Q2 2024 COPT Defense Properties Earnings Call

Operator: Welcome to the COP Defense Properties second 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, COPS Defense's Vice President of Investor Relations. Mr. Kommineni, please go ahead.

Operator: Welcome to the COP Defense Properties 2nd Quarter, 2024 Results Conference Call. As a reminder, today's call is being recorded.

and a very special guest... ... ... ... ... ... ... ... ... ... ... ... ... ...

Venkat Kommineni: Welcome to the COP Defense Properties second 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, COP Defense's Vice President of Investor Relations.

Venkat Kommineni: At this time, I would turn the call over to Venkat Kommineni, COP Defense's Vice-President of Invest Relations. Mr. Kommineni, please go ahead.

Venkat Kommineni: Thank you. Good afternoon and welcome to COP Defense's Comforts Call to discuss the 2nd quarter results. With me today, are Steve Budorick, President and CEO, and Anthony Mifsud, Executive Vice-President and CFF. Recommendations of GAAP and non-GAAP financial measures that management discusses are available on our website in the results, press release and presentation, and in our supplemental information package.

Venkat Kommineni: Good afternoon, and welcome to Cobb Defense's call to discuss the second quarter. Today we have Steve Budorick, President and CEO; and Mifsud, Executive Vice President. The reconciliations of GAAP and non-GAAP financial measures that management discusses are available on our website.

Speaker Change: Mr. Kommineni, please go ahead.

Venkat Kommineni: Thank you, let's hear it. Good afternoon and welcome to COP Defense's conference call to discuss second quarter results.

Venkat Kommineni: With me today are Steve Budorick, President and CEO , and Anthony Mifsud, Executive Vice President and CFO . Reconciliations of GAAP and non-GAAP financial measures that management discusses are available on our website, in the results press release and presentation, and in our supplemental information package.

Venkat Kommineni: As a reminder, Ford-looking statements made during today's call are subject to risks and uncertainties, which are discussed in our SEC filings. Actual events and results can differ materially from these Ford-looking statements, and the company does not understand duty that they have.

Unnamed Speaker: [inaudible] Assuring today's call is subject to risks and uncertainties which are discussed. Good afternoon, and thank you for joining us. Just a quick note. Britt is representing the company in an important meeting for a new opportunity that could not be rescheduled.

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

Steve Budorick: Steve. Good afternoon, and thank you for joining us. Just a quick note.

Speaker Change: Steve?

Steve Budorick: Britt is representing the company in an important meeting for a new opportunity that could not be rescheduled. So he will not be participating in this call, and I'm covering his content this quarter. Turning to our achievements, we reported strong results from the 2nd quarter and continued to drive our outperformance for the year. FFO, for sure, has suggested for comfortability what, 64 cents, one cent above the midpoint of guidance. With this result, we've either met or exceeded guidance each quarter over the past five and a half years. We've exceeded the midpoint, 18 of the past 22 quarters, and we met the midpoint in the other four.

Stephen E. Budorick: Good afternoon, and thank you for joining us.

Stephen E. Budorick: Just a quick note, Britt is representing the company in an important meeting for a new opportunity that could not be rescheduled.

Stephen E. Budorick: So he will not be participating in this call, and I'm covering his content this quarter. Turning to our achievements. We reported strong results for the second quarter and continue to drive our outperformance for the year. FFO per share adjusted for comparability, 64 cents. One cent above the midpoint of guidance.

Speaker Change: So, he will not be participating on this call, and I'm covering his content this quarter.

Speaker Change: Turning to our achievements...

Speaker Change: We reported strong results for the second quarter and continue to drive our outperformance for the year. FFO per share, as adjusted for comparability, was $0.64, 1 cent above the midpoint of guidance.

Stephen E. Budorick: With this result, we've either met or exceeded guidance each quarter over the past five and a half years. We've exceeded the midpoint in 18 of the past 22 quarters. And we met the midpoint in the other four. Same property cash NOI increased 10.9% year over year in our total portfolio and 11.2% in our defense IT portfolio. The 2023 same property pool and standalone generated 8.3% growth. The 10.9% is the highest growth rate for our total portfolio in over a decade, and the 11.2% is the highest growth in our defense IT portfolio since we began reporting the segment in 2015.

Speaker Change: With this result, we've either met or exceeded guidance each quarter over the past five and a half years.

Speaker Change: We've exceeded the midpoint, 18 of the past 22 quarters, and we met the midpoint in the other four.

Steve Budorick: Same property cash on a high increase, 10.9 percent year over year, and our total portfolio at 11.2 percent in our defense IT portfolio. The 2023 same property pool on a stand-alone basis generated 8.3 percent growth. The 10.9 percent is the highest growth rate for our total portfolio in over a decade, and the 11.2 percent is the highest growth in our defense IT portfolio since we began reporting the segment in 2015. We completed 985,000 square feet of total leasing, which consisted of 881,000 square feet of renewals, with an 86 percent retention rate, and 104,000 square feet of vacancy leasing.

Speaker Change: Same property cash NOI increased 10.9% year over year in our total portfolio and 11.2% in our defense IT portfolio.

Speaker Change: The 2023 same property pool on a stand-alone basis generated 8.3% growth.

Speaker Change: The 10.9% is the highest growth rate for our total portfolio in over a decade and the 11.2% is the highest growth in our defense IT portfolio since we began reporting the segment in 2015.

Stephen E. Budorick: We completed 985,000 square feet of total leasing, which consisted of 881,000 square feet of renewals, with an 86% retention rate, and 104,000 square feet of vacancy. This level of vacancy leasing is an oppressive result given the fact that our total portfolio was 95% leased.

Speaker Change: We completed 985,000 square feet of total leasing, which consisted of 881,000 square feet of renewals with an 86% retention rate and 104,000 square feet of vacancy leasing.

Steve Budorick: This level of vacancy leasing is an impressive result given the fact that our total portfolio was 95 percent leased, and our defense IT portfolio was 97 percent leased at the beginning of the quarter. Overall, we produced very strong operating metrics, which have exceeded our plan, and led us to enhance our full year outlook on four key guidance metrics, including same property cash on a wide growth. same property year-end occupancy, tenant retention, and FFO for share as a gesture for comparability. We increase the midpoint of 2024 FFO for share guidance again by two cents to two dollars and fifty-six cents, which implies nearly six percent year-over-year growth.

Speaker Change: This level of vacancy leasing is an oppressive result, given the fact that our total portfolio was 95% leased, and our defense IT portfolio was 97% leased at the beginning of the quarter.

Stephen E. Budorick: And our defense IT portfolio was 97% leased at the beginning of the quarter. Overall, we produced very strong operating metrics which exceeded our plan and led us to enhance our full year outlook on four key guidance metrics, including Same property, cash NOI growth. Same property year and occupancy, tenant retention, and FFO per share as adjusted for comparability. We increased the midpoint of our 2024 FFO per share guidance again. By two cents to $2.56, which implies nearly 6% year-over-year growth.

Speaker Change: Overall, we produced very strong operating metrics which have exceeded our plan and led us to enhance our full-year outlook on four key guidance metrics.

Speaker Change: including

Speaker Change: St. Property Cash NOI Growth

Speaker Change: Same property year end occupancy.

Speaker Change: tenant retention, and FFO per share as adjusted for comparability.

Speaker Change: We increased the midpoint of 2024 FFO per share guidance again by two cents.

Speaker Change: to $2.56, which implies nearly 6% year-over-year growth.

Steve Budorick: Our 2024 FFO for share growth is one of the highest forecast growth rates in the Navy to find office resector and ranks in the 75th percentile for the entire re-sector.

Stephen E. Budorick: Our 2024 FFO per share growth is one of the highest forecasted growth rates in an A-defined office reach sector and ranks in the 75th percentile for the entire REIT sector. Turning to defense funding, There are a lot of moving pieces left to be settled, but overall, we expect a 3% to 4% year-over-year increase for the FY 2025 defense budget. Last month, the House approved the NDAA in line with the President's request.

Speaker Change: Our 2024 FFO per share growth is one of the highest forecasted growth rates in the NA-defined office REIT sector and ranks in the 75th percentile for the entire REIT sector.

Steve Budorick: Turning to defense funding, there are a lot of moving pieces left to be settled, but overall we expect a three to four percent year-over-year increase for the FY 2025 defense budget. Last month, the House approved the NDAA in line with President's request, and this month the Senate Armed Services Committee advanced a bill which approved an additional $25 billion over the President's request, implying roughly three and a half percent year-over-year growth to a total of $860 billion. Notably, the FY 2025 budget request targets $14.5 billion to DOD cyber activities, which marks a 50% increase over the past five years.

Speaker Change: Turning to defense funding...

Speaker Change: There are a lot of moving pieces left to be settled, but overall, we expect a 3 to 4 percent year-over-year increase for the FY 2025 defense budget.

Stephen E. Budorick: And this month, the Senate Armed Services Committee advanced a bill which approved an additional $25 billion over the president's request, implying roughly 3.5% year-over-year growth, to a total of $860 billion. Notably, the FY 2025 budget request targets $14.5 billion for DOD cyber activity, which marks a 50% increase over the past five years. Well, there's a long way to go until appropriations, given the upcoming

Speaker Change: Last month, the House approved the NDAA in line with the President's request.

Speaker Change: And this month, the Senate Armed Services Committee advanced a bill which approved an additional $25 billion over the President's request, implying roughly 3.5% year-over-year growth.

Speaker Change: to a total of $860 billion.

Speaker Change: Notably...

Speaker Change: The FY 2025 budget request targets $14.5 billion to DoD cyber activities.

Steve Budorick: Well, there's a long way to go until appropriation. Given the upcoming election, the trend of increased investment in defense continues, and we expect we'll fund the high priority national defense missions that both we and our tenants support.

Speaker Change: which marks a 50% increase over the past five years.

Speaker Change: Well, there's a long way to go until appropriation, given the upcoming election.

Stephen E. Budorick: The trend of increased investment in defense continues, and we expect we'll fund the high-priority national defense missions that both we and our tenants support. That's where Mark, Demand for secure space remains strong, especially given the challenges associated with the global conflicts we are witnessing and the need to boost cybersecurity capability. In this strong demand environment, we've had great success in improving lease economics by reducing concessions and defense IT assets, with a particular focus on renewal.

Speaker Change: The trend of increased investment in defense continues, and we expect we'll fund the high-priority national defense missions that both we and our tenants support.

Steve Budorick: Now through our markets. The man-for-scare space remains strong, especially given the challenges associated with the global conflicts we are witnessing and the need to boost cybersecurity capabilities. In this strong demand environment, we've had great success in approving lease economics by reducing concessions and defense ATSS, with a particular focus on renewals. We're up for forming our initial forecast, which is contributing to our strong, same-property, cash-on-wide growth results, and our elevated outlook for the full year. Looking at our operating portfolio, at the national business part, our location offers compelling advantages to defense contractors, including proximity and connectivity to the customer and interoperability with other defense contractors.

Speaker Change: Now to our markets.

Speaker Change: Demand for secure space remains strong, especially given the challenges associated with the global conflicts we are witnessing.

Speaker Change: and the need to boost cybersecurity capabilities.

Speaker Change: In this strong demand environment, we've had great success in improving lease economics by reducing concessions and defense IT assets with a particular focus on renewals.

Stephen E. Budorick: We're outperforming our initial forecast, which is contributing to our strong same property cash and oil growth results and our Elevated Outlook for the full year. Looking at our operating portfolio, at the National Business Park, our location offers compelling advantages to defense contractors, including proximity and connectivity to the customer and interoperability with other defense contractors. These advantages drive MVP's uniquely strong operating performance.

Speaker Change: We're outperforming our initial forecast, which is contributing to our strong same-property cash and oil growth results and our elevated outlook for the full year.

Speaker Change: Looking at our operating portfolio

Speaker Change: at the National Business Park.

Speaker Change: Our location offers compelling advantages to defense contractors, including proximity and connectivity to the customer and interoperability with other defense contractors.

Steve Budorick: These advantages drive MVPs uniquely strong operating performance. The park is 99.4% leased and generates second-highest average rents per square foot in our portfolio, trailing only San Antonio. Our largest available suite is only 7,800 square feet in the entire 4.3 million square foot park. In Columbia Gateway, we continued up before in the overall market, given our dominant defense IT franchise with a focus on defense cyber. Our portfolio is over 91 percent, including the 90,000 square feet of vacant space we acquired last quarter and is 9 percent higher than the market occupancy rate of 82 percent. Let me get we accounted for 25 percent of our total vacancy leasing achieved during the first half of the year, and our activity ratio is 185 percent with 445,000 square feet of prospects and 240,000 square feet of availability.

