UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC  20549

_________________

FORM 8-K

_________________

CURRENT REPORT

Pursuant to Section 13 or 15(d) of

the Securities Exchange Act of 1934

Date of report (Date of earliest event reported) February 12, 2016

CORPORATE OFFICE PROPERTIES TRUST

CORPORATE OFFICE PROPERTIES, L.P.

(Exact name of registrant as specified in its charter)

Corporate Office Properties Trust		Maryland		1-14023		23-2947217
		(State or other jurisdiction of		(Commission File		(IRS Employer
		incorporation or organization)		Number)		Identification No.)
Corporate Office Properties, L.P.		Delaware		333-189188		23-2930022
		(State or other jurisdiction of		(Commission File		(IRS Employer
		incorporation or organization)		Number)		Identification No.)

6711 Columbia Gateway Drive, Suite 300

Columbia, Maryland 21046

(Address of principal executive offices)

(443) 285-5400

(Registrant’s telephone number, including area code)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2 below):

o		Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
o		Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
o		Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
o		Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

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Item 2.02.             Results of Operations and Financial Condition

 

On February 12, 2016, Corporate Office Properties Trust (the “Company”) issued a press release relating to its financial results for the three months and year ended December 31, 2015 and, in connection with this release, is making available certain supplemental information pertaining to its properties and operations as of and for the period ended December 31, 2015.  The earnings release and supplemental information are included as Exhibit 99.1 to this report and are incorporated herein by reference.

 

The information included herein, including the exhibits, shall not be deemed “filed” for any purpose, including the purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or subject to liabilities of that Section.  The information included herein, including the exhibits, shall also not be deemed incorporated by reference into any filing under the Securities Act of 1933, as amended (the “Securities Act”), or the Exchange Act regardless of any general incorporation language in such filing.

Item 9.01.             Financial Statements and Exhibits

 

(a)	Financial Statements of Businesses Acquired
	None
(b)	Pro Forma Financial Information
	None
(c)	Shell Company Transactions
	None
(d)	Exhibits

 

Exhibit Number		Exhibit Title
99.1		Corporate Office Properties Trust earnings release and supplemental information for the period ended December 31, 2015, including the press release dated February 12, 2016

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrants have duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

	CORPORATE OFFICE PROPERTIES TRUST		CORPORATE OFFICE PROPERTIES, L.P.
			By: Corporate Office Properties Trust,
			its General Partner
	/s/ Anthony Mifsud		/s/ Anthony Mifsud
	Anthony Mifsud		Anthony Mifsud
	Executive Vice President and Chief Financial Officer		Executive Vice President and Chief Financial Officer
Dated:	February 12, 2016	Dated:	February 12, 2016

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EXHIBIT INDEX

 

Exhibit Number		Exhibit Title
99.1		Corporate Office Properties Trust earnings release and supplemental information for the period ended December 31, 2015, including the press release dated February 12, 2016

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EXHIBIT 99.1

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Corporate Office Properties Trust

Summary Description

The Company: Corporate Office Properties Trust (the “Company” or “COPT”) is a self-managed office real estate investment trust (“REIT”). COPT is listed on the New York Stock Exchange under the symbol “OFC” and is a S&P MidCap 400 Company. We own, manage, lease, develop and selectively acquire office and data center properties. The majority of our portfolio is in locations that support United States Government agencies and their contractors, most of whom are engaged in national security, defense and information technology (“IT”) related activities servicing what we believe are growing, durable priority missions; we refer to these properties as Defense/IT Locations. We also own a complementary portfolio of traditional office properties located in select urban/urban-like submarkets within our regional footprint with durable Class-A office fundamentals and characteristics; these properties are included in a segment referred to as Regional Office Properties. As of December 31, 2015, we derived 84% of our core portfolio annualized revenue from Defense/IT Locations and 16% from our Regional Office Properties. As of December 31, 2015, our core portfolio of 157 office properties encompassed 17.0 million square feet and was 93.9% leased. As of the same date, we also owned one wholesale data center with a critical load of 19.25 megawatts in operations, of which 17.8 were leased to tenants with further expansion rights of up to a combined 18.9 megawatts.

Management:	Investor Relations:
Roger A. Waesche, Jr., President & CEO	Stephanie M. Krewson-Kelly, VP of IR
Stephen E. Budorick, EVP & COO	443-285-5453, stephanie.kelly@copt.com
Wayne H. Lingafelter, EVP, Development & Construction	Michelle Layne, Manager of IR
Anthony Mifsud, EVP & CFO	443-285-5452, michelle.layne@copt.com

 

Corporate Credit Rating: BBB- (Fitch), Baa3 (Moody’s), and BBB- (S&P); All Stable Outlook

Disclosure Statement: This supplemental package contains forward-looking statements within the meaning of the Federal securities laws. 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 we cannot predict with accuracy and some of which we might not even anticipate.  Although we believe that the expectations, estimates and projections reflected in such forward-looking statements are based on reasonable assumptions at the time made, we 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.  Important factors that may affect these expectations, estimates and projections include, but are not limited to: general economic and business conditions, which will, among other things, affect office property and data center demand and rents, tenant creditworthiness, interest rates, financing availability and property values; adverse changes in the real estate markets, including, among other things, increased competition with other companies; governmental actions and initiatives, including risks associated with the impact of a prolonged government shutdown or budgetary reductions or impasses, such as a reduction in rental revenues, non-renewal of leases and/or a curtailment of demand for additional space by our strategic customers; our ability to borrow on favorable terms; risks of real estate acquisition and development activities, including, among other things, risks that development projects may not be completed on schedule, that tenants may not take occupancy or pay rent or that development or operating costs may be greater than anticipated; risks of investing through joint venture structures, including risks that our joint venture partners may not fulfill their financial obligations as investors or may take actions that are inconsistent with our objectives; changes in our plans for properties or views of market economic conditions or failure to obtain development rights, either of which could result in recognition of impairment losses; our ability to satisfy and operate effectively under Federal income tax rules relating to real estate investment trusts and partnerships; the dilutive effects of issuing additional common shares; our ability to achieve projected results; and environmental requirements.  We undertake no obligation to update or supplement any forward-looking statements.  For further information, please refer to our filings with the Securities and Exchange Commission, particularly the section entitled “Risk Factors” in Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2014.

1

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Corporate Office Properties Trust

Equity Research Coverage

Firm		Senior Analyst		Phone		Email
Bank of America Merrill Lynch		Jamie Feldman		646-855-5808		james.feldman@baml.com
Capital One Securities		Chris Lucas		571-633-8151		christopher.lucas@capitalone.com
Citigroup Global Markets		Manny Korchman		212-816-1382		emmanuel.korchman@citi.com
Cowen and Company		Tom Catherwood		646-562-1382		tom.catherwood@cowen.com
Credit Suisse		Derek van Dijkum		212-325-9752		derek.vandijkum@credit-suisse.com
Evercore ISI		Steve Sakwa		212-446-9462		steve.sakwa@evercoreisi.com
Green Street Advisors		John Bejjani		949-640-8780		jbejjani@greenstreetadvisors.com
Jefferies & Co.		Jonathan Petersen		212-284-1705		jpetersen@jefferies.com
JP Morgan		Tony Paolone		212-622-6682		anthony.paolone@jpmorgan.com
KeyBanc Capital Markets		Craig Mailman		917-368-2316		cmailman@key.com
Mizuho Securities USA Inc.		Richard Anderson		212-205-8445		richard.anderson@us.mizuho-sc.com
Raymond James		Bill Crow		727-567-2594		bill.crow@raymondjames.com
RBC Capital Markets		Michael Carroll		440-715-2649		michael.carroll@rbccm.com
Robert W. Baird & Co., Inc.		Dave Rodgers		216-737-7341		drodgers@rwbaird.com
Stifel, Nicolaus & Company, Inc.		John Guinee		443-224-1307		jwguinee@stifel.com
SunTrust Robinson Humphrey, Inc.		Michael Lewis		212-319-5659		michael.lewis@suntrust.com
Wells Fargo Securities		Brendan Maiorana		443-263-6516		brendan.maiorana@wachovia.com

 

With the exception of Green Street Advisors, the above-listed firms are those whose analysts publish research material on the Company and whose estimates of our FFO per share can be tracked through Thomson’s First Call Corporation. Any opinions, estimates, or forecasts the above analysts make regarding COPT’s future performance are their own and do not represent the views, estimates, or forecasts of COPT’s management.

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Corporate Office Properties Trust

Selected Financial Summary Data

(in thousands, except per share data)

		Three Months Ended																				Years Ended
SUMMARY OF RESULTS		12/31/15				9/30/15				6/30/15				3/31/15				12/31/14				12/31/15				12/31/14
Same Office Property NOI		$	65,052			$	65,656			$	64,328			$	61,565			$	65,903			$	256,601			$	257,743
Same Office Property Cash NOI		$	64,651			$	64,375			$	62,434			$	59,802			$	63,089			$	251,262			$	249,405
NOI from real estate operations		$	85,979			$	84,789			$	81,788			$	72,024			$	77,301			$	324,580			$	299,912
Adjusted EBITDA		$	79,718			$	78,932			$	75,001			$	66,216			$	71,083			$	299,867			$	278,727
Net income attributable to COPT common shareholders		$	55,811			$	86,248			$	12,228			$	9,803			$	1,352			$	164,090			$	22,547
FFO - per NAREIT		$	35,138			$	134,989			$	52,257			$	46,567			$	37,345			$	268,951			$	177,545
FFO - as adjusted for comparability		$	55,596			$	55,635			$	55,789			$	48,076			$	50,957			$	215,096			$	195,437
Diluted FFO available to common share and common unit holders		$	30,488			$	130,241			$	47,265			$	41,997			$	32,638			$	249,454			$	155,296
Diluted FFO available to common share and common unit holders, as adjusted for comparability		$	50,858			$	50,684			$	50,783			$	43,499			$	46,191			$	195,824			$	173,110
Diluted AFFO avail. to common share and common unit holders		$	31,592			$	36,570			$	40,812			$	37,724			$	40,136			$	146,698			$	133,181
Per share - diluted:
EPS		$	0.59			$	0.91			$	0.13			$	0.10			$	0.01			$	1.74			$	0.25
FFO - NAREIT		$	0.31			$	1.32			$	0.48			$	0.43			$	0.34			$	2.55			$	1.69
FFO - as adjusted for comparability		$	0.52			$	0.52			$	0.52			$	0.45			$	0.49			$	2.01			$	1.88
Dividend per common share		$	0.275			$	0.275			$	0.275			$	0.275			$	0.275			$	1.100			$	1.100
Payout ratios:
Diluted FFO		88.6		%		21.2		%		57.2		%		64.3		%		81.8		%		43.3		%		65.8		%
Diluted FFO - as adjusted for comparability		53.1		%		53.3		%		53.2		%		62.1		%		57.8		%		55.2		%		59.0		%
Diluted AFFO		85.5		%		73.9		%		66.2		%		71.6		%		66.5		%		73.7		%		76.7		%
Rental revenue operating margin		80.0		%		77.7		%		77.5		%		73.3		%		79.0		%		77.2		%		77.6		%
CAPITALIZATION
Total Market Capitalization		$	4,429,537			$	4,394,500			$	4,649,916			$	5,093,091			$	4,882,468
Total Equity Market Capitalization		$	2,351,785			$	2,273,260			$	2,519,746			$	3,093,469			$	2,962,411
Debt, net		$	2,077,752			$	2,114,859			$	2,123,308			$	1,994,118			$	1,914,036
Debt to Adjusted book		42.9		%		43.4		%		41.6		%		40.2		%		39.6		%
Adjusted EBITDA interest coverage ratio		3.9		x		4.0		x		4.7		x		4.3		x		4.0		x		4.2		x		3.8		x
Adjusted EBITDA debt service coverage ratio		3.6		x		3.7		x		4.2		x		3.9		x		3.7		x		3.8		x		3.5		x
Adjusted EBITDA fixed charge coverage ratio		2.9		x		2.9		x		3.2		x		2.9		x		2.9		x		3.0		x		2.7		x
Adjusted debt to in-place adjusted EBITDA ratio		6.5		x		6.6		x		6.4		x		6.8		x		6.2		x		N/A				N/A
OTHER
Revenue from early termination of leases		$	400			$	159			$	661			$	603			$	611			$	1,823			$	2,034
Capitalized interest costs		$	1,510			$	1,559			$	1,950			$	2,132			$	1,740			$	7,151			$	6,065

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Corporate Office Properties Trust

Selected Consolidated Portfolio Data

	12/31/15			9/30/15			6/30/15			3/31/15			12/31/14
							(1)			(1)			(1)
# of Operating Office Properties
Total Portfolio	177			183			179			178			173
Core Portfolio	157			164			172			178			173
Same Office Properties	145			145			145			145			145
% Occupied
Total Portfolio	91.6	%		91.6	%		92.0	%		91.3	%		90.9	%
Core Portfolio	92.7	%		91.3	%		91.9	%		91.3	%		90.9	%
Same Office Properties	90.9	%		90.4	%		91.1	%		90.5	%		90.6	%
% Leased
Total Portfolio	92.7	%		92.3	%		92.9	%		92.4	%		92.4	%
Core Portfolio	93.9	%		92.1	%		92.8	%		92.4	%		92.4	%
Same Office Properties	92.3	%		91.3	%		92	%		91.8	%		92.2	%
Square Feet of Office Properties (in thousands)
Total Portfolio	18,053			18,825			17,987			17,706			16,790
Core Portfolio	17,038			17,515			17,403			17,706			16,790
Same Office Properties	14,490			14,490			14,490			14,490			14,490
Wholesale Data Center (in megawatts (“MWs”))
Initial Stabilization Critical Load	19.25			19.25			19.25			19.25			18.00
MWs Leased (2)	17.81			17.81			17.81			17.81			6.56
MWs Operational	19.25			19.25			12.50			9			9

(1)	Amounts reported exclude the effect of properties serving as collateral for debt which was in default that we extinguished via conveyance of such properties on August 28, 2015. Effective April 1, 2014, all cash flows from such properties belong to the lender.

(2)	Leased megawatts as of December 31, 2015 included 17.81 in operations, which were leased to tenants with further expansion rights of up to a combined 18.88 megawatts.

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Corporate Office Properties Trust

Quarterly Consolidated Balance Sheets

(dollars in thousands)

	12/31/15				9/30/15				6/30/15				3/31/15				12/31/14
Assets
Properties, net
Operating properties, net	$	2,920,529			$	2,932,843			$	2,896,809			$	2,888,534			$	2,751,488
Construction and redevelopment in progress, including land (1)	137,043				77,268				192,815				161,637				222,146
Land held (1)	292,176				337,489				329,176				327,981				323,280
Total properties, net	3,349,748				3,347,600				3,418,800				3,378,152				3,296,914
Assets held for sale	96,782				150,572				77,013				—				14,339
Cash and cash equivalents	60,310				3,840				37,074				4,429				6,077
Restricted cash and marketable securities	7,716				9,286				10,121				11,445				9,069
Accounts receivable, net	29,167				23,706				20,118				37,382				30,698
Deferred rent receivable, net	105,484				103,064				101,488				98,340				95,910
Intangible assets on real estate acquisitions, net	98,338				106,174				81,728				61,477				43,854
Deferred leasing costs, net (2)	53,868				51,509				53,611				55,365				53,927
Investing receivables	47,875				46,821				45,766				52,814				52,147
Prepaid expenses and other assets, net (2)	60,024				69,520				58,340				72,247				61,301
Total assets	$	3,909,312			$	3,912,092			$	3,904,059			$	3,771,651			$	3,664,236
Liabilities and equity
Liabilities:
Debt, net (2)	$	2,077,752			$	2,114,859			$	2,123,308			$	1,994,118			$	1,914,036
Accounts payable and accrued expenses	91,755				98,551				155,989				138,214				123,035
Rents received in advance and security deposits	37,148				34,504				27,371				31,551				31,011
Dividends and distributions payable	30,178				30,182				30,178				30,174				29,862
Deferred revenue associated with operating leases	19,758				20,113				15,179				14,697				13,031
Interest rate derivatives	3,160				5,844				3,121				4,282				1,855
Other liabilities	13,779				8,524				11,866				9,990				12,105
Total liabilities	2,273,530				2,312,577				2,367,012				2,223,026				2,124,935
Redeemable noncontrolling interests	19,218				19,608				19,414				18,895				18,417
Equity:
COPT’s shareholders’ equity:
Preferred shares at liquidation preference	199,083				199,083				199,083				199,083				199,083
Common shares	945				945				946				945				933
Additional paid-in capital	2,004,507				2,002,730				2,000,775				1,999,708				1,969,968
Cumulative distributions in excess of net income	(657,172		)		(686,986		)		(747,234		)		(733,459		)		(717,264		)
Accumulated other comprehensive loss	(2,838		)		(5,823		)		(3,141		)		(3,947		)		(1,297		)
Total COPT’s shareholders’ equity	1,544,525				1,509,949				1,450,429				1,462,330				1,451,423
Noncontrolling interests in subsidiaries
Common units in the Operating Partnership	52,359				50,992				48,707				49,168				51,534
Preferred units in the Operating Partnership	8,800				8,800				8,800				8,800				8,800
Other consolidated entities	10,880				10,166				9,697				9,432				9,127
Total noncontrolling interests in subsidiaries	72,039				69,958				67,204				67,400				69,461
Total equity	1,616,564				1,579,907				1,517,633				1,529,730				1,520,884
Total liabilities, redeemable noncontrolling interest and equity	$	3,909,312			$	3,912,092			$	3,904,059			$	3,771,651			$	3,664,236
(1) Please refer to pages 23-25 and 27 for detail.
(2) Prior period amounts include retrospective adjustments to reclassify net deferred financing costs in connection with new accounting guidance adopted in the current period.

