Q1 2025 Easterly Government Properties Inc Earnings Call
Operator: Greetings. Welcome to Easterly Government Properties' first quarter 2025 earnings conference call.
Greetings and welcome to easterly government properties first quarter 2025 earnings conference call. At this time, all participants are in a listen only mode.
Operator: At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session between the company's research analysts and Easterly's management team. To answer questions during the session, analysts will need to press star 11 on their telephone. They will then hear an automated message advising their hand is free.
After the Speakers' presentation, there will be a question and answer session between the company's research analyst and he used to lease management team.
To ask a question during the session analysts will need to press star one one or their telephone. They will then hear an automated message advising their hand is raised.
Operator: please be advised that today's conference is being recorded.
Be advised that today's conference is being recorded.
Lindsay Winterhalter: I would now like to hand the conference over to your speaker today, Lindsay Winterhalter, Head of Investor Relations. Please go ahead.
Speaker Change: I would now like to hand, the conference over to your Speaker today Lindsay Winterhalter head of Investor Relations. Please go ahead.
Lindsay Winterhalter: Good morning.
Lindsay Winterhalter: 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 forward looking statements within the meaning of the Private Securities Litigation Reform Act of 1990. Although the company believes that its expectations as reflected in any forward-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 forward-looking statements and will be affected by a variety of risks and factors that are beyond the company's control, including, without limitation, those contained in the company's Form 10-K and in its other SEC filings.
Speaker Change: 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 forward looking statements within the meaning of the private Securities Litigation Reform Act of 1995, although the company believes that its expectations as reflected in any forward looking statements are reasonable.
Speaker Change: It can give no assurance that these expectations will be a temporary 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 the company's control, including without limitation those contained in the company's Form 10-K, and then its other SEC.
Lindsay Winterhalter: The company assumes no obligation to update publicly any forward-looking statements.
Speaker Change: Island.
Speaker Change: The company assumes no obligation to update publicly any forward looking statements. Additionally on this conference call. The company may refer to certain non-GAAP financial measures such as funds from operations core funds from operations and cash available for distribution.
Lindsay Winterhalter: Additionally, on this conference call, the company may refer to certain non-GAAP financial measures, such as funds from operations, core funds from operations, and cash available for distribution. You can find a tabular reconciliation of these non-GAAP financial measures to the most comparable current GAAP numbers in the company's earnings release and separate supplemental information package on the Investor Relations page of the company's website at ir.easterlyreit.com.
Speaker Change: You can find a tabular reconciliation of these non-GAAP financial measures to the most comparable current GAAP numbers in the company's earnings release and separate supplemental information package on the Investor Relations page of the company's website at IR easterly REIT Dot com.
Darrell Crate: I would now like to turn the conference call over to Darrell Crate, President and CEO of Easterly Government Properties. Thank you, Lindsay. Good morning, everyone. And thank you for joining us for our first quarter 2025 conference call. This quarter, we implemented key changes to our capital allocation strategy to create more flexibility for growth, and to position Easterly to capitalize on a major shift underway in the government real estate market. Earlier this month, we announced a reduction of our quarterly dividend and a two for five reverse stock split, which became effective yesterday. We made these strategic corporate actions intentionally to position Easterly for long-term growth and to free up significant capital for accretive investment.
Speaker Change: I would now like to turn the conference call over to Darrell Crate, President and CEO of easterly government properties.
Speaker Change: Okay.
Speaker Change: Thank you Lindsey and good morning, everyone and thank you for joining us for first quarter 2025 conference call.
Speaker Change: This quarter, we implemented key changes to our capital allocation strategy to create more flexibility for growth and to position easterly to capitalize on a major shift underway in the government real estate market.
Speaker Change: Earlier this month, we announced a reduction of our quarterly dividend and a two for five reverse stock split which became effective yesterday. We made these strategic corporate actions intentionally positioned easterly for long term growth and to free up significant capital for accretive investments.
Darrell Crate: Our updated capital strategy reflects three critical priorities. First, we aligned our dividend philosophy to better match our peers. Our focus is firmly on return on equity and value creation over time. Second, we created substantial flexibility to accelerate our growth initiatives, particularly acquisitions and new development opportunities, at a moment when demand for leased government facilities is increasing dramatically. Third, we strengthened our balance sheet by right sizing our payout ratio, improving dividend coverage, and maintaining our investment grade foundation. We are strategically reinvesting to drive future cash flow growth and long-term shareholder value rather than simply recycling discounted capital into the market.
Speaker Change: Our updated capital strategy reflects three critical priorities first we aligned our dividend philosophy to better match our peers.
Speaker Change: Our focus is firmly on return on equity and value creation over time.
Speaker Change: We created substantial flexibility to accelerate our growth initiatives, particularly acquisitions and new development opportunities at a moment when demand for at least government facilities is increasing dramatically.
Speaker Change: Third we strengthened our balance sheet by right sizing, our payout ratio improving dividend coverage and maintaining our investment grade Foundation.
Speaker Change: We are strategically reinvesting to drive future cash flow growth and long term shareholder value rather than simply recycling discounted capital into the market.
Darrell Crate: Today, the federal government is undergoing a historic transformation through the DOJA initiative. DOJA is focused on shifting the government's real estate strategy, moving the government away from its traditional model of owning its office space and toward a more flexible leased model to drive cost efficiency. Easterly is uniquely positioned to benefit. We've built a strong track record as a private sector leader in delivering mission-critical leased government facilities on time, on budget, and at a reduced cost to taxpayers. Importantly, our exposure to DOJ-related risks remains minimal. To date, we have not had a single lease canceled due to DOJ.
Speaker Change: Today, the federal government is undergoing a historic transformation through the dose initiative.
Speaker Change: She is focused on shifting the government's real estate strategy moving the government away from its traditional model of owning its office space and toward a more flexible lease model to drive cost efficiencies.
Speaker Change: Easter is uniquely positioned to benefit we've built a strong track record as a private sector leader and delivering mission critical least government facilities on time on budget and at a reduced cost to taxpayers.
Speaker Change: Importantly, our exposure to dose related risks remains minimal.
Speaker Change: To date, we have not had a single lease canceled due to dose.
Darrell Crate: In fact, we see opportunities to expand our leasing relationships with key government agencies as DOJ accelerates.
Speaker Change: In fact, we see opportunities to expand our leasing relationships with key government agencies as dovish accelerates.
Darrell Crate: In line with our growth strategy, this morning we announced two highly accretive additions to our portfolio.
Speaker Change: In line with our growth strategy. This morning, we announced two highly accretive additions to our portfolio.
Darrell Crate: The first is our award to develop a roughly 40,000 square foot federal courthouse facility in Medford, Oregon, under a 20-year non-cancellable lease. This facility will house multiple agencies, including U.S. Senators' Offices, the U.S. Marshal Office, and the U.S. Attorneys' Offices, and a Probation Office, all under the same lease. This project highlights our advantage in today's market. With development contracts structured to protect us against cost increases and backed by the full faith and credit of the U.S. government, this courthouse strengthens our presence in a mission-critical sector and supports our long-term earnings growth objective.
