Q4 2024 COPT Defense Properties Earnings Call

Britt Snider

Thank you, Steve. Our operating business performed very well in 2024 with continued strong demand for secured admission spaces. The strength of this demand was particularly evident in our record tenant retention rate at 86%, which was the highest annual level in over 20 years. compares extremely favorably to the rest of the office sector. A couple of the major factors driving our retention performance include our tenants invested in security features to create skip space and the fact that Skip space cannot be relocated.
Moreover, we’ve experienced an extraordinary increase in tenant demand for skip space over the last 24 months and that continues today. Evidencing this, over the last two years, we have backfilled over 160,000 square feet of non-renewals with long-term defense contractor leases that added Skip, further strengthening both our Defense/IT concentration and our retention profile.
We finished the quarter with strong occupancy levels at 93.6% in the overall portfolio and 95.6% in the defense IT portfolio. Year-over-year occupancy ticked down 60 basis points, which is a deliberate and short-term reduction resulting from our 2024 investment activities and as a result of our strategic accumulation of approximately 250,000 square feet of inventory to lease. Today, 180,000 square feet or over 70% of this vacancy is either already leased or is expected to be leased shortly. Net of this inventory we acquired, occupancy actually increased 40 basis points year over year.
The short-term reduction in occupancy relates to three investment activities. First, the Franklin Center acquisition in Columbia Gateway reduced occupancy by 35 basis points. At this property, we currently have 180,000 square feet of prospects on approximately 90,000 square feet of vacancy acquired. We are in advanced negotiations on a 48,000 square foot lease with a top 20 defense contractor and expect to execute this lesion very shortly.
Second, the acquisition of 3,900 Rogers Road in San Antonio also reduced occupancy by 35 basis points from the 80,000 square feet of vacancy acquired. But 100% of that lease is now — 100% of that space is now leased and commences occupancy in the second quarter of 2025.
Third, the placing of 75,000 square feet of development space into service at 8,100 Rideout Road in Huntsville, impacted occupancy by 30 basis points. At this property, we executed a 7,000 square foot lease with a defense contractor during the fourth quarter. And we’ve been awarded a 40,000 square foot lease with the US government in this building which will be executed in the coming weeks. Net of these two transactions, we only have 27,000 square feet remaining to lease in this building and less than 45,000 square feet available on all of Redstone Gateway.
This amounts to an availability rate of less than 2% in the entire 2.5 million square foot park. As a result of this executed and expected leasing activity, we are now in the planning phase to advance our next development 8,500 Rideout Road in order to create the inventory required to capture future government and contractor demand in Huntsville.
Now turning to vacancy leasing. Our buildings remain extremely well leased with our total portfolio at 95.1% in our Defense/IT portfolio at 96.8%. We executed 500,000 square feet of vacancy leasing during the year, which exceeded our initial target by 25% or 100,000 feet. Over a quarter of this 500,000 square feet was tied to cyber activity. The vacancy leasing achieved represented 45% of our total available inventory at the beginning of the year and over 60% of availability within our defense IT portfolio. We enjoyed broad-based leasing activity across our markets. Notably, over 40% of our vacancy leasing was executed in our in neighbor — other markets where we have the greatest opportunity to increase occupancy.
Looking forward into ’25, we’ve set a vacancy leasing target of 400,000 square feet again, and this represents a third of total available inventory at the beginning of the year. We’ve already executed over 50,000 square feet of vacancy leasing this year entirely in our Defense/IT portfolio. Our leasing pipeline is strong with over 170 square feet in advanced negotiations, which we expect to close over the next few months. Our leasing activity ratio was 88% in our total portfolio, which equates to a little over 1 million square feet of prospects on 1.2 million square feet of availability. In the first quarter, availability will increase by roughly 103,000 square feet.
