COPT Defense Properties (CDP) 7 Feb 202019 Q4 Earnings call transcript

Company Profile

Participants

Stephanie Krewson-Kelly	Vice President of IR
Steve Budorick	President & CEO
Paul Adkins	EVP & COO
Anthony Mifsud	EVP & CFO
Jason Green	Evercore
Craig Mailman	KeyBanc Capital Markets
Manny Korchman	Citi
Thomas Catherwood	BTIG
Blaine Heck	Wells Fargo
Dave Rodgers	Baird
Rich Anderson	SMBC
John Guinee	Stifel
Omotayo Okusanya	Mizuho
Jamie Feldman	Bank of America
Chris Lucas	Capital One

Call transcript

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Operator

Welcome to the Corporate Office Properties Trust Fourth Quarter and Year-End 2019 Earnings Conference Call.

As a reminder, today’s conference call is being recorded.

At this time, I will turn the call over to Stephanie Krewson-Kelly, COPT’s Vice President of Investor Relations. Ms. Krewson-Kelly, please go ahead.

Stephanie Krewson-Kelly

Carmen. you, Thank welcome quarter and our conference to call for Good year-end to XXXX fourth and as results discuss XXXX. afternoon COPT’s as guidance well Executive President With EVP Mifsud, CEO; Steve today CFO. and Budorick, me Paul and are and Adkins, Vice Anthony President COO; and

our supplemental on GAAP of information the presentation posted on package website. financial in the discusses are measures and Reconciliations and management results our non-GAAP available and website press release, results

that discussed Steve? reminder statements over risks filings. to undertake in can Steve, today’s forward-looking duty from results I are made our update differ and Before the call these not quick during a to statements turn call and a uncertainties, at SEC forward-looking subject the to and does materially them. events which Actual are length company

Steve Budorick

and Good operating you thank tremendous business in year-end XXXX company joining of levels, development capital government or The leasing, debt objectives leasing leasing, rate, year recycling, levels, investment. us. our afternoon and and all leasing new exceeding development retention meeting at including record had a for renewal

the positioned defense by company budget X% increase deliver and [Technical modest achievements Difficulty] the in will our Importantly, another X%. to XXXX growth place suggest to

When defense commenced emerged as highly we our types been square five properties. the deliver feet Last lease Gateway X.X park million Redstone achievements shareholders. six we of location. will year, the development, produce All the of demand to fastest in recovered solid defense discussing spending since and have properties have the contain increases XXXX, benefit operating IT under our growing

Arsenal and additional space and talent leasing, on have our strong emerge from law the XXXX opportunities in XXXX. in may defense located that momentum and the great have We indications enforcement activities XX:XX:XX Redstone support

leasing Now, let's achievement. excellent the captured with the across discuss demand portfolio We details.

square record the million feet. highest feet ever XXX,XXX was the by leasing of XXXX volume X.X total square Our exceeding

in more in third leasing record than leasing The the X our XXX,XXX square feet feet of history. square development development million achieved our highest XXXX. X.X million our Then square prior with was was feet our government of

leasing strong was expansion. industry vacancy defense Our driven by

with IT feet an XXX,XXX submissions highest properties. defense The the was accommodate square years, X,XXX leasing and of addressing now As and serve incremental requirements. portfolio. of was XXX,XXX committed funded tenants size expansions government square growth. since has deal widespread mission XX average our vacancy Progress throughout XXXX The and in the leased In in of to square feet operating volume defense feet. well we the past the transactions consistent pent-up are two nature to US

markets two We and supply have create where inventory. built demand is spec to where outpacing have we on

three the we've at the few Over University are in and XXX% one four spec occupied. years, past College of in Huntsville delivered All Maryland. Park buildings

in XX% in building, in Road XXXX fifth we're spec prospects. We which and with our multiple November, we started is leased, September Rideout discussions building contractor in and already started a in Park College sixth spec Huntsville,

square has prelease X build-to-suit projects square feet, During data the signed feet. totaling shelf for we've defense XXX,XXX totaling years, and completed transactions Since and also we've million X.X large five large facilities recovered, transactions adding contractor build-to-suit new past two feet. demand XX million build-to-suit square XXXX, containing approximately preleased and nine center

and antiterrorism campuses. a a feet campus of consisting secure for square has on our government of NoVA executed In C, our government XXX at lease for XXXX, the leases new square force-protected foot at square plans secured prelease in Secured Additionally, XX,XXX buildings foot returned facilities to Gateway. we executing for long-term XXX,XXX XXX,XXX locations,

XXX,XXX feet government square including leasing. Since we’ve the leasing, beginning new of XXXX vacancy the over and of completed

throughout leasing We our continued portfolio. strong expect

feet of is leasing goal for It Development supported last feet have million year's our we is square million XX% Our higher opportunities initial than square in goal. XXXX initial development Pipeline. X by Shadow of X

