COPT Defense Properties

Welcome to the COP Defense Properties Third Quarter 2025 Results Conference Call. As a reminder, today's call is being recorded. At this time, I'd like to turn the call over to Venkat Komaneni, COP's Defense and Vice President of Investor Relations. Mr. Komaneni, please go ahead.

Thank you, Kevin. Good afternoon, and welcome to COP Defense's conference call to discuss third quarter results. With me today are Steve Bedorek, President and CEO, Britt Snyder, Executive Vice President and COO, Anthony Mifsud, Executive Vice President 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 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. The company's strong performance during the first half of the year continued throughout the third quarter and has resulted in an increase to our guidance for the year across several financial and operating metrics. We've extended our streak of achieving our outperforming our FFO per share guidance to 31 consecutive quarters. And in October, we successfully closed on three important financings, which pre-fund our 2026 bond maturity and provide additional liquidity to fund our external growth. Turning to results. FFO per share, as adjusted for comparability, was 69 cents in the quarter, two cents above the midpoint of guidance, and $2.02 for the first nine months. This is a 6.2% year-over-year increase for the quarter and a 5.2% increase for the first nine months. Same property cash NOI increased 4.6% year-over-year for both the quarter and the first nine months. We continue to outperform on the leasing front. The portfolio ended the quarter at 95.7% lease. That's our highest level in 20 years. We signed 78,000 square feet of vacancy leasing in the quarter and 432,000 square feet during the first nine months. This volume represents 36% of the unleased space we had at the beginning of the year. Recall, our initial vacancy leasing target of 400,000 square feet was increased to 450,000 square feet at the end of the second quarter, so our achievement year to date already represents 96% of that elevated target. Tenant retention remained strong at 82%, both during the quarter and the first nine months. We reduced our lease expiration exposure through year-end 2026 by 25%, or a million square feet since last quarter, and we expect significant progress in the fourth quarter. In recent weeks, we committed $72 million of capital to two external growth investments, both of which enhance our relationships with existing Defense IT tenants. First, we commenced construction of 7,700 Advanced Gateway, and our Redstone Gateway Campus. 100% pre-leased, $27 million development, which is our fourth Build the Sioux project with this tenant at that location. Second, we acquired Stone Gate One in Chantilly, Virginia. A $40 million purchase of a strategic property, fully leased to a top 20 US defense contractor, which represents this tenant's ninth location in our portfolio. Year-to-date, we have committed roughly $125 million of capital to three new investments against our original target of $225 million. We are in the advanced stages of negotiations. Our month will build to suit opportunities, and we expect to exceed our original capital commitment target. Turning to guidance, based on our strong performance year-to-date, we are increasing the midpoint of 2025 guidance for the following six metrics. FFO per share increases by 3 cents to $2.70 a share, which equates to 5.1% growth over 2024's results and is 4 cents above our initial guidance. Same property cash NOI growth increased to 75 basis points to 4%, which is 125 basis points above initial guidance. Same property year-end occupancy increases by 20 basis points to 94.2%. Cash rent spreads on renewals increases by 200 basis points to 2%. Our vacancy leasing target increases by another 50,000 square feet to 500,000 square feet, which is 25% or 100,000 square feet above our initial target. And capital committed to new investments increases by $25 million to $250 million. Britt and Anthony will provide more details on these increases. On September 2nd, President Trump announced the relocation of Space Command's headquarters from Peterson Space Force Base in Colorado Springs to Redstone Arsenal in Huntsville. The command is expected to relocate to our Redstone Gateway secured parcel. Since the announcement, we've been active dialogue with the leadership at both Space Command and Redstone Arsenal headquarters. to optimize their programming and sequencing activities for their new facilities. We expect the command to lease roughly 450,000 square feet in total, most likely in increments over time. Beyond the direct development opportunity with Space Command, we also expect defense contractor growth that supports the command will emerge in the Huntsville market. The government estimates this could eventually drive a two-to-one contractor tail over time, but this won't start to significantly materialize until Space Command has completed its relocation, expected in 2027. Of similar importance, the missions at Redstone Arsenal will play a key role in building the planned Golden Dome Missile Defense Shield and is driving contractor opportunities more quickly than the Space Command relocation. In addition to the mission work our tenants already conduct to support missile defense in the park, we are in discussions with defense contractors seeking space to compete for the incremental opportunities arising from Golden Dome, and one new lease has already been signed since the July funding, and additional contract awards are expected as soon as year end. Turning to the government shutdown, since the end of September, the Senate has failed to pass a continuing resolution putting the government into shutdown, which continues today. As a reminder, one, the government shutdowns do not materially impact our business as we still collect rent, and two, our buildings are well-occupied because they are leased to essential emissions. However, the shutdown does create some uncertainty around the timing of lease activities. Given the significant volume of government lease renewals contemplated in the fourth quarter, an extended shutdown could modestly impact our full year guidance for tenant retention and cash rent spreads due to timing delays. To be clear, any delay as a result of the shutdown only impacts the when for these renewals, not the if. Looking forward, we expect that when the FY2026 defense appropriation is approved, it will support additional demand for our portfolio as the priority missions our tenants support are expected to see increased funding to counter an increasingly complex national security environment. These missions include intelligence, surveillance, and reconnaissance, cybersecurity and network activities, naval sea and air technology development, unmanned aerial vehicles, and missile defense and space activities. So with that, I'll turn the call over to Brett.

