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Easterly Government Properties, Inc. (DEA)·Q3 2025 Earnings Summary

Executive Summary

  • Revenue grew double digits year-over-year; Core FFO per share rose to $0.76, while GAAP diluted EPS was $0.02. Revenue modestly beat consensus, but EPS missed Street expectations, reflecting higher depreciation and interest expense in the quarter . Revenue consensus: $84.9M* vs. actual $86.2M; EPS consensus: $0.10* vs. actual $0.02. Values retrieved from S&P Global.*
  • Guidance: FY2025 Core FFO per share range narrowed to $2.98–$3.02 (lowered the high end by $0.01); FY2026 Core FFO per share initiated at $3.05–$3.12, below Street expectations per management’s commentary .
  • Portfolio/capital: Occupancy ~97% and WALT ~9.5 years maintained; KBRA affirmed investment-grade rating (BBB, Stable). Leverage targeted to trend to ~6x medium-term; liquidity supported by FDA Atlanta lump-sum reimbursement receipts and term loan upsizing .
  • Strategy/catalysts: Near-term catalysts include FDA Atlanta lease commencement in Dec-2025, continued state/local and government-adjacent diversification (e.g., York Space Systems acquisition), and potential multiple relief as leverage declines toward management’s medium-term target .

What Went Well and What Went Wrong

  • What Went Well

    • Core FFO per share increased to $0.76 and CAD improved to $29.3M, underpinned by acquisitions and renewal execution; CEO emphasized “consistent, compounding growth” .
    • Development and funding milestones: FDA Atlanta nearing completion with additional lump-sum reimbursement ($102M received in Q3) and on track for December lease commencement; term loan upsized with added accordion capacity .
    • Portfolio diversification advancing: acquisition of York Space Systems HQ (low-11% cap rate per Q&A) aligns with goal of 15% “adjacent” exposure; state/local FL crime lab ground-breaking supports WALT extension .

  • What Went Wrong

    • FY2026 Core FFO guide came in below consensus per management remarks, implying modest growth headwinds (higher G&A run-rate, timing effects from 2025 acquisitions, reliance on FDA Atlanta ramp) .
    • EPS missed Street expectations (GAAP EPS $0.02 vs $0.10*), reflecting higher depreciation and interest expense; net income margin compressed to ~1.4% versus prior year/quarter . Values retrieved from S&P Global.*
    • Schedule push-outs: Flagstaff Courthouse timing extended as agencies finalize design and TI, moving delivery into 2027; management framed this as expected given multi-agency coordination .

Financial Results

MetricQ3 2024Q1 2025Q2 2025Q3 2025
Revenue ($USD Millions)$74.8 $78.7 $84.2 $86.2
Diluted EPS ($)$0.11 $0.07 $0.09 $0.02
Core FFO per Share ($)$0.74 $0.73 $0.74 $0.76
EBITDA ($USD Millions)$46.7 $51.0 $54.3 $54.2
Net Income Margin %6.5% 4.0% 4.8% 1.4%
EBITDA Margin %62.4% 64.8% 64.5% 62.9%
  • YoY (Q3 2025 vs Q3 2024): Revenue +15.2% ; Core FFO/share +2.7% ; EPS declined on higher D&A and interest .
  • QoQ (Q3 2025 vs Q2 2025): Revenue +2.3% ; Core FFO/share +2.7% ; EPS down .

Segment/Exposure Breakdown (Annualized Lease Income, as of Q3 2025)

  • U.S. Government: 88.0%
  • State & Local Government: 7.2%
  • Private Tenants: 4.8%

Key Performance Indicators (Q3 2025)

  • Occupancy ~97%
  • Weighted Average Lease Term (WALT): 9.5 years
  • Net Debt to Enterprise Value: 59.9%
  • Adjusted Net Debt / annualized quarterly pro forma EBITDA: 7.2x
  • Cash Interest Coverage Ratio: 3.0x
  • Cash Available for Distribution (CAD): $29.3M
  • Dividend per Share: $0.45 (payable Nov 20, 2025)

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Core FFO per Share (fully diluted)FY 2025$2.98–$3.03 $2.98–$3.02 Narrowed; high end -$0.01
Assumed Wholly Owned AcquisitionsFY 2025~$140M ~$167M Raised
Assumed Development InvestmentFY 2025$25–$75M $25–$75M Maintained
Core FFO per Share (fully diluted)FY 2026N/A$3.05–$3.12 New
Assumed Wholly Owned AcquisitionsFY 2026N/A~$50M New
Assumed Development InvestmentFY 2026N/A$50–$100M New
Dividend per ShareQ3 2025$0.45 $0.45 Maintained

