COPT Defense Properties (CDP) Bank of America 2024 Global Real Estate Conference summary

Portfolio and Operations

• Specializes in mission-critical, high-security properties supporting U.S. defense activities, with 201 properties mainly near defense installations in Maryland, Virginia, Alabama, and Texas.

• 80% of the portfolio is high-security, with 8 government-secured campuses and extensive SCIF facilities; 90% of annualized rental revenue comes from defense IT properties, which are 96.7% leased as of June 30, 2024.

• Over 18 million sq ft is 98% occupied, with the U.S. government as the largest tenant (36% of ARR) and defense contractors leasing over 14 million sq ft.

• Non-defense assets make up about 10% of ARR, with plans to recycle these as market conditions allow; no current plans to sell due to unfavorable debt markets.

• Only public REIT specializing in secured, specialized space for defense/IT tenants, with over 30 years of operating excellence and trusted relationships with U.S. Government and contractors.

Growth Strategy and Financials

• Focuses on low-risk, highly pre-leased development and redevelopment near defense installations, maintaining an investment-grade balance sheet and ample liquidity.

• Six projects under development totaling $380 million and 960,000 sq ft, 74% pre-leased; $32 million placed into service in 1H 2024, 100% leased.

• Development is self-funded through cash from operations and cash on hand, with future funding from a line of credit and unsecured notes as needed.

• $200–$240 million capital investment expected in 2024, all in Defense/IT portfolio; future portfolio expected to see continued development at $250 million/year.

• Four competitive advantages: specialized operating platform, development expertise, long government track record, and strategic land positions.

Leasing and Market Dynamics

• Leasing activity is strong, with a 15% increase in the pipeline since the last earnings call; achieved 985,000 SF of total leasing in 2Q 2024, with an 86% total retention rate and 87% in Defense/IT.

• On track to exceed the annual leasing goal of 400,000 sq ft, likely reaching 500,000 sq ft, a 25% outperformance.

• High tenant retention (80%-86%) drives cash flow efficiency, with lower tenant improvements and downtime.

• Renewal leasing accounted for 881,000 SF, with 104,000 SF of vacancy leasing in 2Q 2024.

• Demand for space is improving, with more activity in downtown Baltimore due to state-driven relocations and a stabilized 2100 L property at 92% leased.