Business Wire | Oct 29, 2020 04:16PM EDT

COPT Reports Third Quarter 2020 Results

Oct. 29, 2020

COLUMBIA, Md.--(BUSINESS WIRE)--Oct. 29, 2020--Corporate Office Properties Trust ("COPT" or the "Company") (NYSE: OFC) announced financial and operating results for the third quarter ended September 30, 2020.

Management Comments

Stephen E. Budorick, COPT's President & Chief Executive Officer, commented, "Third quarter FFO per share exceeded the high-end of our guidance, marking the third consecutive quarter of outperformance. Solid demand throughout our Defense/IT Locations continued to support strong development leasing volumes, and tenant retention remains on-track to set a 20-year record. We are in the process of selling interests in data center shell properties to a joint venture with an institutional partner. We anticipate completing two transactions that are expected to raise approximately $165 million of equity proceeds, which would reduce our year-end debt-to-EBITDA ratio to between 6.2x and 6.4x." He continued, "The Company continues to meet or exceed its 2020 plan objectives largely unimpeded by restrictions, shutdowns, or tenant credit issues related to the pandemic, and is raising the mid-point of 2020 guidance for FFO per share, as adjusted for comparability, by 2-cents, to $2.09. The nearly 1.8 million square feet of fully leased development projects we have or will place in service this year position the Company to generate FFO growth of 3-to-6 percent in 2021."

Financial Highlights

3rd Quarter Financial Results:

* Diluted earnings (loss) per share ("EPS") was ($0.29) for the quarter ended September 30, 2020 as compared to $0.19 for the third quarter of 2019.

* Diluted funds from operations per share ("FFOPS"), as calculated in accordance with Nareit's definition, was $0.04 for the third quarter of 2020 as compared to $0.51 for third quarter 2019 results.

* FFOPS as adjusted for comparability of $0.54 in the third quarter of 2020 was 5.9% higher than the $0.51 reported for the third quarter of 2019.

Operating Performance Highlights

Operating Portfolio Summary:

* At September 30, 2020, the Company's core portfolio of 174 operating office and data center shell properties was 94.0% occupied and 94.6% leased.

* During the quarter, the Company placed into service 599,000 square feet that were 100% leased, bringing the total for the year to 1.2 million square feet placed in service that were 99% leased.

Same-Property Performance:

* At September 30, 2020, COPT's same-property portfolio of 152 buildings was 92.5% occupied and 93.2% leased.

* For the quarter and nine months ended September 30, 2020, the Company's same-property cash NOI decreased 0.2% and increased 2.1%, respectively, over the prior year's comparable periods.

Leasing:

* Total Square Feet Leased: For the quarter ended September 30, 2020, the Company leased 1.1 million total square feet, including 841,000 square feet of renewals, 244,000 square feet in development projects, and 61,000 square feet of new leases on vacant space.

For the nine months ended September 30, 2020, the Company executed 2.7 million square feet of total leasing, including 1.9 million square feet of renewals, 520,000 square feet of development leasing, and 274,000 square feet of vacancy leasing.

* Renewal Rates: During the quarter and nine months ended September 30, 2020, the Company respectively renewed 89.0% and 84.3% of total expiring square feet and is on-track to set a 20-year record for tenant retention.

* Cash Rent Spreads & Average Escalations on Renewing Leases: For the quarter and nine months ended September 30, 2020, cash rents on renewed space decreased 2.0%. For the same time periods, annual escalations on renewing leases averaged 2.4%.

* Lease Terms: In the third quarter, lease terms averaged 3.2 years on renewing leases, 11.8 years on development leasing, and 6.6 years on new leasing of vacant space. For the nine months, lease terms averaged 4.2 years on renewing leases, 14.2 years on development leasing, and 6.6 years on vacancy leasing.

Investment Activity Highlights

* Development Pipeline: As of October 7, 2020, the Company's development pipeline consisted of 11 properties and expansion of one fully operational property totaling 1.6 million square feet that were 84% leased. These projects have a total estimated cost of $650.9 million, of which $410.1 million had been incurred as of September 30, 2020.

