dea-8k_20190801.htm

 

 

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 8-K

 

CURRENT REPORT

PURSUANT TO SECTION 13 or 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

Date of Report (Date of earliest event reported):  

August 1, 2019

 

Easterly Government Properties, Inc.

(Exact name of Registrant as Specified in Its Charter)

 

 

Maryland

001-36834

47-2047728

(State or Other Jurisdiction

of Incorporation)

(Commission

File Number)

(IRS Employer

Identification No.)

 

 

 

2101 L Street NW, Suite 650, Washington, D.C.

 

20037

(Address of Principal Executive Offices)

 

(Zip Code)

Registrant’s Telephone Number, Including Area Code: (202) 595-9500

Not Applicable

(Former Name or Former Address, if Changed Since Last Report)

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instructions A.2. below):

Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (17 CFR §230.405) or Rule 12b-2 of the Securities Exchange Act of 1934 (17 CFR §240.12b-2).
Emerging growth company    

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.    

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading

Symbol(s)

Name of each exchange on which registered

Common Stock

DEA

New York Stock Exchange

 

 

 


 

Item 2.02 Results of Operations and Financial Condition.

On August 1, 2019, we issued a press release announcing our results of operations for the second quarter ended June 30, 2019. A copy of this press release as well as a copy of our supplemental information package are available on our website and are attached hereto as Exhibits 99.1 and 99.2 and incorporated herein by reference. The information in this Item 2.02 as well as the attached Exhibits 99.1 and 99.2 are being furnished and shall not be deemed “filed” for any purpose, including for the purposes of Section 18 of the Securities and Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that Section, and shall not be deemed incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Exchange Act regardless of any general incorporation language in such filing.

We will host a webcast and conference call at 11:00 a.m. Eastern Time on August 1, 2019, to review our second quarter 2019 performance, discuss recent events and conduct a question-and-answer session. The number to call is 1-877-705-6003 (domestic) and 1-201-493-6725 (international). A live webcast will be available in the Investor Relations section of our website.  A replay of the conference call will be available through August 15, 2019, by dialing 1-844-512-2921 (domestic) and 1-412-317-6671 (international) and entering the passcode 13692450. Please note that the full text of the press release and supplemental information package are available through our website at ir.easterlyreit.com. The information contained on our website is not incorporated by reference herein.

Item 9.01 Financial Statements and Exhibits.

(d) Exhibits:

 

Exhibit Number

  

Description

 

 

99.1

  

Press release dated August 1, 2019.

 

 

99.2

  

Easterly Government Properties, Inc. Supplemental Information Package for the quarter ended June 30, 2019.

 

 


 

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

EASTERLY GOVERNMENT

PROPERTIES, INC.

 

 

By:

 

/s/ William C. Trimble, III

Name:

 

William C. Trimble, III

Title:

 

Chief Executive Officer and President

Date: August 1, 2019

 

 

 

dea-ex991_7.htm

 

Exhibit 99.1

 

 

EASTERLY GOVERNMENT PROPERTIES

REPORTS SECOND QUARTER 2019 RESULTS

WASHINGTON, D.C. – August 1, 2019 – Easterly Government Properties, Inc. (NYSE: DEA) (the “Company” or “Easterly”), a fully integrated real estate investment trust (“REIT”) focused primarily on the acquisition, development and management of Class A commercial properties leased to the U.S. Government, today announced its results of operations for the quarter ended June 30, 2019.  

Highlights for the Quarter Ended June 30, 2019:

 

Net income of $6.5 million, or $0.08 per share on a fully diluted basis

 

FFO of $23.2 million, or $0.30 per share on a fully diluted basis

 

FFO, as Adjusted of $22.6 million, or $0.29 per share on a fully diluted basis

 

CAD of $19.8 million

 

Announced the lease award for the development of a 162,000-square foot Food & Drug Administration (FDA) laboratory in Atlanta, Georgia. Upon completion, the FDA will occupy the facility with a brand new 20-year lease

 

Acquired a 403,737-square foot U.S. Joint Staff Command (JSC) mission critical facility in Suffolk, Virginia

 

Acquired a 137,679-square foot Federal Bureau of Investigation (FBI) field office in New Orleans, Louisiana

 

Sold a 59,322-square foot U.S. Customs & Border Protection (CBP) facility in Chula Vista, California

 

Issued 300,000 shares of common stock in exchange for approximately $5.5 million in gross proceeds, settling the remainder of the forward sales agreements entered into in connection with the June 2018 underwritten public offering of 20.7 million shares of the Company’s common stock

 

Issued 1,200,712 shares in exchange for approximately $21.6 million in gross proceeds through the recently created ATM program, by which the Company may issue and sell shares of common stock having an aggregate offering price of up to $200.0 million, including through the sale of shares on a forward basis (“2019 ATM Program”)

 

Subsequent to quarter end, executed a $275.0 million private placement of senior unsecured notes (the “Notes”), which is expected to close and fund on September 12, 2019. The Notes offering is comprised of three tranches with a weighted average maturity of 12.4 years and a weighted average interest rate of 3.85%

 

Subsequent to quarter end, the Company issued 1,398,814 shares of the Company’s common stock through the 2017 ATM program (the “2017 ATM Program”) and 205,215 shares of common stock through the Company’s 2019 ATM Program for a combined total of 1,604,029 shares, raising gross proceeds of approximately $29.5 million to maintain balance sheet strength

 

Maintained portfolio occupancy at 100%

“This quarter marked the acquisition of two mission critical facilities and a lease award for the Company’s largest build-to-suit laboratory to date,” said William C. Trimble, III, Easterly’s Chief Executive Officer. “We continue to acquire accretively in the bullseye and expect to earn very attractive yields on this newest development project.”

 


 

 

 

 

Financial Results for the Six Months Ended June 30, 2019:

Net income of $6.0 million, or $0.08 per share on a fully diluted basis

FFO of $45.2 million, or $0.61 per share on a fully diluted basis

FFO, as Adjusted of $43.4 million, or $0.58 per share on a fully diluted basis

CAD of $38.3 million

Portfolio Operations

As of June 30, 2019, the Company wholly owned 66 operating properties in the United States, encompassing approximately 6.1 million square feet in the aggregate, including 64 operating properties that were leased primarily to U.S. Government tenant agencies and two operating properties that were entirely leased to private tenants. As of June 30, 2019, the portfolio had a weighted average age of 13.0 years, based upon the date the property was built or renovated-to-suit, was 100% occupied, and had a weighted average remaining lease term of 7.4 years.  

The Company currently has three active build-to-suit projects, all for the beneficial use of the FDA, totaling approximately 291,000-square feet. Two of the three projects – the 69,624-square foot FDA laboratory in Alameda, California, and the 59,690-square foot FDA laboratory in Lenexa, Kansas – are under construction. The third project – the approximately 162,000-square foot FDA laboratory in Atlanta, Georgia – is in the preliminary stages of design development. Three separate 20-year leases with the General Services Administration (GSA) will commence at each of the locations upon completion.

Acquisitions, Dispositions and Development Activities

On May 8, 2019, the Company acquired a 403,737-square foot U.S. Joint Staff Command facility located in Suffolk, Virginia (“JSC - Suffolk"). JSC - Suffolk is comprised of two modern, Class A buildings 100% leased to the GSA and occupied by the Department of Defense’s (DoD) U.S Joint Staff Command division. The two-building facility sits on just over 40 acres and provides nearly 1,200 surface parking spaces for JSC staff and visitors. The facility provides over 10,000 square feet of Secure Compartmented Information Facility (SCIF) space and over 118,000 square feet of specialized cooling and raised floor area for the facility’s data center operations. Under a lease that expires in June 2028, this Level IV Security facility was recently re-leased to the GSA for a firm term of 10 years with an additional five-year option.

On May 8, 2019, the Company strategically sold one of its older facilities, the 59,322-square foot CBP facility located in Chula Vista, California (“CBP - Chula Vista”). With the sale of CBP - Chula Vista, the Company reduced the average age of its overall portfolio. Constructed in 1998, CBP - Chula Vista is a build-to-suit property that serves as the San Diego Sector Headquarters. The facility is 100% occupied by CBP and the lease was recently renewed for a 10-year term, expiring in 2028.

On May 9, 2019, the Company acquired a 137,679-square foot FBI field office in New Orleans, Louisiana (“FBI - New Orleans”). FBI - New Orleans is a four-story single tenant facility located on a 6.6-acre site chosen by the government that houses the FBI’s New Orleans Division, which oversees federal operations in all of Louisiana, including six satellite offices in Baton Rouge, Alexandria, Lafayette, Lake Charles, Monroe and Shreveport. This build-to-suit property was originally completed in 1999 and renovated in 2006 and is 100% occupied by the FBI until August 2029 under a non-cancelable remaining lease term of 10 years. Additionally, the GSA has an option to renew the lease for an additional 10-year term, expiring in 2039.

 

 


 

 

 

 

On June 19, 2019, the Company received the signed lease award for a 20-year non-cancelable lease for a 162,000-square foot FDA laboratory in Atlanta, Georgia (“FDA - Atlanta"). As one of the FDA’s 13 field laboratories, FDA - Atlanta will house both laboratory and office space for the Atlanta District Office as well as the Southeast Food and Feed Laboratory (SFFL) and Southeast Tobacco Laboratory (STL). The Atlanta District Office oversees the regulatory operations within the Atlanta region, while the SFFL provides laboratory testing and regulation for the region, as well as research into new methodologies and regulatory areas within the FDA. The FDA’s Atlanta region covers operations in Alabama, Florida, Georgia, Louisiana, Tennessee, Mississippi, North Carolina, South Carolina, U.S. Virgin Islands, and Puerto Rico. The state-of-the-art facility will house four separate laboratories for nutritional analysis, chemistry, microbiology and tobacco. The facility is in the preliminary stages of design development and will be designed to meet the requirements of the National Institutes of Health Design Requirements Manual (NIH DRM) whereby the building systems will be designed specifically for important FDA functions.

Balance Sheet and Capital Markets Activity

As of June 30, 2019, the Company had total indebtedness of $896.5 million comprised of $262.0 million outstanding on its revolving credit facility, $150.0 million outstanding on its 2018 term loan facility, $100.0 million outstanding on its 2016 term loan facility, $175.0 million of senior unsecured notes, and $209.5 million of mortgage debt (excluding unamortized premiums and discounts and deferred financing fees). At June 30, 2019, Easterly’s outstanding debt had a weighted average maturity of 5.7 years and a weighted average interest rate of 3.7%. As of June 30, 2019, Easterly’s Net Debt to total enterprise value was 38.1% and its Net Debt to annualized quarterly EBITDA and Adjusted Net Debt to annualized quarterly pro-forma EBITDA ratios were 7.1x and 6.3x, respectively.

