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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 | |
|---|---|---|---|---|---|---|---|---|
| -0.53 | -1.78% | 29.24 | 29.59 | 28.88 | 29.234 | 926,002 | 01:00:00 |
From Jan 2023 to Jan 2025
EPS of ($1.94) for 3Q23; FFO per Share, as Adjusted for Comparability, of $0.60
Maintains Midpoint of 2023 FFO per Share Guidance at $2.40
Defense/IT Portfolio 95.9% Occupied and 97.0% Leased
Same Property Cash NOI Increased 4.5% in 3Q23 and 6.2% Year-to-Date Raising Same Property Cash NOI Guidance for the Year by 100 Basis Points, to 5.75%-6.25%
Placed 443,000 SF of Developments into Service that are 98% Leased 1.0 million SF of Active Developments are 90% Leased
Strong Leasing Volume YTD; High Confidence in Achieving 2023 Goals
Total Leasing of 521,000 SF in 3Q23 and 2.2 million SF Year-to-Date
151,000 SF of Vacancy Leasing in 3Q23 and 337,000 SF Year-to-Date On Track to Achieve Annual Goal of 400,000 SF
Tenant Retention of 82% in 3Q23 and 83% Year-to-Date On Track to Achieve Annual Goal of 80%-85%
495,000 SF of Development Leasing Year-to-Date On Track to Achieve Annual Goal of 700,000 SF
COPT Defense Properties (“COPT Defense” or the “Company”) (NYSE: CDP) announced results for the third quarter ended September 30, 2023.
Management Comments
Stephen E. Budorick, COPT Defense’s President & Chief Executive Officer, commented, “Our Defense/IT investment strategy, which has concentrated our portfolio near priority U.S. defense installations, continues to produce strong results. Our Defense/IT Portfolio is 97% leased, which is the highest leased rate since we started reporting the segment in 2015, supported by growth in defense spending, resulting in continued tenant demand from both our U.S. Government and Defense Contractor tenants.
Our third quarter results were solid, with FFO per share at the midpoint of our guidance range, which led us to narrow the full-year guidance range. We continue to outperform in terms of same property cash NOI growth, which increased 4.5% for 3Q23 over 3Q22, and 6.2% in 2023 YTD over 2022 YTD, which led us to increase our full-year change in same property cash NOI guidance by another 100 basis points. We are highly confident that we will achieve our leasing goals, as we have executed 84% of our vacancy leasing goal and 70% of our development leasing goal, while tenant retention YTD is squarely within our full-year guidance range.
From a balance sheet perspective, our Finance and Capital Markets team once again proved our ability to source low-cost capital to fund our accretive and highly leased development pipeline, as evidenced by our September issuance of $345 million of exchangeable notes due 2028 at 5.25%, which was roughly 200 basis points below where we could have priced 5-year unsecured debt. With this capital raise, and our ability to fund the equity investment in our projects with cash flow from operations after our dividend payments, we forecast we can now fund our anticipated development spend through late 2026. Our investment grade balance sheet is well positioned to navigate the challenging capital markets environment, as we have no variable rate debt exposure and have no significant debt maturity until 2026.
We remain confident in our strategy of allocating capital to investments in our Defense/IT Portfolio that will support continued growth in FFO per share and shareholder value.”
Financial Highlights
3rd 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 third quarter 2023 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
2023 Guidance
Management is revising its full-year guidance for diluted EPS and narrowing its full-year guidance for diluted FFOPS, per Nareit and as adjusted for comparability, from the prior range of $1.49-$1.53, and $2.38-$2.42, respectively, to new ranges of ($0.71)-($0.69), and $2.39-$2.41, respectively. Management is establishing fourth quarter guidance for diluted EPS and diluted FFOPS per Nareit and as adjusted for comparability at $0.27-$0.29 and $0.60-$0.62, 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, 2023
Year Ending December 31, 2023
Low
High
Low
High
Diluted EPS
$
0.27
$
0.29
$
(0.71
)
$
(0.69
)
Real estate-related depreciation and amortization
0.33
0.33
1.32
1.32
Impairment losses
—
—
2.21
2.21
Gain on sales of real estate
—
—
(0.43
)
(0.43
)
Diluted FFOPS, Nareit definition and as adjusted for comparability
$
0.60
$
0.62
$
2.39
$
2.41
Conference Call Information
Management will discuss third quarter 2023 results on its conference call tomorrow at 12:00 p.m. Eastern Time, details of which are listed below:
Conference Call Date:
Friday, October 27, 2023
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/BI3aa228e2cc714d1893a176fa18b0ded0
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. In September 2023, the Company changed its name from Corporate Office Properties Trust to COPT Defense Properties to better describe its investment strategy’s focus on locations serving U.S. priority defense activities. The ticker symbol under which the Company’s common shares are publicly traded on the New York Stock Exchange changed from “OFC” to “CDP.” As of September 30, 2023, the Company’s Defense/IT Portfolio of 188 properties, including 24 owned through unconsolidated joint ventures, encompassed 21.3 million square feet and was 97.0% 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, 2022.
