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8-K

Copt Defense Properties (CDP)

8-K 2021-10-28 For: 2021-10-28
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC  20549

__________________________________________________________

FORM 8-K

__________________________________________________________

CURRENT REPORT

Pursuant to Section 13 or 15(d) of

the Securities Exchange Act of 1934

Date of report (Date of earliest event reported): October 28, 2021

CORPORATE OFFICE PROPERTIES TRUST

(Exact name of registrant as specified in its charter)

Maryland 1-14023 23-2947217
(State or other jurisdiction of (Commission File (IRS Employer
incorporation or organization) Number) Identification No.)

6711 Columbia Gateway Drive, Suite 300

Columbia, Maryland 21046

(Address of principal executive offices)

(443) 285-5400

(Registrant’s telephone number, including area code)

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

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

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2 below):

☐ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
☐ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging Growth Company ☐

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

Item 2.02.             Results of Operations and Financial Condition

On October 28, 2021, Corporate Office Properties Trust (the “Company”) issued a press release relating to its financial results for the three and nine months ended September 30, 2021 and, in connection with this release, is making available certain supplemental information pertaining to its properties and operations as of and for the period ended September 30, 2021.  The earnings release and supplemental information are included as Exhibit 99.1 to this report and are incorporated herein by reference.

The information included herein, including the exhibits, shall not be deemed “filed” for any purpose, including the purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or subject to liabilities of that Section.  The information included herein, including the exhibits, shall also not be deemed incorporated by reference into any filing under the Securities Act of 1933, as amended (the “Securities Act”), or the Exchange Act regardless of any general incorporation language in such filing.

Item 9.01.             Financial Statements and Exhibits

Exhibit Number Exhibit Title
99.1 Corporate Office Properties Trust earnings release and supplemental information for the period endedSeptember30, 2021.
104 Cover Page Interactive Data File (embedded within the Inline XBRL document).

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

CORPORATE OFFICE PROPERTIES TRUST
/s/ Anthony Mifsud
Anthony Mifsud
Executive Vice President and Chief Financial Officer
Dated: October 28, 2021

Document

Exhibit 99.1

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Corporate Office Properties Trust

Summary Description

The Company: Corporate Office Properties Trust (the “Company” or “COPT”) is a self-managed real estate investment trust (“REIT”). COPT is listed on the New York Stock Exchange under the symbol “OFC” and is an S&P MidCap 400 Company. We own, manage, lease, develop and selectively acquire office and data center properties. The majority of our portfolio is in locations that support the United States Government and its contractors, most of whom are engaged in national security, defense and information technology (“IT”) related activities servicing what we believe are growing, durable, priority missions; we refer to these properties as Defense/IT Locations. We also own a portfolio of office properties located in select urban/urban-like submarkets in the Greater Washington, DC/Baltimore region with durable Class-A office fundamentals and characteristics; these properties are included in a segment referred to as Regional Office Properties. As of September 30, 2021, we derived 88% of our core portfolio annualized rental revenue from Defense/IT Locations and 12% from Regional Office Properties. As of September 30, 2021, our core portfolio of 184 office and data center shell properties, including 19 owned through unconsolidated joint ventures, encompassed 21.5 million square feet and was 94.8% leased. As of the same date, we also owned a wholesale data center with a capacity of 19.25 megawatts that was 86.7% leased.

Management: Investor Relations:
Stephen E. Budorick, President & CEO Stephanie Krewson-Kelly, VP of IR
Todd Hartman, EVP & COO 443-285-5453, stephanie.kelly@copt.com
Anthony Mifsud, EVP & CFO Michelle Layne, Manager of IR
443-285-5452, michelle.layne@copt.com

Corporate Credit Rating: Fitch: BBB- Stable; Moody’s: Baa3 Stable; and S&P: BBB- Stable

Disclosure Statement: This supplemental package contains forward-looking statements within the meaning of the Federal securities laws. Forward-looking statements can be identified by the use of words such as “may,” “will,” “should,” “could,” “believe,” “anticipate,” “expect,” “estimate,” “plan” or other comparable terminology.  Forward-looking statements are inherently subject to risks and uncertainties, many of which we cannot predict with accuracy and some of which we might not even anticipate.  Although we believe that the expectations, estimates and projections reflected in such forward-looking statements are based on reasonable assumptions at the time made, we can give no assurance that these expectations, estimates and projections will be achieved.  Future events and actual results may differ materially from those discussed in the forward-looking statements and we undertake 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 our Annual Report on Form 10-K for the year ended December 31, 2020.

Corporate Office Properties Trust

Equity Research Coverage

Firm Senior Analyst Phone Email
Bank of America Securities Jamie Feldman 646-855-5808 james.feldman@bofa.com
BTIG Tom Catherwood 212-738-6410 tcatherwood@btig.com
Capital One Securities Chris Lucas 571-633-8151 christopher.lucas@capitalone.com
Citigroup Global Markets Manny Korchman 212-816-1382 emmanuel.korchman@citi.com
Evercore ISI Steve Sakwa 212-446-9462 steve.sakwa@evercoreisi.com
Green Street Daniel Ismail 949-640-8780 dismail@greenstreet.com
Jefferies & Co. Peter Abramowitz 212-336-7241 pabramowitz@jefferies.com
JP Morgan Tony Paolone 212-622-6682 anthony.paolone@jpmorgan.com
KeyBanc Capital Markets Craig Mailman 917-368-2316 cmailman@key.com
Raymond James Bill Crow 727-567-2594 bill.crow@raymondjames.com
Robert W. Baird & Co., Inc. Dave Rodgers 216-737-7341 drodgers@rwbaird.com
SMBC Nikko Securities America, Inc. Rich Anderson 646-521-2351 randerson@smbcnikko-si.com
Truist Securities Michael Lewis 212-319-5659 michael.r.lewis@truist.com
Wells Fargo Securities Blaine Heck 443-263-6529 blaine.heck@wellsfargo.com

With the exception of Green Street, the above-listed firms are those whose analysts publish research material on the Company and whose estimates of our FFO per share can be tracked through Refinitiv (formerly Thomson’s First Call). Any opinions, estimates, or forecasts the above analysts make regarding COPT’s future performance are their own and do not represent the views, estimates, or forecasts of COPT’s management.

Corporate Office Properties Trust

Selected Financial Summary Data

(in thousands, except per share data)

Page Three Months Ended Nine Months Ended
SUMMARY OF RESULTS Refer. 9/30/21 6/30/21 3/31/21 12/31/20 9/30/20 9/30/21 9/30/20
Net income (loss) 6 $ 28,794 $ 43,898 $ (6,079) $ 83,549 $ (31,342) $ 66,613 $ 19,329
NOI from real estate operations 13 $ 90,460 $ 90,780 $ 89,107 $ 89,304 $ 84,643 $ 270,347 $ 252,532
Same Properties NOI 16 $ 76,728 $ 76,819 $ 74,369 $ 75,633 $ 74,046 $ 227,916 $ 224,197
Same Properties cash NOI 17 $ 77,219 $ 77,429 $ 72,664 $ 76,515 $ 73,697 $ 227,312 $ 224,024
Adjusted EBITDA 10 $ 83,991 $ 85,186 $ 83,338 $ 82,298 $ 80,062 $ 252,515 $ 236,633
Diluted AFFO avail. to common share and unit holders 9 $ 53,635 $ 54,781 $ 52,387 $ 56,792 $ 50,340 $ 160,433 $ 138,525
Dividend per common share N/A $ 0.275 $ 0.275 $ 0.275 $ 0.275 $ 0.275 $ 0.825 $ 0.825
Per share - diluted:
EPS 8 $ 0.24 $ 0.38 $ (0.06) $ 0.73 $ (0.29) $ 0.56 $ 0.14
FFO - Nareit 8 $ 0.56 $ 0.35 $ 0.27 $ 0.53 $ 0.04 $ 1.19 $ 0.97
FFO - as adjusted for comparability 8 $ 0.57 $ 0.58 $ 0.56 $ 0.56 $ 0.54 $ 1.71 $ 1.56
Numerators for diluted per share amounts:
Diluted EPS 6 $ 26,933 $ 42,256 $ (6,839) $ 81,501 $ (31,990) $ 62,431 $ 15,347
Diluted FFO available to common share and unit holders 7 $ 63,898 $ 40,212 $ 30,997 $ 60,137 $ 5,069 $ 135,184 $ 109,658
Diluted FFO available to common share and unit holders, as adjusted for comparability 7 $ 65,179 $ 65,605 $ 64,454 $ 64,188 $ 61,485 $ 194,868 $ 177,168
Payout ratios:
Diluted FFO N/A 48.8% 77.5% 100.5% 51.8% 613.6% 69.2% 85.1%
Diluted FFO - as adjusted for comparability N/A 47.8% 47.5% 48.3% 48.6% 50.7% 48.0% 52.8%
Diluted AFFO N/A 58.1% 56.9% 59.5% 54.9% 61.9% 58.3% 67.5%
CAPITALIZATION
Total Market Capitalization 28 $ 5,251,729 $ 5,315,385 $ 5,226,694 $ 5,062,432 $ 4,898,459
Total Equity Market Capitalization 28 $ 3,069,056 $ 3,184,310 $ 2,995,090 $ 2,960,967 $ 2,701,186
Gross debt 29 $ 2,208,923 $ 2,157,325 $ 2,257,854 $ 2,127,715 $ 2,247,523
Net debt to adjusted book 31 39.4% 39.4% 40.8% 39.1% 41.0% N/A N/A
Net debt plus preferred equity to adjusted book 31 39.4% 39.4% 40.8% 39.1% 41.1% N/A N/A
Adjusted EBITDA fixed charge coverage ratio 31 4.8x 4.9x 4.3x 4.1x 3.9x 4.7x 3.8x
Net debt plus pref. equity to in-place adj. EBITDA ratio 31 6.3x 6.3x 6.6x 6.2x 6.8x N/A N/A
Net debt adjusted for fully-leased development plus pref. equity to in-place adj. EBITDA ratio 31 5.9x 5.8x 6.3x 5.9x 6.4x N/A N/A

Corporate Office Properties Trust

Selected Portfolio Data (1)

9/30/21 6/30/21 (2) 3/31/21 12/31/20 9/30/20
Operating Office and Data Center Shell Properties
# of Properties
Total Portfolio 186 184 182 181 176
Consolidated Portfolio 167 165 165 164 161
Core Portfolio 184 182 180 179 174
Same Properties 159 159 159 159 159
% Occupied
Total Portfolio 93.3 % 93.2 % 93.8 % 94.1 % 93.8 %
Consolidated Portfolio 92.2 % 92.0 % 92.9 % 93.2 % 93.0 %
Core Portfolio 93.5 % 93.4 % 94.0 % 94.3 % 94.0 %
Same Properties 92.2 % 92.2 % 92.6 % 92.9 % 92.9 %
% Leased
Total Portfolio 94.6 % 94.1 % 94.7 % 94.8 % 94.4 %
Consolidated Portfolio 93.7 % 93.0 % 93.9 % 94.0 % 93.6 %
Core Portfolio 94.8 % 94.3 % 94.9 % 95.0 % 94.6 %
Same Properties 93.7 % 93.2 % 93.6 % 93.8 % 93.5 %
Square Feet (in thousands)
Total Portfolio 21,660 21,198 21,006 20,959 20,389
Consolidated Portfolio 18,479 18,016 18,257 18,209 17,940
Core Portfolio 21,503 21,041 20,849 20,802 20,232
Same Properties 17,362 17,362 17,362 17,362 17,362
Wholesale Data Center
Megawatts Operational 19.25 19.25 19.25 19.25 19.25
% Leased 86.7 % 86.7 % 86.7 % 86.7 % 86.7 %

(1)Includes properties owned through unconsolidated real estate joint ventures (see page 33).

(2)The 6/30/21 portfolio data was restated to include a 63,000 square foot property previously reported as removed from service for redevelopment since we no longer intend to redevelop the property.

Corporate Office Properties Trust

Consolidated Balance Sheets

(in thousands)

9/30/21 6/30/21 3/31/21 12/31/20 9/30/20
Assets
Properties, net:
Operating properties, net $ 3,227,797 $ 3,099,182 $ 3,106,698 $ 3,115,280 $ 2,999,892
Development and redevelopment in progress, including land (1) 151,438 201,421 187,290 172,614 302,158
Land held (1) 227,887 230,114 285,266 274,655 284,888
Total properties, net 3,607,122 3,530,717 3,579,254 3,562,549 3,586,938
Property - operating right-of-use assets 38,854 39,333 39,810 40,570 36,442
Property - finance right-of-use assets 40,077 40,082 40,091 40,425 40,432
Assets held for sale, net 2,821 — — — —
Cash and cash equivalents 14,570 17,182 36,139 18,369 11,458
Investment in unconsolidated real estate joint ventures 40,304 40,586 28,934 29,303 49,662
Accounts receivable, net 33,110 39,951 44,916 41,637 36,151
Deferred rent receivable 103,062 99,715 98,048 92,876 92,853
Intangible assets on real estate acquisitions, net 15,788 16,959 18,137 19,344 22,433
Deferred leasing costs, net 62,269 62,277 56,508 58,613 59,392
Investing receivables, net 75,947 73,073 71,831 68,754 74,136
Prepaid expenses and other assets, net 117,214 92,157 99,280 104,583 110,292
Total assets $ 4,151,138 $ 4,052,032 $ 4,112,948 $ 4,077,023 $ 4,120,189
Liabilities and equity
Liabilities:
Debt $ 2,159,732 $ 2,109,640 $ 2,207,903 $ 2,086,918 $ 2,181,551
Accounts payable and accrued expenses 176,636 127,027 96,465 142,717 140,921
Rents received in advance and security deposits 32,092 30,893 30,922 33,425 30,276
Dividends and distributions payable 31,306 31,302 31,305 31,231 31,307
Deferred revenue associated with operating leases 8,704 9,564 10,221 10,832 8,579
Property - operating lease liabilities 29,630 29,909 30,176 30,746 26,382
Interest rate derivatives 5,562 6,646 7,640 9,522 10,977
Other liabilities 10,691 9,699 15,599 12,490 17,038
Total liabilities 2,454,353 2,354,680 2,430,231 2,357,881 2,447,031
Redeemable noncontrolling interests 26,006 26,040 25,925 25,430 23,522
Equity:
COPT’s shareholders’ equity:
Common shares 1,123 1,123 1,123 1,122 1,122
Additional paid-in capital 2,480,412 2,478,416 2,476,807 2,478,906 2,479,321
Cumulative distributions in excess of net income (839,676) (835,894) (847,407) (809,836) (860,647)
Accumulated other comprehensive loss (5,347) (6,415) (7,391) (9,157) (10,548)
Total COPT’s shareholders’ equity 1,636,512 1,637,230 1,623,132 1,661,035 1,609,248
Noncontrolling interests in subsidiaries:
Common units in the Operating Partnership 21,568 21,604 21,345 20,465 19,522
Preferred units in the Operating Partnership — — — — 8,800
Other consolidated entities 12,699 12,478 12,315 12,212 12,066
Total noncontrolling interests in subsidiaries 34,267 34,082 33,660 32,677 40,388
Total equity 1,670,779 1,671,312 1,656,792 1,693,712 1,649,636
Total liabilities, redeemable noncontrolling interests and equity $ 4,151,138 $ 4,052,032 $ 4,112,948 $ 4,077,023 $ 4,120,189

(1)Refer to pages 25 and 27 for detail.

