COPT(CDP) - 2024 Q4 - Annual Report

Tenant and Revenue Concentration - As of December 31, 2024, the company's 10 largest tenants accounted for 63.8% of total Annual Recurring Revenue (ARR), with the largest tenant, the USG, representing 35.9%[56] - 90.3% of the company's ARR is derived from its Defense/IT Portfolio, which is sensitive to government spending fluctuations[58] Real Estate Market Risks - The company faces risks from potential declines in the real estate market, particularly in the Mid-Atlantic region, where most properties are concentrated[60] - The commercial real estate market is highly competitive, with numerous properties vying for tenants, which may pressure occupancy and rental rates[64] Lease and Vacancy Risks - The company may incur losses if unable to renew leases on favorable terms, leading to potential vacancies and increased leasing costs[61] Environmental and Regulatory Compliance - The company is subject to various environmental laws that could impose significant costs for compliance and remediation[71] - Future capital investments may be required to meet energy performance standards due to new legislation in Maryland affecting approximately half of the company's portfolio[75] Financial Structure and Capital Dependency - The company is dependent on external capital sources for growth, as it must distribute at least 90% of its annual taxable income to shareholders, limiting retained cash flow[82] - The company must distribute at least 90% of its annual taxable income to maintain its REIT status, limiting cash available for other business purposes[89] - The company’s organizational documents do not limit the amount of indebtedness it may incur, potentially leading to higher leverage[87] Debt and Interest Rate Exposure - As of December 31, 2024, the company had $2.4 billion in debt, which may affect its ability to operate and pay distributions to shareholders[84] - The company’s ability to pay distributions may be limited by its operational cash flow and compliance with financial covenants[93] - The company is exposed to market risks, particularly changes in interest rates, which can increase interest expenses under its Revolving Credit Facility and other variable-rate debt[204] - The weighted average interest rate for fixed-rate debt is 2.96$34,000 in 2024 and $764,000 in 2023 if the applicable variable index rate was 1$1.3 million in 2025, $436.14 million in 2026, and$345 million in 2028[205] - The company has variable-rate debt maturities of $22.42 million in 2025 and$210.16 million in 2026, with potential extensions subject to conditions[206] - The fair value of the company's debt was $2.2 billion as of December 31, 2024, and if interest rates had been 1$72 million[207]