Q1 2026 COPT Defense Properties Earnings Call

April 28, 2026

Operator: Welcome to the COPT Defense Properties First Quarter 2026 Results Conference Call. As a reminder, today's call is being recorded. At this time, I will turn the call over to Venkat Kommineni, COPT Defense's Vice President of Investor Relations. Mr. Kommineni, please go ahead.

Speaker #1: Please go ahead.

Speaker #2: Thank you, Dee. Good afternoon and welcome to COP DEFENSE's conference call to discuss Q1 results. With me today are Steve Budorick, President and CEO; Britt Snider, Executive Vice President and COO; and Anthony Mifsud, Executive Vice President and CFO.

Venkat Kommineni: Thank you, Dee. Good afternoon, and welcome to COPT Defense's conference call to discuss Q1 results. With me today are Stephen E. Budorick, President and CEO; Britt A. Snider, Executive Vice President and COO; 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. 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 a duty to update them. Steve?

Speaker #2: Reconciliations of GAAP and non-GAAP financial measures that management discusses are available on our website, and in the results press release and presentation, and in our supplemental information package.

Speaker #2: 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 a duty to update them.

Speaker #2: Steve?

Stephen E. Budorick: Good afternoon, and thank you for joining us. We're off to a solid start in 2026, and all aspects of the business are on track to achieve our objectives for the year. Based on our strong results in 2025 and our outlook for 2026, in February, we recommended and our board approved an increase in our annual dividend of $0.06 per share or 4.9%, marking our 4th consecutive year of dividend increases. Since 2022, our dividend has increased 16.4%, and our FFO per share has increased 15.3%, demonstrating our attractive total return investment profile, all while maintaining the conservative AFFO payout ratio below 65% and continuing to have the capacity to self-fund the equity required for our external investments.

Steve Budorick: Good afternoon, and thank you for joining us. We're off to a solid start in 2026, and all aspects of the business are on track to achieve our objectives for the year. Based on our strong results in 2025 and our outlook for 2026, in February, we recommended and our board approved an increase in our annual dividend of $0.06 per share or 4.9%, marking our 4th consecutive year of dividend increases. Since 2022, our dividend has increased 16.4%, and our FFO per share has increased 15.3%, demonstrating our attractive total return investment profile, all while maintaining the conservative AFFO payout ratio below 65% and continuing to have the capacity to self-fund the equity required for our external investments.

Speaker #3: Good afternoon, and thank you for joining us. We're off to a solid start in 2026, and all aspects of the business are on track to achieve our objectives for the year.

Speaker #3: Based on our strong results in 2025 and our outlook for 2026, in February, we recommended and our board approved an increase in our annual dividend of 6 cents per share or 4.9%, marking our fourth consecutive year of dividend increases.

Speaker #3: Since 2022, our dividend has increased 16.4%, and our FFO per share has increased 15.3%, demonstrating our attractive total return investment profile all while maintaining the conservative AFFO payout ratio below 65% and continuing to have the capacity to self-fund the equity required for external investments.

Speaker #3: For the first quarter, FFO per share was $0.69, which is $0.01 above the midpoint of guidance and represents a 6.2% year-over-year increase.

Stephen E. Budorick: For the first quarter, FFO per share was $0.69, which is $0.01 above the midpoint of guidance and represents a 6.2% year-over-year increase. Same-Property Cash NOI increased 5.4% year-over-year, driven in part by a 70 basis point increase in our average ACV. We executed 1.2 million square feet of renewal leasing and achieved a 91% retention rate. This included the full renewal of our nearly 1 million square foot campus, at leased to the US government near Lackland Air Force Base in San Antonio. These renewals address the significant portion of our maturity risk in 2026, reducing our expiring annualized rental revenue from 21% at the beginning of the year to 11%.

Steve Budorick: For the first quarter, FFO per share was $0.69, which is $0.01 above the midpoint of guidance and represents a 6.2% year-over-year increase. Same-Property Cash NOI increased 5.4% year-over-year, driven in part by a 70 basis point increase in our average ACV. We executed 1.2 million square feet of renewal leasing and achieved a 91% retention rate. This included the full renewal of our nearly 1 million square foot campus, at leased to the US government near Lackland Air Force Base in San Antonio. These renewals address the significant portion of our maturity risk in 2026, reducing our expiring annualized rental revenue from 21% at the beginning of the year to 11%.

Speaker #3: Same property cash NOI increased 5.4% year-over-year driven in part by a 70 basis point increase in our average occupancy. We executed 1.2 million square feet of renewable leasing and achieved a 91% retention rate.

Speaker #3: This included the full renewal of our nearly one-million-square-foot campus that is leased to the U.S. government near Lackland Air Force Base in San Antonio.

Speaker #3: These renewals address the significant portion of our maturity risk in 2026, reducing our annual our expiring annualized rental revenue from 21% at the beginning of the year to 11%.

Speaker #3: We executed 92,000 square feet of vacancy leasing and we are right on track to meet our full year target of 400,000 square feet. We executed 384,000 square feet of investment leasing which consists of two previously announced full building leases at the National Business Park.

Stephen E. Budorick: We executed 92,000 square feet of vacancy leasing. We are right on track to meet our full year target of 400,000 square feet. We executed 384,000 square feet of investment leasing, which consists of two previously announced full building leases at the National Business Park. Year to date, we've committed nearly $250 million of capital to new investments, consisting of 620 Guardian Way, which is a fully leased build-to-suit project at the National Business Park, and two new investments totaling nearly $100 million. Based on these strong results, we're elevating 4 guidance metrics. Anthony will provide additional details in his section.

Steve Budorick: We executed 92,000 square feet of vacancy leasing. We are right on track to meet our full year target of 400,000 square feet. We executed 384,000 square feet of investment leasing, which consists of two previously announced full building leases at the National Business Park. Year to date, we've committed nearly $250 million of capital to new investments, consisting of 620 Guardian Way, which is a fully leased build-to-suit project at the National Business Park, and two new investments totaling nearly $100 million. Based on these strong results, we're elevating 4 guidance metrics. Anthony will provide additional details in his section.

Speaker #3: Year to date, we've committed nearly 250 million dollars of capital to new investments consisting of 620 Guardian Way, which is fully leased, filled suit project at the National Business Park, and two new investments totaling nearly 100 million dollars.

Speaker #3: Based on these strong results, we're elevating forward guidance metrics and Anthony will provide additional details in his section. Regarding these two new investments, first, we committed 55 million dollars to 150,000 square foot development project at Redstone Gateway which sits inside the fence within our secure parcel on Redstone Arsenal.

Stephen E. Budorick: Regarding these two new investments, first, we committed $55 million to a 150,000 square foot development project at Redstone Gateway, which sits inside the fence within our secure parcel on Redstone Arsenal. This investment creates Anti-Terrorism Force Protected inventory, or ATFP, for the United States Government in advance of expected requirements. We're currently seeing demand for multiple government missions, experiencing growth related to missile defense and space activities, which in aggregate exceeds the capacity of the building. Second, we committed roughly $43 million to the acquisition of 17 acres of land and a ground lease in the Westfield submarket in Chantilly, Virginia. The ground lease has very attractive long-term economics, which are supported by two highly strategic 100% leased office buildings known as Mission Ridge.

Steve Budorick: Regarding these two new investments, first, we committed $55 million to a 150,000 square foot development project at Redstone Gateway, which sits inside the fence within our secure parcel on Redstone Arsenal. This investment creates Anti-Terrorism Force Protected inventory, or ATFP, for the United States Government in advance of expected requirements. We're currently seeing demand for multiple government missions, experiencing growth related to missile defense and space activities, which in aggregate exceeds the capacity of the building. Second, we committed roughly $43 million to the acquisition of 17 acres of land and a ground lease in the Westfield submarket in Chantilly, Virginia.

Speaker #3: This investment creates anti-terrorism force protected inventory or ATFP for the United States government in advance of expected requirements. We're currently seeing demand for multiple government missions experiencing growth-related missile defense and space activities which, in aggregate, exceeds capacity of the building.

Speaker #3: Second, we committed roughly 43 million dollars to the acquisition of 17 acres of land in a ground lease in the Westfield submarket in Chantilly, Virginia.

Speaker #3: The ground lease has very attractive long-term economics, which are supported by two highly strategic, 100% leased office buildings known as Mission Ridge. These buildings are occupied by the FBI's technology division, including their cyber group, and two leading defense contractors who are among our top 20 defense IT tenants.

Steve Budorick: The ground lease has very attractive long-term economics, which are supported by two highly strategic 100% leased office buildings known as Mission Ridge. These buildings are occupied by the FBI's technology division, including their cyber group, and two leading defense contractors who are among our top 20 defense IT tenants. This transaction provides us with essentially perpetual control of a strategic land parcel in one of our priority submarkets, in which we currently have a dominant market share, and importantly, the senior position in the capital structure. Which should lead to an opportunity to acquire the leasehold interest at attractive terms sometime in the future.

Stephen E. Budorick: These buildings are occupied by the FBI's technology division, including their cyber group, and two leading defense contractors who are among our top 20 defense IT tenants. This transaction provides us with essentially perpetual control of a strategic land parcel in one of our priority submarkets, in which we currently have a dominant market share, and importantly, the senior position in the capital structure. Which should lead to an opportunity to acquire the leasehold interest at attractive terms sometime in the future. Recall last Q, we acquired Stonegate One in this same Westfield submarket, which was a $40 million purchase of a 140,000 square foot building that is fully leased to a top 20 US defense contractor.

Speaker #3: This transaction provides us with essentially perpetual control of a strategic land parcel in one of our priority submarkets in which we currently have a dominant market share and, importantly, the senior position in the capital structure.

Speaker #3: Which should lead to an opportunity to acquire the leasehold interest at attractive terms sometimes sometime in the future. Recall last quarter we acquired Stonegate One in this same Westfield submarket which was a 40 million dollar purchase of 140,000 square foot building that is fully leased to a top 20 US defense contractor.

Steve Budorick: Recall last Q, we acquired Stonegate One in this same Westfield submarket, which was a $40 million purchase of a 140,000 square foot building that is fully leased to a top 20 US defense contractor. As shown on slide 15 of our flipbook, Stonegate and Mission Ridge are located within a half mile of each other in the same rich ecosystem of defense contractors supporting the adjacent U.S. government demand drivers. In March, we were very pleased to receive the news that Moody's upgraded our investment grade rating by one level to Baa2 with a stable outlook. Over the past 5 years, we've issued $1.8 billion of unsecured debt in four separate offerings. We achieved stellar pricing in each of those transactions, with a weight average credit spread of 120 basis points and a maturity of nearly 9 years.

