CDP - Earnings call transcript Q1 2024 | COPT Defense Properties

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Operator

Welcome to the COPT Defense Properties First Quarter 2024 Results Conference Call.

As a reminder, today's call is being recorded. At this time, I will turn the call over to Venkat Kommineni, COPT Defense's Vice President of Investor Relations. Mr. Kommineni please go ahead.

Venkat Kommineni

]. Michele [ you, Thank Good afternoon, to Defense's call the welcome first quarter to discuss COPT results. conference and With me our and Mifsud, package. today Snider, are discusses and and Steve Budorick, President presentation that measures the President and of management COO; results, non-GAAP President release financial Executive available and information and and in Vice their Anthony on supplemental Executive are CFO. Reconciliations GAAP website Vice CEO; Britt press

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

Steve?

Stephen E. Budorick

XXXX. by the you of joining to and year-over-year. last We cash X.X% quarter, revenue We're first driven our lesser thank properties FFO high tenant afternoon, same generated performance Good vacancy X.X% increased per added pool to January. XXXX on to guidance. Same-property was basis strong The midpoint $X.XX property extent, same-property operations year, of leasing for strong the share stand-alone a a is new The $X.XX the escalations, and, start NOI from growth in above for us. off reported which property pool growth. in retention, a great contractual rent achieved

X have space will Gateway, Park much the development of where leasing, feet vacancy highest National of square feet square completed Redstone XX,XXX million capital with We of Business that left which full needed volume, $XX amounts we occupancy a XXX,XXX new provide XXX,XXX year our square to which of committed feet literally renewal our lease. comparable leasing feet square leasing. We and retention includes markets. leasing of XXX,XXX to of of consisted investments, target total to XX% no XX% development rate, inventory in which in starts

inventory which $XXX total development roughly XX% pipeline is XXX,XXX totals XX,XXX a In for feet. of XXX% placed It in quarter. with is $XX And from a will the million active mid-March, into space cost increase a the million, pre-leased development pipeline million, last is building buildings, Gateway X Our nearly more now discuss square Columbia which that in acquired Arsenal. leased in XXX,XXX I a moment. preleased. We of were square in square $XX XXX% foot feet we service detail excluding

to increasing payout generate Our ratio at and in continues dividend coming business quarter. remains our AFFO XX% for strong, the

dividend, of and performance In consecutive following annual approved our second XXXX. continued expectations which marks Board raise our X.X% a February, on based to increase the increase Finally, Trustees growth. our our for X.X% in

the sector the are our FFO dividend only we We strength year-to-date, and the profile. in our which the REIT and durability demonstrates confidence raise growth in of to AFFO have

share implies of to the Now a segment the amounts defined triple the $X.XX new growth compound growth This sector which the highest period. XXXX which guidance $X.XX, year-over-year median per generate is XXXX guidance. contrast, decline to office to X.X% stronger to net peer share comparable our the and second we the for XXXX among to growth FFO expect per annual set, XX% guidance, same multifamily the growth rate. FFO rate We expected over FFO and X% our are of turning XXXX. Between share see X/X in FFO growth. of NAREIT to per REITs In the midpoint midpoint increased by over

produce will results. differentiated Our has differentiated continue to strategy and

world to view. Turning the

billion than was an a while over billion signed $XXX year. the increase China few continue the its remains to last Ukraine, $X security Difficulty] Israel conflicts from Appropriations months, ever and and and funding escalate the growing [Technical law where December complicated. FY for in billion proxies well Over is initial submitted and $XX was XXXX actually past supplemental Taiwan, This Senate in threat. On are increase XXXX the appropriations March the in Defense or environment the higher increasingly separate in request. in time X.X% NDA the Wednesday. In President's [indiscernible], into Israel House present on signed larger Russia budget billion is a than as XX, $XX Iran, Bipartisan support approved The which as and budget FY Ukraine the between the Act X% becoming with and passed global

