COPT DEFENSE PROPERTIESCDP
COPT DEFENSE PROPERTIES Leases Disclosure
Leases
Lessor Arrangements
We lease real estate properties, comprised primarily of office properties and data center shells, to third parties. These leases encompass all, or a portion, of properties, with various expiration dates. Our lease revenue is comprised of: fixed-lease revenue, including contractual rent billings under leases recognized on a straight-line basis over lease terms and amortization of lease incentives and above- and below-market lease intangibles; and variable-lease revenue, including tenant expense recoveries, lease termination revenue and other revenue from tenants that is not fixed under leases. The table below sets forth our composition of lease revenue recognized between fixed- and variable-lease revenue (in thousands):
| For the Years Ended December 31, | ||||||||||||||||||||
| Lease revenue | 2025 | 2024 | 2023 | |||||||||||||||||
| Fixed | $ | 543,300 | $ | 513,461 | $ | 478,585 | ||||||||||||||
| Variable | 170,880 | 157,905 | 141,262 | |||||||||||||||||
| $ | 714,180 | $ | 671,366 | $ | 619,847 | |||||||||||||||
A significant concentration of our lease revenue was earned from our largest tenant, the USG, including 37% of our total lease revenue in 2025, 2024 and 2023 and 26% in 2025 and 27% in 2024 and 2023 of our fixed-lease revenue. Our lease revenue from the USG was earned primarily from properties in the Fort George G. Meade and the Baltimore/Washington Corridor (“Fort Meade/BW Corridor”), Lackland Air Force Base and Northern Virginia Defense/IT (“NoVA Defense/IT”) reportable sub-segments (see Note 13).
Fixed contractual payments due under our property leases were as follows (in thousands):
As of December 31, 2025 | ||||||||||||||
| Year Ending December 31, | Operating leases | Sales-type leases | ||||||||||||
| 2026 | $ | 506,290 | $ | 960 | ||||||||||
| 2027 | 479,574 | 960 | ||||||||||||
| 2028 | 407,473 | 960 | ||||||||||||
| 2029 | 337,270 | 960 | ||||||||||||
| 2030 | 268,762 | 675 | ||||||||||||
| Thereafter | 1,284,857 | — | ||||||||||||
| Total contractual payments | $ | 3,284,226 | 4,515 | |||||||||||
| Less: Amount representing interest | (685) | |||||||||||||
| Net investment in sales-type leases (1) | $ | 3,830 | ||||||||||||
(1) Included in the line entitled “prepaid expenses and other assets, net” on our consolidated balance sheet.
Lessee Arrangements
As of December 31, 2025, our balance sheet included $55.8 million in right-of-use assets associated primarily with land leased from third parties underlying certain properties that we are operating. The land leases have long durations with remaining terms ranging from 23 to 75 years (excluding extension options). As of December 31, 2025, our right-of-use assets included:
•$17.3 million for land in a business park in Huntsville, Alabama under 26 leases through our LW Redstone Company, LLC joint venture, with remaining terms ranging from 37 to 49 years and options to renew for an additional 25 years that were not included in the term used in determining the asset balance;
•$12.0 million for data center space in Phoenix, Arizona with a remaining term of two years;
•$9.1 million for land underlying operating office properties in Washington, DC under two leases with remaining terms of approximately 74 years;
•$6.3 million for land underlying a parking garage in Baltimore, Maryland under a lease with a remaining term of 23 years and an option to renew for an additional 49 years that was included in the term used in determining the asset balance;
•$8.7 million for land in a research park in College Park, Maryland under five leases through our M Square Associates, LLC joint venture, all of the rent on which was previously paid. These leases had remaining terms ranging from 57 to 75 years; and
•$2.0 million for other land underlying operating properties in our Fort Meade/BW Corridor sub-segment under two leases with remaining terms of approximately 42 years, all of the rent on which was previously paid.
