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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 8-K
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CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): August 12, 1998
CORPORATE OFFICE PROPERTIES TRUST
(Exact name of registrant as specified in its charter)
Maryland 0-20047 23-247217
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(State or other jurisdiction of (Commission File (IRS Employer Identification
incorporation) Number) Number)
One Logan Square, Suite 1105
Philadelphia, PA 19103
(Address of principal executive offices) (Zip Code)
(215) 567 - 1800
(Registrant's telephone number, including area code)
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Item 5. Other Events
Corporate Office Properties Trust ("the Company") today announced its
results for the quarter ended June 30, 1998.
A copy of the press release issued by the Company on August 12, 1998
relating to the foregoing attached hereto as Exhibit 99.2 and incorporated
herein by reference.
Item 7. Financial Statements and Exhibits
<TABLE>
<CAPTION>
Exhibit Number Description
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<S> <C>
99.2 Press release dated August 12, 1998
</TABLE>
2
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Company has duly caused this Report to be signed on its behalf by the
undersigned hereunto duly authorized.
Dated: August 12, 1998
CORPORATE OFFICE PROPERTIES TRUST
By: /s/ Clay W. Hamlin, III
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Name: Clay W. Hamlin, III
Title: President and
Chief Executive Officer
By: /s/ Thomas D. Cassel
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Name: Thomas D. Cassel
Title: Vice President Finance
3
<PAGE>
[CORPORATE OFFICE PRODUCTS LETTERHEAD]
CORPORATE OFFICE PROPERTIES TRUST ANNOUNCES
SECOND QUARTER 1998 RESULTS
PHILADELPHIA, PA, August 12, 1998 -- Corporate Office Properties Trust (NYSE:
OFC) reported today Funds From Operations - diluted ("FFO") for the three months
ended June 30, 1998 of $3,328,000 or $0.19 per common share/unit. These figures
compare to FFO of $226,000 or $0.16 per common share/unit for the three months
ended June 30, 1997 and represent a 19% per share/unit increase. Revenues for
the second quarter 1998 increased 1,140% to $7,842,000 from $632,000 reported in
the second quarter 1997. Net operating income grew 890% to $6,197,000 compared
to the $626,000 reported for the comparable quarter 1997.
Highlights for the Second Quarter
- - Second quarter 1998 FFO per diluted common share/unit up 19% to $0.19 per
share from $0.16 per share for the second quarter 1997.
- - Acquired 14 properties totaling 1.1 million square feet of space for a
total investment of $102 million.
- - Announced year-to-date acquisitions of operating properties now exceed
$300 million.
- - Established presence in suburban Baltimore; expanded ownership in Northern
New Jersey.
- - Obtained $100 million secured revolving credit facility to fund new
acquisitions.
- - Raised $73 million in net proceeds through the issuance of 7.5 million
common shares.
- - Moved to the New York Stock Exchange under the symbol "OFC".
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Corporate Office Properties Trust Announces Second Quarter 1998 Results
Page 2
Increasing Revenues and FFO
The Company's improved performance is a direct result of its successful
transformation to a self-managed office REIT over the past nine months. Over
that period the company has increased its properties from 7 to 31, and its total
assets from $23.8 million to $297.5 million.
"We have begun to deliver our growth story," commented Clay W. Hamlin, III,
President and Chief Executive Officer. "In the second quarter, we acquired
fourteen first class properties. We remain on track to achieve the earnings
goals that we established early in 1998."
The Company initiated the reporting of a diluted FFO figure which assumes the
exercise of any outstanding in-the-money options and the conversion of the
Company's Convertible Preferred Units, if dilutive, although these Units are not
exchangeable for common units until October 1, 1999.
Acquisitions
In May, the Company announced the acquisition of an 812,616 square foot, 12
building portfolio in Suburban Baltimore, Maryland for $72.6 million. This
transaction established the Company's presence in the Baltimore/Washington
corridor. The portfolio consists of nine multistory office buildings in Airport
Square and three office/flex buildings located in the Airport Square Technology
Park, purchased for 70% of replacement costs with significantly under market
rents. This portfolio offers substantial near-term upside as the leases renew.
The Fairfield Corporate Center, a two office building complex totaling 262,417
square feet located in Northern New Jersey, was acquired in June 1998. The $29.4
million opportunistic transaction brought into the portfolio properties
purchased at approximately 70% of replacement cost with a vacancy rate of 16%
and rents well below market. Upon leasing the vacant space, the Company expects
to achieve an unleveraged yield above 11%.
Capital Markets
On April 27, 1998 the Company completed the sale of 7.5 million common shares to
the public at $10.50. This offering raised $73 million in net proceeds. The
offering was lead managed by Donaldson, Lufkin & Jenrette Corportation and
co-managed by BT Alex Brown Incorporated and Prudential Securities Incorporated.
In conjunction with the offering, the Company's shares were listed on the New
York Stock Exchange under the symbol "OFC".
