(Source: Business Wire)
Corporate Office Properties Trust (COPT) (NYSE:OFC) announced today
financial and operating results for the quarter and nine months ended
September 30, 2009.
Highlights
6% increase in diluted earnings per share ("Diluted EPS") to $.18 or
$10.4 million of net income available to common shareholders for the
third quarter 2009 as compared to $.17 per diluted share or $8.2
million of net income available to common shareholders for the third
quarter 2008. Year to date, diluted EPS increased 32% to $.62 or $35.2
million of net income available to common shareholders as compared to
$.47 per diluted share or $23.0 million of net income available to
common shareholders for the first nine months of 2008.
3% decrease in diluted Funds from Operations ("FFO") per share to $.60
for the third quarter 2009 from $.62 for the third quarter 2008. FFO
increased 7% to $42.4 million for the third quarter 2009 from $39.5
million for the third quarter 2008. Year to date, diluted FFO per
share increased 10% to $1.94 or $134.1 million from $1.77 or $113.2
million for the first nine months of 2008.
9% increase in diluted Adjusted Funds from Operations available to
common share and common unit holders ("Diluted AFFO") to $27.8 million
for the third quarter 2009 as compared to $25.5 million for the third
quarter 2008. Year to date, diluted AFFO increased 31% to $97.4
million from $74.5 million for the first nine months of 2008.
91% occupied and leased for our wholly-owned portfolio as of September
30, 2009.
68% renewal rate on expiring leases for third quarter 2009, with a 4%
decrease in total straight-line rents for renewed space.
5% increase in same office property cash NOI for the quarter compared
to the third quarter 2008. The Company's same office portfolio for the
quarter ended September 30, 2009 represents 91% of the rentable square
feet of its consolidated portfolio and consists of 230 properties.
761,000 square feet leased in the quarter and approximately 1.9
million square feet leased year to date.
"The Company continues to perform well despite an increasingly difficult
real estate environment. We increased our cash dividend during the
quarter by 5.4%, one of the few REITs to do so this year," stated
Randall M. Griffin, President and Chief Executive Officer, Corporate
Office Properties Trust. "We had an active leasing quarter. Our focused
expense control efforts helped produce strong same office performance,"
he added.
Financial Ratios
Diluted FFO payout ratio for the nine months ended September 30, 2009
was 59% as compared to 60% for the nine months ended September 30, 2008.
Diluted AFFO payout ratio for the nine months ended September 30, 2009
was 73% as compared to 81% for the nine months ended September 30, 2008.
As of September 30, 2009, the Company had a total market capitalization
of $4.5 billion, with $1.9 billion in debt outstanding, equating to a
43% debt to total market capitalization ratio.
For the third quarter 2009, the Company's weighted average interest rate
was 4.9% and at September 30, 2009, the Company had 85% of its total
debt subject to fixed interest rates.
For the third quarter 2009, the Company's EBITDA to interest coverage
ratio was 3.2x, and the EBITDA fixed charge coverage ratio was 2.6x.
Reconciliations of non-GAAP measures to the most directly comparable
GAAP measures are included in the tables that follow the text of this
press release.
Operating Results
At September 30, 2009, the Company's wholly-owned portfolio of 246
office properties totaled 18.4 million square feet. The weighted average
remaining lease term for the portfolio was 4.5 years and the average
rental rate (including tenant reimbursements) was $24.04 per square foot.
For the quarter ended September 30, 2009, 529,000 square feet was
renewed equating to a 68% renewal rate, at an average committed cost of
$5.04 per square foot. Total rent on renewed space decreased 4% on a
straight-line basis, as measured from the straight-line rent in effect
preceding the renewal date and decreased 8% on a cash basis. For renewed
and retenanted space of 670,000 square feet, total straight-line rent
decreased 6% and total rent on a cash basis decreased 12%. The average
committed cost for renewed and retenanted space was $6.09 per square
foot.
