DEA - Earnings call transcript Q2 2024 | Easterly Government Properties, Inc.

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Operator

Greetings. Welcome to the Easterly Government Properties Second Quarter 2024 Earnings Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Lindsay Winterhalter, Head of Investor Relations.

You may begin.

Lindsay Winterhalter

Good morning.

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

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

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

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

Darrell Crate

serving bringing and joining difference transactions, agencies. as to and our more and purpose-built, government portfolio between help office versus everyone, a to for time them our morning, us strategic We've the into our also cultivating Good the thanks U.S. buildings We Lindsay. sector. spent at development traditional driving mission-critical conference the our closing you, had appreciate investors partner second for our Thank considerable busy a quarter results sites, quarter call.

in our real have underscored of the call certain recently, specifications portfolio, this buildings events on may mission better understand and our the observed, estate. mission-driven through help of to updated viewers just the listeners we importance As website fulfilling

examples. some are Here

the has ductwork FBI following of Pittsburgh, including very infiltration. is at rooms assassination prevent FBI standards, Trump's with First, spearheaded anti-ballistic by must office and whose constructed in shielding to one buildings be field specialized equipped President are national offices and Pennsylvania field the - attempt our intelligence glass, radio investigation rally to SCIF frequency facilities. been security

that linguists, analysts, be specialists. they like approximately have for We Whenever week, to like intelligence able are to days XX,XXX scientists hours government a and employs agencies to are proximity, blast account go like FBI must to and agencies these. The year. event including security requirements a FBI other people, information special days times protection, at effectively things screening being agents, the there U.S. structural essential our ready XXX XX in technology day, X an is a and absolutely operate

Paso facility order El / and together of a worked apprehend months allowing X leaders week's leaders, boarded joint FBI U.S., tenants, border law over in Easterly arrest tandem as all several the The cartel last worked to about in the into the this next execute our to in them. course The and agencies, enforcement in crossed the agencies a to say heard facilities thwart Mexico alleged agents that by El DEA what the is clear example stop enable these how and previously you about This reduce Chapo drug plan. in Guzman apprehension the El activities cartel facility. our high-stakes of trafficking. specialized have of of me Jr., carried HSI news in and Paso DEA also known including with out Next, was then Joaquin Lopez, arrest FBI - our cartel to plane

been heroin, never examined manufacturers drugs, and synthetic highly facilities and processing for complicated equipped we determine origins, be that some geographic to DEA specialized and of have drug testing signature before, methods, cocaine or must of seen samples analyze methamphetamine. through programs for Our which

origin We a to It's parcel This in drug have the specific substance a land of not machines our where sourced. organic facilities movie. its and take was an can down isn't that organic conceptual. sci-fi identify

held leader, has work. Just responsible arrest each Justice FBI in do Merrick accountable. and for member every threat of on connection last deadliest said, to Attorney our DEA and agents for mission-critical the cartel Garland, the leaders, This our single what the with associate Fentanyl poisoning for rest them their alleged Thursday, until not is will us Department day the cartel is and General, communities depend drug order in the is faced, country ever

much this are the work So definition facilities. our done They outside assets. of mission-critical specialized of of can't be

give more you example. I'll Finally, one

about of in up XXXX. And service talk from veterans XXXX. which the Over is in Let's XX% X X.X our top Veterans benefits, VA XX% users, million use all tenant. multiple Administration, approximately least at used benefit or half those of

departments, clinics dental that designed be radiology, one-stop And each phlebotomy. own and to shop focused prosthetics community-based These set physical optometry veteran requirements. a have therapy, include outpatient mix health, properties are physical and specialized its VA Our of from for can to regionally care. a of department centers has mental

hope government humidity veterans models In agencies. you take we to provide self-sufficiency and for For have homes. This into if these a we take the it's this -- is systems. U.S. our these various from is disabilities directly example, walls If built re-acclimating providers that certain its specialized - how their are and radiology temperature edge. one with that has we infrastructure assist today, requires VA thing own understand can of rooms the care control, and security pharmaceutical away with definable Phoenix, so you one essential kitchen, customized thing to baseline while call I