Nearly 50,000 square feet relates to one large expected non-renewal of a non-defense tenant for which we have a healthy pipeline of activity totaling 55,000 square feet. And nearly 40,000 square feet relates to a contraction in multiple small non-renewals, which were previously reported in 2024.
We also continue to outperform in renewal leasing. We executed 2.6 million square feet for the year with tenant retention of 86%, and we executed 561,000 square feet in the fourth quarter with an exceptionally strong 93% retention rate.
For the quarter, retention among our defense contractor tenants was 95%. A few notable deals in the quarter included three large renewals in the Fort Meade/BW Corridor, which included Northrop Grumman for 100,000 square feet, Raytheon for 47,000 square feet and General Dynamics for 46,000 square feet.
At Redstone Gateway, Georgia Tech Applied Research renewed 37,000 square feet. For the full year, roughly 65% of vacancy and investment leasing was executed with existing tenants. Our ability to both retain and expand our relationships with existing tenants as well as attract new tenants provides both stability and growth in our portfolio and operating results.
Our outlook for retention over the next several years remains solid. Our 2025 guidance assumes a midpoint for tenant retention, 80%, and we do have 3 million square feet scheduled to expire in 2025. This includes nearly 450,000 square feet of leases to the government, which short term extended from 2024 into this year due to government administrative backlog. We expect this process backlog will continue impacting approximately 600,000 square feet of expirations, which like the government will also short term and into 2026.
To be clear, we fully expect 100% of this government inventory to be renewed. For our total portfolio, the 75% to 85% retention guidance range concentrate short-term government extensions and is based on the net 2.4 million square feet of 2025 expirations. Any acceleration and timing of the government backlog provides up to our retention forecast.
Now turning to our large lease retention on slide 18 of our flip book. We provide our final look at the large list that expire between mid-2022 and year-end 2024. We projected over 95% retention on these large leases, and our final report card on this topic is that we’ve achieved a 98% retention rate on that 2.4 million square feet of leases exceeding our target.
On slide 19, we look to the future and provide our outlook for large leases expiring between mid-2024 and year-end 2026. At the beginning of that period, we had 32 leases over 50,000 square feet totaling 4 million square feet set to expire and we projected over 95% of retention on that space.
Thus far, we have seven of these leases totaling 800,000 square feet and retained 100% of that lease space. The remaining 25 leases totaled 3.2 million square feet, and we expect 100% retention on the US government leases included in this total, which accounts for 2.6 million square feet of this space. Overall, we continue to expect a retention rate of approximately 95% on that 4 million square feet of space.
Moving on to development. Our active development pipeline totaled 600,000 square feet of active or not yet stabilized developments which are 75% pre-leased and represent a total investment of $253 million. Our two development inventory buildings, including that pipeline have roughly 250,000 square feet of prospects on 150,000 square feet of available space, which equates to an activity ratio of 165%. At 9,700 Advanced Gateway in Huntsville, we signed a 26,000 square foot lease with Parsons, a top 20 defense contractor during the fourth quarter. We now have less than 15,000 square feet in that building remaining to lease.
At MVP 400, we have 190,000 square feet of prospects, 138,000 square feet of available space. We expect this demand from both the government and contractors will materialize in leasing towards the back half of this year and early part of 2026. Our development leasing pipeline, which we define as opportunities we consider 50% — will to win or better within two years or less, currently stands at about 800,000 square feet. Beyond that, we’re turning over 2.5 million square feet of potential development opportunities. This activity should allow us to maintain a solid development pipeline in the near and medium term.
With that, I’ll hand it over to Anthony.

