dea-8k_20191106.htm
false 0001622194 DC 0001622194 2019-11-06 2019-11-06

 

 

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):

November 6, 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))

 

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

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.  

 

 


 

Item 2.02 Results of Operations and Financial Condition.

On November 6, 2019, we issued a press release announcing our results of operations for the third quarter ended September 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 10:00 a.m. Eastern Time on November 6, 2019, to review our third 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 November 20, 2019, by dialing 1-844-512-2921 (domestic) and 1-412-317-6671 (international) and entering the passcode 13695158. 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 November 6, 2019.

99.2

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

101.SCH

Inline XBRL Taxonomy Extension Schema Document

101.CAL

Inline XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF

Inline XBRL Taxonomy Extension Definition Linkbase Document

101.LAB

Inline XBRL Taxonomy Extension Label Linkbase Document

101.PRE

Inline XBRL Taxonomy Extension Presentation Linkbase Document

104

Cover Page Interactive Data File (formatted as inline XBRL with applicable taxonomy extension information contained in Exhibits 101.)

 


 

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: November 6, 2019

 

 

dea-ex991_6.htm

 

Exhibit 99.1

 

 

EASTERLY GOVERNMENT PROPERTIES

REPORTS THIRD QUARTER 2019 RESULTS

WASHINGTON, D.C. – November 6, 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 September 30, 2019.  

Highlights for the Quarter Ended September 30, 2019:

 

Net income of $0.6 million, or $0.01 per share on a fully diluted basis

 

FFO of $23.9 million, or $0.29 per share on a fully diluted basis

 

FFO, as Adjusted of $23.7 million, or $0.29 per share on a fully diluted basis

 

CAD of $20.7 million

 

Completed the previously announced $275.0 million private placement of senior unsecured notes (the “Notes”) on September 12, 2019, comprised of three tranches with a weighted average maturity of 12.4 years and a weighted average interest rate of 3.85%

 

Delivered a 69,624-square foot U.S Food & Drug (FDA) laboratory in Alameda, California (“FDA - Alameda") and commenced a brand new 20-year lease with the U.S. Government

 

Acquired a 169,585-square foot Environmental Protection Agency (EPA) regional headquarters located in Lenexa, Kansas (“EPA - Lenexa")

 

Closed on the acquisition of the site that will house the future FDA laboratory located in Atlanta, Georgia (“FDA - Atlanta")

 

Issued 1,398,814 shares of the Company’s common stock through the 2017 ATM program (the “2017 ATM Program”) and 2,094,599 shares of common stock through the Company’s 2019 ATM program (the “2019 ATM Program”) for a combined total of 3,493,413 shares, raising gross proceeds of approximately $68.5 million to maintain balance sheet strength

 

Maintained portfolio occupancy at 100%

“The Company’s consistent quarterly acquisition pace coupled with non-speculative development have historically provided steady growth,” said William C. Trimble, III, Easterly’s CEO. “These accretive drivers of FFO growth remain the backbone of our dependable quarterly dividend.” 

Financial Results for the Nine Months Ended September 30, 2019:

Net income of $6.6 million, or $0.09 per share on a fully diluted basis

FFO of $69.1 million, or $0.90 per share on a fully diluted basis

FFO, as Adjusted of $66.9 million, or $0.87 per share on a fully diluted basis

CAD of $58.9 million

 


 

 

 

 

Portfolio Operations

As of September 30, 2019, the Company wholly owned 68 operating properties in the United States, encompassing approximately 6.3 million square feet in the aggregate, including 66 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 September 30, 2019, the portfolio had a weighted average age of 12.7 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 7.6 years.  

The Company currently has two active build-to-suit projects, each for the beneficial use of the FDA, totaling approximately 222,000-square feet. One project – the 59,690-square foot FDA laboratory in Lenexa, Kansas – is under construction. The second project – the approximately 162,000-square foot FDA laboratory in Atlanta, Georgia – is in the preliminary stages of design development. Separate 20-year leases with the General Services Administration (GSA) will commence at each of the locations upon completion.

Acquisitions and Development Activities

On August 22, 2019, the Company acquired a 169,585-square foot EPA regional headquarters in Lenexa, Kansas. EPA - Lenexa is a single tenant GSA-leased office building which serves as the Region 7 headquarters for the EPA. Originally constructed in 2007, the two-level office building, which is situated on a 30.5-acre parcel of land, underwent a large-scale renovation-to-suit for the EPA in 2012, whereby the facility received U.S. Green Building Council’s (USGBC) LEED Gold for New Construction (version 2009) certification in April 2014. The building also received the LEED Platinum for Existing Buildings (version 2009) certification in February 2015. The Region 7 Office building was also awarded the ENERGY STAR in 2014 and in 2016 with a score of 94. This modern facility is 100% occupied by the EPA through October 2027 under its original 15-year lease, which has a five-year renewal option, thus potentially carrying the term through October 2032.

On August 27, 2019, the lease commenced at the newly re-developed 69,624-square foot FDA laboratory in Alameda, California. Easterly had previously acquired the rights to a lease award to re-develop the new FDA regional laboratory, one of 13 regional laboratories located throughout the country. The Company’s 20-year non-cancelable lease commenced with the GSA for the beneficial use of the FDA following the successful completion of the approximately $83.0 million re-development project. FDA - Alameda is a mission critical laboratory that includes a blend of office and laboratory space, all specifically designed to promote the health and safety of the American public by assuring the safety, efficacy and security of human and veterinary drugs, our nation’s food supply, biological products, medical devices, and other products including cosmetics.

On August 30, 2019, the Company purchased the site of the future FDA - Atlanta laboratory, located on the grounds of the former Fort McPherson U.S. Army base, which is now part of a large-scale master redevelopment plan. This approximately 145-acre redevelopment site is slated for a meaningful transformation, which is expected to offer mixed-use development - including housing, Class A office, retail, and hospitality venues - for a transit-oriented community. The approximately 350 FDA employees and contractors are expected to benefit from the laboratory’s proximity to Atlanta’s mass transit system, the Metropolitan Atlanta Rapid Transit Authority (MARTA).

Balance Sheet and Capital Markets Activity

As of September 30, 2019, the Company had total indebtedness of $908.6 million comprised of $150.0 million outstanding on its 2018 term loan facility, $100.0 million outstanding on its 2016 term loan facility, $450.0 million of senior unsecured notes, and $208.6 million of mortgage debt (excluding unamortized premiums and discounts and deferred financing fees). As of September 30, 2019, the Company had no borrowings outstanding on its revolving credit facility. At September 30, 2019, Easterly’s outstanding debt had a weighted

 


 

 

 

 

average maturity of 8.3 years and a weighted average interest rate of 3.8%. As of September 30, 2019, Easterly’s Net Debt to total enterprise value was 32.3% and its Net Debt to annualized quarterly EBITDA and Adjusted Net Debt to annualized quarterly pro-forma EBITDA ratios were 6.5x and 6.0x, respectively.

On September 12, 2019, the Company completed the previously announced private placement of $275.0 million of fixed rate senior unsecured notes. The Notes were issued and sold by Easterly Government Properties, LP, the Company’s operating partnership, in the following three tranches:

 

3.73% Series A Senior Notes due September 12, 2029 in an aggregate principal amount of $85.0 million,

 

3.83% Series B Senior Notes due September 12, 2031 in an aggregate principal amount of $100.0 million, and

 

3.98% Series C Senior Notes due September 12, 2034 in an aggregate principal amount of $90.0 million.

The weighted average maturity of the Notes was 12.4 years and the weighted average interest rate remains fixed at 3.85%.

