COPT Defense Reports Strong Third Quarter 2024 Results

_______________________________________________________________

EPS of $0.32 FFO per Share, as Adjusted for Comparability, of $0.65 1-cent above the Midpoint of Guidance

Increased Midpoint of 2024 FFO per Share Guidance by 1-cent to $2.57 Implies 6.2% FFO per Share Growth for the Year

Defense/IT Portfolio 95.0% Occupied and 96.5% Leased

Same Property Cash NOI Increased 9.4% in 3Q24 and 8.8% Year-to-Date Raised Midpoint of Same Property Cash NOI Guidance for the Year by 50 Basis Points to 8.5%

_______________________________________________________________

Strong Leasing Volume and Retention YTD Total Leasing of 829,000 SF in 3Q24 and 2.5 million SF Year-to-Date

123,000 SF in 3Q24 and 387,000 SF Year-to-Date of Vacancy Leasing Exceeded Annual Target of 400,000 SF, with 4Q24 Progress To-Date

Tenant Retention of 88% in 3Q24 and 84% Year-to-Date Raised Midpoint of Guidance for the Year by 250 Basis Points to 85%

80,000 SF in 3Q24 and 90,000 SF Year-to-Date of Investment Leasing

_______________________________________________________________

Active on External Growth

Acquired 365-acres in Des Moines, Iowa and 80,000 SF building in San Antonio, Texas

 _______________________________________________________________

COPT Defense Properties (“COPT Defense” or the “Company”) (NYSE: CDP) announced results for the third quarter ended September 30, 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, continued to generate strong results during the third quarter. FFO per share exceeded the midpoint of our guidance range and based on this outperformance, and our forecast for the remainder of the year, we increased the midpoint of 2024 FFO per share guidance by $0.01 to $2.57, which implies over 6% year-over-year growth. This marks our third increase for the year and a total of $0.06 of outperformance compared to the midpoint of our initial guidance. Looking forward, we continue to anticipate compound annual FFO per share growth of at least 4% between 2023 and 2026.

We are exceeding our plan in several areas and raised 2024 guidance on a group of key metrics. We increased the midpoint of 2024 guidance for same property cash NOI growth by 50 basis points to 8.5%, and increased tenant retention by 250 basis points to 85%. Based on our updated guidance, same property cash NOI growth would be the highest level in over a decade, and tenant retention would be the highest level in over two decades.

We are especially excited to announce the acquisition of a 365-acre land parcel near Des Moines, Iowa, which is a significant opportunity for us to expand our data center shell program to a new market. Des Moines, the 5th largest hyperscale market in the country, is home to several of the largest hyperscalers, which are drawn to the market given attractive land values, power availability with abundant access to renewable energy and long-haul fiber lines, and tax incentives enacted by supportive state and local governments. We expect this investment to fuel our development pipeline in the medium to long-term, and result in long-term accretion to FFO, AFFO, and NAV per share. As we build out the parcel in phases, we plan to self-fund development of the site on a leverage-neutral basis.

Additionally, we acquired a vacant office property in San Antonio, then subsequently leased the full building to the U.S. Government. With this transaction, our U.S. Government portfolio, which now includes 35 fully leased buildings and on a pro forma basis as of September 30, 2024, accounts for 36.5% of our annualized rental revenue. This acquisition provides additional operational scale given our nearby campus in San Antonio, will be accretive when rent commences in 2Q25, and reinforces our reputation as a trusted partner in supporting mission critical U.S. Government and defense contractor tenant requirements.”

Financial Highlights

3rd Quarter Financial Results:

> Diluted earnings per share (“EPS”) was $0.32 for the quarter ended September 30, 2024, compared to $(1.94) for the quarter ended September 30, 2023.

> Diluted funds from operations per share (“FFOPS”), as calculated in accordance with Nareit’s definition and as adjusted for comparability, was $0.65 for the quarter ended September 30, 2024, compared to $0.60 for the quarter ended September 30, 2023.