For the nine months ended September 30, 2009, 1.4 million square feet
was renewed equating to a 72% renewal rate, at an average committed cost
of $6.14 per square foot.
Development Activity
At September 30, 2009, the Company had 2.4 million square feet under
construction, development and redevelopment for a total projected cost
of $478.3 million.
The Company's land inventory (wholly-owned and joint venture) at
September 30, 2009 totaled 1,821 acres that can support 16.1 million
square feet of development.
During the quarter, the Company placed into service 338,000 square feet
located in six properties.
Financing and Capital Transactions
The Company closed the following transactions during the quarter:
A $90.0 million secured loan with a five-year term that carries
interest at 7.25%.
A $185.0 million secured loan with a seven-year term that carries
interest at 7.25%.
Subsequent Events
The Company executed the following transactions subsequent to quarter
end:
Acquired a newly-constructed, 156,000 square foot property that is
100% leased, long-term to Northrop Grumman Corporation and a 0.9 acre
adjacent land parcel located in Linthicum, Maryland.
Acquired a 474,000 square foot office tower, parking lot, utility
distribution center, four waterfront lots and riparian rights, all
part of the Canton Crossing planned unit development in Baltimore,
Maryland. The waterfront lots are approved for 500,000 square feet of
office, 150,000 square feet of retail, a 450 room hotel and a marina.
The office tower is 91% leased with CareFirst as the largest tenant at
34%.
Earnings Guidance
The Company will discuss its updated 2009 diluted FFO per share guidance
and its initial 2010 diluted FFO per share guidance on its earnings
conference call.
Conference Call
The Company will hold an investor/analyst conference call:
Conference Call (within the United States)
Date: Thursday, October 29, 2009
Time: 11:00 a.m. Eastern Time
Telephone Number: 888-679-8018
Passcode: 90330872
Conference Call (outside the United States)
Date: Thursday, October 29, 2009
Time: 11:00 a.m. Eastern Time
Telephone Number: 617-213-4845
Passcode: 90330872
-------------------------------------------------------------------------------
Please use the following link to pre-register and view important
information about this conference call. Pre-registering is not mandatory
but is recommended as it will provide you immediate entry into the call
and will facilitate the timely start of the conference. Pre-registration
only takes a few moments and you may pre-register at anytime, including
up to and after the call start time. To pre-register, please click on
the below link:
https://www.theconferencingservice.com/prereg/key.process?key=P86DV6HWU
You may also pre-register in the Investor Relations section of the
Company's website at www.copt.com.
Alternatively, you may be placed into the call by an operator by calling
the number provided above at least 5 to 10 minutes before the start of
the call. A replay of this call will be available beginning Thursday,
October 29 at 3:00 p.m. Eastern Time through Thursday, November 12 at
midnight Eastern Time. To access the replay within the United States,
please call 888-286-8010 and use passcode 18266981. To access the replay
outside the United States, please call 617-801-6888 and use passcode
18266981.
The conference call will also be available via live webcast in the
Investor Relations section of the Company's website at www.copt.com.
A replay of the conference call will be immediately available via
webcast in the Investor Relations section of the Company's website.
Definitions
Please refer to our Form 8-K or our website (www.copt.com)
for definitions of certain terms used in this press release.
Reconciliations of non-GAAP measures to the most directly comparable
GAAP measures are included in the attached tables.
Company Information
Corporate Office Properties Trust (COPT) (NYSE: OFC) is a specialty
office real estate investment trust (REIT) that focuses on strategic
customer relationships and specialized tenant requirements in the U.S.
Government, Defense Information Technology and Data sectors. The Company
acquires, develops, manages and leases properties which are typically
concentrated in large office parks primarily located adjacent to
government demand drivers and/or in growth corridors. As of September
30, 2009, the Company owned 265 office and data properties totaling 19.4
million rentable square feet, which includes 19 properties totaling
989,000 square feet held through joint ventures. The Company's portfolio
primarily consists of technically sophisticated buildings in visually
appealing settings that are environmentally sensitive, sustainable and
meet unique customer requirements. COPT is an S&P MidCap 400 company and
more information can be found at www.copt.com.