Balance Sheet and Capital Transaction Highlights

* As of September 30, 2020, the Company's net debt plus preferred equity to adjusted book ratio was 41.1% and its net debt plus preferred equity to in-place adjusted EBITDA ratio was 6.8x. For the quarter ended September 30, 2020, the Company's adjusted EBITDA fixed charge coverage ratio was 3.9x.

* As of September 30, 2020, and including the effect of interest rate swaps, the Company's weighted average effective interest rate on its consolidated debt portfolio was 3.55% with a weighted average maturity of 3.3 years; additionally, 94.0% of the Company's debt was subject to fixed interest rates.

* During the quarter the Company issued $400 million of 2.25% senior unsecured notes, the proceeds from which were used to complete the tender offer for and subsequent redemption of all of its remaining $300 million of 3.7% senior unsecured notes due in 2021. The redemption was completed on October 19, 2020.

2020 Guidance

Management is increasing its prior full-year guidance ranges from $0.48-$0.52 for EPS to a new range of $0.77-$0.79. Management is also increasing its full-year guidance ranges for FFOPS per Nareit and FFOPS, as adjusted for comparability, to $1.44-$1.46 and $2.08-$2.10, respectively.

For the fourth quarter ending December 31, 2020, management is increasing its guidance for EPS from $0.43-$0.45 to a new range of $0.63-$0.65, lowering its existing guidance for FFOPS, per Nareit, to $0.48-$0.50, and affirming its existing guidance range of $0.52-$0.54 for FFOPS, as adjusted for comparability. Reconciliations of projected diluted EPS to projected FFOPS are as follows:

Table 1: Reconciliation of EPS to Quarter ending Year endingFFOPS, per Nareit andAs Adjusted for Comparability December 31, 2020 December 31, 2020 Low High Low High EPS $ 0.63 $ 0.65 $ 0.77 $ 0.79

Real estate-related depreciation 0.36 0.36 1.27 1.27 and amortizationGain on sales of real estate (0.51 ) (0.51 ) (0.51 ) (0.51 )

Impairment losses - - 0.01 0.01

FFO allocation to other - - (0.10 ) (0.10 )noncontrolling interests resultingfrom capital eventFFOPS, Nareit definition 0.48 0.50 1.44 1.46

FFO allocation to other - - 0.10 0.10 noncontrolling interests resultingfrom capital eventLoss on interest rate derivatives 0.04 0.04 0.54 0.54 and early extinguishment of debtFFOPS, as adjusted for $ 0.52 $ 0.54 $ 2.08 $ 2.10 comparability Associated Supplemental Presentation

Prior to the call, the Company will post a slide presentation to accompany management's prepared remarks for its third quarter 2020 conference call, the details of which are provided below. The accompanying slide presentation can be viewed on and downloaded from the 'Latest Updates' section of COPT's Investors website: https://investors.copt.com/

Conference Call Information

Management will discuss third quarter 2020 results on its conference call tomorrow at 12:00 p.m. Eastern Time, details of which are listed below:

Conference Call Date: Friday, October 30, 2020

Time: 12:00 p.m. Eastern Time

Telephone Number: (within the U.S.) 855-463-9057

Telephone Number: (outside the U.S.) 661-378-9894

Passcode: 8968029

The conference call will also be available via live webcast in the 'Latest Updates' section of COPT's Investors website: https://investors.copt.com/

Replay Information

A replay of the conference call will be immediately available via webcast on the Investors website. Additionally, a telephonic replay of this call will be available beginning at 3:00 p.m. Eastern Time on Friday, October 30, through 2:00 p.m. Eastern Time on Friday, November 13. To access the replay within the United States, please call 855-859-2056; to access it from outside the United States, please call 404-537-3406. In either case, use passcode 8968029.

