COPT Defense Reports First Quarter 2026 Results
Igår, 22:16
COPT Defense Properties (“COPT Defense” or the “Company”) (NYSE: CDP) announced results for the first quarter ended March 31, 2026.
Management Comments
Stephen E. Budorick, COPT Defense’s President & Chief Executive Officer, commented, “We achieved solid results in the first quarter and our performance is tracking on all aspects of our full year plan. FFO per share exceeded the midpoint of our guidance range by $0.01. Based on this outperformance, and our forecast for the remainder of the year, we increased the midpoint of 2026 FFO per share guidance by $0.01 to $2.76.
In terms of our leasing achievements, we are off to a great start, as we have executed over 90,000 square feet of vacancy leasing, over 380,000 square feet of investment leasing, and a record 1.2 million square feet of renewal leasing in the first quarter, which equated to a strong tenant retention rate of 91%. Our strong renewal volume, retention, and cash rent spreads in the quarter were driven by the 953,000 square foot full renewal of our U.S. Government campus near Lackland Air Force Base in San Antonio. Our Defense/IT Portfolio was 95.6% occupied and 96.4% leased at quarter-end, and marked thirteen consecutive quarters in which our occupancy rate exceeded 94%, highlighting the strength and durability of our portfolio.
Over the past 4 months, we committed nearly $250 million to three new investments, consisting of a fully pre-leased build-to-suit development at The National Business Park in Maryland, an inventory building development that is designed for U.S. Government tenancy at Redstone Gateway in Alabama, and an acquisition of 17 acres of strategic land subject to a ground lease on which two fully leased strategic office buildings have been developed in Chantilly, Virginia. These investments serve to enhance and expand our relationships with leading defense contractor and U.S. Government tenants and position the Company to further expand our strategic portfolio in the future and ultimately drive shareholder value.
Our outstanding performance in 2025 and expected performance in 2026 led our Board of Trustees to approve a 4.9% increase in our quarterly dividend in February, which marks our fourth consecutive annual increase, amounting to a 16.4% cumulative increase since 2022. Finally, we were very pleased that Moody’s upgraded our investment grade rating by one level to Baa2 with a Stable outlook in March, which reflects the strength and specialized nature of our strategy, platform, and portfolio.”
Financial Highlights
1st Quarter Financial Results:
- Diluted earnings per share (“EPS”) was $0.34 for the quarter ended March 31, 2026, compared to $0.31 for the quarter ended March 31, 2025.
- Diluted funds from operations per share (“FFOPS”), as calculated in accordance with Nareit’s definition and as adjusted for comparability, was $0.69 for the quarter ended March 31, 2026, compared to $0.65 for the quarter ended March 31, 2025.
Operating Performance Highlights
Operating Portfolio Summary:
- At March 31, 2026, the Company’s 25.2 million square foot total portfolio was 94.4% occupied and 95.2% leased, which includes the 23.2 million square foot Defense/IT Portfolio that was 95.6% occupied and 96.4% leased.
Same Property Performance:
- At March 31, 2026, the Company’s 24.6 million square foot Same Property portfolio was 94.2% occupied and 95.1% leased.
- The Company’s Same Property cash NOI increased 5.4% in the quarter ended March 31, 2026 compared to the same period in 2025.
Leasing:
- Total Square Feet Leased: For the quarter ended March 31, 2026, the Company leased 1.6 million square feet, including 1.2 million square feet of renewals, 92,000 square feet of vacancy leasing, and 384,000 square feet of investment leasing.
- Tenant Retention Rates: During the quarter ended March 31, 2026, the Company renewed 90.8% of expiring square feet in its total portfolio.
- Rent Spreads and Average Escalations on Renewing Leases: For the quarter ended March 31, 2026, straight-line rents on renewals increased 12.0% and cash rents on renewed space increased 3.8% while annual escalations on renewing leases averaged 3.1%.
- Lease Terms: In the quarter ended March 31, 2026, lease terms averaged 4.5 years on renewing leases, 6.6 years on vacancy leasing, and 13.4 years on investment leasing.
Investment Activity Highlights
- Development Pipeline: The Company’s development pipeline consists of seven properties totaling 1.0 million square feet that were 73% leased as of March 31, 2026. These projects represent a total estimated investment of $508 million, of which $139 million was spent as of March 31, 2026. The Company added two new investments to the development pipeline during the quarter totaling 387,000 square feet that are 61% pre-leased and represent $201 million in committed capital.
- Acquisition: Subsequent to the quarter, on April 23, 2026, the Company acquired approximately 17 acres of land for approximately $43 million, subject to a ground lease on which two buildings at Mission Ridge 1 + 2, located at 15020 and 15030 Conference Center Drive in Chantilly, Virginia, have been developed. The buildings are fully leased to the U.S. Government and defense contractors.
Balance Sheet and Capital Transaction Highlights
- On March 16, 2026, the Company repaid at maturity $400 million in 2.25% Notes, using the remaining excess available cash and cash equivalents from prefunding this debt maturity with a new bond issuance in 2025 and borrowings under our Revolving Credit Facility.
- For the quarter ended March 31, 2026, the Company’s adjusted EBITDA fixed charge coverage ratio was 4.3x.
- At March 31, 2026, the Company’s net debt to in-place adjusted EBITDA ratio was 6.1x and its net debt adjusted for fully-leased investment properties to in-place adjusted EBITDA ratio was 5.9x.
