EX-99.1 2 a05-19112_1ex99d1.htm EXHIBIT 99

 

Exhibit 99.1

 

 

 

 

 

 

 

 

 

 

 

 

 

Corporate Office Properties Trust

 

Contact:

 

 

 

 

8815 Centre Park Drive, Suite 400

 

Mary Ellen Fowler

 

 

 

 

Columbia, Maryland 21045

 

Vice President

 

 

 

 

Telephone 410-730-9092

 

Finance and Investor Relations

 

 

 

 

Facsimile 410-740-1174

 

410-992-7324

 

 

 

 

Website     www.copt.com

 

maryellen.fowler@copt.com

 

 

 

 

 

 

 

 

 

 

 

NEWS RELEASE

 

For Immediate Release

 

CORPORATE OFFICE PROPERTIES TRUST REPORTS

STRONG THIRD QUARTER 2005 RESULTS

 

 

COLUMBIA, MD October 26, 2005 - Corporate Office Properties Trust (NYSE: OFC) announced today financial and operating results for the quarter ended September 30, 2005.

 

Highlights

 

                  50.0% increase in Earnings per Share (“EPS”) diluted to $.18 for the third quarter of 2005 from $.12 per diluted share for the third quarter of 2004. Net Income Available to Common Shareholders diluted of $6,936,000 for third quarter 2005 increased from $4,153,000 for the comparable 2004 period. Included in the third quarter 2004 net income available to common shareholders was recognition of an accounting charge of $1,813,000 reflecting the issuance costs of the Series B preferred shares redeemed July 15, 2004. Without this accounting charge, net income available to common shareholders — diluted, as adjusted, would have been $.17 per share.

 

                  20.5% increase in Funds from Operations (“FFO”) per diluted share to $.47 for the third quarter 2005 from $.39 per diluted share for third quarter 2004. Without the third quarter 2004 Series B preferred share accounting charge, FFO per diluted share would have increased 9.3%, from $.43 per diluted share.

 

                  35.1% increase in Adjusted Funds from Operations (“AFFO”) to $15.9 million for third quarter 2005 as compared to $11.8 million for third quarter 2004.

 

                  FFO payout ratio was 60.6% and AFFO payout ratio was 84.4% for third quarter 2005.

 

                  94.6% occupied and 95.8% leased for the Company’s wholly owned portfolio as of September 30, 2005.

 

                  $77.5 million in acquisitions for nine office buildings totaling 418,726 square feet plus 200 acres of land, including 132 acres of the land in which the Company owns a 50% undivided interest.

 

                  1.1 million square feet in 9 buildings under construction that are currently 51% leased.

 

                  9.8% increase in quarterly common dividend from $.255 to $.28 per share.

 



 

 

                  9.0% increase for same property cash net operating income (NOI), compared to the same quarter 2004.

 

                  $75.3 million of equity raised through a 2.3 million common share offering.

 

“We have increased our 2005 FFO guidance and are providing our initial 2006 FFO guidance, that reflects a 10% FFO per diluted share growth for next year based on the upper end of the range,” stated Randall M. Griffin, President and Chief Executive Officer. “We are very pleased with our overall performance this year and are well on our way to meeting or exceeding almost all of our 2005 goals, including occupancy, dispositions, acquisitions, FFO growth and expansion into new tenant driven locations. Our 9% growth in same property NOI for this quarter is indicative of the strength of our markets, which should provide the basis for continued growth over the next few years,” he added.

 

Financial Results

 

                  EPS for the quarter ended September 30, 2005 totaled $.18 per diluted share, or $6,936,000 of Net Income Available to Common Shareholders, as compared to $.12 per diluted share, or $4,153,000 for the quarter ended September 30, 2004, representing an increase of 50.0% per share. Included in the third quarter 2004 net income available to common shareholders was recognition of an accounting charge of $1,813,000 reflecting the write-off of issuance costs of the Series B preferred shares redeemed July 15, 2004. Without this accounting charge, net income available to common shareholders — diluted, as adjusted, would have been $.17 per share. Revenues from real estate operations for the quarter ended September 30, 2005 were $62,996,000, as compared to $52,276,000 for the quarter ended September 30, 2004.

 

                  Diluted FFO for the quarter ended September 30, 2005 totaled $22,127,000, or $.47 per diluted share, as compared to $17,368,000, or $.39 per diluted share, for the quarter ended September 30, 2004, representing an increase of 20.5% per share. Included in the third quarter 2004 FFO was the Series B preferred share accounting charge. Without this accounting charge, FFO per diluted share would have increased 9.3%, from $.43 per diluted share. FFO Payout ratio was 60.6% for third quarter 2005 compared to 65.9% for the comparable 2004 period.

