Summary of COPT Defense Properties 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] - The company operates 204 properties, primarily located near key defense installations in Virginia, Maryland, Washington D.C., Alabama, and Texas. [2] Core Business Insights - 80% of the defense portfolio consists of high-security operations, including eight U.S. government-secured campuses totaling over 4 million square feet. [3] - The U.S. government is the largest tenant, accounting for 36% of annualized rental revenue, with defense contractors contributing 51%. [4] - Non-defense properties contribute only 10% of annualized rental revenue, indicating a strong focus on defense-related assets. [4] Financial Performance and Growth - The defense IT segment is 96.8% leased, significantly above the peer average. [4] - The company forecasts nearly 4% growth in Funds From Operations (FFO) per share for 2025, marking the seventh consecutive year of growth. [8] - COPT has increased its dividend by nearly 11% over the last three years and is the only office REIT to raise dividends in 2023, 2024, and 2025. [8] Development and Leasing Strategy - The company plans to commit $225 million to new developments in 2025, with $50 million already allocated by mid-year. [9] - COPT has a strong leasing pipeline, with over 70% of vacant space having prospects. [35] - The company is in advanced negotiations for build-to-suit solutions with six different tenants. [9] Defense Budget Outlook - The One Big Beautiful Bill pre-appropriated $150 billion for defense over five years, with $113 billion allocated for fiscal year 2026, representing a 13% increase in defense spending. [11] - The president's budget for fiscal year 2026 is $831 billion, which may increase as it moves through Congress. [12] Strategic Opportunities - The relocation of U.S. Space Command headquarters to Huntsville will be developed on COPT's land, representing a significant opportunity for growth. [16][17] - The Golden Dome initiative aims to create an anti-missile defense shield with an estimated budget of $175 billion, expected to drive leasing demand. [28][29] Market Position and Competitive Advantage - COPT has a competitive advantage due to its long-standing relationship with the U.S. government and its specialized focus on defense-related properties. [5][6] - The company has a strong investment-grade balance sheet and a disciplined approach to capital allocation. [5] Risks and Challenges - Government shutdowns do not significantly impact COPT, as leases are covered by the U.S. government. [14] - The company is aware of potential risks related to the broader review of government real estate usage but remains focused on mission-critical work. [33] Future Development Plans - COPT has acquired land in Des Moines, Iowa, for future development, anticipating a four-year timeline before breaking ground due to power constraints. [39] - The company has over 6 million square feet of data centers, with significant rent increases observed upon renewal. [38] Conclusion - COPT Defense Properties is well-positioned for growth in the defense sector, with strong financial performance, strategic development opportunities, and a focus on high-security assets. [6][8][29]

Industry Trend - The security and defense sector is an expanding dimension within the space industry [1] - European Space Agency will be further engaged in defense and security upon member states' request [1] - There's increasing activity and requests from member states to invest and develop technology in the defense and space domain in Europe [3] Funding & Investment - Defense budgets may contribute to space program budgets in some countries, potentially within a NATO framework [2] - Funding from ministers of defense can be accounted against NATO thresholds, such as 2%, 3%, or 3.5% [2] - Investing in defense and space is a good way of investing in R&D technology [2]