DEA - Earnings call transcript Q1 2019 | Easterly Government Properties, Inc.

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Operator

Greetings, and welcome to the Easterly Government Properties First Quarter 2019 Earnings Conference Call. At this time, all participants are in listen-only mode. A brief question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. It's now my pleasure to introduce your host, Lindsay Winterhalter, VP of Investor Relations. ahead. go Please

Lindsay Winterhalter

Good morning.

which note on the made The this Safe call forward-looking include please be statement use complying forward-looking on XXXX, company begins, facts may of historical the conference of and statements the intends by these making the covered call considered provisions. company statements the this and Before are not forward-looking. Safe forward-looking of provisions for are Harbor Reform call. statements contained Litigation in those Act the to for with purpose statements the by Harbor Private Securities is Statements

Although, intentions, the will factors suggested results or by and by its expectations beyond in assurance obligations XXXX, of forward-looking its filings. XX, it those assumes contained Factors, future intentions, in SEC events no information, or prospects are strategies new and and be from statements forward-looking SEC February materially forward-looking expectations, no the and filed actual affected will are reasonable, whether the the as in ended company on Report company strategies December believes that Item those be differ limitation, risks to can XX-K that year Form with those without in its The plans, Annual Risk XX, as of Furthermore, any on publicly these reflected described give result XA, of update XXXX, other statements a plans, control, achieved. including may or company’s for the a variety statements attained that or otherwise.

and such financial refer may distribution. to as Additionally, non-GAAP on this company for the funds operations from available conference measures, cash call, certain

GAAP Darrell Chairman on I to a comparable of company’s Properties. Investor over to ir.easterlyreit.com. to the conference package Relations find turn and of of information measures separate would Crate, current financial these the Government website now can company’s at the non-GAAP in reconciliation call release earnings the page the most supplemental tabular numbers Easterly You like

Darrell Crate

quarter Thank Today, Meghan for and addition Bill Lindsay, morning, first to CFO Baivier, thank call. conference and you, this company's by company's for the Good in COO. you and CEO; the joined Lindsay. everyone, Trimble, joining us I'm

marks quarter a traded Properties publicly REIT. Easterly of as anniversary Government the This four-year

rejected execute launched discipline, private the comprise of the will equity scale decade buildings in continue their that the meaningful same hierarchy of full which credit quality government, portfolio mission-critical thesis achieving mission. our company diversification and and are those we We agency many build the backed have facilities under a for buying rate with now. an NAV high-cap by of buildings or agencies to We shareholders our of we funds, from by leases, a that faith U.S. hold of the not

the XXX and treasury been acquisitions, between balanced supported backed and prudent a target delivering coming That value credit growth X% current as consistency the our cash debt-to-enterprise unencumbered investors We assets plus easily States provides sheet to liabilities, Our over development base value imagine fully to equivalent set and of spread existing has This basis total is and approximately growth a the the from the of we a power will to digest approximately faith and medium assets we the formula price, long-term that given XX-year deployment a of to model and investors leases. that in years. renewal return flows X% shareholders, as economic stock annual considerable by plan, accretion of to business our to of points. non-speculative reasonable can anticipate to a decrease, the believe X% by the sheet, government. in with per total United This are balance NOI approximately ratios. capital of add We full of given there's leases annum. and opportunities return dividend duration simple, vehicle accretive X.X% come a balance

Of discipline bumps, course, we serve there will well. be our will adhering but shareholders our that over are time confident to

to to and Given quarterly predictable prudent cash of to durability strategy related with re-leasing, through of estate, levels along a cost real believe as tenancy, office, to is high the provide operations the flow it dividend. continue we compared distributable

visibility of the completed in has lease quarters, visibility flows. have We us This a our large future to given stronger execute desire which this few added renewals past only cash reinforces into approach. amount

the of XX-year only XX% we that scale. have assuming today over manage if our our billion we modest now, and picture, existing a of NOI contractual decade billion, from and portfolio will that to due We increase the a billion of United Looking lease government. with credit cash average a under renewals of grows leases. at years that the value XX% life. one backed XX-year to big faith leases, hence age margin, grow long-term average over apply of with $X.X Further, in this billion federal number full a assume cash Furthermore, on only term, shareholders own approximately at us in $X.X $X.X by an a our of in XX added a $X.X rule to contractual buildings States the only

been now our cost high-quality XX-property we over federal REIT significantly to our to overall that, focus partnership continued portfolio. lucrative this we goal portfolio Bill. diversifying United growth and buildings, strong the engagement and the And apply with GSA-leased projects. assets such, improving XXXX, tenant your turn acquisition to fundamentals development the we work a government. is our premier our on the increases through it estate more are of get quality simultaneously improve public is engine for company which capital, development our to toward believe the ability It acquisition as there. external by continue build pipeline to portfolio, of in you and pedigree any real have the I'll leased of scale, grew the while our out States robust of We to company's underlying able our As a In Through of the company's the thank portfolio. larger, non-speculative closing credit of best of remains

