OFC - Earnings call transcript Q3 2021 | COPT Defense Properties

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Operator

Welcome to the Corporate Office Properties Trust Third Quarter 2021 Results 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

Blue. you, Thank welcome quarter and conference to call Good results to and third XXXX updated discuss afternoon, COPT's guidance. EVP COO; With me Hartman, Anthony and Todd and President Mifsud, and today are Executive Steve Vice Budorick, and CFO. CEO; President of package. discusses available management results release on measures in and the are and in and presentation financial website our Reconciliations GAAP press that non-GAAP our supplemental information

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

Steve Budorick

Good areas fantastic deal, setting afternoon Company bond us. better of you excellent another delivered joining achievement in record leasing. quarter and and all another than thank for with expected results,

adjusted past of high-end sixth Third comparability quarter guidance time quarters represented FFO seven in expectations. that and by is outperformed of outperformed the $X.XX the the for $X.XX we

two three our also the quarters. of We exceeded guidance last

lowest For quarter. The completed an ever the bond another second for over of as XXXX midpoint above represents results. increasing issued original share the X.X% We we financing In in FFO among of REITs. issued unsecured with updated per coupon record tied a time the full-year which as the notes adjusted. we're of our our August, midpoint midpoint guidance is office senior guidance of and XXXX $X.XX this increase million $X.XX third $XXX X% year, coupon,

the to which strong This achieved square achievement United square of vacancy the completed XX% XXX feet. locations. at the the above floors two represented square And States eight development million highest with shelves at it foot total U.S. the we including of specialized deliver also in leasing included of square government continues quarter the NBP. center IT mission locations, years; XXX,XXX lease full vacancy with and XX,XXX X of also and critical Vacancy foot feet developing volume. owning targets XXX,XXX in strategy In a all a defense leasing for extremely building lease volume leasing, quarter, excellent trailing leasing government. results. strategy IT two the In included leasing office growth was Our average we this defense data quarter,

leased square Lastly, we of strengthen, the square we XXX,XXX the were leasing at of square long-term in our lease delivering consistent leasing with with average XXX,XXX feet just rate, customers square an completed new for square we XX% years. included rate our to Leasing XXX,XXX term the making XXX,XXX with X.X renewed continue feet million of feet which initial total feet bringing another fundamentals an renewals of XX% lease retention We of development leasing, expectations. executed We XX.X of quarter, million square X.X commitments feet economics of lease that's million leasing XX.X and retention that with the year X.X of vacancy term to average average completed space. development years. to under a nine a square an X.X even feet total feet months term for case After at years.

and exceeds we've X.X active million consecutive achieved of leasing result our this represents square transaction, are X totaled a fourth XX% development feet over As to-date goal year our the XXXX developments of Development million square feet leased. XX% leasing. that by

sold impact leasing of operating results, continues development. assets including to into the Our excellent translate fund to impressive performance

from grew months one is For adjusted NOI real up operations as estate from per ago. comparability AFFO XX% XX% the increased year nine period FFO share X%, and for

are extremely share office requirements unique program low-risk rather continue defense quality per generate demand growth to traditional security driven because development and FFO reliable sheet and fundamentals. durable, high that is than defense national portfolio, IT Our spending cash strong by balance and flow

locations our is by at in defense and work-from-home demand demand important future. not As may other impacted the IT affect trends office that

strong before to seize have of over us leasing a We that, balance Todd. hand continue sheet the opportunities development and and With I'll to set upon to call them.

Todd Hartman

Thank you, Steve.

demand markets lease in our strong outstanding this has year. Continued driven achievement

in Third in quarter space quarterly beginning this XXXX, XX% exceptionally square square leasing perspective, has averaged vacancy strong began feet transactions our XXX,XXX was since the put highlighting. feet. vacancy the There quarter worth representing leasing defense available To from two achievement of of the XXX,XXX quarter. spending at at rebounding were major our

which with project floors two to of lease bring government government because at during under we continues XXX%. was customer that indicate their execution remaining The to continuing lease resolution, XXX The lease to square a to the but to space, the now lease leaving U.S. the intent foot a operating is XX,XXX first NBP, XXXX. building