Stephen E. Budorick: The park is 99.4% leased and generates the second highest average rents per square foot in our portfolio, trailing only San Antonio. Our largest available suite is only 7,800 square feet in the entire 4.3 million square foot park. In Columbia Gateway, we continue to outperform the overall market given our dominant defense IT franchise with a focus on defense cyber requirements. Our portfolio is over 91% leased, including the 90,000 square feet of vacant space we acquired last quarter and is 9% higher than the market occupancy rate of 82%. Columbia Gateway accounted for 25% of our total vacancy leasing achieved during the first half of the year.

Speaker Change: These advantages drive MVP's uniquely strong operating performance. The park is 99.4% leased and generates second highest average rents per square foot in our portfolio trailing only San Antonio.

Speaker Change: Our largest available suite is only 7,800 square feet in the entire 4.3 million square foot park.

Speaker Change: In Columbia Gateway, we continue to outperform the overall market given our dominant defense IT franchise with a focus on defense cyber requirements.

Speaker Change: Our portfolio is over 91% leased.

Speaker Change: including the 90,000 square feet of vacant space we acquired last quarter and is 9% higher than the market occupancy rate of 82%.

Speaker Change: Columbia Gateway accounted for 25% of our total vacancy leasing achieved during the first half of the year.

Stephen E. Budorick: And our activity ratio is 185%, with 445,000 square feet of prospects and 240,000 square feet of availability. In Huntsville, our portfolio remains highly leased at 97.7%. Our activity ratio is 125%, with 70,000 square feet of prospects and 55,000 square feet of availability. In Northern Virginia, our assets are concentrated in the Route 28 South Corridor and other primary defense locations. These targeted micromarkets traditionally have, and continue to outperform the overall market

Speaker Change: And our activity ratio is 185 percent.

Speaker Change: with 445,000 square feet of prospects and 240,000 square feet of availability.

Steve Budorick: In Huntsville, our portfolio remains highly leased and 97.7 percent. Our activity ratio is 125 percent with 70,000 square feet of prospects and 55,000 square feet of availability. In Northern Virginia, our assets are concentrated in the Route 28 South Quarter and other primary defense locations. These targeted micro markets traditionally have and continue to, I'll perform the overall market in terms of occupancy and rent levels and its growth and defense missions is driving contractors to our advantage locations. Our portfolio is 93 percent leased, which marks an 80 basis point increase year over year, and it compares extremely favorable to the overall market, which is only 76 percent in occupancy.

Speaker Change: In Huntsville, our portfolio remains highly leased at 97.7%, our activity ratio is 125%,

Speaker Change: with 70,000 square feet of prospects and 55,000 square feet of availability.

Speaker Change: In Northern Virginia, our assets are concentrated in the Route 28 South Corridor and other primary defense locations.

Speaker Change: These targeted micro-markets traditionally have, and continue to, outperform the overall market.

Stephen E. Budorick: In terms of occupancy and rent levels, as growth in defense missions is driving contractors to our advantaged locations, our portfolio is 93% leased, which marks an 80 basis point increase year over year and compares extremely favorably to the overall market, which is only 76% active. Our activity ratio is 50%, with 105,000 square feet of prospect space and 205,000 square feet of available space. And in our other segment.

Speaker Change: In terms of occupancy and rent levels, its growth in defense missions is driving contractors to our advantaged locations.

Speaker Change: Our portfolio is 93% lease.

Speaker Change: which marks an 80 basis point increase year-over-year and compares extremely favorably to the overall market which is only 76% occupied.

Steve Budorick: Our activity ratio is 50 percent with 105,000 square feet of prospects and 205,000 square feet of availability.

Speaker Change: Our activity ratio is 50% with 105,000 square feet of prospects and 205,000 square feet of availability.

Steve Budorick: And in our other segment, we're focused on driving an occupancy. While deals cycle times remain elongated, we are encouraged by the level of activity we're seeing, with a nice upticking both our leased and occupied rates sequentially, and we're achieving results as we executed 64,000 square feet of vacancy leasing during the first half of the year. This included 16,000 square feet of 2100 L Street and DC, which is now 92 percent leased in nearly 25,000 square feet of Pinnacle Powers in Tyson's Corner. Our activity ratio is 80 percent with 410,000 square feet of prospects and 500,000 square feet of availability.

Stephen E. Budorick: We're focused on driving occupancy. While deal cycle times remain elongated, we are encouraged by the level of activity we're seeing, with a nice uptick in both our lease and occupied rates sequentially. And we're achieving results as we executed 64,000 square feet of vacancy leasing during the first half of the year. This included 16,000 square feet of 2100 L Street in D.C., which is now a 92% lease, and nearly 25,000 square feet of Pinnacle Towers in Tyson's Corner. Our activity ratio is 80, with 410,000 square feet of prosperity and 500,000 square feet of available land.

Speaker Change: And in our other segment, we're focused on driving occupancy.

Speaker Change: While deal cycle times remain elongated, we are encouraged by the level of activity we're seeing. With a nice uptick in both our lease and occupied rates sequentially.

Speaker Change: And we're achieving results as we executed 64,000 square feet of vacancy leasing during the first half of the year.

Speaker Change: This included 16,000 square feet of 2100 L Street in D.C., which is now a 92% lease.

Speaker Change: and nearly 25,000 square feet of Pinnacle Towers in Tyson's Corner.

Speaker Change: Our activity ratio is 80%.

Speaker Change: with 410,000 square feet of prospects.

Speaker Change: and 500,000 square feet of availability.

Steve Budorick: Regarding vacancy leasing, we executed 104,000 square feet during the quarter, bringing the year-to-date total of 264,000 square feet. And we are on track to exceed our full year target of 400,000 square feet. Vacancy achieved year-to-date. It was 24 percent of our total available inventory at the beginning of the year and 32 percent of availability within our defense IT portfolio. Renewal leasing was exceptional during both the second quarter and year-to-date. We executed 881,000 square feet of renewal leasing in the quarter. Current retention was an impressive 86 percent. and Northern Virginia was a standout in 99%. Based on our performance here today, we've increased the midpoint for tenant retention guidance by 250 basis points to a new range of 80 to 85%.

Stephen E. Budorick: Regarding vacancy leases, we executed 104,000 square feet during the quarter, bringing the year-to-date total to 264,000 square feet, and we are on track to exceed our full year target of 400,000 square feet. Vacancy achieved year-to-date was 24% of our total available inventory at the beginning of the year, and 32% of availability within our defense IT portfolio. Renewal leasing was exceptional during both the second quarter and year to date.

Speaker Change: Regarding vacancy leasing...

Speaker Change: We executed 104,000 square feet during the quarter, bringing the year-to-date total to 264,000 square feet.

Speaker Change: And we are on track to exceed our full year target of 400,000 square feet.

Speaker Change: Vacancy achieved year-to-date was 24% of our total available inventory at the beginning of the year and 32% of availability within our defense IT portfolio.

Stephen E. Budorick: We executed 881,000 square feet of renewal leasing in the quarter. Tenant retention was an impressive 86%. In Northern Virginia, it was a standout in 1999, based on our performance here today.

Speaker Change: Renewal leasing was exceptional during both the second quarter and year-to-date.

Speaker Change: We executed 881,000 square feet of renewal leasing in the quarter. Tenant retention was an impressive 86%.

Speaker Change: And Northern Virginia was a standout at 99%.

Anthony Mifsud: and Anthony Mifsud.

Anthony Mifsud: Based on our performance here today, we've increased the midpoint tenant retention guidance by 250 basis points to a new range of 80 to 85 percent.

Stephen E. Budorick: We've increased the midpoint for tenant retention guidance by 250 basis points to a new range of 80 to 85%. Our sector-leading retention is driven by our unique investment strategy, which I'll discuss further in my wrap. Cash rent spreads and renewals were up 60 basis points, while gap rent spreads were up 7.7%, driven by annual rent increases of 2.2%, with a weighted average lease term of almost four years. We continue to expect cash rent spreads will be flat at the midpoint for the full year.

Steve Budorick: Our sector-leading retention is driven by our unique investment strategy, which I'll discuss further in my wrap-up. Cash rent spreads and renewals are up 60 basis points, while gap rent spreads are up 7.7%, driven by annual rent increases of 2.2%, with a weight average lease term of almost four years. We continue to expect cash rent spreads will be flat at the midpoint for the full year. Our outlook for retention over the next several years continues to remain very strong.

Anthony Mifsud: Our sector-leading retention is driven by our unique investment strategy, which I'll discuss further in my wrap-up.

Anthony Mifsud: Cash rent spreads and renewals were up 60 basis points, while gap rent spreads were up 7.7 percent, driven by annual rent increases of 2.2 percent, with a weight average lease term of almost four years.

Anthony Mifsud: We continue to expect cash rent spreads will be flat at the midpoint for the full year.

Stephen E. Budorick: Our outlook for retention over the next several years continues to remain very stable. Looking back, in the second quarter of 2022, we began disclosing our view of renewal leases, in excess of 50,000 square feet over the next 30 months through year-end 2024. At that time, we had 25, largely, totaling 2.8 million square feet, set to expire over the following 10 quarters. Since then, we've renewed 20 of those leases, totaling 22.1 million square feet, with a 97.5% retention ratio.

Anthony Mifsud: Our outlook for retention over the next several years continues to remain very strong.

Stephen E. Budorick: We renewed all the tenants. The two of the leases had modest contractions. That leaves five leases remaining in that pool, totaling 700,000 square feet. And we expect to retain 100% of that lease space. When these five leases are renewed, our retention of the 2.8 million square foot pool will be over 98%, as compared to our initial projection of over 95%. So on page 20 of our flip book,

Steve Budorick: Looking back in the second quarter of 2022, we began disclosing our view of renewal leases in excess of 50,000 square feet over the next 30 months through year end 2024. At that time, we had 25 large leases totaling 2.8 million square feet set to expire over the following 10 quarters. Since then, we've renewed 20 of those leases totaling 2.1 million square feet, with a 97.5% retention ratio. We renewed all the tenants, but two of the leases had minus contractions. That lease five leases remaining in that pool totaling 700,000 square feet, and we expect to retain 100% of that lease space.

Anthony Mifsud: Looking back,

Anthony Mifsud: In the second quarter of 2022, we began disclosing our view of renewal leases.

Anthony Mifsud: in excess of 50,000 square feet over the next 30 months through year-end 2024. At that time, we had 25 large leases.

Anthony Mifsud: totaling 2.8 million square feet set to expire over the following 10 quarters.

Anthony Mifsud: Since then, we've renewed 20 of those leases.

Anthony Mifsud: totaling 22.1 million square feet with a 97.5% retention ratio.

Anthony Mifsud: We renewed all the tenants, but two of the leases had modest contractions.

Anthony Mifsud: That leaves five leases remaining in that pool, totaling 700,000 square feet, and we expect to retain 100% of that lease space.

Steve Budorick: When these five leases are renewed, our retention on the 2.8 million square foot pool will be over 98%, as compared to our initial projection of over 95%.

Anthony Mifsud: When these five leases are renewed, our retention of the 2.8 million square foot pool will be over 98%.

Steve Budorick: So on page 20 of our flip book, we expanded our large lease disclosure to include our view of large lease aspirations for the next 30 months through year end 2026. In that window, we have 32 large leases expiring, totaling 4 million square feet. Of those leases, nearly 75% of the annualized rental revenue comes from full buildings leased to the United States government. And recall, in our 32-year history, we've had a 100% renewal rate and full building government leases. Behind the government leases, the pool is mostly defense contractor and data center show leases. We expect to retention rate of over 95%, and this set of large leases expiring through year end 2026. We're highly competent, and our overall tenant retention will remain very strong.

Anthony Mifsud: As compared to our initial projection of over 95%.

Stephen E. Budorick: We expanded our large lease disclosure to include our view of large lease expirations for the next 30 months, through year-end 2026. In that window, we have 32 large leases expiring, totaling 4 million square feet. Of those leases, nearly 75% of the annualized rental revenue comes from full buildings leased to the United States government, and recall, in our 32-year history, we've had a 100% renewal rate on full building government leases, beyond government leases. The pool is mostly defense contractor and data center shows.

Anthony Mifsud: So on page 20 of our flip book, we expanded our large lease disclosure to include our view of large lease expirations for the next 30 months through year-end 2026.

Anthony Mifsud: In that window, we have 32 large leases expiring, totaling 4 million square feet.

Anthony Mifsud: Of those leases, nearly 75%

Anthony Mifsud: of the Annualized Rental Revenue comes from full buildings leased to the United States government.

