Welcome to the Corporate Office Properties Trust fourth quarter and yearend 2015 earnings conference call. As a reminder, today's call is being recorded. At this time, I will turn the call over to Stephanie Krewson-Kelly, COPT's Vice President of Investor Relations. Ms. Krewson-Kelly, please go ahead.

Thank you, Ashley. Good afternoon, and welcome to COPT's conference call to discuss the company's fourth quarter and full year results for 2015. With me today are Roger Waesche, President and CEO; Steve Budorick, Executive Vice President and COO; Wayne Lingafelter, EVP of Development and Construction; and Anthony Mifsud, EVP and CFO. In addition to our supplemental package and press release related to fourth quarter results, please note we have posted a flip book titled 4Q and full year 2015 results to our website that accompanies management's remarks this morning. Please also note that we have changed our segment presentation to provide a better line of sight on our Defense/IT franchise. Accordingly, we now refer to our strategic tenant niche as our Defense/IT Locations. As management discusses GAAP and non-GAAP measures, you will find a reconciliation of such financial measures in the press release issued earlier this morning and in the Investors section of our website. At the conclusion of management's remarks, the call will be opened up for your questions. We remind you that statements made during this call may be forward-looking statements within the meaning of the Safe Harbor of the Private Securities Litigation Reform Act of 1995 and that actual results may differ materially due to a variety of risks, uncertainties and other factors. Please refer to today's press release and our SEC filings for a detailed discussion of forward-looking statements. With that, I will now turn the call over to Roger.

Thank you, Stephanie, and good afternoon, everyone. Before I discuss our fourth quarter and full year 2015 results, I'd like to discuss our planned CEO transition. Succession planning is a critical part of our business and something that the Board and I spend a lot of time on. As you saw in this morning's press release, I will be stepping down as COPT's President and CEO after our Annual Meeting in May, and will be succeeded by Steve Budorick, who currently serves as our EVP and COO. I will complete my current term on the Board, which expires in May, and at that time the Board intends to appoint Steve in my place. As you know from these calls and our meetings, Steve has a deep understanding of our business and a keen ability to anticipate shifting industry trends in the increasingly complex needs of our tenants. He is widely respected across the industry with our customers and within the company. Steve is a proven leader with a track record of operational success. When Steve joined COPT in 2011, I have had the pleasure of partnering closely with him, as we developed and executed our focused strategy. Steve has been instrumental in repositioning our portfolio to upgrade its quality and increase capital allocation to our Defense/IT locations. Steve has the right vision and I am extremely confident that he is the ideal person to lead COPT into the future. Let me turn now to our financial results. We'll focus this call on our strategic framework, the strong results we achieved in the fourth quarter and the resulting momentum with which we enter 2016. We will also update you on the status of our asset sales, which are key component of our 2016 plan to further refine our portfolio and strengthen…

Thank you, Roger. Let me begin by saying that I am honored that the Board has selected me as COPT's next leader. We have the right strategy in place, and I look forward to working with our talented team to continue executing our well-defined plan to create lasting value for shareholders and tenants. I also want to thank Roger for his leadership and his tireless commitment to our company over the last 30 years. We will work closely over the next few months to ensure seamless transition and we remain 100% focused on our business plan and serving our tenants. With that, I'd like to echo some of Roger's comments about our strategy. We allocate capital, first and foremost, to our Defense/IT locations, summarized on Slide 6, in order to strengthen our position as the pre-eminent provider of real estate to high-tech defense segments of the U.S. government. Since 2011, the vast majority of the $925 million we have invested is currently growing our Defense/IT Locations. We also allocate capital very selectively to high-growth regional office assets in urban and infill locations, where we are confident we can grow cash NOI. In 2015, we opportunistically acquired two strong regional office properties to enhance the segment's durability. With that achievement we have no plans to acquire any properties in 2016. Instead, all of our resources are focused on maximizing cash flow from our existing portfolio, pursuing NAV enhancing developments, primarily at our Defense/IT Locations, and recycling capital through asset sales to fund development and further strengthen our balance sheet. Although, our Defense/IT portfolio is very different than our urban-focused regional office properties, both segments benefit from scarcity of land that keeps competing supply in check. Furthermore, tenants need to be at our locations either to support a critical government mission or…

