Easterly Government Properties Reports Fourth Quarter and Full Year 2015 Results
Wednesday, March 02, 2016 7:00:05 AM ET --~ FFO of $0.26 per Share on a Fully Diluted Basis for the Quarter ~
--~ Completed $171 Million of Accretive Acquisitions ~
Easterly Government Properties, Inc. (DEA ) (the "Company" or
"Easterly"), a fully integrated real estate investment trust ("REIT")
focused primarily on the acquisition, development and management of
Class A commercial properties leased to the U.S. Government, today
announced its results of operations for the quarter and full year ended
December 31, 2015.
Highlights for the Quarter Ended December 31, 2015:
--
Acquisition of two Drug Enforcement Administration (DEA) laboratories
in Pleasanton, CA and Dallas, TX, a Federal Bureau of Investigation
(FBI) field office in Richmond, VA and a U.S. Citizenship and
Immigration Services (USCIS) property in Lincoln, NE
--
Funds From Operations of $10.3 million, or $0.26 per share on a fully
diluted basis
--
Cash Available for Distribution of $8.8 million, or $0.22 per share on
a fully diluted basis
--
Portfolio occupancy at 100%
Highlights for the Pro Forma Year Ended December 31, 2015:
--
Completed seven accretive acquisitions with an aggregate purchase
price of $170.9 million since the IPO
--
Raised $297.1 million in net proceeds in the IPO and concurrent
private placement
--
Entered into a $400 million unsecured revolving credit facility with a
$250 million accordion feature. Leverage at year end was 25.2% on the
basis of net debt to total enterprise value
--
Pro Forma Funds From Operations of $41.1 million, or $1.04 per share
on a fully diluted basis
--
Pro Forma Cash Available for Distribution of $35.2 million, or $0.89
per share on a fully diluted basis
"We are pleased to have completed our first calendar year as a public
company with very strong fourth quarter and full year results," said
William C. Trimble III, President and Chief Executive Officer of
Easterly Government Properties, Inc. "In 2015 we exceeded our
acquisition goals with the purchase of seven class A, mission-critical
properties for a combined purchase price of $171 million and we are off
to a great start in 2016. We believe our disciplined investment approach
will continue to serve us well in diversifying our portfolio and our
management team looks forward to continuing to deliver strong earnings
growth to our shareholders."
Financial Results for the Quarter Ended December 31, 2015
Funds From Operations (FFO) was $10.3 million, or $0.26 per share on a
fully diluted basis for the three months ended December 31, 2015
Funds From Operations, as Adjusted was $10.7 million, or $0.27 per share
on a fully diluted basis for the three months ended December 31, 2015
Cash Available for Distribution (CAD) was $8.8 million, or $0.22 per
share on a fully diluted basis for the three months ended December 31,
2015
Net income was $0.2 million, or $0.00 per share on a fully diluted basis
for the three months ended December 31, 2015
Pro Forma Financial Results for the Full Year Ended December 31, 2015
Pro Forma Funds From Operations (FFO) was $41.1 million, or $1.04 per
share on a fully diluted basis for the twelve months ended December 31,
2015
Pro Forma Funds From Operations, as Adjusted was $39.8 million, or $1.00
per share on a fully diluted basis for the twelve months ended December
31, 2015
Pro Forma Cash Available for Distribution (CAD) was $35.2 million, or
$0.89 per share on a fully diluted basis for the twelve months ended
December 31, 2015
Pro Forma Net income was $3.5 million, or $0.09 per share on a fully
diluted basis for the twelve months ended December 31, 2015
The Company’s pro forma financial results for the twelve months ended
December 31, 2015 (1) removes the impact of one-time, non-recurring
expenses related to the Company’s initial public offering, including
legal and accounting fees and new entity formation costs, for the period
from February 11, 2015 (the date of the closing of the Company’s initial
public offering) to December 31, 2015 and (2) reflects a full quarter of
operations for the period from January 1, 2015 to March 31, 2015 on a
pro forma basis based on the financial results of the 49 days of
operations between February 11, 2015 and March 31, 2015.
