Welcome to the Corporate Office Properties Trust first quarter 2009 earnings conference call. (Operator Instructions) At this time, I would now like to turn the call over to Mary Ellen Fowler, the company's Senior Vice President and Treasurer. Miss Fowler, please go ahead.

Today we will be discussing our first quarter 2009 results. With me today are Rand Griffin, President and CEO, Roger Waeshce, our COO, and Steve Riffee, our CFO.As they review our financial results, the management team will be referring to our quarterly supplemental information package. You can access our supplemental package as well as our press release on the Investor Relations section of our website at www.copt.com. Within the supplemental package, you will find the reconciliation of GAAP measures to non-GAAP financial measures referenced throughout this call. Also under the Investor Relations section of our website you will find a reconciliation of our 2009 annual guidance. At the conclusion of this discussion, the call will be opened up for your questions. First, I must remind all you at the outset that certain statements made during this call regarding anticipated operating results or future events are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Although such statements and projections are based upon what we believe to be reasonable assumptions, actual results may differ from those projected. These factors that could cause actual results to differ materially include, without limitation, the ability to renew or re-lease space under favorable terms, regulatory changes, changes in the economy, the successful and timely completion of acquisitions and development projects, changes in interest rates and other risks associated with the commercial real estate business as detailed in our filings from time to time with the Securities and Exchange Commission. Now, I will turn the call over to Rand.

I'm pleased to report we had a good quarter generating FFO of $0.67 per share. This is a 20% increase over first quarter 2008 FFO of $0.56 per share. Renewal rates continued to be strong with 82% of expiring leases renewed and occupancy remained fairly steady at 92.9%. With regard to FFO for the balance of the year, as you know, office is a lagging sector in the economy. Rental rates and occupancy will begin to be under some pressure in the second half of 2009 and into 2010. No company will be immune and COPT will be affected as well. However, we believe we are uniquely positioned to not only weather but also grow through the downturn, and there are a number of reasons for our confidence. First, we are in good shape on our capital position. We are executing on our debt strategy as we outlined in previous calls. In addition, we took advantage of our inclusion in the S&P 400 MidCap Index on April 1st to opportunistically issue equity, not as a defensive measure, but rather as an offensive move in order to be positioned for opportunities we are starting to see in the market. As a result of the index inclusion, index funds rebalanced their portfolios which created a natural demand for our stock. Although our 2009 capital plan did not include an equity offering, we determined that we could take advantage of this demand and issue stock at a very low cost to the company. We also realize that we had additional demand coming from existing as well as new shareholders. We issued 2.9 million shares at a low 0.2% discount to our closing price, raising $72 million. We were restrained in our approach to the equity raise as the demand for shares was significantly…

Turning to our results, FFO for the first quarter of 2009 totaled $44.8 million or $0.67 per diluted share. These results represent a 20% increase on a per share basis over the $0.56 per diluted share or $35.9 million of FFO for the first quarter of 2008. 2009 first quarter FFO results included $3.1 million of net termination fees. We previously indicated that we expected termination fees of $4 million for the year and that they would be front-end weighted. We continue to expect full-year termination fees to be $4 million. For the quarter, third party development fees net of cost slightly exceeded our forecast while NOI, G&A costs and interest expense were in line with our expectations when we last gave our 2009 annual guidance. Our lease renewals remained strong at 82% for the quarter. We reported a net income available to common shareholders for the first quarter of $12.1 million or $0.23 per diluted share compared to $6.7 million or $0.14 per diluted share for the first quarter of 2008. Turning to AFFO, our adjusted funds from operations of $33.4 million represents an increase of 38% from $24.2 million in the first quarter of 2008. Our diluted FFO payout ratio is 56%, and our diluted AFFO payout ratio is 67% for the first quarter. Looking at our same office cash NOI for the first quarter of 2009, for the 223 properties or 92% of the consolidated portfolio square footage, same office cash NOI increased by 9%. Excluding the effect of the increase in termination fees, same office property cash NOI increased by 3% for the quarter. Turning to the balance sheet, at March 31st, our weighted average cost of debt for the first quarter was 4.8% down from 5.4% a year ago. Seventy-five percent of our total debt…

