Q4 2022 Easterly Government Properties Inc Earnings Call
Speaker 1: You you.
Speaker 1: The conference will begin shortly. To raise and lower your hand during Q&A you can die.
Speaker 2: between the company's research analyst and Easterly's management team. So ask the question during the session, analysts will need to press star 1-1 on their telephone. They will then hear an automated message advising their hand is raised. Please be advised that today's conference is being recorded.
Speaker 2: I would now like to hand the conference over to you today, Lindsey Winterholter, Head of Investor Relations. Please go ahead. Good morning. Before the call begins, please note that certain statements made during this conference call may include statements that are not historical facts and are considered forgling statements within the meaning of the private security litigation reform act of 1995. Although the company believes that its expectations as reflected in and need forwardless...
Speaker 2: and in its other FCC filings. The company assumes no obligation to update publicly and enforce looking statements.
Speaker 2: Additionally, on this conference call, the company may refer to certain non- GAAP financial measures such as funds from operations, funds from operations as adjusted and cash available for distribution. You can find a tabular reconciliation of these non- GAAP financial measures to the most comparable current gap numbers.
Speaker 2: in the company's earnings release and separate supplemental information package on the Investor Relations page of the company's website at ir.easterlyrate.com
Speaker 3: I would now like to turn the conference call over to Darrell Crate, Chairman of East Julie Government Properties. Good morning, everyone, and thank you for joining us for this fourth quarter conference call. Today, in addition to Lindsay, I'm also joined by Bill Trimble, the company's CEO , and Megan Bevere, the company's CFO and CEOO.
Speaker 3: 2022 is a year of change for real estate generally and office in particular. I'm going to contrast our business with office because many of the analysts who follow our company compare our performance to the office universe of reads. One meaningful way our portfolio is differentiated from office is our occupancy profile.
Speaker 3: You can't close down a meth lab from your dining room table.
Speaker 3: We also look forward and see the need for our facilities increasing. As the population grows, the demand on our tenant agency function increases. The occupancy needs of our bullseye properties will benefit from population growth over time.
Speaker 3: Another factor affecting some office reads is the shift in the term structure of interest rates, and in particular, accelerating short term rates.
Speaker 3: As you know, we have long-dated leases, and Megan has done a great job terming out our liabilities. We have a limited amount of floating rate indebtedness, which will service well through this period of Federal Reserve monetary tightening.
Speaker 3: Lastly, the quality of our tenant credit is unwavering. All of our leases are backed by the full faith and credit of the United States Federal Government. We have a tenant credit profile that compares favorably with every read in the office universe. Our team continues to be engaged with the government lease market and we're working to find high quality assets to complement our existing portfolio.
Speaker 3: an equilibrium, we are well positioned with our available capital to deploy it in a way that's accretive to our shareholders.
Speaker 3: We're proud to have built a portfolio that is comprised of buildings early in their life with long dated leases with exceptional credit quality. With bulls eye properties, we're uniquely positioned among reeds to have a strong visibility to our future cash flows for many quarters to come.
Speaker 3: which provide high-quality stable income to our shareholders. With that, I'll turn the call over to Bill to give further insights into our portfolio. Thanks, Darrell. Good morning. Thank you for joining us for our fourth quarter earnings call. In spite of increasing headwinds in the capital markets, 2022 was another successful year for easily unmening fronts. Easily either wholly owned or through its JV.
Speaker 3: acquired seven properties, totally just over 800,000 square feet of 100% government-least space. Staying true to our thesis of acquiring newer buildings with strong visibility of cash flows, the 2022 class of assets is both young and enduring. Based on the way the average of an annualized lease income generate from these facilities,
Speaker 3: This subset of buildings averaged the construction delivery year of 2018 and has a lease expiration year of 2041. As we have previously indicated, we are maintaining an active presence in the acquisition market, but we remain cautious because of the changing backdrop and rising cost of capital. Easily we only do accretive deals.
Speaker 3: And at the market is not there at the moment, we remain comfortable waiting. We will not grow the portfolio of the sake of growth. And we feel the strength of the in-place portfolio and visibility of cash flows with our U.S. government tinnitus distinguishes us from other office reads in a significant way.
