DEA - Earnings call transcript Q3 2019 | Easterly Government Properties, Inc.

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

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

I would now like to turn the conference over to your host Lindsay Winterhalter, Vice President-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 this 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 the Act the to for with purpose statements the by Harbor Private Securities is Statements

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

including results in with that actual Item year XXXX filings. its will and risks affected Risk XX, SEC Furthermore, Report described those Annual differ February beyond December from are forward-looking ended for its filed Form other the limitation, and of XX-K may in variety SEC statements the XXXX, control, by without on and the on of XX, factors those a items be in contained the materially Factors, company's XA,

publicly The a update assumes information, company no whether or obligation otherwise. any as future statements forward-looking to result events of new

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

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

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

Darrell Crate

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

we a deliver made was performance area the Each business over well. expect will strong our performed We of that solid quarter. It milestones on progress long-term.

acquisition while development we us performed Our years, target $XXX next - schedule. two the effort delivery the progresses Alameda selective, several our under FDA our laboratories on with development to bullseye for our million the well, additional is will properties being expect plus robust deliver allow well pipeline on FDA of and which

We the sheet over FFO deliver support these to annual balance our growth It X% to X% is And initiatives. the well-positioned we growth believe opportunity this to by is our highest an provides dividend, given the tenants government. to States today which X%. along facing with long-term all shareholders goal our especially, United is of that backed quality attractive credit approximately with full the have rents the

our of predecessors long-term to partner mission the to ago, XX shareholders especially be our the know, years choice almost As mission-critical federal assets. government founding our is in

people our We to XX other with the each In our enabling that its the serve government so, DEA agencies doing its shareholders. along value our workforce build we the being and support for and our of strive mission the every the with best best All and our understand that for VA FBI, achieve facilities to partner. day. be is to pathway the U.S. tenant

developments your to share for morning, you turn detail the Bill thank the more we'll I that, in call to With the over time this quarter. and on

Bill Trimble

Easterly. our Thank another us for you quarter and is for the acquisitions call. team third here joining Darrell, good This at quarter morning. for Thanks, great earnings

Kansas. of on our deliver opportunities nearly headquarters actionable square of with to the Agency XXX,XXX pipeline regional acquisition continue Lenexa, foot Protection We Environmental in

its goal with point, The and was five-year ENERGY awarded facility impressive of EPA building that and thus construction XXX% original buildings. carrying lease the good STAR ownership renewal XX-year through real under building a the the this October and occupied renovation the EPA October XXXX. is and tenant bullseye also existing marriage management specific originally GSA through certification the portfolio. of XXXX. lead option environmental for commitment underwent lead which This green constructed perfect the large-scale is of XXXX acquisition in estate platinum single use for of an At of has a XXXX potentially a by of new in a to was score for facility term strategy a the through This stewardship office like received to leased our the An suit XX. our

U.S. This recently acquired optimal square extensive tenant quarter in to lease working in highly XX-year subsequent facility suit expire renovated new brand fully renovations Tustin, Further, the will important The their XXX% Easterly an foot leased California which space to is under in located facility the LEED-certified Citizenship Services is Immigration and a mission. receiving County. XXXX. end, Orange ensure for XX,XXX

have only we but reduced average not remaining of two these company's have portfolio. extended lease Through average age acquisitions, accretive our also overall the the we term,

XXXX continue million Easterly on you addition, team of for the goal calendar this and to acquisition its of stated deliver the In can to the is expect remainder think for I goal year. nearing $XXX see us

California located led new by XX an the Alameda quarter August. is Chairman deliver to throughout in Ibe. state-of-the-art now pleased Vice side brand FDA We the country. also Alameda was strategically - laboratories the laboratory FDA the the for This this our the exciting newest FDA regional were of development Mike of house

is developer, which new the completed term for project Now our FDA XX-year even FDA in extremely at has compared XXXX. Alameda, requiring the and lump major Alameda and budget the success to a of carries to The has schedule outstanding reimbursed at - laboratories our are order that sophisticated on sector another architect, we've the and completed a contractor This sum expenses team. for - general on private and us August lease work to deliver. government commenced construct brand top-tier

