Welcome to the Corporate Office Properties Trust first quarter 2022 results conference call. As a reminder, today's call is being recorded. At this time, I would like to turn the call over to Stephanie Krewson-Kelly, COPT Vice President of Investor Relations. Ms. Krewson-Kelly, please go ahead. Thank you, Valerie. Good afternoon, and welcome to COPT's conference call to discuss first quarter results. With me today are Steve Budorick, President and CEO, Todd Hartman, Executive Vice President and COO, and Anthony Mifsud, EVP 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 at length 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. Yesterday, we announced another strong quarter with continued progress on our growth strategy. Our successful performance and execution since 2018 have positioned our company to deliver reliable annual FFO growth and long-term shareholder value. Over the past decade, COPT has deeply concentrated its invested capital into properties supporting priority U.S. defense missions and select mission-critical assets in regions that we collectively refer to as defense IT locations. These locations now generate 90% of our annualized rental revenue. Our concentration of leases to the U.S. government and high credit tenants supporting national defense and cybersecurity is the foundation of our ability to generate resilient, high-quality cash flow regardless of the broader economy. Our external growth strategy is driven by our achievement of pre-lease and low risk development at these proven defense IT locations. We have an advantage position in this unique market as the go-to landlord for specialized space satisfying government security requirements. We continue to experience strong leasing demand. As of March thirty-first, our portfolio was 94% leased and 92% occupied and generating steady, high-quality cash flow. Our active development pipeline contains 1.7 million sq ft of projects at Defense/IT Locations. These projects are 96% leased, and when placed into service, will produce incremental FFO that will augment the growth from our stable operating portfolio. We have a strong balance sheet to support growth. The debt refinancing activities we completed in 2020 and 2021 enhanced our investment-grade balance sheet, meaningfully lowered our interest expense, and extended our debt maturities. Accordingly, 97% of our total debt is fixed rate and predominantly in the form of long-term unsecured notes, largely insulating results from interest rate increases and providing solid foundation for growth. Our solid first quarter results show the strength of the strategy and execution. FFO per share of $0.58 exceeded the high end of guidance, making this the eighth quarter out of the past nine that we've met or exceeded the midpoint of guidance. Leasing remains strong in our operating and development portfolios. We completed 871,000 sq ft of total leasing, and this volume included 265,000 sq ft of development leasing or about 40% of the target for the year, and we are on track to achieve 700,000 sq ft development leasing goal. We achieved better than average vacancy leasing volume in the quarter. The 157,000 sq ft we completed is 60% higher than the trailing five-year first quarter average, and virtually all the vacancy leasing occurred at Defense/IT Locations. Additionally, and as discussed on our last call, we completed the sale of DC Six in January, which recycled equity to fund development and further concentrated our capital allocation to Defense/IT Locations. We continue to see the benefits of defense spending growth that began in fiscal year 2017 and expect a nearly 6% increase in the DoD's fiscal year 2022 base budget to further drive demand in our portfolio. Historically, our Defense/IT Locations portfolio benefits from strong demand and industry-leading tenant retention and is generating consistent, steady financial growth. Between 2018 and 2021, our FFO per share compounded at 4.4%. Our guidance suggests 2.2% growth in 2022, coming off the strong 8% growth in 2021. Beginning in 2023, we expect growth to compound at 4% or more through 2026. In summary, we had another strong quarter and we're well-positioned for continued growth. With that, I'll hand the call over to Anthony Mifsud. Thanks, Steve. FFO per share of $0.58 exceeded the high end of our guidance by $0.01 due to stronger than expected same-property results and the timing of development fees. We continue to expect same-property cash NOI to be flat to down 2% for the year. Defense IT should grow between 50 and 100 basis points. Our regional office segment, which now represents only 10% of our annualized rental revenues, will decline 20%-25%, reflecting the Transamerica vacancy that occurred on January 1st, and the roll-down in rent associated with the 15-year CareFirst renewal executed in December. Same-property occupancy of 92.2% was in line with our guidance range, and we expect same-property occupancy to be between 91% and 93% at year-end. NOI from development placed in service will continue to drive growth. Developments