Easterly Government Properties Reports Second Quarter 2023 Results
Highlights for the Quarter Ended June 30, 2023:
-
Net income of
, or$5.8 million per share on a fully diluted basis$0.05 -
Core FFO of
, or$30.3 million per share on a fully diluted basis$0.29 -
Recognized as a 2022 Premier Member by the
U.S. Environmental Protection Agency’s ENERGY STAR Certification Nation -
Named one of the 2023 Best Places to Work in the
Greater Washington region by the Washington Business Journal
-
Expects to receive, as of the date of this release, aggregate net proceeds of approximately
from the sale of 1,700,000 shares of the Company’s common stock that have not yet been settled under the Company's$36.7 million ATM Program launched in December 2019 (the “December 2019 ATM Program”), assuming these forward sales transactions are physically settled in full using a net weighted average combined initial forward sales price of$300.0 million per share$21.61
“We are seeing signs of a thawing acquisition market, and we believe there will be opportunities to transact in the second half of 2023,” said William C. Trimble, III, Easterly's Chief Executive Officer. “We intend to resume our external growth strategy and expand the portfolio through the addition of creditworthy government leases with long durations.”
Financial Results for the Six Months Ended June 30, 2023:
Net income of
Core FFO of
Portfolio Operations
As of June 30, 2023, the Company or its joint venture (the “JV”) owned 86 operating properties in
Balance Sheet and Capital Markets Activity
As of June 30, 2023, the Company had total indebtedness of approximately
As of the date of this release, the Company expects to receive aggregate net proceeds of approximately
Dividend
On August 2, 2023, the Board of Directors of Easterly approved a cash dividend for the second quarter of 2023 in the amount of
Subsequent Events
On July 20, 2023, Easterly exercised the
Guidance
This guidance is forward-looking and reflects management’s view of current and future market conditions. The Company’s actual results may differ materially from this guidance.
Outlook for the 12 Months Ending December 31, 2023
The Company is raising the low end of its full-year 2023 Core FFO per share on a fully diluted basis guidance to a range of
|
|
Low |
|
High |
|
Net income (loss) per share – fully diluted basis |
|
$ |
0.20 |
|
0.22 |
Plus: Company’s share of real estate depreciation and amortization |
|
$ |
0.92 |
|
0.92 |
FFO per share – fully diluted basis |
|
$ |
1.12 |
|
1.14 |
Plus: Company’s share of depreciation of non-real estate assets |
|
$ |
0.01 |
|
0.01 |
Core FFO per share – fully diluted basis |
|
$ |
1.13 |
|
1.15 |
This guidance assumes (i) the closing of VA - Corpus Christi through the JV at the Company’s pro rata share of approximately
Non-GAAP Supplemental Financial Measures
This section contains definitions of certain non-GAAP financial measures and other terms that the Company uses in this press release and, where applicable, the reasons why management believes these non-GAAP financial measures provide useful information to investors about the Company’s financial condition and results of operations and the other purposes for which management uses the measures. These measures should not be considered in isolation or as a substitute for measures of performance in accordance with GAAP. A reconciliation of the differences between each non-GAAP financial measure and the comparable GAAP financial measure are included in this press release following the consolidated financial statements. Additional detail can be found in the Company’s most recent annual report on Form 10-K and quarterly report on Form 10-Q, as well as other documents filed with or furnished to the Securities and Exchange Commission from time to time. We present certain financial information and metrics “at Easterly’s Share,” which is calculated on an entity-by-entity basis. “At Easterly’s Share” information, which we also refer to as being “at share,” “pro rata,” or “our share” is not, and is not intended to be, a presentation in accordance with GAAP.
Cash Available for Distribution (CAD) is a non-GAAP financial measure that is not intended to represent cash flow for the period and is not indicative of cash flow provided by operating activities as determined under GAAP. CAD is calculated in accordance with the current Nareit definition as FFO minus normalized recurring real estate-related expenditures and other non-cash items, nonrecurring expenditures and the unconsolidated real estate venture’s allocated share of these adjustments. CAD is presented solely as a supplemental disclosure because the Company believes it provides useful information regarding the Company’s ability to fund its dividends. Because all companies do not calculate CAD the same way, the presentation of CAD may not be comparable to similarly titled measures of other companies.