Bill Trimble

Darrell, morning. you I Thanks, for begin first for like earnings achievements joining in highlighting to our Thank call. company's first the XXXX. by and would us quarter good the quarter

This properties the XX-property our in quarter we final closed portfolio. three previously announced

two we've the conclude these over acquisition into properties, XXXX. XXXX broken early three tranches With a half which was multistage latter and of separate

consists XX% this of square X.X reminder, The million approximately assets. million a acquisition capture profile of feet combined weighted is portfolio feel expiration of closely term. the a of portfolio that's mirror lease existing comprised near of a $XXX As re-leasing that a in which and the with high-quality space provides opportunity of to the our year duration leased rentable with buildings spreads tremendous attractive had of shortened us value acquired average We XXXX.

construction, happy us overall of a the everyday underlying build-to-suit these now add the Operations and functionality the XX% than report to are that the and assets management, this in needs Additionally, underlying of better meeting portfolio. the going of of attractiveness tenant missions we are constructed buildings to the tenants. underwriting the Easterly was the meaning the of properties expected a are XX even affording building very have design our agencies. performing well opportunity nice under of that We're meet specific to all

a pipeline acquisitions. actionable XXXX. in see Turning very to Easterly to is robust of targets such pleased

We to portfolio of the remains are ensure overall strong. constantly betting opportunities quality our

is one acquisition While portfolios incremental of this can think year what a we growth have are a XXXX the built growth of you we there mentioned, in think was see through eye that us $X at bull's on expect billion or to approximately totaling facilities will from Steady company be time. XXXX. I two

also future the clarity flows towards put was work a By non-speculative cost appreciate capital, cash to which big have opportunities. better extend future in helps important lease renewal U.S. us acquisitions from Easterly every year these have we renewing tenancy mentioned, development we a added renewed lease pleased perspective. to leases for of to and these the of government. our facilities. date Darrell This provided As and understand XXXX clarity by single and We're

development Lenexa. Speaking of to team progress two and make our FDA FDA development, active sites our at Alameda - continues meaningful -

opening has their with of to Our of demonstrated the Tracy exact agency. a in working This that FEMA development state-of-the-art meets deliver delivery recently of underlying FEMA visiting facility decades just grand team expertise - niche hand-in-hand two was been pleasure facility government event. the Tracy the facility for the formal experience the I with the market this in tenant Tracy needs had applying weeks of the ago - California.

the deliver by one is the still of FDA late to While Lenexa countless great how that on to to Alameda thousands there, Later quarter pride which XXXX. - gave it remains California on visited to this in wildfires the work hear to with third the help day people XXXX stories of last of day, third fall. facility affected - I was the and put track FDA quarter in of deliver expected me

development these brand-new expirations. with opportunities projects increased great the long-term provide non-speculative facilities a see reminder, on As to lease scale

the with pipeline, On opportunity we grow a underwriting strict portfolio of to certain while adhering scale the could provide that criteria. still development our to to an us continue monitor projects

project are mentioned, projects risks previously are contract and build development typically purely managed associated the development design reduced. As a because non-speculative through our with significantly

if posted to and when continue awarded. new development will We are everyone projects keep

upgrade to the continue and with in existing the Easterly improve we partnership portfolio, current the to U.S. Turning facilities government.

and we're of power opportunities bureaus will in asset everything portfolio. its company GSA with ensure your everyday that, are think turn expect we the missions that for results. the building the and in call to extremely the company's near growing future. financial agencies out our and A I for great some the conduct discuss agency partnership. the the I to underlying tenant our To represented the the your meeting do from constant necessary to you news is that tenant I the continued excited is the team of Our and important in Easterly best agencies, for conclude, to and various departments, thank buildings throughout management this about time see provides serves With XXXX can support to quarterly the ensure communication in buildings. support mission performance morning our Meghan over and to you the and to presented

Meghan Baivier

our our quarter balance I first our discuss XXXX capital will market provide Today activities, our and review guidance. Bill. sheet you, results, on and current an Thank update portfolio, discuss

company's Additional measures supplemental details found can been quarter first measures GAAP be non-GAAP in our regarding the release and on have of reconciliations discussed results earnings call this and quarter provided first package. supplemental. in our information

term lease operating properties estate with when square comprising had our totaling real was first feet quarter commercial Remarkably XXst, nearly The properties in lease the company we weighted average additional weighted As of remaining approximately XXX,XXX owned two of development the remaining XXXX portfolio March for of XX square the term million X.X under IPO-ed. portfolio years. average the same X.X feet.