During the quarter ended September 30, 2019, the Company issued 3,493,413 shares of the Company’s common stock at a weighted average price of $19.62 per share through the Company’s 2017 and 2019 ATM Programs, raising gross proceeds of approximately $68.5 million to maintain balance sheet strength. There are no shares remaining available for sale under the 2017 ATM Program.

Dividend

On October 30, 2019, the Board of Directors of Easterly approved a cash dividend for the third quarter of 2019 in the amount of $0.26 per common share. The dividend will be payable December 27, 2019 to shareholders of record on November 13, 2019.  

Subsequent Events

On October 22, 2019, the Company acquired a 66,818-square foot U.S. Citizenship and Immigration Services (USCIS) facility in Tustin, California (“USCIS - Tustin"). USCIS - Tustin is a single tenant, LEED Certified office building, 100% leased to the GSA for the beneficial use of USCIS. The facility recently underwent a sizeable renovation-to-suit for USCIS whereby the government provided a substantial capital investment into this facility. The government recently signed a 15-year lease for the building, which expires in 2034.

Subsequent to the quarter ended September 30, 2019, the Company issued 810,616 shares of the Company’s common stock through its 2019 ATM Program with a weighted average price of $21.90 per share, raising gross proceeds of approximately $17.7 million to maintain balance sheet strength.

Guidance

Outlook for the 12 Months Ending December 31, 2019

The Company is reiterating its guidance for 2019 FFO per share on a fully diluted basis in 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.

Outlook for the 12 Months Ending December 31, 2020

The Company is introducing its guidance for 2020 FFO per share on a fully diluted basis in a range of $1.22 - $1.24.

 

  

Low

 

  

High

 

Net income (loss) per share – fully diluted basis

  

$

0.10

 

 

 

0.12

  

Plus: real estate depreciation and amortization

  

$

1.12

 

 

 

1.12

  

FFO per share – fully diluted basis

 

$  

1.22

 

 

 

1.24

 

  

This guidance assumes $200 million of acquisitions and $40 - $50 million of gross development-related investment during 2020.

 

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, amortization of above-/below-market leases, amortization of deferred revenue (which results from landlord assets funded by tenants), 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. Certain prior year amounts have been updated to conform to the current year FFO, as Adjusted definition.

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 Q3 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 10:00 a.m. Eastern Standard time on November 6, 2019 to review the third 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 November 20, 2019 by dialing 844-512-2921 (domestic) and 1-412-317-6671

 


 

 

 

 

(international) and entering the passcode 13695158. 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)

 

 

 

September 30, 2019

 

 

December 31, 2018

 

Assets

 

 

 

 

 

 

 

 

Real estate properties, net

 

$

1,923,371

 

 

$

1,626,617

 

Cash and cash equivalents

 

 

65,407

 

 

 

6,854

 

Restricted cash

 

 

4,200

 

 

 

4,251

 

Deposits on acquisitions

 

 

750

 

 

 

7,070

 

Rents receivable

 

 

25,662

 

 

 

21,140

 

Accounts receivable

 

 

15,794

 

 

 

11,690

 

Deferred financing, net

 

 

1,926

 

 

 

2,459

 

Intangible assets, net

 

 

172,076

 

 

 

165,668

 

Interest rate swaps

 

 

-

 

 

 

4,563

 

Prepaid expenses and other assets

 

 

14,514

 

 

 

11,238

 

Total assets

 

$

2,223,700

 

 

$

1,861,550

 

 

 

 

 

 

 

 

 

 

Liabilities

 

 

 

 

 

 

 

 

Revolving credit facility

 

 

-

 

 

 

134,750

 

Term loan facilities, net

 

 

248,511

 

 

 

248,238

 

Notes payable, net

 

 

446,868

 

 

 

173,778

 

Mortgage notes payable, net

 

 

207,144

 

 

 

209,589

 

Intangible liabilities, net

 

 

26,455

 

 

 

30,835

 

Deferred revenue

 

 

55,381

 

 

 

3,066

 

Interest rate swaps

 

 

7,232

 

 

 

1,797

 

Accounts payable and accrued liabilities

 

 

48,372

 

 

 

34,244

 

Total liabilities

 

 

1,039,963

 

 

 

836,297

 

 

 

 

 

 

 

 

 

 

Equity

 

 

 

 

 

 

 

 

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

 

 

 

 

 

 

 

 

73,339,676 and 60,849,206 shares issued and outstanding at

September 30, 2019 and December 31, 2018, respectively.

 

 

733

 

 

 

608

 

Additional paid-in capital

 

 

1,225,029

 

 

 

1,017,415

 

Retained earnings

 

 

18,572

 

 

 

12,831

 

Cumulative dividends

 

 

(191,477

)

 

 

(139,103

)

Accumulated other comprehensive income (loss)

 

 

(6,393

)

 

 

2,412

 

Total stockholders' equity

 

 

1,046,464

 

 

 

894,163

 

Non-controlling interest in Operating Partnership

 

 

137,273

 

 

 

131,090

 

Total equity

 

 

1,183,737

 

 

 

1,025,253

 

Total liabilities and equity

 

$

2,223,700

 

 

$

1,861,550

 

 


 

 

 

 

Income Statement

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

 

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

September 30, 2019

 

 

September 30, 2018

 

 

September 30, 2019

 

 

September 30, 2018

 

Revenues

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Rental income

 

$

53,382

 

 

$

38,136

 

 

$

152,383

 

 

$

108,255

 

Tenant reimbursements

 

 

3,369

 

 

 

1,169

 

 

 

6,608

 

 

 

3,370

 

Other income

 

 

838

 

 

 

132

 

 

 

1,954

 

 

 

758

 

Total revenues

 

 

57,589

 

 

 

39,437

 

 

 

160,945

 

 

 

112,383

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Property operating

 

 

13,408

 

 

 

7,780

 

 

 

34,305

 

 

 

21,563

 

Real estate taxes

 

 

6,008

 

 

 

4,228

 

 

 

17,228

 

 

 

11,773

 

Depreciation and amortization

 

 

23,299

 

 

 

16,109

 

 

 

68,717

 

 

 

45,331

 

Acquisition costs

 

 

519

 

 

 

300

 

 

 

1,441

 

 

 

1,023

 

Corporate general and administrative

 

 

5,298

 

 

 

3,614

 

 

 

14,282

 

 

 

10,696

 

Total expenses

 

 

48,532

 

 

 

32,031

 

 

 

135,973

 

 

 

90,386

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other income (expenses)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense, net

 

 

(8,454

)

 

 

(4,924

)

 

 

(24,604

)

 

 

(15,981

)

Gain on sale of operating property

 

 

-

 

 

 

-

 

 

 

6,245

 

 

 

-

 

Net income

 

 

603

 

 

 

2,482

 

 

 

6,613

 

 

 

6,016

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-controlling interest in Operating Partnership

 

 

(54

)

 

 

(327

)

 

 

(838

)

 

 

(902

)

Net income available to Easterly Government

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Properties, Inc.