Speaker Change: First is our award to develop a roughly 40000 square foot federal courthouse facility in Medford, Oregon under a 20 year noncancelable lease.
Speaker Change: This facility will house multiple agencies, including the U S Senators offices, the U S. Marshal office in the U S Attorney's offices, and a probation office all under the same lease.
Speaker Change: This project highlights our advantage in today's market with development contract structure to protect us against cost increases and backed by the full faith and credit in the U S. Government. This courthouse strengthens our presence in a mission critical sector and supports our long term earnings growth objectives.
Darrell Crate: The second addition is the acquisition of a two hundred and ninety thousand square foot facility, 98 percent leased to the double A plus rated district of Columbia government with strong mission critical tenants in public education and environmental management. The D.C. government recently extended its tenancy through the year twenty thirty eight with renew with many renewal options and under new mandatory return to office policies. The facility is consistently occupied at high levels. This acquisition aligns perfectly with national trends of decentralizing education oversight to the state and local level, ensuring strong, stable demand for this property going forward.
Speaker Change: The second edition is the acquisition of a 290000 square foot facility, 98% leased to the double a plus rated district of Columbia government with.
Speaker Change: With strong mission critical tenants in public education, and environmental management. The DC government recently extended its tendency through the year 2038 with renewed with many renewal options and under new mandatory return to office policies that facility has consistently occupied at high levels.
Speaker Change: This acquisition aligns perfectly with national trends of Decentralizing education oversight to the state and local level, ensuring strong stable demand for this property going forward.
Darrell Crate: Across our portfolio, we continue to actively manage our assets to enhance cash flow and portfolio quality. One example is our recent re-tenanting of the U.S. Forest Service Facility in Albuquerque. Anticipating a possible reduction in the footprint of the U.S. Department of Agriculture, the parent agency of the U.S. Forest Service, we proactively repositioned this facility. We secured a new 10-year non-cancellable lease with the state of New Mexico, a tenant deeply committed to the local community and to the strategic use of the facility. In fact, the state has already expressed interest in future expansion within the building, making it not only a strong replacement tenant, but also a potential source of future growth.
Speaker Change: Across our portfolio, we continue to actively manage our assets to enhance cash flow and portfolio quality.
Speaker Change: One example is our recent re tenant ing of the U S Forest service facility in Albuquerque.
Speaker Change: Anticipating a possible reduction in the footprint of the U S Department of Agriculture, the parent agency of the U S Forest service, we proactively repositioned this facility.
Speaker Change: We secured a new 10 year noncancelable lease with the state of New Mexico attendant deeply committed to the local community and to the strategic use of the facility in.
Speaker Change: In fact, the state has already expressed interest in future expansion within the building, making it not only a strong replacement tenants, but also a potential source of future growth.
Darrell Crate: This repositioning effort demonstrates our proactive asset management strategy and our focus on maximizing long-term value at the property level. We are operating from a position of strength, making deliberate, forward-looking changes to capitalize on a rapidly shifting market. The DOJ initiative represents a significant tailwind for leased government real estate, and Easterly is exceptionally well positioned to grow with it.
Speaker Change: This repositioning effort demonstrates our proactive asset management strategy and our focus on maximizing long term value at the property level.
Speaker Change: We are operating from a position of strength, making deliberate forward looking changes to capitalize on a rapidly shifting market. The doe's initiative represents a significant tailwind for at least government real estate and easterly is exceptionally well positioned to grow with it we remain committed to delivering predictable.
Darrell Crate: We remain committed to delivering predictable, stable, and growing value to our shareholders for years to come.
Speaker Change: Stable and growing value to our shareholders for years to come.
Allison Marino: Thank you again for joining us this morning, and I'll now turn the call over to Allison Marino, our Chief Financial Officer. Thanks, Darrell.
Speaker Change: Thank you again for joining us this morning, and I'll now turn the call over to Alison Marino, our Chief Financial Officer.
Allison Marino: Good morning, everyone. I'm pleased to report the financial results for the first quarter of 2025. For the quarter, both on a fully diluted basis, net income per share was $0.07, and core FFO per share was $0.73. Our cash available for distribution was $31.1 million. We met consensus and remain on track to deliver an estimated two to 3% core FFO per share growth in 2025. This, coupled with our right-sized dividend yield of roughly 8% today, presents a highly attractive total return opportunity for shareholders through long-standing investment grades. The first quarter performed as expected, with no lease terminations from DOJ or otherwise.
Alison Marino: Thanks, Darryl and good morning, everyone.
Alison Marino: I'm pleased to report the financial results for the first quarter of 2025 for.
Alison Marino: For the quarter, both on a fully diluted basis net income per share was <unk> <unk>.
Alison Marino: Core <unk> per share was <unk> 73.
Alison Marino: Our cash available for distribution was $31 1 million.
Alison Marino: We met consensus and remain on track to deliver an estimated 2% to 3% core <unk> per share growth in 2025.
Alison Marino: Coupled with our right sized dividend yield of roughly 8% today presents a highly attractive total return opportunity for shareholders through long standing investment grade tenancy.
Alison Marino: The first quarter performed as expected with no lease terminations from dose or otherwise our weighted average remaining lease term remains strong at nine eight years.
Allison Marino: Our weighted average remaining lease term remains strong at 9.8 years. With over 95% of our lease income in firm term, which means the government has self-acknowledged they cannot cancel.
Alison Marino: With over 95% of our lease income and firm term, which means the government has self acknowledged they cannot cancel we.
Allison Marino: We feel very good about the performance of this portfolio and our ability to provide mission critical real estate solutions for key We continue to increase our borrowing capacity and extend the maturity date of our debt obligations. As previously announced this quarter, we amended our $100 million Senior Unsecured Term Loan Agreement originally executed in 2016. We also executed in the private placement market, raising an additional $125 million of debt capacity with a combination of new and existing investments.
Alison Marino: We feel very good about the performance of this portfolio and our ability to provide mission critical real estate solutions for key government agencies.
Alison Marino: We continue to increase our borrowing capacity and extend the maturity date of our debt obligations as previously announced this quarter, we amended our $100 million senior unsecured term loan agreement originally executed in 2016, we also executed and the private placement market raising an additional $125 million.
Alison Marino: Of that capacity with a combination of new and existing investors.
Allison Marino: With a successful first quarter concluded, I would like to turn to the recent corporate actions that took place subsequent to quarter end.
Alison Marino: With a successful first quarter concluded.
Alison Marino: I'd like to turn to the recent corporate actions that took place subsequent to quarter end.
Allison Marino: As mentioned in Darrell's remarks, we elected to undertake a thorough review of our capital allocation strategy. We believe resetting our dividend helps position the company for durable, long-term value creation. And this was done with a clear focus on shareholder return. Through this action, we are proactively positioning the company for sustainable earnings growth, increased flexibility, and improved capital efficiency. Cutting our dividend was the prudent decision for growth. While we saw a path to full dividend coverage by year-end 2026, and some of you may have even noticed we achieved dividend coverage this current quarter at our old level, we believe the capital markets were not valuing our dividend at a premium, nor were we being rewarded with a multiple that Maintaining an outsized dividend in that environment was inefficient and a poor use of capital.