At quarter end, our wholly-owned portfolio consisted of 240 properties totaling 18.5 million square feet that were 92.9% occupied and 93.9% leased. Our occupancy was down 0.3% quarter-over-quarter, largely due to the lease buyout Steve mentioned that we executed in our northern Virginia portfolio. During the first quarter, we leased 548,000 square feet, of which 323,000 square feet was renewals, 67,000 square feet was re-tenanting, 37,000 square feet was first-time lease up of previously acquired space and 121,000 square feet was development space. For the quarter, we renewed 82% of expiring leases at an average capital cost of $3.00 per square foot. Rents on renewals increased 6.2% on a straight line basis and 1.4% on a cash basis. Total rent for renewed and re-tenanted space increased 3.9% on a straight line basis and decreased 1.5% on a cash basis. For all renewed and re-tenanted space, the average capital cost was $5.35 per square foot. As Steve mentioned, the company executed a large lease termination in the first quarter, receiving $3.5 million in cash and recognizing $3 million of GAAP earnings after write-off of straight line rent and FAS 141 intangibles. As a philosophy, the company will terminate leases under one of two circumstances. Either there's a replacement tenant identified or the buyout is economically compelling. In this case, we received a fee equal to rent for three of the four remaining years on the lease, realizing a little over $100 per square foot. The tenant also left its furniture behind, providing us with plug and play space of 35,000 square feet. The termination increased overall vacancy by 0.2%, but we believe the downtime and re-tenanting costs will be much lower than the lease termination fee. Looking at our lease expiration schedule across our portfolio for the balance of 2009, we…

Thanks, Roger. Looking at our construction pipeline at quarter end we had 13 buildings under construction for a total of 1.5 million square feet at a projected cost of $331 million. We've added four buildings to the construction pipeline this quarter, all government or defense contractor buildings. Our development pipeline has five buildings under development with close to 525,000 square feet at a projected total cost of $125 million. We have added the next building at San Antonio and National Business Park to the list this quarter. All the buildings in the development pipeline are for our government or defense IT tenants. As we stated previously we are being cautious with our development starts in 2009 and are not starting any market demand buildings. We do expect to see some acceleration in construction starts as we move into 2010. With regard to leasing, our construction pipeline is 33% leased at quarter end, but if we include the buildings positioned for the government then 58% of the construction pipeline has identified tenants that will lease the space. As you may recall, included in this week leasing is the first BRAC related tenant at Aberdeen, and the first BRAC related tenant at NBP. In summary we are strongly positioned for the future and deeply appreciate in these tough times the confidence you have shown in our focus, strategy and execution. We will not disappoint our shareholders, and with that we would be happy to address any questions you may have.

(Operator Instructions) Your first question comes from Rich Anderson – BMO Capital Markets. Richard Anderson – BMO Capital Markets: Just a couple of quick ones, I mean and then there may be a little bit more detail, is the guidance is entirely reduced entirely due to the equity? It seems to me when I put the number in and I get something more like $0.04 or $0.05 but that's how you see it, $0.07. Is there anything else rolled into it?

No, but it's $0.07 and we literally just changed the prior range by that amount, at the time of the equity to include shares. Richard Anderson – BMO Capital Markets: And Steve, as long as I have you, has there been any timing change on these secured financings that you're looking to do? Have they slowed down a little bit in this market or are you sort of – I know your plan is the same terms of dollars but maybe has it slowed down a little bit?

