Recent Quotes View Full List My Watchlist Create Watchlist Indicators DJI Nasdaq Composite SPX Gold Crude Oil Hydroworld Market Index Markets Stocks ETFs Tools Overview News Currencies International Treasuries COPT First Quarter 2023 Results Exceed Guidance By: Corporate Office Properties Trust via Business Wire April 27, 2023 at 16:16 PM EDT _______________________________________________________________ EPS of $0.70 for 1Q23 and FFO per Share, as Adjusted for Comparability, of $0.59 Exceeded High-End of Guidance Narrowed 2023 FFO per Share Guidance, Midpoint Unchanged Core Portfolio 92.9% Occupied and 95.1% Leased Same-Property Cash NOI Increased 8.3% in the Quarter Raising Same-Property Cash NOI Guidance for the Year by 100 Basis Points, to 3%-5% 1.5 million SF of Active Developments are 92% Leased _______________________________________________________________ Strong Leasing to Start the Year; On Track to Meet Development and Vacancy Leasing Goals Total Leasing of 788,000 SF 495,000 SF of Development Leasing 99,000 SF of Vacancy Leasing On Track to Achieve Annual Goal of 400,000 SF Tenant Retention of 63.9% Raising Tenant Retention Rate Guidance for the Year by 250 Basis Points, to 80%-85% _______________________________________________________________ Corporate Office Properties Trust (“COPT” or the “Company”) (NYSE: OFC) announced results for the first quarter ended March 31, 2023. Management Comments Stephen E. Budorick, COPT’s President & Chief Executive Officer, commented, “Our Defense/IT investment strategy, which has concentrated our portfolio near priority U.S. defense installations, continues to produce solid results, as evidenced by the 96.7% leased rate in our Defense / IT segment, which accounts for 90% of our core portfolio annualized rental revenue. Our first quarter results were strong as FFO per share exceeded the midpoint of our guidance range by $0.02, though given the uncertain interest rate environment, we are maintaining the midpoint of our full year guidance at $2.38 per share. Same property Cash NOI increased 8.3% year over year, which led us to increase our full year guidance by 100 basis points. We raised our full year retention rate by 250 basis points, which reflects our tenant’s need to execute their missions at our strategic locations. Leasing overall is off to a great start, having already achieved roughly 70% of our full year development leasing goal, while vacancy leasing is right on track with our 400,000 square foot goal. Our investment grade rated balance sheet is well positioned to navigate the challenging capital markets environment as we have no significant debt maturities until 2026.” “In February, we announced a 3.6% increase to our quarterly dividend, which marks our first dividend increase since 2010. This dividend increase illustrates the high level of confidence we have in our ability to grow our FFO per share, while self-funding the equity required for our expected development pipeline. The outlook for defense spending remains strong, as the FY 2024 Defense budget request calls for a 3.6% year over year increase, which follows the roughly $100 billion increase between FY21-FY23.” Financial Highlights 1st Quarter Financial Results: Diluted earnings per share (“EPS”) was $0.70 for the quarter ended March 31, 2023 compared to $0.52 for the quarter ended March 31, 2022. Diluted funds from operations per share (“FFOPS”), as calculated in accordance with Nareit’s definition and as adjusted for comparability, was $0.59 for the quarter ended March 31, 2023 compared to $0.58 for the quarter ended March 31, 2022. Operating Performance Highlights Operating Portfolio Summary: At March 31, 2023, the Company’s 22.9 million square foot core portfolio was 92.9% occupied and 95.1% leased. Same-Property Performance: At March 31, 2023, the Company’s 20.6 million square foot same-property portfolio was 92.1% occupied and 94.5% leased. The Company’s same-property cash NOI increased 8.3% for the three months ended March 31, 2023, compared to the same period in 2022. Leasing: Total Square Feet Leased: For the quarter ended March 31, 2023, the Company leased 788,000 square feet, including 194,000 square feet of renewals, 99,000 square feet of vacancy leasing, and 495,000 square feet in development projects. Tenant Retention Rates: During the quarter ended March 31, 2023, the Company renewed 63.9% of expiring square feet. Tenant retention rate guidance for 2023 was increased by 250 basis points at the midpoint to 80%-85% from 75%-85%. Rent Spreads & Average Escalations on Renewing Leases: For the quarter ended March 31, 2023, straight-line rents on renewals increased 4.2% and cash rents on renewed space were slightly positive. For the same time period, annual escalations on renewing leases averaged 2.4%. Lease Terms: In the quarter ended March 31, 2023, lease terms averaged 2.7 years on renewing leases, 7.9 years on vacancy leasing and 14.3 years on development leasing. Investment Activity Highlights Development Pipeline: The Company’s development pipeline consists of nine properties totaling 1.5 million square feet that were 92% leased at March 31, 2023. These projects represent a total estimated investment of $477.7 million, of which $165.5 million has been spent. Balance Sheet and Capital Transaction Highlights On January 10, 2023, the Company sold three data center shells to a new, 90%/10% joint venture with entities affiliated with Blackstone, generating approximately $190 million of proceeds. For the quarter ended March 31, 2023, the Company’s adjusted EBITDA fixed charge coverage ratio was 5.0x. At March 31, 2023, the Company’s net debt to in-place adjusted EBITDA ratio was 6.2x and its net debt adjusted for fully-leased development to in-place adjusted EBITDA ratio was 5.8x. At March 31, 2023, and including the effect of interest rate swaps, the Company’s weighted average effective interest rate on its consolidated debt portfolio was 3.0% with a weighted average maturity of 6.5 years; additionally, 98.0% of the Company’s debt was subject to fixed interest rates. Associated Supplemental Presentation Prior to the call, the Company will post a slide presentation to accompany management’s prepared remarks for its first quarter 2023 conference call; the presentation can be viewed and downloaded from the ‘Financial Info – Financial Results’ section of COPT’s Investors website: https://investors.copt.com/financial-information/financial-results 2023 Guidance Management is updating its full-year guidance for diluted EPS and diluted FFOPS, per Nareit and as adjusted for comparability, from the prior range of $1.45-$1.53, and $2.34-$2.42, respectively, to new ranges of $1.46-$1.52, and $2.35-$2.41, respectively. Management is establishing second quarter guidance for diluted EPS and diluted FFOPS per Nareit and as adjusted for comparability at $0.67-$0.69 and $0.57-$0.59, respectively. Reconciliations of projected diluted EPS to projected diluted FFOPS, in accordance with Nareit and as adjusted for comparability are as follows: Reconciliation of Diluted EPS to FFOPS, per Nareit, and As Adjusted for Comparability Quarter Ending June 30, 2023 Year Ending December 31, 2023 Low High Low High Diluted EPS $ 0.67 $ 0.69 $ 1.46 $ 1.52 Real estate-related depreciation and amortization 0.33 0.33 1.32 1.32 Gain on sales of real estate (0.43 ) (0.43 ) (0.43 ) (0.43 ) Diluted FFOPS, Nareit definition and as adjusted for comparability $ 0.57 $ 0.59 $ 2.35 $ 2.41 Conference Call Information Management will discuss first quarter 2023 results on its conference call tomorrow at 12:00 p.m. Eastern Time, details of which are listed below: Conference Call Date: Friday, April 28, 2023 Time: 12:00 p.m. Eastern Time Participants must register for the conference call at the link below to receive the dial-in number and personal pin. Registering only takes a few moments and provides direct access to the conference call without waiting for an operator. You may register at any time, including up to and after the call start time: https://register.vevent.com/register/BI87782b47ac97407ba4fd64c7e403b916 The conference call will also be available via live webcast in the ‘News & Events – IR Calendar’ section of COPT’s Investors website: https://investors.copt.com/news-events/ir-calendar Replay Information A replay of the conference call will be immediately available via webcast only on COPT’s Investors website. Definitions For definitions of certain terms used in this press release, please refer to the information furnished in the Company’s Supplemental Information Package furnished on a Form 8-K which can be found on its website (www.copt.com). Reconciliations of non-GAAP measures to the most directly comparable GAAP measures are included in the attached tables. About COPT COPT is a REIT that owns, manages, leases, develops and selectively acquires office and data center properties. The majority of its portfolio is in locations that support the United States Government and its contractors, most of whom are engaged in national security, defense and information technology (“IT”) related activities servicing what the Company believes are growing, durable, priority missions (“Defense/IT Locations”). The Company also owns a portfolio of office properties located in select urban submarkets in the Greater Washington, DC/Baltimore region with durable Class-A office fundamentals and characteristics (“Regional Office Properties”). As of March 31, 2023, the Company derived 90% of its core portfolio annualized rental revenue from Defense/IT Locations and 10% from its Regional Office Properties. As of the same date and including 24 properties owned through unconsolidated joint ventures, COPT’s core portfolio of 192 properties encompassed 22.9 million square feet and was 95.1% leased. Forward-Looking Information This press release may contain “forward-looking” statements, as defined in Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, that are based on the Company’s current expectations, estimates and projections about future events and financial trends affecting the Company. Forward-looking statements can be identified by the use of words such as “may,” “will,” “should,” “could,” “believe,” “anticipate,” “expect,” “estimate,” “plan” or other comparable terminology. Forward-looking statements are inherently subject to risks and uncertainties, many of which the Company cannot predict with accuracy and some of which the Company might not even anticipate. Although the Company believes that the expectations, estimates and projections reflected in such forward-looking statements are based on reasonable assumptions at the time made, the Company can give no assurance that these expectations, estimates and projections will be achieved. Future events and actual results may differ materially from those discussed in the forward-looking statements and the Company undertakes no obligation to update or supplement any forward-looking statements. The areas of risk that may affect these expectations, estimates and projections include, but are not limited to, those risks described in Item 1A of the Company’s Annual Report on Form 10-K for the year ended December 31, 2022. Corporate Office Properties Trust Summary Financial Data (unaudited) (dollars and shares in thousands, except per share data) For the Three Months Ended March 31, 2023 2022 Revenues Lease revenue $ 150,560 $ 141,389 Other property revenue 1,121 891 Construction contract and other service revenues 15,820 53,200 Total revenues 167,501 195,480 Operating expenses Property operating expenses 59,420 57,181 Depreciation and amortization associated with real estate operations 36,995 34,264 Construction contract and other service expenses 15,201 51,650 General and administrative expenses 7,996 6,670 Leasing expenses 1,999 1,874 Business development expenses and land carry costs 495 783 Total operating expenses 122,106 152,422 Interest expense (16,442 ) (14,424 ) Interest and other income 2,323 1,893 Credit loss (expense) recoveries (67 ) 316 Gain on sales of real estate 49,378 15 Loss on early extinguishment of debt — (342 ) Income from continuing operations before equity in (loss) income of unconsolidated entities and income taxes 80,587 30,516 Equity in (loss) income of unconsolidated entities (64 ) 888 Income tax expense (125 ) (153 ) Income from continuing operations 80,398 31,251 Discontinued operations — 29,573 Net Income 80,398 60,824 Net income attributable to noncontrolling interests: Common units in the Operating Partnership (“OP”) (1,293 ) (856 ) Other consolidated entities (326 ) (649 ) Net income attributable to common shareholders $ 78,779 $ 59,319 Earnings per share (“EPS”) computation: Numerator for diluted EPS: Net income attributable to common shareholders $ 78,779 $ 59,319 Amount allocable to share-based compensation awards (248 ) (181 ) Redeemable noncontrolling interests (64 ) (39 ) Numerator for diluted EPS $ 78,467 $ 59,099 Denominator: Weighted average common shares - basic 112,127 112,020 Dilutive effect of share-based compensation awards 410 426 Dilutive effect of redeemable noncontrolling interests 91 132 Weighted average common shares - diluted 112,628 112,578 Diluted EPS $ 0.70 $ 0.52 Corporate Office Properties Trust Summary Financial Data (unaudited) (in thousands, except per share data) For the Three Months Ended March 31, 2023 2022 Net income $ 80,398 $ 60,824 Real estate-related depreciation and amortization 36,995 34,264 Gain on sales of real estate from continuing and discontinued operations (49,378 ) (28,579 ) Depreciation and amortization on unconsolidated real estate JVs 801 526 Funds from operations (“FFO”) 68,816 67,035 FFO allocable to other noncontrolling interests (708 ) (1,042 ) Basic FFO allocable to share-based compensation awards (466 ) (362 ) Basic FFO available to common share and common unit holders (“Basic FFO”) 67,642 65,631 Redeemable noncontrolling interests (30 ) (6 ) Diluted FFO adjustments allocable to share-based compensation awards 39 27 Diluted FFO available to common share and common unit holders (“Diluted FFO”) 67,651 65,652 Loss on early extinguishment of debt — 342 Diluted FFO comparability adjustments allocable to share-based compensation awards — (2 ) Diluted FFO available to common share and common unit holders, as adjusted for comparability 67,651 65,992 Straight line rent adjustments and lease incentive amortization (3,516 ) (3,189 ) Amortization of intangibles and other assets included in net operating income (“NOI”) (19 ) (372 ) Share-based compensation, net of amounts capitalized 1,733 2,111 Amortization of deferred financing costs 632 597 Amortization of net debt discounts, net of amounts capitalized 618 605 Replacement capital expenditures (28,210 ) (17,358 ) Other (273 ) 39 Diluted adjusted funds from operations available to common share and common unit holders (“Diluted AFFO”) $ 38,616 $ 48,425 Diluted FFO per share $ 0.59 $ 0.58 Diluted FFO per share, as adjusted for comparability $ 0.59 $ 0.58 Dividends/distributions per common share/unit $ 0.285 $ 0.275 Corporate Office Properties Trust Summary Financial Data (unaudited) (Dollars and shares in thousands, except per share data) March 31, 2023 December 31, 2022 Balance Sheet Data Properties, net of accumulated depreciation $ 3,614,075 $ 3,556,398 Total assets $ 4,177,992 $ 4,257,275 Debt per balance sheet $ 2,123,012 $ 2,231,794 Total liabilities $ 2,383,730 $ 2,509,527 Redeemable noncontrolling interests $ 25,448 $ 26,293 Total equity $ 1,768,814 $ 1,721,455 Debt to assets 50.8 % 52.4 % Net debt to adjusted book 38.1 % 39.8 % Core Portfolio Data (as of period end) Number of operating properties 192 192 Total operational square feet (in thousands) 22,863 22,849 % Occupied 92.9 % 92.8 % % Leased 95.1 % 95.3 % For the Three Months Ended March 31, 2023 2022 GAAP Payout ratio: Net income 40.6% 51.6% Debt ratios: Net income to interest expense ratio 4.9x 4.2x Debt to net income ratio 6.6x 8.9x Non-GAAP Payout ratios: Diluted FFO 47.9% 47.6% Diluted FFO, as adjusted for comparability 47.9% 47.4% Diluted AFFO 83.9% 64.5% Debt ratios: Adjusted EBITDA fixed charge coverage ratio 5.0x 5.2x Net debt to in-place adjusted EBITDA ratio 6.2x 6.6x Net debt adj. for fully-leased development to in-place adj. EBITDA ratio 5.8x 6.1x Reconciliation of denominators for per share measures Denominator for diluted EPS 112,628 112,578 Weighted average common units 1,489 1,384 Denominator for diluted FFO per share and as adjusted for comparability 114,117 113,962 Corporate Office Properties Trust Summary Financial Data (unaudited) (in thousands) For the Three Months Ended March 31, 2023 2022 Numerators for Payout Ratios Dividends on unrestricted common and deferred shares $ 31,989 $ 30,837 Distributions on unrestricted common units 430 404 Dividends and distributions on restricted shares and units 215 158 Total dividends and distributions for GAAP payout ratio 32,634 31,399 Dividends and distributions on antidilutive shares and units (216 ) (145 ) Dividends and distributions for non-GAAP payout ratios $ 32,418 $ 31,254 Reconciliation of net income to earnings before interest, income taxes, depreciation and amortization for real estate (“EBITDAre”), adjusted EBITDA and in-place adjusted EBITDA Net income $ 80,398 $ 60,824 