Easterly Government Properties, Inc.

Greetings, and welcome to Eastern League Government Properties' second quarter 2021 earnings conference call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your cell phone keypad. As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Lindsay Winterhalter, Vice President, Investor Relations.

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 statements to be covered by the Safe Harbor provisions for forward-looking statements contained in the Private Securities Litigation Act reform of 1995 and is making this statement for the purpose 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, 2020, filed with the SEC on February 24, 2021, and in its other SEC filings, and risks and uncertainties related to the adverse impact of COVID-19 on the U.S. regional and global economies and the potential adverse impact on the financial condition and results of operation of the company. 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, funds from operations as adjusted, 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.easterlyrate.com. I would now like to turn the conference call over to Darrell Crate, Chairman of Easterly Government Properties.

Thank you, Lindsay. Good morning, everyone, and thank you for joining us for this second quarter conference call. Today, in addition to Lindsay, I'm also joined by Bill Trimble, the company's CEO, and Megan Bevere, the company's CFO and COO. It was a very strong quarter for easterly government properties. We see the country opening up, and as expected, we have been identifying some pent-up opportunity for our business. We have emerged from COVID stronger than we entered, as measured by FFO growth, portfolio scale, age, diversification, and lease duration, as well as an actionable pipeline of acquisition opportunities that materially exceeds pre-pandemic levels. This all leads us to believe that it'll be a very strong end to the year. Today, we have 84 properties across 39 important tenant agencies. We have a diverse portfolio of mission-critical facilities leased to the United States federal government. The quality of our portfolio in this space is excellent. The average age of our buildings is 13.4 years, and the average duration of our leases is 8.6 years. This translates into over $2.2 billion of cash embedded in our leases that is backed by the full faith and credit of the United States government. Given the young age of our buildings and the enduring mission of our agencies, conservatively assuming one modest 15-year role of each lease, up 10% to 15%, this drives that total to over $6 billion. Again, $6 billion backed by the full faith and credit of the United States government. As you saw this last quarter, we increased our dividend. We anticipate that this is the beginning of a new chapter for easterly government properties. Our business has matured. We are entering a period where distributable cash flow can outpace FFO growth. Today, our stock trades with a dividend yield of roughly 5%. This represents a spread of over 370 basis points above the Treasury that's matched to our weighted average lease term. With anticipated growth in our cash flow, we believe we will either see this yield grow meaningfully or our stock price will increase. We're excited for the second half of the year, given how we're positioned in the markets. the opportunities we see, and the cash-generating capacity of this portfolio. With that, I'll turn it over to Bill to give you his view of our second quarter results and the prospects for the future.