Easterly Government Properties, Inc. (NYSE: DEA) (the “Company”
or “Easterly”), a fully integrated real estate investment trust
(“REIT”) focused primarily on the acquisition, development and
management of Class A commercial properties leased to the U.S.
Government, today announced its results of operations for the
quarter ended June 30, 2023.
Highlights for the Quarter Ended June 30, 2023:
- Net income of $5.8 million, or $0.05 per share on a fully
diluted basis
- Core FFO of $30.3 million, or $0.29 per share on a fully
diluted basis
- Recognized as a 2022 Premier Member by the U.S. Environmental
Protection Agency’s ENERGY STAR Certification Nation
- Named one of the 2023 Best Places to Work in the Greater
Washington region by the Washington Business Journal
- Expects to receive, as of the date of this release, aggregate
net proceeds of approximately $36.7 million from the sale of
1,700,000 shares of the Company’s common stock that have not yet
been settled under the Company's $300.0 million ATM Program
launched in December 2019 (the “December 2019 ATM Program”),
assuming these forward sales transactions are physically settled in
full using a net weighted average combined initial forward sales
price of $21.61 per share
“We are seeing signs of a thawing acquisition market, and we
believe there will be opportunities to transact in the second half
of 2023,” said William C. Trimble, III, Easterly's Chief Executive
Officer. “We intend to resume our external growth strategy and
expand the portfolio through the addition of creditworthy
government leases with long durations.”
Financial Results for the Six Months Ended June 30,
2023:
Net income of $10.2 million, or $0.10 per share on a fully
diluted basis
Core FFO of $59.8 million, or $0.57 per share on a fully diluted
basis
Portfolio Operations
As of June 30, 2023, the Company or its joint venture (the “JV”)
owned 86 operating properties in the United States encompassing
approximately 8.6 million leased square feet, including 85
operating properties that were leased primarily to U.S. Government
tenant agencies and one operating property that is entirely leased
to a private tenant. In addition, the Company wholly owned one
property under re-development that the Company expects will
encompass approximately 0.2 million rentable square feet upon
completion. The re-development project, located in Atlanta,
Georgia, is currently in design and, once complete, a 20-year lease
with the U.S. General Services Administration (GSA) is expected to
commence for the beneficial use of the U.S. Food and Drug
Administration (FDA). As of June 30, 2023, the portfolio had a
weighted average age of 14.4 years, based upon the date properties
were built or renovated-to-suit, and had a weighted average
remaining lease term of 10.3 years.
Balance Sheet and Capital Markets Activity
As of June 30, 2023, the Company had total indebtedness of
approximately $1.2 billion comprised of $53.0 million outstanding
on its revolving credit facility, $100.0 million outstanding on its
2016 term loan facility, $150.0 million outstanding on its 2018
term loan facility, $700.0 million of senior unsecured notes, and
$222.8 million of mortgage debt (excluding unamortized premiums and
discounts and deferred financing fees). At June 30, 2023,
Easterly’s outstanding debt had a weighted average maturity of 5.2
years and a weighted average interest rate of 3.8%. As of June 30,
2023, Easterly’s Net Debt to total enterprise value was 44.2% and
its Adjusted Net Debt to annualized quarterly EBITDA ratio was
7.1x.
As of the date of this release, the Company expects to receive
aggregate net proceeds of approximately $36.7 million from the sale
of 1,700,000 shares of the Company’s common stock that have not yet
been settled under the December 2019 ATM Program, assuming these
forward sales transactions are physically settled in full using a
net weighted average combined initial forward sales price of $21.61
per share.
Dividend
On August 2, 2023, the Board of Directors of Easterly approved a
cash dividend for the second quarter of 2023 in the amount of
$0.265 per common share. The dividend will be payable August 29,
2023 to shareholders of record on August 17, 2023.
