<PAGE>
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark one)
/ / QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES AND
EXCHANGE ACT OF 1934
For the quarterly period ended JUNE 30, 2000
------------------------------------------------
or
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES AND
EXCHANGE ACT OF 1934
For the transition period from______________________to_________________________
Commission file number 0-20047
CORPORATE OFFICE PROPERTIES TRUST
(Exact name of registrant as specified in its charter)
MARYLAND 23-2947217
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
8815 CENTRE PARK DRIVE, SUITE 400, COLUMBIA MD 21045
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (410) 730-9092
----------------------------------------
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.
/X/ Yes / / No
On August 1, 2000, 18,711,091 shares of the Company's Common Shares of
Beneficial Interest, $0.01 par value, were issued.
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1
<PAGE>
TABLE OF CONTENTS
FORM 10-Q
<TABLE>
<CAPTION>
PAGE
PART I: FINANCIAL INFORMATION
<S> <C>
Item 1: Financial Statements:
Consolidated Balance Sheets as of June 30, 2000 (unaudited) and December 31, 1999 3
Consolidated Statements of Operations for the three and six months ended June 30, 2000
and 1999 (unaudited) 4
Consolidated Statements of Cash Flows for the six months ended June 30,2000 and 1999
(unaudited) 5
Notes to Consolidated Financial Statements 6
Item 2: Management's Discussion and Analysis of Financial Condition and Results of Operations 18
Item 3: Quantitative and Qualitative Disclosures About Market Risk 26
PART II: OTHER INFORMATION
Item 1: Legal Proceedings 26
Item 2: Changes in Securities 26
Item 3: Defaults Upon Senior Securities 27
Item 4: Submission of Matters to a Vote of Security Holders 27
Item 5: Other Information 27
Item 6: Exhibits and Reports on Form 8-K 27
SIGNATURES 34
</TABLE>
2
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CORPORATE OFFICE PROPERTIES TRUST AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
June 30, December 31,
2000 1999
-------------- --------------
(unaudited)
<S> <C> <C>
ASSETS
Commercial real estate properties:
Operating properties, net $ 691,872 $ 662,664
Projects under construction 36,188 33,825
------------------------------------------------------------------------------------------------------------------------
Total commercial real estate properties, net 728,060 696,489
Cash and cash equivalents 630 2,376
Restricted cash 2,903 2,041
Accounts receivable, net 3,386 1,928
Investment in and advances to Service Companies 4,095 3,661
Deferred rent receivable 6,010 4,634
Deferred charges, net 10,953 7,525
Prepaid and other assets 4,197 2,380
------------------------------------------------------------------------------------------------------------------------
TOTAL ASSETS $ 760,234 $ 721,034
------------------------------------------------------------------------------------------------------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Mortgage and other loans payable $ 436,679 $ 399,627
Accounts payable and accrued expenses 11,245 6,597
Rents received in advance and security deposits 4,277 3,776
Dividends and distributions payable 6,757 6,298
------------------------------------------------------------------------------------------------------------------------
Total liabilities 458,958 416,298
------------------------------------------------------------------------------------------------------------------------
Minority interests:
Preferred Units in the Operating Partnership 24,367 24,367
Common Units in the Operating Partnership 78,720 88,170
Other consolidated partnerships 109 98
------------------------------------------------------------------------------------------------------------------------
Total minority interests 103,196 112,635
------------------------------------------------------------------------------------------------------------------------
Commitments and contingencies (Note 14) Shareholders' equity:
Preferred Shares ($0.01 par value; 5,000,000 shares authorized); 1,025,000
designated as Series A Convertible Preferred Shares of
beneficial interest (984,308 shares issued with an aggregate
liquidation preference of $24,608) 10 10
1,725,000 designated as Series B Cumulative Redeemable Preferred
Shares of beneficial interest (1,250,000 shares issued with an
aggregate liquidation preference of $31,250) 12 12
Common Shares of beneficial interest ($0.01 par value; 45,000,000 shares
authorized, shares issued of 18,711,091 at June 30, 2000 and
17,646,046 at December 31, 1999) 187 176
Additional paid-in capital 211,978 202,867
Accumulated deficit (9,293) (7,547)
Value of unearned restricted Common Share grants (3,399) (3,417)
Treasury Shares, at cost (166,600 shares at June 30, 2000) (1,415) --
------------------------------------------------------------------------------------------------------------------------
Total shareholders' equity 198,080 192,101
------------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 760,234 $ 721,034
------------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to financial statements.
3
<PAGE>
CORPORATE OFFICE PROPERTIES TRUST AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
For the three months ended For the six months ended
June 30, June 30,
-------------------------------- ----------------------------
2000 1999 2000 1999
--------------- ---------------- ------------- --------------
<S> <C> <C> <C> <C>
REVENUES
Rental revenue $ 23,154 $ 17,043 $ 45,060 $ 33,408
Tenant recoveries and other revenue 3,263 2,499 7,218 4,657
------------------------------------------------------------ --------------- ---------------- ------------- --------------
Total revenues 26,417 19,542 52,278 38,065
------------------------------------------------------------ --------------- ---------------- ------------- --------------
EXPENSES
Property operating 7,437 5,385 15,045 10,388
General and administrative 1,160 796 2,508 1,685
Interest 7,404 5,226 14,338 10,419
Amortization of deferred financing costs 311 322 617 547
Depreciation and other amortization 4,307 2,887 8,180 5,679
------------------------------------------------------------ --------------- ---------------- ------------- --------------
Total expenses 20,619 14,616 40,688 28,718
------------------------------------------------------------ --------------- ---------------- ------------- --------------
Income before equity in (loss) income of Service
Companies, gain on sales of rental properties, minority
interests and extraordinary item 5,798 4,926 11,590 9,347
Equity in (loss) income of Service Companies (48) 145 (1) 326
------------------------------------------------------------ --------------- ---------------- ------------- --------------
Income before gain on sales of rental properties, minority
interests and extraordinary item 5,750 5,071 11,589 9,673
Gain on sales of rental properties 57 154 57 1,140
------------------------------------------------------------ --------------- ---------------- ------------- --------------
Income before minority interests and extraordinary item 5,807 5,225 11,646 10,813
Minority interests
Common Units in the Operating Partnership (1,501) (670) (3,135) (1,166)
Preferred Units in the Operating Partnership (548) (853) (1,096) (1,706)
Other consolidated partnership (4) -- (11) --
------------------------------------------------------------ --------------- ---------------- ------------- --------------
Income before extraordinary item 3,754 3,702 7,404 7,941
Extraordinary item - loss on early retirement of debt (42) (144) (42) (838)
------------------------------------------------------------ --------------- ---------------- ------------- --------------
NET INCOME 3,712 3,558 7,362 7,103
Preferred Share dividends (1,119) (338) (2,239) (676)
------------------------------------------------------------ --------------- ---------------- ------------- --------------
NET INCOME AVAILABLE TO COMMON SHAREHOLDERS $ 2,593 $ 3,220 $ 5,123 $ 6,427
------------------------------------------------------------ --------------- ---------------- ------------- --------------
BASIC EARNINGS PER COMMON SHARE
Income before extraordinary item $ 0.15 $ 0.20 $ 0.29 $ 0.43
Extraordinary item (0.01) (0.01) -- (0.05)
------------------------------------------------------------ --------------- ---------------- ------------- --------------
Net income $ 0.14 $ 0.19 $ 0.29 $ 0.38
------------------------------------------------------------ --------------- ---------------- ------------- --------------
DILUTED EARNINGS PER COMMON SHARE
Income before extraordinary item $ 0.14 $ 0.17 $ 0.28 $ 0.37
Extraordinary item -- -- -- (0.04)
------------------------------------------------------------ --------------- ---------------- ------------- --------------
Net income $ 0.14 $ 0.17 $ 0.28 $ 0.33
------------------------------------------------------------ --------------- ---------------- ------------- --------------
</TABLE>
See accompanying notes to financial statements.
4
<PAGE>
CORPORATE OFFICE PROPERTIES TRUST AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
For the six months ended June 30,
---------------------------------
2000 1999
---------------- --------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 7,362 $ 7,103
Adjustments to reconcile net income to net cash
provided by operating activities:
Minority interests 4,242 2,872
Depreciation and other amortization 8,180 5,679
Amortization of deferred financing costs 617 547
Equity in loss (income) of Service Companies 1 (326)
Gain on sales of rental properties (57) (1,140)
Extraordinary item - loss on early retirement of debt 42 838
Increase in deferred rent receivable (1,439) (1,502)
(Increase) decrease in accounts receivable, restricted
cash and prepaid and other assets (759) 1,646
Increase in accounts payable, accrued expenses, rents
received in advance and security deposits 2,247 991
------------------------------------------------------------------ ----------------------- --------------------
Net cash provided by operating activities 20,436 16,708
------------------------------------------------------------------ ----------------------- --------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of and additions to commercial real estate
properties (36,308) (57,370)
Proceeds from sales of rental properties 602 29,970
Investment in and advances to Service Companies (435) (1,523)
Leasing commissions paid (3,218) (531)
Increase in prepaid and other assets (3,378) (18)
------------------------------------------------------------------ ----------------------- --------------------
Net cash used in investing activities (42,737) (29,472)
------------------------------------------------------------------ ----------------------- --------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Increase in prepaid and other assets -- (958)
Deferred financing costs paid (1,246) (1,345)
Proceeds from mortgage and other loans payable 41,118 69,478
Repayments of mortgage and other loans payable (4,712) (42,292)
Increase in other liabilities -- 1,217
Purchase of Treasury Shares (1,415) --
Net proceeds from issuance of Common Shares 151 --
Net proceeds from issuance of share options 4 --
Dividends paid (8,937) (6,714)
Distributions paid (4,408) (2,721)
------------------------------------------------------------------ ----------------------- --------------------
Net cash provided by financing activities 20,555 16,665
------------------------------------------------------------------ ----------------------- --------------------
Net (decrease) increase in cash and cash equivalents (1,746) 3,901
CASH AND CASH EQUIVALENTS
Beginning of period 2,376 2,349
------------------------------------------------------------------ ----------------------- --------------------
End of period $ 630 $ 6,250
------------------------------------------------------------------ ----------------------- --------------------
</TABLE>
See accompanying notes to financial statements.