Source: COPT Defense Properties
COPT Defense Properties
Summary Financial Data
(unaudited)
(dollars and shares in thousands, except per share data)
For the Three Months Ended September 30,
For the Nine Months Ended September 30,
2023
2022
2023
2022
Revenues
Lease revenue
$
155,268
$
146,481
$
459,510
$
430,147
Other property revenue
1,339
1,206
3,731
3,066
Construction contract and other service revenues
11,949
34,813
42,012
130,570
Total revenues
168,556
182,500
505,253
563,783
Operating expenses
Property operating expenses
61,788
57,663
182,808
168,960
Depreciation and amortization associated with real estate operations
37,620
35,247
112,215
104,323
Construction contract and other service expenses
11,493
33,555
40,249
126,509
Impairment losses
252,797
—
252,797
—
General and administrative expenses
7,582
6,558
22,865
19,695
Leasing expenses
2,280
2,340
6,624
6,102
Business development expenses and land carry costs
714
552
1,935
2,036
Total operating expenses
374,274
135,915
619,493
427,625
Interest expense
(17,798
)
(15,123
)
(50,759
)
(44,355
)
Interest and other income, net
2,529
597
6,928
4,399
Gain on sales of real estate
—
16
49,392
12
Loss on early extinguishment of debt
—
—
—
(342
)
(Loss) income from continuing operations before equity in (loss) income of unconsolidated entities and income taxes
(220,987
)
32,075
(108,679
)
95,872
Equity in (loss) income of unconsolidated entities
(68
)
308
(21
)
1,514
Income tax expense
(152
)
(67
)
(467
)
(224
)
(Loss) income from continuing operations
(221,207
)
32,316
(109,167
)
97,162
Discontinued operations
—
—
—
29,573
Net (loss) income
(221,207
)
32,316
(109,167
)
126,735
Net loss (income) attributable to noncontrolling interests:
Common units in the Operating Partnership (“OP”)
3,691
(476
)
1,882
(1,828
)
Other consolidated entities
1,329
(919
)
164
(2,357
)
Net (loss) income attributable to common shareholders
$
(216,187
)
$
30,921
$
(107,121
)
$
122,550
Earnings per share (“EPS”) computation:
Numerator for diluted EPS:
Net (loss) income attributable to common shareholders
$
(216,187
)
$
30,921
$
(107,121
)
$
122,550
Amount allocable to share-based compensation awards
(992
)
(75
)
(1,093
)
(334
)
Redeemable noncontrolling interests
—
(40
)
—
(109
)
Numerator for diluted EPS
$
(217,179
)
$
30,806
$
(108,214
)
$
122,107
Denominator:
Weighted average common shares - basic
112,196
112,093
112,170
112,066
Dilutive effect of share-based compensation awards
—
433
—
429
Dilutive effect of redeemable noncontrolling interests
—
105
—
121
Weighted average common shares - diluted
112,196
112,631
112,170
112,616
Diluted EPS
$
(1.94
)
$
0.27
$
(0.96
)
$
1.08
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,
2023
2022
2023
2022
Net (loss) income
$
(221,207
)
$
32,316
$
(109,167
)
$
126,735
Real estate-related depreciation and amortization
37,620
35,247
112,215
104,323
Impairment losses on real estate
252,797
—
252,797
—
Gain on sales of real estate from continuing and discontinued operations
—
(16
)
(49,392
)
(28,576
)
Depreciation and amortization on unconsolidated real estate JVs
806
524
2,412
1,575
Funds from operations (“FFO”)
70,016
68,071
208,865
204,057
FFO allocable to other noncontrolling interests
(1,059
)
(1,348
)
(3,006
)
(3,568
)
Basic FFO allocable to share-based compensation awards
(481
)
(354
)
(1,427
)
(1,073
)
Basic FFO available to common share and common unit holders (“Basic FFO”)
68,476
66,369
204,432
199,416
Redeemable noncontrolling interests
—
(5
)
(58
)
(7
)
Diluted FFO adjustments allocable to share-based compensation awards
