CDP COPT Defense Properties

EPS of ($0.67) for Full Year Impacted by 3Q23 Impairment of Assets in Other Segment

FFO per Share, as Adjusted for Comparability, of $2.42 Increased 2.5% Over 2022 Results

Defense/IT Portfolio 96.2% Occupied and 97.2% Leased

Same Property Cash NOI Increased 5.7% Highest Reported Year-over-Year Annual Increase in Over 15 Years

Placed 848,000 SF of Developments into Service that are 98% Leased

817,000 SF of Active Developments are 91% Leased

Exceeded Leasing Goals in 2023 Total Leasing of 2.9 million SF

452,000 SF of Vacancy Leasing Exceeded Annual Target of 400,000 SF

Tenant Retention of 80% 3rd Highest Annual Retention Rate Over Last 20 Years

747,000 SF of Development Leasing Exceeded Annual Guidance of 700,000 SF

COPT Defense Properties (“COPT Defense” or the “Company”) (NYSE: CDP) announced results for the fourth quarter and full year ended December 31, 2023.

Management Comments

Stephen E. Budorick, COPT Defense’s President & Chief Executive Officer, commented, “The performance of our Defense/IT investment strategy, which concentrates our portfolio near priority U.S. defense installations, continues to demonstrate operating strength, resulting in a solid earnings growth profile.

We achieved several key operating and financial performance milestones in 2023. Our Defense/IT Portfolio was 96.2% occupied and 97.2% leased at year end, which are the highest rates reported since we began disclosing the segment in 2015. Our sector leading tenant retention rate of 79.4% was the third highest figure in the last 20 years. Same property cash NOI increased 5.7%, the highest reported level in over 15 years, while cash rent spreads on renewals were the highest since 2008.

We attribute our continued strong performance to the strength in defense spending over the past few years, which has resulted in growing tenant demand in our Defense/IT Portfolio to support mission-critical national defense activities.

The outlook for defense spending remains favorable as the FY24 National Defense Authorization Act, which was passed in December and is awaiting Appropriation, calls for 3.3% year-over-year growth, which we believe will fuel demand for space in our portfolio through 2025.

We have generated FFO per share growth in each of the past 5 years, which amounts to a compound annual growth rate of 4.5% between 2019 to 2023. Looking forward, we expect FFO per share to increase 3.7% at the midpoint in 2024 and continue to anticipate compound annual growth of roughly 4% between 2023 to 2026.”

Financial Highlights

4th Quarter Financial Results:

• Diluted earnings per share (“EPS”) was $0.30 for the quarter ended December 31, 2023 as compared to $0.45 for the quarter ended December 31, 2022.
• Diluted funds from operations per share (“FFOPS”), as calculated in accordance with Nareit’s definition and as adjusted for comparability, was $0.62 for the quarter ended December 31, 2023 compared to $0.60 for the quarter ended December 31, 2022.

Full Year 2023 Financial Results:

• EPS for the year ended December 31, 2023 was $(0.67), which included a $252.8 million impairment charge for six operating properties in the Other segment and a parcel of land, located in Baltimore, Maryland, Northern Virginia and Washington, D.C., resulting from the Company’s quarterly portfolio review, as compared to $1.53 for 2022.
• Per Nareit’s definition, FFOPS for 2023 was $2.41 as compared to $2.35 for 2022.
• FFOPS, as adjusted for comparability, for 2023 was $2.42 as compared to $2.36 for 2022.

Operating Performance Highlights

Operating Portfolio Summary:

• At December 31, 2023, the Company’s 23.9 million square foot Total Portfolio was 94.2% occupied and 95.3% leased, which includes the 21.7 million square foot Defense/IT Portfolio that was 96.2% occupied and 97.2% leased.
• During the quarter and year ended December 31, 2023, the Company placed into service 379,000 and 848,000 square feet, respectively, of developments that were 100% and 98% leased, respectively, as of year end.

Same Property Performance:

• At December 31, 2023, the Company’s 20.6 million square foot same property portfolio was 93.4% occupied and 94.7% leased.
• The Company’s same property cash NOI increased 4.5% and 5.7% for the three months and year ended December 31, 2023, respectively, compared to the same periods in 2022.