5
<PAGE>
CORPORATE OFFICE PROPERTIES TRUST AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
NOTE 1 ORGANIZATION
Corporate Office Properties Trust ("COPT") and subsidiaries (the "Company")
is a fully integrated and self-managed real estate investment trust ("REIT"). We
focus principally on the ownership, management, leasing, acquisition and
development of suburban office buildings located in select submarkets in the
Mid-Atlantic region of the United States. COPT is qualified as a REIT as defined
in the Internal Revenue Code and is the successor to a corporation organized in
1988. As of June 30, 2000, our portfolio included 81 office properties and one
retail property.
We conduct almost all of our operations principally through our operating
partnership, Corporate Office Properties, L.P. (the "Operating Partnership"),
for which we are the managing general partner. The Operating Partnership owns
real estate both directly and through subsidiary partnerships and limited
liability companies ("LLCs"). The Operating Partnership also owns the principal
economic interest and, collectively with our Chief Executive Officer and Chief
Operating Officer, 49.5% of the voting stock of Corporate Office Management,
Inc. ("COMI") (together with its subsidiaries defined as the "Service
Companies"). A summary of our Operating Partnership's forms of ownership and the
percentage of those ownership forms owned by COPT as of June 30, 2000 follows:
<TABLE>
<CAPTION>
% Owned by COPT
-----------------
<S> <C>
Common Units 64%
Series A Preferred Units 100%
Series B Preferred Units 100%
Series C Preferred Units 0%
</TABLE>
NOTE 2 BASIS OF PRESENTATION
These notes to our interim financial statements highlight significant
changes to the notes to the financial statements included in our 1999 Form 10-K.
As a result, these notes to our interim financial statements should be read
together with the financial statements and notes thereto included in our 1999
Form 10-K. The interim financial statements on the previous pages reflect all
adjustments which we believe are necessary for the fair presentation of our
financial position and results of operations for the interim periods presented.
These adjustments are of a normal recurring nature. The results of operations
for such interim periods are not necessarily indicative of the results for a
full year.
We use two different accounting methods to report our investments in
entities: the consolidation method and the equity method.
CONSOLIDATION METHOD
We use the consolidation method when we own most of the outstanding voting
interests in an entity and can control its operations. This means the accounts
of the entity are combined with our accounts. We eliminate balances and
transactions between companies when we consolidate these accounts. Our
consolidated financial statements include the accounts of:
- COPT,
- the Operating Partnership and its subsidiary partnerships and LLCs, and
- Corporate Office Properties Holdings, Inc. (we own 100%).
6
<PAGE>
EQUITY METHOD
We use the equity method of accounting to report our investment in the
Service Companies. Under the equity method, we report:
- our ownership interest in the Service Companies' capital as an investment
on our Consolidated Balance Sheets and
- our percentage share of the earnings or losses from the Service Companies
in our Consolidated Statements of Operations.
NOTE 3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
USE OF ESTIMATES IN THE PREPARATION OF FINANCIAL STATEMENTS
We make estimates and assumptions when preparing financial statements under
generally accepted accounting principles. These estimates and assumptions affect
various matters, including:
- our reported amounts of assets and liabilities in our Consolidated Balance
Sheets at the dates of the financial statements,
- our disclosure of contingent assets and liabilities at the dates of the
financial statements, and
- our reported amounts of revenues and expenses in our Consolidated
Statements of Operations during the reporting periods.
These estimates involve judgements with respect to, among other things,
future economic factors that are difficult to predict and are often beyond
management's control. As a result, actual amounts could differ from these
estimates.
MINORITY INTERESTS
As discussed previously, we consolidate the accounts of our Operating
Partnership into our financial statements. However, we do not own 100% of the
Operating Partnership. Our Operating Partnership also does not own 11% of one of
its subsidiary partnerships. The amounts reported for minority interests on our
Consolidated Balance Sheets represent the portion of these consolidated
entities' equity that we do not own. The amounts reported for minority interests
on our Consolidated Statements of Operations represent the portion of these
consolidated entities' net income not allocated to us.
Common Units of the Operating Partnership ("Common Units") are
substantially similar economically to our Common Shares of beneficial interest
("Common Shares"). Common Units are also exchangeable into our Common Shares,
subject to certain conditions. We have accrued distributions related to Common
Units owned by minority interests of $1,784 at June 30, 2000 and $1,983 at
December 31, 1999.
Our Operating Partnership issued 974,662 Series C Preferred Units in
connection with a December 1999 property acquisition. Owners of these units are
entitled to a priority annual return equal to 9% of their liquidation preference
for the first ten years following issuance, 10.5% for the five following years
and 12% thereafter. These units are convertible, subject to certain
restrictions, commencing December 21, 2000 into Common Units in the Operating
Partnership on the basis of 2.381 Common Units for each Series C Preferred Unit,
plus any accrued return. The Common Units would then be exchangeable for Common
Shares, subject to certain conditions. We have accrued distributions related to
Series C Preferred Units owned by minority interests of $548 at June 30, 2000
and $61 at December 31, 1999.
Our Operating Partnership issued 2,100,000 preferred units in connection
with an October 1997 property acquisition (the "Initial Preferred Units"). These
units were converted into Common Units on the basis of 3.5714 Common Units for
each Initial Preferred Unit in October 1999. Prior to converting these units,
owners were entitled to a priority annual return equal to 6.5% of their
liquidation preference.
7
<PAGE>
EARNINGS PER SHARE ("EPS")
We present both basic and diluted EPS. We compute basic EPS by dividing
income available to common shareholders by the weighted-average number of Common
Shares outstanding during the period. Our computation of diluted EPS is similar
except that:
- the denominator is increased to include the weighted average number of
potential additional Common Shares that would have been outstanding if
securities that are convertible into our Common Shares were converted and
- the numerator is adjusted to add back any convertible preferred dividends
and any other changes in income or loss that would result from the assumed
conversion into Common Shares.
Our computation of diluted EPS does not assume conversion of securities into our
Common Shares if conversion of those securities would increase our diluted EPS
in a given period. A summary of the numerator and denominator for purposes of
our basic and diluted EPS calculations is as follows (dollars and shares in
thousands):
<TABLE>
<CAPTION>
Three months ended June 30 Six months ended June 30,
-------------------------- -------------------------
Numerator: 2000 1999 2000 1999
---------- ---- ---- ---- ----
<S> <C> <C> <C> <C>
Net income available to Common Shareholders $ 2,593 $ 3,220 $ 5,123 $ 6,427
Add: Extraordinary loss 42 144 42 838
-------- -------- -------- --------
Numerator for basic earnings per share before
extraordinary item 2,635 3,364 5,165 7,265
Add: Minority interests - Initial Preferred Units -- 853 -- 1,706
Add: Preferred Share dividends -- -- -- 676
-------- -------- -------- --------
Numerator for diluted earnings per share before
extraordinary item 2,635 4,217 5,165 9,647
Less: Series A Preferred Share dividends -- -- -- (676)
Less: Extraordinary loss (42) (144) (42) (838)
-------- -------- -------- --------
Numerator for diluted earnings per share for net
income
$ 2,593 $ 4,073 $ 5,123 $ 8,133
======== ======== ======== ========
Denominator (all weighted averages):
Common Shares - basic 18,014 16,802 17,683 16,802
Assumed conversion of share options 181 9 119 9
Assumed conversion of Common Unit warrants 476 -- 476 --
Conversion of Initial Preferred Units -- 7,500 -- 7,500
Conversion of Series A Preferred Shares -- -- -- 1,845
-------- -------- -------- --------
Denominator for diluted earnings per share before
extraordinary item 18,671 24,311 18,278 26,156
Less: Conversion of Series A Preferred Shares -- -- -- (1,845)
-------- -------- -------- --------
Denominator for diluted earnings per share for net
income 18,671 24,311 18,278 24,311
======== ======== ======== ========
</TABLE>
Our diluted EPS computation for the three months ended June 30, 2000 only
assumes conversion of share options and Common Unit warrants because conversions
of Preferred Units, Series A Preferred Shares of beneficial interest (the
"Series A Preferred Shares") and Common Units would increase diluted EPS in that
period. Our diluted EPS computation for the three months ended June 30, 1999
only assumes conversion of share options and Initial Preferred Units because
conversions of Series A Preferred Shares and Common Units would increase diluted
EPS in that period.
Our diluted EPS computation for the six months ended June 30, 2000 only
assumes conversion of share options and Common Unit warrants because conversions
of Preferred Units, Series A Preferred Shares and Common Units would increase
diluted EPS in that period. Our diluted EPS before extraordinary item
computation for the six months ended June 30, 1999 assumes conversion of share
options, Initial Preferred Units and Series A Preferred Shares because
conversions of Common Units would increase diluted EPS in that period. Our
diluted EPS on net income computation for the six months ended June 30, 1999
only assumes conversion of
8
<PAGE>
share options and Initial Preferred Units because conversions of Series A
Preferred Shares and Common Units would increase diluted EPS in that period.
RECLASSIFICATION
We reclassified certain amounts from prior periods to conform to the
current period presentation of our consolidated financial statements. These
reclassifications did not affect consolidated net income or shareholders'
equity.
NOTE 4 COMMERCIAL REAL ESTATE PROPERTIES
Operating properties consisted of the following:
<TABLE>
<CAPTION>
June 30, December 31,
2000 1999
------------ ------------
<S> <C> <C>
Land $ 141,646 $ 135,641
Buildings and improvements 575,531 544,967
Furniture, fixtures and equipment 345 335
---------- -----------
717,522 680,943
Less: accumulated depreciation (25,650) (18,279)
---------- -----------
$ 691,872 $ 662,664
========== ===========
</TABLE>
Projects we had under construction/development consisted of the following:
<TABLE>
<CAPTION>
June 30, December 31,
2000 1999
------------ ------------
<S> <C> <C>
Land $ 15,888 $ 13,158
Construction in progress 20,300 20,667
--------- ---------
$ 36,188 $ 33,825
========= =========
</TABLE>
2000 ACQUISITIONS
We acquired a 74,513 square foot office building located in Hanover,
Maryland for $7,464 on April 18, 2000.
