Easterly Government Properties (NYSE: NYSE:DEA) delivered a robust performance in Q3 2023, focusing on acquiring mission-critical government-leased assets and completing several accretive acquisitions. The company also provided updates on ongoing development projects, including the FDA Atlanta laboratory, slated for completion in Q4 2025. With 90 properties totaling 8.9 million square feet, Easterly maintains a strong financial position, with leverage below their target midpoint and no current floating rate debt exposure. The company maintains its full-year 2023 core Funds from Operations (FFO) per share guidance in the range of $1.13 to $1.15.
Key takeaways from the earnings call include:
- Easterly's portfolio consists of properties leased to the United States Federal Government and the State of California.
- The company reported a solid performance in Q3 2023, with a strong balance sheet and low leverage.
- Easterly renewed two important leases for 15 and 17 years, respectively.
- The company's net income per share was $0.06, and core FFO per share was $0.29 in Q3.
- Easterly executed various debt and equity activities during the quarter, settling 1.7 million shares of forward equity.
- The company plans to maintain its BBB profile balance sheet and is exploring partnership opportunities for acquisitions.
Easterly, a real estate investment trust (REIT), reported that its facilities' utilization in 2022 was similar to pre-pandemic levels in 2019. The company believes that the criticality of its assets and the strength of its lease renewals demonstrate the necessity and reliability of its portfolio. Easterly is optimistic about attractive growth prospects and is well-positioned to pursue unique opportunities.
The company had total indebtedness of approximately $1.2 billion with a weighted average interest rate of 4%. Easterly plans to maintain its BBB profile balance sheet and is exploring partnership opportunities for acquisitions. The company also discussed its dividend policy and stated that it is focused on what is best for shareholders and recognizes the opportunity for growth.
During the earnings call, Meghan Baivier, a representative from Easterly, discussed lease renewals that were signed in the quarter. The leases for the DEA and the courthouse in Del Rio were signed for a 16-year term and had a net effective spread of around 20%. The company also discussed upcoming debt maturities, including a $100 million term loan and a $50 million mortgage. The company is confident in its ability to maintain capacity at the banks and is considering refinancing options.
Easterly's outlook for the next one or two years includes opportunities for accretive transactions, primarily federal, and potentially some state opportunities. Development cap rates are expected to be higher than acquisition cap rates, but the company aims for accretive returns and considers the risks involved in development.
The company highlighted the Anaheim asset, which is used for adjudicating compensation claims, and the importance of the building's mission during the pandemic. The asset also has training rooms for furthering employment opportunities. The call concluded with Chairman Darrell Crate expressing gratitude to investors and stakeholders for their support.
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