10-Q/A

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-Q/A

(Amendment No. 1)

(Mark one)
x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2012
or
o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from                to

Commission file number 1-14023

Corporate Office Properties Trust

(Exact name of registrant as specified in its charter)

Maryland	23-2947217
(State or other jurisdiction of	(IRS Employer
incorporation or organization)	Identification No.)

6711 Columbia Gateway Drive, Suite 300, Columbia, MD	21046
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code:  (443) 285-5400

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  x Yes  o No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  x Yes  o No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer x	Accelerated filer o
Non-accelerated filer o	Smaller reporting company o
(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act)  o Yes  x No

As of April 18, 2012, 72,040,863 of the Company’s Common Shares of Beneficial Interest, $0.01 par value, were issued and outstanding.

EXPLANATORY NOTE

This amendment to the Quarterly Report on Form 10-Q/A (“Amendment No. 1”) is being filed in order to include disclosure regarding previously undisclosed out-of-period adjustments to the consolidated financial statements that were included in Part I, Items 1 and 2 of the original Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2012 previously filed on April 27, 2012 (the “Original Filing”).

During the second quarter of 2012, we identified an error in the consolidated financial statements for the year ended December 31, 2011 and the quarter ended March, 31, 2012.  The error was attributable to the misapplication of accounting guidance related to the recognition of a deferred tax asset resulting from an impairment of assets in the fourth quarter of 2011 that failed to consider a partial reversal of that asset that would result from a cancellation of related inter-company debt in the first quarter of 2012.  During the first quarter of 2012, we identified an error that impacted the above referenced periods.  The error was an over-accrual of incentive compensation cost.  We have determined that the errors were not material in 2011 and are not material to our expected annual results for the year ending December 31, 2012.  Accordingly, the cumulative change is reported as an out-of-period adjustment in the three months ended March 31, 2012 on our consolidated statement of operations.

This Amendment No. 1 amends only Part I, Items 1 and 2 of the Original Filing solely to reflect the revision of the notes to the consolidated financial statements and to add disclosure to Part I, Item 2 relating to such revision.  The remaining items contained within this Amendment No. 1 consist of all other items originally contained in the Original Filing.  These remaining items are not amended hereby, but are included for the convenience of the reader.  Except for the foregoing amended information, this Amendment No. 1 continues to describe conditions as of the date of the Original Filing, and we have not updated the disclosures contained herein to reflect events that occurred at a later date.  We are also updating the signature page and certifications of our Chief Executive and Financial Officers contained in Exhibits 31.1, 31.2, 32.1 and 32.2.

TABLE OF CONTENTS

FORM 10-Q

		PAGE
PART I:  FINANCIAL INFORMATION
Item 1:	Financial Statements:
	Consolidated Balance Sheets as of March 31, 2012 and December 31, 2011 (unaudited)	3
	Consolidated Statements of Operations for the Three Months Ended March 31, 2012 and 2011 (unaudited)	4
	Consolidated Statements of Comprehensive Income for the Three Months Ended March 31, 2012 and 2011 (unaudited)	5
	Consolidated Statements of Equity for the Three Months Ended March 31, 2012 and 2011 (unaudited)	6
	Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2012 and 2011 (unaudited)	7
	Notes to Consolidated Financial Statements (unaudited)	9
Item 2:	Management’s Discussion and Analysis of Financial Condition and Results of Operations	28
Item 3:	Quantitative and Qualitative Disclosures About Market Risk	38
Item 4:	Controls and Procedures	39
PART II: OTHER INFORMATION
Item 1:	Legal Proceedings	40
Item 1A:	Risk Factors	40
Item 2:	Unregistered Sales of Equity Securities and Use of Proceeds	40
Item 3:	Defaults Upon Senior Securities	40
Item 4:	Mine Safety Disclosures	40
Item 5:	Other Information	40
Item 6:	Exhibits	40
SIGNATURES		42

2

PART I: FINANCIAL INFORMATION

ITEM 1. Financial Statements

Corporate Office Properties Trust and Subsidiaries

Consolidated Balance Sheets

(Dollars in thousands, except share data)

(unaudited)

	March 31,			December 31,
	2012			2011
Assets
Properties, net:
Operating properties, net	$	2,704,323		$	2,714,056
Projects in development or held for future development	633,968			638,919
Total properties, net	3,338,291			3,352,975
Assets held for sale, net	81,352			116,616
Cash and cash equivalents	7,987			5,559
Restricted cash and marketable securities	21,711			36,232
Accounts receivable (net of allowance for doubtful accounts of $3,796 and $3,546, respectively)	11,231			26,032
Deferred rent receivable	89,337			86,856
Intangible assets on real estate acquisitions, net	83,940			89,120
Deferred leasing and financing costs, net	66,987			66,515
Prepaid expenses and other assets	96,532			87,619
Total assets	$	3,797,368		$	3,867,524
Liabilities and equity
Liabilities:
Debt, net	$	2,418,078		$	2,426,303
Accounts payable and accrued expenses	93,156			96,425
Rents received in advance and security deposits	27,647			29,548
Dividends and distributions payable	24,544			35,038
Deferred revenue associated with operating leases	15,258			15,554
Distributions received in excess of investment in unconsolidated real estate joint venture	6,178			6,071
Interest rate derivatives	2,673			30,863
Other liabilities	9,038			9,657
Total liabilities	2,596,572			2,649,459
Commitments and contingencies (Note 15)	—			—
Equity:
Corporate Office Properties Trust’s shareholders’ equity:
Preferred Shares of beneficial interest with an aggregate liquidation preference of $216,333 ($0.01 par value; 15,000,000 shares authorized and 8,121,667 shares issued and outstanding at March 31, 2012 and December 31, 2011)	81			81
Common Shares of beneficial interest ($0.01 par value; 125,000,000 shares authorized, shares issued and outstanding of 72,037,627 at March 31, 2012 and 72,011,324 at December 31, 2011)	720			720
Additional paid-in capital	1,670,451			1,668,645
Cumulative distributions in excess of net income	(549,456		)	(532,288		)
Accumulated other comprehensive loss	(2,201		)	(1,733		)
Total Corporate Office Properties Trust’s shareholders’ equity	1,119,595			1,135,425
Noncontrolling interests in subsidiaries:
Common units in the Operating Partnership	53,883			55,281
Preferred units in the Operating Partnership	8,800			8,800
Other consolidated entities	18,518			18,559
Noncontrolling interests in subsidiaries	81,201			82,640
Total equity	1,200,796			1,218,065
Total liabilities and equity	$	3,797,368		$	3,867,524

See accompanying notes to consolidated financial statements.

3

Corporate Office Properties Trust and Subsidiaries

Consolidated Statements of Operations

(in thousands, except per share data)

(unaudited)

	For the Three Months
	Ended March 31,
	2012			2011
Revenues
Rental revenue	$	99,144		$	94,249
Tenant recoveries and other real estate operations revenue	22,795			22,212
Construction contract and other service revenues	21,534			21,028
Total revenues	143,473			137,489
Expenses
Property operating expenses	47,202			47,061
Depreciation and amortization associated with real estate operations	31,066			30,043
Construction contract and other service expenses	20,607			20,618
Impairment losses	5,126			27,742
General and administrative expenses	7,017			6,777
Business development expenses and land carry costs	1,594			1,241
Total operating expenses	112,612			133,482
Operating income	30,861			4,007
Interest expense	(25,224		)	(26,115		)
Interest and other income	1,217			1,168
Income (loss) from continuing operations before equity in (loss) income of unconsolidated entities and income taxes	6,854			(20,940		)
Equity in (loss) income of unconsolidated entities	(89		)	30
Income tax (expense) benefit	(4,173		)	544
Income (loss) from continuing operations	2,592			(20,366		)
Discontinued operations	4,385			(901		)
Income (loss) before gain on sales of real estate	6,977			(21,267		)
Gain on sales of real estate, net of income taxes	—			2,701
Net income (loss)	6,977			(18,566		)
Net (income) loss attributable to noncontrolling interests:
Common units in the Operating Partnership	(159		)	1,479
Preferred units in the Operating Partnership	(165		)	(165		)
Other consolidated entities	24			(538		)
Net income (loss) attributable to Corporate Office Properties Trust	6,677			(17,790		)
Preferred share dividends	(4,025		)	(4,025		)
Net income (loss) attributable to Corporate Office Properties Trust common shareholders	$	2,652		$	(21,815	)
Net income (loss) attributable to Corporate Office Properties Trust:
Income (loss) from continuing operations	$	2,539		$	(16,946	)
Discontinued operations, net	4,138			(844		)
Net income (loss) attributable to Corporate Office Properties Trust	$	6,677		$	(17,790	)
Basic earnings per common share (1)
Loss from continuing operations	$	(0.02	)	$	(0.32	)
Discontinued operations	0.06			(0.01		)
Net income (loss) attributable to COPT common shareholders	$	0.04		$	(0.33	)
Diluted earnings per common share (1)
Loss from continuing operations	$	(0.02	)	$	(0.32	)
Discontinued operations	0.06			(0.01		)
Net income (loss) attributable to COPT common shareholders	$	0.04		$	(0.33	)

(1) Basic and diluted earnings per common share are calculated based on amounts attributable to common shareholders of Corporate Office Properties Trust.

See accompanying notes to consolidated financial statements.

4

Corporate Office Properties Trust and Subsidiaries

Consolidated Statements of Comprehensive Income

(Dollars in thousands)

(unaudited)

	For the Three Months
	Ended March 31,
	2012			2011
Net income (loss)	$	6,977		$	(18,566	)
Other comprehensive income
Unrealized losses on interest rate derivatives	(1,987		)	(136		)
Losses on interest rate derivatives included in net income	1,474			1,104
Other comprehensive (loss) income	(513		)	968
Comprehensive income (loss)	6,464			(17,598		)
Comprehensive (income) loss attributable to noncontrolling interests	(271		)	714
Comprehensive income (loss) attributable to COPT	$	6,193		$	(16,884	)

See accompanying notes to consolidated financial statements.

5

Corporate Office Properties Trust and Subsidiaries

Consolidated Statements of Equity

(Dollars in thousands)

(unaudited)

	Preferred  Shares		Common  Shares		Additional  Paid-in  Capital			Cumulative  Distributions in  Excess of Net  Income (Loss)			Accumulated  Other  Comprehensive  Loss			Noncontrolling  Interests			Total
Balance at December 31, 2010 (66,931,582 common shares outstanding)	$	81	$	669	$	1,511,844		$	(281,794	)	$	(4,163	)	$	96,501		$	1,323,138
Conversion of common units to common shares (16,725 shares)	—		—		263			—			—			(263		)	—
Costs associated with common shares issued to the public	—		—		(117		)	—			—			—			(117		)
Exercise of share options (24,667 shares)	—		—		346			—			—			—			346
Share-based compensation	—		2		3,201			—			—			—			3,203
Restricted common share redemptions (104,592 shares)	—		—		(3,713		)	—			—			—			(3,713		)
Adjustments to noncontrolling interests resulting from changes in ownership of Operating Partnership by COPT	—		—		(163		)	—			—			163			—
Adjustments related to derivatives designated as cash flow hedges	—		—		—			—			966			2			968
Net loss	—		—		—			(17,790		)	—			(776		)	(18,566		)
Dividends	—		—		—			(31,729		)	—			—			(31,729		)
Distributions to owners of common and preferred units in the Operating Partnership	—		—		—			—			—			(1,974		)	(1,974		)
Contributions from noncontrolling interests in other consolidated entities	—		—		(23		)	—			—			125			102
Balance at March 31, 2011 (67,103,918 common shares outstanding)	$	81	$	671	$	1,511,638		$	(331,313	)	$	(3,197	)	$	93,778		$	1,271,658
Balance at December 31, 2011 (72,011,324 common shares outstanding)	$	81	$	720	$	1,668,645		$	(532,288	)	$	(1,733	)	$	82,640		$	1,218,065
Conversion of common units to common shares (34,550 shares)	—		—		444			—			—			(444		)	—
Costs associated with common shares issued to the public	—		—		(5		)	—			—			—			(5		)
Exercise of share options (5,667 shares)	—		—		82			—			—			—			82
Share-based compensation	—		—		3,746			—			—			—			3,746
Restricted common share redemptions (97,094 shares)	—		—		(2,373		)	—			—			—			(2,373		)
Adjustments to noncontrolling interests resulting from changes in ownership of Operating Partnership by COPT	—		—		(88		)	—			—			88			—
Adjustments related to derivatives designated as cash flow hedges	—		—		—			—			(468		)	(45		)	(513		)
Net income	—		—		—			6,677			—			300			6,977
Dividends	—		—		—			(23,845		)	—			—			(23,845		)
Distributions to owners of common and preferred units in the Operating Partnership	—		—		—			—			—			(1,338		)	(1,338		)
Balance at March 31, 2012 (72,037,627 common shares outstanding)	$	81	$	720	$	1,670,451		$	(549,456	)	$	(2,201	)	$	81,201		$	1,200,796

See accompanying notes to consolidated financial statements.

6

Corporate Office Properties Trust and Subsidiaries

Consolidated Statements of Cash Flows

(Dollars in thousands)

(unaudited)

	For the Three Months Ended
	March 31,
	2012			2011
Cash flows from operating activities
Revenues from real estate operations received	$	129,184		$	114,303
Construction contract and other service revenues received	18,170			21,405
Property operating expenses paid	(42,608		)	(45,267		)
Construction contract and other service expenses paid	(12,454		)	(28,315		)
General and administrative and business development expenses paid	(6,156		)	(6,860		)
Interest expense paid	(19,896		)	(22,252		)
Cash settlement of interest rate derivatives	(29,738		)	—
Proceeds from sale of trading marketable securities	7,041			—
Interest and other income received	252			108
Income taxes paid	(8		)	(170		)
Net cash provided by operating activities	43,787			32,952
Cash flows from investing activities
Purchases of and additions to properties
Construction, development and redevelopment	(35,476		)	(46,676		)
Tenant improvements on operating properties	(7,934		)	(8,778		)
Other capital improvements on operating properties	(3,360		)	(4,064		)
Proceeds from sales of properties	61,230			3,149
Mortgage and other loan receivables funded or acquired	(3,506		)	(1,181		)
Leasing costs paid	(2,853		)	(2,894		)
Other	(310		)	(920		)
Net cash provided by (used in) investing activities	7,791			(61,364		)
Cash flows from financing activities
Proceeds from debt	331,097			97,273
Repayments of debt
Scheduled principal amortization	(3,207		)	(3,798		)
Other repayments	(337,050		)	(25,050		)
Deferred financing costs paid	(2,044		)	(482		)
Dividends paid	(33,711		)	(31,664		)
Distributions paid	(1,939		)	(1,981		)
Restricted share redemptions	(2,373		)	(3,713		)
Other	77			331
Net cash (used in) provided by financing activities	(49,150		)	30,916
Net increase in cash and cash equivalents	2,428			2,504
Cash and cash equivalents
Beginning of period	5,559			10,102
End of period	$	7,987		$	12,606

See accompanying notes to consolidated financial statements.

7

Corporate Office Properties Trust and Subsidiaries

Consolidated Statements of Cash Flows

(Dollars in thousands)

(unaudited)

	For the Three Months Ended
	March 31,
	2012			2011
Reconciliation of net income (loss) to net cash provided by operating activities:
Net income (loss)	$	6,977		$	(18,566	)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and other amortization	31,705			33,645
Impairment losses	5,479			27,742
Amortization of deferred financing costs	1,572			1,759
Increase in deferred rent receivable	(2,559		)	(4,240		)
Amortization of net debt discounts	775			1,649
Gain on sales of real estate	(4,138		)	(2,701		)
Share-based compensation	3,402			2,917
Other	(1,423		)	(926		)
Changes in operating assets and liabilities:
Decrease (increase) in accounts receivable	14,792			(827		)
Decrease in restricted cash and marketable securities and prepaid expenses and other assets	9,448			4,701
Increase (decrease) in accounts payable, accrued expenses and other liabilities	7,661			(10,025		)
Decrease in rents received in advance and security deposits	(1,901		)	(2,176		)
Decrease in interest rate derivatives in connection with cash settlement	(28,003		)	—
Net cash provided by operating activities	$	43,787		$	32,952
Supplemental schedule of non-cash investing and financing activities:
Increase in accrued capital improvements, leasing and other investing activity costs	$	11,828		$	13,171
Increase in property, debt and other liabilities in connection with acquisitions	$	—		$	3,040
Decrease in fair value of derivatives applied to AOCL and noncontrolling interests	$	528		$	662
Dividends/distribution payable	$	24,544		$	33,048
Decrease in noncontrolling interests and increase in shareholders’ equity in connection with the conversion of common units into common shares	$	444		$	263
Adjustments to noncontrolling interests resulting from changes in ownership of Operating Partnership by COPT	$	88		$	163

See accompanying notes to consolidated financial statements.

8

Corporate Office Properties Trust and Subsidiaries

Notes to Consolidated Financial Statements

(unaudited)

1.Organization

Corporate Office Properties Trust (“COPT”) and subsidiaries (collectively, the “Company,” “we” or “us”) is a fully-integrated and self-managed real estate investment trust (“REIT”) that focuses primarily on serving the specialized requirements of strategic customers in the United States Government and defense information technology sectors.  We acquire, develop, manage and lease office and data center properties that are typically concentrated in large office parks primarily located adjacent to government demand drivers and/or in office markets that we believe possess growth opportunities.  As of March 31, 2012, our investments in real estate included the following:

·231 operating office properties totaling 20.2 million square feet;

·seven office properties under construction or redevelopment that we estimate will total approximately 903,000 square feet upon completion, including two partially operational properties included above;

·land held or under pre-construction totaling 2,327 acres (including 583 controlled but not owned) that we believe are potentially developable into approximately 20.5 million square feet; and

·a partially operational, wholesale data center which upon completion and stabilization is expected to have a critical load of 18 megawatts.

We conduct almost all of our operations through our operating partnership, Corporate Office Properties, L.P. (the “Operating Partnership”), of which we are the managing general partner.  The Operating Partnership owns real estate both directly and through subsidiary partnerships and limited liability companies (“LLCs”).  A summary of our Operating Partnership’s forms of ownership and the percentage of those ownership forms owned by COPT as of March 31, 2012 follows:

Common Units	94	%
Series G Preferred Units	100	%
Series H Preferred Units	100	%
Series I Preferred Units	0	%
Series J Preferred Units	100	%
Series K Preferred Units	100	%

Three of our trustees also controlled, either directly or through ownership by other entities or family members, an additional 5% of the Operating Partnership’s common units (“common units”) as of March 31, 2012.

In addition to owning real estate, the Operating Partnership also owns entities that provide real estate services such as property management and construction and development services primarily for our properties but also for third parties.

2.Summary of Significant Accounting Policies

Basis of Presentation

The consolidated financial statements include the accounts of COPT, the Operating Partnership, their subsidiaries and other entities in which we have a majority voting interest and control.  We also consolidate certain entities when control of such entities can be achieved through means other than voting rights (“variable interest entities” or “VIEs”) if we are deemed to be the primary beneficiary of such entities.  We eliminate all significant intercompany balances and transactions in consolidation.

We use the equity method of accounting when we own an interest in an entity and can exert significant influence over the entity’s operations but cannot control the entity’s operations.

We use the cost method of accounting when we own an interest in an entity and cannot exert significant influence over its operations.

9

These interim financial statements should be read together with the financial statements and notes thereto as of and for the year ended December 31, 2011 included in our 2011 Annual Report on Form 10-K.  The unaudited consolidated financial statements include all adjustments that are necessary, in the opinion of management, to fairly present our financial position and results of operations.  All adjustments are of a normal recurring nature except for the out-of-period adjustment described below.  The consolidated financial statements have been prepared using the accounting policies described in our 2011 Annual Report on Form 10-K.

During the second quarter of 2012, we identified an error in the consolidated financial statements for the year ended December 31, 2011 and the quarter ended March, 31, 2012.  The error was attributable to the misapplication of accounting guidance related to the recognition of a deferred tax asset resulting from an impairment of assets in the fourth quarter of 2011 that failed to consider a partial reversal of that asset that would result from a cancellation of related inter-company debt in the first quarter of 2012.  The effect of this error was an overstatement of our income tax benefit and an understatement of our net loss for the year ended December 31, 2011 of $4.0 million ($0.05 per share).  During the first quarter of 2012, we identified an error that impacted the above referenced periods.  The error was an over-accrual of incentive compensation cost.  The effect of this error was an overstatement of general and administrative expenses and an overstatement of net loss for the year ended December 31, 2011 of $0.7 million ($0.01 per share). The net impact of these errors was an understatement of our net loss for the year ended December 31, 2011 of $3.3 million ($0.04 per share).  We have determined that the errors were not material in 2011 and are not material to our expected annual results for the year ending December 31, 2012.  Accordingly, this cumulative change is reported as an out-of-period adjustment in the three months ended March 31, 2012 as follows: a reduction in net income of $3.3 million ($0.04 per share); an increase in income tax expense of $4.0 million ($0.05 per share); and a decrease in general and administrative expenses of approximately $0.7 million ($0.01 per share) on our consolidated statement of operations.

Reclassifications

We reclassified certain amounts from prior periods to conform to the current period presentation of our consolidated financial statements with no effect on previously reported net income or equity.  Included among these reclassifications is a retrospective change in the presentation of costs expensed in connection with properties not in operations; these costs are included in the line on our consolidated statements of operations entitled “business development expenses and land carry costs,” after having been included in property operating expenses in our 2011 Annual Report on Form 10-K.

Recent Accounting Pronouncements

We adopted guidance issued by the Financial Accounting Standards Board (“FASB”) effective January 1, 2012 related to the presentation of comprehensive income that requires us to present the total of comprehensive income, the components of net income and the components of other comprehensive income either in a single continuous statement of comprehensive income or in two separate but consecutive statements.  We adopted this guidance using retrospective application.  This guidance eliminates the option to present the components of other comprehensive income as part of the statement of equity.  Our adoption of this guidance did not affect our financial position, results of operations, cash flows or measurement of comprehensive income but did change the location of our disclosure pertaining to comprehensive income in our consolidated financial statements.

We adopted guidance issued by the FASB effective January 1, 2012 that amends measurement and disclosure requirements related to fair value measurements to improve consistency with International Financial Reporting Standards.  In connection with our adoption of this guidance, we made an accounting policy election to use an exception provided for in the guidance with respect to measuring counterparty credit risk for derivative instruments; this election enables us to continue to measure the fair value of groups of assets and liabilities associated with derivative instruments consistently with how market participants would price the net risk exposure at the measurement date.  Our adoption of this guidance did not affect our financial position, results of operations or cash flows but did result in additional disclosure pertaining to our fair value measurements.

We adopted guidance issued by the FASB effective January 1, 2012 relating to the testing of goodwill for impairment that permits us to first assess qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount as a basis for determining whether it is necessary to perform the two-step goodwill impairment test.  This guidance eliminates the requirement to calculate the fair value of a reporting unit unless the entity determines that it is more likely than not that its fair value is less than its carrying amount.  Our adoption of this guidance did not materially affect our consolidated financial statements or disclosures.

3.Fair Value Measurements

For a description on how we estimate fair value, see Note 3 to the consolidated financial statements in our 2011 Annual Report on Form 10-K.

Recurring Fair Value Measurements

The table below sets forth our financial assets and liabilities that are accounted for at fair value on a recurring basis as of March 31, 2012 and the hierarchy level of inputs used in measuring their respective fair values under applicable accounting standards (in thousands):

10

	Quoted Prices in
	Active Markets for		Significant Other		Significant
	Identical Assets		Observable Inputs		Unobservable Inputs
Description	(Level 1)		(Level 2)		(Level 3)		Total
Assets:
Marketable securities in deferred compensation plan (1)
Mutual funds	$	6,121	$	—	$	—	$	6,121
Common stocks	414		—		—		414
Other	238		—		—		238
Common stock (1)	454		—		—		454
Warrants to purchase common shares in KEYW (2)	—		133		—		133
Assets	$	7,227	$	133	$	—	$	7,360
Liabilities:
Deferred compensation plan liability (3)	$	6,773	$	—	$	—	$	6,773
Interest rate derivatives	—		2,673		—		2,673
Liabilities	$	6,773	$	2,673	$	—	$	9,446

(1)Included in the line entitled “restricted cash and marketable securities” on our consolidated balance sheet.

(2)Included in the line entitled “prepaid expenses and other assets” on our consolidated balance sheet.

(3)Included in the line entitled “other liabilities” on our consolidated balance sheet.

At December 31, 2011, we owned 1.9 million shares, or approximately 7%, of the common stock of The KEYW Holding Corporation (“KEYW”).  During the three months ended March 31, 2012, we completed the sale of all of these shares for $14.0 million.  At March 31, 2012 and December 31, 2011, we owned warrants to purchase 50,000 additional shares of KEYW common stock at an exercise price of $9.25 per share.

The carrying values of cash and cash equivalents, restricted cash, accounts receivable, other assets (excluding mortgage loans receivable) and accounts payable and accrued expenses are reasonable estimates of their fair values because of the short maturities of these instruments.  We estimated the fair values of our mortgage loans receivable as discussed in Note 6 based on the discounted estimated future cash flows of the loans (categorized within Level 3 of the fair value hierarchy); the discount rates used approximate current market rates for loans with similar maturities and credit quality, and the estimated cash payments include scheduled principal and interest payments.  For our disclosure of debt fair values in Note 7 to the consolidated financial statements, we estimated the fair value of our exchangeable senior notes based on quoted market prices for publicly-traded debt (categorized within Level 2 of the fair value hierarchy) and estimated the fair value of our other debt based on the discounted estimated future cash payments to be made on such debt (categorized within Level 3 of the fair value hierarchy); the discount rates used approximate current market rates for loans, or groups of loans, with similar maturities and credit quality, and the estimated future payments include scheduled principal and interest payments.  Fair value estimates are made at a specific point in time, are subjective in nature and involve uncertainties and matters of significant judgment.  Settlement of such fair value amounts may not be possible and may not be a prudent management decision.

For additional fair value information, please refer to Note 6 for mortgage loans receivable, Note 7 for debt and Note 8 for interest rate derivatives.

Nonrecurring Fair Value Measurements

We assess each of our operating properties for impairment quarterly using cash flow projections and estimated fair values that we derive for each of the properties.  We update the leasing and other assumptions used in these projections regularly, paying particular attention to properties that have experienced chronic vacancy or face significant market challenges.  We review our plans and intentions for our development projects and land parcels quarterly.  Each quarter, we also review the reasonableness of changes in our estimated operating property fair values from amounts estimated in the prior quarter.  If events or changes in circumstances indicate that the carrying values of certain operating properties, properties in development or land held for future development may be impaired, we perform a recovery analysis for such properties.  For long-lived assets to be held and used, we analyze recoverability based on the estimated undiscounted future cash flows expected to be generated from the operations and eventual disposition of the assets over, in most cases, a ten-year holding period.  If we believe there is a significant possibility that we might dispose of the assets earlier, we analyze

11

recoverability using a probability weighted analysis of the estimated undiscounted future cash flows expected to be generated from the operations and eventual disposition of the assets over the various possible holding periods.  If the recovery analysis indicates that the carrying value of a tested property is not recoverable from estimated future cash flows, it is written down to its estimated fair value and an impairment loss is recognized.  If and when our plans change, we revise our recoverability analyses to use the cash flows expected from the operations and eventual disposition of each asset using holding periods that are consistent with our revised plans.

Property fair values are determined based on contract prices, indicative bids, discounted cash flow analyses or yield analyses. The estimated cash flows used are based on our plans for the property and our views of market and economic conditions. The estimates consider items such as current and future rental rates, occupancies for the tested property and comparable properties, estimated operating and capital expenditures and recent sales data for comparable properties; most of these items are influenced by market data obtained from third party sources such as CoStar Group and real estate leasing and brokerage firms and our direct experience with the properties and their markets.

We recognized impairment losses on certain properties and other assets associated with such properties during the three months ended March 31, 2012.  Accordingly, certain properties and related assets were adjusted to fair value.  The table below sets forth the fair value hierarchy of the valuation techniques used by us in determining such fair values (dollars in thousands):

	Quoted Prices in
	Active Markets for		Significant Other		Significant				Impairment
	Identical Assets		Observable Inputs		Unobservable Inputs				Losses
Description	(Level 1)		(Level 2)		(Level 3)		Total		Recognized
Assets (1):
Properties, net	$	—	$	—	$	92,176	$	92,176	$	5,479

(1) Reflects balance sheet classifications of assets at time of fair value measurement, excluding the effect of held for sale classifications.

The table below sets forth quantitative information about significant unobservable inputs used for the Level 3 fair value measurements reported above:

	Fair value				Range
	on measurement		Valuation	Unobservable	(Weighted
Description	date		Technique	Input	Average)
Properties on which impairment losses were recognized	$	92,176	Bid for properties indicative of value	Indicative bid (1)	(1)
			Contract of sale	Contract price (1)	(1)
			Discounted cash flow	Discount rate	11.0% (2)
				Terminal capitalization rate	9.0% (2)
				Market rent growth rate	3.0% (2)
				Expense growth rate	3.0% (2)
			Yield Analysis	Yield	12% (2)
				Market rent rate	8.5 (2)
				Leasing costs	$20.00 per square foot (2)

(1) These fair value measurements were developed from third party sources, subject to our corroboration for reasonableness.

(2) Only one level applied to this unobservable input.