recently placed into service contributed $1 million in the first quarter, and we expect a total cash NOI contribution for the year of $15-$17 million, all of which is contractual. In terms of capital, the sale of DC Six provided $223 million of proceeds, which further strengthened our balance sheet. Based on projected development investments, we expect to recycle out of existing assets toward the end of the year to maintain our conservative leverage. As Steve touched on, between September 2020 and November 2021, we issued $1.8 billion of new senior notes with a weighted average term of 8.9 years and retired debt carrying a weighted average term of just 2.1 years. As a result of this proactive refinancing, we increased the weighted average maturity of our consolidated debt portfolio from three years -seven years today and lowered our exposure to variable rate debt from over 11% to less than 3%. Lastly, as detailed on pages 12 and 13 of our slide deck, we are narrowing our full year range of FFO per share to reflect first quarter results. The $2.34 midpoint continues to imply 2.2% growth over 2021 FFO per share results as adjusted for comparability and reflects about 2 percentage points of dilution from the January sale of DC Six. Now I'll hand the call over to Todd. Thank you, Anthony. Our future results will benefit from the strong leasing volumes achieved in the first quarter. Total leasing volume was 871,000 sq ft, or nearly 150% of the first quarter five-year average. Our 64% tenant retention ratio reflects Transamerica's 141,000 sq ft non-renewal at 100 Light Street and was included in our full year retention guidance of 70%-75%. Excluding Transamerica, we renewed 78% of expiring leases in the quarter, and we remain on track to achieve our retention guidance for the year. Cash rents and renewals rolled down 5.7%, which was anticipated and is included in our full year guidance for cash rent spreads to roll down 1%-3%. The 157,000 sq ft of vacancy leasing we completed was very strong. This result was 60% higher than the trailing five-year average for first quarter and represents the third consecutive quarter that we have exceeded our five-year average. 96% of the quarter's vacancy leasing was in Defense/IT Locations. Additionally, nearly 75% of this leased space will have secure compartmentalized information facilities, creating high barriers to exit for the tenants who will be investing an additional 2.5x-3 x the TI allowances we provide to complete their build-outs. Development leasing was strong as well. We executed a 265,000 sq ft build-to-suit for our cloud computing customer in Northern Virginia. We are tracking 1.2 million sq ft of potential build-to-suit and major pre-lease demand in our development leasing pipeline, which supports our objective of leasing 700,000 sq ft in developments this year. Finally, we are encouraged by the activity on our larger vacancies. At 1,200 Redstone Gateway, we are working with more than 300,000 sq ft of demand or nearly three times the building's availability, and expect to have the former Boeing space leased well before the end of the year. At 2,100 L Street in Washington, D.C., the volume and pace of activity has markedly improved. We are working with 165,000 sq ft of prospects or more than double the building's 74,000 sq ft of availability. Similarly, activity strengthened at 100 Light Street in Baltimore, where we are tracking 145,000 sq ft of prospects, representing an 82% activity ratio. We look forward to announcing progress on this activity in coming quarters. With that, I'll hand the call back to Steve. Thanks, Todd. To summarize, we delivered another strong quarter, and we are on track to meet or exceed our 2022 business plan. Vacancy leasing remains strong, and first quarter results significantly exceeded our five-year quarterly average. We are on track to achieve our full year guidance for development leasing, and we expect strong second quarter results. Our 1.7 million sq ft of active developments are 96% leased, assuring incremental NOI from these properties that will drive FFO growth in coming years. Our development leasing pipeline is 1.2 million sq ft of opportunities which we believe will translate into strong future development leasing. Congress appropriated the fiscal year 2022 National Defense Authorization Act in March, providing the Department of Defense with a 5.8% increase in its base budget, the largest annual increase since fiscal year 2018, suggesting leasing demand will remain strong into 2024. Lastly, we've delivered strong growth over the past three years, and we expect to continue to deliver both FFO and NAV growth in the coming years. Operator, please open up the call for questions. Thank you, Mr. Budorick. Ladies and gentlemen, if you'd like to ask a question, please press star then one on your touchtone telephone. Again, if you would like to ask a question, please press star then one. Our first question comes from Manny Korchman of Citi. Your line is open. Hey everyone. Good afternoon. Thanks for sharing the pipelines