COPT Defense Reports First Quarter 2025 Results

EPS of $0.31

FFO per Share, as Adjusted for Comparability, of $0.65

4.8% FFO per Share Growth Year-over-Year

Met Midpoint of Guidance

Reiterates Midpoint of 2025 FFO per Share Guidance of $2.66

Implies 3.5% FFO per Share Growth for the Year

Continued Strong Occupancy and Leased Levels

Defense/IT Portfolio 95.3% Occupied and 96.6% Leased

Occupancy Rate Exceeded 94% for 9 Consecutive Quarters

Same Property Cash NOI Increased 7.1%

Reiterates Midpoint of Same Property Cash NOI Guidance for the Year of 2.75%

Committed $52 million of Capital to New Investment in Huntsville

$308 million of Active Developments (756,000 SF) are 62% Leased

Excellent Leasing to Start the Year

Total Leasing of 647,000 SF

120,000 SF of Vacancy Leasing

On Track to Achieve/Exceed Annual Target of 400,000 SF

Tenant Retention of 75%

On Track to Achieve Annual Goal of 75%-85%

89,000 SF of Investment Leasing

COPT Defense Properties ("COPT Defense" or the "Company") (NYSE:CDP) announced results for the first quarter ended March 31, 2025.

Management Comments

Stephen E. Budorick, COPT Defense's President & Chief Executive Officer, commented, "Our Defense/IT investment strategy, which concentrates our portfolio near priority U.S. defense installations, generated strong results in the first quarter with FFO per share at the midpoint of our guidance range, despite incurring higher than expected net weather-related expenses. Our performance year-to-date is tracking according to plan and we are reiterating the midpoint of our 2025 FFO per share guidance range at $2.66, which implies 3.5% year-over-year growth.

In terms of our leasing achievements, we are off to a great start, as we have executed 179,000 square feet of vacancy leasing and over 100,000 square feet of investment leasing year-to-date, while maintaining a strong tenant retention rate of 75%. Our Defense/IT Portfolio was 95.3% occupied and 96.6% leased at quarter-end, and marked nine consecutive quarters in which our occupancy rate exceeded 94%, highlighting the strength and durability of our portfolio.

In terms of external growth, we commenced construction on a 150,000 square foot development at Redstone Gateway in order to capture near-term demand, as we only have 37,000 square feet of inventory across our entire 2.5 million square foot Huntsville portfolio.

Our actual and expected performance led our Board of Trustees to approve a 3.4% increase in our quarterly dividend in February, which marks our third consecutive annual increase, amounting to a 10.9% cumulative increase since 2022. Looking forward, we continue to anticipate compound annual FFO per share growth of roughly 4% between 2023 to 2026."

Financial Highlights

1st Quarter Financial Results:

> Diluted earnings per share ("EPS") was $0.31 for the quarter ended March 31, 2025, compared to $0.29 for the quarter ended March 31, 2024.

> Diluted funds from operations per share ("FFOPS"), as calculated in accordance with Nareit's definition and as adjusted for comparability, was $0.65 for the quarter ended March 31, 2025, compared to $0.62 for the quarter ended March 31, 2024.

Operating Performance Highlights

Operating Portfolio Summary:

> At March 31, 2025, the Company's 24.5 million square foot total portfolio was 93.6% occupied and 95.1% leased, which includes the 22.6 million square foot Defense/IT Portfolio that was 95.3% occupied and 96.6% leased.

> During the quarter ended March 31, 2025, the Company placed into service 10,000 square feet of development that was 100% leased.

Same Property Performance:

> At March 31, 2025, the Company's 23.9 million square foot Same Property portfolio was 94.1% occupied and 95.2% leased.

> The Company's Same Property cash NOI increased 7.1% in the quarter ended March 31, 2025, compared to the same period in 2024.

Leasing:

> Total Square Feet Leased: For the quarter ended March 31, 2025, the Company leased 647,000 square feet, including 438,000 square feet of renewals, 120,000 square feet of vacancy leasing, and 89,000 square feet of investment leasing.

> Tenant Retention Rates: During the quarter ended March 31, 2025, the Company renewed 74.9% of expiring square feet in its total portfolio, all of which was in the Defense/IT Portfolio.

> Rent Spreads and Average Escalations on Renewing Leases: For the quarter ended March 31, 2025, straight-line rents on renewals increased 8.2% and cash rents on renewed space decreased 0.9% while annual escalations on renewing leases averaged 2.6%.

> Lease Terms: In the quarter ended March 31, 2025, lease terms averaged 3.4 years on renewing leases, 7.1 years on vacancy leasing, and 10.5 years on investment leasing.

