CORPORATE OFFICE PROPERTIES TRUST Results for 4Q 2019 & 2020 Guidance February 6, 2020 The Preferred Provider of Mission Critical Real Estate Solutions
Table of Contents Results for 4Q 2019…............................Page 3 Safe Harbor I. Unless otherwise noted, information in this presentation represents the Company’s consolidated portfolio as of or for the quarter ended December 31, 2019. Factors Supporting Growth……………Page 6 II. Defined terms for Non-GAAP measures used throughout may be found in the Disclosure. In addition, Reconciliations of Non-GAAP measures to the 2020 Guidance………....………..……...Page 19 III. most comparable GAAP measures are included in the Disclosure. This presentation may contain “forward - looking” statements, as defined in Appendices……………………………...Page 23 II. 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 are A. Definitions & Glossary inherently subject to risks and uncertainties, many of which the Company B. Reconciliations cannot predict with accuracy and some of which the Company might not even anticipate. Although the Company believes that expectations, estimates and projections reflected in such forward-looking statements are based on reasonable assumptions at the time made, the Company can give no assurance that these expectations, estimates and projections will be achieved. Future events and actual results may differ materially from those discussed in the forward-looking statements and the Company undertakes no obligation to update or supplement any forward-looking statements. The areas of risk that may affect these expectations, estimates and projections include, but are not limited to, those risks described in Item 1A of the Company’s Annual Report on Form 10 -K for the year ended December 31, 2018 and Quarterly Report on Form 10-Q for the quarter ended June 30, 2019. 2
Results for 4Q & FY 2018 I. Results for 4Q 2019 I. Rendering of 100 Secured Gateway 3
2019 Recap Robust DoD Spending Translated into Record Year U.S. Government Record Development Strong Vacancy Total New Leasing of Leasing Leasing 586,000 SF was 2 nd Best Year › 2.2 million SF executed is › 784,000 SF executed, 1 million SF above highest since 2010 › Record 605,000 SF achieved prior record in 2012 in 2005 2.3 million SF Core Portfolio Under Development 1 $357 million of Equity 93.1% occupied, proceeds raised to fund › 79% leased Development investment 94.6% leased › Represents a 12% increase to our Core portfolio 1. Excludes a 106,000 SF redevelopment project that was 80% pre-leased at December 31, 2019. 4
Results Updated Guidance Actual FFOPS*: ▪ 4Q $0.49 – $0.51 $0.50 ▪ FY $2.02 – $2.04 $2.03 Same-Property Occupancy: 91.5% – 92% ▪ At 12/31/2019 91.9% Same-Property Cash NOI Growth: ▪ 4Q -- 6.2% ▪ FY 3.25% – 3.5% 3.9% 75% – 80% Full Year Tenant Retention 77% $400 – $425 Development Spend $417 Dispositions & Equity Raised $346 $357 Development Leasing Achieved: ▪ 1Q -- 539,000 SF ▪ 2Q -- 652,000 SF ▪ 3Q -- 875,000 SF ▪ 4Q -- 158,000 SF Total to-date 2,225,000 SF Development Leasing 900,000 SF 2.0 mm SF 1.4 mm SF 2.2 mm SF Annual Target: on 2Q19 call initial target on 1Q19 call on 3Q19 call * FFOPS = diluted funds from operations per share, as adjusted for comparability. 5
Results for 4Q & FY 2018 I. Factors Supporting Growth II. 250 West Pratt Street Lobby Renovation 6
Mission Critical Locations COPT owns 161 buildings 1 in Defense/IT Locations adjacent or in close proximity to proven, growing U.S. Government Defense Installations # Core State Bldgs SF 2 Demand Driver Fort Meade, ▪ MD 101 8,979 NAVAIR Cloud Computing, ▪ VA 22 3 3,744 3 NAP for MAE-East Intelligence Community, NGA, 19 2,195 NRO, FBI Cyber & Other Lackland AFB, ▪ TX 7 953 Air Force & Other Cyber ▪ AL 10 806 Redstone Arsenal Washington Navy ▪ DC 2 358 Yard, NAVSEA 161 17,034 1. Excludes seven Regional Office buildings and two buildings in our Other segment. 2. In thousands. 3. Includes 100% of the SF in 15 data center shells that are owned through unconsolidated joint ventures. 7
Mission Critical Land Positions We own/control ~900 acres of developable land at our Defense/IT Locations » 10.4 million developable SF » Strong barriers to entry against new supply COPT’s Strategic Land Inventory Developable SF (millions) ▪ MD 3.8 ▪ VA * 2.6 ▪ AL 3.2 ▪ TX 0.8 10.4 * Includes data center shell land. 8
