COPT DEFENSE PROPERTIES 10-Q

MD&A

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations Overview During the six months ended June 30, 2026, we: • finished the period with our portfolio 94.1% occupied and 95.6% leased; • achieved a tenant retention rate of 84.4%, which was driven by our Defense/IT Portfolio; • acquired approximately 17 acres of land on April 23, 2026 for a purchase price of $43.0 million, subject to a ground lease underlying two fully-leased operating properties located at 15020 and 15030 Conference Center Drive in Chantilly, Virginia; and • repaid at maturity $400.0 million in 2.25% Notes on March 16, 2026 using remaining excess available cash and cash equivalents from our prefunding of this debt maturity with a new bond issuance in 2025 and borrowings under our Revolving Credit Facility. We discuss significant factors contributing to changes in our net income in the section entitled “Results of Operations.” In addition, the section entitled “Liquidity and Capital Resources” includes discussions of, among other things: • how we expect to generate and obtain cash for short and long-term capital needs; and • material cash requirements for known contractual and other obligations. We refer to the measures annualized rental revenue (“ARR”), “tenant retention rate,” “investment space leasing,” and “vacant space leasing” in this Quarterly Report on Form 10-Q. ARR is a measure that we use to evaluate the sources of our rental revenue as of a point in time. It is computed by multiplying by 12 the sum of monthly contractual base rents and estimated monthly expense reimbursements under active leases as of a point in time (ignoring free rent then in effect and rent associated with tenant funded landlord assets). Our computation of ARR excludes the effect of lease incentives. We consider ARR to be a useful measure for analyzing revenue sources because, since it is point-in-time based, it does not contain increases and decreases in revenue associated with periods in which lease terms were not in effect; historical revenue under GAAP does contain such fluctuations. We find the measure particularly useful for leasing, tenant, segment, and industry analysis. In instances in which we report ARR per occupied square foot, the measure excludes revenue from leases not associated with our buildings. Tenant retention rate is a measure we use that represents t