Speaker 3: Other office reads earnings call at this quarter have centered around several things including work from home trends.
Speaker 3: Building occupancy percentages.
Speaker 3: occupancy percentages. Local market metal rates.
Speaker 3: sub-leasing activity and projected layoffs and various industries that might result in real-estate downsizing. To be clear, these are not of concern at East-Rally. We invest for the mission of the government's paramount and the federal employees need to work from our facility cannot be accomplished in their homes. For those reasons, East-Rally took a notable step in the fourth quarter of 2022.
Speaker 3: and executed its first portfolio disposition with an experienced private buyer of GSA lead real estate.
Speaker 3: The disposition portfolio was comprised of 10 buildings, approximately 668,000 leased square feet, with a weighted average age that was older than the remaining and now current portfolio.
Speaker 3: This sale enhanced the overall quality and NAB of the remaining each-report folio, which in turn made those previously cited office challenges even less relevant for each-release.
Speaker 3: Another NAV enhancing aspect of our business, our development arm, is making meaningful progress at our FDA Atlanta Laboratory project. We have recently delivered our 65% CD submissions to the government and have started the process of procuring important materials like chillers and switch gear.
Speaker 3: We anticipate obtaining a permit for TI work this summer, and at that point we'll begin TI construction. We look forward to providing you with meaningful updates on future calls as we work towards building the FDA of brand new state-of-the-art mission-critical laboratory space that sits on an initial 20-year non-cancellable lease with the United States government.
Speaker 3: Turning to leasing updates, our asset management team continues to perform in 2022 and executed on all major renewals for the year. Asets within this class included FBI Birmingham, EPA Kansas City, the DEA Drug Lab in Dallas, FBI Little Rock and ICE Louisville.
Speaker 3: All told, this represents over 320,000 leads square feet and approximately 4.7% of the company's annualized leads income in Q4 2022. And on top of their success in renewing expiring assets in 2022, the asset management team continues to execute on another important aspect of the business.
Speaker 3: are tenant reimbursable projects. As a reminder, these projects include tenant funded improvements, the key of our buildings at peak performance, and enable facilities to continue to help fulfill the important mission of the underlying tenant agencies. In total, just under 14 million of these government funded projects were approved in 2022,
Speaker 3: Our Pharmacy Conversion Project at VA Mobile and the installation of new EV charging stations at DOT Lakewood. I congratulate the acid management team on all their successes past year as they work to extend the weighted average for many in least term of our portfolio and increase our visibility of cash flows. In closing, this has been an important year for East Shore.
Speaker 3: We've added bulls-eye assets of Holy Onde and through the JV, increasing the overall quality of our portfolio. We've made significant strides in our environmental, sustainability, and corporate responsibility efforts through the publication and establishment of formal, environmental, and social goal setting in our inaugural ESG report. We've executed on the company's first portfolio disposition.
Speaker 3: which simultaneously strengthen the company's balance sheet and portfolio profile. Renewed our largest 2022 lease expiration for a weighted average duration of 19.3 years, reflecting the value of the government seized in these facilities, and providing the company with increased certainty and duration of cash flow. The future looks bright at each other. They're in deadly challenges in the short term with a rising cost of capital and a slow transaction market.
Speaker 3: But the underlying fundamentals of business are strong, our NOI is solid, and echo Darrell sentiment, if the world sees us as an office week, then I'm thankful our smartest investors and analysts recognize the clear distinction between us and our office brothers.
Speaker 3: With that, I thank you for your time this morning. I turn the call over to Megan, discuss the quarterly and year-end financial results. Thank you, Bell. Good morning, everyone. As the market settles into a new, interest rate environment and the opportunities for external growth remain muted. The strength of our balance sheet comes into greater focus. I'm happy to share the actions we've taken over 2022 and early in 2023 to...
Speaker 4: of 13.8 years and awaited average remaining least term of 10.3 years.
Speaker 4: For the fourth quarter, all in a fully diluted basis, net income per share was 18 cents, FFO per share was 30 cents, and FFO was adjusted per share was 29 cents.