- At March 31, 2026, and including the effect of interest rate swaps, the Company’s weighted average effective interest rate on its consolidated debt portfolio was 3.8% with a weighted average maturity of 4.5 years (assuming exercise of available extension options), and 85% of the Company’s debt was subject to fixed interest rates.
Associated Supplemental Presentation
Prior to the call, the Company will post a slide presentation to accompany management’s prepared remarks for its first quarter 2026 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
2026 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 $1.21-$1.29 and $2.71-$2.79, respectively, to new ranges of $1.24-$1.30 and $2.73-$2.79, respectively. Management is establishing second quarter guidance for diluted EPS and diluted FFOPS per Nareit and as adjusted for comparability at $0.31-$0.33 and $0.68-$0.70, 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
| Year Ending
| ||||||||||||
Low | High | Low | High | |||||||||||
Diluted EPS | $ | 0.31 | $ | 0.33 | $ | 1.24 | $ | 1.30 | ||||||
Real estate-related depreciation and amortization | 0.37 | 0.37 | 1.50 | 1.50 | ||||||||||
Gain on sales of real estate | — | — | (0.01 | ) | (0.01 | ) | ||||||||
Diluted FFOPS, Nareit definition and as adjusted for comparability | $ | 0.68 | $ | 0.70 | $ | 2.73 | $ | 2.79 |
The Company detailed its initial full year guidance, with supporting assumptions, in a separate press release issued February 5, 2026; 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 first quarter 2026 results on its conference call tomorrow, details of which are listed below:
Conference Call Date: | Tuesday, April 28, 2026 |
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/BIe115c1b620434f18ba2fd85f99acc54d
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 March 31, 2026, the Company’s Defense/IT Portfolio of 201 properties, including 24 owned through unconsolidated joint ventures, encompassed 23.2 million square feet and was 96.4% 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, 2025.
Source: COPT Defense Properties
COPT Defense Properties | |||||||
Summary Financial Data | |||||||
(unaudited) | |||||||
(dollars and shares in thousands, except per share data) | |||||||
For the Three Months Ended
| |||||||
2026 | 2025 | ||||||
Revenues | |||||||
Lease revenue | $ | 192,971 | $ | 175,308 | |||
Other property revenue | 1,625 | 2,289 | |||||
Construction contract and other service revenues | 6,041 | 10,259 | |||||
Total revenues | 200,637 | 187,856 | |||||
Operating expenses | |||||||
Property operating expenses | 81,435 | 72,040 | |||||
Depreciation and amortization associated with real estate operations | 42,685 | 39,359 | |||||
Construction contract and other service expenses | 5,552 | 9,705 | |||||
General and administrative expenses | 8,456 | 8,148 | |||||
Leasing expenses | 2,994 | 2,999 | |||||
Business development expenses and land carry costs | 1,199 | 1,009 | |||||
Total operating expenses | 142,321 | 133,260 | |||||
Interest expense | (23,996 | ) | (20,504 | ) | |||
Interest and other income, net | 3,955 | 1,568 | |||||
Gain on sales of real estate | 582 | 300 | |||||
Income before equity in income of unconsolidated entities and income taxes | 38,857 | 35,960 | |||||
Equity in income of unconsolidated entities | 1,406 | 371 | |||||
Income tax expense | (124 | ) | (103 | ) | |||
Net income | 40,139 | 36,228 | |||||
Net income attributable to noncontrolling interests | |||||||
Common units in the Operating Partnership (“OP”) | (812 | ) | (726 | ) | |||
Other consolidated entities | (771 | ) | (762 | ) | |||
Net income attributable to common shareholders | $ | 38,556 | $ | 34,740 | |||
Earnings per share (“EPS”) computation | |||||||
Numerator for diluted EPS | |||||||
Net income attributable to common shareholders | $ | 38,556 | $ | 34,740 | |||
Amount allocable to share-based compensation awards | (161 | ) | (143 | ) | |||
Numerator for diluted EPS | $ | 38,395 | $ | 34,597 | |||
Denominator | |||||||
Weighted average common shares - basic | 112,806 | 112,383 | |||||
Dilutive effect of share-based compensation awards | 1,031 | 643 | |||||
Dilutive exchangeable debt | 472 | — | |||||
Weighted average common shares - diluted | 114,309 | 113,026 | |||||
Diluted EPS | $ | 0.34 | $ | 0.31 |
COPT Defense Properties | |||||||
Summary Financial Data | |||||||
(unaudited) | |||||||
(in thousands, except per share data) | |||||||
For the Three Months Ended
| |||||||
2026 | 2025 | ||||||
Net income | $ | 40,139 | $ | 36,228 | |||
Real estate-related depreciation and amortization | 42,685 | 39,359 | |||||
Gain on sales of real estate | (582 | ) | (300 | ) | |||
Depreciation and amortization on unconsolidated real estate JVs | 742 | 741 | |||||
Gain on sale of real estate on unconsolidated real estate JV | (1,146 | ) | — | ||||
Funds from operations (“FFO”) | 81,838 | 76,028 | |||||
FFO allocable to other noncontrolling interests | (1,131 | ) | (1,158 | ) | |||
