<PAGE>
================================================================================
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark one)
|X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES AND
EXCHANGE ACT OF 1934
For the quarterly period ended September 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 November 9, 2000, 20,573,136 shares of the Company's Common Shares of
Beneficial Interest, $0.01 par value, were issued.
================================================================================
<PAGE>
TABLE OF CONTENTS
FORM 10-Q
PAGE
----
PART I: FINANCIAL INFORMATION
Item 1: Financial Statements:
Consolidated Balance Sheets as of September 30, 2000
(unaudited) and December 31, 1999 3
Consolidated Statements of Operations for the three
and nine months ended September 30, 2000 and 1999 (unaudited) 4
Consolidated Statements of Cash Flows for the nine months
ended September 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 17
Item 3: Quantitative and Qualitative Disclosures About Market Risk 26
PART II: OTHER INFORMATION
Item 1: Legal Proceedings 26
Item 2: Changes in Securities 27
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
2
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements
Corporate Office Properties Trust and Subsidiaries
Consolidated Balance Sheets
(Dollars in thousands)
<TABLE>
<CAPTION>
September 30, December 31,
2000 1999
------------- ------------
(unaudited)
<S> <C> <C>
Assets
Investment in real estate:
Operating properties, net $ 692,496 $ 662,664
Projects under construction 43,467 33,825
----------------------------------------------------------------------------------------------------------------------------------
Total commercial real estate properties, net 735,963 696,489
Investments in and advances to unconsolidated real estate joint ventures 8,606 --
----------------------------------------------------------------------------------------------------------------------------------
Investment in real estate 744,569 696,489
Cash and cash equivalents 3,259 2,376
Restricted cash 2,007 2,041
Accounts receivable, net 3,571 1,928
Investment in and advances to other unconsolidated entities 4,074 3,661
Deferred rent receivable 7,882 4,634
Deferred charges, net 12,667 7,525
Prepaid and other assets 6,836 2,380
----------------------------------------------------------------------------------------------------------------------------------
Total assets $ 784,865 $ 721,034
==================================================================================================================================
Liabilities and shareholders' equity
Liabilities:
Mortgage and other loans payable $ 465,696 $ 399,627
Accounts payable and accrued expenses 6,435 6,597
Rents received in advance and security deposits 5,351 3,776
Dividends and distributions payable 7,090 6,298
----------------------------------------------------------------------------------------------------------------------------------
Total liabilities 484,572 416,298
----------------------------------------------------------------------------------------------------------------------------------
Minority interests:
Preferred Units in the Operating Partnership 24,367 24,367
Common Units in the Operating Partnership 81,402 88,170
Other consolidated partnerships 115 98
----------------------------------------------------------------------------------------------------------------------------------
Total minority interests 105,884 112,635
----------------------------------------------------------------------------------------------------------------------------------
Commitments and contingencies (Note 13)
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 (shares issued of 1 at September 30, 2000 and
984,308 with an aggregate liquidation
preference of $24,608 at December 31, 1999) -- 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 20,573,136 at September 30, 2000 and
17,646,046 at December 31, 1999) 206 176
Additional paid-in capital 209,384 202,867
Accumulated deficit (10,379) (7,547)
Value of unearned restricted Common Share grants (3,399) (3,417)
Treasury Shares, at cost (166,600 shares at September 30, 2000) (1,415) --
----------------------------------------------------------------------------------------------------------------------------------
Total shareholders' equity 194,409 192,101
----------------------------------------------------------------------------------------------------------------------------------
Total liabilities and shareholders' equity $ 784,865 $ 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 nine months ended
September 30, September 30,
-------------------------------------------------------
2000 1999 2000 1999
-------------------------------------------------------
<S> <C> <C> <C> <C>
Revenues
Rental revenue $ 23,980 $ 17,471 $ 69,040 $ 50,879
Tenant recoveries and other revenue 4,059 2,989 11,277 7,646
----------------------------------------------------------------------------------------------------------------
Total revenues 28,039 20,460 80,317 58,525
----------------------------------------------------------------------------------------------------------------
Expenses
Property operating 8,050 6,051 23,095 16,439
General and administrative 1,319 631 3,827 2,316
Interest 7,850 4,990 22,188 15,409
Amortization of deferred financing costs 349 168 966 715
Depreciation and other amortization 4,295 3,087 12,475 8,766
----------------------------------------------------------------------------------------------------------------
Total expenses 21,863 14,927 62,551 43,645
----------------------------------------------------------------------------------------------------------------
Income before equity in (loss) income of Service
Companies, gain on sales of rental properties,
minority interests and extraordinary item 6,176 5,533 17,766 14,880
Equity in (loss) income of Service Companies (111) (43) (112) 283
----------------------------------------------------------------------------------------------------------------
Income before gain on sales of rental properties,
minority interests and
extraordinary item 6,065 5,490 17,654 15,163
Gain on sales of rental properties -- -- 57 1,140
----------------------------------------------------------------------------------------------------------------
Income before minority interests and extraordinary item 6,065 5,490 17,711 16,303
Minority interests
Common Units in the Operating Partnership (1,693) (591) (4,828) (1,757)
Preferred Units in the Operating Partnership (572) (853) (1,668) (2,559)
Other consolidated partnership (6) -- (17) --
----------------------------------------------------------------------------------------------------------------