Subsequent Events
On July 20, 2023, Easterly exercised the $50.0 million delayed
draw option on the Company's 2018 term loan facility, increasing
the Company's term loan commitments from $250.0 million to $300.0
million. Easterly used these funds, in addition to cash on hand, to
repay the outstanding amounts under its revolving credit facility,
extinguishing the remainder of the Company's current floating rate
indebtedness.
Guidance
This guidance is forward-looking and reflects management’s view
of current and future market conditions. The Company’s actual
results may differ materially from this guidance.
Outlook for the 12 Months Ending
December 31, 2023
The Company is raising the low end of its full-year 2023 Core
FFO per share on a fully diluted basis guidance to a range of $1.13
- $1.15.
Low
High
Net income (loss) per share – fully
diluted basis
$
0.20
0.22
Plus: Company’s share of real estate
depreciation and amortization
$
0.92
0.92
FFO per share – fully diluted basis
$
1.12
1.14
Plus: Company’s share of depreciation of
non-real estate assets
$
0.01
0.01
Core FFO per share – fully diluted
basis
$
1.13
1.15
This guidance assumes (i) the closing of VA - Corpus Christi
through the JV at the Company’s pro rata share of approximately $21
million, (ii) approximately $50 million of wholly owned
acquisitions, and (ii) up to $15 million of gross
development-related investment during 2023.
Non-GAAP Supplemental Financial Measures
This section contains definitions of certain non-GAAP financial
measures and other terms that the Company uses in this press
release and, where applicable, the reasons why management believes
these non-GAAP financial measures provide useful information to
investors about the Company’s financial condition and results of
operations and the other purposes for which management uses the
measures. These measures should not be considered in isolation or
as a substitute for measures of performance in accordance with
GAAP. A reconciliation of the differences between each non-GAAP
financial measure and the comparable GAAP financial measure are
included in this press release following the consolidated financial
statements. Additional detail can be found in the Company’s most
recent annual report on Form 10-K and quarterly report on Form
10-Q, as well as other documents filed with or furnished to the
Securities and Exchange Commission from time to time. We present
certain financial information and metrics “at Easterly’s Share,”
which is calculated on an entity-by-entity basis. “At Easterly’s
Share” information, which we also refer to as being “at share,”
“pro rata,” or “our share” is not, and is not intended to be, a
presentation in accordance with GAAP.
Cash Available for Distribution (CAD) is a non-GAAP
financial measure that is not intended to represent cash flow for
the period and is not indicative of cash flow provided by operating
activities as determined under GAAP. CAD is calculated in
accordance with the current Nareit definition as FFO minus
normalized recurring real estate-related expenditures and other
non-cash items, nonrecurring expenditures and the unconsolidated
real estate venture’s allocated share of these adjustments. CAD is
presented solely as a supplemental disclosure because the Company
believes it provides useful information regarding the Company’s
ability to fund its dividends. Because all companies do not
calculate CAD the same way, the presentation of CAD may not be
comparable to similarly titled measures of other
companies.
Core Funds from Operations (Core FFO) adjusts FFO to
present an alternative measure of the Company's operating
performance, which, when applicable, excludes items which it
believes are not representative of ongoing operating results, such
as liability management related costs (including losses on
extinguishment of debt and modification costs), catastrophic event
charges, depreciation of non-real estate assets, and the
unconsolidated real estate venture's allocated share of these
adjustments. In future periods, the Company may also exclude other
items from Core FFO that it believes may help investors compare its
results. The Company believes Core FFO more accurately reflects the
ongoing operational and financial performance of the Company's core
business.
EBITDA is calculated as the sum of net income (loss)
before interest expense, taxes, depreciation and amortization,
(gain) loss on the sale of operating properties, impairment loss,
and the unconsolidated real estate venture’s allocated share of
these adjustments. EBITDA is not intended to represent cash flow
for the period, is not presented as an alternative to operating
income as an indicator of operating performance, should not be
considered in isolation or as a substitute for measures of
performance prepared in accordance with GAAP, is not indicative of
operating income or cash provided by operating activities as
determined under GAAP and may be presented on a pro forma basis.