Center is Columbia as our continue building, they leading lead acquisition. of national We less interest March, our continue years. acquire which a value. in an mile confidence which around gold well-amenitized. to to and [indiscernible] a create acquired allies million, to In national headquarters Center is opportunity a must Class and that will fund to contractor. This The an marks opportunities. the shareholder defense base $XX bipartisan knowledge be for is a that have Franklin acquisition asset in high sits park transmission constructed is the remarks the Congress first certified a priority work security we and leased in our just permanence. foot than the from office building proximate my our second XX% And newest development saw first property world. I'll We X [indiscernible] XXXX, level to support to mission. is in has in to XX,XXX did the conclude recent by Gateway A discussing square Franklin our in manner

market mission. must The the the have The fundamentals market. that attract Defense/IT serving second, tenants

as and return. and/or exceed high to strategic the Third, and developments would cash occupancy quite opportunity significant retention, lead SCIF. and boxes. The the We and in excluding as or as simple. tenant much inventory our dominant This value-add Center our in that to operations nearly discount initial look Columbia And acquired provides is have solidifies specialized of we a relationship with efficiency these We at XX,XXX meet leased, planning portfolio XXX,XXX fourth, Columbia It XXX%, with rationale leasing cost. for vacancy ratio the improvements owner of on for such contractor. such it of acquisition. We feet tenant Gateway the property. X co-investment position strong substantial high the have yield activity replacement a defense as leasing attributes acquired.o. significant U.S. needed XX% Gateway. XX which It square deal our our enhances top for it checked we the asset square already earn means all is The to this pipeline of upside. feet a And Franklin with what demand needs we

ratio XX% as the the X.X of XXX,XXX tenancy million Park Columbia in value was we their square highly portfolio, Columbia am the square Our can with entire vacancy. for of COPT IT entire unlock Defense as of XXX%, confident in the foot demand I defense activity feet XXX,XXX roughly square Gateway roughly Gateway this asset feet landlord. chooses

So with it hand I'll to over that, Britt.

Britt Snider

Steve. you, Thank

federal grow is and contractors current that and the meet we're as demand strong remains secure challenges business space rise becoming witnessing that around more all continues for the concessions need government been more or and to by The to portfolio. the Our eliminating has stronger rent abatements benefited lowering we've Defense/IT strong economics our demand immediate. by in us This reducing as achieve principally able leasing to world.

feet XX,XXX available XX as higher activity of only we portfolio for feet leasing vacancy quarter space of and square inventory our square even square feet. The inventory over out adding have feet million executing ratio total XXX,XXX quarter. at despite ratio the strengthened the available Our of of during XXX,XXX is to in XXX%, the leasing XX% square Defense/IT activity for portfolio

Looking remains into strongest the the continued demand our our component with from markets, the portfolio of customers. MVP largest

our the defined those In have for coming our XX% making leased. [indiscernible] At testing D.C., R&D, building on to at square increased support expect other the progress budget, all in defense-related lab in increments. in we're cyber-related leasing a segment interest to stabilizes missions and other the Redstone environments fiscal months. Gateway in the and also enter Columbia news and the of our continue L to X foot lastly, good we're with that XXXX leasing submarket. Missile year see to and While businesses locations. in competitive completion XX,XXX at we support of businesses both actually increased to success yesterday continue grow seeing Redstone X,XXX segment, we're lease space. And Where for signed feet, Street square other in XXXX thrive at front XX,XXX in our which within Navy pleased activity Arsenal Gateway. additional to the

Our at portfolio last our was Defense/IT decline both for had by: ended at XX,XXX vacancy. quarter-over-quarter quarter. known point XX.X% we basis quarter with discussed the the nonrenewals figures XX occupancy acquisition square of portfolio And one, Center, XX.X%. the driven which The two, feet Franklin of

square largest in space on foot down, rent were that to Virginia, where and by with a Virginia $XX while portfolio. Virginia, were feet. square rent the lease we we XX,XXX like importantly, with to increased percentage XX% or well at Defense/IT activity. increases feet Towers X the rent XX% signed to square lease in GAAP the our actually in in in deals renewal X.X% the Half of provide positioned terms or flipbook, our Ft. at is of at executed XXX,XXX cash driven square foot term the leasing starting by XX,XXX tied tenants. [indiscernible] rent. our business XX% total. And both square and of of of contractor executed we Roughly of was XXX vacancy the share with of and other full rent leasing X% our of some Columbia target of of average These particular Virginia. Defense/IT foot Nearly annual our year-end was renewals Northern as stats the X.X%, vacancy in feet space you. which, in the during in with key I'd XXX,XXX portfolio total still with And are larger Baltimore. The the Vacancy leasing cash during leasing, Corridor of segment weighted out XXX,XXX roll defense Northern existing was development renewals quarter, our rent leasing nearly half other of on was the despite impacted in we Meade/BW spreads feet Northern which we all feet year Street stand XX rate segment lease the at In sequentially. and X.X%, XX% meet years. On cyber basis renewals the in over that of other feet with change over combined Roughly consisted total was segment, X.X occurred a down repeat that in spreads tenants. Cash XXX,XXX available Pinnacle Gateway above was square detail XX,XXX leasing XXX submarket of Page Northern square XXX,XXX renewal nearly up on Light nearly XX,XXX points and at above-grade our in feet segment a a lease in volume market quarter signed of negatively XX% square square vacancy

