Earnings call transcript Q2 2023

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Operator

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

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

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

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

Darrell Crate

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

create value Properties Government I'm to for work at pleased with Easterly activities we the our shareholders. as

Sellers rate at and recent years. our are transactions accordingly, environment current to clear than seeing the adjusting pipeline in are We to seen of rates we expecting opportunities cap we've higher grow. are interest

shareholders. value team financial property good portfolio and that add improve last addition, identify our that In has profile to to segments work adjacent been to doing the year over are our our

We with a seeking that where adjacencies are consistent value. to are property edge have find definable create and profiles thesis continue our to where we we

is that One about Bill adjacency local state will properties with and strong meets these government credit. talk more objectives the very specifics. leased

observed I to our opportunity federal pipeline. complement improving already our increases set area pipeline However, meaningfully this

We adjacencies, FFO look local allow government state for other objectives to will we in growth us believe XXXX. for continue properties but target similar leased elevated and to can

Exciting at both growing consistent we with of prospects, delivering to consistency flow Easterly, existing and in to time look months. the shareholders our portfolio dividends we Further, and cash the look our coming and happening the current events forward are partners our shareholders. forward over from to updated growth and keeping

our turn call to growth the that, give portfolio the as insights as further existing With to you opportunities. I'll Bill over future into well

William Trimble

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

mentioned, external portfolio. have prepared As liquidity We've and growth our the narrowing Darrell observed grow spreads on Easterly is returned. to to accretively bid/ask opportunities hand market in our use

forward that months. the to Our on with and specifics of criteria acquisitions look government. team long-standing meet that leases assets our the providing sellers in actively is potential engaged carry coming We with strict updates building

back, during learned what and growth future at of Stepping what that mean does Easterly. we the first have half for XXXX

around estate chosen to We mechanism have and as our government have buy that we center date, the to U.S. goal always viewed real universe credit. Easterly to credit. sell With acquisition

have long-term expanding shareholders, to growth a goal time we analysis. amount spent our the of of that delivering credit With on large

number with a U.S. is joined learned government high states ratings. of We credit very that by the

post-pandemic which In of a have along. all the carry actually component strategy comfort fact, than long-term key ratings learned leases security, a degree we carry and We our some higher of tenant. executed government is renewed higher U.S.

principles the universe, investment our further guide on guided and have our that investment As we expand continue to strategy. endeavor me always allow to will elaborate to

flows is will The of very company credit. as only on high the cash underlying the is security maintain have A credit maintain strong Easterly rating. tenants its a that and as and first singular focus

lease will Easterly anchored strong of well remain without we has of finally, started allowed stability the private since intends by retention to us guiding be, This a second estate The to levels Darrell flows cash as company continue drama. real in resiliency. XXXX. tenant a demonstrated term. is served described, and And as and for principle

allocating the to to tenant estate committed dedicated order where remain its of is capital real We buildings the mission. the necessity fulfill to in to

renewal through targeted acquisitions provide to development. positive endeavored a growth have and stable non-speculative accretive We spreads, rate

seeing sector bullseye We in velocity as well state federal are already as increasing certain in opportunities. our

targeting to growth rate in are the put opportunities. million year we rate and pipeline calendar further to believe year To run next $XXX expect provide $XXX to to can this, FFO range. growing quantify this basis acquisitions drive point We XXX million work XXX

to between compared again government landlords a similarities to the or examining committed thoroughly new once this municipality, of are being to United After opportunity consistent the growth to in state high the platform. landlords being we local pursuing drive to degree States Easterly

supporting are the reinvigorated we today growth In its for for strategy we is our and believe on transact seeing positioned as well shareholders. potential are this horizon, platform, investment all trajectory. added a are as we closing, restart With Easterly excited listeners and and solid growth our to hope we opportunities about NOI

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

Meghan Baivier

leverage midpoint to on strong Good range, performed revolver floating zero Bill. no exposure. and target at pleased drawn everyone. today report our portfolio our second am you, in our that Thank solidly current Easterly's the I debt of remains and sheet the quarter, rate morning, with balance

and the attention on portfolio. growing focus is Our

portfolio. our to Turning

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

June lease at with GSA will term, its DOT renewed XXXX. Lakewood commence XX-year Easterly a quarter, the during for Further, in which

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

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

a of adjusted of X.X%, total all $X.X attractive indebtedness weighted average quarter billion of fixed rate at the company net ratio maturity X.X levels. outstanding approximately of represents This XX.X% debt to interest had an debt At X.Xx. with of a weighted quarterly at average and years end, annualized EBITDA

on this along quarter borrowings million repay we million our used proceeds revolving to funded end, cash in rate today, interest to our the under company's given Subsequent its and hand forward sheet, facility. of Furthermore, the year, February Easterly further on feature delayed draw insulating all from of $XX $XXX starting volatility. swaps loan the balance XXXX entered on facility credit no into floating rate shareholders as previously debt term announced with our carries

