Financial Data and Key Metrics Changes - The company reported FFO per share of $0.68, which is $0.02 above the midpoint of guidance and represents a year-over-year increase of 6.3% [4][24] - Same property cash NOI increased by 2.2% year-over-year, driven by a 50 basis point increase in average occupancy [25][24] - The company increased the midpoint of full year guidance for same property cash NOI growth by 50 basis points to 3.25% [25] Business Line Data and Key Metrics Changes - The total portfolio is 95.6% leased, the highest level in nearly twenty years, with tenant retention at 90% during the quarter [5][12] - The defense IT portfolio occupancy increased to 95.6%, with Northern Virginia properties reaching 94% leased and 93% occupied, the highest levels in over a decade [12] - The company signed 353,000 square feet of vacancy leasing during the first half of the year, achieving 88% of the full year target [5][13] Market Data and Key Metrics Changes - The defense budget for 2026 is projected at nearly $950 billion, a 13% year-over-year increase, which is the largest nominal increase in at least twenty-five years [7][11] - The intelligence budget is expected to increase by $14 billion or 14% year-over-year, which is a key demand driver for the company's Northern Virginia and Fort Meade portfolios [8][11] Company Strategy and Development Direction - The company is focused on capturing additional leasing demand and capitalizing on external growth opportunities due to the strong growth outlook for defense spending [22][31] - The company plans to maintain its full year guidance for capital commitment to new investments at $200 million to $250 million [21] - The company is in advanced stages of negotiations on multiple build-to-suit opportunities, targeting an 8.5% cash yield on initial development costs [36] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism regarding the leasing environment, noting strong demand and tenant sentiment following the recent defense budget appropriations [38][58] - The company anticipates enhanced leasing activity will resume in 2026 following the appropriation of the 2025 defense budget [13] - Management expects 2025 to be the seventh consecutive year of FFO per share growth, with a revised guidance implying an annual increase of 3.9% [30][31] Other Important Information - The company has a strong balance sheet, with 97% of its debt at fixed rates, and plans to refinance a $400 million bond maturing in March 2026 [27][28] - The company is tracking a 1,300,000 square foot development leasing pipeline, with an additional 1,100,000 square feet of potential development opportunities [22] Q&A Session Summary Question: Can you talk about the build-to-suit negotiations and expected returns? - Management indicated ongoing discussions in three submarkets, targeting an 8.5% cash yield on initial development costs, with positive trends in negotiations [36] Question: What immediate impacts have been felt from the new legislation? - Management noted an increase in optimism and activity from tenants following the election, with a strong outlook maintained [38] Question: How do you expect the new defense budget to translate into opportunities? - Management highlighted expectations for mission expansions and increased leasing activity, particularly in the intelligence community [42] Question: What is the status of the $400 million bond issuance? - Management provided current trading spreads for potential bond issuance, indicating ongoing evaluation of terms [46] Question: Are any build-to-suit opportunities tied to Golden Dome or Space Command? - Management clarified that current negotiations do not involve these programs, but expressed readiness to support future needs [50] Question: Can you discuss the current leasing environment and demand? - Management reported strong demand across all submarkets, with notable interest in specific properties [58] Question: What are the plans for the Des Moines land parcel? - Management is engaged with the power company for future capacity, indicating a long-term investment perspective [59][62]

Financial Data and Key Metrics Changes - The company reported FFO per share of $0.68, which is $0.02 above the midpoint of guidance and represents a 6.3% year-over-year increase [3][4][22] - Same property cash NOI increased by 2.2% year-over-year, driven by a 50 basis point increase in average occupancy [4][22] - The company increased the midpoint of full year guidance for same property cash NOI growth by 50 basis points to 3.25% [22][25] Business Line Data and Key Metrics Changes - The total portfolio is 95.6% leased, the highest level in nearly twenty years, with a tenant retention rate of 90% during the quarter [4][11] - The company signed 353,000 square feet of vacancy leasing during the first half of the year, achieving 88% of the initial full year target [4][12] - In the defense IT portfolio, occupancy increased to 95.6%, with Northern Virginia properties reaching 94% leased, the highest levels in over a decade [11][12] Market Data and Key Metrics Changes - The defense budget for 2026 is projected at nearly $950 billion, a 13% year-over-year increase, which is the largest nominal increase in at least twenty-five years [6][10] - The intelligence budget is set to increase by $14 billion or 14% year-over-year, which is a key demand driver for the company's Northern Virginia and Fort Meade portfolios [7][10] Company Strategy and Development Direction - The company is focused