COPT Defense Reports Third Quarter 2025 Results

COLUMBIA, Md.--( BUSINESS WIRE)--COPT Defense Properties (“COPT Defense” or the “Company”) (NYSE: CDP) announced results for the third quarter ended September 30, 2025.

Management Comments

Stephen E. Budorick, COPT Defense’s President & Chief Executive Officer, commented, “Our Defense/IT investment strategy, which concentrates our portfolio near priority U.S. defense installations, continued to generate excellent results during the third quarter. FFO per share exceeded the midpoint of our guidance range by $0.02. Based on this outperformance, and our forecast for the remainder of the year, we increased the midpoint of 2025 FFO per share guidance by $0.03 to $2.70, which implies 5.1% year-over-year growth, and is $0.04 above our initial guidance.

We are exceeding our plan in several areas and raised 2025 guidance on multiple key metrics. We increased the midpoint of 2025 guidance for same property cash NOI growth by 75 basis points to 4.0%, cash rent spread on renewals by 200 basis points to 2%, and year-end same property occupancy by 20 basis points to 94.2%. In addition, with 432,000 square feet signed in the first nine months of the year, and a strong pipeline of deals in advanced negotiations, we raised our target for vacancy leasing by 11% from 450,000 square feet to 500,000 square feet. Our revised target is 25% higher than our initial target of 400,000 square feet, and reflects the depth of tenant demand to support priority missions. Additionally, in October, we successfully closed on three financings which pre-fund our 2026 bond maturity and provide $400 million of additional liquidity to fund our external growth.

We committed $72 million of capital to two new investments in September and October, both of which expand our strategic relationships with existing Defense/IT tenants. In September, we commenced construction on a 101,000 square foot build-to-suit development for Yulista, our 14 th largest tenant, at our Redstone Gateway park in Huntsville, and in October, we acquired a 142,000 square foot office building in Chantilly, Virginia, which is 100% leased to a top 20 U.S. Defense Contractor. This acquisition exceeds our development yield threshold, is accretive to FFO per share, and reinforces our position as the dominant owner in the highly-leased and supply-constrained Westfields submarket, as we own roughly one-third of the 4 million square feet of office inventory.

We have produced excellent results for the first nine months of the year, we expect a strong fourth quarter and we continue to anticipate compound annual FFO per share growth of over 4% between 2023 to 2026.”

Financial Highlights

3rd Quarter Financial Results:

Operating Performance Highlights

Operating Portfolio Summary:

Same Property Performance:

Leasing:

Investment Activity Highlights

Balance Sheet and Capital Transaction Highlights

Associated Supplemental Presentation

Prior to the call, the Company will post a slide presentation to accompany management’s prepared remarks for its third quarter 2025 conference call; the presentation can be viewed and downloaded from the ‘Financial Info – Financial Results’ section of COPT Defense’s Investors website:

https://investors.copt.com/financial-information/financial-results

2025 Guidance

Management is revising and increasing the midpoint of its full-year guidance for diluted EPS and diluted FFOPS, per Nareit and as adjusted for comparability of $1.30-$1.34 and $2.65-$2.69, respectively, to new ranges of $1.35-$1.37 and $2.69-$2.71, respectively. Management is establishing fourth quarter guidance for diluted EPS and diluted FFOPS per Nareit and as adjusted for comparability at $0.32-$0.34 and $0.67-$0.69, respectively. Reconciliations of projected diluted EPS to projected diluted FFOPS, in accordance with Nareit and as adjusted for comparability, are as follows:

Reconciliation of Diluted EPS to FFOPS, per Nareit,

and As Adjusted for Comparability

Quarter Ending

December 31, 2025

Year Ending

December 31, 2025

Low

High

Low

High

Diluted EPS

0.32

0.34

1.35

1.37

Real estate-related depreciation and amortization

0.35

1.37

Gain on sales of real estate

—

(0.03

)

(0.03

)

Diluted FFOPS, Nareit definition and as adjusted for comparability

0.67

0.69

2.69

2.71

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

Conference Call Information

Management will discuss third quarter 2025 results on its conference call tomorrow, details of which are listed below:

Conference Call Date:

Friday, October 31, 2025

Time:

12:00 p.m. Eastern Time

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

https://register-conf.media-server.com/register/BI35f24564a63b4f47ada7811d5e985227

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

Replay Information

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

Definitions

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

About COPT Defense

COPT Defense, an S&P MidCap 400 Company, is a self-managed REIT focused on owning, operating and developing properties in locations proximate to, or sometimes containing, key U.S. Government (“USG”) defense installations and missions (referred to as its Defense/IT Portfolio). The Company’s tenants include the USG and their defense contractors, who are primarily engaged in priority national security activities, and who generally require mission-critical and high security property enhancements. As of September 30, 2025, the Company’s Defense/IT Portfolio of 198 properties, including 24 owned through unconsolidated joint ventures, encompassed 22.6 million square feet and was 97.0% leased.