Core Funds from Operations (Core FFO) adjusts FFO to present an alternative measure of the Company's operating performance, which, when applicable, excludes items which it believes are not representative of ongoing operating results, such as liability management related costs (including losses on extinguishment of debt and modification costs), catastrophic event charges, depreciation of non-real estate assets, and the unconsolidated real estate venture's allocated share of these adjustments. In future periods, the Company may also exclude other items from Core FFO that it believes may help investors compare its results. The Company believes Core FFO more accurately reflects the ongoing operational and financial performance of the Company's core business.
EBITDA is calculated as the sum of net income (loss) before interest expense, taxes, depreciation and amortization, (gain) loss on the sale of operating properties, impairment loss, and the unconsolidated real estate venture’s allocated share of these adjustments. EBITDA is not intended to represent cash flow for the period, is not presented as an alternative to operating income as an indicator of operating performance, should not be considered in isolation or as a substitute for measures of performance prepared in accordance with GAAP, is not indicative of operating income or cash provided by operating activities as determined under GAAP and may be presented on a pro forma basis. EBITDA is presented solely as a supplemental disclosure with respect to liquidity because the Company believes it provides useful information regarding the Company's ability to service or incur debt. Because all companies do not calculate EBITDA the same way, the presentation of EBITDA may not be comparable to similarly titled measures of other companies.
Funds From Operations (FFO) is defined, in accordance with the Nareit FFO White Paper - 2018 Restatement, as net income (loss), calculated in accordance with GAAP, excluding depreciation and amortization related to real estate, gains and losses from the sale of certain real estate assets, gains and losses from change in control and impairment write-downs of certain real estate assets and investments in entities when the impairment is directly attributable to decreases in the value of depreciable real estate held by the entity. FFO includes the Company’s share of FFO generated by unconsolidated affiliates. FFO is a widely recognized measure of REIT performance. Although FFO is a non-GAAP financial measure, the Company believes that information regarding FFO is helpful to shareholders and potential investors.
Funds From Operations, as Adjusted (FFO, as Adjusted) adjusts FFO to present an alternative measure of the Company's operating performance, which, when applicable, excludes the impact of losses on extinguishment of debt, depreciation of non-real estate assets, acquisition costs, straight-line rent and other non-cash adjustments, amortization of deferred revenue (which results from landlord assets funded by tenants), non-cash interest expense, non-cash compensation, amortization of above-/below-market leases, and the unconsolidated real estate venture’s allocated share of these adjustments. 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 the Company's consolidated debt and its share of unconsolidated debt adjusted to exclude its share of unamortized premiums and discounts and deferred financing fees, less its share of cash and cash equivalents and property acquisition closing escrow, net of deposit. By excluding these items, the result provides an estimate of the contractual amount of borrowed capital to be repaid, net of cash available to repay it. The Company believes this calculation constitutes a beneficial supplemental non-GAAP financial disclosure to investors in understanding its financial condition. Adjusted Net Debt is Net Debt reduced by 1) for each project under construction or in design, the lesser of i) outstanding lump-sum reimbursement amounts and ii) the cost to date, 2)
Other Definitions
Fully diluted basis assumes the exchange of all outstanding common units representing limited partnership interests in the Company’s operating partnership, or common units, the full vesting of all shares of restricted stock, and the exchange of all earned and vested LTIP units in the Company’s operating partnership for shares of common stock on a one-for-one basis, which is not the same as the meaning of “fully diluted” under GAAP.
