10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-Q 

(Mark one)

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

For the quarterly period ended September 30, 2020

or

☐ 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

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Shares of beneficial interest, $0.01 par value	OFC	New York Stock Exchange

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 ☒ Yes   ☐ No

Corporate Office Properties, L.P. ☒ Yes   ☐ No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files).

Corporate Office Properties Trust ☒ Yes   ☐ No

Corporate Office Properties, L.P. ☒ Yes   ☐ No

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

Corporate Office Properties Trust

Large accelerated filer ☒ Accelerated filer ☐ Non-accelerated filer ☐ Smaller reporting company ☐ Emerging growth company ☐

Corporate Office Properties, L.P.

Large accelerated filer ☐ Accelerated filer ☐ Non-accelerated filer ☒ Smaller reporting company ☐ Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. 

Corporate Office Properties Trust ☐

Corporate Office Properties, L.P. ☐

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 ☐ Yes   ☒ No

Corporate Office Properties, L.P. ☐ Yes   ☒ No

As of October 23, 2020, 112,175,248 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, 2020 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, 2020, COPT owned 98.6% of the outstanding common units in COPLP; the remaining common units and all of the outstanding COPLP preferred units 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 two operate as an interrelated, consolidated company. COPT is a REIT 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 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.

Noncontrolling interests, 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. 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 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, investors 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 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;

•Note 8, Prepaid Expenses and Other Assets, Net 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, 2020 and December 31, 2019 (unaudited)	3
	Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2020 and 2019 (unaudited)	4
	Consolidated Statements of Comprehensive Income for the Three and Nine Months Ended September 30, 2020 and 2019 (unaudited)	5
	Consolidated Statements of Equity for the Three and Nine Months Ended September 30, 2020 and 2019 (unaudited)	6
	Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2020 and 2019 (unaudited)	8
Consolidated Financial Statements of Corporate Office Properties, L.P.
	Consolidated Balance Sheets as of September 30, 2020 and December 31, 2019 (unaudited)	10
	Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2020 and 2019 (unaudited)	11
	Consolidated Statements of Comprehensive Income for the Three and Nine Months Ended September 30, 2020 and 2019 (unaudited)	12
	Consolidated Statements of Equity for the Three and Nine Months Ended September 30, 2020 and 2019 (unaudited)	13
	Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2020 and 2019 (unaudited)	15
Notes to Consolidated Financial Statements (unaudited)		17
Item 2:	Management’s Discussion and Analysis of Financial Condition and Results of Operations	43
Item 3:	Quantitative and Qualitative Disclosures About Market Risk	60
Item 4:	Controls and Procedures	60
PART II: OTHER INFORMATION
Item 1:	Legal Proceedings	61
Item 1A:	Risk Factors	61
Item 2:	Unregistered Sales of Equity Securities and Use of Proceeds	62
Item 3:	Defaults Upon Senior Securities	62
Item 4:	Mine Safety Disclosures	62
Item 5:	Other Information	62
Item 6:	Exhibits	63
SIGNATURES		64

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, 2020		December 31, 2019
Assets
Properties, net:
Operating properties, net	$	2,999,892	$	2,772,647
Projects in development or held for future development	587,046		568,239
Total properties, net	3,586,938		3,340,886
Property - operating right-of-use assets	36,442		27,864
Property - finance right-of-use assets	40,432		40,458
Cash and cash equivalents	11,458		14,733
Investment in unconsolidated real estate joint ventures	49,662		51,949
Accounts receivable, net	36,151		35,444
Deferred rent receivable	92,853		87,736
Intangible assets on real estate acquisitions, net	22,433		27,392
Deferred leasing costs (net of accumulated amortization of $31,927 and $33,782 respectively)	59,392		58,392
Investing receivables (net of allowance for credit losses of $4,040 at September 30, 2020)	74,136		73,523
Prepaid expenses and other assets, net	110,292		96,076
Total assets	$	4,120,189	$	3,854,453
Liabilities and equity
Liabilities:
Debt, net	$	2,181,551	$	1,831,139
Accounts payable and accrued expenses	140,921		148,746
Rents received in advance and security deposits	30,276		33,620
Dividends and distributions payable	31,307		31,263
Deferred revenue associated with operating leases	8,579		7,361
Property - operating lease liabilities	26,382		17,317
Interest rate derivatives	10,977		25,682
Other liabilities	17,038		10,649
Total liabilities	2,447,031		2,105,777
Commitments and contingencies (Note 17)
Redeemable noncontrolling interests	23,522		29,431
Equity:
Corporate Office Properties Trust’s shareholders’ equity:
Common Shares of beneficial interest ($0.01 par value; 150,000,000 shares authorized; shares issued and outstanding of 112,175,688 at September 30, 2020 and 112,068,705 at December 31, 2019)	1,122		1,121
Additional paid-in capital	2,479,321		2,481,558
Cumulative distributions in excess of net income	(860,647)		(778,275)
Accumulated other comprehensive loss	(10,548)		(25,444)
Total Corporate Office Properties Trust’s shareholders’ equity	1,609,248		1,678,960
Noncontrolling interests in subsidiaries:
Common units in COPLP	19,522		19,597
Preferred units in COPLP	8,800		8,800
Other consolidated entities	12,066		11,888
Noncontrolling interests in subsidiaries	40,388		40,285
Total equity	1,649,636		1,719,245
Total liabilities, redeemable noncontrolling interests and equity	$	4,120,189	$	3,854,453

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,
	2020		2019		2020		2019
Revenues
Lease revenue	$	133,875	$	129,461	$	397,034	$	391,779
Other property revenue	568		1,273		2,063		3,716
Construction contract and other service revenues	20,323		28,697		46,240		87,946
Total revenues	154,766		159,431		445,337		483,441
Operating expenses
Property operating expenses	51,552		49,714		151,755		147,045
Depreciation and amortization associated with real estate operations	35,332		34,692		101,540		104,290
Construction contract and other service expenses	19,220		27,802		44,052		85,130
Impairment losses	1,530		327		1,530		327
General, administrative and leasing expenses	7,467		7,929		23,111		26,066
Business development expenses and land carry costs	1,094		964		3,474		2,947
Total operating expenses	116,195		121,428		325,462		365,805
Interest expense	(17,152)		(17,126)		(50,789)		(54,275)
Interest and other income	1,746		1,842		5,233		5,977
Credit loss recoveries	1,465		—		161		—
Gain on sales of real estate	—		—		5		84,469
Loss on early extinguishment of debt	(3,237)		—		(3,237)		—
Loss on interest rate derivatives	(53,196)		—		(53,196)		—
(Loss) income before equity in income of unconsolidated entities and income taxes	(31,803)		22,719		18,052		153,807
Equity in income of unconsolidated entities	477		396		1,372		1,207
Income tax (expense) benefit	(16)		131		(95)		113
Net (loss) income	(31,342)		23,246		19,329		155,127
Net loss (income) attributable to noncontrolling interests:
Common units in COPLP	386		(267)		(185)		(1,863)
Preferred units in COPLP	(77)		(157)		(231)		(487)
Other consolidated entities	(812)		(1,565)		(3,207)		(3,870)
Net (loss) income attributable to COPT common shareholders	$	(31,845)	$	21,257	$	15,706	$	148,907
Earnings per common share: (1)
Net (loss) income attributable to COPT common shareholders - basic	$	(0.29)	$	0.19	$	0.14	$	1.34
Net (loss) income attributable to COPT common shareholders - diluted	$	(0.29)	$	0.19	$	0.14	$	1.33

(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,
	2020		2019		2020		2019
Net (loss) income	$	(31,342)	$	23,246	$	19,329	$	155,127
Other comprehensive income (loss):
Unrealized income (loss) on interest rate derivatives	1,428		(11,047)		(39,592)		(33,437)
Reclassification adjustments on interest rate derivatives recognized in interest expense	1,342		(307)		2,408		(1,434)
Reclassification adjustments on interest rate derivatives recognized in loss on interest rate derivatives	51,865		—		51,865		—
Total other comprehensive income (loss)	54,635		(11,354)		14,681		(34,871)
Comprehensive income	23,293		11,892		34,010		120,256
Comprehensive income attributable to noncontrolling interests	(1,173)		(1,750)		(3,408)		(5,691)
Comprehensive income attributable to COPT	$	22,120	$	10,142	$	30,602	$	114,565

See accompanying notes to consolidated financial statements.

5

Corporate Office Properties Trust and Subsidiaries

Consolidated Statements of Equity

(Dollars in thousands)

(unaudited)

	Common Shares		Additional Paid-in Capital		Cumulative Distributions in Excess of Net Income		Accumulated Other Comprehensive Loss		Noncontrolling Interests		Total
For the Three Months Ended September 30, 2019
Balance at June 30, 2019 (111,949,887 common shares outstanding)	$	1,119	$	2,475,293	$	(780,667)	$	(23,465)	$	46,831	$	1,719,111
Conversion of common units to common shares (97,539 shares)	1		1,475		—		—		(1,476)		—
Redemption of common units	—		—		—		—		(24)		(24)
Share-based compensation (11,749 shares issued, net of redemptions)	1		1,525		—		—		369		1,895
Redemption of vested equity awards	—		(53)		—		—		—		(53)
Adjustments to noncontrolling interests resulting from changes in ownership of COPLP	—		312		—		—		(312)		—
Comprehensive income	—		—		21,257		(11,115)		565		10,707
Dividends	—		—		(30,825)		—		—		(30,825)
Distributions to owners of common and preferred units in COPLP	—		—		—		—		(517)		(517)
Distributions to noncontrolling interests in other consolidated entities	—		—		—		—		(5,878)		(5,878)
Adjustment to arrive at fair value of redeemable noncontrolling interests	—		1,531		—		—		—		1,531
Balance at September 30, 2019 (112,059,175 common shares outstanding)	$	1,121	$	2,480,083	$	(790,235)	$	(34,580)	$	39,558	$	1,695,947
For the Three Months Ended September 30, 2020
Balance at June 30, 2020 (112,183,192 common shares outstanding)	$	1,122	$	2,477,977	$	(797,959)	$	(64,513)	$	40,297	$	1,656,924
Share-based compensation (7,504 shares redeemed, net of issuances)	—		1,223		—		—		561		1,784
Redemption of vested equity awards	—		(57)		—		—		—		(57)
Adjustments to noncontrolling interests resulting from changes in ownership of COPLP	—		552		—		—		(552)		—
Comprehensive income	—		—		(31,845)		53,965		533		22,653
Dividends	—		—		(30,843)		—		—		(30,843)
Distributions to owners of common and preferred units in COPLP	—		—		—		—		(444)		(444)
Distributions to noncontrolling interests in other consolidated entities	—		—		—		—		(7)		(7)
Adjustment to arrive at fair value of redeemable noncontrolling interests	—		(374)		—		—		—		(374)
Balance at September 30, 2020 (112,175,688 common shares outstanding)	$	1,122	$	2,479,321	$	(860,647)	$	(10,548)	$	40,388	$	1,649,636

See accompanying notes to consolidated financial statements.

6

Corporate Office Properties Trust and Subsidiaries

Consolidated Statements of Equity (continued)

(Dollars in thousands)

(unaudited)

	Common Shares		Additional Paid-in Capital		Cumulative Distributions in Excess of Net Income		Accumulated Other Comprehensive Loss		Noncontrolling Interests		Total
For the Nine Months Ended September 30, 2019
Balance at December 31, 2018 (110,241,868 common shares outstanding)	$	1,102	$	2,431,355	$	(846,808)	$	(238)	$	41,637	$	1,627,048
Conversion of common units to common shares (103,039 shares)	1		1,555		—		—		(1,556)		—
Redemption of common units	—		—		—		—		(25)		(25)
Common shares issued under forward equity sale agreements (1,614,087 shares)	16		46,438		—		—		—		46,454
Share-based compensation (100,181 shares issued, net of redemptions)	2		4,574		—		—		954		5,530
Redemption of vested equity awards	—		(1,973)		—		—		—		(1,973)
Adjustments to noncontrolling interests resulting from changes in ownership of COPLP	—		(522)		—		—		522		—
Comprehensive income	—		—		148,907		(34,342)		2,962		117,527
Dividends	—		—		(92,334)		—		—		(92,334)
Distributions to owners of common and preferred units in COPLP	—		—		—		—		(1,620)		(1,620)
Contributions from noncontrolling interests in other consolidated entities	—		—		—		—		2,570		2,570
Distributions to noncontrolling interests in other consolidated entities	—		—		—		—		(5,886)		(5,886)
Adjustment to arrive at fair value of redeemable noncontrolling interests	—		(1,344)		—		—		—		(1,344)
Balance at September 30, 2019 (112,059,175 common shares outstanding)	$	1,121	$	2,480,083	$	(790,235)	$	(34,580)	$	39,558	$	1,695,947
For the Nine Months Ended September 30, 2020
Balance at December 31, 2019 (112,068,705 common shares outstanding)	$	1,121	$	2,481,558	$	(778,275)	$	(25,444)	$	40,285	$	1,719,245
Cumulative effect of accounting change for adoption of credit loss guidance	—		—		(5,541)		—		—		(5,541)
Balance at December 31, 2019, as adjusted	1,121		2,481,558		(783,816)		(25,444)		40,285		1,713,704
Conversion of common units to common shares (12,009 shares)	—		182		—		—		(182)		—
Share-based compensation (94,974 shares issued, net of redemptions)	1		3,394		—		—		1,335		4,730
Redemption of vested equity awards	—		(1,629)		—		—		—		(1,629)
Adjustments to noncontrolling interests resulting from changes in ownership of COPLP	—		527		—		—		(527)		—
Comprehensive income	—		—		15,706		14,896		693		31,295
Dividends	—		—		(92,537)		—		—		(92,537)
Distributions to owners of common and preferred units in COPLP	—		—		—		—		(1,306)		(1,306)
Contributions from noncontrolling interests in other consolidated entities	—		—		—		—		112		112
Distributions to noncontrolling interests in other consolidated entities	—		—		—		—		(22)		(22)
Adjustment to arrive at fair value of redeemable noncontrolling interests	—		(4,711)		—		—		—		(4,711)
Balance at September 30, 2020 (112,175,688 common shares outstanding)	$	1,122	$	2,479,321	$	(860,647)	$	(10,548)	$	40,388	$	1,649,636

7

Corporate Office Properties Trust and Subsidiaries

Consolidated Statements of Cash Flows

(in thousands)

(unaudited) 

	For the Nine Months Ended September 30,
	2020		2019
Cash flows from operating activities
Revenues from real estate operations received	$	394,094	$	391,758
Construction contract and other service revenues received	53,911		65,813
Property operating expenses paid	(159,007)		(151,478)
Construction contract and other service expenses paid	(45,686)		(68,599)
General, administrative, leasing, business development and land carry costs paid	(24,408)		(23,806)
Interest expense paid	(49,693)		(52,818)
Lease incentives paid	(12,634)		(6,366)
Other	2,464		2,533
Net cash provided by operating activities	159,041		157,037
Cash flows from investing activities
Development and redevelopment of properties	(284,416)		(308,997)
Tenant improvements on operating properties	(23,377)		(16,466)
Other capital improvements on operating properties	(24,797)		(14,497)
Proceeds from property dispositions
Distribution from unconsolidated real estate joint venture following contribution of properties	—		129,783
Sale of properties	—		107,440
Distributions from unconsolidated real estate joint ventures	2,287		16,937
Investing receivables funded	(258)		(11,169)
Leasing costs paid	(12,455)		(13,502)
Settlement of interest rate derivatives	(53,130)		—
Other	(63)		1,558
Net cash used in investing activities	(396,209)		(108,913)
Cash flows from financing activities
Proceeds from debt
Revolving Credit Facility	409,000		349,000
Unsecured senior notes	395,264		—
Other debt proceeds	199,088		32,002
Repayments of debt
Revolving Credit Facility	(529,000)		(342,000)
Unsecured senior notes	(122,948)		—
Scheduled principal amortization	(3,077)		(3,300)
Deferred financing costs paid	(2,161)		(405)
Net proceeds from issuance of common shares	—		46,415
Common share dividends paid	(92,512)		(91,835)
Distributions paid to noncontrolling interests in COPLP	(1,303)		(1,661)
Distributions paid to noncontrolling interests in other consolidated entities	(15)		(5,882)
Distributions paid to redeemable noncontrolling interests	(13,515)		(984)
Redemption of vested equity awards	(1,629)		(1,973)
Payments in connection with early extinguishment of debt	(3,037)		—
Other	(442)		(1,944)
Net cash provided by (used in) financing activities	233,713		(22,567)
Net (decrease) increase in cash and cash equivalents and restricted cash	(3,455)		25,557
Cash and cash equivalents and restricted cash
Beginning of period	18,130		11,950
End of period	$	14,675	$	37,507

See accompanying notes to consolidated financial statements.

8

Corporate Office Properties Trust and Subsidiaries

Consolidated Statements of Cash Flows (continued)

(in thousands)

(unaudited)

	For the Nine Months Ended September 30,
	2020		2019
Reconciliation of net income to net cash provided by operating activities:
Net income	$	19,329	$	155,127
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and other amortization	102,864		105,686
Impairment losses	1,530		327
Amortization of deferred financing costs and net debt discounts	3,104		2,716
Increase in deferred rent receivable	(3,560)		(4,184)
Gain on sales of real estate	(5)		(84,469)
Share-based compensation	4,753		4,979
Loss on early extinguishment of debt	3,237		—
Loss on interest rate derivatives	53,196		—
Other	(4,184)		(4,296)
Changes in operating assets and liabilities:
Increase in accounts receivable	(744)		(9,483)
Increase in prepaid expenses and other assets, net	(13,164)		(26,878)
(Decrease) increase in accounts payable, accrued expenses and other liabilities	(3,971)		19,616
Decrease in rents received in advance and security deposits	(3,344)		(2,104)
Net cash provided by operating activities	$	159,041	$	157,037
Reconciliation of cash and cash equivalents and restricted cash:
Cash and cash equivalents at beginning of period	$	14,733	$	8,066
Restricted cash at beginning of period	3,397		3,884
Cash and cash equivalents and restricted cash at beginning of period	$	18,130	$	11,950
Cash and cash equivalents at end of period	$	11,458	$	34,005
Restricted cash at end of period	3,217		3,502
Cash and cash equivalents and restricted cash at end of period	$	14,675	$	37,507
Supplemental schedule of non-cash investing and financing activities:
(Decrease) increase in accrued capital improvements, leasing and other investing activity costs	$	(195)	$	29,457
Finance right-of-use asset contributed by noncontrolling interest in joint venture	$	—	$	2,570
Recognition of operating right-of-use assets and related lease liabilities	$	8,955	$	255
Non-cash changes from property dispositions:
Contribution of properties to unconsolidated real estate joint venture	$	—	$	99,288
Investment in unconsolidated real estate joint venture retained in disposition	$	—	$	26,500
Decrease in fair value of derivatives applied to accumulated other comprehensive loss and noncontrolling interests	$	(37,183)	$	(34,951)
Dividends/distributions payable	$	31,307	$	31,345
Decrease in noncontrolling interests and increase in shareholders’ equity in connection with the conversion of common units into common shares	$	182	$	1,556
Adjustments to noncontrolling interests resulting from changes in COPLP ownership	$	(527)	$	522
Increase in redeemable noncontrolling interests and decrease in equity to carry redeemable noncontrolling interests at fair value	$	4,711	$	1,344

See accompanying notes to consolidated financial statements.

9

Corporate Office Properties, L.P. and Subsidiaries

Consolidated Balance Sheets

(in thousands, except unit data)

(unaudited)

	September 30, 2020		December 31, 2019
Assets
Properties, net:
Operating properties, net	$	2,999,892	$	2,772,647
Projects in development or held for future development	587,046		568,239
Total properties, net	3,586,938		3,340,886
Property - operating right-of-use assets	36,442		27,864
Property - finance right-of-use assets	40,432		40,458
Cash and cash equivalents	11,458		14,733
Investment in unconsolidated real estate joint ventures	49,662		51,949
Accounts receivable, net	36,151		35,444
Deferred rent receivable	92,853		87,736
Intangible assets on real estate acquisitions, net	22,433		27,392
Deferred leasing costs (net of accumulated amortization of $31,927 and $33,782, respectively)	59,392		58,392
Investing receivables (net of allowance for credit losses of $4,040 at September 30, 2020)	74,136		73,523
Prepaid expenses and other assets, net	107,620		93,016
Total assets	$	4,117,517	$	3,851,393
Liabilities and equity
Liabilities:
Debt, net	$	2,181,551	$	1,831,139
Accounts payable and accrued expenses	140,921		148,746
Rents received in advance and security deposits	30,276		33,620
Distributions payable	31,307		31,263
Deferred revenue associated with operating leases	8,579		7,361
Property - operating lease liabilities	26,382		17,317
Interest rate derivatives	10,977		25,682
Other liabilities	14,366		7,589
Total liabilities	2,444,359		2,102,717
Commitments and contingencies (Note 17)
Redeemable noncontrolling interests	23,522		29,431
Equity:
Corporate Office Properties, L.P.’s equity:
Preferred units held by limited partner, 352,000 preferred units outstanding at September 30, 2020 and December 31, 2019	8,800		8,800
Common units, 112,175,688 and 112,068,705 held by the general partner and 1,628,421 and 1,482,425 held by limited partners at September 30, 2020 and December 31, 2019, respectively	1,639,287		1,724,159
Accumulated other comprehensive loss	(10,563)		(25,648)
Total Corporate Office Properties, L.P.’s equity	1,637,524		1,707,311
Noncontrolling interests in subsidiaries	12,112		11,934
Total equity	1,649,636		1,719,245
Total liabilities, redeemable noncontrolling interests and equity	$	4,117,517	$	3,851,393

See accompanying notes to consolidated financial statements.

10

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,
	2020		2019		2020		2019
Revenues
Lease revenue	$	133,875	$	129,461	$	397,034	$	391,779
Other property revenue	568		1,273		2,063		3,716
Construction contract and other service revenues	20,323		28,697		46,240		87,946
Total revenues	154,766		159,431		445,337		483,441
Operating expenses
Property operating expenses	51,552		49,714		151,755		147,045
Depreciation and amortization associated with real estate operations	35,332		34,692		101,540		104,290
Construction contract and other service expenses	19,220		27,802		44,052		85,130
Impairment losses	1,530		327		1,530		327
General, administrative and leasing expenses	7,467		7,929		23,111		26,066
Business development expenses and land carry costs	1,094		964		3,474		2,947
Total operating expenses	116,195		121,428		325,462		365,805
Interest expense	(17,152)		(17,126)		(50,789)		(54,275)
Interest and other income	1,746		1,842		5,233		5,977
Credit loss recoveries	1,465		—		161		—
Gain on sales of real estate	—		—		5		84,469
Loss on early extinguishment of debt	(3,237)		—		(3,237)		—
Loss on interest rate derivatives	(53,196)		—		(53,196)		—
(Loss) income before equity in income of unconsolidated entities and income taxes	(31,803)		22,719		18,052		153,807
Equity in income of unconsolidated entities	477		396		1,372		1,207
Income tax (expense) benefit	(16)		131		(95)		113
Net (loss) income	(31,342)		23,246		19,329		155,127
Net income attributable to noncontrolling interests in consolidated entities	(812)		(1,565)		(3,207)		(3,870)
Net (loss) income attributable to COPLP	(32,154)		21,681		16,122		151,257
Preferred unit distributions	(77)		(157)		(231)		(487)
Net (loss) income attributable to COPLP common unitholders	$	(32,231)	$	21,524	$	15,891	$	150,770
Earnings per common unit: (1)
Net (loss) income attributable to COPLP common unitholders - basic	$	(0.29)	$	0.19	$	0.14	$	1.34
Net (loss) income attributable to COPLP common unitholders - diluted	$	(0.29)	$	0.19	$	0.14	$	1.33

(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.

11

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,
	2020		2019		2020		2019
Net (loss) income	$	(31,342)	$	23,246	$	19,329	$	155,127
Other comprehensive income (loss):
Unrealized income (loss) on interest rate derivatives	1,428		(11,047)		(39,592)		(33,437)
Reclassification adjustments on interest rate derivatives recognized in interest expense	1,342		(307)		2,408		(1,434)
Reclassification adjustments on interest rate derivatives recognized in loss on interest rate derivatives	51,865		—		51,865		—
Total other comprehensive income (loss)	54,635		(11,354)		14,681		(34,871)
Comprehensive income	23,293		11,892		34,010		120,256
Comprehensive income attributable to noncontrolling interests	(827)		(1,464)		(2,803)		(3,769)
Comprehensive income attributable to COPLP	$	22,466	$	10,428	$	31,207	$	116,487

See accompanying notes to consolidated financial statements.

12

Corporate Office Properties, L.P. and Subsidiaries

Consolidated Statements of Equity

(Dollars in thousands)

(unaudited)

	Limited Partner Preferred Units			Common Units			Accumulated Other Comprehensive Loss		Noncontrolling Interests in Subsidiaries
	Units	Amount		Units	Amount						Total Equity
For the Three Months Ended September 30, 2019
Balance at June 30, 2019	352,000	$	8,800	113,532,731	$	1,716,912	$	(23,638)	$	17,037	$	1,719,111
Redemption of common units	—	—		(880)	(24)		—		—		(24)
Share-based compensation (units net of redemption)	—	—		11,749	1,895		—		—		1,895
Redemptions of vested equity awards	—	—		—	(53)		—		—		(53)
Comprehensive income	—	157		—	21,524		(11,253)		279		10,707
Distributions to owners of common and preferred units	—	(157)		—	(31,185)		—		—		(31,342)
Distributions to noncontrolling interests in subsidiaries	—	—		—	—		—		(5,878)		(5,878)
Adjustment to arrive at fair value of redeemable noncontrolling interests	—	—		—	1,531		—		—		1,531
Balance at September 30, 2019	352,000	$	8,800	113,543,600	$	1,710,600	$	(34,891)	$	11,438	$	1,695,947
For the Three Months Ended September 30, 2020
Balance at June 30, 2020	352,000	$	8,800	113,811,613	$	1,701,375	$	(65,183)	$	11,932	$	1,656,924
Share-based compensation (units net of issuances)	—	—		(7,504)	1,784		—		—		1,784
Redemptions of vested equity awards	—	—		—	(57)		—		—		(57)
Comprehensive income	—	77		—	(32,231)		54,620		187		22,653
Distributions to owners of common and preferred units	—	(77)		—	(31,210)		—		—		(31,287)
Distributions to noncontrolling interests in subsidiaries	—	—		—	—		—		(7)		(7)
Adjustment to arrive at fair value of redeemable noncontrolling interests	—	—		—	(374)		—		—		(374)
Balance at September 30, 2020	352,000	$	8,800	113,804,109	$	1,639,287	$	(10,563)	$	12,112	$	1,649,636

See accompanying notes to consolidated financial statements.

13

Corporate Office Properties, L.P. and Subsidiaries

Consolidated Statements of Equity (continued)

(Dollars in thousands)

(unaudited)

	Limited Partner Preferred Units			Common Units			Accumulated Other Comprehensive Loss		Noncontrolling Interests in Subsidiaries
	Units	Amount		Units	Amount						Total Equity
For the Nine Months Ended September 30, 2019
Balance at December 31, 2018	352,000	$	8,800	111,574,754	$	1,604,655	$	(121)	$	13,714	$	1,627,048
Redemption of common units	—	—		(924)	(25)		—		—		(25)
Issuance of common units resulting from common shares issued under COPT forward equity sale agreements	—	—		1,614,087	46,454		—		—		46,454
Share-based compensation (units net of redemption)	—	—		355,683	5,530		—		—		5,530
Redemptions of vested equity awards	—	—		—	(1,973)		—		—		(1,973)
Comprehensive income	—	487		—	150,770		(34,770)		1,040		117,527
Distributions to owners of common and preferred units	—	(487)		—	(93,467)		—		—		(93,954)
Contributions from noncontrolling interests in subsidiaries	—	—		—	—		—		2,570		2,570
Distributions to noncontrolling interests in subsidiaries	—	—		—	—		—		(5,886)		(5,886)
Adjustment to arrive at fair value of redeemable noncontrolling interests	—	—		—	(1,344)		—		—		(1,344)
Balance at September 30, 2019	352,000	$	8,800	113,543,600	$	1,710,600	$	(34,891)	$	11,438	$	1,695,947
For the Nine Months Ended September 30, 2020
Balance at December 31, 2019	352,000	$	8,800	113,551,130	$	1,724,159	$	(25,648)	$	11,934	$	1,719,245
Cumulative effect of accounting change for adoption of credit loss guidance	—	—		—	(5,541)		—		—		(5,541)
Balance at December 31, 2019, as adjusted	352,000	8,800		113,551,130	1,718,618		(25,648)		11,934		1,713,704
Share-based compensation (units net of redemption)	—	—		252,979	4,730		—		—		4,730
Redemptions of vested equity awards	—	—		—	(1,629)		—		—		(1,629)
Comprehensive income	—	231		—	15,891		15,085		88		31,295
Distributions to owners of common and preferred units	—	(231)		—	(93,612)		—		—		(93,843)
Contributions from noncontrolling interests in subsidiaries	—	—		—	—		—		112		112
Distributions to noncontrolling interests in subsidiaries	—	—		—	—		—		(22)		(22)
Adjustment to arrive at fair value of redeemable noncontrolling interests	—	—		—	(4,711)		—		—		(4,711)
Balance at September 30, 2020	352,000	$	8,800	113,804,109	$	1,639,287	$	(10,563)	$	12,112	$	1,649,636

See accompanying notes to consolidated financial statements.

14

Corporate Office Properties, L.P. and Subsidiaries

Consolidated Statements of Cash Flows

(in thousands)

(unaudited)

	For the Nine Months Ended September 30,
	2020		2019
Cash flows from operating activities
Revenues from real estate operations received	$	394,094	$	391,758
Construction contract and other service revenues received	53,911		65,813
Property operating expenses paid	(159,007)		(151,478)
Construction contract and other service expenses paid	(45,686)		(68,599)
General, administrative, leasing, business development and land carry costs paid	(24,408)		(23,806)
Interest expense paid	(49,693)		(52,818)
Lease incentives paid	(12,634)		(6,366)
Other	2,464		2,533
Net cash provided by operating activities	159,041		157,037
Cash flows from investing activities
Development and redevelopment of properties	(284,416)		(308,997)
Tenant improvements on operating properties	(23,377)		(16,466)
Other capital improvements on operating properties	(24,797)		(14,497)
Proceeds from property dispositions
Distribution from unconsolidated real estate joint venture following contribution of properties	—		129,783
Sale of properties	—		107,440
Distributions from unconsolidated real estate joint ventures	2,287		16,937
Investing receivables funded	(258)		(11,169)
Leasing costs paid	(12,455)		(13,502)
Settlement of interest rate derivatives	(53,130)		—
Other	(63)		1,558
Net cash used in investing activities	(396,209)		(108,913)
Cash flows from financing activities
Proceeds from debt
Revolving Credit Facility	409,000		349,000
Unsecured senior notes	395,264		—
Other debt proceeds	199,088		32,002
Repayments of debt
Revolving Credit Facility	(529,000)		(342,000)
Unsecured senior notes	(122,948)		—
Scheduled principal amortization	(3,077)		(3,300)
Deferred financing costs paid	(2,161)		(405)
Net proceeds from issuance of common units	—		46,415
Common unit distributions paid	(93,584)		(93,001)
Distributions paid to noncontrolling interests in other consolidated entities	(15)		(5,882)
Distributions paid to redeemable noncontrolling interests	(13,515)		(984)
Redemption of vested equity awards	(1,629)		(1,973)
Payments in connection with early extinguishment of debt	(3,037)		—
Other	(673)		(2,439)
Net cash provided by (used in) financing activities	233,713		(22,567)
Net (decrease) increase in cash and cash equivalents and restricted cash	(3,455)		25,557
Cash and cash equivalents and restricted cash
Beginning of period	18,130		11,950
End of period	$	14,675	$	37,507

See accompanying notes to consolidated financial statements.

15

Corporate Office Properties, L.P. and Subsidiaries

Consolidated Statements of Cash Flows (Continued)

(in thousands)

(unaudited)

	For the Nine Months Ended September 30,
	2020		2019
Reconciliation of net income to net cash provided by operating activities:
Net income	$	19,329	$	155,127
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and other amortization	102,864		105,686
Impairment losses	1,530		327
Amortization of deferred financing costs and net debt discounts	3,104		2,716
Increase in deferred rent receivable	(3,560)		(4,184)
Gain on sales of real estate	(5)		(84,469)
Share-based compensation	4,753		4,979
Loss on early extinguishment of debt	3,237		—
Loss on interest rate derivatives	53,196		—
Other	(4,184)		(4,296)
Changes in operating assets and liabilities:
Increase in accounts receivable	(744)		(9,483)
Increase in prepaid expenses and other assets, net	(13,552)		(26,489)
(Decrease) increase in accounts payable, accrued expenses and other liabilities	(3,583)		19,227
Decrease in rents received in advance and security deposits	(3,344)		(2,104)
Net cash provided by operating activities	$	159,041	$	157,037
Reconciliation of cash and cash equivalents and restricted cash:
Cash and cash equivalents at beginning of period	$	14,733	$	8,066
Restricted cash at beginning of period	3,397		3,884
Cash and cash equivalents and restricted cash at beginning of period	$	18,130	$	11,950
Cash and cash equivalents at end of period	$	11,458	$	34,005
Restricted cash at end of period	3,217		3,502
Cash and cash equivalents and restricted cash at end of period	$	14,675	$	37,507
Supplemental schedule of non-cash investing and financing activities:
(Decrease) increase in accrued capital improvements, leasing and other investing activity costs	$	(195)	$	29,457
Finance right-of-use asset contributed by noncontrolling interest in joint venture	$	—	$	2,570
Recognition of operating right-of-use assets and related lease liabilities	$	8,955	$	255
Non-cash changes from property dispositions:
Contribution of properties to unconsolidated real estate joint venture	$	—	$	99,288
Investment in unconsolidated real estate joint venture retained in disposition	$	—	$	26,500
Decrease in fair value of derivatives applied to accumulated other comprehensive loss and noncontrolling interests	$	(37,183)	$	(34,951)
Distributions payable	$	31,307	$	31,345
Increase in redeemable noncontrolling interests and decrease in equity to carry redeemable noncontrolling interests at fair value	$	4,711	$	1,344

See accompanying notes to consolidated financial statements.

16

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 own, manage, lease, develop and selectively acquire office and data center properties. The majority of our portfolio is in locations that support the United States Government (“USG”) and its contractors, most of whom are engaged in national security, defense and information technology (“IT”) related activities servicing what we believe are growing, durable, priority missions (“Defense/IT Locations”). We also own a portfolio of office properties located in select urban/urban-like submarkets in the Greater Washington, DC/Baltimore region with durable Class-A office fundamentals and characteristics (“Regional Office”). As of September 30, 2020, our properties included the following:

•176 properties totaling 20.4 million square feet comprised of 15.9 million square feet in 151 office properties and 4.5 million square feet in 25 single-tenant data center shell properties (“data center shells”). We owned 15 of these data center shells through unconsolidated real estate joint ventures;

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

•11 properties under development (ten office properties and one data center shell), including one partially-operational property, and expansion of one fully-operational property that we estimate will total approximately 1.6 million square feet upon completion; and

•approximately 860 acres of land controlled for future development that we believe could be developed into approximately 11.0 million square feet and 43 acres of other land.

COPLP owns real estate 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, development and construction 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, 2020, COPT owned 98.6% of the outstanding COPLP common units (“common units”); the remaining common units and all of the outstanding COPLP preferred units (“preferred units”) were owned by third parties. Common units not owned by COPT carry certain redemption rights. The number of common units owned by COPT is equivalent to the number of outstanding common shares of beneficial interest (“common shares”) of COPT, and the entitlement of common units to quarterly distributions and payments in liquidation is substantially the same as that of COPT common shareholders. In the case of any series of preferred units held by COPT, there would be 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; similarly, although 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 intercompany balances and transactions in consolidation.

17

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.

When we own an equity investment in an entity and cannot exert significant influence over its operations, we measure the investment at fair value, with changes recognized through net income. For an investment without a readily determinable fair value, we measure the investment at cost, less any impairments, plus or minus changes resulting from observable price changes for an identical or similar investment of the same issuer.

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, 2019 included in our 2019 Annual Report on Form 10-K.  The unaudited consolidated financial statements include all adjustments that are necessary, in the opinion of management, to fairly state 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 2019 Annual Report on Form 10-K as updated for our adoption of recent accounting pronouncements discussed below.

Reclassifications

We reclassified certain amounts from prior periods to conform to the current period presentation of our consolidated financial statements with no effect on previously reported net income or equity.

Recent Accounting Pronouncements

Effective January 1, 2020, we adopted guidance issued by the Financial Accounting Standards Board (“FASB”) that changes how entities measure credit losses for most financial assets and certain other instruments not measured at fair value through net income. The guidance replaces the current incurred loss model with an expected loss approach, resulting in a more timely recognition of such losses. The guidance applies to most financial assets measured at amortized cost and certain other instruments, including trade and other receivables (excluding those arising from operating leases), loans, held-to-maturity debt securities, net investments in leases and off-balance-sheet credit exposures. Under this guidance, we recognize an estimate of our expected credit losses on these asset types as an allowance, as the guidance requires that financial assets be measured on an amortized cost basis and be presented at the net amount expected to be collected. We adopted this guidance effective January 1, 2020 using the modified retrospective transition method under which we recognized a $5.5 million allowance for credit losses by means of a cumulative-effect adjustment to cumulative distributions in excess of net income of the Company (or common units of the Operating Partnership), and did not adjust prior comparative reporting periods. Our consolidated statements of operations reflect adjustments for changes in our expected credit losses occurring subsequent to adoption of this guidance.

Effective January 1, 2020, we adopted guidance issued by the FASB that modifies disclosure requirements for fair value measurements. The resulting changes in disclosure did not have a material impact on our consolidated financial statements.

Effective January 1, 2020, we adopted guidance issued by the FASB that aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. FASB guidance did not previously address the accounting for such implementation costs. Our adoption of this guidance did not have a material impact on our consolidated financial statements.

In March 2020, the FASB issued guidance containing practical expedients for reference rate reform related activities pertaining to debt, leases, derivatives and other contracts. The guidance is optional and may be adopted over time as reference rate reform activities occur. During the nine months ended September 30, 2020, we elected to apply an expedient to treat any changes in loans resulting from reference rate reform as debt modifications (as opposed to extinguishments) and hedge accounting expedients related to probability and the assessments of effectiveness for future LIBOR-indexed cash flows to assume that the index upon which future hedged transactions will be based matches the index on the corresponding derivatives. Application of the hedge accounting expedients preserves the presentation of derivatives consistent with past presentation. We will continue to evaluate the impact of this guidance and may apply other elections as applicable as additional changes in the market occur.

In April 2020, the FASB issued a Staff Q&A document that addressed the accounting for lease accounting guidance for lease concessions resulting from the COVID-19 pandemic. Under existing lease guidance, we would normally have to

18

determine, on a lease-by-lease basis, if a lease concession was the result of a new arrangement reached with the tenant (treated as a lease modification) or if such a concession was implemented pursuant to enforceable rights and obligations within the existing lease agreement (and, therefore, not treated as a lease modification). The Staff Q&A document enabled us to bypass the lease-by-lease analysis for lease concessions resulting from the COVID-19 pandemic, and instead elect to either apply the lease modification accounting framework or not, with such elections applied consistently to leases with similar characteristics and similar circumstances. Entities may make the elections for any lessor-provided concessions related to the effects of the COVID-19 pandemic (such as deferrals of lease payments or reduced future lease payments) as long as the concession does not result in a substantial increase in the rights of the lessor or the obligations of the lessee. We chose to apply the elections available under the Staff Q&A to restructurings of lease payment terms granted by us to tenants, the effect of which did not have a material impact on our consolidated financial statements.

Credit Losses, Financial Assets and Other Instruments

As discussed above, effective January 1, 2020, we adopted guidance issued by the FASB that changed how we measure credit losses for most financial assets and certain other instruments not measured at fair value through net income from an incurred loss model to an expected loss approach. Our items within the scope of this guidance included the following:

•investing receivables, as disclosed in Note 7;

•tenant notes receivable;

•other assets comprised of non-lease revenue related accounts receivable (primarily from construction contract services) and contract assets from unbilled construction contract revenue; and

•off-balance sheet credit exposures.

Under this guidance, we recognize an estimate of our expected credit losses on these items as an allowance, as the guidance requires that financial assets be measured on an amortized cost basis and be presented at the net amount expected to be collected (or as a separate liability in the case of off-balance sheet credit exposures). The allowance represents the portion of the amortized cost basis that we do not expect to collect (or loss we expect to incur in the case of off-balance sheet credit exposures) due to credit over the contractual life based on available information relevant to assessing the collectability of cash flows, which includes consideration of past events, current conditions and reasonable and supportable forecasts of future economic conditions (including consideration of asset- or borrower-specific factors). The guidance requires the allowance for expected credit losses to reflect the risk of loss, even when that risk is remote. An allowance for credit losses is measured and recorded upon the initial recognition of a financial asset (or off-balance sheet credit exposure), regardless of whether it is originated or purchased. Quarterly, the expected losses are re-estimated, considering any cash receipts and changes in risks or assumptions, with resulting adjustments recognized as credit loss expense or recoveries on our consolidated statements of operations.

We estimate expected credit losses for in-scope items using historical loss rate information developed for varying classifications of credit risk and contractual lives. Due to our limited quantity of items within the scope of this guidance and the unique risk characteristics of such items, we individually assign each in-scope item a credit risk classification. The credit risk classifications assigned by us are determined based on credit ratings assigned by ratings agencies (as available) or are internally-developed based on available financial information, historical payment experience, credit documentation, other publicly available information and current economic trends. In addition, for certain items in which the risk of credit loss is affected by the economic performance of a real estate development project, we develop probability weighted scenario analyses for varying levels of performance in estimating our credit loss allowance (applicable to our notes receivable from the City of Huntsville disclosed in Note 7 and a tax incremental financing obligation disclosed in Note 17).

19

The table below sets forth the activity for the allowance for credit losses (in thousands):

	For the Nine Months Ended September 30, 2020
	Investing Receivables		Tenant Notes Receivable (1)		Other Assets (2)		Off-Balance Sheet Credit Exposures (3)		Total
December 31, 2019	$	—	$	97	$	—	$	—	$	97
Cumulative effect of change for adoption of credit loss guidance	3,732		325		144		1,340		5,541
Credit loss expense (recoveries)	308		696		152		(1,317)		(161)
September 30, 2020	$	4,040	$	1,118	$	296	$	23	$	5,477

(1)Included in the line entitled “accounts receivable, net” on our consolidated balance sheets.

(2)The balance as of September 30, 2020 included $95,000 in the line entitled “accounts receivable, net” and $201,000 in the line entitled “prepaid expenses and other assets, net” on our consolidated balance sheets.

(3)Included in the line entitled “other liabilities” on our consolidated balance sheets.

