COLUMBIA
GATEWAY
Corporate Office
Properties Trust
REDSTONE
GATEWAY
DISCOVERY
DISTRICT
COLUMBIA
GATEWAY
ANNUAL
MEETING
BOARD OF
TRUSTEES
EXECUTIVE
OFFICERS
INVESTOR
RELATIONS
The 2021 Annual Meeting of
Thomas F. Brady
Shareholders will be held virtually
Chairman
at 9:30 a.m. Eastern Time on
May 13, 2021. You can access the
meeting by visiting www.virtual
shareholdermeeting.com/
OFC2021 and following the
instructions in the Proxy
Statement.
Stephen E. Budorick
Robert L. Denton, Sr.
Philip L. Hawkins
David M. Jacobstein
Steven D. Kesler
Letitia A. Long
Raymond L. Owens
C. Taylor Pickett
Lisa G. Trimberger
Stephen E. Budorick
President + Chief Executive
+ Chief Executive
+
Officer
Todd Hartman
Executive Vice President
+ Chief Operating Officer
Anthony Mifsud
Executive Vice President
+ Chief Financial Officer
For help with questions about
the Company, or for additional
corporate information, please
contact:
Stephanie Krewson-Kelly
Vice President, Investor Relations
Corporate Office Properties Trust
6711 Columbia Gateway Drive,
Suite 300
Columbia, Maryland 21046
Telephone: 443.285.5400
Facsimile: 443.285.7650
Email: ir@copt.com
EXECUTIVE
OFFICES
6711 Columbia Gateway Drive,
Suite 300
Columbia, Maryland 21046
Telephone: 443.285.5400
Facsimile: 443.285.7650
copt.com // NYSE: OFC
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Letter to
Shareholders
Dear fellow shareholders,
2020 was a challenging year for all companies, with the
COVID-19 pandemic emerging in late February, shutting down
many businesses and interrupting global commerce. For
our Company, 2020 was a challenging yet strong year. We
derive nearly 90% of our rents from locations that support the
defense activities of the U.S. Government and its contractors
engaged in national security, defense information technology,
and cybersecurity activities, among others. Our strategy of
concentrating buildings around U.S. defense installations
executing priority missions is unique in the REIT industry, and
our performance during the economic uncertainty caused by
the COVID-19 pandemic and related shutdowns demonstrated
the strength of this strategy.
Rent collections remained very high throughout the shutdowns
due to the exceptional credit quality of our tenants, and we
made only limited collection accommodations, mostly to retail
and amenity tenants to help them bridge the financial gap
caused by the shutdowns. Other pandemic-related impacts our
operations absorbed during the year included a $1.9 million
decrease in parking revenue and a $2.8 million increase in
provisions for collectability losses for our Same Properties pool
relative to the prior year.
Notwithstanding these impacts, we met or exceeded
performance expectations, with our actual results of $2.12
of diluted FFO per share, as adjusted for comparability, for
the year exceeding the midpoint of our initial pre-pandemic
guidance by 4-cents and representing 4.4% growth over
2019 results.
At the end of 2020, our total portfolio was 94.1% occupied
and 94.8% leased, representing gains of 120 basis points
and 40 basis points, respectively. These year-over-year gains
were led by strong increases at The National Business Park
(part of our Ft. Meade/BW Corridor sub-segment), and in
our Northern Virginia Defense/IT and Navy Support sub-
segments. Additionally, development success in our Redstone
Arsenal sub-segment nearly doubled the size of our Redstone
Gateway operations, to 1.5 million square feet that were near
full occupancy.
During the year, we raised debt and equity capital on
attractive terms. In September we issued $400 million of
senior unsecured notes at an interest rate of 2.25%. This
was our first bond issuance since June 2015, and the
transaction received a very positive response from investors
Continued on Inside Back Cover
FIGURE 1: Historical Development Leasing
1.1M SF
Average Annual Volume
2.5M
2M
1.5M
1M
0.5M
0
2012 2013 2014 2015 2016 2017 2018 2019 2020
Actual SF
Initial Goal
FIGURE 2: Square Feet of Development Placed Into Service
2M
1.8M
1.6M
1.4M
1.2M
1M
800K
600K
400K
200K
0
100%
80%
60%
40%
20%
0%
Average 1M SF PIS Annually
96% Leased
2013
2014
2015
2016
2017
2018
2019
2020
SF PIS
% Leased
Continued from Inside Front Cover
who, we believe, clearly appreciated our unique portfolio
The fiscal year 2021 base DOD budget represents 1% growth
and the durability of our cash flows through the pandemic
over fiscal 2020 levels, and the consensus among major
shutdowns. We also raised $165 million of equity value by
defense contractors is that it will continue to grow by roughly
forming a new data center shell joint venture with Blackstone.
1–2% per year for the next several years.
We achieved strong pricing on the assets we contributed,
demonstrating the value we create through development.
Through these transactions and our growing base of EBITDA
from operating and development properties, we further
strengthened our investment grade rated balance sheet.
As we forge into 2021, our performance during the challenges
of 2020 gives us confidence that the portfolio we have built
is stalwart and, we believe, capable of withstanding economic
downturns. Demand for new development remains solid and
is broad-based. In our Development Leasing Pipeline, we
Despite the pandemic shutdowns, we completed a total of
are tracking over two million square feet of demand across
3.6 million square feet of leasing in 2020. We renewed
several of our Defense/IT Locations, including solutions for U.S.
2.2 million square feet of expiring leases, representing an 81%
Government customers and defense contractors, including
retention rate, which matched our 20-year record. Notably, our
hyperscale cloud computing. As a result, we expect to execute
weighted average term on renewals was 4.2 years and the
another one million square feet of development leasing during
modest 2.1% decrease in cash rents on renewals was in-line
the year. We also expect NOI from recently completed and
with our guidance.
Vacancy leasing volume was the area most significantly
affected by the shutdowns. While first quarter volume was
strong and fourth quarter volume recovered, brokerage firm
shutdowns dramatically suppressed vacancy leasing volumes
in the second and third quarters. As a result, the 416,000
current development projects to drive FFO per share between
2–5% higher than 2020’s elevated results. In short, we believe
that our Company has entered a new cycle of growth, driven
by a durable operating portfolio, a strong balance sheet, and
a reliable low-risk development program that is producing
incremental NOI annually.
square feet we completed during the year was about 60% of
In closing out 2020 and looking forward, it is important to
our pre-pandemic expectations. Despite the reduced leasing
express our appreciation for all of those who worked so
volume, we achieved strong rent levels and lease terms that
hard this past year for our Company. Our employees were
averaged 6.2 years.
In contrast, development demand was strong throughout the
year, and we met our pre-pandemic goal of leasing one million
square feet (see Figure 1). These development leases included
five, fully leased build-to-suit projects for defense contractors
totaling 680,000 square feet at four of our six Defense/IT
extraordinary. They exceeded the already high service
levels expected by the tenants we support, which in turn
gave these tenants the confidence to safely remain in their
spaces, executing their vital missions for our country. For
these efforts and those of our entire team, I am extremely
humbled and grateful.
Locations: one each at The National Business Park, Redstone
We look forward to seizing the impressive opportunity
Gateway, and San Antonio, and two data center shell build-to-
before us in 2021, and thank you, our shareholders, for your
suits in Northern Virginia. During the year, we also completed
continued support.
238,000 square feet of development leasing with the U.S.
Government, including 210,000 square feet in 100 Secured
Gateway – which is now fully leased and occupied – and an
18,000 square foot lease on a new development in the Pax
River portion of our Navy Support sub-segment.
Most importantly, we placed 1.8 million square feet that were
fully leased into service during the year, surpassing the prior
Company record by more than 600,000 square feet (see
Figure 2). Our ability to place large volumes of highly leased
developments into service is a primary driver of our long-
term growth. We believe that NOI from these developments
in 2021 will more than offset the effects of 2020’s delayed
vacancy leasing.
National defense spending drives demand for our Defense/
IT Locations, and the defense spending environment remains
healthy. Congress appropriated the fiscal year 2021 defense
budget on January 1, 2021, with solid bi-partisan support.
Stephen E. Budorick
Stephen E. Budorick
President
President + Chief Executive Officer
Letter to
Shareholders
Dear fellow shareholders,
2020 was a challenging year for all companies, with the
COVID-19 pandemic emerging in late February, shutting down
many businesses and interrupting global commerce. For
our Company, 2020 was a challenging yet strong year. We
derive nearly 90% of our rents from locations that support the
defense activities of the U.S. Government and its contractors
engaged in national security, defense information technology,
and cybersecurity activities, among others. Our strategy of
concentrating buildings around U.S. defense installations
executing priority missions is unique in the REIT industry, and
our performance during the economic uncertainty caused by
the COVID-19 pandemic and related shutdowns demonstrated
the strength of this strategy.
Rent collections remained very high throughout the shutdowns
due to the exceptional credit quality of our tenants, and we
made only limited collection accommodations, mostly to retail
and amenity tenants to help them bridge the financial gap
caused by the shutdowns. Other pandemic-related impacts our
operations absorbed during the year included a $1.9 million
decrease in parking revenue and a $2.8 million increase in
provisions for collectability losses for our Same Properties pool
relative to the prior year.
Notwithstanding these impacts, we met or exceeded
performance expectations, with our actual results of $2.12
of diluted FFO per share, as adjusted for comparability, for
the year exceeding the midpoint of our initial pre-pandemic
guidance by 4-cents and representing 4.4% growth over
2019 results.
At the end of 2020, our total portfolio was 94.1% occupied
and 94.8% leased, representing gains of 120 basis points
and 40 basis points, respectively. These year-over-year gains
were led by strong increases at The National Business Park
(part of our Ft. Meade/BW Corridor sub-segment), and in
our Northern Virginia Defense/IT and Navy Support sub-
segments. Additionally, development success in our Redstone
Arsenal sub-segment nearly doubled the size of our Redstone
Gateway operations, to 1.5 million square feet that were near
full occupancy.
During the year, we raised debt and equity capital on
attractive terms. In September we issued $400 million of
senior unsecured notes at an interest rate of 2.25%. This
was our first bond issuance since June 2015, and the
transaction received a very positive response from investors
Continued on Inside Back Cover
FIGURE 1: Historical Development Leasing
1.1M SF
Average Annual Volume
2012 2013 2014 2015 2016 2017 2018 2019 2020
Actual SF
Initial Goal
FIGURE 2: Square Feet of Development Placed Into Service
Average 1M SF PIS Annually
96% Leased
2.5M
2M
1.5M
1M
0.5M
0
2M
1.8M
1.6M
1.4M
1.2M
1M
800K
600K
400K
200K
0
2013
2014
2015
2016
2017
2018
2019
2020
SF PIS
% Leased
100%
80%
60%
40%
20%
0%
The fiscal year 2021 base DOD budget represents 1% growth
over fiscal 2020 levels, and the consensus among major
defense contractors is that it will continue to grow by roughly
1–2% per year for the next several years.
As we forge into 2021, our performance during the challenges
of 2020 gives us confidence that the portfolio we have built
is stalwart and, we believe, capable of withstanding economic
downturns. Demand for new development remains solid and
is broad-based. In our Development Leasing Pipeline, we
are tracking over two million square feet of demand across
several of our Defense/IT Locations, including solutions for U.S.
Government customers and defense contractors, including
hyperscale cloud computing. As a result, we expect to execute
another one million square feet of development leasing during
the year. We also expect NOI from recently completed and
current development projects to drive FFO per share between
2–5% higher than 2020’s elevated results. In short, we believe
that our Company has entered a new cycle of growth, driven
by a durable operating portfolio, a strong balance sheet, and
a reliable low-risk development program that is producing
incremental NOI annually.
In closing out 2020 and looking forward, it is important to
express our appreciation for all of those who worked so
hard this past year for our Company. Our employees were
extraordinary. They exceeded the already high service
levels expected by the tenants we support, which in turn
gave these tenants the confidence to safely remain in their
spaces, executing their vital missions for our country. For
these efforts and those of our entire team, I am extremely
humbled and grateful.
We look forward to seizing the impressive opportunity
before us in 2021, and thank you, our shareholders, for your
continued support.
Stephen E. Budorick
Stephen E. Budorick
President + Chief Executive Officer
President
Continued from Inside Front Cover
who, we believe, clearly appreciated our unique portfolio
and the durability of our cash flows through the pandemic
shutdowns. We also raised $165 million of equity value by
forming a new data center shell joint venture with Blackstone.
We achieved strong pricing on the assets we contributed,
demonstrating the value we create through development.
Through these transactions and our growing base of EBITDA
from operating and development properties, we further
strengthened our investment grade rated balance sheet.
Despite the pandemic shutdowns, we completed a total of
3.6 million square feet of leasing in 2020. We renewed
2.2 million square feet of expiring leases, representing an 81%
retention rate, which matched our 20-year record. Notably, our
weighted average term on renewals was 4.2 years and the
modest 2.1% decrease in cash rents on renewals was in-line
with our guidance.
Vacancy leasing volume was the area most significantly
affected by the shutdowns. While first quarter volume was
strong and fourth quarter volume recovered, brokerage firm
shutdowns dramatically suppressed vacancy leasing volumes
in the second and third quarters. As a result, the 416,000
square feet we completed during the year was about 60% of
our pre-pandemic expectations. Despite the reduced leasing
volume, we achieved strong rent levels and lease terms that
averaged 6.2 years.
In contrast, development demand was strong throughout the
year, and we met our pre-pandemic goal of leasing one million
square feet (see Figure 1). These development leases included
five, fully leased build-to-suit projects for defense contractors
totaling 680,000 square feet at four of our six Defense/IT
Locations: one each at The National Business Park, Redstone
Gateway, and San Antonio, and two data center shell build-to-
suits in Northern Virginia. During the year, we also completed
238,000 square feet of development leasing with the U.S.
Government, including 210,000 square feet in 100 Secured
Gateway – which is now fully leased and occupied – and an
18,000 square foot lease on a new development in the Pax
River portion of our Navy Support sub-segment.
Most importantly, we placed 1.8 million square feet that were
fully leased into service during the year, surpassing the prior
Company record by more than 600,000 square feet (see
Figure 2). Our ability to place large volumes of highly leased
developments into service is a primary driver of our long-
term growth. We believe that NOI from these developments
in 2021 will more than offset the effects of 2020’s delayed
vacancy leasing.
National defense spending drives demand for our Defense/
IT Locations, and the defense spending environment remains
healthy. Congress appropriated the fiscal year 2021 defense
budget on January 1, 2021, with solid bi-partisan support.
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-K
(Mark one)
☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2020
or
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from
to
Commission file number 1-14023 (Corporate Office Properties Trust)
Commission file number 333-189188 (Corporate Office Properties, L.P.)
CORPORATE OFFICE PROPERTIES TRUST
CORPORATE OFFICE PROPERTIES, L.P.
(Exact name of registrant as specified in its charter)
Corporate Office Properties Trust
Corporate Office Properties, L.P.
Maryland
(State or other jurisdiction of
incorporation or organization)
Delaware
(State or other jurisdiction of
incorporation or organization)
23-2947217
(IRS Employer
Identification No.)
23-2930022
(IRS Employer
Identification No.)
6711 Columbia Gateway Drive, Suite 300, Columbia, MD
(Address of principal executive offices)
21046
(Zip Code)
Securities registered pursuant to Section 12(b) of the Act:
Registrant’s telephone number, including area code: (443) 285-5400
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
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Corporate Office Properties Trust ☒ Yes ☐ No
Corporate Office Properties, L.P. ☒ Yes ☐ No
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act.
Corporate Office Properties Trust ☐ Yes ☒ No
Corporate Office Properties, L.P. ☐ Yes ☒ No
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Corporate Office Properties Trust ☒ Yes ☐ No
Corporate Office Properties, L.P. ☒ Yes ☐ No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of
Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Corporate Office Properties Trust ☒ Yes ☐ No
Corporate Office Properties, L.P. ☒ Yes ☐ No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an
emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in
Rule 12b-2 of the Exchange Act.
Corporate Office Properties Trust
Large accelerated filer ☒
Accelerated filer ☐
Non-accelerated filer ☐
Smaller reporting company ☐
Emerging growth company ☐
Corporate Office Properties, L.P.
Large accelerated filer ☐
Accelerated filer ☐
Non-accelerated filer ☒
Smaller reporting company ☐
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.
Corporate Office Properties Trust ☐
Corporate Office Properties, L.P. ☐
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control
over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its
audit report.
Corporate Office Properties Trust ☒
Corporate Office Properties, L.P. ☒
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Corporate Office Properties Trust ☐ Yes ☒ No
Corporate Office Properties, L.P. ☐ Yes ☒ No
The aggregate market value of the voting and nonvoting shares of common stock held by non-affiliates of Corporate Office Properties Trust was
approximately $2.2 billion, as calculated using the closing price of such shares on the New York Stock Exchange as of and the number of outstanding shares as of
June 30, 2020. For purposes of calculating this amount only, affiliates are defined as Trustees, executive owners and beneficial owners of more than 10% of
Corporate Office Properties Trust’s outstanding common shares, $0.01 par value. At January 22, 2021, 112,181,219 of Corporate Office Properties Trust’s
common shares were outstanding.
The aggregate market value of the voting and nonvoting common units of limited partnership interest held by non-affiliates of Corporate Office Properties,
L.P. was approximately $24.2 million, as calculated using the closing price of the common shares of Corporate Office Properties Trust (into which common units
not held by Corporate Office Properties Trust are exchangeable) on the New York Stock Exchange as of June 30, 2020 and the number of outstanding units as of
June 30, 2020.
Portions of the proxy statement of Corporate Office Properties Trust for its 2021 Annual Meeting of Shareholders to be filed within 120 days after the end of
the fiscal year covered by this Form 10-K are incorporated by reference into Part III of this Form 10-K.
EXPLANATORY NOTE
This report combines the annual reports on Form 10-K for the year ended December 31, 2020 of Corporate Office Properties Trust
(“COPT”) and subsidiaries (collectively, the “Company”) and Corporate Office Properties, L.P. (“COPLP”) and subsidiaries (collectively, the
“Operating Partnership”). Unless stated otherwise or the context otherwise requires, “we,” “our,” and “us” refer collectively to COPT, COPLP
and their subsidiaries.
COPT is a real estate investment trust, or REIT, and the sole general partner of COPLP. As of December 31, 2020, COPT owned 98.6% of
the outstanding common units in COPLP; the remaining common units and all of the outstanding COPLP preferred units were owned by third
parties. As the sole general partner of COPLP, COPT controls COPLP and can cause it to enter into major transactions including acquisitions,
dispositions and refinancings and cause changes in its line of business, capital structure and distribution policies.
There are a few differences between the Company and the Operating Partnership which are reflected in this Form 10-K. We believe it is
important to understand the differences between the Company and the Operating Partnership in the context of how the two operate as an
interrelated, consolidated company. COPT is a REIT whose only material asset is its ownership of partnership interests of COPLP. As a result,
COPT does not conduct business itself, other than acting as the sole general partner of COPLP, issuing public equity and guaranteeing certain
debt of COPLP. COPT itself is not directly obligated under any indebtedness but guarantees some of the debt of COPLP. COPLP owns
substantially all of the assets of COPT either directly or through its subsidiaries, conducts almost all of the operations of the business and is
structured as a limited partnership with no publicly traded equity. Except for net proceeds from public equity issuances by COPT, which are
contributed to COPLP in exchange for partnership units, COPLP generates the capital required by COPT’s business.
Noncontrolling interests, shareholders’ equity and partners’ capital are the main areas of difference between the consolidated financial
statements of COPT and those of COPLP. The common limited partnership interests in COPLP not owned by COPT are accounted for as
partners’ capital in COPLP’s consolidated financial statements and as noncontrolling interests in COPT’s consolidated financial statements. The
only other significant differences between the consolidated financial statements of COPT and those of COPLP are assets in connection with a
non-qualified elective deferred compensation plan and the corresponding liability to the plan’s participants that are held directly by COPT.
We believe combining the annual reports on Form 10-K of the Company and the Operating Partnership into this single report results in the
following benefits:
•
•
•
•
combined reports better reflect how management, investors and the analyst community view the business as a single operating unit;
combined reports enhance investors’ understanding of the Company and the Operating Partnership by enabling them to view the business
as a whole and in the same manner as management;
combined reports are more efficient for the Company and the Operating Partnership and result in savings in time, effort and expense; and
combined reports are more efficient for investors by reducing duplicative disclosure and providing a single document for their review.
To help investors understand the differences between the Company and the Operating Partnership, this report presents the following separate
sections for each of the Company and the Operating Partnership:
•
•
•
•
Note 3, Fair Value Measurements of COPT and subsidiaries and COPLP and subsidiaries;
Note 9, Prepaid Expenses and Other Assets, Net of COPT and subsidiaries and COPLP and subsidiaries;
Note 13, Equity of COPT and subsidiaries;
Note 14, Equity of COPLP and subsidiaries; and
Note 19, Earnings per Share of COPT and subsidiaries and Earnings per Unit of COPLP and subsidiaries;
consolidated financial statements;
the following notes to the consolidated financial statements:
•
•
•
•
•
“Item 7: Management’s Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources of
COPT”; and
“Item 7: Management’s Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources of
COPLP.”
This report also includes separate sections under Part II, Item 9A. Controls and Procedures and separate Exhibit 31 and Exhibit 32 certifications
for each of COPT and COPLP to establish that the Chief Executive Officer and the Chief Financial Officer of each entity have made the
requisite certifications and that COPT and COPLP are compliant with Rule 13a-15 and Rule 15d-14 of the Securities Exchange Act of 1934, as
amended (the “Exchange Act”), and 18 U.S.C. §1350.
TABLE OF CONTENTS
Form 10-K
PART I
ITEM 1.
BUSINESS
ITEM 1A. RISK FACTORS
ITEM 1B. UNRESOLVED STAFF COMMENTS
ITEM 2.
ITEM 3.
ITEM 4.
PART II
ITEM 5.
ITEM 6.
ITEM 7.
PROPERTIES
LEGAL PROCEEDINGS
MINE SAFETY DISCLOSURES
MARKET FOR REGISTRANTS’ COMMON EQUITY, RELATED STOCKHOLDER
MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
SELECTED FINANCIAL DATA
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
ITEM 8.
ITEM 9.
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
ITEM 9A. CONTROLS AND PROCEDURES
ITEM 9B. OTHER INFORMATION
PART III
ITEM 10.
ITEM 11.
ITEM 12.
ITEM 13.
ITEM 14.
PART IV
DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
EXECUTIVE COMPENSATION
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
AND RELATED STOCKHOLDER MATTERS
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDENCE
PRINCIPAL ACCOUNTANT FEES AND SERVICES
ITEM 15.
EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
ITEM 16.
FORM 10-K SUMMARY
SIGNATURES
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4
Forward-looking Statements
This Form 10-K contains “forward-looking” statements, as defined in the Private Securities Litigation Reform Act of 1995,
that are based on our current expectations, estimates and projections about future events and financial trends affecting the
financial condition and operations of our business. Additionally, documents we subsequently file with the SEC and
incorporated by reference will contain forward-looking statements.
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. We
caution readers that forward-looking statements reflect our opinion only as of the date on which they were made. You should
not place undue reliance on forward-looking statements. The following factors, among others, could cause actual results and
future events to differ materially from those set forth or contemplated in the forward-looking statements:
•
•
•
•
•
•
•
•
•
•
•
•
•
•
general economic and business conditions, which will, among other things, affect office property and data center demand
and rents, tenant creditworthiness, interest rates, financing availability and property values;
adverse changes in the real estate markets, including, among other things, increased competition with other companies;
risks and uncertainties regarding the impact of the COVID-19 pandemic, and similar pandemics, along with restrictive
measures instituted to prevent spread, on our business, the real estate industry and national, regional and local economic
conditions;
governmental actions and initiatives, including risks associated with the impact of a prolonged government shutdown or
budgetary reductions or impasses, such as a reduction in rental revenues, non-renewal of leases and/or reduced or delayed
demand for additional space by our strategic customers;
our ability to borrow on favorable terms;
risks of real estate acquisition and development activities, 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 our joint venture partners may not fulfill their
financial obligations as investors or may take actions that are inconsistent with our objectives;
changes in our plans for properties or views of market economic conditions or failure to obtain development rights, either
of which could result in recognition of significant impairment losses;
our ability to satisfy and operate effectively under Federal income tax rules relating to real estate investment trusts and
partnerships;
possible adverse changes in tax laws;
the dilutive effects of issuing additional common shares;
our ability to achieve projected results;
security breaches relating to cyber attacks, cyber intrusions or other factors; and
environmental requirements.
We undertake no obligation to publicly update or supplement forward-looking statements, whether as a result of new
information, future events or otherwise. For further information on these and other factors that could affect us and the
statements contained herein, you should refer to the section below entitled “Item 1A. Risk Factors.”
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Item 1. Business
OUR COMPANY
PART I
General. Corporate Office Properties Trust (“COPT”) and subsidiaries (collectively, the “Company”) is a fully-integrated
and self-managed real estate investment trust (“REIT”). Corporate Office Properties, L.P. (“COPLP”) and subsidiaries
(collectively, the “Operating Partnership”) is the entity through which COPT, the sole general partner of COPLP, conducts
almost all of its operations and owns almost all of its assets. Unless otherwise expressly stated or the context otherwise
requires, “we”, “us” and “our” as used herein refer to each of the Company and the Operating Partnership. 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 (“USG”) 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 (“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 (“Regional Office”). As of
December 31, 2020, our properties included the following:
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181 properties totaling 21.0 million square feet comprised of 16.2 million square feet in 155 office properties and 4.7
million square feet in 26 single-tenant data center shell properties (“data center shells”). We owned 17 of these data center
shells through unconsolidated real estate joint ventures;
a wholesale data center with a critical load of 19.25 megawatts;
11 properties under development (nine office properties and two data center shells), including three partially-operational
properties, that we estimate will total approximately 1.5 million square feet upon completion; and
approximately 830 acres of land controlled for future development that we believe could be developed into approximately
10.4 million square feet and 43 acres of other land.
COPLP owns real estate directly and through subsidiary partnerships and limited liability companies (“LLCs”). In addition to
owning real estate, COPLP also owns subsidiaries that provide real estate services such as property management, development
and construction services primarily for our properties but also for third parties. Some of these services are performed by a
taxable REIT subsidiary (“TRS”).
Equity interests in COPLP are in the form of common and preferred units. As of December 31, 2020, COPT owned 98.6%
of the outstanding COPLP common units (“common units”) and there were no preferred units outstanding. Common units not
owned by COPT carry certain redemption rights. The number of common units owned by COPT is equivalent to the number of
outstanding common shares of beneficial interest (“common shares”) of COPT, and the entitlement of common units to
quarterly distributions and payments in liquidation is substantially the same as that of COPT common shareholders.
COPT’s common shares are publicly traded on the New York Stock Exchange (“NYSE”) under the ticker symbol “OFC”.
Because COPLP is managed by COPT, and COPT conducts substantially all of its operations through COPLP, we refer to
COPT’s executive officers as COPLP’s executive officers; similarly, although COPLP does not have a board of trustees, we
refer to COPT’s Board of Trustees as COPLP’s Board of Trustees.
We believe that COPT is organized and has operated in a manner that satisfies the requirements for taxation as a REIT
under the Internal Revenue Code of 1986, as amended, and we intend to continue to operate COPT in such a manner. If COPT
continues to qualify for taxation as a REIT, it generally will not be subject to Federal income tax on its taxable income (other
than that of its TRS entities) that is distributed to its shareholders. A REIT is subject to a number of organizational and
operational requirements, including a requirement that it distribute at least 90% of its annual taxable income to its shareholders.
Our executive offices are located at 6711 Columbia Gateway Drive, Suite 300, Columbia, Maryland 21046 and our
telephone number is (443) 285-5400.
Our Internet address is www.copt.com. We make available on our Internet website free of charge our annual reports on
Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports filed or furnished
pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as soon as
reasonably possible after we file such material with the Securities and Exchange Commission (the “SEC”). In addition, we
have made available on our Internet website under the heading “Corporate Governance” the charters for our Board of Trustees’
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Audit, Nominating and Corporate Governance, Compensation and Investment Committees, as well as our Corporate
Governance Guidelines, Code of Business Conduct and Ethics and Code of Ethics for Financial Officers. We intend to make
available on our website any future amendments or waivers to our Code of Business Conduct and Ethics and Code of Ethics for
Financial Officers within four business days after any such amendments or waivers. The information on our Internet site is not
part of this report.
The SEC maintains an Internet website that contains reports, proxy and information statements and other information
regarding issuers that file electronically with the SEC. This Internet website can be accessed at www.sec.gov.
Business and Growth Strategies
Our primary goal is to create value and deliver attractive and competitive total returns to our shareholders. This section
sets forth key components of our business and growth strategies that we have in place to support this goal.
Defense/IT Locations Strategy: We specialize in serving the unique requirements of tenants in our Defense/IT Locations
properties. These properties are primarily occupied by the USG and contractor tenants engaged in what we believe are high
priority security, defense and IT missions. These tenants’ missions pertain more to knowledge- and technology-based activities
(i.e., cyber security, research and development and other highly technical defense and security areas) than to force structure
(i.e., troops) and weapon system mass production. Our office and data center shell portfolio is significantly concentrated in
Defense/IT Locations, which as of December 31, 2020 accounted for 171 of the portfolio’s 181 properties, representing 87.1%
of its annualized rental revenue, and we control developable land to accommodate future growth in this portfolio. These
properties generally have higher tenant renewal rates than is typical in commercial office space due in large part to: their
proximity to defense installations or other key demand drivers; the ability of many of these properties to meet Anti-Terrorism
Force Protection (“ATFP”) requirements; and significant investments often made by tenants for unique needs such as Secure
Compartmented Information Facility (“SCIF”), critical power supply and operational redundancy.
In recent years, data center shells have been a significant growth driver for our Defense/IT Locations. Data center shells
are properties leased to tenants to be operated as data centers in which we provide tenants with only the core building and basic
power, while the tenants fund the costs for the critical power, fiber connectivity and data center infrastructure. From 2013
through 2020, we placed into service 26 data center shells totaling 4.7 million square feet, and we had an additional two under
development totaling 420,000 square feet as of December 31, 2020. We enter into long-term leases for these properties prior to
commencing development, with triple-net structures and multiple extension options and rent escalators to provide future
growth. Additionally, our tenants’ funding of the costs to fully power and equip these properties significantly enhances the
value of these properties and creates high barriers to exit for such tenants.
We believe that our properties and team collectively complement our Defense/IT Locations strategy due to our:
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properties’ proximity to defense installations and other knowledge- and technology-based government demand drivers.
Such proximity is generally preferred and often required for our tenants to execute their missions. Specifically, our:
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office properties are proximate to such mission-critical facilities as Fort George G. Meade (which houses over 100
Department of Defense organizations and agencies, including ones engaged in signals intelligence, such as U.S. Cyber
Command and Defense Information Systems Agency) and Redstone Arsenal (one of the largest defense installations in
the United States, housing priority missions such as Army procurement, missile defense, space exploration, and
research and development, testing and engineering of advanced weapons systems); and
data center shells located in Northern Virginia, proximate to the MAE-East Corridor, which is a major Network Access
Point in the United States for interconnecting traffic between Internet service providers;
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well-established relationships with the USG and its contractors;
extensive experience in developing:
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high quality, highly-efficient office properties;
secured, specialized space, with the ability to satisfy the USG’s unique needs (including SCIF and ATFP
requirements); and
data center shells to customer specifications within very condensed timeframes to accommodate time-sensitive tenant
demand; and
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depth of knowledge, specialized skills and credentialed personnel in operating highly-specialized properties with unique
security-oriented requirements.
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Regional Office Strategy: While Defense/IT Locations are our primary focus, we also own a portfolio of office properties
located in select urban/urban-like submarkets in the Greater Washington, DC/Baltimore region due to our strong market
knowledge in that region. We believe that these submarkets possess the following favorable characteristics: (1) mixed-use,
lifestyle oriented locations with a robust residential and retail base; (2) proximity to public transportation and major
transportation routes; (3) an educated workforce; and (4) a diverse employment base. As of December 31, 2020, we owned
eight Regional Office properties, representing 12.5% of our office and data center shell portfolio’s annualized rental revenue.
These properties were comprised of: three high-rise Baltimore City properties proximate to the city’s waterfront; four Northern
Virginia properties proximate to existing or future Washington Metropolitan Area Metrorail stations and major interstates; and
a newly-developed property in Washington, D.C.’s central business district.
Asset Management Strategy: We aggressively manage our portfolio to maximize the value and operating performance of
each property through: (1) proactive property management and leasing; (2) maximizing tenant retention in order to minimize
space downtime and additional capital associated with space rollover; (3) increasing rental rates where market conditions
permit; (4) leasing vacant space; (5) achievement of operating efficiencies by increasing economies of scale and, where
possible, aggregating vendor contracts to achieve volume pricing discounts; and (6) redevelopment when we believe property
conditions and market demand warrant. We also continuously evaluate our portfolio and consider dispositions when properties
no longer meet our strategic objectives, or when capital markets and the circumstances pertaining to such holdings otherwise
warrant, in order to maximize our return on invested capital or support our property development and capital strategy.
We aim to sustainably develop and operate our portfolio to create healthier work environments and reduce consumption of
resources by: (1) developing new buildings designed to use resources with a high level of efficiency and low impact on human
health and the environment during their life cycles through our participation in the U.S. Green Building Council’s Leadership in
Energy and Environmental Design (“LEED”) program; (2) investing in energy systems and other equipment that reduce energy
consumption and operating costs; (3) adopting select LEED for Building Operations and Maintenance (“LEED O+M: Existing
Buildings”) prerequisites for much of our portfolio, including guidelines pertaining to cleaning and recycling practices and
energy reduction; and (4) participating in the annual Global Real Estate Sustainability Benchmark (“GRESB”) survey, which is
widely recognized for measuring the environmental, social and governance (“ESG”) performance of real estate companies and
funds. We earned an overall score of “Green Star” on the GRESB survey in each of the last six years, representing the highest
quadrant of achievement on the survey.
Property Development and Acquisition Strategy: We expand our operating portfolio primarily through property
developments in support of our Defense/IT Locations strategy, and we have significant land holdings that we believe can
further support that growth while serving as a barrier against competitive supply. We pursue development activities as market
conditions and leasing opportunities support favorable risk-adjusted returns on investment, and therefore typically prefer
properties to be significantly leased prior to commencing development. To a lesser extent, we may also pursue growth through
acquisitions, seeking to execute such transactions at attractive yields and below replacement cost.
Capital Strategy: Our capital strategy is aimed at maintaining continuous access to capital irrespective of market conditions
in the most cost-effective manner by:
• maintaining an investment grade rating to enable us to use debt comprised of unsecured, primarily fixed-rate debt
(including the effect of interest rate swaps) from public markets and banks;
using secured nonrecourse debt from institutional lenders and banks;
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• managing our debt by monitoring, among other things: (1) the relationship of certain measures of earnings to our debt level
and to certain capital costs; (2) the timing of debt maturities to ensure that maturities in any one year do not exceed levels
that we believe we can refinance; (3) our exposure to changes in interest rates; and (4) our total and secured debt levels
relative to our overall capital structure;
raising equity through issuances of common shares in COPT and common units in COPLP, joint venture structures for
certain investments and, to a lesser extent, issuances of preferred shares in COPT and preferred units in COPLP;
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• monitoring capacity available under revolving credit facilities and equity offering programs to provide liquidity to fund
investment activities;
paying dividends at a level that is at least sufficient for us to maintain our REIT status;
recycling proceeds from sales of interests in properties to fund our investment activities and/or reduce overall debt; and
continuously evaluating the ability of our capital resources to accommodate our plans for growth.
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Industry Segments
As of December 31, 2020, our operations included the following reportable segments: Defense/IT Locations; Regional
Office; Wholesale Data Center; and Other. Our Defense/IT Locations segment included the following sub-segments:
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Fort George G. Meade and the Baltimore/Washington Corridor (referred to herein as “Fort Meade/BW Corridor”);
Northern Virginia Defense/IT Locations;
Lackland Air Force Base in San Antonio, Texas;
locations serving the U.S. Navy (referred to herein as “Navy Support Locations”). Properties in this sub-segment as of
December 31, 2020 were proximate to the Washington Navy Yard in Washington, D.C., the Naval Air Station Patuxent
River in Maryland and the Naval Surface Warfare Center Dahlgren Division in Virginia;
Redstone Arsenal in Huntsville, Alabama; and
data center shells in Northern Virginia (including 17 owned through unconsolidated real estate joint ventures).
As of December 31, 2020, Defense/IT Locations comprised 171 of our office and data center shell portfolio’s properties,
representing 89.4% of its square feet in operations, while Regional Office comprised eight of the portfolio’s properties, or 9.9%
of its square feet in operations. Our Wholesale Data Center segment is comprised of one property in Manassas, Virginia.
For information relating to our segments, refer to Note 17 to our consolidated financial statements, which is included in a
separate section at the end of this Annual Report on Form 10-K beginning on page F-1.
Human Capital
Our Workforce: As of December 31, 2020, our workforce was comprised of 406 employees based in Maryland, where we
are headquartered, Texas, Virginia, Alabama and Washington, D.C. Our workforce has varying expertise, and includes:
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Building Technicians (175 employees): Skilled trades professionals, who perform mechanical maintenance, maintain our
operating systems and service our buildings overall.
Operations Management (70 employees): Property managers and support staff who support our tenant customer needs.
Asset Management and Leasing (11 employees): Customer-facing leaders who drive the financial performance of our
assets.
Development and Construction (30 employees): Project managers and support staff who drive our development pipeline
and interior design.
Finance and Accounting (65 employees): Professionals who manage our financial activities.
Company Support Functions (42 employees): Includes Human Resources, Investor Relations, Investments, Legal,
Marketing, Information Technology, Facility Security and Corporate Administrative Support.
Senior Leadership (13 employees): Our business line and Company leaders, including our Named Executive Officers, who
interface with our Board of Trustees and shareholders and manage our business strategy, functional activities, risk and
overall success.
In support of our Defense/IT Locations strategy, approximately one-third of our employees carry government credentials.
We operate in markets in which we compete for human capital. We rely on our employees to drive our success and we
support them with a variety of programs to enhance their workplace engagement and job fulfillment.
Culture and Workforce Engagement: We develop and reinforce our culture by emphasizing our core values, illustrated by
the actiiVe acronym. actiiVe stands for: Accountability, Commitment, Teamwork, Integrity, Innovation, Value Creation and
Excellence. These values are intended to serve as a compass to our workforce to inform behavior and fuel our success.
We believe in equal opportunity, engagement and ethics. All employees must adhere to our Code of Business Conduct.
We survey our workforce annually to measure engagement, use the feedback to enhance engagement and believe that this has
helped us achieve annual “best workplace” honors for over a decade.
Compensation Program: Our compensation philosophy is driven by accountability, which results in a pay-for-performance
structure. Our compensation program includes: base salary; an annual cash bonus program based on the achievement of
individual, business unit and company objectives; health and welfare benefits; a retirement savings plan with a company match;
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financially supported learning programs; and employee recognition programs. We also grant common equity to all new full-
time employees and provide our senior leadership and high performers with the ability to earn additional grants to align their
interests with those of our shareholders and to incent retention.
Wellbeing and Safety: We view wellbeing as including five pillars: Physical, Emotional, Career, Financial and
Community. We design programs to support each of these pillars. We directly incent wellbeing behaviors through a points-
driven program each year. Employees who achieve the points threshold receive reductions in medical premiums or funds
towards their health savings accounts. We believe this program enhances employee wellbeing and reduces medical costs.
Safety is a key part of our employee wellbeing, largely weighted in the Physical pillar. Recognizing this, we conduct job-
tailored safety training on an ongoing basis. We also monitor our workers’ compensation claims to measure the effectiveness
of our safety program.
With wellbeing and safety in mind, during the COVID-19 pandemic in 2020, we:
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consulted with medical experts in developing an approach to safely operate our properties and workplaces;
required our on-site property operations staff to use COPT-provided personal protective equipment, such as masks, gloves
and hand sanitizer, and implement other procedural changes to enhance separation and minimize spread;
instituted enhanced cleaning measures, particularly for high touch areas and flat surfaces;
provided signage promoting proper social distancing practices and hand sanitizer stations for property common areas; and
had most of our employees (other than on-site property operations staff) work from home from mid-March until the end of
May, when most began reporting to their normal work locations on a bi-weekly rotational basis.
Talent Development: We aim to attract, retain and develop our top talent throughout the employment cycle in order to
enhance our talent pool. During 2020, our workforce grew to support the business’ overall growth and we hired 39 employees.
In 2020, 27 employees departed the Company, resulting in a 6.75% attrition rate.
We offer robust learning programs to all employees, including educational assistance for college-level and vocational
degree programs, and cover all expenses for licenses and certifications, management and leadership courses, key skills training
and industry and professional conferences. Further, we offer internship and mentorship programs to facilitate teaching and
learning from others.
Community Engagement: We encourage employee engagement with our communities to facilitate personal growth and
connection and to enhance our citizenship within our communities. We provide a platform for employees to engage with
communities by contributing time, effort, money and expertise, which includes providing employees eight hours of paid time
per year to engage in volunteer activities to serve our community directly, in a company-organized, team or individual format.
Our employees select community non-profits for Corporate giving grants and for volunteer time contributions. We empower
our employees to become involved and fuel our success in community partnerships.
Competition
The commercial real estate market is highly competitive. Numerous commercial landlords compete with us for tenants.
Some of the properties competing with ours may be newer or in more desirable locations, or the competing properties’ owners
may be willing to accept lower rents. We also compete with our own tenants, many of whom have the right to sublease their
space. The competitive environment for leasing is affected considerably by a number of factors including, among other things,
changes in economic conditions and supply of and demand for space. These factors may make it difficult for us to lease
existing vacant space and space associated with future lease expirations at rental rates that are sufficient to produce acceptable
operating cash flows.
We occasionally compete for the acquisition of land and commercial properties with many entities, including other
publicly-traded commercial REITs. Competitors for such acquisitions may have substantially greater financial resources than
ours. In addition, our competitors may be willing to accept lower returns on their investments or may be willing to incur higher
leverage.
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We also compete with many entities, including other publicly-traded commercial office REITs, for capital. This
competition could adversely affect our ability to raise capital we may need to fulfill our capital strategy.
In addition, we compete with many entities for talent. If there is an increase in the costs for us to retain employees or if we
otherwise fail to attract and retain such employees, our business and operating results could be adversely effected.
Item 1A. Risk Factors
Set forth below are risks and uncertainties relating to our business and the ownership of our securities. These risks and
uncertainties may lead to outcomes that could adversely affect our financial position, results of operations, cash flows and
ability to make expected distributions to our equityholders. You should carefully consider each of these risks and uncertainties,
along with all of the information in this Annual Report on Form 10-K and its Exhibits, including our consolidated financial
statements and notes thereto for the year ended December 31, 2020 included in a separate section at the end of this report
beginning on page F-1.
Risks Associated with the Real Estate Industry and Our Properties
Our performance and asset value are subject to risks associated with our properties and with the real estate
industry. Real estate investments are subject to various risks and fluctuations in value and demand, many of which are beyond
our control. Our performance and the value of our real estate assets may decline due to conditions in the general economy and
the real estate industry which, in turn, could have an adverse effect on our financial position, results of operations, cash flows
and ability to make expected distributions to our shareholders. These conditions include, but are not limited to:
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downturns in national, regional and local economic environments, including increases in the unemployment rate and
inflation or deflation;
competition from other properties;
trends in office real estate that may adversely affect future demand, including telecommuting and flexible workplaces;
deteriorating local real estate market conditions, such as oversupply, reduction in demand and decreasing rental rates;
declining real estate valuations;
adverse developments concerning our tenants, which could affect our ability to collect rents and execute lease renewals;
adverse changes resulting from the COVID-19 pandemic, and similar pandemics, along with restrictive measures instituted
to prevent spread, on our business, the real estate industry and national, regional and local economic conditions;
government actions and initiatives, including risks associated with the impact of prolonged government shutdowns and
budgetary reductions or impasses, such as a reduction of rental revenues, non-renewal of leases and/or reduced or delayed
demand for additional space by our strategic customers;
increasing operating costs, including insurance, utilities, real estate taxes and other expenses, some of which we may not be
able to pass through to tenants;
increasing vacancies and the need to periodically repair, renovate and re-lease space;
increasing interest rates and unavailability of financing on acceptable terms or at all;
unavailability of financing for potential purchasers of our properties;
adverse changes in taxation or zoning laws;
potential inability to secure adequate insurance;
adverse consequences resulting from civil disturbances, natural disasters, terrorist acts or acts of war; and
potential liability under environmental or other laws or regulations.
Our business may be affected by adverse economic conditions. Our business may be affected by adverse economic
conditions in the United States economy or real estate industry as a whole or by the local economic conditions in the markets in
which our properties are located, including the impact of high unemployment and constrained credit. Adverse economic
conditions could increase the likelihood of tenants encountering financial difficulties, including bankruptcy, insolvency or
general downturn of business, and as a result could increase the likelihood of tenants defaulting on their lease obligations to us.
Such conditions could also decrease our likelihood of successfully renewing tenants at favorable terms or leasing vacant space
in existing properties or newly-developed properties. In addition, such conditions could increase the level of risk that we may
not be able to obtain new financing for development activities, refinancing of existing debt, acquisitions or other capital
requirements at reasonable terms, if at all.
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We may suffer adverse consequences as a result of our reliance on rental revenues for our income. We earn revenue
from renting our properties. Certain of our operating costs do not necessarily fluctuate in relation to changes in our rental
revenue. This means that these costs will not necessarily decline and may increase even if our revenues decline.
For new tenants or upon expiration of existing leases, we generally must make improvements and pay other leasing costs
for which we may not receive increased rents. We also make building-related capital improvements for which tenants may not
reimburse us.
If our properties do not generate revenue sufficient to meet our operating expenses and capital costs, we may need to
borrow additional amounts to cover these costs. In such circumstances, we would likely have lower profits or possibly incur
losses. We may also find in such circumstances that we are unable to borrow to cover such costs, in which case our operations
could be adversely affected.
In addition, the competitive environment for leasing is affected considerably by a number of factors including, among other
things, changes due to economic factors such as supply and demand. These factors may make it difficult for us to lease existing
vacant space and space associated with future lease expirations at rental rates that are sufficient to meet our short-term capital
needs.
We rely on the ability of our tenants to pay rent and would be harmed by their inability to do so. Our performance
depends on the ability of our tenants to fulfill their lease obligations by paying their rental payments in a timely manner. As a
result, we would be harmed if one or more of our major tenants, or a number of our smaller tenants, were to experience
financial difficulties, including bankruptcy, insolvency, prolonged government shutdown or general downturn of business.