And the this commensurately will opportunities. increased raising fund development initial our (inaudible) to growth Modest growth. those We their year’s on FFO X.X%. more capital sales doubled year's to tamper asset leasing around than dilution the transactions from last

incremental in service placed from EBITDA this robust will our in next leased developments XXXX. year growth the However, we've produce and FFO

that, call over hand to With I'll call. the

Paul Adkins

our with which gain start now ending year. square in Business Thanks, which XX% that the Steve. the We occurred has XXX a and at increase included of leased points portfolio Support quarter to leased, largest improved our a vacancy The operating Park feet ended XX% the is momentum. by XX% leasing in sub-segment year leased improved Fourth National of year square year the end, leasing increased over strong basis of leasing and the points core Navy and XXX,XXX by XX-basis-point XXX XXX,XXX total also. at feet basis

and Gateway, Road, And XXXX We completed leased Advanced feet the XX% building booked & During feet. our preleased. now tenant X,XXX square Morrison a square with fully lease XX,XXX leased expanded square of exercising at Foerster the of component which size is quarter, an XX,XXX feet, with Elista Redstone option XXX,XXX additional the we development office additional XXXX spec River for feet current leasing. University cybersecurity at an square XX,XXX-square-foot at The L an increasing Gateway of Aviation campus XXX,XXX the of X,XXX remainder the of expansion leased to its Advanced its Maryland.

square the Defense/IT feet square Redstone Gateway, square year, million leasing XXX,XXX center with feet XXX,XXX feet the build-to-suits, million and data of of development included X.X feet government. our X.X at shell US square For

Our occupied basis XX incorporated updated portfolio X.X XX.X% decommission a changes resulted were the feet that The decision million composition portfolio year year, property square was the center data to equating decline. line from and with shells change composition to that point end of at during in our of property portfolio portfolio the DC-X. joint our same same which guidance in in venture was to

make capital decisions and strategic We downtime long-term to to occupancy. renewal manage regarding eliminate continue economics costs, maintain

rolled rent guidance. of renewals term feet square a of XXX,XXX these our rolled four down drove Each eight square million X.X below four annual at we year, X.X%, leases of of mark-to-market years. average escalations. updated year, low cash renewed X.X% basis in renewals feet down off an XX.X% XX completed renewals, and the and weighted long-term totaling large with locking points the Last average our end During

four transactions, X.X the feet in Excluding million X.X%. square down these remaining rolled of of renewals average an year the

tenant The square During quarter was more feet for down foot the doubled leases a their new and renewed square lease. fourth XXX,XXX drove and at these won the than a government Cash XXX,XXX space. contract A recently tenant XX-year quarter, rolling needed for them now We renewals of rents square one market of term high more to cash X.X%. of The end footprint. the captured its than tenant down XX new double on X.X%. renewals a years. the rolled expansion, XXX,XXX of during feet remaining which their off rents

square another built XX% in X.X The scheduled strong are have at million XXXX in rate less April, looks Gateway tenant Columbia single-tenant for XXXX which retention expire XXXX Renewal strong. significantly to nonrenewal one years’ XX%. user. leasing In we a of we recent we feet than to and forecast volumes large

lease. the executed floor XXX,XXX feet one a leaving lease already for We to defense contractor square with

a multi-tenant Class and the implementing to proven building for use this demand are expect amenity to product strategy be We we as A enrichment convert robust.

month back DC-X, week on center we last wholesale half in of of another data a gave our one July. As tenant megawatt last back discussed in give – at to expect Manassas, and three calls, recent quarters megawatt tenant

After which, further contractions or expect terminations. we no

a we XX.XX lease anticipate are expires We full renewal. X August user in megawatt and negotiations with whose the

square I'll leased. feet, conclude with the the an development XXX% of Bringing placed into year leased the million square development X.X XXX,XXX total to on activity. In update projects feet we quarter for service. all the fully fourth

square feet and X.X have are which Among projects, that projects development currently negotiating increase we active XX leases of about are million will core currently leased square portfolio feet of which these and by for volume. have availability half We our XXX,XXX XX%. XX%

Executing on XX% activity, this to development the bring leased. will pipeline

expect under XXXX. service similarly remaining into to and them in million fully service before square place placing into feet During square X.X XXXX, feet XXXX development leased and lease XXX,XXX we

With that call Anthony. the turn I'll to over

Anthony Mifsud

of our Thanks, Paul. year and share for the FFO quarter and midpoints Fourth guidance. comparability $X.XX adjusted as met of updated full per $X.XX

$X.XX were fund our result set opportunities. higher-than-budgeted expanding of to development a midpoint as dispositions original results of than annual Our guidance lower

as higher operating of with quarter, were XX% for to Operations margins the tenant in in XX% retention for better-than-expected property combined strong the the cash X.X% year same the year of drive and X.X% quarter. and growth NOI

the our times During the $XXX midpoint of original development million $XXX X.X in invested million year, activity, we guidance.

of our million forward joint addition million which original million $XX center to issuing our venture to to of XX% shells facility, by more raised Blackstone. double equity a the In than disposition $XXX $XXX our nine million, final with $XXX in selling interest guidance of was XXXX a data we

dispositions shell create demonstrate clearly value ability through Our our development. to center data

our XX Our approximately year's The and of and DC-X, of in and X.X% over upsizing $X.XX and dispositions. our equates XXXX XXXX at growth includes straightforward it's last dilution The implies plan and $X.XXX tenant we've anticipate low experienced XX $X.XXX the midpoint slides and guidance results from risk. is summarized non-renewals contractions which on to presentation also dilution. includes

