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COPT Gives 2013 Outlook, Ups 4Q Fig

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Yesterday, Corporate Office Properties Trust (OFC - Free Report) or COPT raised its adjusted FFO per share guidance for the fourth quarter 2012 and provided its view for the first quarter as well as full year 2013.

This Maryland-based real estate investment trust (REIT), which is scheduled to release its fourth-quarter results on Feb 8, has increased its fourth quarter 2012 adjusted FFO per share outlook to a new range of 49–51 cents, from the prior guidance of 45–48 cents. The increase reflects the one-time gain enjoyed by the company through shedding off its remaining interest in a non-REIT firm.

In addition, the first quarter 2013 FFO per share is expected to be in the range of 44– 46 cents and full year 2013 FFO will likely be in the range of $1.83–$1.93. The factors behind 2013 guidance include disposition of remaining non-core assets worth $160 million to facilitate company’s strategic reallocation plan and an increase in same-office net operating income in the range of 0%−2%.

On a separate development, earlier this week, COPT announced its plans to construct a business center – Ashburn Crossing – in Loudoun County, Virginia for an estimated total investment worth $42 million. It will comprise two buildings spanning approximately 315,000 square feet. The move is in line with COPT’s strategy of focusing on new developments in areas with high demand.

The construction of the first 200,000 square feet building, named COPT DC-8, will commence in early 2013. It will be followed by groundbreaking of the second 115,000 square feet building, named COPT DC-9, by mid-2014.

The company also signed a lease deal with an unnamed tenant – a subsidiary of an investment-grade Fortune 500 company – at the end of 2012 for the two to-be-developed properties. Notably, with this transaction, COPT’s development leasing volume rose to 1.2 million square feet for 2012.

Our Take

We believe the company’s increased expectations of fourth-quarter earnings reflect its successful execution of ongoing portfolio restructuring and development activities. Moreover, the construction of the business center in the upscale region will be accretive to its earnings in the long run.

The Zacks Consensus Estimate for COPT’s fourth-quarter FFO is currently pegged at 47 cents per share. However, for the company, which currently holds a Zacks Rank #4 (Sell), the guidance increase announcement is likely to result in upward revisions in estimates in the coming days. This, in turn may lead to a revision in its rank as well. One of its competitors, Brandywine Realty Trust (BDN - Free Report) holds a Zacks Rank #2 (Buy).

Note: FFO, a widely accepted and reported measure of the performance of REITs, is derived by adding depreciation, amortization and other non-cash expenses to net income.

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