Basic FFO allocable to share-based compensation awards | (603 | ) | (530 | ) | |||
Basic FFO available to common share and common unit holders (“Basic FFO”) | 80,104 | 74,340 | |||||
Diluted FFO adjustments allocable to share-based compensation awards | 64 | 53 | |||||
Diluted FFO available to common share and common unit holders and as adjusted for comparability | 80,168 | 74,393 | |||||
Straight line rent adjustments and lease incentive amortization | (1,330 | ) | (1,699 | ) | |||
Amortization of intangibles and other assets included in net operating income (“NOI”) | 60 | 162 | |||||
Share-based compensation, net of amounts capitalized | 3,186 | 2,854 | |||||
Amortization of deferred financing costs | 832 | 667 | |||||
Amortization of net debt discounts, net of amounts capitalized | 1,217 | 1,051 | |||||
Replacement capital expenditures | (19,205 | ) | (21,464 | ) | |||
Other | 156 | 81 | |||||
Diluted adjusted funds from operations available to common share and common unit holders (“Diluted AFFO”) | $ | 65,084 | $ | 56,045 | |||
Diluted FFO per share | $ | 0.69 | $ | 0.65 | |||
Diluted FFO per share, as adjusted for comparability | $ | 0.69 | $ | 0.65 | |||
Dividends/distributions per common share/unit | $ | 0.32 | $ | 0.305 |
COPT Defense Properties | |||||||
Summary Financial Data | |||||||
(unaudited) | |||||||
(dollars and shares in thousands, except per share data) | |||||||
March 31, | December 31, | ||||||
Balance sheet data | |||||||
Properties, net of accumulated depreciation | $ | 3,802,976 | $ | 3,783,477 | |||
Total assets | $ | 4,458,909 | $ | 4,701,790 | |||
Debt per balance sheet | $ | 2,546,958 | $ | 2,767,834 | |||
Total liabilities | $ | 2,867,138 | $ | 3,114,115 | |||
Redeemable noncontrolling interest | $ | 25,130 | $ | 25,506 | |||
Total equity | $ | 1,566,641 | $ | 1,562,169 | |||
Debt to assets | 57.1 | % | 58.9 | % | |||
Net debt to adjusted book | 40.6 | % | 40.5 | % | |||
Defense/IT Portfolio data (as of period end) | |||||||
Number of operating properties | 201 | 201 | |||||
Total operational square feet (in thousands) | 23,167 | 23,159 | |||||
% Occupied | 95.6 | % | 95.5 | % | |||
% Leased | 96.4 | % | 96.5 | % |
For the Three Months Ended
| |||||
2026 | 2025 | ||||
GAAP | |||||
Payout ratio | |||||
Net income | 92.5 | % | 97.2 | % | |
Debt ratios | |||||
Net income to interest expense ratio | 1.7x | 1.8x | |||
Debt to net income ratio | 15.9x | 16.6x | |||
Non-GAAP | |||||
Payout ratios | |||||
Diluted FFO | 46.0 | % | 47.0 | % | |
Diluted FFO, as adjusted for comparability | 46.0 | % | 47.0 | % | |
Diluted AFFO | 56.6 | % | 62.4 | % | |
Debt ratios | |||||
Adjusted EBITDA fixed charge coverage ratio | 4.3x | 4.7x | |||
Net debt to in-place adjusted EBITDA ratio | 6.1x | 6.1x | |||
Net debt adjusted for fully-leased investment properties to in-place adjusted EBITDA ratio | 5.9x | 6.0x | |||
Reconciliation of denominators for per share measures | |||||
Denominator for diluted EPS | 114,309 | 113,026 | |||
Weighted average common units | 2,063 | 2,047 | |||
Denominator for diluted FFO per share and as adjusted for comparability | 116,372 | 115,073 |
COPT Defense Properties | |||||||
Summary Financial Data | |||||||
(unaudited) | |||||||
(in thousands) | |||||||
For the Three Months Ended
| |||||||
2026 | 2025 | ||||||
Numerators for payout ratios | |||||||
Dividends on unrestricted common and deferred shares | $ | 36,134 | $ | 34,318 | |||
Distributions on unrestricted common units | 711 | 661 | |||||
Dividends and distributions on restricted shares and units | 267 | 236 | |||||
Total dividends and distributions for GAAP payout ratio | 37,112 | 35,215 | |||||
Dividends and distributions on antidilutive shares and units | (257 | ) | (237 | ) | |||
Dividends and distributions for non-GAAP payout ratios | $ | 36,855 | $ | 34,978 | |||
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 | $ | 40,139 | $ | 36,228 | |||
Interest expense | 23,996 | 20,504 | |||||
Income tax expense | 124 | 103 | |||||
Real estate-related depreciation and amortization | 42,685 | 39,359 | |||||
Other depreciation and amortization | 416 | 542 | |||||
Gain on sales of real estate | (582 | ) | (300 | ) | |||
Adjustments from unconsolidated real estate JVs | 650 | 1,518 | |||||
EBITDAre | 107,428 | 97,954 | |||||
Credit loss (recoveries) expense | (369 | ) | 515 | ||||
Business development expenses | 802 | 593 | |||||
Executive transition costs | — | 57 | |||||
Net gain on other investments | (29 | ) | — | ||||
Adjusted EBITDA | 107,832 | 99,119 | |||||
Pro forma NOI adjustment for property changes within period | — | 786 | |||||
Change in collectability of deferred rental revenue | 86 | 1,232 | |||||
In-place adjusted EBITDA | $ | 107,918 | $ | 101,137 | |||
Reconciliations of tenant improvements and incentives, building improvements, and leasing costs for operating properties to replacement capital expenditures | |||||||
Tenant improvements and incentives | $ | 15,899 | $ | 13,758 | |||
Building improvements | 1,142 | 1,872 | |||||