Conference Call Information
The Company will host a webcast and conference call at 11:00 am Eastern time on August 8, 2023 to review the second quarter 2023 performance, discuss recent events and conduct a question-and-answer session. A live webcast will be available in the Investor Relations section of the Company’s website. Shortly after the webcast, a replay of the webcast will be available on the Investor Relations section of the Company's website for up to twelve months. Please note that the full text of the press release and supplemental information package are also available through the Company’s website at ir.easterlyreit.com.
About Easterly Government Properties, Inc.
Easterly Government Properties, Inc. (NYSE: DEA) is based in
Forward Looking Statements
We make statements in this press release that are considered “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act, which are usually identified by the use of words such as “anticipates,” “believes,” “estimates,” “expects,” “intends,” “may,” “plans,” “projects,” “seeks,” “should,” “will,” and variations of such words or similar expressions and include our guidance with respect to Net income (loss) and Core FFO per share on a fully diluted basis. We intend these forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995 and are including this statement in this press release for purposes of complying with those safe harbor provisions. These forward-looking statements reflect our current views about our plans, intentions, expectations, strategies and prospects, which are based on the information currently available to us and on assumptions we have made. Although we believe that our plans, intentions, expectations, strategies and prospects as reflected in or suggested by those forward-looking statements are reasonable, we can give no assurance that the plans, intentions, expectations or strategies will be attained or achieved. Furthermore, actual results may differ materially from those described in the forward-looking statements and will be affected by a variety of risks and factors that are beyond our control including, without limitation: risks associated with our dependence on the
Balance Sheet
|
||||||||
|
|
June 30, 2023 |
|
|
December 31, 2022 |
|||
Assets |
|
|
|
|
|
|||
Real estate properties, net |
|
$ |
2,270,435 |
|
|
$ |
2,285,308 |
|
Cash and cash equivalents |
|
|
9,816 |
|
|
|
7,578 |
|
Restricted cash |
|
|
11,970 |
|
|
|
9,696 |
|
Tenant accounts receivable |
|
|
60,862 |
|
|
|
58,835 |
|
Investment in unconsolidated real estate venture |
|
|
268,594 |
|
|
|
271,644 |
|
Intangible assets, net |
|
|
145,837 |
|
|
|
157,282 |
|
Interest rate swaps |
|
|
5,114 |
|
|
|
4,020 |
|
Prepaid expenses and other assets |
|
|
35,335 |
|
|
|
35,022 |
|
Total assets |
|
$ |
2,807,963 |
|