Income before extraordinary item 3,794 4,046 11,198 11,987
Extraordinary item - loss on early retirement of debt (109) -- (151) (838)
----------------------------------------------------------------------------------------------------------------
Net income 3,685 4,046 11,047 11,149
Preferred Share dividends (781) (1,060) (3,020) (1,736)
----------------------------------------------------------------------------------------------------------------
Net income available to Common Shareholders $ 2,904 $ 2,986 $ 8,027 $ 9,413
================================================================================================================
Basic Earnings per Common Share
Income before extraordinary item $ 0.15 $ 0.18 $ 0.44 $ 0.61
Extraordinary item -- -- -- (0.05)
----------------------------------------------------------------------------------------------------------------
Net income $ 0.15 $ 0.18 $ 0.44 $ 0.56
================================================================================================================
Diluted Earnings per Common Share
Income before extraordinary item $ 0.15 $ 0.16 $ 0.43 $ 0.53
Extraordinary item (0.01) -- (0.01) (0.04)
----------------------------------------------------------------------------------------------------------------
Net income $ 0.14 $ 0.16 $ 0.42 $ 0.49
================================================================================================================
</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 nine months ended September 30,
---------------------------------------
2000 1999
----------------- ------------------
<S> <C> <C>
Cash flows from operating activities
Net income $ 11,047 $ 11,149
Adjustments to reconcile net income to net cash
provided by operating activities:
Minority interests 6,513 4,316
Depreciation and other amortization 12,475 8,766
Amortization of deferred financing costs 966 715
Equity in loss (income) of Service Companies 112 (283)
Gain on sales of rental properties (57) (1,140)
Extraordinary item - loss on early retirement of debt 151 838
Increase in deferred rent receivable (3,311) (2,135)
Increase in accounts receivable, restricted cash and
prepaid and other assets (3,394) (1,331)
Increase in accounts payable, accrued expenses, rents
received in advance and security deposits 2,532 1,204
-------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 27,034 22,099
-------------------------------------------------------------------------------------------------------
Cash flows from investing activities
Purchases of and additions to commercial real estate properties (49,120) (70,618)
Proceeds from sales of rental properties 602 29,970
Investments in and advances to unconsolidated real estate
joint ventures (8,606) (37,199)
Investments in and advances (to) from other unconsolidated
entities (525) 937
Leasing commissions paid (5,730) (1,859)
Increase in prepaid and other assets (2,671) (201)
-------------------------------------------------------------------------------------------------------
Net cash used in investing activities (66,050) (78,970)
-------------------------------------------------------------------------------------------------------
Cash flows from financing activities
Deferred financing costs paid (1,212) (1,983)
Proceeds from mortgage and other loans payable 95,818 170,991
Repayments of mortgage and other loans payable (33,496) (130,145)
Increase in other liabilities -- 1,393
Purchase of Treasury Shares (1,415) --
Net proceeds from issuance of Preferred Shares -- 29,450
Net proceeds from issuance of Common Shares 265 --
Net proceeds from issuance of share options 171 --
Dividends paid (13,493) (10,078)
Distributions paid (6,739) (4,149)
-------------------------------------------------------------------------------------------------------
Net cash provided by financing activities 39,899 55,479
-------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash and cash equivalents 883 (1,392)
Cash and cash equivalents
Beginning of period 2,376 2,349
-------------------------------------------------------------------------------------------------------
End of period $ 3,259 $ 957
=======================================================================================================
</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 properties 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 September 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 September 30, 2000
follows:
% Owned by
COPT
----------
Common Units 66%
Series A Preferred Units 100%
Series B Preferred Units 100%
Series C Preferred Units 0%
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 three different accounting methods to report our investments in
entities: the consolidation method, the equity method and the cost 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:
o COPT,
o the Operating Partnership and its subsidiary partnerships and LLCs, and
o Corporate Office Properties Holdings, Inc. (we own 100%).
6
<PAGE>
Equity Method
We use the equity method of accounting when we own an interest in an
entity and can exert significant influence over the entity's operations but
cannot control the entity's operations. Under the equity method, we report:
o our ownership interest in the entity's capital as an investment on our
Consolidated Balance Sheets and
o our percentage share of the earnings or losses from the entity in our
Consolidated Statements of Operations.
Cost Method
We use the cost method of accounting when we own an interest in an entity
and cannot exert significant influence over the entity's operations. Under the
cost method, we report:
o the cost of our investment in the entity as an investment on our
Consolidated Balance Sheets and
o distributions to us of the entity's earnings 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:
o our reported amounts of assets and liabilities in our Consolidated Balance
Sheets at the dates of the financial statements,
o our disclosure of contingent assets and liabilities at the dates of the
financial statements, and
o 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.
7
<PAGE>
Our Operating Partnership issued 974,662 Series C Preferred Units in
connection with a property acquisition in December 1999. Our Operating
Partnership issued 42,000 additional Series C Preferred Units on July 1, 2000 in
connection with the cancellation of ten-year detachable warrants exercisable for
an additional number of Common Units. Owners of these units are entitled to a
priority annual return equal to 9% of their liquidation preference through
December 20, 2009 , 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.
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.
