COPT DEFENSE PROPERTIES

Notes to Consolidated Financial Statements

1. Organization

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 its defense contractors, who are primarily engaged in priority national security activities, and who generally require mission-critical and high security property enhancements. Our property portfolio is predominantly comprised of office properties and single-tenant data center shells. As of December 31, 2025, our Defense/IT Portfolio included (all references to number of properties, square footage and acres are unaudited):

•201 operating properties totaling 23.2 million square feet. We owned 24 of these properties totaling 4.3 million square feet through unconsolidated real estate joint ventures;

•five properties under development that will total approximately 646,000 square feet upon completion; and

•approximately 1,000 acres of land controlled that we believe could be developed into approximately 10.6 million square feet.

We also ownedsix other operating properties totaling 2.0 million square feet and approximately 50 acres of other developable land in the Greater Washington, DC/Baltimore region as of December 31, 2025.

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, most of which are tenants. 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, 2025, COPT Defense owned 97.5% of the outstanding CDPLP common units (“common units”) and there wereno 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”.

2. Summary of Significant Accounting Policies

Basis of Presentation

These consolidated financial statements include the accounts of COPT Defense, the Operating Partnership, their subsidiaries and other entities in which COPT Defense has a majority voting interest and control. We also consolidate certain entities when control of such entities can be achieved through means other than voting rights (“variable interest entities” or “VIEs”) if we are deemed to be the primary beneficiary of such entities. We eliminate all intercompany balances and transactions in consolidation.

We use the equity method of accounting when we own an interest in an entity and can exert significant influence over but cannot control the entity’s operations. We discontinue equity method accounting if our investment in an entity (and net advances) is reduced to zero unless we have guaranteed obligations of the entity or are otherwise committed to provide further financial support for the entity.

When we own an equity investment in an entity and cannot exert significant influence over its operations, we measure the investment at fair value, with changes recognized through net income. For an investment without a readily determinable fair value, we measure the investment at cost, less any impairments, plus or minus changes resulting from observable price changes for an identical or similar investment of the same issuer.

Reclassifications

We reclassified certain amounts from prior periods to conform to the current period presentation of our consolidated financial statements with no effect on previously reported net income or equity.

Use of Estimates in the Preparation of Financial Statements

We make estimates and assumptions when preparing financial statements under generally accepted accounting principles (“GAAP”). These estimates and assumptions affect various matters, including:

•the reported amounts of assets and liabilities in our consolidated balance sheets as of the dates of the financial statements;

•the disclosure of contingent assets and liabilities as of the dates of the financial statements; and

•the reported amounts of revenues and expenses in our consolidated statements of operations during the reporting periods.

Significant estimates are inherent in the presentation of our financial statements in a number of areas, including the evaluation of the collectability of accounts and deferred rent receivable, the determination of estimated useful lives of assets, the determination of lease terms, the evaluation of long-lived assets for impairment, the amount of impairment losses recognized, the allocation of property acquisition costs, the amount of revenue recognized relating to tenant improvements, the level of expense recognized in connection with share-based compensation and the determination of accounting method for investments. Actual results could differ from these and other estimates.

We report properties to be developed or held and used in operations at our depreciated cost, reduced for impairment losses.

We capitalize direct and indirect project costs (including related compensation and other indirect costs), interest expense and real estate taxes associated with properties, or portions thereof, undergoing development or redevelopment activities. In capitalizing interest expense, if there is a specific debt for a property undergoing development or redevelopment activities, we apply the interest rate of that debt to the average accumulated expenditures that do not exceed such debt; for the portion of expenditures exceeding any such specific debt, we apply our weighted average interest rate on other debt to the expenditures. We continue to capitalize costs while development or redevelopment activities are underway until a property becomes “operational,” which occurs when lease terms commence (generally when the tenant has control of the leased space and we have delivered the premises to the tenant as required under the terms of such lease), but no later thanone year after the cessation of major construction activities. When leases commence on portions of a newly-developed or redeveloped property in the period prior toone year from the cessation of major construction activities, we consider that property to be “partially operational.” When a property is partially operational, we allocate the costs associated with the property between the portion that is operational and the portion under development. We start depreciating costs associated with newly-developed or redeveloped properties as they become operational. For newly-developed properties, we classify improvements provided under the terms of a lease that are deemed to be landlord assets (as discussed further below) as new building development costs.

Most of our leases provide for some form of improvements to leased space. When we are required to provide improvements under the terms of a lease, we determine whether the improvements constitute landlord assets or tenant assets. If the improvements are landlord assets, we capitalize the cost of the improvements and recognize depreciation expense over the estimated useful lives of the assets as discussed below. We recognize any payments from the tenant for such assets as lease revenue over the term of the lease. If the improvements are tenant assets associated with an operating lease, we defer the costs funded by us as a lease incentive asset and amortize it as a reduction of rental revenue over the term of the lease. In determining whether improvements constitute landlord or tenant assets, we consider numerous factors, including whether the economic substance of the lease terms is properly reflected and whether the improvements: have value to us as real estate; are unique to the tenant or reusable by other tenants; may be altered or removed by the tenant without our consent or without compensating us for any lost fair value; or are owned, and remain, with us or the tenant at the end of the lease term.

We depreciate our fixed assets using the straight-line method over their estimated useful lives as follows:

We report properties disposed or classified as held for sale as discontinued operations when the disposition represents a strategic shift having a major effect on our operations and financial results (such as a disposition of a reportable segment or sub-segment or major line of business). For discontinued operations, we classify for all periods presented the associated: assets as held for sale on our consolidated balance sheets; and results of operations as discontinued operations on our consolidated statements of operations (including interest expense on debt specifically identifiable to such components).

For periods in which a property not reported as discontinued operations is classified as held for sale, we classify the assets of the property’s asset group as held for sale on our consolidated balance sheets.

Sales of Properties

We recognize gains from sales of consolidated interests in properties when we transfer control of such interests.

Impairment of Properties

We assess the asset groups associated with each of our properties, including operating properties, properties in development, land held for future development, related intangible assets and liabilities, deferred leasing costs, right-of-use assets, deferred rents receivable and lease liabilities, for indicators of impairment quarterly or when circumstances indicate that an asset group may be impaired. If our analyses indicate that the carrying values of certain properties’ asset groups may be impaired, we perform a recovery analysis for such asset groups. For properties to be held and used, we analyze recoverability based on the estimated undiscounted future cash flows expected to be generated from the operations and eventual disposition of the properties over, in most cases, aten-year holding period. If we believe it is more likely than not that we will dispose of the properties earlier, we analyze recoverability using a probability weighted analysis of the estimated undiscounted future cash flows expected to be generated from the operations and eventual disposition of the properties over the various possible holding periods. If the analysis indicates that the carrying value of a tested property’s asset group is not recoverable from its estimated future cash flows, the property’s asset group is written down to the property’s estimated fair value and an impairment loss is recognized. If and when our plans change, we revise our recoverability analyses to use the cash flows expected from the operations and eventual disposition of such property using holding periods that are consistent with our revised plans; as a result, changes in holding periods may require us to recognize impairment losses.

Fair values are estimated based on contract prices, indicative bids, discounted cash flow analyses or comparable sales analyses. Estimated cash flows used in our impairment analyses are based on our plans for the property and our views of market and economic conditions. The estimates consider items such as current and future market rental and occupancy rates, estimated operating and capital expenditures, leasing commissions, absorption and hold periods and recent sales data for comparable properties; most of these items are influenced by market data obtained from real estate leasing and brokerage firms and our direct experience with the properties and their markets.

When we determine that a property is held for sale, we stop depreciating the property and estimate the property’s fair value, net of selling costs; if we then determine that the estimated fair value, net of selling costs, is less than the net carrying value of the property’s asset group, we recognize an impairment loss equal to the difference and reduce the net carrying value of the property’s asset group.

Acquisition of Operating Properties

Upon completion of operating property acquisitions, we allocate the purchase price and direct transaction-related costs to tangible and intangible assets and liabilities associated with such acquisitions based on their relative fair values. We determine these fair values by using market data and independent appraisals available to us and making numerous estimates and assumptions. We allocate operating property acquisitions to the following components:

•properties based on a valuation performed under the assumption that the property is vacant upon acquisition (the “if-vacant value”). The if-vacant value is allocated based on the valuation performed between land and buildings or, in the case of properties under development, development in progress. We also allocate additional amounts to properties for in-place tenant improvements based on our estimate of improvements per square foot attributable to the remaining non-cancelable terms of the respective in-place leases;

•above- and below-market lease intangible assets or liabilities based on the present value (using an estimated interest rate reflective of the risks associated with the leases acquired) of the difference between: (1) the contractual amounts to be received pursuant to the in-place leases; and (2) our estimate of fair market lease rates for the corresponding spaces, measured over a period equal to the remaining non-cancelable terms of the respective leases. The capitalized above- and below-market lease values are amortized as adjustments to lease revenue over the remaining lease terms of the respective leases, and to renewal periods in the case of below-market leases;

•in-place lease value based on our estimates of: (1) the present value of additional income to be realized as a result of leases being in place on the acquired properties; and (2) costs to execute similar leases. Our estimate of costs to execute similar leases includes leasing commissions, legal and other related costs;

•tenant relationship value based on our evaluation of the specific characteristics of each tenant’s lease and our overall relationship with that respective tenant. Characteristics we consider in determining these values include the nature and extent of our existing business relationships with the tenant, growth prospects for developing new business with the tenant, the tenant’s credit quality and expectations of lease renewals, among other factors; and

•above- and below-market cost arrangements (such as real estate tax treaties or above- or below-market ground leases) based on the present value of the expected benefit from any such arrangements in place on the property at the time of acquisition.

