COPT DEFENSE PROPERTIES
For the period ended Dec 31, 2025. Filed Feb 20, 2026.
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A company's yearly report to the SEC, with audited financial statements. It is the fullest account a company gives of its business, its finances and the risks it sees.
FY2025 · Filed Feb 20, 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-K
Period ended 2024-12-31; filed 2025-02-21.
0000860546-25-000008
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONSCurrent report: 10-K
Period ended 2025-12-31; filed 2026-02-20.
0000860546-26-000011
Item 7. 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 175 previous paragraphs and 170 current paragraphs.
86 unchanged; 55 reworded; 27 added; 30 removed; 4 previous and 2 current paragraphs rearranged.
Tables are not compared: 12 previous and 12 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 (27)
Current report
•completed strong leasing in our operating portfolio, including 557,000 square feet in vacancy leasing, a volume equating to 47% of the unleased space we had as of year end 2024, and a 77.9% tenant retention rate;
Current report
•committed capital to five new external growth investments across four Defense/IT Portfolio sub-segments, including:
Current report
•four new development properties totaling 498,000 square feet, three of which were fully pre-leased; and
Current report
•a fully-occupied, 142,000 square foot Defense/IT Portfolio property acquisition, which reinforces our position as the largest landlord in a highly-leased business park;
Current report
•placed into service 468,000 newly-developed, fully-leased square feet across three Defense/IT Portfolio properties;
Current report
•closed on three new financings, which pre-funded the repayment at maturity of a bond maturing in March 2026 and provided additional liquidity to fund our external growth; and
Current report
•leased 424,000 square feet of its vacant space, achieving progress across its sub-segments;
Current report
•completed 477,000 square feet in investment space leasing, including the four new development properties discussed below and vacant space in a property that we acquired last year.
Current report
Our Defense/IT Portfolio also has benefited from continued defense budget appropriation increases, with bipartisan support, a trend we expect could continue for the foreseeable future with the 2026 USG defense budget appropriations increase approved in February 2026, along with the additional appropriations included in the One Big Beautiful Bill Act passed in July 2025. We expect that these enhanced USG commitments to defense investment will support additional demand for our portfolio as the priority missions our tenants support are expected to see increased funding to counter an increasingly complex national security environment. These missions include intelligence, surveillance and reconnaissance, cybersecurity and network activities, naval sea and air technology development, unmanned aerial vehicles and missile defense and space activities.
Current report
For the 43-day long federal government shutdown in 2025, the most significant effect on us was that it delayed our ability to progress, or finalize, certain of our Defense/IT Portfolio segment’s renewal leasing activities, but our existing USG leases remained in effect and the majority of our rent payments continued to occur in a timely manner.
Current report
•498,000 square feet in new capital commitments in four development properties across our Fort Meade/BW Corridor, Redstone Arsenal and Lackland Air Force Base sub-segments for an anticipated total cost of approximately $233.4 million.
Current report
•acquiring 15050 Conference Center Drive, a 142,000 square foot property in Chantilly, Virginia (included in our NoVA Defense/IT sub-segment), for a gross purchase price of $40.0 million, or $32.6 million net of a $7.4 million credit for an unpaid tenant improvement allowance. This property, with significant secured-space enhancements, is located in a supply-constrained submarket in which we are the largest landlord, and is 100% leased to an existing defense contractor tenant of ours.
Current report
•82,000 square feet in our Other segment, which represented 5.4% of this segment’s occupied square feet.
Current report
We were active in the capital markets in 2025, culminating in our:
Current report
•issuance of $400.0 million of 4.50% Senior Notes due 2030 (the “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 will fund the repayment at maturity of $400.0 million in 2.25% Senior Notes due 2026 (the “2.25% Notes”). Until such time, the proceeds were used for general corporate purposes, including paying down amounts outstanding under our Revolving Credit Facility, which resulted in a portion of the net proceeds being invested in interest-bearing accounts;
Current report
•entry 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; extension of the previous maturity date of our Revolving Credit Facility by approximately three years and expansion of the facility’s lender group; and changes in the facilities’ interest and quarterly fee terms, including a decrease in our interest rate spread over the Secured Overnight Financing Rate (“SOFR”) (effective as of the closing date) on the Revolving Credit Facility by 0.20% and on the term loan facility by 0.25%, and elimination of the 0.10% SOFR transition charge previously included in interest expense for both loans; and
Current report
•entry into the Revolving Development Facility, a secured facility with an initial aggregate lender commitment of $200.0 million, on October 16, 2025. While this facility can be used to fund any investment or for general corporate purposes, we plan on using it to fund property development activities. The net proceeds from our initial borrowing under this facility totaled approximately $154 million, which were used to pay down amounts outstanding under our Revolving Credit Facility previously borrowed to fund development activities.