We also acquired the following properties during the six months ended June
30, 2000:
- a parcel of land located in Cranbury, New Jersey for $633 on March 20,
2000,
- a parcel of land located in Columbia, Maryland for $4,036 on March 29,
2000,
- a parcel of land located in Annapolis Junction, Maryland for $3,022 on May
26, 2000,
- a parcel of land located in Cranbury, New Jersey for $283 on June 5, 2000,
and
- a parcel of land located in Annapolis Junction, Maryland for $364 on June
30, 2000.
All of these land parcels are contiguous to certain of our existing operating
properties.
2000 CONSTRUCTION/DEVELOPMENT
During the six months ended June 30, 2000, we completed the construction of
three office buildings totaling 243,087 square feet. Two of these buildings
totaling 185,807 square feet are located in the Baltimore/Washington Corridor
with the balance located in Dayton, New Jersey.
As of June 30, 2000, we also had construction underway on four new
buildings and development underway on four parcels of land.
9
<PAGE>
2000 DISPOSITIONS
We sold a 46,134 square foot retail property located in Minot, North Dakota
for $2,970 on June 19, 2000. We realized a gain of $57 on the sale of this
property, which was the last of our retail properties located in the Midwest
region of the United States.
NOTE 5 ACCOUNTS RECEIVABLE
Our accounts receivable are reported net of an allowance for bad debts of
$49 at June 30, 2000 and $10 at December 31, 1999.
NOTE 6 INVESTMENT IN AND ADVANCES TO SERVICE COMPANIES
We account for our investment in COMI and its subsidiaries, Corporate
Realty Management, LLC ("CRM"), Corporate Development Services, LLC ("CDS") and
Martin G. Knott and Associates, LLC ("MGK") using the equity method of
accounting. Our investment in and advances to the Service Companies included the
following:
<TABLE>
<CAPTION>
June 30, December 31,
2000 1999
------------ ------------
<S> <C> <C>
Notes receivable $ 2,005 $ 2,005
Equity investment in Service Companies 806 807
Advances receivable 1,284 849
----------- ----------
Total $ 4,095 $ 3,661
=========== ==========
</TABLE>
On July 18, 2000, COMI acquired the remaining 25% interest in CRM.
NOTE 7 DEFERRED CHARGES
Deferred charges consisted of the following:
<TABLE>
<CAPTION>
June 30, December 31,
2000 1999
------------ ------------
<S> <C> <C>
Deferred financing costs $ 5,777 $ 4,592
Deferred leasing costs 7,876 4,658
Deferred other 24 24
----------- ----------
13,677 9,274
Accumulated amortization (2,724) (1,749)
----------- ----------
Deferred charges, net $ 10,953 $ 7,525
=========== ==========
</TABLE>
NOTE 8 MORTGAGE AND OTHER LOANS PAYABLE
This section highlights new borrowing arrangements entered into during the
six months ended June 30, 2000.
On February 10, 2000, we entered into a $6,900 construction loan facility
with Summit Bank to finance the redevelopment of a 57,000 square foot warehouse
facility into office space. This loan bears interest at LIBOR plus 1.75%. The
loan matures on February 28, 2001 and may be extended for a two-year period,
subject to certain conditions. Borrowings under this loan totaled $2,610 at June
30, 2000.
On March 27, 2000, we entered into a $9,325 construction loan facility with
Allfirst Bank to finance the construction of a building at our 6750 Alexander
Bell Drive property. This loan bears interest at LIBOR plus 1.75%. The loan
matures on May 1, 2002. Borrowings under this loan totaled $418 at June 30,
2000.
10
<PAGE>
On March 29, 2000, we entered into a $3,078 loan with Howard Research and
Development Corporation in connection with the acquisition of a land development
parcel located in Columbia, Maryland. The loan carried no interest rate and was
repaid on June 20, 2000.
On March 30, 2000, we entered into a $13,440 construction loan facility
with Bank of America to finance the construction of a building at our 221
National Business Parkway property. This loan bears interest at LIBOR plus
1.75%. The loan matures on March 29, 2002 and may be extended for a one-year
period, subject to certain conditions. Borrowings under this loan totaled $3,738
at June 30, 2000.
On May 25, 2000, we entered into an interest rate cap agreement with Bear
Stearns Capital Markets, Inc.. This agreement caps our one-month LIBOR base at
7.7% per annum on a notional amount of $50,000 through May 31, 2002.
On June 28, 2000, we entered into a $11,855 construction loan facility with
Provident Bank to finance the construction of a building at our 1304 Concourse
Drive property. This loan bears interest at LIBOR plus 1.75%. The loan matures
on July 1, 2002 and may be extended for a one-year period, subject to certain
conditions. No borrowings were made under this facility through June 30, 2000.
NOTE 9 SHAREHOLDERS' EQUITY
On November 3, 1999, the Board of Trustees authorized a share repurchase
program to buy up to 2,000,000 Common Shares in open market and privately
negotiated purchases depending on market conditions and other factors. On March
31, 2000, we repurchased 6,600 shares in the open market for $52. On April 5,
2000, we repurchased 20,000 shares in the open market for $166. On June 5, 2000,
we repurchased 140,000 shares in the open market for $1,197.
On March 16, 2000, 877,545 Common Units in our Operating Partnership were
converted to 877,545 Common Shares. On June 30, 2000, 170,000 Common Units in
our Operating Partnership were converted to 170,000 Common Shares.
During the six months ended June 30, 2000, we issued 12,500 Common Shares
subject to forfeiture restrictions to an officer. We also had forfeiture
restrictions on 15,625 previously issued Common Shares lapse during the six
months ended June 30, 2000.
11
<PAGE>
NOTE 10 DIVIDENDS AND DISTRIBUTIONS
The following summarizes our dividends/distributions for the six months
ended June 30, 2000:
<TABLE>
<CAPTION>
Dividend/
Distribution Total
Per Dividend/
Record Date Payable Date Share/Unit Distribution
----------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Series A Preferred Shares:
Fourth Quarter 1999 December 31, 1999 January 14, 2000 $0.34375 $ 338
First Quarter 2000 March 31, 2000 April 17, 2000 $0.34375 $ 338
Second Quarter 2000 June 30, 2000 July 17, 2000 $0.34375 $ 338
Series B Preferred Shares:
Fourth Quarter 1999 December 31, 1999 January 14, 2000 $0.625 $ 781
First Quarter 2000 March 31, 2000 April 17, 2000 $0.625 $ 781
Second Quarter 2000 June 30, 2000 July 17, 2000 $0.625 $ 781
Common Shares:
Fourth Quarter 1999 December 31, 1999 January 14, 2000 $0.19 $3,265
First Quarter 2000 March 31, 2000 April 17, 2000 $0.19 $3,433
Second Quarter 2000 June 30, 2000 July 17, 2000 $0.19 $3,436
Series C Preferred Units:
Fourth Quarter 1999 December 31, 1999 January 14, 2000 $0.0625 $ 61
First Quarter 2000 March 31, 2000 April 17, 2000 $0.5625 $ 548
Second Quarter 2000 June 30, 2000 July 17, 2000 $0.5625 $ 548
Common Units:
Fourth Quarter 1999 December 31, 1999 January 14, 2000 $0.19 $1,983
First Quarter 2000 March 31, 2000 April 17, 2000 $0.19 $1,816
Second Quarter 2000 June 30, 2000 July 17, 2000 $0.19 $1,784
</TABLE>
NOTE 11 RELATED PARTY TRANSACTIONS
MANAGEMENT
We have a contract with COMI under which COMI provides asset management,
managerial, financial and legal support. Under the terms of this contract, we
reimburse COMI for personnel and other overhead-related expenses. We incurred
management fees and related costs under this contract of $2,361 in the six
months ended June 30, 2000 and $1,529 in the six months ended June 30, 1999.
We have a management agreement with CRM under which CRM provides property
management services to our properties. Under the terms of this arrangement, CRM
is entitled to a fee equal to 3% of revenue from tenant billings. CRM is also
entitled to reimbursement for direct labor and out-of-pocket costs. We incurred
property management fees and related costs with CRM of $2,642 in the six months
ended June 30, 2000 and $1,831 in the six months ended June 30, 1999.
We had a management agreement with Glacier Realty LLC, a company that was
partially owned by one of our former Trustees. We incurred fees under this
agreement of $63 in the six months ended June 30, 1999.
We also had a management agreement with a company for which one of our
Trustees serves on the Board of Directors. We incurred management fees and
related costs under this contract of $41 in the six months ended June 30, 1999.
12
<PAGE>
CONSTRUCTION COSTS
We have a contract with CDS under which CDS provides construction and
development services. Under the terms of this contract, we reimburse CDS for
these services based on actual time incurred at market rates. We incurred $858
in the six months ended June 30, 2000 and $570 in the six months ended June 30,
1999 a substantial portion of which was capitalized into the cost of the related
activities.
COMMON SHARE GRANTS
The Service Companies paid us $119 for the value of Common Shares granted
to one of its employees in the six months ended June 30, 2000.
RENTAL REVENUE
We recognized revenue on office space leased to COMI and CRM of $269 in the
six months ended June 30, 2000 and $206 in the six months ended June 30, 1999.
We recognized revenue on office space leased to Constellation Real Estate, Inc.
("Constellation"), owner of 38% of our Common Shares and 100% of our Series A
Preferred Shares at June 30, 2000, of $481 in the six months ended June 30, 2000
and $462 in the six months ended June 30, 1999. We recognized revenue on office
space leased to a company for which one of our Trustees serves on the Board of
Directors of $45 in the six months ended June 30, 2000.
INTEREST INCOME
We earned interest income on notes receivable from the Service Companies of
$105 in the six months ended June 30, 2000 and $144 in the six months ended June
30, 1999.
CONSTRUCTION FEES
The Service Companies earned construction management fees from an entity
owned by an officer and Trustee of ours of $58 in the six months ended June 30,
1999.
LEASING COMMISSION
The Service Companies earned a leasing commission from an entity owned by
an officer and Trustee of ours of $117 in the six months ended June 30, 1999.
