Earnings call transcript Q4 2022

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

Operator

Greetings. Welcome to the Easterly Government Properties Fourth Quarter 2022 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question-and-answer session between the company’s research analysts and Easterly’s management team. [Operator Instructions] Please be advised that today's conference is being recorded.

to Winterhalter, conference Head like speaker to now Lindsay today, of would hand over the your I Investor Relations. ahead. go Please

Lindsay Winterhalter

Good morning.

call and XXXX. the are Private that note forward-looking statements, conference statements begins, Litigation meaning made considered are the of the that facts this include call Reform certain historical not Securities within during may Before statements please Act of

will are assurance its company as reflected expectations statements believes that forward-looking no give that expectations obtained reasonable the achieved. can Although, any it or be these in

Furthermore, may and XX-K forward-looking those and limitation, company's results be to its variety affected differ actual the described materially the without Form filings. SEC other risks in statements, by contained filed with from in the factors of in be beyond including those that the are and SEC company's will control, recent a most

publicly no statements. update The company to any assumes forward-looking obligation

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

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

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

Darrell Crate

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

office our company REITs. office performance of analysts differentiated of as our the One and business, going occupancy estate office is contrast office is many generally year profile. universe meaningful in the for with I'm change our to to compare from way real follow XXXX particular. portfolio our who our a of because

been was flexibility affected pandemic. seen, by from from we've has office born of adoption that work As the the materially home

functions For require collaboration. agency worker DEA, our mission-critical that facilities support

table. a dining met lab from close room your can't down You

forward look see our increasing. for also We facilities and need the

of grows, properties agency on benefit population the needs from our bullseye our the occupancy time. the As will tenant over population demand function increases, growth

affecting factor structure shift Another and of short-term office some is the in in term particular rates. interest the accelerating rates, REITs

we terming done our leases Meghan liabilities. has you out and know, job great a long-dated have As

have of rate us well this which We will Reserve indebtedness, a of amount monetary limited floating Federal serve through period tightening.

the quality unwavering. tenant our is credit Lastly, of

our the full of faith credit backed All government. federal are by United the of and leases States

office credit profile every We favorably that the in REIT tenant have a universe. with compares

be we're assets continues team interest lease to high-quality Our to are market working portfolio. the Since and engaged in complement the with our rates to find existing re-pricing. in market government our assets shift

real buyers and across and As is widened. the estate case the ask the the bid between sector, sellers

As is one would that as conversations our we narrowing. through anticipate learn spread,

available we with an buildings to shareholders. proud in are eventually built exceptional equilibrium, deploy market of the in positioned comprised to with to with reaches our way life a it quality. As a capital We're our that their well is portfolio that's long-dated credit early leases have accretive

strong visibility a our which for shareholders. bullseye come, quarters With many to income to our stable have among high-quality REITs cash positioned we're future uniquely to to properties flows provide

call that further insights into the give to portfolio. With to Bill over turn I'll our

Bill Trimble

young our Staying assets just is true acquiring XXX,XXX to JV XXXX feet thesis government another us with Thanks, Easterly acquired many the in of for visibility square In quarter of on markets, Easterly flows, fronts. headwinds XXX% year Darrell. Thank seven owned for capital enduring. wholly its leased through or and properties, the totaling strong you morning. newer space. joining buildings successful spite call. increasing either both over of Good cash of class was of our earnings for fourth XXXX

of subset annualized lease an facilities, of XXXX this Based construction year and of has delivery the weighted year lease a on XXXX. a generated these expiration buildings average averaged income of from

in cost but accretive active previously will are an maintaining capital. acquisition the only backdrop we market rising of and we we deals. indicated, Easterly of remain As do have presence the cautious changing because

the is market we remain the not moment, As there comfortable at waiting.

grow the and feel a And of REITs We government the tenant sake with distinguishes will portfolio us other flows from cash in not growth. the of way. for significant in-place strength of US the portfolio office we visibility our

percentages, earnings local activity Other downsizing. projected various centered that around industries rates, including subleasing building trends, several quarter this are office and market layoffs result real calls REIT's in themes work-from-home estate metal might in occupancy

of at homes. We these of clear, mission be paramount from accomplished work Easterly. our are facility and employees need be their the invest government's to for To the in concern not cannot federal the