Anthony Mifsud: And recall, in our 32-year history, we've had a 100% renewal rate on full building government leases.

Speaker Change: Beyond the Government Leases

Speaker Change: The pool is mostly defense contractor and data center shell leases.

Stephen E. Budorick: We expect a retention rate of over 95%, and with this set of large leases expiring through year-end 2026, we're highly confident our overall tenant retention will remain very stable. Our active development pipeline totals roughly 960,000 square feet. It is 74% pre-release, and represents a total cost of $381 million.

Speaker Change: We expect a retention rate of over 95%.

Speaker Change: and this set of large leases expiring through year-end 2026.

Speaker Change: And we're highly confident our overall tenant retention will remain very strong.

Steve Budorick: Our active development pipeline totals roughly 960,000 square feet. It is 74% pre-lease and represents total cost of 3,801 million dollars. We continue to expect development and acquisition leasing activity to be weighted towards the back half of the year based on the timing of those negotiations. For our three inventory buildings in development and our recently acquired Franklin Center, we have combined 605,000 square feet of prospects and 340,000 square feet of available space, which equates to an activity ratio of 175 percent. At MVP 400, we have 190,000 square feet of prospects and 138,000 square feet of available space.

Speaker Change: Our active development pipeline totals roughly 960,000 square feet.

Speaker Change: It is 74% pre-lease and represents a total cost of $381 million.

Stephen E. Budorick: We continue to expect development and acquisition leasing activity to be weighted towards the back half of the year based on the timing of both negotiations. For our three inventory buildings in development and our recently acquired Franklin Center, we have a combined $605,000.

Speaker Change: We continue to expect development and acquisition leasing activity to be weighted towards the back half of the year based on the timing of those negotiations.

Speaker Change: for our three inventory buildings in development and our recently acquired Franklin Center.

Stephen E. Budorick: Square Feet of Prospects and 340,000 square feet of available space, which equates to an activity ratio of 175%. At MVP 400, we have 190,000 square feet of prospects and 138,000 square feet of available space. We started this building due to the dearth of availability in the park.

Speaker Change: We have combined $605,000...

Speaker Change: Square feet of prospects and 340,000 square feet of available space.

Speaker Change: which equates to an activity ratio of 175%.

Speaker Change: At MBP 400, we have 190,000 square feet of prospects and 138,000 square feet of available space.

Steve Budorick: We started this building due to the disunleased building in our MVP operating portfolio. The park would still be over 96 percent lease. The demand for this asset is targeting an occupancy in 2025 and 2026, so we don't expect leasing progress until next year. At 8100 Right Out Road, we have 100,000 square feet of prospects and nearly 75,000 square feet of availability. In 9,700 Advanced Gateway, we have 105,000 square feet of prospects and 40,000 square feet of availability. And finally, at the newly acquired Franklin Center, we have 210,000 square feet of prospects and the nearly 90,000 square feet of availability.

Stephen E. Budorick: If we were to include this unleased building in our MVP operating portfolio, the park would still be over 96% leased. The demand for this asset is targeting occupancy in 2025 and 2026, so we don't expect leasing progress until next year. At 8100 Rideout Road, we have 100,000 square feet of prospects and nearly 75,000 square feet of availability at 9700 Advanced Gateway.

Speaker Change: We started this building due to the dearth of availability in the park.

Speaker Change: If we were to include this unleased building in our MVP operating portfolio, the park would still be over a 96% lease.

Speaker Change: The demand for this asset is targeting an occupancy in 2025 and 2026.

Speaker Change: So we don't expect leasing progress until next year.

Speaker Change: At 8100 Rideout Road, we have 100,000 square feet of prospects and nearly 75,000 square feet of availability.

Stephen E. Budorick: We have 105,000 square feet of prospects and 40,000 square feet of availability. And finally, at the newly-acquired Franklin Center, we have 210,000 square feet of prospects and nearly 90,000 square feet of availability. For these three assets, we expect to report leasing progress over the next two, or the Development Leasing Pipeline, which we define as opportunities we consider 50% likely to win or better within two years or less. Be on it.

Speaker Change: and 9700 Advanced Gateway.

Speaker Change: We have 105,000 square feet of prospects and 40,000 square feet of availability.

Speaker Change: And finally, at the newly acquired Franklin Center, we have 210,000 square feet of prospects and the nearly 90,000 square feet of availability.

Steve Budorick: For these three assets, we expect your port leasing progress over the next two points.

Speaker Change: For these three assets, we expect to report leasing progress over the next two quarters.

Nancy: Our development leasing pipeline, which we define as opportunities we consider 50 percent likely to win or better within two years or less, currently stands at about 700,000 square feet. Beyond that, we're tracking over 1.6 million square feet of potential development opportunities, which should allow us to maintain a solid development pipeline in the near and medium terms. Then, with that, I'll hand call over to Nancy.

Speaker Change: Our development leasing pipeline, which we define as opportunities we consider 50% likely to win or better within two years or less, currently stands at about 700,000 square feet.

Stephen E. Budorick: We're tracking over 1.6 million square feet of potential development opportunities, which should allow us to maintain a solid development pipeline in the near and medium term. And with that, I'll hand the call over to Anson. Thank you. We reported another strong quarter with second quarter FFO per share as adjusted for comparability of 64 cents, exceeding the midpoint of our guidance by one cent, and Property Cash NOI increased 10.9% for our total portfolio and 11.2% for our defense IT portfolio.

Speaker Change: [inaudible]

Speaker Change: We're tracking over 1.6 million square feet of potential development opportunities, which should allow us to maintain a solid development pipeline in the near and medium term. And with that, I'll hand the call over to Anthony. Thank you, Steve.

Nancy: Thank you, Steve. We reported another strong quarter, with second quarter FFO per share, as adjusted for comparability, of 64 cents, exceeding the midpoint of our guidance by 1 cent. Same property cash in OI, increased 10.9 percent for our total portfolio and 11.2 percent for our defense IT portfolio. The year of a year increase was driven by a 50 basis point increase in average occupancy, lower levels of free rent concessions on renewals, the burn off a free rent at recent developments now in service, and lower net operating expenses resulting from successful real estate tax appeals primarily involved more.

Anthony Mifsud: We reported another strong quarter with second quarter FFO per share as adjusted for comparability of 64 cents, exceeding the midpoint of our guidance by one cent.

Anthony Mifsud: Same property cash NOI increased 10.9% for our total portfolio and 11.2% for our defense IT portfolio.

Stephen E. Budorick: The year-over-year increase was driven by a 50 basis point increase in average occupancy, lower levels of free rent concessions on renewables, burn off free rent at recent developments now in service, and Lower Net Operating Expenses Resulting from Successful Real Estate Taxes, primarily in Baltimore, as a result of our year-to-date achievement and our forecast for the remainder of the year. We increased the midpoint of our same-property cash and OI guidance by 150 basis points. This guidance range, combined with the 50 basis point increase at the end of the first quarter, elevated the expected midpoint of growth for the year to 8%.

Anthony Mifsud: The year-over-year increase was driven by a 50 basis point increase in average occupancy, lower levels of free rent concessions on renewals, the burn-off of free rent at recent developments now in service, and lower net operating expenses resulting from successful real estate tax appeals, primarily in Baltimore.

Nancy: As a result of our year-to-date achievement and our forecast for the remainder of the year, we increased the midpoint of our same property cash in OI guidance by 150 basis points. This guidance range, combined with the 50 basis point increase at the end of the first quarter, elevated the expected midpoint of growth for the year to 8 percent. This increase is driven by many of the same factors benefiting the quarter, namely stronger volume and economics on lease renewals, combined with lower net operating expenses resulting from real estate tax appeals and reduced weather-related expenses. Same property occupancy ended the quarter at 93.5%, which is flat compared to last quarter.

Anthony Mifsud: As a result of our year-to-date achievement and our forecast for the remainder of the year, we increased the midpoint of our same property cash and OI guidance by 150 basis points.

Anthony Mifsud: This guidance range, combined with the 50 basis point increase at the end of the first quarter, elevated the expected midpoint of growth for the year to 8 percent.

Stephen E. Budorick: This increase is driven by many of the same factors benefiting the quarter, namely stronger volume and economics on lease repayments, combined with lower net operating expenses resulting from real estate tax appeals and reduced weather-related costs. Same property occupancy ended the quarter at 93.5%, which is flat compared to last year. We expect same-property occupancy to increase towards the end of the year, and we raised the midpoint of our expected year-end occupancy guidance by 250 basis points, to 93 and 3 quarters.

Anthony Mifsud: This increase is driven by many of the same factors benefiting the quarter, namely stronger volume and economics on lease renewals, combined with lower net operating expenses resulting from real estate tax appeals and reduced weather-related expenses.

Anthony Mifsud: Same property occupancy ended the quarter at 93.5%, which is flat compared to last quarter.

Nancy: We expect same property occupancy to increase towards the end of the year, and we raise the midpoint of expected year-end occupancy guidance by 250 basis points to 93 and 3.4%.

Anthony Mifsud: We expect same property occupancy to increase towards the end of the year, and we raised the midpoint of expected year-end occupancy guidance by 250 basis points to 93.75%.

Nancy: Our balance sheet continues to be strong and well positioned to navigate the current interest rate environment and take advantage of future opportunities similar to Franklin Center. We have no significant debt maturities until March 2026. At the end of the quarter, we had over 85% of the capacity on our $600 million dollar line of credit available and $100 million of cash on hand. During the quarter, we paid off a $28 million mortgage at maturity that was secured by three properties at Redstone Gateway using cash on hand. Our unencumbered portfolio now represents 97% of total NLI from real estate operations.

Stephen E. Budorick: Our balance sheet continues to be strong and well-positioned to navigate the current interest rate environment and take advantage of future opportunities. Similar to Frank, we have no significant debt maturities until March 2026. At the end of the quarter, we had over 85% of the capacity on our $600 million line of credit.

Anthony Mifsud: Our balance sheet continues to be strong and well positioned to navigate the current interest rate environment and take advantage of future opportunities similar to Franklin Center.

Anthony Mifsud: We have no significant debt maturities until March 2026. At the end of the quarter, we had over 85% of the capacity on our $600 million line of credit available and $100 million of cash on hand.

Stephen E. Budorick: $100 million of cash on hand. During the quarter, we paid off a $28 million mortgage at Maturity that was secured by three properties at Redstone Gateway using cash on hand. Our unencumbered portfolio now represents 97% of total NOI from real estate operations. We currently have no variable rate debt exposed.

Anthony Mifsud: During the quarter, we paid off a $28 million mortgage at maturity that was secured by three properties at Redstone Gateway using cash on hand.

Anthony Mifsud: Our unencumbered portfolio now represents 97% of total NOI from real estate operations.

Nancy: We currently have no variable rate debt exposure. We expect 100% of our debt will be fixed until late 2024, as the equity component of our capital investments will be funded from cash from operations after the dividend, and the debt component from our existing cash balance and subsequently from our line of credit. The first six months of 2024 demonstrated our ability to self-fund the equity required for investments. Year to date, we invested $82 million in developments and the acquisition of Franklin Center. We funded 52% of that spend with cash from operations after the dividend, which is neutral to overall leverage, and the remainder with cash on hand.

Stephen E. Budorick: We expect 100% of our debt will be fixed until late 2024 as the equity component of our capital investments will be funded from cash from operations after the dividend, and the debt, our existing cash balance, and subsequently from our line of credit. The first six months of 2024 demonstrate our ability to self-fund the equity required for investment; year-to-date, we invested $82 million in developments and the acquisition of..., funded 52% of that spend with cash from operations after the dividend, neutral to overall leverage, and the remainder with cash on hand. The Dividend Payout Ratio was 56% during the first half of the year and has been below 60% in each of the past four quarters.

Anthony Mifsud: We currently have no variable rate debt exposure.

Anthony Mifsud: We expect 100% of our debt will be fixed until late 2024 as the equity component of our capital investments will be funded from cash from operations after the dividend and the debt component from our existing cash balance and subsequently from our line of credit.

Anthony Mifsud: The first six months of 2024 demonstrate our ability to self-fund the equity required for investments.

Anthony Mifsud: Year-to-date, we invested $82 million in developments and the acquisition of Franklin Center.

Anthony Mifsud: We funded 52% of that spend with cash from operations after the dividend, which is neutral to overall leverage, and the remainder with cash on hand.

Nancy: Our dividend payout ratio was 56% during the first half of the year and has been below 60% in each of the past four quarters. We expect a full year payout ratio will be roughly 60%. This strong payout ratio allows us to utilize the retained cash flow to help fund new investments, as achieved during the first six months of the year. With our first quarter dividend increase, we are one of only two REITs in our sector to have raised the dividend during the first half of the year, which demonstrates the confidence we have in our ability to generate strong levels of AFFO.

