Item 7.01.
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Regulation FD Disclosure.
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Results of Tender Offer for 3.600% Notes
due 2023
On March 11, 2021, COPT issued a press
release announcing the expiration of the previously announced cash tender offer (the “2023 Notes Tender Offer”) for
any and all of COPLP’s outstanding 3.600% Senior Notes due 2023, fully and unconditionally guaranteed by COPT (the “2023
Notes”) at 5:00 p.m., New York City time, on March 9, 2021 (the “2023 Notes Tender Offer Expiration Time”). As
of the 2023 Notes Tender Offer Expiration Time, $184,424,000, or 52.69%, of the $350,000,000 aggregate principal amount of the
2023 Notes outstanding prior to the 2023 Notes Tender Offer had been validly tendered and not withdrawn in the 2023 Notes Tender
Offer, excluding 2023 Notes tendered pursuant to a 2023 Notes Notice of Guaranteed Delivery (as defined below) in the 2023 Notes
Tender Offer at or prior to the 2023 Notes Tender Offer Expiration Time.
COPT accepted for purchase all of the 2023
Notes validly tendered and delivered (and not validly withdrawn) in the 2023 Notes Tender Offer at or prior to the 2023 Notes Tender
Offer Expiration Time. Payment for the 2023 Notes purchased pursuant to the 2023 Notes Tender Offer is being made on March 11,
2021 (the “2023 Notes Tender Offer Settlement Date”), and payment for 2023 Notes tendered by a 2023 Notes Notice of
Guaranteed Delivery is anticipated to be made on March 12, 2021 (the “2023 Notes Guaranteed Delivery Settlement Date”).
Any 2023 Notes tendered by a 2023 Notes
Notice of Guaranteed Delivery and accepted for purchase will be purchased on the third business day after the 2023 Notes Tender
Offer Expiration Time, but payment of accrued interest, if any, on such 2023 Notes will only be made to, but not including, the
2023 Notes Tender Offer Settlement Date.
The consideration being paid under the
2023 Notes Tender Offer is $1,066.81 per $1,000 principal amount of 2023 Notes, plus accrued and unpaid interest, if any, up to,
but not including, the 2023 Notes Tender Offer Settlement Date. The 2023 Notes Tender Offer is being funded from a portion of the
net proceeds from the previously announced issuance and sale by COPLP of the Notes.
The 2023 Notes Tender Offer was made pursuant
to the 2023 Notes Offer to Purchase (the “2023 Notes Offer to Purchase”) and the related 2023 Notes Notice of Guaranteed
Delivery attached to the 2023 Notes Offer to Purchase (the “2023 Notes Notice of Guaranteed Delivery”), each dated
March 3, 2021. Wells Fargo Securities, LLC acted as dealer manager for the 2023 Notes Tender Offer.
Redemption of 3.600% Notes due 2023
On March 11, 2021, COPT announced that
it has elected to redeem all of the 2023 Notes that remain outstanding following the 2023 Notes Tender Offer. In accordance with
the redemption provisions of the 2023 Notes and the Indenture, dated as of May 6, 2013 (the “2013 Indenture”), by and
between COPLP, as issuer, COPT, as guarantor, and U.S. Bank National Association, as trustee, the 2023 Notes will be redeemed at
a price equal to the principal amount plus an applicable premium calculated pursuant to the terms of the 2013 Indenture, together
with accrued and unpaid interest, if any, up to, but not including, the redemption date, which has been set for April 12, 2021.
Results of Tender Offer for 5.250% Notes
due 2024
On March 11, 2021, COPT issued a press
release announcing the expiration of the previously announced cash tender offer (the “2024 Notes Tender Offer” and
together with the 2023 Notes Tender Offer, the “Tender Offers”) for any and all of COPLP’s outstanding 5.250%
Senior Notes due 2024, fully and unconditionally guaranteed by COPT (the “2024 Notes”) at 5:00 p.m., New York City
time, on March 10, 2021 (the “2024 Notes Tender Offer Expiration Time”). As of the 2024 Notes Tender Offer Expiration
Time, $145,415,000, or 58.17%, of the $250,000,000 aggregate principal amount of the 2024 Notes outstanding prior to the 2024 Notes
Tender Offer had been validly tendered and not withdrawn in the 2024 Notes Tender Offer, excluding 2024 Notes tendered pursuant
to a 2024 Notes Notice of Guaranteed Delivery (as defined below) in the 2024 Notes Tender Offer at or prior to the 2024 Notes Tender
Offer Expiration Time.
