Corporate Office Properties Trust Reports Third Quarter 2009 Results

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COLUMBIA, Md.--(BUSINESS WIRE)--Corporate Office Properties Trust (COPT) (NYSE:OFC - News) 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:

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 - News) 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 (COPT)
Mary Ellen Fowler
Senior Vice President and Treasurer
443-285-5450
maryellen.fowler@copt.com