Leasing:

• Total Square Feet Leased: For the quarter ended December 31, 2023, the Company leased 668,000 square feet, including 301,000 square feet of renewals, 115,000 square feet of vacancy leasing, and 252,000 square feet in development projects. For the year ended December 31, 2023, the Company executed 2.9 million square feet of total leasing, including 1.7 million square feet of renewals, 452,000 square feet of vacancy leasing, and 747,000 square feet in development projects.
• Tenant Retention Rates: During the quarter and year ended December 31, 2023, the Company renewed 68.9% and 79.7% in its Total Portfolio, respectively, of expiring square feet. During the quarter and year ended December 31, 2023, the Company renewed 77.6% and 85.7% in its Defense/IT Portfolio, respectively, of expiring square feet.
• Rent Spreads & Average Escalations on Renewing Leases: For the quarter and year ended December 31, 2023, straight-line rents on renewals increased 20.5% and 9.3%, respectively, and cash rents on renewed space increased 3.1% and 1.5%, respectively. For the same time periods, annual escalations on renewing leases averaged 2.5% and 2.6%, respectively.
• Lease Terms: In the quarter ended December 31, 2023, lease terms averaged 6.3 years on renewing leases, 9.3 years on vacancy leasing, and 14.6 years on development projects. For the year ended December 31, 2023, lease terms averaged 4.8 years on renewing leases, 8.2 years on vacancy leasing, and 14.4 years on development leasing.

Investment Activity Highlights

• Development Pipeline: The Company’s development pipeline consists of five properties totaling 817,000 square feet that were 91% leased as of December 31, 2023. These projects represent a total estimated investment of $323.8 million, of which $84.4 million has been spent.

Balance Sheet and Capital Transaction Highlights

• For the quarter ended December 31, 2023, the Company’s adjusted EBITDA fixed charge coverage ratio was 4.4x.
• At December 31, 2023, the Company’s net debt to in-place adjusted EBITDA ratio was 6.1x and its net debt adjusted for fully-leased development to in-place adjusted EBITDA ratio was 6.0x.
• At December 31, 2023, 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 5.7 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 fourth quarter and full year 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

2024 Guidance

The Company details its initial full year and first quarter guidance, with supporting assumptions, in a separate press release issued concurrently with this press release; that release can be found in the ‘News & Events – Press Releases’ section of COPT Defense’s Investors website: https://investors.copt.com/news-events/press-releases

Conference Call Information

Management will discuss fourth quarter and full year 2023 results on its conference call tomorrow at 12:00 p.m. Eastern Time, details of which are listed below:

Conference Call Date:

Friday, February 09, 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/BIec6f0e6112cd459ab4eda8f3c55c2d22

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 December 31, 2023, the Company’s Defense/IT Portfolio of 190 properties, including 24 owned through unconsolidated joint ventures, encompassed 21.7 million square feet and was 97.2% 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 December 31,

 

For the Years Ended December 31,

 

2023

 

2022

 

2023

 

2022

Revenues

 

 

 

 

 

 

 

Lease revenue

$

160,337

 

 

$

150,022

 

 

$

619,847

 

 

$

580,169

 

Other property revenue

 

1,225

 

 

 

1,163

 

 

 

4,956

 

 

 

4,229

 

Construction contract and other service revenues

 

18,167

 

 

 

24,062

 

 

 

60,179

 

 

 

154,632

 

Total revenues

 

179,729

 

 

 

175,247

 

 

 

684,982

 

 

 

739,030

 

Operating expenses

 

 

 

 

 

 

 

Property operating expenses

 

64,577

 

 

 

58,470

 

 

 

247,385

 

 

 

227,430

 

Depreciation and amortization associated with real estate operations

 

36,735

 

 

 

36,907

 

 

 

148,950

 

 

 

141,230

 

Construction contract and other service expenses

 

17,167

 

 

 

23,454

 

 

 

57,416

 

 

 

149,963

 

Impairment losses

 

—

 

 

 

—

 

 

 

252,797

 

 

 

—

 

General and administrative expenses

 

8,240

 

 

 

7,766

 

 

 

31,105

 

 

 

27,461

 

Leasing expenses

 

2,308

 

 

 

2,235

 

 

 

8,932

 

 

 

8,337

 

Business development expenses and land carry costs

 

797

 

 

 

1,157

 

 

 

2,732

 

 

 

3,193

 

Total operating expenses

 

129,824

 

 

 

129,989

 

 

 

749,317

 

 

 