on capitalizing on the increased defense spending, particularly in areas such as intelligence, surveillance, reconnaissance, and cybersecurity [10][27] - The company plans to maintain a capital commitment for new investments between $200 million and $250 million, with a development leasing pipeline of 1.3 million square feet [20][21] - The company is well-positioned to capture additional leasing demand and capitalize on external growth opportunities due to the strong growth outlook for defense spending [21][27] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism regarding the leasing environment, noting strong demand and tenant activity following the recent defense budget appropriations [34][52] - The company anticipates enhanced leasing activity will resume in 2026, following the appropriations and contract awards [12][27] - Management expects 2025 to be the seventh consecutive year of FFO per share growth, with a revised guidance implying an annual increase of 3.9% [26][27] Other Important Information - The company has a strong balance sheet, with 97% of its debt at fixed rates, and plans to refinance a $400 million bond maturing in March 2026 [24][25] - The company is focused on maintaining high tenant retention rates, with a historical retention rate of 98% over the past three years for large leases [15][16] Q&A Session Summary Question: Can you talk about the build-to-suit negotiations and expected returns? - The company is in discussions across three sub-markets, targeting an 8.5% cash yield on initial development costs, with positive trends in negotiations [32] Question: What immediate impacts have you felt from the new legislation? - There has been an increase in optimism and activity from tenants, although no significant inflection has been noted since the legislation passed [34] Question: How do you expect the new legislation to translate into opportunities? - The legislation is expected to lead to mission expansions and increased activity in the intelligence community, which should benefit the company's portfolio [38] Question: What is the current leasing environment like? - The leasing environment remains strong, with contractors showing clarity and optimism following the budget passing [52] Question: Are there any plans to bring assets to market? - The company is eager to bring assets to market but is waiting for an improvement in the interest rate environment [76]

Financial Performance - The Funds From Operations Per Share (FFOPS), adjusted for comparability, reached $0.68 for 2Q25 and $1.33 for 1H25[12] - Year-over-year FFO per share growth was 6.3% for 2Q25 and 4.7% for 1H25[12] - The company increased 2025 FFO per share guidance by 1 cent at the midpoint, implying 3.9% year-over-year growth[19, 81] - Same Property Cash Net Operating Income (NOI) increased by 2.2% for 2Q25 and 4.6% for 1H25 across the total portfolio[12] Portfolio Metrics - Occupancy rate for the Defense/IT Portfolio was 95.6% occupied and 96.8% leased[12] - Total leasing activity amounted to 724,000 square feet in 2Q25 and 1.4 million square feet in 1H25[12] - The company increased the annual vacancy leasing target to 450,000 square feet from 400,000 square feet[12, 55] - Tenant retention rate for the total portfolio was 90%[12] Strategic Factors - The One Big Beautiful Bill Act (OBBBA) passed in July 2025, adding approximately $113 billion for Department of Defense (DOD) activities in FY 2026, representing a 13% increase over FY 2025 enacted levels[30] - The company expects to renew approximately 95% of large leases (greater than 50,000 square feet) expiring through year-end 2026[66]

Group 1 - COPT Defense (CDP) reported quarterly funds from operations (FFO) of $0.68 per share, exceeding the Zacks Consensus Estimate of $0.67 per share, and up from $0.64 per share a year ago [1][2] - The company achieved revenues of $189.92 million for the quarter ended June 2025, surpassing the Zacks Consensus Estimate by 3.13%, compared to $187.34 million in the same quarter last year [3] - COPT Defense has outperformed consensus FFO estimates two times and revenue estimates four times over the last four quarters [2][3] Group 2 - The stock has underperformed the market, losing about 9.4% since the beginning of the year, while the S&P 500 gained 8.6% [4] - The current consensus FFO estimate for the upcoming quarter is $0.68 on revenues of $187.28 million, and for the current fiscal year, it is $2.67 on revenues of $749.72 million [8] - The Zacks Industry Rank for REIT and Equity Trust - Other is in the top 38% of over 250 Zacks industries, indicating a favorable outlook for the industry [9]

[Overview](index=3&type=section&id=OVERVIEW) [Summary Description](index=3&type=section&id=Summary%20Description) COPT Defense Properties is a REIT specializing in properties for the U.S. Government and defense contractors, with its **22.6 million** sq ft Defense/IT Portfolio **96.8%** leased - The company focuses on properties near key U.S. Government defense installations, serving tenants engaged in priority national security activities[5](index=5&type=chunk) Portfolio Snapshot as of June 30, 2025 | Metric | Value | | :--- | :--- | | **Portfolio** | Defense/IT | | **Number of Properties** | 198 | | **Total Square Feet** | **22.6 million** | | **% Leased** | **96.8%** | - The company holds investment-grade credit ratings: Fitch (**BBB-** Stable), Moody's (**Baa3** Positive), and S&P (**BBB-** Stable)[6](index=6&type=chunk) [Equity Research