Raises Midpoint of Full Year Guidance Another 1-Cent, Implying 7.1% Growth in FFO per Share, as Adjusted for Comparability

Stronger 3Q Results Drive Higher Full-Year Expectations

Reported EPS of $0.24 in 3Q21;

3Q FFO per Share, as Adjusted for Comparability, of $0.57 was 1-Cent Above High-End of Guidance

Same-Property Cash NOI Increase of 4.8% in the Quarter;

Increasing Midpoint of Same-Property Cash NOI Guidance for the Year

Core Portfolio 93.5% Occupied & 94.8% Leased

1.8 Million SF of Active Developments are 94% Leased

Solid Leasing Activity

Total Leasing of 1.0 Million SF in the Quarter and 2.7 Million SF for First Nine Months of 2021

Included 215,000 SF and 420,000 SF of Vacancy Leasing, Respectively

Tenant Retention of 76% in the Quarter and 75% for the First Nine Months and Changes in Cash Rents In-Line with Expectations

1.2 Million SF of Development Leasing Accomplished To-Date Surpasses 2021 Goal

Corporate Office Properties Trust ("COPT" or the "Company") (NYSE:OFC) announced results for the third quarter ended September 30, 2021.

Management Comments

Stephen E. Budorick, COPT's President & Chief Executive Officer, commented, "Our portfolio of office and data center properties that support priority missions at U.S. defense installations continues to produce strong results, and distinguishes us from other office companies. Demand for our Defense/IT Locations has driven 1.2 million square feet of development leasing to-date, which exceeds our 2021 goal. Vacancy leasing in the third quarter was a very strong 215,000 square feet--our best quarterly volume since the third quarter of 2019--and brought our total for the nine months to 420,000 square feet. Importantly, tenants are committing to lease term lengths that are at or above pre-pandemic levels. Our Development Leasing Pipeline and Activity Ratio remain robust, which leads us to expect customers to continue making long-term commitments to our Defense/IT Locations. Based on our outperformance this quarter, we are increasing the midpoint of full-year guidance for FFO per share, as adjusted for comparability, to $2.27, which is 8-cents above our original midpoint and represents 7.1% growth over 2020's elevated results."

Financial Highlights

3^rd Quarter Financial Results:

Diluted earnings (loss) per share ("EPS") was $0.24 for the quarter ended September 30, 2021 compared to ($0.29) for the third quarter of 2020.
Diluted funds from operations per share ("FFOPS"), as calculated in accordance with Nareit's definition, was $0.56 for the third quarter of 2021 compared to $0.04 for third quarter 2020.
FFOPS, as adjusted for comparability, was $0.57 for the third quarter of 2021 compared to $0.54 for the third quarter of 2020.

Operating Performance Highlights

Operating Portfolio Summary:

At September 30, 2021, the Company's core portfolio of 184 operating office and data center shell properties was 93.5% occupied and 94.8% leased.
During the quarter, the Company placed into service 466,000 square feet that were 100% leased.

Same-Property Performance:

At September 30, 2021, COPT's same-property portfolio of 159 buildings was 92.2% occupied and 93.7% leased.
For the quarter ended September 30, 2021, the Company's same-property cash NOI increased 4.8% over the prior year's comparable period.

Leasing:

Total Square Feet Leased: For the quarter ended September 30, 2021, the Company leased 1.0 million square feet, including 553,000 square feet of renewals, 274,000 square feet in development projects, and 215,000 square feet of new leases on vacant space. For the nine months ended September 30, 2021, the Company executed 2.7 million square feet of leasing, including 1.4 million square feet of renewals, 915,000 square feet in development projects, and 420,000 square feet of vacancy leasing.
Renewal Rates: During the quarter and nine months ended September 30, 2021, the Company renewed 75.7% and 74.6%, respectively, of expiring square feet.
Rent Spreads & Average Escalations on Renewing Leases: For the quarter and nine months ended September 30, 2021, cash rents on renewed space decreased 0.6% and 0.3%, respectively. For the same time periods, annual escalations on renewing leases averaged 1.7% and 2.4%, respectively.
Lease Terms: In the third quarter of 2021, lease terms averaged 3.1 years on renewing leases, 9.3 years on new leasing of vacant space, and 17.0 years on development leasing. For the first nine months, lease terms averaged 3.8 years on renewing leases, 8.6 years on vacancy leasing, and 14.1 years on development leasing.
Post-Quarter Development Leasing: In October, the Company completed two build-to-suit leases totaling 263,000 square feet with a defense contractor at Redstone Gateway. Details of those leases can be found in a separate press release issued this same date.

