COPT DEFENSE PROPERTIES

General

COPT Defense Properties (“COPT Defense”) and subsidiaries (collectively, the “Company”, “we” or “us”) is a fully-integrated and self-managed real estate investment trust (“REIT”) focused on owning, operating and developing properties in locations proximate to, or sometimes containing, key U.S. Government (“USG”) defense installations and missions (which we refer to herein as our Defense/IT Portfolio). Our 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, 2024, our Defense/IT Portfolio included:

195 operating properties totaling 22.4 million square feet comprised of 16.5 million square feet in 164 office properties and 5.9 million square feet in 31 single-tenant data center shells. We owned 24 of these data center shells through unconsolidated real estate joint ventures;

four properties under development (two office properties and two data center shells) that will total approximately 606,000 square feet upon completion; and

approximately 1,020 acres of land controlled that we believe could be developed into approximately 11.0 million square feet.

We also owned eight other operating properties totaling 2.1 million square feet and approximately 50 acres of other developable land in the Greater Washington, DC/Baltimore region as of December 31, 2024.

We conduct almost all of our operations and own almost all of our assets through our operating partnership, COPT Defense Properties, L.P. (“CDPLP”) and subsidiaries (collectively, the “Operating Partnership”), of which COPT Defense is the sole general partner. CDPLP owns real estate directly and through subsidiary partnerships and limited liability companies (“LLCs”). In addition to owning real estate, CDPLP also owns subsidiaries that provide real estate services such as property management, development and construction services primarily for our properties but also for third parties. Some of these services are performed by a taxable REIT subsidiary (“TRS”).

Equity interests in CDPLP are in the form of common and preferred units. As of December 31, 2024, COPT Defense owned 97.5% of the outstanding CDPLP common units (“common units”) and there were no preferred units outstanding. Common units not owned by COPT Defense carry certain redemption rights. The number of common units owned by COPT Defense is equivalent to the number of outstanding common shares of beneficial interest (“common shares”) of COPT Defense, and the entitlement of common units to quarterly distributions and payments in liquidation is substantially the same as that of COPT Defense common shareholders.

COPT Defense’s common shares are publicly traded on the New York Stock Exchange (“NYSE”) under the ticker symbol “CDP”.

We believe that COPT Defense is organized and has operated in a manner that satisfies the requirements for taxation as a REIT under the Internal Revenue Code of 1986, as amended, and we intend to continue to operate COPT Defense in such a manner. If COPT Defense continues to qualify for taxation as a REIT, it generally will not be subject to federal income tax on its taxable income (other than that of its TRS entities) that is distributed to its shareholders. A REIT is subject to a number of organizational and operational requirements, including a requirement that it distribute at least 90% of its annual taxable income to its shareholders.

Our executive offices are located at 6711 Columbia Gateway Drive, Suite 300, Columbia, Maryland 21046 and our telephone number is (443) 285-5400.

Our Internet address is www.copt.com. We make available on our Internet website free of charge our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as soon as reasonably possible after we file such material with the SEC. In addition, we have made available on our Internet website under the heading “Corporate Governance” the charters for our Board of Trustees’ Audit, Compensation, Investment and Nominating and Corporate Governance Committees, as well as our Corporate Governance Guidelines, Code of Business Conduct and Ethics and Code of Ethics for Financial Officers. We intend to make available on our website any future amendments or waivers to our Code of Business Conduct and Ethics and Code of Ethics for Financial Officers within four business days after any such amendments or waivers. The information on our Internet site is not part of this report.

The SEC maintains an Internet website that contains reports, proxy and information statements and other information regarding issuers that file electronically with the SEC. This Internet website can be accessed at www.sec.gov.

Business and Growth Strategies

Our primary goal is to deliver attractive total returns to our shareholders. This section sets forth key components of our business and growth strategies that we have in place to support this goal.