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 it believes are growing, durable, priority missions ("Defense/IT Locations"). The Company also owns a portfolio of office properties located in select urban/urban-like submarkets in the Greater Washington, DC/Baltimore region with durable Class-A office fundamentals and characteristics ("Regional Office Properties"). As of September 30, 2020, the Company derived 88% of its core portfolio annualized rental revenue from Defense/IT Locations and 12% from its Regional Office Properties. As of the same date and including 15 properties owned through unconsolidated joint ventures, COPT's core portfolio of 174 office and data center shell properties encompassed 20.2 million square feet and was 94.6% leased; the Company also owned one wholesale data center with a critical load of 19.25 megawatts that was 86.7% 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, 2019 and subsequent Quarterly Reports on Form 10-Q.

Category: Quarterly Results

Source: Corporate Office Properties Trust

Corporate Office Properties Trust

Summary Financial Data

(unaudited)

(in thousands, except per share data)

For the Three Months Ended For the Nine Months Ended September 30, September 30,

2020 2019 2020 2019

Revenues

Revenues from real $ 134,443 $ 130,734 $ 399,097 $ 395,495 estate operations

Construction contractand other service 20,323 28,697 46,240 87,946 revenues

Total revenues 154,766 159,431 445,337 483,441

Operating expenses

Property operating 51,552 49,714 151,755 147,045 expenses

Depreciation andamortization associated 35,332 34,692 101,540 104,290 with real estateoperations

Construction contractand other service 19,220 27,802 44,052 85,130 expenses

Impairment losses 1,530 327 1,530 327

General and 5,558 6,105 17,372 20,474 administrative expenses

Leasing expenses 1,909 1,824 5,739 5,592

Business developmentexpenses and land carry 1,094 964 3,474 2,947 costs

Total operating expenses 116,195 121,428 325,462 365,805

Interest expense (17,152) (17,126) (50,789) (54,275)

Interest and other 1,746 1,842 5,233 5,977 income

Credit loss recoveries 1,465 - 161 -

Gain on sales of real - - 5 84,469 estate

Loss on early (3,237) - (3,237) - extinguishment of debt

Loss on interest rate (53,196) - (53,196) - derivatives

(Loss) income beforeequity in income of (31,803) 22,719 18,052 153,807 unconsolidated entitiesand income taxes

Equity in income of 477 396 1,372 1,207 unconsolidated entities

Income tax (expense) (16) 131 (95) 113 benefit

Net (loss) income (31,342) 23,246 19,329 155,127

Net loss (income)attributable to noncontrollinginterests:

Common units in theOperating Partnership 386 (267) (185) (1,863) ("OP")

Preferred units in the (77) (157) (231) (487) OP

Other consolidated (812) (1,565) (3,207) (3,870) entities

Net (loss) incomeattributable to COPT $ (31,845) $ 21,257 $ 15,706 $ 148,907 common shareholders



Earnings per share ("EPS") computation:

Numerator for diluted EPS:

Net (loss) incomeattributable to COPT $ (31,845) $ 21,257 $ 15,706 $ 148,907 common shareholders

Redeemable - - - 100 noncontrolling interests

Amount allocable toshare-based compensation (145) (118) (359) (469) awards

Numerator for diluted $ (31,990) $ 21,139 $ 15,347 $ 148,538 EPS

Denominator:

Weighted average common 111,811 111,582 111,778 111,036 shares - basic

Dilutive effect ofshare-based compensation - 361 278 313 awards

Dilutive effect ofredeemable - - - 123 noncontrolling interests

Weighted average common 111,811 111,943 112,056 111,472 shares - diluted

Diluted EPS $ (0.29) $ 0.19 $ 0.14 $ 1.33

Corporate Office Properties Trust

Summary Financial Data

(unaudited)

(in thousands, except per share data)

For the Three Months Ended September 30,

For the Nine Months Ended September 30,

2020

2019

2020

2019

Net (loss) income

$

(31,342)

$

23,246

$

19,329

$

155,127

Real estate-related depreciation and amortization

35,332

34,692

101,540

104,290

Impairment losses on real estate

1,530

327

1,530

327

Gain on sales of real estate

-

-

(5)

(84,469)

Depreciation and amortization on unconsolidated real estate JVs

819

790

2,455

1,922

Funds from operations ("FFO")

6,339

59,055

124,849

177,197

Noncontrolling interests - preferred units in the OP

(77)

(157)

(231)

(487)