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4.Properties, net

Operating properties, net consisted of the following (in thousands):

	March 31,			December 31,
	2012			2011
Land	$	471,995		$	472,483
Buildings and improvements	2,802,570			2,801,252
Less: accumulated depreciation	(570,242		)	(559,679		)
Operating properties, net	$	2,704,323		$	2,714,056

Projects we had in development or held for future development consisted of the following (in thousands):

	March 31,		December 31,
	2012		2011
Land	$	225,085	$	229,833
Construction in progress, excluding land	408,883		409,086
Projects in development or held for future development	$	633,968	$	638,919

Dispositions and Impairments

We sold the following operating properties during the three months ended March 31, 2012 (dollars in thousands):

			Number	Total
		Date of	of	Rentable			Gain on
Project Name	Location	Sale	Buildings	Square Feet	Sale Price		Sale
White Marsh Portfolio (1)	White Marsh, Maryland	1/30/2012	5	163,000	$	19,100	$	2,445
1101 Sentry Gateway	San Antonio, Texas	1/31/2012	1	95,000	13,500		1,750
222 and 224 Schilling Circle	Hunt Valley, Maryland	2/10/2012	2	56,000	4,400		202
			8	314,000	$	37,000	$	4,397

(1)Includes three properties comprising the White Marsh Professional Center, 8615 Ridgely’s Choice and 8114 Sandpiper Circle.

We also sold non-operating properties during the three months ended March 31, 2012 for aggregate sale prices totaling $25.7 million; in addition to the gain on sales reflected above, we also recognized impairment losses on certain of these sales that are disclosed below.

As discussed in our 2011 Annual Report on Form 10-K, we implemented a plan in 2011 to dispose of office properties and land that are no longer closely aligned with our strategy (the “Strategic Reallocation Plan”).  During the three months ended March 31, 2012, we recognized aggregate net impairment losses in connection with the Strategic Reallocation Plan of $6.6 million (including $1.5 million classified as discontinued operations and $1.1 million in exit costs).  Approximately $5.1 million of these losses related to our expected disposition of an additional property. The expected cash flows from the resulting shortened holding period for this property are not sufficient to recover its carrying value.

2012 Construction Activities

As of March 31, 2012, we had construction underway on six office properties that we estimate will total 789,000 square feet upon completion, including three in the Baltimore/Washington Corridor, one in Greater Baltimore, one in Northern Virginia and one in Huntsville, Alabama, and redevelopment underway on one office property in Greater Philadelphia that we estimate will total 113,000 square feet upon completion.

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5.Real Estate Joint Ventures

During the three months ended March 31, 2012, we had an investment in one unconsolidated real estate joint venture accounted for using the equity method of accounting.  Information pertaining to this joint venture investment is set forth below (dollars in thousands):

										Maximum
Investment Balance at (1)						Date			Nature of	Exposure
March 31, 2012			December 31, 2011			Acquired	Ownership		Activity	to Loss (2)
$	(6,178	)	$	(6,071	)	9/29/2005	20	%	Operates 16 Buildings	$	—

(1)The carrying amount of our investment in this joint venture was lower than our share of the equity in the joint venture by $5.2 million at March 31, 2012 and December 31, 2011 due to our deferral of gain on the contribution by us of real estate into the joint venture upon its formation.  A difference will continue to exist to the extent the nature of our continuing involvement in the joint venture remains the same.

(2)Derived from the sum of our investment balance and maximum additional unilateral capital contributions or loans required from us.  Not reported above are additional amounts that we and our partner are required to fund when needed by this joint venture; these funding requirements are proportional to our respective ownership percentages.  Also not reported above are additional unilateral contributions or loans from us, the amounts of which are uncertain, that we would be required to make if certain contingent events occur (see Note 15).

The following table sets forth condensed balance sheets for this unconsolidated real estate joint venture (in thousands):

	March 31,			December 31,
	2012			2011
Properties, net	$	59,333		$	59,792
Other assets	4,403			3,529
Total assets	$	63,736		$	63,321
Liabilities (primarily debt)	$	68,663		$	67,710
Owners’ equity	(4,927		)	(4,389		)
Total liabilities and owners’ equity	$	63,736		$	63,321

The following table sets forth condensed statements of operations for this unconsolidated real estate joint venture (in thousands):

	For the Three Months
	Ended March 31,
	2012			2011
Revenues	$	1,894		$	1,924
Property operating expenses	(737		)	(986		)
Interest expense	(1,125		)	(1,011		)
Depreciation and amortization expense	(570		)	(608		)
Net loss	$	(538	)	$	(681	)

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The table below sets forth information pertaining to our investments in consolidated real estate joint ventures at March 31, 2012 (dollars in thousands):

		Ownership			March 31, 2012 (1)
	Date	% at		Nature of	Total		Pledged		Total
	Acquired	3/31/2012		Activity	Assets		Assets		Liabilities
M Square Associates, LLC	6/26/2007	50	%	Operating two buildings and developing others (2)	$	60,260	$	47,845	$	44,117
LW Redstone Company, LLC	3/23/2010	85	%	Developing business park (3)	55,255		15,858		11,373
Arundel Preserve #5, LLC	7/2/2007	50	%	Operating one building (4)	32,477		31,619		18,079
COPT-FD Indian Head, LLC	10/23/2006	75	%	Developing land parcel (5)	6,544		—		—
MOR Forbes 2 LLC	12/24/2002	50	%	Operating one building (6)	3,836		—		40
					$	158,372	$	95,322	$	73,609

(1) Excludes amounts eliminated in consolidation.

(2) This joint venture’s properties are in College Park, Maryland (in the Suburban Maryland region).

(3) This joint venture’s property is in Huntsville, Alabama.

(4) This joint venture’s property is in Hanover, Maryland (in the Baltimore/Washington Corridor).

(5) This joint venture’s property is in Charles County, Maryland.

(6) This joint venture’s property is in Lanham, Maryland (in the Suburban Maryland region).

Our commitments and contingencies pertaining to our real estate joint ventures are disclosed in Note 15.

6.Prepaid Expenses and Other Assets

Prepaid expenses and other assets consisted of the following (in thousands):

	March 31,		December 31,
	2012		2011
Mortgage and other investing receivables	$	32,739	$	27,998
Prepaid expenses	14,196		20,035
Proceeds from sale of KEYW stock receivable (1)	11,934		5,057
Construction contract costs incurred in excess of billings	10,592		2,094
Furniture, fixtures and equipment, net	9,607		10,177
Deferred tax asset	6,746		10,892
Lease incentives	5,360		5,233
Other assets	5,358		6,133
Prepaid expenses and other assets	$	96,532	$	87,619

(1)Represents unsettled proceeds from sales of KEYW common stock that settled shortly following the respective reporting dates.

Mortgage and Other Investing Receivables

Mortgage and other investing receivables consisted of the following (in thousands):

	March 31,		December 31,
	2012		2011
Notes receivable from City of Huntsville	$	22,526	$	17,741
Mortgage loans receivable	10,213		10,257
	$	32,739	$	27,998

Our notes receivable from the City of Huntsville funded infrastructure costs in connection with our LW Redstone Company, LLC joint venture (see Note 5).  Our mortgage loans receivable reflected above consists of two loans secured by properties in Greater Baltimore and the Baltimore/Washington Corridor.  We did not have an allowance for credit losses in connection with these receivables at March 31, 2012 or December 31, 2011.  The fair value of our mortgage and other investing receivables totaled $32.7 million at March 31, 2012 and $28.0 million at December 31, 2011.

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Operating Notes Receivable

We had operating notes receivable due from tenants with terms exceeding one year totaling $482,000 at March 31, 2012 and $530,000 at December 31, 2011.  We carried allowances for estimated losses for most of these balances.

7.Debt

Our debt consisted of the following (dollars in thousands):

								Scheduled
	Maximum		Carrying Value at					Maturity
	Availability at		March 31,		December 31,		Stated Interest Rates	Dates at
	March 31, 2012		2012		2011		at March 31, 2012	March 31, 2012
Mortgage and Other Secured Loans:
Fixed rate mortgage loans (1)	N/A		$	1,049,204	$	1,052,421	5.20% - 7.87% (2)	2012-2034
Variable rate secured loans	N/A		39,027		39,213		LIBOR + 2.25% (3)	2015
Other construction loan facilities	$	123,802	50,594		40,336		LIBOR + 1.95% to 2.75% (4)	2012-2015
Total mortgage and other secured loans			1,138,825		1,131,970
Revolving Credit Facility	1,000,000		396,000		662,000		LIBOR + 1.75% to 2.50% (5)	September 1, 2014
Term Loan Facilities (6)	650,000		650,000		400,000		LIBOR + 1.65% to 2.40% (7)	2015-2017
Unsecured notes payable	N/A		5,078		5,050		0% (8)	2015-2026
4.25% Exchangeable Senior Notes	N/A		228,175		227,283		4.25%	April 2030(9)
Total debt			$	2,418,078	$	2,426,303

(1)Several of the fixed rate mortgages carry interest rates that were above or below market rates upon assumption and therefore were recorded at their fair value based on applicable effective interest rates.  The carrying values of these loans reflect net unamortized premiums totaling $2.2 million at March 31, 2012 and $2.4 million at December 31, 2011.

(2)The weighted average interest rate on these loans was 6.01% at March 31, 2012.

(3)The interest rate on the loan outstanding was 2.49% at March 31, 2012.

(4)The weighted average interest rate on these loans was 2.73% at March 31, 2012.

(5)The weighted average interest rate on the Revolving Credit Facility was 2.24% at March 31, 2012.

(6)As described further below, we entered into a new facility effective on February 14, 2012.

(7)The weighted average interest rate on these loans was 2.15% at March 31, 2012.

(8)These notes may carry interest rates that were below market rates upon assumption and therefore were recorded at their fair value based on applicable effective interest rates.  The carrying value of these notes reflects an unamortized discount totaling $1.7 million at March 31, 2012 and $1.8 million at December 31, 2011.

(9)As described further in our 2011 Annual Report on Form 10-K, these notes have an exchange settlement feature that provides that the notes may, under certain circumstances, be exchangeable for cash and, at the Operating Partnership’s discretion, our common shares at an exchange rate (subject to adjustment) of 20.8513 shares per one thousand dollar principal amount of the notes (exchange rate is as of March 31, 2012 and is equivalent to an exchange price of $47.96 per common share).  The carrying value of these notes included a principal amount of $240.0 million and an unamortized discount totaling $11.8 million at March 31, 2012 and $12.7 million at December 31, 2011.  The effective interest rate under the notes, including amortization of the issuance costs, was 6.05%.  Because the closing price of our common shares at March 31, 2012 and December 31, 2011 was less than the exchange price per common share applicable to these notes, the if-converted value of the notes did not exceed the principal amount.  The table below sets forth interest expense recognized on these notes before deductions for amounts capitalized (in thousands):

	For the Three Months
	Ended March 31,
	2012		2011
Interest expense at stated interest rate	$	2,550	$	2,550
Interest expense associated with amortization of discount	892		840
Total	$	3,442	$	3,390

Effective February 14, 2012, we entered into an unsecured term loan agreement (the “Term Loan Agreement”) with a group of lenders for which J.P. Morgan Securities LLC and KeyBank Capital Markets acted as joint lead arrangers and joint book runners, KeyBank National Association acted as administrative agent and JPMorgan Chase Bank, N.A. acted as syndication agent.  We borrowed $250.0 million under the Term Loan Agreement.  The term loan matures on February 14, 2017.  The variable interest rate on the loan is based on the LIBOR rate (customarily the 30-day rate) plus 1.65% to 2.40%, as determined by our leverage levels.

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At March 31, 2012 and December 31, 2011, we were in default on a $15 million nonrecourse mortgage loan secured by a property with an estimated fair value of approximately $11 million that is included in our Strategic Reallocation Plan.

We capitalized interest costs of $3.8 million in the three months ended March 31, 2012 and $4.3 million in the three months ended March 31, 2011.

The following table sets forth information pertaining to the fair value of our debt (in thousands):

	March 31, 2012				December 31, 2011
	Carrying		Estimated		Carrying		Estimated
	Amount		Fair Value		Amount		Fair Value
Fixed-rate debt
4.25% Exchangeable Senior Notes	$	228,175	$	239,331	$	227,283	$	238,077
Other fixed-rate debt	1,054,282		1,049,110		1,057,471		1,054,424
Variable-rate debt	1,135,621		1,135,847		1,141,549		1,139,856
	$	2,418,078	$	2,424,288	$	2,426,303	$	2,432,357

8.Interest Rate Derivatives

The following table sets forth the key terms and fair values of our interest rate swap derivatives (dollars in thousands):

								Fair Value at
Notional			Fixed		Floating Rate	Effective	Expiration	March 31,			December 31,
Amount			Rate		Index	Date	Date	2012			2011
$	50,000		0.5025	%	One-Month LIBOR	1/3/2011	1/3/2012	$	—		$	(1	)
50,000			0.5025	%	One-Month LIBOR	1/3/2011	1/3/2012	—			(1		)
120,000			1.7600	%	One-Month LIBOR	1/2/2009	5/1/2012	(152		)	(552		)
100,000			1.9750	%	One-Month LIBOR	1/1/2010	5/1/2012	(144		)	(532		)
100,000			0.6123	%	One-Month LIBOR	1/3/2012	9/1/2014	(282		)	55
100,000			0.6100	%	One-Month LIBOR	1/3/2012	9/1/2014	(277		)	56
100,000			0.8320	%	One-Month LIBOR	1/3/2012	9/1/2015	(365		)	(66		)
100,000			0.8320	%	One-Month LIBOR	1/3/2012	9/1/2015	(363		)	(49		)
39,027		(1)	3.8300	%	One-Month LIBOR	11/2/2010	11/2/2015	(1,090		)	(1,054		)
100,000		(2)	3.8415	%	Three-Month LIBOR	9/30/2011	9/30/2021	—			(16,333		)
75,000		(2)	3.8450	%	Three-Month LIBOR	9/30/2011	9/30/2021	—			(12,275		)
100,000		(2)	2.0525	%	Three-Month LIBOR-Reverse	12/30/2011	9/30/2021	—			345
75,000		(2)	2.0525	%	Three-Month LIBOR-Reverse	12/30/2011	9/30/2021	—			260
								$	(2,673	)	$	(30,147	)

(1)The notional amount of this instrument is scheduled to amortize to $36.2 million.

(2)As described further in our 2011 Annual Report on Form 10-K, on January 5, 2012, we cash settled these instruments, along with interest accrued thereon, for an aggregate of $29.7 million.  Our policy is to present payments to terminate interest rate swaps entered into in order to hedge forecasted interest payments as operating activities on our consolidated statement of cash flows.  Accordingly, the payments to cash settle these instruments were included in net cash provided by operating activities on our consolidated statement of cash flows.

Each of the one-month LIBOR interest rate swaps set forth in the table above was designated as cash flow hedges of interest rate risk.

The table below sets forth the fair value of our interest rate derivatives as well as their classification on our consolidated balance sheet (in thousands):

	March 31, 2012				December 31, 2011
Derivatives	Balance Sheet Location	Fair Value			Balance Sheet Location	Fair Value
Interest rate swaps designated as cash flow hedges	Prepaid expenses and other assets	$	—		Prepaid expenses and other assets	$	111
Interest rate swaps not designated as hedges	N/A	—			Prepaid expenses and other assets	605
Interest rate swaps designated as cash flow hedges	Interest rate derivatives	(2,673		)	Interest rate derivatives	(2,255		)
Interest rate swaps not designated as hedges	N/A	—			Interest rate derivatives	(28,608		)

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The table below presents the effect of our interest rate derivatives on our consolidated statements of operations and comprehensive income (in thousands):

	For the Three Months
	Ended March 31,
	2012			2011
Amount of loss recognized in AOCL (effective portion)	$	(1,987	)	$	(136	)
Amount of loss reclassified from AOCL into interest expense (effective portion)	(1,474		)	(1,104		)

Over the next 12 months, we estimate that approximately $2.5 million will be reclassified from AOCL as an increase to interest expense.

We have agreements with each of our interest rate derivative counterparties that contain provisions under which, if we default or are capable of being declared in default on any of our indebtedness, we could also be declared in default on our derivative obligations.  These agreements also incorporate the loan covenant provisions of our indebtedness with a lender affiliate of the derivative counterparties.  Failure to comply with the loan covenant provisions could result in our being declared in default on any derivative instrument obligations covered by the agreements.  As of March 31, 2012, the fair value of interest rate derivatives in a liability position related to these agreements was $2.7 million, excluding the effects of accrued interest. As of March 31, 2012, we had not posted any collateral related to these agreements.  We are not in default with any of these provisions.  If we breached any of these provisions, we could be required to settle our obligations under the agreements at their termination value of $3.3 million.

9.Shareholders’ Equity

During the three months ended March 31, 2012, holders of 34,550 common units in our Operating Partnership converted their units into common shares on the basis of one common share for each common unit.

We declared dividends per common share of $0.275 in the three months ended March 31, 2012 and $0.4125 in the three months ended March 31, 2011.

See Note 11 for disclosure of common share activity pertaining to our share-based compensation plans.

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10.Information by Business Segment

We have ten reportable operating office property segments (comprised of: the Baltimore/Washington Corridor; Northern Virginia; San Antonio; Washington, DC — Capitol Riverfront; St. Mary’s and King George Counties; Greater Baltimore; Suburban Maryland; Colorado Springs; Greater Philadelphia; and other). We also have an operating wholesale data center segment.  On January 1, 2012, we revised our reportable segments to include only operating properties.  Accordingly, we revised net operating income from real estate operations (“NOI from real estate operations”) to exclude operating expenses not related to operating properties, revised our definition of segment assets to include only long-lived assets associated with operating properties and revised our definition of additions to long-lived assets to include only additions to existing operating properties (excluding acquisitions and transfers from non-operating properties).  Financial information for prior periods has been presented in conformity with this revision.

The table below reports segment financial information for our reportable segments (in thousands).  We measure the performance of our segments through the measure we define as NOI from real estate operations, which is derived by subtracting property operating expenses from revenues from real estate operations.

	Operating Office Property Segments
	Baltimore/ Washington Corridor		Northern Virginia			San Antonio		Washington, DC - Capitol Riverfront			St. Mary’s &  King George Counties		Greater Baltimore		Suburban Maryland		Colorado Springs		Greater Philadelphia			Other			Operating Wholesale Data Center		Total
Three Months Ended March 31, 2012
Revenues from real estate operations	$	56,250	$	18,560		$	7,608	$	3,894		$	4,212	$	15,372	$	5,749	$	6,453	$	2,172		$	3,618		$	1,416	$	125,304
Property operating expenses	20,151		7,400			3,817		1,910			1,258		5,890		2,521		2,385		615			1,233			1,207		48,387
NOI from real estate operations	$	36,099	$	11,160		$	3,791	$	1,984		$	2,954	$	9,482	$	3,228	$	4,068	$	1,557		$	2,385		$	209	$	76,917
Additions to long-lived assets	$	1,864	$	1,661		$	—	$	(729	)	$	167	$	719	$	771	$	99	$	—		$	26		$	—	$	4,578
Transfers from non-operating properties	$	25,594	$	—		$	362	$	—		$	556	$	365	$	335	$	316	$	7,303		$	—		$	—	$	34,831
Segment assets at March 31, 2012	$	1,231,949	$	480,457		$	120,024	$	108,649		$	99,946	$	370,754	$	147,197	$	181,241	$	109,432		$	114,108		$	43,390	$	3,007,147
Three Months Ended March 31, 2011
Revenues from real estate operations	$	53,252	$	18,274		$	7,663	$	4,590		$	3,534	$	17,612	$	5,609	$	5,920	$	1,939		$	2,838		$	1,210	$	122,441
Property operating expenses	21,058		7,590			3,813		1,627			1,014		8,452		2,661		2,343		418			467			709		50,152
NOI from real estate operations	$	32,194	$	10,684		$	3,850	$	2,963		$	2,520	$	9,160	$	2,948	$	3,577	$	1,521		$	2,371		$	501	$	72,289
Additions to long-lived assets	$	6,405	$	2,033		$	—	$	156		$	380	$	8,088	$	1,052	$	736	$	(4	)	$	(646	)	$	—	$	18,200
Transfers from non-operating properties	$	19,883	$	(7	)	$	600	$	—		$	—	$	4,247	$	354	$	—	$	(2,474	)	$	—		$	6,654	$	29,257
Segment assets at March 31, 2011	$	1,199,244	$	488,599		$	115,221	$	117,758		$	87,690	$	479,474	$	145,913	$	214,111	$	96,372		$	83,247		$	30,714	$	3,058,343

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The following table reconciles our segment revenues to total revenues as reported on our consolidated statements of operations (in thousands):

	For the Three Months
	Ended March 31,
	2012			2011
Segment revenues from real estate operations	$	125,304		$	122,441
Construction contract and other service revenues	21,534			21,028
Less: Revenues from discontinued operations (Note 13)	(3,365		)	(5,980		)
Total revenues	$	143,473		$	137,489

The following table reconciles our segment property operating expenses to property operating expenses as reported on our consolidated statements of operations (in thousands):

	For the Three Months
	Ended March 31,
	2012			2011
Segment property operating expenses	$	48,387		$	50,152
Less: Property operating expenses from discontinued operations (Note 13)	(1,185		)	(3,091		)
Total property operating expenses	$	47,202		$	47,061

As previously discussed, we provide real estate services such as property management and construction and development services primarily for our properties but also for third parties.  The primary manner in which we evaluate the operating performance of our service activities is through a measure we define as net operating income from service operations (“NOI from service operations”), which is based on the net of revenues and expenses from these activities.  Construction contract and other service revenues and expenses consist primarily of subcontracted costs that are reimbursed to us by the customer along with a management fee. The operating margins from these activities are small relative to the revenue.  We believe NOI from service operations is a useful measure in assessing both our level of activity and our profitability in conducting such operations. The table below sets forth the computation of our NOI from service operations (in thousands):

	For the Three Months
	Ended March 31,
	2012			2011
Construction contract and other service revenues	$	21,534		$	21,028
Construction contract and other service expenses	(20,607		)	(20,618		)
NOI from service operations	$	927		$	410

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The following table reconciles our NOI from real estate operations for reportable segments and NOI from service operations to income (loss) from continuing operations as reported on our consolidated statements of operations (in thousands):

	For the Three Months
	Ended March 31,
	2012			2011
NOI from real estate operations	$	76,917		$	72,289
NOI from service operations	927			410
Interest and other income	1,217			1,168
Equity in (loss) income of unconsolidated entities	(89		)	30
Income tax (expense) benefit	(4,173		)	544
Other adjustments:
Depreciation and other amortization associated with real estate operations	(31,066		)	(30,043		)
Impairment losses	(5,126		)	(27,742		)
General and administrative expenses	(7,017		)	(6,777		)
Business development expenses and land carry costs	(1,594		)	(1,241		)
Interest expense on continuing operations	(25,224		)	(26,115		)
NOI from discontinued operations	(2,180		)	(2,889		)
Income (loss) from continuing operations	$	2,592		$	(20,366	)

The following table reconciles our segment assets to total assets (in thousands):

	March 31,		March 31,
	2012		2011
Segment assets	$	3,007,147	$	3,058,343
Non-operating property assets	638,856		652,223
Other assets	151,365		155,243
Total assets	$	3,797,368	$	3,865,809

The accounting policies of the segments are the same as those used to prepare our consolidated financial statements, except that discontinued operations are not presented separately for segment purposes.  In the segment reporting presented above, we did not allocate interest expense, depreciation and amortization and impairment losses to our real estate segments since they are not included in the measure of segment profit reviewed by management.  We also did not allocate general and administrative expenses, business development expenses and land carry costs, interest and other income, equity in (loss) income of unconsolidated entities, income taxes and noncontrolling interests because these items represent general corporate or non-operating property items not attributable to segments.

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11.Share-Based Compensation

Performance Share Units (“PSUs”)

On March 1, 2012, our Board of Trustees granted 54,070 PSUs with an aggregate grant date fair value of $1.8 million to executives.  The PSUs have a performance period beginning on January 1, 2012 and concluding on the earlier of December 31, 2014 or the date of: (1) termination by the Company without cause, death or disability of the executive or constructive discharge of the executive (collectively, “qualified termination”); or (2) a sale event.  The number of PSUs earned (“earned PSUs”) at the end of the performance period will be determined based on the percentile rank of the Company’s total shareholder return relative to a peer group of companies, as set forth in the following schedule:

Percentile Rank	Earned PSUs Payout %
75th or greater	200% of PSUs granted
50th	100% of PSUs granted
25th	50% of PSUs granted
Below 25th	0% of PSUs granted

If the percentile rank exceeds the 25th percentile and is between two of the percentile ranks set forth in the table above, then the percentage of the earned PSUs will be interpolated between the ranges set forth in the table above to reflect any performance between the listed percentiles.  At the end of the performance period, we, in settlement of the award, will issue a number of fully-vested common shares equal to the sum of:

·the number of earned PSUs in settlement of the award plan; plus

·the aggregate dividends that would have been paid with respect to the common shares issued in settlement of the earned PSUs through the date of settlement had such shares been issued on the grant date, divided by the share price on such settlement date, as defined under the terms of the agreement.

If a performance period ends due to a sale event or qualified termination, the number of earned PSUs is prorated based on the portion of the three-year performance period that has elapsed.  If employment is terminated by the employee or by the Company for cause, all PSUs are forfeited.  PSUs do not carry voting rights.

We computed a grant date fair value of $32.77 per PSU using a Monte Carlo model, which included assumptions of, among other things, the following: baseline common share value of $24.39; expected volatility for our common shares of 43.2%; and risk-free interest rate of 0.41%.  We are recognizing the grant date fair value in connection with these PSU awards over the performance period.

All PSUs granted on March 4, 2010 and outstanding at December 31, 2011 were held by Mr. Randall M. Griffin, our Chief Executive Officer, and were terminated upon his retirement on March 31, 2012.  Based on the Company’s total shareholder return relative its peer group of companies, there was no payout value in connection with the termination of the PSUs.

The PSUs granted to our executives on March 3, 2011, as described in our 2011 Annual Report on Form 10-K, were outstanding at March 31, 2012.

Restricted Shares

During the three months ended March 31, 2012, certain employees were granted a total of 87,449 restricted shares with an aggregate grant date fair value of $2.1 million (weighted average of $24.39 per share).  Restricted shares granted to employees vest based on increments and over periods of time set forth

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under the terms of the respective awards provided that the employees remain employed by us.  During the three months ended March 31, 2012, forfeiture restrictions lapsed on 251,985 previously issued common shares; these shares had a weighted average grant date fair value of $31.93 per share, and the aggregate intrinsic value of the shares on the vesting dates was $6.2 million.

Options

During the three months ended March 31, 2012, 5,667 options to purchase common shares (“options”) were exercised.  The weighted average exercise price of these options was $14.54 per share, and the aggregate intrinsic value of the options exercised was $56,000.

12.Income Taxes

We own a taxable REIT subsidiary (“TRS”) that is subject to Federal and state income taxes.  Our TRS’s provision for income tax (expense) benefit consisted of the following (in thousands):

	For the Three Months  Ended March 31,
	2012			2011
Deferred
Federal	$	(3,417	)	$	447
State	(756		)	100
	(4,173		)	547
Current
Federal	—			(2		)
State	—			(1		)
	—			(3		)
Total income tax (expense) benefit	$	(4,173	)	$	544

Items in our TRS contributing to temporary differences that lead to deferred taxes include depreciation and amortization, share-based compensation, certain accrued compensation, compensation paid in the form of contributions to a deferred nonqualified compensation plan, impairment losses and net operating losses that are not deductible until future periods.

Our TRS’s combined Federal and state effective tax rate was 38.6% for the three months ended March 31, 2012 and 2011.

13.Discontinued Operations and Assets Held for Sale

Income from discontinued operations primarily includes revenues and expenses associated with the following:

·1344 and 1348 Ashton Road and 1350 Dorsey Road in the Baltimore/Washington Corridor that were sold on May 24, 2011;

·216 Schilling Circle in Greater Baltimore that was sold on August 23, 2011;

·four properties comprising the Towson Portfolio in Greater Baltimore that were sold on September 29, 2011;

·11011 McCormick Road in Greater Baltimore that was sold on November 1, 2011;

·10001 Franklin Square Drive in Greater Baltimore that was sold on December 13, 2011;

·13 properties comprising the Rutherford Business Center portfolio in Greater Baltimore that were sold on December 15, 2011;

·three properties comprising the White Marsh Professional Center, 8615 Ridgely’s Choice and 8114 Sandpiper Circle in Greater Baltimore that were sold on January 30, 2012;

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·1101 Sentry Gateway in San Antonio that was sold on January 31, 2012;

·222 and 224 Schilling Circle in the Greater Baltimore region that were sold on February 10, 2012; and

·four operating properties that were classified as held for sale as of March 31, 2012, including the following:

·226 Schilling Circle in Greater Baltimore;

·11800 Tech Road in Suburban Maryland; and

·15 and 45 West Gude Drive in Suburban Maryland.

The table below sets forth the components of discontinued operations reported on our consolidated statements of operations (in thousands):

	For the Three Months
	Ended March 31,
	2012			2011
Revenue from real estate operations	$	3,365		$	5,980
Property operating expenses	(1,185		)	(3,091		)
Depreciation and amortization	(21		)	(2,977		)
Impairment losses	(1,461		)	—
Interest expense	(451		)	(813		)
Gain on sales of real estate	4,138			—
Discontinued operations	$	4,385		$	(901	)

The table below sets forth the components of assets held for sale on our consolidated balance sheets (in thousands):

	March 31, 2012		December 31, 2011
Properties, net	$	74,758	$	108,356
Deferred rent receivable	2,371		2,800
Intangible assets on real estate acquisitions, net	930		1,737
Deferred leasing costs, net	3,293		3,723
Assets held for sale	$	81,352	$	116,616

14.Earnings Per Share (“EPS”)

We present both basic and diluted EPS.  We compute basic EPS by dividing net income available to common shareholders allocable to unrestricted common shares under the two-class method by the weighted average number of unrestricted common shares outstanding during the period.  Our computation of diluted EPS is similar except that:

·the denominator is increased to include: (1) the weighted average number of potential additional common shares that would have been outstanding if securities that are convertible into our common shares were converted; and (2) the effect of dilutive potential common shares outstanding during the period attributable to share-based compensation using the treasury stock or if-converted methods; and

·the numerator is adjusted to add back any changes in income or loss that would result from the assumed conversion into common shares that we added to the denominator.