Leased Assets, as a Lessee

We recognize right-of-use assets and lease liabilities for land and other assets leased by us from third parties for terms of at least one year. We recognize lease expense over lease terms on a straight-line basis for operating leases and on an effective interest method basis for finance leases. In determining right-of-use assets and lease liabilities, we estimate an appropriate incremental borrowing rate on a fully-collateralized basis for the terms of the leases. Since the terms under our land leases are usually significantly longer than the terms of borrowings available to us on a fully-collateralized basis, our estimates of rates for such leases require significant judgment, and consider factors such as estimated interest rates available to us on a fully-collateralized basis for shorter-termed debt and U.S. Treasury rates.

Cash and Cash Equivalents

Cash and cash equivalents include all cash and liquid investments that mature three months or less from when they are purchased. Cash equivalents are reported at cost, which approximates fair value. We maintain our cash in bank accounts in amounts that may exceed federally insured limits at times. We have not experienced any losses on these accounts in the past and believe that we are not exposed to significant credit risk because our accounts are deposited with major financial institutions.

Investments in Marketable Securities

We classify marketable securities as trading securities when we intend to sell such securities in the near term, and classify other marketable securities as available-for-sale securities. We determine the appropriate classification of investments in marketable securities at the acquisition date and re-evaluate the classification at each balance sheet date. We report investments in marketable securities classified as trading securities at fair value, with unrealized gains and losses recognized through earnings; on our consolidated statements of cash flows, we classify cash flows from these securities as operating activities.

Receivables and Credit Losses

We write off receivables when we believe the facts and circumstances indicate that continued pursuit of collection is no longer warranted. When cash is received in connection with receivables for which we have previously recognized credit losses, we recognize reductions in our credit losses.

Lease Revenue

We estimate the collectability of lease revenue and related accounts receivable using judgement based on the credit status and payment history of the related tenants. If we deem that collectability of revenue under a lease is not probable, revenue recognized is limited to the lesser of revenue that would have been recognized if collectability was probable or lease payments collected.

Financial Assets and Other Instruments

We measure credit losses of most financial assets and certain other instruments not measured at fair value through net income using an expected loss model, including for our:

•investing receivables, as disclosed in Note 7;

•tenant notes receivable;

•net investments in sales-type leases;

•other assets comprised of non-lease revenue related accounts receivable (primarily from construction contract services) and contract assets from unbilled construction contract revenue; and

•off-balance sheet credit exposures.

We recognize an estimate of our expected credit losses on these items as an allowance or as a separate liability in the case of off-balance sheet credit exposures. The allowance represents the portion that we do not expect to collect (or loss we expect to incur in the case of off-balance sheet credit exposures) due to credit over the contractual life based on available information relevant to assessing the collectability of cash flows, which includes consideration of past events, current conditions and reasonable and supportable forecasts of future economic conditions (including consideration of asset- or borrower-specific factors). The allowance for expected credit losses reflects the risk of loss, even when that risk is remote. An allowance for credit losses is measured and recorded upon the initial recognition of a financial asset (or off-balance sheet credit exposure), regardless of whether it is originated or purchased. We update our estimate of expected losses quarterly, considering any cash receipts and changes in risks or assumptions, with resulting adjustments recognized as credit loss expense or recoveries on our consolidated statements of operations (included in the line entitled “interest and other income, net”).

Expected credit losses are estimated using historical loss rate information developed for varying classifications of credit risk and contractual lives. Due to our limited quantity of items for which we use the expected loss model and the unique risk characteristics of such items, we individually assign each item a credit risk classification. The credit risk classifications assigned by us are determined based on credit ratings assigned by ratings agencies (as available) or are internally-developed based on available financial information, historical payment experience, credit documentation, other publicly available information and current economic trends. In addition, for our notes receivable from the City of Huntsville disclosed in Note 7, since the risk of credit loss is affected by the economic performance of a real estate development project, we develop probability weighted scenario analyses for varying levels of performance in estimating our credit loss allowance.

When we believe that collection of interest income on an investing or tenant note receivable is not probable, we place the receivable on nonaccrual status, meaning interest income is recognized when payments are received rather than on an accrual basis.

Deferred Leasing Costs

We defer costs incurred to obtain new tenant leases or extend existing tenant leases. We amortize these costs evenly over the lease terms. We classify leasing costs paid as an investing activity on our statements of cash flows since such costs are necessary in order for us to generate long-term future cash flows from our properties. When tenant leases are terminated early, we expense any unamortized deferred leasing costs associated with those leases over the shortened lease term.

Intangible Assets and Deferred Revenue on Property Acquisitions

We amortize intangible assets and deferred revenue on property acquisitions as follows:

On our consolidated balance sheets, we include intangible assets in the line entitled “prepaid expense and other assets, net” and deferred revenue in the line entitled “deferred revenue associated with operating leases.”

Intangible assets on property acquisitions consisted of the following (in thousands):

Deferred Financing Costs

We defer costs of financing arrangements and recognize such costs as interest expense over the related debt terms on a straight-line basis, which approximates the amortization that would occur under the effective interest method of amortization. We expense any unamortized loan costs when loans are retired early or significantly modified. We include deferred costs of financing arrangements as a direct deduction from the related debt liability, except for costs attributable to line-of-credit arrangements and interest rate derivatives, which we include on our consolidated balance sheets in the line entitled “prepaid expenses and other assets, net.”

Interest Rate Derivatives

Our primary objectives in using interest rate derivatives are to add stability to interest expense and to manage exposure to interest rate movements. To accomplish this objective, we use interest rate swaps as part of our interest rate risk management strategy. Interest rate swaps designated as cash flow hedges involve the receipt of variable-rate amounts from a counterparty in exchange for our making fixed-rate payments over the life of the agreements without exchange of the underlying notional amount. We use interest rate swaps to hedge the cash flows associated with interest rates on variable-rate debt borrowings. We have also used forward-starting interest rate swaps to hedge the cash flows associated with interest rates on forecasted fixed-rate borrowings. We recognize all derivatives as assets or liabilities on our consolidated balance sheets at fair value.

We defer all changes in the fair value of designated cash flow hedges to accumulated other comprehensive income (“AOCI”) or loss (“AOCL”), reclassifying such deferrals to interest expense as interest expense is recognized on the hedged forecasted transactions, and recognize related cash flows as cash flows from operating activities. When an interest rate swap designated as a cash flow hedge no longer qualifies for hedge accounting and the hedged transactions are probable not to occur, we recognize changes in the fair value of the hedge previously deferred to AOCI or AOCL, along with any changes in fair value occurring thereafter, through earnings and, if applicable, related cash flows as cash flows from investing activities. We do not use interest rate derivatives for trading or speculative purposes. We manage counter-party risk by only entering into contracts with major financial institutions based upon their credit ratings and other risk factors.

We use standard market conventions and techniques such as discounted cash flow analysis, option pricing models, replacement cost and termination cost in computing the fair value of derivatives at each balance sheet date.

Noncontrolling Interests

Our consolidated noncontrolling interests are comprised of interests in CDPLP not owned by COPT Defense and interests in consolidated real estate joint ventures not owned by us (discussed further in Note 6). We evaluate whether noncontrolling interests are subject to redemption features outside of our control. We classify noncontrolling interests that are currently redeemable for cash at the option of the holders or are probable of becoming redeemable as redeemable noncontrolling interests in the mezzanine section of our consolidated balance sheet. We adjust these interests each period to the greater of their fair value or carrying amount (initial amount as adjusted for allocations of income and losses and contributions and distributions), with a corresponding offset to additional paid-in capital on our consolidated balance sheets. Our other noncontrolling interests are reported in the equity section of our consolidated balance sheets.

Revenue Recognition

Lease and Other Property Revenue

We lease real estate properties, comprised primarily of office properties and data center shells, to third parties. These leases usually include options under which the tenant may renew its lease based on market rates at the time of renewal, which are then typically subject to further negotiation. These leases occasionally provide the tenant with an option to terminate its lease early, usually for a defined termination fee.

Most of our lease revenue is from fixed contractual payments defined under the lease that, in most cases, escalate annually over the term of the lease. Our lease revenue also includes variable lease payments predominantly for tenant reimbursements of property operating expenses and lease termination fees. Property operating expense reimbursement structures vary, with some tenants responsible for all of a property’s expenses, while others are responsible for their share of a property’s expenses only to the extent such expenses exceed amounts defined in the lease (which are derived from the property’s historical expense levels). Lease termination fees in most cases result from a tenant’s exercise of an existing right under a lease.

Upon lease commencement, we evaluate leases to determine if they meet criteria set forth in lease accounting guidance for classification as sales-type leases or direct financing leases; if a lease meets none of these criteria, we classify the lease as an operating lease. Upon commencement of sales-type leases, we derecognize the underlying asset, recognizing in its place a net investment in the lease equal to the sum of the lease receivable and the present value of any unguaranteed residual asset and recognize any selling profit or loss created as a result of the difference between those two amounts, less any related deferred initial direct lease costs. Similarly, for direct financing leases, we would derecognize the underlying asset and recognize a net investment in the lease, but, unlike in a sales-type lease, would defer profit and amortize it as interest income over the lease term. Our leases of properties as lessor are predominantly classified as operating leases, for which the underlying asset remains on our balance sheet and is depreciated consistently with other owned assets, with income recognized as described below.

We recognize minimum rents on operating leases, net of abatements, on a straight-line basis over the term of tenant leases. A lease term commences when: (1) the tenant has control of the leased space (legal right to use the property); and (2) we have delivered the premises to the tenant as required under the terms of the lease. The term of a lease includes the noncancellable periods of the lease along with periods covered by: (1) a tenant option to extend the lease if the tenant is reasonably certain to exercise that option; (2) a tenant option to terminate the lease if the tenant is reasonably certain not to exercise that option; and (3) an option to extend (or not to terminate) the lease in which exercise of the option is controlled by us as the lessor. When assessing the expected lease end date, 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 for the tenant based on any existing contract, asset, entity or market-based factors associated with the lease. While a significant portion of our portfolio is leased to the USG, and the majority of those leases consist of a series ofone-year renewal options, and/or provide for early termination rights, we have concluded that exercise of existing renewal options, or continuation of such leases without exercising early termination rights, is reasonably certain for most of these leases.

