CDP

• Overall Financial & Leasing Performance

  • Delivered 24th consecutive quarter of year-over-year FFO per share growth, with Q2 2026 FFO per share $0.02 above the midpoint of prior guidance.
  • Executed 139,000 square feet of vacancy leasing in Q2 and 231,000 square feet in H1 2026, reaching ~60% of the original full-year vacancy leasing target; 70% of Q2 vacancy leasing was with existing tenants.
  • Total portfolio occupancy saw a temporary 30 basis point net decline from two one-off events that will reverse in Q3 2026, adding back 30 basis points of occupancy next quarter.
  • Tenant retention averaged 84% in H1 2026 and 79% over the past 10 years; the lower 68% Q2 retention rate was driven by two strategic non-renewals (not market weakness), and net of these deals retention would have been 12 percentage points higher.

• Large Lease Expiration Outlook

  • Of 32 large leases (over 50,000 sq ft) totaling 4 million square feet expiring through end of 2026, 24 have already been renewed for a 97% retention rate by square footage. The remaining 8 leases (all full-building US government leases totaling ~1 million square feet) are expected to be 100% retained, putting total projected retention at ~98%, above the initial 95% projection.
  • For large leases expiring through end of 2028, there are 39 leases totaling 4.1 million square feet; 70% of this pool by square footage is government and data center shell tenants expected to have 100% retention, with overall projected retention of ~90% for the full pool.
  • Since starting large lease retention disclosure four years ago, the company has achieved a 98% retention rate across 5 million square feet of large expired leases, with only four modest downsizes totaling less than 120,000 square feet.

• Development Pipeline

  • Acquired 17 acres of land and a ground lease in Chantilly, Virginia for $43 million at a ~7.5% gap yield, with future upside potential.
  • Active development pipeline totals nearly 900,000 square feet, 73% pre-leased, with $450 million in total capital commitments; four of six active projects are 100% pre-leased.
  • At Redstone Gateway in Huntsville, the existing 2.4 million square foot operating portfolio is 99.6% leased, and will hit 100% occupancy after the final pending lease is signed. Two new development projects totaling 240,000 square feet will break ground in Q3 2026, adding $91 million in capital commitments, to meet unmet demand from Golden Dome and missile defense programs. The combined development pipeline (opportunities with >50% probability of closing within 2 years) grew 20% quarter-over-quarter to 1.2 million square feet, with an additional 900,000 square feet of tracked potential opportunities (up 60% quarter-over-quarter).

• Market Fundamentals

  • The FY2027 US defense base budget request is for $1.1 trillion, a 30% year-over-year increase, and the House-passed NDAA matches this request, with additional reconciliation funding expected to add between $73 billion and $350 billion in extra spending. Management expects trillion-dollar base defense budgets to be the new long-term normal, with disproportionate increases for intelligence, cyber, and missile defense programs that the company's portfolio supports.

• FFO per share midpoint guidance for full-year 2026 was increased 2 cents to $2.78, which is 3 cents above initial guidance and implies 2.2% growth over 2025 results, despite 12 cents of incremental year-over-year financing costs from bond refinancing and dilution from exchangeable notes.
• Same property cash NOI growth midpoint guidance was increased 100 basis points to 4%, 150 basis points above initial guidance. Management expects growth to moderate slightly in the second half of 2026 due to known move-outs/contractions and non-recurring real estate tax refunds that benefited H2 2025.
• Cash rent spreads on renewals midpoint guidance was increased 100 basis points to 3%, driven by expected early renewals in the second half of the year.
• Annual capital commitment guidance for new investments was increased $45 million to $335 million, reflecting the new Redstone Gateway development starts.
• Full-year vacancy leasing guidance was increased ~20% from 400,000 square feet to 475,000 square feet, driven by stronger-than-expected H1 leasing activity.
• Q3 and Q4 2026 FFO per share guidance is set at a range of $0.68 to $0.70 per share.
• Management reaffirmed the long-term annual capital deployment target of $250 million to $300 million for 2027 and beyond, on a leverage-neutral basis.

The call does not break out financial performance for distinct product segments with separate absolute revenue figures or revenue contribution percentages. Overall portfolio-level operating metrics are reported: total portfolio was 95.6% leased and 94.1% occupied, while the defense IT portfolio was 96.4% leased and 95.1% occupied. Northern Virginia portfolio hit a 10+ year high 95.2% leased, compared to a 78% overall market occupancy rate in the region. Second quarter FFO per share was $0.71, up 4.4% year-over-year, and same property cash NOI increased 7.4% year-over-year for the quarter, with 6.4% growth in the first half of 2026.

• The final FY2027 defense appropriations outcome is still pending Congressional approval, and total additional reconciliation funding remains uncertain between a $73 billion low end and $350 billion high end.
• The recently acquired Chantilly, Virginia ground lease is subject to an outstanding matured mortgage that has been transferred to a special servicer, and the company has not yet been able to take control of the existing improvements on the property, with no clear timeline for resolution.
• Proposed data center development in Des Moines, Iowa is currently constrained by limited access to available power, with no near-term timeline for breaking ground on the project.
• Leasing of the 410 Goss Road government inventory building is not expected to occur until 2027, and demand for the space is still in active discussion with prospective agencies.

Q: Does the structural step-up to a $1.1 trillion defense base budget change the company's planned capital deployment for future development, development yield targets, or preference for funding development via free cash flow versus equity issuance?

A: The elevated budget does not change the company's low-risk capital deployment strategy; management notes the balance sheet can support increased investment if opportunities arise, but the approach remains unchanged. Initial development yield targets remain 8.5%, up from 8% set a few years ago, with no plans to change this target. Management has no intention of issuing new equity to fund growth and will continue to fund all investment via free cash flow, as it has worked for years to reach this self-funding position.

Q: Beyond the two new Huntsville development starts, what other markets are seeing tight supply and strong enough demand to support future development, and what is the current scale of Golden Dome-related demand?

A: Huntsville continues to have very strong tangible demand; the company is already investing in pre-development for four additional buildings beyond the two new starts, and planning for eight more after that. The Fort Meade/College Park area in Maryland is also seeing strong demand and is the next most likely market for future development starts. 50% of the company's 1.2 million square foot high-probability development pipeline is currently Golden Dome-related, almost all of which is located in Huntsville.

Q: Are the two new Huntsville speculative development starts the only new starts for 2026, is there upside for additional starts this year, and is there any update on the recently acquired Chantilly ground lease?

A: The two new Huntsville starts do not have signed pre-leases, they are being built as inventory to match confirmed tenant space demand profiles. Management confirms there is additional potential demand beyond these two buildings, but declines to overpromise additional 2026 starts and notes any additional activity will be covered in future calls. For the Chantilly ground lease, the existing property owner has an unpaid matured mortgage now in special servicing, and the company has not made progress on taking control of the existing buildings, though it expects to acquire them eventually as they are a perfect strategic fit for the portfolio.

Q: Would a change in Congressional control after the 2026 midterms impact defense spending growth, particularly for the Golden Dome program?

A: Management notes that increased defense spending has long been a bipartisan issue, regardless of which party controls Congress or the White House. Even under the prior administration, Congress regularly increased the White House's proposed defense budget in a bipartisan fashion. Golden Dome is driven by broad bipartisan recognition of the strategic need for a domestic anti-missile defense shield, so it will remain a supported long-term initiative irrespective of midterm election outcomes.