DEA - Earnings call transcript Q1 2021 | Easterly Government Properties, Inc.

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Operator

Greetings, welcome to the Easterly Government Properties First Quarter 2021 Earnings Conference Call. At this time all participants are in a listen-only mode. [Operator Instructions] Please note this conference is being recorded. I will now turn the conference over to your host Lindsay Winterhalter, Vice President, Investor Relations.

You may begin.

Lindsay Winterhalter

morning. Good

which begins, on use made The this Safe call forward-looking include call be statement by complying forward-looking on XXXX company note facts may company historical the conference of and statements the intends please these making the covered the considered provision. of the statements 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

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

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

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

Darrell Crate

this Thank Baivier Trimble, morning to federal continues Today, government. on Bill its consistently Class you, addition thank Lindsay. the I’m Good strategy conference and Lindsay, critical for first CFO and CEO; call. for leased us the you execute Easterly mission company’s COO. joining United to quarter joined everybody of Meghan also to States owning and company’s in by the facilities A

of tenants execution to buildings important of maintain partner assets. Our We existing chosen We story by enhance the through the of to is agencies. built-to-suit our that development facilities pristine the missions. the FFO occupied portfolio tenant many their seek our of own be a and simple. their through renewal and country’s We in to non-speculative most of to aspire some acquisitions, aid are grow

consistent were objectives. of with quarter this all acquisitions Our these

quarter marks a of sixth first The as anniversary of the Easterly XXXX public company.

We’ve while we’ve billion. credit lease $XXX from We’ve to lease and weighted X.X to grown finally, by years. to from U.S. income $X.X accretive the U.S. the in million from the from cash the annually a term our also XX%. treasuries. at stable We’ve X.X aggregate XX years X%. platform FFO diversified faith at our average And X% to basis implies XXX of flows a percentage premium from from each due we’re scaled XX backed full of supports recurring dividend which back progress. X% within our government points paying We of Looking XX% We’ve properties the XX of created return, a increased tenant base six our contractual government X% pleased the This during the with of total value increased U.S. to through a rent properties to government XX agencies and years, missions. remaining grown rate above acquisitions during a compound approximately development.

We been remained are and as we’ve return the in past. that attractive we’re materially proud the forward our the of delivered profile pleased they’ve going that this to investors, fundamentals same business

values and the superior story. same develop and pipeline, business All complicated established we tenant of not has closing, stable simple. and with been ago, for original leased actionable execute We’ve keep U.S. to government pass shareholders achieved able quality highly years generating on to our this risk believe And purchased the our the are to and strong our years a along thesis In to assets six we returns. of credit investment the be many continue maintaining come. fundamentals we’ll adjusted strong. flows a while discipline We we’re it cash

Our quality full pipeline and robust your our the the any government partnership and continued the thank and of leases remains by of best readout with for you is public backed engagement. credit underlying We U.S. of tenant credit the faith there.

we’ve you results. As Government. assets quarter premier Bill the that, to turn insights over with portfolio give the into worked to first real grow leased Federal the of And to United call this to estate I’ll States