$XXX,XXX between planned. to have acquisitions $XXX plan no development We and in million invest and

investment. less and continue fund equity to our conservatively $XX levels, than will maintain leverage million plan to sheet requires $XX investment maintain of of We our To balance XX% our development capital, expected strength. our between million

we access our to equity to million know, have issue $XXX you As ATM

data in of additional than wholly and in JV owned we the our which, the accretive equity would light our have to be FFO from NAV. adequate inherent to capacity in Alternatively, value developments, raise more remaining shelves center creation sales.

driven points service times. growth same-property from the EBITDA by Gateway. of X.XX%, developments approximately incremental roll-downs The of to X% to cash at from debt-to-EBITDA XXXX X.XX% nonrenewal X year moderate at occupancy, maintain X%, rent Columbia modest the will for increases forecast NOI ratio by basis XXX placed our same-property impacted and We in in

due which per quarter XXXX $X.XX results. and interest December. is data in midpoint of The snow with budgeted of higher $X.XX, fourth Lastly, seasonal we’re $X.XXX cost two selling establishing from for XXXX is share a quarter removal JV below dilution of shelves difference center guidance in FFO $X.XXX utilities, to and first

turn to With back Steve. that, the call I'll

Steve Budorick

Thank you, Anthony.

takeaways We have two key this call. from

fiscal XXXX for defense strong leasing occupancies and Since including representing billion, we first our spending budget, growth $XXX years. space the compound The XXXX, X% expect by X and budget year the is fiscal annual continued in has higher the bottoming DOD in toward increased of across growth portfolio. that

strong intelligence bipartisan solid our demand be and There portfolio. see continues existing missions. expect we fund support backdrop of continue to to for across steady Against space this to defense growth, to and strong new defense

created they've have is growth year development this of Last key EBITDA growth that second are seen FFO into solid an deliver equity groundwork laid point raise, year's placed and to service. XXXX’s achievements XXXX. us waves the The robust for in future developments as we've

incrementally future This reduce sheet. and traction requirements while strong will our equity gain maintaining a balance FFO also

please questions. open up for With that call operator the

Operator

Thank Mr. is Instructions] our go first Jason question from [Operator Green Budorick. with And Evercore. ahead. you, Please

Jason Green

Good morning.

$XX roughly have to guess I the XXXX. in not Given with deal not at moving that you thinking forward. trading and why not I what's down that the call $XX have need what beast guess million ATM there? stock's something something now for development to have pull – you it and the roughly just that

Steve Budorick

over been Well Jason. lockout we've calls in until those a

may JV in phase. also their So JVs our shows. We we’ll we will the plan do use it to or to other And and increasing add ATM ability optionality. reflects measured a maintain

Jason Green

call NOI. right the guess, million to would if ballpark the our data turning X% way just X.X% assume pipeline. current $XX of this CIP and On the the looks development to yield it, the that the Is then math, that bucket like of centers future come project I from an about, office yield. tab. growth be kind thinking And we and get should about get Okay. that development deliver it

Steve Budorick

Yes. That’s money. the on right

Jason Green

Thank much. very you Okay.

Steve Budorick

you. Thank

Operator

Thank you.

Our Mailman with comes Craig ahead. next go question Capital from Please Markets. KeyBanc

Craig Mailman

Hey, guys.

April, number the that large partial the backfill in when On the gross commence? what's on and does renewal square footage

Steve Budorick

subleasing There's XXX,XXX about will And come the tenant the baking. square now. immediate. currently So, is space XXX,XXX feet. commencement This that is total

Craig Mailman

think any you to capital downtime budgeting? or you on there spend do guys Is what on then, And you that that? need

Steve Budorick

be floor So, this redevelopments going help we’re to of ground I the successful amenities the to think of part. to to would couple I the with space as capital in downtime number TIs up Paul don’t shape be a introduce so This million. to And little do month. XX so is us bit modes. great a some it’s have I commented, our but and of budget on expect reasonable to

Anthony Mifsud

as Weighted average night well.

Steve Budorick

Yes, X to XX.

