COPT DEFENSE PROPERTIES
For the period ended Mar 31, 2026. Filed May 6, 2026.
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A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Mar 31, 2026 · Filed May 6, 2026
CDP$32.87+1.6%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2025-09-30; filed 2025-11-04.
0000860546-25-000048
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2026-03-31; filed 2026-05-06.
0000860546-26-000029
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 118 previous paragraphs and 99 current paragraphs.
63 unchanged; 26 reworded; 10 added; 22 removed; 7 previous and 0 current paragraphs rearranged.
Tables are not compared: 11 previous and 8 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (10)
Current report
•repaid at maturity $400.0 million in 2.25% Notes on March 16, 2026 using remaining excess available cash and cash equivalents from our prefunding of this debt maturity with a new bond issuance in 2025 and borrowings under our Revolving Credit Facility.
Current report
On April 23, 2026, we acquired approximately 17 acres of land for a purchase price of approximately $43 million, subject to a ground lease underlying two fully-leased operating properties located at 15020 and 15030 Conference Center Drive in Chantilly, Virginia.
Current report
The tables below present occupancy information:
Current report
•acquired property includes one operating office property acquired in 2025.
Current report
Interest Expense
Current report
Interest expense increased in the current period due primarily to increased debt outstanding resulting from our issuance in October 2025 of $400.0 million of 4.50% Senior Notes due 2030 (the “4.50% Notes”) to prefund the repayment at maturity of our 2.25% Notes on March 16, 2026.
Current report
Net cash flow from operating activities increased $24.3 million when comparing the three months ended March 31, 2026 and 2025, which was driven by increased cash flow from real estate operations due in large part to increased rental and occupancy rates and growth in our operating portfolio.
Current report
Net cash flow used in investing activities increased $12.8 million when comparing the three months ended March 31, 2026 and 2025 due primarily to increased cash outlays for property development activities in the current period, offset in part by the effect of investing receivables funded in the prior period.
Current report
We have a Revolving Credit Facility with a maximum borrowing capacity of $800.0 million. The facility matures in October 2029 and may be extended by two six-month periods at our option, provided that there is no default under the facility and we pay an extension fee of 0.0625% of the total availability under the facility for each extension period. Our available borrowing capacity under the facility totaled $610.0 million as of March 31, 2026.
Current report
We also have a Revolving Development Facility with a maximum borrowing capacity of $200.0 million. The facility matures in October 2029 and may be extended by a 12-month period at our option, provided that there is no default under the facility and we pay an extension fee of 0.250% of the total amount available under the facility. Our available borrowing capacity under the facility totaled $62.0 million as of March 31, 2026.
Removed paragraphs (22)
Previous report
Subsequent to September 30, 2025, we:
Previous report
•issued $400.0 million of 4.50% Notes at an initial offering price of 99.46% of their face value on October 2, 2025, resulting in proceeds, after deducting underwriting discounts and commissions, but before other offering expenses, of $395.5 million. The net proceeds from the notes were used for general corporate purposes, including paying down amounts outstanding under our Revolving Credit Facility and pre-funding the repayment at maturity of our 2.25% Senior Notes due 2026, which resulted in a portion of the net proceeds being invested in interest-bearing accounts pending such use;
Previous report
•entered into an amendment to the existing credit agreement underlying our Revolving Credit Facility and Term Loan Facility on October 6, 2025. The resulting Amended Credit Agreement provided for: an increase in the aggregate lender commitment under our Revolving Credit Facility from $600.0 million to $800.0 million; extended the previous maturity date of our Revolving Credit Facility by approximately three years; and changed the facilities’ interest and quarterly fee terms under the agreement;
Previous report
•entered into the Revolving Development Facility, with an initial aggregate lender commitment of $200.0 million, on October 16, 2025. The net proceeds from our initial borrowing under this facility totaled approximately $154 million, which were used for general corporate purposes, including paying down amounts outstanding under our Revolving Credit Facility; and
Previous report
•acquired 15050 Conference Center Drive, a 142,000 square foot property in Chantilly, Virginia that was 100% leased, for a gross purchase price of approximately $40 million on October 30, 2025.
