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Corporate Office Properties Trust (OFC) Offers FY17 Guidance

January 17, 2017 8:07 AM EST

Corporate Office Properties Trust (“COPT” or the “Company”) (NYSE: OFC) is establishing the following guidance ranges for the year ending December 31, 2017:

  • Diluted earnings per share (“EPS”) in the range of $0.59−$0.67
  • Diluted FFO per share (“FFOPS”), as defined by NAREIT, in the range of $1.99−$2.07
  • FFOPS, as adjusted for comparability, in the range of $2.00−$2.08

(Street sees AFFOPS of $2.10)

“We expect 2017 to be a strong year for leasing, both in our same office portfolio and for new developments,” stated Stephen E. Budorick, COPT’s President & Chief Executive Officer. “Having spent the past five years improving our portfolio and balance sheet, we are excited to now have the portfolio we want, the balance sheet we want, the right people in place to manage both, and a defense spending environment that should translate into exciting growth opportunities throughout our portfolio.”

Please refer to the presentation titled “2017 Initial Guidance” available on the ‘Investors’ tab of www.copt.com for more detail.

2017 Guidance Reconciliation Tables

A reconciliation of projected EPS to projected FFOPS, in accordance with NAREIT and as adjusted for comparability, for the year ending December 31, 2017 is as follows:

Table 1: Reconciliation of EPS to FFOPS, As Adjusted for Comparability Year ending
December 31, 2017
Low High
EPS $0.59 $0.67
Real estate depreciation and amortization 1.40 1.40
FFOPS, NAREIT definition 1.99 2.07
Original issuance cost of redeemed preferred shares 0.07 0.07
Gains on sales of non-operating properties (0.06) (0.06)
FFOPS, as adjusted for comparability $2.00 $2.08

Assumptions Underpinning 2017 Guidance

Table 2 below details assumptions that underpin the Company’s 2017 FFOPS and EPS guidance:

Table 2: Supporting Assumptions for 2017 Guidance
Portfolio Metrics (a) Investment Activity (a) Average Yield
2017 Same Office Pool: Dispositions:
% increase in cash NOI 3% ‒ 3.5% Operating property sales (e)$80 ‒ $90 8% − 8.5%
Year-end occupancy 92.5% ‒ 93.5% Land sales (e)$20 --
Total dispositions$100 ‒ $110
Lease Expirations (b): Acquisitions:None --
SF expiring (as % of total ann'l revs) 1,733k SF (12%) Development spend: (f)$240 ‒ $260 8% − 9%
2017 expected renewal rate 70% ‒ 75%
Cash rental rates on renewing leases (2%) − 0% Capitalized interest expense$6 --
Revenue at Risk (c): $21 Capital Markets Activity & Balance Sheet Targets (g)
- Portion in lease negotiation ($7) Preferred Shares:
Remaining revenue at risk $14 ▪ Redeem 5.6% Series K (January) $27
▪ Redeem 7.375% Series L (potentially in July) $173
NOI from developments placed into service (d) $12 Net Debt to Adjusted Book ratio 40% ‒ 42%
COPT DC-6 cash NOI $15

Net Debt-to-In-Place Adj. EBITDA ratio

≤ 6.0x
Other Assumptions (a)
Other income: Adjustments to Calculate AFFO:
Lease termination fee income $1 − $2

▪ Recurring capital expenditures

($46 − $47)
Interest & other income $6 − $7 Lease incentives from 3Q16 early renewals (h) ($8)
Construction fee income $1 − $2 Total recurring capital expenditures ($54 − $55)
General and administrative costs, net:

▪ GAAP straight line rent adjustments

($12)
▪ G&A expenses $21 − $22

▪ Other GAAP adjustments (incl. FAS 141)

$13
▪ Leasing expenses $7 − $8 Other:
▪ Business devel. expenses & land carry cost $5 − $6 Dividend / AFFO payout ratio 70% ‒ 75%

a. Dollars are in millions

b. Based on the Company's core portfolio, which excludes assets held-for-sale and certain other properties.

c. Revenue at risk is the amount of revenue not yet associated with an executed lease required to achieve the mid-point of guidance.

d. This amount represents cash NOI from developments placed into service during 2016 and 2017, all of which was under executed leases as of December 31, 2016.

e. The Company expects to complete approximately half of these sales during 1Q17.

f. Development spend represents incremental spend, which excludes the value of owned land put into construction. Yields on developments are initial stabilized cash yields.

g. The Company issued $110 million of common shares through its ATM program during 4Q16 at an average gross price of $29.56.

h. This amount represents lease incentives associated with the three large early renewals completed in 3Q16.

Fourth Quarter and Full Year 2016 Results―Conference Call Information:

Earnings Release Date: Thursday, February 9, 2017 after the market close
Conference Call Date: Friday, February 10, 2017
Time: 12:00 p.m. Eastern Time
Telephone Number: (within the U.S.) 888-268-4181
Telephone Number: (outside the U.S.) 617-597-5486
Passcode: 78416731#

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=P3CMC7QQA

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.

Replay Information

A replay of this call will be available beginning at 6:00 p.m. Eastern Time on Friday, February 10, through midnight Eastern Time on Friday, February 24. To access the replay within the United States, please call 888-286-8010 and use passcode 35538878. To access the replay outside the United States, please call 617-801-6888 and use passcode 35538878.

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.



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