Investment Activity Highlights

Development Pipeline: The Company's development pipeline consists of 13 properties totaling 1.8 million square feet that are 94% leased. These projects have a total estimated cost of $585.7 million, of which $188.2 million has been incurred.

Balance Sheet and Capital Transaction Highlights

In August, the Company issued $400 million of 2.000% senior unsecured notes due 2029. The Company used net proceeds from this issuance to repay $100.0 million of its term loan facility due December 2022, retire the outstanding $89.0 million balance of a construction loan, and repay borrowings under its unsecured credit facility.
At September 30, 2021, the Company's net debt to adjusted book ratio was 39.4% and its net debt to in-place adjusted EBITDA ratio was 6.3x. As of the same date, net debt adjusted for fully-leased development to in-place adjusted EBITDA ratio was 5.9x. For the quarter ended September 30, 2021, the Company's adjusted EBITDA fixed charge coverage ratio was 4.8x.
At September 30, 2021, and including the effect of interest rate swaps, the Company's weighted average effective interest rate on its consolidated debt portfolio was 3.05% with a weighted average maturity of 5.7 years; additionally, 97.3% of the Company's debt was subject to fixed interest rates.

Associated Supplemental Presentation

Prior to the call, the Company will post a slide presentation to accompany management's prepared remarks for its third quarter 2021 conference call; the presentation can be viewed and downloaded from the ‘Latest Updates' section of COPT's Investors website: https://investors.copt.com/

2021 Guidance

Management is increasing its full-year guidance for EPS and FFOPS, per Nareit and as adjusted for comparability from the prior ranges of $0.72-$0.76, $1.73-$1.77, and $2.24-$2.28, respectively, to new ranges of $0.76-$0.78, $1.74-$1.76, and $2.26-$2.28, respectively. To account for the expected timing of repair and maintenance projects, management is lowering its prior guidance ranges for EPS and FFOPS (per Nareit and as adjusted for comparability) for the fourth quarter from $0.21-$0.23 and $0.56-$0.58, respectively, to $0.20-$0.22 and $0.55-$0.57, respectively. Reconciliations of projected EPS to projected FFOPS, in accordance with Nareit and as adjusted for comparability are as follows:

Table 1: Reconciliation of EPS to FFOPS, per Nareit and	Quarter ending		Year ending
As Adjusted for Comparability	December 31, 2021		December 31, 2021
	Low	High	Low	High

EPS	$ 0.20	$ 0.22	$ 0.76	$ 0.78
Real estate-related depreciation and amortization	0.35	0.35	1.33	1.33
Gain on sales of real estate	-	-	(0.35)	(0.35)
FFOPS, Nareit definition	0.55	0.57	1.74	1.76
Loss on early extingusishment of debt	-	-	0.52	0.52

FFOPS, as adjusted for comparability	$ 0.55	$ 0.57	$ 2.26	$ 2.28

Conference Call Information

Management will discuss third quarter 2021 results on its conference call tomorrow at 12:00 p.m. Eastern Time, details of which are listed below:

Conference Call Date: Friday, October 29, 2021

Time: 12:00 p.m. Eastern Time

Telephone Number: (within the U.S.) 855-463-9057

Telephone Number: (outside the U.S.) 661-378-9894

Passcode: 9759656

The conference call will also be available via live webcast in the ‘Latest Updates' section of COPT's Investors website: https://investors.copt.com/

Replay Information

A replay of the conference call will be immediately available via webcast on the Investors website. Additionally, a telephonic replay of this call will be available beginning at 3:00 p.m. Eastern Time on Friday, October 29, through 2:00 p.m. Eastern Time on Friday, November 12. To access the replay within the United States, please call 855-859-2056; to access it from outside the United States, please call 404-537-3406. In either case, use passcode 9759656.