Corporate Office Properties Trust

Consolidated Statements of Operations

(in thousands)

Three Months Ended Nine Months Ended
9/30/21 6/30/21 3/31/21 12/31/20 9/30/20 9/30/21 9/30/20
Revenues
Lease revenue $ 145,749 $ 143,658 $ 144,624 $ 139,093 $ 133,875 $ 434,031 $ 397,034
Other property revenue 841 765 540 535 568 2,146 2,063
Construction contract and other service revenues 28,046 19,988 16,558 24,400 20,323 64,592 46,240
Total revenues 174,636 164,411 161,722 164,028 154,766 500,769 445,337
Operating expenses
Property operating expenses 57,190 54,616 56,974 52,085 51,552 168,780 151,755
Depreciation and amortization associated with real estate operations 36,611 37,555 37,321 36,653 35,332 111,487 101,540
Construction contract and other service expenses 27,089 19,082 15,793 23,563 19,220 61,964 44,052
Impairment losses — — — — 1,530 — 1,530
General and administrative expenses 7,269 7,293 6,062 7,897 5,558 20,624 17,372
Leasing expenses 2,073 1,929 2,344 1,993 1,909 6,346 5,739
Business development expenses and land carry costs 1,093 1,372 1,094 999 1,094 3,559 3,474
Total operating expenses 131,325 121,847 119,588 123,190 116,195 372,760 325,462
Interest expense (15,720) (15,942) (17,519) (17,148) (17,152) (49,181) (50,789)
Interest and other income 1,818 2,228 1,865 3,341 1,746 5,911 5,233
Credit loss recoveries (expense) 326 (193) 907 772 1,465 1,040 161
Gain on sales of real estate (32) 40,233 (490) 30,204 — 39,711 5
Gain on sale of investment in unconsolidated real estate joint venture — — — 29,416 — — —
Loss on early extinguishment of debt (1,159) (25,228) (33,166) (4,069) (3,237) (59,553) (3,237)
Loss on interest rate derivatives — — — — (53,196) — (53,196)
Income (loss) before equity in income of unconsolidated entities and income taxes 28,544 43,662 (6,269) 83,354 (31,803) 65,937 18,052
Equity in income of unconsolidated entities 297 260 222 453 477 779 1,372
Income tax expense (47) (24) (32) (258) (16) (103) (95)
Net income (loss) 28,794 43,898 (6,079) 83,549 (31,342) 66,613 19,329
Net (income) loss attributable to noncontrolling interests:
Common units in the Operating Partnership (357) (559) 85 (995) 386 (831) (185)
Preferred units in the Operating Partnership — — — (69) (77) — (231)
Other consolidated entities (1,336) (938) (675) (817) (812) (2,949) (3,207)
Net income (loss) attributable to COPT common shareholders $ 27,101 $ 42,401 $ (6,669) $ 81,668 $ (31,845) $ 62,833 $ 15,706
Amount allocable to share-based compensation awards (79) (125) (170) (280) (145) (320) (359)
Redeemable noncontrolling interests (89) (20) — 44 — (82) —
Distributions on dilutive convertible preferred units — — — 69 — — —
Numerator for diluted EPS $ 26,933 $ 42,256 $ (6,839) $ 81,501 $ (31,990) $ 62,431 $ 15,347

Corporate Office Properties Trust

Funds from Operations

(in thousands)

Three Months Ended Nine Months Ended
9/30/21 6/30/21 3/31/21 12/31/20 9/30/20 9/30/21 9/30/20
Net income (loss) $ 28,794 $ 43,898 $ (6,079) $ 83,549 $ (31,342) $ 66,613 $ 19,329
Real estate-related depreciation and amortization 36,611 37,555 37,321 36,653 35,332 111,487 101,540
Impairment losses on real estate — — — — 1,530 — 1,530
Gain on sales of real estate 32 (40,233) 490 (30,204) — (39,711) (5)
Depreciation and amortization on unconsolidated real estate JVs (1) 525 476 454 874 819 1,455 2,455
Gain on sale of investment in unconsolidated real estate JV — — — (29,416) — — —
FFO - per Nareit (2)(3) 65,962 41,696 32,186 61,456 6,339 139,844 124,849
Noncontrolling interests - preferred units in the Operating Partnership — — — (69) (77) — (231)
FFO allocable to other noncontrolling interests (4) (1,696) (1,302) (1,027) (1,091) (1,074) (4,025) (14,614)
Basic FFO allocable to share-based compensation awards (313) (193) (162) (272) (119) (663) (449)
Basic FFO available to common share and common unit holders (3) 63,953 40,201 30,997 60,024 5,069 135,156 109,555
Dilutive preferred units in the Operating Partnership — — — 69 — — —
Redeemable noncontrolling interests (68) 11 — 44 — 1 103
Diluted FFO adjustments allocable to share-based compensation awards 13 — — — — 27 —
Diluted FFO available to common share and common unit holders - per Nareit (3) 63,898 40,212 30,997 60,137 5,069 135,184 109,658
Loss on early extinguishment of debt 1,159 25,228 33,166 4,069 3,237 59,553 3,237
Loss on interest rate derivatives — — — — 53,196 — 53,196
Demolition costs on redevelopment and nonrecurring improvements 129 302 — — 11 431 63
Dilutive preferred units in the Operating Partnership — — — — 77 — 231
FFO allocation to other noncontrolling interests resulting from capital event (4) — — — — — — 11,090
Diluted FFO comparability adjustments for redeemable noncontrolling interests — — 458 — 34 — —
Diluted FFO comparability adjustments allocable to share-based compensation awards (7) (137) (167) (18) (139) (300) (307)
Diluted FFO available to common share and common unit holders, as adjusted for comparability (3) $ 65,179 $ 65,605 $ 64,454 $ 64,188 $ 61,485 $ 194,868 $ 177,168

(1)FFO adjustment pertaining to COPT’s share of unconsolidated real estate joint ventures reported on page 33.

(2)See reconciliation on page 34 for components of FFO per Nareit.

(3)Refer to the section entitled “Definitions” for a definition of this measure.

(4)Pertains to noncontrolling interests in consolidated real estate joint ventures reported on page 32.

Corporate Office Properties Trust

Diluted Share and Unit Computations

(in thousands, except per share data)

Three Months Ended Nine Months Ended
9/30/21 6/30/21 3/31/21 12/31/20 9/30/20 9/30/21 9/30/20
EPS Denominator:
Weighted average common shares - basic 111,985 111,974 111,888 111,817 111,811 111,949 111,778
Dilutive effect of share-based compensation awards 375 297 — 320 — 285 278
Dilutive effect of redeemable noncontrolling interests 138 133 — 117 — 130 —
Dilutive convertible preferred units — — — 155 — — —
Weighted average common shares - diluted 112,498 112,404 111,888 112,409 111,811 112,364 112,056
Diluted EPS $ 0.24 $ 0.38 $ (0.06) $ 0.73 $ (0.29) $ 0.56 $ 0.14
Weighted Average Shares for period ended:
Common shares 111,985 111,974 111,888 111,817 111,811 111,949 111,778
Dilutive effect of share-based compensation awards 375 297 261 320 274 311 278
Common units 1,262 1,262 1,246 1,239 1,240 1,257 1,235
Redeemable noncontrolling interests 138 133 — 117 — 130 125
Dilutive convertible preferred units — — — 155 — — —
Denominator for diluted FFO per share 113,760 113,666 113,395 113,648 113,325 113,647 113,416
Redeemable noncontrolling interests — — 940 — 109 — —
Dilutive convertible preferred units — — — — 176 — 176
Denominator for diluted FFO per share, as adjusted for comparability 113,760 113,666 114,335 113,648 113,610 113,647 113,592
Weighted average common units (1,262) (1,262) (1,246) (1,239) (1,240) (1,257) (1,235)
Redeemable noncontrolling interests — — (940) — (109) — (125)
Anti-dilutive EPS effect of share-based compensation awards — — (261) — (274) (26) —
Dilutive convertible preferred units — — — — (176) — (176)
Denominator for diluted EPS 112,498 112,404 111,888 112,409 111,811 112,364 112,056
Diluted FFO per share - Nareit $ 0.56 $ 0.35 $ 0.27 $ 0.53 $ 0.04 $ 1.19 $ 0.97
Diluted FFO per share - as adjusted for comparability $ 0.57 $ 0.58 $ 0.56 $ 0.56 $ 0.54 $ 1.71 $ 1.56

Corporate Office Properties Trust

Adjusted Funds from Operations

(in thousands)

Three Months Ended Nine Months Ended
9/30/21 6/30/21 3/31/21 12/31/20 9/30/20 9/30/21 9/30/20
Diluted FFO available to common share and common unit holders, as adjusted for comparability $ 65,179 $ 65,605 $ 64,454 $ 64,188 $ 61,485 $ 194,868 $ 177,168
Straight line rent adjustments and lease incentive amortization (1,806) (1,288) (3,357) 3,438 (1,009) (6,451) 662
Amortization of intangibles and other assets included in NOI 41 41 40 24 (39) 122 (186)
Share-based compensation, net of amounts capitalized 2,048 2,009 1,904 1,751 1,727 5,961 4,754
Amortization of deferred financing costs 736 811 793 664 658 2,340 1,875
Amortization of net debt discounts, net of amounts capitalized 567 520 542 504 453 1,629 1,229
Replacement capital expenditures (1) (13,331) (13,095) (12,230) (13,973) (13,085) (38,656) (46,971)
Other diluted AFFO adjustments associated with real estate JVs (2) 201 178 241 196 150 620 (6)
Diluted AFFO available to common share and common unit holders (“diluted AFFO”) $ 53,635 $ 54,781 $ 52,387 $ 56,792 $ 50,340 $ 160,433 $ 138,525
Replacement capital expenditures (1)
Tenant improvements and incentives $ 8,654 $ 8,303 $ 7,139 $ 9,165 $ 6,950 $ 24,096 $ 27,177
Building improvements 7,793 6,771 3,628 7,523 10,400 18,192 26,537
Leasing costs 2,939 2,805 1,129 1,514 1,934 6,873 6,918
Net (exclusions from) additions to tenant improvements and incentives (1,523) (988) 2,900 (370) (943) 389 1,412
Excluded building improvements and leasing costs (4,532) (3,796) (2,566) (3,859) (5,256) (10,894) (15,073)
Replacement capital expenditures $ 13,331 $ 13,095 $ 12,230 $ 13,973 $ 13,085 $ 38,656 $ 46,971

(1)Refer to the section entitled “Definitions” for a definition of this measure.

(2)AFFO adjustments pertaining to noncontrolling interests on consolidated joint ventures reported on page 32 and COPT’s share of unconsolidated real estate joint ventures reported on page 33.

Corporate Office Properties Trust

EBITDAre and Adjusted EBITDA

(in thousands)

Three Months Ended Nine Months Ended
9/30/21 6/30/21 3/31/21 12/31/20 9/30/20 9/30/21 9/30/20
Net income (loss) $ 28,794 $ 43,898 $ (6,079) $ 83,549 $ (31,342) $ 66,613 $ 19,329
Interest expense 15,720 15,942 17,519 17,148 17,152 49,181 50,789
Income tax expense 47 24 32 258 16 103 95
Real estate-related depreciation and amortization 36,611 37,555 37,321 36,653 35,332 111,487 101,540
Other depreciation and amortization 589 1,045 555 513 457 2,189 1,324
Impairment losses on real estate — — — — 1,530 — 1,530
Gain on sales of real estate 32 (40,233) 490 (30,204) — (39,711) (5)
Gain on sale of investment in unconsolidated real estate JV — — — (29,416) — — —
Adjustments from unconsolidated real estate JVs 763 711 693 1,306 1,274 2,167 3,814
EBITDAre 82,556 58,942 50,531 79,807 24,419 192,029 178,416
Loss on early extinguishment of debt 1,159 25,228 33,166 4,069 3,237 59,553 3,237
Loss on interest rate derivatives — — — — 53,196 — 53,196
Net (gain) loss on other investments — (63) — (1,218) 250 (63) 252
Credit loss (recoveries) expense (326) 193 (907) (772) (1,465) (1,040) (161)
Business development expenses 473 584 548 412 414 1,605 1,630
Demolition costs on redevelopment and nonrecurring improvements 129 302 — — 11 431 63
Adjusted EBITDA 83,991 85,186 83,338 82,298 80,062 $ 252,515 $ 236,633
Proforma NOI adjustment for property changes within period 3,240 (379) 166 1,459 1,631
Change in collectability of deferred rental revenue — — 124 678 224
In-place adjusted EBITDA $ 87,231 $ 84,807 $ 83,628 $ 84,435 $ 81,917

Corporate Office Properties Trust

Office and Data Center Shell Properties by Segment (1) - 9/30/21

(square feet in thousands)

# of<br>Properties Operational<br>Square Feet % Occupied % Leased
Core Portfolio:
Defense/IT Locations:
Fort Meade/Baltimore Washington (“BW”) Corridor:
National Business Park 32 3,925 92.8% 95.1%
Howard County 35 2,855 85.9% 90.0%
Other 23 1,679 92.3% 93.1%
Total Fort Meade/BW Corridor 90 8,459 90.4% 93.0%
Northern Virginia (“NoVA”) Defense/IT 14 2,336 88.8% 90.6%
Lackland AFB (San Antonio, Texas) 8 1,060 100.0% 100.0%
Navy Support 21 1,242 96.5% 96.9%
Redstone Arsenal (Huntsville, Alabama) 17 1,520 99.3% 99.3%
Data Center Shells:
Consolidated Properties 7 1,557 100.0% 100.0%
Unconsolidated JV Properties (2) 19 3,182 100.0% 100.0%
Total Defense/IT Locations 176 19,356 94.1% 95.5%
Regional Office 8 2,147 87.8% 88.6%
Core Portfolio 184 21,503 93.5% 94.8%
Other Properties 2 157 66.2% 66.2%
Total Portfolio 186 21,660 93.3% 94.6%
Consolidated Portfolio 167 18,479 92.2% 93.7%

(1)This presentation sets forth core portfolio data by segment followed by data for the remainder of the portfolio.

(2)See page 33 for additional disclosure regarding our unconsolidated real estate JVs.

chart-9424cb0981774aafa04.jpgchart-0fee73829e2c4983858.jpg

Corporate Office Properties Trust

NOI from Real Estate Operations and Occupancy by Property Grouping - 9/30/21

(dollars and square feet in thousands)

As of Period End
# of Office and Data Center Shell<br>Properties Operational Square Feet % Occupied (1) % Leased (1) Annualized<br>Rental Revenue (2) % of Total <br>Annualized<br>Rental Revenue (2) NOI from Real Estate Operations
Property Grouping Three Months Ended Nine Months Ended
Core Portfolio:
Same Properties: (3)
Consolidated properties 148 15,733 91.7% 93.4% $ 495,692 87.4 % $ 75,899 $ 225,399
Unconsolidated real estate JV 9 1,472 100.0% 100.0% 2,166 0.4 % 504 1,506
Total Same Properties in Core Portfolio 157 17,205 92.4% 94.0% 497,858 87.8 % 76,403 226,905
Properties Placed in Service (4) 17 2,588 96.6% 97.0% 64,434 11.4 % 9,992 28,107
Other unconsolidated JV properties (5) 10 1,710 100.0% 100.0% 2,378 0.4 % 358 3,658
Wholesale Data Center and Other N/A N/A N/A N/A N/A N/A 3,382 10,666
Total Core Portfolio 184 21,503 93.5% 94.8% 564,670 99.6 % 90,135 269,336
Other Properties (Same Properties) (3) 2 157 66.2% 66.2% 2,524 0.4 % 325 1,011
Total Portfolio 186 21,660 93.3% 94.6% $ 567,194 100.0 % $ 90,460 $ 270,347
Consolidated Portfolio 167 18,479 92.2% 93.7% $ 562,650 99.2 % $ 89,400 $ 267,397
As of Period End
# of Office and Data Center Shell<br>Properties Operational Square Feet % Occupied (1) % Leased (1) Annualized<br>Rental Revenue (2) % of Core <br>Annualized<br>Rental Revenue (2) NOI from Real Estate Operations
Property Grouping Three Months Ended Nine Months Ended
Core Portfolio:
Defense/IT Locations: (6)
Consolidated properties 157 16,174 93.0% 94.7% $ 492,754 87.3 % $ 77,469 $ 229,429
Unconsolidated real estate JVs (5) 19 3,182 100.0% 100.0% 4,544 0.8 % 1,060 2,950
Total Defense/IT Locations 176 19,356 94.1% 95.5% 497,298 88.1 % 78,529 232,379
Regional Office 8 2,147 87.8% 88.6% 67,372 11.9 % 8,415 26,470
Wholesale Data Center and Other N/A N/A N/A N/A N/A N/A 3,191 10,487
Total Core Portfolio 184 21,503 93.5% 94.8% $ 564,670 100.0 % $ 90,135 $ 269,336

(1)Percentages calculated based on operational square feet.

(2)Excludes Annualized Rental Revenue from our wholesale data center, DC-6, of $25.3 million as of 9/30/21. With regard to properties owned through unconsolidated real estate joint ventures, we include the portion of Annualized Rental Revenue allocable to COPT’s ownership interest.

(3)Includes office and data center shell properties stably owned and 100% operational since at least 1/1/20.

(4)Newly developed or redeveloped properties placed in service that were not fully operational by 1/1/20.

(5)Includes data center shell properties in which we sold ownership interests and retained 10% interests through unconsolidated real estate JVs in 2021 and 2020. See page 33 for additional disclosure regarding these JVs.