Drive in multiple July Columbia consolidating XX.X-year is second for building executed new XXXX The at lease lease The in feet major the offices expected vacancy Gateway. Bell commencement XX,XXX was XXXX. a lease Alexander for tenant entire square and with

this we four have back into it accordingly full pool. we to moved same our redevelop the and had asset, backfilled months Although, intended property just building in

trailing in XXX,XXX the months and five highest For second the the months, vacancy volume leasing past five-year years. nine-month feet represented average nine through our XXX% of with the square of nine

second ratio of our achievements and is lease of start the has for expectation activity quarter's quarter fourth leasing XXX% underpinning third and the leasing the success into continuing since strong XX% the averaged vacancy quarter. current much Our

of it and quarter, X%. square XXX,XXX down renewals the tenant Cash six-tenths During we third rents translating into XX% and feet grew a renewed gap retention a percent rolled rate. rents

was in square tenant increased escalated rents had lease market renewal and where cash respectively an gap off that the above XX,XXX and rolling quarter. a X% X% Excluding foot XX-year the

feet down X.X escalations the years. rate, retention rolling percent of average we of For rents and X.X initial lease of terms square renewals averaging a a period, with with million nine-month cash completed three-tenths XX% annual X.X%,

lease months averaged renewals, nine the term years. buildings are Gateway X.X Excluding the Redstone that two Boeing on for in still one-year the

to they we and completion. continue they confident pace; The will negotiations The user slow putting the control not their continue given their renew and lease advance We XX.XX are remain tenant's original timeframe its and DCX. in escalated effect we a pay to remains on we renew, process at to megawatt customers' are methodical cannot rent.

for During government. now two in leasing leased. we will development XXX,XXX of Road. U.S. Gateway. development feet. at building square tracking the XXXX. project quarter, executed contractors represents XXX,XXX commencement lease was demand feet foot transaction this with our is square leasing remaining Redstone second a at full the feet campus, which was This of XXX,XXX XX,XXX largest leased space XX% the The Rideout defense secured development who was contractor scheduled the building of with early Lease completion started and The square That XXXX total are of upon development square we is because

XX,XXX outside office space Redstone to defense for the remaining Redstone buildings month, totals of feet. one Road with executed building two gate. along Class visible a world's of A close Rideout Northrop highly are this We Gateway. Arsenal's feet XXX,XXX lease main The largest we just two the office at working with contractors, campus square leases for Earlier build-to-suite Grumman square

in Once largest million concentration and square development exceeded feet total we the our our slightly XXth assets have National continued making projects we feet, size brought The are the goal. straight commencement lease on placed development X.X the the for year, service, making defense second Gateway expect pipeline; are Park. to opportunities, second Business leasing. the equal park leases of than nearly Redstone of leasing under feet it total next square Northrop at X.X tracking the of active track Based the leasing into on are our half our leasing half million IT We XXXX to of development year. will development in year-to-date square X.X more strong we million development

feet raised of nine XX% first that into the developments were we've in leased. months, service Lastly, square XXX,XXX

to another turn XX,XXX to bringing fourth With I'll call into XXX,XXX place square quarter the in our expect feet. the to that, square the feet for Anthony. We roughly year total over service

Anthony Mifsud

Thanks, Todd.

the of share comparability by R&M and quarter FFO driven other for $X.XX deferred $X.XX guidance $X.XX by exceeded projects midpoint of $X.XX adjusted per outperformance. of Third of as

which projects the and fourth range quarter to of same-property this fourth NOI $X.XX. adjusting the midpoint complete deferred quarter, points cash same-property outperformance to are of NOI, impact to expect per we change, timing basis XXX of Incorporating We R&M drove new our share. will $X.XX increased FFO a in and projects guidance X.X% The which quarter. of cash R&M the the in

growth midpoint full-year for X% guidance same-property the revised of cash we points. NOI XX that the At cash range from up midpoint guidance points above new same-property to are up original basis was XXX the is XX basis full-year Given guidance. a growth is XXX again NOI range that flat for to our basis prior our increasing a results, to point our year-to-date

are occupancy also the of range to full-year prior XX.X%. XX% to We XX% new narrowing XX% to from of a same-property for our guidance range

has guidance XX raise revised the to point equity center quarter the in wholly-owned venturing basis continues to incorporate Our adjusted impact of the data shells negative negative XX include been to we fully to occupied, XXXX retire In X% rate the placing fourth basis joint and point and priced service, unsecured senior to into million August, of of Alexander used Drive pool. floating debt. issued impact notes seven-year the back same-property long proceeds back Bell at $XXX