Forward-Looking Information

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

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

COPT Defense Properties

Summary Financial Data

(unaudited)

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

For the Three Months Ended

September 30,

For the Nine Months Ended

September 30,

2025

2024

2025

2024

Revenues

Lease revenue

178,272

170,549

529,178

501,601

Other property revenue

2,038

2,014

6,186

4,710

Construction contract and other service revenues

8,485

16,662

31,202

63,523

Total revenues

188,795

189,225

566,566

569,834

Operating expenses

Property operating expenses

70,356

68,881

209,311

199,037

Depreciation and amortization associated with real estate operations

40,631

38,307

119,563

114,819

Construction contract and other service expenses

7,952

16,127

29,530

61,746

General and administrative expenses

8,483

8,157

24,833

25,126

Leasing expenses

2,449

2,341

8,061

6,990

Business development expenses and land carry costs

1,098

918

3,203

3,079

Total operating expenses

130,969

134,731

394,501

410,797

Interest expense

(20,894

)

(20,376

)

(62,336

)

(61,760

)

Interest and other income, net

2,591

3,324

5,382

10,330

Gain on sales of real estate

3,018

—

3,318

—

Income before equity in income of unconsolidated entities and income taxes

42,541

37,442

118,429

107,607

Equity in income of unconsolidated entities

1,815

2,541

180

Income tax expense

(612

)

(130

)

(832

)

(312

)

Net income

43,744

37,397

120,138

107,475

Net income attributable to noncontrolling interests

Common units in the Operating Partnership (“OP”)

(924

)

(711

)

(2,496

)

(2,013

)

Other consolidated entities

(1,093

)

(601

)

(2,828

)

(1,654

)

Net income attributable to common shareholders

41,727

36,085

114,814

103,808

Earnings per share (“EPS”) computation

Numerator for diluted EPS

Net income attributable to common shareholders

41,727

36,085

114,814

103,808

Amount allocable to share-based compensation awards

(133

)

(104

)

(340

)

(319

)

Numerator for diluted EPS

41,594

35,981

114,474

103,489

Denominator

Weighted average common shares - basic

112,485

112,314

112,442

112,279

Dilutive effect of share-based compensation awards

702

696

749

566

Weighted average common shares - diluted

113,187

113,010

113,191

112,845

Diluted EPS

0.37

0.32

1.01

0.92

COPT Defense Properties

Summary Financial Data

(unaudited)

(in thousands, except per share data)

For the Three Months Ended

September 30,

For the Nine Months Ended

September 30,

2025

2024

2025

2024

Net income

43,744

37,397

120,138

107,475

Real estate-related depreciation and amortization

40,631

38,307

119,563

114,819

Gain on sales of real estate

(3,018

)

—

(3,318

)

—

Depreciation and amortization on unconsolidated real estate JVs

733

756

2,206

2,311

Funds from operations (“FFO”)

82,090

76,460

238,589

224,605

FFO allocable to other noncontrolling interests

(1,502

)

(985

)

(4,042

)

(2,805

)

Basic FFO allocable to share-based compensation awards

(548

)

(617

)

(1,628

)

(1,803

)

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

80,040

74,858

232,919

219,997

Redeemable noncontrolling interest

—

1,446

Diluted FFO adjustments allocable to share-based compensation awards

294

141

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

80,093

74,905

233,213

221,584

Loss on early extinguishment of debt on unconsolidated real estate JVs

—

Executive transition costs

—

227

Diluted FFO comparability adjustments allocable to share-based compensation awards

—

)

