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COPT Defense Reports Third Quarter 2023 Results

EPS of ($1.94) for 3Q23;

FFO per Share, as Adjusted for Comparability, of $0.60

Maintains Midpoint of 2023 FFO per Share Guidance at $2.40

Defense/IT Portfolio 95.9% Occupied and 97.0% Leased

Same Property Cash NOI Increased 4.5% in 3Q23 and 6.2% Year-to-Date

Raising Same Property Cash NOI Guidance for the Year by 100 Basis Points, to 5.75%-6.25%

Placed 443,000 SF of Developments into Service that are 98% Leased

1.0 million SF of Active Developments are 90% Leased

Strong Leasing Volume YTD; High Confidence in Achieving 2023 Goals

Total Leasing of 521,000 SF in 3Q23 and 2.2 million SF Year-to-Date

151,000 SF of Vacancy Leasing in 3Q23 and 337,000 SF Year-to-Date

On Track to Achieve Annual Goal of 400,000 SF

Tenant Retention of 82% in 3Q23 and 83% Year-to-Date

On Track to Achieve Annual Goal of 80%-85%

495,000 SF of Development Leasing Year-to-Date

On Track to Achieve Annual Goal of 700,000 SF

COPT Defense Properties (“COPT Defense” or the “Company”) (NYSE: CDP) announced results for the third quarter ended September 30, 2023.

Management Comments

Stephen E. Budorick, COPT Defense’s President & Chief Executive Officer, commented, “Our Defense/IT investment strategy, which has concentrated our portfolio near priority U.S. defense installations, continues to produce strong results. Our Defense/IT Portfolio is 97% leased, which is the highest leased rate since we started reporting the segment in 2015, supported by growth in defense spending, resulting in continued tenant demand from both our U.S. Government and Defense Contractor tenants.

Our third quarter results were solid, with FFO per share at the midpoint of our guidance range, which led us to narrow the full-year guidance range. We continue to outperform in terms of same property cash NOI growth, which increased 4.5% for 3Q23 over 3Q22, and 6.2% in 2023 YTD over 2022 YTD, which led us to increase our full-year change in same property cash NOI guidance by another 100 basis points. We are highly confident that we will achieve our leasing goals, as we have executed 84% of our vacancy leasing goal and 70% of our development leasing goal, while tenant retention YTD is squarely within our full-year guidance range.

From a balance sheet perspective, our Finance and Capital Markets team once again proved our ability to source low-cost capital to fund our accretive and highly leased development pipeline, as evidenced by our September issuance of $345 million of exchangeable notes due 2028 at 5.25%, which was roughly 200 basis points below where we could have priced 5-year unsecured debt. With this capital raise, and our ability to fund the equity investment in our projects with cash flow from operations after our dividend payments, we forecast we can now fund our anticipated development spend through late 2026. Our investment grade balance sheet is well positioned to navigate the challenging capital markets environment, as we have no variable rate debt exposure and have no significant debt maturity until 2026.

We remain confident in our strategy of allocating capital to investments in our Defense/IT Portfolio that will support continued growth in FFO per share and shareholder value.”

Financial Highlights

3rd Quarter Financial Results:

  • Diluted earnings per share (“EPS”) was ($1.94) for the quarter ended September 30, 2023, which included a $252.8 million impairment charge for six operating properties in the Other segment and a parcel of land, located in Baltimore, Maryland, Northern Virginia and Washington, D.C., resulting from our quarterly portfolio review.
  • Diluted funds from operations per share (“FFOPS”), as calculated in accordance with Nareit’s definition, and FFOPS, as adjusted for comparability, were $0.60 for the quarter ended September 30, 2023 compared to $0.58 for the quarter ended September 30, 2022.

Operating Performance Highlights

Operating Portfolio Summary:

  • At September 30, 2023, the Company’s 21.3 million square foot Defense/IT Portfolio was 95.9% occupied and 97.0% leased.

Same Property Performance:

  • At September 30, 2023, the Company’s 20.6 million square foot same property portfolio was 93.4% occupied and 94.5% leased.
  • The Company’s same property cash NOI increased 4.5% for the three months ended September 30, 2023 compared to the same period in 2022.

