Easterly Government Properties(DEA) - 2021 Q2 - Earnings Call Transcript

Financial Data and Key Metrics Changes - The company reported a net income per share of $0.10 and FFO per share of $0.33 for Q2 2021, with adjusted FFO per share at $0.31 and cash available for distribution at $23.2 million [28] - The total indebtedness at quarter-end was approximately $1 billion, with a net debt to total enterprise value of 33.9% and an adjusted net debt to annualized quarterly pro forma EBITDA ratio of 6.2 times [29][30] Business Line Data and Key Metrics Changes - The company owns 84 properties across 39 tenant agencies, with an average building age of 13.4 years and an average lease duration of 8.6 years [8][25] - Year-to-date, the company has acquired six properties totaling $134 million, increasing its 2021 FFO guidance per share on a fully diluted basis [18][37] Market Data and Key Metrics Changes - The company has executed on 45% of its enhanced acquisition guidance of $300 million for the year, indicating a robust acquisition pipeline, particularly in the VA market [19][20] - The company anticipates growth in cash flow, with a dividend yield of approximately 5%, representing a spread of over 370 basis points above the treasury [10][37] Company Strategy and Development Direction - The company is focused on acquiring mission-critical properties, with a strong emphasis on facilities that support essential government functions [12][14] - The company plans to increase its acquisition volume target by 50% for the year, from $200 million to $300 million, reflecting confidence in its acquisition pipeline [18][19] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the second half of the year, citing a strong acquisition pipeline and the ability to generate cash flow that can outpace FFO growth [11][39] - The company believes it has emerged from COVID-19 stronger, with a diversified portfolio and actionable acquisition opportunities exceeding pre-pandemic levels [7][11] Other Important Information - The company has made significant progress in its debt capital markets activities, including a note purchase agreement to issue up to $250 million in fixed-rate senior unsecured notes [30][31] - The company has implemented a sustainability-linked pricing component in its amended credit facility, which could improve pricing based on achieving certain sustainability performance targets [34][35] Q&A Session Summary Question: Acquisition market competition and pricing impact - Management noted an increase in acquisition opportunities but did not observe new competitors entering the market, maintaining a competitive edge due to better cost of capital [40][41] Question: Future property sales and portfolio repositioning - Management indicated that while there may be occasional strategic sales, the focus remains on maintaining a strong portfolio of mission-critical properties [43][44] Question: Opportunities with specific agencies - Management highlighted ongoing opportunities with the FDA and VA, emphasizing the potential for new outpatient facilities and mission-critical properties [48][49]