Previous report
The tables below set forth occupancy information:
Previous report
•acquired properties includes two operating office properties acquired in 2024.
Previous report
Gain on Sales of Real Estate
Previous report
We recognized a gain on sale of real estate of $3.0 million in the current period in connection with our sale of an undeveloped land parcel.
Previous report
NOI from Real Estate Operations
Previous report
•acquired properties includes two operating office properties acquired in 2024.
Previous report
NOI from Service Operations
Previous report
Gain on Sales of Real Estate
Previous report
Refer to our explanation for the three-month periods.
Previous report
Net cash flow from operating activities decreased $1.3 million when comparing the nine months ended September 30, 2025 and 2024.
Previous report
Net cash flow used in investing activities decreased $46.0 million when comparing the nine months ended September 30, 2025 and 2024 due primarily to distributions of debt refinancing proceeds from two of our unconsolidated real estate joint ventures in the current period and our acquisition of two operating properties in the prior period.
Previous report
As of September 30, 2025, we had:
Previous report
•a Revolving Credit Facility with a maximum borrowing capacity of $600.0 million and an available borrowing capacity of $476.0 million.
Previous report
Following the completion of the capital events described in the section above entitled “Overview,” we had:
Previous report
•significantly higher cash and cash equivalents due to a portion of the net proceeds from our 4.50% Notes issuance being invested in interest-bearing accounts;
Previous report
•a Revolving Credit Facility with a maximum borrowing capacity of $800.0 million (increased from $600.0 million), substantially all of which was available after paying down the facility using proceeds from our 4.50% Notes issuance and the initial borrowing under our Revolving Development Facility; and
Previous report
•a Revolving Development Facility with a maximum borrowing capacity of $200.0 million, approximately $44 million of which was available as of October 16, 2025.
Reworded paragraphs (26)
Previous wording
During the nine months ended September 30, 2025, we:
Current wording
During the three months ended March 31, 2026, we:
Previous wording
•finished the period with our portfolio 93.9% occupied and 95.7% leased; and
Current wording
•finished the period with our portfolio 94.4% occupied and 95.2% leased;
Previous wording
•achieved a tenant retention rate of 81.9%, which was driven by our Defense/IT Portfolio.
Current wording
•achieved a tenant retention rate of 90.8%, which was driven by our Defense/IT Portfolio; and
Previous wording
We discuss significant factors contributing to changes in our net income in the section below entitled “Results of Operations.” In addition, the section below entitled “Liquidity and Capital Resources” includes discussions of, among other things:
Current wording
We discuss significant factors contributing to changes in our net income in the section entitled “Results of Operations.” In addition, the section entitled “Liquidity and Capital Resources” includes discussions of, among other things:
Previous wording
We refer to the measures annualized rental revenue (“ARR”), “tenant retention rate,” “investment space leasing” and “vacant space leasing” in this Quarterly Report on Form 10-Q. ARR is a measure that we use to evaluate the source of our rental revenue as of a point in time. It is computed by multiplying by 12 the sum of monthly contractual base rents and estimated monthly expense reimbursements under active leases as of a point in time (ignoring free rent then in effect and rent associated with tenant funded landlord assets). Our computation of ARR excludes the effect of lease incentives. We consider ARR to be a useful measure for analyzing revenue sources because, since it is point-in-time based, it does not contain increases and decreases in revenue associated with periods in which lease terms were not in effect; historical revenue under generally accepted accounting principles in the United States of America (“GAAP”) does contain such fluctuations. We find the measure particularly useful for leasing, tenant, segment and industry analysis. In instances in which we report ARR per occupied square foot, the measure excludes revenue from leases not associated with our buildings. Tenant retention rate is a measure we use that represents the percentage of square feet renewed in a period relative to the total square feet scheduled to expire in that period, including the effect of early renewals. Investment space leasing represents vacant space leased within two years of the shell completion date for development properties or the acquisition date for operating property acquisitions. Vacant space leasing represents our vacated second-generation space leased and vacant space leased in development properties and operating property acquisitions after two years from such properties’ shell completion or acquisition date.
