London Interbank Offered Rate (LIBOR)
Debt
Variable rate, spread (as a percent)						1.60%
Revolving Credit Facility | Revolving Credit Facility
Debt
Maximum availability				800,000,000		$ 800,000,000
Term Loan Facilities
Debt
Carrying Value				$ 520,000,000		$ 520,000,000				520,000,000
Description of variable rate basis						LIBOR
Weighted average interest rate (as a percent)				1.78%		1.78%
Additional borrowing capacity available provided there is no default under the agreement				$ 380,000,000		$ 380,000,000
Term Loan Facilities | Minimum | London Interbank Offered Rate (LIBOR)
Debt
Variable rate, spread (as a percent)						0.90%
Term Loan Facilities | Maximum | London Interbank Offered Rate (LIBOR)
Debt
Variable rate, spread (as a percent)						2.60%
3.60% Senior Notes | Unsecured senior notes
Debt
Carrying Value				$ 347,691,000		$ 347,691,000				347,496,000
Stated interest rate (as a percent)				3.60%		3.60%
Debt instrument, face amount				$ 350,000,000		$ 350,000,000
Unamortized discount included in carrying value				$ 2,300,000		$ 2,300,000				2,500,000
Interest rate on debt (as a percent)				3.70%		3.70%
5.250% Senior Notes | Unsecured senior notes
Debt
Carrying Value				$ 246,074,000		$ 246,074,000				245,797,000
Stated interest rate (as a percent)				5.25%		5.25%
Debt instrument, face amount				$ 250,000,000		$ 250,000,000
Unamortized discount included in carrying value				$ 3,900,000		$ 3,900,000				4,200,000
Interest rate on debt (as a percent)				5.49%		5.49%
3.70% Senior Notes | Unsecured senior notes
Debt
Carrying Value				$ 297,830,000		$ 297,830,000				297,569,000
Stated interest rate (as a percent)				3.70%		3.70%
Debt instrument, face amount				$ 300,000,000		$ 300,000,000
Unamortized discount included in carrying value				$ 2,200,000		$ 2,200,000				2,400,000
Interest rate on debt (as a percent)				3.85%		3.85%
5.000% Senior Notes | Unsecured senior notes
Debt
Carrying Value				$ 296,646,000		$ 296,646,000				0
Stated interest rate (as a percent)	5.00%			5.00%		5.00%
Debt instrument, face amount	$ 300,000,000
Unamortized discount included in carrying value				$ 3,400,000		$ 3,400,000
Interest rate on debt (as a percent)				5.15%		5.15%
Debt issuance as a percentage of principal amount	99.51%
Proceeds from debt, net	$ 296,600,000
Redemption price ( as a percent)	100.00%
5.000% Senior Notes | Unsecured senior notes | Adjusted Treasury
Debt
Basis points used in determining redemption price prior to maturity	0.45%
Unsecured notes payable
Debt
Carrying Value				$ 1,533,000		$ 1,533,000				1,607,000
Stated interest rate (as a percent)				0.00%		0.00%
Unamortized discount included in carrying value				$ 578,000		$ 578,000				654,000
4.25% Exchangeable Senior Notes
Debt
Carrying Value				$ 0		$ 0				$ 572,000
Percentage of principal amount redeemed			100.00%

XML

Earnings Per Share ("EPS") and Earnings Per Unit ("EPU") (Details 2) - shares shares in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2015	Sep. 30, 2014	Sep. 30, 2015	Sep. 30, 2014
Conversion of common units
Antidilutive securities
Antidilutive securities excluded from computation of diluted earnings per share (in shares)	3,679	3,876	0	3,915
Conversion of Series I Preferred Units
Antidilutive securities
Antidilutive securities excluded from computation of diluted earnings per share (in shares)	176	176	176	176
Conversion of Series K Preferred Shares
Antidilutive securities
Antidilutive securities excluded from computation of diluted earnings per share (in shares)	0	434	434	434
Weighted average restricted stock and deferred shares
Antidilutive securities
Antidilutive securities excluded from computation of diluted earnings per share (in shares)	411	401	412	404
Weighted average options
Antidilutive securities
Antidilutive securities excluded from computation of diluted earnings per share (in shares)	440	490	480	495
Corporate Office Properties, L.P. | Weighted average restricted stock and deferred shares
Antidilutive securities
Antidilutive securities excluded from computation of diluted earnings per share (in shares)	411	401	412	404
Corporate Office Properties, L.P. | Weighted average options
Antidilutive securities
Antidilutive securities excluded from computation of diluted earnings per share (in shares)	440	490	480	495
Corporate Office Properties, L.P. | Conversion of Series I preferred units
Antidilutive securities
Antidilutive securities excluded from computation of diluted earnings per share (in shares)	176	176	176	176
Corporate Office Properties, L.P. | Conversion of Series K preferred units
Antidilutive securities
Antidilutive securities excluded from computation of diluted earnings per share (in shares)	0	434	434	434

XML

Summary of Significant Accounting Policies (Policies)

9 Months Ended

Sep. 30, 2015

Accounting Policies [Abstract]

Basis of Presentation

Basis of Presentation

The COPT consolidated financial statements include the accounts of COPT, the Operating Partnership, their subsidiaries and other entities in which COPT has a majority voting interest and control.  The COPLP consolidated financial statements include the accounts of COPLP, its subsidiaries and other entities in which COPLP has a majority voting interest and control.  We also consolidate certain entities when control of such entities can be achieved through means other than voting rights (“variable interest entities” or “VIEs”) if we are deemed to be the primary beneficiary of such entities.  We eliminate all significant intercompany balances and transactions in consolidation.