Craig Mailman

of NBP Huntsville will any? if the much foot Pipeline, last success Shadow swear then you is been has at NBP, down the had year million Of Helpful. And quiet how and recently. guys a I bit that good two square little

Steve Budorick

Pipeline the NBP. in tenant that progress around our rest the Shadow build – preleased is there's new is think NBP. we’re half bit no NBP that. projects at I of The subleased number Development or of None initially well, XXX in filing XXX XXXX, a built which and contracted and last We making of it. We

aside the building of highly-leased. for floors set in NBP the XXX, and couple Besides a government is

that We feet. have are that XX vacant are below XX,XXX three parcels XX,XXX and feet about square then square are that

Anthony Mifsud

right. All

NBP we be NBP about in leased Excluding well, we’ll XXX XX% the when park. XXX, where, – if leased

Craig Mailman

at the demand fluid surprised is, building? being to where I a government back contracts there up Okay. I'm all a on given things well park put just leased picked seen for just contracts pipeline curious you but have spending are are we've go, guys out. always not know how new

Anthony Mifsud

of not the surprised. years has contractor some to three defense in around one those modest the I'm and four region occurred this or dynamics spaces. has last backfill compelled that mergers Currently, us No. have reductions been and over generated

so otherwise the XXXX. would I drive new that And see us of initiate at wouldn’t all the to a But surprised growth building. in be some absorbing building that’s next

Steve Budorick

Yes. or Development next over greater We Pipeline, called two XX% years those it are happening. we that of the think likelihood projects Shadow the

doesn't potential say right the would I threshold is So to but that – that NBP has just now. rise

Craig Mailman

Appreciate Okay. it. you. fair. That’s Thank

Operator

with is ahead. from And Korchman Citi. you. our Thank next go Please question Manny

Manny Korchman

Hey, everyone.

call about bit to a your left times XXXX, side, NBP. out into be negative should XXX there. going at the be the a in it’s that you If about but what’s XXXX. plusses point out we mentioned guys the flip think you thinking minuses, early the on of just of know strong couple we What about? And into that I – and growth thinking presentation sort leasing Just on

the actually What months XXXX other could leasing growth? happen next would few course over that of drive that the help

Steve Budorick

So take hard let first. part the me

renewal for I think the a important keep it's an in us at get preparing big DC-X the the eye one yet, for an should large renewal. term, extended deal the not that’s is we represent their that and pretty you didn't but risk signed that of user. We're negative on if discussions XX-megawatt would

increase, – project in and year, last those build-outs year, our that obviously. of properties. occupancy over going Besides course during and lot leasing, will year, we we a gain of That's the did occur a leasing tenants the to widespread nice occupancy of will the throughout all

Anthony Mifsud

maybe… And

Manny Korchman

Go ahead, Paul.

Steve Budorick

One on service gave an of that this but the given to our really the that the we annual placed basis not contribution keys and about is drives year on next year commentary what the year, this we’ve developments during their that just is XXXX. growth commentary in confidence on and

Manny Korchman

Got XX%, about think we the it. XX%, we And retention talked at nonrenewal that if on at that you’ve Columbia. got

on not sort landing that non-rate-sensitive rate elsewhere, contract, how is of based not For needing going nonrenewals, non-retains, of those of versus the the if other will, space, you the sort reasons? the much tenants

Steve Budorick

think we’re very much with portion looking of has I anything do rates. nonrenewal to that don’t at the

So it relocating… is just tenants

Anthony Mifsud

contracting. Or

Steve Budorick

the I in contracting with mean, has it’s retention we – excellent, of but our course – none is sensitivities. normal still business. do tenant think of and rate rental rate to it Or

Manny Korchman

Paul. Thanks,

Operator

Please is from ahead. Thank you. question next Tom BTIG. Catherwood go And with our

Thomas Catherwood

was driver it. million visual no square presentation when leasing being leasing. bulk the feet XXXX-XXXX behind XXXX of the Page suggests Maybe renewals. of feet and in you. really at and But X.X square Thank renewal of speaks I It leasing. maybe it to of Excellent. guidance, vacancy look the X a lot helpful a XXX,XXX

of that the a in is reflection or from filled. XXXX already demand slowing a reflection and and markedly down spaces just that market your of expirations XXXX. better of year some of lower cut Maybe Is are That’s outs.

Steve Budorick

Are or leasing at level? new you the driving the renewal

Thomas Catherwood

a by XX.X% looking I'm getting renewal. So, looking what's If implied to look with leasing, at development I'm not same-store. at just on at new lease I

Steve Budorick

Got it.

have sure, leases, then have volume a last So much from incurred a three. of standpoint, maturing for lower we not renewal the we

is, portfolio being as locations, available. then leased that’s we less component. inventory it our well as have just a And So egg with many

Thomas Catherwood

you guess, a not you same for the the at there? Or see a different to matter of it, have call XX volume been continuing there's So, months? it’s that Area of is I asking XX demand way. past, been shift a to

Steve Budorick

Well, absolutely we we – we have managed. similar run a levels. We have process

All square tours names prospects, million of XXX opportunities we of from our week. and steady every has X potential And to that to it’s and as speak. steady, very typically opportunities feet

Thomas Catherwood

FBI announced And then formerly November, build-out Got Huntsville. it. $X in a billion the in

refer even to any bulk you QX. as – the those until so relocate support to ancillary much like the appetite to to expanding think for you're if see related of in there it looks move the jobs XXXX. or of seeing? H and that far won't your what to It started I your holdings down is is But kind fully demand that Gateway build-out

Steve Budorick

two pivot the achieved Meade. So, businesses that of of have to actually to leases that we those that component related Fort we or agency

We on there, campus. secured of X additional feet our the that development of development have is over million capacity square and in X million about

to So, should well-positioned we’re any occur. demand extremely opportunity relocating that capture