Speaker 4: Our cash available for distribution was $21.7 million. For the year end of December 31st, 2022, all in a fully diluted basis, net income per share was $35.00 FFO per share with $1.27, and FFO with adjusted per share with $1.26.
Speaker 4: Our cash available for distribution was $108.5 million. At year end, the company had total indebtedness of approximately $1.3 billion, representing a net debt to annualized quarterly pro-forming ebazaar ratio of 7.1 times.
Speaker 4: With over 384 million capacity in our line of credit, in the fourth quarter, we completed the sale of the 10 properties disposition portfolio, then that proceeds from which we're used to pay down outstanding debt obligations.
Speaker 4: As a result of the transaction, we have so distinguished a mortgage with a rate well above the company's weighted average at that Com Jacksonville. The sale reduced the company's floating rate exposure from 14.1% to 6.5% of all outstanding debt obligations and added capacity for future acquisition.
Speaker 4: and development-related expenses by recycling non-voltaic assets. Subsequent to quarter-end, we took another important step to manage our cost of capital in an uncertain and interesting environment. East Julie recognizes that floating-rate exposure in our test stack works against our universal strategy of being the reach that delivers predictability to our shareholders.
Speaker 4: With that in mind, we elected to proactively and opportunistically enter into forward starting interest rate swap to 60 interest rates on 300 million of our 2016 and 2018 term loans, including the anticipated additional 50 million of delayed drop-un from our 2018 term loan. On February 3rd, 2023, we entered into 340 forward starting soon.
Speaker 4: The third tranche had an effective date of September 29, 2023 and a 21-lens duration with a fixed rate of 3.7%.
Speaker 4: By executing these swaps, we have infused an even greater degree of visibility into our debt stack by managing our exposure to interest rate movements. As a result of the interest rate swaps entered into on February 3rd, the company extended the maturity of its interest rate swaps from a weighted average maturity of less than six months to a weighted average maturity of over 25 months, effectively extending the certainty to a weighted average maturity of over 25 months, effectively extending the maturity of the
Speaker 4: of the company's 6th rate 2016 and 2018 term loan schedule by more than 19 months.
Speaker 4: Another important measure reflecting each really underlying strength is its liquidity and access to capital.
Speaker 4: As previously mentioned, we believe there may be the potential to help distress developers. With over 434 million in debt capacity and just under 93 million in uncedled forward equity, Easterly has ample opportunity to execute on a creative deal without needing to go to the capital market. And finally, before turning to our earnings guys, allow me to send a moment high-
Speaker 4: As such, there can be a lag in providing releasing data relative to the point at which we have signed a renewal list. As of December 31, 2022, we had executed 13 renewals for which the renewal TI worked with complete and accepted by the government. This 13 includes PTO Arlington and IRS Fresno. On the exclude PTO Arlington and IRS Fresno, the average rent is for the...
Speaker 4: which the new lease has not yet commenced, or for which it has commenced, but the TI has not yet been accepted by the government to realize an average renewal run spread of approximately 26%. This group of assets total $660,677 square feet across 11 properties, and each have renewed for total lease terms of between 15 and 20 years with an average of 17.6.
Speaker 4: years. Finally, I will conclude with our earning guidance for 2023. Beginning this year and on it go forward basis, we will be transitioning our guidance to a core FFL metric.
Speaker 4: Core FFO adjusts FFO as defined by NARE to present an alternative measure of the company's operating performance, which one applicable excludes items which we believe are not representative of ongoing results. Examples of such exclusions include liability management related costs, including loss with 18, cost within cheapest costs 1. older pharmaceutical ??itling costs 4,500, and
Speaker 4: catastrophic event charges and depreciation of non-real estate assets. For fiscal year 2022 on a fully diluted basis, the company's FFO for share was $1.27 and its core FFO for share was $1.28. The company is introducing its guidance for full year 2023 core FFO for share on a fully diluted basis in a range of $1.12 to $1.15. The skydend to suit the closing of VA core FIS Christie's property within the VA portfolio.