Current report
•$400.0 million in 2.25% Notes maturing in March 2026 and no significant debt maturing thereafter until 2028;
Current report
The increase in our portfolio’s concentration in the Data Center Shells sub-segment was attributable to newly-developed properties that we placed into service.
Current report
As of December 31, 2025, USG leases accounted for 83.3% of our total portfolio’s 2026 scheduled lease expirations, including 80.0% of Fort Meade/BW Corridor and 100% of Lackland Air Force Base scheduled lease expirations. As discussed above, we encountered some delays in the latter portion of 2025 due to the federal government shutdown. We expect that virtually all of the USG leases scheduled to expire in 2026 will be renewed.
Current report
•acquired properties.
Current report
We recognized a gain on sale of real estate of $3.0 million in 2025 in connection with our sale of an undeveloped land parcel.
Current report
Net cash flow from operating activities decreased $21.0 million, or (6.4)%, from 2024 to 2025 due primarily to the timing of certain USG lease payments in 2025, along with decreased interest and other income and higher lease incentive payments in 2025.
Current report
Net cash flow used in investing activities decreased $1.3 million from 2024 to 2025, which included the effects of additional cash flow from distributions in 2025 of debt refinancing proceeds received from two of our UJVs, offset in part by increased cash outlays for property development activities, tenant improvements on operating properties and leasing costs.
Current report
•net proceeds of debt borrowings during the period of $371.7 million, which included proceeds from our issuance of the 4.50% Notes; and
Current report
As of December 31, 2025, we had $275.0 million in cash and cash equivalents. We were carrying a significant amount of cash and cash equivalents as of the end of the year due to the net proceeds from the October issuance of our 4.50% Notes that will fund the repayment at maturity of our 2.25% Notes in March 2026. Until such time, the proceeds were used for general corporate purposes, which resulted in a portion of the net proceeds being invested in interest-bearing accounts.
Current report
We expect to use our Revolving Development Facility to fund most of our property development cash requirements and subsequently pay it down as development properties are placed into service using cash available from operations, any excess available cash and cash equivalents and borrowings from our Revolving Credit Facility. We expect to use our Revolving Credit Facility to initially fund most of the cash requirements from our other investing activities, including development cash requirements in excess of Revolving Development Facility available borrowings, as well as pay downs of the Revolving Development Facility discussed above and certain debt balloon payments due upon maturity; we expect to pay down this facility using cash available from operations and proceeds from financing and/or investing activities, such as long-term borrowings, equity issuances and sales of interests in properties.
Removed paragraphs (30)
Previous report
completed strong leasing in our operating portfolio, with our highest tenant retention rate in over 20 years and vacant space leased during the year exceeding space vacated upon lease expirations;
Previous report
placed into service space in three properties that were substantially leased and commenced development of two additional properties;
Previous report
acquired operating properties for the first time in nine years to add supply to highly-leased business parks;
Previous report
replenished our supply of land to support future data center shell development; and
Previous report
acquiring vacant space in two operating properties, including:
Previous report
6841 Benjamin Franklin Drive, a 202,000 square foot property in Columbia, Maryland that was 56% leased, for a purchase price of $15.0 million on March 15, 2024; and
Previous report
3900 Rogers Road, an 80,000 square foot property in San Antonio, Texas that was vacant on the acquisition date and subsequently leased in full to the USG, for a purchase price of $17.0 million on September 26, 2024.
Previous report
We believe that these acquisitions provided space that was needed to service existing demand and were completed at substantial discounts to replacement cost; and
Previous report
acquiring 365 acres of land near Des Moines, Iowa for $32.0 million on September 27, 2024 that we believe could be developed into approximately 3.3 million square feet of data center shell space in the long term. We believe that significant demand for data center shells exists, fueled in large part by advancements in cloud computing and artificial intelligence, and Des Moines is one of the largest hyperscale data center markets in the United States.
Previous report
144,000 square feet in our Other segment, the renewal of which we believe was highly uncertain.
Previous report
Economically, we believe that the:
Previous report
rate of cost increases that we observed or experienced in recent years subsided to a more normalized level, and therefore did not significantly affect us in 2024;
Previous report
lingering effects of instability in debt and equity markets also did not significantly affect us in 2024 since we had sufficient liquidity to fund our forecasted investing and financing activities through at least 2025 and virtually no variable-rate debt exposure. However, constraints in commercial debt availability and elevated interest rates were not conducive to proper valuations from potential buyers of properties in our Other segment. In early 2026, we have $400.0 million in unsecured senior notes with a stated interest rate of 2.25% maturing that we will need to repay; to the extent that we refinance this debt with new unsecured fixed-rate debt, we expect it would be at a higher interest rate; and
Previous report
continued prevalence of remote- and flexible-work arrangements that have adversely effected the United States office real estate industry in recent years has not significantly affected us due to our Defense/IT strategy, which results in a higher preponderance of tenants who require their employees to work in the properties for security purposes. However, the properties in our Other segment continued to experience a challenging lease environment.