XXXX loan, $XX L times below rate priced ties of talk. million office duration The The seven-year seven-year Specifically, and treasury, deal paper paid face points XXX ranks retired on for loan oversubscribed basis the office of line lowest and down we over at second as lowest our prepaid Street, the was August our with than points price the term of XX XX million construction at and more X% any amounts XXXX initial overall was REITs among to basis coupon $XXX which remainder. the among credit REITs. as X the

durability the peers spreads income of rated we an and average in-office one used compare billion term an years term rating notes fixed requirements. of higher average Our eight and X.X high quality since years. of our note, of agencies. September senior debt credit Also proceeds issued of investors notch carrying the $X.X favorably XXXX, to the Clearly there cash the have with by work tenants credit who appreciate flow, to our are over retire of of

service range $X.XX new implies of of XXXX a our $X.XX by call forward originally projects to approximately development that into original growth guidance. the into It that than earlier X%. pulling planned this note back With is placing elevated year's hand to growth drove the our to and Steve. that, our tempers NOI and Lastly, is X.X% incorporating are to updated XXXX of outperformance $X.XX of midpoint, important $X.XX nearly range guidance several XXXX midpoint items I'll At $X.XX. results a the the earlier, range than $X.XX guidance from over addressed higher to increasing we previously full-year

Steve Budorick

close Thank you. with the recap our a call I'll points. of key message

by national support company's supported and to defense is continued budget defense strategy States and well with fiscal budget investment threat needs The address of by is bipartisan defense since has the the XXXX security increasingly the which United U.S. environment. been funded the Our United States. risky has aligned funded year growth providing economy, for global

be very Our levels locations. remains as security cannot remote performed from portfolio usage high high, office defense work

not Our to are continue mission defense our require long-term extensions. our evidence, accommodate or as lease defense IT significant densely to experiencing diminished contractions office Rather to results they're making configured office growth continue seeking and usage, to locations. commitments tenants space they short-term

pre-pandemic leases renewal their levels for So in working of and the [indiscernible] their vacancy industry. remain demonstrating long-term confidence above and our for to at in the tenants outlook the development, defense offices or commitment our

different with year. achievement company strategy these the and companies pandemic regardless of up at for the a very in from investing to has its mission plan other this that, FFO office of development low-risk questions. and open the and continues and business flow strengthening economic coming quality business suggesting And new through cash trends. please throughout deliver value we're priority is performance and Clearly, exceeded high per creating locations our Operator, growth, further in call share defense, broader fundamentals locations experiencing continued year, years. strength of Our

Operator

Instructions]. Budorick. Mr. [Operator you, Thank

question of Manny from The comes first the Korchman from line Citi.

line Your is open. now

Manny Korchman

a an guys. it's up. from got in think pretty backlog about afternoon, you've that's that question that just built translating a good for Hey, a should or into good we either Maybe increase physical How perspective? leasing Todd occupancy timing Anthony, but

Anthony Mifsud

this for quarter, of terms on from Typically, six-month occupancy. occupancy probably second occupancy, it’s next to third done leasing -- a based a the it's year. a five In we've to that execution quarter it's to period

Manny Korchman

the that Anthony? NBP as Does well, hold for lease

Anthony Mifsud

does. It

Manny Korchman

pretty a into those any looking continue to drove they just stats, at leases. coming then the went there And an high concessions there specific as numbers especially that as in that, that, high as Is agent be new Okay. that leasing the were? relief

Todd Hartman

the side Well, for was an foot a it lease. our that had new due shell square on that was we was the leasing It to one space. outlier lease quarter, fact a the high XX,XXX

the than higher average And tracks that quarterly quarter. that TI the so five-year for on was rest. the $X.XX, deal was our which with our as was nicely number little Overall deal a removed, very

Steve Budorick

Yes, that's will clear, period lease act extremely Manny, a for NBP, long lease term, that be building of U.S. to although at time. a government it's by tenant XXX that five-year

Operator

Capital comes Your from the Mailman next from Markets. Keybanc line question Craig of

open. Your line is

Steve Budorick

Craig. Hello,

Todd Hartman

Craig. Hey,

Stephanie Krewson-Kelly

Craig?

