Easterly Government Properties Reports Fourth Quarter and Full Year 2023 Results
Highlights for the Quarter Ended
- Net income of
$4.8 million , or$0.04 per share on a fully diluted basis - Core FFO of
$30.1 million , or$0.28 per share on a fully diluted basis - Acquired three properties totaling 221,463 leased square feet with a weighted average remaining lease term of 9.7 years. Key tenancies in these facilities include the
U.S. Department of Homeland Security (DHS ), theState of California , and theU.S. Judiciary - Released the Company's second annual Environmental Social Governance (ESG) Report, featuring environmental data including energy and water usage and Scopes 1 and 2
Greenhouse Gas (GHG) emissions - Announced the appointment of
Darrell W. Crate , Easterly's Executive Chairman and co-founder of Easterly, in connection with the planned retirement of Easterly's Chief Executive Officer (CEO),William C. Trimble , III.Mr. Crate was appointed to the role of CEO effectiveJanuary 1, 2024 , andWilliam H. Binnie , the Company's Lead Independent Director, assumed the role of Easterly's Chairman of the Board of Directors - Entered into forward sales transactions through the Company's
$300.0 million ATM Program launched inDecember 2019 (“theDecember 2019 ATM Program”) for the sale of 500,000 shares of the Company's common stock at a net weighted average initial forward sales price of$13.52 per share that have not yet been settled
Highlights for the Year Ended
- Net income of
$21.1 million , or$0.20 per share on a fully diluted basis - Core FFO of
$120.1 million , or$1.14 per share on a fully diluted basis - Completed the acquisition of, either directly or through the Company's joint venture partnership (the “JV”), four properties for an aggregate pro rata contractual purchase price of approximately
$80.4 million , comprised of$62.2 million of wholly owned acquisitions, and$18.2 million of pro rata JV acquisitions - Successfully renewed 390,330 leased square feet of the Company's portfolio for a weighted average lease term of 16.4 years
- Maintained a quarterly cash dividend of
$0.265 per share - Exercised the
$50.0 million delayed draw option on the Company's 2018 term loan facility, increasing the Company's term loan commitments from$250.0 million to$300.0 million - Recognized as a 2022 ENERGY STAR® Certification Nation Premier Member
- Named one of Washington Business Journal’s 2023 “Best Places to Work”
- Issued an aggregate of 1,950,000 shares of the Company's common stock in settlement of previously entered into forward sales transactions through the
December 2019 ATM Program at a weighted average price per share of$20.14 , raising net proceeds to the Company of approximately$39.3 million
“Mission-critical buildings are essential to the work
Portfolio Operations
As of
Acquisitions
On
On
On
On
Balance Sheet and Capital Markets Activity
As of
Dividend
On
Subsequent Events
Reflective of its superior tenancy and investment grade balance sheet, the Company announced it received an investment grade issuer credit rating from
On
Subsequent to the quarter ending
As of the date of this release, the Company expects to receive aggregate net proceeds of approximately
Guidance
This guidance is forward-looking and reflects management’s view of current and future market conditions. The Company’s actual results may differ materially from this guidance.
Outlook for the 12 Months Ending
The Company is introducing its guidance for full-year 2024 Core FFO per share on a fully diluted basis at a range of
|
|
Low |
|
|
High |
||
Net income (loss) per share – fully diluted basis |
|
$ |
0.22 |
|
|
|
0.24 |
Plus: Company’s share of real estate depreciation and amortization |
|
$ |
0.91 |
|
|
|
0.91 |
FFO per share – fully diluted basis |
|
$ |
1.13 |
|
|
|
1.15 |
Plus: Company’s share of depreciation of non-real estate assets |
|
$ |
0.01 |
|
|
|
0.01 |
Core FFO per share – fully diluted basis |
|
$ |
1.14 |
|
|
|
1.16 |
This guidance assumes (i) the closing of
Non-GAAP Supplemental Financial Measures
This section contains definitions of certain non-GAAP financial measures and other terms that the Company uses in this press release and, where applicable, the reasons why management believes these non-GAAP financial measures provide useful information to investors about the Company’s financial condition and results of operations and the other purposes for which management uses the measures. These measures should not be considered in isolation or as a substitute for measures of performance in accordance with GAAP. A reconciliation of the differences between each non-GAAP financial measure and the comparable GAAP financial measure are included in this press release following the consolidated financial statements. Additional detail can be found in the Company’s most recent annual report on Form 10-K and quarterly report on Form 10-Q, as well as other documents filed with or furnished to the
Cash Available for Distribution (CAD) is a non-GAAP financial measure that is not intended to represent cash flow for the period and is not indicative of cash flow provided by operating activities as determined under GAAP. CAD is calculated in accordance with the current Nareit definition as FFO minus normalized recurring real estate-related expenditures and other non-cash items, nonrecurring expenditures and the unconsolidated real estate venture’s allocated share of these adjustments. CAD is presented solely as a supplemental disclosure because the Company believes it provides useful information regarding the Company’s ability to fund its dividends. Because all companies do not calculate CAD the same way, the presentation of CAD may not be comparable to similarly titled measures of other companies.