Operating Performance Highlights

Operating Portfolio Summary:

> At September 30, 2024, the Company’s 24.3 million square foot Total Portfolio was 93.1% occupied and 94.8% leased, which includes the 22.2 million square foot Defense/IT Portfolio that was 95.0% occupied and 96.5% leased.

Same Property Performance:

> At September 30, 2024, the Company’s 22.2 million square foot same property portfolio was 93.6% occupied and 95.1% leased.

> The Company’s same property cash NOI increased 9.4% for the three months ended September 30, 2024 compared to the same period in 2023.

Leasing:

> Total Square Feet Leased: For the quarter ended September 30, 2024, the Company leased 829,000 square feet, including 626,000 square feet of renewals, 123,000 square feet of vacancy leasing, and 80,000 square feet of investment leasing. For the nine months ended September 30, 2024, the Company executed 2.5 million square feet of total leasing, including 2.1 million square feet of renewals, 387,000 square feet of vacancy leasing, and 90,000 square feet of investment leasing.

> Tenant Retention Rates: During the quarter ended September 30, 2024, the Company renewed 87.6% of expiring square feet in its Total Portfolio and 89.6% in its Defense/IT Portfolio. During the nine months ended September 30, 2024, the Company renewed 84.3% of expiring square feet in its Total Portfolio and 86.9% in its Defense/IT Portfolio.

> Rent Spreads & Average Escalations on Renewing Leases: For the quarter and nine months ended September 30, 2024, straight-line rents on renewals increased 17.2% and 9.3%, respectively, and cash rents on renewed space increased 4.1% and 0.8%, respectively, while annual escalations on renewing leases averaged 2.6% and 2.4%, respectively.

> Lease Terms: In the quarter ended September 30, 2024, lease terms averaged 4.1 years on renewing leases, 7.1 years on vacancy leasing, and 9.5 years on investment leasing. For the nine months ended September 30, 2024, lease terms averaged 4.0 years on renewing leases, 7.8 years on vacancy leasing, and 9.0 years on investment leasing.

Investment Activity Highlights

> Development Pipeline: The Company’s development pipeline consists of five properties totaling 831,000 square feet that were 79% leased as of September 30, 2024. These projects represent a total estimated investment of $335.4 million, of which $108.1 million has been spent.

> Acquisitions: During the quarter, the Company acquired:

> A 365-acre land parcel near Des Moines, Iowa for $32 million that we plan to develop into approximately 3.3 million square feet of data center shell space.

> An 80,000 square foot Class A office building at 3900 Rogers Road in San Antonio, Texas for $17 million. The building was vacant upon acquisition, and the Company subsequently executed two leases with the U.S. Government to occupy the entire building.

> Please see the Company’s acquisition press release dated October 28, 2024 and pages 8-22 of the Company’s 3Q24 Results Presentation (refer to the ‘Associated Supplemental Presentation’ section below).

Balance Sheet and Capital Transaction Highlights

> For the quarter ended September 30, 2024, the Company’s adjusted EBITDA fixed charge coverage ratio was 4.8x.

> At September 30, 2024, the Company’s net debt to in-place adjusted EBITDA ratio was 6.1x and its net debt adjusted for fully-leased investment properties to in-place adjusted EBITDA ratio was 5.9x.

> At September 30, 2024, and including the effect of interest rate swaps, the Company’s weighted average effective interest rate on its consolidated debt portfolio was 3.3% with a weighted average maturity of 5 years, and 100% of the Company’s debt was subject to fixed interest rates.