Leasing costs | 1,547 | 3,461 | |||||
Net additions to tenant improvements and incentives | 924 | 3,538 | |||||
Excluded building improvements | (307 | ) | (201 | ) | |||
Excluded leasing costs | — | (964 | ) | ||||
Replacement capital expenditures | $ | 19,205 | $ | 21,464 |
COPT Defense Properties | |||||||
Summary Financial Data | |||||||
(unaudited) | |||||||
(in thousands) | |||||||
For the Three Months Ended
| |||||||
2026 | 2025 | ||||||
Reconciliation of interest expense to the denominator for fixed charge coverage-Adjusted EBITDA | |||||||
Interest expense | $ | 23,996 | $ | 20,504 | |||
Less: Amortization of deferred financing costs | (832 | ) | (667 | ) | |||
Less: Amortization of net debt discounts, net of amounts capitalized | (1,217 | ) | (1,051 | ) | |||
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 | 947 | 752 | |||||
Scheduled principal amortization | 397 | 461 | |||||
Capitalized interest, excluding amortization of deferred financing costs | 1,679 | 927 | |||||
Denominator for fixed charge coverage-Adjusted EBITDA | $ | 24,970 | $ | 20,926 | |||
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 | $ | 40,139 | $ | 36,228 | |||
Construction contract and other service revenues | (6,041 | ) | (10,259 | ) | |||
Depreciation and other amortization associated with real estate operations | 42,685 | 39,359 | |||||
Construction contract and other service expenses | 5,552 | 9,705 | |||||
General and administrative expenses | 8,456 | 8,148 | |||||
Leasing expenses | 2,994 | 2,999 | |||||
Business development expenses and land carry costs | 1,199 | 1,009 | |||||
Interest expense | 23,996 | 20,504 | |||||
Interest and other income, net | (3,955 | ) | (1,568 | ) | |||
Gain on sales of real estate | (582 | ) | (300 | ) | |||
Equity in income of unconsolidated entities | (1,406 | ) | (371 | ) | |||
Unconsolidated real estate JVs NOI allocable to COPT Defense included in equity in income of unconsolidated entities | 2,056 | 1,889 | |||||
Income tax expense | 124 | 103 | |||||
NOI from real estate operations | 115,217 | 107,446 | |||||
Non-Same Property NOI from real estate operations | (4,836 | ) | (400 | ) | |||
Same Property NOI from real estate operations | 110,381 | 107,046 | |||||
Straight line rent adjustments and lease incentive amortization | 677 | (1,811 | ) | ||||
Amortization of acquired above- and below-market rents | 80 | 64 | |||||
Lease termination fees, net | (1,212 | ) | (834 | ) | |||
Tenant funded landlord assets and lease incentives | (3,318 | ) | (3,413 | ) | |||
Cash NOI adjustments in unconsolidated real estate JVs | (355 | ) | (260 | ) | |||
Same Property Cash NOI from real estate operations | $ | 106,253 | $ | 100,792 |
COPT Defense Properties | ||||||||
Summary Financial Data | ||||||||
(unaudited) | ||||||||
(in thousands) | ||||||||
March 31, | December 31, | |||||||
Reconciliation of total assets to adjusted book | ||||||||
Total assets | $ | 4,458,909 | $ | 4,701,790 | ||||
Accumulated depreciation | 1,721,016 | 1,682,367 | ||||||
Accumulated amortization of intangibles on property acquisitions and deferred leasing costs | 227,989 | 228,656 | ||||||
COPT Defense’s share of liabilities of unconsolidated real estate JVs | 82,353 | 82,039 | ||||||
COPT Defense’s share of accumulated depreciation and amortization of unconsolidated real estate JVs | 16,583 | 16,000 | ||||||
Less: Property - operating lease liabilities | (43,768 | ) | (45,012 | ) | ||||
Less: Property - finance lease liabilities | (752 | ) | (363 | ) | ||||
Less: Cash and cash equivalents | (28,580 | ) | (274,986 | ) | ||||
Less: COPT Defense’s share of cash of unconsolidated real estate JVs | (1,230 | ) | (1,898 | ) | ||||
Adjusted book | $ | 6,432,520 | $ | 6,388,593 |
March 31, | December 31, | March 31, | ||||||||||
Reconciliation of debt to net debt and net debt adjusted for fully-leased investment properties | ||||||||||||
Debt per balance sheet | $ | 2,546,958 | $ | 2,767,834 | $ | 2,412,670 | ||||||
Net discounts and deferred financing costs | 21,946 | 23,466 | 21,886 | |||||||||
COPT Defense’s share of unconsolidated JV gross debt | 75,250 | 75,250 | 53,750 | |||||||||
Gross debt | 2,644,154 | 2,866,550 | 2,488,306 | |||||||||
Less: Cash and cash equivalents | (28,580 | ) | (274,986 | ) | (24,292 | ) | ||||||
Less: COPT Defense’s share of cash of unconsolidated real estate JVs | (1,230 | ) | (1,898 | ) | (1,766 | ) | ||||||
Net debt | 2,614,344 | 2,589,666 | 2,462,248 | |||||||||
Costs incurred on fully-leased development properties | (82,576 | ) | (8,226 | ) | (27,499 | ) | ||||||
Net debt adjusted for fully-leased investment properties | $ | 2,531,768 | $ | 2,581,440 | $ | 2,434,749 |
View source version on businesswire.com: https://www.businesswire.com/news/home/20260427049371/en/
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COPT Defense Reports First Quarter 2026 Results
Igår, 22:16
COPT Defense Properties (“COPT Defense” or the “Company”) (NYSE: CDP) announced results for the first quarter ended March 31, 2026.
