SLG - COPT Defense Properties: Slow And Steady Growth

2024-04-10 00:59:17 ET

Summary

• COPT Defense Properties owns specialized defense properties with high renewal rates and rent roll-ups, positioning the company for 4%-5% growth.
• The company benefits from the stability of government and defense-related tenants, with reliable rent payments and high renewal rates.
• COPT funds its developments without issuing equity and has a clean balance sheet, improving its stability and growth potential.

COPT Defense Properties ( CDP ) owns 210 properties, most of which are focused on the defense industry. While technically classified as an office REIT, its differentiated property type gives it an entirely different set of fundamentals. We see it as moderately opportunistic, with the stock trading at a low AFFO multiple relative to its reliable growth. High renewal rates and rent roll-ups position the company for roughly 4%-5% growth for the next few years, which is a bit higher than one would expect given the 9X FFO and 13X AFFO multiples....

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