Thanks, Steve. We had another solid quarter, as summarized on Slide 10, with diluted FFO per share as adjusted for comparability of $0.52 in the quarter and $2.01 for the year, both in line with the midpoints of our guidance. Same office occupancy and overall portfolio stats were in line or exceeded guidance. Dispositions in 2015 are summarized on Slide 18, with proceeds from asset sales and the resolution of the Washington Tech Park CMBS loan, we strengthened our balance sheet and credit metrics. At yearend, our debt to EBITDA was 6.5x. As the EBITDA from development projects flows into service during the year and as we pay down debt with asset sales, by yearend we expect to improve our debt to EBITDA to 6.1x and our debt to adjusted book ratio to 39%. If you turn to Slide 20, you'll see our debt maturity schedule, on which I'd like to highlight three things. First, in 2015 we continued to lock in attractive long-term rates. As a result, our weighted average debt maturity is 6.1 years. Second, the interest rates on over 90% of our debt are fixed. Third, we have already funded our 2016 debt maturities, and therefore have no debt maturity risk until 2019. This is an important differentiator for our company. So let me give you a little more detail. In 2016, we have $40 million of joint venture-level debt that matures in May. We are in the process of refinancing it with the new secured loan and expect to have that completed in April. We also have $162 million loan maturing that is prepayable at par on July 1 and bears interest at 7.25%. We have already substantially refinanced this loan. Recall that in December we entered into a $250 million seven-year term loan with a…

Thank you, Anthony. I want to take this moment to address two misperceptions about COPT's business that have been circulating since last fall. The first misperception is that our portfolio faces exposure to GSA efficiency efforts. Our U.S. government customers do not use the GSA as their procurement agent. Therefore, we have almost no GSA space in our portfolio. We have 3.8 million square feet leased to the U.S. government today, all of which is densely populated by the tenants. Of this amount, only 93,000 square feet are leased with the GSA. Additionally, the GSA's mandate to densify and reduce space usage is focused on its largest market, the National Capital Region. I say Nation Capital Region and not the BW Corridor, because there is an important distinction between the two. Namely, the National Capital Region excludes Howard and Anne Arundel Counties. These two counties comprise the BW Corridor, where 50% of our buildings in a super majority of our government portfolio are located. Because of GSA's existing concentration space is not our markets, their downsizing will not affect our market conditions. To summarize, we don't have demand risk, because we have only 93,000 square feet leased with the GSA. And we also don't have supply risk, because their buildings are not located in submarkets, where the GSA is highly concentrated and looking to downsize. The second misperception is that the operational organizations at Fort Meade are constructing new facilities to house contractors and consolidate government workers, and that this new supply will somehow compete with the National Business Park. This hypothesis is flawed in several ways, because the reality is that the National Business Park will grow as the Fort's missions expand. A fact that is demonstrated most recently by the 50% pre-lease we executed in December at our…

Thank you, Steve. Remember this thought, the attacks of 9/11 reveal the insufficiency of our intelligence resources and fuel the rapid growth of our intelligence community. The need for more and better intelligence is greater today than it was back in 2001, so it is foolish to believe the industry that supports these efforts will not continue to grow. The advent of cyber crime compounds the need for increased intelligence, analysis, technology and organization. We are very confident that our real estate investments are well-positioned to serve the inevitable expansion of the operational organizations at Fort Meade and elsewhere in the future, as they have in the past. In conclusion, 2016 marks the end of a five-year transformation that has changed our company into a highly-focused productive of portfolio of mission-critical locations backed by an investment-grade balance sheet. After this year, our story will be even simpler, continue to strengthen our balance sheet and grow by maximizing existing operations and through low risk development, primarily at our Defense IT Locations. With that, operator, please open up the call for questions.

[Operator Instructions] Your first question comes from the line of Craig Mailman of KeyBanc Capital Markets.

Just want to start by congratulating Steve, and thanking Roger for all your help over the years and just want to wish you well. And with that said, just curious a little bit about the process here, the decision with the succession planning and the timing and any changes to potential strategy here?