EBITDA is presented solely as a supplemental disclosure with
respect to liquidity because the Company believes it provides
useful information regarding the Company's ability to service or
incur debt. Because all companies do not calculate EBITDA the same
way, the presentation of EBITDA may not be comparable to similarly
titled measures of other companies.
Funds From Operations (FFO) is defined, in accordance
with the Nareit FFO White Paper - 2018 Restatement, as net income
(loss), calculated in accordance with GAAP, excluding depreciation
and amortization related to real estate, gains and losses from the
sale of certain real estate assets, gains and losses from change in
control and impairment write-downs of certain real estate assets
and investments in entities when the impairment is directly
attributable to decreases in the value of depreciable real estate
held by the entity. FFO includes the Company’s share of FFO
generated by unconsolidated affiliates. FFO is a widely recognized
measure of REIT performance. Although FFO is a non-GAAP financial
measure, the Company believes that information regarding FFO is
helpful to shareholders and potential investors.
Funds From Operations, as Adjusted (FFO, as Adjusted)
adjusts FFO to present an alternative measure of the Company's
operating performance, which, when applicable, excludes the impact
of losses on extinguishment of debt, depreciation of non-real
estate assets, acquisition costs, straight-line rent and other
non-cash adjustments, amortization of deferred revenue (which
results from landlord assets funded by tenants), non-cash interest
expense, non-cash compensation, amortization of above-/below-market
leases, and the unconsolidated real estate venture’s allocated
share of these adjustments. By excluding these income and expense
items from FFO, as Adjusted, the Company believes it provides
useful information as these items have no cash impact. In addition,
by excluding acquisition related costs the Company believes FFO, as
Adjusted provides useful information that is comparable across
periods and more accurately reflects the operating performance of
the Company’s properties.
Net Debt and Adjusted Net Debt. Net Debt represents the
Company's consolidated debt and its share of unconsolidated debt
adjusted to exclude its share of unamortized premiums and discounts
and deferred financing fees, less its share of cash and cash
equivalents and property acquisition closing escrow, net of
deposit. By excluding these items, the result provides an estimate
of the contractual amount of borrowed capital to be repaid, net of
cash available to repay it. The Company believes this calculation
constitutes a beneficial supplemental non-GAAP financial disclosure
to investors in understanding its financial condition. Adjusted Net
Debt is Net Debt reduced by 1) for each project under construction
or in design, the lesser of i) outstanding lump-sum reimbursement
amounts and ii) the cost to date, 2) 40% times the amount by which
the cost to date exceeds total lump-sum reimbursement amounts for
each project under construction or in design and 3) outstanding
lump-sum reimbursement amounts for projects previously completed.
These adjustments are made to 1) remove the estimated portion of
each project under construction, in design or previously completed
that has been financed with debt which may be repaid with
outstanding cost reimbursement payments from the US Government and
2) remove the estimated portion of each project under construction
or in design, in excess of total lump-sum reimbursements, that has
been financed with debt but has not yet produced earnings. See page
25 of the Company’s Q2 2023 Supplemental Information Package for
further information. The Company’s method of calculating Net Debt
and Adjusted Net Debt may be different from methods used by other
REITs and may be presented on a pro forma basis. Accordingly, the
Company's method may not be comparable to such other REITs.
Other Definitions
Fully diluted basis assumes the exchange of all
outstanding common units representing limited partnership interests
in the Company’s operating partnership, or common units, the full
vesting of all shares of restricted stock, and the exchange of all
earned and vested LTIP units in the Company’s operating partnership
for shares of common stock on a one-for-one basis, which is not the
same as the meaning of “fully diluted” under GAAP.