Thank you, Steve. Throughout the year, we have continued to see strong demand from defense contractors looking for new or incremental space to support mission programs and contracts, a significant amount of which requires SCIF. As we had anticipated, occupancy in our total portfolio declined 10 basis points sequentially, but the lease rate increased 10 basis points. More importantly, the lease rate in our defense IT portfolio increased 20 basis points to 97%. The short-term occupancy decline over the quarter was driven primarily by two known non-renewals totaling less than 80,000 square feet. This expiring area has already been leased to defense contractors with occupancy commencing in the first half of next year. In the Fort Meade BW corridor, we leased the space related to 41,000 square foot non-renewal by a financial services tenant in Columbia Gateway to Realm One, a rapidly growing cybersecurity innovator. Realm One is expanding its footprint in the park from a little over 10,000 square feet to over 50,000 square feet. This is a continuation of our successful effort to increase the concentration of defense and cyber tenants in our Columbia Gateway portfolio. And in Huntsville, we leased the space related to a 37,000 square foot non-renewal, resulting from M&A activity to Georgia Tech Research Institute, or GTRI, for its expansion. GTRI is doubling its footprint to 75,000 square feet and will fully occupy 8,800 Redstone Gateway. GTRI is a DOD-sponsored, university-affiliated research center which serves missions at the Redstone Arsenal, including Army Air Defense Systems and the Missile Defense Agency. We continue to outperform in terms of vacancy leasing as we lease 78,000 square feet during the quarter and 432,000 square feet during the first nine months of the year. Our third quarter volume exceeded our plan as we anticipated activity in the back half of the year would moderate due to the delayed appropriation, which wasn't passed until July. Despite the late appropriation approval, we have seen some contractors move forward and execute leases. Currently, we have another 110,000 square feet of deals and advanced negotiations, which led us to raise our full year target again to 500,000 square feet. Moving to renewal leasing, we executed nearly 800,000 square feet in the third quarter and achieved an exceptional tenant retention rate of 82%. During the first nine months of the year, we executed 1.7 million square feet, also achieving a tenant retention rate of 82%, which is right in line with the midpoint of our full year guidance range of 82.5%. On slide 23 of the flipbook, we provide an update on our lease expirations in the fourth quarter which total 1.7 million square feet in our defense IT portfolio. All but 75,000 square feet of these expirations are U.S. government leases, and nearly 1.4 million square feet, or 80% of these expirations, are in secure, full-building leases to the U.S. government. We are working with the government on these renewals and expect 100% retention on these leases. Our retention rate guidance assumes that we renew roughly 700,000 square feet of this U.S. government space by year end, and the remaining 660,000 square feet in 2026. Turning to large leases expiring between third quarter of 2024 and through year end of 2026, as shown on slide 24 of the flipbook, we renewed five large leases in the quarter, totaling 640,000 square feet at a 100% retention rate. This included a secure full building lease with the U.S. government in Maryland, a lease with Boeing in Alabama in their defense, space, and security business, and three data center shell leases in Northern Virginia, of which we own 10%, where cash rent spreads increased 91%. Over the last five quarters, we've renewed 1.9 million square feet of large leases at a 97% retention rate. We have 2 million square feet of large leases expiring over the next five quarters, and we continue to expect a 95% retention rate on the full set of large lease expirations. Cash rent spreads on renewals were up 7.5% during the