 

$

549

 

 

$

2,155

 

 

$

5,775

 

 

$

5,114

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income available to Easterly Government

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Properties, Inc. per share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

0.01

 

 

$

0.03

 

 

$

0.08

 

 

$

0.08

 

Diluted

 

$

0.01

 

 

$

0.03

 

 

$

0.08

 

 

$

0.08

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted-average common shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

71,444,448

 

 

 

60,446,199

 

 

 

67,010,162

 

 

 

51,051,388

 

Diluted

 

 

71,828,991

 

 

 

61,978,998

 

 

 

67,332,670

 

 

 

52,600,858

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income, per share - fully diluted basis

 

$

0.01

 

 

$

0.04

 

 

$

0.09

 

 

$

0.10

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average common shares outstanding -

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

fully diluted basis

 

 

81,337,275

 

 

 

69,498,135

 

 

 

76,837,357

 

 

 

60,088,521

 

 

 


 

 

 

 

EBITDA, FFO and CAD

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

 

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

September 30, 2019

 

 

September 30, 2018

 

 

September 30, 2019

 

 

September 30, 2018

 

Net income

 

$

603

 

 

$

2,482

 

 

$

6,613

 

 

$

6,016

 

Depreciation and amortization

 

 

23,299

 

 

 

16,109

 

 

 

68,717

 

 

 

45,331

 

Interest expense

 

 

8,454

 

 

 

4,924

 

 

 

24,604

 

 

 

15,981

 

Tax expense

 

 

173

 

 

 

58

 

 

 

426

 

 

 

265

 

Gain on sale of operating property

 

 

-

 

 

 

-

 

 

 

(6,245

)

 

 

-

 

EBITDA

 

$

32,529

 

 

$

23,573

 

 

$

94,115

 

 

$

67,593

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Pro forma adjustments(1)

 

 

1,426

 

 

 

 

 

 

 

 

 

 

 

 

 

Pro forma EBITDA

 

$

33,955

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

$

603

 

 

$

2,482

 

 

$

6,613

 

 

$

6,016

 

Depreciation and amortization

 

 

23,299

 

 

 

16,109

 

 

 

68,717

 

 

 

45,331

 

Gain on sale of operating property

 

 

-

 

 

 

-

 

 

 

(6,245

)

 

 

-

 

Funds From Operations (FFO)

 

$

23,902

 

 

$

18,591

 

 

$

69,085

 

 

$

51,347

 

Adjustments to FFO:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Acquisition costs

 

 

519

 

 

 

300

 

 

 

1,441

 

 

 

1,023

 

Straight-line rent and other non-cash adjustments

 

 

(110

)

 

 

(1,209

)

 

 

(1,676

)

 

 

(4,256

)

Amortization of above-/below-market leases

 

 

(1,517

)

 

 

(2,219

)

 

 

(4,761

)

 

 

(6,737

)

Amortization of deferred revenue

 

 

(176

)

 

 

(46

)

 

 

(310

)

 

 

(124

)

Non-cash interest expense

 

 

330

 

 

 

313

 

 

 

975

 

 

 

876

 

Non-cash compensation

 

 

714

 

 

 

731

 

 

 

2,145

 

 

 

2,307

 

Funds From Operations, as Adjusted

 

$

23,662

 

 

$

16,461

 

 

$

66,899

 

 

$

44,436

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

FFO, per share - fully diluted basis

 

$

0.29

 

 

$

0.27

 

 

$

0.90

 

 

$

0.85

 

FFO, as Adjusted, per share - fully diluted basis

 

$

0.29

 

 

$

0.24

 

 

$

0.87

 

 

$

0.74

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Funds From Operations, as Adjusted

 

$

23,662

 

 

$

16,461

 

 

$

66,899

 

 

$

44,436

 

Acquisition costs

 

 

(519

)

 

 

(300

)

 

 

(1,441

)

 

 

(1,023

)

Principal amortization

 

 

(852

)

 

 

(803

)

 

 

(2,530

)

 

 

(2,363

)

Maintenance capital expenditures

 

 

(814

)

 

 

(877

)

 

 

(3,054

)

 

 

(2,352

)

Contractual tenant improvements

 

 

(753

)

 

 

(680

)

 

 

(941

)

 

 

(1,231

)

Cash Available for Distribution (CAD)

 

$

20,724

 

 

$

13,801

 

 

$

58,933

 

 

$

37,467

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average common shares outstanding -

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

fully diluted basis

 

 

81,337,275

 

 

 

69,498,135

 

 

 

76,837,357

 

 

 

60,088,521

 

 

1 Pro forma assuming a full quarter of operations from the two properties acquired or placed in service in the third quarter of 2019.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 


 

 

 

 

Net Debt and Adjusted Net Debt

(Unaudited, in thousands)

 

 

September 30, 2019

 

 

Total Debt(1)

$

908,616

 

 

Less: cash and cash equivalents

 

(65,407

)

 

Net Debt

$

843,209

 

 

Less: adjustment for projects under construction(2)

 

(25,495

)

 

Adjusted Net Debt

$

817,714

 

 

 

 

 

 

 

 

1 Excludes unamortized premiums / discounts and deferred financing fees.

2 See definition of Adjusted Net Debt on Page 5.

 

 

 

 

dea-ex992_7.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 September 30, 2019 that will be released on Form 10-Q to be filed on or about November 6, 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, amortization of above-/below-market leases, amortization of deferred revenue (which results from landlord assets funded by tenants), 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

3


Supplemental Definitions

 

 

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. Certain prior year amounts have been updated to conform to the current year FFO, as Adjusted definition.

Net Operating Income (NOI) and Cash NOI. 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, amortization of above-/below-market leases, and amortization of deferred revenue (which results from landlord assets funded by tenants). 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. Certain prior year amounts have been updated to conform to the current year Cash NOI definition.

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

Compass Point Research & Trading, LLC

Jonathan Petersen

Michael R. Lewis

Merrill Ross

212-284-1705

212-319-5659

202-534-1392

 

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

September 30, 2019

 

 

Earnings

 

 

Three months ended

September 30, 2019

 

 

Three months ended

September 30, 2018

 

High closing price during period

 

$

21.30

 

 

Net income available to Easterly Government Properties, Inc.

 

$

549

 

 

$

2,155

 

Low closing price during period

 

$

18.09

 

 

Net income available to Easterly Government Properties, Inc.

 

 

 

 

 

 

 

 

End of period closing price

 

$

21.30

 

 

per share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

$

0.01

 

 

$

0.03

 

Outstanding Classes of Stock and

 

 

 

 

 

Diluted

 

 

$

0.01

 

 

$

0.03

 

Partnership Units - Fully Diluted Basis

 

At September 30, 2019

 

 

 

 

 

 

 

 

 

 

 

 

Common shares

 

 

73,247,479

 

 

Net income

 

 

$

603

 

 

$

2,482

 

Unvested restricted shares

 

 

92,197

 

 

Net income, per share - fully diluted basis

 

 

$

0.01

 

 

$

0.04

 

Common partnership and vested LTIP units

 

 

9,620,569

 

 

 

 

 

 

 

 

 

 

 

 

Total - fully diluted basis

 

 

82,960,245

 

 

Funds From Operations (FFO)

 

 

$

23,902

 

 

$

18,591

 

 

 

 

 

 

 

FFO, per share - fully diluted basis

 

 

$

0.29

 

 

$

0.27

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Market Capitalization

 

At September 30, 2019

 

 

Funds From Operations, as Adjusted

 

 

$

23,662

 

 

$

16,461

 

Total equity market capitalization - fully diluted basis

 

$

1,767,053

 

 

FFO, as Adjusted, per share - fully diluted basis

 

 

$

0.29

 

 

$

0.24

 

Net Debt

 

 

843,209

 

 

 

 

 

 

 

 

 

 

 

 

Total enterprise value

 

$

2,610,262

 

 

Cash Available for Distribution (CAD)

 

 

$

20,724

 

 

$

13,801

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Ratios

 

At September 30, 2019

 

 

Liquidity

 