Coverage](index=4&type=section&id=Equity%20Research%20Coverage) Eight investment firms publish research on COPT Defense Properties, with their analyses not representing the company's views - The company is covered by analysts from firms including BTIG, Citigroup, Evercore ISI, Green Street, Jefferies, JP Morgan, Truist Securities, and Wells Fargo Securities[9](index=9&type=chunk) [Selected Financial Summary Data](index=5&type=section&id=Selected%20Financial%20Summary%20Data) Q2 **2025** net income was **$40.2 million** and diluted FFO per share **$0.68**, with six-month net income growing to **$76.4 million** and net debt to EBITDA stable at **5.9x** Q2 2025 Financial Highlights (Three Months Ended 6/30/25) | Metric | Value (in thousands, except per share) | | :--- | :--- | | Net income | **$40,166** | | Diluted EPS | **$0.34** | | FFO per Nareit | **$80,471** | | Diluted FFO per share | **$0.68** | | Dividend per common share | **$0.305** | Six Months Ended Financial Comparison (6/30/25 vs 6/30/24) | Metric | Six Months 2025 | Six Months 2024 | | :--- | :--- | :--- | | Net income | **$76,394** | **$70,078** | | Diluted EPS | **$0.64** | **$0.60** | | Diluted FFO per share | **$1.33** | **$1.27** | | Same Property cash NOI | **$202,872** | **$194,027** | Key Ratios as of 6/30/25 | Ratio | Value | | :--- | :--- | | Debt to assets | **56.9%** | | Diluted FFO Payout Ratio | **44.5%** | | Diluted AFFO Payout Ratio | **60.7%** | | Net debt to in-place adj. EBITDA ratio | **5.9x** | [Selected Portfolio Data](index=7&type=section&id=Selected%20Portfolio%20Data) As of Q2 **2025**, the total portfolio was **95.6%** leased (**24.6 million** sq ft), with the core Defense/IT Portfolio at **96.8%** leased (**22.6 million** sq ft) Portfolio Metrics as of June 30, 2025 | Portfolio Type | of Properties | Square Feet (thousands) | % Occupied | % Leased | | :--- | :--- | :--- | :--- | :--- | | **Total Portfolio** | **204** | **24,571** | **94.0%** | **95.6%** | | **Defense/IT Portfolio** | **198** | **22,583** | **95.6%** | **96.8%** | | **Consolidated Portfolio** | **180** | **20,276** | **92.8%** | **94.6%** | [Financial Statements](index=8&type=section&id=FINANCIAL%20STATEMENTS) [Consolidated Balance Sheets](index=8&type=section&id=Consolidated%20Balance%20Sheets) As of June **30**, **2025**, total assets were **$4.29 billion**, liabilities **$2.72 billion**, debt **$2.44 billion**, and equity **$1.55 billion**, reflecting steady growth Consolidated Balance Sheet Highlights (in thousands) | Account | 6/30/25 | 12/31/24 | | :--- | :--- | :--- | | **Total properties, net** | **$3,682,556** | **$3,630,526** | | **Total assets** | **$4,286,950** | **$4,254,191** | | **Debt** | **$2,438,591** | **$2,391,755** | | **Total liabilities** | **$2,717,951** | **$2,693,624** | | **Total equity** | **$1,545,741** | **$1,536,593** | [Consolidated Statements of Operations](index=9&type=section&id=Consolidated%20Statements%20of%20Operations) Q2 **2025** revenues reached **$189.9 million** and net income **$40.2 million**, with six-month net income rising to **$76.4 million** from **$70.1 million** in **2024** Statement of Operations Summary (in thousands) | Metric | Q2 2025 | Q2 2024 | | :--- | :--- | :--- | | Total revenues | **$189,915** | **$187,343** | | Total operating expenses | **$130,272** | **$133,215** | | Interest expense | (**$20,938**) | (**$20,617**) | | Net income | **$40,166** | **$36,407** | | Net income attributable to common shareholders | **$38,347** | **$35,114** | [Funds from Operations (FFO)](index=10&type=section&id=Funds%20from%20Operations) Q2 **2025** FFO per Nareit was **$80.5 million**, with diluted FFO at **$78.6 million**; six-month diluted FFO grew to **$153.1 million** from **$146.2 million** FFO Reconciliation (in thousands) | Metric | Q2 2025 | Q2 2024 | | :--- | :--- | :--- | | Net income | **$40,166** | **$36,407** | | Real estate-related depreciation and amortization | **$39,573** | **$38,161** | | **FFO - per Nareit** | **$80,471** | **$75,346** | | **Diluted FFO available to common share and common unit holders** | **$78,635** | **$74,280** | [Diluted Share and Unit Computations](index=11&type=section&id=Diluted%20Share%20%2B%20Unit%20Computations) Q2 **2025** diluted EPS was **$0.34** and diluted FFO per share **$0.68**, up from **$0.31** and **$0.64** respectively in Q2 **2024** Per Share Data for Q2 2025 vs Q2 2024 | Metric | Q2 2025 | Q2 2024 | | :--- | :--- | :--- | | Diluted EPS | **$0.34** | **$0.31** | | Diluted FFO per share - Nareit | **$0.68** | **$0.64** | | Diluted FFO per share - as adjusted | **$0.68** | **$0.64** | | Denominator for diluted EPS (thousands) | **113,224** | **112,785** | | Denominator for diluted FFO (thousands) | **115,401** | **115,414** | [Adjusted Funds from Operations (AFFO)](index=12&type=section&id=Adjusted%20Funds%20from%20Operations) Q2 **2025** diluted AFFO was **$57.7 million**, lower than Q2 **2024**'s **$61.4 million**, primarily due to higher replacement capital expenditures Diluted AFFO Reconciliation for Q2 2025 (in thousands) | Line Item | Amount | | :--- | :--- | | Diluted FFO available, as adjusted | **$78,635** | | Straight line rent adjustments | (**$1,836**) | | Share-based compensation | **$2,924** | | Replacement capital expenditures | (**$23,919**) | | **Diluted AFFO available** | **$57,660** | [EBITDAre and Adjusted EBITDA](index=13&type=section&id=EBITDAre%20%2B%20Adjusted%20EBITDA) Q2 **2025** EBITDAre was **$102.8 million**, with Adjusted EBITDA at **$104.7 million**, a