the of finally XX% government. Portfolio defied lease the passed, of also and the passage young have has to our of at years continues to allowed XX company's occupancy remained age renewal cash years. the States at four credit and United full duration which portfolio The average backed accretive faith success maintain visibility income While assets time of our of by our flows. remained and the annualized to be weighted our of acquisitions and enduring speaks us the have XXX%

fully in FFO per was The fully distribution share more growth was XX% portfolio of our cash grown stream represents cash the $X.XX. impressive first a from as properties million. from basis diluted This this year. basis cash share and first loss $XX.X was flow share last basis dividends. diluted net in comes on company's $X.XX. a on the per which per the a quarter, fully XX For a FFO supporting quarter to has scale XX $X.XX for was on adjusted available diversified diluted an

our revolving million. revolving end outstanding million to sheet, $XXX.X capacity, With the balance stood $XXX.X total credit million million $XXX its on quarter, Turning line $XXX.X unsecured a healthy availability of company had at of credit the of facility. at including on total indebtedness

its Easterly's March enterprise debt total and XXst, was EBITDA times, debt net net X.X of EBITDA quarterly net adjusted was debt to ratio As times. annualized annualized value was XX.X%, to to quarterly its ratio X.X

this $XXX drag as progress will neutralizes development completion. mention and Adjusted year. me reported meaningful bring leverage leverage heard as of our balance dry demonstrates you've leverage our acquisition strength higher project in X.X additional on of times of the of As projects the levels we we target near part million sheet available continue and pursue at to this powder previously,

In to debt, them and strategically of aligned addition access capital. to managing our robust to maintaining borrowing be capacity continue have equity with diversified and sources will we

which Program excess a float forward and final equity January development an in settled March just XX the and nearly of closure of the time the XXXX shares In the equity on stage for increased extended With pipeline. of shares the the support sale into XX now ATM property equity With continue company evolving of company in raising contract early partially $X.X forward we June fund of an strategically that this million of final tranche to XXXX million of training acquisition. year, billion, have the equity the place accretively acquisition backdrop of capital this in put allowed the flexibility to million its $XXX portfolio, portfolio X.X basis.

ending maintaining of on fully in conditions gross development-related XX-property the of the December guidance diluted the This $X.XX. XXXX, to million $XXX current market FFO $X.XX for closing three Turning forward-looking the January on and months view to in future XXst, the and XXXX apart of reflects properties portfolio final is the its per the of guidance, million share XX year. company is $XX investment and guidance based which basis and acquisitions of million from earnings separate to management's company for is $XXX a completing

a Stacy. of assets a Additionally to X% previously adjusted FFO for We've adjustments on we that, share With of X% more expected cash share diluted share FFO in I mentioned, investors. FFO of of fully growth per the is is company's share creation as call adjusted metric believe diluted per represents to turn FFO got strong a growth growth. guidance masking approximately in flow in value with basis due to of growth fully growth on XXXX of year The as accounting per a adjusted in XXXX XX%. which to XX% indicative indicative and portfolio an expected per will per incredibly is remarkable expected basis share for FFO back operating

Operator

We’ll Thank Citigroup. Korchman from Instructions] Manny now first Please go [Operator ahead. question-and-answer you. be session. question with conducting Our comes a

Manny Korchman

Hi. everyone. Good morning,

Meghan Baivier

morning, Manny. Good

Manny Korchman

not ago company about this looks spoken You I'm versus you when changing public. one bit little have about that Can And guys went today surprised a what guess thing years that like I a four bit about talk changing on you've the that been the whether years? next rates so you in cap and market steady is over the the see assets buying. four just you what's kept

Bill Trimble

yes, -- Manny. morning, I think good

think several I things.

the First without of drama. real all, is it estate

So in entire really we've until seen today. a my even seen we've small very movement crisis the career, government after

tend move doesn't in it blocks. So big to

it properties of I job explaining is new we've investors that Secondarily, to is. done after a focus there on government a good wonderful opportunity think what a

then purchase. will able course, the of to like to I that we've So and for been have profit were we acquire going rate think reverse. we interest rates And we actual bull's cap to slowdown what properties seen eye that normal just said X.X% bread-and-butter in we've

as a we're think but X.X% accretively we're I can cap the here some anytime for pipeline from But know and very we good probably here movement soon. we purchase any not So we expecting it rate out. see time,

Manny Korchman

Bill. And for Thanks, one Meghan you.

you how did equity? up about ATM surprised in did just versus ATM taking Just forward the little any on You a doing the forward? think quarter do completing issuances the bit just of you the

Meghan Baivier

at going to the going level. adjusting an forward to continue enter it's of tool. At Yes. opportunity the Hi, to time Manny. as an attractive quarter We're the the ATM end use market

added sheet the great ATM in more dry keep a on rest issuance position the the to year. new with XXXX the of balance potential the from there June the for so bit forward And powder offering

Manny Korchman

there were So assets?