Associated Supplemental Presentation

Prior to the call, the Company will post a slide presentation to accompany management’s prepared remarks for its third 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 $1.22-$1.26, and $2.54-$2.58, respectively, to new ranges of $1.24-$1.26, and $2.56-$2.58, respectively. Management is establishing fourth quarter guidance for diluted EPS and diluted FFOPS per Nareit and as adjusted for comparability at $0.31-$0.33 and $0.64-$0.66, 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 December 31, 2024

 

Year Ending December 31, 2024

 

Low

 

High

 

Low

 

High

Diluted EPS

 

$

0.31

 

$

0.33

 

$

1.24

 

$

1.26

Real estate-related depreciation and amortization

 

 

0.33

 

 

0.33

 

 

1.32

 

 

1.32

Diluted FFOPS, Nareit definition and as adjusted for comparability

 

$

0.64

 

$

0.66

 

$

2.56

 

$

2.58

Conference Call Information

Management will discuss third quarter 2024 results on its conference call tomorrow at 12:00 p.m. Eastern Time, details of which are listed below:

Conference Call Date: Tuesday, October 29, 2024

Time: 12:00 p.m. Eastern Time

Participants 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/BI9796486f46f6424aa012b44d48ca9ae6

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 September 30, 2024, the Company’s Defense/IT Portfolio of 194 properties, including 24 owned through unconsolidated joint ventures, encompassed 22.2 million square feet and was 96.5% 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 September 30,

 

For the Nine Months Ended September 30,

 

 

2024

 

 

 

2023

 

 

 

2024

 

 

 

2023

 

Revenues

 

 

 

 

 

 

 

Lease revenue

$

170,549

 

 

$

155,268

 

 

$

501,601

 

 

$

459,510

 

Other property revenue

 

2,014

 

 

 

1,339

 

 

 

4,710

 

 

 

3,731

 

Construction contract and other service revenues

 

16,662

 

 

 

11,949

 

 

 

63,523

 

 

 

42,012

 

Total revenues

 

189,225

 

 

 

168,556

 

 

 

569,834

 

 

 

505,253

 

Operating expenses

 

 

 

 

 

 

 

Property operating expenses

 

68,881

 

 

 

61,788

 

 

 

199,037

 

 

 

182,808

 

Depreciation and amortization associated with real estate operations

 

38,307

 

 

 

37,620

 

 

 

114,819

 

 

 

112,215

 

Construction contract and other service expenses

 

16,127

 

 

 

11,493

 

 

 

61,746

 

 

 

40,249

 

Impairment losses

 

—

 

 

 

252,797

 

 

 

—

 

 

 

252,797

 

General and administrative expenses

 

8,157

 

 

 

7,582

 

 

 

25,126

 

 

 

22,865

 

Leasing expenses

 

2,341

 

 

 

2,280

 

 

 

6,990

 

 

 

6,624

 

Business development expenses and land carry costs

 

918

 

 

 

714

 

 

 

3,079

 

 

 

1,935

 

Total operating expenses

 

134,731

 

 

 

374,274

 

 

 

410,797

 

 

 

619,493

 

Interest expense

 

(20,376

)

 

 

(17,798

)

 

 

(61,760

)

 

 

(50,759

)

Interest and other income, net

 

3,324

 

 

 

2,529

 

 

 

10,330

 

 

 

6,928

 

Gain on sales of real estate

 

—

 

 

 

—

 

 

 

—

 

 

 

49,392

 

Income (loss) before equity in income (loss) of unconsolidated entities and income taxes

 

37,442

 

 

 

(220,987

)

 

 

107,607

 

 

 

(108,679

)

Equity in income (loss) of unconsolidated entities

 

85

 

 

 

(68

)

 

 

180

 

 

 

(21

)

Income tax expense

 

(130

)

 

 

(152

)

 

 

(312

)

 

 

(467

)

Net income (loss)

 

37,397

 

 

 

(221,207

)

 

 

107,475

 

 

 

(109,167

)

Net (income) loss attributable to noncontrolling interests:

 

 

 

 

 

 

 

Common units in the Operating Partnership (“OP”)

 

(711

)

 

 

3,691

 

 

 

(2,013

)

 

 

1,882

 

Other consolidated entities

 

(601

)

 

 

1,329

 

 

 

(1,654

)

 

 

164

 