Interest expense 16,442 14,424 Income tax expense 125 153 Real estate-related depreciation and amortization 36,995 34,264 Other depreciation and amortization 602 607 Gain on sales of real estate from continuing and discontinued operations (49,378 ) (28,579 ) Adjustments from unconsolidated real estate JVs 1,704 758 EBITDAre 86,888 82,451 Loss on early extinguishment of debt — 342 Net gain on other investments — (565 ) Credit loss expense (recoveries) 67 (316 ) Business development expenses 241 326 Executive transition costs 247 — Adjusted EBITDA 87,443 82,238 Pro forma NOI adjustment for property changes within period (318 ) 579 Change in collectability of deferred rental revenue 899 — In-place adjusted EBITDA $ 88,024 $ 82,817 Reconciliations of tenant improvements and incentives, building improvements and leasing costs for operating properties to replacement capital expenditures Tenant improvements and incentives $ 19,986 $ 10,010 Building improvements 2,141 6,832 Leasing costs 1,750 2,270 Net additions to tenant improvements and incentives 4,839 1,808 Excluded building improvements and leasing costs (506 ) (3,562 ) Replacement capital expenditure $ 28,210 $ 17,358 Corporate Office Properties Trust Summary Financial Data (unaudited) (in thousands) For the Three Months Ended March 31, 2023 2022 Reconciliation of interest expense to the denominator for fixed charge coverage-Adjusted EBITDA Interest expense $ 16,442 $ 14,424 Less: Amortization of deferred financing costs (632 ) (597 ) Less: Amortization of net debt discounts, net of amounts capitalized (618 ) (605 ) COPT’s share of interest expense of unconsolidated real estate JVs, excluding amortization of deferred financing costs and net debt premium and loss on interest rate derivatives 773 231 Scheduled principal amortization 790 774 Capitalized interest 770 1,529 Denominator for fixed charge coverage-Adjusted EBITDA $ 17,525 $ 15,756 Reconciliation of net income to NOI from real estate operations, same properties NOI from real estate operations and same properties cash NOI from real estate operations Net income $ 80,398 $ 60,824 Construction contract and other service revenues (15,820 ) (53,200 ) Depreciation and other amortization associated with real estate operations 36,995 34,264 Construction contract and other service expenses 15,201 51,650 General and administrative expenses 7,996 6,670 Leasing expenses 1,999 1,874 Business development expenses and land carry costs 495 783 Interest expense 16,442 14,424 Interest and other income (2,323 ) (1,893 ) Credit loss expense (recoveries) 67 (316 ) Gain on sales of real estate from continuing operations (49,378 ) (15 ) Loss on early extinguishment of debt — 342 Equity in loss (income) of unconsolidated entities 64 (888 ) Unconsolidated real estate JVs NOI allocable to COPT included in equity in income of unconsolidated entities 1,642 1,080 Income tax expense 125 153 Discontinued operations — (29,573 ) Revenues from real estate operations from discontinued operations — 1,980 Property operating expenses from discontinued operations — (971 ) NOI from real estate operations 93,903 87,188 Non-Same Properties NOI from real estate operations (9,451 ) (5,762 ) Same Properties NOI from real estate operations 84,452 81,426 Straight line rent adjustments and lease incentive amortization 1,392 (2,291 ) Amortization of acquired above- and below-market rents (166 ) (519 ) Lease termination fees, net (1,221 ) (221 ) Tenant funded landlord assets and lease incentives (1,188 ) (1,510 ) Cash NOI adjustments in unconsolidated real estate JVs (75 ) (98 ) Same Properties Cash NOI from real estate operations $ 83,194 $ 76,787 Corporate Office Properties Trust Summary Financial Data (unaudited) (in thousands) March 31, 2023 December 31, 2022 Reconciliation of total assets to adjusted book Total assets $ 4,177,992 $ 4,257,275 Accumulated depreciation 1,300,430 1,267,434 Accumulated depreciation included in assets held for sale — 6,014 Accumulated amortization of intangibles on property acquisitions and deferred leasing costs 224,791 222,779 COPT’s share of liabilities of unconsolidated real estate JVs 60,734 52,404 COPT’s share of accumulated depreciation and amortization of unconsolidated real estate JVs 6,936 6,078 Less: Property - operating lease liabilities (34,896 ) (28,759 ) Less: Property - finance lease liabilities (431 ) — Less: Cash and cash equivalents (15,199 ) (12,337 ) Less: COPT’s share of cash of unconsolidated real estate JVs (881 ) (456 ) Adjusted book $ 5,719,476 $ 5,770,432 March 31, 2023 December 31, 2022 March 31, 2022 Reconciliation of debt to net debt, net debt adjusted for fully-leased development and pro forma net debt adjusted for fully-leased development Debt per balance sheet $ 2,123,012 $ 2,231,794 $ 2,156,784 Net discounts and deferred financing costs 22,250 23,160 24,728 COPT’s share of unconsolidated JV gross debt 52,226 52,100 26,250 Gross debt 2,197,488 2,307,054 2,207,762 Less: Cash and cash equivalents (15,199 ) (12,337 ) (19,347 ) Less: COPT’s share of cash of unconsolidated real estate JVs (881 ) (456 ) (458 ) Net debt 2,181,408 2,294,261 2,187,957 Costs incurred on fully-leased development properties (137,309 ) (95,972 ) (154,259 ) Net debt adjusted for fully-leased development $ 2,044,099 $ 2,198,289 $ 2,033,698 Net debt $ 2,181,408 $ 2,294,261 $ 2,187,957 Pro forma debt adjustments from subsequent event transaction proceeds N/A (189,000 ) N/A Pro forma net debt 2,181,408 2,105,261 2,187,957 Costs incurred on fully-leased development properties (137,309 ) (95,972 ) (154,259 ) Pro forma net debt adjusted for fully-leased development $ 2,044,099 $ 2,009,289 $ 2,033,698 Corporate Office Properties Trust View source version on businesswire.com: https://www.businesswire.com/news/home/20230427005939/en/Contacts IR Contacts: Venkat Kommineni, CFA 443-285-5587 venkat.kommineni@copt.com Michelle Layne 443-285-5452 michelle.layne@copt.com Data & 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COPT First Quarter 2023 Results Exceed Guidance By: Corporate Office Properties Trust via Business Wire April 27, 2023 at 16:16 PM EDT _______________________________________________________________ EPS of $0.70 for 1Q23 and FFO per Share, as Adjusted for Comparability, of $0.59 Exceeded High-End of Guidance Narrowed 2023 FFO per Share Guidance, Midpoint Unchanged Core Portfolio 92.9% Occupied and 95.1% Leased Same-Property Cash NOI Increased 8.3% in the Quarter Raising Same-Property Cash NOI Guidance for the Year by 100 Basis Points, to 3%-5% 1.5 million SF of Active Developments are 92% Leased _______________________________________________________________ Strong Leasing to Start the Year; On Track to Meet Development and Vacancy Leasing Goals Total Leasing of 788,000 SF 495,000 SF of Development Leasing 99,000 SF of Vacancy Leasing On Track to Achieve Annual Goal of 400,000 SF Tenant Retention of 63.9% Raising Tenant Retention Rate Guidance for the Year by 250 Basis Points, to 80%-85% _______________________________________________________________ Corporate Office Properties Trust (“COPT” or the “Company”) (NYSE: OFC) announced results for the first quarter ended March 31, 2023. Management Comments Stephen E. Budorick, COPT’s President & Chief Executive Officer, commented, “Our Defense/IT investment strategy, which has concentrated our portfolio near priority U.S. defense installations, continues to produce solid results, as evidenced by the 96.7% leased rate in our Defense / IT segment, which accounts for 90% of our core portfolio annualized rental revenue. Our first quarter results were strong as FFO per share exceeded the midpoint of our guidance range by $0.02, though given the uncertain interest rate environment, we are maintaining the midpoint of our full year guidance at $2.38 per share. Same property Cash NOI increased 8.3% year over year, which led us to increase our full year guidance by 100 basis points. We raised our full year retention rate by 250 basis points, which reflects our tenant’s need to execute their missions at our strategic locations. Leasing overall is off to a great start, having already achieved roughly 70% of our full year development leasing goal, while vacancy leasing is right on track with our 400,000 square foot goal. Our investment grade rated balance sheet is well positioned to navigate the challenging capital markets environment as we have no significant debt maturities until 2026.” “In February, we announced a 3.6% increase to our quarterly dividend, which marks our first dividend increase since 2010. This dividend increase illustrates the high level of confidence we have in our