Operator

your Craig, line open. is

Stephanie Krewson-Kelly

of you the still cell. on not the Can please? next to he He's fallen question, answering. go might've Sir, out

Operator

Yes. you. Thank

Feldman Bank of line the from America. of comes question next Jamie Your from

now open. line Your is

Jamie Feldman

start, Baltimore interest? talk to you those, on a where you just and stand Maybe can of morning. good explorations some and tenant the about backfilling Thanks

Steve Budorick

there's two X, large marketing the activity. Transamerica volume? vacates you January events. talk have we to want and Well, about Todd,

Todd Hartman

Yes.

put very Downtown it's about of and prospects building, well. think methodical that on response. for overall square XXX,XXX the And January encouraged have by progress we space was feet space. currently We that the Once unique but that said, Xst. as expect we're slow, current the interest indicates as a to And working in top the market, those is Baltimore back Steve space level square it the of is get feet interest on we're of XXX,XXX in the the with I

renewal at XXXX over large other CareFirst Clinton. the as far As

continue to happen the We very and renewal that expect soon. progress

Jamie Feldman

then, know you're it's I like great. just And it you. -- on not guess DCX, Okay, end. Thank that I sounds certainly your

year, you same next As still you guidance. it Just assume in late or do of for kind to you'll the year guys ahead the do in think look keep thing?

here get Just realistic about expectation set to done? actually when what's could a that

Steve Budorick

finishing I why no word in There's get date. our no think quicker. we're the Well, absolutely said the reason business can't longer done of projecting it

progress. quarter, been just the personnel Over a on and next interesting note the frustrating in side. to It's of renewal lack it's change the amazingly we have relationship the

have We the activity side. on also operating regular

the in why continue going the a from schedule Our more know clear stay them. crystal I operating it side activity affirmative for they're but not to we to building. higher makes it's their them, from priority don't await

Anthony Mifsud

will off guidance XXXX, we out the what to that for and when in can of And range year, the we with that is about completed. assumed the once with respect and come our so high-end low that, next we've the report with midpoint be transaction of clear therefore to respect we

Jamie Feldman

growth? we Okay. Thank more? do the should your at I development think what land? general, think just you as up How centers if you've be room ramp three got mean, avenue in or then And about here maybe bank, data thinking a you. could that look you land on about of more for I And four you thinking current

Steve Budorick

million on square have, land X you'll think of that see leasing and I year. land some have we feet the Well, substantial over we next capacity on

Jamie Feldman

And that's discussions on based today.

Steve Budorick

Yes.

Jamie Feldman

development I talk point. about one And making progress on you're the of curious that think that a this only is have I'm how around you -- then, park the leased you pipeline, college development, just Okay. couple it's trending. can projects how are XX% just at there?

Steve Budorick

And building. trigger frankly two closeout the tenants space might the that in are that future, We which the could additional have building. negotiating require next

those the One of by year. get may of end the signed

is anybody of not stopped by we've else. it cyber and of marketing year, may the that funded space funding get done because The a to the other one program end the government process, but

Jamie Feldman

would expanding or and be buildings a one lot sub market you in that or it? two that's Do this more see

Steve Budorick

significant beyond have to what see of next built doing. expect we're what would we'll building one then we and in the I capacity Well, demand. couple years We happens.

So additional as deliver. have demand capacity we rises, to

Jamie Feldman

Okay. land But that sitting comfortable on you're longer-term?