COPT accepted for purchase all of the 2024
Notes validly tendered and delivered (and not validly withdrawn) in the 2024 Notes Tender Offer at or prior to the 2024 Notes Tender
Offer Expiration Time. Payment for the 2024 Notes purchased pursuant to the 2024 Notes Tender Offer is being made on March 11,
2021 (the “2024 Notes Tender Offer Settlement Date”), and payment for 2024 Notes tendered by a 2024 Notes Notice of
Guaranteed Delivery is anticipated to be made on March 15, 2021 (the “2024 Notes Guaranteed Delivery Settlement Date”).
Any 2024 Notes tendered by a 2024 Notes
Notice of Guaranteed Delivery and accepted for purchase will be purchased on the third business day after the 2024 Notes Tender
Offer Expiration Time, but payment of accrued interest, if any, on such 2024 Notes will only be made to, but not including, the
2024 Notes Tender Offer Settlement Date.
The consideration being paid under the
2024 Notes Tender Offer is $1,131.31 per $1,000 principal amount of 2024 Notes, plus accrued and unpaid interest, if any, up to,
but not including, the 2024 Notes Tender Offer Settlement Date. The 2024 Notes Tender Offer is being funded from a portion of the
net proceeds from the previously announced issuance and sale by COPLP of the Notes.
The 2024 Notes Tender Offer was made pursuant
to the 2024 Notes Offer to Purchase (the “2024 Notes Offer to Purchase”) and the related 2024 Notes Notice of Guaranteed
Delivery attached to the 2024 Notes Offer to Purchase (the “2024 Notes Notice of Guaranteed Delivery”), each dated
March 3, 2021. Wells Fargo Securities, LLC acted as dealer manager for the 2024 Notes Tender Offer.
Redemption of 5.25% Notes due 2024
On March 11, 2021, COPT announced that
it has elected to redeem all of the 2024 Notes that remain outstanding following the 2024 Notes Tender Offer. In accordance with
the redemption provisions of the 2024 Notes and the Indenture, dated as of September 16, 2013 (the “2013 Base Indenture”),
by and between COPLP, as issuer, COPT, as guarantor, and U.S. Bank National Association, as trustee, as supplemented by the First
Supplemental Indenture, dated as of September 16, 2013 (the “2013 First Supplemental Indenture” and, together with
the 2013 Base Indenture, the “Indenture for 2024 Notes”), the 2024 Notes will be redeemed at a price equal to the principal
amount plus an applicable premium calculated pursuant to the terms of the Indenture for 2024 Notes, together with accrued and unpaid
interest, if any, up to, but not including, the redemption date, which has been set for April 12, 2021.
This Current Report on Form 8-K is neither
an offer to purchase nor a solicitation to buy any of the 2023 Notes or 2024 Notes nor is it a solicitation for acceptance of the
2023 NotesTender Offer or the 2024 Notes Tender Offer. A copy of the press release announcing the expiration of the Tender Offers
and the redemptions referenced above is furnished as Exhibit 99.1 to this Current Report on Form 8-K.
The information included in this Current
Report on Form 8-K under this Item 7.01 (including Exhibit 99.1) shall not be deemed “filed” for the purposes of Section
18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities
of that section, nor shall it be deemed incorporated by reference into any filing made by the Company under the Exchange Act or
the Securities Act, except as shall be expressly set forth by specific reference in such a filing.
Guidance Update
The Company is modifying its previously
announced guidance to reflect the expected effect of early extinguishment losses resulting from the purchases and redemptions of
the 2023 Notes and 2024 Notes described above.
The Company previously announced guidance for:
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Diluted Earnings (loss) per share (“EPS”)
of between $0.19 and $0.21 for the three months ending March 31, 2021 and between $0.76 and $0.82 for the year ending December
31, 2021;
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Diluted FFO per share (“FFOPS”) of between $0.54 and $0.56 for the three months
ending March 31, 2021 and between $2.16 and $2.22 for the year ending December 31, 2021; and
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FFOPS, as adjusted for comparability, of between $0.54
and $0.56 for the three months ending March 31, 2021 and between $2.16 and $2.22 for the year ending December 31, 2021.
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The Company has modified its guidance as follows:
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Diluted EPS is modified to between ($0.09) and ($0.07) for the three months ending March 31,
2021 and between $0.25 and $0.31 for the year ending December 31, 2021;
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FFOPS is modified to between $0.26 and $0.28 for the three months ending March 31, 2021 and between
$1.65 and $1.71 for the year ending December 31, 2021; and
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the Company is affirming its previously announced guidance
for FFOPS, as adjusted for comparability.
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Risk Factor - Results reflected in the Company’s
earnings guidance may not be achieved.
The
modified guidance disclosed in this Current Report on Form 8-K is based upon a number of estimates and assumptions. While the
Company believes that these estimates and assumptions are sufficiently specific and are reasonable, they are nevertheless subject
to business, economic and competitive uncertainties. As a result, the Company’s actual results could differ from the estimates.
