COPT Defense Properties (NYSE:CDP) reported fourth-quarter and full-year 2025 results that management said outperformed initial expectations across most operating and financial metrics, supported by occupancy gains, robust leasing execution, and an active development pipeline that is largely pre-leased.
2025 performance and operating trends
President and CEO Steve Budorick said 2025 marked the company’s seventh consecutive year of FFO per share growth. Full-year FFO per share was $2.72, which he said was $0.06 above the midpoint of the company’s initial guidance and represented a 5.8% increase over 2024. Same Property Cash NOI increased 4.1% year over year, which management attributed to a 40-basis-point increase in average occupancy along with operating expense savings.
Leasing: vacancy, renewals, and market breadth
Management emphasized strong leasing execution in 2025, including both vacancy leasing and longer-term “investment leasing.” Budorick said the company executed 557,000 square feet of vacancy leasing, representing 47% of space vacant at the start of the year. He also cited 477,000 square feet of investment leasing at a 13-year weighted average lease term.
Snider added that vacancy leasing exceeded the company’s initial target by about 40%, with 424,000 square feet of vacancy leasing in the defense IT portfolio alone. He said about half of vacancy leasing was tied to secure space, cyber activity, or both, and that in the defense IT portfolio, over half of vacancy leasing and 90% of investment leasing came from existing tenants.
Snider pointed to broad-based momentum across markets, highlighting gains in a “Navy support” market and in the company’s “other” segment, which he said holds the portfolio’s largest amount of vacancy. The company executed about 110,000 square feet in the Navy support market and over 130,000 square feet in the other segment, including activity in Tysons Corner and Baltimore.
On renewals, Snider said the company executed 2.0 million square feet of renewal leasing in 2025 with tenant retention of 78% and cash rent spreads up 1.1%. In the defense IT portfolio, renewal leasing totaled 1.9 million square feet with tenant retention of 79% and cash rent spreads up 2.7%.
He also said an administrative delay in government processing affected fourth-quarter outcomes, including 700,000 square feet of secure full-building renewals in San Antonio that were expected in the quarter. Snider quantified that if those delayed renewals had been completed, tenant retention would have been 84% and cash rent spreads on renewals would have been 2.4%.
For 2026, management set a vacancy leasing target of 400,000 square feet and cited an “activity ratio” of 74%, representing 870,000 square feet of prospects against 1.2 million square feet of availability. Snider said 10% of that activity is in advanced negotiations. The company’s guidance assumes tenant retention of 80% at the midpoint and renewal cash rent spreads of 2%.
Development pipeline and new commitments
Budorick said COPT Defense committed $278 million of capital to new investments in 2025 across five projects in four markets, and that these projects are 81% pre-leased. He emphasized that four of five projects were expansions with existing tenants.
Late in December, the company committed about $155 million to two fully pre-leased build-to-suit developments:
- $66 million for a 110,000-square-foot project at the company’s Fort Meade/BW Corridor park with ARLIS (the University of Maryland’s Applied Research Laboratory for Intelligence and Security), expanding the Discovery District campus, which Budorick said totals 415,000 square feet and is 98.4% leased.
- $88 million for a 132,000-square-foot fully pre-leased development in San Antonio with an existing defense IT tenant.
Budorick said that in aggregate, active developments plus projects placed in service or acquired in 2025 are expected to generate $52 million of incremental stabilized annual cash NOI, phased in between 2026 and 2029, with $48 million contractual and the remainder tied to leasing remaining availability at 8500 Advanced Gateway.
Snider said the active development pipeline totals nearly $450 million of capital commitment for 880,000 square feet and is 86% pre-leased. Following a full-building lease at NBP 400, he said five of six development projects are now 100% pre-leased, with the only availability at the 8500 Advanced Gateway inventory building in Huntsville.
Snider said tenant demand at Redstone Gateway remains strong, citing about 400,000 square feet of prospects for the remaining 125,000 square feet of availability at 8500 Advanced Gateway. He said the project is 20% pre-leased after a 32,000-square-foot lease signed in the fourth quarter with a defense IT tenant tied to the Golden Dome initiative, and that the company is in advanced negotiations for another 32,000-square-foot lease that would lift the pre-lease rate to 40%.
