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COPT Reports Second Quarter 2023 Results

EPS of $0.27 for 2Q23;

FFO per Share, as Adjusted for Comparability, of $0.60

Exceeded High-End of Guidance

Increased Midpoint of 2023 FFO per Share Guidance by 2-cents to $2.40

Core Portfolio 93.6% Occupied and 95.0% Leased

Same-Property Cash NOI Increased 5.8% in 2Q23 and 7.0% Year-to-Date

Raising Same-Property Cash NOI Guidance for the Year by 100 Basis Points, to 4.5%-5.5%

1.5 million SF of Active Developments are 92% Leased

Strong Leasing Volume in 1H23; Well Positioned to Achieve 2023 Goals

Total Leasing of 891,000 SF in 2Q23 and 1.7 million SF Year-to-Date

88,000 SF of Vacancy Leasing in 2Q23 and 187,000 SF Year-to-Date

On Track to Achieve Annual Goal of 400,000 SF

Tenant Retention of 89% in 2Q23 and 83% Year-to-Date

On Track to Achieve Annual Goal of 80%-85%

495,000 SF of Development Leasing Year-to-Date

On Track to Achieve Annual Goal of 700,000 SF

Corporate Office Properties Trust (“COPT” or the “Company”) (NYSE: OFC) announced results for the second quarter ended June 30, 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. Since 2022, the significant growth in defense spending has materialized into elevated tenant demand for our portfolio, resulting in a 96.8% leased rate in our Defense/IT Locations segment, which accounts for 90% of our core portfolio annualized rental revenue. This is the highest leased rate since we started reporting the segment in 2015. Our second quarter results were strong as FFO per share exceeded the midpoint of our guidance range by $0.02. Given our outperformance year to date, we are increasing the midpoint of our full year FFO per share guidance by $0.02 to $2.40 per share, which represents a 2% increase over 2022’s results. Same-property cash NOI increased 5.8% for 2Q23 over 2Q22, and 7.0% for the first half of 2023 over the first half of 2022, which led us to again increase our full year change in cash NOI guidance by 100 basis points. Our leasing activity is right on track as we are roughly halfway towards our full year vacancy leasing goal and 70% towards our development leasing 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, with 96% of our NOI unencumbered. We remain confident in our strategy and expect to continue to allocate capital to investments at our Defense/IT Locations that will support continued growth in FFO per share and shareholder value.”

Financial Highlights

2nd Quarter Financial Results:

  • Diluted earnings per share (“EPS”) was $0.27 for the quarter ended June 30, 2023 compared to $0.29 for the quarter ended June 30, 2022.
  • Diluted funds from operations per share (“FFOPS”), as calculated in accordance with Nareit’s definition, and FFOPS, as adjusted for comparability, were $0.60 for the quarter ended June 30, 2023 compared to $0.59 for the quarter ended June 30, 2022.

Operating Performance Highlights

Operating Portfolio Summary:

  • At June 30, 2023, the Company’s 22.9 million square foot core portfolio was 93.6% occupied and 95.0% leased.

Same-Property Performance:

  • At June 30, 2023, the Company’s 20.6 million square foot same-property portfolio was 92.8% occupied and 94.4% leased.
  • The Company’s same-property cash NOI increased 5.8% for the three months ended June 30, 2023 compared to the same period in 2022.

Leasing:

  • Total Square Feet Leased: For the quarter ended June 30, 2023, the Company leased 891,000 square feet, including 803,000 square feet of renewals and 88,000 square feet of vacancy leasing. For the six months ended June 30, 2023, the Company executed 1.7 million square feet of total leasing, including 1.0 million square feet of renewals, 187,000 square feet of vacancy leasing, and 495,000 square feet in development projects.
  • Tenant Retention Rates: During the quarter and six months ended June 30, 2023, the Company renewed 89.0% and 82.7%, respectively, of expiring square feet.
  • Rent Spreads & Average Escalations on Renewing Leases: For the quarter and six months ended June 30, 2023, straight-line rents on renewals increased 7.4% and 6.9%, respectively, and cash rents on renewed space increased 1.3% and 1.1%, respectively. For the same time periods, annual escalations on renewing leases averaged 2.6%.
  • Lease Terms: In the quarter ended June 30, 2023, lease terms averaged 5.0 years on renewing leases and 6.9 years on vacancy leasing. For the six months ended June 30, 2023, lease terms averaged 4.5 years on renewing leases, 7.4 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 June 30, 2023. These projects represent a total estimated investment of $480.8 million, of which $222.1 million has been spent.