We may be adversely affected by developments concerning our major tenants or the USG and its contractors,
including prolonged shutdowns of the government and actual, or potential, reductions in government spending targeting
knowledge- and technology-based activities. As of December 31, 2020, our 10 largest tenants accounted for 62.7% of our
total annualized rental revenue, the three largest of these tenants accounted for 48.8%, and the USG, our largest tenant,
accounted for 34.1%. We calculate annualized rental revenue by multiplying by 12 the sum of monthly contractual base rents
and estimated monthly expense reimbursements under active leases in our portfolio as of December 31, 2020; with regard to
properties owned through unconsolidated real estate joint ventures, we include the portion of annualized rental revenue
allocable to our ownership interest. For additional information regarding our tenant concentrations, refer to the section entitled
“Concentration of Operations” within the section entitled “Management’s Discussion and Analysis of Financial Condition and
Results of Operations.”
Most of our leases with the USG provide for a series of one-year terms. The USG may terminate its leases if, among other
reasons, the United States Congress fails to provide funding. We would be harmed if any of our largest tenants fail to make
rental payments to us over an extended period of time, including as a result of a prolonged government shutdown, or if the USG
elects to terminate some or all of its leases and the space cannot be re-leased on satisfactory terms.
As of December 31, 2020, 87.1% of our office and data center shell properties’ total annualized rental revenue was from
Defense/IT Locations, and we expect to maintain a similarly high revenue concentration from properties in these locations. A
reduction in government spending targeting the activities of the government and its contractors (such as knowledge- and
technology-based defense and security activities) in these locations could adversely affect our tenants’ ability to fulfill lease
obligations, renew leases or enter into new leases and limit our future growth from properties in these locations. Moreover,
uncertainty regarding the potential for future reduction in government spending targeting such activities could also decrease or
delay leasing activity from tenants engaged in these activities.
Our future ability to fuel growth and raise capital through data center shell development may be adversely affected
should we suffer a loss of future development opportunities with our data center shell customer. Data center shells have
been a significant growth driver for us in recent years, enabling us to develop and place into service fully-occupied, single-
tenant properties, with long-term leases and rent escalators for future growth. These properties have garnered the interest of
outside investors, enabling us to raise capital by selling ownership interests through joint venture structures in recent years at
favorable profit margins, and to apply the proceeds towards other development opportunities. Our data center shell activity is
concentrated with one customer. If that customer no longer chooses to allocate development opportunities to us, we may have
limited opportunities to continue to use data center shells as a growth driver and possible source of future capital.
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We may suffer economic harm in the event of a decline in the real estate market or general economic conditions in
the Mid-Atlantic region, particularly in the Greater Washington, DC/Baltimore region, or in particular business parks.
Most of our properties are located in the Mid-Atlantic region of the United States, particularly in the Greater Washington, DC/
Baltimore region. Our properties are also often concentrated in business parks in which we own most of the properties.
Consequently, our portfolio of properties is not broadly distributed geographically. As a result, we would be harmed by a
decline in the real estate market or general economic conditions in the Mid-Atlantic region, the Greater Washington, DC/
Baltimore region or the business parks in which our properties are located.
We would suffer economic harm if we were unable to renew our leases on favorable terms. When leases expire, our
tenants may not renew or may renew on terms less favorable to us than the terms of their original leases. If a tenant vacates a
property, we can expect to experience a vacancy for some period of time, as well as incur higher leasing costs than we would
likely incur if a tenant renews. As a result, we may be harmed if we experience a high volume of tenant departures at the end of
their lease terms.
We may be adversely affected by trends in the office real estate industry. Businesses are increasingly permitting
employee telecommuting, flexible work schedules, open workplaces and teleconferencing. There has also been a trend of
businesses utilizing shared office and co-working spaces. These practices enable businesses to reduce their space requirements.
These trends, some of which could potentially accelerate as a result of changes in work practices during the COVID-19
pandemic, could over time erode the overall demand for office space and, in turn, place downward pressure on occupancy,
rental rates and property valuations.
We may encounter a significant decline in the value of our real estate. The value of our real estate could be adversely
affected by general economic and market conditions connected to a specific property, a market or submarket, a broader
economic region or the office real estate industry. Examples of such conditions include a broader economic recession,
declining demand and decreases in market rental rates and/or market values of real estate assets. If our real estate assets
significantly decline in value, it could result in our recognition of impairment losses. Moreover, a decline in the value of our
real estate could adversely affect the amount of borrowings available to us under future credit facilities and other loans.
We may not be able to compete successfully with other entities that operate in our industry. The commercial real
estate market is highly competitive. Numerous commercial properties compete with our properties for tenants; some of the
properties competing with ours may be newer or in more desirable locations, or the competing properties’ owners may be
willing to accept lower rates than are acceptable to us. In addition, we compete for the acquisition of land and commercial
properties with many entities, including other publicly traded commercial office REITs; competitors for such acquisitions may
have substantially greater financial resources than ours, or may be willing to accept lower returns on their investments or incur
higher leverage.
Real estate investments are illiquid, and we may not be able to dispose of properties on a timely basis when we
determine it is appropriate to do so. Real estate investments can be difficult to sell and convert to cash quickly, especially if
market conditions, including real estate lending conditions, are not favorable. Such illiquidity could limit our ability to fund
capital needs or quickly change our portfolio of properties in response to changes in economic or other conditions. Moreover,
under certain circumstances, the Internal Revenue Code imposes penalties on a REIT that sells property held for less than two
years and limits the number of properties it can sell in a given year.
We may be unable to execute our plans to develop additional properties. Although the majority of our investments are
in operating properties, we also develop and redevelop properties, including some that are not fully pre-leased. When we
develop and redevelop properties, we assume the risk of actual costs exceeding our budgets, conditions occurring that delay or
preclude project completion and projected leasing not occurring. In addition, we may find that we are unable to successfully
execute plans to obtain financing to fund property development activities.
We may suffer adverse effects from acquisitions of commercial real estate properties. We may pursue acquisitions of
existing commercial real estate properties as part of our property development and acquisition strategy. Acquisitions of
commercial properties entail risks, such as the risk that we may not be in a position, or have the opportunity in the future, to
make suitable property acquisitions on advantageous terms and/or that such acquisitions fail to perform as expected.
We may pursue selective acquisitions of properties in regions where we have not previously owned properties. These
acquisitions may entail risks in addition to those we face with acquisitions in more familiar regions, such as our not sufficiently
anticipating conditions or trends in a new market and therefore not being able to operate the acquired property profitably.
13
In addition, we may acquire properties that are subject to liabilities in situations where we have no recourse, or only limited
recourse, against the prior owners or other third parties with respect to unknown liabilities. As a result, if a liability were
asserted against us based upon ownership of those properties, we might have to pay substantial sums to settle or contest it.
Examples of unknown liabilities with respect to acquired properties include, but are not limited to:
•
•
•
•
liabilities for remediation of disclosed or undisclosed environmental contamination;
claims by tenants, vendors or other persons dealing with the former owners of the properties;
liabilities incurred in the ordinary course of business; and
claims for indemnification by general partners, directors, officers and others indemnified by the former owners of the
properties.
Our wholesale data center may become obsolete. Wholesale data centers are much more expensive investments on a per
square foot basis than office properties due to the level of infrastructure required to operate the centers. At the same time,
technology, industry standards and service requirements for wholesale data centers are rapidly evolving and, as a result, the risk
of investments we make in our wholesale data center becoming obsolete is higher than other commercial real estate properties.
Our wholesale data center may become obsolete due to the development of new systems to deliver power to, or eliminate heat
from, the servers housed in the properties, or due to other technological advances. In addition, we may not be able to efficiently
upgrade or change power and cooling systems to meet new demands or industry standards without incurring significant costs
that we may not be able to pass on to our tenants.
Data center space in certain of our office properties may be difficult to reposition for alternative uses. Certain of our
office properties contain data center space, which is highly specialized space containing extensive electrical and mechanical
systems that are uniquely designed to run and maintain banks of computer servers. Data centers are subject to obsolescence
risks. In the event that we needed to reposition such space for another use, the renovations required to do so could be difficult
and costly, and we may, as a result, deem such renovations to be impractical.
We may be subject to possible environmental liabilities. We are subject to various Federal, state and local
environmental laws, including air and water quality, hazardous or toxic substances and health and safety. These laws can
impose liability on current and prior property owners or operators for the costs of removal or remediation of hazardous
substances released on a property, even if the property owner was not responsible for, or even aware of, the release of the
hazardous substances. Costs resulting from environmental liability could be substantial. The presence of hazardous substances
on our properties may also adversely affect occupancy and our ability to sell or borrow against those properties. In addition to
the costs of government claims under environmental laws, private plaintiffs may bring claims for personal injury or other
reasons. Additionally, various laws impose liability for the costs of removal or remediation of hazardous substances at the
disposal or treatment facility. Anyone who arranges for the disposal or treatment of hazardous substances at such a facility is
potentially liable under such laws.
Although most of our properties have been subject to varying degrees of environmental assessment, many of these
assessments are limited in scope and may not include or identify all potential environmental liabilities or risks associated with
the property. Identification of new compliance concerns or undiscovered areas of contamination, changes in the extent or
known scope of contamination, discovery of additional sites, human exposure to the contamination or changes in cleanup or
compliance requirements could result in significant costs to us.
We may be adversely affected by natural disasters and the effects of climate change. Natural disasters, including
earthquakes and severe storms could adversely impact our properties. The potential consequences of climate change could also
adversely impact our properties, particularly those located in Baltimore City near the waterfront, and, over time, could
adversely affect demand for space and our ability to operate the properties effectively and result in additional operating costs.
Terrorist attacks or incidents related to social unrest may adversely affect the value of our properties, our financial
position and cash flows. We have significant investments in properties located in large metropolitan areas or near military
installations. Future terrorist attacks or incidents related to social unrest could directly or indirectly damage our properties or
cause losses that materially exceed our insurance coverage. After such an attack or incident, tenants in these areas may choose
to relocate their businesses to areas of the United States that may be perceived to be less likely targets of future terrorist activity
or unrest, and fewer customers may choose to patronize businesses in these areas. This in turn would trigger a decrease in the
demand for space in these areas, which could increase vacancies in our properties and force us to lease space on less favorable
terms.
14
We may be subject to other possible liabilities that would adversely affect our financial position and cash flows. Our
properties may be subject to other risks related to current or future laws, including laws relating to zoning, development, fire
and life safety requirements and other matters. These laws may require significant property modifications in the future and
could result in the levy of fines against us. In addition, although we believe that we adequately insure our properties, we are
subject to the risk that our insurance may not cover all of the costs to restore a property that is damaged by a fire or other
catastrophic events, including acts of war or, as mentioned above, terrorism.
We may be subject to increased costs of insurance and limitations on coverage. Our portfolio of properties is insured
for losses under our property, casualty and umbrella insurance policies. These policies include coverage for acts of terrorism.
Future changes in the insurance industry’s risk assessment approach and pricing structure may increase the cost of insuring our
properties and decrease the scope of insurance coverage. Most of our loan agreements contain customary covenants requiring
us to maintain insurance. Although we believe that we have adequate insurance coverage for purposes of these agreements, we
may not be able to obtain an equivalent amount of coverage at reasonable costs, or at all, in the future. In addition, if lenders
insist on greater coverage than we are able to obtain, it could adversely affect our ability to finance and/or refinance our
properties and execute our growth strategies.
We may suffer economic harm as a result of the actions of our partners in real estate joint ventures and other
investments. We may invest in certain entities in which we are not the exclusive investor or principal decision maker.
Investments in such entities may, under certain circumstances, involve risks not present when a third party is not involved,
including the possibility that the other parties to these investments might become bankrupt or fail to fund their share of required
capital contributions. Our partners in these entities may have economic, tax or other business interests or goals that are
inconsistent with our business interests or goals, and may be in a position to take actions contrary to our policies or objectives.
Such investments may also lead to impasses on major decisions, such as whether or not to sell a property, because neither we
nor the other parties to these investments may have full control over the entity. In addition, we may in certain circumstances be
liable for the actions of the other parties to these investments.
Our business could be adversely affected by a negative audit by the USG. Agencies of the USG, including the
Defense Contract Audit Agency and various agency Inspectors General, routinely audit and investigate government contractors.
These agencies review a contractor’s performance under its contracts, cost structure and compliance with applicable laws,
regulations and standards. The USG also reviews the adequacy of, and a contractor’s compliance with, its internal control
systems and policies. Any costs found to be misclassified may be subject to repayment. If an audit or investigation uncovers
improper or illegal activities, we may be subject to civil or criminal penalties and administrative sanctions, including
termination of contracts, forfeiture of profits, suspension of payments, fines and suspension or prohibition from doing business
with the USG. In addition, we could suffer serious reputational harm if allegations of impropriety were made against us.
Risks Associated with Financing and Other Capital-Related Matters
We are dependent on external sources of capital for growth. Because COPT is a REIT, it must distribute at least 90%
of its annual taxable income to its shareholders. Due to this requirement, we are not able to significantly fund our investment
activities using retained cash flow from operations. Therefore, our ability to fund these activities is dependent on our ability to
access debt or equity capital. Such capital could be in the form of new debt, common shares, preferred shares, common and
preferred units in COPLP, joint venture funding or sales of interests in properties. These capital sources may not be available
on favorable terms or at all. Moreover, additional debt financing may substantially increase our leverage and subject us to
covenants that restrict management’s flexibility in directing our operations. Our inability to obtain capital when needed could
have a material adverse effect on our ability to expand our business and fund other cash requirements.
We often use our Revolving Credit Facility to initially finance much of our investing activities and certain financing
activities. Our lenders under this and other facilities could, for financial hardship or other reasons, fail to honor their
commitments to fund our requests for borrowings under these facilities. If lenders default under these facilities by not being
able or willing to fund a borrowing request, it would adversely affect our ability to access borrowing capacity under these
facilities.
We may suffer adverse effects as a result of the indebtedness that we carry and the terms and covenants that relate
to this debt. Payments of principal and interest on our debt may leave us with insufficient cash to operate our properties or pay
15
distributions to COPT’s shareholders required to maintain COPT’s qualification as a REIT. We are also subject to the risks
that:
•
•
•
we may not be able to refinance our existing indebtedness, or may only be able to do so on terms that are less favorable to
us than the terms of our existing indebtedness;
in the event of our default under the terms of our Revolving Credit Facility, COPLP could be restricted from making cash
distributions to COPT unless such distributions are required to maintain COPT’s qualification as a REIT, which could
result in reduced distributions to our equityholders or the need for us to incur additional debt to fund such distributions; and
if we are unable to pay our debt service on time or are unable to comply with restrictive financial covenants for certain of
our debt, our lenders could foreclose on our properties securing such debt and, in some cases, other properties and assets
that we own.
Most of our unsecured debt is cross-defaulted, which means that failure to pay interest or principal on the debt above a
threshold value will create a default on certain of our other debt.
If interest rates were to rise, our debt service payments on debt with variable interest rates would increase.
As of December 31, 2020, we had $2.1 billion in debt, the future maturities of which are set forth in Note 10 to our
consolidated financial statements. Our operations likely will not generate enough cash flow to repay all of this debt without
additional borrowings, equity issuances and/or property sales. If we cannot refinance, extend the repayment date of, or
otherwise raise funds required to repay, our debt by its maturity date, we would default on such debt.
Our organizational documents do not limit the amount of indebtedness that we may incur. Therefore, we may incur
additional indebtedness and become more highly leveraged, which could harm our financial position.
We may suffer adverse effects from changes in the method of determining LIBOR or the replacement of LIBOR
with an alternative interest rate. Our variable-rate debt and interest rate swaps use as a reference rate the London Interbank
Offered Rate (“LIBOR”), as calculated for the U.S. dollar (“USD-LIBOR”). In July 2017, the Financial Conduct Authority
(“FCA”) that regulates LIBOR announced it intends to stop compelling banks to submit rates for the calculation of LIBOR after
2021. As a result, the Federal Reserve Board and the Federal Reserve Bank of New York organized the Alternative Reference
Rates Committee (“ARRC”), which identified the Secured Overnight Financing Rate (“SOFR”) as its preferred alternative rate
for USD LIBOR in derivatives and other financial contracts. While we have been closely monitoring developments in the
LIBOR transition, we are not able to predict whether LIBOR will actually cease to be available after 2021 or whether SOFR
will become the market benchmark in its place. Any changes announced or adopted by the FCA or other governing bodies in
the method used for determining LIBOR rates may result in a sudden or prolonged increase or decrease in reported LIBOR
rates. If that were to occur, the level of interest payments we incur may change. In addition, although our variable rate debt
and interest rate swaps will likely provide for alternative methods of calculating the interest rate if LIBOR is not reported,
uncertainty as to the extent and manner of future changes may result in interest rates and/or payments that are higher or lower
than if the LIBOR rate were to remain available in its current form.
A downgrade in our credit ratings would materially adversely affect our business and financial condition. COPLP’s
Senior Notes are currently rated investment grade by the three major rating agencies. These credit ratings are subject to
ongoing evaluation by the credit rating agencies and can change. Any downgrades of our ratings or a negative outlook by the
credit rating agencies would have a materially adverse impact on our cost and availability of capital and also could have a
materially adverse effect on the market price of COPT’s common shares. In addition, since the variable interest rate spread and
facility fees on certain of our debt, including our Revolving Credit Facility and a term loan facility, is determined based on our
credit ratings, a downgrade in our credit ratings would increase the payments required on such debt.
We have certain distribution requirements that reduce cash available for other business purposes. Since COPT is a
REIT, it must distribute at least 90% of its annual taxable income, which limits the amount of cash that can be retained for other
business purposes, including amounts to fund development activities and acquisitions. Also, due to the difference in time
between when we receive revenue or pay expenses and when we report such items for distribution purposes, it is possible that
we may need to borrow funds for COPT to meet the 90% distribution requirement.
We may issue additional common or preferred shares/units that dilute our equityholders’ interests. We may issue
additional common and preferred shares/units without shareholder approval. Similarly, COPT may cause COPLP to issue its
16
common or preferred units for contributions of cash or property without approval by the limited partners of COPLP or COPT’s
shareholders. Our existing equityholders’ interests could be diluted if such additional issuances were to occur.
A number of factors could cause our security prices to decline. As is the case with any publicly-traded securities,
certain factors outside of our control could influence the value of our equity security issuances. These conditions include, but
are not limited to:
• market perception of REITs in general and office REITs in particular;
• market perception regarding our major tenants and sector concentrations;
•
•
•
•
•
• market perception of our financial condition, performance, dividends and growth potential; and
•
the level of institutional investor interest in COPT;
general economic and business conditions;
prevailing interest rates;
our financial performance;
our underlying asset value;
adverse changes in tax laws.
We may be unable to continue to make distributions to our equityholders at expected levels. We expect to make
regular quarterly cash distributions to our equityholders. However, our ability to make such distributions depends on a number
of factors, some of which are beyond our control. Some of our loan agreements contain provisions that could, in the event of
default, restrict future distributions unless we meet certain financial tests or such payments or distributions are required to
maintain COPT’s qualification as a REIT. Our ability to make distributions at expected levels is also dependent, in part, on
other matters, including, but not limited to:
•
•
•
•
•
•
•
•
•
•
continued property occupancy and timely receipt of rent from our tenants;
the amount of future capital expenditures and expenses relating to our properties;
our leasing activity and future rental rates;
the strength of the commercial real estate market;
our ability to compete;
governmental actions and initiatives, including risks associated with the impact of a prolonged government shutdown or
budgetary reductions or impasses;
our costs of compliance with environmental and other laws;
our corporate overhead levels;
our amount of uninsured losses; and
our decision to reinvest in operations rather than distribute available cash.
In addition, we can make distributions to the holders of our common shares/units only after we make preferential distributions
to holders of any outstanding preferred shares/units.
Our ability to pay distributions may be limited, and we cannot provide assurance that we will be able to pay
distributions regularly. Our ability to pay distributions will depend on a number of things discussed elsewhere herein,
including our ability to operate profitably and generate cash flow from our operations. We cannot guarantee that we will be
able to pay distributions on a regular quarterly basis in the future. Additionally, the terms of some of COPLP’s debt may limit
its ability to make some types of payments and other distributions to COPT in the event of certain default situations. This in
turn may limit our ability to make some types of payments, including payment of distributions on common or preferred shares/
units, unless we meet certain financial tests or such payments or distributions are required to maintain COPT’s qualification as a
REIT. As a result, if we are unable to meet the applicable financial tests, we may not be able to pay distributions in one or more
periods. Furthermore, any new common or preferred shares/units that may be issued in the future for raising capital, financing
acquisitions, share-based compensation arrangements or otherwise will increase the cash required to continue to pay cash
distributions at current levels.
We may experience significant losses and harm to our financial condition if financial institutions holding our cash
and cash equivalents file for bankruptcy protection. We believe that we maintain our cash and cash equivalents with high
quality financial institutions. We have not experienced any losses to date on our deposited cash. However, we may incur
significant losses and harm to our financial condition in the future if we were holding large sums of cash in any of these
financial institutions at a time when they filed for bankruptcy protection.
17
Risks Associated with COVID-19
We may suffer further adverse effects from the COVID-19 pandemic, and similar pandemics, along with restrictive
measures instituted to prevent spread. Since first being declared a pandemic by the World Health Organization in early
March 2020, the coronavirus, or COVID-19, has spread worldwide. In an effort to control its spread, governments and other
authorities imposed restrictive measures affecting freedom of movement and business operations, such as shelter-in-place
orders and business closures. Strong restrictive measures were put into place in much of the United States beginning in March
2020, bringing many businesses to a halt while forcing others to change the way in which they conduct their operations, with
much of the workforce working from their homes to the extent they were able. States and local governments began easing these
measures to varying extents in late April 2020, with some lifting restrictive measures entirely, while others chose a more
gradual, extended easing approach. While the easing of these measures enabled many businesses to gradually resume normal
operations, most businesses continue to be hindered to varying extents by either measures still in effect, operational challenges
resulting from social distancing requirements/expectations and/or a reluctance by much of the population to engage in certain
activities while the pandemic is still active. As of the date of this filing, COVID-19 spread continues world- and nation-wide,
and is expected to continue until vaccinations have been administered to much of the population, which is not expected to occur
in the United States until at least mid- to late 2021. As a result, there continues to be significant uncertainty regarding the
duration and extent of this pandemic. The outbreak significantly disrupted financial and economic markets worldwide, as well
as in the United States at a national, regional and local level. These conditions could continue or further deteriorate as
businesses feel the prolonged effects of stalled or reduced operations and uncertainty regarding the pandemic continues.
COVID-19, and any similar pandemics should they occur, along with measures instituted to prevent spread, may adversely
affect us in many ways, including, but not limited to:
•
•
•
•
•
•
disruption of our tenants’ operations, which could adversely affect their ability, or willingness, to sustain their businesses
and/or fulfill their lease obligations;
our ability to maintain occupancy in our properties and obtain new leases for unoccupied and new development space at
favorable terms or at all;
shortages in supply of products or services from our and our tenants’ vendors that are needed for us and our tenants to
operate effectively, and which could lead to increased costs for such products and services;
access to debt and equity capital on attractive terms or at all. Severe disruption and instability in the global financial
markets or deteriorations in credit and financing conditions may affect our or our tenants’ ability to access capital necessary
to fund operations, refinance debt or fund planned investments on a timely basis, and may adversely affect the valuation of
financial assets and liabilities;
our and our tenants’ ability to continue or complete planned development, including the potential for delays in the supply
of materials or labor necessary for development; and
an increase in the pace of businesses implementing remote work arrangements over the long-term, which would adversely
effect demand for office space.
The extent of the effect on our operations, financial condition, cash flows and ability to make expected distributions to
shareholders will be dependent on future developments, including the duration of the pandemic and any future resurgence or
variants thereof, the prevalence, strength and duration of restrictive measures and the resulting effects on our tenants, potential
future tenants, the commercial real estate industry and the broader economy, all of which are uncertain and difficult to predict.
Moreover, some of the risks described in other risk factors set forth in this Annual Report on Form 10-K may be more likely to
impact us as a result of COVID-19 and the responses to curb its spread, including, but not limited to: downturns in national,
regional and local economic environments; deteriorating local real estate market conditions; and declining real estate
valuations.
Other Risks
Our business could be adversely affected by security breaches through cyber attacks, cyber intrusions or otherwise.
We face risks associated with security breaches and other significant disruptions of our information technology networks and
related systems, which are essential to our business operations. Such breaches and disruptions may occur through cyber attacks
or cyber intrusions over the Internet, malware, computer viruses, attachments to e-mails, persons inside our organization or
persons with access to systems inside our organization. Because of our concentration on serving the USG and its contractors
with a general focus on national security and information technology, we may be more likely to be targeted by cyber attacks,
including by governments, organizations or persons hostile to the USG. We have preventative, detective and responsive
measures in place to maintain the security and integrity of our networks and related systems that have to date enabled us to
18
avoid breaches and disruptions that were individually, or in the aggregate, material. We also have insurance coverage in place
in the event of significant future losses from breaches and disruptions. However, despite our activities to maintain the security
and integrity of our networks and related systems, there can be no absolute assurance that these activities will be effective in
mitigating these risks. A security breach involving our networks and related systems could disrupt our operations in numerous
ways, including compromising the confidential information of our tenants, customers, vendors and employees, which could
damage our relationships with such parties, and disrupting the proper functioning of our networks and systems on which much
of our operations depend.
COPT’s ownership limits are important factors. COPT’s Declaration of Trust limits ownership of its common shares
by any single shareholder to 9.8% of the number of the outstanding common shares or 9.8% of the value of the outstanding
common shares, whichever is more restrictive. COPT’s Declaration of Trust also limits ownership by any single shareholder of
our common and preferred shares in the aggregate to 9.8% of the aggregate value of our outstanding common and preferred
shares. We call these restrictions the “Ownership Limit.” COPT’s Declaration of Trust allows our Board of Trustees to exempt
shareholders from the Ownership Limit. The Ownership Limit and the restrictions on ownership of our common shares may
delay or prevent a transaction or a change of control that might involve a premium price for our common shares/units or
otherwise be in the best interest of our equityholders.
COPT’s Declaration of Trust includes other provisions that may prevent or delay a change of control. Subject to the
requirements of the New York Stock Exchange, our Board of Trustees has the authority, without shareholder approval, to issue
additional securities on terms that could delay or prevent a change in control. In addition, our Board of Trustees has the
authority to reclassify any of our unissued common shares into preferred shares. Our Board of Trustees may issue preferred
shares with such preferences, rights, powers and restrictions as our Board of Trustees may determine, which could also delay or
prevent a change in control.
The Maryland business statutes impose potential restrictions that may discourage a change of control of our
company. Various Maryland laws may have the effect of discouraging offers to acquire us, even if the acquisition would be
advantageous to equityholders. Resolutions adopted by our Board of Trustees and/or provisions of our bylaws exempt us from
such laws, but our Board of Trustees can alter its resolutions or change our bylaws at any time to make these provisions
applicable to us.
COPT’s failure to qualify as a REIT would have adverse tax consequences, which would substantially reduce funds
available to make distributions to our equityholders. We believe that COPT has qualified for taxation as a REIT for Federal
income tax purposes since 1992. We plan for COPT to continue to meet the requirements for taxation as a REIT. Many of
these requirements, however, are highly technical and complex. The determination that we are a REIT requires an analysis of
various factual matters and circumstances that may not be totally within our control. For example, to qualify as a REIT, at least
95% of COPT’s gross income must come from certain sources that are specified in the REIT tax laws. COPT is also required to
distribute to shareholders at least 90% of its annual taxable income. The fact that COPT holds most of its assets through
COPLP and its subsidiaries further complicates the application of the REIT requirements. Even a technical or inadvertent
mistake could jeopardize COPT’s REIT status. Furthermore, Congress and the Internal Revenue Service might make changes
to the tax laws and regulations and the courts might issue new rulings that make it more difficult or impossible for COPT to
remain qualified as a REIT.
If COPT fails to qualify as a REIT, it would be subject to Federal income tax at regular corporate rates. Also, unless the
Internal Revenue Service granted us relief under certain statutory provisions, COPT would remain disqualified as a REIT for
four years following the year it first fails to qualify. If COPT fails to qualify as a REIT, it would have to pay significant income
taxes and would therefore have less money available for investments or for distributions to our equityholders. In addition, if
COPT fails to qualify as a REIT, it would no longer be required to pay distributions to shareholders. As a result of all these
factors, COPT’s failure to qualify as a REIT could impair our ability to expand our business and raise capital and would likely
have a significant adverse effect on the value of our shares/units.
We may be adversely impacted by changes in tax laws. At any time, U.S. federal tax laws or the administrative
interpretations of those laws may be changed. We cannot predict whether, when or to what extent new U.S. federal tax laws,
regulations, interpretations or rulings will be issued. In addition, while REITs generally receive certain tax advantages
compared to entities taxed as C corporations, it is possible that future legislation could result in REITs having fewer tax
advantages, and therefore becoming a less attractive investment alternative. As a result, changes in U.S. federal tax laws could
negatively impact our operating results, financial condition and business operations, and adversely impact our equityholders.
19
Occasionally, changes in state and local tax laws or regulations are enacted that may result in an increase in our tax
liability. Shortfalls in tax revenues for states and municipalities may lead to an increase in the frequency and size of such
changes. If such changes occur, we may be required to pay additional taxes on our assets, revenue or income.
Our tenants and contractual counterparties could be designated “Prohibited Persons” by the Office of Foreign
Assets Control. The Office of Foreign Assets Control of the United States Department of the Treasury (“OFAC”) maintains a
list of persons designated as terrorists or who are otherwise blocked or banned (“Prohibited Persons”). OFAC regulations and
other laws prohibit us from conducting business or engaging in transactions with Prohibited Persons. If a tenant or other party
with whom we conduct business is placed on the OFAC list or is otherwise a party with whom we are prohibited from doing
business, we would be required to terminate the lease or other agreement.
Item 1B. Unresolved Staff Comments
None
20
Item 2. Properties
The following table provides certain information about our operating property segments as of December 31, 2020 (dollars
and square feet in thousands, except per square foot amounts):
Segment
Office and Data Center Shell Portfolio
Defense/IT Locations:
Fort Meade/BW Corridor:
National Business Park (Annapolis Junction, MD)
Howard County, MD
Other
Fort Meade/BW Corridor Subtotal / Average
Northern Virginia Defense/IT
Lackland Air Force Base
Navy Support Locations
Redstone Arsenal
Data Center Shells:
Consolidated Properties
Unconsolidated Joint Venture Properties (4)
Defense/IT Locations Subtotal / Average
Regional Office
Other Properties
Total Office and Data Center Shell Portfolio
Wholesale Data Center
Total Operating Properties
Total Consolidated Operating Properties
Number of
Properties
Rentable
Square Feet
or Megawatts
(“MW”)
Occupancy (1)
Annualized
Rental
Revenue (2)
Annualized Rental
Revenue per
Occupied Square
Foot (2)(3)
31
35
23
89
13
7
21
15
9
17
171
8
2
181
1
3,821
2,857
1,679
8,357
1,992
953
1,241
1,454
91.7% $
89.5%
92.2%
91.0%
88.1%
100.0%
97.2%
99.4%
1,990
2,749
18,736
2,066
157
20,959
19.25 MW
100.0%
100.0%
94.5%
92.5%
68.4%
94.1%
86.7%
$
$
141,020 $
71,930
46,816
259,766
61,334
53,402
34,556
30,439
32,349
3,842
475,688
68,086
2,623
546,397 $
24,638
571,035
567,193
40.26
28.09
30.09
34.10
34.96
53.57
28.65
20.96
16.26
13.97
31.05
35.51
24.37
31.50
N/A
(1) This percentage is based upon all rentable square feet or megawatts under lease terms that were in effect as of December 31, 2020.
(2) Annualized rental revenue is the monthly contractual base rent as of December 31, 2020 (ignoring free rent then in effect)
multiplied by 12, plus the estimated annualized expense reimbursements under existing leases. With regard to properties owned
through unconsolidated real estate joint ventures, we include the portion of annualized rental revenue allocable to our ownership
interest. We consider annualized rental revenue to be a useful measure for analyzing revenue sources because, since it is point-in-
time based, it does not contain increases and decreases in revenue associated with periods in which lease terms were not in effect;
historical revenue under generally accepted accounting principles does contain such fluctuations. We find the measure particularly
useful for leasing, tenant and segment analysis.
(3) Annualized rental revenue per occupied square foot is a property’s annualized rental revenue divided by that property’s occupied
square feet as of December 31, 2020. Our computation of annualized rental revenue excludes the effect of lease incentives. The
annualized rent per occupied square foot, including the effect of lease incentives, was $31.11 for our total office and data center
shell portfolio, $33.66 for the Fort Meade/BW Corridor (our largest Defense/IT Location sub-segment) and $34.85 for our Regional
Office portfolio.
(4) Represents 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 our ownership interest.
21
The following table provides certain information about office and data center shell properties that were under
development, or otherwise approved, as of December 31, 2020 (dollars and square feet in thousands):
Estimated
Rentable
Square Feet
Upon
Completion
Percentage
Leased
Calendar
Quarter
Anticipated to
be Operational
Costs
Incurred to
Date (1)
Estimated
Costs to
Complete (1)
102
107
209
54%
4Q 21
$
24,024 $
6,710
100%
78%
1Q 22
22,043
46,067
45,307
52,017
348
100%
4Q 21
59,914
46,305
107
100%
4Q 21
15,409
39,841
Property and Location
Under Development
Fort Meade/BW Corridor:
4600 River Road (2)
College Park, Maryland
610 Guardian Way
Annapolis Junction, Maryland
Subtotal / Average
NoVA Defense/IT:
NoVA Office C
Chantilly, Virginia
Lackland Air Force Base:
Project EL
San Antonio, Texas
Navy Support:
Expedition VII
St. Mary’s County, Maryland
30
60%
4Q 22
1,567
6,622
Redstone Arsenal:
6000 Redstone Gateway (2)
Huntsville, Alabama
8000 Rideout Road
Huntsville, Alabama
7100 Redstone Gateway
Huntsville, Alabama
Subtotal / Average
Data Center Shells:
Parkstone A
Northern Virginia
Parkstone B
Northern Virginia
Subtotal / Average
Regional Office:
2100 L Street (2)
Washington, D.C.
Total Under Development
42
100
46
188
227
193
420
100%
3Q 21
8,639
1,157
9%
1Q 22
16,242
10,485
100%
52%
1Q 21
9,100
33,981
2,066
13,708
100%
2Q 23
5,199
60,401
100%
100%
2Q 24
4,421
9,620
50,579
110,980
190
1,492
56%
84%
2Q 21
157,813
19,187
$ 324,371 $ 288,660
Includes land, development, leasing costs and allocated portion of structured parking and other shared infrastructure, if applicable.
(1)
(2) This property had occupied square feet in service as of December 31, 2020. Therefore, the property and its occupied square feet are
included in our operating property statistics, including the information set forth on the previous page.
22
The following table provides certain information about land that we owned or controlled as of December 31, 2020,
including properties under ground lease to us (square feet in thousands):
Segment
Defense/IT Locations:
Fort Meade/BW Corridor:
National Business Park (Annapolis Junction, MD)
Howard County, MD
Other
Total Fort Meade/BW Corridor
Northern Virginia Defense/IT Locations
Lackland Air Force Base
Navy Support Locations
Redstone Arsenal (1)
Data Center Shells
Total Defense/IT Locations
Regional Office
Total land owned/controlled for future development
Other land owned/controlled
Total Land Owned/Controlled
Acres
Estimated
Developable
Square Feet
175
19
126
320
29
19
38
358
53
817
10
827
43
870
1,999
290
1,338
3,627
1,136
410
64
3,125
1,180
9,542
900
10,442
638
11,080
(1) This land is owned by the USG and is controlled under a long-term master lease agreement to a consolidated joint venture. 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.
23
Lease Expirations
The following table provides a summary schedule of lease expirations for leases in place at our operating
properties as of December 31, 2020 based on the non-cancelable term of tenant leases determined in accordance with
generally accepted accounting principles (dollars and square feet in thousands, except per square foot amounts):
Year of Lease Expiration
2021: Office and Data Center Shells
Wholesale Data Center
2022: Office and Data Center Shells
Wholesale Data Center
2023: Office and Data Center Shells
Wholesale Data Center
2024: Office and Data Center Shells
Wholesale Data Center
2025: Office and Data Center Shells
Wholesale Data Center
2026: Office and Data Center Shells
2027: Office and Data Center Shells
Wholesale Data Center
2028: Office and Data Center Shells
Wholesale Data Center
2029: Office and Data Center Shells
2030: Office and Data Center Shells
2031: Office and Data Center Shells
2032: Office and Data Center Shells
2033: Office and Data Center Shells
2034: Office and Data Center Shells
2035: Office and Data Center Shells
2036: Office and Data Center Shells
2037: Office and Data Center Shells
2038: Office and Data Center Shells
2063: Office and Data Center Shells (2)
Total Operating Properties
Total Office and Data Center Shells
Annualized
Rental
Revenue of
Expiring
Leases (1)
Percentage of
Total
Annualized
Rental Revenue
Expiring (1)
Total Annualized
Rental Revenue
of Expiring
Leases Per
Occupied Square
Foot
Square Footage
of Leases
Expiring
1,485 $
N/A
2,311
N/A
1,868
N/A
2,538
N/A
2,978
N/A
1,481
970
N/A
1,181
N/A
1,405
817
657
21
255
369
497
748
102
39
—
19,722 $
19,722 $
51,342
15,011
73,574
2,493
64,560
1,694
67,288
10
110,868
5,168
38,332
20,901
29
21,245
233
29,072
12,775
11,601
576
9,236
4,187
9,570
14,462
6,061
618
129
571,035
546,397
9.0% $
2.6%
12.9%
0.4%
11.3%
0.3%
11.8%
—%
19.4%
0.9%
6.7%
3.7%
—%
3.7%
—%
5.1%
2.2%
2.0%
0.1%
1.6%
0.7%
1.7%
2.5%
1.1%
0.1%
—%
100.0%
100.0% $
34.56
N/A
31.81
N/A
34.53
N/A
32.85
N/A
38.59
N/A
35.61
32.51
N/A
29.63
N/A
26.45
23.76
17.66
27.95
36.21
11.34
19.24
19.34
58.30
15.92
N/A
N/A
31.50
(1) Refer to definition provided on first page of Item 2 of this Annual Report on Form 10-K.
(2)
Includes only ground leases.
With regard to office and data center shell property leases expiring in 2021, we believe that the weighted average
annualized rental revenue per occupied square foot for such leases as of December 31, 2020 was, on average,
approximately 1.5% to 3.5% higher than estimated current market rents for the related space, with specific results
varying by market.
24
Item 3. Legal Proceedings
We are not currently involved in any material litigation nor, to our knowledge, is any material litigation currently
threatened against the Company or the Operating Partnership (other than routine litigation arising in the ordinary course of
business, substantially all of which is expected to be covered by liability insurance).
Item 4. Mine Safety Disclosures
Not applicable.
PART II
Item 5. Market for Registrants’ Common Equity, Related Stockholder Matters and Issuer Purchases of Equity
Securities
COPT’s common shares trade on the New York Stock Exchange (“NYSE”) under the symbol “OFC.” The number of
holders of record of COPT’s common shares was 462 as of January 22, 2021. This number does not include shareholders
whose shares were held of record by a brokerage house or clearing agency, but does include any such brokerage house or
clearing agency as one record holder.
There is no established public trading market for COPLP’s partnership units. Quarterly common unit distributions per unit
were the same as quarterly common dividends per share declared by COPT. As of January 22, 2021, there were 28 holders of
record of COPLP’s common units.
Unregistered Sales of Equity Securities and Use of Proceeds
During the three months ended December 31, 2020, COPT issued 2,000 common shares in exchange for 2,000 COPLP
common units in accordance with COPLP’s Third Amended and Restated Limited Partnership Agreement, as amended. The
issuance of these common shares was effected in reliance upon the exemption from registration under Section 4(a)(2) of the
Securities Act of 1933, as amended.
25
COPT’s Common Shares Performance Graph
The graph and the table set forth below assume $100 was invested on December 31, 2015 in COPT’s common shares. The
graph and the table compare the cumulative return (assuming reinvestment of dividends) of this investment with a $100
investment at that time in the S&P 500 Index or the All Equity REIT Index of the National Association of Real Estate
Investment Trusts (“Nareit”):
220
200
180
e
u
l
a
V
x
e
d
n
I
160
140
120
100
80
12/31/15
12/31/16
12/31/17
12/31/18
12/31/19
12/31/20
Corporate Office Properties Trust
S&P 500 Index
FTSE Nareit All Equity REIT Index
Period Ended
Index
Corporate Office Properties Trust
S&P 500 Index
FTSE Nareit All Equity REIT Index
Item 6. Selected Financial Data
12/31/17
12/31/15
12/31/16
12/31/20
$ 100.00 $ 148.61 $ 143.77 $ 108.05 $ 156.91 $ 145.75
$ 100.00 $ 111.96 $ 136.40 $ 130.42 $ 171.49 $ 203.04
$ 100.00 $ 108.63 $ 118.05 $ 113.28 $ 145.75 $ 138.28
12/31/19
12/31/18
Omitted pursuant to our election to apply rules adopted by the SEC effective February 10, 2021 to eliminate Item 301 of
Regulation S-K.
26
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
You should refer to our consolidated financial statements and the notes thereto and our Selected Financial Data table as you
read this section.
This section contains “forward-looking” statements, as defined in the Private Securities Litigation Reform Act of 1995, that
are based on our current expectations, estimates and projections about future events and financial trends affecting the financial
condition and operations of our business. 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. Important factors that may affect these expectations, estimates and projections
include, but are not limited to:
•
•
•
•
•
•
•
•
•
•
•
•
•
•
general economic and business conditions, which will, among other things, affect office property and data center demand
and rents, tenant creditworthiness, interest rates, financing availability and property values;
adverse changes in the real estate markets, including, among other things, increased competition with other companies;
risks and uncertainties regarding the impact of the COVID-19 pandemic, and similar pandemics, along with restrictive
measures instituted to prevent spread, on our business, the real estate industry and national, regional and local economic
conditions;
governmental actions and initiatives, including risks associated with the impact of a prolonged government shutdown or
budgetary reductions or impasses, such as a reduction in rental revenues, non-renewal of leases and/or reduced or delayed
demand for additional space by our strategic customers;
our ability to borrow on favorable terms;
risks of real estate acquisition and development activities, 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 our joint venture partners may not fulfill their
financial obligations as investors or may take actions that are inconsistent with our objectives;
changes in our plans for properties or views of market economic conditions or failure to obtain development rights, either
of which could result in recognition of significant impairment losses;
our ability to satisfy and operate effectively under Federal income tax rules relating to real estate investment trusts and
partnerships;
possible adverse changes in tax laws;
the dilutive effects of issuing additional common shares;
our ability to achieve projected results;
security breaches relating to cyber attacks, cyber intrusions or other factors; and
environmental requirements.
We undertake no obligation to publicly update or supplement forward-looking statements.
Overview
While 2020 will most likely be remembered for the COVID-19 pandemic, including the restrictive measures instituted to
prevent spread and the resulting economic uncertainty, we do not believe that the pandemic significantly affected our ability to
execute our business strategy due primarily to our portfolio’s significant concentration in Defense/IT Locations. The tenants in
most of these properties were designated as “essential businesses,” and therefore exempt from use and occupancy restrictions
that otherwise affected much of the commercial real estate industry. Furthermore, since the tenants in these properties
continued to be compensated by the USG for their services, we believe that their ability, and willingness, to fulfill their lease
obligations was not significantly disrupted. As a result, while COVID-19 affected the manner in which we conducted our
operations and adversely impacted certain of our other tenants and property types, we do not believe that it significantly
affected our financial condition, results of operations and cash flows in 2020. Please refer to the section below entitled “Effects
of COVID-19” for additional related disclosure.
27
We ended 2020 with higher leased and occupancy percentages for our office and data center shell portfolio both portfolio-
wide and for our Same Properties and, notably, our highest year end portfolio-wide occupancy since 2001. We ended 2020
with our office and data center shell portfolio 94.8% leased (compared to 94.4% as of December 31, 2019) while our Same
Properties were 93.1% leased (compared to 93.0% as of December 31, 2019). Our year end portfolio-wide office and data
center shell occupancy was 94.1% (compared to 92.9% as of December 31, 2019) and Same Properties occupancy was 92.1%
(compared to 91.1% as of December 31, 2019). Our wholesale data center was 86.7% leased as of year end (compared to
76.9% as of December 31, 2019). Please refer to the section below entitled “Occupancy and Leasing” for additional related
disclosure.
The higher occupancy and leased percentages in our office and data center shell portfolio were attributable primarily to our
placing into service an annual record 1.8 million square feet in 11 newly-developed properties, expansions of three fully-
operational properties and one redeveloped property that were 99.5% leased as of December 31, 2020. These properties were
predominantly Defense/IT Locations in our data center shells or Redstone Arsenal sub-segments. Other noteworthy 2020
leasing activity in our operating portfolio included:
•
•
renewal leasing of 2.2 million square feet, resulting in a portfolio-wide tenant retention rate of 80.6% (81.6% for our
Defense/IT Locations), one of our highest annual rates on record. This leasing included the effect of large early renewals
of leases previously scheduled to expire in 2021. Strong tenant retention is key to our asset management strategy in order
to maximize revenue (by avoiding downtime) and minimize leasing capital; and
vacant space leasing of 416,000 square feet, which fell short of our beginning of 2020 expectations due to the impact of
restrictive measures and the economic uncertainty caused by the pandemic.
As of December 31, 2020, our scheduled lease expirations in 2021, representing 7.5% of our total occupied square feet,
included a high concentration of space in what we believe to be mission-critical Defense/IT Locations. This space included
only two leases of 100,000 square feet or more that are with the USG and expected to be renewed.
We had 1.0 million square feet of development leasing in 2020, representing our fourth highest annual volume. Nearly half
of this leasing was for data center shells, and we also leased new property space in four of our five other Defense/IT Locations
sub-segments. We ended the year with 1.5 million square feet in properties under development that were 84% leased in
aggregate, which included new properties in each of our named office and data center shell segments and sub-segments. Most
of these properties were 100% leased and all but one were more than half leased (the one being a property built on a speculative
basis in Redstone Arsenal in order to keep pace with what we believe to be very strong demand, illustrated by that sub-
segment’s 99.4% year-end occupancy rate). For further disclosure regarding our development underway as of year end, please
refer to Item 2 of this Annual Report on Form 10-K.
•
•
•
•
We believe that our 2020 leasing greatly benefited from a continued:
healthy defense spending environment, with bipartisan support for funding our national defense. We believe that
successive increases in defense spending since 2016, including, most recently, in the National Defense Authorization Act
for Fiscal Year 2021, have enhanced the USG and defense contractor tenants’ ability to invest in facility planning. This
environment has helped fuel leasing demand, as has continued prioritization of spending allocations towards technology
and innovation programs benefiting our Defense/IT Locations, including cyber, space, unmanned systems and artificial
intelligence; and
demand for data center shells. Our leasing included two new data center shells in Northern Virginia, the largest data center
market in the world, and represented further expansion of our relationship with an existing customer. As of year end, we
held land that would accommodate an additional 1.2 million square feet in future data center shell development.