Conference Call Information
The Company will host a webcast and conference call at 11:00 am
Eastern time on August 8, 2023 to review the second quarter 2023
performance, discuss recent events and conduct a
question-and-answer session. A live webcast will be available in
the Investor Relations section of the Company’s website. Shortly
after the webcast, a replay of the webcast will be available on the
Investor Relations section of the Company's website for up to
twelve months. Please note that the full text of the press release
and supplemental information package are also available through the
Company’s website at ir.easterlyreit.com.
About Easterly Government Properties, Inc.
Easterly Government Properties, Inc. (NYSE: DEA) is based in
Washington, D.C., and focuses primarily on the acquisition,
development and management of Class A commercial properties that
are leased to the U.S. Government. Easterly’s experienced
management team brings specialized insight into the strategy and
needs of mission-critical U.S. Government agencies for properties
leased to such agencies either directly or through the U.S. General
Services Administration (GSA). For further information on the
company and its properties, please visit www.easterlyreit.com.
Forward Looking Statements
We make statements in this press release that are considered
“forward-looking statements” within the meaning of Section 27A of
the Securities Act of 1933, as amended, or the Securities Act, and
Section 21E of the Securities Exchange Act of 1934, as amended, or
the Exchange Act, which are usually identified by the use of words
such as “anticipates,” “believes,” “estimates,” “expects,”
“intends,” “may,” “plans,” “projects,” “seeks,” “should,” “will,”
and variations of such words or similar expressions and include our
guidance with respect to Net income (loss) and Core FFO per share
on a fully diluted basis. We intend these forward-looking
statements to be covered by the safe harbor provisions for
forward-looking statements contained in the Private Securities
Litigation Reform Act of 1995 and are including this statement in
this press release for purposes of complying with those safe harbor
provisions. These forward-looking statements reflect our current
views about our plans, intentions, expectations, strategies and
prospects, which are based on the information currently available
to us and on assumptions we have made. Although we believe that our
plans, intentions, expectations, strategies and prospects as
reflected in or suggested by those forward-looking statements are
reasonable, we can give no assurance that the plans, intentions,
expectations or strategies will be attained or achieved.
Furthermore, actual results may differ materially from those
described in the forward-looking statements and will be affected by
a variety of risks and factors that are beyond our control
including, without limitation: risks associated with our dependence
on the U.S. Government and its agencies for substantially all of
our revenues, including credit risk and risk that the U.S.
Government reduces its spending on real estate or that it changes
its preference away from leased properties; risks associated with
ownership and development of real estate; the risk of decreased
rental rates or increased vacancy rates; the loss of key personnel;
general volatility of the capital and credit markets and the market
price of our common stock; the risk we may lose one or more major
tenants; difficulties in completing and successfully integrating
acquisitions; failure of acquisitions or development projects to
occur at anticipated levels or yield anticipated results; risks
associated with our joint venture activities; risks associated with
actual or threatened terrorist attacks; intense competition in the
real estate market that may limit our ability to attract or retain
tenants or re-lease space; insufficient amounts of insurance or
exposure to events that are either uninsured or underinsured;
uncertainties and risks related to adverse weather conditions,
natural disasters and climate change; exposure to liability
relating to environmental and health and safety matters; limited
ability to dispose of assets because of the relative illiquidity of
real estate investments and the nature of our assets; exposure to
litigation or other claims; risks associated with breaches of our
data security; risks associated with our indebtedness; risks
associated with derivatives or hedging activity; risks associated
with mortgage debt or unsecured financing or the unavailability
thereof, which could make it difficult to finance or refinance
properties and could subject us to foreclosure; adverse impacts
from any future pandemic, epidemic or outbreak of any highly
infectious disease on the U.S., regional and global economies and
our financial condition and results of operations; and other risks
and uncertainties detailed in the “Risk Factors” section of our
Form 10-K for the year ended December 31, 2022, filed with the
Securities and Exchange Commission (SEC) on February 28, 2023, and
under the heading “Risk Factors” in our other public filings. In
addition, our anticipated qualification as a real estate investment
trust involves the application of highly technical and complex
provisions of the Internal Revenue Code of 1986, or the Code, and
depends on our ability to meet the various requirements imposed by
the Code through actual operating results, distribution levels and
diversity of stock ownership. We assume no obligation to update
publicly any forward looking statements, whether as a result of new
information, future events or otherwise.