We elected a practical expedient available under lease accounting guidance that enables us to combine non-lease components that otherwise would need to be accounted for under revenue accounting guidance (such as tenant reimbursements of property operating expenses) with the associated lease components for our accounting and reporting of operating lease revenue.

We report on our consolidated balance sheets amounts by which our minimum rental revenue recognized on a straight-line basis under leases exceed the contractual rent billings associated with such leases as deferred rent receivable and amounts by which our minimum rental revenue recognized on a straight-line basis under leases are less than the contractual rent billings associated with such leases in liabilities as deferred revenue associated with operating leases.

In connection with a tenant’s entry into, or modification of, a lease, if we make cash payments to, or on behalf of, the tenant for purposes other than funding the construction of landlord assets, we generally defer the amount of such payments as lease incentives. As discussed above, when we are required to provide improvements under the terms of a lease, we determine whether the improvements constitute landlord assets or tenant assets. If the improvements are tenant assets associated with an operating lease, we defer the costs funded by us as a lease incentive asset. We amortize lease incentives as a reduction of rental revenue over the term of the lease.

If collectability under a lease is not probable, revenue recognized is limited to the lesser of revenue that would have been recognized if collectability was probable or lease payments collected.

We recognize lease revenue associated with tenant expense recoveries in the same periods in which we incur the related expenses, including tenant reimbursements of property taxes, utilities and other property operating expenses.

We recognize fees received for lease terminations as revenue and write off against such revenue any (1) deferred rents receivable, and (2) deferred revenue, lease incentives and intangible assets that are amortizable into lease revenue associated with such leases; the resulting net amount is the net revenue from the early termination of the leases. When a tenant’s lease for space in a property is terminated early but the tenant continues to lease such space under a new or modified lease in the property, the net revenue from the early termination of the lease is recognized evenly over the remaining life of the new or modified lease in place on that property.

Construction Contract and Other Service Revenues

We enter into construction contracts to complete various design and construction services primarily for our USG tenants. The revenues and expenses from these services include primarily subcontracted costs that are reimbursed to us by our customers along with a fee. These services are an ancillary component of our overall operations, with small operating margins relative to the revenue. We review each contract to determine the performance obligations and allocate the transaction price based on the standalone selling price, as discussed further below. We recognize revenue under these contracts as services are performed in an amount that reflects the consideration we expect to receive in exchange for those services. Our performance obligations are satisfied over time as work progresses. Revenue recognition is determined using the input method based on costs incurred as of a point in time relative to the total estimated costs at completion to measure progress towards satisfying our performance obligations. We believe incurred costs of work performed best depicts the transfer of control of the services being transferred to the customer.

In determining whether the performance obligations associated with a construction contract should be accounted for separately versus together, we consider numerous factors that may require significant judgment, including: whether the components contracted are substantially the same with the same pattern of transfer; whether the customer could contract with another party to perform construction based on our design project; and whether the customer can elect not to move forward after the design phase of the contract. Most of our contracts have a single performance obligation as the promise to transfer the services is not separately identifiable from other obligations in the contracts and, therefore, are not distinct. Some contracts have multiple performance obligations, most commonly due to having distinct project phases for design and construction that our customer is managing separately. In these cases, we allocate the transaction price between these performance obligations based on the relative standalone selling prices, which we determine by evaluating: the relative costs of each performance obligation; the expected operating margins (which typically do not vary significantly between obligations); and amounts set forth in the contracts for each obligation. Contract modifications, such as change orders, are routine for our construction contracts and are generally determined to be additions to the existing performance obligations because they would have been part of the initial performance obligations if they were identified at the initial contract date.

We have three main types of compensation arrangements for our construction contracts: guaranteed maximum price (“GMP”); firm fixed price (“FFP”); and cost-plus fee.

•GMP contracts provide for revenue equal to costs incurred plus a fee equal to a percentage of such costs, up to a maximum contract amount. We generally enter into GMP contracts for projects that are significant in nature based on the size of the project and total fees and with an undefined scope as of the contract date. GMP contracts are lower risk to us than FFP contracts since the costs and revenue move proportionately to one another.

•FFP contracts provide for revenue equal to a fixed fee. These contracts are typically lower in value and scope relative to GMP contracts, and are generally entered into when the scope of the project is well defined. Typically, we assume more risk with FFP contracts than GMP contracts since the revenue is fixed and we could realize losses or less than expected profits if we incur more costs than originally estimated. However, these types of contracts offer the opportunity for additional profits when we complete the work for less than originally estimated.

•Cost-plus fee contracts provide for revenue equal to costs incurred plus a fee equal to a percentage of such costs but, unlike GMP contracts, do not have a maximum contract amount. Similar to GMP contracts, cost-plus fee contracts are low risk to us since the costs and revenue move proportionately to one another.

Construction contract cost estimates are based primarily on contracts in place with subcontractors to complete most of the work, but may also include assumptions, such as performance of subcontractors and cost and availability of materials, to project the outcome of future events over the course of the project. We review and update these estimates regularly as a significant change could affect the profitability of our construction contracts. We recognize adjustments in estimated profit on contracts under the cumulative catch-up method as the modification does not create a new performance obligation. Under this method, the impact of an adjustment to profit recorded to date on a contract is recognized in the period the adjustment is identified. Revenue and profit in future periods are recognized using the adjusted estimate. If at any time the estimate of contract profitability indicates an anticipated loss on a contract, we recognize the total loss in the quarter it is identified.

Our timing of revenue recognition for construction contracts generally differs from the timing of invoicing to customers. We recognize construction contract revenue as we satisfy our performance obligations. Payment terms and conditions vary by contract type. Under most of our contracts, we bill customers monthly as work progresses in accordance with the contract terms, with payment due in 30 days, although customers occasionally pay in advance of services being provided. We have determined that our contracts generally do not include a significant financing component. The timing of our customer invoicing is for convenience purposes, rather than to provide or receive financing. Additionally, the timing of transfer of our services is often at the discretion of the customer.

Under most of our contracts, we bill customers one month subsequent to revenue recognition, resulting in contract assets representing unbilled construction revenue.

Our contract liabilities consist of advance payments from our customers or billings in excess of construction contract revenue recognized.

Expense Classification

We classify as property operating expenses costs incurred for property taxes, ground rents, utilities, property management, insurance, repairs and exterior and interior maintenance, as well as associated labor and indirect costs.

We classify as general, administrative, leasing and other expenses costs incurred for corporate-level management, public company administration, asset management, leasing, investor relations, marketing, corporate-level insurance, leasing prospects and business development and land carry costs, as well as associated labor and indirect costs.

Share-Based Compensation

We issue four forms of share-based compensation: restricted COPT Defense common shares (“restricted shares”), profit interest units (“PIUs”) (time-based and performance-based), deferred share awards (also known as restricted share units) and performance share units (also known as performance share awards) (“PSUs”). We account for share-based compensation based on the fair value of awards on the grant date; such cost is then recognized over the period during which the employee is required to provide service in exchange for the award. No compensation cost is recognized for equity instruments for which employees do not render the requisite service. We recognize share-based compensation associated with awards that are ultimately expected to vest; as a result, future forfeitures of awards are estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. If an award is voluntarily cancelled by an employee, we recognize the previously unrecognized cost associated with the original award on the date of such cancellation. We capitalize costs associated with share-based compensation attributable to employees engaged in development and redevelopment activities.

We compute the fair value of restricted shares, time-based PIUs (“TB-PIUs”) and deferred share awards based on the fair value of COPT Defense common shares on the grant date. We compute the fair value of performance-based PIUs (“PB-PIUs”) and PSUs using a Monte Carlo model. Significant assumptions used for that model include the following: the baseline common share value determined based on market value on the grant date; the risk-free interest rate determined based on the U.S. Treasury yield curve in effect at the time of grant; and expected volatility determined based on historical volatility of COPT Defense’s common shares.

Income Taxes

COPT Defense elected to be treated as a REIT under Sections 856 through 860 of the Internal Revenue Code. To qualify as a REIT, COPT Defense must meet a number of organizational and operational requirements, including a requirement that it distribute at least 90% of its adjusted taxable income to its shareholders. As a REIT, COPT Defense generally will not be subject to federal income tax on taxable income that it distributes to its shareholders. If COPT Defense fails to qualify as a REIT in any tax year, it will be subject to federal income tax on its taxable income at regular corporate rates and may not be able to qualify as a REIT for four subsequent tax years.

For federal income tax purposes, dividends to shareholders may be characterized as ordinary income, capital gains or return of capital. The characterization of dividends paid on COPT Defense’s common shares during each of the last three years was as follows:

The dividends allocated to each of the above years for federal income tax purposes included dividends on COPT Defense’s common shares with a record date during each of those years except for the dividends paid on January 17, 2023 (with a record date of December 30, 2022), which were allocated for federal income tax purposes to 2023.

We distributed all of COPT Defense’s REIT taxable income in 2025, 2024 and 2023 and, as a result, did not incur federal income tax in those years.

The net basis of our consolidated assets and liabilities for tax reporting purposes was approximately $238 million higher than the amount reported on our consolidated balance sheet as of December 31, 2025, which was primarily related to differences in basis for net properties and deferred rent receivable.