Previous report
With regard to changes in occupancy from December 31, 2023 to December 31, 2024:
Previous report
Lackland Air Force Base: Decreased due to the acquisition of 3900 Rogers Road, which was vacant at the time of acquisition and subsequently leased in full with occupancy commencing in 2025;
Previous report
Navy Support: Decreased due primarily to tenant space down-sizings at two of our properties. As of December 31, 2024 we had scheduled lease expirations in 2025 for 166,000 square feet, or 15.8%, of this sub-segment’s occupied square feet, most of which we expect to renew;
Previous report
Redstone Arsenal: Decreased due primarily to vacant space placed into service in a newly-developed property to accommodate future anticipated demand in a highly-leased business park; and
Previous report
Other: Decreased due to vacated space resulting from a 49.4% tenant retention rate, the effect of which outweighed lease commencements on vacant space leased. As of December 31, 2024 we had scheduled lease expirations in 2025 for 144,000 square feet, or 9.2%, of this sub-segment’s occupied square feet, the renewal of which we believed was uncertain.
Previous report
(1)Includes scheduled lease expirations in 2025 totaling $46.2 million in ARR on 703,000 square feet that we expect to renew.
Previous report
acquired properties; and
Previous report
disposed properties.
Previous report
dispositions, net of retained interest in newly-formed UJVs reflects the effect of our sale of 90% of our interests in three data center shells in 2023.
Previous report
Impairment Losses
Previous report
As part of our closing process for the three months ended September 30, 2023, we conducted our quarterly review of our portfolio of long-lived assets to be held and used for indicators of impairment. As a result of this process, we shortened the expected holding periods for six operating properties in our Other segment and a parcel of land located in Baltimore, Maryland, Northern Virginia and Washington, DC. We determined that the carrying amount of the properties would not likely be recovered from the undiscounted cash flows from the operations and sales of the properties over the shortened holding periods. Accordingly, we recognized impairment losses of $252.8 million on these properties during 2023.
Previous report
Our general, administrative, leasing and other expenses increased in large part due to compensation-related expenses, including the effects of the resignation of our Chief Operating Officer in early 2023 and hiring of his replacement in late 2023 and higher incentive compensation awards in 2024 in recognition of the Company’s performance.
Previous report
The gain on sales of real estate recognized in 2023 was due to our sale of a 90% interest in three data center shell properties.
Previous report
Net cash flow from operating activities increased $54.7 million, or 19.8%, from 2023 to 2024 due primarily to the effects of the growth of our operating portfolio, along with an increase in interest income on investing receivables received in 2024, and partially offset by higher cash paid for interest expense on our 5.25% Notes issued in September 2023.
Previous report
Net cash flow used in investing activities increased $121.4 million from 2023 to 2024 due primarily to proceeds from properties sold in 2023 (which included our sale of a 90% interest in three data center shells), which was partially offset by decreased cash paid for properties in development or held for future development.
Previous report
net proceeds from debt borrowings during the period of $181.4 million, which included the net effect of our issuance of the 5.25% Notes and a net paydown of borrowings under our Revolving Credit Facility using proceeds from the notes issuance and from property sales; and
Reworded paragraphs (55)
Previous wording
our ability to borrow on favorable terms;
Current wording
•our ability to borrow on favorable terms or at all;
Previous wording
achieved year end occupancy of 93.6% for our total portfolio and 95.6% for our Defense/IT Portfolio;
Current wording
•achieved year end occupancy of 94.0% for our total portfolio and 95.5% for our Defense/IT Portfolio, both of which increased from year end 2024;
Previous wording
ended the year with no significant debt maturing until 2026 and most of our Revolving Credit Facility’s borrowing capacity available.
Current wording
•ended the year with no significant debt maturing until 2028 other than the pre-funded 2026 bond maturity.