FEES EARNED FROM CONSTELLATION AND BGE
The Service Companies earned fees from a project consulting and management
agreement with Constellation of $150 in the six months ended June 30, 2000 and
$750 in the six months ended June 30, 1999. The Service Companies also earned
fees and expense reimbursements under a property management agreement with
Baltimore Gas and Electric Company, an affiliate of Constellation, of $38 in the
six months ended June 30, 2000 and $242 in the six months ended June 30, 1999.
UTILITIES EXPENSE
Baltimore Gas and Electric Company provided utility services to most of our
properties in the Baltimore/Washington Corridor.
ACQUISITIONS
During the six months ended June 30, 2000, we acquired two parcels of land
from Constellation for $3,386.
13
<PAGE>
NOTE 12 SUPPLEMENTAL INFORMATION TO STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
For the six months ended
June 30,
------------------------
2000 1999
---- ----
<S> <C> <C>
Supplemental schedule of non-cash investing and
financing activities:
Debt repaid in connection with sales of rental properties $ 2,432 $ 20,928
-------- --------
Debt assumed in connection with acquisitions $ 3,078 $ 5,097
-------- --------
Increase in accrued capital improvements $ 2,902 $ 765
-------- --------
Dividends/distributions payable $ 6,757 $ 4,792
-------- --------
Increase in minority interests resulting from issuance of
Common Units in connection with Glacier
Transaction $ -- $ 1,487
-------- --------
Adjustments to minority interests resulting from changes
in ownership of Operating Partnership by COPT $ (458) $ (128)
-------- --------
Decrease in minority interests and increase in
shareholders' equity in connection with conversion of
Common Units into Common Shares $ 8,527 $ --
-------- --------
Increase in minority interests resulting from issuance of
Common Units in connection with property acquisitions $ -- $ 3,431
-------- --------
</TABLE>
14
<PAGE>
NOTE 13 INFORMATION BY BUSINESS SEGMENT
We have five segments: Baltimore/Washington Corridor office, Greater
Philadelphia office, Northern/Central New Jersey office, Greater Harrisburg
office and retail. Our office properties represent our core-business. We manage
our retail properties as a single segment since they are considered outside of
our core-business.
The table below reports segment financial information. Our retail segment
is not separately reported since it does not meet the reporting thresholds. We
measure the performance of our segments based on total revenues less property
operating expenses. Accordingly, we do not report other expenses by segment in
the table below.
<TABLE>
<CAPTION>
Baltimore/ Northern/
Washington Greater Central New Greater
Corridor Philadelphia Jersey Harrisburg
Office Office Office Office Other Total
------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Three months ended June 30, 2000:
Revenues $ 16,297 $ 2,507 $ 4,968 $ 2,275 $ 370 $ 26,417
Property operating expenses 4,768 25 1,954 630 60 7,437
-------- -------- -------- -------- -------- --------
Income from operations $ 11,529 $ 2,482 $ 3,014 $ 1,645 $ 310 $ 18,980
-------- -------- -------- -------- -------- --------
Commercial real estate property $ 23,167 $ 77 $ 2,480 $ 380 $ 36 $ 26,140
expenditures ======== ======== ======== ======== ======== ========
Three months ended June 30, 1999:
Revenues $ 11,420 $ 2,507 $ 4,067 $ 795 $ 753 $ 19,542
Property operating expenses 3,461 21 1,545 245 113 5,385
-------- -------- -------- -------- -------- --------
Income from operations $ 7,959 $ 2,486 $ 2,522 $ 550 $ 640 $ 14,157
Commercial real estate property -------- -------- -------- -------- -------- --------
expenditures $ 45,466 $-- $ 7,163 $ 51 $ 30 $ 52,710
======== ======== ======== ======== ======== ========
Six months ended June 30, 2000:
Revenues $ 32,127 $ 5,013 $ 9,674 $ 4,670 $ 794 $ 52,278
Property operating expenses 9,917 54 3,740 1,213 121 15,045
-------- -------- -------- -------- -------- --------
Income from operations $ 22,210 $ 4,959 $ 5,934 $ 3,457 $ 673 $ 37,233
-------- -------- -------- -------- -------- --------
Commercial real estate property $ 36,260 $ 77 $ 5,149 $ 726 $ 76 $ 42,288
expenditures -------- -------- -------- -------- -------- --------
Segment assets at June 30, 2000 $445,188 $106,846 $116,695 $ 71,415 $ 20,090 $760,234
======== ======== ======== ======== ======== ========
Six months ended June 30, 1999:
Revenues $ 21,734 $ 5,013 $ 8,163 $ 1,522 $ 1,633 $ 38,065
Property operating expenses 6,527 44 3,047 487 283 10,388
-------- -------- -------- -------- -------- --------
Income from operations $ 15,207 $ 4,969 $ 5,116 $ 1,035 $ 1,350 $ 27,677
Commercial real estate property -------- -------- -------- -------- -------- --------
expenditures $ 58,300 $-- $ 7,943 $ 133 $ 287 $ 66,663
-------- -------- -------- -------- -------- --------
Segment assets at June 30, 1999 $320,796 $108,242 $105,178 $ 23,754 $ 25,423 $583,393
======== ======== ======== ======== ======== ========
</TABLE>
15
<PAGE>
The following table reconciles our income from operations for reportable
segments to income before extraordinary item as reported in our Consolidated
Statements of Operations.
<TABLE>
<CAPTION>
Three Months Ended June 30, Six Months Ended June 30,
--------------------------- -------------------------
2000 1999 2000 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
Income from operations for reportable segments $ 18,980 $ 14,157 $ 37,233 $ 27,677
Add:
Equity in (loss) income of Service Companies (48) 145 (1) 326
Gain on sales of rental properties 57 154 57 1,140
Less:
General and administrative (1,160) (796) (2,508) (1,685)
Interest (7,404) (5,226) (14,338) (10,419)
Amortization of deferred financing costs (311) (322) (617) (547)
Depreciation and other amortization (4,307) (2,887) (8,180) (5,679)
Minority interests (2,053) (1,523) (4,242) (2,872)
--------- --------- --------- ---------
Income before extraordinary item $ 3,754 $ 3,702 $ 7,404 $ 7,941
========= ========= ========= ==========
</TABLE>
We did not allocate gain on sales of rental properties, interest expense,
amortization of deferred financing costs and depreciation and other amortization
to segments since they are not included in the measure of segment profit
reviewed by management. We also did not allocate equity in (loss) income of
Service Companies, general and administrative and minority interests since these
items represent general corporate items not attributable to segments.
NOTE 14 COMMITMENTS AND CONTINGENCIES
In the normal course of business, we are involved in legal actions arising
from our ownership and administration of properties. In management's opinion,
any liabilities that may result are not expected to have a materially adverse
effect on our financial position, operations or liquidity. We are subject to
various federal, state and local environmental regulations related to our
property ownership and operation. We have performed environment 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.
We are under two contracts to purchase parcels of land that are contiguous
to certain of our existing operating properties. The purchase price for one
parcel is $3,945. The purchase price for the other parcel will be determined
based upon the square footage of the area contained in the building to be
constructed on the land.
NOTE 15 PRO FORMA FINANCIAL INFORMATION (UNAUDITED)
We accounted for our 1999 and 2000 acquisitions using the purchase method
of accounting. We included the results of operations for the acquisitions in our
Consolidated Statements of Operations from their respective purchase dates
through June 30, 2000.
16
<PAGE>
We prepared the pro forma condensed consolidated financial information
presented below as if all of our 1999 and 2000 acquisitions and dispositions had
occurred on January 1, 1999. Accordingly, we were required to make pro forma
adjustments where deemed necessary. The pro forma financial information is
unaudited and is not necessarily indicative of the results which actually would
have occurred if these acquisitions had occurred on January 1, 1999, nor does it
intend to represent our results of operations for future periods.
<TABLE>
<CAPTION>
Six months ended June 30,
-------------------------
2000 1999
---- ----
<S> <C> <C>
Pro forma total revenues $ 52,494 $ 46,918
---------- ----------
Pro forma net income available to Common Shareholders $ 5,105 $ 6,528
---------- ----------
Pro forma earnings per Common Share
Basic $ 0.29 $ 0.39
---------- ----------
Diluted $ 0.28 $ 0.33
========== ==========
</TABLE>
17
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
In this section, we discuss our financial condition and results of
operations for the three months and six months ended June 30, 2000. This section
includes discussions on:
- why various components of our Consolidated Statements of Operations changed
for the three and six months ended June 30, 2000 compared to the same
periods in 1999,
- what our primary sources and uses of cash were in the six months ended June
30, 2000,
- how we raised cash for acquisitions and other capital expenditures during
the six months ended June 30, 2000,
- how we intend to generate cash for future capital expenditures, and
- the computation of our funds from operations.
You should refer to our consolidated financial statements and accompanying
notes and operating data variance analysis set forth below 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 of our business. Statements that are not
historical facts, including statements about our beliefs and expectations, are
forward-looking statements. These statements are not guarantees of future
performance, events or results and involve potential risks and uncertainties.
Accordingly, actual results may differ materially. We undertake no obligation to
publicly update any forward-looking statements, whether as a result of new
information, future events or otherwise.
Important facts that may affect these expectations, estimates or
projections include, but are not limited to: our ability to borrow on favorable
terms; general economic and business conditions, which will, among other things,
affect office property demand and rents, tenant creditworthiness and financing
availability; interest rates; adverse changes in the real estate markets
including, among other things, competition with other companies; risks of real
estate acquisition and development; governmental actions and initiatives and
environmental requirements.