Anthony Mifsud

Thank you, Britt. We reported 2024 FFO per share as adjusted for comparability of $2.57. The year benefited from favorable renewal outcomes, including higher retention and lower concession levels, lower net operating expenses, primarily seasonal and utility costs. Successful real estate tax appeals at several properties higher interest income and development fees. For the fourth quarter, we reported FFO per share as adjusted for comparability of $0.65, which was at the midpoint of our guidance.
During 2024, our same property portfolio generated a 9.1% increase in cash NOI. This growth was driven primarily by cash rent increases from the burn off of free rent on development leases placed into service in 2022, embedded escalations in virtually all of our leases, lower net operating expenses, an increase in same-property occupancy of 30 basis points which included the impact of several favorable renewal outcomes and lower-than-expected free rent concessions. Several of these items that positively impacted 2024 results are non-recurring items, such as the benefit of the free rent burn-off, the real estate tax appeals and lower seasonal operating expenses.
Excluding those items, normalized 2024 same-property cash NOI would have increased 3.4% and Same-property occupancy ended the year at 94.1%, which is a 50 basis point increase compared to last quarter, a 30 basis point increase year over year and is our highest level in over a decade. These gains were driven largely by the Fort Meade/BW Corridor with occupancy up 130 basis points sequentially and up 70 basis points year over year and Northern Virginia, with occupancy up 120 basis points sequentially and up 280 basis points year over year.
Our balance sheet continues to be fortified and well positioned to take advantage of opportunities and at year-end, 100% of our debt remained at fixed rates. We expect our variable rate debt exposure to increase modestly throughout the year but remain below 10% as we draw on the line of credit to fund the debt component of our development spend. We have been funding and expect to continue to fund the equity component of our investments with cash flow from operations after the dividend on a leverage-neutral basis.
With respect to guidance, we expect another healthy year of performance in 2025. We are establishing 2025 FFO per share at a range of $2.62 to $2.70. Implying 3.5% growth at the midpoint. The $2.66 per share midpoint takes into account a $0.22 increase in NOI, $0.12 from portfolio operations and $0.10 from developments placed into service during 2024 and 2025. This is partially offset by $0.08 from higher net interest expense from higher projected debt balance and $0.05 of lower interest and other income and venture-related expenses.
Same-property cash NOI is projected to increase 2.75% at the midpoint. As I previously mentioned, same-property cash NOI normalized to exclude onetime items, increased 3.4% in 2024. Continuing with that methodology 2025, same-property cash NOI would increase 3.3% at the midpoint over normalized 2024. We expect same property occupancy to end the year between 93.5% and 94.5%. Occupancy will dip in the first quarter due to a few non-renewals and contractions, approximately 25% of which were previously reported, then tick back up in the — during the year as 2024 leases commence. In addition, we expect tenant retention in the 75% to 85% range, cash rent spreads on renewals to be flat at the midpoint with average escalations of roughly 2.5%.
Regarding interest and other income, we are forecasting a $0.03 year-over-year decline, which is driven by two factors. First, throughout 2024 we earned interest income from the excess cash proceeds from our fall 2023 exchangeable note offering. Out last year, we drew on the cash — that cash to fund the debt component of our development and acquisition spend. In 2025, we expect to maintain a more normalized cash balance, which contributes to the year-over-year decline.
Second, the City of Huntsville paid down $16 million of its note receivable in December, and we expect an additional paydown in 2025. Guidance assumptions for our 2025 capital plan include the prefunding of our $400 million, 2.25% bond maturing in March of 2026. We believe prefunding the liquidity ahead of this maturity is the prudent course of action. Our guidance assumes a $400 million bond issuance in the fourth quarter and we will use the proceeds to temporarily pay down the outstanding balance on the line of credit and hold the excess proceeds as cash.
Paying down the line of credit will result in a drag of nearly 100 basis points relative to the conservative bond that we modeled, while holding the excess proceeds as cash will result in a drag of a little over 200 basis points. Based on current market projections, the net impact on FFO per share guidance is approximately $0.015. We are incredibly well positioned to access the fixed income market. Our bonds continue to trade at the tightest spreads to treasuries of any equal or higher rated office peer. Our longest stated maturity of $400 million odd maturing in 2033 is currently trading at a spread of 120 basis points, which is 10 to 15 basis points higher and the spreads of our two higher-rated peers with similar maturities.
And in November, Moody’s revised their outlook on our rating from neutral to positive, driven by our strong operating performance and conservative leverage profile.
Regarding uses of capital in 2025, we expect to commit $200 million to $250 million of capital to new investments and expect our development spend on active future projects will be in a range of $250 million to $300 million. We expect to place two data center shell projects into service in 2025 that are 100% leased which represent over $175 million of capital investment. We also plan to place a portion of 9,700 Advanced Gateway in Huntsville into service. We are very confident in our ability to continue to generate strong results and refinance our upcoming debt maturity at an attractive spread, given the strength and stability of our portfolio and a conservative leverage profile.
With that, I’ll turn the call back to Steve.

Stephen Budorick

So before I wrap up, let me refer you to list of our achievements. Over the past five years that we put on slide 13 of our foot book. Each of which is pretty remarkable given the macroeconomic climate that included the global COVID pandemic, and the highest level of inflation in over 40 years, the highest interest rate environment in over 15 years, had a massive shift to work from home, leading to the highest office vacancy rate in over 40 years. And despite these headwinds since 2019, we grew our portfolio by 30%. We increased our FFO per share by 27% and our AFFO by 26%. We increased our occupancy by 70 basis points, and we maintained sector-leading tenant retention rate of nearly 80%.
So finally, I’ll close by memorizing our key accomplishments and messages. We achieved excellent results in 2024, driven by the continued strength in our portfolio operations. We delivered FFO per share growth of 6.2% year over year, marking our sixth consecutive year of growth. We accrued dividend 7.3% over the last two years. We expect 2025 to be our seventh year of FFO per share growth, and our guidance implies an increase of 3.5%.
We’ve set a demanding target for vacancy leasing at 400,000 square feet, given how well leased our portfolio is already. We expect tenant retention will remain strong at 80%. We expect to commit $225 million of capital to new investments, thereby restocking our development pipeline. Our liquidity remains very strong and we expect to continue to self-fund the equity component of our capital investments going forward. And we continue to anticipate compound annual FFO per share growth or 4% between 2023 and 2026. So we’re off to a great start in 2025, and we’re looking forward to another highly successful year.
And with that, operator, please open the call for questions.