 

 

 

 

 

At September 30, 2019

 

Net debt to total enterprise value

 

 

32.3

%

 

Cash and cash equivalents

 

 

 

 

 

 

$

65,407

 

Net debt to annualized quarterly EBITDA

 

 

6.5

x

 

 

 

 

 

 

 

 

 

 

 

Adjusted Net Debt to annualized quarterly pro forma EBITDA

 

6.0

x

 

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

 

 

$

450,000

 

Cash interest coverage ratio

 

 

4.0

x

 

 

 

 

 

 

 

Cash fixed charge coverage ratio

 

 

3.6

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)

 

 

 

 

 

September 30, 2019

 

 

December 31, 2018

 

Assets

 

 

 

 

 

 

 

 

Real estate properties, net

 

$

1,923,371

 

 

$

1,626,617

 

Cash and cash equivalents

 

 

65,407

 

 

 

6,854

 

Restricted cash

 

 

4,200

 

 

 

4,251

 

Deposits on acquisitions

 

 

750

 

 

 

7,070

 

Rents receivable

 

 

25,662

 

 

 

21,140

 

Accounts receivable

 

 

15,794

 

 

 

11,690

 

Deferred financing, net

 

 

1,926

 

 

 

2,459

 

Intangible assets, net

 

 

172,076

 

 

 

165,668

 

Interest rate swaps

 

 

-

 

 

 

4,563

 

Prepaid expenses and other assets

 

 

14,514

 

 

 

11,238

 

Total assets

 

$

2,223,700

 

 

$

1,861,550

 

 

 

 

 

 

 

 

 

 

Liabilities

 

 

 

 

 

 

 

 

Revolving credit facility

 

 

-

 

 

 

134,750

 

Term loan facilities, net

 

 

248,511

 

 

 

248,238

 

Notes payable, net

 

 

446,868

 

 

 

173,778

 

Mortgage notes payable, net

 

 

207,144

 

 

 

209,589

 

Intangible liabilities, net

 

 

26,455

 

 

 

30,835

 

Deferred revenue

 

 

55,381

 

 

 

3,066

 

Interest rate swaps

 

 

7,232

 

 

 

1,797

 

Accounts payable and accrued liabilities

 

 

48,372

 

 

 

34,244

 

Total liabilities

 

 

1,039,963

 

 

 

836,297

 

 

 

 

 

 

 

 

 

 

Equity

 

 

 

 

 

 

 

 

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

 

 

 

 

 

 

 

 

73,339,676 and 60,849,206 shares issued and outstanding at

September 30, 2019 and December 31, 2018, respectively.

 

 

733

 

 

 

608

 

Additional paid-in capital

 

 

1,225,029

 

 

 

1,017,415

 

Retained earnings

 

 

18,572

 

 

 

12,831

 

Cumulative dividends

 

 

(191,477

)

 

 

(139,103

)

Accumulated other comprehensive income (loss)

 

 

(6,393

)

 

 

2,412

 

Total stockholders' equity

 

 

1,046,464

 

 

 

894,163

 

Non-controlling interest in Operating Partnership

 

 

137,273

 

 

 

131,090

 

Total equity

 

 

1,183,737

 

 

 

1,025,253

 

Total liabilities and equity

 

$

2,223,700

 

 

$

1,861,550

 

 

 

 

 

8


Income Statements

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

 

 

 

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

September 30, 2019

 

 

September 30, 2018

 

 

September 30, 2019

 

 

September 30, 2018

 

Revenues

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Rental income

 

$

53,382

 

 

$

38,136

 

 

$

152,383

 

 

$

108,255

 

Tenant reimbursements

 

 

3,369

 

 

 

1,169

 

 

 

6,608

 

 

 

3,370

 

Other income

 

 

838

 

 

 

132

 

 

 

1,954

 

 

 

758

 

Total revenues

 

 

57,589

 

 

 

39,437

 

 

 

160,945

 

 

 

112,383

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Property operating

 

 

13,408

 

 

 

7,780

 

 

 

34,305

 

 

 

21,563

 

Real estate taxes

 

 

6,008

 

 

 

4,228

 

 

 

17,228

 

 

 

11,773

 

Depreciation and amortization

 

 

23,299

 

 

 

16,109

 

 

 

68,717

 

 

 

45,331

 

Acquisition costs

 

 

519

 

 

 

300

 

 

 

1,441

 

 

 

1,023

 

Corporate general and administrative

 

 

5,298

 

 

 

3,614

 

 

 

14,282

 

 

 

10,696

 

Total expenses

 

 

48,532

 

 

 

32,031

 

 

 

135,973

 

 

 

90,386

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other income (expenses)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense, net

 

 

(8,454

)

 

 

(4,924

)

 

 

(24,604

)

 

 

(15,981

)

Gain on sale of operating property

 

 

-

 

 

 

-

 

 

 

6,245

 

 

 

-

 

Net income

 

 

603

 

 

 

2,482

 

 

 

6,613

 

 

 

6,016

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-controlling interest in Operating Partnership

 

 

(54

)

 

 

(327

)

 

 

(838

)

 

 

(902

)

Net income available to Easterly Government

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Properties, Inc.

 

$

549

 

 

$

2,155

 

 

$

5,775

 

 

$

5,114

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income available to Easterly Government

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Properties, Inc. per share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

0.01

 

 

$

0.03

 

 

$

0.08

 

 

$

0.08

 

Diluted

 

$

0.01

 

 

$

0.03

 

 

$

0.08

 

 

$

0.08

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted-average common shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

71,444,448

 

 

 

60,446,199

 

 

 

67,010,162

 

 

 

51,051,388

 

Diluted

 

 

71,828,991

 

 

 

61,978,998

 

 

 

67,332,670

 

 

 

52,600,858

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income, per share - fully diluted basis

 

$

0.01

 

 

$

0.04

 

 

$

0.09

 

 

$

0.10

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average common shares outstanding -

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

fully diluted basis

 

 

81,337,275

 

 

 

69,498,135

 

 

 

76,837,357

 

 

 

60,088,521

 

 

9


Net Operating Income

(Unaudited, in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

 

September 30, 2019

 

 

September 30, 2018

 

 

September 30, 2019

 

 

September 30, 2018

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

$

603

 

 

$

2,482

 

 

$

6,613

 

 

$

6,016

 

 

Depreciation and amortization

 

 

23,299

 

 

 

16,109

 

 

 

68,717

 

 

 

45,331

 

 

Acquisition costs

 

 

519

 

 

 

300

 

 

 

1,441

 

 

 

1,023

 

 

Corporate general and administrative

 

 

5,298

 

 

 

3,614

 

 

 

14,282

 

 

 

10,696

 

 

Interest expense

 

 

8,454

 

 

 

4,924

 

 

 

24,604

 

 

 

15,981

 

 

Gain on sale of operating property

 

 

-

 

 

 

-

 

 

 

(6,245

)

 

 

-

 

 

Net Operating Income

 

 

38,173

 

 

 

27,429

 

 

 

109,412

 

 

 

79,047

 

 

Adjustments to Net Operating Income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Straight-line rent

 

 

(99

)

 

 

(1,174

)

 

 

(1,649

)

 

 

(4,238

)

 

Amortization of above-/below-market leases

 

 

(1,517

)

 

 

(2,219

)

 

 

(4,761

)

 

 

(6,737

)

 

Amortization of deferred revenue

 

 

(176

)

 

 

(46

)

 

 

(310

)

 

 

(124

)

 

Cash Net Operating Income

 

$

36,381

 

 