Management Comments
Stephen E. Budorick, COPT Defense’s President & Chief Executive Officer, commented, “We achieved solid results in the first quarter and our performance is tracking on all aspects of our full year plan. FFO per share exceeded the midpoint of our guidance range by $0.01. Based on this outperformance, and our forecast for the remainder of the year, we increased the midpoint of 2026 FFO per share guidance by $0.01 to $2.76.
In terms of our leasing achievements, we are off to a great start, as we have executed over 90,000 square feet of vacancy leasing, over 380,000 square feet of investment leasing, and a record 1.2 million square feet of renewal leasing in the first quarter, which equated to a strong tenant retention rate of 91%. Our strong renewal volume, retention, and cash rent spreads in the quarter were driven by the 953,000 square foot full renewal of our U.S. Government campus near Lackland Air Force Base in San Antonio. Our Defense/IT Portfolio was 95.6% occupied and 96.4% leased at quarter-end, and marked thirteen consecutive quarters in which our occupancy rate exceeded 94%, highlighting the strength and durability of our portfolio.
Over the past 4 months, we committed nearly $250 million to three new investments, consisting of a fully pre-leased build-to-suit development at The National Business Park in Maryland, an inventory building development that is designed for U.S. Government tenancy at Redstone Gateway in Alabama, and an acquisition of 17 acres of strategic land subject to a ground lease on which two fully leased strategic office buildings have been developed in Chantilly, Virginia. These investments serve to enhance and expand our relationships with leading defense contractor and U.S. Government tenants and position the Company to further expand our strategic portfolio in the future and ultimately drive shareholder value.
Our outstanding performance in 2025 and expected performance in 2026 led our Board of Trustees to approve a 4.9% increase in our quarterly dividend in February, which marks our fourth consecutive annual increase, amounting to a 16.4% cumulative increase since 2022. Finally, we were very pleased that Moody’s upgraded our investment grade rating by one level to Baa2 with a Stable outlook in March, which reflects the strength and specialized nature of our strategy, platform, and portfolio.”
Financial Highlights
1st Quarter Financial Results:
- Diluted earnings per share (“EPS”) was $0.34 for the quarter ended March 31, 2026, compared to $0.31 for the quarter ended March 31, 2025.
- Diluted funds from operations per share (“FFOPS”), as calculated in accordance with Nareit’s definition and as adjusted for comparability, was $0.69 for the quarter ended March 31, 2026, compared to $0.65 for the quarter ended March 31, 2025.
Operating Performance Highlights
Operating Portfolio Summary:
- At March 31, 2026, the Company’s 25.2 million square foot total portfolio was 94.4% occupied and 95.2% leased, which includes the 23.2 million square foot Defense/IT Portfolio that was 95.6% occupied and 96.4% leased.
Same Property Performance:
- At March 31, 2026, the Company’s 24.6 million square foot Same Property portfolio was 94.2% occupied and 95.1% leased.
- The Company’s Same Property cash NOI increased 5.4% in the quarter ended March 31, 2026 compared to the same period in 2025.
Leasing:
- Total Square Feet Leased: For the quarter ended March 31, 2026, the Company leased 1.6 million square feet, including 1.2 million square feet of renewals, 92,000 square feet of vacancy leasing, and 384,000 square feet of investment leasing.
- Tenant Retention Rates: During the quarter ended March 31, 2026, the Company renewed 90.8% of expiring square feet in its total portfolio.
- Rent Spreads and Average Escalations on Renewing Leases: For the quarter ended March 31, 2026, straight-line rents on renewals increased 12.0% and cash rents on renewed space increased 3.8% while annual escalations on renewing leases averaged 3.1%.
- Lease Terms: In the quarter ended March 31, 2026, lease terms averaged 4.5 years on renewing leases, 6.6 years on vacancy leasing, and 13.4 years on investment leasing.
Investment Activity Highlights
- Development Pipeline: The Company’s development pipeline consists of seven properties totaling 1.0 million square feet that were 73% leased as of March 31, 2026. These projects represent a total estimated investment of $508 million, of which $139 million was spent as of March 31, 2026. The Company added two new investments to the development pipeline during the quarter totaling 387,000 square feet that are 61% pre-leased and represent $201 million in committed capital.
- Acquisition: Subsequent to the quarter, on April 23, 2026, the Company acquired approximately 17 acres of land for approximately $43 million, subject to a ground lease on which two buildings at Mission Ridge 1 + 2, located at 15020 and 15030 Conference Center Drive in Chantilly, Virginia, have been developed. The buildings are fully leased to the U.S. Government and defense contractors.
Balance Sheet and Capital Transaction Highlights
- On March 16, 2026, the Company repaid at maturity $400 million in 2.25% Notes, using the remaining excess available cash and cash equivalents from prefunding this debt maturity with a new bond issuance in 2025 and borrowings under our Revolving Credit Facility.
- For the quarter ended March 31, 2026, the Company’s adjusted EBITDA fixed charge coverage ratio was 4.3x.
- At March 31, 2026, the Company’s net debt to in-place adjusted EBITDA ratio was 6.1x and its net debt adjusted for fully-leased investment properties to in-place adjusted EBITDA ratio was 5.9x.
