DEA - Earnings call transcript Q3 2024 | Easterly Government Properties, Inc.

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Operator

Greetings. Welcome to the Easterly Government Properties Third 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, Senior Vice President of Investor Relations. Please go ahead.

Lindsay Winterhalter

morning. Good

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

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

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

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

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

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

Darrell Crate

We're Thank call. quarter. the with pleased made everyone, this thanks and the Good that third third you, progress morning, Lindsay. quarter for joining conference in for we've us

either implementing shareholders. to on billion and are goal pipeline growth to owned roughly executing feels acquisitions our wholly potential harvest striving in commitment million share this assets X% efficiencies a executing Team we accomplish plan or of growth consisting to shared, around of of focusing per X ability our to through identifying accretive attractive We're . We stated acquisitions, by new opportunities. in plan previously we've FFO JV. goal closed our in its this confident and on achieve core XXXX, operating As of our to $XXX.X our compensation $X.X X% growth year-over-year.

our operational internally examine well-defined closely best has the to believe significant embraced operations, public continue organization. externally, finding we for and proposition that REITs. across the both represents strategy We value And the our team savings

our of important FFO core addition, growth to the stated and the achieving the year-over-year, below I'm on that in navigate we've last in quarters, to to the and X% are end team's pleased work accomplished achieving its targeted the company focused of CAD several and In I'm goal goals. ability payout growing these X% X XXXX. XXX% we target a operations by ratio with meet confident

President unique is Of course, election the determine currently today's conference States call the to underway. next of the is as United

country, shows acquiring, mission-critical facilitate edge focused other and our key to support As to government influence the developing are our on and population grows of Their principally the security critical have National that trends, support that a their the infrastructure our the functions you know, veterans areas Easterly nation. supports Enforcement, remain for Defense, Political on functions. Law these administration any little influence and Government, U.S. foundation is managing shifts core the operations. agencies the History government and we driven definable growth. is demographic by helps that and central by of safety consistently continue hone

to the portfolio adjacent or Our U.S. transact mission-critical through pipeline market, With leased states an robust is for addressable strong. total government and is government, growing acquisitions our is delivering U.S. the our ability high and team tenants. accretively credit shareholders expanded assets either to

is Our U.S. development our at making our progress team partner tenant. project site and remains great to strong a government

of to XXXX. deliver middle XXXX that at the other X underway, the projects of in X have and expected end We is the

'XX. and the pursuing delivering projects is further intent of XXXX in team with The

alongside to delivering everyday the our government needs working of Speaking while ensure efficiently effectively has meet are also operating we strong key our U.S. agencies, partnerships, the for and the team government of shareholders. been asset to management

providers Finally, to order goal our our deliver team cultivating the verticals support working achieving growth pipeline. robust of year-over-year core finance has All to are been to debt relationships equity together providers with in FFO X% on working and our shareholders. X% for with

sit This leased quarter, and important secured Aurora, adjacent acquisition recent closing bases. to military progress of we Jacksonville, by Northrop and most in made on Gruvon, Florida Ohio Colorado in assets highly VA Dayton, both our X which to

fixated collective supporting urgency. world, the attention renewed nation heroes with defend escalating the on across With comes conflicts who the our

specialty as a transition facility services, maintains traumatic from disability. suffer physical primary therapy, including the rehabilitation over health a and also missions X.X who nation. serving and as Assets population in Florida. to like in vet access treatment largest have Jacksonville care and property X/X within They medicine. Better injury VA of brain resided service service-related Jacksonville a occupational of in the The veterans million state VA have enduring about represent the veterans domiciliary for

mail impressive shifts supporting Charleston Further is day, facility is this XXX,XXX to state-of-the-art With automated a production mail XX that robotics daily. highly hours fill veterans, facility medicine. equipment prescriptions approximately uses modern prescription filling and other employees XXX a and facility. VA our responsible It's order working an for X

company investment acquisition to Corporation, and an closed an During Northrop on that's aerospace the the maintains of leased asset multinational also [indiscernible] grade-rated quarter, defense robust and Grumman facility we Systems XXX% Research Patterson Force for in design main tenants with point Technology. the Wright the Air of access with Force connection Air Base, Air Force security Institute standards headquarters and the the the Laboratory's contracts the

storage information. of to in for standards space, housing its facility build-out is processing, service. the discussion of also meet active to every Buckley States sensitive supporting provides property's partners, with of The while contracts [indiscernible] related to X,XXX duty the Constructed directly members Director warning missile United security operations the Grumman and and Northrop international National essential Space [indiscernible] the which from compartmented Northrop for We Intelligence leased Colorado. Aurora, to acquired operations another