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

80,121

74,974

233,241

221,810

Straight line rent adjustments and lease incentive amortization

5,053

613

1,518

7,874

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

211

268

544

Share-based compensation, net of amounts capitalized

2,961

2,617

8,739

7,826

Amortization of deferred financing costs

657

671

1,981

2,037

Amortization of net debt discounts, net of amounts capitalized

1,070

1,032

3,181

3,069

Replacement capital expenditures

(26,982

)

(27,824

)

(72,365

)

(69,850

)

Other

352

298

508

493

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

63,274

52,592

177,071

173,803

Diluted FFO per share

0.69

0.65

2.02

1.92

Diluted FFO per share, as adjusted for comparability

0.69

0.65

2.02

1.92

Dividends/distributions per common share/unit

0.305

0.295

0.915

0.885

COPT Defense Properties

Summary Financial Data

(unaudited)

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

September 30,

2025

December 31,

2024

Balance Sheet Data

Properties, net of accumulated depreciation

3,725,856

3,630,526

Total assets

4,351,432

4,254,191

Debt per balance sheet

2,443,518

2,391,755

Total liabilities

2,772,176

2,693,624

Redeemable noncontrolling interest

24,217

23,974

Total equity

1,555,039

1,536,593

Debt to assets

56.2

Net debt to adjusted book

40.2

40.4

Defense/IT Portfolio Data (as of period end)

Number of operating properties

198

197

Total operational square feet (in thousands)

22,597

22,549

% Occupied

95.4

% Leased

97.0

96.7

For the Three Months Ended

September 30,

For the Nine Months Ended

September 30,

2025

2024

2025

2024

GAAP

Payout ratio

Net income

80.5

90.7

87.9

94.6

Debt ratios

Net income to interest expense ratio

2.1x

1.8x

1.9x

1.7x

Debt to net income ratio

14.0x

16.0x

N/A

Non-GAAP

Payout ratios

Diluted FFO

43.7

44.9

45.0

45.6

Diluted FFO, as adjusted for comparability

43.7

44.9

45.0

45.5

Diluted AFFO

55.3

64.0

59.3

58.1

Debt ratios

Adjusted EBITDA fixed charge coverage ratio

4.8x

4.7x

Net debt to in-place adjusted EBITDA ratio

6.1x

N/A

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

5.8x

5.9x

N/A

Reconciliation of denominators for per share measures

Denominator for diluted EPS

113,187

113,010

113,191

112,845

Weighted average common units

2,182

1,696

2,136

1,675

Redeemable noncontrolling interest

—

873

Denominator for diluted FFO per share and as adjusted for comparability

115,369

114,706

115,327

115,393

COPT Defense Properties

Summary Financial Data

(unaudited)

(in thousands)

For the Three Months Ended

September 30,

For the Nine Months Ended

September 30,

2025

2024

2025

2024

Numerators for Payout Ratios

Dividends on unrestricted common and deferred shares

34,332

33,165

102,974

99,461

Distributions on unrestricted common units

658

491

1,985

1,496

Dividends and distributions on restricted shares and units

209

247

663

752

Total dividends and distributions for GAAP payout ratio

35,199

33,903

105,622

101,709

Dividends and distributions on antidilutive shares and units

(202

)

(249

)

(592

)

(756

)

Dividends and distributions for non-GAAP payout ratios

34,997

33,654

105,030

100,953

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

Net income

43,744

37,397

120,138

107,475

Interest expense

20,894

20,376

62,336

61,760

Income tax expense

612

130

832

312

Real estate-related depreciation and amortization

40,631

38,307

119,563

114,819

Other depreciation and amortization

428

614

1,438

1,786

Gain on sales of real estate

(3,018

)

—

(3,318

)

—

Adjustments from unconsolidated real estate JVs

1,758

1,759

4,791

5,139

EBITDAre

105,049

98,583

305,780

291,291

Credit loss (recoveries) expense

(324

)

1,378

496

Business development expenses

731

557

2,065

1,790

Executive transition costs

—

580

Loss on early extinguishment of debt on unconsolidated real estate JVs

—

Net gain on other investments

(1,713

)

(11

)

(1,713

)

(488

)

Adjusted EBITDA

103,771

99,236

307,616

293,669

Pro forma NOI adjustment for property changes within period

—

In-place adjusted EBITDA

103,792

99,236

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

Tenant improvements and incentives

24,769

18,772

53,820

46,593

Building improvements

3,662

6,694

11,175

17,352

Leasing costs

2,240

3,013

10,630

9,713

Net (exclusions from) additions to tenant improvements and incentives

(3,390

)

