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Press release content from Business Wire. The AP news staff was not involved in its creation.

COPT Reports Fourth Quarter and Full Year 2019 Results

February 6, 2020 GMT

COLUMBIA, Md.--(BUSINESS WIRE)--Feb 6, 2020--

Corporate Office Properties Trust (“COPT” or the “Company”) (NYSE: OFC) announced financial and operating results for the fourth quarter and full year ended December 31, 2019.

Management Comments

Stephen E. Budorick, COPT’s President & Chief Executive Officer, commented, “Fourth quarter and full year FFO per share met the mid-points of our updated guidance ranges, and strong demand throughout our Defense/IT Locations translated into record leasing for new developments, strong vacancy leasing, and near-record leasing with the U.S. Government. Our 2.2 million square feet of development leasing exceeded our prior annual record set in 2012 by 1 million square feet, and we executed 586,000 square feet of development and vacancy leasing with the U.S. Government, our second-best year ever.” He continued, “We believe that this strong leasing achievement, combined with the $357 million of equity raised and the 1.2 million square feet of 100% leased developments placed into service during 2019, position our Company to deliver 1.5%-3.5% FFO per share growth in 2020, and robust FFO growth in 2021.”

Financial Highlights

4 th Quarter Financial Results:

Full Year 2019 Financial Results:

Adjustments for comparability encompass items such as demolition costs of redevelopment, executive transition costs, and non-comparable professional and legal expenses.

Operating Performance Highlights

Operating Portfolio Summary:

Same-Property Performance:

Leasing:

Investment Activity Highlights

Development & Redevelopment Projects:

Balance Sheet and Capital Transaction Highlights

Associated Supplemental Presentation

Prior to the call, the Company will post a slide presentation to accompany management’s prepared remarks for its fourth quarter and year end 2019 conference call, the details of which are provided below. The accompanying slide presentation can be viewed on and downloaded from the ‘Latest Updates’ section of COPT’s Investors website: https://investors.copt.com/.

Conference Call Information

Management will discuss fourth quarter and year end 2019 results on its conference call tomorrow at 12:00 p.m. Eastern Time, details of which are listed below:

 

 

Conference Call Date:

Friday, February 7, 2020

Time:

12:00 p.m. Eastern Time

Telephone Number: (within the U.S.)

855-463-9057

Telephone Number: (outside the U.S.)

661-378-9894

Passcode:

8794749

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

Replay Information

A replay of the conference call will be immediately available via webcast on the Investors website. Additionally, a telephonic replay of this call will be available beginning at 3:00 p.m. Eastern Time on Friday, February 7, through 3:00 p.m. Eastern Time on Friday, February 21. 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 8794749.

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 December 31, 2019, the Company derived 88% of its core portfolio annualized rental revenue from Defense/IT Locations and 12% from its Regional Office Properties. As of the same date and including 15 buildings owned through unconsolidated joint ventures, COPT’s core portfolio of 168 office and data center shell properties encompassed 19.0 million square feet and was 94.6% leased; the Company also owned one wholesale data center with a critical load of 19.25 megawatts that was 76.9% 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, 2018 and Quarterly Report on Form 10-Q for the quarter ended June 30, 2019.

 

Corporate Office Properties Trust

Summary Financial Data

(unaudited)

(in thousands, except per share data)

 

 

 

 

 

 

 

For the Three Months

Ended December 31,

 

For the Years Ended

December 31,

 

 

2019

 

2018

 

2019

 

2018

Revenues

 

 

 

 

 

 

 

Revenues from real estate operations

$

131,968

 

 

$

130,825

 

 

$

527,463

 

 

$

517,253

 

Construction contract and other service revenues

25,817

 

 

7,657

 

 

113,763

 

 

60,859

 

Total revenues

157,785

 

 

138,482

 

 

641,226

 

 

578,112

 

Operating expenses

 

 

 

 

 

 

 

Property operating expenses

51,098

 

 

51,298

 

 

198,143

 

 

201,035

 

Depreciation and amortization associated with real estate operations

32,779

 

 

36,219

 

 

137,069

 

 

137,116

 

Construction contract and other service expenses

24,832

 

 

7,111

 

 

109,962

 