Thomas Catherwood

maybe then for Paul. a last Understood. And one me,

rents the the coming options And compared start you us your mentioned kind of us for Street. of the of any guys? L where expansion Foerster Can remind that update expansion you're the then, at projects a Morrison over off floors holding with & the XXXX just while? Morrison out Foerster you market You balance the the building? how progress on have & after ground Does on

Steve Budorick

rent Foerster & Well, than and we was I mentioned, XX,XXX feet was as Morrison that square another higher forma. a at actually with Sure. that sign pro did

vacancy other They then which expansion left years their that. feet about leasing off – we office XX,XXX excited And the have vacancy is expansion a after a there's encumbrances limited for five-year are nothing options the think that of held balance market. there’s That building. in no the leaves else being XX and we’re actually building. of relatively for the of that square So, positioning great

building. We and of for were project activity the still in excited solid the underwritten rents for believe pretty the the have balance a and that we've

So, from for have you was QX delay they leased dates it two-week that on to they did well move of we commencement the impact delivery may Morrison the floor QX will have space which from to noticed really additional Foerster’s mid-April. & both a original just end as lease the zero the But as March that took.

Thomas Catherwood

Got the it. balance building And kind that left or space then that's of the is dispersed… towards is the the it bottom of of

Steve Budorick

Yes.

Thomas Catherwood

building? the Throughout

Steve Budorick

five. It's

going a XX and they're suites also move six the So X X enormously X half probably we two have space prospect bunch – forward the for X-year been, spec for – with X. which X to taking is X D.C. that, we're are or last suites of Half for space in to know, are a years XX-year of which through – to of or and X, is has encumbered. of going program but you years. specs, successful as we

Thomas Catherwood

it. All right. Thanks, Got everyone.

Steve Budorick

Sure.

Anthony Mifsud

Tom. Thanks,

Operator

you. Thank

next Our from go Please Fargo. Wells with question Heck Blaine comes ahead.

Blaine Heck

Thanks. Good afternoon.

elsewhere? you those much guys to making other to versus the up that’s of opportunities kind guys Huntsville, of Huntsville on just the the than those projects developments margins magnitude yields follow economics difference you that more can and active the guys the in between So and achieve on on you speak can

Steve Budorick

we’ve X% for at achieving north office have of Park. cash of programs, north completed X% floor our of and solid. the we’re they’re So College very development a so X% typical in developments Huntsville, is yields all

aggressive center more data been have We on shelves.

are cap. in valuing our X.XX%, but think a typically disclosed about past, yields I the at X% those we’ve

Blaine Heck

the development most Secured talk if I there the this, your Okay. at Road missed can think XXX un-leased you That’s of and sorry And where then and but space Gateway interest helpful. point? Rideout this which I XXXX in about is is is

Steve Budorick

should by vacancy. major the on of that then need, the we end the recent Supplements, we’ve be size So accommodate expect, XXX an component quarter, we was In what Secured of Gateway lease but the XX-ish the of percent identified spend leased that building increased we’re negotiating the And the for to building. – and additional second…

Anthony Mifsud

leased Or by year-end.

Steve Budorick

Yes.

Anthony Mifsud

Right.

Steve Budorick

Oh, XXXX and Road, well, Rideout you’ve Paul, got… then

Anthony Mifsud

the foot that’s delivering for so lease-out of spec a November have square year. in XXX,XXX – this We building

a prospects contractor with We have tenant, have more our and have first than well-known lease-out we we space.

year we asset. stabilizing this that to very – expect be of during So course successful the we’re in

Steve Budorick

pour to Road What building with the building Rideout we’re to our the for to doing immediately we’ve delivery is Gateway approved build XXXX spend time. this the and cut foundation then next

be ground one. next So very to a the of right as come lease-up, position quickly in we’ll we finish this for out the

Blaine Heck

where Okay, rents half. of be great. large four you the have then the And to in bridge second you drags drag similar to touched cash in the average you XXXX? renewals there big guys expect kinds on any down renewals specific that large Are situations

Steve Budorick

No.

If X%, change deals, which is leases. you four minus very to performed the to look strategic our that rent keep portfolio X% balance wanted guidance, in we excluding at those at long and minus they it’s tenants coming all the the were of way really

One of for space those been had their years. in XX tenants

Blaine Heck

Got guys. Thanks, it.

Steve Budorick

Thanks, Blaine.

Operator

you. Thank

Dave next comes question Baird. Our with Rodgers from

David Rodgers

as couple maybe feet much much maybe that opposed much Yes. by Good seeing be might maybe how Paul, demand million answered different may on any? you're us have I a you in government, is regional to of the defense, and X tell of data, guess, development market, But square how asking ways. then is much or can if is afternoon. how how this

Paul Adkins

is that the and of demand half About shells, this years. is over two datacenter next

So, of that. that's a pipeline

of component the that the we Gateway, of in rest the is and pipeline downtown amongst Corridor scattered at it DC. Fort large Another Redstone demand Meade/BW down additional and it see is

Steve Budorick

is XX% About government projects.