FFO allocable to other noncontrolling interests

(1,074)

(1,429)

(14,614)

(3,588)

Basic FFO allocable to share-based compensation awards

(119)

(248)

(449)

(662)

Basic FFO available to common share and common unit holders ("Basic FFO")

5,069

57,221

109,555

172,460

Redeemable noncontrolling interests

-

34

103

100

Diluted FFO available to common share and common unit holders ("Diluted FFO")

5,069

57,255

109,658

172,560

Loss on early extinguishment of debt

3,237

-

3,237

-

Loss on interest rate derivatives

53,196

-

53,196

-

Demolition costs on redevelopment and nonrecurring improvements

11

-

63

44

Executive transition costs

-

-

-

4

Non-comparable professional and legal expenses

-

175

-

486

Dilutive preferred units in the OP

77

-

231

-

FFO allocation to other noncontrolling interests resulting from capital event

-

-

11,090

-

Diluted FFO comparability adjustments for redeemable noncontrolling interests

34

-

-

-

Diluted FFO comparability adjustments allocable to share-based compensation awards

(139)

-

(307)

(2)

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

61,485

57,430

177,168

173,092

Straight line rent adjustments and lease incentive amortization

(1,009)

(515)

662

(1,131)

Amortization of intangibles included in net operating income

(39)

(59)

(186)

(47)

Share-based compensation, net of amounts capitalized

1,727

1,697

4,754

4,993

Amortization of deferred financing costs

658

538

1,875

1,595

Amortization of net debt discounts, net of amounts capitalized

453

377

1,229

1,121

Accum. other comprehensive loss on derivatives amortized to expense

-

12

-

79

Replacement capital expenditures

(13,085)

(16,752)

(46,971)

(43,927)

Other diluted AFFO adjustments associated with real estate JVs

150

66

(6)

280

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

$

50,340

$

42,794

$

138,525

$

136,055

Diluted FFO per share

$

0.04

$

0.51

$

0.97

$

1.53

Diluted FFO per share, as adjusted for comparability

$

0.54

$

0.51

$

1.56

$

1.53

Dividends/distributions per common share/unit

$

0.275

$

0.275

$

0.825

$

0.825

Corporate Office Properties Trust

Summary Financial Data

(unaudited)

(in thousands, except per share data)

For the Three Months For the Nine Months Ended Ended September 30, September 30,

2020 2019 2020 2019

Net (loss) income $ (31,342) $ 23,246 $ 19,329 $ 155,127

Real estate-relateddepreciation and 35,332 34,692 101,540 104,290 amortization

Impairment losses on real 1,530 327 1,530 327 estate

Gain on sales of real - - (5) (84,469) estate

Depreciation andamortization on 819 790 2,455 1,922 unconsolidated realestate JVs

Funds from operations 6,339 59,055 124,849 177,197 ("FFO")

Noncontrolling interests- preferred units in the (77) (157) (231) (487) OP

FFO allocable to other (1,074) (1,429) (14,614) (3,588) noncontrolling interests

Basic FFO allocable toshare-based compensation (119) (248) (449) (662) awards

Basic FFO available tocommon share and common 5,069 57,221 109,555 172,460 unit holders ("BasicFFO")

Redeemable noncontrolling - 34 103 100 interests

Diluted FFO available tocommon share and common 5,069 57,255 109,658 172,560 unit holders ("DilutedFFO")

Loss on early 3,237 - 3,237 - extinguishment of debt

Loss on interest rate 53,196 - 53,196 - derivatives

Demolition costs onredevelopment and 11 - 63 44 nonrecurring improvements

Executive transition - - - 4 costs

Non-comparableprofessional and legal - 175 - 486 expenses

Dilutive preferred units 77 - 231 - in the OP

FFO allocation to othernoncontrolling interests - - 11,090 - resulting from capitalevent

Diluted FFO comparabilityadjustments for 34 - - - redeemable noncontrollinginterests

Diluted FFO comparabilityadjustments allocable to (139) - (307) (2) share-based compensationawards

Diluted FFO available tocommon share and common 61,485 57,430 177,168 173,092 unit holders, as adjustedfor comparability