Alison Marino: As mentioned in <unk> remarks, we elected to undertake a thorough review of our capital allocation strategy.
Alison Marino: We believe resetting our dividend helps position the company for durable long term value creation and this was done with a clear focus on shareholder return.
Alison Marino: Through this action, we are proactively positioning the company for sustainable earnings growth increased flexibility and improved capital efficiency.
Alison Marino: Cutting our dividend was the prudent decision for growth, while we saw a path to full dividend coverage by year end 2026, and some of you may have even noticed we achieve dividend coverage. This current quarter at our old level. We believe the capital markets were not valuing our dividend at a premium nor were we being rewarded with the multiple that reflect.
Alison Marino: The cash we were distributing maintain.
Alison Marino: Maintaining an outsized dividend non environment was inefficient and a poor use of capital.
Allison Marino: The reset allows us to better align with our peers and adopt a more sustainable performance driven dividend policy going forward.
Alison Marino: The reset allows us to better align with our peers and adopt a more sustainable performance driven dividend policy going forward.
Allison Marino: As Darrell mentioned, we are excited to put our capital to work for a recently awarded federal courthouse development project in Medford, Oregon. Like our Flagstaff courthouse, this highly secure asset once delivered will carry a 20 year non cancelable And we look forward to partnering with the GSA and the Judiciary Branch to get started on this exciting new opportunity.
Alison Marino: As Daryl mentioned, we are excited to put our capital to work for our recently awarded Federal Courthouse development project in Medford, Oregon like our Flagstaff courthouse. This highly secure asset once delivered we will carry our 20 year noncancelable lease term and we look forward to partnering with the GSA and the judiciary branch to get started on this exciting.
Alison Marino: A new opportunity.
Allison Marino: Additionally, I'd like to highlight the ongoing development of the FDA Laboratory Facility in Atlanta, Georgia. This mission-critical project remains on budget and is on track for completion by the end of this year. Importantly, the cost structure is not expected to be impacted by recent tariff uncertainty, as our contracts are largely insulated from these market barriers. Between now and the commissioning of the building, the company anticipates receiving approximately $115 million in lump This project not only enhances our long-term cash flow profile, but also underscores the strength of our development platform and the value we bring as a trusted federal partner.
Alison Marino: Additionally, I would like to highlight the ongoing development of the FDA Laboratory facility in Atlanta, Georgia.
Mission critical project remains on budget and is on track for completion by the end of this year.
Alison Marino: Importantly, the cost structure is not expected to be impacted by recent tariff uncertainty as our contracts are largely insulated from these market variables.
Alison Marino: Between now and the commissioning of the building the company anticipates, receiving approximately $115 million in lump sum payments. This project not only enhances our long term cash flow profile, but also underscores the strength of our development platform and the value we bring as a trusted federal partner.
Allison Marino: Additionally, we acquired a highly accretive asset leased primarily to the AA plus rated District of Columbia government through 2030. With a long-standing tenancy in this facility, the asset further our duration of investment-grade cash flows and delivers accretion to shareholders at a spread to our cost. This asset was acquired and funded accretively and helps us to achieve our growth goals in 2025.
Alison Marino: Additionally, we acquired a highly accretive asset leased primarily to the double a plus rated district of Columbia government through 2038.
Alison Marino: With a longstanding tendency in this facility the asset further our duration of investment grade cash flows and delivers accretion to shareholders at a spread to our cost of capital.
Alison Marino: This asset was acquired and funded Accretively and helps us to achieve our growth goals in 2025.
Allison Marino: By addressing our dividend, Easterly is poised to take advantage of the opportunities set in front of us today fully. We have a robust pipeline of many opportunities, and with over $200 million of dry powder comprised of savings from our dividend, lump sum reimbursements from Atlanta, and revolver capacity, we feel our balance sheet is well positioned to execute on the growth strategy.
Alison Marino: By addressing our dividend easterly is poised to take advantage of the opportunities set in front of US today fully we have a robust pipeline of many opportunities and with over $200 million of dry powder comprised of savings from our dividend lump sum reimbursements from Atlanta and revolver capacity we felt.
Alison Marino: Our balance sheet is well positioned to execute on the growth strategy.
Allison Marino: Before handing the call back to our operator, I am pleased to report that we are bringing up the bottom end of our full year core FFO per share guidance for 2025 for the second to a range of $2.98 to $3.03 on a fully diluted bill. This guidance assumes an additional $20 million in wholly owned acquisitions on top of the roughly $120 million we already closed and $25 to $75 million of gross development related investment during the For more information visit www.FEMA.gov To be clear, that 2% to 3% earnings growth target is inclusive of known outcomes in the portfolio, including the FAA finally moving from our disciplines facility.
Alison Marino: Before handing the call back to our operator I am pleased to report that we are bringing up the bottom end of our full year core <unk> per share guidance for 2025 for the second consecutive quarter to a range of $2 98 to $3 <unk> on a fully diluted basis.
Alison Marino: This guidance assumes an additional $20 million in wholly owned acquisitions on top of the roughly $120 million, we already closed and 25% to $75 million of gross development related investment during the year.
Alison Marino: To be clear that 2% to 3% earnings growth target is inclusive of known outcomes in the portfolio, including the FAA finally, moving from our disciplines facility. This is consistent with our established goal of delivering 2% to 3% core <unk> per share growth year over year for shareholders.
Allison Marino: This is consistent with our established goal of delivering 2% to 3% core FFO per share growth year over year per share. We are proud of the earnings power of the portfolio and the growth it can deliver to shareholders.
Shannon: We are proud of the earnings power of the portfolio and the growth it can deliver to shareholders with that we thank you for your time this morning and for your ongoing support and commitment to our shared goals I will now turn the call back to Shannon.
Allison Marino: With that, we thank you for your time this morning and for your ongoing support and commitment to our shared goals.
Operator: I will now turn the call back to Shannon. Thank you.
Operator: As a reminder to the analysts, to ask a question, you will need to press star 11 on your telephone. Please stand by while we compile the Q&A roster.
Speaker Change: Thank you as a reminder to the analysts to ask a question you will need to press star one on your telephone please standby, while we compile the Q&A roster.
Seth Berge: Our first question is from Seth Berge of Citi. Please proceed with your question. Guys, thanks for taking my question.
Speaker Change: Our first question is from Seth <unk> of Citi. Please proceed with your question.
Speaker Change: Guys. Thanks.
Darrell Crate: I was just kind of wondering if you could kind of get into the economics of the acquisition and the development, whether that's, you know, the cap rate or unlevered IRR, just however you think about it. So I'll touch on the DC acquisition first, and then I'll hit on the development at Medford. So for DC, that asset was roughly $120 million in acquisition costs, and we acquired that in the high nines, which does provide for that 100, magic 100 basis. premium to our cost of capital that we hope to achieve. So we're very pleased with that acquisition.