Current wording
We refer to the measures annualized rental revenue (“ARR”), “tenant retention rate,” “investment space leasing,” and “vacant space leasing” in this Quarterly Report on Form 10-Q. ARR is a measure that we use to evaluate the sources of our rental revenue as of a point in time. It is computed by multiplying by 12 the sum of monthly contractual base rents and estimated monthly expense reimbursements under active leases as of a point in time (ignoring free rent then in effect and rent associated with tenant funded landlord assets). Our computation of ARR excludes the effect of lease incentives. We consider ARR to be a useful measure for analyzing revenue sources because, since it is point-in-time based, it does not contain increases and decreases in revenue associated with periods in which lease terms were not in effect; historical revenue under generally accepted accounting principles in the United States of America (“GAAP”) does contain such fluctuations. We find the measure particularly useful for leasing, tenant, segment, and industry analysis. In instances in which we report ARR per occupied square foot, the measure excludes revenue from leases not associated with our buildings. Tenant retention rate is a measure we use that represents the percentage of square feet renewed in a period relative to the total square feet scheduled to expire in that period, including the effect of early renewals. Investment space leasing represents vacant space leased within two years of the shell completion date for development properties or the acquisition date for operating property acquisitions. Vacant space leasing represents our vacated second-generation space leased and vacant space leased in development properties and operating property acquisitions after two years from such properties’ shell completion or acquisition date.
Previous wording
•our ability to borrow on favorable terms;
Current wording
•our ability to borrow on favorable terms or at all;
Previous wording
•changes in our plans for properties or views of market economic conditions or failure to obtain development rights, either of which could result in recognition of significant impairment losses;
Current wording
•changes in our plans for properties or views of market economic conditions or failure to obtain development rights, either of which could result in recognition of impairment losses;
Previous wording
During the nine months ended September 30, 2025, we leased 2.3 million square feet, including: 1.7 million square feet of renewal leasing (representing a tenant retention rate of 81.9%); 432,000 square feet of vacant space leasing; and 203,000 square feet of investment space leasing.
Current wording
During the three months ended March 31, 2026, we leased 1.6 million square feet, including: 1.2 million square feet of renewal leasing (representing a tenant retention rate of 90.8%); 92,000 square feet of vacant space leasing; and 384,000 square feet of investment space leasing.
Previous wording
We view our changes in NOI from real estate operations as being comprised of the following primary categories:
Current wording
Our changes in NOI from real estate operations included the following primary categories:
Previous wording
Our Same Property pool consisted of 198 properties, comprising 97.0% of our portfolio’s square footage as of September 30, 2025. This pool of properties changed from the pool used for purposes of comparing 2024 and 2023 in our 2024 Annual Report on Form 10-K due to the addition of six properties placed in service and 100% operational on or before January 1, 2024 and three properties owned through a UJV that was formed in 2023.
Current wording
Our Same Property pool consisted of 203 properties, comprising 97.6% of our portfolio’s square footage as of March 31, 2026 and 95.8% of NOI from real estate operations for the three months then ended. This pool of properties changed from the pool used for purposes of comparing 2025 and 2024 in our 2025 Annual Report on Form 10-K due to the addition of three properties placed in service and 100% operational on or before January 1, 2025 and two properties acquired in 2024.