Anthony Mifsud: Our dividend payout ratio was 56% during the first half of the year and has been below 60% in each of the past four quarters.

Stephen E. Budorick: We expect a four-year payout ratio will be roughly six... The strong payout ratio allows us to utilize the retained cash flow to help fund new investments, as achieved during the first six months with our first quarter dividend. We are one of only two REITs in our sector to have raised the dividend during the first half of the year, which demonstrates the confidence we have in our ability to generate strong levels of AFI.

Anthony Mifsud: We expect the full year payout ratio will be roughly 60%.

Anthony Mifsud: This strong payout ratio allows us to utilize the retained cash flow to help fund new investments as achieved during the first six months of the year.

Anthony Mifsud: With our first quarter dividend increase, we are one of only two REITs in our sector to have raised the dividend during the first half of the year, which demonstrates the confidence we have in our ability to generate strong levels of AFFO.

Nancy: With respect to guidance, we increased 2024 AFFO per share for the year by two cents at the midpoint, implying nearly 6% growth over 2023's results. This is our second increase this year, as the initial AFFO per share of guidance midpoint was $2.51, which we increased to $2.54 last quarter and now sits at $2.56. The 5-cent guidance increase for the year is primarily driven by the increases in same property cash and a Y, the acquisition of Franklin Center, and higher than expected interest income on cash balances. These items are partially offset by some gap in a Y adjustments and slightly higher G&A expenses.

Stephen E. Budorick: With respect to guidance, we increased 2024 FFO per share for the year by 2 cents at the midpoint, applying nearly 6% growth over 2023 as a result. This is our second increase this year. The initial FFO per share of guidance midpoint was $2.51, which we increased to $2.54 last quarter and now sits at $2.56. The five-cent guidance increase for the year is primarily driven by the increases in same-property cash NOI, the acquisition of Franklin, and higher-than-expected interest income on cash. These items are partially offset by some GAAP NOI adjustments and slightly higher G&A.

Anthony Mifsud: With respect to guidance, we increased 2024 FFO per share for the year by two cents at the midpoint, implying nearly six percent growth over 2023's results.

Anthony Mifsud: This is our second increase this year, as the initial FFO per share guidance midpoint was $2.51, which we increased to $2.54 last quarter and now sits at $2.56.

Anthony Mifsud: The five-cent guidance increase for the year is primarily driven by the increases in same-property cash NOI, the acquisition of Franklin Center, and higher-than-expected interest income on cash balances.

Anthony Mifsud: These items are partially offset by some gap NOI adjustments and slightly higher G&A expenses.

Nancy: We reduce the four-year guidance for capital invested in development and acquisitions by $40 million at the midpoint. Point from $260,000,000 to $220,000,000, driven by the timing of our expected investments. Finally, we are establishing third-quarter guidance for FFO per share as adjusted for comparability in a range of 63 to 65 cents, which implies a slight increase in the fourth quarter. Looking forward, we continue to anticipate compound annual FFO per share growth at least 4% between 2023 and 2026.

Stephen E. Budorick: We reduced the full-year guidance for capital invested in development and acquisitions by $40 million at the mid- $260 million to $220 million, driven by the timing of our expected investment. Finally, we are establishing third quarter guidance for FFO per share as adjusted for comparability in a range of $0.63 to $0.65, which implies a slight increase in the fourth quarter. 2023 and 2026.

Anthony Mifsud: We reduced the full year guidance for capital invested in development and acquisitions by $40 million at the midpoint, from $260 million to $220 million, driven by the timing of our expected investments.

Anthony Mifsud: Finally, we are establishing third quarter guidance for FFO per share as adjusted for comparability in a range of 63 to 65 cents, which implies a slight increase in the fourth quarter.

Anthony Mifsud: Looking forward, we continue to anticipate compound annual FFO per share growth of at least 4% between 2023 and 2026.

Steve Budorick: With that, I'll turn the call back to Steve. So, before I get to my final remarks, I really want to drive home one of our key differentiators, which is our sector-leading Senate retention rate. Year-to-date, we've delivered 83% retention, and over the past five years, we've delivered an average of 77%. Our tenant retention record delivers immense value to our shareholders, which is realized as elevated FFO because the capital required to attract a new tenant for our company is about three times the capital required to renew a tenant. That ratio is likely much higher for gateway office rates.

Stephen E. Budorick: With that, I'll turn the call back. So before I get to my final remarks, I really want to drive home one of our key differentiators, which is our sector-leading tenant retention rate. Year-to-date, we've delivered 83% tenant retention. And over the past five years, we've delivered an average of 77. Our tenant retention record delivers immense value to our shareholders, which is realized as elevated FFO, because the capital required to attract a new tenant for our company is about three times the capital required to renew it.

Anthony Mifsud: With that, I'll turn the call back to Steve.

Steve: So, before I get to my final remarks, I really want to drive home one of our key differentiators

Steve: which is our sector-leading tenant retention rate.

Steve: Year-to-date, we've delivered 83% retention.

Steve: And over the past five years, we've delivered an average of 77%.

Speaker Change: Our tenant retention record delivers immense value to our shareholders, which is realized as elevated AFFO.

Speaker Change: because the capital required to attract a new tenant for our company.

Stephen E. Budorick: That ratio is likely much higher for gateway office rates, vacancy or downtime is a cash-negative event, as rents are lost, and operating expenses for vacant space diminishes to the bottom line. New leasing typically involves a pre-rent period, and that extended negative cash flow period.

Speaker Change: is about three times the capital required to renew a tenant.

Steve Budorick: Vacancy or downtime is the cash negative event. As the rents are lost in operating expenses for vacant space, it diminishes the bottom line. New leasing typically involves free rent periods, and that extend the negative cash flow period. We included exhibits on page 18 and 19 of our footbook that examine the AFFO impact on 2 million square feet of leasing, comparing a hypothetical 8% retention rate and flat change in cash runs to an industry average 35% retention rate with 10% cash rent increases on renewal. The bottom line is high retention scenario with zero year-one rent growth dominates the portfolio that generates a 10% increase on renewals, but as industry average retention.

Speaker Change: That ratio is likely much higher for gateway office rates.

Speaker Change: vacancy or downtime.

Speaker Change: is a cash-negative event, as rents are lost and operating expenses for vacant space diminishes to bottom line.

Speaker Change: New leasing typically involves pre-rent periods.

Stephen E. Budorick: We included exhibits on pages 18 and 19 of our flip book that examined the AFFO impact on 2 million square feet of leased space. Comparing a hypothetical 80% retention rate and a flat change in cash to an industry average 35% retention rate, with 10% cash rent increases, and we're going. The bottom line is that a high retention scenario with zero year one rent growth dominates a portfolio that generates a 10% increase on renewals, but industry average retention.

Speaker Change: And that extends the negative cash flow period.

Speaker Change: We included exhibits on page 18 and 19 of our flip book.

Speaker Change: that examined the AFFO impact on 2 million square feet of leasing.

Speaker Change: comparing a hypothetical 80% retention rate and flat change in cash rents.

Speaker Change: to an industry average 35% retention rate with 10% cash rent increases and renewal.

Speaker Change: The bottom line is high retention scenario with zero year one rent growth dominates a portfolio that generates a 10% increase on renewals but has industry average retention.

Steve Budorick: The high retention scenario generates $45 million, or 10% more in positive cash flow, as compared to the industry average scenario, even assuming it's a pretty optimistic return of the increase. These exhibits thrive on the cash flow strength that our portfolio is delivering, and partially explains our ability to self-fund the equity component of our incremental investment on a leverage and neutral basis.

Stephen E. Budorick: The high retention scenario generates $45 million, for 10% more in positive cash, as compared to the industry average scenario, even assuming some pretty optimistic retention. These exhibits drive home the cash flow strength that our portfolio is delivering.

Speaker Change: The high retention scenario generates $45 million or 10% more in positive cash flow.

Speaker Change: as compared to the industry average scenario, even assuming some pretty optimistic retentive periods.

Speaker Change: These exhibits drive home the cash flow strength that our portfolio is delivering.

Stephen E. Budorick: This partially explains our ability to self-fund the equity component of our incremental investment on a leverage-neutral basis. So I'll close by summarizing our key messages. We've achieved solid results in the first half of the year. Our defense IT segment is 96.7% leased. Year-to-date, we generated same property cash NOI growth of 8.5% in our total portfolio and 9.4% in our defense IT portfolio. We increased the midpoint of 2024 guidance for same property year-end occupancy, same property cash-out-of-life growth, and tenant return. We have executed 264,000 square feet of vacancy leasing year-to-date.

Speaker Change: It partially explains our ability to self-fund the equity component of our incremental investment on a leverage-neutral basis.

Steve Budorick: So I'll close by summarizing our key messages. We've achieved salary results in the first half of the year. Our defense IT segment is 96.7% least. Year-to-date, we generated the same property cash and ROI growth of 8.5% in our total portfolio and 9.4% in our defense IT portfolio. We increased the midpoint of 2024 guidance for the same property year and occupancy, same property cash and ROI growth, and 10% increase. Extension. We executed 264,000 square feet of vacancy leasing, year-to-date; our $381 million of active developments, our 74% pre-lease, and will contribute to N.O.I. growth over the next few years.

Speaker Change: So I'll close by summarizing our key messages.

Speaker Change: We've achieved solid results during the first half of the year. Our defense IT segment is 96.7% at least.

Speaker Change: Year-to-date, we generated same property cash NOI growth of 8.5% in our total portfolio and 9.4% in our defense IT portfolio.

Speaker Change: We increased the midpoint of 2024 guidance for same-property year-end occupancy, same-property cash NOI growth, and tenant retention.

Speaker Change: We executed 264,000 square feet of vacancy leasing year-to-date.

Stephen E. Budorick: Our $381 million in active developments are 74% pre-leased and will contribute to NOI growth over the next few years. Our liquidity is very strong, and we expect to continue to self-fund the equity component of our planned capital investments going forward. And we increased the midpoint of our 2024 FFO per share guidance by another two cents, to $2.56, which implies nearly 6% year-over-year FFO growth. This quarter's performance clearly shows the benefit of our unique investment strategy.

Speaker Change: Our $381 million of active developments, our 74% pre-lease and will contribute to NOI growth over the next few years.

Steve Budorick: Our liquidity is very strong, and we expect to continue to self-fund the equity component of our planned capital investments going forward. And we increased the midpoint of 2024 FFO for shared gains by another two cents to $2.56, which implies nearly 6% year-over-year FFO growth. This quarter's performance clearly shows the benefit of our unique investment strategy.

Speaker Change: Our liquidity is very strong.

Speaker Change: And we expect to continue to self-fund the equity component of our planned capital investments going forward.

Speaker Change: And we increased the midpoint of 2024 FFO per share guidance by another two cents.

Speaker Change: to $2.56.

Speaker Change: which implies nearly 6% year-over-year FFO growth.

Speaker Change: This quarter's performance clearly shows the benefit of our unique investment strategy.

Stephen E. Budorick: So operator, with that, please open up the call for questions. Thank you, Mr. Budorick. As a reminder, to ask a question, you will need to press star one one on your telephone. To remove yourself from the queue, you'll need to press star one one again.

Operator: So, operator, with that, please open up the call for questions. Thank you, Mr. Budorick. As a reminder to ask a question, you will need to press star 1-1 on your telephone to remove yourself from the queue. You'll need to press star 1-1 again. Please stand by while we compile the Q&A roster.

Speaker Change: So operator, with that, please open up the call for questions.

Speaker Change: Thank you, Mr. Budorick. As a reminder, to ask a question, you will need to press star 1 1 on your telephone. To remove yourself from the queue, you'll need to press star 1 1 again. Please stand by while we compile the Q&A roster.

Operator: Please stand by while we compile the Q&A roster. Our first question comes from the line of Richard Anderson of Wedbush Security. Hey, thanks. Good morning or good afternoon.

Richard Anderson: Our first question comes from the line of Richard Anderson of Web Bush Securities. Hey, thanks. Good morning or good afternoon. So, on the same store growth profile first, you know, great job there. I guess there's precedence, but it doesn't seem like something that you've achieved much at all in the past. But you said that the building blocks behind it, correct me if I'm wrong, essentially better than expected renewal options in lower off-axis. Is that basically it in a little bit upside on the occupancy in the back half of the year? That's correct. Okay. So, on the vacancy leasing side, that probably doesn't have as much of an impact, if at all. Is there, you know, sort of a free rent component that so you don't really get a same store impact from the vacancy leasing activity?