Previous wording
Our business is driven by our Defense/IT Portfolio segment, which as of year end represented 91.3% of our property square footage and 90.3% of our ARR. We believe that the critical nature of the activities served by this segment’s properties has helped fuel strong demand for space, enabling the segment to consistently achieve year end occupancy of at least 93% in recent years. In 2024, our Defense/IT Portfolio:
Current wording
Our business is driven by our Defense/IT Portfolio segment, which as of year end represented 92.1% of our property square footage and 90.3% of our ARR. We believe that the critical nature of the activities served by this segment’s properties has helped fuel strong demand for space, enabling the segment to consistently achieve year end occupancy of at least 93% for each of the last nine years. In 2025, our Defense/IT Portfolio:
Previous wording
achieved a near-record tenant retention rate of 88.6%, with average increases in rent per renewed square foot of 1.0% for cash rents (with a compound annual growth rate of 2.8%) and 8.9% for straight-line rents; and
Current wording
•achieved a tenant retention rate of 79.3%, our 10th consecutive year with a retention rate of at least 75%, with average increases in rent per renewed square foot of 2.7% for cash rents and 11.0% for straight-line rents;
Previous wording
increased its Same Property pool’s average occupancy from 95.0% in 2023 to 95.8% in 2024, ending the year 96.4% occupied;
Current wording
•increased its Same Property pool’s average occupancy from 95.9% in 2024 to 96.0% in 2025, ending the year 95.8% occupied; and
Previous wording
Demand for secure space was strong, which we believe was bolstered in part by the nation’s challenges associated with global conflicts and the continued need to boost cybersecurity capabilities, and enabled us to improve lease economics by increasing cash rental rates, with fewer rent concessions. We believe that this demand drove our strong retention rate for the properties in this segment, along with the following unique advantages associated with our Defense/IT strategy: proximity of the properties to the demand drivers they serve; prevalence of significant investments in high security improvements, which may make tenants unable, or less likely, to relocate; and the high level of technical proficiency and credentials of our operations team (many of whom are credentialed) charged with managing these spaces. Our Defense/IT Portfolio also benefited from continued defense budget appropriation increases, with bipartisan support in recent years. As global threats to our national security and that of our allies continue to evolve and, in some cases, escalate, we believe that defense spending for the critical missions that our portfolio supports, such as intelligence, surveillance and cyber, will continue to be considered vital for the foreseeable future.
Current wording
Throughout 2025, we experienced strong demand from defense contractors looking for new or incremental space to support mission programs and contracts, a significant amount of which required secured space. We believe that this demand drove the strong performance of this segment, along with the following unique advantages associated with our Defense/IT strategy: proximity of the properties to the demand drivers they serve; prevalence of significant investments in high security improvements, which may make tenants unable, or less likely, to relocate; and the high level of technical proficiency and credentials of our operations team (many of whom are credentialed) charged with managing these spaces.
Previous wording
Strong Defense/IT Portfolio demand coupled with limited vacancy drove our need to invest in additional space, which we addressed in 2024 by:
Current wording
Strong Defense/IT Portfolio demand coupled with limited vacancy in our operating portfolio drove our need to continue to invest in additional space, which we addressed in 2025 through the following external growth investments:
Previous wording
399,000 square feet placed in service during the year in three properties that were 83% leased as of year end in our Data Center Shells and Redstone Arsenal sub-segments; and
Current wording
•468,000 square feet placed in service during the year in three fully-leased, newly-developed properties in our Data Center Shells and Redstone Arsenal sub-segments; and
Previous wording
606,000 square feet under development at year end in four properties that were 75% leased, including: two fully-leased data center shells scheduled to be placed in service in 2025; and one property each in Fort Meade/BW Corridor and Redstone Arsenal on which we commenced development in 2024 ahead of completed leasing to accommodate future anticipated USG and contractor demand; and
Current wording
As of December 31, 2025, we had an aggregate of 646,000 square feet under development in five properties that were 58% leased, including: three fully-leased properties expected to be placed in service in 2027; and two properties across our Fort Meade/BW Corridor and Redstone Arsenal sub-segments with minimal pre-leasing being developed to accommodate future anticipated USG and contractor demand, which are expected to be placed in service in 2026 and 2027; and
Previous wording
We funded these property investments primarily using excess available cash flow from operations and cash and cash equivalents that we had remaining from our issuance of unsecured senior notes in 2023.
Current wording
We funded these property investments primarily using excess available cash flow from operations and borrowings under our Revolving Credit Facility and Revolving Development Facility (discussed below).
Previous wording
In 2024, our total portfolio also included eight office properties in our Other segment, which as of year end represented 8.7% of our property square footage and 9.7% of our ARR. These properties, which have experienced a challenging leasing environment for several years, had an average occupancy rate of 72.7% in 2024. We do not consider these properties to be strategic holdings since they do not align with our Defense/IT strategy. While we intend to sell them when market conditions and opportunities position us to optimize our return on investment, we did not initiate plans for sales in 2024 due in large part to the effects of increased interest rates and debt availability on potential buyers.
