COPT Defense Properties

Welcome to the Corporate Office Properties Trust First Quarter 2022 Results Conference Call. As a reminder, today's call is being recorded. At this time, I would like to turn the call over to Stephanie Crewson-Kelly, COPT Vice President of Investor Relations. Ms. Crewson-Kelly, please go ahead.

Thank you, Valerie. Good afternoon and welcome to COPS Conference Call to discuss first quarter results. With me today are Steve Bedorek, President and CEO, Todd Hartman, Executive Vice President and COO, and Anthony Mifsud, EVP and CFO. Reconciliations of GAAP and non-GAAP financial measures that management discusses are available on our website, in the results press release and presentation, and in our supplemental information package. As a reminder, forward-looking statements made during today's call are subject to risks and uncertainties, which are discussed at length in our SEC filings. Actual events and results can differ materially from these forward-looking statements, and the company does not undertake a duty to update them. Steve?

Good afternoon, and thank you for joining us. Yesterday, we announced another strong quarter with continued progress on our growth strategy. Our successful performance and execution since 2018 have positioned our company to deliver reliable annual FFO growth and long-term shareholder value. Over the past decade, COPT has deeply concentrated its invested capital into properties supporting priority U.S. defense missions and select mission-critical assets in regions that we collectively refer to as defense IT locations. These locations now generate 90% of our annualized rental revenue. Our concentration of leases to the U.S. government and high-credit tenants supporting national defense and cybersecurity is the foundation of our ability to generate resilient, high-quality cash flow regardless of the broader economy. Our external growth strategy is driven by our achievement of pre-lease and low-risk development at these proven defense IT locations. We have an advantage position in this unique market as the go-to landlord for specialized space satisfying government security requirements. We continue to experience strong leasing demand. As of March 31st, our portfolio is 94% leased and 92% occupied and generating steady high-quality cash flow. Our active development pipeline contains 1.7 million square feet of projects at Defense IT locations. These projects are 96% lease and one place in the service will produce incremental FFO that will augment the growth from our stable operating portfolio. We have a strong balance sheet to support growth. The debt refinancing activities we completed in 2020 and 2021 enhanced our investment grade balance sheet, meaningfully lowered our interest expense, and extended our debt maturities. Accordingly, 97% of our total debt is fixed rate and predominantly in the form of long-term unsecured notes, largely insulating results from interest rate increases and providing solid foundation for growth. Our solid first quarter results show the strength of the strategy and executions. FFO per share of 58 cents exceeded the high end of guidance, making this the eighth quarter out of the past nine that we've met or exceeded the midpoint of guidance. Leasing remains strong in our operating and development portfolios. We completed 871,000 square feet of total leasing, and this volume included 265,000 square feet of development leasing or about 40% of the target for the year. And we are on track to achieve 700,000 square feet development leasing goal. We achieved better than average vacancy leasing volume in the quarter. The 157,000 square feet we completed is 60% higher than the trailing five-year first quarter average. And virtually all the vacancy leasing occurred at Defense IT locations. Additionally, and as discussed on our last call, we completed the sale at DC6 in January, which recycled equity to fund development and further concentrated our capital allocation to defense IT locations. We continue to see the benefits of defense spending growth that began in fiscal year 2017 and expect a nearly 6% increase in the DOD's fiscal year 2022 base budget to further drive demand in our portfolio. Historically, our Defense IT portfolio benefits from strong demand and industry-leading tenant retention and is generating consistent, steady financial growth. Between 2018 and 2021, our FFO per share compounded at 4.4%. Our guidance suggests 2.2% growth in 2022, coming off a strong 8% growth in 2021. Beginning in 2023, we expect growth to compound at 4% or more through 2026. So in summary, we had another strong quarter, and we're well positioned for continued growth. With that, I'll hand the call over to Anthony.