 We use the equity method of accounting when we own an interest in an entity and can exert significant influence over but cannot control the entity’s operations. We discontinue equity method accounting if our investment in an entity (and net advances) is reduced to zero unless we have guaranteed obligations of the entity or are otherwise committed to provide further financial support for the entity.

These interim financial statements should be read together with the consolidated financial statements and notes thereto as of and for the year ended December 31, 2014 included in our 2014 Annual Report on Form 10-K.  The unaudited consolidated financial statements include all adjustments that are necessary, in the opinion of management, to fairly present our financial position and results of operations.  All adjustments are of a normal recurring nature.  The consolidated financial statements have been prepared using the accounting policies described in our 2014 Annual Report on Form 10-K.

Recent Accounting Pronouncement

Recent Accounting Pronouncements

In May 2014, the Financial Accounting Standards Board (“FASB”) issued guidance regarding the recognition of revenue from contracts with customers. Under this guidance, an entity will recognize revenue to depict the transfer of goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. Additionally, this guidance requires improved disclosures regarding the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers. We are required to adopt this guidance for our annual and interim periods beginning January 1, 2018 using one of two methods: retrospective restatement for each reporting period presented at the time of adoption, or retrospectively with the cumulative effect of initially applying this guidance recognized at the date of initial application. We are currently assessing the financial impact of this guidance on our consolidated financial statements.

In January 2015, the FASB issued guidance regarding the presentation of extraordinary and unusual items in statements of operations. This guidance eliminates the concept of extraordinary items. However, the presentation and disclosure requirements for items that are either unusual in nature or infrequent in occurrence remain and will be expanded to include items that are both unusual in nature and infrequent in occurrence. This guidance is effective for periods beginning after December 15, 2015. We expect that the application of this guidance will have no effect on our reported consolidated financial statements.

In February 2015, the FASB issued guidance regarding amendments to the consolidation analysis. This guidance amends the criteria for determining which entities are considered variable interest entities (“VIE”), amends the criteria for determining if a service provider possesses a variable interest in a VIE and ends the deferral granted to investment companies for application of the VIE consolidation model. This guidance is effective for annual periods, and interim periods therein, beginning after December 15, 2015. We are currently assessing the financial impact of this guidance on our consolidated financial statements.

In April 2015, the FASB issued guidance that changes the presentation of debt issuance costs in financial statements. This guidance requires an entity to present such costs in the balance sheet as a direct deduction from the related debt liability rather than as an asset. Amortization of the costs will continue to be reported as interest expense. This guidance was further updated in August 2015 with respect to debt issuance costs of line-of-credit arrangements to note that it will be permissible for an entity to defer and present debt issuance costs as an asset and subsequently amortize the deferred debt issuance costs ratably over the term of a line-of-credit arrangement, regardless of whether there are any outstanding borrowings on the line-of-credit arrangement. This guidance is effective for annual reporting periods beginning after December 15, 2016. Early adoption is permitted. This guidance will be applied retrospectively to each prior period presented. We expect that the application of this guidance will not materially affect our consolidated financial statements.

In September 2015, the FASB issued guidance that eliminates the requirement to restate prior period financial statements for measurement period adjustments following a business combination.  The guidance requires that the cumulative impact of a measurement period adjustment (including the impact on prior periods) be recognized in the reporting period in which the adjustment is identified. The prior period impact of the adjustment should be either presented separately on the face of the statement of operations or disclosed in the notes. This guidance is effective for annual reporting periods beginning after December 15, 2015.  This guidance will be applied prospectively for measurement period adjustments that occur after the effective date.  We expect that the application of this guidance will not materially affect our consolidated financial statements.

XML

Share-Based Compensation (Tables)

9 Months Ended

Sep. 30, 2015

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Schedule of payouts for defined performance under performance-based awards of share-based compensation

The number of PSUs earned (“earned PSUs”) at the end of the performance period will be determined based on the percentile rank of COPT’s total shareholder return relative to a peer group of companies, as set forth in the following schedule:

Percentile Rank	Earned PSUs Payout %
75th or greater	200% of PSUs granted
50th or greater	100% of PSUs granted
25th	50% of PSUs granted
Below 25th	0% of PSUs granted

XML

Equity

9 Months Ended

Sep. 30, 2015

Equity [Abstract]

Equity

Equity

During the nine months endedSeptember 30, 2015, COPT issued 890,241 common shares at a weighted average price of $30.29 per share under its at-the-market (“ATM”) stock offering program established in October 2012. Net proceeds from the shares issued totaled $26.6 million, after payment of $0.4 million in commissions to sales agents. These net proceeds were contributed to COPLP in exchange for 890,241 common units. COPT’s remaining capacity under the ATM Plan is an aggregate gross sales price of $84.0 million in common share sales.

During the nine months endedSeptember 30, 2015, certain COPLP limited partners redeemed 160,160 common units in COPLP for an equal number of common shares in COPT.

See Note 14 for disclosure of COPT common share and COPLP common unit activity pertaining to our share-based compensation plans.