Oct 30, 2026 earnings call — Higher 2026 guidance, strong leasing and development
Raised 2026 midpoints; adjusted FFO per share increased to $2.80 and same-property cash NOI midpoint to 4.25%.
Revenue $0.2B (est $0.2B) · EPS $0.41 (est $0.35)
Key quotes
"We have executed 3 million square feet of total leasing during the first 9 months, which includes strong performance on the vacancy leasing front and very healthy demand."
"Given the dynamic environment we are in, we revisited our Redstone Gateway master plan and expanded our development capacity by an additional 500 thousand square feet."
"We increased the midpoint of same property cash NOI growth by 25 basis points to 4.25% 175 basis points above initial guidance, based on our outperformance this quarter."
Analyst Q&A 5
Redstone expansion and underwriting
Q (Manus Ebbecke · Evercore): He asked how much Redstone can be upsized, how many buildings or square feet might be added, how deep tenant demand is, and whether underwriting economics have changed.
A: Management said they revise the master plan and can squeeze out about 500 thousand square feet of additional buildings. They have not changed underwriting and still target an 8.5% initial cash yield on development costs. Demand is very high and they are preplanning to shorten development timelines.
"We remain with the same threshold cash returns that we have in the past, which currently is 8.5% initial cash yield on development costs." — Stephen E. Budorick (CEO)
Budget timing and space recaptures
Q (Blaine Heck · Wells Fargo): He asked if a change in congressional control could change the FY 2027 DOD budget timing and whether programs like Golden Dome face more funding risk. He also asked about the mark-to-market, downtime, and repeatability of the three proactive space recaptures.
A: Management said if control changes, a lame-duck session would likely push the FY 2027 appropriation through earlier, and they expect an FY 2027 DOD appropriation no later than February. They said Golden Dome (missile defense) is a long-term need and unlikely to be reversed, though timing could vary. On the three recaptures, one was essentially flat, one up about 20%, one down about 20%, and they saw essentially immediate backfills with little downtime; in two cases the prior rent was almost zero so new rents were a large improvement.
"Either way, I would expect no later in February, we are gonna have an f y 2027 DOD appropriation." — Stephen E. Budorick (CEO)
New defense areas and vacancy upside
Q (Richard Anderson · Cantor Fitzgerald): He asked whether new defense initiatives are emerging that the company must join, whether cyber is a higher priority now with AI, and how much more vacancy improvement is possible from 95.2% leased.
A: Management said missile defense is a major area of advanced technology and is centered at Redstone; they also have exposure to naval command and cyber needs tied to Fort Meade. On cyber, they said AI is an immense threat and will require increased spending. On vacancy, they said it is hard to drive much higher but they are optimistic to push it up over the next couple years and explained leasing sources: 55% from vacant space, 25% preleasing maturities, and 20% from asset management actions.
"I would say some of the most advanced the highest investment in advanced technology pertains to missile defense, that is why we highlight it." — Stephen E. Budorick (CEO)
Data center expirations and asset sales
Q (Seth Bergey · Citi): He asked how much data center shell square footage is expiring over the next few years and whether similar uplifts on renewals are likely. He also asked for an update on timing to sell remaining noncore assets.
A: Management said uplifts on renewals have increased over the last 3 years and peaked this year at 140%, noting a progression like 110%, 120%, now 140%. They said gross expirations include 300 thousand square feet in 2028 and almost a million in 2029, but only about 10% would fall into results; the most impactful wholly owned shells renew outside the next 5 years. On noncore disposals, timing depends on the interest rate and investment market, and with rates high sales that make sense for shareholders are several years out.
"I think it breaks down to 110%, 120%, now 140%." — Stephen E. Budorick (CEO)
Biggest risk and rental rate trends
Q (Dylan Burzinski · Green Street): He asked what the biggest near-term risk to the business is. He also asked whether free rent is easing and whether the company can embed higher rent bumps in leases now.
A: Management said the business demand is tied to DOD spending driven by the global threat environment, which they do not see as a concern, but the key factor that affects shareholder delivery is interest rates. They said they continue to drive down free rent where possible and are setting record rates in new Huntsville buildings, with rents in many markets 10% to 20% higher than surrounding markets, so they will push rates where they can but are near the top.
"I would say the 1 thing that affects what we can deliver to shareholders is interest rates." — Stephen E. Budorick (CEO)