557,614

 

Interest expense

 

(20,383

)

 

 

(16,819

)

 

 

(71,142

)

 

 

(61,174

)

Interest and other income, net

 

5,659

 

 

 

4,671

 

 

 

12,587

 

 

 

9,070

 

Gain on sales of real estate

 

—

 

 

 

19,238

 

 

 

49,392

 

 

 

19,250

 

Loss on early extinguishment of debt

 

—

 

 

 

(267

)

 

 

—

 

 

 

(609

)

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

 

35,181

 

 

 

52,081

 

 

 

(73,498

)

 

 

147,953

 

Equity in (loss) income of unconsolidated entities

 

(240

)

 

 

229

 

 

 

(261

)

 

 

1,743

 

Income tax expense

 

(121

)

 

 

(223

)

 

 

(588

)

 

 

(447

)

Income (loss) from continuing operations

 

34,820

 

 

 

52,087

 

 

 

(74,347

)

 

 

149,249

 

Discontinued operations

 

—

 

 

 

—

 

 

 

—

 

 

 

29,573

 

Net income (loss)

 

34,820

 

 

 

52,087

 

 

 

(74,347

)

 

 

178,822

 

Net (income) loss attributable to noncontrolling interests:

 

 

 

 

 

 

 

Common units in the Operating Partnership (“OP”)

 

(576

)

 

 

(775

)

 

 

1,306

 

 

 

(2,603

)

Other consolidated entities

 

(592

)

 

 

(833

)

 

 

(428

)

 

 

(3,190

)

Net income (loss) attributable to common shareholders

$

33,652

 

 

$

50,479

 

 

$

(73,469

)

 

$

173,029

 

 

 

 

 

 

 

 

 

Earnings per share (“EPS”) computation:

 

 

 

 

 

 

 

Numerator for diluted EPS:

 

 

 

 

 

 

 

Net income (loss) attributable to common shareholders

$

33,652

 

 

$

50,479

 

 

$

(73,469

)

 

$

173,029

 

Amount allocable to share-based compensation awards

 

(100

)

 

 

(129

)

 

 

(1,199

)

 

 

(463

)

Redeemable noncontrolling interests

 

—

 

 

 

(60

)

 

 

—

 

 

 

(169

)

Numerator for diluted EPS

$

33,552

 

 

$

50,290

 

 

$

(74,668

)

 

$

172,397

 

Denominator:

 

 

 

 

 

 

 

Weighted average common shares - basic

 

112,199

 

 

 

112,096

 

 

 

112,178

 

 

 

112,073

 

Dilutive effect of share-based compensation awards

 

432

 

 

 

435

 

 

 

—

 

 

 

431

 

Dilutive effect of redeemable noncontrolling interests

 

—

 

 

 

102

 

 

 

—

 

 

 

116

 

Weighted average common shares - diluted

 

112,631

 

 

 

112,633

 

 

 

112,178

 

 

 

112,620

 

Diluted EPS

$

0.30

 

 

$

0.45

 

 

$

(0.67

)

 

$

1.53

 

COPT Defense Properties

Summary Financial Data

(unaudited)

(in thousands, except per share data)

 

 

For the Three Months Ended December 31,

 

For the Years Ended December 31,

 

2023

 

2022

 

2023

 

2022

Net income (loss)

$

34,820

 

 

$

52,087

 

 

$

(74,347

)

 

$

178,822

 

Real estate-related depreciation and amortization

 

36,735

 

 

 

36,907

 

 

 

148,950

 

 

 

141,230

 

Impairment losses on real estate

 

—

 

 

 

—

 

 

 

252,797

 

 

 

—

 

Gain on sales of real estate from continuing and discontinued operations

 

—

 

 

 

(19,238

)

 

 

(49,392

)

 

 

(47,814

)

Depreciation and amortization on unconsolidated real estate JVs

 

805

 

 

 

526

 

 

 

3,217

 

 

 

2,101

 

Funds from operations (“FFO”)

 

72,360

 

 

 

70,282

 

 

 

281,225

 

 

 

274,339

 

FFO allocable to other noncontrolling interests

 

(972

)

 

 

(1,227

)

 

 

(3,978

)

 

 

(4,795

)

Basic FFO allocable to share-based compensation awards

 

(513

)

 

 

(360

)

 

 

(1,940

)

 

 

(1,433

)

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

 

