Easterly Government Properties NYSE: DEA reported higher second-quarter revenue and per-share earnings, raised its full-year Core FFO guidance and said it is nearing a point where improving equity-market valuation could support more accretive external growth.
President and CEO Darrell Crate said Core FFO per share rose 5.4% from a year earlier, exceeding the company’s stated long-term growth target of 2% to 3%. He attributed the performance to steady earnings growth, capital allocation and efforts to improve portfolio quality.
Crate emphasized that the company’s portfolio differs from traditional office real estate because it is centered on mission-specific facilities leased to federal agencies, state and municipal tenants, and defense-related companies. He said many properties provide secure, purpose-built environments that are difficult to replicate and are integral to tenant operations.
Second-Quarter Results
Total revenue increased 10% year over year to $92.4 million from $84.2 million, according to Allison, who said the gain reflected acquisitions and development completed over the past year, lease renewals, and tenant-improvement and building-specific allowance income.
EBITDA increased about 8% to $58.4 million, compared with $54.3 million in the prior-year quarter. Net income was $0.07 per fully diluted share. Both FFO per share and Core FFO per share were $0.78, up from $0.74 a year earlier.
- Occupancy was 98% at quarter-end.
- Weighted average lease term was 9.2 years.
- Cash available for distribution was approximately $25.8 million.
- Net debt to annualized quarterly EBITDA was 7.3 times, down from the first quarter.
Allison said the company’s three active development projects continued to advance: an FDLE laboratory in Fort Myers, Florida; a U.S. courthouse in Flagstaff, Arizona; and a U.S. courthouse in Medford, Oregon. The Fort Myers project, which broke ground in August 2025, remains on track for delivery later in 2026.
Financing and Updated Outlook
During the quarter, Easterly closed a new $200 million unsecured term loan with a five-year maturity, a $50 million accordion feature and an initial spread of 130 basis points over SOFR. The company used the proceeds to repay borrowings on its revolving credit facility, increasing available liquidity for future investments.
Allison said the financing was priced more favorably than the company had expected for a comparable long-term capital solution. She also said development-project reimbursements and future revenue from delivered projects are expected to support deleveraging.
The company raised its full-year 2026 Core FFO per-share guidance range to $3.07 to $3.13, an increase of $0.01 at the midpoint from the prior $3.09 to $3.10 midpoint range. At the midpoint, guidance assumes $50 million to $100 million of gross development-related investment and $50 million of wholly owned acquisitions during the year.
Management said it continues to pursue an additional investment-grade credit rating in 2027. In discussing the planned refinancing of the $127.5 million Loma Linda mortgage, which matures next summer and carries a 3.6% rate, Allison said an investment-grade unsecured issuance would be the company’s preferred option. She added that Easterly has enough revolver capacity to temporarily carry the debt while pursuing a long-term solution.
Pipeline and Capital Allocation
Crate said Easterly maintains a $1.5 billion acquisition and development pipeline that has been cultivated over several years. He said the company is beginning to see opportunities to fund external growth on an accretive basis as its share price improves.
In response to analyst questions, Crate said the company could find “nice transactions” if its stock trades in the $24.50 to $25.50 range, while a share price of $26 to $27 could support a couple hundred million dollars of growth. At higher valuation levels, he said the company could potentially pursue acquisition volume materially above its historical activity.
The pipeline has remained relatively stable, though management said approximately $100 million to $200 million of opportunities may rotate in and out during a quarter. Crate said the company passed on one potential acquisition because it was not a must-have asset and offered an estimated 60 to 75 basis points above its cost of capital.
Management said it is pursuing both General Services Administration-leased properties and assets in state, local and government-adjacent categories. Crate said the company would ideally add assets in an approximately even mix between GSA and alternative categories, with the latter offering 2% to 3% annual escalators that could improve same-store growth.
Easterly also continues to evaluate mezzanine financing opportunities, with management maintaining a target program size of $30 million to $50 million. The company said it has received substantial interest but intends to lend only alongside trusted developers and on assets it would want to own in its portfolio over time.
Leasing, Dispositions and Joint Ventures
Management said it is actively working through lease procurements for expirations extending through much of 2027 and does not expect results outside its current assumptions. Those assumptions include mid- to high-teens net effective rent growth and average tenant-improvement and building-specific allowance spending of about $35 per square foot.
The company said an FAA tenant expected to move out in October will remain through at least the end of its lease term because its notice provisions have expired. Allison said management is hopeful the tenant may remain longer but advised analysts not to include additional revenue in estimates at this point.
Crate said dispositions could be evaluated on a case-by-case basis, including for properties that are geographically isolated from the company’s other assets, but he does not anticipate significant portfolio turnover as a means of raising capital for growth.
The company is also maintaining and expanding relationships with joint-venture partners. Crate said Easterly has worked with a sovereign wealth fund and other potential partners, and that joint ventures could provide an additional avenue for funding growth if equity-market conditions are less favorable.
About Easterly Government Properties (NYSE:DEA)
Easterly Government Properties, Inc is a real estate investment trust that specializes in the acquisition, development and management of commercial properties leased to U.S. government agencies. Structured as a triple-net lease REIT, the company focuses on single-tenant assets with long-term, credit-backed leases that transfer most property-level responsibilities—including taxes, insurance and maintenance—to its government tenants.
The firm’s portfolio encompasses a variety of facility types, including office buildings, training centers, laboratories and mission-critical installations used by federal agencies.
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