Q1 2025 COPT Defense Properties Earnings Call

Unknown Executive: Good day, ladies and gentlemen. Welcome to the COP Defense Properties first quarter 2025 results conference call. As a reminder, today's call is being recorded.

Good day, ladies and gentlemen, welcome to the defense properties first quarter 2025 results Conference call. As a reminder, today's call is being recorded at this time I will turn the call over to Venkat commonality cop defenses, Vice President of Investor Relations. Mr. <unk>. Please go ahead.

Venkat Kommineni: At this time, I will turn the call over to Venkat Kommineni, COP Defense's Vice President of Investor Relations. Mr. Kommineni, please go ahead. Thank you, Howard.

Unknown Executive: Good afternoon and welcome to COP Defense's conference call to discuss first quarter.

Howard: Thank you Howard and good afternoon, and welcome to Cop defenses conference call to discuss first quarter results with me today are Steve <unk>, President and CEO, Britt Snyder Executive Vice President and COO, and Anthony Mifsud Executive Vice President and CFO.

Unknown Executive: With me today are Steve Budorick, President and CEO, Britt Snider, Executive Vice President and COO, and Anthony Mifsud, Executive Vice President. Reconciliations of GAAP and non-GAAP financial measures that management discusses are on our website, in the results, press release and presentation, and there are supplemental As a reminder, forward-looking statements made during today's call are subject to risk. which are discussed in our Actual events and results can differ materially from these four looking Good afternoon, and thank you for joining us.

Reconciliations of GAAP and non-GAAP financial measures that management discusses are available on our website.

Howard: <unk> press release and presentation and there are supplemental information package as a reminder, forward looking statements made during today's call are subject to risks and uncertainties, which are discussed in our SEC filings.

Howard: Actual events and results can differ materially from these forward looking statements and the company does not undertake a duty to update them Steve.

Speaker Change: Good afternoon, and thank you for joining us.

Stephen Budorick: We're off to a strong start in 2025. And our meeting are in some cases on track to exceed all of our 2025 targets.

Speaker Change: We are off to a strong start in 2025.

Speaker Change: And there are meeting or in some cases are on track to exceed over 2025 targets.

Stephen Budorick: Given our strong results in 2024 and our outlook for 2025, We increased our annual dividend by four cents, which marks our third consecutive year of dividend increases, while continuing to maintain a very healthy AFFO payout ratio of 65%. FFO per share, as adjusted for comparability, was $0.65, right on the midpoint of guidance, a 4.8% year-over-year increase. St. Property Cash NOI increased 7.1% year-over-year. Anthony will provide some context, but we reiterate our full year guidance of 2.7% at the midpoint as we recognize some expected one-time items in the first quarter.

Speaker Change: Given our strong results in 2024, and our outlook for 2025.

Speaker Change: We increased our annual dividend by four cents, which marks our third consecutive year of dividend increases while continuing to maintain a very healthy clip.

Speaker Change: The payout ratio of 65%.

Speaker Change: <unk> per share as adjusted for comparability was 65 cents right on the midpoint of guidance of four 8% year over year increase safe.

Speaker Change: Same property cash NOI increased seven 1% year over year.

Speaker Change: Anthony will provide some context, but we reiterate our full year guidance.

Speaker Change: Two 7% at the midpoint as we recognized some expected one time items in the first quarter.

Stephen Budorick: We're off to an excellent start on the leasing front. We've signed 179,000 square feet of vacancy leasing year-to-date, which is 45% of our full-year target. The 23 deals were distributed across each of our markets. And nearly three quarters of the activity was at the Fence IT location. These executions amount to 15% of the space we had vacant at the beginning of the year. We also executed 100,000 square feet of investment leasing year to date across three properties, including a 48,000 square foot lease at Franklin Center and Columbia Gateway. a 41,000 square foot lease at 8100 Redout Road in Huntsville, and a 14,000 square foot lease at 9700 Advanced Gateway, also in Huntsville, bringing that development to 100% lease.

Speaker Change: We are off to an excellent start on the leasing front.

Speaker Change: We signed 179000 square feet of vacancy leasing year to date, which is 45% of our full year target.

Speaker Change: The 23 deals are distributed across each of our markets.

Speaker Change: Nearly three quarters of the activity was at the franchise locations.

Speaker Change: These executions amount to 15% of the space, we had vacant at the beginning of the year.

Speaker Change: We also executed a 100000 square feet of Investor at least seen year to date.

Speaker Change: Three properties.

Speaker Change: <unk>.

Speaker Change: 48000 square foot lease at Franklin Center in Columbia Gateway.

Speaker Change: 41000 square foot lease at 8100 Rideout Road.

Speaker Change: Israel and a 14000 square foot lease at 9700 advanced Gateway also of Huntsville.

Speaker Change: Bringing us to 100% lease.

Stephen Budorick: Tenant retention was very healthy, 75% during the quarter, even as we absorbed a few contractions and non-removal. We committed over $50 million of capital to a new investment at Redstone Gateway. In Huntsville, we only have two suites. to only 37,000 square feet available across our entire 2.5 million square foot portfolio. is our 25 operating properties are 98.5% leased today, with 23 of those buildings 100% Accordingly, we commence development of our next inventory building, 8500 Advanced Gateway. This is a 150,000-square-foot building, and we already have 90,000 square feet of prospects on this space from three large defense contractors.

Speaker Change: Tenant retention was very healthy 75% during the quarter.

Speaker Change: Even as we absorbed if you contractions and Nonrenewals.

Speaker Change: We committed over $50 million of capital.

Speaker Change: Our new investments at Redstone Gateway.

Speaker Change: In Huntsville, we only have two suites.

Speaker Change: 37000 square feet available across our entire two and a half million square foot portfolio.

Speaker Change: As our 25 operating properties are 98, 5% leased today with 23 of those buildings, 100% lease.

Speaker Change: Accordingly, we commenced development of our next inventory Burberry 8500 advanced Gateway.

Speaker Change: This is 150000 square foot probing and we already have 90000 square feet of prospects in this space for them through our strengths contractors.

Stephen Budorick: This new development continues our successful strategy of developing into visible demand. One statistic which illustrates the strength of our strategy and performance. is that our defense IT portfolio occupancy rate has exceeded 94% for 9 consecutive quarters.

Speaker Change: New development continues our successful strategy of developing into visible demand.

Speaker Change: One statistic, which illustrates the strength of our strategy and performance.

Speaker Change: Is that our defense portfolio occupancy rate has exceeded 94% for nine consecutive quarters.

Stephen Budorick: Turning the Guide. We are maintaining 2025 FFO per share guidance of $2.66 at the midpoint and narrowing the range as our year-to-date performance is tracking according to plan. This guidance implies 9 cents or 3.5% growth over 2024's exceptional results.

Speaker Change: Turning to guidance.

Speaker Change: We are maintaining 2025 <unk> per share guidance of $2.66 at the midpoint.

Speaker Change: And narrowing the range as our year to date performance is tracking according to plan.

Speaker Change: This guidance implies nine cents or three 5% growth.

Speaker Change: Over 'twenty 'twenty four is exceptional results.

Stephen Budorick: Now I want to make a few brief comments on the recent headlines. The primary questions we've received from investors and analysts over the past two months have centered on DOJ and defense spending. We have not seen and we do not expect to see. in impact from DOJ and the priority missions we support. This statement is reinforced by our conversations with our government and contractor tenants and further evidenced by our strong leasing activity in Pipeline. We believe priority missions will not be impacted by DOJ, and in fact, the 41,000 square foot investment lease we executed in Huntsville was with the Department of Defense and is an expansion of a priority program supporting missile © The U.S.

Speaker Change: Now I want to make a few brief comments on the recent headlines.

Speaker Change: The primary questions, we've received from investors and analysts over the past two months have centered on dose and defense spending.

Speaker Change: We have not seen and we do not expect to see an impact from those in the priority missions we support.

Speaker Change: This statement is reinforced by our conversations with our government contractor tenants and further evidenced by our strong leasing activity and pipeline.

Speaker Change: We believe priority missions will not be impacted by goes.

Speaker Change: And in fact, the 41000 square foot restaurant lease.

Speaker Change: Executing in Huntsville was with the department of Defense and is an expansion of a priority programs 40 missile defense.

Stephen Budorick: Department of Defense With respect to defense spending, in March, headlines emerged about an 8% cut. In actuality, the Secretary of Defense was referring to reallocating, not cutting, 8% of the defense budget from overhead to mission. The Secretary stated, and I quote, With Doge, we are focusing as much as we can on headquarters and fat and top line stuff that allows us to reinvest elsewhere, end quote. In addition, the DoD outlined 17 areas that would be exempt from DOJ cuts. and possibly be a beneficiary of reallocation. including Cybersecurity and funding for Cyber Command, Missile Defense and funding for Space Command.

Speaker Change: With respect to defense spending in March headlines <unk> got an 8% cut.

Speaker Change: In actuality the secretary of defense was referring to reallocating not 28% of the defense budget from overhead Commission.

Speaker Change: The Secretary stated and I quote.