The following table presents the amortized cost basis of our investing receivables and tenants notes receivable by credit risk classification, by origination year as of September 30, 2020 (in thousands):

	Origination Year
	2015 and Earlier		2016		2017		2018		2019		2020		Total
Investing receivables:
Credit risk classification:
Investment grade	$	62,842	$	—	$	948	$	—	$	—	$	219	$	64,009
Non-investment grade	3,020		—		—		—		11,147		—		14,167
Total	$	65,862	$	—	$	948	$	—	$	11,147	$	219	$	78,176
Tenant notes receivable:
Credit risk classification:
Investment grade	$	—	$	27	$	—	$	1,054	$	90	$	360	$	1,531
Non-investment grade	97		179		—		171		1,973		1,600		4,020
Total	$	97	$	206	$	—	$	1,225	$	2,063	$	1,960	$	5,551

Our investment grade credit risk classification represents entities with investment grade credit ratings from ratings agencies (such as Standard & Poor’s Ratings Services, Moody’s Investors Service, Inc. or Fitch Ratings Ltd.), meaning that they are considered to have at least an adequate capacity to meet their financial commitments, with credit risk ranging from minimal to moderate. Our non-investment grade credit risk classification represents entities with either no credit agency credit ratings or ratings deemed to be sub-investment grade; we believe that there is significantly more credit risk associated with this classification. The credit risk classifications of our investing receivables and tenant notes receivable were last updated in September 2020.

An insignificant portion of the investing and tenant notes receivables set forth above was past due, which we define as being delinquent by more than three months from the due date.

When we believe that collection of interest income on an investing or tenant note receivable is not probable, we place the receivable on nonaccrual status, meaning interest income is recognized when payments are received rather than on an accrual basis. Notes receivable on nonaccrual status as of September 30, 2020 and December 31, 2019 were not significant. We did not recognize any interest income during the three and nine months ended September 30, 2020 on notes receivable on nonaccrual status.

We write off receivables when we believe the facts and circumstances indicate that continued pursuit of collection is no longer warranted. When cash is received in connection with receivables for which we have previously recognized credit losses, we recognize reductions in our credit loss expense.

20

3.     Fair Value Measurements

Recurring Fair Value Measurements

COPT has a non-qualified elective deferred compensation plan for Trustees and certain members of our management team that, prior to December 31, 2019, permitted participants to defer up to 100% of their compensation on a pre-tax basis and receive a tax-deferred return on such deferrals. The Company froze additional entry into the plan effective December 31, 2019.  The assets held in the plan (comprised primarily of mutual funds and equity securities) and the corresponding liability to the participants are measured at fair value on a recurring basis on COPT’s consolidated balance sheets using quoted market prices, as are other marketable securities that we hold. The balance of the plan, which was fully funded and totaled $2.7 million as of September 30, 2020, is included in the line entitled “prepaid expenses and other assets, net” on COPT’s consolidated balance sheets along with an insignificant amount of other marketable securities. The offsetting liability associated with the plan is adjusted to fair value at the end of each accounting period based on the fair value of the plan assets and reported in “other liabilities” on COPT’s consolidated balance sheets. The assets of the plan are classified in Level 1 of the fair value hierarchy, while the offsetting liability is classified in Level 2 of the fair value hierarchy.

The fair values of our interest rate derivatives are determined using widely accepted valuation techniques, including a discounted cash flow analysis on the expected cash flows of each derivative. This analysis reflects the contractual terms of the derivatives, including the period to maturity, and uses observable market-based inputs, including interest rate market data and implied volatilities in such interest rates. While we determined that the majority of the inputs used to value our derivatives fall within Level 2 of the fair value hierarchy, the credit valuation adjustments associated with our interest rate derivatives utilize Level 3 inputs, such as estimates of current credit spreads to evaluate the likelihood of default. However, as of September 30, 2020, we assessed the significance of the impact of the credit valuation adjustments on the overall valuation of our derivatives and determined that these adjustments are not significant. As a result, we determined that our interest rate derivative valuations in their entirety are classified in Level 2 of the fair value hierarchy.

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.  The fair values of our investing receivables, as disclosed in Note 7, were 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 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 as of 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. 

21

COPT and Subsidiaries

The table below sets forth financial assets and liabilities of COPT and subsidiaries that are accounted for at fair value on a recurring basis as of September 30, 2020 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	$	2,652	$	—	$	—	$	2,652
Other	20		—		—		20
Mutual funds (1)	20		—		—		20
Total assets	$	2,692	$	—	$	—	$	2,692
Liabilities:
Deferred compensation plan liability (2)	$	—	$	2,672	$	—	$	2,672
Interest rate derivatives	—		10,977		—		10,977
Total liabilities	$	—	$	13,649	$	—	$	13,649

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

(2)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 subsidiaries that are accounted for at fair value on a recurring basis as of September 30, 2020 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:
Mutual funds (1)	$	20	$	—	$	—	$	20
Liabilities:
Interest rate derivatives	$	—	$	10,977	$	—	$	10,977

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

Nonrecurring Fair Value Measurements

In the third quarter of 2020, we concluded that we no longer expected to develop a property in Baltimore, Maryland. As a result, we recognized an impairment loss on previously incurred predevelopment costs of $1.5 million.

22

4.    Properties, Net

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

	September 30, 2020		December 31, 2019
Land	$	525,584	$	472,976
Buildings and improvements	3,569,749		3,306,791
Less: Accumulated depreciation	(1,095,441)		(1,007,120)
Operating properties, net	$	2,999,892	$	2,772,647

2020 Development Activities

During the nine months ended September 30, 2020, we placed into service 1.2 million square feet in six newly-developed properties, 28,000 square feet in expansions of two fully-operational properties and 21,000 square feet in a redeveloped property. As of September 30, 2020, we had 11 properties under development, including one partially-operational property, and an expansion of one fully-operational property that we estimate will total 1.6 million square feet upon completion.

5.    Leases

Lessor Arrangements

We lease real estate properties, comprised primarily of office properties and data center shells, to third parties. As of September 30, 2020, these leases, which may encompass all, or a portion of, a property, had remaining terms spanning from one month to 18 years and averaging approximately 5.3 years.

Our lease revenue is comprised of: fixed lease revenue, including contractual rent billings under leases recognized on a straight-line basis over lease terms and amortization of lease incentives and above- and below- market lease intangibles; and variable lease revenue, including tenant expense recoveries, lease termination revenue and other revenue from tenants that is not fixed under the lease. The table below sets forth our allocation of lease revenue recognized between fixed and variable lease revenue (in thousands):

	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
Lease revenue	2020		2019		2020		2019
Fixed	$	106,743	$	102,389	$	314,845	$	311,226
Variable	27,132		27,072		82,189		80,553
	$	133,875	$	129,461	$	397,034	$	391,779

Fixed contractual payments due under our property leases were as follows (in thousands):

Year Ending December 31,	September 30, 2020		December 31, 2019
2020 (1)	$	107,972	$	388,310
2021	410,966		336,482
2022	362,892		299,356
2023	307,346		245,661
2024	258,059		195,246
Thereafter	773,582		474,741
	$	2,220,817	$	1,939,796

(1)As of September 30, 2020, represents the three months ending December 31, 2020.

Lessee arrangements

As of September 30, 2020, our balance sheet included $76.9 million in right-of-use assets associated primarily with land leased from third parties underlying certain properties that we are operating or developing. The land leases have long durations

23

with remaining terms ranging from 28 years (excluding extension options) to 96 years. As of September 30, 2020, our right-of-use assets included:

•$37.8 million for land on which we are developing an office property in Washington, DC through our Stevens Investors, LLC joint venture, virtually all of the rent on which was previously paid. This lease has a 96-year remaining term, and we possess a bargain purchase option that we expect to exercise in 2021;

•$10.1 million for land underlying operating office properties in Washington, DC under two leases with remaining terms of approximately 80 years;

•$9.3 million for land in a business park in Huntsville, Alabama under 12 leases through our LW Redstone Company, LLC joint venture, with remaining terms ranging from 43 to 50 years and options to renew for an additional 25 years that were not included in the term used in determining the asset balance;

•$6.6 million for land in a research park in College Park, Maryland under four leases through our M Square Associates, LLC joint venture, all of the rent on which was previously paid. These leases had remaining terms ranging from 62 to 74 years;

•$6.4 million for land underlying a parking garage in Baltimore, Maryland under a lease with a remaining term of 28 years and an option to renew for an additional 49 years that was included in the term used in determining the asset balance;

•$4.3 million for data center space in Phoenix, Arizona with a remaining term of four years and an option to renew for an additional five years; and

•$2.2 million for other land underlying operating properties in our Fort Meade/BW Corridor sub-segment under two leases with remaining terms of approximately 48 years, all of the rent on which was previously paid.

Our property right-of-use assets consisted of the following (in thousands):

Leases	Balance Sheet Location	September 30, 2020		December 31, 2019
Right-of-use assets
Operating leases - Property	Property - operating right-of-use assets	$	36,442	$	27,864
Finance leases - Property	Property - finance right-of-use assets	40,432		40,458
Total right-of-use assets		$	76,874	$	68,322

Property lease liabilities consisted of the following (in thousands):

Leases	Balance Sheet Location	September 30, 2020		December 31, 2019
Lease liabilities
Operating leases - Property	Property - operating lease liabilities	$	26,382	$	17,317
Finance leases - Property	Other liabilities	28		702
Total lease liabilities		$	26,410	$	18,019

The table below sets forth the weighted average terms and discount rates of our property leases as of September 30, 2020:

Weighted average remaining lease term
Operating leases	54 years
Finance leases	< 1 year
Weighted average discount rate
Operating leases	7.19	%
Finance leases	3.62	%

The table below presents our total property lease cost (in thousands):

	Statement of Operations Location	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
Lease cost		2020		2019		2020		2019
Operating lease cost
Property leases - fixed	Property operating expenses	$	600	$	413	$	1,474	$	1,239
Property leases - variable	Property operating expenses	105		—		107		—
Finance lease cost
Amortization of property right-of-use assets	Property operating expenses	9		9		27		21
		$	714	$	422	$	1,608	$	1,260

24

The table below presents the effect of property lease payments on our consolidated statements of cash flows (in thousands):

	For the Nine Months Ended September 30,
Supplemental cash flow information	2020		2019
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows for operating leases	$	987	$	804
Financing cash flows for financing leases	$	674	$	14

Payments on property leases were due as follows (in thousands):

	As of September 30, 2020						As of December 31, 2019
Year Ending December 31,	Operating leases		Finance leases		Total		Operating leases		Finance leases		Total
2020 (1)	$	615	$	—	$	615	$	1,092	$	674	$	1,766
2021	2,513		14		2,527		1,138		14		1,152
2022	2,566		14		2,580		1,162		14		1,176
2023	2,601		—		2,601		1,167		—		1,167
2024	2,636		—		2,636		1,173		—		1,173
Thereafter	118,295		—		118,295		100,609		—		100,609
Total lease payments	129,226		28		129,254		106,341		702		107,043
Less: Amount representing interest	(102,844)		—		(102,844)		(89,024)		—		(89,024)
Lease liability	$	26,382	$	28	$	26,410	$	17,317	$	702	$	18,019

(1)As of September 30, 2020, represents the three months ending December 31, 2020.

6.    Real Estate Joint Ventures

Consolidated Real Estate Joint Ventures

The table below sets forth information pertaining to our investments in consolidated real estate joint ventures as of September 30, 2020 (dollars in thousands):

				September 30, 2020 (1)
	Date Acquired	Nominal Ownership %		Total Assets		Encumbered Assets		Total Liabilities
Entity			Location
LW Redstone Company, LLC	3/23/2010	85%	Huntsville, Alabama	$	371,537	$	110,972	$	104,204
Stevens Investors, LLC	8/11/2015	95%	Washington, DC	153,869		152,972		81,134
M Square Associates, LLC	6/26/2007	50%	College Park, Maryland	98,322		62,628		56,167
				$	623,728	$	326,572	$	241,505

(1)Excludes amounts eliminated in consolidation.

In March 2020, the LW Redstone Company, LLC joint venture agreement was amended to change the distribution terms to allow the venture to distribute financing proceeds to satisfy our partner’s cumulative preferred return and to provide our partner a priority preferred return on its invested capital.

25

Unconsolidated Real Estate Joint Ventures

The table below sets forth information pertaining to our investments in unconsolidated real estate joint ventures accounted for using the equity method of accounting (dollars in thousands):

	Date Acquired	Nominal Ownership %	Number of Properties	Carrying Value of Investment (1)
Entity				September 30, 2020		December 31, 2019
GI-COPT DC Partnership LLC	7/21/2016	50%	6	$	36,135	$	37,816
BREIT COPT DC JV LLC	6/20/2019	10%	9	13,527		14,133
			15	$	49,662	$	51,949

(1)Included in the line entitled “investment in unconsolidated real estate joint ventures” on our consolidated balance sheets.

In May 2020, the GI-COPT DC Partnership LLC joint venture agreement was amended to reflect our agreement to initially fund the costs of expanding certain of the joint venture’s existing operating properties. Following our completion of, and the tenant’s commencement of rent payments on, the property expansion, the joint venture will reimburse us for the lesser of the actual development costs of the expansion or $6 million using proceeds from proportional capital contributions by us and our partner.

7.    Investing Receivables

Investing receivables consisted of the following (in thousands): 

	September 30, 2020		December 31, 2019
Notes receivable from the City of Huntsville	$	64,009	$	59,427
Other investing loans receivable	14,167		14,096
Amortized cost basis	78,176		73,523
Allowance for credit losses	(4,040)		—
Investing receivables, net	$	74,136	$	73,523

The balances above include accrued interest receivable, net of allowance for credit losses, of $3.4 million as of September 30, 2020 and $4.7 million as of December 31, 2019.

Our notes receivable from the City of Huntsville funded infrastructure costs in connection with our LW Redstone Company, LLC joint venture (see Note 6) and carry an interest rate of 9.95%. Our other investing loans receivable carry an interest rate of 8.0%.

The fair value of these receivables was approximately $78 million as of September 30, 2020 and $74 million as of December 31, 2019.

26

8.    Prepaid Expenses and Other Assets, Net

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

	September 30, 2020		December 31, 2019
Lease incentives, net	$	36,259	$	28,433
Prepaid expenses	27,612		18,835
Construction contract costs in excess of billings, net	13,980		17,223
Furniture, fixtures and equipment, net	10,193		7,823
Non-real estate equity investments	6,487		6,705
Restricted cash	3,217		3,397
Deferred financing costs, net (1)	2,721		3,633
Deferred tax asset, net (2)	2,246		2,328
Other assets	4,905		4,639
Total for COPLP and subsidiaries	107,620		93,016
Marketable securities in deferred compensation plan	2,672		3,060
Total for COPT and subsidiaries	$	110,292	$	96,076

(1)Represents deferred costs, net of accumulated amortization, attributable to our Revolving Credit Facility and interest rate derivatives.

(2)Includes a valuation allowance of $565,000 as of September 30, 2020 and $480,000 as of December 31, 2019.

27

9.    Debt, Net

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

	Carrying Value (1) as of
	September 30, 2020		December 31, 2019		September 30, 2020
					Stated Interest Rates	Scheduled Maturity
Mortgage and Other Secured Debt:
Fixed rate mortgage debt (2)	$	140,868	$	143,430	3.82% - 4.62% (3)	2023-2026
Variable rate secured debt (4)	118,690		68,055		LIBOR + 1.45% to 2.35% (5)	2021-2026
Total mortgage and other secured debt	259,558		211,485
Revolving Credit Facility (6)	57,000		177,000		LIBOR + 0.775% to 1.45% (7)	March 2023 (6)
Term Loan Facility (8)	398,253		248,706		LIBOR + 1.00% to 1.65% (9)	2022
Unsecured Senior Notes
3.70%, $300,000 aggregate principal	176,885		299,324		3.70% (10)	October 2020 (10)
3.60%, $350,000 aggregate principal	348,772		348,431		3.60% (11)	May 2023
5.25%, $250,000 aggregate principal	248,056		247,652		5.25% (12)	February 2024
5.00%, $300,000 aggregate principal	297,810		297,503		5.00% (13)	July 2025
2.25%, $400,000 aggregate principal	394,282		—		2.25% (14)	March 2026
Unsecured note payable	935		1,038		0% (15)	May 2026
Total debt, net	$	2,181,551	$	1,831,139

(1)The carrying values of our debt other than the Revolving Credit Facility reflect net deferred financing costs of $6.5 million as of September 30, 2020 and $5.8 million as of December 31, 2019.

(2)Certain of the fixed rate mortgages carry interest rates that, upon assumption, were above or below market rates 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 $170,000 as of September 30, 2020 and $217,000 as of December 31, 2019.

(3)The weighted average interest rate on our fixed rate mortgage debt was 4.16% as of September 30, 2020.

(4)Includes a construction loan with $37.4 million in remaining borrowing capacity as of September 30, 2020.

(5)The weighted average interest rate on our variable rate secured debt was 2.24% as of September 30, 2020.

(6)The facility matures in March 2023, with the ability for us to further extend such maturity 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 under the facility for each extension period. In connection with this facility, we also have the ability to borrow up to $500.0 million under new term loans from the facility’s lender group provided that there is no default under the facility and subject to the approval of the lenders.

(7)The weighted average interest rate on the Revolving Credit Facility was 1.21% as of September 30, 2020.

(8)On March 6, 2020, we amended this loan facility to increase the loan amount by $150.0 million and change the interest terms.

(9)The interest rate on this loan was 1.16% as of September 30, 2020.

(10)The carrying value of these notes reflects an unamortized discount totaling $128,000 as of September 30, 2020 and $534,000 as of December 31, 2019.  The effective interest rate under the notes, including amortization of the issuance costs, was 3.85%. Refer to paragraph below for further disclosure. 

(11)The carrying value of these notes reflects an unamortized discount totaling $860,000 as of September 30, 2020 and $1.1 million as of December 31, 2019.  The effective interest rate under the notes, including amortization of the issuance costs, was 3.70%. 

(12)The carrying value of these notes reflects an unamortized discount totaling $1.8 million as of September 30, 2020 and $2.1 million as of December 31, 2019.  The effective interest rate under the notes, including amortization of the issuance costs, was 5.49%. 

(13)The carrying value of these notes reflects an unamortized discount totaling $1.8 million as of September 30, 2020 and $2.1 million as of December 31, 2019.  The effective interest rate under the notes, including amortization of the issuance costs, was 5.15%.

(14)Refer to paragraph below for further disclosure.

(15)This note carries an interest rate that, upon assumption, was below market rates and it therefore was recorded at its fair value based on applicable effective interest rates.  The carrying value of this note reflects an unamortized discount totaling $176,000 as of September 30, 2020 and $223,000 as of December 31, 2019.

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

On September 17, 2020, we issued $400.0 million of 2.25% Senior Notes due 2026 (the “2.25% Notes”) at an initial offering price of 99.416% of their face value. The proceeds from this issuance, after deducting underwriting discounts, but before other offering expenses, were $395.3 million. The notes mature on March 15, 2026. 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 or (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

28

treasury rate plus a spread of 35 basis points, plus accrued and unpaid interest thereon to the date of redemption. However, if this redemption occurs on or after one month 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. These notes are unconditionally guaranteed by COPT. The carrying value of these notes reflects an unamortized discount totaling $4.7 million as of September 30, 2020. The effective interest rate under the notes, including amortization of discount and issuance costs, was 2.48%.

On September 17, 2020, we purchased $122.9 million, or 40.98% of the aggregate principal amount, of our 3.70% Senior Notes due 2021 (the “3.70% Notes”) for $126.0 million, plus accrued interest, pursuant to a tender offer. In connection with this purchase, we recognized a loss on early extinguishment of debt of $3.2 million during the three and nine months ended September 30, 2020. On October 19, 2020, we redeemed the remaining $177.1 million of the 3.70% Notes for $180.9 million plus accrued interest, and recognized an additional loss on early extinguishment of debt of approximately $4 million.

Certain of our debt instruments require that we comply with a number of restrictive financial covenants.  As of September 30, 2020, we were compliant with these financial covenants.

We capitalized interest costs of $2.9 million in the three months ended September 30, 2020, $2.9 million in the three months ended September 30, 2019, $9.4 million in the nine months ended September 30, 2020 and $7.3 million in the nine months ended September 30, 2019.

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

	September 30, 2020				December 31, 2019
	Carrying Amount		Fair Value		Carrying Amount		Fair Value
Fixed-rate debt
Unsecured Senior Notes	$	1,465,805	$	1,505,414	$	1,192,910	$	1,227,441
Other fixed-rate debt	141,803		144,370		144,468		149,907
Variable-rate debt	573,943		567,461		493,761		495,962
	$	2,181,551	$	2,217,245	$	1,831,139	$	1,873,310

10.    Interest Rate Derivatives

The following table sets forth the key terms and fair values of our interest rate swap derivatives, each of which was designated as a cash flow hedge of interest rate risk (dollars in thousands):

							Fair Value at
Notional Amount			Fixed Rate	Floating Rate Index	Effective Date	Expiration Date	September 30, 2020		December 31, 2019
$	12,132	(1)	1.390%	One-Month LIBOR	10/13/2015	10/1/2020	$	—	$	23
100,000			1.901%	One-Month LIBOR	9/1/2016	12/1/2022	(3,857)		(1,028)
100,000			1.905%	One-Month LIBOR	9/1/2016	12/1/2022	(3,865)		(1,037)
50,000			1.908%	One-Month LIBOR	9/1/2016	12/1/2022	(1,935)		(524)
11,200		(2)	1.678%	One-Month LIBOR	8/1/2019	8/1/2026	(827)		(20)
150,000			0.498%	One-Month LIBOR	4/1/2020	12/31/2020	(127)		—
23,000		(3)	0.573%	One-Month LIBOR	4/1/2020	3/26/2025	(366)		—
75,000		(4)	3.176%	Three-Month LIBOR	6/30/2020	N/A	—		(8,640)
75,000		(4)	3.192%	Three-Month LIBOR	6/30/2020	N/A	—		(8,749)
75,000		(4)	2.744%	Three-Month LIBOR	6/30/2020	N/A	—		(5,684)
							$	(10,977)	$	(25,659)

(1)The notional amount of this instrument is scheduled to amortize to $12.1 million.

(2)The notional amount of this instrument is scheduled to amortize to $10.0 million.

(3)The notional amount of this instrument is scheduled to amortize to $22.1 million.

(4)As discussed below, these instruments were cash settled in September 2020.

29

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):

		Fair Value at
Derivatives	Balance Sheet Location	September 30, 2020		December 31, 2019
Interest rate swaps designated as cash flow hedges	Prepaid expenses and other assets, net	$	—	$	23
Interest rate swaps designated as cash flow hedges	Interest rate derivatives (liabilities)	$	(10,977)	$	(25,682)

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

	Amount of Income (Loss) Recognized in AOCL on Derivatives								Amount of (Loss) Gain Reclassified from AOCL into Interest Expense on Statement of Operations
	For the Three Months Ended September 30,				For the Nine Months Ended September 30,				For the Three Months Ended September 30,				For the Nine Months Ended September 30,
Derivatives in Hedging Relationships	2020		2019		2020		2019		2020		2019		2020		2019
Interest rate derivatives	$	1,428	$	(11,047)	$	(39,592)	$	(33,437)	$	(1,342)	$	307	$	(2,408)	$	1,434

	Amount of Loss Reclassified from AOCL into Loss on Interest Rate Derivatives on Statement of Operations								Amount of Loss Recognized on Undesignated Swaps in Loss on Interest Rate Derivatives on Statement of Operations
	For the Three Months Ended September 30,				For the Nine Months Ended September 30,				For the Three Months Ended September 30,				For the Nine Months Ended September 30,
Derivatives in Hedging Relationships	2020		2019		2020		2019		2020		2019		2020		2019
Interest rate derivatives	$	(51,865)	$	—	$	(51,865)	$	—	$	(1,265)	$	—	$	(1,265)	$	—

As described further in Note 9, in September 2020, we completed our issuance of the 2.25% Notes. In August 2020, in anticipation of pursuing such an issuance, we determined that the forecasted transactions hedged by our three interest rate swaps with an effective date of June 30, 2020 and an aggregate notional amount of $225.0 million were no longer probable of occurring, resulting in our discontinuance of hedge accounting on these swaps. When we consummated the note issuance in September 2020, we determined that it was probable that the forecasted transactions would not occur, resulting in our reclassification of $51.9 million in losses from accumulated other comprehensive loss (“AOCL”) to loss on interest rate derivatives on our statements of operations. On September 22, 2020, we cash settled these swaps and accrued interest thereon for an aggregate amount of $53.1 million.

Based on the fair value of our derivatives as of September 30, 2020, we estimate that approximately $4.8 million of losses will be reclassified from AOCL as an increase to interest expense over the next 12 months.

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. 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, 2020, we were not in default with any of these provisions. As of September 30, 2020, the fair value of interest rate derivatives in a liability position related to these agreements was $11.1 million, excluding the effects of accrued interest and credit valuation adjustments. As of September 30, 2020, we had not posted any collateral related to these agreements.  If we breach any of these provisions, we could be required to settle our obligations under the agreements at their termination value, which was $11.5 million as of September 30, 2020.

30

11.    Redeemable Noncontrolling Interests

Our partners in two real estate joint ventures, LW Redstone Company, LLC and Stevens Investors, LLC, have the right to require us to acquire their respective interests at fair value; accordingly, we classify the fair value of our partners’ interests as redeemable noncontrolling interests in the mezzanine section of our consolidated balance sheets. The table below sets forth the activity for these redeemable noncontrolling interests (in thousands):

	For the Nine Months Ended September 30,
	2020		2019
Beginning balance	$	29,431	$	26,260
Distributions to noncontrolling interests	(13,335)		(1,656)
Net income attributable to noncontrolling interests	2,715		2,729
Adjustment to arrive at fair value of interests	4,711		1,344
Ending balance	$	23,522	$	28,677

We determine the fair value of the interests based on unobservable inputs after considering the assumptions that market participants would make in pricing the interest. We apply a discount rate to the estimated future cash flows allocable to our partners from the properties underlying the respective joint ventures. Estimated cash flows used in such analyses are based on our plans for the properties and our views of market and economic conditions, and consider items such as current and future rental rates, occupancy projections and estimated operating and development expenditures.

12.    Equity

Common Shares/Units

As of September 30, 2020, COPT had remaining capacity under its at-the-market stock offering program equal to an aggregate gross sales price of $300 million in common share sales.

During the nine months ended September 30, 2020, certain COPLP limited partners converted 12,009 common units in COPLP for an equal number of common shares in COPT.

We declared dividends per COPT common share and distributions per COPLP common unit of $0.275 in the three months ended September 30, 2020 and 2019 and $0.825 in the nine months ended September 30, 2020 and 2019.

See Note 15 for disclosure of COPT common share and COPLP common unit activity pertaining to our share-based compensation plans.

31

13.    Information by Business Segment

We have the following reportable segments: Defense/IT Locations; Regional Office; Wholesale Data Center; and Other. We also report on Defense/IT Locations sub-segments, which include the following: Fort George G. Meade and the Baltimore/Washington Corridor (“Fort Meade/BW Corridor”); Northern Virginia Defense/IT Locations; Lackland Air Force Base (in San Antonio); locations serving the U.S. Navy (“Navy Support Locations”), which included properties proximate to the Washington Navy Yard, the Naval Air Station Patuxent River in Maryland and the Naval Surface Warfare Center Dahlgren Division in Virginia; Redstone Arsenal (in Huntsville); and data center shells (properties leased to tenants to be operated as data centers in which the tenants generally fund the costs for the power, fiber connectivity and data center infrastructure).

We measure the performance of our segments through the measure we define as net operating income from real estate operations (“NOI from real estate operations”), which includes: real estate revenues and property operating expenses; and the net of revenues and property operating expenses of real estate operations owned through unconsolidated real estate joint ventures (“UJVs”) that is allocable to COPT’s ownership interest (“UJV NOI allocable to COPT”). Amounts reported for segment assets represent long-lived assets associated with consolidated operating properties (including the carrying value of properties, right-of-use assets, net of related lease liabilities, intangible assets, deferred leasing costs, deferred rents receivable and lease incentives) and the carrying value of investments in UJVs owning operating properties. Amounts reported as additions to long-lived assets represent additions to existing consolidated operating properties, excluding transfers from non-operating properties, which we report separately.

32

The table below reports segment financial information for our reportable segments (in thousands): 

	Operating Property Segments
	Defense/Information Technology Locations
	Fort Meade/BW Corridor		Northern Virginia Defense/IT		Lackland Air Force Base		Navy Support Locations		Redstone Arsenal		Data Center Shells		Total Defense/IT Locations		Regional Office		Wholesale Data Center		Other		Total
Three Months Ended September 30, 2020
Revenues from real estate operations	$	63,328	$	14,699	$	12,602	$	8,006	$	6,079	$	7,995	$	112,709	$	14,913	$	6,068	$	753	$	134,443
Property operating expenses	(21,537)		(5,245)		(7,116)		(3,044)		(2,029)		(861)		(39,832)		(7,782)		(3,642)		(296)		(51,552)
UJV NOI allocable to COPT	—		—		—		—		—		1,752		1,752		—		—		—		1,752
NOI from real estate operations	$	41,791	$	9,454	$	5,486	$	4,962	$	4,050	$	8,886	$	74,629	$	7,131	$	2,426	$	457	$	84,643
Additions to long-lived assets	$	7,511	$	2,219	$	—	$	1,650	$	6,382	$	—	$	17,762	$	5,303	$	1,917	$	(3)	$	24,979
Transfers from non-operating properties	$	(209)	$	58	$	221	$	—	$	61,520	$	65,269	$	126,859	$	—	$	—	$	—	$	126,859
Three Months Ended September 30, 2019
Revenues from real estate operations	$	63,436	$	13,551	$	12,703	$	8,183	$	4,171	$	5,913	$	107,957	$	15,508	$	6,565	$	704	$	130,734
Property operating expenses	(20,743)		(4,965)		(7,149)		(3,581)		(1,717)		(518)		(38,673)		(7,343)		(3,374)		(324)		(49,714)
UJV NOI allocable to COPT	—		—		—		—		—		1,601		1,601		—		—		—		1,601
NOI from real estate operations	$	42,693	$	8,586	$	5,554	$	4,602	$	2,454	$	6,996	$	70,885	$	8,165	$	3,191	$	380	$	82,621
Additions to long-lived assets	$	10,770	$	2,922	$	—	$	2,003	$	446	$	—	$	16,141	$	6,339	$	61	$	19	$	22,560
Transfers from non-operating properties	$	1,381	$	118	$	2,120	$	—	$	4,152	$	9,483	$	17,254	$	—	$	(1,012)	$	—	$	16,242
Nine Months Ended September 30, 2020
Revenues from real estate operations	$	190,464	$	42,824	$	37,935	$	24,466	$	15,402	$	20,648	$	331,739	$	45,535	$	19,695	$	2,128	$	399,097
Property operating expenses	(63,618)		(15,765)		(21,696)		(9,500)		(5,488)		(2,307)		(118,374)		(22,207)		(10,338)		(836)		(151,755)
UJV NOI allocable to COPT	—		—		—		—		—		5,190		5,190		—		—		—		5,190
NOI from real estate operations	$	126,846	$	27,059	$	16,239	$	14,966	$	9,914	$	23,531	$	218,555	$	23,328	$	9,357	$	1,292	$	252,532
Additions to long-lived assets	$	22,144	$	8,114	$	—	$	5,518	$	6,698	$	—	$	42,474	$	13,105	$	10,699	$	165	$	66,443
Transfers from non-operating properties	$	4,304	$	838	$	381	$	—	$	91,827	$	171,465	$	268,815	$	—	$	—	$	—	$	268,815
Segment assets at September 30, 2020	$	1,264,547	$	392,226	$	143,206	$	180,337	$	234,355	$	446,530	$	2,661,201	$	387,290	$	204,834	$	3,643	$	3,256,968
Nine Months Ended September 30, 2019
Revenues from real estate operations	$	187,778	$	42,294	$	36,368	$	24,523	$	12,078	$	21,891	$	324,932	$	45,359	$	22,996	$	2,208	$	395,495
Property operating expenses	(62,422)		(14,951)		(19,756)		(10,271)		(4,855)		(1,630)		(113,885)		(22,349)		(9,830)		(981)		(147,045)
UJV NOI allocable to COPT	—		—		—		—		—		4,071		4,071		—		—		—		4,071
NOI from real estate operations	$	125,356	$	27,343	$	16,612	$	14,252	$	7,223	$	24,332	$	215,118	$	23,010	$	13,166	$	1,227	$	252,521
Additions to long-lived assets	$	22,204	$	6,072	$	—	$	7,948	$	1,282	$	—	$	37,506	$	15,198	$	312	$	63	$	53,079
Transfers from non-operating properties	$	7,759	$	4,647	$	10,456	$	—	$	13,363	$	122,115	$	158,340	$	—	$	(1,012)	$	—	$	157,328
Segment assets at September 30, 2019	$	1,271,668	$	398,137	$	147,505	$	186,243	$	118,839	$	298,675	$	2,421,067	$	393,747	$	205,550	$	3,708	$	3,024,072

33

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,
	2020		2019		2020		2019
Segment revenues from real estate operations	$	134,443	$	130,734	$	399,097	$	395,495
Construction contract and other service revenues	20,323		28,697		46,240		87,946
Total revenues	$	154,766	$	159,431	$	445,337	$	483,441

The following table reconciles UJV NOI allocable to COPT to equity in income of unconsolidated entities as reported on our consolidated statements of operations (in thousands):

	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
	2020		2019		2020		2019
UJV NOI allocable to COPT	$	1,752	$	1,601	$	5,190	$	4,071
Less: Income from UJV allocable to COPT attributable to depreciation and amortization expense and interest expense	(1,274)		(1,202)		(3,814)		(2,859)
Add: Equity in loss of unconsolidated non-real estate entities	(1)		(3)		(4)		(5)
Equity in income of unconsolidated entities	$	477	$	396	$	1,372	$	1,207

As previously discussed, we provide real estate services such as property management, development and construction 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,
	2020		2019		2020		2019
Construction contract and other service revenues	$	20,323	$	28,697	$	46,240	$	87,946
Construction contract and other service expenses	(19,220)		(27,802)		(44,052)		(85,130)
NOI from service operations	$	1,103	$	895	$	2,188	$	2,816

34

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

	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
	2020		2019		2020		2019
NOI from real estate operations	$	84,643	$	82,621	$	252,532	$	252,521
NOI from service operations	1,103		895		2,188		2,816
Interest and other income	1,746		1,842		5,233		5,977
Credit loss recoveries	1,465		—		161		—
Gain on sales of real estate	—		—		5		84,469
Equity in income of unconsolidated entities	477		396		1,372		1,207
Income tax (expense) benefit	(16)		131		(95)		113
Depreciation and other amortization associated with real estate operations	(35,332)		(34,692)		(101,540)		(104,290)
Impairment losses	(1,530)		(327)		(1,530)		(327)
General, administrative and leasing expenses	(7,467)		(7,929)		(23,111)		(26,066)
Business development expenses and land carry costs	(1,094)		(964)		(3,474)		(2,947)
Interest expense	(17,152)		(17,126)		(50,789)		(54,275)
UJV NOI allocable to COPT included in equity in income of unconsolidated entities	(1,752)		(1,601)		(5,190)		(4,071)
Loss on early extinguishment of debt	(3,237)		—		(3,237)		—
Loss on interest rate derivatives	(53,196)		—		(53,196)		—
Net (loss) income	$	(31,342)	$	23,246	$	19,329	$	155,127

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

	September 30, 2020		September 30, 2019
Segment assets	$	3,256,968	$	3,024,072
Operating properties lease liabilities included in segment assets	26,054		16,645
Non-operating property assets	642,182		597,301
Other assets	194,985		217,351
Total COPT consolidated assets	$	4,120,189	$	3,855,369

The accounting policies of the segments are the same as those used to prepare our consolidated financial statements.  In the segment reporting presented above, we did not allocate interest expense, depreciation and amortization, impairment losses, gain on sales of real estate and equity in income of unconsolidated entities not included in NOI 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, administrative and leasing expenses, business development expenses and land carry costs, interest and other income, credit loss recoveries (expense), loss on early extinguishment of debt, loss on interest rate derivatives, income taxes and noncontrolling interests because these items represent general corporate or non-operating property items not attributable to segments.

35

14.     Construction Contract and Other Service Revenues

We disaggregate our construction contract and other service revenues by compensation arrangement and by service type as we believe it best depicts the nature, timing and uncertainty of our revenue. The table below reports construction contract and other service revenues by compensation arrangement (in thousands):

	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
	2020		2019		2020		2019
Construction contract revenue:
Guaranteed maximum price	$	4,358	$	16,217	$	14,834	$	54,365
Firm fixed price	1,365		2,349		9,421		6,009
Cost-plus fee	13,249		9,906		20,121		26,935
Other	1,351		225		1,864		637
	$	20,323	$	28,697	$	46,240	$	87,946

The table below reports construction contract and other service revenues by service type (in thousands):

	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
	2020		2019		2020		2019
Construction contract revenue:
Construction	$	18,786	$	27,988	$	42,520	$	86,487
Design	186		484		1,856		822
Other	1,351		225		1,864		637
	$	20,323	$	28,697	$	46,240	$	87,946

We recognized an increase in revenue of $84,000 in the three months ended September 30, 2020, and $158,000 and $18,000 in the nine months ended September 30, 2020 and 2019, respectively, from performance obligations satisfied (or partially satisfied) in previous periods.

Accounts receivable related to our construction contract services is included in accounts receivable, net on our consolidated balance sheets. The beginning and ending balances of accounts receivable related to our construction contracts were as follows (in thousands):

	For the Nine Months Ended September 30,
	2020		2019
Beginning balance	$	12,378	$	6,701
Ending balance	$	11,183	$	15,494

Contract assets, which we refer to herein as construction contract costs in excess of billings, net are included in prepaid expenses and other assets, net reported on our consolidated balance sheets. The beginning and ending balances of our contract assets were as follows (in thousands):

	For the Nine Months Ended September 30,
	2020		2019
Beginning balance	$	17,223	$	3,189
Ending balance	$	13,980	$	16,743

36

Contract liabilities are included in other liabilities reported on our consolidated balance sheets. Changes in contract liabilities were as follows (in thousands):

	For the Nine Months Ended September 30,
	2020		2019
Beginning balance	$	1,184	$	568
Ending balance	$	5,236	$	725
Portion of beginning balance recognized in revenue during:
Three months ended September 30	$	19	$	—
Nine months ended September 30	$	757	$	445

Revenue allocated to the remaining performance obligations under existing contracts as of September 30, 2020 that will be recognized as revenue in future periods was $82.1 million, approximately $21 million of which we expect to recognize during the remainder of 2020.

We incurred no deferred incremental costs to obtain or fulfill our construction contracts or other service revenues and had no significant credit loss expense on construction contracts receivable or unbilled construction revenue in the three or nine months ended September 30, 2020 and 2019.

15.    Share-Based Compensation

Restricted Shares

During the nine months ended September 30, 2020, certain employees and non-employee members of our Board of Trustees (“Trustees”) were granted a total of 159,518 restricted common shares with an aggregate grant date fair value of $4.0 million (weighted average of $25.16 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 employee remains employed by us. Restricted shares granted to non-employee Trustees vest on the first anniversary of the grant date, provided that the Trustee remains in his or her position. During the nine months ended September 30, 2020, forfeiture restrictions lapsed on 165,778 previously issued common shares; these shares had a weighted average grant date fair value of $28.19 per share, and the aggregate intrinsic value of the shares on the vesting dates was $4.2 million. Additionally, during the nine months ended September 30, 2020, 9,064 restricted shares previously awarded to our former Executive Vice President and Chief Operating Officer were forfeited upon his resignation.

Deferred Share Awards

During the nine months ended September 30, 2020, certain non-employee Trustees were granted a total of 7,972 deferred share awards with an aggregate grant date fair value of $187,000 ($23.44 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).

Performance Share Awards (“PSUs”)

We issued 23,181 common shares on January 13, 2020 to executives in settlement of PSUs granted in 2017, representing 53% of the target awards for those PSUs.

Profit Interest Units (“PIUs”)

For 2020, we offered our executives and Trustees the opportunity to select PIUs as a form of long-term compensation in lieu of, or in combination with, other forms of share-based compensation awards (restricted shares, deferred share awards and PSUs). Our executives and certain of our Trustees selected PIUs as their form of share-based compensation for their 2020 grants. We granted two forms of PIUs: time-based PIUs (“TB-PIUs”); and performance-based PIUs (“PB-PIUs”). TB-PIUs are subject to forfeiture restrictions until the end of the requisite service period, at which time the TB-PIUs automatically convert into vested PIUs. PB-PIUs are subject to a market condition in that the number of earned awards are determined at the end of the performance period (as described further below) and then settled in vested PIUs. Vested PIUs carry substantially the same rights to redemption and distributions as non-PIU common units.

37

TB-PIUs

During the nine months ended September 30, 2020, our executives and certain non-employee Trustees were granted a total of 75,053 TB-PIUs with an aggregate grant date fair value of $1.9 million (weighted average of $25.14 per TB-PIU). TB-PIUs granted to executives vest in equal annual increments over a three-year period beginning on the first anniversary of the date of grant. TB-PIUs granted to non-employee Trustees vest on the first anniversary of the grant date, provided that the Trustee remains in his or her position. Prior to vesting, TB-PIUs carry substantially the same rights to distributions as non-PIU common units but carry no redemption rights. During the nine months ended September 30, 2020, forfeiture restrictions lapsed on 25,182 previously issued TB-PIUs; these TB-PIUs had a grant date fair value of $26.30 per unit, and the aggregate intrinsic value of the TB-PIUs on the vesting date was $640,000.

During the nine months ended September 30, 2020, 20,622 TB-PIUs previously awarded to our former Executive Vice President and Chief Operating Officer were forfeited upon his resignation.

PB-PIUs

On January 1, 2020, we granted our executives 176,758 PB-PIUs with a three-year performance period concluding on the earlier of December 31, 2022 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 earned awards at the end of the performance period will be determined based on the percentile rank of COPT’s total shareholder return (“TSR”) relative to a peer group of companies, as set forth in the following schedule:

Percentile Rank	Earned Awards Payout %
75th or greater	100% of PB-PIUs granted
50th (target)	50% of PB-PIUs granted
25th	25% of PB-PIUs granted
Below 25th	0% of PB-PIUs 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 awards will be interpolated between the ranges set forth in the table above to reflect any performance between the listed percentiles.  If COPT’s TSR during the measurement period is negative, the maximum number of earned awards will be limited to the target level payout percentage.  During the performance period, PB-PIUs carry rights to distributions equal to 10% of the distribution rights of non-PIU common units but carry no redemption rights.

At the end of the performance period, we will settle the award by issuing vested PIUs equal to the number of earned awards in settlement of the award plan and paying cash equal to the excess, if any, of: the aggregate distributions that would have been paid with respect to vested PIUs issued in settlement of the earned awards through the date of settlement had such vested PIUs been issued on the grant date; over the aggregate distributions made on the PB-PIUs during the performance period. If a performance period ends due to a sale event or qualified termination, the number of earned awards is prorated based on the portion of the three-year performance period that has elapsed.  If employment is terminated by the employee or by us for cause, all PB-PIUs are forfeited.