Speaker 4: It will begin to see strengthening opportunities to turn back to this market. With that, we thank you for your commitment to our thesis and appreciate your partnership. I will now turn the call back to Shannon.
Speaker 5: Thank you. As our minor to the analyst, to ask a question you will need to press star 11 on your telephone. Please stand by when we compile the Q&A roster. Our first question is from Michael Griffin with City. Please proceed with your question. Great thanks. Megan, maybe starting back on 2023 guidance. Let's curious if you could give some color around maybe some of the other moving pieces. I think about maybe operating expense for the year, kind of interest expense, Q&A. Any color you can kind of give around that sort of bridge the delta between.
Speaker 4: 22 full year and then the expectation for 23. Yeah, good morning, Michael. What I would remind everyone of is that the DIST position, obviously in a low seven cap rate range, contributed approximately 15 million of NLI on an annualized basis last year. And the death that we were available, that was available for repayment with that DIST position, was running at about a 2.5% interest rate in the last year. When we think of the bridge of removing that and then getting to our 2023 guidance, the residual is coming from inflationary expectations and the environment on both our commodities and our people cost.
Speaker 5: Okay, great. And then just on transaction expectations. I mean, it seems pretty muted for at least the outset of 2023. I'm just wondering if you're seeing any assets out there trading in the market. I seem to recall of a VA asset that might have been in your wheelhouse trade sort of recently, but there'll maybe any commentary or clarity you could give around you.
Speaker 3: buyer expectations, seller expectations, you know, be pretty helpful. No, absolutely. Good morning, Mark. I'm looking forward to seeing you next week. On those assets, there have not been really any assets within our bulls-eye traded. I think it's important to mention to know that there were two VA assets that did trade. One of them not being tax compliant. And as you may know, I think we've discussed all of our VA facilities, especially all of the ones in our new portfolio, R-PACC, which is a requirement of the VA going forward. And as you know, if we don't see at least another couple of least turns left in that building, we're not going to buy it. So that probably would not qualify just on underwriting a loan to be within our portfolio. So that's why we didn't, and they came as a pair. So that's why we did not participate. And Bill, where would cap rates have to get to endure? Or to get you more, I don't know, a creative, a positive set of say? Well, I think, you know, it's interesting. We obviously spent a lot of time. We had a great...
Speaker 5: Abraham Mootes with Jeffries. She'll let us know open.
Speaker 3: Yes, thank you very much. Just one I want to ask about the acquisition guidance. I notice that you said it will be Corpus Christi that closes this year. Sorry if I missed this. Had you closed Jacksonville yet as well or has that assumed later on?
We have not closed Jack's mouth, but it's assumed to be later on at this point. Okay, so that won't be a 23. Got it. And then I guess I'm just trying to get a sense here, but also on the acquisition guide. You know, it assumes none beyond corporate's crispy, but...
I think Darrell's comments were pretty positive that the market is starting to open back up. So just trying to get a sense of how kind of is that? Would you say the guide is just more on the conservative side and you just are waiting for things to open up?
Yeah, I say that it's not a surprise, I think, conservative and easily government properties are probably synonymous in a lot of ways. And so the last thing we need to do is get everybody revved up. I think we've always tried to over-deliver. So you can be rest assured that when the market does open up, we will be participating if not driving it. But I can tell you that I think Darrow is correct. It is moving in the right direction.
quarter, 2022 conference call. I'd like to thank our board, our vendors, our shareholders, and particularly our easterly team for their dedication and support during the year. We hope this call has been helpful, and we look forward to speaking with you all again soon. This concludes today's conference call. Thank you for participating. You may now disconnect.
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Greetings. Welcome to the East Early Government Properties 4th quarter 2022 earnings conference call. At this time all participants are in a listening mode.
After the speakers presentation, there will be a question-and-answer session between the company's research analyst and Easterly's management team. So ask the question during the session, analysts will need to press Star 1-1 on their telephone. They will then hear an automated message advising their hand is raised.