We are subject to certain state and local income and franchise taxes. The expense associated with these state and local taxes, excluding state income tax, is included in general, administrative, leasing and other expenses and property operating expenses on our consolidated statements of operations. We did not separately state these amounts on our consolidated statements of operations because they are insignificant.

Recent Accounting Pronouncements

Effective January 1, 2025, we adopted guidance issued by the Financial Accounting Standards Board (“FASB”) aimed at reducing complexity and diversity in practice in determining whether a profits interest award is accounted for as a share-based payment. Our adoption of this guidance did not change the accounting for any of our share-based compensation award types, and therefore did not affect our consolidated financial statements.

Effective for this 2025 Annual Report on Form 10-K, we adopted guidance issued by the FASB to improve income tax disclosures. This guidance requires enhanced annual disclosures primarily related to existing rate reconciliation and income taxes paid disclosure requirements. This guidance was applied prospectively and did not affect our consolidated financial statements.

In November 2024, the FASB issued guidance requiring disaggregated disclosure of specified information about certain expense categories included in expense line items on the consolidated statements of operations in the notes to the financial statements. This guidance is effective for us for annual periods beginning after December 15, 2026 and interim periods beginning after December 15, 2027. Early adoption is permitted. We expect to apply this guidance prospectively to financial statements issued for reporting periods after the effective date. We are currently assessing the application of this guidance on our future consolidated financial statements.

In July 2025, the FASB issued guidance providing a practical expedient for use in estimating expected credit losses on non-lease revenue related accounts receivable and contract assets. The practical expedient permits an entity to assume that current conditions as of the balance sheet date do not change for the remaining life of the asset. The guidance is effective for us for interim and annual periods beginning after December 15, 2025. Early adoption is permitted and the guidance will be applied prospectively. We do not expect this guidance to materially affect our future consolidated financial statements.

3. Fair Value Measurements

Accounting standards define fair value as the exit price, or the amount that would be received upon sale of an asset or paid to transfer a liability in an orderly transaction between market participants as of the measurement date. The standards also establish a hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. Observable inputs are inputs market participants would use in valuing the asset or liability developed based on market data obtained from sources independent of us. Unobservable inputs are inputs that reflect our assumptions about the factors market participants would use in valuing the asset or liability developed based upon the best information available in the circumstances. The hierarchy of these inputs is broken down into three levels: Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities; Level 2 inputs include (1) quoted prices for similar assets or liabilities in active markets, (2) quoted prices for identical or similar assets or liabilities in inactive markets and (3) inputs (other than quoted prices) that are observable for the asset or liability, either directly or indirectly; and Level 3 inputs are unobservable inputs for the asset or liability. Categorization within the valuation hierarchy is based upon the lowest level of input that is most significant to the fair value measurement.

Recurring Fair Value Measurements

The fair values of our interest rate derivatives are determined using widely accepted valuation techniques, including a discounted cash flow analysis on the expected cash flows of each derivative. This analysis reflects the contractual terms of the derivatives, including the period to maturity, and uses observable market-based inputs, including interest rate market data and implied volatilities in such interest rates. While we determined that the majority of the inputs used to value our derivatives fall within Level 2 of the fair value hierarchy, the credit valuation adjustments associated with our interest rate derivatives utilize Level 3 inputs, such as estimates of current credit spreads, to evaluate the likelihood of default. However, as of December 31, 2025 and 2024, we assessed the significance of the impact of the credit valuation adjustments on the overall valuation of our derivatives and determined that these adjustments were not significant. As a result, we determined that our interest rate derivative valuations in their entirety are classified in Level 2 of the fair value hierarchy.

The carrying values of cash and cash equivalents, restricted cash, accounts receivable, other assets (excluding investing receivables) and accounts payable and accrued expenses are reasonable estimates of their fair values because of the short maturities of these instruments. The fair values of our investing receivables, as disclosed in Note 7, were based on the discounted estimated future cash flows of the loans (categorized within Level 3 of the fair value hierarchy); the discount rates used approximate current market rates for loans with similar maturities and credit quality, and the estimated cash payments include scheduled principal and interest payments. For our disclosure of debt fair values in Note 8, we estimated the fair value of our unsecured senior notes based on quoted market rates for our senior notes (categorized within Level 1 of the fair value hierarchy) and estimated the fair value of our other debt based on the discounted estimated future cash payments to be made on such debt (categorized within Level 3 of the fair value hierarchy); the discount rates used approximate current market rates for loans, or groups of loans, with similar maturities and credit quality, and the estimated future payments include scheduled principal and interest payments. Fair value estimates are made as of a specific point in time, are subjective in nature and involve uncertainties and matters of significant judgment.

The table below sets forth our financial assets and liabilities accounted for at fair value on a recurring basis as of December 31, 2025 and 2024 and the hierarchy level of inputs used in measuring their respective fair values under applicable accounting standards (in thousands):

(1)Included in the line entitled “prepaid expenses and other assets, net” on our consolidated balance sheets.

(2)Included in the line entitled “other liabilities” on our consolidated balance sheets.

4. Properties, Net

Operating properties, net consisted of the following (in thousands):

2025 Acquisition

On October 30, 2025, we acquired 15050 Conference Center Drive, a 142,000 square foot operating office property in Chantilly, Virginia (included in the NoVA Defense/IT sub-segment of our Defense/IT Portfolio reportable segment) that was 100% leased, for a gross purchase price of $40.0 million, or $32.6 million net of a $7.4 million purchase price credit for an unpaid tenant improvement allowance.

The table below sets forth the allocation of the purchase price and transaction costs associated with the acquisition (in thousands):

(1)Represents in-place lease value with an amortization period of 9.8 years associated with the acquisition.

2024 Acquisitions

In 2024, we acquired the following operating office properties:

•6841 Benjamin Franklin Drive, a 202,000 square foot property in Columbia, Maryland (included in the Fort Meade/BW Corridor sub-segment of our Defense/IT Portfolio reportable segment) that was 56% leased, for a purchase price of $15.0 million on March 15, 2024; and

•3900 Rogers Road, an 80,000 square foot property in San Antonio, Texas (included in the Lackland Air Force Base sub-segment of our Defense/IT Portfolio reportable segment) that was vacant on the acquisition date and subsequently leased in full, for a purchase price of $17.0 million on September 26, 2024.

The table below sets forth the allocation of the aggregate purchase price and transaction costs associated with these acquisitions (in thousands):

Intangible assets recorded in connection with these acquisitions included the following (dollars in thousands):

2023 Impairments

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 forsix 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 in 2023.

2023 Dispositions

On January 10, 2023, we sold a 90% interest inthree data center shell properties in Northern Virginia based on an aggregate property value of $211.3 million and retained a 10% interest in the properties through Redshift JV LLC (“Redshift”), a newly-formed joint venture. Our partner in the joint venture acquired the 90% interest from us for $190.2 million. We account for our interest in the joint venture using the equity method of accounting, as described further in Note 6. We recognized a gain on sale of $49.4 million.

5. Leases

Lessor Arrangements

We lease real estate properties, comprised primarily of office properties and data center shells, to third parties. These leases encompass all, or a portion, of properties, with various expiration dates. Our lease revenue is comprised of: fixed-lease revenue, including contractual rent billings under leases recognized on a straight-line basis over lease terms and amortization of lease incentives and above- and below-market lease intangibles; and variable-lease revenue, including tenant expense recoveries, lease termination revenue and other revenue from tenants that is not fixed under leases. The table below sets forth our composition of lease revenue recognized between fixed- and variable-lease revenue (in thousands):

A significant concentration of our lease revenue was earned from our largest tenant, the USG, including 37% of our total lease revenue in 2025, 2024 and 2023 and 26% in 2025 and 27% in 2024 and 2023 of our fixed-lease revenue. Our lease revenue from the USG was earned primarily from properties in the Fort George G. Meade and the Baltimore/Washington Corridor (“Fort Meade/BW Corridor”), Lackland Air Force Base and Northern Virginia Defense/IT (“NoVA Defense/IT”) reportable sub-segments (see Note 13).

Fixed contractual payments due under our property leases were as follows (in thousands):

(1) Included in the line entitled “prepaid expenses and other assets, net” on our consolidated balance sheet.

Lessee Arrangements

As of December 31, 2025, our balance sheet included $55.8 million in right-of-use assets associated primarily with land leased from third parties underlying certain properties that we are operating. The land leases have long durations with remaining terms ranging from 23 to 75 years (excluding extension options). As of December 31, 2025, our right-of-use assets included:

•$17.3 million for land in a business park in Huntsville, Alabama under 26 leases through our LW Redstone Company, LLC joint venture, with remaining terms ranging from 37 to 49 years and options to renew for an additional 25 years that were not included in the term used in determining the asset balance;

•$12.0 million for data center space in Phoenix, Arizona with a remaining term oftwo years;

•$9.1 million for land underlying operating office properties in Washington, DC undertwo leases with remaining terms of approximately 74 years;

•$6.3 million for land underlying a parking garage in Baltimore, Maryland under a lease with a remaining term of 23 years and an option to renew for an additional 49 years that was included in the term used in determining the asset balance;

•$8.7 million for land in a research park in College Park, Maryland under five leases through our M Square Associates, LLC joint venture, all of the rent on which was previously paid. These leases had remaining terms ranging from 57 to 75 years; and

•$2.0 million for other land underlying operating properties in our Fort Meade/BW Corridor sub-segment undertwo leases with remaining terms of approximately 42 years, all of the rent on which was previously paid.

