Welcome to the Corporate Office Properties Trust First Quarter 2012 Earnings Conference Call. As a reminder, today's call is being recorded. At this time, I will turn the call over to Michelle Layne of the COPT's Investor Relations. Ms. Layne, please go ahead.

Thank you, Stephanie. Good morning and welcome to COPT's conference call to discuss the Company's first quarter 2012 results. With me today are Roger Waesche, President and CEO; Steve Riffee, Executive Vice President and CFO; Steve Budorick, Executive Vice President and COO; and Wayne Lingafelter, Executive Vice President of Development & Construction. As management discusses guidance for GAAP and non-GAAP measures, you will find a reconciliation of such financial measures in the press release issued earlier this morning, and under the Investor Relations section of our website. At the conclusion of management's remarks, the call will be opened up for your questions. Before turning the call over to management, let me remind all of you that certain statements made during this call regarding anticipated operating results and 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. 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 dispositions, acquisitions and development projects, changes in interest rates, and other risks associated with the commercial real estate business, as detailed in our filings with the SEC. I would now like to turn the call over to Roger for his formal remarks.

Thank you Michelle and good morning. 2012 is starting off well as evidenced by our better than expected quarterly results. Our FFO per share as adjusted for comparability for the first quarter was $0.53, which is $0.02 above our guidance range and $0.04 above the $0.49 we achieved in 2011. The quarter's modest outperformance was primarily driven by lower than budget property operating expenses associated with the mild winter in the Mid Atlantic state and higher than excepted development fee income. We are reaffirming our 2012 annual FFO guidance of $2.02 to $2.18 per share. The fact that existing and potential strategic tenant in the government and defense IT industries have been operating this fiscal year with a budget rather than other under a continuing resolution as modestly increased leasing activity. We are tracking over 300,000 square feet of potential development leasing activity at the National Business Park area, Patriot Ridge and Red Stone Gateway that we expect to result in further leasing during 2012. This is in addition to 86,000 square feet of development space leased in the first quarter and 60,000 square feet already started in this quarter that Steve Budorick will provide additional color. That said, we believe the potential federal budget cut in fiscal year 2013 generated by the possible application of (inaudible) cuts to the defense budget under the Budget Control Act is causing agencies and some contractors to be more deliberate about making long term large scale space commitment. Compounding this uncertainty is the increasing likelihood that the fiscal 2013 defense budget will not be passed before the November elections. Ultimately we expect to see our markets benefit by continued growth in support of cyber and priority programs as well as the remaining contractor tail following the recent government BRAC moves. In the meantime…

Thanks Roger. Good morning everyone. Before I discuss the quarter's results I'd like to point out a couple of presentation changes we've made. We've refined our segments to include development assets and land and the carrying expenses associated with land have been reclassified from property operating expenses to new business in the land carrying cost. Accordingly our reported NOI now relates solely to our operating properties. These changes are reflected in all periods presented. We hope that this provides additional clarity and to the operations of our property and helps the analysts and investors more clearly understand our operating portfolio. We've also refined our definition of FFO as adjusted for comparability. Because we have previously excluded impairment losses or non-depreciable real estate, we are excluding gains on these types of assets. Now turning to our results, FFO as adjusted for comparability for the quarter was $45.3 million or $0.53 per share, representing an 8% on a per share basis from the $0.49 per share or $39.6 million of FFO as adjusted for comparability for the first quarter of 2011. FFO per share as defined by NAREIT was $0.54 for the quarter as compared $0.13 in the first quarter of 2011. Our 2012 FFO per share includes a $600,000 gain net of tax resulting from the sale of Candlewood which was a non-depreciable asset held in a taxable subsidiary. Our 2011 FFO per share included a $28 million or $0.39 per share non cash impairment share on un-depreciated real estate of Port Richey and the land sale gains of $2.7 million or $0.04 per share. Moving to same office results, cash NOI was favorable to our expectations as a result of lower operating expenses related to mild winter in the mid-Atlantic state. Our same office portfolio excludes properties included in the…

