Easterly Government Properties, Inc.

Greetings. Welcome to the Easterly Government Properties Fourth Quarter 2025 Earnings Conference Call. At this time, all participants are on a list-only mode. After the speaker's presentation, there will be a question-and-answer session between the company's research analyst and the Easterly's management team. To ask a question during the session, analysts will need to press star 11 on their telephone. They will then hear an automated message advising their hand 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, Cole Barterwill, Director of Investor Relations. Please go ahead.

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 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 material 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 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 Darrell Crate, President and CEO of Easterly Government Properties.

Thank you, Cole, and good morning, everyone. In 2025, Easterly continued to execute on our stated strategy. This year represents another year of delivering 2% to 3% core FFO per share growth, reinforcing that our strategy is not only durable, but repeatable. Over the past two years, we've remained focused on steady earnings growth, driven by our government-related cash flows, disciplined capital allocation, and additional diversification while facing difficult external conditions. Importantly, this momentum extends beyond 2025. The midpoint of our current 2026 guidance reflects our third year in a row of at least 2% to 3% core FFO per share growth, demonstrating both the embedded growth in our portfolio and the visibility created by our long-term leases and high credit quality. As we enter 2026, our strategic priorities remain unchanged and continue to guide our approach to disciplined growth and portfolio enhancements. One, core FFO growth per share of 2% to 3% annually. Number two, increasing same store performance through thoughtful diversification into state, local, and high credit government adjacent tenancy. And three, executing value creating development opportunities into high credit stabilized assets. This strategy is designed to balance growth and durability and build a portfolio that performs consistently regardless of the economic or policy backdrop. Easterly's portfolio is comprised of mission-critical government facilities, including courthouses, public health laboratories, law enforcement offices, and secure administrative buildings. These assets are purpose-built, long-term leased, and integral to the ongoing operations of federal, state, and municipal agencies. The durability of our tenant's mission, independent of political or economic cycles, supports stable, predictable cash flows and underpins our ability to generate consistent long-term earnings growth. As demand for secure, modern government facilities continues to increase across all levels of government, We believe our portfolio and our platform are well positioned to meet the demand. We recently visited our veterans affairs and federal law enforcement facilities in Florida. And it was powerful to see firsthand how busy these buildings are as they truly support mission critical work. From homeland security investigation teams to the doctors and staff caring for our nation's veterans, the level of activity underscores the essential role our properties play. It reinforces our commitment to providing high-quality environments that support these dedicated public servants and the important missions they carry out. Turning to specifics of the quarter, we continue to demonstrate the durability of our platform, anchored by high portfolio occupancy and strong long-standing relationships across a broad range of government agencies. Demand for our mission-critical facilities remains resilient, supporting stable cash flows and predictable operating performance. We remain highly disciplined in our capital allocation, maintaining a strong balance sheet and a significant financial flexibility while prioritizing investments that enhance long-term value. Our portfolio continues to perform at a very high level with occupancy near historical highs at 97% and weighted average lease terms of roughly a decade. This performance reflects the durability of our tenant base and reinforces the strength of our mission critical strategy. On the acquisition front, I'm pleased to share that subsequent to quarter end, we completed the acquisition of a three asset portfolio by the Commonwealth of Virginia. The long-term nature of the leases and built-in rent growth add another layer of durable cash flow to the portfolio. And Allison will walk through the details in her remarks. We like partnering with state agencies because the credit quality is comparable to federal tenants, given the essential nature of the services they provide and the stability of their funding. State leases often include contractual rent escalations, which provides built-in growth and enhances long-term cash flow visibility. Our development pipeline remains active, with key projects progressing well. We continue to see accretive opportunities that meet our standards for credit quality, mission alignment, and durable returns. Looking ahead to 2026, recent federal developments, specifically Doge, are in the rearview mirror and did not change how our portfolio performs or how we operate the business. At the midpoint, we are guiding to approximately 3% core FFO per share growth in 2026. Ongoing federal real estate discussions continue to highlight a longstanding reality. Many government agencies are best served by focusing their time, their resources, and their expertise on mission execution rather than real estate ownership. Managing and modernizing specialized facilities can be complex and requires consistent attention. We excel at both of these capabilities. Easterly was built to support agencies in addressing this need. As a private sector partner, we deploy capital to provide modern mission-critical infrastructure that supports agency operations, allowing our tenants to remain focused on their core missions. Importantly, this dynamic continues to drive a strong and expanding growth pipeline for Easterly, as agencies increasingly look to us to be their long-term partner to recapitalize and modernize essential facilities at scale. Against this backdrop, our acquisitions team has built a high-quality, robust pipeline that supports consistent capital deployment at returns in excess of 100 basis points over our weighted average cost of capital. This disciplined approach to underwriting and execution underpins durable long-term growth. We continue to focus on improving our cost of capital with leverage an important part of that effort. Cash leverage trending lower again this quarter, as we move toward a more conventional profile with a medium-term objective of approximately six times. We believe this will structurally support lower funding costs while preserving our ability to pursue accretive growth in excess of our target range. To wrap up, we're delivering on the strategy we laid out, delivering long-term core FFO growth of 2 to 3 percent, advancing a robust acquisition and development pipeline while deepening our relationships across federal, state, and local agencies that we serve, and strengthening the balance sheet as we move forward toward our medium-term leverage objective without sacrificing growth. All while staying true to our mission of providing modern, mission-critical facilities for the agencies we serve. I want to thank the entire Easterly team for their continued focus, discipline, and commitment to execution, which underpins everything we deliver to our tenants and our shareholders. We also appreciate the trust and partnership of our tenants and investors as we move forward with confidence, with clear visibility into our goals. At our core, we're built to support the mission, ensuring the essential work of our tenants can continue seamlessly today and for years to come. Now, I would also like to take a moment to applaud the appointment of Ed Forst as administrator of the GSA. Ed was recently confirmed by the Senate, and Ed brings decades of private sector experience and first-class business acumen to the position, having held meaningful senior leadership roles at both Cushman, Wakefield, and Goldman Sachs. We look forward to working with the new administrator, who we believe is the right person to take on the important responsibilities of GSA. We're looking forward to collaborating with Mr. Force and his team as we seek to maximize value for both our shareholders and the American people. And with that, I'll turn the call over to Allison Marino, our Chief Financial Officer.