quarter and up 2.4% during the first nine months of the year. The outperformance in cash rent spreads during the quarter was driven by the extension of a lease with the US government on our secure parcel in Huntsville, which was not contemplated in our previous guidance. The 210,000 square foot lease was extended for another 10 years and will now expire in 2040. We are increasing the midpoint of full-year guidance for cash rent spreads by 200 basis points, which takes into account this lease and some early renewals expected in the fourth quarter, which were not previously anticipated. With respect to capital commitments, during the quarter we executed a 101,000 square foot lease with ULISTA and commenced construction on 7700 Advanced Gateway, a $27 million development project. The tenant serves DOD missions at the Redstone Arsenal, including the US Army Aviation and Missile Center. Our relationship with ULISTA began in 2020 when we delivered their three building campus in Huntsville, totaling nearly 370,000 square feet. This expansion strengthens our relationship as ULISTA is currently our 14th largest tenant and will occupy nearly half a million square feet in our Redstone Gateway portfolio. Yesterday, we received more good news regarding Huntsville. We signed a 32,000 square foot lease with a defense contractor at 8500 Advanced Gateway. This active development project, which we commenced only two quarters ago, is now 20% pre-leased. The tenant also serves DOD missions at the Arsenal, including the Missile Defense Agency, and its technology is central to the Golden Dome Initiative. This is our first new lease tied to the Golden Dome, which was funded in July. We also have a strong pipeline of demand on the remaining availability in this building, with over 300,000 square feet of prospects on 125,000 square feet of space, and we anticipate additional pre-leasing activity in the coming quarters. On slide 13 of the flipbook, we provide an overview of the $40 million acquisition in the Westfield Submarket in Chantilly, Virginia, completed just yesterday, which meets all of our investment criteria. StoneGate 1 is a 142,000 square foot building that is 100% leased to the 16th largest U.S. defense contractor in terms of defense revenue, with 10 years of lease term remaining. We acquired the building at a 9% initial cash NOI yield, which exceeds our development yield threshold. The tenant's mission group serves defense demand drivers in the Westfield submarket, and the mission set has been executed out of this space for the last 25 years. and the property contains significant security enhancements. This building is a natural extension of our deep concentration in this important sub-market. We own 10 buildings totaling over 1.5 million square feet that are over 94% leased, all within a one-mile radius of Stonegate. We are the dominant landlord in this supply-constrained sub-market as we now own roughly one-third of the 4 million square feet of office inventory. and the bulk of our current tenants serve the same demand drivers as the tenant in this building. In addition, Cushman and Wakefield identifies the Westfield submarket as the tightest submarket in Northern Virginia at 94% least, with Class A office rents increasing 25% over the past five years. Moving to our development pipeline, we have 1.3 million square feet of opportunities, which we consider 50% likely to win or better within two years or less. Beyond that, we are tracking another 1 million square feet of potential development opportunities. 100% of this 2.3 million square feet of development demand is at our defense IT locations. Overall, our leasing results continue to surpass our expectations, and our recent accretive capital deployment initiatives serve to further expand our dominant footprint in two of our highly leased and supply-constrained submarkets, strategically expand our relationships with our top defense tenants, and above all, drive FFO per share growth and create shareholder value. With that, I'll hand it over to Anthony.

