Easterly Government Properties(DEA) - 2024 Q4 - Earnings Call Transcript

Financial Data and Key Metrics Changes - For Q4 2024, net income per share was $0.05, and core FFO per share grew 3% year over year to$ 0.29 [18] - For the full year 2024, net income per share was $0.19, and core FFO met the upper end of guidance at$ 1.17 [18] - Cash available for distribution was $25.1 million for Q4 and$ 100.9 million for the full year [18][19] Business Line Data and Key Metrics Changes - 95% of the portfolio consists of firm term leases, with a weighted average remaining lease term of 10 years [13][27] - The company closed ten new assets in 2024, expanding its total addressable market [15] - The average age of the company's Class A assets is 15.7 years, contrasting with the federal government's average of over 50 years [10] Market Data and Key Metrics Changes - The GSA holds over $80 billion in deferred maintenance liabilities, a 57% increase from five years ago [9] - The FBI plans to relocate 1,500 agents from Washington, D.C. to field offices across the country, which may increase demand for the company's properties [14] Company Strategy and Development Direction - The company focuses on mission-critical facilities and has a strong pipeline of acquisition and development opportunities [16][38] - The strategy includes expanding into state and local government-adjacent spaces while maintaining disciplined portfolio management [19][20] - The company aims for 2% to 3% core FFO growth for shareholders in 2025 [33] Management's Comments on Operating Environment and Future Outlook - Management acknowledges short-term turbulence in government operations but believes the company is well-positioned for long-term growth [47] - The company emphasizes its strong relationships with government agencies and its ability to deliver cost efficiencies [49][52] - Management remains optimistic about future opportunities and the potential for continued growth [32][33] Other Important Information - The company amended its$ 100 million senior unsecured term loan, extending the maturity date to 2028 and increasing borrowing capacity [21][22] - Approximately 5% of the portfolio's annualized lease income is in soft term, which management believes does not pose significant risk [26] Q&A Session Summary Question: Acquisition pipeline and opportunity set - Management sees a strong pipeline for acquisitions and development, with attractive opportunities despite higher interest rates [36][38] Question: Impact of austerity on external growth - Management believes they are well-positioned to help the government find savings despite potential budget cuts [45][47] Question: Office utilization and its importance - Management acknowledges the challenge of measuring utilization but emphasizes the stability of mission-critical facilities [57][60] Question: $100 million acquisition guidance - Management plans to focus on state and local government-adjacent properties for acquisitions [65] Question: AFFO or CAD growth outlook - Management aims to align CAD growth with FFO growth by managing capital levels effectively [67][70] Question: CapEx run rate - Q4 typically sees higher CapEx due to seasonality, with a projected run rate of$ 1.75 to $2 per square foot going forward [76][78] Question: Future of SSA Chicago building post-expiration - Management plans to evaluate options for the building after GSA's tenancy ends, expecting favorable market conditions [80][81]