Leasing:

  • Total Square Feet Leased: For the quarter ended September 30, 2023, the Company leased 521,000 square feet, including 370,000 square feet of renewals and 151,000 square feet of vacancy leasing. For the nine months ended September 30, 2023, the Company executed 2.2 million square feet of total leasing, including 1.4 million square feet of renewals, 337,000 square feet of vacancy leasing, and 495,000 square feet in development projects.
  • Tenant Retention Rates: During the quarter and nine months ended September 30, 2023, the Company renewed 82.0% and 82.5%, respectively, of expiring square feet.
  • Rent Spreads & Average Escalations on Renewing Leases: For the quarter and nine months ended September 30, 2023, straight-line rents on renewals increased 9.3% and 7.5%, respectively, and cash rents on renewed space increased 1.7% and 1.2%, respectively. For the same time periods, annual escalations on renewing leases averaged 2.7% and 2.6%, respectively.
  • Lease Terms: In the quarter ended September 30, 2023, lease terms averaged 4.2 years on renewing leases and 8.4 years on vacancy leasing. For the nine months ended September 30, 2023, lease terms averaged 4.4 years on renewing leases, 7.9 years on vacancy leasing, and 14.3 years on development leasing.

Investment Activity Highlights

  • Development Pipeline: The Company’s development pipeline consists of six properties totaling 1.0 million square feet that were 90% leased at September 30, 2023. These projects represent a total estimated investment of $337.0 million, of which $150.2 million has been spent.

Balance Sheet and Capital Transaction Highlights

  • On September 12, 2023, the Company issued $345 million of 5.25% Exchangeable Senior Notes due 2028. The Company used net proceeds from this issuance to pay down a portion of its Revolving Credit Facility, and to pre-fund future development investments, which resulted in a portion of the net proceeds being invested in short-term interest-bearing money market accounts pending such use. These notes are due in 2028 unless earlier exchanged, redeemed or repurchased only in the event of certain circumstances and during certain periods defined under the terms of the notes. Upon exchange of the notes, the principal amount of notes exchanged is payable in cash, with the remainder of the exchange obligation, if any, payable in cash, common shares or a combination thereof at the Company’s election.
  • For the quarter ended September 30, 2023, the Company’s adjusted EBITDA fixed charge coverage ratio was 4.6x.
  • At September 30, 2023, the Company’s net debt to in-place adjusted EBITDA ratio was 6.2x and its net debt adjusted for fully-leased development to in-place adjusted EBITDA ratio was 5.9x.
  • At September 30, 2023, and including the effect of interest rate swaps, the Company’s weighted average effective interest rate on its consolidated debt portfolio was 3.4% with a weighted average maturity of 5.9 years and, 100.0% 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 2023 conference call; the presentation can be viewed and downloaded from the ‘Financial Info – Financial Results’ section of COPT Defense’s Investors website: https://investors.copt.com/financial-information/financial-results

2023 Guidance

Management is revising its full-year guidance for diluted EPS and narrowing its full-year guidance for diluted FFOPS, per Nareit and as adjusted for comparability, from the prior range of $1.49-$1.53, and $2.38-$2.42, respectively, to new ranges of ($0.71)-($0.69), and $2.39-$2.41, respectively. Management is establishing fourth quarter guidance for diluted EPS and diluted FFOPS per Nareit and as adjusted for comparability at $0.27-$0.29 and $0.60-$0.62, respectively. Reconciliations of projected diluted EPS to projected diluted FFOPS, in accordance with Nareit and as adjusted for comparability are as follows:

Reconciliation of Diluted EPS to FFOPS, per Nareit,

and As Adjusted for Comparability

 

Quarter Ending

December 31, 2023

 

Year Ending

December 31, 2023

 

 

Low

 

High

 

Low

 

High

Diluted EPS

 

$

0.27

 

$

0.29

 

$

(0.71

)

 

$

(0.69

)

Real estate-related depreciation and amortization

 

 

0.33

 

 

0.33

 

 

1.32

 

 

 

1.32

 

Impairment losses

 

 

 

 

 

 

2.21

 

 

 

2.21

 

Gain on sales of real estate

 

 

 

 

 

 

(0.43

)

 

 

(0.43

)

Diluted FFOPS, Nareit definition and as adjusted for comparability

 

$

0.60

 

$

0.62

 

$

2.39

 

 

$

2.41

 

Conference Call Information

Management will discuss third quarter 2023 results on its conference call tomorrow at 12:00 p.m. Eastern Time, details of which are listed below:

Conference Call Date:

Friday, October 27, 2023

Time:

12:00 p.m. Eastern Time

Participants must register for the conference call at the link below to receive the dial-in number and personal pin. Registering only takes a few moments and provides direct access to the conference call without waiting for an operator. You may register at any time, including up to and after the call start time:

https://register.vevent.com/register/BI3aa228e2cc714d1893a176fa18b0ded0

The conference call will also be available via live webcast in the ‘News & Events – IR Calendar’ section of COPT Defense’s Investors website: https://investors.copt.com/news-events/ir-calendar

Replay Information

A replay of the conference call will be immediately available via webcast only on COPT Defense’s Investors website and will be maintained on the website for approximately 90 days after the conference call.

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 Defense

COPT Defense, an S&P MidCap 400 Company, is a self-managed REIT focused on owning, operating and developing properties in locations proximate to, or sometimes containing, key U.S. Government (“USG”) defense installations and missions (referred to as its Defense/IT Portfolio). The Company’s tenants include the USG and their defense contractors, who are primarily engaged in priority national security activities, and who generally require mission-critical and high security property enhancements. In September 2023, the Company changed its name from Corporate Office Properties Trust to COPT Defense Properties to better describe its investment strategy’s focus on locations serving U.S. priority defense activities. The ticker symbol under which the Company’s common shares are publicly traded on the New York Stock Exchange changed from “OFC” to “CDP.” As of September 30, 2023, the Company’s Defense/IT Portfolio of 188 properties, including 24 owned through unconsolidated joint ventures, encompassed 21.3 million square feet and was 97.0% 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, 2022.

Source: COPT Defense Properties

COPT Defense Properties

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,

 

 

2023

 

 

 

2022

 

 

 

2023

 

 

 

2022

 

Revenues

 

 

 

 

 

 

 

Lease revenue

$

155,268

 

 

$

146,481

 

 

$

459,510

 

 

$

430,147

 

Other property revenue

 

1,339

 

 

 

1,206

 

 

 

3,731

 

 

 

3,066

 

Construction contract and other service revenues

 

11,949

 

 

 

34,813

 

 

 

42,012

 

 

 

130,570

 

Total revenues

 

168,556

 

 

 

182,500

 

 

 

505,253

 

 

 

563,783

 

Operating expenses

 

 

 

 

 

 

 

Property operating expenses

 

61,788

 

 

 

57,663

 

 

 

182,808

 

 

 

168,960

 

Depreciation and amortization associated with real estate operations

 

37,620

 

 

 

35,247

 

 

 

112,215

 

 

 

104,323

 

Construction contract and other service expenses

 

11,493

 

 

 

33,555

 

 

 

40,249

 

 

 

126,509

 

Impairment losses

 

252,797

 

 

 

 

 

 

252,797

 

 

 

 

General and administrative expenses

 

7,582

 

 

 

6,558

 

 

 

22,865

 

 

 

19,695

 

Leasing expenses

 

2,280

 

 

 

2,340

 

 

 

6,624

 

 

 

6,102

 

Business development expenses and land carry costs

 

714

 

 

 

552

 

 

 

1,935

 

 

 

2,036

 

Total operating expenses

 

374,274

 

 

 

135,915

 

 

 

619,493

 

 

 

427,625

 

Interest expense

 

(17,798

)

 

 

(15,123

)

 

 

(50,759

)

 

 

(44,355

)

Interest and other income, net

 

2,529

 

 

 

597

 

 

 

6,928

 

 

 

4,399

 

Gain on sales of real estate

 

 

 

 

16

 

 

 

49,392

 

 

 

12

 

Loss on early extinguishment of debt

 

 

 

 

 

 

 

 

 

 

(342

)

(Loss) income from continuing operations before equity in (loss) income of unconsolidated entities and income taxes

 

(220,987

)

 

 

32,075

 

 

 

(108,679

)

 

 

95,872

 

Equity in (loss) income of unconsolidated entities

 

(68

)

 

 

308

 

 

 

(21

)

 

 

1,514

 

Income tax expense

 

(152

)

 

 

(67

)

 

 

(467

)

 

 

(224

)

(Loss) income from continuing operations

 

(221,207

)

 

 

32,316

 

 

 

(109,167

)

 

 

97,162

 

Discontinued operations

 

 

 

 

 

 

 

 

 

 