Net income (loss) attributable to common shareholders

$

36,085

 

 

$

(216,187

)

 

$

103,808

 

 

$

(107,121

)

 

 

 

 

 

 

 

 

Earnings per share (“EPS”) computation:

 

 

 

 

 

 

 

Numerator for diluted EPS:

 

 

 

 

 

 

 

Net income (loss) attributable to common shareholders

$

36,085

 

 

$

(216,187

)

 

$

103,808

 

 

$

(107,121

)

Amount allocable to share-based compensation awards

 

(104

)

 

 

(992

)

 

 

(319

)

 

 

(1,093

)

Numerator for diluted EPS

$

35,981

 

 

$

(217,179

)

 

$

103,489

 

 

$

(108,214

)

Denominator:

 

 

 

 

 

 

 

Weighted average common shares - basic

 

112,314

 

 

 

112,196

 

 

 

112,279

 

 

 

112,170

 

Dilutive effect of share-based compensation awards

 

696

 

 

 

—

 

 

 

566

 

 

 

—

 

Weighted average common shares - diluted

 

113,010

 

 

 

112,196

 

 

 

112,845

 

 

 

112,170

 

Diluted EPS

$

0.32

 

 

$

(1.94

)

 

$

0.92

 

 

$

(0.96

)

COPT Defense Properties

Summary Financial Data

(unaudited)

(in thousands, except per share data)

 

For the Three Months Ended September 30,

 

For the Nine Months Ended September 30,

 

 

2024

 

 

 

2023

 

 

 

2024

 

 

 

2023

 

Net income (loss)

$

37,397

 

 

$

(221,207

)

 

$

107,475

 

 

$

(109,167

)

Real estate-related depreciation and amortization

 

38,307

 

 

 

37,620

 

 

 

114,819

 

 

 

112,215

 

Impairment losses on real estate

 

—

 

 

 

252,797

 

 

 

—

 

 

 

252,797

 

Gain on sales of real estate

 

—

 

 

 

—

 

 

 

—

 

 

 

(49,392

)

Depreciation and amortization on unconsolidated real estate JVs

 

756

 

 

 

806

 

 

 

2,311

 

 

 

2,412

 

Funds from operations (“FFO”)

 

76,460

 

 

 

70,016

 

 

 

224,605

 

 

 

208,865

 

FFO allocable to other noncontrolling interests

 

(985

)

 

 

(1,059

)

 

 

(2,805

)

 

 

(3,006

)

Basic FFO allocable to share-based compensation awards

 

(617

)

 

 

(481

)

 

 

(1,803

)

 

 

(1,427

)

Basic FFO available to common share and common unit holders (“Basic FFO”)

 

74,858

 

 

 

68,476

 

 

 

219,997

 

 

 

204,432

 

Redeemable noncontrolling interests

 

—

 

 

 

—

 

 

 

1,446

 

 

 

(58

)

Diluted FFO adjustments allocable to share-based compensation awards

 

47

 

 

 

36

 

 

 

141

 

 

 

112

 

Diluted FFO available to common share and common unit holders (“Diluted FFO”)

 

74,905

 

 

 

68,512

 

 

 

221,584

 

 

 

204,486

 

Executive transition costs

 

69

 

 

 

82

 

 

 

227

 

 

 

330

 

Diluted FFO comparability adjustments allocable to share-based compensation awards

 

—

 

 

 

(1

)

 

 

(1

)

 

 

(3

)

Diluted FFO available to common share and common unit holders, as adjusted for comparability

 

74,974

 

 

 

68,593

 

 

 

221,810

 

 

 

204,813

 

Straight line rent adjustments and lease incentive amortization

 

613

 

 

 

12,882

 

 

 

7,874

 

 

 

6,205

 

Amortization of intangibles and other assets included in net operating income (“NOI”)

 

211

 

 

 

26

 

 

 

544

 

 

 

24

 

Share-based compensation, net of amounts capitalized

 

2,617

 

