COPT Defense Properties reported strong second quarter 2025 results, with diluted FFO per share, as adjusted for comparability, reaching $0.68. This figure exceeded the midpoint of the company's guidance range by $0.02 and represents a 6.3% year-over-year growth compared to $0.64 in Q2 2024. Diluted earnings per share (EPS) for the quarter was $0.34.
Based on this outperformance, management increased the midpoint of its full-year 2025 FFO per share guidance by $0.01 to $2.67, now implying a 3.9% year-over-year growth. The midpoint of Same Property Cash Net Operating Income (NOI) guidance for 2025 was also raised by 50 basis points to 3.25%, following a 2.2% increase in Q2 2025 and 4.6% year-to-date.
Operational metrics remained robust, with the total portfolio 94.0% occupied and 95.6% leased, and the Defense/IT Portfolio at 95.6% occupied and 96.8% leased as of June 30, 2025. Total leasing volume for the first half of 2025 reached 1.4 million square feet, including 353,000 square feet of vacancy leasing. The annual target for vacancy leasing was increased by 12.5% to 450,000 square feet from 400,000 square feet.
Tenant retention was strong at 90% in the second quarter and 82% for the first half of the year, leading to a 250 basis point increase in the midpoint of the 2025 guidance to 82.5%. Investment leasing for the first half of 2025 totaled 103,000 square feet.
A significant catalyst for the company is the 'One Big Beautiful Bill Act,' signed into law on July 4, 2025, which adds $150 billion to defense spending over the next few years, with $113 billion allocated to FY 2026. This increase, combined with the President's FY 2026 budget request, amounts to nearly $950 billion, representing a 13% year-over-year increase. This additional funding is directed towards priority missions supported by COPT Defense's portfolio, including cybersecurity, missile defense, and space command.
Management expects this increase in defense spending to support strong vacancy leasing volumes and external growth through development, driving earnings growth and shareholder value. The company continues to anticipate compound annual FFO per share growth of approximately 4% between 2023 and 2026.
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