With respect to financing activities, we:
amended an existing term loan facility to increase the loan amount by $150.0 million and reduce the LIBOR interest rate
spread on the facility. We used the resulting loan proceeds to repay borrowings under our Revolving Credit Facility that
funded development costs;
refinanced unsecured senior notes due to mature in June 2021 with a new note issuance on September 17, 2020 by:
•
issuing $400.0 million of 2.25% Notes at an initial offering price of 99.416% of their face value. The proceeds from
this issuance, after deducting underwriting discounts but before other offering expenses, were approximately
$395.3 million; and
purchased or redeemed $300.0 million of 3.70% Notes for $306.9 million plus accrued interest.
•
28
We used the remaining proceeds from the 2.25% Notes issuance to repay borrowings under our Revolving Credit Facility
and for general corporate purposes, which included the cash settlement of three forward-starting interest rate swaps and
accrued interest thereon for $53.1 million;
raised equity by selling interests in single tenant data center shells in Northern Virginia, including proceeds of
approximately:
•
$81 million on October 30, 2020 from our sale of a 90% interest in two data center shell properties based on an
aggregate property value of $89.7 million. We retained a 10% interest in the properties through B RE COPT DC JV II
LLC (“B RE COPT”), a newly-formed joint venture. We recognized a gain on sale of $30.0 million; and
$60 million on December 22, 2020 from our sale, through a series of transactions, of 80% of our 50% interests in
LLCs holding six properties and associated mortgage debt that we owned through GI-COPT DC Partnership LLC, an
unconsolidated joint venture. We retained a 10% interest in the LLCs through B RE COPT, and recognized a gain of
$29.4 million on the sale of interests.
•
We used most of these sale proceeds to repay borrowings under our Revolving Credit Facility; and
redeemed COPLP’s Series I Preferred Units from the third party unitholder at the units’ aggregate liquidation preference of
$8.8 million ($25.00 per unit), plus accrued and unpaid distributions of return thereon up to the date of redemption.
•
•
These activities enabled us to fund $344.4 million in development costs in 2020, while ending the year with: no debt maturing
in 2021; no remaining preferred equity; and $657.0 million in borrowing capacity available to us under our Revolving Credit
Facility.
Net income in 2020 was $97.1 million lower than in 2019 due primarily to a: $53.2 million loss on interest rate derivatives
in 2020 recognized when we consummated the 2.25% Notes issuance; and $45.6 million decrease in gains from sales of real
estate interests due to lower sales volume in 2020. Net operating income (“NOI”) from real estate operations, our segment
performance measure discussed further below, increased $6.8 million from 2019 to 2020, due primarily to: a $20.5 million
increase from properties newly placed into service; offset in part by a net decrease of $9.7 million from dispositions due to our
sales of property interests in 2019 and 2020. NOI from our Same Properties only changed marginally, increasing $0.8 million,
or 0.3%. Additional disclosure comparing our 2020 and 2019 results of operations is provided below.
We discuss significant factors contributing to changes in our net income between 2020 and 2019 in the section below
entitled “Results of Operations.” The results of operations discussion is combined for COPT and COPLP because there are no
material differences in the results of operations between the two reporting entities.
In addition, the section below entitled “Liquidity and Capital Resources” includes discussions of, among other things:
•
•
how we expect to generate cash for short and long-term capital needs; and
our commitments and contingencies.
We refer to the measure “annualized rental revenue” in various sections of the Management’s Discussion and Analysis of
Financial Condition and Results of Operations section of this Annual Report on Form 10-K. Annualized rental revenue is a
measure that we use to evaluate the source of our rental revenue as of a point in time. It is computed by multiplying by 12 the
sum of monthly contractual base rents and estimated monthly expense reimbursements under active leases as of a point in time
(ignoring free rent then in effect). Our computation of annualized rental revenue excludes the effect of lease incentives,
although the effect of this exclusion is not material. We consider annualized rental revenue to be a useful measure for
analyzing revenue sources because, since it is point-in-time based, it does not contain increases and decreases in revenue
associated with periods in which lease terms were not in effect; historical revenue under generally accepted accounting
principles in the United States of America (“GAAP”) does contain such fluctuations. We find the measure particularly useful
for leasing, tenant, segment and industry analysis.
With regard to our operating portfolio square footage, occupancy and leasing statistics included below and elsewhere in
this Annual Report on Form 10-K, amounts disclosed include total information pertaining to properties owned through
unconsolidated real estate joint ventures except for amounts reported for annualized rental revenue, which represent the portion
attributable to our ownership interest.
29
Effects of COVID-19
Pandemic Overview
Since first being declared a pandemic by the World Health Organization in early March 2020, the coronavirus, or
COVID-19, has spread worldwide. In an effort to control its spread, governments and other authorities imposed restrictive
measures affecting freedom of movement and business operations, such as shelter-in-place orders and business closures. Strong
restrictive measures were put into place in much of the United States beginning in March 2020, bringing many businesses to a
halt while forcing others to change the way in which they conduct their operations, with much of the workforce working from
their homes to the extent they were able. States and local governments began easing these measures to varying extents in late
April 2020, with some lifting restrictive measures entirely, while others chose a more gradual, extended easing approach.
While the easing of these measures enabled many businesses to gradually resume normal operations, most businesses continue
to be hindered to varying extents by either measures still in effect, operational challenges resulting from social distancing
requirements/expectations and/or a reluctance by much of the population to engage in certain activities while the pandemic is
still active. As of the date of this filing, COVID-19 spread continues world- and nation-wide, and is expected to continue until
vaccinations have been administered to much of the population, which is not expected to occur in the United States until at least
mid- to late 2021. As a result, there continues to be significant uncertainty regarding the duration and extent of this pandemic.
The outbreak has significantly disrupted financial and economic markets worldwide, as well as in the United States at a
national, regional and local level. These conditions could continue or further deteriorate as businesses feel the prolonged
effects of stalled or reduced operations and uncertainty regarding the pandemic continues.
Effect on Real Estate Industry
COVID-19 has significantly affected the operations of much of the commercial real estate industry as certain tenants’
operations, including the ability to use space and run businesses, have been disrupted. This has adversely affected tenants’
ability to sustain their businesses, including their ability, or willingness, to fulfill their lease obligations. The industry has also
been significantly impacted by the economic disruption that COVID-19 has triggered, which has affected the ability to lease
space in many property types to new and existing tenants at favorable terms. Key demand drivers for office space, such as
employment levels, business confidence and corporate profits, have been adversely affected. In addition, after months of
businesses operating in significant part through remote work arrangements out of necessity, the pace of such arrangements
becoming more prevalent long-term could accelerate, adversely affecting office space demand, although that effect may be
offset by a slowing in the trend toward adoption of shared office and open workplace structures due to greater social distancing
concerns. As a result, the commercial real estate industry, including office real estate, has suffered adverse impacts in its
operations, financial conditions and cash flows due to the COVID-19 pandemic and faces the potential for future effects.
Effect on the Company
Our office and data center shell portfolio is significantly concentrated in Defense/IT Locations, representing 171 of the
portfolio’s 181 properties, or 87.1% of our annualized rental revenue as of December 31, 2020. These properties are primarily
occupied by the USG and contractor tenants engaged in what we believe are high-priority security, defense and IT missions. As
a result, most of these properties were designated as “essential businesses,” and therefore exempt from many of the restrictions
that otherwise have affected much of the commercial real estate industry. Furthermore, since the tenants in these properties are
mostly the USG, or contractors of the USG who continue to be compensated by the USG for their services, we believe that their
ability, and willingness, to fulfill their lease obligations have not been disrupted. Our Defense/IT Locations do include tenants
serving as amenities to business parks housing our properties (such as restaurant, retail and personal service providers); while
these tenants’ operations have been significantly disrupted by COVID-19, our annualized rental revenue from these tenants is
not significant.
As of December 31, 2020, we owned eight Regional Office properties, representing 12.5% of our office and data center
shell portfolio’s annualized rental revenue. These properties were comprised of: three high-rise Baltimore City properties
proximate to the city’s waterfront; four Northern Virginia properties; and a newly-developed property in Washington, D.C.’s
central business district. While these properties include tenants in the financial services, health care and public health sectors,
which, as “essential businesses,” have been exempt from restrictions on operations, they also include a number of non-essential
business tenants. These properties are more subject to traditional office fundamentals than our Defense/IT Locations and
therefore face much of the enhanced risk in adverse impacts from COVID-19 described above.
30
•
•
•
•
•
•
•
•
The pandemic has affected the manner in which we conduct our operations in the following ways:
for the operations of our properties:
•
•
•
we consulted with medical experts in developing an approach to safely operate our properties during the pandemic;
we use manufacturer recommended heating and air conditioning filters to ensure appropriate outside air distribution;
we proactively engaged our tenants to help them through unknowns as pandemic concerns heightened and restrictive
measures were being instituted, and maintained that engagement to ensure communication regarding steps we were
taking in our business operations, any changes in tenant operations (such as office closures or revised work schedules)
and the existence of any actual or presumed COVID-19 cases in properties;
our on-site property operations staff have been required to use personal protective equipment, such as masks, gloves
and hand sanitizer, and implement other procedural changes to enhance separation and minimize spread;
we instituted enhanced cleaning measures, particularly for high touch areas and flat surfaces, and conducted special
deep cleanings in properties potentially affected by actual or presumed COVID-19 cases;
we provided signage promoting proper social distancing practices and hand sanitizer stations for property common
area lobbies; and
for properties that were not being used by tenants due to office closures or work from home arrangements, we locked
down public (non-tenant) access to the properties for security purposes and instituted other measures aimed at
managing costs;
for our employees:
•
our staff deemed to be essential, including our executives, select other members of our leadership team and most of our
property management team, have continued to report to their normal work locations; and
• most of our other staff worked from home from mid-March until the end of May, when most began reporting to their
normal work locations on a bi-weekly rotational basis; and
for our leasing activities:
•
•
we continued active engagement for lease transactions already in progress while business closures were in place;
during periods of time in which we were unable to physically show space to prospective tenants (from mid-March until
late May to mid-June), we showed space to new prospective tenants using a combination of virtual technology and pre-
recorded video tours; and
we implemented new advertising strategies to promote space availability.
•
•
•
•
•
As of the date of this filing, we believe that COVID-19 has not significantly affected our results of operations. Our:
same property NOI from real estate operations increased 0.3% for the year ended December 31, 2020 relative to 2019.
Included in this increase were offsets associated with a $2.8 million increase in provisions for collectability losses and a
$1.9 million decrease in parking revenue for the year ended December 31, 2020 relative to 2019. Substantially all of the
increase in collectability losses was attributable to tenants whose operations were significantly disrupted by the pandemic
(including primarily tenants serving as amenities to Defense/IT Location properties);
other lease revenue collections were not significantly affected by the pandemic. However, we have agreed to deferred
payment arrangements for approximately $2.6 million in lease receivables to be repaid in most cases by 2021 with
primarily Regional Office tenants and tenants serving as amenities to Defense/IT Location properties whose operations
were significantly disrupted;
office and data center shell portfolio was 94.1% occupied (compared to 92.9% at December 31, 2019) and 94.8% leased
(compared to 94.4% at December 31, 2019) and our Same Properties portfolio was 92.1% occupied (compared to 91.1% at
December 31, 2019) and 93.1% leased (compared to 93.0% at December 31, 2019);
operating expenses included the effect of higher cleaning and maintenance related costs, which were partially offset by
higher tenant expense reimbursements; and
leadership team concluded that the economic disruption resulting from COVID-19 constituted a significant adverse change
in the business climate that could affect the value of our Regional Office properties, which are dependent on commercial
office tenants and could suffer increased vacancy as a result. Accordingly, we concluded that these circumstances
constituted an indicator of impairment. We performed recovery analyses for each Regional Office property’s asset group
and concluded that the carrying value of each asset group was recoverable from the respective estimated undiscounted
future cash flows. As a result, no impairment loss was recognized.
While we do not currently expect that COVID-19 will significantly affect our future results of operations, financial condition or
cash flows, we believe that the impact of the pandemic will be dependent on future developments, including the duration of the
pandemic, the prevalence, strength and duration of restrictive measures and the resulting effects on our tenants, potential future
tenants, the commercial real estate industry and the broader economy, all of which are uncertain and difficult to predict.
31
Nevertheless, we believe at this time that there is more inherent risk associated with the operations of our Regional Office
properties than our Defense/IT Locations.
We believe that COVID-19 led to several leases being executed later than we previously expected, and the inability for us
to physically show space to prospective tenants for a period of time due to restrictive measures served as an impediment to
initiating new and progressing active leasing transactions. While we do not believe that our development leasing and ability to
renew leases scheduled to expire have been significantly affected by the pandemic, we do believe that the impact of the
restrictive measures and the economic uncertainty caused by the pandemic has impacted our timing and volume of vacant space
leasing, and may continue to do so in the future.
For our development activity, we have delivered space in ten newly-developed properties and expansions of three fully-
operational properties on schedule since March 2020, and the 11 properties that were under development as of December 31,
2020 face minimal operational risk as they were 84% leased as of the date of this filing. COVID-19 enhances the risk of us
being able to stay on pace to complete development and begin operations on schedule due to the potential for delays from:
jurisdictional permitting and inspections; factories’ ability to provide materials; and possible labor quarantines. These types of
issues have not significantly affected us to date but could in the future, depending on COVID-19 related developments.
We do not expect that we will be required to incur significant additional capital expenditures on existing properties as a
result of COVID-19.
In March 2020, due to the potential for financial market instability from the pandemic, we borrowed under our Revolving
Credit Facility in order to pre-fund our short-term capital needs. As the capital markets remained stable in the second quarter of
2020, we repaid much of these borrowings in June 2020. We subsequently completed an issuance of $400.0 million in
unsecured senior notes in September 2020, which enabled us to refinance $300.0 million in notes maturing in 2021, and we
have no other significant debt maturities until 2022.
Critical Accounting Policies and Estimates
Our consolidated financial statements are prepared in accordance with GAAP, which require us to make certain estimates
and assumptions. A summary of our significant accounting policies is provided in Note 2 to our consolidated financial
statements. The following section is a summary of certain aspects of those accounting policies involving estimates and
assumptions that (1) require our most difficult, subjective or complex judgments in accounting for uncertain matters or matters
that are susceptible to change and (2) materially affect our reported operating performance or financial condition. It is possible
that the use of different reasonable estimates or assumptions in making these judgments could result in materially different
amounts being reported in our consolidated financial statements. While reviewing this section, refer to Note 2 to our
consolidated financial statements, including terms defined therein.
Assessment of Lease Term
As discussed above, a significant portion of our portfolio is leased to the USG, and the majority of those leases consist of a
series of one-year renewal options, and/or provide for early termination rights. In addition, certain other leases in our portfolio
provide early termination rights to tenants. Applicable accounting guidance requires us to recognize minimum rental payments
on a straight-line basis over the term of each lease. The term of a lease includes the noncancellable periods of the lease along
with periods covered by: (1) a tenant option to extend the lease if the tenant is reasonably certain to exercise that option; (2) a
tenant option to terminate the lease if the tenant is reasonably certain not to exercise that option; and (3) an option to extend (or
not to terminate) the lease in which exercise of the option is controlled by us as the lessor. When assessing the expected lease
end date, we use judgment in contemplating the significance of: any penalties a tenant may incur should it choose not to
exercise any existing options to extend the lease or exercise any existing options to terminate the lease; and economic incentives
for the tenant based on any existing contract, asset, entity or market-based factors in the lease. Factors we consider in making
this assessment include the uniqueness of the purpose or location of the property, the availability of a comparable replacement
property, the relative importance or significance of the property to the continuation of the lessee’s line of business and the
existence of tenant leasehold improvements or other assets whose value would be impaired by the lessee vacating or
discontinuing use of the leased property. For most of our leases with the USG, we have determined, based on the factors above,
that exercise of existing renewal options, or continuation of such leases without exercising early termination rights, is
reasonably certain as it relates to the expected lease end date. Changes in these lease term assessments could result in the write-
off of any recorded assets associated with straight-line rental revenue and acceleration of depreciation and amortization expense
associated with costs we incurred related to these leases.
32
Impairment of Long-Lived Assets
We assess the asset groups associated with each of our properties, including operating properties, properties in
development, land held for future development, related intangible assets, right-of-use assets, deferred rents receivable and lease
liabilities, for indicators of impairment quarterly or when circumstances indicate that an asset group may be impaired. If our
analyses indicate that the carrying values of certain properties’ asset groups may be impaired, we perform a recovery analysis
for such asset groups. For properties to be held and used, we analyze recoverability based on the estimated undiscounted future
cash flows expected to be generated from the operations and eventual disposition of the properties over, in most cases, a ten-
year holding period. If we believe it is more likely than not that we will dispose of the properties earlier, we analyze
recoverability using a probability weighted analysis of the estimated undiscounted future cash flows expected to be generated
from the operations and eventual disposition of the properties over the various possible holding periods. If the analysis
indicates that the carrying value of a tested property’s asset group is not recoverable from its estimated future cash flows, the
property’s asset group is written down to the property’s estimated fair value and an impairment loss is recognized. If and when
our plans change, we revise our recoverability analyses of such property’s asset group to use the cash flows expected from the
operations and eventual disposition of such property using holding periods that are consistent with our revised plans.
Property fair values are estimated based on contract prices, indicative bids, discounted cash flow analyses or comparable
sales analyses. Estimated cash flows used in our impairment analyses are based on our plans for the property and our views of
market and economic conditions. The estimates consider items such as current and future market rental and occupancy rates,
estimated operating and capital expenditures and recent sales data for comparable properties; most of these items are influenced
by market data obtained from real estate leasing and brokerage firms and our direct experience with the properties and their
markets. Determining the appropriate capitalization or discount rate also requires significant judgment and is typically based on
many factors, including the prevailing rate for the market or submarket, as well as the quality and location of the property.
Changes in the estimated future cash flows due to changes in our plans for a property (especially our expected holding period),
views of market and economic conditions and/or our ability to obtain development rights could result in recognition of
impairment losses which could be substantial.
Asset groups associated with properties held for sale are carried at the lower of their carrying values (i.e., cost less
accumulated depreciation and any impairment loss recognized, where applicable) or estimated fair values less costs to sell.
Accordingly, decisions to sell certain properties will result in impairment losses if the carrying values of the specific properties’
asset groups classified as held for sale exceed such properties’ estimated fair values less costs to sell. The estimates of fair
value consider matters such as recent sales data for comparable properties and, where applicable, contracts or the results of
negotiations with prospective purchasers. These estimates are subject to revision as market conditions, and our assessment of
such conditions, change.
Revenue Recognition on Tenant Improvements
Most of our leases provide for some form of improvements to leased space. When we are required to provide
improvements under the terms of a lease, we need to determine whether the improvements constitute landlord assets or tenant
assets. If the improvements are landlord assets, we capitalize the cost of the improvements and recognize depreciation expense
over the shorter of the useful life of the assets or the term of the lease and recognize any payments from the tenant as rental
revenue over the term of the lease. If the improvements are tenant assets, we defer the cost of improvements funded by us as a
lease incentive asset and amortize it as a reduction of rental revenue over the term of the lease. Our determination of whether
improvements are landlord assets or tenant assets also may affect when we commence revenue recognition in connection with a
lease.
In determining whether improvements constitute landlord or tenant assets, we consider numerous factors that may require
subjective or complex judgments, including, whether the economic substance of the lease terms is properly reflected and
whether the improvements: have value to us as real estate; are unique to the tenant or reusable by other tenants; may be altered
or removed by the tenant without our consent or without compensating us for any lost fair value; are owned, and remain, with
us or the tenant at the end of the lease term.
33
Concentration of Operations
Customer Concentration of Property Operations
The table below sets forth the 20 largest tenants in our portfolio of operating properties (including our office and data
center shell properties and wholesale data center) based on percentage of annualized rental revenue:
Tenant
USG
Fortune 100 Company
General Dynamics Corporation (1)
The Boeing Company (1)
CACI International Inc
Northrop Grumman Corporation (1)
CareFirst Inc.
Booz Allen Hamilton, Inc.
Wells Fargo & Company (1)
AT&T Corporation (1)
Miles and Stockbridge, PC
Morrison & Foerster, LLP
Raytheon Technologies Corporation (1)
Yulista Holding, LLC
Science Applications International Corp. (1)
Jacobs Engineering Group Inc
Transamerica Life Insurance Company
University of Maryland
The MITRE Corporation
Mantech International Corp.
Peraton Inc.
Kratos Defense and Security Solutions (1)
KEYW Corporation
International Business Machines Corp.
Accenture Federal Services, LLC
Subtotal of 20 largest tenants
All remaining tenants
Total
Percentage of Annualized Rental
Revenue of Operating Properties
for 20 Largest Tenants as of December 31,
2018
2019
2020
34.1%
9.1%
5.6%
3.0%
2.4%
2.3%
2.0%
2.0%
1.2%
1.1%
1.0%
1.0%
1.0%
1.0%
0.9%
0.9%
0.9%
0.9%
0.8%
0.8%
N/A
N/A
N/A
N/A
N/A
72.0%
28.0%
100.0%
34.6%
7.9%
4.9%
3.2%
2.5%
2.2%
2.1%
2.1%
1.3%
1.3%
1.1%
N/A
1.0%
N/A
1.0%
1.0%
0.9%
1.2%
0.7%
0.7%
0.9%
1.0%
N/A
N/A
N/A
71.6%
28.4%
100.0%
32.7%
8.9%
4.7%
3.8%
2.4%
2.3%
2.2%
2.0%
1.3%
0.7%
1.1%
N/A
1.1%
N/A
1.3%
N/A
0.9%
1.4%
0.8%
N/A
N/A
1.0%
1.0%
0.7%
0.7%
71.0%
29.0%
100.0%
Total annualized rental revenue
$ 571,035
$ 525,338
$ 522,898
(1)
Includes affiliated organizations.
The USG’s concentration decreased from 2019 to 2020 due primarily to new properties placed in service in which it is not a
tenant.
34
Concentration of Office and Data Center Shell Properties by Segment
The table below sets forth the segment allocation of our annualized rental revenue of office and data center shell properties
as of the end of the last three calendar years:
Region
Defense/IT Locations:
Fort Meade/BW Corridor
Northern Virginia Defense/IT
Lackland Air Force Base
Navy Support Locations
Redstone Arsenal
Data Center Shells
Total Defense/IT Locations
Regional Office
Other
Percentage of Annualized Rental Revenue
of Office and Data Center Shell
Properties as of December 31,
2019
2018
2020
Number of Properties as of December 31,
2019
2020
2018
47.5%
11.2%
9.8%
6.3%
5.6%
6.6%
87.0%
12.5%
0.5%
100.0%
51.3%
10.9%
10.5%
6.5%
3.5%
5.3%
87.9%
11.5%
0.6%
100.0%
49.5%
12.0%
10.3%
6.3%
2.8%
7.0%
87.9%
11.5%
0.6%
100.0%
89
13
7
21
15
26
171
8
2
181
88
13
7
21
10
22
161
7
2
170
87
13
7
21
8
18
154
7
2
163
For the changes in revenue concentration reflected above between year end 2019 and 2020, the increase in Redstone Arsenal,
Data Center Shells and Regional Office was due to new, fully-occupied properties being placed in service, while the decrease in
Fort Meade/BW Corridor was due to the effect of increases in other segments coupled with a decrease in that segment’s
occupancy.
Occupancy and Leasing
Office and Data Center Shell Portfolio
The tables below set forth occupancy information pertaining to our portfolio of office and data center shell properties:
Occupancy rates at period end
Total
Defense/IT Locations:
Fort Meade/BW Corridor
Northern Virginia Defense/IT
Lackland Air Force Base
Navy Support Locations
Redstone Arsenal
Data Center Shells
Total Defense/IT Locations
Regional Office
Other
2020
December 31,
2019
2018
94.1%
92.9%
93.0%
91.0%
88.1%
100.0%
97.2%
99.4%
100.0%
94.5%
92.5%
68.4%
92.4%
82.4%
100.0%
92.5%
99.3%
100.0%
93.7%
88.1%
73.0%
91.1%
91.3%
100.0%
90.5%
99.0%
100.0%
93.6%
89.2%
77.2%
Average contractual annualized rental rate per square foot at year end (1)
$ 31.50
$ 31.28
$ 30.41
(1)
Includes estimated expense reimbursements.
35
December 31, 2019
Vacated upon lease expiration (1)
Occupancy for new leases
Developed or redeveloped
Other changes
December 31, 2020
Rentable
Square Feet
Occupied
Square Feet
(in thousands)
19,173
—
—
1,823
(37)
20,959
17,816
(463)
567
1,802
—
19,722
(1)
Includes lease terminations and space reductions occurring in connection with lease renewals.
With regard to changes in occupancy from December 31, 2019 to December 31, 2020:
•
•
•
•
Total: Increase was due primarily to placing into service 1.8 million square feet in space that was 99.5% leased as of
December 31, 2020;
Fort Meade/BW Corridor: Decrease was due primarily to vacated space, resulting in a 70.8% retention rate in 2020;
Northern Virginia Defense/IT, Navy Support Locations and Regional Office: Increases each due to vacant space leasing;
and
Other: Included two properties totaling 157,000 square feet in Aberdeen, Maryland.
In 2020, we leased 3.6 million square feet, including 1.0 million square feet of development and redevelopment space
discussed in further detail above.
In 2020, we renewed leases on 2.2 million square feet, representing 80.6% of the square footage of our lease expirations
(including the effect of early renewals). The annualized rents of these renewals (totaling $28.35 per square foot) decreased on
average by approximately 2.1% and the GAAP rents (totaling $28.45 per square foot) increased on average by approximately
6.5% relative to the leases previously in place for the space. The renewed leases had a weighted average lease term of
approximately 4.2 years, with average rent escalations per year of 2.4%, and the per annum average estimated tenant
improvements and lease costs associated with completing the leasing was approximately $2.03 per square foot. The decrease in
average rents on renewals was attributable primarily to per annum rent escalation terms of the previous leases that increased
rents over the lease terms by amounts exceeding the increases in the applicable market rental rates.
In 2020, we also completed leasing on 416,000 square feet of vacant space. The annualized rents of this leasing totaled
$31.32 per square foot and the GAAP rents totaled $32.36 per square foot; these leases had a weighted average lease term of
approximately 6.2 years, with average rent escalations per year of 2.8%, and the per annum average estimated tenant
improvements and lease costs associated with completing this leasing was approximately $7.33 per square foot.
Wholesale Data Center
Our 19.25 megawatt wholesale data center was 86.7% leased as of December 31, 2020 and 76.9% leased as of December
31, 2019, reflecting an increase from our leasing of 3.1 megawatts in April 2020. We have a lease for 11.25 megawatts
perpetually renewing that may be terminated by either party with six months’ notice.
36
Lease Expirations
The table below sets forth as of December 31, 2020 our scheduled lease expirations based on the non-cancelable term of
tenant leases determined in accordance with generally accepted accounting principles for our operating properties by segment/
sub-segment in terms of percentage of annualized rental revenue:
Defense/IT Locations
Fort Meade/BW Corridor
Northern Virginia Defense/IT
Lackland Air Force Base
Navy Support Locations
Redstone Arsenal
Data Center Shells
Regional Office
Other
Wholesale Data Center
Total
Expiration of Annualized Rental Revenue of Operating Properties
2021
2022
2023
2024
2025
Thereafter
Total
4.4%
0.4%
2.1%
1.5%
0.0%
0.0%
0.5%
0.1%
2.6%
11.6%
6.5%
0.8%
0.0%
0.9%
1.6%
0.0%
3.1%
0.1%
0.4%
13.4%
8.4%
1.0%
0.0%
1.1%
0.1%
0.0%
0.8%
0.0%
0.3%
11.7%
7.5%
2.4%
0.0%
1.0%
0.3%
0.1%
0.4%
0.0%
0.0%
11.7%
8.7%
1.8%
6.9%
0.2%
0.9%
0.0%
0.7%
0.2%
0.9%
20.3%
10.1%
4.2%
0.4%
1.5%
2.4%
6.2%
6.5%
0.0%
0.0%
31.3%
45.6%
10.6%
9.4%
6.2%
5.3%
6.3%
12.0%
0.4%
4.2%
100.0%
For our office and data center shell properties, our weighted average lease term as of December 31, 2020 was
approximately six years. We believe that the weighted average annualized rental revenue per occupied square foot for our
office and data center shell leases expiring in 2021 was, on average, approximately 1.5% to 3.5% higher than estimated current
market rents for the related space, with specific results varying by segment. Our wholesale data center had scheduled lease
expirations in 2021 for 61% of its annualized rental revenue, which included a lease for 11.25 megawatts perpetually renewing
that may be terminated by either party with six months’ notice.
Results of Operations
For a discussion of our results of operations comparison for 2019 and 2018, refer to our Annual Report on Form 10-K for
the fiscal year ended December 31, 2019 filed on February 19, 2020.
We evaluate the operating performance of our properties using NOI from real estate operations, our segment performance
measure, which includes: real estate revenues and property operating expenses; and the net of revenues and property operating
expenses of real estate operations owned through unconsolidated real estate joint ventures (“UJVs”) that is allocable to COPT’s
ownership interest (“UJV NOI allocable to COPT”). We view our NOI from real estate operations as comprising the following
primary categories:
•
•
office and data center shell properties:
•
stably owned and 100% operational throughout the two years being compared. We define these as changes from
“Same Properties.” For further discussion of the concept of “operational,” refer to the section of Note 2 of the
consolidated financial statements entitled “Properties”;
developed or redeveloped and placed into service that were not 100% operational throughout the two years being
compared; and
disposed; and
•
•
our wholesale data center.
In addition to owning properties, we provide construction management and other services. The primary manner in which
we evaluate the operating performance of our construction management and other service activities is through a measure we
define as NOI from service operations, which is based on the net of the revenues and expenses from these activities. The
revenues and expenses from these activities consist primarily of subcontracted costs that are reimbursed to us by customers
along with a management fee. The operating margins from these activities are small relative to the revenue. We believe NOI
from service operations is a useful measure in assessing both our level of activity and our profitability in conducting such
operations.
37
Since both of the measures discussed above exclude certain items includable in net income, reliance on these measures has
limitations; management compensates for these limitations by using the measures simply as supplemental measures that are
considered alongside other GAAP and non-GAAP measures. A reconciliation of NOI from real estate operations and NOI from
service operations to net income reported on the consolidated statements of operations of COPT and subsidiaries is provided in
Note 17 to our consolidated financial statements.
Comparison of Statements of Operations for the Years Ended December 31, 2020 and 2019
2020
For the Years Ended December 31,
2019
(in thousands)
Variance
527,463 $
113,763
641,226
11,262
(43,123)
(31,861)
$
538,725 $
70,640
609,365
203,840
138,193
67,615
1,530
33,001
4,473
448,652
198,143
137,069
109,962
329
35,402
4,239
485,144
(67,937)
8,574
933
30,209
29,416
(7,306)
(53,196)
1,825
(353)
102,878 $
(71,052)
7,894
—
105,230
—
—
—
1,633
217
200,004 $
$
5,697
1,124
(42,347)
1,201
(2,401)
234
(36,492)
3,115
680
933
(75,021)
29,416
(7,306)
(53,196)
192
(570)
(97,126)
Revenues
Revenues from real estate operations
Construction contract and other service revenues
Total revenues
Operating expenses
Property operating expenses
Depreciation and amortization associated with real estate operations
Construction contract and other service expenses
Impairment losses
General, administrative and leasing expenses
Business development expenses and land carry costs
Total operating expenses
Interest expense
Interest and other income
Credit loss recoveries
Gain on sales of real estate
Gain on sale of investment in unconsolidated real estate joint venture
Loss on early extinguishment of debt
Loss on interest rate derivatives
Equity in income of unconsolidated entities
Income tax (expense) benefit
Net income
38
NOI from Real Estate Operations
Revenues
Same Properties revenues
Lease revenue, excluding lease termination revenue and provision for
collectability losses
Lease termination revenue
Provision for collectability losses included in lease revenue
Other property revenue
Same Properties total revenues
Developed and redeveloped properties placed in service
Wholesale data center
Dispositions
Other
Property operating expenses
Same Properties
Developed and redeveloped properties placed in service
Wholesale data center
Dispositions
Other
UJV NOI allocable to COPT
Dispositions
Retained interests in newly-formed UJVs
NOI from real estate operations
Same Properties
Developed and redeveloped properties placed in service
Wholesale data center
Dispositions, net of retained interests in newly-formed UJVs
Other
Same Properties NOI from real estate operations by segment
Defense/IT Locations
Regional Office
Other
For the Years Ended December 31,
2019
(Dollars in thousands, except per square foot data)
Variance
2020
$ 472,207
1,451
(3,923)
2,372
472,107
34,491
27,788
4,325
14
538,725
(182,812)
(6,413)
(14,171)
(429)
(15)
(203,840)
$ 464,619
2,046
(1,149)
4,764
470,280
9,186
29,405
16,334
2,258
527,463
(181,803)
(1,594)
(13,213)
(1,457)
(76)
(198,143)
4,818
2,133
6,951
4,851
854
5,705
289,295
28,078
13,617
10,847
(1)
$ 341,836
288,477
7,592
16,192
20,582
2,182
$ 335,025
$ 256,432
31,220
1,643
$ 289,295
$ 257,048
29,928
1,501
$ 288,477
$
$
$
$
7,588
(595)
(2,774)
(2,392)
1,827
25,305
(1,617)
(12,009)
(2,244)
11,262
(1,009)
(4,819)
(958)
1,028
61
(5,697)
(33)
1,279
1,246
818
20,486
(2,575)
(9,735)
(2,183)
6,811
(616)
1,292
142
818
Same Properties rent statistics
Average occupancy rate
Average straight-line rent per occupied square foot (1)
91.8%
26.31
$
91.0%
26.39
$
0.8%
$
(0.08)
(1)
Includes minimum base rents, net of abatements, and lease incentives on a straight-line basis for the years set forth above.
Our Same Properties pool consisted of 144 properties, comprising 73.0% of our office and data center shell portfolio’s
square footage as of December 31, 2020. This pool of properties changed from the pool used for purposes of comparing 2019
and 2018 in our 2019 Annual Report on Form 10-K due to: the addition of five properties placed in service and 100%
operational on or before January 1, 2019 and the removal of eight properties in which we sold a 90% interest.
39
Regarding the changes in NOI from real estate operations reported above:
•
•
•
•
•
our Same Properties pool reflects a net increase due primarily to: increased occupancy and higher expense reimbursements
from tenants, partially offset by higher provisions for collectability losses and lower parking revenue (both of which were
attributable to the effects of COVID-19);
developed and redeveloped properties placed in service reflects the effect of 20 properties placed in service in 2019 and
2020;
our wholesale data center decreased due primarily to lease termination revenue recognized in the prior year that did not
recur in the current year;
dispositions, net of retained interests in newly-formed UJVs reflects the effect of our decrease in ownership of eight data
center shells in 2020 and nine data center shells in 2019; and
Other reflects primarily the effect of previously operational properties that we removed from service in mid-2019.
NOI from Service Operations
2020
For the Years Ended December 31,
2019
(in thousands)
Variance
Construction contract and other service revenues
Construction contract and other service expenses
NOI from service operations
$
$
70,640 $
(67,615)
3,025 $
113,763 $
(109,962)
3,801 $
(43,123)
42,347
(776)
Construction contract and other service revenue and expenses decreased due primarily to a lower volume of construction
activity in connection with several of our tenants. Construction contract activity is inherently subject to significant variability
depending on the volume and nature of projects undertaken by us primarily on behalf of tenants. Service operations are an
ancillary component of our overall operations that typically contribute an insignificant amount of income relative to our real
estate operations.
General, Administrative and Leasing Expenses
General, administrative and leasing expenses decreased in large part due to lower professional fees and compensation
related expenses in the current period.
We capitalize compensation and indirect costs associated with properties, or portions thereof, undergoing development or
redevelopment activities. Our capitalized compensation and indirect costs totaled $9.4 million in 2020 and $10.1 million in
2019.
Interest Expense
The table below sets forth components of our interest expense:
2020
For the Years Ended December 31,
2019
(in thousands)
Variance
Interest on Unsecured Senior Notes
Interest on mortgage and other secured debt
Interest on unsecured term debt
Amortization of deferred financing costs
Interest expense recognized on interest rate swaps
Interest on Revolving Credit Facility
Other interest
Capitalized interest
Interest expense
$
$
53,534 $
8,658
5,909
2,538
3,726
3,239
2,393
(12,060)
67,937 $
53,321 $
7,908
8,908
2,136
(1,415)
8,613
2,367
(10,786)
71,052 $
213
750
(2,999)
402
5,141
(5,374)
26
(1,274)
(3,115)
The increase in interest expense recognized on interest rate swaps was attributable to a decrease in applicable LIBOR rates,
while these decreased rates and lower borrowings on our Revolving Credit Facility resulted in the decrease in interest on our
Revolving Credit Facility.
40
Our average outstanding debt was $2.1 billion in 2020 and $1.9 billion 2019, and our weighted average effective interest
rate on debt was approximately 3.6% in 2020 and 4.1% in 2019.
Gain on sales of real estate
Gain on sales of real estate included gains from sales of 90% interests in data center shell properties, including two
properties in 2020 and nine properties in 2019. We retained 10% interests in these properties through unconsolidated real estate
joint ventures.
Gain on sale of investment in unconsolidated real estate joint venture
The gain on sale of investment in unconsolidated real estate joint venture recognized in 2020 was attributable to our
decrease in ownership interest in six data center shell properties resulting from the sale of properties from GI-COPT to B RE
COPT and subsequent dissolution of GI-COPT described above.
Loss on extinguishment of debt
The loss on early extinguishment of debt recognized in 2020 was attributable to our purchase and redemption of
3.70% Senior Notes due 2021.
Loss on interest rate derivatives
In 2020, we recognized a loss on interest rate swaps previously designated as cash flow hedges of interest expense on
forecasted future borrowings following our determination that such borrowings would probably not occur.
Funds from Operations
Funds from operations (“FFO”) is defined as net income computed using GAAP, excluding gains on sales and impairment
losses of real estate (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 UJVs that were allocable to our ownership
interest in the UJVs. We believe that we use the 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 and investments in unconsolidated real estate joint ventures (net of associated income tax), and
real estate-related depreciation and amortization, FFO can help one compare our operating performance between periods. In
addition, since most equity REITs provide FFO information to the investment community, we believe that FFO is useful to
investors as a supplemental measure for comparing our results to those of other equity REITs. We believe that net income is
the most directly comparable GAAP measure to FFO.
Since FFO excludes certain items includable in net income, reliance on the measure has limitations; management
compensates for these limitations by using the measure simply as a supplemental measure that is weighed in balance with other
GAAP and non-GAAP measures. FFO is not necessarily an indication of our cash flow available to fund cash needs.
Additionally, it should not be used as an alternative to net income 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.
Basic FFO available to common share and common unit holders (“Basic FFO”) is FFO adjusted to subtract (1) preferred
share dividends, (2) income attributable to noncontrolling interests through ownership of preferred units in 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 common unitholders. Common units in the Operating Partnership are substantially similar to our
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 Basic FFO. Basic FFO has essentially the same limitations as FFO; management compensates
for these limitations in essentially the same manner as described above for FFO.
41
Diluted FFO available to common share and common unit holders (“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. 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 Diluted FFO. Since
Diluted FFO excludes certain items includable in the numerator to diluted EPS, reliance on the measure has limitations;
management compensates for these limitations by using the measure simply as a supplemental measure that is weighed in the
balance with other GAAP and non-GAAP measures. Diluted FFO is not necessarily an indication of our cash flow available to
fund cash needs. Additionally, it should not be used as an alternative to net income 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.
Diluted FFO available to common share and common unit holders, as adjusted for comparability is defined as Diluted FFO
adjusted to exclude operating property acquisition costs; gain or loss on early extinguishment of debt; FFO associated with
properties securing non-recourse debt on which we have defaulted and which we have extinguished, or expect to extinguish, via
conveyance of such properties, including property NOI, interest expense and gains on debt extinguishment (discussed further
below); loss on interest rate derivatives; demolition costs on redevelopment and nonrecurring improvements; executive
transition costs; issuance costs associated with redeemed preferred shares; allocations of FFO to holders on noncontrolling
interests resulting from capital events; and certain other expenses that we believe are not closely correlated with our operating
performance. This measure also includes adjustments for the effects of the items noted above pertaining to UJVs that were
allocable to our ownership interest in the UJVs. 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. We believe that net income is the most directly
comparable GAAP measure to this non-GAAP measure. This measure has essentially the same limitations as Diluted FFO, as
well as the further limitation of not reflecting the effects of the excluded items; we compensate for these limitations in
essentially the same manner as described above for Diluted FFO.
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. 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. In addition, since most equity REITs
provide Diluted FFO per share information to the investment community, we believe that Diluted FFO per share is a useful
supplemental measure for comparing us to other equity REITs. We believe that diluted EPS is the most directly comparable
GAAP measure to Diluted FFO per share. Diluted FFO per share has most of the same limitations as Diluted FFO (described
above); management compensates for these limitations in essentially the same manner as described above for Diluted FFO.
Diluted FFO per share, as adjusted for comparability is (1) Diluted FFO, 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. We
believe that this measure is useful to investors because it provides investors with a further context for evaluating our FFO
results. We believe this to be a useful supplemental measure alongside Diluted FFO per share 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. We believe that diluted EPS is the most directly comparable GAAP measure to this per share
measure. This measure has most of the same limitations as Diluted FFO (described above) as well as the further limitation of
not reflecting the effects of the excluded items; we compensate for these limitations in essentially the same manner as described
above for Diluted FFO.
The computations for all of the above measures on a diluted basis assume the conversion of common units in COPLP but
do not assume the conversion of other securities that are convertible into common shares if the conversion of those securities
would increase per share measures in a given period.
We use measures called payout ratios as supplemental measures of our ability to make distributions to investors based on
each of the following: FFO; Diluted FFO; and Diluted FFO, adjusted for comparability. These measures are defined as (1) the
sum of (a) dividends on unrestricted common shares and (b) distributions to holders of interests in COPLP (excluding unvested
42
share-based compensation awards) and dividends on convertible preferred shares when such distributions and dividends are
included in Diluted FFO divided by either (2) FFO, Diluted FFO or Diluted FFO, adjusted for comparability.
The table below sets forth the computation of the above stated measures for 2020 and 2019 and provides reconciliations to
the GAAP measures of COPT and subsidiaries associated with such measures:
For the Years Ended December 31,
2020
2019
Net income
Real estate-related depreciation and amortization
Depreciation and amortization on UJV allocable to COPT
Impairment losses on real estate
Gain on sales of real estate
Gain on sale of investment in unconsolidated real estate JV
FFO
Noncontrolling interests-preferred units in the Operating Partnership
FFO allocable to other noncontrolling interests
Basic FFO allocable to share-based compensation awards
Basic FFO available to common shares and common unit holders
Redeemable noncontrolling interests
Diluted FFO available to common shares and common unit holders
Loss on early extinguishment of debt
Loss on interest rate derivatives
Demolition costs on redevelopment and nonrecurring improvements
Executive transition costs
Non-comparable professional and legal expenses
Dilutive preferred units in the Operating Partnership
FFO allocation to other noncontrolling interests resulting from capital event
Diluted FFO comparability adjustments allocable to share-based compensation awards
Diluted FFO available to common share and common unit holders, as adjusted for comparability
Weighted average common shares
Conversion of weighted average common units
Weighted average common shares/units - Basic FFO per share
Dilutive effect of share-based compensation awards
Redeemable noncontrolling interests
Weighted average common shares/units - Diluted FFO per share
Dilutive convertible preferred units
Weighted average common shares/units - Diluted FFO per share, as adjusted for comparability
Diluted FFO per share
Diluted FFO per share, as adjusted for comparability
Denominator for diluted EPS
Weighted average common units
Redeemable noncontrolling interests
Denominator for diluted FFO per share
Dilutive convertible preferred units
Denominator for diluted FFO per share, as adjusted for comparability
Common share dividends - unrestricted shares and deferred shares
Common unit distributions - unrestricted units
Dividends and distributions for FFO and diluted FFO payout ratios
Distributions on dilutive preferred units
Dividends and distributions for other payout ratio
FFO payout ratio
Diluted FFO payout ratio
Diluted FFO payout ratio, as adjusted for comparability
43
$
$
$
$
$
$
$
(Dollars and shares in thousands,
except per share data)
102,878
138,193
3,329
1,530
(30,209)
(29,416)
186,305
(300)
(15,705)
(719)
169,581
147
169,728
7,306
53,196
63
—
—
300
11,090
(327)
241,356
200,004
137,069
2,703
329
(105,230)
—
234,875
(564)
(5,024)
(905)
228,382
132
228,514
—
—
148
4
681
—
—
(3)
229,344
$
111,788
1,236
113,024
288
123
113,435
171
113,606
1.50
2.12
$
$
112,076
1,236
123
113,435
171
113,606
123,042
1,362
124,404
300
124,704
$
$
111,196
1,299
112,495
308
119
112,922
—
112,922
2.02
2.03
111,623
1,299
—
112,922
—
112,922
122,823
1,405
124,228
—
124,228
66.8%
73.3%
51.7%
52.9%
54.4%
54.2%
Property Additions
The table below sets forth the major components of our additions to properties for 2020 and 2019:
2020
For the Years Ended December 31,
2019
(in thousands)
Variance
Development and redevelopment
Tenant improvements on operating properties (1)
Capital improvements on operating properties
$
$
345,818 $
26,071
34,060
405,949 $
427,526 $
26,294
26,598
480,418 $
(81,708)
(223)
7,462
(74,469)
(1) Tenant improvement costs incurred on newly-developed properties are classified in this table as development and redevelopment.
Cash Flows
Net cash flow from operating activities increased $9.9 million, or 4.3%, from 2019 to 2020 due primarily to the timing of
cash outlays for construction contract costs relative to the cash receipts from customers associated with such costs.
Net cash flow used in investing activities increased $187.8 million from 2019 to 2020 due primarily to proceeds from sales
of real estate interests of $143.0 million in the current period compared to $309.6 million in the prior period, partially offset by
the effect of $53.1 million paid to cash settle interest rate swaps in the current period.
Net cash flow provided by financing activities in 2020 was $91.3 million and included primarily the following:
net proceeds from debt borrowings of $252.0 million, which included $150.0 million in borrowings under a term loan
facility and the net increase from our issuance of the 2.25% Notes and the purchase and redemption of the 3.70% Notes;
offset in part by
dividends and/or distributions to equity holders of $125.2 million;
distributions paid to redeemable noncontrolling interests of $14.4 million; and
our redemption of the Series I Preferred Units for $8.8 million.
Net cash flow used in financing activities in 2019 was $84.4 million and included primarily the following:
dividends and/or distributions to equity holders of $124.8 million; offset in part by
net proceeds from the issuance of common shares (or units) of $46.4 million.
•
•
•
•
•
•
Liquidity and Capital Resources of COPT
COPLP is the entity through which COPT, the sole general partner of COPLP, conducts almost all of its operations and
owns almost all of its assets. COPT occasionally issues public equity but does not otherwise generate any capital itself or
conduct any business itself, other than incurring certain expenses in operating as a public company which are fully reimbursed
by COPLP. COPT itself does not hold any indebtedness, and its only material asset is its ownership of partnership interests of
COPLP. COPT’s principal funding requirement is the payment of dividends on its common and preferred shares. COPT’s
principal source of funding for its dividend payments is distributions it receives from COPLP.