We had planned on it happening in the second quarter. We think it will. It definitely is taking a couple of extra weeks to work through certain steps to the process, but I think we're going to get it done in the same quarter that we planned to, Rich, is what we just spoke about on the call. Richard Anderson – BMO Capital Markets: Okay, and then when you look at the line balance for a hundred and change, I can't remember the exact number, are you looking at that to be pretty close to zero or at least in double digits by the end of the second quarter?

Well, what we talked about was – well first of all we're around $200 million of line capacity today, and I just summarized about $300 million of financing proceeds most of which will be realized in this second quarter or obtained in the second quarter, and we only have $64 million of debt maturities for the rest of the year and some of this happened in the second half of the year. So there's your math. Richard Anderson – BMO Capital Markets: Okay, so Roger, do you, or Rand, you mentioned CapEx pressures and renewal challenges for the remainder of the year, is that in your more market demand portfolio or your conventional portfolio or is that starting to trickle into your defense assets as well?

I think it's in both but it's obviously more pronounced in the non-government, non-government IT part of the portfolio, but I think it's just a general perspective out there from brokers that things are weak and obviously they're pushing on behalf of their customers and obviously as the landlord we're taking a balance between economics that we owe our self and our shareholders and our customers and so I do think there's going to be some pressure. The good news offsetting that though is that construction prices are coming down significantly so we used to do allowance transactions and now we do transactions where we will price actual plans and deliver on those plans because we can do it cheaper than an allowance deal. Richard Anderson – BMO Capital Markets: Okay, but I mean, is there any evidence that the defense side of the business is starting to get touched by everything, or is it sort of been status quo over the past several –

Modestly, but not significantly. Richard Anderson – BMO Capital Markets: Okay, can you characterize the type of activity you're seeing at Blue Bell? You mentioned you're not expecting any leasing on the give back space until 2010 in your numbers but who's looking at it? It's my understanding that Unisys is keeping one building right, and then there'll be one completely vacant, is that the idea?

That's correct and we will renovate that building and break it up into a couple of buildings and obviously that market is characterized by financial services and healthcare tenants and so they are the kind of tenants that we're talking about doing renovation build-to-suits for. We have product that's ready to go and we have the financial capacity to execute quickly so we think we will have an opportunity to re-lease the space based on that basis. Richard Anderson – BMO Capital Markets: But before a mid-2010 timeframe you're hoping?

Some of it, certainly. Richard Anderson – BMO Capital Markets: And finally, you mentioned that you're starting to see sellers or owners start to at least begin to have the body language to have a conversation, how would you characterize those types of assets? Are they again more of the market demand variety or are they in the defense area as well?

I think it's both, we are seeing sellers willing to sell product because they've got demands on their cash from pension funds to return money and in some cases we see distressed sellers that have capital structure issues or otherwise would want to get the money back because they have other uses of their money.

I think Rich, I mean, we see a lot of things out there now, but I think our focus is still on the core. You know, we could have spent a lot of money on other non-core things but we're really focused on what we deem to be pretty much core properties. Richard Anderson – BMO Capital Markets: Okay, I have one real quick one, the construction financing of $30 million Steve, you talked about how is that going in terms of negotiating? I imagine that might be the toughest of the lot in terms of your capital plan.

Well, the truth of the matter is that's $30 million inside JVs. We've already had some preliminary interest but we're working really hard on the two permanent debts, the bank loan and the first joint venture financing so, it's just a matter – it's next on our list, and we've got to get a couple of other things done before we firm up that. Richard Anderson – BMO Capital Markets: Okay, great. I'll yield the floor. Thank you.

Thank you, Rich.

Your next question comes from Brendan Malorana – Wachovia Capital Markets. Brendan Malorana – Wachovia Capital Markets: Good morning. Thanks. Steve, you talked about all the capital activities that you've got going on, and I understand then from your near term kind of sources and uses estimates that you're in good shape, especially for the next couple of years. But when you think about the capital outlook of the company over the long-term, and all the development activities that you've got, and then trying to be opportunistic in the market with new acquisitions, where should we think about how you guys are positioning yourself over the long term in terms of your capital ratios?