Balance Sheet and Capital Transaction Highlights

  • For the quarter ended June 30, 2023, the Company’s adjusted EBITDA fixed charge coverage ratio was 4.9x.
  • At June 30, 2023, the Company’s net debt to in-place adjusted EBITDA ratio was 6.3x and its net debt adjusted for fully-leased development to in-place adjusted EBITDA ratio was 5.7x.
  • At June 30, 2023, and including the effect of interest rate swaps, the Company’s weighted average effective interest rate on its consolidated debt portfolio was 3.1% with a weighted average maturity of 6.2 years; additionally, 95.6% 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 second 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 $1.46-$1.52, and $2.35-$2.41, respectively, to new ranges of $1.49-$1.53, and $2.38-$2.42, respectively. Management is establishing third quarter guidance for diluted EPS and diluted FFOPS per Nareit and as adjusted for comparability at $0.26-$0.28 and $0.59-$0.61, 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

September 30, 2023

 

Year Ending

December 31, 2023

 

 

Low

 

High

 

Low

 

High

Diluted EPS

 

$

0.26

 

$

0.28

 

$

1.49

 

 

$

1.53

 

Real estate-related depreciation and amortization

 

 

0.33

 

 

0.33

 

 

1.32

 

 

 

1.32

 

Gain on sales of real estate

 

 

 

 

 

 

(0.43

)

 

 

(0.43

)

Diluted FFOPS, Nareit definition and as adjusted for comparability

 

$

0.59

 

$

0.61

 

$

2.38

 

 

$

2.42

 

Conference Call Information

Management will discuss second 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, July 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/BI48eea2c0fe934b24aefdd77f5c963ea1

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 June 30, 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% 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.

Source: Corporate Office Properties Trust

Corporate Office Properties Trust

Summary Financial Data

(unaudited)

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

 

 

For the Three Months

Ended June 30,

 

For the Six Months

Ended June 30,

 

 

2023

 

 

 

2022

 

 

 

2023

 

 

 

2022

 

Revenues

 

 

 

 

 

 

 

Lease revenue

$

153,682

 

 

$

142,277

 

 

$

304,242

 

 

$

283,666

 

Other property revenue

 

1,271

 

 

 

969

 

 

 

2,392

 

 

 

1,860

 

Construction contract and other service revenues

 

14,243

 

 

 

42,557

 

 

 

30,063

 

 

 

95,757

 

Total revenues

 

169,196

 

 

 

185,803

 

 

 

336,697

 

 

 

381,283

 

Operating expenses

 

 

 

 

 

 

 

Property operating expenses

 

61,600

 

 

 

54,116

 

 

 

121,020

 

 

 

111,297

 

Depreciation and amortization associated with real estate operations

 

37,600

 

 

 

34,812

 

 

 

74,595

 

 

 

69,076

 

Construction contract and other service expenses

 

13,555

 

 

 

41,304

 

 

 

28,756

 

 

 

92,954

 

General and administrative expenses

 

7,287

 

 

 

6,467

 

 

 

15,283

 

 

 

13,137

 

Leasing expenses

 

2,345

 

 

 

1,888

 

 

 

4,344

 

 

 

3,762

 

Business development expenses and land carry costs

 

726

 

 

 

701

 

 

 

1,221

 

 

 

1,484

 

Total operating expenses

 

123,113

 

 

 

139,288

 

 

 

245,219

 

 

 

291,710

 

Interest expense

 

(16,519

)

 

 

(14,808

)

 

 

(32,961

)

 

 

(29,232

)

Interest and other income, net

 

2,143

 

 

 

1,593

 

 

 

4,399

 

 

 

3,802

 