Stephen E. Budorick: As shown on slide 15 of our flipbook, Stonegate and Mission Ridge are located within a half mile of each other in the same rich ecosystem of defense contractors supporting the adjacent U.S. government demand drivers. In March, we were very pleased to receive the news that Moody's upgraded our investment grade rating by one level to Baa2 with a stable outlook. Over the past 5 years, we've issued $1.8 billion of unsecured debt in four separate offerings. We achieved stellar pricing in each of those transactions, with a weight average credit spread of 120 basis points and a maturity of nearly 9 years. Clearly, our fixed income investors recognize the inherent strength of our strategy and our portfolio, and we're pleased to receive that recognition from Moody's as well.

Speaker #3: As shown on slide 15 of our flipbook, Stonegate and Mission Ridge are located within a half mile of each other in the same rich ecosystem of defense contractors supporting the adjacent U.S. government demand drivers.

Speaker #3: In March, we were very pleased to receive the news that Moody's upgraded our investment grade rating by one level to Baa2 with a stable outlook.

Speaker #3: Over the past five years, we've issued $1.8 billion of unsecured debt in four separate offerings. We achieved stellar pricing in each of those transactions, with a weighted average credit spread of 120 basis points and a maturity of nearly nine years.

Speaker #3: Clearly, our fixed income investors recognize the inherent strength of our strategy and our portfolio and we're pleased to receive that recognition from Moody's as well.

Steve Budorick: Clearly, our fixed income investors recognize the inherent strength of our strategy and our portfolio, and we're pleased to receive that recognition from Moody's as well. We are one of only three office REITs with a Baa2 rating, which we believe acknowledges our proven performance over the last six years, which encompassed the global COVID pandemic, significant increase in both inflation and interest rates, along with factors that led to the highest U.S. office national vacancy rate in over 40 years. Turning to the defense budget, earlier this month, President Trump submitted the FY 2027 budget, which the administration describes as a historic paradigm shift for investment in our national security infrastructure.

Speaker #3: We are one of only three office REITs with a BAA2 rating which we believe acknowledges our proven performance over the last six years which encompass the global COVID pandemic, significant increase in both inflation and interest rates, along with factors that led to the highest US office national vacancy rate in over 40 years.

Stephen E. Budorick: We are one of only three office REITs with a Baa2 rating, which we believe acknowledges our proven performance over the last six years, which encompassed the global COVID pandemic, significant increase in both inflation and interest rates, along with factors that led to the highest U.S. office national vacancy rate in over 40 years. Turning to the defense budget, earlier this month, President Trump submitted the FY 2027 budget, which the administration describes as a historic paradigm shift for investment in our national security infrastructure. The top-line figure for defense budget request is a record $1.5 trillion, which is nearly a 45% increase year-over-year, and it's comprised of a base budget of $1.1 trillion and anticipated reconciliation funding of $350 billion.

Speaker #3: Turning to the defense budget, earlier this month President Trump submitted the FY 2027 budget, which his administration describes as a historic paradigm shift for investment in our national security infrastructure.

Speaker #3: The top-line figure for the defense budget request is a record $1.5 trillion, which is nearly a 45% increase year over year. And it's comprised of a base budget of $1.1 trillion and anticipated reconciliation funding of $350 billion.

Steve Budorick: The top-line figure for defense budget request is a record $1.5 trillion, which is nearly a 45% increase year-over-year, and it's comprised of a base budget of $1.1 trillion and anticipated reconciliation funding of $350 billion. Our business is really driven off the proposed base budget of $1.1 trillion, which has been described as the new baseline by the Chairman of the House Armed Services Committee, Mike Rogers. The FY 2027 proposed budget represents a nearly 30% increase over last year and nearly 50% increase over the last 5 years. The defense-based budget request includes a $16 billion increase for intelligence, or 14%, which is the largest year-over-year increase in over 20 years. A $4 billion increase for DoD cyber funding, or 25%, which is the largest increase in the history of DoD cyber funding.

Speaker #3: Our business is really driven off the proposed base budget of 1.1 trillion which has been described as the new baseline by the chairman of the House Armed Services Committee, Mike Rogers.

Stephen E. Budorick: Our business is really driven off the proposed base budget of $1.1 trillion, which has been described as the new baseline by the Chairman of the House Armed Services Committee, Mike Rogers. The FY 2027 proposed budget represents a nearly 30% increase over last year and nearly 50% increase over the last 5 years. The defense-based budget request includes a $16 billion increase for intelligence, or 14%, which is the largest year-over-year increase in over 20 years. A $4 billion increase for DoD cyber funding, or 25%, which is the largest increase in the history of DoD cyber funding. An additional $18 billion for Golden Dome, which brings appropriations and requests to date for this program to roughly $40 billion of the $185 billion total.

Speaker #3: The FY 2027 proposed budget represents nearly a 30% increase over last year and nearly a 50% increase over the last five years. The defense base budget request includes a $16 billion increase for intelligence, or 14%, which is the largest year-over-year increase in over 20 years.

Speaker #3: A 4 billion dollar increase for DOD cyber funding or 25% which is the largest increase in the history of DOD cyber funding. An additional 18 billion dollars for golden dome which brings appropriations and requests to date for this program to roughly 40 billion of the 185 billion dollar total.

Steve Budorick: An additional $18 billion for Golden Dome, which brings appropriations and requests to date for this program to roughly $40 billion of the $185 billion total. $21 billion was appropriated for Golden Dome in FY 2026, but only a small portion of this amount has actually been awarded to date, which bodes well for emerging demand through the end of the year. There is still more than $160 billion yet to be appropriated. This current and anticipated funding should provide a long runway of tenant demand that will develop and support the Golden Dome initiative in the coming years, as there is typically 12 to 18-month lag time between appropriations and lease executions.

Speaker #3: 21 billion dollars was appropriated for golden dome and FY 2026 but only a small portion of this amount is actually been awarded to date which bodes well for emerging demand through the end of the year.

Stephen E. Budorick: $21 billion was appropriated for Golden Dome in FY 2026, but only a small portion of this amount has actually been awarded to date, which bodes well for emerging demand through the end of the year. There is still more than $160 billion yet to be appropriated. This current and anticipated funding should provide a long runway of tenant demand that will develop and support the Golden Dome initiative in the coming years, as there is typically 12 to 18-month lag time between appropriations and lease executions. The FY 2027 defense budget is a continuation of a 12-year trend of growth in defense spending and represents one of the few areas of public policy that garners strong bipartisan support.

Speaker #3: And there is still more than $160 billion yet to be appropriated. This current and anticipated funding should provide a long runway of tenant demand that will develop and support the Golden Dome initiative in the coming years, as there is typically a 12 to 18 month lag time between appropriations and lease executions.

Speaker #3: The FY 2027 defense budget is continuation of a 12-year trend of growth in defense spending and represents one of the few areas of public policy that garner strong bipartisan support.

Steve Budorick: The FY 2027 defense budget is a continuation of a 12-year trend of growth in defense spending and represents one of the few areas of public policy that garners strong bipartisan support. The country's significant investment in the priority missions which our locations support should result in a favorable demand backdrop for our portfolio over the near and medium term and provide additional opportunities for external growth. With that, I'll turn the call over to Britt.

Speaker #3: The country's significant investment in the priority missions which are location support should result in a favorable demand backdrop for our portfolio over the near and medium term and provide additional opportunities for external external growth.

Stephen E. Budorick: The country's significant investment in the priority missions which our locations support should result in a favorable demand backdrop for our portfolio over the near and medium term and provide additional opportunities for external growth. With that, I'll turn the call over to Britt.

Speaker #3: With that, I'll turn the call over to Britt.

Speaker #4: Thank you, Steve. We finished the quarter with strong occupancy at 94.4% in the total portfolio and 95.6% in the defense IT portfolio. Year over year, occupancy increased in both portfolios by 80 basis points and 30 basis points respectively.

Britt A. Snider: Thank you, Steve. We finished the quarter with strong occupancy at 94.4% in the total portfolio and 95.6% in the defense IT portfolio. Year over year, occupancy increased in both portfolios by 80 basis points and 30 basis points, respectively. During the first quarter, we executed 92,000 square feet of vacancy leasing, nearly 70% of which is tied to cyber activity. Year to date, we have signed 152,000 square feet of vacancy leasing, which equates to 38% of our full year target of 400,000 square feet. We have approximately 115,000 square feet of prospects in advanced negotiations, which we define as over 90% likely to execute.

Britt Snider: Thank you, Steve. We finished the quarter with strong occupancy at 94.4% in the total portfolio and 95.6% in the defense IT portfolio. Year over year, occupancy increased in both portfolios by 80 basis points and 30 basis points, respectively. During the first quarter, we executed 92,000 square feet of vacancy leasing, nearly 70% of which is tied to cyber activity. Year to date, we have signed 152,000 square feet of vacancy leasing, which equates to 38% of our full year target of 400,000 square feet. We have approximately 115,000 square feet of prospects in advanced negotiations, which we define as over 90% likely to execute.

Speaker #4: During the first quarter, we executed 92,000 square feet of vacancy leasing, nearly 70% of which is tied to cyber activity. Year to date, we have signed 152,000 square feet of vacancy leasing, which equates to 38% of our full year target of 400,000 square feet.

Speaker #4: We have approximately 115,000 square feet of prospects in advanced negotiations which we define as over 90% likely to execute. Taken together, we have over 265,000 square feet of leases either executed or in advanced negotiations which amounts to two-thirds of our full year target.

Britt A. Snider: Taken together, we have over 265,000 square feet of leases either executed or in advanced negotiations, which amounts to two-thirds of our full year target. In April, we leased the remaining floor at 8100 Rideout Road in Huntsville to a top 20 US defense contractor. This lease doubles the tenant's footprint in the building to over 50,000 square feet and brings the property to 100% leased. 23 of the 24 operating buildings in our Redstone Gateway Park are now 100% leased, bringing this nearly 2.5 million square foot campus to 99.6% leased, with only 1 10,000 square foot suite available. Also in April, we signed a 12,000 square foot expansion lease at the Franklin Center in Columbia Gateway with a top 10 US defense contractor.