Speaker Change: Thanks for taking my question I was just kind of wondering if you could kind of get into the economics of the acquisition of the developer whether thats.
Speaker Change: The cap rate or Unlevered IRR, just however, you think about it.
Speaker Change: No.
Speaker Change: Sure. So I'll touch on the D. C acquisition first and then I'll hit on the development partner for so far do you see that asset was roughly $120 million of acquisition cost when we acquired that in the high nines, which does provide for that 100, <unk> hundred basis point premium to our cost of capital that we hope to achieve.
Speaker Change: So we're very.
Darrell Crate: We did a ton of underwriting on it, and we think it really complements and augments the state and local exposure that we're growing within the portfolio.
Speaker Change: Pleased with that acquisition, we did a ton of underwriting on it and we think it really complements and augments the state local exposure that we're growing with them in the portfolio.
Darrell Crate: On Medford, we are still in the very beginning stages of design on that lease award. So without the final determination of a lump sum, it would be hard. A very specific number to it, but broadly we achieve and seek to achieve 150 basis points spread to our cost of capital, particularly on a yield basis. And you'll continue to see us execute at that level on this particular project. Great, thank you.
Unmet <unk>, we are still in the very beginning stages of design on that lease reward so without the final determination of the lump sum it would be hard to put it.
Speaker Change: A very specific number to it but broadly we achieve and seek to achieve a 150 basis point spread.
Speaker Change: Our cost of capital, particularly on a yield basis, and you'll continue to see us execute at that level on this particular project.
Speaker Change: Okay.
Speaker Change: Great. Thanks.
Peter Abramowitz: Our next question comes from Peter Abramowitz of Jeffries. Please proceed with your question. Yes, thank you very much.
Speaker Change: Okay.
Speaker Change: Our next question comes from Peter Abramowitz of Jefferies. Please proceed with your question.
Peter Abramowitz: Yes. Thank you very much just wondering could you quantify kind of what the size of the pipeline of opportunities Youre looking at right now and sort of how that breaks down between.
Darrell Crate: Just wondering, can you quantify kind of what the size of the pipeline of opportunities you're looking at right now and sort of how that breaks down between GSA opportunities versus developments versus state and local government facilities? Yeah, thanks, Peter. We have about a billion and a half dollars in our pipeline, you know, that doesn't mean that's what we're executing, but we really have a choice of opportunities, not only, you know, the GSA opportunities, you know, U.S. federal, but also some state and local, you know, as well as these government adjacent facilities. And it's really a unique time in our history.
Peter Abramowitz: GSA opportunities versus developments versus state and local government facilities.
Peter Abramowitz: Yes, no. Thanks, Thanks Peter.
Peter Abramowitz: About a 1 billion and a half dollars in our pipeline.
Peter Abramowitz: Doesn't mean, that's what we're executing but we really have a choice of of.
Peter Abramowitz: <unk> not only the GSA opportunities U S federal but also some state and local as well as these government adjacent facilities and.
Peter Abramowitz: It's really a unique time in our history.
Darrell Crate: There are certain developments for the U.S. government that we are looking at where not one, you know, but but two or three folks who are also looking at that have come to partner with us, you know, on those projects. Why is that? Because, you know, as I've shared on some prior calls, the government lease backed by the full faith and credit of the U.S. government, it was terrific collateral in going to going to banks. So like two people and a dog could start a development company and be able to get an exceptional amount of finance.
Peter Abramowitz: There are certain developments for the U S government that we are looking at where.
Peter Abramowitz: Not one, but two or three folks who are also looking at that have come to partner with us on those projects why is that because as I've shared on some prior calls.
Peter Abramowitz: The government lease backed by the full facing credit of the U S government.
Speaker Change: It was terrific collateral and going to going to banks. So like two people in a dog could start a development company and be able to get an exceptional amount of financing.
Darrell Crate: With the doge overhang and folks not being able to actually underwrite to the agencies, you know, many of the mid tier banks that don't have insights into this have stepped away from the market. providing those folks with the capital that they would need in order to begin a development. What's also happened, you know, with DOJ is that they do understand the capital markets. And today, more than ever, the government actually has to look at the balance sheet quality of a developer, particularly in larger products, before they award a development award. So with that, obviously, we're very well positioned relative some other folks that we've competed with.
Speaker Change: With the doe's overhang and folks not being able to actually underwrite to the agencies. Many of the mid tier banks that don't have insights into this have stepped away from the market and are no longer providing.
Speaker Change: Those folks with the capital that they would need in order to begin a development project.
Speaker Change: What's also happened relative with with does is it they they do understand the capital markets and today more than ever the government actually has to look at the balance sheet quality of a developer, particularly.
Speaker Change: Particularly in larger products before they award.
Speaker Change: Development.
Speaker Change: Award so.
Speaker Change: With that obviously, we're very well positioned relative to some other folks that we've competed with.
Darrell Crate: Our Medford, Oregon courthouse is a is a terrific win for us. It speaks to our strengths. And as you could hear from Allison, you know, our ability to develop at a premium, you know, is is is robust. So, you know, for us to continue to achieve, you know, our two to three percent growth going forward, we feel very well positioned with our existing portfolio to do exactly that. And we continue to see ways to put our money to work, you know, in a in a very creative way that will build our portfolio. And with each of the three areas that we focus on.
Speaker Change: Our Medford, Oregon Courthouse is.
Terrific win for us.
Speaker Change: It speaks to our strengths and as you could hear from Alison.
Speaker Change: <unk> ability to develop at a premium.
Speaker Change: Is is robust.
Speaker Change: So for us to continue to achieve our 2% to 3% growth going forward, we feel very well positioned with our existing portfolio to do exactly that.
Speaker Change: And we continue to see ways to put our money to work.
Speaker Change: In a very accretive way that'll build our portfolio.
Speaker Change: With each of the three.
Speaker Change: Areas that we focused on we would over the next three to five years like 15% of our portfolio to be state and local and 15% of it to be government adjacent.
Darrell Crate: We would, over the next three to five years, like 15% of our portfolio to be state and local. And we will see, given that development is our most accretive way to put capital to work, I think you'll see most of what we do in the federal space is development going forward. Okay, that's helpful.
Speaker Change: And we will see.
Speaker Change: The development is our most accretive way to put capital to work I think youll see most of what we do in the federal space.
Speaker Change: As development going forward.
Speaker Change: Okay. That's helpful. Thanks, Daryl and then a question for Alison just on the balance sheet. So you executed that senior unsecured deal I guess, just before we got the deliberation day announcements.
Allison Marino: And then a question for Allison, just on the balance sheet. So, you executed that senior unsecured deal, I guess, just before we got the deliberation day announcement, which has sent, I guess, the credit markets into a bit of a frenzy. So, just curious, do you have a sense of where you think comparable pricing would be on a similar deal if you were to do that today?
Speaker Change: What's your sense I guess, the credit markets into a bit of a frenzy. So just curious do you have a sense of where are you seeing comparable pricing would be on <unk>.
