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Press Release: COPT Establishes Full Year and 1Q 2021 Guidance

· 02/04/2021 16:17
Table 2: 1Q 2021 Guidance Assumptions --------------------------------------------- ---------------- Portfolio Metrics --------------------------------------------- ---------------- -- 2021 Same-property quarter-end occupancy 92% -- 93% -- Change in same-property cash NOI (2.5%) -- (1.5%)Table 1: Full Year 2021 Guidance Assumptions (a) ------------------------------- ------------------ ----------------- Investment Real Estate NOI Activity ------------------- ---------- ------------------ ----------------- -- 2021 Same-Property -- Development Pool Investment (c) $275 -- $300 % change in cash NOI (2%) -- 0% -- Acquisitions N/A JV equity to Year-end maintain leverage occupancy 90% -- 92% -- Equity levels -- Cash NOI from developments (b) $21 -- $23 -- COPT DC-6 cash Total G&A Expenses NOI $11 -- $13 (d) $38 - $40 ------------------ ----------------- AFFO Adjustments & Information Leasing ------------------- ---------- ------------------ ----------------- -- Recurring capital expenditures & -- Development TIs $60 - $65 Leasing Goal (SF) 1,000,000 -- Straight-line rent & other GAAP -- Tenant adjustments $10 -- $12 Retention Rate 65% -- 75% -- Dividend / Approx 70% -- Cash rental (3.5%) - (1.5%) Diluted AFFO rate on renewals payout ratio a. Dollars are in millions. b. This amount represents cash NOI from developments placed into service during 2020 and expected to be placed into service during 2021 and, as such, are not yet in the Company's same-property portfolio. c. Development spend excludes the value of owned land as of 1/1/2021 transferred to construction. d. Includes G&A, leasing expenses, business development expenses, and land carry cost.Quarter Ending Year Ending March 31, 2021 December 31, 2021 ------------------ ----------------------- Low High Low High ---------- ------ ----------- ---------- EPS $ 0.19 $ 0.21 $ 0.76 $ 0.82 Real estate depreciation and amortization 0.35 0.35 1.40 1.40 FFOPS, Nareit definition and as adjusted for comparability $ 0.54 $ 0.56 $ 2.16 $ 2.22 ====== ===== ======= ======-- EPS in the range of $0.19-$0.21; and -- FFOPS, as defined by Nareit and as adjusted for comparability, in the range of $0.54-$0.56.-- Diluted earnings per share ("EPS") in the range of $0.76-$0.82; and -- Diluted FFO per share ("FFOPS"), as defined by Nareit and as adjusted for comparability, in the range of $2.16-$2.22.COLUMBIA, Md.--(BUSINESS WIRE)--February 04, 2021--

COPT Establishes Full Year and 1Q 2021 Guidance

Corporate Office Properties Trust ("COPT" or the "Company") (NYSE: OFC) is establishing the following guidance for the year ending December 31, 2021:

For the quarter ending March 31, 2021, the Company is establishing the following guidance:

Management Comments

"In October, we established guideposts for 2021 growth that implied a range of $2.15-$2.21 for FFO per share. Since that time, we executed half a million square feet of development leasing, raised equity capital on attractive terms, and outperformed our quarterly guidance for FFO per share, as adjusted for comparability, for the fourth consecutive quarter, " stated Stephen E. Budorick, COPT's President & Chief Executive Officer.

He continued, "We entered 2021 with solid development leasing momentum, recovering demand for existing space, and a healthy defense spending environment. Our 2021 guidance assumes we continue our proven strategy of allocating capital to highly pre-leased developments at Defense/IT Locations by completing one million square feet of development leasing, that we place over 650,000 square feet of well leased developments into service during the year, and maintain our conservatively leveraged balance sheet. The $2.19 midpoint of our 2021 initial guidance is a penny higher than the midpoint implied by the growth guideposts we provided in October and reflects the on-going strength of our operations."

2021 Guidance Reconciliation Tables

Reconciliations of projected EPS to projected FFOPS, in accordance with Nareit and as adjusted for comparability, are as follows:

Assumptions Underpinning 2021 Guidance

Table 1 details assumptions that underpin the Company's 2021 full year EPS and FFOPS guidance, respectively:

Table 2 details assumptions that underpin the Company's first quarter 2021 EPS and FFOPS guidance, respectively:

About COPT

COPT is a REIT that owns, manages, leases, develops and selectively acquires office and data center properties. The majority of its portfolio is in locations that support the United States Government and its contractors, most of whom are engaged in national security, defense and information technology ("IT") related activities servicing what it believes are growing, durable, priority missions ("Defense/IT Locations"). The Company also owns a portfolio of office properties located in select urban/urban-like submarkets in the Greater Washington, DC/Baltimore region with durable Class-A office fundamentals and characteristics ("Regional Office Properties"). As of December 31, 2020, the Company derived 87% of its core portfolio annualized rental revenue from Defense/IT Locations and 13% from its Regional Office Properties. As of the same date and including 17 properties owned through unconsolidated joint ventures, COPT's core portfolio of 179 office and data center shell properties encompassed 20.8 million square feet and was 95.0% leased; the Company also owned one wholesale data center with a critical load of 19.25 megawatts that was 86.7% leased.

Non-GAAP Measures

The Company believes that the measures defined below that are not determined in accordance with generally accepted accounting principles ("GAAP") are helpful to investors in measuring its 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; the Company's 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 should not be used as an alternative to the respective most comparable GAAP measures when evaluating the Company's financial performance or to cash flow from operating, investing and financing activities when evaluating its liquidity or ability to make cash distributions or pay debt service.

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 the Company, (3) depreciation and amortization allocable to noncontrolling interests in other consolidated entities, (4) Basic FFO allocable to share-based compensation awards 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 the Company's common shares of beneficial interest ("common shares") and are exchangeable into common shares, subject to certain conditions. The Company believes that Basic FFO is useful to investors due to the close correlation of common units to common shares, and believes that net income is the most directly comparable GAAP measure to this non-GAAP measure.

Cash net operating income ("Cash NOI")--Defined as NOI from real estate operations adjusted to eliminate the effects of: straight-line rental adjustments, amortization of tenant incentives, amortization of intangibles and other assets included in FFO and NOI, lease termination fees from tenants to terminate their lease obligations prior to the end of the agreed upon lease terms and rental revenue recognized under GAAP resulting from landlord assets and lease incentives funded by tenants. Cash NOI also includes adjustments to NOI from real estate operations for the effects of the items noted above pertaining to unconsolidated real estate JVs that were allocable to the Company's ownership interest in the JVs. Under GAAP, rental revenue is recognized evenly over the term of tenant leases (through straight-line rental adjustments and amortization of tenant incentives), which, given the long-term nature of its leases, does not align with the economics of when tenant payments are due to the Company under the arrangements. Also under GAAP, when a property is acquired, the Company allocates the acquisition to certain intangible components, which are then amortized into NOI over their estimated lives, even though the resulting revenue adjustments are not reflective of the Company's lease economics. In addition, revenue from lease termination fees and tenant-funded landlord improvements, absent an adjustment from the Company, would result in large one-time lump sum amounts in Cash NOI that the Company does not believe are reflective of a property's

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February 04, 2021 16:17 ET (21:17 GMT)