Bill Trimble

of Louisville foot for Darrell, XXX,XXX this XX-year U.S. Department role first of USAO initial of Knoxville closing facility of XXX% of Office one for the for the we’ll the Federal and of its Certified acquisition owns District leased Attorney’s main street accretive as of facility by for XXXX as for of office portfolio targeted directly GSA XXXX federal the joining critical Thanks, investigative real property as operating stated Western Courthouse, District of behalf has GSA federal and the an now comprised the agencies, and A Agency. for the end, to XX FBI on of in Enforcement is With foot the United universe lease facility a built-to-suit XXXX provides completed just the LEED earnings already a ICE offices. and to XX,XXX leased XX,XXX for is acquisitions to efforts U.S. leased continued estate Certified Silver Justice, for the Louisville, Department XXXX within which completed XXXX acquisition of the within our the body $XXX trade portfolio to U.S. our Thank which country Justice in of FBI, elevated acquisitions cooperation square morning. level USAO U.S. XXXX phase us And The continue Class Easterly purchased A U.S. in opportunities on The and is Attorney Attorney’s With building Illinois. is the the lease Office offices agencies for for other good customs, towards intelligence USAO most government. bureau you Office bullseye square for located call. Snyder States transactions. our square this Customs U.S. a on is Kentucky, until the Easterly as Bureau including critical of Office, field foot of Louisville call, criminal to team Attorney’s opportunities Central December until build-to-suit and tenant federal XX,XXX immigration. a serves and are both Gene build-to-suit leased serves portfolio which the such close foot the approximately property facility USAO the foot Attorney’s This is Western completed, announced Illinois quarter Attorney’s seeing drive interior terms. inspired its dual leased some million U.S. the of in recently constructed a off LEED of built-to-suit the through Springfield, a XX-year on our promising Springfield, mission agency a Further and square field our quarter Office lease, The behalf was to term. from FBI GSA of a three-story XXXX. not free district government’s the behalf Federal of office build-to-suit entirely lease of August LEED Investigation, Immigration in first and agency. important customs generation marketed Knoxville May of is and houses of U.S. across the FBI’s XX% previous the leased another works support of Class adding Kentucky. finally, XX through market and in the lot completed both agency. of administrative in with XXXX the for subsequent and leased in the March of under XXXX we District

building high growth. acquisitions through portfolio constantly process disciplined our drive and size targets often a opportunities growth acquisition We leased that that over award FFO and XX,XXX square feet help result of is to of that mirror Our team quality achieved the government are highly size. federal new sourcing they’re single in buildings scale design and the a usually a build U.S. tenant average

acquisition. that As fits bullseye and mentioned know our every for into previously in our we have already underwritten targeted universe, property

Another growth comes source development program. of Easterly at our from

nature given in at make of in of a sophisticated these with foot federal we technical the the which to we laboratories. our the partners Atlanta, appreciate deliver to GSA mission FDA square continue progress Georgia, highly XXX,XXX the facility. work quarter laboratory opportunity with critical deliver FDA harmoniously to so We XXXX, the state-of-the-art and the We expect ensure to third

are other opportunities our team Bauer our In FDA’s by pipeline. and addition letter, development pursuing Mike that currently Mark Ibe to fit led non-speculative

Turning to leasing updates.

first that management into as in the will go Pittsburgh the XXXX lease a XXXX renewed team for great and XX-year in ICE not made expire at asset XXXX. until term of strides Our effect we will quarter

Sterling, in well square renewed the renewed the DEA Parkersburg DEA total new The portfolios X.X% annualized facility in XXXX. approximately and the XX-year term. XXXX March In also income XXXX. a for or first another term XX-year Laboratory renewed as as quarter the of Bakersfield term, of in commencing renewals, for four We XXX,XXX Treasury feet for in Virginia this total, represents XX-year that expiring leased facility of another

are in progress visit our the human on assets the you as commitments amended, we soon vendor policy, to real our deliver our New responsibility inaugural the federal From Finally, to Board we newly welcome execute today strong social Easterly Year disciplined off for well closing, quarter responsibility our will and what we on our expect remain can ESG call a fully serve. employees, acquisition portfolio a facility. acquiring to we here, three shareholders, with Directors website environmental code committed efforts, those and of conduct. and our sustainability, as review We which focused subsequent our most building meaningful communities In in and Springfield will of corporate start its ensuring the the of be in rights the and team to on USAO important leased strategy, portfolio. government’s the estate the end continue and

at upcoming to results. conferences and discuss renewals and With upcoming We development time quarterly the with thank future. look will you hand-in-hand tenant over long-term morning, strategic to turn person Meghan distant We it to investor also call and the that, so this financial seeing relates opportunities. on in meetings underlying for non-speculative continue you your work forward not as and agencies we’ll to GSA in I to the planning the