Straight line rentadjustments and lease (1,009) (515) 662 (1,131) incentive amortization

Amortization ofintangibles included in (39) (59) (186) (47) net operating income

Share-based compensation,net of amounts 1,727 1,697 4,754 4,993 capitalized

Amortization of deferred 658 538 1,875 1,595 financing costs

Amortization of net debtdiscounts, net of amounts 453 377 1,229 1,121 capitalized

Accum. othercomprehensive loss on - 12 - 79 derivatives amortized toexpense

Replacement capital (13,085) (16,752) (46,971) (43,927) expenditures

Other diluted AFFOadjustments associated 150 66 (6) 280 with real estate JVs

Diluted adjusted fundsfrom operations availableto common share and $ 50,340 $ 42,794 $ 138,525 $ 136,055 common unit holders("Diluted AFFO")

Diluted FFO per share $ 0.04 $ 0.51 $ 0.97 $ 1.53

Diluted FFO per share, asadjusted for $ 0.54 $ 0.51 $ 1.56 $ 1.53 comparability

Dividends/distributions $ 0.275 $ 0.275 $ 0.825 $ 0.825 per common share/unit

Corporate Office Properties Trust

Summary Financial Data

(unaudited)

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

September 30,2020

December 31,2019

Balance Sheet Data

Properties, net of accumulated depreciation

$

3,586,938

$

3,340,886

Total assets

4,120,189

3,854,453

Debt, per balance sheet

2,181,551

1,831,139

Total liabilities

2,447,031

2,105,777

Redeemable noncontrolling interests

23,522

29,431

Equity

1,649,636

1,719,245

Net debt to adjusted book

41.0

%

36.8

%

Core Portfolio Data (as of period end) (1)

Number of operating properties

174

168

Total operational square feet (in thousands)

20,232

19,016

% Occupied

94.0

%

93.1

%

% Leased

94.6

%

94.6

%

For the Three Months Ended September 30,

For the Nine Months Ended September 30,

2020

2019

2020

2019

Payout ratios

Diluted FFO

613.6

%

54.2

%

85.1

%

54.0

%

Diluted FFO, as adjusted for comparability

50.7

%

54.1

%

52.8

%

53.8

%

Diluted AFFO

61.9

%

72.6

%

67.5

%

68.5

%

Adjusted EBITDA fixed charge coverage ratio

3.9x

3.7x

3.8x

3.7x

Net debt to in-place adjusted EBITDA ratio (2)

6.8x

6.1x

N/A

N/A

Net debt plus preferred equity to in-place adjusted EBITDA ratio (3)

6.8x

6.1x

N/A

N/A

Reconciliation of denominators for per share measures

Denominator for diluted EPS

111,811

111,943

112,056

111,472

Weighted average common units

1,240

1,312

1,235

1,323

Redeemable noncontrolling interests

-

109

125

-

Anti-dilutive EPS effect of share-based compensation awards

274

-

-

-

Denominator for diluted FFO per share

113,325

113,364

113,416

112,795

Dilutive convertible preferred units

176

-

176

-

Redeemable noncontrolling interests

109

-

-

-

Denominator for diluted FFO per share, as adjusted for comparability

113,610

113,364

113,592

112,795

Corporate Office Properties Trust

Summary Financial Data

(unaudited)

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

September 30, December 31, 2020 2019

Balance Sheet Data

Properties, net of accumulated depreciation $ 3,586,938 $ 3,340,886

Total assets 4,120,189 3,854,453

Debt, per balance sheet 2,181,551 1,831,139

Total liabilities 2,447,031 2,105,777

Redeemable noncontrolling interests 23,522 29,431

Equity 1,649,636 1,719,245

Net debt to adjusted book 41.0 % 36.8 %



Core Portfolio Data (as of period end) (1)