70,875

 

 

 

68,695

 

 

 

275,307

 

 

 

268,111

 

Redeemable noncontrolling interests

 

—

 

 

 

(27

)

 

 

(58

)

 

 

(34

)

Diluted FFO adjustments allocable to share-based compensation awards

 

38

 

 

 

28

 

 

 

150

 

 

 

109

 

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

 

70,913

 

 

 

68,696

 

 

 

275,399

 

 

 

268,186

 

Loss on early extinguishment of debt

 

—

 

 

 

267

 

 

 

—

 

 

 

609

 

Gain on early extinguishment of debt on unconsolidated real estate JVs

 

—

 

 

 

(168

)

 

 

—

 

 

 

(168

)

Executive transition costs

 

188

 

 

 

—

 

 

 

518

 

 

 

343

 

Diluted FFO comparability adjustments allocable to share-based compensation awards

 

(1

)

 

 

(1

)

 

 

(4

)

 

 

(5

)

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

 

71,100

 

 

 

68,794

 

 

 

275,913

 

 

 

268,965

 

Straight line rent adjustments and lease incentive amortization

 

313

 

 

 

(3,043

)

 

 

6,518

 

 

 

(8,825

)

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

 

26

 

 

 

15

 

 

 

50

 

 

 

(258

)

Share-based compensation, net of amounts capitalized

 

2,318

 

 

 

2,247

 

 

 

8,544

 

 

 

8,700

 

Amortization of deferred financing costs

 

681

 

 

 

619

 

 

 

2,580

 

 

 

2,297

 

Amortization of net debt discounts, net of amounts capitalized

 

1,004

 

 

 

615

 

 

 

2,994

 

 

 

2,440

 

Replacement capital expenditures

 

(21,498

)

 

 

(43,283

)

 

 

(93,494

)

 

 

(95,886

)

Other

 

336

 

 

 

158

 

 

 

(84

)

 

 

980

 

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

$

54,280

 

 

$

26,122

 

 

$

203,021

 

 

$

178,413

 

Diluted FFO per share

$

0.62

 

 

$

0.60

 

 

$

2.41

 

 

$

2.35

 

Diluted FFO per share, as adjusted for comparability

$

0.62

 

 

$

0.60

 

 

$

2.42

 

 

$

2.36

 

Dividends/distributions per common share/unit

$

0.285

 

 

$

0.275

 

 

$

1.140

 

 

$

1.100

 

COPT Defense Properties

Summary Financial Data

(unaudited)

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

 

 

       

December 31, 2023

 

December 31, 2022

Balance Sheet Data

       

 

 

 

Properties, net of accumulated depreciation

       

$

3,503,678

 

 

$

3,556,398

 

Total assets

       

$

4,246,966

 

 

$

4,257,275

 

Debt per balance sheet

       

$

2,416,287

 

 

$

2,231,794

 

Total liabilities

       

$

2,699,631

 

 

$

2,509,527

 

Redeemable noncontrolling interests

       

$

23,580

 

 

$

26,293

 

Total equity

       

$

1,523,755

 

 

$

1,721,455

 

Debt to assets

       

 

56.9

%

 

 

52.4

%

Net debt to adjusted book

       

 

40.6

%

 

 

39.8

%

 

       

 

 

 

Defense/IT Portfolio Data (as of period end)

       

 

 

 

Number of operating properties

       

 

190

 

 

 

186

 

Total operational square feet (in thousands)

       

 

21,719

 

 

 

20,869

 

% Occupied

       

 

96.2

%

 

 

94.1

%

% Leased

       

 

97.2

%

 

 

96.7

%

 

 

For the Three Months Ended December 31,

 

For the Years Ended December 31,

2023

 

2022

 

2023

 

2022

GAAP

 

 

 

   

Payout ratio:

 

 

 

   

Net income

93.7

%

 

60.3

%

 

 

N/A

 

 

 

70.2

%

Debt ratios:

 

 

 

 

 

 

 

Net income to interest expense ratio

1.7x

 

 

3.1x

 

 

 

N/A

 

 

 

2.9x

 

Debt to net income ratio

17.3x

 

 

10.7x

 

 

 

N/A

 

 

 

N/A

 

Non-GAAP

 

 

 

 

 

 

 

Payout ratios:

 

 

 

 

 

 

 

Diluted FFO

45.7

%

 

45.5

%

 

 

47.1

%

 

 

46.6

%

Diluted FFO, as adjusted for comparability

45.6

%

 

45.4

%

 

 

47.0

%

 

 

46.5

%

Diluted AFFO

59.7

%

 

119.7

%

 

 

63.9

%

 

 

70.1

%

Debt ratios:

 

 

 

 

 

 

 

Adjusted EBITDA fixed charge coverage ratio

4.4x

 

 

4.7x

 

 

 

4.7x

 

 

 

5.1x

 

Net debt to in-place adjusted EBITDA ratio

6.1x

 

 

6.3x

 

 

 

N/A

 

 

 

N/A

 

Pro forma net debt to in-place adjusted EBITDA ratio (1)

N/A

 

 

6.0x

 

 

 

N/A

 

 

 

N/A

 

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

6.0x

 

 

6.1x

 

 

 

N/A

 

 

 

N/A

 

Pro forma net debt adj. for fully-leased development to in-place adj. EBITDA ratio (1)

N/A

 

 

5.7x

 

 

 

N/A

 

 

 

N/A

 

 

 

 

 

 

 

 

 

Reconciliation of denominators for per share measures

 

 

 

 

 

 

 

Denominator for diluted EPS

112,631

 

 

112,633

 

 

 

112,178

 

 

 

112,620

 

Weighted average common units

1,514

 

 

1,476

 

 

 

1,509

 

 

 

1,454

 

Dilutive effect of additional share-based compensation awards

—

 

 

—

 

 

 

424

 

 

 

—

 

Redeemable noncontrolling interests

—

 

 

—

 

 

 

38

 

 

 

—

 

Denominator for diluted FFO per share and as adjusted for comparability

114,145

 

 

114,109

 

 

 

114,149

 

 

 

114,074

 

(1)

Includes, for the 12/31/22 period, adjustments associated with our sale on 1/10/23 of a 90% interest in three data center shell properties.

COPT Defense Properties

Summary Financial Data

(unaudited)

(in thousands)

 

 

For the Three Months Ended December 31,

 

For the Years Ended December 31,

 

2023

 

2022

 

2023

 

2022

Numerators for Payout Ratios

 

 

 

 

 

 

 

Dividends on unrestricted common and deferred shares

$

31,998

 

 

$

30,844

 

 

$

127,978

 

 

$

123,367

 

Distributions on unrestricted common units

 

430

 

 

 

406

 

 

 

1,725

 

 

 

1,623

 

Dividends and distributions on restricted shares and units

 

209

 

 

 

134

 

 

 

828

 

 

 

567

 

Total dividends and distributions for GAAP payout ratio

 

32,637

 

 

 

31,384

 

 

 

130,531

 

 

 

125,557

 

Dividends and distributions on antidilutive shares and units

 

(212

)

 

 

(121

)

 

 

(835

)

 

 

(516

)

Dividends and distributions for non-GAAP payout ratios

$

32,425

 

 

$

31,263

 

 

$

129,696

 

 

$

125,041

 

 

 

 

 

 

 

 

 

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)

$

34,820

 

 

$

52,087

 

 

$

(74,347

)

 

$

178,822

 

Interest expense

 

20,383

 

 

 

16,819

 

 

 

71,142

 

 

 

61,174

 

Income tax expense

 

121

 

 

 

223

 

 

 

588

 

 

 

447

 

Real estate-related depreciation and amortization

 

36,735

 

 

 

36,907

 

 

 

148,950

 

 

 

141,230

 

Other depreciation and amortization

 

619

 

 

 

602

 

 

 

2,445

 

 

 

2,363

 

Impairment losses on real estate

 

—

 

 

 

—

 

 

 

252,797

 

 

 

—

 

Gain on sales of real estate from continuing and discontinued operations

 

—

 

 

 

(19,238

)

 

 

(49,392

)

 

 

(47,814

)

Adjustments from unconsolidated real estate JVs

 

1,911

 

 

 

1,033

 

 

 

6,917

 

 

 

3,313

 

EBITDAre

 

94,589

 

 

 

88,433

 

 

 

359,100

 

 

 

339,535

 

Credit loss (recoveries) expense

 

(1,288

)

 

 

(1,331

)

 

 

(611

)

 

 

271

 

Business development expenses

 

445

 

 

 

794

 

 

 

1,393

 