Meghan Baivier

Easterly. quarter It Good of to me strong another Bill. gives you, morning, at Thank great everyone. demonstrable growth pleasure post

of As quarter. income organization XXX% due quarters, financial of COVID-XX in our from as material, rental tenants the impact had received first prior Easterly a no negative the on

approximately development As to lease along the additional totaling estate owned strategy newer build-to-suit of properties, and and project prudently relatively with our of our operating XX, million comprised of real distinctive XXX,XXX with lease project within X.X X.X of we feet remaining missions. of feet. properties March high Through years. highly term commercial weighted average provides represents flow approximately sheet one renewals lengthening of in the the of accretive assets average grow years. remaining square remains square future visibility, average to us term support This design an acquisition to which is weighted a XX.X historic company’s portfolio remaining long-term existing young owning of have reflective of also Successful X.X our of age lease at our cash acquisition term allowed weighted facilities, during our that balance Maintaining in young pipeline. allows portfolio a us years. weighted development year-over-year new strategy age manage and This us turn average XX

quarterly Turning results. to our

fully per of share a on was on basis income share $X.XX. a the was $XX.X are on was of For was X.X% the per first our year-over-year FFO $X.XX, FFO rate up for share as fully cash adjusted a million. basis per diluted net given proud and we distribution a $X.XX basis global a quarter fully diluted pandemic. available particularly backdrop diluted nearly

the $X on available approximately quarter embeddedness Turning end, future billion credit balance line development our sheet. the of to and of At $XXX had expenses. total million company for related with acquisitions

XX, adjusted annual and was quarterly its net Easterly’s enterprise times. debt was X.X value XX% of March As EBITDA to to debt pro net forma ratio total

common to approximately As low to the shares through previously of forward mentioned In to raising the million of accretion company’s share equity approximately $XX.XX to forward ATM well-poised a leverage sources stock equity cost shares, basis future net program. proceeds ATM company on debt has weighted we opportunities. delivers attractive first at $XX its company with sales an the are average growth company’s access and of this quarter company of of price attractive the per issued Today, lean this of under million numerous meaningful level, XXXX, X.XX sold are unsettled approximately capital, the subject available cost into to of net shareholders. the million transaction which program, $X.X capital highly a

these Assuming company of sales $XX.XX forward approximately physically proceeds at in a million. initial net settled the $XX.X weighted are share price expects per net full receive to of average shares

range U.S. in may predicated to on million of FFO is fully to in proud in guidance to year-over-year provide $XX X% and our $XXX underlying XXXX. shareholders remains previously our of investment a X% growth is basis guidance a per acquisitions flows. growth company midpoint completing to percentage this related million its deliver per $X.XX development earnings Turning in upon share The issued cash The a guidance. we Easterly share through track diluted on FFO to maintaining or to XXXX government are $X.XX. a

long-term end upcoming had properties or we’ve future Finally, the of We as activity leases with we’ll regarding coming good the this about progress releasing the and previously Bill XXXX, are feet feel time. and mission GSA we report of inactive keep quarters. these XXX,XXX are meaningful XX quarter mentioned, apprised tendency And of renewals nearly and discussions continue at with a to we through successful square pleased making expirations. and the you all to of in expiring

With for you our the thank thesis and I call we commitment that, Shamali. always, partnerships. will back turn As to continued your to

Operator

Carroll your Thank Our with you. RBC [Operator Instructions] first proceed question is Please Capital Michael with question. from Markets.

Michael Carroll

can the of Yes, thanks. Meghan, quarter? build you in kind provide the completed quarters? few the first spread the a talk the and rent guess the cash can little next base what’s the on TI how streams bit about over and numbers outs you Bill I you the real color lease roll and that or renewals rent

Meghan Baivier

Good morning, Michael.

brought as section ICE included But down TIs Pittsburg we go. two Pittsburgh were those Treasury do we improvement are portfolio tenant in TI for approximately budgeted DEA the interesting because An average so, quarter. to completed referred There cross of Sterling. not So Bill of ICE renewal. $XX four DEA, X.X% leases them $XX and an there four the buildings the the Parkersburg expecting, like and and to Parkersburg, average renewals as rent had TI. are the expecting quarter. in they’re spread that mentioned, were again the have of Treasury with The you and no an average of allowances Bakersfield,

Michael Carroll

that’s TI to once I rent out the to complete that the us will base you, guess maybe talk next how quarters rents you to few over you how stream? and about rent build going can then into add and to those take the rolls those budgeted us And spaces, the explain that Great. long TIs?