Speaker Change: Our first question.

Speaker Change: comes from the line of Richard Anderson of Wedbush Securities.

Richard Anderson: So, on the same SOAR growth profile, first, you know, great job there. I guess there is a process that seems like something that you've achieved a lot in the past, but you said that the building blocks behind it, correct me if I'm wrong, essentially better than expected renewal options and lower op-exes. Is that basically it, and there is a little bit of upside on occupancy in the back half of the year? That's correct.

Richard Anderson: Hey, thanks. Good morning, or good afternoon. So, on the same SOAR growth profile, first, you know, great job there. It's, you know,

Speaker Change: I guess there is precedence, but it's...

Speaker Change: It doesn't seem like something that you've achieved much at all in the past, but you said

Speaker Change: That the building blocks behind it, correct me if I'm wrong, essentially better than expected renewal options and lower op-exes, is that basically it and a little bit upside on occupancy in the back half of the year?

Stephen E. Budorick: Okay, so on the vacancy leasing side, that probably doesn't have as much of an impact, if at all. Is there, you know, sort of a free rent component so you don't really get a same-store impact from the Vacancy Leasing Act? Typically, vacancy leasing requires six to maybe even eight months of tenant improvement before we get a commencement and a rent start. And even in a scenario with no free rent, it's really hard to get a deal done in the current year to contribute to that current year cash NOI. Yep. Okay, fair enough.

Speaker Change: That's correct. Okay so on the vacancy leasing side that that probably doesn't have as much of an impact if at all is there you know sort of a free rent component that so so you don't really get a same-store impact from the vacancy leasing activity?

Steve Budorick: Typically, vacancy leasing requires, you know, six to maybe even eight months of tenant improvement, for we get a commencement and a rent start. And even in this area with no free rent, it's really hard to get a deal done in the current year to contribute to that current year cash in a way. Yep. Okay. Fair enough. So, eight percent, I'm just going to take a flyer, maybe not sustainable on a long-term basis, maybe disagree. You know, what do you think the real sort of internal growth firepower of this company is? I know you're reiterating your 4% FFO growth to 2026.

Speaker Change: Typically, vacancy leasing requires, you know, six to maybe even eight months of tenant improvement before we get a commencement and a rent start.

Speaker Change: And even in this area with no free rent, it's really hard to get a deal done in the current year to contribute to that current year cash, in a way.

Speaker Change: Yep, okay, fair enough.

Stephen E. Budorick: So, 8%. I'm just going to..., take a flyer, maybe not sustainable on a long-term basis, maybe disagree, you know. What do you think the real sort of internal growth firepower of this company is? I know you're reiterating your 4% FFO growth to 2026. So, you know, what should investors be expecting from an organic growth point of view as we look ahead? Well, I think a good run rate for percent internal. And then, you know, additional contributions from development. Okay. And Steve, you mentioned the defense budget and were expecting three to four percent for FY 2025. Talk to me, remind me about how that translates. We sing, I think.

Speaker Change: So...

Speaker Change: 8%. I'm just going to...

Speaker Change: to take a flyer, maybe not sustainable on a long-term basis, maybe disagree.

Speaker Change: What do you think the real internal growth firepower of this company is? I know you're reiterating your 4% FFO growth to 2026. What should investors be expecting from an organic growth point of view as we look out?

Steve Budorick: So, you know, what should investors be expecting from an organic growth point of view as we look out? Well, I think you're good run rates for percent internal, and then, you know, additional contributions from development. Okay.

Speaker Change: Well, I think a good run rate's four percent internal.

Speaker Change: And then, you know, additional contributions from development.

Steve Budorick: And Steve, you mentioned... The defense budget and expecting 3% to 4% for FY 2025. Talk to me, remind me about how that translates into leasing. I think we've talked about this before directly. If the government is pretty quick, but with contractors, it kind of takes time for it to matriculate to a leasing event. Is that a fair way to look at it? Yeah, so if the government has additional leasing authority approved in a budget, they typically have to commit that within the fiscal year. As we all know, the appropriations tend to happen on a delayed basis because of continuing resolutions.

Speaker Change: Okay. And Steve, you mentioned...

Speaker Change: The defense budget is expecting 3-4% for FY 2025.

Speaker Change: Talk to me, remind me about how that translates into leasing. I think we've talked about this before, directly with the government it's pretty quick, but with contractors, you know, it kind of takes time for it to matriculate to a leasing event. Is that a fair way to look at it?

Stephen E. Budorick: We've talked about this before; directly with the government, it's pretty quick, but with contractors, it kind of takes time for it to matriculate to a leasing event. Is that a fair way to look at it? Yeah, so if the government has additional leasing authority approved in a budget, they typically have to commit that within the fiscal year. But as we all know, the appropriations tend to happen on a delayed basis because of continuing resolutions. So once you get an appropriation, it's usually six to seven months, following that the U.S. government lease action would have to be executed.

Speaker Change: Yeah, so if the government has additional leasing authority approved in a budget, they typically have to commit that within the fiscal year.

Speaker Change: As we all know, the appropriations tend to happen on a delayed basis because of continuing resolutions. So, once you get an appropriation, it's usually six to seven months.

Steve Budorick: So once you get an appropriation, it's usually 6-7 months following that the US government lease action could, would have to be executed. With defense contractors, we typically experience the benefit through their ability to capture additional business through contracts, and that contract award process takes quite a bit of time. Often there's protests that need to get adjudicated, an award is finalized, and then that contractor can commit to additional space. So we say that tends to lag 12 to 18 months. Okay.

Speaker Change: Following that, the U.S. government lease action would have to be executed.

Stephen E. Budorick: With defense contractors, we typically experience the benefit through their ability to capture additional business through contracts, and that contract award process takes quite a bit of time. Often, there are protests that need to get adjudicated, an award is finalized, and then that contractor can commit to additional space. So we say that tents lag 12 to 18 months. Okay, and then last for me... Looks like things are going well at Franklin Center.

Speaker Change: With defense contractors, we typically experience the benefit through their ability to capture additional business through contracts.

Speaker Change: and that contract award process.

Speaker Change: It takes quite a bit of time. Often there's protests that need to get adjudicated, an award is finalized, and then that contractor can commit to additional space. So we say that tends to lag 12 to 18 months.

Steve Budorick: And then last for me, it looks like things are going well at Franklin Center. Any other hidden gems, you kind of referenced acquisition potentially some similar opportunities like that with upside under your umbrella. You got your eyes on a few things out there, even though you're really a development-oriented stories or stuff out there that is interesting, at least in terms of a pipeline. Thanks. We're still looking rich. That's all I'll say. Good enough. Thanks. Thanks, guys.

Stephen E. Budorick: Any other hidden gems you kind of referenced acquisition, potentially some similar opportunities like that with Upside under your umbrella? You've got your eyes on a few things out there, even though you're really a development-oriented story. There's stuff out there that...

Speaker Change: Okay, and then last for me

Speaker Change: It looks like things are going well at Franklin Center. Any other hidden gems you kind of referenced acquisition, potentially some similar opportunities like that with Upside under your umbrella? You got your eyes on a few things out there, even though you're really a development-oriented story. There's stuff out there that, you know, is...

Stephen E. Budorick: Interesting, at least in terms of a pipeline. Thanks. We're still looking, Rich.

Speaker Change: That's interesting, at least in terms of a pipeline. Thanks.

Stephen E. Budorick: That's all I'll say. Good enough. Thanks. Thanks, guys. Thank you. Our next question comes from the line of Blaine Heck of Wells Fargo. Great, thanks. Good afternoon.

Speaker Change: We're still looking, Rich. That's all I'll say.

Operator: Thank you.

Speaker Change: Good enough. Thanks. Thanks, guys.

Blaine Heck: Our next question comes from the line of blame hack of Wells Fargo. Great. Thanks. Good afternoon. Can you talk a little bit more about the increased development leasing pipeline. I think the pipeline was up to 700,000 square feet from 500,000 square feet, and the potential opportunity set increased to 1.6 million square feet from a million last quarter. So, you know, just curious if there are any specific tenant profiles that are driving that incremental demand, and, you know, are you seeing it in specific geographic areas, or is it relatively widespread across the portfolio? Well, there's always ends and outs on that list, but to give you an idea of last quarter, we had within the pipeline, we had 14 requirements that were about 500,000 square feet in total and they average around 36,000 square feet.

Speaker Change: Thank you.

Blaine Matthew Heck: Can you talk a little bit more about the increased development leasing pipeline? I think the pipeline is up to 700,000 square feet from 500,000 square feet, and the potential opportunity set is up to 1.6 million square feet from a million last quarter. So, you know, just curious if there are any specific tenant profiles that are driving that incremental demand and, you know, are you seeing it in specific geographic areas, or is it relatively widespread across the portfolio?

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

Blaine Matthew Heck: Great, thanks. Good afternoon. Can you talk a little bit more about the increased development leasing pipeline? I think the pipeline was up to 700,000 square feet from 500,000 square feet, and the potential opportunity set increased to 1.6 million square feet from a million last quarter.

Speaker Change: You know, just curious if there are any specific tenant profiles that are driving that incremental demand and, you know, are you seeing it in specific geographic areas or is it relatively widespread across the portfolio?

Blaine Matthew Heck: Well, there are always ins and outs on that list. But to give you an idea, last quarter we had, within our pipeline, 14 requirements that were about 500,000 square feet in total, and they average around 36,000 square feet.

Speaker Change: Well, there's always ins and outs on that list, but to give you an idea, last quarter we had, within the...

Speaker Change: Our pipeline, we had 14 requirements that were about 500,000 square feet in total.

Steve Budorick: This quarter, we've got 80 requirements at about 700,000, and they're average in about 38,000 square feet. Within that, there's expansions, consolidation discussions, and new mission requirements that we're working with customers to have an ability to construct a new building to support. and then within the two-year time frame, it's really, we have conversations continually and we always filter those by two years or less than 50% or greater.

Stephen E. Budorick: This quarter we've got 18 requirements at about 700,000, and they're averaging about 38,000 square feet. Within that, there are expansions. Consolidation Discussions, and New Mission Requirements that we're working with customers to have an ability to construct a new building to support. And then, within the two-year time frame, it's really... We have conversations continually, and we always filter those by two years or less and 50% or greater. So we've had some discussions that are pretty encouraging, and that's about all I can really say. I would not want to give you any other personal information.

Speaker Change: and they average around 36,000 square feet. This quarter we've got 18 requirements at about 700,000 and they're averaged at about 38,000 square feet.

Speaker Change: Within that, there's expansions.

Speaker Change: Consolidation Discussions, and New Mission Requirements that we're working with customers to have an ability to construct a new building to support.

Speaker Change: And then within the two-year time frame, it's really...

Speaker Change: We have conversations continually and we always filter those by two years or less and 50% or greater. So we've had some discussions that are pretty encouraging.

Steve Budorick: So we've had some discussions that are pretty encouraging, and that's about all I could really say. Would that want to give you any other profile information?

Speaker Change: And that's about all I can really say. I would not want to give you any other profile information.

Anthony Mifsud: John, that's helpful, Steve. Just following up on the same stirring and wide guidance increase, you know, it looked like at least some, if not most of that increase was the expense related. So maybe, Anthony, can you just talk through some of the components there? Are there potentially any more significant tacked appeals that could change the outlook again in the second half and then on the weather-related expenses? I'm assuming this is saving relative to kind of what you had budgeted in the first half of the year, not any expectation for lower expenses, but just what I confirm on that.

Blaine Matthew Heck: Got it. That's helpful, Steve. Just following up on the same STIRR and OI guidance increase, you know, it looked like at least some, if not most of that increase was expense related. So, maybe, Anthony, could you just talk through some of the components there? Are there potentially any more significant tax appeals that could change the outlook again in the second half? And then on the weather-related expenses, I'm assuming this is savings relative to kind of what you had budgeted in the first half of the year, not any expectation of lower expenses, but just want to confirm that. You're correct on all those points. The weather-related expenses were experienced in the first quarter and were reported in our results for the first three months.

Jonathan: Got it. That's helpful, Steve. Just following up on the same STIRR and OI guidance increase, you know, it looked like at least some, if not most, of that increase was expense-related.

Jonathan: Maybe, Anthony, can you just talk through some of the components there? Are there potentially any more significant tax appeals that could change the outlook again in the second half?

Speaker Change: On the weather-related expenses, I'm assuming this is savings relative to kind of what you had budgeted in the first half of the year, not any expectation for lower expenses, but just wanted to confirm on that.