Todd Hartman

venture of Maryland. with -- it's will the We part of really joint because to us, has no the land the University cost

gets equity building the becomes land when part of individual balance. their each So developments value that the land into of contributed

So carrying cost the no to land. there's of that company really

Operator

of from from ISI. Sakwa comes line Steve question the Evercore next Your

Your now line open. is

Steve Sakwa

Yes. Thanks. afternoon. Good

bit development million First, I square sort was of wondering down on within provide little breakout could office a of office pipeline. between And that foot a is and more X.X if if How flavor Other where parts Huntsville? centers? does any NBP? just you break just that data that for then Is the portfolio? component, maybe there's the of in up in the

Steve Budorick

of and defense leases, is about broken just Redstone Gateway. defense because signed it's XX% between currently Sure. bunch a XX% we've XX% IT, center NBP It's data that IT shell, and about,

Steve Sakwa

at talk I Northern your markets only and of guess and are kind to mid you standouts good vacancy those two look the leasing, just And within low as I'm markets, if if of certainly wondering which percentages seeing leased of Virginia. what The in And laggards when could County sub kind just most about, about of Howard Todd of you two kind mid, but are label you're your speak you could wondering sort Okay. to or real what are occupied XXs. you I'm you portfolio? the talked

Steve Budorick

agency XX,XXX on answer I'll in We County. Well, fairly market Merrifield. do slow. and is one jump velocity Howard sub in feet And with Northern Virginia that about in square Virginia of have

we have about and velocity exciting it. is market-driven We signed are some challenge. the talk front, lease that's quarter, one on let pretty -- Gateway we've Columbia opportunity this I'll and but a Todd in

Todd Hartman

Gateway generally corridor. is space. market, available occurred in would, XXX% is area very strong four their several transactions in as large Yes. meter Recent of is Columbia ratio Columbia activity some and have the Gateway for our it I activity the Baltimore in the activity about the

increase our Howard anticipate to numbers very soon. would I So County

Operator

Fargo. comes from line question of Blaine Wells to the next Heck Your

Your line now open. is

Blaine Heck

prepared Todd, land mentioned you projects your there's how X.X everything need build is Redstone to I think construction that about capacity remarks or afternoon. those any are completed. left million to in by you to Good the ability time had build more you square much additional feet Can after would talk whether be there done acquire and under there? Thanks.

Todd Hartman

Yes.

have capacity available we currently down now these the with And options. we're expand square there right our about But and have We million after the considering are additional to about X.X done ability feet are halfway capacity. of completed.

Blaine Heck

might thinking be future? I the guidance a you NOI XXXX, in Great. dip drivers what fourth a That's should about place the is same-store give sitting And XXX updated Can and bps anything to the out, of we with implying quarter year, fourth be you to able any assuming know roughly calls might else color can the And then, there. at guidance aren't on to then us levers helpful. means in the Redstone year-to-date going bps X.X% that, but just you Anthony, same-store to in XX you're or your have do result quarter. through have but increase something there giving for forward talk that guys lower pull moved for any there? this in for you I'm the

Anthony Mifsud

of fourth the Well, we was to of down be incremental R&M quarter last two at projects regional the quarter less net some in the year, impacts a quarter's some the attendance of fourth year-to-date the current the there because that some talked increase the in in fourth the -- about. the quarter quarter. properties. from expenses fourth executed timing pull operating compared of is net That is outperformance because office going our One of And are of drive will that to results, one-tenth be than the things.

of for the So quarter. two the fourth really those performance are drivers the

information we respect with -- we'll ready we're -- continue to. put think we're I to think out when next think to will I year, I

for outside of what our there's by would in anomalies that would that internal positive about think of be. nothing -- growth we be quarter that we've I right believe next need that negative lead like and what now talked quarter, to, we'll that us we year, but would talk sort about to historically these if nothing

Operator

of Catherwood question Tom from to BTIG. comes next Your the line from

open. now is line Your

Tom Catherwood

Do kind of shifted not rooms, or have development needs things good your either features of these materially you and office new past, physical new specialized you on of requirements building Steve, in protection what much, developments. those additional layouts you've features? seeing specialized everyone. Skift spend setbacks changing afternoon, in the are that and so mentioned front. like Thanks force But are in find going tenants' that for terms projects kind to

