DEA - Earnings call transcript Q2 2021 | Easterly Government Properties, Inc.

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Operator

Greetings and welcome to Easterly Government Properties' Second Quarter 2021 Earnings Conference Call. [Operator Instructions]. It is now -- I would now like to turn the conference over to your host; Lindsay Winterhalter, Vice President Investor Relations.

Lindsay Winterhalter

Good morning.

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

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

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

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

Darrell Crate

and Good Lindsay, in quarter the everyone joined country Company's us Quarter also was the Meghan joining for Trimble, by; Second Properties. to Easterly opening and see Today expected our CFO addition very up we for as and Conference Company's Bill It identifying COO. Thank and been thank a strong morning I'm Call. for We have Baivier, pent-up for CEO; you, Lindsay. you opportunity business. the the some Government

COVID growth, all This materially strong XX acquisition very as agencies. than from have of have the diversification important as by leads believe an we well tenant a pipeline it XX to properties opportunities us entered will emerged we measured age be actionable that FFO exceeds to year. pre-pandemic and that stronger duration, We Today portfolio end lease scale, as levels. across

is We age of have our leases States excellent. United the years of into buildings and billion embedded over leased a of diverse is cash of This leases government. X.X portfolio quality is Government. our is our Federal portfolio in The space facilities of United to this average The XX.X States mission-critical our duration the credit the in the years. by of average and faith backed translates full that $X.X

of and role young drives XX%. conservatively of agencies and billion Again total the to to by backed one faith $X government. billion. States This lease of buildings United assuming Given full credit of our XX% age $X mission the enduring that up the the our over each XX-year modest

of for you is this anticipate Easterly a chapter As we this last Properties. increased Government beginning saw quarter, that dividend. We our the new

matured. has business Our

over roughly X%. XXX distributable stock will basis of yield are dividend term. spread positioned We're second in increase. the the Bill We believe for of trades with a FFO the excited average that you the stock anticipated meaningfully matched how prospects weighted grow the the over flow. our yield see the represents it a where and our lease growth flow we're Today quarter half view in growth. cash-generating of above given second our this We've for year, our to cash cash points the We results entering treasury of that's this period a we see give we outpace turn either our opportunities can This his capacity I'll future. to portfolio. or of With price and market will to

Bill Trimble

asset, perfect NWS observation and in type Kansas our December Kansas National headquarters facility bullseye located example The serves on Missouri. of as highly us a service advanced not as is This a central radar properties X-year the facility facility tower, Service of The a region earnings radar some in morning. facility fixed the Service to square like XXXXX of country. good - build-to-suit field National City, the renewal expanding with team for introduce for XXX% a and This system. equipment, and central features the Thank the specialized of for Darrell call. option computer the the six second Weather throughout leased continues you National XXXX. Weather until regional acquisitions forecasting acquisition of and XX-year behalf for headquarters, quarter Thanks foot The the one into quarter with serves of houses portfolio. the we'd our offices Service, second term most mission-critical of joining of advanced if the weather region add strategically to does secure which including located technology exercised expire automated Weather rate doppler satellite acquisition City

goals Mission and Administration, their building accomplish objectives of agency, real whose second houses example a facility. of agency cannot a estate SSA be without government quarter, to is Social it. the the one of disposed is This mission the tenant support This the we an can that Bullseye the performed Here this outside Viejo. In of - day the employees of Security property. definition

size source future Mission a of relatively thought its use Given acquisitions. its for regarding small long-term belief as to SSA we Viejo funds best mission, our and it - Bullseye

subsequent has Easterly end, XX,XXX is This serves substantially portion within It was a acquired to again A renovated government. Level for Ohio. and foot facility located the Department in key facility, facility. the a parking, the summarize, XXXX supply and Finally, and leased Specialized Cleveland, With US such fulfills X generator six Security improvements and missions terrorist a in Easterly name tenant property organizations roughly an June in to few. security agencies secured A quarter several Homeland security square a significant the entry Class To and uninterrupted investigating, sally features for properties of lease power as combined of system important criminal average acquired XXXX of a has networks. weighted a largely also of year-to-date, total $XXX to as port, Cleveland's XXXX, in backup -- forecast Weather include National expiration potential office. US Service Government the invested a million. battery