Please be advised that today's conference is being recorded. I would now like to hand the conference over to you today, Renzi Winterholtzer, Head of Investor Relations. Please go ahead. Good morning. Before the call begins, please note that certain statements made during this conference call may include statements that are not historical facts and are considered for looking statements within the meaning of the private security's litigation reform act of 1995.
Although the company believes that its expectations as reflected in and eat for-looking statements are reasonable, it can give no assurance that these expectations will be attained or achieved. Furthermore, actual results may differ materially from those described in the for-looking statements, and will be affected by a variety of risks and factors that are beyond the company's control, including without limitations, those contained in the company's most recent form 10K to be filed with the FCC and in its other SEC filings. The company assumes no obligation to update publicly and in for-looking statements.
to turn the conference call over to Darryl Crate, Chairman of East Julie Government Properties. Good morning, everyone, and thank you for joining us for this fourth quarter conference call. Today, in addition to Lindsay, I'm also joined by Bill Trimble, the company's CEO , and Megan Bevere, the company's CFO and CEOO. 2022 is a year of change for real estate generally, and office in particular.
I'm going to contrast our business with office because many of the analysts who follow our company compare our performance to the office universe of reads. One meaningful way our portfolio is differentiated from office is our occupancy profile. As we've seen, office has been material affected by the adoption of work from home flexibility that was born from the pandemic.
For DEA, our Mission Critical Facilities support agency functions that require worker collaboration. You can't close down a meth lab from your dining room table. We also look forward and see the need for our facilities increasing. As the population grows, the demand on our tenant agency function increases. The occupancy needs of our bullseye properties will benefit from population growth over time. Another factor affecting some office reads is the shift in the term structure of interest rates.
In particular, accelerating short-term rates. As you know, we have long-dated leases, and Megan has done a great job terming out our liabilities. We have a limited amount of floating rate indebtedness, which will service well through this period of Federal Reserve monetary tightening. Lastly, the quality of our tenant credit is unwavering. All of our leases are backed by the full-facing credit of the United States Federal Government. We have a tenant credit profile that compares favorably with every read in the office universe.
Our team continues to be engaged with the government lease market and we're working to find high quality assets to complement our existing portfolio. Since the shift in interest rates, assets in our market are repricing. As is the case across the real estate sector, the bid and the ask between sellers and buyers widened. As one would anticipate that spread, as we learn through our conversations, is narrowing. As the market eventually reaches an equilibrium, we are well positioned with our available capital to deploy it in a way that's accretive to our shareholders. We're proud to have built a portfolio that is comprised of buildings early in their life with long-dated leases, with exceptional credit quality.
With bulls eye properties, we're uniquely positioned among reeds to have a strong visibility to our future cash flows for many quarters to come, which provide high-quality stable income to our shareholders. With that, I'll turn the call over to Bill to give further insights into our portfolio. Thanks, Darrell. Good morning. Thank you for joining us for our fourth quarter earnings call. Thank you.
In spite of increasing headwinds in the capital markets, 2022 was another successful year for easily unmined fronts. Easily either wholly owned or through its JV acquired seven properties, totaling just over 800,000 square feet of 100% government-leaf space. Staying true to our thesis of acquiring newer buildings with strong visibility cash flows.
The 2022 class of assets is both young and enduring. Based on the way the average of an annualized lease income generated from these facilities, this subset of buildings averaged the construction delivery year of 2018 and has a lease expiration year of 2041. As we have previously indicated, we're maintaining an active presence in the acquisition market.
but we remain cautious because of the changing backdrop and rising cost of capital. East really will only do accretive deals. And if the market is not there at the moment, we remain comfortable waiting. We will not grow the portfolio of the sake of growth. And we feel the strength of the in-place portfolio and visibility of cash flows with our U.S. government-tenant distinguishes us from other office reads in a significant way.
Other office reads earnings call of this quarter have centered around several things, including work from home trends, building occupancy for strategies, local market metal rates, sub-leasing activity, and projected layoffs in various industries that might result in real estate downsizing. To be clear, these are not of concern at East-Roy.