 

 

2,280

 

 

 

7,826

 

 

 

6,226

 

Amortization of deferred financing costs

 

671

 

 

 

639

 

 

 

2,037

 

 

 

1,899

 

Amortization of net debt discounts, net of amounts capitalized

 

1,032

 

 

 

750

 

 

 

3,069

 

 

 

1,990

 

Replacement capital expenditures

 

(27,824

)

 

 

(21,122

)

 

 

(69,850

)

 

 

(71,996

)

Other

 

298

 

 

 

74

 

 

 

493

 

 

 

(420

)

Diluted adjusted funds from operations available to common share and common unit holders (“Diluted AFFO”)

$

52,592

 

 

$

64,122

 

 

$

173,803

 

 

$

148,741

 

Diluted FFO per share

$

0.65

 

 

$

0.60

 

 

$

1.92

 

 

$

1.79

 

Diluted FFO per share, as adjusted for comparability

$

0.65

 

 

$

0.60

 

 

$

1.92

 

 

$

1.79

 

Dividends/distributions per common share/unit

$

0.295

 

 

$

0.285

 

 

$

0.885

 

 

$

0.855

 

COPT Defense Properties

Summary Financial Data

(unaudited)

(Dollars and shares in thousands, except per share data)

 

September 30, 2024

 

December 31, 2023

Balance Sheet Data

 

 

 

Properties, net of accumulated depreciation

$

3,604,688

 

 

$

3,503,678

 

Total assets

$

4,234,302

 

 

$

4,246,966

 

Debt per balance sheet

$

2,390,839

 

 

$

2,416,287

 

Total liabilities

$

2,679,271

 

 

$

2,699,631

 

Redeemable noncontrolling interests

$

22,436

 

 

$

23,580

 

Total equity

$

1,532,595

 

 

$

1,523,755

 

Debt to assets

 

56.5

%

 

 

56.9

%

Net debt to adjusted book

 

40.8

%

 

 

40.6

%

 

 

 

 

Defense/IT Portfolio Data (as of period end)

 

 

 

Number of operating properties

 

194

 

 

 

190

 

Total operational square feet (in thousands)

 

22,174

 

 

 

21,719

 

% Occupied

 

95.0

%

 

 

96.2

%

% Leased

 

96.5

%

 

 

97.2

%

 

For the Three Months Ended September 30,

 

For the Nine Months Ended September 30,

2024

 

2023

 

2024

 

2023

GAAP

 

 

 

 

 

 

 

Payout ratio:

 

 

 

 

 

 

 

Net income

90.7

%

 

N/A

 

 

94.6

%

 

N/A

 

Debt ratios:

 

 

 

 

 

 

 

Net income to interest expense ratio

1.8x

 

N/A

 

 

1.7x

 

N/A

 

Debt to net income ratio

16.0x

 

N/A

 

 

N/A

 

 

N/A

 

Non-GAAP

 

 

 

 

 

 

 

Payout ratios:

 

 

 

 

 

 

 

Diluted FFO

44.9

%

 

47.3

%

 

45.6

%

 

47.6

%

Diluted FFO, as adjusted for comparability

44.9

%

 

47.3

%

 

45.5

%

 

47.5

%

Diluted AFFO

64.0

%

 

50.6

%

 

58.1

%

 

65.4

%

Debt ratios:

 

 

 

 

 

 

 

Adjusted EBITDA fixed charge coverage ratio

4.8x

 

4.6x

 

4.7x

 

4.9x

Net debt to in-place adjusted EBITDA ratio

6.1x

 

6.2x

 

N/A

 

 

N/A

 

Net debt adj. for fully-leased investment properties to in-place adj. EBITDA ratio

5.9x

 

5.9x

 

N/A

 

 

N/A

 

 

 

 

 

 

 

 

 

Reconciliation of denominators for per share measures

 

 

 

 

 

 

Denominator for diluted EPS

113,010

 

 

112,196

 

