COPT Reports Second Quarter 2013 Results
COPT Reports Second Quarter 2013 Results
"We had a strong second quarter and are on-track to exceed our leasing objectives for the year," stated Roger A. Waesche, Jr., COPT's President & Chief Executive Officer. "In light of the sequestration cuts kicking in on March 1 of this calendar year, we are particularly pleased with the strong level of development leasing we have achieved," he added.
Diluted earnings per share (EPS) was ($0.16) for the quarter ended June 30, 2013 as compared to $0.10 in the second quarter of 2012. Diluted funds from operations per share (FFOPS), as adjusted for comparability, was $0.52 for the second quarter ended June 30, 2013, which represented a 3.7% decrease from the $0.54 reported for the second quarter of 2012. Adjustments for comparability encompass items such as acquisition costs, impairment losses and gains on non-operating properties, gains (losses) on early extinguishment of debt, derivative losses and write-offs of original issuance costs for redeemed preferred stock. Please refer to the reconciliation tables that appear later in this press release. Per NAREIT's definition, FFOPS for the second quarter of 2013 was $0.25 versus $0.54 reported in the second quarter of 2012.
Portfolio Summary - At June 30, 2013, the Company's consolidated portfolio of 210 operating office properties totaled 19.0 million square feet. The weighted average remaining lease term for the portfolio was 4.3 years and the average rental rate (including tenant reimbursements) was $28.21 per square foot. The Company's consolidated portfolio was 88.2% occupied and 90.0% leased as of June 30, 2013.
Same Office Performance - The Company's same office portfolio excludes properties identified for eventual sale, including those in its Strategic Reallocation Plan. For the quarter ended June 30, 2013, COPT's same office portfolio represents 86% of the rentable square feet of the portfolio and consists of 182 properties.
For the second quarter ended June 30, 2013, the Company's same office property cash NOI, excluding gross lease termination fees, increased 1.6% as compared to the second quarter ended 2012. Including gross lease termination fees, same office property cash NOI for the second quarter ended June 30, 2013 increased 3.5% over the same period in 2012. The Company's same office portfolio occupancy was 89.4% at the end of the second quarter of 2013, up 20 basis points from March 31, 2013.
Leasing - COPT completed a total of 1.1 million square feet of leasing for the quarter ended June 30, 2013. During this same period, the Company's renewal rate was 80%, which is above the Company's historical average of 65%—70%. Consistent with expectations, for the quarter ended June 30, 2013, total rent on renewed space increased 6.2% on a GAAP basis and decreased 2.2% on a cash basis.
Construction - At June 30, 2013, the Company had 11 properties totaling 1.5 million square feet under construction for a total projected cost of $313.5 million, of which $187.1 million had been incurred. As of the same date, COPT had one 183,400-square foot property under redevelopment for a total projected cost of $32.4 million, of which $25.7 million has been incurred. As of June 30, 2013, the Company's 11 properties under construction, on average, were 74% pre-leased, and its redevelopment property was 61% pre-leased.
Dispositions - In the second quarter of 2013, COPT sold one vacant property and land for $10.4 million. The property contained a total of 103,000 square feet.
Balance Sheet and Capital Transactions:
As of June 30, 2013, the Company had a total market capitalization of $4.6 billion, with $2.1 billion in debt outstanding, equating to a 45.1% debt-to-total market capitalization ratio. Also, the Company's weighted average interest rate was 4.4% for the quarter ended June 30, 2013 and 80% of the Company's debt was subject to fixed interest rates, including the effect of interest rate swaps.
During the quarter, the Company announced that it received investment grade corporate ratings with stable outlooks from each of the three major U.S. ratings agencies. COPT received a BBB- rating from Fitch Ratings, a Baa3 rating from Moody's Investors Service and a BBB- rating from Standard & Poor's Ratings Services.
Also during the quarter, the Company redeemed all of its 3,390,000 outstanding 7.625% Series J Cumulative Redeemable Preferred Shares, at a price of $25 per share.
In May, the Company issued $350 million of 3.60% senior unsecured notes due May 15, 2023 at a price equal to 99.816% of the principal amount.