Meghan Baivier

the in balance year. of to a a Just remainder on basis keep strong sheet position leverage the the for

Manny Korchman

Thanks, everyone.

Bill Trimble

you. Thank

Operator

Robinson Our comes with next question go SunTrust from ahead. Please Michael Lewis Humphrey.

Michael Lewis

new consensus maybe the me bit forward on My that offering NAV. well correct below then was priced you. question little it equity And as if issuance maybe ATM strike I'm had the little thing? the the sort do give passed to the Is better how you acquisition? portfolio Thank recent do of, more also you thought the forward you on first directly offerings detail wrong? that. the response much a -- forward you a about fund the in Can to than capability could that to like through the you ATM do can I is that way because looked

Meghan Baivier

Michael. Hi,

ATM price in price relative of market an the and and at was So very price to the improved accretive on offering. we that the this new at pipeline the we're the terms net June entered for looking year attractive

the forward a works in year. same go offering year the nimble our same exactly be the that the functionally forward and and the as evolves comes implemented to But we it the capability view last go flexibility as little on we about is way. clearer rest more marketed we the more just as pipeline As forward functionally, the bit through of

Michael Lewis

Okay.

Bill Trimble

we mean, is I backdrop all in of the of – we're and have remember, cadence that of place. that into opportunities development putting this again, and

So could can bidding executing out is Likewise, opportunity. there robust of want advantage we and there be to development positioned attractive said to efforts our set opportunities take well be as a the that of is be very and we pipeline with that we're non-speculative fortunate we us. for full

right moment we're these of out now are the company again that a to there. in we're So opportunities advantage where positioning take

Michael Lewis

Okay.

think rent of potential out you kind to the contribute? capital but that out? are are the – broken any as or there norm As guessing to rent are in any part a record that move to b far or need so of question, terms down on be horizon I'm likely markup no you of expirations that mark-to-markets this say could a you likely might a there I'm lease on be

Bill Trimble

you answer renewing And the is I to renewing any part the thank right in of be we've strategy. at that already thought leases of weren't we that think that's eye no are that think I for on we've buildings the our of think group a the going no. great that spoken cusp got and I second out-of-the-box bull's higher

government So news we're looking forward the inflows when ahead. good the

Michael Lewis

Okay. in XXXX? you an or know this increased in just in it lastly could expect dividend you dividend like last me, the you then the Would answer I on looks if for don't XQ increase XXXX. Thanks. but XXXX And

Meghan Baivier

continue what everyday We look to do. here shareholder's growing out we're flow that's to giving the to opportunity that forward to and cash

Michael Lewis

Okay. you. Thank

Operator

question next Carroll with go Michael Capital from Our comes RBC Please Markets. ahead.

Michael Carroll

a assets. Yeah. Bill, bidders still comment landscape there's Are on investments? seeing down now what yields? you I acquisition bidding new those now? competitive calmed I a to you few right right pretty previously can you Thanks. that you your of still now these little people are right bit for some And aggressive say, there the guess type know for all? Has doing then out at mid-six get that

Bill Trimble

morning. good Well,

number think of for answers that. I a

I of a the these taken a time the First properties all, break. first of market that of have were spending of think and great may for entering some on money folks that deal some the

Our usual private change. equity competitors number do facilities that a of continue to hasn't be out there. off-market purchase We our

it's think I same. So competitive from the a standpoint

properties a of has I think bit. it for the some decreased maybe larger

after But I to go XX, be now, vanilla we more are care the going smaller As don't opportunities. over about have that, last lot you seen know, so of looking will XX really say the worth we months. lease XX years from XX, plain these terms opportunities at buildings what several and quality. probably We're we a really

lot mid-XXXXs these are to properties mentioned buildings continue. in buildings the as We Not new early Those of constructed that crisis. to before duper build-to-suit I super were coming expect looking that off a the are lease of to older before, surprisingly, properties to owners looking first are A future of and wealth their of on getting lot generations. little a to for opportunities or redeploy roll. – these pass the