These PB-PIU grants had an aggregate grant date fair value of $2.9 million ($16.36 per PB-PIU) which is being recognized over the performance period. The grant date fair value was computed using a Monte Carlo model that included the following assumptions: baseline common share value of $29.38; expected volatility for common shares of 18.0%; and a risk-free interest rate of 1.65%.  

During the nine months ended September 30, 2020, 73,184 PB-PIUs previously awarded to our former Executive Vice President and Chief Operating Officer were forfeited upon his resignation.

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:

38

•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 common shares were converted; and (2) the effect of dilutive potential common shares outstanding during the period attributable to COPT’s forward equity sale agreements, redeemable noncontrolling interests and our 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 add 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,
	2020		2019		2020		2019
Numerator:
Net (loss) income attributable to COPT	$	(31,845)	$	21,257	$	15,706	$	148,907
Income attributable to share-based compensation awards	(145)		(123)		(365)		(495)
Numerator for basic EPS on net (loss) income attributable to COPT common shareholders	(31,990)		21,134		15,341		148,412
Redeemable noncontrolling interests	—		—		—		100
Income attributable to share-based compensation awards	—		5		6		26
Numerator for diluted EPS on net (loss) income attributable to COPT common shareholders	$	(31,990)	$	21,139	$	15,347	$	148,538
Denominator (all weighted averages):
Denominator for basic EPS (common shares)	111,811		111,582		111,778		111,036
Dilutive effect of redeemable noncontrolling interests	—		—		—		123
Dilutive effect of share-based compensation awards	—		361		278		313
Denominator for diluted EPS (common shares)	111,811		111,943		112,056		111,472
Basic EPS	$	(0.29)	$	0.19	$	0.14	$	1.34
Diluted EPS	$	(0.29)	$	0.19	$	0.14	$	1.33

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,
	2020	2019	2020	2019
Conversion of common units	1,240	1,312	1,235	1,323
Conversion of redeemable noncontrolling interests	973	975	954	893
Conversion of Series I preferred units	176	176	176	176

The following securities were also excluded from the computation of diluted EPS because their effect was antidilutive:

•weighted average shares related to COPT’s forward equity sale agreements for the nine months ended September 30, 2019 of 503,000;

•weighted average restricted shares and deferred share awards for the three months ended September 30, 2020 and 2019 of 429,000 and 436,000, respectively, and for the nine months ended September 30, 2020 and 2019 of 432,000 and 441,000, respectively;

•weighted average options for the three and nine months ended ended September 30, 2019 of 3,000 and 16,000, respectively; and

•weighted average unvested TB-PIUs for the three months ended September 30, 2020 and 2019 of 91,000 and 62,000, respectively, and for the nine months ended September 30, 2020 and 2019 of 85,000 and 47,000, respectively.

39

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 COPT’s forward equity sale agreements, redeemable noncontrolling interests and our 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 add 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,
	2020		2019		2020		2019
Numerator:
Net (loss) income attributable to COPLP	$	(32,154)	$	21,681	$	16,122	$	151,257
Preferred unit distributions	(77)		(157)		(231)		(487)
Income attributable to share-based compensation awards	(119)		(139)		(374)		(592)
Numerator for basic EPU on net (loss) income attributable to COPLP common unitholders	(32,350)		21,385		15,517		150,178
Redeemable noncontrolling interests	—		—		—		100
Income attributable to share-based compensation awards	—		5		—		26
Numerator for diluted EPU on net (loss) income attributable to COPLP common unitholders	$	(32,350)	$	21,390	$	15,517	$	150,304
Denominator (all weighted averages):
Denominator for basic EPU (common units)	113,051		112,894		113,013		112,359
Dilutive effect of redeemable noncontrolling interests	—		—		—		123
Dilutive effect of share-based compensation awards	—		361		278		313
Denominator for diluted EPU (common units)	113,051		113,255		113,291		112,795
Basic EPU	$	(0.29)	$	0.19	$	0.14	$	1.34
Diluted EPU	$	(0.29)	$	0.19	$	0.14	$	1.33

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 Shares Excluded from Denominator
	For the Three Months Ended September 30,		For the Nine Months Ended September 30,
	2020	2019	2020	2019
Conversion of redeemable noncontrolling interests	973	975	954	893
Conversion of Series I preferred units	176	176	176	176

The following securities were also excluded from the computation of diluted EPU because their effect was antidilutive:

•weighted average shares related to COPT’s forward equity sale agreements for the nine months ended September 30, 2019 of 503,000;

•weighted average restricted units and deferred share awards for the three months ended September 30, 2020 and 2019 of 429,000 and 436,000, respectively, and for the nine months ended September 30, 2020 and 2019 of 432,000 and 441,000, respectively;

•weighted average options for the three and nine months ended September 30, 2019 of 3,000 and 16,000, respectively; and

•weighted average unvested TB-PIUs for the three months ended September 30, 2020 and 2019 of 91,000 and 62,000, respectively, and for the nine months ended September 30, 2020 and 2019 of 85,000 and 47,000, respectively.

40

17.    Commitments and Contingencies

Litigation and Claims

In the normal course of business, we are subject to legal actions and other claims.  We record losses for specific legal proceedings and claims when we determine that a loss is probable and the amount of loss can be reasonably estimated.  As of September 30, 2020, management believes that it is reasonably possible that we could recognize a loss of up to $3.1 million for certain municipal tax claims. While we do not believe this loss would materially affect our financial position or liquidity, it could be material to our results of operations. Management believes that it is also reasonably possible that we could incur losses pursuant to other such claims but do not believe such losses would materially affect our financial position, liquidity or results of operations. 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.

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 limited to $19 million in the aggregate. We have insurance coverage in place to mitigate much of any potential future losses that may result from these indemnification agreements.

Tax Incremental Financing Obligation

Anne Arundel County, Maryland issued tax incremental financing bonds to third-party investors in order to finance public improvements needed in connection with our project known as the National Business Park.  These bonds had a remaining principal balance of approximately $33 million as of September 30, 2020. The real estate taxes on increases in assessed values post-bond issuance of properties in development districts encompassing the National Business Park are transferred to a special fund pledged to the repayment of the bonds. While we are obligated to fund, through a special tax, any future shortfalls between debt service of the bonds and real estate taxes available to repay the bonds, as of September 30, 2020, we do not expect any such future fundings will be required.

Effects of COVID-19

Since first being declared a pandemic by the World Health Organization in early March 2020, the coronavirus, or COVID-19, has spread worldwide. In an effort to control its spread, governments and other authorities imposed restrictive measures affecting freedom of movement and business operations, such as shelter-in-place orders and business closures. Strong restrictive measures were put into place in much of the United States beginning in March, bringing many businesses to a halt while forcing others to change the way in which they conduct their operations, with much of the workforce working from their homes to the extent they were able. States and local governments began easing these measures to varying extents in late April, with some lifting restrictive measures entirely, while others chose a more gradual, extended easing approach. While the easing of these measures has enabled many businesses to gradually resume normal operations, most businesses continue to be hindered to varying extents by either measures still in effect, operational challenges resulting from social distancing requirements/expectations and/or a reluctance by much of the population to engage in certain activities while the pandemic is still active. As of the date of this filing, COVID-19 spread continues world- and nation-wide, and is expected to continue until effective vaccinations have been developed and then distributed and administered to much of the population. As a result, there continues to be significant uncertainty regarding the duration and extent of this pandemic. The outbreak has significantly disrupted financial and economic markets worldwide, as well as in the United States at a national, regional and local level. These conditions could continue or further deteriorate as businesses feel the prolonged effects of stalled or reduced operations and uncertainty regarding the pandemic continues.

COVID-19, and similar pandemics, along with measures instituted to prevent spread, may adversely affect us in many ways, including, but not limited to:

•disruption of our tenants’ operations, which could adversely affect their ability, or willingness, to sustain their businesses and/or fulfill their lease obligations;

•our ability to maintain occupancy in our properties and obtain new leases for unoccupied and new development space at favorable terms or at all;

41

•shortages in supply of products or services from our and our tenants’ vendors that are needed for us and our tenants to operate effectively, and which could lead to increased costs for such products and services;

•access to debt and equity capital on attractive terms or at all. Severe disruption and instability in the global financial markets or deteriorations in credit and financing conditions may affect our or our tenants’ ability to access capital necessary to fund operations, refinance debt or fund planned investments on a timely basis, and may adversely affect the valuation of financial assets and liabilities;

•our and our tenants’ ability to continue or complete planned development, including the potential for delays in the supply of materials or labor necessary for development; and

•an increase in the pace of businesses implementing remote work arrangements over the long-term, which would adversely effect demand for office space.

The extent of the effect on our operations, financial condition and cash flows will be dependent on future developments, including the duration of the pandemic, the prevalence, strength and duration of restrictive measures and the resulting effects on our tenants, potential future tenants, the commercial real estate industry and the broader economy, all of which are uncertain and difficult to predict.

18.    Subsequent Event

On October 30, 2020, we sold a 90% interest in two data center shell properties in Virginia based on an aggregate property value of $90 million and retained a 10% interest in the properties through B RE COPT DC JV II LLC (“B RE COPT”), a newly-formed joint venture. Our partner in the joint venture acquired the 90% interest from us for $81 million. We are accounting for our interest in the joint venture using the equity method of accounting.

42

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

Overview

During the nine months ended September 30, 2020, we: 

•finished the period with our office and data center shell portfolio 93.8% occupied and 94.4% leased;

•placed into service 1.2 million square feet in six newly-developed properties (including three data center shell properties and three office properties in our Redstone Arsenal sub-segment), expansions of two fully-operational properties and one redeveloped property that were 99.2% leased as of September 30, 2020;

•refinanced unsecured senior notes due to mature in June 2021 with a new note issuance on September 17, 2020 by:

◦issuing $400.0 million of 2.25% Notes at an initial offering price of 99.416% of their face value. The proceeds from this issuance, after deducting underwriting discounts but before other offering expenses, were approximately $395.3 million;

◦completing a tender offer for $300.0 million of 3.70% Notes, which resulted in our purchase of $122.9 million, or 40.98%, of the notes for $126.0 million plus accrued interest; and

◦initiating the redemption of the remaining $177.1 million of 3.70% Notes, which was completed on October 19, 2020 for $180.9 million plus accrued interest.

We initially used the remaining proceeds from the 2.25% Notes issuance to repay borrowings under our Revolving Credit Facility and for general corporate purposes, which included the cash settlement of three forward-starting interest rate swaps and accrued interest thereon for $53.1 million. We subsequently used borrowings under our Revolving Credit Facility to fund the 3.70% Notes redemption on October 19, 2020; and

•amended an existing term loan facility to increase the loan amount by $150.0 million and reduce the LIBOR interest rate spread on the facility. We used the resulting loan proceeds to repay borrowings under our Revolving Credit Facility that funded development costs.

In addition, effective March 16, 2020, Paul R. Adkins resigned from his position as Executive Vice President and Chief Operating Officer. We commenced a search for candidates to replace Mr. Adkins and, in the interim, have senior level employees handling his responsibilities.

On October 30, 2020, we sold a 90% interest in two data center shell properties in Virginia based on an aggregate property value of $90 million and retained a 10% interest in the properties through B RE COPT, a newly-formed joint venture. Our partner in the joint venture acquired the 90% interest from us for $81 million, which was used to repay borrowings under our Revolving Credit Facility.

We refer to the measure “annualized rental revenue” in various sections of the Management’s Discussion and Analysis of Financial Condition and Results of Operations section of this Quarterly Report on Form 10-Q. Annualized rental revenue is a measure that we use to evaluate the source of our rental revenue as of a point in time. It is computed by multiplying by 12 the sum of monthly contractual base rents and estimated monthly expense reimbursements under active leases as of a point in time (ignoring free rent then in effect). Our computation of annualized rental revenue excludes the effect of lease incentives, although the effect of this exclusion is not material. We consider annualized rental revenue to be a useful measure for analyzing revenue sources because, since it is point-in-time based, it does not contain increases and decreases in revenue associated with periods in which lease terms were not in effect; historical revenue under generally accepted accounting principles in the United States of America (“GAAP”) does contain such fluctuations. We find the measure particularly useful for leasing, tenant, segment and industry analysis.

With regard to our operating portfolio square footage, occupancy and leasing statistics included below and elsewhere in this Quarterly Report on Form 10-Q, amounts disclosed include information pertaining to properties owned through unconsolidated real estate joint ventures except for amounts reported for annualized rental revenue, which represent the portion attributable to our ownership interest.

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:

43

•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 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;

•risks and uncertainties regarding the impact of the COVID-19 pandemic, and similar pandemics, along with restrictive measures instituted to prevent spread, on our business, the real estate industry and national, regional and local economic conditions;

•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 reduced or delayed 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;

•possible adverse changes in tax laws;

•the dilutive effects of issuing additional common shares;

•our ability to achieve projected results;

•security breaches relating to cyber attacks, cyber intrusions or other factors; and

•environmental requirements.

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

Effects of COVID-19

Pandemic Overview

Since first being declared a pandemic by the World Health Organization in early March 2020, the coronavirus, or COVID-19, has spread worldwide. In an effort to control its spread, governments and other authorities imposed restrictive measures affecting freedom of movement and business operations, such as shelter-in-place orders and business closures. Strong restrictive measures were put into place in much of the United States beginning in March, bringing many businesses to a halt while forcing others to change the way in which they conduct their operations, with much of the workforce working from their homes to the extent they were able. States and local governments began easing these measures to varying extents in late April, with some lifting restrictive measures entirely, while others chose a more gradual, extended easing approach. While the easing of these measures has enabled many businesses to gradually resume normal operations, most businesses continue to be hindered to varying extents by either measures still in effect, operational challenges resulting from social distancing requirements/expectations and/or a reluctance by much of the population to engage in certain activities while the pandemic is still active. As of the date of this filing, COVID-19 spread continues world- and nation-wide, and is expected to continue until effective vaccinations have been developed and then distributed and administered to much of the population. As a result, there continues

44

to be significant uncertainty regarding the duration and extent of this pandemic. COVID-19 has significantly disrupted financial and economic markets worldwide, as well as in the United States at a national, regional and local level. These conditions could continue or further deteriorate as businesses feel the prolonged effects of stalled or reduced operations and uncertainty regarding the pandemic continues.

Effect on Real Estate Industry

COVID-19 has significantly affected the operations of much of the commercial real estate industry as certain tenants’ operations, including the ability to use space and run businesses, have been disrupted. This has adversely affected tenants’ ability to sustain their businesses, including their ability, or willingness, to fulfill their lease obligations. The industry has also been significantly impacted by the economic disruption that COVID-19 has triggered, which has affected the ability to lease space in many property types to new and existing tenants at favorable terms. Key demand drivers for office space, such as employment levels, business confidence and corporate profits, have been adversely affected. In addition, after months of businesses operating in significant part through remote work arrangements out of necessity, the pace of such arrangements becoming more prevalent long-term could accelerate, adversely affecting office space demand, although that effect may be offset by a slowing in the trend toward adoption of shared office and open workplace structures due to greater social distancing concerns. As a result, the commercial real estate industry, including office real estate, has suffered adverse impacts in its operations, financial conditions and cash flows due to the COVID-19 pandemic and faces the potential for lasting future effects.

Effect on the Company

Our office and data center shell portfolio is significantly concentrated in Defense/IT Locations, representing 167 of the portfolio’s 176 properties, or 88.0%, of our annualized rental revenue as of September 30, 2020. These properties are primarily occupied by the USG and contractor tenants engaged in what we believe are high-priority security, defense and IT missions. As a result, most of these properties were designated as “essential businesses,” and therefore exempt from many of the restrictions that otherwise have affected much of the commercial real estate industry. Furthermore, since the tenants in these properties are mostly the USG, or contractors of the USG who continue to be compensated by the USG for their services, we believe that their ability, and willingness, to fulfill their lease obligations will not be disrupted. Our Defense/IT Locations do include tenants serving as amenities to business parks housing our properties (such as restaurant, retail and personal service providers); while these tenants’ operations have been significantly disrupted by COVID-19, our annualized rental revenue from these tenants is not significant.

As of September 30, 2020, we owned seven Regional Office properties, representing 11.5% of our office and data center shell portfolio’s annualized rental revenue. These properties were comprised of: three high-rise Baltimore City properties proximate to the city’s waterfront; and four Northern Virginia properties. While these properties include tenants in the financial services, health care and public health sectors, which, as “essential businesses,” have been exempt from restrictions on operations, they also include a number of non-essential business tenants. These properties are more subject to traditional office fundamentals than our Defense/IT Locations and therefore face much of the enhanced risk in adverse impacts from COVID-19 described above.

The pandemic has affected the manner in which we conduct our operations in the following ways:

•for the operations of our properties;

◦we consulted with medical experts in developing an approach to safely operate our properties during the pandemic;

◦we use manufacturer recommended heating and air conditioning filters to ensure appropriate outside air distribution;

◦we proactively engaged our tenants to help them through unknowns as pandemic concerns heightened and restrictive measures were being instituted, and maintained that engagement to ensure communication regarding steps we were taking in our business operations, any changes in tenant operations (such as office closures or revised work schedules) and the existence of any actual or presumed COVID-19 cases in properties;

◦our on-site property operations staff have been required to use personal protective equipment, such as masks, gloves and hand sanitizer, and implement other procedural changes to enhance separation and minimize spread;

◦we instituted enhanced cleaning measures, particularly for high touch areas and flat surfaces, and conducted special deep cleanings in properties potentially affected by actual or presumed COVID-19 cases;

◦we provided signage promoting proper social distancing practices and hand sanitizer stations for property common area lobbies; and

◦for properties that were not being used by tenants due to office closures or work from home arrangements, we locked down public (non-tenant) access to the properties for security purposes and instituted other measures aimed at managing costs;

45

•for our employees:

◦our staff deemed to be essential, including our executives, select other members of our leadership team and most of our property management team, have continued to report to their normal work locations; and

◦most of our other staff worked from home from mid-March until the end of May, when most began reporting to their normal work locations on a weekly rotational basis; and

•for our leasing activities:

◦we continued active engagement for lease transactions already in progress while business closures were in place;

◦during periods of time in which we were unable to physically show space to prospective tenants (from mid-March until late May to mid-June), we showed space to new prospective tenants using a combination of virtual technology and pre-recorded video tours; and

◦we implemented new advertising strategies to promote space availability.

As of the date of this filing, we believe that COVID-19 has not significantly affected our results of operations. Our:

•same property NOI from real estate operations decreased 1.6% for the three months ended September 30, 2020 and increased 0.3% for the nine months ended September 30, 2020 relative to the comparable 2019 periods. These changes included the effect of $1.1 million and $2.7 million increases in provisions for collectability losses and $739,000 and $1.3 million decreases in parking revenue in the three and nine months ended September 30, 2020, respectively, relative to the comparable 2019 periods. Substantially all of the increases in collectibility losses was attributable to tenants whose operations were significantly disrupted by the pandemic (including primarily tenants serving as amenities to Defense/IT Location properties);

•other lease revenue collections were not significantly affected by the pandemic. However, we have agreed to deferred payment arrangements for approximately $2.6 million in lease receivables to be repaid in most cases by 2021 with primarily Regional Office tenants and tenants serving as amenities to Defense/IT Location properties whose operations were significantly disrupted;

•office and data center shell portfolio was 93.8% occupied (compared to 92.9% at year end) and 94.4% leased (unchanged from year end) and our Same Properties portfolio was 92.5% occupied (compared to 91.8% at year end) and 93.2% leased (compared to 93.5% at year end);

•operating expenses included the effect of higher cleaning and maintenance related costs, which was partially offset by higher tenant expense reimbursements; and

•leadership team concluded that the economic disruption resulting from COVID-19 constituted a significant adverse change in the business climate that could affect the value of our Regional Office properties, which are dependent on commercial office tenants and could suffer increased vacancy as a result. Accordingly, we concluded that these circumstances constituted an indicator of impairment. We performed recovery analyses for each Regional Office property’s asset group and concluded that the carrying value of each asset group was recoverable from the respective estimated undiscounted future cash flows. As a result, no impairment loss was recognized.

While we do not currently expect that COVID-19 will significantly affect our results of operations, financial condition or cash flows, we believe that the impact of the pandemic will be dependent on future developments, including the duration of the pandemic, the prevalence, strength and duration of restrictive measures and the resulting effects on our tenants, potential future tenants, the commercial real estate industry and the broader economy, all of which are uncertain and difficult to predict. Nevertheless, we believe at this time that there is more inherent risk associated with the operations of our Regional Office properties than our Defense/IT Locations.

We believe that COVID-19 led to several leases being executed later than we previously expected, and the inability for us to physically show space to prospective tenants for a period of time due to restrictive measures served as an impediment to initiating new and progressing active leasing transactions. While we do not believe that our development leasing and ability to renew leases scheduled to expire has been significantly affected by the pandemic, we do believe that the impact of the restrictive measures and the economic uncertainty caused by the pandemic has impacted our timing and volume of vacant space leasing, and may continue to do so in the future.

For our development activity, we have delivered space in five newly-constructed properties and expansions of two fully-operational properties on schedule since March 2020, and the 11 properties and expansion of one fully-operational property that were under development as of September 30, 2020 face minimal operational risk as they were 84% leased as of the date of this filing. COVID-19 enhances the risk of us being able to stay on pace to complete development and begin operations on schedule due to the potential for delays from: jurisdictional permitting and inspections; factories’ ability to provide materials; and possible labor quarantines. These types of issues have not significantly affected us to date but could in the future, depending on COVID-19 related developments.

46

We do not expect that we will be required to incur significant additional capital expenditures on existing properties as a result of COVID-19.

In March 2020, due to the potential for financial market instability from the pandemic, we borrowed under our Revolving Credit Facility in order to pre-fund our short-term capital needs. As the capital markets remained stable in the second quarter of 2020, we repaid much of these borrowings in June 2020. We completed an issuance of $400.0 million in unsecured senior notes in September 2020, which enabled us to refinance $300.0 million in notes maturing in 2021, and we have no other significant debt maturities until 2022.

Occupancy and Leasing

Office and Data Center Shell Portfolio

The tables below set forth occupancy information pertaining to our portfolio of office and data center shell properties:

	September 30, 2020			December 31, 2019
Occupancy rates at period end
Total	93.8		%	92.9		%
Defense/IT Locations:
Fort Meade/BW Corridor	90.7		%	92.4		%
Northern Virginia Defense/IT	88.5		%	82.4		%
Lackland Air Force Base	100.0		%	100.0		%
Navy Support Locations	95.6		%	92.5		%
Redstone Arsenal	99.5		%	99.3		%
Data Center Shells	100.0		%	100.0		%
Total Defense/IT Locations	94.2		%	93.7		%
Regional Office	92.3		%	88.1		%
Other	68.4		%	73.0		%
Average contractual annual rental rate per square foot at period end (1)	$	30.83		$	31.28

(1)Includes estimated expense reimbursements.

	Rentable Square Feet	Occupied Square Feet
	(in thousands)
December 31, 2019	19,173	17,816
Vacated upon lease expiration (1)	—	(365)
Occupancy for new leases (2)	—	459
Developed or redeveloped	1,241	1,220
Other changes	(25)	—
September 30, 2020	20,389	19,130

(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 ended September 30, 2020, we completed 2.7 million square feet of leasing, including: renewed leases on 1.9 million square feet, representing 84.3% of the square footage of our lease expirations (including the effect of early renewals); 520,000 square feet of development and redevelopment space; and 274,000 square feet of vacant space.

Wholesale Data Center

Our 19.25 megawatt wholesale data center was 86.7% leased as of September 30, 2020 and 76.9% leased as of December 31, 2019, reflecting an increase from our leasing of 3.1 megawatts in April 2020. We have a lease for 11.25 megawatts in holdover status requiring six months’ notice for the tenant to terminate that we are negotiating for renewal.

47

Results of Operations

We evaluate the operating performance of our properties using NOI from real estate operations, our segment performance measure, which includes: real estate revenues and property operating expenses; and the net of revenues and property operating expenses of real estate operations owned through unconsolidated real estate joint ventures (“UJVs”) that is allocable to COPT’s ownership interest (“UJV NOI allocable to COPT”).  We view our NOI from real estate operations as comprising the following primary categories:

•office and data center shell properties:

•stably owned and 100% operational throughout the current and prior year reporting periods.  We define these as changes from “Same Properties”;

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

•disposed; and

•our wholesale data center.

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.

Since both of the measures discussed above exclude certain items includable in net 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. A reconciliation of NOI from real estate operations and NOI from service operations to net income reported on the consolidated statements of operations of COPT and subsidiaries is provided in Note 13 to our consolidated financial statements.

Comparison of Statements of Operations for the Three Months Ended September 30, 2020 and 2019

	For the Three Months Ended September 30,
	2020		2019		Variance
	(in thousands)
Revenues
Revenues from real estate operations	$	134,443	$	130,734	$	3,709
Construction contract and other service revenues	20,323		28,697		(8,374)
Total revenues	154,766		159,431		(4,665)
Operating expenses
Property operating expenses	51,552		49,714		1,838
Depreciation and amortization associated with real estate operations	35,332		34,692		640
Construction contract and other service expenses	19,220		27,802		(8,582)
Impairment losses	1,530		327		1,203
General, administrative and leasing expenses	7,467		7,929		(462)
Business development expenses and land carry costs	1,094		964		130
Total operating expenses	116,195		121,428		(5,233)
Interest expense	(17,152)		(17,126)		(26)
Interest and other income	1,746		1,842		(96)
Credit loss recoveries	1,465		—		1,465
Loss on early extinguishment of debt	(3,237)		—		(3,237)
Loss on interest rate derivatives	(53,196)		—		(53,196)
Equity in income of unconsolidated entities	477		396		81
Income tax (expense) benefit	(16)		131		(147)
Net (loss) income	$	(31,342)	$	23,246	$	(54,588)

48

NOI from Real Estate Operations

	For the Three Months Ended September 30,
	2020			2019			Variance
	(Dollars in thousands, except per square foot data)
Revenues
Same Properties revenues
Lease revenue, excluding lease termination revenue and provision for collectability losses	$	118,830		$	117,360		$	1,470
Lease termination revenue	609			823			(214)
Provision for collectability losses included in lease revenue	(1,089)			(39)			(1,050)
Other property revenue	515			1,227			(712)
Same Properties total revenues	118,865			119,371			(506)
Developed and redeveloped properties placed in service	9,510			2,885			6,625
Wholesale data center	6,068			6,565			(497)
Dispositions	—			1,230			(1,230)
Other	—			683			(683)
	134,443			130,734			3,709
Property operating expenses
Same Properties	(46,342)			(45,636)			(706)
Developed and redeveloped properties placed in service	(1,566)			(513)			(1,053)
Wholesale data center	(3,642)			(3,374)			(268)
Dispositions	—			(164)			164
Other	(2)			(27)			25
	(51,552)			(49,714)			(1,838)
UJV NOI allocable to COPT
Same Properties	1,247			1,214			33
Retained interests in UJV formed in 2019	505			387			118
	1,752			1,601			151
NOI from real estate operations
Same Properties	73,770			74,949			(1,179)
Developed and redeveloped properties placed in service	7,944			2,372			5,572
Wholesale data center	2,426			3,191			(765)
Dispositions, net of retained interests in UJV formed in 2019	505			1,453			(948)
Other	(2)			656			(658)
	$	84,643		$	82,621		$	2,022
Same Properties NOI from real estate operations by segment
Defense/IT Locations	$	66,183		$	66,405		$	(222)
Regional Office	7,131			8,163			(1,032)
Other	456			381			75
	$	73,770		$	74,949		$	(1,179)
Same Properties rent statistics
Average occupancy rate	92.4		%	91.6		%	0.8		%
Average straight-line rent per occupied square foot (1)	$	6.54		$	6.56		$	(0.02)

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

Our Same Properties pool consisted of 152 properties, comprising 81.3% of our office and data center shell portfolio’s square footage as of September 30, 2020. This pool of properties changed from the pool used for purposes of comparing 2019 and 2018 in our 2019 Annual Report on Form 10-K due to the addition of five properties placed in service and 100% operational on or before January 1, 2019.

49

NOI from real estate operations of our Same Properties pool decreased primarily due to lower parking revenue and higher provisions for collectibility losses, substantially all of which was attributable to the effects of COVID-19, as well as higher maintenance expenses.

NOI from real estate operations of our developed and redeveloped properties placed in service included 15 properties placed in service in 2019 and 2020, while our dispositions included our decrease in ownership in 2019 of nine data center shells.

NOI from real estate operations of our wholesale data center decreased due primarily to higher repairs and maintenance expenses and slightly lower occupancy.

NOI from Service Operations

	For the Three Months Ended September 30,
	2020		2019		Variance
	(in thousands)
Construction contract and other service revenues	$	20,323	$	28,697	$	(8,374)
Construction contract and other service expenses	(19,220)		(27,802)		8,582
NOI from service operations	$	1,103	$	895	$	208

Construction contract and other service revenue and expenses decreased due primarily to a lower 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 typically contribute an insignificant amount of net income relative to our real estate operations.

Loss on extinguishment of debt

Our loss on early extinguishment of debt in the current period was attributable to our purchase of the 3.70% Senior Notes due 2021.

Loss on interest rate derivatives

As described further in Note 10 to our consolidated financial statements, we recognized a loss in the current period on interest rate swaps previously designated as cash flow hedges of interest expense on forecasted future borrowings that we determined would probably not occur.

50

Comparison of Statements of Operations for the Nine Months Ended September 30, 2020 and 2019

	For the Nine Months Ended September 30,
	2020		2019		Variance
	(in thousands)
Revenues
Revenues from real estate operations	$	399,097	$	395,495	$	3,602
Construction contract and other service revenues	46,240		87,946		(41,706)
Total revenues	445,337		483,441		(38,104)
Operating expenses
Property operating expenses	151,755		147,045		4,710
Depreciation and amortization associated with real estate operations	101,540		104,290		(2,750)
Construction contract and other service expenses	44,052		85,130		(41,078)
Impairment losses	1,530		327		1,203
General, administrative and leasing expenses	23,111		26,066		(2,955)
Business development expenses and land carry costs	3,474		2,947		527
Total operating expenses	325,462		365,805		(40,343)
Interest expense	(50,789)		(54,275)		3,486
Interest and other income	5,233		5,977		(744)
Credit loss recoveries	161		—		161
Gain on sales of real estate	5		84,469		(84,464)
Loss on early extinguishment of debt	(3,237)		—		(3,237)
Loss on interest rate derivatives	(53,196)		—		(53,196)
Equity in income of unconsolidated entities	1,372		1,207		165
Income tax (expense) benefit	(95)		113		(208)
Net income	$	19,329	$	155,127	$	(135,798)

51

NOI from Real Estate Operations

	For the Nine Months Ended September 30,
	2020			2019			Variance
	(Dollars in thousands, except per square foot data)
Revenues
Same Properties revenues
Lease revenue, excluding lease termination revenue and provision for collectability losses	$	357,005		$	349,182		$	7,823
Lease termination revenue	1,052			1,629			(577)
Provision for collectability losses included in lease revenue	(2,789)			(132)			(2,657)
Other property revenue	1,896			3,572			(1,676)
Same Properties total revenues	357,164			354,251			2,913
Constructed and redeveloped properties placed in service	22,251			5,716			16,535
Wholesale data center	19,695			22,996			(3,301)
Dispositions	(17)			10,278			(10,295)
Other	4			2,254			(2,250)
	399,097			395,495			3,602
Property operating expenses
Same Properties	(137,474)			(135,139)			(2,335)
Constructed and redeveloped properties placed in service	(3,936)			(1,173)			(2,763)
Wholesale data center	(10,338)			(9,830)			(508)
Dispositions	4			(864)			868
Other	(11)			(39)			28
	(151,755)			(147,045)			(4,710)
UJV NOI allocable to COPT
Same Properties	3,674			3,638			36
Retained interests in UJV formed in 2019	1,516			433			1,083
	5,190			4,071			1,119
NOI from real estate operations
Same Properties	223,364			222,750			614
Constructed and redeveloped properties placed in service	18,315			4,543			13,772
Wholesale data center	9,357			13,166			(3,809)
Dispositions, net of retained interests in UJV formed in 2019	1,503			9,847			(8,344)
Other	(7)			2,215			(2,222)
	$	252,532		$	252,521		$	11
Same Properties NOI from real estate operations by segment
Defense/IT Locations	$	198,744		$	198,564		$	180
Regional Office	23,328			23,010			318
Other	1,292			1,176			116
	$	223,364		$	222,750		$	614
Same Properties rent statistics
Average occupancy rate	92.4		%	91.6		%	0.8		%
Average straight-line rent per occupied square foot (1)	$	19.55		$	19.66		$	(0.11)

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

52

NOI from real estate operations of our constructed and redeveloped properties placed in service included 15 properties placed in service in 2019 and 2020, while our dispositions included our decrease in ownership in 2019 of nine data center shells.

NOI from real estate operations of our wholesale data center decreased due primarily to lease termination revenue recognized in the prior period that did not recur in the current period.

NOI from Service Operations

	For the Nine Months Ended September 30,
	2020		2019		Variance
	(in thousands)
Construction contract and other service revenues	$	46,240	$	87,946	$	(41,706)
Construction contract and other service expenses	(44,052)		(85,130)		41,078
NOI from service operations	$	2,188	$	2,816	$	(628)

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

General, administrative and leasing expenses

General, administrative and leasing expenses decreased in large part due to lower professional fees and compensation related expenses in the current period.

Interest Expense

Interest expense decreased due primarily to increased capitalized interest resulting from a higher volume of active development projects and lower borrowings and interest rates on our Revolving Credit Facility.

Gain on sales of real estate

The gain on sales of real estate in the current period was due to our sale of a 90% interest in seven data center shell properties in 2019 that did not recur in the current period.

Loss on extinguishment of debt

Refer to our explanation above for the three-month periods.

Loss on interest rate derivatives

Refer to our explanation above for the three-month periods.

Funds from Operations

Funds from operations (“FFO”) is defined as net income computed using GAAP, excluding gains on sales and impairment losses of real estate (net of associated income tax) and real estate-related depreciation and amortization. FFO also includes adjustments to net income for the effects of the items noted above pertaining to UJVs that were allocable to our ownership interest in the UJVs. 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 on sales and impairment losses of real estate (net of associated income tax), and 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 balance with other GAAP and non-GAAP measures. FFO is not necessarily an indication of our cash flow available to fund cash needs. 

53

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.

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 share-based compensation awards.  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 net income 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; 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, interest expense and gains on debt extinguishment; loss on interest rate derivatives; demolition costs on redevelopment and nonrecurring improvements; executive transition costs; issuance costs associated with redeemed preferred shares; allocations of FFO to holders of noncontrolling interests resulting from capital events; and certain other expenses that we believe are not closely correlated with our operating performance.  This measure also includes adjustments for the effects of the items noted above pertaining to UJVs that were allocable to our ownership interest in the UJVs. We believe this to be a useful supplemental measure alongside Diluted FFO as it excludes gains and losses from certain investing and financing activities and certain other items that we believe are not closely correlated to (or associated with) our operating performance. We believe that net income 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 results.  We believe this to be a useful supplemental measure alongside Diluted FFO per share as it excludes gains and losses from certain investing and financing activities and certain other items that we believe are not closely correlated to (or associated

54

with) our operating performance. 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.

The table below sets forth the computation of the above stated measures, and provides reconciliations to the GAAP measures of COPT and subsidiaries associated with such measures:

55

	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
	2020		2019		2020		2019
	(Dollars and shares in thousands,  except per share data)
Net (loss) income	$	(31,342)	$	23,246	$	19,329	$	155,127
Real estate-related depreciation and amortization	35,332		34,692		101,540		104,290
Depreciation and amortization on UJV allocable to COPT	819		790		2,455		1,922
Impairment losses on real estate	1,530		327		1,530		327
Gain on sales of real estate	—		—		(5)		(84,469)
FFO	6,339		59,055		124,849		177,197
Noncontrolling interests-preferred units in the Operating Partnership	(77)		(157)		(231)		(487)
FFO allocable to other noncontrolling interests	(1,074)		(1,429)		(14,614)		(3,588)
Basic FFO allocable to share-based compensation awards	(119)		(248)		(449)		(662)
Basic FFO available to common share and common unit holders	5,069		57,221		109,555		172,460
Redeemable noncontrolling interests	—		34		103		100
Diluted FFO available to common share and common unit holders	5,069		57,255		109,658		172,560
Loss on early extinguishment of debt	3,237		—		3,237		—
Loss on interest rate derivatives	53,196		—		53,196		—
Demolition costs on redevelopment and nonrecurring improvements	11		—		63		44
Executive transition costs	—		—		—		4
Non-comparable professional and legal expenses	—		175		—		486
Dilutive preferred units in the Operating Partnership	77		—		231		—
FFO allocation to other noncontrolling interests resulting from capital event	—		—		11,090		—
Diluted FFO comparability adjustments for redeemable noncontrolling interests	34		—		—		—
Diluted FFO comparability adjustments allocable to share-based compensation awards	(139)		—		(307)		(2)
Diluted FFO available to common share and common unit holders, as adjusted for comparability	$	61,485	$	57,430	$	177,168	$	173,092
Weighted average common shares	111,811		111,582		111,778		111,036
Conversion of weighted average common units	1,240		1,312		1,235		1,323
Weighted average common shares/units - Basic FFO per share	113,051		112,894		113,013		112,359
Dilutive effect of share-based compensation awards	274		361		278		313
Redeemable noncontrolling interests	—		109		125		123
Weighted average common shares/units - Diluted FFO per share	113,325		113,364		113,416		112,795
Dilutive convertible preferred units	176		—		176		—
Redeemable noncontrolling interests	109		—		—		—
Weighted average common shares/units - Diluted FFO per share, as adjusted for comparability	113,610		113,364		113,592		112,795
Diluted FFO per share	$	0.04	$	0.51	$	0.97	$	1.53
Diluted FFO per share, as adjusted for comparability	$	0.54	$	0.51	$	1.56	$	1.53
Denominator for diluted EPS	111,811		111,943		112,056		111,472
Weighted average common units	1,240		1,312		1,235		1,323
Redeemable noncontrolling interests	—		109		125		—
Anti-dilutive EPS effect of share-based compensation awards	274		—		—		—
Denominator for diluted FFO per share	113,325		113,364		113,416		112,795
Dilutive convertible preferred units	176		—		176		—
Redeemable noncontrolling interests	109		—		—		—
Denominator for diluted FFO per share, as adjusted for comparability	113,610		113,364		113,592		112,795

56

Property Additions

The table below sets forth the major components of our additions to properties for the nine months ended September 30, 2020 (in thousands):

Development and redevelopment	$	288,345
Tenant improvements on operating properties (1)	21,162
Capital improvements on operating properties	26,536
	$	336,043

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

Cash Flows

Net cash flow from operating activities increased $2.0 million when comparing the nine months ended September 30, 2020 and 2019.

Net cash flow used for investing activities increased $287.3 million when comparing the nine months ended September 30, 2020 and 2019. This increase included the effect of $53.1 million paid in the current period to cash settle interest rate swaps and an offset to cash outlays in the prior period resulting from $237.2 million in proceeds from our sale of a 90% interest in properties.

Net cash flow provided by financing activities in the nine months ended September 30, 2020 was $233.7 million, and included the following:

•net proceeds from debt borrowings of $348.3 million, which included the net increase from our issuance of the 2.25% Notes and purchase of the 3.70% Notes; offset in part by

•dividends and/or distributions to equity holders of $93.8 million.

Net cash flow used in financing activities in the nine months ended September 30, 2019 was $22.6 million, and included the following:

•dividends and/or distributions to equity holders of $93.5 million; offset in part by

•net proceeds from the issuance of common shares (or units) of $46.4 million; and

•net proceeds from debt borrowings of $35.7 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 occasionally issues public equity 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, 2020, COPT owned 98.6% of the outstanding common units in COPLP; the remaining common units and all of the outstanding preferred units 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 Partnership’s debt, as discussed further in Note 9 of the notes to consolidated financial statements included 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 that the Operating Partnership’s sources of working capital, specifically its cash flow from operations, and borrowings available under its Revolving Credit Facility, are adequate for it to make its distribution payments to COPT and, in turn, for COPT to make its dividend payments to its shareholders.

57

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 to 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 development activities and acquisitions.

Liquidity and Capital Resources of COPLP

COPLP’s primary cash requirements are for operating expenses, debt service, development of new properties and improvements to existing properties.  We expect COPLP to continue to use cash flow provided by operations as the primary source to meet its short-term capital needs, including property operating expenses, general and administrative expenses, interest expense, scheduled principal amortization of debt, distributions to its security holders and improvements to existing properties.  As of September 30, 2020, COPLP had $11.5 million in cash and cash equivalents.

COPLP’s senior unsecured debt is currently rated investment grade by the three major rating agencies. We aim to maintain an investment grade rating to enable COPLP to use debt comprised of unsecured, primarily fixed-rate debt (including the effect of interest rate swaps) from public markets and banks. COPLP also uses secured nonrecourse debt from institutional lenders and banks for joint venture financing. In addition, COPLP periodically raises equity from COPT when COPT accesses the public equity markets by issuing common and/or preferred shares.

COPLP uses its Revolving Credit Facility to initially finance much of its investing activities.  COPLP subsequently pays down the facility using cash available from operations and proceeds from long-term borrowings (net of any related hedging costs), equity issuances and sales of interests in properties.  The lenders’ aggregate commitment under the facility is $800.0 million, with the ability for COPLP to increase the lenders’ aggregate commitment to $1.25 billion, provided that there is no default under the facility and subject to the approval of the lenders. The facility matures in March 2023, and may be extended by two six-month periods at COPLP’s option, provided that there is no default under the facility and COPLP pays an extension fee of 0.075% of the total availability under the facility for each extension period. As of September 30, 2020, the maximum borrowing capacity under this facility totaled $800.0 million, of which $743.0 million was available.

COPT has a program in place under which it may offer and sell common shares in at-the-market stock offerings having an aggregate gross sales price of up to $300 million. Under this program, COPT may also, at its discretion, sell common shares under forward equity sales agreements. The use of a forward equity sales agreement would enable us to lock in a price on a sale of common shares when the agreement is executed but defer receiving the proceeds from the sale until a later date.

We believe that COPLP’s liquidity and capital resources are adequate for its near-term and longer-term requirements without necessitating property sales. However, we may dispose of interests in properties opportunistically or when capital markets otherwise warrant. As discussed above, on October 30, 2020, we sold a 90% interest in two data center shell properties for $81 million, which was used to repay borrowings under our Revolving Credit Facility, and we retained a 10% interest in the properties through a joint venture. In addition, as of the date of this filing, we have a firm commitment for the sale of 80% of our ownership interest in GI-COPT DC Partnership LLC, an unconsolidated joint venture, for approximately $61 million. We believe that we have the ability to raise additional equity by selling interests in data center shells through joint ventures.