Previous wording
•the increase for our Same Properties was due in large part to additional revenue in the current period resulting from increased rental and occupancy rates. Our Same Properties also experienced increased property operating expenses, driven primarily by higher snow removal and utility expenses, the effect of which was mostly offset by increased tenant expense reimbursements and prior year real estate taxes refunded upon appeal. For our Same Properties by segment, the Defense/IT Portfolio increase was partially offset by $2.0 million in collectability loss provisions, while our Other segment increase included $2.6 million from refunds of prior year real estate taxes, net of related tenant reimbursements;
Current wording
•the increase for our Same Properties was due in large part to additional revenue in the current period resulting from increased rental and occupancy rates. Our Same Properties also experienced increased property operating expenses, driven primarily by higher utility expenses (largely due to rate increases) and real estate taxes (due to our recognition in 2025 of prior year taxes refunded upon appeal), the effect of which was mostly offset by increased tenant expense reimbursements;
Previous wording
•developed properties placed in service reflects the effect of four properties placed in service in 2024 and 2025; and
Current wording
•developed properties placed in service reflects the effect of three properties placed in service in 2025; and
Previous wording
Interest and other income, net decreased due in large part to interest income earned from excess loan proceeds that we invested in short-term interest-bearing money market accounts in the prior period.
Current wording
Interest and other income, net increased in the current period due in large part to interest income earned by a portion of the proceeds from the 4.50% Notes being invested in short-term interest-bearing money market accounts prior to repayment of the 2.25% Notes on March 16, 2026.
Previous wording
Diluted FFO available to common share and common unit holders, as adjusted for comparability is defined as Diluted FFO adjusted to exclude: operating property acquisition costs (for acquisitions classified as business combinations); gain or loss on early extinguishment of debt; FFO associated with properties that secured non-recourse debt on which we defaulted and, subsequently, extinguished, via conveyance of such properties (including property NOI, interest expense and gains on debt extinguishment); loss on interest rate derivatives; and executive transition costs associated with named executive officers. This measure also includes adjustments for the effects of the items noted above pertaining to UJVs that were allocable to our ownership interest in the UJVs. We believe this to be a useful supplemental measure alongside Diluted FFO as it excludes gains and losses from certain investing and financing activities and certain other items that we believe are not closely correlated to (or associated with) our operating performance. We believe that net income or loss is the most directly comparable GAAP measure to this non-GAAP measure. This measure has essentially the same limitations as Diluted FFO, as well as the further limitation of not reflecting the effects of the excluded items; we compensate for these limitations in essentially the same manner as described above for Diluted FFO.
Current wording
Diluted FFO available to common share and common unit holders, as adjusted for comparability is defined as Diluted FFO adjusted to exclude: operating property acquisition costs (for acquisitions classified as business combinations); gain or loss on early extinguishment of debt; demolition costs on redevelopment and nonrecurring improvements; FFO associated with properties that secured non-recourse debt on which we defaulted and, subsequently, extinguished, via conveyance of such properties (including property NOI, interest expense, and gains on debt extinguishment); loss on interest rate derivatives; and executive transition costs associated with named executive officers. This measure also includes adjustments for the effects of the items noted above pertaining to UJVs that were allocable to our ownership interest in the UJVs. We believe this to be a useful supplemental measure alongside Diluted FFO as it excludes gains and losses from certain investing and financing activities and certain other items that we believe are not closely correlated to (or associated with) our operating performance. We believe that net income or loss is the most directly comparable GAAP measure to this non-GAAP measure. This measure has essentially the same limitations as Diluted FFO, as well as the further limitation of not reflecting the effects of the excluded items; we compensate for these limitations in essentially the same manner as described above for Diluted FFO.
Previous wording
The table below sets forth the computation of the above stated measures, and provides reconciliations from the GAAP measures associated with such measures:
Current wording
The table below presents the computation of the above stated measures, and provides reconciliations from the GAAP measures associated with such measures:
Previous wording
The table below sets forth the major components of our additions to properties for the nine months ended September 30, 2025 (in thousands):
Current wording
The table below presents the major components of our additions to properties for the three months ended March 31, 2026 (in thousands):
Previous wording
Net cash flow used in financing activities in the nine months ended September 30, 2025 was $60.4 million, and included primarily the following:
Current wording
Net cash flow used in financing activities in the three months ended March 31, 2026 was $260.2 million, and included primarily the following:
Previous wording
•repayments of debt borrowings during the period of $29.5 million; and
Current wording
•net repayments of debt borrowings during the period of $222.4 million, which included our repayment at maturity of $400.0 million in 2.25% Notes; and
Previous wording
•dividends to common shareholders of $102.2 million.
