Financial Data and Key Metrics Changes - For Q3 2025, net income per share was $0.03, and core FFO per share grew to $0.76, slightly above expectations [11] - Cash available for distribution was $29.3 million, reflecting steady operational performance [11] - Core FFO growth from 2024 to the midpoint of 2025 was reported at 3%, driven by acquisitions and strong renewal execution [7][11] Business Line Data and Key Metrics Changes - The company maintained high portfolio occupancy at 97% and a weighted average lease term of approximately 10 years, indicating strong tenancy durability [7] - Recent acquisition of York Space Systems headquarters in Colorado aligns with the goal of 15% government-adjacent exposure [8] - The development pipeline remains active, with major projects like the FDA Atlanta nearing completion, expected to enhance earnings [12] Market Data and Key Metrics Changes - The company is focused on diversifying its portfolio with a goal of 70% federal exposure, 15% state and local, and 15% adjacent space [54] - The acquisition of properties like DC Plaza and DHS Burlington demonstrates the strategy to grow state and local exposure while maintaining high-credit government properties [54] Company Strategy and Development Direction - The company’s growth strategy is centered on three long-term priorities: growing core FFO by 2%-3% annually, increasing same-store performance, and executing value-creating development opportunities [5][10] - The strategy aims to balance growth and durability, ensuring consistent performance regardless of economic conditions [6] - The company is targeting a medium-term cash leverage goal of six times, down from historical levels of seven to eight times, to enhance investor comparability [9] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence that the federal government will not default on leases, despite ongoing budget negotiations and shutdowns [4] - The company remains optimistic about its ability to deliver consistent growth, supported by a robust acquisition pipeline and strong tenant relationships [10][11] - Management acknowledged the challenges posed by the current cost of capital but emphasized the potential for mean reversion as the company continues to deliver on growth targets [25][60] Other Important Information - The company has made significant progress in reducing cash leverage, with expectations to improve further upon project completions [12][13] - The recent acquisition of York Space Systems was priced at $29 million with a cap rate in the low 11%, reflecting strong fundamentals in the Denver market [49] - The company is exploring modern lease structures with the GSA, indicating a shift towards more competitive leasing practices [55] Q&A Session Summary Question: Update on Flagstaff Courthouse completion - Management indicated that the completion date was pushed out due to ongoing design work involving multiple agencies, with a new achievable date set for 2026 [17] Question: Thoughts on capital allocation and funding sources - Management discussed the cost of equity and the potential for partnerships with sovereign wealth funds to optimize capital allocation [18][20] Question: Acquisition guidance for 2026 - Management clarified that the $50 million acquisition guidance for 2026 is a conservative target, reflecting confidence in the pipeline and growth potential [24][26] Question: Impact of dispositions on leverage targets - Management noted that dispositions may require favorable interest rates to effectively reduce leverage, while still pursuing acquisitions [27][29] Question: Effects of government shutdown on operations - Management acknowledged that shutdowns slow operations but do not threaten the value of the portfolio, emphasizing the government's commitment to meet obligations [30][31] Question: Strategy shift from higher leverage to lower leverage - Management explained that the focus is on achieving lower leverage with moderate growth to improve cost of capital, while still aiming for consistent growth [60][64] Question: 2026 guidance and expected growth - Management provided insights into the 2026 guidance, highlighting that growth will primarily come from the FDA Atlanta project and same-store growth, with no expected dispositions [71][73]

Financial Data and Key Metrics Changes - For the third quarter, net income per share was reported at $0.03, while core FFO per share grew to $0.76, slightly above expectations [11] - Cash available for distribution was $29.3 million, reflecting steady operational performance [11] - Core FFO growth from 2024 to the midpoint of the 2025 guidance range was 3%, driven by acquisitions and strong renewal execution [7][11] Business Line Data and Key Metrics Changes - The company maintained high portfolio occupancy at 97% and a weighted average lease term of approximately 10 years, indicating strong tenancy durability [7] - The recent acquisition of York Space Systems headquarters in Colorado aligns with the goal of achieving 15% government-adjacent exposure [8] - The development pipeline remains active, with major projects like the FDA Atlanta nearing completion, expected to enhance earnings [12] Market Data and Key Metrics Changes - The company aims to diversify its portfolio with