58

Our contractual obligations as of September 30, 2020 included the following (in thousands):

	For the Periods Ending December 31,
	2020		2021		2022		2023		2024		Thereafter		Total
Contractual obligations (1)
Debt (2)
Balloon payments due upon maturity	$	177,052	$	12,031	$	474,558	$	470,578	$	277,649	$	767,723	$	2,179,591
Scheduled principal payments (3)	1,048		3,955		4,498		3,553		2,334		2,294		17,682
Interest on debt (3)(4)	16,218		63,388		62,392		45,717		27,625		20,719		236,059
Development and redevelopment obligations (5)(6)	41,644		22,090		2,748		—		—		—		66,482
Third-party construction cost obligations (6)(7)	7,072		13,375		—		—		—		—		20,447
Tenant and other building improvements (3)(6)	18,123		33,531		10,770		—		—		—		62,424
Property finance leases (principal and interest) (3)	—		14		14		—		—		—		28
Property operating leases (3)	615		2,513		2,566		2,601		2,636		118,295		129,226
Total contractual cash obligations	$	261,772	$	150,897	$	557,546	$	522,449	$	310,244	$	909,031	$	2,711,939

(1)The contractual obligations set forth in this table exclude contracts for property operations and certain other contracts entered into in the normal course of business. Also excluded are accruals and payables incurred and interest rate derivative liabilities, which are reflected in our reported liabilities (although debt and lease liabilities are included on the table).

(2)Represents scheduled principal amortization payments and maturities only and therefore excludes net debt discounts and deferred financing costs of $15.7 million. Maturities included $177.1 million in 2020, representing our 3.70% Notes that were redeemed in October 2020 using borrowings under our Revolving Credit Facility, and $57.0 million in 2023 that may be extended to 2024, subject to certain conditions.

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

(4)Represents interest costs for our outstanding debt as of September 30, 2020 for the terms of such debt.  For variable rate debt, the amounts reflected above used September 30, 2020 interest rates on variable rate debt in computing interest costs for the terms of such debt. We expect to pay these items using cash flow from operations.

(5)Represents contractual obligations pertaining to new development and redevelopment activities.

(6)Due to the long-term nature of certain development and construction 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.

(7)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.

We expect to spend approximately $75 million on development costs and approximately $30 million on improvements and leasing costs for operating properties (including the commitments set forth in the table above) during the remainder of 2020.  We expect to fund the development costs initially using primarily borrowings under our Revolving Credit Facility.  We expect to fund improvements to existing operating properties using cash flow from operating activities.

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, 2020, we were compliant with these covenants.

Off-Balance Sheet Arrangements

 We had no material off-balance sheet arrangements during the nine months ended September 30, 2020.

Inflation

Most of our tenants are obligated to pay their share of a property’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.

59

Recent Accounting Pronouncements

See Note 2 to our consolidated financial statements for information regarding recent accounting pronouncements.

Item 3.           Quantitative and Qualitative Disclosures about Market Risk

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, 2020 our debt obligations and weighted average interest rates on debt maturing each year (dollars in thousands):

	For the Periods Ending December 31,
	2020		2021		2022		2023		2024		Thereafter		Total
Debt:
Fixed rate debt (1)	$	177,999	$	3,875	$	4,033	$	416,591	$	279,443	$	737,442	$	1,619,383
Weighted average interest rate	3.70%		3.97%		3.98%		3.70%		5.16%		3.45%		3.84%
Variable rate debt (2)	$	101	$	12,111	$	475,023	$	57,540	$	540	$	32,575	$	577,890
Weighted average interest rate (3)	2.01%		2.00%		1.37%		1.21%		1.66%		1.67%		1.39%

(1)Represents principal maturities only and therefore excludes net discounts and deferred financing costs of $15.7 million.

(2)As of September 30, 2020, maturities included $177.1 million in 2020, representing our 3.70% Notes that were redeemed in October 2020, and $57.0 million in 2023 that may be extended to 2024, subject to certain conditions.

(3)The amounts reflected above used interest rates as of September 30, 2020 for variable rate debt.

The fair value of our debt was $2.2 billion as of September 30, 2020.  If interest rates had been 1% lower, the fair value of our fixed-rate debt would have increased by approximately $55 million as of September 30, 2020.

See Note 10 to our consolidated financial statements for information pertaining to interest rate swap contracts in place as of September 30, 2020 and their respective fair values.

Based on our variable-rate debt balances, including the effect of interest rate swap contracts, our interest expense would have increased by $1.7 million in the nine months ended September 30, 2020 if the applicable LIBOR rate was 1% higher.

Item 4.           Controls and Procedures

COPT

(a)                                  Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of COPT’s disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act) as of September 30, 2020.  Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that COPT’s disclosure controls and procedures as of September 30, 2020 were functioning effectively to provide reasonable assurance that the information required to be disclosed 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 its 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 COPT’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.

60

COPLP

(a)                                  Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of COPLP’s disclosure controls and procedures (as defined in Rule 15d-15(e) under the Exchange Act) as of September 30, 2020.  Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that COPLP’s disclosure controls and procedures as of September 30, 2020 were functioning effectively to provide reasonable assurance that the information required to be disclosed 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 its 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 COPLP’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: OTHER INFORMATION

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

Other than as set forth below, there have been no material changes to the risk factors and uncertainties relating to our business and the ownership of our securities as previously set forth in Part 1, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2019 and Part II, Item 1A of the Quarterly Reports on Form 10-Q for the quarters ended March 31, 2020 and June 30, 2020.

We may suffer further adverse effects from the COVID-19 pandemic, and similar pandemics, along with restrictive measures instituted to prevent spread. Since first being declared a pandemic by the World Health Organization in early March 2020, the coronavirus, or COVID-19, has spread worldwide. In an effort to control its spread, governments and other authorities imposed restrictive measures affecting freedom of movement and business operations, such as shelter-in-place orders and business closures. Strong restrictive measures were put into place in much of the United States beginning in March, bringing many businesses to a halt while forcing others to change the way in which they conduct their operations, with much of the workforce working from their homes to the extent they were able. States and local governments began easing these measures to varying extents in late April, with some lifting restrictive measures entirely, while others chose a more gradual, extended easing approach. While the easing of these measures has enabled many businesses to gradually resume normal operations, most businesses continue to be hindered to varying extents by either measures still in effect, operational challenges resulting from social distancing requirements/expectations and/or a reluctance by much of the population to engage in certain activities while the pandemic is still active. As of the date of this filing, COVID-19 spread continues world- and nation-wide, and is expected to continue until effective vaccinations have been developed and then distributed and administered to much of the population. As a result, there continues to be significant uncertainty regarding the duration and extent of this pandemic. The outbreak has significantly disrupted financial and economic markets worldwide, as well as in the United States at a national, regional and local level. These conditions could continue or further deteriorate as businesses feel the prolonged effects of stalled or reduced operations and uncertainty regarding the pandemic continues.

COVID-19, and similar pandemics, along with measures instituted to prevent spread, may adversely affect us in many ways, including, but not limited to:

•disruption of our tenants’ operations, which could adversely affect their ability, or willingness, to sustain their businesses and/or fulfill their lease obligations;

•our ability to maintain occupancy in our properties and obtain new leases for unoccupied and new development space at favorable terms or at all;

61

•shortages in supply of products or services from our and our tenants’ vendors that are needed for us and our tenants to operate effectively, and which could lead to increased costs for such products and services;

•access to debt and equity capital on attractive terms or at all. Severe disruption and instability in the global financial markets or deteriorations in credit and financing conditions may affect our or our tenants’ ability to access capital necessary to fund operations, refinance debt or fund planned investments on a timely basis, and may adversely affect the valuation of financial assets and liabilities;

•our and our tenants’ ability to continue or complete planned development, including the potential for delays in the supply of materials or labor necessary for development; and

•an increase in the pace of businesses implementing remote work arrangements over the long-term, which would adversely effect demand for office space.

The extent of the effect on our operations, financial condition, cash flows and ability to make expected distributions to shareholders will be dependent on future developments, including the duration of the pandemic and any future resurgence thereof, the prevalence, strength and duration of restrictive measures and the resulting effects on our tenants, potential future tenants, the commercial real estate industry and the broader economy, all of which are uncertain and difficult to predict. Moreover, some of the risks described in the risk factors set forth in Item 1A of our 2019 Annual Report on Form 10-K and subsequent Quarterly Reports on Form 10-Q may be more likely to impact us as a result of COVID-19 and the responses to curb its spread, including, but not limited to: downturns in national, regional and local economic environments; deteriorating local real estate market conditions; and declining real estate valuations.

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

(a)      Not applicable

(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.

62

Item 6.           Exhibits

(a)          Exhibits:

EXHIBIT NO.	DESCRIPTION
10.1	First Supplemental Indenture, by and among Corporate Office Properties, L.P., as issuer, Corporate Office Properties Trust, as guarantor, and U.S. Bank National Association, as trustee (filed with the Company’s Current Report on Form 8-K dated September 17, 2020 and incorporated herein by reference).
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 - The instance document does not appear in the interactive data file because its XBRL tags are embedded within the Inline XBRL document (filed herewith).
101.SCH	Inline XBRL Taxonomy Extension Schema Document (filed herewith).
101.CAL	Inline XBRL Taxonomy Extension Calculation Linkbase Document (filed herewith).
101.LAB	Inline XBRL Extension Labels Linkbase (filed herewith).
101.PRE	Inline XBRL Taxonomy Extension Presentation Linkbase Document (filed herewith).
101.DEF	Inline XBRL Taxonomy Extension Definition Linkbase Document (filed herewith).
104	Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).

63

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the undersigned Registrants have duly caused this report to be signed on their 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/ Stephen E. Budorick		/s/ Stephen E. Budorick
	Stephen E. Budorick		Stephen E. Budorick
	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:	October 30, 2020	Dated:	October 30, 2020

64

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, Stephen E. Budorick, 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:	October 30, 2020	/s/ Stephen E. Budorick
		Stephen E. Budorick
		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:	October 30, 2020	/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, Stephen E. Budorick, 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:	October 30, 2020	/s/ Stephen E. Budorick
		Stephen E. Budorick
		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:	October 30, 2020	/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, 2020, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Stephen E. Budorick, 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/ Stephen E. Budorick
Stephen E. Budorick
President and Chief Executive Officer
Date:	October 30, 2020

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, 2020, 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:	October 30, 2020

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, 2020, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Stephen E. Budorick, 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/ Stephen E. Budorick
Stephen E. Budorick
President and Chief Executive Officer
Date:	October 30, 2020

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, 2020, 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:	October 30, 2020

XML

Cover - shares	9 Months Ended
	Sep. 30, 2020	Oct. 23, 2020
Entity Information [Line Items]
Document Type	10-Q
Document Quarterly Report	true
Document Transition Report	false
Document Period End Date	Sep. 30, 2020
Entity File Number	1-14023
Entity Registrant Name	CORPORATE OFFICE PROPERTIES TRUST
Entity Incorporation, State or Country Code	MD
Entity Tax Identification Number	23-2947217
Entity Address, Address Line One	6711 Columbia Gateway Drive
Entity Address, Address Line Two	Suite 300
Entity Address, City or Town	Columbia
Entity Address, State or Province	MD
Entity Address, Postal Zip Code	21046
City Area Code	443
Local Phone Number	285-5400
Title of 12(b) Security	Common Shares of beneficial interest, $0.01 par value
Trading Symbol	OFC
Security Exchange Name	NYSE
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Shell Company	false
Entity Common Stock, Shares Outstanding		112,175,248
Entity Central Index Key	0000860546
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Entity Filer Category	Large Accelerated Filer
Document Fiscal Year Focus	2020
Document Fiscal Period Focus	Q3
Entity Small Business	false
Entity Emerging Growth Company	false
Corporate Office Properties, L.P.
Entity Information [Line Items]
Document Type	10-Q
Entity File Number	333-189188
Entity Registrant Name	CORPORATE OFFICE PROPERTIES, L.P.
Entity Incorporation, State or Country Code	DE
Entity Tax Identification Number	23-2930022
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Shell Company	false
Entity Central Index Key	0001577966
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Entity Filer Category	Non-accelerated Filer
Document Fiscal Year Focus	2020
Document Fiscal Period Focus	Q3
Entity Small Business	false
Entity Emerging Growth Company	false
COPT | Common Units | Corporate Office Properties, L.P.
Entity Information [Line Items]
Percentage ownership in operating partnership	98.60%

XML

Consolidated Balance Sheets - USD ($) $ in Thousands	Sep. 30, 2020	Dec. 31, 2019
Properties, net:
Operating properties, net	$ 2,999,892	$ 2,772,647
Projects in development or held for future development	587,046	568,239
Total properties, net	3,586,938	3,340,886
Property - operating right-of-use assets	36,442	27,864
Property - finance right-of-use assets	40,432	40,458
Cash and cash equivalents	11,458	14,733
Investment in unconsolidated real estate joint ventures	49,662	51,949
Accounts receivable, net	36,151	35,444
Deferred rent receivable	92,853	87,736
Intangible assets on real estate acquisitions, net	22,433	27,392
Deferred leasing costs (net of accumulated amortization of $31,927 and $33,782 respectively)	59,392	58,392
Prepaid expenses and other assets, net	110,292	96,076
Total assets	4,120,189	3,854,453
Liabilities:
Debt, net	2,181,551	1,831,139
Accounts payable and accrued expenses	140,921	148,746
Rents received in advance and security deposits	30,276	33,620
Dividends and distributions payable	31,307	31,263
Deferred revenue associated with operating leases	8,579	7,361
Property - operating lease liabilities	26,382	17,317
Interest rate derivatives	10,977	25,682
Other liabilities	17,038	10,649
Total liabilities	2,447,031	2,105,777
Commitments and contingencies (Note 17)
Redeemable noncontrolling interests	23,522	29,431
Corporate Office Properties Trust’s shareholders’ equity:
Common Shares of beneficial interest	1,122	1,121
Additional paid-in capital	2,479,321	2,481,558
Cumulative distributions in excess of net income	(860,647)	(778,275)
Accumulated other comprehensive loss	(10,548)	(25,444)
Total Corporate Office Properties Trust/L.P.'s equity	1,609,248	1,678,960
Noncontrolling interests in subsidiaries:
Common units in COPLP	19,522	19,597
Preferred units in COPLP	8,800	8,800
Other consolidated entities	12,066	11,888
Noncontrolling interests in subsidiaries	40,388	40,285
Total equity	1,649,636	1,719,245
Total liabilities, redeemable noncontrolling interests and equity	4,120,189	3,854,453
Corporate Office Properties, L.P.
Properties, net:
Operating properties, net	2,999,892	2,772,647
Projects in development or held for future development	587,046	568,239
Total properties, net	3,586,938	3,340,886
Property - operating right-of-use assets	36,442	27,864
Property - finance right-of-use assets	40,432	40,458
Cash and cash equivalents	11,458	14,733
Investment in unconsolidated real estate joint ventures	49,662	51,949
Accounts receivable, net	36,151	35,444
Deferred rent receivable	92,853	87,736
Intangible assets on real estate acquisitions, net	22,433	27,392
Deferred leasing costs (net of accumulated amortization of $31,927 and $33,782 respectively)	59,392	58,392
Prepaid expenses and other assets, net	107,620	93,016
Total assets	4,117,517	3,851,393
Liabilities:
Debt, net	2,181,551	1,831,139
Accounts payable and accrued expenses	140,921	148,746
Rents received in advance and security deposits	30,276	33,620
Dividends and distributions payable	31,307	31,263
Deferred revenue associated with operating leases	8,579	7,361
Property - operating lease liabilities	26,382	17,317
Interest rate derivatives	10,977	25,682
Other liabilities	14,366	7,589
Total liabilities	2,444,359	2,102,717
Commitments and contingencies (Note 17)
Redeemable noncontrolling interests	23,522	29,431
Corporate Office Properties Trust’s shareholders’ equity:
Common Shares of beneficial interest	1,639,287	1,724,159
Accumulated other comprehensive loss	(10,563)	(25,648)
Total Corporate Office Properties Trust/L.P.'s equity	1,637,524	1,707,311
Noncontrolling interests in subsidiaries:
Noncontrolling interests in subsidiaries	12,112	11,934
Total equity	1,649,636	1,719,245
Total liabilities, redeemable noncontrolling interests and equity	4,117,517	3,851,393
Limited Partner | Corporate Office Properties, L.P.
Corporate Office Properties Trust’s shareholders’ equity:
Preferred units held by limited partner, 352,000 preferred units outstanding at September 30, 2020 and December 31, 2019	8,800	8,800
Investing Receivables
Properties, net:
Investing receivables (net of allowance for credit losses of $4,040 at September 30, 2020)	74,136	73,523
Investing Receivables | Corporate Office Properties, L.P.
Properties, net:
Investing receivables (net of allowance for credit losses of $4,040 at September 30, 2020)	$ 74,136	$ 73,523

XML

Consolidated Balance Sheets (Parenthetical) - USD ($) $ in Thousands	Sep. 30, 2020	Dec. 31, 2019
Accumulated amortization of deferred leasing costs	$ 31,927	$ 33,782
Investing receivable allowance for credit loss	$ 4,040
Common Shares of beneficial interest, par value (in dollars per share)	$ 0.01	$ 0.01
Common Shares of beneficial interest, shares authorized (in shares)	150,000,000	150,000,000
Common Shares of beneficial interest issued (in shares)	112,175,688	112,068,705
Common Shares/units of beneficial interest, shares outstanding (in shares/units)	112,175,688	112,068,705
Corporate Office Properties, L.P.
Accumulated amortization of deferred leasing costs	$ 31,927	$ 33,782
Investing receivable allowance for credit loss	$ 4,040
Corporate Office Properties, L.P. | General Partner
Common Shares/units of beneficial interest, shares outstanding (in shares/units)	112,175,688	112,068,705
Corporate Office Properties, L.P. | Limited Partner
Common Shares/units of beneficial interest, shares outstanding (in shares/units)	1,628,421	1,482,425
Preferred units (in units)	352,000	352,000
Investing Receivables
Investing receivable allowance for credit loss	$ 4,040	$ 0

XML

Consolidated Statements of Operations - USD ($) $ in Thousands		3 Months Ended		9 Months Ended
		Sep. 30, 2020	Sep. 30, 2019	Sep. 30, 2020	Sep. 30, 2019
Revenues
Lease revenue		$ 133,875	$ 129,461	$ 397,034	$ 391,779
Construction contract and other service revenues		20,323	28,697	46,240	87,946
Total revenues		154,766	159,431	445,337	483,441
Operating expenses
Property operating expenses		51,552	49,714	151,755	147,045
Depreciation and amortization associated with real estate operations		35,332	34,692	101,540	104,290
Construction contract and other service expenses		19,220	27,802	44,052	85,130
Impairment losses		1,530	327	1,530	327
General, administrative and leasing expenses		7,467	7,929	23,111	26,066
Business development expenses and land carry costs		1,094	964	3,474	2,947
Total operating expenses		116,195	121,428	325,462	365,805
Interest expense		(17,152)	(17,126)	(50,789)	(54,275)
Interest and other income		1,746	1,842	5,233	5,977
Credit loss recoveries		1,465	0	161	0
Gain on sales of real estate		0	0	5	84,469
Loss on early extinguishment of debt		(3,237)	0	(3,237)	0
Loss on interest rate derivatives		(53,196)	0	(53,196)	0
(Loss) income before equity in income of unconsolidated entities and income taxes		(31,803)	22,719	18,052	153,807
Equity in income of unconsolidated entities		477	396	1,372	1,207
Income tax (expense) benefit		(16)	131	(95)	113
Net (loss) income		(31,342)	23,246	19,329	155,127
Net loss (income) attributable to noncontrolling interests:
Common units in COPLP		386	(267)	(185)	(1,863)
Preferred units in COPLP		(77)	(157)	(231)	(487)
Other consolidated entities		(812)	(1,565)	(3,207)	(3,870)
Net (loss) income attributable to COPLP		(31,845)	21,257	15,706	148,907
Net (loss) income attributable to COPT/COPLP common share/unitholders		$ (31,845)	$ 21,257	$ 15,706	$ 148,907
Earnings per common share/unit:
Net (loss) income attributable to COPT/COPLP common share/unitholders - basic (in dollars per share/unit)	[1]	$ (0.29)	$ 0.19	$ 0.14	$ 1.34
Net (loss) income attributable to COPT/COPLP common share/unit holders - diluted (in dollars per share/unit)	[1]	$ (0.29)	$ 0.19	$ 0.14	$ 1.33
Other Property Revenue
Revenues
Total revenues		$ 568	$ 1,273	$ 2,063	$ 3,716
Corporate Office Properties, L.P.
Revenues
Lease revenue		133,875	129,461	397,034	391,779
Construction contract and other service revenues		20,323	28,697	46,240	87,946
Total revenues		154,766	159,431	445,337	483,441
Operating expenses
Property operating expenses		51,552	49,714	151,755	147,045
Depreciation and amortization associated with real estate operations		35,332	34,692	101,540	104,290
Construction contract and other service expenses		19,220	27,802	44,052	85,130
Impairment losses		1,530	327	1,530	327
General, administrative and leasing expenses		7,467	7,929	23,111	26,066
Business development expenses and land carry costs		1,094	964	3,474	2,947
Total operating expenses		116,195	121,428	325,462	365,805
Interest expense		(17,152)	(17,126)	(50,789)	(54,275)
Interest and other income		1,746	1,842	5,233	5,977
Credit loss recoveries		1,465	0	161	0
Gain on sales of real estate		0	0	5	84,469
Loss on early extinguishment of debt		(3,237)	0	(3,237)	0
Loss on interest rate derivatives		(53,196)	0	(53,196)	0
(Loss) income before equity in income of unconsolidated entities and income taxes		(31,803)	22,719	18,052	153,807
Equity in income of unconsolidated entities		477	396	1,372	1,207
Income tax (expense) benefit		(16)	131	(95)	113
Net (loss) income		(31,342)	23,246	19,329	155,127
Net loss (income) attributable to noncontrolling interests:
Net income attributable to noncontrolling interests in consolidated entities		(812)	(1,565)	(3,207)	(3,870)
Net (loss) income attributable to COPLP		(32,154)	21,681	16,122	151,257
Preferred unit distributions		(77)	(157)	(231)	(487)
Net (loss) income attributable to COPT/COPLP common share/unitholders		$ (32,231)	$ 21,524	$ 15,891	$ 150,770
Earnings per common share/unit:
Net (loss) income attributable to COPT/COPLP common share/unitholders - basic (in dollars per share/unit)	[2]	$ (0.29)	$ 0.19	$ 0.14	$ 1.34
Net (loss) income attributable to COPT/COPLP common share/unit holders - diluted (in dollars per share/unit)	[2]	$ (0.29)	$ 0.19	$ 0.14	$ 1.33
Corporate Office Properties, L.P. | Other Property Revenue
Revenues
Total revenues		$ 568	$ 1,273	$ 2,063	$ 3,716

[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 Comprehensive Income - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2020	Sep. 30, 2019	Sep. 30, 2020	Sep. 30, 2019
Net (loss) income	$ (31,342)	$ 23,246	$ 19,329	$ 155,127
Other comprehensive income (loss):
Unrealized income (loss) on interest rate derivatives	1,428	(11,047)	(39,592)	(33,437)
Reclassification adjustments on interest rate derivatives recognized in interest expense	1,342	(307)	2,408	(1,434)
Reclassification adjustments on interest rate derivatives recognized in loss on interest rate derivatives	51,865	0	51,865	0
Total other comprehensive income (loss)	54,635	(11,354)	14,681	(34,871)
Comprehensive income	23,293	11,892	34,010	120,256
Comprehensive income attributable to noncontrolling interests	(1,173)	(1,750)	(3,408)	(5,691)
Comprehensive (loss) income attributable to COPT/COPLP	22,120	10,142	30,602	114,565
Corporate Office Properties, L.P.
Net (loss) income	(31,342)	23,246	19,329	155,127
Other comprehensive income (loss):
Unrealized income (loss) on interest rate derivatives	1,428	(11,047)	(39,592)	(33,437)
Reclassification adjustments on interest rate derivatives recognized in interest expense	1,342	(307)	2,408	(1,434)
Reclassification adjustments on interest rate derivatives recognized in loss on interest rate derivatives	51,865	0	51,865	0
Total other comprehensive income (loss)	54,635	(11,354)	14,681	(34,871)
Comprehensive income	23,293	11,892	34,010	120,256
Comprehensive income attributable to noncontrolling interests	(827)	(1,464)	(2,803)	(3,769)
Comprehensive (loss) income attributable to COPT/COPLP	$ 22,466	$ 10,428	$ 31,207	$ 116,487

XML

Consolidated Statements of Equity - USD ($) $ in Thousands	Total	Forward Equity Sale Agreement	Common Shares	Common Shares Forward Equity Sale Agreement	Additional Paid-in Capital	Additional Paid-in Capital Forward Equity Sale Agreement	Cumulative Distributions in Excess of Net Income	Accumulated Other Comprehensive Loss	Noncontrolling Interests	Corporate Office Properties, L.P.	Corporate Office Properties, L.P. Forward Equity Sale Agreement	Corporate Office Properties, L.P. Common Shares	Corporate Office Properties, L.P. Common Shares Forward Equity Sale Agreement	Corporate Office Properties, L.P. Accumulated Other Comprehensive Loss	Corporate Office Properties, L.P. Noncontrolling Interests	Corporate Office Properties, L.P. Limited Partner	Corporate Office Properties, L.P. Limited Partner Preferred Shares	Cumulative Effect, Period Of Adoption, Adjustment	Cumulative Effect, Period Of Adoption, Adjustment Cumulative Distributions in Excess of Net Income	Cumulative Effect, Period Of Adoption, Adjustment Corporate Office Properties, L.P.	Cumulative Effect, Period Of Adoption, Adjustment Corporate Office Properties, L.P. Common Shares	Cumulative Effect, Period of Adoption, Adjusted Balance	Cumulative Effect, Period of Adoption, Adjusted Balance Common Shares	Cumulative Effect, Period of Adoption, Adjusted Balance Additional Paid-in Capital	Cumulative Effect, Period of Adoption, Adjusted Balance Cumulative Distributions in Excess of Net Income	Cumulative Effect, Period of Adoption, Adjusted Balance Accumulated Other Comprehensive Loss	Cumulative Effect, Period of Adoption, Adjusted Balance Noncontrolling Interests	Cumulative Effect, Period of Adoption, Adjusted Balance Corporate Office Properties, L.P.	Cumulative Effect, Period of Adoption, Adjusted Balance Corporate Office Properties, L.P. Common Shares	Cumulative Effect, Period of Adoption, Adjusted Balance Corporate Office Properties, L.P. Accumulated Other Comprehensive Loss	Cumulative Effect, Period of Adoption, Adjusted Balance Corporate Office Properties, L.P. Noncontrolling Interests	Cumulative Effect, Period of Adoption, Adjusted Balance Corporate Office Properties, L.P. Limited Partner Preferred Shares
Balance, preferred units (in share/units) at Dec. 31, 2018																	352,000
Balance at Dec. 31, 2018	$ 1,627,048		$ 1,102		$ 2,431,355		$ (846,808)	$ (238)	$ 41,637	$ 1,627,048		$ 1,604,655		$ (121)	$ 13,714		$ 8,800
Balance (in units/ shares) at Dec. 31, 2018	110,241,868											111,574,754
Increase (Decrease) in Shareholders' Equity
Conversion of common units to common shares	$ 0		1		1,555				(1,556)
Redemption of common units (in units)												(924)
Redemption of common units	(25)								(25)	(25)		$ (25)
Redemption of vested equity awards	$ (1,973)				(1,973)					(1,973)		$ (1,973)
Issuance of common units resulting from common shares issued under COPT forward equity sale agreements (in units)		1,614,087											1,614,087
Common shares issued under sale agreements and programs		$ 46,454		$ 16		$ 46,438					$ 46,454		$ 46,454
Share-based compensation issuance, net of redemptions (in units)	100,181											355,683
Share-based compensation issuance, net of redemptions	$ 5,530		2		4,574				954	5,530		$ 5,530
Adjustments to noncontrolling interests resulting from changes in ownership of COPLP	0				(522)				522
Comprehensive income / loss	117,527						148,907	(34,342)	2,962	117,527		150,770		(34,770)	1,040		487
Dividends/Distributions	(92,334)						(92,334)			(93,954)		(93,467)					$ (487)
Distributions to owners of common and preferred units in COPLP	(1,620)								(1,620)
Contributions from noncontrolling interests in other consolidated entities	2,570								2,570	2,570					2,570
Distributions to noncontrolling interests in other consolidated entities/subsidiaries	(5,886)								(5,886)	(5,886)					(5,886)
Adjustment to arrive at fair value of redeemable noncontrolling interests	(1,344)				(1,344)					(1,344)		(1,344)
Balance, preferred units (in shares/units) at Sep. 30, 2019																	352,000
Balance at Sep. 30, 2019	$ 1,695,947		1,121		2,480,083		(790,235)	(34,580)	39,558	1,695,947		$ 1,710,600		(34,891)	11,438		$ 8,800
Balance (in units/ shares) at Sep. 30, 2019	112,059,175											113,543,600
Balance, preferred units (in share/units) at Jun. 30, 2019																	352,000
Balance at Jun. 30, 2019	$ 1,719,111		1,119		2,475,293		(780,667)	(23,465)	46,831	1,719,111		$ 1,716,912		(23,638)	17,037		$ 8,800
Balance (in units/ shares) at Jun. 30, 2019	111,949,887											113,532,731
Increase (Decrease) in Shareholders' Equity
Conversion of common units to common shares	$ 0		1		1,475				(1,476)
Redemption of common units (in units)												(880)
Redemption of common units	(24)								(24)	(24)		$ (24)
Redemption of vested equity awards	$ (53)				(53)					(53)		$ (53)
Share-based compensation issuance, net of redemptions (in units)	11,749											11,749
Share-based compensation issuance, net of redemptions	$ 1,895		1		1,525				369	1,895		$ 1,895
Adjustments to noncontrolling interests resulting from changes in ownership of COPLP	0				312				(312)
Comprehensive income / loss	10,707						21,257	(11,115)	565	10,707		21,524		(11,253)	279		157
Dividends/Distributions	(30,825)						(30,825)			(31,342)		(31,185)					$ (157)
Distributions to owners of common and preferred units in COPLP	(517)								(517)
Distributions to noncontrolling interests in other consolidated entities/subsidiaries	(5,878)								(5,878)	(5,878)					(5,878)
Adjustment to arrive at fair value of redeemable noncontrolling interests	1,531				1,531					1,531		1,531
Balance, preferred units (in shares/units) at Sep. 30, 2019																	352,000
Balance at Sep. 30, 2019	$ 1,695,947		1,121		2,480,083		(790,235)	(34,580)	39,558	1,695,947		$ 1,710,600		(34,891)	11,438		$ 8,800
Balance (in units/ shares) at Sep. 30, 2019	112,059,175											113,543,600
Balance, preferred units (in share/units) at Dec. 31, 2019																352,000	352,000															352,000
Balance at Dec. 31, 2019	$ 1,719,245		1,121		2,481,558		(778,275)	(25,444)	40,285	1,719,245		$ 1,724,159		(25,648)	11,934		$ 8,800	$ (5,541)	$ (5,541)	$ (5,541)	$ (5,541)	$ 1,713,704	$ 1,121	$ 2,481,558	$ (783,816)	$ (25,444)	$ 40,285	$ 1,713,704	$ 1,718,618	$ (25,648)	$ 11,934	$ 8,800
Balance (in units/ shares) at Dec. 31, 2019	112,068,705											113,551,130				1,482,425													113,551,130
Increase (Decrease) in Shareholders' Equity
Conversion of common units to common shares	$ 0				182				(182)
Redemption of vested equity awards	$ (1,629)				(1,629)					(1,629)		$ (1,629)
Share-based compensation issuance, net of redemptions (in units)	94,974											252,979
Share-based compensation issuance, net of redemptions	$ 4,730		1		3,394				1,335	4,730		$ 4,730
Adjustments to noncontrolling interests resulting from changes in ownership of COPLP	0				527				(527)
Comprehensive income / loss	31,295						15,706	14,896	693	31,295		15,891		15,085	88		231
Dividends/Distributions	(92,537)						(92,537)			(93,843)		(93,612)					$ (231)
Distributions to owners of common and preferred units in COPLP	(1,306)								(1,306)
Contributions from noncontrolling interests in other consolidated entities	112								112	112					112
Distributions to noncontrolling interests in other consolidated entities/subsidiaries	(22)								(22)	(22)					(22)
Adjustment to arrive at fair value of redeemable noncontrolling interests	(4,711)				(4,711)					(4,711)		(4,711)
Balance, preferred units (in shares/units) at Sep. 30, 2020																352,000	352,000
Balance at Sep. 30, 2020	$ 1,649,636		1,122		2,479,321		(860,647)	(10,548)	40,388	1,649,636		$ 1,639,287		(10,563)	12,112		$ 8,800
Balance (in units/ shares) at Sep. 30, 2020	112,175,688											113,804,109				1,628,421
Balance, preferred units (in share/units) at Jun. 30, 2020																	352,000
Balance at Jun. 30, 2020	$ 1,656,924		1,122		2,477,977		(797,959)	(64,513)	40,297	1,656,924		$ 1,701,375		(65,183)	11,932		$ 8,800
Balance (in units/ shares) at Jun. 30, 2020	112,183,192											113,811,613
Increase (Decrease) in Shareholders' Equity
Redemption of vested equity awards	$ (57)				(57)					(57)		$ (57)
Share-based compensation issuance, net of redemptions (in units)	(7,504)											(7,504)
Share-based compensation issuance, net of redemptions	$ 1,784				1,223				561	1,784		$ 1,784
Adjustments to noncontrolling interests resulting from changes in ownership of COPLP	0				552				(552)
Comprehensive income / loss	22,653						(31,845)	53,965	533	22,653		(32,231)		54,620	187		77
Dividends/Distributions	(30,843)						(30,843)			(31,287)		(31,210)					$ (77)
Distributions to owners of common and preferred units in COPLP	(444)								(444)
Distributions to noncontrolling interests in other consolidated entities/subsidiaries	(7)								(7)	(7)					(7)
Adjustment to arrive at fair value of redeemable noncontrolling interests	(374)				(374)					(374)		(374)
Balance, preferred units (in shares/units) at Sep. 30, 2020																352,000	352,000
Balance at Sep. 30, 2020	$ 1,649,636		$ 1,122		$ 2,479,321		$ (860,647)	$ (10,548)	$ 40,388	$ 1,649,636		$ 1,639,287		$ (10,563)	$ 12,112		$ 8,800
Balance (in units/ shares) at Sep. 30, 2020	112,175,688											113,804,109				1,628,421

XML

Consolidated Statements of Equity (Parenthetical) - shares	3 Months Ended		9 Months Ended
	Sep. 30, 2020	Sep. 30, 2019	Sep. 30, 2020	Sep. 30, 2019	Jun. 30, 2020	Dec. 31, 2019	Jun. 30, 2019	Dec. 31, 2018
Shares outstanding (in units/ shares)	112,175,688	112,059,175	112,175,688	112,059,175	112,183,192	112,068,705	111,949,887	110,241,868
Conversion of common units to common shares (in units/shares)		97,539	12,009	103,039
Share-based compensation issuance, net of redemptions (in units/shares)	(7,504)	11,749	94,974	100,181
Forward Equity Sale Agreement
Common shares issued during the period (in units/shares)				1,614,087

XML

Consolidated Statements of Cash Flows - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2020	Sep. 30, 2019
Cash flows from operating activities
Revenues from real estate operations received	$ 394,094	$ 391,758
Construction contract and other service revenues received	53,911	65,813
Property operating expenses paid	(159,007)	(151,478)
Construction contract and other service expenses paid	(45,686)	(68,599)
General, administrative, leasing, business development and land carry costs paid	(24,408)	(23,806)
Interest expense paid	(49,693)	(52,818)
Lease incentives paid	(12,634)	(6,366)
Other	2,464	2,533
Net cash provided by operating activities	159,041	157,037
Cash flows from investing activities
Development and redevelopment of properties	(284,416)	(308,997)
Tenant improvements on operating properties	(23,377)	(16,466)
Other capital improvements on operating properties	(24,797)	(14,497)
Proceeds from property dispositions
Distribution from unconsolidated real estate joint venture following contribution of properties	0	129,783
Sale of properties	0	107,440
Distributions from unconsolidated real estate joint ventures	2,287	16,937
Investing receivables funded	(258)	(11,169)
Leasing costs paid	(12,455)	(13,502)
Settlement of interest rate derivatives	(53,130)	0
Other	(63)	1,558
Net cash used in investing activities	(396,209)	(108,913)
Proceeds from debt
Revolving Credit Facility	409,000	349,000
Unsecured senior notes	395,264	0
Other debt proceeds	199,088	32,002
Repayments of debt
Revolving Credit Facility	(529,000)	(342,000)
Unsecured senior notes	(122,948)	0
Scheduled principal amortization	(3,077)	(3,300)
Deferred financing costs paid	(2,161)	(405)
Net proceeds from issuance of common shares	0	46,415
Common share/unit dividends/distributions paid	(92,512)	(91,835)
Distributions paid to noncontrolling interests in COPLP	(1,303)	(1,661)
Distributions paid to noncontrolling interests in other consolidated entities	(15)	(5,882)
Distributions paid to redeemable noncontrolling interests	(13,515)	(984)
Redemption of vested equity awards	(1,629)	(1,973)
Payments in connection with early extinguishment of debt	(3,037)	0
Other	(442)	(1,944)
Net cash provided by (used in) financing activities	233,713	(22,567)
Net (decrease) increase in cash and cash equivalents and restricted cash	(3,455)	25,557
Cash and cash equivalents and restricted cash
Beginning of period	18,130	11,950
End of period	14,675	37,507
Reconciliation of net income to net cash provided by operating activities:
Net income	19,329	155,127
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and other amortization	102,864	105,686
Impairment losses	1,530	327
Amortization of deferred financing costs and net debt discounts	3,104	2,716
Increase in deferred rent receivable	(3,560)	(4,184)
Gain on sales of real estate	(5)	(84,469)
Share-based compensation	4,753	4,979
Loss on early extinguishment of debt	3,237	0
Loss on interest rate derivatives	53,196	0
Other	(4,184)	(4,296)
Changes in operating assets and liabilities:
Increase in accounts receivable	(744)	(9,483)
Increase in prepaid expenses and other assets, net	(13,164)	(26,878)
(Decrease) increase in accounts payable, accrued expenses and other liabilities	(3,971)	19,616
Decrease in rents received in advance and security deposits	(3,344)	(2,104)
Net cash provided by operating activities	159,041	157,037
Reconciliation of cash and cash equivalents and restricted cash:
Cash and cash equivalents and restricted cash	14,675	37,507
Supplemental schedule of non-cash investing and financing activities:
(Decrease) increase in accrued capital improvements, leasing and other investing activity costs	(195)	29,457
Finance right-of-use asset contributed by noncontrolling interest in joint venture	0	2,570
Recognition of operating right-of-use assets and related lease liabilities	8,955	255
Non-cash changes from property dispositions:
Contribution of properties to unconsolidated real estate joint venture	0	99,288
Investment in unconsolidated real estate joint venture retained in disposition	0	26,500
Decrease in fair value of derivatives applied to accumulated other comprehensive loss and noncontrolling interests	(37,183)	(34,951)
Decrease in noncontrolling interests and increase in shareholders’ equity in connection with the conversion of common units into common shares	182	1,556
Adjustments to noncontrolling interests resulting from changes in COPLP ownership	(527)	522
Increase in redeemable noncontrolling interests and decrease in equity to carry redeemable noncontrolling interests at fair value	4,711	1,344
Corporate Office Properties, L.P.
Cash flows from operating activities
Revenues from real estate operations received	394,094	391,758
Construction contract and other service revenues received	53,911	65,813
Property operating expenses paid	(159,007)	(151,478)
Construction contract and other service expenses paid	(45,686)	(68,599)
General, administrative, leasing, business development and land carry costs paid	(24,408)	(23,806)
Interest expense paid	(49,693)	(52,818)
Lease incentives paid	(12,634)	(6,366)
Other	2,464	2,533
Net cash provided by operating activities	159,041	157,037
Cash flows from investing activities
Development and redevelopment of properties	(284,416)	(308,997)
Tenant improvements on operating properties	(23,377)	(16,466)
Other capital improvements on operating properties	(24,797)	(14,497)
Proceeds from property dispositions
Distribution from unconsolidated real estate joint venture following contribution of properties	0	129,783
Sale of properties	0	107,440
Distributions from unconsolidated real estate joint ventures	2,287	16,937
Investing receivables funded	(258)	(11,169)
Leasing costs paid	(12,455)	(13,502)
Settlement of interest rate derivatives	(53,130)	0
Other	(63)	1,558
Net cash used in investing activities	(396,209)	(108,913)
Proceeds from debt
Revolving Credit Facility	409,000	349,000
Unsecured senior notes	395,264	0
Other debt proceeds	199,088	32,002
Repayments of debt
Revolving Credit Facility	(529,000)	(342,000)
Unsecured senior notes	(122,948)	0
Scheduled principal amortization	(3,077)	(3,300)
Deferred financing costs paid	(2,161)	(405)
Net proceeds from issuance of common shares	0	46,415
Common share/unit dividends/distributions paid	(93,584)	(93,001)
Distributions paid to noncontrolling interests in other consolidated entities	(15)	(5,882)
Distributions paid to redeemable noncontrolling interests	(13,515)	(984)
Redemption of vested equity awards	(1,629)	(1,973)
Payments in connection with early extinguishment of debt	(3,037)	0
Other	(673)	(2,439)
Net cash provided by (used in) financing activities	233,713	(22,567)
Net (decrease) increase in cash and cash equivalents and restricted cash	(3,455)	25,557
Cash and cash equivalents and restricted cash
Beginning of period	18,130	11,950
End of period	14,675	37,507
Reconciliation of net income to net cash provided by operating activities:
Net income	19,329	155,127
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and other amortization	102,864	105,686
Impairment losses	1,530	327
Amortization of deferred financing costs and net debt discounts	3,104	2,716
Increase in deferred rent receivable	(3,560)	(4,184)
Gain on sales of real estate	(5)	(84,469)
Share-based compensation	4,753	4,979
Loss on early extinguishment of debt	3,237	0
Loss on interest rate derivatives	53,196	0
Other	(4,184)	(4,296)
Changes in operating assets and liabilities:
Increase in accounts receivable	(744)	(9,483)
Increase in prepaid expenses and other assets, net	(13,552)	(26,489)
(Decrease) increase in accounts payable, accrued expenses and other liabilities	(3,583)	19,227
Decrease in rents received in advance and security deposits	(3,344)	(2,104)
Net cash provided by operating activities	159,041	157,037
Reconciliation of cash and cash equivalents and restricted cash:
Cash and cash equivalents and restricted cash	14,675	11,950
Supplemental schedule of non-cash investing and financing activities:
(Decrease) increase in accrued capital improvements, leasing and other investing activity costs	(195)	29,457
Finance right-of-use asset contributed by noncontrolling interest in joint venture	0	2,570
Recognition of operating right-of-use assets and related lease liabilities	8,955	255
Non-cash changes from property dispositions:
Contribution of properties to unconsolidated real estate joint venture	0	99,288
Investment in unconsolidated real estate joint venture retained in disposition	0	26,500
Decrease in fair value of derivatives applied to accumulated other comprehensive loss and noncontrolling interests	(37,183)	(34,951)
Increase in redeemable noncontrolling interests and decrease in equity to carry redeemable noncontrolling interests at fair value	$ 4,711	$ 1,344

XML

Organization

9 Months Ended

Sep. 30, 2020

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 own, manage, lease, develop and selectively acquire office and data center properties. The majority of our portfolio is in locations that support the United States Government (“USG”) and its contractors, most of whom are engaged in national security, defense and information technology (“IT”) related activities servicing what we believe are growing, durable, priority missions (“Defense/IT Locations”). We also own a portfolio of office properties located in select urban/urban-like submarkets in the Greater Washington, DC/Baltimore region with durable Class-A office fundamentals and characteristics (“Regional Office”). As of September 30, 2020, our properties included the following:

•176 properties totaling 20.4 million square feet comprised of 15.9 million square feet in 151 office properties and 4.5 million square feet in 25 single-tenant data center shell properties (“data center shells”). We owned 15 of these data center shells through unconsolidated real estate joint ventures;

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

•11 properties under development (ten office properties and one data center shell), including one partially-operational property, and expansion of one fully-operational property that we estimate will total approximately 1.6 million square feet upon completion; and

•approximately 860 acres of land controlled for future development that we believe could be developed into approximately 11.0 million square feet and 43 acres of other land.