Current wording
•dividends to common shareholders of $34.6 million.
Previous wording
Net cash flow used in financing activities in the nine months ended September 30, 2024 was $134.5 million, and included primarily the following:
Current wording
Net cash flow used in financing activities in the three months ended March 31, 2025 was $16.2 million, and included primarily the following:
Previous wording
•net proceeds from debt borrowings during the period of $47.6 million; and
Current wording
•net proceeds of debt borrowings during the period of $19.5 million; and
Previous wording
•dividends to common shareholders of $98.6 million.
Current wording
•dividends to common shareholders of $33.3 million.
Previous wording
•$23.7 million in cash and cash equivalents; and
Current wording
As of March 31, 2026, we had $28.6 million in cash and cash equivalents.
Previous wording
Our senior unsecured debt is rated investment grade, with either stable or positive outlooks, by the three major rating agencies. We aim to maintain an investment grade rating to enable us to use debt comprised of unsecured, primarily fixed-rate debt (including the effect of interest rate swaps) from public markets and banks. We also use secured nonrecourse debt from institutional lenders and banks primarily for joint venture financings. In addition, we periodically raise equity when we access the public equity markets by issuing common shares.
Current wording
Our senior unsecured debt is rated investment grade, with stable outlooks, by the three major rating agencies. We aim to maintain an investment grade rating to enable us to use debt comprised of unsecured, primarily fixed-rate debt (including the effect of interest rate swaps) from public markets and banks. We also use secured nonrecourse debt from institutional lenders and banks primarily for joint venture financings. In addition, we periodically raise equity when we access the public equity markets by issuing common shares.
Previous wording
•tenant and capital improvements and leasing costs for operating properties (expected to total approximately $35 million during the remainder of 2025);
Current wording
•tenant and capital improvements and leasing costs for operating properties (expected to total approximately $80 million during the remainder of 2026);
Previous wording
During the remainder of 2025, we: expect to spend $75 million to $85 million on costs for properties actively under development, most of which was contractually obligated as of September 30, 2025, and additional costs to actively develop additional properties; and funded our acquisition of 15050 Conference Center Drive. We expect to fund these activities using, in part, available cash flow from operations, with the balance funded using borrowings under our Revolving Development Facility and excess available cash and cash equivalents.
Current wording
During the remainder of 2026, we expect to spend $125 million to $155 million on costs for properties actively under development, most of which was contractually obligated as of March 31, 2026, and have $45.6 million in debt balloon payments maturing in 2026. During the remainder of 2026 and beyond, we expect to continue to actively develop additional properties and also could opportunistically acquire operating properties. We expect to fund these activities using, in part, available cash flow from operations, with the balance funded using any excess available cash and cash equivalents and borrowings under our Revolving Development Facility and Revolving Credit Facility.
Rearranged previous paragraphs (7)
Previous report — wording carried elsewhere
•the increase for our Same Properties was due primarily to additional revenue in the current period resulting from increased rental and occupancy rates;
Previous report — wording carried elsewhere
Comparison of Statements of Operations for the Nine Months Ended September 30, 2025 and 2024
Previous report — wording carried elsewhere
(1)Includes minimum base rents, net of abatements and lease incentives and excluding lease termination revenue, on a straight-line basis for the periods set forth above.
Previous report — wording carried elsewhere
Regarding the changes in NOI from real estate operations reported above:
Previous report — wording carried elsewhere
•developed properties placed in service reflects the effect of four properties placed in service in 2024 and 2025; and
Previous report — wording carried elsewhere
Construction contract and other service revenue and expenses decreased in the current period due primarily to a lower volume of construction activity for one of our tenants.
Previous report — wording carried elsewhere
Beyond 2025, we expect to fund property development activities and, potentially, opportunistic acquisitions of operating properties using, in part, available cash flow from operations, with the balance funded using any remaining excess available cash and cash equivalents and borrowings under our Revolving Development Facility and Revolving Credit Facility.