DEA - Earnings call transcript Q2 2019 | Easterly Government Properties, Inc.

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Operator

Greetings, and welcome to the Easterly Government Properties Second Quarter 2019 Earnings Conference Call. At this time, all participants are in listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded.

It is now my pleasure to introduce your host, Lindsay Winterhalter, Vice President of Investor Relations. Ms. you, Thank Winterhalter.

begin. You may

Lindsay Winterhalter

morning. Good

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

assurance the as these or expectations will its reflected Although, forward-looking plans, plans, be prospects suggested strategies achieved. attained or strategies no by those and it that that believes in reasonable, statements intentions, intentions, company are or expectations, give can

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

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

GAAP and the the Relations supplemental to company’s financial release information package the at reconciliation of tabular a numbers of separate can You non-GAAP these page website earnings measures most the current ir.easterlyreit.com. in company’s on Investor comparable find

conference to the over I Crate, Easterly of Properties. turn call Darrell Government Chairman like to would now

Darrell Crate

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

pleased results. Halfway direction year, our the through we’re of the with

Our early and life. in properties bullseye new dated that useful are facilities acquisition effort leases is and generating their long

Our efforts seasoned by in our are partnership re-leasing being with government team. the executed

is capacity very plenty our future dated growth. revolver Our long obligations balance and positioned of well with under sheet available for

Our development to strategy enhancing of portfolio values continues for grow.

the Atlanta. recent FDA in With of our win laboratory third

a Alameda lab for have next We at We this XXXX. the at of in ward targeted XXXX. Atlanta new cutting the Lenexa the XXXXand delivered end month. is in ribbon lab And delivery

is deploying our most our accretive admirably. is capitals is win executing team of into the capital. In to space these use and development It a projects privilege our

to be to the We match over risk without enables cost grow acquire Today, quality the accretively few our portfolios capital portfolio. weighted well positioned continue profile. average of our to the us that to needing medium and stretch existing criteria our to term underwriting

States Government. With by quality under with in of faith the in XX the development diversification the all pleased full in and United we’re and of leases assets, properties our design, X our backed with credit ownership, one

forward our be deliver to furthering to pleased look our strategic to We’re expectations on value and the track on enhance objectives shareholders. for to

share call turn on to developments the I’ll Bill, the in more detail to the Now, over quarter.

William Trimble

Command for share second facility of you for it has the in starting I’m the Thank in Joint quarter company’s Staff quarter a call. Virginia. morning. good of earnings XXX,XXX acquisition to square quarter second What feet and with Darrell located Suffolk, XXXX the Thanks joining been, us U.S. achievements the our excited

occupied forces. facility of secure Command This as bullseye by truly Defense’s highly the XX center unified invested of recent direction division heavily just facility leased facility, acquisition combat Easterly's X-year years is is responsible additional in U.S. comprised was option. GSA wonderful renewal of this JSC This two XXX% their a addition Staff with a demonstrated The portfolio. is of for for Class-A Joint and modern U.S. to the buildings the an lease in meaningful is strategic growing that Division. are to a Department The and government

This of in ninth office. quarter New company’s FBI Orleans, also the marked field acquisition the FBI

Just for like important eight, some regional the handles missions its the as FBI served this of of other facility the most and operations. headquarter

Specifically, Monroe, Louisiana, offices Rouge, of including satellite in Orleans six Charles, Alexandria, Lafayette, oversees and FBI all Baton New Freeport. Lake

mission. to U.S. as important is specifically was location that to this the site Government its note the selected It by which conduct optimal in

unable from this the In property was government so to the due constraints. but prior do owner attempted to fact, purchase budgetary to

mentioned, the most exact As the FBI specialized the are They largest wish we owner these offices tenants of are the is the type use the important private highly field to previously aids own. and fulfilling Government. tenants Easterly property the underlying missions to U.S. which for in of facilities of