Well, first of all, we're in good shape throughout '09 and '10, and in 2011 our debt maturities are manageable, too. And I outlined, as I think you said in your piece today, [Brendan], that for a very modest fee, we'll push out all of our liquidity vehicles, our lines into '12. Obviously, we're a growing company and growing companies need capital to keep growing. But we're not projecting any new equity raise. We obviously did an opportunistic raise as of April 1. And the way we tend to look at how do we want to monitor, we want to keep our coverage ratio, our fixed charge coverage ratio above 2. We're well above that. And we tend to look at our debt-to-gross assets as defined in our line, and all that in the covenant 65%, but we try to manage that below 50%, and we're at 42% as of March 31. And we stress test that and that will be one of our guiding ways of looking at it through 2012. Brendan Malorana – Wachovia Capital Markets: Okay, so below 50%. I mean in terms of you guys have spoken previously about the Unisys camp as a possibility of where some capital recycling might occur. How should we think about the potential for capital recycling dispositions over the next couple of years?

Brendan, we have two assets in New Jersey that are under contract to of the tenants that occupies them, that will close in 2010. Our Unisys campus long-term is non-core. As soon as we can stabilize it, we will sell it and redeploy those funds into our core business. And then inside of even this region, the greater Baltimore, Washington region, we have certain pockets of non-core assets that don't advance to franchise or don't have a customer constituency attached to them. So we're willing to sell those assets. And so you will see some one-off sales of individual assets. We're obviously mindful of what's going on in the market, so we're not in a position where we have to sell today. But over a few years, you should see us move non-core assets. Brendan Malorana – Wachovia Capital Markets: Okay, so the preference just to kind of clarify or just make sure I understand it properly, I mean over the long-term your preference would be to sell those assets first if pricing is reasonable, and then with the issue equity as kind of the stack in terms of sources to capital?

That's correct. Brendan Malorana – Wachovia Capital Markets: Okay, thanks. And then just looking at the core metrics, I know that Roger, you said, you would expect a higher level of non-renewals, higher CapEx and pressure on rents as it relates to kind of historical norms, but when we look in the quarter, all those metrics were above average. Is your outlook just based on looking at the overall economic conditions, and understanding that real estate is a lagging sector? Or is that based on kind of the current environment as you see it now with the conversations that you're having?

I think it's both. I think we're realistic about the macro environment with the – we've heard what GDP came out with today and so we're sensitive to that, and then I'm in daily contact with our asset managers and all of their transactions. And so I can feel some of the pressure that they're getting, and so when we add those two things together, we're just trying to give the investors a conservative forecast of what may happen over the next 12 months or so. Brendan Malorana – Wachovia Capital Markets: Just given that your overall kind of guidance metrics, the t10 things that Steve laid out didn't really change. Is it fair to say that your assessment hasn't changed dramatically since you gave us the last update kind of the beginning of the year?

That's correct.

Your next question comes from John Guinee – Stifel Nicolaus. John Guinee – Stifel Nicolaus & Co.: Thank you. Hey, Steve, just out of curiosity, how often do you think the life companies, and the term loan lenders are underwriting on an LTV? Do you have a sense for that, and if you answered that already just correct me?

I'd say 55% to 60%. That's where they seem to be, John. John Guinee – Stifel Nicolaus & Co.: And where are they capping and all that sort of thing?

I'm sorry, what did you say? John Guinee – Stifel Nicolaus & Co.: Are they capping a stabilized income at 8, 9, 10?

