COPT Defense Properties (CDP) Q4 2023 earnings summary

Executive summary

• FY23 adjusted FFOPS was $2.42, up 2.5% from 2022 and above the high end of guidance; same-property cash NOI grew 5.7%, its highest annual increase in over 15 years.

• Defense/IT portfolio ended 2023 at 97.2% leased and 96.2% occupied, the highest rates since segment disclosure began in 2015.

• Annual leasing exceeded targets across vacancy, development and renewal activity; total portfolio retention was 79.7% for FY23.

Financial highlights

• Adjusted FFOPS was $0.62 in 4Q23 and $2.42 for FY23, compared with $0.60 and $2.36 in the prior-year periods; 15 of the past 16 quarters met or exceeded the midpoint of guidance.

• Same-property cash NOI grew 4.5% in 4Q23 and 5.7% for FY23.

• FY23 diluted EPS was a loss of $0.67, versus $1.53 in 2022; Nareit FFO per share was $2.41, versus $2.35.

• FY23 diluted AFFO payout ratio was 63.9%.

Outlook and guidance

• FY24 diluted EPS guidance is $1.15–$1.23, with a $1.19 midpoint; adjusted FFOPS guidance is $2.47–$2.55, with a $2.51 midpoint.

• FY24 same-property cash NOI growth guidance is 5%–7%, midpoint 6%; year-end occupancy guidance is 93%–94%, midpoint 93.5%.

• FY24 renewal cash-rent change guidance is -1% to 1%, midpoint 0%; tenant retention guidance is 75%–85%, midpoint 80%.

• FY24 development cash NOI guidance is $10M–$12M, midpoint $11M; adjusted FFOPS midpoint implies 3.7% growth over FY23.

• Expected adjusted FFOPS compound growth is ~4% from 2023–2026, based on the original FY23 guidance midpoint of $2.38.