 

112,845

 

 

112,170

 

Weighted average common units

1,696

 

 

1,520

 

 

1,675

 

 

1,508

 

Dilutive effect of additional share-based compensation awards

—

 

 

429

 

 

—

 

 

422

 

Redeemable noncontrolling interests

—

 

 

—

 

 

873

 

 

51

 

Denominator for diluted FFO per share and as adjusted for comparability

114,706

 

 

114,145

 

 

115,393

 

 

114,151

 

COPT Defense Properties

Summary Financial Data

(unaudited)

(in thousands)

 

For the Three Months Ended September 30,

 

For the Nine Months Ended September 30,

 

2024

 

2023

 

2024

 

2023

Numerators for Payout Ratios

 

 

 

 

 

 

 

Dividends on unrestricted common and deferred shares

$

33,165

 

 

$

31,996

 

 

$

99,461

 

 

$

95,980

 

Distributions on unrestricted common units

 

491

 

 

 

432

 

 

 

1,496

 

 

 

1,295

 

Dividends and distributions on restricted shares and units

 

247

 

 

 

200

 

 

 

752

 

 

 

619

 

Total dividends and distributions for GAAP payout ratio

 

33,903

 

 

 

32,628

 

 

 

101,709

 

 

 

97,894

 

Dividends and distributions on antidilutive shares and units

 

(249

)

 

 

(202

)

 

 

(756

)

 

 

(623

)

Dividends and distributions for non-GAAP payout ratios

$

33,654

 

 

$

32,426

 

 

$

100,953

 

 

$

97,271

 

 

 

 

 

 

 

 

 

Reconciliation of net income (loss) to earnings before interest, income taxes, depreciation and amortization for real estate (“EBITDAre”), adjusted EBITDA and in-place adjusted EBITDA

 

 

 

 

 

 

 

Net income (loss)

$

37,397

 

 

$

(221,207

)

 

$

107,475

 

 

$

(109,167

)

Interest expense

 

20,376

 

 

 

17,798

 

 

 

61,760

 

 

 

50,759

 

Income tax expense

 

130

 

 

 

152

 

 

 

312

 

 

 

467

 

Real estate-related depreciation and amortization

 

38,307

 

 

 

37,620

 

 

 

114,819

 

 

 

112,215

 

Other depreciation and amortization

 

614

 

 

 

615

 

 

 

1,786

 

 

 

1,826

 

Impairment losses on real estate

 

—

 

 

 

252,797

 

 

 

—

 

 

 

252,797

 

Gain on sales of real estate

 

—

 

 

 

—

 

 

 

—

 

 

 

(49,392

)

Adjustments from unconsolidated real estate JVs

 

1,759

 

 

 

1,743

 

 

 

5,139

 

 

 

5,006

 

EBITDAre

 

98,583

 

 

 

89,518

 

 

 

291,291

 

 

 

264,511

 

Credit loss expense

 

38

 

 

 

372

 

 

 

496

 

 

 

677

 

Business development expenses

 

557

 

 

 

313

 

 

 

1,790

 

 

 

948

 

Executive transition costs

 

69

 

 

 

82

 

 

 

580

 

 

 

636

 

Net gain on other investments

 

(11

)

 

 

(25

)

 

 

(488

)

 

 

(25

)

Adjusted EBITDA

 

99,236

 

 

 

90,260

 

 

$

293,669

 

 

$

266,747

 

Pro forma NOI adjustment for property changes within period

 

—

 

 

 

1,647

 

 

 

 

 

In-place adjusted EBITDA

$

99,236

 

 

$

91,907

 

 

 

 

 

 

 

 

 

 

 

 

 

Reconciliations of tenant improvements and incentives, building improvements and leasing costs for operating properties to replacement capital expenditures

 

 

 

 

 

 

 

Tenant improvements and incentives

$

18,772

 

 

$

14,457

 

 

$

46,593

 

 

$

67,062

 

Building improvements

 

