Q2 2026 Easterly Government Properties Inc Earnings Call

August 3, 2026

Speaker #1: Greetings. Welcome to the Easterly Government Properties' second quarter 2026 earnings conference call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session between the company's research analysts and Easterly's management team.

Operator: Greetings. Welcome to the Easterly Government Properties Second Quarter 2026 Earnings Conference Call. At this time, all participants are on 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 ask a question during the session, the analysts will need to press star one one on their telephone. They will 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 your speaker today, Cole Bardawill, Director of Investor Relations. Please go ahead.

Operator: Greetings. Welcome to the Easterly Government Properties Q2 2026 Earnings Conference Call. At this time, all participants are on 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 ask a question during the session, the analysts will need to press star one one on their telephone. They will 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 your speaker today, Cole Bardawill, Director of Investor Relations. Please go ahead.

Speaker #1: To ask a question during the session, the analyst will need to press *11 on their telephone. They will then hear an automated message advising that their hand is raised.

Speaker #1: Please be advised that today’s conference is being recorded. I would now like to hand the conference over to your speaker today, Cole Bartowell, Director of Investor Relations.

Speaker #1: Please go ahead.

Speaker #2: 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.

Cole Bardawill: 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, 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 most recent Form 10-K filed with the SEC, and in other SEC filings. The company assumes no obligation to update publicly any forward-looking statements.

Speaker #2: 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.

Speaker #2: 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 most recent Form 10-K filed with the SEC and in other SEC filings.

Speaker #2: 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.

Cole Bardawill: 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. I would now like to turn the conference call over to Darrell Crate, President and CEO of Easterly Government Properties.

Speaker #2: 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 #2: I would now like to turn the conference call over to Darrell Crate, President and CEO of Easterly Government Properties.

Speaker #3: Thanks, Cole. Good morning, everyone. This quarter, we delivered year-over-year core FFO per share growth of 5.4%. As many of you know, this is above our 2% to 3% stated long-term growth target, and we are pleased to have achieved these results by executing our strategy of growing earnings steadily, allocating capital thoughtfully, and improving the quality of the portfolio over time.

Darrell Crate: Thanks, Cole. Good morning, everyone. This quarter, we delivered year-over-year Core FFO per share growth of 5.4%. As many of you know, this is above our 2% to 3% stated long-term growth target, and we are pleased and achieved these results by executing our strategy of growing earnings steadily, allocating capital thoughtfully, and improving the quality of the portfolio over time. While the current interest rate environment hasn't improved, driven in part by the volatility of geopolitical conditions that we're currently facing, our business moves forward steadily in periods like this, as evidenced by our improved earnings guidance. We own facilities that support essential government missions, leased to critical federal agencies, high credit state and municipal tenants, and defense-related companies. These leases are long duration and backed primarily by the full faith and credit of the U.S. Government.

Speaker #3: While the current interest rate environment hasn't improved, driven in part by the volatility of geopolitical conditions that we're currently facing, our business moves forward steadily in periods like this, as evidenced by our improved earnings guidance.

Speaker #3: We own facilities that support essential government missions, leased to critical federal agencies, high-credit state and municipal tenants, and defense-related companies. These leases are long-duration and backed primarily by the full faith and credit of the U.S.

Speaker #3: We continue to communicate to investors that we are clearly differentiated from traditional office real estate. Many of our facilities include secure, purpose-built environments where sensitive government work is conducted.

Darrell Crate: We continue to communicate to investors that we are clearly differentiated from traditional office real estate. Many of our facilities include secure, purpose-built environments where sensitive government work is conducted. They are mission-specific, difficult to replicate, and essential to the agencies they serve. For example, we recently visited our U.S. District Courthouse in Charleston, South Carolina. The building sits at the city's historic Four Corners of Law, physically connected to the adjoining Federal Judicial Center, deeply embedded into both the operations of the federal judiciary and the fabric of downtown Charleston. It's a clear example of the tenant stickiness that runs throughout our portfolio. Facilities that are integral to the missions they serve and the communities they anchor. Turning to the quarter, the portfolio continues to perform well. Occupancy stood at 98%, and our weighted average lease term stands at 9.2 years.

Speaker #3: They are mission-specific, difficult to replicate, and essential to the agency they serve. For example, we recently visited our U.S. District Courthouse in Charleston, South Carolina.

Speaker #3: The building sits at the city's historic Four Corners of Law, physically connected to the adjoining federal judicial center. Deeply embedded into both the operations of the federal judiciary and the fabric of downtown Charleston, it's a clear example of the tenant stickiness that runs throughout our portfolio.

Speaker #3: Facilities that are integral to the missions they serve and the communities they anchor. Turning to the quarter, the portfolio continues to perform well. Occupancy stood at 98%, and our weighted average lease term stands at 9.2 years.

Speaker #3: Both of these key metrics compare quite favorably to our office REIT peers, and each reflects the quality of our assets, the mission-critical work happening inside them, and the durability of the portfolio's cash flows.

Darrell Crate: Both of these key metrics compare quite favorably to our office REIT peers. Each reflects the quality of our assets, the mission critical work happening inside them, and the durability of the portfolio's cash flows. During the quarter, we closed a new 5-year term loan facility. Allison will cover the details, but I'd note that in a selective lending environment, we executed efficiently and on attractive terms. We view that as a reflection of how lenders see the business. High-quality cash flows derived from government-backed income, supporting a disciplined, strong balance sheet. As part of our growth plan, we also continue to have ongoing conversations with the rating agencies. We look forward to updating you on our progress as we work toward an additional investment-grade rating in 2027.

Speaker #3: During the quarter, we closed a new five-year term loan facility. Allison will cover the details, but I'd note that in a selective lending environment, we executed efficiently and on attractive terms.

Speaker #3: We view that as a reflection of how lenders see the business: high-quality cash flows derived from government-backed income, supporting a disciplined, strong balance sheet.

Speaker #3: As part of our growth plan, we also continue to have ongoing conversations with the rating agencies, and we look forward to updating you on our progress as we work toward an additional investment-grade rating in 2027.

Speaker #3: Turning to our cost of capital, our shares have performed well year to date, and the improvement supports our ability to grow. As our equity continues to re-rate, reflecting the quality and consistent growth of our FFO relative to peers, we will be able to harvest more opportunities across our $1.5 billion pipeline. Even at current levels, we’re beginning to see opportunities to fund external growth on an accretive basis.

Darrell Crate: Turning to our cost of capital, our shares have performed well year to date. The improvement supports our ability to grow. As our equity continues to re-rate, reflecting the quality and consistent growth of our FFO relative to peers, we will be able to harvest more opportunities across our $1.5 billion pipeline. Even at current levels, we're beginning to see opportunities to fund external growth on an accretive basis. As the stock price improves, more of that pipeline meets our return thresholds. We've spent the last several years building this pipeline. We will hopefully look to begin converting it in the coming quarters. Based on our continued operational performance and successful capital markets execution, we are raising our full year Core FFO per share guidance range. The increase reflects the strength of our business and our confidence in delivering another year of steady growth against our stated objectives.

Speaker #3: As the stock price improves, more of that pipeline meets our return thresholds. We've spent the last several years building this pipeline, and we will hopefully look to begin converting it in the coming quarters.

Speaker #3: Based on our continued operational performance and successful capital markets execution, we are raising our full-year core FFO per share guidance range. The increase reflects the strength of our business and our confidence in delivering another year of steady growth against our stated objectives.