on those three big target lease ups. Just, you know, how is your confidence level on getting those done now versus maybe a few months ago? I know you've sort of broken it down to how much demand you have for each and their multiples, but sort of what's the probability of actually getting the leases done and in one timeframe? Well, we're very encouraged by the activity increase at all of the assets over the quarter. You know, we've seen increases in D.C., increases in Baltimore, and increases down in Huntsville. The probability of getting a lease done is hard to predict. We're very confident that we will get leasing done in the coming quarters, but I hesitate to put a timeframe on it. You feel better now than you did a little while ago, it sounds like. Yeah. I think activity overall is increasing. We've seen, as we said, increasing levels of activity in D.C. and increasing tour activity in Baltimore, increasing tour activity in D.C. Yeah, so we characterize activity as increasing. I'd add, we're extremely confident in Huntsville. Right. In terms of the same store NOI growth guidance, I think you guys exceeded your own plan for the first quarter, but that didn't lead to a lift in the year. Is there an offset somewhere, or is it just kind of already accounted for in the range? You know, if you look at the actual outperformance in the first quarter, the actual total cash NOI increase versus our midpoint of guidance range was about $550,000. So it wasn't a lot of incremental NOI that drove the percentage outperformance, first of all. Then as you look at the quarterly sort of cadence of cash NOI, the first quarter benefited from the burn off of free rent on several large leases, which offset the impact of the Boeing and Transamerica vacancies. We don't have the benefit of that in the second and third and fourth quarter because that free rent had turned into cash rent in 2021 already. I get that. I guess the question more is, if you look at slide 11 of the presentation, you had a range of 0%-1%. You came in at 1.2%. So you exceeded your own range by, you know, the midpoint of your own range by 70 basis points. I guess the question is, why doesn't that flow through to the rest of the year if all those things you just named should have been, I guess, knowns to you when you put out this initial guidance. What changed that won't remain sort of, I guess, more permanent for the rest of the year, versus where your initial expectations were? I guess what I was trying to point out is that the half a million dollars outperformance in the first quarter would increase the midpoint of our total range, but not by enough to change the total range for the year. You know. It's just not enough to move it from you know zero flat to down 2% to you know something that's you know 50 basis points higher. You know, nothing else has really changed. Got it. Appreciate that. Thank you. Thank you. Our next question comes from Blaine Heck of Wells Fargo. Your line is open. Great. Thanks. Good afternoon. Just related to Manny's first question on vacancy leasing and specifically with respect to Redstone, 100 Light, and 2100 L. Is there anything included in guidance related to leasing at any of those properties? No, I don't believe there is. No. Okay, great. Just switching gears here, just thinking about the inflation we've seen this year, Steve, maybe can you talk about how that might be affecting development costs and whether your yields are being affected on that side of the business? Yeah, that's a great question. We actually did an exercise this last quarter, and we were benchmarking our 8000 series developments, which are the easiest like for like comparison that we have in our portfolio. From our 8000 to our most recent development, costs actually increased over two years about 22%. Our rental rates that we've achieved are about 22% as well. We've been able to increase our rent because of the strength of demand in defense IT to preserve our target development yields. Of course, you realize as, you know, costs continue to escalate, that's a battle that we'll take on with each and every asset. Okay, that's helpful. Then, you know, Steve, sticking with you and more of a big picture question here. You know, what effect do geopolitical tensions like, you know, what we're seeing now with Russia have on increasing government and contractor demand for new space in your key markets? Are there, you know, any prior instances you could point to where new military conflict or rising, you know, geopolitical stress seem to lead to increased space needs within your portfolio? And maybe help us understand how that played out. You know, what was the timeframe and what was the scope of the increase in demand? I haven't had anything occur quite like this while I've been with the company. If I describe the process, I think it'll be clear. When the government responds to needs in the Defense Department, it does so through Congress, through increased spending. That spending ends up into a NDAA appropriation. That appropriation flows into the