notable increase from Q2 **2024**'s **$98.6 million** EBITDAre and Adjusted EBITDA Reconciliation (in thousands) | Metric | Q2 2025 | Q2 2024 | | :--- | :--- | :--- | | Net income | **$40,166** | **$36,407** | | Interest expense | **$20,938** | **$20,617** | | Real estate-related depreciation & amortization | **$39,573** | **$38,161** | | **EBITDAre** | **$102,777** | **$97,472** | | **Adjusted EBITDA** | **$104,726** | **$98,592** | | **In-place adjusted EBITDA** | **$104,803** | **$98,619** | [Portfolio Information](index=14&type=section&id=PORTFOLIO%20INFORMATION) [Properties by Segment](index=14&type=section&id=Properties%20by%20Segment) As of June **30**, **2025**, the Defense/IT Portfolio (**198** properties) was **96.8%** leased, with Data Center Shells **100%** leased, indicating strong demand Defense/IT Portfolio by Segment (as of 6/30/25) | Segment | of Properties | Operational Square Feet (k) | % Occupied | % Leased | | :--- | :--- | :--- | :--- | :--- | | Fort Meade/BW Corridor | **95** | **9,234** | **94.5%** | **95.5%** | | NoVA Defense/IT | **16** | **2,501** | **93.1%** | **94.1%** | | Lackland Air Force Base | **9** | **1,142** | **100.0%** | **100.0%** | | Redstone Arsenal | **25** | **2,511** | **95.8%** | **98.4%** | | Data Center Shells (Total) | **31** | **5,924** | **100.0%** | **100.0%** | | **Total Defense/IT Portfolio** | **198** | **22,583** | **95.6%** | **96.8%** | [Consolidated Real Estate Revenues & NOI by Segment](index=15&type=section&id=Consolidated%20Real%20Estate%20Revenues%20%2B%20NOI%20by%20Segment) Q2 **2025** consolidated Defense/IT Portfolio generated **$158.7 million** in revenues and **$103.8 million** in NOI, with total NOI at **$112.4 million** Q2 2025 Revenue and NOI by Segment (in thousands) | Segment | Consolidated Real Estate Revenues | NOI from Real Estate Operations | | :--- | :--- | :--- | | Fort Meade/BW Corridor | **$81,337** | **$54,440** | | NoVA Defense/IT | **$22,018** | **$13,160** | | Redstone Arsenal | **$18,977** | **$12,817** | | **Total Defense/IT Portfolio** | **$158,709** | **$103,784** | | **Total Real Estate Operations** | **$177,457** | **$112,412** | [Cash NOI by Segment](index=16&type=section&id=Cash%20NOI%20by%20Segment) Q2 **2025** total Cash NOI was **$104.9 million**, up from **$101.4 million** in Q2 **2024**, with the Defense/IT Portfolio contributing **$96.9 million** Q2 2025 Cash NOI by Segment (in thousands) | Segment | Q2 2025 Cash NOI | Q2 2024 Cash NOI | | :--- | :--- | :--- | | Fort Meade/BW Corridor | **$51,640** | **$51,380** | | NoVA Defense/IT | **$12,717** | **$12,452** | | **Total Defense/IT Portfolio** | **$96,873** | **$93,875** | | **Total Cash NOI** | **$104,927** | **$101,381** | [NOI and Occupancy by Property Grouping](index=17&type=section&id=NOI%20from%20Real%20Estate%20Operations%20%2B%20Occupancy%20by%20PropertyGrouping) As of June **30**, **2025**, the Same Property portfolio was **96.2%** occupied, generating **$100.4 million** in Q2 NOI and accounting for **87.5%** of total ARR Portfolio Breakdown as of 6/30/25 | Property Grouping | of Properties | % Occupied | % Leased | Q2 2025 NOI (thousands) | | :--- | :--- | :--- | :--- | :--- | | **Same Property (Defense/IT)** | **192** | **96.2%** | **97.0%** | **$100,434** | | **Properties Placed in Service** | **4** | **84.4%** | **93.8%** | **$2,424** | | **Acquired properties** | **2** | **67.4%** | **84.4%** | **$926** | | **Total Portfolio** | **204** | **94.0%** | **95.6%** | **$112,412** | [Same Property Occupancy Rates by Segment](index=18&type=section&id=Same%20Property%20Average%20Occupancy%20Rates%20by%20Segment) The Same Property portfolio maintained high occupancy, with period-end rates increasing to **94.5%** overall and **96.2%** for Defense/IT in Q2 **2025** Same Property Period End Occupancy Rates | Portfolio | 6/30/25 | 3/31/25 | 6/30/24 | | :--- | :--- | :--- | :--- | | Total Same Property | **94.5%** | **94.1%** | **93.9%** | | Defense/IT Portfolio | **96.2%** | **95.9%** | **95.8%** | [Same Property Revenues and NOI by Segment](index=19&type=section&id=Same%20Property%20Real%20Estate%20Revenues%20%2B%20NOI%20by%20Segment) Q2 **2025** Same Property NOI increased to **$108.7 million**, with year-to-date growth of **3.8%** to **$212.9 million**, driven by the Defense/IT portfolio Same Property NOI Comparison (in thousands) | Metric | Q2 2025 | Q2 2024 | YTD 2025 | YTD 2024 | | :--- | :--- | :--- | :--- | :--- | | **Same Property NOI** | **$108,665** | **$104,092** | **$212,941** | **$205,204** | | **Defense/IT Portfolio Same Property NOI** | **$100,434** | **$96,673** | **$195,631** | **$191,552** | [Same Property Cash NOI by Segment](index=20&type=section&id=Same%20Property%20Cash%20NOI%20by%20Segment) Total Same Property Cash NOI increased by **2.2%** in Q2 **2025** and **4.6%** year-to-date, with the Defense/IT portfolio showing **2.0%** and **3.0%** growth respectively - Total Same Property cash NOI increased by **2.2%** in Q2 **2025** and **4.6%** for the six months ended **6/30/25**, compared to the same periods in the prior year[61](index=61&type=chunk)[62](index=62&type=chunk) - The Defense/IT Portfolio's Same Property cash NOI grew by **2.0%** in Q2 **2025** and **3.0%** for the six months ended **6/30/25**, year-over-year[61](index=61&type=chunk)[62](index=62&type=chunk) [Leasing Activity](index=21&type=section&id=Leasing) Q2 **2025** leasing totaled **724,000** sq ft with **89.7%** retention, and straight-line rents on renewals increased **9.5%**, while