Current wording
In 2025, our total portfolio also included six office properties in our Other segment, which as of year end represented 7.9% of our property square footage and 9.7% of our ARR, and accounted for 31% of the portfolio’s vacant space. These properties, which have experienced a challenging leasing environment for several years, increased their average occupancy rate from 72.5% in 2024 to 75.5% in 2025, and we were successful in leasing 133,000 square feet of this segment’s vacant space in 2025, which exceeded the expiring lease square footage that was vacated. One property accounted for 37% of this segment’s vacant space and 11% of our total portfolio’s vacant space. We do not consider our Other segment’s properties to be strategic holdings since they do not align with our Defense/IT strategy. While we intend to sell them when market conditions and opportunities position us to optimize our return on investment, we did not initiate plans for sales in 2025 due in part to continued unfavorable capital markets for potential buyers.
Previous wording
Our 2024 year end occupancy rate decreased (relative to 2023) from 94.2% to 93.6% for our total portfolio and from 96.2% to 95.6% for our Defense/IT Portfolio due primarily to the vacant space that we acquired and placed in service in 2024 to feed demand in highly-leased business parks. Conversely, the 2024 year end occupancy rate of our Same Property pool (which excludes the effect of properties acquired and placed in service) increased (relative to 2023) from 93.8% to 94.1% for our total portfolio and from 96.0% to 96.4% for the Defense/IT Portfolio component due to lease commencements on vacant space leasing and strong tenant retention (86.0% for the total portfolio and 88.6% for the Defense/IT Portfolio). As of December 31, 2024, we had scheduled lease expirations for 3.0 million square feet in 2025, representing 13.0% of our total occupied square feet and 19.2% of our total ARR, including:
Current wording
Our total portfolio’s 2025 year end occupancy rate increased (relative to 2024) from 93.6% to 94.0% due primarily to improved occupancy in our Other segment resulting from vacant space leasing, with occupancy for our Defense/IT Portfolio increasing slightly from 95.4% to 95.5%. The 2025 year end occupancy rate of our Same Property pool (which excludes the effect of properties acquired and placed in service in 2024 and 2025) decreased (relative to 2024) from 94.4% to 94.2% for our total portfolio and from 96.4% to 95.8% for the Defense/IT Portfolio component due primarily to several leases not renewed upon expiration in our Fort Meade/BW Corridor and Redstone Arsenal sub-segments. As of December 31, 2025, we had scheduled lease expirations for 2.9 million square feet in 2026, representing 12.3% of our total occupied square feet and 19.3% of our total ARR, including:
Previous wording
2.8 million square feet in our Defense/IT Portfolio segment, a high proportion of which we expect to renew due to the unique retention advantages associated with our Defense/IT strategy discussed above; and
Current wording
•2.8 million square feet in our Defense/IT Portfolio segment, which included several large USG leases whose renewals were affected by the federal government shutdown. We expect to renew virtually all of these scheduled lease expirations due to the strong demand for space and unique retention advantages associated with our Defense/IT strategy discussed above; and
Previous wording
As of December 31, 2024, we had $38.3 million in cash and cash equivalents.
Current wording
•$275.0 million in cash and cash equivalents;
Previous wording
$525.0 million in available borrowing capacity under our Revolving Credit Facility;
Current wording
•$746.0 million in available borrowing capacity under our Revolving Credit Facility;
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no variable-rate debt exposure, including the effect of interest rate swaps;
Current wording
•no variable-rate debt exposure, including the effect of interest rate swaps, although a $200.0 million notional amount of these swaps expired in February 2026;
Previous wording
only 2.9% of our outstanding debt encumbered by properties; and
Current wording
•5.1% of our outstanding debt encumbered by properties; and
Previous wording
our diluted earnings per share increased from a loss of $(0.67) per share in 2023 to earnings of $1.23 per share in 2024, and our net income increased from a loss of $(74.3) million in 2023 to income of $143.9 million in 2024 due primarily to $252.8 million in impairment losses that we recognized in 2023 on six operating properties in our Other segment and a parcel of other land that we control;
Current wording
•our diluted earnings per share increased from $1.23 per share in 2024 to $1.34 per share in 2025, and our net income increased from $143.9 million in 2024 to $159.5 million in 2025, due primarily to increased income from our real estate operations;
Previous wording
net operating income (“NOI”) from real estate operations, our segment performance measure, increased $34.9 million, or 9.1%, relative to 2023. This increase was driven primarily by a:
Current wording
•net operating income (“NOI”) from real estate operations, our segment performance measure, increased $26.7 million, or 6.4%, relative to 2024. This increase was driven primarily by a $14.9 million increase from our Same Properties, which included the effect of increased rental and occupancy rates in our Defense/IT Portfolio, and an $11.0 million increase from external growth in our portfolio, including newly-developed properties placed in service and property acquisitions; and
Previous wording
diluted funds from operations per share, as adjusted for comparability increased 6.2% and the numerator for that measure increased $20.9 million, or 7.6%, relative to 2023 due primarily to increased NOI from real estate operations in 2024, offset in part by higher interest expense.