 

                  Adjusted Funds From Operations (“AFFO”) diluted totaled $15,892,000 for third quarter 2005 as compared to $11,759,000 for third quarter 2004, representing an increase of 35.1%. The Company’s AFFO payout ratio was 84.4% for third quarter 2005 compared to 97.3% for third quarter 2004.

 

As of September 30, 2005, the Company had a total market capitalization of $3.0 billion, with $1.1 billion in debt outstanding, equating to a 37.6% debt-to-total market capitalization ratio. The Company’s total quarterly weighted average interest rate was 5.8%, and 69.7% of total debt was subject to fixed interest rates. For the third quarter 2005, EBITDA interest coverage ratio was 3.17x and EBITDA fixed charge coverage was 2.51x.

 

 

2



 

 

Operating Results

 

At September 30, 2005, the Company’s wholly owned portfolio of 136 office properties totaling 11.7 million square feet, was 94.6% occupied and 95.8% leased. The Company’s entire portfolio including the unconsolidated joint ventures, was 93.8% occupied and 95.0% leased.

 

During the quarter, 165,311 square feet was renewed, equating to a 64.8% renewal rate, at an average capital cost of $9.22 per square foot. For renewed and retenanted space totaling 453,716 square feet, total rent on a cash basis decreased 22.5% and total rent on a straight line basis decreased 14.3%. The average capital cost for renewed and retenanted space was $9.04 per square foot.

 

Same property cash NOI increased 9.0% for the quarter, compared to the quarter ended September 30, 2004.  The increase in cash NOI for the same property portfolio resulted primarily from improved occupancy and higher rental rates in our Baltimore Washington Corridor and our Northern Virginia portfolios. The same property portfolio consists of 111 properties representing 84.4% of the total square footage as of September 30, 2005.

 

Significant leases signed during the quarter include 201,200 square feet with a large credit worthy tenant in the Princeton Technology Center in Cranbury, NJ. The tenant commenced paying rent on the entire building at 431 Ridge Road, a 171,200 square foot single-story office building. The tenant also leased the entire building at 437 Ridge Road, a 30,000 square foot single-story office building effective January 1, 2007, when the existing lease expires.

 

Development and Construction Activity

 

At quarter end, the Company had under development three buildings — 320 NBP, 302 NBP and 16444 Commerce Drive for a total of 342,000 square feet. In addition, the Company had nine buildings under construction totaling 1.1 million square feet that are 51% leased and a two building complex under redevelopment for 470,000 square feet that is 100% leased.

 

During the quarter, the Company placed into service 191 NBP, a 104,000 square foot office building which is 100% leased to Northrop Grumman Corporation for a seven year term.

 

The Company executed a ten year lease for 61,038 square feet with Applied Signal Technology, Inc. at 306 NBP, which is under construction, and a 53,000 square foot lease at 6711 Columbia Gateway Drive for the Company’s new corporate headquarters.

 

Land Control

 

At quarter end, the Company had under control 555 acres of land that can support 7.8 million square feet of office space. A majority of the land is located in the Baltimore Washington Corridor, Northern Virginia and Colorado Springs.

 

During the quarter, the Company acquired 200 acres of land, including 132 acres of the land located in Colorado Springs in which the Company owns a 50% undivided interest.

 

 

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These land acquisitions are as follows:

 

                  64 acre parcel of land known as Patriot Park for $10.0 million along with the development rights to build a two story, 50,000 square foot Class A office building on approximately 5 of the 64 acres within the park, all located in Colorado Springs, Colorado. The proposed building is 100% preleased to a defense contractor on a long term lease. The remaining 59 acres can be developed with 650,000 square feet of office space. The business park is located at the north entrance to Peterson Air Force Base,

 

                  4 acres of land located in Columbia, Maryland for $1.5 million, and

 

                  50% undivided interest in 132 acres of land known as the InterQuest Office Park for $10.6 million that can support approximately 935,000 square feet. The InterQuest Office Park is located along I-25 at the northern portion of the Colorado Springs market, near the entrance to the United States Air Force Academy.

 

Acquisition Activity

 

During the quarter ending September 30, 2005, the Company acquired nine office buildings comprising 418,726 square feet for a total cost of $55.3 million that were 94% leased at closing:

 

                  26,500 square foot office building for $2.3 million in Columbia, Maryland,

 

                  189,000 square feet in five one story office buildings known as Gateway Crossing 95 for $26.0 million located in the Columbia Gateway Business Park in Columbia, Maryland,

 

                  136,000 square feet located in two office buildings to be known as Patriot Park I & II for $18.0 million located in Colorado Springs. The buildings are 93% leased primarily to defense contractors serving Peterson Air Force Base, and

 

                  67,500 square foot office building known as Newport Centre One for $9.0 million. The building is located near the Colorado Springs Airport and Peterson Air Force Base, and is 100% leased to the United States Government and a defense contractor.