cash rents decreased **3.1%** Leasing Summary for Q2 2025 (Total Portfolio) | Leasing Metric | Square Feet (thousands) | Details | | :--- | :--- | :--- | | **Total Leased** | **724** | - | | Renewed Space | **477** | **89.7%** Retention Rate | | Vacant Space Leased | **233** | Avg. Term: **7.9** years | | New Leases (Investment) | **14** | Avg. Term: **5.4** years | - For renewed space in Q2 **2025**, straight-line rents increased by **9.5%**, while cash rents decreased by **3.1%**[65](index=65&type=chunk) - For the six months ended June **30**, **2025**, total leasing activity was **1,371,000** square feet, with a tenant retention rate of **81.9%**[69](index=69&type=chunk) [Lease Expiration Analysis](index=23&type=section&id=Lease%20Expiration%20Analysis) As of June **30**, **2025**, **17.3%** of Defense/IT ARR expires in remaining **2025**, with a **5.0**-year weighted average lease term and **37.2%** expiring after **2029** Defense/IT Portfolio Lease Expiration Schedule by ARR | Year of Expiration | % of Defense/IT ARR Expiring | | :--- | :--- | | **2025** | **17.3%** | | **2026** | **9.1%** | | **2027** | **9.4%** | | **2028** | **15.7%** | | **2029** | **11.3%** | | Thereafter | **37.2%** | - The weighted average remaining lease term for the total portfolio is **5.0** years as of June **30**, **2025**[73](index=73&type=chunk) [2025 Defense/IT Portfolio Quarterly Lease Expiration Analysis](index=25&type=section&id=2025%20Defense%2FIT%20Portfolio%20Quarterly%20Lease%20Expiration%20Analysis) Remaining **2025** Defense/IT lease expirations total **$109.4 million** in ARR, with Q3 seeing **8.9%** (**$55.9 million**) and Q4 **8.5%** (**$53.5 million**) 2025 Quarterly Lease Expirations (Defense/IT Portfolio) | Quarter of Expiration | Square Footage Expiring (k) | Annualized Rental Revenue Expiring (k) | % of Defense/IT ARR Expiring | | :--- | :--- | :--- | :--- | | Q3 **2025** | **1,296** | **$55,909** | **8.9%** | | Q4 **2025** | **943** | **$53,488** | **8.5%** | | **Total 2025 Remaining** | **2,239** | **$109,397** | **17.3%** | [Top 20 Tenants](index=26&type=section&id=Top%2020%20Tenants) The top **20** tenants, including the U.S. Government (**35.8%** of ARR), account for **73.0%** of total annualized rental revenue, highlighting portfolio stability - The U.S. Government is the largest tenant, accounting for **35.8%** of total Annualized Rental Revenue (ARR) and occupying **5.6 million** square feet[81](index=81&type=chunk) - The top **20** tenants, including major defense contractors like General Dynamics, Northrop Grumman, and The Boeing Company, represent **73.0%** of total ARR[81](index=81&type=chunk) [Investing Activity](index=27&type=section&id=INVESTING%20ACTIVITY) [Summary of Development Projects](index=27&type=section&id=Summary%20of%20Development%20Projects) As of June **30**, **2025**, COPT Defense has a **756,000** sq ft development pipeline (**62%** pre-leased) with an anticipated cost of **$308.7 million**, including fully leased data center shells Development Pipeline Summary (as of 6/30/25) | Metric | Value | | :--- | :--- | | Total Projects | **5** | | Total Rentable Square Feet | **756,000** | | % Leased | **62%** | | Anticipated Total Cost | **$308.7 million** | | Cost to Date | **$134.4 million** | - The development pipeline is heavily weighted towards data center shells, with two projects in Northern VA totaling **418,000** sq. ft. that are **100%** leased[84](index=84&type=chunk) [Development Placed in Service](index=28&type=section&id=Development%20Placed%20in%20Service) In H1 **2025**, **36,000** sq ft of the **9700** Advanced Gateway project in Huntsville, AL, was placed in service and was **100%** leased 2025 Development Placed in Service | Property | Location | Total 2025 Sq. Ft. Placed in Service | % Leased as of 6/30/25 | | :--- | :--- | :--- | :--- | | **9700** Advanced Gateway | Huntsville, AL | **36,000** | **100%** | [Summary of Land Owned/Controlled](index=29&type=section&id=Summary%20of%20Land%20Owned%2FControlled) As of June **30**, **2025**, the company holds **1,008** acres of land for future Defense/IT development, with **10.8 million** sq ft potential and a **$204.5 million** book value Land Inventory for Future Development (as of 6/30/25) | Portfolio | Acres | Estimated Developable Sq. Ft. (k) | Carrying Amount (k) | | :--- | :--- | :--- | :--- | | **Defense/IT Portfolio** | **1,008** | **10,846** | **$204,517** | | Other | **53** | **1,538** | **$9,653** | | **Total** | **1,061** | **12,384** | **$214,170** | [Capitalization](index=30&type=section&id=CAPITALIZATION) [Capitalization Overview](index=30&type=section&id=Capitalization%20Overview) As of June **30**, **2025**, total market capitalization was **$5.64 billion**, with **$2.46 billion** in consolidated debt at a **3.40%** effective rate and **97%** fixed-rate Debt Profile as of 6/30/25 | Debt Type | Wtd. Avg. Maturity (Years) | Effective Rate | Amount Outstanding (thousands) | | :--- | :--- | :--- | :--- | | Fixed-rate debt | **4.4** | **3.34%** | **$2,392,075** | | Variable-rate debt | **2.3** | **5.62%** | **$67,025** | | **Total Consolidated Debt** | **4.2** | **3.40%** | **$2,459,100** | Market Capitalization as of 6/30/25 (in thousands) | Metric | Value | | :--- | :--- | | Closing Common Share Price | **$27.58** | | Equity Market Capitalization | **$3,181,463** | | **Total Market Capitalization** | **$5,640,563** | [Summary of Outstanding Debt](index=31&type=section&id=Summary%20of%20Outstanding%20Debt) As of June **30**, **2025**, consolidated debt totaled **$2.46 billion**, primarily **$2.15 billion** in senior unsecured notes, with **$2.39 billion** being unsecured Major Debt Components as of 6/30/25 (in thousands) | Debt Instrument | Amount Outstanding | Maturity Date | | :--- | :--- | :--- | | Revolving Credit Facility | **$120,000** | Oct-**26** | | Senior Unsecured Notes (Subtotal) | **$2,145,000** | Various (**2026**-**2033**) | | Unsecured Bank Term Loan | **$125,000** | Jan-**26** | | Total Secured Debt | **$68,939** | Various (**2026**) | | **Consolidated Debt** | **$2,459,100** | - | [Debt Analysis](index=33&type=section&id=Debt%20Analysis) As of Q2 **2025**, COPT Defense complied with all debt covenants, with Total Debt to Assets at **41.4%** and Net Debt to EBITDA at **5.9x**, indicating a healthy debt profile Covenant Compliance as of 6/30/25 | Covenant (Senior Notes) | Required | Actual | | :--- | :--- | :--- | | Total Debt / Total Assets | < **60%** | **41.4%** | | Secured Debt / Total Assets | < **40%** | **1.2%** | | Debt Service Coverage | > **1.5x** | **4.8x** | | Unencumbered Assets / Unsecured Debt | > **150%** | **241.3%** | Key Debt Ratios as of 6/30/25 | Ratio | Value | | :--- | :--- | | Net debt to in-place adj. EBITDA | **5.9x** | | Adjusted EBITDA fixed charge coverage | **4.9x** | | Net debt to adjusted book | **40.6%** | [Consolidated Real Estate Joint Ventures](index=34&type=section&id=Consolidated%20Real%20Estate%20Joint%20Ventures) As of June **30**, **2025**, consolidated JVs, primarily LW Redstone, held **$866.2 million** in assets and **$68.9 million** in debt, including **24** operating properties Key Consolidated JVs as of 6/30/25 | Joint Venture | Location | COPT Ownership % | Total Assets (k) | Debt Outstanding (k) | | :--- | :--- | :--- | :--- | :--- | | M Square Associates, LLC | Suburban MD | **50%** | **$92,870** | **$46,914** | | LW Redstone Company, LLC | Huntsville, AL | **85%** | **$631,843** | **$22,025** | | Stevens Place | Washington, DC | **95%** | **$141,483** | **$0** | [Unconsolidated Real Estate Joint Ventures](index=35&type=section&id=Unconsolidated%20Real%20Estate%20Joint%20Ventures) The company holds a **10%** interest in five unconsolidated JVs with **24** data center shell properties (**4.3 million** sq ft, **100%** occupied), contributing **$1.87 million** in Q2 NOI Unconsolidated JV Summary (as of 6/30/25) | Metric | Total | COPT Defense's Share (10%) | | :--- | :--- | :--- | | of Properties | **24** | - | | Square Feet | **4,295,000** | - | | % Occupied | **100%** | - | | Total Assets (k) | **$1,022,601** | **$102,260** | | Debt (k) | **$536,435** | **$53,644** | | Q2 **2025** NOI (k) | **$18,706** | **$1,870** | [Reconciliations & Definitions](index=36&type=section&id=RECONCILIATIONS%20%2B%20DEFINITIONS) [Supplementary Reconciliations of Non-GAAP Measures](index=36&type=section&id=Supplementary%20Reconciliations%20of%20Non-GAAP%20Measures) This section provides detailed reconciliations of non-GAAP financial measures, including NOI, Cash NOI, Same Property NOI, Adjusted Book, and Net Debt, ensuring transparency - Provides a reconciliation from Net Income to NOI from real estate operations, showing a Q2 **2025** NOI of **$112.4 million**[121](index=121&type=chunk) - Details the calculation of Same Property Cash NOI, arriving at **$102.7 million** for Q2 **2025**[121](index=121&type=chunk) - Shows the calculation of Adjusted Book and Net Debt, with values of **$6.12 billion** and **$2.49 billion** respectively as of June **30**, **2025**[127](index=127&type=chunk) [Definitions](index=39&type=section&id=Definitions) This section defines key non-GAAP terms like FFO, AFFO, EBITDAre, Adjusted EBITDA, NOI, and Cash NOI, clarifying how management assesses performance - Defines Funds from Operations (FFO) according to Nareit's standard, as net income excluding gains/losses from property sales and real estate depreciation[146](index=146&type=chunk) - Defines Net Operating Income (NOI) as the primary segment performance measure, including revenues and property expenses from consolidated and unconsolidated JVs[153](index=153&type=chunk) - Defines Same Property as operating properties that have been stably owned and **100%** operational since at least January **1**, **2024**[169](index=169&type=chunk) [Earnings Release](index=44&type=section&id=EARNINGS%20RELEASE) [Second Quarter 2025 Results Highlights](index=44&type=section&id=Second%20Quarter%202025%20Results%20Highlights) COPT Defense reported strong Q2 **2025** results with **6.3%** FFO per share growth to **$0.68**, raising full-year guidance and achieving **2.2%** Same Property Cash NOI growth - FFO per Share, as Adjusted for Comparability, was **$0.68**, a **6.3%** YoY increase[173](index=173&type=chunk) - The midpoint of **2025** FFO per Share Guidance was increased by **1**-cent to **$2.67**[173](index=173&type=chunk) - The Defense/IT Portfolio was **96.8%** leased, and the company achieved **1.4 million** SF of leasing in the first half of **2025**[173](index=173&type=chunk) [Management Comments](index=45&type=section&id=Management%20Comments) CEO Stephen E. Budorick noted strong Defense/IT performance, raising **2025** guidance for cash NOI growth and tenant retention, anticipating **4%** FFO per share growth driven by increased defense spending - Raised **2025** guidance for same property cash NOI growth by **50** bps to **3.25%** and tenant retention by **250** bps to **82.5%**[177](index=177&type=chunk) - Increased