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| Share Name | Share Symbol | Market | Type |
|---|---|---|---|
| COPT Defense Properties | NYSE:CDP | NYSE | Common Stock |
| Price Change | % Change | Share Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|
| -0.08 | -0.26% | 31.03 | 31.15 | 30.6875 | 30.93 | 549,268 | 00:43:47 |
From Dec 2023 to Dec 2024
EPS of $0.29 FFO per Share, as Adjusted for Comparability, of $0.62 Exceeded High-End of Guidance
Increased Midpoint of 2024 FFO per Share Guidance by 3-cents to $2.54 Implies 5% FFO per Share Growth at the Midpoint for the Year
Defense/IT Portfolio 95.6% Occupied and 96.8% Leased
Same Property Cash NOI Increased 6.1% Raised Same Property Cash NOI Guidance for the Year by 50 Basis Points, to 6.0%-7.0%
Committed $91 Million of Capital to New Investments
Placed 73,000 SF of Developments into Service that are 100% Leased
$381 Million of Active Developments (959,000 SF) are 74% Leased
Excellent Leasing to Start the Year Total Leasing of 721,000 SF
160,000 SF of Vacancy Leasing On Track to Achieve Annual Target of 400,000 SF
Tenant Retention of 78% On Track to Achieve Annual Goal of 75%-85%
COPT Defense Properties (“COPT Defense” or the “Company”) (NYSE: CDP) announced results for the first quarter ended March 31, 2024.
Management Comments
Stephen E. Budorick, COPT Defense’s President & Chief Executive Officer, commented, “Our Defense/IT investment strategy, which concentrates our portfolio near priority U.S. defense installations, generated strong results in the first quarter with FFO per share exceeding the midpoint of our guidance range by $0.02. Based on this outperformance and our forecast over the remainder of the year, we increased the midpoint of 2024 FFO per share guidance by $0.03 to $2.54, which implies 5% year-over-year growth.
In terms of internal growth, the strength of demand for our portfolio is evidenced by our same property cash NOI growth of 6.1% for our Total Portfolio and 7.6% for our Defense/IT Portfolio on a year-over-year basis, which led us to increase our 2024 guidance by 50 basis points at the midpoint. Our Defense/IT Portfolio was 95.6% occupied and 96.8% leased at quarter-end, while our tenant retention rate was 78%, all of which we believe compare favorably to other leading REIT sectors.
In terms of external growth, we committed $91 million of capital to new investments which includes two development projects totaling $76 million at The National Business Park and Redstone Gateway, two of our highest occupancy markets. We also acquired Franklin Center in Columbia Gateway for $15 million, which marks our first acquisition since 2015. This transaction is an excellent opportunity to acquire high quality inventory at a deeply discounted basis, and leverage our Defense/IT franchise and strong demand from defense contractors, to create significant shareholder value.
Our actual and expected performance led our Board of Trustees to approve a 3.5% increase in our quarterly dividend in February, which marks our second consecutive annual increase, following the 3.6% raise in 2023. Looking forward, we continue to anticipate compound annual FFO per share growth of roughly 4% between 2023 to 2026.”
Financial Highlights
1st Quarter Financial Results:
Operating Performance Highlights
Operating Portfolio Summary:
Same Property Performance:
Leasing:
Investment Activity Highlights
Balance Sheet and Capital Transaction Highlights
Associated Supplemental Presentation
Prior to the call, the Company will post a slide presentation to accompany management’s prepared remarks for its first quarter 2024 conference call; the presentation can be viewed and downloaded from the ‘Financial Info – Financial Results’ section of COPT Defense’s Investors website: https://investors.copt.com/financial-information/financial-results
2024 Guidance
Management is revising its full-year guidance for diluted EPS and diluted FFOPS, per Nareit and as adjusted for comparability, from the prior range of $1.15-$1.23, and $2.47-$2.55, respectively, to new ranges of $1.19-$1.25, and $2.51-$2.57, respectively. Management is establishing second quarter guidance for diluted EPS and diluted FFOPS per Nareit and as adjusted for comparability at $0.29-$0.31 and $0.62-$0.64, respectively. Reconciliations of projected diluted EPS to projected diluted FFOPS, in accordance with Nareit and as adjusted for comparability are as follows:
Reconciliation of Diluted EPS to FFOPS, per Nareit,
and As Adjusted for Comparability
Quarter Ending June 30, 2024
Year Ending December 31, 2024
Low
High
Low
High
Diluted EPS
$
0.29
$
0.31
$
1.19
$
1.25
Real estate-related depreciation and amortization
0.33
0.33
1.32
1.32
Diluted FFOPS, Nareit definition and as adjusted for comparability
$
0.62
$
0.64
$
2.51
$
2.57
Conference Call Information
Management will discuss first quarter 2024 results on its conference call tomorrow at 12:00 p.m. Eastern Time, details of which are listed below:
Conference Call Date:
Friday, April 26, 2024
Time:
12:00 p.m. Eastern TimeParticipants must register for the conference call at the link below to receive the dial-in number and personal pin. Registering only takes a few moments and provides direct access to the conference call without waiting for an operator. You may register at any time, including up to and after the call start time: https://register.vevent.com/register/BI45e0b73633dc499fa57ffc62af57efd2
The conference call will also be available via live webcast in the ‘News & Events – IR Calendar’ section of COPT Defense’s Investors website: https://investors.copt.com/news-events/ir-calendar
Replay Information
A replay of the conference call will be immediately available via webcast only on COPT Defense’s Investors website and will be maintained on the website for approximately 90 days after the conference call.