 

Disposition Activity

 

During the quarter the Company disposed of the following assets:

 

                  33,000 square feet in a recently developed office building located in Columbia, Maryland for $4.8 million,

 

                  153,000 square feet in 3 buildings within the New Jersey portfolio for $22.5 million, and

 

                  672,000 square feet within 16 office buildings located in Harrisburg, Pennsylvania, representing 100% of the Company’s holdings in that market. The Company sold 80% of its ownership interest in the portfolio which was valued at $73.0 million.

 

 

4



 

 

Financing and Capital Transactions

 

The Company executed the following transactions during the quarter:

 

                  $36.0 million bridge loan that the Company repaid in October 2005,

 

                  $19.5 million credit facility to fund the construction of 6711 Columbia Gateway Drive in Columbia, Maryland,

 

                  9.8% increase in quarterly common dividend from $.255 to $.28 per share, and

 

                  2,300,000 common shares issued, generating proceeds of $75.3 million before expenses.

 

Subsequent Events

 

Since September 30, 2005, the Company has:

 

                  Placed into service 318 NBP, 126,000 square feet, 100% leased,

 

                  Placed into service 8611 Military Drive, 470,000 square feet, 100% leased,

 

                  Executed a 32,000 square foot lease at 306 NBP,

 

                  Closed a $103.0 million interest only, ten year loan at a fixed rate of 5.53%. In connection with this loan closing, the Company terminated its $73.4 million forward starting swap,

 

                  Acquired a 118,000 square foot office building on a 21.4 acre site for $17.0 million. The site can support approximately 80,000 square feet of new office space development. The property is located in Frederick, Maryland, close to the northwest end of the I-270 Corridor.  This acquisition marks the Company’s entrance into this targeted submarket, and

 

                  Executed a long term lease for 47,000 square feet at 15 West Gude Drive in Rockville, Maryland.

 

Earnings Guidance

 

The Company has revised the EPS guidance from $.47 — $.51 to $.58 — $.60 per diluted share for 2005. The previous 2005 FFO guidance of $1.81 — $1.85 has been revised to $1.84 — $1.86 per diluted share. The Company’s 2006 EPS guidance is $.47 — $.55 per diluted share. The 2006 FFO guidance is $1.97 — $2.05 per diluted share. The Company will discuss the assumptions for the 2006 guidance during the Earnings Call.

 

5



 

 

 

Conference Call

 

The Company will hold an investor/analyst conference call:

 

Conference Call and Webcast Date:  October 27, 2005

Time:  4:00 p.m. ET

Dial In Number: (800) 406-5345

Confirmation Code for the call:  1460093

 

A replay of the conference call will begin on Thursday, October 27, 2004 at 7:30 p.m. ET and will be available through Thursday, November 10, 2005, midnight ET.  The telephone number for the replay is (888) 203-1112. When prompted, enter the confirmation code shown above.  The live webcast may be accessed under the Investor Relations section of the Company’s website at www.copt.com.

 

Definitions

 

Please refer to our Form 8K or our website (www.copt.com) for definitions of certain terms used in this press release.  Reconciliations of GAAP and non-GAAP measurements are included in the attached tables.

 

Company Information

 

Corporate Office Properties Trust (COPT) is a fully integrated, self-managed real estate investment trust (REIT) that focuses on the ownership, management, leasing, acquisition and development of suburban office properties primarily in select Mid-Atlantic submarkets.  The Company is among the largest owners of suburban office properties in the Greater Washington, DC region.  The Company currently owns 158 office properties totaling 13.3 million rentable square feet, which includes 18 properties totaling 885,000 square feet held through joint ventures.  The Company has implemented a core customer expansion strategy that is built around meeting, through acquisitions and development, the multi-location requirements of the Company’s existing strategic tenants.  The Company’s property management services team provides comprehensive property and asset management to company owned properties and select third party clients.  The Company’s development and construction services team provides a wide range of development and construction management services for company owned properties, as well as land planning, design/build services, consulting, and merchant development to select third party clients.  The Company’s shares are traded on the New York Stock Exchange under the symbol OFC.  More information on Corporate Office Properties Trust can be found on the Internet at www.copt.com.

 

Forward-Looking Information

 

This press release may contain “forward-looking” statements, as defined in Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, that are based on the Company’s current expectations, estimates and projections about future events and financial trends affecting the Company.  Forward-looking statements can be identified by the use of words such as “may”, “will”, “should”, “expect”, “estimate” or other comparable terminology.  Forward-looking statements are inherently subject to risks and uncertainties, many of which the Company cannot predict with accuracy and some of which the Company might not even anticipate.  Accordingly, the Company can give no assurance that these expectations, estimates and projections will be achieved.  Future events and actual results may differ materially from those discussed in the forward-looking statements.