(6)For two data center shell properties in which we sold a 90% interest and retained a 10% interest through an unconsolidated real estate JV on 6/2/21, the activity associated with these properties prior to the sale is included in consolidated properties and the activity thereafter is included in unconsolidated real estate JVs.

Corporate Office Properties Trust

Consolidated Real Estate Revenues and NOI by Segment

(in thousands)

Three Months Ended Nine Months Ended
9/30/21 6/30/21 3/31/21 12/31/20 9/30/20 9/30/21 9/30/20
Consolidated real estate revenues
Defense/IT Locations:
Fort Meade/BW Corridor $ 66,029 $ 64,840 $ 66,446 $ 63,733 $ 63,328 $ 197,315 $ 190,464
NoVA Defense/IT 15,291 14,712 15,211 14,993 14,699 45,214 42,824
Lackland Air Force Base 14,519 13,688 12,555 13,047 12,602 40,762 37,935
Navy Support 8,558 8,445 8,398 8,403 8,006 25,401 24,466
Redstone Arsenal 9,144 8,775 8,253 7,113 6,079 26,172 15,402
Data Center Shells-Consolidated 6,913 8,070 8,787 8,491 7,995 23,770 20,648
Total Defense/IT Locations 120,454 118,530 119,650 115,780 112,709 358,634 331,739
Regional Office 16,810 16,884 16,677 15,092 14,913 50,371 45,535
Wholesale Data Center 8,637 8,175 8,090 8,093 6,068 24,902 19,695
Other 689 834 747 663 753 2,270 2,128
Consolidated real estate revenues $ 146,590 $ 144,423 $ 145,164 $ 139,628 $ 134,443 $ 436,177 $ 399,097
NOI
Defense/IT Locations:
Fort Meade/BW Corridor $ 43,073 $ 43,126 $ 41,775 $ 42,319 $ 41,791 $ 127,974 $ 126,846
NoVA Defense/IT 9,311 9,174 9,335 9,437 9,454 27,820 27,059
Lackland Air Force Base 7,584 6,182 5,681 5,688 5,486 19,447 16,239
Navy Support 5,104 5,218 4,965 5,248 4,962 15,287 14,966
Redstone Arsenal 6,141 5,807 5,699 4,482 4,050 17,647 9,914
Data Center Shells:
Consolidated properties 6,256 7,293 7,705 7,603 7,134 21,254 18,341
COPT’s share of unconsolidated real estate JVs 1,060 973 917 1,761 1,752 2,950 5,190
Total Defense/IT Locations 78,529 77,773 76,077 76,538 74,629 232,379 218,555
Regional Office 8,415 9,042 9,013 8,155 7,131 26,470 23,328
Wholesale Data Center 3,292 3,546 3,669 4,260 2,426 10,507 9,357
Other 224 419 348 351 457 991 1,292
NOI from real estate operations $ 90,460 $ 90,780 $ 89,107 $ 89,304 $ 84,643 $ 270,347 $ 252,532

Corporate Office Properties Trust

Cash NOI by Segment

(in thousands)

Three Months Ended Nine Months Ended
9/30/21 6/30/21 3/31/21 12/31/20 9/30/20 9/30/21 9/30/20
Cash NOI
Defense/IT Locations:
Fort Meade/BW Corridor $ 42,301 $ 42,514 $ 39,666 $ 42,430 $ 41,365 $ 124,481 $ 125,503
NoVA Defense/IT 9,591 9,600 9,222 9,519 9,410 28,413 28,138
Lackland Air Force Base 6,637 6,122 5,999 6,006 5,929 18,758 17,533
Navy Support 5,381 5,394 4,965 5,376 5,130 15,740 15,524
Redstone Arsenal 5,262 4,890 4,706 4,383 2,848 14,858 7,922
Data Center Shells:
Consolidated properties 5,426 6,261 6,505 6,588 6,234 18,192 16,055
COPT’s share of unconsolidated real estate JVs 951 871 816 1,668 1,655 2,638 4,929
Total Defense/IT Locations 75,549 75,652 71,879 75,970 72,571 223,080 215,604
Regional Office 7,172 7,684 7,448 8,156 7,045 22,304 22,602
Wholesale Data Center 3,385 3,633 3,760 4,320 2,480 10,778 9,333
Other 200 429 363 356 438 992 1,253
Cash NOI from real estate operations 86,306 87,398 83,450 88,802 82,534 257,154 248,792
Straight line rent adjustments and lease incentive amortization 2,148 1,692 4,006 (3,104) 1,016 7,846 (435)
Amortization of acquired above- and below-market rents 99 98 99 99 98 296 291
Amortization of intangibles and other assets to property operating expenses (140) (139) (139) (122) (60) (418) (105)
Lease termination fees, net 853 1,094 1,362 141 455 3,309 691
Tenant funded landlord assets and lease incentives 1,085 535 228 3,395 504 1,848 3,037
Cash NOI adjustments in unconsolidated real estate JVs 109 102 101 93 96 312 261
NOI from real estate operations $ 90,460 $ 90,780 $ 89,107 $ 89,304 $ 84,643 $ 270,347 $ 252,532

Corporate Office Properties Trust

Same Properties (1) Average Occupancy Rates by Segment

(square feet in thousands)

# of Properties Operational Square Feet Three Months Ended Nine Months Ended
9/30/21 6/30/21 3/31/21 12/31/20 9/30/20 9/30/21 9/30/20
Core Portfolio:
Defense/IT Locations:
Fort Meade/BW Corridor 87 8,192 89.6 % 90.4 % 90.3 % 91.2 % 90.8 % 90.1 % 91.5 %
NoVA Defense/IT 13 1,988 86.9 % 87.7 % 87.8 % 88.4 % 88.4 % 87.5 % 86.4 %
Lackland Air Force Base 7 953 100.0 % 100.0 % 100.0 % 100.0 % 100.0 % 100.0 % 100.0 %
Navy Support 21 1,242 96.7 % 96.9 % 96.8 % 96.9 % 94.6 % 96.8 % 94.0 %
Redstone Arsenal 10 806 99.0 % 99.2 % 99.2 % 99.1 % 99.7 % 99.2 % 99.6 %
Data Center Shells:
Consolidated properties 3 594 100.0 % 100.0 % 100.0 % 100.0 % 100.0 % 100.0 % 100.0 %
Unconsolidated JV properties 9 1,471 100.0 % 100.0 % 100.0 % 100.0 % 100.0 % 100.0 % 100.0 %
Total Defense/IT Locations 150 15,246 92.4 % 93.0 % 92.9 % 93.4 % 93.1 % 92.7 % 93.1 %
Regional Office 7 1,959 90.8 % 92.0 % 92.0 % 92.1 % 92.1 % 91.6 % 91.6 %
Core Portfolio Same Properties 157 17,205 92.2 % 92.8 % 92.8 % 93.3 % 93.0 % 92.6 % 92.9 %
Other Same Properties 2 157 66.2 % 67.0 % 68.4 % 68.4 % 68.4 % 67.2 % 67.2 %
Total Same Properties 159 17,362 92.0 % 92.6 % 92.6 % 93.0 % 92.8 % 92.4 % 92.7 %
Same Properties (1) Period End Occupancy Rates by Segment <br>(square feet in thousands)
# of Properties Operational Square Feet
9/30/21 6/30/21 3/31/21 12/31/20 9/30/20
Core Portfolio:
Defense/IT Locations:
Fort Meade/BW Corridor 87 8,192 90.1 % 89.8 % 90.3 % 91.0 % 90.9 %
NoVA Defense/IT 13 1,988 86.8 % 87.7 % 87.6 % 88.1 % 88.5 %
Lackland Air Force Base 7 953 100.0 % 100.0 % 100.0 % 100.0 % 100.0 %
Navy Support 21 1,242 96.5 % 96.9 % 96.9 % 97.2 % 95.6 %
Redstone Arsenal 10 806 98.7 % 99.2 % 99.2 % 98.9 % 99.2 %
Data Center Shells:
Consolidated properties 3 594 100.0 % 100.0 % 100.0 % 100.0 % 100.0 %
Unconsolidated JV properties 9 1,471 100.0 % 100.0 % 100.0 % 100.0 % 100.0 %
Total Defense/IT Locations 150 15,246 92.6 % 92.6 % 92.9 % 93.3 % 93.2 %
Regional Office 7 1,959 90.8 % 91.3 % 92.5 % 92.1 % 92.3 %
Core Portfolio Same Properties 157 17,205 92.4 % 92.5 % 92.8 % 93.2 % 93.1 %
Other Same Properties 2 157 66.2 % 66.2 % 68.4 % 68.4 % 68.4 %
Total Same Properties 159 17,362 92.2 % 92.2 % 92.6 % 92.9 % 92.9 %

(1)Includes office and data center shell properties stably owned and 100% operational since at least 1/1/20.

Corporate Office Properties Trust

Same Properties Real Estate Revenues and NOI by Segment

(in thousands)

Three Months Ended Nine Months Ended
9/30/21 6/30/21 3/31/21 12/31/20 9/30/20 9/30/21 9/30/20
Same Properties real estate revenues
Defense/IT Locations:
Fort Meade/BW Corridor $ 64,643 $ 63,669 $ 65,278 $ 62,912 $ 62,694 $ 193,590 $ 188,567
NoVA Defense/IT 15,266 14,713 15,127 14,993 14,698 45,106 42,823
Lackland Air Force Base 13,551 13,420 12,555 13,047 12,603 39,526 37,936
Navy Support 8,558 8,445 8,398 8,403 8,007 25,401 24,466
Redstone Arsenal 4,828 4,785 4,555 4,487 4,449 14,168 13,530
Data Center Shells-Consolidated 2,361 2,366 2,419 2,559 2,281 7,146 6,907
Total Defense/IT Locations 109,207 107,398 108,332 106,401 104,732 324,937 314,229
Regional Office 15,121 15,205 14,995 14,829 14,913 45,321 45,535
Other Properties 665 652 665 663 753 1,982 2,127
Same Properties real estate revenues $ 124,993 $ 123,255 $ 123,992 $ 121,893 $ 120,398 $ 372,240 $ 361,891
Same Properties NOI
Defense/IT Locations:
Fort Meade/BW Corridor $ 42,032 $ 42,378 $ 40,975 $ 41,756 $ 41,369 $ 125,385 $ 125,572
NoVA Defense/IT 9,288 9,174 9,251 9,436 9,454 27,713 27,060
Lackland Air Force Base 6,653 5,924 5,682 5,688 5,486 18,259 16,239
Navy Support 5,104 5,218 4,965 5,248 4,961 15,287 14,966
Redstone Arsenal 3,015 2,951 2,912 2,684 2,743 8,878 8,407
Data Center Shells:
Consolidated properties 2,068 2,070 2,066 2,072 1,942 6,204 5,818
COPT’s share of unconsolidated real estate JV 504 503 499 506 504 1,506 1,515
Total Defense/IT Locations 68,664 68,218 66,350 67,390 66,459 203,232 199,577
Regional Office 7,739 8,220 7,715 7,892 7,131 23,674 23,328
Other Properties 325 381 304 351 456 1,010 1,292
Same Properties NOI $ 76,728 $ 76,819 $ 74,369 $ 75,633 $ 74,046 $ 227,916 $ 224,197

Corporate Office Properties Trust

Same Properties Cash NOI by Segment

(dollars in thousands)

Three Months Ended Nine Months Ended
9/30/21 6/30/21 3/31/21 12/31/20 9/30/20 9/30/21 9/30/20
Same Properties cash NOI
Defense/IT Locations:
Fort Meade/BW Corridor $ 41,706 $ 42,074 $ 39,192 $ 42,069 $ 40,991 $ 122,972 $ 124,900
NoVA Defense/IT 9,593 9,599 9,138 9,519 9,410 28,330 28,138
Lackland Air Force Base 6,664 6,133 5,999 6,005 5,929 18,796 17,534
Navy Support 5,381 5,394 4,965 5,376 5,130 15,740 15,524
Redstone Arsenal 3,111 3,054 2,957 2,790 2,628 9,122 7,731
Data Center Shells:
Consolidated properties 1,823 1,778 1,806 1,783 1,670 5,407 4,977
COPT’s share of unconsolidated real estate JV 465 465 456 460 456 1,386 1,365
Total Defense/IT Locations 68,743 68,497 64,513 68,002 66,214 201,753 200,169
Regional Office 8,176 8,540 7,832 8,157 7,045 24,548 22,602
Other Properties 300 392 319 356 438 1,011 1,253
Same Properties cash NOI 77,219 77,429 72,664 76,515 73,697 227,312 224,024
Straight line rent adjustments and lease incentive amortization (1,671) (2,283) 24 (1,416) (571) (3,930) (1,582)
Amortization of acquired above- and below-market rents 99 98 99 99 98 296 291
Amortization of intangibles and other assets to property operating expenses — — — — (23) — (69)
Lease termination fees, net 853 1,094 1,362 141 455 3,309 693
Tenant funded landlord assets and lease incentives 191 441 178 249 342 810 690
Cash NOI adjustments in unconsolidated real estate JV 37 40 42 45 48 119 150
Same Properties NOI $ 76,728 $ 76,819 $ 74,369 $ 75,633 $ 74,046 $ 227,916 $ 224,197
Percentage change in total Same Properties cash NOI (1) 4.8% 1.5%
Percentage change in Defense/IT Locations Same Properties cash NOI (1) 3.8% 0.8%

(1)Represents the change between the current period and the same period in the prior year.

Corporate Office Properties Trust

Leasing - Office and Data Center Shell Portfolio (1)

Quarter Ended 9/30/21

(square feet in thousands)

Defense/IT Locations
Ft Meade/BW Corridor NoVA Defense/IT Navy Support Redstone Arsenal Total Defense/IT Locations Regional Office Total
Renewed Space
Leased Square Feet 206 10 79 242 538 15 553
Expiring Square Feet 345 25 96 246 713 17 730
Vacating Square Feet 139 15 18 4 176 2 177
Retention Rate (% based upon square feet) 59.8 % 39.7 % 81.7 % 98.3 % 75.4 % 89.6 % 75.7 %
Statistics for Completed Leasing:
Per Annum Average Committed Cost per Square Foot (2) $ 4.13 $ 3.58 $ 1.59 $ 0.46 $ 2.09 $ 1.13 $ 2.07
Weighted Average Lease Term in Years 5.6 5.3 2.9 1.0 3.1 1.0 3.1
Average Rent Per Square Foot
Renewal Average Rent $ 33.33 $ 23.56 $ 18.72 $ 23.49 $ 26.57 $ 33.52 $ 26.76
Expiring Average Rent $ 33.84 $ 25.06 $ 17.19 $ 22.93 $ 26.32 $ 33.23 $ 26.51
Change in Average Rent (1.5) % (6.0) % 8.9 % 2.4 % 1.0 % 0.9 % 1.0 %
Cash Rent Per Square Foot
Renewal Cash Rent $ 34.39 $ 29.50 $ 18.37 $ 23.49 $ 27.04 $ 33.84 $ 27.23
Expiring Cash Rent $ 35.56 $ 30.11 $ 18.14 $ 22.93 $ 27.22 $ 33.79 $ 27.39
Change in Cash Rent (3.3) % (2.0) % 1.3 % 2.4 % (0.6) % 0.2 % (0.6) %
Average Escalations Per Year 1.6 % 2.5 % 2.3 % — % 1.7 % — % 1.7 %
New Leases
Development and Redevelopment Space
Leased Square Feet — — — 274 274 — 274
Statistics for Completed Leasing:
Per Annum Average Committed Cost per Square Foot (2) $ — $ — $ — $ 4.30 $ 4.30 $ — $ 4.30
Weighted Average Lease Term in Years — — — 17.0 17.0 — 17.0
Average Rent Per Square Foot $ — $ — $ — $ 28.19 $ 28.19 $ — $ 28.19
Cash Rent Per Square Foot $ — $ — $ — $ 24.98 $ 24.98 $ — $ 24.98
Vacant Space (3)
Leased Square Feet 170 32 — 5 207 8 215
Statistics for Completed Leasing:
Per Annum Average Committed Cost per Square Foot (2) $ 9.09 $ 5.76 $ — $ 1.92 $ 8.41 $ 7.66 $ 8.38
Weighted Average Lease Term in Years 9.7 7.2 — 5.3 9.2 10.8 9.3
Average Rent Per Square Foot $ 27.13 $ 29.14 $ — $ 24.30 $ 27.37 $ 29.89 $ 27.46
Cash Rent Per Square Foot $ 25.59 $ 29.41 $ — $ 24.25 $ 26.14 $ 28.75 $ 26.24
Total Square Feet Leased 377 42 79 522 1,019 23 1,042
Average Escalations Per Year 2.2 % 2.5 % 2.3 % 2.5 % 2.4 % 2.4 % 2.4 %
Average Escalations Excl. Data Center Shells 2.4 %

(1)Activity excludes owner occupied space, leases with less than a one-year term and expirations associated with space removed from service. Weighted average lease term is based on the lease term defined in the lease assuming no exercise of early termination rights. Committed costs for leasing are reported above in the period of lease execution. Actual capital expenditures for leasing are reported on page 9 in the period such costs are incurred. Cash rent per square foot ignores the effect of rent abatements.

