Easterly Government Properties: Bear Thesis Is Running Dry

Group 1: Investment Thesis - DEA's current market price of just over $20 is considered undervalued relative to its cash flow potential, offering a 14% cash yield with slightly growing cash flows [2][21] - The bear thesis surrounding DEA has weakened as fears regarding DOGE's impact on revenues and dividend sustainability have not materialized [3][21] - The dividend cut from $0.6625 to $0.45 was viewed as a responsible decision to ensure long-term growth, despite negative market reactions [7][8] Group 2: Financial Performance - DEA's Q1 2025 earnings report showed solid performance with a net operating income (NOI) increase to $57.121 million from $51.480 million year-over-year [12] - Cash available for distribution (CAD) increased significantly to $31.145 million from $25.885 million year-over-year, indicating strong cash flow generation [14] - FFO per share remained flat at $0.71, while core FFO per share increased to $0.73 from $0.71 year-over-year, reflecting stable operational performance [14] Group 3: Market Position and Future Outlook - DEA maintains a strong lease structure with over 95% of lease income in firm terms, reducing exposure to potential lease cancellations [15][16] - The company has a project pipeline valued at $1.5 billion, indicating growth opportunities in government-related real estate [17] - Long-term lease agreements with the U.S. government provide a stable revenue base, with rent obligations exceeding the company's enterprise value [26][28]