 

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Important factors that may affect these expectations, estimates, and projections include, but are not limited to:

                  the Company’s ability to borrow on  favorable terms;

                  general economic and business conditions, which will, among other things, affect office property demand and rents, tenant creditworthiness, interest rates and financing availability;

                  adverse changes in the real estate markets including, among other things, increased competition with other companies;

                  risk of real estate acquisition and development, including, among other things, risks that development projects may not be completed on schedule, that tenants may not take occupancy or pay rent or that development or operating costs may be greater than anticipated;

                  risks of investing through joint venture structures, including risks that the Company’s joint venture partners may not fulfill their financial obligations as investors or may take actions that are inconsistent with the Company’s objectives;

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

                  governmental actions and initiatives; and

                  environmental requirements.

 

The Company undertakes no obligation to update or supplement any forward-looking statements.  For further information, please refer to the Company’s filings with the Securities and Exchange Commission, particularly the section entitled “Risk Factors” in Item 1 of the Company’s Annual Report on Form 10-K for the year ended December 31, 2004.

 

 

Financial Tables Attached

 

7



 

 

Corporate Office Properties Trust

Summary Financial Data

(unaudited)

(Amounts in thousands, except per share data)

 

 

 

 

Three months ended
September 30,

 

 

 

2005

 

2004

 

Revenues

 

 

 

 

 

Real estate revenues

 

$

62,996

 

$

52,276

 

Service operations revenues

 

29,784

 

7,466

 

Total revenues

 

92,780

 

59,742

 

Expenses

 

 

 

 

 

Property operating

 

19,032

 

15,789

 

Depreciation and other amortization associated with real estate operations

 

18,004

 

11,619

 

Service operations expenses

 

29,326

 

6,978

 

General and administrative expenses

 

3,318

 

2,698

 

Total operating expenses

 

69,680

 

37,084

 

Operating income

 

23,100

 

22,658

 

Interest expense

 

(14,370

)

(10,668

)

Amortization of deferred financing costs

 

(641

)

(577

)

Income from continuing operations before gain on sales of real estate, income taxes and minority interests

 

8,089

 

11,413

 

Gain on sales of real estate

 

105

 

24

 

Income tax expense

 

(294

)

(145

)

Income from continuing operations before minority interests

 

7,900

 

11,292

 

Minority interests in income from continuing operations

 

(967

)

(1,589

)

Income from continuing operations

 

6,933

 

9,703

 

Income from discontinued operations, net of minority interests

 

3,656

 

47

 

Net income

 

10,589

 

9,750

 

Preferred share dividends

 

(3,653

)

(3,784

)

Issuance costs associated with redeemed preferred shares

 

 

(1,813

)

Net income available to common shareholders

 

$

6,936

 

$

4,153

 

 

 

 

 

 

 

Earnings per share “EPS” computation

 

 

 

 

 

Numerator:

 

$

6,936

 

$

4,153

 

 

 

 

 

 

 

Denominator:

 

 

 

 

 

Weighted average common shares - basic

 

36,913

 

33,797

 

Assumed conversion of dilutive options

 

1,667

 

1,655

 

Weighted average common shares - diluted

 

38,580

 

35,452

 

 

 

 

 

 

 

EPS

 

 

 

 

 

Basic

 

$

0.19

 

$

0.12

 

Diluted

 

$

0.18

 

$

0.12

 

 

 

8



 

Corporate Office Properties Trust

Summary  Financial Data

(unaudited)

(Amounts in thousands, except per share data and ratios)

 

 

 

Three months ended
September 30,

 

 

 

2005

 

2004

 

Net income

 

$

10,589

 

$

9,750

 

Add: Real estate-related depreciation and amortization

 

17,848

 

11,700

 

Less: Depreciation and amortization allocable to minority interests in other consolidated entities

 

(23

)

(56

)

Less: Gain on sales of real estate, excluding development portion

 

(4,360

)

(24

)

Less: Issuance costs associated with redeemed preferred shares

 

 

(1,813

)

Funds from operations (“FFO”)

 

24,054

 

19,557

 

Add: Minority interests-common units in the Operating Partnership

 

1,726

 

1,595

 

Less: Preferred share dividends

 

(3,653

)

(3,784

)

Funds from Operations - basic and diluted (“Diluted FFO”)

 

22,127

 

17,368

 

Less: Straight-line rent adjustments

 

(1,519

)

(2,519

)

Less: Recurring capital expenditures

 

(4,945

)

(4,679

)

Add (less): Amortization of deferred market rental revenue

 

229

 

(224

)

Add: Issuance costs associated with redeemed preferred shares

 

 

1,813

 

Adjusted Funds from Operations - diluted (“Diluted AFFO”)

 

$

15,892

 

$

11,759

 

 

 

 

 

 

 

Weighted average shares

 

 

 

 

 

Weighted average common shares

 

36,913

 

33,797

 

Conversion of weighted average common units

 

8,758

 

8,690

 

Weighted average common shares/units - basic FFO per share

 

45,671

 

42,487

 

Assumed conversion of share options

 

1,667

 