Operator

(Operator Instructions) Tom Catherwood, BTIG.

Tom Catherwood

Thank you, and good afternoon, everyone. Maybe Steve, to start, in terms of the three defense priorities that you detailed in your prepared remarks, how would you expect demand to evolve in your markets around those? And is there a consideration of getting ahead of that demand with additional inventory developments or acquiring assets with lease-up potential.

Stephen Budorick

So the three priorities we named space activities, we believe that will definitely affect Huntsville. And among them is a strong consideration to relocate Space Command to Huntsville from Colorado Springs. And that could potentially create development in our immediate portfolio to house the initial standing up of that mission and then subsequently contractor developments to support the contractors needing to serve it.
The second is missile defense in all likelihood effect Huntsville as well. The PEO of Business and Space is located on Redstone Arsenal. And if you listen to what President Trump has talked about — iron dome equivalent, which is a significant expansion to the antimissile defense system that’s also headquartered in our park Redstone Gateway, known as GMD Ground Missile Defense.
Then the third priority is naval capabilities expansion, and that could benefit our portfolio, both in Washington, D.C. next to the US Navy Yard by the way, where we’ve experienced increased demand. Last quarter was a nice lease to support the OUS submarine development program as well as our portfolio in Southern Maryland, where we support reference development and an error. So I think I answered the question. Did I miss that third?

Tom Catherwood

That was great. Thank you, Steve. And I also appreciate your thoughts on DOGE and the focus on GSA leases. But could there be an indirect impact to comp if there’s an increased focus or put on kind of your contractor customers? Or is that likely to be outside their DoD-related businesses?

Stephen Budorick

Well, it’s interesting. If you look at their — if you look at their comments on earnings calls, then I won’t be specific, most of the service companies believe that they are part of the solution that DOGE looking for, and they believe that they’re well positioned to bring efficiencies to the DoD and the larger manufacturers have really focused in on streamlining the procurement process to make it more competitive, more efficient transition from contractor to contractor, less protesting. But the mood in the industry is this is an opportunity to kind of move the less efficient procurement methods in traditions and move to really more value for the dollar spent at the mission.

Tom Catherwood

Got it. Appreciate I thought. And then last one for me. Can you provide an update on your data center land in Iowa that you acquired last quarter and the status of applications for power?

Stephen Budorick

Yes. We’re working through our request. We got an initial response from the power company in the last month. Good news is we have a path to — gigawatt. The last good news is timing is less clear from a standpoint.
They have a variety of requests in queued up in sequence and they’ve kind of got to work through some of those for — bring us more specificity, but we’re excited. We’re working with the customer on a kind of a global term sheet and then on specific discussions regarding power.

Tom Catherwood

Got it. Appreciate all the answers. Thanks, everyone.

Stephen Budorick

Happy birthday, Tom.

Operator

Michael Griffin, Citi.

Michael Griffin

Great, thanks. Maybe just going to sort of defense budget expectations for this year. I know the appropriations was deferred until the middle of March, and there’s precedent for reaching a deal there. But given the different factions in Congress and the razor spend majority that Republican have, do you foresee any potential issue of this being installed or continued delays? And could that impact your business, if that were the case.

Stephen Budorick

Well, anything can happen when it comes to DoD spending. I’ll say this, that after the initial Trump election victory, the continuing resolution that occurred that year is, I believe, the longest in history all the way to the end of May, primarily because there’s significant effort to get a dramatic increase in that budget, which could potentially happen.
There’s I think a lot of promotion around the housing center right now. So I’m not smart enough to predict really how that translates to the final negotiations and the DoD authorization. But I can’t say that over the last eight years, there’s been amazing bipartisan support to increase funding into the DoD and a broad recognition that even at our level of spending today, we’re probably a full percentage point of GDP lower than we should be. And so when all is said and done, I think you’ll see an increase.

Britt Snider

Hi, Greg, this is Britt. I mean, just one thing to add on that is, I mean, our direct conversations with the customers are showing no slowdown whatsoever. In fact, potentially the opposite of that with expansion with military customers and their contractors. So there may be some process stuff that gets figured out here. but we’re not seeing any slowdown from the customers themselves.