Number of operating properties 174 168

Total operational square feet (in thousands) 20,232 19,016

% Occupied 94.0 % 93.1 %

% Leased 94.6 % 94.6 %

For the Three Months For the Nine Months Ended Ended September 30, September 30,

2020 2019 2020 2019

Payout ratios

Diluted FFO 613.6 % 54.2 % 85.1 % 54.0 %

Diluted FFO, as adjusted for 50.7 % 54.1 % 52.8 % 53.8 % comparability

Diluted AFFO 61.9 % 72.6 % 67.5 % 68.5 %

Adjusted EBITDA fixed charge 3.9x 3.7x 3.8x 3.7x coverage ratio

Net debt to in-place adjusted 6.8x 6.1x N/A N/A EBITDA ratio (2)

Net debt plus preferred equityto in-place adjusted EBITDA 6.8x 6.1x N/A N/A ratio (3)



Reconciliation of denominators for per share measures

Denominator for diluted EPS 111,811 111,943 112,056 111,472

Weighted average common units 1,240 1,312 1,235 1,323

Redeemable noncontrolling - 109 125 - interests

Anti-dilutive EPS effect ofshare-based compensation 274 - - - awards

Denominator for diluted FFO 113,325 113,364 113,416 112,795 per share

Dilutive convertible preferred 176 - 176 - units

Redeemable noncontrolling 109 - - - interests

Denominator for diluted FFOper share, as adjusted for 113,610 113,364 113,592 112,795 comparability

(1)

Represents Defense/IT Locations and Regional Office properties.

(2)

Represents net debt as of period end divided by in-place adjusted EBITDA for the period, as annualized (i.e. three month periods are multiplied by four).

(3)

Represents net debt plus the total liquidation preference of preferred equity as of period end divided by in-place adjusted EBITDA for the period, as annualized (i.e. three month periods are multiplied by four).

(1) Represents Defense/IT Locations and Regional Office properties.

Represents net debt as of period end divided by in-place adjusted EBITDA(2) for the period, as annualized (i.e. three month periods are multiplied by four).

Represents net debt plus the total liquidation preference of preferred(3) equity as of period end divided by in-place adjusted EBITDA for the period, as annualized (i.e. three month periods are multiplied by four).

Corporate Office Properties Trust

Summary Financial Data

(unaudited)

(Dollars in thousands)

For the Three Months Ended September 30,

For the Nine Months Ended September 30,

2020

2019

2020

2019

Reconciliation of common share dividends to dividends and distributions for payout ratios

Common share dividends - unrestricted shares and deferred shares

$

30,763

$

30,721

$

92,278

$

92,099

Common unit distributions - unrestricted units

341

338

1,021

1,068

Dividends and distributions for diluted FFO payout ratio

31,104

31,059

93,299

93,167

Distributions on dilutive preferred units

77

-

231

-

Dividends and distributions for other payout ratios

$

31,181

$

31,059

$

93,530

$

93,167

Reconciliation of GAAP net income to earnings before interest, income taxes, depreciation and amortization for real estate ("EBITDAre"), adjusted EBITDA and in-place adjusted EBITDA

Net (loss) income

$

(31,342)

$

23,246

$

19,329

$

155,127

Interest expense

17,152

17,126

50,789

54,275

Income tax expense (benefit)

16

(131)

95

(113)

Real estate-related depreciation and amortization

35,332

34,692

101,540

104,290

Impairment losses on real estate

1,530

327

1,530

327

Other depreciation and amortization

457

467

1,324

1,396

Gain on sales of real estate

-

-

(5)

(84,469)

Adjustments from unconsolidated real estate JVs

1,274

1,202

3,814

2,859

EBITDAre

24,419

76,929

178,416

233,692

Loss on early extinguishment of debt

3,237

-

3,237

-

Loss on interest rate derivatives

53,196

-

53,196

-

Net loss (gain) on other investments

250

-

252

(400)

Credit loss recoveries

(1,465)

-

(161)

-

Business development expenses

414

419

1,630

1,427

Non-comparable professional and legal expenses

-

175

-

486

Demolition costs on redevelopment and nonrecurring improvements

11

-

63

44

Executive transition costs

-

-

-

4

Adjusted EBITDA

80,062

77,523

$

236,633

$

235,253

Proforma net operating income adjustment for property changes within period

1,631

-

Change in collectability of deferred rental revenue

224

-

In-place adjusted EBITDA

$

81,917

$

77,523

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

Interest expense

$

17,152

$

17,126

$

50,789

$

54,275

Less: Amortization of deferred financing costs

(658)