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Corporate Office Properties Trust

Consolidated Statements of Operations

(in thousands, except per share data)

	Three Months Ended																				Years Ended
	12/31/15				9/30/15				6/30/15				3/31/15				12/31/14				12/31/15				12/31/14
Revenues
Rental revenue	$	107,514			$	109,080			$	105,508			$	98,238			$	97,822			$	420,340			$	386,396
Tenant recoveries and other real estate operations revenue	26,963				24,606				22,683				24,472				22,791				98,724				93,329
Construction contract and other service revenues	8,848				17,058				42,172				38,324				26,358				106,402				106,748
Total revenues	143,325				150,744				170,363				161,034				146,971				625,466				586,473
Expenses
Property operating expenses	48,498				48,897				46,418				50,681				43,334				194,494				179,934
Depreciation and amortization associated with real estate operations	36,237				38,403				33,786				31,599				31,358				140,025				136,086
Construction contract and other service expenses	7,773				16,132				41,293				37,498				24,705				102,696				100,058
Impairment losses	19,744				2,307				1,238				—				48				23,289				1,416
General and administrative expenses	6,609				5,783				5,884				6,250				7,206				24,526				24,841
Leasing expenses	1,888				1,656				1,650				1,641				1,706				6,835				6,953
Business development expenses and land carry costs	2,521				5,573				2,623				2,790				1,466				13,507				5,573
Total operating expenses	123,270				118,751				132,892				130,459				109,823				505,372				454,861
Operating income	20,055				31,993				37,471				30,575				37,148				120,094				131,612
Interest expense	(22,347		)		(24,121		)		(21,768		)		(20,838		)		(23,286		)		(89,074		)		(92,393		)
Interest and other income	1,300				692				1,242				1,283				1,148				4,517				4,923
(Loss) gain on early extinguishment of debt	(402		)		85,745				(65		)		(3		)		(9,106		)		85,275				(9,552		)
(Loss) income from continuing operations before equity in income of unconsolidated entities and income taxes	(1,394		)		94,309				16,880				11,017				5,904				120,812				34,590
Equity in income of unconsolidated entities	10				18				9				25				23				62				229
Income tax expense	(46		)		(48		)		(50		)		(55		)		(53		)		(199		)		(310		)
(Loss) income from continuing operations	(1,430		)		94,279				16,839				10,987				5,874				120,675				34,509
Discontinued operations	—				—				394				(238		)		22				156				26
(Loss) income before gain on sales of real estate	(1,430		)		94,279				17,233				10,749				5,896				120,831				34,535
Gain on sales of real estate	64,047				15				(1		)		3,986				41				68,047				10,671
Net income	62,617				94,294				17,232				14,735				5,937				188,878				45,206
Net income attributable to noncontrolling interests
Common units in the Operating Partnership	(2,172		)		(3,357		)		(476		)		(398		)		(64		)		(6,403		)		(1,006		)
Preferred units in the Operating Partnership	(165		)		(165		)		(165		)		(165		)		(165		)		(660		)		(660		)
Other consolidated entities	(916		)		(972		)		(810		)		(817		)		(804		)		(3,515		)		(3,285		)
Net income attributable to COPT	59,364				89,800				15,781				13,355				4,904				178,300				40,255
Preferred share dividends	(3,553		)		(3,552		)		(3,553		)		(3,552		)		(3,552		)		(14,210		)		(15,939		)
Issuance costs associated with redeemed preferred shares	—				—				—				—				—				—				(1,769		)
Net income attributable to COPT common shareholders	$	55,811			$	86,248			$	12,228			$	9,803			$	1,352			$	164,090			$	22,547

6

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Corporate Office Properties Trust Consolidated Statements of Operations (continued) (in thousands, except per share data)
	Three Months Ended																				Years Ended
	12/31/15				9/30/15				6/30/15				3/31/15				12/31/14				12/31/15				12/31/14
For diluted EPS computations:
Numerator for diluted EPS
Net income attributable to common shareholders	$	55,811			$	86,248			$	12,228			$	9,803			$	1,352			$	164,090			$	22,547
Dividends on dilutive convertible preferred shares	—				372				—				—				—				—				—
Common units in the Operating Partnership	—				—				—				—				—				6,403				—
Amount allocable to share-based compensation awards	(230		)		(369		)		(113		)		(122		)		(100		)		(706		)		(432		)
Numerator for diluted EPS	$	55,581			$	86,251			$	12,115			$	9,681			$	1,252			$	169,787			$	22,115
Denominator:
Weighted average common shares - basic	94,164				94,153				94,128				93,199				90,752				93,914				88,092
Dilutive convertible preferred shares	—				434				—				—				—				—				—
Common units in the Operating Partnership	—				—				—				—				—				3,692				—
Dilutive effect of share-based compensation awards	—				21				35				198				196				61				171
Weighted average common shares - diluted	94,164				94,608				94,163				93,397				90,948				97,667				88,263
Diluted EPS	$	0.59			$	0.91			$	0.13			$	0.10			$	0.01			$	1.74			$	0.25

7

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Corporate Office Properties Trust

Consolidated Statements of FFO

(in thousands)

	Three Months Ended																				Years Ended
	12/31/15				9/30/15				6/30/15				3/31/15				12/31/14				12/31/15				12/31/14
Net income	$	62,617			$	94,294			$	17,232			$	14,735			$	5,937			$	188,878			$	45,206
Real estate-related depreciation and amortization	36,237				38,403				33,786				31,599				31,358				140,025				136,086
Impairment losses on previously depreciated operating properties (1)(2)	331				2,307				1,239				233				48				4,110				1,370
Gain on sales of previously depreciated operating properties (2)	(64,047		)		(15		)		—				—				2				(64,062		)		(5,117		)
FFO - per NAREIT (3)	35,138				134,989				52,257				46,567				37,345				268,951				177,545
Operating property acquisition costs	32				2,695				361				1,046				—				4,134				—
Gain on sales of non-operating properties, net of associated income tax	—				—				1				(3,986		)		(43		)		(3,985		)		(5,578		)
Impairment losses on non-operating properties, net of associated income tax	19,413				—				—				—				—				19,413				49
Valuation allowance on tax asset associated with FFO comparability adjustments	—				—				—				—				—				—				—
Loss on interest rate derivatives	386				—				—				—				—				386				—
Loss (gain) on early extinguishment of debt (2)	402				(85,745		)		(315		)		3				9,106				(85,655		)		9,668
Issuance costs associated with redeemed preferred shares	—				—				—				—				—				—				1,769
Add: Negative FFO of properties conveyed to extinguish debt in default	—				2,766				3,419				4,271				3,493				10,456				10,928
Demolition costs on redevelopment properties	225				930				66				175				—				1,396				—
Executive transition costs	—				—				—				—				1,056				—				1,056
FFO - as adjusted for comparability (3)	$	55,596			$	55,635			$	55,789			$	48,076			$	50,957			$	215,096			$	195,437
Weighted Average Shares for period ended:
Common Shares Outstanding	94,164				94,153				94,128				93,199				90,752				93,914				88,092
Dilutive effect of share-based compensation awards	—				21				35				198				196				61				171
Common Units	3,677				3,679				3,680				3,732				3,846				3,692				3,897
Dilutive convertible preferred shares (4)	—				434				—				—				—				—				—
Dilutive noncontrolling interests - preferred units in the Operating Partnership (4)	—				176				—				—				—				—				—
Denominator for diluted FFO per share	97,841				98,463				97,843				97,129				94,794				97,667				92,160
Antidilutive preferred securities for diluted FFO, as adjusted for comparability (4)	—				(610		)		—				—				—				—				—
Denominator for diluted FFO per share, as adjusted for comparability	97,841				97,853				97,843				97,129				94,794				97,667				92,160
Weighted average common units	(3,677		)		(3,679		)		(3,680		)		(3,732		)		(3,846		)		—				(3,897		)
Dilutive convertible preferred shares	—				434				—				—				—				—				—
Denominator for diluted EPS	94,164				94,608				94,163				93,397				90,948				97,667				88,263
(1) Please see reconciliations on pages 33 through 35.
(2) Includes continuing and discontinued operations.
(3) Please refer to the section entitled “Definitions” for a definition of this measure.
(4) These securities were dilutive for Diluted FFO purposes but antidilutive for Diluted FFO as adjusted for comparability purposes.

8

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Corporate Office Properties Trust

Consolidated Statements of FFO

(in thousands)

	Three Months Ended																				Years Ended
	12/31/15				9/30/15				6/30/15				3/31/15				12/31/14				12/31/15				12/31/14
NOI from real estate operations (1)
Real estate revenues	$	134,477			$	133,686			$	128,195			$	122,710			$	120,611			$	519,068			$	479,711
Real estate property operating expenses	(48,498		)		(48,897		)		(46,407		)		(50,686		)		(43,310		)		(194,488		)		(179,799		)
NOI from real estate operations	85,979				84,789				81,788				72,024				77,301				324,580				299,912
General and administrative expenses	(6,609		)		(5,783		)		(5,884		)		(6,250		)		(7,206		)		(24,526		)		(24,841		)
Leasing expenses	(1,888		)		(1,656		)		(1,650		)		(1,641		)		(1,706		)		(6,835		)		(6,953		)
Business development expenses and land carry costs	(2,521		)		(5,573		)		(2,623		)		(2,790		)		(1,466		)		(13,507		)		(5,573		)
NOI from construction contracts and other service operations	1,075				926				879				826				1,653				3,706				6,690
Impairment losses on non-operating properties	(19,413		)		—				—				—				—				(19,413		)		(49		)
Equity in income of unconsolidated entities	10				18				9				25				23				62				229
Interest and other income	1,300				692				1,242				1,283				1,148				4,517				4,923
(Loss) gain on early extinguishment of debt	(402		)		85,745				315				(3		)		(9,106		)		85,655				(9,668		)
Gain on sales of non-operating properties	—				—				(1		)		3,986				43				3,985				5,578
Total interest expense	(22,347		)		(24,121		)		(21,768		)		(20,838		)		(23,286		)		(89,074		)		(92,393		)
Income tax expense	(46		)		(48		)		(50		)		(55		)		(53		)		(199		)		(310		)
FFO - per NAREIT (1)	35,138				134,989				52,257				46,567				37,345				268,951				177,545
Preferred share dividends	(3,553		)		(3,552		)		(3,553		)		(3,552		)		(3,552		)		(14,210		)		(15,939		)
Issuance costs associated with redeemed preferred shares	—				—				—				—				—				—				(1,769		)
Noncontrolling interests - preferred units in the Operating Partnership	(165		)		(165		)		(165		)		(165		)		(165		)		(660		)		(660		)
FFO allocable to other noncontrolling interests	(817		)		(1,027		)		(1,072		)		(670		)		(867		)		(3,586		)		(3,216		)
Basic and diluted FFO allocable to restricted shares	(115		)		(541		)		(202		)		(183		)		(123		)		(1,041		)		(665		)
Basic FFO available to common share and common unit holders (1)	30,488				129,704				47,265				41,997				32,638				249,454				155,296
Dividends on dilutive convertible preferred shares	—				372				—				—				—				—				—
Distributions on dilutive preferred units in the Operating Partnership	—				165				—				—				—				—				—
Diluted FFO available to common share and common unit holders (1)	30,488				130,241				47,265				41,997				32,638				249,454				155,296
Operating property acquisition costs	32				2,695				361				1,046				—				4,134				—
Gain on sales of non-operating properties, net of associated income tax	—				—				1				(3,986		)		(43		)		(3,985		)		(5,578		)
Impairment losses on non-operating properties, net of associated income tax	19,413				—				—				—				—				19,413				49
Loss on interest rate derivatives	386				—				—				—				—				386				—
Loss (gain) on early extinguishment of debt (1)	402				(85,745		)		(315		)		3				9,106				(85,655		)		9,668
Issuance costs associated with redeemed preferred shares	—				—				—				—				—				—				1,769
Add: Negative FFO of properties conveyed to extinguish debt in default (2)	—				2,766				3,419				4,271				3,493				10,456				10,928
Demolition costs on redevelopment properties	225				930				66				175				—				1,396				—
Executive transition costs	—				—				—				—				1,056				—				1,056
Diluted FFO comparability adjustments allocable to restricted shares	(88		)		334				(14		)		(7		)		(59		)		225				(78		)
Dividends and distributions on antidilutive preferred securities (3)	—				(537		)		—				—				—				—				—
Diluted FFO avail. to common share and common unit holders, as adj. for comparability (1)	$	50,858			$	50,684			$	50,783			$	43,499			$	46,191			$	195,824			$	173,110
(1) Please refer to the section entitled “Definitions” for a definition of this measure.
(2) Interest expense exceeded NOI from these properties by the amounts in the statement.
(3) These securities were dilutive for Diluted FFO purposes but antidilutive for Diluted FFO as adjusted for comparability purposes.

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Corporate Office Properties Trust

Consolidated Reconciliations of AFFO

(in thousands)

	Three Months Ended																				Years Ended
	12/31/15				9/30/15				6/30/15				3/31/15				12/31/14				12/31/15				12/31/14
Diluted FFO available to common share and common unit holders, as adjusted for comparability	$	50,858			$	50,684			$	50,783			$	43,499			$	46,191			$	195,824			$	173,110
Straight line rent adjustments (1)	(2,614		)		(5,706		)		(3,788		)		(1,271		)		(379		)		(13,379		)		(1,820		)
Straight line rent adjustments on properties conveyed to extinguish debt in default	—				(19		)		(24		)		(72		)		(47		)		(115		)		(142		)
Amortization of intangibles included in NOI	365				474				478				111				208				1,428				855
Share-based compensation, net of amounts capitalized	1,625				1,739				1,658				1,552				1,504				6,574				6,067
Amortization of deferred financing costs	1,127				1,203				1,146				990				1,020				4,466				4,666
Amortization of deferred financing costs on debt in default extinguished via conveyance of properties	—				—				—				—				—				—				(333		)
Amortization of net debt discounts, net of amounts capitalized	317				321				264				264				261				1,166				920
Amortization of settled debt hedges	—				—				—				—				11				—				57
Recurring capital expenditures on properties to be held	(20,086		)		(12,126		)		(9,705		)		(7,349		)		(8,633		)		(49,266		)		(50,199		)
Diluted AFFO available to common share and common unit holders (“diluted AFFO”)	$	31,592			$	36,570			$	40,812			$	37,724			$	40,136			$	146,698			$	133,181
Recurring capital expenditures
Tenant improvements and incentives on operating properties	$	6,836			$	6,374			$	6,644			$	4,390			$	7,239			$	24,244			$	29,651
Building improvements on operating properties	16,674				4,223				4,543				3,203				4,974				28,643				23,432
Leasing costs for operating properties	3,518				2,547				1,485				954				1,341				8,504				8,536
Less: Nonrecurring tenant improvements and incentives on operating properties	(393		)		205				(986		)		(264		)		(1,747		)		(1,438		)		(2,734		)
Less: Nonrecurring building improvements on operating properties	(6,551		)		(1,155		)		(1,298		)		(875		)		(3,012		)		(9,879		)		(8,281		)
Less: Nonrecurring leasing costs for operating properties	2				(68		)		(683		)		(59		)		(162		)		(808		)		(405		)
Recurring capital expenditures	$	20,086			$	12,126			$	9,705			$	7,349			$	8,633			$	49,266			$	50,199
(1) Includes COPT’s pro rata share of straight line rent adjustments from properties held through joint ventures.

10

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Corporate Office Properties Trust

Consolidated Reconciliations of Adjusted EBITDA

(in thousands)

	Three Months Ended																				Years Ended
	12/31/15				9/30/15				6/30/15				3/31/15				12/31/14				12/31/15				12/31/14
Net income	$	62,617			$	94,294			$	17,232			$	14,735			$	5,937			$	188,878			$	45,206
Interest expense on continuing and discontinued operations	22,347				24,121				21,768				20,838				23,286				89,074				92,393
Income tax expense	46				48				50				55				53				199				310
Depreciation of furniture, fixtures and equipment	597				590				527				492				513				2,206				2,404
Real estate-related depreciation and amortization	36,237				38,403				33,786				31,599				31,358				140,025				136,086
Impairment losses	19,744				2,307				1,239				233				48				23,523				1,419
Loss (gain) on early extinguishment of debt on continuing and discont. operations	402				(85,745		)		(315		)		3				9,106				(85,655		)		9,668
Gain on sales of operating properties	(64,047		)		(15		)		—				—				2				(64,062		)		(5,117		)
Gain on sales of non-operational properties	—				—				1				(3,986		)		(43		)		(3,985		)		(5,578		)
Net loss (gain) on investments in unconsolidated entities included in interest and other income	6				98				(52		)		75				(74		)		127				291
Business development expenses	1,512				1,221				1,181				861				669				4,775				2,680
Operating property acquisition costs	32				2,695				361				1,046				—				4,134				—
EBITDA from properties conveyed to extinguish debt in default	—				(15		)		(843		)		90				(828		)		(768		)		(2,091		)
Demolition costs on redevelopment properties	225				930				66				175				—				1,396				—
Executive transition costs	—				—				—				—				1,056				—				1,056
Adjusted EBITDA	$	79,718			$	78,932			$	75,001			$	66,216			$	71,083			$	299,867			$	278,727
Add back:
General, administrative and leasing expenses on continuing and discontinued operations	8,497				7,439				7,534				7,891				8,912				31,361				31,794
Land carry costs	752				727				1,015				708				797				3,202				2,893
Depreciation of FF&E	(597		)		(590		)		(527		)		(492		)		(513		)		(2,206		)		(2,404		)
Income from construction contracts and other service operations	(1,075		)		(926		)		(879		)		(826		)		(1,653		)		(3,706		)		(6,690		)
Interest and other income, excluding net loss/gain on investments in unconsolidated entities	(1,306		)		(790		)		(1,190		)		(1,358		)		(1,074		)		(4,644		)		(5,214		)
Equity in income of unconsolidated entities	(10		)		(18		)		(9		)		(25		)		(23		)		(62		)		(229		)
NOI from properties conveyed to extinguish debt in default	—				15				843				(90		)		828				768				2,091
Executive transition costs	—				—				—				—				(1,056		)		—				(1,056		)
NOI from real estate operations	$	85,979			$	84,789			$	81,788			$	72,024			$	77,301			$	324,580			$	299,912
Adjusted EBITDA	$	79,718			$	78,932			$	75,001			$	66,216			$	71,083
Proforma NOI adjustment for mid-period property changes	(1,738		)		1,309				509				1,573				—
In-place adjusted EBITDA	$	77,980			$	80,241			$	75,510			$	67,789			$	71,083

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Corporate Office Properties Trust

Consolidated Office Properties by Segment (1) - 12/31/2015

(square feet in thousands)

		Operational Properties (5)												Construction/Redevelopment (6)
		# of Properties			Operational Square Feet			Occupancy %			Leased  %			# of Properties			Construction/Redevelopment Square Feet			Operational Square Feet (5)			Total Square Feet
Core Portfolio: (2)
Defense IT Locations: (3)
Fort Meade/Baltimore Washington (“BW”) Corridor:
National Business Park		29			3,485			97.4	%		98.3	%		2			336			—			336
Howard County		33			2,695			94.6	%		95.0	%		2			74			—			74
Other		28			1,998			89.5	%		89.7	%		3			114			88			202
Total Fort Meade/BW Corridor		90			8,178			94.5	%		95.1	%		7			524			88			612
Northern Virginia (“NoVA”) Defense/IT		13			1,934			81.9	%		87.1	%		2			401			—			401
Lackland AFB (San Antonio, Texas)		7			953			100.0	%		100.0	%		—			—			—			—
Navy Support		21			1,262			72.1	%		73.9	%		—			—			—			—
Redstone Arsenal (Huntsville, Alabama)		6			632			97.0	%		98.9	%		1			19			—			19
Data Center Shells		9			1,415			100.0	%		100.0	%		3			447			—			447
Total Defense/IT Locations		146			14,374			91.9	%		93.1	%		13			1,391			88			1,479
Regional Office (4)		11			2,664			97.1	%		98.0	%		—			—			—			—
Core Portfolio		157			17,038			92.7	%		93.9	%		13			1,391			88			1,479
Properties Held for Sale		15			658			84.7	%		85.2	%		—			—			—			—
Other Properties		5			357			51.8	%		51.8	%		—			—			—			—
Total Portfolio		177			18,053			91.6	%		92.7	%		13			1,391			88			1,479

(1)	The above presentation sets forth Core Portfolio data by segment followed by data for the remainder of the portfolio.