Speaker Change: Similar deal if you were to do that today.
Allison Marino: And then a second part to that, just wondering if you could comment, just given the terms were pretty favorable there, especially relative to your cost equity, which is maybe not cooperating, just how you're thinking about kind of the range for your leverage target longer term. Yeah, sure. So, you know, we, we've definitely heard in the market that spreads have widened anywhere from 25 to 50. for more. So I think we do very much believe that we timed the market well and took advantage of some of the slide and the treasuries when we priced that deal.
Speaker Change: And then a second part to that just wondering if you could comment.
Speaker Change: Just given the the terms are pretty favorable there, especially relative to your cost of equity, which is maybe not cooperating.
Speaker Change: How are you thinking about kind of a range for your leverage target longer term.
Yeah sure so we.
Speaker Change: We definitely heard in the market spreads have widened anywhere from 25 to 50 basis points for our more recent deals.
Speaker Change: So I think we do very much believe that we timed the market well and took advantage of some of the slide in the treasury.
Allison Marino: So we're very pleased with that execution. And I think the credit quality of the portfolio and the long term nature of the leases really continues to resonate with those investors. And, you know, it's very clear to that group that this is a different portfolio than just office or just GSA exposure. It really speaks to the mission of each of the buildings. And I think that that's shown through in getting that deal done. In terms of leverage, we do have that stated range of 6 1⁄2 to 7 1⁄2 times adjusted, obviously, for development. You know, as we look forward, we're navigating to that range.
Speaker Change: When we priced the deal so we're very pleased with that execution.
Speaker Change: And I think the credit quality of the portfolio and the long term nature of the leases really continues to resonate with those investors and it's very clear.
Speaker Change: To that group that this is a different portfolio than just office or just GSA exposure. It really speaks to the mission of each of the buildings and I think that that's shown through and getting that deal done.
Speaker Change: In terms of leverage we do have that stated range of six five to seven five times adjusted obviously for development.
Speaker Change: Yeah.
Speaker Change: As we look forward, we're navigating to that range. We're certainly aware that our cost of equity is maybe not as favorable to our cost of debt, but that's something we look forward to continued to providing total shareholder return to shareholders <unk> growth, hopefully driving some change or not to our favor so.
Allison Marino: We're certainly aware that our cost of equity is maybe not as favorable to our cost of debt, but, you know, that's something we look forward to continue to providing total shareholder return to shareholders and core FFO growth hopefully driving some change in that to our favor. So when we look to incremental cost of equity and cost of debt, we're still able to do deals at an accretive level. They certainly take a lot more effort and a lot more creativity and volume, but they're, as you can see from the DC building, there's opportunities in the market where we can acquire and provide value to core FFO growth.
Speaker Change: When we look to incremental cost of equity and cost of debt, we're still able to do deals at an accretive level.
Speaker Change: Certainly would take a lot more effort and a lot more creativity on volume, but there as you can see from the D. C building there's opportunities in the market, where we can acquire.
Speaker Change: And provide value to <unk> growth.
Allison Marino: And maybe just to speak to DC a little bit, I mean, because some might imagine that to, you know, be a bit of a contrarian investment, you know, but I would say it was a place where we really could apply our underwriting. I mean, obviously, you know, we're based in Washington. We work with the federal government, we work with state and local, and we really had an opportunity to diligence the building, the mission, the structure of leases, how DC works, how it interfaces with the federal government, and we had access to many of the folks who have control over the long-term planning on how these leases work.
Speaker Change: And maybe just to speak to D C a little bit because some might imagine that to be a bit of a contrarian investment.
Speaker Change: But I would say it was a place where we really could apply our underwriting I mean, obviously, we're based in Washington, We work with the federal government, we work with state and local and we really had an opportunity.
Speaker Change: To diligence that building the mission the structure of leases how D. C works, how it interfaces with the federal government.
Speaker Change: And we had access to many of the folks who have control over the long term planning on how these leases work. So we're very excited again to take advantage of.
Allison Marino: So we were very excited, again, to take advantage of, you know, the edge and information edge that, you know, we've developed over time. for our investors.
Speaker Change: The edge an information edge that we've developed over time in order to find it very attractive asset for our investors.
Seth Berge: That's all for me. Thank you.
Speaker Change: Alright, Thats all for me. Thank you.
Michael Carroll: Our next question comes from Michael Carroll of RBC, please proceed with your question. Yeah, thanks, Darrell. I wanted to circle back on your prepared remarks regarding the Department of Forestry building in Albuquerque. I think you said that you brought in the state of New Mexico. I mean, can you provide some details on this? Did the Department of Forestry hand back some space and then you backfilled it with the state of New Mexico? Well, yeah, so we've been working with the state of New Mexico for some time, and there's an interest in that space. We have two agencies there, the New Mexico Education Department and the New Mexico Healthcare Authority.
Speaker Change: Our next question comes from Michael Carroll of RBC. Please proceed with your question.
Speaker Change: Okay.
Michael Carroll: Yes, Thanks, Daryl I wanted to circle back on your prepared remarks regarding the department of Forestry building in Albuquerque.
Michael Carroll: Thank you said that you brought in the state of New Mexico, I mean can you provide some details on this did the department of Forestry hand back some space and then you backfill that with the state of New Mexico.
Michael Carroll: Well, yes, so so.
Michael Carroll: We've been working with the state of New Mexico for some time and and there is an interest in that space. We have two agencies there the new Mexico Education Department in New Mexico Health Care Authority, we were in a place where the.
Darrell Crate: We were in a place where the U.S. Forestry Services, we were reading headlines. And this is back in sort of the early times of DOJ uncertainty, and we knew that was a place where there may be, you know, some consolidation. We ended up creating not only a, let's say, an auction, but we created some, you know, alternatives, you know, to working with the forestry service. And we ended up going with the state of New Mexico, you know, as a better alternative for the building, and also, you know, their desire to continue to expand into that space made it seem like a better portfolio decision for us.
Michael Carroll: As far as three services, we were reading headlines.
Michael Carroll: Headlines and and yes, it was back in sort of the early times.
Michael Carroll: <unk> uncertainty and we knew that was a place where there may be some consolidation we ended up creating not only.
Michael Carroll: <unk>.
Speaker Change: Say an auction.
Michael Carroll: Created some alt.
Michael Carroll: Turn it is to working with with the with the Forestry service.
And we ended up going with that.
Michael Carroll: The state of New Mexico, as a better alternative for the building and also their desire to continue to expand into that space made it seem like a better portfolio decision for us so lower volatility in the future more certainty and.
Darrell Crate: So, you know, lower volatility in the future, more certainty, and, you know, and we've got some, you know, nice hop-back funks in that lease that make it a little more attractive, you know, than a traditional federal lease. Okay, so did the Department of...
Michael Carroll: And we've got some nice opex bumps in that lease that make it a little more attractive than the traditional federal lease.
Michael Carroll: Okay, so that the department.