Defense/IT Strategy: We focus on owning, operating and developing Defense/IT Portfolio properties, which as of December 31, 2024 accounted for 195 of our 203 properties, representing 90.3% of our annualized rental revenue (“ARR”), and we control developable land to accommodate future growth in this portfolio. The properties in this portfolio are adjacent to, or contain, their demand drivers, whose activities pertain more to knowledge and technology (i.e., research and development and other highly-technical defense and security areas) rather than to force structure (i.e., troops) and weapon system mass production. Demand drivers for our Defense/IT Portfolio include:

high-priority facilities and missions of USG organizations and agencies supporting defense and national security activities, such as intelligence, surveillance, reconnaissance, missile defense, cybersecurity, space exploration, research and development and advanced weapons systems testing and engineering, in Maryland, Northern Virginia, Washington, DC, Huntsville, Alabama and San Antonio, Texas; and

data center shells developed in response to demand driven by advancements in cloud computing and Artificial Intelligence. Our data center shells in operations or under development as of December 31, 2024 were located in Northern Virginia, one of the largest data center markets in the world due in large part to its central location along the United States’ Eastern Seaboard, robust fiber connectivity infrastructure and access to reliable and affordable utilities required to support operations.

Due to this business strategy, our Defense/IT Portfolio has certain distinguishing characteristics relative to typical commercial office properties, including:

proximity to demand drivers, which is generally preferred, and often required, for tenants to execute their missions;

demand that is driven by, and correlated with, national security spending for activities occurring in the properties’ respective demand drivers, which we believe supports higher tenant retention and less susceptibility to the effects of overall economic conditions than typical office properties;

higher likelihood of significant tenant investments in properties for unique needs, such as Sensitive Compartmented Information Facility (“SCIF”), critical power supply, access control and operational redundancy, which we believe may make tenants unable, or less likely, to relocate;

ability of many of the properties leased to the USG to meet Anti-Terrorism Force Protection (“ATFP”) requirements; and

higher preponderance of tenants who require their employees to work in the properties for security purposes, which we believe makes them less susceptible to remote work trends.

Our Defense/IT Portfolio’s data center shells are properties leased to tenants to be operated as data centers in which we provide tenants with only the land, core building and basic power, while the tenants fund the costs for the critical power, fiber connectivity and data center infrastructure. We typically enter into long-term leases for these properties prior to commencing development, with triple-net structures, rent escalators and multiple extension options. Additionally, our tenants’ significant funding of the costs to fully power and equip these properties greatly enhances the value of these properties and creates high barriers to exit for such tenants.

We believe that our cross-discipline teams collectively complement our Defense/IT strategy due to:

well-established relationships with the USG and its contractors, many of whom lease space in more than one of our properties, and in multiple geographic locations in some cases;

extensive experience in developing:

high quality office properties;

secured, specialized space, with the ability to satisfy the USG’s unique needs (including SCIF, ATFP and access control requirements); and

data center shells to customer specifications within very condensed timeframes to accommodate time-sensitive tenant demand; and

depth of knowledge, specialized skills and credentialed personnel in operating and developing highly-specialized properties with complex space and security-oriented needs.

Other Office Properties: In addition to our Defense/IT Portfolio, we also owned eight other office properties located in the Greater Washington, DC/Baltimore region as of December 31, 2024, representing 9.7% of our ARR. We intend to sell our other office properties when we believe that market conditions and opportunities position us to be able to optimize our return on investment.

Asset Management Strategy: We aggressively manage our portfolio to maximize the value and operating performance of each property through: (1) proactive property management and leasing; (2) maximizing tenant retention in order to minimize space downtime and capital requirements associated with space rollover; (3) increasing rental rates where market conditions permit; (4) leasing vacant space; (5) achievement of operating efficiencies by increasing economies of scale and, where possible, aggregating vendor contracts to achieve volume pricing discounts; and (6) redevelopment when we believe property conditions and market demand warrant. We also continuously evaluate our portfolio and consider dispositions when properties no longer meet our strategic objectives, or when capital markets and circumstances pertaining to such holdings otherwise warrant, in order to maximize our return on invested capital or support our capital strategy.

We aim to develop and operate our portfolio to create healthier work environments and reduce consumption of resources by: (1) developing new buildings designed to use resources with a high level of efficiency and low impact on human health and the environment during their life cycles through our participation in the U.S. Green Building Council’s Leadership in Energy and Environmental Design (“LEED”) program, targeting new office properties to meet LEED certification standards or, when not possible, striving to otherwise incorporate LEED criteria into property designs; (2) adopting select property operations practices from the Environmental Protection Agency’s Green Building standards and LEED for Building Operations and Maintenance (“LEED O+M: Existing Buildings”) guidelines for much of our portfolio, including cleaning, recycling, integrated pest management, energy reduction and landscaping practices; (3) investing in building automation systems and high-efficiency heating, ventilation and air conditioning systems and implementing resource conservation practices to reduce energy consumption; and (4) investing in water-saving features. We have participated in the annual Global Real Estate Sustainability Benchmark survey, which is widely recognized for measuring the environmental, social and governance (“ESG”) performance of real estate companies and funds, and earned an overall score of “Green Star” on the survey in each of the last 10 years, representing the highest quadrant of achievement.