Current wording
•diluted funds from operations per share, as adjusted for comparability increased 5.8% relative to 2024 due primarily to increased NOI from real estate operations in 2025.
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We discuss significant factors contributing to changes in our net income or loss between 2024 and 2023 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 between 2025 and 2024 in the section below entitled “Results of Operations.” In addition, the section below entitled “Liquidity and Capital Resources” includes discussions of, among other things:
Previous wording
We refer to the measures “ARR”, “tenant retention rate”, “investment space leasing” and “vacant space leasing” in various sections of the Management’s Discussion and Analysis of Financial Condition and Results of Operations section of this Annual Report on Form 10-K. 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 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 “ARR”, “tenant retention rate”, “investment space leasing” and “vacant space leasing” in various sections of the Management’s Discussion and Analysis of Financial Condition and Results of Operations section of this Annual Report on Form 10-K. 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 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
We also refer to the measures “cash rents”, “straight-line rents”, and “committed costs” in the “Occupancy and Leasing” section of the Management’s Discussion and Analysis of Financial Condition and Results of Operations section of this Annual Report on Form 10-K. Cash rents include monthly contractual base rent (ignoring rent abatements and rent associated with tenant funded landlord assets) multiplied by 12, plus estimated annualized expense reimbursements (average for first 12 months of term for new or renewed leases or as of lease expiration for expiring leases). Straight-line rents include annual minimum base rents, net of abatements and lease incentives and excluding rent associated with tenant funded landlord assets, on a straight-line basis over the term of the lease, and estimated annual expense reimbursements (as of lease commencement for new or renewed leases or as of lease expiration for expiring leases). We believe that cash rents and straight-line rents are useful measures for evaluating the rental rates of our leasing activity, including changes in such rates relative to rates that may have been previously in place, with cash rents serving as a measure to evaluate rents at the time rent payments commence, and straight-line rents serving as a measure to evaluate rents over the related lease terms. Committed costs includes tenant improvement allowances (excluding tenant funded landlord assets), leasing commissions and estimated turn key costs and excludes lease incentives; we believe this is a useful measure for evaluating our costs associated with obtaining new leases.
Current wording
We also refer to the measures “cash rents”, “straight-line rents”, and “committed costs” in the “Occupancy and Leasing” section of the Management’s Discussion and Analysis of Financial Condition and Results of Operations section of this Annual Report on Form 10-K. Cash rents include monthly contractual base rent (ignoring rent abatements and rent associated with tenant-funded landlord assets) multiplied by 12, plus estimated annualized expense reimbursements (average for first 12 months of term for new or renewed leases or as of lease expiration for expiring leases). Straight-line rents include: (1) annual minimum base rents, net of abatements and lease incentives and excluding rent associated with tenant funded landlord assets, on a straight-line basis over the term of the lease; (2) and estimated annual expense reimbursements. Straight-line rents are disclosed as of lease commencement for new or renewed leases or as of lease expiration for expiring leases. We believe that cash rents and straight-line rents are useful measures for evaluating the rental rates of our leasing activity, including changes in such rates relative to rates that may have been previously in place, with cash rents serving as a measure to evaluate rents at the time rent payments commence, and straight-line rents serving as a measure to evaluate rents over the related lease terms. Committed costs includes tenant improvement allowances (excluding tenant-funded landlord assets), leasing commissions and estimated turn key costs and excludes lease incentives; we believe this is a useful measure for evaluating our costs associated with obtaining new leases.
Previous wording
As discussed above, a significant portion of our portfolio is leased to the USG, and the majority of those leases provide for one-year terms, with a series of one-year renewal options (with defined rent escalations upon each renewal), and/or provide for early termination rights. Applicable accounting guidance requires us to recognize minimum rental payments on operating leases, net of rent abatements, on a straight-line basis over the term of each lease. We estimate a tenant’s lease term at the lease commencement date and do not subsequently reassess such term unless the lease is modified. When estimating a tenant’s lease term, we use judgment in contemplating the significance of: any penalties a tenant may incur should it choose not to exercise any existing options to extend the lease or exercise any existing options to terminate the lease; and economic incentives to the tenant based on any existing contract, asset, entity or market-based factors associated with the lease. Factors we consider in making this assessment include the uniqueness of the purpose or location of the property, the availability of a comparable replacement property, the relative importance or significance of the property to the continuation of the lessee’s line of business and the existence of tenant leasehold improvements or other assets whose value would be impaired by the tenant vacating or discontinuing use of the leased property. For most of our leases with the USG, our estimates of lease term conclude that exercise of existing renewal options, or continuation of such leases without exercising early termination rights, is reasonably certain as it relates to the expected lease end date. As a result, our recognition of minimum rents on these leases includes the effect of annual rent escalations over our estimate of the lease term (including on one-year renewal options) and our depreciation and amortization of costs incurred on these leases is recognized over the lease term. An over-estimate of the term of these leases by us could result in the write-off of any recorded assets associated with straight-line rental revenue and acceleration of depreciation and amortization expense associated with costs we incurred related to these leases. We had no significant USG leases with lease terms determined to have been over-estimated during the reporting periods included herein.