In May, the Company closed on a $100 million, two-year senior secured revolving
credit facility with Bankers Trust Company. The Company intends to utilize this
facility primarilly to fund acquisitions. The loan is a variable rate loan that
bears interest at LIBOR plus 175 basis points. As of June 30, the company has
drawn $23.8 million on this facility.
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Corporate Office Properties Trust Announces Second Quarter 1998 Results
Page 3
Constellation Transaction
In May, the Company and Constellation Real Estate Group, Inc. announced the
signing of a definitive agreement under which affiliates of Constellation would
contribute certain real property and other assets to the Company for Company
shares, cash and debt assumption. The Company believes that this transaction
will significantly expand the company's management, property, tenant and capital
base. In addition the Constellation management team will add property
development and third party property management functions that the company
believes will enhance its resources and long-term performance. The Special
Meeting of Shareholders to consider and vote on the transaction has been set for
Friday, August 21, 1998.
Company Information
Corporate Office Properties Trust is a real estate investment trust which
focuses on the acquisition management, ownership, and development of suburban
office properties located in high-growth submarkets in the United States. As of
June 30, 1998 the Company owned 31 properties totaling 2.9 million square feet
of space.
Forward-looking Information
This press release contains forward-looking information based upon the Company's
current best judgment and expectations. Actual results could vary from those
presented herein. The risks and uncertainties associated with the
forward-looking information include the strength of the commercial office real
estate market in which the Company operates, competitive market conditions,
general economic growth, interest rates and capital market conditions. For
further information, please refer to the Company's filings with the Securities
and Exchange Commission.
# # #
Financial Tables Attached
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Corporate Office Properties Trust Announces Second Quarter 1998 Results
Page 4
Corporate Office Properties Trust
Summary Financial Data
(Unaudited)
(all amounts in thousands except per share data)
<TABLE>
<CAPTION>
Three Months Ended
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June 30, 1998 March 31, 1998 June 30, 1997
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<S> <C> <C> <C>
Revenues:
Rental income ......................................... $ 7,058 $ 4,919 $ 627
Tenant reimbursements and other income ................ 784 606 6
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Total revenues .................................... 7,842 5,525 632
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Expenses:
Interest .............................................. 2,416 2,159 307
Depreciation and amortization.......................... 1,364 1,041 142
Property expenses ..................................... 1,645 899 6
General and administrative ............................ 359 299 90
Reformation costs(1) .................................. - 637 -
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Total expenses .................................... 5,784 5,035 545
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Income before minority interests.......................... 2,058 490 87
Minority interests:
Preferred units.................................. (853) (853) -
Common units..................................... (276) (136) -
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Net income (loss) (1)..................................... $ 929 $ (499) $ 87
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Net income (loss) per common share - Basic and Diluted.... $ 0.12 $(0.22) $ 0.06
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Income before minority interests.......................... $ 2,058 $ 490 $ 87
Less: Distributions to preferred units.................... (853) (853) -
Add: Real estate depreciation and Amortization............ 1,270 972 139
Add: Non-recurring charge for REIT reformation costs (1) - 637 -
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Funds from Operations ("FFO")............................. 2,475 $ 1,246 226
Add: Distributions to preferred units..................... 853 853 -
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Funds from Operations ("FFO") - diluted................... $ 3,328 $ 2,099 $ 226
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Weighted average shares
Weighted average basic shares outstanding.............. 7,628 2,268 1,420
Weighted average common units outstanding.............. 2,582 2,582 -
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Total weighted average common share/units outstanding..... 10,210 4,850 1,420
Stock option equivalents............................... 21 26 -
Conversion of preferred units.......................... 7,500 7,500 -
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Total weighted average share/units outstanding- diluted... 17,731 12,376 1,420
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FFO per common share/unit................................. $ 0.24 $ 0.26 $ 0.16
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FFO - diluted............................................. $ 0.19 $ 0.17 $ 0.16
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Per share/unit cash dividends/distributions............... $ 0.15 $ 0.15 $ 0.13
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FFO payout ratio - common share/units.................... 75% 58% 79%
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FFO payout ratio - diluted (2)........................... 81% 75% 79%
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</TABLE>
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(1) Reflects a non-recurring expense of $637 associated with the Reformation of
the Company during the first quarter of 1998. This transaction has been
eliminated in determining FFO since it is not expected to have a continuing
impact on the Company.
(2) Based upon $1,853 of dividends/distributions to common shares/units and
$853 of contractual distributions to preferred units for the three months
ended June 30, 1998 and $728 of dividends/distributions to common
shares/units and $853 of contractual distributions to preferred units for
the three months ended March 31, 1998.