- At March 31, 2026, and including the effect of interest rate swaps, the Company’s weighted average effective interest rate on its consolidated debt portfolio was 3.8% with a weighted average maturity of 4.5 years (assuming exercise of available extension options), and 85% of the Company’s debt was subject to fixed interest rates.
Associated Supplemental Presentation
Prior to the call, the Company will post a slide presentation to accompany management’s prepared remarks for its first quarter 2026 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
2026 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 $1.21-$1.29 and $2.71-$2.79, respectively, to new ranges of $1.24-$1.30 and $2.73-$2.79, respectively. Management is establishing second quarter guidance for diluted EPS and diluted FFOPS per Nareit and as adjusted for comparability at $0.31-$0.33 and $0.68-$0.70, 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
| Year Ending
| ||||||||||||
Low | High | Low | High | |||||||||||
Diluted EPS | $ | 0.31 | $ | 0.33 | $ | 1.24 | $ | 1.30 | ||||||
Real estate-related depreciation and amortization | 0.37 | 0.37 | 1.50 | 1.50 | ||||||||||
Gain on sales of real estate | — | — | (0.01 | ) | (0.01 | ) | ||||||||
Diluted FFOPS, Nareit definition and as adjusted for comparability | $ | 0.68 | $ | 0.70 | $ | 2.73 | $ | 2.79 |
The Company detailed its initial full year guidance, with supporting assumptions, in a separate press release issued February 5, 2026; 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 first quarter 2026 results on its conference call tomorrow, details of which are listed below:
Conference Call Date: | Tuesday, April 28, 2026 |
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/BIe115c1b620434f18ba2fd85f99acc54d
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 March 31, 2026, the Company’s Defense/IT Portfolio of 201 properties, including 24 owned through unconsolidated joint ventures, encompassed 23.2 million square feet and was 96.4% 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, 2025.
Source: COPT Defense Properties
COPT Defense Properties | |||||||
Summary Financial Data | |||||||
(unaudited) | |||||||
(dollars and shares in thousands, except per share data) | |||||||
For the Three Months Ended
| |||||||
2026 | 2025 | ||||||
Revenues | |||||||
Lease revenue | $ | 192,971 | $ | 175,308 | |||
Other property revenue | 1,625 | 2,289 | |||||
Construction contract and other service revenues | 6,041 | 10,259 | |||||
Total revenues | 200,637 | 187,856 | |||||
Operating expenses | |||||||
Property operating expenses | 81,435 | 72,040 | |||||
Depreciation and amortization associated with real estate operations | 42,685 | 39,359 | |||||
Construction contract and other service expenses | 5,552 | 9,705 | |||||
General and administrative expenses | 8,456 | 8,148 | |||||
Leasing expenses | 2,994 | 2,999 | |||||
Business development expenses and land carry costs | 1,199 | 1,009 | |||||
Total operating expenses | 142,321 | 133,260 | |||||
Interest expense | (23,996 | ) | (20,504 | ) | |||
Interest and other income, net | 3,955 | 1,568 | |||||
Gain on sales of real estate | 582 | 300 | |||||
Income before equity in income of unconsolidated entities and income taxes | 38,857 | 35,960 | |||||
Equity in income of unconsolidated entities | 1,406 | 371 | |||||
Income tax expense | (124 | ) | (103 | ) | |||
Net income | 40,139 | 36,228 | |||||
Net income attributable to noncontrolling interests | |||||||
Common units in the Operating Partnership (“OP”) | (812 | ) | (726 | ) | |||
Other consolidated entities | (771 | ) | (762 | ) | |||
Net income attributable to common shareholders | $ | 38,556 | $ | 34,740 | |||
Earnings per share (“EPS”) computation | |||||||
Numerator for diluted EPS | |||||||
Net income attributable to common shareholders | $ | 38,556 | $ | 34,740 | |||
Amount allocable to share-based compensation awards | (161 | ) | (143 | ) | |||
Numerator for diluted EPS | $ | 38,395 | $ | 34,597 | |||
Denominator | |||||||
Weighted average common shares - basic | 112,806 | 112,383 | |||||
Dilutive effect of share-based compensation awards | 1,031 | 643 | |||||
Dilutive exchangeable debt | 472 | — | |||||
Weighted average common shares - diluted | 114,309 | 113,026 | |||||
Diluted EPS | $ | 0.34 | $ | 0.31 |
COPT Defense Properties | |||||||
Summary Financial Data | |||||||
(unaudited) | |||||||
(in thousands, except per share data) | |||||||
For the Three Months Ended
| |||||||
2026 | 2025 | ||||||
Net income | $ | 40,139 | $ | 36,228 | |||
Real estate-related depreciation and amortization | 42,685 | 39,359 | |||||
Gain on sales of real estate | (582 | ) | (300 | ) | |||
Depreciation and amortization on unconsolidated real estate JVs | 742 | 741 | |||||
Gain on sale of real estate on unconsolidated real estate JV | (1,146 | ) | — | ||||
Funds from operations (“FFO”) | 81,838 | 76,028 | |||||
FFO allocable to other noncontrolling interests | (1,131 | ) | (1,158 | ) | |||