Speaker Change: With those we are focusing as much as we can and headquarters and fat and pipeline stuff that allows us to reinvest elsewhere.

Speaker Change: In addition, the Vod outlines 17 areas there would be exempt from those cuts.

Speaker Change: And possibly be a beneficiary of reallocation.

Speaker Change: Including cyber security and funding for Cyber command missile defense and funding for space Command.

Stephen Budorick: Surface Ships and Nuclear Submarines, and Autonomous and Unmanned Aerials. These are all missions that our portfolio supports in our Fort Meade VW Corridor, Redstone Gateway, and Navy Support locations. Although the details of the fiscal year 2025 and expected fiscal year 2026 defense budget have not been released. The recent commentary suggests there will be increases in defense. In our view, the goal of the administration is to extract from defense spending more mission output for every dollar of input. while continuing to increase investment in the to achieve their ultimate goal of peace through strength. We believe the missions we serve could be beneficiaries of these policies and investments over time as they align with the administration's priorities for national security.

Speaker Change: Surface ships and nuclear submarines.

Speaker Change: Economists and unmanned aerial systems.

Speaker Change: These are all missions that our portfolio of sports and our Fort Meade BW corridor, Redstone Gateway and Navy support locations.

Speaker Change: Although the details for the fiscal year 2025, and expected fiscal year 2026 transparency.

Speaker Change: Have not been released the recent commentary suggests there will be increases in defense spending.

Speaker Change: In our view the role of the administration is to extract.

Speaker Change: Defense spending more mission output for every dollar of input.

Speaker Change: Continuing to increase investment in defense too.

Speaker Change: To achieve their ultimate goal of <unk>.

Speaker Change: We believe the missions, we serve could be beneficiaries of these policies and investments over time.

Speaker Change: As they align with the administration's priorities for National Defense.

Britt Snider: And with that, I'll turn the call over to Britt. Thank you, Steve. We finished the quarter with strong occupancy in both the total portfolio at 93.6% and the defense IT portfolio at 95.3%. We're off to a great start in terms of our leasing activity, and we're ahead of schedule for the year and our pipeline remains strong. During the first quarter, we executed 120,000 square feet of vacancy leasing comprised of 16 dealers. over 40% of which contains secure space and nearly 50% of which is tied to cyber activity. We had broad-based leasing activity throughout our markets, but Columbia Gateway was the standout.

Brett: And with that I'll turn the call over to Brett.

Brett: Thank you Steve.

Brett: We finished the quarter with strong occupancy in both the total portfolio at 93, 6% and the defense portfolio at 95, 3%.

Brett: We're off to a great start in terms of our leasing activity and we're ahead of schedule for the year and our pipeline remains strong.

Brett: During the first quarter, we executed 120000 square feet of vacancy leasing comprised of 16 deals.

Brett: Over 40% of which contain secure space and nearly 50% of which is tied to cyber activity.

Brett: We had broad based leasing activity throughout our markets by Columbia Gateway with the standout.

Britt Snider: We executed nearly 50,000 square feet of vacancy leasing in the park, including a 40,000 square foot expansion lease to a DoD cyber contract. In 2019, this contractor signed a 12,000 square foot lease with us in Columbia Gateway. As their business grew, they reached a significant milestone in the life cycle of a small to mid-sized contractor. which is the ability to control their own secure space to compete for, win, and execute high security contract. With this expansion, the tenant now leases over 50,000 square feet, a majority of which will be secure space, and we look forward to supporting their future.

Brett: We executed nearly 50000 square feet of vacancy leasing in the park, including a 40000 square foot expansion lease to a Dod cyber contractor.

In 2019, this contractor signed a 12000 square foot lease with us in Columbia Gateway as their business grew they reached a significant milestone in the lifecycle of a small to mid sized contractor, which is the ability to control their own secure space to compete for win and execute high security contract Awards.

Brett: With this expansion the tenant now leases over 50000 square feet, a majority of which will be secure space and we look forward to supporting our future growth.

Britt Snider: This is just another example of our success story in Columbia Gateway, which has become the hub for cyber innovators near Fort Meade. It also illustrates our unique relationship with defense contractors as their life-cycle landlord, as we provide high-quality properties in the best locations to support priority missions, the expertise to construct secure space to execute those missions. and the ability for these tenants to scale within our parks as their business grows while meeting their unique design and technology requirements. Sticking with the cyber theme, this quarter's cyber leasing volume was a continuation of the long-term trend we've been seeing.

Brett: This is just another example of our success story in Columbia Gateway, which has become the hub for cyber innovators near Fort Meade.

It also illustrates our unique relationship with defense contractors as their lifecycle landlord as we provide high quality properties in the best locations to support priority missions, the expertise to construct secure space to execute those missions and the ability for these tenants to scale within our parks as their business grows while meeting their unique design.

Brett: And technology requirements.

Brett: Yes.

Brett: Sticking with the cyber theme this quarter cyber leasing volume was a continuation of the long term trend we've been seeing.

Britt Snider: Since 2011, we've completed 3.2 million square feet of total leasing to DoD-related cybercrime. now representing over 12% of our portfolio. In fact, 2024 was our second highest year in terms of vacancy leasing tied to cyber activity. As shown on slide 15 of our flipbook, cyber leasing as a percentage of our vacancy leasing has steadily increased over the past 10 for monthly 10% to over 30%. Correlates with growth in funding for U.S. Cyber Command located at Fort The National Business Park and Columbia Gateway have been the prime beneficiaries of this growth given their proximity to... as these parks have captured roughly 70% of all cyber leasing in our portfolio over the Year-to-date, we have signed 179,000 square feet of vacancy leasing, nearly three-quarters of which is at our Defense IT location.

Brett: Since 2011, we've completed $3 2 million square feet of total leasing to Dod related cyber tenants now representing over 12% of our portfolio. In fact 2024 was our second highest year in terms of vacancy leasing tied to cyber activity.

Brett: As shown on slide 15 of our flipbook cyber leasing as a percentage of our vacancy leasing has steadily increased over the past 10 years from roughly 10% to over 30%, which correlates with growth and funding for U S. Cyber command located at Fort Meade.

Brett: The National business Park, and Columbia Gateway has been the prime beneficiaries of this growth given their proximity to Fort Meade as these parks have captured roughly 70% of all cyber leasing in our portfolio over the last 10 years.

Brett: Year to date, we have signed 179000 square feet of vacancy leasing nearly three quarters of which is that our defense it locations.

Britt Snider: Notwithstanding our impressive leasing executions, our leasing pipeline remains strong as well. We have 975,000 square feet of prospect. Under 95,000 square feet of these prospects are classified as in advance negotiations, which we define as over 90% likely to execute. Taken together, we have over 370,000 square feet of leases, either executed or in advanced negotiation. which amounts to 93% of our full-year target of 400,000 square feet, and we're still only in April. These totals also reflect the positive momentum in our other segment, with over 50,000 square feet of space leased year-to-date and another 50,000 square feet in advanced negotiations.

Brett: Notwithstanding our impressive leasing executions, our leasing pipeline remains strong as well.

Brett: 975000 square feet of prospects, which equates to a healthy activity ratio of 79% of the currently on lease space.

Brett: 195000 square feet of these prospects are classified as in advanced negotiations, which we define as over 90% likely to execute.

Brett: Taken together, we have over 370000 square feet of leases either executed or in advanced negotiations.

Brett: Which amounts to 93% of our full year target of 400000 square feet and we are still only in April.

Brett: Totals also reflect the positive momentum in our other segment with over 50000 square feet of space leased year to date and another 50000 square feet in advanced negotiations.

Britt Snider: Turning to renewal leasing, we executed 438,000 square feet in the first quarter, achieving a tenant retention of 75%. We renewed all the leases we had expected and absorbed non-renewals that we had negotiated in early 2023 and 2024, as we discussed last quarter. The full year outlook remains unchanged in the 75 to 85. The largest non-renewal was a non-defense tenant in Columbia Gateway, which provides us with another opportunity to further deepen our concentration of defense and cyber tenants in the submarine. Turning to large leases expiring through 2026, as shown on slide 17 of the flipbook. We renewed three large leases in the quarter, totaling 250,000 square feet with 88%.

Brett: Turning to renewal leasing we executed 438000 square feet in the first quarter, achieving a tenant retention of 75%.

Brett: We renewed all of the leases, we had expected and absorbed non renewals that we had negotiated in early 2023 and 2024 as we discussed last quarter.

Brett: Our full year outlook remains unchanged in the 75% to 85% range.

Brett: <unk> non renewal was the nondefense tenant in Columbia Gateway, which provides us with another opportunity to further deepen our concentration of defense and cyber tenants in the Submarket.

Brett: Turning to large leases expiring through 2026 as shown on slide 17 of the flipbook.

Brett: We renewed three large leases in the quarter totaling 250000 square feet with 88% retention.

Britt Snider: Over the last three quarters, we've renewed 1.1 million square feet of large leases at a 97%. That leaves 2.9 million square feet of large leases expiring over the next seven quarters. And we continue to expect a 95% retention rate on the full set of large leases expiring. On slide 18, we provided additional detail on the large government leases included in that population. These government leases consist of 13 full building leases totaling 2 million square feet. We continue to expect 100% retention on these leases. This confidence is driven by the fact that 97% of the square footage is located in secure facilities.