Core Funds from Operations (Core FFO) adjusts FFO to present an alternative measure of the Company's operating performance, which, when applicable, excludes items which it believes are not representative of ongoing operating results, such as liability management related costs (including losses on extinguishment of debt and modification costs), catastrophic event charges, depreciation of non-real estate assets, and the unconsolidated real estate venture's allocated share of these adjustments. In future periods, the Company may also exclude other items from Core FFO that it believes may help investors compare its results. The Company believes Core FFO more accurately reflects the ongoing operational and financial performance of the Company's core business.
EBITDA is calculated as the sum of net income (loss) before interest expense, taxes, depreciation and amortization, (gain) loss on the sale of operating properties, impairment loss, and the unconsolidated real estate venture’s allocated share of these adjustments. EBITDA is not intended to represent cash flow for the period, is not presented as an alternative to operating income as an indicator of operating performance, should not be considered in isolation or as a substitute for measures of performance prepared in accordance with GAAP, is not indicative of operating income or cash provided by operating activities as determined under GAAP and may be presented on a pro forma basis. EBITDA is presented solely as a supplemental disclosure with respect to liquidity because the Company believes it provides useful information regarding the Company's ability to service or incur debt. Because all companies do not calculate EBITDA the same way, the presentation of EBITDA may not be comparable to similarly titled measures of other companies.
Funds From Operations (FFO) is defined, in accordance with the Nareit FFO White Paper - 2018 Restatement, as net income (loss), calculated in accordance with GAAP, excluding depreciation and amortization related to real estate, gains and losses from the sale of certain real estate assets, gains and losses from change in control and impairment write-downs of certain real estate assets and investments in entities when the impairment is directly attributable to decreases in the value of depreciable real estate held by the entity. FFO includes the Company’s share of FFO generated by unconsolidated affiliates. FFO is a widely recognized measure of REIT performance. Although FFO is a non-GAAP financial measure, the Company believes that information regarding FFO is helpful to shareholders and potential investors.
Net Debt and Adjusted Net Debt. Net Debt represents the Company's consolidated debt and its share of unconsolidated debt adjusted to exclude its share of unamortized premiums and discounts and deferred financing fees, less its share of cash and cash equivalents and property acquisition closing escrow, net of deposit. By excluding these items, the result provides an estimate of the contractual amount of borrowed capital to be repaid, net of cash available to repay it. The Company believes this calculation constitutes a beneficial supplemental non-GAAP financial disclosure to investors in understanding its financial condition. Adjusted Net Debt is Net Debt reduced by 1) for each project under construction or in design, the lesser of i) outstanding lump-sum reimbursement amounts and ii) the cost to date, 2) 40% times the amount by which the cost to date exceeds total lump-sum reimbursement amounts for each project under construction or in design and 3) outstanding lump-sum reimbursement amounts for projects previously completed. These adjustments are made to 1) remove the estimated portion of each project under construction, in design or previously completed that has been financed with debt which may be repaid with outstanding cost reimbursement payments from the
Other Definitions
Fully diluted basis assumes the exchange of all outstanding common units representing limited partnership interests in the Company’s operating partnership, or common units, the full vesting of all shares of restricted stock, and the exchange of all earned and vested LTIP units in the Company’s operating partnership for shares of common stock on a one-for-one basis, which is not the same as the meaning of “fully diluted” under GAAP.