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", "expect", "estimate" 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. Accordingly, 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.
Important factors that may affect these expectations, estimates, and
projections include, but are not limited to:
the Company's ability to borrow on favorable terms;
general economic and business conditions, which will, among other
things, affect office property demand and rents, tenant
creditworthiness, interest rates and financing availability;
adverse changes in the real estate markets including, among other
things, increased competition with other companies;
risk of real estate acquisition and development, including, among
other things, risks that development projects may not be completed on
schedule, that tenants may not take occupancy or pay rent or that
development or operating costs may be greater than anticipated;
risks of investing through joint venture structures, including
risks that the Company's joint venture partners may not fulfill their
financial obligations as investors or may take actions that are
inconsistent with the Company's objectives;
our ability to satisfy and operate effectively under federal income
tax rules relating to real estate investment trusts and partnerships;
governmental actions and initiatives; and
environmental requirements.
The Company undertakes no obligation to update or supplement any
forward-looking statements. For further information, please refer
to the Company's filings with the Securities and Exchange Commission,
particularly the section entitled "Risk Factors" in Item 1A of the
Company's Annual Report on Form 10-K for the year ended December 31,
2008.
Corporate Office Properties Trust
Summary Financial Data
(unaudited)
(Amounts in thousands, except per share data)
Three Months Ended September 30, Nine Months Ended September 30,
2009 2008 2009 2008
Revenues
Real estate revenues $ 104,843 $ 101,086 $ 317,405 $ 296,034
Service operations revenues 95,321 90,002 273,534 123,040
Total revenues 200,164 191,088 590,939 419,074
Expenses
Property operating expenses 38,583 35,854 114,778 104,353
Depreciation and other amortization associated with real estate operations 26,712 25,583 81,911 75,430
Service operations expenses 93,805 87,657 268,289 120,090
General and administrative expenses 5,898 5,904 17,275 17,608
Business development expenses 458 199 1,550 464
Total operating expenses 165,456 155,197 483,803 317,945
Operating income 34,708 35,891 107,136 101,129
Interest expense (20,986 ) (22,503 ) (59,088 ) (65,580 )
Interest and other income 2,619 559 4,949 924
Income from continuing operations before equity in loss of unconsolidated entities and income taxes 16,341 13,947 52,997 36,473
Equity in loss of unconsolidated entities (758 ) (57 ) (1,075 ) (167 )
Income tax expense (47 ) (97 ) (169 ) (102 )
Income from continuing operations 15,536 13,793 51,753 36,204
Discontinued operations - (9 ) - 2,571
Income before gain on sales of real estate 15,536 13,784 51,753 38,775
Gain on sales of real estate, net of income taxes - 4 - 1,104
Net income 15,536 13,788 51,753 39,879
Less net income attributable to noncontrolling interests
Common units in the Operating Partnership (956 ) (1,467 ) (4,032 ) (4,130 )
Preferred units in the Operating Partnership (165 ) (165 ) (495 ) (495 )
Other 40 90 15 (132 )
Net income attributable to COPT 14,455 12,246 47,241 35,122
Preferred share dividends (4,025 ) (4,025 ) (12,076 ) (12,076 )
Net income attributable to COPT common shareholders $ 10,430 $ 8,221 $ 35,165 $ 23,046
