COPT Defense Properties

Hello, welcome to COP Defense Properties' third quarter 2026 results conference call. As a reminder, today's call is being recorded. At this time, I will turn the call over to Mr. Venkat Kommineni, COP Defense's Vice President of Investor Relations. Sir, you may begin.

Thank you, Tawanda. Good afternoon and welcome to COP Defense's conference call to discuss third 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. We had another great quarter with continued strength in demand and a robust underlying business environment highlighted by our vacancy leasing achievements. It all translated into solid results, which I'll detail. For the third quarter, FFO per share was 71 cents, which was two cents above the midpoint of guidance and represents 2.9% increase year over year. Same property cash NOI increased 3.2% year over year and 5.3% during the nine months. We had a particularly strong quarter in terms of vacancy leasing, executing 222,000 square feet which exceeded our trailing five-year quarterly average by 50%. This achievement brings vacancy leasing during the first nine months to 453,000 square feet which amounts to 95% of our prior full-year target of 475,000 square feet and over 110% of our initial target of 400,000 square feet. We committed $88 million to two developments at Redstone Gateway, which we announced on our last call. The Huntsville operating portfolio is 98% leased and continues to see very strong demand, which led us to start these projects to provide the vital inventory we need to meet the demand we're seeing and to accelerate those lease commencements. Turning to guidance, We increased the midpoint of 2026 guidance for four metrics. FFO per share as adjusted for comparability increased to $2.80 per share. Same property cash NOI growth increased to 4.25%. Capital committed to new investments increased to $375 million. And capital invested in development and acquisitions increased to $240 million. Anthony will provide additional detail on what drove these increases. We decreased the midpoint of our tenant retention guidance for a very good reason, to support the growth of core tenants and strengthen our tenant roster. Our tenant retention was actually tracking 84%, but we created an opportunity to recapture space from three suboptimal tenants and release those spaces to high-value tenants with strong long-term growth in credit profiles. As a result, we're reducing the midpoint of our tenant retention guidance by 250 basis points to a still very strong 80%. We made a corresponding change to our vacancy leasing target. increasing it to 625,000 square feet because we have leased or expect to lease over 145,000 square feet of this nearly 160,000 square feet of space recaptured from the three tenants. The strong level of demand in our portfolio positioned us to proactively enhance our tenant growth profile while continuing to maintain a sector-leading With the midterm election just days away, I'd like to remind everyone of the immense stability in our country's support for increased defense spending over the past 12 years, regardless of the shifts in control of the chambers of Congress and the presidency. First, over that period, there's been a balance between unified and split control of government. With six years of unified control, including the presidency in both chambers, four under the Republican Party and two under the Democrat Party, and six years of split control. Despite these control changes within the government, there has been strong bipartisan support for defense spending throughout the period. Since fiscal year 2015, the National Defense Authorization Act has, on average, passed the House by a margin of 3.5 to 1 and the Senate by over 7.5 to 1. During this period, the defense-based budget grew by $285 billion, or 51%, and that equates to a compound annual growth rate of nearly 4%, with annual increases incurring in each of those 12 years. Second, our business is primarily driven of the Department of War base budget, which at $840 billion in fiscal year 2026 is the highest defense budget in history. Looking forward, the FY 2027 base budget request is $1.1 trillion. With a challenging global threat environment, we expect defense spending will continue to be a priority regardless of the election results. And finally, given the 12 to 18 month lag we generally experience between budget appropriation and leasing activity, there is embedded demand throughout our portfolio from funding that has already been appropriated. The FY 2025 and FY 2026 budgets plus the $150 billion of funding appropriated in the One Big Beautiful Bill Act will continue to produce demand in our portfolio through 2027. The FY2027 budget, when ultimately passed, will drive activity in 2028 and 2029. So notwithstanding the election, we have a very strong funding backdrop supporting our underlying industry. We're not the only company seeing growth opportunities created by the massive investments in technological advancement in support of national defense. There's a rising tide of private capital targeting the defense sector space, and in particular, emerging technologies. In fact, Blackstone has invested $20 billion in the sector over the past five years, with a recent investment of $1 billion to form a defense tech platform specializing in missile interceptor technology. Carlyle Group announced a $3 billion defense fund. They recently invested in the company developing low-cost hypersonic weapons. And JP Morgan announced a $1.5 trillion security and resiliency initiative last year to finance and facilitate investments in key areas of economic and national security, including aerospace and defense, and frontier and strategic technologies such as cybersecurity and quantum computing. Clearly, the investment priorities of the Department of War are generating a strong response from the private sector to deploy capital to companies serving the same priority missions supported by our portfolio, which include Intelligence, Cybersecurity, and Missile Defense. So having touched on the highlights of the business, I'll turn it over to Britt for additional detail.