Earnings call transcript Q1 2023

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Operator

Greetings. Welcome to the Easterly Government Properties First Quarter 2023 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session between the company's research analysts and Easterly's management team. [Operator Instructions]. today's being that advised be conference recorded. is Please

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

Lindsay Winterhalter

morning. Good

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

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

actual in SEC described the publicly be beyond may statements, obligation filings. company's XX-K Form the other forward-looking and Furthermore, the affected results no to the will update are contained differ that company's materially most and recent control, risks those and in with of its factors in The filed from including by without any SEC assumes variety a company those forward-looking limitation, statements.

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

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

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

Darrell Crate

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

by the uncertainties is real estate future. surrounding under times work in pressure The market. These of the office are patterns sector the plagued transformative

with largest shareholders. agencies value Easterly concentrate differentiates our how for protect and on risks has pleased we're mission the Our decision the to positioned and office to create sector, facing from us critical

creation. shares for same are We a long-term capital have that with value built grateful partnership partner the to also vision a

The dynamic well-positioned is to grow. forward we and are becoming clear

our are new Atlanta projects. forward opportunities as pipeline of at as well development our potential Our moving FDA project,

there experience also for as that projects that over-levered sheet. liquidity distress see the We XX may over development months, dries balance up developers coming be with some

strategy end XXXX, of study value today the include domestic, when other Veterans recently our true goal shareholders on and through Affairs it's recall to We new while bullseye critical delivered then, period. stability. kept outpatient acquisition to foreign in asset was remaining and team expanded Lastly, opportunities of to our Department welcomed this government class the facilities. Since and we've a important close of both another at the Easterly delivering is mission eye

used seller to have our time facilities same identify that attributes and portfolio. and share readjust characteristics expectations of We the current our while underwrite important

to to universe investors But believe us. more expect there's and come bullseye with to And the our we discipline at have over come the trajectory Easterly but shareholders long-term. will the you for look is the about create happen posted. medium we growth forward Our grow from as the does, with better. and being government ever seeking overnight value for to deliberate will not we This nothing are changing keeping our

many properties, to proud future long-dated have quality turn which we're with credit flows in leases comprised quarters life income provides with closing, in early to come, In shareholder their With dividends. quality. build strong visibility that of high that to a portfolio our buildings to bullseye exceptional uniquely to is cash through we're for positioned

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

Bill Trimble

Thank Darrell, joining good Thanks, our quarter first for and you earnings us for morning. call.

signs who brand narrow, poised and In struggling trajectory developers United cooling, Emergency Easterly awarded is projects. our government liquidity immediate-term, to to in recently XX-year we leased Easterly mission rates, development developers the and superior not exit Federal from quarters, government. spreads ready. regional take States the for are to current stands In to for begin Easterly This portfolio. their These observed seeing Easterly for a new restart be its will XXX,XXX move forward an continues growth a as accretively on construction is lease. find raise delivered many energy some these great we approximately the use sheet California, We've Management us. show Fed federal to we grow critical brand to Agency continues bid/ask more of to star Looking inflation hand over the acquiring several as and that by be government to the believe themselves signs warehouse given may our prepared opportunities assets market we is are new were a for foot backdrop. whereby the an may Years ago, balance square the to with our moments, macroeconomic project unprecedented pleased Tracy, looking

are participating meet criteria. but indicated, previously presence market, acquisitions of volume. currently we remain our in transaction accretive to note market in properties have in acquisition the we decline the from bullseye said, we a committed suffers an active we maintaining strict That As that

to last last market me a fallout Valley bank durability. Further, quarter, Silicon The Bank Bank, this both listeners call challenges. quarter's focus Signature heard on as office has doubt market's faced of another the struggle of time casting yet sector office and since with