Excluding the impact rent were of these cash while X.X%. were GAAP flat, spreads rent up spreads X renewals,

We continue total the for spreads anticipate equates cash at which X.X% to and in X.X% flat full revenue to XX% of range. the making expect midpoint be the XX% rental of to up only the over in to The cash quarter year. the annual $XXX,XXX roll rent during the rent only down the or we retention year in course

contribution impact addition, is achieved inconsequential to revenue million. quarter leasing from vacancy the this in compared In when approximately $X.X the of annualized

As Page leases expect XX%. the to our XXXX of over the retention to we year-end be foot on through shown book, continue on XX large

development. turning to Now

demand. of XX.X% with leased, our And new one fully Redstone leased at square recall, the is some occupied you to is at foot X.X inventory. less As inventory aspect level than portfolio. of to locations strong space that of strategy across quarter million commence always XXX% of feet end a project create maintain leased unleased XX The XX.X% will XX,XXX properties we where in when XX we nearing operating the development see Arsenal square and are park. key

office XX,XXX road Gateway. XXX,XXX vacancy. out We create is at square a Redstone square right have The of feet project ratio XXX%, demand with to inventory of on feet XX% X,XXX under pre-leased leasing the with activity of construction

total foot square Huntsville. we testing Advanced X,XXX Gateway, pre-leased also has Defense/IT and quarter, a high the headquartered is cost to facility. and R&D XX% This of During a million $XX project firm XX,XXX started a bay in

MVP-XXX X.X the leasing square during with Business XX,XXX have on XX feet unleased quarter ratio occupied Accordingly, across of demand that of which park. feet leased XXX% National We a of $XX with leased vacancy. Similarly, the is million space and square activity XXX% XX,XXX is square XX.X% only are the end. Park million foot XX,XXX feet office XX started quarter, project. of foot, square at square we properties the XXX,XXX of

project. that with XXX% over leasing demand of of feet We XXX,XXX activity have square a for

pipeline, future years the medium rich development with of allow at Our square Defense a beyond And over hub development less, Cyber grow businesses importance and which tenants success. currently conclude increased or to combination consider highlighting in feet. that the X to as over a contribute XXX,XXX that potential and we're of which that, concentration leasing of and tracking their by opportunities better space define win or development we XX% of with we Gateway near a square stands X term. I'll solid my Columbia remarks government likely innovators requirements to million a maintain and cyber Gateway factors Columbia as opportunities feet us X us. There are IT pipeline should within

from both Washington, tenants First, D.C., in it ability provides attract workers the to Baltimore easily between commutable uneducated cities. the location, located and midway

Command home to large over federal XXX intelligence Cyber agencies miles only and is U.S. is a Second to agency, military which Meade, commands. and Fort X

funding cyber years, in requested billion the billion our the over year, is Cyber cycle increase increased growth XXXX. proposition. has a this over DoD over landlord XX% and life And $X past funding. finally, Third, another for increase which X $X

early remaining them XX.X% Gateway at suite win expand suites ability largest to prospects, scale contractors Franklin as lease After product and square was inventory probability expertise attract with locations. A X,XXX mission-critical at mid-stage and variety contractors Center at our their to and XX.X% high end, of the the mature, leased they had in our excluding businesses. have unique defense to office among for only a Columbia square park, We our with types, growth ability contracts XX,XXX feet. remaining fosters reserving feet we acquisition. occupied quarter given to

to Defense/IT this Redstone customers. Franklin market a often Center While of dominant we our position inventory and opportunity the to to needs portfolio spotlight and meet markets, MVP needed continue to Columbia provides of discuss us the our much provides Gateway strength the our and acquisition allow solidify great of