Well, I'll talk about the process and then Steve can talk about changes in strategy. Steve had been designated successor as CEO for some time. Steve was evaluated regularly, both externally and internally, and he was determined to be ready now. And by externally, I mean, he was evaluated by a major search consulting firm. The foundation of work that needed to get done over the last five years is now done. The portfolio has been repositioned. We've sold more than a third of the portfolio and we focused the company on niche development. We've done about 4.8 million square feet during that time. The balance sheet has been deleveraged and we've achieved investment-grade ratings. And then most importantly, the government contractor business model and space reset has been weathered and now is in a position to start to grow again. So the Board felt that the timing was optimal to have CEO transition and Steve is absolutely the right leader for the next stage of the company's growth. In terms of strategy, I'll let Steve talk.

Craig, there will be no change in our strategy. Roger and I have worked in harmony for the last four years to get our portfolio where we wanted it and to have development opportunities at multiple locations. We're going to continue to invest in those Defense/IT Locations to create value and keep our business focused on our niche.

And should we be expecting a charge in the second quarter related to the succession?

There will be a charge that we will take in the first quarter that we outlined in our earnings reconciliation, that's about $0.03 a share.

And then, Steve, your comments are helpful here on Fort Meade. Just curious, can defense contractors sign leases in military construction?

No, they can't. There are times when the military is short of personnel and they higher contract employers from a contractor to collocate in those buildings with them as, think of it is more like temporary labor. They do not lease space in the government buildings.

Your next question comes from the line of Manny Korchman of Citi.

Steve, maybe the next part of the succession planning, the COO search, was that sort of put on hold until this announcement is made publicly or if not what type of candidates are you looking for? Is it somebody with more of the more consulting or defense background or is it more a real estate person?

We commenced this search last week after the Board meeting, and what I plan to look for is the value creator with real estate background, who can continue the work that I have been conducting for the last four years and be a team mate, that's very complimentary.

And then just switching to development for a second, in terms of just timeline for those of us that aren't as familiar with the way that you handle, whether it'd be RFPs or just conversations with these tenants that are more subject to contract? How much lead time do they have and how much lead time do they give you, so if you're in conversations today, is it for development that's going to start in six months, nine months, 18 months, five years, sort of how do they think about timelines?

Well, it all depends on the contract. I hate to be vague, but we're working with two right now that expect to win a contract in the next 12 months that should require somewhere between 80,000 square feet to a 100,000 square feet each. There are others that we're working with on a build-to-suit that from contractor award to needing the space would be only six months, but they've been perusing that contract for over a year-and-a-half.

Your next question comes from the line of Jamie Feldman of Bank of America.

Just to echo, congratulations to Steve and Roger, it's been a pleasure to work with you and best of luck in the future. So I guess, Steve, I think you went pretty quickly through some of the leases you are close to signing on the development. Can you run through those again? I just want to make sure I got them all. And have some other follow-up questions in the pipeline.

The only leases I referred to in the document were NBP 310 and NoVA B, which are two government leases -- two government buildings that we expect to get lease this year. With regard to the pipeline we had that on Page 14, that includes activity at Redstone Gateway in the NoVA portfolio and then the National Business Park, as well as Arborcrest where we have building demand for the next redevelopment.

So I guess I'm looking at Page 24 of the supplemental, are you saying like 310 will be 100% leased? Maybe just you refer to the supplemental because you have all the percentages?

Let me go through the supplemental. I'm there. 310 we expect to get lease this year.

A 100%?

100%. NoVA B we expect to get lease this year. It could be leased in two phases. 2100 Redstone Gateway is retail building. We have 58% of it pre-lease, I don't expect additional activity till the building is completed. And then 540 National Business Parkway, we signed 49% pre-lease. We have two users looking for 80,000 to 100,000 square feet at the NBP that will fill that building out and then flow into a 400 Series. With regard to the redevelopment buildings, 6708 Alexander Bell Drive we held off for a full building user, that deal did not materialize. And we're working on leasing about half of that to two tenants right now. 7134 Columbia Gateway, we really just started the construction in December. We have about a 20% lease up for execution and good demand behind it, that's being very well received. And then Airport Square 13, 1201 Winterson, we are working with two separate full building users for that building. And then the last item I am -- the list is Airport Square 5, the retail building. John's working with multiple retailers to take the remaining 6,000 square feet.