Speaker #3: We continue to remain focused on disciplined execution, prudent capital allocation, and creating long-term value for our shareholders. As we look ahead, we couldn't be more excited about the opportunities in front of us.

Darrell Crate: We continue to remain focused on disciplined execution, prudent capital allocation, and creating long-term value for our shareholders. As we look ahead, we couldn't be more excited about the opportunities in front of us. Over the past several years, we've remained focused on executing our strategy, strengthening the portfolio, and positioning the company for consistent long-term growth. We're encouraged to see that that execution increasingly reflected in our market valuation. We believe we remain in the early innings of unlocking the value embedded within our platform. We appreciate the dedication our team and the continued support of our tenants and shareholders. We look forward to building on this momentum through the rest of the year. With that, I'll turn the call over to Allison.

Speaker #3: Over the past several years, we've remained focused on executing our strategy, strengthening the portfolio, and positioning the company for consistent, long-term growth. We're encouraged to see that execution increasingly reflected in our market valuation, and we believe we remain in the early innings of unlocking the value embedded within our platform.

Speaker #3: We appreciate the dedication of our team and the continued support of our tenants and shareholders. We look forward to building on this momentum throughout the rest of the year.

Speaker #3: And with that, I'll turn the call over to Allison.

Speaker #4: Thanks, Darrell, and happy Monday, everyone. I'm pleased to report the financial results for the second quarter of 2026. The underlying growth of the business continues to come through clearly in the numbers.

Allison Marino: Thanks, Darrell, and happy Monday, everyone. I'm pleased to report the financial results for Q2 2026. The underlying growth of the business continues to come through clearly in the numbers. Total revenue for the quarter was $92.4 million, up from $84.2 million in Q2 2025. That's an increase of 10% year over year, and it was driven by several factors. The acquisitions and development we've completed over the past 12 months, lease renewals, and TI and BSAC income coming online. EBITDA grew alongside revenue, coming in at $58.4 million for the quarter versus $54.3 million in Q2 2025, approximately 8% growth. Importantly, that growth is reaching the bottom line on a per share basis. For the quarter, net income was $0.07 per share on a fully diluted basis.

Speaker #4: Total revenue for the quarter was $92.4 million, up from $84.2 million in the second quarter of 2025. That's an increase of 10% year over year, and it was driven by several factors.

Speaker #4: The acquisitions and development we've completed over the past 12 months, lease renewals, and TI and BSAC income coming online all contributed. EBITDA grew alongside revenue, coming in at $58.4 million for the quarter versus $54.3 million in the second quarter of 2025—approximately 8% growth.

Speaker #4: And importantly, that growth is reaching the bottom line on a per-share basis. For the quarter, net income was $0.07 per share on a fully diluted basis.

Speaker #4: FFO per share was $0.78, up from $0.74 in the prior year. Core FFO per share also came in at $0.78, up from $0.74 in the prior year.

Allison Marino: FFO per share was $0.78, up from $0.74 in the prior year. Core FFO per share as well came in at $0.78, up from $0.74 in the prior year. That is approximately 5% growth year over year for both metrics. Finally, cash available for distribution for the quarter was approximately $25.8 million. In terms of our active development projects, all three continue to progress nicely. Our FDLE lab facility in Fort Myers, Florida, the US Courthouse in Flagstaff, Arizona, and the US Courthouse in Medford, Oregon are all advancing, and we're confident these will be high quality, mission critical additions to the portfolio once delivered. We initially broke ground on our FDLE lab facility in August 2025, and our team and development partners have done an excellent job executing against the construction timeline and keeping the project on track with delivery later this year.

Speaker #4: That is approximately 5% growth year-over-year for both metrics. And finally, cash available for distribution for the quarter was approximately $25.8 million. In terms of our active development projects, all three continue to progress nicely.

Speaker #4: Our FDLE lab facility in Fort Myers, Florida, the U.S. Courthouse in Flagstaff, Arizona, and the U.S. Courthouse in Medford, Oregon, are all advancing, and we're confident these will be high-quality, mission-critical additions to the portfolio once delivered.

Speaker #4: We initially broke ground on our FDLE lab facility in August 2025, and our team and development partners have done an excellent job executing against the construction timeline and keeping the project on track, with delivery later this year.

Speaker #4: Our net debt to annualized quarterly EBITDA currently stands at 7.3 times, down from the first quarter, as we continue to make steady progress towards our deleveraging targets.

Allison Marino: Our net debt to annualized quarterly EBITDA currently stands at 7.3 times, down from Q1 as we continue to make steady progress towards our de-leveraging targets. As our development projects advance, agreed upon lump sum reimbursements will provide a natural source of de-leveraging, followed by incremental EBITDA growth as projects are delivered and lease revenues commence. These factors are an important step towards our medium term leverage objectives and our pursuit of additional investment grade ratings, which we believe will enhance access to attractively priced debt capital and support future pipeline funding. The term loan was an excellent outcome for the company. We secured a new $200 million unsecured facility with a five-year maturity and a $50 million accordion feature at pricing that was better than we initially had anticipated for a comparable long-term capital solution.

Speaker #4: As our development projects advance, agreed-upon lump sum reimbursements will provide a natural source of deleveraging, followed by incremental EBITDA growth as projects are delivered and lease revenues commence.

Speaker #4: These factors are an important step toward our medium-term leverage objectives and our pursuit of additional investment-grade ratings, which we believe will enhance access to attractively priced debt capital and support future pipeline funding.

Speaker #4: The term loan was an excellent outcome for the company. We secured a new $200 million unsecured facility with a five-year maturity and a $50 million accordion feature, at pricing that was better than we initially had anticipated for a comparable long-term capital solution.

Speaker #4: With an initial spread of 130 basis points over SOFR, we believe the financing reflects both the continued strengthening of the business and the quality of the relationships we've built with our lending group.

Allison Marino: With an initial spread of 130 basis points over SOFR, we believe the financing reflects both the continued strengthening of the business and the quality of the relationships we've built with our lending group. We used the proceeds to pay down our revolving credit facility, which increased our available liquidity and provides additional capacity to fund future growth opportunities. With the successful closing of the term loan during the quarter, we are raising our full year Core FFO per share guidance range by $0.01 at the midpoint from $3.09 to $3.10, resulting in a revised full year range of $3.07 to $3.13. Despite a challenging interest rate environment, our portfolio continues to perform better than expected, supporting confidence in our earnings outlook for the balance of the year.

Speaker #4: We use the proceeds to pay down our revolving credit facility, which increased our available liquidity and provides additional capacity to fund future growth opportunities.

Speaker #4: With the successful closing of the term loan during the quarter, we are raising our full-year core FFO per share guidance range by $0.01 at the midpoint, from $3.09 to $3.10, resulting in a revised full-year range of $3.07 to $3.13.

Speaker #4: Despite a challenging interest rate environment, our portfolio continues to perform better than expected, supporting confidence in our earnings outlook for the balance of the year.

Speaker #4: At the midpoint, our guidance assumes that we will have $50 to $100 million of gross development-related investment during the year, and $50 million in wholly owned acquisitions.