Brett: Over the last three quarters, we've renewed $1 1 million square feet of large leases at a 97% retention rate.

Brett: At least $2 9 million square feet of large leases expiring over the next seven quarters and we continue to expect a 95% retention rate on a full set of large leases expiring.

Brett: On slide 18, we provided additional detail on our large government leases included in that population.

Brett: These government leases consist of 13 full building leases totaling 2 million square feet. We continue to expect 100% retention on these leases.

Brett: This confidence is driven by the fact that 97% of the square footage is located and secure facilities. The government has invested significantly in these assets and our 30 year history of achieving 100% retention all tall buildings government leases.

Britt Snider: The government has invested significantly in these assets and our 30-year history of achieving 100% retention on full building government property. We've also been successful on the investment leasing front as we signed over 100,000 square feet year-to-date. At Franklin Center in Columbia Gateway, we signed a 48,000 square foot lease primarily supporting Navy cyber with a top 10 US Defense County. Franklin Center is now 78% leased, which is ahead of the pace assumed in our acquisition. And we have 140,000 square feet of prospects on the remaining 44,000 square feet of availability. At 8100 Rideout Road in Huntsville, we signed a 41,000-square-foot lease with the DoD for a missile defense...

Brett: We've also been successful in the investment leasing front as we signed over 100000 square feet year to date.

At Franklin Center in Columbia Gateway, We signed a 48000 square foot lease primarily supporting Navy cyber with a top 10 U S defense contractor Franklin Center is now 78% leased which is ahead of the pace assumed in our acquisition underwriting and we have 140000 square feet of prospects on the remaining 44000 square feet of availability.

Brett: At 8100 Rideout Road in Huntsville, We signed a 41000 square foot lease with the Dod for missile Defense mission and.

Britt Snider: And that property is now 79% leased with only one 27,000 square foot floor. And we have over 40,000 square feet of prospects for that. Importantly, both of these leases support two priorities for the administration. Cybersecurity and Missile Defense. And finally, at 9700 Advanced Gateway in Huntsville, we signed a lease for the remaining 14,000 square feet. to a leading firm in the field of fiber laser technology. Building, which just reached substantial completion two months ago. is now fully leased and demonstrates the efficacy of our strategy to develop indivisible development. With respect to our inventory building at National Business Park, we commenced development on NBP 400 last year to provide 138,000 square feet of inventory at the 4.3 million square foot National Business Park, which is 98,000 square feet.

Brett: And that property is now 79% leased with only $1 27000 square foot, Florida remaining and we have over 40000 square feet of prospects for that space.

Brett: <unk> both of these leases support two priorities for the administration.

Brett: Cyber security and missile defense.

Brett: Finally at 9700 advanced Gateway in Huntsville, We signed a lease for the remaining 14000 square feet to a leading firm in the field of fiber laser technology.

Brett: Building, which just reached substantial completion two months ago is now fully leased and demonstrates the efficacy of our strategy to develop into visible demand.

Brett: With respect to our inventory building a national business Park, we commenced development on MVP 400 last year to provide 138000 square feet of inventory at the $4 3 million square foot National business Park, which is 98% leased.

Britt Snider: This building is now substantially complete and our pipeline of prospects for this asset has grown to $340,000. One third of which is related to DoD cyber. 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 $1.2 million. Beyond that, we're tracking another one and a half million square feet of potential development. 100% of this 2.7 million square feet of demand for office space is at our defense sites.

Brett: This building is now substantially complete and our pipeline of prospects for this asset has grown to 340000 square feet, one third of which is related to Dod cyber activity.

Brett: 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 $1 2 million square feet.

Brett: And that we're tracking another one 5 million square feet of potential development opportunities.

Brett: 100% of this $2 7 million square feet of demand for office space is that our defense it locations.

Britt Snider: And in closing, our leasing activity to tenants executing priority missions is strong and broad-based throughout our defense IT portfolio, demonstrating that our portfolio and our leasing momentum have not been, and are not expected to be, impacted by any of the DOJ's actions. We are well-positioned to meet or beat our full year vacancy lease.

Brett: In closing our leasing activity to tenants executing priority missions is strong and broad based throughout our defense portfolio demonstrating at our portfolio and our leasing momentum has not been and are not expected to be impacted by any of those initiatives and we are well positioned to meet or beat our full year vacancy leasing target with that.

Anthony Mifsud: With that, I'll hand it over. Thank you, Britt. We reported first quarter FFO per share as adjusted for comparability of $0.65, which was at the midpoint of guidance and represents a year-over-year increase of 4.8%. We achieved the midpoint of guidance despite incurring half a penny from higher net weather-related expenses relative to our budget.

Anthony: I'll hand, it over to Anthony.

Anthony: Thank you Brad.

Anthony: We reported first quarter epitope per share as adjusted for comparability of <unk> 65.

Anthony: Which was at the midpoint of guidance and represents a year over year increase of four 8%.

Anthony: We achieved the midpoint of guidance, despite incurring half a penny from higher net weather related expenses relative to our budget.

Anthony Mifsud: you all have a good day. and an $8 million decline in our note receivable balance from the City of Huntsville due to a significant TIF repayment received last quarter. During the quarter, our same property cash NOI increased 7.1% and excluding the benefit from real estate tax refunds recognized in our other segment, the year-over-year increase was 4.3%. This growth was driven primarily by cash and OI increases of approximately 3% from the vast majority of our portfolio, driven by the embedded cash rent increases in virtually all of our leases. and the burn off of free rent on development leases placed into service in 2023 and on leases that commenced later in 2024.

Anthony: The year over year <unk> per share increased three absorbing.

Anthony: Absorbing a $2.05 reduction in interest income, resulting from the investment of the proceeds from our exchangeable note offering into development and acquisitions last year, which led to a $120 million lower average cash balance and an $8 million decline in our note receivable balance from the city of Huntsville due to a significant tiff repayment received last quarter.

Anthony: During the quarter, our same property cash NOI increased seven 1% and excluding the benefit from real estate tax refunds, recognizing our other segment the year over year increase was four 3%.

Anthony: This growth was driven primarily by cash NOI increases of approximately 3% from the vast majority of our portfolio driven by the embedded cash rent increases in virtually all of our leases and the burn off of free rent on development leases placed into service in 2023 and on leases that commenced later in 2024.

Anthony Mifsud: These items were partially offset by higher, year-over-year, net weather-related expenses. We are maintaining the midpoint of our full year guidance for same property cash NOI growth of 2.75%. We expect growth for the remainder of the year from the majority of the portfolio will be relatively consistent with the 3% growth generated in the first quarter, which will be diminished by the impact from the first quarter contractions and non-renewals and the timing differences from the receipt of real estate tax refunds in 2024 as compared to 2025. To be clear, we expect the refunds from the successful appeals in 2025 will approximate the amount received in 2024, and therefore have no impact on our expected full-year growth in same-property cash NOI, but creates quarterly revenues.

Anthony: These items were partially offset by higher year over year net weather related expenses.

Anthony: We are maintaining the midpoint of our full year guidance for same property cash NOI growth of 275%.

Anthony: We expect growth for the remainder of the year for the majority of the portfolio will be relatively consistent with the 3% growth generated in the first quarter, which will be diminished by the impact from the first quarter contractions in non renewals and timing differences from the receipt of real estate tax refunds in 2024 as compared to 2025.

Anthony: To be clear, we expect the refunds from the successful appeals in 2025 will approximate the amount received in 2024, and therefore have no impact on our expected full year growth in same property cash NOI, but creates quarterly noise.

Anthony Mifsud: Our balance sheet remains strong and well-positioned to take advantage of opportunities, and at quarter end, 98% of our debt remained at fixed rates. We have been funding, and expect to continue to fund, the equity component of our investments with cash flow from operations after the dividend on a leverage-neutral basis. and will continue to draw on the line of credit to fund the debt. With respect to debt maturities, we plan on pre-funding the capital required to refinance our $400 million, 2.25% bond, which matures in March of 2026. Our guidance continues to assume a $400 million bond issuance in the fourth quarter, and we plan on using the proceeds to temporarily pay down the outstanding balance on the line of credit and hold the excess proceeds as cash until the March maturity.

Anthony: Yes.

Anthony: Our balance sheet remains strong and well positioned to take advantage of opportunities and at quarter end, 98% of our debt remained at fixed rates.

Anthony: We have been funding and expect to continue to fund the equity component of our investments with cash flow from operations. After the dividend on a leverage neutral basis, and we will continue to draw on our line of credit to fund the debt component.

Anthony: With respect to debt maturities, we plan on pre funding the capital required to refinance our $400 million, 2.25% bond, which matures in March of 2026.

Anthony: Our guidance continues to assume a $400 million bond issuance in the fourth quarter and we plan on using the proceeds to temporarily pay down the outstanding balance on our line of credit and hold the excess proceeds as cash until the March maturity.