Earnings per share "EPS" computation:
Numerator for diluted EPS:
Net income available to common shareholders $ 10,430 $ 8,221 $ 35,165 $ 23,046
Amount allocable to restricted shares (253 ) (192 ) (763 ) (528 )
Numerator for diluted EPS 10,177 8,029 34,402 22,518
Denominator:
Weighted average common shares - basic 57,470 47,273 55,366 47,128
Dilutive effect of stock option awards 485 779 506 765
Weighted average common shares - diluted 57,955 48,052 55,872 47,893
Diluted EPS $ 0.18 $ 0.17 $ 0.62 $ 0.47
-------------------------------------------------------------------------------
Corporate Office Properties Trust
Summary Financial Data
(unaudited)
(Amounts in thousands, except per share data and ratios)
Three Months Ended September 30, Nine Months Ended September 30,
2009 2008 2009 2008
Net income $ 15,536 $ 13,788 $ 51,753 $ 39,879
Add: Real estate-related depreciation and amortization 26,712 25,583 81,911 75,482
Add: Depreciation and amortization on unconsolidated real estate entities 160 162 481 489
Less: Gain on sales of operating properties, net of income taxes - - - (2,630 )
Funds from operations ("FFO") 42,408 39,533 134,145 113,220
Less: Noncontrolling interests - preferred units in the Operating Partnership (165 ) (165 ) (495 ) (495 )
Less: Noncontrolling interests - other consolidated entities 40 90 15 (132 )
Less: Preferred share dividends (4,025 ) (4,025 ) (12,076 ) (12,076 )
Less: Depreciation and amortization allocable to noncontrolling interests in other consolidated entities (91 ) (74 ) (251 ) (198 )
Less: Basic and diluted FFO allocable to restricted shares (395 ) (321 ) (1,298 ) (903 )
Basic and diluted FFO available to common share and common unit holders ("Basic and diluted FFO") 37,772 35,038 120,040 99,416
Less: Straight-line rent adjustments (2,665 ) (2,850 ) (5,523 ) (8,284 )
Less: Amortization of deferred market rental revenue (451 ) (555 ) (1,447 ) (1,458 )
Less: Recurring capital expenditures (7,572 ) (7,008 ) (17,838 ) (17,611 )
Add: Amortization of discount on Exchangeable Senior Notes, net of amounts capitalized 762 828 2,183 2,446
Diluted adjusted funds from operations available to common share and common unit holders ("Diluted AFFO") $ 27,846 $ 25,453 $ 97,415 $ 74,509
Weighted average shares
Weighted average common shares 57,470 47,273 55,366 47,128
Conversion of weighted average common units 5,084 8,130 5,932 8,145
Weighted average common shares/units - basic FFO per share 62,554 55,403 61,298 55,273
Dilutive effect of share-based compensation awards 485 779 506 765
Weighted average common shares/units - diluted FFO per share 63,039 56,182 61,804 56,038
Diluted FFO per share $ 0.60 $ 0.62 $ 1.94 $ 1.77
Dividends/distributions per common share/unit $ 0.3925 $ 0.3725 $ 1.1375 $ 1.0525
Earnings payout ratio 219.1 % 233.3 % 184.0 % 223.7 %
Diluted FFO payout ratio 65.8 % 63.4 % 58.9 % 60.5 %
Diluted AFFO payout ratio 89.2 % 87.2 % 72.6 % 80.7 %
EBITDA interest coverage ratio 3.20x 2.92x 3.47x 2.91x
EBITDA fixed charge coverage ratio 2.64x 2.44x 2.83x 2.43x
Reconciliation of denominators for diluted EPS and diluted FFO per share
Denominator for diluted EPS 57,955 48,052 55,872 47,893
Weighted average common units 5,084 8,130 5,932 8,145
Denominator for diluted FFO per share 63,039 56,182 61,804 56,038
-------------------------------------------------------------------------------
Corporate Office Properties Trust
Summary Financial Data
(unaudited)
(Dollars and shares in thousands, except per share data)
September 30, December 31,
2009 2008
Balance Sheet Data (in thousands) (as of period end)
