COPT Defense Properties Q4 FY2025 earnings call

• 2025 was a strong year with FFO per share growth, same-property cash NOI increase, and significant leasing and development activity.
• Executed 557,000 sq ft of vacancy leasing and 477,000 sq ft of investment leasing.
• Committed $278 million to 5 projects, 81% pre-leased; late December committed $155 million to 2 build-to-suit projects.
• Defense budget: FY 2026 Defense Appropriations Act is $950 billion, largest in history, with strong bipartisan support.
• Britt discussed leasing performance, renewal leasing, development pipeline, etc.
• Anthony discussed 2025 financial results, guidance for 2026, and capitalization of development costs.

In 2025, FFO per share was $2.72, $0.06 above initial guidance midpoint, up 5.8% from 2024. Same-property cash NOI increased 4.1% year-over-year due to a 40 basis point rise in average occupancy. Vacancy leasing totaled 557,000 square feet (47% of年初 vacant space), and investment leasing was 477,000 square feet at a weighted average lease term of 13 years. Capital commitments of $278 million were made to 5 projects in 4 markets, 81% pre-leased. For 2026, FFO per share guidance midpoint is $2.75, implying 1.1% growth, absorbing a $0.09 increase in financing costs.

• 2026 FFO per share guidance range $2.71-$2.79, midpoint $2.75, implying 1.1% growth. Absorbs $0.09 increase in financing costs; excluding this, growth would be 4.4%.
• Same-property cash NOI projected to increase 2.5% midpoint.
• 2026 vacancy leasing target 400,000 sq ft, 1/3 of available inventory.
• Development pipeline: active pipeline ~$450 million, 86% pre-leased.

• Government administrative delays in processing lease renewals impacted tenant retention and cash rent spreads.
• Uncertainty in timing of government processing of lease renewals, especially for large leases.
• Interest rate risk related to refinancing and financing costs.

Q: Development pipeline and Golden Dome visibility?

A: Both, with prospects related to Golden Dome in Huntsville.

Q: Leasing assumptions and tenant retention?

A: Nonrenewals are often smaller tenants, 80% retention historically.

Q: Investment mix and yields?

A: Development yield target 8.5% cash-on-cash; acquisitions opportunistic, yield must exceed.

Q: Development spending and growth outlook?

A: Spending to ramp in 2027-2028; 5-year outlook for Huntsville has significant runway.

Q: Defense budget impact timing?

A: 12-18 months for demand to impact bottom line, but Golden Dome may have quicker impact.

Q: Data center development and office dispositions?

A: No current data center plans; office disposition in D.C. when cap rates align.