 

58,326

 

Impairment losses

2

 

 

2,367

 

 

329

 

 

2,367

 

General and administrative expenses

7,043

 

 

5,105

 

 

27,517

 

 

22,829

 

Leasing expenses

2,293

 

 

1,976

 

 

7,885

 

 

6,071

 

Business development expenses and land carry costs

1,292

 

 

1,425

 

 

4,239

 

 

5,840

 

Total operating expenses

119,339

 

 

105,501

 

 

485,144

 

 

433,584

 

Interest expense

(16,777

)

 

(18,475

)

 

(71,052

)

 

(75,385

)

Interest and other income

1,917

 

 

74

 

 

7,894

 

 

4,358

 

Gain on sales of real estate

20,761

 

 

2,367

 

 

105,230

 

 

2,340

 

Loss on early extinguishment of debt

 

 

(258

)

 

 

 

(258

)

Income before equity in income of unconsolidated entities and income taxes

44,347

 

 

16,689

 

 

198,154

 

 

75,583

 

Equity in income of unconsolidated entities

426

 

 

1,577

 

 

1,633

 

 

2,697

 

Income tax benefit

104

 

 

190

 

 

217

 

 

363

 

Net income

44,877

 

 

18,456

 

 

200,004

 

 

78,643

 

Net income attributable to noncontrolling interests:

 

 

 

 

 

 

 

Common units in the Operating Partnership (“OP”)

(500

)

 

(210

)

 

(2,363

)

 

(1,742

)

Preferred units in the OP

(77

)

 

(165

)

 

(564

)

 

(660

)

Other consolidated entities

(1,515

)

 

(1,061

)

 

(5,385

)

 

(3,940

)

Net income attributable to COPT common shareholders

$

42,785

 

 

$

17,020

 

 

$

191,692

 

 

$

72,301

 

 

 

 

 

 

 

 

 

Earnings per share (“EPS”) computation:

 

 

 

 

 

 

 

Numerator for diluted EPS:

 

 

 

 

 

 

 

Net income attributable to COPT common shareholders

$

42,785

 

 

$

17,020

 

 

$

191,692

 

 

$

72,301

 

Redeemable noncontrolling interests

33

 

 

 

 

132

 

 

 

Amount allocable to share-based compensation awards

(154

)

 

(114

)

 

(623

)

 

(462

)

Numerator for diluted EPS

$

42,664

 

 

$

16,906

 

 

$

191,201

 

 

$

71,839

 

Denominator:

 

 

 

 

 

 

 

Weighted average common shares - basic

111,670

 

 

108,528

 

 

111,196

 

 

103,946

 

Dilutive effect of share-based compensation awards

293

 

 

45

 

 

308

 

 

134

 

Dilutive effect of redeemable noncontrolling interests

108

 

 

 

 

119

 

 

 

Dilutive effect of forward equity sale agreements

 

 

 

 

 

 

45

 

Weighted average common shares - diluted

112,071

 

 

108,573

 

 

111,623

 

 

104,125

 

Diluted EPS

$

0.38

 

 

$

0.16

 

 

$

1.71

 

 

$

0.69

 

 
 

Corporate Office Properties Trust

Summary Financial Data

(unaudited)

(in thousands, except per share data)

 

 

 

 

 

 

 

For the Three Months

Ended December 31,

 

For the Years Ended

December 31,

 

 

2019

 

2018

 

2019

 

2018

Net income

$

44,877

 

 

$

18,456

 

 

$

200,004

 

 

$

78,643

 

Real estate-related depreciation and amortization

32,779

 

 

36,219

 

 

137,069

 

 

137,116

 

Impairment losses on real estate

2

 

 

2,367

 

 

329

 

 

2,367

 

Gain on sales of real estate

(20,761

)

 

(2,367

)

 

(105,230

)

 

(2,340

)

Depreciation and amortization on unconsolidated real estate JVs

781

 

 

565

 

 

2,703

 

 

2,256

 

Funds from operations (“FFO”)

57,678

 

 

55,240

 

 

234,875

 

 

218,042

 

Noncontrolling interests - preferred units in the OP

(77

)

 

(165

)

 

(564

)

 

(660

)

