DEA - Earnings call transcript Q4 2024 | Easterly Government Properties, Inc.

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Operator

Greetings. Welcome to Easterly Government Properties Fourth 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. 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

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

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

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

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

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

Darrell Crate

Thank you, thanks everyone, quarter call. morning, for and joining Lindsay. fourth Good conference us for XXXX this

a midst of how government in the shift in are We function. will

company. show we Dog pleased the before been that of founded to to have Some we see change we us that underwriting is since are actions the and the say dramatic, the real, we're headlines dose

drug government's agencies. align with imagine what facilities the just have for to a share partnerships does been Law their We're the our protecting enforcement, and in is few. name American that mission-critical agencies on in focused What legal strengthening the to would food we truly the we've I veterans, pleased well. progress supply care government made people mission-critical with that mean

The optimizing spending progress or has and the is on the portfolio. DOGE, the funds utilized speedy Department Efficiency, on people well-being be must made cutting real expenditures to in estate of functions and to of safety agencies country. critical American message taxpayer clear. wasteful federal its Government across government DOGE's

no real estate Its portfolio is exception.

over sector age have As deferred we over the a long serve. maintenance Through as record agencies XX X,XXX private in we and efficiencies proven delivering year of it specialist, to facilities time owned cost federal track billion a its fiscal is over holds The years, $XX government that average repair GSA, liabilities buildings. the owns of XXXX. the and of

partnership year. states employees These in earlier. importance This years. February increase of government XX in release from exists underscore this remarkable XX.X workforce years X weighted return portfolio future. of contrast XX% Class the managing average outlook our GSA state-of-the-art published a deferred reducing liabilities, of GSA's office and age to supporting The is to This real optimizing of stronger a estate the A of prioritizes the federal the in advantage GSA's assets, portfolio stark taking maintenance just our hold which the its a private in the press as of figures on

to for The DOGE uniquely itself. would and are develop quickly. own deliver for notably taxpayers, our of the government and cheaper and deliver recognized positioned the cost estate real value we a GSA in we GSA, sector government we before development example, can have a Take the source was leased to partner DOGE them estimate long efficiency than a for it As created. at federally it the we as to projects laboratory government private to help have championed FDA, and efficiency faster the cost Xx

Commissioner Service the Acquisition the Federal this whole Deputy the reduce buildings Transformation can are GSA's owned of and staffers newer sentiment intention his of and stating and to old more GSA recently more the Technology directly modern. is the flexible Director Shed, echoed to Services be government of number buildings, that liabilities of federal leased are which in with favor high Thomas

DOGE headlines, believe portfolio. real While as of we we've continue we will said, mission-critical see important component the to and government in be an the estate properties ongoing

Oregon. week, As XX,XXX evidenced noncancelable a firm U.S. Engineers by that, for in renewed we Corps lease the term foot Portland, just square of Army last

While emphasis believe government typically significant execution is this immaterial investors, efficiency. on given the we to renewed our

is of of weighted Allison to of average A redistribution Director, Recently our will and the term ours emerging administration. is comprised this the on DOGE country. second leases, we across term XX% go into look under this our with lease he confirmed call, spending X,XXX government firm portfolio Washington. forward its agents to but away relocate that later Kash from headquarters today new will strengthening from Patel, theme the stated field like DC offices FBI

Utah, footprint its or essential in high-profile York from and we along, supporting all offices homicides Gang operations FBI drug the housing field terror it From more. these the fulfill Lake been help role as across FBI Salt to should This City, Albany-New to and tackling the enforcement, threats crime agency increases country. look violence its forward have

we've ticket our renewed value continued proposition savings with on in inefficiencies the the deliver the agency execute emphasis federal a government that to cost the accretive partner. acquisitions addresses DOGE bureaucracy, we As of exist to

assets, venture either XX in through or XXXX. owned new our wholly joint closed We

expand the market a demonstrate their exposure to also expanded government contracts. tenants sector our expect for leasing fulfill total to addressable to adjacent like We ] demand secure government facilities corporations consistent Grumman investment-grade defense-focused Northrop our [ materially we as through in and

and shareholders. the these morning. well you join buildings on the again executing lease for stated add to acquiring execute portfolio Thank we're to focused growing taking remain accretive renewals priorities. We believe our us positioned to time that value We this

and Financial Accounting Marino, And Chief with over Officer. call the Chief our that, I'll turn Allison to