36
27
112
81
Diluted FFO available to common share and common unit holders (“Diluted FFO”)
68,512
66,391
204,486
199,490
Loss on early extinguishment of debt
—
—
—
342
Executive transition costs
82
206
330
343
Diluted FFO comparability adjustments allocable to share-based compensation awards
(1
)
(2
)
(3
)
(4
)
Diluted FFO available to common share and common unit holders, as adjusted for comparability
68,593
66,595
204,813
200,171
Straight line rent adjustments and lease incentive amortization
12,882
605
6,205
(5,782
)
Amortization of intangibles and other assets included in net operating income (“NOI”)
26
50
24
(273
)
Share-based compensation, net of amounts capitalized
2,280
2,188
6,226
6,453
Amortization of deferred financing costs
639
540
1,899
1,678
Amortization of net debt discounts, net of amounts capitalized
750
612
1,990
1,825
Replacement capital expenditures
(21,122
)
(17,528
)
(71,996
)
(52,603
)
Other
74
377
(420
)
822
Diluted adjusted funds from operations available to common share and common unit holders (“Diluted AFFO”)
$
64,122
$
53,439
$
148,741
$
152,291
Diluted FFO per share
$
0.60
$
0.58
$
1.79
$
1.75
Diluted FFO per share, as adjusted for comparability
$
0.60
$
0.58
$
1.79
$
1.75
Dividends/distributions per common share/unit
$
0.285
$
0.275
$
0.855
$
0.825
COPT Defense Properties
Summary Financial Data
(unaudited)
(Dollars and shares in thousands, except per share data)
September 30, 2023
December 31, 2022
Balance Sheet Data
Properties, net of accumulated depreciation
$
3,468,197
$
3,556,398
Total assets
$
4,239,257
$
4,257,275
Debt per balance sheet
$
2,415,783
$
2,231,794
Total liabilities
$
2,691,562
$
2,509,527
Redeemable noncontrolling interests
$
21,822
$
26,293
Total equity
$
1,525,873
$
1,721,455
Debt to assets
57.0
%
52.4
%
Net debt to adjusted book
40.5
%
39.8
%
Defense/IT Portfolio Data (as of period end)
Number of operating properties
188
186
Total operational square feet (in thousands)
21,339
20,869
% Occupied
95.9
%
94.1
%
% Leased
97.0
%
96.7
%
For the Three Months Ended September 30,
For the Nine Months Ended September 30,
2023
2022
2023
2022
GAAP
Payout ratio:
Net income
N/A
97.1
%
N/A
74.3
%
Debt ratios:
Net income to interest expense ratio
N/A
2.1x
N/A
2.9x
Debt to net income ratio
N/A
17.6x
N/A
N/A
Non-GAAP
Payout ratios:
Diluted FFO
47.3
%
47.1
%
47.6
%
47.0
%
Diluted FFO, as adjusted for comparability
47.3
%
46.9
%
47.5
%
46.8
%
Diluted AFFO
50.6
%
58.5
%
65.4
%
61.6
%
Debt ratios:
Adjusted EBITDA fixed charge coverage ratio
4.6x
5.1x
4.9x
5.2x
Net debt to in-place adjusted EBITDA ratio
6.2x
6.7x
N/A
N/A
Net debt adj. for fully-leased development 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
112,196
112,631
112,170
112,616
Weighted average common units
1,520
1,477
1,508
1,446
Dilutive effect of additional share-based compensation awards
429
—
422
—
Redeemable noncontrolling interests
—
—
51
—
Denominator for diluted FFO per share and as adjusted for comparability
114,145
114,108
114,151
114,062
COPT Defense Properties
Summary Financial Data
(unaudited)
(in thousands)
For the Three Months Ended September 30,
For the Nine Months Ended September 30,
2023
2022
2023
2022
Numerators for Payout Ratios
Dividends on unrestricted common and deferred shares
$
31,996
$
30,844
$
95,980
$
92,523
Distributions on unrestricted common units
432
406
1,295
1,217
Dividends and distributions on restricted shares and units
200
140
619
433
Total dividends and distributions for GAAP payout ratio
32,628
31,390
97,894
94,173