Britt Snider: Taken together, we have over 265,000 square feet of leases either executed or in advanced negotiations, which amounts to two-thirds of our full year target. In April, we leased the remaining floor at 8100 Rideout Road in Huntsville to a top 20 US defense contractor. This lease doubles the tenant's footprint in the building to over 50,000 square feet and brings the property to 100% leased. 23 of the 24 operating buildings in our Redstone Gateway Park are now 100% leased, bringing this nearly 2.5 million square foot campus to 99.6% leased, with only 1 10,000 square foot suite available. Also in April, we signed a 12,000 square foot expansion lease at the Franklin Center in Columbia Gateway with a top 10 US defense contractor.

Speaker #4: In April, we leased the remaining floor at 8,100 Rideout Road in Huntsville to a top 20 U.S. defense contractor. This lease doubled the tenant's footprint in the building to over 50,000 square feet and brings the property to 100% leased.

Speaker #4: 23 of the 24 operating buildings in our Redstone Gateway Park are now 100% leased, bringing this nearly two and a half million square foot campus to 99.6% leased, with only one 10,000 square foot suite available.

Speaker #4: Also in April, we signed a 12,000-square-foot expansion lease at Franklin Center in Columbia Gateway with a top 10 U.S. defense contractor. This lease increases the tenant's footprint in the building to 60,000 square feet, and we are tracking 155,000 square feet of prospects on the remaining 55,000 square feet of availability.

Britt A. Snider: This lease increases the tenant's footprint in the building to 60,000 square feet, and we are tracking 155,000 square feet of prospects on the remaining 55,000 square feet of availability. Turning to renewal leasing, we executed 1.2 million square feet in the quarter with tenant retention of 91%, cash rent spreads of 3.8%, and GAAP rent spreads of 12%. Our quarterly volume was driven by the full renewal of our US government campus near Lackland Air Force Base in San Antonio, which totaled 953,000 square feet and accounted for over 40% of our annualized rental revenue expiring in 2026 at the beginning of the year. Cash rent spreads on the San Antonio renewals increased 4.2%, with annual rent bumps of 3%.

Britt Snider: This lease increases the tenant's footprint in the building to 60,000 square feet, and we are tracking 155,000 square feet of prospects on the remaining 55,000 square feet of availability. Turning to renewal leasing, we executed 1.2 million square feet in the quarter with tenant retention of 91%, cash rent spreads of 3.8%, and GAAP rent spreads of 12%. Our quarterly volume was driven by the full renewal of our US government campus near Lackland Air Force Base in San Antonio, which totaled 953,000 square feet and accounted for over 40% of our annualized rental revenue expiring in 2026 at the beginning of the year. Cash rent spreads on the San Antonio renewals increased 4.2%, with annual rent bumps of 3%.

Speaker #4: Turning to renewal leasing, we executed 1.2 million square feet in the quarter with tenant retention of 91%, cash rent spreads of 3.8%, and GAAP rent spreads of 12%.

Speaker #4: Our quarterly volume was driven by the full renewal of our US government campus near Lackland Air Force Base in San Antonio which totaled 953,000 square feet and accounted for over 40% of our annualized rental revenue expiring in 2026 at the beginning of the year.

Speaker #4: Cash rent spreads on the San Antonio renewals increased 4.2%, with annual rent bumps of 3%. Once we include these four large lease renewals in San Antonio, our track record for retention on leases in excess of 50,000 square feet becomes even more impressive.

Britt A. Snider: Once we include these four large lease renewals in San Antonio, our track record for retention on leases in excess of 50,000 sq ft becomes even more impressive. For large leases that expire between mid-2024 and year-end 2026, we have renewed nearly 3 million sq ft with a retention rate of 97%. We have eight leases remaining, totaling 950,000 sq ft, all with the U.S. government. We expect 100% retention on these leases, with executions anticipated in 2027. Additionally, since we started providing this disclosure nearly four years ago, we have renewed over 5 million sq ft of large leases with a retention rate of over 97%. Moving on to development, we commenced two projects in Q1. Our active pipeline now totals over 1 million sq ft.

Britt Snider: Once we include these four large lease renewals in San Antonio, our track record for retention on leases in excess of 50,000 sq ft becomes even more impressive. For large leases that expire between mid-2024 and year-end 2026, we have renewed nearly 3 million sq ft with a retention rate of 97%. We have eight leases remaining, totaling 950,000 sq ft, all with the U.S. government. We expect 100% retention on these leases, with executions anticipated in 2027. Additionally, since we started providing this disclosure nearly four years ago, we have renewed over 5 million sq ft of large leases with a retention rate of over 97%. Moving on to development, we commenced two projects in Q1. Our active pipeline now totals over 1 million sq ft.

Speaker #4: For large leases that expire between mid-2024 and year-end 2026, we have renewed nearly 3 million square feet with a retention rate of 97%. We have eight leases remaining, totaling 950,000 square feet, all with the U.S. government.

Speaker #4: We expect 100% retention on these leases, with executions anticipated in 2027. Additionally, since we started providing this disclosure nearly four years ago, we have renewed over 5 million square feet of large leases, with a retention rate of over 97%.

Speaker #4: Moving on to development, we commenced two projects in the first quarter and our active pipeline now totals over 1 million square feet, that is 73% pre-leased and amounts to over half a billion dollars in capital commitment.

Britt A. Snider: That is 73% pre-leased and amounts to over a half a billion dollars in capital commitment. Each of these seven projects are on schedule and on budget, and five of the seven are 100% pre-leased. The two developments with available space are both inventory buildings in Huntsville. One inside the fence targeting government tenancy and one outside the fence for defense contractors. We commenced construction of 410 Gause Road in Q1, which is designed for the government inside the fence, and we are tracking demand that exceeds the availability in the building from multiple missions, all of which require secure facilities that are ATFP compliant. We achieved substantial completion of 8500 Advanced Gateway earlier this month, which is outside the fence and is currently 20% leased to a defense contractor.

Britt Snider: That is 73% pre-leased and amounts to over a half a billion dollars in capital commitment. Each of these seven projects are on schedule and on budget, and five of the seven are 100% pre-leased. The two developments with available space are both inventory buildings in Huntsville. One inside the fence targeting government tenancy and one outside the fence for defense contractors. We commenced construction of 410 Gause Road in Q1, which is designed for the government inside the fence, and we are tracking demand that exceeds the availability in the building from multiple missions, all of which require secure facilities that are ATFP compliant. We achieved substantial completion of 8500 Advanced Gateway earlier this month, which is outside the fence and is currently 20% leased to a defense contractor.

Speaker #4: Each of these seven projects is on schedule and on budget, and five of the seven are 100% pre-leased. The two developments with available space are both inventory buildings in Huntsville.

Speaker #4: One inside the fence targeting government tenancy and one outside the fence for defense contractors. We commenced construction of 410 Goss Road in the first quarter which is designed for the government inside the fence and we are tracking demand that exceeds the availability in the building from multiple missions.

Speaker #4: All of which require secure facilities that are ATFP compliant. We achieved substantial completion of 8,500 Advanced Gateway earlier this month, which is outside the fence and is currently 20% leased to a defense contractor.

Speaker #4: We are finalizing a lease for a full floor, which we expect to execute imminently, that will increase the lease rate to 40%. We're working on another deal for two full floors, which would increase the lease rate to over 80%.

Britt A. Snider: We are finalizing a lease for a full floor, which we expect to execute imminently, that will increase the lease rate to 40%, and we're working on another deal for two full floors, which would increase the lease rate to over 80%. We've already planned the next inventory building, RG 6300, and expect to commence development once we approach that 80% threshold. 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 nearly 1 million square feet. Beyond that, we're tracking an additional 600,000 square feet of potential development opportunities. With that, I'll hand it over to Anthony.

Britt Snider: We are finalizing a lease for a full floor, which we expect to execute imminently, that will increase the lease rate to 40%, and we're working on another deal for two full floors, which would increase the lease rate to over 80%. We've already planned the next inventory building, RG 6300, and expect to commence development once we approach that 80% threshold. 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 nearly 1 million square feet. Beyond that, we're tracking an additional 600,000 square feet of potential development opportunities. With that, I'll hand it over to Anthony.

Speaker #4: We've already planned the next inventory building RG6300 and expect to commence development once we approach that 80% threshold. 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 nearly 1 million square feet.

Speaker #4: Beyond that, we're tracking an additional 600,000 square feet of potential development opportunities. With that, I'll hand it over to Anthony. Thank you, Britt. We reported first quarter FFO per share of 69 cents which was 1 cent above the midpoint of guidance and represents a 6.2% increase year over year.

Anthony Mifsud: Thank you, Brad. We reported Q1 FFO per share of $0.69, which was $0.01 above the midpoint of guidance and represents a 6.2% increase year-over-year. The quarter benefited from the earlier than budgeted commencement of several leases, strong renewal leasing, the timing of certain R&M projects, and unbudgeted real estate tax refunds from continued successful assessment appeals. These favorable items were partially offset by higher than forecasted net winter weather-related expenses. Same-Property Cash NOI increased 5.4% year-over-year, driven by the burn-off of free rent on development and acquisition leases which commenced in prior years, and a 70 basis point increase in same property average occupancy. We received $2 million less of non-recurring real estate tax refunds in 2026, which muted this quarter's strong growth by approximately 200 basis points.

Speaker #4: The quarter benefited from the earlier than budgeted commencement of several leases, strong renewal leasing, the timing of certain R&M projects, and unbudgeted real estate tax refunds from continued successful assessment appeals.

Speaker #4: These favorable items were partially offset by higher-than-forecasted net winter weather-related expenses. Same property cash NOI increased 5.4% year over year, driven by the burn-off of free rent on development and acquisition leases which commenced in prior years, and a 70 basis point increase in same property average occupancy.

Speaker #4: We received $2 million less of non-recurring real estate tax refunds in 2026 which muted this quarter's strong growth by approximately 200 basis points. Same property occupancy ended the quarter at 94.2% which is a 60 basis point increase over the year and was driven by a 500 basis point increase in the other segment.

Anthony Mifsud: We received $2 million less of non-recurring real estate tax refunds in 2026, which muted this quarter's strong growth by approximately 200 basis points. Same property occupancy ended the quarter at 94.2%, which is a 60 basis point increase over the year and was driven by a 500 basis point increase in the other segment. With respect to capital transactions, on 16 March, we repaid our $400 million bond, which carried an interest rate of 2.25%. Recall that we pre-funded the capital for this maturity roughly 7 months ago when we issued $400 million of 5-year unsecured notes at 4.5% at a sector-leading credit spread of 95 basis points. The increased interest on this $400 million of debt results in $0.09 of higher financing costs in 2026.