Balance Sheet (Unaudited,
in thousands, except share amounts)
June 30, 2023
December 31, 2022
Assets
Real estate properties, net
$
2,270,435
$
2,285,308
Cash and cash equivalents
9,816
7,578
Restricted cash
11,970
9,696
Tenant accounts receivable
60,862
58,835
Investment in unconsolidated real estate
venture
268,594
271,644
Intangible assets, net
145,837
157,282
Interest rate swaps
5,114
4,020
Prepaid expenses and other assets
35,335
35,022
Total assets
$
2,807,963
$
2,829,385
Liabilities
Revolving credit facility
53,000
65,500
Term loan facilities, net
249,179
248,972
Notes payable, net
696,290
696,052
Mortgage notes payable, net
222,711
240,847
Intangible liabilities, net
14,421
16,387
Deferred revenue
85,932
83,309
Accounts payable, accrued expenses and
other liabilities
64,363
67,336
Total liabilities
1,385,896
1,418,403
Equity
Common stock, par value $0.01, 200,000,000
shares authorized, 93,415,706 and 90,814,021 shares issued and
outstanding at June 30, 2023 and December 31, 2022,
respectively
934
908
Additional paid-in capital
1,673,399
1,622,913
Retained earnings
102,491
93,497
Cumulative dividends
(524,806
)
(475,983
)
Accumulated other comprehensive income
(loss)
4,518
3,546
Total stockholders' equity
1,256,536
1,244,881
Non-controlling interest in Operating
Partnership
165,531
166,101
Total equity
1,422,067
1,410,982
Total liabilities and equity
$
2,807,963
$
2,829,385
Income Statement
(Unaudited, in thousands, except share and per share
amounts)
Three Months Ended
Six Months Ended
June 30, 2023
June 30, 2022
June 30, 2023
June 30, 2022
Revenues
Rental income
$
67,758
$
71,156
$
135,906
$
141,595
Tenant reimbursements
2,500
916
4,575
2,060
Asset management income
517
317
1,034
565
Other income
598
368
1,078
839
Total revenues
71,373
72,757
142,593
145,059
Expenses
Property operating
17,629
15,551
35,517
31,009
Real estate taxes
7,619
7,851
15,087
15,677
Depreciation and amortization
22,619
24,343
45,700
48,502
Acquisition costs
444
302
905
664
Corporate general and administrative
7,024
5,966
14,319
11,949
Total expenses
55,335
54,013
111,528
107,801
Other income (expense)
Income from unconsolidated real estate
venture
1,418
825
2,820
1,456
Interest expense, net
(11,678
)
(11,439
)
(23,693
)
(22,321
)
Net income
5,778
8,130
10,192
16,393
Non-controlling interest in Operating
Partnership
(675
)
(933
)
(1,198
)
(1,855
)
Net income available to Easterly
Government Properties, Inc.
