COPT Defense Properties (CDP) Q3 2025 Earnings Call Highlights: Record Leasing Rates and ...

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FFO per Share: $0.69 for the quarter, $2.02 for the first nine months, a 6.2% year-over-year increase for the quarter. Same Property Cash NOI Growth: 4.6% year-over-year for both the quarter and the first nine months. Leased Portfolio: 95.7% leased, highest level in 20 years. Vacancy Leasing: 78,000 square feet in the quarter, 432,000 square feet year-to-date. Tenant Retention: 82% for both the quarter and the first nine months. Capital Committed to New Investments: $72 million in recent weeks, $124 million year-to-date. Guidance for FFO per Share: Increased by $0.03 to $2.70 for 2025, a 5.1% growth over 2024. Same-Property Year-End Occupancy: Increased by 20 basis points to 94.2%. Cash Rent Spreads on Renewals: Increased by 200 basis points to 2%. Vacancy Leasing Target: Increased by 50,000 square feet to 500,000 square feet. Bond Offering: $400 million five-year unsecured bond at a yield of 4.6%. Revolving Credit Facility: Upsized to $800 million, extended maturity to 2030. Development Pipeline: 1.3 million square feet of opportunities considered 50% likely to win or better within two years.

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Release Date: October 31, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

COPT Defense Properties (NYSE:CDP) achieved a 6.2% year-over-year increase in FFO per share for the third quarter, marking 31 consecutive quarters of meeting or exceeding guidance. The company reported a high leasing rate of 95.7%, the highest in 20 years, with significant leasing activity including 78,000 square feet in the quarter. CDP successfully closed on three financings in October, prefunding 2026 bond maturity and increasing liquidity for external growth. The company increased its 2025 guidance for six key metrics, including FFO per share and same-property cash NOI growth. CDP committed $72 million to two new fully leased investments, enhancing relationships with existing Defense/IT tenants.

Negative Points

The government shutdown creates uncertainty around the timing of lease activities, potentially impacting full-year guidance for tenant retention and cash rent spreads. There is a potential $0.01 drag on FFO per share in the first quarter of 2026 due to pre-funding the March bond maturity. The company faces a refinancing headwind in 2026 due to a negative spread between new and maturing bonds, impacting FFO per share. Occupancy in the total portfolio declined by 10 basis points sequentially, driven by two nonrenewals totaling less than 80,000 square feet. The relocation of Space Command to Redstone Arsenal, while beneficial long-term, will not significantly materialize until 2027, delaying immediate impact.

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Q & A Highlights

Q: Can you provide an update on the expected lag time before increased budgets and policy decisions impact leasing activity, especially outside of Huntsville? A: Stephen Budorick, President and CEO, explained that while the Golden Dome activities are already funded, the government shutdown has created uncertainty. Typically, demand arises 9 to 18 months after appropriation, but this time it might be quicker, potentially within six months, due to pent-up need and expectations.

Q: Regarding the acquisition of Stonegate I, does this property lead to more acquisition opportunities in that market? A: Stephen Budorick noted that the property fits well within their existing portfolio's geographical footprint. He expressed interest in expanding market share in the area, given the presence of key demand drivers and defense contractors in buildings they do not own.

Q: Why was the yield on the Stonegate I acquisition so high? A: Stephen Budorick attributed the high yield to the seller's specific timeline, their delay in renewal, and the tenant's preference for COPT as the new owner due to their strong relationship. These factors allowed COPT to secure the asset with favorable terms.

Q: How does the Golden Dome opportunity impact near-term development opportunities at Redstone Arsenal? A: Stephen Budorick stated that any additional leases would require new developments due to high occupancy levels. Conversations with contractors suggest that Golden Dome opportunities will manifest in new developments, which are included in their potential development pipeline.

Q: Can you discuss the process and influence behind the Space Command's move to Huntsville? A: Stephen Budorick explained that the decision was made through a comprehensive Air Force process, with Redstone Arsenal deemed the optimal location. COPT's role is to support the missions at Redstone Arsenal, and their secured parcel offers the necessary speed and security for Space Command's needs.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

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