Easterly Government Props (NYSE:DEA) released first-quarter financial results and hosted an earnings call on Monday. Read the complete transcript below.
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Summary
Easterly Government Props reported a 16% year-over-year increase in revenue to $91.5 million for Q1 2026, driven by recent acquisitions and stable lease conditions.
The company’s EBITDA grew by 12% to $57.3 million, with FFO per share increasing by 7% to $0.76, reflecting strong earnings growth.
Strategically, the company completed its first mezzanine investment tied to a VA outpatient clinic, with a 12% yield, highlighting a focus on capital allocation and long-term ownership opportunities.
The company maintained an occupancy rate of 97% and a weighted average lease term of 9.4 years, indicating strong operational performance.
Easterly Government Props raised the low end of its full-year guidance, now ranging from $3.06 to $3.12 per share, citing disciplined capital allocation and ongoing development projects.
Management emphasized the stability of its portfolio, supported by government functions, and the potential for future growth through strategic acquisitions and developments.
Full Transcript
OPERATOR
Welcome welcome to the Easterly Government Properties
Cole Barter
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 10K filed with the SEC and in its other SEC filings. 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. 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@ir.easterlyreit.com I would now like to turn the conference call over to Darrell Crait, President and CEO of Easterly Government Properties.
Darrell Crait (President and CEO)
Thank you, Cole. Good morning everyone. We continue to operate in a market defined by volatility, whether it’s interest rates, geopolitical uncertainty or broader capital market disruption. In these environments, investors tend to focus on businesses with durable cash flows, strong tenant credit, and disciplined capital allocation. We believe Easterly continues to stand out in each of these areas. Our portfolio supports essential government functions that continue regardless of economic cycles or external events. These are facilities tied to critical federal missions, high credit, state and municipal agencies, and select defense related tenants. The durability of those missions and the strength of those credit relationships continues to provide a stable foundation for our business. Importantly, we believe our portfolio is often misclassified alongside traditional office real estate. That comparison misses the specialized nature of what we own from our FBI offices in places like El Paso, New Orleans and Pittsburgh. These facilities include secure classified environments, SCIFs and other controlled spaces where sensitive law enforcement and intelligence work is conducted. These are highly tailored facilities with support agents that support agency specific operations and are difficult to replicate. They serve essential functions, benefit from long duration leases, and are backed by some of the strongest credit tenants in the world. Against that backdrop, we remain focused on a straightforward strategy growing earnings, steadily allocating capital thoughtfully, and continuing to improve overall portfolio quality over time. Over the past several years we’ve taken deliberate steps to strengthen the company and including leadership transitions, resetting the dividend and maintaining additional capital internally. These decisions are not always easy, but they position us to enter 2026 from a position of strength, supporting a robust and sustainable dividend while continuing to deliver consistent earnings growth that outperforms our peers. Turning to the quarter, our portfolio continued to perform at a high level. Occupancy continues to outpace our REIT peers at 97% and weighted average lease terms stood at approximately 9.4 years. These metrics reflect both the quality of our assets and the mission critical nature of the work taking place inside our buildings during the quarter. We also completed our first mezzanine investment tied to the development of a new VA output patient clinic. This transaction reflects how we are thinking about capital allocation in today’s environment. While traditional acquisitions remain central to our long term growth strategy, we are also identifying adjacent opportunities that can generate attractive current returns while preserving future optionality. This investment is expected to deliver a 12% yield, is backed by a committed federal tenant, and allows us to remain connected to an asset that may ultimately fit in our long term term ownership strategy. VA facilities represent one of our largest portfolio exposures and that’s by design. These assets are highly specialized, tend to be very sticky, and are backed by the credit quality of the federal government. We were recently at our VA Jacksonville facility and it was filled with veterans receiving the care and services they need. An important reminder that these aren’t traditional office buildings but essential infrastructure Supporting Critical mission We also believe that the Administration’s increased focus on defense spending represents an additional tailwind for the company, particularly as it relates to external growth opportunities. As we look to the year ahead, we are encouraged by the strength of our first quarter performance and our ability to raise the low end of guidance. While broader market volatility remains, our priorities remain unchanged, disciplined capital allocation, operational execution and consistent earnings growth. We believe our portfolio offers investors a compelling combination of income stability, long term growth and exceptional tenant credit quality with a leased portfolio that generates a double A revenue stream. We look forward to working with the credit agencies on achieving an investment grade rating in 2027. To wrap up, we’re pleased with how the year started. We’re growing earnings, maintaining strong occupancy, allocating capital thoughtfully and continuing to improve portfolio quality. We believe that disciplined execution will continue creating long term value for shareholders. I want to thank our team for their continued focus and execution, as well as our tenants and shareholders for their ongoing trust and partnership. With that, I’ll turn the call over to Alison.