space total for addressable our facilities. and expand and government see milestones market. important are consistent acquisitions contracts in secure We with companies sector from These specialized defense for materially Easterly demand a the adjacent government need

national continues and a international global our deliver to mission-critical approach estate, fulfill to pursue continue component real we in and anticipate we're Dayton accretive defense to and our security to of prioritized the and our Aurora growth exposure as to important excited sector to Both expand. unrest, an and owning partner, deals adjacent shareholders. to mid our facilities the sector in ability government be earnings As

lowering to pipeline, and model In XX we time dividend believe within defined coverage path, want clear this very ratio payout our to path We've achieve connection are worked this with track we year to a that growth a charted be towards our under on we months. we've sustained line.

sheet commitment disciplined stewards with to our Our focus to investors' continuing honor as We're the on of capital. we provide, guidance to committed management the efficiencies. operational execute responsible continue and is that and earnings strategy balance we'll

and XXXX to for And We forecast. With X% of dislocations to range The observed to enhance on of under X% portfolio that that, core stable basis our we, for this We finally, us dynamic the in government. we presents private more we team the year-over-year derived looks right $X.XX bright the closing, and again, believe our the guidance right this the for the deliver from FFO plan delivering have a our FFO foundation flows believe right pipeline, future will we on fully have opportunities the we're limited exciting over $X.XX. exist focus access investors. to price core capital as company, in coming to our diluted introducing to on growth capital. of sellers U.S. year continue as cost cash

you Officer. I'll things for this our to Thank And over morning. Financial time hand Allison join to Marino, Chief again taking us now

Allison Marino

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

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

As of our shareholders. government deliver now us earnings market, acquisition to contractors, seek of mentioned, and continues and accelerate larger, includes our advantage that. expanded to total our strategy assets to should is growth an Darryl which take pool capital With to and leased this we enable buying to improve, cost materially addressable

continue through average we lease in future focused lengthening weighted remaining cash the the portfolio, While leases our acquisitions our flows. assets, growing growing existing and portfolio team on term is renew to mission-critical

and In XXXX as capture total, a same-store look open can we have the to growth are renewed of that some they on opportunities our and beyond all assets of towards to significant us we XXXX banks most not our markets view Bank leases are finance. office and secure because embedded basis.

dialogue in translate constant lenders into cheaper cost with credit spreads a We tenant tighter our market-leading to of capital. and are

forward in in shift by to $XX capitalize fundamentals We million ATM. equity roughly have the able recently further on been underlying raising market our on

a to growth acquisition year-over-year more larger to of capital our chart market cost portfolio, are dynamics, future. volume with capital, and With course can to of of our a we the X% cost sustained we positioned acquire earnings for a improving X% increase strong a for cheaper believe attractive we pool foreseeable significantly a assets

On are million $XXX later Turning operating a rata This $XXX acquisitions acquisitions, acquired that full diluted of this wholly owned properties additional year of accretion to assumes to basis. investment million core the a year XXXX. $X.XX these for we gross and an we range a the top developments either exciting maintaining that final on drive per during for guidance million to equity on share in you in already or look to forward basis. XXXX We keeping a our year. month will guidance, have posted we fully $X.XX the $XX development-related we at year-to-date, levels in of raised million on FFO in of have $XX pro guidance and

goal basis. that during that $XX range consistent share assumes on per $XX core of guidance shareholders. gross is of the a full $X.XX growth development-related year Finally, I'm in investment for with million happy of we core established introduced FFO and guidance share fully XXXX X% will FFO This for a to we million X% diluted our to our have to today, year $X.XX delivering to

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

Operator

Instructions] question from Griffin is Michael Our first [Operator of Citi.

Michael Griffin

expectations it's dive you chance elaborate be? upcoming some or And can on how trend and building of wanted a maybe whether rent year? them bit lease you to that then ] then growth, Any in more guidance. the sense leverage the can expect expiries of where releasing blocks Just of expect acquisitions us a bumps accretive XXXX you to you And little around to [ into the give those?