Steve Budorick

market. Well, with How TI the point. in them. it. regard uses development with existing tenant fully allowance. we up for demand of Skift my guess to The of can't inventory. now. fulfilled With the spend, and contractors negotiated that a we fund right regard don't market It's but is Skift I a kind to, be to extremely We the meet Skift NBP There's pent-up around seeking high set the the

have new it'll way drive high accommodate environments Northrop demand including we build-to-suite in extreme buildings. interesting, to very to of to to tell executed two and the computing have because to structured can going put technology those that to future. costs, we normally somewhat space. buildings development of is going to adding Skift being expect done, building as other in the I could go than regard spaces Grumman's With So that the kind they're development, in is the in because we're the slower of recently part density partial And continued actually parking of used the the you space delivery the

I I think questions something So I missed. addressed your or

Tom Catherwood

these projects. kind on new into idea then, of same how much tenants And those this, their may no. then a along of TIs sense are Steve. space putting That average and was you not No, perfect, you're above any allocating, maybe and over those have lines more for but

Steve Budorick

this is guess XX% my TI guess almost but guess, than more them. of the no and a give So a is we

Tom Catherwood

Appreciate --

Steve Budorick

average. On

Tom Catherwood

that between your prior me delta more one but and quarter, it a there's are you quarter, differently And that. in some accounting land Is out sell this What NBP bank, was like looks or Appreciate in this this anything specifically for quarter rolled quarter land you did driving at looking of acres that, didn't about there then for that XX land? -- in that, off? the you area. start

Todd Hartman

one, Tom. that look laying need is we assumed going parcels parcel believe different at for are a that kinds in to get NBP just That the the cookie for density on sale. the one as the adjustment out tenants an uses we You for of of that

Tom Catherwood

Got it.

So -- is requirement so future adjustment was? what that

Todd Hartman

It's land about team will space in out It -- space anything is at how or about out for just future. be any into going looking laid development. It or Yes. really get any used that using the wasn't used. of putting service was and how the -- is about that to the how

Operator

Your of comes from next Dave line question Baird. from Rodgers the

open. is line Your now

Dave Rodgers

termination long quarter good during that the to you the and like XX afternoon. think the of you Can developments lease on about had of subsequent Steve to announced Yes, some durations XX that years. wanted ask to I talk kind we're a options about what And out out leases? it kind or of did how lease, from long the tenants seems development on that's seeing. the used returns pretty longer came have to like duration those

Steve Budorick

have they an And our No, better. yield. outs. and returns, They've cash in slightly all that threshold and IT defense development is X% as some return don't neighborhood been

Dave Rodgers

tied And so aren't a specific to contract. these necessarily

that answered that in reason that to kind is And would you for lock think right in so Is long. they it? the likely the way want about question last capital to the the of

Steve Budorick

our at remember headquarters That's had new bunch And and leases correct. we've locations. a the some of done

to assets Redstone service center they're future. to in Arsenal those the operation going so in their where business they're heavily, that's investing in because And the

Dave Rodgers

Anthony, us the helpful. Got plan. you. maybe on That's disposition update

that? and year, for it and think as then You your I think comments for about fourth into the continued any quarter, maybe dispositions mentioned amount, looking you quarter timing next in thoughts about

Anthony Mifsud

can -- two currently for shells issue little we're capital that using fourth center into transaction So focusing worth equity equity fund we that over we of believe point we're could XXXX to about continuing quarter center we have to the option, of under we've been our would and year, or tap would either making. fair And issue choice pipeline. under ATM match structure saying, first on we're is extent worth the the at for price we consistently value a To for the we're as the raise million that at that isn't fourth getting the stock development look that fair as be done equity of to that quarter, we $XX investment we we that value, past. in of where after that if to would in data sort we our into value always over an contemplating gross development next a still we the have million $XXX invest fund could the that requirements data that -- are operating shells development the our

Steve Budorick

$XXX million.

Anthony Mifsud

Million, excuse me.

million. $XXX Okay.

Operator

Anderson next of from Rich from comes SMBC. line question Your the

Your line now is open.