Alison
Thanks Darrell and good morning everyone. I’m pleased to report the financial results for the first quarter of 2026 on this sunny Monday morning. The underlying growth in the business is clear. Total revenue increased to $91.5 million, up from $78.7 million in the first quarter of 2025, a 16% year over year increase. This is driven primarily by acquisitions completed over the last 12 months, contractual rent growth and continued lease stability across the portfolio. EBITDA also grew meaningfully, increasing from $57.3 million from $51 million last year, representing approximately 12% growth, reflecting the expanding earnings power of the platform. Most importantly, that growth continued to translate into higher earnings for shareholders on a per share even as we raised capital to support portfolio expansion on a fully diluted basis. Net income per share was $0.03. FFO per share increased to $0.76, up from $0.71 representing approximately 7% growth, while core FFO per share increased to $0.77 from $0.73 or roughly 5.5% growth year over year. Our cash available for distribution was approximately $32.2 million. In terms of our active development projects, we are on track to meet previously communicated timelines. Our Fort Myers, Florida Lab project is expected to complete and commence its lease in the fourth quarter of 2026. That will be followed by the Flagstaff Courthouse in Arizona which is scheduled to deliver in the first quarter of 2027. Finally, the Medford Courthouse in Oregon is anticipated to complete during the second half of 2027. The delivery of these development projects are natural de-leveraging points towards our medium term cash leverage goals as the NOI comes online and any agreed upon lump sums are received. Turning to leverage, our adjusted net debt to annualized quarterly pro forma EBITDA was 7.3 times edging higher during the quarter due primarily to the timing of equity relating to our Commonwealth of Virginia acquisition. Given the share price volatility, the broader markets experienced in the first quarter, we elected to defer issuing the majority of that equity and we expect to complete the issuance by the end of the year. As Darrell mentioned, during the quarter we completed our first mezzanine loan investment providing $7 million of financing for the development of a new 120,000 square foot VA outpatient clinic in Kennewick, Washington. The loan carries an anticipated 12% yield and supports a 20 year firm term lease commitment from the Department of Veterans affairs with an expected project completion date of October 2028. The transaction is backed by an experienced VA and GSA developer as sponsor who our team has known for decades and Easterly has transacted with multiple times. This allows us the opportunity to acquire the property upon completion as well as and enables us to generate attractive current returns while remaining closely aligned with assets that fit our long term portfolio strategy. With the successful closing of the mezzanine loan during the quarter, we are raising the low end of our full year guidance by one penny from $3.05 to $3.06 resulting in a revised full year range of $3.06 to $3.12. While performance year to date is trending modestly ahead of our initial expectations, we continue to take a disciplined and cautious approach as we evaluate the remainder of the year, particularly given the ongoing volatility in the interest rate and broader equity market environment. 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 we are beginning to make meaningful progress on potential transactions that meet our investment criteria and can be executed at a spread to our cost of capital, either independently or through a partnership. We’re staying disciplined on capital allocation, focused on retaining our tenants and executing across our development pipeline, all in line with the strategic objectives we’ve communicated. These are the fundamentals behind Easterly’s stable and growing cash flows and we believe this will drive shareholder value. 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
Shannon (Moderator)
call back to Shannon.
OPERATOR
Thank you. 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 and A roster. Our first question is from Seth Burgay of Citi. Please proceed with your question.
Seth Burgay (Equity Analyst at Citi)
Hi. Thanks for taking my question. I guess just starting off with the mezzanine Lending piece, you know, is it 7 million kind of a one off transaction or is there something you would look to kind of do more of? And how should we think about kind of the sizing of that if that’s something that you would kind of, know, think about doing more of in the future?
Darrell Crait (President and CEO)
Yeah, I mean, look it’s a terrific way for us to get involved early in a project and I think we could see ourselves allocating about $30 million to this pipeline. The VA pipeline over the next four, five, six years is quite significant. There’s a set of terrific, well respected developers who really have a knack for building these. Well, and as you can see, at $7 million, roughly $30 million allocated to this effort would get us involved …
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