The table below sets forth our property right-of-use assets and property lease liabilities on our consolidated balance sheets (in thousands):
| As of December 31, | ||||||||||||||||||||
| Leases | Balance Sheet Location | 2025 | 2024 | |||||||||||||||||
| Right-of-use assets | ||||||||||||||||||||
| Operating leases - Property | Property - operating lease right-of-use assets | $ | 50,383 | $ | 55,760 | |||||||||||||||
| Finance leases - Property | 5,373 | 2,491 | ||||||||||||||||||
| Total right-of-use assets | $ | 55,756 | $ | 58,251 | ||||||||||||||||
| Lease liabilities | ||||||||||||||||||||
| Operating leases - Property | Property - operating lease liabilities | $ | 45,012 | $ | 49,240 | |||||||||||||||
| Finance leases - Property | 363 | 391 | ||||||||||||||||||
| Total lease liabilities | $ | 45,375 | $ | 49,631 | ||||||||||||||||
As of December 31, 2025, our operating leases had a weighted average remaining lease term of 41 years and a weighted average discount rate of 7.4%, while our finance leases had a weighted average remaining lease term of seven years and a weighted average discount rate of 9.1%. The table below presents our total property lease cost (in thousands):
| Statement of Operations Location | For the Years Ended December 31, | |||||||||||||||||||||||||
| Lease cost | 2025 | 2024 | 2023 | |||||||||||||||||||||||
| Operating lease cost | ||||||||||||||||||||||||||
| Property leases - fixed | Property operating expenses | $ | 9,088 | $ | 7,845 | $ | 6,955 | |||||||||||||||||||
| Property leases - variable | Property operating expenses | 108 | 246 | 66 | ||||||||||||||||||||||
| Finance lease cost | ||||||||||||||||||||||||||
| Amortization of property right-of-use assets | Property operating expenses | 76 | 74 | 76 | ||||||||||||||||||||||
| Interest on lease liabilities | Interest expense | 35 | 37 | 42 | ||||||||||||||||||||||
| $ | 9,307 | $ | 8,202 | $ | 7,139 | |||||||||||||||||||||
The table below presents the effect of property lease payments on our consolidated statements of cash flows (in thousands):
| For the Years Ended December 31, | ||||||||||||||||||||
| Supplemental cash flow information | 2025 | 2024 | 2023 | |||||||||||||||||
| Cash paid for amounts included in the measurement of lease liabilities | ||||||||||||||||||||
| Operating cash flows for operating leases | $ | 7,940 | $ | 7,002 | $ | 6,056 | ||||||||||||||
| Operating cash flows for finance leases | $ | 35 | $ | 37 | $ | 42 | ||||||||||||||
| Financing cash flows for finance leases | $ | 28 | $ | 24 | $ | 20 | ||||||||||||||
Payments on property leases were due as follows (in thousands):
December 31, 2025 | ||||||||||||||
| Year Ending December 31, | Operating Leases | Finance Leases | ||||||||||||
| 2026 | $ | 8,218 | $ | 65 | ||||||||||
| 2027 | 8,418 | 67 | ||||||||||||
| 2028 | 2,838 | 69 | ||||||||||||
| 2029 | 2,094 | 71 | ||||||||||||
| 2030 | 2,129 | 73 | ||||||||||||
| Thereafter | 151,870 | 153 | ||||||||||||
| Total lease payments | 175,567 | 498 | ||||||||||||
| Less: Amount representing interest | (130,555) | (135) | ||||||||||||
| Lease liability | $ | 45,012 | $ | 363 | ||||||||||
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 20, 2026 | Showing above |
| 2022 | Feb 24, 2023 | |
| 2021 | Feb 22, 2022 | |
| 2020 | Feb 12, 2021 | |
About Leases Disclosures
Lease disclosures under ASC 842 provide a comprehensive view of a company's leased asset portfolio, including the split between operating and finance leases, discount rates used to present-value future payments, and the maturity schedule of lease obligations. This section reveals a significant source of off-balance-sheet commitments that were largely hidden before the current standard.
Key signals: the weighted-average discount rate affects the size of recorded lease liabilities — a higher rate reduces the reported obligation, so compare the chosen rate against the company's incremental borrowing rate. The operating versus finance lease mix affects both EBITDA and operating income presentation. Watch the maturity table for concentration risk: large payment cliffs in specific years may create cash flow pressure. Variable lease payments excluded from the liability measurement represent real obligations that do not appear on the balance sheet. Compare total lease costs against prior-year operating lease expense to assess the true economic burden.