Definitions
For definitions of certain terms used in this press release, please refer to the information furnished in the Company’s Supplemental Information Package furnished on a Form 8-K which can be found on its website (www.copt.com). Reconciliations of non-GAAP measures to the most directly comparable GAAP measures are included in the attached tables.
About COPT Defense
COPT Defense, an S&P MidCap 400 Company, is a self-managed REIT focused on owning, operating and developing properties in locations proximate to, or sometimes containing, key U.S. Government (“USG”) defense installations and missions (referred to as its Defense/IT Portfolio). The Company’s tenants include the USG and their defense contractors, who are primarily engaged in priority national security activities, and who generally require mission-critical and high security property enhancements. As of March 31, 2024, the Company’s Defense/IT Portfolio of 193 properties, including 24 owned through unconsolidated joint ventures, encompassed 22.0 million square feet and was 96.8% leased.
Forward-Looking Information
This press release may contain “forward-looking” statements, as defined in Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, that are based on the Company’s current expectations, estimates and projections about future events and financial trends affecting the Company. Forward-looking statements can be identified by the use of words such as “may,” “will,” “should,” “could,” “believe,” “anticipate,” “expect,” “estimate,” “plan” or other comparable terminology. Forward-looking statements are inherently subject to risks and uncertainties, many of which the Company cannot predict with accuracy and some of which the Company might not even anticipate. Although the Company believes that the expectations, estimates and projections reflected in such forward-looking statements are based on reasonable assumptions at the time made, the Company can give no assurance that these expectations, estimates and projections will be achieved. Future events and actual results may differ materially from those discussed in the forward-looking statements and the Company undertakes no obligation to update or supplement any forward-looking statements.
The areas of risk that may affect these expectations, estimates and projections include, but are not limited to, those risks described in Item 1A of the Company’s Annual Report on Form 10-K for the year ended December 31, 2023.
Source: COPT Defense Properties
COPT Defense Properties
Summary Financial Data
(unaudited)
(in thousands)
For the Three Months Ended March 31,
2024
2023
Revenues
Lease revenue
$
165,433
$
150,560
Other property revenue
1,230
1,121
Construction contract and other service revenues
26,603
15,820
Total revenues
193,266
167,501
Operating expenses
Property operating expenses
66,746
59,420
Depreciation and amortization associated with real estate operations
38,351
36,995
Construction contract and other service expenses
26,007
15,201
General and administrative expenses
8,378
7,996
Leasing expenses
2,187
1,999
Business development expenses and land carry costs
1,182
495
Total operating expenses
142,851
122,106
Interest expense
(20,767
)
(16,442
)
Interest and other income, net
4,122
2,256
Gain on sales of real estate
—
49,378
Income before equity in income (loss) of unconsolidated entities and income taxes
33,770
80,587
Equity in income (loss) of unconsolidated entities
69
(64
)
Income tax expense
(168
)
(125
)
Net income
33,671
80,398
Net income attributable to noncontrolling interests:
Common units in the Operating Partnership (“OP”)
(608
)
(1,293
)
Other consolidated entities
(454
)
(326
)
Net income attributable to common shareholders
$
32,609
$
78,779
Earnings per share (“EPS”) computation:
Numerator for diluted EPS:
Net income attributable to common shareholders
$
32,609
$
78,779
Amount allocable to share-based compensation awards
(129
)
(248
)
Redeemable noncontrolling interests
—
(64
)
Numerator for diluted EPS
$
32,480
$
78,467
Denominator:
Weighted average common shares - basic
112,231
112,127
Dilutive effect of share-based compensation awards
509
410
Dilutive effect of redeemable noncontrolling interests
—
91
Weighted average common shares - diluted
112,740
112,628
Diluted EPS
$
0.29
$
0.70
COPT Defense Properties
Summary Financial Data
(unaudited)
(in thousands, except per share data)
For the Three Months Ended March 31,