ability to grow our FFO per share, while self-funding the equity required for our expected development pipeline. The outlook for defense spending remains strong, as the FY 2024 Defense budget request calls for a 3.6% year over year increase, which follows the roughly $100 billion increase between FY21-FY23.” Financial Highlights 1st Quarter Financial Results: Diluted earnings per share (“EPS”) was $0.70 for the quarter ended March 31, 2023 compared to $0.52 for the quarter ended March 31, 2022. Diluted funds from operations per share (“FFOPS”), as calculated in accordance with Nareit’s definition and as adjusted for comparability, was $0.59 for the quarter ended March 31, 2023 compared to $0.58 for the quarter ended March 31, 2022. Operating Performance Highlights Operating Portfolio Summary: At March 31, 2023, the Company’s 22.9 million square foot core portfolio was 92.9% occupied and 95.1% leased. Same-Property Performance: At March 31, 2023, the Company’s 20.6 million square foot same-property portfolio was 92.1% occupied and 94.5% leased. The Company’s same-property cash NOI increased 8.3% for the three months ended March 31, 2023, compared to the same period in 2022. Leasing: Total Square Feet Leased: For the quarter ended March 31, 2023, the Company leased 788,000 square feet, including 194,000 square feet of renewals, 99,000 square feet of vacancy leasing, and 495,000 square feet in development projects. Tenant Retention Rates: During the quarter ended March 31, 2023, the Company renewed 63.9% of expiring square feet. Tenant retention rate guidance for 2023 was increased by 250 basis points at the midpoint to 80%-85% from 75%-85%. Rent Spreads & Average Escalations on Renewing Leases: For the quarter ended March 31, 2023, straight-line rents on renewals increased 4.2% and cash rents on renewed space were slightly positive. For the same time period, annual escalations on renewing leases averaged 2.4%. Lease Terms: In the quarter ended March 31, 2023, lease terms averaged 2.7 years on renewing leases, 7.9 years on vacancy leasing and 14.3 years on development leasing. Investment Activity Highlights Development Pipeline: The Company’s development pipeline consists of nine properties totaling 1.5 million square feet that were 92% leased at March 31, 2023. These projects represent a total estimated investment of $477.7 million, of which $165.5 million has been spent. Balance Sheet and Capital Transaction Highlights On January 10, 2023, the Company sold three data center shells to a new, 90%/10% joint venture with entities affiliated with Blackstone, generating approximately $190 million of proceeds. For the quarter ended March 31, 2023, the Company’s adjusted EBITDA fixed charge coverage ratio was 5.0x. At March 31, 2023, the Company’s net debt to in-place adjusted EBITDA ratio was 6.2x and its net debt adjusted for fully-leased development to in-place adjusted EBITDA ratio was 5.8x. At March 31, 2023, and including the effect of interest rate swaps, the Company’s weighted average effective interest rate on its consolidated debt portfolio was 3.0% with a weighted average maturity of 6.5 years; additionally, 98.0% of the Company’s debt was subject to fixed interest rates. Associated Supplemental Presentation Prior to the call, the Company will post a slide presentation to accompany management’s prepared remarks for its first quarter 2023 conference call; the presentation can be viewed and downloaded from the ‘Financial Info – Financial Results’ section of COPT’s Investors website: https://investors.copt.com/financial-information/financial-results 2023 Guidance Management is updating its full-year guidance for diluted EPS and diluted FFOPS, per Nareit and as adjusted for comparability, from the prior range of $1.45-$1.53, and $2.34-$2.42, respectively, to new ranges of $1.46-$1.52, and $2.35-$2.41, respectively. Management is establishing second quarter guidance for diluted EPS and diluted FFOPS per Nareit and as adjusted for comparability at $0.67-$0.69 and $0.57-$0.59, respectively. Reconciliations of projected diluted EPS to projected diluted FFOPS, in accordance with Nareit and as adjusted for comparability are as follows: Reconciliation of Diluted EPS to FFOPS, per Nareit, and As Adjusted for Comparability Quarter Ending June 30, 2023 Year Ending December 31, 2023 Low High Low High Diluted EPS $ 0.67 $ 0.69 $ 1.46 $ 1.52 Real estate-related depreciation and amortization 0.33 0.33 1.32 1.32 Gain on sales of real estate (0.43 ) (0.43 ) (0.43 ) (0.43 ) Diluted FFOPS, Nareit definition and as adjusted for comparability $ 0.57 $ 0.59 $ 2.35 $ 2.41 Conference Call Information Management will discuss first quarter 2023 results on its conference call tomorrow at 12:00 p.m. Eastern Time, details of which are listed below: Conference Call Date: Friday, April 28, 2023 Time: 12:00 p.m. Eastern Time Participants must register for the conference call at the link below to receive the dial-in number and personal pin. Registering only takes a few moments and provides direct access to the conference call without waiting for an operator. You may register at any time, including up to and after the call start time: https://register.vevent.com/register/BI87782b47ac97407ba4fd64c7e403b916 The conference call will also be available via live webcast in the ‘News & Events – IR Calendar’ section of COPT’s Investors website: https://investors.copt.com/news-events/ir-calendar Replay Information A replay of the conference call will be immediately available via webcast only on COPT’s Investors website. Definitions For definitions of certain terms used in this press release, please refer to the information furnished in the Company’s Supplemental Information Package furnished on a Form 8-K which can be found on its website (www.copt.com). Reconciliations of non-GAAP measures to the most directly comparable GAAP measures are included in the attached tables. About COPT COPT is a REIT that owns, manages, leases, develops and selectively acquires office and data center properties. The majority of its portfolio is in locations that support the United States Government and its contractors, most of whom are engaged in national security, defense and information technology (“IT”) related activities servicing what the Company believes are growing, durable, priority missions (“Defense/IT Locations”). The Company also owns a portfolio of office properties located in select urban submarkets in the Greater Washington, DC/Baltimore region with durable Class-A office fundamentals and characteristics (“Regional Office Properties”). As of March 31, 2023, the Company derived 90% of its core portfolio annualized rental revenue from Defense/IT Locations and 10% from its Regional Office Properties. As of the same date and including 24 properties owned through unconsolidated joint ventures, COPT’s core portfolio of 192 properties encompassed 22.9 million square feet and was 95.1% leased. Forward-Looking Information This press release may contain “forward-looking” statements, as defined in Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, that are based on the Company’s current expectations, estimates and projections about future events and financial trends affecting the Company. Forward-looking statements can be identified by the use of words such as “may,” “will,” “should,” “could,” “believe,” “anticipate,” “expect,” “estimate,” “plan” or other comparable terminology. Forward-looking statements are inherently subject to risks and uncertainties, many of which the Company cannot predict with accuracy and some of which the Company might not even anticipate. Although the Company believes that the expectations, estimates and projections reflected in such forward-looking statements are based on reasonable assumptions at the time made, the Company can give no assurance that these expectations, estimates and projections will be achieved. Future events and actual results may differ materially from those discussed in the forward-looking statements and the Company undertakes no obligation to update or supplement any forward-looking statements. The areas of risk that may affect these expectations, estimates and projections include, but are not limited to, those risks described in Item 1A of the Company’s Annual Report on Form 10-K for the year ended December 31, 2022. Corporate Office Properties Trust Summary Financial Data (unaudited) (dollars and shares in thousands, except per share data) For the Three Months Ended March 31, 2023 2022 Revenues Lease revenue $ 150,560 $ 141,389 Other property revenue 1,121 891 Construction contract and other service revenues 15,820 53,200 Total