$

23,990

 

 

$

102,692

 

 

$

67,948

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

10


EBITDA, FFO and CAD

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

 

 

 

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

September 30, 2019

 

 

September 30, 2018

 

 

September 30, 2019

 

 

September 30, 2018

 

Net income

 

$

603

 

 

$

2,482

 

 

$

6,613

 

 

$

6,016

 

Depreciation and amortization

 

 

23,299

 

 

 

16,109

 

 

 

68,717

 

 

 

45,331

 

Interest expense

 

 

8,454

 

 

 

4,924

 

 

 

24,604

 

 

 

15,981

 

Tax expense

 

 

173

 

 

 

58

 

 

 

426

 

 

 

265

 

Gain on sale of operating property

 

 

-

 

 

 

-

 

 

 

(6,245

)

 

 

-

 

EBITDA

 

$

32,529

 

 

$

23,573

 

 

$

94,115

 

 

$

67,593

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Pro forma adjustments(1)

 

 

1,426

 

 

 

 

 

 

 

 

 

 

 

 

 

Pro forma EBITDA

 

$

33,955

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

$

603

 

 

$

2,482

 

 

$

6,613

 

 

$

6,016

 

Depreciation and amortization

 

 

23,299

 

 

 

16,109

 

 

 

68,717

 

 

 

45,331

 

Gain on sale of operating property

 

 

-

 

 

 

-

 

 

 

(6,245

)

 

 

-

 

Funds From Operations (FFO)

 

$

23,902

 

 

$

18,591

 

 

$

69,085

 

 

$

51,347

 

Adjustments to FFO:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Acquisition costs

 

 

519

 

 

 

300

 

 

 

1,441

 

 

 

1,023

 

Straight-line rent and other non-cash adjustments

 

 

(110

)

 

 

(1,209

)

 

 

(1,676

)

 

 

(4,256

)

Amortization of above-/below-market leases

 

 

(1,517

)

 

 

(2,219

)

 

 

(4,761

)

 

 

(6,737

)

Amortization of deferred revenue

 

 

(176

)

 

 

(46

)

 

 

(310

)

 

 

(124

)

Non-cash interest expense

 

 

330

 

 

 

313

 

 

 

975

 

 

 

876

 

Non-cash compensation

 

 

714

 

 

 

731

 

 

 

2,145

 

 

 

2,307

 

Funds From Operations, as Adjusted

 

$

23,662

 

 

$

16,461

 

 

$

66,899

 

 

$

44,436

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

FFO, per share - fully diluted basis

 

$

0.29

 

 

$

0.27

 

 

$

0.90

 

 

$

0.85

 

FFO, as Adjusted, per share - fully diluted basis

 

$

0.29

 

 

$

0.24

 

 

$

0.87

 

 

$

0.74

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Funds From Operations, as Adjusted

 

$

23,662

 

 

$

16,461

 

 

$

66,899

 

 

$

44,436

 

Acquisition costs

 

 

(519

)

 

 

(300

)

 

 

(1,441

)

 

 

(1,023

)

Principal amortization

 

 

(852

)

 

 

(803

)

 

 

(2,530

)

 

 

(2,363

)

Maintenance capital expenditures

 

 

(814

)

 

 

(877

)

 

 

(3,054

)

 

 

(2,352

)

Contractual tenant improvements

 

 

(753

)

 

 

(680

)

 

 

(941

)

 

 

(1,231

)

Cash Available for Distribution (CAD)

 

$

20,724

 

 

$

13,801

 

 

$

58,933

 

 

$

37,467

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average common shares outstanding -

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

fully diluted basis

 

 

81,337,275

 

 

 

69,498,135

 

 

 

76,837,357

 

 

 

60,088,521

 

 

 

(1)Pro forma assuming a full quarter of operations from the two properties acquired or placed in service in the third quarter of 2019.

 

11


Debt Schedules

(Unaudited, in thousands)

 

 

 

Debt Instrument

Maturity Date

 

 

September 30, 2019

Interest Rate

 

September 30, 2019

Balance(1)

 

September 30, 2019

Percent of

Total Indebtedness

 

Unsecured debt

 

 

 

 

 

 

 

 

 

 

 

 

 

Revolving credit facility

18-Jun-22(2)

 

 

LIBOR + 140bps

 

$

-

 

0.0%

 

2018 term loan facility

19-Jun-23

 

 

4.06%(3)

 

 

150,000

 

16.5%

 

2016 term loan facility

29-Mar-24

 

 

2.77%(4)

 

 

100,000

 

11.0%

 

Series A 4.05% notes due 2027

25-May-27

 

 

4.05%

 

 

95,000

 

10.5%

 

Series B 4.15% notes due 2029

25-May-29

 

 

4.15%

 

 

50,000

 

5.5%

 

Series C 4.30% notes due 2032

25-May-32

 

 

4.30%

 

 

30,000

 

3.3%

 

Series A 3.73% notes due 2029

12-Sep-29

 

 

3.73%

 

 

85,000

 

9.4%

 

Series B 3.83% notes due 2031

12-Sep-31

 

 

3.83%

 

 

100,000

 

11.0%

 

Series C 3.98% notes due 2034

12-Sep-34

 

 

3.98%

 

 

90,000

 

9.9%

 

 

8.6 years

 

 

3.81%

 

$

700,000

 

77.1%

 

Total unsecured debt

(wtd-avg maturity)

 

 

(wtd-avg rate)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Secured mortgage debt

 

 

 

 

 

 

 

 

 

 

 

 

 

VA - Loma Linda

6-Jul-27

 

 

3.59%

 

$

127,500

 

14.0%

 

ICE - Charleston

15-Jan-27

 

 

4.21%

 

 

17,729

 

2.0%

 

USFS II - Albuquerque

14-Jul-26

 

 

4.46%

 

 

16,338

 

1.8%

 

DEA - Pleasanton

18-Oct-23

 

 

LIBOR + 150bps

 

 

15,700

 

1.7%

 

CBP - Savannah

10-Jul-33

 

 

3.40%

 

 

12,942

 

1.4%

 

MEPCOM - Jacksonville

14-Oct-25

 

 

4.41%

 

 

9,186

 

1.0%

 

VA - Golden

1-Apr-24

 

 

5.00%

 

 

9,221

 

1.0%

 

 

7.5 years

 

 

3.80%

 

$

208,616

 

22.9%

 

Total secured mortgage debt

(wtd-avg maturity)

 

 

(wtd-avg rate)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Debt Statistics

September 30, 2019

 

 

 

 

 

 

 

 

September 30, 2019

 

Variable rate debt - unhedged

$

15,700

 

 

% Variable rate debt - unhedged

 

 

1.7

%

Fixed rate debt

 

892,916

 

 

% Fixed rate debt

 

 

98.3

%

Total Debt(1)

$

908,616

 

 

 

 

 

 

 

 

 

 

 

Less: cash and cash equivalents

 

(65,407

)

 

Weighted average maturity

 

8.3 years

 

Net Debt

$

843,209

 

 

Weighted average interest rate

 

 

3.8

%

Less: adjustment for projects under construction(5)

 

(25,495

)

 

 

 

 

 

 

 

 

 

 

Adjusted Net Debt

$

817,714

 

 

 

 

 

 

 

 

 

 

 

 

(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 4.06% 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 2.77% 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

 

$

862

 

 

-

 

 

-

 

 

$

862

 

 

 

0.1

%

 

-

 

2020

 

 

3,564

 

 

-

 

 

-

 

 

 

3,564

 

 

 

0.4

%

 

-

 

2021

 