Allison Marino: At the midpoint, our guidance assumes that we will have $50 to $100 million of gross development related investment during the year and $50 million in wholly owned acquisitions. We continue to maintain a $1.5 billion acquisition and development pipeline, and with the recent improvement in our share price, we believe we are approaching an inflection point where we can begin to unlock opportunities from that pipeline in a meaningful way over the coming quarters. We remain focused on disciplined capital allocation, maintaining the strength of our tenant relationships, and advancing opportunities across our development and acquisition pipeline. Consistent execution in these areas continues to support the resilience of our cash flows and positions us to create long term value for shareholders. Thank you for your time this morning. We appreciate your partnership and look forward to updating you on our progress.

Speaker #4: We continue to maintain a $1.5 billion acquisition and development pipeline, and with the recent improvement in our share price, we believe we are approaching an inflection point where we can begin to unlock opportunities from that pipeline in a meaningful way over the coming quarters.

Speaker #4: We remain focused on disciplined capital allocation, maintaining the strength of our tenant relationships, and advancing opportunities across our development and acquisition pipeline. Consistent execution in these areas continues to support the resilience of our cash flows and positions us to create long-term value for shareholders.

Speaker #4: Thank you for your time this morning. We appreciate your partnership and look forward to updating you on our progress. With that, I will now turn the call back to Shannon.

Allison Marino: With that, I will now turn the call back to Shannon.

Speaker #2: Thank you. As a reminder, today, Annelis, to ask a question you will need to press star on your telephone. Please stand by while we compile the Q&A roster.

Operator: Thank you. As a reminder to the analysts, to ask a question, you will need to press * one on your telephone. Please stand by while we compile the Q&A roster. Our first question comes from the line of Seth Boge with Citi. Please proceed with your question.

Speaker #2: Our first question comes from the line of Seth Burgie with Citi. Please proceed with your question.

Speaker #3: Hi, good morning, and thanks for taking my question. I just wanted to dig in a little bit more on the acquisition pipeline.

Seth Boge: Hi. Good morning, and thanks for taking my question. I just wanted to dig in a little bit more on kind of the acquisition pipeline, and reaching kind of an inflection point as your share prices have moved upwards. How should we just think about kind of the cadence of maybe starting to unlock some of those opportunities as we move into the back half of the year and into next year?

Seth Burgey: Hi. Good morning, and thanks for taking my question. I just wanted to dig in a little bit more on kind of the acquisition pipeline, and reaching kind of an inflection point as your share prices have moved upwards. How should we just think about kind of the cadence of maybe starting to unlock some of those opportunities as we move into the back half of the year and into next year?

Speaker #3: And reaching kind of an inflection point as your share prices have moved upwards, how should we think about the cadence of maybe starting to unlock—take a step back—over the year and into next year?

Speaker #5: Yeah, I mean, I think as Allison, you know, says, we're really approaching a level where, again, getting dollars put to work at a, you know, sort of 100-basis-point premium to our cost of capital is achievable.

Darrell Crate: Yeah. I think as Allison says, we're really approaching a level where, again, getting dollars put to work at a sort of 100 basis point premium to our cost of capital is achievable. Seth, as we've spoken, our company's small, so the great news is that it doesn't take much for us to be able to make a material difference. Mike Ivy and Chris Wang have been developing, managing, nurturing, cultivating this $1.5 billion pipeline for the last couple of years as we've continued to execute on our growth strategy successfully. We will find things that are able to pop out of that if the stock at $24.50 to $25.50 gets us into a nice range where we have some opportunity to work some nice transactions. At $26, $27, you can start seeing sort of material movement being a couple hundred million bucks of solid growth.

Speaker #5: And, you know, Seth, as we've spoken, I mean, our company's small, so the great news is that it doesn't take much for us to be able to make a material difference.

Speaker #5: And we've been managing Mike Ivey and Chris Wong have been developing, managing, nurturing, cultivating, you know, this one and a half billion dollar pipeline, you know, for the last couple of years as we've, you know, continued to execute on this on our growth strategy successfully.

Speaker #5: And, you know, we will find things that are able to pop out of that if, you know, the stock at, you know, $24.50 to, you know, $25.50 gets us into a nice range where we can—where we have some opportunity to work some nice transactions.

Speaker #5: At 26, 27, you can start seeing material movement—sort of material movement—being a couple hundred million bucks of solid growth. And, you know, at 28, 29, 30, I think we could see very material acquisition volume, well in excess of anything that we've done historically.

Darrell Crate: At $28, $29, $30, I think we could see very material acquisition volume well in excess of anything that we've done historically. The optimism is bred by what's within our control today and what we know we can execute on. For us to continue to grow forward, and as we all know, Allison won't let me release 2027 earnings guidance. As we continue to look to move forward, I'm very confident that we have the resources to continue to deliver our long term growth target to investors.

Speaker #5: So, you know, the optimism is bred by, you know, what's within our control today and what we know we can execute on. We, you know, for us to continue to grow forward and as we all know, Allison won't let me release 2027 earnings guidance.

Speaker #5: But as we, you know, continue to look to move forward, I'm very confident that we have the resources to continue to deliver our long-term growth target to investors.

Speaker #3: Thanks. And then maybe just a quick follow-up on that, but last quarter you announced mezzanine financing opportunities. Just of the 1.5 billion, is there any color you can kind of give around kind of maybe some of the size of those deals and then how much would be development opportunities versus acquisitions or any additional mezzanine financing you'd look to do?

Seth Boge: Thanks. Then maybe just a quick follow-up on that. Last quarter you announced mezzanine financing opportunities. Just of the $1.5 billion, is there any color you can kind of give around kind of maybe some of the size of those deals, and then how much would be development opportunities versus acquisitions or any additional mezzanine financing you look to do?

Seth Burgey: Thanks. Then maybe just a quick follow-up on that. Last quarter you announced mezzanine financing opportunities. Just of the $1.5 billion, is there any color you can kind of give around kind of maybe some of the size of those deals, and then how much would be development opportunities versus acquisitions or any additional mezzanine financing you look to do?

Speaker #4: Yeah, I think we shared last quarter—I think, Seth, by the way—I think we shared last quarter that the program could grow to be somewhere between $30 and $50 million.

Allison Marino: Yeah. Hey, Seth. By the way, I think we shared last quarter that the program could grow to be somewhere between $30 and $50 million, and that is still the target that we're working towards today. Certainly, that pipeline includes additional mezzanine financing opportunities. Many are in the final stages of lease procurement, so our participation in them would be contingent on those lease awards being made. As I've shared before, there's another batch of particularly VAs coming off the pipeline, and we expect the acquisition activity there and the mezzanine financing activity there to accelerate over the coming years.

Speaker #4: And that's still the target that we were working towards today. Certainly, that pipeline includes additional mezzanine financing opportunities. Many are in the final stages of lease procurement.

Speaker #4: So our participation in them would be contingent on those lease awards being made. But as we've shared before, there's another batch of, particularly, VAs coming off the pipeline, and we expect the acquisition activity there and the mezzanine financing activity there to accelerate over the coming years.

Darrell Crate: Maybe for some folks who may not be aware, our mezzanine program, since we announced that as part of our earnings growth strategy, to say we've been flooded with opportunities would maybe even be an understatement. Our discipline out of those is really just to provide mezzanine financing with developers and folks who we know are trusted and are known to us, and in particular, have buildings that we'd want to have as part of our portfolio. It's a very nice bridge as our cost of capital continues to improve, both on the equity side and the debt side, to be close to some projects that we think can be very accretive to the portfolio over the long term.