Thank you Steve. Our office portfolio was 87% occupied and 89% leased at quarter end, up 80% and 70% basis points respectively from the prior quarter. Our same office portfolio occupancy was 89.5% at the end of the first quarter 2012, down very modestly from 89.6% at the end of 2011. During the first quarter we leased a total of 570,000 square feet of which 320,000 square feet were renewals, 121,000 square feet were re-tenanted, 86,000 square feet related to development and re-development projects and 43,000 square feet represented other first generation space, leased properties we acquired with existing vacancy. Based on leasing today, revenue at risk required to meet our mid-point of guidance has been reduced from approximately $15 million to just $9 million. We have leasing in progress which would reduce this revenue at risk to under $3 million. For the first quarter we had a renewal rate of 59% and an average cost of $7.52 per square foot. Print and renewals increased 2% on a straight line basis and decreased 8% on a cash basis. For renewed and re-tenanted base, total rent increased 1% on a straight line basis, and decreased 9% on a cash basis. Our average capital commitment on second generation leases was $10.17 per square foot. We expect really spreads to tighten because our leasing plans for the rest of the year include a higher percentage of renewals and are more concentrated at our strategic properties. The commercial office market to Maryland, Washington DC and Northern Virginia continue to be challenged by the uncertainty around the 2012 and 2013 federal budget, the upcoming election the restraint in GSA leasing. Overall vacancies hover in the 15% to 16% range and first quarter absorption was flat and negative 1% in the quarter comparing by market to…

Thanks Steve. In summary, the 2012 economic and operating environment will continue to be challenging. The company is performing well as indicated by our first quarter result and remains focused during this year of transition on executing along four major strategic lines, leasing space, executing the sale of non-strategic properties and land, allocating capital prudently and strengthening our balance sheet. With that operator please open up the call for questions.

(Operator Instructions). Your first question comes from the line of Craig Mailman, KeyBanc Capital Markets. Please proceed. Craig Mailman – KeyBanc Capital Markets: Maybe if you can just start of Power Lofts where you guys kind of ended your comments, I know you guys have gotten the question in the past a lot whether you guys are opening it up to more traditional internet type tenants just curious what the marketing strategy has been there particularly in light of the activity that one of your competitors focused data center guys just announced last night.

Currently we are marketing the property over multiple channel. We have a pretty intense marketing effort directed at our core customer base which is directly linked to the federal government and much of the difficulty in making progress with that program really is associated with the budget situation in Washington but similarly we have expanded our marketing team and our marketing channels and we are focused on enterprise, large enterprise user from the commercial segment as well as the smaller deals that kind of predominate the market currently. Craig Mailman – KeyBanc Capital Markets: Was it been about the asset that’s been for you guys to get traction with more traditional sense, is it just because it's a Manassas and sort of closure to Ashburn or is it just that you guys have been really holding back that space?

Well there is a couple of factors, one factor is that remember we built the partially constructed and so through parts of 2011 some of the demand that was actually in the market exceeded our built out capacity. But as we moved in the fourth quarter of 2011 we now have a significant amount of capacity immediately available. And there is certainly a segment of the market that prefers to be an Ashburn for reasons that help their business, our assets really setup for large high density enterprise. Users that value the kind of Tier 3 characteristics we have and the unique security element that we can provide. Craig Mailman – KeyBanc Capital Markets: That’s helpful then just sort of on in a more traditional tenant base, sounds like you guys are starting to see a pretty good pickup in demand from the contractor base and sort of your intelligent tenants. Can you maybe just give us some more color on the 300,000 square feet pipeline sort of how much of that is the private contractors versus your intelligence agencies that you guys lease to and if there has been any shift in sentiment among the contractors, are they solely waiting till a contract assign to take space or they have been taking space ahead of contracts that they think are sort of really in bad for them.

Regarding the composition, I would say the contractor element is probably three parts and the one part core government customer. With regard to the viewpoint of the contractors it's really very specific and contract elements of their business and it varies across Arakan region, so it's very much associated with the business activity of the ultimate core customer once they released it.