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Summaries of the numerator and denominator for purposes of basic and diluted EPS calculations are set forth below (in thousands, except per share data):

	For the Three Months
	Ended March 31,
	2012			2011
Numerator:
Income (loss) from continuing operations	$	2,592		$	(20,366	)
Gain on sales of real estate, net	—			2,701
Preferred share dividends	(4,025		)	(4,025		)
(Income) loss from continuing operations attributable to noncontrolling interests	(53		)	719
Income from continuing operations attributable to restricted shares	(141		)	(282		)
Numerator for basic EPS from continuing operations attributable to COPT common shareholders	(1,627		)	(21,253		)
Dilutive effect of common units in the Operating Partnership on diluted EPS from continuing operations	—			(1,422		)
Numerator for diluted EPS from continuing operations attributable to COPT common shareholders	$	(1,627	)	$	(22,675	)
Numerator for basic EPS from continuing operations attributable to COPT common shareholders	$	(1,627	)	$	(21,253	)
Discontinued operations	4,385			(901		)
Discontinued operations attributable to noncontrolling interests	(247		)	57
Numerator for basic EPS on net income (loss) attributable to COPT common shareholders	2,511			(22,097		)
Dilutive effect of common units in the Operating Partnership	—			(1,479		)
Numerator for diluted EPS on net income (loss) attributable to COPT common shareholders	$	2,511		$	(23,576	)
Denominator (all weighted averages):
Denominator for basic EPS (common shares)	71,458			66,340
Dilutive effect of common units	—			4,396
Denominator for diluted EPS	71,458			70,736
Basic EPS:
Loss from continuing operations attributable to COPT common shareholders	$	(0.02	)	$	(0.32	)
Discontinued operations attributable to COPT common shareholders	0.06			(0.01		)
Net income (loss) attributable to COPT common shareholders	$	0.04		$	(0.33	)
Diluted EPS:
Loss from continuing operations attributable to COPT common shareholders	$	(0.02	)	$	(0.32	)
Discontinued operations attributable to COPT common shareholders	0.06			(0.01		)
Net income (loss) attributable to COPT common shareholders	$	0.04		$	(0.33	)

Our diluted EPS computations do not include the effects of the following securities since the conversions of such securities would increase diluted EPS for the respective periods (in thousands):

	Weighted Average Shares
	Excluded from Denominator
	For the Three Months
	Ended March 31,
	2012	2011
Conversion of common units	—	4,396
Conversion of convertible preferred units	176	176
Conversion of convertible preferred shares	434	434

The following share-based compensation securities were excluded from the computation of diluted EPS because their effect was antidilutive:

·weighted average restricted shares for the three months ended March 31, 2012 and 2011 of 572,000 and 651,000, respectively; and

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·weighted average options for the three months ended March 31, 2012 and 2011 of 819,000 and 1.2 million, respectively.

As discussed in Note 7, we have outstanding senior notes that have an exchange settlement feature but did not affect our diluted EPS reported above since the weighted average closing price of our common shares during each of the periods was less than the exchange prices per common share applicable for such periods.

15.Commitments and Contingencies

Litigation

In the normal course of business, we are involved in legal actions arising from our ownership and administration of properties.  We establish reserves for specific legal proceedings when we determine that the likelihood of an unfavorable outcome is probable and the amount of loss can be reasonably estimated.  Management does not anticipate that any liabilities that may result from such proceedings will have a materially adverse effect on our financial position, operations or liquidity.  Our assessment of the potential outcomes of these matters involves significant judgment and is subject to change based on future developments.

Environmental

We are subject to various Federal, state and local environmental regulations related to our property ownership and operation.  We have performed environmental assessments of our properties, the results of which have not revealed any environmental liability that we believe would have a materially adverse effect on our financial position, operations or liquidity.

Joint Ventures

In connection with our 2005 contribution of properties to an unconsolidated partnership in which we hold a partnership interest, we entered into standard nonrecourse loan guarantees (environmental indemnifications and guarantees against fraud and misrepresentation, and springing guarantees of partnership debt in the event of a voluntary bankruptcy of the partnership).  The maximum amount we could be required to pay under the guarantees is approximately $65 million.  We are entitled to recover 20% of any amounts paid under the guarantees from an affiliate of our partner pursuant to an indemnity agreement so long as we continue to manage the properties.  In the event that we no longer manage the properties, the percentage that we are entitled to recover is increased to 80%.  Management estimates that the aggregate fair value of the guarantees is not material and would not exceed the amounts included in distributions received in excess of investment in unconsolidated real estate joint venture reported on the consolidated balance sheets.

We are party to a contribution agreement that formed a joint venture relationship with a limited partnership to develop up to 1.8 million square feet of office space on 63 acres of land located in Hanover, Maryland.  As we and the joint venture partner agree to proceed with the construction of buildings in the future, our joint venture partner would contribute land into newly-formed entities and we would make cash capital contributions into such entities to fund development and construction activities for which financing is not obtained.  We owned a 50% interest in one such joint venture as of March 31, 2012.

We may be required to make our pro rata share of additional investments in our real estate joint ventures (generally based on our percentage ownership) in the event that additional funds are needed.  In the event that the other members of these joint ventures do not pay their share of investments when additional funds are needed, we may then deem it appropriate to make even larger investments in these joint ventures.

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Tax Incremental Financing Obligation

In August 2010, Anne Arundel County, Maryland issued $30 million in tax incremental financing bonds to third-party investors in order to finance public improvements needed in connection with our project known as National Business Park North.  The real estate taxes on increases in assessed value of a development district encompassing National Business Park North are to be transferred to a special fund pledged to the repayment of the bonds.  We recognized a $4.4 million liability through March 31, 2012 representing the estimated fair value of our obligation to fund through a special tax any future shortfalls between debt service on the bonds and real estate taxes available to repay the bonds.

Environmental Indemnity Agreement

We agreed to provide certain environmental indemnifications in connection with a lease and subsequent sale of three New Jersey properties. The prior owner of the properties, a Fortune 100 company that is responsible for groundwater contamination at such properties, previously agreed to indemnify us for (1) direct losses incurred in connection with the contamination and (2) its failure to perform remediation activities required by the State of New Jersey, up to the point that the state declares the remediation to be complete.  Under the environmental indemnification agreement, we agreed to the following:

·to indemnify the tenant against losses covered under the prior owner’s indemnity agreement if the prior owner fails to indemnify the tenant for such losses.  This indemnification is capped at $5.0 million in perpetuity after the State of New Jersey declares the remediation to be complete;

·to indemnify the tenant for consequential damages (e.g., business interruption) at one of the buildings in perpetuity and another of the buildings for 15 years after the tenant’s acquisition of the property from us.  This indemnification is limited to $12.5 million; and

·to pay 50% of additional costs related to construction and environmental regulatory activities incurred by the tenant as a result of the indemnified environmental condition of the properties.  This indemnification is limited to $300,000 annually and $1.5 million in the aggregate.

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Item 2.    Management’s Discussion and Analysis of Financial Condition and Results of Operations

Overview

We are an office real estate investment trust (“REIT”) that focuses primarily on serving the specialized requirements of strategic customers in the United States Government and defense information technology sectors.  We acquire, develop, manage and lease office and data center properties that are typically concentrated in large office parks primarily located adjacent to government demand drivers and/or in office parks that we believe possess growth opportunities.

During the three months ended March 31, 2012, we:

·had an increase in net income attributable to common shareholders of $24.5 million as compared to the three months ended March 31, 2011, due in large part to a decrease in impairment losses attributable primarily to a $27.7 million loss recognized on our property in Cascade, Maryland that was formerly the Army base known as Fort Ritchie (“Fort Ritchie”) in the three months ended March 31, 2011;

·had an increase of $3.1 million as compared to the three months ended March 31, 2011 in our net operating income (“NOI”) from real estate operations (defined below) attributable to our Same Office Properties (also defined below);

·finished the period with occupancy of our portfolio of operating office properties at 87.0%;

·sold eight operating properties totaling 314,000 square feet and non-operating properties for aggregate sale prices totaling $62.7 million.  The net proceeds from these sales were used primarily to pay down our Revolving Credit Facility; and

·entered into an unsecured term loan agreement, under which we borrowed $250.0 million.  The term loan agreement matures on February 14, 2017.  The net proceeds from these borrowings were used to pay down our Revolving Credit Facility.

We discuss significant factors contributing to changes in our net income attributable to common shareholders and diluted earnings per share over the prior year period in the section below entitled “Results of Operations.” In addition, the section below entitled “Liquidity and Capital Resources” includes discussions of, among other things:

·how we expect to generate cash for short and long-term capital needs; and

·our commitments and contingencies.

You should refer to our consolidated financial statements as you read this section.

This section contains “forward-looking” statements, as defined in the Private Securities Litigation Reform Act of 1995, that are based on our current expectations, estimates and projections about future events and financial trends affecting the financial condition and operations of our business.  Forward-looking statements can be identified by the use of words such as “may,” “will,” “should,” “could,” “believe,” “anticipate,” “expect,” “estimate,” “plan” or other comparable terminology.  Forward-looking statements are inherently subject to risks and uncertainties, many of which we cannot predict with accuracy and some of which we might not even anticipate.  Although we believe that the expectations, estimates and projections reflected in such forward-looking statements are based on reasonable assumptions at the time made, we 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.  Important factors that may affect these expectations, estimates and projections include, but are not limited to:

·general economic and business conditions, which will, among other things, affect office property and data center demand and rents, tenant creditworthiness, interest rates, financing availability and property values;

·adverse changes in the real estate markets, including, among other things, increased competition with other companies;

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·governmental actions and initiatives, including risks associated with the impact of a government shutdown or budgetary reductions or impasses, such as a reduction in rental revenues, non-renewal of leases and/or a curtailment of demand for additional space by our strategic customers;

·our ability to sell properties included in our Strategic Reallocation Plan;

·our ability to borrow on favorable terms;

·risks of real estate acquisition and development activities, including, among other things, risks that development projects may not be completed on schedule, that tenants may not take occupancy or pay rent or that development and operating costs may be greater than anticipated;

·risks of investing through joint venture structures, including risks that our joint venture partners may not fulfill their financial obligations as investors or may take actions that are inconsistent with our objectives;

·changes in our plans for properties or views of market economic conditions or failure to obtain development rights, either of which could result in recognition of impairment losses;

·our ability to satisfy and operate effectively under Federal income tax rules relating to real estate investment trusts and partnerships;

·the dilutive effects of issuing additional common shares; and

·environmental requirements.

We undertake no obligation to update or supplement forward-looking statements.

Occupancy and Leasing

Office Properties

The tables below set forth occupancy information pertaining to our portfolio of operating office properties:

	March 31,			December 31,
	2012			2011
Occupancy rates at period end
Total	87.0		%	86.2		%
Baltimore/Washington Corridor	87.6		%	87.9		%
Northern Virginia	86.4		%	84.8		%
San Antonio	96.5		%	90.7		%
Washington, DC - Capitol Riverfront	89.0		%	89.6		%
St. Mary’s and King George Counties	88.4		%	87.3		%
Greater Baltimore	86.1		%	84.5		%
Suburban Maryland	79.6		%	79.6		%
Colorado Springs	77.0		%	74.9		%
Greater Philadelphia	99.7		%	99.7		%
Other	100.0		%	100.0		%
Average contractual annual rental rate per square foot at period end (1)	$	26.95		$	26.59

(1) Includes estimated expense reimbursements.

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	Rentable		Occupied
	Square Feet		Square Feet
	(in thousands)
December 31, 2011	20,514		17,685
Square feet vacated upon lease expiration (1)	—		(199	)
Square feet retenanted after lease expiration (2)	—		224
Square feet constructed or redeveloped	48		79
Dispositions	(314	)	(176	)
Other changes	(12	)	(8	)
March 31, 2012	20,236		17,605

(1) Includes lease terminations and space reductions occurring in connection with lease renewals.

(2) Excludes retenanting of vacant square feet acquired or developed.

Wholesale Data Center Property

Our shell-complete wholesale data center property, which upon completion and stabilization is expected to have a critical load of 18 megawatts, had three megawatts in operations at March 31, 2012 and December 31, 2011 that was leased to tenants with further expansion rights of up to a combined five megawatts.  We did not complete any leases on this property during the three months ended March 31, 2012.

Results of Operations

We evaluate the operating performance of our properties using NOI from real estate operations, our segment performance measure which is derived by subtracting property operating expenses from revenues from real estate operations.  We view our NOI from real estate operations as comprising the following primary categories of operating properties:

·office properties owned and 100% operational throughout the current and prior year reporting periods, excluding properties included in the Strategic Reallocation Plan.  We define these as changes from “Same Office Properties”;

·office properties acquired during the current and prior year reporting periods;

·constructed office properties placed into service that were not 100% operational throughout the current and prior year reporting periods; and

·properties included in the Strategic Reallocation Plan that were not sold as of March 31, 2012; and

·property dispositions.

Refer to Note 13 of the consolidated financial statements for a summary of operating properties that were either disposed or classified as held for sale and therefore are included in discontinued operations.

The primary manner in which we evaluate the operating performance of our construction management and other service activities is through a measure we define as NOI from service operations, which is based on the net of the revenues and expenses from these activities.  The revenues and expenses from these activities consist primarily of subcontracted costs that are reimbursed to us by customers along with a management fee.  The operating margins from these activities are small relative to the revenue.  We believe NOI from service operations is a useful measure in assessing both our level of activity and our profitability in conducting such operations.

We believe that operating income, as reported on our consolidated statements of operations, is the most directly comparable generally accepted accounting principles (“GAAP”) measure for both NOI from real estate operations and NOI from service operations.  Since both of these measures exclude certain items includable in operating income, reliance on these measures has limitations; management compensates for these limitations by using the measures simply as supplemental measures that are considered alongside other GAAP and non-GAAP measures.

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The table below reconciles NOI from real estate operations and NOI from service operations to operating income reported on our consolidated statement of operations:

	For the Three Months
	Ended March 31,
	2012			2011
	(in thousands)
NOI from real estate operations	$	76,917		$	72,289
NOI from service operations	927			410
NOI from discontinued operations	(2,180		)	(2,889		)
Depreciation and amortization associated with real estate operations	(31,066		)	(30,043		)
Impairment losses	(5,126		)	(27,742		)
General and administrative expense	(7,017		)	(6,777		)
Business development expenses and land carry costs	(1,594		)	(1,241		)
Operating income	$	30,861		$	4,007

Comparison of the Three Months Ended March 31, 2012 to the Three Months Ended March 31, 2011

	For the Three Months Ended March 31,
	2012			2011			Variance
	(in thousands)
Revenues
Revenues from real estate operations	$	121,939		$	116,461		$	5,478
Construction contract and other service revenues	21,534			21,028			506
Total revenues	143,473			137,489			5,984
Expenses
Property operating expenses	47,202			47,061			141
Depreciation and amortization associated with real estate operations	31,066			30,043			1,023
Construction contract and other service expenses	20,607			20,618			(11		)
Impairment losses	5,126			27,742			(22,616		)
General and administrative expense	7,017			6,777			240
Business development expenses and land carry costs	1,594			1,241			353
Total operating expenses	112,612			133,482			(20,870		)
Operating income	30,861			4,007			26,854
Interest expense	(25,224		)	(26,115		)	891
Interest and other income	1,217			1,168			49
Equity in (loss) income of unconsolidated entities	(89		)	30			(119		)
Income tax (expense) benefit	(4,173		)	544			(4,717		)
Income (loss) from continuing operations	2,592			(20,366		)	22,958
Discontinued operations	4,385			(901		)	5,286
Gain on sales of real estate, net of income taxes	—			2,701			(2,701		)
Net income (loss)	6,977			(18,566		)	25,543
Net (income) loss attributable to noncontrolling interests	(300		)	776			(1,076		)
Preferred share dividends	(4,025		)	(4,025		)	—
Net income (loss) attributable to COPT common shareholders	$	2,652		$	(21,815	)	$	24,467

31

NOI from Real Estate Operations

	For the Three Months Ended March 31,
	2012			2011			Variance
	(Dollars in thousands, except per square foot data)
Revenues
Same Office Properties	$	104,416		$	102,528		$	1,888
Constructed office properties placed in service	4,868			2,679			2,189
Acquired office properties	916			—			916
Strategic Reallocation Plan Properties	13,014			12,133			881
Dispositions	374			3,563			(3,189		)
Other	1,716			1,538			178
	125,304			122,441			2,863
Property operating expenses
Same Office Properties	39,590			40,753			(1,163		)
Constructed office properties placed in service	1,441			671			770
Acquired office properties	157			—			157
Strategic Reallocation Plan Properties	4,951			5,328			(377		)
Dispositions	197			2,442			(2,245		)
Other	2,051			958			1,093
	48,387			50,152			(1,765		)
NOI from real estate operations
Same Office Properties	64,826			61,775			3,051
Constructed office properties placed in service	3,427			2,008			1,419
Acquired office properties	759			—			759
Strategic Reallocation Plan Properties	8,063			6,805			1,258
Dispositions	177			1,121			(944		)
Other	(335		)	580			(915		)
	$	76,917		$	72,289		$	4,628
Same Office Properties rent statistics
Average occupancy rate	89.5		%	90.1		%	-0.6		%
Average straight-line rent per occupied square foot (1)	$	5.86		$	5.80		$	0.06

(1)Includes minimum base rents, net of abatements, and lease incentives on a straight-line basis for the three month periods set forth above.

The decrease in property operating expenses of Same Office Properties was primarily due to decreases in snow removal and utility expenses resulting from a milder winter in the Mid Atlantic region in the current period.

Impairment Losses

We recognized the impairment losses described below in the current and prior periods:

·as described further in Note 4 to the consolidated financial statements, we recognized aggregate net impairment losses in the three months ended March 31, 2012 of $6.6 million (including $1.5 million classified as discontinued operations and $1.1 million in exit costs) on dispositions completed or expected to occur in connection with the Strategic Reallocation Plan; and

·as described further in our 2011 Annual Report on Form 10-K, we recognized an impairment loss of $27.7 million on Fort Ritchie in the three months ended March 31, 2011.

The table below sets forth impairment losses (recoveries) recognized by property classification:

32

	Three Months Ended
	March 31,
	2012			2011
	(in thousands)
Operating properties	$	11,833		$	—
Non-operating properties	(5,246		)	27,242
Total	$	6,587		$	27,242

Income Tax (Expense) Benefit

The income tax expense recognized in the current period was due primarily to the impact of an out-of-period adjustment. See Note 2 of the consolidated financial statements for additional information.

Discontinued Operations

The increase in discontinued operations was due primarily to $4.1 million in gains on sales of real estate recognized in the current period.

Gain on Sales of Real Estate, Net of Income Taxes

The decrease in gain on sales of real estate was attributable to our sale of a land parcel in Hunt Valley, Maryland in the prior period.

Funds from Operations

Funds from operations (“FFO”) is defined as net income computed using GAAP, excluding gains on sales of, and impairment losses on, previously depreciated operating properties, plus real estate-related depreciation and amortization. We believe that we use the National Association of Real Estate Investment Trusts (“NAREIT”) definition of FFO, although others may interpret the definition differently and, accordingly, our presentation of FFO may differ from those of other REITs.  We believe that FFO is useful to management and investors as a supplemental measure of operating performance because, by excluding gains related to sales of, and impairment losses on, previously depreciated operating properties, net of related tax benefit, and excluding real estate-related depreciation and amortization, FFO can help one compare our operating performance between periods.  In addition, since most equity REITs provide FFO information to the investment community, we believe that FFO is useful to investors as a supplemental measure for comparing our results to those of other equity REITs.  We believe that net income is the most directly comparable GAAP measure to FFO.

Since FFO excludes certain items includable in net income, reliance on the measure has limitations; management compensates for these limitations by using the measure simply as a supplemental measure that is weighed in the balance with other GAAP and non-GAAP measures. FFO is not necessarily an indication of our cash flow available to fund cash needs.  Additionally, it should not be used as an alternative to net income when evaluating our financial performance or to cash flow from operating, investing and financing activities when evaluating our liquidity or ability to make cash distributions or pay debt service.

Basic FFO available to common share and common unit holders (“Basic FFO”) is FFO adjusted to subtract (1) preferred share dividends, (2) income attributable to noncontrolling interests through ownership of preferred units in the Operating Partnership or interests in other consolidated entities not owned by us, (3) depreciation and amortization allocable to noncontrolling interests in other consolidated entities and (4) Basic FFO allocable to restricted shares.  With these adjustments, Basic FFO represents FFO available to common shareholders and common unitholders.  Common units in the Operating Partnership are substantially similar to our common shares and are exchangeable into common shares, subject to certain conditions.  We believe that Basic FFO is useful to investors due to the close correlation of common units to common shares.  We believe that net income is the most directly comparable GAAP measure to Basic

33

FFO.  Basic FFO has essentially the same limitations as FFO; management compensates for these limitations in essentially the same manner as described above for FFO.

Diluted FFO available to common share and common unit holders (“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.  We believe that Diluted FFO is useful to investors because it is the numerator used to compute Diluted FFO per share, discussed below.  We believe that the numerator for diluted EPS is the most directly comparable GAAP measure to Diluted FFO.  Since Diluted FFO excludes certain items includable in the numerator to diluted EPS, reliance on the measure has limitations; management compensates for these limitations by using the measure simply as a supplemental measure that is weighed in the balance with other GAAP and non-GAAP measures.  Diluted FFO is not necessarily an indication of our cash flow available to fund cash needs.  Additionally, it should not be used as an alternative to net income when evaluating our financial performance or to cash flow from operating, investing and financing activities when evaluating our liquidity or ability to make cash distributions or pay debt service.

Diluted FFO, as adjusted for comparability is defined as Diluted FFO adjusted to exclude operating property acquisition costs, gains on sales of, and impairment losses on, properties other than previously depreciated operating properties, net of associated income tax, gain or loss on early extinguishment of debt and loss on interest rate swaps.  We believe that the excluded items are not reflective of normal operations and, as a result, we believe that a measure that excludes these items is a useful supplemental measure in evaluating our operating performance.  We believe that the numerator to diluted EPS is the most directly comparable GAAP measure to this non-GAAP measure.  This measure has essentially the same limitations as Diluted FFO, as well as the further limitation of not reflecting the effects of the excluded items; we compensate for these limitations in essentially the same manner as described above for Diluted FFO.

Diluted FFO per share 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.  We believe that Diluted FFO per share is useful to investors because it provides investors with a further context for evaluating our FFO results in the same manner that investors use earnings per share (“EPS”) in evaluating net income available to common shareholders.  In addition, since most equity REITs provide Diluted FFO per share information to the investment community, we believe that Diluted FFO per share is a useful supplemental measure for comparing us to other equity REITs. We believe that diluted EPS is the most directly comparable GAAP measure to Diluted FFO per share. Diluted FFO per share has most of the same limitations as Diluted FFO (described above); management compensates for these limitations in essentially the same manner as described above for Diluted FFO.

Diluted FFO per share, as adjusted for comparability is (1) Diluted FFO, 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.  We believe that this measure is useful to investors because it provides investors with a further context for evaluating our FFO results.  We believe that diluted EPS is the most directly comparable GAAP measure to this per share measure.  This measure has most of the same limitations as Diluted FFO (described above) as well as the further limitation of not reflecting the effects of the excluded items; we compensate for these limitations in essentially the same manner as described above for Diluted FFO.

The computations for all of the above measures on a diluted basis assume the conversion of common units in our Operating Partnership but do not assume the conversion of other securities that are convertible into common shares if the conversion of those securities would increase per share measures in a given period.

34

The table below sets forth the computation of the above stated measures for the three months ended March 31, 2012 and 2011 and provides reconciliations to the GAAP measures associated with such measures:

	For the Three Months
	Ended March 31,
	2012			2011
	(Dollars and shares in thousands, except per share data)
Net income (loss)	$	6,977		$	(18,566	)
Add: Real estate-related depreciation and amortization	31,087			33,020
Add: Depreciation and amortization on unconsolidated real estate entities	114			119
Add: Impairment losses on previously depreciated operating properties	11,833			—
Less: Gain on sales of previously depreciated operating properties, net of income taxes	(4,138		)	—
FFO	45,873			14,573
Less: Noncontrolling interests-preferred units in the Operating Partnership	(165		)	(165		)
Less: Noncontrolling interests-other consolidated entities	24			(538		)
Less: Preferred share dividends	(4,025		)	(4,025		)
Less: Depreciation and amortization allocable to noncontrolling interests in other consolidated entities	(284		)	(65		)
Basic and Diluted FFO allocable to restricted shares	(294		)	(282		)
Basic and Diluted FFO	$	41,129		$	9,498
Operating property acquisition costs	—			23
Gain on sales of non-operating properties, net of income taxes	—			(2,701		)
Impairment (recoveries) losses on other properties	(5,246		)	27,742
Income tax expense on impairment recoveries on other properties	4,642			—
Diluted FFO, as adjusted for comparability	$	40,525		$	34,562
Weighted average common shares	71,458			66,340
Conversion of weighted average common units	4,281			4,396
Weighted average common shares/units - Basic FFO	75,739			70,736
Dilutive effect of share-based compensation awards	44			261
Weighted average common shares/units - Diluted FFO	75,783			70,997
Diluted FFO per share	$	0.54		$	0.13
Diluted FFO per share, as adjusted for comparability	$	0.53		$	0.49
Numerator for diluted EPS	$	2,511		$	(23,576	)
Add: Income allocable to noncontrolling interests-common units in the Operating Partnership	159			—
Add: Real estate-related depreciation and amortization	31,087			33,020
Add: Depreciation and amortization of unconsolidated real estate entities	114			119
Add: Impairment losses on previously depreciated operating properties	11,833			—
Add: Numerator for diluted EPS allocable to restricted shares	141			282
Less: Depreciation and amortization allocable to noncontrolling interests in other consolidated entities	(284		)	(65		)
Less: Basic and diluted FFO allocable to restricted shares	(294		)	(282		)
Less: Gain on sales of previously depreciated operating properties, net of income taxes	(4,138		)	—
Basic and Diluted FFO	$	41,129		$	9,498
Operating property acquisition costs	—			23
Gain on sales of non-operating properties, net of income taxes	—			(2,701		)
Impairment (recoveries) losses on other properties	(5,246		)	27,742
Income tax expense on impairment recoveries on other properties	4,642			—
Diluted FFO, as adjusted for comparability	$	40,525		$	34,562
Denominator for diluted EPS	71,458			70,736
Weighted average common units	4,281			—
Anti-dilutive EPS effect of share-based compensation awards	44			261
Denominator for diluted FFO per share measures	75,783			70,997

35

Property Additions

The table below sets forth the major components of our additions to properties for the three months ended March 31, 2012 (in thousands):

Construction, development and redevelopment	$	33,546
Tenant improvements on operating properties	948		(1)
Capital improvements on operating properties	1,694
	$	36,188

(1)Tenant improvement costs incurred on newly-constructed properties are classified in this table as construction, development and redevelopment.

Cash Flows

Our net cash flow provided by operating activities increased $10.8 million when comparing the three months ended March 31, 2012 and 2011 due primarily to: an increase in cash flow received from real estate operations, which was affected by the timing of cash receipts; an increase in cash flow associated with the timing of cash flow from third-party construction projects; and $7.0 million in proceeds from the sale of our KEYW common stock in the current period; offset in part by $29.7 million paid to cash settle interest rate swaps in the current period.

Our net cash flow provided by investing activities increased $69.2 million when comparing the three months ended March 31, 2012 and 2011 due primarily to a $58.1 million increase from sales of properties.  Property sales in the current period included the disposition of properties in connection with the Strategic Reallocation Plan.  Property sales in the prior period included the disposition of a land parcel in Hunt Valley, Maryland.

Our net cash flow used in financing activities increased $80.1 million when comparing the three months ended March 31, 2012 and 2011 due primarily to:

·a $311.4 million increase in debt repayments.  Our debt repayments in the current period included primarily $337.0 million to pay down our Revolving Credit Facility using mostly proceeds from a new $250.0 million term loan agreement and property sales.  Our debt repayments in the prior period included primarily $25.0 million to pay down our Revolving Credit Facility using mostly proceeds from draws under construction loan facilities; offset in part by

·a $233.8 million increase in proceeds from debt.  Our proceeds in the current period included primarily: (1) $250.0 million upon origination of the new term loan agreement; and (2) $71.0 million in draws under our Revolving Credit Facility.  Our proceeds in the prior period included primarily $78.0 million in draws under our Revolving Credit Facility.

Liquidity and Capital Resources

Our primary cash requirements are for operating expenses, debt service, development of new properties, improvements to existing properties and acquisitions.  We expect to continue to use cash flow provided by operations as the primary source to meeting our short-term capital needs, including property operating expenses, general and administrative expenses, interest expense, scheduled principal amortization of debt, dividends to our shareholders, distributions to our noncontrolling interest holders of preferred and common units in the Operating Partnership and improvements to existing properties.  We believe that our liquidity and capital resources are adequate for our near-term and longer-term requirements without necessitating property sales.  However, we do expect to generate significant cash by selling properties during the remainder of 2012 and in 2013.

We have historically relied on fixed-rate, non-recourse mortgage loans from banks and institutional lenders for long-term financing and to restore availability on our Revolving Credit Facility.  In recent years, we have relied more on unsecured bank loans and publicly issued, convertible unsecured debt for long-term

36

financing.  We also periodically access the public equity markets to raise capital by issuing common and/or preferred shares.

We often use our Revolving Credit Facility to initially finance much of our investing activities.  We then pay down the facility using proceeds from long-term borrowings, equity issuances and property sales.   The lenders’ aggregate commitment under the facility is $1.0 billion, with a right for us to increase the lenders’ aggregate commitment to $1.5 billion, provided that there is no default under the facility.  Amounts available under the facility are computed based on 60% of our unencumbered asset value, as defined in the agreement.  The Revolving Credit Facility matures on September 1, 2014, and may be extended by one year at our option, provided that there is no default under the facility and we pay an extension fee of 0.20% of the total availability of the facility.  As of March 31, 2012, the maximum borrowing capacity under this facility totaled $1.0 billion, of which $590.6 million was available.

