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CD

COPT DEFENSE PROPERTIES (CDP)·Q3 2025 Earnings Summary

Executive Summary

  • Q3 2025 delivered solid operating performance: diluted EPS of $0.37 and FFOPS (as adjusted for comparability) of $0.69; same‑property cash NOI rose 4.6% YoY, and the Defense/IT portfolio reached 97.0% leased, the highest in 20 years .
  • Versus S&P Global consensus: revenue beat and EBITDA was modestly above, while Primary EPS was approximately in line to slightly below; CDP’s reported GAAP diluted EPS exceeded S&P’s “Primary EPS” actual measure, creating a definitional discrepancy (see Estimates Context) [*].
  • Guidance lifted across six key metrics (FFOPS, EPS, same‑property cash NOI, cash rent spreads, year‑end occupancy, vacancy leasing target), and Q4 EPS/FFOPS ranges were set; financing actions added ~$400M of liquidity and pre‑funded the March 2026 bond maturity .
  • Strategic catalysts: Space Command relocation to Redstone Arsenal, Golden Dome missile defense initiative, accretive Chantilly (Stone Gate One) acquisition at ~9% initial cash NOI yield, and strong leasing momentum across secure defense markets .

What Went Well and What Went Wrong

  • What Went Well

    • “FFO per share exceeded the midpoint of our guidance range by $0.02,” prompting increases to 2025 EPS/FFOPS, same‑property cash NOI, cash rent spread, occupancy, and vacancy leasing targets .
    • Highest leased rate in 20 years (total portfolio 95.7% leased; Defense/IT 97.0% leased), with 971k SF of Q3 leasing and 2.3M SF YTD; tenant retention at 82% Q3 and YTD .
    • Financing wins: $400M 4.50% notes due 2030, revolver upsized to $800M with tighter spreads, and a new $200M secured development facility; CFO highlighted a >10x oversubscribed bond book and sector‑leading spread, boosting liquidity and growth capacity .

  • What Went Wrong

    • Government shutdown timing risk could delay execution of renewals in Q4, shifting some leases into holdover and pushing recognition into 2026; management expects no change to eventual retention but acknowledges timing uncertainty .
    • 2026 refinancing drag: ~$0.07 headwind post March maturity due to spread between the new and maturing bonds, with a ~$0.01 drag in Q1 2026 before repayment; partially offset by acquisition accretion .
    • Sequential occupancy dip (by ~10 bps) from known non‑renewals in Q3, though space already re‑leased with occupancies commencing in H1 2026; highlights near‑term friction in BW corridor before backfill start dates .

Financial Results

MetricQ1 2025Q2 2025Q3 2025
Total Revenues ($USD Millions)$187.856 $189.915 $188.795
Diluted EPS ($USD)$0.31 $0.34 $0.37
Diluted FFO per Share – As Adjusted ($USD)$0.65 $0.68 $0.69
Adjusted EBITDA ($USD Millions)$99.119 $104.726 $103.771
Same‑Property Cash NOI Growth YoY (%)7.1% 2.2% 4.6%

Segment breakdown (Consolidated real estate revenues – Q3 2025):

SegmentRevenue ($USD Thousands)
Fort Meade/BW Corridor$81,756
Redstone Arsenal$19,477
NoVA Defense/IT$22,343
Lackland Air Force Base$18,555
Navy Support$8,727
Data Center Shells – Consolidated$10,715
Other$18,737
Total Consolidated Real Estate Revenues$180,310

Key KPIs (Q3 2025):

KPIQ3 2025
Total portfolio occupied / leased93.9% / 95.7%
Defense/IT occupied / leased95.4% / 97.0%
Same‑property occupied / leased94.3% / 95.8%
Leasing volume (Q3 / YTD)971k SF / 2.3M SF
Vacancy leasing (Q3 / YTD)78k SF / 432k SF
Tenant retention (Q3 / YTD)81.8% / 81.9%
Net debt to in‑place adj. EBITDA6.1x
Adjusted EBITDA fixed charge coverage4.8x
Weighted avg lease term (portfolio)5.0 years