Dividends and distributions on antidilutive shares and units
(202
)
(127
)
(623
)
(395
)
Dividends and distributions for non-GAAP payout ratios
$
32,426
$
31,263
$
97,271
$
93,778
Reconciliation of net (loss) income to earnings before interest, income taxes, depreciation and amortization for real estate (“EBITDAre”), adjusted EBITDA and in-place adjusted EBITDA
Net (loss) income
$
(221,207
)
$
32,316
$
(109,167
)
$
126,735
Interest expense
17,798
15,123
50,759
44,355
Income tax expense
152
67
467
224
Real estate-related depreciation and amortization
37,620
35,247
112,215
104,323
Other depreciation and amortization
615
602
1,826
1,761
Impairment losses on real estate
252,797
—
252,797
—
Gain on sales of real estate from continuing and discontinued operations
—
(16
)
(49,392
)
(28,576
)
Adjustments from unconsolidated real estate JVs
1,743
762
5,006
2,280
EBITDAre
89,518
84,101
264,511
251,102
Credit loss expense
372
1,693
677
1,602
Business development expenses
313
386
948
1,097
Executive transition costs
82
206
636
343
Loss on early extinguishment of debt
—
—
—
342
Net gain on other investments
(25
)
—
(25
)
(564
)
Adjusted EBITDA
90,260
86,386
$
266,747
$
253,922
Pro forma NOI adjustment for property changes within period
1,647
—
Change in collectability of deferred rental revenue
—
13
In-place adjusted EBITDA
$
91,907
$
86,399
Reconciliations of tenant improvements and incentives, building improvements and leasing costs for operating properties to replacement capital expenditures
Tenant improvements and incentives
$
14,457
$
8,848
$
67,062
$
29,513
Building improvements
6,307
7,477
11,214
21,060
Leasing costs
1,902
3,073
7,194
7,091
Net (exclusions from) additions to tenant improvements and incentives
(813
)
(57
)
(11,981
)
2,225
Excluded building improvements and leasing costs
(731
)
(1,813
)
(1,493
)
(7,286
)
Replacement capital expenditures
$
21,122
$
17,528
$
71,996
$
52,603
COPT Defense Properties
Summary Financial Data
(unaudited)
(in thousands)
For the Three Months Ended September 30,
For the Nine Months Ended September 30,
2023
2022
2023
2022
Reconciliation of interest expense to the denominator for fixed charge coverage-Adjusted EBITDA
Interest expense
$
17,798
$
15,123
$
50,759
$
44,355
Less: Amortization of deferred financing costs
(639
)
(540
)
(1,899
)
(1,678
)
Less: Amortization of net debt discounts, net of amounts capitalized
(750
)
(612
)
(1,990
)
(1,825
)
CDP’s share of interest expense of unconsolidated real estate JVs, excluding amortization of deferred financing costs and net debt premium and loss on interest rate derivatives
805
236
2,369
700
Scheduled principal amortization
753
851
2,289
2,469
Capitalized interest
1,487
1,969
3,451
4,874
Denominator for fixed charge coverage-Adjusted EBITDA
$
19,454
$
17,027
$
54,979
$
48,895
Reconciliation of net (loss) income to NOI from real estate operations, same property NOI from real estate operations and same property cash NOI from real estate operations
Net (loss) income
$
(221,207
)
$
32,316
$
(109,167
)
$
126,735
Construction contract and other service revenues
(11,949
)
(34,813
)
(42,012
)
(130,570
)
Depreciation and other amortization associated with real estate operations
37,620
35,247
112,215
104,323
Construction contract and other service expenses
11,493
33,555
40,249
126,509
Impairment losses
252,797
—
252,797
—
General and administrative expenses
7,582
6,558
22,865
19,695
Leasing expenses
2,280
2,340
6,624
6,102
Business development expenses and land carry costs
714
552
1,935
2,036
Interest expense
17,798
15,123
50,759
44,355