In the first quarter of 2019, the Company launched its 2019 ATM Program, pursuant to which the Company may issue and sell shares of common stock having an aggregate offering price of up to $200.0 million from time to time in negotiated transactions or transactions that are deemed to be “at-the-market” offerings through the applicable sales agents.  Under the 2019 ATM Program, the Company may also enter into one or more forward transactions under separate master forward sale confirmations and related supplemental confirmations with certain sales agents or their affiliates for the sale of shares of common stock on a forward basis. During the quarter ended June 30, 2019, the Company issued 1,200,712 shares of the Company’s common stock at a weighted average price of $18.01 per share through the Company’s 2019 ATM Program, raising gross proceeds of approximately $21.6 million to maintain balance sheet strength. In addition to its ATM activity, the Company also settled the remaining 300,000 shares of the forward sales agreements entered into in connection with the June 2018 underwritten public offering of 20.7 million shares of the Company’s common stock, which settled in exchange for approximately $5.5 million in gross proceeds.

Dividend

On July 31, 2019, the Board of Directors of Easterly approved a cash dividend for the second quarter of 2019 in the amount of $0.26 per common share. The dividend will be payable September 26, 2019 to shareholders of record on September 12, 2019.  

Subsequent Events

On July 30, 2019, the Company executed a private placement of $275.0 million principal amount of fixed rate Notes. The Notes are to be issued and sold by Easterly Government Properties, LP, the Company’s operating partnership, in the following three tranches:

 

$85,000,000 3.73% Senior Notes, Series A, due September 12, 2029

 

$100,000,000 3.83% Senior Notes, Series B, due September 12, 2031

 


 

 

 

 

 

$90,000,000 3.98% Senior Notes, Series C, due September 12, 2034

The weighted average maturity of the Notes is 12.4 years and the weighted average interest rate is 3.85%. The Company expects the Notes to close and fund on September 12, 2019.

As of June 30, 2019, pro forma for the closing of the private placement and issuance of the Notes, the Company’s weighted average debt maturity was 8.6 years and the weighted average interest rate was 3.8%.

Subsequent to the quarter ended June 30, 2019, the Company issued 1,398,814 shares of the Company’s common stock through the 2017 ATM Program and 205,215 shares of common stock through the Company’s 2019 ATM Program for a combined total of 1,604,029 shares with a weighted average price of $18.42 per share, raising gross proceeds of approximately $29.5 million to maintain balance sheet strength.

Outlook for the 12 Months Ending December 31, 2019

The Company is updating its guidance for 2019 FFO per share on a fully diluted basis to a range of $1.18 - $1.20.

 

  

Low

 

  

High

 

Net income (loss) per share – fully diluted basis

  

$

0.10

 

 

 

0.12

  

Plus: real estate depreciation and amortization

  

$

1.16

 

 

 

1.16

  

Less: Gain on sale of operating property

 

$  

(0.08)

 

 

 

(0.08)

 

FFO per share – fully diluted basis

  

$

1.18

 

 

 

1.20

  

 

This guidance assumes $200 million of acquisitions, not including the Q1 2019 closings of the final three properties in the 14-property portfolio, and $75 - $100 million of gross development-related investment during 2019.

 

The Company’s guidance for 2019 FFO per share on a fully diluted basis represents expected FFO, as Adjusted per share on a fully diluted basis growth of approximately 8% to 11%.  

 

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.

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. 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 SEC from time to time.

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 and nonrecurring expenditures. 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.

EBITDA is calculated as the sum of net income (loss) before interest expense, taxes, depreciation and amortization. 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 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.

Funds From Operations, as Adjusted (FFO, as Adjusted) adjusts FFO to present an alternative measure of our operating performance, which, when applicable, excludes the impact of acquisition costs, straight-line rent, above-/below-market leases, non-cash interest expense, non-cash compensation and other non-cash items. By excluding these income and expense items from FFO, as Adjusted, the Company believes it provides useful information as these items have no cash impact. In addition, by excluding acquisition related costs the Company believes FFO, as Adjusted provides useful information that is comparable across periods and more accurately reflects the operating performance of the Company’s properties.

Net Debt and Adjusted Net Debt. Net Debt represents consolidated debt (reported in accordance with GAAP) adjusted to exclude unamortized premiums and discounts and deferred financing fees, less cash and cash equivalents. 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) the lesser of i) anticipated lump-sum reimbursement amounts and ii) the cost to date for each project under construction and 2) 40% times the amount by which the cost to date exceeds anticipated lump-sum reimbursement amounts for each project under construction. These adjustments are made to 1) remove the estimated portion of each project under construction that has been financed with debt which may be repaid with anticipated cost reimbursement payments from the US Government and 2) remove the estimated portion of each project under construction, in excess of anticipated lump-sum reimbursements, that has been financed with debt but has not yet produced earnings. See page 19 of the Company’s Q2 2019 Supplemental Information Package for further information. The Company’s method of calculating Net Debt and Adjusted Net Debt may be different from methods used by other REITs and, accordingly, may not be comparable to such other REITS.

Other Definitions

Fully diluted basis assumes the exchange of all outstanding common units representing limited partnership

 


 

 

 

 

interests in the Company’s operating partnership, 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 11:00 a.m. Eastern Standard time on August 1, 2019 to review the second quarter 2019 performance, discuss recent events and conduct a question-and-answer session. The number to call is 1-877-705-6003 (domestic) and 1-201-493-6725 (international). A live webcast will be available in the Investor Relations section of the Company’s website.  A replay of the conference call will be available through August 15, 2019 by dialing 844-512-2921 (domestic) and 1-412-317-6671 (international) and entering the passcode 13692450. Please note that the full text of the press release and supplemental information package are available through the Company’s website at ir.easterlyreit.com.

About Easterly Government Properties, Inc.

Easterly Government Properties, Inc. (NYSE:DEA) is based in Washington, D.C., and focuses primarily on the acquisition, development and management of Class A commercial properties that are leased to the U.S. Government. Easterly’s experienced management team brings specialized insight into the strategy and needs of mission-critical U.S. Government agencies for properties leased to such agencies either directly or through the U.S. General Services Administration (GSA). For further information on the company and its properties, please visit www.easterlyreit.com.

Contact:

Easterly Government Properties, Inc.

Lindsay S. Winterhalter

Vice President, Investor Relations & Operations

202-596-3947

ir@easterlyreit.com


 


 

 

 

 

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 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 U.S. Government and its agencies for substantially all of our revenues; risks associated with ownership and development of real estate; the risk of decreased rental rates or increased vacancy rates; loss of key personnel; general volatility of the capital and credit markets and the market price of our common stock; the risk we may lose one or more major tenants; difficulties in completing and successfully integrating acquisitions; failure of acquisitions or development projects to occur at anticipated levels or to yield anticipated results; risks associated with actual or threatened terrorist attacks; intense competition in the real estate market that may limit our ability to attract or retain tenants or re-lease space; insufficient amounts of insurance or exposure to events that are either uninsured or underinsured; uncertainties and risks related to adverse weather conditions, natural disasters and climate change; exposure to liability relating to environmental and health and safety matters; limited ability to dispose of assets because of the relative illiquidity of real estate investments and the nature of our assets; exposure to litigation or other claims; risks associated with breaches of our data security; risks associated with our indebtedness; and other risks and uncertainties detailed in the “Risk Factors” section of our Form 10-K for the year ended December 31, 2018, filed with the Securities and Exchange Commission on February 28, 2019 and under the heading “Risk Factors” in our other public filings.  In addition, our anticipated qualification as a real estate investment trust involves the application of highly technical and complex provisions of the Internal Revenue Code of 1986, or the Code, and depends on our ability to meet the various requirements imposed by the Code through actual operating results, distribution levels and diversity of stock ownership.  We assume no obligation to update publicly any forward looking statements, whether as a result of new information, future events or otherwise.

 


 

 

 

 

Balance Sheet

(Unaudited, in thousands, except share amounts)

 

 

 

June 30, 2019

 

 

December 31, 2018

 

Assets

 

 

 

 

 

 

 

 

Real estate properties, net

 

$

1,857,730

 

 

$

1,626,617

 

Cash and cash equivalents

 

 

9,737

 

 

 

6,854

 

Restricted cash

 

 

5,184

 

 

 

4,251

 

Deposits on acquisitions

 

 

1,900

 

 

 

7,070

 

Rents receivable

 

 

25,323

 

 

 

21,140

 

Accounts receivable

 

 

13,367

 

 

 

11,690

 

Deferred financing, net

 

 

2,104

 

 

 

2,459

 

Intangible assets, net

 

 

176,232

 

 

 

165,668

 

Interest rate swaps

 

 

852

 

 

 

4,563

 

Prepaid expenses and other assets

 

 

14,808

 

 

 

11,238

 

Total assets

 

$

2,107,237

 

 

$

1,861,550

 

 

 

 

 

 

 

 

 

 

Liabilities

 

 

 

 

 

 

 

 

Revolving credit facility

 

 

262,000

 

 

 

134,750

 

Term loan facilities, net

 

 

248,420

 

 

 

248,238

 

Notes payable, net

 

 

173,831

 

 

 

173,778

 

Mortgage notes payable, net

 

 

207,966

 

 

 

209,589

 

Intangible liabilities, net

 

 

28,206

 

 

 

30,835

 

Interest rate swaps

 

 

6,276

 

 

 

1,797

 

Accounts payable and accrued liabilities

 

 

42,613

 

 

 

37,310

 

Total liabilities

 

 

969,312

 

 

 

836,297

 

 

 

 

 

 

 

 

 

 

Equity

 

 

 

 

 

 

 

 

Common stock, par value $0.01, 200,000,000 shares authorized,

 

 

 

 

 

 

 

 

69,601,138 and 60,849,206 shares issued and outstanding at June 30, 2019 and December 31, 2018, respectively.