FFO allocable to other noncontrolling interests

(1,436

)

 

(1,011

)

 

(5,024

)

 

(3,768

)

Basic and diluted FFO allocable to share-based compensation awards

(243

)

 

(200

)

 

(905

)

 

(851

)

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

55,922

 

 

53,864

 

 

228,382

 

 

212,763

 

Distributions on dilutive preferred units in the OP

77

 

 

 

 

 

 

 

Redeemable noncontrolling interests

33

 

 

331

 

 

132

 

 

1,540

 

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

56,032

 

 

54,195

 

 

228,514

 

 

214,303

 

Loss on early extinguishment of debt

 

 

258

 

 

 

 

258

 

Demolition costs on redevelopment and nonrecurring improvements

104

 

 

163

 

 

148

 

 

462

 

Executive transition costs

 

 

371

 

 

4

 

 

793

 

Non-comparable professional and legal expenses

195

 

 

 

 

681

 

 

 

Diluted FFO comparability adjustments allocable to share-based compensation awards

(1

)

 

(13

)

 

(3

)

 

(16

)

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

56,330

 

 

54,974

 

 

229,344

 

 

215,800

 

Straight line rent adjustments and lease incentive amortization

1,386

 

 

(46

)

 

255

 

 

(1,487

)

Amortization of intangibles included in net operating income

(174

)

 

153

 

 

(221

)

 

893

 

Share-based compensation, net of amounts capitalized

1,735

 

 

1,601

 

 

6,728

 

 

6,193

 

Amortization of deferred financing costs

541

 

 

550

 

 

2,136

 

 

1,954

 

Amortization of net debt discounts, net of amounts capitalized

382

 

 

365

 

 

1,503

 

 

1,439

 

Accum. other comprehensive loss on derivatives amortized to expense

 

 

34

 

 

79

 

 

135

 

Replacement capital expenditures

(19,862

)

 

(14,848

)

 

(63,789

)

 

(64,784

)

Other diluted AFFO adjustments associated with real estate JVs

(68

)

 

(28

)

 

212

 

 

121

 

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

$

40,270

 

 

$

42,755

 

 

$

176,247

 

 

$

160,264

 

Diluted FFO per share

$

0.49

 

 

$

0.49

 

 

$

2.02

 

 

$

1.99

 

Diluted FFO per share, as adjusted for comparability

$

0.50

 

 

$

0.50

 

 

$

2.03

 

 

$

2.01

 

Dividends/distributions per common share/unit

$

0.275

 

 

$

0.275

 

 

$

1.100

 

 

$

1.100

 

 
 

Corporate Office Properties Trust

Summary Financial Data

(unaudited)

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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31,

2019

 

December 31,

2018

Balance Sheet Data

 

 

Properties, net of accumulated depreciation

$3,340,886

 

 

$3,250,626

 

Total assets

3,854,453

 

3,656,005

 

Debt, per balance sheet

1,831,139

 

1,823,909

 

Total liabilities

2,105,777

 

2,002,697

 

Redeemable noncontrolling interest

29,431

 

26,260

 

Equity

1,719,245

 

1,627,048

 

Net debt to adjusted book

36.8

%

38.9

%

 

 

 

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

 

 

Number of operating properties

168

 

161

 

Total net rentable square feet owned (in thousands)

19,016

 

17,937

 

% Occupied

93.1

%

93.1

%

% Leased

94.6

%

94.0

%

 

 

 

 

For the Three Months Ended

December 31,

 

For the Years Ended

December 31,

2019

 

2018

 

2019

 

2018

Payout ratios

 

 

 

Diluted FFO

55.6

%

56.4

%

54.4

%

 

55.4

%

Diluted FFO, as adjusted for comparability

55.3

%

55.6

%

54.2

%

 

55.0

%

Diluted AFFO

77.3

%

71.5

%

70.5

%

 

74.1

%

Adjusted EBITDA fixed charge coverage ratio

3.7x

 

3.6x

 

3.7x

 

 

3.6x

 

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

6.1x

 

6.0x

 

N/A

 

 

N/A

 

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

6.1x

 

6.0x

 

N/A

 

 

N/A

 

 

 

 

 

Reconciliation of denominators for per share measures

 

 

Denominator for diluted EPS

112,071

 

108,573

 

111,623

 

 

104,125

 

Weighted average common units

1,228

 

1,345

 

1,299

 

 

2,468

 

Redeemable noncontrolling interests

 

1,126

 

 

 

936

 

Dilutive convertible preferred units

176

 

 

 

 

 

Denominator for diluted FFO per share and as adjusted for comparability

113,475

 

111,044

 

112,922

 

 

107,529

 

 

 

 

 

 

 

(1)

 

Represents Defense/IT Locations and Regional Office properties.