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:
o 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
o 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 Nine months ended
September 30, September 30,
-------------------- --------------------
Numerator: 2000 1999 2000 1999
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Net income available to Common Shareholders $ 2,904 $ 2,986 $ 8,027 $ 9,413
Add: Extraordinary loss 109 -- 151 838
-------- -------- -------- --------
Numerator for basic earnings per share
before extraordinary item 3,013 2,986 8,178 10,251
Add: Minority interests - Initial Preferred
Units -- 853 -- 2,559
-------- -------- -------- --------
Numerator for diluted earnings per share
before extraordinary item 3,013 3,839 8,178 12,810
Less: Extraordinary loss (109) -- (151) (838)
-------- -------- -------- --------
Numerator for diluted earnings per share for net
income $ 2,904 $ 3,839 $ 8,027 $ 11,972
======== ======== ======== ========
Denominator (all weighted averages):
Common Shares - basic 19,934 17,037 18,439 16,881
Assumed conversion of share options 239 18 146 9
Assumed conversion of Common Unit warrants -- -- 316 --
Conversion of Initial Preferred Units -- 7,500 -- 7,500
-------- -------- -------- --------
Denominator for diluted earnings per share 20,173 24,555 18,901 24,390
======== ======== ======== ========
</TABLE>
Our diluted EPS computation for the three months ended September 30, 2000
only assumes conversion of share options 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 September 30, 1999 only assumes
conversion of share options and
8
<PAGE>
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 nine months ended September 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 computation for the nine
months ended September 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.
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.
Recent Accounting Pronouncements
In June 1998, the Financial Accounting Standards Board ("FASB") issued
SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities."
SFAS No. 133 and related amendments establish accounting and reporting standards
for derivative financial instruments and for hedging activities. It requires
that an entity recognize all derivatives as assets or liabilities in the balance
sheet and measure those instruments at fair value. Changes in the fair value of
derivatives are recorded each period in current earnings or other comprehensive
income depending on whether a derivative is designated as part of a hedge
transaction and, if it is, the type of hedge transaction. We plan to adopt these
standards beginning January 1, 2001. As of September 30, 2000, we were
evaluating the impact of the adoption of these standards on our financial
position and results of operations.
Effective July 1, 2000, the FASB issued FIN No. 44, "Accounting for
Certain Transactions Involving Stock Compensation." FIN No. 44 clarifies the
application of the Accounting Principle Board's Opinion No. 25, "Accounting for
Stock Issued to Employees" for certain issues, including the definition of the
term "employee", the criteria for determining whether a plan qualifies as a
noncompensatory plan, the accounting consequence of various modifications to
previous issuances and the accounting for an exchange of stock compensation
awards in a business compensation. We adopted FIN No. 44 effective July 1, 2000.
The primary impact of our adoption of this Interpretation is that we and the
Service Companies recognize additional expenses from share options issued to
employees for the following:
o the share price appreciation and future vesting relating to share options
that were repriced in 1999, and
o the issuance of share options to employees of CRM and MGK (all defined in
Note 7).
Our adoption of this Interpretation resulted in a $65 increase in general and
administrative expenses and $31 decrease in our equity in income of the Service
Companies during the three months and nine months ended September 30, 2000.
Note 4 Commercial Real Estate Properties
Operating properties consisted of the following:
September 30, December 31,
2000 1999
------------- ------------
Land $ 136,723 $ 135,641
Buildings and improvements 585,067 544,967
Furniture, fixtures and equipment 345 335
--------- ---------
722,135 680,943
Less: accumulated depreciation (29,639) (18,279)
--------- ---------
$ 692,496 $ 662,664
========= =========
9
<PAGE>
Projects we had under construction/development consisted of the following:
September 30, December 31,
2000 1999
------------- ------------
Land $21,888 $13,158
Construction in progress 21,579 20,667
------- -------
$43,467 $33,825
======= =======
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 nine months ended
September 30, 2000:
o a parcel of land located in Cranbury, New Jersey for $633 on March
20, 2000,
o a parcel of land located in Columbia, Maryland for $4,036 on March
29, 2000,
o a parcel of land located in Annapolis Junction, Maryland for $3,022
on May 26, 2000,
o a parcel of land located in Cranbury, New Jersey for $283 on June 5,
2000,
o a parcel of land located in Annapolis Junction, Maryland for $364 on
June 30, 2000, and
o a parcel of land located in Columbia, Maryland for $3,958 on
September 28, 2000.
All of these land parcels are contiguous to certain of our existing operating
properties.
2000 Construction/Development
During the nine months ended September 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 September 30, 2000, we also had construction underway on five new
buildings and development underway on three parcels of land.
2000 Disposition
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 Investments in and Advances to Unconsolidated Real Estate Joint Ventures
On September 28, 2000, we acquired an 80% interest in Gateway 67, LLC, a
newly organized joint venture developing a parcel of land located in Columbia,
Maryland. On September 29, 2000, we acquired a 10% interest in NBP 201, LLC, a
newly organized joint venture constructing an 118,000 square foot office
building on a parcel of land located in Annapolis Junction. We account for our
investments in these joint ventures using the equity method of accounting. Our
investments in and advances to these joint ventures at September 30, 2000
included the following:
Advances receivable $ 4,610
Equity investments 3,996
-------
Total $ 8,606
=======
Note 6 Accounts Receivable
Our accounts receivable are reported net of an allowance for bad debts of
$43 at September 30, 2000 and $10 at December 31, 1999.
10
<PAGE>
Note 7 Investment in and Advances to Other Unconsolidated Entities
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:
September 30, December 31,
2000 1999
------------- ------------
Notes receivable $2,005 $2,005
Equity investment 695 807
Advances receivable 835 849
------ ------
Total $3,535 $3,661
====== ======
On July 18, 2000, COMI acquired the remaining 25% interest in CRM.
