Corporate Office Properties Trust (OFC) Guides FY15, Q1 FFO

February 10, 2015 6:12 AM

Corporate Office Properties Trust (NYSE: OFC) is establishing the following guidance ranges for the year ending December 31, 2015 (detailed assumptions provided on the following page):

For the first quarter ending March 31, 2015, the Company is establishing the following ranges:

“Our 6.4% growth from $1.88 in 2014 to the mid-point of $2.00 this year reflects our confidence in the stability of our same office portfolio and that we are well positioned to capitalize on growth opportunities across several strategic markets,” stated Roger A. Waesche, Jr., COPT’s President & Chief Executive Officer.

2015 Guidance Reconciliation Tables

A reconciliation of projected EPS to projected FFOPS, in accordance with NAREIT and as adjusted for comparability, for the first quarter ending March 31, 2015, and the year ending December 31, 2015 is provided as follows:

Three months ending Year ending
March 31, 2015 December 31, 2015
Low High Low High
EPS $0.86 $0.88 $1.24 $1.30
Real estate depreciation and amortization 0.35 0.35 1.50 1.50
FFOPS, NAREIT definition 1.21 1.23 2.74 2.80
NOI from properties to be conveyed (a) (0.01) (0.01) (0.01) (0.01)
Interest expense on loan secured by properties to be conveyed(a) 0.03 0.03 0.03 0.03
Gains on sales of undepreciated properties (0.04) (0.04) (0.04) (0.04)
Net gains on extinguishment of debt (b) (0.75) (0.75) (0.75) (0.75)
FFOPS, as adjusted for comparability $0.44 $0.46 $1.97 $2.03

Footnotes to Guidance Reconciliation tables:

a. The Company expects to transfer two operating properties in satisfaction of non-recourse secured indebtedness. These amounts represent the Company's forecast of net operating income generated by these assets and interest expense (accrued at the default rate) from January 1, 2015 through the assumed transfer date of March 31, 2015.

b. Represents debt and accrued interest in excess of the book value of the assets to be conveyed.

Assumptions Underpinning 2015 Guidance

The table below details assumptions that underpin the Company’s 2015 FFOPS and EPS guidance:

Portfolio Metrics (a)(b) Investment Activity (a) Yield
2015 Same Office Pool: Acquisitions:
% increase in Cash NOI (c)

0.5% - 1.5%

Operating properties $0 - $100 7.5%
Average occupancy 91%
Forecasted year-end occupancy 92% - 93% Dispositions: (f)
Cash rental rates on renewing leases

(3%) - (2%)

Operating properties $0 - $50 8.5%
Land $20 --
2015-2016 expected renewal rate 60%-65%
Revenue at Risk (d) $21.9 Development & Redevelopment
- Portion in lease negotiation ($15.8) Spend: (g) $200 - $250

7.5%-10%

Remaining revenue at risk $6.1
NOI from developments placed into service (e) $15.5
Balance Sheet Metrics (b)
Year End Debt to Adjusted Book ratio approx. 40% Adj. Debt-to-In-Place Adj. EBITDA ratio < 6.5x
Other (a)
Development fee and interest income

$7.0 - $9.0

Capitalized interest expense $8.5
COPT DC-6 cash NOI $10.0 GAAP straight lined rent $14.0
Lease termination fee income

$1.0-$2.0

Other GAAP adjustments ($4.0)
G&A, Selling Costs and New Business Costs

$34-$35

Recurring Capital Expenditures

$50-$55

a. Dollars in millions.

b. Excludes two properties to be conveyed.

c. Based on cash NOI excluding lease termination fee income and prepayments of rent.

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

e. This amount represents cash NOI from developments placed into service during 2014 and 2015, all of which was under executed leases as of December 31, 2014.

f. The Company expects to transfer two properties in satisfaction of a $150 million of non-recourse secured loan. Please refer to Footnote (a) associated with the 2015 Guidance reconciliation table, above.

g. Yields on developments are initial stabilized cash yields.

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