the annual target for vacancy leasing by **12.5%** to **450,000** square feet[177](index=177&type=chunk) - Management anticipates continued growth driven by increased defense spending, with the 'One Big Beautiful Bill Act' adding **$150 billion** to defense spending over the next few years[178](index=178&type=chunk) [Financial and Operational Highlights](index=45&type=section&id=Financial%20and%20Operational%20Highlights) Q2 **2025** saw strong financial and operational performance, with diluted FFO per share of **$0.68**, **2.2%** Same Property cash NOI growth, and a solid **5.9x** net debt to EBITDA ratio [Operating Performance](index=45&type=section&id=Operating%20Performance) Q2 **2025** diluted EPS was **$0.34** and FFOPS **$0.68**, with the Defense/IT Portfolio **96.8%** leased and Same Property cash NOI up **2.2%** YoY Q2 2025 Operating Metrics | Metric | Value | | :--- | :--- | | Diluted EPS | **$0.34** | | Diluted FFOPS | **$0.68** | | Defense/IT Portfolio % Leased | **96.8%** | | Same Property Cash NOI Increase | **2.2%** | [Leasing Activity](index=46&type=section&id=Leasing%20Activity) Q2 **2025** total leasing was **724,000** sq ft with **89.7%** retention, and straight-line rents on renewals increased by **9.5%** Leasing Highlights | Metric | Q2 2025 | YTD 2025 | | :--- | :--- | :--- | | Total Square Feet Leased | **724,000** | **1,400,000** | | Tenant Retention Rate | **89.7%** | **81.9%** | | Straight-line Rent Change (Renewals) | **+9.5%** | **+8.8%** | | Cash Rent Change (Renewals) | **-3.1%** | **-2.0%** | [Investment Activity](index=46&type=section&id=Investment%20Activity) The active development pipeline includes five properties totaling **756,000** sq ft, **62%** leased, with an estimated total investment of **$309 million** - The development pipeline consists of **5** properties, totaling **756,000** sq. ft., which are **62%** leased, with a total estimated investment of **$309 million**[182](index=182&type=chunk) [Balance Sheet](index=46&type=section&id=Balance%20Sheet) The company maintains a strong balance sheet with a **4.9x** adjusted EBITDA fixed charge coverage and **5.9x** net debt to EBITDA, with **97%** fixed-rate debt at **3.4%** effective interest - Key leverage and coverage ratios as of June **30**, **2025**: - Adjusted EBITDA fixed charge coverage ratio: **4.9x** - Net debt to in-place adjusted EBITDA ratio: **5.9x** - Net debt adjusted for fully-leased investment properties to in-place adj. EBITDA ratio: **5.8x**[183](index=183&type=chunk) [2025 Guidance](index=47&type=section&id=2025%20Guidance) Management increased full-year **2025** diluted FFO per share guidance to **$2.65**-**$2.69** and set Q3 guidance at **$0.66**-**$0.68**, following strong H1 performance Updated 2025 Guidance | Metric | Q3 2025 Guidance | Full Year 2025 Guidance | | :--- | :--- | :--- | | Diluted EPS | **$0.32** - **$0.34** | **$1.30** - **$1.34** | | Diluted FFOPS | **$0.66** - **$0.68** | **$2.65** - **$2.69** |

Company Overview - COPT Defense (CDP) is a real estate investment trust (REIT) specializing in suburban office properties, currently experiencing a share price decline of -10.02% this year [3] - The company is based in Columbia and operates within the Finance sector [3] Dividend Information - CDP is currently distributing a dividend of $0.31 per share, resulting in a dividend yield of 4.38%, which is lower than the industry average yield of 4.84% and significantly higher than the S&P 500's yield of 1.52% [3] - The annualized dividend of $1.22 represents a 3.4% increase from the previous year, with an average annual increase of 2.33% over the last five years [4] - The current payout ratio for CDP is 47%, indicating that the company pays out 47% of its trailing 12-month earnings per share as dividends [4] Earnings Growth Expectations - For the fiscal year 2025, the Zacks Consensus Estimate predicts earnings of $2.67 per share, reflecting a year-over-year growth rate of 3.89% [5] - The company's future dividend growth will be contingent on earnings growth and the payout ratio [4] Investment Appeal - CDP is positioned as an attractive investment opportunity due to its dividend yield and strong Zacks Rank of 2 (Buy) [6] - The company is seen as a viable option for income investors, especially in the context of rising interest rates, where high-yielding stocks may face challenges [6]

Core Viewpoint - COPT Defense (CDP) has been upgraded to a Zacks Rank 2 (Buy), indicating a positive outlook on its earnings estimates, which is a significant factor influencing stock prices [1][3]. Earnings Estimates and Stock Price Movement - The Zacks rating system is based on changes in earnings estimates, which have a strong correlation with near-term stock price movements [4][6]. - Rising earnings estimates for COPT Defense suggest an improvement in the company's underlying business, likely leading to increased stock prices [5][10]. Zacks Rank System - The Zacks Rank system classifies stocks into five groups based on earnings estimates, with Zacks Rank 1 (Strong Buy) stocks historically generating an average annual return of +25% since 1988 [7]. - COPT Defense's upgrade to Zacks Rank 2 places it in the top 20% of Zacks-covered stocks, indicating a strong potential for market-beating returns in the near term [9][10]. Earnings Estimate Revisions - For the fiscal year ending December 2025, COPT Defense is expected to earn $2.67 per share, with a 0.2% increase in the Zacks Consensus Estimate over the past three months [8].