this cash to our than remaining are opportunity and stability of have on estate perform from to are provides focused strategy We volatility to provide we office well. And and our expand the cultivating on portfolio markets our with our differentiated suffered, strengths we've attractive Rather our broaden time, shareholders during taken opportunity. shareholders. and idle, portfolio, this meaningfully returns lower an flow. Real greater but continues to

space with institutional anticipate an on rates, to rate declining to X investors, and focused remember strategy core we the we're tailwinds we revisiting important that For execute; towards easing believe these have resources it's interest a growth; in we key eye truths: our this have will additional environment.

ratio the a months strategy the historical and next see laid our Given that the a out us, XX is in we we consistent in front to have opportunities of growth payout path achieving with levels. we

them with government we And us our developing over to Chief help partners. on chosen We're now, companies developed the have defense high not we their again similar I'll have We things the properties to hand Operating building and and government focused own critical have being need that's work industry, U.S. those working are that only by to customized you time their this but missions. Thank morning. and ones the credit government U.S. alongside like the Officer. contracts President and support facilitate Baivier, a in which owned government-adjacent taking a development to join organizations to and agencies, missions significant, with meet we partner their also and for pipeline Meghan facilities that with

Meghan Baivier

Thanks, Darrell, good and morning.

Darrell's for and We I are opportunities excited this echo on have the us morning, you enthusiasm to horizon. the join

true of REIT Easterly grow, pipeline the incredible years, scale to tenant missions hard government-adjacent the for has specialized harvest of The same have an we facilities. been is the focus. an growth working need While and agencies in ongoing and terms has on sector several which opportunities. The continue faced long-term of criticality, both outflows our past over tenants for to they

contractual to that cost types estate. with our We lease further aligns opportunities strategy favorable fulfill We Easterly enhance of pursue our earnings escalators these platform, and target mission-critical the are not allows business potential sheet existing seeing capital drive also only to but have and with definition balance assets net of to shareholder lines, access of growth returns. An to our complement and growth. uniquely has strict increasingly projects long-term strategic that large-scale the believe us equity real

capitalized and the is Orlando, thereby the acquired safety, Florida, to X last security in efficiencies. assets, have to maximizing critical and synergies our time not infrastructure we position our By and market growth assets, both Our our to our goal operations, both seamlessly our and value just strategy of to leveraging them opportunity, strengthen deliver integrate but additional aim acquire this our operational and into to call, country. we shareholders. Since on of sustainable

and X in execute transacted backdrop We volume, source environments. have on our a market despite lower highlighting accretive deals to ability successfully challenging in XXXX of

ability to edge estate to to an acquisitions, partnership with our we deliver further our our shareholders. cash tenants. In stable is of part owners continue of in relative addition of is mission-critical assets bolster important component to our other and to real important strong This our competitive flows government-leased consistently investing

opportunities of delivering ability see further per we goal Looking we to believe X% X% years core for to forward, of FFO growth pipeline year-over-year to come. will that an stated meet share outsized our our

on progress making organization. with opportunity this keeping this then for attendees growth for to I digging over to assets the trajectory will Allison. We time Easterly to several getting as path our as model call that, lender serve into growth hand develops. With of call years. I you some believe, on the outsized morning. this we this your a forward spend an thank to change to will further over encourage opportunity that, buyer are and mission-critical you of We the next time look for apprised now the understand

Allison Marino

income pleased financial share results on a was net basis, second morning, $X.XX FFO quarter. Meghan. per fully core report per to I'm everyone. and diluted share was Thanks, Both the the Good for $X.XX.

as million. We the mission-critical and for available well to government, distribution enterprise cash Our U.S. renewal the on the through primarily as our leased maintain assets its development of growing was focus partners. acquisition, adjacent $XX.X

at behind While pace to the on billion team the see surface, $X.X working billion is of the opportunities we to $X on roughly pipeline rapid a our today. scenes, execute calm worth

team exciting market $X.X a the prospective ready to for unique fund opportunity absorb shareholders. balance outsized job a great extremely and with of company done getting this capital a anticipated the our Easterly cap, growth hopefully sheet needs company the is The opportunity. this billion to and has poised As