Budorick also noted early 2026 activity, including a $146 million commitment in January to a fully pre-leased 236,000-square-foot development at National Business Park with an existing defense IT tenant, and execution of a full-building lease for NBP 400 with an existing top-10 U.S. defense contractor for 148,000 square feet and a term of nearly 11 years.
2026 outlook, financing, and capital priorities
Executive Vice President and CFO Anthony Mifsud said 2026 FFO per share guidance is $2.71 to $2.79, with a midpoint of $2.75, implying 1.1% growth year over year. Budorick highlighted that guidance includes a $0.09 impact from higher financing costs; excluding that, he said 2026 FFO per share would have been $2.84, or 4.4% growth.
Mifsud said Same Property Cash NOI is projected to grow 2.5% at the midpoint, noting that non-recurring real estate tax benefits in 2025 reduce the 2026 growth rate by about 100 basis points. He said year-end same-property occupancy is expected to be between 93.5% and 94.5% and relatively flat through the year.
On the balance sheet, Mifsud reviewed the company’s October issuance of $400 million of five-year unsecured notes at a 4.6% yield to maturity, with proceeds intended to repay a maturing $400 million bond with a 2.25% coupon. He said the refinancing contributes to the higher interest expense embedded in 2026 guidance and described the pre-funding decision as conservative given market execution risk early in the year.
For 2026 capital plans, Mifsud said the company expects to spend $200 million to $250 million on active and future projects and to commit $225 million to $275 million to new investments. He also said the company’s AFFO payout ratio has averaged roughly 60% over the last two years and is forecast to be under 65% in 2026, which management said supports internally funding the equity component of investments on a leveraged-neutral basis.
Mifsud also discussed the impact of placing NBP 400 into service on April 1. He said the company’s policy requires it to stop capitalizing interest and operating costs at that time, resulting in a $0.015 impact to 2026 FFO per share. He added that delivery of NBP 400 will temporarily reduce total portfolio occupancy by 60 basis points beginning in the second quarter, while guidance assumes the newly executed lease commences in the fourth quarter.
During Q&A, management said development yields remain targeted at 8.5% cash-on-cash at lease commencement. On acquisitions, management characterized them as opportunistic and said none are built into guidance, adding that an acquisition yield would generally need to exceed development returns. Management also reiterated that equity issuance is viewed as a last alternative and said it does not expect to need equity to fund anticipated development investments. The company said it continues to consider dispositions of a few non-defense assets in its “other” segment, but timing depends on market conditions.
Defense budget commentary and demand signals
Budorick tied demand expectations to defense spending and mission priorities supported by the company’s portfolio, including intelligence, surveillance and reconnaissance, cybersecurity, missile defense, and space-related activities. He said President Trump signed the FY 2026 Defense Appropriations Act, describing a base budget of $841 billion and citing additional DoD funding that, in management’s view, brings the defense budget to “over $950 billion,” which he characterized as the largest defense-based budget in U.S. history.
Management also discussed expectations for the $175 billion multi-year Golden Dome initiative and the relocation of Space Command’s headquarters to Huntsville as potential drivers of demand at Redstone Gateway. In response to analyst questions, Budorick said the company has historically seen demand impacts 12 to 18 months after appropriations, while also acknowledging the administration’s “high sense of urgency” and the potential for faster benefit in some cases.
Budorick concluded by noting the company’s performance has supported a third consecutive dividend increase, totaling a 10.9% increase over the last three years, and said management expects 2026 to be the eighth consecutive year of FFO per share growth. He also paid tribute to former CEO Roger Waesche, who he said passed away on January 8.
About COPT Defense Properties (NYSE:CDP)
COPT Defense Properties (NYSE: CDP) is a real estate investment trust organized to own, lease and manage healthcare and life science facilities serving the United States federal government, with a particular focus on Department of Defense and Veterans Affairs tenants. The company was formed in 2016 through a spin-off from Corporate Office Properties Trust, enabling it to concentrate exclusively on medical office buildings and specialized research facilities situated on or near military and federal research campuses.
The company’s portfolio comprises purpose-built, Class A medical office and outpatient specialty clinics, as well as life science laboratories.