We also have construction loan facilities that provide for aggregate borrowings of up to $123.8 million, $73.2 million of which was available at March 31, 2012 to fund future construction costs at specific projects.

The following table summarizes our contractual obligations as of March 31, 2012 (in thousands):

	For the Periods Ending December 31,
	2012		2013		2014		2015		2016		Thereafter			Total
Contractual obligations (1)
Debt (2)
Balloon payments due upon maturity	$	52,953	$	159,058	$	547,681	$	804,284	$	274,605	$	550,621		$	2,389,202
Scheduled principal payments	9,854		10,285		7,099		5,738		4,037		3,258			40,271
Interest on debt (3)	73,345		90,753		78,032		55,371		30,891		4,562			332,954
New construction and redevelopment obligations (4)(5)	41,582		6,746		—		—		—		—			48,328
Third-party construction and development obligations (5)(6)	30,176		3,353		—		—		—		—			33,529
Capital expenditures for operating properties (5)(7)	19,393		6,464		—		—		—		—			25,857
Operating leases (8)	832		1,068		986		864		810		70,478			75,038
Other purchase obligations (9)	3,020		3,591		2,435		1,491		968		233			11,738
Total contractual cash obligations	$	231,155	$	281,318	$	636,233	$	867,748	$	311,311	$		629,152	$	2,956,917

(1)The contractual obligations set forth in this table generally exclude property operations contracts that had a value of less than $20,000.  Also excluded are contracts associated with the operations of our properties that may be terminated with notice of one month or less, which is the arrangement that applies to most of our property operations contracts.

(2)Represents scheduled principal amortization payments and maturities only and therefore excludes a net discount of $11.4 million.

(3)Represents interest costs for debt at March 31, 2012 for the terms of such debt.  For variable rate debt, the amounts reflected above used March 31, 2012 interest rates on variable rate debt in computing interest costs for the terms of such debt.

(4)Represents contractual obligations pertaining to new construction and redevelopment activities.  Construction and redevelopment activities underway at March 31, 2012 included the following:

			Estimated		Expected Year
	Number of	Square Feet (in	Remaining Costs		For Costs to be
Activity	Properties	thousands)	(in millions)		Incurred Through
Construction of new office properties	6	789	$	61.2	2013
Redevelopment of existing office properties	1	113	6.4		2013

(5)Due to the long-term nature of certain construction and development contracts and leases included in these lines, the amounts reported in the table represent our estimate of the timing for the related obligations being payable.

(6)Represents contractual obligations pertaining to projects for which we are acting as construction manager on behalf of unrelated parties who are our clients.  We expect to be reimbursed in full for these costs by our clients.

(7)Represents contractual obligations pertaining to recurring and nonrecurring capital expenditures for our operating properties.  We expect to finance these costs primarily using cash flow from operations.

(8)We expect to pay these items using cash flow from operations.

37

(9)Primarily represents contractual obligations pertaining to managed-energy service contracts in place for certain of our operating properties.  We expect to pay these items using cash flow from operations.

We expect to spend more than $150 million on construction and development costs and approximately $70 million on improvements to operating properties (including the commitments set forth in the table above) during the remainder of 2012.  We expect to fund these costs and our debt maturities during the remainder of 2012 using primarily a combination of borrowings under our Revolving Credit Facility and existing construction loan facilities.  We expect to sell more than $130 million of properties during the remainder of 2012 and use the proceeds primarily to pay down our Revolving Credit Facility and pay off debt secured by the properties.

Certain of our debt instruments require that we comply with a number of restrictive financial covenants, including maximum leverage ratio, unencumbered leverage ratio, minimum net worth, minimum fixed charge coverage, minimum unencumbered interest coverage ratio, minimum debt service and maximum secured indebtedness ratio.  As of March 31, 2012, we were well within the compliance requirements of these financial covenants.

Off-Balance Sheet Arrangements

We had no significant changes in our off-balance sheet arrangements from those described in the section entitled “Off-Balance Sheet Arrangements” in our 2011 Annual Report on Form 10-K.

Inflation

Most of our tenants are obligated to pay their share of a building’s operating expenses to the extent such expenses exceed amounts established in their leases, based on historical expense levels.  Some of our tenants are obligated to pay their full share of a building’s operating expenses.  These arrangements somewhat reduce our exposure to increases in such costs resulting from inflation.

Item 3.  Quantitative and Qualitative Disclosures about Market Risk

We are exposed to certain market risks, the most predominant of which is change in interest rates.  Increases in interest rates can result in increased interest expense under our Revolving Credit Facility and other variable rate debt.  Increases in interest rates can also result in increased interest expense when our fixed rate debt matures and needs to be refinanced.

The following table sets forth as of March 31, 2012 our debt obligations and weighted average interest rates for fixed rate debt by expected maturity date (dollars in thousands):

	For the Periods Ending December 31,
	2012			2013			2014			2015			2016			Thereafter			Total
Long term debt: (1)
Fixed rate debt (2)	$	45,426		$	144,345		$	157,965		$	363,595		$	278,642		$	303,879		$	1,293,852
Weighted average interest rate	6.37		%	5.62		%	6.41		%	4.66		%	6.57		%	5.52		%	5.65		%
Variable rate debt	$	17,381		$	24,998		$	396,815		$	446,427		$	—		$	250,000		$	1,135,621

(1)Maturities include $16.8 million during the remainder of 2012, $24.2 million in 2013, $396.0 million in 2014 and $409.6 million in 2015 that may each be extended for one year, subject to certain conditions.

(2)Represents principal maturities only and therefore excludes net discounts of $11.4 million.

The fair market value of our debt was $2.4 billion at March 31, 2012.  If interest rates had been 1% lower, the fair value of our fixed-rate debt would have increased by approximately $78 million at March 31, 2012.

The following table sets forth information pertaining to interest rate swap contracts in place as of March 31, 2012 and December 31, 2011 and their respective fair values (dollars in thousands):

38

								Fair Value at
Notional			Fixed		Floating Rate	Effective	Expiration	March 31,			December 31,
Amount			Rate		Index	Date	Date	2012			2011
$	50,000		0.5025	%	One-Month LIBOR	1/3/2011	1/3/2012	$	—		$	(1	)
50,000			0.5025	%	One-Month LIBOR	1/3/2011	1/3/2012	—			(1		)
120,000			1.7600	%	One-Month LIBOR	1/2/2009	5/1/2012	(152		)	(552		)
100,000			1.9750	%	One-Month LIBOR	1/1/2010	5/1/2012	(144		)	(532		)
100,000			0.6123	%	One-Month LIBOR	1/3/2012	9/1/2014	(282		)	55
100,000			0.6100	%	One-Month LIBOR	1/3/2012	9/1/2014	(277		)	56
100,000			0.8320	%	One-Month LIBOR	1/3/2012	9/1/2015	(365		)	(66		)
100,000			0.8320	%	One-Month LIBOR	1/3/2012	9/1/2015	(363		)	(49		)
39,027		(1)	3.8300	%	One-Month LIBOR	11/2/2010	11/2/2015	(1,090		)	(1,054		)
100,000		(2)	3.8415	%	Three-Month LIBOR	9/30/2011	9/30/2021	—			(16,333		)
75,000		(2)	3.8450	%	Three-Month LIBOR	9/30/2011	9/30/2021	—			(12,275		)
100,000		(2)	2.0525	%	Three-Month LIBOR-Reverse	12/30/2011	9/30/2021	—			345
75,000		(2)	2.0525	%	Three-Month LIBOR-Reverse	12/30/2011	9/30/2021	—			260
								$	(2,673	)	$	(30,147	)

(1)The notional amount of this instrument is scheduled to amortize to $36.2 million.

(2)As described further in our 2011 Annual Report on Form 10-K, on January 5, 2012, we cash settled these instruments, along with interest accrued thereon, for an aggregate of $29.7 million.

Based on our variable-rate debt balances, including the effect of interest rate swap contracts, our interest expense would have increased by $1.3 million in the three months ended March 31, 2012 if short-term interest rates were 1% higher.

Item 4.    Controls and Procedures

(a)           Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act) as of March 31, 2012.  Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures as of March 31, 2012 were functioning effectively to provide reasonable assurance that the information required to be disclosed by us in reports filed or submitted under the Securities Exchange Act of 1934 is (i) recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and (ii) accumulated and communicated to our management, including our principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

(b)          Change in Internal Control over Financial Reporting

No change in our internal control over financial reporting occurred during the most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

39

PART II

Item 1.  Legal Proceedings

We are not currently involved in any material litigation nor, to our knowledge, is any material litigation currently threatened against the Company (other than routine litigation arising in the ordinary course of business, substantially all of which is expected to be covered by liability insurance).

Item 1A.  Risk Factors

There have been no material changes to the risk factors included in our 2011 Annual Report on Form 10-K.

Item 2.  Unregistered Sales of Equity Securities and Use of Proceeds

(a)During the three months ended March 31, 2012, 34,550 of the Operating Partnership’s common units were exchanged for 34,550 common shares in accordance with the Operating Partnership’s Second Amended and Restated Limited Partnership Agreement, as amended.  The issuance of these common shares was effected in reliance upon the exemption from registration under Section 4(2) of the Securities Act of 1933, as amended.

(b)Not applicable

(c)Not applicable

Item 3.  Defaults Upon Senior Securities

(a)Not applicable

(b)Not applicable

Item 4.  Mine Safety Disclosures

Not applicable

Item 5.  Other Information

None

Item 6.  Exhibits

(a)Exhibits:

EXHIBIT NO.	DESCRIPTION
10.1	Term Loan Agreement, dated as of February 14, 2012, by and among Corporate Office Properties, L.P.; Corporate Office Properties Trust; J.P. Morgan Securities LLC; KeyBanc Capital Markets; KeyBank National Association; JPMorgan Chase Bank, N.A.; Bank of America, N.A.; PNC Bank, National Association; Royal Bank of Canada; and Wells Fargo Bank, National Association (previously filed).
31.1	Certification of the Chief Executive Officer of Corporate Office Properties Trust required by Rule 13a-14(a) under the Securities Exchange Act of 1934, as amended (filed herewith).

40

EXHIBIT NO.	DESCRIPTION
31.2	Certification of the Chief Financial Officer of Corporate Office Properties Trust required by Rule 13a-14(a) under the Securities Exchange Act of 1934, as amended (filed herewith).
32.1	Certification of the Chief Executive Officer of Corporate Office Properties Trust required by Rule 13a-14(b) under the Securities Exchange Act of 1934, as amended. (This exhibit shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liability of that section. Further, this exhibit shall not be deemed to be incorporated by reference into any filing under the Securities Exchange Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended.) (Furnished herewith).
32.2	Certification of the Chief Financial Officer of Corporate Office Properties Trust required by Rule 13a-14(b) under the Securities Exchange Act of 1934, as amended. (This exhibit shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liability of that section. Further, this exhibit shall not be deemed to be incorporated by reference into any filing under the Securities Exchange Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended). (Furnished herewith).
101.INS	XBRL Instance Document (furnished herewith).
101.SCH	XBRL Taxonomy Extension Schema Document (furnished herewith).
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document (furnished herewith).
101.LAB	XBRL Extension Labels Linkbase (furnished herewith).
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document (furnished herewith).
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document (furnished herewith).

41

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this Amendment No. 1 to the report to be signed on its behalf by the undersigned thereunto duly authorized.

	CORPORATE OFFICE PROPERTIES TRUST
Date:  June 19, 2012	By:	/s/ Roger A. Waesche, Jr.
		Roger A. Waesche, Jr.
		President and Chief Executive Officer
Date:  June 19, 2012	By:	/s/ Stephen E. Riffee
		Stephen E. Riffee
		Executive Vice President and Chief Financial Officer

42

EX-31.1

EXHIBIT 31.1

CORPORATE OFFICE PROPERTIES TRUST

CERTIFICATIONS REQUIRED BY
RULE 13a-14(a) UNDER THE SECURITIES EXCHANGE ACT OF 1934

CERTIFICATIONS

I, Roger A. Waesche, Jr., certify that:

1. I have reviewed this Amendment No. 1 to the quarterly report on Form 10-Q of Corporate Office Properties Trust;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:	June 19, 2012	/s/ Roger A. Waesche, Jr.
		Roger A. Waesche, Jr.
		President and Chief Executive Officer

EX-31.2

EXHIBIT 31.2

CORPORATE OFFICE PROPERTIES TRUST

CERTIFICATIONS REQUIRED BY
RULE 13a-14(a) UNDER THE SECURITIES EXCHANGE ACT OF 1934

CERTIFICATIONS

I, Stephen E. Riffee, certify that:

1. I have reviewed this Amendment No. 1 to the quarterly report on Form 10-Q of Corporate Office Properties Trust;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:	June 19, 2012	/s/ Stephen E. Riffee
		Stephen E. Riffee
		Chief Financial Officer

EX-32.1

EXHIBIT 32.1

CORPORATE OFFICE PROPERTIES TRUST

CERTIFICATIONS REQUIRED BY
RULE 13a-14(b) UNDER THE SECURITIES EXCHANGE ACT OF 1934

In connection with this Amendment No. 1 to the Quarterly Report on Form 10-Q of Corporate Office Properties Trust (the “Company”) for the quarter ended March 31, 2012, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Roger A. Waesche, Jr., President and Chief Executive Officer of the Company, certify that to my knowledge:

(1)           The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2)           The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.

/s/ Roger A. Waesche, Jr.

Roger A. Waesche, Jr.

President and Chief Executive Officer

Date:  June 19, 2012

EX-32.2

EXHIBIT 32.2

CORPORATE OFFICE PROPERTIES TRUST

CERTIFICATIONS REQUIRED BY
RULE 13a-14(b) UNDER THE SECURITIES EXCHANGE ACT OF 1934

In connection with this Amendment No. 1 to the Quarterly Report on Form 10-Q of Corporate Office Properties Trust (the “Company”) for the quarter ended March 31, 2012, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Stephen E. Riffee, Chief Financial Officer of the Company, certify that to my knowledge:

(1)           The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2)           The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.

/s/ Stephen E. Riffee

Stephen E. Riffee

Chief Financial Officer

Date:  June 19, 2012

XML

Summary of Significant Accounting Policies (Details) (USD $) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended				12 Months Ended	3 Months Ended	12 Months Ended	3 Months Ended	12 Months Ended	3 Months Ended
	Mar. 31, 2012		Mar. 31, 2011		Dec. 31, 2011 Misapplication Of Accounting Guidance Related To Recognition Of Deferred Tax Asset Previously reported	Mar. 31, 2012 Misapplication Of Accounting Guidance Related To Recognition Of Deferred Tax Asset Scenario Adjustment	Dec. 31, 2011 Over accrual Of Incentive Compensation Cost Previously reported	Mar. 31, 2012 Over accrual Of Incentive Compensation Cost Scenario Adjustment	Dec. 31, 2011 Misapplication Of Accounting Guidance Related To Recognition Of Deferred Tax Asset And Over-accrual Of Incentive Compensation Cost Previously reported	Mar. 31, 2012 Misapplication Of Accounting Guidance Related To Recognition Of Deferred Tax Asset And Over-accrual Of Incentive Compensation Cost Scenario Adjustment
Quantifying Misstatement in Current Year Financial Statements [Line Items]
Net income (loss)	$ 6,977		$ (18,566)		$ 4,000		$ (700)		$ 3,300	$ (3,300)
Income tax (expense) benefit	4,173		(544)		(4,000)	4,000
General and administrative expenses	$ 7,017		$ 6,777				$ 700	$ (700)
Net income (loss) attributable to COPT common shareholders (in dollars per share)	$ 0.04	[1]	$ (0.33)	[1]	$ 0.05	$ (0.05)	$ (0.01)	$ 0.01	$ 0.04	$ (0.04)
Net income (loss) attributable to COPT common shareholders (in dollars per share)	$ 0.04	[1]	$ (0.33)	[1]	$ 0.05	$ (0.05)	$ (0.01)	$ 0.01	$ 0.04	$ (0.04)

[1] Basic and diluted earnings per common share are calculated based on amounts attributable to common shareholders of Corporate Office Properties Trust.

XML

Shareholders' Equity (Details) (USD $)	3 Months Ended
	Mar. 31, 2012	Mar. 31, 2011
Common Shares
Number of common shares for each converted common unit (in shares)	34,550
Dividends declared per common share (in dollars per share)	$ 0.275	$ 0.4125

XML

Real Estate Joint Ventures (Details) (USD $)	3 Months Ended		12 Months Ended
	Mar. 31, 2012 building venture	Mar. 31, 2011	Dec. 31, 2011 building
Investments in real estate joint ventures
Investment Balance	$ (6,178,000)		$ (6,071,000)
Unconsolidated real estate joint ventures
Investments in real estate joint ventures
Number of unconsolidated real estate joint ventures in which the entity has an interest	1
Investment Balance	(6,178,000)		(6,071,000)
Ownership (as a percent)	20.00%		20.00%
Number of buildings operated by the joint venture	16		16
Maximum exposure to loss	0
Difference between carrying amount of investment and share of the equity in the joint venture	5,200,000		5,200,000
Condensed balance sheets for unconsolidated real estate joint venture
Properties, net	59,333,000		59,792,000
Other assets	4,403,000		3,529,000
Total assets	63,736,000		63,321,000
Liabilities (primarily debt)	68,663,000		67,710,000
Owners' equity	(4,927,000)		(4,389,000)
Total liabilities and owners' equity	63,736,000		63,321,000
Condensed statements of operations for unconsolidated real estate joint venture
Revenues	1,894,000	1,924,000
Property operating expenses	(737,000)	(986,000)
Interest expense	(1,125,000)	(1,011,000)
Depreciation and amortization expense	(570,000)	(608,000)
Net loss	(538,000)	(681,000)
M Square Associates, LLC
Investments in real estate joint ventures
Number of buildings operated by the joint venture	2
Investments in consolidated real estate joint ventures
Ownership (as a percent)	50.00%
Total Assets	60,260,000
Pledged Assets	47,845,000
Total Liabilities	44,117,000
LW Redstone Company, LLC
Investments in consolidated real estate joint ventures
Ownership (as a percent)	85.00%
Total Assets	55,255,000
Pledged Assets	15,858,000
Total Liabilities	11,373,000
Arundel Preserve 5, LLC
Investments in real estate joint ventures
Number of buildings operated by the joint venture	1
Investments in consolidated real estate joint ventures
Ownership (as a percent)	50.00%
Total Assets	32,477,000
Pledged Assets	31,619,000
Total Liabilities	18,079,000
COPT-FD Indian Head, LLC
Investments in consolidated real estate joint ventures
Ownership (as a percent)	75.00%
Total Assets	6,544,000
MOR Forbes 2 LLC
Investments in real estate joint ventures
Number of buildings operated by the joint venture	1
Investments in consolidated real estate joint ventures
Ownership (as a percent)	50.00%
Total Assets	3,836,000
Total Liabilities	40,000
Consolidated real estate joint ventures
Investments in consolidated real estate joint ventures
Total Assets	158,372,000
Pledged Assets	95,322,000
Total Liabilities	$ 73,609,000

XML

Information by Business Segment (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2012 segment	Mar. 31, 2011	Dec. 31, 2011
Information by Business Segment
Number of primary office property segments	10
Segment financial information for real estate operations
Revenues from real estate operations	$ 125,304	$ 122,441
Property operating expenses	48,387	50,152
NOI from real estate operations	76,917	72,289
Additions to long-lived assets	3,797,368	3,865,809
Transfers from non-operating properties	34,831
Segment assets	3,797,368	3,865,809	3,867,524
Operating Segment Total
Segment financial information for real estate operations
Revenues from real estate operations	125,304	122,441
Property operating expenses	48,387	50,152
NOI from real estate operations	76,917	72,289
Additions to long-lived assets	4,578	18,200
Transfers from non-operating properties	34,831	29,257
Segment assets	3,007,147	3,058,343
Baltimore/Washington Corridor
Segment financial information for real estate operations
Revenues from real estate operations	56,250	53,252
Property operating expenses	20,151	21,058
NOI from real estate operations	36,099	32,194
Additions to long-lived assets	1,864	6,405
Transfers from non-operating properties	25,594	19,883
Segment assets	1,231,949	1,199,244
Northern Virginia
Segment financial information for real estate operations
Revenues from real estate operations	18,560	18,274
Property operating expenses	7,400	7,590
NOI from real estate operations	11,160	10,684
Additions to long-lived assets	1,661	2,033
Transfers from non-operating properties		(7)
Segment assets	480,457	488,599
San Antonio
Segment financial information for real estate operations
Revenues from real estate operations	7,608	7,663
Property operating expenses	3,817	3,813
NOI from real estate operations	3,791	3,850
Transfers from non-operating properties	362	600
Segment assets	120,024	115,221
Washington, DC - Capitol Riverfront
Segment financial information for real estate operations
Revenues from real estate operations	3,894	4,590
Property operating expenses	1,910	1,627
NOI from real estate operations	1,984	2,963
Additions to long-lived assets	(729)	156
Segment assets	108,649	117,758
St. Mary's and King George Counties
Segment financial information for real estate operations
Revenues from real estate operations	4,212	3,534
Property operating expenses	1,258	1,014
NOI from real estate operations	2,954	2,520
Additions to long-lived assets	167	380
Transfers from non-operating properties	556
Segment assets	99,946	87,690
Greater Baltimore
Segment financial information for real estate operations
Revenues from real estate operations	15,372	17,612
Property operating expenses	5,890	8,452
NOI from real estate operations	9,482	9,160
Additions to long-lived assets	719	8,088
Transfers from non-operating properties	365	4,247
Segment assets	370,754	479,474
Suburban Maryland
Segment financial information for real estate operations
Revenues from real estate operations	5,749	5,609
Property operating expenses	2,521	2,661
NOI from real estate operations	3,228	2,948
Additions to long-lived assets	771	1,052
Transfers from non-operating properties	335	354
Segment assets	147,197	145,913
Colorado Springs
Segment financial information for real estate operations
Revenues from real estate operations	6,453	5,920
Property operating expenses	2,385	2,343
NOI from real estate operations	4,068	3,577
Additions to long-lived assets	99	736
Transfers from non-operating properties	316
Segment assets	181,241	214,111
Greater Philadelphia
Segment financial information for real estate operations
Revenues from real estate operations	2,172	1,939
Property operating expenses	615	418
NOI from real estate operations	1,557	1,521
Additions to long-lived assets		(4)
Transfers from non-operating properties	7,303	(2,474)
Segment assets	109,432	96,372
Other
Segment financial information for real estate operations
Revenues from real estate operations	3,618	2,838
Property operating expenses	1,233	467
NOI from real estate operations	2,385	2,371
Additions to long-lived assets	26	(646)
Segment assets	114,108	83,247
Wholesale Data Center
Segment financial information for real estate operations
Revenues from real estate operations	1,416	1,210
Property operating expenses	1,207	709
NOI from real estate operations	209	501
Transfers from non-operating properties		6,654
Segment assets	$ 43,390	$ 30,714

XML

Properties, net (Details 3) (USD $)	3 Months Ended
	Mar. 31, 2012
Disposals and Impairment Losses
Aggregate net impairment losses recognized in connection with disposition plan	$ 6,600,000
Aggregate net impairment losses recognized in discontinued operation in connection with disposition plan	1,500,000
Exit cost included in net impairment losses recognized in connection with disposition plan	1,100,000
Net impairment losses on expected disposition of additional property	5,100,000
Non-operating properties
Dispositions
Sale Price of Non-operating Properties	25,700,000
Operating properties, net
Dispositions
Number of Buildings	8
Total Rentable Square Feet	314,000
Sale Price of Operating Properties	37,000,000
Gain on Sale	4,397,000
White Marsh Portfolio | Operating properties, net
Dispositions
Number of Buildings	5
Total Rentable Square Feet	163,000
Sale Price of Operating Properties	19,100,000
Gain on Sale	2,445,000
Number of properties comprising White Marsh Professional Center	3
1101 Sentry Gateway | Operating properties, net
Dispositions
Number of Buildings	1
Total Rentable Square Feet	95,000
Sale Price of Operating Properties	13,500,000
Gain on Sale	1,750,000
222 and 224 Schilling Circle | Operating properties, net
Dispositions
Number of Buildings	2
Total Rentable Square Feet	56,000
Sale Price of Operating Properties	4,400,000
Gain on Sale	$ 202,000

XML

Share-Based Compensation (Tables)

3 Months Ended

Mar. 31, 2012

Share-Based Compensation

Schedule of payouts for defined performance under performance-based awards of share-based compensation

Percentile Rank	Earned PSUs Payout %
75th or greater	200% of PSUs granted
50th	100% of PSUs granted
25th	50% of PSUs granted
Below 25th	0% of PSUs granted

XML

Information by Business Segment (Details 3) (USD $) In Thousands, unless otherwise specified	Mar. 31, 2012	Dec. 31, 2011	Mar. 31, 2011
Reconciliation of segment assets to total assets
Assets	$ 3,797,368	$ 3,867,524	$ 3,865,809
Operating Segment
Reconciliation of segment assets to total assets
Assets	3,007,147		3,058,343
Non-operating property assets
Reconciliation of segment assets to total assets
Assets	638,856		652,223
Other
Reconciliation of segment assets to total assets
Assets	$ 151,365		$ 155,243

XML

Organization (Tables)

3 Months Ended

Mar. 31, 2012

Organization

Summary of forms of ownership and percentage of ownership forms

A summary of our Operating Partnership’s forms of ownership and the percentage of those ownership forms owned by COPT as of March 31, 2012 follows:

Common Units	94	%
Series G Preferred Units	100	%
Series H Preferred Units	100	%
Series I Preferred Units	0	%
Series J Preferred Units	100	%
Series K Preferred Units	100	%

XML

Prepaid Expenses and Other Assets (Details 2) (USD $)	Mar. 31, 2012	Dec. 31, 2011
Mortgage and other investing receivables
Mortgage and other investing receivables	$ 32,739,000	$ 27,998,000
Fair value of mortgage and other investing receivables	32,700,000	28,000,000
Notes receivable from City of Huntsville
Mortgage and other investing receivables
Mortgage and other investing receivables	22,526,000	17,741,000
Mortgage loans receivable
Mortgage and other investing receivables
Mortgage and other investing receivables	10,213,000	10,257,000
Number of mortgage loans receivable	2
Operating notes receivable
Operating Notes Receivable
Operating notes receivables due from tenants with terms exceeding one year	$ 482,000	$ 530,000

XML

Fair Value Measurements (Details 3) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2012	Mar. 31, 2011
Fair value of impaired properties and other assets
Impairment Losses Recognized	$ 5,126	$ 27,742
Fair value measurement on a nonrecurring basis | Properties, net
Fair value of impaired properties and other assets
Impairment Losses Recognized	5,479
Fair value measurement on a nonrecurring basis | Significant Unobservable Inputs (Level 3) | Properties, net
Fair value of impaired properties and other assets
Assets	92,176
Fair value measurement on a nonrecurring basis | Total | Properties, net
Fair value of impaired properties and other assets
Assets	$ 92,176

XML

Organization (Details)	3 Months Ended
	Mar. 31, 2012 sqfeet property
Operating office properties
Investments in real estate
Number of real estate properties	231
Square footage of real estate properties (in square feet)	20,200,000
Office properties under construction or redevelopment
Investments in real estate
Number of real estate properties	7
Square footage of real estate properties (in square feet)	903,000
Office properties under construction or redevelopment which are partially operational
Investments in real estate
Number of real estate properties	2
Land held or under pre-construction
Investments in real estate
Area of land held or under pre-construction (in acres)	2,327
Area of land parcels controlled but not owned (in acres)	583
Developable square footage of real estate properties (in square feet)	20,500,000
Partially operational, wholesale data center
Investments in real estate
The expected stabilization critical load after completion of development (in megawatts)	18

XML

Debt (Details 2) (USD $) In Thousands, unless otherwise specified	Mar. 31, 2012	Dec. 31, 2011
Carrying amount and estimated fair value of debt
Debt, net	$ 2,418,078	$ 2,426,303
4.25% Exchangeable Senior Notes
Carrying amount and estimated fair value of debt
Debt, net	228,175	227,283
Carrying Amount
Carrying amount and estimated fair value of debt
Variable- rate debt	1,135,621	1,141,549
Debt, net	2,418,078	2,426,303
Carrying Amount | 4.25% Exchangeable Senior Notes
Carrying amount and estimated fair value of debt
Fixed-rate debt	228,175	227,283
Carrying Amount | Other fixed-rate debt
Carrying amount and estimated fair value of debt
Fixed-rate debt	1,054,282	1,057,471
Total Estimated Fair Value
Carrying amount and estimated fair value of debt
Variable- rate debt	1,135,847	1,139,856
Debt, net	2,424,288	2,432,357
Total Estimated Fair Value | 4.25% Exchangeable Senior Notes
Carrying amount and estimated fair value of debt
Fixed-rate debt	239,331	238,077
Total Estimated Fair Value | Other fixed-rate debt
Carrying amount and estimated fair value of debt
Fixed-rate debt	$ 1,049,110	$ 1,054,424

XML

Earnings Per Share ("EPS") (Details) (USD $) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended
	Mar. 31, 2012		Mar. 31, 2011
Numerator:
Income (loss) from continuing operations	$ 2,592		$ (20,366)
Gain on sales of real estate, net			2,701
Preferred share dividends	(4,025)		(4,025)
(Income) loss from continuing operations attributable to noncontrolling interests	(53)		719
Income from continuing operations attributable to restricted shares	(141)		(282)
Numerator for basic EPS from continuing operations attributable to COPT common shareholders	(1,627)		(21,253)
Dilutive effect of common units in the Operating Partnership on diluted EPS from continuing operations			(1,422)
Numerator for diluted EPS from continuing operations attributable to COPT common shareholders	(1,627)		(22,675)
Numerator for basic EPS from continuing operations attributable to COPT common shareholders	(1,627)		(21,253)
Discontinued operations	4,385		(901)
Discontinued operations attributable to noncontrolling interests	(247)		57
Numerator for basic EPS on net (loss) income attributable to COPT common shareholders	2,511		(22,097)
Dilutive effect of common units in the Operating Partnership			(1,479)
Numerator for diluted EPS on net income (loss) attributable to COPT common shareholders	$ 2,511		$ (23,576)
Denominator (all weighted averages):
Denominator for basic EPS (common shares) (in shares)	71,458		66,340
Dilutive effect of common units (in shares)			4,396
Denominator for diluted EPS (in shares)	71,458		70,736
Basic EPS:
Loss from continuing operations attributable to COPT common shareholders (in dollars per share)	$ (0.02)	[1]	$ (0.32)	[1]
Discontinued operations attributable to COPT common shareholders (in dollars per share)	$ 0.06	[1]	$ (0.01)	[1]
Net income (loss) attributable to COPT common shareholders (in dollars per share)	$ 0.04	[1]	$ (0.33)	[1]
Diluted EPS:
Loss from continuing operations attributable to COPT common shareholders	$ (0.02)	[1]	$ (0.32)	[1]
Discontinued operations attributable to COPT common shareholders (in dollars per share)	$ 0.06	[1]	$ (0.01)	[1]
Net income (loss) attributable to COPT common shareholders (in dollars per share)	$ 0.04	[1]	$ (0.33)	[1]

[1] Basic and diluted earnings per common share are calculated based on amounts attributable to common shareholders of Corporate Office Properties Trust.