Anthony Mifsud: Despite the recent volatility in interest rates and in credit spreads in the fixed income market. Our bonds continue to trade at one of the tightest spreads to treasuries of any equal or higher rated office peer. With respect to guidance, we are affirming the midpoint of 2025 FFO per share at $2.66.

Anthony: Despite the recent volatility in interest rates and credit spreads in the fixed income market. Our bonds continue to trade at one of the tightest spreads to treasuries of any equal or higher rated office peer.

Anthony: With respect to guidance, we are affirming the midpoint of 2025 <unk> per share at $2 66.

Anthony Mifsud: while narrowing the range by one cent at the high and low end as the year is progressing right on track with our We're establishing second quarter guidance for FFO per share as adjusted for comparability in the range of 65 to 67.

Anthony: While narrowing the range by <unk> <unk> at the high end low end as the year is progressing right on track with our forecast.

We're establishing second quarter guidance for <unk> per share as adjusted for comparability and a range of 65 to 67.

Anthony Mifsud: With that, I'll turn the call back. Thank you.

With that I'll turn the call back to Steve.

Stephen Budorick: I'll close by summarizing our key accomplishments and messages. We achieved excellent results in the first quarter, highlighted by our leasing achievements. We delivered FFO per share growth of 4.8% year over year, marking our 19th consecutive quarter of year over year growth. We expect 2025 to be our seventh consecutive year of FFO per share growth. And our guidance implies an annual increase of three and a half percent. We increased the dividend again in the first quarter by 3.4% and have increased it by nearly 11% over the last three years. Our portfolio ended the year 95.1% lease, but we still set an aggressive target for vacancy leasing at 400,000 square feet.

Anthony: Thank you I'll close by summarizing our key accomplishments of messages.

Anthony: We achieved excellent results in the first quarter highlighted by our leasing achievements.

Anthony: We delivered <unk> per share growth of four 8% year over year, marking our 19th consecutive quarter of year over year growth.

We expect 2025 to be our seventh consecutive year.

Anthony: <unk> per share growth.

Anthony: And our guidance implies an annual increase of three 5%.

Anthony: We increased the dividend again in the first quarter by three 4%.

Anthony: It has increased by nearly 11% over the last three years.

Anthony: Our portfolio ended the year 95, 1% lease where we still set an aggressive target for vacancy leasing at <unk>.

Anthony: 400000 square feet.

Stephen Budorick: We're off to a strong start with over 370,000 square feet, either executed or in advanced negotiations year to date. and we are well positioned to meet or beat that target. We completed 103,000 square feet of investment leasing year to date.

Anthony: We're off to a strong start with over 370000 square feet, either executed or in advanced negotiations year to date.

Anthony: And we are well positioned to meet or beat that target.

Anthony: We completed 103000 square feet of investment leasing year to date.

Stephen Budorick: Our liquidity remains very strong, and we expect to continue self-funding the equity component of our capital investments going forward. And we continue to anticipate compound annual FFO per share growth of 4% between 2023 and 2026. Again, we're off to a great start in 2025, and we expect to deliver another successful year.

Anthony: Liquidity remains very strong and we expect to continue self funding the equity component of our capital investments going forward.

Anthony: And we continue to anticipate compound annual <unk> per share growth.

Anthony: 4% between 23, 3% in 2026.

Anthony: Again, we're off to a great start in 2025, and we expect to deliver another successful year.

Unknown Executive: With that, operator, please open the call for questions. Thank you, Mr. Budorick.

Anthony: With that operator, please open the call for questions.

Speaker Change: Thank you Mr <unk>.

Unknown Executive: Ladies and gentlemen, if you have a question or comment at this time, please press star one, one on your telephone keypad. If your question has been answered or you wish to remove yourself from the queue, simply press star one, one again. Again, if you have a question or comment at this time, please press star 11 on your telephone keypad.

Speaker Change: Ladies and gentlemen, if you have a question or comment at this time. Please press star one one on your telephone keypad. If your question has been answered or you wish to remove yourself from the queue simply press star one again.

Speaker Change: Again, if you have a question or comment at this time. Please press star one one on your telephone keypad.

Unknown Executive: Please stand by while we compile the Q&A round.

Speaker Change: Please standby, while we compile the Q&A roster.

Blaine Heck: Our first question or comment comes from the line of Blaine Heck from Wells Fargo. Your line is open. Great, thanks. Good afternoon.

Operator: Our first question or comment comes from the line of Blaine Heck from Wells Fargo. Your line is open.

Stephen Budorick: Steve, can you give us any updates you might have on the potential Space Command relocation to Huntsville and also the potential for additional missile defense programs in Huntsville that you referenced on last call? Sure. So there's, I'll just say there's a lot in the newsprint, particularly in the city of Huntsville. And there are very high expectations that a decision to relocate the command will occur. The timing, we believe, is within weeks, maybe a month. and it should be a pretty exciting opportunity for our shareholders overall. It's a little.

Operator: Great. Thanks, Good afternoon, Steve can you give us any update you might have on the potential space command relocation to Huntsville, and also the potential for additional.

Operator: Additional missile defense programs in Huntsville.

Operator: Since our last call.

Operator: Sure.

Operator: So there is.

Operator: I'll just say, there's a lot in the newsprint, particularly in the city of Huntsville.

Operator: And they are very high expectations of the decision to relocate the command will occur.

Operator: That timing, we believe is within weeks, maybe a month.

Operator: It should be a pretty exciting opportunity for our shareholders overall.

Stephen Budorick: early in the process regarding missile defense. to try to quantify increased demand, but the administration has made very clear that the Golden Dome missile defense The program is going to be a high priority and that program will be heavily concentrated on current missions and contractors that operate missile defense programs in Huntsville. So it's not quite clear from a production standpoint, but it's a very exciting. programmatic shift that we think will serve us well. Got it, that's helpful.

Operator: It's a little.

Operator: Early in the process regarding the missile defense.

Operator: To try to quantify increased demand.

Operator: The administration has made very clear that the Golden dome.

Operator: Missile defense.

Operator: The program is going to be a high priority.

That program will be <unk>.

Operator: Heavily concentrated then.

Operator: Current missions and contractors that operate missile defense programs in Huntsville.

Operator: So.

Operator: It's not quite clear.

Operator: From a production standpoint, but it's very exciting.

Operator: <unk>.

Operator: Programmatic shift that we think it will service well.

Stephen Budorick: Switching gears real quick, can you talk about your investment pipeline, specifically the $225 million earmarks and guidance for new investments in 2025? I guess, what do you think the mix between acquisitions and developments will be in that total? Can you talk about the profile and yields you're targeting on acquisitions? And then, you know, any color on additional near-term development projects that you guys are eyeing at the moment? Certainly. So let me take that in layers. My current expectation is we'll meet that threshold with new development starts. There could be a possibility of an acquisition. We continue to look at opportunities as they arise, but as I've said on earlier calls, we have a very specific set of criteria that we apply to acquisition opportunities, and thus far we have not found one that satisfies all our criteria.

Operator: Got it Thats helpful.

Operator: Switching gears real quick can you talk about your investment pipeline, specifically, the $225 million earmarked and guidance for new investments in 2025, I guess, what do you think the mix between acquisitions and developments, we'll be in that total can you talk about the profile and yields that you're targeting on acquisitions and then any any.

Operator: Color on additional near term development projects that you guys are at the moment.

Operator: Certainly so let me take the employers.

Operator: My current expectation is we will meet that threshold.

Operator: With new development starts.

Operator: There could be a possibility of an acquisition we continue to look at opportunities as they arise, but as I've said on earlier calls we have a very specific set of criteria.

Operator: We apply to acquisition opportunities and thus far we have not found one that satisfies our criterias.

Stephen Budorick: Turning to our expectations for that development, we are in multiple discussions. with users that are motivated. to get new facilities to support mission growth or programmatic growth in multiple places in our location. I don't want to be any more specific than that, but we're pretty excited about our opportunity to start new buildings for a priority program. Okay, great.

Operator: Turning to our expectations for that development, we are in multiple discussions.

Operator: With.

Operator: Users that are motivated.

Operator: Two.

Operator: To get new facilities to support Michigan growth or programmatic growth.

In multiple places in our location and.

Operator: Don't want to be any more specific than that but we're pretty excited about our opportunity to start new buildings for priority programs.

Stephen Budorick: Last one for me. Yeah, go ahead. Yeah, I'm sorry, I ducked the yield question. Our acquisition yields are at least, they at least have to meet the threshold of our development yields. And you'll recall, we're targeting, you know, eight and a half cash yield on new development for non-data center assets. An acquisition yield would have to at least hit that threshold and show us some opportunity for growth from that level and long-term sustainability of demand in the asset. Okay, great. Very helpful there.

Operator: Okay, Great last one yes, yes, I'm, sorry, I think the yield question.

Operator: Our acquisition yields or at least.

Operator: At least half to meet the thresholds of our development yields and you'll recall we're targeting.

Operator: They have cash yield on new development.

Operator: <unk> non data center assets and the acquisition yield would have to at least hit that threshold and show us.