On August 3, 2000, we acquired a 2% interest in MediTract, LLC
("MediTract"), an entity engaged in the development of an Internet based
contract imaging and management system. We account for our investment in
MediTract using the cost method of accounting. Our investment in MediTract
totaled $539 at September 30, 2000. We are committed to invest an additional
$1,077 in MediTract prior to the end of 2000.
Note 8 Deferred Charges
Deferred charges consisted of the following:
September 30, December 31,
2000 1999
------------- ------------
Deferred financing costs $ 5,741 $ 4,592
Deferred leasing costs 10,388 4,658
Deferred other 24 24
-------- --------
16,153 9,274
Accumulated amortization (3,486) (1,749)
-------- --------
Deferred charges, net $ 12,667 $ 7,525
======== ========
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. Shares
repurchased under this program are summarized below.
Repurchase Number of Cost of
Date Shares Repurchase
---------- --------- ----------
3/31/00 6,600 $ 52
4/5/00 20,000 166
6/5/00 140,000 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.
On September 28, 2000, Constellation Real Estate, Inc. ("Constellation")
converted 984,307 of our Series A Preferred Shares into 1,845,378 Common Shares.
Constellation owned 43.5% of our outstanding Common Shares at September 30,
2000.
11
<PAGE>
During the nine months ended September 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 nine
months ended September 30, 2000.
During the nine months ended September 30, 2000, we issued 21,667 Common
Shares in connection with the exercise of share options.
Note 10 Dividends and Distributions
The following summarizes our dividends/distributions for the nine months
ended September 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
Third Quarter 2000 September 30, 2000 October 16, 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
Third Quarter 2000 September 30, 2000 October 16, 2000 $ 0.20 $ 3,989
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
Third Quarter 2000 September 30, 2000 October 16, 2000 $ 0.5625 $ 572
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
Third Quarter 2000 September 30, 2000 October 16, 2000 $ 0.20 $ 1,878
</TABLE>
12
<PAGE>
Note 11 Supplemental Information to Statements of Cash Flows
<TABLE>
<CAPTION>
For the nine months ended
September 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 $ 6,179 $ 9,901
-------- --------
(Decrease) increase in accrued capital improvements $ (1,119) $ 911
-------- --------
Dividends/distributions payable $ 7,090 $ 5,732
-------- --------
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 $ 2,408 $ (348)
-------- --------
Decrease in minority interests and increase in
shareholders' equity in connection with conversion of
Common Units into Common Shares $ 8,527 $ 3,141
-------- --------
Increase in minority interests resulting from issuance of
Common Units in connection with property acquisitions $ -- $ 3,942
-------- --------
Note receivable balance applied to cost of property
acquisition $ -- $ 1,575
-------- --------
</TABLE>
13
<PAGE>
Note 12 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/
Washington Greater Northern/ Greater
Corridor Philadelphia Central New Harrisburg
Office Office Jersey Office Office Other Total
----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Three months ended September 30, 2000:
Revenues $ 17,197 $ 2,506 $ 5,326 $ 2,228 $ 782 $ 28,039
Property operating expenses 5,535 24 1,868 544 79 8,050
------------ ------------ ------------ ------------ ------------ ------------
Income from operations $ 11,662 $ 2,482 $ 3,458 $ 1,684 $ 703 $ 19,989
============ ============ ============ ============ ============ ============
Commercial real estate property
expenditures $ 8,074 $ 140 $ 3,559 $ 134 $ (14) $ 11,893
============ ============ ============ ============ ============ ============
Three months ended September 30, 1999:
Revenues $ 11,573 $ 2,506 $ 4,735 $ 841 $ 805 $ 20,460
Property operating expenses 3,818 22 1,914 262 35 6,051
------------ ------------ ------------ ------------ ------------ ------------
Income from operations $ 7,755 $ 2,484 $ 2,821 $ 579 $ 770 $ 14,409
============ ============ ============ ============ ============ ============
Commercial real estate property
expenditures $ 8,755 $ 17 $ 4,944 $ 6,049 $ 420 $ 20,185
============ ============ ============ ============ ============ ============
Nine months ended September 30, 2000:
Revenues $ 49,324 $ 7,519 $ 15,000 $ 6,898 $ 1,576 $ 80,317
Property operating expenses 15,452 78 5,608 1,757 200 23,095
------------ ------------ ------------ ------------ ------------ ------------
Income from operations $ 33,872 $ 7,441 $ 9,392 $ 5,141 $ 1,376 $ 57,222
============ ============ ============ ============ ============ ============
Commercial real estate property
expenditures $ 44,333 $ 217 $ 8,708 $ 860 $ 62 $ 54,180
============ ============ ============ ============ ============ ============
Segment assets at September 30, 2000 $ 455,611 $ 106,566 $ 120,946 $ 71,213 $ 30,529 $ 784,865
============ ============ ============ ============ ============ ============
Nine months ended September 30, 1999:
Revenues $ 33,307 $ 7,519 $ 12,898 $ 2,363 $ 2,438 $ 58,525
Property operating expenses 10,345 66 4,961 749 318 16,439
------------ ------------ ------------ ------------ ------------ ------------
Income from operations $ 22,962 $ 7,453 $ 7,937 $ 1,614 $ 2,120 $ 42,086
============ ============ ============ ============ ============ ============
Commercial real estate property
expenditures $ 67,154 $ 17 $ 12,887 $ 6,182 $ 707 $ 86,947
============ ============ ============ ============ ============ ============
Segment assets at September 30, 1999 $ 330,690 $ 107,887 $ 110,422 $ 29,657 $ 54,465 $ 633,121
============ ============ ============ ============ ============ ============
</TABLE>
14
<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 Nine Months Ended
September 30, September 30,
-------------------- --------------------
2000 1999 2000 1999
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Income from operations for reportable segments $ 19,989 $ 14,409 $ 57,222 $ 42,086
Add:
Equity in (loss) income of Service Companies (111) (43) (112) 283
Gain on sales of rental properties -- -- 57 1,140
Less:
General and administrative (1,319) (631) (3,827) (2,316)
Interest (7,850) (4,990) (22,188) (15,409)
Amortization of deferred financing costs (349) (168) (966) (715)
Depreciation and other amortization (4,295) (3,087) (12,475) (8,766)
Minority interests (2,271) (1,444) (6,513) (4,316)
-------- -------- -------- --------
Income before extraordinary item $ 3,794 $ 4,046 $ 11,198 $ 11,987
======== ======== ======== ========
</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 13 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.