Allison Marino: Allison, do you have anything else to share just about that or no? Yeah, I would also add that the the term of the lease is very attractive. It's a 10 year firm term with an additional two to five year renewal option. So for a total term of 30 years. We think on a durability and length of cash flows, that was a really attractive opportunity. As well as the rents are more or less the same as what was in the building, so from a cash basis, we feel like this was a great opportunity to, again, expand our exposure to state and local and really get commitment to the building.
Alison Marino: Alison do you have anything else to share just about that or no.
Alison Marino: I would also add that the term up releases very attractive Thats, a 10 year firm term with it an additional 225 year renewal option. So for our total term of 30 years, that's certainly better than the U S government provides today.
Alison Marino: And then gone on durability and length of cash flows that was a really attractive opportunity as well as.
Alison Marino: The rents are more or less the same as what was in the building so from a cash basis.
Alison Marino: We feel like this was a great opportunity to again expand our exposure to state and local and really get commitment to the building.
Michael Carroll: And then just to be clear, did the Department of Forestry completely vacate or do they only give back some of the space to the state of New Mexico? Yeah, the, the building consolidated into our other building, which is sort of like across the business park. And we sort of saw that in some of the discussions with them that that was the plan. Hence, we enacted our marketing process, through which we were very successful in retentating with state of Okay, so then the two buildings now are 100% at least, one to the Department of Forestry and one to the state of New Mexico?
Alison Marino: And then just to be clear did the department of forestry completely vacate or do they only give back some of the space to the state of New Mexico.
Alison Marino: Yes.
Alison Marino: On the building consolidated into our other building, which is sort of like across the business Park and we sort of saw that in some of the discussions with them that that was the plan.
Alison Marino: Hence we enacted our.
Alison Marino: Marketing process through which we were very successful in re tenant England state of New Mexico.
Okay. So the two buildings now are 100% leased one to the department of Forestry and one that the state of New Mexico.
Michael Carroll: Correct. Okay, and then can you remind us when the Department of Forestry lease actually expires? I think it's still pretty far out there in the 2034 region if I remember correctly, but is there any soft term related to that or anything we need to know about? I believe it's end of next year, but let me grab it for you. And then again, Michael, no good question. And just to give just a little bit more color, you know, I think that, you know, these things, you obviously, you know, take time and months and, you know, the, we, you know, we work closely with the agencies that are in our building.
Alison Marino: Correct.
Okay.
Speaker Change: Can you remind us when the department of Forestry lease actually expires I think it's still pretty far out there in 2034 region. If I remember correctly, but is there any soft term related to that or anything we need to know about.
Alison Marino: I believe at the end of next year, but let me grab it for you.
Michael Carroll: And then I guess, Michael Good question, and just to give just a little bit more color.
Michael Carroll: I think that.
Michael Carroll: These things obviously take time in months and.
Michael Carroll: The.
We work closely with the agencies that are in our building and before the return to work mandate I think there was there is real interest in consolidating space and finding opportunities and we moved in that direction. I think I think the government now is they've had returned to work and demand for more space.
Michael Carroll: And before the return to work mandate, I think there was, there was real interest in consolidating space and finding opportunities. And I, you know, we moved in that direction. I think, I think the government, you know, now is they've had returned to work in demand for more space. We're seeing, you know, some of the buildings where we were trying to find efficiencies to, we're seeing, you know, demand for more space or, you know, some needing to rejigger space to accommodate more people. Yeah, and then just coming back to your question, it expires in 2026. We are, as we are with other expirations and renewals working through that process.
Michael Carroll: We're seeing some of the buildings, where we are trying to find efficiencies to even too we're seeing demand for more space or.
Michael Carroll: Some needing to rejigger space to accommodate more folks.
Michael Carroll: And then just coming back to your question it.
Michael Carroll: It expires in 2026, we are.
Michael Carroll: As we are with other explorations and renewals working through that process with the government to define service.
Michael Carroll: to define currently. There is no stop term on the second building. Okay, so those discussions haven't happened already since you've already downsized it in one building. I mean, do you have an idea of what they're thinking about if they want to keep that space at all? Yeah, I mean, the as you can probably imagine, speed has never been the hallmark of a government lease procurement process. So we have been in discussions on that renewal for some time now we expect that it will continue over the rest of 2025. And then, you know, our hope would be to share any news as it does.
Michael Carroll: Okay.
Michael Carroll: On the second building now.
Michael Carroll: Okay. So those discussions have happened already since that you've already downsize them in one building.
Michael Carroll: You have an idea of what theyre thinking about if they want to keep that space at all.
Michael Carroll: Yes.
Michael Carroll: As you can probably imagine speed has never been the hallmark of a government lease procurement process. So we haven't been in discussions on that.
Michael Carroll: For some time now we expect.
Michael Carroll: It will continue over the rest of 2025.
Michael Carroll: And then our hope would be to share any news as it does come along.
Michael Carroll: I think they're pleased with the space, and I think they find themselves in need. given the reduced footprint size and the stabilization of the number of folks. Department posts via reduction in force. Okay, great.
Michael Carroll: It does.
Michael Carroll: I think they're pleased with the space and.
Michael Carroll: And I think they find themselves in need of the space.
Given the reduced footprint size, and and then and the stabilization of the number of folks who are working in that department.
Michael Carroll: Post the reduction in force.
Michael Carroll: And then just my last question going to the DC acquisition, I know, Darrell, in the beginning of like the IPO, Easterly used to always talk about how their unique functions to these buildings, they keep the tenants kind of locked into that space, kind of like the FBI and DEA spaces. I mean, does the DC acquisition have anything similar to that? Or is it just a good credit with a long term lease? I would say it's a good credit with a long-term lease, but it's a little bit more than that, you know, which it is the center, you know, if you think about building hierarchy.
Speaker Change: Okay, Great and then just my last question going to the D. C acquisition I know Daryl in the beginning of the IPO.
Speaker Change: Easterly used to always talk about how their unique functions to these buildings. They keep the tenants kind of locked in to that space kind of like the FBI DEA spaces.
Speaker Change: Does the <unk> acquisition have anything similar to that or is it just a good credit with a long term lease.
Speaker Change: I would say, it's a good credit with a long term lease, but it's a little bit more than that which is the center.
Speaker Change: If you think about building hierarchy, among the Washington State government.
Darrell Crate: Education is one of the primary purposes, and they've developed really a center of excellence around running D.C. schools from this building, and it is very high in the hierarchy of D.C. government, of the facilities that they're looking at.
Speaker Change: Education is one of the primary purposes and they are.
Speaker Change: They've developed really a center of excellence around running DC schools from this building and it as is.
Speaker Change: It is very high in the hierarchy.
Speaker Change: DC government.
Speaker Change: Of the facilities that they're looking at Allison. That's also located physically in geographically within the district of Columbia, and one of the DC government sort of economics focus down there.