Speaker #5: And maybe for, you know, some folks who may not be aware, I mean, our mezzanine program, since we announced that as part of our earnings growth strategy—to say we've been flooded with opportunities would maybe even be an understatement.

Speaker #5: But our discipline out of those is really just to provide mezzanine financing with developers and folks who we know are trusted and are known to us and in particular, you know, have buildings that we'd want to be that we'd want to have as part of our portfolio.

Speaker #5: So, it's a very nice bridge as our cost of capital continues to improve, both on the equity side and the debt side, to be close to some projects that we think can be very accretive to the portfolio, you know, over the long term.

Seth Boge: Great. Thank you.

Seth Burgey: Great. Thank you.

Speaker #3: Great, thank you.

Speaker #2: Thank you. Our next question is from Michael Lewis of Truist Securities. Please proceed with your question.

Operator: Thank you. Our next question is from Michael Lewis of Truist Securities. Please proceed with your question.

Speaker #6: Thanks. So, Allison, you didn't mention any need for equity when you talked about, you know, getting into your target leverage range. And then Darrell did talk about equity a little on a question about acquisitions.

Michael Lewis: Thanks. Allison, you didn't mention any need for equity when you talked about getting into your target leverage range, Darrell did talk about equity a little on a question about acquisitions, how accretive it would be at certain levels. I was just wondering, how do you think about your cost of equity? Do you look at NAV? Is it really just more of matching it up with acquisitions and making it accretive? How do you value the cost of equity in the stock?

Speaker #6: You know, how accretive it would be at certain levels. I was just wondering, you know, how do you think about your cost of equity?

Speaker #6: You know, do you look at NAV? Is it really just more of matching it up with acquisitions and making it accretive? How do you kind of value the cost of equity in the stock?

Speaker #4: Sure. So it's a few points. I would say, first and foremost, we primarily match equity against acquisition capital. So that timing may not always be a perfect science. As you saw, we raised some equity in Q2 that was to fund the acquisition from Q1.

Allison Marino: Sure. It's a few points. I would say, first and foremost, we primarily match equity against acquisition capital. That timing may not always be a perfect science. As you saw, we raised some equity in Q2. That was to fund the acquisition from Q1. That equity was raised at a higher price than we underwrote the deal at. We're really pleased with how that was matched. In terms of the impact of leverage and equity combined, we see a natural de-leveraging path with just the development deliveries that we have. With that, there's not a need to raise additional equity in order to meet those targets, though we are mindful of all of our goals in concert with each other, and we will make the best decision, both from an accretion perspective, a leverage perspective, and all in relative and relation to NAV as well.

Speaker #4: And that equity was raised at a higher price than we underwrote the deal at. So we're really pleased with how that was matched. In terms of the impact of leverage and equity combined, we see a natural deleveraging path with just the development delivery set we have.

Speaker #4: And with that, there's not a need to raise additional equity in order to meet those targets. Though we are mindful of all of our goals in concert with each other, and we will make the best decision both from an accretion perspective, a leverage perspective, and all in relation to NAV as well.

Speaker #6: Okay, great. And then my second question, the Loma Linda mortgage matures next summer 127 and a half million dollars at 3.6%. I know it's early.

Michael Lewis: Okay, great. My second question, the Loma Linda mortgage matures next summer, $127.5 million at 3.6%. I know it's early. Is there any sense of how you'll recapitalize that and maybe what the cost could be?

Speaker #6: Is there any sense of how you'll recapitalize that, and maybe what the cost could be?

Speaker #4: Sure. So as Darrell has shared, and we've shared over a couple of calls, we view an investment-grade rating and investment-grade issuance as our primary goal in terms of refinancing that mortgage.

Allison Marino: Sure. As Darrell has shared, and we've shared over a couple of calls, we believe that we are on a path to an investment-grade rating. An investment-grade issuance would be our primary goal in terms of refinancing that mortgage. As you know, we prefer to be an unsecured borrower, that would make a very attractive cost of capital on an unsecured basis. That being said, while we won't stand still, we have ample capacity on the revolver now to take it on until we find the most attractive long-term debt capital solution. That's assuming we don't do anything but stand still. We could certainly take it on the revolver.

Speaker #4: As you know, we prefer to be an unsecured borrower, so that would make for a very attractive cost of capital on an unsecured basis. That being said, we have ample capacity on the revolver now to take it on until we find the most attractive long-term debt capital solution.

Speaker #4: So that's assuming we don't do anything but stand still. We could certainly take it on the revolver.

Speaker #5: Yeah. And I think one of the, you know, as we, you know, obviously it's a quarterly conference call, but as we're looking ahead, we've been doing significant amount of planning around, you know, 2027, 2028, 2029, understanding the leases that are going to make a big difference there, trying to get the structure of those leases in a way that we think will be most favored by the public markets.

Darrell Crate: Yeah. I think one of the-- Obviously it's a quarterly conference call. As we're looking ahead, we've been doing a significant amount of planning around 2027, 2028, 2029, understanding the leases that are going to make a big difference there, trying to get the structure of those leases in a way that we think will be most favored by the public markets. On the debt side, Allison did a fabulous job getting these term loans in place. As we look out at our refinancings and we see the opportunities in the debt markets, I think that we're planning well ahead in order to absorb, refinance, and continue to be on the growth path that we've articulated again, which is strong 2% to 3% growth consistently over the long term.

Speaker #5: And on the debt side, Allison did a fabulous job getting these term loans in place. But as we look out at our refinancings and we see the opportunities in the debt markets, I think that we are planning well ahead, you know, in order to absorb refinance and continue to be on the growth path, you know, that we've articulated again, which is, you know, strong 2% to 3% of growth consistently over the long term.

Speaker #5: And we think we could even step that up if we, you know, get our ratings and continue to move forward.

Darrell Crate: We think we could even step that up if we get our ratings and continue to move forward.

Speaker #6: Okay. And then lastly from me, we noticed a little bit higher maintenance CapEx this quarter. So I was just wondering if there was anything one-off or, you know, any reason for that.

Michael Lewis: Okay. Lastly from me, we noticed a little bit higher maintenance CapEx this quarter. Was just wondering if there was anything one-off or any reason for that.

Speaker #4: No. We had some very fortunate weather in the spring, so as you can imagine, Q1 tends to be a little light with the winter weather.

Allison Marino: No. We had some very fortunate weather in the spring, so as you can imagine, Q1 tends to be a little light with the winter weather, and this quarter was very active in terms of the external facing projects, things like roofs or parking lots or HVAC equipment that sits exterior to the building. We are still anticipating that our full year general range of $1.50 to $2 a square foot will be the plan for the year, but there's obviously some seasonality in the numbers as well.

Speaker #4: And this quarter was very active in terms of the external-facing projects—things like roofs, parking lots, or HVAC equipment that sits exterior to the building.

Speaker #4: We are still anticipating that our full-year general range of $1.50 to $2.00 per square foot will be the plan for the year, but there's obviously some seasonality in the numbers as well.

Speaker #6: Okay, great. Thank you. Appreciate it.

Michael Lewis: Okay. Great. Thank you. Appreciate it.

Speaker #4: Mm-hmm.

Speaker #2: Our next question is from John Kim of BMO Capital Markets. Please proceed with your question.

Operator: Our next question is from John Kim of BMO Capital Markets. Please proceed with your question.