Anthony Mifsud: Same property occupancy ended the quarter at 94.2%, which is a 60 basis point increase over the year and was driven by a 500 basis point increase in the other segment. With respect to capital transactions, on 16 March, we repaid our $400 million bond, which carried an interest rate of 2.25%. Recall that we pre-funded the capital for this maturity roughly 7 months ago when we issued $400 million of 5-year unsecured notes at 4.5% at a sector-leading credit spread of 95 basis points. The increased interest on this $400 million of debt results in $0.09 of higher financing costs in 2026. We have no significant near-term refinancing risk, as our next bond maturity is not until the fall of 2028.

Speaker #4: With respect to capital transactions, on March 16th, we repaid our $400 million bond which carried an interest rate of two and a quarter percent.

Speaker #4: Recall that we pre-funded the capital for this maturity roughly seven months ago when we issued $400 million of five year unsecured notes at four and a half percent at a sector leading credit spread of 95 basis points.

Speaker #4: The increased interest on this $400 million of debt results in 9 cents of higher financing costs in 2026. We have no significant near-term refinancing risk as our next bond maturity is not until the fall of 2028.

Anthony Mifsud: We have no significant near-term refinancing risk, as our next bond maturity is not until the fall of 2028. As Steve mentioned, Moody's upgraded our investment-grade credit rating in March to Baa2. In its press release, Moody's highlighted the strong operating performance of our specialized office portfolio, our solid EBITDA to interest expense ratio, and income growth from assets under development. I would like to give a special recognition to our team who worked diligently to achieve this important milestone, which represents the culmination of years of effort and outreach. We appreciate that Moody's recognizes the strength and specialized nature of our strategy, platform, portfolio, and tenants. With respect to guidance, we increased the midpoint for several items.

Speaker #4: As Steve mentioned, Moody's upgraded our investment grade credit rating in March to Baa2. In its press release, Moody's highlighted the strong operating performance of our specialized office portfolio, our solid EBITDA-to-interest expense ratio, and income growth from assets under development.

Anthony Mifsud: As Steve mentioned, Moody's upgraded our investment-grade credit rating in March to Baa2. In its press release, Moody's highlighted the strong operating performance of our specialized office portfolio, our solid EBITDA to interest expense ratio, and income growth from assets under development. I would like to give a special recognition to our team who worked diligently to achieve this important milestone, which represents the culmination of years of effort and outreach. We appreciate that Moody's recognizes the strength and specialized nature of our strategy, platform, portfolio, and tenants. With respect to guidance, we increased the midpoint for several items. We increased the midpoint of FFO per share guidance by $0.01 to $2.76, which is driven by the contribution from both the outperformance during the quarter and the Mission Ridge land acquisition, partially offset by the accounting treatment for the dilution from our exchangeable notes.

Speaker #4: I would like to give a special recognition to our team who worked diligently to achieve this important milestone which represents the culmination of years of effort and outreach.

Speaker #4: We appreciate that Moody's recognizes the strength and specialized nature of our strategy, platform, portfolio, and tenants. With respect to guidance, we increased the midpoint for several items. We increased the midpoint of FFO per share guidance by $0.01 to $2.76, which is driven by both the outperformance during the quarter and the Mission Ridge land acquisition, partially offset by the accounting treatment for the dilution from our exchangeable notes.

Anthony Mifsud: We increased the midpoint of FFO per share guidance by $0.01 to $2.76, which is driven by the contribution from both the outperformance during the quarter and the Mission Ridge land acquisition, partially offset by the accounting treatment for the dilution from our exchangeable notes. We increased the midpoint of Same-Property Cash NOI growth by 50 basis points to 3% due to stronger renewal leasing and unanticipated real estate tax refunds. We increased the midpoint of tenant retention guidance by 250 basis points to 82.5%. We increased the midpoint of capital committed to new investment guidance by $40 million to $290 million due to the Mission Ridge land acquisition. Finally, we're establishing Q2 guidance for FFO per share in a range of $0.68 to $0.70.

Speaker #4: We increased the midpoint of same property cash NOI growth by 50 basis points to 3% due to stronger renewal leasing and unanticipated real estate tax refunds.

Anthony Mifsud: We increased the midpoint of Same-Property Cash NOI growth by 50 basis points to 3% due to stronger renewal leasing and unanticipated real estate tax refunds. We increased the midpoint of tenant retention guidance by 250 basis points to 82.5%. We increased the midpoint of capital committed to new investment guidance by $40 million to $290 million due to the Mission Ridge land acquisition. Finally, we're establishing Q2 guidance for FFO per share in a range of $0.68 to $0.70.

Speaker #4: We increased the midpoint of tenant retention guidance by 250 basis points to 82 and a half percent. We increased the midpoint of capital committed to new investment guidance by 40 million dollars to 290 million dollars due to the mission ridge land acquisition.

Speaker #4: And finally, we're establishing second quarter guidance for FFO per share in a range of $0.68 to $0.70. With that, I'll turn the call back to Steve.

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

Speaker #5: So in closing, we're after a great start to the year. With leasing volume right on track with full year plan, we delivered FFO per share growth of 6.2% year over year marking our 23rd consecutive quarter of year over year growth.

Stephen E. Budorick: In closing, we're off to a great start to the year with leasing volume right on track with full year plan. We delivered FFO per share growth of 6.2% year over year, marking our 23rd consecutive quarter of year over year growth. We increased the midpoint of 2026 guidance for 4 key metrics. We increased the dividend again in Q1 by 4.9%, and have increased it over 16% over the last 4 years. We committed nearly $250 million of capital to 3 new investments year to date. Since the beginning of 2025, the strength of our strategy has resulted in over a half billion dollars of capital commitments to new investments consisting of 8 projects in 5 different markets.

Steve Budorick: In closing, we're off to a great start to the year with leasing volume right on track with full year plan. We delivered FFO per share growth of 6.2% year over year, marking our 23rd consecutive quarter of year over year growth. We increased the midpoint of 2026 guidance for 4 key metrics. We increased the dividend again in Q1 by 4.9%, and have increased it over 16% over the last 4 years. We committed nearly $250 million of capital to 3 new investments year to date. Since the beginning of 2025, the strength of our strategy has resulted in over a half billion dollars of capital commitments to new investments consisting of 8 projects in 5 different markets.

Speaker #5: We increased the midpoint of 2026 guidance for four key metrics. We increased the dividend again in the first quarter by 4.9%, and have increased it over 16% over the last four years.

Speaker #5: We committed nearly $250 million of capital to three new investments year to date. And since the beginning of 2025, the strength of our strategy has resulted in over half a million dollars of capital commitments to new investments, consisting of eight projects in five different markets.

Speaker #5: 80% of the dollar value is for 100% pre-lease projects and 20% of the dollar value is great much needed inventory to meet the demand we're seeing from both the US government and defense contractors in parks where we have little to no availability.

Stephen E. Budorick: 80% of the dollar value is for 100% pre-leased projects, and 20% of the dollar value is great much needed inventory to meet the demand we're seeing from both the U.S. government and defense contractors in parks where we have little to no availability. These investments, combined with the expected additional opportunities from the substantial increase in the proposed defense budget, will support the continued track record of growth we've delivered in NOI and shareholder value. With that, operator, please open the call for questions.

Steve Budorick: 80% of the dollar value is for 100% pre-leased projects, and 20% of the dollar value is great much needed inventory to meet the demand we're seeing from both the U.S. government and defense contractors in parks where we have little to no availability. These investments, combined with the expected additional opportunities from the substantial increase in the proposed defense budget, will support the continued track record of growth we've delivered in NOI and shareholder value. With that, operator, please open the call for questions.

Speaker #5: These investments combined with the expected additional opportunities from the substantial increase in the proposed defense budget will support continued the continued track record of growth we've delivered in NOI and shareholder value.

Speaker #5: With that operator, please open the call for questions.

Speaker #6: Thank you, Mr. Budorick. To ask a question, please press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again.

Operator: Thank you, Mr. Budorick. To ask a question, please press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. Please stand by while we compile the Q&A roster. Our first question comes from Seth Bergey of Citi. Your line is open.

Speaker #6: Please stand back and compile the Q&A roster. And our first question comes from Seth Berkey of Citi. Your line is open.

Seth Bergey: Hey, thanks for taking my question. You know, just kind of wanted to ask, you have a, you have a slide in the, in the flip book on just kind of the long-term growth rate of like 4.5% kind of FFO per share CAGR. You know, just with the kind of increase in defense spending, is that kind of how you think about the long-term kind of earnings power or, you know, do you kind of see a path to that accelerating as the defense spending increases and the development pipeline kind of continues to mature?

Speaker #7: Hey, thanks for taking my question. Just kind of wanted to ask you have a slide in the Flipbook on just kind of the long-term growth rate of four and a half percent kind of FFO per share CAGR.

Speaker #7: Just with the kind of increase in defense spending, is that kind of how you think about the long-term kind of earnings power or do you kind of see a path to that accelerating as the defense spending increases and the development pipeline kind of continues to mature?

Speaker #5: Sure. The slide Seth's referring to demonstrates the four and a half percent growth rate we've compounded at for the last seven or eight years.

Stephen E. Budorick: Sure. The slide Seth's referring to demonstrates the 4.5% growth rate we've compounded at for the last 7 or 8 years. Looking forward, Seth, this year our growth is a little muted because of the $0.09 of additional interest expense Anthony referred to in his comments. We expect to get somewhere around 1.5% of growth. Looking forward, we generally expect that we can return to the growth path that we've experienced recently. Hypothetically, there could be upside to that from the increase in defense spending.

Steve Budorick: Sure. The slide Seth's referring to demonstrates the 4.5% growth rate we've compounded at for the last 7 or 8 years. Looking forward, Seth, this year our growth is a little muted because of the $0.09 of additional interest expense Anthony referred to in his comments. We expect to get somewhere around 1.5% of growth. Looking forward, we generally expect that we can return to the growth path that we've experienced recently. Hypothetically, there could be upside to that from the increase in defense spending. I remind you that bill has not even been passed and appropriated yet. It's aspirational. It certainly supports the continued trend we refer to over the last 12 years of increases in investment, which will be good for our business and potentially lead to a better outlook.

Speaker #5: Looking forward, Seth, this year our growth is a little muted. Because of the 9 cents of additional interest expense Anthony referred to in his comments.