Investment Activity Highlights

> Development Pipeline: The Company's development pipeline consists of five properties totaling 756,000 square feet that were 62% leased as of April 14, 2025. These projects represent a total estimated investment of $308 million, of which $91 million was spent as of March 31, 2025.

Balance Sheet and Capital Transaction Highlights

> For the quarter ended March 31, 2025, the Company's adjusted EBITDA fixed charge coverage ratio was 4.7x.

> At March 31, 2025, the Company's net debt to in-place adjusted EBITDA ratio was 6.1x and its net debt adjusted for fully-leased investment properties to in-place adjusted EBITDA ratio was 6.0x.

> At March 31, 2025, and including the effect of interest rate swaps, the Company's weighted average effective interest rate on its consolidated debt portfolio was 3.4% with a weighted average maturity of 4.5 years, and 98% of the Company's debt was subject to fixed interest rates.

Associated Supplemental Presentation

Prior to the call, the Company will post a slide presentation to accompany management's prepared remarks for its first quarter 2025 conference call; the presentation can be viewed and downloaded from the ‘Financial Info – Financial Results' section of COPT Defense's Investors website: https://investors.copt.com/financial-information/financial-results

2025 Guidance

Management is narrowing its full-year guidance for diluted EPS and diluted FFOPS, per Nareit and as adjusted for comparability of $1.27-$1.35 and $2.62-$2.70, respectively to new ranges of $1.28-$1.34 and $2.63-$2.69, respectively. Management is establishing second quarter guidance for diluted EPS and diluted FFOPS per Nareit and as adjusted for comparability at $0.31-$0.33 and $0.65-$0.67, respectively. Reconciliations of projected diluted EPS to projected diluted FFOPS, in accordance with Nareit and as adjusted for comparability are as follows:

The Company detailed its initial full year guidance, with supporting assumptions, in a separate press release issued February 6, 2025; that release can be found in the ‘News & Events – Press Releases' section of COPT Defense's Investors website: https://investors.copt.com/news-events/press-releases

Conference Call Information

Management will discuss first quarter 2025 results on its conference call tomorrow at 12:00 p.m. Eastern Time, details of which are listed below:

Participants must register for the conference call at the link below to receive the dial-in number and personal pin. Registering only takes a few moments and provides direct access to the conference call without waiting for an operator. You may register at any time, including up to and after the call start time: https://register-conf.media-server.com/register/BIcd5f0d58372b4632aafb741d70095683

The conference call will also be available via live webcast in the ‘News & Events – IR Calendar' section of COPT Defense's Investors website: https://investors.copt.com/news-events/ir-calendar

Replay Information

A replay of the conference call will be immediately available via webcast only on COPT Defense's Investors website and will be maintained on the website for approximately 90 days after the conference call.

Definitions

For definitions of certain terms used in this press release, please refer to the information furnished in the Company's Supplemental Information Package furnished on a Form 8-K which can be found on its website (www.copt.com). Reconciliations of non-GAAP measures to the most directly comparable GAAP measures are included in the attached tables.

About COPT Defense

COPT Defense, an S&P MidCap 400 Company, is a self-managed REIT focused on owning, operating and developing properties in locations proximate to, or sometimes containing, key U.S. Government ("USG") defense installations and missions (referred to as its Defense/IT Portfolio). The Company's tenants include the USG and their defense contractors, who are primarily engaged in priority national security activities, and who generally require mission-critical and high security property enhancements. As of March 31, 2025, the Company's Defense/IT Portfolio of 198 properties, including 24 owned through unconsolidated joint ventures, encompassed 22.6 million square feet and was 96.6% leased.

Forward-Looking Information

This press release may contain "forward-looking" statements, as defined in Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, that are based on the Company's current expectations, estimates and projections about future events and financial trends affecting the Company. Forward-looking statements can be identified by the use of words such as "may," "will," "should," "could," "believe," "anticipate," "expect," "estimate," "plan" or other comparable terminology. Forward-looking statements are inherently subject to risks and uncertainties, many of which the Company cannot predict with accuracy and some of which the Company might not even anticipate. Although the Company believes that the expectations, estimates and projections reflected in such forward-looking statements are based on reasonable assumptions at the time made, the Company can give no assurance that these expectations, estimates and projections will be achieved. Future events and actual results may differ materially from those discussed in the forward-looking statements and the Company undertakes no obligation to update or supplement any forward-looking statements.

The areas of risk that may affect these expectations, estimates and projections include, but are not limited to, those risks described in Item 1A of the Company's Annual Report on Form 10-K for the year ended December 31, 2024.

Source: COPT Defense Properties

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IR Contacts:

Venkat Kommineni, CFA

443.285.5587

[email protected]

Michelle Layne

443.285.5452

[email protected]