Current wording
A significant portion of our portfolio is leased to the USG, and the majority of those leases provide for one-year terms, with a series of one-year renewal options (with defined rent escalations upon each renewal), and/or provide for early termination rights. Applicable accounting guidance requires us to recognize minimum rental payments on operating leases, net of rent abatements, on a straight-line basis over the term of each lease. We estimate a tenant’s lease term at the lease commencement date and do not subsequently reassess such term unless the lease is modified. When estimating a tenant’s lease term, we use judgment in contemplating the significance of: any penalties a tenant may incur should it choose not to exercise any existing options to extend the lease or exercise any existing options to terminate the lease; and economic incentives to the tenant based on any existing contract, asset, entity or market-based factors associated with the lease. Factors we consider in making this assessment include the uniqueness of the purpose or location of the property, the availability of a comparable replacement property, the relative importance or significance of the property to the continuation of the lessee’s line of business and the existence of tenant leasehold improvements or other assets whose value would be impaired by the tenant vacating or discontinuing use of the leased property. For most of our leases with the USG, our estimates of lease term conclude that exercise of existing renewal options, or continuation of such leases without exercising early termination rights, is reasonably certain as it relates to the expected lease end date. As a result, our recognition of minimum rents on these leases includes the effect of annual rent escalations over our estimate of the lease term (including on one-year renewal options) and our depreciation and amortization of costs incurred on these leases is recognized over the lease term. An over-estimate of the term of these leases by us could result in the write-off of any recorded assets associated with straight-line rental revenue and acceleration of depreciation and amortization expense associated with costs we incurred related to these leases. We had no significant USG leases with lease terms determined to have been over-estimated during the reporting periods included herein.
Previous wording
Since asset groups associated with properties held for sale are carried at the lower of their carrying values (i.e., cost less accumulated depreciation and any impairment loss recognized, where applicable) or estimated fair values less costs to sell, decisions by us to sell certain properties will result in impairment losses if the carrying values of the specific properties’ asset groups classified as held for sale exceed such properties’ estimated fair values less costs to sell. Our estimates of fair value consider matters such as recent sales data for comparable properties and, where applicable, contracts or the results of negotiations with prospective purchasers. These estimates are subject to revision as market conditions, and our assessment of such conditions, change.
Current wording
Since asset groups associated with properties held for sale are carried at the lower of their carrying values (i.e., cost less accumulated depreciation and any impairment loss recognized, where applicable) or estimated fair values less costs to sell, decisions by us to sell certain properties will result in impairment losses if the carrying values of the specific properties’ asset groups classified as held for sale exceed such properties’ estimated fair values less costs to sell. Our estimates of fair value consider matters such as recent sales data for comparable properties and, when applicable, contracts or the results of negotiations with prospective purchasers. These estimates are subject to revision as market conditions, and our assessment of such conditions, change.
Previous wording
The table below sets forth the 20 largest tenants in our portfolio of operating properties based on percentage of ARR:
Current wording
The table below sets forth the 20 largest tenants in our portfolio of operating properties based on percentage of ARR (dollars in thousands):
Previous wording
(1)Includes affiliated organizations where applicable.
Current wording
(1)Includes affiliated organizations where applicable. Percentages shown as of December 31, 2024 and 2023 have not been restated for organizational changes of our top 20 largest tenants that occurred subsequent to those respective reporting periods.