"Easterly is very well positioned to continue to execute on our
strategy, with balance sheet capacity to harvest acquisition
opportunities. Our portfolio, with over 96% of revenue backed by the
full faith and credit of the U.S. Government, serves as a very strong
foundation to deliver continued, attractive risk adjusted returns to
shareholders," said Darrell Crate, Chairman of Easterly Government
Properties, Inc. "We believe our platform is designed to combine
acquisition opportunities and capital allocation discipline to drive
strong compounding returns for shareholders going forward."
Portfolio Operations
As of December 31, 2015, the Company wholly owned 36 properties in the
United States, encompassing approximately 2.6 million square feet in the
aggregate, including 33 properties that were leased primarily to U.S.
Government tenant agencies and three properties that were entirely
leased to private tenants. As of December 31, 2015, the portfolio had an
average age of 12 years, was 100% occupied, and had a weighted average
remaining lease term of seven years. With less than seven percent of
leases, based on square footage and total annualized lease income,
scheduled to expire before 2018, Easterly expects to continue to provide
a highly visible and stable cash-flow stream.
Acquisitions
From the time of its initial public offering, through the end of 2015,
the Company has acquired seven properties and driven Pro Forma Cash NOI
to a run-rate annualized level of approximately $59.5 million.
On April 1, 2015, Easterly acquired the Department of Energy (DOE)
building in Lakewood, Colorado. The 115,650-square foot building serves
as the headquarters for the DOE’s Western Area Power Administration
(WAPA) and represents the Company’s second asset in Lakewood, Colorado.
The Class A facility is 100% occupied by WAPA and leased to the General
Services Administration (GSA) until 2029.
On June 17, 2015 Easterly acquired the Thad Cochran U.S. Bankruptcy
Courthouse in Aberdeen, Mississippi. The Company believes the
46,979-square foot building is state of the art for court functionality
and security and fully compliant with the Judiciary’s needs. The
property is leased to the GSA with 9.5 years remaining on an initial
20-year lease.
On September 11, 2015 Easterly acquired the 52,881-square foot
Immigration and Customs Enforcement (ICE) building, in the Otay Mesa
community of San Diego. The ICE - Otay building is adjacent to the
Easterly-owned DEA - Otay building and located less than one half mile
from the Otay Mesa Land Port of Entry, the busiest truck crossing on the
California/Mexico border.
On October 21, 2015 Easterly acquired the 42,480-square foot Drug
Enforcement Administration (DEA) laboratory, in Pleasanton, CA. The
Pleasanton western regional laboratory is the newest lab in the DEA
portfolio and provides services to DEA divisions in the northwestern
U.S. The property was built in 2015 and is leased to the GSA for a
20-year term.
On November 12, 2015 Easterly acquired the U.S. Citizenship and
Immigration Services (USCIS) property in Lincoln, NE. The 137,671-square
foot building is part of the USCIS Nebraska Service Center, one of four
national USCIS service centers across the country. The property was
built-to-suit in 2005 and is currently 100% leased to the GSA with 4.7
years remaining on an initial 15-year lease.
On December 1, 2015 Easterly acquired the Drug Enforcement
Administration (DEA) regional laboratory in Dallas, TX. The
49,723-square foot building is located in a three-property federal
enclave including an FBI field office and Easterly’s DEA - Dallas field
division office property. The third built-to-suit DEA laboratory in
Easterly’s portfolio, the DEA - Dallas Lab was built in 2001 and is
leased to the GSA with six years remaining on an initial 20-year lease.
On December 7, 2015 Easterly acquired a 96,607-square foot Federal
Bureau of Investigation (FBI) field office in Richmond, VA. The FBI -
Richmond property is one of 56 field offices of the FBI, serves as the
regional headquarters, and is responsible for the oversight of six FBI
resident agencies located throughout the state of Virginia. Built in
2001, FBI - Richmond is leased to the GSA with five years remaining on
an initial 20-year lease.