Thank you, Britt. We reported third quarter FFO per share as adjusted for comparability of 69 cents, which was two cents above the midpoint of guidance and represents a year-over-year increase of 6.2%. The outperformance versus the midpoint of our guidance was a combination of higher than anticipated same property cash NOI, lower than anticipated interest expense, as well as a one penny gain on an alternative investment. During the quarter, our same property cash NOI increased 4.6%. The growth was driven primarily by the benefit from a 40 basis point increase in average occupancy in the same property portfolio, lower than anticipated net operating expenses, including receipt of a non-recurring real estate tax refunds, and the burn off of free rent on development leases placed into service in 2023 and on leases that commenced later in 2024. The outperformance for the quarter was driven primarily by the net operating expense savings. Based on our achievement year to date, we are increasing the midpoint of our full year guidance for same property cash NOI by 75 basis points to 4%. With 4.6% growth during the first nine months of the year, there are two offsetting factors to note in the fourth quarter. The first is $1 million of real estate tax refunds in the fourth quarter of last year that will not recur this year. And the second is the impact to NOI from a few previously discussed non-renewals in the Fort Meade VW corridor, each of which are under 30,000 square feet. Despite these non-renewals, we are increasing the midpoint of our year-end same property occupancy by 20 basis points to 94.2%. due to a few earlier than anticipated lease commencements now expected late in the fourth quarter. We've been very active in the capital markets over the past few months. When we established 2025 guidance in February, our forecast assumed we would pre-fund the capital required to repay our $400 million, two and a quarter percent bond in the fourth quarter. We are very pleased to report that we've had great success on this front, along with two other financings, all of which demonstrate the tremendous support we have from both fixed income investors and the banking community. On the bond issuance, in late September, we announced a $300 million five-year unsecured bond offering at an initial credit spread of 125 to 130 basis points. The order book surpassed $3 billion, more than 10 times oversubscribed. As a result of this tremendous investor demand, we upsize the offering to $400 million and price the offering at a credit spread of 95 basis points and a yield to maturity of 4.6%. The credit spread achieved was tighter than the trading levels of all of our equal and higher rated office peers and these bonds continue to trade at levels that are tighter than those peers. We sincerely appreciate the support from the fixed income investor base and strongly believe this execution and the credit spread achieved is a testament to their appreciation of the resiliency of our cash flows and the strength of our strategy, portfolio, operations, and balance sheet. In October, we recast our revolving credit facility. The last time we recast this facility was in the fall of 2022. a period when the debt capital markets were particularly constrained for office companies, which resulted in a downsized facility from $800 to $600 million. With this new facility, we upsized the capacity by $200 million back to $800 million, extended the maturity by three years to 2030, expanded our bank group, and most importantly, attained pricing at BBB flat, BAA2 spread levels, as opposed to our current BBB minus BAA3 rating. As a result, the SOFR spread on the credit facility declined by 20 basis points to 85 basis points. The SOFR spread on the term loan declined by 25 basis points to 105 basis points, and we eliminated the 10 basis points SOFR transition charge on both loans. Also in October, we closed on a $200 million four-year secured revolving credit facility. This facility can be used to fund any investment or for general corporate purposes. However, we plan on using the capital to fund the construction of our development projects. Needless to say, we are very pleased with the $400 million of additional capital capacity from the line of credit and the new development facility and thankful for the commitment and support from existing and new lenders to the company. With respect to guidance, we are increasing the midpoint of 2025 FFO per share by 3 cents to $2.70 while narrowing the overall range. This increase is a result of our 2 cents of outperformance in the quarter and 1 cent from better than anticipated rate on the bond offering and the acquisition of StoneGate 1. We are establishing fourth quarter guidance for FFO per share as adjusted for comparability in a range of 67 to 69 cents. which is a one cent sequential decline based on the one cent non-recurring gain in the third quarter and a one cent drag from the bond offering in the fourth quarter as the proceeds will be held as cash until maturity. These items are partially offset by the impact of StoneGate I. In 2026, pre-funding the March maturity will result in a one cent drag in the first quarter until the repayment on March 15th and a seven cent refinancing drag over the remainder of the year based on the roughly 235 basis point negative spread between a new bond and a maturing bond. This refinancing headwind is partially offset by the acquisition of StoneGate One, which is expected to be accretive to FFO per share by nearly half a cent in 2025 and nearly two cents in 2026. The successful financing activities over the past few weeks generated the capital to repay our March 2026 bond maturity, and puts us in an even stronger position to capitalize on external growth opportunities and deliver shareholder value. With that, I'll turn the call back to Steve.