American state-of-the-art U.S. government can of partnerships and safety government they public. allowed to that strong experience the our facility of provide builders the with our fulfill mission an and Our the for to the and so absolutely critical decades a security us

closing this on Continuing future our the regional development, FDA the of - quarter property for Atlanta redevelopment with the laboratory. existing marks

As mentioned, opportunity serve a we of honored for the again government. us to partner are wonderful to U.S. the choice this as and once is

District Tobacco - office Feed FDA as feet and Atlanta over FDA twice the as at the for XXX,XXX square state-of-the-art Alameda the The both Southeast the to will of Food have is size Laboratory. Laboratory Southeast the well project. expected be laboratory - and Atlanta and Office space facility

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

continue of year. Easterly Atlanta in to Starting or with Alameda anticipated Tracy years - in then FEMA project delivering come. to delivery a FDA A in FDA the XXXX - pattern and followed XXXX, of by XXXX the to establish has for a deliveries and started - XXXX XXXX we Lenexa FDA hope - pattern a in of

starting taking on day lease advantage at these attractive We one. are yields opportunities of with duration long-term

results provide we for our to are long-term financial shareholders. predictable So, well-positioned

center the we in will to go are was government's with this XXXX we lease And term to as GSA FBI finally, located to lease the renewal on a field a it through new turning unequivocally mission-critical we our years, carries which to facility. of in signed will demonstrated pleasure bullseye pleased renewals, through serve years this the were be This lease effect Virginia. to is report exercise This attractive January property for with thesis bullseye into the spreads of new government continue lease XXXX. and at the re-leasing earn have renewal The location. office landlord Richmond, XX federal the this XX and able for is which firm highly

hand-in-hand these differentiated to the abilities also asset team agencies. with continue meets The reflective their the of important government that U.S. to an success our is needs demonstrating and to of asset skills work everyday management provide

To square of Easterly continues. IPO. summarize, our the of since tripled has footage time portfolio The growth at

market and float our by our X.X by existing and new company's grown over frame. times cap times time same nearly Thus, investors. has liquidity to that X over Our greater offering

management of capacity Prudent has balance increased to the sheet develop and our accretively assets. acquire

scale X.X% of with of has allowed representing asset portfolio. the to and on team And total growth the to no management asset we the Our portfolio NAV grow of than with the tenant-funded continue as the government near-term portfolio the works a single U.S. overall more improvements. us expiration, diversify

believe you this over for partnership a for be at to investment of that stability the proud thesis. of net will our lease we to to again only occupancy time. Further, commitment superior with And peers, and our Easterly. growth tenant There's I thank lot of your continue vehicle

I'll financial Meghan quarterly the call turn company's over to results. to discuss the

Meghan Baivier

you, backdrop strong the and this in volatility. third consistently quarter Easterly's strategy again us Good Thank earnings to Bill. uncertainty the everyone. market unique allowed against and morning, business portfolio post once of time increasing

was per release, FFO our share share diluted for a a basis fully was And fully net $XX.X share as income fully per basis per $X.XX. was quarter, was third $X.XX. available in adjusted FFO million. saw $X.XX. distribution for the on you earnings diluted a As our cash on on diluted basis

of real XX, totaling with XX or properties design. feet September comprising projects estate under feet As two commercial development we operating approximately square X.X square owned additional of million XXX,XXX in

acquisition the mission-critical, California state-of-the-art our bullseye project our portfolio in reduce the the The laboratory age we age able were that XX.X our is weighted of of young, years. Alameda properties of of FDA again to portfolio through It average and is quarter-over-quarter. latest delivery

Looking years basis a has years. our IPO, aged X.X while only our portfolio by has passed, weighted on back X.X to average

to working and we time to reasons same these average lease X.X even with weighted remaining were quarter-over-quarter term lengthen X.X able For also the us, from years. against

Our overall the year, diversified portfolio size stated its of portfolio, goal the the By earnings XX% has stream our predictability of from operations, XX more square a we have to created portfolio dividend. company's flows grown the and approximately since in properties meaningfully time last supporting ultimately on achieving footage. this growth based scale to company's representing cash XX

the government's prolonged cash these factors our Given future portfolio. give and quality primary of credit unique nature average of missions term the remaining towards this duration enduring the within our believe facilities visibility flows we superior the us of lease the tenant, of the

quarter of end, Turning to for expenses. At a million credit of with fully related future $XXX had line the development total indebtedness acquisitions sheet. and the balance company million available $XXX.X