Speaker #7: Thank you. I want to ask about your $1.5 billion acquisition and development pipeline, and how that has evolved since the last time you provided an update.

John Kim: Thank you. I want to ask about your billion and a half acquisition and development pipeline and how that has evolved from the last time you provided that update. Did the window close on some of these transactions and new ones have entered that pool? If you can maybe comment on the rationale for passing up on some of the opportunities during the quarter.

Speaker #7: Did the window close on some of these transactions, and have new ones entered that pool? And if you could maybe comment on the rationale for passing up on some of the opportunities during the quarter.

Darrell Crate: Yeah. I think the pipeline continues to remain surprisingly stable given its size. There are seller expectations. I think we're a very good buyer for a bunch of reasons. Many of the folks who own these buildings, the idea of having the opportunity to do some more tax planning with us relative to others, I don't think they feel like the market is in a place where they need to sell right now, so there isn't that level of urgency. We do continue to probably rotate, I'm going to say, $100 to $200 million of opportunity within that pipeline within the quarter. There's one deal that we did end up passing on. I think we were in a place, it was a fine building. It wasn't a building that was a have-to-have for us, and it was probably 60 to 75 basis points above our cost of capital.

Speaker #5: I mean, I think the pipeline continues to remain surprisingly stable given its size. You know, there are seller expectations. I think we're a very good buyer for a bunch of reasons.

Speaker #5: Many of the folks who own these buildings, the idea of having the opportunity to do some more tax planning with us, relative to others.

Speaker #5: I don't think they feel like the market is in a place where they need to sell right now, so there isn't that level of urgency.

Speaker #5: And we do continue to probably rotate, I'm going to say, $100 million to $200 million of opportunity within that pipeline within the quarter. There's one deal that we did end up passing on.

Speaker #5: You know, I think we were in a place—it was a fine building. It wasn't a building that was a must-have for us.

Speaker #5: And it was probably 60 to 75 basis points above our cost of capital. And so we decided to pass on that, as you know, we have very strong earnings growth right now, and we're positioning ourselves for next year.

Darrell Crate: We decided to pass on that as we have very strong earnings growth right now. We're positioning ourselves for next year. We're very excited to continue to execute on what we're identifying with some really terrific opportunities.

Speaker #5: But we're very excited to, you know, continue to execute on what we're identifying with some really terrific opportunities.

Speaker #7: And of those potential opportunities that you may close on in the next few months, or I guess for the remainder of the year, can you provide some commentary on what that looks like between GSA and government-adjacent assets, or maybe more state-level investments?

John Kim: Of those potential opportunities that you may close on in the next few months or I guess for the remainder of the year, can you provide some commentary on what that looks like between GSA and government-adjacent assets or maybe more state-level investments, and how much of that is acquisitions versus development opportunities?

Speaker #7: And how much of that is acquisitions versus development opportunities?

Speaker #5: Yeah, I mean, I think, you know, we're seeing some GSA assets that we're excited about, and they're sort of at the forefront of what we're doing.

Darrell Crate: Yeah. I think we're seeing some GSA assets that we're excited about, and they're sort of at the forefront of what we're doing. Our hope is, again, if we could control the world, we'd probably do half GSA and half sort of in the alternative bucket. As we know, our goal is to get to 30% of the portfolio being either in state, local, or government adjacent. Why is that number important? That number's important because those have escalators of 2% to 3%. The idea of adding 60 to 90 basis points to our same-store growth rate, we think positions the portfolio very nicely relative to peers. We believe the stability of our cash flows, the mission-critical nature of our buildings should put us at a premium to those businesses. As I've said on prior calls, our portfolio is outstanding.

Speaker #5: You know, our hope is, you know, again, if we could control the world, we'd probably do half GSA and half, you know, sort of in the, you know, alternative bucket as we know.

Speaker #5: You know, our goal is to get to 30% of the portfolio being either in state, local, or government-adjacent. Why is that number important? The number is important because those have escalators of 2% to 3%.

Speaker #5: So, the idea of adding, you know, 60 to 90 basis points to our same-store growth rate, we think, positions the portfolio very nicely, you know, relative to peers.

Speaker #5: And we believe the stability of our cash flows, the mission-critical nature of our buildings, should put us at a premium to those businesses. You know, as I've said, on prior calls, our portfolios outstanding, I mean, of the buildings that we have that duration of the leases, the quality of the cash flow, the occupancy, the tenancy, and I think what we're really working on is, you know, packaging those cash flows in a way and that means packaging as in obtaining the, you know, lowest cost of capital it means giving a growth rate that's strong to investors it's creating a tremendous level of cushion in the dividend and giving us that reinvestment opportunity.

Darrell Crate: Of the buildings that we have, the duration of the leases, the quality of the cash flow, the occupancy, the tenancy. I think what we're really working on is packaging those cash flows in a way, and that means packaging as in obtaining the lowest cost of capital. It means giving a growth rate that's strong to investors. It's creating a tremendous level of cushion in the dividend, and giving us that reinvestment opportunity. All of which I think should make us compound relative to peers in a way that gives us a multiple on the stock that can be just very attractive to our investors and to potential sellers of buildings.

Speaker #5: All of which, I think, should make us comp out relative to peers in a way that gives us a multiple on the stock that can be just very attractive, you know, to, you know, our investors and to, you know, potential sellers of buildings.

Speaker #7: And how are you thinking about dispositions as a funding source potentially, because they may have releasing risk down the road, or due to the focus on keeping your average portfolio age young versus peers?

John Kim: How are you thinking about dispositions as a funding source? Potentially because they may have re-leasing risk down the road or due to the focus on keeping your average portfolio age young versus peers.

Speaker #4: Yeah, I think it's all of those things.

Darrell Crate: I think it's all of those things. To be very candid about it, and I know we've shared this with you a little bit in the past. These last two, three years, Allison, myself, the team, Nick Nimmagadda, and the whole asset management team have really cleared up any of the fog or lack of clarity that's around the portfolio. We've got a lot of conviction of where we are. We will look at things on a case-by-case basis, and sometimes we're really working to find efficiencies. Even if we have a high-quality building, but maybe it's a loaner in a way from the other asset management resources that are really working for us, that might be a reason to sell. You're not going to see a significant portfolio turnover for us to go and raise cash to grow.

Speaker #5: And, you know, to be, you know, very candid about it and I know, you know, we've sort of shared this with you a little bit in the past.

Speaker #5: I mean, these last two, three years, Allison, myself, the team, Nick Namarilla, and the whole asset management team have really cleared up any of the fog or lack of clarity that's around the portfolio.

Speaker #5: We've got a lot of conviction of where we are. We will look at things on a case-by-case, you know, basis and, you know, sometimes we're, you know, we're really working to find efficiencies.

Speaker #5: So, even if we have a high-quality building, but maybe it's a loaner, you know, and sort of, in a way, from the other asset management resources that are really working for us, you know, that might be a reason to sell.

Speaker #5: But I don't think you're not going to see, you know, a significant portfolio turnover for us to, you know, go and, you know, raise cash to grow.

Speaker #5: You know, we continue to work and develop relationships with joint venture partners. So I think we're optimistic that our stock price is going to get to a good place and we can continue to harvest the pipeline.