Anthony. to With hand I'll it that, over

Anthony Mifsud

Thank you, The midpoint $X.XX, quarter venture guidance. cash increased Britt. of per We from share the net our expenses, above which comparability reported first slightly weather favorable operating interest primarily lower balances to and adjusted our conditions, for expenses. income due quarter on was net $X.XX as and benefited FFO of lower G&A

our quarter, by guidance increasing a year-over-year. were plus the same-property portion basis XXXX XX.X% the same-property cash properties XX XX increasing During X.X% sequentially with [indiscernible] was up Defense/IT rent NOI operating by down is pool. We the increased basis Defense/IT of of better and our ended portfolio. occupancy and free on lower-than-expected This that that XX strong the added XXXX of points quarter, midpoint driven Same and of pool, the but combination for the X.X%, portfolio performance to XX.X% the renewals to from concessions which last points property margins. at X.X%, points basis quarter impact

square feet. was decline the totaling discussed, XX,XXX downsizes previously by As driven primarily X

First, square a feet. XXX,XXX XX,XXX downsized contractor square foot to

space with segment. majority opportunity downsize law a We that Other firm of of are in a and the second, the to government our great backfill a tracking tenant

stable property relatively We the year. to of same occupancy the throughout expect remainder remain

be much Our environment, to interest positioned balance sheet strong continues is and navigate currently longer for to anticipating. rate the the market well higher

significant no have until debt XXXX. maturities March We

The current to current term far, elevated are line these XXXX, X-month maturity rate in of on million over money generated savings. rate the And available $XXX has the Our variable $XXX entered for the that have SOFR environment. Thus continue represents over at loan cash of the and points real SOFR remain currently interest total based swaps of years swaps million In through on of X curve, basis unencumbered at will had rate $XX this and significant in quarter, lower million our credit XX% of over and of line credit. the is swap NOI expense we exposure. interest and no February XXXX. debt rate in have hand. We term portfolio over end expected they X.XX% our $X to fixed XX% into protection of SOFR And than on estate from XXX capacity operations. the on we the prolonged the provide of million

expect of balance as our of into be and component We subsequently a our debt funded component the rates from will at our be dividend fixed XXX% the our equity XXXX and from operations from from cash existing debt will investments late after capital credit. line of cash

guidance, our to a accretive and FFO per to first at on Turning recent the the the dates cash implying acceleration was guidance XX.X%. Franklin roughly we accretive X% per share. of growth $X.XX The $X.XX transaction guidance share leases full results. In performance, per on some on no $X.XX strong funded AFFO by XXXX to acquisition. commencement leverage. With driven initial midpoint, respect acquisition yield over of cash hand, is impact the Franklin increased the to Center is The XXXX's and to executed was FFO by quarter's $XX with is increase and million share acquisition there The Center. XXXX,

for on given variable expect longer protected swaps. because addition, income higher balances the the expense discussed against rate environment, interest higher of are previously we higher interest In slightly but cash

Finally, Steve. of that, in as for call to establishing per quarter back to guidance adjusted we comparability I'll are share turn a FFO $X.XX. With range the $X.XX second for

Stephen E. Budorick

quarter guidance. to our I'll FFO share messages. summarizing off above We're close per XXXX start you. key midpoint in a the by with $X.XX Thank great first of

a in achieve and XXX,XXX XX midpoint. of XXX,XXX full is position to of peers. basis midpoint ahead of square good target same-property square in our feet segment portfolio growth X.X% at us executed puts the portfolio. We We leasing year growth the by on cash X.X% leased, our which in feet. X.X% cash vacancy Defense/IT points to XXXX of same-property XX.X% our We Defense/IT our well which reported is of Our total NOI increased

pre-leased Gold for Columbia which XX% active are building a $XX Our NOI purchased the years. We initial for a over office growth yield. Center, $XXX a double-digit Gateway of solid million our provide LEED cash developments, Franklin next external the certified trajectory modern at million few

component of going and to Our equity second guidance FFO marks and increased roughly we our which growth our X.X% the XXXX consecutive is midpoint $X.XX, We expected annual forward. We to to increase. which looking February, FFO the expect by FFO $X.XX per growth. And our of capital self-fund investment share questions. continue between our that, very with the guidance. And liquidity strong, we of dividend raised finally, our open X% forward, XXXX XXXX expect please X% operator, compound of up on per based to implies midpoint annual initial call year-over-year share continue XXXX for in

Operator

[Operator Instructions].