Easterly reasons, those leased and fourth experienced in comprised disposition square quarter executed private with portfolio XXXX GSA leased feet, step portfolio took first its of buildings, approximately the of a real XXX,XXX XX The was For disposition enhanced an than notable sale estate. challenges This of overall and the in now of and which older those office made remaining was portfolio, that cited current age previously less Easterly. relevant average for NAV weighted remaining a the Easterly the turn even quality with portfolio. buyer

our development Another is project. arm of business, laboratory making Atlanta meaningful NAV-enhancing FDA our our progress aspect at

chillers and have this like TI We a obtaining important process the switchgear. procuring submissions that recently our begin work construction. point anticipate the delivered at XX% started have to and CD and We we'll for TI of summer permit materials government

to we a on We an building with the brand-new, updates as laboratory future providing XX-year that sits work initial space you the States non-cancelable with calls look forward government. FDA, towards meaningful mission-critical lease state-of-the-art, United on

updates. leasing to Turning

executed perform in year. Our renewals the asset on all management to XXXX major for and team continued

our success business tenant in the to And asset XXXX. this reimbursable Drug X.X% Rock in and over and in execute class FBI, DEA expiring Louisville represents ICE, important QX all projects. aspect Kansas leased City, Birmingham, EPA, Dallas, the team renewing annualized Assets square told Lab management top on FBI of the their lease assets another XXXX, within feet XXX,XXX company's included income of Little the in of this continues on approximately

As fulfill of mission tenant-funded a under include these XXXX that the buildings continue management fee. agencies. million enable at approved underlying improvements projects tenant peak these just important and keep project our a in the which from XX performance projects In to government-funded Easterly of total, facilities to earns reminder, were help

projects of include, Examples the EV at of approved FBI our USCG, our portfolio our new project jack and at in a mobile conversion visibility weighted of the JSC, fencing increase work VA gate perimeter the term pharmacy guard Lakewood. bay asset congratulate all such and project installation at past XXXX test to Martinsburg; construction as remaining replacement lease a installation flows. at at team Suffolk; and cash of year, extend on I they stations management this their success DOT charging Pittsburgh; average

an significant environmental, been Easterly. both owned formal ESG corporate efforts strides social for bullseye and In our setting important year establishment our wholly responsibility closing, and portfolio. We've goal the in the JV through We've of in assets inaugural our environmental quality this added sustainability overall made of increasing has report. through the and and publication

providing with the a We've largest company executed and simultaneously government on of renewed which XX.X sheet and years, the certainty these value the and portfolio cash expirations company's reflecting lease balance increased of first portfolio our duration and average the in sees duration facilities weighted for company's flow. strengthened XXXX disposition, profile the

transaction a are challenges cost rising underlying fundamentals but slow business Easterly. the There in are strong. The with future short and term looks undoubtedly the a of capital the market, of at bright

between clear solid. Darrell's and distinction smartest our is analysts if NOI office. an world the investors as the And Our REIT recognize us our office us echo sentiment sees then unthankful and

the turn and With and that, over to year-end you Meghan the for I your thank I'll discuss this results. call time to financial morning quarterly

Meghan Baivier

you, everyone. Thank Bill. morning, Good

early growth the into for of focus. actions balance strength settles As the rate a opportunities our muted, come. sheet greater market exposure environment leverage into and reduce capital happy remain interest enhance I'm the we've position share taken in XXXX our ourselves to and rate comes recycle XXXX profile new over to floating to for our the opportunities and external

joint million average XX venture years of of approximately we wholly As weighted of properties owned XXXX, our weighted a operating with square and feet, comprising term age lease remaining year-end or XX.X either own X.X average through a lease XX.X years.

quarter a adjusted share share was basis, as and per share fourth $X.XX, per all FFO fully FFO diluted $X.XX on $X.XX. per the was was income net For

for distribution million. cash was available $XX.X Our

per the income $X.XX, year $X.XX, and basis share For December was per ended was share diluted share XX, XXXX net was on $X.XX. a all adjusted as fully per FFO FFO

Our cash was available $XXX.X million. for distribution

were which to EBITDA sale debt capacity to properties had representing At net approximately X.X forma portfolio, ratio over of line pay times, pro $X.X proceeds the net obligations. million completed disposition in fourth XX year-end, with quarter, down annualized outstanding a debt the In the indebtedness credit. we of on quarterly company total our from $XXX of the the billion, of used

also MEPCOM, Jacksonville. all debt above extinguished by rate acquisitions floating of expenses at and a we non-bullseye X.X% with This reduced obligations to the XX.X% the result development-related a for company's exposure As from added sale of and a mortgage the future outstanding average capacity company's rate transaction, weighted well recycling assets.