Conference Call Information
The Company will host a webcast and conference call at
About
Forward Looking Statements
We make statements in this press release that are considered “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act, which are usually identified by the use of words such as “anticipates,” “believes,” “estimates,” “expects,” “intends,” “may,” “plans,” “projects,” “seeks,” “should,” “will,” and variations of such words or similar expressions and include our guidance with respect to Net income (loss) and Core FFO per share on a fully diluted basis. We intend these forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995 and are including this statement in this press release for purposes of complying with those safe harbor provisions. These forward-looking statements reflect our current views about our plans, intentions, expectations, strategies and prospects, which are based on the information currently available to us and on assumptions we have made. Although we believe that our plans, intentions, expectations, strategies and prospects as reflected in or suggested by those forward-looking statements are reasonable, we can give no assurance that the plans, intentions, expectations or strategies will be attained or achieved. Furthermore, actual results may differ materially from those described in the forward-looking statements and will be affected by a variety of risks and factors that are beyond our control including, without limitation: risks associated with our dependence on the
Balance Sheet |
||||||||
(Unaudited, in thousands, except share amounts) |
||||||||
|
|
|
|
|
|
|
||
Assets |
|
|
|
|
|
|
||
Real estate properties, net |
|
$ |
2,319,143 |
|
|
$ |
2,285,308 |
|
Cash and cash equivalents |
|
|
9,381 |
|
|
|
7,578 |
|
Restricted cash |
|
|
12,558 |
|
|
|
9,696 |
|
Tenant accounts receivable |
|
|
66,274 |
|
|
|
58,835 |
|
Investment in unconsolidated real estate venture |
|
|
284,544 |
|
|
|
271,644 |
|
Intangible assets, net |
|
|
148,453 |
|
|
|
157,282 |
|
Interest rate swaps |
|
|
1,994 |
|
|
|
4,020 |
|
Prepaid expenses and other assets |
|
|
37,405 |
|
|
|
35,022 |
|
Total assets |
|
$ |
2,879,752 |
|
|
$ |
2,829,385 |
|
|
|
|
|
|
|
|
||
Liabilities |
|
|
|
|
|
|
||
Revolving credit facility |
|
|
79,000 |
|
|
|
65,500 |
|
Term loan facilities, net |
|
|
299,108 |
|
|
|
248,972 |
|
Notes payable, net |
|
|
696,532 |
|
|
|
696,052 |
|
Mortgage notes payable, net |
|
|
220,195 |
|
|
|
240,847 |
|
Intangible liabilities, net |
|
|
12,480 |
|
|
|
16,387 |
|
Deferred revenue |
|
|
82,712 |
|
|
|
83,309 |
|
Accounts payable, accrued expenses and other liabilities |
|
|
80,209 |
|
|
|
67,336 |
|
Total liabilities |
|
|
1,470,236 |
|
|
|
1,418,403 |
|
|
|
|
|
|
|
|
||
Equity |
|
|
|
|
|
|
||
Common stock, par value |
|
|
1,010 |
|
|
|
908 |
|
Additional paid-in capital |
|
|
1,783,338 |
|
|
|
1,622,913 |
|
Retained earnings |
|
|
112,301 |
|
|
|
93,497 |
|
Cumulative dividends |
|
|
(576,319 |
) |
|
|
(475,983 |
) |
Accumulated other comprehensive income |
|
|
1,871 |
|
|
|
3,546 |
|
Total stockholders' equity |
|
|
1,322,201 |
|
|
|
1,244,881 |
|
Non-controlling interest in |
|
|
87,315 |
|
|
|
166,101 |
|
Total equity |
|
|
1,409,516 |
|
|
|
1,410,982 |
|
Total liabilities and equity |
|
$ |
2,879,752 |
|
|
$ |
2,829,385 |
|
|
|
|
|
|
|
|
Income Statement |
||||||||||||||||
(Unaudited, in thousands, except share and per share amounts) |
||||||||||||||||
|
|
Three Months Ended |
|
|
Twelve Months Ended |
|
||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Revenues |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Rental income |
|
$ |
69,795 |
|
|
$ |
70,250 |
|
|
$ |
273,906 |
|
|
$ |
284,488 |
|
Tenant reimbursements |
|
|
1,629 |
|
|
|
2,244 |
|
|
|
8,908 |