29,573

 

Net (loss) income

 

(221,207

)

 

 

32,316

 

 

 

(109,167

)

 

 

126,735

 

Net loss (income) attributable to noncontrolling interests:

 

 

 

 

 

 

 

Common units in the Operating Partnership (“OP”)

 

3,691

 

 

 

(476

)

 

 

1,882

 

 

 

(1,828

)

Other consolidated entities

 

1,329

 

 

 

(919

)

 

 

164

 

 

 

(2,357

)

Net (loss) income attributable to common shareholders

$

(216,187

)

 

$

30,921

 

 

$

(107,121

)

 

$

122,550

 

 

 

 

 

 

 

 

 

Earnings per share (“EPS”) computation:

 

 

 

 

 

 

 

Numerator for diluted EPS:

 

 

 

 

 

 

 

Net (loss) income attributable to common shareholders

$

(216,187

)

 

$

30,921

 

 

$

(107,121

)

 

$

122,550

 

Amount allocable to share-based compensation awards

 

(992

)

 

 

(75

)

 

 

(1,093

)

 

 

(334

)

Redeemable noncontrolling interests

 

 

 

 

(40

)

 

 

 

 

 

(109

)

Numerator for diluted EPS

$

(217,179

)

 

$

30,806

 

 

$

(108,214

)

 

$

122,107

 

Denominator:

 

 

 

 

 

 

 

Weighted average common shares - basic

 

112,196

 

 

 

112,093

 

 

 

112,170

 

 

 

112,066

 

Dilutive effect of share-based compensation awards

 

 

 

 

433

 

 

 

 

 

 

429

 

Dilutive effect of redeemable noncontrolling interests

 

 

 

 

105

 

 

 

 

 

 

121

 

Weighted average common shares - diluted

 

112,196

 

 

 

112,631

 

 

 

112,170

 

 

 

112,616

 

Diluted EPS

$

(1.94

)

 

$

0.27

 

 

$

(0.96

)

 

$

1.08

 

COPT Defense Properties

Summary Financial Data

(unaudited)

(in thousands, except per share data)

 

 

For the Three Months Ended

September 30,

 

For the Nine Months Ended

September 30,

 

 

2023

 

 

 

2022

 

 

 

2023

 

 

 

2022

 

Net (loss) income

$

(221,207

)

 

$

32,316

 

 

$

(109,167

)

 

$

126,735

 

Real estate-related depreciation and amortization

 

37,620

 

 

 

35,247

 

 

 

112,215

 

 

 

104,323

 

Impairment losses on real estate

 

252,797

 

 

 

 

 

 

252,797

 

 

 

 

Gain on sales of real estate from continuing and discontinued operations

 

 

 

 

(16

)

 

 

(49,392

)

 

 

(28,576

)

Depreciation and amortization on unconsolidated real estate JVs

 

806

 

 

 

524

 

 

 

2,412

 

 

 

1,575

 

Funds from operations (“FFO”)

 

70,016

 

 

 

68,071

 

 

 

208,865

 

 

 

204,057

 

FFO allocable to other noncontrolling interests

 

(1,059

)

 

 

(1,348

)

 

 

(3,006

)

 

 

(3,568

)

Basic FFO allocable to share-based compensation awards

 

(481

)

 

 

(354

)

 

 

(1,427

)

 

 

(1,073

)

Basic FFO available to common share and common unit holders (“Basic FFO”)

 

68,476

 

 

 

66,369

 

 

 

204,432

 

 

 

199,416

 

Redeemable noncontrolling interests

 

 

 

 

(5

)

 

 

(58

)

 

 

(7

)

Diluted FFO adjustments allocable to share-based compensation awards

 

36

 

 

 

27

 

 

 

112

 

 

 

81

 

Diluted FFO available to common share and common unit holders (“Diluted FFO”)

 

68,512

 

 

 

66,391

 

 

 

204,486

 

 

 

199,490

 

Loss on early extinguishment of debt

 

 

 

 

 

 

 

 

 

 

342

 

Executive transition costs

 

82

 

 

 

206

 

 

 

330

 

 

 

343

 

Diluted FFO comparability adjustments allocable to share-based compensation awards

 

(1

)

 

 

(2

)

 

 

(3

)

 

 

(4

)

Diluted FFO available to common share and common unit holders, as adjusted for comparability

 

68,593

 