Allison Marino

quarter XXXX. morning, year report pleased Good Darrell. results the to fourth full for everyone. Thanks, I'm and financial the

both and Net quarter, diluted fully basis, FFO grew was share on $X.XX $X.XX. the core a and was income per X% per share For year-over-year

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

on the a also our basis, $X.XX met net of and guidance end share was core income For per at FFO both diluted raised $X.XX. the year, upper fully

$XXX.X success for X% cash XXXX, growth, Our a A distribution we cultivating In critical growth successfully available avenues direct delivered government million. was approach pipeline been opening total space this of and earnings to opportunities. our ability for market, of local disciplined to robust element management. a of the and addressable has state expand maintaining our while our adjacent portfolio new in result

us only value long-term our not expansion strongly but creation. continued enhances This near-term for positions prospects,

cornerstone the As mission-critical. strategy assets with serve work. the our estate Many functionality is our real that recognition government relying current to these dependent on perform portfolio essential mentioned, of the a of key tenants are of continued we Darrell of spaces operations our is considered on

business to to successfully $XXX characteristic loan of resilience the XXXX. quarter our agreement XXXX. our the extended amended properties term solidifies this, end, doing of maturity further we we for By This the mission-critical million in originally outperform senior the unique XXXX unsecured have date our office. to loan from as continues demand government Subsequent commodity executed

to conditions. options, which Additionally, subject X could XXXX, extend date X-year secured extension we certain the to maturity have

stability the balance We our the believe banking the our the strength capacity us this available forward. increased We of also moving through providing amendment and relationships of with accordion flexibility underscores feature, sheet. borrowing greater

we to shareholders. strategy on long-term Thanks focus executing even these favorable growth drive our our more investment continuing now can terms, disciplined to intently and for

strengthen rate an term with Additionally, we amended the rate interest ability our our our around certainty into moves pursue loan, in will strategic swap These entered to provides greater connection that goals. exposure.

questions as doing successes so, the have of on underlying like to audience fundamentals the I'd a we'd But the before lot our GSA Further, call, government's the news is earnings circulating U.S. like a the cancel fourth to There customary our about government. year-end. lease ability VA of in discuss to or the re-leasing as within lease. quarter been behind remind of a

facts here relates as the it leases. to So our are

VA not GSA so can or a necessarily of mind. be defense This for is A that true ways. structured keep X please lease, X a in lease in

First, a XX-year it in the or noncancelable term. the see cannot it term lease soft you'll and term a the term for the term. a XX-year can is be example firm lease firm second, or with a GSA is of firm lease typical lease. be can If the combination A term, entirety cancel of firm unilaterally

government To a do a soft the young When are so terminate company believes and this significant equivalent its to does the agencies, government government portfolio. pose our to to of allowed a unilaterally is is assets would default. lease not key because lease the but term, so important risk be in the

in entire is is end, quarter the remaining The annualized for the ongoing weighted we of soft comfortable and facilities. of portfolio XX income roughly with feel need term lease X% term, lease of the years. those portfolio's average exactly As

If out is portions you weighted soft X.X lease that a the the of have term term, still portfolio remaining average years. the back healthy

of a year, the we lease income X% We have with than any government. where U.S. our credit our and no to in annualized more committed given curated rolls portfolio remain high leases

reminder, renewal leases, exact complete. that the dollars work the required is of of is nature rents amount the and government final unique cannot a known the due to at until With be by that, ascertained as TI TI renewal

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

As no coming over rates, attractive we the stewardship expansion erodes we that and years, our priority existing we as careful tenant properties. as focused single on retention asset of ensuring with scale a grow remain value balance