First, existing market, and credit tenant were in fourth maturities. senior once private from from of that This government we rating placement We is X-year third-party this unsecured the our significant with our interest draw were of new the $XXX validation in believe this and success BBB million oversubscribed pleased is with with quality U.S. notes a fixed-rate investors into great met again Kroll we and entry with our that. provides execution the underlying of stable of alike. market, market

conditions. of $XX second August million to the As and tranche of remain we subject $XXX close to Series customary XX, closed first closing track notes A Series notes, tranche of we on the have million today, B on

with deployment highlights to and partner Wells Citi, feature to and PNC, we pleased $XXX our liquidity lender our premier were other With pursue our to for to both relative believe revolver. necessary as strategy, facility we an banks on with we new arrangers credit $XXX execution successful XXXX partners a serving total, credit the extension X syndicate of of superior a this up initial the million capital Truist commitments to as-of-right REITs. capacity opportunities. I allows and capital In to total Second, platform borrowing term success and revolving thank for an maturity would June the thanks to options, transactions of on date execute Fargo attractive and joint accordion like unique pleased lead our extend accretive million. secure of quality special are of and X-month that

million, Easterly the guidance basis. price guidance, of to closing to in million for this our outsized growth full investment XXXX, year. company's at year. that, At that shareholders we we this maintaining FFO to on a your This a path time quarter's we last to $X.XX acquisition range share in that shareholders outsized morning a $XX the $X.XX FFO venture then - and Towanda XXXX $XXX [ I will call, year your start happy share and am guidance for to recent gross core per midpoint, through wholly-owned are $XXX And opportunities of $XX thank its core subsequent VA pro Turning this development-related appreciate call Jacksonville deliver for pipeline raise to on the you follow. With growth fully approximately sets per strong to after as diluted assumes partnership. will we share to million expect ]. joint rata the acquisitions an our earnings now million of execute during turn the throughout of have to for I opportunity back we of identified, a

Operator

Our Citi. line question Michael [Operator the with Griffin first Instructions] comes from of

Michael Griffin

opening color in the the Appreciate remarks.

a opportunities expand could you're you of acquisition on the if seeing. bit kind wondering Just

transaction the could when they are a so somewhat, seen on we've your up. then, about spreads cost And expectation if you investment think could I maybe thaw capital? market an where current relative us to pick sense give of

Darrell Crate

at last about top, Yes. the obviously -- quarter, and wide, spread was the we we bid-ask to start just Maybe shrinking. talked that as see we

a maturing, little debt folks powerful bit that's and a that having today place it spread buildings taking forward. is we move shrinking where have are in that's We side a -- where bid-ask on again, a time our as And impact on, especially bit.

build forward stock how to our our X.XX%. back, growth the cost is and at just For And out to talked growth and about X% going of strategy $XX. capital today was of were strategy, about we we our us, continuing sort stepping growth when X%

almost seen that things REITs as means and capital, bit better that more only then, make this So, a we've around. more stock cost since all XX%, accretion, little go of appreciate those

have We a robust pipeline.

said, the well and tenants, I feel as about we as and forward. excited prospects working state on growth high-credit U.S. as agencies, but those go we not local, also government-adjacent As government we're very only

Michael Griffin

Appreciate broad could upcoming of chance then, if of that, of change administration maybe your impact business? aspects and one Darrell. in various And around any just kind there's comment potential election, the

Darrell Crate

picked strategy we've assets, core DEA. the of that by government political Our so swayed aren't VA, really FBI, U.S. wins, always agencies

We're agree not the -- our very critical that of I is Department Education a a not think important on of parties mission. serve those both list. each

folks one party's are who other so, hear the over of preference major our you vulnerable And most are to the not tenants.

