COPT(CDP) - 2025 Q2 - Quarterly Results

Overview Summary Description 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] 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] Equity Research Coverage 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] Selected Financial Summary Data 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 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 Consolidated Balance Sheets 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 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) 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 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) 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 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 Properties by Segment 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 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 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 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 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 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 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][62] - 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][62] Leasing Activity 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] - 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] Lease Expiration Analysis 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] 2025 Defense/IT Portfolio Quarterly Lease Expiration Analysis 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 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] - The top 20 tenants, including major defense contractors like General Dynamics, Northrop Grumman, and The Boeing Company, represent 73.0% of total ARR[81] Investing Activity Summary of Development Projects 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] Development Placed in Service 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 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 Capitalization Overview 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 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 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 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 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 Supplementary Reconciliations of Non-GAAP Measures 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] - Details the calculation of Same Property Cash NOI, arriving at $102.7 million for Q2 2025[121] - 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] 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] - Defines Net Operating Income (NOI) as the primary segment performance measure, including revenues and property expenses from consolidated and unconsolidated JVs[153] - Defines Same Property as operating properties that have been stably owned and 100% operational since at least January 1, 2024[169] Earnings Release Second Quarter 2025 Results Highlights 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] - The midpoint of 2025 FFO per Share Guidance was increased by 1-cent to $2.67[173] - 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] Management Comments 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] - Increased the annual target for vacancy leasing by 12.5% to 450,000 square feet[177] - 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] Financial and Operational Highlights 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 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 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 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] Balance Sheet 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] 2025 Guidance 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 |