COPT Defense Properties (CDP) Q2 2024 earnings summary

Executive summary

• Q2 2024 FFO per share (adjusted) was $0.64, exceeding guidance midpoint and continuing a multi-year trend of meeting or exceeding guidance.

• Defense/IT portfolio was 95.5% occupied and 96.7% leased as of June 30, 2024, with strong leasing activity and high tenant retention.

• Same property cash NOI increased 10.9% year-over-year, marking the highest growth rate in over a decade.

• Tenant retention was 86% in Q2 2024 and 83% year-to-date, with guidance midpoint raised to 82.5%.

• Portfolio-wide leasing activity was robust, with 985,000 sq ft leased in Q2 and 1.7M sq ft year-to-date.

Financial highlights

• Q2 2024 total revenues were $187.3M, up from $169.2M in Q2 2023; net income was $36.4M, up from $31.6M.

• Diluted FFO per share (adjusted) was $0.64 in Q2 2024, up from $0.60 in Q2 2023.

• Same property cash NOI up 10.9% year-over-year; guidance for 2024 raised to 8% at midpoint.

• Dividend payout ratio was 56% for H1 2024, expected to be ~60% for the full year; declared $0.295 per share in Q2.

• Net debt to in-place adjusted EBITDA was 5.8x–6.0x as of Q2 2024.

Outlook and guidance

• 2024 FFO per share guidance raised to $2.54–$2.58, midpoint $2.56, implying 5.8% annual growth.

• Midpoint of same property cash NOI growth guidance raised to 8.0%; year-end occupancy guidance raised to 93.75%.

• Tenant retention guidance midpoint increased to 82.5%.

• Q3 2024 FFO per share guidance set at $0.63–$0.65; EPS guidance $0.30–$0.32.

• Plans to spend $110–$130M on active development in the remainder of 2024, funded by operations, cash, and credit facility.