XX associated XXXX, complete by renewal has which renewed work XX, we TI leases are government. TI or work there December that of As renewals no was since Of accepted XX and have the for been IPO. renewal XX,

TI be The and leases term feet Buffalo. the the average There with $XX.XX the X.X renewals, renewal Arlington, PTO on of anticipated achieved average leases including spread exclude a to we these of smaller XX.X rent assets, pending renewals years. projects. combined When square an million This estimated square are total it foot IRS XX government. remaining by across was various these TI XX%, Fresno remaining is weighted renewals for XX includes other utilized amount at

our XXXX Stepping beyond. and to track strong back, execution we are in XXXX achieved and our we on continue objectives,

long-term Our remains clear. vision

look about to continued We a remain you a future. focus growth disciplined have informed opportunities the keeping I as continued forward progress. look optimistic to excellence we strategy ahead on the on pipeline, and a operational and our strong

to assumes report acquisitions This Before and $XXX bottom fully range handing million I'm $XX basis. our diluted XXXX operator, $X.XX investment that core our back during to up development-related the guidance for gross to of a million a owned we're million of guidance on to wholly bringing FFO call of pleased to the in $X.XX end $XX XXXX.

to back X% will for and delivering core of turn goal our FFO shared your established this commitment for our time X% with support consistent we and to now that, With ongoing the I call your goals. you growth thank is Shannon. This shareholders. to morning for

Operator

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

Michael Griffin

there. are that on How viewing you're just Appreciate it cap to mid-X. be pipeline around commentary off like Xs all we're with an expected? implied capital, the deals seeing. given now, Maybe these mid longer accretion at interest than you're If rate going and set higher seems the cost at rates the the of for which in going the basis, looking and probably previously you deals acquisition opportunity of versus recall, just the your starting I

Darrell Crate

a as have the mean, development this will egg to we not really context, I Allison, the we is particularly acquisitions But pipeline, answer which media. is developers. to as in Maybe I ham opportunities. with broad well bit lending just a and both and spend banks background of strong time lot investor talking Dog on calls a still the while are the about

to a case, that strong -- sellers That that a longer for sell just asset, be time position. time or for are either interest to you longer. for rates we've appropriate and it's are set And facing seen is being going capital an saying to maturities the in sell. now puts they're an looking them having higher And of very and

grow, think, that I So continues the with pipeline attractive. are very to opportunities

spread, view Michael, net we where we principally we business know, look risk at so I our the a you plenty accretive of have business of I at the underwriting cost capital, look -- acquisitions. of in As we're think lease at we that as look

acquisitions on really think in our we about is conservative, as the targeting, and Obviously, in mean million of heard, for course about the X.X% setting the you a what years. around think, to parameters we company of give we that having we're been I going is next do, ourselves guidance that, growth targeting guidance. a range. what have We've we're the I midpoint rate set $XXX in when as

and gets a got robust If for increased announce to we bring we're the can and us our what the terribly to space that continue is earnings our it's well seem of in the more we job In on harvesting where we've structure. pipeline our like we've positions again we terrific so us probably in any lower which levels. Allison what in XXXX, amount end very And year, guidance unless those up a a that as doing build a range, build high hurdle and doesn't and TAM growth capital acquisitions.

in rolled we debt debt creativity What's thought, modifying earnings. the some think that's how in that to for plenty get news as your face their cost opportunities us know, in a generally of Allison? good has headwind ways you as of had in have we're we've I regarding future. And and been past over, But cheaper our REITs and capital.