Balance Sheet
Easterly believes that its strong balance sheet and borrowing ability
under its unsecured revolving credit facility provides ample capacity to
pursue and fund its growth plan. As of December 31, 2015, the Company
had total indebtedness of $237.7 million comprised of $154.4 million on
its unsecured revolving credit facility and $83.2 million of mortgage
debt (excluding unamortized premiums and discounts). At December 31,
2015, Easterly had net debt to total enterprise value of 25.2% and a net
debt to annualized quarterly EBITDA ratio of 4.8x. Easterly’s
outstanding debt had a weighted average maturity of six years and a
weighted average interest rate of 2.4%. The Company also had
approximately $245.6 million of remaining capacity on its $400 million
revolver, before consideration for the facility’s $250 million accordion
feature.
Dividend
On February 26, 2016 the Board of Directors of Easterly approved a cash
dividend for the fourth quarter of 2015 in the amount of $0.22 per
common share. The dividend will be payable March 25, 2016 to
shareholders of record on March 10, 2016.
Subsequent Events
On February 17, 2016 the Company acquired a 71,100 square foot property
located in Albuquerque, New Mexico. The building was constructed in 2011
and is 100% leased to the GSA and occupied by Immigration and Customs
Enforcement (ICE) under a 15-year lease that expires in January 2027.
The addition of the ICE - Albuquerque property is anticipated to bring
Pro Forma Cash NOI to a run-rate annualized level of approximately $62
million.
Outlook for 2016 - Including Potential Future Acquisitions
The Company is raising its expectations for 2016 FFO per share on a
fully diluted basis from a range of $1.14 to $1.18 to a range of $1.19
to $1.23.
Outlook for the 12 Months Ending December
31, 2016
--------------------------------------------------------------
Low High
------ ----------------------
Net income (loss) per share - fully diluted basis $ 0.09 $ 0.13
Plus: real estate depreciation and amortization $ 1.10 $ 1.10
FFO per share - fully diluted basis $ 1.19 $ 1.23
This guidance assumes $75 million of acquisitions in 2016, including the
recently announced ICE - Albuquerque acquisition, spread evenly
throughout the year. This guidance does not contemplate dispositions or
additional capital markets activities. This guidance is forward-looking
and reflects management’s view of current and future market conditions.
The Company’s actual results may differ materially from this guidance.
Non-GAAP Supplemental Financial Measures
Cash Available for Distribution (CAD) is a non-GAAP financial
measure that is not intended to represent cash flow for the period and
is not indicative of cash flow provided by operating activities as
determined under GAAP. CAD is calculated in accordance with the current
NAREIT definition as FFO minus normalized recurring real estate-related
expenditures and other non-cash items and nonrecurring expenditures. CAD
is presented solely as a supplemental disclosure with respect to
liquidity because the Company believes it provides useful information
regarding the Company’s ability to fund its dividends. Because all
companies do not calculate CAD the same way, the presentation of CAD may
not be comparable to similarly titled measures of other companies.
EBITDA is calculated as the sum of net income (loss) before
interest expense, income taxes, depreciation and amortization. EBITDA is
not intended to represent cash flow for the period, is not presented as
an alternative to operating income as an indicator of operating
performance, should not be considered in isolation or as a substitute
for measures of performance prepared in accordance with GAAP and is not
indicative of operating income or cash provided by operating activities
as determined under GAAP. EBITDA is presented solely as a supplemental
disclosure with respect to liquidity because the Company believes it
provides useful information regarding the Company’s ability to service
or incur debt. Because all companies do not calculate EBITDA the same
way, the presentation of EBITDA may not be comparable to similarly
titled measures of other companies.
Funds From Operations (FFO) is generally defined by NAREIT as net
income (loss), calculated in accordance with GAAP, excluding gains or
losses from sales of property and impairment losses on depreciable real
estate, plus real estate depreciation and amortization, and after
adjustments for unconsolidated partnerships and joint ventures. FFO is a
widely recognized measure of REIT performance. Although FFO is a
non-GAAP financial measure, the Company believes that information
regarding FFO is helpful to shareholders and potential investors.