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<PAGE>
Corporate Office Properties Trust Announces Second Quarter 1998 Results
Page 5
Corporate Office Properties Trust
Summary Financial Data
(Unaudited)
(all amounts in thousands except per share data)
<TABLE>
<CAPTION>
Six Months Ended
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June 30, 1998 June 30, 1997
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<S> <C> <C>
Revenues:
Rental income ......................................... $ 11,977 $ 1,252
Tenant reimbursements and other income ................ 1,390 13
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Total revenues .................................... 13,367 1,265
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Expenses:
Interest .............................................. 4,575 615
Depreciation and amortization.......................... 2,405 284
Property expenses ..................................... 2,544 12
General and administrative ............................ 658 176
Reformation costs (1) ................................. 637 -
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Total expenses .................................... 10,819 1,087
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Income before minority interests.......................... 2,548 178
Minority interests:
Preferred units......................................... (1,706) -
Common units............................................ (412) -
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Net income (loss) (1)..................................... $ 430 $ 178
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Net income (loss) per common share - Basic and Diluted (2) $ 0.09 $ 0.19
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Income before minority interests.......................... $ 2,548 $ 178
Less: Distributions to preferred units.................... (1,706) -
Add: Real estate depreciation and amortization............ 2,241 277
Add: Non-recurring charge for REIT reformation costs (1) 637 -
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Funds from Operations ("FFO")............................. 3,720 455
Add: Distributions to preferred units..................... 1,706 -
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Funds from Operations ("FFO") - diluted................... $ 5,426 $ 455
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Weighted average shares
Weighted average basic shares outstanding.............. 4,964 1,420
Weighted average common units outstanding.............. 2,582
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Total weighted average common share/units outstanding..... 7,546 1,420
Stock option equivalents............................... 21 -
Conversion of preferred units.......................... 7,500 -
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Total weighted average share/units outstanding- diluted... 15,067 1,420
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FFO per common share/unit................................. $ 0.49 $ 0.32
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FFO per common share/unit - diluted....................... $ 0.36 $ 0.32
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Cash dividends/distributions per common share/unit ....... $ 0.30 $ 0.25
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FFO payout ratio - common share/units.................... 69% 78%
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FFO payout ratio - diluted (3)........................... 79% 78%
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</TABLE>
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(1) Reflects a non-recurring expense of $637 associated with the Reformation of
the Company during the first quarter of 1998. This transaction has been
eliminated in determining FFO since it is not expected to have a continuing
impact on the Company.
(2) The effect of the redemption of common units and conversion of preferred
units is antidilutive in calculating net income per share for the six
months ended June 30, 1998.
(3) Based upon $2,581 of dividends/distributions to common shares/units and
$1,706 of contractual distributions to preferred units for the six months
ended June 30, 1998.
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<PAGE>
Corporate Office Properties Trust Announces Second Quarter 1998 Results
Page 6
Corporate Office Properties Trust
Summary Financial Data
(Unaudited)
(dollars in thousands)
<TABLE>
<CAPTION>
June 30, 1998 December 31, 1997
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<S> <C> <C>
Balance Sheet Data (as of period end):
Real estate investments, net of accumulated depreciation $ 288,672 $ 188,625
Total assets .................................... 297,525 193,534
Mortgages payable ............................... 144,417 114,375
Total liabilities ............................... 149,997 117,008
Minority interests .............................. 64,499 64,862
Shareholders' equity............................. 83,029 11,664
Property Data (as of period end):
Number of properties owned ...................... 31 17
Total net rentable square feet owned (in thousands) 2,927 1,852
Occupancy........................................ 97% 99%
</TABLE>
<TABLE>
<CAPTION>
Summary of Second Quarter 1998 Acquisitions
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Investment(1)
Location Square Feet (In Millions) Occupancy (2) Major Tenants
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<S> <C> <C> <C> <C>
New Jersey
695 Route 46 158,273 $ 18.6 77% United Health Care, Pearson Inc.
710 Route 46 104,144 10.8 93% Midsco Inc.
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Subtotal 262,417 29.4
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Maryland
Airport Square II 97,139 10.0 100% First Annapolis
Airport Square IV 51,953 4.7 100% Agency Holding Co.
Airport Square V 54,057 5.2 67% Aerotek, Inc.
Airport Square X 73,572 5.2 100% United States Government
Airport Square XI 68,162 6.0 73% United States Government,
Optacor Financial Services
Airport Square XIII 67,903 6.4 100% Ciena Corporation
Airport Square XIV 68,567 6.7 100% Chesapeake Appraisal
Airport Square XIX 69,738 6.6 93% Preferred Health Network
Airport Square XX 96,636 8.0 100% United States Government
Tech Park I 57,140 5.0 100% Ciena Corporation
Tech Park II 57,140 4.9 100% Ciena Corporation
Tech Park IV 50,609 3.9 100% HRB Systems Inc.
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Subtotal 812,616 72.6
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Total 1,075,033 $ 102.0
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</TABLE>
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(1) Total investment cost includes all costs incurred to date [as of June 30]
for the property acquisition.
(2) Percent leased at acquisition.