So, we achieved great results, highlighted by our strong leasing and recent capital deployment. We delivered FFO per share growth of 6.2% year over year, marking our 21st consecutive quarter of year over year growth. We expect 2025 to be our seventh consecutive year of FO growth per share, and our revised guidance implies an annual increase of 5.1%. We increased the midpoint of 2025 guidance for six key metrics. We committed $72 million of capital to two new investments, both of which are fully leased, and we expect additional activity in the fourth quarter. And notably, we had great success on three financings, increasing our liquidity by $400 million and achieving a sector-leading credit spread on our bond offering. Finally, we continue to anticipate self-funding the equity capital invested in development and acquisitions on a leveraged neutral basis and compound annual FFO per share growth of over 4% between 2023 in 2026. So, we are well on track to deliver another successful full year. Operator, please open the call for questions.

Thank you, Mr. Bedork. Ladies and gentlemen, if you have a question or a comment at this time, please press star 1-1 on your telephone. If your question has been answered and you wish to move yourself from the queue, please press star 1-1 again. We will pause for a moment while we compile our Q&A roster. Our first question comes from Blaine Heck with Wells Fargo. Your line is open.

Great, thanks. Steve, can you give us an update on how you're thinking about how long of a lag there could be before we start to see the increased budget, you know, once approved and other positive policy decisions to really start impacting leasing decisions and activity, mainly outside of Huntsville, which I think has its own, you know, demand driver dynamics?

Yeah, so kind of pick up on your last point. Remember the Golden Dome activities are already funded for the initial down payment through the One Big Beautiful Bill Act, and we see demand building right away. I wish I had a more specific answer for the first part of the question, which is when will the appropriation get approved? Clearly the shutdown is not helping things, and Before the shutdown, it was expected to do a continuing resolution into the end of November and then appropriate the nine budgets in December. I'm not exactly sure. It's not clear to us how that might be affected by the extended shutdown.

That's helpful. I guess, you know, once approved, would you expect kind of a six-month lag, a nine-month lag? You know, how do you think this cycle compares with others that you've been through and what was the lag that you've experienced in the past?

I got it. I would say this one, you'll start to see activity, I would think, no later than six months. And I only say that, which is in contrast to our usual comments. that demand arises 9 to 12 and sometimes 18 months after appropriation. Because we've had so many discussions with tenants that are contract contingent, they're planning for an expected win of a contract, and they need that appropriation for contract towards flow. So I would think it would be quicker this time around. There is pent-up need and expectations.

Great, that's really helpful. Second question with respect to the acquisition of StoneGate One. I guess when I look at the aerial view and your presentation, this property seems to be just a little bit outside of the cluster that you've historically owned in that market. So, you know, without asking details on the seller, I'm just wondering if this acquisition might lead to more opportunities to acquire in that market and whether you'd be interested in growing, you know, continuing to grow your market share there.

Well, first I'll take a little exception to your analysis. We have two buildings immediately across the street from this building and a secure campus kitty corner on that intersection. And it fits quite nicely into the geographical footprint of our portfolio in that market. And you'll come on a tour and I'll show you that in person. With regard to expanding our concentration in that market, I've been interested in doing that for a long period of time. We have key demand drivers in the market. It's one of the markets where, although we're now up to about a third of the inventory, that's relatively low for our deep concentration in the sub-markets that we tend to have. So there are other good assets, and there are a significant amount of defense contractors in buildings we don't own, and if the opportunity arose to acquire them with the kind of returns we achieved on this one, I would strongly look to do so.

All right. Thanks, Guy. Looking forward to that tour.

All right. Thank you, Blake. One moment for our next question. Our next question comes from Steve Suck with Evercore ISI. Your line is open.

Thanks. Yeah, just on that StoneGate, I guess, Steve, given the location, the tenant, kind of the work they put in, I guess I'm a little surprised at how good the yield is for you. Obviously, that's a great outcome for you guys, but I guess why is the yield so high on this? It just strikes me as kind of an above-market return for what seems like little risk. So is there something we're missing here?

There are three factors that really play into it. One, the seller had a specific timeline to sell this asset, and they were delayed in getting their renewal done. We started looking at this building, I think, late 2024. So there was a pressure time frame to execute. We were by no means the lowest bidder, but the strength of our bid was clearly superior in terms of surety of capital time to execute the transaction. So that was the second major factor. The third is the tenant was involved in influencing the outcome because they had a very strong preference that the asset be transferred to us because of our deep relationship with them. As I mentioned in our remarks, this is the ninth lease we have with the tenant in the building. And so all those three factors worked in our favor.