Basic FFO allocable to share-based compensation awards | (603 | ) | (530 | ) | |||
Basic FFO available to common share and common unit holders (“Basic FFO”) | 80,104 | 74,340 | |||||
Diluted FFO adjustments allocable to share-based compensation awards | 64 | 53 | |||||
Diluted FFO available to common share and common unit holders and as adjusted for comparability | 80,168 | 74,393 | |||||
Straight line rent adjustments and lease incentive amortization | (1,330 | ) | (1,699 | ) | |||
Amortization of intangibles and other assets included in net operating income (“NOI”) | 60 | 162 | |||||
Share-based compensation, net of amounts capitalized | 3,186 | 2,854 | |||||
Amortization of deferred financing costs | 832 | 667 | |||||
Amortization of net debt discounts, net of amounts capitalized | 1,217 | 1,051 | |||||
Replacement capital expenditures | (19,205 | ) | (21,464 | ) | |||
Other | 156 | 81 | |||||
Diluted adjusted funds from operations available to common share and common unit holders (“Diluted AFFO”) | $ | 65,084 | $ | 56,045 | |||
Diluted FFO per share | $ | 0.69 | $ | 0.65 | |||
Diluted FFO per share, as adjusted for comparability | $ | 0.69 | $ | 0.65 | |||
Dividends/distributions per common share/unit | $ | 0.32 | $ | 0.305 |
COPT Defense Properties | |||||||
Summary Financial Data | |||||||
(unaudited) | |||||||
(dollars and shares in thousands, except per share data) | |||||||
March 31, | December 31, | ||||||
Balance sheet data | |||||||
Properties, net of accumulated depreciation | $ | 3,802,976 | $ | 3,783,477 | |||
Total assets | $ | 4,458,909 | $ | 4,701,790 | |||
Debt per balance sheet | $ | 2,546,958 | $ | 2,767,834 | |||
Total liabilities | $ | 2,867,138 | $ | 3,114,115 | |||
Redeemable noncontrolling interest | $ | 25,130 | $ | 25,506 | |||
Total equity | $ | 1,566,641 | $ | 1,562,169 | |||
Debt to assets | 57.1 | % | 58.9 | % | |||
Net debt to adjusted book | 40.6 | % | 40.5 | % | |||
Defense/IT Portfolio data (as of period end) | |||||||
Number of operating properties | 201 | 201 | |||||
Total operational square feet (in thousands) | 23,167 | 23,159 | |||||
% Occupied | 95.6 | % | 95.5 | % | |||
% Leased | 96.4 | % | 96.5 | % |
For the Three Months Ended
| |||||
2026 | 2025 | ||||
GAAP | |||||
Payout ratio | |||||
Net income | 92.5 | % | 97.2 | % | |
Debt ratios | |||||
Net income to interest expense ratio | 1.7x | 1.8x | |||
Debt to net income ratio | 15.9x | 16.6x | |||
Non-GAAP | |||||
Payout ratios | |||||
Diluted FFO | 46.0 | % | 47.0 | % | |
Diluted FFO, as adjusted for comparability | 46.0 | % | 47.0 | % | |
Diluted AFFO | 56.6 | % | 62.4 | % | |
Debt ratios | |||||
Adjusted EBITDA fixed charge coverage ratio | 4.3x | 4.7x | |||
Net debt to in-place adjusted EBITDA ratio | 6.1x | 6.1x | |||
Net debt adjusted for fully-leased investment properties to in-place adjusted EBITDA ratio | 5.9x | 6.0x | |||
Reconciliation of denominators for per share measures | |||||
Denominator for diluted EPS | 114,309 | 113,026 | |||
Weighted average common units | 2,063 | 2,047 | |||
Denominator for diluted FFO per share and as adjusted for comparability | 116,372 | 115,073 |
COPT Defense Properties | |||||||
Summary Financial Data | |||||||
(unaudited) | |||||||
(in thousands) | |||||||
For the Three Months Ended
| |||||||
2026 | 2025 | ||||||
Numerators for payout ratios | |||||||
Dividends on unrestricted common and deferred shares | $ | 36,134 | $ | 34,318 | |||
Distributions on unrestricted common units | 711 | 661 | |||||
Dividends and distributions on restricted shares and units | 267 | 236 | |||||
Total dividends and distributions for GAAP payout ratio | 37,112 | 35,215 | |||||
Dividends and distributions on antidilutive shares and units | (257 | ) | (237 | ) | |||
Dividends and distributions for non-GAAP payout ratios | $ | 36,855 | $ | 34,978 | |||
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 | $ | 40,139 | $ | 36,228 | |||
Interest expense | 23,996 | 20,504 | |||||
Income tax expense | 124 | 103 | |||||
Real estate-related depreciation and amortization | 42,685 | 39,359 | |||||
Other depreciation and amortization | 416 | 542 | |||||
Gain on sales of real estate | (582 | ) | (300 | ) | |||
Adjustments from unconsolidated real estate JVs | 650 | 1,518 | |||||
EBITDAre | 107,428 | 97,954 | |||||
Credit loss (recoveries) expense | (369 | ) | 515 | ||||
Business development expenses | 802 | 593 | |||||
Executive transition costs | — | 57 | |||||
Net gain on other investments | (29 | ) | — | ||||
Adjusted EBITDA | 107,832 | 99,119 | |||||
Pro forma NOI adjustment for property changes within period | — | 786 | |||||
Change in collectability of deferred rental revenue | 86 | 1,232 | |||||
In-place adjusted EBITDA | $ | 107,918 | $ | 101,137 | |||
Reconciliations of tenant improvements and incentives, building improvements, and leasing costs for operating properties to replacement capital expenditures | |||||||
