• Net Income Per Share (Q4 2024): $0.05 on a fully diluted basis.
• Core FFO Per Share (Q4 2024): $0.29, a 3% year-over-year growth.
• Cash Available for Distribution (Q4 2024): $25.1 million.
• Net Income Per Share (Full Year 2024): $0.19 on a fully diluted basis.
• Core FFO (Full Year 2024): $1.17, meeting the upper end of raised guidance.
• Cash Available for Distribution (Full Year 2024): $100.9 million.
• Weighted Average Remaining Lease Term: 10 years, with 8.6 years excluding soft term leases.
• Lease Renewal Rent Spread: Anticipated 16% increase, with $41.55 per square foot of TI utilized.
• Core FFO Guidance for 2025: Raised to $1.18 to $1.21 on a fully diluted basis.

• Warning! GuruFocus has detected 7 Warning Signs with DEA.

Release Date: February 25, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Easterly Government Properties Inc (NYSE:DEA) reported a 3% year-over-year growth in core funds from operations (FFO) per share, reaching $0.29 for the fourth quarter.
• The company successfully closed 10 new assets in 2024, expanding its portfolio and total addressable market.
• Easterly Government Properties Inc (NYSE:DEA) has a strong pipeline of acquisition and development opportunities, positioning it well for future growth.
• The company has extended the maturity date of its $100 million senior unsecured term loan to 2028, with options to extend further, enhancing financial flexibility.
• Easterly Government Properties Inc (NYSE:DEA) has a high tenant retention rate, with 95% of its portfolio comprised of firm term leases, ensuring stable income streams.

Negative Points

• The company faces potential challenges from higher interest rates, which could impact the accretion of new deals.
• There is uncertainty regarding the impact of government austerity measures on external growth opportunities, particularly in defense-related projects.
• Easterly Government Properties Inc (NYSE:DEA) has a portion of its portfolio in soft term leases, which could pose a risk if the government decides to terminate these leases.
• The company's stock price at $11 limits its ability to pursue more aggressive acquisition strategies due to cost of capital considerations.
• Higher capital expenditures and tenant improvements in government-adjacent leases could impact cash available for distribution growth.

Q & A Highlights

Q: How are you viewing the accretion of acquisition deals given the expectation of higher interest rates for longer? A: Darrell Crate, CEO, explained that Easterly Government Properties has a strong pipeline for acquisitions and development opportunities. Despite higher interest rates, the company is in a strong position due to limited bank lending to developers. They are targeting a 2.5% growth rate and have $100 million of acquisitions in their guidance range. CFO Allison Marino added that they aim for a 50 to 100 basis points spread on new deals to achieve growth goals.

Q: Could austerity measures, such as potential budget cuts at the Pentagon, impact your external growth, particularly in government-adjacent properties? A: CEO Darrell Crate acknowledged potential short-term turbulence but expressed confidence in Easterly's long-term positioning as a specialist in private partnerships with the US government. He emphasized their strong relationships and ability to deliver cost-effective solutions, which align with government efficiency goals.

Q: Is office utilization an important measure for DOGE leadership, and how does it impact your portfolio? A: CEO Darrell Crate noted that while office utilization is a concern in Washington, Easterly's portfolio focuses on mission-critical facilities that are essential for government operations. These facilities, such as labs and secure offices, continue to be in demand and are not significantly impacted by utilization metrics.

Q: Can you provide details on the $100 million of acquisitions in your guidance? Will they be GSA leases or non-GSA leases? A: CEO Darrell Crate indicated that the acquisitions will likely include state and local government leases as well as non-adjacent properties, reflecting a broader approach beyond traditional GSA leases.

Q: What is your outlook for AFFO or CAD growth, considering higher CapEx and TIs in government-adjacent leases? A: CFO Allison Marino stated that growth in CAD will come from successful lease renewals, improved operating margins, and strategic acquisitions. They aim to align CAD generation with dividend coverage by the end of 2026, with positive developments expected in the near term.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.