Operator

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

Michael Carroll

give much. you can activity? changed really schedule looks Meghan, an lease leasing expiration update like guess, it on I I the us your hasn't know

pretty quarter, of quarter. So you're I'm assuming this I was signed by optimistic last And progresses. really nothing some those know

maybe satisfy timing when and of the the you what's So idea can can of for outlook give the leases us XXXX you expirations? an XXXX the

Meghan Baivier

do happy Yes, that. to

the look X do an other then, the about As in asset, in of FBI It's small commentary our I And tenancies. I well, certainly, FBI the largest positive we our XXXX, but I as we others. very good you as right, And X at -- that, would - for as feel Omaha, had have have the FBI well say, Portland is outsized. remainder tenancy today, we about could wish we Omaha. one

sentiment courthouse Looking positive of a look and as the stages where and in a become being horizon, to Aberdeen. a more XXXX, procurements I'd at outcome. firmly view, the in the news those positive progress we've got handful there for FBIs we same in position see appreciate on and say to applies those a

Michael Carroll

to targeting, your expirations range? there guess, something XX% And that a typically we thinking can in being unique XX% spreads, Okay. -- are you're these cash then, be should I is the these the about? of with of center assume lot being the of the we in eye kind lease that bull's Or

Meghan Baivier

Omaha a We've - FBI prospectus. subject to that. Yes. known is

likely that in range the more look renewal. looks as But are net our XXXX, spread. you high-teens would tell from effective are renewal Mike, FBIs to we in I the flat a So, and those yes, X -- courthouse expectations squarely a that like

Michael Carroll

of then, And kind Great. I just questions. guess, modeling-type Okay. X,

of timing deal, completing like, the that that On last what's the the acquisition, acquisition from JV transaction? JV

Meghan Baivier

Jacksonville we last our that expectation the VA, the and in teed up -- would to last be is That that, that quarter, Yes. the it is close -- transaction.

Michael Carroll

a small. I want me. I for really one -- there final then, it's was -- small know And so don't Okay.

added is? expect that it's there provision loan talking additional kind next for the sure you Can loss worth a losses we is recorded what to FFO. to should was about, explain few provisions be credit of And I'm quarters? So, that back but not over credit any

Allison Marino

Sure. can take I that one.

position. as we've a in the and for in an shared, on with act there's partner opportunity projects developers lender So, to market us

We to for default, it's asset And this estimate accounting us have loan not is experiencing actual probability term that a loss for a the small loan pre-lease loss out credit developer. outstanding. a or rules require while award to

So, that date. through continue to will tweaked its maturity get

Operator

[Operator with from Sreckovich line next Jefferies. the of question comes Instructions] Our Christopher

Christopher Sreckovich

Peter. [ Stepping in ] here for

CapEx. to Can look should talk about out expected was you maintenance year we AFFO It this little items rest an from going rate wanted bit quarter. touch Just a any on forward the higher for, for run the of and perspective?

Allison Marino

and As complete throughout expect, you probably can off year. kick as timing always projects the there's

our to no rate would say there's expectations So on I that changes run line.

Christopher Sreckovich

rates we pricing? as you how different looking Great. competition you Okay. pool I you're it generally, these you'll bit, assets. kind buyers on get of down, Do assets impact on will And think the a of at guess, touched the then, and targeting of but more that for come front, generally acquisition we're little a kind see

Meghan Baivier

I'll take that.

private our cost I normalizing be increased points and for is Our think we meeting are in to acquire excited way of the really we basis capital our capital more XX still That spread. basis a we -- XXX to market blended advantage into in equity to point access right, competitive a is so right? the cost go really the -- the sellers' the leading the cost did, still about healthy today opportunities at ability industry, cost presenting of cost been expectations. it's placement the It's marketplace. stock, to capital as of of

Operator

like remarks. Thank Easterly Crate, no the Darrell for queue. questions back of I'm Chairman closing turn further to showing the to in would now you. I call Properties, Government

Darrell Crate

quarters and on of Easterly pipeline everyone, on Properties opportunities. joining Quarter We as you to Call. forward we Conference the growth coming for thanks look and our progress Second Thank make XXXX you, the Government posted keeping

Operator

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

may now disconnect. You

Easterly Government Properties (DEA) 31 Jul 242024 Q2 Earnings call transcript