So the is pipeline we're where very pleased today. with

Michael Carroll

probably or renew? what knowledge lease where that assets they're there are better a opportunities those and you you can rate terms shorter to get type renew there leases more Are of have maybe going at out know buy valuation to to with going where if

Bill Trimble

obviously value in And does is portfolio a not that renewals. the us, our on-the-lease fact see that there's for of pointed last we out think obviously I there. Absolutely. long-term which we some And think XX-property portfolio terrific we'll have expectation year, lot a

well. together to we of And that terms. have interesting. We looking are come there's consistent lease also we short-term where not pricing it's that's flows on Obviously, see only but a bond some values if lottery that faith the set portfolio a we where all floor. in, as at different full putting The constructing the cash organic depending are leases those you're growth

the But you gets the I hold do years else because to left seven to will four XX% that renewal through think when drop. are one properties, owners or the success at there's hold year two opportunity. rate to obviously they three the think see point three it down When at on if on tend you'll or just those left transition. wonderful period don't with we anything a the years often to

Michael Carroll

then, from so? quarter. And on just timing it's guess month I back saying but looks pushed delayed of projects, time, or Okay. guess it two-development be a like me. last got it got one kind it I The that may Is right question you're

Bill Trimble

what happen always at just transparent if basically said X. third -- we've that on and October it and No. the quarter, the the what to of we're happened end happened at end be It's trying would

talking. we're mean I So,

I … think be it'll there.

Michael Carroll

Okay.

Bill Trimble

development with perhaps in and folks. trophy I've doing are of pleased a at at team country. And Lenexa building the But areas spectacular. the GSA got are Alameda extremely other is Ibe, around asset. coming it's California. same forward real folks very our head The was look as And FDA we thing the and is to well. to this out It absolutely I And along Mike reiterate, and

Michael Carroll

you. thank Great,

Operator

question from Jefferies. is ahead. with Please comes Jon [Operator go Instructions] Petersen Our next

Jon Petersen

thanks. Great,

But minute, there's sticking for expiration a of a you a lease Just little there. of average with schedule have about the duration. barbell seven bit years

question. But near-term we lot of there's, to touched barbell as a maturities. on really like I of and Mike's a certain go guess you then renewals, or think this maturities a get always a little away is the be on there we of of long-term to should going through kind I level there's expect lot it kind with? CapEx, next you'll as of at at elevated a of that that we I moderate the expect after dealing be should through and a should of get over then, XXXX, lower shorter-term that And when get couple the on same reasonable leases level more follow-up years. kind those guess kind you of CapEx renewals lines, you point?

Meghan Baivier

we're into obviously to year always year Jon, to Yeah. working terms. renew lease long XX XX

in in so, and what should as side appropriate And are to we the three high-teens our so, XX renew years wave opportunity maturities us have to a next depending will that. the build these of the we upon years from particular terminating to said, forward the that to then the to to with And but next to properties capital level likely comes years able acquisition And not to lease low-XXs us go any from to coming through the be the we create reduced XX we're forward years. do to two as to few and Bill post-XXXX. terms, obviously house. And that look another work

Jon Petersen

focused, thoughts productive they're the any you And don't anything approval? branch, do the at congressional on of they guess Okay any the have legislative executive that's helpful. then, to and I be Do maturities, seem moment. require be to on, able upcoming

years things any fears, over can get of couple held Congress? do you up if the guess next I So in have

Bill Trimble

on folks, things analyst and quicker to seen prospectus I voice a the the but over incredible, it's it two years. basically know Interestingly, it's basically on committees, begin we've vote. move. passed several move the actually To level last remind sounds

process a that standpoint. fairly it's from rapid So

I up think side. have get things facility We do government these benefit going to months their coming get is up. these to prospectus from an to in a the also FBI realizing XX to advance,

But can to going absolute be our it's San our One it we're And in you level million regions. properties to best portfolio and within a expect be handled looking which there it. that a terrific the be number the It's Antonio. below going renewal that's down forward of prospectus. the prospectus, will above to $X by

Jon Petersen

you. Thank Okay.

Operator

questions. no to Darrell to over like comments. I closing would further for are the There turn floor

Darrell Crate

everyone the your Properties Call. Thank by U.S. the for look of Conference to speaking assets joining Government, you partnership. a and continued faith And of foundation First premier XXXX forward and Okay. appreciate soon. the on Easterly company full Quarter Government The all we is you with growing credit backed again

Operator

This today's your concludes you Thank participation. conference. for

Easterly Government Properties (DEA) 7 May 192019 Q1 Earnings call transcript