David Rodgers

are to DC, L? just in demand XXXX say you when you And you. Thank government. XX% talking

Steve Budorick

Yes.

David Rodgers

there Okay. is there? more Or

Steve Budorick

No.

David Rodgers

going kind in really one no like to the release, first was the of for your equity, just a price and maybe do top how remaining to saving future. I higher mind. press you weigh datacenter dispositions It need I that more guess, comment I equity. the versus in in think of that the was maybe back maybe comments versus Steve, your the guess, equity of that sounded shells earlier do

Steve Budorick

Anthony pointed on accretive today. Issuing to the we’re So, and both will NAV. FFO equity trading as be out, the ATM

I shells, long-term So, could value equity. the it’s that a like kind them a as reserve when for tap we in while choice to a look of, – capital in and data the have those to we at of think access we good good it’s us center future don’t think

So, I you surprise be would to not if some the starting capital us ATM. see with drawn

David Rodgers

Steve Clear. as I for XXXX, Okay. something at or maybe explains maybe a maybe a pipeline the fourth going But back guess, that. lot first and that. then, the the to the Thanks ramp $X.XX robust term your it guidance Anthony, And look development or effect. in XXXX the quarter guidance, to you you quite quarter looks use like between of that bit implies

as you much a of ramp comes your start kind out XXXX development mind second of in see in to online? how But of How play in do does that half the the year. that

Steve Budorick

back really weighted. is ramp The Yes. end

of but some you’ll in So, quarter point representation that the of fourth represent we fair where to will will will the majority it see it a of in in do a XXXX quarter. third what the it get

David Rodgers

Thank Okay. you.

Operator

you. Thank

with Our question comes Anderson SMBC. from next Rich

Richard Anderson

Hey. Thanks.

wanted to the I one just haven't to before I my disclosure, said taste want most of and I say, the this First, friendly user is mentioned that. I from think like

do think Tough or on a disclosure another my quarterly. with thing. cartilage good the that’s I you’ll job but tone

year after, budget this demand to one X% X%? long-term all than or driver years EBITDA is when key it’s size stay whatever at same-store and spending, better the anything first now is you you profile you some kind when above next and or I'm wondering few sort be of growing going the coming is way questions, – line the I've prognosis – think the year once X% you’ve year. per my And aback. at X% of through to is, kind a with right growing now growth company, – basically or is development, seen do your there only how of about on the now at defense get of your a But defense

Steve Budorick

which to the not per the in percentage really Well, market our operate. rental by driven levels related They’re budget increase. are se buildings of defense those

of the growth is supply Rent by rent. would I driven issue, demand. local budget bifurcate thought a in So growth and from in

typically remind We’ve years, in rolled a X% can – basis. What exceed the reset. rent that, people in really the over lease several a time, we’ve X% growth embedded long to structures and cash that to rent, is period our X% last we we down drives that’s the what to of on growth have have X% market

average are Our X.X% X.X%. escalators to

So, we I portfolio. rents, growth with we structures, and one-year barring forward a portfolio. we then step-back, progress take our – average, the condition X.X% on a But growth spike of where and think spiked portfolio it’s our rent can

David Rodgers

Yes.

another. I spending you. fair. one that’s or mean, I defense phenomenon, certainly the influences Okay. the market, end a It’s get way market-driven but at the of the day,

Steve Budorick

Correct.

David Rodgers

not same-store pool, of correct? is know I �� this. thesame should in DC-X terms In store

Steve Budorick

Correct.

David Rodgers

Like, know was be store lot I it was? there’s What but going if included? what if – it the impact would a what same there, on

Steve Budorick

So the – yes, go ahead.

Anthony Mifsud

night, percentage million impact DC-X put NOI look $XX the generated over would in worth little XXXX. last know if we that I disclosure the out at cash be a you of what but

last $XX Our guidance disclosed property that $X also time was million that for between million we for to XXXX.

So call same in of base cash the that NOI alone $XXX worth asset million that. down, of probably forecasted is at the million it $X.X of so cash off go office is NOI, X% to midpoint of

David Rodgers

Okay. Good…

Steve Budorick

again going to a of but income – got X% year reestablish vacancy And down that when reversal we get the then in this if that you're back. so we you're

David Rodgers

have flat sort or Right. And Steve, on something I you of DC-X? guidance appreciate a the the candor in baked the where renewal on at do there. downward the movement you core Is assuming tenant rent have a

Steve Budorick

conservatively. budgeted it lease in negotiate to but we've really Well, that that leave don’t public. I want I’ll at

David Rodgers

of All modeling right. me Last question. a more for is question

line have rent a cadence, a straight curious modeling beyond? in and You sometimes rent be XXXX funky kind line too. sometimes – straight up, What for I'm would we of should down. what

Steve Budorick

higher slightly developments about $X I $X.X to For new the first and the from some from the well in quarters leases as as in of leasing some the XXXX, model online. the of as million would million fourth quarter commence three coming

of that So, run ended rate. call good $XX probably it, a total million about, is

was little bit year by impacted one tenant this cadence Our at contractions a DC-X… of some – the

David Rodgers

Okay.