(2)	Represents Defense/IT Locations and Regional Office properties excluding properties held for sale.

(3)	Includes properties in locations that support United States Government agencies and their contractors, most of whom are engaged in national security, defense and IT related activities servicing what we believe are growing, durable priority missions.

(4)	Includes traditional office properties located in select urban/urban-like submarkets within our regional footprint with durable Class-A office fundamentals and characteristics, as well as other properties supporting general commercial office tenants.

(5)	Number of properties includes buildings under construction or redevelopment once those buildings become partially operational. Operational square feet includes square feet in operations for a partially operational property; NOI for this property was $573,000 and cash NOI was $91,000 for the three months ended 12/31/15.

(6)	This schedule includes properties under, or contractually committed for, construction or redevelopment as of 12/31/15 and an additional property (DC-17) that became 100% leased on 1/8/16. Please refer to pages 24 and 25.

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Corporate Office Properties Trust

NOI from Real Estate Operations and Occupancy by Property Grouping

(dollars and square feet in thousands)

		12/31/15
		# of Operating Office Properties			Office Operational Square Feet							Office Property Annualized Rental Revenue (2)				Percentage of Total Office Annualized Rental Revenue			NOI from Real Estate Operations for Three Months Ended				NOI from Real Estate Operations for Year Ended
Property Grouping								% Occupied (1)		% Leased (1)									12/31/15				12/31/15
Core Portfolio:
Same Office Properties (3)		140			14,133			91.9%		93.3%		$	398,155			81.5	%		$	64,437			$	253,739
Office Properties Placed in Service (4)		14			1,746			96.5%		96.7%		40,430				8.3	%		7,867				23,891
Acquired Office Properties (5)		3			1,159			96.7%		96.7%		32,960				6.7	%		5,050				11,957
Wholesale Data Center and Other		N/A			N/A			N/A		N/A		N/A				N/A			4,220				9,188
Total Core Portfolio		157			17,038			92.7%		93.9%		471,545				96.5	%		81,574				298,775
Office Properties Held for Sale (6)		15			658			84.7%		85.2%		12,251				2.5	%		2,020				7,681
Disposed Office Properties		N/A			N/A			N/A		N/A		NA				N/A			1,770				15,262
Other Office Properties (Same Office)		5			357			51.8%		51.8%		4,866				1.0	%		615				2,862
Total Portfolio		177			18,053			91.6%		92.7%		$	488,662			100.0	%		$	85,979			$	324,580
		12/31/15
		# of Operating Office Properties			Office Operational Square Feet							Office Property Annualized Rental Revenue (2)				Percentage of Core Portfolio Annualized Rental Revenue			NOI from Real Estate Operations for Three Months Ended				NOI from Real Estate Operations for Year Ended
Property Grouping								% Occupied (1)		% Leased (1)									12/31/15				12/31/15
Core Portfolio:
Defense/IT Locations		146			14,374			91.9%		93.1%		394,974				83.8	%		65,414				249,057
Regional Office		11			2,664			97.1%		98.0%		76,571				16.2	%		12,001				40,729
Wholesale Data Center and Other		N/A			N/A			N/A		N/A		NA				NA			4,159				8,989
Total Core Portfolio		157			17,038			92.7%		93.9%		$	471,545			100.0	%		$	81,574			$	298,775

(1)	Percentages calculated based on operational square feet.

(2)	Excludes annualized rental revenue from our wholesale data center, DC-6, of $21,939 as of 12/31/15.

(3)	Properties held for long-term investment owned and 100% operational since at least 1/1/14.

(4)	Newly constructed or redeveloped properties placed in service that were not fully operational by 1/1/14.

(5)	Includes properties acquired in March, April and August of 2015.

(6)	The carrying value of operating property assets held for sale as of 12/31/15 totaled $78,882.

13

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Corporate Office Properties Trust

Real Estate Revenues, NOI and Cash NOI* by Segment

(dollars in thousands)

	Three Months Ended																				Years Ended
	12/31/15				9/30/15				6/30/15				3/31/15				12/31/14				12/31/15				12/31/14
Real estate revenues
Defense/IT Locations:
Fort Meade/BW Corridor	$	61,683			$	61,400			$	60,007			$	61,184			$	58,133			$	244,274			$	233,764
NoVA Defense/IT	11,816				12,875				13,462				11,046				11,280				49,199				48,313
Lackland Air Force Base	12,233				9,018				9,743				8,665				9,635				39,659				34,463
Navy Support	6,840				6,886				7,186				7,265				7,670				28,177				31,335
Redstone Arsenal	3,063				3,061				2,658				2,446				3,016				11,228				10,446
Data Center Shells	5,930				5,665				5,037				5,114				4,900				21,746				18,421
Total Defense/IT locations	101,565				98,905				98,093				95,720				94,634				394,283				376,742
Regional Office	25,023				26,782				24,400				21,960				21,371				98,165				85,025
Wholesale Data Center	6,099				6,078				3,820				3,035				2,661				19,032				10,430
Other	1,790				1,921				1,882				1,995				1,945				7,588				7,514
Real estate revenues	$	134,477			$	133,686			$	128,195			$	122,710			$	120,611			$	519,068			$	479,711
NOI
Defense/IT Locations:
Fort Meade/BW Corridor	$	41,476			$	41,294			$	40,527			$	37,668			$	39,472			$	160,965			$	152,940
NoVA Defense/IT	7,829				7,725				8,108				5,430				7,022				29,092				29,242
Lackland Air Force Base	4,894				4,465				4,394				3,902				3,713				17,655				14,786
Navy Support	3,686				3,599				3,796				3,867				4,507				14,948				18,759
Redstone Arsenal	2,171				2,173				1,770				1,617				2,225				7,731				7,380
Data Center Shells	5,358				5,133				4,538				4,419				4,231				19,448				16,149
Total Defense/IT locations	65,414				64,389				63,133				56,903				61,170				249,839				239,256
Regional Office	15,608				17,186				15,994				13,212				14,037				62,000				53,598
Wholesale Data Center	4,138				2,070				1,599				823				997				8,630				3,144
Other	819				1,144				1,062				1,086				1,097				4,111				3,914
NOI from real estate operations	$	85,979			$	84,789			$	81,788			$	72,024			$	77,301			$	324,580			$	299,912
Cash NOI
Defense/IT Locations:
Fort Meade/BW Corridor	$	40,475			$	40,414			$	41,727			$	37,458			$	39,541			$	160,074			$	149,644
NoVA Defense/IT	8,070				6,804				6,448				4,665				7,196				25,987				29,766
Lackland Air Force Base	4,745				3,680				3,222				3,446				3,613				15,093				14,097
Navy Support	3,597				3,565				3,579				3,832				4,450				14,573				18,272
Redstone Arsenal	2,267				1,881				1,832				1,848				2,280				7,828				7,986
Data Center Shells	5,024				4,802				3,831				4,525				4,161				18,182				20,827
Total Defense/IT locations	64,178				61,146				60,639				55,774				61,241				241,737				240,592
Regional Office	15,161				15,939				14,966				13,622				14,208				59,688				52,986
Wholesale Data Center	4,011				1,952				2,206				825				984				8,994				3,041
Other	837				1,117				1,101				1,057				1,106				4,112				3,756
Cash NOI from real estate operations	$	84,187			$	80,154			$	78,912			$	71,278			$	77,539			$	314,531			$	300,375
Straight line rent adjustments	2,254				5,217				3,446				941				56				11,858				737
Add: Amortization of deferred market rental revenue	(178		)		(293		)		(308		)		59				4				(720		)		(7		)
Less: Amortization of below-market cost arrangements	(284		)		(289		)		(262		)		(254		)		(298		)		(1,089		)		(1,193		)
NOI from real estate operations	$	85,979			$	84,789			$	81,788			$	72,024			$	77,301			$	324,580			$	299,912

*     Includes continuing and discontinued operations.

14

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Corporate Office Properties Trust

Same Office Properties (1) Average Occupancy Rates by Segment 

(square feet in thousands)

	Number of Buildings			Rentable Square Feet			Three Months Ended															Years Ended
							12/31/15			9/30/15			6/30/15			3/31/15			12/31/14			12/31/15			12/31/14
Core Portfolio:
Defense/IT Locations:
Fort Meade/BW Corridor	87			7,826			94.7	%		94.2	%		94.5	%		93.9	%		93.7	%		94.3	%		93.5	%
NoVA Defense/IT	11			1,537			77.2	%		76.5	%		76.7	%		76.1	%		81.9	%		76.6	%		83.0	%
Lackland Air Force Base	6			792			100.0	%		100.0	%		100.0	%		100.0	%		100.0	%		100.0	%		100.0	%
Navy Support	20			1,233			73.9	%		73.3	%		77.8	%		82.0	%		86.1	%		76.7	%		86.9	%
Redstone Arsenal	4			442			94.5	%		93.0	%		87.4	%		79.4	%		78.8	%		88.6	%		80.6	%
Data Center Shells	5			885			100.0	%		100.0	%		100.0	%		100.0	%		100.0	%		100.0	%		100.0	%
Total Defense/IT Locations	133			12,715			91.2	%		90.8	%		91.2	%		90.9	%		91.8	%		91.0	%		92.0	%
Regional Office	7			1,418			96.9	%		96.3	%		95.7	%		94.8	%		95.2	%		95.9	%		92.0	%
Core Portfolio Same Office Properties	140			14,133			91.8	%		91.3	%		91.6	%		91.3	%		92.2	%		91.5	%		92.0	%
Other Same Office Properties	5			357			51.6	%		52.6	%		57.0	%		56.8	%		56.8	%		54.5	%		52.8	%
Total Same Office Properties	145			14,490			90.8	%		90.4	%		90.8	%		90.4	%		91.3	%		90.6	%		91.1	%
Corporate Office Properties Trust Same Office Properties (1) Period End Occupancy Rates by Segment  (square feet in thousands)
	Number of Buildings			Rentable Square Feet
							12/31/15			9/30/15			6/30/15			3/31/15			12/31/14
Core Portfolio:
Defense/IT Locations:
Fort Meade/BW Corridor	87			7,826			94.7	%		94.2	%		94.7	%		94.0	%		93.9	%
NoVA Defense/IT	11			1,537			77.3	%		77.3	%		77.4	%		76.1	%		75.7	%
Lackland Air Force Base	6			792			100.0	%		100.0	%		100.0	%		100.0	%		100.0	%
Navy Support	20			1,233			73.8	%		73.1	%		77.4	%		81.9	%		86.0	%
Redstone Arsenal	4			442			95.8	%		93.8	%		91.3	%		79.4	%		75.6	%
Data Center Shells	5			885			100.0	%		100.0	%		100.0	%		100.0	%		100.0	%
Total Defense/IT Locations	133			12,715			91.3	%		90.9	%		91.5	%		90.9	%		91.1	%
Regional Office	7			12,715			91.3	%		96.3	%		95.9	%		95.4	%		95.2	%
Core Portfolio Same Office Properties	140			14,133			91.9	%		91.4	%		91.9	%		91.4	%		91.5	%
Other Same Office Properties	5			357			51.8	%		51.3	%		57.4	%		56.8	%		56.8	%
Total Same Office Properties	145			14,490			90.9	%		90.4	%		91.1	%		90.5	%		90.6	%

(1)    Same office properties represent buildings owned and 100% operational since at least January 1, 2014, excluding properties held for future disposition.

15

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Corporate Office Properties Trust

Same Office Property Real Estate Revenues, NOI and Cash NOI(1) by Segment

(dollars in thousands)

	Three Months Ended																				Years Ended
	12/31/15				9/30/15				6/30/15				3/31/15				12/31/14				12/31/15				12/31/14
Same office property real estate revenues
Defense/IT Locations:
Fort Meade/BW Corridor	$	58,931			$	58,965			$	58,234			$	59,448			$	56,538			$	235,578			$	230,067
NoVA Defense/IT	8,450				8,359				8,381				8,516				9,170				33,706				36,950
Lackland Air Force Base	10,564				7,912				8,670				8,307				9,634				35,453				34,462
Navy Support	6,840				6,887				7,185				7,265				7,670				28,177				31,335
Redstone Arsenal	2,113				2,111				1,951				1,799				1,856				7,974				7,824
Data Center Shells	4,390				4,423				4,350				4,530				4,525				17,693				17,817
Total Defense/IT Locations	91,288				88,657				88,771				89,865				89,393				358,581				358,455
Regional Office	11,025				11,716				11,189				11,349				11,587				45,279				43,491
Other Properties	1,246				1,349				1,322				1,395				1,379				5,312				5,214
Same office property real estate revenues	$	103,559			$	101,722			$	101,282			$	102,609			$	102,359			$	409,172			$	407,160
Same office property NOI
Defense/IT Locations:
Fort Meade/BW Corridor	$	39,354			$	39,391			$	38,967			$	36,575			$	38,295			$	154,287			$	150,615
NoVA Defense/IT	5,378				5,281				5,176				4,923				6,194				20,758				23,577
Lackland Air Force Base	3,746				3,672				3,689				3,702				3,712				14,809				14,785
Navy Support	3,706				3,604				3,770				3,893				4,513				14,973				18,811
Redstone Arsenal	1,470				1,442				1,266				1,140				1,230				5,318				5,329
Data Center Shells	3,959				3,980				3,959				3,938				3,935				15,836				15,665
Total Defense/IT Locations	57,613				57,370				56,827				54,171				57,879				225,981				228,782
Regional Office	6,824				7,463				6,730				6,741				7,170				27,758				25,984
Other Properties	615				823				771				653				854				2,862				2,977
Same office property NOI	$	65,052			$	65,656			$	64,328			$	61,565			$	65,903			$	256,601			$	257,743
Same office property cash NOI (1)
Defense/IT Locations:
Fort Meade/BW Corridor	$	38,906			$	39,237			$	37,994			$	35,698			$	36,535			$	151,835			$	145,537
NoVA Defense/IT	5,229				5,023				4,915				4,678				5,833				19,845				23,181
Lackland Air Force Base	3,748				3,573				3,591				3,603				3,614				14,515				14,098
Navy Support	3,617				3,570				3,552				3,853				4,281				14,592				18,098
Redstone Arsenal	1,521				1,294				1,242				1,231				1,268				5,288				5,696
Data Center Shells	3,802				3,793				3,770				3,727				3,701				15,092				14,567
Total Defense/IT Locations	56,823				56,490				55,064				52,790				55,232				221,167				221,177
Regional Office	7,208				7,052				6,543				6,366				6,974				27,169				25,231
Other Properties	620				833				827				646				883				2,926				2,997
Same office property cash NOI	$	64,651			$	64,375			$	62,434			$	59,802			$	63,089			$	251,262			$	249,405
Straight line rent adjustments	(339		)		946				1,117				1,216				2,293				2,940				3,725
Add: Amortization of deferred market rental revenue	28				16				15				39				(16		)		98				(89		)
Less: Amortization of below-market cost arrangements	(251		)		(256		)		(250		)		(245		)		(288		)		(1,002		)		(1,154		)
Add: Lease termination fee, gross	416				185				1,012				753				741				2,366				1,618
Add: Cash NOI on tenant-funded landlord assets	547				390				—				—				84				937				4,238
Same office property NOI	$	65,052			$	65,656			$	64,328			$	61,565			$	65,903			$	256,601			$	257,743
Percentage change in same office property cash NOI (2)	2.48		%																		0.74		%

(1)	In addition to excluding the effects of noncash rental revenues and property operating expenses, same office property cash NOI also excludes the effects of gross lease termination fees and revenue recognized as a result of tenant-funded landlord assets.