Speaker #5: So we expect to get somewhere around a point and a half percent of growth. Looking forward, we generally expect that we can return to the growth path that we've experienced recently.

Speaker #5: And hypothetically, there could be upside to that from the increase in defense spending. I remind you that Bill has not even been past an appropriated yet.

Stephen E. Budorick: I remind you that bill has not even been passed and appropriated yet. It's aspirational. It certainly supports the continued trend we refer to over the last 12 years of increases in investment, which will be good for our business and potentially lead to a better outlook.

Speaker #5: So his aspirational, but it's certainly supports the continued trend we refer to over the last 12 years of increases in investment, which will be good for our business and potentially lead to a better outlook.

Seth Bergey: Great. With the acquisition, that's kind of the second acquisition you've made in that sub-market, are there any other types of kind of buildings or ground leases that you're looking at in that market? Just kind of as, you know, the business improves, defense spending increases, are you seeing any kind of changes to, you know, other players in the space?

Speaker #7: Great. And then with the acquisition that's kind of the second acquisition you've made, and that submarket, are there any other types of the kind of buildings or ground leases that you're looking at in that market?

Speaker #7: And then just kind of as the business improves, defense spending increases, are you seeing any kind of changes to other players in the space?

Speaker #5: So, to speak to the first one, if you look at the aerial on slide 15, you'll see that market is, as we described, in a rich ecosystem of defense contractors supporting the local missions.

Stephen E. Budorick: To speak to the 1st one, if you look at the aerial on slide 15, you'll see that market is, as we described it, a rich ecosystem of defense contractors supporting the local missions. Well, we own about 28% of that market now. There are certainly buildings that have great tenants, with characteristics that would be compatible with us that, you know, under the right price or terms, we'd be very interested in buying. There are none currently available, but it's certainly one of the top 3 markets we've staked out, and we keep a pretty sharp eye peeled on opportunities there. The 2nd part of the question referred to. Seth, help me out. Any other questions.

Steve Budorick: To speak to the 1st one, if you look at the aerial on slide 15, you'll see that market is, as we described it, a rich ecosystem of defense contractors supporting the local missions. Well, we own about 28% of that market now. There are certainly buildings that have great tenants, with characteristics that would be compatible with us that, you know, under the right price or terms, we'd be very interested in buying. There are none currently available, but it's certainly one of the top 3 markets we've staked out, and we keep a pretty sharp eye peeled on opportunities there. The 2nd part of the question referred to. Seth, help me out. Any other questions. Any other players?

Speaker #5: And we control, well, we own about 28% of that market now. There are certainly buildings that have great tenants with characteristics that would be compatible with us that, under the right price or terms, we'd be very interested in buying.

Speaker #5: There are none currently available, but it's certainly one of the top three markets we've staked out, and we keep a pretty sharp eye peeled for opportunities there.

Speaker #5: Second part of the question referred to Seth, help me out.

Speaker #7: Any other?

Seth Bergey: Oh.

Stephen E. Budorick: Any other players?

Speaker #5: Any other players?

Seth Bergey: Are you seeing? Yeah.

Seth Bergey: Are you seeing? Yeah. Is this increased competition that are also kind of seeing the increase in defense spending and getting more interested in taking a look at the space?

Speaker #7: Yeah. Just increased competition that are also kind of seeing the increase in defense spending and getting more interested in taking a look at the space.

Stephen E. Budorick: Uh.

Seth Bergey: Is this increased competition that are also kind of seeing the increase in defense spending and getting more interested in taking a look at the space?

Stephen E. Budorick: Nothing meaningful that I could talk about. You know, there are several investment groups that are, you know, considerably smaller that like to invest in Northern Virginia in similar assets. I think their interest will remain high as it has been in the past, but I can't say that I can identify any new entrants.

Steve Budorick: Nothing meaningful that I could talk about. You know, there are several investment groups that are, you know, considerably smaller that like to invest in Northern Virginia in similar assets. I think their interest will remain high as it has been in the past, but I can't say that I can identify any new entrants.

Speaker #5: Nothing meaningful that I could talk about. There are several investment groups that are considerably smaller that like to invest in the Northern Virginia in similar assets.

Speaker #5: And I think their interest will remain high, as it has been in the past. But I can't say that I can identify any new entrants.

Speaker #7: Great. Thank you.

Seth Bergey: Great. Thank you.

Speaker #6: Thank you. And our next question comes from Steve Sakwa of Evercore ISI, your line is open.

Operator: Thank you. Our next question comes from Steve Sakwa of Evercore ISI. Your line is open.

Speaker #8: Yeah, thanks. Good afternoon. Steve, I'm just wondering if your sort of thinking about the development pipeline and development starts, kind of any differently today, just given all of the positive sort of backdrop and tailwinds that you talked about, are you kind of willing in some of the submarkets to have a little bit more spec product?

Steve Sakwa: Yeah, thanks. Good afternoon. Steve, I'm just wondering if you're sort of thinking about the development pipeline and development start kind of any differently today, just given all of the positive sort of backdrop and tailwinds that you talked about. Are you kind of willing in some of the submarkets to have a little bit more spec product? Is the tenancy changing given some of the, I guess, new entrants into the defense contracting business?

Speaker #8: And is the tendency changing given some of the, I guess, new entrants into the defense contracting business?

Speaker #5: So we're not yet ready to start accumulating more inventory than we traditionally have. But we are certainly for the last year and increasingly so putting ourselves in a posture to move extremely quickly by pre-designing and in some cases addressing land conditions in advance of the opportunity to cut our delivery timeframe.

Stephen E. Budorick: We're not yet ready to start accumulating more inventory than we traditionally have. We are certainly, for the last year and increasingly so, putting ourselves in a posture to move extremely quickly by pre-designing and, in some cases, addressing land conditions in advance of the opportunity to cut our delivery timeframe. To the extent that demand ramps up, particularly in Huntsville, where we expect it to ramp up to support Golden Dome, we're prepared to move more aggressively, but we need to see that demand, you know, really materialize a little more formally than it has been.

Steve Budorick: We're not yet ready to start accumulating more inventory than we traditionally have. We are certainly, for the last year and increasingly so, putting ourselves in a posture to move extremely quickly by pre-designing and, in some cases, addressing land conditions in advance of the opportunity to cut our delivery timeframe. To the extent that demand ramps up, particularly in Huntsville, where we expect it to ramp up to support Golden Dome, we're prepared to move more aggressively, but we need to see that demand, you know, really materialize a little more formally than it has been.

Speaker #5: To the extent that demand ramps up, particularly in Huntsville, where we expect it to ramp up to spark Golden Dome, we're prepared to move more aggressively, but we need to see that demand really materialize a little more formally than it has been.

Speaker #8: Got it. And then, I guess as you just think about vacancy leasing, maybe just talk about kind of where the, I guess, focal points are, and what are the prospects for, I guess, driving occupancy even higher from current levels?

Steve Sakwa: Got it. I guess as you just think about vacancy leasing, maybe just talk about kind of where the I guess, focal points are and, you know, I guess, what are the prospects for I guess, driving occupancy even higher from kind of current levels?

Speaker #5: Yeah. And this is Brett Haystead. So I think in terms of the prospects that we're standing in Northern Virginia, if you look at some of the buildings and deals that we've done recently, we've been able to actually push some cash rents there too.

Britt A. Snider: Yeah. This is Brit. Hey, Steve. I think in terms of the prospects that we're seeing in Northern Virginia, you know, if you look at some of the buildings and deals that we've done recently, we've been able to actually push some cash rents there too. I think that's a good sign for the tenants that are in that market looking at our buildings there. I would also say, I mean, the growth in the cyber funding in the, you know, BW Corridor, I think is an area that we're starting to see some more activity after, I would just say a little bit, I mean, a little bit quieter period, but all of a sudden, we're starting to see a lot more inquiries there.

Britt Snider: Yeah. This is Brit. Hey, Steve. I think in terms of the prospects that we're seeing in Northern Virginia, you know, if you look at some of the buildings and deals that we've done recently, we've been able to actually push some cash rents there too. I think that's a good sign for the tenants that are in that market looking at our buildings there. I would also say, I mean, the growth in the cyber funding in the, you know, BW Corridor, I think is an area that we're starting to see some more activity after, I would just say a little bit, I mean, a little bit quieter period, but all of a sudden, we're starting to see a lot more inquiries there.

Speaker #5: And so I think that's a good sign for the tenants that are in that market looking at our buildings there. And I would also say, I mean, the growth in the cyber funding in the BW corridor, I think, is an area that we're starting to see some more activity after, I would say, a little bit— I mean, a little bit quieter period.

Speaker #5: But all of a sudden, we're starting to see a lot more inquiries there. And if you really look at how the funding is being allocated, it's really for the missions that we support in our buildings.

Britt A. Snider: If you really look at how the funding is being allocated, it's really for the missions that we support in our buildings and looking at, you know, the Cyber Mission Force, which is a key part of where the dollars are flowing for cyber. I think those are two areas, Northern Virginia and BW Corridor, where we're gonna see heightened vacancy leasing. We've certainly seen it in Columbia Gateway as well at the beginning of this year.

Britt Snider: If you really look at how the funding is being allocated, it's really for the missions that we support in our buildings and looking at, you know, the Cyber Mission Force, which is a key part of where the dollars are flowing for cyber. I think those are two areas, Northern Virginia and BW Corridor, where we're gonna see heightened vacancy leasing. We've certainly seen it in Columbia Gateway as well at the beginning of this year.

Speaker #5: And looking at the cyber mission force, which is a key part of where the dollars are flowing for cyber, I think those are two areas Northern Virginia and BW corridor where we're going to see heightened vacancy leasing.

Speaker #5: We've certainly seen it in Columbia Gateway as well at the beginning of this year. And we don't have any vacancy to lease in Huntsville.

Stephen E. Budorick: We don't have any vacancy to lease in Huntsville. We're down to our last suite.

Steve Budorick: We don't have any vacancy to lease in Huntsville. We're down to our last suite.

Speaker #5: We're down to our last suite.

Steve Sakwa: That's it for me. Thanks.

Speaker #8: That's it for me. Thanks.

Speaker #6: Thank you. And our next question comes from Blaine Heck of Wells Fargo. Your line is open.

Operator: Thank you. Our next question comes from Blaine Heck of Wells Fargo. Your line is open.