(538)

(1,875)

(1,595)

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

(453)

(377)

(1,229)

(1,121)

Less: Accum. other comprehensive loss on derivatives amortized to expense

-

(12)

-

(79)

COPT's share of interest expense of unconsolidated real estate JVs, excluding deferred financing costs

444

403

1,327

916

Scheduled principal amortization

1,033

1,107

3,077

3,300

Capitalized interest

2,908

2,927

9,440

7,319

Preferred unit distributions

77

157

231

487

Denominator for fixed charge coverage-Adjusted EBITDA

$

20,503

$

20,793

$

61,760

$

63,502

Corporate Office Properties Trust

Summary Financial Data

(unaudited)

(Dollars in thousands)

For the Three Months For the Nine Months Ended Ended September 30, September 30,

2020 2019 2020 2019

Reconciliation of commonshare dividends todividends and distributions for payoutratios

Common share dividends -unrestricted shares and $ 30,763 $ 30,721 $ 92,278 $ 92,099 deferred shares

Common unit distributions 341 338 1,021 1,068 - unrestricted units

Dividends anddistributions for diluted 31,104 31,059 93,299 93,167 FFO payout ratio

Distributions on dilutive 77 - 231 - preferred units

Dividends anddistributions for other $ 31,181 $ 31,059 $ 93,530 $ 93,167 payout ratios



Reconciliation of GAAPnet income to earningsbefore interest, incometaxes, depreciation and amortization for realestate ("EBITDAre"),adjusted EBITDA andin-place adjusted EBITDA

Net (loss) income $ (31,342) $ 23,246 $ 19,329 $ 155,127

Interest expense 17,152 17,126 50,789 54,275

Income tax expense 16 (131) 95 (113) (benefit)

Real estate-relateddepreciation and 35,332 34,692 101,540 104,290 amortization

Impairment losses on real 1,530 327 1,530 327 estate

Other depreciation and 457 467 1,324 1,396 amortization

Gain on sales of real - - (5) (84,469) estate

Adjustments fromunconsolidated real 1,274 1,202 3,814 2,859 estate JVs

EBITDAre 24,419 76,929 178,416 233,692

Loss on early 3,237 - 3,237 - extinguishment of debt

Loss on interest rate 53,196 - 53,196 - derivatives

Net loss (gain) on other 250 - 252 (400) investments

Credit loss recoveries (1,465) - (161) -

Business development 414 419 1,630 1,427 expenses

Non-comparableprofessional and legal - 175 - 486 expenses

Demolition costs onredevelopment and 11 - 63 44 nonrecurring improvements

Executive transition - - - 4 costs

Adjusted EBITDA 80,062 77,523 $ 236,633 $ 235,253

Proforma net operatingincome adjustment for 1,631 - property changes withinperiod

Change in collectabilityof deferred rental 224 - revenue

In-place adjusted EBITDA $ 81,917 $ 77,523



Reconciliation ofinterest expense to thedenominators for fixed charge coverage-AdjustedEBITDA

Interest expense $ 17,152 $ 17,126 $ 50,789 $ 54,275

Less: Amortization of (658) (538) (1,875) (1,595) deferred financing costs

Less: Amortization of netdebt discounts, net of (453) (377) (1,229) (1,121) amounts capitalized

Less: Accum. othercomprehensive loss on - (12) - (79) derivatives amortized toexpense

COPT's share of interestexpense of unconsolidatedreal estate JVs, 444 403 1,327 916 excluding deferredfinancing costs

Scheduled principal 1,033 1,107 3,077 3,300 amortization

Capitalized interest 2,908 2,927 9,440 7,319

Preferred unit 77 157 231 487 distributions

Denominator for fixedcharge coverage-Adjusted $ 20,503 $ 20,793 $ 61,760 $ 63,502 EBITDA

Corporate Office Properties Trust

Summary Financial Data

(unaudited)

(Dollars in thousands)