$
5,103
$
7,197
$
8,994
$
14,538
Net income available to Easterly
Government Properties, Inc. per share:
Basic
$
0.05
$
0.08
$
0.09
$
0.16
Diluted
$
0.05
$
0.08
$
0.09
$
0.16
Weighted-average common shares
outstanding:
Basic
93,358,851
90,751,351
92,235,346
90,452,594
Diluted
93,641,382
91,083,980
92,508,651
90,799,647
Net income, per share - fully diluted
basis
$
0.05
$
0.08
$
0.10
$
0.16
Weighted average common shares outstanding
- fully diluted basis
105,707,282
102,545,589
104,569,748
102,044,603
EBITDA (Unaudited, in
thousands)
Three Months Ended
Six Months Ended
June 30, 2023
June 30, 2022
June 30, 2023
June 30, 2022
Net income
$
5,778
$
8,130
$
10,192
$
16,393
Depreciation and amortization
22,619
24,343
45,700
48,502
Interest expense
11,678
11,439
23,693
22,321
Tax expense
352
174
520
225
Unconsolidated real estate venture
allocated share of above adjustments
1,942
1,181
3,882
2,109
EBITDA
$
42,369
$
45,267
$
83,987
$
89,550
FFO and CAD (Unaudited, in
thousands, except share and per share amounts)
Three Months Ended
Six Months Ended
June 30, 2023
June 30, 2022
June 30, 2023
June 30, 2022
Net income
$
5,778
$
8,130
$
10,192
$
16,393
Depreciation of real estate assets
22,368
24,096
45,199
48,008
Unconsolidated real estate venture
allocated share of above adjustments
1,875
1,127
3,750
2,005
FFO
$
30,021
$
33,353
$
59,141
$
66,406
Adjustments to FFO:
Loss on extinguishment of debt
$
-
$
-
$
14
$
-
Natural disaster event expense, net of
recovery
(22
)
4
78
9
Depreciation of non-real estate assets
251
247
501
494
Unconsolidated real estate venture
allocated share of above adjustments
17
16
33
32
Core FFO
$
30,267
$
33,620
$
59,767
$
66,941
Adjustments to Core FFO:
Acquisition costs
444
302
905
664
Straight-line rent and other non-cash
adjustments
(902
)
451
(1,365
)
(531
)
Amortization of above-/below-market
leases
(676
)
(743
)
(1,376
)
(1,604
)
Amortization of deferred revenue
(1,622
)
(1,443
)
(3,106
)
(2,841
)
Non-cash interest expense
244
235
488
460
Non-cash compensation
1,299
1,637
2,967
3,266
Natural disaster event expense, net of
recovery
22
(4
)
(78
)
(9
)
Unconsolidated real estate venture
allocated share of above adjustments
43
(394
)
(70
)
(709
)
FFO, as Adjusted
$
29,119
$
33,661
$
58,132
$
65,637
FFO, per share - fully diluted basis
$
0.28
$
0.33
$
0.57
$
0.65
Core FFO, per share - fully diluted
basis
$
0.29
$
0.33
$
0.57
$
0.66
FFO, as Adjusted, per share - fully
diluted basis
$
0.28
$
0.33
$
0.56
$
0.64
FFO, as Adjusted
$
29,119
$
33,661
$
58,132
$
65,637
Acquisition costs
(444
)
(302
)
(905
)
(664
)
Principal amortization
(1,068
)
(1,328
)
(2,126
)
(2,628
)
Maintenance capital expenditures
(2,329
)
(1,972
)
(5,069
)
(2,906
)
Contractual tenant improvements
(712
)
(511
)
(1,013
)
(1,128
)
Unconsolidated real estate venture
allocated share of above adjustments
(4
)
-
(4
)
-
Cash Available for Distribution
(CAD)
$
24,562
$
29,548
$
49,015
$
58,311
Weighted average common shares outstanding
- fully diluted basis
105,707,282
102,545,589
104,569,748
102,044,603
Net Debt and Adjusted Net
Debt (Unaudited, in thousands)
June 30, 2023
Total Debt(1)
$
1,225,786
Less: Cash and cash equivalents
(10,702
)
Net Debt
$
1,215,084
Less: Adjustment for development
projects(2)
(15,990
)
Adjusted Net Debt
$
1,199,094
1 Excludes unamortized premiums /
discounts and deferred financing fees.
2 See definition of Adjusted Net Debt on
Page 4.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20230808141288/en/
Easterly Government Properties, Inc. Lindsay S. Winterhalter
Supervisory Vice President, Investor Relations & Operations
202-596-3947 ir@easterlyreit.com
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