As of December 31, 2020, COPT owned 98.6% of the outstanding common units in COPLP and there were no preferred
units outstanding. As the sole general partner of COPLP, COPT has the full, exclusive and complete responsibility for
COPLP’s day-to-day management and control.
The liquidity of COPT is dependent on COPLP’s ability to make sufficient distributions to COPT. The primary cash
requirement of COPT is its payment of dividends to its shareholders. COPT also guarantees some of the Operating
Partnership’s debt, as discussed further in Note 10 of the notes to consolidated financial statements included herein. If the
Operating Partnership fails to fulfill certain of its debt requirements, which trigger COPT’s guarantee obligations, then COPT
will be required to fulfill its cash payment commitments under such guarantees. However, COPT’s only significant asset is its
investment in COPLP.
44
As discussed further below, we believe that the Operating Partnership’s sources of working capital, specifically its cash
flow from operations, and borrowings available under its Revolving Credit Facility, are adequate for it to make its distribution
payments to COPT and, in turn, for COPT to make its dividend payments to its shareholders.
COPT’s short-term liquidity requirements consist primarily of funds to pay for future dividends expected to be paid to its
shareholders. COPT periodically accesses the public equity markets to raise capital by issuing common and/or preferred shares.
For COPT to maintain its qualification as a REIT, it must pay dividends to its shareholders aggregating annually to at least
90% of its ordinary taxable income. As a result of this distribution requirement, it cannot rely on retained earnings to fund its
ongoing operations to the same extent that some other companies can. COPT may need to continue to raise capital in the equity
markets to fund COPLP’s development activities and acquisitions.
Liquidity and Capital Resources of COPLP
COPLP’s primary cash requirements are for operating expenses, debt service, development of new properties and
improvements to existing properties. We expect COPLP to continue to use cash flow provided by operations as the primary
source to meet its short-term capital needs, including property operating expenses, general and administrative expenses, interest
expense, scheduled principal amortization of debt, distributions to its security holders and improvements to existing properties.
As of December 31, 2020, COPLP had $18.4 million in cash and cash equivalents.
COPLP’s senior unsecured debt is currently rated investment grade by the three major rating agencies. We aim to maintain
an investment grade rating to enable COPLP to use debt comprised of unsecured, primarily fixed-rate debt (including the effect
of interest rate swaps) from public markets and banks. COPLP also uses secured nonrecourse debt from institutional lenders
and banks primarily for joint venture financings. In addition, COPLP periodically raises equity from COPT when COPT
accesses the public equity markets by issuing common and/or preferred shares.
COPLP uses its Revolving Credit Facility to initially finance much of its investing activities. COPLP subsequently pays
down the facility using cash available from operations and proceeds from long-term borrowings (net of any related hedging
costs), equity issuances and sales of interests in properties. The lenders’ aggregate commitment under the facility is $800.0
million, with the ability for COPLP to increase the lenders’ aggregate commitment to $1.25 billion, provided that there is no
default under the facility and subject to the approval of the lenders. The facility matures in March 2023, and may be extended
by two six-month periods at COPLP’s option, provided that there is no default under the facility and COPLP pays an extension
fee of 0.075% of the total availability under the facility for each extension period. As of December 31, 2020, the maximum
borrowing capacity under this facility totaled $800.0 million, of which $657.0 million was available.
COPT has a program in place under which it may offer and sell common shares in at-the-market stock offerings having an
aggregate gross sales price of up to $300 million. Under this program, COPT may also, at its discretion, sell common shares
under forward equity sales agreements. The use of a forward equity sales agreement would enable us to lock in a price on a
sale of common shares when the agreement is executed but defer receiving the proceeds from the sale until a later date.
We believe that COPLP’s liquidity and capital resources are adequate for its near-term and longer-term requirements
without necessitating property sales. However, we may dispose of interests in properties opportunistically or when capital
markets otherwise warrant. We believe that we have the ability to raise additional equity by selling interests in data center
shells through joint ventures.
45
Our contractual obligations as of December 31, 2020 (in thousands):
2021
2022
2023
2024
2025
Thereafter
Total
For the Years Ending December 31,
Contractual obligations (1)
Debt (2)
Balloon payments due upon maturity
Scheduled principal payments (3)
$
Interest on debt (3)(4)
Development and redevelopment
obligations (5)(6)
Third-party construction obligations (6)(7)
Tenant and other building improvements
(3)(6)
— $ 482,882 $ 556,578 $ 277,649 $ 322,100 $ 445,623 $ 2,084,832
16,633
222,476
4,498
63,576
3,552
45,913
2,334
27,625
1,617
18,176
677
2,543
3,955
64,643
100,139
18,823
7,302
—
388
—
26,624
24,740
7,992
—
—
—
—
—
—
—
—
—
107,829
18,823
59,356
Property finance leases (principal and
interest) (3)
Property operating leases (3)
Total contractual cash obligations
14
3,211
28
141,489
$ 217,409 $ 586,344 $ 617,805 $ 311,042 $ 343,673 $ 575,193 $ 2,651,466
—
126,350
—
3,434
14
3,332
—
1,780
—
3,382
(1) The contractual obligations set forth in this table exclude contracts for property operations and certain other contracts entered into in the
normal course of business. Also excluded are accruals and payables incurred and interest rate derivative liabilities, which are reflected in
our reported liabilities (although debt and lease liabilities are included on the table).
(2) Represents scheduled principal amortization payments and maturities only and therefore excludes net debt discounts and deferred
financing costs of $14.5 million. As of December 31, 2020, maturities included $143.0 million in 2023 that may be extended to 2024,
subject to certain conditions.
(3) We expect to pay these items using cash flow from operations.
(4) Represents interest costs for our outstanding debt as of December 31, 2020 for the terms of such debt. For variable rate debt, the
amounts reflected above used December 31, 2020 interest rates on variable rate debt in computing interest costs for the terms of such
debt. We expect to pay these items using cash flow from operations.
(5) Represents contractual obligations pertaining to new development and redevelopment activities.
(6) Due to the long-term nature of certain development and construction contracts and leases included in these lines, the amounts reported in
the table represent our estimate of the timing for the related obligations being payable.
(7) Represents contractual obligations pertaining to projects for which we are acting as construction manager on behalf of unrelated parties
who are our clients. We expect to be reimbursed in full for these costs by our clients.
We expect to spend $275 million to $300 million on development costs and approximately $85 million on improvements
and leasing costs for operating properties (including the commitments set forth in the table above) in 2021. We expect to fund
the development costs initially using primarily borrowings under our Revolving Credit Facility. We expect to fund
improvements to existing operating properties using cash flow from operating activities.
Certain of our debt instruments require that we comply with a number of restrictive financial covenants, including
maximum leverage ratio, unencumbered leverage ratio, minimum net worth, minimum fixed charge coverage, minimum
unencumbered interest coverage ratio, minimum debt service and maximum secured indebtedness ratio. As of December 31,
2020, we were compliant with these covenants.
Off-Balance Sheet Arrangements
We had no material off-balance sheet arrangements during 2020.
Inflation
Most of our tenants are obligated to pay their share of a property’s operating expenses to the extent such expenses exceed
amounts established in their leases, which are based on historical expense levels. Some of our tenants are obligated to pay their
full share of a building’s operating expenses. These arrangements somewhat reduce our exposure to increases in such costs
resulting from inflation.
Recent Accounting Pronouncements
See Note 2 to our consolidated financial statements for information regarding recent accounting pronouncements.
46
Item 7A. Quantitative and Qualitative Disclosures about Market Risk
We are exposed to certain market risks, one of the most predominant of which is a change in interest rates. Increases in
interest rates can result in increased interest expense under our Revolving Credit Facility and other variable rate debt. Increases
in interest rates can also result in increased interest expense when our fixed rate debt matures and needs to be refinanced.
The following table sets forth as of December 31, 2020 our debt obligations and weighted average interest rates on debt
maturing each year (dollars in thousands):
2021
2022
2023
2024
2025
Thereafter
Total
For the Years Ending December 31,
Debt:
Fixed rate debt (1)
$ 3,875
$ 4,033
$ 416,590
$ 279,443
$ 301,302
$ 436,140
$ 1,441,383
Weighted average interest rate
Variable rate debt (2)
Weighted average interest rate (3)
$
3.97%
80
1.60%
3.98%
3.70%
$ 483,347
$ 143,540
$
1.39%
1.20%
5.16%
540
1.66%
4.99%
2.38%
3.86%
$ 22,415
$ 10,160
$ 660,082
1.70%
1.60%
1.37%
(1) Represents principal maturities only and therefore excludes net discounts and deferred financing costs of $14.5 million.
(2) As of December 31, 2020, maturities included $143.0 million in 2023 that may be extended to 2024, subject to certain conditions.
(3) The amounts reflected above used interest rates as of December 31, 2020 for variable rate debt.
The fair value of our debt was $2.1 billion as of December 31, 2020 and $1.9 billion as of December 31, 2019. If interest
rates had been 1% lower, the fair value of our fixed-rate debt would have increased by approximately $52 million as of
December 31, 2020 and $45 million as of December 31, 2019.
See Note 11 to our consolidated financial statements for information pertaining to interest rate swap contracts in place as of
December 31, 2020 and 2019 and their respective fair values.
Based on our variable-rate debt balances, including the effect of interest rate swap contracts, our interest expense would
have increased by $2.2 million in 2020 and $2.0 million in 2019 if the applicable LIBOR rate was 1% higher. Interest expense
in 2020 was more sensitive to a change in interest rates than 2019 due primarily to our having a higher average variable-rate
debt balance in 2020 including the effect of interest rate derivatives in place.
Item 8. Financial Statements and Supplementary Data
This item is included in a separate section at the end of this report beginning on page F-1.
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
None.
Item 9A. Controls and Procedures
I.
Internal Control Over Financial Reporting
COPT
Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the
effectiveness of COPT’s disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act) as of
December 31, 2020. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that COPT’s
disclosure controls and procedures as of December 31, 2020 were functioning effectively to provide reasonable assurance that
the information required to be disclosed in reports filed or submitted under the Securities Exchange Act of 1934 is (i) recorded,
processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and (ii) accumulated and
47
communicated to its management, including its principal executive and principal financial officers, or persons performing
similar functions, as appropriate to allow timely decisions regarding required disclosure.
(a) Management’s Report on Internal Control Over Financial Reporting
Management’s Report on Internal Control Over Financial Reporting is included in a separate section at the end of this
report on page F-2.
(b) Report of Independent Registered Public Accounting Firm
The Report of Independent Registered Public Accounting Firm is included in a separate section at the end of this report on
pages F-4 and F-5.
(c) Change in Internal Control over Financial Reporting
No change in COPT’s internal control over financial reporting occurred during the most recent fiscal quarter that has
materially affected, or is reasonably likely to materially affect, its internal control over financial reporting.
COPLP
Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the
effectiveness of COPLP’s disclosure controls and procedures (as defined in Rule 15d-15(e) under the Exchange Act) as of
December 31, 2020. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that
COPLP’s disclosure controls and procedures as of December 31, 2020 were functioning effectively to provide reasonable
assurance that the information required to be disclosed in reports filed or submitted under the Securities Exchange Act of 1934
is (i) recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and
(ii) accumulated and communicated to its management, including its principal executive and principal financial officers, or
persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.
(a) Management’s Report on Internal Control Over Financial Reporting
Management’s Report on Internal Control Over Financial Reporting is included in a separate section at the end of this
report on page F-3.
(b) Report of Independent Registered Public Accounting Firm
The Report of Independent Registered Public Accounting Firm is included in a separate section at the end of this report on
pages F-6 and F-7.
(c) Change in Internal Control over Financial Reporting
No change in COPLP’s internal control over financial reporting occurred during the most recent fiscal quarter that has
materially affected, or is reasonably likely to materially affect, its internal control over financial reporting.
Item 9B. Other Information
None.
48
PART III
Items 10, 11, 12, 13 & 14. Directors, Executive Officers and Corporate Governance; Executive Compensation; Security
Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters; Certain Relationships and
Related Transactions, and Director Independence; and Principal Accountant Fees and Services
For the information required by Item 10, Item 11, Item 12, Item 13 and Item 14, you should refer to COPT’s definitive
proxy statement relating to the 2021 Annual Meeting of COPT’s Shareholders to be filed with the Securities and Exchange
Commission no later than 120 days after the end of the fiscal year covered by this Annual Report on Form 10-K.
Item 15. Exhibits and Financial Statement Schedules
(a)
The following documents are filed as exhibits to this Form 10-K:
PART IV
1. Financial Statements. See “Index to consolidated financial statements” on page F-1 of this Annual Report on Form
10-K.
2. Financial Statement Schedules. See “Index to consolidated financial statements” on page F-1 of this Annual Report
on Form 10-K.
3. See section below entitled “Exhibits.”
(b) Exhibits. Refer to the Exhibit Index that follows. Unless otherwise noted, the file number of all documents incorporated
by reference is 1-14023.
EXHIBIT
NO.
DESCRIPTION
3.1
3.2
3.3
3.4
4
10.1
10.1.1
10.2.1*
10.2.2*
10.3.1*
10.3.2*
Articles Supplementary of Corporate Office Properties Trust filed with the State Department of Assessments
and Taxation of Maryland on September 22, 2014 (filed with the Company’s Current Report on Form 8-K dated
September 24, 2014 and incorporated herein by reference).
Amended and Restated Declaration of Trust of Corporate Office Properties Trust, as amended through May 15,
2018 (filed with the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2018 and
incorporated herein by reference).
Amended and Restated Bylaws of Corporate Office Properties Trust, as amended through May 2017 (filed with
the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2017 and incorporated herein by
reference).
Form of certificate for the Registrant’s Common Shares of Beneficial Interest, $0.01 par value per share (filed
with the Company’s Registration Statement on Form S-4 (Commission File No. 333-45649) and incorporated
herein by reference).
Description of Common Shares (filed with the Company’s Annual Report on Form 10-K for the year ended
December 31, 2019 and incorporated herein by reference).
Third Amended and Restated Limited Partnership Agreement of Corporate Office Properties, L.P. (filed with
the Company’s Current Report on Form 8-K dated December 6, 2018 and incorporated herein by reference).
First Amendment to Third Amended and Restated Limited Partnership Agreement of Corporate Office
Properties, L.P. dated July 31, 2019 (filed with the Company’s Quarterly Report on Form 10-Q for the quarter
ended June 30, 2019 and incorporated herein by reference).
Corporate Office Properties Trust Supplemental Nonqualified Deferred Compensation Plan (filed with the
Company’s Current Report on Form 8-K dated December 10, 2008 and incorporated herein by reference).
First Amendment to the Corporate Office Properties Trust Supplemental Nonqualified Deferred Compensation
Plan dated December 4, 2008 (filed with the Company’s Current Report on Form 8-K dated December 10, 2008
and incorporated herein by reference).
Corporate Office Properties Trust 2017 Omnibus Equity and Incentive Plan (included in Annex B to the
Company’s Definitive Proxy Statement on Schedule 14A filed with the Securities and Exchange Commission
on March 27, 2017 and incorporated herein by reference).
First Amendment to the Corporate Office Properties Trust 2017 Omnibus Equity and Incentive Plan (filed with
the Company’s Current Report on Form 8-K dated December 6, 2018 and incorporated herein by reference).
49
EXHIBIT
NO.
10.4.1*
10.4.2*
10.4.3*
10.5*
10.6*
10.7*
10.8*
10.9.1*
10.10*
10.11
10.12
10.13
10.14
10.15
10.16
10.17
10.18
10.19
DESCRIPTION
Form of Corporate Office Properties Trust Performance-Based Restricted Share Unit Award Certificate (2017
Omnibus Equity and Incentive Plan) (filed with the Company’s Annual Report on Form 10-K for the year ended
December 31, 2017 and incorporated herein by reference).
Form of Corporate Office Properties Trust Performance-Based Profit Interest Unit Award Certificate (2017
Omnibus Equity and Incentive Plan) (filed with the Company’s Quarterly Report on Form 10-Q for the quarter
ended March 31, 2019 and incorporated herein by reference).
Form of Corporate Office Properties Trust Time-Based Profit Interest Unit Award Certificate (2017 Omnibus
Equity and Incentive Plan) (filed with the Company’s Quarterly Report on Form 10-Q for the quarter ended
March 31, 2019 and incorporated herein by reference).
Corporate Office Properties Trust and Corporate Office Properties, L.P. Executive Change in Control and
Severance Plan (filed with the Company’s Current Report on Form 8-K dated March 13, 2013 and incorporated
herein by reference).
Letter Agreement, dated May 12, 2016, between Corporate Office Properties Trust, Corporate Office Properties,
L.P., and Stephen E. Budorick (filed with the Company’s Current Report on Form 8-K dated May 17, 2016 and
incorporated herein by reference).
Letter Agreement, dated November 1, 2016, between Corporate Office Properties Trust, Corporate Office
Properties, L.P., and Anthony Mifsud (filed with the Company’s Annual Report on Form 10-K for the year
ended December 31, 2017 and incorporated herein by reference).
Letter Agreement, dated November 1, 2016, between Corporate Office Properties Trust, Corporate Office
Properties, L.P., and Gregory J. Thor (filed with the Company’s Annual Report on Form 10-K for the year
ended December 31, 2017 and incorporated herein by reference).
Separation Agreement and Release, dated as of March 16, 2020, by and between Corporate Office Properties,
L.P. and Paul R. Adkins (filed with the Company’s Current Report on Form 8-K dated March 16, 2020 and
incorporated herein by reference).
Letter Agreement, dated November 30, 2020, between Corporate Office Properties Trust, Corporate Office
Properties, L.P., and Todd W. Hartman (filed herewith).
Amended and Restated Registration Rights Agreement, dated March 16, 1998, for the benefit of certain
shareholders of the Company (filed with the Company’s Quarterly Report on Form 10-Q for the quarter ended
June 30, 1998 and incorporated herein by reference).
Indenture, dated as of May 6, 2013, among Corporate Office Properties, L.P., as issuer, Corporate Office
Properties Trust, as guarantor, and U.S. Bank National Association, as trustee (filed with the Company’s
Current Report on Form 8-K dated May 7, 2013 and incorporated herein by reference).
Registration Rights Agreement, dated May 6, 2013, among Corporate Office Properties, L.P., Corporate Office
Properties Trust, J.P. Morgan Securities LLC and Wells Fargo Securities, LLC (filed with the Company’s
Current Report on Form 8-K dated May 7, 2013 and incorporated herein by reference).
Indenture, dated as of September 16, 2013, by and among Corporate Office Properties, L.P., as issuer, Corporate
Office Properties Trust, as guarantor, and U.S. Bank National Association, as trustee (filed with the Company’s
Current Report on Form 8-K dated September 19, 2013 and incorporated herein by reference).
First Supplemental Indenture, dated as of September 16, 2013, by and among Corporate Office Properties, L.P.,
as issuer, Corporate Office Properties Trust, as guarantor, and U.S. Bank National Association, as trustee (filed
with the Company’s Current Report on Form 8-K dated September 19, 2013 and incorporated herein by
reference).
Third Supplemental Indenture, dated as of June 29, 2015, among Corporate Office Properties, L.P., as issuer,
Corporate Office Properties Trust, as guarantor, and U.S. Bank National Association, as trustee (filed with the
Company’s Current Report on Form 8-K dated July 1, 2015 and incorporated herein by reference).
Indenture, dated as of April 8, 2019, among Corporate Office Properties, L.P., as issuer, Corporate Office
Properties Trust, as guarantor, and U.S. Bank National Association, as trustee (filed with the Company’s
Registration Statement on Form S-3 (Commission File No. 333-230764) and incorporated herein by reference).
First Supplemental Indenture, dated as of September 17, 2020, by and among Corporate Office Properties, L.P.,
as issuer, Corporate Office Properties Trust, as guarantor, and U.S. Bank National Association, as trustee (filed
with the Company’s Current Report on Form 8-K dated September 17, 2020 and incorporated herein by
reference).
Amended and Restated Term Loan Agreement, dated as of March 6, 2020, by and among Corporate Office
Properties, L.P., Corporate Office Properties Trust, Capital One, National Association, PNC Capital Markets
LLC and Regions Capital Markets, a division of Regions Bank, PNC Bank, National Association and Regions
Bank (filed with the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2020 and
incorporated herein by reference).
50
EXHIBIT
NO.
10.20
21.1
21.2
23.1
23.2
31.1
31.2
31.3
31.4
32.1
32.2
32.3
32.4
DESCRIPTION
Credit Agreement, dated as of October 10, 2018, by and among Corporate Office Properties, L.P.; Corporate
Office Properties Trust; KeyBank National Association; KeyBanc Capital Markets, Inc.; JPMorgan Chase Bank,
N.A.; Citibank, N.A.; Wells Fargo Bank, National Association; Barclays Bank PLC; Merrill Lynch, Pierce,
Fenner & Smith Incorporated; Bank of America, N.A.; U.S. Bank National Association; Capital One National
Association; Manufacturers and Traders Trust Company; PNC Bank, National Association; Regions Bank; and
TD Bank, N.A. (filed with the Company’s Current Report on Form 8-K dated October 16, 2018 and
incorporated herein by reference).
Subsidiaries of COPT (filed herewith).
Subsidiaries of COPLP (filed herewith).
COPT’s Consent of Independent Registered Public Accounting Firm (filed herewith).
COPLP’s Consent of Independent Registered Public Accounting Firm (filed herewith).
Certification of the Chief Executive Officer of Corporate Office Properties Trust required by
Rule 13a-14(a) under the Securities Exchange Act of 1934, as amended (filed herewith).
Certification of the Chief Financial Officer of Corporate Office Properties Trust required by
Rule 13a-14(a) under the Securities Exchange Act of 1934, as amended (filed herewith).
Certification of the Chief Executive Officer of Corporate Office Properties, L.P. required by
Rule 15d-14(a) under the Securities Exchange Act of 1934, as amended (filed herewith).
Certification of the Chief Financial Officer of Corporate Office Properties, L.P. required by
Rule 15d-14(a) under the Securities Exchange Act of 1934, as amended (filed herewith).
Certification of the Chief Executive Officer of Corporate Office Properties Trust required by
Rule 13a-14(b) under the Securities Exchange Act of 1934, as amended. (This exhibit shall not be deemed
“filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to
the liability of that section. Further, this exhibit shall not be deemed to be incorporated by reference into any
filing under the Securities Exchange Act of 1933, as amended, or the Securities Exchange Act of 1934, as
amended.) (Furnished herewith).
Certification of the Chief Financial Officer of Corporate Office Properties Trust required by
Rule 13a-14(b) under the Securities Exchange Act of 1934, as amended. (This exhibit shall not be deemed
“filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to
the liability of that section. Further, this exhibit shall not be deemed to be incorporated by reference into any
filing under the Securities Exchange Act of 1933, as amended, or the Securities Exchange Act of 1934, as
amended). (Furnished herewith).
Certification of the Chief Executive Officer of Corporate Office Properties, L.P. required by
Rule 15d-14(b) under the Securities Exchange Act of 1934, as amended. (This exhibit shall not be deemed
“filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to
the liability of that section. Further, this exhibit shall not be deemed to be incorporated by reference into any
filing under the Securities Exchange Act of 1933, as amended, or the Securities Exchange Act of 1934, as
amended.) (Furnished herewith).
Certification of the Chief Financial Officer of Corporate Office Properties, L.P. required by
Rule 15d-14(b) under the Securities Exchange Act of 1934, as amended. (This exhibit shall not be deemed
“filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to
the liability of that section. Further, this exhibit shall not be deemed to be incorporated by reference into any
filing under the Securities Exchange Act of 1933, as amended, or the Securities Exchange Act of 1934, as
amended). (Furnished herewith).
101.INS
XBRL Instance Document - The instance document does not appear in the interactive data file because its
XBRL tags are embedded within the Inline XBRL document (filed herewith).
101.SCH XBRL Taxonomy Extension Schema Document (filed herewith).
101.CAL XBRL Taxonomy Extension Calculation Linkbase Document (filed herewith).
101.LAB XBRL Extension Labels Linkbase (filed herewith).
101.PRE XBRL Taxonomy Extension Presentation Linkbase Document (filed herewith).
101.DEF XBRL Taxonomy Extension Definition Linkbase Document (filed herewith).
104
Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).
* - Indicates a compensatory plan or arrangement required to be filed as an exhibit to this Form 10-K.
(c)
Not applicable.
Item 16. Form 10-K Summary
None.
51
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this
report to be signed on its behalf by the undersigned, thereunto duly authorized.
SIGNATURES
Date: February 12, 2021
Date: February 12, 2021
By:
By:
CORPORATE OFFICE PROPERTIES TRUST
/s/ Stephen E. Budorick
Stephen E. Budorick
President and Chief Executive Officer
/s/ Anthony Mifsud
Anthony Mifsud
Executive Vice President and Chief Financial Officer
52
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following
persons on behalf of the Registrant and in the capacities and on the dates indicated:
Signatures
Title
Date
/s/ Stephen E. Budorick
(Stephen E. Budorick)
President and Chief Executive Officer and Trustee February 12, 2021
/s/ Anthony Mifsud
(Anthony Mifsud)
Executive Vice President and Chief Financial
Officer (Principal Financial Officer)
February 12, 2021
/s/ Gregory J. Thor
(Gregory J. Thor)
/s/ Thomas F. Brady
(Thomas F. Brady)
/s/ Robert L. Denton, Sr.
( Robert L. Denton, Sr.)
/s/ Philip L. Hawkins
(Philip L. Hawkins)
/s/ David M. Jacobstein
(David M. Jacobstein)
/s/ Steven D. Kesler
(Steven D. Kesler)
/s/ Letitia A. Long
(Letitia A. Long)
/s/ C. Taylor Pickett
(C. Taylor Pickett)
/s/ Lisa G. Trimberger
(Lisa G. Trimberger)
Senior Vice President, Controller and Chief
Accounting Officer (Principal Accounting Officer)
February 12, 2021
Chairman of the Board and Trustee
February 12, 2021
February 12, 2021
February 12, 2021
February 12, 2021
February 12, 2021
February 12, 2021
February 12, 2021
February 12, 2021
Trustee
Trustee
Trustee
Trustee
Trustee
Trustee
Trustee
53
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this
report to be signed on its behalf by the undersigned, thereunto duly authorized.
Date: February 12, 2021
Date: February 12, 2021
CORPORATE OFFICE PROPERTIES, L.P.
By: Corporate Office Properties Trust,
its General Partner
/s/ Stephen E. Budorick
Stephen E. Budorick
President and Chief Executive Officer
/s/ Anthony Mifsud
Anthony Mifsud
Executive Vice President and Chief Financial Officer
By:
By:
54
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following
persons on behalf of the Registrant and in the capacities and on the dates indicated:
Signatures
Title
Date
/s/ Stephen E. Budorick
(Stephen E. Budorick)
President and Chief Executive Officer and Trustee February 12, 2021
/s/ Anthony Mifsud
(Anthony Mifsud)
Executive Vice President and Chief Financial
Officer (Principal Financial Officer)
February 12, 2021
/s/ Gregory J. Thor
(Gregory J. Thor)
/s/ Thomas F. Brady
(Thomas F. Brady)
/s/ Robert L. Denton, Sr.
( Robert L. Denton, Sr.)
/s/ Philip L. Hawkins
(Philip L. Hawkins)
/s/ David M. Jacobstein
(David M. Jacobstein)
/s/ Steven D. Kesler
(Steven D. Kesler)
/s/ Letitia A. Long
(Letitia A. Long)
/s/ C. Taylor Pickett
(C. Taylor Pickett)
/s/ Lisa G. Trimberger
(Lisa G. Trimberger)
Senior Vice President, Controller and Chief
Accounting Officer (Principal Accounting Officer)
February 12, 2021
Chairman of the Board and Trustee
February 12, 2021
February 12, 2021
February 12, 2021
February 12, 2021
February 12, 2021
February 12, 2021
February 12, 2021
February 12, 2021
Trustee
Trustee
Trustee
Trustee
Trustee
Trustee
Trustee
55
INDEX TO FINANCIAL STATEMENTS AND SCHEDULE
Management’s Reports on Internal Control Over Financial Reporting
Corporate Office Properties Trust
Corporate Office Properties, L.P.
Reports of Independent Registered Public Accounting Firm
Corporate Office Properties Trust
Corporate Office Properties, L.P.
Consolidated Financial Statements of Corporate Office Properties Trust
Consolidated Balance Sheets as of December 31, 2020 and 2019
Consolidated Statements of Operations for the Years Ended December 31, 2020, 2019 and 2018
Consolidated Statements of Comprehensive Income for the Years Ended December 31, 2020, 2019
and 2018
Consolidated Statements of Equity for the Years Ended December 31, 2020, 2019 and 2018
Consolidated Statements of Cash Flows for the Years Ended December 31, 2020, 2019 and 2018
Consolidated Financial Statements of Corporate Office Properties, L.P.
Consolidated Balance Sheets as of December 31, 2020 and 2019
Consolidated Statements of Operations for the Years Ended December 31, 2020, 2019 and 2018
Consolidated Statements of Comprehensive Income for the Years Ended December 31, 2020, 2019
and 2018
Consolidated Statements of Equity for the Years Ended December 31, 2020, 2019 and 2018
Consolidated Statements of Cash Flows for the Years Ended December 31, 2020, 2019 and 2018
Notes to Consolidated Financial Statements
Financial Statements Schedule
Schedule III - Real Estate and Accumulated Depreciation as of December 31, 2020
F-2
F-3
F-4
F-6
F-8
F-9
F-10
F-11
F-12
F-14
F-15
F-16
F-17
F-18
F-20
F-62
F-1
Corporate Office Properties Trust Management’s Report on Internal Control Over Financial Reporting
Management is responsible for establishing and maintaining adequate internal control over financial reporting, and for
performing an assessment of the effectiveness of internal control over financial reporting as of December 31, 2020. Internal
control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting
principles. Our internal control over financial reporting includes those policies and procedures that (i) pertain to the
maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our assets; (ii)
provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in
accordance with generally accepted accounting principles, and that our receipts and expenditures are being made only in
accordance with authorizations of our management and trustees; and (iii) provide reasonable assurance regarding prevention or
timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial
statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect
misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may
become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may
deteriorate.
Management performed an assessment of the effectiveness of our internal control over financial reporting as of
December 31, 2020 based upon criteria in Internal Control - Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission (“COSO”). Based on our assessment, management determined that our internal
control over financial reporting was effective as of December 31, 2020 based on the criteria in Internal Control - Integrated
Framework (2013) issued by the COSO.
The effectiveness of our internal control over financial reporting as of December 31, 2020 has been audited by
PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in their report which appears herein.
F-2
Corporate Office Properties, L.P. Management’s Report on Internal Control Over Financial Reporting
Management is responsible for establishing and maintaining adequate internal control over financial reporting, and for
performing an assessment of the effectiveness of internal control over financial reporting as of December 31, 2020. Internal
control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting
principles. Our internal control over financial reporting includes those policies and procedures that (i) pertain to the
maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our assets; (ii)
provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in
accordance with generally accepted accounting principles, and that our receipts and expenditures are being made only in
accordance with authorizations of our management and trustees; and (iii) provide reasonable assurance regarding prevention or
timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial
statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect
misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may
become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may
deteriorate.
Management performed an assessment of the effectiveness of our internal control over financial reporting as of
December 31, 2020 based upon criteria in Internal Control - Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission (“COSO”). Based on our assessment, management determined that our internal
control over financial reporting was effective as of December 31, 2020 based on the criteria in Internal Control - Integrated
Framework (2013) issued by the COSO.
The effectiveness of our internal control over financial reporting as of December 31, 2020 has been audited by
PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in their report which appears herein.
F-3
Report of Independent Registered Public Accounting Firm
To the Board of Trustees and Shareholders of Corporate Office Properties Trust
Opinions on the Financial Statements and Internal Control over Financial Reporting
We have audited the accompanying consolidated balance sheets of Corporate Office Properties Trust and its subsidiaries (the
“Company”) as of December 31, 2020 and 2019, and the related consolidated statements of operations, of comprehensive
income, of equity and of cash flows for each of the three years in the period ended December 31, 2020, including the related
notes and financial statement schedule listed in the accompanying index (collectively referred to as the “consolidated financial
statements”). We also have audited the Company’s internal control over financial reporting as of December 31, 2020, based on
criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of
the Treadway Commission (COSO).
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial
position of the Company as of December 31, 2020 and 2019, and the results of its operations and its cash flows for each of the
three years in the period ended December 31, 2020 in conformity with accounting principles generally accepted in the United
States of America. Also in our opinion, the Company maintained, in all material respects, effective internal control over
financial reporting as of December 31, 2020, based on criteria established in Internal Control - Integrated Framework (2013)
issued by the COSO.
Basis for Opinions
The Company’s management is responsible for these consolidated financial statements, for maintaining effective internal
control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included
in the accompanying Management’s Report on Internal Control Over Financial Reporting. Our responsibility is to express
opinions on the Company’s consolidated financial statements and on the Company’s internal control over financial reporting
based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United
States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities
laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the
audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement,
whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material
respects.
Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement
of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks.
Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated
financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by
management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal
control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the
risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based
on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the
circumstances. We believe that our audits provide a reasonable basis for our opinions.
Definition and Limitations of Internal Control over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally
accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures
that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and
dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit
preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and
expenditures of the company are being made only in accordance with authorizations of management and trustees of the
company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or
disposition of the company’s assets that could have a material effect on the financial statements.
F-4
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate
because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Critical Audit Matters
The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial
statements that was communicated or required to be communicated to the audit committee and that (i) relates to accounts or
disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or
complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated
financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate
opinion on the critical audit matter or on the accounts or disclosures to which it relates.
Determination of Expected Lease End Date for United States Government Leases with One-year Renewal Options and/or Early
Termination Rights
As described in Notes 2 and 5 to the consolidated financial statements, total lease revenue for the year ended December 31,
2020 was $536.1 million and a significant portion of the Company’s leases are with the United States Government, which
represented 25% of the fixed lease revenues for the year ended December 31, 2020. The majority of United States Government
leases contain one-year renewal options and/or provide for early termination rights. The Company recognizes minimum rental
payments on a straight-line basis over the terms of each lease. The lease term of a lease includes the noncancellable periods of
the lease along with periods covered by: (1) a tenant option to extend the lease if the tenant is reasonably certain to exercise that
option; (2) a tenant option to terminate the lease if the tenant is reasonably certain not to exercise that option; and (3) an option
to extend (or not to terminate) the lease in which exercise of the option is controlled by the Company as the lessor. When
assessing the expected lease end date, management uses judgment in contemplating the significance of any penalties a tenant
may incur should it choose not to exercise any existing options to extend the lease or exercise any existing options to terminate
the lease; and economic incentives for the tenant based on any existing contract, asset, entity or market-based factors in the
lease.
The principal considerations for our determination that performing procedures relating to the determination of the expected
lease end date for United States Government leases with one-year renewal options and/or early termination rights is a critical
audit matter are the significant judgments by management when determining the expected lease end date for the United States
Government leases with one-year renewal options and/or early termination rights, which in turn led to a high degree of auditor
judgment, subjectivity and audit effort in performing procedures and evaluating audit evidence relating to the determination of
such expected lease end dates.
Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall
opinion on the consolidated financial statements. These procedures included testing the effectiveness of controls relating to the
revenue recognition for leases, including controls over the determination of the expected lease end dates for United States
Government leases with one-year renewal options and/or early termination rights. These procedures also included, among
others, testing management’s process for determining the expected lease end date for a sample of United States Government
leases with one-year renewal options and/or early termination rights, including evaluating the reasonableness of significant
assumptions utilized by management, related to the significance of any penalties a tenant may incur should it choose not to
exercise any existing options to extend the lease or exercise any existing options to terminate the lease; and economic incentives
for the tenant based on any existing contract, asset, entity or market-based factors in the lease. Evaluating the assumptions
included evaluating whether the assumptions used were reasonable considering past experience with the tenant and the rental
property and whether the assumptions were consistent with evidence obtained in other areas of the audit.
/s/ PricewaterhouseCoopers LLP
Baltimore, Maryland
February 12, 2021
We have served as the Company’s auditor since 1997.
F-5
Report of Independent Registered Public Accounting Firm
To the Board of Trustees and Unitholders of Corporate Office Properties, L.P.
Opinions on the Financial Statements and Internal Control over Financial Reporting
We have audited the accompanying consolidated balance sheets of Corporate Office Properties, L.P. and its subsidiaries (the
“Operating Partnership”) as of December 31, 2020 and 2019, and the related consolidated statements of operations, of
comprehensive income, of equity and of cash flows for each of the three years in the period ended December 31, 2020,
including the related notes and financial statement schedule listed in the accompanying index (collectively referred to as the
“consolidated financial statements”). We also have audited the Operating Partnership’s internal control over financial reporting
as of December 31, 2020, based on criteria established in Internal Control - Integrated Framework (2013) issued by the
Committee of Sponsoring Organizations of the Treadway Commission (COSO).
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial
position of the Operating Partnership as of December 31, 2020 and 2019, and the results of its operations and its cash flows for
each of the three years in the period ended December 31, 2020 in conformity with accounting principles generally accepted in
the United States of America. Also in our opinion, the Operating Partnership maintained, in all material respects, effective
internal control over financial reporting as of December 31, 2020, based on criteria established in Internal Control - Integrated
Framework (2013) issued by the COSO.
Basis for Opinions
The Operating Partnership’s management is responsible for these consolidated financial statements, for maintaining effective
internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting,
included in the accompanying Management’s Report on Internal Control Over Financial Reporting. Our responsibility is to
express opinions on the Operating Partnership’s consolidated financial statements and on the Operating Partnership’s internal
control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company
Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Operating
Partnership in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and
Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the
audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement,
whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material
respects.
Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement
of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks.
Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated
financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by
management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal
control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the
risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based
on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the
circumstances. We believe that our audits provide a reasonable basis for our opinions.
Definition and Limitations of Internal Control over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally
accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures
that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and
dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit
preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and
expenditures of the company are being made only in accordance with authorizations of management and trustees of the
company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or
disposition of the company’s assets that could have a material effect on the financial statements.
F-6
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate
because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Critical Audit Matters
The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial
statements that was communicated or required to be communicated to the audit committee and that (i) relates to accounts or
disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or
complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated
financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate
opinion on the critical audit matter or on the accounts or disclosures to which it relates.
Determination of Expected Lease End Date for United States Government Leases with One-year Renewal Options and/or Early
Termination Rights
As described in Notes 2 and 5 to the consolidated financial statements, total lease revenue for the year ended December 31,
2020 was $536.1 million and a significant portion of the Operating Partnership’s leases are with the United States Government,
which represented 25% of the fixed lease revenues for the year ended December 31, 2020. The majority of United States
Government leases contain one-year renewal options and/or provide for early termination rights. The Operating Partnership
recognizes minimum rental payments on a straight-line basis over the terms of each lease. The lease term of a lease includes the
noncancellable periods of the lease along with periods covered by: (1) a tenant option to extend the lease if the tenant is
reasonably certain to exercise that option; (2) a tenant option to terminate the lease if the tenant is reasonably certain not to
exercise that option; and (3) an option to extend (or not to terminate) the lease in which exercise of the option is controlled by
the Operating Partnership as the lessor. When assessing the expected lease end date, management uses judgment in
contemplating the significance of any penalties a tenant may incur should it choose not to exercise any existing options to
extend the lease or exercise any existing options to terminate the lease; and economic incentives for the tenant based on any
existing contract, asset, entity or market-based factors in the lease.
The principal considerations for our determination that performing procedures relating to the determination of the expected
lease end date for United States Government leases with one-year renewal options and/or early termination rights is a critical
audit matter are the significant judgments by management when determining the expected lease end date for the United States
Government leases with one-year renewal options and/or early termination rights, which in turn led to a high degree of auditor
judgment, subjectivity and audit effort in performing procedures and evaluating audit evidence relating to the determination of
such expected lease end dates.
Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall
opinion on the consolidated financial statements. These procedures included testing the effectiveness of controls relating to the
revenue recognition for leases, including controls over the determination of the expected lease end dates for United States
Government leases with one-year renewal options and/or early termination rights. These procedures also included, among
others, testing management’s process for determining the expected lease end date for a sample of United States Government
leases with one-year renewal options and/or early termination rights, including evaluating the reasonableness of significant
assumptions utilized by management, related to the significance of any penalties a tenant may incur should it choose not to
exercise any existing options to extend the lease or exercise any existing options to terminate the lease; and economic incentives
for the tenant based on any existing contract, asset, entity or market-based factors in the lease. Evaluating the assumptions
included evaluating whether the assumptions used were reasonable considering past experience with the tenant and the rental
property and whether the assumptions were consistent with evidence obtained in other areas of the audit.
/s/ PricewaterhouseCoopers LLP
Baltimore, Maryland
February 12, 2021
We have served as the Operating Partnership’s auditor since 2013.
F-7
Corporate Office Properties Trust and Subsidiaries
Consolidated Balance Sheets
(in thousands, except share data)
Assets
Properties, net:
Operating properties, net
Projects in development or held for future development
Total properties, net
Property - operating right-of-use assets
Property - finance right-of-use assets
Cash and cash equivalents
Investment in unconsolidated real estate joint ventures
Accounts receivable, net
Deferred rent receivable
Intangible assets on real estate acquisitions, net
Deferred leasing costs (net of accumulated amortization of $30,375 and $33,782, respectively)
Investing receivables (net of allowance for credit losses of $2,851 at December 31, 2020)
Prepaid expenses and other assets, net
Total assets
Liabilities and equity
Liabilities:
Debt, net
Accounts payable and accrued expenses
Rents received in advance and security deposits
Dividends and distributions payable
Deferred revenue associated with operating leases
Property - operating lease liabilities
Interest rate derivatives
Other liabilities
Total liabilities
Commitments and contingencies (Note 20)
Redeemable noncontrolling interests
Equity:
Corporate Office Properties Trust’s shareholders’ equity:
Common Shares of beneficial interest ($0.01 par value; 150,000,000 shares authorized; shares
issued and outstanding of 112,181,759 at December 31, 2020 and 112,068,705 at December 31,
2019)
Additional paid-in capital
Cumulative distributions in excess of net income
Accumulated other comprehensive loss
Total Corporate Office Properties Trust’s shareholders’ equity
Noncontrolling interests in subsidiaries:
Common units in COPLP
Preferred units in COPLP
Other consolidated entities
Noncontrolling interests in subsidiaries
Total equity
Total liabilities, redeemable noncontrolling interests and equity
See accompanying notes to consolidated financial statements.
F-8
December 31,
2020
2019
$ 3,115,280 $ 2,772,647
568,239
3,340,886
27,864
40,458
14,733
51,949
35,444
87,736
27,392
58,392
73,523
96,076
$ 4,077,023 $ 3,854,453
447,269
3,562,549
40,570
40,425
18,369
29,303
41,637
92,876
19,344
58,613
68,754
104,583
$ 2,086,918 $ 1,831,139
148,746
33,620
31,263
7,361
17,317
25,682
10,649
2,105,777
142,717
33,425
31,231
10,832
30,746
9,522
12,490
2,357,881
25,430
29,431
1,122
2,478,906
(809,836)
(9,157)
1,661,035
1,121
2,481,558
(778,275)
(25,444)
1,678,960
19,597
20,465
8,800
—
11,888
12,212
40,285
32,677
1,693,712
1,719,245
$ 4,077,023 $ 3,854,453
Corporate Office Properties Trust and Subsidiaries
Consolidated Statements of Operations
(in thousands, except per share data)
For the Years Ended December 31,
2020
2019
2018
Revenues
Lease revenue
Other property revenue
Construction contract and other service revenues
Total revenues
Operating expenses
Property operating expenses
Depreciation and amortization associated with real estate operations
Construction contract and other service expenses
Impairment losses
General, administrative and leasing expenses
Business development expenses and land carry costs
Total operating expenses
Interest expense
Interest and other income
Credit loss recoveries
Gain on sales of real estate
Gain on sale of investment in unconsolidated real estate joint venture
Loss on early extinguishment of debt
Loss on interest rate derivatives
Income before equity in income of unconsolidated entities and income taxes
Equity in income of unconsolidated entities
Income tax (expense) benefit
Net income
Net income attributable to noncontrolling interests:
Common units in COPLP
Preferred units in COPLP
Other consolidated entities
Net income attributable to COPT common shareholders
Earnings per common share: (1)
$ 536,127 $ 522,472 $ 512,327
4,926
60,859
578,112
4,991
113,763
641,226
2,598
70,640
609,365
203,840
138,193
67,615
1,530
33,001
4,473
448,652
198,143
137,069
109,962
329
35,402
4,239
485,144
(67,937)
8,574
933
30,209
29,416
(7,306)
(53,196)
101,406
1,825
(353)
102,878
(71,052)
7,894
—
105,230
—
—
—
198,154
1,633
217
200,004
201,035
137,116
58,326
2,367
28,900
5,840
433,584
(75,385)
4,358
—
2,340
—
(258)
—
75,583
2,697
363
78,643
(1,180)
(300)
(4,024)
(1,742)
(660)
(3,940)
$ 97,374 $ 191,692 $ 72,301
(2,363)
(564)
(5,385)
Net income attributable to COPT common shareholders - basic
Net income attributable to COPT common shareholders - diluted
$
$
0.87 $
0.87 $
1.72 $
1.71 $
0.69
0.69
(1) Basic and diluted earnings per common share are calculated based on amounts attributable to common shareholders of Corporate Office
Properties Trust.
See accompanying notes to consolidated financial statements.
F-9
Corporate Office Properties Trust and Subsidiaries
Consolidated Statements of Comprehensive Income
(in thousands)
For the Years Ended December 31,
Net income
Other comprehensive income (loss)
2020
2019
$ 102,878 $ 200,004 $ 78,643
2018
Unrealized loss on interest rate derivatives
Reclassification adjustments on interest rate derivatives recognized in
interest expense
(39,454)
(24,321)
(2,373)
3,725
(1,415)
(407)
Reclassification adjustments on interest rate derivatives recognized in loss
on interest rate derivatives
Equity in other comprehensive income of equity method investee
Total other comprehensive income (loss)
Comprehensive income
Comprehensive income attributable to noncontrolling interests
Comprehensive income attributable to COPT
—
199
(25,537)
51,865
—
16,136
119,014
—
210
(2,570)
76,073
(6,453)
$ 113,661 $ 166,486 $ 69,620
174,467
(5,353)
(7,981)
See accompanying notes to consolidated financial statements.