(2)Committed costs include tenant improvements and leasing commissions and exclude free rent concessions.

(3)Vacant space includes acquired first generation space, vacated second generation space and leases executed on developed and redeveloped space previously placed in service.

Corporate Office Properties Trust

Leasing - Office and Data Center Shell Portfolio (1)

Nine Months Ended 9/30/21

(square feet in thousands)

Defense/IT Locations
Ft Meade/BW Corridor NoVA Defense/IT Lackland Air Force Base Navy Support Redstone Arsenal Data Center Shells Total Defense/IT Locations Regional Office Other Total
Renewed Space
Leased Square Feet 587 66 250 191 252 — 1,346 15 7 1,368
Expiring Square Feet 914 97 250 219 257 — 1,737 87 10 1,835
Vacating Square Feet 328 31 — 28 4 — 392 72 3 467
Retention Rate (% based upon square feet) (1) 64.2 % 67.7 % 100.0 % 87.2 % 98.4 % — % 77.5 % 17.4 % 67.0 % 74.6 %
Statistics for Completed Leasing:
Per Annum Average Committed Cost per Square Foot (2) $ 3.95 $ 2.24 $ 2.00 $ 1.58 $ 0.48 $ — $ 2.52 $ 1.13 $ 0.28 $ 2.49
Weighted Average Lease Term in Years 4.7 4.4 5.0 3.0 1.0 — 3.8 1.0 11.8 3.8
Average Rent Per Square Foot
Renewal Average Rent $ 35.37 $ 31.06 $ 50.29 $ 22.24 $ 23.65 $ — $ 33.87 $ 33.52 $ 25.83 $ 33.82
Expiring Average Rent $ 33.96 $ 29.52 $ 44.30 $ 21.36 $ 22.93 $ — $ 31.81 $ 33.23 $ 20.69 $ 31.77
Change in Average Rent 4.2 % 5.2 % 13.5 % 4.1 % 3.1 % — % 6.5 % 0.9 % 24.8 % 6.5 %
Cash Rent Per Square Foot
Renewal Cash Rent $ 35.39 $ 33.54 $ 48.52 $ 22.20 $ 23.65 $ — $ 33.67 $ 33.84 $ 26.32 $ 33.63
Expiring Cash Rent $ 36.16 $ 33.89 $ 47.70 $ 22.46 $ 23.08 $ — $ 33.80 $ 33.79 $ 22.59 $ 33.74
Change in Cash Rent (2.1) % (1.0) % 1.7 % (1.2) % 2.5 % — % (0.4) % 0.2 % 16.5 % (0.3) %
Average Escalations Per Year 2.1 % 2.5 % 3.0 % 2.6 % — % — % 2.4 % — % — % 2.4 %
New Leases
Development and Redevelopment Space
Leased Square Feet 183 — — — 464 265 911 3 — 915
Statistics for Completed Leasing:
Per Annum Average Committed Cost per Square Foot (2) $ 8.91 $ — $ — $ — $ 6.83 $ — $ 5.26 $ 13.83 $ — $ 5.29
Weighted Average Lease Term in Years 11.8 — — — 14.4 15.0 14.1 10.0 — 14.1
Average Rent Per Square Foot $ 37.87 $ — $ — $ — $ 28.45 $ 31.40 $ 31.20 $ 73.66 $ — $ 31.36
Cash Rent Per Square Foot $ 38.00 $ — $ — $ — $ 26.65 $ 27.70 $ 29.23 $ 68.89 $ — $ 29.38
Vacant Space (3)
Leased Square Feet 343 52 — 6 5 — 407 13 — 420
Statistics for Completed Leasing:
Per Annum Average Committed Cost per Square Foot (2) $ 9.04 $ 6.72 $ — $ 6.13 $ 1.92 $ — $ 8.60 $ 8.56 $ — $ 8.60
Weighted Average Lease Term in Years 8.8 7.1 — 8.9 5.3 — 8.5 9.4 — 8.6
Average Rent Per Square Foot $ 28.05 $ 29.93 $ — $ 40.18 $ 24.30 $ — $ 28.43 $ 29.57 $ — $ 28.47
Cash Rent Per Square Foot $ 27.50 $ 30.18 $ — $ 44.00 $ 24.25 $ — $ 28.06 $ 28.26 $ — $ 28.06
Total Square Feet Leased 1,113 118 250 197 721 265 2,664 31 7 2,702
Average Escalations Per Year 2.3 % 2.5 % 3.0 % 2.5 % 2.5 % 2.0 % 2.4 % 2.5 % — % 2.4 %
Average Escalations Excl. Data Center Shells 2.4 %

(1)Activity excludes owner occupied space, leases with less than a one-year term and expirations associated with space removed from service. Retention rate includes the effect of 63,000 square feet vacated in a property in the Ft Meade/BW Corridor that was removed from service for redevelopment in June 2021 and excluded from reporting as of 6/30/21; this property was placed back into operations and retrospectively added to YTD reporting. Weighted average lease term is based on the lease term defined in the lease assuming no exercise of early termination rights. Committed costs for leasing are reported above in the period of lease execution. Actual capital expenditures for leasing are reported on page 9 in the period such costs are incurred. Cash rent per square foot ignores the effect of rent abatements.

(2)Committed costs include tenant improvements and leasing commissions and exclude free rent concession.

(3)Vacant space includes acquired first generation space, vacated second generation space and leases executed on developed and redeveloped space previously placed in service.

Corporate Office Properties Trust

Lease Expiration Analysis as of 9/30/21 (1)

(dollars and square feet in thousands, except per square foot amounts)

Office and Data Center Shells

Segment of Lease and Year of Expiration (2) Square Footage of Leases Expiring Annualized Rental<br>Revenue of Expiring Leases (3) % of Core/Total<br>Annualized <br>Rental<br>Revenue<br>Expiring (3)(4) Annualized Rental<br>Revenue of<br>Expiring Leases per <br>Occupied Sq. Foot (3)
Core Portfolio
Ft Meade/BW Corridor 252 $ 7,730 1.4 % $ 30.70
NoVA Defense/IT 3 99 — % 30.11
Navy Support 95 3,369 0.6 % 35.56
Redstone Arsenal 121 2,724 0.5 % 22.50
Regional Office 24 932 0.2 % 37.85
2021 495 14,854 2.6 % 29.98
Ft Meade/BW Corridor 1,032 36,237 6.4 % 35.09
NoVA Defense/IT 109 3,752 0.7 % 34.49
Navy Support 225 6,223 1.1 % 27.60
Redstone Arsenal 40 978 0.2 % 24.74
Regional Office 555 18,449 3.3 % 33.16
2022 1,961 65,639 11.7 % 33.44
Ft Meade/BW Corridor 1,325 48,802 8.6 % 36.79
NoVA Defense/IT 165 5,531 1.0 % 33.51
Navy Support 231 6,592 1.2 % 28.58
Redstone Arsenal 256 5,892 1.0 % 23.00
Regional Office 145 4,584 0.8 % 31.58
2023 2,122 71,400 12.6 % 33.62
Ft Meade/BW Corridor 1,111 41,099 7.3 % 36.95
NoVA Defense/IT 408 14,458 2.6 % 35.44
Navy Support 276 6,491 1.1 % 23.52
Redstone Arsenal 75 1,852 0.3 % 24.56
Data Center Shells-Unconsolidated JV Properties 546 669 0.1 % 12.25
Regional Office 78 2,410 0.4 % 30.56
2024 2,494 66,978 11.9 % 33.40
Ft Meade/BW Corridor 1,582 55,525 9.8 % 35.03
NoVA Defense/IT 280 11,660 2.1 % 41.65
Lackland Air Force Base 703 39,339 7.0 % 55.98
Navy Support 93 1,746 0.3 % 18.75
Redstone Arsenal 253 5,337 0.9 % 20.96
Data Center Shells-Unconsolidated JV Properties 121 156 — % 12.93
Regional Office 110 4,127 0.7 % 37.45
2025 3,142 117,890 20.9 % 38.82
Thereafter
Consolidated Properties 7,380 224,190 39.8 % 29.69
Unconsolidated JV Properties 2,515 3,719 0.7 % 14.79
Core Portfolio 20,109 $ 564,670 100.0 % $ 32.43
Segment of Lease and Year of Expiration (2) Square Footage of Leases Expiring Annualized Rental<br>Revenue of Expiring Leases (3) % of Core/Total<br>Annualized <br>Rental<br>Revenue<br>Expiring (3)(4) Annualized Rental<br>Revenue of<br>Expiring Leases per <br>Occupied Sq. Foot (3)
--- --- --- --- --- --- --- ---
Core Portfolio 20,109 $ 564,670 99.6 % $ 32.43
Other Properties 104 2,524 0.4 % 24.10
Total Portfolio 20,213 $ 567,194 100.0 % $ 32.38
Consolidated Portfolio 17,031 $ 562,650
Unconsolidated JV Properties 3,182 $ 4,544

Note: As of 9/30/21, the weighted average lease term was 5.4 years for the core and total portfolio and 5.2 years for the consolidated portfolio.

Wholesale Data Center

Year of Expiration Capacity (MW) Annualized Rental<br>Revenue of <br>Expiring Leases (3)
2021 (5) 11.25 $ 14,908
2022 1.15 2,454
2023 1.19 2,295
2024 — 11
2025 3.10 5,328
Thereafter — 291
16.69 $ 25,287

(1)This expiration analysis reflects occupied space of our total portfolio (including consolidated and unconsolidated properties) and includes the effect of early renewals completed on existing leases but excludes the effect of new tenant leases on square feet yet to commence as of 9/30/21 of 284,000 for the core portfolio. With regard to properties owned through unconsolidated real estate joint ventures, the amounts reported above reflect 100% of the properties’ square footage but only reflect the portion of Annualized Rental Revenue that was allocable to COPT’s ownership interest.

(2)A number of our leases are subject to certain early termination provisions.  The year of lease expiration is based on the lease term determined in accordance with GAAP.

(3)Total Annualized Rental Revenue is the monthly contractual base rent as of 9/30/21 (ignoring free rent then in effect) multiplied by 12 plus the estimated annualized expense reimbursements under existing leases. The amounts reported above for Annualized Rental Revenue include the portion of properties owned through unconsolidated real estate joint ventures that was allocable to COPT’s ownership interest.

(4)Amounts reported represent the percentage of our core portfolio for components of such portfolio while other amounts represent the percentage of our total portfolio.

(5)An 11.25MW lease that expired in August 2020 remains in place until renewed by both parties or terminated by either party.

Corporate Office Properties Trust

2022 Core Portfolio Quarterly Lease Expiration Analysis as of 9/30/21 (1)

(dollars and square feet in thousands, except per square foot amounts)

Office and Data Center Shells

Segment of Lease and Quarter of Expiration (2) Square Footage of Leases Expiring Annualized Rental<br>Revenue of Expiring Leases (3) % of Core Annualized <br>Rental Revenue Expiring (3) Annualized Rental Revenue of Expiring Leases per Occupied Sq. Foot
Core Portfolio
Ft Meade/BW Corridor 202 $ 7,109 1.3 % $ 35.12
NoVA Defense/IT 11 262 — % 22.86
Navy Support 96 2,402 0.4 % 25.13
Regional Office 211 5,748 1.0 % 27.15
Q1 2022 520 15,521 2.7 % 29.79
Ft Meade/BW Corridor 255 8,369 1.5 % 32.79
NoVA Defense/IT 58 1,981 0.4 % 34.21
Navy Support 37 1,803 0.3 % 48.93
Regional Office 45 1,648 0.3 % 36.58
Q2 2022 395 13,801 2.5 % 34.94
Ft Meade/BW Corridor 261 9,419 1.7 % 36.06
NoVA Defense/IT 6 224 — % 36.60
Navy Support 60 1,178 0.2 % 19.60
Redstone Arsenal 10 281 — % 27.32
Regional Office 17 604 0.1 % 34.03
Q3 2022 354 11,706 2.0 % 32.93
Ft Meade/BW Corridor 315 11,341 2.0 % 36.12
NoVA Defense/IT 33 1,284 0.2 % 38.59
Navy Support 33 839 0.1 % 25.53
Redstone Arsenal 29 697 0.1 % 23.83
Regional Office 282 10,450 1.9 % 37.05
Q4 2022 692 24,611 4.3 % 35.60
1,961 $ 65,639 11.7 % $ 33.44

(1)This expiration analysis reflects occupied space of our total portfolio (including consolidated and unconsolidated properties) and includes the effect of early renewals completed on existing leases but excludes the effect of new tenant leases on square feet yet to commence as of 9/30/21.

(2)A number of our leases are subject to certain early termination provisions.  The period of lease expiration is based on the lease term determined in accordance with GAAP.

(3)Total Annualized Rental Revenue is the monthly contractual base rent as of 9/30/21 (ignoring free rent then in effect) multiplied by 12 plus the estimated annualized expense reimbursements under existing leases.

Corporate Office Properties Trust

Top 20 Tenants as of 9/30/21 (1)

(dollars and square feet in thousands)

Tenant Total<br>Annualized<br>Rental Revenue (2) %<br>of Total<br>Annualized <br>Rental Revenue (2) Occupied Square Feet in Office and Data Center Shells Weighted Average Remaining Lease Term in Office and Data Center Shells (3)
United States Government (4) $ 208,672 35.2 % 5,057 4.6
Fortune 100 Company 54,976 9.3 % 4,983 8.8
General Dynamics Corporation 33,107 5.6 % 752 2.2
The Boeing Company 17,577 3.0 % 610 1.7
CACI International Inc 13,561 2.3 % 354 3.5
Peraton Corp. 12,421 2.1 % 349 6.5
CareFirst Inc. 11,409 1.9 % 312 1.4
Booz Allen Hamilton, Inc. 11,055 1.9 % 297 3.5
Northrop Grumman Corporation 8,121 1.4 % 284 2.2
Wells Fargo & Company 7,063 1.2 % 172 6.4
Raytheon Technologies Corporation 6,684 1.1 % 202 1.5
Yulista Holding, LLC 6,494 1.1 % 366 8.2
AT&T Corporation 6,287 1.1 % 321 8.0
Miles and Stockbridge, PC 6,180 1.0 % 160 6.0
Mantech International Corp. 5,926 1.0 % 195 3.3
Morrison & Foerster, LLP 5,925 1.0 % 102 15.5
Jacobs Engineering Group Inc. 5,312 0.9 % 165 7.2
Transamerica Life Insurance Company 5,296 0.9 % 140 0.3
The Mitre Corporation 4,922 0.8 % 152 4.7
University of Maryland 4,700 0.8 % 146 6.2
Subtotal Top 20 Tenants 435,688 73.6 % 15,119 5.8
All remaining tenants 156,793 26.4 % 5,094 3.9
Total/Weighted Average $ 592,481 100.0 % 20,213 5.4

(1)Includes Annualized Rental Revenue (“ARR”) in our portfolio of operating office and data center shells and our wholesale data center. For properties owned through unconsolidated real estate joint ventures, includes COPT’s share of those properties’ ARR of $4.5 million (see page 33 for additional information).

(2)Total ARR is the monthly contractual base rent as of 9/30/21, multiplied by 12, plus the estimated annualized expense reimbursements under existing leases. With regard to properties owned through unconsolidated real estate joint ventures, the amounts reported above reflect 100% of the properties’ square footage but only reflect the portion of ARR that was allocable to COPT’s ownership interest.

(3)Weighted average remaining lease term is based on the lease term determined in accordance with GAAP for our office and data center shell properties (i.e., excluding the effect of our wholesale data center leases). The weighting of the lease term was computed based on occupied square feet.

(4)Substantially all of our government leases are subject to early termination provisions which are customary in government leases. As of 9/30/21, $5.7 million of our ARR was through the General Services Administration (GSA), representing 2.7% of our ARR from the United States Government and 1.0% of our total ARR.