(2)	Represents the change between the current period and the same period in the prior year.

16

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Corporate Office Properties Trust

Leasing - Total Office Portfolio

Quarter Ended December 31, 2015

(square feet in thousands)

	Ft Meade/BW Corridor				NoVA Defense/IT				Navy Support				Redstone Arsenal				Regional Office				Other				Total Office
Renewed Space
Leased Square Feet	331				26				39				—				24				—				419
Expiring Square Feet	346				28				53				—				41				—				468
Vacated Square Feet	15				2				13				—				17				—				48
Retention Rate (% based upon square feet)	95.6		%		92.4		%		74.6		%		—		%		57.5		%		0.0		%		89.7		%
Statistics for Completed Leasing:
Average Committed Cost per Square Foot	$	14.15			$	18.63			$	18.26			$	—			$	7.97			$	—			$	14.46
Weighted Average Lease Term in Years	4.6				7.0				4.4				—				3.3				—				4.7
GAAP Rent Per Square Foot
Renewal GAAP Rent	$	31.96			$	30.81			$	27.86			$	—			$	27.06			$	—			$	31.23
Expiring GAAP Rent	$	27.03			$	28.98			$	30.19			$	—			$	27.24			$	—			$	27.46
Change in GAAP Rent	18.3		%		6.3		%		(7.7		)%		—		%		(0.7		)%		0.00		%		13.8		%
Cash Rent Per Square Foot
Renewal Cash Rent	$	30.70			$	30.00			$	28.34			$	—			$	26.63			$	—			$	30.20
Expiring Cash Rent	$	30.46			$	31.44			$	32.38			$	—			$	26.70			$	—			$	30.48
Change in Cash Rent	0.8		%		(4.6		)%		(12.5		)%		—		%		(0.3		)%		0.00		%		(0.9		)%
Average escalations per year	3.0		%		2.8		%		2.7		%		—		%		0.6		%		—		%		2.8		%
New Leases
Development and Redevelopment Space
Leased Square Feet	89				—				—				—				—				—				89
Statistics for Completed Leasing:
Average Committed Cost per Square Foot	$	68.86			$	—			$	—			$	—			$	—			$	—			$	68.86
Weighted Average Lease Term in Years	9.7				—				—				—				—				—				9.7
GAAP Rent Per Square Foot	$	37.92			$	—			$	—			$	—			$	—			$	—			$	37.92
Cash Rent Per Square Foot	$	34.71			$	—			$	—			$	—			$	—			$	—			$	34.71
Other New Leases (1)
Leased Square Feet	26				69				21				20				15				7				158
Statistics for Completed Leasing:
Average Committed Cost per Square Foot	$	54.24			$	73.02			$	45.77			$	54.28			$	46.04			$	2.57			$	58.20
Weighted Average Lease Term in Years	7.0				9.6				4.7				5.2				4.7				2.0				7.2
GAAP Rent Per Square Foot	$	29.59			$	27.28			$	34.20			$	22.74			$	28.91			$	26.90			$	28.14
Cash Rent Per Square Foot	$	28.38			$	26.51			$	34.80			$	22.28			$	29.37			$	26.50			$	27.65
Total Square Feet Leased	446				95				60				20				39				7				666
Average escalations per year	2.8		%		2.6		%		2.7		%		2.8		%		1.5		%		3.0		%		2.7		%

(1)     Other New Leases includes acquired first generation space and vacated second generation space.

Notes: No expiration, renewal or retenanting activity transpired in our Lackland Air Force Base and Data Center Shells segments.

Activity is exclusive of owner occupied space and leases with less than a one-year term. Weighted average lease term was calculated assuming no exercise of any existing early termination rights. Committed costs for leasing are reported above in the period of lease execution. Actual capital expenditures for leasing are reported on page 10 in the period such costs are incurred.

17

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Corporate Office Properties Trust

Leasing - Total Office Portfolio

Year Ended December 31, 2015

(square feet in thousands)

	Ft Meade/BW Corridor				NoVA Defense/IT				Navy Support				Redstone Arsenal				Data Center Shells				Regional Office				Other				Total Office
Renewed Space
Leased Square Feet	627				84				267				—				—				246				34				1,258
Expiring Square Feet	813				126				454				11				—				321				56				1,781
Vacated Square Feet	186				41				188				11				—				75				22				523
Retention Rate (% based upon square feet)	77.1		%		67.1		%		58.7		%		0.0		%		—		%		76.7		%		60.7		%		70.6		%
Statistics for Completed Leasing:
Average Committed Cost per Square Foot	$	13.22			$	20.81			$	9.05			$	—			$	—			$	12.22			$	10.76			$	12.58
Weighted Average Lease Term in Years	4.5				5.6				3.3				—				—				4.6				3.1				4.3
GAAP Rent Per Square Foot
Renewal GAAP Rent	$	27.72			$	27.82			$	25.09			$	—			$	—			$	28.05			$	21.43			$	27.06
Expiring GAAP Rent	$	24.73			$	27.37			$	26.03			$	—			$	—			$	26.78			$	18.59			$	25.42
Change in GAAP Rent	12.1		%		1.7		%		(3.6		)%		0.0		%		—		%		4.8		%		15.3		%		6.5		%
Cash Rent Per Square Foot
Renewal Cash Rent	$	27.10			$	28.79			$	25.42			$	—			$	—			$	27.32			$	20.43			$	26.72
Expiring Cash Rent	$	27.40			$	31.01			$	27.09			$	—			$	—			$	27.78			$	19.65			$	27.44
Change in Cash Rent	(1.1		)%		(7.2		)%		(6.2		)%		—		%		—		%		(1.7		)%		3.9		%		(2.6		)%
Average escalations per year	2.8		%		2.7		%		2.8		%		—		%		—		%		2.6		%		3.2		%		2.7		%
New Leases
Development and Redevelopment Space
Leased Square Feet	104				28				—				—				597				4				2				735
Statistics for Completed Leasing:
Average Committed Cost per Square Foot	$	63.25			$	98.91			$	—			$	—			$	1.34			$	62.38			$	60.92			$	14.27
Weighted Average Lease Term in Years	9.0				11.8				—				—				10.0				6.7				5.3				9.9
GAAP Rent Per Square Foot	$	36.46			$	35.57			$	—			$	—			$	16.53			$	26.07			$	27.18			$	20.15
Cash Rent Per Square Foot	$	33.59			$	31.17			$	—			$	—			$	15.11			$	25.17			$	27.00			$	18.42
Other New Leases (1)
Leased Square Feet	231				83				63				40				—				91				7				515
Statistics for Completed Leasing:
Average Committed Cost per Square Foot	$	39.58			$	70.49			$	35.41			$	33.01			$	—			$	42.15			$	2.57			$	43.49
Weighted Average Lease Term in Years	6.0				8.9				5.3				4.7				—				6.4				2.0				6.3
GAAP Rent Per Square Foot	$	25.05			$	27.26			$	29.43			$	21.51			$	—			$	26.02			$	26.90			$	25.86
Cash Rent Per Square Foot	$	24.53			$	26.70			$	29.78			$	20.62			$	—			$	25.30			$	26.50			$	25.38
Total Square Feet Leased	962				195				329				40				597				341				43				2,508
Average escalations per year	2.7		%		2.7		%		2.8		%		3.6		%		2.3		%		2.7		%		3.1		%		2.5		%

(1)     Other New Leases includes acquired first generation space and vacated second generation space.

Activity is exclusive of owner occupied space and leases with less than a one-year term. Weighted average lease term was calculated assuming no exercise of any existing early termination rights. Committed costs for leasing are reported above in the period of lease execution. Actual capital expenditures for leasing are reported on page 10 in the period such costs are incurred.

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Corporate Office Properties Trust

Lease Expiration Analysis as of 12/31/15 (1)

(dollars and square feet in thousands, except per square foot amounts)

Year and Region of Lease (2)		Number of Leases Expiring		Square Footage of Leases Expiring			Annual Rental Revenue of Expiring Leases (3)			Percentage of Total Annualized  Rental Revenue Expiring			Annual Rental Revenue of Expiring Leases per Occupied Square Foot
Core Portfolio
Ft Meade/BW Corridor		47		873			28,890			6.1	%		$33.1
NoVA Defense/IT		9		73			1,599			0.3	%		21.79
Navy Support		20		208			4,820			1.0	%		23.22
Regional Office		19		167			4,656			1.0	%		27.94
2016		95		1,321			39,965			8.5	%		30.27
Ft Meade/BW Corridor		46		1,346			42,346			9.0	%		31.46
NoVA Defense/IT		4		226			7,443			1.6	%		32.88
Navy Support		8		72			1,307			0.3	%		18.17
Redstone Arsenal		1		2			34			—	%		19.89
Regional Office		14		132			4,456			0.9	%		33.74
2017		73		1,778			55,586			11.8	%		31.26
Ft Meade/BW Corridor		51		1,017			33,906			7.2	%		33.34
NoVA Defense/IT		10		357			10,622			2.3	%		29.71
Navy Support		16		171			4,945			1.0	%		28.89
Redstone Arsenal		3		251			6,362			1.3	%		25.32
Data Center Shells		1		155			2,449			0.5	%		15.80
Regional Office		13		370			14,087			3.0	%		38.09
2018		94		2,321			72,371			15.3	%		31.17
Ft Meade/BW Corridor		49		1,476			46,381			9.8	%		31.42
NoVA Defense/IT		9		340			12,788			2.7	%		37.57
Navy Support		8		42			1,151			0.2	%		27.35
Redstone Arsenal		4		71			1,433			0.3	%		20.17
Regional Office		16		189			5,017			1.1	%		26.59
2019		86		2,118			66,770			14.2	%		31.52

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Year and Region of Lease (2)		Number of Leases Expiring		Square Footage of Leases Expiring			Annual Rental Revenue of Expiring Leases (3)			Percentage of Total Annualized  Rental Revenue Expiring			Annual Rental Revenue of Expiring Leases per Occupied Square Foot
Ft Meade/BW Corridor		50		1,249			37,968			8.1	%		30.40
NoVA Defense/IT		7		124			3,462			0.7	%		27.83
Lackland Air Force Base		2		250			9,092			1.9	%		36.32
Navy Support		15		170			6,758			1.4	%		39.74
Redstone Arsenal		3		141			2,918			0.6	%		20.76
Regional Office		14		261			6,838			1.5	%		26.16
2020		91		2,195			67,036			14.2	%		30.53
Thereafter		141		6,059			169,817			36.0	%		28.03
Core Portfolio		580		15,792			471,545			100.0	%		29.86
Office Properties Held for Sale and Other
Regional Office (Held for Sale)		44		469			10,426			60.9	%		22.22
Other		16		274			6,691			39.1	%		24.45
Office Properties Held for Sale and Other Total Average		60		743			17,117			100.0	%		23.04
Total Portfolio		640		16,535			488,662						29.55

Note: As of December 31, 2015, the weighted average lease term is 4.9 years for the Core Portfolio and the Total Portfolio.

Wholesale Data Center Lease Expiration Analysis

Year of Lease Expiration	Number of Leases Expiring	Raised Floor Square Footage		Critical Load(MW)		Total Annual Rental Revenue of Expiring Leases (3)(000's)
2016	2	22		2.00		$	4,320
2018	2	1		0.26		527
2019	1	6		1.00		2,228
2020	2	19		13.38		13,343
2022	1	6		1.00		1,521
				17.64		$	21,939

(1)	This expiration analysis reflects occupied space and includes the effect of early renewals completed on existing leases but excludes the effect of new tenant leases on square feet yet to commence as of December 31, 2015 of 209 for the portfolio, including 205 for the Core Portfolio.

(2)	A number of our leases are subject to certain early termination provisions.  The year of lease expiration was computed assuming no exercise of such early termination rights.

(3)	Total Annualized Rental Revenue is the monthly contractual base rent as of December 31, 2015 multiplied by 12 plus the estimated annualized expense reimbursements under existing leases.

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Corporate Office Properties Trust

Top 20 Office Tenants as of 12/31/15

(Based on Annualized Rental Revenue of

office properties, dollars and square feet in thousands)

Tenant		Number of Leases			Total Occupied Square Feet			Percentage of Total Occupied Square Feet			Total Annualized Rental Revenue (1)				Percentage of Total Annualized  Rental Revenue			Weighted Average Remaining Lease Term (2)
United States Government	(3)	63			3,800			23.0	%		$	141,497			29.0	%		4.8
Northrop Grumman Corporation		9			764			4.6	%		22,403				4.6	%		4.4
The Boeing Company		12			739			4.5	%		21,842				4.5	%		3.3
General Dynamics Corporation		7			528			3.2	%		19,163				3.9	%		2.3
Computer Sciences Corporation		3			279			1.7	%		10,632				2.2	%		3.2
Vadata Inc.		6			964			5.8	%		10,530				2.2	%		8.9
CareFirst, Inc.		2			300			1.8	%		10,401				2.1	%		5.9
Booz Allen Hamilton, Inc.		6			280			1.7	%		9,547				2.0	%		5.2
Wells Fargo & Company		3			190			1.1	%		8,144				1.7	%		3.0
Harris Corporation		8			218			1.3	%		6,441				1.3	%		4.7
AT&T Corporation		3			308			1.9	%		5,886				1.2	%		3.3
KEYW Corporation		2			211			1.3	%		5,803				1.2	%		8.0
Raytheon Company		6			168			1.0	%		5,781				1.2	%		3.2
Science Applications International Corp.		5			151			0.9	%		5,410				1.1	%		4.8
L-3 Communications Holdings, Inc.		1			159			1.0	%		5,390				1.1	%		3.8
Miles & Stockbridge, PC		2			157			0.9	%		4,916				1.0	%		11.7
Transamerica Life Insurance Company		1			158			1.0	%		4,591				0.9	%		6.0
University of Maryland		3			172			1.0	%		4,543				0.9	%		5.6
Engility Holdings, Inc.		3			118			0.7	%		4,458				0.9	%		1.8
Kratos Defense and Security Solutions		1			131			0.8	%		4,401				0.9	%		4.3
Subtotal Top 20 Office Tenants		146			9,795			59.2	%		311,779				63.8	%		5.0
All remaining tenants		494			6,740			40.8	%		176,883				36.2	%		4.8
Total/Weighted Average		640			16,535			100.0	%		$	488,662			100.0	%		4.9

 

(1)  Total Annualized Rental Revenue is the monthly contractual base rent as of 12/31/15, multiplied by 12, plus the estimated annualized expense reimbursements under existing leases.

(2)  A number of our leases are subject to certain early termination provisions.  The year of lease expiration was computed assuming no exercise of such early termination rights. The weighting of the lease term was computed using Total Rental Revenue.

(3)  Substantially all of our government leases are subject to early termination provisions which are customary in government leases. The weighted average remaining lease term was computed assuming no exercise of such early termination rights. As of 12/31/15, $2.5 million in annualized rental revenue (or 1.8% of our annualized rental revenue from the United States Government) was through the General Services Administration (GSA).

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Corporate Office Properties Trust

Investment Activity

(dollars and square feet in thousands)

Location		Property Segment		Business Park/Submarket		Number of Buildings			Square Feet			Transaction Date		Occupancy on Transaction Date		Transaction  Price
Operating Property Acquisitions
Quarter Ended March 31,2015
250 West Pratt Street		Regional Office		Baltimore City		1			367			3/19/2015		96.2%		$	61,802
Quarter Ended June 30, 2015
2600 Park Tower Drive		NoVA Defense/IT		Other Northern Virginia		1			237			4/15/2015		100.0%		80,504
Quarter Ended September 30, 2015
100 and 30 Light Street		Regional Office		Baltimore City		1			558		(1)	8/7/2015		93.5%		121,231
Total - Year Ended December 31, 2015						3			1,162							$	263,537
Property Dispositions
Quarter Ended March 31,2015
White Marsh Land						N/A			N/A			Various				$	17,900
Other Land						N/A			N/A			Various				175
Subtotal - Quarter Ended March 31, 2015																18,075
Quarter Ended September 30, 2015
1550 Westbranch Drive		Regional Office		Tysons Corner		1			160			7/27/2015		100.0%		27,800
15000 and 15010 Conference Center Drive (2)		NoVA Defense/IT		Westfields Corporate Center		2			665			8/28/2015		25.1%		167,335
Subtotal - Quarter Ended September 30, 2015						3			825							195,135
13200 Woodland Park Road		Regional Office		Herndon		1			397			10/27/2015		100.0%		84,000
9900, 9910 and 9920 Franklin Square Drive		Regional Office		White Marsh		3			135			11/9/2015		100.0%		24,150
9690 Deereco Road and 375 W. Padonia Road		Regional Office		Hunt Valley/RTE 83 Corridor		2			240			12/17/2015		100.0%		44,500
Subtotal - Quarter Ended December 31, 2015						6			772							152,650
Total - Year Ended December 31, 2015						9			1,597							$	365,860

(1)	30 Light Street is a 560-space structured parking garage adjacent to 100 Light Street, including 10 square feet included above.

(2)	Ownership in these properties was transferred to the mortgage lender on a $150,000 nonrecourse mortgage loan that was secured by the properties. The debt obligation and accrued interest were removed from our balance sheet. The transaction price represents the amount of debt and accrued interest extinguished.