18
<PAGE>
CORPORATE OFFICE PROPERTIES TRUST
OPERATING DATA VARIANCE ANALYSIS
(DOLLARS FOR THIS TABLE ARE IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
Three Months Ended June 30, Six Months Ended June 30,
--------------------------- -------------------------
2000 1999 Variance % Change 2000 1999 Variance % Change
---- ---- -------- -------- ---- ---- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues
Rental revenue $ 23,154 $ 17,043 $ 6,111 36% $ 45,060 $ 33,408 $ 11,652 35%
Tenant recoveries and other revenue 3,263 2,499 764 31% 7,218 4,657 2,561 55%
-------- -------- -------- -------- -------- --------
Total revenues 26,417 19,542 6,875 35% 52,278 38,065 14,213 37%
-------- -------- -------- -------- -------- --------
Expenses
Property operating 7,437 5,385 2,052 38% 15,045 10,388 4,657 45%
General and administrative 1,160 796 364 46% 2,508 1,685 823 49%
Interest and amortization of deferred
financing costs 7,715 5,548 2,167 39% 14,955 10,966 3,989 36%
Depreciation and other amortization 4,307 2,887 1,420 49% 8,180 5,679 2,501 44%
-------- -------- -------- -------- -------- --------
Total expenses 20,619 14,616 6,003 41% 40,688 28,718 11,970 42%
-------- -------- -------- -------- -------- --------
Income before equity in (loss) income of
Service Companies, gain on sales of rental
properties, minority interests and
extraordinary item 5,798 4,926 872 18% 11,590 9,347 2,243 24%
Equity in (loss) income of Service Companies (48) 145 (193)(133%) (1) 326 (327) (100%)
Gain on sales of rental properties 57 154 (97) (63%) 57 1,140 (1,083) (95%)
-------- -------- -------- -------- -------- --------
Income before minority interests and
extraordinary item 5,807 5,225 582 11% 11,646 10,813 833 8%
Minority interests (2,053) (1,523) (530) 35% (4,242) (2,872) (1,370) 48%
Extraordinary item-loss on early retirement
of debt (42) (144) 102 (71%) (42) (838) 796 (95%)
-------- -------- -------- -------- -------- --------
Net income 3,712 3,558 154 4% 7,362 7,103 259 4%
Preferred Share dividends (1,119) (338) (781) 231% (2,239) (676) (1,563) 231%
-------- -------- -------- -------- -------- --------
Net income available to Common at Shareholders $ 2,593 $ 3,220 (627) (19%) 5,123 $ 6,427 $ (1,304) (20%)
======== ======== ======== ======== ======== ========
Basic earnings per Common Share
Income before extraordinary item $ 0.15 $ 0.20 $ (0.05) (25%) $ 0.29 $ 0.43 $ (0.14) (33%)
Net income $ 0.14 $ 0.19 $ (0.05) (26%) $ 0.29 $ 0.38 $ (0.09) (24%)
Diluted earnings per Common Share
Income before extraordinary item $ 0.14 $ 0.17 $ (0.03) (18%) $ 0.28 $ 0.37 $ (0.09) (24%)
Net income $ 0.14 $ 0.17 $ (0.03) (18%) $ 0.28 $ 0.33 $ (0.05) (15%)
</TABLE>
19
<PAGE>
COMPARISON OF THE THREE MONTHS ENDED JUNE 30, 2000 AND 1999
Our total revenues increased $6.9 million or 35%, of which $6.1 million was
generated by rental revenue and $764,000 by tenant recoveries and other revenue.
Included in this change is the following:
- $6.1 million increase attributable to 28 properties acquired and five
newly-constructed properties placed in service since April 1, 1999.
- $1.1 million increase attributable to 47 office properties owned throughout
both reporting periods due mostly to increases in rental rates on renewed
space, additional lease termination revenue and steady occupancy.
- $212,000 decrease attributable to properties sold since April 1, 1999.
Our total expenses increased $6.0 million or 41% due to the effects of the
increases in property operating, interest expense and amortization of deferred
financing costs, depreciation and other amortization and general and
administrative expenses described below.
Our property operating expenses increased $2.1 million or 38%. Included in
this change is the following:
- $1.7 million increase attributable to 28 properties acquired and five
newly-constructed properties placed in service since April 1, 1999.
- $411,000 increase attributable to 47 office properties owned throughout
both reporting periods.
- $16,000 decrease attributable to properties sold since April 1, 1999.
Our interest expense and amortization of deferred financing costs increased
$2.2 million or 39% due mostly to a 38% increase in our average outstanding debt
balance resulting from our 1999 and 2000 acquisitions and construction activity.
Our depreciation and other amortization expense increased $1.4 million or 49%,
$947,000 of which is attributable to 28 properties acquired and five
newly-constructed properties placed in service since April 1, 1999. Our general
and administrative expenses increased $364,000 or 46%, $164,000 of which is
attributable to Common Shares subject to forfeiture restrictions issued to
certain of our officers.
Our income before minority interests and extraordinary item also includes a
$97,000 decrease in gain realized on the sales of rental properties and a
$193,000 decrease in our equity in the income of the Service Companies.
As a result of the above factors, income before minority interests and
extraordinary item increased by $582,000 or 11%. The amounts reported for
minority interests on our Consolidated Statements of Operations represent
primarily the portion of the Operating Partnership's net income not allocated to
us. Our income allocation to minority interests increased $530,000 or 35% due to
the increase in the Operating Partnership's net income combined with a higher
percentage ownership by minority interests during the current period.
The factors discussed above combined with a $102,000 decrease in
extraordinary losses collectively resulted in a $154,000 increase in net income.
There was a $781,000 increase in Preferred Share dividends resulting from the
Series B Preferred Share issuance in July 1999. As a result of all of the above,
net income available to Common Shareholders decreased $627,000 or 19%.
COMPARISON OF THE SIX MONTHS ENDED JUNE 30, 2000 AND 1999
Our total revenues increased $14.2 million or 37%, of which $11.7 million
was generated by rental revenue and $2.5 million by tenant recoveries and other
revenue. Included in this change is the following:
- $12.9 million increase attributable to 29 properties acquired and five
newly-constructed properties placed in service since January 1, 1999.
20
<PAGE>
- $2.1 million increase attributable to 46 office properties owned throughout
both reporting periods due mostly to increases in rental rates on renewed
space, additional lease termination revenue and steady occupancy.
- $753,000 decrease attributable to properties sold since January 1, 1999.
Our total expenses increased $12.0 million or 42% due to the effects of the
increases in property operating, interest expense and amortization of deferred
financing costs, depreciation and other amortization and general and
administrative expenses described below.
Our property operating expenses increased $4.7 million or 45%. Included in
this change is the following:
- $3.6 million increase attributable to 29 properties acquired and five
newly-constructed properties placed in service since January 1, 1999.
- $1.1 million increase attributable to 46 office properties owned throughout
both reporting periods, $540,000 of which is due to increased snow removal
costs.
- $153,000 decrease attributable to properties sold since January 1, 1999.
Our interest expense and amortization of deferred financing costs increased
$4.0 million or 36% due mostly to a 38% increase in our average outstanding debt
balance resulting from our 1999 and 2000 acquisitions and construction activity.
Our depreciation and other amortization expense increased $2.5 million or 44%,
$1.9 million of which is attributable to 29 properties acquired and five
newly-constructed properties placed in service since January 1, 1999. Our
general and administrative expenses increased $823,000 or 49%, $463,000 of which
is attributable to Common Shares subject to forfeiture restrictions issued to
certain of our officers and the lapsing of these restrictions on a number of
these shares.
Our income before minority interests and extraordinary item also includes a
$1.1 million decrease in our gain realized on the sales of rental properties and
a $327,000 decrease in our equity in the income of the Service Companies.
As a result of the above factors, income before minority interests and
extraordinary item increased by $833,000 or 8%. Our income allocation to
minority interests increased $1.4 million or 48% due to the increase in the
Operating Partnership's net income combined with a higher percentage ownership
by minority interests during the current period.
The factors discussed above combined with a $796,000 decrease in
extraordinary losses collectively resulted in a $259,000 increase in net income.
There was a $1.6 million increase in Preferred Share dividends resulting from
the Series B Preferred Share issuance in July 1999. As a result of all of the
above, net income available to Common Shareholders decreased $1.3 million or
20%.
21
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
CAPITALIZATION AND LIQUIDITY
Cash provided from operations represented our primary source of liquidity
to fund dividends and distributions, pay debt service and fund working capital
requirements. We expect to continue to meet our short-term capital needs,
including all property expenses, general and administrative expenses, debt
service, distribution requirements and recurring capital improvements and
leasing commissions. We do not anticipate borrowing to meet these requirements.
We historically have financed our property acquisitions using a combination
of borrowings secured by our properties, proceeds from the sales of properties
and the equity issuances of Common and Preferred Units in our Operating
Partnership and Common and Preferred Shares. We use our secured revolving credit
facility with Deutsche Banc Alex. Brown (the "Revolving Credit Facility") to
finance much of our investing and financing activities. We pay down our
Revolving Credit Facility using proceeds from long-term borrowings
collateralized by our properties as attractive financing conditions arise and
equity issuances as attractive equity market conditions arise. We also have a
$50.0 million line of credit with Prudential Securities Credit Corporation (the
"Prudential Credit Facility"). Amounts available under the Revolving Credit
Facility and the Prudential Credit Facility are computed based on 65% of the
appraised value of properties pledged as collateral. As of August 1, 2000, the
maximum amount available under our Revolving Credit Facility was $99.4 million,
of which $8.2 million was unused. As of August 1, 2000, none of our properties
were pledged as collateral for the Prudential Credit Facility and therefore no
borrowings were available.
Our debt strategy favors long-term, fixed-rate, secured debt over
variable-rate debt to minimize the risk of short-term increases in interest
rates. As of June 30, 2000, 64% of our mortgage and other loans payable balance
carried fixed interest rates.