Allison Marino

Yes.

see. would what looking are portfolio opportunity I acquisition there capital of spread is we and of So to add to incremental the we invest as we an cost

us that the deals interest certainly or expected are accounts the that next range allow XX are the broader pipeline, goals. basis to growth But to few generate So that points looking XXX spread we rates are and over our where for next achieve and years. to be to on will

Michael Griffin

government job have the or cut requisitions to Appreciate difference kind austerity, to DOGE new to office all context of market But a delayed I good Easter kind traditional the consider And projects. there. of its guys the getting it's space. you the of you to Obviously, potentially going might just as then, lease look idea relative highlighting for whether looking budgets done Pentagon Darrell, portfolio of the think the what initiatives. back

as whether growth about I being worries Any not mean, commentary could properties spending. defense be side, developments new the attractive or adjacent external helpful. maybe it's of being government that some impact awarded these would there given

Darrell Crate

I ourselves in But government. that with chop partnership Yes. I we're as we out guess very the a if landing be are term, company, a everybody and I've mean spent have a I think like to going a creating squint what short we've to on you some -- going light is turbulence is figures in decade at for in government. the all set specialist used here internally metaphor our smooth because a helping dedicating U.S. private over the the

buildings We have terrific or relationships with the officers. folks that leasing with we've with built our

we is to improve they step their try when back, housing is ways what that a we means about really GSA, think I detail, I'll maybe mission. who the at which to speak this can tell work the creative satisfy to folks but when little deeply care very in And they in And improved government you in you, facilities. suggesting folks be too those mission.

irrational and out the outside private mean right is navigating great they bureaucracy. a spend and -- come couple just we business, create think I the somebody reality as of they have could figuring that example, would facilities not save million bucks the a and and that's to they is for from much see who I that because the that what idea. as the it's we GSA do mission the time candidly, being in solution And works

procurement closer is government sincere redo These and the to agents are will probably the could of and and But for they would that and we months, terribly who the taxpayers. respect time it take years. amount X work minimum the is folks hard X reality say, this working

a years that know is save mission and we a would American dollars, We we People million facility of housed way to adequate this couple that a in but So for take can is that X not the they're facility. today need hey, need in accomplished and choice our proud. new we make be

get that's want that They the get is and bureaucracy. And want operating fixed, process navigating ticket met that that the call facilities in operating professional there do people. become that's needs excited be number to these we to to to I've no American They thing GSA for bureaucracy. quickly. the right what of really it's And the and to ever

efforts real to roof And carpet dose greater their the I at will applaud that serve to We're estate. criminals, that's the the make They're lease doesn't replace partnership efforts And really We but have leak. sure time. at can and well very we certainly why government good mission. look and portfolio. good paint over can't catch

people of help look we're And out we very getting think the to building best when to FDA Denver, are one in short-term to the they're find the as I are for so are of And planning doing reasons period, it that can that this that's deliver savings. there mentioning that little unaccountable some example, just of on that forward because we them I'm for that positioned me who on. still work X/X cost

I what fixed. their with to XXX% know So will that the And I GSA feel -- is get them objectives. achieve help aligned

So but. maybe asking, than you're more

Michael Griffin

really appreciate Darrell. I No, that,

Operator

is of question John BMO Kim from Capital next Our Markets.

John Kim

approach an office measure And portfolio. take if could that you've potential within leased is it's to a on much important I the hard of find it's DOGE access Question more your wondering And engaging? in But in if utilization, you been how a which commenting real gauge you know measure proactive I'm estate. something that historically, typically that for is that's leadership.

Darrell Crate

have It's -- day. And between question a limited incredibly here, trying think that would the Yes. we're draw ask to every ourselves we in I I I offices distinction mean great Washington, that it's almost a question. of where are exposure. version

to are figured it out. utilization, of and trying in they're get But they and in trying those they feet, navigate to if return at will at things where out. look reduction balance office places square look there all low to be a these utilization, I work think Washington federal when footprint the they

A stable. bunch Pleasanton. It houses facilities, in lab in -- a I go from. it take tell very the come that you Colombia a a our it is room down codes, code exact back. can would There's any Nespresso the the in of that -- if you let's think that, you mean, nice about yourself had ZIP organic you little like drug machine, $XXX,XXX machine, take it think put lab came just And will the machine that drug, get ZIP in that tell and

And in has to I what's the don't utilization but it that room? know, exist.

