DEA
#Good morning.
Before the call begins, please note the use of forward-looking statements by the Company on this conference call.
Statements made on this call may include statements which are not historical facts and are considered forward-looking.
The Company intends these forward-looking to be covered by the Safe Harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995 and is making this statement for the purposes of complying with those Safe Harbor provisions.
Although the Company believes that its plans, intentions, expectations, strategies, and prospects as reflected in or suggested by those forward-looking statements are reasonable, it can give no assurance that these 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 the Company's control, including without limitation those contained in item 1A, Risk Factors, of its annual report on Form 10-K for the year ended December 31, 2015, filed with the SEC on March 2, 2016, and its other SEC filings.
The Company assumes no obligations to update publicly any forward-looking statements, whether as a result of new information, future events, or otherwise.
Additionally on this conference call, the Company may refer to certain non-GAAP financial measures, such as 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 <UNK> <UNK>, Chairman of Easterly Government Properties.
Thanks, <UNK>, and good morning.
I would like to spend a few minutes discussing our first quarter of 2016.
We were very pleased to acquire the 71,100-square-foot Albuquerque, New Mexico, Immigration and Customs Enforcement facility, which, combined with our other properties, represents a portfolio of 37 buildings from which 96% of its rental income is derived from the full faith and credit of the United States federal government.
ICE-Albuquerque represents well our focused investment discipline.
As a new facility, built in 2011, it serves a critical mission for an important agency of the federal government.
The building's hierarchy of mission makes it an integral part of ICE's ability to provide enforcement in the busy Southwest-quarter region.
The development team remains active in responding to all opportunities that would fit within the strict criteria of our portfolio metrics.
While there has been very little in the way of projects that we would consider, we are actively engaged in several opportunities.
Additionally, our asset management and development teams are currently engaged in a number of value-added projects to our existing portfolio.
22 of our 37 properties have seen mission-enhancing projects by the government, at government expense, which serves in keeping our tenant able-to-perform mission, while keeping our already young buildings updated.
Our acquisition pipeline remains robust, and we are looking at a number of single-facility and multi-facility portfolios.
These buildings are very similar to our existing portfolio of properties.
They are leased to a single tenant of the US federal government, are the result of design-build award, and are usually over 40,000 square feet in size.
It's important to note that we underwrite the agency, and the hierarchy of mission, of the perspective building before performing the deep dive on the actual bricks and mortar.
We see a number of opportunities, over [200 million], that are actionable in the near to midterm and will continue to maintain our rigorous underwriting standards so as to do as well, or even better, than the current 93% to 95% renewal for this class of federally leased buildings.
I will now turn it over to <UNK> for a discussion of the quarterly results and earnings guidance.
Thank you, <UNK>.
Today, I will touch upon our current portfolio, discuss our first-quarter results, provide an update on our balance sheet, and review our 2016 guidance.
Additional details regarding our first-quarter results can be found in the Company's earnings release and supplemental information package.
As of March 31, we owned 37 properties comprising nearly 2.7 million square feet of commercial real estate.
The weighted-average lease term for the portfolio is 6.9 years, and our portfolio occupancy remains at 100%.
In addition, 96% of our annualized-lease income is backed by the full faith and credit of the United States government.
For the first quarter, FFO per share on a fully diluted basis was $0.30.
FFO as adjusted per share on a fully diluted basis was $0.29, and our cash available for distribution was $0.26 per share on a fully diluted basis.
GAAP measures and reconciliations to GAAP measures have been provided in our supplemental information package.
For the 12 months ending December 31, 2016, the Company is reiterating its guidance for FFO per share on a fully diluted basis of $1.19 to $1.23 per share.
This guidance assumes acquisitions at $75 million in 2016, including the ICE-Albuquerque acquisition we completed in the first quarter, spread evenly throughout the year.
This guidance does not contemplate dispositions or additional capital markets activity.
Let me walk you through this guidance in more detail.
As of December 31, 2015, given acquisitions that were completed through 2015, run-rate FFO on a fully diluted basis was approximately $1.17 per share.
This increase to $1.17 already included approximately $9 million of cash general and administrative expenses for the year.
This amount provides the resources which we believe will support robust growth for the Company this year.
A portion of this increase is compensation for our team, based on Easterly meeting or exceeding our communicated growth targets.
As you know, a disproportionate amount of Management's total compensation is incentive based.
To be clear, if we do not meet our growth targets, our cash G&A expense will be lower.
As I said, the run-rate FFO for the business at year end was approximately $1.17 per share.
We would expect the impact from $75 million of acquisitions, spread equally across the year in 2016, to add $0.08 per share to our run-rate FFO on a fully diluted basis, bringing run-rate FFO to $1.25 by the end of 2016 and FFO for the year to a range with a midpoint of $1.21.
Now turning to the balance sheet, at quarter end we had $184 million outstanding on our revolving line of credit and total debt of $267 million.
Availability on our line of credit stood at $216 million.
In terms of leverage, net debt-to-total enterprise value was 26.3%.
Finally, as previously announced this week our Board of Directors declared a dividend related to our first-quarter of operations of $0.23 per share.
This dividend will be paid on June 23 to shareholders of record on June 8.
When we came public, our first full-quarter dividend was $0.21 per share.
We increased our dividend to $0.22 per share one quarter later, and now, two quarters after that, we have increased it further, to $0.23 per share.
This is in line with our outlined expectation of consistent dividend growth.
I'll now turn the call back to the operator for questions.
Good morning, <UNK>.
First of all, the answer is of course, and we have been looking at multi-building portfolios since we went public.
Our overall pipeline remains at about $700 million, but $200 million, as I've said, is sort of what we'd like to have from an active standpoint.
Yes.
The first-quarter, if were to annualize that number, you would see it coming a little higher than our communicated $9 million rate.
That's due to just the corporate activity associated with the business in the first quarter.
But you can expect that to peter out and grow consistently over ---+ from a run-rate basis over the remainder of the year.
Good morning, <UNK>.
I think the message is that the Company continues to do what we said we're going to do.
It continues to grow.
We see a very actionable pipeline going forward, and I can just reiterate that we have terrific team here that are able to mine wonderful opportunities from a big list of properties.
And I think you can expect us to do just we've done in the past.
And we're looking forward, as we said, to acquiring $75 million to $125 million in properties this year.
No.
And as I said before, we really have not seen any change in the competition, as I mentioned I think last quarter.
And we continue to do what we do.
We think the middle sector of this market is a good place to play.
And I would say there are no changes.
Okay.
And I believe you touch on this earlier, but has there been any improvements in the GSA build to suit activity.
And what do you think will be the catalyst that will drive that activity higher for the government.
I think that there has not been any change.
We came off of 2007 and 2008 when we saw a lot of activity.
Obviously the federal government is not doing as much development today, and changes would be as these buildings become older, not our buildings because we are some of the newest in the federal government inventory.
But as some of those of buildings need to be replaced, the government will be forced to start building again.
I think the bottom line is the spending is due to the Congress of the United States, and if you can tell me what they're going to do I'll be very gratified.
But I don't think there will be much change at this point.