Blaine Heck: Great. Thanks. The 2027 budget request at roughly $1.5 trillion is clearly a major positive. Steve, assuming that goes through, given that the increase is so substantial, do you think your tenant base will need to start leasing a bit earlier and get out ahead of all of those funds coming in? Or do you think the normal kind of 12 to 18-month lag rule probably still holds steady?

Speaker #7: Great. Thanks. The 2027 budget request that roughly $1.5 trillion is clearly a major positive. Steve, assuming that goes through, given that the increase is so substantial, do you think your tenant base will need to start leasing a bit earlier and get out ahead of all of those funds coming in, or do you think the normal kind of 12 to 18-month lag rule probably still holds steady?

Speaker #5: Well, remember, you got to break that $1.5 trillion down into $350 billion that's going to be a reconciliation appropriation. And if you break that down, that's really going for things that would not affect leases in our portfolio.

Stephen E. Budorick: Well, remember, you got to break that $1.5 trillion down into $350 billion. That's gonna be a reconciliation appropriation. If you break that down, that's really going for things that would not affect leases in our portfolio. Increased inventory, ammunitions, and shipbuilding. We've got a breakdown. I could go through it with you offline. The almost 30% increase in the base budget, that certainly should affect our tenant base and hypothetically could and would influence their need for space. Again, it's too early. It hasn't been passed yet, nor appropriated. Once it's appropriated, it's got to flow through to the contractors. I think the 12 to 18 months is still gonna hold in.

Steve Budorick: Well, remember, you got to break that $1.5 trillion down into $350 billion. That's gonna be a reconciliation appropriation. If you break that down, that's really going for things that would not affect leases in our portfolio. Increased inventory, ammunitions, and shipbuilding. We've got a breakdown. I could go through it with you offline. The almost 30% increase in the base budget, that certainly should affect our tenant base and hypothetically could and would influence their need for space. Again, it's too early. It hasn't been passed yet, nor appropriated. Once it's appropriated, it's got to flow through to the contractors. I think the 12 to 18 months is still gonna hold in.

Speaker #5: So increased inventory and munitions, ship building, we've got to break down. I could go through it with you offline. The almost 30% increase in the base budget that certainly should affect our tenant base.

Speaker #5: And hypothetically, it could and would influence their need for space. But again, it's too early. It hasn't been passed yet, nor appropriated. And then once it's appropriated, it's got to flow through to the contractors, so I think the 12 to 18 months is still going to hold in.

Speaker #7: Got it. Very helpful. And then we noticed your potential for future opportunities in the development pipeline came down by about 400,000 square feet from last quarter.

Blaine Heck: Got it. Very helpful. We noticed your potential for future opportunities in the development pipeline came down by about 400,000 square feet from last quarter. Was there any specific driver behind that reduction? Any projects that might have fell out of that bucket? Any color you can provide around those situations?

Speaker #7: Was there any specific driver behind that reduction? Any projects that might have fallen out of that bucket? And any color you can provide around those situations?

Speaker #5: Well, we harvested some with deals that we announced last quarter. And we made a decision on one particular mission to reduce the possibility of future demand because they look pretty committed to a mill kind of solution.

Stephen E. Budorick: Well, we harvested some with the deals that we announced last quarter, and we made a decision on one particular mission to reduce the possibility of future demand because they look pretty committed to a MILCON solution.

Steve Budorick: Well, we harvested some with the deals that we announced last quarter, and we made a decision on one particular mission to reduce the possibility of future demand because they look pretty committed to a MILCON solution.

Speaker #7: Okay. Got it. Thanks very much.

Blaine Heck: Okay. Got it. Thank you very much.

Speaker #6: Thank you. And our next question comes from Tom Catherwood of BTIG. Your line is open.

Operator: Thank you. Our next question comes from Thomas Catherwood of BTIG. Your line is open.

Speaker #8: Thank you. Good afternoon, everybody. Maybe going back to Steve's question on the leasing, Britt, in the past, you've talked about dialing back on tenant improvements and free rent and that's clearly shown up in the numbers for the last few quarters.

Thomas Catherwood: Thank you. Good afternoon, everybody. Maybe going back to Steve's question on the leasing. Britt, in the past, you've talked about dialing back on tenant improvements and free rent, and that's clearly shown up in the numbers for the last few quarters. Two questions around that. Kind of how much growth are you getting on a net effective basis now? And second, as availabilities get tighter in your portfolio, how much more do you think you can pull back on concessions?

Tom Catherwood: Thank you. Good afternoon, everybody. Maybe going back to Steve's question on the leasing. Britt, in the past, you've talked about dialing back on tenant improvements and free rent, and that's clearly shown up in the numbers for the last few quarters. Two questions around that. Kind of how much growth are you getting on a net effective basis now? And second, as availabilities get tighter in your portfolio, how much more do you think you can pull back on concessions?

Speaker #8: So two questions around that. Kind of how much growth are you getting on a net effective basis now? And second, as availabilities get tighter in your portfolio, how much more do you think you can pull back on concessions?

Speaker #5: Well, I think on the NER front, I mean, it's something that we're very focused on in every deal we look at. And so, I don't have the exact percentage about how we've grown that, but certainly, we have an enhanced focus on that, I would say, over the past couple of years.

Britt A. Snider: Well, I think on the NER front, I mean, it's just something that we're very focused on every deal we look at. I don't have the exact percentage about how we've grown that, but it certainly, we have an enhanced focus on that, I would say, over the past couple of years. I think it's, in certain markets, certainly in, Northern Virginia in particular, we've been able to pull back on the concessions more so than we have in the past. I mean, you know, for the folks that need mission critical space, they are willing to pony up more dollars to build out and upgrade their SCIFs. Whereas we're staying generally at the same level, if not pulling back.

Britt Snider: Well, I think on the NER front, I mean, it's just something that we're very focused on every deal we look at. I don't have the exact percentage about how we've grown that, but it certainly, we have an enhanced focus on that, I would say, over the past couple of years. I think it's, in certain markets, certainly in, Northern Virginia in particular, we've been able to pull back on the concessions more so than we have in the past. I mean, you know, for the folks that need mission critical space, they are willing to pony up more dollars to build out and upgrade their SCIFs. Whereas we're staying generally at the same level, if not pulling back. Certainly in the free rent area is where we're really trying to pull back.

Speaker #5: And then I think it's in certain markets, certainly in Northern Virginia in particular, we've been able to pull back on the concessions more so than we have in the past.

Speaker #5: So I mean, for the folks that need mission-critical space, they are willing to pony up more dollars to build out and upgrade their skiffs.

Speaker #5: Whereas we're staying generally at the same level, if not pulling back. And certainly in the free rent area, it's where we're really trying to pull back.

Britt A. Snider: Certainly in the free rent area is where we're really trying to pull back.

Thomas Catherwood: All right. Do you think that's low single digits? Do you think it's high single digits on a net effective basis? I mean, just kind of general bookends. Do you have a sense of what that might look like over the past year?

Tom Catherwood: All right. Do you think that's low single digits? Do you think it's high single digits on a net effective basis? I mean, just kind of general bookends. Do you have a sense of what that might look like over the past year?

Speaker #8: All right. Do you think that's low single digits? Do you think it's high single digits on a net effective basis? I mean, just kind of general bookends, do you have a sense of what that might look like over the past year?

Speaker #5: Yeah. Probably mid-single digits.

Britt A. Snider: Yeah, probably mid single digits.

Britt Snider: Yeah, probably mid single digits.

Stephen E. Budorick: You talking about a growth rate, Tom?

Steve Budorick: You talking about a growth rate, Tom?

Speaker #3: Talking about a growth rate type?

Speaker #8: Yeah.

Thomas Catherwood: Yeah.

Tom Catherwood: Yeah.

Speaker #3: Yeah. That's about right.

Stephen E. Budorick: Yeah, that's about right.

Steve Budorick: Yeah, that's about right.

Speaker #8: Perfect. Perfect. Perfect. And then Steve, kind of going back to something that you alluded to in your response to Blaine's question, but traditionally, we've thought of CDP with a focus on defense intelligence markets and then you've shied away from markets that were more focused on defense manufacturing or deployment.

Thomas Catherwood: Perfect. Perfect, perfect. Then Steve, kind of going back to something that you alluded to, in your response to Blaine's question, like traditionally we've thought of CDP, you know, with a focus on defense intelligence markets, then you've shied away from markets that were more focused on defense manufacturing or deployment. With the push to modernize defense capabilities, it seems like those lines are blurring. Is that a fair comment? If so, is that driving you to look at other markets that maybe you hadn't looked at before?

Tom Catherwood: Perfect. Perfect, perfect. Then Steve, kind of going back to something that you alluded to, in your response to Blaine's question, like traditionally we've thought of CDP, you know, with a focus on defense intelligence markets, then you've shied away from markets that were more focused on defense manufacturing or deployment. With the push to modernize defense capabilities, it seems like those lines are blurring. Is that a fair comment? If so, is that driving you to look at other markets that maybe you hadn't looked at before?

Speaker #8: But with the push to modernize defense capabilities, it seems like those lines are blurring. Does that A, is that a fair comment? And if so, is that driving you to look at other markets that maybe you hadn't looked at before?

Speaker #5: Well, if we were going to bridge into the realm of defense we've not traditionally served, it would be in conjunction with one of our tenants in a specific opportunity to support them with third-party capital to support their needs.

Stephen E. Budorick: Well, if we're going to bridge into the realm of defense we've not traditionally served, it would be in conjunction with one of our tenants in a specific opportunity to support them with, you know, third-party capital to support their needs. We have had conversations in the past with some of our tenants to move to other markets. We've not yet made that decision. I can't say that's accelerating now, but on a individual basis, we'd consider it.

Steve Budorick: Well, if we're going to bridge into the realm of defense we've not traditionally served, it would be in conjunction with one of our tenants in a specific opportunity to support them with, you know, third-party capital to support their needs. We have had conversations in the past with some of our tenants to move to other markets. We've not yet made that decision. I can't say that's accelerating now, but on a individual basis, we'd consider it.

Speaker #5: We have had conversations in the past with some of our tenants to move to other markets. We've not yet made that decision. I can't say that's accelerating now, but on an individual basis, we'd consider it.

Speaker #8: Got it. That's it for me. Thanks, everyone.

Thomas Catherwood: Got it. That's it for me. Thanks everyone.

Tom Catherwood: Got it. That's it for me. Thanks everyone.

Speaker #6: Thank you. And our next question comes from Richard Anderson of Cantor Fitzgerald, your line is open.

Operator: Thank you. Our next question comes from Richard Anderson of Cantor Fitzgerald. Your line is open.

