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COPT Defense Reports First Quarter 2025 Results

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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

COLUMBIA, Md.--(BUSINESS WIRE)-- 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:

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:

Reconciliation of Diluted EPS to FFOPS, per Nareit, and As Adjusted for Comparability

Quarter Ending
June 30, 2025

Year Ending
December 31, 2025

Low

High

Low

High

Diluted EPS

$

0.31

$

0.33

$

1.28

$

1.34

AG˹ٷ estate-related depreciation and amortization

0.34

0.34

1.35

1.35

Diluted FFOPS, Nareit definition and as adjusted for comparability

$

0.65

$

0.67

$

2.63

$

2.69

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:

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:

Conference Call Date:

Tuesday, April 29, 2025

Time:

12:00 p.m. Eastern Time

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:

The conference call will also be available via live webcast in the ‘News & Events � IR Calendar� section of COPT Defense’s Investors website:

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 (). 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

COPT Defense Properties

Summary Financial Data

(unaudited)

(dollars and shares in thousands, except per share data)

For the Three Months Ended
March 31,

2025

2024

Revenues

Lease revenue

$

175,308

$

165,433

Other property revenue

2,289

1,230

Construction contract and other service revenues

10,259

26,603

Total revenues

187,856

193,266

Operating expenses

Property operating expenses

72,040

66,746

Depreciation and amortization associated with real estate operations

39,359

38,351

Construction contract and other service expenses

9,705

26,007

General and administrative expenses

8,148

8,378

Leasing expenses

2,999

2,187

Business development expenses and land carry costs

1,009

1,182

Total operating expenses

133,260

142,851

Interest expense

(20,504

)

(20,767

)

Interest and other income, net

1,568

4,122

Gain on sales of real estate

300

Income before equity in income of unconsolidated entities and income taxes

35,960

33,770

Equity in income of unconsolidated entities

371

69

Income tax expense

(103

)

(168

)

Net income

36,228

33,671

Net income attributable to noncontrolling interests

Common units in the Operating Partnership (“OP�)

(726

)

(608

)

Other consolidated entities

(762

)

(454

)

Net income attributable to common shareholders

$

34,740

$

32,609

Earnings per share (“EPS�) computation

Numerator for diluted EPS

Net income attributable to common shareholders

$

34,740

$

32,609

Amount allocable to share-based compensation awards

(143

)

(129

)

Numerator for diluted EPS

$

34,597

$

32,480

Denominator

Weighted average common shares - basic

112,383

112,231

Dilutive effect of share-based compensation awards

643

509

Weighted average common shares - diluted

113,026

112,740

Diluted EPS

$

0.31

$

0.29

COPT Defense Properties

Summary Financial Data

(unaudited)

(in thousands, except per share data)

For the Three Months Ended
March 31,

2025

2024

Net income

$

36,228

$

33,671

AG˹ٷ estate-related depreciation and amortization

39,359

38,351

Gain on sales of real estate

(300

)

Depreciation and amortization on unconsolidated real estate JVs

741

777

Funds from operations (“FFO�)

76,028

72,799

FFO allocable to other noncontrolling interests

(1,158

)

(836

)

Basic FFO allocable to share-based compensation awards

(530

)

(587

)

Basic FFO available to common share and common unit holders (“Basic FFO�)

74,340

71,376

Redeemable noncontrolling interest

469

Diluted FFO adjustments allocable to share-based compensation awards

53

47

Diluted FFO available to common share and common unit holders (“Diluted FFO�)

74,393

71,892

Executive transition costs

77

Diluted FFO available to common share and common unit holders, as adjusted for comparability

74,393

71,969

Straight line rent adjustments and lease incentive amortization

(1,699

)

3,473

Amortization of intangibles and other assets included in net operating income (“NOI�)

162

122

Share-based compensation, net of amounts capitalized

2,854

2,645

Amortization of deferred financing costs

667

685

Amortization of net debt discounts, net of amounts capitalized

1,051

1,014

Replacement capital expenditures

(21,464

)

(20,776

)

Other

81

137

Diluted adjusted funds from operations available to common share and common unit holders (“Diluted AFFO�)