Mandate to Restore & Fund U.S. Military » A 2018 Pentagon Study reported that the DoD funding deficit created by the Budget Control Act of 2011 and the multi-year failure to provide timely appropriations had eroded U.S. Military power “to a dangerous degree,” and provided the imperative to correct it Prior Spending Deficit in Base Budget (050) Source: National Defense Strategy Commission’s Providing for the Common Defense (2018): https://www.usip.org/publications/2018/11/providing-common-defense 9
Healthy DoD Spending Levels » Bi-partisan agreement for FY20 & FY21 Budgets eliminates sequestration threat (Budget Control Act of 2011 sunsets after FY21) » FY 2020 Budget signed in December 2019 raised Base Budget another 3% » FY 2015 –FY 2020, DoD’s Base Budget has grown at a compound annual rate of 5% DoD’s Discretionary Budget Authority (“Base Budget”)* Current dollars, in billions. Sources: Historical data through FY 2016 are pulled from Tables 1-9 and 2-1 of the National Defense Budget Estimates ("Green Books") for FY 2017 or earlier; data for FY 2017 through FY 2019 are pulled from Tables 1-2 and 2-1 of the FY 2020 Green Book; Capital Alpha Partners; COPT’s IR Department. † DoD base budget (051) numbers exclude funding for overseas contingency operations ("OCO"), Atomic Energy Defense Activiti es (053), Other Defense-Related Activities (054), and mandatory spending. * FY 2017 includes $8.25 billion of "OCO for base budget purposes." Source: CRS report on the final authorizations. ** FY 2018 includes $5.8 billion of supplemental authorizations for Missile Defense. 10 ‡ Estimated, using the 2020 DoD Appropriations Act and the 2020 Military Construction, Veterans Affairs, and Related Agenci es Appropriations Act.
Demand Related to DoD Budgets » Healthy defense spending environment supported strong leasing in all five demand categories COPT Portfolio – 2019 Activity Types of Demand ▪ 784,000 SF of Vacancy Leasing for 2019 1) Defense contract awards spur ▪ 4Q19 Vacancy Leasing of 162,000 SF incremental space requirements in operating portfolio ▪ 12 new leases within the operating portfolio with the U.S. Government in five 2) Deferred U.S. Government demand materializing locations totaling 198,000 SF 1 ▪ Redstone Gateway: 3) Demand exceeds available » Recent speculative developments totaling 155,000 SF are 100% leased inventory, leading to the » Commenced next inventory building of 100,000 SF (8000 Rideout Road) in 4Q19; creation of new supply strong demand prospects ▪ Discovery District at College Park: » 5801 University Research Court – 100% leased » 4600 River Road, a 100,000 SF building, commenced in 3Q and is 25% pre-leased ▪ Redstone Gateway – 548,000 SF signed in 2019: 4) Defense contractors commit » 366,000+ SF campus for Yulista to BTS and major new leases » 8800 Redstone Gateway is 100% pre-leased to two defense contractors for long-term growth and/or » 79% pre-lease of 6000 Redstone Gateway efficiencies ▪ Data Center Shells – 1.2 million SF leased ▪ 6950 Columbia Gateway Drive – 80% leased ▪ NoVA C full-building lease executed in 3Q19 for 348,000 SF, 100% leased; 5) U.S. Government plans for long-term space requirements delivers in 2022 ▪ 100 Secured Gateway – 1 st U.S. Government building on Redstone Gateway’s secure campus » 16% pre-leased at 12/31/19 » Process advancing with second, larger U.S. Government user 1. The 164,000 SF of U.S. Government leasing in this statistic are also included in the 784,000 SF of Vacancy Leasing in #1. In 1Q, we accounted for 34,000 SF as Development Leasing for reporting purposes; we are treating it as deferred 11 Government demand here.
Highly Leased Developments Drive NOI Growth » Between 2011-2017, we Square Feet of Development Placed Into Service sold 11.4 million SF of assets, raising $1.6 billion 1,600,000 100% that we used to reduce 90% 1,400,000 leverage and fund strategic developments 80% 1,200,000 840,000 SF 70% » PIS annually, Those same years, the 90% leased 5.7 million SF of 1,000,000 60% developments ($1.3 billion 800,000 50% cost) we placed into service were 88% leased, which 40% 600,000 mitigated the dilutive impact of the sales, and helped 30% 400,000 maintain FFO at 20% approximately $2/share 200,000 10% » The 1.37 million SF - 0% ($296 million) that will be 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 E placed into service during SF PIS Forecasted % Leased 2020 are expected to be fully leased, contributing to FFO growth this year, and into 2021/2022 12
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