Note 14 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 September 30, 2000.
15
<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.
Nine months ended
September 30,
------------------
2000 1999
--------- -------
Pro forma total revenues $80,533 $71,401
======= =======
Pro forma net income available to Common Shareholders $ 7,997 $ 9,394
======= =======
Pro forma earnings per Common Share
Basic $ 0.43 $ 0.56
======= =======
Diluted $ 0.43 $ 0.49
======= =======
16
<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 nine months ended September 30, 2000. This
section includes discussions on:
o why various components of our Consolidated Statements of Operations
changed for the three and nine months ended September 30, 2000 compared to
the same periods in 1999,
o what our primary sources and uses of cash were in the nine months ended
September 30, 2000,
o how we raised cash for acquisitions and other capital expenditures during
the nine months ended September 30, 2000,
o how we intend to generate cash for future capital expenditures, and
o 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.
17
<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 September 30, Nine Months Ended September 30,
--------------------------------------- ----------------------------------------
2000 1999 Variance % Change 2000 1999 Variance % Change
------- ------- ------ -------- ------- ------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues
Rental revenue $23,980 $17,471 $6,509 37% $69,040 $50,879 $18,161 36%
Tenant recoveries and other revenue 4,059 2,989 1,070 36% 11,277 7,646 3,631 47%
------- ------- ------ ------- ------- -------
Total revenues 28,039 20,460 7,579 37% 80,317 58,525 21,792 37%
------- ------- ------ ------- ------- -------
Expenses
Property operating 8,050 6,051 1,999 33% 23,095 16,439 6,656 40%
General and administrative 1,319 631 688 109% 3,827 2,316 1,511 65%
Interest and amortization of deferred
financing costs 8,199 5,158 3,041 59% 23,154 16,124 7,030 44%
Depreciation and other amortization 4,295 3,087 1,208 39% 12,475 8,766 3,709 42%
------- ------- ------ ------- ------- -------
Total expenses 21,863 14,927 6,936 46% 62,551 43,645 18,906 43%
------- ------- ------ ------- ------- -------
Income before equity in (loss) income of
Service Companies, gain on sales of
rental properties, minority interests
and extraordinary item 6,176 5,533 643 12% 17,766 14,880 2,886 19%
Equity in (loss) income of Service Companies (111) (43) (68) 158% (112) 283 (395) (140%)
Gain on sales of rental properties -- -- -- N/A 57 1,140 (1,083) (95%)
------- ------- ------ ------- ------- -------
Income before minority interests and
extraordinary item 6,065 5,490 575 10% 17,711 16,303 1,408 9%
Minority interests (2,271) (1,444) (827) 57% (6,513) (4,316) (2,197) 51%
Extraordinary item - loss on early retirement
of debt (109) -- (109) N/A (151) (838) 687 (82%)
------- ------- ------ ------- ------- -------
Net income 3,685 4,046 (361) (9%) 11,047 11,149 (102) (1%)
Preferred Share dividends (781) (1,060) 279 (26%) (3,020) (1,736) (1,284) 74%
------- ------- ------ ------- ------- -------
Net income available to Common Shareholders $ 2,904 $ 2,986 (82) (3%) $ 8,027 $ 9,413 $(1,386) (15%)
======= ======= ====== ======= ======= =======
Basic earnings per Common Share
Income before extraordinary item $ 0.15 $ 0.18 $(0.03) (17%) $ 0.44 $ 0.61 $ (0.17) (28%)
Net income $ 0.15 $ 0.18 $(0.03) (17%) $ 0.44 $ 0.56 $ (0.12) (21%)
Diluted earnings per Common Share
Income before extraordinary item $ 0.15 $ 0.16 $(0.01) (6%) $ 0.43 $ 0.53 $ (0.10) (19%)
Net income $ 0.14 $ 0.16 $(0.02) (13%) $ 0.42 $ 0.49 $ (0.07) (14%)
</TABLE>
18
<PAGE>
Comparison of the three months ended September 30, 2000 and 1999
Our total revenues increased $7.6 million or 37%, of which $6.5 million
was generated by rental revenue and $1.1 million by tenant recoveries and other
revenue. Included in this change is the following:
o $6.9 million increase attributable to 17 properties acquired and
five newly-constructed properties placed in service since July 1,
1999.
o $733,000 increase attributable to 58 office properties owned
throughout both reporting periods due mostly to increases in rental
rates on renewed space, additional lease termination revenue and
steady occupancy.
o $132,000 decrease attributable to properties sold since July 1,
1999.
Our total expenses increased $6.9 million or 46% 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 $2.0 million or 33%. Included in
this change is the following:
o $1.9 million increase attributable to 17 properties acquired and
five newly-constructed properties placed in service since July 1,
1999.
o $115,000 increase attributable to 58 office properties owned
throughout both reporting periods.
Our interest expense and amortization of deferred financing costs
increased $3.0 million or 59% due to a 46% increase in our average outstanding
debt balance resulting from our 1999 and 2000 acquisitions and construction
activity and an increase in interest rates on our variable rate and refinanced
debt. Our depreciation and other amortization expense increased $1.2 million or
39%, $1.1 million of which is attributable to 17 properties acquired and five
newly-constructed properties placed in service since July 1, 1999. Our general
and administrative expenses increased $688,000 or 109% due mostly to our
responsibility for an increased percentage of COMI's personnel and overhead
related expenses in the current period.
As a result of the above factors, income before minority interests and
extraordinary item increased by $575,000 or 10%. 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 $827,000 or 57% 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 $109,000 increase in
extraordinary losses collectively resulted in a $361,000 decrease in net income.
There was a $279,000 decrease in Preferred Share dividends resulting mostly from
the absence of dividends on the Series A Preferred Share converted into Common
Shares in September 2000 . As a result of all of the above, net income available
to Common Shareholders decreased $82,000 or 3%.
Comparison of the nine months ended September 30, 2000 and 1999
Our total revenues increased $21.8 million or 37%, of which $18.2 million
was generated by rental revenue and $3.6 million by tenant recoveries and other
revenue. Included in this change is the following:
o $19.4 million increase attributable to 29 properties acquired and
five newly-constructed properties placed in service since January 1,
1999.
o $2.7 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.
o $885,000 decrease attributable to properties sold since January 1,
1999.
19
<PAGE>
Our total expenses increased $18.9 million or 43% 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 $6.7 million or 40%. Included in
this change is the following:
o $5.4 million increase attributable to 29 properties acquired and
five newly-constructed properties placed in service since January 1,
1999.
o $1.2 million increase attributable to 46 office properties owned
throughout both reporting periods, $540,000 of which is due to
increased snow removal costs.
o $152,000 decrease attributable to properties sold since January 1,
1999.
Our interest expense and amortization of deferred financing costs
increased $7.0 million or 44% due to a 41% increase in our average outstanding
debt balance resulting from our 1999 and 2000 acquisitions and construction
activity and an increase in interest rates on our variable rate and refinanced
debt. Our depreciation and other amortization expense increased $3.7 million or
42%, $3.1 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 $1.5 million or 65% due mostly to
our responsibility for an increased percentage of COMI's personnel and overhead
related expenses in the current period.
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.
As a result of the above factors, income before minority interests and
extraordinary item increased by $1.4 million or 9%. Our income allocation to
minority interests increased $2.2 million or 51% 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 $687,000 decrease in
extraordinary losses on early retirement of debt collectively resulted in a
$102,000 decrease in net income. There was a $1.3 million increase in Preferred
Share dividends resulting mostly from the Series B Preferred Share issuance in
July 1999, offset somewhat by the absence of dividends on the Series A Preferred
Shares converted into Common Shares in September 2000. As a result of all of the
above, net income available to Common Shareholders decreased $1.4 million or
15%.
20
<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 use cash provided by operations 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 generally computed based on 65%
of the appraised value of properties pledged as collateral. As of November 3,
2000, the maximum amount available under our Revolving Credit Facility was $99.4
million, of which $8.1 was unused. As of November 3, 2000, the maximum amount
available under the Prudential Credit Facility was $21.6 million all of which
was borrowed, with the proceeds being used primarily to refinance existing debt.
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 September 30, 2000, 66% of our mortgage and other loans payable
balance carried fixed interest rates.
21
<PAGE>
Mortgage and other loans payable at September 30, 2000 consisted of the
following (dollars in thousands):
<TABLE>
<S> <C>
Deutsche Banc Alex. Brown, Term Credit Facility, 7.50%, maturing October 2001 (1) $100,000
Deutsche Banc Alex. Brown, Revolving Credit Facility, LIBOR + 1.75%, maturing May 2001 97,285
Teachers Insurance and Annuity Association of America, 6.89%, maturing November 2008 82,525
Teachers Insurance and Annuity Association of America, 7.72%, maturing October 2006 59,250
Mutual of New York Life Insurance Company, 7.79%, maturing August 2004 27,471
Transamerica Life Insurance and Annuity Company, 8.3%, maturing October 2005 17,650
Bank of America, LIBOR + 1.75%, maturing December 2000 16,576
Allfirst Bank, LIBOR + 1.75%, maturing May 2002 12,069
Allfirst Bank, LIBOR + 1.75%, maturing October 2001(2) 8,831
Teachers Insurance and Annuity Association of America, 8.35%, maturing October 2006 8,000
Bank of America, LIBOR + 1.75%, maturing March 2002 (3) 6,597
Aegon USA Realty Advisors, Inc., 8.29%, maturing May 2007 6,090
Prudential Securities Credit Corp., LIBOR + 1.75%, maturing June 2001 4,761
Mellon Bank, yield on 5-year Treasury Securities + 2%, maturing August 2005 (4) 4,143
Summit Bank, LIBOR + 1.75%, maturing February 2001 (5) 4,048
Howard Research & Development Corporation, 8%, maturing December 2000 3,101
Allfirst Bank, LIBOR + 1.75%, maturing May 2002 (6) 3,009
Provident Bank of Maryland, LIBOR + 1.75%, maturing March 2001 2,763
Seller loan, 8.0%, maturing May 2007 1,527
--------
$465,696
========
</TABLE>
(1) May be extended for a one-year period, 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 $12,375. Loan may be extended
for a one-year period, subject to certain conditions.