The table below sets forth our property right-of-use assets and property lease liabilities on our consolidated balance sheets (in thousands):

As of December 31, 2025, our operating leases had a weighted average remaining lease term of 41 years and a weighted average discount rate of 7.4%, while our finance leases had a weighted average remaining lease term ofseven years and a weighted average discount rate of 9.1%. The table below presents our total property lease cost (in thousands):

The table below presents the effect of property lease payments on our consolidated statements of cash flows (in thousands):

Payments on property leases were due as follows (in thousands):

6. Real Estate Joint Ventures

Consolidated Real Estate Joint Ventures

The table below sets forth information pertaining to our investments in consolidated real estate joint ventures, which are each variable interest entities (dollars in thousands):

(1)As discussed below, we fund all capital requirements. Our partner receives distributions of $1.2 million of annual operating cash flows, plus certain fees for leasing and development, and we receive the remainder.

Each of these joint ventures is engaged in the development and/or operation of real estate. We consolidate these joint ventures because of our: (1) power to direct the matters that most significantly impact their activities, including development, leasing and management of their properties; and (2) right to receive returns on our fundings and, in many cases, the obligation to fund the activities of the ventures to the extent that third-party financing is not obtained, both of which potentially could be significant. With regard to these joint ventures:

•for LW Redstone Company, LLC, we have funded $75.3 million in infrastructure costs through December 31, 2025 (excluding accrued interest thereon), which are due to be reimbursed by the City of Huntsville as discussed further in Note 7. We also have funded development costs through equity contributions to the extent that third party financing was not obtained, and expect to continue to do so in the future. Our partner was credited with $9.0 million in invested capital upon formation and is not required to make, nor has it made, additional equity contributions. Cash flows are generally distributed to the partners as follows: (1) debt service on member loans; (2) cumulative preferred returns of 13.5% on our partner’s invested capital; (3) cumulative preferred returns of 13.5% on our invested capital; (4) return of our invested capital; (5) return of our partner’s invested capital; and (6) any remaining residual 85% to us and 15% to our partner. Our partner has the right to require us to acquire its interest for fair value; accordingly, we classify the fair value of our partner’s interest as redeemable noncontrolling interests in the mezzanine section of our consolidated balance sheets. We have the right to acquire our partner’s interest at fair value upon the earlier offive years following the project’s achievement of a construction commencement threshold of 4.4 million square feet or March 2040; the project had achieved approximately 2.8 million square feet of construction commencement through December 31, 2025. Our partner has the right to receive some or all of the consideration for the acquisition of its interests in the form of common units in CDPLP;

•for Stevens Investors, LLC, net cash flows of this entity are distributed to the partners as follows: (1) member loans and accrued interest; (2) pro rata return of the partners’ capital; (3) pro rata return of the partners’ respective unpaid preferred returns; and (4) varying splits of 85% to 60% to us and the balance to our partners as we reach specified return hurdles. Our partners had the right to require us to acquire some or all of their interests for fair value until June 2023; accordingly, we classified the fair value of our partners’ interests as redeemable noncontrolling interests in the mezzanine section of our consolidated balance sheets until such rights expired in June 2023. We and our partners each have the right to acquire each other’s interests at fair value. Our partners have the right to receive some or all of the consideration for the acquisition of their interests in the form of common units in CDPLP; and

•for M Square Associates, LLC, net cash flows of this entity are distributed to the partners as follows: (1) member loans and accrued interest; (2) our capital contributions used to fund infrastructure costs and 10% preferred return thereon; (3) the partners’ capital contributions used to fund all other costs and 10% preferred return thereon in proportion to their respective accrued returns and capital accounts; and (4) residual amounts distributed 50% to each member.

We disclose the activity of our redeemable noncontrolling interests in Note 10.

Unconsolidated Real Estate Joint Ventures

The table below sets forth information pertaining to our investments in unconsolidated real estate joint ventures accounted for using the equity method of accounting (dollars in thousands):

(1)Included $36.4 million and $39.4 million reported in “investment in unconsolidated real estate joint ventures” and $22.8 million and $3.4 million for investments with deficit balances reported in “other liabilities” on our consolidated balance sheets as of December 31, 2025 and 2024, respectively. Investments with deficit balances are attributable to JV distributions of nonrecourse debt refinancing proceeds in excess of our equity in B RE COPT DC JV III LLC and B RE COPT DC JV II LLC; we are obligated to fund our share of future cash flow requirements of these joint ventures.

(2)Formed in connection with the transaction described further in Note 4.

(3)Our investment in B RE COPT DC JV II LLC was lower than our share of the joint venture’s equity by $6.5 million as of December 31, 2025 and $6.7 million as of December 31, 2024 due to a difference between our cost basis and our share of the joint venture’s underlying equity in its net assets. We recognize adjustments to our share of the joint venture’s earnings and losses resulting from this basis difference in the underlying assets of the joint venture.

These joint ventures operate triple-net leased, single-tenant data center shell properties in Northern Virginia. We concluded that these joint ventures are variable interest entities. Under the terms of the joint venture agreements, we and our partners receive returns in proportion to our investments, and our maximum exposure to losses is limited to our investments, subject to our share of certain indemnification obligations with respect to nonrecourse debt secured by the properties. The nature of our involvement in the activities of the joint ventures do not give us power over decisions that significantly affect their economic performance.

7. Investing Receivables

Investing receivables consisted of the following (in thousands):

The balances above included accrued interest receivable, net of allowance for credit losses, of $3.8 million as of December 31, 2025 and $3.2 million as of December 31, 2024.

Our notes receivable from the City of Huntsville funded infrastructure costs in connection with our LW Redstone Company, LLC joint venture (see Note 6) and carry an interest rate of 9.95%. These notes and the accrued and unpaid interest thereon, which compounds annually on March 1, will be repaid using the real estate taxes generated by the properties developed by the joint venture. When these tax revenues are sufficient to cover the debt service on a certain increment of municipal bonds, the City of Huntsville is required to issue bonds to repay the notes and the accrued and unpaid interest thereon. The city made payments on these notes and accrued interest thereon totaling $12.7 million in 2025, $17.6 million in 2024 and $820,000 in 2023. Each note has a maturity date of the earlier of 30 years from the date issued or the expiration of the tax increment district comprising the developed properties in 2045.

Our other investing loan receivable as of December 31, 2025 carries an effective interest rate of 12.0% and matures in early 2026.

The fair value of these receivables was approximately $73 million as of December 31, 2025 and $72 million as of December 31, 2024.

8. Debt, Net

Debt Summary

Our debt consisted of the following (dollars in thousands):

(1)The carrying values of our debt other than the Revolving Development Facility and Revolving Credit Facility reflect net deferred financing costs of $4.1 million as of December 31, 2025 and $4.0 million as of December 31, 2024.

(2)Including the effect of an interest rate swap that hedges the risk of interest rate changes, the weighted average interest rate on our variable-rate secured debt as of December 31, 2025 was 3.1%; excluding the effect of this swap, the weighted average interest rate on this debt as of December 31, 2025 was 5.2%.

(3)Refer to the paragraphs below for further disclosure.

(4)The weighted average interest rate on the Revolving Development Facility was 5.1% as of December 31, 2025, excluding the effect of interest rate swaps that hedge the risk of interest rate changes (see Note 9).

(5)The weighted average interest rate on the Revolving Credit Facility was 4.6% as of December 31, 2025, excluding the effect of interest rate swaps that hedge the risk of interest rate changes (see Note 9).

(6)The interest rate on this loan was 4.9% as of December 31, 2025, excluding the effect of interest rate swaps that hedge the risk of interest rate changes (see Note 9).

(7)The carrying value of these notes reflects unamortized discounts and commissions totaling $153,000 as of December 31, 2025 and $1.1 million as of December 31, 2024. The effective interest rate under the notes, including amortization of such costs, was 2.5%.

(8)As discussed below, these notes have an exchange settlement feature under which the notes may, under certain circumstances, be exchangeable at the option of the holders. The carrying value of these notes reflects unamortized commissions totaling $4.9 million as of December 31, 2025 and $6.6 million as of December 31, 2024. The effective interest rate under the notes, including amortization of such costs, was 5.8%.

(9)The carrying value of these notes reflects unamortized discounts and commissions totaling $1.1 million as of December 31, 2025 and $1.5 million as of December 31, 2024. The effective interest rate under the notes, including amortization of such costs, was 2.1%.

(10)The carrying value of these notes reflects unamortized discounts and commissions totaling $4.3 million as of December 31, 2025. The effective interest rate under the notes, including amortization of such costs, was 4.8%.

(11)The carrying value of these notes reflects unamortized discounts and commissions totaling $5.7 million as of December 31, 2025 and $6.7 million as of December 31, 2024. The effective interest rate under the notes, including amortization of such costs, was 2.9%.

(12)The carrying value of these notes reflects unamortized discounts and commissions totaling $3.2 million as of December 31, 2025 and $3.5 million as of December 31, 2024. The effective interest rate under the notes, including amortization of such costs, was 3.0%.

(13)This note carries an interest rate that, upon assumption, was below market rates and it therefore was recorded at its fair value based on applicable effective interest rates. The carrying value of this note reflects an unamortized discount totaling $1,000 as of December 31, 2025 and $10,000 as of December 31, 2024.

All debt is owed by the Operating Partnership. While COPT Defense is not directly obligated by any debt, it has guaranteed CDPLP’s Revolving Development Facility, Revolving Credit Facility, term loan facility and Unsecured Senior Notes. As of December 31, 2025, all of our mortgage and other secured debt was for consolidated real estate joint ventures (see Note 6), except for our Revolving Development Facility.

Certain of our debt instruments require that we comply with a number of restrictive financial covenants, including corporate leverage ratio, unencumbered leverage ratio, minimum fixed charge coverage ratio, minimum unencumbered interest coverage ratio, minimum debt service and maximum secured indebtedness ratio. In addition, the terms of some of CDPLP’s debt may limit its ability to make certain types of payments and distributions to COPT Defense in the event of default or when such payments or distributions may prompt failure of debt covenants, excluding distributions required to maintain COPT Defense’s qualification as a REIT. As of December 31, 2025, we were compliant with these financial covenants.