revenues 167,501 195,480 Operating expenses Property operating expenses 59,420 57,181 Depreciation and amortization associated with real estate operations 36,995 34,264 Construction contract and other service expenses 15,201 51,650 General and administrative expenses 7,996 6,670 Leasing expenses 1,999 1,874 Business development expenses and land carry costs 495 783 Total operating expenses 122,106 152,422 Interest expense (16,442 ) (14,424 ) Interest and other income 2,323 1,893 Credit loss (expense) recoveries (67 ) 316 Gain on sales of real estate 49,378 15 Loss on early extinguishment of debt — (342 ) Income from continuing operations before equity in (loss) income of unconsolidated entities and income taxes 80,587 30,516 Equity in (loss) income of unconsolidated entities (64 ) 888 Income tax expense (125 ) (153 ) Income from continuing operations 80,398 31,251 Discontinued operations — 29,573 Net Income 80,398 60,824 Net income attributable to noncontrolling interests: Common units in the Operating Partnership (“OP”) (1,293 ) (856 ) Other consolidated entities (326 ) (649 ) Net income attributable to common shareholders $ 78,779 $ 59,319 Earnings per share (“EPS”) computation: Numerator for diluted EPS: Net income attributable to common shareholders $ 78,779 $ 59,319 Amount allocable to share-based compensation awards (248 ) (181 ) Redeemable noncontrolling interests (64 ) (39 ) Numerator for diluted EPS $ 78,467 $ 59,099 Denominator: Weighted average common shares - basic 112,127 112,020 Dilutive effect of share-based compensation awards 410 426 Dilutive effect of redeemable noncontrolling interests 91 132 Weighted average common shares - diluted 112,628 112,578 Diluted EPS $ 0.70 $ 0.52 Corporate Office Properties Trust Summary Financial Data (unaudited) (in thousands, except per share data) For the Three Months Ended March 31, 2023 2022 Net income $ 80,398 $ 60,824 Real estate-related depreciation and amortization 36,995 34,264 Gain on sales of real estate from continuing and discontinued operations (49,378 ) (28,579 ) Depreciation and amortization on unconsolidated real estate JVs 801 526 Funds from operations (“FFO”) 68,816 67,035 FFO allocable to other noncontrolling interests (708 ) (1,042 ) Basic FFO allocable to share-based compensation awards (466 ) (362 ) Basic FFO available to common share and common unit holders (“Basic FFO”) 67,642 65,631 Redeemable noncontrolling interests (30 ) (6 ) Diluted FFO adjustments allocable to share-based compensation awards 39 27 Diluted FFO available to common share and common unit holders (“Diluted FFO”) 67,651 65,652 Loss on early extinguishment of debt — 342 Diluted FFO comparability adjustments allocable to share-based compensation awards — (2 ) Diluted FFO available to common share and common unit holders, as adjusted for comparability 67,651 65,992 Straight line rent adjustments and lease incentive amortization (3,516 ) (3,189 ) Amortization of intangibles and other assets included in net operating income (“NOI”) (19 ) (372 ) Share-based compensation, net of amounts capitalized 1,733 2,111 Amortization of deferred financing costs 632 597 Amortization of net debt discounts, net of amounts capitalized 618 605 Replacement capital expenditures (28,210 ) (17,358 ) Other (273 ) 39 Diluted adjusted funds from operations available to common share and common unit holders (“Diluted AFFO”) $ 38,616 $ 48,425 Diluted FFO per share $ 0.59 $ 0.58 Diluted FFO per share, as adjusted for comparability $ 0.59 $ 0.58 Dividends/distributions per common share/unit $ 0.285 $ 0.275 Corporate Office Properties Trust Summary Financial Data (unaudited) (Dollars and shares in thousands, except per share data) March 31, 2023 December 31, 2022 Balance Sheet Data Properties, net of accumulated depreciation $ 3,614,075 $ 3,556,398 Total assets $ 4,177,992 $ 4,257,275 Debt per balance sheet $ 2,123,012 $ 2,231,794 Total liabilities $ 2,383,730 $ 2,509,527 Redeemable noncontrolling interests $ 25,448 $ 26,293 Total equity $ 1,768,814 $ 1,721,455 Debt to assets 50.8 % 52.4 % Net debt to adjusted book 38.1 % 39.8 % Core Portfolio Data (as of period end) Number of operating properties 192 192 Total operational square feet (in thousands) 22,863 22,849 % Occupied 92.9 % 92.8 % % Leased 95.1 % 95.3 % For the Three Months Ended March 31, 2023 2022 GAAP Payout ratio: Net income 40.6% 51.6% Debt ratios: Net income to interest expense ratio 4.9x 4.2x Debt to net income ratio 6.6x 8.9x Non-GAAP Payout ratios: Diluted FFO 47.9% 47.6% Diluted FFO, as adjusted for comparability 47.9% 47.4% Diluted AFFO 83.9% 64.5% Debt ratios: Adjusted EBITDA fixed charge coverage ratio 5.0x 5.2x Net debt to in-place adjusted EBITDA ratio 6.2x 6.6x Net debt adj. for fully-leased development to in-place adj. EBITDA ratio 5.8x 6.1x Reconciliation of denominators for per share measures Denominator for diluted EPS 112,628 112,578 Weighted average common units 1,489 1,384 Denominator for diluted FFO per share and as adjusted for comparability 114,117 113,962 Corporate Office Properties Trust Summary Financial Data (unaudited) (in thousands) For the Three Months Ended March 31, 2023 2022 Numerators for Payout Ratios Dividends on unrestricted common and deferred shares $ 31,989 $ 30,837 Distributions on unrestricted common units 430 404 Dividends and distributions on restricted shares and units 215 158 Total dividends and distributions for GAAP payout ratio 32,634 31,399 Dividends and distributions on antidilutive shares and units (216 ) (145 ) Dividends and distributions for non-GAAP payout ratios $ 32,418 $ 31,254 Reconciliation of net income to earnings before interest, income taxes, depreciation and amortization for real estate (“EBITDAre”), adjusted EBITDA and in-place adjusted EBITDA Net income $ 80,398 $ 60,824 Interest expense 16,442 14,424 Income tax expense 125 153 Real estate-related depreciation and amortization 36,995 34,264 Other depreciation and amortization 602 607 Gain on sales of real estate from continuing and discontinued operations (49,378 ) (28,579 ) Adjustments from unconsolidated real estate JVs 1,704 758 EBITDAre 86,888 82,451 Loss on early extinguishment of debt — 342 Net gain on other investments — (565 ) Credit loss expense (recoveries) 67 (316 ) Business development expenses 241 326 Executive transition costs 247 — Adjusted EBITDA 87,443 82,238 Pro forma NOI adjustment for property changes within period (318 ) 579 Change in collectability of deferred rental revenue 899 — In-place adjusted EBITDA $ 88,024 $ 82,817 Reconciliations of tenant improvements and incentives, building improvements and leasing costs for operating properties to replacement capital expenditures Tenant improvements and incentives $ 19,986 $ 10,010 Building improvements 2,141 6,832 Leasing costs 1,750 2,270 Net additions to tenant improvements and incentives 4,839 1,808 Excluded building improvements and leasing costs (506 ) (3,562 ) Replacement capital expenditure $ 28,210 $ 17,358 Corporate Office Properties Trust Summary Financial Data (unaudited) (in thousands) For the Three Months Ended March 31, 2023 2022 Reconciliation of interest expense to the denominator for fixed charge coverage-Adjusted EBITDA Interest expense $ 16,442 $ 14,424 Less: Amortization of deferred financing costs (632 ) (597 ) Less: Amortization of net debt discounts, net of amounts capitalized (618 ) (605 ) COPT’s share of interest expense of unconsolidated real estate JVs, excluding amortization of deferred financing costs and net debt premium and loss on interest rate derivatives 773 231 Scheduled principal amortization 790 774 Capitalized interest 770 1,529 Denominator for fixed charge coverage-Adjusted EBITDA $ 17,525 $ 15,756 Reconciliation of net income to NOI from real estate operations, same properties NOI from real estate operations and same properties cash NOI from real estate operations Net income $ 80,398 $ 60,824 Construction contract and other service revenues (15,820 ) (53,200 ) Depreciation and other amortization associated with real estate operations 36,995 34,264 Construction contract and other service expenses 15,201 51,650 General and administrative expenses 7,996 6,670 Leasing expenses 1,999 1,874 Business development expenses and land carry costs 495 783 Interest expense 16,442 14,424 Interest and other income (2,323 ) (1,893 ) Credit loss expense (recoveries) 67 (316 ) Gain on sales of real estate from continuing operations (49,378 ) (15 ) Loss on early extinguishment of debt — 342 Equity in loss (income) of unconsolidated entities 64 (888 ) Unconsolidated real estate JVs NOI allocable to COPT included in equity in income of unconsolidated entities 