Allison Marino: Allison? It's also located physically and geographically within the District of Columbia in one of the D.C. government sort of... focus zones. So the, you know, they're trying to drive more demand and redevelopment in that area. And they purposely choose areas like that, to commit to long term to sort of augment this sort of economic ferocity in the area. So we do see them have having expanded in the building over the last few years. And I think that sort of demonstrates their commitment to that local market as and maybe, you know, following on that. dozens of people, you know, that we that we spoke with, you know, I think DC, you know, is one of the second to last, I believe, in the country to remove the mask mandate, the city, you know, was sort of drained of commuters.
Speaker Change: They are trying to drive more.
Speaker Change: Redevelopment in that area and a purposely choose areas like that to commit to long term to sort of.
Speaker Change: Manta is sort of.
Speaker Change: Economic.
Speaker Change: <unk> in the area. So we do.
Speaker Change: <unk>.
Speaker Change: Having expanded in the building over the last few years, and I think thats sort of demonstrates our commitment to that local market as well as specifically and maybe following on that.
Speaker Change: One of the things that we learned in our diligence and with dozens of people that we that we spoke with.
Speaker Change: I think D C.
Speaker Change: As one of the second to last I believe in the country to remove the mask mandate.
Speaker Change: City.
Speaker Change: Sort of drained.
Darrell Crate: And, and I think the DC government really looks today and says from an economic development perspective, maybe they overreacted relative to, you know, other cities around the country. So they have a real renewed, you know, energy and effort to, you know, build economic activity in these centers. And we know this building, as Allison pointed out, you know, is in one of the target areas where DC wants the city to remain strong, vibrant, growing. It's got plenty of residential space, you know, as well as, as well as, you know, retail, a robust retailer, you know, sort of sense, you know, neighborhood.
Speaker Change: Commuters and and I think the DC government.
Speaker Change: Today and says from an economic development perspective.
Speaker Change: Maybe they overreacted relative to other cities around the country. So they have a real renewed.
Speaker Change: Energy and effort to.
Speaker Change: To build economic activity in these centers and we know this building as Alan pointed out is in one of the target areas, where do you see once the city to remain strong vibrant growing.
Speaker Change: <unk> got plenty of residential space as well as as well as.
Speaker Change: Retail a robust retailer sort of sensitive neighborhood.
Darrell Crate: And, and it's an affordable place to, to live. So it's a it's an exciting space. And I think our diligence got us very comfortable that the that we were able to buy at a very attractive, surprisingly attractive price, just given, you know, that when we're negotiating this, it was in the middle of, you know, some of the great So, we're very grateful for it.
Speaker Change: And it's an affordable place to.
Speaker Change: So it's a mix.
Speaker Change: Lighting space and I think our diligence got us very comfortable that.
Speaker Change: That we were able to buy at a very attractive surprisingly attractive price just given that when we're negotiating as it was in the middle of some of the great headline uncertainties related to D C.
Speaker Change: So we're very grateful for it.
Darrell Crate: This will probably be the only building that we own in D.C. I mean, I don't mean to say that's forever, but it was a special asset, and we're very excited. Okay, great.
Speaker Change: This will probably be the only building that we own in D C.
Speaker Change: Mean to say that's forever, but it was a special asset and and we were very excited to acquire it.
Speaker Change: Okay, great. Thank you.
Operator: As a reminder, to ask a question at this time, please press star 1-1 on your telephone.
Speaker Change: As a reminder to ask a question at this time. Please press star one one on your telephone.
John Kim: Our next question is from John Kim of BMO Capital Markets. Please proceed with your question. Thank you. Can I just clarify? So now you've had no lease terminations with Doge. Do you believe now you're in the clear with Doge, especially with Elon Musk stepping back? Or is there still some assessing and right sizing of the office footprint that that Doge is looking at?
Speaker Change: Our next question is from John Kim of BMO Capital markets. Please proceed with your question.
Speaker Change: Thank you can I just clarify so now <unk> had no lease terminations, but Don do you believe now you're in the clear.
Speaker Change: Especially with Elon musk stepping back or is there still some assessing and right sizing of the office footprint.
Speaker Change: I was just looking at.
Darrell Crate: Yeah, I mean, I think to say we're in the clear and it's over would be sort of, you know, brash and inappropriate. But what we absolutely know today is what DOJ's specific objectives are. And I think, as we've said along the way, we spend time with with folks in the Senate, which are, you know, they're the next the next chapter of all these things that are going on with the with the administration. and working, you know, with the GSA, we understand what they're trying to maximize too. And they be, you know, as I've said, we find them to be more receptive to our ideas for efficiency than ever before.
Speaker Change: Yes, I mean, I think to say, we're in the clear and its over would be sort of.
Speaker Change: Brash and inappropriate but.
Speaker Change: What we absolutely know today is what does doses specific objectives are and I think as we've said along the way.
Speaker Change: We spent time with with folks in the Senate, which are there.
Speaker Change: There is the next the next chapter of all these things that are going on with the with the administrative agencies.
Speaker Change: And and working with the GSA, we understand what they're trying to maximize too and they will be as I've said, we find them to be more receptive to our ideas for efficiency than than ever before in our history.
Darrell Crate: So the opportunity for us to demonstrate value and bring value to this very important client is right in front of us. And so I think that we, when we, so the statement that I'd make knowing our portfolio and looking at the assets we have, the weighted average lease term that we have and what is happening in those buildings, we feel very good about our portfolio's ability and the power of the portfolio going forward. I mean, as you know, 95% of our leases are firm term and some of the leases that we have that are nearing their renewal are mission critical, are buildings that...
Speaker Change: So the opportunity for us to demonstrate value and bring value to this.
Speaker Change: It is very important client is.
Speaker Change: Is right in front of us and so.
Speaker Change: I think that we when we so the statement that I've made knowing our portfolio and looking at the assets. We have the weighted average lease term that we have.
Speaker Change: And what is happening in those buildings, we feel very good about our portfolios ability and the power of the portfolio going forward I mean, as you know 95% of our leases are firm term and.
Speaker Change: Some of the leases that we have that are that are nearing their renewal or are mission.
Speaker Change: Mission critical our buildings for.
Speaker Change: First set of reasons will be very attractive to the U S government.
Darrell Crate: So, while DOJ continues to be in the headlines, I think we feel like we understand what it's trying to do and, in fact, I think can be a very good partner in helping DOJ achieve its objectives beyond what it could achieve on its own.
Speaker Change: So we've.
Speaker Change: Well <unk>.
Speaker Change: He used to be in the headlines I think we feel like we understand what is trying to do and in fact I think can be.
Speaker Change: Very good partner in helping dose achieve its objectives beyond beyond what it could achieve on its own.
John Kim: On the DC acquisition, is there anything you could share as far as the lease structure, whether it's a triple net or gross modified, any annual escalators it has, or CapEx requirements? And maybe just if you could provide any insight as to why the seller principal was looking to exit this asset at a nine cap. I'll just want you to do a little on lease structure. Again, we really appreciate the lease structure, you know, of this facility. So I'll let Allison give you the details. Sure. So it would be a typical modified gross lease. It provides A roughly a 1% annual escalation for a majority of the space.