a target of 70% federal exposure, 15% state and local, and 15% in adjacent spaces [54] - The acquisition of properties like DC Plaza and DHS Burlington demonstrates the strategy to grow state and local exposure while maintaining high-credit government properties [54] Company Strategy and Development Direction - The company is focused on a disciplined growth strategy centered on three long-term priorities: growing core FFO by 2-3% annually, increasing same-store performance, and executing value-creating development opportunities [5][10] - The strategy aims to balance growth and durability, ensuring consistent performance regardless of economic conditions [6] - The company is targeting a medium-term cash leverage goal of six times, down from historical levels of seven to eight times, to enhance investor comparability [9] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence that the government will not default on leases, despite the ongoing federal government shutdown [4] - The company remains optimistic about its growth trajectory, with expectations of achieving 2-3% annual core FFO growth and potential upside [14][60] - Management highlighted the importance of maintaining strong relationships with government agencies and the potential for modernizing lease structures with the GSA [55] Other Important Information - The company has successfully extended leases at key properties, including USCIS Lincoln and VA Golden, indicating strong tenant relationships [11] - The FDA Atlanta project is expected to significantly contribute to earnings growth, with a large portion of the anticipated increase in 2026 coming from this development [71] Q&A Session Summary Question: What is happening with the Flagstaff Courthouse completion? - The completion date has been pushed out two quarters due to the government balancing multiple agency designs, but the new date is considered achievable [17] Question: Can you discuss your overall thoughts on capital allocation and funding sources for development? - The company is focused on optimizing its cost of equity and exploring partnerships with sovereign wealth funds to enhance funding opportunities [20][21] Question: What are the headwinds affecting the $50 million acquisition guidance for 2026? - The guidance is conservative to reflect the current cost of capital, but the company expects to achieve this target given its strong acquisition pipeline [25][26] Question: Will dispositions be part of achieving the leverage target? - Dispositions may be necessary, but the company believes it can achieve its leverage goals through careful management of acquisitions and development projects [28] Question: How does the government shutdown impact operations? - While the shutdown slows down processes, management believes it will not diminish the portfolio's value, and the government will continue to meet its obligations [30][76] Question: Can you clarify the 2026 guidance and any expected dispositions? - There are no dispositions expected for 2026, and the guidance reflects growth primarily from the FDA Atlanta project and same-store growth [73]

Financial Data and Key Metrics Changes - For Q3 2025, net income per share was $0.03 and core FFO per share grew to $0.76, slightly above expectations [16] - Cash available for distribution was $29.3 million, reflecting steady operational performance [16] - Core FFO growth from 2024 to the midpoint of guidance for 2025 was reported at 3% [10] Business Line Data and Key Metrics Changes - The portfolio occupancy remained near historical highs at 97% with a weighted average lease term of approximately ten years [10] - The recent acquisition of York Space Systems headquarters in Colorado aligns with the goal of 15% government-adjacent exposure [11] Market Data and Key Metrics Changes - The company continues to maintain strong relationships across agencies and has refined its balance sheet with a disciplined approach to capital deployment [10] - The development pipeline remains active, with major projects progressing, including the FDA Atlanta project nearing completion [18] Company Strategy and Development Direction - The company is focused on three long-term priorities: growing core FFO by 2% to 3% annually, increasing same-store performance through diversification, and executing value-creating development opportunities [7] - The strategy aims to balance growth and durability, ensuring consistent performance regardless of economic or policy changes [7] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence that the government will not default on leases, viewing shutdowns as part of budget negotiations [5] - The company is optimistic about its growth strategy and the opportunities ahead, emphasizing the importance of mission-critical facilities [14] Other Important Information - The company is targeting a medium-term cash leverage goal of six times, down from historical levels of seven to eight times [13] - The acquisition team has built a robust pipeline, allowing for selective capital deployment [12] Q&A Session Summary Question: Update on Flagstaff warehouse completion - The completion has been pushed out two quarters due to ongoing design work by the government, but the new date is considered achievable [24] Question: Thoughts on capital allocation and funding sources - The company is focused on cost of equity and believes it can develop at a spread above its cost of capital, with strong relationships with sovereign wealth funds [25][27] Question: Acquisition guidance for 2026 - The $50 million acquisition guidance is set low to manage expectations, with a strong pipeline of $1.5 billion identified [31][34] Question: Impact of government shutdown on leasing - The shutdown slows processes but does not diminish portfolio value, with agencies continuing to work effectively [40][42] Question: Achieving six times cash flow leverage - The company plans to leverage attractive development projects and joint ventures to reach its leverage target [46][50] Question: Changes in growth strategy - The focus has shifted to lower leverage with moderate growth to improve cost of capital, while still aiming for 2% to 3% growth [69][76] Question: 2026 guidance and headwinds - The guidance reflects growth from FDA Atlanta and same-store growth, offset by increased G&A expenses [81][84] Question: Government shutdown and lease funding - All leases are funded for six months, and the company expects the government to meet its obligations despite shutdowns [86][88]

Financial Data and Key Metrics Changes - For Q3 2025, net income per share was $0.03, and core FFO per share grew to $0.76, slightly above expectations [11] - Cash available for distribution was $29.3 million, reflecting steady operational performance [11] - Core FFO growth from 2024 to the midpoint of guidance for 2025 was 3%, driven by acquisitions and strong renewal execution [7][11] Business Line Data and Key Metrics Changes - The company maintained high portfolio occupancy at 97% and a weighted average lease term of approximately 10 years, indicating strong tenancy durability [7] - Recent acquisition of York Space Systems headquarters in Colorado aligns with the goal of 15% government-adjacent exposure [8] Market Data and Key Metrics Changes - The company is focused on diversifying its portfolio with state and local government leases, which can extend lease terms up to 40 years, enhancing weighted average lease term [12] - The development pipeline remains active, with major projects like the FDA Atlanta nearing completion, expected to drive future earnings growth [12][67] Company Strategy and Development Direction - The company’s growth strategy is centered on three long-term priorities: growing core FFO by 2-3% annually, increasing same-store performance through diversification, and executing value-creating development opportunities [5] - The company aims to improve its cost of capital through leverage optimization, targeting a medium-term cash leverage goal of six times, down from historical levels of seven to eight times [9] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence that the government will not default on leases despite the ongoing federal government shutdown, viewing it as a negotiating tool rather than a threat [4][73] - The company remains optimistic about its growth trajectory, with a focus on delivering essential real estate that supports government operations [10][77] Other Important Information - The company has successfully extended leases at key properties, including USCIS Lincoln and VA Golden, and continues to find the government a constructive partner [11] - The company’s guidance for full-year core FFO per share for 2025 is narrowed to a range of $2.98 to $3.02, consistent with its growth objectives [14] Q&A Session Summary Question: What is the status of the Flagstaff Courthouse completion? - The completion date has been pushed out two quarters due to ongoing design work involving multiple agencies, but the new date is considered achievable [18] Question: Can you discuss your thoughts on capital allocation and funding sources for development? - The company is exploring various funding sources, including partnerships with sovereign wealth funds, to optimize capital allocation while managing costs [19][22] Question: What is the reasoning behind the $50 million acquisition guidance for 2026? - The guidance reflects a conservative approach amid cost of capital challenges, but the company expects to identify opportunities within its $1.5 billion pipeline [25][27] Question: Will dispositions be part of achieving your leverage target? - Dispositions may be considered, but the company believes it can achieve its leverage goals through acquisitions and partnerships without needing to sell assets [28][29] Question: How does the government shutdown affect leasing and agency operations? - While the shutdown may slow processes, it does not threaten the value of the portfolio, and the company expects a quick catch-up once operations resume [30][31] Question: Can you elaborate on the strategy for achieving six times cash flow leverage? - The company plans to leverage development projects effectively while maintaining a focus on growth, aiming for a gradual reduction in leverage over the next few years [33][36] Question: What are the expectations for 2026 guidance and potential headwinds? - The 2026 guidance reflects growth primarily from the FDA Atlanta project, with expectations for same-store growth offset by increased G&A expenses [67][70]