F-10
Corporate Office Properties Trust and Subsidiaries
Consolidated Statements of Equity
(Dollars in thousands)
F
-
1
1
Balance at December 31, 2017 (101,292,299 common shares outstanding)
Cumulative effect of accounting change for adoption of hedge accounting guidance
Balance at December 31, 2017, as adjusted
Conversion of common units to common shares (1,904,615 shares)
Redemption of common units
Common shares issued under forward equity sale agreements (5,907,000 shares)
Common shares issued under at-the-market program (991,664 shares)
Share-based compensation (146,290 shares issued, net of redemptions)
Redemption of vested equity awards
Adjustments to noncontrolling interests resulting from changes in ownership of COPLP
Comprehensive income
Dividends
Distributions to owners of common and preferred units in COPLP
Distributions to noncontrolling interest in other consolidated entities
Adjustment to arrive at fair value of redeemable noncontrolling interests
Balance at December 31, 2018 (110,241,868 common shares outstanding)
Conversion of common units to common shares (105,039 shares)
Redemption of common units
Common shares issued to the public (1,000 shares)
Common shares issued under forward equity sale agreements (1,614,087 shares)
Share-based compensation (106,711 shares issued, net of redemptions)
Redemption of vested equity awards
Adjustments to noncontrolling interests resulting from changes in ownership of COPLP
Comprehensive income
Dividends
Distributions to owners of common and preferred units in COPLP
Contributions from noncontrolling interests in other consolidated entities
Distributions to noncontrolling interests in other consolidated entities
Adjustment to arrive at fair value of redeemable noncontrolling interests
Balance at December 31, 2019 (112,068,705 common shares outstanding)
Cumulative effect of accounting change for adoption of credit loss guidance
Balance at December 31, 2019, as adjusted
Conversion of common units to common shares (14,009 shares)
Redemption of preferred units
Share-based compensation (99,045 shares issued, net of redemptions)
Redemption of vested equity awards
Adjustments to noncontrolling interests resulting from changes in ownership of COPLP
Comprehensive income
Dividends
Distributions to owners of common and preferred units in COPLP
Contributions from noncontrolling interests in other consolidated entities
Distributions to noncontrolling interests in other consolidated entities
Adjustment to arrive at fair value of redeemable noncontrolling interests
Balance at December 31, 2020 (112,181,759 common shares outstanding)
Common
Shares
Additional
Paid-in
Capital
Cumulative
Distributions in
Excess of Net
Income
Accumulated
Other
Comprehensive
Income (Loss)
Noncontrolling
Interests
Total
$
1,013 $ 2,201,047 $
—
1,013
19
—
59
10
1
—
—
—
—
—
—
—
1,102
1
—
—
16
2
—
—
—
—
—
—
—
—
1,121
—
1,121
—
—
1
—
—
—
—
—
—
—
—
—
2,201,047
27,394
—
172,235
29,722
6,962
(1,702)
(2,466)
—
—
—
—
(1,837)
2,431,355
1,585
—
29
46,438
6,131
(2,064)
(167)
—
—
—
—
—
(1,749)
2,481,558
—
2,481,558
211
—
4,676
(1,699)
767
—
—
—
—
—
(6,607)
$
1,122 $ 2,478,906 $
(802,085) $
(276)
(802,361)
—
—
—
—
—
—
—
72,301
(116,748)
—
—
—
(846,808)
—
—
—
—
—
—
—
191,692
(123,159)
—
—
—
—
(778,275)
(5,541)
(783,816)
—
—
—
—
—
97,374
(123,394)
—
—
—
—
(809,836) $
2,167 $
276
2,443
—
—
—
—
—
—
—
(2,681)
—
—
—
—
(238)
—
—
—
—
—
—
—
(25,206)
—
—
—
—
—
(25,444)
—
(25,444)
—
—
—
—
—
16,287
—
—
—
—
—
(9,157) $
—
66,165
(27,413)
(339)
—
—
—
—
2,466
3,930
—
(3,157)
(15)
—
41,637
(1,586)
(25)
—
—
1,323
—
167
4,146
—
(2,057)
2,570
(5,890)
—
40,285
—
40,285
(211)
(8,800)
1,907
—
(767)
1,927
—
(1,746)
112
(30)
—
66,165 $ 1,468,307
—
1,468,307
—
(339)
172,294
29,732
6,963
(1,702)
—
73,550
(116,748)
(3,157)
(15)
(1,837)
1,627,048
—
(25)
29
46,454
7,456
(2,064)
—
170,632
(123,159)
(2,057)
2,570
(5,890)
(1,749)
1,719,245
(5,541)
1,713,704
—
(8,800)
6,584
(1,699)
—
115,588
(123,394)
(1,746)
112
(30)
(6,607)
32,677 $ 1,693,712
See accompanying notes to consolidated financial statements.
Corporate Office Properties Trust and Subsidiaries
Consolidated Statements of Cash Flows
(in thousands)
For the Years Ended December 31,
2018
2019
2020
Cash flows from operating activities
Revenues from real estate operations received
Construction contract and other service revenues received
Property operating expenses paid
Construction contract and other service expenses paid
General, administrative, leasing, business development and land carry costs paid
Interest expense paid
Lease incentives paid
Sales-type lease costs paid
Income taxes paid
Other
Net cash provided by operating activities
Cash flows from investing activities
Development and redevelopment of properties
Tenant improvements on operating properties
Other capital improvements on operating properties
Proceeds from property dispositions
Distribution from unconsolidated real estate joint venture following
contribution of properties
Sale of properties
Proceeds from sale of investment in unconsolidated real estate joint venture
Non-operating distributions from unconsolidated real estate joint venture
Investing receivables funded
Investing receivables payments received
Leasing costs paid
Settlement of interest rate derivatives
Other
Net cash used in investing activities
Cash flows from financing activities
Proceeds from debt
Revolving Credit Facility
Unsecured senior notes
Other debt proceeds
Repayments of debt
Revolving Credit Facility
Unsecured senior notes
Scheduled principal amortization
Other debt repayments
Deferred financing costs paid
Payments on finance lease liabilities
Net proceeds from issuance of common shares
Common share dividends paid
Distributions paid to noncontrolling interests in COPLP
Distributions paid to noncontrolling interests in other consolidated entities
Distributions paid to redeemable noncontrolling interests
Redemption of preferred units
Payments in connection with early extinguishment of debt
Other
Net cash provided by (used in) financing activities
Net increase (decrease) in cash and cash equivalents and restricted cash
Cash and cash equivalents and restricted cash
Beginning of year
End of year
78,470
(202,660)
(67,760)
(31,406)
(61,471)
(11,925)
(10,747)
(4)
$ 542,727 $ 530,280 $ 528,066
33,579
(197,647)
(79,386)
(27,006)
(72,460)
(7,679)
—
(21)
3,036
180,482
94,677
(196,611)
(96,789)
(29,347)
(67,475)
(9,482)
—
—
3,305
228,558
3,200
238,424
(344,401)
(28,754)
(32,756)
(394,444)
(23,809)
(24,659)
(159,994)
(35,098)
(24,223)
—
83,165
59,841
3,695
(272)
8,000
(16,938)
(53,130)
(4,242)
(325,792)
201,499
108,128
—
22,426
(11,180)
—
(16,825)
—
849
(138,015)
—
—
—
1,942
(97)
4,455
(10,926)
—
(8,977)
(232,918)
664,000
395,264
206,931
409,000
—
43,615
381,000
—
13,406
(698,000)
(300,000)
(4,125)
(12,031)
(2,400)
(854)
—
(123,367)
(1,825)
(30)
(14,357)
(8,800)
(7,029)
(2,106)
91,271
3,903
(445,000)
—
(4,310)
(77)
(448)
(223)
46,415
(122,657)
(2,166)
(5,890)
(1,659)
—
—
(963)
(84,363)
6,180
(294,000)
—
(4,240)
(100,000)
(8,292)
(15,379)
202,065
(114,286)
(3,699)
(16)
(1,382)
—
—
(5,622)
49,555
(2,881)
18,130
22,033 $
11,950
18,130 $
14,831
11,950
$
See accompanying notes to consolidated financial statements.
F-12
Corporate Office Properties Trust and Subsidiaries
Consolidated Statements of Cash Flows (continued)
(in thousands)
Reconciliation of net income to net cash provided by operating activities:
Net income
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and other amortization
Impairment losses
Amortization of deferred financing costs and net debt discounts
Increase in deferred rent receivable
Gain on sales of real estate
Gain on sale of investment in unconsolidated real estate joint venture
Share-based compensation
Loss on early extinguishment of debt
Loss on interest rate derivatives
Other
Changes in operating assets and liabilities:
(Increase) decrease in accounts receivable
Increase in prepaid expenses and other assets, net
Increase (decrease) in accounts payable, accrued expenses and other liabilities
(Decrease) increase in rents received in advance and security deposits
Net cash provided by operating activities
Reconciliation of cash and cash equivalents and restricted cash:
Cash and cash equivalents at beginning of period
Restricted cash at beginning of period
Cash and cash equivalents and restricted cash at beginning of period
Cash and cash equivalents at end of period
Restricted cash at end of period
Cash and cash equivalents and restricted cash at end of period
Supplemental schedule of non-cash investing and financing activities:
(Decrease) increase in accrued capital improvements, leasing and other investing
activity costs
Finance right-of-use asset contributed by noncontrolling interest in joint venture
Recognition of operating right-of-use assets and related lease liabilities
Non-cash changes from property dispositions:
Contribution of properties to unconsolidated real estate joint venture
Investment in unconsolidated real estate joint ventures retained in disposition
Non-cash changes from recognition of property sale previously accounted for as
financing arrangement:
Decrease in assets held for sale, net
Decrease in deferred property sale
(Decrease) increase in fair value of derivatives applied to accumulated other
comprehensive income and noncontrolling interests
Equity in other comprehensive income of an equity method investee
Dividends/distributions payable
Decrease in noncontrolling interests and increase in shareholders’ equity in
connection with the conversion of common units into common shares
Adjustments to noncontrolling interests resulting from changes in COPLP
ownership
Increase in redeemable noncontrolling interests and decrease in equity to carry
redeemable noncontrolling interests at fair value
For the Years Ended December 31,
2020
2019
2018
$ 102,878 $ 200,004 $
78,643
140,031
1,530
4,272
(2,168)
(30,209)
(29,416)
6,503
7,306
53,196
(7,855)
138,903
329
3,639
(4,091)
(105,230)
—
6,714
—
—
(6,022)
139,063
2,367
3,393
(4,621)
(2,340)
—
6,376
258
—
(2,991)
(6,377)
(7,626)
6,554
(195)
5,673
(987)
(49,179)
4,827
$ 238,424 $ 228,558 $ 180,482
(7,141)
(22,457)
20,369
3,541
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
14,733 $
3,397
18,130 $
18,369 $
3,664
22,033 $
8,066 $
3,884
11,950 $
14,733 $
3,397
18,130 $
12,261
2,570
14,831
8,066
3,884
11,950
(9,421) $
— $
13,340 $
35,913 $
2,570 $
840 $
6,570
—
—
— $ 158,542 $
34,506 $
11,474 $
—
—
— $
— $
— $
— $
(42,226)
43,377
(35,728) $
— $
31,231 $
(25,817) $
199 $
31,263 $
2,915
210
30,856
211 $
1,586 $
27,413
(767) $
167 $
2,466
6,607 $
1,749 $
1,837
See accompanying notes to consolidated financial statements.
F-13
Corporate Office Properties, L.P. and Subsidiaries
Consolidated Balance Sheets
(in thousands, except unit data)
Assets
Properties, net:
Operating properties, net
Projects in development or held for future development
Total properties, net
Property - operating right-of-use assets
Property - finance right-of-use assets
Cash and cash equivalents
Investment in unconsolidated real estate joint ventures
Accounts receivable, net
Deferred rent receivable
Intangible assets on real estate acquisitions, net
Deferred leasing costs (net of accumulated amortization of $30,375 and $33,782, respectively)
Investing receivables (net of allowance for credit losses of $2,851 at December 31, 2020)
Prepaid expenses and other assets, net
Total assets
Liabilities and equity
Liabilities:
Debt, net
Accounts payable and accrued expenses
Rents received in advance and security deposits
Distributions payable
Deferred revenue associated with operating leases
Property - operating lease liabilities
Interest rate derivatives
Other liabilities
Total liabilities
Commitments and contingencies (Note 20)
Redeemable noncontrolling interests
Equity:
Corporate Office Properties, L.P.’s equity:
Preferred units held by limited partner, 352,000 preferred units outstanding at December 31,
2019
Common units, 112,181,759 and 112,068,705 held by the general partner and 1,352,430 and
1,482,425 held by limited partners at December 31, 2020 and 2019, respectively
Accumulated other comprehensive loss
Total Corporate Office Properties, L.P.’s equity
Noncontrolling interests in subsidiaries
Total equity
Total liabilities, redeemable noncontrolling interests and equity
See accompanying notes to consolidated financial statements.
F-14
December 31,
2020
2019
$ 3,115,280 $ 2,772,647
568,239
3,340,886
27,864
40,458
14,733
51,949
35,444
87,736
27,392
58,392
73,523
93,016
$ 4,073,996 $ 3,851,393
447,269
3,562,549
40,570
40,425
18,369
29,303
41,637
92,876
19,344
58,613
68,754
101,556
$ 2,086,918 $ 1,831,139
148,746
33,620
31,263
7,361
17,317
25,682
7,589
2,102,717
142,717
33,425
31,231
10,832
30,746
9,522
9,463
2,354,854
25,430
29,431
—
8,800
(9,155)
1,690,610
1,724,159
(25,648)
1,707,311
1,681,455
11,934
12,257
1,693,712
1,719,245
$ 4,073,996 $ 3,851,393
Corporate Office Properties, L.P. and Subsidiaries
Consolidated Statements of Operations
(in thousands, except per unit data)
For the Years Ended December 31,
2018
2019
2020
Revenues
Lease revenue
Other property revenue
Construction contract and other service revenues
Total revenues
Operating expenses
Property operating expenses
Depreciation and amortization associated with real estate operations
Construction contract and other service expenses
Impairment losses
General, administrative and leasing expenses
Business development expenses and land carry costs
Total operating expenses
Interest expense
Interest and other income
Credit loss recoveries
Gain on sales of real estate
Gain on sale of investment in unconsolidated real estate joint venture
Loss on early extinguishment of debt
Loss on interest rate derivatives
Income before equity in income of unconsolidated entities and income taxes
Equity in income of unconsolidated entities
Income tax (expense) benefit
Net income
Net income attributable to noncontrolling interests in consolidated entities
Net income attributable to COPLP
Preferred unit distributions
Net income attributable to COPLP common unitholders
Earnings per common unit: (1)
$ 536,127 $ 522,472 $ 512,327
4,926
60,859
578,112
2,598
70,640
609,365
4,991
113,763
641,226
(67,937)
8,574
933
30,209
29,416
(7,306)
(53,196)
203,840
138,193
67,615
1,530
33,001
4,473
448,652
198,143
137,069
109,962
329
35,402
4,239
485,144
201,035
137,116
58,326
2,367
28,900
5,840
433,584
(75,385)
4,358
—
2,340
—
(258)
—
75,583
2,697
363
78,643
(3,940)
74,703
(660)
$ 98,554 $ 194,055 $ 74,043
(71,052)
7,894
—
105,230
—
—
—
198,154
1,633
217
200,004
101,406
1,825
(353)
(4,024)
98,854
102,878
194,619
(5,385)
(564)
(300)
Net income attributable to COPLP common unitholders - basic
Net income attributable to COPLP common unitholders - diluted
$
$
0.87 $
0.87 $
1.72 $
1.71 $
0.69
0.69
(1) Basic and diluted earnings per common unit are calculated based on amounts attributable to common unitholders of Corporate Office
Properties, L.P.
See accompanying notes to consolidated financial statements.
F-15
Corporate Office Properties, L.P. and Subsidiaries
Consolidated Statements of Comprehensive Income
(in thousands)
For the Years Ended December 31,
2020
2019
$ 102,878 $ 200,004 $ 78,643
2018
Net income
Other comprehensive income (loss)
Unrealized loss on interest rate derivatives
Reclassification adjustments on interest rate derivatives recognized in
interest expense
(39,454)
(24,321)
(2,373)
3,725
(1,415)
(407)
Reclassification adjustments on interest rate derivatives recognized in loss
on interest rate derivatives
Equity in other comprehensive income of equity method investee
Total other comprehensive income (loss)
Comprehensive income
Comprehensive income attributable to noncontrolling interests
Comprehensive income attributable to COPLP
—
199
(25,537)
51,865
—
16,136
119,014
—
210
(2,570)
76,073
(3,940)
$ 115,347 $ 169,092 $ 72,133
174,467
(3,667)
(5,375)
See accompanying notes to consolidated financial statements.
F-16
Corporate Office Properties, L.P. and Subsidiaries
Consolidated Statements of Equity
(Dollars in thousands)
F
-
1
7
Balance at December 31, 2017
Cumulative effect of accounting change for adoption of hedge accounting
guidance
Balance at December 31, 2017 as adjusted
Redemption of common units
Issuance of common units resulting from common shares issued under COPT
forward equity sale agreements
Issuance of common units resulting from common shares issued under COPT
at-the-market program
Share-based compensation (units net of redemption)
Redemptions of vested equity awards
Comprehensive income
Distributions to owners of common and preferred units
Distributions to noncontrolling interests in subsidiaries
Adjustment to arrive at fair value of redeemable noncontrolling interests
Balance at December 31, 2018
Redemption of common units
Issuance of common units resulting from public issuance of common shares
Issuance of common units resulting from common shares issued under COPT
forward equity sale agreements
Share-based compensation (units net of redemption)
Redemptions of vested equity awards
Comprehensive income
Distributions to owners of common and preferred units
Contributions from noncontrolling interests in subsidiaries
Distributions to noncontrolling interests in subsidiaries
Adjustment to arrive at fair value of redeemable noncontrolling interests
Balance at December 31, 2019
Cumulative effect of accounting change for adoption of credit loss guidance
Balance at December 31, 2019, as adjusted
Redemption of preferred units
Share-based compensation (units net of redemption)
Redemptions of vested equity awards
Comprehensive income
Distributions to owners of common and preferred units
Contributions from noncontrolling interests in subsidiaries
Distributions to noncontrolling interests in subsidiaries
Adjustment to arrive at fair value of redeemable noncontrolling interests
Balance at December 31, 2020
Limited Partner
Preferred Units
Units
Amount
352,000 $ 8,800
Common Units
Units
Amount
Accumulated
Other
Comprehensive
Income (Loss)
Noncontrolling
Interests in
Subsidiaries
Total
Equity
104,543,177 $ 1,445,022 $
2,173 $
12,312 $ 1,468,307
—
352,000
—
—
8,800
—
—
104,543,177
(13,377)
(276)
1,444,746
(339)
—
—
5,907,000
172,294
—
—
—
—
—
—
—
352,000
—
—
—
—
—
660
(660)
—
—
8,800
—
—
991,664
146,290
—
—
—
—
—
111,574,754
(924)
1,000
29,732
6,963
(1,702)
74,043
(119,245)
—
(1,837)
1,604,655
(25)
29
—
—
—
—
—
—
564
—
(564)
—
—
—
—
—
—
—
8,800
352,000
—
—
8,800
352,000
(8,800)
(352,000)
—
—
—
—
300
—
(300)
—
—
—
—
—
—
—
— $ —
1,614,087
362,213
—
—
—
—
—
—
113,551,130
—
113,551,130
—
280,315
—
—
—
—
—
—
46,454
7,456
(2,064)
194,055
(124,652)
—
—
(1,749)
1,724,159
(5,541)
1,718,618
—
6,584
(1,699)
98,554
(124,840)
—
—
(6,607)
113,831,445 $ 1,690,610 $
276
2,449
—
—
—
—
—
(2,570)
—
—
—
(121)
—
—
—
—
—
(25,527)
—
—
—
—
(25,648)
—
(25,648)
—
—
—
16,493
—
—
—
—
(9,155) $
—
12,312
—
—
1,468,307
(339)
—
172,294
—
—
—
1,417
—
(15)
—
13,714
—
—
29,732
6,963
(1,702)
73,550
(119,905)
(15)
(1,837)
1,627,048
(25)
29
—
—
—
1,540
—
2,570
(5,890)
—
11,934
—
11,934
—
—
—
241
—
112
(30)
—
46,454
7,456
(2,064)
170,632
(125,216)
2,570
(5,890)
(1,749)
1,719,245
(5,541)
1,713,704
(8,800)
6,584
(1,699)
115,588
(125,140)
112
(30)
(6,607)
12,257 $ 1,693,712
See accompanying notes to consolidated financial statements.
Corporate Office Properties, L.P. and Subsidiaries
Consolidated Statements of Cash Flows
(in thousands)
For the Years Ended December 31,
2018
2019
2020
Cash flows from operating activities
Revenues from real estate operations received
Construction contract and other service revenues received
Property operating expenses paid
Construction contract and other service expenses paid
General, administrative, leasing, business development and land carry costs paid
Interest expense paid
Lease incentives paid
Sales-type lease costs paid
Income taxes paid
Other
78,470
(202,660)
(67,760)
(31,406)
(61,471)
(11,925)
(10,747)
(4)
$ 542,727 $ 530,280 $ 528,066
33,579
(197,647)
(79,386)
(27,006)
(72,460)
(7,679)
—
(21)
3,036
180,482
94,677
(196,611)
(96,789)
(29,347)
(67,475)
(9,482)
—
—
3,305
228,558
3,200
238,424
Net cash provided by operating activities
Cash flows from investing activities
Development and redevelopment of properties
Tenant improvements on operating properties
Other capital improvements on operating properties
Proceeds from property dispositions
Distribution from unconsolidated real estate joint venture following
contribution of properties
Sale of properties
Proceeds from sale of investment in unconsolidated real estate joint venture
Non-operating distributions from unconsolidated real estate joint venture
Investing receivables funded
Investing receivables payments received
Leasing costs paid
Settlement of interest rate derivatives
Other
Net cash used in investing activities
Cash flows from financing activities
Proceeds from debt
Revolving Credit Facility
Unsecured senior notes
Other debt proceeds
Repayments of debt
Revolving Credit Facility
Unsecured senior notes
Scheduled principal amortization
Other debt repayments
Deferred financing costs paid
Payments on finance lease liabilities
Net proceeds from issuance of common units
Redemption of preferred units
Common unit distributions paid
Distributions paid to noncontrolling interests in other consolidated entities
Distributions paid to redeemable noncontrolling interests
Payments in connection with early extinguishment of debt
Other
Net cash provided by (used in) financing activities
Net increase (decrease) in cash and cash equivalents and restricted cash
Cash and cash equivalents and restricted cash
(344,401)
(28,754)
(32,756)
(394,444)
(23,809)
(24,659)
(159,994)
(35,098)
(24,223)
—
83,165
59,841
3,695
(272)
8,000
(16,938)
(53,130)
(4,242)
(325,792)
201,499
108,128
—
22,426
(11,180)
—
(16,825)
—
849
(138,015)
—
—
—
1,942
(97)
4,455
(10,926)
—
(8,977)
(232,918)
664,000
395,264
206,931
409,000
—
43,615
381,000
—
13,406
(698,000)
(300,000)
(4,125)
(12,031)
(2,400)
(854)
—
(8,800)
(124,815)
(30)
(14,357)
(7,029)
(2,483)
91,271
3,903
(445,000)
—
(4,310)
(77)
(448)
(223)
46,415
—
(124,171)
(5,890)
(1,659)
—
(1,615)
(84,363)
6,180
(294,000)
—
(4,240)
(100,000)
(8,292)
(15,379)
202,065
—
(117,325)
(16)
(1,382)
—
(6,282)
49,555
(2,881)
Beginning of year
End of year
18,130
22,033 $
11,950
18,130 $
14,831
11,950
$
See accompanying notes to consolidated financial statements.
F-18
Corporate Office Properties, L.P. and Subsidiaries
Consolidated Statements of Cash Flows (Continued)
(in thousands)
Reconciliation of net income to net cash provided by operating activities:
Net income
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and other amortization
Impairment losses
Amortization of deferred financing costs and net debt discounts
Increase in deferred rent receivable
Gain on sales of real estate
Gain on sale of investment in unconsolidated real estate joint venture
Share-based compensation
Loss on early extinguishment of debt
Loss on interest rate derivatives
Other
Changes in operating assets and liabilities:
(Increase) decrease in accounts receivable
Increase in prepaid expenses and other assets, net
Increase (decrease) in accounts payable, accrued expenses and other liabilities
(Decrease) increase in rents received in advance and security deposits
Net cash provided by operating activities
Reconciliation of cash and cash equivalents and restricted cash:
Cash and cash equivalents at beginning of period
Restricted cash at beginning of period
Cash and cash equivalents and restricted cash at beginning of period
Cash and cash equivalents at end of period
Restricted cash at end of period
Cash and cash equivalents and restricted cash at end of period
Supplemental schedule of non-cash investing and financing activities:
(Decrease) increase in accrued capital improvements, leasing and other investing
activity costs
Finance right-of-use asset contributed by noncontrolling interest in joint venture
Recognition of operating right-of-use assets and related lease liabilities
Non-cash changes from property dispositions:
Contribution of properties to unconsolidated real estate joint venture
Investment in unconsolidated real estate joint ventures retained in disposition
Non-cash changes from recognition of property sale previously accounted for as
financing arrangement:
Decrease in assets held for sale, net
Decrease in deferred property sale
(Decrease) increase in fair value of derivatives applied to accumulated other
comprehensive income and noncontrolling interests
Equity in other comprehensive income of an equity method investee
Distributions payable
Increase in redeemable noncontrolling interests and decrease in equity to carry
redeemable noncontrolling interests at fair value
For the Years Ended December 31,
2020
2019
2018
$ 102,878 $ 200,004 $
78,643
140,031
1,530
4,272
(2,168)
(30,209)
(29,416)
6,503
7,306
53,196
(7,855)
138,903
329
3,639
(4,091)
(105,230)
—
6,714
—
—
(6,022)
139,063
2,367
3,393
(4,621)
(2,340)
—
6,376
258
—
(2,991)
(6,377)
(7,659)
6,587
(195)
5,673
(1,735)
(48,431)
4,827
$ 238,424 $ 228,558 $ 180,482
(7,141)
(23,255)
21,167
3,541
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
14,733 $
3,397
18,130 $
8,066 $
3,884
11,950 $
12,261
2,570
14,831
18,369 $
3,664
22,033 $
14,733 $
3,397
18,130 $
8,066
3,884
11,950
(9,421) $
— $
13,340 $
35,913 $
2,570 $
840 $
6,570
—
—
— $ 158,542 $
34,506 $
11,474 $
—
—
— $
— $
— $
— $
(42,226)
43,377
(35,728) $
— $
31,231 $
(25,817) $
199 $
31,263 $
2,915
210
30,856
6,607 $
1,749 $
1,837
See accompanying notes to consolidated financial statements.
F-19
Corporate Office Properties Trust and Subsidiaries and Corporate Office Properties, L.P. and Subsidiaries
Notes to Consolidated Financial Statements
1.
Organization
Corporate Office Properties Trust (“COPT”) and subsidiaries (collectively, the “Company”) is a fully-integrated and self-
managed real estate investment trust (“REIT”). Corporate Office Properties, L.P. (“COPLP”) and subsidiaries (collectively, the
“Operating Partnership”) is the entity through which COPT, the sole general partner of COPLP, conducts almost all of its
operations and owns almost all of its assets. Unless otherwise expressly stated or the context otherwise requires, “we”, “us”
and “our” as used herein refer to each of the Company and the Operating Partnership. 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 (“USG”) 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 (“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 (“Regional Office”). As of December 31, 2020, our
properties included the following (all references to number of properties, square footage, acres and megawatts are unaudited):
•
•
•
•
181 properties totaling 21.0 million square feet comprised of 16.2 million square feet in 155 office properties and 4.7
million square feet in 26 single-tenant data center shell properties (“data center shells”). We owned 17 of these data center
shells through unconsolidated real estate joint ventures;
a wholesale data center with a critical load of 19.25 megawatts;
11 properties under development (nine office properties and two data center shells), including three partially-operational
properties, that we estimate will total approximately 1.5 million square feet upon completion; and
approximately 830 acres of land controlled for future development that we believe could be developed into approximately
10.4 million square feet and 43 acres of other land.
COPLP owns real estate directly and through subsidiary partnerships and limited liability companies (“LLCs”). In addition to
owning real estate, COPLP also owns subsidiaries that provide real estate services such as property management, development
and construction services primarily for our properties but also for third parties. Some of these services are performed by a
taxable REIT subsidiary (“TRS”).
Equity interests in COPLP are in the form of common and preferred units. As of December 31, 2020, COPT owned 98.6%
of the outstanding COPLP common units (“common units”) and there were no preferred units outstanding. Common units not
owned by COPT carry certain redemption rights. The number of common units owned by COPT is equivalent to the number of
outstanding common shares of beneficial interest (“common shares”) of COPT, and the entitlement of common units to
quarterly distributions and payments in liquidation is substantially the same as that of COPT common shareholders.
COPT’s common shares are publicly traded on the New York Stock Exchange (“NYSE”) under the ticker symbol “OFC”.
Because COPLP is managed by COPT, and COPT conducts substantially all of its operations through COPLP, we refer to
COPT’s executive officers as COPLP’s executive officers; similarly, although COPLP does not have a board of trustees, we
refer to COPT’s Board of Trustees as COPLP’s Board of Trustees.
2.
Summary of Significant Accounting Policies
Basis of Presentation
The COPT consolidated financial statements include the accounts of COPT, the Operating Partnership, their subsidiaries
and other entities in which COPT has a majority voting interest and control. The COPLP consolidated financial statements
include the accounts of COPLP, its subsidiaries and other entities in which COPLP has a majority voting interest and control.
We also consolidate certain entities when control of such entities can be achieved through means other than voting rights
(“variable interest entities” or “VIEs”) if we are deemed to be the primary beneficiary of such entities. We eliminate all
intercompany balances and transactions in consolidation.
We use the equity method of accounting when we own an interest in an entity and can exert significant influence over but
cannot control the entity’s operations. We discontinue equity method accounting if our investment in an entity (and net
advances) is reduced to zero unless we have guaranteed obligations of the entity or are otherwise committed to provide further
financial support for the entity.
F-20
Corporate Office Properties Trust and Subsidiaries and Corporate Office Properties, L.P. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
When we own an equity investment in an entity and cannot exert significant influence over its operations, we measure the
investment at fair value, with changes recognized through net income. For an investment without a readily determinable fair
value, we measure the investment at cost, less any impairments, plus or minus changes resulting from observable price changes
for an identical or similar investment of the same issuer.
Use of Estimates in the Preparation of Financial Statements
We make estimates and assumptions when preparing financial statements under generally accepted accounting principles
(“GAAP”). These estimates and assumptions affect various matters, including:
•
•
•
the reported amounts of assets and liabilities in our consolidated balance sheets as of the dates of the financial statements;
the disclosure of contingent assets and liabilities as of the dates of the financial statements; and
the reported amounts of revenues and expenses in our consolidated statements of operations during the reporting periods.
Significant estimates are inherent in the presentation of our financial statements in a number of areas, including the
evaluation of the collectability of accounts and deferred rent receivable, the determination of estimated useful lives of assets,
the determination of lease terms, the evaluation of impairment of long-lived assets, the amount of impairment losses
recognized, the allocation of property acquisition costs, the amount of revenue recognized relating to tenant improvements, the
level of expense recognized in connection with share-based compensation and the determination of accounting method for
investments. Actual results could differ from these and other estimates.
Properties
We report properties to be developed or held and used in operations at our depreciated cost, reduced for impairment losses.
We capitalize direct and indirect project costs (including related compensation and other indirect costs), interest expense
and real estate taxes associated with properties, or portions thereof, undergoing development or redevelopment activities. In
capitalizing interest expense, if there is a specific borrowing for a property undergoing development or redevelopment
activities, we apply the interest rate of that borrowing to the average accumulated expenditures that do not exceed such
borrowing; for the portion of expenditures exceeding any such specific borrowing, we apply our weighted average interest rate
on other borrowings to the expenditures. We continue to capitalize costs while development or redevelopment activities are
underway until a property becomes “operational,” which occurs when lease terms commence (generally when the tenant has
control of the leased space and we have delivered the premises to the tenant as required under the terms of such lease), but no
later than one year after the cessation of major construction activities. When leases commence on portions of a newly-
developed or redeveloped property in the period prior to one year from the cessation of major construction activities, we
consider that property to be “partially operational.” When a property is partially operational, we allocate the costs associated
with the property between the portion that is operational and the portion under development. We start depreciating costs
associated with newly-developed or redeveloped properties as they become operational.
Most of our leases provide for some form of improvements to leased space. When we are required to provide
improvements under the terms of a lease, we determine whether the improvements constitute landlord assets or tenant assets. If
the improvements are landlord assets, we capitalize the cost of the improvements and recognize depreciation expense over the
shorter of the useful life of the assets or the term of the lease and recognize any payments from the tenant as rental revenue over
the term of the lease. If the improvements are tenant assets, we defer the cost of improvements funded by us as a lease
incentive asset and amortize it as a reduction of rental revenue over the term of the lease. In determining whether
improvements constitute landlord or tenant assets, we consider numerous factors, including whether the economic substance of
the lease terms is properly reflected and whether the improvements: have value to us as real estate; are unique to the tenant or
reusable by other tenants; may be altered or removed by the tenant without our consent or without compensating us for any lost
fair value; or are owned, and remain, with us or the tenant at the end of the lease term.
F-21
Corporate Office Properties Trust and Subsidiaries and Corporate Office Properties, L.P. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
We depreciate our fixed assets using the straight-line method over their estimated useful lives as follows:
Buildings and building improvements
Land improvements
Tenant improvements on operating properties
Estimated Useful Lives
10-40 years
10-20 years
Shorter of remaining useful lives of
assets or related lease term
Equipment and personal property
3-10 years
For periods in which a property is classified as held for sale, we classify the assets of the property’s asset group as held for
sale on our consolidated balance sheet for such periods.
When we dispose of, or classify as held for sale, a component (such as a reportable segment or sub-segment) or group of
components that represents a strategic shift having a major effect on our operations and financial results (such as a major
geographical area of operations or major line of business), we classify the associated results of operations as discontinued
operations. We had no properties newly classified as discontinued operations in the last three years.
Sales of Properties
We recognize gains from sales of consolidated interests in properties to non-customer third parties when we have
transferred control of such interests.
Impairment of Properties
We assess the asset groups associated with each of our properties, including operating properties, properties in
development, land held for future development, related intangible assets, right-of-use assets, deferred rents receivable and lease
liabilities for indicators of impairment quarterly or when circumstances indicate that an asset group may be impaired. If our
analyses indicate that the carrying values of certain properties’ asset groups may be impaired, we perform a recovery analysis
for such asset groups. For properties to be held and used, we analyze recoverability based on the estimated undiscounted future
cash flows expected to be generated from the operations and eventual disposition of the properties over, in most cases, a ten-
year holding period. If we believe it is more likely than not that we will dispose of the properties earlier, we analyze
recoverability using a probability weighted analysis of the estimated undiscounted future cash flows expected to be generated
from the operations and eventual disposition of the properties over the various possible holding periods. If the analysis
indicates that the carrying value of a tested property’s asset group is not recoverable from its estimated future cash flows, the
property’s asset group is written down to the property’s estimated fair value and an impairment loss is recognized. If and when
our plans change, we revise our recoverability analyses to use the cash flows expected from the operations and eventual
disposition of such property using holding periods that are consistent with our revised plans. Changes in holding periods may
require us to recognize impairment losses.
Fair values are estimated based on contract prices, indicative bids, discounted cash flow analyses, yield analyses or
comparable sales analyses. Estimated cash flows used in our impairment analyses are based on our plans for the property and
our views of market and economic conditions. The estimates consider items such as current and future market rental and
occupancy rates, estimated operating and capital expenditures and recent sales data for comparable properties; most of these
items are influenced by market data obtained from real estate leasing and brokerage firms and our direct experience with the
properties and their markets.
When we determine that a property is held for sale, we stop depreciating the property and estimate the property’s fair value,
net of selling costs; if we then determine that the estimated fair value, net of selling costs, is less than the net book value of the
property’s asset group, we recognize an impairment loss equal to the difference and reduce the net book value of the property’s
asset group.
F-22
Corporate Office Properties Trust and Subsidiaries and Corporate Office Properties, L.P. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
Acquisition of Operating Properties
Upon completion of operating property acquisitions, we allocate the purchase price to tangible and intangible assets and
liabilities associated with such acquisitions based on our estimates of their fair values. We determine these fair values by using
market data and independent appraisals available to us and making numerous estimates and assumptions. We allocate operating
property acquisitions to the following components:
•
•
•
•
•
properties based on a valuation performed under the assumption that the property is vacant upon acquisition (the “if-vacant
value”). The if-vacant value is allocated between land and buildings or, in the case of properties under development,
development in progress. We also allocate additional amounts to properties for in-place tenant improvements based on our
estimate of improvements per square foot provided under market leases that would be attributable to the remaining non-
cancelable terms of the respective leases;
above- and below-market lease intangible assets or liabilities based on the present value (using an interest rate which
reflects the risks associated with the leases acquired) of the difference between: (1) the contractual amounts to be received
pursuant to the in-place leases; and (2) our estimate of fair market lease rates for the corresponding space, measured over a
period equal to the remaining non-cancelable term of the lease. The capitalized above- and below-market lease values are
amortized as adjustments to lease revenue over the remaining lease terms of the respective leases, and to renewal periods in
the case of below-market leases;
in-place lease value based on our estimates of: (1) the present value of additional income to be realized as a result of leases
being in place on the acquired properties; and (2) costs to execute similar leases. Our estimate of costs to execute similar
leases includes leasing commissions, legal and other related costs;
tenant relationship value based on our evaluation of the specific characteristics of each tenant’s lease and our overall
relationship with that respective tenant. Characteristics we consider in determining these values include the nature and
extent of our existing business relationships with the tenant, growth prospects for developing new business with the tenant,
the tenant’s credit quality and expectations of lease renewals, among other factors; and
above- and below-market cost arrangements (such as real estate tax treaties or above- or below-market ground leases)
based on the present value of the expected benefit from any such arrangements in place on the property at the time of
acquisition.
Leased Assets, as a Lessee
Effective January 1, 2019, we adopted guidance requiring lessees to classify leases as either finance or operating leases
based on the principle of whether or not the lease is effectively a financed purchase of the leased asset by the lessee. The
resulting classification determines whether the lease expense is recognized based on an effective interest method or straight-line
basis over the term of the lease. The guidance also requires us to recognize upon lease term commencement a right-of-use asset
and lease liability for all leases with a term of greater than 12 months regardless of their classification. We adopted this
guidance for leases on January 1, 2019 using a modified retrospective transition approach under which we elected to not adjust
prior comparative reporting periods. We elected to apply a package of practical expedients that enabled us to carry forward
upon adoption our historical assessments of: expired or existing leases regarding their lease classification; and whether any
expired or existing contracts are, or contain, leases. We also elected a practical expedient that enabled us to avoid the need to
assess whether expired or existing land easements not previously accounted for as leases are, or contain, a lease.
In determining right-of-use assets and lease liabilities, we estimate an appropriate incremental borrowing rate on a fully-
collateralized basis for the terms of the leases. Since the terms under our ground leases are usually significantly longer than the
terms of borrowings available to us on a fully-collateralized basis, our estimate of this rate requires significant judgment, and
considers factors such as interest rates available to us on a fully-collateralized basis for shorter-termed debt and U.S. Treasury
rates.
Cash and Cash Equivalents
Cash and cash equivalents include all cash and liquid investments that mature three months or less from when they are
purchased. Cash equivalents are reported at cost, which approximates fair value. We maintain our cash in bank accounts in
amounts that may exceed Federally insured limits at times. We have not experienced any losses in these accounts in the past
and believe that we are not exposed to significant credit risk because our accounts are deposited with major financial
institutions.
F-23
Corporate Office Properties Trust and Subsidiaries and Corporate Office Properties, L.P. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
Investments in Marketable Securities
We classify marketable securities as trading securities when we have the intent to sell such securities in the near term, and
classify other marketable securities as available-for-sale securities. We determine the appropriate classification of investments
in marketable securities at the acquisition date and re-evaluate the classification at each balance sheet date. We report
investments in marketable securities classified as trading securities at fair value (which is included in the line entitled “Prepaid
expenses and other assets, net” on our consolidated balance sheets), with unrealized gains and losses recognized through
earnings; on our consolidated statements of cash flows, we classify cash flows from these securities as operating activities.
Receivables and Credit Losses
We evaluate our receivables from customers and borrowers for collectability and recognize estimated credit losses on these
receivables. We use judgment in estimating these losses based upon the credit status of the entities associated with the
individual receivables and payment history.
Effective January 1, 2020, we adopted guidance issued by the Financial Accounting Standards Board (“FASB”) that
changed how we measure credit losses for most financial assets and certain other instruments not measured at fair value through
net income from an incurred loss model to an expected loss approach. Our items within the scope of this guidance included the
following:
•
•
•
•
•
investing receivables, as disclosed in Note 8;
tenant notes receivable;
net investment in sales-type leases;
other assets comprised of non-lease revenue related accounts receivable (primarily from construction contract services) and
contract assets from unbilled construction contract revenue; and
off-balance sheet credit exposures.
Under this guidance, we recognize an estimate of our expected credit losses on these items as an allowance, as the guidance
requires that financial assets be measured on an amortized cost basis and be presented at the net amount expected to be
collected (or as a separate liability in the case of off-balance sheet credit exposures). The allowance represents the portion of
the amortized cost basis that we do not expect to collect (or loss we expect to incur in the case of off-balance sheet credit
exposures) due to credit over the contractual life based on available information relevant to assessing the collectability of cash
flows, which includes consideration of past events, current conditions and reasonable and supportable forecasts of future
economic conditions (including consideration of asset- or borrower-specific factors). The guidance requires the allowance for
expected credit losses to reflect the risk of loss, even when that risk is remote. An allowance for credit losses is measured and
recorded upon the initial recognition of a financial asset (or off-balance sheet credit exposure), regardless of whether it is
originated or purchased. Quarterly, the expected losses are re-estimated, considering any cash receipts and changes in risks or
assumptions, with resulting adjustments recognized as credit loss expense or recoveries on our consolidated statements of
operations.
We estimate expected credit losses for in-scope items using historical loss rate information developed for varying
classifications of credit risk and contractual lives. Due to our limited quantity of items within the scope of this guidance and the
unique risk characteristics of such items, we individually assign each in-scope item a credit risk classification. The credit risk
classifications assigned by us are determined based on credit ratings assigned by ratings agencies (as available) or are
internally-developed based on available financial information, historical payment experience, credit documentation, other
publicly available information and current economic trends. In addition, for certain items in which the risk of credit loss is
affected by the economic performance of a real estate development project, we develop probability weighted scenario analyses
for varying levels of performance in estimating our credit loss allowance (applicable to our notes receivable from the City of
Huntsville disclosed in Note 8 and a tax incremental financing obligation disclosed in Note 20).
For lease revenue, if collectability is not probable, revenue recognized is limited to the lesser of revenue that would have
been recognized if collectability was probable or lease payments collected. Losses on lease revenue receivables are presented
on our consolidated statements of operation with property operating expenses for years prior to January 1, 2019, when we
adopted new lease accounting guidance, and as reductions in lease revenue thereafter.
F-24
Corporate Office Properties Trust and Subsidiaries and Corporate Office Properties, L.P. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
Prior to our adoption of the credit loss guidance discussed above, we evaluated the collectability of both interest and
principal of loans whenever events or changes in circumstances indicated such amounts may not be recoverable. A loan was
impaired when it was probable that we would be unable to collect all amounts due according to the existing contractual terms.
When a loan was impaired, the amount of the loss accrual was calculated by comparing the carrying amount of the investment
to the present value of expected future cash flows discounted at the loan’s effective interest rate and the value of any collateral
under such loan.
When we believe that collection of interest income on an investing or tenant note receivable is not probable, we place the
receivable on nonaccrual status, meaning interest income is recognized when payments are received rather than on an accrual
basis.
We write off receivables when we believe the facts and circumstances indicate that continued pursuit of collection is no
longer warranted. When cash is received in connection with receivables for which we have previously recognized credit losses,
we recognize reductions in our credit losses.
Intangible Assets and Deferred Revenue on Real Estate Acquisitions
We amortize the intangible assets and deferred revenue on real estate acquisitions discussed above as follows:
Asset Type
Above- and below-market leases
In-place lease value
Tenant relationship value
Above- and below-market cost arrangements
Amortization Period
Related lease terms
Related lease terms
Estimated period of time that tenant will lease
space in property
Term of arrangements
We recognize the amortization of acquired above- and below-market leases as adjustments to rental revenue. We recognize
the amortization of above- and below-market cost arrangements as adjustments to property operating expenses. We recognize
the amortization of other intangible assets on property acquisitions as amortization expense.
Deferred Leasing Costs
We defer costs incurred to obtain new tenant leases or extend existing tenant leases; our deferral of costs included related
non-incremental compensation costs until January 1, 2019, when we adopted new lease accounting guidance. We amortize
these costs evenly over the lease terms. We classify leasing costs paid as an investing activity on our statements of cash flows
since such costs are necessary in order for us to generate long-term future cash flows from our properties. When tenant leases
are terminated early, we expense any unamortized deferred leasing costs associated with those leases over the shortened term of
the lease.
Deferred Financing Costs
We defer costs of financing arrangements and recognize these costs as interest expense over the related debt terms on a
straight-line basis, which approximates the amortization that would occur under the effective interest method of amortization.
We expense any unamortized loan costs when loans are retired early. We present deferred costs of financing arrangements as a
direct deduction from the related debt liability, except for costs attributable to line-of-credit arrangements and interest rate
derivatives, which we present in the balance sheet in the line entitled “prepaid expenses and other assets, net”.
F-25
Corporate Office Properties Trust and Subsidiaries and Corporate Office Properties, L.P. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
Interest Rate Derivatives
Our primary objectives in using interest rate derivatives are to add stability to interest expense and to manage exposure to
interest rate movements. To accomplish this objective, we use interest rate swaps as part of our interest rate risk management
strategy. Interest rate swaps designated as cash flow hedges involve the receipt of variable-rate amounts from a counterparty in
exchange for our making fixed-rate payments over the life of the agreements without exchange of the underlying notional
amount. We use interest rate swaps to hedge the cash flows associated with interest rates on variable-rate debt borrowings. We
also use forward-starting interest rate swaps to hedge the cash flows associated with interest rates on forecasted fixed-rate
borrowings. We recognize all derivatives as assets or liabilities on our consolidated balance sheet at fair value.
We defer all changes in the fair value of designated cash flow hedges to accumulated other comprehensive income
(“AOCI”) or loss (“AOCL”), reclassifying such deferrals to interest expense as interest expense is recognized on the hedged
forecasted transactions. When an interest rate swap designated as a cash flow hedge no longer qualifies for hedge accounting
and the hedged transactions are probable not to occur, we recognize changes in fair value of the hedge previously deferred to
AOCI or AOCL, along with any changes in fair value occurring thereafter, through earnings. We do not use interest rate
derivatives for trading or speculative purposes. We manage counter-party risk by only entering into contracts with major
financial institutions based upon their credit ratings and other risk factors.