Definitions

For definitions of certain terms used in this press release, please refer to the information furnished in the Company's Supplemental Information Package furnished on a Form 8-K which can be found on its website (www.copt.com). Reconciliations of non-GAAP measures to the most directly comparable GAAP measures are included in the attached tables.

About COPT

COPT is a REIT that owns, manages, leases, develops and selectively acquires office and data center properties. The majority of its portfolio is in locations that support the United States Government and its contractors, most of whom are engaged in national security, defense and information technology ("IT") related activities servicing what it believes are growing, durable, priority missions ("Defense/IT Locations"). The Company also owns a portfolio of office properties located in select urban/urban-like submarkets in the Greater Washington, DC/Baltimore region with durable Class-A office fundamentals and characteristics ("Regional Office Properties"). As of September 30, 2021, the Company derived 88% of its core portfolio annualized rental revenue from Defense/IT Locations and 12% from its Regional Office Properties. As of the same date and including 19 properties owned through unconsolidated joint ventures, COPT's core portfolio of 184 office and data center shell properties encompassed 21.5 million square feet and was 94.8% leased; the Company also owned one wholesale data center with a capacity of 19.25 megawatts that was 86.7% leased.

Forward-Looking Information

This press release may contain "forward-looking" statements, as defined in Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, that are based on the Company's current expectations, estimates and projections about future events and financial trends affecting the Company. Forward-looking statements can be identified by the use of words such as "may," "will," "should," "could," "believe," "anticipate," "expect," "estimate," "plan" or other comparable terminology. Forward-looking statements are inherently subject to risks and uncertainties, many of which the Company cannot predict with accuracy and some of which the Company might not even anticipate. Although the Company believes that the expectations, estimates and projections reflected in such forward-looking statements are based on reasonable assumptions at the time made, the Company can give no assurance that these expectations, estimates and projections will be achieved. Future events and actual results may differ materially from those discussed in the forward-looking statements and the Company undertakes no obligation to update or supplement any forward-looking statements.

The areas of risk that may affect these expectations, estimates and projections include, but are not limited to, those risks described in Item 1A of the Company's Annual Report on Form 10-K for the year ended December 31, 2020.

Category: Quarterly Results

Source: Corporate Office Properties Trust

Corporate Office Properties Trust Summary Financial Data (unaudited) (dollars and shares in thousands, except per share data)

	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
	2021		2020		2021		2020
Revenues
Revenues from real estate operations	$	146,590	$	134,443	$	436,177	$	399,097
Construction contract and other service revenues	28,046		20,323		64,592		46,240
Total revenues	174,636		154,766		500,769		445,337
Operating expenses
Property operating expenses	57,190		51,552		168,780		151,755
Depreciation and amortization associated with real estate operations	36,611		35,332		111,487		101,540
Construction contract and other service expenses	27,089		19,220		61,964		44,052
Impairment losses	—		1,530		—		1,530
General and administrative expenses	7,269		5,558		20,624		17,372
Leasing expenses	2,073		1,909		6,346		5,739
Business development expenses and land carry costs	1,093		1,094		3,559		3,474
Total operating expenses	131,325		116,195		372,760		325,462
Interest expense	(15,720)		(17,152)		(49,181)		(50,789)
Interest and other income	1,818		1,746		5,911		5,233
Credit loss recoveries	326		1,465		1,040		161
Gain on sales of real estate	(32)		—		39,711		5
Loss on early extinguishment of debt	(1,159)		(3,237)		(59,553)		(3,237)
Loss on interest rate derivatives	—		(53,196)		—		(53,196)
Income (loss) before equity in income of unconsolidated entities and income taxes	28,544		(31,803)		65,937		18,052
Equity in income of unconsolidated entities	297		477		779		1,372
Income tax expense	(47)		(16)		(103)		(95)
Net income (loss)	28,794		(31,342)		66,613		19,329
Net (income) loss attributable to noncontrolling interests:
Common units in the Operating Partnership ("OP")	(357)		386		(831)		(185)
Preferred units in the OP	—		(77)		—		(231)
Other consolidated entities	(1,336)		(812)		(2,949)		(3,207)
Net income (loss) attributable to COPT common shareholders	$	27,101	$	(31,845)	$	62,833	$	15,706