Steve Budorick

payment as termination showed on line then it a but a a a termination straight as contraction that write-off X full Had result that of the up payment, megawatt. had

some through had add this year. it So, it things running

David Rodgers

Thanks perfect. much. very Okay,

Operator

Thank you.

from Our comes John with next question Guinee Stifel.

John Guinee

to DC-X is Great. is saying, same about impressive the going think, say? very what I falls because time actually to it’s off. ramp fair guidance Is that This that in you're second half the

Steve Budorick

Probably not But the quarter, It place will DC-X the fourth third by and have exactly the timed ramp development that the in decline of as the slightly services. in from well ramp way. impact as we’ll full the quarter.

John Guinee

you. Got

Okay.

So, land, XXXX? same there this sort land lease on age. what's big fees – still is got sales any day is million people relatively and in land? Do which of picture lines, you or the And term Steve, along very most to the of about XXX what's big number a

Steve Budorick

missions holding associated to missions we needed we’re land expand as that own, John, aligned the create the and with we defense land to that (inaudible) priority to is support with. Well, opportunity like the

left with up last the much a smaller of couple up. we really don’t We over the accumulated lot have clean years, company of cleaned the but at to

Anthony Mifsud

we’re And XXXX, with $X typical respect to termination million in to $X fees our of million. budgeting sort

John Guinee

land sales? Yes. But no more

Steve Budorick

quarter in in have the to at that’s land of of a up terms for really forecast what you off our farm and sell about left small Dorsey Road in North nonstrategic When think we in But the year. sold a it because land, of fourth parcel Not XXXX. Gate. last Frederick it’s we

John Guinee

Stephanie. way, then you’re great disclosure, the at – XXXX, And Okay. at by looking

You’re including Antonio these pretty are and Do basis? at can you BW in Meade Corridor. at on big are flat about rents in-place renew Fort in pretty Lackland San Those $XX.X much cash numbers. think a you $XX.XX, $XX things

Steve Budorick

absolutely. Yes,

John Guinee

Okay. enough. you. Good Thank

Steve Budorick

this square John, the expire the rents, that are Each campus that rent, the just are XXX,XXX rents know, you full there our so we buildings in year. two feet. disclosed And Antonio recoveries of those from the leases base government. plus San are the

that expenses high at the reason to government asks the such that’s – facility that’s those operate and So the they’re down rents, there.

to leases those continue expect the increase typical in leases government the our across we So increase, to portfolio.

line buildings two quarter about which renewing the we this what space a accomplished $XX year. rent those of the the average pull you fourth in on If foot, out, is with in is

John Guinee

that have They they? building, in a call don’t center do

Steve Budorick

Not in buildings. not in – these no,

John Guinee

All a lot. right. Thanks

Steve Budorick

you. Thank

Operator

Thank you.

Okusanya Our comes with next from question Omotayo Mizuho.

Omotayo Okusanya

Yes. Good afternoon.

So NPV long-term very renewals given taking quarter could why then, a to a And but, of we market more I but to ensuring rent? little have of little of situation kind strategy this the get less I just of bit around cash be that just continue talk during that, exactly kind the And renewal guess rent bit strong strong? why again, the but spread. negative of rate the – kind very you seems

Steve Budorick

Sure.

growth rent for growth. the but market, lease. We tenant that a about structure higher just exceeded market needed talk decade? XXX,XXX-square-foot more the at grown rent X% quarter fourth knew at let’s tenant Moreover, XX-year Is at end rolling the So than the also will expansion. of the market that up tenant in XXX% lease, the lease for X.X%, and

on bit hit a took lease doubled So, yes, little a rent for sure, we that of but their we capacity.

And building priority long very to existing high their a we’ll have time. a and their serve great and space we expansion mission confidence be in a importantly, they're for – that reconfiguring very that

that lost. if one about at square the non-renewal. $X.X change in foot. look place, our we full at year feet actual in then a look mark-to-market, last point, rent and XXX,XXX if of It – you it’s the And about million that is rent $XX you equates put average So about we

the from lease an ponying tenant replace as no important through them. up, and improvements the big to rent far of downtime, than And having the tenant same standpoint So losing more that kind (inaudible) is grow then FFO structure. again, renewal getting we’ll with

Omotayo Okusanya

All right. you. Thank

Operator

you. Thank

question from Bank next comes Feldman Our America. of with Jamie

Jamie Feldman

demand of different JEDI to flow announced then initiatives Great. Can have to mean, base other talk demand. sub know markets I from expecting and I press terms been yet what that Thank are you're have in major you. other see the seen through then any that in cloud they in you contracts. we've And kind that. about of

Steve Budorick

there's clarity. Well, both of a issues those not lot no.

federal when will accounting field get the no office telling JEDI in there's government and that in So, results. court

announcement at – could And then supporting It firm to be with regards for of command. in no command been elements and multiple Commanders. selection basis space that the just Space the for the

think XX I the next over out that play will months.