DoD, where they conceptualize things that they need. They structure them in contracts. They have competitions. A contractor, you know, is awarded a victory, and then the need for space manifests in our portfolio. It's generally at least 12-18 to 24 months after the increase in a defense spending act that we'll realize the benefit in leasing, which is why my comments conveyed confidence in demand through 2024. Great. Very helpful. Thanks, guys. Thank you. Our next question comes from Brian Spahn of Evercore ISI. Your line is open. Hi, Steve. You talked about 4% annual compounding FFO growth beginning in 2023. Could you maybe just walk us through the components of that, and what you're assuming in terms of regional asset sales there? To what degree, you know, would these forecasts be affected by a recession? That's a great question. I don't wanna get into specific components and have this be misconstrued as some sort of guidance. What I can say is management is conveying strong confidence in the company's position to generate that growth. That confidence really comes from our five-year modeling process that we complete at the beginning of each year. Our most recent modeling process dealt with the 2022-2026 period, and it was robust. We ran 10 different scenarios and then stressed those scenarios. To give you an example, we had four different capital recycling alternatives. We modeled 3 different development spend scenarios. We modeled in the impact of a deep recession starting in the end of 2023, and then we've stressed them all for higher LIBOR rates in response to the change in interest rates that have occurred. That exercise gives us confidence that after the dilutive year from the sale of DC Six, that we can generate 4% or better growth. Okay. Anthony, your comment about recycling out of some assets at the end of this year, I assume that was directed toward more D.C. shell sales. Is that right? That is one of the options that we have to generate the approximately $75 million-$80 million worth of capital that we're projecting to need by the end of the year. Okay. To what extent are you exploring or having conversations regarding regional office sales? How has that activity changed at all in light of the recent move in bond yields? Well, we monitor the capital market for office properties in Baltimore and in Northern Virginia and our data center shelves each quarter. I would say that all of our regional assets are potential recycling candidates at some point in time as an alternative to the shelves. When we see an opportunity that is optimal for taking one of those to market, it's a definite possibility. Okay. Great. Thank you. Thank you. Our next question comes from Jamie Feldman of Bank of America. Your line is open. Hi, everyone. This is Suri Gangulapu on for Jamie. Thanks for taking my question. Kind of going along the lines of the last question, could you talk a little bit more about the investor appetite for your assets, whether it's data center shelves or your regional office portfolio? Have cap rates or buyer pools changed with the rising interest rate environment? Well, demand for our data center shelves has been extraordinary. I don't believe demand has changed at all. I have no comparable sales to provide indication that cap rates have crept higher on those assets. With regard to some of our regional assets, there is sales activity in both, you know, the Baltimore market and Northern Virginia. There are active processes being conducted, so we don't have the outcome from a cap rate perspective. I will say that the selling entities have pretty high expectations for attractive cap rates. Okay, great. Thank you. It's really helpful. Have rising rates, recession concerns, or economic concerns in general slowed tenant lease decision-making or not really considering your tenant mix? No, we really haven't seen a slowing in the pace and progress of our leasing. As we pointed out in our remarks, you know, first quarter, virtually all our leasing was in the defense IT segment. We just don't see that impacting them. That really speaks to the strength of our strategy. Our markets are driven by defense budgets more than they are by the overall economy. Okay, great. Thank you. That's all for me. Thank you. Our next question comes from Rich Anderson of SMBC. Your line is open. Thanks. First question is on DC Six. No, just kidding. Yeah. On, I could do this math myself. Development assets as a percentage of total assets, what, where are you at right now? 10%. Yeah, on a square foot basis, it's probably 9%. Okay. Let's say 9%-10%. Is that your comfort zone to maintain it there? The reason why I ask is as you complete development and put them into the operating portfolio, and they start growing for you and producing cash, you know, NOI. I think that's a more valuable part of the story from the standpoint of the stock market. I know you guys are a development engine, and it's vital to continue that going. But from just the standpoint of, you know, how your stock performs, I think the same store portfolio and the