Tenant improvements and incentives | $ | 15,899 | $ | 13,758 | |||
Building improvements | 1,142 | 1,872 | |||||
Leasing costs | 1,547 | 3,461 | |||||
Net additions to tenant improvements and incentives | 924 | 3,538 | |||||
Excluded building improvements | (307 | ) | (201 | ) | |||
Excluded leasing costs | — | (964 | ) | ||||
Replacement capital expenditures | $ | 19,205 | $ | 21,464 |
COPT Defense Properties | |||||||
Summary Financial Data | |||||||
(unaudited) | |||||||
(in thousands) | |||||||
For the Three Months Ended
| |||||||
2026 | 2025 | ||||||
Reconciliation of interest expense to the denominator for fixed charge coverage-Adjusted EBITDA | |||||||
Interest expense | $ | 23,996 | $ | 20,504 | |||
Less: Amortization of deferred financing costs | (832 | ) | (667 | ) | |||
Less: Amortization of net debt discounts, net of amounts capitalized | (1,217 | ) | (1,051 | ) | |||
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 | 947 | 752 | |||||
Scheduled principal amortization | 397 | 461 | |||||
Capitalized interest, excluding amortization of deferred financing costs | 1,679 | 927 | |||||
Denominator for fixed charge coverage-Adjusted EBITDA | $ | 24,970 | $ | 20,926 | |||
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 | $ | 40,139 | $ | 36,228 | |||
Construction contract and other service revenues | (6,041 | ) | (10,259 | ) | |||
Depreciation and other amortization associated with real estate operations | 42,685 | 39,359 | |||||
Construction contract and other service expenses | 5,552 | 9,705 | |||||
General and administrative expenses | 8,456 | 8,148 | |||||
Leasing expenses | 2,994 | 2,999 | |||||
Business development expenses and land carry costs | 1,199 | 1,009 | |||||
Interest expense | 23,996 | 20,504 | |||||
Interest and other income, net | (3,955 | ) | (1,568 | ) | |||
Gain on sales of real estate | (582 | ) | (300 | ) | |||
Equity in income of unconsolidated entities | (1,406 | ) | (371 | ) | |||
Unconsolidated real estate JVs NOI allocable to COPT Defense included in equity in income of unconsolidated entities | 2,056 | 1,889 | |||||
Income tax expense | 124 | 103 | |||||
NOI from real estate operations | 115,217 | 107,446 | |||||
Non-Same Property NOI from real estate operations | (4,836 | ) | (400 | ) | |||
Same Property NOI from real estate operations | 110,381 | 107,046 | |||||
Straight line rent adjustments and lease incentive amortization | 677 | (1,811 | ) | ||||
Amortization of acquired above- and below-market rents | 80 | 64 | |||||
Lease termination fees, net | (1,212 | ) | (834 | ) | |||
Tenant funded landlord assets and lease incentives | (3,318 | ) | (3,413 | ) | |||
Cash NOI adjustments in unconsolidated real estate JVs | (355 | ) | (260 | ) | |||
Same Property Cash NOI from real estate operations | $ | 106,253 | $ | 100,792 |
COPT Defense Properties | ||||||||
Summary Financial Data | ||||||||
(unaudited) | ||||||||
(in thousands) | ||||||||
March 31, | December 31, | |||||||
Reconciliation of total assets to adjusted book | ||||||||
Total assets | $ | 4,458,909 | $ | 4,701,790 | ||||
Accumulated depreciation | 1,721,016 | 1,682,367 | ||||||
Accumulated amortization of intangibles on property acquisitions and deferred leasing costs | 227,989 | 228,656 | ||||||
COPT Defense’s share of liabilities of unconsolidated real estate JVs | 82,353 | 82,039 | ||||||
COPT Defense’s share of accumulated depreciation and amortization of unconsolidated real estate JVs | 16,583 | 16,000 | ||||||
Less: Property - operating lease liabilities | (43,768 | ) | (45,012 | ) | ||||
Less: Property - finance lease liabilities | (752 | ) | (363 | ) | ||||
Less: Cash and cash equivalents | (28,580 | ) | (274,986 | ) | ||||
Less: COPT Defense’s share of cash of unconsolidated real estate JVs | (1,230 | ) | (1,898 | ) | ||||
Adjusted book | $ | 6,432,520 | $ | 6,388,593 |
March 31, | December 31, | March 31, | ||||||||||
Reconciliation of debt to net debt and net debt adjusted for fully-leased investment properties | ||||||||||||
Debt per balance sheet | $ | 2,546,958 | $ | 2,767,834 | $ | 2,412,670 | ||||||
Net discounts and deferred financing costs | 21,946 | 23,466 | 21,886 | |||||||||
COPT Defense’s share of unconsolidated JV gross debt | 75,250 | 75,250 | 53,750 | |||||||||
Gross debt | 2,644,154 | 2,866,550 | 2,488,306 | |||||||||
Less: Cash and cash equivalents | (28,580 | ) | (274,986 | ) | (24,292 | ) | ||||||
Less: COPT Defense’s share of cash of unconsolidated real estate JVs | (1,230 | ) | (1,898 | ) | (1,766 | ) | ||||||
Net debt | 2,614,344 | 2,589,666 | 2,462,248 | |||||||||
Costs incurred on fully-leased development properties | (82,576 | ) | (8,226 | ) | (27,499 | ) | ||||||
Net debt adjusted for fully-leased investment properties | $ | 2,531,768 | $ | 2,581,440 | $ | 2,434,749 |
View source version on businesswire.com: https://www.businesswire.com/news/home/20260427049371/en/
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