|
|
|
5,920 |
|
Asset management income |
|
|
550 |
|
|
|
467 |
|
|
|
2,110 |
|
|
|
1,409 |
|
Other income |
|
|
646 |
|
|
|
545 |
|
|
|
2,303 |
|
|
|
1,789 |
|
Total revenues |
|
|
72,620 |
|
|
|
73,506 |
|
|
|
287,227 |
|
|
|
293,606 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Expenses |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Property operating |
|
|
17,701 |
|
|
|
17,970 |
|
|
|
71,964 |
|
|
|
66,781 |
|
Real estate taxes |
|
|
7,560 |
|
|
|
7,047 |
|
|
|
30,461 |
|
|
|
30,900 |
|
Depreciation and amortization |
|
|
23,347 |
|
|
|
24,702 |
|
|
|
91,292 |
|
|
|
98,254 |
|
Acquisition costs |
|
|
435 |
|
|
|
431 |
|
|
|
1,661 |
|
|
|
1,370 |
|
Corporate general and administrative |
|
|
6,692 |
|
|
|
6,966 |
|
|
|
27,118 |
|
|
|
24,785 |
|
Total expenses |
|
|
55,735 |
|
|
|
57,116 |
|
|
|
222,496 |
|
|
|
222,090 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Other income (expense) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Income from unconsolidated real estate venture |
|
|
1,332 |
|
|
|
1,088 |
|
|
|
5,498 |
|
|
|
3,374 |
|
Interest expense, net |
|
|
(13,430 |
) |
|
|
(12,648 |
) |
|
|
(49,169 |
) |
|
|
(47,378 |
) |
Gain on the sale of operating properties |
|
|
- |
|
|
|
13,590 |
|
|
|
- |
|
|
|
13,590 |
|
Impairment loss |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(5,540 |
) |
Net income |
|
|
4,787 |
|
|
|
18,420 |
|
|
|
21,060 |
|
|
|
35,562 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Non-controlling interest in |
|
|
(351 |
) |
|
|
(2,126 |
) |
|
|
(2,256 |
) |
|
|
(4,088 |
) |
Net income available to Easterly Government |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
$ |
4,436 |
|
|
$ |
16,294 |
|
|
$ |
18,804 |
|
|
$ |
31,474 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net income available to Easterly Government |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Basic |
|
$ |
0.04 |
|
|
$ |
0.18 |
|
|
$ |
0.19 |
|
|
$ |
0.34 |
|
Diluted |
|
$ |
0.04 |
|
|
$ |
0.18 |
|
|
$ |
0.19 |
|
|
$ |
0.34 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Weighted-average common shares outstanding: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Basic |
|
|
98,982,693 |
|
|
|
90,772,706 |
|
|
|
94,264,166 |
|
|
|
90,613,966 |
|
Diluted |
|
|
99,334,449 |
|
|
|
91,136,238 |
|
|
|
94,556,055 |
|
|
|
90,948,701 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net income, per share - fully diluted basis |
|
$ |
0.04 |
|
|
$ |
0.18 |
|
|
$ |
0.20 |
|
|
$ |
0.35 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Weighted average common shares outstanding - |
|
|
|
|
|
|
|
|
|
|
|
|
||||
fully diluted basis |
|
|
107,424,269 |
|
|
|
102,846,963 |
|
|
|
105,621,563 |
|
|
|
102,433,575 |
|
EBITDA |
||||||||||||||||
(Unaudited, in thousands) |
||||||||||||||||
|
|
Three Months Ended |
|
|
Twelve Months Ended |
|
||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net income |
|
$ |
4,787 |
|
|
$ |
18,420 |
|
|
$ |
21,060 |
|
|
$ |
35,562 |
|
Depreciation and amortization |
|
|
23,347 |
|
|
|
24,702 |
|
|
|
91,292 |
|
|
|
98,254 |
|
Interest expense |
|
|
13,430 |
|
|
|
12,648 |
|
|
|
49,169 |
|
|
|
47,378 |
|
Tax expense |
|
|
302 |
|
|
|
585 |
|
|
|
1,105 |
|
|
|
931 |
|
Gain on the sale of operating properties |
|
|
- |
|
|
|
(13,590 |
) |
|
|
- |
|
|
|
(13,590 |
) |
Impairment loss |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
5,540 |
|
Unconsolidated real estate venture allocated share of above adjustments |
|
|
2,087 |
|
|
|
1,703 |
|
|
|
7,929 |
|
|
|
5,206 |
|
EBITDA |
|
$ |
43,953 |
|
|
$ |
44,468 |
|
|
$ |
170,555 |
|
|
$ |
179,281 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Pro forma adjustments(1) |
|
|
79 |
|
|
|
|
|
|
|
|
|
|
|||
Pro forma EBITDA |
|
$ |
44,032 |
|
|
|
|
|
|
|
|
|
|