(3) Construction loan with a total commitment of $13,440. Loan may be extended
for a one-year period, subject to certain conditions.
(4) Construction loan with a total commitment of $4,549.
(5) Construction loan with a total commitment of $6,900. Loan may be extended
for a two-year period, subject to certain conditions.
(6) Construction loan with a total commitment of $9,325
As of November 3, 2000, we had $8.4 million in mortgage and other loans
payable maturing in 2000. 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.
We are committed to investing an additional $1.1 million in MediTract
during 2000. We have no other material contractual obligations as of September
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.
22
<PAGE>
Investing and financing activities for the nine months ended September 30, 2000:
During the nine months ended September 30, 2000, we acquired a 74,513
square foot operating property and six parcels of land for an aggregate
acquisition cost of $19.8 million. These acquisitions were financed by:
o using $10.8 million in proceeds under our Revolving Credit Facility,
o assuming $6.2 million in mortgage and other loans, and
o using cash reserves for the balance.
During the nine months ended September 30, 2000, we completed the
construction of three office buildings totaling 243,087 square feet. Costs
incurred on these buildings through September 30, 2000 totaled $30.6 million. We
have $19.3 million in construction loan facilities for two of these buildings of
which $12.9 million was borrowed through September 30, 2000. We borrowed $6.5
million for the other building under a construction loan facility that was
subsequently refinanced. The balance of the costs was funded primarily using
proceeds from the Revolving Credit Facility and cash from operations.
As of September 30, 2000, we had construction activities underway on five
new buildings totaling 441,000 square feet that were 38% pre-leased. Estimated
costs upon completion for these projects total approximately $70.9 million. We
have construction loan facilities in place totaling $34.6 million to finance the
construction of three of these projects. Borrowings under these facilities
totaled $9.6 million at September 30, 2000 all of which was drawn upon during
the nine months then ended. We also borrowed under the Revolving Credit Facility
to finance these activities.
As of September 30, 2000, we also had development activities underway on
three parcels of land.
During the nine months ended September 30, 2000, we invested $8.6 million
into two unconsolidated real estate joint ventures using $3.5 million in
proceeds under our Revolving Credit Facility and cash reserves for the balance.
During the nine months ended September 30, 2000, we sold a retail property
located in Minot, North Dakota 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.
During the nine months ended September 30, 2000, we received $59.3 million
in borrowings from mortgages and other loans payable other than our Revolving
Credit Facility, the proceeds of which were used as follows:
o $24.1 million to repay other loans,
o $22.7 million to finance construction activities,
o $6.2 million to finance acquisitions, and
o the balance applied to cash reserves.
Statement of Cash Flows
We generated net cash flow from operating activities of $27.0 million for
the nine months ended September 30, 2000, an increase of $4.9 million from the
nine months ended September 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
nine months ended September 30, 2000 decreased $12.9 million from the nine
months ended September 30, 1999 due mostly to a $21.5 million decrease in cash
outlays associated with purchases of and additions to commercial real estate
properties and a $28.6 million decrease in investments in and advances to real
estate joint ventures offset by a $29.4 million decrease in proceeds from rental
property sales. Our net cash flow provided by financing activities for the nine
months ended September 30, 2000 decreased $15.6 million from the nine months
ended September 30, 1999 due mostly to a $75.2 million decrease in proceeds from
mortgage and other loans payable and a $29.5 million
23
<PAGE>
decrease in proceeds from the issuance of Preferred Shares offset by a $96.6
million decrease in repayments of 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 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 nine months ended
September 30, 2000 and 1999 are summarized in the following table:
24
<PAGE>
<TABLE>
<CAPTION>
(Dollars and shares for this table are in thousands)
----------------------------------------------------
For the three months For the nine months
ended September 30, ended September 30,
------------------------ ------------------------
2000 1999 2000 1999
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Income before minority interests and
extraordinary item ............................ $ 6,065 $ 5,490 $ 17,711 $ 16,303
Add: Real estate related depreciation
and amortization .............................. 4,272 3,073 12,406 8,719
Less: Preferred Unit distributions .............. (572) (853) (1,668) (2,559)
Less: Preferred Share dividends ................. (781) (1,060) (3,020) (1,736)
Less: Minority interest in other
consolidated partnership ...................... (6) -- (17) --
Less: Gain on sales of rental properties ........ -- -- (57) (1,140)
-------- -------- -------- --------
Funds from operations ........................... 8,978 6,650 25,355 19,587
Add: Preferred Unit distributions ............... 572 853 1,668 2,559
Add: Convertible Preferred Share dividends ...... -- 339 677 1,015
-------- -------- -------- --------
Funds from operations assuming conversion
of share options, Common Unit warrants,
Preferred Units and Preferred Shares .......... 9,550 7,842 27,700 23,161
Less: Preferred Unit distributions .............. (572) -- (1,668) --
Less: Straight line rent adjustments ............ (1,872) (634) (3,307) (2,134)