The one place we have seen speculative spaces on cyber a lot of people are opening up cyber operations in close proximity to Fort Meade because of the standup of U.S. cyber command, they are in the fall 2010, beyond that people are being more deliberate about taking space. Craig Mailman – KeyBanc Capital Markets: Okay then just one last quick one, looks like you guys reversed some earlier impairment on asset. Do you think that’s just the function of these assets that were in sort of the first or earlier rounds, you got better pricing and do you see that trends serve a bathing order. Are we going to see more and more of these impairments reversed just given the better sales environment?

Well the big reversal was related to the Candlewood property that we sold and that is a property that was converted industrial in to office condos. So we did realize ultimately a little bit better value than what we assumed at the time we put it into our SRP plan. And because we had taken impairment while it was in held for sale, the gain had to be recorded as a recovery of the fire impairment. I don't think that's going to be necessarily typical of the broader sale.

All right, so to the extent that we had gained otherwise, they would just run to the gain on sale line on the income statement.

Your next question comes from the line of Michael Knott with Green Street Advisors. Please proceed. Michael Knott – Green Street Advisors: Just curious if the rent roll down number I think was a blended minus nine on a cash basis for the quarter. Just curious if that was a little worse than you expected or kind of as expected and if it has any sort of signal for the market or how you thought about that?

Michael couple of things, first we did have one tenant skew the numbers a little bit. We had one renewal that had quite a substantial rollback for particular circumstances on that tenant and building. Beyond that, the characteristic of the tenant that we renewed or re-tenanted in the first quarter were largely in locations that were not as strategic as our other locations. So we would expect that as the year goes on and the renewals and the re-tenanting which we expect to be located near our demand drivers that pricing would be much more favorable than the first quarter. Michael Knott – Green Street Advisors: Okay that's helpful and then Roger, let's say if we look forward to when you are done with SRP, do you feel like the remaining portfolio that you'll generally garner lease terms that are longer than three to four years which you've spent signing in a lot of the last several quarters as I recall?

I think so. We're going to have a little bit of a transition period with some contractors who are going to want to some of which will want to go shorter term to have some flexibility which the budget uncertainties get walkthrough but longer-term we should get back to a higher average year life on our leases. Michael Knott – Green Street Advisors: And I guess this one would be for Steve Riffee, same store on life of the year, I think guidance was plus 1 to 2%. That's unchanged, I take it given the FFO guidance?

Correct. Michael Knott – Green Street Advisors: Okay and then what kind of expense number is baked in for the year. It looked like you were minus 5% for 1Q. I am just curious that given that you were much better than you expected or little better than you expected for 1Q because of the expense side that moved. That seems like it would move the year number a little bit but maybe not enough to change the range.

We're not ready to change the range. We'll probably update the range after we get a better feel for how we're doing at the mid-year point Michael. Michael Knott – Green Street Advisors: Okay. But any color on what kind of expense number for the year you had in there compared to the 5% decline for 1Q.

We clearly benefited in the first quarter to lower heating costs and lower snow removal etcetera, but we also adjusted our cam recoveries and all. So we have more seasonal R&M and those kinds of expenses in the next couple of quarters and then we'll see how hot the summer is in terms of utilities. But we'll give an updated guidance range as we get just a little bit more feel for how the expenses will play out for the year. Michael Knott – Green Street Advisors: Okay. And then just on the dispositions. How are you feeling about the buyer pool and their ability to finance these acquisitions. I presume and I think you said before that most of the buyers release are smaller buyers reliant on local bank financing potentially.

Well our sales in the second quarter were one to a user, two an institution and three to a private equity firm all of which obviously had great access to capital and I would say everybody that we're currently dealing within the pipeline has access to capital that wouldn’t be a consideration for our deals not moving forward so far.

Your next question comes from the line of Brock Stevenson with Macquarie, please proceed.

Just to follow up on the last question, did I miss it or did you guys talk about what the cap rate was on the first quarter sales and what you thought you were going to be able to achieve on the stuff that you have under contract?