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Properties, net (Details 4)	3 Months Ended
	Mar. 31, 2012 sqfeet property
Properties under construction
Construction and Redevelopment Activities
Number of real estate properties	6
Square footage of real estate properties (in square feet)	789,000
Properties under construction | Baltimore/Washington Corridor
Construction and Redevelopment Activities
Number of real estate properties	3
Properties under construction | Greater Baltimore
Construction and Redevelopment Activities
Number of real estate properties	1
Properties under construction | Northern Virginia
Construction and Redevelopment Activities
Number of real estate properties	1
Properties under construction | Huntsville
Construction and Redevelopment Activities
Number of real estate properties	1
Properties under redevelopment | Greater Philadelphia
Construction and Redevelopment Activities
Number of real estate properties	1
Square footage of real estate properties (in square feet)	113,000

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Organization

3 Months Ended

Mar. 31, 2012

Organization

Organization

1.Organization

Corporate Office Properties Trust (“COPT”) and subsidiaries (collectively, the “Company,” “we” or “us”) is a fully-integrated and self-managed real estate investment trust (“REIT”) that focuses primarily on serving the specialized requirements of strategic customers in the United States Government and defense information technology sectors.  We acquire, develop, manage and lease office and data center properties that are typically concentrated in large office parks primarily located adjacent to government demand drivers and/or in office markets that we believe possess growth opportunities.  As of March 31, 2012, our investments in real estate included the following:

·231 operating office properties totaling 20.2 million square feet;

·seven office properties under construction or redevelopment that we estimate will total approximately 903,000 square feet upon completion, including two partially operational properties included above;

·land held or under pre-construction totaling 2,327 acres (including 583 controlled but not owned) that we believe are potentially developable into approximately 20.5 million square feet; and

·a partially operational, wholesale data center which upon completion and stabilization is expected to have a critical load of 18 megawatts.

We conduct almost all of our operations through our operating partnership, Corporate Office Properties, L.P. (the “Operating Partnership”), of which we are the managing general partner.  The Operating Partnership owns real estate both directly and through subsidiary partnerships and limited liability companies (“LLCs”).  A summary of our Operating Partnership’s forms of ownership and the percentage of those ownership forms owned by COPT as of March 31, 2012 follows:

Common Units	94	%
Series G Preferred Units	100	%
Series H Preferred Units	100	%
Series I Preferred Units	0	%
Series J Preferred Units	100	%
Series K Preferred Units	100	%

Three of our trustees also controlled, either directly or through ownership by other entities or family members, an additional 5% of the Operating Partnership’s common units (“common units”) as of March 31, 2012.

In addition to owning real estate, the Operating Partnership also owns entities that provide real estate services such as property management and construction and development services primarily for our properties but also for third parties.

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Earnings Per Share ("EPS") (Details 2)	3 Months Ended
	Mar. 31, 2012	Mar. 31, 2011
Weighted average conversion of common units
Antidilutive securities
Antidilutive securities excluded from computation of diluted earnings per share (in shares)		4,396,000
Weighted average conversion of convertible preferred units
Antidilutive securities
Antidilutive securities excluded from computation of diluted earnings per share (in shares)	176,000	176,000
Weighted average conversion of convertible preferred shares
Antidilutive securities
Antidilutive securities excluded from computation of diluted earnings per share (in shares)	434,000	434,000
Weighted average restricted shares
Antidilutive securities
Antidilutive securities excluded from computation of diluted earnings per share (in shares)	572,000	651,000
Weighted average options
Antidilutive securities
Antidilutive securities excluded from computation of diluted earnings per share (in shares)	819,000	1,200,000

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Fair Value Measurements (Details 4) (Properties on which impairment losses were recognized, USD $)	3 Months Ended
	Mar. 31, 2012
Quantitative information for significant unobservable inputs used for Level 3 fair value measurements
Fair value on measurement date	92,176,000
Discounted cash flow
Quantitative information for significant unobservable inputs used for Level 3 fair value measurements
Discount rate	11.00%
Terminal capitalization rate	9.00%
Market rent growth rate	3.00%
Expense growth rate	3.00%
Yield Analysis
Quantitative information for significant unobservable inputs used for Level 3 fair value measurements
Yield	12.00%
Market rent rate	8.50%
Leasing costs per square foot	20.00

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Prepaid Expenses and Other Assets (Tables)

3 Months Ended

Mar. 31, 2012

Prepaid Expenses and Other Assets

Schedule of prepaid expenses and other assets

	March 31,		December 31,
	2012		2011
Mortgage and other investing receivables	$	32,739	$	27,998
Prepaid expenses	14,196		20,035
Proceeds from sale of KEYW stock receivable (1)	11,934		5,057
Construction contract costs incurred in excess of billings	10,592		2,094
Furniture, fixtures and equipment, net	9,607		10,177
Deferred tax asset	6,746		10,892
Lease incentives	5,360		5,233
Other assets	5,358		6,133
Prepaid expenses and other assets	$	96,532	$	87,619

(1)Represents unsettled proceeds from sales of KEYW common stock that settled shortly following the respective reporting dates.

Schedule of mortgage and other investing receivables

	March 31,		December 31,
	2012		2011
Notes receivable from City of Huntsville	$	22,526	$	17,741
Mortgage loans receivable	10,213		10,257
	$	32,739	$	27,998

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Real Estate Joint Ventures (Tables)

3 Months Ended

Mar. 31, 2012

Real Estate Joint Ventures

Schedule of information related to the investment in unconsolidated real estate joint venture accounted for using the equity method of accounting

										Maximum
Investment Balance at (1)						Date			Nature of	Exposure
March 31, 2012			December 31, 2011			Acquired	Ownership		Activity	to Loss (2)
$	(6,178	)	$	(6,071	)	9/29/2005	20	%	Operates 16 Buildings	$	—

(1)The carrying amount of our investment in this joint venture was lower than our share of the equity in the joint venture by $5.2 million at March 31, 2012 and December 31, 2011 due to our deferral of gain on the contribution by us of real estate into the joint venture upon its formation.  A difference will continue to exist to the extent the nature of our continuing involvement in the joint venture remains the same.

(2)Derived from the sum of our investment balance and maximum additional unilateral capital contributions or loans required from us.  Not reported above are additional amounts that we and our partner are required to fund when needed by this joint venture; these funding requirements are proportional to our respective ownership percentages.  Also not reported above are additional unilateral contributions or loans from us, the amounts of which are uncertain, that we would be required to make if certain contingent events occur (see Note 15).

Schedule of condensed balance sheets for unconsolidated real estate joint venture

	March 31,			December 31,
	2012			2011
Properties, net	$	59,333		$	59,792
Other assets	4,403			3,529
Total assets	$	63,736		$	63,321
Liabilities (primarily debt)	$	68,663		$	67,710
Owners’ equity	(4,927		)	(4,389		)
Total liabilities and owners’ equity	$	63,736		$	63,321

Schedule of condensed statements of operations for unconsolidated real estate joint venture

	For the Three Months
	Ended March 31,
	2012			2011
Revenues	$	1,894		$	1,924
Property operating expenses	(737		)	(986		)
Interest expense	(1,125		)	(1,011		)
Depreciation and amortization expense	(570		)	(608		)
Net loss	$	(538	)	$	(681	)

Schedule of information related to investments in consolidated real estate joint ventures

		Ownership			March 31, 2012 (1)
	Date	% at		Nature of	Total		Pledged		Total
	Acquired	3/31/2012		Activity	Assets		Assets		Liabilities
M Square Associates, LLC	6/26/2007	50	%	Operating two buildings and developing others (2)	$	60,260	$	47,845	$	44,117
LW Redstone Company, LLC	3/23/2010	85	%	Developing business park (3)	55,255		15,858		11,373
Arundel Preserve #5, LLC	7/2/2007	50	%	Operating one building (4)	32,477		31,619		18,079
COPT-FD Indian Head, LLC	10/23/2006	75	%	Developing land parcel (5)	6,544		—		—
MOR Forbes 2 LLC	12/24/2002	50	%	Operating one building (6)	3,836		—		40
					$	158,372	$	95,322	$	73,609

(1) Excludes amounts eliminated in consolidation.

(2) This joint venture’s properties are in College Park, Maryland (in the Suburban Maryland region).

(3) This joint venture’s property is in Huntsville, Alabama.

(4) This joint venture’s property is in Hanover, Maryland (in the Baltimore/Washington Corridor).

(5) This joint venture’s property is in Charles County, Maryland.

(6) This joint venture’s property is in Lanham, Maryland (in the Suburban Maryland region).

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Information by Business Segment (Details 2) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2012	Mar. 31, 2011
Reconciliation of segment revenues to total revenues
Segment revenues from real estate operations	$ 125,304	$ 122,441
Construction contract and other service revenues	21,534	21,028
Less: Revenues from discontinued operations	(3,365)	(5,980)
Total revenues	143,473	137,489
Reconciliation of segment property operating expenses to property operating expenses
Segment property operating expenses	48,387	50,152
Less: Property operating expenses from discontinued operations	(1,185)	(3,091)
Total property operating expenses	47,202	47,061
Computation of net operating income from service operations
Construction contract and other service revenues	21,534	21,028
Construction contract and other service expenses	(20,607)	(20,618)
NOI from service operations	927	410
Reconciliation of NOI from real estate operations and NOI from service operations to (loss) income from continuing operations
NOI from real estate operations	76,917	72,289
NOI from service operations	927	410
Interest and other income	1,217	1,168
Equity in (loss) income of unconsolidated entities	(89)	30
Income tax (expense) benefit	(4,173)	544
Other adjustments:
Depreciation and amortization associated with real estate operations	(31,066)	(30,043)
Impairment losses	(5,126)	(27,742)
General and administrative expenses	(7,017)	(6,777)
Business development expenses and land carry costs	(1,594)	(1,241)
Interest expense on continuing operations	(25,224)	(26,115)
NOI from discontinued operations	(2,180)	(2,889)
Income (loss) from continuing operations	$ 2,592	$ (20,366)

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Properties, net (Details) (USD $) In Thousands, unless otherwise specified	Mar. 31, 2012	Dec. 31, 2011
Properties
Operating properties, net	$ 2,704,323	$ 2,714,056
Operating properties, net
Properties
Less: accumulated depreciation	(570,242)	(559,679)
Operating properties, net | Land [Member]
Properties
Gross	471,995	472,483
Operating properties, net | Building and Building Improvements [Member]
Properties
Gross	$ 2,802,570	$ 2,801,252

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Debt (Tables)

3 Months Ended

Mar. 31, 2012

Debt

Schedule of debt

								Scheduled
	Maximum		Carrying Value at					Maturity
	Availability at		March 31,		December 31,		Stated Interest Rates	Dates at
	March 31, 2012		2012		2011		at March 31, 2012	March 31, 2012
Mortgage and Other Secured Loans:
Fixed rate mortgage loans (1)	N/A		$	1,049,204	$	1,052,421	5.20% - 7.87% (2)	2012-2034
Variable rate secured loans	N/A		39,027		39,213		LIBOR + 2.25% (3)	2015
Other construction loan facilities	$	123,802	50,594		40,336		LIBOR + 1.95% to 2.75% (4)	2012-2015
Total mortgage and other secured loans			1,138,825		1,131,970
Revolving Credit Facility	1,000,000		396,000		662,000		LIBOR + 1.75% to 2.50% (5)	September 1, 2014
Term Loan Facilities (6)	650,000		650,000		400,000		LIBOR + 1.65% to 2.40% (7)	2015-2017
Unsecured notes payable	N/A		5,078		5,050		0% (8)	2015-2026
4.25% Exchangeable Senior Notes	N/A		228,175		227,283		4.25%	April 2030(9)
Total debt			$	2,418,078	$	2,426,303

(1)Several of the fixed rate mortgages carry interest rates that were above or below market rates upon assumption and therefore were recorded at their fair value based on applicable effective interest rates.  The carrying values of these loans reflect net unamortized premiums totaling $2.2 million at March 31, 2012 and $2.4 million at December 31, 2011.

(2)The weighted average interest rate on these loans was 6.01% at March 31, 2012.

(3)The interest rate on the loan outstanding was 2.49% at March 31, 2012.

(4)The weighted average interest rate on these loans was 2.73% at March 31, 2012.

(5)The weighted average interest rate on the Revolving Credit Facility was 2.24% at March 31, 2012.

(6)As described further below, we entered into a new facility effective on February 14, 2012.

(7)The weighted average interest rate on these loans was 2.15% at March 31, 2012.

(8)These notes may carry interest rates that were below market rates upon assumption and therefore were recorded at their fair value based on applicable effective interest rates.  The carrying value of these notes reflects an unamortized discount totaling $1.7 million at March 31, 2012 and $1.8 million at December 31, 2011.

(9)As described further in our 2011 Annual Report on Form 10-K, these notes have an exchange settlement feature that provides that the notes may, under certain circumstances, be exchangeable for cash and, at the Operating Partnership’s discretion, our common shares at an exchange rate (subject to adjustment) of 20.8513 shares per one thousand dollar principal amount of the notes (exchange rate is as of March 31, 2012 and is equivalent to an exchange price of $47.96 per common share).  The carrying value of these notes included a principal amount of $240.0 million and an unamortized discount totaling $11.8 million at March 31, 2012 and $12.7 million at December 31, 2011.  The effective interest rate under the notes, including amortization of the issuance costs, was 6.05%.  Because the closing price of our common shares at March 31, 2012 and December 31, 2011 was less than the exchange price per common share applicable to these notes, the if-converted value of the notes did not exceed the principal amount.  The table below sets forth interest expense recognized on these notes before deductions for amounts capitalized (in thousands):

	For the Three Months
	Ended March 31,
	2012		2011
Interest expense at stated interest rate	$	2,550	$	2,550
Interest expense associated with amortization of discount	892		840
Total	$	3,442	$	3,390

Schedule of the fair value of debt

March 31, 2012	December 31, 2011
	Carrying		Estimated		Carrying		Estimated
	Amount		Fair Value		Amount		Fair Value
Fixed-rate debt
4.25% Exchangeable Senior Notes	$	228,175	$	239,331	$	227,283	$	238,077
Other fixed-rate debt	1,054,282		1,049,110		1,057,471		1,054,424
Variable-rate debt	1,135,621		1,135,847		1,141,549		1,139,856
	$	2,418,078	$	2,424,288	$	2,426,303	$	2,432,357

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Interest Rate Derivatives (Tables)

3 Months Ended

Mar. 31, 2012

Interest Rate Derivatives

Schedule of key terms and fair values of interest rate swap derivatives

								Fair Value at
Notional			Fixed		Floating Rate	Effective	Expiration	March 31,			December 31,
Amount			Rate		Index	Date	Date	2012			2011
$	50,000		0.5025	%	One-Month LIBOR	1/3/2011	1/3/2012	$	—		$	(1	)
50,000			0.5025	%	One-Month LIBOR	1/3/2011	1/3/2012	—			(1		)
120,000			1.7600	%	One-Month LIBOR	1/2/2009	5/1/2012	(152		)	(552		)
100,000			1.9750	%	One-Month LIBOR	1/1/2010	5/1/2012	(144		)	(532		)
100,000			0.6123	%	One-Month LIBOR	1/3/2012	9/1/2014	(282		)	55
100,000			0.6100	%	One-Month LIBOR	1/3/2012	9/1/2014	(277		)	56
100,000			0.8320	%	One-Month LIBOR	1/3/2012	9/1/2015	(365		)	(66		)
100,000			0.8320	%	One-Month LIBOR	1/3/2012	9/1/2015	(363		)	(49		)
39,027		(1)	3.8300	%	One-Month LIBOR	11/2/2010	11/2/2015	(1,090		)	(1,054		)
100,000		(2)	3.8415	%	Three-Month LIBOR	9/30/2011	9/30/2021	—			(16,333		)
75,000		(2)	3.8450	%	Three-Month LIBOR	9/30/2011	9/30/2021	—			(12,275		)
100,000		(2)	2.0525	%	Three-Month LIBOR-Reverse	12/30/2011	9/30/2021	—			345
75,000		(2)	2.0525	%	Three-Month LIBOR-Reverse	12/30/2011	9/30/2021	—			260
								$	(2,673	)	$	(30,147	)

(1)The notional amount of this instrument is scheduled to amortize to $36.2 million.

(2)As described further in our 2011 Annual Report on Form 10-K, on January 5, 2012, we cash settled these instruments, along with interest accrued thereon, for an aggregate of $29.7 million.  Our policy is to present payments to terminate interest rate swaps entered into in order to hedge forecasted interest payments as operating activities on our consolidated statement of cash flows.  Accordingly, the payments to cash settle these instruments were included in net cash provided by operating activities on our consolidated statement of cash flows.

Schedule of fair value and balance sheet classification of interest rate derivatives

	March 31, 2012				December 31, 2011
Derivatives	Balance Sheet Location	Fair Value			Balance Sheet Location	Fair Value
Interest rate swaps designated as cash flow hedges	Prepaid expenses and other assets	$	—		Prepaid expenses and other assets	$	111
Interest rate swaps not designated as hedges	N/A	—			Prepaid expenses and other assets	605
Interest rate swaps designated as cash flow hedges	Interest rate derivatives	(2,673		)	Interest rate derivatives	(2,255		)
Interest rate swaps not designated as hedges	N/A	—			Interest rate derivatives	(28,608		)

Schedule of effect of interest rate derivatives on consolidated statements of operations and comprehensive income

	For the Three Months
	Ended March 31,
	2012			2011
Amount of loss recognized in AOCL (effective portion)	$	(1,987	)	$	(136	)
Amount of loss reclassified from AOCL into interest expense (effective portion)	(1,474		)	(1,104		)

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Consolidated Statements of Cash Flows (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2012	Mar. 31, 2011
Cash flows from operating activities
Revenues from real estate operations received	$ 129,184	$ 114,303
Construction contract and other service revenues received	18,170	21,405
Property operating expenses paid	(42,608)	(45,267)
Construction contract and other service expenses paid	(12,454)	(28,315)
General and administrative and business development expenses paid	(6,156)	(6,860)
Interest expense paid	(19,896)	(22,252)
Cash settlement of interest rate derivatives	(29,738)
Proceeds from sale of trading marketable securities	7,041
Interest and other income received	252	108
Income taxes paid	(8)	(170)
Net cash provided by operating activities	43,787	32,952
Purchases of and additions to properties
Construction, development and redevelopment	(35,476)	(46,676)
Tenant improvements on operating properties	(7,934)	(8,778)
Other capital improvements on operating properties	(3,360)	(4,064)
Proceeds from sales of properties	61,230	3,149
Mortgage and other loan receivables funded or acquired	(3,506)	(1,181)
Leasing costs paid	(2,853)	(2,894)
Other	(310)	(920)
Net cash provided by (used in) investing activities	7,791	(61,364)
Cash flows from financing activities
Proceeds from debt	331,097	97,273
Repayments of debt
Scheduled principal amortization	(3,207)	(3,798)
Other repayments	(337,050)	(25,050)
Deferred financing costs paid	(2,044)	(482)
Dividends paid	(33,711)	(31,664)
Distributions paid	(1,939)	(1,981)
Restricted share redemptions	(2,373)	(3,713)
Other	77	331
Net cash (used in) provided by financing activities	(49,150)	30,916
Net increase in cash and cash equivalents	2,428	2,504
Cash and cash equivalents
Beginning of period	5,559	10,102
End of period	7,987	12,606
Reconciliation of net income (loss) to net cash provided by operating activities:
Net income (loss)	6,977	(18,566)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and other amortization	31,705	33,645
Impairment losses	5,479	27,742
Amortization of deferred financing costs	1,572	1,759
Increase in deferred rent receivable	(2,559)	(4,240)
Amortization of net debt discounts	775	1,649
Gain on sales of real estate	(4,138)	(2,701)
Share-based compensation	3,402	2,917
Other	(1,423)	(926)
Changes in operating assets and liabilities:
Decrease (increase) in accounts receivable	14,792	(827)
Decrease in restricted cash and marketable securities and prepaid expenses and other assets	9,448	4,701
Increase (decrease) in accounts payable, accrued expenses and other liabilities	7,661	(10,025)
Decrease in rents received in advance and security deposits	(1,901)	(2,176)
Decrease in interest rate derivatives in connection with cash settlement	(28,003)
Net cash provided by operating activities	43,787	32,952
Supplemental schedule of non-cash investing and financing activities:
Increase in accrued capital improvements, leasing and other investing activity costs	11,828	13,171
Increase in property, debt and other liabilities in connection with acquisitions		3,040
Decrease in fair value of derivatives applied to AOCL and noncontrolling interests	528	662
Dividends/distribution payable	24,544	33,048
Decrease in noncontrolling interests and increase in shareholders' equity in connection with the conversion of common units into common shares	444	263
Adjustments to noncontrolling interests resulting from changes in ownership of Operating Partnership by COPT	$ 88	$ 163

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Information by Business Segment (Tables)

3 Months Ended

Mar. 31, 2012

Information by Business Segment

Schedule of segment financial information for real estate operations

	Operating Office Property Segments
	Baltimore/ Washington Corridor		Northern Virginia			San Antonio		Washington, DC - Capitol Riverfront			St. Mary’s &  King George Counties		Greater Baltimore		Suburban Maryland		Colorado Springs		Greater Philadelphia			Other			Operating Wholesale Data Center		Total
Three Months Ended March 31, 2012
Revenues from real estate operations	$	56,250	$	18,560		$	7,608	$	3,894		$	4,212	$	15,372	$	5,749	$	6,453	$	2,172		$	3,618		$	1,416	$	125,304
Property operating expenses	20,151		7,400			3,817		1,910			1,258		5,890		2,521		2,385		615			1,233			1,207		48,387
NOI from real estate operations	$	36,099	$	11,160		$	3,791	$	1,984		$	2,954	$	9,482	$	3,228	$	4,068	$	1,557		$	2,385		$	209	$	76,917
Additions to long-lived assets	$	1,864	$	1,661		$	—	$	(729	)	$	167	$	719	$	771	$	99	$	—		$	26		$	—	$	4,578
Transfers from non-operating properties	$	25,594	$	—		$	362	$	—		$	556	$	365	$	335	$	316	$	7,303		$	—		$	—	$	34,831
Segment assets at March 31, 2012	$	1,231,949	$	480,457		$	120,024	$	108,649		$	99,946	$	370,754	$	147,197	$	181,241	$	109,432		$	114,108		$	43,390	$	3,007,147
Three Months Ended March 31, 2011
Revenues from real estate operations	$	53,252	$	18,274		$	7,663	$	4,590		$	3,534	$	17,612	$	5,609	$	5,920	$	1,939		$	2,838		$	1,210	$	122,441
Property operating expenses	21,058		7,590			3,813		1,627			1,014		8,452		2,661		2,343		418			467			709		50,152
NOI from real estate operations	$	32,194	$	10,684		$	3,850	$	2,963		$	2,520	$	9,160	$	2,948	$	3,577	$	1,521		$	2,371		$	501	$	72,289
Additions to long-lived assets	$	6,405	$	2,033		$	—	$	156		$	380	$	8,088	$	1,052	$	736	$	(4	)	$	(646	)	$	—	$	18,200
Transfers from non-operating properties	$	19,883	$	(7	)	$	600	$	—		$	—	$	4,247	$	354	$	—	$	(2,474	)	$	—		$	6,654	$	29,257
Segment assets at March 31, 2011	$	1,199,244	$	488,599		$	115,221	$	117,758		$	87,690	$	479,474	$	145,913	$	214,111	$	96,372		$	83,247		$	30,714	$	3,058,343

Schedule of reconciliation of segment revenues to total revenues

	For the Three Months
	Ended March 31,
	2012			2011
Segment revenues from real estate operations	$	125,304		$	122,441
Construction contract and other service revenues	21,534			21,028
Less: Revenues from discontinued operations (Note 13)	(3,365		)	(5,980		)
Total revenues	$	143,473		$	137,489

Schedule of reconciliation of segment property operating expenses to total property operating expenses

	For the Three Months
	Ended March 31,
	2012			2011
Segment property operating expenses	$	48,387		$	50,152
Less: Property operating expenses from discontinued operations (Note 13)	(1,185		)	(3,091		)
Total property operating expenses	$	47,202		$	47,061

Schedule of computation of net operating income from service operations

	For the Three Months
	Ended March 31,
	2012			2011
Construction contract and other service revenues	$	21,534		$	21,028
Construction contract and other service expenses	(20,607		)	(20,618		)
NOI from service operations	$	927		$	410

Schedule of reconciliation of net operating income from real estate operations and service operations to (loss) income from continuing operations

	For the Three Months
	Ended March 31,
	2012			2011
NOI from real estate operations	$	76,917		$	72,289
NOI from service operations	927			410
Interest and other income	1,217			1,168
Equity in (loss) income of unconsolidated entities	(89		)	30
Income tax (expense) benefit	(4,173		)	544
Other adjustments:
Depreciation and other amortization associated with real estate operations	(31,066		)	(30,043		)
Impairment losses	(5,126		)	(27,742		)
General and administrative expenses	(7,017		)	(6,777		)
Business development expenses and land carry costs	(1,594		)	(1,241		)
Interest expense on continuing operations	(25,224		)	(26,115		)
NOI from discontinued operations	(2,180		)	(2,889		)
Income (loss) from continuing operations	$	2,592		$	(20,366	)

Schedule of reconciliation of segment assets to total assets

	March 31,		March 31,
	2012		2011
Segment assets	$	3,007,147	$	3,058,343
Non-operating property assets	638,856		652,223
Other assets	151,365		155,243
Total assets	$	3,797,368	$	3,865,809

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Fair Value Measurements (Details) (USD $) In Thousands, unless otherwise specified	Mar. 31, 2012	Dec. 31, 2011
Liabilities:
Interest rate derivatives	$ 2,673	$ 30,863
Fair value measurement on a recurring basis | Quoted Prices in Active Markets for Identical Assets (Level 1)
Assets:
Common stocks	454
Assets	7,227
Liabilities:
Deferred compensation plan liability	6,773
Liabilities	6,773
Fair value measurement on a recurring basis | Quoted Prices in Active Markets for Identical Assets (Level 1) | Mutual funds
Assets:
Marketable securities in deferred compensation plan	6,121
Fair value measurement on a recurring basis | Quoted Prices in Active Markets for Identical Assets (Level 1) | Common stocks
Assets:
Marketable securities in deferred compensation plan	414
Fair value measurement on a recurring basis | Quoted Prices in Active Markets for Identical Assets (Level 1) | Other
Assets:
Marketable securities in deferred compensation plan	238
Fair value measurement on a recurring basis | Significant Other Observable Inputs (Level 2)
Assets:
Warrants to purchase common shares in KEYW	133
Assets	133
Liabilities:
Interest rate derivatives	2,673
Liabilities	2,673
Fair value measurement on a recurring basis | Total Estimated Fair Value
Assets:
Common stocks	454
Warrants to purchase common shares in KEYW	133
Assets	7,360
Liabilities:
Deferred compensation plan liability	6,773
Interest rate derivatives	2,673
Liabilities	9,446
Fair value measurement on a recurring basis | Total Estimated Fair Value | Mutual funds
Assets:
Marketable securities in deferred compensation plan	6,121
Fair value measurement on a recurring basis | Total Estimated Fair Value | Common stocks
Assets:
Marketable securities in deferred compensation plan	414
Fair value measurement on a recurring basis | Total Estimated Fair Value | Other
Assets:
Marketable securities in deferred compensation plan	$ 238

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Interest Rate Derivatives (Details) (USD $)	1 Months Ended	3 Months Ended
	Jan. 31, 2012	Mar. 31, 2012	Mar. 31, 2011	Dec. 31, 2011
Fair values of interest rate swap derivatives
Fair value of interest rate swaps		$ (2,673,000)		$ (30,147,000)
Cash settlement of the forward starting swaps and interest accrued thereon	29,700,000	29,738,000
Effect of interest rate derivatives on consolidated statements of operations and comprehensive income
Amount of loss recognized in AOCL (effective portion)		(1,987,000)	(136,000)
Amount of loss reclassified from AOCL into interest expense (effective portion)		(1,474,000)	(1,104,000)
Interest rate swaps
Fair value of interest rate derivatives and balance sheet classification
Fair value of interest rate swaps classified as prepaid expenses and other assets				111,000
Fair value of Interest rate swaps classified as interest rate derivatives		(2,673,000)		(2,255,000)
Fair value of interest rate swaps not designated as hedge classified as prepaid expenses and other assets				605,000
Fair value of interest rate swaps not designated as hedge classified as interest rate derivatives				(28,608,000)
Approximate amount to be reclassified from AOCL to interest expense over the next 12 months		2,500,000
Interest rate derivatives in liability position, fair value		2,700,000
Termination value to settle obligations under interest rate derivative agreements		3,300,000
Designated | Interest rate swap, effective date January 3, 2011
Fair values of interest rate swap derivatives
Notional Amount		50,000,000
Fixed rate (as a percent)		0.5025%
Floating rate index		One-Month LIBOR
Fair value of interest rate swaps				(1,000)
Designated | Interest rate swap two, effective date January 3, 2011
Fair values of interest rate swap derivatives
Notional Amount		50,000,000
Fixed rate (as a percent)		0.5025%
Floating rate index		One-Month LIBOR
Fair value of interest rate swaps				(1,000)
Designated | Interest rate swap, effective date January 2, 2009
Fair values of interest rate swap derivatives
Notional Amount		120,000,000
Fixed rate (as a percent)		1.76%
Floating rate index		One-Month LIBOR
Fair value of interest rate swaps		(152,000)		(552,000)
Designated | Interest rate swap, effective date January 1, 2010
Fair values of interest rate swap derivatives
Notional Amount		100,000,000
Fixed rate (as a percent)		1.975%
Floating rate index		One-Month LIBOR
Fair value of interest rate swaps		(144,000)		(532,000)
Designated | Interest rate swap, effective date January 3, 2012
Fair values of interest rate swap derivatives
Notional Amount		100,000,000
Fixed rate (as a percent)		0.6123%
Floating rate index		One-Month LIBOR
Fair value of interest rate swaps		(282,000)		55,000
Designated | Interest rate swap one, effective date January 3, 2012
Fair values of interest rate swap derivatives
Notional Amount		100,000,000
Fixed rate (as a percent)		0.61%
Floating rate index		One-Month LIBOR
Fair value of interest rate swaps		(277,000)		56,000
Designated | Interest rate swap two, effective date January 3, 2012
Fair values of interest rate swap derivatives
Notional Amount		100,000,000
Fixed rate (as a percent)		0.832%
Floating rate index		One-Month LIBOR
Fair value of interest rate swaps		(365,000)		(66,000)
Designated | Interest rate swap three, effective date January 3, 2012
Fair values of interest rate swap derivatives
Notional Amount		100,000,000
Fixed rate (as a percent)		0.832%
Floating rate index		One-Month LIBOR
Fair value of interest rate swaps		(363,000)		(49,000)
Designated | Interest rate swap, effective date November 2, 2010
Fair values of interest rate swap derivatives
Notional Amount		39,027,000
Fixed rate (as a percent)		3.83%
Floating rate index		One-Month LIBOR
Fair value of interest rate swaps		(1,090,000)		(1,054,000)
Notional amount of interest rate derivatives after scheduled amortization		36,200,000
Not-designated | Interest rate swap two, effective date December 30, 2011
Fair values of interest rate swap derivatives
Notional Amount		75,000,000
Fixed rate (as a percent)		2.0525%
Floating rate index		Three-Month LIBOR-Reverse
Fair value of interest rate swaps				260,000
Not-designated | Interest rate swap, effective date September 30, 2011
Fair values of interest rate swap derivatives
Notional Amount		100,000,000
Fixed rate (as a percent)		3.8415%
Floating rate index		Three-Month LIBOR
Fair value of interest rate swaps				(16,333,000)
Not-designated | Interest rate swap two, effective date September 30, 2011
Fair values of interest rate swap derivatives
Notional Amount		75,000,000
Fixed rate (as a percent)		3.845%
Floating rate index		Three-Month LIBOR
Fair value of interest rate swaps				(12,275,000)
Not-designated | Interest rate swap, effective date December 30, 2011
Fair values of interest rate swap derivatives
Notional Amount		100,000,000
Fixed rate (as a percent)		2.0525%
Floating rate index		Three-Month LIBOR-Reverse
Fair value of interest rate swaps				$ 345,000

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Consolidated Balance Sheets (USD $) In Thousands, unless otherwise specified	Mar. 31, 2012	Dec. 31, 2011
Properties, net:
Operating properties, net	$ 2,704,323	$ 2,714,056
Projects in development or held for future development	633,968	638,919
Total properties, net	3,338,291	3,352,975
Assets held for sale, net	81,352	116,616
Cash and cash equivalents	7,987	5,559
Restricted cash and marketable securities	21,711	36,232
Accounts receivable (net of allowance for doubtful accounts of $3,796 and $3,546, respectively)	11,231	26,032
Deferred rent receivable	89,337	86,856
Intangible assets on real estate acquisitions, net	83,940	89,120
Deferred leasing and financing costs, net	66,987	66,515
Prepaid expenses and other assets	96,532	87,619
Total assets	3,797,368	3,867,524
Liabilities:
Debt, net	2,418,078	2,426,303
Accounts payable and accrued expenses	93,156	96,425
Rents received in advance and security deposits	27,647	29,548
Dividends and distributions payable	24,544	35,038
Deferred revenue associated with operating leases	15,258	15,554
Distributions received in excess of investment in unconsolidated real estate joint venture	6,178	6,071
Interest rate derivatives	2,673	30,863
Other liabilities	9,038	9,657
Total liabilities	2,596,572	2,649,459
Commitments and contingencies (Note 15)
Corporate Office Properties Trust's shareholders' equity:
Preferred Shares of beneficial interest with an aggregate liquidation preference of $216,333 ($0.01 par value; 15,000,000 shares authorized and 8,121,667 shares issued and outstanding at March 31, 2012 and December 31, 2011)	81	81
Common Shares of beneficial interest ($0.01 par value; 125,000,000 shares authorized, shares issued and outstanding of 72,037,627 at March 31, 2012 and 72,011,324 at December 31, 2011)	720	720
Additional paid-in capital	1,670,451	1,668,645
Cumulative distributions in excess of net income	(549,456)	(532,288)
Accumulated other comprehensive loss	(2,201)	(1,733)
Total Corporate Office Properties Trust's shareholders' equity	1,119,595	1,135,425
Noncontrolling interests in subsidiaries:
Common units in the Operating Partnership	53,883	55,281
Preferred units in the Operating Partnership	8,800	8,800
Other consolidated entities	18,518	18,559
Noncontrolling interests in subsidiaries	81,201	82,640
Total equity	1,200,796	1,218,065
Total liabilities and equity	$ 3,797,368	$ 3,867,524

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Properties, net (Details 2) (USD $) In Thousands, unless otherwise specified	Mar. 31, 2012	Dec. 31, 2011
Properties
Projects in development or held for future development	$ 633,968	$ 638,919
Projects in development or held for future development | Land in development or held for future development
Properties
Projects in development or held for future development	225,085	229,833
Projects in development or held for future development | Construction in progress, excluding land
Properties
Projects in development or held for future development	$ 408,883	$ 409,086

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Consolidated Statements of Equity (USD $) In Thousands, unless otherwise specified	Total	Preferred Shares	Common Shares	Additional Paid-in Capital	Cumulative Distributions in Excess of Net Income (Loss)	Accumulated Other Comprehensive Loss	Noncontrolling Interests
Balance at Dec. 31, 2010	$ 1,323,138	$ 81	$ 669	$ 1,511,844	$ (281,794)	$ (4,163)	$ 96,501
Increase (Decrease) in Shareholders' Equity
Conversion of common units to common shares (34,550 and 16,725 shares in 2012 and 2011, respectively)				263			(263)
Costs associated with common shares issued to the public	(117)			(117)
Exercise of share options (5,667 and 24,667 shares in 2012 and 2011, respectively)	346			346
Share-based compensation	3,203		2	3,201
Restricted common share redemptions (97,094 and 104,592 shares in 2012 and 2011, respectively)	(3,713)			(3,713)
Adjustments to noncontrolling interests resulting from changes in ownership of Operating Partnership by COPT				(163)			163
Adjustments related to derivatives designated as cash flow hedges	968					966	2
Net income (loss)	(18,566)				(17,790)		(776)
Dividends	(31,729)				(31,729)
Distributions to owners of common and preferred units in the Operating Partnership	(1,974)						(1,974)
Contributions from noncontrolling interests in other consolidated entities	102			(23)			125
Balance at Mar. 31, 2011	1,271,658	81	671	1,511,638	(331,313)	(3,197)	93,778
Balance at Dec. 31, 2011	1,218,065	81	720	1,668,645	(532,288)	(1,733)	82,640
Increase (Decrease) in Shareholders' Equity
Conversion of common units to common shares (34,550 and 16,725 shares in 2012 and 2011, respectively)				444			(444)
Costs associated with common shares issued to the public	(5)			(5)
Exercise of share options (5,667 and 24,667 shares in 2012 and 2011, respectively)	82			82
Share-based compensation	3,746			3,746
Restricted common share redemptions (97,094 and 104,592 shares in 2012 and 2011, respectively)	(2,373)			(2,373)
Adjustments to noncontrolling interests resulting from changes in ownership of Operating Partnership by COPT				(88)			88
Adjustments related to derivatives designated as cash flow hedges	(513)					(468)	(45)
Net income (loss)	6,977				6,677		300
Dividends	(23,845)				(23,845)
Distributions to owners of common and preferred units in the Operating Partnership	(1,338)						(1,338)
Balance at Mar. 31, 2012	$ 1,200,796	$ 81	$ 720	$ 1,670,451	$ (549,456)	$ (2,201)	$ 81,201

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Income Taxes (Details) (TRS, USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2012	Mar. 31, 2011
TRS
Deferred income tax (expense) benefit
Federal	$ (3,417)	$ 447
State	(756)	100
Total deferred income tax (expense) benefit	(4,173)	547
Current income tax (expense) benefit
Federal		(2)
State		(1)
Total current income tax (expense) benefit		(3)
Total income tax (expense) benefit	$ (4,173)	$ 544
Reconciliation of Federal statutory rate to the effective tax rate
Effective tax rate (as a percent)	38.60%	38.60%

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Discontinued Operations and Assets Held for Sale (Tables)

3 Months Ended

Mar. 31, 2012

Discontinued Operations and Assets Held for Sale

Components of discontinued operations

	For the Three Months
	Ended March 31,
	2012			2011
Revenue from real estate operations	$	3,365		$	5,980
Property operating expenses	(1,185		)	(3,091		)
Depreciation and amortization	(21		)	(2,977		)
Impairment losses	(1,461		)	—
Interest expense	(451		)	(813		)
Gain on sales of real estate	4,138			—
Discontinued operations	$	4,385		$	(901	)

Components of assets held for sale

	March 31, 2012		December 31, 2011
Properties, net	$	74,758	$	108,356
Deferred rent receivable	2,371		2,800
Intangible assets on real estate acquisitions, net	930		1,737
Deferred leasing costs, net	3,293		3,723
Assets held for sale	$	81,352	$	116,616

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Earnings Per Share ("EPS")

3 Months Ended

Mar. 31, 2012

Earnings Per Share ("EPS")

Earnings Per Share ("EPS")

14.Earnings Per Share (“EPS”)

We present both basic and diluted EPS.  We compute basic EPS by dividing net income available to common shareholders allocable to unrestricted common shares under the two-class method by the weighted average number of unrestricted common shares outstanding during the period.  Our computation of diluted EPS is similar except that:

·the denominator is increased to include: (1) the weighted average number of potential additional common shares that would have been outstanding if securities that are convertible into our common shares were converted; and (2) the effect of dilutive potential common shares outstanding during the period attributable to share-based compensation using the treasury stock or if-converted methods; and

·the numerator is adjusted to add back any changes in income or loss that would result from the assumed conversion into common shares that we added to the denominator.

Summaries of the numerator and denominator for purposes of basic and diluted EPS calculations are set forth below (in thousands, except per share data):

	For the Three Months
	Ended March 31,
	2012			2011
Numerator:
Income (loss) from continuing operations	$	2,592		$	(20,366	)
Gain on sales of real estate, net	—			2,701
Preferred share dividends	(4,025		)	(4,025		)
(Income) loss from continuing operations attributable to noncontrolling interests	(53		)	719
Income from continuing operations attributable to restricted shares	(141		)	(282		)
Numerator for basic EPS from continuing operations attributable to COPT common shareholders	(1,627		)	(21,253		)
Dilutive effect of common units in the Operating Partnership on diluted EPS from continuing operations	—			(1,422		)
Numerator for diluted EPS from continuing operations attributable to COPT common shareholders	$	(1,627	)	$	(22,675	)
Numerator for basic EPS from continuing operations attributable to COPT common shareholders	$	(1,627	)	$	(21,253	)
Discontinued operations	4,385			(901		)
Discontinued operations attributable to noncontrolling interests	(247		)	57
Numerator for basic EPS on net income (loss) attributable to COPT common shareholders	2,511			(22,097		)
Dilutive effect of common units in the Operating Partnership	—			(1,479		)
Numerator for diluted EPS on net income (loss) attributable to COPT common shareholders	$	2,511		$	(23,576	)
Denominator (all weighted averages):
Denominator for basic EPS (common shares)	71,458			66,340
Dilutive effect of common units	—			4,396
Denominator for diluted EPS	71,458			70,736
Basic EPS:
Loss from continuing operations attributable to COPT common shareholders	$	(0.02	)	$	(0.32	)
Discontinued operations attributable to COPT common shareholders	0.06			(0.01		)
Net income (loss) attributable to COPT common shareholders	$	0.04		$	(0.33	)
Diluted EPS:
Loss from continuing operations attributable to COPT common shareholders	$	(0.02	)	$	(0.32	)
Discontinued operations attributable to COPT common shareholders	0.06			(0.01		)
Net income (loss) attributable to COPT common shareholders	$	0.04		$	(0.33	)

Our diluted EPS computations do not include the effects of the following securities since the conversions of such securities would increase diluted EPS for the respective periods (in thousands):

	Weighted Average Shares
	Excluded from Denominator
	For the Three Months
	Ended March 31,
	2012	2011
Conversion of common units	—	4,396
Conversion of convertible preferred units	176	176
Conversion of convertible preferred shares	434	434

The following share-based compensation securities were excluded from the computation of diluted EPS because their effect was antidilutive:

·weighted average restricted shares for the three months ended March 31, 2012 and 2011 of 572,000 and 651,000, respectively; and

·weighted average options for the three months ended March 31, 2012 and 2011 of 819,000 and 1.2 million, respectively.

As discussed in Note 7, we have outstanding senior notes that have an exchange settlement feature but did not affect our diluted EPS reported above since the weighted average closing price of our common shares during each of the periods was less than the exchange prices per common share applicable for such periods.

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Earnings Per Share ("EPS") (Tables)

3 Months Ended

Mar. 31, 2012

Earnings Per Share ("EPS")

Summary of calculation of numerator and denominator in basic and diluted earning per share

	For the Three Months
	Ended March 31,
	2012			2011
Numerator:
Income (loss) from continuing operations	$	2,592		$	(20,366	)
Gain on sales of real estate, net	—			2,701
Preferred share dividends	(4,025		)	(4,025		)
(Income) loss from continuing operations attributable to noncontrolling interests	(53		)	719
Income from continuing operations attributable to restricted shares	(141		)	(282		)
Numerator for basic EPS from continuing operations attributable to COPT common shareholders	(1,627		)	(21,253		)
Dilutive effect of common units in the Operating Partnership on diluted EPS from continuing operations	—			(1,422		)
Numerator for diluted EPS from continuing operations attributable to COPT common shareholders	$	(1,627	)	$	(22,675	)
Numerator for basic EPS from continuing operations attributable to COPT common shareholders	$	(1,627	)	$	(21,253	)
Discontinued operations	4,385			(901		)
Discontinued operations attributable to noncontrolling interests	(247		)	57
Numerator for basic EPS on net income (loss) attributable to COPT common shareholders	2,511			(22,097		)
Dilutive effect of common units in the Operating Partnership	—			(1,479		)
Numerator for diluted EPS on net income (loss) attributable to COPT common shareholders	$	2,511		$	(23,576	)
Denominator (all weighted averages):
Denominator for basic EPS (common shares)	71,458			66,340
Dilutive effect of common units	—			4,396
Denominator for diluted EPS	71,458			70,736
Basic EPS:
Loss from continuing operations attributable to COPT common shareholders	$	(0.02	)	$	(0.32	)
Discontinued operations attributable to COPT common shareholders	0.06			(0.01		)
Net income (loss) attributable to COPT common shareholders	$	0.04		$	(0.33	)
Diluted EPS:
Loss from continuing operations attributable to COPT common shareholders	$	(0.02	)	$	(0.32	)
Discontinued operations attributable to COPT common shareholders	0.06			(0.01		)
Net income (loss) attributable to COPT common shareholders	$	0.04		$	(0.33	)

Schedule of securities excluded from computation of diluted earnings per share

	Weighted Average Shares
	Excluded from Denominator
	For the Three Months
	Ended March 31,
	2012	2011
Conversion of common units	—	4,396
Conversion of convertible preferred units	176	176
Conversion of convertible preferred shares	434	434

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Summary of Significant Accounting Policies (Policies)

3 Months Ended

Mar. 31, 2012

Summary of Significant Accounting Policies

Basis of Presentation

Basis of Presentation

The consolidated financial statements include the accounts of COPT, the Operating Partnership, their subsidiaries and other entities in which we have a majority voting interest and control.  We also consolidate certain entities when control of such entities can be achieved through means other than voting rights (“variable interest entities” or “VIEs”) if we are deemed to be the primary beneficiary of such entities.  We eliminate all significant intercompany balances and transactions in consolidation.

We use the equity method of accounting when we own an interest in an entity and can exert significant influence over the entity’s operations but cannot control the entity’s operations.

We use the cost method of accounting when we own an interest in an entity and cannot exert significant influence over its operations.

These interim financial statements should be read together with the financial statements and notes thereto as of and for the year ended December 31, 2011 included in our 2011 Annual Report on Form 10-K.  The unaudited consolidated financial statements include all adjustments that are necessary, in the opinion of management, to fairly present our financial position and results of operations.  All adjustments are of a normal recurring nature except for the out-of-period adjustment described below.  The consolidated financial statements have been prepared using the accounting policies described in our 2011 Annual Report on Form 10-K.

During the second quarter of 2012, we identified an error in the consolidated financial statements for the year ended December 31, 2011 and the quarter ended March, 31, 2012.  The error was attributable to the misapplication of accounting guidance related to the recognition of a deferred tax asset resulting from an impairment of assets in the fourth quarter of 2011 that failed to consider a partial reversal of that asset that would result from a cancellation of related inter-company debt in the first quarter of 2012.  The effect of this error was an overstatement of our income tax benefit and an understatement of our net loss for the year ended December 31, 2011 of $4.0 million ($0.05 per share).  During the first quarter of 2012, we identified an error that impacted the above referenced periods.  The error was an over-accrual of incentive compensation cost.  The effect of this error was an overstatement of general and administrative expenses and an overstatement of net loss for the year ended December 31, 2011 of $0.7 million ($0.01 per share). The net impact of these errors was an understatement of our net loss for the year ended December 31, 2011 of $3.3 million ($0.04 per share).  We have determined that the errors were not material in 2011 and are not material to our expected annual results for the year ending December 31, 2012.  Accordingly, this cumulative change is reported as an out-of-period adjustment in the three months ended March 31, 2012 as follows: a reduction in net income of $3.3 million ($0.04 per share); an increase in income tax expense of $4.0 million ($0.05 per share); and a decrease in general and administrative expenses of approximately $0.7 million ($0.01 per share) on our consolidated statement of operations.

Reclassifications

We reclassified certain amounts from prior periods to conform to the current period presentation of our consolidated financial statements with no effect on previously reported net income or equity.  Included among these reclassifications is a retrospective change in the presentation of costs expensed in connection with properties not in operations; these costs are included in the line on our consolidated statements of operations entitled “business development expenses and land carry costs,” after having been included in property operating expenses in our 2011 Annual Report on Form 10-K.

Impairments

We assess each of our operating properties for impairment quarterly using cash flow projections and estimated fair values that we derive for each of the properties.  We update the leasing and other assumptions used in these projections regularly, paying particular attention to properties that have experienced chronic vacancy or face significant market challenges.  We review our plans and intentions for our development projects and land parcels quarterly.  Each quarter, we also review the reasonableness of changes in our estimated operating property fair values from amounts estimated in the prior quarter.  If events or changes in circumstances indicate that the carrying values of certain operating properties, properties in development or land held for future development may be impaired, we perform a recovery analysis for such properties.  For long-lived assets to be held and used, we analyze recoverability based on the estimated undiscounted future cash flows expected to be generated from the operations and eventual disposition of the assets over, in most cases, a ten-year holding period.  If we believe there is a significant possibility that we might dispose of the assets earlier, we analyze recoverability using a probability weighted analysis of the estimated undiscounted future cash flows expected to be generated from the operations and eventual disposition of the assets over the various possible holding periods.  If the recovery analysis indicates that the carrying value of a tested property is not recoverable from estimated future cash flows, it is written down to its estimated fair value and an impairment loss is recognized.  If and when our plans change, we revise our recoverability analyses to use the cash flows expected from the operations and eventual disposition of each asset using holding periods that are consistent with our revised plans.

Property fair values are determined based on contract prices, indicative bids, discounted cash flow analyses or yield analyses. The estimated cash flows used are based on our plans for the property and our views of market and economic conditions. The estimates consider items such as current and future rental rates, occupancies for the tested property and comparable properties, estimated operating and capital expenditures and recent sales data for comparable properties; most of these items are influenced by market data obtained from third party sources such as CoStar Group and real estate leasing and brokerage firms and our direct experience with the properties and their markets.

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Consolidated Statements of Equity (Parenthetical)	3 Months Ended
	Mar. 31, 2012	Mar. 31, 2011
Consolidated Statements of Equity
Balance (in shares)	72,011,324	66,931,582
Conversion of common units to common shares	34,550	16,725
Exercise of share options	5,667	24,667
Restricted common share redemptions	97,094	104,592
Balance (in shares)	72,037,627	67,103,918

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Consolidated Balance Sheets (Parenthetical) (USD $) In Thousands, except Share data, unless otherwise specified	Mar. 31, 2012	Dec. 31, 2011
Consolidated Balance Sheets
Accounts receivable, allowance for doubtful accounts (in dollars)	$ 3,796	$ 3,546
Preferred Shares of beneficial interest, aggregate liquidation preference (in dollars)	$ 216,333	$ 216,333
Preferred Shares of beneficial interest, par value (in dollars per share)	$ 0.01	$ 0.01
Preferred Shares of beneficial interest, shares authorized	15,000,000	15,000,000
Preferred Shares of beneficial interest, shares issued	8,121,667	8,121,667
Preferred Shares of beneficial interest, shares outstanding	8,121,667	8,121,667
Common Shares of beneficial interest, par value (in dollars per share)	$ 0.01	$ 0.01
Common Shares of beneficial interest, shares authorized	125,000,000	125,000,000
Common Shares of beneficial interest, shares issued	72,037,627	72,011,324
Common Shares of beneficial interest, shares outstanding	72,037,627	72,011,324

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Shareholders' Equity

3 Months Ended

Mar. 31, 2012

Shareholders' Equity

Shareholders' Equity

9.Shareholders’ Equity

During the three months ended March 31, 2012, holders of 34,550 common units in our Operating Partnership converted their units into common shares on the basis of one common share for each common unit.

We declared dividends per common share of $0.275 in the three months ended March 31, 2012 and $0.4125 in the three months ended March 31, 2011.

See Note 11 for disclosure of common share activity pertaining to our share-based compensation plans.

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Document and Entity Information	3 Months Ended
	Mar. 31, 2012	Apr. 18, 2012
Document and Entity Information
Entity Registrant Name	CORPORATE OFFICE PROPERTIES TRUST
Entity Central Index Key	0000860546
Document Type	10-Q
Document Period End Date	Mar. 31, 2012
Amendment Flag	true
Amendment Description	This amendment to the Quarterly Report on Form 10-Q/A ("Amendment No. 1") is being filed in order to include disclosure regarding previously undisclosed out-of-period adjustments to the consolidated financial statements that were included in Part I, Items 1 And 2 of the original Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2012 previously filed on April 27, 2012 (the "Original Filing"). During the second quarter 2012, we identified an error in the consolidated financial statements for the year ended December 31, 2011 and the quarter ended March 31, 2012. The error was attributable to the misapplication of accounting guidance related to the recognition of a deferred tax asset resulting from an impairment of assets in the fourth quarter of 2011 that failed to consider a partial reversal of that asset that would result from a cancellation of related inter-company debt in the first quarter of 2012. During the first quarter of 2012, we identified an error that impacted the above referenced periods. The error was an over-accrual of incentive compensation cost. We have determined that the errors were not material in 2011 and are not material to our expected annual results for the year ending December 31, 2012. Accordingly, the cumulative change is reported as an out-of-period adjustment in the three months ended March 31, 2012 on our consolidated statement of operations. This Amendment No. 1 amends and restates only Part Items 1 And 2 of the Original Filing soley to reflect the restatement of consolidated financial statements and to add disclosure to Part I, Item 2 relating to such revision. The remaining items contained within this Amendment No. 1 consist of all other items originally contained in the Original Filing. These remaining items are not amended hereby, but are included for the convenience of the reader. Except for the foregoing amended information, This Amendment No. 1 continues to describe conditions as of the date of the Original Filing, and we have not updated the disclosures contained herein to reflect events that occurred at a later date. We are also updating the signature page and certifications of our Chief Executive and Financial Officers contained in Exhibits 31.1, 31.2, 32.1 and 32.2.
Current Fiscal Year End Date	--12-31
Entity Current Reporting Status	Yes
Entity Filer Category	Large Accelerated Filer
Entity Common Stock, Shares Outstanding		72,040,863
Document Fiscal Year Focus	2012
Document Fiscal Period Focus	Q1

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Information by Business Segment

3 Months Ended

Mar. 31, 2012

Information by Business Segment

Information by Business Segment

10.Information by Business Segment

We have ten reportable operating office property segments (comprised of: the Baltimore/Washington Corridor; Northern Virginia; San Antonio; Washington, DC — Capitol Riverfront; St. Mary’s and King George Counties; Greater Baltimore; Suburban Maryland; Colorado Springs; Greater Philadelphia; and other). We also have an operating wholesale data center segment.  On January 1, 2012, we revised our reportable segments to include only operating properties.  Accordingly, we revised net operating income from real estate operations (“NOI from real estate operations”) to exclude operating expenses not related to operating properties, revised our definition of segment assets to include only long-lived assets associated with operating properties and revised our definition of additions to long-lived assets to include only additions to existing operating properties (excluding acquisitions and transfers from non-operating properties).  Financial information for prior periods has been presented in conformity with this revision.

The table below reports segment financial information for our reportable segments (in thousands).  We measure the performance of our segments through the measure we define as NOI from real estate operations, which is derived by subtracting property operating expenses from revenues from real estate operations.

	Operating Office Property Segments
	Baltimore/ Washington Corridor		Northern Virginia			San Antonio		Washington, DC - Capitol Riverfront			St. Mary’s &  King George Counties		Greater Baltimore		Suburban Maryland		Colorado Springs		Greater Philadelphia			Other			Operating Wholesale Data Center		Total
Three Months Ended March 31, 2012
Revenues from real estate operations	$	56,250	$	18,560		$	7,608	$	3,894		$	4,212	$	15,372	$	5,749	$	6,453	$	2,172		$	3,618		$	1,416	$	125,304
Property operating expenses	20,151		7,400			3,817		1,910			1,258		5,890		2,521		2,385		615			1,233			1,207		48,387
NOI from real estate operations	$	36,099	$	11,160		$	3,791	$	1,984		$	2,954	$	9,482	$	3,228	$	4,068	$	1,557		$	2,385		$	209	$	76,917
Additions to long-lived assets	$	1,864	$	1,661		$	—	$	(729	)	$	167	$	719	$	771	$	99	$	—		$	26		$	—	$	4,578
Transfers from non-operating properties	$	25,594	$	—		$	362	$	—		$	556	$	365	$	335	$	316	$	7,303		$	—		$	—	$	34,831
Segment assets at March 31, 2012	$	1,231,949	$	480,457		$	120,024	$	108,649		$	99,946	$	370,754	$	147,197	$	181,241	$	109,432		$	114,108		$	43,390	$	3,007,147
Three Months Ended March 31, 2011
Revenues from real estate operations	$	53,252	$	18,274		$	7,663	$	4,590		$	3,534	$	17,612	$	5,609	$	5,920	$	1,939		$	2,838		$	1,210	$	122,441
Property operating expenses	21,058		7,590			3,813		1,627			1,014		8,452		2,661		2,343		418			467			709		50,152
NOI from real estate operations	$	32,194	$	10,684		$	3,850	$	2,963		$	2,520	$	9,160	$	2,948	$	3,577	$	1,521		$	2,371		$	501	$	72,289
Additions to long-lived assets	$	6,405	$	2,033		$	—	$	156		$	380	$	8,088	$	1,052	$	736	$	(4	)	$	(646	)	$	—	$	18,200
Transfers from non-operating properties	$	19,883	$	(7	)	$	600	$	—		$	—	$	4,247	$	354	$	—	$	(2,474	)	$	—		$	6,654	$	29,257
Segment assets at March 31, 2011	$	1,199,244	$	488,599		$	115,221	$	117,758		$	87,690	$	479,474	$	145,913	$	214,111	$	96,372		$	83,247		$	30,714	$	3,058,343

The following table reconciles our segment revenues to total revenues as reported on our consolidated statements of operations (in thousands):

	For the Three Months
	Ended March 31,
	2012			2011
Segment revenues from real estate operations	$	125,304		$	122,441
Construction contract and other service revenues	21,534			21,028
Less: Revenues from discontinued operations (Note 13)	(3,365		)	(5,980		)
Total revenues	$	143,473		$	137,489

The following table reconciles our segment property operating expenses to property operating expenses as reported on our consolidated statements of operations (in thousands):

	For the Three Months
	Ended March 31,
	2012			2011
Segment property operating expenses	$	48,387		$	50,152
Less: Property operating expenses from discontinued operations (Note 13)	(1,185		)	(3,091		)
Total property operating expenses	$	47,202		$	47,061

As previously discussed, we provide real estate services such as property management and construction and development services primarily for our properties but also for third parties.  The primary manner in which we evaluate the operating performance of our service activities is through a measure we define as net operating income from service operations (“NOI from service operations”), which is based on the net of revenues and expenses from these activities.  Construction contract and other service revenues and expenses consist primarily of subcontracted costs that are reimbursed to us by the customer along with a management fee. The operating margins from these activities are small relative to the revenue.  We believe NOI from service operations is a useful measure in assessing both our level of activity and our profitability in conducting such operations. The table below sets forth the computation of our NOI from service operations (in thousands):

	For the Three Months
	Ended March 31,
	2012			2011
Construction contract and other service revenues	$	21,534		$	21,028
Construction contract and other service expenses	(20,607		)	(20,618		)
NOI from service operations	$	927		$	410

The following table reconciles our NOI from real estate operations for reportable segments and NOI from service operations to income (loss) from continuing operations as reported on our consolidated statements of operations (in thousands):

	For the Three Months
	Ended March 31,
	2012			2011
NOI from real estate operations	$	76,917		$	72,289
NOI from service operations	927			410
Interest and other income	1,217			1,168
Equity in (loss) income of unconsolidated entities	(89		)	30
Income tax (expense) benefit	(4,173		)	544
Other adjustments:
Depreciation and other amortization associated with real estate operations	(31,066		)	(30,043		)
Impairment losses	(5,126		)	(27,742		)
General and administrative expenses	(7,017		)	(6,777		)
Business development expenses and land carry costs	(1,594		)	(1,241		)
Interest expense on continuing operations	(25,224		)	(26,115		)
NOI from discontinued operations	(2,180		)	(2,889		)
Income (loss) from continuing operations	$	2,592		$	(20,366	)

The following table reconciles our segment assets to total assets (in thousands):

	March 31,		March 31,
	2012		2011
Segment assets	$	3,007,147	$	3,058,343
Non-operating property assets	638,856		652,223
Other assets	151,365		155,243
Total assets	$	3,797,368	$	3,865,809

The accounting policies of the segments are the same as those used to prepare our consolidated financial statements, except that discontinued operations are not presented separately for segment purposes.  In the segment reporting presented above, we did not allocate interest expense, depreciation and amortization and impairment losses to our real estate segments since they are not included in the measure of segment profit reviewed by management.  We also did not allocate general and administrative expenses, business development expenses and land carry costs, interest and other income, equity in (loss) income of unconsolidated entities, income taxes and noncontrolling interests because these items represent general corporate or non-operating property items not attributable to segments.

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Consolidated Statements of Operations (USD $) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended
	Mar. 31, 2012		Mar. 31, 2011
Revenues
Rental revenue	$ 99,144		$ 94,249
Tenant recoveries and other real estate operations revenue	22,795		22,212
Construction contract and other service revenues	21,534		21,028
Total revenues	143,473		137,489
Expenses
Property operating expenses	47,202		47,061
Depreciation and amortization associated with real estate operations	31,066		30,043
Construction contract and other service expenses	20,607		20,618
Impairment losses	5,126		27,742
General and administrative expenses	7,017		6,777
Business development expenses and land carry costs	1,594		1,241
Total operating expenses	112,612		133,482
Operating income	30,861		4,007
Interest expense	(25,224)		(26,115)
Interest and other income	1,217		1,168
Income (loss) from continuing operations before equity in (loss) income of unconsolidated entities and income taxes	6,854		(20,940)
Equity in (loss) income of unconsolidated entities	(89)		30
Income tax (expense) benefit	(4,173)		544
Income (loss) from continuing operations	2,592		(20,366)
Discontinued operations	4,385		(901)
Income (loss) before gain on sales of real estate	6,977		(21,267)
Gain on sales of real estate, net of income taxes			2,701
Net income (loss)	6,977		(18,566)
Net (income) loss attributable to noncontrolling interests:
Common units in the Operating Partnership	(159)		1,479
Preferred units in the Operating Partnership	(165)		(165)
Other consolidated entities	24		(538)
Net income (loss) attributable to Corporate Office Properties Trust	6,677		(17,790)
Preferred share dividends	(4,025)		(4,025)
Net income (loss) attributable to Corporate Office Properties Trust common shareholders	2,652		(21,815)
Net income (loss) attributable to Corporate Office Properties Trust:
Income (loss) from continuing operations	2,539		(16,946)
Discontinued operations, net	4,138		(844)
Net income (loss) attributable to Corporate Office Properties Trust	$ 6,677		$ (17,790)
Basic earnings per common share
Loss from continuing operations (in dollars per share)	$ (0.02)	[1]	$ (0.32)	[1]
Discontinued operations (in dollars per share)	$ 0.06	[1]	$ (0.01)	[1]
Net income (loss) attributable to COPT common shareholders (in dollars per share)	$ 0.04	[1]	$ (0.33)	[1]
Diluted earnings per common share
Loss from continuing operations (in dollars per share)	$ (0.02)	[1]	$ (0.32)	[1]
Discontinued operations (in dollars per share)	$ 0.06	[1]	$ (0.01)	[1]
Net income (loss) attributable to COPT common shareholders (in dollars per share)	$ 0.04	[1]	$ (0.33)	[1]

[1] Basic and diluted earnings per common share are calculated based on amounts attributable to common shareholders of Corporate Office Properties Trust.

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Properties, net

3 Months Ended

Mar. 31, 2012

Properties, net

Properties, net

4.Properties, net

Operating properties, net consisted of the following (in thousands):

	March 31,			December 31,
	2012			2011
Land	$	471,995		$	472,483
Buildings and improvements	2,802,570			2,801,252
Less: accumulated depreciation	(570,242		)	(559,679		)
Operating properties, net	$	2,704,323		$	2,714,056

Projects we had in development or held for future development consisted of the following (in thousands):

	March 31,		December 31,
	2012		2011
Land	$	225,085	$	229,833
Construction in progress, excluding land	408,883		409,086
Projects in development or held for future development	$	633,968	$	638,919

Dispositions and Impairments

We sold the following operating properties during the three months ended March 31, 2012 (dollars in thousands):

			Number	Total
		Date of	of	Rentable			Gain on
Project Name	Location	Sale	Buildings	Square Feet	Sale Price		Sale
White Marsh Portfolio (1)	White Marsh, Maryland	1/30/2012	5	163,000	$	19,100	$	2,445
1101 Sentry Gateway	San Antonio, Texas	1/31/2012	1	95,000	13,500		1,750
222 and 224 Schilling Circle	Hunt Valley, Maryland	2/10/2012	2	56,000	4,400		202
			8	314,000	$	37,000	$	4,397

(1)Includes three properties comprising the White Marsh Professional Center, 8615 Ridgely’s Choice and 8114 Sandpiper Circle.

We also sold non-operating properties during the three months ended March 31, 2012 for aggregate sale prices totaling $25.7 million; in addition to the gain on sales reflected above, we also recognized impairment losses on certain of these sales that are disclosed below.

As discussed in our 2011 Annual Report on Form 10-K, we implemented a plan in 2011 to dispose of office properties and land that are no longer closely aligned with our strategy (the “Strategic Reallocation Plan”).  During the three months ended March 31, 2012, we recognized aggregate net impairment losses in connection with the Strategic Reallocation Plan of $6.6 million (including $1.5 million classified as discontinued operations and $1.1 million in exit costs).  Approximately $5.1 million of these losses related to our expected disposition of an additional property. The expected cash flows from the resulting shortened holding period for this property are not sufficient to recover its carrying value.

2012 Construction Activities

As of March 31, 2012, we had construction underway on six office properties that we estimate will total 789,000 square feet upon completion, including three in the Baltimore/Washington Corridor, one in Greater Baltimore, one in Northern Virginia and one in Huntsville, Alabama, and redevelopment underway on one office property in Greater Philadelphia that we estimate will total 113,000 square feet upon completion.

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Fair Value Measurements

3 Months Ended

Mar. 31, 2012

Fair Value Measurements

Fair Value Measurements

3.Fair Value Measurements

For a description on how we estimate fair value, see Note 3 to the consolidated financial statements in our 2011 Annual Report on Form 10-K.

Recurring Fair Value Measurements

The table below sets forth our financial assets and liabilities that are accounted for at fair value on a recurring basis as of March 31, 2012 and the hierarchy level of inputs used in measuring their respective fair values under applicable accounting standards (in thousands):

	Quoted Prices in
	Active Markets for		Significant Other		Significant
	Identical Assets		Observable Inputs		Unobservable Inputs
Description	(Level 1)		(Level 2)		(Level 3)		Total
Assets:
Marketable securities in deferred compensation plan (1)
Mutual funds	$	6,121	$	—	$	—	$	6,121
Common stocks	414		—		—		414
Other	238		—		—		238
Common stock (1)	454		—		—		454
Warrants to purchase common shares in KEYW (2)	—		133		—		133
Assets	$	7,227	$	133	$	—	$	7,360
Liabilities:
Deferred compensation plan liability (3)	$	6,773	$	—	$	—	$	6,773
Interest rate derivatives	—		2,673		—		2,673
Liabilities	$	6,773	$	2,673	$	—	$	9,446

(1)Included in the line entitled “restricted cash and marketable securities” on our consolidated balance sheet.

(2)Included in the line entitled “prepaid expenses and other assets” on our consolidated balance sheet.

(3)Included in the line entitled “other liabilities” on our consolidated balance sheet.

At December 31, 2011, we owned 1.9 million shares, or approximately 7%, of the common stock of The KEYW Holding Corporation (“KEYW”).  During the three months ended March 31, 2012, we completed the sale of all of these shares for $14.0 million.  At March 31, 2012 and December 31, 2011, we owned warrants to purchase 50,000 additional shares of KEYW common stock at an exercise price of $9.25 per share.

The carrying values of cash and cash equivalents, restricted cash, accounts receivable, other assets (excluding mortgage loans receivable) and accounts payable and accrued expenses are reasonable estimates of their fair values because of the short maturities of these instruments.  We estimated the fair values of our mortgage loans receivable as discussed in Note 6 based on the discounted estimated future cash flows of the loans (categorized within Level 3 of the fair value hierarchy); the discount rates used approximate current market rates for loans with similar maturities and credit quality, and the estimated cash payments include scheduled principal and interest payments.  For our disclosure of debt fair values in Note 7 to the consolidated financial statements, we estimated the fair value of our exchangeable senior notes based on quoted market prices for publicly-traded debt (categorized within Level 2 of the fair value hierarchy) and estimated the fair value of our other debt based on the discounted estimated future cash payments to be made on such debt (categorized within Level 3 of the fair value hierarchy); the discount rates used approximate current market rates for loans, or groups of loans, with similar maturities and credit quality, and the estimated future payments include scheduled principal and interest payments.  Fair value estimates are made at a specific point in time, are subjective in nature and involve uncertainties and matters of significant judgment.  Settlement of such fair value amounts may not be possible and may not be a prudent management decision.

For additional fair value information, please refer to Note 6 for mortgage loans receivable, Note 7 for debt and Note 8 for interest rate derivatives.

Nonrecurring Fair Value Measurements

We assess each of our operating properties for impairment quarterly using cash flow projections and estimated fair values that we derive for each of the properties.  We update the leasing and other assumptions used in these projections regularly, paying particular attention to properties that have experienced chronic vacancy or face significant market challenges.  We review our plans and intentions for our development projects and land parcels quarterly.  Each quarter, we also review the reasonableness of changes in our estimated operating property fair values from amounts estimated in the prior quarter.  If events or changes in circumstances indicate that the carrying values of certain operating properties, properties in development or land held for future development may be impaired, we perform a recovery analysis for such properties.  For long-lived assets to be held and used, we analyze recoverability based on the estimated undiscounted future cash flows expected to be generated from the operations and eventual disposition of the assets over, in most cases, a ten-year holding period.  If we believe there is a significant possibility that we might dispose of the assets earlier, we analyze recoverability using a probability weighted analysis of the estimated undiscounted future cash flows expected to be generated from the operations and eventual disposition of the assets over the various possible holding periods.  If the recovery analysis indicates that the carrying value of a tested property is not recoverable from estimated future cash flows, it is written down to its estimated fair value and an impairment loss is recognized.  If and when our plans change, we revise our recoverability analyses to use the cash flows expected from the operations and eventual disposition of each asset using holding periods that are consistent with our revised plans.

Property fair values are determined based on contract prices, indicative bids, discounted cash flow analyses or yield analyses. The estimated cash flows used are based on our plans for the property and our views of market and economic conditions. The estimates consider items such as current and future rental rates, occupancies for the tested property and comparable properties, estimated operating and capital expenditures and recent sales data for comparable properties; most of these items are influenced by market data obtained from third party sources such as CoStar Group and real estate leasing and brokerage firms and our direct experience with the properties and their markets.

We recognized impairment losses on certain properties and other assets associated with such properties during the three months ended March 31, 2012.  Accordingly, certain properties and related assets were adjusted to fair value.  The table below sets forth the fair value hierarchy of the valuation techniques used by us in determining such fair values (dollars in thousands):

	Quoted Prices in
	Active Markets for		Significant Other		Significant				Impairment
	Identical Assets		Observable Inputs		Unobservable Inputs				Losses
Description	(Level 1)		(Level 2)		(Level 3)		Total		Recognized
Assets (1):
Properties, net	$	—	$	—	$	92,176	$	92,176	$	5,479

(1) Reflects balance sheet classifications of assets at time of fair value measurement, excluding the effect of held for sale classifications.

The table below sets forth quantitative information about significant unobservable inputs used for the Level 3 fair value measurements reported above:

	Fair value				Range
	on measurement		Valuation	Unobservable	(Weighted
Description	date		Technique	Input	Average)
Properties on which impairment losses were recognized	$	92,176	Bid for properties indicative of value	Indicative bid (1)	(1)
			Contract of sale	Contract price (1)	(1)
			Discounted cash flow	Discount rate	11.0% (2)
				Terminal capitalization rate	9.0% (2)
				Market rent growth rate	3.0% (2)
				Expense growth rate	3.0% (2)
			Yield Analysis	Yield	12% (2)
				Market rent rate	8.5 (2)
				Leasing costs	$20.00 per square foot (2)

(1) These fair value measurements were developed from third party sources, subject to our corroboration for reasonableness.

(2) Only one level applied to this unobservable input.

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Commitments and Contingencies

3 Months Ended

Mar. 31, 2012

Commitments and Contingencies

Commitments and Contingencies

15.Commitments and Contingencies

Litigation

In the normal course of business, we are involved in legal actions arising from our ownership and administration of properties.  We establish reserves for specific legal proceedings when we determine that the likelihood of an unfavorable outcome is probable and the amount of loss can be reasonably estimated.  Management does not anticipate that any liabilities that may result from such proceedings will have a materially adverse effect on our financial position, operations or liquidity.  Our assessment of the potential outcomes of these matters involves significant judgment and is subject to change based on future developments.

Environmental

We are subject to various Federal, state and local environmental regulations related to our property ownership and operation.  We have performed environmental assessments of our properties, the results of which have not revealed any environmental liability that we believe would have a materially adverse effect on our financial position, operations or liquidity.

Joint Ventures

In connection with our 2005 contribution of properties to an unconsolidated partnership in which we hold a partnership interest, we entered into standard nonrecourse loan guarantees (environmental indemnifications and guarantees against fraud and misrepresentation, and springing guarantees of partnership debt in the event of a voluntary bankruptcy of the partnership).  The maximum amount we could be required to pay under the guarantees is approximately $65 million.  We are entitled to recover 20% of any amounts paid under the guarantees from an affiliate of our partner pursuant to an indemnity agreement so long as we continue to manage the properties.  In the event that we no longer manage the properties, the percentage that we are entitled to recover is increased to 80%.  Management estimates that the aggregate fair value of the guarantees is not material and would not exceed the amounts included in distributions received in excess of investment in unconsolidated real estate joint venture reported on the consolidated balance sheets.

We are party to a contribution agreement that formed a joint venture relationship with a limited partnership to develop up to 1.8 million square feet of office space on 63 acres of land located in Hanover, Maryland.  As we and the joint venture partner agree to proceed with the construction of buildings in the future, our joint venture partner would contribute land into newly-formed entities and we would make cash capital contributions into such entities to fund development and construction activities for which financing is not obtained.  We owned a 50% interest in one such joint venture as of March 31, 2012.

We may be required to make our pro rata share of additional investments in our real estate joint ventures (generally based on our percentage ownership) in the event that additional funds are needed.  In the event that the other members of these joint ventures do not pay their share of investments when additional funds are needed, we may then deem it appropriate to make even larger investments in these joint ventures.

Tax Incremental Financing Obligation

In August 2010, Anne Arundel County, Maryland issued $30 million in tax incremental financing bonds to third-party investors in order to finance public improvements needed in connection with our project known as National Business Park North.  The real estate taxes on increases in assessed value of a development district encompassing National Business Park North are to be transferred to a special fund pledged to the repayment of the bonds.  We recognized a $4.4 million liability through March 31, 2012 representing the estimated fair value of our obligation to fund through a special tax any future shortfalls between debt service on the bonds and real estate taxes available to repay the bonds.

Environmental Indemnity Agreement

We agreed to provide certain environmental indemnifications in connection with a lease and subsequent sale of three New Jersey properties. The prior owner of the properties, a Fortune 100 company that is responsible for groundwater contamination at such properties, previously agreed to indemnify us for (1) direct losses incurred in connection with the contamination and (2) its failure to perform remediation activities required by the State of New Jersey, up to the point that the state declares the remediation to be complete.  Under the environmental indemnification agreement, we agreed to the following:

·to indemnify the tenant against losses covered under the prior owner’s indemnity agreement if the prior owner fails to indemnify the tenant for such losses.  This indemnification is capped at $5.0 million in perpetuity after the State of New Jersey declares the remediation to be complete;

·to indemnify the tenant for consequential damages (e.g., business interruption) at one of the buildings in perpetuity and another of the buildings for 15 years after the tenant’s acquisition of the property from us.  This indemnification is limited to $12.5 million; and

·to pay 50% of additional costs related to construction and environmental regulatory activities incurred by the tenant as a result of the indemnified environmental condition of the properties.  This indemnification is limited to $300,000 annually and $1.5 million in the aggregate.

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Share-Based Compensation

3 Months Ended

Mar. 31, 2012

Share-Based Compensation

Share-Based Compensation

11.Share-Based Compensation

Performance Share Units (“PSUs”)

On March 1, 2012, our Board of Trustees granted 54,070 PSUs with an aggregate grant date fair value of $1.8 million to executives.  The PSUs have a performance period beginning on January 1, 2012 and concluding on the earlier of December 31, 2014 or the date of: (1) termination by the Company without cause, death or disability of the executive or constructive discharge of the executive (collectively, “qualified termination”); or (2) a sale event.  The number of PSUs earned (“earned PSUs”) at the end of the performance period will be determined based on the percentile rank of the Company’s total shareholder return relative to a peer group of companies, as set forth in the following schedule:

Percentile Rank	Earned PSUs Payout %
75th or greater	200% of PSUs granted
50th	100% of PSUs granted
25th	50% of PSUs granted
Below 25th	0% of PSUs granted

If the percentile rank exceeds the 25th percentile and is between two of the percentile ranks set forth in the table above, then the percentage of the earned PSUs will be interpolated between the ranges set forth in the table above to reflect any performance between the listed percentiles.  At the end of the performance period, we, in settlement of the award, will issue a number of fully-vested common shares equal to the sum of:

·the number of earned PSUs in settlement of the award plan; plus

·the aggregate dividends that would have been paid with respect to the common shares issued in settlement of the earned PSUs through the date of settlement had such shares been issued on the grant date, divided by the share price on such settlement date, as defined under the terms of the agreement.

If a performance period ends due to a sale event or qualified termination, the number of earned PSUs is prorated based on the portion of the three-year performance period that has elapsed.  If employment is terminated by the employee or by the Company for cause, all PSUs are forfeited.  PSUs do not carry voting rights.

We computed a grant date fair value of $32.77 per PSU using a Monte Carlo model, which included assumptions of, among other things, the following: baseline common share value of $24.39; expected volatility for our common shares of 43.2%; and risk-free interest rate of 0.41%.  We are recognizing the grant date fair value in connection with these PSU awards over the performance period.

All PSUs granted on March 4, 2010 and outstanding at December 31, 2011 were held by Mr. Randall M. Griffin, our Chief Executive Officer, and were terminated upon his retirement on March 31, 2012.  Based on the Company’s total shareholder return relative its peer group of companies, there was no payout value in connection with the termination of the PSUs.

The PSUs granted to our executives on March 3, 2011, as described in our 2011 Annual Report on Form 10-K, were outstanding at March 31, 2012.

Restricted Shares

During the three months ended March 31, 2012, certain employees were granted a total of 87,449 restricted shares with an aggregate grant date fair value of $2.1 million (weighted average of $24.39 per share).  Restricted shares granted to employees vest based on increments and over periods of time set forth under the terms of the respective awards provided that the employees remain employed by us.  During the three months ended March 31, 2012, forfeiture restrictions lapsed on 251,985 previously issued common shares; these shares had a weighted average grant date fair value of $31.93 per share, and the aggregate intrinsic value of the shares on the vesting dates was $6.2 million.

Options

During the three months ended March 31, 2012, 5,667 options to purchase common shares (“options”) were exercised.  The weighted average exercise price of these options was $14.54 per share, and the aggregate intrinsic value of the options exercised was $56,000.

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Debt

3 Months Ended

Mar. 31, 2012

Debt

Debt

7.Debt

Our debt consisted of the following (dollars in thousands):

								Scheduled
	Maximum		Carrying Value at					Maturity
	Availability at		March 31,		December 31,		Stated Interest Rates	Dates at
	March 31, 2012		2012		2011		at March 31, 2012	March 31, 2012
Mortgage and Other Secured Loans:
Fixed rate mortgage loans (1)	N/A		$	1,049,204	$	1,052,421	5.20% - 7.87% (2)	2012-2034
Variable rate secured loans	N/A		39,027		39,213		LIBOR + 2.25% (3)	2015
Other construction loan facilities	$	123,802	50,594		40,336		LIBOR + 1.95% to 2.75% (4)	2012-2015
Total mortgage and other secured loans			1,138,825		1,131,970
Revolving Credit Facility	1,000,000		396,000		662,000		LIBOR + 1.75% to 2.50% (5)	September 1, 2014
Term Loan Facilities (6)	650,000		650,000		400,000		LIBOR + 1.65% to 2.40% (7)	2015-2017
Unsecured notes payable	N/A		5,078		5,050		0% (8)	2015-2026
4.25% Exchangeable Senior Notes	N/A		228,175		227,283		4.25%	April 2030(9)
Total debt			$	2,418,078	$	2,426,303

(1)Several of the fixed rate mortgages carry interest rates that were above or below market rates upon assumption and therefore were recorded at their fair value based on applicable effective interest rates.  The carrying values of these loans reflect net unamortized premiums totaling $2.2 million at March 31, 2012 and $2.4 million at December 31, 2011.

(2)The weighted average interest rate on these loans was 6.01% at March 31, 2012.

(3)The interest rate on the loan outstanding was 2.49% at March 31, 2012.

(4)The weighted average interest rate on these loans was 2.73% at March 31, 2012.

(5)The weighted average interest rate on the Revolving Credit Facility was 2.24% at March 31, 2012.

(6)As described further below, we entered into a new facility effective on February 14, 2012.

(7)The weighted average interest rate on these loans was 2.15% at March 31, 2012.

(8)These notes may carry interest rates that were below market rates upon assumption and therefore were recorded at their fair value based on applicable effective interest rates.  The carrying value of these notes reflects an unamortized discount totaling $1.7 million at March 31, 2012 and $1.8 million at December 31, 2011.

(9)As described further in our 2011 Annual Report on Form 10-K, these notes have an exchange settlement feature that provides that the notes may, under certain circumstances, be exchangeable for cash and, at the Operating Partnership’s discretion, our common shares at an exchange rate (subject to adjustment) of 20.8513 shares per one thousand dollar principal amount of the notes (exchange rate is as of March 31, 2012 and is equivalent to an exchange price of $47.96 per common share).  The carrying value of these notes included a principal amount of $240.0 million and an unamortized discount totaling $11.8 million at March 31, 2012 and $12.7 million at December 31, 2011.  The effective interest rate under the notes, including amortization of the issuance costs, was 6.05%.  Because the closing price of our common shares at March 31, 2012 and December 31, 2011 was less than the exchange price per common share applicable to these notes, the if-converted value of the notes did not exceed the principal amount.  The table below sets forth interest expense recognized on these notes before deductions for amounts capitalized (in thousands):

	For the Three Months
	Ended March 31,
	2012		2011
Interest expense at stated interest rate	$	2,550	$	2,550
Interest expense associated with amortization of discount	892		840
Total	$	3,442	$	3,390

Effective February 14, 2012, we entered into an unsecured term loan agreement (the “Term Loan Agreement”) with a group of lenders for which J.P. Morgan Securities LLC and KeyBank Capital Markets acted as joint lead arrangers and joint book runners, KeyBank National Association acted as administrative agent and JPMorgan Chase Bank, N.A. acted as syndication agent.  We borrowed $250.0 million under the Term Loan Agreement.  The term loan matures on February 14, 2017.  The variable interest rate on the loan is based on the LIBOR rate (customarily the 30-day rate) plus 1.65% to 2.40%, as determined by our leverage levels.

At March 31, 2012 and December 31, 2011, we were in default on a $15 million nonrecourse mortgage loan secured by a property with an estimated fair value of approximately $11 million that is included in our Strategic Reallocation Plan.

We capitalized interest costs of $3.8 million in the three months ended March 31, 2012 and $4.3 million in the three months ended March 31, 2011.

The following table sets forth information pertaining to the fair value of our debt (in thousands):

	March 31, 2012				December 31, 2011
	Carrying		Estimated		Carrying		Estimated
	Amount		Fair Value		Amount		Fair Value
Fixed-rate debt
4.25% Exchangeable Senior Notes	$	228,175	$	239,331	$	227,283	$	238,077
Other fixed-rate debt	1,054,282		1,049,110		1,057,471		1,054,424
Variable-rate debt	1,135,621		1,135,847		1,141,549		1,139,856
	$	2,418,078	$	2,424,288	$	2,426,303	$	2,432,357

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Discontinued Operations and Assets Held for Sale (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended			12 Months Ended	1 Months Ended
	Mar. 31, 2012 property	Mar. 31, 2011	Dec. 31, 2011	Dec. 31, 2011 Rutherford Business Center Portfolio property	Sep. 30, 2011 Towson Portfolio property	Jan. 30, 2012 White Marsh Professional Center property	Mar. 31, 2012 Assets held for sale	Dec. 31, 2011 Assets held for sale
Discontinued Operations and Assets Held for Sale
Revenue from real estate operations	$ 3,365	$ 5,980
Property operating expenses	(1,185)	(3,091)
Depreciation and amortization	(21)	(2,977)
Impairment losses	(1,461)
Interest expense	(451)	(813)
Gain on sales of real estate	4,138
Discontinued operations	4,385	(901)
Properties
Properties, net	3,338,291		3,352,975				74,758	108,356
Deferred rent receivable	89,337		86,856				2,371	2,800
Intangible assets on real estate acquisitions, net	83,940		89,120				930	1,737
Deferred leasing costs, net							3,293	3,723
Assets held for sale, net	$ 81,352		$ 116,616				$ 81,352	$ 116,616
Number of properties sold				13	4
Number of properties comprising White Marsh Professional Center						3
Number of operating properties classified as held for sale	4

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Real Estate Joint Ventures

3 Months Ended

Mar. 31, 2012

Real Estate Joint Ventures

Real Estate Joint Ventures

5.Real Estate Joint Ventures

During the three months ended March 31, 2012, we had an investment in one unconsolidated real estate joint venture accounted for using the equity method of accounting.  Information pertaining to this joint venture investment is set forth below (dollars in thousands):

										Maximum
Investment Balance at (1)						Date			Nature of	Exposure
March 31, 2012			December 31, 2011			Acquired	Ownership		Activity	to Loss (2)
$	(6,178	)	$	(6,071	)	9/29/2005	20	%	Operates 16 Buildings	$	—

(1)The carrying amount of our investment in this joint venture was lower than our share of the equity in the joint venture by $5.2 million at March 31, 2012 and December 31, 2011 due to our deferral of gain on the contribution by us of real estate into the joint venture upon its formation.  A difference will continue to exist to the extent the nature of our continuing involvement in the joint venture remains the same.

(2)Derived from the sum of our investment balance and maximum additional unilateral capital contributions or loans required from us.  Not reported above are additional amounts that we and our partner are required to fund when needed by this joint venture; these funding requirements are proportional to our respective ownership percentages.  Also not reported above are additional unilateral contributions or loans from us, the amounts of which are uncertain, that we would be required to make if certain contingent events occur (see Note 15).