Earnings per share ("EPS") computation:
Numerator for diluted EPS:
Net income attributable to COPT common shareholders	$	27,101	$	(31,845)	$	62,833	$	15,706
Amount allocable to share-based compensation awards	(79)		(145)		(320)		(359)
Redeemable noncontrolling interests	(89)		—		(82)		—
Numerator for diluted EPS	$	26,933	$	(31,990)	$	62,431	$	15,347
Denominator:
Weighted average common shares - basic	111,985		111,811		111,949		111,778
Dilutive effect of share-based compensation awards	375		—		285		278
Dilutive effect of redeemable noncontrolling interests	138		—		130		—
Weighted average common shares - diluted	112,498		111,811		112,364		112,056
Diluted EPS	$	0.24	$	(0.29)	$	0.56	$	0.14

Corporate Office Properties Trust Summary Financial Data (unaudited) (in thousands, except per share data)

	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
	2021		2020		2021		2020
Net income (loss)	$	28,794	$	(31,342)	$	66,613	$	19,329
Real estate-related depreciation and amortization	36,611		35,332		111,487		101,540
Impairment losses on real estate	—		1,530		—		1,530
Gain on sales of real estate	32		—		(39,711)		(5)
Depreciation and amortization on unconsolidated real estate JVs	525		819		1,455		2,455
Funds from operations ("FFO")	65,962		6,339		139,844		124,849
FFO allocable to other noncontrolling interests	(1,696)		(1,074)		(4,025)		(14,614)
Basic FFO allocable to share-based compensation awards	(313)		(119)		(663)		(449)
Noncontrolling interests - preferred units in the OP	—		(77)		—		(231)
Basic FFO available to common share and common unit holders ("Basic FFO")	63,953		5,069		135,156		109,555
Redeemable noncontrolling interests	(68)		—		1		103
Diluted FFO adjustments allocable to share-based compensation awards	13		—		27		—
Diluted FFO available to common share and common unit holders ("Diluted FFO")	63,898		5,069		135,184		109,658
Loss on early extinguishment of debt	1,159		3,237		59,553		3,237
Loss on interest rate derivatives	—		53,196		—		53,196
Demolition costs on redevelopment and nonrecurring improvements	129		11		431		63
Dilutive preferred units in the OP	—		77		—		231
FFO allocation to other noncontrolling interests resulting from capital event	—		—		—		11,090
Diluted FFO comparability adjustments for redeemable noncontrolling interests	—		34		—		—
Diluted FFO comparability adjustments allocable to share-based compensation awards	(7)		(139)		(300)		(307)
Diluted FFO available to common share and common unit holders, as adjusted for comparability	65,179		61,485		194,868		177,168
Straight line rent adjustments and lease incentive amortization	(1,806)		(1,009)		(6,451)		662
Amortization of intangibles and other assets included in net operating income	41		(39)		122		(186)
Share-based compensation, net of amounts capitalized	2,048		1,727		5,961		4,754
Amortization of deferred financing costs	736		658		2,340		1,875
Amortization of net debt discounts, net of amounts capitalized	567		453		1,629		1,229
Replacement capital expenditures	(13,331)		(13,085)		(38,656)		(46,971)
Other diluted AFFO adjustments associated with real estate JVs	201		150		620		(6)
Diluted adjusted funds from operations available to common share and common unit holders ("Diluted AFFO")	$	53,635	$	50,340	$	160,433	$	138,525
Diluted FFO per share	$	0.56	$	0.04	$	1.19	$	0.97
Diluted FFO per share, as adjusted for comparability	$	0.57	$	0.54	$	1.71	$	1.56
Dividends/distributions per common share/unit	$	0.275	$	0.275	$	0.825	$	0.825

Corporate Office Properties Trust Summary Financial Data (unaudited) (Dollars and shares in thousands, except per share data)