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Diluted EPS ($)FY 2025$1.30–$1.34 $1.35–$1.37 Raised
Diluted FFOPS, as adjusted ($)FY 2025$2.65–$2.69 $2.69–$2.71 Raised
Diluted EPS ($)Q4 2025—$0.32–$0.34 Established
Diluted FFOPS, as adjusted ($)Q4 2025—$0.67–$0.69 Established
Same‑property cash NOI growth (%)FY 20253.25% midpoint 4.0% midpoint Raised
Cash rent spread on renewals (%)FY 2025~0% midpoint (not previously set to +2%) 2% midpoint Raised
Year‑end same‑property occupancy (%)FY 202594.0% midpoint (implied prior) 94.2% midpoint Raised
Vacancy leasing target (SF)FY 2025450k SF 500k SF Raised
Capital committed to new investments ($)FY 2025$225M original target $250M Raised
Dividend per common share ($)Quarterly$0.295 (2024) $0.305 (2025) Raised (Feb 2025 board action referenced )

Earnings Call Themes & Trends

TopicPrevious Mentions (Q1 & Q2)Current Period (Q3)Trend
Defense budget backdropQ2: “One Big Beautiful Bill” adds $150B to defense; FY26 allocation ~13% YoY increase supporting missions (cyber, ISR, missile defense, UAV, naval/aviation) . Q1: reiterated growth plan, strong occupancy .Reinforced demand outlook; Space Command relocation to Redstone; Golden Dome to accelerate contractor demand .Strengthening demand visibility into 2026.
Space Command relocationNot discussed in Q1/Q2 materials.Space Command to Redstone; ~450k SF expected over time; two‑to‑one contractor tail potential post relocation completion (~2027) .New multi‑year development catalyst.
Golden Dome missile defenseQ2: Broad defense spending tailwinds .Immediate contractor activity; first lease signed tied to Golden Dome; more awards expected as soon as year‑end .Accelerating near‑term leasing and development.
Leasing/occupancyQ1: 647k SF, retention 75%, same‑property cash NOI +7.1% . Q2: 724k SF, retention 89.7% Q2; raised targets .Q3: 971k SF; retention 82%; Defense/IT 97.0% leased; targets raised again .Sustained strength; targets moving higher.
Financing/liquidityQ1/Q2: Leverage neutral self‑fund; steady coverage .$400M notes, $800M revolver, $200M secured line; sector‑leading bond spread, >10x oversubscription .Liquidity up; cost of capital competitive.
Government shutdown timingNot a factor in Q1/Q2.Shutdown timing may modestly delay Q4 renewals; holdovers pay expiring cash rent; catch‑up straight‑line once executed .Procedural timing risk; not fundamental demand risk.

Management Commentary

  • CEO: “FFO per share exceeded the midpoint of our guidance range by $0.02…we increased the midpoint of 2025 FFO per share guidance by $0.03 to $2.70…We are exceeding our plan…raised 2025 guidance on multiple key metrics…” .
  • COO: “We continue to outperform in terms of vacancy leasing…we executed nearly 800,000 square feet in the third quarter…retention rate of 82%…we acquired Stone Gate One…a 142,000 square foot building…at a 9% initial cash NOI yield…dominant landlord in Westfields” .
  • CFO: “Order book surpassed $3 billion…upsized to $400 million…priced at a credit spread of 95 bps…tighter than equal/higher‑rated office peers…credit facility declined by 20 bps to 85 bps; term loan declined by 25 bps to 105 bps” .
  • Strategy: “We continue to anticipate compound annual FFO per share growth of over 4% between 2023 to 2026” .