We invest for the mission of the government's paramount and the federal employees need to work from our facility cannot be accomplished in their homes. For those reasons, each really took a notable step in the fourth quarter of 2022 and executed its first portfolio disposition with an experienced private buyer of GSA LEAD real estate.
The disposition portfolio was comprised of 10 buildings, approximately 668,000 leads to square feet.
With a weighted average age that was older than the remaining and now current portfolio. This sale enhanced the overall quality and NAV of the remaining each-reward portfolio, which in turn made those previously cited office challenges even less relevant for Easterly. Another NAV enhancing aspect of our business, our development arm, is making meaningful progress at our FDA Atlanta Laboratory Project.
We have recently delivered our 65% CD submissions to the government and have started the process of procuring important materials like chillers and switch gear. We anticipate obtaining a permit for TI work this summer and at that point we'll begin TI construction. We look forward to providing you with meaningful updates on future calls as we work towards building the FDA brand new state of the art mission critical laboratory space.
that sits on an initial 20-year non-cancellable lease with the United States government. Turning to leasing updates, our asset management team continues to perform in 2022 and executed on all major renewals for the year. Asets within this class included FBI Birmingham, EPA Kansas City, the DEA Drug Lab in Dallas, FBI Lil' Rock and ICE Louisville. All told, this represents over 320,000 leased square feet and approximately 4.7%.
of the company's annualized lease income in Q4 2022. And on top of their success in renewing expiring assets in 2022, the asset management team continues to execute on another important aspect of the business our tenant reimbursable projects.
As a reminder, these projects include tenant-funded improvements, the key of our buildings at peak performance, and enable facilities to continue to help fulfill the important mission of the underlying tenant agencies.
In total, just under 14 million of these government fund projects were approved in 2022, from which each really earns a project management fee.
Examples as such approved projects in 2022 include a Guard Jack replacement at FBI Pittsburgh, a test-based construction project at JSC Suffolk, perimeter fencing and gain installation at USCG Martinsburg, a pharmacy conversion project at VA Mobile.
and the installation of new EV charging stations at DOT Lakewood. I congratulate the acid management team and all their successes past year as they work to extend the weighted average for many least term of our portfolio and increase our visibility of cash flows. In closing, this has been an important year for East Shoei.
We've added bulls-eye assets of Holy Oamed and through the JV, increasing the overall quality of our portfolio. We've made significant strides in our environmental, sustainability, and corporate responsibility efforts through the publication and establishment of formal environmental and social goal setting in our inaugural ESG report.
We've executed on the company's first portfolio disposition, which simultaneously strengthen the company's balance sheet and portfolio profile. And renewed our largest 2022 lease expiration for a weighted average duration of 19.3 years, reflecting the value of the government sees in these facilities and providing the company with increased certainty and duration of cash flow.
The future looks bright at each other. There are undoubtedly challenges in the short term with a rising cost of capital and a slow transaction market. But the underlying fundamentals of the business are strong. Our NOI is solid. And echo Darrell's sentiment, if the world sees us as an office rate, then I'm thankful our smartest investors and analysts recognize us.
into a new interest rate environment and the opportunities for external growth remain muted. The strength of our balance sheet comes into greater focus. I'm happy to share the actions we've taken over 2022 and early in 2023 to recycle capital and hands our leverage profile, reduce our floating rate exposure and position ourselves for opportunities to come.
remaining least term of 10.3 years.
For the fourth quarter, all in a fully diluted basis, net income per share was $0.18, FFO per share was $0.30, and FFO was adjusted per share was $0.29. Our cash available for distribution was $0.7.9. For the year end of December 31st, 2022, all in a fully diluted basis, net income per share was $0.35.
FFO for share with the $1.27, and FFO with adjusted for share with the $1.26. Our cash available for distribution was $108.5 million. At year end, the company had total indebtedness of approximately $1.3 billion, representing a net debt to annualized quarterly pro-forming ebid-hour ratio of 7.1 times.
With over 384 million capacity on our line of credit, in the fourth quarter, we completed the sale of the 10 properties disposition portfolio, then that proceeds from which we're used to pay down outstanding debt obligations. As a result of the transaction, we have so distinguished a mortgage with a rate well all about the companies we did average it and that's Tom Jacksonville.
