COPT Defense Properties

Welcome to the COPD Defense Properties second quarter 2026 results conference call. As a reminder, today's call is being recorded. At this time, I will turn the call over to Venkat Kommineni, COPD Defense's Vice President of Investor Relations. Mr. Kommineni, please go ahead.

Thank you, Lateef. Good afternoon and welcome to COPD Defense's conference call to discuss second quarter results. With me today are Steve Budorick, President and CEO, Britt Snider, Executive Vice President and COO, and 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 delivered a strong first half of the year in all aspects of our financial and operating performance, and the defense economy we serve continues to be strong and benefits from increasing investment. For the second quarter, FFO per share was $0.71, which was $0.02 above the midpoint of guidance, represents a 4.4% increase year-over-year, and is the 24th consecutive quarter of year-over-year FFO per share growth for the company. Same property cash NOI increased 7.4% year-over-year, and we generated 6.4% growth in the first half of the year. This was favorably impacted by the timing of lease and rent commencements. We expect growth will moderate slightly in the back half of the year, which has been reflected in our annual guidance. Anthony will provide more detail. We executed 139,000 square feet of vacancy leasing in the quarter and 231,000 square feet during the first half of the year. This amounts to nearly 60% of our full year target. and represents 20% of the unleased space we had at the beginning of the year. We invested $43 million to acquire 17 acres of land and a ground lease in the Westfield Submarket in Chantilly, Virginia at a gap yield of roughly 7.5% with some additional future upside. Turning to guidance, based on our strong performance year to date and our outlook for the second half of the year, We increased the midpoint of 2026 guidance for four metrics. FFO per share increased by two cents to $2.78 per share. This implies 2.2% growth over 2025 results and is three cents above our initial guidance. This revised midpoint is even more impressive when you account for the 12 cents of higher financing costs year over year in our guidance based on $0.08 of incremental net interest expense from our bond refinancing and $0.04 of dilution from our exchangeable notes resulting from our strong stock performance. Same property cash NOI growth increased by 100 basis points to 4%, which is 150 basis points above our initial guidance. Cash rent spreads on renewals increased by 100 basis points to 3%, and our capital commitment to new investments increased by $45 million to $335 million. Additionally, our vacancy leasing target increased by nearly 20% from 400,000 to 475,000 square feet. Moving on to the defense budget. In April, the White House submitted the FY2027 Defense Base Budget Requests, which requested a 30% increase year-over-year to $1.1 trillion that amounts to a nearly 50% increase over the last five years. Last week, Congress made progress on the legislation and the House passed the National Defense Authorization Act, or NDAA, which matched the President's Base Budget Requests of $1.1 trillion. Reconciliation funding is expected to provide additional upside to FY2027 spending, and the estimates range between $73 billion at the low end, based on the reconciliation framework passed by the House, all the way to the $350 billion at the high end, which was the President's request. The NDAA calls for meaningful increases in funding in the priority missions that our portfolio supports, including a $16 billion or 14% increase for intelligence, a $4 billion or 25% increase for DOD cyber funding, and an additional $18 billion for Golden Dome. While the ultimate outcome is still being determined in Congress, Our business has really driven off the base budget of $1.1 trillion, which is expected to be the new run rate for fund spending. Mike Rogers, Chairman of the House Armed Services Committee, was recently quoted stating that trillion dollar base budgets are going to be the new normal. Regarding our growth opportunities, things are getting even more exciting at Redstone Gateway in Huntsville. In the third quarter, we will start two new development projects totaling 240,000 square feet because we have no contractor space left to lease. Our 2.4 million square foot operating portfolio is 99.6% leased and the only remaining availability is spoken for. Following the execution of this last 10,000 square foot lease, All 24 buildings will be 100% leased. In our active developments for defense contractors, 7700 Advanced Gateway is fully leased, and 8500 Advanced Gateway, our current inventory development, is 41% leased. We expect to sign a lease for 75,000 square feet this week, and we're negotiating a lease for the remaining 15,000 square feet which we expect to sign next month. Beyond these deals in progress, we have another 415,000 square feet of demand from contractors for mission space related to Golden Dome and missile defense activities. Given our strong success in the quarter and the depth of demand we're seeing, we're commencing development on two inventory buildings consisting of RG 6300, 180,000 square foot building with 30,000 square foot floor plates which will deliver in early 2028. And RG 2200, a 60,000 square foot building with 20,000 square foot floor plates which will deliver in late 2027. These buildings will provide vital inventory to begin to meet the space and timing requirements of the current demand. Looking back, in 2011, we commenced our first development in Redstone Gateway, a 120,000 square foot building, in order to create the initial inventory to seed the park. We leased that building to a defense contractor shortly thereafter, and it has been 100% leased ever since. Over the past 15 years, we've developed 2.4 million square feet that will be 100% leased in the coming weeks. Upon completion of the three projects under active development, the park will be 2.8 million square feet, making Redstone Gateway our second largest market concentration. And following completion of the two planned starts, the park will exceed 3 million square feet. For context, it took 21 years for the National Business Park to reach 3 million square feet after commencing development in 1990. Anticipating only our current planned activity, we'll achieve that milestone at Redstone Gateway in 16 years, or five years earlier than the National Business Park. Given the strength of the demand we're seeing in the market, we look forward to updating this projection in the next 24 months. And with that, I'll turn the call over to Britt. Thank you, Steve.