Properties, net of accumulated depreciation $ 2,868,707 $ 2,778,466
Total assets 3,230,647 3,114,239
Debt 1,897,852 1,856,751
Total liabilities 2,094,464 2,031,816
Beneficiaries' equity 1,136,183 1,082,423
Debt to total assets 58.7 % 59.6 %
Debt to undepreciated book value of real estate assets 56.7 % 57.8 %
Debt to total market capitalization 42.6 % 47.4 %
Property Data (wholly owned properties) (as of period end)
Number of operating properties owned 246 238
Total net rentable square feet owned (in thousands) 18,449 18,462
Occupancy 90.9 % 93.2 %
Reconciliation of denominator for debt to total assets to denominator for debt to undepreciated book value of real estate assets
Denominator for debt to total assets $ 3,230,647 $ 3,114,239
Assets other than assets included in properties, net (361,940 ) (335,773 )
Accumulated depreciation on real estate assets 402,125 343,110
Intangible assets on real estate acquisitions, net 75,506 91,848
Denominator for debt to undepreciated book value of real estate assets $ 3,346,338 $ 3,213,424
Three Months Ended Nine Months Ended
September 30, September 30,
2009 2008 2009 2008
Reconciliation of tenant improvements and incentives, capital improvements and leasing costs for operating properties to recurring capital expenditures
Total tenant improvements and incentives on operating properties $ 3,553 $ 6,305 $ 11,604 $ 14,883
Total capital improvements on operating properties 2,927 3,179 6,763 6,827
Total leasing costs on operating properties 1,855 999 4,431 2,764
Less: Nonrecurring tenant improvements and incentives on operating properties (711 ) (1,995 ) (2,780 ) (4,077 )
Less: Nonrecurring capital improvements on operating properties (58 ) (1,299 ) (1,340 ) (2,667 )
Less: Nonrecurring leasing costs incurred on operating properties - (217 ) (916 ) (269 )
Add: Recurring capital expenditures on operating properties held through joint ventures 6 36 76 150
Recurring capital expenditures $ 7,572 $ 7,008 $ 17,838 $ 17,611
-------------------------------------------------------------------------------
Corporate Office Properties Trust
Summary Financial Data
(unaudited)
(Dollars in thousands)
Three Months Ended Nine Months Ended
September 30, September 30,
2009 2008 2009 2008
Reconciliation of dividends for earnings payout ratio to dividends and distributions for FFO & AFFO payout ratio
Common share dividends for earnings payout ratio $ 22,851 $ 19,183 $ 64,712 $ 51,553
Common unit distributions 1,995 3,021 5,974 8,564
Dividends and distributions for FFO & AFFO payout ratio $ 24,846 $ 22,204 $ 70,686 $ 60,117
Reconciliation of GAAP net income to earnings before interest, income taxes, depreciation and amortization ("EBITDA")
Net income $ 15,536 $ 13,788 $ 51,753 $ 39,879
Interest expense on continuing operations 20,986 22,503 59,088 65,580
Interest expense on discontinued operations - - - 51
Income tax expense 47 97 169 680
Real estate-related depreciation and amortization 26,712 25,583 81,911 75,482
Depreciation of furniture, fixtures and equipment 458 401 1,261 1,177
EBITDA $ 63,739 $ 62,372 $ 194,182 $ 182,849
Reconciliation of interest expense from continuing operations to the denominators for interest coverage-EBITDA and fixed charge coverage-EBITDA
Interest expense from continuing operations $ 20,986 $ 22,503 $ 59,088 $ 65,580
Interest expense from discontinued operations - - - 51
Less: Amortization of deferred financing costs (1,056 ) (1,143 ) (3,089 ) (2,805 )
Denominator for interest coverage-EBITDA 19,930 21,360 55,999 62,826
Preferred share dividends 4,025 4,025 12,076 12,076