COPLP owns real estate 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, development and construction 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, 2020, COPT owned 98.6% of the outstanding COPLP common units (“common units”); the remaining common units and all of the outstanding COPLP preferred units (“preferred units”) were owned by third parties. Common units not owned by COPT carry certain redemption rights. The number of common units owned by COPT is equivalent to the number of outstanding common shares of beneficial interest (“common shares”) of COPT, and the entitlement of common units to quarterly distributions and payments in liquidation is substantially the same as that of COPT common shareholders. In the case of any series of preferred units held by COPT, there would be 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; similarly, although COPLP does not have a board of trustees, we refer to COPT’s Board of Trustees as COPLP’s Board of Trustees.

XML

Summary of Significant Accounting Policies

9 Months Ended

Sep. 30, 2020

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 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.

When we own an equity investment in an entity and cannot exert significant influence over its operations, we measure the investment at fair value, with changes recognized through net income. For an investment without a readily determinable fair value, we measure the investment at cost, less any impairments, plus or minus changes resulting from observable price changes for an identical or similar investment of the same issuer.

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, 2019 included in our 2019 Annual Report on Form 10-K.  The unaudited consolidated financial statements include all adjustments that are necessary, in the opinion of management, to fairly state 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 2019 Annual Report on Form 10-K as updated for our adoption of recent accounting pronouncements discussed below.

Reclassifications

We reclassified certain amounts from prior periods to conform to the current period presentation of our consolidated financial statements with no effect on previously reported net income or equity.

Recent Accounting Pronouncements

Effective January 1, 2020, we adopted guidance issued by the Financial Accounting Standards Board (“FASB”) that changes how entities measure credit losses for most financial assets and certain other instruments not measured at fair value through net income. The guidance replaces the current incurred loss model with an expected loss approach, resulting in a more timely recognition of such losses. The guidance applies to most financial assets measured at amortized cost and certain other instruments, including trade and other receivables (excluding those arising from operating leases), loans, held-to-maturity debt securities, net investments in leases and off-balance-sheet credit exposures. Under this guidance, we recognize an estimate of our expected credit losses on these asset types as an allowance, as the guidance requires that financial assets be measured on an amortized cost basis and be presented at the net amount expected to be collected. We adopted this guidance effective January 1, 2020 using the modified retrospective transition method under which we recognized a $5.5 million allowance for credit losses by means of a cumulative-effect adjustment to cumulative distributions in excess of net income of the Company (or common units of the Operating Partnership), and did not adjust prior comparative reporting periods. Our consolidated statements of operations reflect adjustments for changes in our expected credit losses occurring subsequent to adoption of this guidance.

Effective January 1, 2020, we adopted guidance issued by the FASB that modifies disclosure requirements for fair value measurements. The resulting changes in disclosure did not have a material impact on our consolidated financial statements.

Effective January 1, 2020, we adopted guidance issued by the FASB that aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. FASB guidance did not previously address the accounting for such implementation costs. Our adoption of this guidance did not have a material impact on our consolidated financial statements.

In March 2020, the FASB issued guidance containing practical expedients for reference rate reform related activities pertaining to debt, leases, derivatives and other contracts. The guidance is optional and may be adopted over time as reference rate reform activities occur. During the nine months ended September 30, 2020, we elected to apply an expedient to treat any changes in loans resulting from reference rate reform as debt modifications (as opposed to extinguishments) and hedge accounting expedients related to probability and the assessments of effectiveness for future LIBOR-indexed cash flows to assume that the index upon which future hedged transactions will be based matches the index on the corresponding derivatives. Application of the hedge accounting expedients preserves the presentation of derivatives consistent with past presentation. We will continue to evaluate the impact of this guidance and may apply other elections as applicable as additional changes in the market occur.

In April 2020, the FASB issued a Staff Q&A document that addressed the accounting for lease accounting guidance for lease concessions resulting from the COVID-19 pandemic. Under existing lease guidance, we would normally have to

determine, on a lease-by-lease basis, if a lease concession was the result of a new arrangement reached with the tenant (treated as a lease modification) or if such a concession was implemented pursuant to enforceable rights and obligations within the existing lease agreement (and, therefore, not treated as a lease modification). The Staff Q&A document enabled us to bypass the lease-by-lease analysis for lease concessions resulting from the COVID-19 pandemic, and instead elect to either apply the lease modification accounting framework or not, with such elections applied consistently to leases with similar characteristics and similar circumstances. Entities may make the elections for any lessor-provided concessions related to the effects of the COVID-19 pandemic (such as deferrals of lease payments or reduced future lease payments) as long as the concession does not result in a substantial increase in the rights of the lessor or the obligations of the lessee. We chose to apply the elections available under the Staff Q&A to restructurings of lease payment terms granted by us to tenants, the effect of which did not have a material impact on our consolidated financial statements.

Credit Losses, Financial Assets and Other Instruments

As discussed above, effective January 1, 2020, we adopted guidance issued by the FASB that changed how we measure credit losses for most financial assets and certain other instruments not measured at fair value through net income from an incurred loss model to an expected loss approach. Our items within the scope of this guidance included the following:

•investing receivables, as disclosed in Note 7;

•tenant notes receivable;

•other assets comprised of non-lease revenue related accounts receivable (primarily from construction contract services) and contract assets from unbilled construction contract revenue; and

•off-balance sheet credit exposures.

Under this guidance, we recognize an estimate of our expected credit losses on these items as an allowance, as the guidance requires that financial assets be measured on an amortized cost basis and be presented at the net amount expected to be collected (or as a separate liability in the case of off-balance sheet credit exposures). The allowance represents the portion of the amortized cost basis that we do not expect to collect (or loss we expect to incur in the case of off-balance sheet credit exposures) due to credit over the contractual life based on available information relevant to assessing the collectability of cash flows, which includes consideration of past events, current conditions and reasonable and supportable forecasts of future economic conditions (including consideration of asset- or borrower-specific factors). The guidance requires the allowance for expected credit losses to reflect the risk of loss, even when that risk is remote. An allowance for credit losses is measured and recorded upon the initial recognition of a financial asset (or off-balance sheet credit exposure), regardless of whether it is originated or purchased. Quarterly, the expected losses are re-estimated, considering any cash receipts and changes in risks or assumptions, with resulting adjustments recognized as credit loss expense or recoveries on our consolidated statements of operations.

We estimate expected credit losses for in-scope items using historical loss rate information developed for varying classifications of credit risk and contractual lives. Due to our limited quantity of items within the scope of this guidance and the unique risk characteristics of such items, we individually assign each in-scope item a credit risk classification. The credit risk classifications assigned by us are determined based on credit ratings assigned by ratings agencies (as available) or are internally-developed based on available financial information, historical payment experience, credit documentation, other publicly available information and current economic trends. In addition, for certain items in which the risk of credit loss is affected by the economic performance of a real estate development project, we develop probability weighted scenario analyses for varying levels of performance in estimating our credit loss allowance (applicable to our notes receivable from the City of Huntsville disclosed in Note 7 and a tax incremental financing obligation disclosed in Note 17).

The table below sets forth the activity for the allowance for credit losses (in thousands):

	For the Nine Months Ended September 30, 2020
	Investing Receivables		Tenant Notes Receivable (1)		Other Assets (2)		Off-Balance Sheet Credit Exposures (3)		Total
December 31, 2019	$	—	$	97	$	—	$	—	$	97
Cumulative effect of change for adoption of credit loss guidance	3,732		325		144		1,340		5,541
Credit loss expense (recoveries)	308		696		152		(1,317)		(161)
September 30, 2020	$	4,040	$	1,118	$	296	$	23	$	5,477

(1)Included in the line entitled “accounts receivable, net” on our consolidated balance sheets.

(2)The balance as of September 30, 2020 included $95,000 in the line entitled “accounts receivable, net” and $201,000 in the line entitled “prepaid expenses and other assets, net” on our consolidated balance sheets.

(3)Included in the line entitled “other liabilities” on our consolidated balance sheets.

The following table presents the amortized cost basis of our investing receivables and tenants notes receivable by credit risk classification, by origination year as of September 30, 2020 (in thousands):

	Origination Year
	2015 and Earlier		2016		2017		2018		2019		2020		Total
Investing receivables:
Credit risk classification:
Investment grade	$	62,842	$	—	$	948	$	—	$	—	$	219	$	64,009
Non-investment grade	3,020		—		—		—		11,147		—		14,167
Total	$	65,862	$	—	$	948	$	—	$	11,147	$	219	$	78,176
Tenant notes receivable:
Credit risk classification:
Investment grade	$	—	$	27	$	—	$	1,054	$	90	$	360	$	1,531
Non-investment grade	97		179		—		171		1,973		1,600		4,020
Total	$	97	$	206	$	—	$	1,225	$	2,063	$	1,960	$	5,551

Our investment grade credit risk classification represents entities with investment grade credit ratings from ratings agencies (such as Standard & Poor’s Ratings Services, Moody’s Investors Service, Inc. or Fitch Ratings Ltd.), meaning that they are considered to have at least an adequate capacity to meet their financial commitments, with credit risk ranging from minimal to moderate. Our non-investment grade credit risk classification represents entities with either no credit agency credit ratings or ratings deemed to be sub-investment grade; we believe that there is significantly more credit risk associated with this classification. The credit risk classifications of our investing receivables and tenant notes receivable were last updated in September 2020.

An insignificant portion of the investing and tenant notes receivables set forth above was past due, which we define as being delinquent by more than three months from the due date.

When we believe that collection of interest income on an investing or tenant note receivable is not probable, we place the receivable on nonaccrual status, meaning interest income is recognized when payments are received rather than on an accrual basis. Notes receivable on nonaccrual status as of September 30, 2020 and December 31, 2019 were not significant. We did not recognize any interest income during the three and nine months ended September 30, 2020 on notes receivable on nonaccrual status.

We write off receivables when we believe the facts and circumstances indicate that continued pursuit of collection is no longer warranted. When cash is received in connection with receivables for which we have previously recognized credit losses, we recognize reductions in our credit loss expense.

XML

Fair Value Measurements

9 Months Ended

Sep. 30, 2020

Fair Value Disclosures [Abstract]

Fair Value Measurements

Fair Value Measurements

Recurring Fair Value Measurements

COPT has a non-qualified elective deferred compensation plan for Trustees and certain members of our management team that, prior to December 31, 2019, permitted participants to defer up to 100% of their compensation on a pre-tax basis and receive a tax-deferred return on such deferrals. The Company froze additional entry into the plan effective December 31, 2019.  The assets held in the plan (comprised primarily of mutual funds and equity securities) and the corresponding liability to the participants are measured at fair value on a recurring basis on COPT’s consolidated balance sheets using quoted market prices, as are other marketable securities that we hold. The balance of the plan, which was fully funded and totaled $2.7 million as of September 30, 2020, is included in the line entitled “prepaid expenses and other assets, net” on COPT’s consolidated balance sheets along with an insignificant amount of other marketable securities. The offsetting liability associated with the plan is adjusted to fair value at the end of each accounting period based on the fair value of the plan assets and reported in “other liabilities” on COPT’s consolidated balance sheets. The assets of the plan are classified in Level 1 of the fair value hierarchy, while the offsetting liability is classified in Level 2 of the fair value hierarchy.

The fair values of our interest rate derivatives are determined using widely accepted valuation techniques, including a discounted cash flow analysis on the expected cash flows of each derivative. This analysis reflects the contractual terms of the derivatives, including the period to maturity, and uses observable market-based inputs, including interest rate market data and implied volatilities in such interest rates. While we determined that the majority of the inputs used to value our derivatives fall within Level 2 of the fair value hierarchy, the credit valuation adjustments associated with our interest rate derivatives utilize Level 3 inputs, such as estimates of current credit spreads to evaluate the likelihood of default. However, as of September 30, 2020, we assessed the significance of the impact of the credit valuation adjustments on the overall valuation of our derivatives and determined that these adjustments are not significant. As a result, we determined that our interest rate derivative valuations in their entirety are classified in Level 2 of the fair value hierarchy.

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.  The fair values of our investing receivables, as disclosed in Note 7, were 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 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 as of 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 subsidiaries that are accounted for at fair value on a recurring basis as of September 30, 2020 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	$	2,652	$	—	$	—	$	2,652
Other	20		—		—		20
Mutual funds (1)	20		—		—		20
Total assets	$	2,692	$	—	$	—	$	2,692
Liabilities:
Deferred compensation plan liability (2)	$	—	$	2,672	$	—	$	2,672
Interest rate derivatives	—		10,977		—		10,977
Total liabilities	$	—	$	13,649	$	—	$	13,649

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

(2)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 subsidiaries that are accounted for at fair value on a recurring basis as of September 30, 2020 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:
Mutual funds (1)	$	20	$	—	$	—	$	20
Liabilities:
Interest rate derivatives	$	—	$	10,977	$	—	$	10,977

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

Nonrecurring Fair Value Measurements

In the third quarter of 2020, we concluded that we no longer expected to develop a property in Baltimore, Maryland. As a result, we recognized an impairment loss on previously incurred predevelopment costs of $1.5 million.

XML

Properties, Net

9 Months Ended

Sep. 30, 2020

Real Estate [Abstract]

Properties, Net

Properties, Net

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

	September 30, 2020		December 31, 2019
Land	$	525,584	$	472,976
Buildings and improvements	3,569,749		3,306,791
Less: Accumulated depreciation	(1,095,441)		(1,007,120)
Operating properties, net	$	2,999,892	$	2,772,647

2020 Development Activities

During the nine months ended September 30, 2020, we placed into service 1.2 million square feet in six newly-developed properties, 28,000 square feet in expansions of two fully-operational properties and 21,000 square feet in a redeveloped property. As of September 30, 2020, we had 11 properties under development, including one partially-operational property, and an expansion of one fully-operational property that we estimate will total 1.6 million square feet upon completion.

XML

Leases

9 Months Ended

Sep. 30, 2020

Leases [Abstract]

Leases

Leases

Lessor Arrangements

We lease real estate properties, comprised primarily of office properties and data center shells, to third parties. As of September 30, 2020, these leases, which may encompass all, or a portion of, a property, had remaining terms spanning from one month to 18 years and averaging approximately 5.3 years.

Our lease revenue is comprised of: fixed lease revenue, including contractual rent billings under leases recognized on a straight-line basis over lease terms and amortization of lease incentives and above- and below- market lease intangibles; and variable lease revenue, including tenant expense recoveries, lease termination revenue and other revenue from tenants that is not fixed under the lease. The table below sets forth our allocation of lease revenue recognized between fixed and variable lease revenue (in thousands):

	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
Lease revenue	2020		2019		2020		2019
Fixed	$	106,743	$	102,389	$	314,845	$	311,226
Variable	27,132		27,072		82,189		80,553
	$	133,875	$	129,461	$	397,034	$	391,779

Fixed contractual payments due under our property leases were as follows (in thousands):

Year Ending December 31,	September 30, 2020		December 31, 2019
2020 (1)	$	107,972	$	388,310
2021	410,966		336,482
2022	362,892		299,356
2023	307,346		245,661
2024	258,059		195,246
Thereafter	773,582		474,741
	$	2,220,817	$	1,939,796

(1)As of September 30, 2020, represents the three months ending December 31, 2020.

Lessee arrangements

As of September 30, 2020, our balance sheet included $76.9 million in right-of-use assets associated primarily with land leased from third parties underlying certain properties that we are operating or developing. The land leases have long durations

with remaining terms ranging from 28 years (excluding extension options) to 96 years. As of September 30, 2020, our right-of-use assets included:

•$37.8 million for land on which we are developing an office property in Washington, DC through our Stevens Investors, LLC joint venture, virtually all of the rent on which was previously paid. This lease has a 96-year remaining term, and we possess a bargain purchase option that we expect to exercise in 2021;

•$10.1 million for land underlying operating office properties in Washington, DC under two leases with remaining terms of approximately 80 years;

•$9.3 million for land in a business park in Huntsville, Alabama under 12 leases through our LW Redstone Company, LLC joint venture, with remaining terms ranging from 43 to 50 years and options to renew for an additional 25 years that were not included in the term used in determining the asset balance;

•$6.6 million for land in a research park in College Park, Maryland under four leases through our M Square Associates, LLC joint venture, all of the rent on which was previously paid. These leases had remaining terms ranging from 62 to 74 years;

•$6.4 million for land underlying a parking garage in Baltimore, Maryland under a lease with a remaining term of 28 years and an option to renew for an additional 49 years that was included in the term used in determining the asset balance;

•$4.3 million for data center space in Phoenix, Arizona with a remaining term of four years and an option to renew for an additional five years; and

•$2.2 million for other land underlying operating properties in our Fort Meade/BW Corridor sub-segment under two leases with remaining terms of approximately 48 years, all of the rent on which was previously paid.

Our property right-of-use assets consisted of the following (in thousands):

Leases	Balance Sheet Location	September 30, 2020		December 31, 2019
Right-of-use assets
Operating leases - Property	Property - operating right-of-use assets	$	36,442	$	27,864
Finance leases - Property	Property - finance right-of-use assets	40,432		40,458
Total right-of-use assets		$	76,874	$	68,322

Property lease liabilities consisted of the following (in thousands):

Leases	Balance Sheet Location	September 30, 2020		December 31, 2019
Lease liabilities
Operating leases - Property	Property - operating lease liabilities	$	26,382	$	17,317
Finance leases - Property	Other liabilities	28		702
Total lease liabilities		$	26,410	$	18,019

The table below sets forth the weighted average terms and discount rates of our property leases as of September 30, 2020:

Weighted average remaining lease term
Operating leases	54 years
Finance leases	< 1 year
Weighted average discount rate
Operating leases	7.19	%
Finance leases	3.62	%

The table below presents our total property lease cost (in thousands):

	Statement of Operations Location	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
Lease cost		2020		2019		2020		2019
Operating lease cost
Property leases - fixed	Property operating expenses	$	600	$	413	$	1,474	$	1,239
Property leases - variable	Property operating expenses	105		—		107		—
Finance lease cost
Amortization of property right-of-use assets	Property operating expenses	9		9		27		21
		$	714	$	422	$	1,608	$	1,260

The table below presents the effect of property lease payments on our consolidated statements of cash flows (in thousands):

	For the Nine Months Ended September 30,
Supplemental cash flow information	2020		2019
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows for operating leases	$	987	$	804
Financing cash flows for financing leases	$	674	$	14

Payments on property leases were due as follows (in thousands):

	As of September 30, 2020						As of December 31, 2019
Year Ending December 31,	Operating leases		Finance leases		Total		Operating leases		Finance leases		Total
2020 (1)	$	615	$	—	$	615	$	1,092	$	674	$	1,766
2021	2,513		14		2,527		1,138		14		1,152
2022	2,566		14		2,580		1,162		14		1,176
2023	2,601		—		2,601		1,167		—		1,167
2024	2,636		—		2,636		1,173		—		1,173
Thereafter	118,295		—		118,295		100,609		—		100,609
Total lease payments	129,226		28		129,254		106,341		702		107,043
Less: Amount representing interest	(102,844)		—		(102,844)		(89,024)		—		(89,024)
Lease liability	$	26,382	$	28	$	26,410	$	17,317	$	702	$	18,019

(1)As of September 30, 2020, represents the three months ending December 31, 2020.

Leases

Leases

Lessor Arrangements

We lease real estate properties, comprised primarily of office properties and data center shells, to third parties. As of September 30, 2020, these leases, which may encompass all, or a portion of, a property, had remaining terms spanning from one month to 18 years and averaging approximately 5.3 years.

Our lease revenue is comprised of: fixed lease revenue, including contractual rent billings under leases recognized on a straight-line basis over lease terms and amortization of lease incentives and above- and below- market lease intangibles; and variable lease revenue, including tenant expense recoveries, lease termination revenue and other revenue from tenants that is not fixed under the lease. The table below sets forth our allocation of lease revenue recognized between fixed and variable lease revenue (in thousands):

	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
Lease revenue	2020		2019		2020		2019
Fixed	$	106,743	$	102,389	$	314,845	$	311,226
Variable	27,132		27,072		82,189		80,553
	$	133,875	$	129,461	$	397,034	$	391,779

Fixed contractual payments due under our property leases were as follows (in thousands):

Year Ending December 31,	September 30, 2020		December 31, 2019
2020 (1)	$	107,972	$	388,310
2021	410,966		336,482
2022	362,892		299,356
2023	307,346		245,661
2024	258,059		195,246
Thereafter	773,582		474,741
	$	2,220,817	$	1,939,796

(1)As of September 30, 2020, represents the three months ending December 31, 2020.

Lessee arrangements

As of September 30, 2020, our balance sheet included $76.9 million in right-of-use assets associated primarily with land leased from third parties underlying certain properties that we are operating or developing. The land leases have long durations

with remaining terms ranging from 28 years (excluding extension options) to 96 years. As of September 30, 2020, our right-of-use assets included:

•$37.8 million for land on which we are developing an office property in Washington, DC through our Stevens Investors, LLC joint venture, virtually all of the rent on which was previously paid. This lease has a 96-year remaining term, and we possess a bargain purchase option that we expect to exercise in 2021;

•$10.1 million for land underlying operating office properties in Washington, DC under two leases with remaining terms of approximately 80 years;

•$9.3 million for land in a business park in Huntsville, Alabama under 12 leases through our LW Redstone Company, LLC joint venture, with remaining terms ranging from 43 to 50 years and options to renew for an additional 25 years that were not included in the term used in determining the asset balance;

•$6.6 million for land in a research park in College Park, Maryland under four leases through our M Square Associates, LLC joint venture, all of the rent on which was previously paid. These leases had remaining terms ranging from 62 to 74 years;

•$6.4 million for land underlying a parking garage in Baltimore, Maryland under a lease with a remaining term of 28 years and an option to renew for an additional 49 years that was included in the term used in determining the asset balance;

•$4.3 million for data center space in Phoenix, Arizona with a remaining term of four years and an option to renew for an additional five years; and

•$2.2 million for other land underlying operating properties in our Fort Meade/BW Corridor sub-segment under two leases with remaining terms of approximately 48 years, all of the rent on which was previously paid.

Our property right-of-use assets consisted of the following (in thousands):

Leases	Balance Sheet Location	September 30, 2020		December 31, 2019
Right-of-use assets
Operating leases - Property	Property - operating right-of-use assets	$	36,442	$	27,864
Finance leases - Property	Property - finance right-of-use assets	40,432		40,458
Total right-of-use assets		$	76,874	$	68,322

Property lease liabilities consisted of the following (in thousands):

Leases	Balance Sheet Location	September 30, 2020		December 31, 2019
Lease liabilities
Operating leases - Property	Property - operating lease liabilities	$	26,382	$	17,317
Finance leases - Property	Other liabilities	28		702
Total lease liabilities		$	26,410	$	18,019

The table below sets forth the weighted average terms and discount rates of our property leases as of September 30, 2020:

Weighted average remaining lease term
Operating leases	54 years
Finance leases	< 1 year
Weighted average discount rate
Operating leases	7.19	%
Finance leases	3.62	%

The table below presents our total property lease cost (in thousands):

	Statement of Operations Location	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
Lease cost		2020		2019		2020		2019
Operating lease cost
Property leases - fixed	Property operating expenses	$	600	$	413	$	1,474	$	1,239
Property leases - variable	Property operating expenses	105		—		107		—
Finance lease cost
Amortization of property right-of-use assets	Property operating expenses	9		9		27		21
		$	714	$	422	$	1,608	$	1,260

The table below presents the effect of property lease payments on our consolidated statements of cash flows (in thousands):

	For the Nine Months Ended September 30,
Supplemental cash flow information	2020		2019
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows for operating leases	$	987	$	804
Financing cash flows for financing leases	$	674	$	14

Payments on property leases were due as follows (in thousands):

	As of September 30, 2020						As of December 31, 2019
Year Ending December 31,	Operating leases		Finance leases		Total		Operating leases		Finance leases		Total
2020 (1)	$	615	$	—	$	615	$	1,092	$	674	$	1,766
2021	2,513		14		2,527		1,138		14		1,152
2022	2,566		14		2,580		1,162		14		1,176
2023	2,601		—		2,601		1,167		—		1,167
2024	2,636		—		2,636		1,173		—		1,173
Thereafter	118,295		—		118,295		100,609		—		100,609
Total lease payments	129,226		28		129,254		106,341		702		107,043
Less: Amount representing interest	(102,844)		—		(102,844)		(89,024)		—		(89,024)
Lease liability	$	26,382	$	28	$	26,410	$	17,317	$	702	$	18,019

(1)As of September 30, 2020, represents the three months ending December 31, 2020.

Leases

Leases

Lessor Arrangements

We lease real estate properties, comprised primarily of office properties and data center shells, to third parties. As of September 30, 2020, these leases, which may encompass all, or a portion of, a property, had remaining terms spanning from one month to 18 years and averaging approximately 5.3 years.

Our lease revenue is comprised of: fixed lease revenue, including contractual rent billings under leases recognized on a straight-line basis over lease terms and amortization of lease incentives and above- and below- market lease intangibles; and variable lease revenue, including tenant expense recoveries, lease termination revenue and other revenue from tenants that is not fixed under the lease. The table below sets forth our allocation of lease revenue recognized between fixed and variable lease revenue (in thousands):

	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
Lease revenue	2020		2019		2020		2019
Fixed	$	106,743	$	102,389	$	314,845	$	311,226
Variable	27,132		27,072		82,189		80,553
	$	133,875	$	129,461	$	397,034	$	391,779

Fixed contractual payments due under our property leases were as follows (in thousands):

Year Ending December 31,	September 30, 2020		December 31, 2019
2020 (1)	$	107,972	$	388,310
2021	410,966		336,482
2022	362,892		299,356
2023	307,346		245,661
2024	258,059		195,246
Thereafter	773,582		474,741
	$	2,220,817	$	1,939,796

(1)As of September 30, 2020, represents the three months ending December 31, 2020.

Lessee arrangements

As of September 30, 2020, our balance sheet included $76.9 million in right-of-use assets associated primarily with land leased from third parties underlying certain properties that we are operating or developing. The land leases have long durations

with remaining terms ranging from 28 years (excluding extension options) to 96 years. As of September 30, 2020, our right-of-use assets included:

•$37.8 million for land on which we are developing an office property in Washington, DC through our Stevens Investors, LLC joint venture, virtually all of the rent on which was previously paid. This lease has a 96-year remaining term, and we possess a bargain purchase option that we expect to exercise in 2021;

•$10.1 million for land underlying operating office properties in Washington, DC under two leases with remaining terms of approximately 80 years;

•$9.3 million for land in a business park in Huntsville, Alabama under 12 leases through our LW Redstone Company, LLC joint venture, with remaining terms ranging from 43 to 50 years and options to renew for an additional 25 years that were not included in the term used in determining the asset balance;

•$6.6 million for land in a research park in College Park, Maryland under four leases through our M Square Associates, LLC joint venture, all of the rent on which was previously paid. These leases had remaining terms ranging from 62 to 74 years;

•$6.4 million for land underlying a parking garage in Baltimore, Maryland under a lease with a remaining term of 28 years and an option to renew for an additional 49 years that was included in the term used in determining the asset balance;

•$4.3 million for data center space in Phoenix, Arizona with a remaining term of four years and an option to renew for an additional five years; and

•$2.2 million for other land underlying operating properties in our Fort Meade/BW Corridor sub-segment under two leases with remaining terms of approximately 48 years, all of the rent on which was previously paid.

Our property right-of-use assets consisted of the following (in thousands):

Leases	Balance Sheet Location	September 30, 2020		December 31, 2019
Right-of-use assets
Operating leases - Property	Property - operating right-of-use assets	$	36,442	$	27,864
Finance leases - Property	Property - finance right-of-use assets	40,432		40,458
Total right-of-use assets		$	76,874	$	68,322

Property lease liabilities consisted of the following (in thousands):

Leases	Balance Sheet Location	September 30, 2020		December 31, 2019
Lease liabilities
Operating leases - Property	Property - operating lease liabilities	$	26,382	$	17,317
Finance leases - Property	Other liabilities	28		702
Total lease liabilities		$	26,410	$	18,019

The table below sets forth the weighted average terms and discount rates of our property leases as of September 30, 2020:

Weighted average remaining lease term
Operating leases	54 years
Finance leases	< 1 year
Weighted average discount rate
Operating leases	7.19	%
Finance leases	3.62	%

The table below presents our total property lease cost (in thousands):

	Statement of Operations Location	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
Lease cost		2020		2019		2020		2019
Operating lease cost
Property leases - fixed	Property operating expenses	$	600	$	413	$	1,474	$	1,239
Property leases - variable	Property operating expenses	105		—		107		—
Finance lease cost
Amortization of property right-of-use assets	Property operating expenses	9		9		27		21
		$	714	$	422	$	1,608	$	1,260

The table below presents the effect of property lease payments on our consolidated statements of cash flows (in thousands):

	For the Nine Months Ended September 30,
Supplemental cash flow information	2020		2019
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows for operating leases	$	987	$	804
Financing cash flows for financing leases	$	674	$	14

Payments on property leases were due as follows (in thousands):

	As of September 30, 2020						As of December 31, 2019
Year Ending December 31,	Operating leases		Finance leases		Total		Operating leases		Finance leases		Total
2020 (1)	$	615	$	—	$	615	$	1,092	$	674	$	1,766
2021	2,513		14		2,527		1,138		14		1,152
2022	2,566		14		2,580		1,162		14		1,176
2023	2,601		—		2,601		1,167		—		1,167
2024	2,636		—		2,636		1,173		—		1,173
Thereafter	118,295		—		118,295		100,609		—		100,609
Total lease payments	129,226		28		129,254		106,341		702		107,043
Less: Amount representing interest	(102,844)		—		(102,844)		(89,024)		—		(89,024)
Lease liability	$	26,382	$	28	$	26,410	$	17,317	$	702	$	18,019

(1)As of September 30, 2020, represents the three months ending December 31, 2020.

XML

Real Estate Joint Ventures

9 Months Ended

Sep. 30, 2020

Equity Method Investments and Joint Ventures [Abstract]

Real Estate Joint Ventures

Real Estate Joint Ventures

Consolidated Real Estate Joint Ventures

The table below sets forth information pertaining to our investments in consolidated real estate joint ventures as of September 30, 2020 (dollars in thousands):

				September 30, 2020 (1)
	Date Acquired	Nominal Ownership %		Total Assets		Encumbered Assets		Total Liabilities
Entity			Location
LW Redstone Company, LLC	3/23/2010	85%	Huntsville, Alabama	$	371,537	$	110,972	$	104,204
Stevens Investors, LLC	8/11/2015	95%	Washington, DC	153,869		152,972		81,134
M Square Associates, LLC	6/26/2007	50%	College Park, Maryland	98,322		62,628		56,167
				$	623,728	$	326,572	$	241,505

(1)Excludes amounts eliminated in consolidation.

In March 2020, the LW Redstone Company, LLC joint venture agreement was amended to change the distribution terms to allow the venture to distribute financing proceeds to satisfy our partner’s cumulative preferred return and to provide our partner a priority preferred return on its invested capital.

Unconsolidated Real Estate Joint Ventures

The table below sets forth information pertaining to our investments in unconsolidated real estate joint ventures accounted for using the equity method of accounting (dollars in thousands):

	Date Acquired	Nominal Ownership %	Number of Properties	Carrying Value of Investment (1)
Entity				September 30, 2020		December 31, 2019
GI-COPT DC Partnership LLC	7/21/2016	50%	6	$	36,135	$	37,816
BREIT COPT DC JV LLC	6/20/2019	10%	9	13,527		14,133
			15	$	49,662	$	51,949

(1)Included in the line entitled “investment in unconsolidated real estate joint ventures” on our consolidated balance sheets.

In May 2020, the GI-COPT DC Partnership LLC joint venture agreement was amended to reflect our agreement to initially fund the costs of expanding certain of the joint venture’s existing operating properties. Following our completion of, and the tenant’s commencement of rent payments on, the property expansion, the joint venture will reimburse us for the lesser of the actual development costs of the expansion or $6 million using proceeds from proportional capital contributions by us and our partner.

XML

Investing Receivables

9 Months Ended

Sep. 30, 2020

Receivables [Abstract]

Investing Receivables

Investing Receivables

Investing receivables consisted of the following (in thousands): 

	September 30, 2020		December 31, 2019
Notes receivable from the City of Huntsville	$	64,009	$	59,427
Other investing loans receivable	14,167		14,096
Amortized cost basis	78,176		73,523
Allowance for credit losses	(4,040)		—
Investing receivables, net	$	74,136	$	73,523

The balances above include accrued interest receivable, net of allowance for credit losses, of $3.4 million as of September 30, 2020 and $4.7 million as of December 31, 2019.

Our notes receivable from the City of Huntsville funded infrastructure costs in connection with our LW Redstone Company, LLC joint venture (see Note 6) and carry an interest rate of 9.95%. Our other investing loans receivable carry an interest rate of 8.0%.

The fair value of these receivables was approximately $78 million as of September 30, 2020 and $74 million as of December 31, 2019.

XML

Prepaid Expenses and Other Assets, Net

9 Months Ended

Sep. 30, 2020

Prepaid Expense and Other Assets [Abstract]

Prepaid Expenses and Other Assets, Net

Prepaid Expenses and Other Assets, Net

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

	September 30, 2020		December 31, 2019
Lease incentives, net	$	36,259	$	28,433
Prepaid expenses	27,612		18,835
Construction contract costs in excess of billings, net	13,980		17,223
Furniture, fixtures and equipment, net	10,193		7,823
Non-real estate equity investments	6,487		6,705
Restricted cash	3,217		3,397
Deferred financing costs, net (1)	2,721		3,633
Deferred tax asset, net (2)	2,246		2,328
Other assets	4,905		4,639
Total for COPLP and subsidiaries	107,620		93,016
Marketable securities in deferred compensation plan	2,672		3,060
Total for COPT and subsidiaries	$	110,292	$	96,076

(1)Represents deferred costs, net of accumulated amortization, attributable to our Revolving Credit Facility and interest rate derivatives.

(2)Includes a valuation allowance of $565,000 as of September 30, 2020 and $480,000 as of December 31, 2019.

XML

Debt, Net

9 Months Ended

Sep. 30, 2020

Debt Disclosure [Abstract]

Debt, Net

Debt, Net

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

	Carrying Value (1) as of
	September 30, 2020		December 31, 2019		September 30, 2020
					Stated Interest Rates	Scheduled Maturity
Mortgage and Other Secured Debt:
Fixed rate mortgage debt (2)	$	140,868	$	143,430	3.82% - 4.62% (3)	2023-2026
Variable rate secured debt (4)	118,690		68,055		LIBOR + 1.45% to 2.35% (5)	2021-2026
Total mortgage and other secured debt	259,558		211,485
Revolving Credit Facility (6)	57,000		177,000		LIBOR + 0.775% to 1.45% (7)	March 2023 (6)
Term Loan Facility (8)	398,253		248,706		LIBOR + 1.00% to 1.65% (9)	2022
Unsecured Senior Notes
3.70%, $300,000 aggregate principal	176,885		299,324		3.70% (10)	October 2020 (10)
3.60%, $350,000 aggregate principal	348,772		348,431		3.60% (11)	May 2023
5.25%, $250,000 aggregate principal	248,056		247,652		5.25% (12)	February 2024
5.00%, $300,000 aggregate principal	297,810		297,503		5.00% (13)	July 2025
2.25%, $400,000 aggregate principal	394,282		—		2.25% (14)	March 2026
Unsecured note payable	935		1,038		0% (15)	May 2026
Total debt, net	$	2,181,551	$	1,831,139

(1)The carrying values of our debt other than the Revolving Credit Facility reflect net deferred financing costs of $6.5 million as of September 30, 2020 and $5.8 million as of December 31, 2019.

(2)Certain of the fixed rate mortgages carry interest rates that, upon assumption, were above or below market rates 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 $170,000 as of September 30, 2020 and $217,000 as of December 31, 2019.

(3)The weighted average interest rate on our fixed rate mortgage debt was 4.16% as of September 30, 2020.

(4)Includes a construction loan with $37.4 million in remaining borrowing capacity as of September 30, 2020.

(5)The weighted average interest rate on our variable rate secured debt was 2.24% as of September 30, 2020.

(6)The facility matures in March 2023, with the ability for us to further extend such maturity 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 under the facility for each extension period. In connection with this facility, we also have the ability to borrow up to $500.0 million under new term loans from the facility’s lender group provided that there is no default under the facility and subject to the approval of the lenders.

(7)The weighted average interest rate on the Revolving Credit Facility was 1.21% as of September 30, 2020.

(8)On March 6, 2020, we amended this loan facility to increase the loan amount by $150.0 million and change the interest terms.

(9)The interest rate on this loan was 1.16% as of September 30, 2020.

(10)The carrying value of these notes reflects an unamortized discount totaling $128,000 as of September 30, 2020 and $534,000 as of December 31, 2019.  The effective interest rate under the notes, including amortization of the issuance costs, was 3.85%. Refer to paragraph below for further disclosure. 

(11)The carrying value of these notes reflects an unamortized discount totaling $860,000 as of September 30, 2020 and $1.1 million as of December 31, 2019.  The effective interest rate under the notes, including amortization of the issuance costs, was 3.70%. 

(12)The carrying value of these notes reflects an unamortized discount totaling $1.8 million as of September 30, 2020 and $2.1 million as of December 31, 2019.  The effective interest rate under the notes, including amortization of the issuance costs, was 5.49%. 

(13)The carrying value of these notes reflects an unamortized discount totaling $1.8 million as of September 30, 2020 and $2.1 million as of December 31, 2019.  The effective interest rate under the notes, including amortization of the issuance costs, was 5.15%.

(14)Refer to paragraph below for further disclosure.

(15)This note carries an interest rate that, upon assumption, was below market rates and it therefore was recorded at its fair value based on applicable effective interest rates.  The carrying value of this note reflects an unamortized discount totaling $176,000 as of September 30, 2020 and $223,000 as of December 31, 2019.

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

On September 17, 2020, we issued $400.0 million of 2.25% Senior Notes due 2026 (the “2.25% Notes”) at an initial offering price of 99.416% of their face value. The proceeds from this issuance, after deducting underwriting discounts, but before other offering expenses, were $395.3 million. The notes mature on March 15, 2026. 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 or (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 a spread of 35 basis points, plus accrued and unpaid interest thereon to the date of redemption. However, if this redemption occurs on or after one month 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. These notes are unconditionally guaranteed by COPT. The carrying value of these notes reflects an unamortized discount totaling $4.7 million as of September 30, 2020. The effective interest rate under the notes, including amortization of discount and issuance costs, was 2.48%.

On September 17, 2020, we purchased $122.9 million, or 40.98% of the aggregate principal amount, of our 3.70% Senior Notes due 2021 (the “3.70% Notes”) for $126.0 million, plus accrued interest, pursuant to a tender offer. In connection with this purchase, we recognized a loss on early extinguishment of debt of $3.2 million during the three and nine months ended September 30, 2020. On October 19, 2020, we redeemed the remaining $177.1 million of the 3.70% Notes for $180.9 million plus accrued interest, and recognized an additional loss on early extinguishment of debt of approximately $4 million.

Certain of our debt instruments require that we comply with a number of restrictive financial covenants.  As of September 30, 2020, we were compliant with these financial covenants.

We capitalized interest costs of $2.9 million in the three months ended September 30, 2020, $2.9 million in the three months ended September 30, 2019, $9.4 million in the nine months ended September 30, 2020 and $7.3 million in the nine months ended September 30, 2019.

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

	September 30, 2020				December 31, 2019
	Carrying Amount		Fair Value		Carrying Amount		Fair Value
Fixed-rate debt
Unsecured Senior Notes	$	1,465,805	$	1,505,414	$	1,192,910	$	1,227,441
Other fixed-rate debt	141,803		144,370		144,468		149,907
Variable-rate debt	573,943		567,461		493,761		495,962
	$	2,181,551	$	2,217,245	$	1,831,139	$	1,873,310

XML

Interest Rate Derivatives

9 Months Ended

Sep. 30, 2020

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, each of which was designated as a cash flow hedge of interest rate risk (dollars in thousands):

							Fair Value at
Notional Amount			Fixed Rate	Floating Rate Index	Effective Date	Expiration Date	September 30, 2020		December 31, 2019
$	12,132	(1)	1.390%	One-Month LIBOR	10/13/2015	10/1/2020	$	—	$	23
100,000			1.901%	One-Month LIBOR	9/1/2016	12/1/2022	(3,857)		(1,028)
100,000			1.905%	One-Month LIBOR	9/1/2016	12/1/2022	(3,865)		(1,037)
50,000			1.908%	One-Month LIBOR	9/1/2016	12/1/2022	(1,935)		(524)
11,200		(2)	1.678%	One-Month LIBOR	8/1/2019	8/1/2026	(827)		(20)
150,000			0.498%	One-Month LIBOR	4/1/2020	12/31/2020	(127)		—
23,000		(3)	0.573%	One-Month LIBOR	4/1/2020	3/26/2025	(366)		—
75,000		(4)	3.176%	Three-Month LIBOR	6/30/2020	N/A	—		(8,640)
75,000		(4)	3.192%	Three-Month LIBOR	6/30/2020	N/A	—		(8,749)
75,000		(4)	2.744%	Three-Month LIBOR	6/30/2020	N/A	—		(5,684)
							$	(10,977)	$	(25,659)

(1)The notional amount of this instrument is scheduled to amortize to $12.1 million.

(2)The notional amount of this instrument is scheduled to amortize to $10.0 million.

(3)The notional amount of this instrument is scheduled to amortize to $22.1 million.

(4)As discussed below, these instruments were cash settled in September 2020.