Company Overview - COPT Defense (CDP) is headquartered in Columbia and has experienced a price change of -8.27% this year [3] - The company currently pays a dividend of $0.31 per share, resulting in a dividend yield of 4.3%, which is lower than the REIT and Equity Trust - Other industry's yield of 4.96% and significantly higher than the S&P 500's yield of 1.52% [3] Dividend Performance - The current annualized dividend of COPT Defense is $1.22, reflecting a 3.4% increase from the previous year [4] - Over the past 5 years, the company has increased its dividend 3 times, with an average annual increase of 2.05% [4] - The current payout ratio is 47%, indicating that the company paid out 47% of its trailing 12-month earnings per share as dividends [4] Earnings Growth Expectations - For the fiscal year 2025, the Zacks Consensus Estimate for earnings is $2.67 per share, which represents a year-over-year earnings growth rate of 3.89% [5] - The company is viewed as an attractive dividend play and a compelling investment opportunity, currently holding a Zacks Rank of 2 (Buy) [6]

Group 1 - The company has extensive experience in property development, having worked with notable clients such as Walmart, O'Reilly Auto Parts, Sherwin-Williams, Dollar General, and PetSmart [1] Group 2 - iREIT® offers in-depth research on various investment vehicles including REITs, mREITs, Preferreds, BDCs, MLPs, ETFs, Builders, and Asset Managers [2] - The iREIT® Tracker provides data on over 250 tickers, including quality scores, buy targets, and trim targets [2] - A new Ratings Tracker called iREIT Buy Zone has been introduced to assist members in screening for value [2]

Summary of COPT Defense Properties (CDP) 2025 Conference Call Company Overview - COPT Defense Properties is a specialized Real Estate Investment Trust (REIT) focused on mission-critical assets supporting U.S. national defense activities. [2][3] - The majority of properties are located near U.S. defense installations in Maryland, Virginia, Alabama, and Texas, with 80% of the portfolio dedicated to high-security operations. [3][4] Core Business Insights - Over 90% of annualized rental revenue comes from defense information technology properties, with a leasing rate of 96.6% in this segment. [5] - The U.S. government is the largest tenant, accounting for 36% of annualized rental revenue through 101 leases across 71 properties. [5] - Defense contractors contribute 51% of annualized rental revenue, with a significant focus on cyber defense contractors as the fastest-growing tenant segment. [6] Strategic Advantages - The company has a strong operating platform with over 20 years of experience managing high-security properties. [8] - COPT has a track record of building and operating secure facilities, with a focus on locations adjacent to priority defense installations. [9] - The company maintains a strong investment-grade balance sheet and aims to allocate capital to durable demand locations. [7] Financial Performance and Growth - Expected FFO per share growth of 3.5% in 2025, marking the seventh consecutive year of positive growth. [11] - The company has increased dividends by nearly 11% over the last three years and is the only office REIT to raise dividends in both 2023 and 2024. [11] - Leasing targets for the year are set at 400,000 square feet, with 288,000 square feet already achieved and another 120,000 square feet in advanced negotiations. [12] Development Pipeline - Plans to commit $150 to $200 million to new developments, primarily pre-leased. [13] - Current construction includes 760,000 square feet, with 62% pre-leased. [23] - Anticipation of strong demand for space due to the relocation of Space Command to Huntsville, with plans for additional buildings to support this mission. [24][31] Defense Budget Insights - The FY 2025 defense budget is projected to increase by $150 billion, with significant allocations for shipbuilding and cyber capabilities. [16][17] - Confidence in continued funding for intelligence and defense missions due to the adversarial global environment. [17] Market Position and Future Outlook - The company is trading at $27.06 per share, with a 4.4% dividend yield and a 16% discount to NAV. [14][15] - Plans to address a $400 million bond maturity in 2026 by pre-funding capital in the fixed income market. [33][34] - The company maintains a low leverage ratio of 6.1 times debt to EBITDA, indicating strong cash flow resilience. [36][38] Additional Considerations - The company is considering selling legacy regional office assets, with timing dependent on capital market conditions. [44][46] - The potential impact of privatization within the federal government is not expected to disrupt defense-related activities or tenant operations. [48][49]