 

4,233

 

 

-

 

 

-

 

 

 

4,233

 

 

 

0.5

%

 

-

 

2022

 

 

5,297

 

 

-

 

 

 

-

 

 

 

5,297

 

 

 

0.6

%

 

-

 

2023

 

 

5,585

 

 

 

15,700

 

 

 

150,000

 

 

 

171,285

 

 

 

18.9

%

 

 

4.02

%

2024

 

 

5,730

 

 

 

8,395

 

 

 

100,000

 

 

 

114,125

 

 

 

12.6

%

 

 

2.96

%

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

 

 

 

25.3

%

 

 

3.82

%

2028

 

 

983

 

 

-

 

 

-

 

 

 

983

 

 

 

0.1

%

 

-

 

2029

 

 

1,016

 

 

-

 

 

 

135,000

 

 

 

136,016

 

 

 

15.0

%

 

 

3.89

%

2030

 

 

1,049

 

 

-

 

 

-

 

 

 

1,049

 

 

 

0.1

%

 

-

 

2031

 

 

1,081

 

 

-

 

 

 

100,000

 

 

 

101,081

 

 

 

11.1

%

 

 

3.83

%

2032

 

 

1,116

 

 

-

 

 

 

30,000

 

 

 

31,116

 

 

 

3.4

%

 

 

4.30

%

2033

 

 

668

 

 

-

 

 

-

 

 

 

668

 

 

 

0.1

%

 

-

 

2034

 

 

-

 

 

-

 

 

 

90,000

 

 

 

90,000

 

 

 

9.9

%

 

 

3.98

%

Total

 

$

41,596

 

 

$

167,020

 

 

$

700,000

 

 

$

908,616

 

 

 

100.0

%

 

 

 

 

 

 

 

 

 

13


Operating Property Overview

(As of September 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

 

 

 

7.5

%

 

$

49.18

 

Various GSA - Buffalo

 

Buffalo, NY

 

Office

 

2019 - 2025

 

2004

 

 

267,766

 

 

 

8,414,455

 

 

 

4.0

%

 

 

31.42

 

JSC - Suffolk

 

Suffolk, VA

 

Office

 

2028

 

1993 / 2004

 

 

403,737

 

 

 

8,106,829

 

 

 

3.8

%

 

 

20.08

 

Various GSA - Portland

 

Portland, OR

 

Office

 

2020 - 2025

 

2002

 

 

223,261

 

 

 

6,868,163

 

 

 

3.3

%

 

 

31.07

 

FBI - Salt Lake

 

Salt Lake City, UT

 

Office

 

2032

 

2012

 

 

169,542

 

 

 

6,801,432

 

 

 

3.2

%

 

 

40.12

 

IRS - Fresno

 

Fresno, CA

 

Office

 

2033

 

2003

 

 

180,481

 

 

 

6,770,052

 

 

 

3.2

%

 

 

37.51

 

PTO - Arlington

 

Arlington, VA

 

Office

 

2035

 

2009

 

 

190,546

 

 

 

6,521,081

 

 

 

3.1

%

 

 

34.22

 

Various GSA - Chicago

 

Des Plaines, IL

 

Office

 

2020 / 2022

 

1971 / 1999

 

 

232,759

 

 

 

6,434,294

 

 

 

3.0

%

 

 

28.70

 

VA - San Jose

 

San Jose, CA

 

Outpatient Clinic

 

2038

 

2018

 

 

90,085

 

 

 

5,767,065

 

 

 

2.7

%

 

 

64.02

 

EPA - Lenexa

 

Lenexa, KS

 

Office

 

2027

 

2007 / 2012

 

 

169,585

 

 

 

5,498,307

 

 

 

2.6

%

 

 

32.42

 

FBI - San Antonio

 

San Antonio, TX

 

Office

 

2021

 

2007

 

 

148,584

 

 

 

5,159,501

 

 

 

2.4

%

 

 

34.72

 

FEMA - Tracy

 

Tracy, CA

 

Warehouse

 

2038

 

2018

 

 

210,373

 

 

 

4,607,609

 

 

 

2.2

%

 

 

21.90

 

FBI - Omaha

 

Omaha, NE

 

Office

 

2024

 

2009

 

 

112,196

 

 

 

4,467,047

 

 

 

2.1

%

 

 

39.81

 

TREAS - Parkersburg

 

Parkersburg, WV

 

Office

 

2021

 

2004 / 2006

 

 

182,500

 

 

 

4,416,549

 

 

 

2.1

%

 

 

24.20

 

FDA - Alameda

 

Alameda, CA

 

Laboratory

 

2039

 

2019

 

 

69,624

 

 

 

4,286,185

 

 

 

2.0

%

 

 

61.56

 

EPA - Kansas City

 

Kansas City, KS

 

Laboratory

 

2023

 

2003

 

 

71,979

 

 

 

4,213,094

 

 

 

2.0

%

 

 

58.53

 

VA - South Bend

 

Mishakawa, IN

 

Outpatient Clinic

 

2032

 

2017

 

 

86,363

 

 

 

3,975,368

 

 

 

1.9

%

 

 

46.03

 

ICE - Charleston

 

North Charleston, SC

 

Office

 

2021 / 2027

 

1994 / 2012

 

 

86,733

 

 

 

3,814,323

 

 

 

1.8

%

 

 

43.98

 

FBI - Pittsburgh

 

Pittsburgh, PA

 

Office

 

2027

 

2001

 

 

100,054

 

 

 

3,618,787

 

 

 

1.7

%

 

 

36.17

 

DOT - Lakewood

 

Lakewood, CO

 

Office

 

2024

 

2004

 

 

122,225

 

 

 

3,493,720

 

 

 

1.7

%

 

 

28.58

 

FBI - New Orleans

 

New Orleans, LA

 

Office

 

2029

 

1999 / 2006

 

 

137,679

 

 

 

3,472,512

 

 

 

1.6

%

 

 

25.22

 

USCIS - Lincoln

 

Lincoln, NE

 

Office

 

2020

 

2005

 

 

137,671

 

 

 

3,358,313

 

 

 

1.6

%

 

 

24.39

 

FBI - Birmingham

 

Birmingham, AL

 

Office

 

2020

 

2005

 

 

96,278

 

 

 

3,358,246

 

 

 

1.6

%

 

 

34.88

 

JUD - El Centro

 

El Centro, CA

 

Courthouse/Office

 

2034

 

2004

 

 

43,345

 

 

 

3,036,785

 

 

 

1.4

%

 

 

70.06

 

USFS II - Albuquerque

 

Albuquerque, NM

 

Office

 

2026

 

2011

 

 

98,720

 

 

 

3,009,129

 

 

 

1.4

%

 

 

30.48

 

OSHA - Sandy

 

Sandy, UT

 

Laboratory

 

2024

 

2003

 

 

75,000

 

 

 

3,004,875

 

 

 

1.4

%

 

 

40.07

 

FDA - College Park

 

College Park, MD

 

Laboratory

 

2029

 

2004

 

 

80,677

 

 

 

2,980,334

 

 

 

1.4

%

 

 

36.94

 

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

 

 

 

1.3

%

 

 

51.72

 

SSA - Charleston

 

Charleston, WV

 

Office

 

2024

 

1959 / 2000

 

 

110,000

 

 

 

2,784,822

 

 

 

1.3

%

 

 

25.32

 

ICE - Albuquerque

 

Albuquerque, NM

 

Office

 

2027

 

2011

 

 

71,100

 

 

 

2,757,942

 

 

 

1.3

%

 

 

38.79

 