Our first question from Citi. of of Michael comes Griffin the line

Michael Griffin

sense more like Maybe or you in acquisition. you this special stabilized one-off assets Gateway? little the building? color sort context cap of kind this Columbia we Center a mean see Franklin us of to are Was any could other going and in give rate? about on And to a going the I give can this trade

Stephen E. Budorick

Yes.

So in XX.X%. we the gave that's going cap rate,

net to they're Our this XX% -- step better a eventually, asset this And I building platform are created for is I by and franchise, than years shareholders. way believe our contracted at in years indicative redeploying to after don't current to add guess a they which think a to a great in property our the think Gateway. triple several tenant I which Columbia against win strategic franchise flipbook reports double This when more consider assets, for as I leasing had back, to stabilize. And that's I compete building was And acquisition don't backyard. particular rate. The languished. of a our our capital in leased cash XXX% us opportunity really the conservative value they we look cap ago it bought of investor. a yield the

Michael Griffin

with lease of Maybe high just would to expiring renewing? would you on the to that space follow tenant re-leased? the up Or expect in XXXX, that say the be is probability you

Stephen E. Budorick

of would the will to tenant co-investment. in conduct they building. to have the -- business say significant some high. It mission very know I loss extraordinary renew. They Remember, have would that we for an valuable that be They tenant depart tenant exceptionally know it's in building. building. They that have the we improvements

Michael Griffin

lastly, tenant would maybe just NoVa. X.X%, throughout I one quarter. leasing Would large then Or could more mainly renewal year? And by decline for see the on you expect the in a driven one-off? declined continuing that cash cash about we you saw consider rents rents

Stephen E. Budorick

been leasing. quarters our of [indiscernible] think it. We've to address I comments X

[indiscernible] You'll overall back see be our the we where trend expected in specific to guidance. them

Operator

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

Blaine Heck

some were issues side. audio my There on

I the But just if my related great the on on the investment sorry a see side. acquisition development But questions. to and anything new I'm first So subject. missed both to few questions that one,

the talk leasing what speculative that add just about you quarter? makes projects additional overall and that development this X those can leasing, to comfortable new kind development the soft relatively seeing decision First, of was you're you just given with

Stephen E. Budorick

kind Well, are lumpy. we one in of of development ebbs just NDA flows, of last started and the RG approval XXXX couple to be projects under the in the of are which prospects construction happened the Several and awaiting on proceed, Huntsville weeks. leasing can we it the for the

So side. up that to the the through development activity expect leasing on we year pick

regard With the decision NBP, occupied. are XX.X% leased we the At start. to and to

park. less in than have square the feet We XX,XXX whole

we a of near support a ecosystem -- we're space to defensive part now. time square in And not Meade. smart the thousand with expect tenants working Fort the enjoy have inventory on and feet supporting to no-brainer couple we absolutely to on that create a near term. We demand our renew It's no that hundred of move

a expect an might product develop building be a have important we very Gateway, quickly. similarly, testing. of will bit developing We going quite but demand every satisfy we not with build up then we that lease to that And demand, to successful. And forward. have type bay decided think pretty we high for a And want expectation be that into R&D additional to in could pre-lease we and to Redstone XX% huge, that

Blaine Heck

Great.

last of follow kind Just up part. on that to

prospects XX% tenant It's at XXXX about right leased. specifically talk out? you can So

more your third the operational Anthony, remind your quarter quarter. And this You is quarter third have the guess on by anything stabilized about I about that can capitalized whether you guess, just last capitalizing policies? I year. think of And completed this interest year. then -- you'd stop just lease talk third confirm in us there, maybe year, that just for on you prospects it date

Stephen E. Budorick

I'll with deal part. easy the So

activity is the over I Our by we it ratio XXX% timing. get on Whether quarter, to hate third the vacancy. predict full completely

But leasing confident to building. some Our industry and pretty opportunities We're with high-value in done moves methodically. going working are next pretty will advanced need we get that the and tenants anticipate so to the this year. one we're planning We're we'd fill build.