Our debt matures on the following schedule (in thousands):

(1)Represents scheduled principal amortization and maturities only and therefore excludes net discounts and deferred financing costs of $23.5 million.

We capitalized interest costs of $5.2 million in 2025, $2.9 million in 2024 and $4.5 million in 2023.

The following table sets forth information pertaining to the fair value of our debt (in thousands):

Revolving Development Facility

On October 16, 2025, we entered into a credit agreement for a secured revolving line of credit that we expect to use to fund property development activities (the “Revolving Development Facility”). The agreement provides for an initial aggregate commitment by the lender of $200.0 million. The facility matures on October 16, 2029, with the ability to extend such maturity 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. The interest rate on the facility is based on the Secured Overnight Financing Rate (“SOFR”) plus 1.250% to 1.900%, as determined by the credit ratings assigned to CDPLP by S&P Global Ratings, Moody’s Investors Service, Inc. or Fitch Ratings, Inc. (collectively, the “Ratings Agencies”) or otherwise specified under the agreement. The facility also carries a quarterly fee that is based on the lenders’ commitment multiplied by a per annum rate of 0.125% to 0.300%, as determined by the credit ratings assigned to CDPLP by the Ratings Agencies or otherwise specified under the agreement. As of December 31, 2025, the maximum borrowing capacity under our Revolving Development Facility totaled $200.0 million, of which $104.0 million was available.

In 2025, weighted average borrowings totaled $123.4 million and the weighted average interest rate was 5.3% under our Revolving Development Facility.

Revolving Credit Facility and Term Loan Facility

On October 6, 2025, we entered into an amendment to an existing credit agreement with a group of lenders for an unsecured revolving credit facility (the “Revolving Credit Facility”), and which also provided for a $125.0 million term loan facility. The resulting amended credit agreement (the “Amended Credit Agreement”) includes the following provisions:

•for the Revolving Credit Facility:

•an aggregate commitment by the lenders of $800.0 million (increased from $600.0 million);

•an interest rate based on SOFR plus 0.725% to 1.400%, as determined by the credit ratings assigned to CDPLP by the Ratings Agencies or otherwise specified under the Amended Credit Agreement, with no SOFR transition charge;

•a quarterly fee based on the lenders’ commitment under the facility multiplied by a per annum rate of 0.125% to 0.300%, as determined by the credit ratings assigned to CDPLP by the Ratings Agencies or otherwise specified under the Amended Credit Agreement; and

•an extension of the maturity date from October 26, 2026 to October 5, 2029, with the ability for us to extend such maturity bytwo six-month periods at our option, provided that there is no default under the Amended Credit Agreement and we pay an extension fee of 0.0625% of the total availability under the facility for each extension period; and

•for the term loan facility:

•an interest rate based on SOFR plus 0.850% to 1.700%, as determined by the credit ratings assigned to CDPLP by the Ratings Agencies or otherwise specified under the Amended Credit Agreement, with no SOFR transition charge; and

•maintained the facility’s maturity date and extension option terms. The facility matures on January 30, 2027, with the ability for us to extend such maturity by a 12-month period at our option, provided that there is no default under the Amended Credit Agreement and we pay an extension fee of 0.125% of the outstanding term loans under the agreement for each extension period.

As of December 31, 2025, the maximum borrowing capacity under our Revolving Credit Facility totaled $800.0 million, of which $746.0 million was available.

Weighted average borrowings under our Revolving Credit Facility totaled $100.9 million in 2025 and $78.3 million in 2024. The weighted average interest rate on our Revolving Credit Facility was 5.4% in 2025 and 6.3% in 2024, excluding the effect of interest rate swaps that hedge the risk of interest rate changes.

We repaid $75.0 million of our term loan facility in the fourth quarter of 2025.

Unsecured Senior Notes

During 2023 and 2025, we issued the following unsecured senior notes:

•$345.0 million of 5.25% Exchangeable Senior Notes due 2028 (the “5.25% Notes”) on September 12, 2023 in a private placement to persons reasonably believed to be qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933, as amended, resulting in proceeds, after deducting the initial purchasers’ commissions, but before other offering expenses, of $336.4 million. The notes mature on September 15, 2028; and

•$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. The proceeds from this issuance, after deducting underwriting discounts and commissions, but before other offering expenses, were $395.5 million. The notes mature on October 15, 2030.

With regard to the 5.25% Notes:

•prior to the close of business on the business day immediately preceding June 15, 2028, the notes will be exchangeable at the option of the noteholders only in the event of certain circumstances and during certain periods defined under the terms of the notes. On or after June 15, 2028, the notes will be exchangeable at the option of the holders at any time prior to the close of business on the business day immediately preceding the maturity date. Upon exchange, the principal amount of notes is payable in cash. The remainder of the exchange obligation, if any, as determined based on the exchange price per common share at the time of settlement, is payable in cash, common shares or a combination thereof at our election. The exchange rate of the notes initially equaled 33.3739 of our common shares per $1,000 principal amount of notes (equivalent to an initial exchange price of approximately $29.96 per common share) and is subject to adjustment upon the occurrence of some events, but will not be adjusted for any accrued and unpaid interest. As of December 31, 2025, the exchange rate of the notes equaled 33.5201 of our common shares per $1,000 principal amount of notes (equivalent to an exchange price of approximately $29.83 per common share);

•we may redeem the notes at our option, in whole or in part, on any business day on or after September 21, 2026, and prior to the 51st scheduled trading day immediately preceding the maturity date, if the last reported sale price of our common shares has been at least 130% of the exchange price then in effect for at least 20 trading days (whether or not consecutive) during any 30 consecutive trading day period ending on, and including, the trading day immediately preceding the date on which we provide notice of redemption. The redemption price will be equal to 100% of the principal amount of the notes to be redeemed, plus accrued and unpaid interest, if any, to, but excluding, the redemption date; and

•the table below sets forth interest expense recognized on the notes (in thousands):

We may redeem our 2.25% Senior Notes due 2026 (the “2.25% Notes”),2.00% Senior Notes due 2029 (the “2.00% Notes”),4.50% Notes,2.75% Senior Notes due 2031 (the “2.75% Notes”) and 2.90% Senior Notes due 2033 (the “2.90% Notes”) in whole at any time or in part from time to time, at our option, at a redemption price equal to the greater of (1) the aggregate principal amount of the notes being redeemed or (2) the sum of the present values of the remaining scheduled payments of principal and interest thereon (not including any portion of such payments of interest accrued as of the date of redemption) discounted, on a semi-annual basis at an adjusted treasury rate plus a spread (35 basis points for the 2.25% Notes,20 basis points for the 2.00% Notes,15 basis points for the 4.50% Notes,25 basis points for the 2.75% Notes and 25 basis points for the 2.90% Notes), plus, in each case, accrued and unpaid interest thereon to the date of redemption. However, in each case, if this redemption occurs on or after a defined date (February 15, 2026 for the 2.25% Notes, November 15, 2028 for the 2.00% Notes, September 15, 2030 for the 4.50% Notes, January 15, 2031 for the 2.75% Notes and September 1, 2033 for the 2.90% Notes), the redemption price will be equal to 100% of the principal amount of the notes being redeemed, plus accrued and unpaid interest thereon to, but not including, the applicable redemption date.

Our unsecured senior notes are unconditionally guaranteed by COPT Defense.

9. Interest Rate Derivatives

The following table sets forth the key terms and fair values of our interest rate swap derivatives (dollars in thousands):

(1)The notional amount of this instrument is scheduled to amortize to $10.0 million.

Each of these swaps was designated as a cash flow hedge of interest rate risk.

The table below sets forth the fair value of our interest rate derivatives as well as their classification on our consolidated balance sheets (in thousands):

The table below presents the effect of our interest rate derivatives on our consolidated statements of operations and comprehensive income (in thousands):

Based on the fair value of our derivatives as of December 31, 2025, we estimate that approximately $107,000 of net gains will be reclassified from AOCI as a decrease to interest expense over the next 12 months.

We have agreements with each of our interest rate derivative counterparties that contain provisions under which, if we default or are capable of being declared in default on defined levels of our indebtedness, we could also be declared in default on our derivative obligations. Failure to comply with the loan covenant provisions could result in our being declared in default on any derivative instrument obligations covered by the agreements. As of December 31, 2025, we were not in default with any of these provisions. As of December 31, 2025, the fair value of interest rate derivatives in a liability position related to these agreements was $7,000, excluding the effects of accrued interest and credit valuation adjustments. As of December 31, 2025, we had not posted any collateral related to these agreements.

10. Redeemable Noncontrolling Interests

As discussed further in Note 6, redeemable noncontrolling interests on our consolidated balance sheets included the ownership interests of our partners in LW Redstone Company, LLC, and until June 2023 also included Stevens Investors, LLC, due to the partners’ rights to require us to acquire their interests. Effective in June 2023, these rights expired for our Stevens Investors, LLC partners, which resulted in our reclassification of their interests from redeemable noncontrolling interests to the noncontrolling interests in subsidiaries section of equity. The table below sets forth the activity for redeemable noncontrolling interests (in thousands):

We determine the fair value of the interests based on unobservable inputs after considering the assumptions that market participants would make in pricing the interest. We apply a discount rate to the estimated future cash flows allocable to our partners from the properties underlying the respective joint ventures. Estimated cash flows used in such analyses are based on our plans for the properties and our views of market and economic conditions, and consider items such as current and future rental rates, occupancy projections and estimated operating and development expenditures.

11. Equity

Preferred Shares

As of December 31, 2025, we had 25.0 million preferred shares authorized and unissued at $0.01 par value per share.