1,655

 

Weighted average common shares/units - diluted FFO per share

 

47,338

 

44,142

 

 

 

 

 

 

 

Diluted FFO per common share

 

$

0.47

 

$

0.39

 

Dividends/distributions per common share/unit

 

$

0.280

 

$

0.255

 

Earnings payout ratio

 

158.1

%

222.4

%

Diluted FFO payout ratio

 

60.6

%

65.9

%

Diluted AFFO payout ratio

 

84.4

%

97.3

%

EBITDA interest coverage ratio

 

3.17

 

3.20

 

EBITDA fixed charge coverage ratio

 

2.51

 

2.37

 

 

 

 

 

 

 

Reconciliation of denominators for diluted EPS and diluted FFO per share

 

 

 

 

 

Denominator for diluted EPS

 

38,580

 

35,452

 

Weighted average common units

 

8,758

 

8,690

 

Denominator for diluted FFO per share

 

47,338

 

44,142

 

 

9



 

Corporate Office Properties Trust

Summary Financial Data

(unaudited)

(Amounts in thousands, except per share data)

 

 

 

Nine months ended
September 30,

 

 

 

2005

 

2004

 

Revenues

 

 

 

 

 

Real estate revenues

 

$

182,887

 

$

153,523

 

Service operations revenues

 

65,345

 

21,188

 

Total revenues

 

248,232

 

174,711

 

Expenses

 

 

 

 

 

Property operating

 

55,171

 

44,862

 

Depreciation and other amortization associated with real estate operations

 

47,459

 

37,512

 

Service operations expenses

 

63,692

 

19,720

 

General and administrative expenses

 

9,760

 

7,471

 

Total operating expenses

 

176,082

 

109,565

 

Operating income

 

72,150

 

65,146

 

Interest expense

 

(41,281

)

(31,117

)

Amortization of deferred financing costs

 

(1,508

)

(1,936

)

Income from continuing operations before gain (loss) on sales of real estate, equity in loss of unconsolidated entities, income taxes and minority interests

 

29,361

 

32,093

 

Gain (loss) on sales of real estate

 

339

 

(174

)

Equity in loss of unconsolidated entities

 

 

(88

)

Income tax expense

 

(964

)

(375

)

Income from continuing operations before minority interests

 

28,736

 

31,456

 

Minority interests in income from continuing operations

 

(3,850

)

(4,168

)

Income from continuing operations

 

24,886

 

27,288

 

Income from discontinued operations, net of minority interests

 

3,863

 

298

 

Net income

 

28,749

 

27,586

 

Preferred share dividends

 

(10,961

)

(12,675

)

Issuance costs associated with redeemed preferred shares

 

 

(1,813

)

Net income available to common shareholders

 

$

17,788

 

$

13,098

 

 

 

 

 

 

 

Earnings per share “EPS” computation

 

 

 

 

 

Numerator:

 

 

 

 

 

Net income available to common shareholders

 

$

17,788

 

$

13,098

 

Dividends on convertible preferred shares

 

 

21

 

Numerator for diluted EPS

 

$

17,788

 

$

13,119

 

 

 

 

 

 

 

Denominator:

 

 

 

 

 

Weighted average common shares - basic

 

36,721

 

32,124

 

Assumed conversion of dilutive options

 

1,595

 

1,680

 

Assumed conversion of preferred shares

 

 

179

 

Weighted average common shares - diluted

 

38,316

 

33,983

 

 

 

 

 

 

 

EPS

 

 

 

 

 

Basic

 

$

0.48

 

$

0.41

 

Diluted

 

$

0.46

 

$

0.39

 

 

10



 

 

Corporate Office Properties Trust

Summary  Financial Data

(unaudited)

(Amounts in thousands, except per share data and ratios)

 

 

 

Nine months ended
September 30,

 

 

 

2005

 

2004

 

Net income

 

$

28,749

 

$

27,586

 

Add: Real estate-related depreciation and amortization

 

47,440

 

37,746

 

Add: Depreciation and amortization on unconsolidated real estate entities

 

 

106

 

Less: Depreciation and amortization allocable to minority interests in other consolidated entities

 

(85

)

(56

)

Less: Gain on sales of real estate, excluding development portion

 

(4,408

)

(71

)

Less: Issuance costs associated with redeemed preferred shares

 

 

(1,813

)

Funds from operations (“FFO”)

 

71,696

 

63,498

 

Add: Minority interests-common units in the Operating Partnership

 

4,369

 

4,241

 

Less: Preferred share dividends

 

(10,961

)

(12,675

)

Funds from Operations - basic (“Basic FFO”)

 

65,104

 

55,064

 

Add: Convertible preferred share dividends

 

 

21

 

Funds from Operations - diluted (“Diluted FFO”)

 

65,104

 

55,085

 

Less: Straight-line rent adjustments

 

(4,471

)