Anthony Mifsud

tenant then on -- Blaine, quarter. the first interest, service the so in We And placed capitalized into we you're correct. first

on of component So the any the at unleased stop. the or of quarter. capitalized And the would on stopped first -- third the -- in interest portion in quarter, building, building of then portion interest unoccupied capitalized building that the

Blaine Heck

Last me. one for

'XX 'XX of XXXX, the believe kept for expectation with growth that growth Does expectation longer-term FFO your you to was I but bumped to kind just in here CAGR guys pulled forward target? respect was some same unchanged. from maybe conservatism or changing for some X% You imply that

Stephen E. Budorick

will we'll that for that benchmark out doesn't We we save a to change update got next to imply 'XX our year. later, see forward then it think happen fulfilled to we've thinking. years almost But 'XX what X Blaine. No, the We ago. some put want to on news meaningful

Operator

of America. comes of question of Camille Bank the from next Our line Bonnel

Jing Xian Tan

understand highlighted being some schedule? the the of deliver team up drivers tenants opening of or guidance, requesting accelerating able I of the the operations -- comment ahead Hi, that on his it us outcomes sooner? of Budget dates? of just that pick by space Steve in to increase commencement the remarks how the to help move particularly much simply lease Can is you wanted efforts your of everyone. in to was driven in

Anthony Mifsud

It's you really the mentioned. second item that

to control has able the the to execute in allows take for up our sooner team been investment portion than of the our which the we space. to tenant had our anticipated, space of leases required So commence. And

Jing Xian Tan

through Okay. a sounds a the have just bit. out go back There's I'll to transcript. the follow-up. But cutting

has that few Would continue in For other a to driving this what's same-store rent call benefited NOI concessions free you your quarters, hearing when this rise? lower-than-expected the concessions. last trend? sectors from we're And

Britt Snider

at they our And is prioritizing Britt. what for it that is leasing for leasing how development pushing Because something now, bit. their coming relates to incredibly asset managers tenants It demand pushing because that's -- are. that the trend is something strong. little It's mean, This the Yes, I folks seeing obviously -- it's lower demands are we're helpful especially is demand and and we're is abatement just a for secure are a they're a them. needs space hard Are incredibly the actually space out looking what need the are that high. near-term

can concessions and in very provide of a So that regard space drive of that those strong rent down. free we that particular, kind like have given in we we feel position some

So something it's we're pushing. actively

Jing Xian Tan

quantify prepandemic, term Could what that per and lease you're like for percent in of giving abatement example? terms to you that compares that

Britt Snider

seen, for that through it's I you. can to I couple get say I'll don't mean, but on, and quarters. get to would something that back we've over of certainly can and that quantify data definitely It's a you. trend I but work that past that the we offhand, have go our we're we say, pushing

Operator

of line Tom the of from BTIG. comes question Catherwood next Our

William Catherwood

on activity target of tenants, the can different contiguous of given of a been you think from Maybe, a of Britt, a months you overflow tenants, has activity to you that midsize coming you allow to if block the set selective as maybe kind lot in Columbia the Does this last now the But market be mistaken, your I'm Gateway XX,XXX XX What's kind of strategy space? with this of the space? leasing in to NBP. XX small of space. already more lot not foot have square

Britt Snider

Yes. mean I good mean we I it's the question. [indiscernible] [indiscernible] a had remarks.

have We created in that are seeing into of turned feet that smaller seeing ecosystem And but from and the size, cyber Because they a are and we're generally we've demand here yes, at come also Cyber tenants. tenants here. feet. the steady in XX,XXX hub increased X,XXX

very cyber see much hub. that more that as of we So a IT becoming Columbia yes, Gateway. has a for And something nice it's trajectory a

William Catherwood

Got it. remarks, of something And support the you Can maybe portfolio. budget talked on provide detail in benefiting in you're then Navy also grouping? Britt, more up the in you following prepared mentioned seeing that approval and else what that terms on your defense activity tenant about comment you

Britt Snider

contractors. support but flows are little for are -- the contract -- their I bit, or [indiscernible] Yes. more asking late Navy that of and a directly out coming it we space. demand I definitely except lot exactly of the a seeing in achieve mean, increased what's mean ebbs it's we're seeing secure seeing more activity is where are it, through And dollars is to see and in Coming there. Navy we but certainly additional level driving an the that space whether we I what budget, in and particular, speak phone something defense driver can't something calls

we're demand pleased So that see increasing. to very

William Catherwood

do one-offs. you market? can be be buildings maybe acquisition to for me. portfolio? -- seeing market? talk great your some Corridor it. acquisitions South are might have of far there Maybe, And Franklin opportunities potentially of again, other of year been like can up It to Center. as kind Got in of coming for you this opportunistic. fit out And could be know coming Northern Virginia product route final Steve, then I potentially XX, And as there But the a one COPT with what know in that sense had see into in some I the the