2024
2023
Net income
$
33,671
$
80,398
Real estate-related depreciation and amortization
38,351
36,995
Gain on sales of real estate
—
(49,378
)
Depreciation and amortization on unconsolidated real estate JVs
777
801
Funds from operations (“FFO”)
72,799
68,816
FFO allocable to other noncontrolling interests
(836
)
(708
)
Basic FFO allocable to share-based compensation awards
(587
)
(466
)
Basic FFO available to common share and common unit holders (“Basic FFO”)
71,376
67,642
Redeemable noncontrolling interests
469
(30
)
Diluted FFO adjustments allocable to share-based compensation awards
47
39
Diluted FFO available to common share and common unit holders (“Diluted FFO”)
71,892
67,651
Executive transition costs
77
—
Diluted FFO available to common share and common unit holders, as adjusted for comparability
71,969
67,651
Straight line rent adjustments and lease incentive amortization
3,473
(3,516
)
Amortization of intangibles and other assets included in net operating income (“NOI”)
122
(19
)
Share-based compensation, net of amounts capitalized
2,645
1,733
Amortization of deferred financing costs
685
632
Amortization of net debt discounts, net of amounts capitalized
1,014
618
Replacement capital expenditures
(20,776
)
(28,210
)
Other
137
(273
)
Diluted adjusted funds from operations available to common share and common unit holders (“Diluted AFFO”)
$
59,269
$
38,616
Diluted FFO per share
$
0.62
$
0.59
Diluted FFO per share, as adjusted for comparability
$
0.62
$
0.59
Dividends/distributions per common share/unit
$
0.295
$
0.285
March 31, 2024
December 31, 2023
Balance Sheet Data
Properties, net of accumulated depreciation
$
3,517,878
$
3,503,678
Total assets
$
4,232,895
$
4,246,966
Debt per balance sheet
$
2,416,873
$
2,416,287
Total liabilities
$
2,683,883
$
2,699,631
Redeemable noncontrolling interests
$
22,966
$
23,580
Total equity
$
1,526,046
$
1,523,755
Debt to assets
57.1
%
56.9
%
Net debt to adjusted book
40.9
%
40.6
%
Defense/IT Portfolio Data (as of period end)
Number of operating properties
193
190
Total operational square feet (in thousands)
21,993
21,719
% Occupied
95.6
%
96.2
%
% Leased
96.8
%
97.2
%
For the Three Months Ended March 31,
2024
2023
GAAP
Payout ratio:
Net income
100.7
%
40.6
%
Debt ratios:
Net income to interest expense ratio
1.6x
4.9x
Debt to net income ratio
17.9x
6.6x
Non-GAAP
Payout ratios:
Diluted FFO
46.8
%
47.9
%
Diluted FFO, as adjusted for comparability
46.7
%
47.9
%
Diluted AFFO
56.8
%
83.9
%
Debt ratios:
Adjusted EBITDA fixed charge coverage ratio
4.5x
5.0x
Net debt to in-place adjusted EBITDA ratio
6.1x
6.2x
Net debt adj. for fully-leased development to in-place adj. EBITDA ratio
6.0x
5.8x
Reconciliation of denominators for per share measures
Denominator for diluted EPS
112,740
112,628
Weighted average common units
1,625
1,489
Redeemable noncontrolling interests
947
—
Denominator for diluted FFO per share and as adjusted for comparability
115,312
114,117
COPT Defense Properties
Summary Financial Data
(unaudited)
(in thousands)
For the Three Months Ended March 31,
2024
2023
Numerators for Payout Ratios
Dividends on unrestricted common and deferred shares
$
33,143
$
31,989
Distributions on unrestricted common units
500
430
Dividends and distributions on restricted shares and units
267
215
Total dividends and distributions for GAAP payout ratio
33,910
32,634
Dividends and distributions on antidilutive shares and units
(266
)
(216
)
Dividends and distributions for non-GAAP payout ratios
$
33,644
$
32,418
Reconciliation of net income to earnings before interest, income taxes, depreciation and amortization for real estate (“EBITDAre”), adjusted EBITDA and in-place adjusted EBITDA
Net income
$
33,671
$
80,398
Interest expense
20,767
16,442
Income tax expense
168
125
Real estate-related depreciation and amortization
38,351
36,995
Other depreciation and amortization
608
602
Gain on sales of real estate
—
(49,378
)
Adjustments from unconsolidated real estate JVs
1,671
1,704
EBITDAre
95,236
86,888
Credit loss expense
22
67
Business development expenses
630
241
Executive transition costs
430
247
Net gain on other investments
(477
)
—
Adjusted EBITDA
95,841
87,443
Pro forma NOI adjustment for property changes within period
813
(318
)
Change in collectability of deferred rental revenue
—
899
In-place adjusted EBITDA
$
96,654
$
88,024
Reconciliations of tenant improvements and incentives, building improvements and leasing costs for operating properties to replacement capital expenditures
