• Net Income Per Share: $0.07 on a fully diluted basis.
• Core FFO Per Share: $0.73 on a fully diluted basis.
• Cash Available for Distribution: $31.1 million.
• Dividend Yield: Approximately 8% after recent adjustments.
• Weighted Average Remaining Lease Term: 9.8 years.
• Lease Income in Firm Term: Over 95%.
• Debt Capacity Increase: Additional $125 million raised in the private placement market.
• Full Year Core FFO Per Share Guidance for 2025: Raised to a range of $2.98 to $3.03.
• Expected Core FFO Per Share Growth for 2025: Estimated 2% to 3%.
• Recent Acquisitions: $120 million closed with an additional $20 million expected.
• Development Investment for 2025: $25 million to $75 million projected.

• Warning! GuruFocus has detected 8 Warning Signs with DEA.

Release Date: April 29, 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) implemented key changes to its capital allocation strategy, including a reduction of the quarterly dividend and a reverse stock split, to create more flexibility for growth.
• The company announced two highly accretive additions to its portfolio: a federal courthouse facility in Medford, Oregon, and a facility leased to the District of Columbia government, both under long-term leases.
• Easterly is well-positioned to benefit from the DOGE initiative, which is shifting the government's real estate strategy towards more flexible leased models.
• The company reported strong financial results for the first quarter of 2025, with net income per share of $0.07 and core FFO per share of $0.73, meeting consensus expectations.
• Easterly has a robust pipeline of opportunities, with $1.5 million in potential projects, and is focused on long-term growth and value creation for shareholders.

Negative Points

• Easterly Government Properties Inc (NYSE:DEA) reduced its quarterly dividend, which may not be well-received by income-focused investors.
• The company faces challenges in the capital markets, as its dividend was not being valued at a premium, leading to a reset of its dividend policy.
• There is ongoing uncertainty related to the DOGE initiative, which could impact the company's leasing strategy and government relationships.
• Easterly's cost of equity is not as favorable as its cost of debt, which may affect its ability to fund future acquisitions and developments.
• The company is navigating a complex market environment, with potential risks related to government lease renewals and the broader economic landscape.

Q & A Highlights

Q: Can you discuss the economics of the recent acquisition and development projects, specifically the cap rate or unlevered IRR? A: Allison Marino, CFO: The DC acquisition cost approximately $120 million, acquired at a high 9% cap rate, providing a 100 basis point premium to our cost of capital. For the Medford development, we're in early design stages, but we aim for a 150 basis point spread to our cost of capital on a yield basis.

Q: What is the size of your current pipeline of opportunities, and how does it break down between GSA, developments, and state/local government facilities? A: Darrell W. Crate, CEO: Our pipeline is about $1.5 billion, including GSA, state/local, and government-adjacent facilities. We aim for 15% of our portfolio to be state/local and 15% government-adjacent over the next 3-5 years, with federal developments being our most accretive capital use.

Q: Can you provide details on the Department of Forestry building in Albuquerque and the involvement of the state of New Mexico? A: Darrell W. Crate, CEO: We replaced the US Forestry Service with the state of New Mexico as a tenant, securing a 10-year firm term lease with 25-year renewal options. This decision reduces volatility and provides more certainty and potential growth.

Q: Are you in the clear with DOGE, especially with recent changes in leadership? A: Darrell W. Crate, CEO: While it's premature to say we're completely in the clear, we understand DOGE's objectives and feel confident in our portfolio's strength. We have 95% of our leases in firm term, and our mission-critical buildings remain attractive to the government.

Q: Regarding the DC acquisition, can you share details about the lease structure and why the seller exited at a non-cap rate? A: Allison Marino, CFO: The lease is a modified gross lease with a 1% annual escalation and real estate tax and operating expense escalations. The seller likely exited due to market confusion, allowing us to acquire the property at a significant discount.

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