Also in May, the Company commenced a cash tender offer for any and all of the $186,273,000 outstanding principal amount of the 4.25% Exchangeable Senior Notes due on April 15, 2030. In June, the Company completed its tender offer for 99.7% of the Operating Partnership's 4.25% Exchangeable Senior Notes due on April 15, 2030.
2013 FFO Guidance:
Management is increasing its previously issued guidance for 2013 FFOPS, as adjusted for comparability, from the prior range of between $1.83 and $1.93 to a new range of between $1.92 and $1.97. The Company is establishing third quarter 2013 guidance of FFOPS, as adjusted for comparability, of between $0.47 and $0.49. A reconciliation of projected diluted EPS to projected FFOPS for the quarter ending September 30, 2013 and the year ending December 31, 2013 is provided, as follows:
|Quarter Ending||Year Ending|
|September 30, 2013||December 31,2013|
|Real estate depreciation and amortization||0.32||0.32||1.31||1.31|
|Impairments and exit costs on previously depreciated properties||-||-||0.10||0.10|
|FFOPS, NAREIT definition||0.47||0.49||1.62||1.67|
|Net losses on early extinguishment of debt||-||-||0.30||0.30|
|Gains on sales of non-operating properties||-||-||(0.03||)||(0.03||)|
|Issuance costs of redeemed preferred shares||-||-||0.03||0.03|
|FFOPS, as adjusted for comparability||$||0.47||$||0.49||$||1.92||$||1.97|
Conference Call Information:
Management will discuss second quarter 2013 earnings results, as well as its 2013 guidance, on its conference call on July 26, 2013 at 12:00 p.m. Eastern Time, details of which are listed below:
|Earnings Release Date:||Friday, July 26, 2013 at 6:00 a.m. Eastern Time|
|Conference Call Date:||Friday, July 26, 2013|
|Time:||12:00 p.m. Eastern Time|
Telephone Number: (within the U.S.)
Telephone Number: (outside the U.S.)
Please use the following link to pre-register and view important information about this conference call. Pre-registering is not mandatory but is recommended as it will provide you immediate entry into the call and will facilitate the timely start of the conference. Pre-registration only takes a few moments and you may pre-register at anytime, including up to and after the call start time. To pre-register, please click on the below link:
You may also pre-register in the Investor Relations section of the Company's website at www.copt.com. Alternatively, you may be placed into the call by an operator by calling the number provided above at least 5 to 10 minutes before the start of the call.
A replay of this call will be available beginning Friday, July 26 at 1:00 p.m. Eastern Time through Friday, August 9 at midnight Eastern Time. To access the replay within the United States, please call 888-286-8010; to access the replay outside the United States, please call 617-801-6888. The replay passcode for both numbers is 36959168.
The conference calls will also be available via live webcast in the Investor Relations section of the Company's website at www.copt.com. A replay of the conference calls will be immediately available via webcast in the Investor Relations section of the Company's website.
Please refer to the information furnished with our Form 8-K or our website (www.copt.com) for definitions of certain terms used in this press release. Reconciliations of non-GAAP measures to the most directly comparable GAAP measures are included in the attached tables.
COPT is an office REIT that focuses primarily on serving the specialized requirements of U.S. Government agencies and defense contractors, most of whom are engaged in defense information technology and national security-related activities. The Company generally acquires, develops, manages and leases office and data center properties concentrated in large office parks primarily located near knowledge-based government demand drivers and/or in targeted markets or submarkets in the Greater Washington, DC/Baltimore region. As of June 30, 2013, the Company's consolidated portfolio consisted of 210 office properties totaling 19.0million rentable square feet. COPT is an S&P MidCap 400 company.
This press release may contain "forward-looking" statements, as defined in Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, that are based on the Company's current expectations, estimates and projections about future events and financial trends affecting the Company. Forward-looking statements can be identified by the use of words such as "may," "will," "should," "could," "believe," "anticipate," "expect," "estimate," "plan" or other comparable terminology. Forward-looking statements are inherently subject to risks and uncertainties, many of which the Company cannot predict with accuracy and some of which the Company might not even anticipate. Accordingly, the Company can give no assurance that these expectations, estimates and projections will be achieved. Future events and actual results may differ materially from those discussed in the forward-looking statements.