Funds From Operations, as Adjusted (FFO, as Adjusted) adjusts
Funds From Operations (FFO) to present an alternative measure of our
operating performance that we believe is useful to shareholders and
potential investors, which, when applicable, excludes the impact of
acquisition costs, straight-line rent, above-/below-market leases,
non-cash interest and non-cash compensation. In the future, we may also
exclude other items from FFO, as Adjusted that we believe may help
investors compare our results. Because all companies do not calculate
FFO, as Adjusted in the same way, the presentation of FFO, as Adjusted
may not be comparable to similarly titled measures of other companies.
Net Operating Income (NOI) is calculated as total property
revenues (rental income, tenant reimbursements and other income) less
property operating expenses and real estate taxes from the properties
owned by the Company. Cash NOI excludes from NOI straight-line rent and
amortization of above-/below-market leases. NOI presented by the Company
may not be comparable to NOI reported by other REITs that define NOI
differently. NOI should not be considered an alternative to net income
as an indication of our performance or to cash flows as a measure of the
Company’s liquidity or its ability to make distributions.
Other Definitions
Fully diluted basis assumes the exchange of all outstanding
common units representing limited partnership interests in the Company’s
operating partnership, or common units, the full vesting of all
restricted stock units, and the exchange of all earned and outstanding
LTIP units in the Company’s operating partnership for shares of common
stock on a one-for-one basis, which is not the same as the meaning of
"fully diluted" under GAAP. Fully diluted basis does not include
outstanding LTIP units in the Company’s operating partnership that are
subject to performance criteria that have not yet been met.
Conference Call Information
The Company will host a webcast and conference call at 10:00 a.m.
Eastern Standard time on March 2, 2016 to review the fourth quarter and
full year 2015 performance, discuss recent events and conduct a
question-and-answer session. The number to call is 1-877-705-6003
(domestic) and 1-201-493-6725 (international). A live webcast will be
available in the Investor Relations section of the Company’s website. A
replay of the conference call will be available through March 16, 2016
by dialing 1-877-870-5176 (domestic) and 1-858-384-5517 (international)
and entering the passcode 13628736. Please note that the full text of
the press release and supplemental information package are available
through the Company’s website at ir.easterlyreit.com.
About Easterly Government Properties, Inc.
Easterly Government Properties, Inc. (DEA ) is based in Washington,
D.C., and focuses primarily on the acquisition, development and
management of Class A commercial properties that are leased to the U.S.
Government. Easterly’s experienced management team brings specialized
insight into the strategy and needs of mission-critical U.S. Government
agencies for properties leased primarily through the U.S. General
Services Administration (GSA). For further information on the company
and its properties, please visit www.easterlyreit.com.
Forward Looking Statements
We make statements in this press release that are considered
"forward-looking statements" within the meaning of Section 27A of the
Securities Act of 1933, as amended, or the Securities Act, and Section
21E of the Securities Exchange Act of 1934, as amended, or the Exchange
Act, which are usually identified by the use of words such as
"anticipates," "believes," "estimates," "expects," "intends," "may,"
"plans," "projects," "seeks," "should," "will," and variations of such
words or similar expressions and include our guidance with respect to
Net income (loss) and FFO per share on a fully diluted basis. We
intend these forward-looking statements to be covered by the safe harbor
provisions for forward-looking statements contained in the Private
Securities Litigation Reform Act of 1995 and are including this
statement in this press release for purposes of complying with those
safe harbor provisions. These forward-looking statements reflect our
current views about our plans, intentions, expectations, strategies and
prospects, which are based on the information currently available to us
and on assumptions we have made. Although we believe that our
plans, intentions, expectations, strategies and prospects as reflected
in or suggested by those forward-looking statements are reasonable, we
can give no assurance that the plans, intentions, expectations or
strategies 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 our control including, without limitation:
risks associated with our dependence on the U.S. Government and its
agencies for substantially all of our revenues; risks associated with
ownership and development of real estate; decreased rental rates or
increased vacancy rates; loss of key personnel; general volatility of
the capital and credit markets and the market price of our common stock;
the risk that the market price of our common stock may be negatively
impacted by increased selling activity following the liquidation of
certain private investment funds that contributed assets in our initial
public offering; the risk we may lose one or more major tenants; failure
of acquisitions or development projects to yield anticipated results;
risks associated with actual or threatened terrorist attacks; intense
competition in the real estate market that may limit our ability to
attract or retain tenants or re-lease space; insufficient amounts of
insurance or exposure to events that are either uninsured or
underinsured; uncertainties and risks related to adverse weather
conditions, natural disasters and climate change; exposure to liability
relating to environmental and health and safety matters; limited ability
to dispose of assets because of the relative illiquidity of real estate
investments and the nature of our assets; exposure to litigation or
other claims; risks associated with breaches of our data security; risks
associated with our indebtedness; and other risks and uncertainties
detailed in the "Risk Factors" section of our Form 10-K for the year
ended December 31, 2015, to be filed with the Securities and Exchange
Commission on or about March 2, 2016. In addition, our
anticipated qualification as a real estate investment trust involves the
application of highly technical and complex provisions of the Internal
Revenue Code of 1986, or the Code, and depends on our ability to meet
the various requirements imposed by the Code through actual operating
results, distribution levels and diversity of stock ownership. We
assume no obligation to update publicly any forward looking statements,
whether as a result of new information, future events or otherwise.