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

yet As average stock the forward share. aggregate shares not of using that proceeds have to combined settled company's $XX.X approximately sales settled are of sale full, receive assuming we expect price of net million initial these sales forward common from a transactions today, net X.X million weighted of been the per of in physically $XX.XX

gross end to to approximately The to VA $XX basis, its $XX XXXX. rata the $X.XX component Turning XXXX of ended share company to the from the on per continues owned XXXX XXXX, but $X.XX guidance fully investment of includes full-year at to also $XX million, a guidance third FFO company's acquisitions up of pro within the VA property the Corpus a portfolio core of in year diluted to wholly up million Christi, of is of during development-related $X.XX raising $X.XX. This the range a now a assume share to closing guidance. range a low million for of company's

and offsetting growth dilution in is new resumes property our second keeping some shareholders Darrell of informed look the its expected a from as Bill XXXX to half opportunities XX to As the XXXX. disposition Easterly generate of thawing forward We mentioned, trajectory. portfolio external market and to our transact

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

Operator

the Thank your Please [Operator Citi. Our proceed of first comes Griffin of you. Michael from line with Instructions] question. question

Michael Griffin

bid/ask going rate talked for kind about shake narrowing expectations Maybe from I these think of seeing transaction initial Thanks. you expect Great. you cap Bill, to to where acquisition year, rates. are out this activity mean the perspective? cap spreads, a I relative

William Trimble

seeing I morning. – Griffin, we're finally good think that Well,

accretively. I seeing squarely we purchase buildings where these can opportunity think the we're finally

movement feel party. we're that that But the realistic And some overall. the So these opportunities. from of in in X.XX don't I range And know probably getting the sellers situation rates high the turn to we're and all understand if that make only are some cap looking Xs the going short-term interest in how not coming a it's the this are way better. think to I going to rates think quickly is I the we get to down.

Michael Griffin

working And there agency government agencies differences I talked familiar might lease then asset bit, not for from a just know federal on perspective? the that – with those you pipeline as to this class. we relative state are a state about with be the government any

So if helpful. around that be you some give of can would color that, kind

William Trimble

obviously, are subset a as very interested federal we And huge small well. in it's And and market. Absolutely. the is so a of space, market that

be annual be And to to that is since certainly that contribute, agencies have think, the these market, place in pandemic. handled buildings a have and able that think from by end about to it in so in our forward. of I missions size renewed of pipeline growth going to standpoint have I the substantially But the to of think enough buildings the large their be

on from to and diligence well. at credit Easterly, are focusing the really as an have same that a those I United and States here team we're states that federal have think government similar incredible missions the standpoint, we

going be these a I hear I lease seeing actually from So to have to leases going bumps. to standpoint. there more be think that and very know more opportunities you're you're upset

opportunities. the GSA more So those we're leases also, with the have to are lot numbers I a some than the in leases. going federal cases, fixed to And some along modern opportunity increasing see think

So all all, very positive from in I different those attributes. think

Michael Griffin

time. me. Great. Thanks the it for That's for

Operator

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

now Your open. line is

Peter Abramowitz

Thank Yes. you.

million $XXX kind overall million that Is of market? would what target number. You aiming mentioned be on you was annual of size Or the the basis? potentially the an to that for $XXX

William Trimble

it's next zone are increased They're XXX and We pipeline these the to with point been situation federal – years, Pete, of on very our to the back which get that And market opportunities, growth getting coming last larger opportunities. forward year. been to basis point state is basis some to the for to a XXX really I we've over terrific by rate per many and certainly happy that XX FFO we're frozen back and it now. between annual far that think back to year. months excited right look

Peter Abramowitz

it. Got Okay.

what you've month. as kind in that's combination well the the of done past new So of a as pipeline

William Trimble

Exactly.

Peter Abramowitz

the Okay. Got could about just it. or be? some be thinking to qualitative who And I talk states it's more willing working factors then you into or want terms your talked that those generally every comment in about why are might of you that that you that to and of you're went not guess state could work and with less agency other with. you

William Trimble

actually. Absolutely. various state a the every through And of United what United inventories a in the – of local world, bit went I were, went the went states We of through we what the civics think out in did the localities some of the a and States. ratings we in ratings number lot have a – figured the of the were. figured through credit lesson Interestingly, highest governments out credit and

look the mission state, obviously then of attributes, agency. And the building also then but satisfied that you've the at the look those particular the municipality. of with at you so importance looking gotten that and And state at within two you after federal

coming of I mining a coming an set so be years. that and opportunity done And up, the all we that quarters think, we've attractive will build and over

I view very much in you we space that the think like entered should XXXX. this VA when

done we've think our homework on I that.

and our within very I think, a, provided opportunity. another safe think a it's shareholders very very diversification I to and accretive very just been attractive successful, very, portfolio

Peter Abramowitz

you. Thank me. for it That's it. Got

Operator

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

Darrell Crate

Well, thanks, everybody.

So being growth sharing thanks, the conference All Properties for everyone, this the our end you our quarter. call of to results for at and We joining the announcing very look year forward the prospects. Government with and best. Easterly much

Operator

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

may You disconnect. now

Easterly Government Properties (DEA) 8 Aug 232023 Q2 Earnings call transcript