Jamie Feldman

contract there Okay. global about cloud another was – And then what before…

Steve Budorick

Yes, there's a big Paul. one – Yes. Go ahead,

Paul Adkins

impact another, very as don’t the the insight it’s to relationship that’s affecting have not little size, our our yet. and show market what awarded we same But and continuation with almost has anyway data in again, There's think been been customer. of out center if larger not slightly pipeline on JEDI And, than the there.

Jamie Feldman

back you speaking going you centers, see they're the And there giving Okay. and started two a more space? Where the that portfolio? risk can with talk to in tenants then more that about are data is just

Steve Budorick

The footprint. So, just and had load was that gaming of only that moved the out the they're was rest we tenant leasing and the one that not of reduced building successful. their platform that

good to we occupied we is floor where news raised a – the had floor So, very space there news lease. is level space – good to – if little were

the we’ll So, contiguous where fulfill demands the nice market have them past. block had to in capacity have compete just enough to we now in a the larger that been not for

Jamie Feldman

space that big think Do fully you as other this or utilized? there's have have excess tenants been capacity well

Steve Budorick

This is original rolled from the the it. All leases leasing.

Jamie Feldman

Okay.

Steve Budorick

the news we we’re lot some two. We do but in quarter say or to going prospect have have exciting a an that hope to about, next

Jamie Feldman

talk what your in that of some And kind demand, you of but seen some others. the can growth stick-up from you then these about rent I speaking Northern specifically of sub-markets? Virginia Okay. in guess have

Steve Budorick

roughly is in in Northern seen solid. months. Virginia’s have the a XX% pretty Yes. Corner our been picture Actually, – over last rents There's Tysons increase XX assets

with assets has at are, the foot right location those square Burrow, multi-million it So, the basically use. do the where metro new mixed of to the of foot walkable to and

just Road as that’s in of Tysons on emerging the tech So, rising demand as Tow South both amount Corridor. the well the there's definitely Silverline, Herndon along rents and in XX Route

the is in So, significantly the improving has over vacancies improved assets also Chantelle quarters. last to of outlook the four our and three and

XX,XXX vacancy square So, repositioning feet. we that Chantilly have out some we’re in

leasing. optimistic So cautiously we’re about

rapidly Northern definitely And so a Virginia strengthening and corridor. particular is in the Tysons/Herndon

Jamie Feldman

about what then your some other And of submarkets?

Steve Budorick

– I as River mentioned I PAX would say strengthening.

we’re XX% Gateway rents raising is We’re down in leased River. getting so slightly Columbia PAX steady. and tighter,

have We coming continue to do XX% leased. the up nonrenewal be We here.

So I…

Anthony Mifsud

Each high. lease we sign in new Huntsville is a literally market establishing

Steve Budorick

Yes.

So…

Jamie Feldman

you say are Yes. like would Huntsville What year-over-year? rents

Steve Budorick

cheap to rents it’s range. buildings, $XX we’re but operate So $XX, in very getting the those

Anthony Mifsud

were of they ago, couple a And Right. $XX. years

Steve Budorick

like Expenses $X. down in Texas are

Jamie Feldman

$XX? gross rents, are Those

Steve Budorick

Yes.

Jamie Feldman

All you. right. Thank Great.

Steve Budorick

Thank you.

Operator

And from question One. Capital Lucas Instructions] is Chris our Thank you. [Operator next with

Steve Budorick

Chris. Hi,

Chris Lucas

ticked Hey. you afternoon. have on looked Good us it give Steve, just center an you the can for update It like data up. land the position shelves?

not as inventory Just to have is what you of data kind curious of square center in under sort construction. volume sort that footage of of currently

Steve Budorick

Yes.

So up which in quarter at or the three to capacity create we square additional parcel year locations, this to one year. campus of in remaining different capacity picked have some we the sites last one X feet so. about And million for and next blank our we get expect of

Chris Lucas

center – of their all at you for the changed you demand pace customer of sales? sort the from from has data So

Steve Budorick

No.

year completed we of line reached I been. think have But last two of steady. development million going which think ‘s really contributed five and it’s overall We the feet achievement. pace lumpy we be overall really leases. – period our But year where had in the I it square to time, a remember, is right

Chris Lucas

or comes there a why an point you? it you asset and guess the least it, not has that kind has you for lucky something historically. become multi-tenanted would is given get and additional at the get that of Is that in this longer-term hold tenancy core thing question always is just DC-X, not an some on lease at then maybe back view are sort of I here, it’s of a that And business on this sort of be monetized owning that to

Steve Budorick

certainly on capacity have major we we renew. lease. have to don’t value maximum Well, lease a sale a to go we We've when and got

few optionality thereafter. through So we're years next operate going an to the make

Chris Lucas

Thank Great. you. Okay.

Operator

Mr. any Thank in you. final I for like to And Budorick the to would I'm not call his the queue. further questions turn showing remarks.

Steve Budorick

for all our you today. joining Thank call

you’d We call. in Stephanie will through like coordinate Thank afternoon if be please you follow-up so offices a our much. very this

Operator

Properties Thank you and for Corporate today’s Trust call. your XXXX conference concludes fourth presentation. quarter This participation the Office year-end to

may disconnect. You Good day. now

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