 

 

66,595

 

 

 

204,813

 

 

 

200,171

 

Straight line rent adjustments and lease incentive amortization

 

12,882

 

 

 

605

 

 

 

6,205

 

 

 

(5,782

)

Amortization of intangibles and other assets included in net operating income (“NOI”)

 

26

 

 

 

50

 

 

 

24

 

 

 

(273

)

Share-based compensation, net of amounts capitalized

 

2,280

 

 

 

2,188

 

 

 

6,226

 

 

 

6,453

 

Amortization of deferred financing costs

 

639

 

 

 

540

 

 

 

1,899

 

 

 

1,678

 

Amortization of net debt discounts, net of amounts capitalized

 

750

 

 

 

612

 

 

 

1,990

 

 

 

1,825

 

Replacement capital expenditures

 

(21,122

)

 

 

(17,528

)

 

 

(71,996

)

 

 

(52,603

)

Other

 

74

 

 

 

377

 

 

 

(420

)

 

 

822

 

Diluted adjusted funds from operations available to common share and common unit holders (“Diluted AFFO”)

$

64,122

 

 

$

53,439

 

 

$

148,741

 

 

$

152,291

 

Diluted FFO per share

$

0.60

 

 

$

0.58

 

 

$

1.79

 

 

$

1.75

 

Diluted FFO per share, as adjusted for comparability

$

0.60

 

 

$

0.58

 

 

$

1.79

 

 

$

1.75

 

Dividends/distributions per common share/unit

$

0.285

 

 

$

0.275

 

 

$

0.855

 

 

$

0.825

 

COPT Defense Properties

Summary Financial Data

(unaudited)

(Dollars and shares in thousands, except per share data)

 

 

September 30,

2023

 

December 31,

2022

Balance Sheet Data

 

 

 

Properties, net of accumulated depreciation

$

3,468,197

 

 

$

3,556,398

 

Total assets

$

4,239,257

 

 

$

4,257,275

 

Debt per balance sheet

$

2,415,783

 

 

$

2,231,794

 

Total liabilities

$

2,691,562

 

 

$

2,509,527

 

Redeemable noncontrolling interests

$

21,822

 

 

$

26,293

 

Total equity

$

1,525,873

 

 

$

1,721,455

 

Debt to assets

 

57.0

%

 

 

52.4

%

Net debt to adjusted book

 

40.5

%

 

 

39.8

%

 

 

 

 

Defense/IT Portfolio Data (as of period end)

 

 

 

Number of operating properties

 

188

 

 

 

186

 

Total operational square feet (in thousands)

 

21,339

 

 

 

20,869

 

% Occupied

 

95.9

%

 

 

94.1

%

% Leased

 

97.0

%

 

 

96.7

%

 

For the Three Months Ended

September 30,

 

For the Nine Months Ended

September 30,

2023

 

2022

 

2023

 

2022

GAAP

 

 

 

��

 

 

 

Payout ratio:

 

 

 

 

 

 

 

Net income

N/A

 

 

97.1

%

 

N/A

 

 

74.3

%

Debt ratios:

 

 

 

 

 

 

 

Net income to interest expense ratio

N/A

 

 

2.1x

 

N/A

 

 

2.9x

Debt to net income ratio

N/A

 

 

17.6x

 

N/A

 

 

N/A

 

Non-GAAP

 

 

 

 

 

 

 

Payout ratios:

 

 

 

 

 

 

 

Diluted FFO

47.3

%

 

47.1

%

 

47.6

%

 

47.0

%

Diluted FFO, as adjusted for comparability

47.3

%

 

46.9

%

 

47.5

%

 

46.8

%

Diluted AFFO

50.6

%

 

58.5

%

 

65.4

%

 

61.6

%

Debt ratios:

 

 

 

 

 

 

 

Adjusted EBITDA fixed charge coverage ratio

4.6x

 

5.1x

 

4.9x

 

5.2x

Net debt to in-place adjusted EBITDA ratio

6.2x

 

6.7x

 

N/A

 

 

N/A

 

Net debt adj. for fully-leased development to in-place adj. EBITDA ratio

5.9x

 

5.9x

 

N/A

 

 

N/A

 

 

 

 

 

 

 

 

 

Reconciliation of denominators for per share measures

 

 

 

 

 

 

Denominator for diluted EPS

112,196

 

 

112,631

 

 

112,170

 

 

112,616

 

Weighted average common units

1,520

 

 

1,477

 

 

1,508

 

 

1,446

 

Dilutive effect of additional share-based compensation awards

429

 

 

 

 

422

 

 

 

Redeemable noncontrolling interests

 

 

 

 

51

 

 

 

Denominator for diluted FFO per share and as adjusted for comparability

114,145

 

 

114,108

 

 

114,151

 

 

114,062

 

COPT Defense Properties

Summary Financial Data

(unaudited)

(in thousands)

 

 

For the Three Months Ended

September 30,

 

For the Nine Months Ended

September 30,

 

 

2023

 

 

 

2022

 

 

 

2023

 

 

 

2022

 

Numerators for Payout Ratios

 

 

 

 

 

 

 

Dividends on unrestricted common and deferred shares

$

31,996

 

 

$

30,844

 

 

$

95,980

 

 

$

92,523

 

Distributions on unrestricted common units

 

432

 

 

 

406

 

 

 

1,295

 

 

 

1,217

 

Dividends and distributions on restricted shares and units

 

200

 

 

 

140

 

 

 

619

 

 

 

433

 

Total dividends and distributions for GAAP payout ratio

 

32,628

 

 

 

31,390

 

 

 

97,894

 

 

 

94,173

 

Dividends and distributions on antidilutive shares and units

 

(202

)

 

 

(127

)

 

 

(623

)

 

 

(395

)

Dividends and distributions for non-GAAP payout ratios

$

32,426

 

 

$

31,263

 

 

$

97,271

 

 

$

93,778

 

 

 

 

 

 

 

 

 

Reconciliation of net (loss) income to earnings before interest, income taxes, depreciation and amortization for real estate (“EBITDAre”), adjusted EBITDA and in-place adjusted EBITDA

 

 

 

 

 

 

 

Net (loss) income

$

(221,207

)

 

$

32,316

 

 

$

(109,167

)

 

$

126,735

 

Interest expense

 

17,798

 

 

 

15,123

 

 

 

50,759

 

 

 

44,355

 

Income tax expense

 

152

 

 

 

67

 

 

 

467

 

 

 

224

 

Real estate-related depreciation and amortization

 

37,620

 

 

 

35,247

 

 

 

112,215

 

 

 

104,323

 

Other depreciation and amortization

 

615

 

 

 

602

 

 

 

1,826

 

 

 

1,761

 

Impairment losses on real estate

 

252,797

 

 

 

 

 

 

252,797

 

 

 

 

Gain on sales of real estate from continuing and discontinued operations

 

 

 

 

(16

)

 

 

(49,392

)

 

 

(28,576

)

Adjustments from unconsolidated real estate JVs

 

1,743

 

 

 

762

 

 

 

5,006

 

 

 

2,280

 

EBITDAre

 

89,518

 

 

 

84,101

 

 

 

264,511

 

 

 

251,102

 

Credit loss expense

 

372

 

 

 

1,693

 

 

 

677

 

 

 

1,602

 

Business development expenses

 

313

 

 

 

386

 

 

 

948

 

 

 

1,097

 

Executive transition costs

 

82

 

 

 

206

 

 

 

636

 

 

 

343

 

Loss on early extinguishment of debt

 

 

 

 

 

 

 

 

 

 

342

 

Net gain on other investments

 

(25

)

 

 

 

 

 

(25

)

 

 

(564

)

Adjusted EBITDA

 

90,260

 

 

 

86,386

 

 

$

266,747

 

 

$

253,922

 

Pro forma NOI adjustment for property changes within period

 

1,647

 

 

 

 

 

 

 

 

Change in collectability of deferred rental revenue

 

 

 

 

13

 

 

 

 

 

In-place adjusted EBITDA

$

91,907

 

 

$

86,399

 

 

 

 

 

 

 

 

 

 

 

 

 

Reconciliations of tenant improvements and incentives, building improvements and leasing costs for operating properties to replacement capital expenditures

 

 

 

 

 

 

 

Tenant improvements and incentives

$

14,457

 

 

$

8,848

 

 

$

67,062

 

 

$

29,513

 

Building improvements

 

6,307

 

 

 

7,477

 

 

 

11,214

 

 

 

21,060

 

Leasing costs

 

1,902

 

 

 

3,073

 

 

 

7,194

 

 