For the Three Months Ended September 30,

For the Nine Months Ended September 30,

2020

2019

2020

2019

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

Tenant improvements and incentives

$

6,950

$

10,880

$

27,177

$

26,600

Building improvements

10,400

8,908

26,537

17,772

Leasing costs

1,934

2,722

6,918

8,665

Net additions to (exclusions from) tenant improvements and incentives

(943)

(2,156)

1,412

(1,866)

Excluded building improvements and leasing costs

(5,256)

(3,602)

(15,073)

(7,244)

Replacement capital expenditures

$

13,085

$

16,752

$

46,971

$

43,927

Same Properties cash NOI

$

73,910

$

74,071

$

224,709

$

220,063

Straight line rent adjustments and lease incentive amortization

(1,214)

(572)

(3,294)

(587)

Amortization of acquired above- and below-market rents

98

82

291

115

Amortization of intangibles and other assets to property operating expenses

(23)

(23)

(69)

(69)

Lease termination fees, gross

609

823

1,052

1,629

Tenant funded landlord assets and lease incentives

342

526

564

1,452

Cash NOI adjustments in unconsolidated real estate JV

48

42

111

147

Same Properties NOI

$

73,770

$

74,949

$

223,364

$

222,750

Corporate Office Properties Trust

Summary Financial Data

(unaudited)

(Dollars in thousands)

For the Three Months For the Nine Months Ended Ended September 30, September 30,

2020 2019 2020 2019

Reconciliations of tenantimprovements andincentives, buildingimprovements and leasing costs for operatingproperties to replacementcapital expenditures

Tenant improvements and $ 6,950 $ 10,880 $ 27,177 $ 26,600 incentives

Building improvements 10,400 8,908 26,537 17,772

Leasing costs 1,934 2,722 6,918 8,665

Net additions to(exclusions from) tenant (943) (2,156) 1,412 (1,866) improvements and incentives

Excluded buildingimprovements and leasing (5,256) (3,602) (15,073) (7,244) costs

Replacement capital $ 13,085 $ 16,752 $ 46,971 $ 43,927 expenditures



Same Properties cash NOI $ 73,910 $ 74,071 $ 224,709 $ 220,063

Straight line rentadjustments and lease (1,214) (572) (3,294) (587) incentive amortization

Amortization of acquiredabove- and below-market 98 82 291 115 rents

Amortization of intangiblesand other assets to (23) (23) (69) (69) property operating expenses

Lease termination fees, 609 823 1,052 1,629 gross

Tenant funded landlord 342 526 564 1,452 assets and lease incentives

Cash NOI adjustments inunconsolidated real estate 48 42 111 147 JV

Same Properties NOI $ 73,770 $ 74,949 $ 223,364 $ 222,750

September 30,2020

December 31,2019

Reconciliation of total assets to adjusted book

Total assets

$

4,120,189

$

3,854,453

Accumulated depreciation

1,095,441

1,007,120

Accumulated amortization of real estate intangibles and deferred leasing costs

215,651

212,547

COPT's share of liabilities of unconsolidated real estate JVs

50,957

50,734

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

10,640

8,164

Less: Property - operating lease liabilities

(26,382)

(17,317)

Less: Property - finance lease liabilities

(28)

(702)

Less: Cash and cash equivalents

(11,458)

(14,733)

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

(538)

(498)

Adjusted book

$

5,454,472

$

5,099,768

Reconciliation of debt outstanding to net debt and net debt plus preferred equity

Debt outstanding (excluding net debt discounts and deferred financing costs)

$

2,247,523

1,893,057

Less: Cash and cash equivalents

(11,458)

(14,733)

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

(538)

(498)

Net debt

$

2,235,527

$

1,877,826

Preferred equity

8,800

8,800

Net debt plus preferred equity

$

2,244,327

$

1,886,626

View source version on businesswire.com: https://www.businesswire.com/news/home/20201029006224/en/

CONTACT: IR Contacts: Stephanie Krewson-Kelly 443-285-5453 stephanie.kelly@copt.com

CONTACT: Michelle Layne 443-285-5452 michelle.layne@copt.com