FBI - Richmond

 

Richmond, VA

 

Office

 

2041

 

2001

 

 

96,607

 

 

 

2,755,886

 

 

 

1.3

%

 

 

28.53

 

JUD - Del Rio

 

Del Rio, TX

 

Courthouse/Office

 

2024

 

1992 / 2004

 

 

89,880

 

 

 

2,707,330

 

 

 

1.3

%

 

 

30.12

 

DEA - Pleasanton

 

Pleasanton, CA

 

Laboratory

 

2035

 

2015

 

 

42,480

 

 

 

2,679,599

 

 

 

1.3

%

 

 

63.08

 

DEA - Dallas Lab

 

Dallas, TX

 

Laboratory

 

2021

 

2001

 

 

49,723

 

 

 

2,433,565

 

 

 

1.2

%

 

 

48.94

 

TREAS - Birmingham

 

Birmingham, AL

 

Office

 

2029

 

2014

 

 

83,676

 

 

 

2,429,274

 

 

 

1.1

%

 

 

29.03

 

DEA - Sterling

 

Sterling, VA

 

Laboratory

 

2020

 

2001

 

 

49,692

 

 

 

2,403,449

 

 

 

1.1

%

 

 

48.37

 

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 September 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

 

 

 

1.0

%

 

 

73.00

 

CBP - Savannah

 

Savannah, GA

 

Laboratory

 

2033

 

2013

 

 

35,000

 

 

 

2,153,784

 

 

 

1.0

%

 

 

61.54

 

FBI - Albany

 

Albany, NY

 

Office

 

2019

 

1998

 

 

98,184

 

 

 

2,113,623

 

 

 

1.0

%

 

 

21.53

 

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

 

 

 

1,899,598

 

 

 

0.9

%

 

 

47.60

 

JUD - Charleston

 

Charleston, SC

 

Courthouse/Office

 

2019

 

1999

 

 

50,888

 

 

 

1,818,135

 

 

 

0.9

%

 

 

35.73

 

NPS - Omaha

 

Omaha, NE

 

Office

 

2024

 

2004

 

 

62,772

 

 

 

1,778,658

 

 

 

0.8

%

 

 

28.34

 

ICE - Otay

 

San Diego, CA

 

Office

 

2022 / 2026

 

2001

 

 

52,881

 

 

 

1,753,547

 

 

 

0.8

%

 

 

35.46

 

VA - Golden

 

Golden, CO

 

Office/Warehouse

 

2026

 

1996 / 2011

 

 

56,753

 

 

 

1,730,118

 

 

 

0.8

%

 

 

30.49

 

DEA - Dallas

 

Dallas, TX

 

Office

 

2021

 

2001

 

 

71,827

 

 

 

1,681,167

 

 

 

0.8

%

 

 

23.41

 

DEA - Otay

 

San Diego, CA

 

Office

 

2020

 

1997

 

 

32,560

 

 

 

1,627,003

 

 

 

0.8

%

 

 

49.97

 

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

 

 

 

1,599,477

 

 

 

0.8

%

 

 

26.86

 

DEA - Birmingham

 

Birmingham, AL

 

Office

 

2020

 

2005

 

 

35,616

 

 

 

1,531,347

 

 

 

0.7

%

 

 

43.00

 

JUD - Aberdeen

 

Aberdeen, MS

 

Courthouse/Office

 

2025

 

2005

 

 

46,979

 

 

 

1,490,415

 

 

 

0.7

%

 

 

31.73

 

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

 

 

 

1,432,449

 

 

 

0.7

%

 

 

22.47

 

DEA - Albany

 

Albany, NY

 

Office

 

2025

 

2004

 

 

31,976

 

 

 

1,350,107

 

 

 

0.6

%

 

 

42.22

 

DEA - Riverside

 

Riverside, CA

 

Office

 

2032

 

1997

 

 

34,354

 

 

 

1,241,200

 

 

 

0.6

%

 

 

36.13

 

SSA - Dallas

 

Dallas, TX

 

Office

 

2020

 

2005

 

 

27,200

 

 

 

1,076,946

 

 

 

0.5

%

 

 

39.59

 

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

 

 

 

760,077

 

 

 

0.4

%

 

 

25.24

 

DEA - San Diego

 

San Diego, CA

 

Warehouse

 

2032

 

1999

 

 

16,100

 

 

 

535,158

 

 

 

0.3

%

 

 

33.24

 

SSA - Mission Viejo

 

Mission Viejo, CA

 

Office

 

2020

 

2005

 

 

11,590

 

 

 

477,348

 

 

 

0.2

%

 

 

41.19

 

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

 

 

 

334,747

 

 

 

0.2

%

 

 

33.28

 

Subtotal

 

 

 

 

 

 

 

 

 

 

6,166,771

 

 

$

210,331,966

 

 

 

99.5

%

 

$

34.24

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Privately Leased Properties

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

5998 Osceola Court - United Technologies

 

Midland, GA

 

Warehouse/Manufacturing

 

2023

 

2014

 

 

105,641

 

 

 

541,849

 

 

 

0.3

%

 

 

5.13

 

501 East Hunter Street - Lummus Corporation

 

Lubbock, TX

 

Warehouse/Distribution

 

2028

 

2013

 

 

70,078

 

 

 

408,702

 

 

 

0.2

%

 

 

5.83

 

Subtotal

 

 

 

 

 

 

 

 

 

 

175,719

 

 

$

950,551

 

 

 

0.5

%

 

$

5.41

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total / Weighted Average

 

 

 

 

 

 

 

 

 

 

6,342,490

 

 

$

211,282,517

 

 

 

100.0

%

 

$

33.43

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

15


Tenants

(As of September 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")

 

 

7.0

 

 

 

1,085,860

 

 

 

17.3

%

 

$

34,667,055

 

 

 

16.4

%

Department of Veteran Affairs ("VA")

 

 

12.8

 

 

 

695,998

 

 

 

11.0

%

 

 

31,680,106

 

 

 

15.0

%

Drug Enforcement Administration ("DEA")

 

 

5.0

 

 

 

557,313

 

 

 

8.8

%

 

 

24,144,011

 

 

 

11.4

%

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

 

 

5.9

 

 

 

261,211

 

 

 

4.1

%

 

 

9,812,742

 

 

 

4.6

%

Environmental Protection Agency ("EPA")

 

 

6.7

 

 

 

241,564

 

 

 

3.8

%

 

 

9,711,401

 

 

 

4.6

%

Internal Revenue Service ("IRS")

 

 

10.9

 

 

 

241,815

 

 

 

3.8

%

 

 

8,767,706

 

 

 

4.1

%

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

 

 

8.7

 

 

 

403,737

 

 

 

6.4

%

 

 

8,106,829

 

 

 

3.8

%

Immigration and Customs Enforcement ("ICE")

 

 

5.7

 

 

 

193,661

 

 

 

3.1

%

 

 

7,936,810

 

 

 

3.8

%

Food and Drug Administration ("FDA")

 

 

14.6

 

 

 

150,301

 

 

 

2.4

%

 

 

7,266,519

 

 

 

3.4

%

Bureau of the Fiscal Service ("BFS")

 

 

4.2

 

 

 

266,176

 

 

 

4.2

%

 

 

6,845,823

 

 

 

3.2

%

Patent and Trademark Office ("PTO")

 

 

15.3

 

 

 

190,546

 

 

 

3.0

%

 

 

6,521,081

 

 

 

3.1

%

Federal Aviation Administration ("FAA")

 

 

1.1

 

 

 

209,970

 

 

 