Okay, thanks. And I know I can't remember if it was Britt or Anthony had talked about page 23 where you have the 1.7 million square feet of space rolling. And I know you're highly confident that basically all the space is going to get renewed. But you do have this one purple box where you're basically, I guess, expecting about 660,000 feet to effectively get pushed. into the first quarter of 26, which is understandable. Just from an accounting standpoint, you know, what happens if that lease expires but doesn't get renewed? Does that go into holdover rent? Does it just stay at the same rent? What sort of happens from, I guess, your financials on that space?

So on our financials, Steve, we execute holdover agreements or stancel agreements with the the term of the expiration through the expected renewal date. So based on those standstill agreements, they continue to pay us rent at the expiring cash rent level. And that's what we will recognize as NOI during that standstill period. And then once the renewal is executed, we will catch up in that quarter for the impact on the straight line rent of the term of the renewal.

Got it. So basically, you're just cheated a little bit in terms of the uplift. You'll get that in the first quarter, but there's no negative impact in the fourth quarter from that holdover.

That's correct.

Great. Thank you. That's it for me.

Good. Thank you. One moment for our next question. Our next question comes from Seth Berge with Citi. Your line is open.

Thanks for taking my question. With the Missile Defense Agency or Redstone Arsenal, do you kind of view the Golden Dome Operative as creating any near-term development opportunities, or do you kind of currently view that as just driving leasing demand for that real estate?

Well, the answer is yes. Our portfolio is so well-occupied now. Any additional lease has got to go into a new development. We literally have no operating or minimal operating square footage to lease. The lease that we did execute yesterday, that's in a new development. And certainly there are conversations with several contractors that contemplate much bigger commitments that would require, you know, build suit or significant pre-leases to accommodate. So in essence, I think all of that Golden Dome incremental opportunity will be manifested in new developments.

And is that kind of contemplated in the potential development square footage bucket, or is that further out where that would be kind of incremental to what you've kind of outlined?

So the way we developed that pipeline Those are known opportunities where we've had conversations with specific tenants. There is no speculative kind of allowance put into that. So, yeah, there's quite a few of them in the active. Those prospects we expect 50% likely to win in two years or less, as well as some in the next 1 million square feet.

Okay, great, thanks. One moment for our next question. Our next question comes from Rich Anderson with Cantor Fitzgerald. Your line is open.

Hey, thanks. Good afternoon, everyone. So, Steve, can you talk a little bit about the process with Space Command moving from Peterson to Huntsville? I mean, it's a worst-kept secret, perhaps, but was that a lobbying effort by you, by the government, because they liked Huntsville. Who drove the initial thought about moving it there, and what did you have to do as an organization to push that through to the point where we're at now where you've kind of gotten it to happen? Can you just talk about that?

Sure. The process is really quite protracted. Under Trump's first term, he created Space Force, and then that kind of led to the natural creation of an integrated combatant command, Space Command. We're talking about Space Command relocating to Red Zone Arsenal, not Space Force, to be clear. At that point in time, the Air Force was charged with determining the best location for the combatant command. And they went through a very comprehensive process. Many states and other facilities were competing to be the awardee, and that process determined Redstone Arsenal was the optimal location for the command. Subsequent to that decision, Other locations filed protests. It was reviewed by oversight in the DOD. It was re-adjudicated as properly awarded one time. Then it was challenged again based on changes in criteria. It went through that process. It came out first again. It was re-adjudicated a second time. These last two events occurred during the Biden administration to Redstone Arsenal, and then President Joe Biden signed an executive order freezing it in Colorado. In the current administration, the executive order was overturned, and the proper decision is determined by the DOD process was allowed to be awarded to Redstone Arsenal. So I'd love to think I have influence to make that kind of stuff happen. But the reality is we are rather inconsequential. Now, with regard to the opportunity coming to us, we're an integrated value proposition with the command on Redstone Arsenal. Remember, the Army is our indirect joint venture partner because we release the space from them and our purpose is to serve our shareholders, of course, but we're also there to help the missions on Redstone Arsenal succeed. So we're part of that value proposition and we actually represent the quickest way to establish the proper mission operability for the United States government and taxpayer. And that's why we're getting the opportunity.

And Rich, this is Brett. I mean, just one extra thing on that. I mean, they really need to be behind the fence, and they can't wait for MilCon. So the ability for us to control that secured parcel through an enhanced use lease behind the fence, that's really, there's really no other option that could meet their speed requirements and achieve the security they need.