$XXX basis Given guidance of our acquisitions million with and clarity per XX% diluted for year, million. from acquisition pace increasing XXXX the increased our by a the our fully volume to $XXX target FFO on we conjunction of share in pipeline, our

our $XXX XX% and company's confident guidance is we ability acquisition the As emphatic of of enhanced executed team on feel of have the in we for short, year. million today, the In to million acquisitions acquisition related extremely see pipeline, note, On meet market. team possibly the VA to particularly this or in robust $XXX continues even volume. an exceed acquisition a significantly in the

actively new and incredibly superior predominantly already care facilities opportunities lease in women, mission terms, state-of-the-art outpatient outpatient designed, VA servicemen being delivered. to our these medical of portfolio, coupled and XX-year fulfillment makes With to of missions, are growing the The and facilities ones portfolio. our compelling for their constructed providing important our long-term facilities similar the features with in

development. Turning to

foot the We continue with to quarter which GSA FDA expect and the the to at laboratory in Atlanta, we progress deliver third FDA Georgia, of XXXX. square in make the XXX,XXX

Given of ensure partners with the state-of-the-art nature harmoniously to our so a facility. appreciate the laboratories, highly technical we work these opportunity federal sophisticated deliver we to mission-critical

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

to updates. leasing Turning

we I'll XXXX. to Meghan, growth The you quarterly DEA assets term time that the assets thank markets its weighted with XX a year Bullseye average for decades. will a first lease important combined square the that, XX.X will morning, believe work feet chartered XXXX X.X% in and of your secure the - shareholders. partnering course renewed on term returns future organic continues renewal results of of stage In call the financial team the March totaling the Our capital successful now set the opportunities. - for with and execute into to asset for the a Government executions. pipeline Pittsburgh all strong to or closing, years effect five the go lease ICE Easterly to half XXXX. until and lease DEA in renewed firm from tenancy With first outsized I the for we the Easterly quarter, and delivering management for the income for over turn growth Marlboro show has second Bakersfield Sterling not together renewals with US has Bullseye - Upper to our this from coupled to This prowess at annualized Treasury lease risk-adjusted at XXX,XXX of in over and acquisition Parkersburg - discuss renewals In DEA quarter. expire

Meghan Baivier

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

years. us of have When X.X of the our in company's lengthened This feet last turn real this also Through facilities, allowed comprised flows Successful age the while estate project young XXX,XXX manage we accretive of lease high owned XX highly acquiring historic term square square our additional average As approximately to have cash also XX, the assets maintain age acquisition the properties in us pipeline. portfolio our newer its remains and average the keep which X.X of we project at the to commercial average totaling clarity compared time of to and term, feet. sheet of renewals combination acquisition with weighted support balance relatively remaining of of prudently million year, approximately provides to development June at one years. operating weighted newer portfolio design, development future long-term remaining existing young. at properties lease XX.X allows

Turning to results. our quarterly

FFO was line development $XXX distribution for future credit million and The balance available of indebtedness expenses. share of acquisitions share For the was on $X.XX, our a on diluted diluted basis second was a adjusted share per fully as fully basis per FFO reflects was a million. quarter billion our total income basis $XX.X $X for diluted approximately sheet net company's and available end cash the on quarter, with $X.XX $X.XX, per at fully on related

June of Easterly's net its pro As total adjusted ratio remained at XX.X% and value to debt debt was XXth, EBITDA annualized net X.X to quarterly enterprise forma times.

sold leverage call equity with on available Since level, have of attractive As access our previously equity future cost events. mentioned two well-poised are last capital, to into debt notable to debt opportunities. a forward low on lean basis sources of capital and this an growth numerous executed we we markets

First maturity million in $XXX interest to note of of entered X.XX%. the a a a of rate senior years with up rate agreement average quarter, into weighted company tranches in and weighted second purchase will two notes. average be fixed principal The the issued notes amount X.X unsecured to issue