We use standard market conventions and techniques such as discounted cash flow analysis, option pricing models,
replacement cost and termination cost in computing the fair value of derivatives at each balance sheet date. We made an
accounting policy election to use an exception provided for in the applicable accounting guidance with respect to measuring
counterparty credit risk for derivative instruments; this election enables us to measure the fair value of groups of assets and
liabilities associated with derivative instruments consistently with how market participants would price the net risk exposure as
of the measurement date.
Noncontrolling Interests
COPT’s consolidated noncontrolling interests are comprised of interests in COPLP not owned by COPT (discussed further
in Note 14) and interests in consolidated real estate joint ventures not owned by us (discussed further in Note 6). COPLP’s
consolidated noncontrolling interests are comprised primarily of interests in our consolidated real estate joint ventures. We
evaluate whether noncontrolling interests are subject to redemption features outside of our control. We classify noncontrolling
interests that are currently redeemable for cash at the option of the holders or are probable of becoming redeemable as
redeemable noncontrolling interests in the mezzanine section of our consolidated balance sheets; we adjust these interests each
period to the greater of their fair value or carrying amount (initial amount as adjusted for allocations of income and losses and
contributions and distributions), with a corresponding offset to additional paid-in capital on COPT’s consolidated balance
sheets or common units on COPLP’s balance sheet. Our other noncontrolling interests are reported in the equity section of our
consolidated balance sheets.
Revenue Recognition
Lease and Other Property Revenue
We lease real estate properties, comprised primarily of office properties and data center shells, to third parties. These
leases usually include options under which the tenant may renew its lease based on market rates at the time of renewal, which
are then typically subject to further negotiation. These leases occasionally provide the tenant with an option to terminate its
lease early usually for a defined termination fee.
F-26
Corporate Office Properties Trust and Subsidiaries and Corporate Office Properties, L.P. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
Most of our lease revenue is from fixed contractual payments defined under the lease that, in most cases, escalate annually
over the term of the lease. Our lease revenue also includes variable lease payments predominantly for tenant reimbursements of
property operating expenses and lease termination fees. Property operating expense reimbursement structures vary, with some
tenants responsible for all of a property’s expenses, while others are responsible for their share of a property’s expense only to
the extent such expenses exceed amounts defined in the lease (which are derived from the property’s historical expense levels).
Lease termination fees in most cases result from a tenant’s exercise of an existing right under a lease.
Upon lease commencement, we evaluate leases to determine if they meet criteria set forth in lease accounting guidance for
classification as sales-type leases or direct financing leases; when a lease meets none of these criteria, we classify the lease as
an operating lease. Upon commencement of sales-type leases, we derecognize the underlying asset, recognizing in its place a
net investment in the lease equal to the sum of the lease receivable and the present value of any unguaranteed residual asset and
recognize any selling profit or loss created as a result of the difference between those two amounts. Similarly, for direct
financing leases, the lessor derecognizes the underlying asset and recognizes a net investment in the lease, but, unlike in a sales-
type lease, defers profit and amortizes it as interest income over the lease term. Our leases of properties as lessor are
predominantly classified as operating leases, for which the underlying asset remains on our balance sheet and is depreciated
consistently with other owned assets, with income recognized as described further below.
We recognize minimum rents on operating leases, net of abatements, on a straight-line basis over the term of tenant leases.
A lease term commences when: (1) the tenant has control of the leased space (legal right to use the property); and (2) we have
delivered the premises to the tenant as required under the terms of such lease. The term of a lease includes the noncancellable
periods of the lease along with periods covered by: (1) a tenant option to extend the lease if the tenant is reasonably certain to
exercise that option; (2) a tenant option to terminate the lease if the tenant is reasonably certain not to exercise that option; and
(3) an option to extend (or not to terminate) the lease in which exercise of the option is controlled by us as the lessor. When
assessing the expected lease end date, we use judgment in contemplating the significance of: any penalties a tenant may incur
should it choose not to exercise any existing options to extend the lease or exercise any existing options to terminate the lease;
and economic incentives for the tenant based on any existing contract, asset, entity or market-based factors in the lease. While
a significant portion of our portfolio is leased to the USG, and the majority of those leases consist of a series of one-year
renewal options, or provide for early termination rights, we have concluded that exercise of existing renewal options, or
continuation of such leases without exercising early termination rights, is reasonably certain for most of these leases.
We report the amount by which our minimum rental revenue recognized on a straight-line basis under leases exceeds the
contractual rent billings associated with such leases as deferred rent receivable on our consolidated balance sheets. Amounts by
which our minimum rental revenue recognized on a straight-line basis under leases are less than the contractual rent billings
associated with such leases are reported in liabilities as deferred revenue associated with operating leases on our consolidated
balance sheets.
In connection with a tenant’s entry into, or modification of, a lease, if we make cash payments to, or on behalf of, the
tenant for purposes other than funding the construction of landlord assets, we defer the amount of such payments as lease
incentives. As discussed above, when we are required to provide improvements under the terms of a lease, we determine
whether the improvements constitute landlord assets or tenant assets; if the improvements are tenant assets, we defer the cost of
improvements funded by us as a lease incentive asset. We amortize lease incentives as a reduction of rental revenue over the
term of the lease.
If collectability under a lease is not probable, revenue recognized is limited to the lesser of revenue that would have been
recognized if collectability was probable or lease payments collected.
We recognize lease revenue associated with tenant expense recoveries in the same periods in which we incur the related
expenses, including tenant reimbursements of property taxes, utilities and other property operating expenses.
We recognize fees received for lease terminations as revenue and write off against such revenue any (1) deferred rents
receivable, and (2) deferred revenue, lease incentives and intangible assets that are amortizable into rental revenue associated
with the leases; the resulting net amount is the net revenue from the early termination of the leases. When a tenant’s lease for
space in a property is terminated early but the tenant continues to lease such space under a new or modified lease in the
property, the net revenue from the early termination of the lease is recognized evenly over the remaining life of the new or
modified lease in place on that property.
F-27
Corporate Office Properties Trust and Subsidiaries and Corporate Office Properties, L.P. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
Effective January 1, 2019, we adopted guidance issued by the FASB setting forth principles for the recognition,
measurement, presentation and disclosure of leases, which required lessors of real estate to account for leases using an approach
substantially equivalent to guidance previously in place for operating leases, direct financing leases and sales-type leases. We
adopted this guidance for leases on January 1, 2019 using a modified retrospective transition approach under which we elected
to not adjust prior comparative reporting periods (except for our presentation of lease revenue discussed below). We elected to
apply a package of practical expedients that enabled us to carry forward upon adoption our historical assessments of: expired or
existing leases regarding their lease classification and deferred recognition of non-incremental direct leasing costs; and whether
any expired or existing contracts are, or contain, leases. We also elected a practical expedient that enabled us to avoid the need
to assess whether expired or existing land easements not previously accounted for as leases are, or contain, a lease. In addition,
we elected a practical expedient to avoid separating non-lease components that otherwise would need to be accounted for under
revenue accounting guidance (such as tenant reimbursements of property operating expenses) from the associated lease
component since (1) the non-lease components have the same timing and pattern of transfer as the associated lease component
and (2) the lease component, if accounted for separately, would be classified as an operating lease; this enables us to account for
the combination of the lease component and non-lease components as an operating lease since the lease component is the
predominant component of the combined components.
Construction Contract and Other Service Revenues
We enter into construction contracts to complete various design and construction services primarily for our USG tenants.
The revenues and expenses from these services consist primarily of subcontracted costs that are reimbursed to us by our
customers along with a fee. These services are an ancillary component of our overall operations, with small operating margins
relative to the revenue. We review each contract to determine the performance obligations and allocate the transaction price
based on the standalone selling price, as discussed further below. We recognize revenue under these contracts as services are
performed in an amount that reflects the consideration we expect to receive in exchange for those services. Our performance
obligations are satisfied over time as work progresses. Revenue recognition is determined using the input method based on
costs incurred as of a point in time relative to the total estimated costs at completion to measure progress toward satisfying our
performance obligations. We believe incurred costs of work performed best depicts the transfer of control of the services being
transferred to the customer.
In determining whether the performance obligations of each construction contract should be accounted for separately
versus together, we consider numerous factors that may require significant judgment, including: whether the components
contracted are substantially the same with the same pattern of transfer; whether the customer could contract with another party
to perform construction based on our design project; and whether the customer can elect not to move forward after the design
phase of the contract. Most of our contracts have a single performance obligation as the promise to transfer the services is not
separately identifiable from other obligations in the contracts and, therefore, are not distinct. Some contracts have multiple
performance obligations, most commonly due to having distinct project phases for design and construction for which our
customer is making decisions and managing separately. In these cases, we allocate the transaction price between these
performance obligations based on the relative standalone selling prices, which we determine by evaluating: the relative costs of
each performance obligation; the expected operating margins (which typically do not vary significantly between obligations);
and amounts set forth in the contracts for each obligation. Contract modifications, such as change orders, are routine for our
construction contracts and are generally determined to be additions to the existing performance obligations because they would
have been part of the initial performance obligations if they were identified at the initial contract date.
We have three main types of compensation arrangements for our construction contracts: guaranteed maximum price
(“GMP”); firm fixed price (“FFP”); and cost-plus fee.
•
•
GMP contracts provide for revenue equal to costs incurred plus a fee equal to a percentage of such costs, up to a maximum
contract amount. We generally enter into GMP contracts for projects that are significant in nature based on the size of the
project and total fees, and for which the full scope of the project has not been determined as of the contract date. GMP
contracts are lower risk to us than FFP contracts since the costs and revenue move proportionately to one another.
FFP contracts provide for revenue equal to a fixed fee. These contracts are typically lower in value and scope relative to
GMP contracts, and are generally entered into when the scope of the project is well defined. Typically, we assume more
risk with FFP contracts than GMP contracts since the revenue is fixed and we could realize losses or less than expected
profits if we incur more costs than originally estimated. However, these types of contracts offer the opportunity for
additional profits when we complete the work for less than originally estimated.
F-28
Corporate Office Properties Trust and Subsidiaries and Corporate Office Properties, L.P. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
•
Cost-plus fee contracts provide for revenue equal to costs incurred plus a fee equal to a percentage of such costs but, unlike
GMP contracts, do not have a maximum contract amount. Similar to GMP contracts, cost-plus fee contracts are low risk to
us since the costs and revenue move proportionately to one another.
Construction contract cost estimates are based primarily on contracts in place with subcontractors to complete most of the
work, but may also include assumptions, such as performance of subcontractors and cost and availability of materials, to project
the outcome of future events over the course of the project. We review and update these estimates regularly as a significant
change could affect the profitability of our construction contracts. We recognize adjustments in estimated profit on contracts
under the cumulative catch-up method as the modification does not create a new performance obligation. Under this method,
the impact of the adjustment on profit recorded to date on a contract is recognized in the period the adjustment is identified.
Revenue and profit in future periods are recognized using the adjusted estimate. If at any time the estimate of contract
profitability indicates an anticipated loss on the contract, we recognize the total loss in the quarter it is identified.
Our timing of revenue recognition for construction contracts generally differs from the timing of invoicing to customers.
We recognize such revenue as we satisfy our performance obligations. Payment terms and conditions vary by contract type.
Under most of our contracts, we bill customers monthly, as work progresses, in accordance with the contract terms, with
payment due in 30 days, although customers occasionally pay in advance of services being provided. We have determined that
our contracts generally do not include a significant financing component. The primary purpose of the timing of our invoicing is
for convenience, not to receive financing from our customers or to provide customers with financing. Additionally, the timing
of transfer of the services is often at the discretion of the customer.
Under most of our contracts, we bill customers one month subsequent to revenue recognition, resulting in contract assets
representing unbilled construction revenue.
Our contract liabilities consist of advance payments from our customers or billings in excess of construction contract
revenue recognized.
Expense Classification
We classify as property operating expense costs incurred for property taxes, ground rents, utilities, property management,
insurance, repairs and exterior and interior maintenance, as well as associated labor and indirect costs attributable to these costs.
We classify as general, administrative and leasing expenses costs incurred for corporate-level management, public
company administration, asset management, leasing, investor relations, marketing and corporate-level insurance (including
general business and director and officers) and leasing prospects, as well as associated labor and indirect costs attributable to
these expenses.
Share-Based Compensation
We issue four forms of share-based compensation: restricted COPT common shares (“restricted shares”), deferred share
awards (also known as restricted share units), performance share units (also known as performance share awards) (“PSUs”) and
profit interest units (“PIUs”) (time-based and performance-based). We account for share-based compensation in accordance
with authoritative guidance provided by the FASB that establishes standards for the accounting for transactions in which an
entity exchanges its equity instruments for goods or services, focusing primarily on accounting for transactions in which an
entity obtains employee services in share-based payment transactions. The guidance requires us to measure the cost of
employee services received in exchange for an award of equity instruments based generally on the fair value of the award on the
grant date; such cost is then recognized over the period during which the employee is required to provide service in exchange
for the award. No compensation cost is recognized for equity instruments for which employees do not render the requisite
service. The guidance also requires that share-based compensation be computed based on awards that are ultimately expected
to vest; as a result, future forfeitures of awards are estimated at the time of grant and revised, if necessary, in subsequent periods
if actual forfeitures differ from those estimates. If an award is voluntarily cancelled by an employee, we recognize the
previously unrecognized cost associated with the original award on the date of such cancellation. We capitalize costs associated
with share-based compensation attributable to employees engaged in development and redevelopment activities.
We compute the fair value of restricted shares, time-based PIUs and deferred share awards based on the fair value of COPT
common shares on the grant date. We compute the fair value of PSUs and performance-based PIUs using a Monte Carlo
F-29
Corporate Office Properties Trust and Subsidiaries and Corporate Office Properties, L.P. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
model. Significant assumptions used for that model include the following: the baseline common share value is the market value
on the grant date; the risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant; and expected
volatility is based on historical volatility of COPT’s common shares.
Income Taxes
COPT elected to be treated as a REIT under Sections 856 through 860 of the Internal Revenue Code. To qualify as a
REIT, COPT must meet a number of organizational and operational requirements, including a requirement that it distribute at
least 90% of the Company’s adjusted taxable income to its shareholders. As a REIT, COPT generally will not be subject to
Federal income tax on taxable income that it distributes to its shareholders. If COPT fails to qualify as a REIT in any tax year,
it will be subject to Federal income tax on its taxable income at regular corporate rates and may not be able to qualify as a REIT
for four subsequent tax years.
COPLP is a limited partnership and is not subject to federal income tax. Its partners are required to report their respective
share of the Operating Partnership’s taxable income on their respective tax returns. COPT’s share of the Operating
Partnership’s taxable income is reported on COPT’s income tax return.
For Federal income tax purposes, dividends to shareholders may be characterized as ordinary income, capital gains or
return of capital. The characterization of dividends paid on COPT’s common shares during each of the last three years was as
follows:
Ordinary income
Long-term capital gain
Return of capital
For the Years Ended December 31,
2020
2019
2018
45.1%
54.9%
—%
54.4%
45.6%
—%
83.1%
—%
16.9%
The dividends allocated to each of the above years for Federal income tax purposes included dividends paid on COPT’s
common shares during each of those years except for the dividends paid on January 15, 2021 and 2020 (with a record date of
December 31, 2020 and 2019, respectively), which were allocated for Federal income tax purposes to 2020 and 2019,
respectively.
We distributed all of COPT’s REIT taxable income in 2020, 2019 and 2018 and, as a result, did not incur Federal income
tax in those years.
The net basis of our consolidated assets and liabilities for tax reporting purposes was approximately $10 million higher
than the amount reported on our consolidated balance sheet as of December 31, 2020.
We are subject to certain state and local income and franchise taxes. The expense associated with these state and local
taxes is included in general and administrative expense and property operating expenses on our consolidated statements of
operations. We did not separately state these amounts on our consolidated statements of operations because they are
insignificant.
Reclassifications
We reclassified certain amounts from prior periods to conform to the current period presentation of our consolidated
financial statements with no effect on previously reported net income or equity.
Recent Accounting Pronouncements
As discussed above, effective January 1, 2020, we adopted guidance issued by the FASB that changed how entities
measure credit losses for most financial assets and certain other instruments not measured at fair value through net income. The
guidance replaced the current incurred loss model with an expected loss approach, resulting in a more timely recognition of
such losses. The guidance applies to most financial assets measured at amortized cost and certain other instruments, including
trade and other receivables (excluding those arising from operating leases), loans, held-to-maturity debt securities, net
investments in leases and off-balance-sheet credit exposures. Under this guidance, we recognize an estimate of our expected
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Corporate Office Properties Trust and Subsidiaries and Corporate Office Properties, L.P. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
credit losses on these asset types as an allowance, as the guidance requires that financial assets be measured on an amortized
cost basis and be presented at the net amount expected to be collected. We adopted this guidance using the modified
retrospective transition method under which we recognized a $5.5 million allowance for credit losses by means of a cumulative-
effect adjustment to cumulative distributions in excess of net income of the Company (or common units of the Operating
Partnership), and did not adjust prior comparative reporting periods. Our consolidated statements of operations reflect
adjustments for changes in our expected credit losses occurring subsequent to adoption of this guidance.
Effective January 1, 2020, we adopted guidance issued by the FASB that modifies disclosure requirements for fair value
measurements. The resulting changes in disclosure did not have a material impact on our consolidated financial statements.
Effective January 1, 2020, we adopted guidance issued by the FASB that aligns the requirements for capitalizing
implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing
implementation costs incurred to develop or obtain internal-use software. FASB guidance did not previously address the
accounting for such implementation costs. Our adoption of this guidance did not have a material impact on our consolidated
financial statements.
In March 2020, the FASB issued guidance containing practical expedients for reference rate reform related activities
pertaining to debt, leases, derivatives and other contracts. The guidance is optional and may be adopted over time as reference
rate reform activities occur. During 2020, we elected to apply an expedient to treat any changes in loans resulting from
reference rate reform as debt modifications (as opposed to extinguishments) and hedge accounting expedients related to
probability and the assessments of effectiveness for future LIBOR-indexed cash flows to assume that the index upon which
future hedged transactions will be based matches the index on the corresponding derivatives. Application of the hedge
accounting expedients preserves the presentation of derivatives consistent with past presentation. We will continue to evaluate
the impact of this guidance and may apply other elections as applicable as additional changes in the market occur.
In April 2020, the FASB issued a Staff Q&A document that addressed the accounting for lease accounting guidance for
lease concessions resulting from the COVID-19 pandemic. Under existing lease guidance, we would normally have to
determine, on a lease-by-lease basis, if a lease concession was the result of a new arrangement reached with the tenant (treated
as a lease modification) or if such a concession was implemented pursuant to enforceable rights and obligations within the
existing lease agreement (and, therefore, not treated as a lease modification). The Staff Q&A document enabled us to bypass
the lease-by-lease analysis for lease concessions resulting from the COVID-19 pandemic, and instead elect to either apply the
lease modification accounting framework or not, with such elections applied consistently to leases with similar characteristics
and similar circumstances. Entities may make the elections for any lessor-provided concessions related to the effects of the
COVID-19 pandemic (such as deferrals of lease payments or reduced future lease payments) as long as the concession does not
result in a substantial increase in the rights of the lessor or the obligations of the lessee. We chose to apply the elections
available under the Staff Q&A to restructurings of lease payment terms granted by us to tenants, the effect of which did not
have a material impact on our consolidated financial statements.
3.
Fair Value Measurements
Accounting standards define fair value as the exit price, or the amount that would be received upon sale of an asset or paid
to transfer a liability in an orderly transaction between market participants as of the measurement date. The standards also
establish a hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use
of unobservable inputs by requiring that the most observable inputs be used when available. Observable inputs are inputs
market participants would use in valuing the asset or liability developed based on market data obtained from sources
independent of us. Unobservable inputs are inputs that reflect our assumptions about the factors market participants would use
in valuing the asset or liability developed based upon the best information available in the circumstances. The hierarchy of
these inputs is broken down into three levels: Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets
or liabilities; Level 2 inputs include (1) quoted prices for similar assets or liabilities in active markets, (2) quoted prices for
identical or similar assets or liabilities in inactive markets and (3) inputs (other than quoted prices) that are observable for the
asset or liability, either directly or indirectly; and Level 3 inputs are unobservable inputs for the asset or liability.
Categorization within the valuation hierarchy is based upon the lowest level of input that is most significant to the fair value
measurement.
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Corporate Office Properties Trust and Subsidiaries and Corporate Office Properties, L.P. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
Recurring Fair Value Measurements
COPT has a non-qualified elective deferred compensation plan for Trustees and certain members of our management team
that, prior to December 31, 2019, permitted participants to defer up to 100% of their compensation on a pre-tax basis and
receive a tax-deferred return on such deferrals. The Company froze additional entry into the plan effective December 31, 2019.
The assets held in the plan (comprised primarily of mutual funds and equity securities) and the corresponding liability to the
participants are measured at fair value on a recurring basis on COPT’s consolidated balance sheets using quoted market prices,
as are other marketable securities that we hold. The balance of the plan, which was fully funded, totaled $3.0 million as of
December 31, 2020 and $3.1 million as of December 31, 2019, and is included in the line entitled “prepaid expenses and other
assets, net” on COPT’s consolidated balance sheets along with an insignificant amount of other marketable securities. The
offsetting liability associated with the plan is adjusted to fair value at the end of each accounting period based on the fair value
of the plan assets and reported in “other liabilities” on COPT’s consolidated balance sheets. The assets of the plan are classified
in Level 1 of the fair value hierarchy, while the offsetting liability is classified in Level 2 of the fair value hierarchy.
The fair values of our interest rate derivatives are determined using widely accepted valuation techniques, including a
discounted cash flow analysis on the expected cash flows of each derivative. This analysis reflects the contractual terms of the
derivatives, including the period to maturity, and uses observable market-based inputs, including interest rate market data and
implied volatilities in such interest rates. While we determined that the majority of the inputs used to value our derivatives fall
within Level 2 of the fair value hierarchy, the credit valuation adjustments associated with our interest rate derivatives utilize
Level 3 inputs, such as estimates of current credit spreads to evaluate the likelihood of default. However, as of December 31,
2020 and 2019, we assessed the significance of the impact of the credit valuation adjustments on the overall valuation of our
derivatives and determined that these adjustments are not significant. As a result, we determined that our interest rate derivative
valuations in their entirety are classified in Level 2 of the fair value hierarchy.
The carrying values of cash and cash equivalents, restricted cash, accounts receivable, other assets (excluding investing
receivables) and accounts payable and accrued expenses are reasonable estimates of their fair values because of the short
maturities of these instruments. The fair values of our investing receivables, as disclosed in Note 8, were based on the
discounted estimated future cash flows of the loans (categorized within Level 3 of the fair value hierarchy); the discount rates
used approximate current market rates for loans with similar maturities and credit quality, and the estimated cash payments
include scheduled principal and interest payments. For our disclosure of debt fair values in Note 10, we estimated the fair value
of our unsecured senior notes based on quoted market rates for publicly-traded debt (categorized within Level 2 of the fair value
hierarchy) and estimated the fair value of our other debt based on the discounted estimated future cash payments to be made on
such debt (categorized within Level 3 of the fair value hierarchy); the discount rates used approximate current market rates for
loans, or groups of loans, with similar maturities and credit quality, and the estimated future payments include scheduled
principal and interest payments. Fair value estimates are made as of a specific point in time, are subjective in nature and
involve uncertainties and matters of significant judgment.
For additional fair value information, refer to Note 8 for investing receivables, Note 10 for debt and Note 11 for interest
rate derivatives.
F-32
Corporate Office Properties Trust and Subsidiaries and Corporate Office Properties, L.P. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
COPT and Subsidiaries
The tables below set forth financial assets and liabilities of COPT and subsidiaries that are accounted for at fair value on a
recurring basis as of December 31, 2020 and 2019 and the hierarchy level of inputs used in measuring their respective fair
values under applicable accounting standards (in thousands):
Description
December 31, 2020:
Assets:
Marketable securities in deferred compensation
plan (1)
Mutual funds
Other
Other marketable securities (1)
Total assets
Liabilities:
Deferred compensation plan liability (2)
Interest rate derivatives
Total liabilities
December 31, 2019:
Assets:
Marketable securities in deferred compensation
plan (1)
Mutual funds
Other
Interest rate derivatives (1)
Total assets
Liabilities:
Deferred compensation plan liability (2)
Interest rate derivatives
Total liabilities
Quoted Prices in
Active Markets for
Identical Assets
(Level 1)
Significant Other
Observable Inputs
(Level 2)
Significant
Unobservable
Inputs
(Level 3)
Total
$
$
$
$
$
$
$
$
3,008 $
19
30
3,057 $
— $
—
—
— $
— $
—
— $
3,027 $
9,522
12,549 $
3,035 $
25
—
3,060 $
— $
—
23
23 $
— $
—
— $
3,060 $
25,682
28,742 $
— $
—
—
— $
— $
—
— $
— $
—
—
— $
— $
—
— $
3,008
19
30
3,057
3,027
9,522
12,549
3,035
25
23
3,083
3,060
25,682
28,742
(1)
(2)
Included in the line entitled “prepaid expenses and other assets, net” on COPT’s consolidated balance sheet.
Included in the line entitled “other liabilities” on COPT’s consolidated balance sheet.
F-33
Corporate Office Properties Trust and Subsidiaries and Corporate Office Properties, L.P. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
COPLP and Subsidiaries
The tables below set forth financial assets and liabilities of COPLP and subsidiaries that are accounted for at fair value on a
recurring basis as of December 31, 2020 and 2019 and the hierarchy level of inputs used in measuring their respective fair
values under applicable accounting standards (in thousands):
Description
December 31, 2020:
Assets:
Other marketable securities (1)
Liabilities:
Interest rate derivatives
December 31, 2019:
Assets:
Interest rate derivatives (1)
Liabilities:
Interest rate derivatives
Quoted Prices in
Active Markets for
Identical Assets
(Level 1)
Significant Other
Observable Inputs
(Level 2)
Significant
Unobservable
Inputs
(Level 3)
Total
$
$
$
$
30 $
— $
— $
30
— $
9,522 $
— $
9,522
— $
23 $
— $
23
— $
25,682 $
— $
25,682
(1)
Included in the line entitled “prepaid expenses and other assets, net” on COPLP’s consolidated balance sheet.
2019 Nonrecurring Fair Value Measurements
In the third quarter of 2019, we determined that the carrying amount of land held in Frederick, Maryland would not be
recovered from its eventual disposition. As a result, we recognized an impairment loss of $327,000 in order to adjust the land
to its estimated fair value. This land was sold in the fourth quarter of 2019.
4.
Properties, Net
Operating properties, net consisted of the following (in thousands):
December 31,
Land
Buildings and improvements
Less: Accumulated depreciation
Operating properties, net
2020 Dispositions
$
2020
528,269 $
2019
472,976
3,306,791
(1,007,120)
$ 3,115,280 $ 2,772,647
3,711,264
(1,124,253)
On October 30, 2020, we sold a 90% interest in two data center shell properties in Northern Virginia based on an aggregate
property value of $89.7 million and retained a 10% interest in the properties through B RE COPT DC JV II LLC (“B RE
COPT”), a newly-formed joint venture. Our partner in the joint venture acquired the 90% interest from us for $80.7 million.
We account for our interest in the joint venture using the equity method of accounting as described further in Note 6. We
recognized a gain on sale of $30.0 million.
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Corporate Office Properties Trust and Subsidiaries and Corporate Office Properties, L.P. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
2020 Development Activities
In 2020, we placed into service 1.8 million square feet in 11 newly-developed properties, 42,000 square feet in expansions
of three fully-operational properties and 21,000 square feet in a redeveloped property. As of December 31, 2020, we had 11
properties under development, including three partially-operational properties, that we estimate will total 1.5 million square feet
upon completion.
In the third quarter of 2020, we concluded that we no longer expected to develop a property in Baltimore, Maryland. As a
result, we recognized an impairment loss on previously incurred pre-development costs of $1.5 million.
2019 Dispositions
In 2019, we sold, through a series of transactions, a 90% interest in nine data center shells in Northern Virginia based on an
aggregate property value of $345.1 million, retaining a 10% interest in the properties through BREIT COPT DC JV LLC
(“BREIT-COPT”), a newly-formed joint venture. The transactions for seven of these properties were completed on June 20,
2019 and the remaining two properties on December 5, 2019. Our partner in the joint venture acquired the 90% interest from us
for $310.6 million. We account for our interest in the joint venture using the equity method of accounting as described further
in Note 6. We recognized a gain on sale of $105.2 million.
2019 Development Activities
In 2019, we placed into service 1.1 million square feet in nine newly-developed properties and 85,000 square feet in one
property under redevelopment.
2018 Dispositions
In 2018, we sold 11751 Meadowville Lane, an operating property totaling 193,000 square feet in Chester, Virginia (in our
Data Center Shells sub-segment). We contractually closed on the sale of this property on October 27, 2017 for $44.0 million.
We provided a financial guaranty to the buyer under which we provided an indemnification for up to $20 million in losses it
could incur related to a potential defined capital event occurring on the property; our financial guaranty to the buyer expired on
October 1, 2018, resulting in no losses to us. We accounted for this transaction as a financing arrangement. Accordingly, we
did not recognize the sale of this property for accounting purposes until the expiration of the guaranty on October 1, 2018. In
the fourth quarter of 2018, we recognized a gain on this sale of $1.5 million.
2018 Development Activities
In 2018, we placed into service 666,000 square feet in six newly-developed properties, 22,000 square feet in one
redeveloped property and land under a long-term contract.
In the fourth quarter of 2018, we abandoned plans to redevelop a property in our Fort Meade/BW Corridor sub-segment
after we completed leasing on the property that did not require any redevelopment. Accordingly, we recognized an impairment
loss of $2.4 million representing pre-development costs associated with the property.
5.
Leases
Lessor Arrangements
We lease real estate properties, comprised primarily of office properties and data center shells, to third parties. As of
December 31, 2020, these leases, which may encompass all, or a portion of, a property, had remaining terms spanning from one
month to 18 years and averaging approximately 5.4 years.
F-35
Corporate Office Properties Trust and Subsidiaries and Corporate Office Properties, L.P. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
Our lease revenue is comprised of: fixed lease revenue, including contractual rent billings under leases recognized on a
straight-line basis over lease terms and amortization of lease incentives and above- and below- market lease intangibles; and
variable lease revenue, including tenant expense recoveries, lease termination revenue and other revenue from tenants that is not
fixed under the lease. The table below sets forth our composition of lease revenue recognized between fixed and variable lease
revenue (in thousands):
Lease revenue
Fixed
Variable
For the Years Ended December 31,
2020
2019
425,593 $
110,534
536,127 $
412,342
110,130
522,472
$
$
A significant concentration of our lease revenue in 2020 and 2019 was earned from our largest tenant, the USG, including 35%
and 34% of our total lease revenue, respectively, and 25% of our fixed lease revenue in each of those years. Our lease revenue
from the USG in 2020 and 2019 was earned primarily from properties in the Fort Meade/BW Corridor, Lackland Air Force
Base and Northern Virginia Defense/IT reportable sub-segments (see Note 17).
Fixed contractual payments due under our property leases were as follows (in thousands):
Year Ending December 31,
2021
2022
2023
2024
2025
Thereafter
Total contractual payments
Less: Amount representing interest
Net investment in sales-type leases
Lessee Arrangements
As of December 31, 2020
Operating leases
Sales-type leases
$
$
424,585 $
378,573
324,917
276,488
197,677
745,303
2,347,543
$
871
949
949
949
949
4,464
9,131
(2,558)
6,573
As of December 31, 2020, our balance sheet included $81.0 million in right-of-use assets associated primarily with land
leased from third parties underlying certain properties that we are operating or developing. The land leases have long durations
with remaining terms ranging from 28 years (excluding extension options) to 95 years. As of December 31, 2020, our right-of-
use assets included:
•
•
•
•
•
•
•
$37.8 million for land on which we are developing an office property in Washington, D.C. through our Stevens Investors,
LLC joint venture, virtually all of the rent on which was previously paid. This lease has a 95-year remaining term, and we
possess a bargain purchase option that we expect to exercise in 2021;
$11.3 million for land in a business park in Huntsville, Alabama under 15 leases through our LW Redstone Company, LLC
joint venture, with remaining terms ranging from 42 to 51 years and options to renew for an additional 25 years that were
not included in the term used in determining the asset balance;
$10.1 million for land underlying operating office properties in Washington, D.C. under two leases with remaining terms of
approximately 79 years;
$6.6 million for land in a research park in College Park, Maryland under four leases through our M Square Associates,
LLC joint venture, all of the rent on which was previously paid. These leases had remaining terms ranging from 62 to 73
years;
$6.5 million for land underlying a parking garage in Baltimore, Maryland under a lease with a remaining term of 28 years
and an option to renew for an additional 49 years that was included in the term used in determining the asset balance;
$6.5 million for data center space in Phoenix, Arizona with a remaining term of 4 years and an option to renew for an
additional five years that were not included in the term used in determining the asset balance; and
$2.2 million for other land underlying operating properties in our Fort Meade/BW Corridor sub-segment under two leases
with remaining terms of approximately 47 years, all of the rent on which was previously paid.
F-36
Corporate Office Properties Trust and Subsidiaries and Corporate Office Properties, L.P. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
Our property right-of-use assets consisted of the following (in thousands):
Leases
Right-of-use assets
Operating leases - Property
Finance leases - Property
Total right-of-use assets
Balance Sheet Location
Property - operating right-of-use assets
Property - finance right-of-use assets
As of December 31,
2020
2019
$
$
40,570 $
40,425
80,995 $
27,864
40,458
68,322
Property lease liabilities consisted of the following (in thousands):
Leases
Lease liabilities
Operating leases - Property
Finance leases - Property
Total lease liabilities
Balance Sheet Location
As of December 31,
2020
2019
Property - operating lease liabilities
Other liabilities
$
$
30,746 $
28
30,774 $
17,317
702
18,019
The table below sets forth the weighted average terms and discount rates of our property leases as of December 31, 2020:
Weighted average remaining lease term
Operating leases
Finance leases
Weighted average discount rate
Operating leases
Finance leases
50 years
< 1 year
7.21%
3.62%
The table below presents our total property lease cost (in thousands):
Lease cost
Operating lease cost
Property leases - fixed
Property leases - variable
Finance lease cost
Amortization of property right-of-use assets
Property operating expenses
Statement of Operations Location
2020
2019
For the Years Ended December 31,
Property operating expenses
Property operating expenses
$
$
2,413 $
127
34
2,574 $
1,664
4
30
1,698
The table below presents the effect of property lease payments on our consolidated statements of cash flows (in thousands):
Supplemental cash flow information
Cash paid for amounts included in the
measurement of lease liabilities:
For the Years Ended December 31,
2020
2019
Operating cash flows for operating leases
Financing cash flows for financing leases
$
$
1,694 $
674 $
1,004
14
F-37
Corporate Office Properties Trust and Subsidiaries and Corporate Office Properties, L.P. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
Payments on property leases were due as follows (in thousands):
Year Ending December 31,
2020
2021
2022
2023
2024
2025
Thereafter
Total lease payments
Less: Amount representing interest
Lease liability
As of December 31, 2020
As of December 31, 2019
Operating
leases
Finance
leases
Total
Operating
leases
Finance
leases
$
N/A
3,211 $
3,332
3,382
3,434
1,780
126,350
141,489
(110,743)
$
30,746 $
N/A
N/A $
14 $
14
—
—
—
—
28
—
28 $
3,225
3,346
3,382
3,434
1,780
126,350
141,517
(110,743)
30,774 $
1,092 $
1,138
1,162
1,167
1,173
N/A
100,609
106,341
(89,024)
17,317 $
674 $
14
14
—
—
N/A
—
702
—
702 $
Total
1,766
1,152
1,176
1,167
1,173
N/A
100,609
107,043
(89,024)
18,019
6.
Real Estate Joint Ventures
Consolidated Real Estate Joint Ventures
We consolidate the real estate joint ventures described below because of our: (1) power to direct the matters that most
significantly impact their activities, including development, leasing and management of the properties developed by the VIEs;
and (2) right to receive returns on our fundings and, in many cases, the obligation to fund the activities of the ventures to the
extent that third-party financing is not obtained, both of which could be potentially significant to the VIEs.
The table below sets forth information pertaining to our investments in consolidated real estate joint ventures as of
December 31, 2020 (dollars in thousands):
Entity
Date
Acquired
LW Redstone Company, LLC 3/23/2010
8/11/2015
Stevens Investors, LLC
6/26/2007
M Square Associates, LLC
Nominal
Ownership %
85%
95%
50%
Location
Huntsville, Alabama
Washington, D.C.
College Park, Maryland
(1) Excludes amounts eliminated in consolidation.
December 31, 2020 (1)
Total
Assets
Encumbered
Assets
Total
Liabilities
$ 403,448 $
161,735
100,258
$ 665,441 $
92,590 $ 100,334
88,028
158,286
55,227
62,446
313,322 $ 243,589
Each of these joint ventures are engaged in the development and operation of real estate. With regard to these joint ventures:
•
for LW Redstone Company, LLC, we anticipate funding certain infrastructure costs (up to a maximum of $76.0 million
excluding accrued interest thereon) due to be reimbursed by the City of Huntsville as discussed further in Note 8. We had
advanced $61.0 million to the City through December 31, 2020 to fund such costs. We also expect to fund additional
development costs through equity contributions to the extent that third party financing is not obtained. Our partner was
credited with a $9.0 million in invested capital upon formation and is not required to make, nor has it made, additional
equity contributions. In March 2020, the LW Redstone Company, LLC joint venture agreement was amended to change
the distribution terms to allow the venture to distribute financing proceeds to satisfy our partner’s cumulative preferred
return and to provide our partner a priority preferred return on its invested capital. While net cash flow distributions to the
partners vary depending on the source of the funds distributed, cash flows are generally distributed to the partners as
follows: (1) cumulative preferred returns of 13.5% on our partner’s invested capital; (2) cumulative preferred returns of
13.5% on our invested capital; (3) return of our invested capital; (4) return of our partner’s invested capital; and (5) any
remaining residual 85% to us and 15% to our partner. Our partner has the right to require us to acquire its interest for fair
value; accordingly, we classify the fair value of our partner’s interest as redeemable noncontrolling interests in the
mezzanine section of our consolidated balance sheets. We have the right to acquire our partner’s interest at fair value upon
the earlier of five years following the project’s achievement of a construction commencement threshold of 4.4 million
square feet or March 2040; the project had achieved approximately 1.6 million square feet of construction commencement
F-38
Corporate Office Properties Trust and Subsidiaries and Corporate Office Properties, L.P. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
•
•
through December 31, 2020. Our partner has the right to receive some or all of the consideration for the acquisition of its
interests in the form of common units in COPLP;
for Stevens Investors, LLC, net cash flows of this entity will be distributed to the partners as follows: (1) member loans and
accrued interest; (2) pro rata return of the partners’ capital; (3) pro rata return of the partners’ respective unpaid preferred
returns; and (4) varying splits of 85% to 60% to us and the balance to our partners as we reach specified return hurdles.
Our partners have the right to require us to acquire some or all of their interests for fair value for a defined period of time
following the property’s development completion (expected to occur in 2021) and stabilization (as defined in the operating
agreement) of the joint venture’s office property; accordingly, we classify the fair value of our partners’ interest as
redeemable noncontrolling interests in the mezzanine section of our consolidated balance sheets. We and our partners each
have the right to acquire each other’s interests at fair value upon the second anniversary of the property’s stabilization date
(as defined in the operating agreement). Our partners have the right to receive some or all of the consideration for the
acquisition of their interests in the form of common units in COPLP; and
for M Square Associates, LLC, net cash flows of this entity are distributed to the partners as follows: (1) member loans and
accrued interest; (2) our preferred return and capital contributions used to fund infrastructure costs; (3) the partners’
preferred returns and capital contributions used to fund all other costs, including the base land value credit, in proportion to
the accrued returns and capital accounts; and (4) residual amounts distributed 50% to each member.
We disclose the activity of our redeemable noncontrolling interests in Note 12.
The ventures discussed above include only ones in which parties other than COPLP and COPT own interests.
Unconsolidated Real Estate Joint Ventures
The table below sets forth information pertaining to our investments in unconsolidated real estate joint ventures accounted
for using the equity method of accounting (dollars in thousands):
Entity
B RE COPT DC JV II LLC (2)
BREIT COPT DC JV LLC
GI-COPT DC Partnership LLC
Date
Acquired
10/30/2020
6/20/2019
7/21/2016
Nominal
Ownership %
10%
10%
50%
Number of
Properties
Carrying Value of Investment (1)
December 31, 2020
December 31, 2019
8 $
9
N/A
17 $
15,988 $
13,315
—
29,303 $
—
14,133
37,816
51,949
(1) Included in the line entitled “investment in unconsolidated real estate joint ventures” on our consolidated balance sheets.
(2) As of December 31, 2020, our investment in B RE COPT was $7.4 million lower than our share of the joint venture’s equity due to a
difference between our cost basis and our share of B RE COPT’s underlying equity in the net assets acquired from GI-COPT.
These joint ventures operate triple-net leased, single-tenant data center shell properties in Northern Virginia. With regard to
these joint ventures:
•
•
•
B RE COPT was formed in 2020, when, as described further in Note 4, we sold a 90% interest in two properties and
retained a 10% interest in the properties through B RE COPT;
on December 22, 2020, we sold, through a series of transactions, 80% of our 50% interests in LLCs holding six properties
and associated mortgage debt that we owned through GI-COPT DC Partnership LLC (“GI-COPT”). We received
$60 million in proceeds and a 10% retained interest in the LLCs through B RE COPT, and recognized a gain of
$29.4 million on the sale of these interests. GI-COPT was dissolved upon completion of these transactions; and
BREIT-COPT was formed in 2019, when, as described further in Note 4, we sold a 90% interest in nine properties and
retained a 10% interest in the properties through the joint venture;
We concluded that B RE COPT and BREIT-COPT are variable interest entities. Under the terms of the joint venture
agreements, we and our partners receive returns in proportion to our investments, and our maximum exposure to losses is
limited to our investments, subject to certain indemnification obligations with respect to nonrecourse debt secured by the
properties. The nature of our involvement in the activities of the joint venture does not give us power over decisions that
significantly affect its economic performance.
F-39
Corporate Office Properties Trust and Subsidiaries and Corporate Office Properties, L.P. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
7.
Intangible Assets on Real Estate Acquisitions
Intangible assets on real estate acquisitions consisted of the following (in thousands):
In-place lease value
Tenant relationship value
Above-market leases
Other
December 31, 2020
December 31, 2019
Gross
Carrying
Amount
Accumulated
Amortization
Net
Carrying
Amount
Gross
Carrying
Amount
Accumulated
Amortization
Net
Carrying
Amount
$
131,974 $
59,069
13,718
1,333
206,094 $
$
123,291 $
49,055
13,380
1,024
186,750 $
8,683 $
10,014
338
309
19,344 $
131,975 $
59,131
13,718
1,333
206,157 $
120,894 $
43,544
13,318
1,009
178,765 $
11,081
15,587
400
324
27,392
Amortization of intangible assets on real estate acquisitions totaled $8.0 million in 2020, $8.7 million in 2019 and $15.6 million
in 2018. The approximate weighted average amortization periods of the categories set forth above follow: in-place lease value:
six years; tenant relationship value: eight years; above-market leases: eight years; and other: 22 years. The approximate
weighted average amortization period for all of the categories combined is seven years. The estimated amortization (to
amortization associated with real estate operations, rental revenue and property operating expenses) associated with the
intangible asset categories set forth above for the next five years is: $4.7 million for 2021; $3.2 million for 2022; $2.8 million
for 2023; $2.3 million for 2024; and $2.0 million for 2025.
8.
Investing Receivables
Investing receivables consisted of the following (in thousands):
Notes receivable from the City of Huntsville
Other investing loans receivable
Amortized cost basis
Allowance for credit losses
Investing receivables, net
December 31,
2020
65,564 $
6,041
71,605
(2,851)
68,754 $
2019
59,427
14,096
73,523
—
73,523
$
$
The balances above include accrued interest receivable, net of allowance for credit losses, of $4.8 million as of December 31,
2020 and $4.7 million as of December 31, 2019.
Our notes receivable from the City of Huntsville funded infrastructure costs in connection with our LW Redstone
Company, LLC joint venture (see Note 6) and carry an interest rate of 9.95%. These notes and the accrued and unpaid interest
thereon, which is compounded annually on March 1, will be repaid using the real estate taxes generated by the properties
developed by the joint venture. When these tax revenues are sufficient to cover the debt service on a certain increment of
municipal bonds, the City of Huntsville will be required to issue bonds to repay the notes and the accrued and unpaid interest
thereon. Each note has a maturity date of the earlier of 30 years from the date issued or the expiration of the tax increment
district comprising the developed properties in 2045.
Our other investing loans receivable carry an interest rate of 8.0% and mature in 2021.
The fair value of these receivables was approximately $73 million as of December 31, 2020 and $74 million as of
December 31, 2019.
F-40
Corporate Office Properties Trust and Subsidiaries and Corporate Office Properties, L.P. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
9.
Prepaid Expenses and Other Assets, Net
Prepaid expenses and other assets, net consisted of the following (in thousands):
Lease incentives, net
Prepaid expenses
Furniture, fixtures and equipment, net
Construction contract costs in excess of billings, net
Net investment in sales-type leases
Non-real estate equity investments
Restricted cash
Deferred financing costs, net (1)
Deferred tax asset, net
Other assets
Total for COPLP and subsidiaries
Marketable securities in deferred compensation plan
Total for COPT and subsidiaries
December 31,
$
2020
35,642 $
19,690
10,433
10,343
6,573
5,509
3,664
2,439
1,989
5,274
101,556
3,027
$ 104,583 $
2019
28,433
18,835
7,823
17,223
—
6,705
3,397
3,633
2,328
4,639
93,016
3,060
96,076
(1) Represents deferred costs, net of accumulated amortization, attributable to our Revolving Credit Facility and interest rate derivatives.
Deferred tax asset, net reported above includes the following tax effects of temporary differences and carry forwards of our
TRS (in thousands):
Operating loss carry forward
Property
Valuation allowance
Deferred tax asset, net
December 31,
2020
2019
$
$
2,087 $
103
(201)
1,989 $
2,885
(77)
(480)
2,328
We recognize a valuation allowance on our deferred tax asset if we believe all or some portion of the asset may not be realized.
An increase or decrease in the valuation allowance resulting from a change in circumstances that causes a change in our
judgment about the realizability of our deferred tax asset is included in income. We believe it is more likely than not that the
results of future operations in our TRS will generate sufficient taxable income to realize our December 31, 2020 net deferred
tax asset.
F-41
Corporate Office Properties Trust and Subsidiaries and Corporate Office Properties, L.P. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
10.