I'd a to reason, from office spend For typical some more time that Easterly business. like contrasting

building percentages, and challenged office including work-from-home occupancy downsizing. real several reiterate, might layoffs To activity, sub-leasing result estate rates, projected in is sector various industries that market headwinds, by rental local in the trends,

concerns important. None really us at And this Easterly. this of is

away year. outpatient high our focus pandemic, of and we not business, day. at government the year after of on laboratories, our only is clinics, we only courthouses, future facilities layoffs In have and continues in fact, office risk to The warehouses VA throughout occupied occupancy grows seen larger specialty aspect level the our and this of if fact heavily strip which

we we can average single that find healthy you you a XX% with renewal if to of term of spread at years. over expect look average have renewals XX today, finally, from rent And will tenant an XXXX office the completed

the are situation office Easterly's We metrics Easterly start COVID-XX compared renewals is office the the from today. This solely these very our believe speak to market. volumes, as office repeat, and these strategy To broader mission to renewal different assets. the a of of criticality

two income, only from addition, only this bucket worth on lease our Center office acquisition. annualized of of offices income. VA comes XX% In office or also Department noting when on. close it's of And or offices income in offices, this Portfolio office that field annualized the Defense seven announced we It number could shrink assets Easterly's previously FBI the assets. and X% properties in annualized regional include XX weather XX% VA our DEA remaining Suffolk, ICE I Joint specialized field assets, Command in lease go a of includes of Staff Examples facility, lease office will a

owning we While office recognize for may no aversion our internal because this index specific Easterly important has screeners bullseye be highly of statistic investment to mission an stock. criteria, of our

on consider We are mission, REIT, a categorized are office in unique one you several of office category we indices infrastructure. our government focused as but and portfolio an when

Year to off Finally, our Tennessee, the a Jackson, new management our started Meghan, brand for before the asset courthouse at call New renewal a strong in lease XX-year turning and executed team term.

you renewal forward to for great the several on up I near-term, updated look in and keeping progress. have We our assets

between we with horizon distinction hope opportunities well-petitioned these today is In the the of right listeners appreciate our moment our brethren. on closing, take the prospects we there Easterly solid NOI advantage are office and our us supporting believe when to is a platform, and

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

Meghan Baivier

Thank you, Good Bill. morning, everyone.

opportunities remains XXXX, enhance the took balance in strategic we market incremental absorb to In steps our in As sheet balance by strong. interest sheet the turn capital, strongly to come. continues to us rates, positions recycling several which increases for Easterly

additional efforts XXXX have into I'm the draw pleased quarter million rates Easterly starting opportunistically exposure XXXX from of including interest forward entering swaps our million $XX fix interest whereby debt report and delayed of rate to XXXX, in proactively its first $XXX significantly rate term to XXXX reduced loans, and funds the by the term on floating anticipated loan. of continued these our

each by months from time weighted we Further, executing more its average average swaps, vulnerability. at into is It Specifically when and our a uncertainty, at on to belief maturity weighted a potential months is exposure carries than maturity that months entered XX of duty a February this it maturity SOFR-based notional to with a value. six to interest XX the time of less shareholders million three $XXX our swaps starting our of company forward swaps extended over the risk floating rate X, of our rate debt minimize execution. to than these by the

operating to X.X Turning venture feet quarter age lease weighted years owned ended lease and million with portfolio, of joint of remaining properties average XX, approximately term our for average our we wholly-owned XX.X XX.X comprising either March square weighted a the a or years. through XX

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

available credit over attractive $XX line of levels. million. and end, under EBITDA X.X% on fixed annualized of weighted in billion with rate million indebtedness for at $X.X of This average ratio available cash represents to Our XXXX a additional capacity $XXX approximately interest term debt company debt At distribution at with was our outstanding of X.Xx of a million all quarter XX% loan. net $XX.X the total quarterly our an had

shares Easterly underwritten quarter, common million through the XXXX of the approximately offering. shares XXX,XXX common aggregate stock, common approximately ATM issued August shares million first and of X.X of of program an X.X stock comprised company's stock the through company's the During the public of company's

approximately component the were of offering, net With million. proceeds of shares of X.X weighted $XX.X at common the stock of a $XX.XX, settled highly the the combined use raising to ATM and our attractive both the million on average the company's approximately price company forward

of maintains ATM. equity forward our on healthy unsettled Easterly balance a

shares net stock settled. today, have the company's been of million receive As of sale aggregate from expect approximately $XX.X of not X.X common we the proceeds yet to that of million

full Assuming of net physically per $XX.XX sales share. weighted these forward price combined settled forward average are sales in a transactions initial using