Rich Anderson

Thanks. Good afternoon, everyone.

is a vacancy X if this then a year treadmill, is the of I is doing given retention your is if is way leasing that kind square of you. feet year, future call it at have million you you're expiring, about XX%, I So And new the XX%. and have reason the XXX,XXX feet reasonable why theory that at that your say occupancy coming sort well of a at square looking it's is about And much for company? XX% vacancy of a in that any capped

Todd Hartman

think service, portfolio, are the that overall is projects into future -- with right. thing is that how portfolio these may well to as in adding to to be the those the impact that I one may pipeline will placed respect development the going the be impact operating to

by a X we time development be service, they'll expect that got now XX% the they're square of They're almost leased. right So leased that's fully million today. feet are roughly under And we've the placed into XX% existing portfolio. XXX%

think risk, number leased referring highly the you that development off low to. So continued will that of help if drive you're margin, on that the

Rich Anderson

retention enough. of difference Okay, IT business? office What good regional defense your core rate the in is the versus

Steve Budorick

Well, sure, get very Transamerica, if make because from back can good, we're -- feet typically look square I going to XXX,XXX

Rich Anderson

run on a rate, I guess. More typical

Steve Budorick

year. it's Historically, pretty consistent. But ugly to look going next pretty it's been

Rich Anderson

Yes.

frustration of feel building in sorry, Okay. future? wondering the but with I'm is future? Or obviously day how do tenant would is I about mean in Last a that question every this them okay. still what the this to partner hesitate business but business perhaps, relationship DCX, potential you a a area you the just is as

Steve Budorick

is and leasing, center multiple I every we're it's work love levels, operating them. to of them Our and would owner great. We to have like data in grateful relationship said, kind have, with

get tenant. Just fits and change have our this little thrilled personnel bit and renewal building. to them We're frustrating. of lot been We'll a through a been has a starts. There's great it's it, in in but

Operator

next comes Rob from Management. from question Your Hedgeye Risk of line the Simone

Rob Simone

Hey question. Thanks guys, the going? how's for taking it

Steve Budorick

Rob. Hey

Rob Simone

So hey long-term question, high-level of so like a question Anthony, strategic for OFC. super more

guess case the to as some debt that like effectively that leverage turn consider and fund is, than ago. up that -- know pulling say right, there I one it your a I be is like there that longer the tapping taking made I call, guess, opposed be with years a long-term came to capital four up to of that or a data is the match I number case development of tenants is forward so mean, I this nature obviously why So portfolio like cleaner potentially whatever a But term the leases, that your and thought of to longer that lot case or to maybe development. the is to strategy of made fund -- a because terming on ATM tapping out like the things was or five the reason

a better have to least like theoretically, to that. long-term mix So be these tenant able support at contracts you plus

And gauge question So to related then I your don't just that. thoughts it. quick know, I to I wanted one have around follow-up

Steve Budorick

than less higher to the we're argument. the debt-to-EBITDA having performance, the debt, that we argue we're have, credit the level we and debt number have make manner. to debt. debt run company value time, comfortable. highly in could you meaningful averse quality to but our develop could hope people Certainly, Over a reasonable if for we we higher We continue Well, way a prefer shareholder at lower create risk

Rob Simone

Sure.

-- and to related And sense. then Makes specifically Okay. that.

What's going year. what million due refinance the that? like guys you do guys coming plan it's or think that? term loan Is the for do So $XXX that to have with you bond unsecured I next an -- late the

Anthony Mifsud

I a public the again. the to sort that options. of refinance term loan market unsecured wide think to go market bank We open could we is few have back

tier refinance the the group. is banks. believe are our funded we group That the bank just bank actually the banks bank folks bank funded to within lower group that we have not sort particular So within a loan the -- six of is six that that loan by, -- opportunity fully with XX. the That we by of have

to have that. take capacity And so there our with the increase clearly to if to and term wanted bank group out do even think is market that or to, we loan we we

Operator

Instructions]. [Operator Thank you.