Michael Griffin

And Britt, this price segues well into my next question. But obviously, as you think about sort of leasing and renewal rates and ability to push pricing. I understand particularly the government side, they’re sensitive about increases. But as you look to kind of the private sector tenant base, have you seen any ability to push on pricing, greater landlord pricing power from that perspective? I understand it could be kind of a give and take with the relationship you have with your customers, but are you noticing any pricing differences as a result of that demand?

Britt Snider

Yes. I mean we continue to push where we can. But as we pointed out many times, we’re really focused on initially on concessions and reducing those, which we were very successful in doing last year. But then also just going back to that retention, I mean it is a massive cost benefit over the cash rent spread. So we’re very focused on that. We’ll take those opportunities when we can push rate where it makes sense to do so, but we’re not going to risk losing tenants.

Michael Griffin

Great. That’s it for me. Thanks for the time.

Operator

Anthony Paolone, JPMorgan.

Anthony Paolone

Great, thanks. Just going back to the data center land in Des Moines, is it fair then to assume, just trying to parse through your comments, that that’s probably not going to be a lot of the spending this year?

Stephen Budorick

That is very fair.

Anthony Paolone

Okay, and so if we go to your development starts for 2025, can you maybe just give us some additional color and thoughts on what you might do there, where, nature of the projects?

Stephen Budorick

Well, for sure, we’re going to start our GA500 in Redstone mentioned in his comments, as we signed the lease with the US government, we will have very little space available in the park, and we’re anticipating a lift in demand and potentially advancement on some of the build-to-suits that we’ve been talking about over the past 12 months. So we plan to have inventory in production there. We are preparing to develop on our secure campus to provide the solution for a space force Space Command relocation should it occur. And moreover, across the portfolio, in the last 30 days, we’ve moved to some pretty encouraging build suits with as many as four different tenants in multiple locations, all Defense/IT.

Anthony Paolone

Okay. If Space Command were to just get hung up in a process this year, would that change like the starts in Huntsville or just the guidance there?

Stephen Budorick

Well, we won’t start that building without a recognition that the relocation would occur and that is at least an intent to lease from us. But I don’t think it will affect our overall numbers at all.

Anthony Mifsud

Yes. And Tony, in terms of the developed capital that we’re assuming to invest during the year, there’s really — there’s not any capital assumed for the Space Command vertical development.

Anthony Paolone

Okay. Got it. And then just one last one, if I could sneak in. Just over on the regional office side. any change to liquidity or anything you’re seeing out there that might prompt you to kind of sell anything on that front?

Stephen Budorick

No. I’ll answer. There’s really not a lot of investment sales activity. And what has occurred or is about to occur is deeply distressed assets, short sales workouts. We just don’t see cap rates in potentially getting to a range where it would be an efficient so. We continue to monitor, but it’s too early, rates are high.

Anthony Paolone

Okay, great, thank you.

Operator

Blaine Heck, Wells Fargo.

Blaine Heck

Great, thanks. Good afternoon and happy birthday, Tom. So Steve, you mentioned there’s been a lot of news and conversation focused on the administration change in the government workforce and properties. But I guess just to put a finer point on it. Can you just talk us through whether you think any of your tenants are susceptible to these changes and whether you see any potential for an impact to your portfolio?

Stephen Budorick

So we’ve reviewed deeply our — the missions we support and the leases we have, and we do not see anything at risk is by proactively addressing the GSA component. We have a couple of functions we mentioned where those leases are under a GSA form because of the group they have put their first skip space that correlates in interplays with the overall missions in and around them. And then we have a core system and a police force. So we don’t see that affecting our tenants.

Blaine Heck

Very helpful. And somewhat related to that. Britt mentioned the 600,000 square feet government leases expiring this year that are expected to extend into ’26. Can you just confirm whether those tenants have additional near extension options or are likely to remain sticky in your portfolio or if there’s any risk of move-up in ’26 from that group?

Britt Snider

No, we really don’t see that. Do you see any move outs of that group, is this something that really happens every single year, and it’s just the amount changes a little bit. But we feel very good about that. It’s just more administrative process. I mean those process could actually help — this is actually get the leases process — renewals process faster. So it’s not something that’s atypical.