(2)

 

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

(3)

 

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

 

 

Corporate Office Properties Trust

Summary Financial Data

(unaudited)

(Dollars in thousands)

 

 

For the Three Months

Ended December 31,

 

For the Years Ended

December 31,

 

2019

 

2018

 

2019

 

2018

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

 

 

 

 

 

 

 

Common share dividends - unrestricted shares and deferred shares

$

30,724

 

 

$

30,206

 

 

$

122,823

 

 

$

116,285

 

Common unit distributions - unrestricted units

337

 

 

367

 

 

1,405

 

 

2,498

 

Distributions on dilutive preferred units

$

77

 

 

$

 

 

$

 

 

$

 

Dividends and distributions for payout ratios

$

31,138

 

 

$

30,573

 

 

$

124,228

 

 

$

118,783

 

 

 

 

 

 

 

 

 

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

 

 

 

 

 

 

 

Net income

$

44,877

 

 

$

18,456

 

 

$

200,004

 

 

$

78,643

 

Interest expense

16,777

 

 

18,475

 

 

71,052

 

 

75,385

 

Income tax benefit

(104

)

 

(190

)

 

(217

)

 

(363

)

Depreciation of furniture, fixtures and equipment

438

 

 

404

 

 

1,834

 

 

1,947

 

Real estate-related depreciation and amortization

32,779

 

 

36,219

 

 

137,069

 

 

137,116

 

Impairment losses on real estate

2

 

 

2,367

 

 

329

 

 

2,367

 

Gain on sales of real estate

(20,761

)

 

(2,367

)

 

(105,230

)

 

(2,340

)

Adjustments from unconsolidated real estate JVs

1,206

 

 

832

 

 

4,065

 

 

3,314

 

EBITDAre

75,214

 

 

74,196

 

 

308,906

 

 

296,069

 

Loss on early extinguishment of debt

 

 

258

 

 

 

 

258

 

Net gain on other investments

(1

)

 

(449

)

 

(401

)

 

(449

)

Business development expenses

512

 

 

661

 

 

1,939

 

 

3,114

 

Non-comparable professional and legal expenses

195

 

 

 

 

681

 

 

 

Demolition costs on redevelopment and nonrecurring improvements

104

 

 

163

 

 

148

 

 

462

 

Executive transition costs

 

 

371

 

 

4

 

 

793

 

Adjusted EBITDA

76,024

 

 

75,200

 

 

$

311,277

 

 

$

300,247

 

Proforma net operating income adjustment for property changes within period

463

 

 

2,052

 

 

 

 

 

Change in collectability of deferred rental revenue

928

 

 

 

 

 

 

 

In-place adjusted EBITDA

$

77,415

 

 

$

77,252

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

 

 

 

 

 

 

Interest expense

$

16,777

 

 

$

18,475

 

 

$

71,052

 

 

$

75,385

 

Less: Amortization of deferred financing costs

(541

)

 

(550

)

 

(2,136

)

 

(1,954

)

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

(382

)

 

(365

)

 

(1,503

)

 

(1,439

)

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

 

 

(34

)

 

(79

)

 

(135

)

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

416

 

 

260

 

 

1,332

 

 

1,034

 

Scheduled principal amortization

1,010

 

 

1,079

 

 

4,310

 

 

4,240

 

Capitalized interest

3,467

 

 

1,748

 

 

10,786

 

 

5,929

 

Preferred unit distributions

77

 

 

165

 

 

564

 

 

660

 

Denominator for fixed charge coverage-Adjusted EBITDA

$

20,824

 

 

$

20,778

 

 

$

84,326

 