And then you announced in the first quarter, it looks like a datacenter deal. Can you talk about the pace of leasing in datacenters and over time how much of your portfolio you'd be comfortable having in datacenters?

Well, the pace has been pretty rapid since 2012 when we landed our first deal. We expect a couple of more leases in 2016, and then that activity would flow into 2017 as well. And we're comfortable with the level we have now in our development pipeline. But some time down the road, as we look at the fraction of the revenue that comes from that segment, we'll have to make some prudent decisions about how much we want to continue to own or if we want to potentially JV some of that tenant risk off with a good capital partner.

And then finally, I guess, for Anthony. So you said a $175 million of sales either in the contractor LOI by the end of the second quarter, it looks like that leaves $250 million or so. Can you talk about that the demand for those assets and any change in -- I mean, we've certainly seen buyer spread or credit spreads widened here, and its sounds like secondary market interest is slowing down, so can you talk about that remaining chunk and how confident you guys are in getting that done?

We have very high confidence. We're going to put out more to the market. In total, what we're introducing to the market this quarter and next quarter is about $600 million. Many of the projects we're getting very positive feedback, from the brokerage community bought interest in the assets. And we've been pleased with the level of the buyer interest, and literally all the projects that we're seeking to sell. So we've got a very high confidence level right now.

Can you characterize those assets?

Prefer not to. But we're seeking to improve the overall quality of our portfolio. So we're looking at things that are lower on the growth profile or that could simplify our story further.

And then one final question. It looks like your TIs gapped up in the fourth quarter, but we're still in line with last year's overall for the year. Can you talk about your CapEx outlook for this year and maybe what you're thinking in terms of AFFO coverage?

Well, let me address the fourth quarter. It popped up a little bit, those driven by the high volume of leasing in Northern Virginia, where we did 63,000 square feet in the aerospace building. And those are generally 10-year leases, so the TIs are in the $70 range.

And we're expecting our AFFO coverage to be in the 70% to 75% range for 2016 for the full year.

Your next question comes from the line of Brendan Maiorana with Wells Fargo.

First question for Anthony. So starting at the $0.47 midpoint of FFO guidance for Q1, let's add back $0.02 for the snow, which isn't going to continue in the future quarter, so that's $0.49. You've got the additional sales that are going to happen throughout the year, that seems like those would mostly offset the increased NOI from development and then just your natural NOI growth as you ramp occupancy during the year. But your guidance suggests that your FFO run rate, as you get to the latter part of the year is going to be much higher than that adjusted $0.49 number for Q1. So what else kind of drives it higher as we progress throughout the year?

It's not going to really drive it much higher than that. I mean, our midpoint of our guidance is $2 a share. So you get to the $0.49 and the net impact of the sales, which will, as you correctly pointed out, will offset the NOI coming in from the development assets coming online. We maintained that $0.49 to $0.51 each quarter for the year, because of those changes in the portfolio throughout the year. So the $0.49 doesn't really trigger a much higher run rate in the future to get to our midpoint. Our range is really a product of the timing expectations around the dispositions. If we sell sooner it will be lower than the $2, if we sell later it would be higher.

And then I wanted to understand kind of the capital plan a little bit more. So you've got the $150 million term loan takedown to pay-off that maturity in July or substantially all of that maturity in July. But then your capital plan also has about $200 million more in terms of disposition proceeds relative to development spending and your credit facility balance is pretty low today. So what do you sort of use the extra $200 million in terms of proceeds for? What else is there to pay-off that's on the balance sheet today or do you just kind of hold cash by, say, end of the year?

It's a combination of holding cash. And we also have a term loan that's comes due in 2019 that is on a relative basis to the other pieces of debt that we have in the portfolio is one of the more expensive from a spread standpoint, so we might be looking to pay that off early. But the number is little bit in excess of $200 million, some of it would go to repay debt, some of it would be to have cash on the balance sheet, but that gets us to our net debt to EBITDA that we're projecting of 6.1x by the end of the year.