Debt, Net
Debt Summary
Our debt consisted of the following (dollars in thousands):
Carrying Value (1) as of
December 31,
2020
December 31,
2019
December 31, 2020
Stated Interest Rates
Scheduled Maturity
Mortgage and Other Secured Debt:
Fixed rate mortgage debt (2)
Variable rate secured debt (4)
Total mortgage and other secured debt
Revolving Credit Facility
Term Loan Facility
Unsecured Senior Notes (9)
3.60%, $350,000 aggregate principal
5.25%, $250,000 aggregate principal
5.00%, $300,000 aggregate principal
2.25%, $400,000 aggregate principal
3.70%, $300,000 aggregate principal
Unsecured note payable
Total debt, net
$
139,991 $
143,430
3.82% - 4.62% (3)
115,119
255,110
143,000
398,447
348,888
248,194
297,915
394,464
—
900
2023-2026
2022-2026
68,055
LIBOR + 1.45% to 2.35% (5)
211,485
177,000 LIBOR + 0.775% to 1.45% (6)
March 2023 (7)
248,706
LIBOR + 1.00% to 1.65% (8)
2022
348,431
247,652
297,503
—
299,324
1,038
3.60% (10)
5.25% (11)
5.00% (12)
2.25% (13)
3.70% (14)
0% (15)
May 2023
February 2024
July 2025
March 2026
N/A (14)
May 2026
$ 2,086,918 $ 1,831,139
(1) The carrying values of our debt other than the Revolving Credit Facility reflect net deferred financing costs of $5.9 million as of
December 31, 2020 and $5.8 million as of December 31, 2019.
(2) Certain of the fixed rate mortgages carry interest rates that, upon assumption, were above or below market rates and therefore were
recorded at their fair value based on applicable effective interest rates. The carrying values of these loans reflect net unamortized
premiums totaling $155,000 as of December 31, 2020 and $217,000 as of December 31, 2019.
Includes a construction loan with $29.1 million in remaining borrowing capacity as of December 31, 2020.
(3) The weighted average interest rate on our fixed rate mortgage debt was 4.16% as of December 31, 2020.
(4)
(5) The weighted average interest rate on our variable rate secured debt was 2.28% as of December 31, 2020.
(6) The weighted average interest rate on the Revolving Credit Facility was 1.20% as of December 31, 2020.
(7) The facility matures in March 2023, with the ability for us to further extend such maturity by two six-month periods at our option,
provided that there is no default under the facility and we pay an extension fee of 0.075% of the total availability under the facility for
each extension period.
(8) The interest rate on this loan was 1.15% as of December 31, 2020.
(9) Refer to the paragraphs below for further disclosure.
(10) The carrying value of these notes reflects an unamortized discount totaling $781,000 as of December 31, 2020 and $1.1 million as of
December 31, 2019. The effective interest rate under the notes, including amortization of the issuance costs, was 3.70%.
(11) The carrying value of these notes reflects an unamortized discount totaling $1.6 million as of December 31, 2020 and $2.1 million as of
December 31, 2019. The effective interest rate under the notes, including amortization of the issuance costs, was 5.49%.
(12) The carrying value of these notes reflects an unamortized discount totaling $1.8 million as of December 31, 2020 and $2.1 million as of
December 31, 2019. The effective interest rate under the notes, including amortization of the issuance costs, was 5.15%
(13) The carrying value of these notes reflects an unamortized discount totaling $4.5 million as of December 31, 2020.
(14) The carrying value of these notes reflects an unamortized discount totaling $534,000 as of December 31, 2019. The effective interest
rate under the notes, including amortization of the issuance costs, was 3.85%.
(15) This note carries an interest rate that, upon assumption, was below market rates and it therefore was recorded at its fair value based on
applicable effective interest rates. The carrying value of this note reflects an unamortized discount totaling $161,000 as of December 31,
2020 and $223,000 as of December 31, 2019.
All debt is owed by the Operating Partnership. While COPT is not directly obligated by any debt, it has guaranteed COPLP’s
Revolving Credit Facility, Term Loan Facilities and Unsecured Senior Notes.
Certain of our debt instruments require that we comply with a number of restrictive financial covenants, including
maximum leverage ratio, unencumbered leverage ratio, minimum fixed charge coverage, minimum unencumbered interest
coverage ratio, minimum debt service and maximum secured indebtedness ratio. In addition, the terms of some of COPLP’s
debt may limit its ability to make certain types of payments and other distributions to COPT in the event of default or when
F-42
Corporate Office Properties Trust and Subsidiaries and Corporate Office Properties, L.P. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
such payments or distributions may prompt failure of debt covenants. As of December 31, 2020, we were compliant with these
financial covenants.
Our debt matures on the following schedule (in thousands):
Year Ending December 31,
2021
2022
2023
2024
2025
Thereafter
Total
December 31, 2020
3,955
$
487,380
560,130
279,983
323,717
446,300
2,101,465 (1)
$
(1) Represents scheduled principal amortization and maturities only and therefore excludes net discounts and deferred financing costs of
$14.5 million.
We capitalized interest costs of $12.1 million in 2020, $10.8 million in 2019 and $5.9 million in 2018.
The following table sets forth information pertaining to the fair value of our debt (in thousands):
Fixed-rate debt
Unsecured Senior Notes
Other fixed-rate debt
Variable-rate debt
Revolving Credit Facility
December 31, 2020
December 31, 2019
Carrying
Amount
Estimated
Fair Value
Carrying
Amount
Estimated
Fair Value
$
$
1,289,461 $
140,891
656,566
2,086,918 $
1,334,342 $
142,838
654,102
2,131,282 $
1,192,910 $
144,468
493,761
1,831,139 $
1,227,441
149,907
495,962
1,873,310
On October 10, 2018, we entered into a credit agreement with a group of lenders to replace our existing unsecured
revolving credit facility with a new facility (the prior facility and new facility are referred to collectively herein as our
“Revolving Credit Facility”). The lenders’ aggregate commitment under the facility is $800.0 million, with the ability for us to
increase the lenders’ aggregate commitment to $1.25 billion, provided that there is no default under the facility and subject to
the approval of the lenders. The facility matures on March 10, 2023, with the ability for us to further extend such maturity
by two six-month periods at our option, provided that there is no default under the facility and we pay an extension fee
of 0.075% of the total availability under the facility for each extension period. The interest rate on the facility is based on
LIBOR plus 0.775% to 1.450%, as determined by the credit ratings assigned to COPLP by Standard & Poor’s Ratings Services,
Moody’s Investors Service, Inc. or Fitch Ratings Ltd. (collectively, the “Ratings Agencies”). The facility also carries a
quarterly fee that is based on the lenders’ aggregate commitment under the facility multiplied by a per annum rate
of 0.125% to 0.300%, as determined by the credit ratings assigned to COPLP by the Ratings Agencies. As of December 31,
2020, the maximum borrowing capacity under this facility totaled $800.0 million, of which $657.0 million was available.
Weighted average borrowings under our Revolving Credit Facility totaled $204.9 million in 2020 and $255.6 million in
2019. The weighted average interest rate on our Revolving Credit Facility was 1.55% in 2020 and 3.32% in 2019.
Term Loan Facilities
As of December 31, 2020, we had an unsecured term loan facility that we amended in 2020 to increase the loan amount by
$150.0 million and change the interest terms. The loan carries a variable interest rate based on the LIBOR rate (customarily the
30-day rate) plus 1.00% to 1.65%, as determined by: a ratio of our debt to our assets; and the credit ratings assigned to COPLP
by the Ratings Agencies.
F-43
Corporate Office Properties Trust and Subsidiaries and Corporate Office Properties, L.P. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
In addition to the term loan discussed above, we also had a term loan for which we repaid the remaining balance of $100.0
million in 2018.
In connection with our Revolving Credit Facility discussed above, we have the ability to borrow up to $500.0 million under
new term loans from the facility’s lender group provided that there is no default under the facility and subject to the approval of
the lenders.
Unsecured Senior Notes
On September 17, 2020, we issued $400.0 million of 2.25% Senior Notes due 2026 (the “2.25% Notes”) at an initial
offering price of 99.416% of their face value. The proceeds from this issuance, after deducting underwriting discounts, but
before other offering expenses, were $395.3 million. The notes mature on March 15, 2026. The effective interest rate under the
notes, including amortization of discount and issuance costs, was 2.48%.
With regard to our 3.70% Senior Notes, we:
•
•
purchased $122.9 million of our 3.70% Senior Notes due 2021 (the “3.70% Notes”) on September 17, 2020 for $126.0
million, plus accrued interest, pursuant to a tender offer; and
redeemed the remaining $177.1 million of the 3.70% Notes on October 19, 2020 for $180.9 million plus accrued interest.
In connection with this purchase and redemption, we recognized a loss on early extinguishment of debt of $7.3 million in 2020.
We may redeem our unsecured senior notes, in whole at any time or in part from time to time, at our option, at a
redemption price equal to the greater of (1) the aggregate principal amount of the notes being redeemed or (2) the sum of the
present values of the remaining scheduled payments of principal and interest thereon (not including any portion of such
payments of interest accrued as of the date of redemption) discounted to its present value, on a semi-annual basis at an adjusted
treasury rate plus a spread (30 basis points for the 3.60% Senior Notes, 40 basis points for the 5.25% Senior Notes, 45 basis
points for the 5.00% Senior Notes and 35 basis points for the 2.25% Senior Notes), plus, in each case, accrued and unpaid
interest thereon to the date of redemption. However, in each case, if this redemption occurs on or after a defined period of time
prior to the maturity date (one month for the 2.25% Notes or three months for the other notes), the redemption price will be
equal to 100% of the principal amount of the notes being redeemed, plus accrued and unpaid interest thereon to, but not
including, the applicable redemption date. These notes are unconditionally guaranteed by COPT.
11.
Interest Rate Derivatives
The following table sets forth the key terms and fair values of our interest rate swap derivatives, each of which was
designated as a cash flow hedge of interest rate risk (dollars in thousands):
$
Notional
Amount
100,000
100,000
50,000
11,200 (1)
23,000 (2)
75,000 (3)
75,000 (3)
75,000 (3)
—
Fixed Rate
Floating Rate Index
1.901% One-Month LIBOR
1.905% One-Month LIBOR
1.908% One-Month LIBOR
1.678% One-Month LIBOR
0.573% One-Month LIBOR
3.176% Three-Month LIBOR
3.192% Three-Month LIBOR
2.744% Three-Month LIBOR
1.390% One-Month LIBOR
Effective Date
9/1/2016
9/1/2016
9/1/2016
8/1/2019
4/1/2020
6/30/2020
6/30/2020
6/30/2020
10/13/2015
Expiration Date
12/1/2022
12/1/2022
12/1/2022
8/1/2026
3/26/2025
N/A
N/A
N/A
10/1/2020
Fair Value at December 31,
2020
(3,394) $
(3,401)
(1,704)
(733)
(290)
—
—
—
—
(9,522) $
2019
(1,028)
(1,037)
(524)
(20)
—
(8,640)
(8,749)
(5,684)
23
(25,659)
$
$
(1) The notional amount of this instrument is scheduled to amortize to $10.0 million.
(2) The notional amount of this instrument is scheduled to amortize to $22.1 million.
(3) As discussed below, these instruments were cash settled in September 2020.
F-44
Corporate Office Properties Trust and Subsidiaries and Corporate Office Properties, L.P. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
The table below sets forth the fair value of our interest rate derivatives as well as their classification on our consolidated
balance sheets (in thousands):
Derivatives
Interest rate swaps designated as cash flow hedges
Interest rate swaps designated as cash flow hedges
Balance Sheet Location
2020
2019
Prepaid expenses and other assets, net $
$
Interest rate derivatives (liabilities)
— $
(9,522) $
23
(25,682)
Fair Value at December 31,
The tables below presents the effect of our interest rate derivatives on our consolidated statements of operations and
comprehensive income (in thousands):
Amount of Loss Recognized in AOCL on
Derivatives
Amount of (Loss) Gain Reclassified from
AOCL into Interest Expense on Statement of
Operations
For the Years Ended December 31,
For the Years Ended December 31,
Derivatives in Hedging Relationships
Interest rate derivatives
2020
(39,454) $
2019
(24,321) $
2018
(2,373) $
2020
(3,725) $
$
2019
2018
1,415 $
407
Amount of Loss Reclassified from AOCL into
Loss on Interest Rate Derivatives on Statement
of Operations
Amount of Loss Recognized on Undesignated
Swaps in Loss on Interest Rate Derivatives on
Statement of Operations
For the Years Ended December 31,
For the Years Ended December 31,
Derivatives in Hedging Relationships
Interest rate derivatives
2020
(51,865) $
$
2019
2018
—
— $
2020
(1,265) $
2019
2018
—
—
As described further in Note 10, in September 2020, we completed our issuance of the 2.25% Notes. In August 2020, in
anticipation of pursuing such an issuance, we determined that the forecasted transactions hedged by our three interest rate swaps
with an effective date of June 30, 2020 and an aggregate notional amount of $225.0 million were no longer probable of
occurring, resulting in our discontinuance of hedge accounting on these swaps. When we consummated the note issuance in
September 2020, we determined that it was probable that the forecasted transactions would not occur, resulting in our
reclassification of $51.9 million in losses from AOCL to loss on interest rate derivatives on our statements of operations. On
September 22, 2020, we cash settled these swaps and accrued interest thereon for an aggregate amount of $53.1 million.
Based on the fair value of our derivatives as of December 31, 2020, we estimate that approximately $4.8 million of losses
will be reclassified from AOCL as an increase to interest expense over the next 12 months.
We have agreements with each of our interest rate derivative counterparties that contain provisions under which, if we
default or are capable of being declared in default on defined levels of our indebtedness, we could also be declared in default on
our derivative obligations. Failure to comply with the loan covenant provisions could result in our being declared in default on
any derivative instrument obligations covered by the agreements. As of December 31, 2020, we were not in default with any of
these provisions. As of December 31, 2020, the fair value of interest rate derivatives in a liability position related to these
agreements was $9.6 million, excluding the effects of accrued interest and credit valuation adjustments. As of December 31,
2020, we had not posted any collateral related to these agreements. If we breach any of these provisions, we could be required
to settle our obligations under the agreements at their termination value, which was $10.0 million as of December 31, 2020.
12.
Redeemable Noncontrolling Interests
As discussed further in Note 6, our partners in two real estate joint ventures, LW Redstone Company, LLC and Stevens
Investors, LLC, have the right to require us to acquire their respective interests at fair value; accordingly, we classify the fair
F-45
Corporate Office Properties Trust and Subsidiaries and Corporate Office Properties, L.P. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
value of our partners’ interests as redeemable noncontrolling interests in the mezzanine section of our consolidated balance
sheets. The table below sets forth the activity for these redeemable noncontrolling interests (in thousands):
For the Years Ended December 31,
2019
2018
2020
Beginning balance
Contributions from noncontrolling interests
Distributions to noncontrolling interests
Net income attributable to noncontrolling interests
Adjustment to arrive at fair value of interests
Ending balance
$
29,431 $
—
(14,034)
3,426
6,607
$
25,430 $
26,260 $
—
(2,413)
3,835
1,749
29,431 $
23,125
186
(1,411)
2,523
1,837
26,260
We determine the fair value of the interests based on unobservable inputs after considering the assumptions that market
participants would make in pricing the interest. We apply a discount rate to the estimated future cash flows allocable to our
partners from the properties underlying the respective joint ventures. Estimated cash flows used in such analyses are based on
our plans for the properties and our views of market and economic conditions, and consider items such as current and future
rental rates, occupancy projections and estimated operating and development expenditures.
13.
Equity - COPT and Subsidiaries
Preferred Shares
As of December 31, 2020, COPT had 25.0 million preferred shares authorized and unissued at $0.01 par value per share.
Common Shares
In November 2018, COPT established an at-the-market (“ATM”) stock offering program under which it may offer and sell
common shares in at-the-market stock offerings having an aggregate gross sales price of up to $300.0 million (the “2018 ATM
Program”). Under the 2018 ATM Program, COPT may also, at its discretion, sell common shares under forward equity sales
agreements. As of December 31, 2020, COPT had not issued any shares under the 2018 ATM Program.
From 2018 to 2020, COPT completed the following share issuances under stock programs no longer in effect:
•
•
1.6 million shares in 2019 for net proceeds of $46.5 million, and 5.9 million shares in 2018 for net proceeds of $172.5
million, under forward equity sale agreements originating on November 2, 2017 to issue shares at an initial gross offering
price of $31.00 per share, before underwriting discounts, commissions and offering expenses. The forward sale price
received upon physical settlement of the agreements was subject to adjustment on a daily basis based on a floating interest
rate factor equal to the overnight bank funding rate less a spread, and was decreased on each of certain dates specified in
the agreements during the term of the agreements; and
992,000 common shares in 2018 at a weighted average price of $30.46 per share under an ATM program established in
2016. Net proceeds from the shares issued totaled $29.8 million, after payment of $0.5 million in commissions to sales
agents.
COPT contributed the net proceeds from these issuances to COPLP in exchange for an equal number of units in COPLP.
Certain holders of COPLP common units converted their units into COPT common shares on the basis of one common
share for each common unit in the amount of 14,009 in 2020, 105,039 in 2019 and 1.9 million in 2018.
COPT declared dividends per common share of $1.10 in 2020, 2019 and 2018.
COPT pays dividends at the discretion of its Board of Trustees. COPT’s ability to pay cash dividends will be dependent
upon: (1) the cash flow generated from our operations; (2) cash generated or used by our financing and investing activities; and
(3) the annual distribution requirements under the REIT provisions of the Code described in Note 2 and such other factors as
the Board of Trustees deems relevant. COPT’s ability to make cash dividends will also be limited by the terms of COPLP’s
Partnership Agreement, as well as by limitations imposed by state law. In addition, COPT is prohibited from paying cash
dividends in excess of the amount necessary for it to qualify for taxation as a REIT if a default or event of default exists
F-46
Corporate Office Properties Trust and Subsidiaries and Corporate Office Properties, L.P. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
pursuant to the terms of our Revolving Credit Facility; this restriction does not currently limit COPT’s ability to pay dividends,
and COPT does not believe that this restriction is reasonably likely to limit its ability to pay future dividends because it expects
to comply with the terms of our Revolving Credit Facility.
See Note 15 for disclosure of common share activity pertaining to our share-based compensation plans.
14.
Equity - COPLP and Subsidiaries
Limited Partner Preferred Units
On December 21, 2020, COPLP redeemed its 352,000 Series I Preferred Units from the third party unitholder at the units’
aggregate liquidation preference of $8.8 million ($25.00 per unit), plus accrued and unpaid distributions of return thereon up to
the date of redemption. The owner of these units earned a priority annual cumulative return on the units equal to: 3.5% of their
liquidation preference from September 23, 2019 up to the redemption date; and 7.5% of their liquidation preference prior to
September 23, 2019. These units were convertible into common units on the basis of 0.5 common units for each Series I
Preferred Unit, with the resulting common units being exchangeable for COPT common shares in accordance with the terms of
COPLP’s agreement of limited partnership.
Common Units
COPT owned 98.6% of COPLP’s common units as of December 31, 2020 and 98.7% as of December 31, 2019.
From 2018 to 2020, COPT acquired additional common units through the following common share issuances under stock
programs no longer in effect:
•
•
1.6 million shares in 2019 for net proceeds of $46.5 million, and 5.9 million shares in 2018 for net proceeds of $172.5
million, under forward equity sale agreements originating on November 2, 2017; and
992,000 shares in 2018 at a weighted average price of $30.46 per share under an ATM program established in 2016. Net
proceeds from the shares issued totaled $29.8 million, after payment of $0.5 million in commissions to sales agents.
Limited partners in COPLP holding common units have the right to require COPLP to redeem all or a portion of their
common units. COPLP (or COPT as the general partner) has the right, in its sole discretion, to deliver to such redeeming
limited partners for each partnership unit either one COPT common share (subject to anti-dilution adjustment) or a cash
payment equal to the then fair market value of such share (so adjusted) (based on the formula for determining such value set
forth in the partnership agreement). Certain limited partners holding common units redeemed their units into common shares
on the basis of one common share for each common unit in the amount of 14,009 in 2020, 105,039 in 2019 and 1.9 million in
2018. In addition, we redeemed 924 common units in 2019 for $25,000 and 13,377 in 2018 for $339,000.
COPLP declared distributions per common unit of $1.10 in 2020, 2019 and 2018.
15.
Share-Based Compensation and Other Compensation Matters
Share-Based Compensation Plans
In May 2017, COPT adopted the 2017 Omnibus Equity and Incentive Plan (the “2017 Plan”) following the approval of
such plan by our common shareholders. COPT may issue equity-based awards under this plan to officers, employees, non-
employee trustees and any other key persons of us and our subsidiaries, as defined in the plan. The plan provides for a
maximum of 3.4 million common shares in COPT to be issued in the form of options, share appreciation rights, restricted share
unit awards, restricted share awards, unrestricted share awards, dividend equivalent rights and other equity-based awards and
for the granting of cash-based awards. In November 2018, we amended the 2017 Plan to provide for the future grant of awards
in the form of PIUs; PIUs are a special class of common unit structured to qualify as “profit interests” for tax purposes which
are similar to restricted shares and PSUs, except that upon vesting recipients will receive common units in COPLP. This plan
expires on May 11, 2027. Shares for the 2017 Plan are issued under a registration statement on Form S-8 that became effective
upon filing with the Securities and Exchange Commission. In connection with awards of common shares granted by COPT
under the 2017 Plan, COPLP issues to COPT an equal number of equity instruments with identical terms.
F-47
Corporate Office Properties Trust and Subsidiaries and Corporate Office Properties, L.P. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
The table below sets forth our reporting for share based compensation cost (in thousands):
For the Years Ended December 31,
General, administrative and leasing expenses
Property operating expenses
Capitalized to development activities
Share-based compensation cost
2020
2018
2019
$ 5,385 $ 5,748 $ 5,415
961
587
$ 7,060 $ 7,456 $ 6,963
1,119
556
966
742
The amounts included in our consolidated statements of operations for share-based compensation reflected an estimate of
pre-vesting forfeitures of 0% for PSUs, PIUs and deferred share awards and 0% to 8% for restricted shares.
As of December 31, 2020, unrecognized compensation costs related to unvested awards included:
•
•
•
•
$5.6 million on restricted shares expected to be recognized over a weighted average period of approximately two years;
$2.2 million on performance-based PIUs (“PB-PIUs”) expected to be recognized over a weighted average performance
period of approximately two years;
$2.1 million on time-based PIUs (“TB-PIUs”) expected to be recognized over a weighted average period of approximately
three years; and
$121,000 on deferred share awards expected to be recognized through October 2021.
Restricted Shares
The following table summarizes restricted shares under the share-based compensation plans for 2018, 2019 and 2020:
Unvested as of December 31, 2017
Granted
Forfeited
Vested
Unvested as of December 31, 2018
Granted
Forfeited
Vested
Unvested as of December 31, 2019
Granted
Forfeited
Vested
Unvested as of December 31, 2020
Unvested shares as of December 31,
2020 that are expected to vest
Weighted
Average
Grant Date
Fair Value
$
$
$
30.37
25.62
30.02
29.49
28.38
26.56
29.44
28.01
27.49
25.22
27.12
28.14
26.16
26.14
Shares
425,626
219,716
(25,419)
(181,238)
438,685
195,520
(56,341)
(185,001)
392,863
166,918
(25,773) (1)
(173,191)
360,817
330,605
(1)
Includes 9,064 restricted shares previously awarded to our former Executive Vice President and Chief Operating Officer that were
forfeited upon his resignation.
Restricted shares granted to employees vest based on increments and over periods of time set forth under the terms of the
respective awards provided that the employee remains employed by us. Restricted shares granted to non-employee Trustees
vest on the first anniversary of the grant date, provided that the Trustee remains in his or her position.
The aggregate intrinsic value of restricted shares that vested was $4.4 million in 2020, $4.9 million in 2019 and $4.6
million in 2018.
F-48
Corporate Office Properties Trust and Subsidiaries and Corporate Office Properties, L.P. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
PIUs
Commencing in 2019, we offered our executives and Trustees the opportunity to select PIUs as a form of long-term
compensation in lieu of, or in combination with, other forms of share-based compensation awards (restricted shares, deferred
share awards and PSUs). Our executives and certain of our Trustees selected PIUs as their form of share-based compensation
for their 2019 and 2020 grants. We granted two forms of PIUs: TB-PIUs; and PB-PIUs. TB-PIUs are subject to forfeiture
restrictions until the end of the requisite service period, at which time the TB-PIUs automatically convert into vested PIUs. PB-
PIUs are subject to a market condition in that the number of earned awards are determined at the end of the performance period
(as described further below) and then settled in vested PIUs. Vested PIUs carry substantially the same rights to redemption and
distributions as non-PIU common units.
TB-PIUs
TB-PIUs granted to executives vest based on increments and over periods of time set forth under the terms of the
respective awards provided that the employee remains employed by us. TB-PIUs granted to non-employee Trustees vest on the
first anniversary of the grant date, provided that the Trustee remains in his or her position. Prior to vesting, TB-PIUs carry
substantially the same rights to distributions as non-PIU common units but carry no redemption rights. The following table
summarizes TB-PIUs under the share-based compensation plan for 2019 and 2020:
Unvested as of December 31, 2018
Granted
Unvested as of December 31, 2019
Granted
Forfeited
Vested
Unvested as of December 31, 2020
Unvested TB-PIUs as of December 31,
2020 that are expected to vest
Number of
TB-PIUs
Weighted
Average
Grant Date
Fair Value
—
61,820
61,820
98,318
(20,622) (1)
(25,182)
114,334
114,334
$
$
$
N/A
26.01
26.01
25.47
25.50
26.30
25.57
25.57
(1) Represents TB-PIUs previously awarded to our former Executive Vice President and Chief Operating Officer that were forfeited upon
his resignation.
The aggregate intrinsic value of TB-PIUs that vested was $640,000 in 2020.
PB-PIUs
We made the following grants of PB-PIUs to executives in 2019 and 2020: (dollars in thousands, except per share data):
Number of
PB-PIUs
Granted
193,682
176,758
Performance
Period
Commencement
Date
1/1/2019
1/1/2020
Grant Date
1/1/2019
1/1/2020
Performance
Period End Date
12/31/2021
12/31/2022
Grant Date
Fair Value
$
$
2,415
2,891
Number of PB-PIUs
Outstanding as of
December 31, 2020 (1)
156,104
141,152
(1) Excludes 73,184 PB-PIUs previously awarded to our former Executive Vice President and Chief Operating Officer that were forfeited
upon his resignation.
The PB-PIUs each have a three-year performance period concluding on the earlier of the respective performance period end
dates, or the date of: (1) termination by us without cause, death or disability of the executive or constructive discharge of the
executive (collectively, “qualified termination”); or (2) a sale event. The number of earned awards at the end of the
F-49
Corporate Office Properties Trust and Subsidiaries and Corporate Office Properties, L.P. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
performance period will be determined based on the percentile rank of COPT’s total shareholder return (“TSR”) relative to a
peer group of companies, as set forth in the following schedule:
Percentile Rank
75th or greater
50th (target)
25th
Below 25th
Earned Awards Payout %
100% of PB-PIUs granted
50% of PB-PIUs granted
25% of PB-PIUs granted
0% of PB-PIUs granted
If the percentile rank exceeds the 25th percentile and is between two of the percentile ranks set forth in the table above, then the
percentage of the earned awards will be interpolated between the ranges set forth in the table above to reflect any performance
between the listed percentiles. If COPT’s TSR during the measurement period is negative, the maximum number of earned
awards will be limited to the target level payout percentage. During the performance period, PB-PIUs carry rights to
distributions equal to 10% of the distribution rights of non-PIU common units but carry no redemption rights.
At the end of the performance period, we will settle the award by issuing vested PIUs equal to the number of earned awards
in settlement of the award plan and paying cash equal to the excess, if any, of: the aggregate distributions that would have been
paid with respect to vested PIUs issued in settlement of the earned awards through the date of settlement had such vested PIUs
been issued on the grant date; over the aggregate distributions made on the PB-PIUs during the performance period. If a
performance period ends due to a sale event or qualified termination, the number of earned awards is prorated based on the
portion of the three-year performance period that has elapsed. If employment is terminated by the employee or by us for cause,
all PB-PIUs are forfeited.
We computed grant date fair values for PB-PIUs using Monte Carlo models and are recognizing these values over the
respective performance periods. The grant date fair value and certain of the assumptions used in the Monte Carlo models for
the PB-PIUs granted in 2019 and 2020 are set forth below:
Grant Date
Fair Value
Per PB-PIU
$
$
12.47 $
16.36 $
Baseline
Common
Share Value
21.03
29.38
Expected
Volatility of
Common Shares
21.0%
18.0%
Risk-free
Interest Rate
2.51%
1.65%
Grant Date
1/1/2019
1/1/2020
PSUs
We made the following grants of PSUs to executives from 2016 through 2018 (dollars in thousands):
Number of
PSUs
Granted
26,299
39,351
59,110
Performance
Period
Commencement
Date
1/1/2016
1/1/2017
1/1/2018
Grant Date
3/1/2016
1/1/2017
1/1/2018
Performance
Period End Date
12/31/2018
12/31/2019
12/31/2020
Grant Date
Fair Value
$
$
$
1,005
1,415
1,890
Number of PSUs
Outstanding as of
December 31, 2020
—
—
46,912 (1)
(1) Excludes 12,198 PSUs previously awarded to our former Executive Vice President and Chief Operating Officer that were forfeited upon
his resignation.
The PSUs each had three-year performance periods concluding on the earlier of the respective performance period end dates set
forth above or the date of: (1) termination by us without cause, death or disability of the executive or constructive discharge of
the executive (collectively, “qualified termination”); or (2) a sale event. The number of PSUs earned (“earned PSUs”) at the
end of the performance period were determined based on the percentile rank of COPT’s TSR relative to a peer group of
companies, as set forth in the following schedule:
Percentile Rank
75th or greater
50th (target)
25th
Below 25th
Earned PSUs Payout %
200% of PSUs granted
100% of PSUs granted
50% of PSUs granted
0% of PSUs granted
F-50
Corporate Office Properties Trust and Subsidiaries and Corporate Office Properties, L.P. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
If the percentile rank exceeded the 25th percentile and was between two of the percentile ranks set forth in the table above, then
the percentage of the earned PSUs was interpolated between the ranges set forth in the table above to reflect any performance
between the listed percentiles. At the end of the performance period, we settled the award by issuing fully-vested COPT shares
equal to the number of earned PSUs in settlement of the award plan and either:
•
•
for awards granted January 1, 2017 and prior thereto, issuing fully-vested COPT shares equal to the aggregate dividends
that would have been paid with respect to the common shares issued in settlement of the earned PSUs through the date of
settlement had such shares been issued on the grant date, divided by the share price on such settlement date, as defined
under the terms of the agreement; or
for awards issued subsequent to January 1, 2017, paying cash equal to the aggregate dividends that would have been paid
with respect to the common shares issued in settlement of the earned PSUs through the date of settlement had such shares
been issued on the grant date.
If a performance period ends due to a sale event or qualified termination, the number of earned PSUs was prorated based on the
portion of the three-year performance period that had elapsed. If employment was terminated by the employee or by us for
cause, all PSUs were forfeited. PSUs do not carry voting rights.
Based on COPT’s TSR relative to its peer group of companies:
•
•
•
for the 2016 PSUs issued to executives that vested on December 31, 2018, we issued 44,757 common shares in settlement
of the PSUs on January 18, 2019;
for the 2017 PSUs issued to executives that vested on December 31, 2019, we issued 23,181 common shares in settlement
of the PSUs on January 13, 2020; and
for the 2018 PSUs issued to executives that vested on December 31, 2020, we issued 93,824 common shares in settlement
of the PSUs on February 3, 2021.
We computed grant date fair values for PSUs using Monte Carlo models and recognized these values over the performance
periods. The 2018 grant date fair value of $31.97 was computed using a Monte Carlo model that included the following
assumptions: baseline common share value of $29.20; expected volatility for common shares of 17.0%; and a risk-free interest
rate of 2.04%.
Deferred Share Awards
We made the following grants of deferred share awards to nonemployee members of our Board of Trustees in 2018, 2019
and 2020 (dollars in thousands, except per share data):
Year of Grant
2018
2019
2020
Number of
Deferred Share
Awards Granted
Aggregate
Grant Date
Fair Value
13,832 $
3,432 $
10,679 $
388
95
253
Grant Date Fair
Value Per Share
28.08
$
27.60
$
23.68
$
Deferred share awards vest on the first anniversary of the grant date, provided that the Trustee remains in his or her position.
We settle deferred share awards by issuing an equivalent number of common shares upon vesting of the awards or a later date
elected by the Trustee (generally upon cessation of being a Trustee). We issued the following common shares in settlement of
deferred shares in 2018, 2019 and 2020 (dollars in thousands, except per share data):
Year of Settlement
2018
2019
2020
Number of
Common Shares
Issued
Grant Date
Fair Value
Per Share
5,515 $
3,097 $
—
29.32
26.77
N/A
Aggregate
Intrinsic Value
154
$
86
$
N/A
F-51
Corporate Office Properties Trust and Subsidiaries and Corporate Office Properties, L.P. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
Options
We have not issued options since 2009, the last of which expired in 2019, and all of our options were vested and fully
expensed prior to 2018.
16.
Credit Losses, Financial Assets and Other Instruments
The table below sets forth the activity for the allowance for credit losses (in thousands):
December 31, 2019
Cumulative effect of change for
adoption of credit loss guidance
Credit loss (recoveries) expense
Other changes
December 31, 2020
For the Year Ended December 31, 2020
Investing
Receivables
Tenant Notes
Receivable (1)
Other Assets (2)
Off-Balance
Sheet Credit
Exposures
Total
$
— $
97 $
— $
— $
97
3,732
(881)
—
2,851 $
325
729
52
1,203 $
$
144
559
(60)
643 $
1,340
(1,340)
—
— $
5,541
(933)
(8)
4,697
Included in the line entitled “accounts receivable, net” on our consolidated balance sheets.
(1)
(2) The balance as of December 31, 2020 included $257,000 in the line entitled “accounts receivable, net” and $386,000 in the line entitled
“prepaid expenses and other assets, net” on our consolidated balance sheets.
The following table presents the amortized cost basis of our investing receivables and tenants notes receivable by credit
risk classification, by origination year as of December 31, 2020 (in thousands):
2015 and
Earlier
2016
2017
2018
2019
2020
Total
Origination Year
Investing receivables:
Credit risk classification:
Investment grade
Non-investment grade
Total
Tenant notes receivable:
Credit risk classification:
Investment grade
Non-investment grade
Total
Sales-type lease receivable:
Credit risk classification:
Investment grade
$ 64,354 $
—
$ 64,354 $
— $
—
— $
971 $
—
971 $
— $
—
— $
— $
6,041
6,041 $
239 $ 65,564
—
6,041
239 $ 71,605
$
$
$
— $
97
97 $
14 $
165
179 $
— $
—
— $
1,028 $
164
1,192 $
84 $
1,883
1,967 $
343 $
1,803
2,146 $
1,469
4,112
5,581
— $
— $
— $
— $
— $
6,573 $
6,573
Our investment grade credit risk classification represents entities with investment grade credit ratings from ratings agencies
(such as Standard & Poor’s Ratings Services, Moody’s Investors Service, Inc. or Fitch Ratings Ltd.), meaning that they are
considered to have at least an adequate capacity to meet their financial commitments, with credit risk ranging from minimal to
moderate. Our non-investment grade credit risk classification represents entities with either no credit agency credit ratings or
ratings deemed to be sub-investment grade; we believe that there is significantly more credit risk associated with this
classification. The credit risk classifications of our investing receivables and tenant notes receivable were last updated in
December 2020.
An insignificant portion of the investing and tenant notes receivables set forth above was past due, which we define as
being delinquent by more than three months from the due date.
F-52
Corporate Office Properties Trust and Subsidiaries and Corporate Office Properties, L.P. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
Notes receivable on nonaccrual status as of December 31, 2020 and 2019 were not significant. We did not recognize any
interest income during the year ended December 31, 2020 on notes receivable on nonaccrual status.
17.
Information by Business Segment
We have the following reportable segments: Defense/IT Locations; Regional Office; Wholesale Data Center; and Other.
We also report on Defense/IT Locations sub-segments, which include the following: Fort George G. Meade and the Baltimore/
Washington Corridor (“Fort Meade/BW Corridor”); Northern Virginia Defense/IT Locations; Lackland Air Force Base (in San
Antonio); locations serving the U.S. Navy (“Navy Support Locations”), which included properties proximate to the Washington
Navy Yard, the Naval Air Station Patuxent River in Maryland and the Naval Surface Warfare Center Dahlgren Division in
Virginia; Redstone Arsenal (in Huntsville); and data center shells (properties leased to tenants to be operated as data centers in
which the tenants fund the costs for the power, fiber connectivity and data center infrastructure).
We measure the performance of our segments through the measure we define as net operating income from real estate
operations (“NOI from real estate operations”), which includes: real estate revenues and property operating expenses; and the
net of revenues and property operating expenses of real estate operations owned through unconsolidated real estate joint
ventures (“UJVs”) that is allocable to COPT’s ownership interest (“UJV NOI allocable to COPT”). Amounts reported for
segment assets represent long-lived assets associated with consolidated operating properties (including the carrying value of
properties, right-of-use assets, net of related lease liabilities, intangible assets, deferred leasing costs, deferred rents receivable
and lease incentives) and the carrying value of investments in UJVs owning operating properties. Amounts reported as
additions to long-lived assets represent additions to existing consolidated operating properties, excluding transfers from non-
operating properties, which we report separately.
F-53
Corporate Office Properties Trust and Subsidiaries and Corporate Office Properties, L.P. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
The table below reports segment financial information for our reportable segments (in thousands):
Fort Meade/
BW
Corridor
Northern
Virginia
Defense/IT
Operating Property Segments
Defense/Information Technology Locations
Navy
Support
Locations
Lackland
Air Force
Base
Redstone
Arsenal
Data Center
Shells
Total
Defense/IT
Locations
Regional
Office
Operating
Wholesale
Data Center
Other
Total
Year Ended December 31, 2020
Revenues from real estate operations
Property operating expenses
UJV NOI allocable to COPT
NOI from real estate operations
Additions to long-lived assets
Transfers from non-operating properties
Segment assets at December 31, 2020
Year Ended December 31, 2019
Revenues from real estate operations
Property operating expenses
UJV NOI allocable to COPT
F
-
5
4
NOI from real estate operations
Additions to long-lived assets
Transfers from non-operating properties
Segment assets at December 31, 2019
Year Ended December 31, 2018
Revenues from real estate operations
Property operating expenses
UJV NOI allocable to COPT
NOI from real estate operations
Additions to long-lived assets
Transfers from non-operating properties
Segment assets at December 31, 2018
$ 254,197 $
(85,032)
—
27,788 $
(14,171)
—
13,617 $
$ 169,165 $
11,158 $
31,295 $
$
$
— $
21,859 $
$ 1,277,849 $ 392,714 $ 142,137 $ 178,897 $ 281,386 $ 419,929 $ 2,692,912 $ 490,422 $ 202,089 $
29,139 $ 447,519 $
(3,195)
6,951
32,895 $ 295,093 $
52,924 $
— $ 138,122 $ 230,277 $ 393,271 $
60,627 $
(29,144)
—
31,483 $
17,232 $
83,091 $
57,817 $
(21,321)
—
36,496 $
11,620 $
2,557 $
50,982 $
(29,055)
—
21,927 $
— $
456 $
32,869 $
(12,655)
—
20,214 $
7,104 $
22,515 $
(8,119)
—
14,396 $
2,905 $
(159,377)
6,951
— $
$ 252,781 $
(82,815)
—
29,405 $
(13,213)
—
16,192 $
$ 169,966 $
893 $
34,618 $
$
$
(1,012) $
18,606 $
$ 1,280,656 $ 396,914 $ 146,592 $ 184,257 $ 138,501 $ 279,099 $ 2,426,019 $ 392,319 $ 202,935 $
26,571 $ 435,486 $
16,593 $
(1,962)
(6,626)
5,705
—
30,314 $ 287,388 $
9,967 $
1,548 $
54,404 $
33,606 $ 159,472 $ 227,013 $
32,659 $
(13,579)
—
19,080 $
8,912 $
— $
55,742 $
(19,779)
—
35,963 $
9,326 $
4,548 $
59,611 $
(29,682)
—
29,929 $
20,925 $
— $
51,140 $
(29,042)
—
22,098 $
— $
10,781 $
(153,803)
5,705
— $
$ 248,927 $
(82,975)
—
31,892 $
(16,342)
—
15,550 $
$ 165,952 $
856 $
38,612 $
$
$
2,304 $
35,648 $
$ 1,279,571 $ 399,339 $ 139,731 $ 188,911 $ 108,010 $ 353,165 $ 2,468,727 $ 395,380 $ 216,640 $
25,650 $ 421,053 $
(3,225)
4,818
27,243 $ 272,867 $
53,676 $
99,191 $ 163,839 $
31,927 $
(13,536)
—
18,391 $
6,535 $
(116) $
53,518 $
(20,330)
—
33,188 $
7,956 $
10,231 $
61,181 $
(30,253)
—
30,928 $
19,730 $
— $
46,286 $
(26,888)
—
19,398 $
— $
14,718 $
14,745 $
(6,050)
—
8,695 $
573 $
4,167 $
(153,004)
4,818
— $
2,791 $ 538,725
(203,840)
(1,148)
6,951
—
1,643 $ 341,836
81,479
— $ 476,362
3,555 $ 3,388,978
165 $
2,961 $ 527,463
(198,143)
(1,445)
5,705
—
1,516 $ 335,025
76,350
— $ 226,001
3,685 $ 3,024,958
128 $
3,127 $ 517,253
(201,035)
(1,436)
4,818
—
1,691 $ 321,036
74,742
— $ 166,143
4,115 $ 3,084,862
480 $
Corporate Office Properties Trust and Subsidiaries and Corporate Office Properties, L.P. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
The following table reconciles our segment revenues to total revenues as reported on our consolidated statements of
operations (in thousands):
Segment revenues from real estate operations
Construction contract and other service revenues
Total revenues
For the Years Ended December 31,
2018
2019
2020
$ 538,725 $ 527,463 $ 517,253
60,859
113,763
$ 609,365 $ 641,226 $ 578,112
70,640
The following table reconciles UJV NOI allocable to COPT to equity in income of unconsolidated entities as reported on
our consolidated statements of operations (in thousands):
UJV NOI allocable to COPT
Less: Income from UJV allocable to COPT attributable to depreciation and
amortization expense and interest expense
Add: Equity in (loss) income of unconsolidated non-real estate entities
Equity in income of unconsolidated entities
For the Years Ended December 31,
2018
2019
2020
$
6,951 $
5,705 $
4,818
(5,120)
(6)
1,825 $
(4,065)
(7)
1,633 $
(3,314)
1,193
2,697
$
As previously discussed, we provide real estate services such as property management, development and construction
services primarily for our properties but also for third parties. The primary manner in which we evaluate the operating
performance of our service activities is through a measure we define as net operating income from service operations (“NOI
from service operations”), which is based on the net of revenues and expenses from these activities. Construction contract and
other service revenues and expenses consist primarily of subcontracted costs that are reimbursed to us by the customer along
with a management fee. The operating margins from these activities are small relative to the revenue. We believe NOI from
service operations is a useful measure in assessing both our level of activity and our profitability in conducting such operations.
The table below sets forth the computation of our NOI from service operations (in thousands):
For the Years Ended December 31,
2018
2019
2020
$ 70,640 $ 113,763 $ 60,859
(58,326)
2,533
(67,615) (109,962)
3,801 $
3,025 $
$
Construction contract and other service revenues
Construction contract and other service expenses
NOI from service operations
F-55
Corporate Office Properties Trust and Subsidiaries and Corporate Office Properties, L.P. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
The following table reconciles our NOI from real estate operations for reportable segments and NOI from service
operations to net income as reported on our consolidated statements of operations (in thousands):
NOI from real estate operations
NOI from service operations
Interest and other income
Credit loss recoveries
Gain on sales of real estate
Gain on sale of investment in unconsolidated real estate joint venture
Equity in income of unconsolidated entities
Income tax (expense) benefit
Depreciation and other amortization associated with real estate operations
Impairment losses
General, administrative and leasing expenses
Business development expenses and land carry costs
Interest expense
UJV NOI allocable to COPT included in equity in income of
unconsolidated entities
Loss on early extinguishment of debt
Loss on interest rate derivatives
Net income
3,025
8,574
933
30,209
29,416
1,825
(353)
3,801
7,894
—
105,230
—
1,633
217
For the Years Ended December 31,
2018
2019
2020
$ 341,836 $ 335,025 $ 321,036
2,533
4,358
—
2,340
—
2,697
363
(138,193) (137,069) (137,116)
(2,367)
(28,900)
(5,840)
(75,385)
(329)
(35,402)
(4,239)
(71,052)
(1,530)
(33,001)
(4,473)
(67,937)
(6,951)
(7,306)
(53,196)
(4,818)
(258)
—
$ 102,878 $ 200,004 $ 78,643
(5,705)
—
—
The following table reconciles our segment assets to the consolidated total assets of COPT and subsidiaries (in thousands):
Segment assets
Operating properties lease liabilities included in segment assets
Non-operating property assets
Other assets
Total COPT consolidated assets
As of December 31,
2020
2019
$ 3,388,978 $ 3,024,958
17,317
621,630
190,548
$ 4,077,023 $ 3,854,453
30,721
466,991
190,333
The accounting policies of the segments are the same as those used to prepare our consolidated financial statements. In the
segment reporting presented above, we did not allocate interest expense, depreciation and amortization, impairment losses, gain
on sales of real estate, gain on sale of investment in unconsolidated real estate joint venture, loss on early extinguishment of
debt, loss on interest rate derivatives and equity in income of unconsolidated entities not included in NOI to our real estate
segments since they are not included in the measure of segment profit reviewed by management. We also did not allocate
general, administrative and leasing expenses, business development expenses and land carry costs, interest and other income,
credit loss recoveries (expense), income taxes and noncontrolling interests because these items represent general corporate or
non-operating property items not attributable to segments.
F-56
Corporate Office Properties Trust and Subsidiaries and Corporate Office Properties, L.P. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
18.
Construction Contract and Other Service Revenues
We disaggregate our construction contract and other service revenues by compensation arrangement and by service type as
we believe it best depicts the nature, timing and uncertainty of our revenue. The table below reports construction contract and
other service revenues by compensation arrangement (in thousands):
Construction contract revenue:
GMP
Cost-plus fee
FFP
Other
For the Years Ended December 31,
2019
2018
2020
$
$
22,032 $
34,025
12,373
2,210
70,640 $
67,708 $
34,386
10,688
981
113,763 $
34,050
5,540
20,327
942
60,859
The table below reports construction contract and other service revenues by service type (in thousands):
Construction contract revenue:
Construction
Design
Other
For the Years Ended December 31,
2019
2018
2020
$
$
66,087 $
2,343
2,210
70,640 $
112,170 $
612
981
113,763 $
57,986
1,931
942
60,859
We derived 55% of our construction contract revenue from the USG in 2020, 74% in 2019 and 95% in 2018.
We recognized an insignificant amount of revenue in 2020, 2019 and 2018 from performance obligations satisfied (or
partially satisfied) in previous periods.