 

$

83,720

 

 

 

 

 

 

 

 

 

 

Corporate Office Properties Trust

Summary Financial Data

(unaudited)

(Dollars in thousands)

 

 

 

 

 

 

 

For the Three Months

Ended December 31,

 

For the Years Ended

December 31,

 

 

2019

 

2018

 

2019

 

2018

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

 

 

 

 

 

 

 

Tenant improvements and incentives

$

11,447

 

 

$

7,876

 

 

$

38,047

 

 

$

37,502

 

Building improvements

8,826

 

 

9,306

 

 

26,598

 

 

22,977

 

Leasing costs

2,998

 

 

3,800

 

 

11,663

 

 

9,847

 

Net (exclusions from) additions to tenant improvements and incentives

(426

)

 

(2,131

)

 

(2,292

)

 

1,577

 

Excluded building improvements

(2,983

)

 

(3,984

)

 

(10,227

)

 

(7,073

)

Excluded leasing costs

 

 

(19

)

 

 

 

(46

)

Replacement capital expenditures

$

19,862

 

 

$

14,848

 

 

$

63,789

 

 

$

64,784

 

 

 

 

 

 

 

 

 

Same Properties cash NOI

$

73,708

 

 

$

69,377

 

 

$

285,944

 

 

$

275,094

 

Straight line rent adjustments and lease incentive amortization

(2,838

)

 

(907

)

 

(5,004

)

 

(3,111

)

Amortization of acquired above- and below-market rents

197

 

 

(97

)

 

312

 

 

(671

)

Amortization of below-market cost arrangements

(23

)

 

(56

)

 

(92

)

 

(222

)

Lease termination fees, gross

417

 

 

906

 

 

2,046

 

 

3,231

 

Tenant funded landlord assets and lease incentives

748

 

 

409

 

 

2,177

 

 

3,421

 

Cash NOI adjustments in unconsolidated real estate JV

34

 

 

57

 

 

181

 

 

254

 

Same Properties NOI

$

72,243

 

 

$

69,689

 

 

$

285,564

 

 

$

277,996

 

 

 

 

 

 

 

 

 

           

 

          

December 31,

2019

 

December 31,

2018

Reconciliation of total assets to adjusted book

          

 

 

 

Total assets

          

$

3,854,453

 

 

$

3,656,005

 

Accumulated depreciation

          

1,007,120

 

 

897,903

 

Accumulated amortization of real estate intangibles and deferred leasing costs

          

212,547

 

 

204,882

 

COPT’s share of liabilities of unconsolidated real estate JVs

          

50,734

 

 

29,917

 

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

          

8,164

 

 

5,446

 

Less: Property - operating lease liabilities

          

(17,317

)

 

 

Less: Property - finance lease liabilities

          

(702

)

 

(660

)

Less: Cash and cash equivalents

          

(14,733

)

 

(8,066

)

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

          

(498

)

 

(293

)

Adjusted book

          

$

5,099,768

 

 

$

4,785,134

 

 

          

 

 

 

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

          

 

 

 

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

          

$

1,893,057

 

 

$

1,868,504

 

Less: Cash and cash equivalents

          

(14,733

)

 

(8,066

)

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

          

(498

)

 

(293

)

Net debt

          

$

1,877,826

 

 

$

1,860,145

 

Preferred equity

          

8,800

 

 

8,800

 

Net debt plus preferred equity

          

$

1,886,626

 

 

$

1,868,945

 

           

 

View source version on businesswire.com:https://www.businesswire.com/news/home/20200206005935/en/

CONTACT: IR Contacts:

Stephanie Krewson-Kelly

443-285-5453

stephanie.kelly@copt.comMichelle Layne

443-285-5452

michelle.layne@copt.com

KEYWORD: UNITED STATES NORTH AMERICA MARYLAND

INDUSTRY KEYWORD: COMMERCIAL BUILDING & REAL ESTATE CONSTRUCTION & PROPERTY REIT

SOURCE: Corporate Office Properties Trust

Copyright Business Wire 2020.

PUB: 02/06/2020 04:16 PM/DISC: 02/06/2020 04:16 PM

http://www.businesswire.com/news/home/20200206005935/en