And then last one probably for Steve Budorick. So you really do a nice job laying out kind of the long-term growth drivers at NBP is very helpful. So you've got over 200 acres of land that's there, I think you can do close to 2 million square feet of development. Based on kind of the drivers that are in place today, do you think development at NBP accelerates from where it's been over the past couple of years? Do you think it's in line with that or is it possible it could be lower than what you guys have done over the past couple of years?

Well, the activity around the NBP improved dramatically in the fourth quarter. We did a lot of leasing there. Bill has literally five vacant suites totaling a 104,000 square feet and he's got 69,000 square feet of prospects working against that. And then we have the balance of 540,000 square foot, where we have two tenants working for that. And then we're anticipating the continued steady ramp up is Cyber Command has stood up and the mission expands, so it's improved, and I think it will return to what it was in 2013 and 2014 this year and it could accelerate.

Does that give you kind of maybe like somewhere between five and 10 years of sort of land inventory there depending on pace?

Yes. That's about right.

And Brendon, we can come back and identify also in the earlier phases of NBP if we need to.

Your next question comes from the line of Tom Catherwood of Cowen and Company.

Question, I guess for Roger and Steve. If you take a look at the president's 2017 budget, it includes a significant uptick in funding for high-tech defense project, including cyber security. But given the grid lock in Congress, what do you think the likelihood that we'll actually see these funds make their way into project allocations in 2017 and 2018?

I think it's very good, simply because of the risks that the country is taking on with respect to cyber. And there has been, across the board, whether it's the Democrats or the Republicans, there has been Bipartisan support to fund those initiatives that are priorities for the country. And certainly cyber security is really one of about the top priority that the country has in terms of risk, so that it undertakes everyday. So I think it's actually pretty good.

And we also, as part of that, we hear about what sounds like it could be competition for Fort Meade with cyber security getting started up with FBI, Department of Homeland Security, CIA. Do you see other sources of funding as competition or is it all kind of added to the environment of cyber security?

Well, the work needs to go on. And there is the issue of the GSA and funding new buildings, and obviously the FBI exist in the location today, and they'd like to get to a new location. And the part of cyber, that's the civilian part, the Department of Homeland Security is executing, exist today, it's just all over the place and it would like to get to a new facility. So I think there is the real estate and then there is the work itself, and the work is getting done and it's getting funded and it will continue to get funded, and eventually each of those organizations will get a new home.

And Tom, just to throw in, the FBI cyber effort is out in the Westfields. We have buildings around that. I think that's supporting some of the growth and the leasing that we're realizing there. And if you read about the magnitude of the cyber defense challenge, it's just massive. Everything from utilities to businesses to the government networks, I think it will be accretive to the whole market and certainly many of the places we have buildings.

And then switching to the regional office portfolio for a second, any progress this past quarter on the development plans in Canton?

We did make progress this quarter. In December, we received an approval to our plan from the UDAR body. So now we move from that design review into the legislative steps that go along with the council's approval of the plan.

And what's the kind of timing on that next phase of the approval?

We would expect it to be through those approvals this spring.

Your next question comes from the line of John Guinee of Stifel.

Let me just -- I've got to, my job is to give a little pushback, so I'm going to give you a little gentle pushback on Fort Meade. First can you sort of explain how the Army Corps of Engineers how they do RFPs and do business may differ from the GSA sort of web-based scoring all comes down to the bottom nickel sort of thing, how the two differ?

They use a solicitation for offer document, and they award contracts on the lowest price technically acceptable basis. So they have very specific requirements for the building and very rigid competition. So we do have to complete to win it.

But I think, John, a thing to remember is that there are only a few designated locations, where the customers that are supported by the Army Corp of Engineers can take their customers. And so it's not a, let's go all over D.C. and find a location. It's got approximate to the mother ship.