Less: Recurring capital improvements ............ (415) (643) (2,067) (1,790)
-------- -------- -------- --------
Adjusted funds from operations assuming
conversion of share options, Common
Unit warrants, Preferred Units and
Preferred Shares (1) .......................... $ 6,691 $ 6,565 $ 20,658 $ 19,237
======== ======== ======== ========
Weighted average Common Shares .................. 19,934 17,037 18,439 16,881
Conversion of weighted average Common Units ..... 9,388 3,068 9,740 3,012
-------- -------- -------- --------
Weighted average Common Shares/Units ............ 29,322 20,105 28,179 19,893
Assumed conversion of share options ............. 239 18 146 9
Assumed conversion of Common Unit warrants ...... -- -- 316 --
Conversion of weighted average convertible
Preferred Shares .............................. -- 1,845 1,226 1,845
Conversion of weighted average Preferred Units .. 2,421 7,500 2,355 7,500
-------- -------- -------- --------
Weighted average Common Shares/Units for funds
from operations assuming conversion of share
options, Common Unit warrants, Preferred
Units and Preferred Shares .................... 31,982 29,468 32,222 29,247
======== ======== ======== ========
Weighted average Common Shares/Units for adjusted
funds from operations assuming conversion of
share options, Common Unit warrants, Preferred
Units and Preferred Shares (1) ................ 29,561 29,468 29,867 29,247
======== ======== ======== ========
</TABLE>
(1) Preferred Units are not included in our computation of AFFO for the
periods ended September 30, 2000.
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
25
<PAGE>
obligated to pay their share of operating expenses, thereby reducing exposure to
increases in such costs resulting from inflation.
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 September 30, 2000 (dollars in thousands):
<TABLE>
<CAPTION>
For the Year Ended December 31,
-------------------------------------------------------
2000 2001(1)(2)(3) 2002(4) 2003 2004 Thereafter Total FMV
---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Long term debt:
Fixed rate $3,882 $103,347 $ 3,605 $3,883 $29,726 $161,172 $305,615 $299,747
Average interest rate 7.54% 7.22% 7.18% 7.17% 7.19% 7.04%
Variable rate $ 152 $134,550 $21,318 $ 41 $ 45 $ 3,975 $160,081 $160,081
Average interest rate 8.36% 8.36% 8.17% 8.04% 8.04% 8.04%
</TABLE>
(1) Includes $100.0 million maturity in October that may be extended for a
one-year period, subject to certain conditions.
(2) Includes $8.8 million for a construction loan facility maturing that may
be extended for a one-year period, subject to certain conditions.
(3) Includes $4.0 million for a construction loan facility maturing that may
be extended for a two-year period, subject to certain conditions.
(4) Includes $6.6 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 September 30, 2000 was $22,000.
On September 13, 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% per annum on a notional amount of $50.0 million through October 12, 2001.
The fair market value of this agreement as of September 30, 2000 was $20,000.
Based on our variable rate debt balances during the nine months ended
September 30, 2000, our interest expense would have increased $1.0 million 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).
26
<PAGE>
Item 2. Changes in Securities
a. N/A
b. N/A
c. On September 28, 2000, Constellation Real Estate, Inc. converted 984,307
Series A Preferred Shares into 1,845,378 Common Shares. The issuance of
these Common Shares was exempt from registration under Section 3(a)(9) of
the Securities Act of 1933, as amended.
d. N/A
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
27
<PAGE>
EXHIBIT
NO. DESCRIPTION
------- ----------------------------------------------------------------
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
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).
28
<PAGE>
EXHIBIT
NO. DESCRIPTION
------- ----------------------------------------------------------------
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).
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).
29
<PAGE>
EXHIBIT
NO. DESCRIPTION
------- ----------------------------------------------------------------
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 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 Bylaws 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).
4.4.3 Second Amendment to Second Amended and Restated Limited
Partnership Agreement of the Operating Partnership, dated
December 21, 1999 (filed with the Company's Post Effective
Amendment No. 2 to Form S-3 dated November 1, 2000 (Registration
Statement No. 333-71807) and incorporated herein by reference).
4.4.4 Third Amendment to Second Amended and Restated Limited
Partnership Agreement of the Operating Partnership, dated
September 29, 2000 (filed with the Company's Post Effective
Amendment No. 2 to Form S-3 dated November 1, 2000 (Registration
Statement No. 333-71807) and incorporated herein by reference).
30
<PAGE>
EXHIBIT
NO. DESCRIPTION
------- ----------------------------------------------------------------
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).
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
31
<PAGE>
EXHIBIT
NO. DESCRIPTION
------- ----------------------------------------------------------------
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).
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
32
<PAGE>
EXHIBIT
NO. DESCRIPTION
------- ----------------------------------------------------------------
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).
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: November 13, 2000 By: /s/ Randall M. Griffin
-------------------------------------
Randall M. Griffin
President and Chief Operating Officer
Date: November 13, 2000 By: /s/ Roger A. Waesche, Jr.
-------------------------------------
Roger A. Waesche, Jr.
Senior Vice President and Chief
Financial Officer
34