 

 

696

 

 

 

608

 

Additional paid-in capital

 

 

1,155,327

 

 

 

1,017,415

 

Retained earnings

 

 

18,023

 

 

 

12,831

 

Cumulative dividends

 

 

(172,642

)

 

 

(139,103

)

Accumulated other comprehensive income (loss)

 

 

(4,751

)

 

 

2,412

 

Total stockholders' equity

 

 

996,653

 

 

 

894,163

 

Non-controlling interest in Operating Partnership

 

 

141,272

 

 

 

131,090

 

Total equity

 

 

1,137,925

 

 

 

1,025,253

 

Total liabilities and equity

 

$

2,107,237

 

 

$

1,861,550

 

 


 

 

 

 

Income Statement

(Unaudited, in thousands, except share and per share amounts)

 

 

 

Three Months Ended

 

 

Six Months Ended

 

 

 

June 30, 2019

 

 

June 30, 2018

 

 

June 30, 2019

 

 

June 30, 2018

 

Revenues

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Rental income

 

$

50,513

 

 

$

35,288

 

 

$

99,001

 

 

$

70,119

 

Tenant reimbursements

 

 

1,655

 

 

 

1,260

 

 

 

3,239

 

 

 

2,201

 

Other income

 

 

581

 

 

 

424

 

 

 

1,116

 

 

 

626

 

Total revenues

 

 

52,749

 

 

 

36,972

 

 

 

103,356

 

 

 

72,946

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Property operating

 

 

10,934

 

 

 

7,223

 

 

 

20,897

 

 

 

13,783

 

Real estate taxes

 

 

5,465

 

 

 

3,845

 

 

 

11,220

 

 

 

7,545

 

Depreciation and amortization

 

 

22,967

 

 

 

14,588

 

 

 

45,418

 

 

 

29,222

 

Acquisition costs

 

 

452

 

 

 

499

 

 

 

922

 

 

 

723

 

Corporate general and administrative

 

 

4,667

 

 

 

3,623

 

 

 

8,984

 

 

 

7,082

 

Total expenses

 

 

44,485

 

 

 

29,778

 

 

 

87,441

 

 

 

58,355

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other income (expenses)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense, net

 

 

(8,018

)

 

 

(5,475

)

 

 

(16,150

)

 

 

(11,057

)

Gain on sale of operating property

 

 

6,245

 

 

 

-

 

 

 

6,245

 

 

 

-

 

Net income

 

 

6,491

 

 

 

1,719

 

 

 

6,010

 

 

 

3,534

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-controlling interest in Operating Partnership

 

 

(849

)

 

 

(279

)

 

 

(784

)

 

 

(575

)

Net income available to Easterly Government

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Properties, Inc.

 

$

5,642

 

 

$

1,440

 

 

$

5,226

 

 

$

2,959

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income available to Easterly Government

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Properties, Inc. per share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

0.08

 

 

$

0.02

 

 

$

0.08

 

 

$

0.05

 

Diluted

 

$

0.08

 

 

$

0.02

 

 

$

0.08

 

 

$

0.05

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted-average common shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

68,247,822

 

 

 

47,531,128

 

 

 

64,756,271

 

 

 

46,276,125

 

Diluted

 

 

68,419,665

 

 

 

49,124,886

 

 

 

64,901,261

 

 

 

47,845,560

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income, per share - fully diluted basis

 

$

0.08

 

 

$

0.03

 

 

$

0.08

 

 

$

0.06

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average common shares outstanding -

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

fully diluted basis

 

 

78,227,623

 

 

 

56,782,105

 

 

 

74,550,106

 

 

 

55,305,734

 

 

 


 

 

 

 

EBITDA, FFO and CAD

(Unaudited, in thousands, except share and per share amounts)

 

 

 

Three Months Ended

 

 

Six Months Ended

 

 

 

June 30, 2019

 

 

June 30, 2018

 

 

June 30, 2019

 

 

June 30, 2018

 

Net income

 

$

6,491

 

 

$

1,719

 

 

$

6,010

 

 

$

3,534

 

Depreciation and amortization

 

 

22,967

 

 

 

14,588

 

 

 

45,418

 

 

 

29,222

 

Interest expense

 

 

8,018

 

 

 

5,475

 

 

 

16,150

 

 

 

11,057

 

Tax expense

 

 

135

 

 

 

106

 

 

 

253

 

 

 

207

 

Gain on sale of operating property

 

 

(6,245

)

 

 

-

 

 

 

(6,245

)

 

 

-

 

EBITDA

 

$

31,366

 

 

$

21,888

 

 

$

61,586

 

 

$

44,020

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Pro forma adjustments(1)

 

 

822

 

 

 

 

 

 

 

 

 

 

 

 

 

Pro forma EBITDA

 

$

32,188

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

$

6,491

 

 

$

1,719

 

 

$

6,010

 

 

$

3,534

 

Depreciation and amortization

 

 

22,967

 

 

 

14,588

 

 

 

45,418

 

 

 

29,222

 

Gain on sale of operating property

 

 

(6,245

)

 

 

-

 

 

 

(6,245

)

 

 

-

 

Funds From Operations (FFO)

 

$

23,213

 

 

$

16,307

 

 

$

45,183

 

 

$

32,756

 

Adjustments to FFO:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Acquisition costs

 

 

452

 

 

 

499

 

 

 

922

 

 

 

723

 

Straight-line rent and other non-cash adjustments

 

 

(592

)

 

 

(1,253

)

 

 

(1,566

)

 

 

(3,047

)

Above-/below-market leases

 

 

(1,515

)

 

 

(2,239

)

 

 

(3,244

)

 

 

(4,518

)

Non-cash interest expense

 

 

323

 

 

 

299

 

 

 

645

 

 

 

563

 

Non-cash compensation

 

 

697

 

 

 

712

 

 

 

1,431

 

 

 

1,576

 

Funds From Operations, as Adjusted

 

$

22,578

 

 

$

14,325

 

 

$

43,371

 

 

$

28,053

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

FFO, per share - fully diluted basis

 

$

0.30

 

 

$

0.29

 

 

$

0.61

 

 

$

0.59

 

FFO, as Adjusted, per share - fully diluted basis

 

$

0.29

 

 

$

0.25

 

 

$

0.58

 

 

$

0.51

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Funds From Operations, as Adjusted

 

$

22,578

 

 

$

14,325

 

 

$

43,371

 

 

$

28,053

 

Acquisition costs

 

 

(452

)

 

 

(499

)

 

 

(922

)

 

 

(723

)

Principal amortization

 

 

(842

)

 

 

(797

)

 

 

(1,678

)

 

 

(1,560

)

Maintenance capital expenditures

 

 

(1,338

)

 

 

(1,009

)

 

 

(2,240

)

 

 

(1,475

)

Contractual tenant improvements

 

 

(150

)

 

 

(456

)

 

 

(188

)

 

 

(551

)

Cash Available for Distribution (CAD)

 

$

19,796

 

 

$

11,564

 

 

$

38,343

 

 

$

23,744

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average common shares outstanding -

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

fully diluted basis

 

 

78,227,623

 

 

 

56,782,105

 

 

 

74,550,106

 

 

 

55,305,734

 

 

1 Pro-forma assuming a full quarter of operations from the two properties acquired in the second quarter of 2019.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 


 

 

 

 

Net Debt and Adjusted Net Debt

(Unaudited, in thousands)

 

 

June 30, 2019

 

 

Total Debt(1)

$

896,467

 

 

Less: cash and cash equivalents

 

(9,737

)

 

Net Debt

$

886,730

 

 

Less: Adjustment for projects under construction(2)

 

(80,759

)

 

Adjusted Net Debt

$

805,971

 

 

 

 

 

 

 

 

1 Excludes unamortized premiums / discounts and deferred financing fees.

2 See definition of Adjusted Net Debt on Page 4.

 

 

 

dea-ex992_6.htm

 Exhibit 99.2

 

 

 


Disclaimers

 

 

Forward-looking Statement

We make statements in this Supplemental Information Package 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. 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 Supplemental Information Package 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 U.S. Government and its agencies for substantially all of our revenues; risks associated with ownership and development of real estate; the risk of decreased rental rates or increased vacancy rates; loss of key personnel; general volatility of the capital and credit markets and the market price of our common stock; the risk we may lose one or more major tenants; difficulties in completing and successfully integrating acquisitions; failure of acquisitions or development projects to occur at anticipated levels or to yield anticipated results; risks associated with actual or threatened terrorist attacks; intense competition in the real estate market that may limit our ability to attract or retain tenants or re-lease space; insufficient amounts of insurance or exposure to events that are either uninsured or underinsured; uncertainties and risks related to adverse weather conditions, natural disasters and climate change; exposure to liability relating to environmental and health and safety matters; limited ability to dispose of assets because of the relative illiquidity of real estate investments and the nature of our assets; exposure to litigation or other claims; risks associated with breaches of our data security; risks associated with our indebtedness; and other risks and uncertainties detailed in the “Risk Factors” section of our Form 10-K for the year ended December 31, 2018, filed with the Securities and Exchange Commission, or the SEC, on February 28, 2019 and the factors included under the heading “Risk Factors” in our other public filings.  In addition, our qualification as a real estate investment trust involves the application of highly technical and complex provisions of the Internal Revenue Code of 1986, or the Code, and depends on our ability to meet the various requirements imposed by the Code through actual operating results, distribution levels and diversity of stock ownership.  We assume no obligation to update publicly any forward-looking statements, whether as a result of new information, future events or otherwise.

Ratings

Ratings are not recommendations to buy, sell or hold the Company’s securities.

The following discussion related to the consolidated financial statements of the Company should be read in conjunction with the financial statements for the quarter ended June 30, 2019 that will be released on Form 10-Q to be filed on or about August 1, 2019.

 

2


Supplemental Definitions

 

 

This section contains definitions of certain non-GAAP financial measures and other terms that the Company uses in this Supplemental Information Package 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. Additional detail can be found in the Company’s most recent quarterly report on Form 10-Q and the Company’s most recent annual report on Form 10-K, as well as other documents filed with or furnished to the SEC from time to time.

 

Annualized lease income is defined as the annualized contractual base rent for the last month in a specified period, plus the annualized straight-line rent adjustments for the last month in such period and the annualized net expense reimbursements earned by us for the last month in such period.

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 and nonrecurring expenditures. 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.

Cash fixed charge coverage ratio is calculated as EBITDA divided by the sum of principal amortization and interest expense, excluding amortization of premiums / discounts and deferred financing fees, for the most recent quarter.