 

7,091

 

Net (exclusions from) additions to tenant improvements and incentives

 

(813

)

 

 

(57

)

 

 

(11,981

)

 

 

2,225

 

Excluded building improvements and leasing costs

 

(731

)

 

 

(1,813

)

 

 

(1,493

)

 

 

(7,286

)

Replacement capital expenditures

$

21,122

 

 

$

17,528

 

 

$

71,996

 

 

$

52,603

COPT Defense Properties

Summary Financial Data

(unaudited)

(in thousands)

 

 

For the Three Months Ended

September 30,

 

For the Nine Months Ended

September 30,

 

 

2023

 

 

 

2022

 

 

 

2023

 

 

 

2022

 

Reconciliation of interest expense to the denominator for fixed charge coverage-Adjusted EBITDA

 

 

 

 

 

 

 

Interest expense

$

17,798

 

 

$

15,123

 

 

$

50,759

 

 

$

44,355

 

Less: Amortization of deferred financing costs

 

(639

)

 

 

(540

)

 

 

(1,899

)

 

 

(1,678

)

Less: Amortization of net debt discounts, net of amounts capitalized

 

(750

)

 

 

(612

)

 

 

(1,990

)

 

 

(1,825

)

CDP’s share of interest expense of unconsolidated real estate JVs, excluding amortization of deferred financing costs and net debt premium and loss on interest rate derivatives

 

805

 

 

 

236

 

 

 

2,369

 

 

 

700

 

Scheduled principal amortization

 

753

 

 

 

851

 

 

 

2,289

 

 

 

2,469

 

Capitalized interest

 

1,487

 

 

 

1,969

 

 

 

3,451

 

 

 

4,874

 

Denominator for fixed charge coverage-Adjusted EBITDA

$

19,454

 

 

$

17,027

 

 

$

54,979

 

 

$

48,895

 

 

 

 

 

 

 

 

 

Reconciliation of net (loss) income to NOI from real estate operations, same property NOI from real estate operations and same property cash NOI from real estate operations

 

 

 

 

 

 

 

Net (loss) income

$

(221,207

)

 

$

32,316

 

 

$

(109,167

)

 

$

126,735

 

Construction contract and other service revenues

 

(11,949

)

 

 

(34,813

)

 

 

(42,012

)

 

 

(130,570

)

Depreciation and other amortization associated with real estate operations

 

37,620

 

 

 

35,247

 

 

 

112,215

 

 

 

104,323

 

Construction contract and other service expenses

 

11,493

 

 

 

33,555

 

 

 

40,249

 

 

 

126,509

 

Impairment losses

 

252,797

 

 

 

 

 

 

252,797

 

 

 

 

General and administrative expenses

 

7,582

 

 

 

6,558

 

 

 

22,865

 

 

 

19,695

 

Leasing expenses

 

2,280

 

 

 

2,340

 

 

 

6,624

 

 

 

6,102

 

Business development expenses and land carry costs

 

714

 

 

 

552

 

 

 

1,935

 

 

 

2,036

 

Interest expense

 

17,798

 

 

 

15,123

 

 

 

50,759

 

 

 

44,355

 

Interest and other income, net

 

(2,529

)

 

 

(597

)

 

 

(6,928

)

 

 

(4,399

)

Gain on sales of real estate from continuing operations

 

 

 

 

(16

)

 

 

(49,392

)

 

 

(12

)

Loss on early extinguishment of debt

 

 

 

 

 

 

 

 

 

 

342

 

Equity in loss (income) of unconsolidated entities

 

68

 

 

 

(308

)

 

 

21

 

 

 

(1,514

)

Unconsolidated real estate JVs NOI allocable to CDP included in equity in (loss) income of unconsolidated entities

 

1,675

 

 

 

1,072

 

 

 

4,988

 

 

 

3,232

 

Income tax expense

 

152

 

 

 

67

 

 

 

467

 

 

 

224

 

Discontinued operations

 

 

 

 

 

 

 

 

 

 

(29,573

)

Revenues from real estate operations from discontinued operations

 

 

 

 

 

 

 

 

 

 

1,980

 

Property operating expenses from discontinued operations

 

 

 

 

 

 

 

 

 

 

(971

)

NOI from real estate operations

 

96,494

 

 

 

91,096

 

 

 

285,421

 

 

 

268,494

 