At million future equity, forward stable. access to the $XX JV opportunity future. Easterly acquisitions in unsettled and to quarter we or under on capital to needing believe in capital our $XXX partner million opportunistic that remains markets end, consistent bankers, debt foreseeable for investors and without strong to execute the indicates our over liquidity maintained has With ample has Further, capacity dialogue accretive with go Easterly deals for just developments.

results. turning recall and an present to this adjusts alternative operating company's of that which we core catastrophic a Examples ongoing we operating on year related of a FFO are the Core to to by applicable metric. and the management non-real performance, include measure representative FFO beginning go-forward NAREIT items transitioned excludes charges, not XXXX FFO costs, basis, assets. when event depreciation which Finally, such have exclusions of defined company's believe estate guidance, as of liability

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

to transact property to guidance not incorporates look market. the this for begin assume forward portfolio in yet continues capital spread the to from recycled sure XX acquisitions everyone we disposition higher our We reminder, be strengthening a if rates does We'll opportunities see as at wholly-owned redeploying in but this the XXXX, to any year. narrow. bid/ask of keep As to dilution cap informed the

and now we'll thank appreciate With your for Shannon. back partnership. call that, this to turn And we morning your you the time

Operator

Instructions]. Thank you. [Operator

first Griffin the line Our with question comes of Citi. Michael from

line Your open. now is

Michael Griffin

Maybe with Great. starting Thanks. just guidance.

a rate the to that I should for that out forward there cadence? I'm when of around kind around year, of results kind kind we first that earnings Meghan, estimate we're mid-point. OpEx quarter curious, issues kind any imply or keep looking of G&A kind of the are of run maybe a think that mind your in

Meghan Baivier

Yes. morning. Mike, good

the a that's to level as guidance our run right, range. we of at shy year are of rating As you through march we said, the just mid-point

and our interest swaps. online with I we're continue come to be from small TI completed looking our to headwind work think forward to rate continuing expiring renewals a offset the

Michael Griffin

spending talks a in are these could cuts, see think budget with but kind heard just government maybe and we we Awesome. something macro, a in around Is shutdown mean, sequestration, implications there on debt there like or impact maybe I talk the your anything for a illuminate some of maybe adverse potential ceiling Washington be coincide And the on to know calling then house the limit some I that. I helpful. would business potential of if you any

Bill Trimble

result this I that -- fiscal York The right morning we it's juncture. we're I was every of and is good is Mike, lot has this -- more of Sure, year believe done more which time. this the was basically, good we I know same XX had government Exchange just New a till funded at this concern to And be for that properties. And our going don't since it was to going the of through thought than notes I the I morning. all at Stock we've have looking even the XXXX. end think I news that think separate times. theater. The

closed sad But things summer, standpoint going you're Easterly of be being to will which some confident some, a national potential I'm from issues. that see other fairly not might we think Government Theater. see any parks very Kabuki I this Properties,

Michael Griffin

Bill, like the or shutdown government can't And anything do building concurrently with buildings you the your that? shutdown enter like

Bill Trimble

No, they don't. No.

Michael Griffin

feels then sense. And think I talked on last if being it just make Cool. one about you transaction activity maybe opportunistic one

implied mean, north your more properties seven get the think in of Is at you you to need be to look caps rates attractive? talk what seven? would high-Xs always -- cap bullseye looking now, about to it of I is that around order I it kind those in

Bill Trimble

also be becomes to mention I I think have the it I looking stuff high-Xs I think, that we strategic quality we're us. at fine to purchase we're the as we ability especially for with And think really think the -- -- think partner, our I will no, have highest that available, assets.

seeing We're in ready So out open. the from go. some to visiting. is We're our standpoint, and business market are our narrowing teams

quarters, this we've So at some done. a we're but two think stuff glommed I been here, point. there the of sort And so looking sea last busy getting is think I for to change forward

Operator

Thank you. Instructions]. [Operator

the with from comes question next Michael Our RBC. Carroll line of

line your your line now open. Michael check mute Your is open. Carroll, Please is button.