 

 

1,891

 

Executive transition costs

 

188

 

 

 

387

 

 

 

824

 

 

 

730

 

Loss on early extinguishment of debt

 

—

 

 

 

267

 

 

 

—

 

 

 

609

 

Gain on early extinguishment of debt on unconsolidated real estate JVs

 

—

 

 

 

(168

)

 

 

—

 

 

 

(168

)

Net gain on other investments

 

—

 

 

 

(595

)

 

 

(25

)

 

 

(1,159

)

Adjusted EBITDA

 

93,934

 

 

 

87,787

 

 

$

360,681

 

 

$

341,709

 

Pro forma NOI adjustment for property changes within period

 

1,341

 

 

 

2,704

 

 

 

 

 

Change in collectability of deferred rental revenue

 

(198

)

 

 

—

 

 

 

 

 

In-place adjusted EBITDA

$

95,077

 

 

$

90,491

 

 

 

 

 

Pro forma NOI adjustment from subsequent event transactions

 

N/A

 

 

 

(2,903

)

 

 

 

 

Pro forma in-place adjusted EBITDA

$

95,077

 

 

$

87,588

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

 

 

 

 

 

 

Tenant improvements and incentives

$

7,850

 

 

$

33,439

 

 

$

74,912

 

 

$

62,952

 

Building improvements

 

14,762

 

 

 

8,468

 

 

 

25,976

 

 

 

29,528

 

Leasing costs

 

2,440

 

 

 

4,389

 

 

 

9,634

 

 

 

11,480

 

Net (exclusions from) additions to tenant improvements and incentives

 

(189

)

 

 

(75

)

 

 

(12,170

)

 

 

2,150

 

Excluded building improvements and leasing costs

 

(3,365

)

 

 

(2,938

)

 

 

(4,858

)

 

 

(10,224

)

Replacement capital expenditures

$

21,498

 

 

$

43,283

 

 

$

93,494

 

 

$ 

95,886

 

COPT Defense Properties

Summary Financial Data

(unaudited)

(in thousands)

 

 

For the Three Months Ended December 31,

 

For the Years Ended December 31,

 

2023

 

2022

 

2023

 

2022

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

 

 

 

 

 

 

 

Interest expense

$

20,383

 

 

$

16,819

 

 

$

71,142

 

 

$

61,174

 

Less: Amortization of deferred financing costs

 

(681

)

 

 

(619

)

 

 

(2,580

)

 

 

(2,297

)

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

 

(1,004

)

 

 

(615

)

 

 

(2,994

)

 

 

(2,440

)

COPT Defense’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

 

819

 

 

 

423

 

 

 

3,188

 

 

 

1,123

 

Scheduled principal amortization

 

763

 

 

 

864

 

 

 

3,052

 

 

 

3,333

 

Capitalized interest

 

1,028

 

 

 

1,835

 

 

 

4,479

 

 

 

6,709

 

Denominator for fixed charge coverage-Adjusted EBITDA

$

21,308

 

 

$

18,707

 

 

$

76,287

 

 

$

67,602

 

 

 

 

 

 

 

 

 

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)

$

34,820

 

 

$

52,087

 

 

$

(74,347

)

 

$

178,822

 

Construction contract and other service revenues

 

(18,167

)

 

 

(24,062

)

 

 

(60,179

)

 

 

(154,632

)

Depreciation and other amortization associated with real estate operations

 

36,735

 

 

 

36,907

 

 

 

148,950

 

 

 

141,230

 

Construction contract and other service expenses

 

17,167

 

 

 

23,454

 

 

 

57,416

 

 

 

149,963

 

Impairment losses

 

—

 

 

 

—

 

 

 

252,797

 

 

 

—

 

General and administrative expenses

 

8,240

 

 

 

7,766

 

 

 

31,105

 

 

 

27,461

 

Leasing expenses

 

2,308

 

 

 

2,235

 

 

 

8,932

 

 

 

8,337

 

Business development expenses and land carry costs

 

797

 

 

 

1,157

 

 

 

2,732

 

 

 

3,193

 

Interest expense

 

20,383

 

 

 

16,819

 

 

 

71,142

 

 

 

61,174

 

Interest and other income, net

 

(5,659

)

 

 

(4,671

)

 

 

(12,587

)

 

 

(9,070

)

Gain on sales of real estate from continuing operations

 