Corporate Office Properties Trust

Property Dispositions

(dollars and square feet in thousands)

Property Property Segment Location # of Properties Operational Square Feet Transaction<br>Date % Occupied on Transaction Date Transaction<br>Value <br>(in millions)
Quarter Ended 6/30/21
90% interest in MP 1 and 2 (1) Data Center Shells Northern Virginia 2 432 6/2/21 100.0 % $ 107

(1)We sold a 90% interest in these properties based on an aggregate property value of $119 million and retained a 10% interest in the properties through, BRE-COPT 3, an unconsolidated real estate JV.

Corporate Office Properties Trust

Summary of Development Projects as of 9/30/21 (1)

(dollars and square feet in thousands)

Total Rentable Square Feet % Leased as of 10/14/21 as of 9/30/21 (2) Actual or Anticipated Shell Completion Date Anticipated Operational Date (3)
Anticipated Total Cost Cost to Date Cost to Date Placed in Service
Property and Segment Location
Fort Meade/BW Corridor:
4600 River Road (4) College Park, Maryland 102 54% $ 30,734 $ 24,687 $ 16,756 4Q 20 4Q 21
560 National Business Parkway Annapolis Junction, Maryland 183 100% 66,325 26,629 — 2Q 22 4Q 22
Subtotal / Average 285 84% 97,059 51,316 16,756
Navy Support:
Expedition VII St. Mary’s County, Maryland 29 62% 8,907 4,810 — 4Q 21 4Q 22
Redstone Arsenal:
6000 Redstone Gateway (5) Huntsville, Alabama 42 100% 9,928 8,897 7,852 4Q 20 4Q 21
8000 Rideout Road (6) Huntsville, Alabama 100 88% 28,070 20,178 6,465 2Q 21 2Q 22
6200 Redstone Gateway Huntsville, Alabama 172 91% 53,900 9,683 — 1Q 23 1Q 23
8300 Rideout Road Huntsville, Alabama 131 100% 51,100 15,316 — 3Q 22 3Q 22
8200 Rideout Road Huntsville, Alabama 131 100% 52,100 12,326 — 4Q 22 4Q 22
7000 Redstone Gateway Huntsville, Alabama 46 46% 11,600 966 — 1Q 23 1Q 24
300 Secured Gateway Huntsville, Alabama 205 100% 59,700 2,060 — 1Q 24 1Q 24
Subtotal / Average 827 94% 266,398 69,426 14,317
Data Center Shells:
Oak Grove C Northern Virginia 265 100% 92,700 51,391 — 1Q 22 1Q 22
PS A Northern Virginia 227 100% 65,600 6,085 — 2Q 23 2Q 23
PS B Northern Virginia 193 100% 55,000 5,129 — 2Q 24 2Q 24
Subtotal / Average 685 100% 213,300 62,605 —
Total Under Development 1,826 94% $ 585,664 $ 188,157 $ 31,073

(1)Includes properties under, or contractually committed for, development as of 9/30/21.

(2)Cost includes land, development, leasing costs and allocated portion of structured parking and other shared infrastructure, if applicable.

(3)Anticipated operational date is the earlier of the estimated date when leases have commenced on 100% of a property’s space or one year from the cessation of major construction activities.

(4)Although classified as under development, 55,000 square feet were operational as of 9/30/21.

(5)Although classified as under development, 32,000 square feet were operational as of 9/30/21.

(6)Although classified as under development, 20,000 square feet were operational as of 9/30/21.

Corporate Office Properties Trust

Development Placed in Service as of 9/30/21

(square feet in thousands)

Total Property Square Feet Placed in Service Total Space Placed in Service % Leased as of 9/30/21
Property Segment % Leased as of 9/30/21 Rentable Square Feet Prior Year 2021 Total
Property and Location 1st Quarter 2nd Quarter 3rd Quarter Total 2021
7100 Redstone Gateway<br><br>Huntsville, Alabama Redstone Arsenal 100% 46 — 46 — — 46 46 100%
8000 Rideout Road<br><br>Huntsville, Alabama Redstone Arsenal 88% 100 — — 9 11 20 20 100%
2100 L Street<br><br>Washington, D.C. Regional Office 59% 188 107 — 81 — 81 188 59%
Project EL<br><br>San Antonio, Texas Lackland Air Force Base 100% 107 — — 107 — 107 107 100%
610 Guardian Way<br><br>Annapolis Junction, Maryland Fort Meade/BW Corridor 100% 107 — — — 107 107 107 100%
NoVA Office C<br><br>Chantilly, Virginia NoVA Defense/IT 100% 348 — — — 348 348 348 100%
Total Development Placed in Service 90% 896 107 46 197 466 709 816 90%
% Leased as of 9/30/21 100% 60% 100% 89%

Corporate Office Properties Trust

Summary of Land Owned/Controlled as of 9/30/21 (1)

(in thousands)

Location Acres Estimated Developable Square Feet Carrying Amount
Land owned/controlled for future development
Defense/IT Locations:
Fort Meade/BW Corridor:
National Business Park 146 1,816
Howard County 19 290
Other 126 1,338
Total Fort Meade/BW Corridor 291 3,444
NoVA Defense/IT 29 1,133
Navy Support 38 64
Redstone Arsenal (2) 310 2,439
Data Center Shells 43 913
Total Defense/IT Locations 711 7,993
Regional Office 10 900
Total land owned/controlled for future development 721 8,893 $ 224,453
Other land owned/controlled 43 638 3,434
Land held, net 764 9,531 $ 227,887

(1)This land inventory schedule includes properties under ground lease to us and excludes all properties listed as development as detailed on page 25. The costs associated with the land included on this summary are reported on our consolidated balance sheet in the line entitled “land held.”

(2)This land is controlled under a long-term master lease agreement to LW Redstone Company, LLC, a consolidated joint venture (see page 32). As this land is developed in the future, the joint venture will execute site-specific leases under the master lease agreement. Rental payments will commence under the site-specific leases as cash rents under tenant leases commence at the respective properties.

Corporate Office Properties Trust

Capitalization Overview

(dollars, shares and units in thousands)

Wtd. Avg. Maturity (Years) (1) Stated Rate Effective Rate <br>(2)(3) Gross Debt Balance at 9/30/21
Debt
Secured debt 3.0 3.65 % 3.78 % $ 171,762
Unsecured debt 5.9 2.58 % 2.99 % 2,010,911
Total Consolidated Debt 5.7 2.66 % 3.05 % $ 2,182,673
Fixed rate debt (3) 6.5 2.95 % 3.10 % $ 2,122,673
Variable rate debt 1.5 1.14 % 1.10 % 60,000
Total Consolidated Debt $ 2,182,673
Common Equity
Common Shares 112,325
Common Units (4) 1,428
Total Common Shares and Units 113,753
Closing Common Share Price on 9/30/21 $ 26.98
Equity Market Capitalization $ 3,069,056
Total Market Capitalization $ 5,251,729

(1)Calculated assuming exercise of extension options on our Revolving Credit Facility.

(2)Excludes the effect of deferred financing cost amortization.

(3)Includes the effect of interest rate swaps with notional amounts of $284.2 million that hedge the risk of changes in interest rates on variable rate debt.

(4)Excludes unvested share-based compensation awards subject to market conditions.

Investment Grade Ratings & Outlook Latest Affirmation
Fitch BBB- Stable 10/8/21
Moody’s Baa3 Stable 3/3/21
Standard & Poor’s BBB- Stable 3/3/21

chart-6c51c86e1cd64757b06.jpgchart-540ce6fc9b1e4d14bd8.jpg

Corporate Office Properties Trust

Summary of Outstanding Debt as of 9/30/21

(dollars in thousands)

Unsecured Debt Stated Rate Amount Outstanding Maturity Date Secured Debt Stated Rate Amount Outstanding Balloon Payment Due Upon Maturity Maturity Date
Revolving Credit Facility L + 1.10% $ 10,000 Mar-23 (1)(2) 7740 Milestone Parkway 3.96% $ 16,552 $ 15,902 Feb-23
Senior Unsecured Notes 100 & 30 Light Street 4.32% 49,625 47,676 Jun-23
5.00% due 2025 5.00% 300,000 Jul-25 LW Redstone:
2.25% due 2026 2.25% 400,000 Mar-26 1000, 1200 & 1100 Redstone
2.00% due 2029 2.00% 400,000 Jan-29 Gateway (3) 4.47% (4) 30,926 27,649 Jun-24
2.75% due 2031 2.75% 600,000 Apr-31 4000 & 4100 Market Street and
Subtotal - Senior Unsecured Notes 2.85% $ 1,700,000 8800 Redstone Gateway (2)(3) L + 1.55% 23,000 22,100 Mar-25 (5)
M Square:
Unsecured Bank Term Loans 5825 & 5850 University Research
2022 Maturity L + 1.00% $ 300,000 Dec-22 (2) Court (3) 3.82% 40,479 35,603 Jun-26
Other Unsecured Debt 0.00% 911 May-26 5801 University Research Court (2)(3) L + 1.45% 11,180 10,020 Aug-26
Total Unsecured Debt 2.58% $ 2,010,911 Total Secured Debt 3.65% $ 171,762
Debt Summary
Total Unsecured Debt 2.58% $ 2,010,911
Total Secured Debt 3.65% 171,762
Consolidated Debt 2.66% $ 2,182,673
Net discounts and deferred<br><br>financing costs (22,941)
Debt, per balance sheet $ 2,159,732
Consolidated Debt $ 2,182,673
COPT’s share of unconsolidated JV gross debt 26,250
Gross debt $ 2,208,923

(1)The Company’s $800 million Revolving Credit Facility matures in March 2023 and may be extended for two six-month periods, at our option.

(2)Pre-payable anytime without penalty.

(3)These properties are owned through consolidated joint ventures.

(4)Represents the weighted average rate of three loans on the properties.

(5)The loan maturity may be extended for two one-year periods, provided certain conditions are met.

Corporate Office Properties Trust

Summary of Outstanding Debt as of 9/30/21 (continued)

chart-397747bf668e4dcf993.jpg

chart-1c39820e6c9044ceaf0.jpgchart-4742abf1b0884c14a8e.jpg

(1)Revolving Credit Facility maturity of $10.0 million scheduled for 2023 is presented assuming our exercise of two six-month extension options.

(2)Includes the effect of $284.2 million in interest rate swaps that hedge the risk of changes in interest rates on variable rate debt.

Corporate Office Properties Trust

Debt Analysis

(dollars and square feet in thousands)

As of and for<br><br>Three Months Ended 9/30/21 As of and for Three Months Ended<br><br>9/30/21
Senior Note Covenants (1) Required Other Notes 5.00% Notes Line of Credit & Term Loan Covenants (1) Required
Total Debt / Total Assets < 60% 39.7% 40.2% Total Debt / Total Assets < 60% 37.0%
Secured Debt / Total Assets < 40% 3.1% 3.7% Secured Debt / Total Assets < 40% 2.9%
Debt Service Coverage > 1.5x 5.0x 5.1x Adjusted EBITDA / Fixed Charges > 1.5x 4.7x
Unencumbered Assets / Unsecured Debt > 150% 251.8% 251.8% Unsecured Debt / Unencumbered Assets < 60% 37.2%
Unencumbered Adjusted NOI / Unsecured Interest Expense > 1.75x 5.3x
Debt Ratios Page Refer. Unencumbered Portfolio Analysis
Gross debt 29 $ 2,208,923 # of unencumbered properties 160
Adjusted book 36 $ 5,574,260 % of total portfolio 86 %
Net debt / adjusted book ratio 39.4 % Unencumbered square feet in-service 17,683
Net debt 36 $ 2,193,823 % of total portfolio 82 %
Net debt adj. for fully-leased development 36 $ 2,073,842 NOI from unencumbered real estate operations $ 82,983
In-place adjusted EBITDA 10 $ 87,231 % of total NOI from real estate operations 92 %
Net debt / in-place adjusted EBITDA ratio 6.3 x Adjusted EBITDA from unencumbered real estate operations $ 76,515
Net debt adj. for fully-leased development / in-place adj. EBITDA ratio 5.9 x % of total adjusted EBITDA from real estate operations 91 %
Denominator for debt service coverage 35 $ 15,642 Unencumbered adjusted book $ 5,127,439
Denominator for fixed charge coverage 35 $ 17,405 % of total adjusted book 92 %
Adjusted EBITDA 10 $ 83,991
Adjusted EBITDA debt service coverage ratio 5.4 x
Adjusted EBITDA fixed charge coverage ratio 4.8 x

(1)The covenants are calculated as defined in the applicable agreements, and the calculations differ between those agreements.

Corporate Office Properties Trust

Consolidated Real Estate Joint Ventures as of 9/30/21

(dollars and square feet in thousands)

Operating Properties Operational <br>Square Feet % Occupied % Leased NOI for the Three Months Ended 9/30/21 (1) NOI for the Nine Months Ended 9/30/21 (1) Total Assets (2) Venture Level Debt COPT Nominal Ownership %
Suburban Maryland:
M Square Associates, LLC (4 properties) 368 98.0% 98.0% $ 1,789 $ 5,350 $ 86,982 $ 51,659 50%
Huntsville, Alabama:
LW Redstone Company, LLC (16 properties) 1,383 100.0% 100.0% 5,657 16,168 296,506 53,926 85% (3)
Washington, D.C.:
Stevens Place (1 property) 188 56.9% 58.7% 675 2,795 164,189 — 95%
Total/Average 1,939 95.4% 95.6% $ 8,121 $ 24,313 $ 547,677 $ 105,585
Non-operating Properties Estimated Developable Square Feet Total Assets (2) Venture Level Debt COPT Nominal Ownership %
--- --- --- --- --- --- --- ---
Suburban Maryland:
M Square Research Park 395 $ 13,652 $ — 50%
Huntsville, Alabama:
Redstone Gateway (4) 3,214 156,990 — 85% (3)
Total 3,609 $ 170,642 $ —

(1)Represents NOI of the joint venture operating properties before allocation to joint venture partners.

(2)Total assets includes the assets of the consolidated joint venture plus any outside investment basis.

(3)Our partner receives an annual priority return of 13.5% on its $9.0 million in contributed equity, plus certain fees for leasing and development, and we expect to receive all other distributions from the JV.

(4)Total assets include $71.3 million in amortized cost basis pertaining to amounts due from the City of Huntsville (including accrued interest) in connection with infrastructure costs funded by the joint venture.

Corporate Office Properties Trust

Unconsolidated Real Estate Joint Ventures as of 9/30/21

(dollars and square feet in thousands)

Joint venture information (1) BREIT-COPT BRE-COPT 2 BRE-COPT 3
COPT ownership % 10% 10% 10%
COPT’s investment $ 12,620 $ 15,735 $ 11,949
# of Properties 9 8 2
Square Feet 1,472 1,278 432
% Occupied 100 % 100 % 100 %
COPT’s share of ARR $ 2,166 $ 1,747 $ 631
Balance sheet information Total COPT’s Share (2)
Operating properties, net $ 686,233 $ 68,623
Total assets $ 750,674 $ 75,067
Debt $ 261,697 $ 26,170
Total liabilities $ 274,983 $ 27,498
Three Months Ended 9/30/21 Nine Months Ended 9/30/21
Operating information (1) Total COPT’s Share (2) Total COPT’s Share (2)
Revenue $ 12,463 $ 1,232 $ 34,720 $ 3,458
Operating expenses (1,708) (172) (5,069) (508)
NOI and EBITDA 10,755 1,060 29,651 2,950
Interest expense (2,375) (238) (7,116) (712)
Depreciation and amortization (5,713) (525) (15,946) (1,455)
Net income $ 2,667 $ 297 $ 6,589 $ 783
NOI (per above) $ 10,755 $ 1,060 $ 29,651 $ 2,950
Straight line rent adjustments (614) (61) (1,690) (169)
Amortization of acquired above- and below-market rents (477) (48) (1,429) (143)
Cash NOI $ 9,664 $ 951 $ 26,532 $ 2,638

(1)Refer to the section entitled “Definitions” for joint venture names. On 6/2/21, we sold a 90% interest in two data center shell properties totaling 432,000 square feet based on an aggregate property value of $119 million and retained a 10% interest in the properties through BRE-COPT 3.

(2)Represents the portion allocable to our ownership interest.