Important factors that may affect these expectations, estimates, and projections include, but are not limited to:
- 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;
- governmental actions and initiatives, including risks associated with the impact of a government shutdown or budgetary reductions or impasses, such as a reduction in rental revenues, non-renewal of leases, and/or a curtailment of demand for additional space by the Company's strategic customers;
- the Company's 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;
- the Company's ability to sell properties included in its Strategic Reallocation Plan;
- risks of investing through joint venture structures, including risks that the Company's joint venture partners may not fulfill their financial obligations as investors or may take actions that are inconsistent with the Company's objectives;
- changes in the Company's 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;
- the Company's ability to satisfy and operate effectively under Federal income tax rules relating to real estate investment trusts and partnerships;
- the Company's ability to achieve projected results;
- the dilutive effects of issuing additional common shares; and
- environmental requirements.
The Company undertakes no obligation to update or supplement any forward-looking statements. For further information, please refer to the Company's filings with the Securities and Exchange Commission, particularly the section entitled "Risk Factors" in Item 1A of the Company's Annual Report on Form 10-K for the year ended December 31, 2012.
|Corporate Office Properties Trust|
|Summary Financial Data|
|(in thousands, except per share data)|
For the Three Months Ended
|For the Six Months Ended|
|Real estate revenues||$||119,729||$||110,669||$||236,087||$||220,869|
|Construction contract and other service revenues||20,795||16,995||35,057||38,529|
|Property operating expenses||43,408||39,441||85,927||80,628|
|Depreciation and amortization associated with real estate operations||28,866||28,295||57,029||56,029|
|Construction contract and other service expenses||19,382||16,285||32,859||36,892|
|General and administrative expenses||4,992||7,741||10,976||15,469|
|Business development expenses and land carry costs||1,327||1,298||2,686||2,874|
|Total operating expenses||99,566||94,170||192,904||190,007|
|Interest and other income||2,006||840||2,952||2,057|
|Loss on early extinguishment of debt||(21,470||)||(169||)||(26,654||)||(169||)|
|(Loss) income from continuing operations before equity in income (loss) of unconsolidated entities and income taxes||(1,808||)||9,926||8,929||22,609|
|Equity in income (loss) of unconsolidated entities||126||(187||)||167||(276||)|
|Income tax expense||(21||)||(17||)||(37||)||(221||)|
|(Loss) income from continuing operations||(1,703||)||9,722||9,059||22,112|
|(Loss) income before gain on sales of real estate||(4,734||)||11,840||8,189||22,075|
|Gain on sales of real estate, net of income taxes||329||21||2,683||21|
|Net (loss) income||(4,405||)||11,861||10,872||22,096|
|Net loss (income) attributable to noncontrolling interests|
|Common units in the Operating Partnership||671||(422||)||242||(795||)|
|Preferred units in the Operating Partnership||(165||)||(165||)||(330||)||(330||)|
|Other consolidated entities||(1,466||)||31||(1,129||)||629|
|Net (loss) income attributable to COPT||(5,365||)||11,305||9,655||21,600|
|Preferred share dividends||(4,885||)||(4,167||)||(10,991||)||(8,192||)|
|Issuance costs associated with redeemed preferred shares||(2,904||)||—||(2,904||)||—|
|Net (loss) income attributable to COPT common shareholders||$||(13,154||)||$||7,138||$||(4,240||)||$||13,408|
|Earnings per share ("EPS") computation:|
|Numerator for diluted EPS:|
|Net (loss) income attributable to common shareholders||$||(13,154||)||$||7,138||$||(4,240||)||$||13,408|
|Dilutive effect of common units in the Operating Partnership||(671||)||—||(242||)||—|
|Amount allocable to restricted shares||(102||)||(105||)||(220||)||(246||)|
|Numerator for diluted EPS||$||(13,927||)||$||7,033||$||(4,702||)||$||13,162|
|Weighted average common shares - basic||85,425||71,624||83,422||71,541|
|Dilutive effect of common units in the Operating Partnership||3,801||—||3,847||—|
|Dilutive effect of share-based compensation awards||—||25||—||35|
|Weighted average common shares - diluted||89,226||71,649||87,269||71,576|
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