Q&A Highlights

  • Appropriation lag and shutdown: management expects activity to start “no later than six months” after approval given contract‑contingent tenant plans; shutdown affects timing (when), not retention (if) .
  • Stone Gate One yield drivers: compressed timeline, seller urgency, tenant preference for CDP due to deep relationship; CDP’s local dominance supports further acquisitions if returns attractive .
  • Holdover mechanics: U.S. government renewals enter standstill/holdover paying expiring cash rent; straight‑line uplift is recognized upon renewal execution, limiting near‑term financial impact .
  • Golden Dome and development: incremental demand is expected to manifest in new developments due to limited operating inventory; pipeline includes significant build‑to‑suit opportunities .
  • Fixed‑income vs equity views: bond investors appreciate resilient cash flows and high pre‑leasing build‑to‑suit pipeline; equity performance lag not fully aligned with credit strength .

Estimates Context

Q3 2025 vs S&P Global consensus:

MetricConsensus EstimateReported/ActualSurprise
Primary EPS ($USD)$0.3519*$0.3485*−$0.0034 (slight miss)*
Revenue ($USD Millions)$186.51*$190.61*+$4.10 (beat)*
EBITDA ($USD Millions)$100.38*$100.70*+$0.32 (in line to slight beat)*

Notes:

  • CDP reported GAAP diluted EPS of $0.37, while S&P’s “Primary EPS” actual was $0.3485, indicating definitional differences; investors should consider FFOPS ($0.69) as the more relevant REIT earnings metric for comparability and guidance tracking [*].
  • Revenue definitions differ: CDP’s total revenues were $188.8M; S&P’s “actual” revenue used in consensus tracking was $190.6M [].
    Values retrieved from S&P Global.

Key Takeaways for Investors

  • Demand tailwinds strengthening: Space Command relocation and Golden Dome are multi‑year catalysts for Huntsville/Redstone, supporting sustained development and leasing velocity .
  • Operating momentum durable: 97% leased in Defense/IT; 971k SF Q3 leasing; YTD vacancy leasing already ~86% of the raised 500k SF target—expect continued occupancy/NOI support into Q4 and 2026 .
  • Guidance bias positive: Midpoints raised across EPS/FFOPS, same‑property cash NOI, cash rent spreads, occupancy, and vacancy leasing; supports estimate revisions and sentiment .
  • Balance sheet/liquidity improved: $400M notes, $800M revolver, $200M secured line provide growth capital and de‑risk 2026 maturity; near‑term EPS drag is manageable and well‑flagged .
  • Short‑term trading: Expect headlines on Q4 renewal timing amid shutdown and any Space Command/Golden Dome awards; accretive Stone Gate highlights capital deployment alpha in Northern VA .
  • Medium‑term thesis: Mission‑critical, secure assets near defense installations underpin resilient cash flows and above‑peer credit execution; development returns and FFO compounding (4%+ CAGR 2023–2026) remain intact .
  • Watch list: Timing of large renewals (holdovers), incremental pre‑leasing in Redstone, additional Westfields acquisitions, and 2026 refinancing drag pacing versus growth offsets .

Appendix: Additional Data and Disclosures

  • Summary Financial Data and detailed reconciliations (NOI, Cash NOI, FFO/FFOPS, Adjusted EBITDA) are furnished in the Q3 supplemental and press release within the 8‑K filing .
  • Leasing statistics and retention metrics are detailed in Q3 schedules (renewal cash/straight‑line rent spreads, terms, escalations) .
  • Capitalization and debt covenants/ratios (fixed charge, interest coverage, net debt metrics) are presented in Q3 debt analysis .

Cross‑references:

  • Q3 2025: 8‑K Supplemental & News Release (10/30/25) .
  • Q3 2025: Earnings call transcript (10/31/25) .
  • Q2 2025: 8‑K Supplemental & News Release (7/28/25) .
  • Q1 2025: 8‑K Supplemental & News Release (4/28/25) .

Values retrieved from S&P Global.*