COPT(US:CDP)2025-07-29 17:02Financial 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]