Cash interest coverage ratio is calculated as EBITDA divided by interest expense, excluding amortization of premiums / discounts and deferred financing fees, for the most recent quarter.

EBITDA is calculated as the sum of net income (loss) before interest expense, taxes, depreciation and amortization. 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.

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.

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 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.

Funds From Operations, as Adjusted (FFO, as Adjusted) adjusts FFO to present an alternative measure of our operating performance, which, when applicable, excludes the impact of acquisition costs, straight-line rent, above-/below-market leases, non-cash interest expense, non-cash compensation and other non-cash items. By excluding these income and expense items from FFO, as Adjusted, the Company believes it provides useful information as these items have

3


Supplemental Definitions

 

 

no cash impact. In addition, by excluding acquisition related costs the Company believes FFO, as Adjusted provides useful information that is comparable across periods and more accurately reflects the operating performance of the Company’s properties.

Net Operating Income (NOI) is calculated as net income plus depreciation and amortization, acquisition costs, corporate general and administrative costs, interest expense and gains or losses from sales of property. Cash NOI excludes from NOI straight-line rent and amortization of above-/below market leases. NOI and Cash NOI presented by the Company may not be comparable to NOI and Cash NOI reported by other REITs that define NOI and Cash NOI differently. The Company believes that NOI and Cash NOI provide investors with useful measures of the operating performance of our properties. NOI and Cash NOI should not be considered an alternative to net income as an indication of our performance or to cash flows as a measure of the Company's liquidity or its ability to make distributions.

Net Debt and Adjusted Net Debt. Net Debt represents consolidated debt (reported in accordance with GAAP) adjusted to exclude unamortized premiums and discounts and deferred financing fees, less cash and cash equivalents. 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) the lesser of i) anticipated lump-sum reimbursement amounts and ii) the cost to date for each project under construction and 2) 40% times the amount by which the cost to date exceeds anticipated lump-sum reimbursement amounts for each project under construction. These adjustments are made to 1) remove the estimated portion of each project under construction that has been financed with debt which may be repaid with anticipated cost reimbursement payments from the US Government and 2) remove the estimated portion of each project under construction, in excess of anticipated lump-sum reimbursements, that has been financed with debt but has not yet produced earnings. See page 19 for further information. The Company’s method of calculating Net Debt and Adjusted Net Debt may be different from methods used by other REITs and, accordingly, may not be comparable to such other REITS.

 

4


Table of Contents

 

 

 

Overview

 

 

 

 

 

Corporate Information and Analyst Coverage

 

6

 

 

 

Executive Summary

 

7

 

 

 

Corporate Financials

 

 

 

 

 

Balance Sheets

 

8

 

 

 

Income Statements

 

9

 

 

 

Net Operating Income

 

10

 

 

 

EBITDA, FFO and CAD

 

11

 

 

 

Debt

 

 

 

 

 

Debt Schedules

 

12

 

 

 

Debt Maturities

 

13

 

 

 

Properties

 

 

 

 

 

Operating Property Overview

 

14

 

 

 

Tenants

 

16

 

 

 

Lease Expirations

 

18

 

 

 

Summary of Re/Development Projects

 

19

 

 

 

 

 

 

5


Corporate Information and Analyst Coverage

 

 

 

Corporate Information

 

 

 

 

Corporate Headquarters

Stock Exchange Listing

Information Requests

Investor Relations

2101 L Street NW

New York Stock Exchange

Please contact ir@easterlyreit.com

Lindsay Winterhalter,

Suite 650

 

or 202-596-3947 to request an

VP, Investor Relations

Washington, DC 20037

Ticker

Investor Relations package

& Operations

202-595-9500

DEA

 

 

 

Executive Team

 

Board of Directors

 

William Trimble III, CEO

Darrell Crate, Chairman

William Binnie, Lead Independent Director

Michael Ibe

Michael Ibe, Vice-Chairman and EVP

Meghan Baivier, CFO & COO

Darrell Crate

James Mead

Alison Bernard, CAO

Ronald Kendall, EVP

Cynthia Fisher

William Trimble III

Andrew Pulliam, EVP

 

Emil Henry Jr.

 

 

 

Equity Research Coverage

 

 

 

 

 

Citigroup

Raymond James & Associates

RBC Capital Markets

Michael Bilerman / Emmanuel Korchman

Bill Crow / Paul Puryear

Michael Carroll

212-816-1383 / 212-816-1382

727-567-2594 / 727-567-2253

440-715-2649

 

 

 

Jefferies

SunTrust Robinson Humphrey

 

Jonathan Petersen

Michael R. Lewis

 

212-284-1705

212-319-5659

 

 

Any opinions, estimates, forecasts or predictions regarding Easterly Government Properties, Inc.’s performance made by these analysts are theirs alone and do not represent opinions, estimates, forecasts or predictions of Easterly Government Properties, Inc. or its management. Easterly Government Properties, Inc. does not by its reference above or distribution imply its endorsement of or concurrence with such opinions, estimates, forecasts or predictions.

 

 

 

 

6


Executive Summary

(In thousands, except share and per share amounts)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Price of Common Shares

 

Three months ended

June 30, 2019

 

 

Earnings

 

 

Three months ended

June 30, 2019

 

 

Three months ended

June 30, 2018

 

High closing price during period

 

$

18.78

 

 

Net income available to Easterly Government Properties, Inc.

 

$

5,642

 

 

$

1,440

 

Low closing price during period

 

$

17.46

 

 

Net income available to Easterly Government Properties, Inc.

 

 

 

 

 

 

 

 

End of period closing price

 

$

18.11

 

 

per share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

$

0.08

 

 

$

0.02

 

Outstanding Classes of Stock and

 

 

 

 

 

Diluted

 

 

$

0.08

 

 

$

0.02

 

Partnership Units - Fully Diluted Basis

 

At June 30, 2019

 

 

 

 

 

 

 

 

 

 

 

 

Common shares

 

 

69,508,941

 

 

Net income

 

 

$

6,491

 

 

$

1,719

 

Unvested restricted shares

 

 

92,197

 

 

Net income, per share - fully diluted basis

 

 

$

0.08

 

 

$

0.03

 

Common partnership and vested LTIP units

 

 

9,865,694

 

 

 

 

 

 

 

 

 

 

 

 

Total - fully diluted basis

 

 

79,466,832

 

 

Funds From Operations ("FFO")

 

 

$

23,213

 

 

$

16,307

 

 

 

 

 

 

 

FFO, per share - fully diluted basis

 

 

$

0.30

 

 

$

0.29

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Market Capitalization

 

At June 30, 2019

 

 

Funds From Operations, as Adjusted

 

 

$

22,578

 

 

$

14,325

 

Total equity market capitalization - fully diluted basis

 

$

1,439,144

 

 

FFO, as Adjusted, per share - fully diluted basis

 

 

$

0.29

 

 

$

0.25

 

Net Debt

 

 

886,730

 

 

 

 

 

 

 

 

 

 

 

 

Total enterprise value

 

$

2,325,874

 

 

Cash Available for Distribution

 

 

$

19,796

 

 

$

11,564

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Ratios

 

At June 30, 2019

 

 

Liquidity

 

 

 

 

 

 

At June 30, 2019

 

Net debt to total enterprise value

 

 

38.1

%

 

Cash and cash equivalents

 

 

 

 

 

 

$

9,737

 

Net debt to annualized quarterly EBITDA

 

 

7.1

x

 

 

 

 

 

 

 

 

 

 

 

Adjusted Net Debt to annualized quarterly pro forma EBITDA

 

6.3

x

 

Available under $450 million unsecured revolving credit facility(1)

 

 

$

188,000

 

Cash interest coverage ratio

 

 

4.1

x

 

 

 

 

 

 

 

Cash fixed charge coverage ratio

 

 

3.7

x

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1)Revolving credit facility has an accordion feature that provides additional capacity, subject to the satisfaction of customary terms and conditions, of up to $250 million, for a total revolving credit facility size of not more than $700 million.

 

7


Balance Sheets

(Unaudited, in thousands, except share amounts)

 

 

 

 

 

June 30, 2019

 

 

December 31, 2018

 

Assets

 

 

 

 

 

 

 

 

Real estate properties, net

 

$

1,857,730

 

 

$

1,626,617

 

Cash and cash equivalents

 

 

9,737

 

 

 

6,854

 

Restricted cash

 

 

5,184

 

 

 

4,251

 

Deposits on acquisitions

 

 

1,900

 

 

 

7,070

 

Rents receivable

 

 

25,323

 

 

 

21,140

 

Accounts receivable

 

 

13,367

 

 

 

11,690

 

Deferred financing, net

 

 

2,104

 

 

 

2,459

 

Intangible assets, net

 

 

176,232

 

 

 

165,668

 

Interest rate swaps

 

 

852

 

 

 

4,563

 

Prepaid expenses and other assets

 

 

14,808

 

 

 

11,238

 

Total assets

 

$

2,107,237

 

 

$

1,861,550

 

 

 

 

 

 

 

 

 

 

Liabilities

 

 

 

 

 

 

 

 

Revolving credit facility

 

 

262,000

 

 

 

134,750

 

Term loan facilities, net

 

 

248,420

 

 

 

248,238

 

Notes payable, net

 

 

173,831

 

 

 

173,778

 

Mortgage notes payable, net

 

 

207,966

 

 

 

209,589

 

Intangible liabilities, net

 

 

28,206

 

 

 

30,835

 

Interest rate swaps

 

 

6,276

 

 

 

1,797

 

Accounts payable and accrued liabilities

 

 

42,613

 

 

 

37,310

 

Total liabilities

 

 

969,312

 

 

 

836,297

 

 

 

 

 

 

 

 

 

 

Equity

 

 

 

 

 

 

 

 

Common stock, par value $0.01, 200,000,000 shares authorized,

 

 

 

 

 

 

 

 

69,601,138 and 60,849,206 shares issued and outstanding at June 30, 2019 and December 31, 2018, respectively.