Darrell Crate: We continue to work and develop relationships with joint venture partners. I think we're optimistic that our stock price is going to get into a good place, and we can continue to harvest the pipeline. That said, pivoting toward the end of this year or the beginning of next year, if that's not going to be the case, we can work on joint ventures with folks with more attractive cost of capital because we are the chosen partner of the US government. We're the largest landlord to the US government. We're working very closely from top to bottom with the GSA and with the other agencies.

Speaker #5: You know, that said, you know, pivoting toward the end of this year, the beginning of next year, if we don't if that's not going to be the case, we can work on joint ventures with folks with more attractive cost of capital.

Speaker #5: Because we are the chosen partner of the U.S. government. We're the largest landlord to the U.S. government. We're working very closely from top to

Speaker #1: Bottom with the GSA and with the other agencies . We understand what they need and , , and we are helping them become more efficient .

Darrell Crate: We understand what they need, and we are helping them become more efficient, and we're working on their most important quality buildings in order to be a good partner. All of that said, for us to go find money that's either in the US or around the globe that wants to invest in these very high-quality assets, that essentially deliver double-A plus rent streams, we're a partner of choice for somebody. We don't have a concern about not having the cost of capital when we need it in order to grow the company. As I said, our company's tiny today. In that with it being worth $1 to 2 billion, to grow that in a way that's competitive to peers, does not take a tremendous amount of sort of good luck or for things to blow our way.

Speaker #1: And we're working on their most important quality buildings . , you know , in order to be a good partner . So all of that said for us to go find , , you know , money that's either in the US or around the globe that wants to invest in these very high quality assets , you know , that essentially deliver double a plus rent streams .

Speaker #1: , you know , we're , , we're , we're a partner of choice for somebody . So , , we don't have a concern about not having the cost of capital when we need it in order to grow the company .

Speaker #1: And as I said , you know , our company is tiny today . I mean , in that , you know , with with it being worth , you know , 1 to $2 billion to grow that , , in a way that's competitive to peers , , does not take a tremendous amount of , , of , , you know , sort of good luck or for things to blow our way .

Speaker #1: We're still at a place and a size where we can control that growth and deliver it to shareholders with consistency.

Darrell Crate: We're still in the place and the size where we can control that growth and deliver it to shareholders with consistency.

Speaker #2: Great . Thank you

John Kim: Great. Thank you.

Speaker #3: Thank you. Our next question is from R.J. Milligan of Raymond James. Please proceed with your question. R.J. Milligan, your line is open.

Operator: Thank you. Our next question is from RJ Milligan of Raymond James. Please proceed with your question. RJ Milligan, your line is open. Please check your mute button.

Speaker #3: Please check your mute button

Speaker #4: Yep. Thank you. I just wanted to maybe follow up on the investment pipeline question and maybe ask it a little bit differently.

RJ Milligan: Yep. Thank you. I just wanted to maybe follow up on the investment pipeline question and maybe ask it a little bit differently. Based on your comments that more things are starting to pencil, I'm just curious if there's a mixed component to that of, is it that more development deals are starting to pencil and we should expect if you guys announce more investment activity, that we'd see it on the development side? Is it acquisitions? I'm just curious, at different levels and different pricing, should we expect a different mix of investment activity?

Speaker #4: But based on your comments that more things are starting to pencil, I'm just curious if there's a mixed component to that, or is it that more development deals are starting to pencil and we should expect if you guys announce more investment activity, that we'd see it on the development side?

Speaker #4: Or is it acquisitions? I'm just curious, you know, at different levels and different pricing, should we expect a different mix of investment activity?

Speaker #1: I think there's nothing that's that that's that's completely discernible . , other than there are two dynamics that are happening . One , in the development world , you can see that we're finding , these sort of veins of advantage , you know , you see it with courthouses .

Darrell Crate: I think there's nothing that's completely discernible other than there are two dynamics that are happening. One, in the development world, you can see that we're finding these sort of veins of advantage. You'd see it with courthouses. We're building one in Flagstaff, we're building one in Medford. We're good at this. We know how to work with the government, and we know how to make the process more efficient. Courts are prickly animals. You can develop a definable edge in that space as a developer. Because pleasing the judges, pleasing the various agencies that are in those buildings is a skill. You're seeing advantage there. In Florida, I think that we've done a terrific job with this FDLE business. Florida is a fast-growing state.

Speaker #1: I mean , we're building one in Flagstaff . We're building one in Medford . , we're good at this . , we know how to work with the government and we know how to make the process more efficient .

Speaker #1: And courts are prickly animals . , so , so you can develop a definable edge , you know , in that space as a developer , , because pleasing the judges , pleasing the various agencies that are in those buildings is a , is a , is a skill .

Speaker #1: , and so you're seeing advantage there in Florida , I think that we , we've done a terrific job with this FDLE business .

Speaker #1: Florida is a fast-growing state. Their law enforcement is important to them, and they have other facilities that need to be built.

Darrell Crate: Their law enforcement is important to them, they have other facilities that need to be built, and we'd be thrilled to be the state of Florida's partner in order to do that. On the acquisition side, it's a little trickier, again, I can't say enough that our small denominator, being a smaller company, is really our friend because we can continue to find opportunities in buildings where we have an advantage as a buyer because we're a long-term holder of product. What does that mean? That means that if there are buildings that may not be well-suited to be flipped in five years by an institutional buyer, but they're core to what we do, we're going to be able to get those at an attractive price.

Speaker #1: And we'd be thrilled to be a state of Florida's partner in order to do that . On the acquisition side , you know , it's a it's a little trickier .

Speaker #1: And again , I can't say enough that our small denominator , you know , being a smaller company is really our friend because we can continue to find opportunities , , in buildings where we're a , we have an advantage as a buyer because we're a long term holder of product .

Speaker #1: You know , then what does that mean ? That means that if there are buildings that may not , , you know , be well suited to be flipped in five years by an institutional buyer , but they're core to what we do .

Speaker #1: We're going to be able to get those at an attractive price . And , and those buildings like that . I mean , I've got them in my head .

Darrell Crate: Those buildings like that, I've got them in my head, maybe I'm not describing them with words on the call as clear as I'd like to. Those buildings pencil for us, where we are, and those are with very high-quality agencies where we have a terrific relationship. I think that puts us in some good stead, and we hope that we can get a couple of those in the next nine months.

Speaker #1: So maybe I'm not describing them with words on the call as clearly as I'd like to. Those buildings pencil for us, you know, where we are.

Speaker #1: And those are with very high quality agencies where we have a terrific relationship . And , , and I think that that puts us in some , , some good stead .

Speaker #1: And we hope that we can , , can get a couple of those , you know , in the next nine months

Speaker #4: Great . Thank you . And just a separate question here Any in this more modeling , but any update on the expected , , FFA FAA move out expected in October

RJ Milligan: Great. Thank you. Just a separate question here. This is more modeling, but any update on the expected FAA move-out expected in October?

Speaker #5: So we , , at this point , no , they will stay through at least the end of the lease term . There .

Allison Marino: We, at this point, know they will stay through at least the end of the lease term. Their notice provisions have expired, they will be there definitely through the end of October. We're hoping for a better update on their moving process over the next month or so. These operations aren't always as streamlined in terms of moving as you and I might be moving in our own homes. We should have an update for you, but they have historically had a bit of a move-out on time challenge. We're optimistic that they may stay a little bit longer, but we don't have anything concrete to share.

Speaker #5: Notice provisions have expired, so they will be there definitely through the end of October. We’re looking for a better update on their moving process over the next month or so.