(5,469

)

Less: Recurring capital expenditures

 

(12,972

)

(12,699

)

Less: Amortization of deferred market rental revenue

 

(32

)

(806

)

Add: Issuance costs associated with redeemed preferred shares

 

 

1,813

 

Adjusted Funds from Operations - diluted (“Diluted AFFO”)

 

$

47,629

 

$

37,924

 

 

 

 

 

 

 

Weighted average shares

 

 

 

 

 

Weighted average common shares

 

36,721

 

32,124

 

Conversion of weighted average common units

 

8,707

 

8,773

 

Weighted average common shares/units - basic FFO per share

 

45,428

 

40,897

 

Assumed conversion of share options

 

1,595

 

1,680

 

Assumed conversion of weighted average convertible preferred shares

 

 

179

 

Weighted average common shares/units - diluted FFO per share

 

47,023

 

42,756

 

 

 

 

 

 

 

Diluted FFO per common share

 

$

1.38

 

$

1.29

 

Dividends/distributions per common share/unit

 

$

0.790

 

$

0.725

 

Earnings payout ratio

 

166.9

%

185.5

%

Diluted FFO payout ratio

 

56.1

%

55.6

%

Diluted AFFO payout ratio

 

76.7

%

80.8

%

 

 

 

 

 

 

Reconciliation of denominators for diluted EPS and diluted FFO per share

 

 

 

 

 

Denominator for diluted EPS

 

38,316

 

33,983

 

Weighted average common units

 

8,707

 

8,773

 

Denominator for diluted FFO per share

 

47,023

 

42,756

 

 

 

11



 

 

 

Corporate Office Properties Trust

Summary Financial Data

(Unaudited)

(Dollars and shares in thousands, except per share data)

 

 

 

September 30,

 

December 31,

 

 

 

2005

 

2004

 

Balance Sheet Data (in thousands) (as of period end):

 

 

 

 

 

Investment in real estate, net of accumulated depreciation

 

$

1,696,605

 

$

1,544,501

 

Total assets

 

1,901,696

 

1,732,026

 

Mortgage and other loans payable

 

1,124,299

 

1,022,688

 

Total liabilities

 

1,210,649

 

1,111,224

 

Minority interests

 

108,530

 

98,878

 

Beneficiaries’ equity

 

582,517

 

521,924

 

 

 

 

 

 

 

Debt to Total Assets

 

59.1

%

59.0

%

Debt to Undepreciated Book Value of Real Estate Assets

 

58.3

%

58.3

%

Debt to Total Market Capitalization

 

37.6

%

40.4

%

 

 

 

 

 

 

Property Data (wholly owned properties)
(as of period ended):

 

 

 

 

 

Number of operating properties owned

 

136

 

 

 

Total net rentable square feet owned (in thousands)

 

11,692

 

 

 

Occupancy

 

94.6

%

 

 

 

 

 

Three Months Ended

 

Nine Months Ended

 

 

 

September 30,

 

September 30,

 

 

 

2005

 

2004

 

2005

 

2004

 

Reconciliation of tenant improvements and incentives, capital improvements and leasing costs for operating properties to recurring capital expenditures

 

 

 

 

 

 

 

 

 

Total tenant improvements and incentives on operating properties

 

$

3,484

 

$

3,924

 

$

24,306

 

$

10,612

 

Total capital improvements on operating properties

 

2,760

 

3,669

 

6,838

 

6,228

 

Total leasing costs on operating properties

 

3,017

 

2,598

 

4,652

 

8,957

 

Less: Nonrecurring tenant improvements and incentives on operating properties

 

(1,199

)

(1,454

)

(16,633

)

(3,221

)

Less: Nonrecurring capital improvements on operating properties

 

(1,047

)

(2,920

)

(3,568

)

(4,266

)

Less: Nonrecurring leasing costs incurred on operating properties

 

(2,070

)

(1,138

)

(2,623

)

(5,611

)

Recurring capital expenditures

 

$

4,945

 

$

4,679

 

$

12,972

 

$

12,699

 

 

 

12



 

 

 

Corporate Office Properties Trust

Summary Financial Data

(Unaudited)

(Dollars in thousands)

 

 

 

 

Three Months Ended

 

Nine Months Ended

 

 

 

September 30,

 

September 30,

 

 

 

2005

 

2004

 

2005

 

2004

 

Reconciliation of dividends for Earnings Payout Ratio to dividends and distributions for FFO & AFFO Payout Ratio

 

 

 

 

 

 

 

 

 

Common share dividends for earnings payout ratio

 

$

10,966

 

$

9,235

 

$

29,686

 

$

24,291

 

Common unit distributions

 

2,452

 

2,202

 

6,836

 

6,333

 

Convertible preferred share dividends

 

 

 

 

21

 

Dividends and distributions for FFO & AFFO payout ratio

 

$

13,418

 

$

11,437

 