The sale reduced to companies floating rate exposure from 14.1% to 6.5% of all outstanding debt obligations and added capacity for future acquisition and development related expenses is by recycling non-volt assets.
Subsequent to quarter ends, we took another important step to manage our cost of capital in an uncertain, industry environment.
East Chile recognizes that floating rate exposure in our death stack works against our universal strategy of being the reach that delivers predictability to our shareholders. With that in mind, we elected to proactively and opportunistically enter into forward starting interest rate slots to 60 interest rates on 300 million of our 2016 and 2018 term loans, including the anticipated additional 50 million of delayed draw funds from our 2018 term loan. On February 3rd, 2023, we entered into 340 forward starting super-based
By executing these swaps, we have ensued an even greater degree of visibility into our debt stack by managing our exposure to industry movements.
As a result of the interest rate sloths entered into on February 3rd, the company extended the maturity of its interest rate sloths from a weighted average maturity of less than six months to a weighted average maturity of over 25 months, effectively extending the certainty of the company's 6th straight 2016 and 2018 term loan schedule.
by more than 19 months. Another important metric reflecting each release underlying strength is its liquidity and access to capital.
As previously mentioned, we believe there may be the potential to help distress developers. With over 434 million in debt capacity and just under 93 million in uncedled forward equity, Easterly has ample opportunity to execute on a creative deal without needing to go to the capital market.
And finally, before turning to our earnings guys, allow me to spend a moment highlighting our releasing successes as of your end.
As previously mentioned, due to the unique nature of our releases, final renewal runs cannot be ascertained until the exact amount of tenant improvement or TI dollars required by the government at renewal is known and the TI work is complete. As such, there can be a lag in providing releasing data relative to the point at which we have signed a renewal lease.
As of December 31, 2022, we had executed 13 renewals for which the renewal TI worked with complete and accepted by the government. This 13 includes PTO Arlington and IRS Fresnel.
On the exclude PTR-Lin 10 and IRA's Fresno, the average rents for the chief on the remaining 11 renewals will they present, including approximately $18 for square-cut of TI utilized by the government. The average total renewal term for these 11-rules releases was 15 years.
I can also share that we currently expect our single tenant bold properties that have renewed, but for which the newly-sus-not yet commenced or for which it has commenced that the TI has not yet been accepted by the government to realize an average renewal run spread of approximately 26%. This group of assets total 660,677 square feet.
across 11 properties and each have renewed for total least terms of between 15 and 20 years with an average of 17.6 years. Finally, I will conclude with our earnings guidance for 2023. Beginning this year and on a go-forward basis, we will be transitioning our guidance to a core FFL metric.
Core FFO adjusts FFO as defined by NARE to present an alternative measure of the company's operating performance, which one applicable excludes items which we believe are not representative of ongoing results. Examples of such exclusions include liability management related costs. The FFO adjusts FFO as defined by NARE to present an alternative measure of the company's operating performance.
including ortho-bonic extinguishment of that catastrophic event charges.
and depreciation of non-real estate assets. For fiscal year 2022, on a fully diluted basis, the company's FFO for share was $1.27, and its core FFO for share was $1.28. The company is introducing its guidance for full year 2023 core FFO for share on a fully diluted basis.
in a range of $1.12 to $1.15. This guidance assumes the closing of VA corpus Christi's property within the VA portfolio at the company's Pro Rata share of approximately $21 million and up to 15 million of growth development related investments during 2023. At this time, our guidance incorporates the dilution from the disposition of our 10 property portfolio.
now turn the call back to Shannon.
Thank you. As a reminder to the analyst, to ask the question you will need to per star 11 or your telephone.
Please stand by when we compile the Q&A roster. Our first question is from Michael Griffin with City. Please proceed with your question.
Great, thanks. Megan, maybe starting back on 2023 guidance, let's carry a seat and give some color around maybe some of the other moving pieces. I think about maybe operating expense for the year, kind of interest expense, GNA. Any color you can kind of give around that sort of bridge to delta between.