|
$ |
2,829,385 |
|
|
|
|
|
|
|
|||
Liabilities |
|
|
|
|
|
|||
Revolving credit facility |
|
|
53,000 |
|
|
|
65,500 |
|
Term loan facilities, net |
|
|
249,179 |
|
|
|
248,972 |
|
Notes payable, net |
|
|
696,290 |
|
|
|
696,052 |
|
Mortgage notes payable, net |
|
|
222,711 |
|
|
|
240,847 |
|
Intangible liabilities, net |
|
|
14,421 |
|
|
|
16,387 |
|
Deferred revenue |
|
|
85,932 |
|
|
|
83,309 |
|
Accounts payable, accrued expenses and other liabilities |
|
|
64,363 |
|
|
|
67,336 |
|
Total liabilities |
|
|
1,385,896 |
|
|
|
1,418,403 |
|
|
|
|
|
|
|
|||
Equity |
|
|
|
|
|
|||
Common stock, par value |
|
|
934 |
|
|
|
908 |
|
Additional paid-in capital |
|
|
1,673,399 |
|
|
|
1,622,913 |
|
Retained earnings |
|
|
102,491 |
|
|
|
93,497 |
|
Cumulative dividends |
|
|
(524,806 |
) |
|
|
(475,983 |
) |
Accumulated other comprehensive income (loss) |
|
|
4,518 |
|
|
|
3,546 |
|
Total stockholders' equity |
|
|
1,256,536 |
|
|
|
1,244,881 |
|
Non-controlling interest in Operating Partnership |
|
|
165,531 |
|
|
|
166,101 |
|
Total equity |
|
|
1,422,067 |
|
|
|
1,410,982 |
|
Total liabilities and equity |
|
$ |
2,807,963 |
|
|
$ |
2,829,385 |
|
Income Statement
|
||||||||||||||||
|
||||||||||||||||
|
|
Three Months Ended |
|
Six Months Ended |
||||||||||||
|
|
June 30, 2023 |
|
June 30, 2022 |
|
June 30, 2023 |
|
June 30, 2022 |
||||||||
Revenues |
|
|
|
|
|
|
|
|
||||||||
Rental income |
|
$ |
67,758 |
|
|
$ |
71,156 |
|
|
$ |
135,906 |
|
|
$ |
141,595 |
|
Tenant reimbursements |
|
|
2,500 |
|
|
|
916 |
|
|
|
4,575 |
|
|
|
2,060 |
|
Asset management income |
|
|
517 |
|
|
|
317 |
|
|
|
1,034 |
|
|
|
565 |
|
Other income |
|
|
598 |
|
|
|
368 |
|
|
|
1,078 |
|
|
|
839 |
|
Total revenues |
|
|
71,373 |
|
|
|
72,757 |
|
|
|
142,593 |
|
|
|
145,059 |
|
|
|
|
|
|
|
|
|
|
||||||||
Expenses |
|
|
|
|
|
|
|
|
||||||||
Property operating |
|
|
17,629 |
|
|
|
15,551 |
|
|
|
35,517 |
|
|
|
31,009 |
|
Real estate taxes |
|
|
7,619 |
|
|
|
7,851 |
|
|
|
15,087 |
|
|
|
15,677 |
|
Depreciation and amortization |
|
|
22,619 |
|
|
|
24,343 |
|
|
|
45,700 |
|
|
|
48,502 |
|
Acquisition costs |
|
|
444 |
|
|
|
302 |
|
|
|
905 |
|
|
|
664 |
|
Corporate general and administrative |
|
|
7,024 |
|
|
|
5,966 |
|
|
|
14,319 |
|
|
|
11,949 |
|
Total expenses |
|
|
55,335 |
|
|
|
54,013 |
|
|
|
111,528 |
|
|
|
107,801 |
|
|
|
|
|
|
|
|
|
|
||||||||
Other income (expense) |
|
|
|
|
|
|
|
|
||||||||
Income from unconsolidated real estate venture |
|
|
1,418 |
|
|
|
825 |
|
|
|
2,820 |
|
|
|
1,456 |
|
Interest expense, net |
|
|
(11,678 |
) |
|
|
(11,439 |
) |
|
|
(23,693 |
) |
|
|
(22,321 |
) |
Net income |
|
|
5,778 |
|
|
|
8,130 |
|
|
|
10,192 |
|
|
|
16,393 |
|
|
|
|
|
|
|
|
|
|
||||||||
Non-controlling interest in Operating Partnership |
|
|
(675 |
) |
|
|
(933 |
) |
|
|