22
<PAGE>
Mortgage and other loans payable at June 30, 2000 consisted of the
following (dollars in thousands):
<TABLE>
<S> <C>
Deutsche Bank Alex. Brown, Term Credit Facility, 7.50%, maturing October 2000 (1) $ 100,000
Deutsche Bank Alex. Brown, Revolving Credit Facility, LIBOR + 1.75%, maturing May 2001 84,685
Teachers Insurance and Annuity Association of America, 6.89%, maturing November 2008 82,885
Teachers Insurance and Annuity Association of America, 7.72%, maturing October 2006 59,460
Mutual of New York Life Insurance Company, 7.79%, maturing August 2004 27,566
Bank of America, LIBOR + 1.75%, maturing December 2000 16,624
Allfirst Bank, LIBOR + 1.75%, maturing May 2002 12,144
Provident Bank of Maryland, LIBOR + 1.75%, maturing February 2001 (2) 9,779
Allfirst Bank, LIBOR + 1.6%, maturing February 2001(3) 8,494
Allfirst Bank, LIBOR + 1.75%, maturing October 2001 (4) 8,388
Aegon USA Realty Advisors, Inc., 8.29%, maturing May 2007 6,132
Bank of Maryland, LIBOR + 1.75%, maturing October 2001 (5) 5,242
Mellon Bank, yield on 5-year Treasury Securities + 2%, maturing August 2005 (6) 4,199
Bank of America, LIBOR + 1.75%, maturing March 2002 (7) 3,738
Provident Bank of Maryland , LIBOR + 1.75%, maturing September 2000 2,783
Summit Bank, LIBOR + 1.75%, maturing February 2001 (8) 2,610
Seller loan, 8.0%, maturing May 2007 1,532
Allfirst Bank, LIBOR + 1.75%, maturing May 2002 (9) 418
---------
$ 436,679
=========
</TABLE>
(1)May be extended for two one-year periods, subject to certain conditions. The
interest rate on this loan will be LIBOR + 1.75% beginning October 13, 2000.
(2)Construction loan with a total commitment of $10,875. Loan may be extended
for a one-year period, subject to certain conditions.
(3)Construction loan with a total commitment of $9,825. Loan may be extended for
a one-year period, subject to certain conditions.
(4)Construction loan with a total commitment of $12,375. Loan may be extended
for a one-year period, subject to certain conditions.
(5)Construction loan with a total commitment of $7,400. Loan may be extended for
a one-year period, subject to certain conditions.
(6)Construction loan with a total commitment of $4,549.
(7)Construction loan with a total commitment of $13,440. Loan may be extended
for a one-year period, subject to certain conditions.
(8)Construction loan with a total commitment of $6,900. Loan may be extended for
a two-year period, subject to certain conditions.
(9)Construction loan with a total commitment of $9,325.
We expect to meet our long-term capital needs through a combination of cash
from operations, additional borrowings from existing credit facilities and new
loans and additional equity issuances of Common Shares, Preferred Shares, Common
Units and/or Preferred Units.
As of June 30, 2000, we had $121.0 million in mortgage and other loans
payable maturing in 2000 which includes a $100.0 million loan maturing in
October that may be extended for two one-year periods, subject to certain
conditions. We expect to extend this loan for a one-year period and as of June
30, 2000 are in compliance with the necessary conditions. We expect to repay the
remaining balance of the 2000 loan maturities through a combination of
borrowings from existing credit facilities and new loans and cash from
operations.
We are under two contracts to purchase parcels of land that are contiguous
to certain of our existing operating properties. The purchase price for one
parcel will be $3.9 million. The purchase price for the other parcel will be
determined based upon the square footage of the area contained in the building
to be constructed on the land. We have no other contractual obligations as of
June 30, 2000 for property acquisitions or material capital costs other than the
completion of construction and development projects that were underway and
tenant improvements and leasing costs in the ordinary course of business.
23
<PAGE>
INVESTING AND FINANCING ACTIVITIES FOR THE SIX MONTHS ENDED JUNE 30, 2000:
During the six months ended June 30, 2000, we acquired a 74,513 square foot
operating property and five parcels of land for an aggregate acquisition cost of
$15.8 million. These acquisitions were financed by:
- using $10.0 million in proceeds under our Revolving Credit Facility,
- assuming $3.1 million in mortgage and other loans, and
- using cash reserves for the balance.
During the six months ended June 30, 2000, we completed the construction of
three office buildings totaling 243,087 square feet. Costs incurred on these
buildings through June 30, 2000 totaled $29.1 million. We have $26.7 million in
construction loan facilities for these buildings of which $16.2 million was
borrowed through June 30, 2000.
As of June 30, 2000, we had construction activities underway on four new
buildings totaling 321,000 square feet that were 44% pre-leased. Estimated costs
upon completion for these projects total approximately $49.3 million. We have
construction loan facilities in place totaling $34.6 million to finance the
construction of these projects. Borrowings under these facilities totaled $4.2
million at June 30, 2000 all of which was drawn upon during the six months then
ended. We also borrowed under the Revolving Credit Facility to finance these
activities.
As of June 30, 2000, we also had development activities underway on four
parcels of land.
During the six months ended June 30, 2000, we sold a retail property for
$3.0 million of which $2.4 million was used to pay off a mortgage loan payable
on the property. Net proceeds from this sale after mortgage loan repayment,
transaction costs and operating revenue and expense pro-rations totaled $513,000
all of which was applied to working capital.
STATEMENT OF CASH FLOWS
We generated net cash flow from operating activities of $20.4 million for
the six months ended June 30, 2000, an increase of $3.7 million from the six
months ended June 30, 1999. Our increase in cash flows from operating activities
is due mostly to income generated from our newly acquired and newly constructed
properties. Our net cash flow used in investing activities for the six months
ended June 30, 2000 increased $13.3 million from the six months ended June 30,
1999 due mostly to a decrease of $29.4 million in proceeds from rental property
sales offset by a $21.0 million decrease in cash outlays associated with
purchases of and additions to commercial real estate properties. Our net cash
flow provided by financing activities for the six months ended June 30, 2000
increased $3.9 million from the six months ended June 30, 1999 due mostly to a
$37.6 million decrease in repayments of mortgage and other loans payable, offset
by an $28.4 million decrease in proceeds from mortgage and other loans payable.
FUNDS FROM OPERATIONS
We consider Funds from Operations ("FFO") to be meaningful to investors as
a measure of the financial performance of an equity REIT when considered with
the financial data presented under generally accepted accounting principles
("GAAP"). Under the National Association of Real Estate Investment Trusts'
("NAREIT") definition, FFO means net income (loss) computed using generally
accepted accounting principles, excluding gains (or losses) from debt
restructuring and sales of property, plus real estate-related depreciation and
amortization and after adjustments for unconsolidated partnerships and joint
ventures. Further, if the conversion of securities into Common Shares is
dilutive, we exclude any GAAP income allocated to these securities in computing
FFO. The FFO we present may not be comparable to the FFO of other REITs since
they may interpret the current NAREIT definition of FFO differently or they may
not use the current NAREIT definition of FFO. FFO is not the same as cash
generated from operating activities or net income determined in accordance with
GAAP. 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
24
<PAGE>
from operating, investing and financing when evaluating our liquidity or ability
to make cash distributions or pay debt service. Our FFO for the three and six
months ended June 30, 2000 and 1999 are summarized in the following table:
<TABLE>
<CAPTION>
(Dollars and shares for this table are in thousands)
----------------------------------------------------
For the three months For the six months
ended June 30, ended June 30,
------------------- -------------------
2000 1999 2000 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
Income before minority interests
and extraordinary income ........................... $ 5,807 $ 5,225 $ 11,646 $ 10,813
Add: Real estate related depreciation and
amortization ....................................... 4,284 2,872 8,134 5,646
Less: Preferred Unit distributions ................... (548) (853) (1,096) (1,706)
Less: Preferred Share dividends ...................... (1,119) (338) (2,239) (676)
Less: Minority interest in other consolidated
partnership ........................................ (4) -- (11) --
Less: Gain on sales of rental properties ............. (57) (154) (57) (1,140)
-------- -------- -------- --------
Funds from operations ................................ 8,363 6,752 16,377 12,937
Add: Preferred Unit distributions .................... 548 853 1,096 1,706
Add: Convertible Preferred Share dividends ........... 339 338 677 676
-------- -------- -------- --------
Funds from operations assuming conversion of share
options, Common Unit warrants, Preferred Units
and Preferred Shares ............................... 9,250 7,943 18,150 15,319
Less: Straight line rent adjustments ................. (693) (825) (1,435) (1,500)
Less: Recurring capital improvements ................. (923) (478) (1,652) (1,147)
Adjusted funds from operations assuming conversion of ------- ------- ------- -------
share options, Common Unit warrants, Preferred Units
and Preferred Shares ............................... $ 7,634 $ 6,640 $ 15,063 $ 12,672
======== ======== ======== ========
Weighted average Common Shares ....................... 18,014 16,802 17,684 16,802
Conversion of weighted average Common Units .......... 9,556 3,203 9,918 2,982
-------- -------- -------- --------
Weighted average Common Shares/Units ................. 27,570 20,005 27,602 19,784
Assumed conversion of share options .................. 181 9 119 9
Assumed conversion of Common Unit warrants ........... 476 -- 476 --
Conversion of weighted average convertible
Preferred Shares ................................... 1,845 1,845 1,845 1,845
Conversion of weighted average Preferred Units ....... 2,321 7,500 2,321 7,500
-------- -------- -------- --------
Weighted average Common Shares/Units assuming
conversion of share options, Common Unit warrants,
Preferred Units and Preferred Shares ............... 32,393 29,359 32,363 29,138
======== ======== ======== ========
</TABLE>
INFLATION
We have not been significantly impacted by inflation during the periods
presented in this report. This is mostly because of the relatively low inflation
rates in our markets. Most of our tenants are contractually obligated to pay
their share of operating expenses, thereby reducing exposure to increases in
such costs resulting from inflation.
25
<PAGE>
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We are exposed to certain market risks, the most predominant of which is
changes in interest rates. Increases in interest rates can result in increased
interest expense under our Revolving Credit Facility and our other loans payable
carrying variable interest rate terms. Increases in interest rates can also
result in increased interest expense when our loans payable carrying fixed
interest rate terms mature and need to be refinanced.
The following table sets forth our long-term debt obligations, principal
cash flows by scheduled maturity, weighted average interest rates and estimated
fair market value ("FMV") at June 30, 2000 (dollars in thousands):
<TABLE>
<CAPTION>
For the Year Ended December 31,
----------------------------------------------------------------
2000 (1) 2001 (2)(3) 2002 (4) 2003 2004 Thereafter Total FMV
-------- ----------- --------- ---- ---- ---------- ----- ---
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Long term debt:
Fixed rate $ 101,425 $ 3,014 $ 3,241 $ 3,488 $ 29,297 $137,110 $277,575 $269,176
Average interest rate 7.37% 7.34% 7.35% 7.35% 7.36% 7.15%
Variable rate $ 19,624 $ 119,456 $15,919 $ 43 $ 47 $ 4,015 $159,104 $159,104
Average interest rate 8.41% 8.36% 8.14% 7.97% 7.97% 7.97%
</TABLE>
(1) Includes $100.0 million maturity in October that may be extended for two
one-year terms, subject to certain conditions.