Property Investment Strategy: We expand our portfolio of operating properties primarily through property development in support of our Defense/IT strategy, and we have significant land holdings adjacent to, or containing, demand drivers that we believe can further support that growth while serving as a barrier against competitive supply. We pursue development activities as market conditions and leasing opportunities support favorable risk-adjusted returns on investment. While we typically prefer properties to be significantly leased prior to commencing development, we develop properties ahead of completed leasing in certain locations where we believe that consistent demand and high occupancy rates warrant building of inventory to accommodate future anticipated USG and contractor demand. To a lesser extent, we may also pursue growth through acquisitions, seeking to execute such transactions at attractive yields and below replacement cost.

Capital Strategy: Our capital strategy is aimed at maintaining continuous access to capital irrespective of market conditions in the most cost-effective manner by:

maintaining an investment grade rating to enable us to use debt comprised primarily of unsecured, fixed-rate debt (including the effect of interest rate swaps) from public markets and banks;

using secured nonrecourse debt from institutional lenders and banks;

managing our debt by monitoring, among other things: (1) the relationship of certain measures of earnings to our debt level and to certain capital costs; (2) the timing of debt maturities to ensure that maturities in any one year do not exceed levels that we believe we can refinance; (3) our exposure to changes in interest rates; and (4) our total and secured debt levels relative to our overall capital structure;

monitoring capacity available under revolving credit facilities and equity offering programs to provide liquidity to fund investment activities and other capital needs;

raising equity through issuances of common shares and, to a lesser extent, issuances of common equity in CDPLP and preferred equity;

recycling proceeds from sales of interests in properties, including through joint venture structures for certain investments, to fund property investment activities and/or reduce overall debt;

paying dividends at a level that is at least sufficient for us to maintain our REIT status; and

continuously evaluating the ability of our capital resources to accommodate our plans for growth.

Industry Segments

As of December 31, 2024, our operations included the following reportable segments: Defense/IT Portfolio and Other. Our Defense/IT Portfolio segment included the following sub-segments:

Fort George G. Meade and the Baltimore/Washington Corridor (“Fort Meade/BW Corridor”);

Northern Virginia Defense/IT Locations (“NoVA Defense/IT”);

Lackland Air Force Base in San Antonio, Texas;

locations serving the U.S. Navy (“Navy Support”). Properties in this sub-segment as of December 31, 2024 were proximate to the Washington Navy Yard in Washington, DC, the Naval Air Station Patuxent River in Maryland and the Naval Surface Warfare Center Dahlgren Division in Virginia;

Redstone Arsenal in Huntsville, Alabama; and

data center shells in Northern Virginia.

As of December 31, 2024: our Defense/IT Portfolio segment included 195 of our operating properties, representing 91.3% of our square feet in operations, and all of our properties under development were for this segment; and our Other segment included our remaining eight operating properties, representing 8.7% of our square feet in operations.

For information relating to our reportable segments, refer to Note 13 to our consolidated financial statements, which are included in a separate section at the end of this Annual Report on Form 10-K beginning on page F-1.

Human Capital

Our Workforce: As of December 31, 2024, our workforce was comprised of 427 employees based in Maryland, where we are headquartered, Virginia, Washington, DC, Alabama and Texas. Our workforce has varying expertise, and includes:

Building Technicians (175 employees), of which approximately 35% were of minority race. Building technicians are skilled trades professionals who perform mechanical and operating systems maintenance and otherwise service our properties; and

Office Staff (252 employees), of which approximately 56% were female and approximately 30% of minority race, including:

Operations Management (83 employees): Property managers and support staff who service our tenant customer needs.

Asset Management and Leasing (11 employees): Customer-facing leaders who drive the financial performance of our assets.

Development and Construction (31 employees): Project managers and support staff who drive our development pipeline and interior design.