Previous wording
Concentration of Properties by Segment
Current wording
Concentration of Properties by Segment/Sub-Segment
Previous wording
The table below sets forth the segment allocation of our ARR (square feet in thousands):
Current wording
The table below sets forth the allocation of our ARR by segment/sub-segment (square feet in thousands):
Previous wording
The tables below set forth occupancy information (excluding our Wholesale Data Center that we sold on January 25, 2022):
Current wording
The tables below set forth occupancy information:
Previous wording
In 2024, we leased 3.2 million square feet, including the following:
Current wording
In 2025, we leased 3.1 million square feet, including the following:
Previous wording
2.6 million square feet in renewed leases, representing a tenant retention rate of 86.0%. Most of these lease renewals were for our Defense/IT Portfolio, which had a retention rate of 88.6%, while our Other segment had a retention rate of 49.4%. The cash rents for our renewals (totaling $35.26 per square foot) increased on average by approximately 0.6% and the straight-line rents (totaling $35.47 per square foot) increased on average by approximately 8.6% relative to the leases previously in place for the space. The renewed leases had a weighted average lease term of approximately 3.9 years, with average escalations per year of 2.4%, and the per annum average committed costs associated with completing the leasing was approximately $2.79 per square foot;
Current wording
•2.0 million square feet in renewed leases, representing a tenant retention rate of 77.9%. Most of these lease renewals were for our Defense/IT Portfolio, which had a retention rate of 79.3%, while our Other segment had a retention rate of 60.5%. The cash rents for our renewals (totaling $34.38 per square foot) increased on average by approximately 1.1% and the straight-line rents (totaling $34.50 per square foot) increased on average by approximately 9.6% relative to the leases previously in place for the space. The renewed leases had a weighted average lease term of approximately 5.3 years, with average escalations per year of 2.0%, and the per annum average committed costs associated with completing the leasing was approximately $2.51 per square foot;
Previous wording
500,000 square feet of vacant space leased, most of which for our Defense/IT Portfolio. The cash rents of this leasing totaled $35.23 per square foot and the straight-line rents totaled $36.26 per square foot; these leases had a weighted average lease term of approximately 7.7 years, with average escalations per year of 2.5%, and the per annum average committed costs associated with completing this leasing was approximately $11.60 per square foot; and
Current wording
•557,000 square feet of vacant space leased, including 424,000 in our Defense/IT Portfolio and 133,000 in our Other segment. The cash rents from this leasing totaled $31.66 per square foot and the straight-line rents totaled $31.88 per square foot. These leases had a weighted average lease term of approximately 7.6 years, with average escalations per year of 2.7%, and the per annum average committed costs associated with completing this leasing was approximately $8.04 per square foot; and
Previous wording
124,000 square feet of investment space in our Defense/IT Portfolio, with weighted average lease terms of 8.2 years, including our leasing of 3900 Rogers Road subsequent to its acquisition.
Current wording
•477,000 square feet of investment space in our Defense/IT Portfolio, with weighted average lease terms of 13.1 years, virtually all of which was for development properties.
Previous wording
The weighted average lease term as of December 31, 2024 was approximately five years. We believe that the weighted average ARR per occupied square foot for leases expiring in 2025, on average, approximated current market rents for the related space, with specific results varying by segment/sub-segment.
Current wording
The weighted average lease term as of December 31, 2025 was approximately five years. We believe that the weighted average ARR per occupied square foot for leases expiring in 2026, on average, was approximately 1.0% to 3.0% lower than estimated current market rents for the related space, with specific results varying by segment/sub-segment.
Previous wording
We evaluate the operating performance of our properties using NOI from real estate operations, our segment performance measure, which includes: real estate revenues and property operating expenses; and the net of revenues and property operating expenses of real estate operations owned through unconsolidated real estate joint ventures (“UJV” or “UJVs”) that is allocable to our ownership interest (“UJV NOI allocable to COPT Defense”). The table below reconciles net income (loss), the most directly comparable GAAP measure, to NOI from real estate operations:
Current wording
We evaluate the operating performance of our properties using NOI from real estate operations, our segment performance measure, which includes: real estate revenues and property operating expenses; and the net of revenues and property operating expenses of real estate operations owned through unconsolidated real estate joint ventures (“UJV” or “UJVs”) that is allocable to our ownership interest (“UJV NOI allocable to COPT Defense”). The table below reconciles net income, the most directly comparable GAAP measure, to NOI from real estate operations:
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
developed properties placed into service that were not 100% operational throughout the two years being compared;
Current wording
•developed properties placed into service that were not 100% operational throughout the two years being compared; and
Previous wording
Our Same Property pool consisted of 189 properties, comprising 90.6% of our portfolio’s square footage as of December 31, 2024. This pool of properties changed from the pool used for purposes of comparing 2023 and 2022 in our 2023 Annual Report on Form 10-K due to the addition of seven properties placed in service and 100% operational on or before January 1, 2023 and two properties owned through a UJV that was formed in 2022.
Current wording
Our Same Property pool consisted of 198 properties, comprising 94.9% of our portfolio’s square footage as of December 31, 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.
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Current report — wording carried from elsewhere
•$104.0 million in available borrowing capacity under our Revolving Development Facility;
Current report — wording carried from elsewhere
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 $104.0 million as of December 31, 2025.
Rearranged previous paragraphs (4)
Previous report — wording carried elsewhere
leased 388,000 of its vacant space, which exceeded the expiring lease square footage that was vacated.
Previous report — wording carried elsewhere
no significant debt maturing until 2026;
Previous report — wording carried elsewhere
$19.9 million increase from newly-developed properties placed in service; and
Previous report — wording carried elsewhere
$14.2 million increase from our Same Properties, which included the effect of increased rental and occupancy rates in our Defense/IT Portfolio; and