is up will the nine five revolver second company of basis of subject is is date to years allows a feature up the The will $XXX $XXX The notes million closing of draw option to the $XXX has to capacity years notes entire company's up closing seven up of be expected spread conditions. XXXX four the to days to with notes with year the a in notes first up second this $XXX year a The of With term July million. coupon company without million. The of under of from The basis investor from XXXX. XXX October July X.XX%. to will with and customary initially the a accordion issued XXX increase lender $XX of coupon bear of XXXX the for amount $XXX to million basis community well-received of subscription of maturity July term points total option The at the revolver investor the third XXX loan. loan interest million the tranche on penalty post to XX, the are the Borrowings million the company's tranche existing of LIBOR additional a significant a for date delayed plus XXX LIBOR principal the helps X.XX% credit to with The interest facility strong relationships company depending facility million bear revolving consists at will request and credit ratio. rate term the mature senior our XXXX. fortify loan revolver credit to million amended pre-payable available market a mature senior upsized leverage facility a points leverage of private to term of quarter an XXX plus and and on senior term a to new entry a for million in on that restated The depending facility closing unsecured a loan the commitments and the rate amended extend ratio. a includes unsecured to closing. on of was spread $XXX to The debt into unsecured placement Subsequent be $XXX which will $XX by credit end, loan lenders. its the facility.

Given It the note, sustainability-linked to the if pricing the our current and points to sustainability. targets performance the basis to amended is ratio, features evaluation. this pricing we whereby, credit for XXX sustainability Easterly certain the continue also points is set one XXX commitment spread leverage as LIBOR component, facility determined company's discounted independent spread an strive improve loan. basis Of meets term revolver as by initial the to a for basis by earn our point corporate pleasure can third-party at

was for from average notes X.XX%. interest XX the and weighted to company's private line credit X.X the of of on maturity execution facility, the rate years whereby, the June and X.X the placement the of forma repaid, As company's weighted of amended of issuance outstanding balances was meaningfully are company's existing XXXX, pro and revolving closing credit extended average its the debt

issue ATM shares quarterly of common activities second of the any through ATM company our XXXX, not the to company's the stock Turning quarter in did program.

has are unsettled company's the of the company approximately four transactions which forward As million shares, under program. call, this sales subject to ATM

company average million. Assuming full equity price of $XXX million funding. receive the weighted initial markets prepared share, forward are through the in net approximately proceeds settled implemented our preferred program, these physically of Further, shares net to newly company a well with expects equity just-in-time sales $XX.XX per to at utilize the ATM the remains of method $XX.X

Turning to our guidance. earnings

FFO diluted million the increased increased in on $X.XX. its share investment is XXth, underlying our Easterly to our its million be to are shareholders this total to on on continue actionable of proud acquisition steady June and in range to be of which in pipeline, the share, guidance we with $XX of XXXX basis attractive of of track to growth through At flows. dividend for midpoint dividend would when in of returns per a price per stock acquisitions run in to ended deliver to guidance development year-over-year yield our Government to track generates quarter US part related Reflective $X.XXX predicated continue $X.XX its upon position gross record Based our the XXXX. rate quarter-end During a company completing FFO $XXX increased up midpoint, a cash coupled a fully X%.

previously Bill as made mentioned, pipeline of through in we our working upcoming progress lease Finally expirations.

successful of through square and we leases now Upper the the up XXX,XXX feet nine XXXX. Marlboro renewal execution With have at end DEA, for approximately

coming on XXXX half continue quarters. apprised it and and And strong discussions future the feel for front, GSA all financial a We to keep of mission are the at been with regarding conclusion, long-term this these time. properties progress expirations. meaningful in of every make the you about Easterly. tendency to of continue We in we'll upcoming and first renewals active has operational good In

commitment for thesis year. we I seeing the of thank Joe. this back you partnership. always, back continued call in look We person, to in forward As to our and With your each turn the will you, that, to of half

Operator

Thank you.

Korchman question from is be We now Instructions] with session. [Operator proceed. Our Please conducting first Citigroup. Manny will a question-and-answer

Unidentified Analyst

Hey. for is time. Manny. actually Thanks for Good taking morning the on This everyone. [Indiscernible]

any of or touch that over competition acquisition months so? for acquiring here on Just you're those could at market, on, some of additional XX pricing, or, seeing you're if impact was wondering the the if looking guys in assets I terms next you just

Bill Trimble

Hi. Good It's morning. Hi. Bill.

that, opportunities, seeing think seen we're I story pipeline. that we've of the all before more first ever is the acquisition than in

standpoint I We that, competition some pricing, a of space. a came strong low-Xs from will the in equity be of private we recent But think we're seeing think I market. competitors think new I the average. right, where you if standpoint, they'd most from we have in any in we're look players on do on sort our the four out acquisitions say where the would not

of I better think cost we capital. have a

something, past still when I the and little need as just cap accretively towards and worth, cap we mission-critical buildings understand So XX-year range, from we more are that new looking we of be $X further seem I no below we're will want competition. those able new brand to billion what to think do. seen what a buy rates you've because those get to but on be the standpoint going though, say are in that some properties to people to more new leases brand

