COLUMBIA, Md.--(BUSINESS WIRE)--Corporate Office Properties Trust announced financial and operating results for the fourth quarter and full year ended December 31, 2019.

Management Comments

Stephen E. Budorick, COPT’s President & Chief Executive Officer, commented, “Fourth quarter and full year FFO per share met the mid-points of our updated guidance ranges, and strong demand throughout our Defense/IT Locations translated into record leasing for new developments, strong vacancy leasing, and near-record leasing with the U.S. Government. Our 2.2 million square feet of development leasing exceeded our prior annual record set in 2012 by 1 million square feet, and we executed 586,000 square feet of development and vacancy leasing with the U.S. Government, our second-best year ever.” He continued, “We believe that this strong leasing achievement, combined with the $357 million of equity raised and the 1.2 million square feet of 100% leased developments placed into service during 2019, position our Company to deliver 1.5%-3.5% FFO per share growth in 2020, and robust FFO growth in 2021.”

Financial Highlights

4th Quarter Financial Results:

• Diluted earnings per share (“EPS”) was $0.38 for the quarter ended December 31, 2019 as compared to $0.16 for the fourth quarter of 2018.
• Diluted funds from operations per share (“FFOPS”), as calculated in accordance with Nareit’s definition, of $0.49 for the fourth quarter of 2019 equaled fourth quarter 2018 results.
• FFOPS, as adjusted for comparability, was $0.50 for the fourth quarter of 2019, equal to fourth quarter 2018 results.

Full Year 2019 Financial Results:

• EPS for the year ended December 31, 2019 was $1.71, which included $105.2 million of gains on the sale of a 90% interest in nine data center shell properties during the year as compared to 2018 EPS of $0.69.
• Per Nareit’s definition, FFOPS for 2019 was $2.02 as compared to $1.99 for 2018.
• FFOPS, as adjusted for comparability, for 2019 was $2.03 as compared to $2.01 for 2018.

Adjustments for comparability encompass items such as demolition costs of redevelopment, executive transition costs, and non-comparable professional and legal expenses.

Operating Performance Highlights

Operating Portfolio Summary:

• At December 31, 2019, the Company’s core portfolio of 168 operating office and data center shell properties was 93.1% occupied and 94.6% leased.
• During the quarter and the year, the Company placed into service 375,000 and 1.2 million respective square feet that were 100% leased.

Same-Property Performance:

• At December 31, 2019, COPT’s same-property portfolio of 147 buildings was 91.9% occupied and 93.7% leased.
• For the quarter and year ended December 31, 2019, the Company’s same-property cash NOI increased 6.2% and 3.9%, respectively, over the prior year’s comparable periods.

Leasing:

• Total Square Feet Leased: For the quarter ended December 31, 2019, the Company leased 659,000 total square feet, including 339,000 square feet of renewals, 162,000 square feet of new leases on vacant space, and 158,000 square feet in development projects.

  For the year ended December 31, 2019, the Company leased 4.9 million total square feet, including 1.9 million square feet of renewals, 784,000 square feet of new leases on vacant space, and 2.2 million square feet in development projects.

• Renewal Rates: During the quarter and year ended December 31, 2019, the Company respectively renewed 84% and 77% of total expiring square feet.
• Cash Rent Spreads & Average Escalations on Renewing Leases: For the quarter and year ended December 31, 2019, cash rents on renewed space decreased 8.4% and 5.8%, respectively. For the same time periods, average annual escalations on renewing leases were 2.3% and 2.4%, respectively.
• Lease Terms: In the fourth quarter, lease terms averaged 6.1 years on renewing leases, 6.6 years on new leasing of vacant space, and 12.1 years on development leasing. For the year, lease terms averaged 4.1 years on renewing leases, 6.4 years on new leasing of vacant space, and 12.6 years on development leasing.

Investment Activity Highlights

Development & Redevelopment Projects:

• Development Pipeline: At January 31, 2020, the Company’s development pipeline consisted of 13 properties totaling 2.3 million square feet that were 79% leased. These projects have a total estimated cost of $683.4 million, of which $326.6 million has been incurred.
• Redevelopment: At December 31, 2019, one project was under redevelopment totaling 106,000 square feet that was 80% leased. The Company has invested $23.3 million of the $25.6 million anticipated total cost.

Balance Sheet and Capital Transaction Highlights

• As of December 31, 2019, the Company’s net debt plus preferred equity to adjusted book ratio was 37.0% and its net debt plus preferred equity to in-place adjusted EBITDA ratio was 6.1x. For the quarter and year ended December 31, 2019, the Company’s adjusted EBITDA fixed charge coverage ratio was 3.7x.
• As of December 31, 2019, and including the effect of interest rate swaps, the Company’s weighted average effective interest rate was 4.07%; additionally, 87.8% of the Company’s debt was subject to fixed interest rates and the consolidated debt portfolio had a weighted average maturity of 3.5 years.
• During the quarter ended March 31, 2019, the Company issued the remaining 1.6 million common shares under its 2017 forward equity sale agreements for net proceeds of $46.5 million.
• During the year, the Company sold a 90% interest in nine single-tenant data center shell properties through the Blackstone Real Estate Income Trust, Inc. (“BREIT”)-COPT joint venture formed in June 2019. The Company received a total of $310.6 million of proceeds in 2019, plus an additional $20.1 million in net proceeds associated with the joint venture entering into non-recourse mortgage loans on the properties.

Associated Supplemental Presentation

Prior to the call, the Company will post a slide presentation to accompany management’s prepared remarks for its fourth quarter and year end 2019 conference call, the details of which are provided below. The accompanying slide presentation can be viewed on and downloaded from the ‘Latest Updates’ section of COPT’s Investors website: https://investors.copt.com/.

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 December 31, 2019, 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 15 buildings owned through unconsolidated joint ventures, COPT’s core portfolio of 168 office and data center shell properties encompassed 19.0 million square feet and was 94.6% leased; the Company also owned one wholesale data center with a critical load of 19.25 megawatts that was 76.9% leased.