Speaker Change: On the <unk> acquisition is there anything you can share as far as the lease structure, whether it's triple net or gross modified.
Speaker Change: Any annual escalators that has or capex requirements and maybe just if you could provide any.
Speaker Change: Insight as to why the seller principal was looking to exit this asset at a nine cap.
Speaker Change: Also once you do a little on the lease structure again, we we really appreciate the lease structure.
Alex: So I'll, let Alex and give you the details.
Alex: Sure. So it would be a typical modified cross lease it provides.
Alex: Scott.
Alex: Yeah.
Alex: It's roughly a 1% annual escalation for a majority of this space.
Allison Marino: There are a few private tenants as well. Those would have, you know, typical retail CDS, Wells Fargo, those types of baseholder. So that would have, you know, kind of like your standard retail lease associated with it. But for the DC government, it does have escalators, it would have modified gross recovery structure, and would be have real estate tax and sort of operating expense escalations.
Alex: Their RFP private tenants as well does that have.
Alex: Typical of retail CD asphalt Fargo those types of.
Alex: Stakeholder, so that would have kind of.
Alex: Like your standard retail lease associated with it but for the DC government.
Alex: Those have escalators it would have a modified gross recovery structure.
Alex: And would be rare.
Alex: Real estate tax on sort of operating expense escalations as well.
Allison Marino: You know, as we think about, again, the long term growth strategy, especially with, you know, being with the dividend cut and repositioning the cash We've been trying to, you know, we're focused on long term growth of two to 3%, which we think is very With that additional capital, you know, I think we're going to be pushing, you know, I think for this call, we'll say, to the upper end of that growth range. And we're also trying to build a, you know, a portion of the portfolio that leads us to have, you know, sort of 60 to 100 basis points of escalating growth, you know, in the portfolio over time so we can continue to get those long-term growth rates.
Alex: As we think about again, the long term growth strategy.
Alex: With with the dividend cut and repositioning the cash flows of the business we've been trying to.
Alex: We're focused on long term growth of 2% to 3%, which we think is very achievable.
Alex: With that additional capital I think we're going to be pushing I think for this call will say to the upper end of that growth range.
Alex: And we're also trying to build a portion of the portfolio that leads us to have sort of 60 to 100 basis points of.
Alex: Escalating growth in the portfolio over time, so we can continue to get those long term growth rates too.
John Kim: to be even higher. Why the seller was selling, I think they had a renewal. I think they were certainly in a place where this would be an appropriate time for them to think about exiting. And I think with the confusion in the DC market generally, that led them to probably make a decision. I think we were able to acquire this property at a significant discount to the original broker talk. And we were very pleased when it ended up coming our way.
Alex: To be even higher.
Alex: Why the seller was selling I think they had a renewal I think they.
Alex: They were certainly in a place where this would be inappropriate time for them to think about exiting and I think with with the confusion in the DC market generally.
Alex: Led them to probably make a decision I think we were able to acquire this property at a significant discount to the original broker talk and we were very pleased when that when the when it ends up coming our way.
Allison Marino: Okay, and my final question, Allison, you talked about your balance sheet and maybe using a little bit more leverage and being more creative to make creative acquisitions work. Can you talk about other funding sources you may have in case or in the event that your stock continues to trade where it is today? Sure. So, you know, we obviously have a number of debt products at our disposal. We have been very active in the private placement market over the last few years. We've been five times. Certainly, we have a broad and well-positioned syndicate of banks that have provided us term loan capacity as well as revolver capacity over the last few years, and we think those relationships have really been a great partnership, and we are excited to continue there.
Speaker Change: Okay and my final question Alison you talked about.
Speaker Change: Your balance sheet, and maybe using a little bit more leverage of being more creative to make accretive acquisitions work can you just talk about other funding sources you may have.
Speaker Change: In case or in the event that your stock continues to trade where it is today.
Speaker Change: Sure. So we obviously have a number of products at our disposal, we have been very active in the private placement market.
Speaker Change: Over the last few years has been five times.
Speaker Change: Certainly we have a.
Speaker Change: Broad and well positioned syndicate of banks that have provided us term loan capacity as well as the revolver capacity over the last three years and we think those relationships has really been a great partnership and we're excited to continue there in terms of and maybe one of the areas that we don't talk about as much is our joint venture partner.
Allison Marino: In terms of, and maybe one of the areas that we don't talk about as much is our joint venture partner. They have been a wonderful partner to us, and we have, we think that portfolio has really demonstrated an ability to create return, and they're, you know, broadly looking for ways to continue to partner with Easterly. So, we are, you know, excited to find ways that we can continue to work with them creatively on deals as well. I mean, I just add to that maybe just to punctuate it a bit, you know, for us to continue on our growth strategy, as we as we look forward, we don't have to access the equity markets in order to accomplish what we are in We would issue equity if we can do that on an accretive basis, but we feel like we have the resources, you know, both from debt, both from internal cash, from lump sum payment money, as well as our joint venture partner, that can continue to enable us to achieve all of our strategic objectives and repositioning our portfolio.
Speaker Change: <unk>.
Speaker Change: There has been a wonderful partner to us and we have we think that portfolio has really demonstrated an ability to create return in there.
Speaker Change: Broadly looking for ways to continue to partner with easterly.
Speaker Change: So we are excited to find ways that we can continue to work with them accretively on deals as well.
Speaker Change: Yes.
Speaker Change: Add to that maybe just to punctuate it a bit.
Speaker Change: For us to continue on our growth strategy as we as we look forward, we don't have to access the equity markets in order to accomplish what we are intending to accomplish.
Speaker Change: We would issue equity if we can do that on an accretive basis.
Speaker Change: But we feel like we have the resources both from debt both from internal cash.
Speaker Change: From lump sum payment money as well as our joint venture partner that can continue to enable us to achieve all of our strategic objectives and repositioning our portfolio and continuing to produce an elevated.
Darrell Crate: produce an elevated, you know, compounding growth rate to Okay, great.
Speaker Change: Compounding growth rate to shareholders.
Speaker Change: Okay, great. Thank you.
Darrell Crate: I would now like to turn the conference back to Darrell Crate, President and CEO of Easterly Government Properties for closing remarks. Thank you again to everybody for joining us on the Easterly Government Properties first quarter conference call. We very much look forward to continuing to work to build shareholder value, cultivate our pipeline, and we look forward to getting together here in a quarter and reporting those results.
Daryl: I would now like to turn the conference back to Daryl <unk>, President and CEO of easterly government properties for closing remarks.
Daryl: Thank you again to everybody for joining us on the easterly government properties first quarter conference call. We very much look forward to continuing to work to build shareholder value cultivate our pipeline and we look forward to getting together here in the quarter and reporting those results.
Operator: This concludes today's conference call. Thank you for participating. You may now disconnect.
This concludes today's conference call. Thank you for participating you may now disconnect.
Daryl: Okay.
Daryl: Okay.
Daryl: [music].
Daryl: Okay.
Daryl: Okay.
Daryl: [music].
Daryl: Okay.
[music].