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

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

goal throughout common stock price the As active June our funding, this approximately raising part the $XX.X issued million a company third to of end. proceeds in to quarter properties on program company of gross total X.X XX average quarter weighted million through Since was ATM has year, subsequent $XX.XX. purchase of of its the at just-in-time and shares

funded million of rate During company and placement third fixed previously the of the $XXX notes. the unregistered private announced unsecured closed senior amount principal quarter,

strong debt to relationships existing placement initiated and trip private second the lenders. The market unsecured with new solidified partnerships

deploying notes the into of company the maturity company's acquisitions an of the years interest and the the fixed closing, opportunities. rate rate average is liabilities positions X.XX%. weighted average XX.X capital such future attractive Extending an for impressive time was weighted at by accretively The development and growth at

we Darrell through of non-speculative our development achieved mentioned opportunistic As acquisitions earlier, the externally growth majority and projects. accretive

lease among I of remind efficient interest favorably weighted years. will this term our quarter-end weighted of adjusted X.X balance our and pleased average have average weighted compares at average I am leverage of management company's such, to the of is X.X% a years. maturity rate with to sheet remaining six times X.X priorities As you a top and

Turning to our guidance. earnings

is XXXX, the For a the of in XX million year. million three $XXX the ending based company maintaining is on diluted fully December for months of XX, per guidance share $X.XX completing basis guidance FFO This company to XX separate to on $XXX final its portfolio acquisitions, investment $XX closing property the gross apart development-related in of of XXXX million January properties from the and the $X.XX. and the

completing guidance FFO share $XXX to the gross also million diluted XX, company is The in The a fully XX on development-related of $XX year. on company based the months for million of $X.XX investment and is this introducing basis guidance per midpoint million ending the of to for $X.XX. XXXX of $XX December acquisitions

midpoint guidance recipe guidance for to in long-term approximately earnings secure long-term our X% achieve cost X% growth investors. in a growth strive our line and represents from of this to annual midpoint, believe X% with that of XXXX paired again a to consistently From with We combination this is our sector-leading improving we delivering steady capital to goal XXXX. XXXX dividend growth

will With Stacy. to call that, the turn back I

Operator

Thank you.

be now Our Instructions] will from with a question We conducting session [Operator RBC go Capital Carroll question-and-answer comes Please Michael Markets. first ahead.

Michael Carroll

pricing that what of there volume can these acquisition talk that more has mean, your been within looking market on said deals? you're in know you transactions Bill, you your the about seeing today? Thanks. space. this how of in and little does that a bit coming I impact kind types broker previously I

Bill Trimble

Thanks morning. question. for the Good

I I think and well. opportunities. And I more we've our seen looking say strong. opportunities think is at more are I we also the off-market But that supply brokerage very stepping pricing recently, some will seeing as back think

feel good that. Michael really So about I

change over say seen to we've XX that I'd the the XX in XX nine last months. market basis to point probably

XXX, seeing say have And long were purchasing, of also properties state-of-the-art brand-new sort you've I seeing the we're I'd terms. that seeing as we're we been been facilities XXXs, the category, we've that think lease what but in have noted that so very XXX

well. are robust little some opportunities might our off-market as a that But and be So now we pipeline it shading more bit. remains seeing

Michael Carroll

here if the that that term? some near holding of Is of sales. then of assets are want Or about what thinking you're the happy in pursue your you to that terms you vanilla. within portfolio I looking are properties plain your are And are more you guess, something of right about those that asset Great. now? in kind

Bill Trimble

plain renewed the of we've I going largest seen, Well, think assets terms as forward. certainly very lease you've with our vanilla long

the years, have decide a we're we what number So going there. can to do of management team

I think portfolio. in the we're have pleased with we everything

always But they're the to are be valuable. we trying properties the portfolio, because refresh as was I've long mentioned in before, the term we going most new bull's-eye obviously to believe add

think there. So I surprises no

certainly take we'll of. opportunities see we As advantage

Michael Carroll

this assume that talk it the any Okay, pipeline great. range Or about does And last guess are other new opportunities? and bit project build-to-suit start Atlanta? little one you then that for me. the And your does the Can assume I a guidance projects Meghan, GSA starts complete year? your in just you