Anthony Mifsud: You're correct on all these points. The weather-related expenses were experienced in the first quarter and reported through our results for the first three months. The successful real estate tax appeal in Baltimore came through our second quarter results. We'll see some benefit of that going forward because that reduction will continue through the current year expense and into the future. But if you look at the total change in same property cash and a Y in terms of gross dollars between the 6% original guidance and the 8%, it's about $7 million. About 30% of that is expense related, and the balance is a combination of stronger renewals and lower free rent on renewals.

Speaker Change: You're correct on all those points. The weather-related expenses were experienced in the first quarter and reported through our results for the first three months. The successful real estate tax appeal in Baltimore came through our second quarter results. We'll see some benefit of that going forward.

Stephen E. Budorick: The successful real estate tax appeal in Baltimore came through in our second quarter results. We'll see some benefit of that going forward because that reduction will continue through the current year expense and into the future. But if you look at the total change in same property cash NOI in terms of gross dollars between the 6% original guidance and the 8%, it's about $7 million.

Speaker Change: because that reduction will continue through the current year expense and into the future. But if you look at the total change in

Speaker Change: same property cash NOI in terms of gross dollars between the six percent original guidance and the eight percent it's about seven million dollars about

Blaine Matthew Heck: 30% of that is expense-related, and the balance is a combination of stronger renewals, lower free rent on renewals, you have better economics. Great, very helpful. And then maybe just back to Steve for one more.

Speaker Change: 30% of that is expense related and the balance is a combination of stronger renewals, lower free rent on on renewals, and

Anthony Mifsud: And you know, better, better economics on our releases. Great. Very helpful.

Steve Budorick: And then maybe just back to Steve for one one more. You know, can you can you just talk about any additional data center opportunities that you have maybe in Northern Virginia and even potentially elsewhere and talk about how, you know, the limited power availability might have kind of resulted. You know, has it resulted in a roadblock with respect to further expansion of that program, and, you know, how do you think about that going forward? Well, I wouldn't call it a roadblock, but it might be a long traffic light. So, you know, clearly, without available power.

Speaker Change: You know, better economics on our leases.

Stephen E. Budorick: You know, can you just talk about any additional data center opportunities that you have maybe in northern Virginia and even potentially elsewhere and talk about how, you know, the limited power availability might have kind of resulted, you know, has it resulted in a roadblock with respect to further expansion of that program? And, and, you know, how do you think about that going forward? Well, I wouldn't call it a roadblock, but it might be a long traffic light.

Speaker Change: Great, very helpful. And then maybe just back to Steve for one more.

Steve: You know, can you can you just talk about any additional data center opportunities that you have maybe in northern Virginia and even potentially elsewhere, and talk about how, you know, the limited power availability might have kind of resulted?

Speaker Change: You know, has it resulted in a roadblock with respect to further expansion of that program? And, you know, how do you think about that going forward?

Stephen E. Budorick: So, you know, clearly without available power. We've talked about this on prior calls, and factoring in the extremely high price of land today, it's tough to move forward until we have clarity where we can match power and land and have confidence our customers would be interested in that solution. So the power situation is no clearer today than I think it was a year ago.

Speaker Change: Well, I wouldn't call it a roadblock, but it might be a long traffic light. So, you know, clearly without available power.

Steve Budorick: We've talked about this on prior calls. It's and factoring in the extremely high price of land today. It's tough to move forward until we have clarity where we can match power and land and have confidence our customer would be interested in that solution. So the power situation is no clear today that I think it was a year ago, and we await some clarity on available power, and we work the market to understand what pieces of land we could buy and develop solutions.

Speaker Change: We've talked about this on prior calls, it's in factoring in the extremely high price of land today.

Speaker Change: It's tough to move forward until we have clarity where we can match power and land and have confidence our customer would be interested in that solution.

Speaker Change: So, the power situation is no clearer today than I think it was a year ago, and we await some clarity on available power.

Stephen E. Budorick: And we await some clarity on available power, and we work the market to understand what pieces of land we could buy and develop solutions. But as I said last quarter, I don't expect expansion of that program during the current calendar year and, you know, could be into the later half of next year. Great, thank you.

Speaker Change: And we work the market to understand what pieces of land we could buy and develop solutions.

Steve Budorick: But, as I said last quarter, I don't expect, you know, to expand through the VAP program during the current calendar year, you know, it could be into the later half of next year. Great.

Speaker Change: But, as I said last quarter, I don't expect, you know, expansion of that program during the current calendar year and, you know, could be into the later half of next year.

Operator: Thank you.

Michael Griffin: Our next question comes on the line of Michael Griffin of City. Great. Thanks.

Speaker Change: Great, thank you.

Michael Anderson Griffin: Thank you. Our next question comes from the line of Michael Griffin, " Great, thanks." I'm just going back to leasing for a bit. Just given the high lease rate and limited vacancy in your portfolio, is it fair to expect kind of outsize future cash-releasing spreads or maybe greater lease escalators given the favorable supply and demand backdrop and then maybe following up on that for your non-US government leases? Have you been able to push leasing more for these kind of tenants? So I think what you're seeing this year is the benefit of...

Speaker Change: Thank you.

Speaker Change: Our next question comes from the line of Michael Griffin of Citi.

Steve Budorick: Just going back to leasing for a bit, just given the highly straight and limited vacant senior portfolio, it was fair to expect kind of outsize future cash releasing spreads or maybe greater lease escalators, given the favorable supply demand backdrop and then maybe following up on that for your non US government leases. Have you have you been able to push leasing more for for these kind of tenants? So I think what you're seeing this year is the benefit of tighter supply and demand is manifesting itself in reduced free rent annual renewal, and that's flowing through our same office results in a pretty positive way.

Michael Anderson Griffin: Great, thanks. Just going back to leasing for a bit. Just given the high lease rate and limited vacancy in your portfolio, is it fair to expect kind of outsized future cash releasing spreads or maybe greater lease escalators given the favorable supply-demand backdrop? And then maybe following up on that, for your non-U.S. government leases, have you been able to push leasing more for these kind of tenants?

Speaker Change: So, I think what you're seeing this year is the benefit of tighter supply and demand is manifesting itself in reduced free rent and renewal.

Stephen E. Budorick: Tighter supply and demand is manifesting itself in reduced free rent and renewal, and that's flowing through our same office results in a pretty positive way with regard to market rent. You know, as we've talked about before, it's not the best metric to judge our company on because our markets are very stable. We don't get peaks, and we don't get crashes with recoveries, and the internal growth in our leases tends to move about with market rent. And so we get very little.

Steve Budorick: With regard to market rent, you know, as we've talked about before, it's not the best metric to judge our company, and because our markets are very stable, we don't get peaks, we don't get crashes with recoveries. And so we and the internal growth in our leases times tends to move about with market rent, and so we get a very little cash rent change on renewal and then continued growth. So I guess to wrap it up, where we're seeing the most advantage is lower free rent concessions, which is a big boost to cash.

Speaker Change: And that's flowing through our same office results in a pretty positive way.

Speaker Change: With regard to market rent, as we've talked about before, it's not the best metric to judge our company on because our markets are very stable.

Speaker Change: We don't get peaks. We don't get crashes with recoveries.

Speaker Change: and the internal growth in our leases.

Speaker Change: tends to move about with market rent.

Michael Anderson Griffin: Cash Rent Change on Renewal and then continued growth. So I guess to wrap it up, where we're seeing the most advantage is lower free rent concessions, which is a big boost to cash. Great. Appreciate that color, Steve.

Speaker Change: And so we get a very little.

Speaker Change: Cash Rent Change on Renewal.

Speaker Change: and then continued growth.

Speaker Change: So I guess to wrap it up, where we're seeing the most advantage is lower free rent concessions, which is a big boost to cash.

Steve Budorick: Great, appreciate that color, Steve.

Steve Budorick: I'm going to be curious to hear thoughts just on kind of the cybersecurity industry. Obviously, we saw the impact that the recent CrowdStrike outage, you know, had on things. So would you do an event like this is kind of a way to catalyze your tenants in your tenant base to invest more in cybersecurity and you know that this is a growing portion of your portfolio. So any kind of comment you could have on the outlook for that industry would be helpful. Well, you know, it's been a great performer for us since we first started to realize the benefit of U.S. Cyber Command being co-located at Fort Mead.

Stephen E. Budorick: I'm going to be curious about your thoughts just on the kind of cybersecurity industry. Obviously, we saw the impact that the recent CrowdStrike outage had on things. So would you view an event like this as kind of a way to encourage tenants in your tenant base to invest more in cybersecurity? And, you know, I know that this is a growing portion of your portfolio. So any kind of comment you could have on the outlook for that industry would be helpful. Well, you know, it's been a great performer for us since we first started to realize the benefit of U.S. Cyber Command being co-located at Fort Meade.

Speaker Change: Great. Appreciate that color, Steve. And I'd be curious to hear your thoughts just on kind of the cybersecurity industry. Obviously, we saw the impact that the recent CrowdStrike outage, you know, had on things. So would you view an event like this as kind of a way to catalyze tenants in your tenant base to invest more in cybersecurity?

Speaker Change: You know, I know that this is a growing portion of your portfolio, so any kind of comment you could have on the outlook for that industry would be helpful.

Steve: Well, you know, it's been a great performer for us since we first started.

Speaker Change: to realize the benefit of U.S. Cyber Command being co-located at Fort Meade. I think our total cyber tenancy, where we can tie new leases that we've achieved to the missions coming out of Cyber Command.

Steve Budorick: I think our total cyber tenancy, where we can tie new leases that we've achieved to the missions coming out of Cyber Command, is nearing three million square feet in our portfolio. And I have to say those tenants, they're not contracting very frequently; they're expanding. I think it's just a great fundamental set of tenants to have in your portfolio because the threat is asymmetric and it's an environment of casting innovation. The threat constantly innovates to defeat a so a protection. And so the protectors need to constantly innovate to protect that threat. I think you see that a little bit in the comment that we made about the idea of the cyber being earmarked for fourteen and a half billion as thirteen and a half billion dollars last.

Stephen E. Budorick: I think our total cyber tenancy, where we can tie new leases that we've achieved to the missions coming out of Cyber Command, is nearing 3 million square feet in our portfolio. And then I have to say, those tenants... They're not contracting. Very frequently, they're expanding. I think it's just a great fundamental set of tenants to have in your portfolio because the threat is asymmetric, and it's an environment of constant innovation. The threat constantly innovates to defeat the protection.

Speaker Change: is nearing three million square feet in our portfolio. And I have to say, those tenants, they're not contracting.

Speaker Change: very frequently they're expanding. I think it's just a great fundamental set of tenants to have in your portfolio because the threat is asymmetric and it's a environment of constant innovation.

Stephen E. Budorick: And so the protectors need to constantly innovate to protect that threat. I think you see that a little bit in the comment that we made about DoD cyber being earmarked for $14.5 billion. That's $13.5 billion last year. So the targeted $1 billion increase, that's about a 7 12% increase. On a long-term basis, if that's the compound rate, I'm pretty satisfied that we'll be well-served to continue to try to capture that tendency. Great, that's it for me. Thanks for your time.

Speaker Change: The threat constantly innovates to defeat a protection.

Speaker Change: And so the protectors need to constantly innovate.

Speaker Change: to protect that threat. I think you see that.

Speaker Change: A little bit in the comment that we made about DOD cyber being earmarked for $14.5 billion, that's $13.5 billion dollars last year.

Steve Budorick: Year. So, targeted $1 billion increase. That's about a 7.5%. On a long-term basis, that's a compound rate. I'm pretty satisfied that we'll be well-served to continue to try to capture that tendency.

Speaker Change: So, targeted $1 billion increase, that's about a seven and a half percent.

Speaker Change: On a long-term basis, if that's the compound rate, I'm pretty satisfied that we'll be well-served to continue to try to capture that tendency.

Steve Budorick: Great. That's it for me. Thanks for the time. Thanks. Thank you.

Speaker Change: Great. That's it for me. Thanks for the time. Thanks.

Stephen Thomas Sakwa: Thank you. Our next question comes from the line of Steve Sakwa of Evercore ISI. Thanks, good afternoon. Steve, I guess I wanted to circle back on the development pipeline and the activity level that you're seeing. It's clearly very robust.

Steve Sakwa: Our next question comes from the line of Steve Sakwa. Evercore ISI. Thanks. Good afternoon. Steve, I guess I wanted to circle back on the development kind of pipeline and the activity level that you're seeing. It's clearly very robust. And it sounds like the big property at MVP has good demand, but maybe it's a little bit early to sign.

Speaker Change: Thank you. Our next question comes from the line of Steve Sakwa of Evercore ISI.