Michael Carroll

Yes. Thanks.

a about Mike of you out Are guess question there talk prior your remarks. could Sorry the can acquire? know and Bill, targeting developments little about I mean, at highlighted you're in kind broken that I to that looking that. in today? you what's bit today? development or prepared the you you deals more I investments

Bill Trimble

and it think good the -- to I Yes. takeaway, thing Well, first and was separate Michael. morning,

let's thing, first the all think I three. take

bullseye never from the the we're seen would side, about. development and sorts of seeing we opportunities care think team And as many right as has I our that those the now. all be agencies amongst agencies

road. replaced so on our sense what? increasing buildings needs. needs mission because that And critical old makes And growing, they're some The the population's in had and are the buildings those the guess And been for think it not cases I decades. service

is is I that from uptick most think, which standpoint, a So standpoint, accretive from our opportunity. healthy in area, raw our seeing development

been very out Washington -- that's wonderful of our broken our I acquisition development in San in think marriage deal in good team team we've Diego. and and that's something a and here group at the that standpoint the From doing

to think good only but are as in opportunities We as fall. that recession all expert potential I'm head standpoint. from an standpoint, certainly the at well. looking we increase there our I'm into that, they're on that's not And not that, potential calling from we here going

a seeing narrowing. are we think I market, acquisition the in Finally,

really We weren't which few these in are talking that properties, seeing last to of quarters. the the is sellers something of much we as

happening the realization lot I to these slow in of to about more It's probably going I going sellers a realistic going think are think getting drop be a not there's rates future. what's be a decline. interest a that And to are precipitously. number

incredible we Is standpoint, different we speed that from full very So ago. now? I we because ahead? year signal we're Yes. to And it seeing Are our opportunities wanted busy. situation think will. about a saw I than a that's

Michael Carroll

mean, are one I I'm you're And development than then rates maybe the rates or I but another? acquisition looking higher deals, deals? cap are cap than significantly cap mean those I rates, they they how stabilized from are broken different broken the these acquisitions at acquisitions? on higher assuming are if development guess

Bill Trimble

Yes.

very think development our been There's absolutely a I aspect accretive correct. healthy you're always to area.

lot It's last to no heretofore too is a the know for I juncture, the by that very come as them to government realize competition there. profitable have think in us. is longer business difficult you've They I for TIs the the with don't the that this way of got at and which was financing. that neither do up you will

the talked that's I deals accretion but done. say but then our they of standpoint be deals as a terrific if the accretive takes our And not gives add best us. tough finally ever one from is negotiating, lot And do, mentioned most that's partner not if broken So It and the will we Tracy flexibility. think -- only the we've deals. regular problem always that accretive. for I about from deal we more will way an that I'd us a sheet, we balance

Michael Carroll

then is the a for on ground I And Atlanta has building to the of prepared Okay. and know new break the stages developments? just while. been been FDA planning kind government

Bill Trimble

finally to COVID over work. country. All else and is gone back everybody absolutely. Absolutely, over I realized It's has that the

Michael Carroll

maintenance, rate. AFFO, comfortable this quarter then the me, us with last you I rate? dropped you are you the dividend dividend current going how can are to talk I thinking for know of below Okay. and I it I and forward? that CapEx, just out And you take kind about that how if guess about coverage mean, guess at TIs

Meghan Baivier

Mike. Yes. Meghan. Good It's morning,

rely flows, we've of to on comfort the we've and ever that look the policy built right? XX times, the one our got longest consistent as our a cash visibilities had the around backed U.S. and strength many definitely we that's with underlying setting discussed the account government stability Board We've the the into years continue As of at and we've around of dividends the dividend and visibility management over taken that strength of the that, by dividend. NOI, maintained

Michael Carroll

lumpy anything there expect kind my increase do Is dividend mean, or in the off Okay. back the to to that drop of guess flows charges, get to cash quarter? covered expect metric? the CapEx you maintenance in that first of you I do

Meghan Baivier

we of prior cash is CapEx do renewals to QX to said in continue forward drive but business run as materially to not off comments, look flow before CapEx. rate Yes. I level, in the my

Operator

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

Darrell Crate

Great. joining Thank call for quarter again Government look has you XXXX forward been the Easterly you, first call. we soon. Properties helpful We hope everyone with and to speaking conference this all

Operator

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

You disconnect. may now

Easterly Government Properties (DEA) 2 May 232023 Q1 Earnings call transcript