3.3

%

 

 

6,053,368

 

 

 

2.9

%

U.S. Forest Service ("USFS")

 

 

4.3

 

 

 

191,175

 

 

 

3.0

%

 

 

5,886,508

 

 

 

2.8

%

Social Security Administration ("SSA")

 

 

4.6

 

 

 

200,866

 

 

 

3.2

%

 

 

5,617,980

 

 

 

2.7

%

Federal Emergency Management Agency ("FEMA")

 

 

19.0

 

 

 

210,373

 

 

 

3.3

%

 

 

4,607,609

 

 

 

2.2

%

Customs and Border Protection ("CBP")

 

 

11.5

 

 

 

68,000

 

 

 

1.1

%

 

 

3,753,612

 

 

 

1.8

%

Department of Transportation ("DOT")

 

 

4.6

 

 

 

129,659

 

 

 

2.1

%

 

 

3,742,091

 

 

 

1.8

%

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

 

 

0.9

 

 

 

137,671

 

 

 

2.2

%

 

 

3,358,313

 

 

 

1.6

%

Occupational Safety and Health Administration ("OSHA")

 

 

4.3

 

 

 

75,000

 

 

 

1.2

%

 

 

3,004,875

 

 

 

1.4

%

Military Entrance Processing Command ("MEPCOM")

 

 

6.0

 

 

 

30,000

 

 

 

0.5

%

 

 

2,189,904

 

 

 

1.0

%

Department of Energy ("DOE")

 

 

9.8

 

 

 

120,496

 

 

 

1.9

%

 

 

2,184,044

 

 

 

1.0

%

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

 

 

3.1

 

 

 

73,031

 

 

 

1.2

%

 

 

2,124,744

 

 

 

1.0

%

National Park Service ("NPS")

 

 

4.7

 

 

 

62,772

 

 

 

1.0

%

 

 

1,778,658

 

 

 

0.8

%

U.S. Coast Guard ("USCG")

 

 

8.2

 

 

 

59,547

 

 

 

0.9

%

 

 

1,599,477

 

 

 

0.8

%

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

 

 

5.4

 

 

 

39,320

 

 

 

0.6

%

 

 

1,468,380

 

 

 

0.7

%

Small Business Administration ("SBA")

 

 

2.5

 

 

 

37,253

 

 

 

0.6

%

 

 

1,155,029

 

 

 

0.5

%

National Labor Relations Board ("NLRB")

 

 

6.0

 

 

 

36,640

 

 

 

0.6

%

 

 

1,071,739

 

 

 

0.5

%

National Oceanic and Atmospheric Administration ("NOAA")

 

 

1.3

 

 

 

25,612

 

 

 

0.4

%

 

 

830,118

 

 

 

0.4

%

Bureau of Alcohol, Tobacco, Firearms and Explosives (“ATF”)

 

 

2.5

 

 

 

21,342

 

 

 

0.3

%

 

 

762,420

 

 

 

0.4

%

     

 

 

 

 

 

 

16


Tenants (Cont.)

(As of September 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

 

 

4.1

 

 

 

17,235

 

 

 

0.3

%

 

 

560,305

 

 

 

0.3

%

Bureau of Indian Affairs ("BIA")

 

 

3.9

 

 

 

6,477

 

 

 

0.1

%

 

 

217,628

 

 

 

0.1

%

U.S. Attorney Office ("USAO")

 

 

4.3

 

 

 

6,408

 

 

 

0.1

%

 

 

143,976

 

 

 

0.1

%

U.S. Marshals Service ("USMS")

 

 

7.3

 

 

 

1,054

 

 

 

0.0

%

 

 

47,533

 

 

 

0.0

%

Department of Labor ("DOL")

 

 

4.3

 

 

 

1,004

 

 

 

0.0

%

 

 

22,556

 

 

 

0.0

%

U.S. Probation Office ("USPO")

 

 

4.3

 

 

 

452

 

 

 

0.0

%

 

 

10,163

 

 

 

0.0

%

Subtotal

 

 

7.7

 

 

 

6,049,539

 

 

 

95.8

%

 

$

207,651,113

 

 

 

98.2

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Private Tenants

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other Private Tenants

 

 

2.5

 

 

 

50,794

 

 

 

0.8

%

 

$

1,419,629

 

 

 

0.7

%

Providence Health & Services

 

 

0.9

 

 

 

21,643

 

 

 

0.3

%

 

 

639,775

 

 

 

0.3

%

We Are Sharing Hope SC

 

 

2.0

 

 

 

21,609

 

 

 

0.3

%

 

 

621,449

 

 

 

0.3

%

United Technologies (Pratt & Whitney)

 

 

4.3

 

 

 

105,641

 

 

 

1.7

%

 

 

541,849

 

 

 

0.3

%

Lummus Corporation

 

 

8.8

 

 

 

70,078

 

 

 

1.1

%

 

 

408,702

 

 

 

0.2

%

Subtotal

 

 

4.7

 

 

 

269,765

 

 

 

4.2

%

 

$

3,631,404

 

 

 

1.8

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total / Weighted Average

 

 

7.6

 

 

 

6,319,304

 

 

 

100.0

%

 

$

211,282,517

 

 

 

100.0

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1)Weighted based on leased square feet.

 

17


Lease Expirations

(As of September 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

 

 

 

2.5

%

 

$

4,222,987

 

 

 

2.0

%

 

$

26.21

 

2020

 

18

 

 

 

762,983

 

 

 

12.1

%

 

 

26,082,364

 

 

 

12.3

%

 

 

34.18

 

2021

 

12

 

 

 

843,491

 

 

 

13.3

%

 

 

25,088,212

 

 

 

11.9

%

 

 

29.74

 

2022

 

7

 

 

 

124,523

 

 

 

2.0

%

 

 

4,763,739

 

 

 

2.3

%

 

 

38.26

 

2023

 

10

 

 

 

291,498

 

 

 

4.6

%

 

 

8,105,126

 

 

 

3.8

%

 

 

27.81

 

2024

 

10

 

 

 

727,374

 

 

 

11.5

%

 

 

22,944,196

 

 

 

10.9

%

 

 

31.54

 

2025

 

7

 

 

 

190,725

 

 

 

3.0

%

 

 

7,772,120

 

 

 

3.7

%

 

 

40.75

 

2026

 

3

 

 

 

157,011

 

 

 

2.5

%

 

 

4,795,892

 

 

 

2.3

%

 

 

30.54

 

2027

 

6

 

 

 

495,529

 

 

 

7.8

%

 

 

17,427,464

 

 

 

8.2

%

 

 

35.17

 

2028

 

3

 

 

 

506,815

 

 

 

8.0

%

 

 

10,115,359

 

 

 

4.8

%

 

 

19.96

 

Thereafter

 

20

 

 

 

2,058,230

 

 

 

32.7

%

 

 

79,965,058

 

 

 

37.8

%

 

 

38.85

 

Total / Weighted Average

 

99

 

 

 

6,319,304

 

 

 

100.0

%

 

$

211,282,517

 

 

 

100.0

%

 

$

33.43

 

 

18


Summary of Re/Development Projects

(As of September 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 - Lenexa

 

Lenexa, KS

 

Laboratory

 

 

59,690

 

 

100%

 

 

20-Year

 

$

68,553

 

 

$

25,495

 

 

$

41,257

 

 

4Q 2020

 

4Q 2020

 

Total

 

 

 

 

 

 

59,690

 

 

 

 

 

 

 

 

$

68,553

 

 

$

25,495

 

 

$

41,257

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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.

 

19