6,694

 

 

 

6,307

 

 

 

17,352

 

 

 

11,214

 

Leasing costs

 

3,013

 

 

 

1,902

 

 

 

9,713

 

 

 

7,194

 

Net additions to (exclusions from) tenant improvements and incentives

 

728

 

 

 

(813

)

 

 

4

 

 

 

(11,981

)

Excluded building improvements and leasing costs

 

(1,383

)

 

 

(731

)

 

 

(3,812

)

 

 

(1,493

)

Replacement capital expenditures

$

27,824

 

 

$

21,122

 

$

69,850

 

$

71,996

COPT Defense Properties

Summary Financial Data

(unaudited)

(in thousands)

 

For the Three Months Ended September 30,

 

For the Nine Months Ended September 30,

 

 

2024

 

 

 

2023

 

 

 

2024

 

 

 

2023

 

Reconciliation of interest expense to the denominator for fixed charge coverage-Adjusted EBITDA

 

 

 

 

 

 

 

Interest expense

$

20,376

 

 

$

17,798

 

 

$

61,760

 

 

$

50,759

 

Less: Amortization of deferred financing costs

 

(671

)

 

 

(639

)

 

 

(2,037

)

 

 

(1,899

)

Less: Amortization of net debt discounts, net of amounts capitalized

 

(1,032

)

 

 

(750

)

 

 

(3,069

)

 

 

(1,990

)

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

 

821

 

 

 

805

 

 

 

2,433

 

 

 

2,369

 

Scheduled principal amortization

 

448

 

 

 

753

 

 

 

1,879

 

 

 

2,289

 

Capitalized interest

 

712

 

 

 

1,487

 

 

 

1,944

 

 

 

3,451

 

Denominator for fixed charge coverage-Adjusted EBITDA

$

20,654

 

 

$

19,454

 

 

$

62,910

 

 

$

54,979

 

 

 

 

 

 

 

 

 

Reconciliation of net income (loss) to NOI from real estate operations, same property NOI from real estate operations and same property cash NOI from real estate operations

 

 

 

 

 

 

 

Net income (loss)

$

37,397

 

 

$

(221,207

)

 

$

107,475

 

 

$

(109,167

)

Construction contract and other service revenues

 

(16,662

)

 

 

(11,949

)

 

 

(63,523

)

 

 

(42,012

)

Depreciation and other amortization associated with real estate operations

 

38,307

 

 

 

37,620

 

 

 

114,819

 

 

 

112,215

 

Construction contract and other service expenses

 

16,127

 

 

 

11,493

 

 

 

61,746

 

 

 

40,249

 

Impairment losses

 

—

 

 

 

252,797

 

 

 

—

 

 

 

252,797

 

General and administrative expenses

 

8,157

 

 

 

7,582

 

 

 

25,126

 

 

 

22,865

 

Leasing expenses

 

2,341

 

 

 

2,280

 

 

 

6,990

 

 

 

6,624

 

Business development expenses and land carry costs

 

918

 

 

 

714

 

 

 

3,079

 

 

 

1,935

 

Interest expense

 

20,376

 

 

 

17,798

 

 

 

61,760

 

 

 

50,759

 

Interest and other income, net

 

(3,324

)

 

 

(2,529

)

 

 

(10,330

)

 

 

(6,928

)

Gain on sales of real estate

 

—

 

 

 

—

 

 

 

—

 

 

 

(49,392

)

Equity in (income) loss of unconsolidated entities

 

(85

)

 

 

68

 

 

 

(180

)

 

 

21

 

Unconsolidated real estate JVs NOI allocable to COPT Defense included in equity in income (loss) of unconsolidated entities

 

1,844

 

 

 

1,675

 

 

 

5,319

 

 

 

4,988

 

Income tax expense

 

130

 

 

 

152

 

 

 

312

 

 

 

467

 

NOI from real estate operations

 

105,526

 

 

 

96,494

 

 

 

312,593

 