Well there were two parts to the first quarter sales. There was $38 million that were assets that really did not have tenancy and so obviously the cap rate was probably a minus number because we were incurring operating expenses. On the assets that were in service and were 80% occupied, we had a 7.9% cap rate. And looking out, with under contract and other deals that we're working on, we're still comfortable with the 8% range for the balance of the program.

Okay, and then one other question, can you talk about how conversations have been going with CSC which I believe is your fourth largest tenant given that you are inside two years now on their lease term on renewals?

Well we have CSC in four different locations and varying groups. We have them in Huntsville, we have them are around (inaudible) we have them in North of Virginia and we have them in DC and its different groups, different programs and I think we're in pretty good shape on the majority of the CSC space. We'll see we're due to meet with them in the next couple of weeks and get more clarity on their specific locations.

Okay, but nothing as of yet would suggest that they are going to be giving back significant space over time here.

That's correct.

The next question comes from the line of Joshua Attie with Citi. Please proceed.

For the rest of your plan assets sales for the year, what portion of those are landholdings or other non-operating assets?

Everything else is in the queue to sell for the balance of the year is in operating assets. We are slowly working on some land transactions but it's nothing that we are willing put an absolute timeframe on at this point. So everything else should sell, either be a cap rate sale and sell again in the 8% range.

Okay and I know you guys talked a little bit about development leasing subsequent to quarter end. I don't know if you have a specific target in mind for leasing for the end of the year?

Well back one and two quarters ago we talked about 400,000 square feet of development leasing for the year. We've done 86,000 in the first quarter. Steve mentioned we did 60,000 square feet so far this quarter. So that brings us right around to 150,000 square feet which then suggests another 250,000 square feet for the balance of the year. Right now we have deals in the works that if executed would allow us to get to that number.

Okay and I know about a year ago there was a lot of talk about government consolidating their data centers and how that would benefit you guys. I don't know what the status is on those consolidations and have you seen any impact from that?

I think there is still a lot of discussion and a lot of analysis going on there. I don't think it's anything that's going to happen in the next six to 12 months. It is project that the government's working on at various different agencies and depending on who the agency is; the timing will either be quicker or slower. But I don't think it's anything that we can count on in terms of our business plan for the next 12 months.

Thanks. And just one more for your G&A. It was a little bit higher than usual this quarter. I don't know if there were any one time items in there and what you should sort of expect going forward.

We had guided before that we would have some executive transition costs. That made it a little bit higher. I had expected in the second quarter as we complete those costs to be in the $6.5 to $7 million range and then our run rate for the third and fourth quarter will be around 5.5 million now. So the timing is a little different than perhaps you would have seen.

Your next question comes from the line of Rich Anderson with BMO Capital Markets. Please proceed.

Hey Roger you mentioned when you are talking about the (inaudible) if you could do more faster you will if possible. How much more is more?

Well for this year, we had projected $206 million in our guidance and so year-to-date we've done the 63 million and as we mentioned, we have another 71 million under contract and then we we're working on other deals and to the extent that we could do a big deal to accelerate the plan we consider doing that. So I think at max we could be another $50 to $100 million over the plan for the year.

Okay, but that's not relative to 562. The 562 is identified and you don't think it will be more than that in terms of the overall plan.

Right, we have a plan that's 562 million. I do think that it will be continual recycler of capital going forward but that plan is supposed to end at the end of 2013.

Okay, when you talk about contractors being deliberate and all the rest, what about some of those wavers that are out there that have the clock ticking and then they have to move eventually. I mean how does that play into your expectations in terms of leasing in the contract retail?

I think it does, it's just we can't exactly frame up the exact timing, when it's going to happen. So there is a proximate requirement to settle for response time in those contracts and then beyond that our customers collaborate as part of their business solutions. So our customers by their nature want to be closer to their customers so the prime contractors want to be close to the government and the sub-contractors want to be close to the prime contractors and all that will fall in place, it's just that it's going to take a lot to happen, we’ve experienced this before with (inaudible) experienced it in other locations where the government gets ramped up and its obviously frustrating for us that it's not going faster but we do believe that the combination of the contract requirements and just the co-location that's important for their business model will get us to where we want to get over time.