Balance Sheet
(Unaudited, in thousands)
December 31, 2015
--------------------------------------------------
Assets
Real estate properties, net $ 772,007
Cash and cash equivalents 8,176
Restricted cash 1,736
Rents receivable 6,347
Accounts receivable 2,920
Deferred financing, net 2,767
Intangible assets, net 116,585
Prepaid expenses and other assets 1,509
-------------------- ------- --------------------
Total assets $ 912,047
==================== ======= ====================
Liabilities
Revolving credit facility 154,417
Mortgage notes payable 83,785
Intangible liabilities, net 44,605
Accounts payable and accrued liabilities 9,346
-------------------- ------- --------------------
Total liabilities 292,153
-------------------- ------- --------------------
Equity
Common stock, par value $0.01, 200,000,000 shares authorized, 241
24,168,379 shares issued and outstanding
Additional paid-in capital 391,767
Retained (deficit) (1,694 )
Cumulative dividends (13,051 )
-------------------- ------- --------------------
Total stockholders’ equity 377,263
-------------------- ------- --------------------
Non-controlling interest in operating partnership 242,631
-------------------- ------- --------------------
Total equity 619,894
-------------------- ------- --------------------
Total liabilities and equity $ 912,047
==================== ======= ====================
Income Statement
(Unaudited, in thousands, except share and per share data)
Easterly
Less: Less: One Government Pro forma
Year ended Predecessor time charges Properties Inc. year ended
December 31, 2015 1/1/15 - 2/10/15 related to offering 2/11/15 - 12/31/15 December 31, 2015
-------------------------------------------------- ---------------------------------------------- ---------------------------------------------- -------------------------------------------------- --------------------------------------------------
Revenues
Rental income $ 64,942 $ - $ - $ 64,942 $ 72,728
Tenant reimbursements 6,233 - - 6,233 6,883
Other income 203 - - 203 212
-------------------- ---------- -------------------- -------------------- ------ -------------------- -------------------- ------ -------------------- -------------------- ---------- -------------------- -------------------- ---------- --------------------
Total revenues 71,378 - - 71,378 79,823
-------------------- ---------- -------------------- -------------------- ------ -------------------- -------------------- ------ -------------------- -------------------- ---------- -------------------- -------------------- ---------- --------------------
Operating Expenses
Property operating 13,340 - 45 13,295 14,743
Real estate taxes 6,983 - - 6,983 7,786
Depreciation and amortization 33,561 - - 33,561 37,662
Acquisition costs 2,887 - 1,262 1,625 1,670
Formation expenses 1,666 - 1,666 - -
Corporate general and administrative 8,817 384 291 8,142 8,941
Fund general and administrative 75 75 - - -
-------------------- ---------- -------------------- -------------------- ------ -------------------- -------------------- ------ -------------------- -------------------- ---------- -------------------- -------------------- ---------- --------------------
Total expenses 67,329 459 3,264 63,606 70,802
-------------------- ---------- -------------------- -------------------- ------ -------------------- -------------------- ------ -------------------- -------------------- ---------- -------------------- -------------------- ---------- --------------------
Operating income 4,049 (459 ) (3,264 ) 7,772 9,021
-------------------- ---------- -------------------- -------------------- ------ -------------------- -------------------- ------ -------------------- -------------------- ---------- -------------------- -------------------- ---------- --------------------
Other (expenses)
Interest expense, net (4,972 ) - - (4,972 ) (5,559 )
Net unrealized (loss) on investments (5,122 ) (5,122 ) - -
-------------------- ---------- -------------------- -------------------- ------ -------------------- -------------------- ------ -------------------- -------------------- ---------- -------------------- -----------------------------------------------------
Net income (loss) (6,045 ) (5,581 ) (3,264 ) 2,800 3,462
Non-controlling interest in operating partnership 4,351 4,169 1,277 (1,095 ) (1,355 )
Net income (loss) available to Easterly Government Properties, $ (1,694 ) $ (1,412 ) $ (1,987 ) $ 1,705 $ 2,107
Inc.