	September 30, 2021			December 31, 2020
Balance Sheet Data
Properties, net of accumulated depreciation	$	3,607,122		$	3,562,549
Total assets	4,151,138			4,077,023
Debt, per balance sheet	2,159,732			2,086,918
Total liabilities	2,454,353			2,357,881
Redeemable noncontrolling interests	26,006			25,430
Equity	1,670,779			1,693,712
Net debt to adjusted book	39.4		%	39.1		%

Core Portfolio Data (as of period end) (1)
Number of operating properties	184			179
Total operational square feet (in thousands)	21,503			20,802
% Occupied	93.5		%	94.3		%
% Leased	94.8		%	95.0		%

	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
	2021		2020		2021		2020
Payout ratios
Diluted FFO	48.8	%	613.6	%	69.2	%	85.1	%
Diluted FFO, as adjusted for comparability	47.8	%	50.7	%	48.0	%	52.8	%
Diluted AFFO	58.1	%	61.9	%	58.3	%	67.5	%
Adjusted EBITDA fixed charge coverage ratio	4.8	x	3.9	x	4.7	x	3.8	x
Net debt plus preferred equity to in-place adjusted EBITDA ratio (2)	6.3	x	6.8	x	N/A		N/A
Net debt adj. for fully-leased development plus pref. equity to in-place adj. EBITDA ratio (3)	5.9	x	6.4	x	N/A		N/A

Reconciliation of denominators for per share measures
Denominator for diluted EPS	112,498		111,811		112,364		112,056
Weighted average common units	1,262		1,240		1,257		1,235
Anti-dilutive EPS effect of share-based compensation awards	—		274		26		—
Redeemable noncontrolling interests	—		—		—		125
Denominator for diluted FFO per share	113,760		113,325		113,647		113,416
Redeemable noncontrolling interests	—		109		—		—
Dilutive convertible preferred units	—		176		—		176
Denominator for diluted FFO per share, as adjusted for comparability	113,760		113,610		113,647		113,592

Represents Defense/IT Locations and Regional Office properties.
Represents net debt plus the total liquidation preference of preferred equity as of period end divided by in-place adjusted EBITDA for the period, as annualized (i.e. three month periods are multiplied by four).
Represents net debt less costs incurred on properties under development that were 100% leased as of period end plus the total liquidation preference of preferred equity divided by in-place adjusted EBITDA for the period, as annualized (i.e. three month periods are multiplied by four).

Corporate Office Properties Trust Summary Financial Data (unaudited) (in thousands)

	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
	2021		2020		2021		2020
Reconciliation of common share dividends to dividends and distributions for payout ratios
Common share dividends - unrestricted shares and deferred shares	$	30,813	$	30,763	$	92,429	$	92,278
Common unit distributions - unrestricted units	347		341		1,041		1,021
Common unit distributions - dilutive restricted units	6		—		19		—
Dividends and distributions for diluted FFO payout ratio	31,166		31,104		93,489		93,299
Distributions on dilutive preferred units	—		77		—		231
Dividends and distributions for other payout ratios	$	31,166	$	31,181	$	93,489	$	93,530

Reconciliation of GAAP net income (loss) to earnings before interest, income taxes, depreciation and amortization for real estate ("EBITDAre"), adjusted EBITDA and in-place adjusted EBITDA
Net income (loss)	$	28,794	$	(31,342)	$	66,613	$	19,329
Interest expense	15,720		17,152		49,181		50,789
Income tax expense	47		16		103		95
Real estate-related depreciation and amortization	36,611		35,332		111,487		101,540
Other depreciation and amortization	589		457		2,189		1,324
Impairment losses on real estate	—		1,530		—		1,530
Gain on sales of real estate	32		—		(39,711)		(5)
Adjustments from unconsolidated real estate JVs	763		1,274		2,167		3,814
EBITDAre	82,556		24,419		192,029		178,416
Loss on early extinguishment of debt	1,159		3,237		59,553		3,237
Loss on interest rate derivatives	—		53,196		—		53,196
Net loss (gain) on other investments	—		250		(63)		252
Credit loss recoveries	(326)		(1,465)		(1,040)		(161)
Business development expenses	473		414		1,605		1,630
Demolition costs on redevelopment and nonrecurring improvements	129		11		431		63
Adjusted EBITDA	83,991		80,062		$	252,515	$	236,633
Proforma net operating income adjustment for property changes within period	3,240		1,631
Change in collectability of deferred rental revenue	—		224
In-place adjusted EBITDA	$	87,231	$	81,917