Corporate Office Properties Trust

Supplementary Reconciliations of Non-GAAP Measures

(in thousands)

Three Months Ended Nine Months Ended
9/30/21 6/30/21 3/31/21 12/31/20 9/30/20 9/30/21 9/30/20
NOI from real estate operations (1)
Real estate revenues $ 146,590 $ 144,423 $ 145,164 $ 139,628 $ 134,443 $ 436,177 $ 399,097
Property operating expenses (57,190) (54,616) (56,974) (52,085) (51,552) (168,780) (151,755)
COPT’s share of NOI in unconsolidated real estate JVs (2) 1,060 973 917 1,761 1,752 2,950 5,190
NOI from real estate operations 90,460 90,780 89,107 89,304 84,643 270,347 252,532
General and administrative expenses (7,269) (7,293) (6,062) (7,897) (5,558) (20,624) (17,372)
Leasing expenses (2,073) (1,929) (2,344) (1,993) (1,909) (6,346) (5,739)
Business development expenses and land carry costs (1,093) (1,372) (1,094) (999) (1,094) (3,559) (3,474)
NOI from construction contracts and other service operations 957 906 765 837 1,103 2,628 2,188
Equity in loss of unconsolidated non-real estate entities — (2) (2) (2) (1) (4) (4)
Interest and other income 1,818 2,228 1,865 3,341 1,746 5,911 5,233
Credit loss recoveries (expense) (3) 326 (193) 907 772 1,465 1,040 161
Interest expense (15,720) (15,942) (17,519) (17,148) (17,152) (49,181) (50,789)
Loss on early extinguishment of debt (1,159) (25,228) (33,166) (4,069) (3,237) (59,553) (3,237)
Loss on interest rate derivatives — — — — (53,196) — (53,196)
COPT’s share of interest expense of unconsolidated real estate JVs (2) (238) (235) (239) (432) (455) (712) (1,359)
Income tax expense (47) (24) (32) (258) (16) (103) (95)
FFO - per Nareit (1) $ 65,962 $ 41,696 $ 32,186 $ 61,456 $ 6,339 $ 139,844 $ 124,849
Real estate revenues
Lease revenue
Fixed contractual payments $ 114,309 $ 113,423 $ 112,425 $ 110,748 $ 106,743 $ 340,157 $ 314,845
Variable lease payments (4) 31,440 30,235 32,199 28,345 27,132 93,874 82,189
Lease revenue 145,749 143,658 144,624 139,093 133,875 434,031 397,034
Other property revenue 841 765 540 535 568 2,146 2,063
Real estate revenues $ 146,590 $ 144,423 $ 145,164 $ 139,628 $ 134,443 $ 436,177 $ 399,097
Provision for credit losses (recoveries) on billed lease revenue $ (1) $ (5) $ — $ 41 $ 212 $ (6) $ 215

(1)Refer to section entitled “Definitions” for a definition of this measure.

(2)See page 33 for a schedule of the related components.

(3)Excludes credit losses on lease revenue, which are included in lease revenue.

(4)Represents primarily lease revenue associated with property operating expense reimbursements from tenants.

Corporate Office Properties Trust

Supplementary Reconciliations of Non-GAAP Measures (continued)

(in thousands)

Three Months Ended Nine Months Ended
9/30/21 6/30/21 3/31/21 12/31/20 9/30/20 9/30/21 9/30/20
Total interest expense $ 15,720 $ 15,942 $ 17,519 $ 17,148 $ 17,152 $ 49,181 $ 50,789
Less: Amortization of deferred financing costs (736) (811) (793) (664) (658) (2,340) (1,875)
Less: Amortization of net debt discounts, net of amounts capitalized (567) (520) (542) (504) (453) (1,629) (1,229)
COPT’s share of interest expense of unconsolidated real estate JVs, excluding deferred financing costs 236 236 234 422 444 706 1,327
Denominator for interest coverage 14,653 14,847 16,418 16,402 16,485 45,918 49,012
Scheduled principal amortization 989 959 962 1,048 1,033 2,910 3,077
Denominator for debt service coverage 15,642 15,806 17,380 17,450 17,518 48,828 52,089
Capitalized interest 1,763 1,707 1,805 2,620 2,908 5,275 9,440
Preferred unit distributions — — — 69 77 — 231
Denominator for fixed charge coverage $ 17,405 $ 17,513 $ 19,185 $ 20,139 $ 20,503 $ 54,103 $ 61,760
Common share dividends - unrestricted shares and deferred shares $ 30,813 $ 30,811 $ 30,805 $ 30,764 $ 30,763 $ 92,429 $ 92,278
Common share dividends - restricted shares and deferred shares 70 77 97 94 80 244 258
Common unit distributions - unrestricted units 347 347 347 341 341 1,041 1,021
Common unit distributions - restricted units 52 52 51 31 25 155 75
Preferred unit distributions — — — 69 77 — 231
Total dividends/distributions $ 31,282 $ 31,287 $ 31,300 $ 31,299 $ 31,286 $ 93,869 $ 93,863
Common share dividends - unrestricted shares and deferred shares $ 30,813 $ 30,811 $ 30,805 $ 30,764 $ 30,763 $ 92,429 $ 92,278
Common unit distributions - unrestricted units 347 347 347 341 341 1,041 1,021
Common unit distributions - dilutive restricted units 6 — — — — 19 —
Distributions on dilutive preferred units — — — 69 — — —
Dividends and distributions for diluted FFO payout ratio 31,166 31,158 31,152 31,174 31,104 93,489 93,299
Distributions on dilutive preferred units — — — — 77 — 231
Dividends and distributions for other payout ratios $ 31,166 $ 31,158 $ 31,152 $ 31,174 $ 31,181 $ 93,489 $ 93,530

Corporate Office Properties Trust

Supplementary Reconciliations of Non-GAAP Measures (continued)

(in thousands)

9/30/21 6/30/21 3/31/21 12/31/20 9/30/20
Total assets $ 4,151,138 $ 4,052,032 $ 4,112,948 $ 4,077,023 $ 4,120,189
Accumulated depreciation 1,202,780 1,182,432 1,157,059 1,124,253 1,095,441
Accumulated depreciation included in assets held for sale 12,146 — — — —
Accumulated amort. of real estate intangibles and deferred leasing costs 219,179 219,666 217,811 217,124 215,651
Accumulated amortization of real estate intangibles and deferred leasing costs included in assets held for sale 3,102 — — — —
COPT’s share of liabilities of unconsolidated real estate JVs 27,498 27,529 27,603 26,710 50,957
COPT’s share of accumulated depreciation and amortization of unconsolidated real estate JVs 3,161 2,578 2,043 1,489 10,640
Less: Property - operating lease liabilities (29,630) (29,909) (30,176) (30,746) (26,382)
Less: Property - finance lease liabilities (14) (18) (28) (28) (28)
Less: Cash and cash equivalents (14,570) (17,182) (36,139) (18,369) (11,458)
Less: COPT’s share of cash of unconsolidated real estate JVs (530) (373) (202) (152) (538)
Adjusted book $ 5,574,260 $ 5,436,755 $ 5,450,919 $ 5,397,304 $ 5,454,472
Gross debt (page 29) $ 2,208,923 $ 2,157,325 $ 2,257,854 $ 2,127,715 $ 2,247,523
Less: Cash and cash equivalents (14,570) (17,182) (36,139) (18,369) (11,458)
Less: COPT’s share of cash of unconsolidated real estate JVs (530) (373) (202) (152) (538)
Net debt $ 2,193,823 $ 2,139,770 $ 2,221,513 $ 2,109,194 $ 2,235,527
Preferred equity — — — — 8,800
Net debt plus preferred equity $ 2,193,823 $ 2,139,770 $ 2,221,513 $ 2,109,194 $ 2,244,327
Costs incurred on fully-leased development properties (119,981) (171,453) (128,032) (114,532) (149,201)
Net debt adjusted for fully-leased development plus preferred equity $ 2,073,842 $ 1,968,317 $ 2,093,481 $ 1,994,662 $ 2,095,126

Corporate Office Properties Trust

Definitions

Non-GAAP Measures

We believe that the measures defined below that are not determined in accordance with generally accepted accounting principles (“GAAP”) are helpful to investors in measuring our performance and comparing it to that of other real estate investment trusts (“REITs”).  Since these measures exclude certain items includable in their respective most comparable GAAP measures, reliance on the measures has limitations; management compensates for these limitations by using the measures simply as supplemental measures that are weighed in balance with other GAAP and non-GAAP measures.  These measures should not be used as an alternative to the respective most comparable GAAP measures when evaluating our financial performance or to cash flow from operating, investing and financing activities when evaluating our liquidity or ability to make cash distributions or pay debt service.

Adjusted book

Defined as total assets presented on our consolidated balance sheet, net of lease liabilities associated with property right-of-use assets, and excluding the effect of cash and cash equivalents, accumulated depreciation on real estate properties, accumulated amortization of intangible assets on real estate acquisitions, accumulated amortization of deferred leasing costs, disposed properties included in assets held for sale, unconsolidated real estate joint ventures (“JVs”) cash and cash equivalents, liabilities and accumulated depreciation and amortization (of real estate intangibles and deferred leasing costs) allocable to our ownership interest in the JVs and the effect of properties serving as collateral for debt in default that we extinguished (or intend to extinguish) via conveyance of such properties.

Adjusted earnings before interest, income taxes, depreciation and amortization (“Adjusted EBITDA”)

Adjusted EBITDA is net income adjusted for the effects of interest expense, depreciation and amortization, gain on sales and impairment losses of real estate and investments in unconsolidated real estate JVs, gain or loss on early extinguishment of debt, loss on interest rate derivatives, net gain or loss on other investments, credit loss expense or recoveries, operating property acquisition costs, income taxes, business development expenses, demolition costs on redevelopment and nonrecurring improvements, executive transition costs and certain other expenses that we believe are not closely correlated with our operating performance.  Adjusted EBITDA also includes adjustments to net income for the effects of the items noted above pertaining to unconsolidated real estate JVs that were allocable to our ownership interest in the JV. While EBITDA (earnings before interest, taxes, depreciation and amortization) is a universally-defined supplemental measure, Adjusted EBITDA incorporates additional adjustments for gains and losses from investing and financing activities and certain other items that we believe are not closely correlated to (or associated with) our operating performance. We believe that adjusted EBITDA is a useful supplemental measure for assessing our un-levered performance.  We believe that net income is the most directly comparable GAAP measure to this non-GAAP measure.

Amortization of acquisition intangibles included in NOI

Represents the amortization of intangible asset and liability categories that is included in net operating income, including amortization of above- or below-market leases and above- or below-market cost arrangements.

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

This measure is FFO adjusted to subtract (1) preferred share dividends, (2) income attributable to noncontrolling interests through ownership of preferred units in Corporate Office Properties, L.P. (the “Operating Partnership”) or interests in other consolidated entities not owned by us, (3) depreciation and amortization allocable to noncontrolling interests in other consolidated entities, (4) Basic FFO allocable to share-based compensation awards and (5) issuance costs associated with redeemed preferred shares.  With these adjustments, Basic FFO represents FFO available to common shareholders and holders of common units in the Operating Partnership (“common units”).  Common units are substantially similar to our common shares of beneficial interest (“common shares”) and are exchangeable into common shares, subject to certain conditions.  We believe that Basic FFO is useful to investors due to the close correlation of common units to common shares.  We believe that net income is the most directly comparable GAAP measure to this non-GAAP measure.

Corporate Office Properties Trust

Definitions

Cash net operating income (“Cash NOI”)

Defined as NOI from real estate operations adjusted to eliminate the effects of: straight-line rental adjustments, amortization of tenant incentives, amortization of intangibles and other assets included in FFO and NOI, lease termination fees from tenants to terminate their lease obligations prior to the end of the agreed upon lease terms and rental revenue recognized under GAAP resulting from landlord assets and lease incentives funded by tenants.  Cash NOI also includes adjustments to NOI from real estate operations for the effects of the items noted above pertaining to unconsolidated real estate JVs that were allocable to our ownership interest in the JVs. Under GAAP, rental revenue is recognized evenly over the term of tenant leases (through straight-line rental adjustments and amortization of tenant incentives), which, given the long term nature of our leases, does not align with the economics of when tenant payments are due to us under the arrangements.  Also under GAAP, when a property is acquired, we allocate the acquisition to certain intangible components, which are then amortized into NOI over their estimated lives, even though the resulting revenue adjustments are not reflective of our lease economics.  In addition, revenue from lease termination fees and tenant-funded landlord improvements, absent an adjustment from us, would result in large one-time lump sum amounts in Cash NOI that we do not believe are reflective of a property’s long-term value.  We believe that Cash NOI is a useful supplemental measure of operating performance for a REIT’s operating real estate because it makes adjustments to NOI for the above stated items to be more reflective of the economics of when tenant payments are due to us under our leases and the value of our properties.  As is the case with NOI, the measure is useful in our opinion in evaluating and comparing the performance of geographic segments, Same Properties groupings and individual properties.  We believe that NOI from real estate operations, our segment performance measure, is the most directly comparable GAAP measure to this non-GAAP measure.

COPT’s share of NOI from unconsolidated real estate JVs

Represents the net of revenues and property operating expenses of real estate operations owned through unconsolidated JVs that are allocable to COPT’s ownership interest. This measure is included in the computation of NOI, our segment performance measure, as discussed below.

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

Defined as Diluted FFO, as adjusted for comparability, adjusted for the following: (1) the elimination of the effect of (a) noncash rental revenues and property operating expenses (comprised of straight-line rental adjustments, which includes the amortization of recurring tenant incentives, and amortization of acquisition intangibles included in FFO and NOI, both of which are described under “Cash NOI” above), (b) share-based compensation, net of amounts capitalized, (c) amortization of deferred financing costs, (d) amortization of debt discounts and premiums and (e) amortization of settlements of debt hedges; and (2) replacement capital expenditures (defined below).  Diluted AFFO also includes adjustments to Diluted FFO, as adjusted for comparability for the effects of the items noted above pertaining to unconsolidated real estate JVs that were allocable to our ownership interest in the JVs. We believe that Diluted AFFO is a useful supplemental measure of operating performance for a REIT because it incorporates adjustments for: certain revenue and expenses that are not associated with cash to or from us during the period; and certain capital expenditures for operating properties incurred during the period that do require cash outlays.  We believe that net income is the most directly comparable GAAP measure to this non-GAAP measure.

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

Diluted FFO is Basic FFO adjusted to add back any changes in Basic FFO that would result from the assumed conversion of securities that are convertible or exchangeable into common shares.  The computation of Diluted FFO assumes the conversion of common units but does not assume the conversion of other securities that are convertible into common shares if the conversion of those securities would increase Diluted FFO per share in a given period.  We believe that Diluted FFO is useful to investors because it is the numerator used to compute Diluted FFO per share, discussed below.  We believe that net income is the most directly comparable GAAP measure to this non-GAAP measure.

Corporate Office Properties Trust

Definitions

Diluted FFO available to common share and common unit holders, as adjusted for comparability (“Diluted FFO, as adjusted for comparability”)

Defined as Diluted FFO or FFO adjusted to exclude: operating property acquisition costs; gain or loss on early extinguishment of debt; FFO associated with properties that secured non-recourse debt on which we defaulted and, subsequently, extinguished via conveyance of such properties (including property NOI, interest expense and gains on debt extinguishment); loss on interest rate derivatives; demolition costs on redevelopment and nonrecurring improvements; executive transition costs; accounting charges for original issuance costs associated with redeemed preferred shares; allocations of FFO to holders of noncontrolling interests resulting from capital events; and certain other expenses that we believe are not closely correlated with our operating performance.  Diluted FFO, as adjusted for comparability also includes adjustments to Diluted FFO for the effects of the items noted above pertaining to unconsolidated real estate JVs that were allocable to our ownership interest in the JVs. We believe this to be a useful supplemental measure alongside Diluted FFO as it excludes gains and losses from certain investing and financing activities and certain other items that we believe are not closely correlated to (or associated with) our operating performance. The adjustment for FFO associated with properties securing non-recourse debt on which we defaulted pertains to the periods subsequent to our default on the loan’s payment terms, which was the result of our decision to not support payments on the loan since the estimated fair value of the properties was less than the loan balance. While we continued as the legal owner of the properties during this period, all cash flows produced by them went directly to the lender and we did not fund any debt service shortfalls, which included incremental additional interest under the default rate. We believe that net income is the most directly comparable GAAP measure to this non-GAAP measure.

