COPT Defense Properties Annual report [Section 13 and 15(d), not S-K Item 405]

Annual report [Section 13 and 15(d), not S-K Item 405]

Real Estate Joint Ventures

Real Estate Joint Ventures

12 Months Ended

Dec. 31, 2025

Equity Method Investments and Joint Ventures [Abstract]

Consolidated Real Estate Joint Ventures

The table below sets forth information pertaining to our investments in consolidated real estate joint ventures, which are each variable interest entities (dollars in thousands):


		Nominal Ownership %		December 31, 2025
	Date Formed			Total Assets		Encumbered Assets		Total Liabilities		Mortgage Debt
Entity			Location
LW Redstone Company, LLC (1)	3/23/2010	85%	Huntsville, AL	$	758,799	$	33,119	$	61,581	$	—
Stevens Investors, LLC	8/11/2015	95%	Washington, DC	141,077		—		2,444		—
M Square Associates, LLC	6/26/2007	50%	College Park, MD	103,856		54,348		48,592		46,189
				$	1,003,732	$	87,467	$	112,617	$	46,189

(1)As discussed below, we fund all capital requirements. Our partner receives distributions of $1.2 million of annual operating cash flows, plus certain fees for leasing and development, and we receive the remainder.

Each of these joint ventures is engaged in the development and/or operation of real estate. We consolidate these joint ventures because of our: (1) power to direct the matters that most significantly impact their activities, including development, leasing and management of their properties; and (2) right to receive returns on our fundings and, in many cases, the obligation to fund the

activities of the ventures to the extent that third-party financing is not obtained, both of which potentially could be significant. With regard to these joint ventures:

•for LW Redstone Company, LLC, we have funded $75.3 million in infrastructure costs through December 31, 2025 (excluding accrued interest thereon), which are due to be reimbursed by the City of Huntsville as discussed further in Note 7. We also have funded development costs through equity contributions to the extent that third party financing was not obtained, and expect to continue to do so in the future. Our partner was credited with $9.0 million in invested capital upon formation and is not required to make, nor has it made, additional equity contributions. Cash flows are generally distributed to the partners as follows: (1) debt service on member loans; (2) cumulative preferred returns of 13.5% on our partner’s invested capital; (3) cumulative preferred returns of 13.5% on our invested capital; (4) return of our invested capital; (5) return of our partner’s invested capital; and (6) any remaining residual 85% to us and 15% to our partner. Our partner has the right to require us to acquire its interest for fair value; accordingly, we classify the fair value of our partner’s interest as redeemable noncontrolling interests in the mezzanine section of our consolidated balance sheets. We have the right to acquire our partner’s interest at fair value upon the earlier of five years following the project’s achievement of a construction commencement threshold of 4.4 million square feet or March 2040; the project had achieved approximately 2.8 million square feet of construction commencement through December 31, 2025. Our partner has the right to receive some or all of the consideration for the acquisition of its interests in the form of common units in CDPLP;

•for Stevens Investors, LLC, net cash flows of this entity are distributed to the partners as follows: (1) member loans and accrued interest; (2) pro rata return of the partners’ capital; (3) pro rata return of the partners’ respective unpaid preferred returns; and (4) varying splits of 85% to 60% to us and the balance to our partners as we reach specified return hurdles. Our partners had the right to require us to acquire some or all of their interests for fair value until June 2023; accordingly, we classified the fair value of our partners’ interests as redeemable noncontrolling interests in the mezzanine section of our consolidated balance sheets until such rights expired in June 2023. We and our partners each have the right to acquire each other’s interests at fair value. Our partners have the right to receive some or all of the consideration for the acquisition of their interests in the form of common units in CDPLP; and

•for M Square Associates, LLC, net cash flows of this entity are distributed to the partners as follows: (1) member loans and accrued interest; (2) our capital contributions used to fund infrastructure costs and 10% preferred return thereon; (3) the partners’ capital contributions used to fund all other costs and 10% preferred return thereon in proportion to their respective accrued returns and capital accounts; and (4) residual amounts distributed 50% to each member.

We disclose the activity of our redeemable noncontrolling interests in Note 10.

Unconsolidated Real Estate Joint Ventures

The table below sets forth information pertaining to our investments in unconsolidated real estate joint ventures accounted for using the equity method of accounting (dollars in thousands):


	Date Formed	Nominal Ownership %	Number of Properties	Carrying Value of Investment as of December 31 (1),
Entity				2025		2024
Redshift (2)	1/10/2023	10%	3	$	20,767	$	20,921
BREIT COPT DC JV LLC	6/20/2019	10%	9	8,941		9,584
Quark JV LLC	12/14/2022	10%	2	6,660		6,706
B RE COPT DC JV III LLC	6/2/2021	10%	2	(600)		2,149
B RE COPT DC JV II LLC (3)	10/30/2020	10%	8	(22,243)		(3,409)
			24	$	13,525	$	35,951

(1)Included $36.4 million and $39.4 million reported in “investment in unconsolidated real estate joint ventures” and $22.8 million and $3.4 million for investments with deficit balances reported in “other liabilities” on our consolidated balance sheets as of December 31, 2025 and 2024, respectively. Investments with deficit balances are attributable to JV distributions of nonrecourse debt refinancing proceeds in excess of our equity in B RE COPT DC JV III LLC and B RE COPT DC JV II LLC; we are obligated to fund our share of future cash flow requirements of these joint ventures.

(2)Formed in connection with the transaction described further in Note 4.

(3)Our investment in B RE COPT DC JV II LLC was lower than our share of the joint venture’s equity by $6.5 million as of December 31, 2025 and $6.7 million as of December 31, 2024 due to a difference between our cost basis and our share of the joint venture’s underlying equity in its net assets. We recognize adjustments to our share of the joint venture’s earnings and losses resulting from this basis difference in the underlying assets of the joint venture.

These joint ventures operate triple-net leased, single-tenant data center shell properties in Northern Virginia. We concluded that these joint ventures are variable interest entities. Under the terms of the joint venture agreements, we and our partners receive returns in proportion to our investments, and our maximum exposure to losses is limited to our investments, subject to our share of certain indemnification obligations with respect to nonrecourse debt secured by the properties. The nature of our involvement in the activities of the joint ventures do not give us power over decisions that significantly affect their economic performance.