Allison Marino

opportunities levels, So At pipeline. the range, we see all the of definitely to the like drive pipeline we well. growth, look of do based is we of leverage of likely guidance things G&A outcomes that the to end a think interest dollars of of about rate couple upper NOI we million property range when And the course, and expectation to indicates deals. on and growth, hundred as provided sort an will expectations of maintained

We would well. are in X.X% comfortable to range. very in that X.X% put that And us this as guidance range still

Michael Griffin

yield see how within going cost kind It maybe relative of example. kind part you of I mean then the more And Northrop [indiscernible] capital? there. into government to acquisition of then pipeline? your the you're opportunity give see properties, you the of color like us expectations acquisition the how maybe, can a type of do Appreciate you expanding seems Darrell, And back adjacent that an pipeline. to sense the set these where are is

Darrell Crate

mean portfolio, in about continuing, of faith XX% of And stepping about portfolio in to to look portfolio back, to state U.S. GSA VA, this government high portfolio I in have strive credit course, sure. credit our tenant XX% and our our when leases. Yes, space. adjacent and government, have going full of of the way at the XX% we're exposure we

in As the and are understand and about the [indiscernible] very essentially we space we to spaces. that that and how That's that work operationally look buildings used remarks, finding talk the and we're that what look way prepared similar already adjacent my buildings space that's own. looking compartmented the information we're buildings in forward, similar maintaining we're in That's they to operate. a we we those government why

We an ability their have to forecast NOI.

that beautiful government you're Griff, One their that is in buildings leases. bumps have these things is of love, that to going adjacent the

of that beginning addressable we so it know, year, changed strategy you as at and market our So larger. enhanced our was total the the

of finding billion said, I've in As over We the be very a through ones. can sorting we're $X.X little identified right disciplined buildings.

job think I working And think with a I to acquire providers. above we're at Allison that's rate cap capital. of basis range to able buildings our of cost a doing XX a is great debt points XXX wide

to maintain through So going to I spreads. imagine as able we be we're those to continue move XXXX,

and the issue where estate And private real the the would leverage have balance able that some has maturing reaching the to we're that seem buildings sheet to the would so brokers because us many past. debt out be absent buyers up normally to capital they present can't tell their some seller looking find been of clean of either or sort identifying, find in that that they've be they they're

look we forward the of the end acquisitions we I being about saying, to range continuing on as to our prudent year. by of that So this as the million us of Allison think is very the to the guidance execute year, we're close $XX lower was need end

doing we'll job all. and they'll is manage have full a year which continue costs to fabulous So their well, us for Allison housing next year, effect

beginning other large, low million at very invest, $XXX in it cost acquisitions, shareholders, that for nice the capital as we our $XXX the been in million as of acquisition but return start XXXX. really the capital folks our And the with exceed can us unlevered we upper to we've of opportunities, that, what market have we investors, we're by is we of we think about with or look We between seeing But to a think think that end we're at our a in opportunities to orientation X% in that's add range. And when and plus and could credit X%, delivering portfolio, that get search broadly, portfolio goals relative we attractive [ we our X% have at growth we the relative REITs guidance, markets our what with the opportunity. awarded of very the we're getting of we're risk the that tenancy in into look really XXXX. gives we optimistic that, Xs high the to you're to ] to in and

Operator

of next Our question Peter is Abramowitz Jefferies. from

Peter Abramowitz

Just more to a into the little dig bit on comments leverage.

of bringing get think you the range high leverage could you said end ]. I to the [ up without

curious that. of kind I but of of you're how just and of today spread? compared is you're just see curious sort to equity the your XX overall you thinking cost So you maybe know XXX cost of debt your that sort targeting, how versus sort to basis how points said what the of about

Allison Marino

Yes.

done we decision us. they look every think I So is planning, how [indiscernible] forward a of that we when leverage, we buildings, certainly, at make in acquire how for create accretion

basis will we XX-XX that's typically look and debt ability equity, how range. So manage on to that ultimately stay within and flow we to pipeline's deal a the

basis. From help specifically an in to in overall a capital the higher Xs I we're a it say Xs. maybe cost an on low But perspective, for sure. from we're for start, prices the I perspective, unsecured debt stock would of cost would that say debt of low Certainly, of cost from perspective,

course, not at of the it. we new look for as So debt, for overall stack

Darrell Crate

acquisitions are we're the is Xs X the with in and seeing acting opportunities what we're I and And finding that high upon. then Yes. mean, that that,

Peter Abramowitz

any helpful. are then investment That's there? portfolio Okay. that of made how about? out transactions within billion thinking And is we pipeline, that be portfolios much maybe $X.X should that of up And pipeline there larger

Darrell Crate

little buildings, the we're a a a portfolio, X of it's mean $XXX there's buildings there's billion significant X looking and in other of portfolios, like couple million that not got of of billion. -- a portfolios, small I because $X.X it's there's cobble nothing but that question $X mean we've I No, at. nothing kind great building

to some think guidance start pipeline. they always got with that and to attractive market with get And the dislocations sellers to can what we've cost that trying obviously, dislocation, our capital. And -- of than expectations lumpy -- a have satisfy. trying be can on robust we're they spread -- I higher think our I acquisitions we're an anticipates seize we're

Peter Abramowitz

one And last helpful. That's one.