1,642 1,080 Income tax expense 125 153 Discontinued operations — (29,573 ) Revenues from real estate operations from discontinued operations — 1,980 Property operating expenses from discontinued operations — (971 ) NOI from real estate operations 93,903 87,188 Non-Same Properties NOI from real estate operations (9,451 ) (5,762 ) Same Properties NOI from real estate operations 84,452 81,426 Straight line rent adjustments and lease incentive amortization 1,392 (2,291 ) Amortization of acquired above- and below-market rents (166 ) (519 ) Lease termination fees, net (1,221 ) (221 ) Tenant funded landlord assets and lease incentives (1,188 ) (1,510 ) Cash NOI adjustments in unconsolidated real estate JVs (75 ) (98 ) Same Properties Cash NOI from real estate operations $ 83,194 $ 76,787 Corporate Office Properties Trust Summary Financial Data (unaudited) (in thousands) March 31, 2023 December 31, 2022 Reconciliation of total assets to adjusted book Total assets $ 4,177,992 $ 4,257,275 Accumulated depreciation 1,300,430 1,267,434 Accumulated depreciation included in assets held for sale — 6,014 Accumulated amortization of intangibles on property acquisitions and deferred leasing costs 224,791 222,779 COPT’s share of liabilities of unconsolidated real estate JVs 60,734 52,404 COPT’s share of accumulated depreciation and amortization of unconsolidated real estate JVs 6,936 6,078 Less: Property - operating lease liabilities (34,896 ) (28,759 ) Less: Property - finance lease liabilities (431 ) — Less: Cash and cash equivalents (15,199 ) (12,337 ) Less: COPT’s share of cash of unconsolidated real estate JVs (881 ) (456 ) Adjusted book $ 5,719,476 $ 5,770,432 March 31, 2023 December 31, 2022 March 31, 2022 Reconciliation of debt to net debt, net debt adjusted for fully-leased development and pro forma net debt adjusted for fully-leased development Debt per balance sheet $ 2,123,012 $ 2,231,794 $ 2,156,784 Net discounts and deferred financing costs 22,250 23,160 24,728 COPT’s share of unconsolidated JV gross debt 52,226 52,100 26,250 Gross debt 2,197,488 2,307,054 2,207,762 Less: Cash and cash equivalents (15,199 ) (12,337 ) (19,347 ) Less: COPT’s share of cash of unconsolidated real estate JVs (881 ) (456 ) (458 ) Net debt 2,181,408 2,294,261 2,187,957 Costs incurred on fully-leased development properties (137,309 ) (95,972 ) (154,259 ) Net debt adjusted for fully-leased development $ 2,044,099 $ 2,198,289 $ 2,033,698 Net debt $ 2,181,408 $ 2,294,261 $ 2,187,957 Pro forma debt adjustments from subsequent event transaction proceeds N/A (189,000 ) N/A Pro forma net debt 2,181,408 2,105,261 2,187,957 Costs incurred on fully-leased development properties (137,309 ) (95,972 ) (154,259 ) Pro forma net debt adjusted for fully-leased development $ 2,044,099 $ 2,009,289 $ 2,033,698 Corporate Office Properties Trust View source version on businesswire.com: https://www.businesswire.com/news/home/20230427005939/en/Contacts IR Contacts: Venkat Kommineni, CFA 443-285-5587 venkat.kommineni@copt.com Michelle Layne 443-285-5452 michelle.layne@copt.com
_______________________________________________________________ EPS of $0.70 for 1Q23 and FFO per Share, as Adjusted for Comparability, of $0.59 Exceeded High-End of Guidance Narrowed 2023 FFO per Share Guidance, Midpoint Unchanged Core Portfolio 92.9% Occupied and 95.1% Leased Same-Property Cash NOI Increased 8.3% in the Quarter Raising Same-Property Cash NOI Guidance for the Year by 100 Basis Points, to 3%-5% 1.5 million SF of Active Developments are 92% Leased _______________________________________________________________ Strong Leasing to Start the Year; On Track to Meet Development and Vacancy Leasing Goals Total Leasing of 788,000 SF 495,000 SF of Development Leasing 99,000 SF of Vacancy Leasing On Track to Achieve Annual Goal of 400,000 SF Tenant Retention of 63.9% Raising Tenant Retention Rate Guidance for the Year by 250 Basis Points, to 80%-85% _______________________________________________________________
Corporate Office Properties Trust (“COPT” or the “Company”) (NYSE: OFC) announced results for the first quarter ended March 31, 2023. Management Comments Stephen E. Budorick, COPT’s President & Chief Executive Officer, commented, “Our Defense/IT investment strategy, which has concentrated our portfolio near priority U.S. defense installations, continues to produce solid results, as evidenced by the 96.7% leased rate in our Defense / IT segment, which accounts for 90% of our core portfolio annualized rental revenue. Our first quarter results were strong as FFO per share exceeded the midpoint of our guidance range by $0.02, though given the uncertain interest rate environment, we are maintaining the midpoint of our full year guidance at $2.38 per share. Same property Cash NOI increased 8.3% year over year, which led us to increase our full year guidance by 100 basis points. We raised our full year retention rate by 250 basis points, which reflects our tenant’s need to execute their missions at our strategic locations. Leasing overall is off to a great start, having already achieved roughly 70% of our full year development leasing goal, while vacancy leasing is right on track with our 400,000 square foot goal. Our investment grade rated balance sheet is well positioned to navigate the challenging capital markets environment as we have no significant debt maturities until 2026.” “In February, we announced a 3.6% increase to our quarterly dividend, which marks our first dividend increase since 2010. This dividend increase illustrates the high level of confidence we have in our ability to grow our FFO per share, while self-funding the equity required for our expected development pipeline. The outlook for defense spending remains strong, as the FY 2024 Defense budget request calls for a 3.6% year over year increase, which follows the roughly $100 billion increase between FY21-FY23.” Financial Highlights 1st Quarter Financial Results: Diluted earnings per share (“EPS”) was $0.70 for the quarter ended March 31, 2023 compared to $0.52 for the quarter ended March 31, 2022. Diluted funds from operations per share (“FFOPS”), as calculated in accordance with Nareit’s definition and as adjusted for comparability, was $0.59 for the quarter ended March 31, 2023 compared to $0.58 for the quarter ended March 31, 2022. Operating Performance Highlights Operating Portfolio Summary: At March 31, 2023, the Company’s 22.9 million square foot core portfolio was 92.9% occupied and 95.1% leased. Same-Property Performance: At March 31, 2023, the Company’s 20.6 million square foot same-property portfolio was 92.1% occupied and 94.5% leased. The Company’s same-property cash NOI increased 8.3% for the three months ended March 31, 2023, compared to the same period in 2022. Leasing: Total Square Feet Leased: For the quarter ended March 31, 2023, the Company leased 788,000 square feet, including 194,000 square feet of renewals, 99,000 square feet of vacancy leasing, and 495,000 square feet in development projects. Tenant Retention Rates: During the quarter ended March 31, 2023, the Company renewed 63.9% of expiring square feet. Tenant retention rate guidance for 2023 was increased by 250 basis points at the midpoint to 80%-85% from 75%-85%. Rent Spreads & Average Escalations on Renewing Leases: For the quarter ended March 31, 2023, straight-line rents on renewals increased 4.2% and cash rents on renewed space were slightly positive. For the same time period, annual escalations on renewing leases averaged 2.4%. Lease Terms: In the quarter ended March 31, 2023, lease terms averaged 2.7 years on renewing leases, 7.9 years on vacancy leasing and 14.3 years on development leasing. Investment Activity Highlights Development Pipeline: The Company’s development pipeline consists of nine properties totaling 1.5 million square feet that were 92% leased at March 31, 2023. These projects represent a total estimated investment of $477.7 million, of which $165.5 million has been spent. Balance Sheet and Capital Transaction Highlights On January 10, 2023, the Company sold three data center shells to a new, 90%/10% joint venture with entities affiliated with Blackstone, generating approximately $190 million of proceeds. For the quarter ended March 31, 2023, the Company’s adjusted EBITDA fixed charge coverage ratio was 5.0x. At March 31, 2023, the Company’s net debt to in-place adjusted EBITDA ratio was 6.2x and its net debt adjusted for fully-leased development to in-place adjusted EBITDA ratio was 5.8x. At March 31, 2023, and including the effect of interest rate swaps, the Company’s weighted average effective interest rate on its