of billion, on acquisition was of one the a for fragmented quarter pipeline time. expect highly two opportunities a the of development drives growth opportunity strong. that dedicated growth. no mentioned will Easterly that we acquisition believe while rewarding remains house. XXXX have As or still bullseye the portfolio also public in facilities our a approximately $X quarter, for demonstrated With Easterly This the be incremental a market year we at And we through side totaling further this competitors,

again brand-new, pleased honored of by to ago laboratory for & selected as were Food GSA a partner Administration share This Drug Atlanta, to a in redevelop weeks the laboratory the is office the Atlanta Several is us serve news with the the as The we and of Feed the expected for the XXX,XXX and be to-date Southeast feet. facility house that anticipated FDA, Easterly Southeast Atlanta as build-to-suit, to been tremendous Class-A and Laboratory size opportunity Georgia. approximately the are state-of-the-art Laboratory. to we largest U.S. square Food laboratory once has well district Government. our space will an Tobacco to choice both to office and

expected Atlanta operations areas regulatory laboratory The within Atlanta provide Food the region and within the the as research into Southeast new FDA. to the facility GSA while separate laboratory as microbiology for the Feed and this laboratories use regulation the and well district and commence lease delivered, office of analysis, methodologies chemistry, tobacco. for beneficial the nutritional the its oversees Once for is four will non-cancelable project The testing is region, FDA. house regulatory XX-year

These Alameda to for on potentially the government’s for With of Atlanta, XXXX, track for now is uses August FDA acceptance preparing fourth XXXX. best on XXXX the of delivery. are is quarter the among of Easterly and space in capital XXXX, XXXX project track Lenexa a XXXX, deliver company. FDA is in or in FDA while projects the build-to-suit XXXX

non-speculative we incurred contribute As mentioned, or the nature on Award, the company's Lease the overruns, risk-free the attractive Award, prevent option ability minimal while of and building, cost yields building minimizing design to land to contract all the to the place earn build with to the GC expenses Lease the prior risks.

will versus extremely development we're between if is Further, to at exact the building much tighter the attempt be Government. it XX-year of initial same the a the brand-new we to an earn Easterly opportunities U.S. with building non-cancelable purchase a end were To rate one rather would compelling. development that project, cap than acquisition lease with ourselves into pay context, we That to facility than into. these state-of-the-art put expected spread

a of the and the latest management underlying the the management, portfolio. fee. continues to modest asset constantly agencies facilities improve with tenant wonderful achieving the portfolio. Tenants projects to team existing the to while keep to also NAV and only to increase standards. find our overall are existing these GSA improvements Turning upon Further, the work company's opportunities up

improvement us appreciate tenancy our shareholders. which future also towards quarterly better of dividend understand and clarity clarity These for our lease government facility. income, a help the in is then our and It this that projects we add apply visibility a agency’s

Easterly. for conclude, a this is To great quarter

development We XX% other continue the With and over grow those generating for portfolio acquisitions back through to us credit Government. the cash and REIT. non-speculative faith public XXX% U.S. stability of occupied The our believe, cash any of we bullseye distinguishes full flows from flows of opportunities.

With the time quarterly results. and and you your support turn over the for for call this your company's that, partnership. I’ll financial to discuss to I thank morning continued Megan

Meghan Baivier

Bill. you, Thank

comprising enduring XXXX projects the our operating As to renewal acquire speaks average the quarter of when to young, the by through achieved it real design. did weighted visibility square X.X year-over-year of our weighted average and The first has estate owned remaining X,XX,XXX continuing additional mission-critical defying This portfolio of XX been for facilities cash exactly or portfolio flows. company the IPO-ed. specifics June of million totaling commercial upscale time with the of which term lease remaining the leases feet as term in three years. lease approximately square properties Remarkably our XX, feet X.X in same we under development was has

young The Portfolio credit portfolio United average remained of of defined has also at Government. our at faith and income and XX% age by full of lease continued XX and our time the passage to finally XXX% years. occupancy a backed be annualized the the States remains of

on share income FFOs basis $XX.X and per For on cash was for a a diluted $X.XX. was the basis million. was per on $X.XX, fully a share second $X.XX diluted our quarter diluted was FFO adjusted available net share fully fully basis distribution per

supporting a And grown more dividend. company's the just XX also properties stream scale year. flows has last with portfolio XX from since Our time cash to comes of diversified this this

