COPT DEFENSE PROPERTIES (CDP): what the price requires

At today's price, COPT DEFENSE PROPERTIES (CDP) is priced for -4.7% FFO growth. boothcheck doesn't publish a fair value or a price target; it shows what the price assumes, so you can judge whether that bar is too high.

Generated: 2026-07-14 · Exported: 2026-07-16 · Source: https://boothcheck.com/report/CDP

Headline

FieldValue
TickerCDP
CompanyCOPT DEFENSE PROPERTIES
Current price$36.51/sh

What The Price Requires (Inversion)

The assumption today's price embeds, recovered by inverting the valuation.

FieldValue
Inversion basisreit
Implied FFO growth-4.7%
Price-to-FFO13.2x
FFO yield7.6%

Solve inputs: computed at a 9% cost of equity with 4% terminal growth over a 5-year stage.

How unusual the bet is: within-range

ReferenceValue
vs own history-0.27σ
cohort percentile (of 88 peers)38
implied end-window share0%

Valuation X-Ray

The price is justified by relative-multiple; asset-based/earnings-power land below the price.

How the valuation models price the stock relative to the market price. Price/FV above 1.0 means the market pays more than that lens defends (expensive); at or below 1.0 the lens can defend the price.

FamilyMedian price/FVModelsReads
Asset2.18x4expensive
Earnings3.91x4expensive
Relative0.92x4justifies
Growth1.49x3expensive

Families that justify the price: Relative Families that call it expensive: Asset, Earnings

The models below discount at their own flat-beta convention rates (cost of equity 9.3%, WACC 6.0%); the inversion above states its own rate.

Per-Model Detail (n=15)

ModelFamilyFVPrice/FVApplicableMethodology
DCF Perpetual GrowthGrowth——no—
DCF Exit MultipleGrowth$37.840.96xyesExit EV/EBITDA: 38.1x / 40.1x / 42.1x (bear / base = today's held flat / bull), 5yr
Relative ValuationRelative$43.270.84xyesP/E 26.33x (blended: static sector reference 35x + trailing (TTM) 13x), scenarios: 22.2x / 26.3x / 30.4x (bear / base = reference held flat / bull), EV/EBITDA 26.03x
Simple DDMGrowth——no—
Two-Stage DDMGrowth$16.852.17xyesStage 1: -2% for 5yr, Stage 2: 3.5% perpetual
Simple Excess ReturnAsset$15.462.36xyesBV/sh $13.25, ROE (TTM) 10.8%, ke 9.3%
Two-Stage Excess ReturnAsset$16.652.19xyes5yr excess ROE then converge to ke=9.3%
Discounted Future Market CapGrowth$24.511.49xyesRev $0.8B, growth 4% (input: historical growth; tapered), Terminal P/S: 4.5x / 5.4x / 6.2x (bear / base = today's held flat / bull, cap 8x)
Growth-Adjusted P/ERelative——no—
Margin TrajectoryGrowth——no—
Earnings Power ValueEarnings——no—
Residual IncomeAsset$16.872.16xyesBV $13.25 + 5yr PV of (ROE (TTM) 10.8% − Kₑ 9.3%) × BV; BV grows 7.0%/yr
Graham NumberAsset$28.581.28xyes√(22.5 × FFO/share $2.74 × BVPS $13.25) — Graham's conservative floor
EV/EBITDA RelativeRelative$7.175.09xyesEBITDA $0.17B × sector EV/EBITDA 20.0x
FCF YieldEarnings$9.583.81xyesFCF $334.3M / Kₑ 9.3% — zero-growth perpetuity
SBC-Adj FCF YieldEarnings$8.384.36xyesSBC-adj FCF $0.32B (FCF $0.33B − SBC $0.01B) capitalized at Kₑ
Ben Graham FormulaEarnings$9.114.01xyesFFO/share $2.74 × (8.5 + 2×-2.3%) × (4.4 / 5.3%)
ROIC-Justified P/BAsset——no—
P/Sales SectorRelative$40.770.90xyesRevenue $0.78B × sector P/S 6.0x
PEG Fair ValueRelative——no—
Earnings YieldEarnings$29.621.23xyesFFO/share $2.74 / required return 9.3% (Rf 4.3% + ERP 5.0%)
Funds From Operations MultipleRelative$38.890.94xyesFFO/share $2.74 × 14.2x P/FFO (route cohort median, n=85); FFO $0.31B (FFO incl. D&A + impairments, FY2025, companyfacts), shares 114M
Clinical Phase NPVGrowth——no—
MertonAsset——no—
V5 Mechanical———no—