Diluted FFO per share

Diluted FFO per share is (1) Diluted FFO divided by (2) the sum of the (a) weighted average common shares outstanding during a period, (b) weighted average common units outstanding during a period and (c) weighted average number of potential additional common shares that would have been outstanding during a period if other securities that are convertible or exchangeable into common shares were converted or exchanged.  The computation of Diluted FFO per share assumes the conversion of common units but does not assume the conversion of other securities that are convertible into common shares if the conversion of those securities would increase Diluted FFO per share in a given period.  We believe that Diluted FFO per share is useful to investors because it provides investors with a further context for evaluating our FFO results in the same manner that investors use earnings per share (“EPS”) in evaluating net income available to common shareholders.  We believe that diluted EPS is the most directly comparable GAAP measure to this non-GAAP measure.

Diluted FFO per share, as adjusted for comparability

Defined as (1) Diluted FFO available to common share and common unit holders, as adjusted for comparability divided by (2) the sum of the (a) weighted average common shares outstanding during a period, (b) weighted average common units outstanding during a period and (c) weighted average number of potential additional common shares that would have been outstanding during a period if other securities that are convertible or exchangeable into common shares were converted or exchanged.  The computation of this measure assumes the conversion of common units but does not assume the conversion of other securities that are convertible into common shares if the conversion of those securities would increase the per share measure in a given period.  We believe this to be a useful supplemental measure alongside Diluted FFO per share as it excludes gains and losses from investing and financing activities and certain other items that we believe are not closely correlated to (or associated with) our operating performance. We believe that diluted EPS is the most directly comparable GAAP measure to this non-GAAP measure.

Earnings before interest, income taxes, depreciation and amortization for real estate (“EBITDAre”)

Defined as net income adjusted for the effects of interest expense, depreciation and amortization, gains on sales and impairment losses of real estate and investments in unconsolidated real estate JVs, and income taxes. EBITDAre also includes adjustments to net income for the effects of the items noted above pertaining to unconsolidated real estate JVs that were allocable to our ownership interest in the JVs. While EBITDA (earnings before interest, taxes, depreciation and amortization) is a universally-defined supplemental measure, EBITDAre incorporates additional adjustments for gains and losses from investing activities related to our investments in operating properties. We believe that EBITDAre is a useful supplemental measure for assessing our un-levered performance. We believe that net income is the most directly comparable GAAP measure to this non-GAAP measure.

Corporate Office Properties Trust

Definitions

Funds from operations (“FFO” or “FFO per Nareit”)

Defined as net income computed using GAAP, excluding gains on sales and impairment losses of real estate and investments in unconsolidated real estate JVs (net of associated income tax) and real estate-related depreciation and amortization. FFO also includes adjustments to net income for the effects of the items noted above pertaining to unconsolidated real estate JVs that were allocable to our ownership interest in the JVs. We believe that we use the National Association of Real Estate Investment Trust’s (“Nareit”) definition of FFO, although others may interpret the definition differently and, accordingly, our presentation of FFO may differ from those of other REITs.  We believe that FFO is useful to management and investors as a supplemental measure of operating performance because, by excluding gains on sales and impairment losses of real estate (net of associated income tax) and real estate-related depreciation and amortization, FFO can help one compare our operating performance between periods.  We believe that net income is the most directly comparable GAAP measure to this non-GAAP measure.

Gross debt

Defined as total consolidated outstanding debt, which is debt reported per our balance sheet adjusted to exclude net discounts and premiums and deferred financing costs, as further adjusted to include outstanding debt of unconsolidated real estate JVs that were allocable to our ownership interest in the JVs.

In-place adjusted EBITDA

Defined as Adjusted EBITDA, as further adjusted for: (1) the removal of NOI pertaining to properties in the quarterly periods in which such properties were disposed or removed from service; (2) the addition of pro forma adjustments to NOI for (a) properties acquired, placed in service or expanded upon subsequent to the commencement of a quarter made in order to reflect a full quarter of ownership/operations and (b) significant mid-quarter occupancy changes associated with properties recently placed in service with no occupancy; and (3) certain adjustments to deferred rental revenue associated with changes in our assessment of collectability that we believe are not closely correlated with our operating performance. The measure also includes adjustments to Adjusted EBITDA for the effects of the items noted above pertaining to unconsolidated real estate JVs that were allocable to our ownership interest in the JVs. We believe that in-place adjusted EBITDA is a useful supplemental measure of performance for assessing our un-levered performance, as further adjusted for changes in operating properties subsequent to the commencement of a quarter.  We believe that net income is the most directly comparable GAAP measure to this non-GAAP measure.

Net debt

Defined as Gross debt (total outstanding debt reported per our balance sheet as adjusted to exclude net discounts and premiums and deferred financing costs), as adjusted to subtract cash and cash equivalents as of the end of the period and debt in default that was extinguished via conveyance of properties. The measure also includes adjustments to Gross debt for the effects of the items noted above pertaining to unconsolidated real estate JVs that were allocable to our ownership interest in the JVs.

Net debt plus preferred equity

Defined as Net debt plus the total liquidation preference of outstanding preferred equity.

Net debt adjusted for fully-leased development

Defined as Net debt less costs incurred on properties under development that were 100% leased.

Net debt adjusted for fully-leased development plus preferred equity

Defined as Net debt less costs incurred on properties under development that were 100% leased plus the total liquidation preference of outstanding preferred equity.

Net debt to Adjusted book and Net debt plus preferred equity to Adjusted book

These measures divide either Net debt or Net debt plus preferred equity (defined above) by Adjusted book (defined above).

Corporate Office Properties Trust

Definitions

Net debt to in-place adjusted EBITDA ratio, Net debt plus preferred equity to in-place adjusted EBITDA ratio, Net debt adjusted for fully-leased development to in-place adjusted EBITDA ratio and Net debt adjusted for fully-leased development plus preferred equity to in-place adjusted EBITDA ratio

Defined as Net debt, Net debt plus preferred equity, Net debt adjusted for fully-leased development or Net debt adjusted for fully-leased development plus preferred equity divided by in-place adjusted EBITDA (defined above) for the three month period that is annualized by multiplying by four.

Net operating income from real estate operations (“NOI”)

NOI, which is our segment performance measure, includes: consolidated real estate revenues; consolidated property operating expenses; and the net of revenues and property operating expenses of real estate operations owned through unconsolidated real estate JVs that are allocable to COPT’s ownership interest in the JVs. We believe that NOI is an important supplemental measure of operating performance for a REIT’s operating real estate because it provides a measure of the core real estate operations that is unaffected by depreciation, amortization, financing and general, administrative and leasing expenses; we believe this measure is particularly useful in evaluating the performance of geographic segments, Same Properties groupings and individual properties.

NOI debt service coverage ratio and Adjusted EBITDA debt service coverage ratio

These measures divide either NOI from real estate operations or Adjusted EBITDA by the sum of interest expense (excluding amortization of deferred financing costs and amortization of debt discounts and premiums, net of amounts capitalized, gains or losses on interest rate derivatives and interest expense on debt in default to be extinguished via conveyance of properties) and scheduled principal amortization on mortgage loans.

NOI fixed charge coverage ratio and Adjusted EBITDA fixed charge coverage ratio

These measures divide either NOI from real estate operations or Adjusted EBITDA by the sum of (1) interest expense (excluding amortization of deferred financing costs and amortization of debt discounts and premiums, net of amounts capitalized, gains or losses on interest rate derivatives and interest expense on debt in default to be extinguished via conveyance of properties), (2) scheduled principal amortization on mortgage loans, (3) capitalized interest, (4) dividends on preferred shares and (5) distributions on preferred units in the Operating Partnership not owned by us.

NOI interest coverage ratio and Adjusted EBITDA interest coverage ratio

These measures divide either NOI from real estate operations or Adjusted EBITDA by interest expense (excluding amortization of deferred financing costs and amortization of debt discounts and premiums, net of amounts capitalized, gains on losses on interest rate derivatives and interest expense on debt in default to be extinguished via conveyance of properties).

Payout ratios based on: Diluted FFO; Diluted FFO, as adjusted for comparability; and Diluted AFFO

These payout ratios are defined as (1) the sum of dividends on unrestricted common shares and distributions to holders of interests in the Operating Partnership (excluding unvested share-based compensation awards) and dividends on convertible preferred shares when such distributions and dividends are included in Diluted FFO divided by (2) the respective non-GAAP measures on which the payout ratios are based.

Corporate Office Properties Trust

Definitions

Replacement capital expenditures

Replacement capital expenditures are defined as tenant improvements and incentives, building improvements and leasing costs incurred during the period for operating properties that are not (1) items contemplated prior to the acquisition of a property, (2) improvements associated with the expansion of a building or its improvements, (3) renovations to a building which change the underlying classification of the building (for example, from industrial to office or Class C office to Class B office), (4) capital improvements that represent the addition of something new to the property rather than the replacement of something (for example, the addition of a new heating and air conditioning unit that is not replacing one that was previously there) or (5) replacements of significant components of a building after the building has reached the end of its original useful life. Replacement capital expenditures excludes expenditures of operating properties included in disposition plans during the period that were already sold or are held for future disposition. For cash tenant incentives not due to the tenant for a period exceeding three months past the date on which such incentives were incurred, we recognize such incentives as replacement capital expenditures in the periods such incentives are due to the tenant. Replacement capital expenditures, which is included in the computation of Diluted AFFO, is intended to represent non-transformative capital expenditures of existing properties held for long-term investment. We believe that the excluded expenditures are more closely associated with our investing activities than the performance of our operating portfolio.

Same Properties NOI and Same Properties cash NOI

Defined as NOI, or Cash NOI, from real estate operations of Same Properties.  We believe that these are important supplemental measures of operating performance of Same Properties for the same reasons discussed above for NOI from real estate operations and Cash NOI.

Other Definitions

Acquisition Costs — Transaction costs expensed in connection with executed or anticipated acquisitions of operating properties.

Annualized Rental Revenue (“ARR”) — The monthly contractual base rent as of the reporting date multiplied by 12, plus the estimated annualized expense reimbursements under existing leases for occupied space. With regard to properties owned through unconsolidated real estate JVs, we include the portion of Annualized Rental Revenue allocable to COPT’s ownership interest.

Average escalations — Leasing statistic used to report average increase in rental rates over lease terms for leases with a term of greater than one-year.

BRE-COPT 2 — B RE COPT DC JV II LLC, a real estate JV formed in 2020.

BRE-COPT 3 — B RE COPT DC JV III LLC, a real estate JV formed in 2021.

BREIT-COPT — BREIT COPT DC JV LLC, a real estate JV formed in 2019.

Development Properties — Properties under, or contractually committed for, development.

Core Portfolio — Represents Defense/IT Locations and Regional Office properties.

Defense/IT Locations — Represents properties in locations that support the United States Government and its contractors, most of whom are engaged in national security, defense and IT related activities servicing what we believe are growing, durable, priority missions.

First Generation Space — Newly-developed or redeveloped space that has never been occupied.

Operational Space — The portion of a property in operations (excludes portion under development or redevelopment).

Corporate Office Properties Trust

Definitions

Redevelopment Properties — Properties previously in operations on which activities to substantially renovate such properties were underway or approved.

Regional Office Properties — Includes office properties located in select urban/urban-like submarkets in the Greater Washington, DC/Baltimore region with durable Class-A office fundamentals and characteristics.

Same Properties — Operating office and data center shell properties stably owned and 100% operational since at least 1/1/20.

Second Generation Space — Space leased that has been previously occupied.

Total Portfolio — Operating properties, including ones owned through unconsolidated real estate JVs.

logo2dtd021015a01a18.jpg 6711 Columbia Gateway Drive, Suite 300
Columbia, Maryland 21046
Telephone 443-285-5400
Facsimile 443-285-7650
www.copt.com
NYSE: OFC
NEWS RELEASE
FOR IMMEDIATE RELEASE IR Contacts:
Stephanie Krewson-Kelly Michelle Layne
443-285-5453 443-285-5452
stephanie.kelly@copt.com michelle.layne@copt.com

COPT Reports Third Quarter 2021 Results

Raises Midpoint of Full Year Guidance Another 1-Cent, Implying 7.1% Growth

in FFO per Share, as Adjusted for Comparability

Stronger 3Q Results Drive Higher Full-Year Expectations

_______________________________________________________________

Reported EPS of $0.24 in 3Q21;

3Q FFO per Share, as Adjusted for Comparability, of $0.57 was 1-Cent Above

High-End of Guidance

Same-Property Cash NOI Increase of 4.8% in the Quarter;

Increasing Midpoint of Same-Property Cash NOI Guidance for the Year

Core Portfolio 93.5% Occupied & 94.8% Leased

1.8 Million SF of Active Developments are 94% Leased

_______________________________________________________________

Solid Leasing Activity

Total Leasing of 1.0 Million SF in the Quarter and 2.7 Million SF for First Nine Months of 2021

Included 215,000 SF and 420,000 SF of Vacancy Leasing, Respectively

Tenant Retention of 76% in the Quarter and 75% for the First Nine Months and

Changes in Cash Rents In-Line with Expectations

1.2 Million SF of Development Leasing Accomplished To-Date Surpasses 2021 Goal

_______________________________________________________________

COLUMBIA, MD (BUSINESS WIRE) October 28, 2021 - Corporate Office Properties Trust (“COPT” or the “Company”) (NYSE: OFC) announced results for the third quarter ended September 30, 2021.

Management Comments

Stephen E. Budorick, COPT’s President & Chief Executive Officer, commented, “Our portfolio of office and data center properties that support priority missions at U.S. defense installations continues to produce strong results, and distinguishes us from other office companies. Demand for our Defense/IT Locations has driven 1.2 million square feet of development leasing to-date, which exceeds our 2021 goal. Vacancy leasing in the third quarter was a very strong 215,000 square feet--our best quarterly volume since the third quarter of 2019--and brought our total for the nine months to 420,000 square feet. Importantly, tenants are committing to lease term lengths that are at or above pre-pandemic levels. Our Development Leasing Pipeline and Activity Ratio remain robust, which leads us to expect customers to continue making long-term commitments to our Defense/IT Locations. Based on our outperformance

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this quarter, we are increasing the midpoint of full-year guidance for FFO per share, as adjusted for comparability, to $2.27, which is 8-cents above our original midpoint and represents 7.1% growth over 2020’s elevated results.”

Financial Highlights

3rd Quarter Financial Results:

•Diluted earnings (loss) per share (“EPS”) was $0.24 for the quarter ended September 30, 2021 compared to ($0.29) for the third quarter of 2020.

•Diluted funds from operations per share (“FFOPS”), as calculated in accordance with Nareit’s definition, was $0.56 for the third quarter of 2021 compared to $0.04 for third quarter 2020.

•FFOPS, as adjusted for comparability, was $0.57 for the third quarter of 2021 compared to $0.54 for the third quarter of 2020.

Operating Performance Highlights

Operating Portfolio Summary:

•At September 30, 2021, the Company’s core portfolio of 184 operating office and data center shell properties was 93.5% occupied and 94.8% leased.

•During the quarter, the Company placed into service 466,000 square feet that were 100% leased.

Same-Property Performance:

•At September 30, 2021, COPT’s same-property portfolio of 159 buildings was 92.2% occupied and 93.7% leased.

•For the quarter ended September 30, 2021, the Company’s same-property cash NOI increased 4.8% over the prior year’s comparable period.

Leasing:

•Total Square Feet Leased: For the quarter ended September 30, 2021, the Company leased 1.0 million square feet, including 553,000 square feet of renewals, 274,000 square feet in development projects, and 215,000 square feet of new leases on vacant space. For the nine months ended September 30, 2021, the Company executed 2.7 million square feet of leasing, including 1.4 million square feet of renewals, 915,000 square feet in development projects, and 420,000 square feet of vacancy leasing.

•Renewal Rates: During the quarter and nine months ended September 30, 2021, the Company renewed 75.7% and 74.6%, respectively, of expiring square feet.

•Rent Spreads & Average Escalations on Renewing Leases: For the quarter and nine months ended September 30, 2021, cash rents on renewed space decreased 0.6% and 0.3%, respectively. For the same time periods, annual escalations on renewing leases averaged 1.7% and 2.4%, respectively.

•Lease Terms: In the third quarter of 2021, lease terms averaged 3.1 years on renewing leases, 9.3 years on new leasing of vacant space, and 17.0 years on development leasing. For the first nine months, lease terms averaged 3.8 years on renewing leases, 8.6 years on vacancy leasing, and 14.1 years on development leasing.

•Post-Quarter Development Leasing: In October, the Company completed two build-to-suit leases totaling 263,000 square feet with a defense contractor at Redstone Gateway. Details of those leases can be found in a separate press release issued this same date.

Investment Activity Highlights

•Development Pipeline: The Company’s development pipeline consists of 13 properties totaling 1.8 million square feet that are 94% leased. These projects have a total estimated cost of $585.7 million, of which $188.2 million has been incurred.