728

(93

)

Excluded building improvements

(299

)

(1,383

)

(2,203

)

(3,771

)

Excluded leasing costs

—

(964

)

(41

)

Replacement capital expenditures

26,982

27,824

72,365

69,850

COPT Defense Properties

Summary Financial Data

(unaudited)

(in thousands)

For the Three Months Ended

September 30,

For the Nine Months Ended

September 30,

2025

2024

2025

2024

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

Interest expense

20,894

20,376

62,336

61,760

Less: Amortization of deferred financing costs

(657

)

(671

)

(1,981

)

(2,037

)

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

(1,070

)

(1,032

)

(3,181

)

(3,069

)

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

898

821

2,409

2,433

Scheduled principal amortization

458

448

1,376

1,879

Capitalized interest

1,292

712

3,345

1,944

Denominator for fixed charge coverage-Adjusted EBITDA

21,815

20,654

64,304

62,910

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

Net income

43,744

37,397

120,138

107,475

Construction contract and other service revenues

(8,485

)

(16,662

)

(31,202

)

(63,523

)

Depreciation and other amortization associated with real estate operations

40,631

38,307

119,563

114,819

Construction contract and other service expenses

7,952

16,127

29,530

61,746

General and administrative expenses

8,483

8,157

24,833

25,126

Leasing expenses

2,449

2,341

8,061

6,990

Business development expenses and land carry costs

1,098

918

3,203

3,079

Interest expense

20,894

20,376

62,336

61,760

Interest and other income, net

(2,591

)

(3,324

)

(5,382

)

(10,330

)

Gain on sales of real estate

(3,018

)

—

(3,318

)

—

Equity in income of unconsolidated entities

(1,815

)

(85

)

(2,541

)

(180

)

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

1,864

1,844

5,623

5,319

Income tax expense

612

130

832

312

NOI from real estate operations

111,818

105,526

331,676

312,593

Non-Same Property NOI from real estate operations

(3,948

)

(1,482

)

(10,865

)

(3,345

)

Same Property NOI from real estate operations

107,870

104,044

320,811

309,248

Straight line rent adjustments and lease incentive amortization

3,315

(498

)

3,460

3,597

Amortization of acquired above- and below-market rents

(92

)

(69

)

(230

)

(207

)

Lease termination fees, net

(1,191

)

(931

)

(2,753

)

(2,587

)

Tenant funded landlord assets and lease incentives

(4,920

)

(2,103

)

(12,954

)

(15,065

)

Cash NOI adjustments in unconsolidated real estate JVs

(209

)

(280

)

(689

)

(796

)

Same Property Cash NOI from real estate operations

104,773

100,163

307,645

294,190

COPT Defense Properties

Summary Financial Data

(unaudited)

(in thousands)

September 30,

2025

December 31,

2024

Reconciliation of total assets to adjusted book

Total assets

4,351,432

4,254,191

Accumulated depreciation

1,644,472

1,537,293

Accumulated amortization of intangibles on property acquisitions and deferred leasing costs

226,312

228,154

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

82,430

61,294

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

15,197

12,817

Less: Property - operating lease liabilities

(46,203

)

(49,240

)

Less: Property - finance lease liabilities

(370

)

(391

)

Less: Cash and cash equivalents

(23,687

)

(38,284

)

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

(2,080

)

(2,053

)

Adjusted book

6,247,503

6,003,781

September 30,

2025

December 31,

2024

September 30,

2024

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

Debt per balance sheet

2,443,518

2,391,755

2,390,839

Net discounts and deferred financing costs

19,123

23,262

24,633

COPT Defense’s share of unconsolidated JV gross debt

75,250

53,750

53,148

Gross debt

2,537,891

2,468,767

2,468,620

Less: Cash and cash equivalents

(23,687

)

(38,284

)

(34,478

)

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

(2,080

)

(2,053

)

(1,575

)

Net debt

2,512,124

2,428,430

2,432,567

Costs incurred on fully-leased development properties

(83,794

)

(18,774

)

(70,954

)

Costs incurred on fully-leased operating property acquisitions

—

(17,034

)

(17,034

)

Net debt adjusted for fully-leased investment properties

2,428,330

2,392,622

2,344,579

Source: COPT Defense Properties