consolidated debt portfolio was 3.0% with a weighted average maturity of 6.5 years; additionally, 98.0% of the Company’s debt was subject to fixed interest rates. Associated Supplemental Presentation Prior to the call, the Company will post a slide presentation to accompany management’s prepared remarks for its first quarter 2023 conference call; the presentation can be viewed and downloaded from the ‘Financial Info – Financial Results’ section of COPT’s Investors website: https://investors.copt.com/financial-information/financial-results 2023 Guidance Management is updating its full-year guidance for diluted EPS and diluted FFOPS, per Nareit and as adjusted for comparability, from the prior range of $1.45-$1.53, and $2.34-$2.42, respectively, to new ranges of $1.46-$1.52, and $2.35-$2.41, respectively. Management is establishing second quarter guidance for diluted EPS and diluted FFOPS per Nareit and as adjusted for comparability at $0.67-$0.69 and $0.57-$0.59, respectively. Reconciliations of projected diluted EPS to projected diluted FFOPS, in accordance with Nareit and as adjusted for comparability are as follows: Reconciliation of Diluted EPS to FFOPS, per Nareit, and As Adjusted for Comparability Quarter Ending June 30, 2023 Year Ending December 31, 2023 Low High Low High Diluted EPS $ 0.67 $ 0.69 $ 1.46 $ 1.52 Real estate-related depreciation and amortization 0.33 0.33 1.32 1.32 Gain on sales of real estate (0.43 ) (0.43 ) (0.43 ) (0.43 ) Diluted FFOPS, Nareit definition and as adjusted for comparability $ 0.57 $ 0.59 $ 2.35 $ 2.41 Conference Call Information Management will discuss first quarter 2023 results on its conference call tomorrow at 12:00 p.m. Eastern Time, details of which are listed below: Conference Call Date: Friday, April 28, 2023 Time: 12:00 p.m. Eastern Time Participants must register for the conference call at the link below to receive the dial-in number and personal pin. Registering only takes a few moments and provides direct access to the conference call without waiting for an operator. You may register at any time, including up to and after the call start time: https://register.vevent.com/register/BI87782b47ac97407ba4fd64c7e403b916 The conference call will also be available via live webcast in the ‘News & Events – IR Calendar’ section of COPT’s Investors website: https://investors.copt.com/news-events/ir-calendar Replay Information A replay of the conference call will be immediately available via webcast only on COPT’s Investors website. Definitions For definitions of certain terms used in this press release, please refer to the information furnished in the Company’s Supplemental Information Package furnished on a Form 8-K which can be found on its website (www.copt.com). Reconciliations of non-GAAP measures to the most directly comparable GAAP measures are included in the attached tables. About COPT COPT is a REIT that owns, manages, leases, develops and selectively acquires office and data center properties. The majority of its portfolio is in locations that support the United States Government and its contractors, most of whom are engaged in national security, defense and information technology (“IT”) related activities servicing what the Company believes are growing, durable, priority missions (“Defense/IT Locations”). The Company also owns a portfolio of office properties located in select urban submarkets in the Greater Washington, DC/Baltimore region with durable Class-A office fundamentals and characteristics (“Regional Office Properties”). As of March 31, 2023, the Company derived 90% of its core portfolio annualized rental revenue from Defense/IT Locations and 10% from its Regional Office Properties. As of the same date and including 24 properties owned through unconsolidated joint ventures, COPT’s core portfolio of 192 properties encompassed 22.9 million square feet and was 95.1% leased. Forward-Looking Information This press release may contain “forward-looking” statements, as defined in Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, that are based on the Company’s current expectations, estimates and projections about future events and financial trends affecting the Company. Forward-looking statements can be identified by the use of words such as “may,” “will,” “should,” “could,” “believe,” “anticipate,” “expect,” “estimate,” “plan” or other comparable terminology. Forward-looking statements are inherently subject to risks and uncertainties, many of which the Company cannot predict with accuracy and some of which the Company might not even anticipate. Although the Company believes that the expectations, estimates and projections reflected in such forward-looking statements are based on reasonable assumptions at the time made, the Company can give no assurance that these expectations, estimates and projections will be achieved. Future events and actual results may differ materially from those discussed in the forward-looking statements and the Company undertakes no obligation to update or supplement any forward-looking statements. The areas of risk that may affect these expectations, estimates and projections include, but are not limited to, those risks described in Item 1A of the Company’s Annual Report on Form 10-K for the year ended December 31, 2022. Corporate Office Properties Trust Summary Financial Data (unaudited) (dollars and shares in thousands, except per share data) For the Three Months Ended March 31, 2023 2022 Revenues Lease revenue $ 150,560 $ 141,389 Other property revenue 1,121 891 Construction contract and other service revenues 15,820 53,200 Total revenues 167,501 195,480 Operating expenses Property operating expenses 59,420 57,181 Depreciation and amortization associated with real estate operations 36,995 34,264 Construction contract and other service expenses 15,201 51,650 General and administrative expenses 7,996 6,670 Leasing expenses 1,999 1,874 Business development expenses and land carry costs 495 783 Total operating expenses 122,106 152,422 Interest expense (16,442 ) (14,424 ) Interest and other income 2,323 1,893 Credit loss (expense) recoveries (67 ) 316 Gain on sales of real estate 49,378 15 Loss on early extinguishment of debt — (342 ) Income from continuing operations before equity in (loss) income of unconsolidated entities and income taxes 80,587 30,516 Equity in (loss) income of unconsolidated entities (64 ) 888 Income tax expense (125 ) (153 ) Income from continuing operations 80,398 31,251 Discontinued operations — 29,573 Net Income 80,398 60,824 Net income attributable to noncontrolling interests: Common units in the Operating Partnership (“OP”) (1,293 ) (856 ) Other consolidated entities (326 ) (649 ) Net income attributable to common shareholders $ 78,779 $ 59,319 Earnings per share (“EPS”) computation: Numerator for diluted EPS: Net income attributable to common shareholders $ 78,779 $ 59,319 Amount allocable to share-based compensation awards (248 ) (181 ) Redeemable noncontrolling interests (64 ) (39 ) Numerator for diluted EPS $ 78,467 $ 59,099 Denominator: Weighted average common shares - basic 112,127 112,020 Dilutive effect of share-based compensation awards 410 426 Dilutive effect of redeemable noncontrolling interests 91 132 Weighted average common shares - diluted 112,628 112,578 Diluted EPS $ 0.70 $ 0.52 Corporate Office Properties Trust Summary Financial Data (unaudited) (in thousands, except per share data) For the Three Months Ended March 31, 2023 2022 Net income $ 80,398 $ 60,824 Real estate-related depreciation and amortization 36,995 34,264 Gain on sales of real estate from continuing and discontinued operations (49,378 ) (28,579 ) Depreciation and amortization on unconsolidated real estate JVs 801 526 Funds from operations (“FFO”) 68,816 67,035 FFO allocable to other noncontrolling interests (708 ) (1,042 ) Basic FFO allocable to share-based compensation awards (466 ) (362 ) Basic FFO available to common share and common unit holders (“Basic FFO”) 67,642 65,631 Redeemable noncontrolling interests (30 ) (6 ) Diluted FFO adjustments allocable to share-based compensation awards 39 27 Diluted FFO available to common share and common unit holders (“Diluted FFO”) 67,651 65,652 Loss on early extinguishment of debt — 342 Diluted FFO comparability adjustments allocable to share-based compensation awards — (2 ) Diluted FFO available to common share and common unit holders, as adjusted for comparability 67,651 65,992 Straight line rent adjustments and lease incentive amortization (3,516 ) (3,189 ) Amortization of intangibles and other assets included in net operating income (“NOI”) (19 ) (372 ) Share-based compensation, net of amounts