Corporate Office Properties Trust (NYSE:OFC) Q4 2014 Earnings Conference Call - Final Transcript

Feb 10, 2015 • 12:00 pm ET

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Corporate Office Properties Trust (NYSE:OFC) Q4 2014 Earnings Conference Call - Final Transcript

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Presentation
Operator
Operator

Welcome to the Corporate Office Properties Trust Fourth Quarter and Year End 2014 Earnings Conference Call. As a reminder, today's call is being recorded.

At this time, I will turn the call over to Stephanie Krewson Kelly, COPT's Vice President of Investor Relations. Ms. Krewson Kelly, please go ahead.

Executive
Stephanie Krewson Kelly

Thank you, Santali. Good afternoon, and welcome to COPT's conference call to discuss the Company's fourth quarter and year-end 2014 results and our guidance for 2015, the details of which we released in a separate press release this morning. With me today are Roger Waesche, President and CEO; Steve Budorick, Executive Vice President and COO; Wayne Lingafelter, EVP of Development and Construction; and Anthony Mifsud, EVP and CFO.

As management discusses GAAP and non-GAAP measures, you will find a reconciliation of such financial measures in the press release issued earlier this morning and on the Investors Section of our website. At the conclusion of management's remarks, the call will be opened up for your questions. We remind you that statements made during this call may be forward-looking statements within the meaning of the Safe Harbor of the Private Securities Litigation Reform Act of 1995 and that actual results may differ materially due to a variety of risks, uncertainties and other factors.

Please refer to today's press release and our SEC filings for a detailed discussion of forward-looking statements. Before turning the call over to management, let me highlight that the Company posted its inaugural sustainability report this morning to the Investors section of its website www.copt.com. We also launched our sustainability related website coptgreen.com.

With that, I will turn the call over to Roger.

Executive
Roger Waesche

Thank you, Stephanie and good afternoon everyone. 2014 was a solid year for our Company and 2015 is looking even better. We continue to see strong demand for newly developed space that supports growing US Defense installations involved in IT and Cyber Security. When combined with their same office portfolio, NOI embedded in development project is fueling our FFO and NAV per share growth. Including the two full building leases we announced yesterday, projects under construction exceed 1.5 million square feet and are 75% leased. Additionally, we are constructing two projects intended for US government use. When these are signed, our development pipeline will be 98% leased.

The Defense budget headwinds are over and the outlook for Defense spending is positive. On February 2nd, the President released his fiscal year 2016 budget request to Congress. The DoD base budget request of $534 billion represents a 7.7% increase from the current fiscal year's budget of $496 billion. Within the DoD base budget, the Defense IT spending request is $37.3 billion which would be a 2.9% increase from fiscal '13 levels. For the DoD cyber program the President has requested an 8% increase in next year's budget to $5.5 billion. Given the state of the world, we expect Defense IT and Cyber Security spending to support a healthy pace of contract awards from various agencies and by extension continued demand