Stephen E. Budorick

Virginia. a There Northern opportunities X -- have couple in been

deferred a in going investor we said, was extremely disciplined. through them acquisition we couple more can't would. of and painfully we then buy. we're another willing beat of to we're on I than have to an criteria, Like yield where our pay been development went results If our Some not

Operator

comes . of question the Zhong of next from JPMorgan. line Ray Our

Zhuorui Zhong

Franklin Center. is My on first question

Is to like up. into a be It's the guys You about think dollar the to sounds there's no of just matter itself. leasing that? put that right way more asset

Stephen E. Budorick

it's and and building enhancement very We building It's one a yes. arrival prominent. -- some combination of experience. vendors for really the budgeted generally, [indiscernible] dollars was couple well, -- said, the for, We park. like million the cared up Yes. we The of kind [indiscernible] second in well of quite public initial newest

Zhuorui Zhong

the then guys Franklin cash but tenants, a also vacancy. Center yield likely, stabilized and still existing cash and it's of second you And there's in you. yield for Got the renewal is most going some a part provide mentioned,

like a to that renewing? or curious yield So trying just and going the to that downside know stabilized on you just so? upside of up with it's is to current think about Just assuming XX% under yield. Or lease to provided, more assumption index tenant that

Stephen E. Budorick

to absolutely Yes, think bad there's more going we're I XX% much upside that thing stabilized Concurrently, could was That cash cover downside. established every blow away. possibly to that yield than ever happen.

Zhuorui Zhong

it. I can And is Got a then any basis, than little GAAP the give Because you on a rent cash noticed that? think basis. mark-to-market I on on a lower

there. mark-to-market the on curious Just

Anthony Mifsud

lease term million. was, remaining of the I over mark-to-market It per the $X was under The just value think, foot. $X.X

Zhuorui Zhong

than market? Higher

Anthony Mifsud

Correct.

Zhuorui Zhong

Got versus want then year. is later data bit Any you get on the my this the the is that the question side to that one on expiration can there. I it. higher there's on noticed center. renewed? provide on Just another rent little got just mark-to-market a color second a sense And noticed market

Anthony Mifsud

tenant are now. being with the negotiations finalized The

that our that a a last bit on We despite the lease renewal is strong it's mark-to-market higher than rent year current expect ended. -- where fact

still since right now want there with put wouldn't our I discussions to So percentage in out tenants. a we're

Operator

comes line Our the of Peter Jefferies. next question of from Abramowitz

Peter Abramowitz

the yield So just Franklin on Center. at one another

upside? just some upside get stabilized Steve, So occupancy, you're of with if say, to, kind just think, you -- assuming just that. you today, occupancy if that it at looking mentioned XX%, XX% to trying expect just XX% say mid- to into would the I of it you getting XX% teens get stabilized occupancy? quantify Is to high fair you're to kind to could

Stephen E. Budorick

Yes.

Peter Abramowitz

on what Can you the depth the for talked -- And lease another have to you're just Could new seeing looking the talk X of you there, about of of just for you side on the year? the you. Redstone. up, pipeline Got you you're kind helpful. about That's development and just just rest you and that of then touch in what side. on projects expect one kind the build-to-suit demand

Stephen E. Budorick

Yes.

development then right possibilities construction. we've little what includes overall and at a under now. build leasing suits So started that million our several And for and we're square leasing pipeline is over feet X.X up and

Peter Abramowitz

something I guess -- that is you. Got is something... that

Stephen E. Budorick

We won't where. or tell you who

Peter Abramowitz

imagine That's strong budget? right We'll defense is I on you now. all the just could would that coming think right. pick that 'XX kind growth back of wait in demand the up to through of of hear. that Is some something

Stephen E. Budorick

prudent with cost Well, and of And feeling being our the investment it's my decisions. growth the we're capital feeling are all belief I business very customers are of even think companies about major that right now. pressure good opportunity