Stephen E. Budorick: And it sounds like the big property at MVP has good demand, but maybe it's a little bit early to sign. I guess what I'm trying to figure out is, what gets you guys to start new development projects? Is it pre-leasing?

Stephen Thomas Sakwa: Thanks, good afternoon. Steve, I guess I wanted to circle back on the development kind of pipeline and the activity level that you're seeing. It's clearly very robust.

Stephen Thomas Sakwa: It sounds like the big property of NBP has good demand, but maybe it's a little bit early to sign. I guess what I'm trying to figure out is what gets you guys to start new development projects?

Steve Budorick: I guess what I'm trying to figure out is what gets you guys to start new development projects? Is it pre-leasing? Is it getting some of these existing projects? You know, closer to the finish line. It sounds like there's so much good demand. I'm not sure why you're not starting more projects today.

Stephen E. Budorick: Is it getting some of these existing projects closer to the finish line? This sounds like there's so much good demand. I'm not sure why you're not starting more projects today.

Speaker Change: Pre-leasing, is it getting some of these finished line? It sounds like there's so much good demand. I'm not sure why you're not starting more projects today.

Steve Budorick: Well, we tend to be pretty conservative on our commitment to new supply until we see immediate opportunity to satisfy what we've already started. We have three inventory buildings with vacancy. We see that demand. As those. Buildings as the demand, near leases, we're already prepared in planning subsequent buildings to bring to market quickly. For instance, at the National Business, or I'm sorry, Redstone Gateway, we are ready to go to permit on our next inventory building. We've already prepared the site. We're ready to start on, you know, blow great improvements and be up in call of 12 months.

Stephen E. Budorick: Well, we tend to be pretty conservative in our commitment to new supply until we see an immediate opportunity to satisfy what we've already started. We have three inventory buildings with vacancy; we see the demand. As those buildings, as the demand nears leases, we're already prepared and planning subsequent buildings to bring to market quickly, for instance at the Redstone Gateway. We are ready to go to permit on our next inventory building. We've already prepared the site.

Speaker Change: Well, we tend to be pretty conservative on our commitment to new supply until we see immediate opportunity to satisfy what we've already started.

Speaker Change: We have three inventory buildings with vacancy. We see the demand as those buildings, as the demand nears leases, we're already prepared in planning subsequent buildings to bring to market quickly.

Speaker Change: for instance, at the Redstone Gateway.

Speaker Change: We are ready to go to permit on our next inventory building. We've already prepared the site. We're ready to start on below-grade improvements and be up in, call it, 12 months.

Stephen E. Budorick: We're ready to start on, you know, below-grade improvements and be up in, call it, 12 months. So we like to have a posture of preparedness, but we don't want to put out too much capital at risk until we see that demand materialize. Okay, thanks. And then maybe just turning to some of the non-core assets, some of the, you know, downtown Baltimore assets. You know, just how are you thinking about those?

Steve Budorick: So we like to have a past year of preparedness, but we don't want to put out too much capital at risk. Do we see that demand materializing? Okay, thanks.

Speaker Change: So, we like to have a posture of preparedness, but we don't want to put out too much capital at risk until we see that demand materializing.

Steve Budorick: And then maybe just turning to some of the non-core assets, some of the downtown Baltimore assets. You know, just how are you thinking about those? I know, you know, T-Row prices are kind of getting set to move out of their headquarters building and move further east in Baltimore, which will create some more vacancy, which isn't too far from some of your buildings there on Light and Pratchery. So, you know, how are you thinking about either leasing on those and then ultimately the disposition of those Baltimore assets as well as 2100 L Street?

Stephen E. Budorick: I know, you know, T. Rowe Price is kind of getting set to move out of their headquarters building and move further east in Baltimore, which will create some more vacancy, which isn't too far from some of your buildings there on Light and Pratt Street. So, you know, how are you thinking about, A, the leasing on those, and then ultimately the disposition of those Baltimore assets, as well as 2100 Elstree? Well, let me take that in reverse order.

Speaker Change: Okay, thanks. And then maybe just turning to some of the non-core assets, some of the, you know, downtown Baltimore assets, you know, just how are you thinking about those? I know, you know, T. Rowe Price is kind of getting set to move out of there.

Speaker Change: headquarters building and move further east in Baltimore which will create some more vacancy which you know isn't too far from some of your buildings there on Light and Pratt Street. So you know how are you thinking about A, the leasing on those and then ultimately the disposition of those Baltimore assets as well as 2100 L Street?

Steve Budorick: Well, let me take that in reverse order. So 2100 L at 92% lease, the building stabilized. It has inherent value to sell. We need a capital market environment that will support a proper valuation. And that really speaks to the cost of debt for a buyer and availability of debt. And that's just not today. So we think we're launch ready when the market is in a position to get a proper valuation.

Stephen E. Budorick: So 2100L at 92% lease, the building's stabilized. It has inherent value to sell. We need a capital market environment that'll support a proper valuation. And that really speaks to the cost of debt for a buyer and the availability of debt. And that's just not today.

Speaker Change: Well let me take that in reverse order. So 2100 L and 92% lease, the building stabilized.

Speaker Change: It has inherent value to sell. We need a capital market environment that will support a proper valuation, and that really speaks to the cost of debt for a buyer and availability of debt.

Stephen E. Budorick: So we think we're launch ready when the market is in a position to get a proper evaluation. With regard to downtown Baltimore. Yes, indeed, TRO will vacate that building, leaving it with a significant amount of vacancy. We consider that a potential, significant challenge relative to our 100 Light, which has quite a bit of vacancy, but it looks like the good news is that the owners of that building are not very well capitalized. And for them to, kind of, interpret what we've heard in the market. To get a deal, they're going to need incremental financing from a lender. I just don't think that's going to win in today's environment.

Speaker Change: And that's just not today. So we think we're launch ready when the market is in a position.

Steve Budorick: With regard to downtown Baltimore. more. Yes, indeed, Tiro will vacate that building, leaving it a significant amount of vacancy. We consider that a potential significant challenge relative to our 100 light building, which has quite a bit of vacancy. But it looks like the good news is that the owners of that building are not very well capitalized. And for them to kind of interpreting what we've heard in the market, to get a deal, they're going to need incremental financing from a lender. I just don't think that's going to win in today's environment. But we are laser focused on the opportunities in the market, competing well for them and getting leases reestablished in the vacancy at 100 Light.

Speaker Change: to get a proper valuation.

Speaker Change: With regard to downtown Baltimore.

Speaker Change: Yes, indeed, TRO will vacate that building, leaving a significant amount of vacancy.

Speaker Change: We consider that a potential.

Speaker Change: significant challenge relative to our 100-light building.

Speaker Change: which has quite a bit of vacancy.

Speaker Change: But it looks like the good news is that the owners of that building are not very well capitalized. And for them to...

Speaker Change: kind of interpreting what we've heard in the market. To get a deal, they're going to need incremental financing from a lender. I just don't think that's going to win in today's environment.

Stephen E. Budorick: But we are laser focused on the opportunities in the market. [inaudible] With regard to capital markets, again, we got to have a market where a buyer can finance an acquisition to give us a proper value before we'll bring it back. Okay, thanks. Just one quick follow-up on the $2100. Would you be willing to do any kind of seller financing on that?

Speaker Change: But we are laser focused on the opportunities in the market.

Speaker Change: competing well for them in getting leases re-established in the vacancy at 100 light. And then the other two buildings compete in their own kind of micro market. We have pretty good demand on both of them. I think you'll see their occupancies improve over the next two quarters.

Steve Budorick: And then the other two buildings compete in their own kind of micro-market. We have pretty good demand on both of them. I think you'll see their activities improve over the next two quarters.

Steve Budorick: With regard to capital markets again, we got to have a market where a buyer can finance an acquisition to give us a proper value for a rent to market. Okay, thanks.

Speaker Change: With regard to capital markets, again, we've got to have a market where a buyer can finance an acquisition to give us a proper value before we'll bring it to market.

Stephen E. Budorick: Obviously, capital markets are getting better, and rates are coming down. But would you do seller financing on that building to effectuate a transaction sooner? With a significant downstroke, yeah.

Steve Budorick: Just one quick follow-up on the 2100L. Would you be willing to do any kind of seller financing on that? Obviously, capital markets are getting better and rates are coming down. But would you do seller financing on that building that affects you way to a transaction sooner? With a significant don't stroke, yeah. Okay, great thing.

Speaker Change: Okay, thanks. Just one quick follow-up on the 2100L. Would you be willing to do any kind of seller financing on that? Obviously, capital markets are getting better and rates are coming down, but would you do seller financing on that building to effectuate a transaction sooner?

Stephen E. Budorick: Okay, great, thanks. That's it for me. Thank you. Our next question comes from the line of Camille Bonnel of Bank of America. Hi, everyone.

Speaker Change: With a significant downstroke, yeah.

Steve Sakwa: That's it for me. Thank you.

Speaker Change: Okay, great, thanks. That's it for me.

Camille Bonnel: My next question comes from the line of Camille Benel of Bank of America.

Speaker Change: Thank you.

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

Camille Bonnel: Hi, everyone. I appreciate that the pipeline remains robust, but I'm curious as we get closer to the elections if you're starting to see any slowdown in decision-making from your tenants, or just a difference in mindset, whether that be on your vacancy or development pipeline? Well, so it's tough to know what's inside the head of our tenants because we just don't have clarity in what they're thinking is. But as long as I've been at the company, I've never really seen the election result influence the need for lease space. It's more from our viewpoint, contractors waiting to get confidence on an award win. You know, planning for the facility to verify that they're ready to move forward.

Camille Bonnel: I appreciate that the pipeline remains robust, but I'm curious as we get closer to the elections if you're starting to see any slowdown in decision making from your tenants or just a difference in mindset, whether that be on your vacancy or development pipeline. Well, so it's tough to know what's inside the heads of our tenants because, you know, we just don't have clarity into what their thinking is. But as long as I've been at the company, I've never really seen the election result influence, the need for leased space, it's more from our viewpoint, contractors waiting to get confidence on an award win, planning for the facility to verify that they're ready to move forward. It really tends to be more focused on the contractors. So my answer is no; I have no evidence that the elect are influencing decisions.

Camille Bonnel: Hi everyone. I appreciate that the pipeline remains robust, but I'm curious as we get closer to the elections if you're starting to see any slowdown in decision-making from your tenants or just a difference in mindset whether that be on your vacancy or development pipeline.

Speaker Change: Well so it's tough to know what's inside the head of our tenants because you know we just don't have clarity into what their thinking is but as long as I've been at the company I've never really seen the election result influence

Speaker Change: the need for leased space. It's more from our viewpoint.

Speaker Change: you know, planning for the facility to verify that they're ready to move forward. It really tends to be more focused at the contractor's business.

Steve Budorick: It really tends to be more focused at the contractors' business.

Camille Bonnel: So my answer is not; I have no evidence that the election is influencing decisions. Got it.

Speaker Change: So, my answer is no, I have no evidence at the election.

Stephen E. Budorick: Got it. And looking towards Redstone Arsenal, the retention there was much lower this quarter, and you have a few projects under development as well as the new opportunities that you mentioned in that market. So could you expand a bit more on what's driving the move-outs there? Yeah, so the two small tenants downsized, but the largest of the non-renewals we got, or reported, was a contractor who we gave temporary space in one of our buildings off of Redstone Gateway. So they had time for us to build them a new building, and we moved that contractor into their new building and took back their swing. So that was the bigger driver.

Steve Budorick: And looking towards Redstone Arsenal, the retention there was much lower this quarter, and you have a few projects under development as well as the new opportunities that you mentioned in that market. So could you expand a bit more on what's driving the move out there? Yeah, so the two small tenants downsized, but the largest of the non-renules we got or reported was a contractor who we gave temporary space in one of our buildings off of Redstone Gateway. So they had time for us to build them a new building. And we moved that contractor into their new building and took back their space.

Speaker Change: is influencing decisions.

Speaker Change: Got it. And looking towards Redstone Arsenal, the retention there was much lower this quarter and you have a few projects under development as well as the new opportunities that you mentioned in that market. So could you expand a bit more on what's driving the move out there?

Speaker Change: Yeah, so the two small tenants downsized, but the largest of the...

Speaker Change: non-renewals we got.

Speaker Change: was a contractor who we gave temporary space in one of our buildings off of Redstone Gateway, so they had time for us to build them a new building.

Speaker Change: And we moved that contractor into their new building and took back their swing space.

Steve Budorick: So that was a bigger driver. And if you look at the very small amount of square footage.