our our took we the from swaps strategy forward that floating that important XXXX exposure shareholders. With of and step our XXXX funds opportunistically to term recognizes being interest our works to debt predictability fix end, term million including our enter capital anticipated mind, of we of into quarter elected XXXX interest on that cost REIT Easterly in in the in uncertain another rate proactively to Subsequent rate additional environment. our draw million rates delivers delayed and universal rate to of manage an starting $XX stack loan. $XXX the against interest loan, to

we each On XXXX, notional forward with February million superbase $XXX three X, value. a swaps entered starting into

fixed of duration tranche rate X.XX%. has an date with The a and effective an XXXX XX, XX-month of June first

has of with June XX, fixed XX tranche duration a of second X.XX%. XXXX and The the months effective an rate date

The duration September effective XXXX fixed tranche of XX, a and an a rate of X.X%. with date third has XX-month

debt an have we by interest stack visibility rate degree our our swaps, these executing to even of exposure managing into movements. greater infused By

entered months. swaps to the XXXX XX its and of company effectively rate a loan less As the maturity maturity scheduled months more into over the extended weighted XXXX of interest average maturity from term weighted rate a company's of X, fixed six XX swaps result of a average February of the months on the than rate certainty than by interest extending

access and strength Another liquidity to underlying capital. its is important reflecting metric Easterly's

the opportunity over in under As be markets. million on has previously accretive there ample With unsettled capital may and to capacity mentioned, $XXX believe potential without to distress Easterly forward debt needing to execute million the equity, help go in to we $XX just developers. deals

re-leasing guidance, year-end. of finally, before our And to allow turning a spend our me moment to as successes earnings highlighting

government the final nature tenant known leases, by As improvement, until rents mentioned, TI at cannot amount is TI and as exact of complete. previously be renewal of renewal due work the the ascertained our dollars or to unique the required

such, can renewal a there signed re-leasing the lag providing we lease. point As be to a at in which have relative data

Fresnel, XXXX, term Fresnel. renewal for As This Arlington PTO we leases XX these and renewals the XX, had When the utilized square the work and average XX was rent of approximately spread $XX achieved executed years. average government. complete including TI by exclude which by for was the XX X% of the renewal and TI IRS renewals, XX Arlington XX PTO renewal accepted government. per The includes we was on foot December remaining IRS total

rent has worldwide can it has commenced that the realize an not and renewed, renewed group but which XX accepted for our single-tenant the total square XX properties expect currently This has average an yet TI we of XX I for spread of approximately lease have not lease with XXX,XXX average that each new but government commenced, and assets also of terms for between or renewal the by across of years. XX.X totaled have yet share been which years XX%. to properties feet,

this ongoing guidance NAREIT of applicable measure exclusions losses operating performance, we and on costs, Beginning FFO a which alternative including earnings as of Examples Core results. depreciation transitioning to non-real will debt, basis, of a are go-forward not core and an believe of company's defined on our year items, when I will such which our with guidance the FFO by event include present charges to related metric. liability catastrophic management representative we Finally, conclude estate be excludes extinguishment assets. for of FFO XXXX. adjusted

guidance pro on a within basis, diluted its gross - a a was up The share related the the rata share million investment year VA per FFO property the million range closing XXXX $X.XX. share share is XXXX. $X.XX. and a to during in for This $X.XX and per FFO assumes fiscal year development company FFO Christi, Portfolio XXXX of at of on was its $X.XX core $XX introducing full per company's guidance fully basis company's diluted the of $XX of to For fully VA Corpus core approximately

the forward to capital incorporates time, at XX-property yet does guidance this stabilizes. our the assume At rates for the our not but acquisitions the We look wholly-owned portfolio any disposition dilution redeploying cap from higher that recycled when year. of market

We we market. in opportunities this begin informed will if be to to everyone see transact sure keep strengthening to

With that, you to our I your turn we back call to commitment thank your will appreciate thesis for now Shannon. and partnership. the

Operator

Michael Instructions] proceed Our with Griffin [Operator you. Please from with your Thank Citi. question first is question.