Earnings Call Themes & Trends

TopicPrevious Mentions (Q2 & Q1 2025)Current Period (Q3 2025)Trend
Leverage target, cost of capitalLeverage guided 6.5–7.5x; focus on selective growth; dividend reset to align capital strategy Medium-term cash leverage goal of ~6x; expect delevering via development cash flows, JV partners if needed Improving leverage trajectory
Government shutdown/DOGEDOGE seen as manageable; no lease terminations; government modernizing leases (escalators) Shutdown viewed as “Kabuki Theater”; leases backed by U.S. government funding; limited operational impact Stable; low risk to rent payments
Development milestonesFDA Atlanta on track; Medford courthouse awarded; Flagstaff progressing FDA Atlanta lease commencement expected Dec-2025; Flagstaff pushed to 2027; Fort Myers lab underway Mixed (major delivery near-term; some timing push-out)
Portfolio diversificationDC Capitol Plaza acquisition; DHS Burlington; goal 15% state/local & 15% adjacent York Space Systems acquired; management reiterates 70/15/15 target mix Advancing diversification
Credit/ratingNo change discussedKBRA affirmation of BBB, Stable outlook Positive credit validation

Management Commentary

  • “We’ve delivered another quarter of strong results… [and] ability to deliver consistent, compounding growth over time.” – Darrell Crate, President & CEO .
  • “We are targeting a medium-term cash leverage goal of six times… a decline to historical cash leverage results of seven to eight times.” – Darrell Crate .
  • “FDA Atlanta… we expect the government to accept the premises and the lease to commence in December of this year… receipt of $102 million meaningfully reduced cash leverage… We expect that cash leverage will further improve upon the project’s completion.” – Allison Marino, CFO .
  • “We can continue to deliver growth… $50 million of acquisitions [for 2026] is meant to be a low bar.” – Darrell Crate .
  • “KBRA reaffirmed Easterly’s investment-grade rating with a stable outlook.” – Company press release .

Q&A Highlights

  • Flagstaff Courthouse timing: Agencies finalizing design and TI; delivery pushed into 2027; viewed as achievable .
  • Capital allocation and cost of capital: Management targets developments ~100–150 bps above cost of capital; considers JV partners and sovereign wealth fund alignment to optimize funding .
  • Acquisitions guidance: 2026 $50M set intentionally low to ensure growth without stretching capital; pipeline ~$1.5B .
  • Dispositions/leverage: Dispositions not central to delevering plan; expect leverage lower by end-2026; aim for “6 handle” on cash leverage .
  • EPS/FFO guidance context: FY2026 guide below consensus; drivers include FDA Atlanta ramp, same-store modest growth, higher run-rate non-cash comp .

Estimates Context

  • Q3 2025 vs. Street:
    • Revenue: Consensus $84.9M*; actual company-reported $86.2M, a beat of ~$1.2M . Values retrieved from S&P Global.*
    • EPS (GAAP): Consensus $0.10*; actual $0.02, a miss of $0.08 . Values retrieved from S&P Global.*
  • Implications: Street models likely need to reflect higher D&A, interest expense and timing of development commencements; modest upward revision to FY2025 revenue is possible given acquisitions and operational performance, while EPS/FFO trajectories hinge on FDA Atlanta commencement and leverage trajectory .
MetricQ3 2025 ConsensusQ3 2025 Actual# of Estimates
Revenue ($USD)$84,918,400*$86,151,000 5*
Primary EPS ($)$0.10*$0.02 2*

Values retrieved from S&P Global.*

Key Takeaways for Investors

  • Revenue and Core FFO per share trends are favorable; durable occupancy and WALT support stability despite near-term EPS pressure from D&A and interest expense .
  • FY2025 guidance fine-tuning (high end trimmed) and below-consensus FY2026 guide set a conservative base; upside depends on FDA Atlanta commencement and selective acquisitions .
  • Deleveraging toward ~6x medium-term is a core strategic priority; FDA lump-sum receipts and disciplined development returns are catalysts for lower cost of capital and multiple relief .
  • Diversification into state/local and government-adjacent assets (e.g., York Space Systems) enhances growth via escalators and extends WALT, supporting compounding FFO .
  • Credit strength validated by KBRA’s BBB affirmation (Stable); improved access to debt markets underpins pipeline execution .
  • Near-term trading: Watch FDA Atlanta lease commencement and additional lump-sum reimbursements (deleveraging signal) and any incremental rating actions; monitor macro (rates) for dispositions optionality .
  • Medium-term thesis: Mission-critical tenancy and long firm-term leases, combined with targeted leverage reduction and diversification, support steady 2–3% Core FFO growth trajectory with potential upside on capital cost normalization .

Additional Press Releases in Q3 2025

  • Dividend announcement: $0.45 per common share (payable Nov 20, 2025) .
  • KBRA rating affirmation (BBB, Stable) .
  • Q3 earnings release timing announcement .
  • York Space Systems acquisition (138,125 SF, triple-net; extension option to 2041) .