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

it’s debt quarterly of to net X.X As XX.X% net to debt was times. enterprise was and ratio June EBITDA annualized Easterly’s value total XX, adjusted

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

our to programs its throughout to end. quarter the just-in-time purchase and active through properties the As been goal part has funding, subsequent of quarter on second company ATM

During $XX.X to total XXX,XXX of its just in the company common shares outstanding stock shares approximately fund forward over second through million proceeds remaining offering, June acquisitions. announced settling the gross quarter, X.X issued raising the to the in million recently ATM addition XXXX equity from

notes. September market placement private initiated marks which quarter to close approximately on second unsecured to senior company also of The over the end company XX, principal company's existing private $XX.X unsecured the end, solidified to strong amount in for new funds the of XXXX. and debt the This common gross the entry Subsequent announced relationships with fixed-rate expects of lenders. notes Subsequent quarter into partnerships proceeds a shares company million. $XXX unregistered stock X.X million issued of has million the execution just placement of

will the fixed-rate rate These tranches, in interest an an interest-only X.XX%. is which three an portfolio, million of profile notes The average our XX.X XX-year strategy, is notes $XX maturity XX-year $XXX notes be years in and $XX X.XX%. weighted impressive X.XX%, investment interest as and with market issued execution million the interest notes is the with of grade. of This million rate and sheet, X.XX% notes validating interest an rate with average of XX-year rate and in clearly weighted balance

deploy rates X.X our forma that looks pipeline. years also X.X only only duration evolving duration quite debt XX presents it to from takes this basis But execution from XX by closing our taking lease X.X% average surpasses an up announced, in X.X%, superior in of well weighted with points weighted takes field for accretively Pro X.X balance remarkable. an point The our the is opportunity our only term Achieving remaining and average for which for years of development stronger. support maturity years, to the fixed-rate interest X.X years. basis to average and such sheet company acquisition attractive frankly capital weighted

duration of The superior this company's debt enhanced environment. by our execution quality an sheet through resonated placement the credit of private its unsecured we rate interest extending liabilities market again attractive in and in balance the primary once the tenant

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

basis Additionally growth. with mentioned, metric share share indicative more per expected share, FFOs adjustments due adjusted is cash approximately FFO growth which expected we company's basis fully XX%. operating on The guidance of a in is XXXX as growth adjusted previously to to growth believe a accounting of masking per FFO diluted FFO flow on share per represents fully diluted for a per X% and

have portfolio creation an per assets expected share We indicative X% of exceptional an both year investors. for FFOs incredibly XX% of is growth adjusted in of XXXX, in strong value we believe to

that, turn to I'll back With call Doug. the

Operator

proceed Thank comes Instructions] your you. question question. from Manny Citigroup. [Operator Korchman with Our Please first of line from

Manny Korchman

that of Is projects everyone. what Hi, is one know was out secondly, how other you on become don’t working reality morning I large most a like X made RFP just right it - And now to to, recent think this projects that that over full-on good throw next many do months? sort I’ll and win XX you development development there. who and if but just there the could it are was? the you

William Trimble

Manny, competition. a competitors morning that There involved Bill. were it strong was blown full of very in Yes number very, national Good a it’s project. absolutely,

extremely know, XX are the There important you FDA. lab there. out this As is to

We that with win proven the I cannot have that a partner first the Government. but guarantee been terrific Federal awarded going we’ve three. We think we’re we’re everyone, to

that be forward. at least lasting program decade going think we’re FDA I So that the within looking a at could a

was finished Ibe, weeks And Head you with to how our see and stem us their working beginning this the through Lenexa, GSA work the it and expertise I with two achieving Development XX.X% because of we we've since then again and is I about think going Mike done stern. these goals, made the were solution the together I certainly doing building for from there been we've great our And FDA partnership now after that really when projects. they ago and – in a think FDA for in on the all what