Finance and Accounting (70 employees): Professionals who manage our financial activities.

Company Support Functions (46 employees): Includes Human Resources, Investor Relations, Legal, Marketing, Information Technology, Facility Security and Corporate Administrative Support.

Senior Leadership (11 employees): Our business line and Company leaders, including our Named Executive Officers, who interface with our Board of Trustees and shareholders and manage our business strategy, functional activities, risk and overall success.

In support of our Defense/IT Portfolio strategy, over one-third of our employees carry government credentials.

We operate in markets in which we compete for human capital. We rely on our employees to drive our success and we support them with a variety of programs to enhance their workplace engagement and job fulfillment.

Culture and Workforce Engagement: We develop and reinforce our culture by emphasizing our core values, illustrated by the actiiVe acronym that stands for: Accountability, Commitment, Teamwork, Integrity, Innovation, Value Creation and Excellence. These values are intended to serve as a compass to our workforce to inform behavior and fuel our success.

We believe in equal opportunity, engagement and ethics. All employees must adhere to our Code of Business Conduct and Ethics. We survey our workforce annually to measure employee engagement and identify opportunities for further improvement, which we believe has helped us to achieve annual “great workplace” honors for over a decade.

Compensation Program: Our compensation philosophy is driven by accountability, which results in a pay-for-performance structure. Our compensation program includes: base salary; an annual cash bonus program based on the achievement of individual, business unit and company objectives; health and wellbeing benefits; a retirement savings plan with a company match; financially-supported learning programs; and employee recognition programs. We also grant common equity to all new full-time employees and provide our senior management team and high performers with the ability to earn additional grants to align their interests with those of our shareholders and to incent retention.

Wellbeing and Safety: We view wellbeing as including four facets: Life, Mind, Body and Giving. We design programs to support each of these facets. We directly incent wellbeing engagement through a points-driven program each year. Employees who achieve a points threshold receive reductions in medical premiums or contributions to their health savings accounts. We believe this program enhances employee engagement and reduces medical costs.

Safety is a key part of our employee wellbeing. Recognizing this, we conduct job-tailored safety training on an ongoing basis. We also monitor our workers’ compensation claims to measure the effectiveness of our safety program.

Talent Development: We aim to attract, retain and develop our top talent throughout the employment cycle to enhance our present and future workforce. During 2024, our workforce size increased by approximately 4%, with 83 new hires and 66 departures, including 10 retirements, representing an attrition rate of approximately 15.5% total, or 13.1% without retirements.

We offer robust learning programs to all employees, including educational assistance for college-level and vocational degree programs. We cover employee expenses for licenses and certifications, management and leadership courses, key skills training and industry and professional conferences. Further, we offer Company-sponsored internship and mentorship programs to facilitate teaching and learning from others.

Community Engagement: We encourage employee engagement with our communities to enhance our citizenship and facilitate personal growth and wellbeing. We provide a platform for our employees to engage with our communities by contributing time, effort, money and expertise. This includes providing employees eight hours or more of paid time per year to engage in volunteer activities to serve our community directly in a company-organized team or individual format. Our employees select community non-profits for Corporate giving grants and for volunteer time contributions. We empower our employees to become involved and fuel our success in community partnerships.

Competition

The commercial real estate market is highly competitive. Numerous commercial landlords compete with us for tenants. Some of the properties competing with ours may be newer or in more desirable locations, or the competing properties’ owners may be willing to accept lower rents. We also compete with our own tenants, many of whom have the right to sublease their space. The competitive environment for leasing is affected considerably by a number of factors including, among other things, changes in economic conditions and supply of and demand for space. These factors may make it difficult for us to lease existing vacant space and space associated with future lease expirations at rental rates that are sufficient to produce acceptable operating cash flows.

We occasionally compete with other entities, including other publicly-traded commercial REITs, for acquisitions of land and/or commercial properties. Competitors for such acquisitions may have substantially greater financial resources than ours. In addition, our competitors may be willing to accept lower returns on their investments or may be willing to incur higher leverage.

We also compete with other entities, including other publicly-traded commercial office REITs, for capital. This competition could adversely affect our ability to raise capital that we may need to fulfill our capital strategy.

In addition, we compete with other entities for talent. If there is an increase in the costs for us to retain employees, or if we otherwise fail to attract and retain employees, our business and operating results could be adversely affected.