Operator: Some opportunity for growth from that level.

Operator: Long term sustainability of demand in the answer.

Stephen Budorick: Last one for me with respect to data centers, there have been a lot of mixed messages on hyperscaler demand and some news of pullbacks from certain groups in the market. Do you see any of that impacting your tenants plans with you in Des Moines or elsewhere, or even impacting any of the data centers you currently own? So Let me take the last question. In no way will it affect the data centers we currently own. Then with regard to our customers' long-term demand, we do not believe they are pulling back in the sense of the business component we serve with our Danish Shell program.

Operator: Okay great.

Operator: Very helpful. There last one for me with respect to data centers. There have been a lot of mixed messages on hyperscale or demand in some news a pullback from certain groups in the market do you see any of that impacting your tenants plans with you at the mine or elsewhere or even impacting any of the data centers that you currently own.

Operator: So well.

Operator: Let me take the last question in no way will it affect the data centers, we currently own.

Operator: Then with regard to our customers' long term demand.

Operator: We do not believe they are pulling back.

Operator: In the sense of the.

Operator: The business component, we serve with our data shell program.

Stephen Budorick: I think the biggest challenge we have with our customer, particularly in our land site in Iowa, is the timing of power availability. Currently, we do not have a clear path to the delivery timing yet, so that is not really a component in our development pipeline as we speak today. Got it. Thanks, Steve. Thank you.

Operator: I think the biggest challenge, we have with our customer, particularly in our land site in Iowa as the timing of power availability.

Operator: Currently we don't have.

Operator: A clear path to a.

Operator: So the delivery timing, yet and so that's been a really a component in our development pipeline.

Operator: As we speak today.

Got it thanks, Steve.

Seth Berge: Our next question or comment comes from the line of Seth Berge from Citi. Your line is now open. You know, you kind of talked about the progress you've made on vacancy leasing. Are you seeing that translate into fewer concessions or signs of stronger rent growth? So, you know, rent growth is really kind of determined by market overall, we've had, you know, solid rent performance over the last several years, our markets tend to stay very stable and don't you know, spike and crash. So not so much in rent growth, but certainly in the strength of the concessions we give to lease that space.

Speaker Change: Thank you our next question or comment comes from the line of Scott.

Speaker Change: <unk> from Citi. Your line is now open.

Speaker Change: Alright.

Speaker Change: Kind of talk about the progress you've made on vacancy leasing.

Speaker Change: Are you seeing that translate in a fewer concessions are signs of a stronger bank rats.

Speaker Change: So rent growth is really kind of determined by market overall.

Speaker Change: We've had.

Speaker Change: Solid rent performance over the last several years.

Speaker Change: Our markets tend to stay very stable.

Don: And Don.

Don: Spike and crash so not so much in rent growth, but certainly in the strength of the concessions we give to lease that space I think if you look at our statistics.

Stephen Budorick: I think if you look at our statistics on the cost of leasing this quarter, you can see that.

Don: In the.

Don: The cost of leasing this quarter you can see that.

Stephen Budorick: What you don't see on that report is we've been able to pull back quite a bit on any free rent concessions.

Don: You don't see in that report as well.

Don: But are you able to pull back quite a bit.

Don: And any free rent concessions.

Seth Berge: Thanks, that's helpful.

Anthony Mifsud: And just one question about the bond offering, where do you think you could kind of price that today? Given where the 10-year is right now and where our longest bond is trading, that bond would probably price at or slightly higher than 6%.

Don: Thanks, that's helpful.

Don: One question about the bond offering where do you think you can kind of price start today.

Don: Given where the tenure is right now and where are our longest bond is trading.

Don: Bond would probably price.

Don: At or slightly higher than 6%.

Unknown Executive: Great, thank you.

Don: Great. Thanks.

Unknown Executive: Thank you.

Anthony Paolone: Our next question or comment comes from the line of Anthony Paolone from J.P. Morgan. Your line is open. Yeah, thanks. You mentioned Columbia Gateway, I think a few times in the commentary. Can you just remind us, you know, how much of that is tenanted by defense IT folks at this point versus more traditional office or, you know, is there still more to kind of convert there? You know, I haven't run that that exact math in a couple quarters, but it's about 70-75% fence IT in our property. There are other landlords in the park that don't have nearly as much.

Speaker Change: Thank you. Our next question or comment comes from the line of Anthony <unk> from Jpmorgan. Your line is open.

Speaker Change: Yes. Thanks.

Anthony: You mentioned Columbia Gateway I think a few times in the commentary can you just remind us how much of that is tenanted by defense I'd folks at this point versus more traditional office or what.

Speaker Change: Is there still more to kind of convert there.

Speaker Change: Yes.

Speaker Change: The exact math.

Speaker Change: Six quarters, but it's about 70, 75% trends in our properties.

Speaker Change: There are other landlords in fact don't have nearly as much.

Anthony Paolone: or much of any defense contractor tenants, because our franchise tends to dominate that segment. Okay, got it.

Speaker Change: Or much of any defense contractor tenants.

Speaker Change: Because our franchise tends to dominate that.

Speaker Change: Segment.

Stephen Budorick: And then you talked about the investment spending, you know, likely skewed to development. Any sense as to construction cost implications from just what's happening on the macro side, and, you know, whether or not you're still pretty comfortable with yields and rents will be there at a level to achieve the yields you want? Sure. So thus far, there's a lot of talk about tariffs, but there's really very little data coming out on the implications of tariffs. What I can tell you is we are very active in all of our active and potential developments, making sure we understand what our costs are, and making sure we manage the yields we deliver to our investors.

Speaker Change: Okay got it and then.

Speaker Change: You talked about the investment spending likely skewed to development.

Speaker Change: Sensors to construction cost implications from just what's happening on the macro side.

Speaker Change: Whether or not you.

Speaker Change: Are you still pretty comfortable with yields and rents will be there they were able to achieve the <unk>.

Speaker Change: Sure.

Speaker Change: Thus far there is a lot of that.

Speaker Change: Talk about tariffs, but there's really very little data.

Speaker Change: Coming out on the implications of tariffs.

Speaker Change: I can tell you is we are very active in there.

Speaker Change: All of our active and potential developments make sure we understand what our costs are.

Speaker Change: It mixture, we managed through the yields we delivered to our investors and where possible we're lacking into.

Stephen Budorick: And where possible, we're locking into our longer lead term items to share the pricing that we're counting on.

Speaker Change: Our longer lead time items to assure the pricing that we're counting them with regard to the future.

Stephen Budorick: With regard to, you know, the future, I just want to remind people, we operated through the. Inflationary period, you know, three years ago, and, you know, in one year, we had Identical buildings escalate in cost by 22% under the prior president, and that speaks to our ability to maintain the rents we need to get the yield on the costs we have. So we're very confident that we can maintain our yield, and we're very diligent in being prepared to be nimble should costs start to shift from the current.

Speaker Change: Just wanted to remind people we operated through the.

Speaker Change: Inflationary period.

Speaker Change: Three years ago.

Speaker Change: In one year.

Speaker Change: Identical buildings escalate and cross by 22%.

Speaker Change: Under the prior precedent.

Speaker Change: And that speaks to our ability to either maintain the rents we need to get the yield and the costs. We have so we're very confident that we can maintain our yield and we're very diligent being prepared to be nimble should cost start to shift from.

Speaker Change: Kurt.

Stephen Budorick: And if I could just add one thing on the development project that Steve mentioned that we're kicking off, all of that pricing is locked in. Guaranteed Maximum Presence. Okay, got it. Sorry, thank you. Thank you.

Speaker Change: The tariff discussions and if I could just add one thing on the development project that Steve mentioned that we're kicking off all of that pricing is locked in already.

Speaker Change: <unk>.

Speaker Change: That's a guaranteed maximum price contract.

Okay got it sorry got it thank you.

Manis Ebek: Our next question or comment comes from the line of Manis Ebek from Evercore ISI. Your line is open. Thanks for taking the question. Just wanted to hop on to the advanced negotiation pipeline and deals that you have in there. Has maybe that mix changed since the beginning of April in terms of what the US government represents out of prospects in that pipeline versus like maybe top 10 defense contractors? If there are more like new expansion type requirements or typical relocations to a certain area close to a base, just maybe if you could help us understand that that would be very So that statistic is vacancy leasing, advanced negotiations.

Magnus: Thank you. Our next question or comment comes from the line of Magnus <unk> from Evercore ISI. Your line is open.

Magnus: Thanks for taking the question just wanted to hop onto the advanced negotiation pipeline and deals that you have in there has maybe that mix changed since the beginning of April in terms of what the U S. Government represents out of prospects in that pipeline versus like maybe top 10 defense contractors. If there are more than I can.

New expansion type requirements or typical relocations to a certain area of close to a base just maybe if you could help us understand that that would be very helpful.

Magnus: So.

Magnus: Net.

Magnus: <unk> is vacancy leasing advanced negotiations.

Manis Ebek: It's pretty broad-based. It's across multiple defense segments. There is one tenant in other that Britt's comments spoke to. That's a pretty large tenant. Besides that tenant, it's all defense. And it's Northern Virginia, Fort Meade. and Navy Support and pretty even between government.