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):

		Fair Value at
Derivatives	Balance Sheet Location	September 30, 2020		December 31, 2019
Interest rate swaps designated as cash flow hedges	Prepaid expenses and other assets, net	$	—	$	23
Interest rate swaps designated as cash flow hedges	Interest rate derivatives (liabilities)	$	(10,977)	$	(25,682)

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

	Amount of Income (Loss) Recognized in AOCL on Derivatives								Amount of (Loss) Gain Reclassified from AOCL into Interest Expense on Statement of Operations
	For the Three Months Ended September 30,				For the Nine Months Ended September 30,				For the Three Months Ended September 30,				For the Nine Months Ended September 30,
Derivatives in Hedging Relationships	2020		2019		2020		2019		2020		2019		2020		2019
Interest rate derivatives	$	1,428	$	(11,047)	$	(39,592)	$	(33,437)	$	(1,342)	$	307	$	(2,408)	$	1,434

	Amount of Loss Reclassified from AOCL into Loss on Interest Rate Derivatives on Statement of Operations								Amount of Loss Recognized on Undesignated Swaps in Loss on Interest Rate Derivatives on Statement of Operations
	For the Three Months Ended September 30,				For the Nine Months Ended September 30,				For the Three Months Ended September 30,				For the Nine Months Ended September 30,
Derivatives in Hedging Relationships	2020		2019		2020		2019		2020		2019		2020		2019
Interest rate derivatives	$	(51,865)	$	—	$	(51,865)	$	—	$	(1,265)	$	—	$	(1,265)	$	—

As described further in Note 9, in September 2020, we completed our issuance of the 2.25% Notes. In August 2020, in anticipation of pursuing such an issuance, we determined that the forecasted transactions hedged by our three interest rate swaps with an effective date of June 30, 2020 and an aggregate notional amount of $225.0 million were no longer probable of occurring, resulting in our discontinuance of hedge accounting on these swaps. When we consummated the note issuance in September 2020, we determined that it was probable that the forecasted transactions would not occur, resulting in our reclassification of $51.9 million in losses from accumulated other comprehensive loss (“AOCL”) to loss on interest rate derivatives on our statements of operations. On September 22, 2020, we cash settled these swaps and accrued interest thereon for an aggregate amount of $53.1 million.

Based on the fair value of our derivatives as of September 30, 2020, we estimate that approximately $4.8 million of losses will be reclassified from AOCL as an increase to interest expense over the next 12 months.

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. 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, 2020, we were not in default with any of these provisions. As of September 30, 2020, the fair value of interest rate derivatives in a liability position related to these agreements was $11.1 million, excluding the effects of accrued interest and credit valuation adjustments. As of September 30, 2020, we had not posted any collateral related to these agreements.  If we breach any of these provisions, we could be required to settle our obligations under the agreements at their termination value, which was $11.5 million as of September 30, 2020.

XML

Redeemable Noncontrolling Interests

9 Months Ended

Sep. 30, 2020

Noncontrolling Interest [Abstract]

Redeemable Noncontrolling Interests

Redeemable Noncontrolling Interests

Our partners in two real estate joint ventures, LW Redstone Company, LLC and Stevens Investors, LLC, have the right to require us to acquire their respective interests at fair value; accordingly, we classify the fair value of our partners’ interests as redeemable noncontrolling interests in the mezzanine section of our consolidated balance sheets. The table below sets forth the activity for these redeemable noncontrolling interests (in thousands):

	For the Nine Months Ended September 30,
	2020		2019
Beginning balance	$	29,431	$	26,260
Distributions to noncontrolling interests	(13,335)		(1,656)
Net income attributable to noncontrolling interests	2,715		2,729
Adjustment to arrive at fair value of interests	4,711		1,344
Ending balance	$	23,522	$	28,677

We determine the fair value of the interests based on unobservable inputs after considering the assumptions that market participants would make in pricing the interest. We apply a discount rate to the estimated future cash flows allocable to our partners from the properties underlying the respective joint ventures. Estimated cash flows used in such analyses are based on our plans for the properties and our views of market and economic conditions, and consider items such as current and future rental rates, occupancy projections and estimated operating and development expenditures.

XML

Equity

9 Months Ended

Sep. 30, 2020

Equity [Abstract]

Equity

Equity

Common Shares/Units

As of September 30, 2020, COPT had remaining capacity under its at-the-market stock offering program equal to an aggregate gross sales price of $300 million in common share sales.

During the nine months ended September 30, 2020, certain COPLP limited partners converted 12,009 common units in COPLP for an equal number of common shares in COPT.

We declared dividends per COPT common share and distributions per COPLP common unit of $0.275 in the three months ended September 30, 2020 and 2019 and $0.825 in the nine months ended September 30, 2020 and 2019.

See Note 15 for disclosure of COPT common share and COPLP common unit activity pertaining to our share-based compensation plans.

XML

Information by Business Segment

9 Months Ended

Sep. 30, 2020

Segment Reporting [Abstract]

Information by Business Segment

Information by Business Segment

We have the following reportable segments: Defense/IT Locations; Regional Office; Wholesale Data Center; and Other. We also report on Defense/IT Locations sub-segments, which include the following: Fort George G. Meade and the Baltimore/Washington Corridor (“Fort Meade/BW Corridor”); Northern Virginia Defense/IT Locations; Lackland Air Force Base (in San Antonio); locations serving the U.S. Navy (“Navy Support Locations”), which included properties proximate to the Washington Navy Yard, the Naval Air Station Patuxent River in Maryland and the Naval Surface Warfare Center Dahlgren Division in Virginia; Redstone Arsenal (in Huntsville); and data center shells (properties leased to tenants to be operated as data centers in which the tenants generally fund the costs for the power, fiber connectivity and data center infrastructure).

We measure the performance of our segments through the measure we define as net operating income from real estate operations (“NOI from real estate operations”), which includes: real estate revenues and property operating expenses; and the net of revenues and property operating expenses of real estate operations owned through unconsolidated real estate joint ventures (“UJVs”) that is allocable to COPT’s ownership interest (“UJV NOI allocable to COPT”). Amounts reported for segment assets represent long-lived assets associated with consolidated operating properties (including the carrying value of properties, right-of-use assets, net of related lease liabilities, intangible assets, deferred leasing costs, deferred rents receivable and lease incentives) and the carrying value of investments in UJVs owning operating properties. Amounts reported as additions to long-lived assets represent additions to existing consolidated operating properties, excluding transfers from non-operating properties, which we report separately.

The table below reports segment financial information for our reportable segments (in thousands): 

	Operating Property Segments
	Defense/Information Technology Locations
	Fort Meade/BW Corridor		Northern Virginia Defense/IT		Lackland Air Force Base		Navy Support Locations		Redstone Arsenal		Data Center Shells		Total Defense/IT Locations		Regional Office		Wholesale Data Center		Other		Total
Three Months Ended September 30, 2020
Revenues from real estate operations	$	63,328	$	14,699	$	12,602	$	8,006	$	6,079	$	7,995	$	112,709	$	14,913	$	6,068	$	753	$	134,443
Property operating expenses	(21,537)		(5,245)		(7,116)		(3,044)		(2,029)		(861)		(39,832)		(7,782)		(3,642)		(296)		(51,552)
UJV NOI allocable to COPT	—		—		—		—		—		1,752		1,752		—		—		—		1,752
NOI from real estate operations	$	41,791	$	9,454	$	5,486	$	4,962	$	4,050	$	8,886	$	74,629	$	7,131	$	2,426	$	457	$	84,643
Additions to long-lived assets	$	7,511	$	2,219	$	—	$	1,650	$	6,382	$	—	$	17,762	$	5,303	$	1,917	$	(3)	$	24,979
Transfers from non-operating properties	$	(209)	$	58	$	221	$	—	$	61,520	$	65,269	$	126,859	$	—	$	—	$	—	$	126,859
Three Months Ended September 30, 2019
Revenues from real estate operations	$	63,436	$	13,551	$	12,703	$	8,183	$	4,171	$	5,913	$	107,957	$	15,508	$	6,565	$	704	$	130,734
Property operating expenses	(20,743)		(4,965)		(7,149)		(3,581)		(1,717)		(518)		(38,673)		(7,343)		(3,374)		(324)		(49,714)
UJV NOI allocable to COPT	—		—		—		—		—		1,601		1,601		—		—		—		1,601
NOI from real estate operations	$	42,693	$	8,586	$	5,554	$	4,602	$	2,454	$	6,996	$	70,885	$	8,165	$	3,191	$	380	$	82,621
Additions to long-lived assets	$	10,770	$	2,922	$	—	$	2,003	$	446	$	—	$	16,141	$	6,339	$	61	$	19	$	22,560
Transfers from non-operating properties	$	1,381	$	118	$	2,120	$	—	$	4,152	$	9,483	$	17,254	$	—	$	(1,012)	$	—	$	16,242
Nine Months Ended September 30, 2020
Revenues from real estate operations	$	190,464	$	42,824	$	37,935	$	24,466	$	15,402	$	20,648	$	331,739	$	45,535	$	19,695	$	2,128	$	399,097
Property operating expenses	(63,618)		(15,765)		(21,696)		(9,500)		(5,488)		(2,307)		(118,374)		(22,207)		(10,338)		(836)		(151,755)
UJV NOI allocable to COPT	—		—		—		—		—		5,190		5,190		—		—		—		5,190
NOI from real estate operations	$	126,846	$	27,059	$	16,239	$	14,966	$	9,914	$	23,531	$	218,555	$	23,328	$	9,357	$	1,292	$	252,532
Additions to long-lived assets	$	22,144	$	8,114	$	—	$	5,518	$	6,698	$	—	$	42,474	$	13,105	$	10,699	$	165	$	66,443
Transfers from non-operating properties	$	4,304	$	838	$	381	$	—	$	91,827	$	171,465	$	268,815	$	—	$	—	$	—	$	268,815
Segment assets at September 30, 2020	$	1,264,547	$	392,226	$	143,206	$	180,337	$	234,355	$	446,530	$	2,661,201	$	387,290	$	204,834	$	3,643	$	3,256,968
Nine Months Ended September 30, 2019
Revenues from real estate operations	$	187,778	$	42,294	$	36,368	$	24,523	$	12,078	$	21,891	$	324,932	$	45,359	$	22,996	$	2,208	$	395,495
Property operating expenses	(62,422)		(14,951)		(19,756)		(10,271)		(4,855)		(1,630)		(113,885)		(22,349)		(9,830)		(981)		(147,045)
UJV NOI allocable to COPT	—		—		—		—		—		4,071		4,071		—		—		—		4,071
NOI from real estate operations	$	125,356	$	27,343	$	16,612	$	14,252	$	7,223	$	24,332	$	215,118	$	23,010	$	13,166	$	1,227	$	252,521
Additions to long-lived assets	$	22,204	$	6,072	$	—	$	7,948	$	1,282	$	—	$	37,506	$	15,198	$	312	$	63	$	53,079
Transfers from non-operating properties	$	7,759	$	4,647	$	10,456	$	—	$	13,363	$	122,115	$	158,340	$	—	$	(1,012)	$	—	$	157,328
Segment assets at September 30, 2019	$	1,271,668	$	398,137	$	147,505	$	186,243	$	118,839	$	298,675	$	2,421,067	$	393,747	$	205,550	$	3,708	$	3,024,072

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,
	2020		2019		2020		2019
Segment revenues from real estate operations	$	134,443	$	130,734	$	399,097	$	395,495
Construction contract and other service revenues	20,323		28,697		46,240		87,946
Total revenues	$	154,766	$	159,431	$	445,337	$	483,441

The following table reconciles UJV NOI allocable to COPT to equity in income of unconsolidated entities as reported on our consolidated statements of operations (in thousands):

	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
	2020		2019		2020		2019
UJV NOI allocable to COPT	$	1,752	$	1,601	$	5,190	$	4,071
Less: Income from UJV allocable to COPT attributable to depreciation and amortization expense and interest expense	(1,274)		(1,202)		(3,814)		(2,859)
Add: Equity in loss of unconsolidated non-real estate entities	(1)		(3)		(4)		(5)
Equity in income of unconsolidated entities	$	477	$	396	$	1,372	$	1,207

As previously discussed, we provide real estate services such as property management, development and construction 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,
	2020		2019		2020		2019
Construction contract and other service revenues	$	20,323	$	28,697	$	46,240	$	87,946
Construction contract and other service expenses	(19,220)		(27,802)		(44,052)		(85,130)
NOI from service operations	$	1,103	$	895	$	2,188	$	2,816

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

	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
	2020		2019		2020		2019
NOI from real estate operations	$	84,643	$	82,621	$	252,532	$	252,521
NOI from service operations	1,103		895		2,188		2,816
Interest and other income	1,746		1,842		5,233		5,977
Credit loss recoveries	1,465		—		161		—
Gain on sales of real estate	—		—		5		84,469
Equity in income of unconsolidated entities	477		396		1,372		1,207
Income tax (expense) benefit	(16)		131		(95)		113
Depreciation and other amortization associated with real estate operations	(35,332)		(34,692)		(101,540)		(104,290)
Impairment losses	(1,530)		(327)		(1,530)		(327)
General, administrative and leasing expenses	(7,467)		(7,929)		(23,111)		(26,066)
Business development expenses and land carry costs	(1,094)		(964)		(3,474)		(2,947)
Interest expense	(17,152)		(17,126)		(50,789)		(54,275)
UJV NOI allocable to COPT included in equity in income of unconsolidated entities	(1,752)		(1,601)		(5,190)		(4,071)
Loss on early extinguishment of debt	(3,237)		—		(3,237)		—
Loss on interest rate derivatives	(53,196)		—		(53,196)		—
Net (loss) income	$	(31,342)	$	23,246	$	19,329	$	155,127

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

	September 30, 2020		September 30, 2019
Segment assets	$	3,256,968	$	3,024,072
Operating properties lease liabilities included in segment assets	26,054		16,645
Non-operating property assets	642,182		597,301
Other assets	194,985		217,351
Total COPT consolidated assets	$	4,120,189	$	3,855,369

The accounting policies of the segments are the same as those used to prepare our consolidated financial statements.  In the segment reporting presented above, we did not allocate interest expense, depreciation and amortization, impairment losses, gain on sales of real estate and equity in income of unconsolidated entities not included in NOI 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, administrative and leasing expenses, business development expenses and land carry costs, interest and other income, credit loss recoveries (expense), loss on early extinguishment of debt, loss on interest rate derivatives, income taxes and noncontrolling interests because these items represent general corporate or non-operating property items not attributable to segments.

XML

Construction Contract and Other Service Revenues

9 Months Ended

Sep. 30, 2020

Revenue from Contract with Customer [Abstract]

Construction Contract and Other Service Revenues

Construction Contract and Other Service Revenues

We disaggregate our construction contract and other service revenues by compensation arrangement and by service type as we believe it best depicts the nature, timing and uncertainty of our revenue. The table below reports construction contract and other service revenues by compensation arrangement (in thousands):

	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
	2020		2019		2020		2019
Construction contract revenue:
Guaranteed maximum price	$	4,358	$	16,217	$	14,834	$	54,365
Firm fixed price	1,365		2,349		9,421		6,009
Cost-plus fee	13,249		9,906		20,121		26,935
Other	1,351		225		1,864		637
	$	20,323	$	28,697	$	46,240	$	87,946

The table below reports construction contract and other service revenues by service type (in thousands):

	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
	2020		2019		2020		2019
Construction contract revenue:
Construction	$	18,786	$	27,988	$	42,520	$	86,487
Design	186		484		1,856		822
Other	1,351		225		1,864		637
	$	20,323	$	28,697	$	46,240	$	87,946

We recognized an increase in revenue of $84,000 in the three months ended September 30, 2020, and $158,000 and $18,000 in the nine months ended September 30, 2020 and 2019, respectively, from performance obligations satisfied (or partially satisfied) in previous periods.

Accounts receivable related to our construction contract services is included in accounts receivable, net on our consolidated balance sheets. The beginning and ending balances of accounts receivable related to our construction contracts were as follows (in thousands):

	For the Nine Months Ended September 30,
	2020		2019
Beginning balance	$	12,378	$	6,701
Ending balance	$	11,183	$	15,494

Contract assets, which we refer to herein as construction contract costs in excess of billings, net are included in prepaid expenses and other assets, net reported on our consolidated balance sheets. The beginning and ending balances of our contract assets were as follows (in thousands):

	For the Nine Months Ended September 30,
	2020		2019
Beginning balance	$	17,223	$	3,189
Ending balance	$	13,980	$	16,743

Contract liabilities are included in other liabilities reported on our consolidated balance sheets. Changes in contract liabilities were as follows (in thousands):

	For the Nine Months Ended September 30,
	2020		2019
Beginning balance	$	1,184	$	568
Ending balance	$	5,236	$	725
Portion of beginning balance recognized in revenue during:
Three months ended September 30	$	19	$	—
Nine months ended September 30	$	757	$	445

Revenue allocated to the remaining performance obligations under existing contracts as of September 30, 2020 that will be recognized as revenue in future periods was $82.1 million, approximately $21 million of which we expect to recognize during the remainder of 2020.

We incurred no deferred incremental costs to obtain or fulfill our construction contracts or other service revenues and had no significant credit loss expense on construction contracts receivable or unbilled construction revenue in the three or nine months ended September 30, 2020 and 2019.

XML

Share-Based Compensation

9 Months Ended

Sep. 30, 2020

Share-based Payment Arrangement [Abstract]

Share-Based Compensation

Share-Based Compensation

Restricted Shares

During the nine months ended September 30, 2020, certain employees and non-employee members of our Board of Trustees (“Trustees”) were granted a total of 159,518 restricted common shares with an aggregate grant date fair value of $4.0 million (weighted average of $25.16 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 employee remains employed by us. Restricted shares granted to non-employee Trustees vest on the first anniversary of the grant date, provided that the Trustee remains in his or her position. During the nine months ended September 30, 2020, forfeiture restrictions lapsed on 165,778 previously issued common shares; these shares had a weighted average grant date fair value of $28.19 per share, and the aggregate intrinsic value of the shares on the vesting dates was $4.2 million. Additionally, during the nine months ended September 30, 2020, 9,064 restricted shares previously awarded to our former Executive Vice President and Chief Operating Officer were forfeited upon his resignation.

Deferred Share Awards

During the nine months ended September 30, 2020, certain non-employee Trustees were granted a total of 7,972 deferred share awards with an aggregate grant date fair value of $187,000 ($23.44 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).

Performance Share Awards (“PSUs”)

We issued 23,181 common shares on January 13, 2020 to executives in settlement of PSUs granted in 2017, representing 53% of the target awards for those PSUs.

Profit Interest Units (“PIUs”)

For 2020, we offered our executives and Trustees the opportunity to select PIUs as a form of long-term compensation in lieu of, or in combination with, other forms of share-based compensation awards (restricted shares, deferred share awards and PSUs). Our executives and certain of our Trustees selected PIUs as their form of share-based compensation for their 2020 grants. We granted two forms of PIUs: time-based PIUs (“TB-PIUs”); and performance-based PIUs (“PB-PIUs”). TB-PIUs are subject to forfeiture restrictions until the end of the requisite service period, at which time the TB-PIUs automatically convert into vested PIUs. PB-PIUs are subject to a market condition in that the number of earned awards are determined at the end of the performance period (as described further below) and then settled in vested PIUs. Vested PIUs carry substantially the same rights to redemption and distributions as non-PIU common units.

TB-PIUs

During the nine months ended September 30, 2020, our executives and certain non-employee Trustees were granted a total of 75,053 TB-PIUs with an aggregate grant date fair value of $1.9 million (weighted average of $25.14 per TB-PIU). TB-PIUs granted to executives vest in equal annual increments over a three-year period beginning on the first anniversary of the date of grant. TB-PIUs granted to non-employee Trustees vest on the first anniversary of the grant date, provided that the Trustee remains in his or her position. Prior to vesting, TB-PIUs carry substantially the same rights to distributions as non-PIU common units but carry no redemption rights. During the nine months ended September 30, 2020, forfeiture restrictions lapsed on 25,182 previously issued TB-PIUs; these TB-PIUs had a grant date fair value of $26.30 per unit, and the aggregate intrinsic value of the TB-PIUs on the vesting date was $640,000.

During the nine months ended September 30, 2020, 20,622 TB-PIUs previously awarded to our former Executive Vice President and Chief Operating Officer were forfeited upon his resignation.

PB-PIUs

On January 1, 2020, we granted our executives 176,758 PB-PIUs with a three-year performance period concluding on the earlier of December 31, 2022 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 earned awards at the end of the performance period will be determined based on the percentile rank of COPT’s total shareholder return (“TSR”) relative to a peer group of companies, as set forth in the following schedule:

Percentile Rank	Earned Awards Payout %
75th or greater	100% of PB-PIUs granted
50th (target)	50% of PB-PIUs granted
25th	25% of PB-PIUs granted
Below 25th	0% of PB-PIUs 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 awards will be interpolated between the ranges set forth in the table above to reflect any performance between the listed percentiles.  If COPT’s TSR during the measurement period is negative, the maximum number of earned awards will be limited to the target level payout percentage.  During the performance period, PB-PIUs carry rights to distributions equal to 10% of the distribution rights of non-PIU common units but carry no redemption rights.

At the end of the performance period, we will settle the award by issuing vested PIUs equal to the number of earned awards in settlement of the award plan and paying cash equal to the excess, if any, of: the aggregate distributions that would have been paid with respect to vested PIUs issued in settlement of the earned awards through the date of settlement had such vested PIUs been issued on the grant date; over the aggregate distributions made on the PB-PIUs during the performance period. If a performance period ends due to a sale event or qualified termination, the number of earned awards is prorated based on the portion of the three-year performance period that has elapsed.  If employment is terminated by the employee or by us for cause, all PB-PIUs are forfeited.

These PB-PIU grants had an aggregate grant date fair value of $2.9 million ($16.36 per PB-PIU) which is being recognized over the performance period. The grant date fair value was computed using a Monte Carlo model that included the following assumptions: baseline common share value of $29.38; expected volatility for common shares of 18.0%; and a risk-free interest rate of 1.65%.  

During the nine months ended September 30, 2020, 73,184 PB-PIUs previously awarded to our former Executive Vice President and Chief Operating Officer were forfeited upon his resignation.

XML

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

9 Months Ended

Sep. 30, 2020

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 common shares were converted; and (2) the effect of dilutive potential common shares outstanding during the period attributable to COPT’s forward equity sale agreements, redeemable noncontrolling interests and our 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 add 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,
	2020		2019		2020		2019
Numerator:
Net (loss) income attributable to COPT	$	(31,845)	$	21,257	$	15,706	$	148,907
Income attributable to share-based compensation awards	(145)		(123)		(365)		(495)
Numerator for basic EPS on net (loss) income attributable to COPT common shareholders	(31,990)		21,134		15,341		148,412
Redeemable noncontrolling interests	—		—		—		100
Income attributable to share-based compensation awards	—		5		6		26
Numerator for diluted EPS on net (loss) income attributable to COPT common shareholders	$	(31,990)	$	21,139	$	15,347	$	148,538
Denominator (all weighted averages):
Denominator for basic EPS (common shares)	111,811		111,582		111,778		111,036
Dilutive effect of redeemable noncontrolling interests	—		—		—		123
Dilutive effect of share-based compensation awards	—		361		278		313
Denominator for diluted EPS (common shares)	111,811		111,943		112,056		111,472
Basic EPS	$	(0.29)	$	0.19	$	0.14	$	1.34
Diluted EPS	$	(0.29)	$	0.19	$	0.14	$	1.33

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,
	2020	2019	2020	2019
Conversion of common units	1,240	1,312	1,235	1,323
Conversion of redeemable noncontrolling interests	973	975	954	893
Conversion of Series I preferred units	176	176	176	176

The following securities were also excluded from the computation of diluted EPS because their effect was antidilutive:

•weighted average shares related to COPT’s forward equity sale agreements for the nine months ended September 30, 2019 of 503,000;

•weighted average restricted shares and deferred share awards for the three months ended September 30, 2020 and 2019 of 429,000 and 436,000, respectively, and for the nine months ended September 30, 2020 and 2019 of 432,000 and 441,000, respectively;

•weighted average options for the three and nine months ended ended September 30, 2019 of 3,000 and 16,000, respectively; and

•weighted average unvested TB-PIUs for the three months ended September 30, 2020 and 2019 of 91,000 and 62,000, respectively, and for the nine months ended September 30, 2020 and 2019 of 85,000 and 47,000, respectively.

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 COPT’s forward equity sale agreements, redeemable noncontrolling interests and our 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 add 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,
	2020		2019		2020		2019
Numerator:
Net (loss) income attributable to COPLP	$	(32,154)	$	21,681	$	16,122	$	151,257
Preferred unit distributions	(77)		(157)		(231)		(487)
Income attributable to share-based compensation awards	(119)		(139)		(374)		(592)
Numerator for basic EPU on net (loss) income attributable to COPLP common unitholders	(32,350)		21,385		15,517		150,178
Redeemable noncontrolling interests	—		—		—		100
Income attributable to share-based compensation awards	—		5		—		26
Numerator for diluted EPU on net (loss) income attributable to COPLP common unitholders	$	(32,350)	$	21,390	$	15,517	$	150,304
Denominator (all weighted averages):
Denominator for basic EPU (common units)	113,051		112,894		113,013		112,359
Dilutive effect of redeemable noncontrolling interests	—		—		—		123
Dilutive effect of share-based compensation awards	—		361		278		313
Denominator for diluted EPU (common units)	113,051		113,255		113,291		112,795
Basic EPU	$	(0.29)	$	0.19	$	0.14	$	1.34
Diluted EPU	$	(0.29)	$	0.19	$	0.14	$	1.33

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 Shares Excluded from Denominator
	For the Three Months Ended September 30,		For the Nine Months Ended September 30,
	2020	2019	2020	2019
Conversion of redeemable noncontrolling interests	973	975	954	893
Conversion of Series I preferred units	176	176	176	176

The following securities were also excluded from the computation of diluted EPU because their effect was antidilutive:

•weighted average shares related to COPT’s forward equity sale agreements for the nine months ended September 30, 2019 of 503,000;

•weighted average restricted units and deferred share awards for the three months ended September 30, 2020 and 2019 of 429,000 and 436,000, respectively, and for the nine months ended September 30, 2020 and 2019 of 432,000 and 441,000, respectively;

•weighted average options for the three and nine months ended September 30, 2019 of 3,000 and 16,000, respectively; and

•weighted average unvested TB-PIUs for the three months ended September 30, 2020 and 2019 of 91,000 and 62,000, respectively, and for the nine months ended September 30, 2020 and 2019 of 85,000 and 47,000, respectively.

XML

Commitments and Contingencies

9 Months Ended

Sep. 30, 2020

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies

Commitments and Contingencies

Litigation and Claims

In the normal course of business, we are subject to legal actions and other claims.  We record losses for specific legal proceedings and claims when we determine that a loss is probable and the amount of loss can be reasonably estimated.  As of September 30, 2020, management believes that it is reasonably possible that we could recognize a loss of up to $3.1 million for certain municipal tax claims. While we do not believe this loss would materially affect our financial position or liquidity, it could be material to our results of operations. Management believes that it is also reasonably possible that we could incur losses pursuant to other such claims but do not believe such losses would materially affect our financial position, liquidity or results of operations. 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.

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 limited to $19 million in the aggregate. We have insurance coverage in place to mitigate much of any potential future losses that may result from these indemnification agreements.

Tax Incremental Financing Obligation

Anne Arundel County, Maryland issued tax incremental financing bonds to third-party investors in order to finance public improvements needed in connection with our project known as the National Business Park.  These bonds had a remaining principal balance of approximately $33 million as of September 30, 2020. The real estate taxes on increases in assessed values post-bond issuance of properties in development districts encompassing the National Business Park are transferred to a special fund pledged to the repayment of the bonds. While we are obligated to fund, through a special tax, any future shortfalls between debt service of the bonds and real estate taxes available to repay the bonds, as of September 30, 2020, we do not expect any such future fundings will be required.

Effects of COVID-19

Since first being declared a pandemic by the World Health Organization in early March 2020, the coronavirus, or COVID-19, has spread worldwide. In an effort to control its spread, governments and other authorities imposed restrictive measures affecting freedom of movement and business operations, such as shelter-in-place orders and business closures. Strong restrictive measures were put into place in much of the United States beginning in March, bringing many businesses to a halt while forcing others to change the way in which they conduct their operations, with much of the workforce working from their homes to the extent they were able. States and local governments began easing these measures to varying extents in late April, with some lifting restrictive measures entirely, while others chose a more gradual, extended easing approach. While the easing of these measures has enabled many businesses to gradually resume normal operations, most businesses continue to be hindered to varying extents by either measures still in effect, operational challenges resulting from social distancing requirements/expectations and/or a reluctance by much of the population to engage in certain activities while the pandemic is still active. As of the date of this filing, COVID-19 spread continues world- and nation-wide, and is expected to continue until effective vaccinations have been developed and then distributed and administered to much of the population. As a result, there continues to be significant uncertainty regarding the duration and extent of this pandemic. The outbreak has significantly disrupted financial and economic markets worldwide, as well as in the United States at a national, regional and local level. These conditions could continue or further deteriorate as businesses feel the prolonged effects of stalled or reduced operations and uncertainty regarding the pandemic continues.

COVID-19, and similar pandemics, along with measures instituted to prevent spread, may adversely affect us in many ways, including, but not limited to:

•disruption of our tenants’ operations, which could adversely affect their ability, or willingness, to sustain their businesses and/or fulfill their lease obligations;

•our ability to maintain occupancy in our properties and obtain new leases for unoccupied and new development space at favorable terms or at all;

•shortages in supply of products or services from our and our tenants’ vendors that are needed for us and our tenants to operate effectively, and which could lead to increased costs for such products and services;

•access to debt and equity capital on attractive terms or at all. Severe disruption and instability in the global financial markets or deteriorations in credit and financing conditions may affect our or our tenants’ ability to access capital necessary to fund operations, refinance debt or fund planned investments on a timely basis, and may adversely affect the valuation of financial assets and liabilities;

•our and our tenants’ ability to continue or complete planned development, including the potential for delays in the supply of materials or labor necessary for development; and

•an increase in the pace of businesses implementing remote work arrangements over the long-term, which would adversely effect demand for office space.

The extent of the effect on our operations, financial condition and cash flows will be dependent on future developments, including the duration of the pandemic, the prevalence, strength and duration of restrictive measures and the resulting effects on our tenants, potential future tenants, the commercial real estate industry and the broader economy, all of which are uncertain and difficult to predict.

XML

Subsequent Events	9 Months Ended
	Sep. 30, 2020
Subsequent Events [Abstract]
Subsequent Events	Subsequent EventOn October 30, 2020, we sold a 90% interest in two data center shell properties in Virginia based on an aggregate property value of $90 million and retained a 10% interest in the properties through B RE COPT DC JV II LLC (“B RE COPT”), a newly-formed joint venture. Our partner in the joint venture acquired the 90% interest from us for $81 million. We are accounting for our interest in the joint venture using the equity method of accounting.

XML

Summary of Significant Accounting Policies (Policies)

9 Months Ended

Sep. 30, 2020

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 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.

When we own an equity investment in an entity and cannot exert significant influence over its operations, we measure the investment at fair value, with changes recognized through net income. For an investment without a readily determinable fair value, we measure the investment at cost, less any impairments, plus or minus changes resulting from observable price changes for an identical or similar investment of the same issuer.

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, 2019 included in our 2019 Annual Report on Form 10-K.  The unaudited consolidated financial statements include all adjustments that are necessary, in the opinion of management, to fairly state 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 2019 Annual Report on Form 10-K as updated for our adoption of recent accounting pronouncements discussed below.

Reclassifications

Reclassifications

We reclassified certain amounts from prior periods to conform to the current period presentation of our consolidated financial statements with no effect on previously reported net income or equity.

Recent Accounting Pronouncements

Recent Accounting Pronouncements

Effective January 1, 2020, we adopted guidance issued by the Financial Accounting Standards Board (“FASB”) that changes how entities measure credit losses for most financial assets and certain other instruments not measured at fair value through net income. The guidance replaces the current incurred loss model with an expected loss approach, resulting in a more timely recognition of such losses. The guidance applies to most financial assets measured at amortized cost and certain other instruments, including trade and other receivables (excluding those arising from operating leases), loans, held-to-maturity debt securities, net investments in leases and off-balance-sheet credit exposures. Under this guidance, we recognize an estimate of our expected credit losses on these asset types as an allowance, as the guidance requires that financial assets be measured on an amortized cost basis and be presented at the net amount expected to be collected. We adopted this guidance effective January 1, 2020 using the modified retrospective transition method under which we recognized a $5.5 million allowance for credit losses by means of a cumulative-effect adjustment to cumulative distributions in excess of net income of the Company (or common units of the Operating Partnership), and did not adjust prior comparative reporting periods. Our consolidated statements of operations reflect adjustments for changes in our expected credit losses occurring subsequent to adoption of this guidance.

Effective January 1, 2020, we adopted guidance issued by the FASB that modifies disclosure requirements for fair value measurements. The resulting changes in disclosure did not have a material impact on our consolidated financial statements.

Effective January 1, 2020, we adopted guidance issued by the FASB that aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. FASB guidance did not previously address the accounting for such implementation costs. Our adoption of this guidance did not have a material impact on our consolidated financial statements.

In March 2020, the FASB issued guidance containing practical expedients for reference rate reform related activities pertaining to debt, leases, derivatives and other contracts. The guidance is optional and may be adopted over time as reference rate reform activities occur. During the nine months ended September 30, 2020, we elected to apply an expedient to treat any changes in loans resulting from reference rate reform as debt modifications (as opposed to extinguishments) and hedge accounting expedients related to probability and the assessments of effectiveness for future LIBOR-indexed cash flows to assume that the index upon which future hedged transactions will be based matches the index on the corresponding derivatives. Application of the hedge accounting expedients preserves the presentation of derivatives consistent with past presentation. We will continue to evaluate the impact of this guidance and may apply other elections as applicable as additional changes in the market occur.

In April 2020, the FASB issued a Staff Q&A document that addressed the accounting for lease accounting guidance for lease concessions resulting from the COVID-19 pandemic. Under existing lease guidance, we would normally have to

determine, on a lease-by-lease basis, if a lease concession was the result of a new arrangement reached with the tenant (treated as a lease modification) or if such a concession was implemented pursuant to enforceable rights and obligations within the existing lease agreement (and, therefore, not treated as a lease modification). The Staff Q&A document enabled us to bypass the lease-by-lease analysis for lease concessions resulting from the COVID-19 pandemic, and instead elect to either apply the lease modification accounting framework or not, with such elections applied consistently to leases with similar characteristics and similar circumstances. Entities may make the elections for any lessor-provided concessions related to the effects of the COVID-19 pandemic (such as deferrals of lease payments or reduced future lease payments) as long as the concession does not result in a substantial increase in the rights of the lessor or the obligations of the lessee. We chose to apply the elections available under the Staff Q&A to restructurings of lease payment terms granted by us to tenants, the effect of which did not have a material impact on our consolidated financial statements.

Credit Losses, Financial Assets and Other Instruments

Credit Losses, Financial Assets and Other Instruments

As discussed above, effective January 1, 2020, we adopted guidance issued by the FASB that changed how we measure credit losses for most financial assets and certain other instruments not measured at fair value through net income from an incurred loss model to an expected loss approach. Our items within the scope of this guidance included the following:

•investing receivables, as disclosed in Note 7;

•tenant notes receivable;

•other assets comprised of non-lease revenue related accounts receivable (primarily from construction contract services) and contract assets from unbilled construction contract revenue; and

•off-balance sheet credit exposures.

Under this guidance, we recognize an estimate of our expected credit losses on these items as an allowance, as the guidance requires that financial assets be measured on an amortized cost basis and be presented at the net amount expected to be collected (or as a separate liability in the case of off-balance sheet credit exposures). The allowance represents the portion of the amortized cost basis that we do not expect to collect (or loss we expect to incur in the case of off-balance sheet credit exposures) due to credit over the contractual life based on available information relevant to assessing the collectability of cash flows, which includes consideration of past events, current conditions and reasonable and supportable forecasts of future economic conditions (including consideration of asset- or borrower-specific factors). The guidance requires the allowance for expected credit losses to reflect the risk of loss, even when that risk is remote. An allowance for credit losses is measured and recorded upon the initial recognition of a financial asset (or off-balance sheet credit exposure), regardless of whether it is originated or purchased. Quarterly, the expected losses are re-estimated, considering any cash receipts and changes in risks or assumptions, with resulting adjustments recognized as credit loss expense or recoveries on our consolidated statements of operations.

We estimate expected credit losses for in-scope items using historical loss rate information developed for varying classifications of credit risk and contractual lives. Due to our limited quantity of items within the scope of this guidance and the unique risk characteristics of such items, we individually assign each in-scope item a credit risk classification. The credit risk classifications assigned by us are determined based on credit ratings assigned by ratings agencies (as available) or are internally-developed based on available financial information, historical payment experience, credit documentation, other publicly available information and current economic trends. In addition, for certain items in which the risk of credit loss is affected by the economic performance of a real estate development project, we develop probability weighted scenario analyses for varying levels of performance in estimating our credit loss allowance (applicable to our notes receivable from the City of Huntsville disclosed in Note 7 and a tax incremental financing obligation disclosed in Note 17).

When we believe that collection of interest income on an investing or tenant note receivable is not probable, we place the receivable on nonaccrual status, meaning interest income is recognized when payments are received rather than on an accrual basis.We write off receivables when we believe the facts and circumstances indicate that continued pursuit of collection is no longer warranted. When cash is received in connection with receivables for which we have previously recognized credit losses, we recognize reductions in our credit loss expense.

XML

Summary of Significant Accounting Policies (Tables)

9 Months Ended

Sep. 30, 2020

Accounting Policies [Abstract]

Credit Losses, Financial Assets and Other Instruments, Allowance for Credit Loss

The table below sets forth the activity for the allowance for credit losses (in thousands):

	For the Nine Months Ended September 30, 2020
	Investing Receivables		Tenant Notes Receivable (1)		Other Assets (2)		Off-Balance Sheet Credit Exposures (3)		Total
December 31, 2019	$	—	$	97	$	—	$	—	$	97
Cumulative effect of change for adoption of credit loss guidance	3,732		325		144		1,340		5,541
Credit loss expense (recoveries)	308		696		152		(1,317)		(161)
September 30, 2020	$	4,040	$	1,118	$	296	$	23	$	5,477

(1)Included in the line entitled “accounts receivable, net” on our consolidated balance sheets.

(2)The balance as of September 30, 2020 included $95,000 in the line entitled “accounts receivable, net” and $201,000 in the line entitled “prepaid expenses and other assets, net” on our consolidated balance sheets.

(3)Included in the line entitled “other liabilities” on our consolidated balance sheets.

Accounts Receivable, Noncurrent, Credit Quality Indicator

The following table presents the amortized cost basis of our investing receivables and tenants notes receivable by credit risk classification, by origination year as of September 30, 2020 (in thousands):

	Origination Year
	2015 and Earlier		2016		2017		2018		2019		2020		Total
Investing receivables:
Credit risk classification:
Investment grade	$	62,842	$	—	$	948	$	—	$	—	$	219	$	64,009
Non-investment grade	3,020		—		—		—		11,147		—		14,167
Total	$	65,862	$	—	$	948	$	—	$	11,147	$	219	$	78,176
Tenant notes receivable:
Credit risk classification:
Investment grade	$	—	$	27	$	—	$	1,054	$	90	$	360	$	1,531
Non-investment grade	97		179		—		171		1,973		1,600		4,020
Total	$	97	$	206	$	—	$	1,225	$	2,063	$	1,960	$	5,551

XML

Fair Value Measurements (Tables)

9 Months Ended

Sep. 30, 2020

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 COPT and subsidiaries that are accounted for at fair value on a recurring basis as of September 30, 2020 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	$	2,652	$	—	$	—	$	2,652
Other	20		—		—		20
Mutual funds (1)	20		—		—		20
Total assets	$	2,692	$	—	$	—	$	2,692
Liabilities:
Deferred compensation plan liability (2)	$	—	$	2,672	$	—	$	2,672
Interest rate derivatives	—		10,977		—		10,977
Total liabilities	$	—	$	13,649	$	—	$	13,649

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

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

The table below sets forth financial assets and liabilities of COPLP and subsidiaries that are accounted for at fair value on a recurring basis as of September 30, 2020 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:
Mutual funds (1)	$	20	$	—	$	—	$	20
Liabilities:
Interest rate derivatives	$	—	$	10,977	$	—	$	10,977

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

XML

Properties, Net (Tables)

9 Months Ended

Sep. 30, 2020

Real Estate [Abstract]

Schedule of operating properties, net

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

	September 30, 2020		December 31, 2019
Land	$	525,584	$	472,976
Buildings and improvements	3,569,749		3,306,791
Less: Accumulated depreciation	(1,095,441)		(1,007,120)
Operating properties, net	$	2,999,892	$	2,772,647

XML

Leases (Tables)

9 Months Ended

Sep. 30, 2020

Leases [Abstract]

Operating Lease Revenue Recognized

The table below sets forth our allocation of lease revenue recognized between fixed and variable lease revenue (in thousands):

	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
Lease revenue	2020		2019		2020		2019
Fixed	$	106,743	$	102,389	$	314,845	$	311,226
Variable	27,132		27,072		82,189		80,553
	$	133,875	$	129,461	$	397,034	$	391,779

Fixed Contractual Payments Due

Fixed contractual payments due under our property leases were as follows (in thousands):

Year Ending December 31,	September 30, 2020		December 31, 2019
2020 (1)	$	107,972	$	388,310
2021	410,966		336,482
2022	362,892		299,356
2023	307,346		245,661
2024	258,059		195,246
Thereafter	773,582		474,741
	$	2,220,817	$	1,939,796

(1)As of September 30, 2020, represents the three months ending December 31, 2020.