So the big picture, when I look at, just been around here for a while, you've got the defense department seems to have a tendency to be on base. If you look at the C4 ISR at Aberdeen Proving Ground, I think that's 2 million or 2.5 million square feet. This relocated 700,000 square feet from skyline, the [ph] Coronado asset on to Fort Meade. Department of Defense bought the land from Duke Reality and Mark Center and built I think a 1.5 million square feet right there. And then NGA build about 700,000 in Springfield with the annexed Fort Belvoir. So when I'm looking at it, it appears to me, and you obviously know more than I do it, it appears to me there is a real tendency to be on base. And then when I look at Fort Meade, that was 5,000 acres, it's got 17 million square feet of office space on it right now. They just decommissioned those two golf courses about 250 acres, which used to be referred to as Site M is now referred to as the NSA East Campus. At a 0.5 SAR that's about 5 million square feet of space. They've got 1.8 billion of military construction, under construction, MILCON, which you outlined. It appears to me that they're on $300 million to $400 million annual run rate of expenditures. And then when you look at the growth plans that the NSA outlines, they basically say 1,400 more personnel coming on base in the next five years, and then 6,000 to 9,000 employees coming on base in 2022 to 2028. So where I'm struggling is, it seems that they have a really long-term plan to continue to focus on base from everything that they are publishing. Am I missing something?

No. I think a lot of the points you made are facts. Remember those projects with Aberdeen, the Mark Center, NGA, those were all funded and driven out of the last BRAC, which really started in 2005 is a very long period of time to get that money allocated and put those in place. And all else being equal the DOD does like to be on their own land. But there is never enough resources, and there are places where they need overflow. And with regard to the operational missions at Fort Meade, they also need to diversify, as we spoke to in the comments. With regard to Site M, remember half of Site M is where DISA and DMA 1, 2. And the other half was reserved for other organizational missions. And we've just walked through that about 2 million square feet capacity that was reserved. And then the document you're referring to, I'm familiar with, if you look at that closely, it was produced by the garrison and not by the operational organization. And the garrison -- the best way to explain it, think of the Fort as a city, the garrison is the operational works of this city and the head of the garrison is Mayor. And that document is presented to the community and it's really a marketing tool to get better roads and infrastructure for the Fort. But nothing in that document was produced from the tenant and the base or the operational organizations. So it's a bit of marketing document and not a strategic plan.

Your next question comes from the line of John Bejjani of Green Street Advisors.

Steve, you've noted the improved activity around Fort Meade and part of this on cyber. Just wondering, you touched a little bit on Westfield, but wondering more broadly, if you've seen a discernible change in leasing in your other markets since those '16 and '17 budgets were approved? And if not, when you think that impact will become more evident?

At various levels, literally in all our defense markets we've got improved activity. Certainly, the NBP is very strong and Westfields is very strong, but we did leasing at Maritime Plaza, Pax River, Dahlgren. We've really made progress in Columbia Gateway with contractors in Airport Square. So overall the trend is positive. There is more magnitude in some markets than others.

I guess sort of related to that the leasing cost for a lot of the new deals still seem pretty high. Is there point at which, and I imagine a large piece of that is just the challenging lease economics of the area more broadly, do you see a point where your, I guess, leasing cost and your niche start to diverge from just a broader market or are you going to be tied to that till broader DC, et cetera recover?

Well, the kind of influence that's making them look more costly currently is the very competitive conditions in Northern Virginia, and then to some extent at Maritime Plaza at the Navy Yard. Those are two of the softer that we're in and there's not upward pressure from where we are, but continued pressure for relatively high TI to capture the business.

I guess, lastly, can you share the cash cap rate and remaining lease term on the suburban Baltimore sales? And how are the buyers financing those deals?

We think the cap rate will be around 8% and the financing is -- there's an amazing amount of money still out there where borrowers are getting up to 80% financing. There is two parts that, there is the primary loan and then there is the mez piece. And then they've got sources of equity. And so what we sold in 2015 was really generally speaking either really private money, or I'll call it, private operators with the institutional capital and that's really what we're finding so far in 2016.

Your next question comes from the line of Richard Anderson of Mizuho.

Let me be the 20th person to congratulate both of you. Good luck, and hope you enjoy your crossing guard job after all this hard work. So I want to first talk about dispositions. You have some still significant dilution dialed in for this year. What's a going on run rate from a disposition standpoint, like how much of your portfolio do you think is up for sale per year and how are you going to manage that on a go-forward basis?

We'll, without our stock price going forward, once we reach our targeted debt to EBITDA level, which as Anthony mentioned was right around 6x, 6.1x, going forward then, in a theoretical world, the sales would equal the development spend. And in the future year, if we get our stock price back at some point in the future that's the change. But in the interim, we view our cost of capital as the opportunity cost of what we sell. And we think we've got some favorable assets to sell that will allow us to spread invest with the new development.