Speaker #9: Thanks, good afternoon. So, speaking of other markets, what about Des Moines? What's the latest and greatest there as you sort of look to build out data center shells in that market?

Richard Anderson: Thanks. Good afternoon. Speaking of other markets, what about Des Moines? What's the latest and greatest there as you know, sort of look to build out data center shells in that market?

Stephen E. Budorick: It's gonna be a great corn crop this year. No real update. We're at an impasse on power. We're waiting for the power situation to materialize. I think we told you in prior calls that, to move forward today, the economic terms were too burdensome. We elected to step aside, let others lead in that market, and wait for the power company to adjust to the new elevated demand for power for the data in the market. We continue-

Steve Budorick: It's gonna be a great corn crop this year. No real update. We're at an impasse on power. We're waiting for the power situation to materialize. I think we told you in prior calls that, to move forward today, the economic terms were too burdensome. We elected to step aside, let others lead in that market, and wait for the power company to adjust to the new elevated demand for power for the data in the market. We continue to think that three to four years out.

Speaker #3: It's going to be a great corn crop this year. No real update. We're at an impasse on power. We're waiting for the power situation to materialize.

Speaker #3: I think we told you in prior calls that to move forward today, the economic terms were too burdensome. We elected to step aside, let others lead in that market, and await for the power company to adjust to the new elevated demand for power for the data in the market.

Speaker #3: So we continue to think that's three to four years out.

Richard Anderson: I see.

Stephen E. Budorick: to think that three to four years out.

Speaker #9: So for now, no corn on the COPT. Is that what you're saying? Sorry.

Richard Anderson: For now, no corn on the cob. Is that what you're saying? Sorry.

Stephen E. Budorick: No corn on the cob.

Steve Budorick: No corn on the cob.

Speaker #3: No corn on the COPT.

Richard Anderson: Wow.

Speaker #9: Wow.

Stephen E. Budorick: That's impressive, Rich.

Steve Budorick: That's impressive, Rich. That is impressive.

Speaker #3: That's impressive, Rich. That is impressive.

Richard Anderson: Sorry.

Stephen E. Budorick: That is impressive.

Speaker #9: So as far as Huntsville, you mentioned 99.6% leased, 10,000 square 10,000 square feet 10,000 square feet available, excuse me, in a single suite. That campus has the potential to be twice the size in terms of your buildings.

Richard Anderson: As far as Huntsville, you know, you mentioned 99.6% leased, 10,000 square feet, 10,000 square feet available, excuse me, in a single suite. That campus has the potential to be twice the size in terms of your buildings. I assume I have that correct. When you talk about all the old Golden Dome initiatives that are going on, you know, what's the chance that you could have the very high class problem of, you know, just not having enough space there when it's all said and done?

Speaker #9: I assume I have that correct. When you talk about all the Golden Dome initiatives that are going on, what's the chance that you could have the very high-class problem of just not having enough space there when it's all said and done?

Speaker #3: Well, that's a long runway away. So we have at least two and a half, really more like three million square feet of capacity. And to the extent that we have that great news and we're gobbling it up, do recall that our partner, in essence, is the US government.

Stephen E. Budorick: Well, that's a long runway away, we have at least 2.5, really more like 3 million square feet of capacity. To the extent that we have that great news and we're gobbling it up, do recall that our partner, in essence, is U.S. government. We lease land from them. It's an extraordinarily large parcel of property, the U.S., the Redstone Arsenal, and certainly believe in light of that kind of success, we can find a way to expand our enhanced use lease and continue to support the growth of the missions on the arsenal. That's the least of my concerns when I go to bed at night.

Steve Budorick: Well, that's a long runway away, we have at least 2.5, really more like 3 million square feet of capacity. To the extent that we have that great news and we're gobbling it up, do recall that our partner, in essence, is U.S. government. We lease land from them. It's an extraordinarily large parcel of property, the U.S., the Redstone Arsenal, and certainly believe in light of that kind of success, we can find a way to expand our enhanced use lease and continue to support the growth of the missions on the arsenal. That's the least of my concerns when I go to bed at night.

Speaker #3: We lease land from them. It's an extraordinarily large parcel of property, the Redstone Arsenal. And certainly believe in light of that kind of success, we could find a way to expand our enhanced use lease and continue to support the growth of the missions on the arsenal.

Speaker #3: So that's the least of my concerns when I go to bed at night.

Speaker #9: Okay. And then finally for me on the vacancy leasing, I know you're tracking to 400,000, but you've guilty of your own past success on that topic in the past couple of years.

Richard Anderson: Okay. Finally for me on the vacancy leasing, I know you're tracking to 400,000, you know, you're guilty of your own past success on that topic. In the past couple of years, you've kind of blew away your vacancy leasing targets over the course of the year. You're sort of tracking in line now. Is that a vestige of just the more you get occupied, the harder it is to execute on vacancy leasing, so we should probably not expect the $400,000 target to go up meaningfully from here over the course of the year? Is that a fair way to think about it?

Speaker #9: You've kind of blew away your vacancy leasing targets over the course of the year. You're sort of tracking in line now. Is that a vestige of just the more you get occupied, the harder it is to execute on vacancy leasing?

Speaker #9: So we should probably not expect that 400,000 target to go up meaningfully from here over the course of the year. Is that a fair way to think about it?

Speaker #3: Yeah. I think generally that's fair. As our properties get as full as they are, it becomes more difficult to have inventory that matches the exact demand that's emerging.

Stephen E. Budorick: Yeah, I think generally that's fair. As our properties get as full as they are, it becomes, you know, more difficult to have inventory that matches the exact demand that's emerging. We've done a really good job of continuing to attack it. You know, we get some space back even with our extraordinary renewal retention that we can bring to market. The wild card is, can we make some hay with our other assets where we have more vacancy? We like to set a target and beat it. We fully plan to do our best to beat this 400,000 square foot goal, but we're comfortable we're gonna make it.

Steve Budorick: Yeah, I think generally that's fair. As our properties get as full as they are, it becomes, you know, more difficult to have inventory that matches the exact demand that's emerging. We've done a really good job of continuing to attack it. You know, we get some space back even with our extraordinary renewal retention that we can bring to market. The wild card is, can we make some hay with our other assets where we have more vacancy? We like to set a target and beat it. We fully plan to do our best to beat this 400,000 square foot goal, but we're comfortable we're gonna make it.

Speaker #3: We've done a really good job of continuing to attack it. And of course, we get some space back even with our extraordinary rural retention.

Speaker #3: Then we can bring to market. And then the wild card is, can we make some hay with our other assets where we have more vacancy?

Speaker #3: We like to set a target and beat it. So we fully plan to do our best to beat this 400,000-square-foot goal, but we're comfortable we're going to make it.

Speaker #9: Sorry, one that's great. One quick last one for me. On the defense budget, yet to be appropriated, given its sheer size, is it not reasonable to assume that it will take longer for that to pass just because it's such a big commitment?

Richard Anderson: Sorry, one. That's great. One quick last one from me. On the defense budget, you know, yet to be appropriated, given its sheer size, is it not reasonable to assume that it will take longer for that to pass just because it's such a big commitment? Is it because it's bipartisan, you might actually get to a, you know, a final, you know, budget pretty soon after October first?

Speaker #9: Or is it because it's bipartisan, you might actually get to a final budget pretty soon after October 1st?

Speaker #3: Well, that's a tough question to handicap. We seem to find ourselves in new circumstances, continually trying to get things appropriated and funded. So I would think it's going to be difficult, not because it doesn't have bipartisan support, but because we have, let's face it, some adversarial objectives in the overall direction of the country.

Stephen E. Budorick: Well, that's a tough question to handicap. We seem to find ourselves in new circumstances continually trying to get things appropriated and funded. I would think it's going to be difficult, not because it doesn't have bipartisan support, but because we have, you know, let's face it, some adversarial objectives in the overall direction of the country, and it seems like anything is a potential for a bargaining chip, as we're seeing right now with Department of Homeland Security unfunded in, you know, a point in time where we absolutely need the funding for so many reasons. It. Anyway, I won't editorialize. Anything's possible.

Steve Budorick: Well, that's a tough question to handicap. We seem to find ourselves in new circumstances continually trying to get things appropriated and funded. I would think it's going to be difficult, not because it doesn't have bipartisan support, but because we have, you know, let's face it, some adversarial objectives in the overall direction of the country, and it seems like anything is a potential for a bargaining chip, as we're seeing right now with Department of Homeland Security unfunded in, you know, a point in time where we absolutely need the funding for so many reasons. It. Anyway, I won't editorialize. Anything's possible.

Speaker #3: And it seems like anything is a potential bargaining chip, as we're seeing right now with the Department of Homeland Security unfunded at a point in time where we absolutely need the funding for so many reasons.

Speaker #3: Anyway, I won't editorialize. Anything's possible.

Speaker #9: Okay. Great. Thanks very much.

Richard Anderson: Okay, great. Thanks very much.

Speaker #6: Thank you. And our next question comes from Dylan Brzezinski of Green Street. Your line is open.

Operator: Thank you. Our next question comes from Dylan Burzinski of Green Street. Your line is open.

Speaker #10: Hi, guys. Most of my questions have been asked, but I guess since you guys called out sort of activity picking up—or maybe not picking up, but potential for vacancy leasing to accelerate in the VW Corridor and Northern Virginia.

Dylan Burzinski: Hi, guys. Most of my questions have been asked, I guess since you guys called out sort of activity picking up or maybe not picking up, but potential for vacancy leasing to accelerate in BW Corridor and Northern Virginia. I'm just curious, it looks like Navy support still remains sort of the most underleased within the portfolio, albeit it's still at a high level. Just sort of curious what, you know, vacancy leasing prospects are there for this part of the portfolio?

Speaker #10: I'm just curious, it looks like Navy support still remains sort of the most underleased within the portfolio, albeit still at a high level. So just sort of curious what vacancy leasing prospects are there for this part of the portfolio?

Speaker #3: Yeah. I mean, it has a lot to do with the cyber prospects. I think we're seeing them pop up again after, like I said, a little bit of a quiet period.

Britt A. Snider: Yeah, I mean, it has a lot to do with the cyber prospects I think are. We were seeing them pop up again after, like I said, a little bit of a quiet period. You know, smaller cyber-related companies.

Britt Snider: Yeah, I mean, it has a lot to do with the cyber prospects I think are. We were seeing them pop up again after, like I said, a little bit of a quiet period. You know, smaller cyber-related companies.