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Corporate Office Properties Trust

Construction, Redevelopment and Land Owned/Controlled as of 12/31/15

(dollars and square feet in thousands)

	Construction Projects (1)				Redevelopment Projects (2)				Land Owned/Controlled (3)				Total
Segment	Rentable Square Feet
Defense/IT Locations:
Fort Meade/BW Corridor	456				156				4,175				4,787
NoVA Defense/IT	401				—				1,614				2,015
Lackland Air Force Base	—				—				1,033				1,033
Navy Support	—				—				109				109
Redstone Arsenal	19				—				4,084				4,103
Data Center Shells	447				—				—				447
Subtotal Defense/IT Locations	1,323				156				11,015				12,494
Regional Office	—				—				1,613				1,613
Other	—				—				3,278				3,278
Total	1,323				156				15,906				17,385
	Costs to date by region
Defense/IT Locations:
Fort Meade/BW Corridor	$	80,830			$	21,688			$	124,538			$	227,056
NoVA Defense/IT	38,809				—				83,890				122,699
Lackland Air Force Base	—				—				20,201				20,201
Navy Support	—				—				2,588				2,588
Redstone Arsenal	2,677				—				14,249				16,926
Data Center Shells	42,510				—				—				42,510
Subtotal Defense/IT Locations	164,826				21,688				245,466				431,980
Regional Office	—				—				45,200				45,200
Other	—				—				51,699				51,699
Total	$	164,826			$	21,688			$	342,365			$	528,879
Reconciliation to amounts included in projects in development or held for future development, including land costs, as reported on consolidated balance sheet
Operating properties	(37,372		)		(8,540		)		(32,289		)		(78,201		)
Assets held for sale	—				—				(17,900		)		(17,900		)
Deferred leasing costs and other assets	(3,407		)		(152		)		—				(3,559		)
Projects in development or held for future development, including associated land costs (4)	$	124,047			$	12,996			$	292,176			$	429,219

(1)	Represents construction projects as listed on page 24.

(2)	Represents redevelopment projects as listed on page 25.

(3)	Represents our land owned/controlled as listed on page 27.

(4)	Represents total of costs included in lines on our consolidated balance sheet entitled “construction and redevelopment in progress, including land” and “land owned/controlled”.

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Corporate Office Properties Trust

Summary of Construction Projects as of 12/31/15 (1)

(dollars and square feet in thousands) 

		Property Segment		Park/Submarket	Total Rentable Square Feet		Percentage Leased as of 1/8/16	as of 12/31/15 (2)									Actual or Anticipated Shell Completion Date	Anticipated Operational Date (3)
								Anticipated Total Cost			Cost to Date			Cost to Date Placed in Service
	Property and Location
	310 Sentinel Way Annapolis Junction, Maryland	Ft Meade/BW Corridor		National Bus. Park	191		0%	$	54,352		$	38,838		$	9,191		1Q 15	1Q 16
	Patriot Point - DC15    Ashburn, Virginia	Data Center Shells		Ashburn	149		100%	29,750			19,482			—			1Q 16	1Q 16
	Patriot Point - DC16    Ashburn, Virginia	Data Center Shells		Ashburn	149		100%	29,840			16,478			—			2Q 16	2Q 16
	NOVA Office B    Northern Virginia	NoVA Defense/IT		Other	161		0%	41,500			30,336			3,320			2Q 15	2Q 16
	7880 Milestone Parkway (4) Hanover, Maryland	Ft Meade/BW Corridor		Arundel Preserve	120		74%	31,535			29,356			24,861			3Q 15	3Q 16
	Patriot Point - DC - 17 Ashburn, Virginia	Data Center Shells		Ashburn	149		100%	22,670			6,550			—			3Q 16	3Q 16
	2100 Redstone Gateway Huntsville, Alabama	Redstone Arsenal		Redstone Gateway	19		58%	5,033			2,677			—			2Q 16	2Q 17
	540 National Business Parkway Annapolis Junction, Maryland	Ft. Meade/BW Corridor		National Bus. Park	145		49%	43,712			12,636			—			4Q 16	4Q 17
	NOVA Office D    Northern Virginia	NoVA Defense/IT		Other	240		100%	46,525			8,473			—			1Q 18	1Q 18
	Total Under Construction				1,323		65%	$	304,917		$	164,826		$	37,372

(1)	Includes properties under active construction and properties that we were contractually committed to construct as of 12/31/15 and an additional property (DC-17) that became 100% leased on 1/8/16.

(2)	Cost includes land, construction, leasing costs and allocated portion of structured parking and other shared infrastructure, if applicable.

(3)	Anticipated operational date is the estimated date when leases have commenced on 100% of a property’s space or one year from the cessation of major construction activities.

(4)	Although classified as under construction, 88 square feet were operational as of 12/31/15; NOI for this property was $573 and cash NOI was $91 for the three months ended 12/31/15.

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Corporate Office Properties Trust

Summary of Redevelopment Projects as of 12/31/15

(dollars and square feet in thousands) 

		Property Segment	Park/Submarket	Total Rentable Square Feet		Percentage Leased as of 12/31/15 (3)	as of 12/31/15 (1)															Actual or Anticipated Shell Completion Date	Anticipated Operational Date (2)
							Historical Basis, Net			Incremental Redevelopment Cost			Anticipated Total Cost			Cost to Date			Cost to Date Placed in Service
Property and Location
6708 Alexander Bell Drive Columbia, Maryland		Ft Meade/BW Corridor	Howard Co. Perimeter	52		0%	$	2,662		$	8,646		$	11,308		$	7,918		$	2,662		1Q 15	1Q 16
7134 Columbia Gateway Drive Columbia, Maryland		Ft Meade/BW Corridor	Howard Co. Perimeter	22		0%	1,755			2,394			4,149			1,923			1,755			1Q 16	1Q 17
1201 Winterson Rd (AS 13) Linthicum, Maryland		Ft Meade/BW Corridor	Airport Square	68		0%	3,079			12,772			15,851			10,100			3,079			1Q 16	1Q 17
Airport Landing (3) Linthicum, Maryland		Ft Meade/BW Corridor	Airport Square
Retail Buildings				14		56%	785			5,598			6,383			1,488			785			3Q 16	3Q 17
Pad Site				N/A		100%	259			405			664			259			259			4Q 16	4Q 16
Total Under Redevelopment				156		8%	$	8,540		$	29,815		$	38,355		$	21,688		$	8,540

 

(1) Cost includes construction, leasing costs and allocated portion of shared infrastructure.

(2) Anticipated operational date is the estimated date when leases have commenced on 100% of a property’s space or one year from the cessation of major construction activities.

(3) The redevelopment of Airport Landing involves the demolition of the existing office property to develop a retail center to serve the submarket. Upon completion, the project’s retail amenities will include: newly constructed retail property totaling 14 square feet; and a 1.2 acre retail pad site already under ground lease for 20 years to a national food service provider. The total percentage leased reported above for redevelopment projects was calculated by including the square footage of the building to be constructed on the pad site by the lessee.

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Corporate Office Properties Trust

Office Property Construction and Redevelopment Place in Service as of 12/31/15

(square feet in thousands)

 

			Rentable Square Feet of Property												Space Placed in Service Percentage Leased as of 12/31/15
					Square Feet Placed in Service
	Property Segment				Year 2015
Property and Location		Park/Submarket			1st Quarter		2nd Quarter		3rd Quarter		4th Quarter		Total
Ashburn Crossing - DC10 Ashburn, Virginia	Data Center Shells	Ashburn	121		121		—		—		—		121		100%
NOVA Office A Ashburn, Virginia	NoVA Defense/IT	Ashburn	159		159		—		—		—		159		100%
Sentry Gateway - Z San Antonio, Texas	Lackland Air Force Base	San Antonio	160		160		—		—		—		160		100%
731 Arbor Way (Hillcrest III) Blue Bell, Pennsylvania	Regional Office	Philadelphia	141		111		—		30		—		141		100%
7400 Redstone Huntsville, Alabama	Redstone Arsenal	Huntsville	69		—		69		—		—		69		100%
7880 Milestone Parkway Hanover, Maryland	Ft Meade/BW Corridor	Arundel Preserve	120		—		—		88		—		88		100%
Southpoint Manassas DC12 Manassas, Virginia	Data Center Shells	Other Northern Virginia	150		—		—		150		—		150		100%
Southpoint Manassas DC14 Manassas, Virginia	Data Center Shells	Other Northern Virginia	150		—		—		150		—		150		100%
44417 Pecan Court St. Mary’s County, Maryland	Navy Support	St. Mary’s County	29		—		—		29		—		29		0%
Total Construction/Redevelopment Placed Into Service					551		69		447		—		1,067		97%

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Corporate Office Properties Trust

Summary of Land Owned/Controlled as of 12/31/15 (1)

Location	Acres			Estimated Developable Square Feet (in thousands)			Costs to Date (2)
Land Owned/Controlled for Future Development
Defense IT Locations:
Fort Meade/BW Corridor:
National Business Park	233			1,956
Howard County	27			590
Other	143			1,629
Total Fort Meade/BW Corridor	403			4,175
NoVA Defense/IT	64			1,614
Lackland AFB	68			1,033
Navy Support	44			109
Redstone Arsenal (3)	428			4,084
Total Defense/IT Locations	1,007			11,015
Regional Office	52			1,613
Total land owned/controlled for future development	1,059			12,628			$	258,377
Other land owned/controlled	282			3,278			33,799
Land held for sale	98			1,675			17,900
Land owned/controlled	1,439			17,581			$	310,076
Land held for sale	(98	)		(1,675	)		(17,900		)
Land held, net	1,341			15,906			$	292,176

(1)	This land inventory schedule excludes all properties listed as construction or redevelopment as detailed on pages 24 and 25, and includes properties under ground lease to us.

(2)	Represents total costs to date included in “projects in development or held for future development, including associated land costs,” as reported on page 23 (in thousands).

(3)

Includes land owned under a long-term master lease agreement to LW Redstone Company, a consolidated joint venture (see page 32). As this land is developed in the future, the joint venture will execute site-specific leases under the master lease agreement. Rental payments will commence under the site-specific leases as cash rents under tenant leases commence at the respective properties. The costs incurred on this land totaled $14,200 as of 12/31/15.

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Corporate Office Properties Trust

Quarterly Equity Analysis

(dollars, shares and units in thousands, except per share amounts)

SHAREHOLDER CLASSIFICATION	Common Shares			Common Units			As if Converted Preferred Shares/Units			Total			Diluted Ownership % of Total
As of December 31, 2015:
Insiders	581			309			—			890			0.90	%
Non-insiders	93,951			3,368			610			97,929			99.10	%
Total	94,532			3,677			610			98,819			100.00	%

COMMON EQUITY - End of Quarter	12/31/15				9/30/15				6/30/15				3/31/15				12/31/14
Unrestricted Common Shares	94,154				94,145				94,133				94,097				92,865
Restricted Common Shares	378				389				397				439				390
Common Shares	94,532				94,534				94,530				94,536				93,255
Common Units	3,677				3,677				3,680				3,680				3,838
Total	98,209				98,211				98,210				98,216				97,093
End of Quarter Common Share Price	$	21.83			$	21.03			$	23.54			$	29.38			$	28.37
Market Value of Common Shares/Units	$	2,143,902			$	2,065,377			$	2,311,863			$	2,885,586			$	2,754,528
PREFERRED EQUITY - End of Quarter
Nonconvertible Preferred Equity - liquidation preference
Redeemable Series L Shares Outstanding - 7.375%	$	172,500			$	172,500			$	172,500			$	172,500			$	172,500
Convertible Preferred Equity - liquidation preference
Convertible Series I Units - 7.5% (1)	8,800				8,800				8,800				8,800				8,800
Convertible Series K Shares - 5.6% (2)	26,583				26,583				26,583				26,583				26,583
Total Convertible Preferred Equity	35,383				35,383				35,383				35,383				35,383
Total Liquidation Preference of Preferred Equity	$	207,883			$	207,883			$	207,883			$	207,883			$	207,883
CAPITALIZATION
Liquidation Preference of Preferred Shares/Units	$	207,883			$	207,883			$	207,883			$	207,883			$	207,883
Market Value of Common Shares/Units	2,143,902				2,065,377				2,311,863				2,885,586				2,754,528
Total Equity Market Capitalization	$	2,351,785			$	2,273,260			$	2,519,746			$	3,093,469			$	2,962,411

(1) 352 units outstanding with a liquidation preference of $25 per unit, and convertible into 176 common units.

(2) 532 shares outstanding with a liquidation preference of $50 per share, and convertible into 434 shares.

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Corporate Office Properties Trust

Debt Analysis as of December 31, 2015

(dollars in thousands)

	Stated Rate		GAAP  Effective Rate		Weighted Average Maturity (in Years)		Maximum Availability				Outstanding Balance				Carrying Value				Average Stated Interest Rates for Three Months Ended 12/31/15 (1)
Debt Outstanding
Fixed rate
Secured debt	6.08%		6.04%		3.5						$	281,702			$	281,208			6.1%
Senior Unsecured Notes	4.32%		4.47%		7.6						1,200,000				1,185,842				4.3%
Other Unsecured Debt	0.00%		6.50%		10.3						2,061				1,508				0.0%
Total fixed rate debt	4.65%		4.77%		6.8						$	1,483,763			$	1,468,558			4.7%
Variable rate
Secured debt	2.20%		2.20%		1.6						$	49,967			$	49,792			2.3%
Unsecured Revolving Credit Facility	1.59%		1.59%		3.3		$	800,000			43,500				43,500				1.4%
Unsecured Term Loans	1.92%		1.92%		4.7						520,000				515,902				1.8%
Total variable rate debt	1.92%		1.92%		4.3						$	613,467			$	609,194			2.9%	(1)(2)
Total Consolidated Debt outstanding	3.85%		3.94%		6.1						$	2,097,230			$	2,077,752			4.1%	(1)(2)
Variable Rate Loans Subject to Interest Rate Swaps (1)											$	413,941							1.0%
% of Fixed Rate Loans (1)											90.5		%
% of Variable Rate Loans (1)											9.5		%
											100.0		%
Recourse debt											$	1,859,129			$	1,839,685
Nonrecourse debt											238,101				238,067
Total Consolidated Debt outstanding											$	2,097,230			$	2,077,752

 

(1)	Includes the effect of interest rate swaps in effect during certain of the periods set forth above that hedge the risk of changes in interest rates on certain of our one-month LIBOR-based variable rate debt.

(2) Includes facility commitment fees incurred for our Unsecured Revolving Credit Facility.

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Corporate Office Properties Trust

Debt Analysis  (continued)

(dollars in thousands)

	December 31, 2015
Secured debt	$	331,000
Unsecured debt	1,746,752
Numerator for debt to adjusted book ratio	$	2,077,752
Less: Cash and cash equivalents	(60,310		)
Numerator for adjusted debt to in-place adjusted EBITDA ratio	$	2,017,442
Unencumbered adjusted book	$	4,270,416
Encumbered adjusted book	570,538
Total adjusted book	$	4,840,954
# of Operating Office Properties
Unencumbered	158
Encumbered	19
Total	177
Square Feet of Office Properties (in thousands)
Unencumbered	15,398
Encumbered	2,655
Total	18,053
	Three Months Ended 12/31/15
NOI from unencumbered real estate operations	$	72,091
NOI from encumbered real estate operations	13,888
Total NOI from real estate operations	$	85,979
Unencumbered adjusted EBITDA	$	65,848
Encumbered adjusted EBITDA (1)	13,870
Total adjusted EBITDA (1)	$	79,718
Debt ratios (coverage ratios excluding capitalized interest) — All coverage computations include discontinued operations	Three Months Ended 12/31/15
Adjusted EBITDA debt service coverage ratio	3.6x
Adjusted EBITDA fixed charge coverage ratio	2.9x
Adjusted debt to in-place adjusted EBITDA ratio	6.5x
	As of and for Three Months Ended 12/31/15
Unsecured Senior Notes Covenants	Actual				Required
Total Debt / Total Assets	44.3%				Less than 60%
Secured Debt / Total Assets	7.0%				Less than 40%
Debt Service Coverage	3.2x				Greater than 1.5x
Unencumbered Assets / Unsecured Debt	236.1%				Greater than 150%

(1)	Except for Unsecured Senior Notes Covenants, amounts exclude the effect of properties that served as collateral for debt in default that we extinguished via conveyance of such properties.

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Corporate Office Properties Trust

Debt Maturity Schedule

(dollars in thousands) 

			GAAP
	Stated		Effective
	Rate		Rate		2016			2017			2018			2019			2020			Thereafter			Total
Unsecured Debt
Unsecured Revolving Credit Facility (1)	LIBOR + 1.20%		1.59%		$	—		$	—		$	—		$	43,500		$	—		$	—		$	43,500
Senior Unsecured Notes
Due 6/15/21	3.70%		3.85%		—			—			—			—			—			300,000			300,000
Due 5/15/23	3.60%		3.70%		—			—			—			—			—			350,000			350,000
Due 2/15/24	5.25%		5.49%		—			—			—			—			—			250,000			250,000
Due 7/1/25	5.00%		5.15%		—			—			—			—			—			300,000			300,000
Total Senior Unsecured Notes					—			—			—			—			—			1,200,000			1,200,000
Other Unsecured Debt
2019 maturities	LIBOR + 2.10%		2.34%		—			—			—			120,000			—			—			120,000
2020 maturities	LIBOR + 1.40%		1.65%		—			—			—			—			300,000			—			300,000
2022 maturities (2)	LIBOR + 1.80%		2.23%		—			—			—			—			—			100,000			100,000
2026 maturities	0.00%		6.50%		200			200			200			200			200			1,061			2,061
Total Other Unsecured Debt					200			200			200			120,200			300,200			101,061			522,061
Total Unsecured Debt					$	200		$	200		$	200		$	163,700		$	300,200		$	1,301,061		$	1,765,561
Secured Debt
Fixed Rate Secured Debt
2016 maturities	7.22%		7.21%		$	169,343		$	—		$	—		$	—		—			$	—		$	169,343
2019 maturities	7.87%		6.76%		356			385			417			412			—			—			1,570
Thereafter	4.31%		4.24%		1,829			2,298			2,400			2,506			2,614			99,142			110,789
Total Fixed Rate Secured Debt					171,528			2,683			2,817			2,918			2,614			99,142			281,702
Variable Rate Secured Debt
2016 maturities	LIBOR + 2.0%		2.24%		36,026			—			—			—			—			—			36,026
2020 maturities	LIBOR + 1.85%		2.09%		355			369			383			396			12,438			—			13,941
Variable Rate Secured Debt					36,381			369			383			396			12,438			—			49,967
Total Secured Debt					$	207,909		$	3,052		$	3,200		$	3,314		$	15,052		$	99,142		$	331,669
Total Debt					$	208,109		$	3,252		$	3,400		$	167,014		$	315,252		$	1,400,203		$	2,097,230
Fixed Rate Debt	4.65%		4.77%		$	171,728		$	2,883		$	3,017		$	3,118		$	2,814		$	1,300,203		$	1,483,763
Variable Rate Debt	1.92%		1.92%		36,381			369			383			163,896			312,438			100,000			613,467
Total Debt					$	208,109		$	3,252		$	3,400		$	167,014		$	315,252		$	1,400,203		$	2,097,230
Balloon Payments					$	201,713		$	—		$	—		$	163,500		$	312,132		$	1,391,229		$	2,068,574
Scheduled Principal Amortization					6,396			3,252			3,400			3,514			3,120			8,974			28,656
Total Debt					$	208,109		$	3,252		$	3,400		$	167,014		$	315,252		$	1,400,203		$	2,097,230
											Net debt discounts and deferred financing costs												(19,478		)
											Numerator for debt to adjusted book												$	2,077,752

(1)	Matures in May 2019, and may be extended by two six-month periods at our option, subject to certain conditions.