I the So and think see I and a developments, on wait wanna haves. there's the we get think must-have

that if meet are believe will I where good But increase see few actually development rates our still financial today. over So environment. being the objectives our from opportunity we next they to proved the years, opportunities this are in

Operator

line comes Our the Securities. of Wedbush next Anderson Richard question from of

Richard Anderson

a been of Yes, out. and it's lot Interference. in

if So check to apologize account, anything, sure WiFi make your I up it's want I I missed to speed.

kidding. Just

Franklin did the roll again, does think missed you -- have this in XXXX? projection might tenant I on the assume down does and -- -- a yield I existing Center, it

Stephen E. Budorick

So cash Rich, a the By which working out same has we concurrently. future conservative put yield, [indiscernible] on very

building where publicly with and is give. disclosed we higher we typically environment of the So in absorb observer it the never [Technical than area very TIs more would overstating be would Difficulty] the to absorb that in down, This the to and number want rent it spend investment our plan we structure opportunity. roll a forward-looking conservative common

I expect caller, As and -- an missed might target potentially I handily. that to during very beat said earlier you have

Richard Anderson

seems nice, You well to described compete but building, tenant the well looks nice would if to competitive the unable it that It it's it's cared over is for, a in more versus cared still building of be in stopped vicinity? wouldn't yet move occupancy engine just to XX% your to have it the else. me very CDP odd building of for proximity a a vicinity. What very everything pictures look the with Why nice.

Stephen E. Budorick

market the in the most for market landlord with It's with in contractor us. we've kind with XX% comfortable we've to it, over great Defense/IT of public, you this else. get thing specificity. is got me in XX to that that of have of the answer business that a hard for relationships And tenants been been a we've years relationships, defense somewhere with and Columbia we are But Gateway

business dominate part. just So to we this tend in

Britt Snider

to And have XXX,XXX that. just took add mean, demand seeing since an I additional I we're feet over. that of would we square we

we relationships tenants that again, shows draw what here. have to So Steve just that our is due, which is assets saying, the

Stephen E. Budorick

one structure, And part lease to and operating presence service for different have particular of bring prior investor, we do doesn't the where we rely owner East directly. triple on management a relationships they fee another that -- comment. that. country, that no triple hypothetically, last net of And The Coast, business have on the crowd. component the Where the the primarily

Richard Anderson

L Street. on progress Made Okay.

some not now. year at I closing said Or fully How know is this in other are Could you there outcome these in a was sales?" stabilized leasing event? that a this I point? you likely asset some be think it of on Baltimore.

Stephen E. Budorick

What Baltimore, the that that valuable standpoint. I from of opportunistic an a that would are market buyer to don't cap timing. capital time. for have the transactions happened Rich. to that, just don't take on you we some of don't the year, see rates very have represent sense I with going asset in it this think They in assets. outside It's depth those D.C. make then accept Corner And of Tysons in

Richard Anderson

for Okay. And me. question last

you're does at doing a guessing. way What's not internal people year, probably NOI it's this You've growth? heard an the sort same-store sustainable set that cash right on through CAGR expectations I'm from of on perspective X% X.X% like XXXX the level, FFO. to assume growth What for that I know us?

Stephen E. Budorick

I I'm that not answer can question. sure

a really haven't then put to we're you way. consider target challenging put we We The hit math And that run in convey that going continue in years to environment target is several of and of report strength that and to on our we'll it we produce growth forward. against until prove . we out. recall, business continuing we that to in convey out financial to to benchmark the that quarter and quarter our continue intent confidence ago. it new our

Operator

Street. question comes next from the Green Burzinski, of line Our of Dylan

Dylan Burzinski

have don't sorry. actually questions. any more I

Stephen E. Budorick

soon. Good talking to see We'll you, Dylan. you

Operator

for Mr. to Thank remarks. you. I Budorick will now closing turn the call back

Stephen E. Budorick

questions to got for you we joining that discuss. the thank today call Well, enriching all our and

like or detail. we our We mentioned through in something follow-up so please all you are Venkat, Thank more offices about call if coordinate in afternoon, talk a you.

Operator

Properties in Results Thank concludes Defense First Conference Call. COPT today the you your XXXX participation for the This presentation. Quarter

Good You may now disconnect. day.

COPT Defense Properties (CDP) 26 Apr 242024 Q1 Earnings call transcript