Blaine Heck

All right, great. That’s helpful. Okay, thanks. That’s helpful. And then I think Anthony mentioned that 25% non-renewals and contractions expected in the first quarter were previously communicated. Can you talk about the other 75%? Were those surprises to you guys? And any color on the profile of those tenants or other commentary would be helpful.

Stephen Budorick

No, the largest of which is the medical system. It’s Carefirst Blue Cross, Blue Shield. They’re in our headquarters three-building complex. We know that they have been moving out for several years. It’s about 50,000 square feet. We’ve been premarketing and I mentioned in his comments, we’ve got strong demand there. And Columbia Gateway, non-renewing a non-defense tenant, we actually view as an opportunity because we have so much demand for cyber and skiff that allows us to more deeply concentrate the tenancy in our buildings that we want.

Blaine Heck

Great. Thanks, everyone.

Operator

Richard Anderson, Wedbush Securities.

Richard Anderson

Thanks. Britt, question for you on the availability as we saw at the end of the year, something like 1.2 million square feet, if I’m do my math right. And then you’re adding some availability. I think you said 130,000 square feet, correct me if I’m wrong on that. But I guess the question for me is there always a natural level of what or what level of frictional vacancy in the portfolio in your mind? Or is there some Nirvana moment where you can actually be almost 100% leased. I’m just curious what should we expect as like the topping point of the lease percentage for you guys?

Britt Snider

Yes, I mean, I think that the 95%, maybe 96% is kind of the natural occupancy for us. But I mean, there are opportunities to close the gap a little bit, but I think remaining flat for this year is a good assumption. Yes, that’s it.

Richard Anderson

Okay, that’s good enough for me. On the same-store growth, 2.75% at the midpoint, you talked about the onetime events in 2024. I think I heard it right, not 9.1% becomes 3.4% without it. Was that the right path?

Britt Snider

That’s correct.

Richard Anderson

Okay, so to get to the top end of the range, is there any noise in the number this year, I guess, is the question around the same-store pool in terms of the growth, internal growth?

Anthony Mifsud

The only — there is no noise in the projected results because we’re not anticipating any onetime items in 2025. The noise is really off the amount you’re benchmarking against for last year. So normalizing that gets you to the 3.3% versus the 3.4% for last year.

Richard Anderson

Okay, okay. Fair enough. And then last for me, you mentioned in the release, first time you’ve done some acquisitions in a while, and I’m wondering what the pipeline looks, whether it’s more land like Des Moines or operating assets like San Antonio and Franklin Center. Do you see a pipeline of opportunity from acquisitions or is that — are those sort of kind of one-offish and unlikely to be a meaningful part of the external growth story? Thanks.

Britt Snider

Yes, this is Britt. I mean we are seeing some opportunities that are distressed there that we’re taking a look at, I would say one or two, I would say, so much to the Franklin Center profile. But yes we’re out there looking, but again, it has to meet all of our criteria.

Stephen Budorick

Yes, that’s the important point. It’s not going to be programmatic. We’ve got a very strict criteria on what we’d be willing to buy. It’s got to fit into our portfolio and the use has to be defense IT, near emission, servicing emission that we believe in, or we’re not going to buy it.

Richard Anderson

Okay, fair enough. Thanks very much.

Operator

(Operator Instructions) Dylan Burzinski, Green Street.

Dylan Burzinski

Thanks for taking the question guys. Just sort of wanting to touch on future development prospects. I mean, obviously you guys talked about the strong demand environment that you’re currently seeing. The operating portfolio is 95% occupied today and you expect sort of defense spending, especially as it relates to spending dollars towards the missions itself to go up over the near-term?
So I guess with that in mind, I mean, does it seem reasonable to expect that the development spend starting in 2026 and beyond will immediately pick up in the level that we see in 2025 or how should we be thinking about that?

Stephen Budorick

Well, I would view it on average in the range that we’ve provided. With some ebb and flow from year-to-year, we’ll see what this administration brings to the table. I’d say there’s some optimism. There’ll be increased opportunity. We can already see behaviors that have more confidence in our tenants. But I think our range is pretty good.

Dylan Burzinski

Awesome. That’s it for me. Thanks, guys.

Operator

Thank you. I will now turn the call back to Mr. Budorick for closing remarks.

Stephen Budorick

So thank you all for joining our call today, and happy birthday again, Tom. We are in our offices, so please coordinate the event kit if you’d like to follow up. Thank you.

Operator

Thank you for your participation today and the COPT Defense Properties fourth-quarter and full-year 2024 results conference call. This concludes the presentation. You may now disconnect. Good day.