capitalized 1,733 2,111 Amortization of deferred financing costs 632 597 Amortization of net debt discounts, net of amounts capitalized 618 605 Replacement capital expenditures (28,210 ) (17,358 ) Other (273 ) 39 Diluted adjusted funds from operations available to common share and common unit holders (“Diluted AFFO”) $ 38,616 $ 48,425 Diluted FFO per share $ 0.59 $ 0.58 Diluted FFO per share, as adjusted for comparability $ 0.59 $ 0.58 Dividends/distributions per common share/unit $ 0.285 $ 0.275 Corporate Office Properties Trust Summary Financial Data (unaudited) (Dollars and shares in thousands, except per share data) March 31, 2023 December 31, 2022 Balance Sheet Data Properties, net of accumulated depreciation $ 3,614,075 $ 3,556,398 Total assets $ 4,177,992 $ 4,257,275 Debt per balance sheet $ 2,123,012 $ 2,231,794 Total liabilities $ 2,383,730 $ 2,509,527 Redeemable noncontrolling interests $ 25,448 $ 26,293 Total equity $ 1,768,814 $ 1,721,455 Debt to assets 50.8 % 52.4 % Net debt to adjusted book 38.1 % 39.8 % Core Portfolio Data (as of period end) Number of operating properties 192 192 Total operational square feet (in thousands) 22,863 22,849 % Occupied 92.9 % 92.8 % % Leased 95.1 % 95.3 % For the Three Months Ended March 31, 2023 2022 GAAP Payout ratio: Net income 40.6% 51.6% Debt ratios: Net income to interest expense ratio 4.9x 4.2x Debt to net income ratio 6.6x 8.9x Non-GAAP Payout ratios: Diluted FFO 47.9% 47.6% Diluted FFO, as adjusted for comparability 47.9% 47.4% Diluted AFFO 83.9% 64.5% Debt ratios: Adjusted EBITDA fixed charge coverage ratio 5.0x 5.2x Net debt to in-place adjusted EBITDA ratio 6.2x 6.6x Net debt adj. for fully-leased development to in-place adj. EBITDA ratio 5.8x 6.1x Reconciliation of denominators for per share measures Denominator for diluted EPS 112,628 112,578 Weighted average common units 1,489 1,384 Denominator for diluted FFO per share and as adjusted for comparability 114,117 113,962 Corporate Office Properties Trust Summary Financial Data (unaudited) (in thousands) For the Three Months Ended March 31, 2023 2022 Numerators for Payout Ratios Dividends on unrestricted common and deferred shares $ 31,989 $ 30,837 Distributions on unrestricted common units 430 404 Dividends and distributions on restricted shares and units 215 158 Total dividends and distributions for GAAP payout ratio 32,634 31,399 Dividends and distributions on antidilutive shares and units (216 ) (145 ) Dividends and distributions for non-GAAP payout ratios $ 32,418 $ 31,254 Reconciliation of net income to earnings before interest, income taxes, depreciation and amortization for real estate (“EBITDAre”), adjusted EBITDA and in-place adjusted EBITDA Net income $ 80,398 $ 60,824 Interest expense 16,442 14,424 Income tax expense 125 153 Real estate-related depreciation and amortization 36,995 34,264 Other depreciation and amortization 602 607 Gain on sales of real estate from continuing and discontinued operations (49,378 ) (28,579 ) Adjustments from unconsolidated real estate JVs 1,704 758 EBITDAre 86,888 82,451 Loss on early extinguishment of debt — 342 Net gain on other investments — (565 ) Credit loss expense (recoveries) 67 (316 ) Business development expenses 241 326 Executive transition costs 247 — Adjusted EBITDA 87,443 82,238 Pro forma NOI adjustment for property changes within period (318 ) 579 Change in collectability of deferred rental revenue 899 — In-place adjusted EBITDA $ 88,024 $ 82,817 Reconciliations of tenant improvements and incentives, building improvements and leasing costs for operating properties to replacement capital expenditures Tenant improvements and incentives $ 19,986 $ 10,010 Building improvements 2,141 6,832 Leasing costs 1,750 2,270 Net additions to tenant improvements and incentives 4,839 1,808 Excluded building improvements and leasing costs (506 ) (3,562 ) Replacement capital expenditure $ 28,210 $ 17,358 Corporate Office Properties Trust Summary Financial Data (unaudited) (in thousands) For the Three Months Ended March 31, 2023 2022 Reconciliation of interest expense to the denominator for fixed charge coverage-Adjusted EBITDA Interest expense $ 16,442 $ 14,424 Less: Amortization of deferred financing costs (632 ) (597 ) Less: Amortization of net debt discounts, net of amounts capitalized (618 ) (605 ) COPT’s share of interest expense of unconsolidated real estate JVs, excluding amortization of deferred financing costs and net debt premium and loss on interest rate derivatives 773 231 Scheduled principal amortization 790 774 Capitalized interest 770 1,529 Denominator for fixed charge coverage-Adjusted EBITDA $ 17,525 $ 15,756 Reconciliation of net income to NOI from real estate operations, same properties NOI from real estate operations and same properties cash NOI from real estate operations Net income $ 80,398 $ 60,824 Construction contract and other service revenues (15,820 ) (53,200 ) Depreciation and other amortization associated with real estate operations 36,995 34,264 Construction contract and other service expenses 15,201 51,650 General and administrative expenses 7,996 6,670 Leasing expenses 1,999 1,874 Business development expenses and land carry costs 495 783 Interest expense 16,442 14,424 Interest and other income (2,323 ) (1,893 ) Credit loss expense (recoveries) 67 (316 ) Gain on sales of real estate from continuing operations (49,378 ) (15 ) Loss on early extinguishment of debt — 342 Equity in loss (income) of unconsolidated entities 64 (888 ) Unconsolidated real estate JVs NOI allocable to COPT included in equity in income of unconsolidated entities 1,642 1,080 Income tax expense 125 153 Discontinued operations — (29,573 ) Revenues from real estate operations from discontinued operations — 1,980 Property operating expenses from discontinued operations — (971 ) NOI from real estate operations 93,903 87,188 Non-Same Properties NOI from real estate operations (9,451 ) (5,762 ) Same Properties NOI from real estate operations 84,452 81,426 Straight line rent adjustments and lease incentive amortization 1,392 (2,291 ) Amortization of acquired above- and below-market rents (166 ) (519 ) Lease termination fees, net (1,221 ) (221 ) Tenant funded landlord assets and lease incentives (1,188 ) (1,510 ) Cash NOI adjustments in unconsolidated real estate JVs (75 ) (98 ) Same Properties Cash NOI from real estate operations $ 83,194 $ 76,787 Corporate Office Properties Trust Summary Financial Data (unaudited) (in thousands) March 31, 2023 December 31, 2022 Reconciliation of total assets to adjusted book Total assets $ 4,177,992 $ 4,257,275 Accumulated depreciation 1,300,430 1,267,434 Accumulated depreciation included in assets held for sale — 6,014 Accumulated amortization of intangibles on property acquisitions and deferred leasing costs 224,791 222,779 COPT’s share of liabilities of unconsolidated real estate JVs 60,734 52,404 COPT’s share of accumulated depreciation and amortization of unconsolidated real estate JVs 6,936 6,078 Less: Property - operating lease liabilities (34,896 ) (28,759 ) Less: Property - finance lease liabilities (431 ) — Less: Cash and cash equivalents (15,199 ) (12,337 ) Less: COPT’s share of cash of unconsolidated real estate JVs (881 ) (456 ) Adjusted book $ 5,719,476 $ 5,770,432 March 31, 2023 December 31, 2022 March 31, 2022 Reconciliation of debt to net debt, net debt adjusted for fully-leased development and pro forma net debt adjusted for fully-leased development Debt per balance sheet $ 2,123,012 $ 2,231,794 $ 2,156,784 Net discounts and deferred financing costs 22,250 23,160 24,728 COPT’s share of unconsolidated JV gross debt 52,226 52,100 26,250 Gross debt 2,197,488 2,307,054 2,207,762 Less: Cash and cash equivalents (15,199 ) (12,337 ) (19,347 ) Less: COPT’s share of cash of unconsolidated real estate JVs (881 ) (456 ) (458 ) Net debt 2,181,408 2,294,261 2,187,957 Costs incurred on fully-leased development properties (137,309 ) (95,972 ) (154,259 ) Net debt adjusted for fully-leased development $ 2,044,099 $ 2,198,289 $ 2,033,698 Net debt $ 2,181,408 $ 2,294,261 $ 2,187,957 Pro forma debt adjustments from subsequent event transaction proceeds N/A (189,000 ) N/A Pro forma net debt 2,181,408 2,105,261 2,187,957 Costs incurred on fully-leased development properties (137,309 ) (95,972 ) (154,259 ) Pro forma net debt adjusted for fully-leased development $ 2,044,099 $ 2,009,289 $ 2,033,698 Corporate Office Properties Trust View source version on businesswire.com: https://www.businesswire.com/news/home/20230427005939/en/
IR Contacts: Venkat Kommineni, CFA 443-285-5587 venkat.kommineni@copt.com Michelle Layne 443-285-5452 michelle.layne@copt.com