$

56,045

$

59,269

Diluted FFO per share

$

0.65

$

0.62

Diluted FFO per share, as adjusted for comparability

$

0.65

$

0.62

Dividends/distributions per common share/unit

$

0.305

$

0.295

COPT Defense Properties

Summary Financial Data

(unaudited)

(Dollars and shares in thousands, except per share data)

March 31,
2025

December 31,
2024

Balance Sheet Data

Properties, net of accumulated depreciation

$

3,643,482

$

3,630,526

Total assets

$

4,250,311

$

4,254,191

Debt per balance sheet

$

2,412,670

$

2,391,755

Total liabilities

$

2,688,481

$

2,693,624

Redeemable noncontrolling interest

$

23,539

$

23,974

Total equity

$

1,538,291

$

1,536,593

Debt to assets

56.8

%

56.2

%

Net debt to adjusted book

40.7

%

40.4

%

Defense/IT Portfolio Data (as of period end)

Number of operating properties

198

197

Total operational square feet (in thousands)

22,560

22,549

% Occupied

95.3

%

95.4

%

% Leased

96.6

%

96.7

%

For the Three Months Ended
March 31,

2025

2024

GAAP

Payout ratio

Net income

97.2

%

100.7

%

Debt ratios

Net income to interest expense ratio

1.8x

1.6x

Debt to net income ratio

16.6x

17.9x

Non-GAAP

Payout ratios

Diluted FFO

47.0

%

46.8

%

Diluted FFO, as adjusted for comparability

47.0

%

46.7

%

Diluted AFFO

62.4

%

56.8

%

Debt ratios

Adjusted EBITDA fixed charge coverage ratio

4.7x

4.5x

Net debt to in-place adjusted EBITDA ratio

6.1x

6.1x

Net debt adj. for fully-leased investment properties to in-place adj. EBITDA ratio

6.0x

6.0x

Reconciliation of denominators for per share measures

Denominator for diluted EPS

113,026

112,740

Weighted average common units

2,047

1,625

Redeemable noncontrolling interest

947

Denominator for diluted FFO per share and as adjusted for comparability

115,073

115,312

COPT Defense Properties

Summary Financial Data

(unaudited)

(in thousands)

For the Three Months
Ended March 31,

2025

2024

Numerators for Payout Ratios

Dividends on unrestricted common and deferred shares

$

34,318

$

33,143

Distributions on unrestricted common units

661

500

Dividends and distributions on restricted shares and units

236

267

Total dividends and distributions for GAAP payout ratio

35,215

33,910

Dividends and distributions on antidilutive shares and units

(237

)

(266

)

Dividends and distributions for non-GAAP payout ratios

$

34,978

$

33,644

Reconciliation of net income to earnings before interest, income taxes, depreciation and amortization for real estate (“EBITDAre�), adjusted EBITDA and in-place adjusted EBITDA

Net income

$

36,228

$

33,671

Interest expense

20,504

20,767

Income tax expense

103

168

AG˹ٷ estate-related depreciation and amortization

39,359

38,351

Other depreciation and amortization

542

608

Gain on sales of real estate

(300

)

Adjustments from unconsolidated real estate JVs

1,518

1,671

EBITDAre

97,954

95,236

Credit loss expense

515

22

Business development expenses

593

630

Executive transition costs

57

430

Net gain on other investments

(477

)

Adjusted EBITDA

99,119

95,841

Pro forma NOI adjustment for property changes within period

786

813

Change in collectability of deferred rental revenue

1,232

In-place adjusted EBITDA

$

101,137

$

96,654

Reconciliations of tenant improvements and incentives, building improvements and leasing costs for operating properties to replacement capital expenditures

Tenant improvements and incentives

$

13,758

$

12,776

Building improvements

1,872

4,953

Leasing costs

3,461

3,590

Net additions to tenant improvements and incentives

3,538

316

Excluded building improvements

(201

)

(818

)

Excluded leasing costs

(964

)

(41

)

Replacement capital expenditures

$

21,464

$

20,776

COPT Defense Properties

Summary Financial Data

(unaudited)

(in thousands)

For the Three Months Ended
March 31,

2025

2024

Reconciliation of interest expense to the denominator for fixed charge coverage-Adjusted EBITDA