 

 

696

 

 

 

608

 

Additional paid-in capital

 

 

1,155,327

 

 

 

1,017,415

 

Retained earnings

 

 

18,023

 

 

 

12,831

 

Cumulative dividends

 

 

(172,642

)

 

 

(139,103

)

Accumulated other comprehensive income (loss)

 

 

(4,751

)

 

 

2,412

 

Total stockholders' equity

 

 

996,653

 

 

 

894,163

 

Non-controlling interest in Operating Partnership

 

 

141,272

 

 

 

131,090

 

Total equity

 

 

1,137,925

 

 

 

1,025,253

 

Total liabilities and equity

 

$

2,107,237

 

 

$

1,861,550

 

 

 

 

 

8


Income Statements

(Unaudited, in thousands, except share and per share amounts)

 

 

 

 

 

Three Months Ended

 

 

Six Months Ended

 

 

 

June 30, 2019

 

 

June 30, 2018

 

 

June 30, 2019

 

 

June 30, 2018

 

Revenues

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Rental income

 

$

50,513

 

 

$

35,288

 

 

$

99,001

 

 

$

70,119

 

Tenant reimbursements

 

 

1,655

 

 

 

1,260

 

 

 

3,239

 

 

 

2,201

 

Other income

 

 

581

 

 

 

424

 

 

 

1,116

 

 

 

626

 

Total revenues

 

 

52,749

 

 

 

36,972

 

 

 

103,356

 

 

 

72,946

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Property operating

 

 

10,934

 

 

 

7,223

 

 

 

20,897

 

 

 

13,783

 

Real estate taxes

 

 

5,465

 

 

 

3,845

 

 

 

11,220

 

 

 

7,545

 

Depreciation and amortization

 

 

22,967

 

 

 

14,588

 

 

 

45,418

 

 

 

29,222

 

Acquisition costs

 

 

452

 

 

 

499

 

 

 

922

 

 

 

723

 

Corporate general and administrative

 

 

4,667

 

 

 

3,623

 

 

 

8,984

 

 

 

7,082

 

Total expenses

 

 

44,485

 

 

 

29,778

 

 

 

87,441

 

 

 

58,355

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other income (expenses)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense, net

 

 

(8,018

)

 

 

(5,475

)

 

 

(16,150

)

 

 

(11,057

)

Gain on sale of operating property

 

 

6,245

 

 

 

-

 

 

 

6,245

 

 

 

-

 

Net income

 

 

6,491

 

 

 

1,719

 

 

 

6,010

 

 

 

3,534

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-controlling interest in Operating Partnership

 

 

(849

)

 

 

(279

)

 

 

(784

)

 

 

(575

)

Net income available to Easterly Government

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Properties, Inc.

 

$

5,642

 

 

$

1,440

 

 

$

5,226

 

 

$

2,959

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income available to Easterly Government

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Properties, Inc. per share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

0.08

 

 

$

0.02

 

 

$

0.08

 

 

$

0.05

 

Diluted

 

$

0.08

 

 

$

0.02

 

 

$

0.08

 

 

$

0.05

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted-average common shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

68,247,822

 

 

 

47,531,128

 

 

 

64,756,271

 

 

 

46,276,125

 

Diluted

 

 

68,419,665

 

 

 

49,124,886

 

 

 

64,901,261

 

 

 

47,845,560

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income, per share - fully diluted basis

 

$

0.08

 

 

$

0.03

 

 

$

0.08

 

 

$

0.06

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average common shares outstanding -

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

fully diluted basis

 

 

78,227,623

 

 

 

56,782,105

 

 

 

74,550,106

 

 

 

55,305,734

 

 

9


Net Operating Income

(Unaudited, in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

 

Six Months Ended

 

 

 

 

June 30, 2019

 

 

June 30, 2018

 

 

June 30, 2019

 

 

June 30, 2018

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

$

6,491

 

 

$

1,719

 

 

$

6,010

 

 

$

3,534

 

 

Depreciation and amortization

 

 

22,967

 

 

 

14,588

 

 

 

45,418

 

 

 

29,222

 

 

Acquisition costs

 

 

452

 

 

 

499

 

 

 

922

 

 

 

723

 

 

Corporate general and administrative

 

 

4,667

 

 

 

3,623

 

 

 

8,984

 

 

 

7,082

 

 

Interest expense

 

 

8,018

 

 

 

5,475

 

 

 

16,150

 

 

 

11,057

 

 

Gain on sale of operating property

 

 

(6,245

)

 

 

-

 

 

 

(6,245

)

 

 

-

 

 

Net Operating Income

 

 

36,350

 

 

 

25,904

 

 

 

71,239

 

 

 

51,618

 

 

Adjustments to Net Operating Income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Straight-line rent

 

 

(583

)

 

 

(1,259

)

 

 

(1,550

)

 

 

(3,064

)

 

Above-/below-market leases

 

 

(1,515

)

 

 

(2,239

)

 

 

(3,244

)

 

 

(4,518

)

 

Cash Net Operating Income

 

$

34,252

 

 

$

22,406

 

 

$

66,445

 

 

$

44,036

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

10


EBITDA, FFO and CAD

(Unaudited, in thousands, except share and per share amounts)

 

 

 

 

 

Three Months Ended

 

 

Six Months Ended

 

 

 

June 30, 2019

 

 

June 30, 2018

 

 

June 30, 2019

 

 

June 30, 2018

 

Net income

 

$

6,491

 

 

$

1,719

 

 

$

6,010

 

 

$

3,534

 

Depreciation and amortization

 

 

22,967

 

 

 

14,588

 

 

 

45,418

 

 

 

29,222

 

Interest expense

 

 

8,018

 

 

 

5,475

 

 

 

16,150

 

 

 

11,057

 

Tax expense

 

 

135

 

 

 

106

 

 

 

253

 

 

 

207

 

Gain on sale of operating property

 

 

(6,245

)

 

 

-

 

 

 

(6,245

)

 

 

-

 

EBITDA

 

$

31,366

 

 

$

21,888

 

 

$

61,586

 

 

$

44,020

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Pro forma adjustments(1)

 

 

822

 

 

 

 

 

 

 

 

 

 

 

 

 

Pro forma EBITDA

 

$

32,188

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

$

6,491

 

 

$

1,719

 

 

$

6,010

 

 

$

3,534

 

Depreciation and amortization

 

 

22,967

 

 

 

14,588

 

 

 

45,418

 

 

 

29,222

 

Gain on sale of operating property

 

 

(6,245

)

 

 

-

 

 

 

(6,245

)

 

 

-

 

Funds From Operations (FFO)

 

$

23,213

 

 

$

16,307

 

 

$

45,183

 

 

$

32,756

 

Adjustments to FFO:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Acquisition costs

 

 

452

 

 

 

499

 

 

 

922

 

 

 

723

 

Straight-line rent and other non-cash adjustments

 

 

(592

)

 

 

(1,253

)

 

 

(1,566

)

 

 

(3,047

)

Above-/below-market leases

 

 

(1,515

)

 

 

(2,239

)

 

 

(3,244

)

 

 

(4,518

)

Non-cash interest expense

 

 

323

 

 

 

299

 

 

 

645

 

 

 

563

 

Non-cash compensation

 

 

697

 

 

 

712

 

 

 

1,431

 

 

 

1,576

 

Funds From Operations, as Adjusted

 

$

22,578

 

 

$

14,325

 

 

$

43,371

 

 

$

28,053

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

FFO, per share - fully diluted basis

 

$

0.30

 

 

$

0.29

 

 

$

0.61

 

 

$

0.59

 

FFO, as Adjusted, per share - fully diluted basis

 

$

0.29

 

 

$

0.25

 

 

$

0.58

 

 

$

0.51

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Funds From Operations, as Adjusted

 

$

22,578

 

 

$

14,325

 

 

$

43,371

 

 

$

28,053

 

Acquisition costs

 

 

(452

)

 

 

(499

)

 

 

(922

)

 

 

(723

)

Principal amortization

 

 

(842

)

 

 

(797

)

 

 

(1,678

)

 

 

(1,560

)

Maintenance capital expenditures

 

 

(1,338

)

 

 

(1,009

)

 

 

(2,240

)

 

 

(1,475

)

Contractual tenant improvements

 

 

(150

)

 

 

(456

)

 

 

(188

)

 

 

(551

)

Cash Available for Distribution (CAD)

 

$

19,796

 

 

$

11,564

 

 

$

38,343

 

 

$

23,744

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average common shares outstanding -

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

fully diluted basis

 

 

78,227,623

 

 

 

56,782,105

 

 

 

74,550,106

 

 

 

55,305,734

 

 

 

(1) Pro forma assuming a full quarter of operations from the two properties acquired in the second quarter of 2019.

 

 

 

11


Debt Schedules

(Unaudited, in thousands)

 

 

 

Debt Instrument

Maturity Date

 

 

June 30, 2019

Interest Rate

 

June 30, 2019

Balance(1)

 

June 30, 2019

Percent of

Total Indebtedness

 

Unsecured debt

 

 

 

 

 

 

 

 

 

 

 

 

 

Unsecured revolving credit facility

18-Jun-22(2)

 

 

LIBOR + 125bps

 

$

262,000

 

29.2%

 

2018 Unsecured term loan facility

19-Jun-23

 

 

3.96%(3)

 

 

150,000

 

16.7%

 

2016 Unsecured term loan facility

29-Mar-24

 

 

2.67%(4)

 

 

100,000

 

11.2%

 

Notes payable - series A

25-May-27

 

 

4.05%

 

 

95,000

 

10.6%

 

Notes payable - series B

25-May-29

 

 

4.15%

 

 

50,000

 

5.6%

 

Notes payable - series C

25-May-32

 

 

4.30%

 

 

30,000

 

3.3%

 

 

5.1 years

 

 

3.72%

 

$

687,000

 

76.6%

 

Total unsecured debt

(wtd-avg maturity)

 

 

(wtd-avg rate)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Secured mortgage debt

 

 

 

 

 

 

 

 

 

 

 

 

 

VA - Loma Linda

6-Jul-27

 

 

3.59%

 

$

127,500

 

14.2%

 

ICE - Charleston

15-Jan-27

 

 

4.21%

 

 

18,035

 

2.0%

 

USFS II - Albuquerque

14-Jul-26

 

 

4.46%

 

 

16,420

 

1.8%

 

DEA - Pleasanton

18-Oct-23

 

 

LIBOR + 150bps

 

 

15,700

 

1.8%

 

CBP - Savannah

10-Jul-33

 

 

3.40%

 

 

13,128

 

1.5%

 

MEPCOM - Jacksonville

14-Oct-25

 

 

4.41%

 

 

9,424

 

1.1%

 

VA - Golden

1-Apr-24

 

 

5.00%

 

 

9,260

 

1.0%

 

 

7.8 years

 

 

3.83%

 

$

209,467

 

23.4%

 

Total secured mortgage debt

(wtd-avg maturity)

 

 

(wtd-avg rate)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Debt Statistics

June 30, 2019

 

 

 

 

 

 

 

 

June 30, 2019

 

Variable rate debt - unhedged

$

277,700

 

 

% Variable rate debt - unhedged

 

 

31.0

%

Fixed rate debt

 

618,767

 

 

% Fixed rate debt

 

 

69.0

%

Total Debt(1)

$

896,467

 

 

 

 

 

 

 

 

 

 

 

Less: cash and cash equivalents

 

(9,737

)

 

Weighted average maturity

 

  5.7 years

 

Net Debt

$

886,730

 

 

Weighted average interest rate

 

 

3.7

%

Less: adjustment for projects under construction(5)

 

(80,759

)

 

 

 

 

 

 

 

 

 

 

Adjusted Net Debt

$

805,971

 

 

 

 

 

 

 

 

 

 

 

 

(1)Excludes unamortized premiums / discounts and deferred financing fees.