Meghan Baivier

Sure.

Treasury said, Treasury have not any Parkersburg allowances. ICE as you Pittsburgh I ICE Pittsburgh do Parkersburg don’t So have and TI and

will the the sufficient leases, perfectly we quarter also this provide expectation Sterling, have and it’s that to in clear we in commencement be those January have don’t tenant of and should So Bakersfield in prior XXXX. one. And time of a day kick the asset third Bakersfield spreads improvement Sterling in a ball, but It to able new commence crystal of on that completed would would our XXXX year.

Michael Carroll

with great. to can does field guess having field FBI that offices? Okay, your deals Easterly that complete of what talk maybe full more about type And bit owns advantages incremental offices? little Bill, think within, to that I that? ability because you then today. you mean, you have, highlighted XX or I that a sign leases synergies I provide does The there’s

Bill Trimble

Good Michael. morning Yes.

does. it think I

at that who think we the point, the knows XX are. at certainly I now FBI we’re

we’re projects think there’s to another we’re we very government one pleased think of And we as beginning their see, do facilities. I with run building will buildings. number at the our is I we’ll how that one that what of do a then before, mentioned I at with expense

I have our because to as on they these they cost what good a renewals, understand think worth, I what that we also very develop. are out think it’s smooth handle would buildings

I only our think going and to that’s going newer so And to forward. benefit

think so look group forward pleased next that’s I’m own relationship scale this So, have think within as I’m a get we to know, very federal to I government. buildings looking the XX. the can with to to And best we of forward the the possibly agency, owning I terrific you more

Michael Carroll

that. then you little GSA pursuing bit guess that know Ibe’s remarks think prepared talk if I your question the the And qualifier you’ve with that highlighted last in on, put he’s don’t Mike a great. that on I pursuing. about Okay, can a deals you I build-to-suit?

there? expectation many or you this many multiple put announced year how out there several a how on GSA an build-to-suits are but even potentially or is So is

Bill Trimble

it the sort move What would to that needed imagine because can get government done of I’d a pace slow when glacial we the I during Michael, got really of you which luckily comes lot federal changed hasn’t laboratory we was this shut at FDA opportunities, before is COVID, to continue it say these everything but say a does to down. program

think starts FDA. expertise, the on to some going expensive the real a the in Those buildings there’s [ph] to very there. and are be next I off in winter, opportunities fall it think Mark we’ll and white have I Mike here. terrific we especially Whether delivering or

more I think some FEMA to see we’re going projects.

think I with administration. the popular very that’s a current agency

see a seeing purchasing And brand I not other we’ve as some developers overnight think you’re VA. plans. the And I you’re these new again, terrific standpoint, there. then opportunities from lot of a but on to really more buying going of executing VA been stays, think new of face the facilities, those

we’re see of well. lot think as I them a going So, from certainly to upside

get we all, out But world. COVID new of think bond announcing waiting still some all see But So think in I opportunities it forward to yes, the traveling the down little with of us into bit to a look isn’t will I they’re to them. think FFO but the I driver crossed, and slow for that They’re to fingers looking will growth going at strong a be around, our continue opportunities team. we’re future.

Michael Carroll

for Thanks great. time. your Okay,

Operator

is Point. Merrill Our Please your proceed from with Compass question next question. with Ross

Merrill Ross

that can you assets you’ve I’m – you’re if in I good Hi, underwritten morning. already described interested inventory. that the GSA wondering a you mean,

sellers people makes willing you kind years? Do the you six of willing had to previous depends XXXX your the see globally the the actionability more then that acquisition sell of on in sell. in to XXXX So of anything being pipeline pace fulsomeness sort of seen or or