Is the term revenue at risk a new one for you guys? I like it, I like it. Don't get me wrong.

Internally it's been something we’ve always focused on. We just thought we would communicate that to the public's people to get comfortable with our guidance for the balance of the year.

Yes, I think it's good. So is that the main swing factor or I know there is other factors to get to your guidance for the year but how substantial is capturing that 9 million of remaining revenue risk relative to other factors in getting to your guidance. Is that like the biggest one?

It is if you take the 9 million and divide by 76 million shares outstanding that's $0.12 a share. Now Steve Budorick mentioned in his comments that we're working on deals of $6 million so two-thirds of the nine are active deals that we think have a high likelihood of getting done. The other wildcard which is something you touched on earlier is accelerated sales and would impact that would have on loss NOI and with the proceeds going to pay down debt if we were to accelerate sales.

(Operator Instructions). Your next question comes from the line of Young Hu, Wells Fargo. Please proceed.

Probably just quick questions from me. In terms of your occupancy level, it's around 87% now but it was as high as close to 95%. How high do you think that occupancy can get and how long do you think it will take to materialize?

I think for long term modeling, we’re thinking in terms of 92-93%. I think when your portfolio gets to a certain size and you have lots of moving parts, when you are dealing with one or two buildings or even a portfolio of 20-30 buildings, the 95 sort of convention for stabilized occupancy I think is a factor or maybe if you are in a really high barrier market but I think the nature of our business is that if we can get to 92-93 we would be happy with that. We would consider that structural occupancy of structural vacancy depending on how you want to look at it. And I think in terms of timing that we are looking at 13 and early 14 to get to that kind of stabilization.

And you sold a couple vacant assets in the quarter, but just wondering how many other vacant assets in terms of gross dollar amount was square footage? Is that still in your portfolio today and how much of that is premium SRP?

Right now we have one vacant building that is in the SRP that may lease before we sell it but generally speaking the majority of the assets. Again, all the assets really in the SRP except that one building or whatever we call it cap rate sales.

Your next question comes from the line of George Auerbach with ISI Group. Please proceed.

Just a quick question on leverage. The supplemental shows net debt to EBITDA or adjusted EBITDA at 6.7 times. I think your number is a little bit higher than that, but maybe just thinking through longer-term balance sheet. That 6.7 times, first as that assumes a full lease of development assets and or further asset sales. And two, where would you want to see that number over the medium to longer term?

Well the way we actually compute is rather than make and project lease up in timing is, we adjust the debt and exclude the construction in progress say that it works dollar per dollar. That's how we do it. I think long-term as we lease up the portfolio to the 92-93% levels that Roger talked about and in development is likely not to be quite as high a percentage of the overall portfolios that may have entered its peak. We think that we'll start to approach, get better than that and start to approach what we seeing the adjusted debt to EBITDA. We again use our adjusted to growth assets as our key metric. We reported to have 49.2. I think we said, our longer-term vision knowing that our best source of capital today are the SRP assets to take that ratio down to the low to mid 40s.

Sorry if I missed it, but can you talk a bit about capital costs for lease transactions, put us down in DC and it sounded like the metro DC market leasing cost had really moved to the upside over the past six months. Maybe if you talk about what you're seeing both in the more commodity market as well as your expense market?

George I think it's some market to some market and obviously the higher your percentage of renewals to retaining the better, the lower your CapEx costs are. We experienced for the last two years now about $11 per square foot for renewals and retaining this quarter we were a little over $10 and I think that sort of a number that we're focused on for the balance of the year. I don't think we've seen where CapEx pushing by (inaudible) is that extreme in most of the markets that we're in. I think we'll see a little bit of that in Virginia depending on how much leasing we do there this year. But up in the BW Carter where things are a little more in balance , we're not seeing that push.

With no further questions in queue. I will now turn the call back to Mr. Waesche for closing remarks.

Thank you all again for joining us today. If your questions did not get answered on this call, we are in our offices and available to speak with you later today. Thank you.