Michael Griffin

of could other curious Meghan, the I moving Thanks. guidance. starting maybe maybe back some some if you was Great. around on pieces. XXXX give color

delta expense around interest for XXXX? and the I color G&A the give XXXX maybe full that expectation operating kind kind sort you any, of, for can bridge of think between year of the about expense year,

Meghan Baivier

removing annualized commodities inflationary at our that about the Good obviously, for everyone remind available expectations of and approximately to million that guidance environment is coming seven disposition low the with of rate a year. -- we of And When NOI were the residual X.X% getting we repayment basis that in the our was the last was in range of $XX an What interest think is from debt year. cost. Michael. annualized our and last on rate XXXX contributed available I then the cap disposition that people both bridge would running morning, on that

Michael Griffin

transaction pretty XXXX. you been And on of seem commentary that trade, maybe mean, out then seeing that expectations, recently. you're there wheelhouse Great. in VA just least the any just muted at around wondering it the clarity a expectations seller recall I'm would any buyer for could in pretty give you I or outset if expectations, market. trading asset have helpful? to be But seems I Okay. of, might your sort assets Bill

Bill Trimble

assets trade. No forward absolutely. were On looking not two assets to mention you any there seeing assets our VA that of I'm bullseye I that within it's next to have week. Good to morning, Michael. did note And think really those trade. important there been

you compliant, VA the them new requirement -- may of think facilities One being tax is not VA all in a discussed our as portfolio I compliant, are are ones know our of especially and PAC which all forward. we've of the going

lease see know it. you turns least in as not we And at couple building left we're of if to that don't another going buy

be So that property our would not qualify just on underwriting portfolio. a loan within to

So a that's why and came as we did pair. they

participate. So that's why did we not

Michael Griffin

And cap Bill, don't to to know have I get to acquisitive where say? get accretive so you more would to or rates in

Bill Trimble

in in the earlier great a we're And a Well, earlier between I think spent I We've the obviously of and it's sector the the meeting interesting. lot all with seeing the sellers think, We call had top brokers time. mentioned buyers. Darrell movement this of as year. in

going gotten to seven yet, participating the assured in everything, see to traveling there And in And be execute. to We're we quite is can going see. we We're you to I'm around. we high-Xs I probably us will. sure rest we think you're that haven't are think see owners. anything the I all visiting talking but where you're

But something. luxury to we'll and As you have owners that within now. it's a be able the of right mentioned, confident as do recall, actually space slow the are little knowing our we all you

Michael Griffin

That’s right. for All the it Thanks time. me. from

Operator

the Instructions] of Peter comes next [Operator Abramowitz question you. Jefferies. with Thank Our from line

line now open. Your is

Peter Abramowitz

much. thank Yes, you, very

you acquisition to guidance. wanted ask this noticed year. about Christi will closed Just Corpus that it that said, one be I the I

later missed or is Jacksonville on? well, Have I yet as this. you Sorry, assumed closed that if

Meghan Baivier

not on have be Jacksonville. later assumed at point. No, That we this is to closed

Peter Abramowitz

Okay.

guide, 'XX. is So that open starting I'm Got then pretty I sense comments beyond but acquisition also it. it on won't trying be to guess, think assumes But Christi. up. here, the market And Corpus that get a I were none back in just Darrell's positive to the

waiting get to and a is is to more -- things open of you would for that say on trying guide just how side of the are up? just kind So, you the conservative sense just

Bill Trimble

Yes. I'd Properties lot probably not say conservative of I that, a Easterly surprise, in think are synonymous in a it's Government ways.

thing And is up. so we to do get last everybody need the revved

deliver. I over to think, always we've tried

be not rest open when So that if be market you driving can it. assured up, does the participating we will

So -- velocity but think I right marginal Darrell It direction, now. can in tell moving that is the you, I very right is the correct. is but

Peter Abramowitz

me. from all That’s it. Got Thank you.

Operator

conference now Darrell of turn remarks. I to Crate, closing Chairman back like the Easterly to Properties would Government you. for Thank

Darrell Crate

to and Fourth our call team again this like We for Properties speaking hope to Great. Board, their shareholders during you joining our support we I'd Government Easterly Call. our for everyone forward Thank vendors, look XXXX thank the helpful you Easterly and and Conference dedication Quarter all the with has particularly been year. our soon.

Operator

conference today's concludes call. This participating. Thank you for

disconnect. You now may

Easterly Government Properties (DEA) 28 Feb 232022 Q4 Earnings call transcript