(2)	An additional $150,000 in borrowings is available to be drawn under this loan through September 2016.

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Corporate Office Properties Trust

Consolidated Joint Ventures as of 12/31/15

(dollars and square feet in thousands) 

Operating Properties	Operational Square Feet			Occupancy %	Leased %	Total Assets (1)			Venture Level Debt			% COPT Owned
Suburban Maryland:
M Square Associates, LLC (2 properties)	242			100.0%	100.0%	$	53,469		$	36,026		50%
Huntsville, AL:
LW Redstone Company, LLC (5 properties)	495			100.0%	100.0%	85,757			50,742			85%
Total/Average	737			100.0%	100.0%	$	139,226		$	86,768
NOI of Operating Properties for the Three Months Ended 12/31/15 (2)	$	3,271
NOI of Operating Properties for the Year Ended 12/31/15 (2)	$	12,037

 

Non-operational Properties	Estimated Developable Square Feet				Total Assets (1)			Venture Level Debt			% COPT Owned
Suburban Maryland:
M Square Research Park	525				$	2,986		$	—		50%
Huntsville, Alabama:
Redstone Gateway (3)	4,084				61,855			—			85%
Washington, DC:
Stevens Place	185				5,284			—			95%
Total	4,794				$	70,125		$	—

 

(1)  Total assets includes the total assets recorded on the books of the consolidated joint venture plus any outside investment basis related to the applicable joint ventures.

(2)	Represents gross NOI of the joint venture operating properties before allocation to joint venture partners.

(3)	Total assets include $44.9 million due from the City of Huntsville (including accrued interest) in connection with infrastructure costs funded by the joint venture.

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Corporate Office Properties Trust Supplementary Reconciliations of Non-GAAP Measures (dollars in thousands)
	Three Months Ended																				Years Ended
	12/31/15				9/30/15				6/30/15				3/31/15				12/31/14				12/31/15				12/31/14
GAAP revenues from real estate operations from continuing operations	$	134,477			$	133,686			$	128,191			$	122,710			$	120,613			$	519,064			$	479,725
Revenues from discontinued operations	—				—				4				—				(2		)		4				(14		)
Real estate revenues	$	134,477			$	133,686			$	128,195			$	122,710			$	120,611			$	519,068			$	479,711
GAAP property operating expenses from continuing operations	$	48,498			$	48,897			$	46,418			$	50,681			$	43,334			$	194,494			$	179,934
Property operating expenses from discontinued operations	—				—				(11		)		5				(24		)		(6		)		(135		)
Real estate property operating expenses	$	48,498			$	48,897			$	46,407			$	50,686			$	43,310			$	194,488			$	179,799
Discontinued Operations
Revenues from real estate operations	$	—			$	—			$	4			$	—			$	(2	)		$	4			$	(14	)
Property operating expenses	—				—				11				(5		)		24				6				135
Gain (loss) on early extinguishment of debt	—				—				380				—				—				380				(116		)
Impairment (losses) recoveries	—				—				(1		)		(233		)		—				(234		)		(3		)
Gain on sales of depreciated real estate properties	—				—				—				—				—				—				24
Discontinued operations	$	—			$	—			$	394			$	(238	)		$	22			$	156			$	26
Gain on sales of real estate, net, per statements of operations	$	64,047			$	15			$	(1	)		$	3,986			$	41			$	68,047			$	10,671
Gain on sales of real estate from discontinued operations	—				—				—				—				—				—				24
Gain on sales of real estate from continuing and discont. operations	64,047				15				(1		)		3,986				41				68,047				10,695
Gain on sales of non-operating properties	—				—				1				(3,986		)		(43		)		(3,985		)		(5,578		)
Gain on sales of operating properties	$	64,047			$	15			$	—			$	—			$	(2	)		$	64,062			$	5,117
Impairment losses, per statements of operations	$	19,744			$	2,307			$	1,238			$	—			$	48			$	23,289			$	1,416
Impairment losses on discontinued operations	—				—				1				233				—				234				3
Total impairment losses	$	19,744			$	2,307			$	1,239			$	233			$	48			$	23,523			$	1,419
Impairment losses on previously depreciated operating properties	(331		)		(2,307		)		(1,239		)		(233		)		(48		)		(4,110		)		(1,370		)
Impairment losses on non-operating properties	$	19,413			$	—			$	—			$	—			$	—			$	19,413			$	49

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Corporate Office Properties Trust Supplementary Reconciliations of Non-GAAP Measures (continued) (dollars in thousands)
	Three Months Ended																				Years Ended
	12/31/15				9/30/15				6/30/15				3/31/15				12/31/14				12/31/15				12/31/14
Total interest expense	$	22,347			$	24,121			$	21,768			$	20,838			$	23,286			$	89,074			$	92,393
Less: Amortization of deferred financing costs	(1,127		)		(1,203		)		(1,146		)		(990		)		(1,020		)		(4,466		)		(4,666		)
Less: Amortization of net debt discounts and prem., net of amounts capitalized	(317		)		(321		)		(264		)		(264		)		(261		)		(1,166		)		(920		)
Less: Loss on interest rate derivatives	(386		)		—				—				—				—				(386		)		—
Less: Interest expense on debt in default extinguished via conveyance of properties	—				(2,781		)		(4,261		)		(4,182		)		(4,320		)		(11,224		)		(12,684		)
Denominator for interest coverage	20,517				19,816				16,097				15,402				17,685				71,832				74,123
Scheduled principal amortization	1,717				1,692				1,670				1,649				1,603				6,728				6,517
Denominator for debt service coverage	22,234				21,508				17,767				17,051				19,288				78,560				80,640
Capitalized interest	1,510				1,559				1,950				2,132				1,740				7,151				6,065
Preferred share dividends - redeemable non-convertible	3,553				3,552				3,553				3,552				3,552				14,210				15,939
Preferred unit distributions	165				165				165				165				165				660				660
Denominator for fixed charge coverage	$	27,462			$	26,784			$	23,435			$	22,900			$	24,745			$	100,581			$	103,304
Preferred share dividends	$	3,553			$	3,552			$	3,553			$	3,552			$	3,552			$	14,210			$	15,939
Preferred unit distributions	165				165				165				165				165				660				660
Common share dividends	25,998				26,000				26,002				25,998				25,638				103,998				97,944
Common unit distributions	1,011				1,011				1,012				1,012				1,055				4,046				4,270
Total dividends/distributions	$	30,727			$	30,728			$	30,732			$	30,727			$	30,410			$	122,914			$	118,813
Common share dividends	$	25,998			$	26,000			$	26,002			$	25,998			$	25,638			$	103,998			$	97,944
Common unit distributions	1,011				1,011				1,012				1,012				1,055				4,046				4,270
Dividends and distributions on dilutive preferred securities	—				537				—				—				—				—				—
Dividends and distributions for diluted FFO payout ratio	27,009				27,548				27,014				27,010				26,693				108,044				102,214
Dividends and distributions on antidilutive preferred securities	—				(537		)		—				—				—				—				—
Dividends and distributions for other payout ratios	$	27,009			$	27,011			$	27,014			$	27,010			$	26,693			$	108,044			$	102,214

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Corporate Office Properties Trust Supplementary Reconciliations of Non-GAAP Measures (continued) (dollars in thousands)
	Three Months Ended
	12/31/15				9/30/15				6/30/15				3/31/15				12/31/14
Total Assets	$	3,909,312			$	3,912,092			$	3,904,059			$	3,771,651			$	3,664,236
Accumulated depreciation	700,363				675,747				723,470				724,539				703,083
Accumulated depreciation included in assets held for sale	18,317				65,872				24,930				—				—
Accumulated amort. of real estate intangibles and deferred leasing costs	195,506				189,571				211,522				219,437				214,611
Accumulated amortization of real estate intangibles and deferred leasing costs included in assets held for sale	17,456				26,260				15,271				—				—
Less: Adj. book assoc. with properties conveyed to extinguish debt in default	—				—				(130,471		)		(131,623		)		(131,118		)
Adjusted book	$	4,840,954			$	4,869,542			$	4,748,781			$	4,584,004			$	4,450,812
Debt, net	$	2,077,752			$	2,114,859			$	2,123,308			$	1,994,118			$	1,914,036
Less: Debt in default extinguished via conveyance of properties	—				—				(150,000		)		(150,000		)		(150,000		)
Numerator for debt to adjusted book ratio	2,077,752				2,114,859				1,973,308				1,844,118				1,764,036
Less: Cash and cash equivalents	(60,310		)		(3,840		)		(37,074		)		(4,429		)		(6,077		)
Adjusted debt	$	2,017,442			$	2,111,019			$	1,936,234			$	1,839,689			$	1,757,959

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Corporate Office Properties Trust

Definitions

Non-GAAP Measures

We believe that the measures defined below that are not determined in accordance with generally accepted accounting principles (“GAAP”) are helpful to investors in measuring our performance and comparing it to that of other real estate investment trusts (“REITs”).  Since these measures exclude certain items includable in their respective most comparable GAAP measures, reliance on the measures has limitations; management compensates for these limitations by using the measures simply as supplemental measures that are weighed in balance with other GAAP and non-GAAP measures.  These measures are not necessarily indications of our cash flow available to fund cash needs.  Additionally, they should not be used as an alternative to the respective most comparable GAAP measures when evaluating our financial performance or to cash flow from operating, investing and financing activities when evaluating our liquidity or ability to make cash distributions or pay debt service.

 

Adjusted book

Defined as total assets presented on our consolidated balance sheet excluding the effect of accumulated depreciation on real estate properties, accumulated amortization of intangible assets on real estate acquisitions and accumulated amortization of deferred leasing costs, and excluding the effect of properties that served as collateral for debt in default that we extinguished via conveyance of such properties.

Adjusted debt

Defined as the carrying value of our debt, as adjusted to subtract cash and cash equivalents as of the end of the period and debt in default that was extinguished via conveyance of properties.

Adjusted debt to in-place adjusted EBITDA ratio

Defined as adjusted debt (as defined above) divided by in-place adjusted EBITDA (defined below) for the three month period that is annualized by multiplying by four.

Adjusted earnings before interest, income taxes, depreciation and amortization (“Adjusted EBITDA”) 

Adjusted EBITDA is net income (loss) adjusted for the effects of interest expense, depreciation and amortization, impairment losses, gain on sales of properties, gain or loss on early extinguishment of debt, net gain on unconsolidated entities, operating property acquisition costs, loss on interest rate derivatives, income taxes, business development expenses, demolition costs on redevelopment properties and executive transition costs, and excluding the effect of properties that served as collateral for debt in default that we extinguished via conveyance of such properties.  We believe that adjusted EBITDA is a useful supplemental measure of performance for assessing our un-levered performance.  We believe that net income is the most directly comparable GAAP measure to adjusted EBITDA.

 

Amortization of acquisition intangibles included in NOI 

Represents the amortization of intangible asset and liability categories that is included in net operating income, including amortization of above- or below-market leases and above- or below-market cost arrangements.

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

This measure is FFO adjusted to subtract (1) preferred share dividends, (2) income attributable to noncontrolling interests through ownership of preferred units in Corporate Office Properties, L.P. (the “Operating Partnership”) or interests in other consolidated entities not owned by us, (3) depreciation and amortization allocable to noncontrolling interests in other consolidated entities, (4) Basic FFO allocable to restricted shares and (5) issuance costs associated with redeemed preferred shares.  With these adjustments, Basic FFO represents FFO available to common shareholders and holders of common units in the Operating Partnership (“common units”).  Common units are substantially similar to our common shares of beneficial interest (“common shares”) and are exchangeable into common shares, subject to certain conditions.  We believe that Basic FFO is useful to investors due to the close correlation of common units to common shares.  We believe that net income is the most directly comparable GAAP measure to Basic FFO.

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Corporate Office Properties Trust

Definitions

Cash net operating income (“Cash NOI”) 

Defined as NOI from real estate operations adjusted to eliminate the effects of noncash rental revenues and property operating expenses (comprised of straight-line rental adjustments, which includes the amortization of tenant incentives, and amortization of acquisition intangibles included in FFO and NOI).  Under GAAP, rental revenue is recognized evenly over the term of tenant leases.  Many leases provide for contractual rent increases and the effect of accounting under GAAP for such leases is to accelerate the recognition of lease revenue.  Since some leases provide for periods under the lease in which rental concessions are provided to tenants, the effect of accounting under GAAP is to allocate rental revenue to such periods.  Also under GAAP, when a property is acquired, we allocate the acquisition to certain intangible components (including above- and below-market leases and above- or below-market cost arrangements), which are then amortized into FFO and NOI over their estimated lives.  We believe that Cash NOI is an important supplemental measure of operating performance for a REIT’s operating real estate because it makes adjustments to NOI for the above stated items that are not associated with cash to us.  As is the case with NOI, the measure is useful in our opinion in evaluating and comparing the performance of geographic segments, same-office property groupings and individual properties.  We believe that net income is the most directly comparable GAAP measure to Cash NOI.

Debt to Adjusted book 

Defined as debt, as adjusted to subtract debt in default that was extinguished via conveyance of properties, divided by Adjusted book (defined above).

 

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

Defined as Diluted FFO, as adjusted for comparability, adjusted for the following: (1) the elimination of the effect of (a) noncash rental revenues and property operating expenses (comprised of straight-line rental adjustments, which includes the amortization of recurring tenant incentives, and amortization of acquisition intangibles included in FFO and NOI, both of which are described under “Cash NOI” below), (b) share-based compensation, net of amounts capitalized, (c) amortization of deferred financing costs, (d) amortization of debt discounts and premiums and (e) amortization of settlements of debt hedges; and (2) recurring capital expenditures.  Recurring capital expenditures are defined as tenant improvements and incentives, building improvements and leasing costs for operating properties that are not (1) items contemplated prior to the acquisition of a property, (2) improvements associated with the expansion of a building or its improvements, (3) renovations to a building which change the underlying classification of the building (for example, from industrial to office or Class C office to Class B office) or (4) capital improvements that represent the addition of something new to the property rather than the replacement of something (for example, the addition of a new heating and air conditioning unit that is not replacing one that was previously there); recurring capital expenditures excludes expenditures of operating properties included in disposition plans during the period that were already sold or are held for future disposition.  We believe that Diluted AFFO is an important supplemental measure of liquidity for an equity REIT because it provides management and investors with an indication of our ability to incur and service debt and to fund dividends and other cash needs.  We believe that the numerator to diluted EPS is the most directly comparable GAAP measure to Diluted AFFO.

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

Diluted FFO is Basic FFO adjusted to add back any changes in Basic FFO that would result from the assumed conversion of securities that are convertible or exchangeable into common shares.  The computation of Diluted FFO assumes the conversion of common units in the Operating Partnership but does not assume the conversion of other securities that are convertible into common shares if the conversion of those securities would increase Diluted FFO per share in a given period.  We believe that Diluted FFO is useful to investors because it is the numerator used to compute Diluted FFO per share, discussed below.  We believe that the numerator to diluted EPS is the most directly comparable GAAP measure to Diluted FFO.

 

Diluted FFO available to common share and common unit holders, as adjusted for comparability (“Diluted FFO, as adjusted for comparability”) and FFO, as adjusted for comparability 

Defined as Diluted FFO or FFO adjusted to exclude: operating property acquisition costs: gains on sales of, and impairment losses on, properties other than previously depreciated operating properties, net of associated income tax; gain or loss on early extinguishment of debt; FFO associated with properties that secured non-recourse debt on which we defaulted and, subsequently, extinguished via conveyance of such properties (including property NOI, interest expense and gains on debt extinguishment); loss on interest rate derivatives; demolition costs on redevelopment properties; executive transition costs; and accounting charges for original issuance costs associated with redeemed preferred shares.  We believe that the excluded items are not reflective of normal operations and, as a result, believe that a measure that excludes these items is a

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Corporate Office Properties Trust

Definitions

useful supplemental measure in evaluating operating performance.  The adjustment for FFO associated with properties securing non-recourse debt on which we defaulted pertains to the periods subsequent to our default on the loan’s payment terms, which was the result of our decision to not support payments on the loan since the estimated fair value of the properties was less than the loan balance. While we continued as the legal owner of the properties during this period, all cash flows produced by them went directly to the lender and we did not fund any debt service shortfalls, which included incremental additional interest under the default rate. We believe that the numerator to diluted EPS is the most directly comparable GAAP measure to this non-GAAP measure.