—

 

 

 

(19,238

)

 

 

(49,392

)

 

 

(19,250

)

Loss on early extinguishment of debt

 

—

 

 

 

267

 

 

 

—

 

 

 

609

 

Equity in loss (income) of unconsolidated entities

 

240

 

 

 

(229

)

 

 

261

 

 

 

(1,743

)

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

 

1,671

 

 

 

1,095

 

 

 

6,659

 

 

 

4,327

 

Income tax expense

 

121

 

 

 

223

 

 

 

588

 

 

 

447

 

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

 

98,656

 

 

 

93,810

 

 

 

384,077

 

 

 

362,304

 

Non-Same Property NOI from real estate operations

 

(11,705

)

 

 

(9,015

)

 

 

(39,244

)

 

 

(27,991

)

Same Property NOI from real estate operations

 

86,951

 

 

 

84,795

 

 

 

344,833

 

 

 

334,313

 

Straight line rent adjustments and lease incentive amortization

 

7,947

 

 

 

319

 

 

 

25,631

 

 

 

(2,729

)

Amortization of acquired above- and below-market rents

 

(121

)

 

 

(131

)

 

 

(536

)

 

 

(844

)

Lease termination fees, net

 

(717

)

 

 

(1,026

)

 

 

(3,745

)

 

 

(2,237

)

Tenant funded landlord assets and lease incentives

 

(7,501

)

 

 

(1,068

)

 

 

(25,244

)

 

 

(5,915

)

Cash NOI adjustments in unconsolidated real estate JVs

 

(58

)

 

 

(81

)

 

 

(267

)

 

 

(358

)

Same Property Cash NOI from real estate operations

$

86,501

 

 

$

82,808

 

 

$

340,672

 

 

$

322,230

 

COPT Defense Properties

Summary Financial Data

(unaudited)

(in thousands)

 

 

 

December 31, 2023

 

December 31, 2022

Reconciliation of total assets to adjusted book

 

 

 

 

Total assets

 

$

4,246,966

 

 

$

4,257,275

 

Accumulated depreciation

 

 

1,400,162

 

 

 

1,267,434

 

Accumulated depreciation included in assets held for sale

 

 

—

 

 

 

6,014

 

Accumulated amortization of intangibles on property acquisitions and deferred leasing costs

 

 

228,484

 

 

 

222,779

 

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

 

 

60,583

 

 

 

52,404

 

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

 

 

9,528

 

 

 

6,078

 

Less: Property - operating lease liabilities

 

 

(33,931

)

 

 

(28,759

)

Less: Property - finance lease liabilities

 

 

(415

)

 

 

—

 

Less: Cash and cash equivalents

 

 

(167,820

)

 

 

(12,337

)

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

 

 

(852

)

 

 

(456

)

Adjusted book

 

$

5,742,705

 

 

$

5,770,432

 

 

 

 

December 31, 2023

 

December 31, 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

 

$

2,416,287

 

 

$

2,231,794

 

Net discounts and deferred financing costs

 

 

28,713

 

 

 

23,160

 

COPT Defense’s share of unconsolidated JV gross debt

 

 

52,613

 

 

 

52,100

 

Gross debt

 

 

2,497,613

 

 

 

2,307,054

 

Less: Cash and cash equivalents

 

 

(167,820

)

 

 

(12,337

)

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

 

 

(852

)

 

 

(456

)

Net debt

 

 

2,328,941

 

 

 

2,294,261

 

Costs incurred on fully-leased development properties

 

 

(53,914

)

 

 

(95,972

)

Net debt adjusted for fully-leased development

 

$

2,275,027

 

 

$

2,198,289

 

 

 

 

 

 

Net debt

 

$

2,328,941

 

 

$

2,294,261

 

Pro forma debt adjustments from subsequent event transaction proceeds

 

 

N/A

 

 

 

(189,000

)

Pro forma net debt

 

 

2,328,941

 

 

 

2,105,261

 

Costs incurred on fully-leased development properties

 

 

(53,914

)

 

 

(95,972

)

Pro forma net debt adjusted for fully-leased development

 

$

2,275,027

 

 

$

2,009,289

 

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20240208427624/en/

IR Contacts: Venkat Kommineni, CFA 443.285.5587 venkat.kommineni@copt.com

Michelle Layne 443.285.5452 michelle.layne@copt.com