Right-of-Use Assets and Lease Liabilities

Our property right-of-use assets consisted of the following (in thousands):

Leases	Balance Sheet Location	September 30, 2020		December 31, 2019
Right-of-use assets
Operating leases - Property	Property - operating right-of-use assets	$	36,442	$	27,864
Finance leases - Property	Property - finance right-of-use assets	40,432		40,458
Total right-of-use assets		$	76,874	$	68,322

Property lease liabilities consisted of the following (in thousands):

Leases	Balance Sheet Location	September 30, 2020		December 31, 2019
Lease liabilities
Operating leases - Property	Property - operating lease liabilities	$	26,382	$	17,317
Finance leases - Property	Other liabilities	28		702
Total lease liabilities		$	26,410	$	18,019

Lease Costs

The table below sets forth the weighted average terms and discount rates of our property leases as of September 30, 2020:

Weighted average remaining lease term
Operating leases	54 years
Finance leases	< 1 year
Weighted average discount rate
Operating leases	7.19	%
Finance leases	3.62	%

The table below presents our total property lease cost (in thousands):

	Statement of Operations Location	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
Lease cost		2020		2019		2020		2019
Operating lease cost
Property leases - fixed	Property operating expenses	$	600	$	413	$	1,474	$	1,239
Property leases - variable	Property operating expenses	105		—		107		—
Finance lease cost
Amortization of property right-of-use assets	Property operating expenses	9		9		27		21
		$	714	$	422	$	1,608	$	1,260

The table below presents the effect of property lease payments on our consolidated statements of cash flows (in thousands):

	For the Nine Months Ended September 30,
Supplemental cash flow information	2020		2019
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows for operating leases	$	987	$	804
Financing cash flows for financing leases	$	674	$	14

Finance Lease, Liability, Maturity

Payments on property leases were due as follows (in thousands):

	As of September 30, 2020						As of December 31, 2019
Year Ending December 31,	Operating leases		Finance leases		Total		Operating leases		Finance leases		Total
2020 (1)	$	615	$	—	$	615	$	1,092	$	674	$	1,766
2021	2,513		14		2,527		1,138		14		1,152
2022	2,566		14		2,580		1,162		14		1,176
2023	2,601		—		2,601		1,167		—		1,167
2024	2,636		—		2,636		1,173		—		1,173
Thereafter	118,295		—		118,295		100,609		—		100,609
Total lease payments	129,226		28		129,254		106,341		702		107,043
Less: Amount representing interest	(102,844)		—		(102,844)		(89,024)		—		(89,024)
Lease liability	$	26,382	$	28	$	26,410	$	17,317	$	702	$	18,019

(1)As of September 30, 2020, represents the three months ending December 31, 2020.

Lessee, Operating Lease, Liability, Maturity

Payments on property leases were due as follows (in thousands):

	As of September 30, 2020						As of December 31, 2019
Year Ending December 31,	Operating leases		Finance leases		Total		Operating leases		Finance leases		Total
2020 (1)	$	615	$	—	$	615	$	1,092	$	674	$	1,766
2021	2,513		14		2,527		1,138		14		1,152
2022	2,566		14		2,580		1,162		14		1,176
2023	2,601		—		2,601		1,167		—		1,167
2024	2,636		—		2,636		1,173		—		1,173
Thereafter	118,295		—		118,295		100,609		—		100,609
Total lease payments	129,226		28		129,254		106,341		702		107,043
Less: Amount representing interest	(102,844)		—		(102,844)		(89,024)		—		(89,024)
Lease liability	$	26,382	$	28	$	26,410	$	17,317	$	702	$	18,019

(1)As of September 30, 2020, represents the three months ending December 31, 2020.

XML

Real Estate Joint Ventures (Tables)

9 Months Ended

Sep. 30, 2020

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 investments in consolidated real estate joint ventures as of September 30, 2020 (dollars in thousands):

				September 30, 2020 (1)
	Date Acquired	Nominal Ownership %		Total Assets		Encumbered Assets		Total Liabilities
Entity			Location
LW Redstone Company, LLC	3/23/2010	85%	Huntsville, Alabama	$	371,537	$	110,972	$	104,204
Stevens Investors, LLC	8/11/2015	95%	Washington, DC	153,869		152,972		81,134
M Square Associates, LLC	6/26/2007	50%	College Park, Maryland	98,322		62,628		56,167
				$	623,728	$	326,572	$	241,505

(1)Excludes amounts eliminated in consolidation.

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

The table below sets forth information pertaining to our investments in unconsolidated real estate joint ventures accounted for using the equity method of accounting (dollars in thousands):

	Date Acquired	Nominal Ownership %	Number of Properties	Carrying Value of Investment (1)
Entity				September 30, 2020		December 31, 2019
GI-COPT DC Partnership LLC	7/21/2016	50%	6	$	36,135	$	37,816
BREIT COPT DC JV LLC	6/20/2019	10%	9	13,527		14,133
			15	$	49,662	$	51,949

(1)Included in the line entitled “investment in unconsolidated real estate joint ventures” on our consolidated balance sheets.

XML

Investing Receivables (Tables)

9 Months Ended

Sep. 30, 2020

Receivables [Abstract]

Schedule of investing receivables

Investing receivables consisted of the following (in thousands): 

	September 30, 2020		December 31, 2019
Notes receivable from the City of Huntsville	$	64,009	$	59,427
Other investing loans receivable	14,167		14,096
Amortized cost basis	78,176		73,523
Allowance for credit losses	(4,040)		—
Investing receivables, net	$	74,136	$	73,523

XML

Prepaid Expenses and Other Assets, Net (Tables)

9 Months Ended

Sep. 30, 2020

Prepaid Expense and Other Assets [Abstract]

Schedule of prepaid expenses and other assets

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

	September 30, 2020		December 31, 2019
Lease incentives, net	$	36,259	$	28,433
Prepaid expenses	27,612		18,835
Construction contract costs in excess of billings, net	13,980		17,223
Furniture, fixtures and equipment, net	10,193		7,823
Non-real estate equity investments	6,487		6,705
Restricted cash	3,217		3,397
Deferred financing costs, net (1)	2,721		3,633
Deferred tax asset, net (2)	2,246		2,328
Other assets	4,905		4,639
Total for COPLP and subsidiaries	107,620		93,016
Marketable securities in deferred compensation plan	2,672		3,060
Total for COPT and subsidiaries	$	110,292	$	96,076

(1)Represents deferred costs, net of accumulated amortization, attributable to our Revolving Credit Facility and interest rate derivatives.

(2)Includes a valuation allowance of $565,000 as of September 30, 2020 and $480,000 as of December 31, 2019.

XML

Debt, Net (Tables)

9 Months Ended

Sep. 30, 2020

Debt Disclosure [Abstract]

Schedule of debt

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

	Carrying Value (1) as of
	September 30, 2020		December 31, 2019		September 30, 2020
					Stated Interest Rates	Scheduled Maturity
Mortgage and Other Secured Debt:
Fixed rate mortgage debt (2)	$	140,868	$	143,430	3.82% - 4.62% (3)	2023-2026
Variable rate secured debt (4)	118,690		68,055		LIBOR + 1.45% to 2.35% (5)	2021-2026
Total mortgage and other secured debt	259,558		211,485
Revolving Credit Facility (6)	57,000		177,000		LIBOR + 0.775% to 1.45% (7)	March 2023 (6)
Term Loan Facility (8)	398,253		248,706		LIBOR + 1.00% to 1.65% (9)	2022
Unsecured Senior Notes
3.70%, $300,000 aggregate principal	176,885		299,324		3.70% (10)	October 2020 (10)
3.60%, $350,000 aggregate principal	348,772		348,431		3.60% (11)	May 2023
5.25%, $250,000 aggregate principal	248,056		247,652		5.25% (12)	February 2024
5.00%, $300,000 aggregate principal	297,810		297,503		5.00% (13)	July 2025
2.25%, $400,000 aggregate principal	394,282		—		2.25% (14)	March 2026
Unsecured note payable	935		1,038		0% (15)	May 2026
Total debt, net	$	2,181,551	$	1,831,139

(1)The carrying values of our debt other than the Revolving Credit Facility reflect net deferred financing costs of $6.5 million as of September 30, 2020 and $5.8 million as of December 31, 2019.

(2)Certain of the fixed rate mortgages carry interest rates that, upon assumption, were above or below market rates 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 $170,000 as of September 30, 2020 and $217,000 as of December 31, 2019.

(3)The weighted average interest rate on our fixed rate mortgage debt was 4.16% as of September 30, 2020.

(4)Includes a construction loan with $37.4 million in remaining borrowing capacity as of September 30, 2020.

(5)The weighted average interest rate on our variable rate secured debt was 2.24% as of September 30, 2020.

(6)The facility matures in March 2023, with the ability for us to further extend such maturity 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 under the facility for each extension period. In connection with this facility, we also have the ability to borrow up to $500.0 million under new term loans from the facility’s lender group provided that there is no default under the facility and subject to the approval of the lenders.

(7)The weighted average interest rate on the Revolving Credit Facility was 1.21% as of September 30, 2020.

(8)On March 6, 2020, we amended this loan facility to increase the loan amount by $150.0 million and change the interest terms.

(9)The interest rate on this loan was 1.16% as of September 30, 2020.

(10)The carrying value of these notes reflects an unamortized discount totaling $128,000 as of September 30, 2020 and $534,000 as of December 31, 2019.  The effective interest rate under the notes, including amortization of the issuance costs, was 3.85%. Refer to paragraph below for further disclosure. 

(11)The carrying value of these notes reflects an unamortized discount totaling $860,000 as of September 30, 2020 and $1.1 million as of December 31, 2019.  The effective interest rate under the notes, including amortization of the issuance costs, was 3.70%. 

(12)The carrying value of these notes reflects an unamortized discount totaling $1.8 million as of September 30, 2020 and $2.1 million as of December 31, 2019.  The effective interest rate under the notes, including amortization of the issuance costs, was 5.49%. 

(13)The carrying value of these notes reflects an unamortized discount totaling $1.8 million as of September 30, 2020 and $2.1 million as of December 31, 2019.  The effective interest rate under the notes, including amortization of the issuance costs, was 5.15%.

(14)Refer to paragraph below for further disclosure.

(15)This note carries an interest rate that, upon assumption, was below market rates and it therefore was recorded at its fair value based on applicable effective interest rates.  The carrying value of this note reflects an unamortized discount totaling $176,000 as of September 30, 2020 and $223,000 as of December 31, 2019.

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, 2020				December 31, 2019
	Carrying Amount		Fair Value		Carrying Amount		Fair Value
Fixed-rate debt
Unsecured Senior Notes	$	1,465,805	$	1,505,414	$	1,192,910	$	1,227,441
Other fixed-rate debt	141,803		144,370		144,468		149,907
Variable-rate debt	573,943		567,461		493,761		495,962
	$	2,181,551	$	2,217,245	$	1,831,139	$	1,873,310

XML

Interest Rate Derivatives (Tables)

9 Months Ended

Sep. 30, 2020

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, each of which was designated as a cash flow hedge of interest rate risk (dollars in thousands):

							Fair Value at
Notional Amount			Fixed Rate	Floating Rate Index	Effective Date	Expiration Date	September 30, 2020		December 31, 2019
$	12,132	(1)	1.390%	One-Month LIBOR	10/13/2015	10/1/2020	$	—	$	23
100,000			1.901%	One-Month LIBOR	9/1/2016	12/1/2022	(3,857)		(1,028)
100,000			1.905%	One-Month LIBOR	9/1/2016	12/1/2022	(3,865)		(1,037)
50,000			1.908%	One-Month LIBOR	9/1/2016	12/1/2022	(1,935)		(524)
11,200		(2)	1.678%	One-Month LIBOR	8/1/2019	8/1/2026	(827)		(20)
150,000			0.498%	One-Month LIBOR	4/1/2020	12/31/2020	(127)		—
23,000		(3)	0.573%	One-Month LIBOR	4/1/2020	3/26/2025	(366)		—
75,000		(4)	3.176%	Three-Month LIBOR	6/30/2020	N/A	—		(8,640)
75,000		(4)	3.192%	Three-Month LIBOR	6/30/2020	N/A	—		(8,749)
75,000		(4)	2.744%	Three-Month LIBOR	6/30/2020	N/A	—		(5,684)
							$	(10,977)	$	(25,659)

(1)The notional amount of this instrument is scheduled to amortize to $12.1 million.

(2)The notional amount of this instrument is scheduled to amortize to $10.0 million.

(3)The notional amount of this instrument is scheduled to amortize to $22.1 million.

(4)As discussed below, these instruments were cash settled in September 2020.

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):

		Fair Value at
Derivatives	Balance Sheet Location	September 30, 2020		December 31, 2019
Interest rate swaps designated as cash flow hedges	Prepaid expenses and other assets, net	$	—	$	23
Interest rate swaps designated as cash flow hedges	Interest rate derivatives (liabilities)	$	(10,977)	$	(25,682)

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):

	Amount of Income (Loss) Recognized in AOCL on Derivatives								Amount of (Loss) Gain Reclassified from AOCL into Interest Expense on Statement of Operations
	For the Three Months Ended September 30,				For the Nine Months Ended September 30,				For the Three Months Ended September 30,				For the Nine Months Ended September 30,
Derivatives in Hedging Relationships	2020		2019		2020		2019		2020		2019		2020		2019
Interest rate derivatives	$	1,428	$	(11,047)	$	(39,592)	$	(33,437)	$	(1,342)	$	307	$	(2,408)	$	1,434

	Amount of Loss Reclassified from AOCL into Loss on Interest Rate Derivatives on Statement of Operations								Amount of Loss Recognized on Undesignated Swaps in Loss on Interest Rate Derivatives on Statement of Operations
	For the Three Months Ended September 30,				For the Nine Months Ended September 30,				For the Three Months Ended September 30,				For the Nine Months Ended September 30,
Derivatives in Hedging Relationships	2020		2019		2020		2019		2020		2019		2020		2019
Interest rate derivatives	$	(51,865)	$	—	$	(51,865)	$	—	$	(1,265)	$	—	$	(1,265)	$	—

XML

Redeemable Noncontrolling Interests (Tables)

9 Months Ended

Sep. 30, 2020

Noncontrolling Interest [Abstract]

Schedule of activity for redeemable noncontrolling interest

The table below sets forth the activity for these redeemable noncontrolling interests (in thousands):

	For the Nine Months Ended September 30,
	2020		2019
Beginning balance	$	29,431	$	26,260
Distributions to noncontrolling interests	(13,335)		(1,656)
Net income attributable to noncontrolling interests	2,715		2,729
Adjustment to arrive at fair value of interests	4,711		1,344
Ending balance	$	23,522	$	28,677

XML

Information by Business Segment (Tables)

9 Months Ended

Sep. 30, 2020

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): 

	Operating Property Segments
	Defense/Information Technology Locations
	Fort Meade/BW Corridor		Northern Virginia Defense/IT		Lackland Air Force Base		Navy Support Locations		Redstone Arsenal		Data Center Shells		Total Defense/IT Locations		Regional Office		Wholesale Data Center		Other		Total
Three Months Ended September 30, 2020
Revenues from real estate operations	$	63,328	$	14,699	$	12,602	$	8,006	$	6,079	$	7,995	$	112,709	$	14,913	$	6,068	$	753	$	134,443
Property operating expenses	(21,537)		(5,245)		(7,116)		(3,044)		(2,029)		(861)		(39,832)		(7,782)		(3,642)		(296)		(51,552)
UJV NOI allocable to COPT	—		—		—		—		—		1,752		1,752		—		—		—		1,752
NOI from real estate operations	$	41,791	$	9,454	$	5,486	$	4,962	$	4,050	$	8,886	$	74,629	$	7,131	$	2,426	$	457	$	84,643
Additions to long-lived assets	$	7,511	$	2,219	$	—	$	1,650	$	6,382	$	—	$	17,762	$	5,303	$	1,917	$	(3)	$	24,979
Transfers from non-operating properties	$	(209)	$	58	$	221	$	—	$	61,520	$	65,269	$	126,859	$	—	$	—	$	—	$	126,859
Three Months Ended September 30, 2019
Revenues from real estate operations	$	63,436	$	13,551	$	12,703	$	8,183	$	4,171	$	5,913	$	107,957	$	15,508	$	6,565	$	704	$	130,734
Property operating expenses	(20,743)		(4,965)		(7,149)		(3,581)		(1,717)		(518)		(38,673)		(7,343)		(3,374)		(324)		(49,714)
UJV NOI allocable to COPT	—		—		—		—		—		1,601		1,601		—		—		—		1,601
NOI from real estate operations	$	42,693	$	8,586	$	5,554	$	4,602	$	2,454	$	6,996	$	70,885	$	8,165	$	3,191	$	380	$	82,621
Additions to long-lived assets	$	10,770	$	2,922	$	—	$	2,003	$	446	$	—	$	16,141	$	6,339	$	61	$	19	$	22,560
Transfers from non-operating properties	$	1,381	$	118	$	2,120	$	—	$	4,152	$	9,483	$	17,254	$	—	$	(1,012)	$	—	$	16,242
Nine Months Ended September 30, 2020
Revenues from real estate operations	$	190,464	$	42,824	$	37,935	$	24,466	$	15,402	$	20,648	$	331,739	$	45,535	$	19,695	$	2,128	$	399,097
Property operating expenses	(63,618)		(15,765)		(21,696)		(9,500)		(5,488)		(2,307)		(118,374)		(22,207)		(10,338)		(836)		(151,755)
UJV NOI allocable to COPT	—		—		—		—		—		5,190		5,190		—		—		—		5,190
NOI from real estate operations	$	126,846	$	27,059	$	16,239	$	14,966	$	9,914	$	23,531	$	218,555	$	23,328	$	9,357	$	1,292	$	252,532
Additions to long-lived assets	$	22,144	$	8,114	$	—	$	5,518	$	6,698	$	—	$	42,474	$	13,105	$	10,699	$	165	$	66,443
Transfers from non-operating properties	$	4,304	$	838	$	381	$	—	$	91,827	$	171,465	$	268,815	$	—	$	—	$	—	$	268,815
Segment assets at September 30, 2020	$	1,264,547	$	392,226	$	143,206	$	180,337	$	234,355	$	446,530	$	2,661,201	$	387,290	$	204,834	$	3,643	$	3,256,968
Nine Months Ended September 30, 2019
Revenues from real estate operations	$	187,778	$	42,294	$	36,368	$	24,523	$	12,078	$	21,891	$	324,932	$	45,359	$	22,996	$	2,208	$	395,495
Property operating expenses	(62,422)		(14,951)		(19,756)		(10,271)		(4,855)		(1,630)		(113,885)		(22,349)		(9,830)		(981)		(147,045)
UJV NOI allocable to COPT	—		—		—		—		—		4,071		4,071		—		—		—		4,071
NOI from real estate operations	$	125,356	$	27,343	$	16,612	$	14,252	$	7,223	$	24,332	$	215,118	$	23,010	$	13,166	$	1,227	$	252,521
Additions to long-lived assets	$	22,204	$	6,072	$	—	$	7,948	$	1,282	$	—	$	37,506	$	15,198	$	312	$	63	$	53,079
Transfers from non-operating properties	$	7,759	$	4,647	$	10,456	$	—	$	13,363	$	122,115	$	158,340	$	—	$	(1,012)	$	—	$	157,328
Segment assets at September 30, 2019	$	1,271,668	$	398,137	$	147,505	$	186,243	$	118,839	$	298,675	$	2,421,067	$	393,747	$	205,550	$	3,708	$	3,024,072

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,
	2020		2019		2020		2019
Segment revenues from real estate operations	$	134,443	$	130,734	$	399,097	$	395,495
Construction contract and other service revenues	20,323		28,697		46,240		87,946
Total revenues	$	154,766	$	159,431	$	445,337	$	483,441

Reconciliation of UJV NOI allocable to COPT to equity in income of unconsolidated entities

The following table reconciles UJV NOI allocable to COPT to equity in income of unconsolidated entities as reported on our consolidated statements of operations (in thousands):

	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
	2020		2019		2020		2019
UJV NOI allocable to COPT	$	1,752	$	1,601	$	5,190	$	4,071
Less: Income from UJV allocable to COPT attributable to depreciation and amortization expense and interest expense	(1,274)		(1,202)		(3,814)		(2,859)
Add: Equity in loss of unconsolidated non-real estate entities	(1)		(3)		(4)		(5)
Equity in income of unconsolidated entities	$	477	$	396	$	1,372	$	1,207

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,
	2020		2019		2020		2019
Construction contract and other service revenues	$	20,323	$	28,697	$	46,240	$	87,946
Construction contract and other service expenses	(19,220)		(27,802)		(44,052)		(85,130)
NOI from service operations	$	1,103	$	895	$	2,188	$	2,816

Schedule of reconciliation of net operating income from real estate operations and service operations to net income

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

	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
	2020		2019		2020		2019
NOI from real estate operations	$	84,643	$	82,621	$	252,532	$	252,521
NOI from service operations	1,103		895		2,188		2,816
Interest and other income	1,746		1,842		5,233		5,977
Credit loss recoveries	1,465		—		161		—
Gain on sales of real estate	—		—		5		84,469
Equity in income of unconsolidated entities	477		396		1,372		1,207
Income tax (expense) benefit	(16)		131		(95)		113
Depreciation and other amortization associated with real estate operations	(35,332)		(34,692)		(101,540)		(104,290)
Impairment losses	(1,530)		(327)		(1,530)		(327)
General, administrative and leasing expenses	(7,467)		(7,929)		(23,111)		(26,066)
Business development expenses and land carry costs	(1,094)		(964)		(3,474)		(2,947)
Interest expense	(17,152)		(17,126)		(50,789)		(54,275)
UJV NOI allocable to COPT included in equity in income of unconsolidated entities	(1,752)		(1,601)		(5,190)		(4,071)
Loss on early extinguishment of debt	(3,237)		—		(3,237)		—
Loss on interest rate derivatives	(53,196)		—		(53,196)		—
Net (loss) income	$	(31,342)	$	23,246	$	19,329	$	155,127

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, 2020		September 30, 2019
Segment assets	$	3,256,968	$	3,024,072
Operating properties lease liabilities included in segment assets	26,054		16,645
Non-operating property assets	642,182		597,301
Other assets	194,985		217,351
Total COPT consolidated assets	$	4,120,189	$	3,855,369

XML

Construction Contract and Other Service Revenues (Tables)

9 Months Ended

Sep. 30, 2020

Revenue from Contract with Customer [Abstract]

Disaggregation of Revenue

The table below reports construction contract and other service revenues by compensation arrangement (in thousands):

	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
	2020		2019		2020		2019
Construction contract revenue:
Guaranteed maximum price	$	4,358	$	16,217	$	14,834	$	54,365
Firm fixed price	1,365		2,349		9,421		6,009
Cost-plus fee	13,249		9,906		20,121		26,935
Other	1,351		225		1,864		637
	$	20,323	$	28,697	$	46,240	$	87,946

The table below reports construction contract and other service revenues by service type (in thousands):

	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
	2020		2019		2020		2019
Construction contract revenue:
Construction	$	18,786	$	27,988	$	42,520	$	86,487
Design	186		484		1,856		822
Other	1,351		225		1,864		637
	$	20,323	$	28,697	$	46,240	$	87,946

Contract with Customer, Asset and Liability

The beginning and ending balances of accounts receivable related to our construction contracts were as follows (in thousands):

	For the Nine Months Ended September 30,
	2020		2019
Beginning balance	$	12,378	$	6,701
Ending balance	$	11,183	$	15,494

The beginning and ending balances of our contract assets were as follows (in thousands):

	For the Nine Months Ended September 30,
	2020		2019
Beginning balance	$	17,223	$	3,189
Ending balance	$	13,980	$	16,743

Changes in contract liabilities were as follows (in thousands):

	For the Nine Months Ended September 30,
	2020		2019
Beginning balance	$	1,184	$	568
Ending balance	$	5,236	$	725
Portion of beginning balance recognized in revenue during:
Three months ended September 30	$	19	$	—
Nine months ended September 30	$	757	$	445

XML

Share-Based Compensation (Tables)

9 Months Ended

Sep. 30, 2020

Share-based Payment Arrangement [Abstract]

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

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

Percentile Rank	Earned Awards Payout %
75th or greater	100% of PB-PIUs granted
50th (target)	50% of PB-PIUs granted
25th	25% of PB-PIUs granted
Below 25th	0% of PB-PIUs granted

XML

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

9 Months Ended

Sep. 30, 2020

Earnings Per Share [Abstract]

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,
	2020		2019		2020		2019
Numerator:
Net (loss) income attributable to COPT	$	(31,845)	$	21,257	$	15,706	$	148,907
Income attributable to share-based compensation awards	(145)		(123)		(365)		(495)
Numerator for basic EPS on net (loss) income attributable to COPT common shareholders	(31,990)		21,134		15,341		148,412
Redeemable noncontrolling interests	—		—		—		100
Income attributable to share-based compensation awards	—		5		6		26
Numerator for diluted EPS on net (loss) income attributable to COPT common shareholders	$	(31,990)	$	21,139	$	15,347	$	148,538
Denominator (all weighted averages):
Denominator for basic EPS (common shares)	111,811		111,582		111,778		111,036
Dilutive effect of redeemable noncontrolling interests	—		—		—		123
Dilutive effect of share-based compensation awards	—		361		278		313
Denominator for diluted EPS (common shares)	111,811		111,943		112,056		111,472
Basic EPS	$	(0.29)	$	0.19	$	0.14	$	1.34
Diluted EPS	$	(0.29)	$	0.19	$	0.14	$	1.33

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,
	2020		2019		2020		2019
Numerator:
Net (loss) income attributable to COPLP	$	(32,154)	$	21,681	$	16,122	$	151,257
Preferred unit distributions	(77)		(157)		(231)		(487)
Income attributable to share-based compensation awards	(119)		(139)		(374)		(592)
Numerator for basic EPU on net (loss) income attributable to COPLP common unitholders	(32,350)		21,385		15,517		150,178
Redeemable noncontrolling interests	—		—		—		100
Income attributable to share-based compensation awards	—		5		—		26
Numerator for diluted EPU on net (loss) income attributable to COPLP common unitholders	$	(32,350)	$	21,390	$	15,517	$	150,304
Denominator (all weighted averages):
Denominator for basic EPU (common units)	113,051		112,894		113,013		112,359
Dilutive effect of redeemable noncontrolling interests	—		—		—		123
Dilutive effect of share-based compensation awards	—		361		278		313
Denominator for diluted EPU (common units)	113,051		113,255		113,291		112,795
Basic EPU	$	(0.29)	$	0.19	$	0.14	$	1.34
Diluted EPU	$	(0.29)	$	0.19	$	0.14	$	1.33

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,
	2020	2019	2020	2019
Conversion of common units	1,240	1,312	1,235	1,323
Conversion of redeemable noncontrolling interests	973	975	954	893
Conversion of Series I preferred units	176	176	176	176

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 Shares Excluded from Denominator
	For the Three Months Ended September 30,		For the Nine Months Ended September 30,
	2020	2019	2020	2019
Conversion of redeemable noncontrolling interests	973	975	954	893
Conversion of Series I preferred units	176	176	176	176

XML

Organization - Narrative 1 (Details) - Sep. 30, 2020 ft² in Millions	property	ft²	MW	a
Unconsolidated Real Estate Joint Ventures
Investments in real estate
Number of real estate properties	15
Operating Properties
Investments in real estate
Number of real estate properties	176
Area of real estate property (in sqft or acres) | ft²		20.4
Operating Properties | Office Properties
Investments in real estate
Number of real estate properties	151
Area of real estate property (in sqft or acres) | ft²		15.9
Operating Properties | Single-tenant data centers
Investments in real estate
Number of real estate properties	25
Area of real estate property (in sqft or acres) | ft²		4.5
Operating Properties | Single-tenant data centers | Unconsolidated Real Estate Joint Ventures
Investments in real estate
Number of real estate properties	15
Operating wholesale data center
Investments in real estate
Critical load (in megawatts) | MW			19.25
Properties under development
Investments in real estate
Number of real estate properties	11
Area of real estate property (in sqft or acres) | ft²		1.6
Properties under development | Office Properties
Investments in real estate
Number of real estate properties	10
Properties under development | Single-tenant data centers
Investments in real estate
Number of real estate properties	1
Properties under development, partially-operational
Investments in real estate
Number of real estate properties	1
Properties under development, expansions of fully-operational properties
Investments in real estate
Number of real estate properties	1
Land controlled for future development
Investments in real estate
Area of real estate property (in sqft or acres)		11.0		860
Other Land
Investments in real estate
Area of real estate property (in sqft or acres) | a				43

XML

Organization - Narrative 2 (Details)	9 Months Ended
	Sep. 30, 2020
COPT | Corporate Office Properties, L.P. | Common Units
Forms of ownership in Operating Partnership and ownership percentage by the entity
Percentage ownership in operating partnership	98.60%

XML

Summary of Significant Accounting Policies - Narrative (Details) $ in Thousands	9 Months Ended
	Sep. 30, 2020 USD ($)
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Allowance for credit loss impact	$ 5,541
Cumulative Effect, Period Of Adoption, Adjustment
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Allowance for credit loss impact	$ 5,500

XML

Summary of Significant Accounting Policies - Allowance for Credit Loss Activity (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2020	Sep. 30, 2019	Sep. 30, 2020	Sep. 30, 2019
Financing Receivable, Allowance for Credit Loss [Roll Forward]
September 30, 2020	$ 4,040		$ 4,040
Off-Balance Sheet, Credit Loss, Exposure, Credit Loss Expense (Reversal) Allowance for Credit Loss [Roll Forward]
December 31, 2019			0
Cumulative effect of change for adoption of credit loss guidance			1,340
Credit loss expense (recoveries)			(1,317)
September 30, 2020	23		23
Credit Losses, Financial Assets and Other Instruments [Roll Forward]
December 31, 2019			97
Cumulative effect of change for adoption of credit loss guidance			5,541
Credit loss expense (recoveries)	(1,465)	$ 0	(161)	$ 0
September 30, 2020	5,477		5,477
Investing Receivables
Financing Receivable, Allowance for Credit Loss [Roll Forward]
December 31, 2019			0
Cumulative effect of change for adoption of credit loss guidance			3,732
Credit loss expense (recoveries)			308
September 30, 2020	4,040		4,040
Tenant Notes Receivables
Financing Receivable, Allowance for Credit Loss [Roll Forward]
December 31, 2019			97
Cumulative effect of change for adoption of credit loss guidance			325
Credit loss expense (recoveries)			696
September 30, 2020	1,118		1,118
Other Assets
Accounts Receivable, Allowance for Credit Loss [Roll Forward]
December 31, 2019			0
Cumulative effect of change for adoption of credit loss guidance			144
Credit loss expense (recoveries)			152
September 30, 2020	296		296
Accounts receivable, allowance for credit loss	296		296
Accounts Receivable, Net | Other Assets
Accounts Receivable, Allowance for Credit Loss [Roll Forward]
September 30, 2020	95		95
Accounts receivable, allowance for credit loss	95		95
Prepaid Expenses and Other Assets, Net | Other Assets
Accounts Receivable, Allowance for Credit Loss [Roll Forward]
September 30, 2020	201		201
Accounts receivable, allowance for credit loss	$ 201		$ 201

XML

Summary of Significant Accounting Policies - Credit Risk Classification (Details) - USD ($) $ in Thousands	Sep. 30, 2020	Dec. 31, 2019
Investing Receivables
Financing Receivable, Credit Quality Indicator [Line Items]
2015 and Earlier	$ 65,862
2016	0
2017	948
2018	0
2019	11,147
2020	219
Total	78,176	$ 73,523
Investing Receivables | Investment grade
Financing Receivable, Credit Quality Indicator [Line Items]
2015 and Earlier	62,842
2016	0
2017	948
2018	0
2019	0
2020	219
Total	64,009
Investing Receivables | Non-investment grade
Financing Receivable, Credit Quality Indicator [Line Items]
2015 and Earlier	3,020
2016	0
2017	0
2018	0
2019	11,147
2020	0
Total	14,167
Tenant Notes Receivables
Financing Receivable, Credit Quality Indicator [Line Items]
2015 and Earlier	97
2016	206
2017	0
2018	1,225
2019	2,063
2020	1,960
Total	5,551
Tenant Notes Receivables | Investment grade
Financing Receivable, Credit Quality Indicator [Line Items]
2015 and Earlier	0
2016	27
2017	0
2018	1,054
2019	90
2020	360
Total	1,531
Tenant Notes Receivables | Non-investment grade
Financing Receivable, Credit Quality Indicator [Line Items]
2015 and Earlier	97
2016	179
2017	0
2018	171
2019	1,973
2020	1,600
Total	$ 4,020

XML

Fair Value Measurements - Narrative (Details) - USD ($) $ in Thousands	3 Months Ended	9 Months Ended
	Sep. 30, 2020	Sep. 30, 2020	Dec. 31, 2019
Assets and liabilities measured at fair value on a recurring basis
Marketable securities in deferred compensation plan	$ 2,672	$ 2,672	$ 3,060
Fair value measurement on a recurring basis | Deferred compensation plan | Trustees and Management
Assets and liabilities measured at fair value on a recurring basis
Maximum percentage of participants' compensation which is deferrable (as a percent)		100.00%
Marketable securities in deferred compensation plan	2,700	$ 2,700
Fair Value, Nonrecurring | Baltimore, Maryland
Assets and liabilities measured at fair value on a recurring basis
Impairment losses	$ 1,500

XML

Fair Value Measurements - Assets and Liabilities, Measured on Recurring Basis (Details) - USD ($) $ in Thousands	Sep. 30, 2020	Dec. 31, 2019
Assets:
Marketable securities in deferred compensation plan	$ 2,672	$ 3,060
Fair value measurement on a recurring basis
Assets:
Total assets	2,692
Liabilities:
Deferred compensation plan liability	2,672
Interest rate derivatives	10,977
Total liabilities	13,649
Fair value measurement on a recurring basis | Mutual funds
Assets:
Marketable securities in deferred compensation plan	2,652
Mutual funds	20
Fair value measurement on a recurring basis | Other
Assets:
Marketable securities in deferred compensation plan	20
Fair value measurement on a recurring basis | Quoted Prices in Active Markets for Identical Assets (Level 1)
Assets:
Total assets	2,692
Liabilities:
Deferred compensation plan liability	0
Interest rate derivatives	0
Total liabilities	0
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	2,652
Mutual funds	20
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	20
Fair value measurement on a recurring basis | Significant Other Observable Inputs (Level 2)
Assets:
Total assets	0
Liabilities:
Deferred compensation plan liability	2,672
Interest rate derivatives	10,977
Total liabilities	13,649
Fair value measurement on a recurring basis | Significant Other Observable Inputs (Level 2) | Mutual funds
Assets:
Marketable securities in deferred compensation plan	0
Mutual funds	0
Fair value measurement on a recurring basis | Significant Other Observable Inputs (Level 2) | Other
Assets:
Marketable securities in deferred compensation plan	0
Fair value measurement on a recurring basis | Significant Unobservable  Inputs (Level 3)
Assets:
Total assets	0
Liabilities:
Deferred compensation plan liability	0
Interest rate derivatives	0
Total liabilities	0
Fair value measurement on a recurring basis | Significant Unobservable  Inputs (Level 3) | Mutual funds
Assets:
Marketable securities in deferred compensation plan	0
Mutual funds	0
Fair value measurement on a recurring basis | Significant Unobservable  Inputs (Level 3) | Other
Assets:
Marketable securities in deferred compensation plan	0
Fair value measurement on a recurring basis | Corporate Office Properties, L.P.
Liabilities:
Interest rate derivatives	10,977
Fair value measurement on a recurring basis | Corporate Office Properties, L.P. | Mutual funds
Assets:
Mutual funds	20
Fair value measurement on a recurring basis | Corporate Office Properties, L.P. | Quoted Prices in Active Markets for Identical Assets (Level 1)
Liabilities:
Interest rate derivatives	0
Fair value measurement on a recurring basis | Corporate Office Properties, L.P. | Quoted Prices in Active Markets for Identical Assets (Level 1) | Mutual funds
Assets:
Mutual funds	20
Fair value measurement on a recurring basis | Corporate Office Properties, L.P. | Significant Other Observable Inputs (Level 2)
Liabilities:
Interest rate derivatives	10,977
Fair value measurement on a recurring basis | Corporate Office Properties, L.P. | Significant Other Observable Inputs (Level 2) | Mutual funds
Assets:
Mutual funds	0
Fair value measurement on a recurring basis | Corporate Office Properties, L.P. | Significant Unobservable  Inputs (Level 3)
Liabilities:
Interest rate derivatives	0
Fair value measurement on a recurring basis | Corporate Office Properties, L.P. | Significant Unobservable  Inputs (Level 3) | Mutual funds
Assets:
Mutual funds	$ 0

XML

Properties, Net - Operating properties, net (Details) - USD ($) $ in Thousands	Sep. 30, 2020	Dec. 31, 2019
Operating properties, net
Operating properties, net	$ 2,999,892	$ 2,772,647
Operating Properties, net
Operating properties, net
Less: accumulated depreciation	(1,095,441)	(1,007,120)
Operating properties, net	2,999,892	2,772,647
Operating Properties, net | Land
Operating properties, net
Gross	525,584	472,976
Operating Properties, net | Buildings and improvements
Operating properties, net
Gross	$ 3,569,749	$ 3,306,791

XML

Properties, Net - 2020 Development Activities (Details) ft² in Thousands	Sep. 30, 2020 ft² property
Newly developed properties placed in service
Real Estate [Line Items]
Area of real estate property (in sqft or acres) | ft²	1,200
Number of real estate properties	6
Expansion of fully-operational properties placed in service
Real Estate [Line Items]
Area of real estate property (in sqft or acres) | ft²	28
Number of real estate properties	2
Redeveloped properties placed in service
Real Estate [Line Items]
Area of real estate property (in sqft or acres) | ft²	21
Properties under development
Real Estate [Line Items]
Area of real estate property (in sqft or acres) | ft²	1,600
Number of real estate properties	11
Properties under development, partially-operational
Real Estate [Line Items]
Number of real estate properties	1
Properties under development, expansions of fully-operational properties
Real Estate [Line Items]
Number of real estate properties	1

XML

Leases - Lessor Arrangements (Details)	9 Months Ended
	Sep. 30, 2020
Lessor, Lease, Description [Line Items]
Average term of contract	5 years 3 months 18 days
Minimum
Lessor, Lease, Description [Line Items]
Term of contract	1 month
Maximum
Lessor, Lease, Description [Line Items]
Term of contract	18 years

XML

Leases - Lease Revenue and Payments to be Received (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2020	Sep. 30, 2019	Sep. 30, 2020	Sep. 30, 2019	Dec. 31, 2019
Leases [Abstract]
Fixed	$ 106,743	$ 102,389	$ 314,845	$ 311,226
Variable	27,132	27,072	82,189	80,553
Lease revenue	133,875	$ 129,461	397,034	$ 391,779
Lease Payments to be Received
Remainder of fiscal year	107,972		107,972
Year one	410,966		410,966		$ 388,310
Year two	362,892		362,892		336,482
Year three	307,346		307,346		299,356
Year four	258,059		258,059		245,661
Year five					195,246
Thereafter	773,582		773,582
Thereafter					474,741
Total	$ 2,220,817		$ 2,220,817		$ 1,939,796

XML

Leases - Lessee Arrangements (Details) $ in Millions	9 Months Ended
	Sep. 30, 2020 USD ($) Lease
Lessee, Lease, Description [Line Items]
Lessee right-of-use asset	$ 76.9
Minimum | Land Leases
Lessee, Lease, Description [Line Items]
Remaining term of contract	28 years
Maximum | Land Leases
Lessee, Lease, Description [Line Items]
Remaining term of contract	96 years
Washington, DC
Lessee, Lease, Description [Line Items]
Lessee right-of-use asset	$ 10.1
Remaining term of contract	80 years
Number of contracts | Lease	2
Baltimore, Maryland
Lessee, Lease, Description [Line Items]
Lessee right-of-use asset	$ 6.4
Remaining term of contract	28 years
Optional renewal term	49 years
Phoenix, Arizona
Lessee, Lease, Description [Line Items]
Lessee right-of-use asset	$ 4.3
Remaining term of contract	4 years
Optional renewal term	5 years
Stevens Investors, LLC | Washington, DC
Lessee, Lease, Description [Line Items]
Lessee right-of-use asset	$ 37.8
Remaining term of contract	96 years
M Square Associates, LLC | College Park, Maryland
Lessee, Lease, Description [Line Items]
Lessee right-of-use asset	$ 6.6
Number of contracts | Lease	4
M Square Associates, LLC | College Park, Maryland | Minimum
Lessee, Lease, Description [Line Items]
Remaining term of contract	62 years
M Square Associates, LLC | College Park, Maryland | Maximum
Lessee, Lease, Description [Line Items]
Remaining term of contract	74 years
LW Redstone Company, LLC | Huntsville, Alabama
Lessee, Lease, Description [Line Items]
Lessee right-of-use asset	$ 9.3
Number of contracts | Lease	12
Optional renewal term	25 years
LW Redstone Company, LLC | Huntsville, Alabama | Minimum
Lessee, Lease, Description [Line Items]
Remaining term of contract	43 years
LW Redstone Company, LLC | Huntsville, Alabama | Maximum
Lessee, Lease, Description [Line Items]
Remaining term of contract	50 years
Fort Meade/BW Corridor
Lessee, Lease, Description [Line Items]
Lessee right-of-use asset	$ 2.2
Remaining term of contract	48 years
Number of contracts | Lease	2

XML

Leases - Right-of-Use Assets and Lease Liabilities (Details) - USD ($) $ in Thousands	Sep. 30, 2020	Dec. 31, 2019
Leases [Abstract]
Operating leases - Property	$ 36,442	$ 27,864
Finance leases - Property	40,432	40,458
Total right-of-use assets	76,874	68,322
Property - operating lease liabilities	26,382	17,317
Finance leases - Property	28	702
Total lease liabilities	$ 26,410	$ 18,019

XML

Leases - Weighted Average Terms and Discount Rates (Details)	Sep. 30, 2020
Leases [Abstract]
Operating leases, Weighted average remaining lease term	54 years
Finance leases, Weighted average remaining lease term (less than)	1 year
Operating lease, Weighted average discount rate	7.19%
Finance lease, Weighted average discount rate	3.62%

XML

Leases - Lease Cost (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2020	Sep. 30, 2019	Sep. 30, 2020	Sep. 30, 2019
Lessee, Lease, Description [Line Items]
Lease costs	$ 714	$ 422	$ 1,608	$ 1,260
Property Operating Expense
Lessee, Lease, Description [Line Items]
Property leases - fixed	600	413	1,474	1,239
Property leases - variable	105	0	107	0
Finance lease right-of use amortization	$ 9	$ 9	$ 27	$ 21

XML

Leases - Supplemental Cash Flow Information (Details) - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2020	Sep. 30, 2019
Leases [Abstract]
Operating cash flows for operating leases	$ 987	$ 804
Financing cash flows for financing leases	$ 674	$ 14

XML

Leases - Lease Liabilities (Details) - USD ($) $ in Thousands	Sep. 30, 2020	Dec. 31, 2019
Operating leases
Remainder of fiscal year	$ 615
Year one	2,513	$ 1,092
Year two	2,566	1,138
Year three	2,601	1,162
Year four	2,636	1,167
Year five		1,173
Thereafter	118,295
Thereafter		100,609
Total lease payments	129,226	106,341
Less: Amount representing interest	(102,844)	(89,024)
Lease liability	26,382	17,317
Finance leases
Remainder of fiscal year	0
Year one	14	674
Year two	14	14
Year three	0	14
Year four	0	0
Year five		0
Thereafter	0
Thereafter		0
Total lease payments	28	702
Less: Amount representing interest	0	0
Lease liability	28	702
Total
Remainder of fiscal year	615
Year one	2,527	1,766
Year two	2,580	1,152
Year three	2,601	1,176
Year four	2,636	1,167
Year five		1,173
Thereafter	118,295
Thereafter		100,609
Total lease payments	129,254	107,043
Less: Amount representing interest	(102,844)	(89,024)
Total lease liabilities	$ 26,410	$ 18,019