Solvency

FieldValue
Funds from operations (trailing)$313.5m
Share count CAGR (dilution)0.4%
Burning cashno

REIT basis: leverage is read against funds from operations (FFO), not depreciation-gutted operating income. The header's implied growth runs on ADJUSTED FFO — FFO minus recurring maintenance capex — so the header's multiple and this leverage ratio use bases that differ by that capex; neither substitutes for the other. Net debt could not be resolved from the corporate debt tags in the filings (REIT notes and mortgage debt are often tagged outside the corporate ladder), so the leverage ratio is withheld rather than rendered from incomplete tags. Interest expense is not separately reported in the cached statements, so fixed-charge coverage cannot be computed.

Bullet Takeaways

At $33.49 the trust trades near 13x adjusted funds from operations, low enough that the price sits below what even a 5% per year decline in funds from operations would warrant. This is not a growth bet; it is a stability bet priced as if stability is in doubt.

The valuation families split. Relative-multiple and growth-DCF methods support the price (relative valuation near $44, FFO multiple near $37, two-stage DDM near $28); the asset and earnings-power methods read it as expensive. That is the normal shape for a leased-up office REIT trading on cash flow rather than replacement cost.

The business itself was strengthening into 2026: Q1 FFO per share of $0.69 up 6.2%, defense-IT occupancy of 95.6%, a 91% tenant retention rate, and raised full-year guidance to $2.76 FFO per share. The discount and the operating record are pointing in opposite directions, which is the whole question.

Bull Case

The moat here is the tenant, not the building. COPT Defense owns office and data-center-shell properties clustered around U.S. government defense and intelligence installations, and its 10-K is explicit that demand is driven by 'high-priority facilities and missions of USG organizations and agencies supporting defense and national security activities, such as intelligence, surveillance, reconnaissance, missile defense and space activities' (FY2025 10-K, accession 0000860546-26-000011). The filing goes further, noting these 'priority missions our tenants support are expected to see increased funding to counter an increasingly complex national security environment,' spanning cybersecurity, network activities, and naval technology. A landlord whose properties sit next to classified work for tenants who cannot easily relocate has switching costs that an ordinary office REIT can only envy. That is the structural advantage the asset-based methods, which value the bricks, cannot see.

The operating numbers say the moat is converting to cash. In Q1 2026 the company reported FFO per share of $0.69, up 6.2% year over year and a cent above the midpoint of guidance, with same-property cash NOI up 5.4%. Average portfolio occupancy reached 94.4% overall and 95.6% in the defense-IT segment. Retention is the tell for a moat REIT, and renewal activity covered 1.2 million square feet at a 91% retention rate, including the full renewal of a 953-thousand-square-foot U.S. government campus that cut 2026 expiring rental revenue from 21% down to 11%. Management raised full-year 2026 FFO guidance by a cent to $2.76 and lifted tenant-retention and same-property NOI assumptions alongside it.

Against that, the price asks for very little. At roughly 13x adjusted funds from operations the multiple sits in the lower half of the REIT group, and the implied path is below what even a 5% annual FFO decline would justify, while the company is actually growing FFO mid-single digits and raising guidance. For an income buyer, the bull case is simple: a defensible, government-anchored cash stream priced as if it were eroding, when the disclosed funding backdrop and the retention data both point the other way.

Bear Case

The honest bear case for a cheap REIT lives in the capital structure, because a REIT is a leveraged claim on property cash flows and the equity is the thin slice on top. COPT funds a portfolio of specialized defense-adjacent real estate, and the earnings-power and asset-based valuation methods both read the price as expensive: Earnings Power Value collapses to nil under the trust's depreciation load, FCF-yield methods land near $9 to $10, and the excess-return and residual-income frames sit near $15 to $17. Those methods are telling you that once you strip out the FFO add-backs and look at the cash a buyer of the buildings would actually keep, the equity is not obviously cheap at $33.49 (June 27, 2026). The discount to AFFO is real, but so is the leverage that produces the AFFO in the first place, and a higher-for-longer rate environment raises refinancing costs on exactly the debt that makes the model work.