there Huntsville. some adjacent you're back there around Springs, Colorado force, possibly be think There's to the I will base. at Trump moving wins, Buckley he potentially if least Aurora, in in Just conversations to been space

consider underwriting? that that when curious, Or kind not of sort there? something So Is had impacts that you that you're thinking is issue is the an that underwriting just of and something to the when asset? to

Darrell Crate

it's yes. in issue. that present The at We've are mean is I Buckley. there's determined answer an functions not critical

We are there also plane -- tickets Alabama. what's we've spending got been couple We've time a of well. understanding down on to as going

those in mindful is regions. of I what so of that think been . each opportunity we've And the

Operator

question Balachandran next from Our is of Capital Markets. Aditi RBC

Aditi Balachandran

any your have remaining expiration? like, So XXXX color on And expecting I know you the the provide to guess, touching XXXX be? on some you're remarks, you on what you I can do prepared guess spreads leasing started I in and for update just but Allison, this lease -- outlook

Allison Marino

Yes.

our all spreads of in remaining as those high Aberdeen. teens the consistent mid- important we're prior we that completed as to feeling to expecting be got And look have XXXX well, about net a levels. We renewals. FBIs We're we've in and our with XXXX, rent to renewals good effective courthouse in achievements few

Aditi Balachandran

Got buyer I more seeing guess competition have just specific changes it. or been in the down, rates any you been assets? general, And for as any coming pool overall in have

Darrell Crate

really it buyers, the have -- they after one that time feels our certainly random which a from X/X it No. of is private -- like much another, it's buyer in market. is mean probably I transition pretty private that's competition, represent evaporated because

with of touring very clear and our our who and our continue folks folks . been and of I a And mission-critical rewarded markets. office Allison, supportive to not you the think nature as debt the It's know, of access some can they to -- to understand tenant certainly have prospective we're creditworthiness that us lot So buildings. and we'll capacity give of debt into time our facilities. be additional spent we've providers us the who debt

Operator

Truist Our next [Operator from Securities. of Lewis question is Instructions] Michael

Michael Lewis

materially to period, I in the material think talk just because you the was provision forward? I'm about don't also what that, severance think going quarter. decrease? it's or you . was Can the might related that The in for that prior costs? I G&A any expense wrong. split don't be out if What And expect down then do to me drove rate separation credit losses correct you run because record

Allison Marino

Great question.

Darrell Crate

Several great questions.

Allison Marino

questions. great Several

one them try by will to one. tackle We

seeing from Meghan So you're and with is last equity recapture all date for what quarter-over-quarter forfeited expense her award her invested awards, of we resignation, G&A, she a voluntary with trend day. the to

So that quarter-over-quarter basis, QX on was It a to is driving correct. the a change the QX you're credit basis. losses not on

Darrell Crate

for year? rate What next G&A about run

Lindsay Winterhalter

Yes.

So next year or are not hopefully or that costs we large G&A run expecting were this where year, severance termination we consistent those levels, increases in to rate for expecting flat we're numbers.

Michael Lewis

just Okay. maybe And now that number losses, going Is a for provision that accounting it. an like on Got that's around I amount bounces kind what the was? determined construct. what -- then of assume that to credit be or

Allison Marino

Sure.

a potential is estimate require we would to into quarterly, have accounting on loss provision update us is getting while actual to probability without an -- the loss And that default, with or So accounting it huge not while we're class that outstanding. that loan. experiencing would

Michael Lewis

so one could be it you into allocate more about tone. mean, about where then is of may lastly But that? I purchase a that Okay. turn I Where might of -- type me, Got you pipeline And does you a investment? deals has how that like the something mean, fit this do this opportunities. loan option, think into it. loan development for capital, particular investment talked it

Lindsay Winterhalter

use honest. cost it's to be an of capital, I our think attractive of

to and liquidity I to it's average to able opportunity go who these a developers us regional out their bank for get financed. great aren't provide projects think to

period, we lens through asset for we future generate an something portfolio. think think the return about pipeline. can our understand. acquiring also I that that attractive complements it think we have we of the particularly, an We but well in the the in that us, potential in is This lending underwrite will

Darrell Crate

It's think a be development The we're of that's by intent to building our to getting being involved going our them. to price a us why would terrific to part also with portfolio. attractive And helpful partner, capital. relative be we . buildings at cost of give for these a it's

Operator

remarks. President turn Government I Chief for and would to conference Crate, Executive back Easterly now to like the Properties. of Officer Darrell Please closing

Darrell Crate

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

Operator

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

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Easterly Government Properties (DEA) 5 Nov 242024 Q3 Earnings call transcript