And think problem. and to kinds And deliver mission-critical so buildings trying at solve know when don't help been the that COVID, that utilities have that functions. U.S. we're using COVID facilities, through we they for these fully facilities they've about execute they're illegal look the the mission -- they drug think of and we have maintain a lot government, I those them and all of when we

I to the drugs get could on go that to cotton And that for of about filled veterans the we happening. is that the lettuce all romaine import

the I what publishes end, go up that visit, it the and so see doing. mission buildings and in they're strong, and very government about and that what the our on they're is delivery other happening to the numbers we see And in when see we we

John Kim

be in will Can have eye whether historically? recently? you've $XXX were the leases on that been that be in requiring leases you are to any that million there provide your bulls going commentary they non-GSA acquisitions guidance, Or you of more the GSA now

Darrell Crate

in probably guidance. bit Yes. nonadjacent the state think well as look local the we'll I and as that's for mean, that I to

John Kim

that I CAD some Okay. final wondering some government provide in there's you goes TIs leases? could AFFO higher where question and if And commentary on CapEx on just of given or you then a these growth. think adjacent was

Darrell Crate

question. Great

Allison Marino

Sure.

an levels we we've and year. to And that renewals, last place. acquisition we're the successful opportunities margins path about comes that in driven effective So basis. And the Darrell operating mentioned of committed market of they growth been that seeing to improved on CAD an a growth managing talking by combination are are also the for capital in through lease

deals So we're accretive on do as we CAD end. deals trying and new as impact well look evaluating to that at

John Kim

forward? line to But going in the is it growth? be Or your initial phases in it FFO with will go lag

Darrell Crate

and at what by and Yes, we the looked yes. to on. it, focused we've we're trying mean -- dividend our end said, I generation distance get within is as CAD of striking as XXXX

at news to of next I we think the stock have got provides that put -- is year. paradox our that as guidance forward price said, some we've the we'll $XX, here. good at But we look $XX this business

cost kind same. $XX place and we're to our incremental capital because market. At going price can or And is see down in clean the of is going we up the $XX, a of at $XX we're buildings where staying activity the of

We So what and like but it's think at this, we I'm super doing. no problem. if about -- we let we're today. $XX the excited that's like dividend, into -- stuff -- the where ourselves. projects if I we're not was stand leaning where find maybe covering mean, stock that's from say the

Operator

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

Aditi Balachandran

touching know we quarter. was higher CapEx about. previously spoke on little a a It that than I

going So a run good is forward? that rate

Allison Marino

Yes.

So have of call I seasonality. QX does the would impact what

to of per to that QX. lighter square the the throughout QX $X.XX share foot things of we tends a I as winter more So X that months the spread basis, months just then in hit to in year. be we're projects forward. to X, little tends lot put there and are say Typically, last typically, run that $X would the not capital range That's On seasonality a ramp bit quarter X year. expect up it a the of evenly in at to going rate quarters

Aditi Balachandran

building SAA a being the about the on sale? think should we Got Chicago Do post Or exploration? All your right. facility? you releasing plan plan then And the it. for what's this

Allison Marino

Yes.

part as of a cap ago rate. number of portfolio a at building XX% that acquired years a we So

our underwriting certainly It's a is by this So and term itself. Xx both in terms outperformed victory performance. property of in the

the GSA building, be. a that to not might to expiration to following outcome whenever we be that would would goal and remain -- expecting we disposition the are look in Our

Darrell Crate

I -- be we mean building I the next today detail expect either will mean, something is what moving a anything, which or if examining forward. building, they're a little mean, The be tenancy I bit that is longer. things Josh which little and on it that to just in how they're deed doing where be

And if see were that to to give place, the you pleased the will by facility. moves the go new visit that price think when I a us you'd FAA their be investors will market

Operator

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

Darrell Crate

everybody, you, you forward look year-end with to that we Thank for you in X forward all move on conference be and the have We XXXX company dose chat joining All for the best. quarter, back we'll to call. us events months. really coming our in the to posting the and

Operator

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

You now disconnect. may

Easterly Government Properties (DEA) 25 Feb 252024 Q4 Earnings call transcript