 

Diluted FFO per share 

Diluted FFO per share is (1) Diluted FFO divided by (2) the sum of the (a) weighted average common shares outstanding during a period, (b) weighted average common units outstanding during a period and (c) weighted average number of potential additional common shares that would have been outstanding during a period if other securities that are convertible or exchangeable into common shares were converted or exchanged.  The computation of Diluted FFO per share assumes the conversion of common units in the Operating Partnership but does not assume the conversion of other securities that are convertible into common shares if the conversion of those securities would increase Diluted FFO per share in a given period.  We believe that Diluted FFO per share is useful to investors because it provides investors with a further context for evaluating our FFO results in the same manner that investors use earnings per share (“EPS”) in evaluating net income available to common shareholders.  We believe that diluted EPS is the most directly comparable GAAP measure to Diluted FFO per share.

 

Diluted FFO per share, as adjusted for comparability 

Defined as (1) Diluted FFO available to common share and common unit holders, as adjusted for comparability divided by (2) the sum of the (a) weighted average common shares outstanding during a period, (b) weighted average common units outstanding during a period and (c) weighted average number of potential additional common shares that would have been outstanding during a period if other securities that are convertible or exchangeable into common shares were converted or exchanged.  The computation of this measure assumes the conversion of common units in the Operating Partnership but does not assume the conversion of other securities that are convertible into common shares if the conversion of those securities would increase the per share measure in a given period.  As discussed above, we believe that the excluded items are not indicative of normal operations.  As such, we believe that a measure that excludes these items is a useful supplemental measure in evaluating our operating performance.  We believe that diluted EPS is the most directly comparable GAAP measure.

 

Dividend coverage-Diluted FFO, Diluted FFO, as adjusted for comparability, and Dividend coverage-Diluted AFFO 

These measures divide either Diluted FFO, Diluted FFO, as adjusted for comparability, or Diluted AFFO by the sum of (1) dividends on common shares and (2) distributions to holders of interests in the Operating Partnership and dividends on convertible preferred shares when such distributions and dividends are included in Diluted FFO.

Funds from operations (“FFO” or “FFO per NAREIT”) 

Defined as net income computed using GAAP, excluding gains on sales of, and impairment losses on, previously depreciated operating properties and real estate-related depreciation and amortization.  When multiple properties consisting of both operating and non-operating properties exist on a single tax parcel, we classify all of the gains on sales of, and impairment losses on, the tax parcel as all being for previously depreciated operating properties when most of the value of the parcel is associated with operating properties on the parcel. We believe that we use the National Association of Real Estate Investment Trust’s (“NAREIT”) definition of FFO, although others may interpret the definition differently and, accordingly, our presentation of FFO may differ from those of other REITs.  We believe that FFO is useful to management and investors as a supplemental measure of operating performance because, by excluding gains related to sales of, and impairment losses on, previously depreciated operating properties and excluding real estate-related depreciation and amortization, FFO can help one compare our operating performance between periods.  We believe that net income is the most directly comparable GAAP measure to FFO.

In-place adjusted EBITDA

Defined as Adjusted EBITDA, as further adjusted for: (1) the removal of NOI pertaining to properties in the quarterly periods in which such properties were sold; and (2) the addition of pro forma adjustments to NOI for properties acquired or placed into service subsequent to the commencement of a quarter made in order to reflect a full quarter

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Corporate Office Properties Trust

Definitions

of ownership/operations. We believe that in-place adjusted EBITDA is a useful supplemental measure of performance for assessing our un-levered performance, as further adjusted for changes in operating properties subsequent to the commencement of a quarter.  We believe that net income is the most directly comparable GAAP measure to in-place adjusted EBITDA.

 

Net operating income (“NOI”) from real estate operations 

NOI is real estate revenues from continuing and discontinued operations reduced by total property expenses associated with real estate operations, including discontinued operations; total property expenses, as used in this definition, do not include depreciation, amortization or interest expense associated with real estate operations.  We believe that NOI is an important supplemental measure of operating performance for a REIT’s operating real estate because it provides a measure of the core real estate operations that is unaffected by depreciation, amortization, financing and general, administrative and leasing expenses; we believe this measure is particularly useful in evaluating the performance of geographic segments, same-office property groupings and individual properties.  We believe that net income is the most directly comparable GAAP measure to NOI.

 

NOI debt service coverage ratio and Adjusted EBITDA debt service coverage ratio 

These measures divide either NOI from real estate operations or Adjusted EBITDA by the sum of interest expense on continuing and discontinued operations (excluding amortization of deferred financing costs and amortization of debt discounts and premiums, net of amounts capitalized, gains or losses on interest rate derivatives and interest expense on debt in default to be extinguished via conveyance of properties) and scheduled principal amortization on mortgage loans for continuing and discontinued operations.

 

NOI fixed charge coverage ratio and Adjusted EBITDA fixed charge coverage ratio 

These measures divide either NOI from real estate operations or Adjusted EBITDA by the sum of (1) interest expense on continuing and discontinued operations (excluding amortization of deferred financing costs and amortization of debt discounts and premiums, net of amounts capitalized, gains or losses on interest rate derivatives and interest expense on debt in default to be extinguished via conveyance of properties), (2) scheduled principal amortization on mortgage loans for continuing and discontinued operations, (3) capitalized interest, (4) dividends on preferred shares and (5) distributions on preferred units in the Operating Partnership not owned by us.

 

NOI interest coverage ratio and Adjusted EBITDA interest coverage ratio 

These measures divide either NOI from real estate operations or Adjusted EBITDA by interest expense on continuing and discontinued operations (excluding amortization of deferred financing costs and amortization of debt discounts and premiums, net of amounts capitalized, gains on losses on interest rate derivatives and interest expense on debt in default to be extinguished via conveyance of properties).

 

Payout ratios based on: Diluted FFO; Diluted FFO, as adjusted for comparability; and Diluted AFFO 

These payout ratios are defined as (1) the sum of (a) dividends on common shares and (b) distributions to holders of interests in the Operating Partnership and dividends on convertible preferred shares when such distributions and dividends are included in Diluted FFO divided by (2) the respective non-GAAP measures on which the payout ratios are based.

Real estate revenue operating margin 

Defined as NOI from real estate operations divided by real estate revenue, including continuing and discontinued operations.

Recurring capital expenditures 

Definition is included above in the definition for Diluted AFFO.

 

Rental revenue operating margin 

Defined as NOI from real estate operations divided by real estate rental revenue, including continuing and discontinued operations.

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Corporate Office Properties Trust

Definitions

Same office property NOI 

Defined as NOI from real estate operations of Same Office Properties.  We believe that Same Office Property NOI is an important supplemental measure of operating performance of Same Office Properties for the same reasons discussed above for NOI from real estate operations.

Same office property cash NOI 

Defined as cash NOI attributable to same office properties with additional adjustments to eliminate the effects of: (1) lease termination fees paid by tenants to terminate their lease obligations prior to the end of the agreed upon lease terms; and (2) rental revenue recognized under GAAP resulting from landlord assets funded by tenants.  Lease termination fees and tenant-funded landlord improvements are often recognized as revenue in large one-time lump sum amounts.  We believe that cash NOI attributable to same office properties with additional adjustments to eliminate the effects of these amounts is a useful supplemental measure of operating performance in evaluating same-office property groupings.  We believe that net income is the most directly comparable GAAP measure to Same office property cash NOI. 

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Corporate Office Properties Trust

Definitions

Other Definitions

 

Acquisition Costs — Transaction costs expensed in connection with executed or anticipated acquisitions of operating properties.

 

Annualized Rental Revenue — The monthly contractual base rent as of the reporting date multiplied by 12, plus the estimated annualized expense reimbursements under existing leases for occupied space.

 

Construction Properties — Properties under active construction and properties that we were contractually committed to construct.

Core Portfolio — Represents Defense/IT Locations and Regional Office properties excluding properties held for sale.

Defense/IT Locations — Represents properties in locations that support United States Government agencies and their contractors, most of whom are engaged in national security, defense and IT related activities servicing what we believe are growing, durable priority missions.

First Generation Space — Newly constructed or redeveloped space that has never been occupied.

 

Operational Space — The portion of a property in operations (excludes portion under construction or redevelopment).

Pre-Construction Properties — Properties on which work associated with one or more of the following tasks is underway on a regular basis: pursuing entitlements, planning, design and engineering, bidding, permitting and premarketing/preleasing. Typically, these projects, as categorized in this Supplemental Information package, are targeted to begin construction in 12 months or less.

Redevelopment Properties — Properties previously in operations on which activities to substantially renovate such properties were underway or approved.

Regional Office Properties — Includes traditional office properties located in select urban/urban-like submarkets within our regional footprint with durable Class-A office fundamentals and characteristics, as well as other properties supporting general commercial office tenants.

Same Office Properties — Operating office properties owned and 100% operational since at least January 1, 2014, excluding properties held for future disposition and properties under redevelopment.

 

Second Generation Space — Space leased that has been previously occupied.

 

Total Portfolio — Operating properties, excluding the effect of properties serving as collateral for debt which is in default that we expect to extinguish via property conveyance.

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	6711 Columbia Gateway Drive, Suite 300
	Columbia, Maryland 21046
	Telephone 443-285-5400
	Facsimile 443-285-7650
	www.copt.com
	NYSE: OFC
	NEWS RELEASE
FOR IMMEDIATE RELEASE	IR Contacts:
	Stephanie Krewson-Kelly	Michelle Layne
	VP, Investor Relations	Investor Relations Specialist
	443-285-5453	443-285-5452
	stephanie.kelly@copt.com	michelle.layne@copt.com

COPT REPORTS 2015 RESULTS

COLUMBIA, MD February 12, 2016 - Corporate Office Properties Trust (“COPT” or the “Company”) (NYSE: OFC) announced financial and operating results for the fourth quarter and full year ended December 31, 2015.

Management Comments

“Fourth quarter and full year results topped off a year of significant achievement for the Company,” stated Roger A. Waesche, Jr., COPT’s President & Chief Executive Officer. “During the year, we further honed our portfolio by investing in development projects at multiple strategic locations and upgraded our portfolio by recycling suburban office assets into urban locations. As a result of these tactics, we now derive 84% of our core portfolio’s annualized revenue from locations that are tied to national defense. We are off to a strong start in 2016, and will continue recycling capital from suburban assets in order to grow our Defense IT locations and to further strengthen our balance sheet.”

Financial Highlights

4^th Quarter Financial Results:

•	Diluted earnings per share (“EPS”) was $0.59 for the quarter ended December 31, 2015 as compared to $0.01 for the fourth quarter of 2014.

•	Diluted funds from operations per share (“FFOPS”), as calculated in accordance with NAREIT’s definition, was $0.31 for the fourth quarter of 2015 as compared to $0.34 for the fourth quarter of 2014.

•	FFOPS, as adjusted for comparability, was $0.52 for the quarter ended December 31, 2015 as compared to $0.49 for the fourth quarter of 2014, a 6.1% increase.

Full Year 2015 Financial Results:

•	EPS was $1.74 for the year ended December 31, 2015 as compared to $0.25 for 2014.

•	Per NAREIT’s definition, FFOPS for 2015 was $2.55 as compared to $1.69 for 2014.

•	FFOPS for the full year 2015, as adjusted for comparability, was $2.01 as compared to $1.88 reported for 2014, a 6.9% increase.

Adjustments for comparability encompass items such as acquisition costs, impairment losses and gains on non-operating properties (net of related tax adjustments), gains (losses) on early extinguishment of debt, derivative losses, executive transition costs and write-offs of original issuance costs for redeemed preferred shares.

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Operating Performance Highlights

Portfolio Summary:

•	At December 31, 2015, the Company’s core portfolio of 157 operating office properties totaled 17.0 million square feet that were 92.7% occupied and 93.9% leased.

•	At year end, the Company had 15 operating properties and 98 acres of land held for sale. The held for sale properties total 658,000 square feet and, at December 31, 2015, were 84.7% occupied.

Same Office Performance:

•	At December 31, 2015, COPT’s same office portfolio represented 85% of the core portfolio’s rentable square feet, consisted of 145 properties that were 90.9% occupied and 92.3% leased.

•	For the quarter ended December 31, 2015, the Company’s same office property cash NOI increased 2.5% as compared to the quarter ended December 31, 2014.

•	For the full year, same office property cash NOI increased 0.7% as compared to 2014.

Leasing:

•	Square Feet Leased - For the year and quarter ended December 31, 2015, the Company completed 2.5 million and 666,000 square feet of leasing, respectively. For the year, the Company completed 735,000 square feet of development leasing, modestly exceeding expectations.

On January 8, 2016, the Company executed a 149,000 square foot build-to-suit in Northern Virginia with a Defense /IT customer. Including this 100% pre-leased project, which was out for signature at the end of 4Q15, the Company completed 884,000 square feet of development leasing in 2015.

•	Strong Renewal Rates - During the year and fourth quarter, the Company renewed 71% and 90% of expiring leases, respectively, which exceeded expectations.

•	Rent Spreads Met Expectations - For the year and the quarter ended December 31, 2015, GAAP rent on renewed space increased 6.5% and 13.8%, respectively; on a cash basis, renewal rates declined by 2.6% for the year and by only 0.9% in the fourth quarter, as compared to the expiring rents.

•

Lease Term Lengthening - For the full year, lease terms averaged 4.3 years on renewals and 8.4 years on development and other new leases, for an average term of 6.3 years on all leasing completed during the year. In the fourth quarter, lease terms on 419,000 square feet of renewals averaged 4.7 years and 8.1 years on 247,000 square feet of development and other new leasing, for an average lease term of 6.0 years in the quarter.

Investment Activity Highlights

Development & Redevelopment Projects:

•	The Company has nine properties totaling 1.3 million square feet under construction that, at December 31, 2015, were 65% pre-leased. The nine projects have a total estimated cost of $304.9 million, of which $164.8 million has been incurred.

•	COPT has 156,000 square feet in four properties under redevelopment, representing a total expected cost of $38.4 million, of which $21.7 million has been invested. The four projects were 8% leased at year end 2015.

Acquisitions:

•	During 2015, the Company acquired three buildings, including an associated free-standing structured parking garage, totaling 1.2 million square feet for $263.5 million.

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Dispositions:

•	During 2015, the Company disposed of nine buildings aggregating 1.6 million square feet and non-strategic land for $365.9 million. This total included the disposition of two properties in Northern Virginia that collateralized a $150 million loan that was extinguished in exchange for title to the properties.

•	During the fourth quarter, the Company completed the following $153 million of asset sales:

◦	The disposition of 13200 Woodland Park Road in Herndon, Virginia, for $84.0 million. The building contains approximately 397,000 rentable square feet and was 100% leased to Booz Allen Hamilton Inc. until December 31, 2015.

◦	The disposition of 9900, 9910 and 9920 Franklin Square Drive in the White Marsh submarket of Greater Baltimore, Maryland, for $24 million. The three properties contained roughly 135,000 rentable square feet that were 100% occupied.

◦	The disposition of 9690 Deereco Road and 375 W. Padonia Road in Timonium, a suburban submarket of Greater Baltimore, Maryland, for $44.5 million. The properties contained 240,000 rentable square feet that were 100% occupied at the time of sale.

Balance Sheet and Capital Transaction Highlights

•	As of December 31, 2015, the Company’s debt to adjusted book ratio was 42.9%, adjusted debt to in-place adjusted EBITDA ratio was 6.5x, and, for the quarter ended December 31, 2015, its adjusted EBITDA fixed charge coverage ratio was 2.9x.

•	The Company’s weighted average interest rate was 4.1% for the quarter ended December 31, 2015 and, including the effect of interest rate swaps, 90% of the Company’s debt was subject to fixed interest rates and the debt portfolio has a weighted average maturity of 6.1 years.

•	During the year ended December 31, 2015:

◦	The Company issued $26.6 million of common equity from its ATM facility at an average gross price of $30.29.

◦	In May, the Company amended the terms of its $800 million line of credit to: (1) extend the maturity date from July 2017, to May 2019 plus two six-month extension options; and (2) lower the interest rate spread and the facility fee to current market.

◦	Also in May, the Company amended the terms of its $250 million Term Loan that was previously scheduled to mature on February 2017. The Company increased the Term Loan balance by $50 million, to $300 million, extended the maturity date to May 2020 and lowered the interest rate.

◦	In late June, the Company issued $300 million of 5.00% senior unsecured notes due July 2025.

◦	In December, the Company entered into a new 7-year $250 million Term Loan and used $100 million of proceeds to retire the $100 million Term Loan that was scheduled to mature in 2016. Through the new Term Loan’s delayed draw feature, the Company will use the remaining $150 million to retire a $162.5 million secured loan that is prepayable at par in July 2016.

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2016 FFO Guidance:

Management is maintaining its previously issued guidance ranges for full year FFOPS, as adjusted for comparability, of $1.95-$2.05, and establishing guidance for the first quarter ending March 31, 2016 at a range of $0.46-$0.48. Reconciliations of projected diluted EPS to projected FFOPS are provided as follows:

		Three Months Ending								Year Ending
		March 31, 2016								December 31, 2016
		Low				High				Low				High
EPS		$	0.03			$	0.05			$	0.42			$	0.52
Real estate depreciation and amortization		0.40				0.40				1.60				1.60
Gains on sales of operating properties		—				—				(0.10		)		(0.10		)
FFOPS, NAREIT definition		0.43				0.45				1.92				2.02
Executive transition costs		0.03				0.03				0.03				0.03
FFOPS, as adjusted for comparability		$	0.46			$	0.48			$	1.95			$	2.05

Associated Supplemental Presentation

The Company has posted a slide presentation to accompany management’s prepared remarks for its fourth quarter and full year 2015 conference call, the details of which are provided below. You may access the slide presentation on the ‘Investors’ section of the website (www.copt.com). Please have the slides available to review during management’s comments.