So it sounds like 450,000 directly 2X contractor tail, so call it 1.5 million square feet, eventually associated with this effort. Is that Chapter 1, or is there kind of a big growth story behind that in your mind?

So in my mind, I think that's the book. Chapter 1 is the command, Chapter 2... is growth in the support of the command. Certainly the command's importance and challenges are going to increase over time as the progression of defense activities further moves into space. And certainly Golden Dome is going to be a huge component of developing new capabilities that that command will have to coordinate. So that's one of the One of the reasons why it makes so much sense to put the command near the agencies that are building the systems the command's going to rely upon.

That's my next question. The interplay between Golden Dome Missile Command and Space Command, I guess, is an obvious part of the selling point as well. Is that fair to say?

It's very fair. And remember, there's also NASA... in a 50-year history of missile, rocket, and space activities, and a deep, deep pool of PhD-level workers that support those activities in Huntsville, Alabama.

Okay, and my second question is perhaps not as cool and exciting, but just as equally as important. You had some really great success in terms of your debt issuance, interplay with the banks that are 10 times oversupplied that you talked about, Anthony. What do you think is driving, what are the fixed income investor communities getting that the equity investor community is not getting? Because oftentimes we see this, we do a lot of work on fixed income investing and how that might foreshadow fortunes for the stock market. Why is the fixed income community so sort of willing to be so supportive of you? Whereas, you know, not that people aren't turning their back on the story, but, you know, you still haven't had the same type of performance in the equity markets that you had in the fixed income markets. Is there anything you can sort of talk about in terms of your conversations?

Well, the fixed income investor community and the conversations we've had leading up to the offering as well as interactions that we have with them throughout the year focus on really the things that we mentioned for the reasons for the success of the transaction. They look a little bit backward more than forward. They look at how the company has performed during the cycles. And they look at how the company performed during COVID, how they performed during the high inflationary environment of the last several years during the higher interest rate environment. And from that, they see that the strategy that has been executed has created an incredibly resilient cash flow base and that the When you think about fixed income investors, typically they would look at development and sort of turn their noses to it. The fixed income investors actually have a deep appreciation for the development pipeline that we execute because they see it in terms of the high level of pre-leasing and build-to-suit as incremental EBITDA in the future that's contractual that will continue to support the unsecured bonds. How that then translates into how an equity investor might view the company, I'm not quite sure, but the fixed income community absolutely appreciates the strength of the strategy and the performance of the company over the past several years.

Okay, great. Very interesting color. Thanks very much.

One moment for our next question. Our next question comes from Dylan Brzezinski with green streets. Your line is open.

Okay. Thanks for taking the question. And, you know, great to hear that the leasing story continues to play out. I guess just one, one thing that, you know, we were curious about, I think it was last week, maybe a week before the Trump administration, or there was an article that the Trump administration has been making cuts to cyber defense and us cyber command. So just sort of curious, if that's having any sort of impact on the leasing demand prospects in the Fort Meade area, given the prominence of the cyber demand there.

Well, I'm not familiar with the article you're looking at, so I can't really address that question specifically. But Cyber Command got a huge top-up funding in the one big beautiful bill. and their expected increase is significant for FY26. I'm kind of shocked at the tone of the article as you describe it. I don't know if he's looking at some overhead in cyber activities outside of the DOD, but I can't really answer the question.

Dylan, I've seen some of that too, and I've seen it more on the CISA side and less on, not really on cyber commands. In fact, there's a number of different efforts going on from a leasing perspective here that we're actually very encouraged about from Cyber Command and some of the related contractors. So I have heard some of that with CISA, but not Cyber Command.

Remember, Cyber Command is DOD activity. CISA is the rest of the government. We don't serve CISA.

Okay, that makes sense. And as I just, you know, look at it, you know, sometimes these headlines just, you know, only talk about the high-level stuff rather than get into the details. So, you know, those comments are appreciative. That's really all I have today. Thanks, guys.

Okay, thank you.

And I'm not showing any further questions at this time. I'd like to turn the call back over to Mr. Dorek for closing remarks.

Thank you all for joining our call today. We are in our offices this afternoon, so please coordinate through VenCat if you'd like a follow-up call, and enjoy your Halloween.

Thank you for participating in today's COP Defense Properties Third Quarter 2025 Results Conference Call. This concludes the presentation. You may now disconnect. Good day.