(2)Revolving credit facility has two six-month as-of-right extension options, subject to certain conditions and the payment of an extension fee.

(3)Calculated based on four interest rate swaps with an aggregate notional value of $150.0 million, which effectively fix the interest rate at 3.96% annually based on the Company’s current leverage ratio.

(4)Calculated based on two interest rate swaps with an aggregate notional value of $100.0 million, which effectively fix the interest rate at 2.67% annually based on the Company’s current leverage ratio.

5)See definition of Adjusted Net Debt on Page 4.

12


Debt Maturities

(Unaudited, in thousands)

 

 

 

 

 

Secured Debt

 

 

Unsecured Debt

 

 

 

 

 

 

 

 

 

 

 

 

 

Year

 

Scheduled

Amortization

 

 

Scheduled

Maturities

 

 

Scheduled

Maturities

 

 

Total

 

 

Percentage of

Debt Maturing

 

 

Weighted Average

Interest Rate of

Scheduled Maturities

 

2019

 

$

1,713

 

 

-

 

 

-

 

 

$

1,713

 

 

 

0.2

%

 

-

 

2020

 

 

3,564

 

 

-

 

 

-

 

 

 

3,564

 

 

 

0.4

%

 

-

 

2021

 

 

4,233

 

 

-

 

 

-

 

 

 

4,233

 

 

 

0.5

%

 

-

 

2022

 

 

5,297

 

 

-

 

 

 

262,000

 

 

 

267,297

 

 

 

29.8

%

 

 

3.71

%

2023

 

 

5,585

 

 

 

15,700

 

 

 

150,000

 

 

 

171,285

 

 

 

19.1

%

 

 

3.96

%

2024

 

 

5,730

 

 

 

8,395

 

 

 

100,000

 

 

 

114,125

 

 

 

12.7

%

 

 

2.87

%

2025

 

 

5,633

 

 

 

1,917

 

 

-

 

 

 

7,550

 

 

 

0.8

%

 

 

4.41

%

2026

 

 

3,686

 

 

 

6,368

 

 

-

 

 

 

10,054

 

 

 

1.1

%

 

 

4.46

%

2027

 

 

1,093

 

 

 

134,640

 

 

 

95,000

 

 

 

230,733

 

 

 

25.8

%

 

 

3.82

%

2028

 

 

983

 

 

-

 

 

-

 

 

 

983

 

 

 

0.1

%

 

-

 

2029

 

 

1,016

 

 

-

 

 

 

50,000

 

 

 

51,016

 

 

 

5.7

%

 

 

4.15

%

2030

 

 

1,049

 

 

-

 

 

-

 

 

 

1,049

 

 

 

0.1

%

 

-

 

2031

 

 

1,081

 

 

-

 

 

-

 

 

 

1,081

 

 

 

0.1

%

 

-

 

2032

 

 

1,116

 

 

-

 

 

 

30,000

 

 

 

31,116

 

 

 

3.5

%

 

 

4.30

%

2033

 

 

668

 

 

-

 

 

-

 

 

 

668

 

 

 

0.1

%

 

-

 

Total

 

$

42,447

 

 

$

167,020

 

 

$

687,000

 

 

$

896,467

 

 

 

100.0

%

 

 

 

 

13


Operating Property Overview

(As of June 30, 2019, unaudited)

 

 

 

Property Name

 

Location

 

Property Type

 

Tenant

Lease

Expiration

Year

 

Year Built /

Renovated

 

Rentable

Square

Feet

 

 

Annualized

Lease

Income

 

 

Percentage

of Total

Annualized

Lease

Income

 

 

Annualized

Lease

Income per

Leased

Square Foot

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Government Leased Properties

 

VA - Loma Linda

 

Loma Linda, CA

 

Outpatient Clinic

 

2036

 

2016

 

 

327,614

 

 

$

16,111,542

 

 

 

8.0

%

 

$

49.18

 

Various GSA - Buffalo

 

Buffalo, NY

 

Office

 

2019 - 2025

 

2004

 

 

267,766

 

 

 

8,388,234

 

 

 

4.1

%

 

 

31.33

 

JSC - Suffolk

 

Suffolk, VA

 

Office

 

2028

 

1993 / 2004

 

 

403,737

 

 

 

8,074,740

 

 

 

4.0

%

 

 

20.00

 

FBI - Salt Lake

 

Salt Lake City, UT

 

Office

 

2032

 

2012

 

 

169,542

 

 

 

6,826,753

 

 

 

3.4

%

 

 

40.27

 

Various GSA - Portland

 

Portland, OR

 

Office

 

2020 - 2025

 

2002

 

 

223,261

 

 

 

6,796,650

 

 

 

3.4

%

 

 

30.96

 

IRS - Fresno

 

Fresno, CA

 

Office

 

2033

 

2003

 

 

180,481

 

 

 

6,686,460

 

 

 

3.3

%

 

 

37.05

 

PTO - Arlington

 

Arlington, VA

 

Office

 

2035

 

2009

 

 

190,546

 

 

 

6,546,803

 

 

 

3.3

%

 

 

34.36

 

Various GSA - Chicago

 

Des Plaines, IL

 

Office

 

2020 / 2022

 

1971 / 1999

 

 

232,759

 

 

 

6,434,294

 

 

 

3.2

%

 

 

28.70

 

VA - San Jose

 

San Jose, CA

 

Outpatient Clinic

 

2038

 

2018

 

 

90,085

 

 

 

5,782,190

 

 

 

2.9

%

 

 

64.19

 

FBI - San Antonio

 

San Antonio, TX

 

Office

 

2021

 

2007

 

 

148,584

 

 

 

5,159,501

 

 

 

2.6

%

 

 

34.72

 

FEMA - Tracy

 

Tracy, CA

 

Warehouse

 

2038

 

2018

 

 

210,373

 

 

 

4,640,242

 

 

 

2.3

%

 

 

22.06

 

FBI - Omaha

 

Omaha, NE

 

Office

 

2024

 

2009

 

 

112,196

 

 

 

4,459,261

 

 

 

2.2

%

 

 

39.75

 

TREAS - Parkersburg

 

Parkersburg, WV

 

Office

 

2021

 

2004 / 2006

 

 

182,500

 

 

 

4,427,336

 

 

 

2.2

%

 

 

24.26

 

EPA - Kansas City

 

Kansas City, KS

 

Laboratory

 

2023

 

2003

 

 

71,979

 

 

 

4,213,094

 

 

 

2.1

%

 

 

58.53

 

VA - South Bend

 

Mishakawa, IN

 

Outpatient Clinic

 

2032

 

2017

 

 

86,363

 

 

 

3,975,368

 

 

 

2.0

%

 

 

46.03

 

ICE - Charleston

 

North Charleston, SC

 

Office

 

2021 / 2027

 

1994 / 2012

 

 

86,733

 

 

 

3,800,808

 

 

 

1.9

%

 

 

43.82

 

DOT - Lakewood

 

Lakewood, CO

 

Office

 

2024

 

2004

 

 

122,225

 

 

 

3,488,745

 

 

 

1.7

%

 

 

28.54

 

FBI - New Orleans

 

New Orleans, LA

 

Office

 

2029

 

1999 / 2006

 

 

137,679

 

 

 

3,472,512

 

 

 

1.7

%

 

 

25.22

 

FBI - Pittsburgh

 

Pittsburgh, PA

 

Office

 

2027

 

2001

 

 

100,054

 

 

 

3,407,585

 

 

 

1.7

%

 

 

34.06

 

USCIS - Lincoln

 

Lincoln, NE

 

Office

 

2020

 

2005

 

 

137,671

 

 

 

3,393,736

 

 

 

1.7

%

 

 

24.65

 

FBI - Birmingham

 

Birmingham, AL

 

Office

 

2020

 

2005

 

 

96,278

 

 

 

3,207,521

 

 

 

1.6

%

 

 

33.32

 

JUD - El Centro

 

El Centro, CA

 

Courthouse/Office

 

2034

 

2004

 

 

43,345

 

 

 

3,036,785

 

 

 

1.5

%

 

 

70.06

 

OSHA - Sandy

 

Sandy, UT

 

Laboratory

 

2024

 

2003

 

 

75,000

 

 

 

2,988,944

 

 

 

1.5

%

 

 

39.85

 

FDA - College Park

 

College Park, MD

 

Laboratory

 

2029

 

2004

 

 

80,677

 

 

 

2,957,789

 

 

 

1.5

%

 

 

36.66

 

USFS II - Albuquerque

 

Albuquerque, NM

 

Office

 

2026

 

2011

 

 

98,720

 

 

 

2,946,150

 

 

 

1.5

%

 

 

29.84

 

USFS I - Albuquerque

 

Albuquerque, NM

 

Office

 

2021

 

2006

 

 

92,455

 

 

 

2,877,379

 

 

 

1.4

%

 

 

31.12

 

DEA - Vista

 

Vista, CA

 

Laboratory

 

2020

 

2002

 

 

54,119

 

 

 

2,798,970

 

 

 

1.4

%

 

 

51.72

 

DEA - Pleasanton

 

Pleasanton, CA

 

Laboratory

 

2035

 

2015

 

 

42,480

 

 

 

2,789,001

 

 

 

1.4

%

 

 

65.65

 

ICE - Albuquerque

 

Albuquerque, NM

 

Office

 

2027

 

2011

 

 

71,100

 

 

 