You know, John, hi, this is Rand. I was at [Urban] Land Institute to last week, we had a lot of in-depth panels with lenders, and I think the metrics nowadays is totally gone away from Cap rates, and gone away from loan-to-values. They're using the debt costs, which is really the NOI for that specific property divided by the amount of the loan. And they've said they want to be in the 12% to 15% range, and went down example after example of things that fall into that range. I think the best we heard was about a 10% and the worst we heard was 18%. But their guidelines are pretty much in that 12% to 15%. And when you run through the math on ours it's falling right on the lower end of that part of it. So I think people are struggling generally with, what are Cap rates, and Cap rates aren't indicative of value necessarily. It's indicative of when we look at buying things at distressed sellers as opposed to distressed properties. And they're sort of struggling with those metrics, so that's seems to be the flavor of the day. John Guinee – Stifel Nicolaus & Co.: How about a sort of a NOI to get constant? Are they looking at that also? What kind of coverage are they looking at there, Rand?

Not really. They're really not looking at that.

Your next question comes from Nick Pirsos – Macquarie. Nick Pirsos – Macquarie Research Equities: Good morning. Thank you, but all my questions have been answered.

(Operator Instructions)

It looked like, operator, there were a couple on the screen there, but I don't know.

And we do have a follow-up question from Brendan – Wachovia. Brendan Malorana – Wachovia Capital Markets: Just to follow up on your point in terms of debt-to-EBITDA levels or debt costs. If I take that mid-point of the 12% to 15%, assume 13.5% that implies kind of a debt -o-EBITDA level of I think around 7.5% if I'm just doing the back of the envelope math quickly. If I look at the annualized level that you guys did in Q1, it seems like it's around 8.5%, and maybe I'm not really giving you enough credit for the development NOI that you're going to have coming online. But that would, I guess suggest to me that maybe you need to think about additional capital sources to get to that 7.5% target over time. I mean, does that kind of factor in to your loan to gross asset value below 50%?

No, I don't think so. I mean I think we're very comfortable with where we are. And as we went out, one thing that was very evident as you go out to talk to lenders, the very first thing they're looking at is the quality of sponsorship first. And then secondly, they're looking at markets, and then finally they start delving into the specifics of the property. So I think the fact that we have excellent credit and growth, and kind of a long history of excellent performance allows us to operate in a different band probably than others. Brendan Malorana – Wachovia Capital Markets: Okay. So you're more comfortable at the lower end. Okay. All right, thank you.

Your next question comes from Dave Rogers – RBC Capital Markets. Dave Rogers – RBC Capital Markets: Hey, Rand, could you talk about development starts for this year? I didn't hear you put a number? I did hear you say, we started $100 million roughly this year; you're going to accelerate in the back half of the year. I don't know if you could put a band around that, and then also kind of talk about a couple of the hinging points that might drive earlier or later, and the change in the size as well?

Well, I think we've got, now that we started the four, and we have as I've said, in my section at the end, we have another five buildings that are under development that we would anticipate starting before year-end. It really is somewhat of a function of leasing activity. For example, at MVPs still under construction, lease to MITRE a lot of activity as we see those leases get buttoned up. Then we would start 308 MVP just to make sure there's a continued product in the pipeline. So that's really how we're looking at it. So the second building at North Gate is ready to go. We started the first one. It's primarily leased to MITRE, good activity, leasing activity in the second building. We think that will follow on in a couple of months and start. Then that part's got 800,000 square feet of capacity and we think we will move through that very, very quickly to meet the BRAC demand. So I think it's really just a function of that. We did add a building in what is the next phase of MVP that we would expect to start within that 12-month period, as the road gets in and utilities and so that's positioned to really start to meet the acceleration of BRAC at Fort Meade. And then in San Antonio we did start two government buildings. We have not yet met the demand at all for the defense contractors. That's starting to heat up. We bought last year some of the property across the highway that we can do about 750,000 square feet and we anticipate starting the defense contractor building there before year-end. So it's really a function of get them designed, have them positioned, meet the market demand and be ready to go, but the 525,000 is what we anticipate starting in the remainder of this year.

Your next question comes from Chris Lucas – Robert W. Baird. Christopher Lucas – Robert W. Baird & Co.: Most of my questions have been asked and answered. I do have sort of a broader question, Rand. Just earlier in the month Secretary Gates laid out sort of change in priorities for the new administration as it relates to defense spending. You commented a little bit about those. I guess one of the ones that has raised a little bit of concern, it relates to sort of bringing on back into the Defense Department employees as opposed to using contracts for a lot of the services. What are your thoughts on that and what's your overall thought about how the political process might impact some of the decision making that ultimately gets resolved here on the new priorities?

I think, Chris, that's an admirable goal. I think you mentioned bringing 13,000 people in that they maybe have relied on particularly on the procurement side through contractors and then bring that on within the government. I think the practical matter of that is it's extremely difficult to do. If you look in the greater D.C. area the number of actual government employees has continued to go down yet the federal expenditure has gone up, obviously significantly. And the gap has been made up by the contractors. So I think that's frankly a little bit more of rhetoric than reality. I do think that when you looked at the sort of decreasing of spending that they mentioned in some areas, it was really weapon systems, moving things around. It's kind of a standard Washington game. So they cancelled some of the remaining F22s, know that they'll get some political heat on that, ramped up significantly the F35s which are tested down at Pax River, so that's good for us. And then also they'll spread out some of that so in the upcoming short-term years it looks like they're spending less on defense. They did increase immediately the intelligence budget by $2 billion for Afghanistan and we do expect forthcoming shortly that $15 billion to $30 billion of additional spending being in as a separate request for the Cyber Initiative that the President's getting ready to announce shortly. So it's what you would expect, Chris, on a change in administration. A lot of rhetoric, but as you get into the reality and look at it, the world's a very dangerous place and we're continuing to see an acceleration of activities. We had – Monday was a building dedication for IARPA which was announced if you saw that on TV and in the paper, which is the second building at M Square and the Director of National Intelligence, Dennis Blair, got up and spoke quite eloquently about the issues facing the intelligence community and how active they are and how much additional funding needs to be there to actively support their efforts. So we really see our sector of it continuing pretty well, Chris.

Your next question comes from Rich Anderson – BMO Capital Markets. Richard Anderson – BMO Capital Markets: Just a quick follow-up, Rand I thought it was interesting how you said you still haven't met the demand in San Antonio that you expect to see. How – could you make a similar characterization and maybe even quantify what the amount of demand that you see coming that has yet to have been met by you guys in terms of the BRAC and all the rest. Is there a way to quantify that?

It's really hard, Rich, to do that. It's probably of all the areas it's the easiest at Aberdeen Proving Ground where there's 140 companies that are currently doing business with C4ISR and Fort Monmouth, New Jersey. They're shutting Fort Monmouth down. The moves are scheduled. There's 8,500 people moving on-site and the range is anywhere from 12,000 to 16,000 jobs off site. And so we think that's 2 million to 2.5 million square feet of demand and we can only accommodate 800,000 of it. So we know we'll do that and we'll blow through it, and the early discussion from the tenants is you can see the demand heating up because they're facing the moves. I think as Roger said on Ft. Meade, the validation of the contracts that we relate to DISA which is the larger of the agencies moving, hasn't yet occurred. And that will occur in fiscal year 2010 after October 1 of this year. So kind of the early indications that we're getting from a lot of the BRAC firms is that once the government validates it for fiscal year 2010 then you'll start to see the lease commitments and they'll proceed accordingly, so lots of discussions; some of the early ones signing, but nothing really there yet. What is of more significance is really the Cyber Initiative and the expectations of very quick space requirements and a lot of tenants are hovering around talking about those requirements and trying to line up space there. So I think it's just early to be able to tell that. We'll get a very good picture by year end as to what that demand looks like, Rich.

Thank you. I will now turn the call back over to Mr. Griffin for any closing remarks. You may proceed, sir.

Well, thanks for joining us today and as always we appreciate your participation and support. And all of us are available to answer any questions you might have. So thank you and have a great day everyone.