Unidentified Analyst

of this of to altogether? anticipate next way try of just you. you understand one gave over sale facility some strategic of a this portfolio the sort I XX in And Got SSA we sales months then, guys capital. that in just as like But comments the other reposition should quarter sale it. your to some recycle Thank terms look in it's sort and opening your And you remarks.

Bill Trimble

Yeah.

portfolio this was are mission few and of were our for have just government along. do XX be the middle with would are that one to are time is, a not of portfolio acquisition important I there the there in right a very few that the that right move pleased conducting that agencies we it of very We think them real answer young bull's-eye. we so properties felt the buildings

So of think I strategy. our an would as part dispositions our never overall important of really

now Let's But right talk think about can in buildings years. own best own. I XX that possibly we we the

portfolio. a we But think to And fund or steady something in they of don't things don't so fit when think, of along, see a within maybe better. you're drumbeat this very going for we young I move will either sales source

Unidentified Analyst

Thanks Okay. it. I Bill. appreciate

Bill Trimble

Yeah.

Operator

The [Operator RBC next Thank Instructions] Carroll you. is proceed. Markets. with Please Michael Capital question from

Michael Carroll

type agencies with in the if to DAC's portfolio the Thanks. and opportunities you Weather Bill, the any that's not portfolio? like highlight currently are of can the agencies you'd most there National to Yeah. Service the to add expand today, like new

Bill Trimble

on Good going of, see are I mentioned and opportunities that new with there all most I see program to facilities years. in Yeah. in federal with laboratories is And these Yeah. I Michael. the government the VA that coming space. real other out them. FDA within in brand we're brand think, clinics are more of new the are mean, the the you ones available the going building the today, morning, the think going you're to the outpatient I've and major building only And

footballs, for I be get child those that I ones care either so the we new agencies are wonderful poster the not that we about than Democrat Other that, going not opportunities in of always our party. or think the to it's imagine, Republican that the political most space. that And share with fair

facility facility enforcement you've National in popular important I from expect – it's can – anything So be in of been airplane, most mean might City. your that you've up we these will country. particular agencies in Kansas of an I getting with like getting Services. one always within I Mission-critical just think the picked facilities amazing Weather weather it us. law kind an been well and been any the this facilities be your Basically, if in you've aircraft you

forward. enforcement a no But it. of to we're omission FBI, if think go it see usual to you'll the going law take DEA the suspects going like this, see hierarchy agency, got a build expect of to ahead I can you advantage So lot the you've and with what usual, matter

Michael Carroll

able what Weather of are Service? acquire fits are there out then and National growth there to of the I And with buildings and opportunity the target how many you is that kind out your those? mean, some bullseye

Bill Trimble

the you facility traffic City think the rest this not a scale That air be United handling all States. saw is of that new and Kansas facility. and I are one the There weather six would for it. are the just of

facilities. The others are smaller

us. So, probably not as to much interest of

Michael Carroll

Great. the And to DEA can the to about and sustainability-linked those briefly achieve you company Okay. doing Meghan those reduce talk today spreads targets targets? needs hit what related to what's to facility, then

Meghan Baivier

Sure.

XX% numerous score So efficiency points rather throughout a able that that. quality we out in of are to that's and to basis our the incentive we basis environmental the box, that one we able improvement energy are and – great linking portfolio think point obtain are one projects achieve to score with be and ISS on working with a to

Michael Carroll

you. Okay. Great. Thank

Operator

and are more you. Ladies no gentlemen, there questions. Thank

So Crate closing I over remarks. would to for the back like to call turn Darrell

Darrell Crate

Easterly the quarter continue and hard joining for appreciate everyone our time, for you to your for risk-adjusted returns Thank come. conference strong to years XXXX We call. work deliver Government Properties' we'll shareholders Great. to second

Operator

ends conference. This today's

You your have may great for day. very time. you your this a participation, at Thank and disconnect lines much

Easterly Government Properties (DEA) 3 Aug 212021 Q2 Earnings call transcript