So I so a to into almost this to work think we’ve one of come taken in lot has Atlanta months XX put a it. fruition,

Manny Korchman

you’re in there else then terms anything is dispositions, of now? about and right thinking Thanks that

William Trimble

is have. our take and what we or instance very past that we’re an said for into, I pleased new to portfolio very be a put - we’re a with I’ve and project, with advantage harvest call in but we young there’s property when opportunity might the of a pleased it redeploy that, and development and we’ll very money that have portfolio what older

Manny Korchman

Thanks.

Operator

Jason with Our with proceed next question comes RBC Please from the line Markets. question. [ph] Adoni your of Capital

Unidentified Analyst

I’m and has XXXX Hi, during my that you I’m then through all impact what XXXX? should in on but thinking the guidance? at we that wondering about of for how I thanks end then did had the the on interesting disposing that maybe smart and And also be you strategy then have discussed assets changed that sale dispositions, taking are know previously obviously and for question. touching you some quarter, had the

William Trimble

that do we’ve in as I’d just our we year just older year every consistent actually I've and for kept we’ve of get mentioned fairly a as our said remarkably think what properties. Megan purchasing - portfolio buildings and new I building obviously that, incredible the some Manny, to say kept, age market

the think mission, time the value. we though in and However, at our it’s know which a even of new to but hard just that we Protection, XX-year Customs it with way believe I was Border lease, California, renewed a oldest by property the looking we brand XXXXs buildings, great just in with one to it’s sold maximize though, important terrific, you’re

better that that there’s taken opportunity think to the forward. say when for we going dispositions us So, or money are another I'd

Unidentified Analyst

it, you. thank Got

William Trimble

that any of effect the on none guidance. had And

Unidentified Analyst

could touch market you the And on today? landscape competitive then, you’re the also current that seeing in

William Trimble

I that the landscape say would is consistent. fairly

market public large very large companies, competitors. involved. South see We wealth companies Korean get have we sovereign funds, projects, insurance to no insurance When even we’ll

competing in [ph] enjoyed Baltimore think There in them market. We that a a was market equity longer funds for year basis. I in last private We the public that have market regular competitor was participating that probably a no over property is several the years. we’ve on with see that

So consistent. been very it's

Unidentified Analyst

Got you. you, thank

Operator

next Jefferies. Our with John of question Peterson your Instructions] Please [Operator line question. proceed the comes with from

Unidentified Analyst

for Hi, on Peter this is John.

high acquisition more be if sweet seeing bullseye the are rates? front, you attractive to on willing deals take how Just are you your leverage sort of would in your that at spot acquisitions cap

Meghan Baivier

use ability our guide development but we be to that push to Yes, into the capital call us, I will feel to best that of we our think continue that sheet. keeping while range balance – leverage pipeline a generate growth the strong have going we, confident to range, in the higher yes, higher and is

Unidentified Analyst

you Got sort expecting a lot on of on rents you. are trend And you’re things have maturities is sort to of any lease huge there of maturities, ones, near but update and not do that directionally? up term where coming

Meghan Baivier

you next, of look about. years there vast those fall majority so that at coming think those Sure, of day that the cost we’re two renewal and remainder and next and are driven as the to sort look for get a that cross-section of we bumps so this at you the year of into is the every renewal, properties replacement working bullseye up

Unidentified Analyst

me, you. Got from it, it thank that’s

Operator

back in over would queue. are to further for closing to the like the questions There no Darrell I hand call remarks. Crate

Darrell Crate

the conference back Government to November. your you XXXX you and Properties appreciate Easterly Thank in forward everyone for look second getting call. We time joining quarter we to

Operator

teleconference. this Thank gentlemen, participation. you does today's and conclude Ladies your for

lines day. time a wonderful have and disconnect at may this You your

Easterly Government Properties (DEA) 1 Aug 192019 Q2 Earnings call transcript