COPT DEFENSE PROPERTIES Q4 FY2024 earnings call

Key 2024 Performance - FFO per share $2.06, up 6.2% from 2023; same property cash NOI up 9.1%. - Executed 500,000 sq ft vacancy leasing (45% of年初 vacancy), 86% tenant retention. - Committed $212M to new investments, including first building acquisitions since 2015. ### 2025 Expectations - 2025 FFO per share guidance midpoint $2.66, implying 3.5% growth over 2024. - Anticipate President Trump's second term to be supportive of defense programs, focusing on space activities, missile defense, and naval capabilities. - Tenant retention for 2025 guidance midpoint at 80%, with 3 million sq ft set to expire, including nearly 450,000 sq ft to the government. ### Leasing and Occupancy - Occupancy at 93.6% overall and 95.6% in defense IT portfolio at year-end 2024. - Vacancy leasing target for 2025 is 400,000 sq ft, with over 50,000 sq ft already executed. - Renewal leasing strong, with 2.6 million sq ft executed in 2024, 86% tenant retention, and 93% retention in Q4. ### Development - Active development pipeline totaled 600,000 sq ft, 75% pre-leased, $253M investment. - Two development inventory buildings have 150,000 sq ft prospects on 150,000 sq ft available space.

In 2024, FFO per share (adjusted for comparability) was $2.06, a 6.2% increase over 2023, with six cents above initial guidance. Excluding nonrecurring events, FFO per share grew 5%. Same property cash NOI increased 9.1% year over year. They executed half a million square feet of vacancy leasing (45% of vacant space at the start of the year), achieved 86% tenant retention (highest in over twenty years), and committed $212 million to new investments. Revenue from 99 US government leases generated 36% of annualized rental revenue, with GSA exposure being minimal at less than 1% of annualized rental revenue.

• 2025 FFO per share range $2.62 to $2.70, midpoint $2.66, implying 3.5% growth. - Same property cash NOI projected to increase 2.75% at midpoint. - Expect same property occupancy to end 2025 between 93.5% and 94.5%. - Guidance assumes tenant retention in 75% to 85% range, with 3 million sq ft set to expire in 2025, including government leases. - Plan to commit $200M to $250M to new investments and $250 to $300M to development spend in 2025.

• Potential delays in government spending and administrative processes could impact lease renewals and expirations. - GSA exposure is minimal but any changes in GSA policies could indirectly affect the company, though their GSA exposure is de minimis. - Interest rate fluctuations could impact net interest expense, as variable rate debt exposure is expected to increase modestly.

Q: In terms of the three defense priorities detailed, how would demand evolve in markets around those and consideration of additional inventory developments or acquiring assets with lease-up potential?

A: Space activities could create development in Huntsville related to potential relocation of space command; missile defense affects Huntsville with PEO of missiles in space; naval capabilities expansion benefits DC near US Navy Yard and Southern Maryland. Consideration of developing inventory to meet demand.

Q: Could there be an indirect impact to COPT Defense Properties if there's increased focus on contractor customers?

A: Service companies believe they are part of the solution DOGE is looking for, well-positioned to bring efficiencies to DOD, and mood is to move to more value for dollar spent at mission.

Q: Update on data center land in Iowa acquired last quarter and status of power applications?

A: Working through power request, initial response from power company, path to gigawatt but timing less clear.

Q: Defense budget expectations and potential impact on business?

A: Uncertainty in negotiations, but over last eight years bipartisan support for DOD funding increase expected. Direct conversations with customers show no slowdown.

Q: Leasing and renewal rates, pricing power with private sector tenants?

A: Focus on reducing concessions first, then pushing rate where makes sense, but not risking losing tenants.

Q: Space command relocation impact on Huntsville development starts?

A: Won't start building without recognition of relocation and intent to lease, but won't affect overall numbers.

Q: Regional office side, liquidity and potential sales?

A: No significant investment sales activity, distressed assets not at efficient sale range.

Q: Tenants susceptible to government workforce/property changes and impact on portfolio?

A: No risk seen, GSA component addressed, and divisions supported not at risk.

Q: 75% of non-renewals, profile of tenants?

A: Largest is CareFirst Blue Cross Blue Shield moving out of 50,000 sq ft, viewed as opportunity to concentrate tenancy in desired buildings.

Q: Availability and natural level of frictional vacancy?

A: Natural occupancy around 95%-96%, remaining flat in 2025 is good assumption.

Q: Future development prospects and pick-up in development spend?

A: Viewed on average range, with ebb and flow, and optimism from administration bringing increased opportunity.