$

36,522

 

$

30,645

 

 

 

 

 

 

 

 

 

 

 

Reconciliation of GAAP net income to earnings before interest, income taxes, depreciation and amortization (“EBITDA”)

 

 

 

 

 

 

 

 

 

Net income

 

$

10,589

 

$

9,750

 

 

 

 

 

Interest expense on continuing operations

 

14,370

 

10,668

 

 

 

 

 

Interest expense on discontinued operations

 

126

 

171

 

 

 

 

 

Income tax expense

 

294

 

145

 

 

 

 

 

Real estate-related depreciation and amortization

 

17,848

 

11,700

 

 

 

 

 

Amortization of deferred financing costs

 

641

 

577

 

 

 

 

 

Other depreciation and amortization

 

178

 

101

 

 

 

 

 

Minority interests

 

1,872

 

1,601

 

 

 

 

 

EBITDA

 

$

45,918

 

$

34,713

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Reconciliation of interest expense from continuing operations to the denominators for interest coverage-EBITDA and fixed charge coverage-EBITDA

 

 

 

 

 

 

 

 

 

Interest expense from continuing operations

 

$

14,370

 

$

10,668

 

 

 

 

 

Interest expense from discontinued operations

 

126

 

171

 

 

 

 

 

Denominator for interest coverage-EBITDA

 

14,496

 

10,839

 

 

 

 

 

Preferred share dividends

 

3,653

 

3,784

 

 

 

 

 

Preferred unit distributions

 

165

 

14

 

 

 

 

 

Denominator for fixed charge coverage-EBITDA

 

$

18,314

 

$

14,637

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Reconciliation of same property net operating income to same property cash net operating income

 

 

 

 

 

 

 

 

 

Same property net operating income

 

$

34,855

 

$

34,395

 

 

 

 

 

Less: Straight-line rent adjustments

 

(603

)

(2,471

)

 

 

 

 

Less: Amortization of deferred market rental revenue

 

294

 

(224

)

 

 

 

 

Same property cash net operating income

 

$

34,546

 

$

31,700

 

 

 

 

 

 

 

13



 

 

 

Corporate Office Properties Trust

Summary Financial Data

(Unaudited)

(Amounts in thousands, except per share data)

 

 

 

 

September 30,

 

December 31,

 

 

 

2005

 

2004

 

Reconciliation of denominator for debt to total assets to denominator for debt to undepreciated book value of real estate assets

 

 

 

 

 

Denominator for debt to total assets

 

$

1,901,696

 

$

1,732,026

 

Assets other than assets included in investment in real estate

 

(205,091

)

(187,525

)

Accumulated depreciation on real estate assets

 

163,424

 

141,716

 

Intangible assets on real estate acquisitions, net

 

67,686

 

67,560

 

Denominator for debt to undepreciated book value of real estate assets

 

$

1,927,715

 

$

1,753,777

 

 

 

 

Three months

 

Nine months

 

 

 

ended

 

ended

 

 

 

September 30,

 

September 30,

 

 

 

2004

 

2004

 

Reconciliation of numerators for diluted EPS and diluted FFO as reported to numerators for diluted EPS and diluted FFO excluding issuance costs associated with redeemed preferred shares

 

 

 

 

 

Numerator for diluted EPS, as reported

 

$

4,153

 

$

13,119

 

Add: Issuance costs associated with redeemed preferred shares

 

1,813

 

1,813

 

Numerator for diluted EPS, as adjusted

 

$

5,966

 

$

14,932

 

 

 

 

 

 

 

Numerator for diluted FFO, as reported

 

$

17,368

 

$

55,085

 

Add: Issuance costs associated with redeemed preferred shares

 

1,813

 

1,813

 

Numerator for diluted FFO, as adjusted

 

$

19,181

 

$

56,898

 

 

 

 

Twelve Months Ending

 

Twelve Months Ending

 

 

 

December 31, 2005

 

December 31, 2006

 

 

 

Low

 

High

 

Low

 

High

 

Reconciliation of projected EPS-diluted to projected diluted FFO per share

 

 

 

 

 

 

 

 

 

Reconciliation of numerators

 

 

 

 

 

 

 

 

 

Numerator for projected EPS-diluted

 

$

22,450

 

$

23,250

 

$

20,450

 

$

23,850

 

Gain on sales of real estate, excluding development portion

 

(4,432

)

(4,432

)

 

 

Real estate-related depreciation and amortization

 

64,096

 

64,096

 

77,262

 

77,262

 

Minority interests-common units

 

5,543

 

5,740

 

4,547

 

5,303

 

Numerator for projected diluted FFO per share

 

$

87,657

 

$

88,654

 

$

102,259

 

$

106,415

 

 

 

 

 

 

 

 

 

 

 

Reconciliation of denominators

 

 

 

 

 

 

 

 

 

Denominator for projected EPS-diluted

 