(2) Includes $31.9 million for four construction loan facilities maturing that
may be extended for a one-year period, subject to certain conditions.
(3) Includes $2.6 million for a construction loan facility maturing that may be
extended for a two-year period, subject to certain conditions.
(4) Includes $3.7 million for a construction loan facility maturing that may be
extended for a one-year period, subject to certain conditions.
On May 25, 2000, we entered into an interest rate cap agreement with Bear
Stearns Capital Markets, Inc. This agreement caps our one-month LIBOR base at
7.7% per annum on a notional amount of $50.0 million through May 31, 2002. The
fair market value of this agreement as of June 30, 2000 was $84,000.
Based on our variable rate debt balances during the six months ended June
30, 2000, our interest expense would have increased $627,000 if interest rates
were 1% higher.
PART II
ITEM 1. LEGAL PROCEEDINGS
We are not currently involved in any material litigation nor, to the best
of our knowledge, is any material litigation currently threatened against us
(other than routine litigation arising in the ordinary course of business,
substantially all of which is expected to be covered by liability insurance).
ITEM 2. CHANGES IN SECURITIES
a. N/A
b. N/A
c. On June 30, 2000, 170,000 of our Common Units were converted to 170,000
Common Shares. The issuance of these Common Shares was exempt from
registration under Section 4 (2) of the Securities Act of 1933, as amended.
d. N/A
26
<PAGE>
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
N/A
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
N/A
ITEM 5. OTHER INFORMATION
N/A
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
EXHIBIT
NO. DESCRIPTION
--------- ----------------------------------------------------------
2.1 Agreement and Plan of Merger, dated January 31, 1998,
among the Registrant, the Maryland Company and the Company
(filed with the Trust's Registration Statement on Form S-4
(Commission File No. 333-45649) and incorporated herein by
reference).
2.2 Assignment of Partnership Interests, dated April 30, 1998,
between Airport Square Limited Partnership, Airport Square
Corporation, Camp Meade Corporation and COPT Airport
Square One LLC and COPT Airport Square Two LLC. (filed
with the Company's Current Report on Form 8-K on May 14,
1998 and incorporated herein by reference).
2.3 Assignment of Purchase and Sale Agreement, dated April 30,
1998, between Aetna Life Insurance Company and the
Operating Partnership. (filed with the Company's Current
Report on Form 8-K on May 14, 1998 and incorporated herein
by reference).
2.4 Assignment of Loan Purchase and Sale Agreement, dated
April 30, 1998, between Constellation Real Estate, Inc.
and the Operating Partnership. (filed with the Company's
Current Report on Form 8-K on May 14, 1998 and
incorporated herein by reference).
2.5 Purchase and Sale Agreement, dated April 1, 1998, between
Aetna Life Insurance Company and Airport Square Limited
Partnership (filed with the Company's Current Report on
Form 8-K on May 14, 1998 and incorporated herein by
reference).
2.6.1 Loan Purchase and Sale Agreement, dated March 13, 1998,
between Aetna Life Insurance Company and Constellation
Real Estate, Inc. (filed with the Company's Current Report
on Form 8-K on May 14, 1998 and incorporated herein by
reference).
2.6.2 Amendment to Loan Purchase and Sale Agreement, dated April
16, 1998, between Aetna Life Insurance Company and
Constellation Real Estate, Inc. (filed with the Company's
Current Report on Form 8-K on May 14, 1998 and
incorporated herein by reference).
2.7.1 Purchase and Sale Agreement, dated March 4, 1998, between
695 Rt. 46 Realty, LLC, 710 Rt. 46 Realty, LLC and COPT
Acquisitions, Inc. (filed with the Company's Current
Report on Form 8-K on June 10, 1998 and incorporated
herein by reference).
2.7.2 Letter Amendment to Purchase and Sale Agreement, dated
March 26, 1998, between 695 Rt. 46 Realty, LLC, 710 Rt. 46
Realty, LLC and COPT Acquisitions, Inc. (filed with the
Company's Current Report on Form 8-K on June 10, 1998 and
incorporated herein by
27
<PAGE>
reference).
2.8.1 Contribution Agreement between the Company and the
Operating Partnership and certain Constellation affiliates
(filed as Exhibit A of the Company's Schedule 14A
Information on June 26, 1998 and incorporated herein by
reference).
2.8.2 First Amendment to Contribution Agreement, dated July 16,
1998, between Constellation Properties, Inc. and certain
entities controlled by Constellation Properties, Inc.
(filed with the Company's Current Report on Form 8-K on
October 13, 1998 and incorporated herein by reference).
2.8.3 Second Amendment to Contribution Agreement, dated
September 28, 1998, between Constellation Properties, Inc.
and certain entities controlled by Constellation
Properties, Inc. (filed with the Company's Current Report
on Form 8-K on October 13, 1998 and incorporated herein by
reference).
2.9 Service Company Asset Contribution Agreement between the
Company and the Operating Partnership and certain
Constellation affiliates (filed as Exhibit B of the
Company's Schedule 14A Information on June 26, 1998 and
incorporated herein by reference).
2.10.1 Option Agreement, dated May 14, 1998, between the
Operating Partnership and NBP-III, LLC (a Constellation
affiliate) (filed as Exhibit C of the Company's Schedule
14A Information on June 26, 1998 and incorporated herein
by reference).
2.10.2 First Amendment to Option Agreement, dated June 22, 1998,
between the Operating Partnership and NBP-III, LLC (a
Constellation affiliate) (filed as Exhibit E of the
Company's Schedule 14A Information on June 26, 1998 and
incorporated herein by reference).
2.11.1 Option Agreement, dated May 14, 1998, between the
Operating Partnership and Constellation Gatespring II, LLC
(a Constellation affiliate) (filed as Exhibit D of the
Company's Schedule 14A Information on June 26, 1998 and
incorporated herein by reference).
2.11.2 First Amendment to Option Agreement, dated June 22, 1998,
between the Operating Partnership and Constellation
Gatespring II, LLC (a Constellation affiliate) (filed as
Exhibit F of the Company's Schedule 14A Information on
June 26, 1998 and incorporated herein by reference).
2.12 Option Agreement, dated September 28, 1998, between Jolly
Acres Limited Partnership, Arbitrage Land Limited
Partnership and the Operating Partnership (filed with the
Company's Current Report on Form 8-K on October 13, 1998
and incorporated herein by reference).
2.13 Right of First Refusal Agreement, dated September 28,
1998, between Constellation Properties, Inc. and the
Operating Partnership (filed with the Company's Current
Report on Form 8-K on October 13, 1998 and incorporated
herein by reference).
2.14 Right of First Refusal Agreement, dated September 28,
1998, between 257 Oxon, LLC and the Operating Partnership
(filed with the Company's Current Report on Form 8-K on
October 13, 1998 and incorporated herein by reference).
28
<PAGE>
2.15 Contribution Agreement, dated September 30, 1998, between
COPT Acquisitions, Inc. and M.O.R. XXIX Associates Limited
Partnership (filed with the Company's Current Report on
Form 8-K on October 28, 1998 and incorporated herein by
reference).
2.16 Purchase and Sale Agreement, dated September 30, 1998,
between New England Life Pension Properties II: A Real
Estate Limited Partnership and COPT Acquisitions, Inc.
(filed with the Company's Current Report on Form 8-K on
October 28, 1998 and incorporated herein by reference).
2.17.1 Sale-Purchase Agreement, dated August 20, 1998 between
South Middlesex Industrial Park Associates, L.P. and SM
Monroe Associates and COPT Acquisitions, Inc. (filed
with the Company's Current Report on Form 8-K on
October 28, 1998 and incorporated herein by reference).
2.17.2 First Amendment to Sale-Purchase Agreement, dated October
30, 1998, between South Middlesex Industrial Park
Associates, L.P. and SM Monroe Associates, L.P. and COPT
Acquisitions, Inc. (filed with the Company's Current
Report on Form 8-K on November 16, 1998 and incorporated
herein by reference).
2.18 Contribution Agreement, dated December 31, 1998, between
the Operating Partnership and M.O.R. 44 Gateway Associates
L.P., RA & DM, Inc. and M.R.U. L.P. (filed with the
Company's Current Report on Form 8-K on January 14, 1999
and incorporated herein by reference).
2.19.1 Purchase and Sale Agreement, dated December 31, 1998,
between Metropolitan Life Insurance Company and Corporate
Office Acquisitions, Inc. (filed with the Company's
Current Report on Form 8-K on January 14, 1999 and
incorporated herein by reference).
2.19.2 Amendment to Purchase and Sale Agreement, dated December
31, 1998, between Metropolitan Life Insurance Company,
DPA/Gateway L.P., Corporate Office Acquisitions, Inc.,
COPT Gateway, LLC and the Operating Partnership (filed
with the Company's Current Report on Form 8-K on January
14, 1999 and incorporated herein by reference).
2.20 Contribution Agreement, dated February 24, 1999, between
the Operating Partnership and John Parsinen, John D.
Parsinen, Jr., Enterprise Nautical, Inc. and Vernon Beck
(filed with the Company's Quarterly Report on Form 10-Q on
May 14, 1999 and incorporated herein by reference).
2.21 Agreement to Sell Partnership Interests, dated August 12,
1999, between Gateway Shannon Development Corporation,
Clay W. Hamlin, III and COPT Acquisitions, Inc. (filed
with the Company's Quarterly Report on Form 10-Q on
November 8, 1999 and incorporated herein by reference).
2.22 Agreement of Purchase and Sale, dated July 21, 1999,
between First Industrial Financing Partnership, L.P. and
COPT Acquisitions, Inc. (filed with the Company's
Quarterly Report on Form 10-Q on November 8, 1999 and
incorporated herein by reference).
2.23 Contribution Agreement, dated December 21, 1999, between
United Properties Group, Incorporated and COPT
Acquisitions, Inc. (filed with the Company's Annual Report
on
29
<PAGE>
Form 10-K on March 16, 2000 and incorporated herein by
reference).
