August 26, 2002
Mr. Jonathan G. Katz
U.S. Securities and Exchange Commission
450 Fifth Street, NW
Washington, DC 20549-0609
Re: File No. S7-22-02
Dear Mr. Katz:
Corporate Office Properties Trust is pleased to have the opportunity to respond to the Securities and Exchange Commission ("Commission") regarding the proposals set forth in Release Nos. 33-8106 and 34-46084. Corporate Office Properties Trust is a fully-integrated and self-managed real estate investment trust which focuses on the ownership, development, management and acquisition of suburban office properties located in targeted suburban sub-markets in the Mid-Atlantic.
Corporate Office Properties Trust supports the Commission's efforts to provide investors with enhanced and "real-time" disclosure of important corporate events. We agree with most of the Commission's proposals relating to Form 8-K. However, Corporate Office Properties Trust is concerned that one aspect of the proposals could be counterproductive to the interests of investors. Corporate Office Properties Trust believes that requiring companies to disclose terms of material non-binding agreements could severely hinder the negotiating positions and competitiveness of companies.
Item 1.01--Entry into a Material Agreement
While Corporate Office Properties Trust generally supports the Commission's position to require a company to disclose when it enters into a material agreement that is not made during the ordinary course of its business, we believe that letters of intent, non-binding agreements and other similar documents should not be required to be disclosed. We do not feel that such agreements can be deemed to be material until they become binding contracts. In addition, contracts to purchase real estate typically contain many due diligence conditions that allow the purchaser to walk away from the contract if its due diligence is not completed to its satisfaction. Until such due diligence is satisfactorily concluded, these contracts are not binding and therefore should not have to be disclosed.
In addition, Corporate Office Properties Trust is concerned that disclosure of such non-binding agreements would cause companies to disclose competitive terms and would otherwise disrupt the ability of companies to negotiate agreements on their own behalf and for the benefit of their investors. Companies would be disclosing negotiating terms that their competitors could review, which could harm a company's future negotiating position. Public companies would be at a particular competitive disadvantage relative to privately held companies that are not required to disclose the terms of their agreements. Furthermore, Corporate Office Properties Trust feels that the confidentiality provisions that normally apply to such non-binding agreements would be rendered ineffective.
Please note that, due to the contingent nature of all our transactions, it has been Corporate Office Properties Trust's consistent policy for 5 years not to disclosed contracts for acquisitions of properties until the acquisitions are completed. We believe it would, however, usually be appropriate to disclose a merger or similar very large and unusual corporate event at the letter of intent stage, even if contingencies exist. The reason is due to the magnitude and nature of the event.
In order to promote uniform standards, we believe that Item 1.01 should be kept consistent with the current requirements of Exhibit 10 under Regulation S-K, Item 6.01(b)(10) which does not require the filing of non-binding agreements. Additionally, Corporate Office Properties Trust supports the position that registrants should not be required to file the material agreements that are subject to the Form 8-K disclosure requirements as exhibits, because such agreements are required to be filed in Form 10-Q and/or Form 10-K. We would suggest that if Item 1.01 becomes a part of Form 8-K, the Form should include a box on the cover page that would allow a registrant to satisfy obligations under Rule 165, Rule 14d-2(b) and/or Rule 14a-12, as suggested by the Commission in its proposed rule.
Corporate Office Properties Trust thanks the Commission for the opportunity to comment on this proposal. Please contact me if you have any questions regarding this letter.
Clay W. Hamlin, III
Chief Executive Officer
Cc: Jay H. Shidler
Randall M. Griffin
John H. Gurley
Kenneth D. Wethe