38,978

 

38,978

 

43,212

 

43,212

 

Weighted average common units

 

8,722

 

8,722

 

8,765

 

8,765

 

Denominator for projected diluted FFO per share

 

47,700

 

47,700

 

51,977

 

51,977

 

 

 

 

 

 

 

 

 

 

 

EPS - diluted

 

$

0.58

 

$

0.60

 

$

0.47

 

$

0.55

 

FFO per share - diluted

 

$

1.84

 

$

1.86

 

$

1.97

 

$

2.05

 

 

14



 

Top Twenty Office Tenants of Wholly Owned Properties as of September 30, 2005

(Dollars and square feet in thousands)

 

 

 

 

 

 

 

 

 

Percentage of

 

Total

 

Percentage of Total

 

Weighted

 

 

 

 

 

 

 

Total

 

Total

 

Annualized

 

Annualized

 

Average

 

 

 

 

 

Number of

 

Occupied

 

Occupied

 

Rental

 

Rental

 

Remaining

 

Tenant

 

 

 

Leases

 

Square Feet

 

Square Feet

 

Revenue(1)(6)

 

Revenue

 

Lease Term(2)

 

United States of America

 

(3

)

37

 

1,412,699

 

12.8

%

$

31,887

 

13.9

%

4.5

 

Booz Allen Hamilton, Inc.

 

 

 

11

 

534,787

 

4.8

%

12,981

 

5.7

%

7.3

 

Northrop Grumman Corporation

 

 

 

12

 

524,884

 

4.7

%

11,530

 

5.0

%

3.4

 

Computer Sciences Corporation

 

(4

)

4

 

454,902

 

4.1

%

10,701

 

4.7

%

5.7

 

L-3 Communications Titan Corporation

 

(4

)

5

 

239,153

 

2.2

%

8,699

 

3.8

%

7.8

 

Unisys

 

(5

)

3

 

741,284

 

6.7

%

8,060

 

3.5

%

3.8

 

General Dynamics Corporation

 

 

 

9

 

278,239

 

2.5

%

6,765

 

3.0

%

3.3

 

AT&T Corporation

 

(4

)

7

 

262,302

 

2.4

%

6,012

 

2.6

%

3.3

 

The Aerospace Corporation

 

 

 

2

 

221,785

 

2.0

%

5,779

 

2.5

%

9.2

 

Wachovia Bank

 

 

 

3

 

176,470

 

1.6

%

5,324

 

2.3

%

13.2

 

The Boeing Company

 

(4

)

5

 

162,279

 

1.5

%

4,168

 

1.8

%

3.7

 

Ciena Corporation

 

 

 

3

 

221,609

 

2.0

%

3,333

 

1.5

%

2.6

 

VeriSign, Inc.

 

 

 

1

 

99,121

 

0.9

%

3,272

 

1.4

%

8.8

 

Magellan Health Services, Inc.

 

 

 

2

 

142,199

 

1.3

%

2,867

 

1.3

%

5.8

 

PricewaterhouseCoopers

 

 

 

1

 

97,638

 

0.9

%

2,720

 

1.2

%

0.4

 

Johns Hopkins University

 

(4

)

7

 

106,473

 

1.0

%

2,586

 

1.1

%

1.9

 

Merck & Co., Inc. (Unisys)

 

(5

)

1

 

219,065

 

2.0

%

2,419

 

1.1

%

3.8

 

Wyle Laboratories, Inc.

 

 

 

4

 

174,792

 

1.6

%

2,348

 

1.0

%

6.8

 

Carefirst, Inc. and Subsidiaries

 

(4

)

3

 

94,223

 

0.9

%

2,277

 

1.0

%

2.3

 

BAE Systems PLC

 

 

 

7

 

199,212

 

1.8

%

2,260

 

1.0

%

1.3

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Subtotal Top 20 Office Tenants

 

 

 

127

 

6,363,116

 

57.5

%

135,987

 

59.3

%

5.2

 

All remaining tenants

 

 

 

442

 

4,700,128

 

42.5

%

93,292

 

40.7

%

4.3

 

Total/Weighted Average

 

 

 

569

 

11,063,244

 

100.0

%

$

229,279

 

100.0

%

4.9

 


(1)          Total Annualized Rental Revenue is the monthly contractual base rent as of September 30, 2005 multiplied by 12 plus the estimated annualized expense reimbursements under existing office leases.

(2)          The weighting of the lease term was computed using Total Rental Revenue.

(3)          Many of our government leases are subject to early termination provisions which are customary to government leases. The weighted average remaining lease term was computed assuming no exercise of such early termination rights.

(4)          Includes affiliated organizations or agencies.

(5)          Merck & Co., Inc. subleases 219,065 rentable square feet from Unisys’ 960,349 leased rentable square feet.

(6)          Order of tenants is based on Annualized Rent.

 

 

15