Important factors that may affect these estimates and assumptions are set forth in the Company’s periodic filings under the
Exchange Act.
A reconciliation of projected
diluted EPS to projected FFOPS and projected FFOPS, as adjusted for comparability for the three months ending March 31, 2021 and
the year ending December 31, 2021 is provided, as follows:
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Quarter ending
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Year ending
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March 31, 2021
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December 31, 2021
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Low
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High
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Low
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High
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EPS
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$
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(0.09
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)
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$
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(0.07
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)
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$
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0.25
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$
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0.31
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Real estate-related depreciation and amortization
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0.35
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0.35
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1.40
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1.40
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FFOPS, Nareit definition
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0.26
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0.28
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1.65
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1.71
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Loss on early extinguishment of debt
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0.28
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0.28
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0.51
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0.51
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FFOPS, as adjusted for comparability
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$
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0.54
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$
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0.56
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$
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2.16
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$
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2.22
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The Company uses the non-GAAP financial
measures described below in earnings press releases and information furnished to the Securities and Exchange Commission. The Company
believes that these measures are helpful to investors in measuring its performance and comparing such performance to 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 the Company’s 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 the Company’s financial performance or to cash flow from
operating, investing and financing activities when evaluating the Company’s liquidity or ability to make cash distributions
or pay debt service.
Funds from operations (“FFO”
or “FFO per Nareit”)
Defined
as net income computed using GAAP, excluding gains on sales and impairment losses of real estate and investments in unconsolidated
real estate JVs (net of associated income tax) and real estate-related depreciation and amortization. FFO also includes
adjustments to net income for the effects of the items noted above pertaining to unconsolidated real estate joint ventures (“UJVs”)
that were allocable to the Company’s ownership interest in the UJVs. The Company believes that it uses the National Association
of Real Estate Investment Trust’s (“Nareit”) definition of FFO, although others may interpret the definition
differently and, accordingly, the Company’s presentation of FFO may differ from those of other REITs. The Company believes
that FFO is useful to management and investors as a supplemental measure of operating performance because, by excluding gains on
sales and impairment losses of real estate (net of associated income tax) and real estate-related depreciation and amortization,
FFO can help one compare its operating performance between periods. The Company believes that net income is the most directly comparable
GAAP measure to this non-GAAP measure.
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. The Company believes that net income is the most directly
comparable GAAP measure to this non-GAAP measure.
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 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. The Company believes that Diluted FFO is useful to investors because it is the
numerator used to compute Diluted FFO per share, discussed below. The Company believes that net income is the most directly
comparable GAAP measure to this non-GAAP measure.
Diluted FFO available to common
share and common unit holders, as adjusted for comparability (“Diluted FFO, as adjusted for comparability”)
Defined
as Diluted FFO or FFO adjusted to exclude: operating property acquisition costs; gain or loss on early extinguishment of debt;
FFO associated with properties securing non-recourse debt on which the Company has defaulted and which the Company has extinguished,
or expects to extinguish, via conveyance of such properties (including property net operating income, interest expense and gains
on debt extinguishment); loss on interest rate derivatives; demolition costs on redevelopment and nonrecurring improvements; executive
transition costs; accounting charges for original issuance costs associated with redeemed preferred shares; allocations of FFO
to holders of noncontrolling interests resulting from capital events; and certain other expenses that the Company believes are
not closely correlated with its operating performance. This measure also includes adjustments for the effects of the items noted
above pertaining to UJVs allocable to the Company’s ownership interest in the UJVs. The Company believes this to be a useful
supplemental measure alongside Diluted FFO as it excludes gains and losses from certain investing and financing activities and
certain other items that the Company believes are not closely correlated to (or associated with) its operating performance. The
Company believes that net income is the most directly comparable GAAP measure to this non-GAAP measure.
Diluted FFO per share (“FFOPS”)
FFOPS 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 FFOPS assumes the conversion of common units 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. The Company believes
that FFOPS is useful to investors because it provides investors with a further context for evaluating its FFO results in the same
manner that investors use earnings per share (“EPS”) in evaluating net income available to common shareholders. The
Company believes that diluted EPS is the most directly comparable GAAP measure to this non-GAAP measure.
FFOPS, 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 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. The Company believes that this measure
is useful to investors because it provides a further context for evaluating its FFO results. The Company believes this to be a
useful supplemental measure alongside Diluted FFO per share as it excludes gains and losses from certain investing and financing
activities and certain other items that it believes are not closely correlated to (or associated with) its operating performance.
The Company believes that diluted EPS is the most directly comparable GAAP measure to this non-GAAP measure.