Speaker Change: So that was the bigger driver, and if you look at the volume, it's a very small amount of square footage.

Camille Bonnel: Okay, thanks.

Camille Bonnel: And if you look at the volume, it's a very small amount of square footage. Okay, thanks. And lastly, can you please elaborate a bit more on the acquisition guidance update this quarter? Is it more of a timing factor of when you expect to close on a deal?

Camille Bonnel: And lastly, can you please elaborate a bit more on the acquisition guidance update this quarter? Is it more of a timing factor when you expect to close on the deal, or has anything changed in what you're seeing in the investment market? Our update was of our development spend. So it's really the forecast we have for just development capital and invested in our existing pipeline that's in the ground, as well as the capital we're anticipating investing in new projects later in the year. Okay, got it.

Speaker Change: Okay, thanks. And lastly, can you please elaborate a bit more on the Acquisition Guidance Update this quarter? Is it more of a timing factor when you expect to close on a deal or has anything changed in what you're seeing in the investment market?

Stephen E. Budorick: Or has anything changed in what you're seeing in the investment market? Our update was on our development spend, so it's really the forecast we have for just development capital invested in our existing pipeline that's in the ground, as well as the capital we're anticipating investing in new projects later. Okay.

Speaker Change: Our update was of our development spend.

Speaker Change: So, it's really the forecast we have for just development capital invested in our existing pipeline that's in the ground, as well as the capital we're anticipating investing in new projects later in the year.

Peter Abramowitz: Thank you.

Peter Abramowitz: My next question comes on the line of Peter Abramowitz, up Jeff Freeze. Thanks. Yeah, most of my questions have been answered. But I guess just to hear first start out, I guess it's become much quieter on this front and not a top conversation much anymore.

Speaker Change: Okay, got it. Thank you.

Camille Bonnel: Thank you. Thank you. My next question comes from the line of Peter Abramowitz of Jeff.

Speaker Change: Thank you. Our next question comes from the line of Peter Abramowitz of Jeffries.

Peter Dylan Abramowitz: Yeah, most of my questions have been answered, but I guess just to hear, first off, I guess it's become much quieter on this front and not a topic of conversation much anymore, but just wondering if you can comment on construction costs, sort of how things are trending there, and how you feel relative to the cost of capital and to your underwriting year. So the rate of increase in construction costs has clearly abated, I would say, year-to-date, and is pretty close to stable.

Peter Dylan Abramowitz: Thanks, yeah, most of my questions have been answered, but I guess just to hear, first to start out, I guess it's become much quieter on this front and not a topic of conversation much anymore, but just wondering if you can comment on construction costs.

Steve Budorick: But just want to know if you can comment on construction costs, sort of how things are trending there and how you feel relative to cost capital and to your underwriting yields. So the rate of increase in construction costs has clearly abated. I would say near-to-date it is pretty close to stable. We're not seeing big increases like we did over the last few years. Having said that, it cost a lot more to build building today than it did three years ago. And cost capital has been essentially kind of sent this year, maybe a little bit improved as we get into the mid-year.

Speaker Change: Sort of how things are trending there and how you feel relative to cost capital and to your underwriting yields.

Speaker Change #100: So, the rate of increase in construction costs...

Speaker Change #101: has clearly abated, I would say, year-to-date.

Peter Dylan Abramowitz: We're not seeing big increases like we did over the last few years. However, having said that, it costs a lot more to build a building today than it did three years ago. And cost of capital has been essentially constant this year, maybe a little bit improved as we get into the mid-year. So it's still a challenge to get rents to support new development. I think that has some impact on our overall ability to generate development progress. But we have.

Speaker Change #102: pretty close to stable.

Speaker Change #103: We're not seeing big increases like we did over the last few years.

Speaker Change #103: Having said that, it costs a lot more to build a building today than it did three years ago.

Speaker Change #103: and Trust Capital is...

Speaker Change #103: We've been essentially absent this year, maybe a little bit improved as we...

Steve Budorick: So it's still a challenge to get rents to support new development. I think that has some impact on our overall ability to generate development progress.

Speaker Change #103: get into the mid-year. So it's still a challenge to get rents to support.

Speaker Change #103: new development. I think that has some impact on our overall ability to generate development progress.

Steve Budorick: But we have not yet seen construction costs start to decrease in a more competitive environment. All right, that's helpful. Thank you, Steve.

Stephen E. Budorick: We have not yet seen construction costs start to decrease in a more competitive environment. All right, that's helpful. And then one on just the overall sort of market for your assets. Have you seen any sales in the transaction market, particularly for defense contractors or government build-to-suits, particularly the BW Corridor, but overall in the portfolio? Any sales that give you a sense of cap rates and pricing for those assets in your portfolio?

Speaker Change #103: [inaudible]

Speaker Change #103: We have not yet seen construction costs start to decrease in a more competitive environment.

Steve Budorick: And then one on just the overall sort of market for your assets. Have you seen any sales in the transaction market, particularly for defense contractors or government-build disputes, particularly in the BW quarter, but overall in the portfolio? Any sales that give you a sense of cap rates and pricing for those assets in your portfolio?

Speaker Change #104: All right, that's helpful. Thank you, Steve. And then one on just the overall sort of market for your assets. Have you seen any sales in the transaction market, particularly for

Speaker Change #105: Defense Contractor or Government Build-to-Suits, particularly in the BW Corridor, but overall in the portfolio. Any sales that give you a sense of cap rates and pricing for those assets in your portfolio?

Peter Dylan Abramowitz: Nothing I can speak to right now. There were a few acquisition opportunities we looked at over the last year that were not in the BW corridor where we observed the transaction and saw prices bid to a level below what we would have paid. So pretty aggressive pricing. And those involve defense contractor building.

Steve Budorick: Nothing I could speak to you right now. There were a few acquisition opportunities we licked over the last year that were not in the BW quarter, where we observed the transaction and saw prices bid to a level below what we would have paid. So pretty aggressive pricing. And those involved defense contractor building. and so I think if you have a good asset with a mission-oriented defense contractor, there's still a tremendous amount of value in those assets. Sure, and I guess just to follow up on that, where did the pricing go from an initial cap or a perspective that kind of precluded you from following up on going through with those?

Speaker Change #106: Nothing I can speak to right now. There were a few acquisition opportunities we looked at over the last year.

Speaker Change #106: that we're not in the BW corridor, where we...

Speaker Change #107: observed the transaction and saw...

Speaker Change #107: prices bid to a level below what we would have paid.

Stephen E. Budorick: So I think if you have a good asset with a mission-oriented defense contractor, there's still a tremendous amount of value in those assets. Sure. And I guess just to follow up on that, where did the pricing go from an initial cap rate perspective that kind of precluded you from following up on going through? Well, below 8% in... My recollection is close to seven.

Speaker Change #107: So, pretty aggressive pricing, and those involve defense contractor buildings.

Speaker Change #107: And so I think if you have a good asset with a mission-oriented defense contractor, there's still a tremendous amount of value in those assets.

Speaker Change #108: Sure, and I guess just to follow up on that, where did the pricing go from an initial CAFRA perspective that kind of precluded you from following up on going through with those?

Operator: Well, below 8% in my recollections, closer to 7. Got it, the telephone. Thank you. Once again, to ask a question, please press star 11 on your telephone. Again, that star 11 on your telephone to ask a question.

Speaker Change #108: Well, below 8% in...

Peter Dylan Abramowitz: Got it. That's helpful. Thank you. Thank you. Once again, to ask a question, please press star 11 on your telephone. Again, that's star 11 on your telephone to ask a question.

Speaker Change #109: My recollection is closer to seven.

Speaker Change #110: Got it. That's helpful. Thank you.

Speaker Change #111: Thank you. Once again, to ask a question, please press star 11 on your telephone. Again, that's star 11 on your telephone to ask a question.

Dylan Burzinski: Our next question comes from the line of Dylan Burzinski of Green Street. Hi guys, thanks for taking the question. Just curious how you guys are thinking about future occupancy growth, given that occupancy is now approaching the mid 90% range. I mean, are we sort of approaching frictional vacancy levels in the portfolio today?

Operator: Our next question comes from the line of Dylan Burzinski of Green State. Hi guys. Thanks for taking the question. I was just curious how you guys are thinking about, you know, future occupancy growth given that occupancy is now approaching, call it the mid 90% range. I mean, are we sort of approaching frictional vacancy levels in the portfolio today? Or do you guys think you can sort of move occupancy past, call it, the 94, 95% range over the next few years? Well, we're never satisfied with where we are, and we're going to continue to try to fill every square foot. But matching the vacancy to the demand gets much tougher as you're over 95% leased.

Speaker Change #112: Our next question comes from the line of Dylan Burzinski of Green Street.

Dylan Burzinski: Hi guys. Thanks for taking the question. Just curious how you guys are thinking about, you know, future occupancy growth given that occupancy is now approaching, call it the mid-90% range. I mean,

Steve Budorick: Are you guys think you can sort of move occupancy past the 94-95% range here of the next few years? Well, we're never satisfied with where we are, and we're going to continue to try to fill every square foot, but managing the vacancy to the demand gets much tougher as you're over 95% leased. So I'd like to say we're going to continue to make some incremental progress, but it's not going to be easy.

Dylan Burzinski: Are we sort of approaching frictional vacancy levels in the portfolio today, or do you guys think you can sort of move occupancy past, call it the 94-95% range here over the next few years?

Speaker Change #116: Well, we're never satisfied with where we are, and we're going to continue to try to fill every square foot. But matching the vacancy to the demand gets much tougher as you're over 95%, at least.

Dylan Burzinski: So I'd like to say we're going to continue to make some incremental progress, but it's not going to be easy. And then, as a sort of a parallel to that, given where occupancy is today, given sort of the demand drivers that you outlined on the call, are you guys, do you guys imagine yourselves being able to sort of push? embedded rent bumps in leases, or has that not changed at all over the last few years?

Dylan Burzinski: So, I'd like to say we're going to continue to make some incremental progress, but it's not going to be easy.

Steve Budorick: And then, as a sort of a parallel to that, given where occupancy is today, given sort of the demand drivers that you outlined on the call. Are you guys envision yourself being able to sort of push embedded rent bums and leases or is that not changed at all over the last few years and where should we expect that to sort of go on a go for basis. Well, from quarter to quarter, those bumps will move a bit. We've had a couple quarters where they are a little higher than they are in this quarter. We're always trying to push on the entirety of the profitability of the lease.

Speaker Change #114: And then as a sort of a parallel to that, given where occupancy is today, given sort of the demand drivers that you outlined on the call, do you guys envision yourselves being able to sort of push

Stephen E. Budorick: And where should we expect that to sort of go on a go-forward basis? Well, from quarter to quarter, those bumps will move a bit. We've had a couple of quarters where they were a little higher than they are this quarter.

Speaker Change #115: embedded rent bumps in leases or is that not changed at all over the last few years and and where should we expect that to sort of go on a go-forward basis?

Speaker Change #117: Well, from quarter to quarter, those bumps will move a bit. We've had a couple of quarters where they were a little higher than they are this quarter. We're always trying to push on the

Dylan Burzinski: We're always trying to push the boundaries of the entirety of the profitability of a lease. So I mean, there's some trade-offs.

Steve Budorick: So, I mean, there's some trade-offs. You know, we'll push across the board and get what we can. Thank you.

Speaker Change #117: entirety of the profitability of a lease. So, I mean, there's some trade-offs, you know, we'll push across the board and get what we can.

Stephen E. Budorick: We'll push across the board and get where we can. Thanks. I appreciate the comment. Thank you. I will now turn the call back to Mr. Budorick for his closing remarks. So, thank you all for joining our call. We are in our offices, so please coordinate through Venkat. If you'd like a follow-up call, thanks again for joining us. Thank you for your participation today in the COP Defense Properties Second Quarter 2024 Results Conference. This concludes the presentation. You may now disconnect. Good day.

Steve Budorick: I will now turn the call back to Mr. Podoric for closing remarks. So thank you all for joining our call. We are in our offices. So please coordinate through.

Speaker Change #118: Thanks, appreciate the comment.

Speaker Change #118: Thank you. I will now turn the call back to Mr. Budorick for closing remarks.

Speaker Change #119: So thank you all for joining our call.

Operator: If you'd like to follow up call, thanks again for joining us. Thank you for your participation today in the cop defense property. Second quarter, 2024 results conference call.

Speaker Change #118: We are in our offices, so please coordinate through Venkat. If you'd like a follow-up call, thanks again for joining us.

Operator: This concludes the presentation. You may now disconnect. Good day. Thank you.

Speaker Change #118: Thank you for watching!