Bill Trimble

Well, space the I we think opportunities the from something build-to-suit want speculative not We're they that decides in are unique be going doing when in government development. built. to and a out

sides coin. there's that two to So

the the I facilities XX have country. we think that FDA these has of throughout mentioned

them. think those one of to would we've through get don't to The every of work, hard laboratories, single I surprised first guarantee more I can Mike been awarded and get I them. Ibe the going three not be see team's us we're the of future. awarded in

before, some opportunities. we've there's are there As FEMA stuff some out There's opportunities, there. mentioned some FBI

-- new certainly happening one attuned will we're coming of right on stay think we in way projects And to And and to now, run we of up what's be that hope there. rate terrific time. for delivering every some I quite tuned a So year. these

Meghan Baivier

of And completion the And Atlanta, guidance but our a of very level nothing further. contemplates in investment small initial Mike Lenexa.

Michael Carroll

Thank great. you. Okay,

Operator

Merrill from comes question Ross Point. go next Our Please with ahead. Compass

Merrill Ross

Thank you good morning. and

on the renewal lease spread? was You know I got asked, what Richmond, at the

Meghan Baivier

Good at Yeah. excited the Richmond. is This Meghan. really Merrill. morning, about We're outcome

of exploration. year all, of over in a has been renewal First completed that advance

while the the we time government, So before fully effective of area to that lease the are basis that roll good to not net TI in lease. work a on by yet to TI up we're complete determined XX%. is expecting going And have commencement that of worked the

Merrill Ross

of it’s thank they building prospects there the suspect. looks property any small. maybe it federal the the end I they're have for the know Diego, on other leaving border at re-let you to and to Excellent, Are it that agency. clearly a lease, It's in suited you, and San DEA going that? like I outgrew be

Bill Trimble

facilities other property. respect away. the a stood are believe. that all There opportunities from I've got that are looking border more. agree on end building And for of mile one couldn't sorts you at We've I with Mexican literally the two there. we to

along it really others warehouse only also spaces our in Most And the is office position. that is it with one of located and industrial. of

in plenty Mexico we opportunities. our prospects current there'll And are the that property. So, with I'm saying sure be one of about situation for

Merrill Ross

Yeah. It way. you just would that the seem Meghan, sum lump circle from would like can reimbursement if know Alameda. expense I to

Meghan Baivier

circle... we if sorry can I'm

Merrill Ross

[Indiscernible]

Meghan Baivier

million. $XX did receive the lump sum We

-- So the that. waiting government that we -- on for have waiting further not nothing we're

Merrill Ross

So was much how I'm sorry?

Meghan Baivier

million. $XX

Merrill Ross

you. Thank

Operator

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

Unidentified Analyst

Peter from terms is on This of through I positive what expirations Jon, of Hi. this rest a those year kind or directionally where of in are the level looking of whether be in negative at, leases your lease some XXXX. for are seeing you just rolling it'd just spreads? guess higher

Bill Trimble

is Well, next first our I some them thing the guidance I'd year worried years which I say think the think of we're we very rolling year the transitioned that, leases in positive where I'd last to today. also have reflected in in about next sort deliver is we not in be for that plain going very certainly certainly that over anticipate vanilla. where fact, the we had happy two

as But out. how I it's pleased during are negotiations And to think very you to government, part. are are know think they trend for properties and where federal our the going Richmond, with tell evidenced we most going. I we renew discussing see where not you by they a favorably very be bull's-eye that begin These turn we're will of as anticipated. going the leases FBI - will to the

Unidentified Analyst

you. Thank it. Got

Operator

Thank you. like closing for would floor remarks. Darrell the over to I to, turn

Darrell Crate

Stacy. Thanks,

So We backed keeping pristine appreciate faith of forward work, Third everyone time. Government you to and the of XXXX as to We thank you posted build full Easterly look assets portfolio of Quarter all a government. for Call. Properties our joining the the your we Conference by strive on credit U.S.

Operator

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

Easterly Government Properties (DEA) 6 Nov 192019 Q3 Earnings call transcript