2,757,943

 

 

 

1.4

%

 

 

38.79

 

FBI - Richmond

 

Richmond, VA

 

Office

 

2021

 

2001

 

 

96,607

 

 

 

2,755,886

 

 

 

1.4

%

 

 

28.53

 

JUD - Del Rio

 

Del Rio, TX

 

Courthouse/Office

 

2024

 

1992 / 2004

 

 

89,880

 

 

 

2,696,566

 

 

 

1.3

%

 

 

30.00

 

DEA - Dallas Lab

 

Dallas, TX

 

Laboratory

 

2021

 

2001

 

 

49,723

 

 

 

2,433,565

 

 

 

1.2

%

 

 

48.94

 

DEA - Sterling

 

Sterling, VA

 

Laboratory

 

2020

 

2001

 

 

49,692

 

 

 

2,403,448

 

 

 

1.2

%

 

 

48.37

 

TREAS - Birmingham

 

Birmingham, AL

 

Office

 

2029

 

2014

 

 

83,676

 

 

 

2,379,514

 

 

 

1.2

%

 

 

28.44

 

SSA - Charleston

 

Charleston, WV

 

Office

 

2024

 

1959 / 2000

 

 

110,000

 

 

 

2,322,332

 

 

 

1.2

%

 

 

21.11

 

DEA - Upper Marlboro

 

Upper Marlboro, MD

 

Laboratory

 

2022

 

2002

 

 

50,978

 

 

 

2,289,287

 

 

 

1.1

%

 

 

44.91

 

FBI - Little Rock

 

Little Rock, AR

 

Office

 

2021

 

2001

 

 

101,977

 

 

 

2,246,497

 

 

 

1.1

%

 

 

22.03

 

 

14


Operating Property Overview (Cont.)

(As of June 30, 2019, unaudited)

 

 

 

Property Name

 

Location

 

Property Type

 

Tenant

Lease

Expiration

Year

 

Year Built /

Renovated

 

Rentable

Square

Feet

 

 

Annualized

Lease

Income

 

 

Percentage

of Total

Annualized

Lease

Income

 

 

Annualized

Lease

Income per

Leased

Square Foot

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Government Leased Properties (Cont.)

 

MEPCOM - Jacksonville

 

Jacksonville, FL

 

Office

 

2025

 

2010

 

 

30,000

 

 

 

2,189,904

 

 

 

1.1

%

 

 

73.00

 

CBP - Savannah

 

Savannah, GA

 

Laboratory

 

2033

 

2013

 

 

35,000

 

 

 

2,144,467

 

 

 

1.1

%

 

 

61.27

 

FBI - Albany

 

Albany, NY

 

Office

 

2019

 

1998

 

 

98,184

 

 

 

2,126,817

 

 

 

1.1

%

 

 

21.66

 

DOE - Lakewood

 

Lakewood, CO

 

Office

 

2029

 

1999

 

 

115,650

 

 

 

2,064,224

 

 

 

1.0

%

 

 

17.85

 

DEA - Santa Ana

 

Santa Ana, CA

 

Office

 

2024

 

2004

 

 

39,905

 

 

 

1,912,663

 

 

 

1.0

%

 

 

47.93

 

JUD - Charleston

 

Charleston, SC

 

Courthouse/Office

 

2019

 

1999

 

 

50,888

 

 

 

1,810,980

 

 

 

0.9

%

 

 

35.59

 

NPS - Omaha

 

Omaha, NE

 

Office

 

2024

 

2004

 

 

62,772

 

 

 

1,771,759

 

 

 

0.9

%

 

 

28.23

 

ICE - Otay

 

San Diego, CA

 

Office

 

2022 / 2026

 

2001

 

 

52,881

 

 

 

1,752,889

 

 

 

0.9

%

 

 

35.44

 

VA - Golden

 

Golden, CO

 

Office/Warehouse

 

2026

 

1996 / 2011

 

 

56,753

 

 

 

1,730,118

 

 

 

0.9

%

 

 

30.49

 

DEA - Dallas

 

Dallas, TX

 

Office

 

2021

 

2001

 

 

71,827

 

 

 

1,686,629

 

 

 

0.8

%

 

 

23.48

 

DEA - Otay

 

San Diego, CA

 

Office

 

2020

 

1997

 

 

32,560

 

 

 

1,621,374

 

 

 

0.8

%

 

 

49.80

 

CBP - Sunburst

 

Sunburst, MT

 

Office

 

2028

 

2008

 

 

33,000

 

 

 

1,599,828

 

 

 

0.8

%

 

 

48.48

 

USCG - Martinsburg

 

Martinsburg, WV

 

Office

 

2027

 

2007

 

 

59,547

 

 

 

1,593,519

 

 

 

0.8

%

 

 

26.76

 

JUD - Aberdeen

 

Aberdeen, MS

 

Courthouse/Office

 

2025

 

2005

 

 

46,979

 

 

 

1,485,353

 

 

 

0.7

%

 

 

31.62

 

DEA - Birmingham

 

Birmingham, AL

 

Office

 

2020

 

2005

 

 

35,616

 

 

 

1,466,342

 

 

 

0.7

%

 

 

41.17

 

DEA - North Highlands

 

Sacramento, CA

 

Office

 

2033

 

2002

 

 

37,975

 

 

 

1,441,221

 

 

 

0.7

%

 

 

37.95

 

GSA - Clarksburg

 

Clarksburg, WV

 

Office

 

2024

 

1999

 

 

63,750

 

 

 

1,431,148

 

 

 

0.7

%

 

 

22.45

 

DEA - Albany

 

Albany, NY

 

Office

 

2025

 

2004

 

 

31,976

 

 

 

1,349,109

 

 

 

0.7

%

 

 

42.19

 

DEA - Riverside

 

Riverside, CA

 

Office

 

2032

 

1997

 

 

34,354

 

 

 

1,245,565

 

 

 

0.6

%

 

 

36.26

 

SSA - Dallas

 

Dallas, TX

 

Office

 

2020

 

2005

 

 

27,200

 

 

 

1,073,215

 

 

 

0.5

%

 

 

39.46

 

ICE - Pittsburgh

 

Pittsburgh, PA

 

Office

 

2022 / 2023

 

2004

 

 

33,425

 

 

 

792,601

 

 

 

0.4

%

 

 

31.40

 

VA - Baton Rouge

 

Baton Rouge, LA

 

Outpatient Clinic

 

2024

 

2004

 

 

30,000

 

 

 

772,128

 

 

 

0.4

%

 

 

25.74

 

JUD - South Bend

 

South Bend, IN

 

Courthouse/Office

 

2027

 

1996 / 2011

 

 

30,119

 

 

 

762,709

 

 

 

0.4

%

 

 

25.32

 

DEA - San Diego

 

San Diego, CA

 

Warehouse

 

2032

 

1999

 

 

16,100

 

 

 

556,452

 

 

 

0.3

%

 

 

34.56

 

SSA - Mission Viejo

 

Mission Viejo, CA

 

Office

 

2020

 

2005

 

 

11,590

 

 

 

532,626

 

 

 

0.3

%

 

 

45.96

 

DEA - Bakersfield

 

Bakersfield, CA

 

Office

 

2021

 

2000

 

 

9,800

 

 

 

357,559

 

 

 

0.2

%

 

 

36.49

 

SSA - San Diego

 

San Diego, CA

 

Office

 

2032

 

2003

 

 

10,856

 

 

 

332,445

 

 

 

0.2

%

 

 

33.05

 

Subtotal

 

 

 

 

 

 

 

 

 

 

5,927,562

 

 

$

199,577,075

 

 

 

99.5

%

 

$

33.81

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Privately Leased Properties

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

5998 Osceola Court - United Technologies

 

Midland, GA

 

Warehouse/Manufacturing

 

2023

 

2014

 

 

105,641

 

 

 

542,600

 

 

 

0.3

%

 

 

5.14

 

501 East Hunter Street - Lummus Corporation

 

Lubbock, TX

 

Warehouse/Distribution

 

2028

 

2013

 

 

70,078

 

 

 

409,366

 

 

 

0.2

%

 

 

5.84

 

Subtotal

 

 

 

 

 

 

 

 

 

 

175,719

 

 

$

951,966

 

 

 

0.5

%

 

$

5.42

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total / Weighted Average

 

 

 

 

 

 

 

 

 

 

6,103,281

 

 

$

200,529,041

 

 

 

100.0

%

 

$

32.99

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

15


Tenants

(As of June 30, 2019, unaudited)

 

 

Tenant

 

Weighted

Average

Remaining

Lease Term(1)

 

 

Leased

Square Feet

 

 

Percentage

of Leased

Square Feet

 

 

Annualized

Lease Income

 

 

Percentage

of Total

Annualized

Lease

Income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Government

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Federal Bureau of Investigation ("FBI")

 

 

5.5

 

 

 

1,085,860

 

 

 

17.9

%

 

$

34,333,435

 

 

 

17.0

%

Department of Veteran Affairs ("VA")

 

 

13.0

 

 

 

695,998

 

 

 

11.4

%

 

 

31,682,383

 

 

 

15.7

%

Drug Enforcement Administration ("DEA")

 

 

5.2

 

 

 

557,313

 

 

 

9.2

%

 

 

24,242,092

 

 

 

12.1

%

Judiciary of the U.S. ("JUD")

 

 

6.1

 

 

 

261,211

 

 

 

4.3

%

 

 

9,792,393

 

 

 

4.9

%

Internal Revenue Service ("IRS")

 

 

11.1

 

 

 

241,815

 

 

 

4.0

%

 

 

8,675,500

 

 

 

4.3

%

U.S. Joint Staff Command ("JSC")

 

 

9.0

 

 

 

403,737

 

 

 

6.6

%

 

 

8,074,740

 

 

 

4.0

%

Immigration and Customs Enforcement ("ICE")

 

 

6.0

 

 

 

193,661

 

 

 

3.2

%

 

 

7,932,408

 

 

 

4.0

%

Bureau of the Fiscal Service ("BFS")

 

 

4.5

 

 

 

266,176

 

 

 

4.4

%

 

 

6,806,850

 

 

 

3.4

%

Patent and Trademark Office ("PTO")

 

 

15.5

 

 

 

190,546

 

 

 

3.1

%

 

 

6,546,803

 

 

 

3.3

%

Federal Aviation Administration ("FAA")

 

 

1.3

 

 

 

209,970

 

 