22 full year and then the expectation for 23. Yeah, good morning, Michael. What I would remind everyone of is that the DIST position, obviously in a low seven cap rate range, contributed approximately 15 million of NLI on an annualized basis last year. And the death that we were available, that was available for repayment with that DIST position.
year and then the expectation for 23. Good morning, Michael. What I would remind everyone of is that the DIST position, obviously in a low seven cap rate range, contributed approximately 15 million in a lie on an annualized basis last year. And the death that we were available, that was available for repayment with that disposition, was running at about a 2.5%.
industry in July last year. What we think of the bridge of removing that and then getting to our 2023 guidance, the residual is coming from inflationary expectations in the environment on both our commodities and our people cost. Okay, great. And then just on transaction expectations. I mean, it seems pretty muted for at least the outset of 2023. I'm just wondering if you're seeing any assets out there trading in the market. I seem to recall a VA asset that might have been in your wheelhouse trade sort of recently, but there'll maybe any commentary or clarity you could give around you.
fire expectations, seller expectations, you know, be pretty helpful. No, absolutely. Good morning, Mike, and looking forward to seeing you next week. On those assets, there have not been really any assets within our bulls-eye traded. And I think it's important to mention to know that there were two VA assets that did trade. One of them not being packed compliant. And as you may know, I think we've discussed all of our VA facilities.
or especially all the ones in our new portfolio, our PACS compliant, which is a requirement of the VA going forward. And as you know, we don't see at least another couple of least turns left in that building, we're not gonna buy it. So that property would not qualify just on underwriting a loan to be within our portfolio. So that's why we didn't, and they came as a pair. So that's why we did not participate. And Bill, where would cap rates have to get to and or to get you more?
I don't know, a creative, a positive set of say. Well, I think, you know, it's interesting. We obviously spent a lot of time. We had a great meeting with all of the top brokers in the sector earlier in this year. And as Darryl mentioned earlier in the call, I think we're seeing movement between the sellers and the buyers. I think you're going to see in the high sixes to seven is probably where you're going to see us execute.
And I think we haven't quite gotten there yet, but I'm sure we will, and you can be rest assured that we are participating in anything we say we're traveling around, we're visiting everything, talking to all the owners, as you recall, we actually have a luxury of knowing all the owners within our space. And our confidence that we'll be able to do something, but as you mentioned, it's a little slow right now.
All right, that's it for me. Thanks for the time. Thank you. As a reminder, to ask a question at this time, please press star 11 or you touched on telephone.
Our next question comes from the line of Peter Amber Avermo with Jeffries. She won't let us know. Yes, thank you very much. Just one I wanted to ask about the acquisition guidance. I noticed that you said it'll be Corpus Christi that closes this year. Sorry if I missed this. Did you close Jacksonville yet as well?
or is that assumed later on? We have not closed Jack's mouth, but it's assumed to be later on at this point. OK, so that won't be a 23. Got it.
And then I guess I'm just trying to get a sense here, but also on the acquisition guide. You know, it assumes none beyond corporate's Christie, but you know, I think Darrell's comments were pretty positive that the market's starting to open back up. So just trying to get a sense of how kind of is that.
Would you say the guide is just more on the conservative side and you just are waiting for things to open up? Yeah, I'd say that it's not a surprise, I think, conservative and easily government properties are probably synonymous in a lot of ways. And so the last thing we need to do is get everybody wrapped up. I think we've always tried to over-deliver.
So you can be rest assured that when the market does open up, we will be participating if not driving it. But I can tell you that I think Darrell was correct. It is moving in the right direction, but the velocity is very marginal right now. Got it. That's all for me. Thank you. I would now like to turn the conference back to Darrell Crate, chairman of these three government properties for closing remarks. Great. Thank you everyone for joining the easterly government properties force quarter 2022 conference call.
I'd like to thank our board, our vendors, our shareholders, and particularly our Easterly team for their dedication and support during the year. We hope this call has been helpful, and we look forward to speaking with you all again This concludes today's conference call. Thank you for participating. You may now disconnect. Connect.