(1,198 |
) |
|
|
(1,855 |
) |
Net income available to Easterly Government Properties, Inc. |
|
$ |
5,103 |
|
|
$ |
7,197 |
|
|
$ |
8,994 |
|
|
$ |
14,538 |
|
|
|
|
|
|
|
|
|
|
||||||||
Net income available to Easterly Government Properties, Inc. per share: |
|
|
|
|
|
|
|
|
||||||||
Basic |
|
$ |
0.05 |
|
|
$ |
0.08 |
|
|
$ |
0.09 |
|
|
$ |
0.16 |
|
Diluted |
|
$ |
0.05 |
|
|
$ |
0.08 |
|
|
$ |
0.09 |
|
|
$ |
0.16 |
|
|
|
|
|
|
|
|
|
|
||||||||
Weighted-average common shares outstanding: |
|
|
|
|
|
|
|
|
||||||||
Basic |
|
|
93,358,851 |
|
|
|
90,751,351 |
|
|
|
92,235,346 |
|
|
|
90,452,594 |
|
Diluted |
|
|
93,641,382 |
|
|
|
91,083,980 |
|
|
|
92,508,651 |
|
|
|
90,799,647 |
|
|
|
|
|
|
|
|
|
|
||||||||
Net income, per share - fully diluted basis |
|
$ |
0.05 |
|
|
$ |
0.08 |
|
|
$ |
0.10 |
|
|
$ |
0.16 |
|
|
|
|
|
|
|
|
|
|
||||||||
Weighted average common shares outstanding - fully diluted basis |
|
|
105,707,282 |
|
|
|
102,545,589 |
|
|
|
104,569,748 |
|
|
|
102,044,603 |
|
EBITDA
|
||||||||||||
|
||||||||||||
|
|
Three Months Ended |
|
Six Months Ended |
||||||||
|
|
June 30, 2023 |
|
June 30, 2022 |
|
June 30, 2023 |
|
June 30, 2022 |
||||
Net income |
|
$ |
5,778 |
|
$ |
8,130 |
|
$ |
10,192 |
|
$ |
16,393 |
Depreciation and amortization |
|
|
22,619 |
|
|
24,343 |
|
|
45,700 |
|
|
48,502 |
Interest expense |
|
|
11,678 |
|
|
11,439 |
|
|
23,693 |
|
|
22,321 |
Tax expense |
|
|
352 |
|
|
174 |
|
|
520 |
|
|
225 |
Unconsolidated real estate venture allocated share of above adjustments |
|
|
1,942 |
|
|
1,181 |
|
|
3,882 |
|
|
2,109 |
EBITDA |
|
$ |
42,369 |
|
$ |
45,267 |
|
$ |
83,987 |
|
$ |
89,550 |
FFO and CAD
|
||||||||||||||||
|
||||||||||||||||
|
|
Three Months Ended |
|
Six Months Ended |
||||||||||||
|
|
June 30, 2023 |
|
June 30, 2022 |
|
June 30, 2023 |
|
June 30, 2022 |
||||||||
|
|
|
|
|
|
|
|
|
||||||||
Net income |
|
$ |
5,778 |
|
|
$ |
8,130 |
|
|
$ |
10,192 |
|
|
$ |
16,393 |
|
Depreciation of real estate assets |
|
|
22,368 |
|
|
|
24,096 |
|
|
|
45,199 |
|
|
|
48,008 |
|
Unconsolidated real estate venture allocated share of above adjustments |
|
|
1,875 |
|
|
|
1,127 |
|
|
|
3,750 |
|
|
|
2,005 |
|
FFO |
|
$ |
30,021 |
|
|
$ |
33,353 |
|
|
$ |
59,141 |
|
|
$ |
66,406 |
|
Adjustments to FFO: |
|
|
|
|
|
|
|
|
||||||||
Loss on extinguishment of debt |
|
$ |
- |
|
|
$ |
- |
|
|
$ |
14 |
|
|
$ |
- |
|
Natural disaster event expense, net of recovery |
|
|
(22 |
) |
|
|
4 |
|
|
|
78 |
|
|
|
9 |
|
Depreciation of non-real estate assets |
|
|
251 |
|
|
|
247 |
|
|
|
501 |
|
|
|
494 |
|
Unconsolidated real estate venture allocated share of above adjustments |
|
|
17 |
|
|
|
16 |
|
|
|
33 |
|
|
|
32 |
|
Core FFO |
|
$ |
30,267 |
|
|
$ |
33,620 |
|
|
$ |
59,767 |
|
|
$ |
66,941 |
|
Adjustments to Core FFO: |
|
|
|
|
|
|
|
|
||||||||
Acquisition costs |
|
|
444 |
|
|
|
302 |
|
|
|
905 |
|
|
|
664 |
|
Straight-line rent and other non-cash adjustments |
|
|
(902 |
) |
|
|
451 |
|
|
|
(1,365 |
) |
|
|
(531 |
) |
Amortization of above-/below-market leases |
|
|
(676 |
) |
|
|
(743 |
) |
|
|
(1,376 |
) |
|
|
(1,604 |
) |
Amortization of deferred revenue |
|
|
(1,622 |
) |
|
|
(1,443 |
) |
|
|
(3,106 |
) |
|
|
(2,841 |
) |
Non-cash interest expense |
|
|
244 |
|
|
|
235 |
|
|
|
488 |
|
|
|
460 |
|
Non-cash compensation |
|
|
1,299 |
|
|
|
1,637 |
|
|
|
2,967 |
|
|
|
3,266 |
|
Natural disaster event expense, net of recovery |
|
|
22 |
|
|
|
(4 |
) |
|
|
(78 |
) |
|
|
(9 |
) |
Unconsolidated real estate venture allocated share of above adjustments |
|
|
43 |
|
|
|
(394 |
) |
|
|
(70 |
) |
|
|
(709 |
) |
FFO, as Adjusted |
|
$ |
29,119 |
|
|
$ |
33,661 |
|
|
$ |
58,132 |
|
|
$ |
65,637 |
|
|
|
|
|
|
|
|
|
|
||||||||
FFO, per share - fully diluted basis |
|
$ |
0.28 |
|
|
$ |
0.33 |
|
|
$ |
0.57 |
|
|
$ |
0.65 |
|
Core FFO, per share - fully diluted basis |
|
$ |
0.29 |
|
|
$ |
0.33 |
|
|
$ |
0.57 |
|
|
$ |
0.66 |
|
FFO, as Adjusted, per share - fully diluted basis |
|
$ |
0.28 |
|
|
$ |
0.33 |
|
|
$ |
0.56 |
|
|
$ |
0.64 |
|
|
|
|
|
|
|
|
|
|
||||||||
FFO, as Adjusted |
|
$ |
29,119 |
|
|
$ |
33,661 |
|
|
$ |
58,132 |
|
|
$ |
65,637 |
|
Acquisition costs |
|
|
(444 |
) |
|
|
(302 |
) |
|
|
(905 |
) |
|
|
(664 |
) |
Principal amortization |
|
|
(1,068 |
) |
|
|
(1,328 |
) |
|
|
(2,126 |
) |
|
|
(2,628 |
) |
Maintenance capital expenditures |
|
|
(2,329 |
) |
|
|
(1,972 |
) |
|
|
(5,069 |
) |
|
|
(2,906 |
) |
Contractual tenant improvements |
|
|
(712 |
) |
|
|
(511 |
) |
|
|
(1,013 |
) |
|
|
(1,128 |
) |
Unconsolidated real estate venture allocated share of above adjustments |
|
|
(4 |
) |
|
|
- |
|
|
|
(4 |
) |
|
|
- |
|
Cash Available for Distribution (CAD) |
|
$ |
24,562 |
|
|
$ |
29,548 |
|
|
$ |
49,015 |
|
|
$ |
58,311 |
|
|
|
|
|
|
|
|
|
|
||||||||
Weighted average common shares outstanding - fully diluted basis |
|
|
105,707,282 |
|
|
|
102,545,589 |
|
|
|
104,569,748 |
|
|
|
102,044,603 |
|
Net Debt and Adjusted Net Debt
|
|||
|
June 30, 2023 |
||
Total Debt(1) |
$ |
1,225,786 |
|
Less: Cash and cash equivalents |
|
(10,702 |
) |
Net Debt |
$ |
1,215,084 |
|
Less: Adjustment for development projects(2) |
|
(15,990 |
) |
Adjusted Net Debt |
$ |
1,199,094 |
|
|
|
||
1 Excludes unamortized premiums / discounts and deferred financing fees. |
|||
2 See definition of Adjusted Net Debt on Page 4. |
|||
View source version on businesswire.com: https://www.businesswire.com/news/home/20230808141288/en/
Easterly Government Properties, Inc.
Lindsay S. Winterhalter
Supervisory Vice President, Investor Relations & Operations
202-596-3947
ir@easterlyreit.com
Source: Easterly Government Properties, Inc.