Bill Trimble

and answer. I a Good Merrill. question think And that’s Morning the is absolutely great

of got a factors. think you’ve I number

rate. within rather happening be it’s make capital change XX-XX sooner change these buildings might as code see and will lot the be decision owned There individuals, of there of tax a that there that a might our secret to than I sort that I some you going lot are exchange the some think we’re of things later. in make think owners, gains first out no by of most know,

tax factor. important an offer also Obviously group are these that’s that can think we only unions there owners. I efficiency for really to out the So,

in else So there’s a advantage our big space. over anybody

they’re think built They’re in XXs. another or lot and rolling. owners XXs that come of of of a to take the is I taking a of And thing advantage and planning happening were advantage to the their lot that it or newer some is these state need I I’m and world renewed just facilities or from XXXX, or XXXX. fires to and whatever that’s put going been with be, restarting to think opportunities. out sort might They’ve literally, these equity be just hotels new or, going up maybe their

is So there this I think out putting a in everything to tailwind us market.

but we capital acquisitions. Meghan I – execute will knows are, it, quickly. cost attractive of think and make and I I think, go us the our very accretive to think into we who allows Everybody

relationships our out brokers strong very exceed to going year. And that there we see am possible. what the I’m $XXX very think I so very are to and gratified with excited this million I is see for since forward

Merrill Ross

you. Thank

Operator

BMO. [Operator Please Frank Lee with is Instructions] from question. your Our with question proceed next

Frank Lee

there’s range guidance on that, $X.XX this or Hi, be the could reported first everyone. that if so could aside ATM wondering I earnings else top $XXX that maybe target, guidance considering the about it. just that If or quarter from activity the prevented even this that should you what to get anything we year, quarter? in issuances a talking some above Thanks. end you acquisitions from more consider drag your far pace raising exceed you the we are annualize you of morning could million and you

Meghan Baivier

Obviously Good put the proud we strong out. morning, Frank. very quarter of

a COVID-XX as of the before. the we never at thought year, to remainder look work and we the think continue pandemic pipeline we’ve on from I

I the progresses. exceed we time our and year with project. approaching current that levels to just that the terms this getting look in that And at forward look higher our We so stay range. preference and of to board to as for the the opportunity It’s hopefully the approvals approach took it’s guidance to

Frank Lee

quarter in touch looks the then From XXXX, a to leases basis. term expired them. shorter on two, great. it were that on last were three like And were there Okay, three want of renewed just

what curious renew lease Just expectations your to happened basis? last with other a on two the and longer-term the

Meghan Baivier

Yes.

last those was One one DEA Birmingham. three, quarter, was So Vista. DEA

sort a where GSA, the You’ll called a just the into in position what’s get you’re if month-to-month to get of their holdover nearing situation note paperwork of while waiting they’ll queues. process can that renewal stay or they a end signed through oftentimes they’re

the And that’s, two. status pre-announce in are feet those don’t so And both the to yet renewals as we the we any unfortunately, of small in that to square be you, want our third stage, you know, believe a those get one the you won’t but very Buffalo before they X,XXX Delis future. that’s was happen, much in of able of asset

Frank Lee

detail, Okay. for the on completion any this? Yes. minor but additional back just slightly color FDA project, by your date Atlanta a And drove one one looks development up. on a is like me it’s there last end got then pushed Maybe costs just it what quarter were

Meghan Baivier

They’re design drawings. the final working out in the They’re requirements and phase. set of

so pushed it change And a little, it project. year a XX doesn’t

Darrell Crate

to figure can with a out they better happy more how We’re government to us building. the always money build let spend

So, patient. we were always

Frank Lee

timing still, then additional right? clarity lump on And the sum, no on Okay.

Meghan Baivier

the past payments we on successful strong receiving That’s the in there from correct. and yet. desire FDA progress be were believe correct. our still government, That’s Lenexa but no as do It’s in finalities we we’ll

Frank Lee

you. Thank Great. Okay.

Operator

the And now for will remarks. the Darrell of end question-and-answer Crate to the over reached closing I have call session. we And turn

Darrell Crate

you We enhance the we full Government and joining conference to assets build morning, Properties for and everyone developments U.S. backed the portfolio you on this quarter as of keeping of and Easterly your Thank the time strive appreciate posted we pristine credit to by Great. our faith look forward call. government. first XXXX our

Operator

And this your this today’s time. for disconnect Thank And your you participation. conference. may you concludes lines at

Easterly Government Properties (DEA) 4 May 212021 Q1 Earnings call transcript