Easterly Government Properties(DEA) - 2025 Q2 - Quarterly Results

Disclaimers and General Notes This section outlines forward-looking statement disclaimers and clarifies financial reporting adjustments Forward-looking Statement This section outlines standard forward-looking statement disclaimers, noting that actual results may differ due to various risks - Forward-looking statements are subject to risks including dependence on U.S. Government revenues, real estate market volatility, and debt-related challenges[2] Ratings and Financial Statement Context Ratings are not recommendations, and all share and per share data are adjusted for a 1-for-2.5 reverse stock split - All share and per share data have been adjusted for a 1-for-2.5 reverse stock split, effective April 28, 2025[4] Supplemental Definitions This section defines key non-GAAP financial measures used by the Company for supplemental investor information Non-GAAP Financial Measures This section defines key non-GAAP financial measures like FFO, CAD, and EBITDA, providing supplemental investor information - The Company utilizes several non-GAAP financial measures to provide additional insights into its financial condition and operating results, including:[5] - Annualized Lease Income: Annualized contractual base rent, straight-line rent adjustments, and net expense reimbursements for the last month of a period[6] - Cash Available for Distribution (CAD): FFO minus normalized recurring real estate-related expenditures and other non-cash/nonrecurring items, used to assess dividend funding ability[7] - Core Funds from Operations (Core FFO): FFO adjusted for items not representative of ongoing operating results, such as liability management costs and credit loss provisions, to reflect core business performance[9] - EBITDA: Net income (loss) before interest, taxes, depreciation, amortization, gains/losses on property sales, and impairment loss, used as a supplemental liquidity disclosure[10] - Funds From Operations (FFO): GAAP net income (loss) excluding real estate-related depreciation/amortization, gains/losses from real estate sales, and impairment write-downs, a widely recognized REIT performance measure[12] - Net Debt and Adjusted Net Debt: Consolidated debt adjusted for unamortized premiums/discounts, deferred financing fees, cash, and property acquisition escrow. Adjusted Net Debt further reduces this for estimated debt financed portions of projects under construction/design or previously completed that may be repaid by US Government reimbursements[13] - Net Operating Income (NOI) and Cash NOI: Net income adjusted for non-operating items and non-cash rent adjustments, respectively, to measure property operating performance[14] Overview This section provides corporate information, analyst coverage, and an executive summary of key financial and operational highlights Corporate Information and Analyst Coverage This section details the Company's executive team, stock exchange listing, investor relations contacts, and equity research coverage - Key personnel include Darrell Crate (President & CEO), Michael Ibe (Vice-Chairman & EVP), and Allison Marino (CFO)[16] - The Company's common stock is listed on the New York Stock Exchange under the ticker DEA[17] - Equity research coverage is provided by firms such as BMO Capital Markets, Citigroup, Raymond James & Associates, RBC Capital Markets, Jefferies, Truist Securities, and Compass Point Research & Trading, LLC[17][18] Executive Summary This executive summary highlights key financial and operational metrics for Q2 2025, showing year-over-year increases in FFO and CAD Key Financial Metrics (Three Months Ended June 30) | Metric | June 30, 2025 | June 30, 2024 | Change (YoY) | Percentage Change (YoY) | | :------------------------------------------ | :------------ | :------------ | :----------- | :---------------------- | | Net income available to Easterly Government Properties, Inc. | $4,071 | $4,611 | -$540 | -11.7% | | Net income available to Easterly Government Properties, Inc. per share (Diluted) | $0.09 | $0.11 | -$0.02 | -18.2% | | Funds From Operations (FFO) | $34,816 | $30,690 | $4,126 | 13.4% | | FFO, per share - fully diluted basis | $0.74 | $0.71 | $0.03 | 4.2% | | Core FFO | $34,592 | $31,373 | $3,219 | 10.3% | | Core FFO, per share - fully diluted basis | $0.74 | $0.72 | $0.02 | 2.8% | | Cash Available for Distribution (CAD) | $29,298 | $24,806 | $4,492 | 18.1% | Key Capitalization and Liquidity Ratios (At June 30, 2025) | Metric | Value | | :------------------------------------------ | :------ | | Total equity market capitalization - fully diluted basis | $1,046,253 | | Net Debt | $1,725,005 | | Total enterprise value | $2,771,258 | | Net debt to total enterprise value | 62.2% | | Net debt to annualized quarterly EBITDA | 7.9x | | Adjusted Net Debt to annualized quarterly pro forma EBITDA | 7.2x | | Cash interest coverage ratio | 3.0x | | Cash fixed charge coverage ratio | 2.8x | | Cash and cash equivalents | $5,789 | | Available under $400 million senior unsecured 2024 revolving credit facility | $122,325 | Corporate Financials This section presents detailed corporate financial statements, including balance sheets, income statements, and key performance metrics Balance Sheets The balance sheet shows increased total assets and liabilities as of June 30, 2025, primarily driven by real estate properties and notes payable Balance Sheet Highlights (in thousands) | Item | June 30, 2025 | December 31, 2024 | Change | Percentage Change | | :-------------------------------- | :------------ | :---------------- | :----- | :---------------- | | Assets | | | | | | Real estate properties, net | $2,682,915 | $2,572,095 | $110,820 | 4.3% | | Cash and cash equivalents | $4,697 | $19,353 | -$14,656 | -75.7% | | Total assets | $3,359,427 | $3,223,071 | $136,356 | 4.2% | | Liabilities | | | | | | Notes payable, net | $1,018,398 | $894,676 | $123,722 | 13.8% | | Total liabilities | $1,972,895 | $1,835,954 | $136,941 | 7.5% | | Equity | | | | | | Total stockholders' equity | $1,334,329 | $1,321,118 | $13,211 | 1.0% | | Total equity | $1,386,532 | $1,387,117 | -$585 | -0.04% | - The Company reclassified $0.6 million from Common Stock to Additional Paid-in-Capital due to a reduction in shares outstanding from the Reverse Stock Split effective April 28, 2025[20] Income Statements Income statements show increased total revenues but decreased net income for Q2 and H1 2025 due to higher expenses Income Statement Highlights (in thousands, except per share amounts) | Item | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Change (YoY) | Percentage Change (YoY) | | :------------------------------------------ | :------------------------------- | :------------------------------- | :----------- | :---------------------- | | Total revenues | $84,234 | $76,221 | $8,013 | 10.5% | | Total expenses | $62,860 | $57,583 | $5,277 | 9.2% | | Interest expense, net | ($18,960) | ($15,165) | ($3,795) | 25.0% | | Net income | $4,254 | $4,850 | ($596) | -12.3% | | Net income available to Easterly Government Properties, Inc. | $4,071 | $4,611 | ($540) | -11.7% | | Diluted EPS | $0.09 | $0.11 | ($0.02) | -18.2% | | Weighted-average common shares outstanding (Diluted) | 45,111,753 | 41,280,249 | 3,831,504 | 9.3% | | Item | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | Change (YoY) | Percentage Change (YoY) | | :------------------------------------------ | :------------------------------- | :------------------------------- | :----------- | :---------------------- | | Total revenues | $162,909 | $149,021 | $13,888 | 9.3% | | Total expenses | $121,697 | $113,078 | $8,619 | 7.6% | | Interest expense, net | ($37,337) | ($29,001) | ($8,336) | 28.7% | | Net income | $7,537 | $9,734 | ($2,197) | -22.6% | | Net income available to Easterly Government Properties, Inc. | $7,198 | $9,237 | ($2,039) | -22.1% | | Diluted EPS | $0.15 | $0.22 | ($0.07) | -31.8% | Net Operating Income This section reconciles net income to NOI and Cash NOI, both showing significant year-over-year increases for improved property performance Net Operating Income (in thousands) | Item | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Change (YoY) | Percentage Change (YoY) | | :----------------------- | :------------------------------- | :------------------------------- | :----------- | :---------------------- | | Net Operating Income | $60,718 | $53,707 | $7,011 | 13.1% | | Cash