Common Shares

In May 2022, we entered into an at-the-market (“ATM”) stock offering program under which we may offer and sell common shares in at-the-market stock offerings having an aggregate gross sales price of up to $300 million and may also, at our discretion, sell common shares under forward equity sales agreements. As of December 31, 2025, we hadnot issued any shares under the ATM Program.

Certain CDPLP limited partners converted their common units in CDPLP for an equal number of common shares in the amount of 296,046 in 2025 and 40,000 in 2024.

We declared dividends per common share of $1.22 in 2025 and $1.18 in 2024 and $1.14 in 2023.

We pay dividends at the discretion of our Board of Trustees. Our ability to pay cash dividends will be dependent upon: (1) the cash flow generated from our operations; (2) cash generated or used by our financing and investing activities; and (3) the annual distribution requirements under the REIT provisions of the Internal Revenue Code described in Note 2 and such other factors as the Board of Trustees deems relevant. Our ability to make cash dividends will also be limited by the terms of CDPLP’s Partnership Agreement, as well as by limitations imposed by state law. In addition, we are prohibited from paying cash dividends in excess of the amount necessary for us to qualify for taxation as a REIT if a default or event of default exists pursuant to the terms of the credit agreement underlying our Revolving Credit Facility, Revolving Development Facility and term loan facility; this restriction does not currently limit our ability to pay dividends, and we do not believe that this restriction is reasonably likely to limit our ability to pay future dividends because we expect to comply with the terms of this agreement.

See Note 12 for disclosure of common share activity pertaining to our share-based compensation plans.

12. Share-Based Compensation and Other Compensation Matters

Share-Based Compensation Plans

In May 2017, we adopted the 2017 Omnibus Equity and Incentive Plan following the approval of such plan by our common shareholders, and we amended the plan in November 2018 and May 2024. We may issue equity-based awards under this plan to officers, employees, non-employee trustees and any other key persons of us and our subsidiaries, as defined in the plan. The plan provides for a maximum of 6.9 million of our common shares to be issued in the form of options, share appreciation rights, restricted share unit awards, restricted share awards, unrestricted share awards, PIUs, dividend equivalent rights and other equity-based awards and for the granting of cash-based awards. This plan expires on May 11, 2027. Shares for the plan are issued under a registration statement on Form S-8 that became effective upon filing with the Securities and Exchange Commission.

The table below sets forth our reporting for share based compensation cost (in thousands):

The amounts included in our consolidated statements of operations for share-based compensation reflected an estimate of pre-vesting forfeitures of 0% for awards to our executives and non-employee Trustees and 8% to 9% for awards to all other employees.

As of December 31, 2025, unrecognized compensation costs related to unvested awards included:

•$7.3 million on restricted shares expected to be recognized over a weighted average period of approximately three years;

•$5.3 million on PB-PIUs expected to be recognized over a weighted average performance period of approximatelytwo years;

•$3.6 million on TB-PIUs expected to be recognized over a weighted average period of approximatelytwo years;

•$296,000 on PSUs expected to be recognized through December 2027; and

•$41,000 on deferred share awards expected to be recognized through May 2026.

Restricted Shares

The following table summarizes restricted shares activity under our share-based compensation plan for 2023, 2024 and 2025:

Restricted shares granted to employees generally vest based on increments and over periods of time set forth under the terms of the respective awards provided that the employee remains employed by us. Restricted shares granted to non-employee Trustees vest on the first anniversary of the grant date, provided that the Trustee remains in the position.

The aggregate intrinsic value of restricted shares that vested was $4.0 million in 2025 and 2024 and $3.8 million in 2023.

PIUs

We grantedtwo forms of PIUs: TB-PIUs; and PB-PIUs. TB-PIUs are subject to forfeiture restrictions until the end of the requisite service period, at which time the TB-PIUs automatically convert into vested PIUs. PB-PIUs are subject to a market condition in that the number of earned awards are determined at the end of the performance period (as described further below) and then settled in vested PIUs. Vested PIUs automatically convert into common units in CDPLP if, or when, a book-up event (as defined under federal income tax regulations) has occurred and carry substantially the same rights to distributions as common units.

TB-PIUs

TB-PIUs granted to senior management team members vest based on increments and over periods of time set forth under the terms of the respective awards provided that the employee remains employed by us. TB-PIUs granted to non-employee Trustees vest on the first anniversary of the grant date, provided that the Trustee remains in the position. Prior to vesting, TB-PIUs carry substantially the same rights to distributions as common units but carry no redemption rights. The following table summarizes TB-PIUs activity under our share-based compensation plan for 2023, 2024 and 2025:

The aggregate intrinsic value of TB-PIUs that vested was $3.0 million in 2025, $2.4 million in 2024 and $2.3 million in 2023.

Performance-Based Awards

We made the following grants of performance-based equity in the form of either PB-PIUs or PSUs to certain senior management team members from 2021 through 2025 as based on the election of the grant recipients(dollars in thousands):

The performance-based equity awards have athree-year performance period concluding on the earlier of the respective performance period end dates, or the date of: (1) termination by us without cause, death or disability of the employee or constructive discharge of the employee (collectively, “qualified termination”); or (2) a sale event. The number of earned awards following the end of the performance period will be determined based on the percentile rank of COPT Defense’s total shareholder return (“TSR”) relative to a peer group of companies, as set forth in the following schedule:

If the percentile rank exceeds the 25th percentile and is betweentwo of the percentile ranks set forth in the table above, then the percentage of the earned awards will be interpolated between the ranges set forth in the table above to reflect any performance between the listed percentiles. In addition:

•for performance-based equity granted in 2024 and 2025:

•if COPT Defense’s TSR is negative when its TSR’s percentile rank exceeds the 50th percentile, then the earned award payout percentage used to arrive at the earned awards would be reduced by 25 percentage points, but in no event to a payout percentage of less than 100% of the target award; however, the resulting reduction in earned awards would subsequently be deemed earned awards if COPT Defense’s TSR becomes positive on any date in the calendar year following the end of the performance period; and

•regardless of COPT Defense’s TSR relative to the peer group, no less than 100% of the target award will be earned if COPT Defense’s TSR is at least 10% and no less than 50% of the target award will be earned if COPT Defense’s TSR is at least 6%, with linear interpolation if COPT Defense’s TSR is between 6% and 10%; and

•for PB-PIUs granted prior to 2024, if COPT Defense’s TSR is negative, the maximum number of earned awards will be limited to the target level payout percentage.

During the performance period, PB-PIUs carry rights to distributions equal to 10% of the distribution rights of common units but carry no redemption rights.

Following the end of the performance period, we settle the awards as follows:

•for PB-PIUs, issuing vested PIUs equal to the number of earned awards and the excess, if any, of (1) the aggregate distributions that would have been paid with respect to vested PIUs issued in settlement of the earned awards through the date of settlement had such vested PIUs been issued on the grant date over (2) the aggregate distributions made on the PB-PIUs through the date of settlement, divided by the price of our common shares over a defined period of time; and

•for PSUs, issuing fully-vested COPT Defense shares equal to: the number of earned awards; and the aggregate dividends that would have been paid with respect to the common shares issued in settlement of the earned awards through the date of settlement had such shares been issued on the grant date, divided by the price of our common shares over a defined period of time.

If a performance period ends due to a sale event or qualified termination, the number of earned awards is prorated based on the portion of thethree-year performance period that has elapsed. If employment is terminated by the employee or by us for cause, all unvested performance-based awards are forfeited.

Based on COPT Defense’s TSR relative to its peer group of companies:

•for the 2021 PB-PIUs issued to executives that vested on December 31, 2023, we issued 211,845 vested PIUs in settlement of the PB-PIUs on February 1, 2024;

•for the 2022 PB-PIUs issued to executives that vested on December 31, 2024, we issued 212,831 vested PIUs in settlement of the PB-PIUs on February 1, 2025; and

•for the 2023 PB-PIUs issued to executives that vested on December 31, 2025, we issued 250,070 vested PIUs in settlement of the PB-PIUs on February 5, 2026.

We computed grant date fair values for performance-based equity using Monte Carlo models and recognize these values over the respective performance periods. The grant date fair value and certain of the assumptions used in the Monte Carlo models for the performance-based equity granted in 2023, 2024 and 2025 are set forth below:

In 2023,126,890 PB-PIUs were forfeited due to an award recipient’s resignation.

Deferred Share Awards

We made the following grants of deferred share awards to non-employee Trustees in 2023, 2024 and 2025 (dollars in thousands, except per share data):

Deferred share awards vest on the first anniversary of the grant date, provided that the Trustee remains in the position. We settle deferred share awards by issuing an equivalent number of common shares upon vesting of the awards or a later date elected by the Trustee (generally upon cessation of being a Trustee). In 2025, we issued 32,669 common shares in settlement of vested deferred share awards with a weighted average grant date fair value of $26.19 per award and an aggregate intrinsic value on the settlement date of $897,000. We didnot have any award settlements in 2023 or 2024.

13. Information by Business Segment

We organize our portfolio of operating properties into reportable segments by demand driver, which is based primarily on their location and secondarily on their physical characteristics and use. We havetwo reportable segments: Defense/IT Portfolio; and Other. We also report on Defense/IT Portfolio sub-segments, which include the following: Fort Meade/BW Corridor; Redstone Arsenal (in Huntsville, Alabama); NoVA Defense/IT; Lackland Air Force Base (in San Antonio, Texas); locations serving the U.S. Navy (“Navy Support”), which included properties 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; and data center shells (properties leased to tenants to be operated as data centers in which the tenants fund the costs for the power, fiber connectivity and data center infrastructure). In the first quarter of 2025, we retrospectively reclassifiedtwo properties to our Fort Meade/BW Corridor sub-segment from our Other segment.