==================== ========== ==================== ==================== ====== ==================== ==================== ====== ==================== ==================== ========== ==================== ==================== ========== ====================
Net income (loss) available to Easterly Government
Properties, Inc. per share:
Basic $ (0.08 )
==================== ========== ====================
Diluted $ (0.08 )
==================== ========== ====================
Weighted-average common shares outstanding:
Basic 21,430,016
Diluted 21,430,016
Net income, per share - fully diluted basis $ 0.07 $ 0.09
==================== ========== ==================== ==================== ========== ====================
Weighted average common shares outstanding - fully diluted basis 39,702,096 39,701,784
EBITDA, FFO and CAD
(Unaudited, in thousands, except share and per share data)
Three months ended Pro forma year ended
December 31, 2015 December 31, 2015
----------------------------------------------------- -----------------------------------------------------
Net income $ 173 $ 3,462
Depreciation and amortization 10,166 37,662
Interest expense 1,610 5,559
-------------------- ---------- -------------------- -------------------- ---------- --------------------
EBITDA $ 11,949 $ 46,683
==================== ========== ==================== ==================== ========== ====================
Net income $ 173 $ 3,462
Depreciation and amortization 10,166 37,662
-------------------- ---------- -------------------- -------------------- ---------- --------------------
Funds From Operations (FFO) $ 10,339 $ 41,124
==================== ========== ==================== ==================== ========== ====================
Adjustments to FFO:
Acquisition costs 1,017 1,670
Straight-line rent (52 ) (249 )
Above-/below-market leases (1,507 ) (5,431 )
Non-cash interest expense 194 762
Non-cash compensation 692 1,913
-------------------- ---------- -------------------- -------------------- ---------- --------------------
Funds From Operations, as Adjusted $ 10,683 $ 39,789
==================== ========== ==================== ==================== ========== ====================
FFO, per share - fully diluted basis $ 0.26 $ 1.04
==================== ========== ==================== ==================== ========== ====================
FFO, as Adjusted, per share - fully diluted basis $ 0.27 $ 1.00
==================== ========== ==================== ==================== ========== ====================
Funds From Operations, as Adjusted $ 10,683 $ 39,789
Acquisition costs (1,017 ) (1,670 )
Principal amortization (650 ) (2,442 )
Maintenance capital expenditures (98 ) (373 )
Contractual tenant improvements (85 ) (135 )
-------------------- ---------- -------------------- -------------------- ---------- --------------------
Cash Available for Distribution (CAD) $ 8,833 $ 35,169
==================== ========== ==================== ==================== ========== ====================
CAD, per share - fully diluted basis $ 0.22 $ 0.89
==================== ========== ==================== ==================== ========== ====================
Weighted average common shares outstanding - fully diluted basis 39,709,101 39,701,784
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SOURCE: Easterly Government Properties, Inc.
Easterly Government Properties, Inc.
Alison M. Bernard, 202-971-9867
Chief Financial Officer
ir@easterlyreit.com
