Stock Analysis & Valuation COPT Defense Properties (CDP)

• Previous Close: $30.81
• Sector Valuation Confidence Level: Low

Valuation method	Value, $	Upside, %
Artificial intelligence (AI)	28.32	-8
Intrinsic value (DCF)	10.85	-65
Graham-Dodd Method	1.87	-94
Graham Formula	21.89	-29

Strategic Investment Analysis

Company Overview

COPT Defense Properties (NYSE: CDP) is a specialized real estate investment trust (REIT) focused on owning, managing, and developing office and data center properties primarily serving the U.S. Government and its defense and IT contractors. With 90% of its core portfolio rental revenue derived from Defense/IT Locations, COPT is strategically positioned in high-demand national security and technology-driven markets. The company’s portfolio, comprising 192 properties and 22.9 million square feet (95% leased as of June 2023), benefits from durable, mission-critical government leasing demand. Additionally, COPT maintains a smaller footprint in the Greater Washington, DC/Baltimore region, offering Class-A office spaces with strong fundamentals. As a niche player in government-focused real estate, COPT provides investors exposure to stable, long-term cash flows supported by federal spending priorities in defense and IT infrastructure.

Investment Summary

COPT Defense Properties offers a compelling investment case due to its specialized focus on government and defense-related real estate, which provides resilient cash flows amid economic cycles. The company’s 95% leased portfolio and high tenant retention underscore its defensive positioning. However, risks include concentration in government contracts, potential budgetary constraints, and exposure to office sector headwinds. With a dividend yield of ~3.9% (based on a $1.19 annual dividend) and a low beta (0.88), COPT appeals to income-focused investors seeking lower volatility. Valuation hinges on sustained federal spending and the ability to maintain high occupancy in its niche markets.

Competitive Analysis

COPT Defense Properties differentiates itself through its specialized focus on defense and IT-related government real estate, a niche with high barriers to entry due to stringent location and security requirements. Its competitive advantage lies in long-standing relationships with government agencies and contractors, as well as a portfolio concentrated in mission-critical locations. Unlike traditional office REITs, COPT’s revenue is less susceptible to macroeconomic downturns due to the non-discretionary nature of its tenants’ leasing needs. However, the company faces competition from larger diversified REITs with government leasing segments and data center operators encroaching on its IT-focused properties. COPT’s regional office exposure in the DC/Baltimore area also competes with urban office REITs, though this segment is a smaller part of its business. The REIT’s scale (22.9M sq. ft.) is modest compared to sector leaders, but its niche specialization allows for pricing power and tenant stickiness.

Major Competitors

• Prologis, Inc. (PLD): Prologis dominates the industrial/logistics REIT sector but overlaps with COPT in data center and government-related properties. Its vast scale ($121B market cap) and global footprint give it superior capital access, but it lacks COPT’s defense-sector specialization.
• Digital Realty Trust, Inc. (DLR): A leader in data center REITs, Digital Realty competes with COPT’s IT-focused properties. DLR’s global scale and hyperscale client base are strengths, but it does not have COPT’s U.S. government tenant concentration.
• Boston Properties, Inc. (BXP): A Class-A office REIT with significant DC-area exposure, BXP competes in COPT’s regional office segment. BXP’s urban focus and higher-end portfolio are strengths, but it lacks COPT’s defense/IT leasing durability.
• Douglas Emmett, Inc. (DEI): A West Coast-focused office REIT, DEI shares COPT’s emphasis on stable markets but lacks government leasing exposure. Its weaker occupancy (89.3% as of Q2 2023) highlights COPT’s advantage in niche demand.