Financial Data and Key Metrics Changes - For Q1 2025, net income per share was $0.07 and core FFO per share was $0.73, with cash available for distribution at $31.1 million [13][14] - The company is on track to deliver an estimated 2% to 3% core FFO per share growth in 2025, with a rightsized dividend yield of approximately 8% [13][14] Business Line Data and Key Metrics Changes - The company announced two significant additions to its portfolio: a federal courthouse facility in Medford, Oregon, and a 290,000 square foot facility leased to the AA plus rated District of Columbia government [9][10] - The weighted average remaining lease term is strong at 9.8 years, with over 95% of lease income in firm term [14] Market Data and Key Metrics Changes - The company is strategically positioned to benefit from the Doge Initiative, which is shifting the government's real estate strategy towards a more flexible leased model [7][8] - The acquisition of the DC facility aligns with national trends of decentralizing education oversight to state and local levels, ensuring stable demand [10] Company Strategy and Development Direction - The updated capital allocation strategy focuses on return on equity and value creation, with a reduction in the quarterly dividend to free up capital for growth initiatives [5][6] - The company aims to have 15% of its portfolio in state and local government facilities and 15% in government-adjacent properties over the next three to five years [30] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the portfolio's ability to provide mission-critical real estate solutions, with no lease terminations from Doge or otherwise [14][60] - The company is navigating a robust pipeline of opportunities, with approximately $1 billion in potential projects [27] Other Important Information - The company executed a $100 million senior unsecured term loan amendment and raised an additional $125 million in debt capacity [14][15] - The recent dividend cut was deemed a prudent decision for growth, allowing for better alignment with peers and a more sustainable dividend policy [16] Q&A Session Summary Question: Can you discuss the economics of the acquisition and development? - The DC acquisition cost was approximately $120 million with a cap rate in the high nines, providing a premium to the cost of capital [23] - For the Medford project, specific numbers are not yet available as it is in the early design stages, but a 150 basis points spread to the cost of capital is targeted [24] Question: What is the size of the pipeline of opportunities? - The pipeline is approximately $1 billion, including GSA opportunities, state and local projects, and government-adjacent facilities [27] Question: Can you comment on the balance sheet and leverage targets? - Spreads have widened by 25 to 50 basis points for recent deals, but the company believes it timed the market well for its recent debt execution [33] - The leverage target remains in the range of 6.5 to 7.5 times adjusted for development [34] Question: Can you provide details on the Department of Forestry building in Albuquerque? - The state of New Mexico was brought in as a tenant, providing a ten-year firm lease with additional renewal options, enhancing cash flow durability [41][42] Question: What is the lease structure of the DC acquisition? - The lease is a modified gross lease with approximately 1% annual escalations and includes real estate tax and operating expense escalations [63]

Easterly Government Properties (DEA) Q1 2025 Earnings Call April 29, 2025 11:00 AM ET Company Participants Lindsay Winterhalter - Senior Vice President of Investor Relations & OperationsDarrell Crate - CEO, President & DirectorAllison Marino - EVP & CFOPeter Abramowitz - SVP - Equity ResearchMichael Carroll - Managing Director & Head of US Real Estate ResearchJohn Kim - Managing Director - US Real Estate Conference Call Participants Seth Bergey - Senior Analyst Operator Welcome to the Easterly Government Pr ...