COPT Defense Properties

Second-quarter FFO per share was $0.71, which was $0.02 above the midpoint of guidance and 4.4% above the prior year. Same-property cash NOI increased 7.4% year over year, and same-property occupancy ended at 94.5%. Management raised 2026 midpoint FFO per share guidance to $2.78, implying 2.2% growth over 2025 and $0.03 above initial guidance; same-property cash NOI growth was raised to 4%; cash rent spreads on renewals were raised to 3%; capital committed to new investments was raised to $335 million; and vacancy leasing guidance was raised to 475,000 square feet. For third quarter and fourth quarter, FFO per share guidance was set at $0.68 to $0.70.

Steve Budorick struck an optimistic, expansion-minded tone, saying the company had a strong first half and that the defense economy continues to benefit from increased investment. He emphasized that the firm is seeing durable, growing mission demand tied to missile defense, cyber, space, intelligence, and Golden Dome-related activity, especially in Huntsville. He also said the company is prepared to add capital deployment if the elevated defense budget level proves durable, but wants to keep growing on a low-risk basis.

Anthony Mifsud said Q2 FFO per share of $0.71 benefited from effective operating expense and property management plus higher development fees. He noted that full-year FFO guidance moved up by $8 million since initial 2026 guidance, with $5 million of first-half outperformance and $3 million from Mission Ridge, additional interest income, and the expected settlement agreement in Columbia Gateway. He also pointed to about $0.04 of dilution from exchangeable notes, said same-property cash NOI guidance was raised because first-half performance was strong but second-half growth should moderate due to known move-outs and the absence of prior-year tax refunds, and said same-property occupancy should end the year around 94%.

Analysts focused on whether the higher defense base budget means a structural step-up in future development, but management said it does not change their low-risk capital approach and that they prefer to fund growth with free cash flow rather than equity issuance. Questions also probed Huntsville’s next development starts; management said the two planned buildings are inventory with no preleases yet, but they expect strong demand and may add more inventory or preleases later. On Golden Dome, management said they see bipartisan support for defense spending and do not view the program as dependent on election outcomes.