(1) |
Pro forma assuming a full quarter of operations from the three properties acquired in the fourth quarter of 2023. |
FFO and CAD |
||||||||||||||||
(Unaudited, in thousands, except share and per share amounts) |
||||||||||||||||
|
|
Three Months Ended |
|
|
Twelve Months Ended |
|
||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net income |
|
$ |
4,787 |
|
|
$ |
18,420 |
|
|
$ |
21,060 |
|
|
$ |
35,562 |
|
Depreciation of real estate assets |
|
|
23,094 |
|
|
|
24,453 |
|
|
|
90,288 |
|
|
|
97,262 |
|
Gain on the sale of operating properties |
|
|
- |
|
|
|
(13,590 |
) |
|
|
- |
|
|
|
(13,590 |
) |
Impairment loss |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
5,540 |
|
Unconsolidated real estate venture allocated share of above adjustments |
|
|
2,002 |
|
|
|
1,585 |
|
|
|
7,639 |
|
|
|
4,937 |
|
FFO |
|
$ |
29,883 |
|
|
$ |
30,868 |
|
|
$ |
118,987 |
|
|
$ |
129,711 |
|
Adjustments to FFO: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Loss on extinguishment of debt |
|
|
- |
|
|
|
20 |
|
|
|
14 |
|
|
|
20 |
|
Natural disaster event expense, net of recovery |
|
|
(17 |
) |
|
|
87 |
|
|
|
69 |
|
|
|
96 |
|
Depreciation of non-real estate assets |
|
|
252 |
|
|
|
249 |
|
|
|
1,003 |
|
|
|
992 |
|
Unconsolidated real estate venture allocated share of above adjustments |
|
|
16 |
|
|
|
17 |
|
|
|
66 |
|
|
|
66 |
|
Core FFO |
|
$ |
30,134 |
|
|
$ |
31,241 |
|
|
$ |
120,139 |
|
|
$ |
130,885 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
FFO, per share - fully diluted basis |
|
$ |
0.28 |
|
|
$ |
0.30 |
|
|
$ |
1.13 |
|
|
$ |
1.27 |
|
Core FFO, per share - fully diluted basis |
|
$ |
0.28 |
|
|
$ |
0.30 |
|
|
$ |
1.14 |
|
|
$ |
1.28 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Core FFO |
|
$ |
30,134 |
|
|
$ |
31,241 |
|
|
$ |
120,139 |
|
|
$ |
130,885 |
|
Straight-line rent and other non-cash adjustments |
|
|
(1,236 |
) |
|
|
(970 |
) |
|
|
(3,897 |
) |
|
|
(410 |
) |
Amortization of above-/below-market leases |
|
|
(678 |
) |
|
|
(732 |
) |
|
|
(2,730 |
) |
|
|
(3,105 |
) |
Amortization of deferred revenue |
|
|
(1,571 |
) |
|
|
(1,484 |
) |
|
|
(6,249 |
) |
|
|
(5,797 |
) |
Non-cash interest expense |
|
|
272 |
|
|
|
240 |
|
|
|
1,024 |
|
|
|
934 |
|
Non-cash compensation |
|
|
1,122 |
|
|
|
1,644 |
|
|
|
5,747 |
|
|
|
6,536 |
|
Natural disaster event expense, net of recovery |
|
|
17 |
|
|
|
(87 |
) |
|
|
(69 |
) |
|
|
(96 |
) |
Principal amortization |
|
|
(1,090 |
) |
|
|
(1,149 |
) |
|
|
(4,316 |
) |
|
|
(5,091 |
) |
Maintenance capital expenditures |
|
|
(4,198 |
) |
|
|
(4,648 |
) |
|
|
(12,474 |
) |
|
|
(9,771 |
) |
Contractual tenant improvements |
|
|
(771 |
) |
|
|
(2,045 |
) |
|
|
(2,139 |
) |
|
|
(4,134 |
) |
Unconsolidated real estate venture allocated share of above adjustments |
|
|
(139 |
) |
|
|
(323 |
) |
|
|
(201 |
) |
|
|
(1,424 |
) |
Cash Available for Distribution (CAD) |
|
$ |
21,862 |
|
|
$ |
21,687 |
|
|
$ |
94,835 |
|
|
$ |
108,527 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Weighted average common shares outstanding - fully diluted basis |
|
|
107,424,269 |
|
|
|
102,846,963 |
|
|
|
105,621,563 |
|
|
|
102,433,575 |
|
Net Debt and Adjusted Net Debt |
|||
(Unaudited, in thousands) |
|||
|
|
|
|
Total Debt(1) |
$ |
1,299,597 |
|
Less: Cash and cash equivalents |
|
(10,250 |
) |
Net Debt |
$ |
1,289,347 |
|
Less: Adjustment for development projects(2) |
|
(54,159 |
) |
Adjusted Net Debt |
$ |
1,235,188 |
|
|
|
|
1Excludes unamortized premiums / discounts and deferred financing fees. |
|
2See definition of Adjusted Net Debt on Page 5. |
View source version on businesswire.com: https://www.businesswire.com/news/home/20240227505783/en/
Senior Vice President, Investor Relations & Operations
202-596-3947
ir@easterlyreit.com
Source: