Easterly Government Properties to Issue $200 Million in Senior Unsecured Notes

Rhea-AI Summary

Easterly Government Properties (NYSE: DEA) announced a master note purchase agreement to issue $200 million in 9-year senior unsecured notes at a fixed rate of 6.56%. The issuance includes $150 million of Series A Senior Notes to be released on May 29, 2024, and $50 million of Series B Senior Notes to be issued on August 14, 2024, subject to customary closing conditions. The company emphasized its strong credit quality and investment-grade balance sheet, attributing the favorable pricing to investor confidence. These Senior Notes will not be registered under the Securities Act of 1933 and cannot be offered or sold without proper registration or exemption.

Positive

• Easterly secured $200 million in new financing at a competitive interest rate of 6.56%.
• The issuance is split into $150 million of Series A and $50 million of Series B, allowing staggered debt maturity.
• The strong support from new and existing investors indicates high confidence in the company's credit quality.
• The notes are fixed-rate, reducing exposure to interest rate volatility.
• Easterly's investment-grade balance sheet enhances its ability to secure favorable financing terms.

Negative

• The Senior Notes are not registered under the Securities Act of 1933, limiting liquidity and marketability.
• Future obligations include interest payments at a 6.56% fixed rate, increasing financial liabilities.
• The issuance increases the company's overall debt, potentially affecting leverage ratios.

Insights

Financial Analyst

Easterly Government Properties, Inc. (NYSE: DEA) has successfully secured $200 million in senior unsecured notes at a fixed rate of 6.56%. This financial maneuver reflects a strategic approach to debt management, ensuring liquidity and extending the company's debt maturity profile. A key takeaway for investors is the ability of Easterly to attract oversubscribed investor interest, indicating strong market confidence in their creditworthiness and financial stability.

The 6.56% interest rate on the notes appears competitive, especially given the current market environment. It suggests the company has favorable credit terms and a robust balance sheet, traits desirable for long-term investors. This also aligns with Easterly’s strategy to maintain a staggered and extended debt maturity profile, a prudent move to mitigate refinancing risks.

However, investors should also be aware of potential risks. Although the debt is unsecured, which implies no specific collateral, it also means that in case of financial distress, these notes may be riskier compared to secured debt. Nonetheless, the solid backing by U.S. government leases adds a layer of security.

In summary, this financial move suggests a positive outlook for Easterly’s debt management and financial health, focusing on sustainable growth and liquidity maintenance.

Market Research Analyst

Easterly Government Properties focuses on leasing properties to the U.S. Government, a strategy that inherently carries a lower risk due to the reliable and stable nature of the tenant. This issuance of $200 million in senior unsecured notes not only secures additional capital but also signals a strategic intent to expand and enhance their property portfolio.

The structure of the notes, with staggered issuance dates in May and August 2024, helps in managing the company’s cash flows and reduces the impact of interest rate fluctuations. The interest in their notes, indicated by oversubscription, reflects investor confidence in the stability and growth potential of Easterly’s business model.

For retail investors, understanding that Easterly’s revenue source is primarily from government leases can be reassuring. It implies a steady revenue stream, which is a significant advantage in uncertain economic times. Moreover, the competitive pricing of the notes reaffirms the company's strong market position and financial prudence.

In conclusion, the issuance is a strategic move to bolster financial stability while aiming for growth, indicating a sound investment for those seeking lower-risk opportunities.

WASHINGTON--(BUSINESS WIRE)-- Easterly Government Properties, Inc. (NYSE: DEA) (the “Company” or “Easterly”), a fully integrated real estate investment trust focused primarily on the acquisition, development and management of Class A commercial properties leased to the U.S. Government and its adjacent partners, announced today that it has entered into a master note purchase agreement to issue $200 million of 6.56% (ICUR9 + 210 basis point spread) 9-year fixed rate, senior unsecured notes (“Senior Notes”), consisting of:

• $150 million of Series A Senior Notes issued and sold by Easterly Government Properties LP, the Company’s operating partnership (the “Partnership”), on May 29, 2024; and
• $50 million of Series B Senior Notes to be issued and sold by the Partnership on or about August 14, 2024, subject to customary closing conditions.

“We believe that Easterly’s ability to obtain competitive pricing in the unsecured debt market is a reflection of the superior credit quality of our tenant and our investment grade balance sheet,” said Allison Marino, Easterly’s Chief Financial and Chief Accounting Officer. “We favorably priced with oversubscribed levels of new and existing investor support, thus enabling Easterly to appropriately stagger and extend its weighted average debt maturities.”

The Senior Notes have not been and will not be registered under the Securities Act of 1933 or the securities laws of any state or other jurisdiction and may not be offered or sold in the United States or any other jurisdiction absent registration or an exemption from the registration requirements of the Securities Act of 1933 and the applicable securities laws of any state or other jurisdiction.

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.

This press release contains forward-looking statements within the meaning of federal securities laws and regulations. These forward-looking statements are identified by their use of terms and phrases such as “believe,” “expect,” “intend,” “project,” “anticipate,” “position,” and other similar terms and phrases, including references to assumptions and forecasts of future results. Forward-looking statements are not guarantees of future performance and involve known and unknown risks, uncertainties and other factors which may cause the actual results to differ materially from those anticipated at the time the forward-looking statements are made. These risks include, but are not limited to, those risks and uncertainties associated with our business described from time to time in our filings with the Securities and Exchange Commission, including our Annual Report on Form 10-K filed on February 27, 2024. Although we believe the expectations reflected in such forward-looking statements are based upon reasonable assumptions, we can give no assurance that the expectations will be attained or that any deviation will not be material. All information in this release is as of the date of this release, and we undertake no obligation to update any forward-looking statement to conform the statement to actual results or changes in our expectations.

View source version on businesswire.com: https://www.businesswire.com/news/home/20240530685280/en/

Easterly Government Properties, Inc.

Lindsay S. Winterhalter

Senior Vice President, Investor Relations & Operations

202-596-3947

IR@easterlyreit.com

Source: Easterly Government Properties, Inc.

FAQ

What are the details of Easterly Government Properties' new senior unsecured notes?

Easterly is issuing $200 million in 9-year senior unsecured notes at a 6.56% fixed rate, split into $150 million of Series A and $50 million of Series B.

When will Easterly Government Properties issue the Series A and Series B Senior Notes?

Series A Senior Notes will be issued on May 29, 2024, and Series B Senior Notes on August 14, 2024, subject to customary closing conditions.

Why did Easterly Government Properties secure $200 million in new financing?

Easterly secured the financing to extend its weighted average debt maturities and benefit from competitive pricing due to its strong credit quality and investment-grade balance sheet.

What is the interest rate on Easterly Government Properties' new senior unsecured notes?

The senior unsecured notes carry a fixed interest rate of 6.56%.

Are the new senior unsecured notes from Easterly Government Properties registered under the Securities Act of 1933?

No, the Senior Notes are not registered under the Securities Act of 1933 and cannot be offered or sold without registration or exemption.