Non-Same Property NOI from real estate operations

 

(9,318

)

 

 

(6,611

)

 

 

(27,539

)

 

 

(18,976

)

Same Property NOI from real estate operations

 

87,176

 

 

 

84,485

 

 

 

257,882

 

 

 

249,518

 

Straight line rent adjustments and lease incentive amortization

 

15,060

 

 

 

544

 

 

 

17,684

 

 

 

(3,048

)

Amortization of acquired above- and below-market rents

 

(120

)

 

 

(97

)

 

 

(415

)

 

 

(713

)

Lease termination fees, net

 

(748

)

 

 

(591

)

 

 

(3,028

)

 

 

(1,211

)

Tenant funded landlord assets and lease incentives

 

(15,364

)

 

 

(2,026

)

 

 

(17,743

)

 

 

(4,847

)

Cash NOI adjustments in unconsolidated real estate JVs

 

(64

)

 

 

(87

)

 

 

(209

)

 

 

(277

)

Same Property Cash NOI from real estate operations

$

85,940

 

 

$

82,228

 

 

$

254,171

 

 

$

239,422

 

COPT Defense Properties

Summary Financial Data

(unaudited)

(in thousands)

 

 

 

September 30,

2023

 

December 31,

2022

Reconciliation of total assets to adjusted book

 

 

 

 

Total assets

 

$

4,239,257

 

 

$

4,257,275

 

Accumulated depreciation

 

 

1,367,473

 

 

 

1,267,434

 

Accumulated depreciation included in assets held for sale

 

 

 

 

 

6,014

 

Accumulated amortization of intangibles on property acquisitions and deferred leasing costs

 

 

228,334

 

 

 

222,779

 

CDP’s share of liabilities of unconsolidated real estate JVs

 

 

60,762

 

 

 

52,404

 

CDP’s share of accumulated depreciation and amortization of unconsolidated real estate JVs

 

 

8,664

 

 

 

6,078

 

Less: Property - operating lease liabilities

 

 

(32,940

)

 

 

(28,759

)

Less: Property - finance lease liabilities

 

 

(420

)

 

 

 

Less: Cash and cash equivalents

 

 

(204,238

)

 

 

(12,337

)

Less: CDP’s share of cash of unconsolidated real estate JVs

 

 

(1,031

)

 

 

(456

)

Adjusted book

 

$

5,665,861

 

 

$

5,770,432

 

 

 

September 30,

2023

 

December 31,

2022

 

September 30,

2022

Reconciliation of debt to net debt, net debt adjusted for fully-leased development and pro forma net debt adjusted for fully-leased development

 

 

 

 

 

 

Debt per balance sheet

 

$

2,415,783

 

 

$

2,231,794

 

 

$

2,269,834

 

Net discounts and deferred financing costs

 

 

29,980

 

 

 

23,160

 

 

 

22,984

 

CDP’s share of unconsolidated JV gross debt

 

 

52,511

 

 

 

52,100

 

 

 

26,250

 

Gross debt

 

 

2,498,274

 

 

 

2,307,054

 

 

 

2,319,068

 

Less: Cash and cash equivalents

 

 

(204,238

)

 

 

(12,337

)

 

 

(12,643

)

Less: CDP’s share of cash of unconsolidated real estate JVs

 

 

(1,031

)

 

 

(456

)

 

 

(547

)

Net debt

 

 

2,293,005

 

 

 

2,294,261

 

 

 

2,305,878

 

Costs incurred on fully-leased development properties

 

 

(124,038

)

 

 

(95,972

)

 

 

(275,359

)

Net debt adjusted for fully-leased development

 

$

2,168,967

 

 

$

2,198,289

 

 

$

2,030,519

 

 

 

 

 

 

 

 

Net debt

 

$

2,293,005

 

 

$

2,294,261

 

 

$

2,305,878

 

Pro forma debt adjustments from subsequent event transaction proceeds

 

 

N/A

 

 

 

(189,000

)

 

 

N/A

 

Pro forma net debt

 

 

2,293,005

 

 

 

2,105,261

 

 

 

2,305,878

 

Costs incurred on fully-leased development properties

 

 

(124,038

)

 

 

(95,972

)

 

 

(275,359

)

Pro forma net debt adjusted for fully-leased development

 

$

2,168,967

 

 

$

2,009,289

 

 

$

2,030,519

 

 

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