Interest expense

$

20,504

$

20,767

Less: Amortization of deferred financing costs

(667

)

(685

)

Less: Amortization of net debt discounts, net of amounts capitalized

(1,051

)

(1,014

)

COPT Defense’s share of interest expense of unconsolidated real estate JVs, excluding amortization of deferred financing costs and net debt premium and gain or loss on interest rate derivatives

752

804

Scheduled principal amortization

461

769

Capitalized interest

927

589

Denominator for fixed charge coverage-Adjusted EBITDA

$

20,926

$

21,230

Reconciliation of net income to NOI from real estate operations, same property NOI from real estate operations and same property cash NOI from real estate operations

Net income

$

36,228

$

33,671

Construction contract and other service revenues

(10,259

)

(26,603

)

Depreciation and other amortization associated with real estate operations

39,359

38,351

Construction contract and other service expenses

9,705

26,007

General and administrative expenses

8,148

8,378

Leasing expenses

2,999

2,187

Business development expenses and land carry costs

1,009

1,182

Interest expense

20,504

20,767

Interest and other income, net

(1,568

)

(4,122

)

Gain on sales of real estate

(300

)

Equity in income of unconsolidated entities

(371

)

(69

)

Unconsolidated real estate JVs NOI allocable to COPT Defense included in equity in income of unconsolidated entities

1,889

1,740

Income tax expense

103

168

NOI from real estate operations

107,446

101,657

Non-Same Property NOI from real estate operations

(3,170

)

(545

)

Same Property NOI from real estate operations

104,276

101,112

Straight line rent adjustments and lease incentive amortization

154

3,913

Amortization of acquired above- and below-market rents

(69

)

(69

)

Lease termination fees, net

(834

)

(775

)

Tenant funded landlord assets and lease incentives

(3,105

)

(10,364

)

Cash NOI adjustments in unconsolidated real estate JVs

(260

)

(262

)

Same Property Cash NOI from real estate operations

$

100,162

$

93,555

COPT Defense Properties

Summary Financial Data

(unaudited)

(in thousands)

March 31,
2025

December 31,
2024

Reconciliation of total assets to adjusted book

Total assets

$

4,250,311

$

4,254,191

Accumulated depreciation

1,572,422

1,537,293

Accumulated amortization of intangibles on property acquisitions and deferred leasing costs

227,122

228,154

COPT Defense’s share of liabilities of unconsolidated real estate JVs

61,190

61,294

COPT Defense’s share of accumulated depreciation and amortization of unconsolidated real estate JVs

13,616

12,817

Less: Property - operating lease liabilities

(48,216

)

(49,240

)

Less: Property - finance lease liabilities

(384

)

(391

)

Less: Cash and cash equivalents

(24,292

)

(38,284

)

Less: COPT Defense’s share of cash of unconsolidated real estate JVs

(1,766

)

(2,053

)

Adjusted book

$

6,050,003

$

6,003,781

March 31,
2025

December 31,
2024

March 31,
2024

Reconciliation of debt to net debt and net debt adjusted for fully-leased investment properties

Debt per balance sheet

$

2,412,670

$

2,391,755

$

2,416,873

Net discounts and deferred financing costs

21,886

23,262

27,358

COPT Defense’s share of unconsolidated JV gross debt

53,750

53,750

52,819

Gross debt

2,488,306

2,468,767

2,497,050

Less: Cash and cash equivalents

(24,292

)

(38,284

)

(123,144

)

Less: COPT Defense’s share of cash of unconsolidated real estate JVs

(1,766

)

(2,053

)

(1,159

)

Net debt

2,462,248

2,428,430

2,372,747

Costs incurred on fully-leased development properties

(27,499

)

(18,774

)

(43,034

)

Costs incurred on fully-leased operating property acquisitions

(17,034

)

Net debt adjusted for fully-leased investment properties

$

2,434,749

$

2,392,622

$

2,329,713

IR Contacts:

Venkat Kommineni, CFA

443.285.5587

[email protected]

Michelle Layne

443.285.5452

[email protected]

Source: COPT Defense Properties

Copt Defense Properties

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REIT - Office
AG˹ٷ Estate Investment Trusts
United States
COLUMBIA