Accounts receivable related to our construction contract services is included in accounts receivable, net on our consolidated
balance sheets. The beginning and ending balances of accounts receivable related to our construction contracts were as follows
(in thousands):
Beginning balance
Ending balance
For the Years Ended December 31,
2020
2019
$
$
12,378 $
13,997 $
6,701
12,378
Contract assets, which we refer to herein as construction contract costs in excess of billings, are included in prepaid expenses
and other assets, net reported on our consolidated balance sheets. The beginning and ending balances of our contract assets
were as follows (in thousands):
Beginning balance
Ending balance
For the Years Ended December 31,
2020
2019
$
$
17,223 $
10,343 $
3,189
17,223
Contract liabilities are included in other liabilities reported on our consolidated balance sheets. Changes in contract liabilities
were as follows (in thousands):
Beginning balance
Ending balance
Portion of beginning balance recognized in revenue during the year
$
$
$
1,184 $
4,610 $
757 $
568
1,184
446
For the Years Ended December 31,
2020
2019
F-57
Corporate Office Properties Trust and Subsidiaries and Corporate Office Properties, L.P. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
Revenue allocated to the remaining performance obligations under existing contracts as of December 31, 2020 that will be
recognized as revenue in future periods was $81.9 million, all of which we expect to recognize in 2021.
We have no deferred incremental costs incurred to obtain or fulfill our construction contracts or other service revenues, and
had no significant credit loss expense on construction contracts receivable or unbilled construction revenue in 2020, 2019 and
2018.
19.
Earnings Per Share (“EPS”) and Earnings Per Unit (“EPU”)
COPT and Subsidiaries EPS
We present both basic and diluted EPS. We compute basic EPS by dividing net income available to common shareholders
allocable to unrestricted common shares under the two-class method by the weighted average number of unrestricted common
shares outstanding during the period. Our computation of diluted EPS is similar except that:
•
•
the denominator is increased to include: (1) the weighted average number of potential additional common shares that would
have been outstanding if securities that are convertible into common shares were converted; and (2) the effect of dilutive
potential common shares outstanding during the period attributable to COPT’s forward equity sale agreements, redeemable
noncontrolling interests and our share-based compensation using the treasury stock or if-converted methods; and
the numerator is adjusted to add back any changes in income or loss that would result from the assumed conversion into
common shares that we add to the denominator.
Summaries of the numerator and denominator for purposes of basic and diluted EPS calculations are set forth below (in
thousands, except per share data):
For the Years Ended December 31,
2018
2019
2020
$ 97,374 $ 191,692 $ 72,301
(462)
(431)
(656)
$ 96,943 $ 191,036 $ 71,839
—
—
132
33
—
27
$ 96,970 $ 191,201 $ 71,839
111,788
—
288
—
112,076
$
$
111,196
119
308
—
111,623
103,946
—
134
45
104,125
0.69
0.69
0.87 $
0.87 $
1.72 $
1.71 $
Numerator:
Net income attributable to COPT
Income attributable to share-based compensation awards
Numerator for basic EPS on net income attributable to COPT common
shareholders
Redeemable noncontrolling interests
Income attributable to share-based compensation awards
Numerator for diluted EPS on net income attributable to COPT common
shareholders
Denominator (all weighted averages):
Denominator for basic EPS (common shares)
Dilutive effect of redeemable noncontrolling interests
Dilutive effect of share-based compensation awards
Dilutive effect of forward equity sale agreements
Denominator for diluted EPS (common shares)
Basic EPS
Diluted EPS
F-58
Corporate Office Properties Trust and Subsidiaries and Corporate Office Properties, L.P. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
Our diluted EPS computations do not include the effects of the following securities since the conversions of such securities
would increase diluted EPS for the respective periods (in thousands):
Conversion of common units
Conversion of redeemable noncontrolling interests
Conversion of Series I Preferred Units
Weighted Average Shares Excluded from
Denominator for the Years Ended
December 31,
2020
2019
2018
1,236
957
171
1,299
896
176
2,468
936
176
The following securities were also excluded from the computation of diluted EPS because their effect was antidilutive:
•
•
•
•
weighted average restricted shares and deferred share awards of 430,000 for 2020, 441,000 for 2019 and 452,000 for 2018;
weighted average unvested TB-PIUs of 89,000 for 2020 and 51,000 for 2019;
weighted average options of 12,000 for 2019 and 42,000 for 2018; and
weighted average shares related to COPT’s forward equity sale agreements of 376,000 for 2019.
COPLP and Subsidiaries EPU
We present both basic and diluted EPU. We compute basic EPU by dividing net income available to common unitholders
allocable to unrestricted common units under the two-class method by the weighted average number of unrestricted common
units outstanding during the period. Our computation of diluted EPU is similar except that:
•
•
the denominator is increased to include: (1) the weighted average number of potential additional common units that would
have been outstanding if securities that are convertible into our common units were converted; and (2) the effect of dilutive
potential common units outstanding during the period attributable to COPT’s forward equity sale agreements, redeemable
noncontrolling interests and our share-based compensation using the treasury stock or if-converted methods; and
the numerator is adjusted to add back any changes in income or loss that would result from the assumed conversion into
common units that we add to the denominator.
Summaries of the numerator and denominator for purposes of basic and diluted EPU calculations are set forth below (in
thousands, except per unit data):
For the Years Ended December 31,
2020
2019
2018
Numerator:
Net income attributable to COPLP
Preferred unit distributions
Income attributable to share-based compensation awards
Numerator for basic EPU on net income attributable to COPLP common
unitholders
Redeemable noncontrolling interests
Income attributable to share-based compensation awards
Numerator for diluted EPU on net income attributable to COPLP common
unitholders
Denominator (all weighted averages):
Denominator for basic EPU (common units)
Dilutive effect of redeemable noncontrolling interests
Dilutive effect of share-based compensation awards
Dilutive effect of forward equity sale agreements
Denominator for diluted EPU (common units)
Basic EPU
Diluted EPU
F-59
$ 98,854 $ 194,619 $ 74,703
(660)
(462)
(300)
(511)
(564)
(785)
98,043
—
—
193,270
132
33
73,581
—
—
$ 98,043 $ 193,435 $ 73,581
112,495
119
308
—
112,922
113,024
—
288
—
113,312
$
$
0.87 $
0.87 $
1.72 $
1.71 $
106,414
—
134
45
106,593
0.69
0.69
Corporate Office Properties Trust and Subsidiaries and Corporate Office Properties, L.P. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
Our diluted EPU computations do not include the effects of the following securities since the conversions of such securities
would increase diluted EPU for the respective periods (in thousands):
Conversion of redeemable noncontrolling interests
Conversion of Series I Preferred Units
Weighted Average Units Excluded from
Denominator for the Years Ended
December 31,
2020
2019
2018
957
171
896
176
936
176
The following securities were also excluded from the computation of diluted EPU because their effect was antidilutive:
•
•
•
•
weighted average restricted units and deferred share awards of 430,000 for 2020, 441,000 for 2019 and 452,000 for 2018;
weighted average unvested TB-PIUs of 89,000 for 2020 and 51,000 for 2019;
weighted average options of 12,000 for 2019 and 42,000 for 2018; and
weighted average shares related to COPT’s forward equity sale agreements of 376,000 for 2019.
20.
Commitments and Contingencies
Litigation and Claims
In the normal course of business, we are subject to legal actions and other claims. We record losses for specific legal
proceedings and claims when we determine that a loss is probable and the amount of loss can be reasonably estimated. As of
December 31, 2020, management believes that it is reasonably possible that we could recognize a loss of up to $3.1 million for
certain municipal tax claims. While we do not believe this loss would materially affect our financial position or liquidity, it
could be material to our results of operations. Management believes that it is also reasonably possible that we could incur
losses pursuant to other such claims but do not believe such losses would materially affect our financial position, liquidity or
results of operations. Our assessment of the potential outcomes of these matters involves significant judgment and is subject to
change based on future developments.
Environmental
We are subject to various Federal, state and local environmental regulations related to our property ownership and
operation. We have performed environmental assessments of our properties, the results of which have not revealed any
environmental liability that we believe would have a materially adverse effect on our financial position, operations or liquidity.
In connection with a lease and subsequent sale in 2008 and 2010 of three properties in Dayton, New Jersey, we agreed to
provide certain environmental indemnifications limited to $19 million in the aggregate. We have insurance coverage in place to
mitigate much of any potential future losses that may result from these indemnification agreements.
Tax Incremental Financing Obligation
Anne Arundel County, Maryland issued tax incremental financing bonds to third-party investors in order to finance public
improvements needed in connection with our project known as the National Business Park. These bonds had a remaining
principal balance of approximately $33 million as of December 31, 2020. The real estate taxes on increases in assessed values
post-bond issuance of properties in development districts encompassing the National Business Park are transferred to a special
fund pledged to the repayment of the bonds. While we are obligated to fund, through a special tax, any future shortfalls
between debt service of the bonds and real estate taxes available to repay the bonds, as of December 31, 2020, we do not expect
any such future fundings will be required.
Effects of COVID-19
Since first being declared a pandemic by the World Health Organization in early March 2020, the coronavirus, or
COVID-19, has spread worldwide. In an effort to control its spread, governments and other authorities imposed restrictive
measures affecting freedom of movement and business operations, such as shelter-in-place orders and business closures. Strong
restrictive measures were put into place in much of the United States beginning in March 2020, bringing many businesses to a
halt while forcing others to change the way in which they conduct their operations, with much of the workforce working from
F-60
Corporate Office Properties Trust and Subsidiaries and Corporate Office Properties, L.P. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
their homes to the extent they were able. States and local governments began easing these measures to varying extents in late
April 2020, with some lifting restrictive measures entirely, while others chose a more gradual, extended easing approach.
While the easing of these measures enabled many businesses to gradually resume normal operations, most businesses continue
to be hindered to varying extents by either measures still in effect, operational challenges resulting from social distancing
requirements/expectations and/or a reluctance by much of the population to engage in certain activities while the pandemic is
still active. As of the date of this filing, COVID-19 spread continues world- and nation-wide, and is expected to continue until
vaccinations have been administered to much of the population, which is not expected to occur in the United States until at least
mid- to late 2021. As a result, there continues to be significant uncertainty regarding the duration and extent of this pandemic.
The outbreak significantly disrupted financial and economic markets worldwide, as well as in the United States at a national,
regional and local level. These conditions could continue or further deteriorate as businesses feel the prolonged effects of
stalled or reduced operations and uncertainty regarding the pandemic continues.
COVID-19, and any similar pandemics should they occur, along with measures instituted to prevent spread, may adversely
affect us in many ways, including, but not limited to:
•
•
•
•
•
•
disruption of our tenants’ operations, which could adversely affect their ability, or willingness, to sustain their businesses
and/or fulfill their lease obligations;
our ability to maintain occupancy in our properties and obtain new leases for unoccupied and new development space at
favorable terms or at all;
shortages in supply of products or services from our and our tenants’ vendors that are needed for us and our tenants to
operate effectively, and which could lead to increased costs for such products and services;
access to debt and equity capital on attractive terms or at all. Severe disruption and instability in the global financial
markets or deteriorations in credit and financing conditions may affect our or our tenants’ ability to access capital necessary
to fund operations, refinance debt or fund planned investments on a timely basis, and may adversely affect the valuation of
financial assets and liabilities;
our and our tenants’ ability to continue or complete planned development, including the potential for delays in the supply
of materials or labor necessary for development; and
an increase in the pace of businesses implementing remote work arrangements over the long-term, which would adversely
effect demand for office space.
The extent of the effect on our operations, financial condition and cash flows will be dependent on future developments,
including the duration of the pandemic and any future resurgence or variants thereof, the prevalence, strength and duration of
restrictive measures and the resulting effects on our tenants, potential future tenants, the commercial real estate industry and the
broader economy, all of which are uncertain and difficult to predict.
F-61
Corporate Office Properties Trust and Subsidiaries and Corporate Office Properties, L.P. and Subsidiaries
Schedule III—Real Estate and Accumulated Depreciation
December 31, 2020
(Dollars in thousands)
Initial Cost
Gross Amounts Carried
At Close of Period
Property (Type) (1)
Location
100 Light Street (O)
100 Secured Gateway (O)
1000 Redstone Gateway (O)
1100 Redstone Gateway (O)
Baltimore, MD
Huntsville, AL
Huntsville, AL
Huntsville, AL
F
-
6
2
114 National Business Parkway (O) Annapolis Junction, MD
1200 Redstone Gateway (O)
Huntsville, AL
1201 M Street SE (O)
1201 Winterson Road (O)
1220 12th Street SE (O)
Washington, DC
Linthicum, MD
Washington, DC
1243 Winterson Road (L)
131 National Business Parkway (O) Annapolis Junction, MD
Linthicum, MD
132 National Business Parkway (O) Annapolis Junction, MD
133 National Business Parkway (O) Annapolis Junction, MD
134 National Business Parkway (O) Annapolis Junction, MD
1340 Ashton Road (O)
Hanover, MD
13450 Sunrise Valley Drive (O)
Herndon, VA
13454 Sunrise Valley Drive (O)
Herndon, VA
135 National Business Parkway (O) Annapolis Junction, MD
1362 Mellon Road (O)
Hanover, MD
13857 McLearen Road (O)
Herndon, VA
140 National Business Parkway (O) Annapolis Junction, MD
141 National Business Parkway (O) Annapolis Junction, MD
14280 Park Meadow Drive (O)
Chantilly, VA
1460 Dorsey Road (L)
Hanover, MD
14840 Conference Center Drive (O) Chantilly, VA
14850 Conference Center Drive (O) Chantilly, VA
14900 Conference Center Drive (O) Chantilly, VA
1501 South Clinton Street (O)
Baltimore, MD
15049 Conference Center Drive (O) Chantilly, VA
15059 Conference Center Drive (O) Chantilly, VA
1550 West Nursery Road (O)
Linthicum, MD
1560 West Nursery Road (O)
1610 West Nursery Road (O)
1616 West Nursery Road (O)
1622 West Nursery Road (O)
16442 Commerce Drive (O)
Linthicum, MD
Linthicum, MD
Linthicum, MD
Linthicum, MD
Dahlgren, VA
Encumbrances
(2)
Land
Building
and Land
Improvements
Costs
Capitalized
Subsequent
to
Acquisition
Building
and Land
Improvements
Total
(3)
Accumulated
Depreciation
(4)
Year Built or
Renovated
Date
Acquired
(5)
Land
$
46,543 $ 26,715 $
58,002 $
21,859 $ 26,715 $
79,861 $ 106,576 $
(20,981) 1973/2011
—
9,666
10,263
—
11,851
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
364
—
—
2,130
—
630
1,906
2,917
2,517
3,684
905
1,386
2,847
2,484
950
3,507
3,407
2,398
3,731
1,577
1,572
1,615
3,436
27,964
4,415
5,753
14,071
1,441
259
393
393
613
70,552
20,533
19,593
3,109
22,389
49,785
17,007
42,464
—
7,623
12,259
10,068
7,517
3,620
5,576
11,986
9,750
3,864
30,177
24,167
9,538
15,953
76
8,175
8,358
14,402
51,990
20,365
13,615
16,930
113
246
3,323
2,542
2,582
—
65
66
302
60
9,621
901
8,795
—
5,075
4,730
6,274
5,007
2,042
4,636
9,184
6,528
1,065
4,915
1,751
4,832
5,485
—
5,751
3,873
8,659
—
—
—
364
—
—
2,130
—
630
1,906
2,917
2,517
3,684
905
1,386
2,847
2,484
950
3,507
3,407
2,398
3,731
1,577
1,572
1,615
3,436
20,656
27,964
17,851
4,415
4,386
—
5,753
14,071
—
—
75
—
980
1,441
259
393
393
613
70,552
20,598
19,659
3,411
22,449
59,406
17,908
51,259
—
12,698
16,989
16,342
12,524
5,662
10,212
21,170
16,278
4,929
35,092
25,918
14,370
21,438
76
13,926
12,231
23,061
72,646
38,216
18,001
16,930
113
246
3,398
2,542
3,562
70,552
20,598
19,659
3,775
22,449
59,406
20,038
51,259
630
14,604
19,906
18,859
16,208
6,567
11,598
24,017
18,762
5,879
38,599
29,325
16,768
25,169
1,653
15,498
13,846
26,497
100,610
42,631
23,754
31,001
1,554
505
3,791
2,935
4,175
(566)
2020
(4,007)
(3,418)
(1,584)
(3,945)
(19,011)
2013
2014
2002
2013
2001
(5,506) 1985/2017
(17,812)
—
(7,442)
(10,566)
(10,443)
(7,329)
(3,255)
(6,156)
(12,075)
(10,164)
(854)
(12,784)
(10,941)
(9,190)
(9,512)
—
(7,351)
(7,115)
(13,126)
(28,175)
(18,061)
(10,079)
(6,310)
(19)
(23)
(268)
(244)
(1,860)
2003
(6)
1990
2000
1997
1999
1989
1998
1998
1998
2006
2007
2003
1990
1999
(6)
2000
2000
1999
2006
1997
2000
2009
2014
2016
2017
2016
2002
8/7/2015
3/23/2010
3/23/2010
3/23/2010
6/30/2000
3/23/2010
9/28/2010
4/30/1998
9/28/2010
12/19/2001
9/28/1998
5/28/1999
9/28/1998
11/13/1998
4/28/1999
7/25/2003
7/25/2003
12/30/1998
2/10/2006
7/11/2012
12/31/2003
9/28/1998
9/29/2004
2/28/2006
7/25/2003
7/25/2003
7/25/2003
10/27/2009
8/14/2002
8/14/2002
10/28/2009
10/28/2009
4/30/1998
4/30/1998
4/30/1998
12/21/2004
Property (Type) (1)
Location
Encumbrances
(2)
Initial Cost
Gross Amounts Carried
At Close of Period
Building
and Land
Improvements
Costs
Capitalized
Subsequent
to
Acquisition
16480 Commerce Drive (O)
16501 Commerce Drive (O)
16539 Commerce Drive (O)
16541 Commerce Drive (O)
16543 Commerce Drive (O)
1751 Pinnacle Drive (O)
1753 Pinnacle Drive (O)
206 Research Boulevard (O)
209 Research Boulevard (O)
210 Research Boulevard (O)
2100 L Street (O)
2100 Rideout Road (O)
Dahlgren, VA
Dahlgren, VA
Dahlgren, VA
Dahlgren, VA
Dahlgren, VA
McLean, VA
McLean, VA
Aberdeen, MD
Aberdeen, MD
Aberdeen, MD
Washington, DC
Huntsville, AL
F
-
6
3
22289 Exploration Drive (O)
Lexington Park, MD
22299 Exploration Drive (O)
Lexington Park, MD
22300 Exploration Drive (O)
Lexington Park, MD
22309 Exploration Drive (O)
Lexington Park, MD
23535 Cottonwood Parkway (O)
California, MD
250 W Pratt St (O)
2500 Riva Road (O)
Baltimore, MD
Annapolis, MD
2600 Park Tower Drive (O)
Vienna, VA
2691 Technology Drive (O)
Annapolis Junction, MD
2701 Technology Drive (O)
2711 Technology Drive (O)
Annapolis Junction, MD
Annapolis Junction, MD
2720 Technology Drive (O)
Annapolis Junction, MD
2721 Technology Drive (O)
Annapolis Junction, MD
2730 Hercules Road (O)
30 Light Street (O)
300 Sentinel Drive (O)
302 Sentinel Drive (O)
304 Sentinel Drive (O)
306 Sentinel Drive (O)
308 Sentinel Drive (O)
310 Sentinel Way (O)
310 The Bridge Street (O)
312 Sentinel Way (O)
314 Sentinel Way (O)
Annapolis Junction, MD
Baltimore, MD
Annapolis Junction, MD
Annapolis Junction, MD
Annapolis Junction, MD
Annapolis Junction, MD
Annapolis Junction, MD
Annapolis Junction, MD
Huntsville, AL
Annapolis Junction, MD
Annapolis Junction, MD
Land
1,856
522
688
773
436
10,486
8,275
—
134
—
—
—
—
—
—
—
—
—
—
82,882
113
19,024
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
3,915
—
—
—
—
—
—
—
—
—
—
1,422
1,362
1,094
2,243
692
8,057
2,791
20,284
2,098
1,737
2,251
3,863
4,611
8,737
—
1,517
2,648
3,411
3,260
1,422
2,372
261
3,138
1,254
Land
1,856
522
688
773
436
2,602
1,040
2,326
2,594
838
33,689
10,486
23,954
8,275
—
327
248
—
2,995
2,061
2,994
2,770
8,205
648
16,213
1
—
134
113
19,024
—
1,422
1,362
1,094
2,243
692
8,057
2,791
3,883
20,284
5,565
5,629
4,332
2,796
3,247
8,726
1,009
2,095
1,094
1,982
2,566
2,354
—
5,135
—
—
2,098
1,737
2,251
3,863
4,611
8,737
—
1,517
2,648
3,411
3,260
1,422
2,372
261
3,138
1,254
Building
and Land
Improvements
Total
(3)
Accumulated
Depreciation
(4)
Year Built or
Renovated
10,027
11,883
3,130
5,186
5,688
2,580
76,028
58,307
—
2,038
1,650
92,387
10,342
7,780
8,785
7,808
18,624
3,699
50,801
12,156
38,326
22,899
20,895
25,943
32,068
17,844
40,338
13,110
61,260
30,781
26,899
25,158
28,562
42,584
31,666
27,797
7,741
3,652
5,874
6,461
3,016
86,514
66,582
—
2,172
1,763
111,411
10,342
9,202
10,147
8,902
20,867
4,391
58,858
14,947
58,610
24,997
22,632
28,194
35,931
22,455
49,075
13,110
62,777
33,429
30,310
28,418
29,984
44,956
31,927
30,935
8,995
(4,274)
(1,399)
(2,879)
(2,696)
(1,231)
2000
2002
1990
1996
2002
(38,872) 1989/1995
(25,248) 1976/2004
(1)
(599)
(493)
—
(1,786)
(4,126)
(4,888)
(3,624)
2012
2010
2010
2020 (7)
2016
2000
1998
1997
(8,227) 1984/1997
(2,027)
(15,418)
(12,146)
(7,108)
(11,747)
(12,487)
(13,586)
(13,249)
(10,267)
(22,740)
(1,894)
(16,564)
(10,028)
(11,186)
(9,147)
(7,003)
(5,027)
(11,066)
(4,389)
(1,247)
1984
1985
2000
1999
2005
2001
2002
2004
2000
1990
2009
2009
2007
2005
2006
2010
2016
2009
2014
2008
Date
Acquired
(5)
12/28/2004
12/21/2004
12/21/2004
12/21/2004
12/21/2004
9/23/2004
9/23/2004
9/14/2007
9/14/2007
9/14/2007
8/11/2015
3/23/2010
3/24/2004
3/24/2004
11/9/2004
3/24/2004
3/24/2004
3/19/2015
3/4/2003
4/15/2015
5/26/2000
5/26/2000
11/13/2000
1/31/2002
10/21/1999
9/28/1998
8/7/2015
11/14/2003
11/14/2003
11/14/2003
11/14/2003
11/14/2003
11/14/2003
8/9/2011
11/14/2003
11/14/2003
7,425
2,090
2,860
3,094
1,742
42,339
34,353
—
1,711
1,402
92,387
7,347
5,719
5,791
5,038
10,419
3,051
34,588
12,155
34,443
17,334
15,266
21,611
29,272
14,597
31,612
12,101
59,165
29,687
24,917
22,592
26,208
42,584
26,531
27,797
7,741
Initial Cost
Gross Amounts Carried
At Close of Period
Property (Type) (1)
Location
Encumbrances
(2)
Land
Building
and Land
Improvements
316 Sentinel Way (O)
318 Sentinel Way (O)
320 Sentinel Way (O)
322 Sentinel Way (O)
324 Sentinel Way (O)
Annapolis Junction, MD
Annapolis Junction, MD
Annapolis Junction, MD
Annapolis Junction, MD
Annapolis Junction, MD
—
—
—
—
—
4000 Market Street (O)
Huntsville, AL
6,052
2,748
2,185
2,067
2,605
1,656
—
410 National Business Parkway (O) Annapolis Junction, MD
—
1,831
4100 Market Street (O)
Huntsville, AL
5,269
420 National Business Parkway (O) Annapolis Junction, MD
430 National Business Parkway (O) Annapolis Junction, MD
44408 Pecan Court (O)
California, MD
F
-
6
4
44414 Pecan Court (O)
44417 Pecan Court (O)
44420 Pecan Court (O)
44425 Pecan Court (O)
45310 Abell House Lane (O)
4600 River Road (O)
46579 Expedition Drive (O)
46591 Expedition Drive (O)
California, MD
California, MD
California, MD
California, MD
California, MD
College Park, MD
Lexington Park, MD
Lexington Park, MD
4851 Stonecroft Boulevard (O)
Chantilly, VA
540 National Business Parkway (O) Annapolis Junction, MD
5520 Research Park Drive (O)
5522 Research Park Drive (O)
Catonsville, MD
Catonsville, MD
5801 University Research Court (O) College Park, MD
5825 University Research Court (O) College Park, MD
5850 University Research Court (O) College Park, MD
6000 Redstone Gateway (O)
Huntsville, AL
610 Guardian Way (O)
Annapolis Junction, MD
6700 Alexander Bell Drive (O)
Columbia, MD
Columbia, MD
6708 Alexander Bell Drive (O)
6711 Columbia Gateway Drive (O) Columbia, MD
6716 Alexander Bell Drive (O)
Columbia, MD
6721 Columbia Gateway Drive (O) Columbia, MD
Columbia, MD
6724 Alexander Bell Drive (O)
6731 Columbia Gateway Drive (O) Columbia, MD
Columbia, MD
6740 Alexander Bell Drive (O)
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
11,200
20,011
21,171
—
—
—
—
—
—
—
—
—
—
—
2,370
1,852
817
405
434
344
1,309
2,272
—
1,406
1,200
1,878
2,035
—
—
—
—
—
—
6,946
1,755
897
2,683
1,242
1,753
449
2,807
1,424
38,156
28,426
21,623
22,827
23,018
9,207
23,257
8,020
27,751
21,563
1,583
1,619
3,822
890
3,506
13,808
23,294
5,796
7,199
11,558
31,249
20,072
4,550
17,434
22,771
31,906
8,268
14,597
7,019
12,644
23,239
4,969
34,090
5,039
19,098
5,696
Costs
Capitalized
Subsequent
to
Acquisition
226
560
132
1,900
38
—
Land
2,748
2,185
2,067
2,605
1,656
—
2,080
1,831
—
148
830
1,706
1,138
180
291
2,349
816
—
2,712
3,399
299
9
1,641
855
—
1,780
405
—
—
8,788
1,618
1,557
4,672
2,391
2,507
5,605
3,466
—
2,370
1,852
817
405
434
344
1,309
2,272
—
1,406
1,200
1,878
2,035
—
—
—
—
—
—
6,946
1,755
897
2,683
1,242
1,753
449
2,807
1,424
Building
and Land
Improvements
Total
(3)
Accumulated
Depreciation
(4)
Year Built or
Renovated
38,382
28,986
21,755
24,727
23,056
9,207
25,337
8,020
27,899
22,393
3,289
2,757
4,002
1,181
5,855
14,624
23,294
8,508
10,598
11,857
31,258
21,713
5,405
17,434
24,551
32,311
8,268
14,597
15,807
14,262
24,796
9,641
36,481
7,546
24,703
9,162
41,130
31,171
23,822
27,332
24,712
9,207
27,168
8,020
30,269
24,245
4,106
3,162
4,436
1,525
7,164
16,896
23,294
9,914
11,798
13,735
33,293
21,713
5,405
17,434
24,551
32,311
8,268
21,543
17,562
15,159
27,479
10,883
38,234
7,995
27,510
10,586
(8,426)
(10,716)
(7,029)
(8,568)
(5,956)
2011
2005
2007
2006
2010
(394)
2018
(5,032)
(304)
(4,752)
(4,936)
(1,679)
(1,512)
2012
2019
2013
2011
1986
1986
(2,005) 1989/2015
(546)
(3,431)
(3,455)
1989
1997
2011
(19)
2020 (7)
(4,231)
(3,932)
(4,697)
(2,521)
(6,375)
(1,652)
(1,195)
(7,170)
(8,885)
(14)
—
(8,825)
2002
2005
2004
2017
2009
2007
2018
2008
2008
2020 (7)
(7)
1988
(4,674) 1988/2016
(9,200) 2006-2007
(6,123)
(10,096)
(3,592)
(13,179)
(6,236)
1990
2009
2001
2002
1992
Date
Acquired
(5)
11/14/2003
11/14/2003
11/14/2003
11/14/2003
6/29/2006
3/23/2010
6/29/2006
3/23/2010
6/29/2006
6/29/2006
3/24/2004
3/24/2004
3/24/2004
11/9/2004
5/5/2004
8/30/2010
1/29/2008
3/24/2004
3/24/2004
8/14/2002
6/29/2006
4/4/2006
3/8/2006
1/29/2008
1/29/2008
1/29/2008
3/23/2010
6/29/2006
5/14/2001
5/14/2001
9/28/2000
12/31/1998
9/28/2000
5/14/2001
3/29/2000
12/31/1998
F
-
6
5
Property (Type) (1)
Location
6741 Columbia Gateway Drive (O) Columbia, MD
6750 Alexander Bell Drive (O)
Columbia, MD
6760 Alexander Bell Drive (O)
Columbia, MD
6940 Columbia Gateway Drive (O) Columbia, MD
6950 Columbia Gateway Drive (O) Columbia, MD
7000 Columbia Gateway Drive (O) Columbia, MD
7005 Columbia Gateway Drive (L)
Columbia, MD
7015 Albert Einstein Drive (O)
Columbia, MD
7061 Columbia Gateway Drive (O) Columbia, MD
7063 Columbia Gateway Drive (O) Columbia, MD
7065 Columbia Gateway Drive (O) Columbia, MD
7067 Columbia Gateway Drive (O) Columbia, MD
7100 Redstone Gateway (O)
Huntsville, AL
7125 Columbia Gateway Drive (O) Columbia, MD
7130 Columbia Gateway Drive (O) Columbia, MD
7134 Columbia Gateway Drive (O) Columbia, MD
7138 Columbia Gateway Drive (O) Columbia, MD
7142 Columbia Gateway Drive (O) Columbia, MD
7150 Columbia Gateway Drive (O) Columbia, MD
7150 Riverwood Drive (O)
7160 Riverwood Drive (O)
7170 Riverwood Drive (O)
7175 Riverwood Drive (O)
7200 Redstone Gateway (O)
7200 Riverwood Drive (O)
7205 Riverwood Drive (O)
7272 Park Circle Drive (O)
7318 Parkway Drive (O)
7400 Redstone Gateway (O)
7467 Ridge Road (O)
7500 Advanced Gateway (O)
7600 Advanced Gateway (O)
7740 Milestone Parkway (O)
7770 Backlick Road (O)
7880 Milestone Parkway (O)
8000 Rideout Road (O)
Columbia, MD
Columbia, MD
Columbia, MD
Columbia, MD
Huntsville, AL
Columbia, MD
Columbia, MD
Hanover, MD
Hanover, MD
Huntsville, AL
Hanover, MD
Huntsville, AL
Huntsville, AL
Hanover, MD
Springfield, VA
Hanover, MD
Huntsville, AL
Initial Cost
Gross Amounts Carried
At Close of Period
Encumbrances
(2)
Land
Building
and Land
Improvements
Costs
Capitalized
Subsequent
to
Acquisition
Building
and Land
Improvements
Total
(3)
Accumulated
Depreciation
(4)
Year Built or
Renovated
Land
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
675
1,263
890
3,545
3,596
3,131
3,036
2,058
729
902
919
1,829
—
20,487
1,350
704
1,104
1,342
1,032
1,821
2,732
1,283
1,788
—
4,089
1,367
1,479
972
—
1,565
—
—
16,902
—
—
—
3,825
6,387
4,857
—
1,711
12,461
3,561
9,916
27,723
12,103
747
6,093
3,094
3,684
3,763
11,823
9,101
47,029
4,359
4,700
3,518
7,148
3,429
4,388
7,006
3,096
7,269
8,348
22,630
21,419
6,300
3,888
9,223
3,116
19,070
14,126
34,176
78,779
25,916
16,138
169
5,075
3,920
8,739
3,223
7,537
—
3,319
2,640
3,468
3,097
5,404
—
675
1,263
890
3,545
3,596
3,131
3,036
2,058
729
902
919
1,829
—
23,580
20,487
2,896
668
2,853
2,611
813
1,850
4,405
2,281
—
81
4,634
—
4,608
1,324
75
5,041
—
—
1,084
1,531
321
—
1,350
704
1,104
1,342
1,032
1,821
2,732
1,283
1,788
—
4,089
1,367
1,479
972
—
1,565
—
—
3,825
6,387
4,857
—
1,880
17,536
7,481
18,655
30,946
19,640
747
9,412
5,734
7,152
6,860
17,227
9,101
70,609
7,255
5,368
6,371
9,759
4,242
6,238
11,411
5,377
7,269
8,429
27,264
21,419
10,908
5,212
9,298
8,157
19,070
14,126
35,260
80,310
26,237
16,138
2,555
18,799
8,371
22,200
34,542
22,771
3,783
11,470
6,463
8,054
7,779
19,056
9,101
91,096
8,605
6,072
7,475
11,101
5,274
8,059
14,143
6,660
9,057
8,429
31,353
22,786
12,387
6,184
9,298
9,722
19,070
14,126
39,085
86,697
31,094
16,138
Date
Acquired
(5)
9/28/2000
12/31/1998
12/31/1998
11/13/1998
(639)
(10,635)
(4,859)
(10,795)
2008
2001
1991
1999
(11,991) 1998/2019
10/22/1998
(9,679)
—
(4,585)
(3,393)
(4,450)
(4,565)
(8,693)
—
1999
(6)
1999
2000
2000
2000
2001
(7)
(27,691) 1973/1999
(3,848)
1989
(1,803) 1990/2016
(4,072)
1990
(4,052) 1994/2018
(1,789)
1991
(3,016)
(4,768)
2000
2000
(2,576)
(1,298) 1996/2013
2000
(1,393)
(12,592)
2013
1986
(3,987)
(5,467) 1991/1996
2013
(2,929)
(1,281)
(4,110)
(264)
(135)
(9,279)
(14,971)
(3,384)
—
1984
2015
1990
2020
2020
2009
2012
2015
(7)
5/31/2002
6/26/2014
12/1/2005
8/30/2001
8/30/2001
8/30/2001
8/30/2001
3/23/2010
6/29/2006
9/19/2005
9/19/2005
9/19/2005
9/19/2005
9/19/2005
1/10/2007
1/10/2007
1/10/2007
7/27/2005
3/23/2010
10/13/1998
7/27/2005
1/10/2007
4/16/1999
3/23/2010
4/28/1999
3/23/2010
3/23/2010
7/2/2007
3/10/2010
9/17/2013
3/23/2010
Initial Cost
Gross Amounts Carried
At Close of Period
Encumbrances
(2)
Land
Building
and Land
Improvements
Costs
Capitalized
Subsequent
to
Acquisition
Building
and Land
Improvements
Total
(3)
Accumulated
Depreciation
(4)
Year Built or
Renovated
Land
250,355
16,105
6,050
266,460
272,510
(72,246)
Property (Type) (1)
Location
8600 Advanced Gateway (O)
8621 Robert Fulton Drive (O)
8661 Robert Fulton Drive (O)
8671 Robert Fulton Drive (O)
Huntsville, AL
Columbia, MD
Columbia, MD
Columbia, MD
870 Elkridge Landing Road (O)
Linthicum, MD
—
—
—
—
—
8800 Redstone Gateway (O)
Huntsville, AL
11,679
891 Elkridge Landing Road (O)
Linthicum, MD
901 Elkridge Landing Road (O)
Linthicum, MD
911 Elkridge Landing Road (O)
Linthicum, MD
938 Elkridge Landing Road (O)
939 Elkridge Landing Road (O)
9651 Hornbaker Road (D)
Arundel Preserve (L)
Canton Crossing Land (L)
Linthicum, MD
Linthicum, MD
Manassas, VA
Hanover, MD
Baltimore, MD
Canton Crossing Util Distr Ctr (O)
Baltimore, MD
Columbia Gateway - Southridge (L) Columbia, MD
Dahlgren Technology Center (L)
Dahlgren, VA
F
-
6
6
Expedition VII (O)
IN 1 (O)
IN 2 (O)
M Square Research Park (L)
MP 1 (O)
MP 2 (O)
MR Land (L)
Lexington Park, MD
Northern Virginia
Northern Virginia
College Park, MD
Northern Virginia
Northern Virginia
Northern Virginia
National Business Park North (L)
Annapolis Junction, MD
North Gate Business Park (L)
NoVA Office A (O) (8)
NoVA Office B (O) (8)
NoVA Office C (O) (8)
NoVA Office D (O) (8)
Oak Grove A (O)
Oak Grove B (O)
Oak Grove Phase II (L)
Old Annapolis Road (O)
P2 A (O)
P2 B (O)
Aberdeen, MD
Chantilly, VA
Chantilly, VA
Chantilly, VA
Chantilly, VA
Northern Virginia
Northern Virginia
Northern Virginia
Columbia, MD
Northern Virginia
Northern Virginia
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
2,317
1,510
1,718
2,003
—
1,165
1,156
1,215
922
939
6,050
13,352
17,285
6,100
6,387
978
705
1,815
2,627
—
9,426
9,426
9,038
21,898
1,755
2,096
739
5,604
6,587
12,866
12,866
23,483
1,637
16,878
22,866
25,168
12,642
3,764
4,280
9,442
18,446
4,772
4,437
4,861
4,748
3,756
—
6,191
3,019
4,294
10,464
—
3,512
4,789
3,431
1,516
4,444
—
2,317
1,510
1,718
2,003
—
1,165
1,156
1,215
922
939
25,168
18,833
6,783
8,574
19,906
18,446
8,284
9,226
8,292
6,264
8,200
25,168
21,150
8,293
10,292
21,909
18,446
9,449
10,382
9,507
7,186
9,139
9,699
8,363
10,450
3,722
178
862
15,972
28,829
2,020
30,924
29,989
514
35,639
5
46,849
38,376
48,235
40,559
34,427
40,550
8,833
5,500
39,934
35,960
—
13,352
142
17,285
1,689
—
—
—
—
—
—
—
—
—
6,100
6,387
978
705
1,815
2,627
—
9,426
9,426
9,038
—
21,898
—
10
—
—
—
—
1,755
2,096
739
5,604
6,587
12,866
—
12,866
—
6,710
23,483
1,637
—
—
16,878
22,866
9,699
8,505
12,139
3,722
178
862
15,972
28,829
2,020
30,924
29,989
514
35,639
5
46,859
38,376
48,235
40,559
34,427
40,550
8,833
12,210
39,934
35,960
23,051
25,790
18,239
10,109
1,156
1,567
17,787
31,456
2,020
40,350
39,415
9,552
57,537
1,760
48,955
39,115
53,839
47,146
47,293
53,416
32,316
13,847
56,812
58,826
(45)
2020
(6,700) 2005-2006
(3,528)
(4,716)
(11,574)
(511)
(5,193)
(4,687)
(4,786)
(3,221)
(5,388)
—
—
2002
2002
1981
2019
1984
1984
1985
1984
1983
2010
(6)
(6)
(6,269)
2006
—
—
—
(735)
(1,081)
—
(1,240)
(1,416)
—
—
—
(6,926)
(3,734)
—
(3,450)
(494)
(811)
—
(6)
(6)
(7)
2019
2019
(6)
2019
2018
(6)
(6)
(6)
2015
2016
(7)
2017
2020
2019
(6)
(4,870) 1974/1985
(738)
(292)
2020
2020
Date
Acquired
(5)
3/23/2010
6/10/2005
12/30/2003
12/30/2003
8/3/2001
3/23/2010
7/2/2001
7/2/2001
4/30/1998
7/2/2001
4/30/1998
9/14/2010
7/2/2007
10/27/2009
10/27/2009
9/20/2004
3/16/2005
3/24/2004
8/31/2016
8/31/2016
1/29/2008
11/20/2017
11/20/2017
11/8/2018
6/29/2006
9/14/2007
7/18/2002
7/18/2002
7/18/2002
7/2/2013
11/1/2018
11/1/2018
11/1/2018
12/14/2000
5/2/2019
5/2/2019
Property (Type) (1)
Location
Encumbrances
(2)
P2 C (O)
Paragon Park (L)
Parkstone A (O)
Parkstone B (O)
Patriot Ridge (L)
Project EL (O)
Project EX (O) (9)
Redstone Gateway (L)
Sentry Gateway (L)
Sentry Gateway - T (O)
Sentry Gateway - V (O)
Sentry Gateway - W (O)
Sentry Gateway - X (O)
Sentry Gateway - Y (O)
Sentry Gateway - Z (O)
SP Manassas (L)
Westfields - Park Center (L)
Other Developments, including
intercompany eliminations (V)
Northern Virginia
Northern Virginia
Northern Virginia
Northern Virginia
Springfield, VA
Confidential-USA
Confidential-USA
Huntsville, AL
San Antonio, TX
San Antonio, TX
San Antonio, TX
San Antonio, TX
San Antonio, TX
San Antonio, TX
San Antonio, TX
Manassas, VA
Chantilly, VA
Various
F
-
6
7
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
Initial Cost
Gross Amounts Carried
At Close of Period
Building
and Land
Improvements
Costs
Capitalized
Subsequent
to
Acquisition
Building
and Land
Improvements
Total
(3)
Accumulated
Depreciation
(4)
Year Built or
Renovated
Date
Acquired
(5)
Land
30,272
462
1,257
1,074
14,562
7,479
16,981
33,310
1,833
38,804
1,066
1,884
21,178
21,298
30,573
187
6,206
—
14,842
30,272
45,114
(60)
2020
—
—
—
7,738
3,942
3,346
—
18,517
—
—
—
—
13
—
71
—
—
—
—
7,430
8,959
—
4,052
14,020
—
—
1,964
1,964
1,964
8,156
—
10,815
462
1,257
1,074
14,562
7,479
16,981
33,310
1,833
38,817
1,066
1,955
21,178
21,298
30,573
187
6,206
8,200
5,199
4,420
33,079
14,909
25,940
33,310
5,885
52,837
1,066
1,955
23,142
23,262
32,537
8,343
17,021
—
—
—
—
—
(6)
(7)
(7)
(6)
(7)
(698)
2018
(5)
—
(6)
(6)
(13,473) 1982/2008
(321)
(548)
(5,375)
(5,407)
(4,438)
—
—
2007
2009
2010
2010
2015
(6)
(6)
5/2/2019
5/8/2017
1/27/2005
1/27/2005
3/10/2010
1/20/2006
7/16/2008
3/23/2010
3/30/2005
3/30/2005
3/30/2005
3/30/2005
1/20/2006
1/20/2006
6/14/2005
7/24/2019
7/2/2013
Land
14,842
7,738
3,942
3,346
18,517
7,430
8,959
—
4,052
14,020
—
—
1,964
1,964
1,964
8,156
10,815
—
282
257
—
539
539
(90)
Various
Various
$
257,404 $ 712,057 $
3,427,401 $
547,344 $ 712,057 $
3,974,745 $ 4,686,802 $
(1,124,253)
(1) A legend for the Property Type follows: (O) = Office or Data Center Shell Property; (L) = Land held or pre-development; (D) = Wholesale Data Center; and (V) = Various.
(2) Excludes our Revolving Credit Facility of $143.0 million, term loan facilities of $398.4 million, unsecured senior notes of $1.3 billion, unsecured notes payable of $900,000, and deferred financing costs, net of
premiums, on the remaining loans of $2.3 million.
(3) The aggregate cost of these assets for Federal income tax purposes was approximately $3.6 billion as of December 31, 2020.
(4) The estimated lives over which depreciation is recognized follow: Building and land improvements: 10-40 years; and tenant improvements: related lease terms.
(5) The acquisition date of multi-parcel properties reflects the date of the earliest parcel acquisition. The acquisition date of properties owned through real estate joint ventures reflects the date of the formation of the
joint venture.
(6) Held as of December 31, 2020.
(7) Under development or redevelopment as of December 31, 2020.
(8) The carrying amounts of these properties exclude allocated costs of the garage being constructed to support the properties.
(9) This property represents land under a long-term contract.
The following table summarizes our changes in cost of properties for the years ended December 31, 2020, 2019 and 2018 (in thousands):
Beginning balance
Improvements and other additions
Sales (1)
Impairments
Other dispositions
Reclassification to right-of use asset
Ending balance
2020
2019
2018
$ 4,348,006
$ 4,148,529
$ 3,980,813
405,940
(65,475)
(1,530)
(139)
480,418
(242,497)
(329)
(340)
—
(37,775)
224,524
(53,547)
(2,493)
(768)
—
$ 4,686,802
$ 4,348,006
$ 4,148,529
The following table summarizes our changes in accumulated depreciation for the same time periods (in thousands):
Beginning balance
Depreciation expense
Sales (1)
Impairments
Other dispositions
Ending balance
2020
2019
2018
$ 1,007,120
$
897,903
$
801,038
119,377
(2,105)
—
(139)
117,973
(8,416)
—
(340)
112,610
(14,845)
(132)
(768)
$ 1,124,253
$ 1,007,120
$
897,903
F
-
6
8
(1)
Includes our sale, through a series of transactions, of ownership interests in data center shells through newly-formed unconsolidated real estate joint ventures in 2020 and 2019, as described in Note 4 to our
consolidated financial statements.
COLUMBIA
GATEWAY
Corporate Office
Properties Trust
ANNUAL
MEETING
The 2021 Annual Meeting of
Shareholders will be held virtually
at 9:30 a.m. Eastern Time on
May 13, 2021. You can access the
meeting by visiting www.virtual
shareholdermeeting.com/
OFC2021 and following the
instructions in the Proxy
Statement.
BOARD OF
TRUSTEES
Thomas F. Brady
Chairman
Stephen E. Budorick
Robert L. Denton, Sr.
Philip L. Hawkins
David M. Jacobstein
Steven D. Kesler
Letitia A. Long
Raymond L. Owens
C. Taylor Pickett
Lisa G. Trimberger
EXECUTIVE
OFFICERS
INVESTOR
RELATIONS
Stephen E. Budorick
President + Chief Executive
+ Chief Executive
+
Officer
Todd Hartman
Executive Vice President
+ Chief Operating Officer
Anthony Mifsud
Executive Vice President
+ Chief Financial Officer
For help with questions about
the Company, or for additional
corporate information, please
contact:
Stephanie Krewson-Kelly
Vice President, Investor Relations
Corporate Office Properties Trust
6711 Columbia Gateway Drive,
Suite 300
Columbia, Maryland 21046
Telephone: 443.285.5400
Facsimile: 443.285.7650
Email: ir@copt.com
EXECUTIVE
OFFICES
6711 Columbia Gateway Drive,
Suite 300
Columbia, Maryland 21046
Telephone: 443.285.5400
Facsimile: 443.285.7650
copt.com // NYSE: OFC
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REDSTONE
GATEWAY
DISCOVERY
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COLUMBIA
GATEWAY