Easterly Government Properties(US:DEA)2021-11-02 20:11Financial Data and Key Metrics Changes - Net income per share on a fully diluted basis was $0.09, FFO per share was $0.33, and FFO as adjusted per share was $0.31 [34] - Cash available for distribution was $26.1 million, with total indebtedness of approximately $1 billion [34][37] - The weighted average age of the portfolio was 13.8 years, and the weighted average remaining lease term was 8.9 years [35] Business Line Data and Key Metrics Changes - The company has acquired 10 properties year-to-date for a total pro rata contractual purchase price of approximately $321.3 million, exceeding its increased acquisition volume target for the year [25] - The weighted average remaining lease term is expected to grow nearly 16% from 8.9 years to 10.3 years through the acquisition of the VA portfolio [20] Market Data and Key Metrics Changes - The company has positioned itself to achieve an acquisition target range of $200 million to $300 million for 2022, with a significant pipeline of actionable opportunities [27] - The universe of global investors sees value in these assets at a sub-5% cap rate, indicating strong market interest [15] Company Strategy and Development Direction - The company has increased its acquisition guidance for 2021 to $350 million, representing a 75% increase from the original target [8] - A new joint venture with a leading global investor has been formed to enhance acquisition capabilities and access to larger assets [46] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the acquisition pipeline and the ability to deliver consistent growth to shareholders, maintaining a steady dividend yield of 5% [49][51] - The company is focused on acquiring young buildings and renewing existing assets for long lease durations, which are core to its strategy [36] Other Important Information - The company has entered into a sustainability-linked pricing component in its credit facility, which can improve pricing based on sustainability performance [41] - The company has executed a public offering of 6.3 million shares at a net price of $21.64 per share to fund its acquisition pipeline [42] Q&A Session Summary Question: Can you quantify how much of the acquisition guidance for 2022 is contractual under the JV versus new targeted acquisitions? - The guidance assumes $50 million of pro rata acquisition volume falls into next year, with $250 million of fresh acquisitions targeted [53] Question: How much of the joint venture do you still have to close? - Approximately $300 million of the share still needs to close within that portfolio, with most expected to close in 2022 [57] Question: What are your expectations for cap rates in 2022? - The expectation is that cap rates will continue to trend down, with opportunities ranging from 5% to north of 6% [70] Question: How do you plan on growing the joint venture? - The company anticipates larger portfolio deals will be put in the joint venture, while smaller transactions will be completed on the balance sheet [61] Question: Can you comment on the inflationary impact on operating expenses? - The company has a tenant reimbursement line item that offsets operating expenses, and it feels insulated from inflation due to lease structures [68]