Magnus: It's pretty broad based it's across multiple defense.

Magnus: <unk> there is one.

Magnus: In other that.

Magnus: Britain comments spoke to is pretty large tenant.

Magnus: Tenants, all defense and its rich.

Magnus: Junior Fort Meade.

Magnus: Sure.

Magnus: And.

Magnus: Navy support.

Magnus: Pretty even between government and contract.

Manis Ebek: And if I could maybe follow up with one here on the lease expirations, I know if you alluded on the call and also talked about it last quarter, that there is a larger share of government leases that are set to expire in 2025 and 2026, which you're tackling a very low risk of losing those leases. And I know we've talked about like 600,000 square feet of those short-term ones that were expected to be pushed from 2025 expiration into 2026. Could you maybe just kind of like shine some light on how much progress has been done for those ones in the first quarter and why maybe the government wouldn't want to sign longer renewals there?

Magnus: Got you perfect and if I could maybe follow up with one here on the lease expirations are now if you've alluded on the call and also talked about it last quarter that there is around data as a largest share of government leases that are set to expire in 'twenty five 'twenty six.

Magnus: Which youre tackling a very low risk of losing dose.

Magnus: Thesis and I know, we've talked about like 600000 square feet of those short term ones that were expected to be pushed from 25 exploration into 'twenty six.

Magnus: Could you, maybe just kind of like shine some light on how much progress has been done for those loans in the first quarter and why maybe the government wouldn't want to sign longer renewals there.

Stephen Budorick: Well, they will sign longer renewals. The short-term push speaks to the way they address, I don't want to use the word holdover, it's not a holdover, but when they haven't gotten their renewal lease completed, they have a process where we sign a different agreement called a standstill agreement, and they continue to pay the rent under the lease that's just expired. We continue to deliver the services called for in the lease, and when the ultimate longer-term renewal is done, we true up on the ultimate rate that should have been charged. It really speaks more to the their ability to handle all the work and get it through the system in a timely basis.

Magnus: Kind of going forward.

Magnus: Well they will sign longer renewals.

Magnus: The short term push speaks to the way the address.

Magnus: I don't want to use the word holdovers side, a holdover from when they haven't gotten their renewal lease completed they have a process, where we sign a different agreement called standstill agreement.

Magnus: They continue to pay the rent under the lease just expired we continued to deliver the services called for in the lease and when the ultimate longer term.

Magnus: The renewals done we true up on the ultimate rate they should have been charged.

Magnus: It really speaks more to be.

Magnus: Sure.

Magnus: Their ability to handle all of the work and get it through the system in a timely basis and that's why we.

Stephen Budorick: And that's why we set out to advise people that last year we had some leases delayed into this year, and similarly we expect that to kind of flow into next year. With regard to first quarter, I don't believe we signed any of those leases. The government has a very predictable leasing cycle, and that activity tends to start to pop up in June, often is completed either in August or September at the end of their fiscal year. So look for Q3 and potentially some Q2 results on those U.S. government leases. But I reiterate, those 13 leases, we have full confidence we will renew 100% of them.

Magnus: Set out to advise people that last year, we added some leases delayed into this year and similarly, we expect that kind of affluent to next year with regard to first quarter I don't believe we've signed any of those leases the governor is.

Magnus: Very predictable leasing cycle and that activity tends to start to ramp up in June and.

Magnus: Is completed either in August or September at the end of their fiscal year. So look for.

Magnus: Q3.

Magnus: Some Q2 results and those U S government leases, but I reiterate those 13 leases we have full confidence we will renew reminder percent of them.

Unknown Executive: Perfect. Thank you. That's for me. Thank you.

Magnus: Perfect. Thank you.

Magnus: Thanks.

Richard Anderson: Our next question or comment comes from the line of Richard Anderson from Webb Bush Securities. Your line is open. Okay, thanks. Good afternoon. First question is for Anthony, and I'm not sure I'm I'm not exactly asking this correctly, but for the same sort of guidance of 2.75% for the full year, is that assuming the 4.3% in the first quarter absent the tax appeals or the 7.1%? I'm just trying to get a sense of how things will sort of flow for the remaining quarters to get you to that 2.75%. Well, I think you can look at it both ways.

Richard Anderson: Thank you. Our next question or comment comes from the line of Richard Anderson from Wedbush Securities. Your line is open.

Speaker Change: Okay. Thanks. Good afternoon first question is for Anthony and I am not sure.

Speaker Change: Exactly asking this correctly, but for the same store guidance of 275% for the full year is that assuming the four three in the first quarter absent the tax appeal or the seven one I'm just trying to get a sense of how things will.

Speaker Change: Sort of flow on for the remaining quarters to get you to that $2 75.

Speaker Change: Well I think you can look at it both ways.

Anthony Mifsud: So the 2.75 is not impacted on an annual basis by the real estate tax refunds received in 2024 and 2025, because the amounts in each year approximate the same amount. So you can take it off the 7.1 or the 4.3. The 7.1 is impacted by the higher tax amount received in the first quarter. Some of the subsequent three quarters in 2025 will be impacted by the fact that there's zero assumed in 2025, but we did receive refunds in each of the last three quarters of 2025. Okay, so. What, how would, how would you, if you were me, how would you model?

Speaker Change: So that.

Speaker Change: At $2 75.

Speaker Change: It is is not impacted on an annual basis by the real estate tax refunds received in 2024 and 2025, because the amount in each year approximate the same amount.

Speaker Change: So.

Speaker Change: Can take it off.

Speaker Change: Seven one or the 43.

Speaker Change: <unk>.

Speaker Change: Seven one is impacted by the.

Speaker Change: The higher tax amount received in the first quarter.

Speaker Change: Some of the subsequent three quarters in 2025 will be impacted by the fact that there is zero assumed in 2025, but we did receive refunds in each of the last three quarters of 'twenty four.

Speaker Change: Okay.

Speaker Change: No.

Speaker Change: How would how would you. If you were me how would you model is it sort of ride a ratable growth across the remaining three quarters of the year or is there some.

Anthony Mifsud: Is it sort of ratable growth across the remaining three-quarters of the year? Or is there some sort of deceleration, internal growth as the year progressed? The largest of the three refunds we received last year was in the second quarter, and then it tailed off in the third and fourth.

Speaker Change: Sort of deceleration in internal growth as the year progresses.

Speaker Change: The largest of the three refunds, we received last year, where it was in the second quarter.

Speaker Change: And then it tailed off in the third and fourth.

Speaker Change: Okay.

Stephen Budorick: Steve, maybe just a question to sort of explain why your stock may be doing as well as you thought it might be doing this year. You said that you see no expectation of impact from DOJ on any of your programs that you're exposed to. But is it impacting? I assume, you know, some some programs out there, right, perhaps not related to what you're working on. Is it sort of like a too close for comfort type of thing? Or is DOJ not really affecting much in the way of any kind of contract work going on? So honestly, we have no evidence of doge impacting.

Speaker Change: Steve maybe just a question of sort of explain why your stock is and maybe doing as well as you thought it might be doing this year.

Speaker Change: You said that you see no.

Speaker Change: Expectation of impact from does on any of your programs that you are exposed to but is is it impacting.

Speaker Change: I assume some some programs out there right, perhaps not related to what you're working on.

Speaker Change: Is it sort of like a too close for comfort type of thing or is does not really affecting much in the way of of any kind of contract work going on in the space.

Speaker Change: Honestly, we have no evidence of dose impacting.

Stephen Budorick: The portions of the business of the tenants in our buildings. It might impact some of those tenants in other parts of their business, but certainly not the work they're doing in our buildings for the missions we support. If you look at the, there's a list of canceled leases that's been put out, and there were a few DOD leases in those in very odd places, they really weren't in the Washington area and they were Small Leases and Ancillary Functions. Some of them, I would almost guess, were recruiting facilities based on the 5,000 or 6,000 square feet that got canceled.

Speaker Change: The portions of the business.

Speaker Change: In our buildings.

Speaker Change: It might impact some of those tenants in other parts of their business, but certainly that the work they're doing in our buildings for the missions we support.

Speaker Change: And if you look at the.

Speaker Change: There is a list of canceled leases thats been put out there were a few leases in those in.

Speaker Change: Very odd places.

Speaker Change: We really weren't in the Washington area in there.

Speaker Change: Small leases and ancillary functions. Some of them were almost guests were recruiting facilities based on the five or 6000 square feet that got canceled.

Stephen Budorick: But there's really no activity. Visible or Discussed. affecting the priority missions we support.

Speaker Change: Theres really no activity.

Speaker Change: Visible or discussed affecting the priority missions, we support.

Richard Anderson: Okay, and then lastly, on sort of the, you know, the offer for people to early retire. Is it possible that, you know, there's sort of like a a broad offer that didn't necessarily take into account where these people were coming from and what agencies and is there a risk perhaps that, you know, a disproportionate amount of people could, through these job cut offers, come out of, you know, certain areas in too much of a cluster that could cause problems from that standpoint? Is that something that is even, you know, a part of the conversation or am I just off base entirely on the question?