Speaker #5: These operations aren't always as streamlined in terms of moving as you and I might be moving in our own homes.

Speaker #5: So , , we should have an update for you , but , , you know , they have historically had a bit of a move out on time challenge .

Speaker #5: So we're optimistic that they may stay a little bit longer, but we don't have anything concrete to share.

Speaker #1: So maybe just to , you know , punch that right down , I would not , I would not add additional revenue in your model at this time .

Darrell Crate: maybe just to punch that right down. I would not add additional revenue in your model at this time. We do know they will stay to the end of the term, but we may be able to share some It's either going to be status quo or we're going to have a little optimism to share with you on our next call.

Speaker #1: , we do know they will stay to the end of the end of the term . , but we may be able to share some , you know , it's , it's either going to be status quo or we're going to have a optimism to share with you on our next call

Speaker #4: Excellent. Thanks, guys.

RJ Milligan: Excellent. Thanks, guys.

Speaker #3: Thank you. Our next question is from Michael Carroll of RBC Capital Markets. Please proceed with your question.

Operator: Thank you. Our next question is from Michael Carroll of RBC Capital Markets. Please proceed with your question.

Speaker #6: Yeah . Thanks , Daryl . I wanted to circle back on your comments on your investment pipeline and your I guess the ideal mix .

Michael Carroll: Yep. Thanks. Darrell, I wanted to circle back on your comments on your investment pipeline and your, I guess the ideal mix, I believe you said, was 50% GSA type buildings and 50% alternative type assets. Can you kind of give us an idea of, are the cap rates the same for those two types of buildings? I know the alternatives have the lease bumps, or how should we think about the pricing ranges of those types of properties?

Speaker #6: I believe you said was 50% GSA type buildings and 50% alternative type assets . I mean , can you kind of give us an idea of are the cap rates the same for those type two types of buildings ?

Speaker #6: I know the alternatives have the least bumps, but how should we think about the pricing ranges of those types of properties?

Speaker #1: Yeah , no , I mean , it's a great question . And it really is . It really is case . Case by case .

Darrell Crate: Yeah, no, it's a great question, and it really is case by case. We're looking at some of these development deals with escalators, thus the individual opportunities are complicated. Some of them we can find an advantage and really are excited to get that capital put to work. Then on acquisitions, again, it's finding unique circumstances where our cost of capital gets us to a point where we can get a high-quality building. When I say 50/50, what I mean is we're working on opportunities equally that are acquisition and development. How it actually shakes out in a set of ways doesn't matter. Volume does matter. Again, our long-term growth targets, getting to that 3% number is very important.

Speaker #1: I mean , we're looking at some of these development deals with escalators and , , and just the individual opportunities . Are , they are complicated .

Speaker #1: , and , and some of them we have , we can find an advantage and really are excited to get that capital put to work and , and , , and then on acquisitions again , , it's finding unique circumstances where our cost of capital , , you know , gets us to a point where we can get a high quality building .

Speaker #1: So , you know , when I say 5050 , what I mean is we're working on opportunities equally that are acquisition and development , how it actually shakes out in a set of ways doesn't matter .

Speaker #1: Volume does matter . , again , our long term growth targets , you know , getting to that 3% number is , is very important .

Speaker #1: And we feel like we have the resources , not only with the existing portfolio , the lease renewals , all the good work that we have , have done to get things buffed up and ready and predictable .

Darrell Crate: We feel like we have the resources, not only with the existing portfolio, the lease renewals, all the good work that we have done to get things buffed up and ready and predictable. In addition to where our cost of capital is today and with regard to this very large pipeline that we continue to navigate, we're going to get to a place where I think our long-term goals are achievable.

Speaker #1: , and , you know , in addition to , you know , where our cost of capital is today and with regard to this very large pipeline that we continue to navigate , , you know , we're going to get to a place where I think our long term goals are achievable .

Speaker #6: Okay . And then circling back to your comments about potentially accessing the JV market , , if you don't like your , your , , I guess if you don't want to issue equity to fund some of these deals , are you in discussions with potential , , JV type funds that that wanted to invest with you guys to buy some of these properties ?

Michael Carroll: Okay. Then circling back to your comments about potentially accessing the JV market, if you don't like your, I guess if you don't want to issue equity to fund some of these deals. Are you in discussions with potential JV-type funds that wanted to invest with you guys to buy some of these properties?

Speaker #1: Yeah , we maintain , , you know , a series of those relationships and we've continued to develop them over the last six months .

Darrell Crate: Yeah. We maintain a series of those relationships, and we've continued to develop them over the last six months. As we look forward, I think that we've always had a very large sovereign wealth fund who's been a very good partner. We found some other folks who nicely complement that. As we have a broader range of properties that we're interested in, I think we can appeal to a wider range of tastes and preferences as we work with folks. I can say clearly, obviously we've been at this for the better part of 15 years. We are one of the largest in the space, and we are close with. We understand not only the commercial part of real estate, but how government works.

Speaker #1: You know , as we , as , as we look forward , I think that , , you know , we've always had a very large sovereign wealth fund who's been a very good partner .

Speaker #1: But we found some other folks who nicely complement that, as we have a broader range of properties that we're interested in.

Speaker #1: , I think we can appeal to a wider range of tastes and preferences , you know , as we , , as , as we work with folks , , and I , and I can say , you know , clearly we , I mean , obviously we've been at this for the better part of 15 years , , we are one of the largest in the space .

Speaker #1: And we are close with , we understand not only the commercial part of real estate , but how government works . So if you're a JV partner and this is , , this is an exposure that you want in your portfolio , , we , we do make it an easy choice for them .

Darrell Crate: If you're a JV partner and this is an exposure that you want in your portfolio, we do make it an easy choice for them. We'll continue to cultivate those relationships. Also, given the order of magnitude of the pipeline that we're developing, we don't need to be a ball hog about it. We can be a very good partner with some JVs as well as doing things on our own, and continue to grow the business in a way that I think is going to be pleasing to investors.

Speaker #1: So we'll continue to cultivate those relationships and also , you know , given the order of magnitude of the pipeline that we're developing , , you know , we don't need to be a ball hog about it .

Speaker #1: We can be a very good partner , , with some JVs as well as , you know , doing things on our own .

Speaker #1: , and , , and continue to grow the business in a way that I think is going to be pleasing to investors .

Speaker #6: Okay . And with these JV type investments , is it more of a one off type deal with specific JV partners ? Or could you create or would you want to create more of a fund type business to kind of actively grow ?

Michael Carroll: Okay. With these JV-type investments, is it more of a one-off type deal with specific JV partners, or could you create or would you want to create more of a fund type business to kind of actively grow that relationship and buy new assets?

Speaker #6: ...that relationship to buy new assets?

Speaker #1: I think , I think a fund is a little sort of a more formal , but , you know , with the Vas , we had a program , you know , with our JV partner where we ended up putting , you know , close to six , $700 million of assets , you know , in that entity , , and that was a , that was a terrific program for them .

Darrell Crate: I think a fund is a little sort of more formal. With the VAs, we had a program with our JV partner where we ended up putting close to $600 to $700 million of assets in that entity. That was a terrific program for them, and filled a need, and it's something that we do well. When you say one-off, that doesn't feel like what's accurate because it's really a waste of everybody's time to build the level of relationships that we're looking to have with JV partners. We're not coming up with a building and auctioning it off. These are partners who I think are excited to be in this space, and we want to do something that's fairly programmatic and consistent over time.