Your of next the from from line comes question Korchman Manny Citi.

line open. now Your is

Manny Korchman

to answer the you follow-up wanted that to Steve Hi, last my gave on question. me last

numbers, or not that the in inclusive was the at a know said that TIs You thought the that high I October, lease? that because XXX. at numbers the XQ because of are in were leasing is was XQ NBP lease, I

Steve Budorick

No, Manny. individually. put the significant it with just We to XQ earnings enough was it's in out announced call; quite numbers the it

in drives in is committed will cost number well, XX of deal, building years. term. there. that per be tenant that that business, more a our your It's $XX But for which in a year five-year So than on TI up

Operator

the Lucas next of from Securities. line Capital Your Chris question One comes from

open. now is line Your

Chris Lucas

is to for just what a the on and the on versus term that afternoon been Steve understand duration deal? what couple Hi, is here just long follow-ups it renewal dealing with good Hey, how at actual up that, of -- on it sort the you've trying the everybody. bring again, I to DCX, just of hate

Steve Budorick

and We've years it a three-year two good been question. That's it's term. for negotiating very a

Chris Lucas

pretty level going across just commercial terms all for in nature space to the the of space well of issues, the that the back vacancy of to businesses up? interest more recognizing what then has just And I'm Okay. available? is some or spaces space interest they're is other competitive it? the trying buttoned to understand you seeing what portion Are there sort of promising board perspective

Steve Budorick

about the regional office? talking Are you

Chris Lucas

Yes, I am.

Steve Budorick

Yes.

services concentration premier views. I demand and it's Did quality expect law, tenants, kind downtown business a in services, answer you building of largest question be vacancy financial --? great our So seeking and Baltimore, would high or the of

Chris Lucas

That me space contractor. the a of let space? go vacated to that was question. contractor defense space is just Yes, I Merryfield prior well mean sort Building -- mentioned -- the guess Is I defense general by back in that Office or

Steve Budorick

needs again. contractor a convenient connected defense the was that It space. that of metro another Pentagon, Senate M&A The it, event. a fits makes But to It the by back was chunk rail, contraction. need Pentagon. some building contracting an to because chunk contractors of very space it's that defense basically given access recently A big was expanded it's of

Operator

Thank you.

from question the Bill last comes James. of Your of line Raymond Crow

line Your is open.

Bill Crow

questions. supply How hopefully new morning. construction Is got your in -- good being by quick. markets your not under they're but taking I've Thanks the OFC? submarkets? much for driven three, Hey, very

Steve Budorick

there of occurred a Well, rather city. certainly In inbound But service this very lot this there's a really servicing active against little, in activity, industrial proper development development marketing NBP, the radius. it really Alabama, is within that's that's none. relocation manufacturing. At other it's

Our business we're where market IT Nova, we're one you've XX% Virginia, South, there's It's Alabama, of And XX most Northern markets that got corridor, Route on in with. active located competing in strongest Nova. which the in no defense vacancy the submarkets, there's the in development is the in development is XX% much to except one is across conditions relocating to that side. not which the

Bill Crow

figured. what of I kind that's Yes,

it retention, primary is it to What funding? and M&A? kind you've Is aspiring renewed? is second that the defense got aren't sticking around? which reason IT that the XX% of leases program So So tenant XX% leads of don't that they question, me the that is to get

Steve Budorick

And seesaw awards defense contract, And a right take happens give to of Redstone that leased space going one kind always they're fairly go to with contractor component there's in its we're won a and major And back to them the it's of us Boeing and contract it. So going we've another a space. some through routine; re-competes. now, was where place.

keep So comes back last turnover. five the would sports over say mission and the has the there's third Where been there's any some fully driven. space four a and turn typically the like that. space over they or they years consolidation long-term And skiff scrape M&A I the some industry, in then,

Bill Crow

DCX And with question, which all market profit? is been We All for then right. going they I'll with simply rents what's going had on figured -- there. more the end down stabilized rent

Steve Budorick

XXXX development down as they've of -- centers compression those that the stabilized. in that got that they're in there's really observed I now, characterize spec would mean power developer-driven. bidding amount inventory a or rate. I definitely much and was occurred stabilized data demand in There's so XXXX, The huge they years.

that We've So the renewal. for time. settled our been prices are on some on really quite discussion

Operator

you. the There time. for at turn I no closing questions Mr. to this back Thank now remarks. conference further Budorick are will

Steve Budorick

all call We're you our joining for today. our Thank in offices.

any you So questions follow-up through And thank please Stephanie. for attending. coordinate

Operator

Thank you Corporate for XXXX today Properties concludes the Trust results your This third conference call. participation in Office presentation. the quarter

may Good disconnect. now You day.

COPT Defense Properties (CDP) 29 Oct 212021 Q3 Earnings call transcript