Gain on sales of real estate

 

14

 

 

 

(19

)

 

 

49,392

 

 

 

(4

)

Loss on early extinguishment of debt

 

 

 

 

 

 

 

 

 

 

(342

)

Income from continuing operations before equity in income of unconsolidated entities and income taxes

 

31,721

 

 

 

33,281

 

 

 

112,308

 

 

 

63,797

 

Equity in income of unconsolidated entities

 

111

 

 

 

318

 

 

 

47

 

 

 

1,206

 

Income tax expense

 

(190

)

 

 

(4

)

 

 

(315

)

 

 

(157

)

Income from continuing operations

 

31,642

 

 

 

33,595

 

 

 

112,040

 

 

 

64,846

 

Discontinued operations

 

 

 

 

 

 

 

 

 

 

29,573

 

Net Income

 

31,642

 

 

 

33,595

 

 

 

112,040

 

 

 

94,419

 

Net income attributable to noncontrolling interests:

 

 

 

 

 

 

 

Common units in the Operating Partnership (“OP”)

 

(516

)

 

 

(496

)

 

 

(1,809

)

 

 

(1,352

)

Other consolidated entities

 

(839

)

 

 

(789

)

 

 

(1,165

)

 

 

(1,438

)

Net income attributable to common shareholders

$

30,287

 

 

$

32,310

 

 

$

109,066

 

 

$

91,629

 

 

 

 

 

 

 

 

 

Earnings per share (“EPS”) computation:

 

 

 

 

 

 

 

Numerator for diluted EPS:

 

 

 

 

 

 

 

Net income attributable to common shareholders

$

30,287

 

 

$

32,310

 

 

$

109,066

 

 

$

91,629

 

Amount allocable to share-based compensation awards

 

(98

)

 

 

(75

)

 

 

(349

)

 

 

(259

)

Redeemable noncontrolling interests

 

(51

)

 

 

(30

)

 

 

(115

)

 

 

(69

)

Numerator for diluted EPS

$

30,138

 

 

$

32,205

 

 

$

108,602

 

 

$

91,301

 

Denominator:

 

 

 

 

 

 

 

Weighted average common shares - basic

 

112,188

 

 

 

112,082

 

 

 

112,157

 

 

 

112,052

 

Dilutive effect of share-based compensation awards

 

426

 

 

 

429

 

 

 

418

 

 

 

427

 

Dilutive effect of redeemable noncontrolling interests

 

62

 

 

 

126

 

 

 

77

 

 

 

129

 

Weighted average common shares - diluted

 

112,676

 

 

 

112,637

 

 

 

112,652

 

 

 

112,608

 

Diluted EPS

$

0.27

 

 

$

0.29

 

 

$

0.96

 

 

$

0.81

 

Corporate Office Properties Trust

Summary Financial Data

(unaudited)

(in thousands, except per share data)

 

 

For the Three Months

Ended June 30,

For the Six Months

Ended June 30,

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

Net income

$

31,642

 

$

33,595

 

$

112,040

 

$

94,419

 

Real estate-related depreciation and amortization

 

37,600

 

 

34,812

 

 

74,595

 

 

69,076

 

Gain on sales of real estate from continuing and discontinued operations

 

(14

)

 

19

 

 

(49,392

)

 

(28,560

)

Depreciation and amortization on unconsolidated real estate JVs

 

805

 

 

525

 

 

1,606

 

 

1,051

 

Funds from operations (“FFO”)

 

70,033

 

 

68,951

 

 

138,849

 

 

135,986

 

FFO allocable to other noncontrolling interests

 

(1,239

)

 

(1,178

)

 

(1,947

)

 

(2,220

)

Basic FFO allocable to share-based compensation awards

 

(480

)

 

(357

)

 

(946

)

 

(719

)

Basic FFO available to common share and common unit holders (“Basic FFO”)

 

68,314

 

 

67,416

 

 

135,956

 

 

133,047

 

Redeemable noncontrolling interests

 

(28

)

 

4

 

 

(58

)

 

(2

)

Diluted FFO adjustments allocable to share-based compensation awards

 