Speaker Change: Okay, and then lastly on sort of the.

Speaker Change: The offer for people to early retire.

Speaker Change: Is it possible that that's sort of like a.

Speaker Change: A broad offer that didn't necessarily take into account, where these people were coming from and what agencies.

Speaker Change: Is there a risk perhaps that.

Speaker Change: A disproportionate amount of people through.

Through these job cuts offers come out of.

Speaker Change: Certain areas and Ah.

Speaker Change: Too much of a cluster that could cause problems in that from that standpoint is that something that is even.

Speaker Change: Part of the conversation or is that am I just off based entirely on the question.

Stephen Budorick: Well, I think the matter is already settled, Rich, because they had a very tight time frame to execute that offer. Right, but now you're now you're left with fewer people. And are there fewer people in too many? Is it too clustered, I guess, is the question? Well, there's no data that I have that could inform me of, you know, where they came out of. But remember, you know, it's, it's the larger government DC that was being targeted more so than DOD. And kind of speaking to that, recall that Pete Hyseth invited the DOD people that were forced to resign or leave the military, because they would not get the COVID vaccine back to the military.

Tom Andrews: I think Tom Andrews.

Speaker Change: I think the vendors already settled rich because they had a very tight.

Tom Andrews: Timeframe to execute that offer.

Tom Andrews: But now now you are now you are left with fewer people and they are there fewer people in.

Tom Andrews: Too many is it to clustered I guess is the question.

Tom Andrews: There is no data that I have.

Tom Andrews: Good for me.

Tom Andrews: Where they came out of but remember.

It's the larger government DC that was being targeted more so than <unk>.

Tom Andrews: Cody.

Tom Andrews: Kind of speaking to that.

Tom Andrews: I'll, let Pete hakes.

Pete hakes: Invited the Dod people that were forced to resign or leave the military because they would not get the COVID-19 vaccine back to the military and this year.

Stephen Budorick: And this year, the US Army achieved its full year goal of recruiting in the fastest time period in history, meeting the goal by April. So we just don't see it in DOD. And then with regard to the people we deal with every day across our various government customers. There's none that I know of that are accepted that resignation, it could impair, you know, their ability to process the business we do. Okay, fair enough. Thanks very much.

Tom Andrews: Sorry.

Tom Andrews: Cheese is full year goal of recruiting in the fastest time period in history, leading to grow by April.

Tom Andrews: We just don't see it.

Tom Andrews: Then with regard to the people we deal with every day across our various government customers.

Tom Andrews: There is none that I know of that are accepted that resignation.

Tom Andrews: Could impair their ability to process the business we do.

Stephen Budorick: And then, you know, Britt just gave me a quick note. We took some investors on a property tour recently. And if you saw our parking lots, you know, they're not short on people. Okay, lots are jammed. I'm not going to start counting cars and parking lots just yet. But yeah, maybe some but but I do want to make one comment about you know, our stock is performed. It's an awfully good opportunity for a savvy investor. Just had to let somebody know that, you know, Fear can affect price, but as we've made clear in our comments and our results, our business is as strong as ever, and it's a good opportunity to make an investment.

Tom Andrews: Okay fair enough thanks very much.

Rick: Rick just gave me a quick note.

Speaker Change: We took some investors on a property tour recently.

Tom Andrews: Recently.

Tom Andrews: If you saw our parking lots, even though they are not short on people.

Tom Andrews: Okay.

Tom Andrews: <unk>.

Tom Andrews: Im going to start counting.

Tom Andrews: And cars and parking lots, just yet, but maybe some but I do want to make one comment about our <unk> performed roughly good opportunity for a savvy investor just.

Tom Andrews: I just had to let somebody know that.

Tom Andrews: Yes.

Tom Andrews: Fair.

Tom Andrews: <unk> affect price, but as we've made clear in our comments in our results our business is as strong as ever it's a good opportunity to make an investment.

Tom Andrews: Okay.

Tom Andrews: Thanks very much.

Peter Abramowitz: Thank you.

Britt Snider: Our next question or comment comes from the line of Peter Abramowitz from Jeffries. Your line is open. Yes, thank you very much. I know you've talked a lot about the retention. Just wanted to touch on the non-renewal. I think you mentioned it was in Columbia Gateway, and maybe a question for Britt or Steve. I guess, how long are you underwriting right now to sort of backfill those spaces, just so we can get a sense, you know, if you do have any other move-outs or expirations in the portfolio?

Speaker Change: Thank you our next question or comment comes from the line of Peter.

Speaker Change: <unk> from Jefferies. Your line is open Sir.

Peter: Yes. Thank you very much I know you've talked a lot about the retention.

Peter: Wanted to touch on the non renewal I think you mentioned there was some Columbia Gateway and maybe a question for Brett or Steve.

Peter: I guess, how long are you underwriting right now to sort of backfill those spaces.

Peter: So we can get a sense if you do have any other.

Peter: Move outs are explorations in the portfolio.

Britt Snider: Yeah, this is Britt. Yeah, I mean, there's already, you know, a number of prospects looking at this, we have it, I mean, conservatively underwritten in the 18 month timeframe.

Bret: Yes. This is bret.

Speaker Change: Yes, I mean, theres already a number of prospects looking at this we have it I mean conservatively underwritten in the 18 month timeframe.

Speaker Change: 18 months to two years.

Speaker Change: Im frame, but I mean, just given where the prospect activity is for.

Speaker Change: We're confident we can.

Britt Snider: Get to Elyse here. And then one other comment, Peter, that space is immediately across the courtyard in our headquarters, three buildings. In 2020, we had a full building tenant non-renew. And that tenant was, that function was non-defense. So it had a name that, you know, of the same name as one of our long term great tenants, but it was non-defense function. We backfilled it in a year. and it's now over 80% defense contractors and has significant skiff in the building. And we think we view this non-renewal of a Blue Cross Blue Shield affiliate affords us a great opportunity to bring more cyber and defense tenants into our portfolio.

Speaker Change: We see some relief here quickly.

Speaker Change: And then one other comment Peter that space is immediately across the courtyard in our headquarters three buildings.

Speaker Change: In 2020, we had a full building tenant then renew.

Speaker Change: And that tenant was.

Speaker Change: Function was down defense.

Speaker Change: So it had a name.

Speaker Change: Ed.

Of the same name as one of our.

Speaker Change: Long term great tenants, but it was not in defense function.

Speaker Change: We backfill that in a year.

Speaker Change: It's now over 80% defense contractors and has significant skiff in the building.

Speaker Change: And we think we view this non renewal.

Speaker Change: Blue Cross Blue Shield affiliate.

Speaker Change: Affords us a great opportunity to bring more cyber defense tenants into our portfolio.

Britt Snider: So it's a good thing in the long term. Got it. That's helpful.

Speaker Change: No.

Speaker Change: It's a good thing in the long term.

Britt Snider: And then just wondering if you could touch on how's the leasing pipeline on some of those vacancies you have in the other portfolio? And I guess, you know, how does that affect the capital plans longer term to eventually sell those buildings? Yeah, so the the pipeline for those other assets is, has actually been Phenomenal. I mean, based on, you know, historical performance, what we're seeing is the credit of the landlords are being heavily evaluated by tenants and the brokers because obviously, they want to see execution and the ability to pay on TIs and leasing commissions.

Speaker Change: Got it that's helpful. And then just strip wondering if you could touch on.

Speaker Change: Household leasing pipeline on some of those vacancies you have in the other portfolio.

Speaker Change: And I guess, how does that affect the.

Speaker Change: With capital plans longer term to eventually sell those buildings.

Speaker Change: Yes.

Speaker Change: I'll now turn the first part yes so.

Speaker Change: The pipeline for those other assets has actually been.

Speaker Change: Phenomenal I mean based on <unk>.

Speaker Change: Historical performance, what we're seeing is the credit of the landlords are being heavily evaluated by tenants and the brokers because obviously they want to see execution.

Anthony Mifsud: And there's a lot of landlords that are struggling in those markets. So now we're seeing more tenants being directed our way, so we feel very confident about our ability to lease up that space and get more than our fair share of tenants in this space.

Speaker Change: The ability to pay on Tis and leasing commissions and Theres a lot of landlords that are struggling in those markets and so now we're seeing more tenants being directed our our way so we.

Speaker Change: We feel very confident about our ability to lease up that space and get more than our fair share of tenants in those markets and you want to talk to the capital, yes, and with regard to capital recycling.

Anthony Mifsud: Do you want to talk to the Capitol? Yeah, and with regard to capital recycling... It's really going to be more a function. It's great news that we're going to get some occupancy back. And clearly, when you look at our vacancy, we've got a lot in those buildings. So this is one of the places where we can really drive FFO growth. But in terms of recycling, that pricing is really going to be tied to interest rates, and the ability of another investor to get attractive debt to make an investment in three very high quality buildings. And I just don't see that.

Speaker Change: It's really going to be more a function. It's great news that we're going to get some occupancy back and clearly when you look at our vacancy we've got a lot in those buildings. So this is.