The following table sets forth condensed balance sheets for this unconsolidated real estate joint venture (in thousands):

	March 31,			December 31,
	2012			2011
Properties, net	$	59,333		$	59,792
Other assets	4,403			3,529
Total assets	$	63,736		$	63,321
Liabilities (primarily debt)	$	68,663		$	67,710
Owners’ equity	(4,927		)	(4,389		)
Total liabilities and owners’ equity	$	63,736		$	63,321

The following table sets forth condensed statements of operations for this unconsolidated real estate joint venture (in thousands):

	For the Three Months
	Ended March 31,
	2012			2011
Revenues	$	1,894		$	1,924
Property operating expenses	(737		)	(986		)
Interest expense	(1,125		)	(1,011		)
Depreciation and amortization expense	(570		)	(608		)
Net loss	$	(538	)	$	(681	)

The table below sets forth information pertaining to our investments in consolidated real estate joint ventures at March 31, 2012 (dollars in thousands):

		Ownership			March 31, 2012 (1)
	Date	% at		Nature of	Total		Pledged		Total
	Acquired	3/31/2012		Activity	Assets		Assets		Liabilities
M Square Associates, LLC	6/26/2007	50	%	Operating two buildings and developing others (2)	$	60,260	$	47,845	$	44,117
LW Redstone Company, LLC	3/23/2010	85	%	Developing business park (3)	55,255		15,858		11,373
Arundel Preserve #5, LLC	7/2/2007	50	%	Operating one building (4)	32,477		31,619		18,079
COPT-FD Indian Head, LLC	10/23/2006	75	%	Developing land parcel (5)	6,544		—		—
MOR Forbes 2 LLC	12/24/2002	50	%	Operating one building (6)	3,836		—		40
					$	158,372	$	95,322	$	73,609

(1) Excludes amounts eliminated in consolidation.

(2) This joint venture’s properties are in College Park, Maryland (in the Suburban Maryland region).

(3) This joint venture’s property is in Huntsville, Alabama.

(4) This joint venture’s property is in Hanover, Maryland (in the Baltimore/Washington Corridor).

(5) This joint venture’s property is in Charles County, Maryland.

(6) This joint venture’s property is in Lanham, Maryland (in the Suburban Maryland region).

Our commitments and contingencies pertaining to our real estate joint ventures are disclosed in Note 15.

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Prepaid Expenses and Other Assets

3 Months Ended

Mar. 31, 2012

Prepaid Expenses and Other Assets

Prepaid Expenses and Other Assets

6.Prepaid Expenses and Other Assets

Prepaid expenses and other assets consisted of the following (in thousands):

	March 31,		December 31,
	2012		2011
Mortgage and other investing receivables	$	32,739	$	27,998
Prepaid expenses	14,196		20,035
Proceeds from sale of KEYW stock receivable (1)	11,934		5,057
Construction contract costs incurred in excess of billings	10,592		2,094
Furniture, fixtures and equipment, net	9,607		10,177
Deferred tax asset	6,746		10,892
Lease incentives	5,360		5,233
Other assets	5,358		6,133
Prepaid expenses and other assets	$	96,532	$	87,619

(1)Represents unsettled proceeds from sales of KEYW common stock that settled shortly following the respective reporting dates.

Mortgage and Other Investing Receivables

Mortgage and other investing receivables consisted of the following (in thousands):

	March 31,		December 31,
	2012		2011
Notes receivable from City of Huntsville	$	22,526	$	17,741
Mortgage loans receivable	10,213		10,257
	$	32,739	$	27,998

Our notes receivable from the City of Huntsville funded infrastructure costs in connection with our LW Redstone Company, LLC joint venture (see Note 5).  Our mortgage loans receivable reflected above consists of two loans secured by properties in Greater Baltimore and the Baltimore/Washington Corridor.  We did not have an allowance for credit losses in connection with these receivables at March 31, 2012 or December 31, 2011.  The fair value of our mortgage and other investing receivables totaled $32.7 million at March 31, 2012 and $28.0 million at December 31, 2011.

Operating Notes Receivable

We had operating notes receivable due from tenants with terms exceeding one year totaling $482,000 at March 31, 2012 and $530,000 at December 31, 2011.  We carried allowances for estimated losses for most of these balances.

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Interest Rate Derivatives

3 Months Ended

Mar. 31, 2012

Interest Rate Derivatives

Interest Rate Derivatives

8.Interest Rate Derivatives

The following table sets forth the key terms and fair values of our interest rate swap derivatives (dollars in thousands):

								Fair Value at
Notional			Fixed		Floating Rate	Effective	Expiration	March 31,			December 31,
Amount			Rate		Index	Date	Date	2012			2011
$	50,000		0.5025	%	One-Month LIBOR	1/3/2011	1/3/2012	$	—		$	(1	)
50,000			0.5025	%	One-Month LIBOR	1/3/2011	1/3/2012	—			(1		)
120,000			1.7600	%	One-Month LIBOR	1/2/2009	5/1/2012	(152		)	(552		)
100,000			1.9750	%	One-Month LIBOR	1/1/2010	5/1/2012	(144		)	(532		)
100,000			0.6123	%	One-Month LIBOR	1/3/2012	9/1/2014	(282		)	55
100,000			0.6100	%	One-Month LIBOR	1/3/2012	9/1/2014	(277		)	56
100,000			0.8320	%	One-Month LIBOR	1/3/2012	9/1/2015	(365		)	(66		)
100,000			0.8320	%	One-Month LIBOR	1/3/2012	9/1/2015	(363		)	(49		)
39,027		(1)	3.8300	%	One-Month LIBOR	11/2/2010	11/2/2015	(1,090		)	(1,054		)
100,000		(2)	3.8415	%	Three-Month LIBOR	9/30/2011	9/30/2021	—			(16,333		)
75,000		(2)	3.8450	%	Three-Month LIBOR	9/30/2011	9/30/2021	—			(12,275		)
100,000		(2)	2.0525	%	Three-Month LIBOR-Reverse	12/30/2011	9/30/2021	—			345
75,000		(2)	2.0525	%	Three-Month LIBOR-Reverse	12/30/2011	9/30/2021	—			260
								$	(2,673	)	$	(30,147	)

(1)The notional amount of this instrument is scheduled to amortize to $36.2 million.

(2)As described further in our 2011 Annual Report on Form 10-K, on January 5, 2012, we cash settled these instruments, along with interest accrued thereon, for an aggregate of $29.7 million.  Our policy is to present payments to terminate interest rate swaps entered into in order to hedge forecasted interest payments as operating activities on our consolidated statement of cash flows.  Accordingly, the payments to cash settle these instruments were included in net cash provided by operating activities on our consolidated statement of cash flows.

Each of the one-month LIBOR interest rate swaps set forth in the table above was designated as cash flow hedges of interest rate risk.

The table below sets forth the fair value of our interest rate derivatives as well as their classification on our consolidated balance sheet (in thousands):

	March 31, 2012				December 31, 2011
Derivatives	Balance Sheet Location	Fair Value			Balance Sheet Location	Fair Value
Interest rate swaps designated as cash flow hedges	Prepaid expenses and other assets	$	—		Prepaid expenses and other assets	$	111
Interest rate swaps not designated as hedges	N/A	—			Prepaid expenses and other assets	605
Interest rate swaps designated as cash flow hedges	Interest rate derivatives	(2,673		)	Interest rate derivatives	(2,255		)
Interest rate swaps not designated as hedges	N/A	—			Interest rate derivatives	(28,608		)

The table below presents the effect of our interest rate derivatives on our consolidated statements of operations and comprehensive income (in thousands):

	For the Three Months
	Ended March 31,
	2012			2011
Amount of loss recognized in AOCL (effective portion)	$	(1,987	)	$	(136	)
Amount of loss reclassified from AOCL into interest expense (effective portion)	(1,474		)	(1,104		)

Over the next 12 months, we estimate that approximately $2.5 million will be reclassified from AOCL as an increase to interest expense.

We have agreements with each of our interest rate derivative counterparties that contain provisions under which, if we default or are capable of being declared in default on any of our indebtedness, we could also be declared in default on our derivative obligations.  These agreements also incorporate the loan covenant provisions of our indebtedness with a lender affiliate of the derivative counterparties.  Failure to comply with the loan covenant provisions could result in our being declared in default on any derivative instrument obligations covered by the agreements.  As of March 31, 2012, the fair value of interest rate derivatives in a liability position related to these agreements was $2.7 million, excluding the effects of accrued interest. As of March 31, 2012, we had not posted any collateral related to these agreements.  We are not in default with any of these provisions.  If we breached any of these provisions, we could be required to settle our obligations under the agreements at their termination value of $3.3 million.

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Commitments and Contingencies (Details) (USD $)	1 Months Ended			3 Months Ended
	Aug. 31, 2010	Mar. 31, 2012 property Y	Mar. 31, 2012 Nonrecourse loan guarantees of unconsolidated partnership	Mar. 31, 2012 Arundel Preserve 5, LLC, Date Acquired 7/2/2007 sqfeet acre
Joint Ventures
Maximum approximate amount required to be paid under the guarantees			$ 65,000,000
Recovery percentage of amount paid under the guarantee when the entity continues to manage the properties			20.00%
Recovery percentage of amount paid under the guarantee when the entity no longer manages the properties			80.00%
Maximum amount of office space to be developed through the joint venture (in square feet)				1,800,000
Land available to develop office space (in acres)				63
Ownership (as a percent)				50.00%
Tax incremental financing obligation
The amount of tax incremental financing bonds issued by Anne Arundel County, Maryland	30,000,000
Liability recognized with regard to tax incremental financing obligation at end of current period		4,400,000
Environmental Indemnity Agreement
Number of lease properties which were provided environmental indemnifications		3
Environmental indemnification to the tenant against losses covered under prior owner's indemnity agreement		5,000,000
Length of environmental indemnification to the tenant against consequential damages at a building after the tenant's acquisition of the property (in years)		15
Maximum environmental indemnification to the tenant against consequential damages after acquisition of property		12,500,000
Additional costs agreed to be paid by the entity related to construction and environmental regulatory activities (as a percent)		50.00%
Maximum annual additional costs agreed to be paid by the entity related to construction and environmental regulatory activities		300,000
Maximum additional costs agreed to be paid by the entity related to construction and environmental regulatory activities		$ 1,500,000

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Income Taxes (Tables)

3 Months Ended

Mar. 31, 2012

Income Taxes

Components of provision for income tax

	For the Three Months  Ended March 31,
	2012			2011
Deferred
Federal	$	(3,417	)	$	447
State	(756		)	100
	(4,173		)	547
Current
Federal	—			(2		)
State	—			(1		)
	—			(3		)
Total income tax (expense) benefit	$	(4,173	)	$	544

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Debt (Details) (USD $)	3 Months Ended					3 Months Ended		3 Months Ended		3 Months Ended		3 Months Ended		1 Months Ended			3 Months Ended			3 Months Ended
	Mar. 31, 2012	Mar. 31, 2011	Dec. 31, 2011	Mar. 31, 2012 Mortgage and Other Secured Loans:	Dec. 31, 2011 Mortgage and Other Secured Loans:	Mar. 31, 2012 Fixed rate mortgage loans	Dec. 31, 2011 Fixed rate mortgage loans	Mar. 31, 2012 Variable rate secured loans	Dec. 31, 2011 Variable rate secured loans	Mar. 31, 2012 Other construction loan facilities	Dec. 31, 2011 Other construction loan facilities	Mar. 31, 2012 Revolving Credit Facility	Dec. 31, 2011 Revolving Credit Facility	Feb. 29, 2012 Term Loan Facility	Mar. 31, 2012 Term Loan Facility	Dec. 31, 2011 Term Loan Facility	Mar. 31, 2012 Term Loan Facility LIBOR 30-day	Mar. 31, 2012 Unsecured notes payable	Dec. 31, 2011 Unsecured notes payable	Mar. 31, 2012 4.25% Exchangeable Senior Notes	Mar. 31, 2011 4.25% Exchangeable Senior Notes	Dec. 31, 2011 4.25% Exchangeable Senior Notes
Debt
Maximum Availability										$ 123,802,000		$ 1,000,000,000			$ 650,000,000
Carrying Value	2,418,078,000		2,426,303,000	1,138,825,000	1,131,970,000	1,049,204,000	1,052,421,000	39,027,000	39,213,000	50,594,000	40,336,000	396,000,000	662,000,000		650,000,000	400,000,000		5,078,000	5,050,000	228,175,000		227,283,000
Stated interest rate (as a percent)																		0.00%		4.25%
Stated Interest Rates, low end of range (as a percent)						5.20%
Stated Interest Rates, high end of range (as a percent)						7.87%
Description of variable rate basis								LIBOR		LIBOR		LIBOR					LIBOR
Variable rate, spread (as a percent)								2.25%
Variable rate, spread low end of range (as a percent)										1.95%		1.75%					1.65%
Variable rate, spread high end of range (as a percent)										2.75%		2.50%					2.40%
Unamortized premium included in carrying value						2,200,000	2,400,000
Unamortized discount included in carrying value																		1,700,000	1,800,000	11,800,000		12,700,000
Interest rate on debt (as a percent)								2.49%
Weighted average interest rate (as a percent)						6.01%				2.73%		2.24%			2.15%
Exchange rate per $1000 principal amount (in common shares)																				20.8513
Convertible debt principal amount, basis for exchange																				1,000
Exchange price per common share based on exchange rate (in dollars per share)																				$ 47.96
Principal amount of debt																				240,000,000
Effective interest rate, including amortization of issuance costs (as a percent)																				6.05%
Interest expense at stated interest rate																				2,550,000	2,550,000
Interest expense associated with amortization of discount	775,000	1,649,000																		892,000	840,000
Total interest expenses																				3,442,000	3,390,000
Initial amount borrowed														250,000,000
Estimated fair value of property secured by nonrecourse mortgage loan in default				11,000,000	11,000,000
Nonrecourse mortgage loan secured by a property in default				15,000,000	15,000,000
Capitalized interest costs	$ 3,800,000	$ 4,300,000

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Discontinued Operations and Assets Held for Sale

3 Months Ended

Mar. 31, 2012

Discontinued Operations and Assets Held for Sale

Discontinued Operations and Assets Held for Sale

13.Discontinued Operations and Assets Held for Sale

Income from discontinued operations primarily includes revenues and expenses associated with the following:

·1344 and 1348 Ashton Road and 1350 Dorsey Road in the Baltimore/Washington Corridor that were sold on May 24, 2011;

·216 Schilling Circle in Greater Baltimore that was sold on August 23, 2011;

·four properties comprising the Towson Portfolio in Greater Baltimore that were sold on September 29, 2011;

·11011 McCormick Road in Greater Baltimore that was sold on November 1, 2011;

·10001 Franklin Square Drive in Greater Baltimore that was sold on December 13, 2011;

·13 properties comprising the Rutherford Business Center portfolio in Greater Baltimore that were sold on December 15, 2011;

·three properties comprising the White Marsh Professional Center, 8615 Ridgely’s Choice and 8114 Sandpiper Circle in Greater Baltimore that were sold on January 30, 2012;

·1101 Sentry Gateway in San Antonio that was sold on January 31, 2012;

·222 and 224 Schilling Circle in the Greater Baltimore region that were sold on February 10, 2012; and

·four operating properties that were classified as held for sale as of March 31, 2012, including the following:

·226 Schilling Circle in Greater Baltimore;

·11800 Tech Road in Suburban Maryland; and

·15 and 45 West Gude Drive in Suburban Maryland.

The table below sets forth the components of discontinued operations reported on our consolidated statements of operations (in thousands):

	For the Three Months
	Ended March 31,
	2012			2011
Revenue from real estate operations	$	3,365		$	5,980
Property operating expenses	(1,185		)	(3,091		)
Depreciation and amortization	(21		)	(2,977		)
Impairment losses	(1,461		)	—
Interest expense	(451		)	(813		)
Gain on sales of real estate	4,138			—
Discontinued operations	$	4,385		$	(901	)

The table below sets forth the components of assets held for sale on our consolidated balance sheets (in thousands):

	March 31, 2012		December 31, 2011
Properties, net	$	74,758	$	108,356
Deferred rent receivable	2,371		2,800
Intangible assets on real estate acquisitions, net	930		1,737
Deferred leasing costs, net	3,293		3,723
Assets held for sale	$	81,352	$	116,616

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Fair Value Measurements (Tables)

3 Months Ended

Mar. 31, 2012

Fair Value Measurements

Schedule of fair value assets and liabilities measured on recurring basis

	Quoted Prices in
	Active Markets for		Significant Other		Significant
	Identical Assets		Observable Inputs		Unobservable Inputs
Description	(Level 1)		(Level 2)		(Level 3)		Total
Assets:
Marketable securities in deferred compensation plan (1)
Mutual funds	$	6,121	$	—	$	—	$	6,121
Common stocks	414		—		—		414
Other	238		—		—		238
Common stock (1)	454		—		—		454
Warrants to purchase common shares in KEYW (2)	—		133		—		133
Assets	$	7,227	$	133	$	—	$	7,360
Liabilities:
Deferred compensation plan liability (3)	$	6,773	$	—	$	—	$	6,773
Interest rate derivatives	—		2,673		—		2,673
Liabilities	$	6,773	$	2,673	$	—	$	9,446

(1)Included in the line entitled “restricted cash and marketable securities” on our consolidated balance sheet.

(2)Included in the line entitled “prepaid expenses and other assets” on our consolidated balance sheet.

(3)Included in the line entitled “other liabilities” on our consolidated balance sheet.

Schedule of fair value hierarchy of impaired properties and other assets associated with such properties

	Quoted Prices in
	Active Markets for		Significant Other		Significant				Impairment
	Identical Assets		Observable Inputs		Unobservable Inputs				Losses
Description	(Level 1)		(Level 2)		(Level 3)		Total		Recognized
Assets (1):
Properties, net	$	—	$	—	$	92,176	$	92,176	$	5,479

(1) Reflects balance sheet classifications of assets at time of fair value measurement, excluding the effect of held for sale classifications.

Schedule of quantitative information about significant unobservable inputs used for Level 3 fair value measurements

	Fair value				Range
	on measurement		Valuation	Unobservable	(Weighted
Description	date		Technique	Input	Average)
Properties on which impairment losses were recognized	$	92,176	Bid for properties indicative of value	Indicative bid (1)	(1)
			Contract of sale	Contract price (1)	(1)
			Discounted cash flow	Discount rate	11.0% (2)
				Terminal capitalization rate	9.0% (2)
				Market rent growth rate	3.0% (2)
				Expense growth rate	3.0% (2)
			Yield Analysis	Yield	12% (2)
				Market rent rate	8.5 (2)
				Leasing costs	$20.00 per square foot (2)

(1) These fair value measurements were developed from third party sources, subject to our corroboration for reasonableness.

(2) Only one level applied to this unobservable input.

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Prepaid Expenses and Other Assets (Details) (USD $) In Thousands, unless otherwise specified	Mar. 31, 2012	Dec. 31, 2011
Prepaid Expenses and Other Assets
Mortgage and other investing receivables	$ 32,739	$ 27,998
Prepaid expenses	14,196	20,035
Proceeds from sale of KEYW stock receivable	11,934	5,057
Construction contract costs incurred in excess of billings	10,592	2,094
Furniture, fixtures and equipment, net	9,607	10,177
Deferred tax asset	6,746	10,892
Lease incentives	5,360	5,233
Other assets	5,358	6,133
Prepaid expenses and other assets	$ 96,532	$ 87,619

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Fair Value Measurements (Details 2) (KEYW Holding Corporation, USD $) In Millions, except Share data, unless otherwise specified	3 Months Ended
	Mar. 31, 2012	Dec. 31, 2011
KEYW Holding Corporation
Schedule of Trading Security [Line Items]
Number of shares owned in investee (in shares)		1,900,000
Percentage of common stock owned		7.00%
Amount of sale of owned shares	$ 14.0
Warrants
Number of warrants owned (in shares)	50,000	50,000
Exercise price of warrants (in dollars per share)	$ 9.25	$ 9.25

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Consolidated Statements of Comprehensive Income (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2012	Mar. 31, 2011
Net income (loss)	$ 6,977	$ (18,566)
Other comprehensive income
Unrealized losses on interest rate derivatives	(1,987)	(136)
Losses on interest rate derivatives included in net income	1,474	1,104
Other comprehensive (loss) income	(513)	968
Comprehensive income (loss)	6,464	(17,598)
Comprehensive (income) loss attributable to noncontrolling interests	(271)	714
Comprehensive income (loss) attributable to COPT	$ 6,193	$ (16,884)

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Summary of Significant Accounting Policies

3 Months Ended

Mar. 31, 2012

Summary of Significant Accounting Policies

Summary of Significant Accounting Policies

2.Summary of Significant Accounting Policies

Basis of Presentation

The consolidated financial statements include the accounts of COPT, the Operating Partnership, their subsidiaries and other entities in which we have a majority voting interest and control.  We also consolidate certain entities when control of such entities can be achieved through means other than voting rights (“variable interest entities” or “VIEs”) if we are deemed to be the primary beneficiary of such entities.  We eliminate all significant intercompany balances and transactions in consolidation.

We use the equity method of accounting when we own an interest in an entity and can exert significant influence over the entity’s operations but cannot control the entity’s operations.

We use the cost method of accounting when we own an interest in an entity and cannot exert significant influence over its operations.

These interim financial statements should be read together with the financial statements and notes thereto as of and for the year ended December 31, 2011 included in our 2011 Annual Report on Form 10-K.  The unaudited consolidated financial statements include all adjustments that are necessary, in the opinion of management, to fairly present our financial position and results of operations.  All adjustments are of a normal recurring nature except for the out-of-period adjustment described below.  The consolidated financial statements have been prepared using the accounting policies described in our 2011 Annual Report on Form 10-K.

During the second quarter of 2012, we identified an error in the consolidated financial statements for the year ended December 31, 2011 and the quarter ended March, 31, 2012.  The error was attributable to the misapplication of accounting guidance related to the recognition of a deferred tax asset resulting from an impairment of assets in the fourth quarter of 2011 that failed to consider a partial reversal of that asset that would result from a cancellation of related inter-company debt in the first quarter of 2012.  The effect of this error was an overstatement of our income tax benefit and an understatement of our net loss for the year ended December 31, 2011 of $4.0 million ($0.05 per share).  During the first quarter of 2012, we identified an error that impacted the above referenced periods.  The error was an over-accrual of incentive compensation cost.  The effect of this error was an overstatement of general and administrative expenses and an overstatement of net loss for the year ended December 31, 2011 of $0.7 million ($0.01 per share). The net impact of these errors was an understatement of our net loss for the year ended December 31, 2011 of $3.3 million ($0.04 per share).  We have determined that the errors were not material in 2011 and are not material to our expected annual results for the year ending December 31, 2012.  Accordingly, this cumulative change is reported as an out-of-period adjustment in the three months ended March 31, 2012 as follows: a reduction in net income of $3.3 million ($0.04 per share); an increase in income tax expense of $4.0 million ($0.05 per share); and a decrease in general and administrative expenses of approximately $0.7 million ($0.01 per share) on our consolidated statement of operations.

Reclassifications

We reclassified certain amounts from prior periods to conform to the current period presentation of our consolidated financial statements with no effect on previously reported net income or equity.  Included among these reclassifications is a retrospective change in the presentation of costs expensed in connection with properties not in operations; these costs are included in the line on our consolidated statements of operations entitled “business development expenses and land carry costs,” after having been included in property operating expenses in our 2011 Annual Report on Form 10-K.

Recent Accounting Pronouncements

We adopted guidance issued by the Financial Accounting Standards Board (“FASB”) effective January 1, 2012 related to the presentation of comprehensive income that requires us to present the total of comprehensive income, the components of net income and the components of other comprehensive income either in a single continuous statement of comprehensive income or in two separate but consecutive statements.  We adopted this guidance using retrospective application.  This guidance eliminates the option to present the components of other comprehensive income as part of the statement of equity.  Our adoption of this guidance did not affect our financial position, results of operations, cash flows or measurement of comprehensive income but did change the location of our disclosure pertaining to comprehensive income in our consolidated financial statements.

We adopted guidance issued by the FASB effective January 1, 2012 that amends measurement and disclosure requirements related to fair value measurements to improve consistency with International Financial Reporting Standards.  In connection with our adoption of this guidance, we made an accounting policy election to use an exception provided for in the guidance with respect to measuring counterparty credit risk for derivative instruments; this election enables us to continue to measure the fair value of groups of assets and liabilities associated with derivative instruments consistently with how market participants would price the net risk exposure at the measurement date.  Our adoption of this guidance did not affect our financial position, results of operations or cash flows but did result in additional disclosure pertaining to our fair value measurements.

We adopted guidance issued by the FASB effective January 1, 2012 relating to the testing of goodwill for impairment that permits us to first assess qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount as a basis for determining whether it is necessary to perform the two-step goodwill impairment test.  This guidance eliminates the requirement to calculate the fair value of a reporting unit unless the entity determines that it is more likely than not that its fair value is less than its carrying amount.  Our adoption of this guidance did not materially affect our consolidated financial statements or disclosures.

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Share-Based Compensation (Details) (USD $)	3 Months Ended				1 Months Ended	3 Months Ended
	Mar. 31, 2012	Mar. 31, 2011	Mar. 31, 2012 Options	Mar. 31, 2012 Restricted shares	Mar. 31, 2012 Performance share units	Mar. 31, 2012 Performance share units Rank
Potential earned PSUs payout for defined levels of performance under awards
Earned PSUs payout (as a percent of PSUs granted) on 75th or greater percentile rank					200.00%	200.00%
Earned PSUs payout (as a percent of PSUs granted) on 50th percentile rank					100.00%	100.00%
Earned PSUs payout (as a percent of PSUs granted) on 25th percentile rank					50.00%	50.00%
Performance share units granted on percentile rank below 25th (as a percent)					0.00%	0.00%
The number of percentile ranks to fall between to earn interpolated PSUs, conditioned on the percentile rank exceeding 25%						2
Assumptions used to value stock awards
Baseline value per common share (in dollars per share)					$ 24.39	$ 24.39
Expected volatility of common shares (as a percent)						43.20%
Risk-free interest rate (as a percent)						0.41%
Shares
Stock awards granted (in shares or units)				87,449	54,070
Weighted Average Grant Date Fair Value
Aggregate grant date fair value				$ 2,100,000	$ 1,800,000
Grant date fair value (in dollars per share)				$ 24.39		$ 32.77
Options
Exercised (in shares)	(5,667)	(24,667)	(5,667)
Exercise price range, options exercised (in dollars per share)			$ 14.54
Aggregate intrinsic value (in dollars)			56,000
Other Share-based Compensation Additional Disclosures
Aggregate intrinsic value of restricted common shares, forfeiture restrictions lapsed				$ 6,200,000
Restricted common shares, forfeiture restrictions lapsed (in shares)				251,985
Weighted average grant date fair value of restricted common share, forfeiture restrictions lapsed (in dollars per share)				$ 31.93

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Properties, net (Tables)

3 Months Ended

Mar. 31, 2012

Properties, net

Schedule of components of net operating properties

	March 31,			December 31,
	2012			2011
Land	$	471,995		$	472,483
Buildings and improvements	2,802,570			2,801,252
Less: accumulated depreciation	(570,242		)	(559,679		)
Operating properties, net	$	2,704,323		$	2,714,056

Schedule of projects in development or held for future development

	March 31,		December 31,
	2012		2011
Land	$	225,085	$	229,833
Construction in progress, excluding land	408,883		409,086
Projects in development or held for future development	$	633,968	$	638,919

Schedule of operating property dispositions

We sold the following operating properties during the three months ended March 31, 2012 (dollars in thousands):

			Number	Total
		Date of	of	Rentable			Gain on
Project Name	Location	Sale	Buildings	Square Feet	Sale Price		Sale
White Marsh Portfolio (1)	White Marsh, Maryland	1/30/2012	5	163,000	$	19,100	$	2,445
1101 Sentry Gateway	San Antonio, Texas	1/31/2012	1	95,000	13,500		1,750
222 and 224 Schilling Circle	Hunt Valley, Maryland	2/10/2012	2	56,000	4,400		202
			8	314,000	$	37,000	$	4,397

(1)Includes three properties comprising the White Marsh Professional Center, 8615 Ridgely’s Choice and 8114 Sandpiper Circle.

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Organization (Details 2) (Corporate Office Properties, L.P.)	3 Months Ended
	Mar. 31, 2012 trustee
Common Units
Forms of ownership in Operating Partnership and ownership percentage by the entity
Percentage ownership in operating partnership	94.00%
Number of trustees controlling additional common units	3
Additional percentage of common units controlled by trustees (as a percent)	5.00%
Series G Preferred Units
Forms of ownership in Operating Partnership and ownership percentage by the entity
Percentage ownership in operating partnership	100.00%
Series H Preferred Units
Forms of ownership in Operating Partnership and ownership percentage by the entity
Percentage ownership in operating partnership	100.00%
Series I Preferred Units
Forms of ownership in Operating Partnership and ownership percentage by the entity
Percentage ownership in operating partnership	0.00%
Series J Preferred Units
Forms of ownership in Operating Partnership and ownership percentage by the entity
Percentage ownership in operating partnership	100.00%
Series K Preferred Units
Forms of ownership in Operating Partnership and ownership percentage by the entity
Percentage ownership in operating partnership	100.00%

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Income Taxes

3 Months Ended

Mar. 31, 2012

Income Taxes

Income Taxes

12.Income Taxes

We own a taxable REIT subsidiary (“TRS”) that is subject to Federal and state income taxes.  Our TRS’s provision for income tax (expense) benefit consisted of the following (in thousands):

	For the Three Months  Ended March 31,
	2012			2011
Deferred
Federal	$	(3,417	)	$	447
State	(756		)	100
	(4,173		)	547
Current
Federal	—			(2		)
State	—			(1		)
	—			(3		)
Total income tax (expense) benefit	$	(4,173	)	$	544

Items in our TRS contributing to temporary differences that lead to deferred taxes include depreciation and amortization, share-based compensation, certain accrued compensation, compensation paid in the form of contributions to a deferred nonqualified compensation plan, impairment losses and net operating losses that are not deductible until future periods.

Our TRS’s combined Federal and state effective tax rate was 38.6% for the three months ended March 31, 2012 and 2011.