So in 2017 and 2018, is $200 million of development spending something like that?

That's correct.

And then if I could switch to Baltimore, you mentioned no acquisitions dialed in. To what degree, though, are there some potential things maybe not in guidance, but that you're monitoring right now in Baltimore?

We're not monitoring anything at this point. I mean 100% of the focus of the company, again, is on those three things, same office growth of 3%-plus this year, low risk development that reads as in pre-leased development, and then selling $400 million of assets of which $200 million goes to the development spend and $200 million goes to delever the balance sheet and no acquisitions.

And then with the talk about Under Armour relocating or expanding. Do you have any idea, is that a deck chair shuffling type thing or is that incremental demand for the Inner Harbor or how do you view that potential decision on their part or whether or not it's official or not, I'm not sure.

Well, there is constraint where they're at now, Rich. They own most of their campus. They lease what's really a warehouse connected by a bridge walkway, and they have no room to grow. So that big move into the Port Covington area is to capture room for their growth, room for other businesses that Kevin Plank has invested in. And then it mixed use for a long-term development, which would be very positive for Baltimore as a whole. The plans for office there really won't compete or affect a CBD.

And then, Steve, just let's think maybe five years from now, I don't know. But do you have any designs on thinking while we've created a value in Baltimore, and maybe someday somehow you would be 100%, well you don't call it strategic anymore, 100% that as opposed to and maybe zero regional offices. Is that a possibility in the future, however, out we're talking?

Well, we have to stay flexible to maximize shareholder value. And if we get to a point in the future where that's the best move for our shareholders, we'd have to do it.

Your next question comes from the line of Chris Lucas with Capital One.

I guess kind of going back to the disposition program. What's the timing, as it relates to actually putting the full amount of asset on the market? It sounds like it's not all on the market at this point. What can you tell us about when those will be in brokers' hands?

I think everything will be in the market no later than March 31, maybe a week or two into April, but we're going to front-end load all of the product to the market.

And then on the data shell business, I guess, is there anything in the relationships that you have there that precludes you from selling a 100% of the interest to a third-party?

I'm sorry, say that again Chris.

On the data center shells, is there anything in the leases or the contracts that you have there with the client that precludes you from selling a 100% of the asset or assets?

No.

No. They have a right to buy it, if we do sell it.

Just write a first offer or is there some set pricing?

No, no set pricing.

And I guess, a question, why would you not look -- rather than just looking at a JV, why not look to sell the entire package?

We would look to go both ways and see where we could optimize the overall process and the overall franchise for the company.

And then as it relates to, I haven't heard any commentary on this, so I'm just curious, on the downtown D.C. JV with Akridge, could you give some color on the background of status and sort of timing expectations for that project?

So in terms of the status of that we're actively working through the design of the project. As you'll recall from some of the original announcements, the intent is for any construction to occur really in 2017. So entitlements are largely in place. We're working through the full range of the planning activities in 2016 and would expect to be positioned for that start when the leasing activity justifies it.

Your next question comes from the line of John Guinee of Stifel.

One other or two other questions I neglected to ask. Anthony, what's the plan with the 200 million of preferred shares and what's the current rate on those?

The current rate is 7 3/8. And we have the option to redeem those beginning in July of 2017. So we'll keep that option out there and continue to look at that option as that day comes closer.

So that's an easy FFO. And then second, maybe Steve or Anthony, when you're generating a couple percent or flat cash same-store -- I'm sorry, cash re-leasing spreads and 5%, 10% GAAP re-leasing spreads. When you adjust it for the increase in the operating expenses, how does that math work? i.e., I get the gross rents going up, what happens with the net rents when one considers the reset of the OpEx?

It really mirrors what we report. Before the lease matures, you're passing through above a base year. And then when you move to a renewal, typically the base year is reset to the higher level. And you're measuring the change in the cash and the whole package of both the face rate plus the pass-through against the new level.

I would now turn the call back to Mr. Waesche for closing remarks. End of Q&A

Thank you all, again, for joining us today. If your questions did not get answered, we are available to speak with you later. Good day.