Tenant improvements and incentives
$
12,776
$
19,986
Building improvements
4,953
2,141
Leasing costs
3,590
1,750
Net additions to tenant improvements and incentives
316
4,839
Excluded building improvements and leasing costs
(859
)
(506
)
Replacement capital expenditures
$
20,776
$
28,210
COPT Defense Properties
Summary Financial Data
(unaudited)
(in thousands)
For the Three Months Ended March 31,
2024
2023
Reconciliation of interest expense to the denominator for fixed charge coverage-Adjusted EBITDA
Interest expense
$
20,767
$
16,442
Less: Amortization of deferred financing costs
(685
)
(632
)
Less: Amortization of net debt discounts, net of amounts capitalized
(1,014
)
(618
)
COPT Defense’s share of interest expense of unconsolidated real estate JVs, excluding amortization of deferred financing costs and net debt premium and gain or loss on interest rate derivatives
804
773
Scheduled principal amortization
769
790
Capitalized interest
589
770
Denominator for fixed charge coverage-Adjusted EBITDA
$
21,230
$
17,525
Reconciliation of net income to NOI from real estate operations, same property NOI from real estate operations and same property cash NOI from real estate operations
Net income
$
33,671
$
80,398
Construction contract and other service revenues
(26,603
)
(15,820
)
Depreciation and other amortization associated with real estate operations
38,351
36,995
Construction contract and other service expenses
26,007
15,201
General and administrative expenses
8,378
7,996
Leasing expenses
2,187
1,999
Business development expenses and land carry costs
1,182
495
Interest expense
20,767
16,442
Interest and other income, net
(4,122
)
(2,256
)
Gain on sales of real estate
—
(49,378
)
Equity in (income) loss of unconsolidated entities
(69
)
64
Unconsolidated real estate JVs NOI allocable to COPT Defense included in equity in income (loss) of unconsolidated entities
1,740
1,642
Income tax expense
168
125
NOI from real estate operations
101,657
93,903
Non-Same Property NOI from real estate operations
(6,254
)
(1,180
)
Same Property NOI from real estate operations
95,403
92,723
Straight line rent adjustments and lease incentive amortization
5,367
(3,570
)
Amortization of acquired above- and below-market rents
(69
)
(166
)
Lease termination fees, net
(775
)
(1,221
)
Tenant funded landlord assets and lease incentives
(8,190
)
(1,222
)
Cash NOI adjustments in unconsolidated real estate JVs
(117
)
(153
)
Same Property Cash NOI from real estate operations
$
91,619
$
86,391
COPT Defense Properties
Summary Financial Data
(unaudited)
(in thousands)
March 31, 2024
December 31, 2023
Reconciliation of total assets to adjusted book
Total assets
$
4,232,895
$
4,246,966
Accumulated depreciation
1,434,621
1,400,162
Accumulated amortization of intangibles on property acquisitions and deferred leasing costs
225,443
228,484
COPT Defense’s share of liabilities of unconsolidated real estate JVs
60,904
60,583
COPT Defense’s share of accumulated depreciation and amortization of unconsolidated real estate JVs
10,364
9,528
Less: Property - operating lease liabilities
(33,141
)
(33,931
)
Less: Property - finance lease liabilities
(409
)
(415
)
Less: Cash and cash equivalents
(123,144
)
(167,820
)
Less: COPT Defense’s share of cash of unconsolidated real estate JVs
(1,159
)
(852
)
Adjusted book
$
5,806,374
$
5,742,705
March 31, 2024
December 31, 2023
March 31, 2023
Reconciliation of debt to net debt and net debt adjusted for fully-leased development
Debt per balance sheet
$
2,416,873
$
2,416,287
$
2,123,012
Net discounts and deferred financing costs
27,358
28,713
22,250
COPT Defense’s share of unconsolidated JV gross debt
52,819
52,613
52,226
Gross debt
2,497,050
2,497,613
2,197,488
Less: Cash and cash equivalents
(123,144
)
(167,820
)
(15,199
)
Less: COPT Defense’s share of cash of unconsolidated real estate JVs
(1,159
)
(852
)
(881
)
Net debt
2,372,747
2,328,941
2,181,408
Costs incurred on fully-leased development properties
(43,034
)
(53,914
)
(137,309
)
Net debt adjusted for fully-leased development
$
2,329,713
$
2,275,027
$
2,044,099
View source version on businesswire.com: https://www.businesswire.com/news/home/20240425738167/en/
IR Contacts: Venkat Kommineni, CFA 443.285.5587 venkat.kommineni@copt.com
Michelle Layne 443.285.5452 michelle.layne@copt.com
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