production of cash rents is more valued by the market. Do you see development staying there or declining as the operating portfolio gets bigger? That would be my first question. As a percentage, I would say it would probably, you know, diminish a bit. Remember, we're a low-risk developer with a strong preference to build to a significant pre-lease or a build to suit. We're not going to introduce more product than we see demand in our markets to maintain a targeted sq ft ratio. We've delivered on average over 1.1 million sq ft of development leasing for a decade. We have no reason, on average, over a longer period of time, to think that would materially change. I don't think you should never change your stripes as a developer, but I do think the stock market has immediate gratification mentality when it comes to development. That's just my opinion. Balancing that with what you know what you need to do long term is, I guess, the essence of my question. The second question is the 200 basis points spread between the leased percentage and the occupied percentage, 94% versus 92%. I'm wondering how that might change in the future. You know, that seems tighter than I think I've normally seen, and maybe you could just comment on that. Tighter? Yeah. Is it normally 200 basis? I always thought it was a little bit wider than 200 basis point. Yeah. I don't study that, I gotta be honest with you. Why don't we follow up with you on that one, Rich? I love stumping you, Steve. It's so much fun. I will say we did get a lot of vacancy back in the last quarter with Transamerica and the transition with Boeing, and we have good demand behind it. We expect that'll create some opportunity for nice growth next year. Okay. My last question is with everything that's going on in you know, Ukraine and you know, you just walk through you know, the process of congressional approval to leasing. I thought that was very interesting perspective, so thank you for that. You know, in the office business you know, you obviously run a niche, and there's other niches in office like life science, and you've seen a lot of conventional office players try to get themselves in intertwined into the life science world. Do you see that similar dynamic happening in your neck of the woods? Or is it the reverse that people kind of hesitate to work directly with the government because there's so much that goes into having to do that? You guys you know, have your clearances and all that sort of stuff. Are you seeing more or less in the way of competition for your specific niche in the current environment? We haven't seen a change in recent years. Overall, I would say I thought there was more competition in Maryland from 2012 to 2014 or 15 than we experience today, as there were some projects that were started with you know, a desire to compete head-to-head with some of our better assets. They didn't succeed, and they no longer exist. We don't see elevating competition. Remember, one of the unique advantages our franchise has, not only the clearances and the capabilities, the 25-year history of working on secure assets for the government, we have advantaged land positions that tend to dominate when competitions occur. I think our competitive posture is as good as it's ever been. Okay, great. That's all I have. Thanks. Thank you. Our next question comes from Tom Catherwood of BTIG. Your line is open. Thanks so much, and good afternoon, everyone. So Todd, I wanna just kind of loop back on your comments on 2100 L Street, just with the demand improving there. The commentary last quarter was, let's just say, muted at best to somewhat negative on the D.C. market. Can you talk a bit about the improvement that you saw in the first quarter and kind of what's driving that uptick in demand and maybe, you know, what specific tenant sectors? Sure. Well, the activity has increased dramatically over the quarter as D.C. overall has emerged from the pandemic, and it's more and more in the rearview mirror. You know, keep in mind, 2100 L is a trophy asset, well located in the western edge of the CBD, which is one of the more popular submarkets in D.C. I think as a flight to quality continues with tenants coming back into the market, we're gonna see increased demand over the long haul for 2100 L. I think, you know, largely it's people returning to the market, pursuing a flight to quality, and as a result, 2100 L is seeing the benefit of that activity. Got it. Then Steve, maybe along those same lines, last quarter, you'd drawn this kind of comparison between D.C. proper and your markets at NBP and Columbia Gateway and kind of the stark difference in demand. You even mentioned that it felt like, you know, COVID was over at that point in time in your Columbia, Maryland markets. With the pickup in D.C., has that come at the expense of your other markets like NBP and Columbia Gateway, or, how does the demand trend in those other markets? No, there's no scenario where our markets overlap for demand. It's completely unrelated. Demand is very strong in our, you know, Fort Meade