Speaker #1: And , you know , filled a need and something that we do well . , so thinking about again , I don't think when you say one off that , that doesn't feel like what's , what's accurate because it's really a waste of everybody's time to build the level of relationships that we're looking to have with JV partners .

Speaker #1: We're not coming up with a building in like auctioning it off . , you know , these are partners who I think are excited to be in this space .

Speaker #1: And , you know , we want to do something that's , that's fairly programmatic and consistent over time . That also said to be an investment grade issuer , , you know , we would like to have more than $300 million of debt that we're issuing every year .

Darrell Crate: That also said, to be an investment-grade issuer, we would like to have more than $300 million of debt that we're issuing every year. That is also achievable. In the context of trying to drive volume, especially as cost of capital gets a little bit better, we'll weigh all of that as factors in how we decide to execute.

Speaker #1: That is also achieved. And in the context of trying to drive volume, especially as the cost of capital gets a little bit better.

Speaker #1: , we will , , that we'll , we'll weigh all of that , , is as factors in how we decide to execute .

Speaker #6: Okay, great. Thank you. I appreciate it.

Michael Carroll: Okay, great. Thank you. Appreciate it.

Speaker #1: Thank you. Appreciate it.

Darrell Crate: Yeah, thank you. Appreciate it.

Speaker #3: Our next question is from Merrill Ross of Compass Point Research and Trading. Please proceed with your question.

Operator: Our next question is from Merrill Ross of Compass Point Research & Trading. Please proceed with your question.

Speaker #7: Hi . Good morning . , if you had an update on the lease expirations , aside from the FAA , I know they're pretty light for this year , but are you starting to look towards next year ?

Merrill Ross: Hi, good morning. I wonder if you have an update on the lease expirations aside from the FAA. I know they're pretty light for this year, but are you starting to look towards next year? I guess they peak in 2028, though you may dilute that with growth. It becomes more meaningful the further out you go. I'm just wondering if there's any update, kind of more in the near term, but are you starting to look towards the intermediate?

Speaker #7: And then I guess a peak in 2028 , though you may dilute that with , you know , with growth . , but it becomes more meaningful further out you go .

Speaker #7: And I'm just wondering if there's any update . , you know , kind of more in the near term , but are you starting to look towards the intermediate ?

Speaker #5: Yeah . Hi . Merrill . , thanks for the question . So we are , , you know , in the happy stages of procurement for , , upcoming expirations going through , , most much of 2027 .

Allison Marino: Hi, Merrill. Thanks for the question. We are in the happy stages of procurement for upcoming expirations going through much of 2027. Procurements have kicked off for many, if not all. We are actively participating in those. We hope to share a little bit more progress as we get closer to those completions. We're not expecting anything out of line with our currently forecasted renewal expectations, mid to high teens net effective rent growth, about $35 a square foot TI and BSAC on average. That being said, I know you mentioned that we've got a lot in 2028. We're generally about 5% of expirations any given year, and if you look at 2030, the golden year for all of us, there's less than a percent.

Speaker #5: So procurements have kicked off for many , if not all . , and we are actively participating in those . We hope to share a little bit more progress as we get closer to those , , completions , but we're not expecting anything , , out of line with our currently , forecasted , , renewal expectations mid , mid to high teens that effective rent growth about $35 a square foot in T and B stack on average .

Speaker #5: That being said, I know you mentioned that we've got a lot in '28. We're generally about 5% of expirations in any given year.

Speaker #5: And if you look at 2030 , the golden year for all of us , there's like less than a percent . So that's going to be a very happy year to talk about on our earnings calls , because I don't know what we'll talk about , but that'll be hopefully something else .

Allison Marino: That's going to be a very happy year to talk about on earnings calls because I don't know what we'll talk about. That'll be hopefully something else pretty cool. We're underway, and hope to share some more progress in Q3.

Speaker #5: Pretty cool . , but we're , , we're underway and I hope to share some more progress in Q3 .

Speaker #1: Yeah . And I would just say , , I mean , yeah , to put some color around it . , you know , Allison's done a tremendous job of putting more organization and discipline around getting these procurements going .

Darrell Crate: I'd just say, to put some color around it, Allison's done a tremendous job of putting more organization and discipline around getting these procurements going. It's been a broad executive team effort to work more closely with the government, figure out DOGE was our friend in this respect because it did open people's eyes to having a more fresh look on how they process things. We have very important buildings to them. The reality being they should be renewing these leases. We've done a very good job as a landlord. These are mission-critical facilities. We shouldn't be wasting a lot of time dickering around with the leases and getting to a place where we can streamline a process where the American taxpayers are getting a fair deal, our shareholders are getting fairly compensated for their capital.

Speaker #1: , it's been a broad executive team effort to work more closely with the government , figure out , you no , Doge was our friend , you know , in this respect , because it did open people's eyes , , to having a more fresh look on how they process things .

Speaker #1: We have very important buildings to them . And , , and the reality being , , they should be renewing these leases . We've done a very good job as a landlord .

Speaker #1: These are mission-critical facilities, so we shouldn't be wasting a lot of time dickering around with leases. We need to get to a place where we can streamline the process, ensuring that the American taxpayers are getting a fair deal.

Speaker #1: Our shareholders are getting fairly compensated for their for their capital . , everybody from , , our elected officials to the folks at the agencies to the GSA , to us , nobody disagrees with that framework .

Darrell Crate: Everybody from our elected officials to the folks at the agencies to the GSA to us, nobody disagrees with that framework. Getting that to move more smoothly has been an effort. Allison's absolutely done her part with the team internally to push up to the agencies, the government, and the elected officials in a way that I think everybody's pleased with how it's going.

Speaker #1: And so getting that to move more smoothly , , has been , has been an effort . And , and Allison's absolutely done her part with the team .

Speaker #1: Internally, to a post up to the agencies, the government, and the elected officials, in a way that I think everybody's pleased with how it's going.

Speaker #7: Yeah. Great job, Ellison. I always appreciate it.

Merrill Ross: Yeah. Great job, Allison. I always appreciate you.

Speaker #3: Thank you. I would now like to turn the conference back to Darrell Crate, President and CEO of Easterly Government Properties, Inc.

Operator: Thank you. I would now like to turn the conference back to Darrell Crate, President and CEO of Easterly Government Properties, for closing remarks.

Speaker #3: Closing remarks .

Speaker #1: Great . Well , thanks , everybody , for joining us for this conference call . We're very pleased with how the portfolio continues to move forward .

Darrell Crate: Well, thanks everybody for joining us for this conference call. We're very pleased with how the portfolio continues to move forward. As you know, we're executing on this long-term growth plan. It is terrific to see the team continue to do their work. I'd really just like to thank our new shareholders and folks who've been with us also for quite some time. Thank you for your support and confidence, we really look forward to continuing to deliver strong growth to you in the coming quarters and years.

Speaker #1: As you know , we're executing . On this long term growth plan . , it is , , terrific to see , , the team continue to do their work .

Speaker #1: , and I'd really just like to thank our new shareholders and folks who've been with us for , , for , also for quite some time .

Speaker #1: Thank you for your support and confidence. We really look forward to continuing to deliver strong growth to you in the coming quarters and years.

Operator: This concludes today's conference call. Thank you for participating. You may now disconnect.

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