37

 

 

27

 

 

76

 

 

54

 

Diluted FFO available to common share and common unit holders (“Diluted FFO”)

 

68,323

 

 

67,447

 

 

135,974

 

 

133,099

 

Loss on early extinguishment of debt

 

 

 

 

 

 

 

342

 

Executive transition costs

 

248

 

 

137

 

 

248

 

 

137

 

Diluted FFO comparability adjustments allocable to share-based compensation awards

 

(2

)

 

 

 

(2

)

 

(2

)

Diluted FFO available to common share and common unit holders, as adjusted for comparability

 

68,569

 

 

67,584

 

 

136,220

 

 

133,576

 

Straight line rent adjustments and lease incentive amortization

 

(3,161

)

 

(3,198

)

 

(6,677

)

 

(6,387

)

Amortization of intangibles and other assets included in net operating income (“NOI”)

 

17

 

 

49

 

 

(2

)

 

(323

)

Share-based compensation, net of amounts capitalized

 

2,213

 

 

2,154

 

 

3,946

 

 

4,265

 

Amortization of deferred financing costs

 

628

 

 

541

 

 

1,260

 

 

1,138

 

Amortization of net debt discounts, net of amounts capitalized

 

622

 

 

608

 

 

1,240

 

 

1,213

 

Replacement capital expenditures

 

(22,664

)

 

(17,717

)

 

(50,874

)

 

(35,075

)

Other

 

(221

)

 

406

 

 

(494

)

 

445

 

Diluted adjusted funds from operations available to common share and common unit holders (“Diluted AFFO”)

$

46,003

 

$

50,427

 

$

84,619

 

$

98,852

 

Diluted FFO per share

$

0.60

 

$

0.59

 

$

1.19

 

$

1.17

 

Diluted FFO per share, as adjusted for comparability

$

0.60

 

$

0.59

 

$

1.19

 

$

1.17

 

Dividends/distributions per common share/unit

$

0.285

 

$

0.275

 

$

0.57

 

$

0.55

 

Corporate Office Properties Trust

Summary Financial Data

(unaudited)

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

 

 

June 30,

2023

 

December 31,

2022

Balance Sheet Data

 

 

 

Properties, net of accumulated depreciation

$

3,672,235

 

 

$

3,556,398

 

Total assets

$

4,246,346

 

 

$

4,257,275

 

Debt per balance sheet

$

2,176,174

 

 

$

2,231,794

 

Total liabilities

$

2,447,436

 

 

$

2,509,527

 

Redeemable noncontrolling interests

$

22,215

 

 

$

26,293

 

Total equity

$

1,776,695

 

 

$

1,721,455

 

Debt to assets

 

51.2

%

 

 

52.4

%

Net debt to adjusted book

 

38.4

%

 

 

39.8

%

 

 

 

 

Core Portfolio Data (as of period end)

 

 

 

Number of operating properties

 

192

 

 

 

192

 

Total operational square feet (in thousands)

 

22,878

 

 

 

22,849

 

% Occupied

 

93.6

%

 

 

92.8

%

% Leased

 

95.0

%

 

 

95.3

%

 

For the Three Months

Ended June 30,

 

For the Six Months

Ended June 30,

2023

 

 

2022

 

 

2023

 

 

2022

 

GAAP

 

 

 

 

 

 

 

Payout ratio:

 

 

 

 

 

 

 

Net income

103.1

%

 

93.4

%

 

58.3

%

 

66.5

%

Debt ratios:

 

 

 

 

 

 

 

Net income to interest expense ratio

1.9x

 

2.3x

 

3.4x

 

3.2x

Debt to net income ratio

17.2x

 

16.2x

 

N/A

 

 

N/A

 

Non-GAAP

 

 

 

 

 

 

 

Payout ratios:

 

 

 

 

 

 

 

Diluted FFO

47.5

%

 

46.3

%

 

47.7

%

 

47.0

%

Diluted FFO, as adjusted for comparability

47.3

%

 

46.3

%

 

47.6

%

 

46.8

%

Diluted AFFO

70.5

%

 

62.0

%

 