Reconciliation of interest expense to the denominators for fixed charge coverage-Adjusted EBITDA
Interest expense	$	15,720	$	17,152	$	49,181	$	50,789
Less: Amortization of deferred financing costs	(736)		(658)		(2,340)		(1,875)
Less: Amortization of net debt discounts, net of amounts capitalized	(567)		(453)		(1,629)		(1,229)
COPT's share of interest expense of unconsolidated real estate JVs, excluding deferred financing costs	236		444		706		1,327
Scheduled principal amortization	989		1,033		2,910		3,077
Capitalized interest	1,763		2,908		5,275		9,440
Preferred unit distributions	—		77		—		231
Denominator for fixed charge coverage-Adjusted EBITDA	$	17,405	$	20,503	$	54,103	$	61,760

Corporate Office Properties Trust Summary Financial Data (unaudited) (in thousands)

	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
	2021		2020		2021		2020
Reconciliations of tenant improvements and incentives, building improvements and leasing costs for operating properties to replacement capital expenditures
Tenant improvements and incentives	$	8,654	$	6,950	$	24,096	$	27,177
Building improvements	7,793		10,400		18,192		26,537
Leasing costs	2,939		1,934		6,873		6,918
Net (exclusions from) additions to tenant improvements and incentives	(1,523)		(943)		389		1,412
Excluded building improvements and leasing costs	(4,532)		(5,256)		(10,894)		(15,073)
Replacement capital expenditures	$	13,331	$	13,085	$	38,656	$	46,971

Same Properties cash NOI	$	77,219	$	73,697	$	227,312	$	224,024
Straight line rent adjustments and lease incentive amortization	(1,671)		(571)		(3,930)		(1,582)
Amortization of acquired above- and below-market rents	99		98		296		291
Amortization of intangibles and other assets to property operating expenses	—		(23)		—		(69)
Lease termination fees, net	853		455		3,309		693
Tenant funded landlord assets and lease incentives	191		342		810		690
Cash NOI adjustments in unconsolidated real estate JV	37		48		119		150
Same Properties NOI	$	76,728	$	74,046	$	227,916	$	224,197

	September 30, 2021		December 31, 2020
Reconciliation of total assets to adjusted book
Total assets	$	4,151,138	$	4,077,023
Accumulated depreciation	1,202,780		1,124,253
Accumulated depreciation included in assets held for sale	12,146		—
Accumulated amortization of real estate intangibles and deferred leasing costs	219,179		217,124
Accumulated amortization of real estate intangibles and deferred leasing costs included in assets held for sale	3,102		—
COPT's share of liabilities of unconsolidated real estate JVs	27,498		26,710
COPT's share of accumulated depreciation and amortization of unconsolidated real estate JVs	3,161		1,489
Less: Property - operating lease liabilities	(29,630)		(30,746)
Less: Property - finance lease liabilities	(14)		(28)
Less: Cash and cash equivalents	(14,570)		(18,369)
Less: COPT's share of cash of unconsolidated real estate JVs	(530)		(152)
Adjusted book	$	5,574,260	$	5,397,304

	September 30, 2021		December 31, 2020		September 30, 2020
Reconciliation of debt outstanding to net debt and net debt adjusted for fully-leased development plus preferred equity
Debt outstanding (excluding net debt discounts and deferred financing costs)	$	2,208,923	$	2,127,715	$	2,247,523
Less: Cash and cash equivalents	(14,570)		(18,369)		(11,458)
Less: COPT's share of cash of unconsolidated real estate JVs	(530)		(152)		(538)
Net debt	$	2,193,823	$	2,109,194	$	2,235,527
Preferred equity	—		—		8,800
Net debt plus preferred equity	$	2,193,823	$	2,109,194	$	2,244,327
Costs incurred on fully-leased development properties	(119,981)		(114,532)		(149,201)
Net debt adjusted for fully-leased development plus preferred equity	$	2,073,842	$	1,994,662	$	2,095,126

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