Speaker Change: As one of the places, where we can really drive vessel <unk> growth.

Speaker Change: Terms of recycling that pricing is really going to be tied to interest rates and the ability of.

Speaker Change: Another investor to get attractive debt to make an investment in three very high quality buildings.

Speaker Change: And I, just don't see that occurring.

Dylan Burzinski: Recurring yet, so it'll be a year or two out. Got it. That's all for me. Thank you.

Speaker Change: Occurring yet so it'll be a year or two.

Speaker Change: That's all for me thanks.

Dylan Burzinski: Our next question or comment comes from the line of Dylan Burzinski from Green Street. The line is open. Hey guys, thanks for taking the question. And appreciate your comments on Doge not having an impact on your guys's leasing activity or demand.

Speaker Change: Thank you. Our next question or comment comes from the line of Dylan Brzezinski from Green Street. Your line is open Sir.

Dylan Brzezinski: Hey, guys. Thanks for taking the question.

Speaker Change: And I appreciate your comments on does not have an impact on you guys as leasing activity or demand, but just sort of curious one of the initiatives of diodes floating around out there is the idea of them to monetize some of that real estate. So just curious if that is the potential opportunity for you guys in terms of acquisitions.

Stephen Budorick: But just sort of curious, you know, one of the initiatives of Doge floating around out there is the idea of them to monetize some of their real estate. So just curious if that is a potential opportunity for you guys, in terms of acquisitions that CREDITS So nothing I've seen or we've seen yet. My understanding is most of the real estate they want to sell is in downtown D.C., occupied by non-defense tenants. That's not a sandbox we want to play in, so I'm not expecting an opportunity. The priority missions we support in the buildings that are owned by the U.S.

Speaker Change: So don't see and I've seen or we've seen yet.

Speaker Change: My understanding is most of the real estate there ourselves in downtown DC occupied by non defense tenants.

Speaker Change: Sandbox, we want to plan.

Speaker Change: Im not expecting an opportunity the priority missions, we support in the buildings that are owned by the U S government and.

Stephen Budorick: government are on military installations, and they will not sell. Makes sense.

Speaker Change: Military installations, and they will not sell those.

Dylan Burzinski: That's all for me. Thanks, guys. Good. Thank you.

Speaker Change: Thanks, guys. That's all for me.

Speaker Change: Good.

Tom Catherwood: Our next question or comment comes from the line of Tom Catherwood from BTIG. Mr. Catherwood, your line is open. Thank you. Just wanted to follow up on Blaine's initial Huntsville question. The FBI recently discussed expanding at the Arsenal. And if memory serves me, the last large expansion there by the FBI was, I think, 2017 and 2018. Is that correct? And how did that result in demand and leasing it your portfolio? I think most of the relocation was to a new micro-campus they built on the Arsenal, which is very impressive, by the way, when you tour it.

Speaker Change: Thank you. Our next question or comment comes from the line of Tom Catherwood from <unk>. Mr. <unk>. Your line is open.

Speaker Change: Thank you just wanted to follow up on the blames initial Huntsville question.

The FBI recently discussed expanding at the Arsenal.

Speaker Change: Memory serves me the last large expansion there by the FBI was I think 2017 and 2018 is is that correct and how did that result in demand and leasing at EUR portfolio.

Speaker Change: I think most of the relocation was to a new micro campus. They built on the Arsenal, which is very impressive by the way when the mature.

Stephen Budorick: We have some FBI in our portfolio as well, but the bulk of it went to develop buildings. To the extent there's an increase in FBI Call it Assignments to Red Zone, it could potentially drive leasing to some extent in our portfolio. It's too early to tell. Got it.

Speaker Change: No.

And we have some SBA.

Speaker Change: Our portfolio as well, but the bulk of it went to develop buildings.

Speaker Change: To the extent there is an increase in SBA.

Speaker Change: Call it assignments to read something could potentially drive leasing to some extent in our portfolio.

Speaker Change: It's too early to tell.

Stephen Budorick: Appreciate that, Steve. The last one for me, on the near-term development leasing pipeline, you know, when we adjust for roughly 100,000 square feet of development that you've done, the pipeline is up 500,000 square feet, quarter over quarter. Which geographies or priority missions really drove that uptick? Well, it's quite a bit in Fort Meade, BWI and Huntsville. and one other, but I'm not going to mention it.

Speaker Change: Got it I appreciate I appreciate that Steve and then last one for me on the near term development leasing pipeline when we adjust for the roughly 100000 square feet of development that you've done.

Speaker Change: The pipeline is up 500000 square feet quarter over quarter, which geographies or priority missions really drove that uptick.

Speaker Change: Well, it's quite a bit in Fort Meade BWI in Huntsville.

Speaker Change: And one other Mexican.

Speaker Change: And I can mention it.

Steve Sakwa: I appreciate the answers. Thanks, everybody. Thank you.

Speaker Change: Okay.

Speaker Change: I appreciate the answers thanks, everybody.

Steve Sakwa: Our next question or comment comes from the line of Steve Sakwa from Evercore ISI. Your line is open. Yeah, thanks.

Speaker Change: Thank you our next question or comment comes from the line of Steve <unk>.

Speaker Change: Evercore ISI. Your line is open yes. Thanks, I just had one follow up Steve I guess a related to Blaine earlier question on the data Center development in Iowa.

Stephen Budorick: I just had one follow-up, Steve, and I guess related to Blaine's earlier question on the data center development in Iowa. You know, when you bought that, I think there was an expectation it would take you maybe upwards of two years to secure power with the local power company. Has anything changed in that time frame? Have things gotten elongated or more difficult? So just kind of looking for any color on how those processes are unfolding in these municipalities.

Speaker Change: When you bought that I think there was an expectation it would take you maybe upwards of two years to secure power with the local power company.

Speaker Change: Anything changed in that timeframe have things gotten elongated or more difficult.

Speaker Change: So just kind of looking for any color on how those processes are unfolding in these municipalities.

Stephen Budorick: Well, they're not unfolding quickly. And I would say, if anything, our expectations have elongated. Two years would be a great result right now. And we have no specificity.

Speaker Change: But that unfolding quickly.

Speaker Change: I would say if anything our expectations of elongated two years would be a great result, right now and we have no specificity.

Stephen Budorick: I think it could be more like three to four years. Got it.

Speaker Change: It could be more like three to four years.

Stephen Budorick: I guess, does that maybe temper your enthusiasm for doing more of those, just given the uncertainty around the timing? Okay. I'm düşer. Well, certainly this this last, say, 12 months has been an extraordinary a period of time across the country with companies, individuals of all sorts asking for new power support. And undoubtedly, the utility we're relying on has been, it's our interpretation, they've been overwhelmed by the requests for power. And I think with some of the pullback on the AI computing expectations that might mitigate But from our standpoint, if we're going to buy another piece of land on spec, or, you know, informed demand, as we like to think of it, we're gonna have to understand the power pretty clearly.

Speaker Change: Got it I guess does that maybe temper your enthusiasm for doing more of those just given the uncertainty around the timing.

Speaker Change: Yes.

Speaker Change: Well certainly.

Speaker Change: This last say 12 months has been extraordinary.

Speaker Change: Period of time across the country with companies individuals of all source asking for new power supply.

Speaker Change: Undoubtedly.

The utility we're relying on is Ben.

Speaker Change: Our interpretation they've been overwhelmed by the request for power.

Speaker Change: And I think with some of the pull back on.

Speaker Change: AI computing expectations that may mitigate.

Speaker Change: <unk>.

Speaker Change: But from our standpoint, if we're going to buy another piece of land on spec.

Speaker Change: Informed demand as we like to think of it.

We're going to have to understand power pretty clearly.

Stephen Budorick: Gotcha, thanks for the caller. Thank you.

Speaker Change: Got you thanks for the color.

Speaker Change: Yes.

Unknown Executive: I'm sure no additional questions in the queue at this time.

Speaker Change: Thank you I'm showing no additional questions in the queue at this time I'd like to turn the conference back over to Mr. <unk> for any closing remarks.

Stephen Budorick: I'd like to turn the conference back over to Mr. Budorick for any closing remarks. Sure. Well, thank you all for joining our call today.

Speaker Change: Sure well. Thank you all for joining our call today, we are in our offices. So please.

Stephen Budorick: We are in our offices, so please, if you want to talk to us, follow up by calling Venkat, and we look forward to talking to you if you do. Thanks.

Speaker Change: If you want to talk to his follow up by calling Venkat and we look forward to talking to you. If you do thanks.

Unknown Executive: Ladies and gentlemen, thank you for your participation today in the Comp Defense Properties first quarter 2025 results conference call. This concludes the presentation. You may now disconnect. Good.

Speaker Change: Ladies and gentlemen, thank you for your participation today in the comp defense properties first quarter 2025 results Conference call. This concludes the presentation. You may now disconnect good day.

Speaker Change: Okay.

Speaker Change: Okay.

Speaker Change: [music].

Speaker Change: Okay.

Unknown Executive: Thanks for watching!

Speaker Change: Yes.

[music].

Speaker Change: Okay.

[music].