Interest and other income, net
(2,529
)
(597
)
(6,928
)
(4,399
)
Gain on sales of real estate from continuing operations
—
(16
)
(49,392
)
(12
)
Loss on early extinguishment of debt
—
—
—
342
Equity in loss (income) of unconsolidated entities
68
(308
)
21
(1,514
)
Unconsolidated real estate JVs NOI allocable to CDP included in equity in (loss) income of unconsolidated entities
1,675
1,072
4,988
3,232
Income tax expense
152
67
467
224
Discontinued operations
—
—
—
(29,573
)
Revenues from real estate operations from discontinued operations
—
—
—
1,980
Property operating expenses from discontinued operations
—
—
—
(971
)
NOI from real estate operations
96,494
91,096
285,421
268,494
Non-Same Property NOI from real estate operations
(9,318
)
(6,611
)
(27,539
)
(18,976
)
Same Property NOI from real estate operations
87,176
84,485
257,882
249,518
Straight line rent adjustments and lease incentive amortization
15,060
544
17,684
(3,048
)
Amortization of acquired above- and below-market rents
(120
)
(97
)
(415
)
(713
)
Lease termination fees, net
(748
)
(591
)
(3,028
)
(1,211
)
Tenant funded landlord assets and lease incentives
(15,364
)
(2,026
)
(17,743
)
(4,847
)
Cash NOI adjustments in unconsolidated real estate JVs
(64
)
(87
)
(209
)
(277
)
Same Property Cash NOI from real estate operations
$
85,940
$
82,228
$
254,171
$
239,422
COPT Defense Properties
Summary Financial Data
(unaudited)
(in thousands)
September 30, 2023
December 31, 2022
Reconciliation of total assets to adjusted book
Total assets
$
4,239,257
$
4,257,275
Accumulated depreciation
1,367,473
1,267,434
Accumulated depreciation included in assets held for sale
—
6,014
Accumulated amortization of intangibles on property acquisitions and deferred leasing costs
228,334
222,779
CDP’s share of liabilities of unconsolidated real estate JVs
60,762
52,404
CDP’s share of accumulated depreciation and amortization of unconsolidated real estate JVs
8,664
6,078
Less: Property - operating lease liabilities
(32,940
)
(28,759
)
Less: Property - finance lease liabilities
(420
)
—
Less: Cash and cash equivalents
(204,238
)
(12,337
)
Less: CDP’s share of cash of unconsolidated real estate JVs
(1,031
)
(456
)
Adjusted book
$
5,665,861
$
5,770,432
September 30, 2023
December 31, 2022
September 30, 2022
Reconciliation of debt to net debt, net debt adjusted for fully-leased development and pro forma net debt adjusted for fully-leased development
Debt per balance sheet
$
2,415,783
$
2,231,794
$
2,269,834
Net discounts and deferred financing costs
29,980
23,160
22,984
CDP’s share of unconsolidated JV gross debt
52,511
52,100
26,250
Gross debt
2,498,274
2,307,054
2,319,068
Less: Cash and cash equivalents
(204,238
)
(12,337
)
(12,643
)
Less: CDP’s share of cash of unconsolidated real estate JVs
(1,031
)
(456
)
(547
)
Net debt
2,293,005
2,294,261
2,305,878
Costs incurred on fully-leased development properties
(124,038
)
(95,972
)
(275,359
)
Net debt adjusted for fully-leased development
$
2,168,967
$
2,198,289
$
2,030,519
Net debt
$
2,293,005
$
2,294,261
$
2,305,878
Pro forma debt adjustments from subsequent event transaction proceeds
N/A
(189,000
)
N/A
Pro forma net debt
2,293,005
2,105,261
2,305,878
Costs incurred on fully-leased development properties
(124,038
)
(95,972
)
(275,359
)
Pro forma net debt adjusted for fully-leased development
$
2,168,967
$
2,009,289
$
2,030,519
View source version on businesswire.com: https://www.businesswire.com/news/home/20231026411916/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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