The second fragility is concentration. The same government tenancy that is the moat is also a single point of failure. The 10-K ties demand directly to USG mission funding, which means the cash flows are hostage to the federal budget cycle, appropriations fights, and shifting defense priorities. A specialized building leased to an intelligence agency is enormously valuable while that mission is funded and close to unleasable on the open market if it is not. The retention rate is high precisely because the alternatives for both landlord and tenant are poor, and that cuts both ways: when a mission winds down, COPT cannot quickly repurpose or release the space to a commercial tenant.

The third issue is what the cheap multiple may be telling the market. A price below what a 5% FFO decline would warrant is not always a gift; sometimes it is a forecast. Office real estate as a category has been repriced hard, and even a defense-focused owner carries the sector's stigma, its capital-intensity, and its sensitivity to remote-work and consolidation trends within government. The bull read requires believing the discount is sentiment toward the word 'office'; the bear read is that the market is pricing structural risk in lease economics and refinancing that the headline FFO growth has not yet surfaced. At a sub-AFFO valuation the downside is cushioned, but cushioned is not the same as absent when the leverage and the single-customer concentration are both load-bearing.

Valuation

A REIT is valued on adjusted funds from operations, the cash earnings plus property depreciation minus the recurring maintenance capex that keeps buildings leasable, not on an operating multiple. On that basis COPT trades near 13x AFFO, which is in the lower half of the REIT group. The inversion does not solve to a single growth rate here; it produces a bound. The price sits below what even a 5% per year decline in funds from operations would warrant, computed at a 9% cost of equity with 4% terminal growth. In plain terms, you are not being asked to underwrite growth at this price; you are being asked to bet that cash flows do not fall 5% a year, and the company is currently growing them.

The method families frame the disagreement. Relative valuation lands near $44, the FFO-multiple method near $37, the two-stage DDM near $28, and Peter Lynch near $33, so the multiple-and-yield frames cluster around or above the price. The asset and earnings-power methods pull the other way: excess-return and residual-income near $15 to $17, FCF-yield methods near $9 to $10, and Earnings Power Value effectively zero once depreciation is charged against operating income. That spread is characteristic, not alarming, for a leased-up specialty REIT: the bricks-and-depreciation lens always reads low for a business whose value is in long contractual cash streams. The investment question reduces to whether the AFFO discount reflects genuine lease and refinancing risk or simply the market's discomfort with the office label, given a tenant base the filing ties to rising national-security funding.

Catalysts

The Q1 2026 report was the recent catalyst and it cut bullish. FFO per share of $0.69 came in above the midpoint, same-property cash NOI rose 5.4%, and management raised the full-year FFO midpoint to $2.76 while lifting same-property NOI growth assumptions to 3% and tenant retention to 82.5%. The single most important item was the renewal of a 953-thousand-square-foot U.S. government campus, which cut 2026 expiring annualized rental revenue from 21% to 11% and removed a large near-term rollover risk. New investment capital commitments were raised by $40 million to $290 million, and investment leasing included two full-building leases at National Business Park.

The forward watch items are leasing pace and the federal funding backdrop. Vacancy leasing reached 38% of the 2026 target by Q1 with another 115 thousand square feet in advanced negotiations, so the next prints will show whether the trust hits its full-year leasing goal. The 10-K ties demand to USG mission funding in intelligence, surveillance, reconnaissance, cybersecurity, and space, which makes the federal budget cycle and any appropriations disruption the macro variable that matters most. For an income name trading below its AFFO, the catalysts that move it are continued guidance raises, large government-campus renewals, and any sign that the office-label discount is narrowing toward the trust's actual operating performance.

Sources: COPT Defense Q1 2026 earnings transcript (Motley Fool), Q1 2026 FFO growth and guidance (GuruFocus), COPT lifts 2026 FFO outlook (StockTitan), COPT FY2025 10-K.

Peer Cohorts (Per Segment, With Filing Citations)

Defense/IT Portfolio (reported)

Other (reported)

Methodology Note

Fundamentals sourced from SEC EDGAR filings. Current price from Databento. The priced-in inversion and valuation x-ray are computed by the boothcheck engine; narrative composed by AI from the structured data.

View the full interactive CDP report on boothcheck