Speaker #3: Smaller cyber-related companies really think he's looking for Navy support.

Stephen E. Budorick: Bradley, I think he's looking for Navy support.

Steve Budorick: Bradley, I think he's looking for Navy support.

Britt A. Snider: Oh, Navy support. I'm sorry. Yeah, Navy support, actually, it's a much smaller portfolio for us, but, you know, Navy support, we are actually seeing some improvements down in especially the Pax River area. There's a lot of autonomous vehicle and drone work happening down there. As you might imagine, there's been some pickup there. Certainly with our buildings next to the DC Navy Yard at Maritime Plaza, those have also seen quite a bit of activity and pretty significant increases in occupancy over the past year. That's. There's a lot of activity going on in the DC Navy Yard, and the contractor support there is critical. Yeah. I would say Pax River and the DC Maritime Plaza are two areas where we're seeing, you know, real prospect activity increase.

Britt Snider: Oh, Navy support. I'm sorry. Yeah, Navy support, actually, it's a much smaller portfolio for us, but, you know, Navy support, we are actually seeing some improvements down in especially the Pax River area. There's a lot of autonomous vehicle and drone work happening down there. As you might imagine, there's been some pickup there. Certainly with our buildings next to the DC Navy Yard at Maritime Plaza, those have also seen quite a bit of activity and pretty significant increases in occupancy over the past year. That's. There's a lot of activity going on in the DC Navy Yard, and the contractor support there is critical. Yeah. I would say Pax River and the DC Maritime Plaza are two areas where we're seeing, you know, real prospect activity increase.

Speaker #9: Oh, Navy support. I'm sorry. Yeah. Navy support actually it's a much smaller portfolio for us, but Navy support, we are actually seeing some improvements down in especially the Pax River area.

Speaker #9: There's a lot of autonomous vehicle and drone work happening down there. So as you might imagine, there's been some pickup there. And then certainly with our buildings next to the DC Navy Yard, at Maritime Plaza, those have also seen quite a bit of activity and pretty significant increases in occupancy over the past year.

Speaker #9: That's there's a lot of activity going on in the DC Navy Yard and the contractor support there is critical. So yeah, I would say Pax River and the DC Maritime Plaza.

Speaker #9: Our two areas where we're seeing real prospect activity increase.

Speaker #10: Great. And then, I know this question gets asked every so often—and I know it's tough because acquisitions are tough to pencil—but I'm just curious what you're seeing in terms of the acquisition pipeline today.

Dylan Burzinski: Great. I know this question gets asked every so often, and I know it's tough because acquisitions are tough to pencil, but sort of just curious what you're seeing in terms of the acquisition pipeline today. I mean, any noticeable pickup at all, or is it still sort of one-off opportunities that you guys are looking at?

Speaker #10: I mean, any noticeable pickup at all, or is it still sort of one-off opportunities that you guys are looking at?

Speaker #3: So we're currently not looking at anything and it continues to be one-off. Remember, we've got very, very focused investment strategy. So in the broader market, I'm sure there's more activity than we're paying attention to.

Stephen E. Budorick: We're currently not looking at anything, and it continues to be one-off. Remember, we've got a very, very focused investment strategy. In the broader market, I'm sure there's more activity than we're paying attention to. Within the small set of assets we would invest in, there's nothing currently that we're tracking.

Steve Budorick: We're currently not looking at anything, and it continues to be one-off. Remember, we've got a very, very focused investment strategy. In the broader market, I'm sure there's more activity than we're paying attention to. Within the small set of assets we would invest in, there's nothing currently that we're tracking.

Speaker #3: But within the small set of assets, we would invest in. There's nothing currently that we're tracking.

Speaker #10: Great. Thanks, guys. Have a good one.

Dylan Burzinski: Great. Thanks, guys. Have a good one.

Speaker #6: Thank you. And as a reminder, if you have a question, please press star one-one. And our next question comes from Anthony Palone of JPMorgan.

Operator: Thank you. As a reminder, if you have a question, please press star one one. Our next question comes from Anthony Paolone of JPMorgan. Your line is open.

Speaker #6: Your line is open.

Speaker #9: Yeah, thanks. Good afternoon. I think you touched on this a little bit, but that million square feet of development leasing pipeline—for what's basically about 180,000 square feet that you have—how much of that pipeline is for that specific space versus requirements that you might consider for incremental starts? And to the extent you don't accommodate them...

Anthony Paolone: Yeah. Thanks. Good afternoon. I know you touched on this a little bit, but that 1 million square foot of lease, of development leasing pipeline for what's basically about 180,000 square feet that you have, how much of that pipeline's for that specific space versus requirements that you might consider for incremental starts? To the extent you don't accommodate them, where do these folks tend to go?

Speaker #9: Where do these folks tend to go?

Stephen E. Budorick: Many of the things in that development pipeline anticipate new projects. I'd say 25%, 30% are for things that we're actually building currently. Some is overflow for the next set of buildings that would follow what comes behind it. It's more where's the demand, where's the market, and, you know, we're in the business to make sure we have inventory when it's ready to move forward.

Steve Budorick: Many of the things in that development pipeline anticipate new projects. I'd say 25%, 30% are for things that we're actually building currently. Some is overflow for the next set of buildings that would follow what comes behind it. It's more where's the demand, where's the market, and, you know, we're in the business to make sure we have inventory when it's ready to move forward.

Speaker #3: So many of the things in that development pipeline anticipate new projects. I'd say 25, 30 percent are for things that we're actually building currently.

Speaker #3: Some is overflow for the next set of buildings that would follow what comes behind it. It's more where's the demand, where's the market, and we're in the business to make sure we have inventory when it's ready to move forward.

Speaker #9: Okay. And then just a second question on the regional office, portfolio. I know it's small and there's not much expiring this year, but just looking out the next couple of years, the expiration starts to get heavier.

Anthony Paolone: Okay. Just a second question on the regional office portfolio. I know it's small and there's not much expiring this year, but as we look out the next couple of years, the expiration starts to get heavier. I mean, would any updated thoughts on how to mitigate that or the risk of that getting in the way of what's otherwise been just a lot of growth in the core?

Speaker #9: I mean, any updated thoughts on how to mitigate that or the risk of that getting in the way of what's otherwise been just a lot of growth in the core?

Speaker #9: I think the team's already starting to address some of those expirations that are in the next several years with the tenants and they're working on transactions to try and pull those forward and get those done early.

Anthony Mifsud: I think the team's already starting to address some of those expirations that are in the next several years with the tenants, and they're working on transactions to try and pull those forward and get those done early. In order to mitigate that risk. I think what we're trying to do is to make sure that our headline remains where it belongs, which is in our defense IT portfolio and not on any blips within the other portfolio.

Speaker #9: And in order to mitigate that risk. So I think what we're trying to do is to make sure that our headline remains where it belongs, which is in our defense IT portfolio and not on any lips within the other portfolio.

Speaker #9: Okay. Thank you.

Anthony Paolone: Okay. Thank you.

Speaker #6: Thank you. And our next question comes from Steve Sakwa of Evercore ISI. Your line is open.

Operator: Thank you. Our next question comes from Steve Sakwa of Evercore ISI. Your line is open.

Speaker #5: Yeah, just one quick follow-up. Steve, I know you've talked about selling some of those non-core office assets at sort of the right time. And I realize traditional office has been a little bit of a dirty word, but we have seen some, I think, successful new developments take place in Washington, DC, at what are, I think, considered exceptionally high rents?

Steve Sakwa: Yeah, just one quick follow-up. Steve, I know you've talked about selling some of those non-core office assets at sort of the right time, and I realize, you know, office, traditional office has been a little bit of a dirty word. We have seen some, I think, successful new developments take place in Washington, DC, at what are, I think, considered exceptionally high rents. I'm just curious, does that make 2100 L Street, you know, kind of a more viable disposition candidate today? I realize Baltimore might be a different story, but where does the Washington, DC asset fall?

Speaker #5: And I'm just curious, does that make 2,100 Elm Street kind of a more viable disposition candidate today? I realize Baltimore might be a different story, but where does the Washington, DC asset fall?

Speaker #3: Well, I think those benchmark rents certainly support an increased expectation of value for the asset. Those are really being driven by a relatively small component in demand—very well-funded tenants that want true trophy space in a market that doesn't have any available.

Stephen E. Budorick: Well, I think those benchmark rents certainly support an increased expectation of value for the asset. Those have really been driven by a relatively small component of the demand that's very well-funded tenants that want true trophy space in a market that doesn't have any available. I don't think the investment cash flow is quite picked up enough where it would make sense to market that. I don't think we're that far away. Certainly, I think that opportunity comes quicker than we'll see, say, in Baltimore at Tysons Corner.

Steve Budorick: Well, I think those benchmark rents certainly support an increased expectation of value for the asset. Those have really been driven by a relatively small component of the demand that's very well-funded tenants that want true trophy space in a market that doesn't have any available. I don't think the investment cash flow is quite picked up enough where it would make sense to market that. I don't think we're that far away. Certainly, I think that opportunity comes quicker than we'll see, say, in Baltimore at Tysons Corner.

Speaker #3: I don't think the investment cash flow is quite picked up enough where it would make sense to market that. But I don't think we're that far away.

Speaker #3: Certainly, I think that opportunity comes quicker than we'll see say in Baltimore or Dyson's Corner.

Steve Sakwa: Great. That's it for me. Thanks.

Speaker #5: Great. That's it for me. Thanks.

Speaker #6: Thank you. I will now turn the call back to Mr. Badorick for closing remarks.

Operator: Thank you. I will now turn the call back to Mr. Budorick for closing remarks.

Speaker #3: So thank you for joining our call today. We are in the office. So please coordinate with Venkat if you've got a follow-up question you'd like to discuss.

Stephen E. Budorick: Thank you for joining our call today. We are in the office, so please coordinate with Venkat if you've got a follow-up question you'd like to discuss. Thanks again.

Steve Budorick: Thank you for joining our call today. We are in the office, so please coordinate with Venkat if you've got a follow-up question you'd like to discuss. Thanks again.

Speaker #3: Thanks again.

Speaker #6: Thank you for your participation today and the COPT Defense Properties First Quarter 2026 results conference call. This concludes the presentation, and you may now disconnect.

Operator: Thank you for your participation today in the COPT Defense Properties Q1 2026 results conference call. This concludes the presentation, and you may now disconnect. Good day.

Q1 2026 COPT Defense Properties Earnings Call

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