Preferred unit distributions 165 165 495 495
Denominator for fixed charge coverage-EBITDA $ 24,120 $ 25,550 $ 68,570 $ 75,397
Reconciliation of same property net operating income to same office property cash net operating income and same office property cash net operating income, excluding gross lease termination fees
Same office property net operating income $ 63,608 $ 62,412 $ 185,660 $ 179,560
Less: Straight-line rent adjustments (733 ) (2,529 ) (2,204 ) (6,683 )
Less: Amortization of deferred market rental revenue (385 ) (480 ) (944 ) (1,117 )
Same office property cash net operating income $ 62,490 $ 59,403 $ 182,512 $ 171,760
Less: Lease termination fees, gross (966 ) (209 ) (5,184 ) (368 )
Same office property cash net operating income, excluding gross lease termination fees $ 61,524 $ 59,194 $ 177,328 $ 171,392
-------------------------------------------------------------------------------
Top Twenty Office Tenants of Wholly Owned Properties as of September 30, 2009 (1)
(Dollars in thousands)
Percentage of Total Percentage Weighted
Total Total Annualized of Total Average
Number of Occupied Occupied Rental Annualized Rental Remaining
Tenant Leases Square Feet Square Feet Revenue (2) (3) Revenue Lease Term (4)
United States of America (5) 67 2,649,894 15.8 % 75,570 18.7 % 6.2
Northrop Grumman Corporation (6) 15 1,135,642 6.8 % 30,218 7.5 % 6.0
Booz Allen Hamilton, Inc. 9 738,284 4.4 % 21,545 5.3 % 5.5
Computer Sciences Corporation (6) 3 454,986 2.7 % 12,475 3.1 % 1.8
L-3 Communications Holdings, Inc. (6) 5 266,943 1.6 % 9,877 2.4 % 4.5
General Dynamics Corporation (6) 10 299,153 1.8 % 8,302 2.1 % 1.3
Wells Fargo & Company (6) 7 218,199 1.3 % 7,764 1.9 % 8.4
The Aerospace Corporation (6) 3 245,935 1.5 % 7,523 1.9 % 5.3
ITT Corporation (6) 8 305,689 1.8 % 7,223 1.8 % 4.8
Integral Systems, Inc. (6) 4 241,504 1.4 % 6,062 1.5 % 10.4
Comcast Corporation (6) 7 306,123 1.8 % 6,011 1.5 % 4.1
AT&T Corporation (6) 5 306,932 1.8 % 5,955 1.5 % 3.7
Unisys Corporation 2 258,498 1.5 % 4,631 1.1 % 0.5
The Boeing Company (6) 4 144,227 0.9 % 4,467 1.1 % 4.0
Ciena Corporation 4 229,842 1.4 % 4,391 1.1 % 3.7
BAE Systems PLC (6) 7 211,805 1.3 % 3,235 0.8 % 5.8
The Johns Hopkins Institutions (6) 4 128,827 0.8 % 3,234 0.8 % 3.1
Merck & Co., Inc. (6) 2 225,900 1.3 % 2,772 0.7 % 7.0
Lockheed Martin Corporation 5 143,943 0.9 % 2,683 0.7 % 2.8
Magellan Health Services, Inc. 2 113,727 0.7 % 2,681 0.7 % 2.6
Subtotal Top 20 Office Tenants 173 8,626,053 51.4 % 226,619 56.2 % 5.3
All remaining tenants 702 8,151,421 48.6 % 176,721 43.8 % 3.6
Total/Weighted Average 875 16,777,474 100.0 % $ 403,340 100.0 % 4.5
-------------------------------------------------------------------------------
(1) Table excludes owner occupied leasing activity which represents 164,257 square feet with a weighted average remaining lease term of 5.8 years as of September 30, 2009.
(2) Total Annualized Rental Revenue is the monthly contractual base rent as of September 30, 2009, multiplied by 12, plus the estimated annualized expense reimbursements under existing office leases.
(3) Order of tenants is based on Annualized Rent.
(4) The weighting of the lease term was computed using Total Rental Revenue.
(5) Many of our government leases are subject to early termination provisions which are customary to government leases.
The weighted average remaining lease term was computed assuming no exercise of such early termination rights.
(6) Includes affiliated organizations or agencies.
-------------------------------------------------------------------------------
A service of YellowBrix, Inc.