 

 

285,421

 

Non-Same Property NOI from real estate operations

 

(6,875

)

 

 

(1,455

)

 

 

(19,867

)

 

 

(3,436

)

Same Property NOI from real estate operations

 

98,651

 

 

 

95,039

 

 

 

292,726

 

 

 

281,985

 

Straight line rent adjustments and lease incentive amortization

 

1,531

 

 

 

10,154

 

 

 

9,399

 

 

 

3,888

 

Amortization of acquired above- and below-market rents

 

(69

)

 

 

(120

)

 

 

(207

)

 

 

(415

)

Lease termination fees, net

 

(931

)

 

 

(748

)

 

 

(2,587

)

 

 

(3,028

)

Tenant funded landlord assets and lease incentives

 

(1,942

)

 

 

(15,402

)

 

 

(12,630

)

 

 

(18,837

)

Cash NOI adjustments in unconsolidated real estate JVs

 

(136

)

 

 

(130

)

 

 

(364

)

 

 

(420

)

Same Property Cash NOI from real estate operations

$

97,104

 

 

$

88,793

 

 

$

286,337

 

 

$

263,173

 

COPT Defense Properties

Summary Financial Data

(unaudited)

(in thousands)

 

 

September 30, 2024

 

December 31, 2023

Reconciliation of total assets to adjusted book

 

 

 

 

Total assets

 

$

4,234,302

 

 

$

4,246,966

 

Accumulated depreciation

 

 

1,502,730

 

 

 

1,400,162

 

Accumulated amortization of intangibles on property acquisitions and deferred leasing costs

 

 

227,281

 

 

 

228,484

 

COPT Defense’s share of liabilities of unconsolidated real estate JVs

 

 

61,118

 

 

 

60,583

 

COPT Defense’s share of accumulated depreciation and amortization of unconsolidated real estate JVs

 

 

12,014

 

 

 

9,528

 

Less: Property - operating lease liabilities

 

 

(33,615

)

 

 

(33,931

)

Less: Property - finance lease liabilities

 

 

(397

)

 

 

(415

)

Less: Cash and cash equivalents

 

 

(34,478

)

 

 

(167,820

)

Less: COPT Defense’s share of cash of unconsolidated real estate JVs

 

 

(1,575

)

 

 

(852

)

Adjusted book

 

$

5,967,380

 

 

$

5,742,705

 

 

September 30, 2024

 

December 31, 2023

 

September 30, 2023

Reconciliation of debt to net debt and net debt adjusted for fully-leased investment properties

 

 

 

 

 

 

Debt per balance sheet

 

$

2,390,839

 

 

$

2,416,287

 

 

$

2,415,783

 

Net discounts and deferred financing costs

 

 

24,633

 

 

 

28,713

 

 

 

29,980

 

COPT Defense’s share of unconsolidated JV gross debt

 

 

53,148

 

 

 

52,613

 

 

 

52,511

 

Gross debt

 

 

2,468,620

 

 

 

2,497,613

 

 

 

2,498,274

 

Less: Cash and cash equivalents

 

 

(34,478

)

 

 

(167,820

)

 

 

(204,238

)

Less: COPT Defense’s share of cash of unconsolidated real estate JVs

 

 

(1,575

)

 

 

(852

)

 

 

(1,031

)

Net debt

 

 

2,432,567

 

 

 

2,328,941

 

 

 

2,293,005

 

Costs incurred on fully-leased development properties

 

 

(70,954

)

 

 

(53,914

)

 

 

(124,038

)

Costs incurred on fully-leased operating property acquisitions

 

 

(17,034

)

 

 

—

 

 

 

—

 

Net debt adjusted for fully-leased investment properties

 

$

2,344,579

 

 

$

2,275,027

 

 

$

2,168,967

 

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20241028177751/en/

IR Contacts: Venkat Kommineni, CFA 443.285.5587 [e-mail]

Michelle Layne 443.285.5452 [e-mail]