Net Operating Income | $58,108 | $50,585 | $7,523 | 14.9% | | Item | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | Change (YoY) | Percentage Change (YoY) | | :----------------------- | :------------------------------- | :------------------------------- | :----------- | :---------------------- | | Net Operating Income | $117,839 | $105,187 | $12,652 | 12.0% | | Cash Net Operating Income | $113,243 | $99,047 | $14,196 | 14.3% | EBITDA This section presents EBITDA and Pro forma EBITDA calculations, showing substantial year-over-year increases in operational earnings EBITDA (in thousands) | Item | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Change (YoY) | Percentage Change (YoY) | | :----- | :------------------------------- | :------------------------------- | :----------- | :---------------------- | | EBITDA | $54,282 | $45,889 | $8,393 | 18.3% | | Pro forma EBITDA | $54,542 | N/A | N/A | N/A | | Item | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | Change (YoY) | Percentage Change (YoY) | | :----- | :------------------------------- | :------------------------------- | :----------- | :---------------------- | | EBITDA | $105,243 | $90,749 | $14,494 | 16.0% | - Pro forma EBITDA for the three months ended June 30, 2025, includes adjustments assuming a full quarter of operations from two properties acquired in Q2 2025[23] FFO and CAD This section details FFO, Core FFO, and CAD calculations, all showing positive year-over-year growth in operational cash flow FFO, Core FFO, and CAD (in thousands, except per share amounts) | Item | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Change (YoY) | Percentage Change (YoY) | | :-------------------------------- | :------------------------------- | :------------------------------- | :----------- | :---------------------- | | FFO | $34,816 | $30,690 | $4,126 | 13.4% | | Core FFO | $34,592 | $31,373 | $3,219 | 10.3% | | CAD | $29,298 | $24,806 | $4,492 | 18.1% | | FFO, per share - fully diluted basis | $0.74 | $0.71 | $0.03 | 4.2% | | Core FFO, per share - fully diluted basis | $0.74 | $0.72 | $0.02 | 2.8% | | Item | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | Change (YoY) | Percentage Change (YoY) | | :-------------------------------- | :------------------------------- | :------------------------------- | :----------- | :---------------------- | | FFO | $66,924 | $61,125 | $5,799 | 9.5% | | Core FFO | $67,653 | $62,129 | $5,524 | 8.9% | | CAD | $60,443 | $50,691 | $9,752 | 19.2% | | FFO, per share - fully diluted basis | $1.45 | $1.41 | $0.04 | 2.8% | | Core FFO, per share - fully diluted basis | $1.46 | $1.44 | $0.02 | 1.4% | Unconsolidated Real Estate Venture This section provides financial details for the unconsolidated real estate venture, in which the Company holds a 53.0% share - The Company owns 53.0% of the properties through the unconsolidated joint venture[26][27] Unconsolidated Real Estate Venture - Easterly's Share (in thousands) | Item | June 30, 2025 (Balance Sheet) | Three Months Ended June 30, 2025 (Income Statement) | Six Months Ended June 30, 2025 (Income Statement) | | :-------------------------------- | :---------------------------- | :------------------------------------------ | :------------------------------------------ | | Real estate properties - net | $262,827 | N/A | N/A | | Total assets | $316,165 | N/A | N/A | | Total liabilities | $5,960 | N/A | N/A | | Total equity | $310,514 | N/A | N/A | | Net income | N/A | $1,840 | $3,662 | | EBITDA | N/A | $4,181 | $8,344 | | FFO | N/A | $4,120 | $8,221 | | Core FFO | N/A | $4,136 | $8,254 | | CAD | N/A | $4,146 | $8,244 | Debt This section details the Company's debt structure, including schedules, maturities, and key debt statistics Debt Schedules This section details the Company's unsecured and secured debt instruments, including maturity dates, interest rates, and key debt statistics Debt Instrument Overview (June 30, 2025, in thousands) | Debt Instrument | Maturity Date | Interest Rate | Balance | Percentage of Total Indebtedness | | :-------------------------- | :------------ | :------------ | :------ | :------------------------------- | | Total unsecured debt | 4.6 years (wtd-avg) | 4.81% (wtd-avg) | $1,577,050 | 91.1% | | Total secured mortgage debt | 2.3 years (wtd-avg) | 3.67% (wtd-avg) | $154,034 | 8.9% | | Total Debt | N/A | N/A | $1,731,084 | 100.0% | Debt Statistics (June 30, 2025, in thousands) | Statistic | Value | | :------------------------------------------ | :------ | | Variable rate debt - unhedged | $252,050 | | % Variable rate debt - unhedged | 14.6% | | Fixed rate debt | $1,479,034 | | % Fixed rate debt | 85.4% | | Weighted average maturity | 4.4 years | | Weighted average interest rate | 4.7% | | Net Debt | $1,725,005 | | Adjusted Net Debt | $1,576,420 | - The Company uses interest rate swaps to effectively fix interest rates on portions of its revolving credit facility and term loan facilities, with some swaps not coterminous with the debt maturity dates[30][31][32][35] Debt Maturities This section outlines the Company's debt maturity schedule by year, detailing secured and unsecured debt and weighted average interest rates Debt Maturity Schedule (in thousands) | Year | Secured Debt Scheduled Amortization | Secured Debt Scheduled Maturities | Unsecured Debt Scheduled Maturities | Total Debt Maturing | Percentage of Debt Maturing | Weighted Average Interest Rate of Scheduled Maturities | | :--- | :---------------------------------- | :-------------------------------- | :---------------------------------- | :------------------ | :-------------------------- | :----------------------------------------------------- | | 2025 | $2,334 | - | - | $2,334 | 0.0% | 0.00% | | 2026 | $3,686 | $6,368 | $174,500 | $184,554 | 10.5% | 5.06% | | 2027 | $1,093 | $134,640 | $95,000 | $230,733 | 13.4% | 3.80% | | 2028 | $983 | - | $427,550 | $428,533 | 24.9% | 5.24% | | 2029 | $1,016 | - | $135,000 | $136,016 | 7.9% | 3.89% | | 2030 | $1,049 | - | $225,000 | $226,049 | 13.1% | 3.25% | | 2031 | $1,081 | - | $100,000 | $101,081 | 5.8% | 3.83% | | 2032 | $1,116 | - | $130,000 | $131,116 | 7.6% | 5.86% | | 2033 | $668 | - | $200,000 | $200,668 | 11.6% | 6.43% | | 2034 | - | - | $90,000 | $90,000 | 5.2% | 3.98% | | Total | $13,026 | $141,008 | $1,577,050 | $1,731,084 | 100.0% | N/A | - The largest portion of debt, 24.9% or $428.5 million, is scheduled to mature in 2028, followed by 13.4% in 2027 and 13.1% in 2030[36] Properties This section provides an overview of the Company's leased properties, tenant breakdown, lease expiration schedule, and re/development projects Leased Operating Property Overview This section provides a comprehensive overview of leased operating properties, categorized by tenant type, including square footage and annualized lease income Leased Operating Property Summary (As of June 30, 2025) | Category | Total Leased Square Feet | Annualized Lease Income | Percentage of Total Annualized Lease Income | Annualized Lease Income per Leased Square Foot | | :------------------------------------------ | :----------------------- | :---------------------- | :------------------------------------------ | :--------------------------------------------- | | Wholly Owned U.S. Government Leased Properties | 7,946,677 | $283,418,381 | 76.9% | $35.67 | | Wholly Owned State and Local Government Leased Property | 667,424 | $29,522,746 | 8.0% | $44.23 | | Wholly Owned Privately Leased Property | 273,460 | $5,409,571 | 1.4% | $19.78 | | U.S Government Leased to Unconsolidated Real Estate Venture | 1,214,165 | $50,378,017 | 13.7% | $41.49 | | Total / Weighted Average | 10,101,726 | $368,728,715 | 100.0% | $36.50 | | Total / Weighted Average at Easterly's Share | 9,531,067 | $345,051,047 | N/A | $36.20 | - The majority of the Company's annualized lease income (76.9%) comes from wholly-owned U.S. Government leased properties[39] - The unconsolidated real estate venture, in which Easterly owns 53.0%, contributes 13.7% of the total annualized lease income, primarily from VA outpatient clinics[40][46] Tenants This section categorizes tenants by government and private sectors, detailing leased square footage, annualized lease income, and remaining lease terms Tenant Breakdown (As of June 30, 2025) | Tenant Category | Weighted Average Remaining Lease Term | Leased Square Feet | Percentage of Leased Square Feet | Annualized Lease Income | Percentage of Total Annualized Lease Income | | :-------------------------- | :------------------------------------ | :----------------- | :------------------------------- | :---------------------- | :------------------------------------------ | | U.S. Government | 9.9 years | 8,951,206 | 88.6% | $329,012,287 | 89.2% | | State and Local Government | 10.2 years | 597,214 | 5.9% | $26,018,356 | 7.0% | | Private Tenants | 4.5 years | 553,306 | 5.5% | $13,698,072 | 3.8% | | Total / Weighted Average | 9.6 years | 10,101,726 | 100.0% | $368,728,715 | 100.0% | - The Department of Veteran Affairs (VA) is the largest U.S. Government tenant, contributing 26.0% of annualized lease income with a weighted average remaining lease term of 13.7 years[47] - The Federal Bureau of Investigation (FBI) is the second largest U.S. Government tenant, contributing 14.9% of annualized lease income with an 8.5-year weighted average remaining lease term[47] Lease Expirations This section schedules lease expirations by year, detailing expiring leases, square footage, and annualized lease income, with over 50% expiring thereafter Lease Expiration Schedule (As of June 30, 2025) | Year of Lease Expiration | Number of Leases Expiring | Leased Square Footage Expiring | Percentage of Total Leased Square Footage Expiring | Annualized Lease Income Expiring | Percentage of Total Annualized Lease Income Expiring | Annualized Lease Income per Leased Square Foot Expiring | | :----------------------- | :------------------------ | :----------------------------- | :------------------------------------------------- | :------------------------------- | :--------------------------------------------------- | :------------------------------------------------------ | | 2025 | 8 | 466,741 | 4.6% | $15,272,598 | 4.1% | $32.72 | | 2026 | 5 | 296,112 | 2.9% | $11,102,918 | 3.0% | $37.50 | | 2027 | 11 | 545,872 | 5.4% | $20,280,347 | 5.5% | $37.15 | | 2028 | 12 | 807,610 | 8.0% | $18,092,114 | 4.9% | $22.40 | | 2029 | 10 | 757,363 | 7.5% | $24,733,328 | 6.7% | $32.66 | | 2030 | 4 | 67,202 | 0.7% | $1,808,571 | 0.5% | $26.91 | | 2031 | 7 | 304,726 | 3.0% | $11,762,560 | 3.2% | $38.60 | | 2032 | 11 | 712,188 | 7.1% | $21,952,563 | 6.0% | $30.82 | | 2033 | 10 | 566,197 | 5.6% | $22,349,592 | 6.1% | $39.47 | | 2034 | 10 | 507,793 | 5.0% | $21,098,786 | 5.7% | $41.55 | | Thereafter | 55 | 5,069,922 | 50.2% | $200,275,338 | 54.3% | $39.50 | | Total / Weighted Average | 143 | 10,101,726 | 100.0% | $368,728,715 | 100.0% | $36.50 | - As of June 30, 2025, nine tenants occupying approximately 5.3% of leased square feet and contributing 4.7% of annualized lease income have the right to terminate their leases before the stated expiration terms[50] Summary of Re/Development Projects This section summarizes re/development projects, including properties under construction and in design, detailing costs, timelines, and reimbursements Projects Under Construction (As of June 30, 2025, in thousands) | Property Name | Location | Property Type | Total Leased Square Feet | Lease Term | Anticipated Total Cost | Cost to Date | Anticipated Lump Sum Reimbursement | Anticipated Completion Date | Anticipated Lease Commencement | | :-------------- | :--------- | :------------ | :----------------------- | :--------- | :--------------------- | :----------- | :--------------------------------- | :-------------------------- | :----------------------------- | | FDA - Atlanta | Atlanta, GA | Laboratory | 162,000 | 20-Year | $244,006 | $213,726 | $150,680 | 4Q 2025 | 4Q 2025 | | JUD - Flagstaff | Flagstaff, AZ | Courthouse | 50,777 | 20-Year | $60,916 | $17,558 | $24,700 | 3Q 2026 | 3Q 2026 | | Total | N/A | N/A | 212,777 | N/A | $304,922 | $231,284 | $175,380 | N/A | N/A | Projects in Design (As of June 30, 2025) | Property Name | Location | Property Type | Total Estimated Leased Square Feet | Lease Term | Anticipated Completion Date | Anticipated Lease Commencement | | :-------------- | :--------- | :------------ | :--------------------------------- | :--------- | :-------------------------- | :----------------------------- | | JUD - Medford | Medford, OR | Courthouse | 40,035 | 20-Year | 2H 2027 | 2H 2027 | - Lump-sum reimbursements include tenant improvement costs and development fees[56]