We measure the performance of our segments through the measure we define as net operating income from real estate operations (“NOI from real estate operations”), which includes real estate revenues and other segment items, which is comprised of: 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”). Property operating expenses represent costs associated with operating our properties, including property taxes, ground rents, utilities, property management, insurance, repairs and exterior and interior maintenance, as well as associated labor and indirect costs.

FASB guidance on segment reporting uses the term chief operating decision maker to define a function responsible for allocating resources to and assessing the performance of the segments of a public entity. Our President and Chief Executive Officer served as our chief operating decision maker for each of the periods included herein. Our chief operating decision maker uses budget to actual comparisons of:

•NOI from real estate operations to assess the performance of our segments; and

•operating expense information on a consolidated basis and for our Same Property pool (defined as our properties stably owned and 100% operational throughout both the current and prior year) to manage expenses associated with operating our properties.

Amounts reported for segment assets represent long-lived assets associated with consolidated operating properties (including the carrying value of properties, right-of-use assets, net of related lease liabilities, intangible assets, deferred leasing costs, deferred rents receivable and lease incentives) and the carrying value of investments in UJVs owning operating properties, net of deficit investment balances reported in “other liabilities” on our consolidated balance sheets (which were included in our data center shells sub-segment and totaled $13.5 million, $36.0 million and $38.3 million as of December 31, 2025, 2024 and 2023, respectively).

Amounts reported as additions to long-lived assets represent additions to existing consolidated operating properties, excluding transfers from non-operating properties, which we report separately.

The table below reports segment financial information for our reportable segments (in thousands):

The following table reconciles our segment revenues to total revenues as reported on our consolidated statements of operations (in thousands):

The following table reconciles UJV NOI allocable to COPT Defense to equity in income (loss) of unconsolidated entities as reported on our consolidated statements of operations (in thousands):

As previously discussed, we provide real estate services such as property management, development and construction services primarily for our properties but also for third parties. The primary manner in which we evaluate the operating performance of our service activities is through a measure we define as net operating income from service operations (“NOI from service operations”), which is based on the net of revenues and expenses from these activities. Construction contract and other service revenues and expenses consist primarily of subcontracted costs that are reimbursed to us by the customer along with a management fee. The operating margins from these activities are small relative to the revenue. We believe NOI from service operations is a useful measure in assessing both our level of activity and our profitability in conducting such operations. The table below sets forth the computation of our NOI from service operations (in thousands):

The following table reconciles our NOI from real estate operations for reportable segments and NOI from service operations to net income as reported on our consolidated statements of operations (in thousands):

The following table reconciles our segment assets to our consolidated total assets (in thousands):

The accounting policies of the segments are the same as those used to prepare our consolidated financial statements. In the segment reporting presented above, we did not allocate interest expense, depreciation and amortization, impairment losses, gain on sales of real estate, loss on early extinguishment of debt and equity in income (loss) of unconsolidated entities not included in NOI to our real estate segments since they are not included in the measure of segment profit reviewed by management. We also did not allocate general, administrative, leasing and other expenses, interest and other income, net, income taxes and noncontrolling interests because these items represent general corporate or non-operating property items not attributable to segments.

14. Construction Contract and Other Service Revenues

We disaggregate in the table below our construction contract and other service revenues by compensation arrangement as we believe it best depicts the nature, timing and uncertainty of our revenue (in thousands):

We derived 98% of our construction contract revenue from the USG in 2025 and 2024 and 88% in 2023.

We recognized an insignificant amount of revenue in 2025, 2024 and 2023 from performance obligations satisfied (or partially satisfied) in previous periods.

Accounts receivable related to our construction contract services is included in accounts receivable, net on our consolidated balance sheets. The beginning and ending balances of accounts receivable related to our construction contracts were as follows (in thousands):

Contract assets are included in prepaid expenses and other assets, net on our consolidated balance sheets. The beginning and ending balances of our contract assets were as follows (in thousands):

Contract liabilities are included in other liabilities on our consolidated balance sheets. Changes in contract liabilities were as follows (in thousands):

Revenue allocated to the remaining performance obligations under existing contracts as of December 31, 2025 that will be recognized as revenue in future periods was $26.7 million, all of which we expect to recognize in 2026.

We haveno deferred incremental costs incurred to obtain or fulfill our construction contracts or other service revenues as of December 31, 2025 and 2024. Credit loss expense or recoveries on construction contracts receivable and unbilled construction revenue were insignificant in 2025, 2024 or 2023.

15. Credit Losses on Financial Assets and Other Instruments

The table below sets forth the activity for our allowance for credit losses in 2023, 2024 and 2025 (in thousands):

(1)Included in the line entitled “accounts receivable, net” on our consolidated balance sheets.

(2)The balances as of December 31, 2025 and 2024 included insignificant amounts in the lines entitled “accounts receivable, net” and “prepaid expenses and other assets, net” on our consolidated balance sheets.

(3)Included in the line entitled “interest and other income, net” on our consolidated statements of operations.

The following table presents the amortized cost basis of our investing receivables, tenant notes receivable and sales-type lease receivables by credit risk classification, by origination year as of December 31, 2025 (in thousands):

Our investment grade credit risk classification represents entities with investment grade credit ratings from the Ratings Agencies, meaning that they are considered to have at least an adequate capacity to meet their financial commitments, with credit risk ranging from minimal to moderate. Our non-investment grade credit risk classification represents entities with either no credit agency credit ratings or ratings deemed to be sub-investment grade; we believe that there is significantly more credit risk associated with this classification. The credit risk classifications of our investing receivables and tenant notes receivable were last updated in December 2025.

None of the investing and tenant notes receivables set forth above were past due, which we define as being delinquent by more than three months from the due date.

We did not have any tenant notes receivable on nonaccrual status as of December 31, 2025 and 2024. We did not recognize any interest income on tenant notes receivable on nonaccrual status during the years ended December 31, 2025, 2024 and 2023.

16. Earnings Per Share (“EPS”)

We present both basic and diluted EPS. We compute basic EPS by dividing net income (loss) available to common shareholders allocable to unrestricted common shares by the weighted average number of unrestricted common shares outstanding during the period after allocating undistributed earnings between common shareholders and participating securities under the two-class method. Our participating securities include restricted shares and PIUs and deferred share awards not previously settled by common share issuances. Our computation of diluted EPS is similar except that:

•the denominator is increased to include: (1) the weighted average number of potential additional common shares that would have been outstanding if securities that are convertible into common shares were converted; and (2) the effect of dilutive potential common shares outstanding during the period attributable to redeemable noncontrolling interests and share-based compensation awards using the if-converted or treasury stock methods; and

•the numerator is adjusted to add back any changes in income or loss that would result from the assumed conversion into common shares that we add to the denominator.

We compute diluted EPS using the treasury stock method for unvested restricted shares, TB-PIUs and deferred share awards and the if-converted method for exchangeable debt (including our 5.25% Notes), common units, redeemable noncontrolling interests, PB-PIUs, PSUs and vested PIUs and deferred share awards not previously settled by common share issuances.

Summaries of the numerator and denominator for purposes of basic and diluted EPS calculations are set forth below (in thousands, except per share data):

Our diluted EPS computations do not include the effects of the following securities since the conversions of such securities would increase diluted EPS for the respective periods (in thousands):

The following securities were also excluded from the computation of diluted EPS because their effect was antidilutive:

•weighted average restricted shares and deferred share awards of 432,000 for 2025,434,000 for 2024 and 416,000 for 2023;

•weighted average TB-PIUs of 236,000 for 2025,223,000 for 2024 and 175,000 for 2023;

•weighted average PB-PIUs of 629,000 for 2023; and

•weighted average vested PIUs of 215,000 for 2024 and 154,000 for 2023.

As discussed in Note 8, our 5.25% Notes have an exchange settlement feature under which the principal amount of notes exchanged is payable in cash, with the remainder of the exchange obligation, if any, determined based on the exchange price per common share at the time of settlement, payable in cash, common shares or a combination thereof at our election. These notes did not affect our diluted EPS reported above since the weighted average closing price of our common shares for the years ended December 31, 2025, 2024 and 2023 was less than the exchange price applicable to those periods.

17. Commitments and Contingencies

Litigation and Claims

In the normal course of business, we are subject to legal actions and other claims. We record losses for specific legal proceedings and claims when we determine that a loss is probable and the amount of loss can be reasonably estimated. As of December 31, 2025, management believes that it is reasonably possible that we could recognize a loss of up to $5.3 million for certain municipal tax claims; while we do not believe this loss would materially affect our financial position or liquidity, it could be material to our results of operations. Management believes that it is also reasonably possible that we could incur losses pursuant to other claims but do not believe such losses would materially affect our financial position, liquidity or results of operations. Our assessment of the potential outcomes of these matters involves significant judgment and is subject to change based on future developments.

Environmental

We are subject to various federal, state and local environmental regulations related to our property ownership and operations. We have performed environmental assessments of our properties, the results of which have not revealed any environmental liability that we believe would have a materially adverse effect on our financial position, operations or liquidity.

In connection with a lease and subsequent sale in prior periods ofthree properties in Dayton, New Jersey, we agreed to provide certain environmental indemnifications limited to $19 million in the aggregate. We have insurance coverage in place to mitigate most of any potential future losses that may result from these indemnification agreements.

Tax Incremental Financing Obligation

Anne Arundel County, Maryland issued tax incremental financing bonds to third-party investors in order to finance public improvements needed in connection with our project known as the National Business Park. These bonds had a remaining principal balance of approximately $23 million as of December 31, 2025. The real estate taxes on increases in assessed values post-bond issuance of properties in development districts encompassing the National Business Park are transferred to a special fund pledged to the repayment of the bonds. While we are obligated to fund, through a special tax, any future shortfalls between debt service of the bonds and real estate taxes available to repay the bonds, as of December 31, 2025, we do not expect any such future fundings will be required.