Conference Call Information

Management will discuss fourth quarter and full year 2015 earnings results on its conference call today at 12:00 p.m. Eastern Time, details of which are listed below:

Earnings Release Date:    Friday, February 12, 2016 at 6:00 a.m. Eastern Time

Conference Call Date:    Friday, February 12, 2016

Time:     12:00 p.m. Eastern Time

Telephone Number: (within the U.S.)     888-713-4205

Telephone Number: (outside the U.S.)    617-213-4862

Passcode:    47665945#

Please use the following link to pre-register and view important information about this conference call. Pre-registering is not mandatory but is recommended as it will provide you immediate entry into the call and will facilitate the timely start of the conference. To pre-register, please click on the below link:

https://www.theconferencingservice.com/prereg/key.process?key=PX64ACELX

You may also pre-register in the Investors section of the Company’s website at www.copt.com. Alternatively, you may be placed into the call by an operator by calling the number provided above at least 5 to 10 minutes before the start of the call.

A replay of this call will be available beginning Friday, February 12, at 4:00 p.m. Eastern Time through Friday, February 26, at midnight Eastern Time. To access the replay within the United States, please call 888-286-8010 and use passcode 93348081. To access the replay outside the United States, please call 617-801-6888 and use passcode 93348081.

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The conference call will also be available via live webcast in the Investor Relations section of the Company’s website at www.copt.com. A replay of the conference calls will be immediately available via webcast in the Investor Relations section of the Company’s website.

Definitions

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

Company Information

COPT is an office REIT that owns, manages, develops and selectively acquires office and data center properties in locations that support United States Government agencies and their contractors, most of whom are engaged in national security, defense and information technology (“IT”) related activities servicing priority missions (“Defense/IT Locations”). We also own a complementary portfolio of traditional Class-A office properties located in select urban/urban-like submarkets within our regional footprint (“Regional Office Properties”). As of December 31, 2015, we derived 84% of core portfolio annualized revenue from Defense/IT Locations and 16% from our Regional Office Properties. As of December 31, 2015, our core portfolio of 157 office properties encompassed 17.0 million square feet and was 93.9% 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. Accordingly, 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.

Important factors that may affect these expectations, estimates, and projections include, but are not limited to:

*	general economic and business conditions, which will, among other things, affect office property and data center demand and rents, tenant creditworthiness, interest rates, financing availability and property values;

*	adverse changes in the real estate markets including, among other things, increased competition with other companies;

*	governmental actions and initiatives, including risks associated with the impact of a prolonged government shutdown or budgetary reductions or impasses, such as a reduction in rental revenues, non-renewal of leases, and/or a curtailment of demand for additional space by the Company's strategic customers;

*	the Company’s ability to borrow on favorable terms;

*	risks of real estate acquisition and development activities, including, among other things, risks that development projects may not be completed on schedule, that tenants may not take occupancy or pay rent or that development or operating costs may be greater than anticipated;

*	risks of investing through joint venture structures, including risks that the Company’s joint venture partners may not fulfill their financial obligations as investors or may take actions that are inconsistent with the Company’s objectives;

*	changes in the Company’s plans for properties or views of market economic conditions or failure to obtain development rights, either of which could result in recognition of significant impairment losses;

*	the Company’s ability to satisfy and operate effectively under Federal income tax rules relating to real estate investment trusts and partnerships;

*	the Company's ability to achieve projected results;

*	the dilutive effects of issuing additional common shares; and

*	environmental requirements.

The Company undertakes no obligation to update or supplement any forward-looking statements. For further information, please refer to the Company’s filings with the Securities and Exchange Commission, particularly the section entitled “Risk Factors” in Item 1A of the Company’s Annual Report on Form 10-K for the year ended December 31, 2014.

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Corporate Office Properties Trust

Summary Financial Data

(unaudited)

(in thousands, except per share data)

	For the Three Months Ended December 31, 2015								For the Year Ended December 31,
	2015				2014				2015				2014
Revenues
Real estate revenues	$	134,477			$	120,613			$	519,064			$	479,725
Construction contract and other service revenues	8,848				26,358				106,402				106,748
Total revenues	143,325				146,971				625,466				586,473
Expenses
Property operating expenses	48,498				43,334				194,494				179,934
Depreciation and amortization associated with real estate operations	36,237				31,358				140,025				136,086
Construction contract and other service expenses	7,773				24,705				102,696				100,058
Impairment losses	19,744				48				23,289				1,416
General and administrative expenses	6,609				7,206				24,526				24,841
Leasing expenses	1,888				1,706				6,835				6,953
Business development expenses and land carry costs	2,521				1,466				13,507				5,573
Total operating expenses	123,270				109,823				505,372				454,861
Operating income	20,055				37,148				120,094				131,612
Interest expense	(22,347		)		(23,286		)		(89,074		)		(92,393		)
Interest and other income	1,300				1,148				4,517				4,923
(Loss) gain on early extinguishment of debt	(402		)		(9,106		)		85,275				(9,552		)
(Loss) income from continuing operations before equity in income of unconsolidated entities and income taxes	(1,394		)		5,904				120,812				34,590
Equity in income of unconsolidated entities	10				23				62				229
Income tax expense	(46		)		(53		)		(199		)		(310		)
(Loss) income from continuing operations	(1,430		)		5,874				120,675				34,509
Discontinued operations	—				22				156				26
(Loss) income before gain on sales of real estate	(1,430		)		5,896				120,831				34,535
Gain on sales of real estate, net of income taxes	64,047				41				68,047				10,671
Net income	62,617				5,937				188,878				45,206
Net income attributable to noncontrolling interests
Common units in the Operating Partnership (“OP”)	(2,172		)		(64		)		(6,403		)		(1,006		)
Preferred units in the OP	(165		)		(165		)		(660		)		(660		)
Other consolidated entities	(916		)		(804		)		(3,515		)		(3,285		)
Net income attributable to COPT	59,364				4,904				178,300				40,255
Preferred share dividends	(3,553		)		(3,552		)		(14,210		)		(15,939		)
Issuance costs associated with redeemed preferred shares	—				—				—				(1,769		)
Net income attributable to COPT common shareholders	$	55,811			$	1,352			$	164,090			$	22,547
Earnings per share (“EPS”) computation:
Numerator for diluted EPS:
Net income attributable to common shareholders	$	55,811			$	1,352			$	164,090			$	22,547
Common units in the OP	—				—				6,403				—
Amount allocable to share-based compensation awards	(230		)		(100		)		(706		)		(432		)
Numerator for diluted EPS	$	55,581			$	1,252			$	169,787			$	22,115
Denominator:
Weighted average common shares - basic	94,164				90,752				93,914				88,092
Common units in the OP	—				—				3,692				—
Dilutive effect of share-based compensation awards	—				196				61				171
Weighted average common shares - diluted	94,164				90,948				97,667				88,263
Diluted EPS	$	0.59			$	0.01			$	1.74			$	0.25

vi

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Corporate Office Properties Trust

Summary Financial Data

(unaudited)

(in thousands, except per share data)

	For the Three Months Ended December 31, 2015								For the Year Ended December 31,
	2015				2014				2015				2014
Net income	$	62,617			$	5,937			$	188,878			$	45,206
Real estate-related depreciation and amortization	36,237				31,358				140,025				136,086
Impairment losses on previously depreciated operating properties	331				48				4,110				1,370
Gain on sales of previously depreciated operating properties	(64,047		)		2				(64,062		)		(5,117		)
Funds from operations (“FFO”)	35,138				37,345				268,951				177,545
Noncontrolling interests - preferred units in the OP	(165		)		(165		)		(660		)		(660		)
FFO allocable to other noncontrolling interests	(817		)		(867		)		(3,586		)		(3,216		)
Preferred share dividends	(3,553		)		(3,552		)		(14,210		)		(15,939		)
Issuance costs associated with redeemed preferred shares	—				—				—				(1,769		)
Basic and diluted FFO allocable to share-based compensation awards	(115		)		(123		)		(1,041		)		(665		)
Basic and diluted FFO available to common share and common unit holders (“Diluted FFO”)	30,488				32,638				249,454				155,296
Operating property acquisition costs	32				—				4,134				—
Gain on sales of non-operating properties	—				(43		)		(3,985		)		(5,578		)
Impairment losses on other properties	19,413				—				19,413				49
Loss on interest rate derivatives	386				—				386				—
Loss (gain) on early extinguishment of debt	402				9,106				(85,655		)		9,668
Issuance costs associated with redeemed preferred shares	—				—				—				1,769
Add: Negative FFO of properties conveyed to extinguish debt in default (1)	—				3,493				10,456				10,928
Demolition costs on redevelopment properties	225				—				1,396				—
Executive transition costs	—				1,056				—				1,056
Diluted FFO comparability adjustments allocable to share-based compensation awards	(88		)		(59		)		225				(78		)
Diluted FFO available to common share and common unit holders, as adjusted for comparability	50,858				46,191				195,824				173,110
Straight line rent adjustments	(2,614		)		(379		)		(13,379		)		(1,820		)
Straight line rent adjustments - properties in default conveyed	—				(47		)		(115		)		(142		)
Amortization of intangibles included in net operating income	365				208				1,428				855
Share-based compensation, net of amounts capitalized	1,625				1,504				6,574				6,067
Amortization of deferred financing costs	1,127				1,020				4,466				4,666
Amortization of deferred financing costs - properties in default conveyed	—				—				—				(333		)
Amortization of net debt discounts, net of amounts capitalized	317				261				1,166				920
Amortization of settled debt hedges	—				11				—				57
Recurring capital expenditures	(20,086		)		(8,633		)		(49,266		)		(50,199		)
Diluted adjusted funds from operations available to common share and common unit holders (“Diluted AFFO”)	$	31,592			$	40,136			$	146,698			$	133,181
Diluted FFO per share	$	0.31			$	0.34			$	2.55			$	1.69
Diluted FFO per share, as adjusted for comparability	$	0.52			$	0.49			$	2.01			$	1.88
Dividends/distributions per common share/unit	$	0.275			$	0.275			$	1.100			$	1.100

(1) Interest expense exceeded net operating income from these properties by the amounts in the statement.

vii

---

Corporate Office Properties Trust

Summary Financial Data

(unaudited)

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

		December 31, 2015				December 31, 2014
Balance Sheet Data
Properties, net of accumulated depreciation		$	3,349,748			$	3,296,914
Total assets		3,909,312				3,664,236
Debt, net		2,077,752				1,914,036
Total liabilities		2,273,530				2,124,935
Redeemable noncontrolling interest		19,218				18,417
Equity		1,616,564				1,520,884
Debt to adjusted book		42.9		%		39.6		%
Core Portfolio Data (as of period end) (1)
Number of operating properties		157				173
Total net rentable square feet owned (in thousands)		17,038				16,790
Occupancy %		92.7		%		90.9		%
Leased %		93.9		%		92.4		%

	For the Three Months Ended December 31, 2015								For the Year Ended December 31,
	2015				2014				2015				2014
Payout ratios
Diluted FFO	88.6		%		81.8		%		43.3		%		65.8		%
Diluted FFO, as adjusted for comparability	53.1		%		57.8		%		55.2		%		59.0		%
Diluted AFFO	85.5		%		66.5		%		73.7		%		76.7		%
Adjusted EBITDA interest coverage ratio	3.9		x		4.0		x		4.2		x		3.8		x
Adjusted EBITDA fixed charge coverage ratio	2.9		x		2.9		x		3.0		x		2.7		x
Adjusted debt to in-place adjusted EBITDA ratio (2)	6.5		x		6.2		x		N/A				N/A
Reconciliation of denominators for per share measures
Denominator for diluted EPS	94,164				90,948				97,667				88,263
Weighted average common units	3,677				3,846				—				3,897
Denominator for diluted FFO per share	97,841				94,794				97,667				92,160
Reconciliation of FFO to FFO, as adjusted for comparability
FFO, per NAREIT	$	35,138			$	37,345			$	268,951			$	177,545
Gain on sales of non-operating properties	—				(43		)		(3,985		)		(5,578		)
Impairment losses on non-operating properties, net of associated tax	19,413				—				19,413				49
Operating property acquisition costs	32				—				4,134				—
Loss on interest rate derivatives	386				—				386				—
Loss (gain) on early extinguishment of debt, continuing and discontinued operations	402				9,106				(85,655		)		9,668
Issuance costs associated with redeemed preferred shares	—				—				—				1,769
Add: Negative FFO of properties conveyed to extinguish debt in default	—				3,493				10,456				10,928
Demolition costs on redevelopment properties	225				—				1,396				—
Executive transition costs	—				1,056				—				1,056
FFO, as adjusted for comparability	$	55,596			$	50,957			$	215,096			$	195,437

(1)	Represents operating properties held for long-term investment.

(2)	Represents debt as of period end divided by in-place adjusted EBITDA for the period, as annualized (i.e. three month periods are multiplied by four).

viii

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Corporate Office Properties Trust

Summary Financial Data

(unaudited)

(Dollars in thousands)

	For the Three Months Ended December 31, 2015								For the Year Ended December 31,
	2015				2014				2015				2014
Reconciliation of common share dividends to dividends and distributions for payout ratios
Common share dividends	$	25,998			$	25,638			$	103,998			$	97,944
Common unit distributions	1,011				1,055				4,046				4,270
Dividends and distributions for payout ratios	$	27,009			$	26,693			$	108,044			$	102,214
Reconciliation of GAAP net income to adjusted earnings before interest, income taxes, depreciation and amortization (“Adjusted EBITDA”) and in-place adjusted EBITDA
Net income	$	62,617			$	5,937			$	188,878			$	45,206
Interest expense on continuing operations	22,347				23,286				89,074				92,393
Income tax expense	46				53				199				310
Real estate-related depreciation and amortization	36,237				31,358				140,025				136,086
Depreciation of furniture, fixtures and equipment	597				513				2,206				2,404
Impairment losses	19,744				48				23,523				1,419
Loss (gain) on early extinguishment of debt on continuing and discontinued operations	402				9,106				(85,655		)		9,668
Gain on sales of operating properties	(64,047		)		2				(64,062		)		(5,117		)
Gain on sales of non-operational properties	—				(43		)		(3,985		)		(5,578		)
Net loss on investments in unconsolidated entities included in interest and other income	6				(74		)		127				291
Business development expenses	1,512				669				4,775				2,680
Operating property acquisition costs	32				—				4,134				—
EBITDA of properties conveyed to extinguish debt in default	—				(828		)		(768		)		(2,091		)
Demolition costs on redevelopment properties	225				—				1,396				—
Executive transition costs	—				1,056				—				1,056
Adjusted EBITDA	$	79,718			$	71,083			$	299,867			$	278,727
Proforma net operating income adjustment for mid-period property changes	(1,738		)		—
In-place adjusted EBITDA	$	77,980			$	71,083
Reconciliation of interest expense to the denominators for interest coverage-Adjusted EBITDA and fixed charge coverage-Adjusted EBITDA
Interest expense	$	22,347			$	23,286			$	89,074			$	92,393
Less: Amortization of deferred financing costs	(1,127		)		(1,020		)		(4,466		)		(4,666		)
Less: Amortization of net debt discount, net of amounts capitalized	(317		)		(261		)		(1,166		)		(920		)
Less: Loss on interest rate derivatives	(386		)		—				(386		)		—
Less: Interest expense on debt in default extinguished via conveyance of properties	—				(4,320		)		(11,224		)		(12,684		)
Denominator for interest coverage-Adjusted EBITDA	20,517				17,685				71,832				74,123
Scheduled principal amortization	1,717				1,603				6,728				6,517
Capitalized interest	1,510				1,740				7,151				6,065
Preferred share dividends	3,553				3,552				14,210				15,939
Preferred unit distributions	165				165				660				660
Denominator for fixed charge coverage-Adjusted EBITDA	$	27,462			$	24,745			$	100,581			$	103,304

ix

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Corporate Office Properties Trust

Summary Financial Data

(unaudited)

(Dollars in thousands)

	For the Three Months Ended December 31, 2015								For the Year Ended December 31,
	2015				2014				2015				2014
Reconciliations of tenant improvements and incentives, capital improvements and leasing costs for operating properties to recurring capital expenditures
Tenant improvements and incentives on operating properties	$	6,836			$	7,239			$	24,244			$	29,651
Building improvements on operating properties	16,674				4,974				28,643				23,432
Leasing costs for operating properties	3,518				1,341				8,504				8,536
Less: Nonrecurring tenant improvements and incentives on operating properties	(393		)		(1,747		)		(1,438		)		(2,734		)
Less: Nonrecurring building improvements on operating properties	(6,551		)		(3,012		)		(9,879		)		(8,281		)
Less: Nonrecurring leasing costs for operating properties	2				(162		)		(808		)		(405		)
Recurring capital expenditures	$	20,086			$	8,633			$	49,266			$	50,199
Same office property cash NOI	$	64,651			$	63,089			$	251,262			$	249,405
Straight line rent adjustments	(339		)		2,293				2,940				3,725
Add: Amortization of deferred market rental revenue	28				(16		)		98				(89		)
Less: Amortization of below-market cost arrangements	(251		)		(288		)		(1,002		)		(1,154		)
Add: Lease termination fee, gross	416				741				2,366				1,618
Add: Cash NOI on tenant-funded landlord assets	547				84				937				4,238
Same office property NOI	$	65,052			$	65,903			$	256,601			$	257,743

		December 31, 2015				December 31, 2014
Reconciliation of total assets to adjusted book
Total assets		$	3,909,312			$	3,664,236
Accumulated depreciation		700,363				703,083
Accumulated depreciation included in assets held for sale		18,317				—
Accumulated amortization of real estate intangibles and deferred leasing costs		195,506				214,611
Accumulated amortization of real estate intangibles and deferred leasing costs included in assets held for sale		17,456				—
Less: Adjusted book associated with properties conveyed to extinguish debt in default		—				(131,118		)
Adjusted book		$	4,840,954			$	4,450,812
Reconciliation of debt to adjusted debt
Debt, net		$	2,077,752			$	1,914,036
Less: Debt in default extinguished via conveyance of properties		—				(150,000		)
Numerator for debt to adjusted book ratio		2,077,752				1,764,036
Less: Cash and cash equivalents		(60,310		)		(6,077		)
Adjusted debt		$	2,017,442			$	1,757,959

x