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Balance Sheet and Capital Transaction Highlights

•In August, the Company issued $400 million of 2.000% senior unsecured notes due 2029. The Company used net proceeds from this issuance to repay $100.0 million of its term loan facility due December 2022, retire the outstanding $89.0 million balance of a construction loan, and repay borrowings under its unsecured credit facility.

•At September 30, 2021, the Company’s net debt to adjusted book ratio was 39.4% and its net debt to in-place adjusted EBITDA ratio was 6.3x. As of the same date, net debt adjusted for fully-leased development to in-place adjusted EBITDA ratio was 5.9x. For the quarter ended September 30, 2021, the Company’s adjusted EBITDA fixed charge coverage ratio was 4.8x.

•At September 30, 2021, and including the effect of interest rate swaps, the Company’s weighted average effective interest rate on its consolidated debt portfolio was 3.05% with a weighted average maturity of 5.7 years; additionally, 97.3% 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 third quarter 2021 conference call; the presentation can be viewed and downloaded from the ‘Latest Updates’ section of COPT’s Investors website: https://investors.copt.com/

2021 Guidance

Management is increasing its full-year guidance for EPS and FFOPS, per Nareit and as adjusted for comparability from the prior ranges of $0.72-$0.76, $1.73-$1.77, and $2.24-$2.28, respectively, to new ranges of $0.76-$0.78, $1.74-$1.76, and $2.26-$2.28, respectively. To account for the expected timing of repair and maintenance projects, management is lowering its prior guidance ranges for EPS and FFOPS (per Nareit and as adjusted for comparability) for the fourth quarter from $0.21-$0.23 and $0.56-$0.58, respectively, to $0.20-$0.22 and $0.55-$0.57, respectively. Reconciliations of projected EPS to projected FFOPS, in accordance with Nareit and as adjusted for comparability are as follows:

Reconciliation of EPS to FFOPS, per Nareit,<br>and As Adjusted for Comparability Quarter ending Year ending
December 31, 2021 December 31, 2021
Low High Low High
EPS $ 0.20 $ 0.22 $ 0.76 $ 0.78
Real estate-related depreciation and amortization 0.35 0.35 1.33 1.33
Gain on sales of real estate — — (0.35) (0.35)
FFOPS, Nareit definition 0.55 0.57 1.74 1.76
Loss on early extinguishment of debt — — 0.52 0.52
FFOPS, as adjusted for comparability $ 0.55 $ 0.57 $ 2.26 $ 2.28

Conference Call Information

Management will discuss third quarter 2021 results on its conference call tomorrow at 12:00 p.m. Eastern Time, details of which are listed below:

Conference Call Date:     Friday, October 29, 2021

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:     9759656

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

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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 29, through 2:00 p.m. Eastern Time on Friday, November 12. 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 9759656.

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, 2021, 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 19 properties owned through unconsolidated joint ventures, COPT’s core portfolio of 184 office and data center shell properties encompassed 21.5 million square feet and was 94.8% leased; the Company also owned one wholesale data center with a capacity 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, 2020.

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Corporate Office Properties Trust

Summary Financial Data

(unaudited)

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

For the Three Months Ended September 30, For the Nine Months Ended September 30,
2021 2020 2021 2020
Revenues
Revenues from real estate operations $ 146,590 $ 134,443 $ 436,177 $ 399,097
Construction contract and other service revenues 28,046 20,323 64,592 46,240
Total revenues 174,636 154,766 500,769 445,337
Operating expenses
Property operating expenses 57,190 51,552 168,780 151,755
Depreciation and amortization associated with real estate operations 36,611 35,332 111,487 101,540
Construction contract and other service expenses 27,089 19,220 61,964 44,052
Impairment losses — 1,530 — 1,530
General and administrative expenses 7,269 5,558 20,624 17,372
Leasing expenses 2,073 1,909 6,346 5,739
Business development expenses and land carry costs 1,093 1,094 3,559 3,474
Total operating expenses 131,325 116,195 372,760 325,462
Interest expense (15,720) (17,152) (49,181) (50,789)
Interest and other income 1,818 1,746 5,911 5,233
Credit loss recoveries 326 1,465 1,040 161
Gain on sales of real estate (32) — 39,711 5
Loss on early extinguishment of debt (1,159) (3,237) (59,553) (3,237)
Loss on interest rate derivatives — (53,196) — (53,196)
Income (loss) before equity in income of unconsolidated entities and income taxes 28,544 (31,803) 65,937 18,052
Equity in income of unconsolidated entities 297 477 779 1,372
Income tax expense (47) (16) (103) (95)
Net income (loss) 28,794 (31,342) 66,613 19,329
Net (income) loss attributable to noncontrolling interests:
Common units in the Operating Partnership (“OP”) (357) 386 (831) (185)
Preferred units in the OP — (77) — (231)
Other consolidated entities (1,336) (812) (2,949) (3,207)
Net income (loss) attributable to COPT common shareholders $ 27,101 $ (31,845) $ 62,833 $ 15,706
Earnings per share (“EPS”) computation:
Numerator for diluted EPS:
Net income attributable to COPT common shareholders $ 27,101 $ (31,845) $ 62,833 $ 15,706
Amount allocable to share-based compensation awards (79) (145) (320) (359)
Redeemable noncontrolling interests (89) — (82) —
Numerator for diluted EPS $ 26,933 $ (31,990) $ 62,431 $ 15,347
Denominator:
Weighted average common shares - basic 111,985 111,811 111,949 111,778
Dilutive effect of share-based compensation awards 375 — 285 278
Dilutive effect of redeemable noncontrolling interests 138 — 130 —
Weighted average common shares - diluted 112,498 111,811 112,364 112,056
Diluted EPS $ 0.24 $ (0.29) $ 0.56 $ 0.14

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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,
2021 2020 2021 2020
Net income (loss) $ 28,794 $ (31,342) $ 66,613 $ 19,329
Real estate-related depreciation and amortization 36,611 35,332 111,487 101,540
Impairment losses on real estate — 1,530 — 1,530
Gain on sales of real estate 32 — (39,711) (5)
Depreciation and amortization on unconsolidated real estate JVs 525 819 1,455 2,455
Funds from operations (“FFO”) 65,962 6,339 139,844 124,849
FFO allocable to other noncontrolling interests (1,696) (1,074) (4,025) (14,614)
Basic FFO allocable to share-based compensation awards (313) (119) (663) (449)
Noncontrolling interests - preferred units in the OP — (77) — (231)
Basic FFO available to common share and common unit holders (“Basic FFO”) 63,953 5,069 135,156 109,555
Redeemable noncontrolling interests (68) — 1 103
Diluted FFO adjustments allocable to share-based compensation awards 13 — 27 —
Diluted FFO available to common share and common unit holders (“Diluted FFO”) 63,898 5,069 135,184 109,658
Loss on early extinguishment of debt 1,159 3,237 59,553 3,237
Loss on interest rate derivatives — 53,196 — 53,196
Demolition costs on redevelopment and nonrecurring improvements 129 11 431 63
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 (7) (139) (300) (307)
Diluted FFO available to common share and common unit holders, as adjusted for comparability 65,179 61,485 194,868 177,168
Straight line rent adjustments and lease incentive amortization (1,806) (1,009) (6,451) 662
Amortization of intangibles and other assets included in net operating income 41 (39) 122 (186)
Share-based compensation, net of amounts capitalized 2,048 1,727 5,961 4,754
Amortization of deferred financing costs 736 658 2,340 1,875
Amortization of net debt discounts, net of amounts capitalized 567 453 1,629 1,229
Replacement capital expenditures (13,331) (13,085) (38,656) (46,971)
Other diluted AFFO adjustments associated with real estate JVs 201 150 620 (6)
Diluted adjusted funds from operations available to common share and common unit holders (“Diluted AFFO”) $ 53,635 $ 50,340 $ 160,433 $ 138,525
Diluted FFO per share $ 0.56 $ 0.04 $ 1.19 $ 0.97
Diluted FFO per share, as adjusted for comparability $ 0.57 $ 0.54 $ 1.71 $ 1.56
Dividends/distributions per common share/unit $ 0.275 $ 0.275 $ 0.825 $ 0.825

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Corporate Office Properties Trust

Summary Financial Data

(unaudited)

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

September 30,<br>2021 December 31,<br>2020
Balance Sheet Data
Properties, net of accumulated depreciation $ 3,607,122 $ 3,562,549
Total assets 4,151,138 4,077,023
Debt, per balance sheet 2,159,732 2,086,918
Total liabilities 2,454,353 2,357,881
Redeemable noncontrolling interests 26,006 25,430
Equity 1,670,779 1,693,712
Net debt to adjusted book 39.4 % 39.1 %
Core Portfolio Data (as of period end) (1)
Number of operating properties 184 179
Total operational square feet (in thousands) 21,503 20,802
% Occupied 93.5 % 94.3 %
% Leased 94.8 % 95.0 % For the Three Months Ended September 30, For the Nine Months Ended September 30,
--- --- --- --- --- --- --- --- --- --- --- --- ---
2021 2020 2021 2020
Payout ratios
Diluted FFO 48.8 % 613.6 % 69.2 % 85.1 %
Diluted FFO, as adjusted for comparability 47.8 % 50.7 % 48.0 % 52.8 %
Diluted AFFO 58.1 % 61.9 % 58.3 % 67.5 %
Adjusted EBITDA fixed charge coverage ratio 4.8 x 3.9 x 4.7 x 3.8 x
Net debt plus preferred equity to in-place adjusted EBITDA ratio (2) 6.3 x 6.8 x N/A N/A
Net debt adj. for fully-leased development plus pref. equity to in-place adj. EBITDA ratio (3) 5.9 x 6.4 x N/A N/A
Reconciliation of denominators for per share measures
Denominator for diluted EPS 112,498 111,811 112,364 112,056
Weighted average common units 1,262 1,240 1,257 1,235
Anti-dilutive EPS effect of share-based compensation awards — 274 26 —
Redeemable noncontrolling interests — — — 125
Denominator for diluted FFO per share 113,760 113,325 113,647 113,416
Redeemable noncontrolling interests — 109 — —
Dilutive convertible preferred units — 176 — 176
Denominator for diluted FFO per share, as adjusted for comparability 113,760 113,610 113,647 113,592

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

(2)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).

(3)Represents net debt less costs incurred on properties under development that were 100% leased as of period end plus the total liquidation preference of preferred equity divided by in-place adjusted EBITDA for the period, as annualized (i.e. three month periods are multiplied by four).

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Corporate Office Properties Trust

Summary Financial Data

(unaudited)

(in thousands)

For the Three Months Ended September 30, For the Nine Months Ended September 30,
2021 2020 2021 2020
Reconciliation of common share dividends to dividends and distributions for payout ratios
Common share dividends - unrestricted shares and deferred shares $ 30,813 $ 30,763 $ 92,429 $ 92,278
Common unit distributions - unrestricted units 347 341 1,041 1,021
Common unit distributions - dilutive restricted units 6 — 19 —
Dividends and distributions for diluted FFO payout ratio 31,166 31,104 93,489 93,299
Distributions on dilutive preferred units — 77 — 231
Dividends and distributions for other payout ratios $ 31,166 $ 31,181 $ 93,489 $ 93,530
Reconciliation of GAAP net income (loss) to earnings before interest, income taxes, depreciation and amortization for real estate (“EBITDAre”), adjusted EBITDA and in-place adjusted EBITDA
Net income (loss) $ 28,794 $ (31,342) $ 66,613 $ 19,329
Interest expense 15,720 17,152 49,181 50,789
Income tax expense 47 16 103 95
Real estate-related depreciation and amortization 36,611 35,332 111,487 101,540
Other depreciation and amortization 589 457 2,189 1,324
Impairment losses on real estate — 1,530 — 1,530
Gain on sales of real estate 32 — (39,711) (5)
Adjustments from unconsolidated real estate JVs 763 1,274 2,167 3,814
EBITDAre 82,556 24,419 192,029 178,416
Loss on early extinguishment of debt 1,159 3,237 59,553 3,237
Loss on interest rate derivatives — 53,196 — 53,196
Net loss (gain) on other investments — 250 (63) 252
Credit loss recoveries (326) (1,465) (1,040) (161)
Business development expenses 473 414 1,605 1,630
Demolition costs on redevelopment and nonrecurring improvements 129 11 431 63
Adjusted EBITDA 83,991 80,062 $ 252,515 $ 236,633
Proforma net operating income adjustment for property changes within period 3,240 1,631
Change in collectability of deferred rental revenue — 224
In-place adjusted EBITDA $ 87,231 $ 81,917
Reconciliation of interest expense to the denominators for fixed charge coverage-Adjusted EBITDA
Interest expense $ 15,720 $ 17,152 $ 49,181 $ 50,789
Less: Amortization of deferred financing costs (736) (658) (2,340) (1,875)
Less: Amortization of net debt discounts, net of amounts capitalized (567) (453) (1,629) (1,229)
COPT’s share of interest expense of unconsolidated real estate JVs, excluding deferred financing costs 236 444 706 1,327
Scheduled principal amortization 989 1,033 2,910 3,077
Capitalized interest 1,763 2,908 5,275 9,440
Preferred unit distributions — 77 — 231
Denominator for fixed charge coverage-Adjusted EBITDA $ 17,405 $ 20,503 $ 54,103 $ 61,760

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Corporate Office Properties Trust

Summary Financial Data

(unaudited)

(in thousands)

For the Three Months Ended September 30, For the Nine Months Ended September 30,
2021 2020 2021 2020
Reconciliations of tenant improvements and incentives, building improvements and leasing costs for operating properties to replacement capital expenditures
Tenant improvements and incentives $ 8,654 $ 6,950 $ 24,096 $ 27,177
Building improvements 7,793 10,400 18,192 26,537
Leasing costs 2,939 1,934 6,873 6,918
Net (exclusions from) additions to tenant improvements and incentives (1,523) (943) 389 1,412
Excluded building improvements and leasing costs (4,532) (5,256) (10,894) (15,073)
Replacement capital expenditures $ 13,331 $ 13,085 $ 38,656 $ 46,971
Same Properties cash NOI $ 77,219 $ 73,697 $ 227,312 $ 224,024
Straight line rent adjustments and lease incentive amortization (1,671) (571) (3,930) (1,582)
Amortization of acquired above- and below-market rents 99 98 296 291
Amortization of intangibles and other assets to property operating expenses — (23) — (69)
Lease termination fees, net 853 455 3,309 693
Tenant funded landlord assets and lease incentives 191 342 810 690
Cash NOI adjustments in unconsolidated real estate JV 37 48 119 150
Same Properties NOI $ 76,728 $ 74,046 $ 227,916 $ 224,197
September 30,<br>2021 December 31,<br>2020
--- --- --- --- ---
Reconciliation of total assets to adjusted book
Total assets $ 4,151,138 $ 4,077,023
Accumulated depreciation 1,202,780 1,124,253
Accumulated depreciation included in assets held for sale 12,146 —
Accumulated amortization of real estate intangibles and deferred leasing costs 219,179 217,124
Accumulated amortization of real estate intangibles and deferred leasing costs included in assets held for sale 3,102 —
COPT’s share of liabilities of unconsolidated real estate JVs 27,498 26,710
COPT’s share of accumulated depreciation and amortization of unconsolidated real estate JVs 3,161 1,489
Less: Property - operating lease liabilities (29,630) (30,746)
Less: Property - finance lease liabilities (14) (28)
Less: Cash and cash equivalents (14,570) (18,369)
Less: COPT’s share of cash of unconsolidated real estate JVs (530) (152)
Adjusted book $ 5,574,260 $ 5,397,304 September 30,<br>2021 December 31,<br>2020 September 30,<br>2020
--- --- --- --- --- --- ---
Reconciliation of debt outstanding to net debt and net debt adjusted for fully-leased development plus preferred equity
Debt outstanding (excluding net debt discounts and deferred financing costs) $ 2,208,923 $ 2,127,715 $ 2,247,523
Less: Cash and cash equivalents (14,570) (18,369) (11,458)
Less: COPT’s share of cash of unconsolidated real estate JVs (530) (152) (538)
Net debt $ 2,193,823 $ 2,109,194 $ 2,235,527
Preferred equity — — 8,800
Net debt plus preferred equity $ 2,193,823 $ 2,109,194 $ 2,244,327
Costs incurred on fully-leased development properties (119,981) (114,532) (149,201)
Net debt adjusted for fully-leased development plus preferred equity $ 2,073,842 $ 1,994,662 $ 2,095,126

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