area. We had some great leases that we executed this last quarter, expecting a strong full year leasing there. They're just unrelated. There's plenty of opportunity for D.C. to approve, improve, and no impact on our Fort Meade activity. Understood. Going back to the defense IT portfolio, last quarter, you'd also talked about potentially shifting two regional assets into the defense IT portfolio as the tenant base was changing. It looks like that happened this quarter. When you make that shift, is there kind of a marked change you have to make marketing a building? Is there additional capital you have to put into it to make it defense IT ready? Kind of or is there anything else, or is it really just a, you know, a moving from one bucket to the next? Well, it's really an evolution in the tenant occupancy and the nature of the tenants in the building. Those two buildings are on Sunrise Valley Drive near Dulles Airport. Over the last, you know, really three years, the assets started attracting more defense and cyber contractors. In this quarter, we signed a major lease for a very important tenant that's gonna be doing DoD work, creating a full SCIF facility. It occurred to us to look at our concentration of defense versus non, and that building's now 80% defense tenant. It's appeal to that market that we desire has evolved it naturally to where we consider it's a different portfolio than when I set those segments back in 2014. Tom, in addition to that, it's not just our two buildings, it's also the location, the buildings around them that have also had the same kind of changes in their tenancy, and that sort of little submarket in terms of the defense tenants and contractors who have migrated towards that area. Got it. It seems like the clustering effect then as more demand kind of, or as more demand is concentrated in that area, these contractors tend to group together. Is that a fair statement? It is. Okay. Last one for me. Kind of putting all the pieces together as you're talking about, you know, the potential for 4%+ growth going forward. How do you think about the dividend strategy as it ties into that? I mean, obviously, you know, you're growing your asset base through development spending each year. But with those rolling into the portfolio, what are the thoughts on strategically managing the dividend going forward? Well, we've maintained a posture of a constant dividend with any surplus cash flow funding our development. We're not planning to change that philosophy. As we look forward, you know, we have to balance that against our taxable income. There will be a point in time in the future when we will, in all likelihood, because of the growth in our taxable income, have to start moving our dividend up. I don't want to put out a firm date. I totally get it. That's it for me. Thanks, everyone. Thank you, Tom. Thank you. Again, ladies and gentlemen, if you'd like to ask a question, please press star then one on your touchtone telephone. Our next question comes from Bill Crow, Raymond James. Your line is open. Hey. Good afternoon, all. Steve, from a macro front, the increased budget, defense budget is clearly good news. But on a micro basis, when it really comes down to your portfolio, it's more about the specific contracts that the contractors win or lose, or also M&A within the contractor space. I'm just curious whether there's anything on the renewals, expansions, non-renewals or M&A that we should consider as we think about the next year. No, there's no big M&A that we're aware of currently that would have any kind of a negative or positive effect on us. In terms of renewals, but for our Transamerica and the Boeing renewals we've disclosed, over the next two years, we expected very strong renewals with you know a brief bridge to the nature of our leasing. Todd made the point that 75% of the space that we leased in this quarter all require SCIF facilities, and that's a characteristic in the demand right now. A lot of tenants looking to either add, attain, or expand SCIF in their leasing objectives. Wasn't SCIF really big, you know, 15, 20 years ago, and then did it just kind of phase out a little bit? Now it's coming back. Is it how we think about it? No. SCIF's always been vitally important and hard to get. It's a complicated process. Takes a long time to build. With escalation in construction costs, now it's very expensive to build a SCIF. It's a bit of a catch-22. You need a contract to get a SCIF. You need a SCIF to do the contract. SCIF is extremely valuable and always has been. Yeah. Okay. Thank you. Thank you, Bill. Thank you. I'm showing no further questions at this time. I'd like to turn the call back over to Mr. Budorick for any closing remarks. Thank you all for joining the call today. We will be in our offices, so please coordinate any follow-up questions with Stephanie if you have any. Thank you. Thank you for your participation today in Corporate Office Properties Trust first quarter 2022 results conference call. This concludes the presentation. You may now disconnect. Good day.