3.1 Amended and Restated Declaration of Trust of Registrant
(filed with the Registrant's Registration Statement on
Form S-4 (Commission File No. 333-45649) and incorporated
herein by reference).
3.2 By laws of Registrant (filed with the Registrant's
Registration Statement on Form S-4 (Commission File No.
333-45649) and incorporated herein by reference).
4.1 Form of certificate for the Registrant's Common Shares of
Beneficial Interest, $0.01 par value per share (filed with
the Registrant's Registration Statement on Form S-4
(Commission File No. 333-45649) and incorporated herein by
reference).
4.2 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 on August 12, 1998 and incorporated herein by
reference).
4.3 Articles Supplementary of Corporate Office Properties
Trust Series A Convertible Preferred Shares, dated
September 28, 1998 (filed with the Company's Current
Report on Form 8-K on October 13, 1998 and incorporated
herein by reference).
4.4.1 Second Amended and Restated Limited Partnership Agreement
of the Operating Partnership, dated December 7, 1999
(filed with the Company's Annual Report on Form 10-K on
March 16, 2000 and incorporated herein by reference).
4.4.2 First Amendment to Second Amended and Restated Limited
Partnership Agreement of the Operating Partnership, dated
December 21, 1999 (filed with the Company's Annual Report
on Form 10-K on March 16, 2000 and incorporated herein by
reference).
4.5 Articles Supplementary of Corporate Office Properties
Trust Series B Convertible Preferred Shares, dated July 2,
1999 (filed with the Company's Current Report on Form 8-K
on July 7, 1999 and incorporated herein by reference).
10.1 Employment Agreement, dated December 16, 1999, between
Corporate Office Management, Inc., COPT and Clay W.
Hamlin, III (filed with the Company's Annual Report on
Form 10-K on March 16, 2000 and incorporated herein by
reference).
10.2 Employment Agreement, dated December 16, 1999, between
Corporate Office Management, Inc., COPT and Randall M.
Griffin (filed with the Company's Annual Report on Form
10-K on March 16, 2000 and incorporated herein by
reference).
10.3 Employment Agreement, dated December 16, 1999, between
Corporate Office Management, Inc., COPT and Roger A.
Waesche, Jr. (filed with the Company's Annual Report on
Form 10-K on March 16, 2000 and incorporated herein by
reference).
10.4 Employment Agreement, dated December 16, 1999, between
Corporate Development Services, LLC, COPT and Dwight
Taylor (filed with the Company's Annual Report on Form
10-K on March 16, 2000 and incorporated herein by
reference).
10.5 Employment Agreement, dated December 16, 1999, between
Corporate Realty Management, LLC, COPT and Michael D.
Kaiser (filed with the Company's Annual Report on Form
10-K on March 16, 2000 and incorporated herein by
reference).
30
<PAGE>
10.6 Restricted Share Agreement, dated December 16, 1999,
between Corporate Office Properties Trust and Randall M.
Griffin (filed with the Company's Annual Report on Form
10-K on March 16, 2000 and incorporated herein by
reference).
10.7 Restricted Share Agreement, dated December 16, 1999,
between Corporate Office Properties Trust and Roger A.
Waesche, Jr (filed with the Company's Annual Report on
Form 10-K on March 16, 2000 and incorporated herein by
reference).
10.8 Restricted Share Agreement, dated December 16, 1999,
between Corporate Office Properties Trust and Dwight
Taylor (filed with the Company's Annual Report on Form
10-K on March 16, 2000 and incorporated herein by
reference).
10.9 Restricted Share Agreement, dated December 16, 1999,
between Corporate Office Properties Trust and Michael D.
Kaiser (filed with the Company's Annual Report on Form
10-K on March 16, 2000 and incorporated herein by
reference).
10.10 Management agreement between Registrant and Glacier
Realty, LLC (filed with the Company's Current Report on
Form 8-K on October 29, 1997, and incorporated herein by
reference).
10.11 Senior Secured Credit Agreement, dated October 13, 1997,
(filed with the Company's Current Report on Form 8-K on
October 29, 1997, and incorporated herein by reference).
10.12.1 Corporate Office Properties Trust 1998 Long Term Incentive
Plan (filed with the Registrant's Registration Statement
on Form S-4 (Commission File No. 333-45649) and
incorporated herein by reference).
10.12.2 Amendment No. 1 to Corporate Office Properties Trust 1998
Long Term Incentive Plan (filed with the Company's
Quarterly Report on Form 10-Q on August 13, 1999 and
incorporated herein by reference).
10.13 Stock Option Plan for Directors (filed with Royale
Investments, Inc.'s Form 10-KSB for the year ended
December 31, 1993 (Commission File No. 0-20047) and
incorporated herein by reference).
10.14 Lease Agreement between Blue Bell Investment Company, L.P.
and Unisys Corporation dated March 12, 1997 with respect
to lot A (filed with the Registrant's Registration
Statement on Form S-4 (Commission File No. 333-45649) and
incorporated herein by reference).
10.15 Lease Agreement between Blue Bell Investment Company, L.P.
and Unisys Corporation, dated March 12, 1997, with respect
to lot B (filed with the Registrant's Registration
Statement on Form S-4 (Commission File No. 333-45649) and
incorporated herein by reference).
10.16 Lease Agreement between Blue Bell Investment Company, L.P.
and Unisys Corporation, dated March 12, 1997, with respect
to lot C (filed with the Registrant's Registration
Statement on Form S-4 (Commission File No. 333-45649) and
incorporated herein by reference).
31
<PAGE>
10.17 Senior Secured Revolving Credit Agreement, dated May 28,
1998, between the Company, the Operating Partnership, Any
Mortgaged Property Subsidiary and Bankers Trust Company
(filed with the Company's Current Report on Form 8-K on
June 10, 1998 and incorporated herein by reference).
10.18 Consulting Services Agreement, dated April 28, 1998,
between the Company and Net Lease Finance Corp., doing
business as Corporate Office Services (filed with the
Company's Current Report on Form 8-K on October 13, 1998
and incorporated herein by reference).
10.19 Project Consulting and Management Agreement, dated
September 28, 1998, between Constellation Properties, Inc.
and COMI (filed with the Company's Current Report on Form
8-K on October 13, 1998 and incorporated herein by
reference).
10.20 Promissory Note, dated October 22, 1998, between Teachers
Insurance and Annuity Association of America and the
Operating Partnership (filed with the Company's Quarterly
Report on Form 10-Q on November 13, 1998 and incorporated
herein by reference).
10.21 Indemnity Deed of Trust, Assignment of Leases and Rents
and Security Agreement, dated October 22, 1998, by
affiliates of the Operating Partnership for the benefit of
Teachers Insurance and Annuity Association of America
(filed with the Company's Quarterly Report on Form 10-Q on
November 13, 1998 and incorporated herein by reference).
10.22 Agreement for Services, dated September 28, 1998, between
the Company and Corporate Office Management, Inc. (filed
with the Company's Annual Report on Form 10-K on March 30,
1999 and incorporated herein by reference).
10.23.1 Lease Agreement, dated September 28,1998, between St.
Barnabas Limited Partnership and Constellation Properties,
Inc. (filed with the Company's Annual Report on Form 10-K
on March 30, 1999 and incorporated herein by reference).
10.23.2 First Amendment to Lease, dated December 31, 1998, between
St. Barnabas, LLC and Constellation Properties, Inc.
(filed with the Company's Annual Report on Form 10-K on
March 30, 1999 and incorporated herein by reference).
10.24.1 Lease Agreement, dated August 3, 1998, between
Constellation Real Estate, Inc. and Constellation
Properties, Inc. (filed with the Company's Annual Report
on Form 10-K on March 30, 1999 and incorporated herein by
reference).
10.24.2 First Amendment to Lease, dated December 30, 1998, between
Three Centre Park, LLC and Constellation Properties, Inc.
(filed with the Company's Annual Report on Form 10-K on
March 30, 1999 and incorporated herein by reference).
10.25 Underwriting Agreement, dated June 29, 1999, between
Corporate Office Properties Trust and the underwriters of
the Series B Preferred Shares (filed with the Company's
Current Report on Form 8-K on July 7, 1999 and
incorporated herein by reference).
10.26 Contribution Rights Agreement, dated June 23, 1999,
between the Operating Partnership and United Properties
Group, Incorporated (filed with the Company's Quarterly
Report on Form 10-Q on August 13, 1999 and incorporated
herein by reference).
32
<PAGE>
10.27 Promissory Note, dated September 30, 1999, between
Teachers Insurance and Annuity Association of America and
the Operating Partnership (filed with the Company's
Quarterly Report on Form 10-Q on November 8, 1999 and
incorporated herein by reference).
10.28 Indemnity Deed of Trust, Assignment of Leases and Rents
and Security Agreement, dated September 30, 1999, by
affiliates of the Operating Partnership for the benefit of
Teachers Insurance and Annuity Association of America
(filed with the Company's Quarterly Report on Form 10-Q on
November 8, 1999 and incorporated herein by reference).
10.29 Revolving Credit Agreement, dated December 29, 1999,
between Corporate Office Properties, L.P. and Prudential
Securities Credit Corp. (filed with the Company's Annual
Report on Form 10-K on March 16, 2000 and incorporated
herein by reference).
10.30 Option agreement, dated March 1998, between Corporate
Office Properties, L.P. and Blue Bell Land, L.P. (filed
with the Company's Annual Report on Form 10-K on March 16,
2000 and incorporated herein by reference).
10.31 Option agreement, dated March 1998, between Corporate
Office Properties, L.P. and Comcourt Land, L.P. (filed
with the Company's Annual Report on Form 10-K on March 16,
2000 and incorporated herein by reference).
27 Financial Data Schedule.
c. Reports on Form 8-K
None.
33
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Act of
1934, the Registrant has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.
CORPORATE OFFICE PROPERTIES TRUST
Date: August 4, 2000 By: /s/ RANDALL M. GRIFFIN
---------------------------------------------
Randall M. Griffin
President and Chief Operating Officer
Date: August 4, 2000 By: /s/ ROGER A. WAESCHE, JR.
---------------------------------------------
Roger A. Waesche, Jr.
Senior Vice President and Chief Financial
Officer