 

3.5

%

 

 

6,053,368

 

 

 

3.0

%

U.S. Forest Service ("USFS")

 

 

4.5

 

 

 

191,175

 

 

 

3.1

%

 

 

5,823,529

 

 

 

2.9

%

Social Security Administration ("SSA")

 

 

4.9

 

 

 

200,866

 

 

 

3.3

%

 

 

5,203,876

 

 

 

2.6

%

Federal Emergency Management Agency ("FEMA")

 

 

19.3

 

 

 

210,373

 

 

 

3.5

%

 

 

4,640,242

 

 

 

2.3

%

Environmental Protection Agency ("EPA")

 

 

3.8

 

 

 

71,979

 

 

 

1.2

%

 

 

4,213,094

 

 

 

2.1

%

Customs and Border Protection ("CBP")

 

 

11.8

 

 

 

68,000

 

 

 

1.1

%

 

 

3,744,295

 

 

 

1.9

%

Department of Transportation ("DOT")

 

 

4.8

 

 

 

129,659

 

 

 

2.1

%

 

 

3,736,212

 

 

 

1.9

%

U.S. Citizenship and Immigration Services ("USCIS")

 

 

1.2

 

 

 

137,671

 

 

 

2.3

%

 

 

3,393,736

 

 

 

1.7

%

Occupational Safety and Health Administration ("OSHA")

 

 

4.6

 

 

 

75,000

 

 

 

1.2

%

 

 

2,988,944

 

 

 

1.5

%

Food and Drug Administration ("FDA")

 

 

10.2

 

 

 

80,677

 

 

 

1.3

%

 

 

2,957,789

 

 

 

1.5

%

Military Entrance Processing Command ("MEPCOM")

 

 

6.3

 

 

 

30,000

 

 

 

0.5

%

 

 

2,189,904

 

 

 

1.1

%

Department of Energy ("DOE")

 

 

10.1

 

 

 

120,496

 

 

 

2.0

%

 

 

2,184,044

 

 

 

1.1

%

U.S. Department of Agriculture ("USDA")

 

 

3.3

 

 

 

73,031

 

 

 

1.2

%

 

 

2,118,166

 

 

 

1.1

%

National Park Service ("NPS")

 

 

5.0

 

 

 

62,772

 

 

 

1.0

%

 

 

1,771,759

 

 

 

0.9

%

U.S. Coast Guard ("USCG")

 

 

8.5

 

 

 

59,547

 

 

 

1.0

%

 

 

1,593,519

 

 

 

0.8

%

U.S. Army Corps of Engineers ("ACOE")

 

 

5.6

 

 

 

37,811

 

 

 

0.6

%

 

 

1,433,503

 

 

 

0.7

%

Small Business Administration ("SBA")

 

 

2.8

 

 

 

37,253

 

 

 

0.6

%

 

 

1,147,667

 

 

 

0.6

%

National Labor Relations Board ("NLRB")

 

 

6.2

 

 

 

36,640

 

 

 

0.6

%

 

 

1,076,982

 

 

 

0.5

%

National Oceanic and Atmospheric Administration ("NOAA")

 

 

1.6

 

 

 

25,612

 

 

 

0.4

%

 

 

827,322

 

 

 

0.4

%

Bureau of Alcohol, Tobacco, Firearms and Explosives ("ATF")

 

 

2.7

 

 

 

21,342

 

 

 

0.4

%

 

 

745,195

 

 

 

0.4

%

 

 

      

     

 

 

 

 

 

 

16


Tenants (Cont.)

(As of June 30, 2019, unaudited)

 

 

Tenant

 

Weighted

Average

Remaining

Lease Term(1)

 

 

Leased

Square Feet

 

 

Percentage

of Leased

Square Feet

 

 

Annualized

Lease Income

 

 

Percentage

of Total

Annualized

Lease

Income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Government (Cont.)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

General Services Administration - Other

 

 

4.4

 

 

 

17,235

 

 

 

0.3

%

 

 

557,555

 

 

 

0.3

%

Bureau of Indian Affairs ("BIA")

 

 

4.1

 

 

 

6,477

 

 

 

0.1

%

 

 

216,191

 

 

 

0.1

%

U.S. Attorney Office ("USAO")

 

 

4.6

 

 

 

6,408

 

 

 

0.1

%

 

 

143,845

 

 

 

0.1

%

U.S. Marshals Service ("USMS")

 

 

7.6

 

 

 

1,054

 

 

 

0.0

%

 

 

47,463

 

 

 

0.0

%

Department of Labor ("DOL")

 

 

4.6

 

 

 

1,004

 

 

 

0.0

%

 

 

22,536

 

 

 

0.0

%

U.S. Probation Office ("USPO")

 

 

4.6

 

 

 

452

 

 

 

0.0

%

 

 

10,154

 

 

 

0.0

%

Subtotal

 

 

7.5

 

 

 

5,808,821

 

 

 

95.5

%

 

$

196,927,494

 

 

 

98.2

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Private Tenants

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other Private Tenants

 

 

2.6

 

 

 

50,794

 

 

 

0.8

%

 

$

1,402,361

 

 

 

0.7

%

Providence Health & Services

 

 

1.2

 

 

 

21,643

 

 

 

0.4

%

 

 

634,962

 

 

 

0.3

%

We Are Sharing Hope SC

 

 

2.3

 

 

 

21,609

 

 

 

0.4

%

 

 

612,258

 

 

 

0.3

%

United Technologies (Pratt & Whitney)

 

 

4.5

 

 

 

105,641

 

 

 

1.7

%

 

 

542,600

 

 

 

0.3

%

Lummus Corporation

 

 

9.1

 

 

 

70,078

 

 

 

1.2

%

 

 

409,366

 

 

 

0.2

%

Subtotal

 

 

4.9

 

 

 

269,765

 

 

 

4.5

%

 

$

3,601,547

 

 

 

1.8

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total / Weighted Average

 

 

7.4

 

 

 

6,078,586

 

 

 

100.0

%

 

$

200,529,041

 

 

 

100.0

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1)Weighted based on leased square feet.

 

17


Lease Expirations

(As of June 30, 2019, unaudited)

 

 

 

Year of Lease Expiration

 

Number of

Leases

Expiring

 

 

Square

Footage

Expiring

 

 

Percentage of

Total Square

Footage

Expiring

 

 

Annualized

Lease Income

Expiring

 

 

Percentage of

Total Annualized

Lease Income

Expiring

 

 

Annualized

Lease Income

per Leased

Square Foot Expiring

 

2019

 

3

 

 

 

161,125

 

 

 

2.7

%

 

$

4,229,260

 

 

 

2.1

%

 

$

26.25

 

2020

 

19

 

 

 

764,519

 

 

 

12.6

%

 

 

25,980,973

 

 

 

13.0

%

 

 

33.98

 

2021

 

13

 

 

 

940,098

 

 

 

15.5

%

 

 

27,828,023

 

 

 

13.9

%

 

 

29.60

 

2022

 

7

 

 

 

124,523

 

 

 

2.0

%

 

 

4,762,814

 

 

 

2.4

%

 

 

38.25

 

2023

 

10

 

 

 

291,498

 

 

 

4.8

%

 

 

8,082,809

 

 

 

4.0

%

 

 

27.73

 

2024

 

10

 

 

 

727,374

 

 

 

12.0

%

 

 

22,444,756

 

 

 

11.2

%

 

 

30.86

 

2025

 

6

 

 

 

187,680

 

 

 

3.1

%

 

 

7,683,920

 

 

 

3.8

%

 

 

40.94

 

2026

 

3

 

 

 

157,011

 

 

 

2.6

%

 

 

4,732,913

 

 

 

2.4

%

 

 

30.14

 

2027

 

5

 

 

 

325,944

 

 

 

5.4

%

 

 

11,710,306

 

 

 

5.8

%

 

 

35.93

 

2028

 

3

 

 

 

506,815

 

 

 

8.3

%

 

 

10,083,934

 

 

 

5.0

%

 

 

19.90

 

Thereafter

 

18

 

 

 

1,891,999

 

 

 

31.0

%

 

 

72,989,333

 

 

 

36.4

%

 

 

38.58

 

Total / Weighted Average

 

97

 

 

 

6,078,586

 

 

 

100.0

%

 

$

200,529,041

 

 

 

100.0

%

 

$

32.99

 

 

18


Summary of Re/Development Projects

(As of June 30, 2019, unaudited, in thousands, except square feet)

 

 

 

Projects Under Construction(1)

 

Property Name

 

Location

 

Property Type

 

Total Rentable Square Feet

 

 

Percentage Leased

 

 

Lease Term

 

Anticipated Total Cost

 

 

Cost to Date

 

 

Anticipated Lump-Sum Reimbursement(2)

 

 

Anticipated Completion Date

 

Anticipated Lease Commencement

 

FDA - Alameda

 

Alameda, CA

 

Laboratory

 

 

69,624

 

 

100%

 

 

20-Year

 

$

83,042

 

 

$

80,764

 

 

$

52,317

 

 

3Q 2019

 

3Q 2019

 

FDA - Lenexa

 

Lenexa, KS

 

Laboratory

 

 

59,690

 

 

100%

 

 

20-Year

 

 

68,549

 

 

 

17,063

 

 

 

41,257

 

 

3Q 2020

 

3Q 2020

 

Total

 

 

 

 

 

 

129,314

 

 

 

 

 

 

 

 

$

151,591

 

 

$

97,827

 

 

$

93,574

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Projects in Design(3)

 

 

 

 

 

 

 

 

 

 

Property Name

 

Location

 

Property Type

 

Total Estimated Rentable Square Feet

 

 

Percentage Leased

 

 

Lease Term

 

Anticipated Completion Date

 

 

Anticipated Lease Commencement

 

 

 

 

 

 

 

 

 

 

FDA - Atlanta

 

Atlanta, GA

 

Laboratory

 

 

162,000

 

 

100%

 

 

20-Year

 

4Q 2022

 

 

4Q 2022

 

 

 

 

 

 

 

 

 

 

Total

 

 

 

 

 

 

162,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1)Includes properties under construction for which design is complete.

(2)Includes reimbursement of lump-sum tenant improvement costs and development fees.

(3)Includes projects in the design phase for which project scope is not fully determined. The Company has been awarded the lease for FDA - Atlanta. Closing of the acquisition of the underlying property to   be redeveloped is subject to customary closing conditions.

19