76.6

%

 

63.2

%

Debt ratios:

 

 

 

 

 

 

 

Adjusted EBITDA fixed charge coverage ratio

4.9x

 

5.3x

 

5.0x

 

5.3x

Net debt to in-place adjusted EBITDA ratio

6.3x

 

6.4x

 

N/A

 

 

N/A

 

Net debt adj. for fully-leased development to in-place adj. EBITDA ratio

5.7x

 

5.8x

 

N/A

 

 

N/A

 

 

 

 

 

 

 

 

 

Reconciliation of denominators for per share measures

 

 

 

 

 

 

Denominator for diluted EPS

112,676

 

 

112,637

 

 

112,652

 

 

112,608

 

Weighted average common units

1,514

 

 

1,476

 

 

1,502

 

 

1,430

 

Denominator for diluted FFO per share and as adjusted for comparability

114,190

 

 

114,113

 

 

114,154

 

 

114,038

 

Corporate Office Properties Trust

Summary Financial Data

(unaudited)

(in thousands)

 

 

For the Three Months

Ended June 30,

 

For the Six Months

Ended June 30,

 

 

2023

 

 

 

2022

 

 

 

2023

 

 

 

2022

 

Numerators for Payout Ratios

 

 

 

 

 

 

 

Dividends on unrestricted common and deferred shares

$

31,995

 

 

$

30,842

 

 

$

63,984

 

 

$

61,679

 

Distributions on unrestricted common units

 

433

 

 

 

407

 

 

 

863

 

 

 

811

 

Dividends and distributions on restricted shares and units

 

204

 

 

 

135

 

 

 

419

 

 

 

293

 

Total dividends and distributions for GAAP payout ratio

 

32,632

 

 

 

31,384

 

 

 

65,266

 

 

 

62,783

 

Dividends and distributions on antidilutive shares and units

 

(205

)

 

 

(123

)

 

 

(421

)

 

 

(268

)

Dividends and distributions for non-GAAP payout ratios

$

32,427

 

 

$

31,261

 

 

$

64,845

 

 

$

62,515

 

 

 

 

 

 

 

 

 

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

$

31,642

 

 

$

33,595

 

 

$

112,040

 

 

$

94,419

 

Interest expense

 

16,519

 

 

 

14,808

 

 

 

32,961

 

 

 

29,232

 

Income tax expense

 

190

 

 

 

4

 

 

 

315

 

 

 

157

 

Real estate-related depreciation and amortization

 

37,600

 

 

 

34,812

 

 

 

74,595

 

 

 

69,076

 

Other depreciation and amortization

 

609

 

 

 

552

 

 

 

1,211

 

 

 

1,159

 

Gain on sales of real estate from continuing and discontinued operations

 

(14

)

 

 

19

 

 

 

(49,392

)

 

 

(28,560

)

Adjustments from unconsolidated real estate JVs

 

1,559

 

 

 

760

 

 

 

3,263

 

 

 

1,518

 

EBITDAre

 

88,105

 

 

 

84,550

 

 

 

174,993

 

 

 

167,001

 

Loss on early extinguishment of debt

 

 

 

 

 

 

 

 

 

 

342

 

Net gain on other investments

 

 

 

 

1

 

 

 

 

 

 

(564

)

Credit loss expense (recoveries)

 

238

 

 

 

225

 

 

 

305

 

 

 

(91

)

Business development expenses

 

394

 

 

 

385

 

 

 

635

 

 

 

711

 

Executive transition costs

 

307

 

 

 

137

 

 

 

554

 

 

 

137

 

Adjusted EBITDA

 

89,044

 

 

 

85,298

 

 

$

176,487

 

 

$

167,536

 

Pro forma NOI adjustment for property changes within period

 

56

 

 

 

127

 

 

 

 

 

Change in collectability of deferred rental revenue

 

28

 

 

 

231

 

 

 

 

 

In-place adjusted EBITDA

$

89,128

 

 

$

85,656

 

 

 

 

 

 

 

 

 

 

 

 

 

Reconciliations of tenant improvements and incentives, building improvements and leasing costs for operating properties to replacement capital expenditures

 

 

 

 

 

 

 

Tenant improvements and incentives

$

32,619

 

 

$

10,655

 

 

$

52,605

 

 

$

20,665

 

Building improvements

 

2,766

 

 

 

6,751

 

 

 

4,907

 

 

 

13,583

 

Leasing costs

 

3,542

 

 

 

1,748

 

 

 

5,292

 

 

 

4,018

 

Net (exclusions from) additions to tenant improvements and incentives

 

(16,007

)

 

 

474

 

 

 

(11,168

)

 

 

2,282

 

Excluded building improvements and leasing costs

 

(256

)

 

 

(1,911

)

 

 

(762

)

 

 

(5,473

)

Replacement capital expenditures

$

22,664

 

 

$

17,717

 

 

$

50,874

 

 

$

35,075

 

 

Corporate Office Properties Trust

Summary Financial Data

(unaudited)

(in thousands)

 

 

For the Three Months

Ended June 30,

 

For the Six Months

Ended June 30,

 

 

2023

 

 

 

2022

 

 

 

2023

 

 

 

2022

 

Reconciliation of interest expense to the denominator for fixed charge coverage-Adjusted EBITDA

 

 

 

 

 

 

 

Interest expense

$

16,519

 

 

$

14,808

 

 

$

32,961

 

 

$

29,232

 

Less: Amortization of deferred financing costs

 

(628

)

 

 

(541

)

 

 

(1,260

)

 

 

(1,138

)

Less: Amortization of net debt discounts, net of amounts capitalized

 

(622

)

 

 

(608

)

 

 

(1,240

)

 

 

(1,213

)

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

 

791

 

 

 

233

 

 

 

1,564

 

 

 

464

 

Scheduled principal amortization

 

746

 

 

 

844

 

 

 

1,536

 

 

 

1,618

 

Capitalized interest

 

1,194

 

 

 

1,376

 

 

 

1,964

 

 

 

2,905

 

Denominator for fixed charge coverage-Adjusted EBITDA

$

18,000

 

 

$

16,112

 

 

$

35,525

 

 

$

31,868

 

 

 

 

 

 

 

 

 

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

$

31,642

 

 

$

33,595

 

 

$

112,040

 

 

$

94,419

 

Construction contract and other service revenues

 

(14,243

)

 

 

(42,557

)

 

 

(30,063

)

 

 

(95,757

)

Depreciation and other amortization associated with real estate operations

 

37,600

 

 

 

34,812

 

 

 

74,595

 

 

 

69,076

 

Construction contract and other service expenses

 

13,555

 

 

 

41,304

 

 

 

28,756

 

 

 

92,954

 

General and administrative expenses

 

7,287

 

 

 

6,467

 

 

 

15,283

 

 

 

13,137

 

Leasing expenses

 

2,345

 

 

 

1,888

 

 

 

4,344

 

 

 

3,762

 

Business development expenses and land carry costs

 

726

 

 

 

701

 

 

 

1,221

 

 

 

1,484

 

Interest expense

 

16,519

 

 

 

14,808

 

 

 

32,961

 

 

 

29,232

 

Interest and other income, net

 

(2,143

)

 

 

(1,593

)

 

 

(4,399

)

 

 

(3,802

)

Gain on sales of real estate from continuing operations

 

(14

)

 

 

19

 

 

 

(49,392

)

 

 

4

 

Loss on early extinguishment of debt

 

 

 

 

 

 

 

 

 

 

342

 

Equity in income of unconsolidated entities

 

(111

)

 

 

(318

)

 

 

(47

)

 

 

(1,206

)

Unconsolidated real estate JVs NOI allocable to COPT included in equity in income of unconsolidated entities

 

1,671

 

 

 

1,080

 

 

 

3,313

 

 

 

2,160

 

Income tax expense

 

190

 

 

 

4

 

 

 

315

 

 

 

157

 

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

 

95,024

 

 

 

90,210

 

 

 

188,927

 

 

 

177,398

 

Non-Same Properties NOI from real estate operations

 

(8,770

)

 

 

(6,603

)

 

 

(18,221

)

 

 

(12,365

)

Same Properties NOI from real estate operations

 

86,254

 

 

 

83,607

 

 

 

170,706

 

 

 

165,033

 

Straight line rent adjustments and lease incentive amortization

 

1,232

 

 

 

(1,301

)

 

 

2,624

 

 

 

(3,592

)

Amortization of acquired above- and below-market rents

 

(129

)

 

 

(97

)

 

 

(295

)

 

 

(616

)

Lease termination fees, net

 

(1,059

)

 

 

(399

)

 

 

(2,280

)

 

 

(620

)

Tenant funded landlord assets and lease incentives

 

(1,191

)

 

 

(1,311

)

 

 

(2,379

)

 

 

(2,821

)

Cash NOI adjustments in unconsolidated real estate JVs

 

(70

)

 

 

(92

)

 

 

(145

)

 

 

(190

)

Same Properties Cash NOI from real estate operations

$

85,037

 

 

$

80,407

 

 

$

168,231

 

 

$

157,194

 

Corporate Office Properties Trust

Summary Financial Data

(unaudited)

(in thousands)

 

 

 

June 30,

2023

 

December 31,

2022

Reconciliation of total assets to adjusted book

 

 

 

 

Total assets

 

$

4,246,346

 

 

$

4,257,275

 

Accumulated depreciation

 

 

1,334,066

 

 

 

1,267,434

 

Accumulated depreciation included in assets held for sale

 

 

 

 

 

6,014

 

Accumulated amortization of intangibles on property acquisitions and deferred leasing costs

 

 

226,555

 

 

 

222,779

 

COPT’s share of liabilities of unconsolidated real estate JVs

 

 

60,724

 

 

 

52,404

 

COPT’s share of accumulated depreciation and amortization of unconsolidated real estate JVs

 

 

7,800

 

 

 

6,078

 

Less: Property - operating lease liabilities

 

 

(33,923

)

 

 

(28,759

)

Less: Property - finance lease liabilities

 

 

(426

)

 

 

 

Less: Cash and cash equivalents

 

 

(14,273

)

 

 

(12,337

)

Less: COPT’s share of cash of unconsolidated real estate JVs

 

 

(974

)

 

 

(456

)

Adjusted book

 

$

5,825,895

 

 

$

5,770,432

 

 

 

June 30,

2023

 

December 31,

2022

 

June 30,

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

 

$

2,176,174

 

 

$

2,231,794

 

 

$

2,177,811

 

Net discounts and deferred financing costs

 

 

21,342

 

 

 

23,160

 

 

 

23,857

 

COPT’s share of unconsolidated JV gross debt

 

 

52,364

 

 

 

52,100

 

 

 

26,250

 

Gross debt

 

 

2,249,880

 

 

 

2,307,054

 

 

 

2,227,918

 

Less: Cash and cash equivalents

 

 

(14,273

)

 

 

(12,337

)

 

 

(20,735

)

Less: COPT’s share of cash of unconsolidated real estate JVs

 

 

(974

)

 

 

(456

)

 

 

(457

)

Net debt

 

 

2,234,633

 

 

 

2,294,261

 

 

 

2,206,726

 

Costs incurred on fully-leased development properties

 

 

(189,407

)

 

 

(95,972

)

 

 

(223,485

)

Net debt adjusted for fully-leased development

 

$

2,045,226

 

 

$

2,198,289

 

 

$

1,983,241

 

 

 

 

 

 

 

 

Net debt

 

$

2,234,633

 

 

$

2,294,261

 

 

$

2,206,726

 

Pro forma debt adjustments from subsequent event transaction proceeds

 

 

N/A

 

 

 

(189,000

)

 

 

N/A

 

Pro forma net debt

 

 

2,234,633

 

 

 

2,105,261

 

 

 

2,206,726

 

Costs incurred on fully-leased development properties

 

 

(189,407

)

 

 

(95,972

)

 

 

(223,485

)

Pro forma net debt adjusted for fully-leased development

 

$

2,045,226

 

 

$

2,009,289

 

 

$

1,983,241

 

 

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