XML

Real Estate Joint Ventures - Investments in Consolidated Real Estate Joint Ventures (Details) - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2020	Dec. 31, 2019	Sep. 30, 2019
Investments in consolidated real estate joint ventures
Total Assets	$ 4,120,189	$ 3,854,453	$ 3,855,369
Total Liabilities	2,447,031	$ 2,105,777
Variable Interest Entity, Primary Beneficiary
Investments in consolidated real estate joint ventures
Total Assets	623,728
Encumbered Assets	326,572
Total Liabilities	$ 241,505
Variable Interest Entity, Primary Beneficiary | LW Redstone Company, LLC
Investments in consolidated real estate joint ventures
Nominal Ownership %	85.00%
Total Assets	$ 371,537
Encumbered Assets	110,972
Total Liabilities	$ 104,204
Variable Interest Entity, Primary Beneficiary | Stevens Investors, LLC
Investments in consolidated real estate joint ventures
Nominal Ownership %	95.00%
Total Assets	$ 153,869
Encumbered Assets	152,972
Total Liabilities	$ 81,134
Variable Interest Entity, Primary Beneficiary | M Square Associates, LLC
Investments in consolidated real estate joint ventures
Nominal Ownership %	50.00%
Total Assets	$ 98,322
Encumbered Assets	62,628
Total Liabilities	$ 56,167

XML

Real Estate Joint Ventures - Investments in Unconsolidated Real Estate Joint Ventures (Details) $ in Thousands	1 Months Ended
	May 31, 2020 USD ($)	Sep. 30, 2020 USD ($) property	Dec. 31, 2019 USD ($)
Unconsolidated Real Estate Joint Ventures
Schedule of Equity Method Investments [Line Items]
Number of Properties | property		15
Carrying value of Investments		$ 49,662	$ 51,949
GI-COPT DC Partnership LLC
Schedule of Equity Method Investments [Line Items]
Nominal Ownership %		50.00%
Number of Properties | property		6
Carrying value of Investments		$ 36,135	37,816
Maximum cost reimbursement for development	$ 6,000
Variable Interest Entity, Not Primary Beneficiary | BREIT COPT DC JV LLC
Schedule of Equity Method Investments [Line Items]
Nominal Ownership %		10.00%
Number of Properties | property		9
Carrying value of Investments		$ 13,527	$ 14,133

XML

Investing Receivables - Investing Receivables (Details) - USD ($) $ in Thousands	Sep. 30, 2020	Dec. 31, 2019
Accounts, Notes, Loans and Financing Receivable [Line Items]
Allowance for credit losses	$ (4,040)
Investing Receivables
Accounts, Notes, Loans and Financing Receivable [Line Items]
Amortized cost basis	78,176	$ 73,523
Allowance for credit losses	(4,040)	0
Investing receivables, net	74,136	73,523
Investing Receivables | Notes receivable from the City of Huntsville
Accounts, Notes, Loans and Financing Receivable [Line Items]
Amortized cost basis	64,009	59,427
Investing Receivables | Other investing loans receivable
Accounts, Notes, Loans and Financing Receivable [Line Items]
Amortized cost basis	$ 14,167	$ 14,096

XML

Investing Receivables - Narrative (Details) - USD ($) $ in Millions	Sep. 30, 2020	Dec. 31, 2019
Investing Receivables
Accounts, Notes, Loans and Financing Receivable [Line Items]
Notes receivable, fair value disclosure	$ 78.0	$ 74.0
Investing Receivables
Accounts, Notes, Loans and Financing Receivable [Line Items]
Accrued interest receivable, net of allowance for credit losses	$ 3.4	$ 4.7
Investing Receivables | Other investing loans receivable
Accounts, Notes, Loans and Financing Receivable [Line Items]
Interest rate	8.00%
Investing Receivables | LW Redstone Company, LLC | Notes receivable from the City of Huntsville
Accounts, Notes, Loans and Financing Receivable [Line Items]
Interest rate	9.95%

XML

Prepaid Expenses and Other Assets, Net (Details) - USD ($) $ in Thousands	Sep. 30, 2020	Dec. 31, 2019	Sep. 30, 2019	Dec. 31, 2018
Property, Plant and Equipment [Line Items]
Restricted cash	$ 3,217	$ 3,397	$ 3,502	$ 3,884
Marketable securities in deferred compensation plan	2,672	3,060
Total	110,292	96,076
Taxable REIT Subsidiary
Property, Plant and Equipment [Line Items]
Deferred tax assets, valuation allowance	(565)	(480)
Corporate Office Properties, L.P.
Property, Plant and Equipment [Line Items]
Lease incentives, net	36,259	28,433
Prepaid expenses	27,612	18,835
Construction contract costs in excess of billings, net	13,980	17,223
Furniture, fixtures and equipment, net	10,193	7,823
Non-real estate equity investments	6,487	6,705
Restricted cash	3,217	3,397	$ 3,502	$ 3,884
Deferred financing costs, net	2,721	3,633
Deferred tax asset, net	2,246	2,328
Other assets	4,905	4,639
Total	$ 107,620	$ 93,016

XML

Debt, Net - Schedule of Debt (Details)		9 Months Ended
	Mar. 06, 2020 USD ($)	Sep. 30, 2020 USD ($) extension	Sep. 17, 2020 USD ($)	Dec. 31, 2019 USD ($)
Debt
Carrying Value		$ 2,181,551,000		$ 1,831,139,000
Mortgage and other secured debt
Debt
Carrying Value		$ 259,558,000		211,485,000
Line of Credit | Revolving Credit Facility
Debt
Number of extensions | extension		2
Extension option period (in years)		6 months
Line of credit facility, extension fee percentage		0.075%
Loans payable
Debt
Debt issuance costs		$ 6,500,000		5,800,000
Fixed rate mortgage debt | Mortgage and other secured debt
Debt
Carrying Value		140,868,000		143,430,000
Unamortized premium included in carrying value		$ 170,000		217,000
Weighted average interest rate (as a percent)		4.16%
Fixed rate mortgage debt | Mortgage and other secured debt | Minimum
Debt
Interest rate		3.82%
Fixed rate mortgage debt | Mortgage and other secured debt | Maximum
Debt
Interest rate		4.62%
Variable-rate secured debt | Mortgage and other secured debt
Debt
Carrying Value		$ 118,690,000		68,055,000
Weighted average interest rate (as a percent)		2.24%
Variable-rate secured debt | Mortgage and other secured debt | Minimum
Debt
Variable rate, spread		1.45%
Variable-rate secured debt | Mortgage and other secured debt | Maximum
Debt
Variable rate, spread		2.35%
Construction Loan | Mortgage and other secured debt | London Interbank Offered Rate (LIBOR)
Debt
Remaining borrowing capacity		$ 37,400,000
Revolving Credit Facility
Debt
Carrying Value		$ 57,000,000		177,000,000
Weighted average interest rate (as a percent)		1.21%
Aggregate additional borrowing capacity available		$ 500,000,000.0
Revolving Credit Facility | Minimum
Debt
Variable rate, spread		0.775%
Revolving Credit Facility | Maximum
Debt
Variable rate, spread		1.45%
Term Loan Facility
Debt
Carrying Value		$ 398,253,000		248,706,000
Interest rate		1.16%
Loan increase	$ 150,000,000.0
Term Loan Facility | Minimum
Debt
Variable rate, spread		1.00%
Term Loan Facility | Maximum
Debt
Variable rate, spread		1.65%
3.70%, $300,000 aggregate principal | Unsecured senior notes
Debt
Debt instrument, face amount		$ 300,000,000
Carrying Value		$ 176,885,000		299,324,000
Interest rate		3.70%
Unamortized discount included in carrying value		$ 128,000		534,000
Effective interest rate on debt		3.85%
3.60%, $350,000 aggregate principal | Unsecured senior notes
Debt
Debt instrument, face amount		$ 350,000,000
Carrying Value		$ 348,772,000		348,431,000
Interest rate		3.60%
Unamortized discount included in carrying value		$ 860,000		1,100,000
Effective interest rate on debt		3.70%
5.25%, $250,000 aggregate principal | Unsecured senior notes
Debt
Debt instrument, face amount		$ 250,000,000
Carrying Value		$ 248,056,000		247,652,000
Interest rate		5.25%
Unamortized discount included in carrying value		$ 1,800,000		2,100,000
Effective interest rate on debt		5.49%
5.00%, $300,000 aggregate principal | Unsecured senior notes
Debt
Debt instrument, face amount		$ 300,000,000
Carrying Value		$ 297,810,000		297,503,000
Interest rate		5.00%
Unamortized discount included in carrying value		$ 1,800,000		2,100,000
Effective interest rate on debt		5.15%
2.25%, $400,000 aggregate principal | Unsecured senior notes
Debt
Debt instrument, face amount		$ 400,000,000	$ 400,000,000.0
Carrying Value		$ 394,282,000		0
Interest rate		2.25%	2.25%
Unamortized discount included in carrying value		$ 4,700,000
Effective interest rate on debt		2.48%
Unsecured note payable
Debt
Carrying Value		$ 935,000		1,038,000
Interest rate		0.00%
Unamortized discount included in carrying value		$ 176,000		$ 223,000

XML

Debt, Net (Narrative) (Details) - USD ($)			3 Months Ended		9 Months Ended
	Oct. 19, 2020	Sep. 17, 2020	Sep. 30, 2020	Sep. 30, 2019	Sep. 30, 2020	Sep. 30, 2019	Dec. 31, 2019
Debt
Loss on early extinguishment of debt			$ (3,237,000)	$ 0	$ (3,237,000)	$ 0
Interest costs capitalized			2,900,000	$ 2,900,000	9,400,000	$ 7,300,000
2.25% Notes | Unsecured senior notes
Debt
Debt instrument, face amount		$ 400,000,000.0	$ 400,000,000		$ 400,000,000
Interest rate		2.25%	2.25%		2.25%
Initial offering price		99.416%
Proceeds from issuance of debt		$ 395,300,000
Basis point used in determining redemption price prior to maturity		0.35%
Redemption price		100.00%
Unamortized discount included in carrying value			$ 4,700,000		$ 4,700,000
Effective interest rate on debt			2.48%		2.48%
3.70% Notes | Unsecured senior notes
Debt
Debt instrument, face amount			$ 300,000,000		$ 300,000,000
Interest rate			3.70%		3.70%
Unamortized discount included in carrying value			$ 128,000		$ 128,000		$ 534,000
Effective interest rate on debt			3.85%		3.85%
Repurchased face amount		$ 122,900,000
Repurchase amount of debt, rate		40.98%
Repurchase face amount including accrued interest		$ 126,000,000.0
Loss on early extinguishment of debt			$ (3,200,000)		$ (3,200,000)
3.70% Notes | Unsecured senior notes | Subsequent Event
Debt
Repurchased face amount	$ 177,100,000
Repurchase face amount including accrued interest	180,900,000
Loss on early extinguishment of debt	$ 4,000,000

XML

Debt, Net - Fair Value of Debt (Details) - USD ($) $ in Thousands	Sep. 30, 2020	Dec. 31, 2019
Carrying Amount
Carrying amount and estimated fair value of debt
Long-term debt	$ 2,181,551	$ 1,831,139
Carrying Amount | Unsecured senior notes
Carrying amount and estimated fair value of debt
Long-term debt	1,465,805	1,192,910
Carrying Amount | Other fixed-rate debt
Carrying amount and estimated fair value of debt
Long-term debt	141,803	144,468
Carrying Amount | Variable-rate secured debt
Carrying amount and estimated fair value of debt
Long-term debt	573,943	493,761
Estimated Fair Value
Carrying amount and estimated fair value of debt
Long-term debt	2,217,245	1,873,310
Estimated Fair Value | Unsecured senior notes
Carrying amount and estimated fair value of debt
Long-term debt	1,505,414	1,227,441
Estimated Fair Value | Other fixed-rate debt
Carrying amount and estimated fair value of debt
Long-term debt	144,370	149,907
Estimated Fair Value | Variable-rate secured debt
Carrying amount and estimated fair value of debt
Long-term debt	$ 567,461	$ 495,962

XML

Interest Rate Derivatives (Details) $ in Thousands		1 Months Ended	3 Months Ended		9 Months Ended
	Sep. 22, 2020 USD ($)	Sep. 30, 2020 USD ($)	Sep. 30, 2020 USD ($)	Sep. 30, 2019 USD ($)	Sep. 30, 2020 USD ($)	Sep. 30, 2019 USD ($)	Aug. 31, 2020 USD ($) derivative	Dec. 31, 2019 USD ($)
Effect of interest rate derivatives on consolidated statements of operations and comprehensive income
Amount of Income (Loss) Recognized in AOCL on Derivatives			$ 1,428	$ (11,047)	$ (39,592)	$ (33,437)
Amount of (Loss) Gain Reclassified from AOCL into Interest Expense on Statement of Operations			(1,342)	307	(2,408)	1,434
Interest rate derivatives			(53,196)	0	(53,196)	0
Reclassification adjustments on interest rate derivatives recognized in loss on interest rate derivatives			(51,865)	0	(51,865)	0
Payments for hedge, investing activities					53,130	0
Interest rate swaps
Effect of interest rate derivatives on consolidated statements of operations and comprehensive income
Number of interest rate derivatives discontinued due to forecasted transaction not probable of occurring | derivative							3
Notional amount of forecasted transaction not probable of occurring							$ 225,000
Reclassification adjustments on interest rate derivatives recognized in loss on interest rate derivatives		$ 51,900
Payments for hedge, investing activities	$ 53,100
Interest rate swaps | Accumulated Net Gain (Loss) from Cash Flow Hedges Including Portion Attributable to Noncontrolling Interest | Reclassification out of Accumulated Other Comprehensive Income
Effect of interest rate derivatives on consolidated statements of operations and comprehensive income
Interest rate derivatives			(51,865)	0	(51,865)	0
Interest rate swaps | Interest Expense
Effect of interest rate derivatives on consolidated statements of operations and comprehensive income
Amount of (Loss) Gain Reclassified from AOCL into Interest Expense on Statement of Operations			(1,342)	307	(2,408)	1,434
Interest rate swaps | Prepaid expenses and other assets, net
Fair value of interest rate derivatives and balance sheet classification
Interest rate swaps designated as cash flow hedges		0	0		0			$ 23
Interest rate swaps | Interest rate derivatives (liabilities)
Fair value of interest rate derivatives and balance sheet classification
Interest rate swaps designated as cash flow hedges		(10,977)	(10,977)		(10,977)			(25,682)
Undesignated Swaps
Effect of interest rate derivatives on consolidated statements of operations and comprehensive income
Interest rate derivatives			(1,265)	$ 0	(1,265)	$ 0
Designated
Fair values of interest rate swap derivatives
Fair value of interest rate swaps		(10,977)	(10,977)		(10,977)			(25,659)
Designated | Interest rate swaps
Effect of interest rate derivatives on consolidated statements of operations and comprehensive income
Approximate amount to be reclassified from AOCL to interest expense over the next 12 months		4,800	4,800		4,800
Fair value of derivative liability		11,100	11,100		11,100
Settlement amount of derivative obligation at termination value		11,500	11,500		11,500
Designated | Interest rate swap, effective October 13, 2015
Fair values of interest rate swap derivatives
Notional Amount		$ 12,132	$ 12,132		$ 12,132
Fixed Rate		1.39%	1.39%		1.39%
Fair value of interest rate swaps		$ 0	$ 0		$ 0			23
Notional amount of interest rate derivatives after scheduled amortization		12,100	12,100		12,100
Designated | Interest rate swap, effective September 1, 2016, swap one
Fair values of interest rate swap derivatives
Notional Amount		$ 100,000	$ 100,000		$ 100,000
Fixed Rate		1.901%	1.901%		1.901%
Fair value of interest rate swaps		$ (3,857)	$ (3,857)		$ (3,857)			(1,028)
Designated | Interest rate swap, effective September 1, 2016, swap two
Fair values of interest rate swap derivatives
Notional Amount		$ 100,000	$ 100,000		$ 100,000
Fixed Rate		1.905%	1.905%		1.905%
Fair value of interest rate swaps		$ (3,865)	$ (3,865)		$ (3,865)			(1,037)
Designated | Interest rate swap, effective September 1, 2016, swap three
Fair values of interest rate swap derivatives
Notional Amount		$ 50,000	$ 50,000		$ 50,000
Fixed Rate		1.908%	1.908%		1.908%
Fair value of interest rate swaps		$ (1,935)	$ (1,935)		$ (1,935)			(524)
Designated | Interest rate swap, effective August 1, 2019
Fair values of interest rate swap derivatives
Notional Amount		$ 11,200	$ 11,200		$ 11,200
Fixed Rate		1.678%	1.678%		1.678%
Fair value of interest rate swaps		$ (827)	$ (827)		$ (827)			(20)
Notional amount of interest rate derivatives after scheduled amortization		10,000	10,000		10,000
Designated | Interest rate swap, effective April 1, 2020, swap one
Fair values of interest rate swap derivatives
Notional Amount		$ 150,000	$ 150,000		$ 150,000
Fixed Rate		0.498%	0.498%		0.498%
Fair value of interest rate swaps		$ (127)	$ (127)		$ (127)			0
Designated | Interest rate swap, effective April 1, 2020, swap two
Fair values of interest rate swap derivatives
Notional Amount		$ 23,000	$ 23,000		$ 23,000
Fixed Rate		0.573%	0.573%		0.573%
Fair value of interest rate swaps		$ (366)	$ (366)		$ (366)			0
Notional amount of interest rate derivatives after scheduled amortization		22,100	22,100		22,100
Designated | Interest rate swap, effective June 30, 2020, swap one
Fair values of interest rate swap derivatives
Notional Amount		$ 75,000	$ 75,000		$ 75,000
Fixed Rate		3.176%	3.176%		3.176%
Fair value of interest rate swaps		$ 0	$ 0		$ 0			(8,640)
Designated | Interest rate swap, effective June 30, 2020, swap two
Fair values of interest rate swap derivatives
Notional Amount		$ 75,000	$ 75,000		$ 75,000
Fixed Rate		3.192%	3.192%		3.192%
Fair value of interest rate swaps		$ 0	$ 0		$ 0			(8,749)
Designated | Interest rate swap, effective June 30, 2020, swap three
Fair values of interest rate swap derivatives
Notional Amount		$ 75,000	$ 75,000		$ 75,000
Fixed Rate		2.744%	2.744%		2.744%
Fair value of interest rate swaps		$ 0	$ 0		$ 0			$ (5,684)

XML

Redeemable Noncontrolling Interests (Details) $ in Thousands	9 Months Ended
	Sep. 30, 2020 USD ($) joint_venture	Sep. 30, 2019 USD ($)
Noncontrolling Interest [Abstract]
Number of joint ventures with redeemable noncontrolling interests | joint_venture	2
Redeemable Noncontrolling Interest [Roll Forward]
Beginning balance	$ 29,431	$ 26,260
Distributions to noncontrolling interests	(13,335)	(1,656)
Net income attributable to noncontrolling interests	2,715	2,729
Adjustment to arrive at fair value of interests	4,711	1,344
Ending balance	$ 23,522	$ 28,677

XML

Equity (Details) - USD ($) $ / shares in Units, $ in Millions		3 Months Ended		9 Months Ended
	Sep. 30, 2020	Sep. 30, 2020	Sep. 30, 2019	Sep. 30, 2020	Sep. 30, 2019
Class of Stock [Line Items]
Conversion of common units to common shares (in units/shares)			97,539	12,009	103,039
Dividends declared per share (in usd per share)		$ 0.275	$ 0.275	$ 0.825	$ 0.825
Common Shares
Class of Stock [Line Items]
Conversion of common units to common shares (in units/shares)				12,009
Common Shares | 2018 Common Stock Issued to Public Under At-the-Market Program
Class of Stock [Line Items]
At the market, offering program established, aggregate value	$ 300
Corporate Office Properties, L.P.
Class of Stock [Line Items]
Dividends declared per share (in usd per share)		$ 0.275	$ 0.275	$ 0.825	$ 0.825

XML

Information by Business Segment - Reportable Segments (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2020	Sep. 30, 2019	Sep. 30, 2020	Sep. 30, 2019	Dec. 31, 2019
Segment financial information for real estate operations
Revenues from real estate operations	$ 154,766	$ 159,431	$ 445,337	$ 483,441
Property operating expenses	(51,552)	(49,714)	(151,755)	(147,045)
UJV NOI allocable to COPT	1,752	1,601	5,190	4,071
Segment assets	4,120,189	3,855,369	4,120,189	3,855,369	$ 3,854,453
Real estate operations
Segment financial information for real estate operations
Revenues from real estate operations	134,443	130,734	399,097	395,495
Property operating expenses	(51,552)	(49,714)	(151,755)	(147,045)
UJV NOI allocable to COPT	1,752	1,601	5,190	4,071
NOI from real estate operations	84,643	82,621	252,532	252,521
Additions to long-lived assets	24,979	22,560	66,443	53,079
Transfers from non-operating properties	126,859	16,242	268,815	157,328
Defense/Information Technology Locations | Real estate operations
Segment financial information for real estate operations
Revenues from real estate operations	112,709	107,957	331,739	324,932
Property operating expenses	(39,832)	(38,673)	(118,374)	(113,885)
UJV NOI allocable to COPT	1,752	1,601	5,190	4,071
NOI from real estate operations	74,629	70,885	218,555	215,118
Additions to long-lived assets	17,762	16,141	42,474	37,506
Transfers from non-operating properties	126,859	17,254	268,815	158,340
Defense/Information Technology Locations | Fort Meade/BW Corridor | Real estate operations
Segment financial information for real estate operations
Revenues from real estate operations	63,328	63,436	190,464	187,778
Property operating expenses	(21,537)	(20,743)	(63,618)	(62,422)
UJV NOI allocable to COPT	0	0	0	0
NOI from real estate operations	41,791	42,693	126,846	125,356
Additions to long-lived assets	7,511	10,770	22,144	22,204
Transfers from non-operating properties	(209)	1,381	4,304	7,759
Defense/Information Technology Locations | Northern Virginia Defense/IT | Real estate operations
Segment financial information for real estate operations
Revenues from real estate operations	14,699	13,551	42,824	42,294
Property operating expenses	(5,245)	(4,965)	(15,765)	(14,951)
UJV NOI allocable to COPT	0	0	0	0
NOI from real estate operations	9,454	8,586	27,059	27,343
Additions to long-lived assets	2,219	2,922	8,114	6,072
Transfers from non-operating properties	58	118	838	4,647
Defense/Information Technology Locations | Lackland Air Force Base | Real estate operations
Segment financial information for real estate operations
Revenues from real estate operations	12,602	12,703	37,935	36,368
Property operating expenses	(7,116)	(7,149)	(21,696)	(19,756)
UJV NOI allocable to COPT	0	0	0	0
NOI from real estate operations	5,486	5,554	16,239	16,612
Additions to long-lived assets	0	0	0	0
Transfers from non-operating properties	221	2,120	381	10,456
Defense/Information Technology Locations | Navy Support Locations | Real estate operations
Segment financial information for real estate operations
Revenues from real estate operations	8,006	8,183	24,466	24,523
Property operating expenses	(3,044)	(3,581)	(9,500)	(10,271)
UJV NOI allocable to COPT	0	0	0	0
NOI from real estate operations	4,962	4,602	14,966	14,252
Additions to long-lived assets	1,650	2,003	5,518	7,948
Transfers from non-operating properties	0	0	0	0
Defense/Information Technology Locations | Redstone Arsenal | Real estate operations
Segment financial information for real estate operations
Revenues from real estate operations	6,079	4,171	15,402	12,078
Property operating expenses	(2,029)	(1,717)	(5,488)	(4,855)
UJV NOI allocable to COPT	0	0	0	0
NOI from real estate operations	4,050	2,454	9,914	7,223
Additions to long-lived assets	6,382	446	6,698	1,282
Transfers from non-operating properties	61,520	4,152	91,827	13,363
Defense/Information Technology Locations | Data Center Shells | Real estate operations
Segment financial information for real estate operations
Revenues from real estate operations	7,995	5,913	20,648	21,891
Property operating expenses	(861)	(518)	(2,307)	(1,630)
UJV NOI allocable to COPT	1,752	1,601	5,190	4,071
NOI from real estate operations	8,886	6,996	23,531	24,332
Additions to long-lived assets	0	0	0	0
Transfers from non-operating properties	65,269	9,483	171,465	122,115
Regional Office | Real estate operations
Segment financial information for real estate operations
Revenues from real estate operations	14,913	15,508	45,535	45,359
Property operating expenses	(7,782)	(7,343)	(22,207)	(22,349)
UJV NOI allocable to COPT	0	0	0	0
NOI from real estate operations	7,131	8,165	23,328	23,010
Additions to long-lived assets	5,303	6,339	13,105	15,198
Transfers from non-operating properties	0	0	0	0
Operating wholesale data center | Real estate operations
Segment financial information for real estate operations
Revenues from real estate operations	6,068	6,565	19,695	22,996
Property operating expenses	(3,642)	(3,374)	(10,338)	(9,830)
UJV NOI allocable to COPT	0	0	0	0
NOI from real estate operations	2,426	3,191	9,357	13,166
Additions to long-lived assets	1,917	61	10,699	312
Transfers from non-operating properties	0	(1,012)	0	(1,012)
Other | Real estate operations
Segment financial information for real estate operations
Revenues from real estate operations	753	704	2,128	2,208
Property operating expenses	(296)	(324)	(836)	(981)
UJV NOI allocable to COPT	0	0	0	0
NOI from real estate operations	457	380	1,292	1,227
Additions to long-lived assets	(3)	19	165	63
Transfers from non-operating properties	0	0	0	0
Segment assets
Segment financial information for real estate operations
Segment assets	3,256,968	3,024,072	3,256,968	3,024,072
Segment assets | Real estate operations
Segment financial information for real estate operations
Segment assets	3,256,968	3,024,072	3,256,968	3,024,072
Segment assets | Defense/Information Technology Locations | Real estate operations
Segment financial information for real estate operations
Segment assets	2,661,201	2,421,067	2,661,201	2,421,067
Segment assets | Defense/Information Technology Locations | Fort Meade/BW Corridor | Real estate operations
Segment financial information for real estate operations
Segment assets	1,264,547	1,271,668	1,264,547	1,271,668
Segment assets | Defense/Information Technology Locations | Northern Virginia Defense/IT | Real estate operations
Segment financial information for real estate operations
Segment assets	392,226	398,137	392,226	398,137
Segment assets | Defense/Information Technology Locations | Lackland Air Force Base | Real estate operations
Segment financial information for real estate operations
Segment assets	143,206	147,505	143,206	147,505
Segment assets | Defense/Information Technology Locations | Navy Support Locations | Real estate operations
Segment financial information for real estate operations
Segment assets	180,337	186,243	180,337	186,243
Segment assets | Defense/Information Technology Locations | Redstone Arsenal | Real estate operations
Segment financial information for real estate operations
Segment assets	234,355	118,839	234,355	118,839
Segment assets | Defense/Information Technology Locations | Data Center Shells | Real estate operations
Segment financial information for real estate operations
Segment assets	446,530	298,675	446,530	298,675
Segment assets | Regional Office | Real estate operations
Segment financial information for real estate operations
Segment assets	387,290	393,747	387,290	393,747
Segment assets | Operating wholesale data center | Real estate operations
Segment financial information for real estate operations
Segment assets	204,834	205,550	204,834	205,550
Segment assets | Other | Real estate operations
Segment financial information for real estate operations
Segment assets	$ 3,643	$ 3,708	$ 3,643	$ 3,708

XML

Information by Business Segment - Reconciliation of Segment Revenues and Computation of NOI (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2020	Sep. 30, 2019	Sep. 30, 2020	Sep. 30, 2019
Reconciliation of segment revenues to total revenues
Construction contract and other service revenues	$ 20,323	$ 28,697	$ 46,240	$ 87,946
Total revenues	154,766	159,431	445,337	483,441
Reconciliation of UJV NOI allocable to COPT to Equity Income in Unconsolidated Entities
UJV NOI allocable to COPT	1,752	1,601	5,190	4,071
Less: Income from UJV allocable to COPT attributable to depreciation and amortization expense and interest expense	(1,274)	(1,202)	(3,814)	(2,859)
Add: Equity in loss of unconsolidated non-real estate entities	(1)	(3)	(4)	(5)
Equity in income of unconsolidated entities	477	396	1,372	1,207
Computation of net operating income from service operations
Construction contract and other service revenues	20,323	28,697	46,240	87,946
Construction contract and other service expenses	(19,220)	(27,802)	(44,052)	(85,130)
Real estate operations
Reconciliation of segment revenues to total revenues
Total revenues	134,443	130,734	399,097	395,495
Reconciliation of UJV NOI allocable to COPT to Equity Income in Unconsolidated Entities
UJV NOI allocable to COPT	1,752	1,601	5,190	4,071
Service operations
Computation of net operating income from service operations
NOI from service operations	$ 1,103	$ 895	$ 2,188	$ 2,816

XML

Information by Business Segment - Reconciliation of NOI from Real Estate Operations and NOI from Service Operations (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2020	Sep. 30, 2019	Sep. 30, 2020	Sep. 30, 2019
Segment financial information for real estate operations
Interest and other income	$ 1,746	$ 1,842	$ 5,233	$ 5,977
Credit loss expense	1,465	0	161	0
Gain on sales of real estate	0	0	5	84,469
Equity in income of unconsolidated entities	477	396	1,372	1,207
Income tax (expense) benefit	(16)	131	(95)	113
Depreciation and other amortization associated with real estate operations	(35,332)	(34,692)	(101,540)	(104,290)
Impairment losses	(1,530)	(327)	(1,530)	(327)
General, administrative and leasing expenses	(7,467)	(7,929)	(23,111)	(26,066)
Business development expenses and land carry costs	(1,094)	(964)	(3,474)	(2,947)
Interest expense	(17,152)	(17,126)	(50,789)	(54,275)
UJV NOI allocable to COPT included in equity in income of unconsolidated entities	(1,752)	(1,601)	(5,190)	(4,071)
Loss on early extinguishment of debt	(3,237)	0	(3,237)	0
Loss on interest rate derivatives	(53,196)	0	(53,196)	0
Net (loss) income	(31,342)	23,246	19,329	155,127
Real estate operations
Segment financial information for real estate operations
NOI from real estate operations	84,643	82,621	252,532	252,521
UJV NOI allocable to COPT included in equity in income of unconsolidated entities	(1,752)	(1,601)	(5,190)	(4,071)
Service operations
Segment financial information for real estate operations
NOI from service operations	$ 1,103	$ 895	$ 2,188	$ 2,816

XML

Information by Business Segment - Reconciliation of Segment Assets (Details) - USD ($) $ in Thousands	Sep. 30, 2020	Dec. 31, 2019	Sep. 30, 2019
Reconciliation of segment assets to total assets
Total COPT consolidated assets	$ 4,120,189	$ 3,854,453	$ 3,855,369
Operating properties lease liabilities included in segment assets	26,382	$ 17,317
Segment assets
Reconciliation of segment assets to total assets
Total COPT consolidated assets	3,256,968		3,024,072
Operating properties lease liabilities included in segment assets	26,054		16,645
Other assets
Reconciliation of segment assets to total assets
Total COPT consolidated assets	642,182		597,301
Non-operating property assets
Reconciliation of segment assets to total assets
Total COPT consolidated assets	$ 194,985		$ 217,351

XML

Construction Contract and Other Service Revenues - Construction Contracts and Other Service Revenues by Compensation Arrangement and Service Type (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2020	Sep. 30, 2019	Sep. 30, 2020	Sep. 30, 2019
Disaggregation of Revenue [Line Items]
Construction contract and other service revenues	$ 20,323	$ 28,697	$ 46,240	$ 87,946
Construction
Disaggregation of Revenue [Line Items]
Construction contract and other service revenues	18,786	27,988	42,520	86,487
Design
Disaggregation of Revenue [Line Items]
Construction contract and other service revenues	186	484	1,856	822
Other
Disaggregation of Revenue [Line Items]
Construction contract and other service revenues	1,351	225	1,864	637
Guaranteed Maximum Price
Disaggregation of Revenue [Line Items]
Construction contract and other service revenues	4,358	16,217	14,834	54,365
Firm fixed price
Disaggregation of Revenue [Line Items]
Construction contract and other service revenues	1,365	2,349	9,421	6,009
Cost-plus fee
Disaggregation of Revenue [Line Items]
Construction contract and other service revenues	13,249	9,906	20,121	26,935
Other
Disaggregation of Revenue [Line Items]
Construction contract and other service revenues	$ 1,351	$ 225	$ 1,864	$ 637

XML

Construction Contract and Other Service Revenues - Narrative (Details) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2020	Sep. 30, 2019	Sep. 30, 2020	Sep. 30, 2019
Disaggregation of Revenue [Line Items]
Remaining performance obligations	$ 82,100,000		$ 82,100,000
Remaining performance obligation expected to be recognized during the remainder of year	21,000,000		21,000,000
Construction Contract Revenue
Disaggregation of Revenue [Line Items]
Performance obligations satisfied or already satisfied	84,000		158,000	$ 18,000
Deferred incremental costs incurred	$ 0	$ 0	$ 0	$ 0

XML

Construction Contract and Other Service Revenues - Rollforwards (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2020	Sep. 30, 2019	Sep. 30, 2020	Sep. 30, 2019
Change in Accounts Receivable
Beginning balance			$ 35,444
Ending balance	$ 36,151		36,151
Construction Contract Revenue
Change in Accounts Receivable
Beginning balance			12,378	$ 6,701
Ending balance	11,183	$ 15,494	11,183	15,494
Change in Contract with Customer, Asset
Beginning balance			17,223	3,189
Ending balance	13,980	16,743	13,980	16,743
Change in Contract with Customer, Liability
Beginning balance			1,184	568
Ending balance	5,236	725	5,236	725
Portion of beginning balance recognized in revenue during the period ended June 30	$ 19	$ 0	$ 757	$ 445

XML

Share-Based Compensation (Details) $ / shares in Units, $ in Thousands			9 Months Ended
	Jan. 13, 2020 shares	Jan. 01, 2020 USD ($) Percentile_Rank $ / shares shares	Sep. 30, 2020 USD ($) form $ / shares shares
Restricted shares
Share-Based Compensation
Stock awards granted (in shares or units)			159,518
Aggregate grant date fair value | $			$ 4,000
Aggregate grant date fair value (in dollars per share) | $ / shares			$ 25.16
Shares vested (in shares)			165,778
Weighted average fair value of shares vested (in dollars per share) | $ / shares			$ 28.19
Aggregate intrinsic value of awards upon vesting | $			$ 4,200
Deferred Share Awards
Share-Based Compensation
Stock awards granted (in shares or units)			7,972
Aggregate grant date fair value | $			$ 187
Aggregate grant date fair value (in dollars per share) | $ / shares			$ 23.44
PIUs
Share-Based Compensation
Number of forms of executive compensation | form			2
Time-based PIU's
Share-Based Compensation
Stock awards granted (in shares or units)			75,053
Aggregate grant date fair value | $			$ 1,900
Aggregate grant date fair value (in dollars per share) | $ / shares			$ 25.14
Shares vested (in shares)			25,182
Weighted average fair value of shares vested (in dollars per share) | $ / shares			$ 26.30
Aggregate intrinsic value of awards upon vesting | $			$ 640
Performance-based PIU's
Share-Based Compensation
Stock awards granted (in shares or units)		176,758
Aggregate grant date fair value | $		$ 2,900
Aggregate grant date fair value (in dollars per share) | $ / shares		$ 16.36
Award vesting period		3 years
Potential earned PSUs payout for defined levels of performance under awards
Earned PB-PIUs payout (as a percent of PB-PIUs granted) on 75th or greater percentile rank		100.00%
Earned PB-PIUs payout (as a percent of PB-PIUs granted) on 50th percentile rank		50.00%
Earned PB-PIUs payout (as a percent of PB-PIUs granted) on 25th percentile rank		25.00%
Earned PB-PIUs granted on percentile rank below 25th (as a percent)		0.00%
The number of percentile ranks to fall between to earn interpolated PB-PIUs between such percentile ranks, conditioned on the percentile rank exceeding 25% | Percentile_Rank		2
Assumptions used to value stock awards
Percent of award distribution rights		10.00%
Award performance period		3 years
Baseline value per common share (in dollars per share) | $ / shares		$ 29.38
Expected volatility of common shares (as a percent)		18.00%
Risk-free interest rate (as a percent)		1.65%
2017 PSU Grants | Performance share units
Share-Based Compensation
Shares issued (in shares)	23,181
Percentage of target	53.00%
Executives | Time-based PIU's
Share-Based Compensation
Award vesting period			3 years
Former Executive Vice President and Chief Operating Officer | Restricted shares
Share-Based Compensation
Forfeitures (in shares)			9,064
Former Executive Vice President and Chief Operating Officer | Time-based PIU's
Share-Based Compensation
Forfeitures (in shares)			20,622
Former Executive Vice President and Chief Operating Officer | Performance-based PIU's
Share-Based Compensation
Forfeitures (in shares)			73,184

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, 2020	Sep. 30, 2019	Sep. 30, 2020	Sep. 30, 2019
Numerator:
Net (loss) income attributable to COPT/COPLP		$ (31,845)	$ 21,257	$ 15,706	$ 148,907
Income attributable to share-based compensation awards		(145)	(123)	(365)	(495)
Numerator for basic EPS/EPU on net income attributable to COPT/COPLP common shareholders/unitholders		(31,990)	21,134	15,341	148,412
Redeemable noncontrolling interests		0	0	0	100
Income attributable to share-based compensation awards		0	5	6	26
Numerator for diluted EPS/EPU on net income attributable to COPT/COPLP common shareholders/unitholders		$ (31,990)	$ 21,139	$ 15,347	$ 148,538
Denominator (all weighted averages):
Denominatior for basic EPS/EPU (common shares/units)		111,811	111,582	111,778	111,036
Dilutive effect of redeemable noncontrolling interests		0	0	0	123
Dilutive effect of share-based compensation awards (in shares/units)		0	361	278	313
Denominator for diluted EPS/EPU (common shares/units)		111,811	111,943	112,056	111,472
Basic EPS:
Basic EPS/EPU (in dollars per share/unit)	[1]	$ (0.29)	$ 0.19	$ 0.14	$ 1.34
Diluted EPS:
Diluted EPS/EPU (in dollars per share/unit)	[1]	$ (0.29)	$ 0.19	$ 0.14	$ 1.33
Corporate Office Properties, L.P.
Numerator:
Net (loss) income attributable to COPT/COPLP		$ (32,154)	$ 21,681	$ 16,122	$ 151,257
Preferred share/unit dividends/distributions		(77)	(157)	(231)	(487)
Income attributable to share-based compensation awards		(119)	(139)	(374)	(592)
Numerator for basic EPS/EPU on net income attributable to COPT/COPLP common shareholders/unitholders		(32,350)	21,385	15,517	150,178
Redeemable noncontrolling interests		0	0	0	100
Income attributable to share-based compensation awards		0	5	0	26
Numerator for diluted EPS/EPU on net income attributable to COPT/COPLP common shareholders/unitholders		$ (32,350)	$ 21,390	$ 15,517	$ 150,304
Denominator (all weighted averages):
Denominatior for basic EPS/EPU (common shares/units)		113,051	112,894	113,013	112,359
Dilutive effect of redeemable noncontrolling interests		0	0	0	123
Dilutive effect of share-based compensation awards (in shares/units)		0	361	278	313
Denominator for diluted EPS/EPU (common shares/units)		113,051	113,255	113,291	112,795
Basic EPS:
Basic EPS/EPU (in dollars per share/unit)	[2]	$ (0.29)	$ 0.19	$ 0.14	$ 1.34
Diluted EPS:
Diluted EPS/EPU (in dollars per share/unit)	[2]	$ (0.29)	$ 0.19	$ 0.14	$ 1.33

[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

Earnings Per Share ("EPS") and Earnings Per Unit ("EPU") (Details 2) - shares shares in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2020	Sep. 30, 2019	Sep. 30, 2020	Sep. 30, 2019
Conversion of common units
Antidilutive securities
Weighted average antidilutive securities excluded from computation of diluted earnings per share (in shares)	1,240	1,312	1,235	1,323
Conversion of redeemable noncontrolling interests
Antidilutive securities
Weighted average antidilutive securities excluded from computation of diluted earnings per share (in shares)	973	975	954	893
Conversion of Series I preferred units
Antidilutive securities
Weighted average antidilutive securities excluded from computation of diluted earnings per share (in shares)	176	176	176	176
Weighted average shares related to forward equity sale agreements
Antidilutive securities
Weighted average antidilutive securities excluded from computation of diluted earnings per share (in shares)				503
Weighted average restricted shares/units and deferred shares
Antidilutive securities
Weighted average antidilutive securities excluded from computation of diluted earnings per share (in shares)	429	436	432	441
Weighted average options
Antidilutive securities
Weighted average antidilutive securities excluded from computation of diluted earnings per share (in shares)		3		16
Weighted average unvested TB-PIUs
Antidilutive securities
Weighted average antidilutive securities excluded from computation of diluted earnings per share (in shares)	91	62	85	47
Corporate Office Properties, L.P. | Conversion of redeemable noncontrolling interests
Antidilutive securities
Weighted average antidilutive securities excluded from computation of diluted earnings per share (in shares)	973	975	954	893
Corporate Office Properties, L.P. | Conversion of Series I preferred units
Antidilutive securities
Weighted average antidilutive securities excluded from computation of diluted earnings per share (in shares)	176	176	176	176
Corporate Office Properties, L.P. | Weighted average shares related to forward equity sale agreements
Antidilutive securities
Weighted average antidilutive securities excluded from computation of diluted earnings per share (in shares)				503
Corporate Office Properties, L.P. | Weighted average restricted shares/units and deferred shares
Antidilutive securities
Weighted average antidilutive securities excluded from computation of diluted earnings per share (in shares)	429	436	432	441
Corporate Office Properties, L.P. | Weighted average options
Antidilutive securities
Weighted average antidilutive securities excluded from computation of diluted earnings per share (in shares)		3		16
Corporate Office Properties, L.P. | Weighted average unvested TB-PIUs
Antidilutive securities
Weighted average antidilutive securities excluded from computation of diluted earnings per share (in shares)	91	62	85	47

XML

Commitments and Contingencies (Details) $ in Millions	Sep. 30, 2020 USD ($) property
Commitments and Contingencies Disclosure [Abstract]
Estimate of possible loss	$ 3.1
Environmental Indemnity Agreement
Number of lease properties which were provided environmental indemnifications | property	3
Maximum environmental indemnification to the tenant against consequential damages after acquisition of property	$ 19.0
Tax Incremental Financing Bond | Anne Arundel County, Maryland | Specialty Tax Guarantee
Environmental Indemnity Agreement
Purchase obligations	$ 33.0

XML

Subsequent Events (Details) - Subsequent Event - Data Center Shells - Disposed of by sale $ in Millions	Oct. 30, 2020 USD ($) property_sold
Subsequent Event [Line Items]
Ownership percentage sold	90.00%
Number of real estate properties | property_sold	2
Consideration received from sale of ownership interest	$ 90
Proceeds from sale	$ 81
B RE COPT DC JV II LLC
Subsequent Event [Line Items]
Nominal Ownership %	10.00%