Easterly Government Properties, Inc.

Welcome to the East Elite Government Properties second quarter 2024 earnings conference call. At this time, all participants are on a listen-only mode. After the speaker's presentation, there will be a question and answer session between the company's research analysts and East Elite's management team. To ask the question during the session, analysts would need to press star 11 on their telephone. They would then hear an automated message advising their hands is raised. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Lindsey Winterholt, Head of Investor Relations. You may begin.

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 10-K 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 its separate supplemental information package on the investor relations page of the company's website at ir.easterlyrete.com. I would now like to turn the conference call over to Darrell Crate, CEO of Easterly Government Properties.

Thank you, Lindsay. Good morning, everyone, and thanks for joining us for the second quarter conference call. We had a busy quarter cultivating and closing transactions, driving results at our development sites, and serving as a strategic partner to our U.S. government agencies. We've also spent considerable time bringing our investors into our buildings to help them appreciate the difference between our purpose-built, mission-critical portfolio versus the more traditional office sector. As listeners on this call may have observed, we updated our website to help viewers better understand the mission-driven specifications of the buildings in our portfolio. And just recently, certain events underscore the importance of fulfilling mission through real estate. Here are some examples. First, the investigation following the assassination attempt at President Trump's rally in Pennsylvania has been spearheaded by FBI Pittsburgh, whose field office is one of our facilities. FBI field offices are very specialized buildings and must be constructed with anti-ballistic glass, SCIF rooms equipped to national intelligence security standards, including radio frequency shielding and duct work to prevent infiltration. We have to account for things like blast protection, security screening, and other structural requirements that are essential to agencies like the FBI being able to operate effectively in times like these. The FBI employs approximately 35,000 people, including special agents, intelligence analysts, linguists, scientists, and information technology specialists. Whenever there is an event and our U.S. government agencies are in proximity, they absolutely must be ready to go 24 hours a day, seven days a week, 365 days a year. Next, in last week's news about the apprehension of the arrest of alleged cartel leaders, including Joaquin Guzman Lopez, also known as El Chapo Jr., was carried out by agents in our FBI DEA El Paso facility. The FBI and DEA in our joint El Paso facility worked together with HSI to apprehend cartel leaders that boarded a plane in Mexico and then crossed the border into the U.S., allowing law enforcement to arrest them. The three agencies, all easterly tenants, worked in tandem over the course of the next several months in order to execute this high-stakes plan. This is a clear example of what you have heard me previously say about how our specialized facilities enable these agencies to thwart and stop cartel activities and reduce drug trafficking. Our DEA facilities must be equipped for highly specialized and complicated testing of synthetic drugs, some of which have never been seen or examined before. Through drug signature programs that analyze samples to determine processing methods, geographic origins, and manufacturers for heroin, cocaine, and methamphetamine. We have machines in our facilities that can take an organic drug and identify its origin down to a specific parcel of land where the organic substance was sourced. This isn't conceptual. It's not a sci-fi movie. Just last Thursday, in connection with the arrest of the alleged cartel leaders, Attorney General Merrick Garland said fentanyl is the deadliest drug threat our country has ever faced, then the Justice Department will not rest until every single cartel leader, member, and associate responsible for poisoning our communities is held accountable. This is what the FBI and DEA agents depend on us for each day in order for them to do their mission-critical work. So much of this work can't be done outside of our specialized facilities. They are the definition of mission-critical assets. Finally, I'll give you one more example. Let's talk about the Veterans Administration, which is our top tenant. Over half of all veterans used at least one VA benefit or service in 2021. And of those 9.8 million users, approximately 51% use multiple benefits, up from 36% in 2010. Our VA properties include community-based outpatient clinics that are designed to be a one-stop shop for veteran care. These regionally focused centers can have a specialized mix of departments, from radiology, dental and optometry, to mental health, physical therapy, prosthetics, and phlebotomy. And each department has its own set of physical requirements. For example, radiology has its own baseline for humidity and temperature control, while pharmaceutical requires specialized security systems. In VA Phoenix, we have a customized kitchen And these models are built directly into the walls of certain rooms so that care providers can assist veterans with various disabilities with self-sufficiency and the reacclimating to their homes. This is our definable edge. If you take one thing away from this call today, I hope it's that you understand how essential the infrastructure we provide is to these U.S. government agencies. We are meaningfully differentiated from an office portfolio. And this provides our shareholders with greater stability and lower volatility of cash flow. Real estate markets have suffered, but our portfolio continues to perform well. And during this time, we've taken the opportunity to expand on our strengths and broaden our strategy to provide attractive returns to our shareholders. Rather than remaining idle, we're focused on cultivating opportunity. For institutional investors revisiting the space with an eye towards easing interest rates, it's important to remember these three key truths. We're focused on growth, we believe we have the resources to execute, and we anticipate our core strategy will have additional tailwinds in a declining rate environment. Given the strategy we laid out and the growth opportunities we have in front of us, we see a path to achieving a payout ratio in the next 24 months that is consistent with our historical levels. We have a development pipeline that's significant, and we are working not only with U.S. government agencies, but also with high credit government adjacent companies, like those in the defense industry, which have government contracts and need customized facilities similar to the ones that we have owned and developed to support their own missions alongside their U.S. government partners. We're focused on being a chosen partner to the organizations we work with by building and developing properties that help them meet and facilitate their critical missions. Thank you again for taking the time to join us this morning, and now I'll hand things over to Megan Bevere, our President and Chief Operating Officer.