Easterly Government Properties, Inc. (DEA) Bundle
Understanding Easterly Government Properties, Inc. (DEA) Revenue Streams
Understanding Easterly Government Properties, Inc. Revenue Streams
The primary revenue sources for the company are derived from rental income, tenant reimbursements, asset management income, and other income. Below is a breakdown of these revenue streams for the nine months ended September 30, 2024 and 2023.
| Revenue Source | 2024 (in thousands) | 2023 (in thousands) | Change (in thousands) |
|---|---|---|---|
| Rental Income | $215,465 | $204,111 | $11,354 |
| Tenant Reimbursements | $4,494 | $7,279 | $(2,785) |
| Asset Management Income | $1,680 | $1,560 | $120 |
| Other Income | $2,163 | $1,657 | $506 |
| Total Revenues | $223,802 | $214,607 | $9,195 |
Year-over-Year Revenue Growth Rate
The total revenues increased by 4.3% from $214.6 million in 2023 to $223.8 million in 2024.
Contribution of Different Business Segments to Overall Revenue
For the nine months ended September 30, 2024, rental income constituted the largest portion of total revenue, accounting for approximately 96.3% of total revenues. The contributions of other segments were as follows:
- Tenant Reimbursements: 2.0%
- Asset Management Income: 0.75%
- Other Income: 0.97%
Analysis of Significant Changes in Revenue Streams
The increase in rental income by $11.4 million is primarily attributed to the acquisition of seven operating properties since September 30, 2023. However, tenant reimbursements decreased by $2.8 million, mainly due to a reduction in tenant project reimbursements. The asset management income showed a slight increase of $0.1 million due to fees earned from management of joint ventures.
| Revenue Source | Change (2024 vs 2023) |
|---|---|
| Rental Income | $11,354 |
| Tenant Reimbursements | $(2,785) |
| Asset Management Income | $120 |
| Other Income | $506 |
In summary, the primary driver of revenue growth remains the rental income from newly acquired properties, while tenant reimbursements saw a decline due to decreased project reimbursements.
A Deep Dive into Easterly Government Properties, Inc. (DEA) Profitability
A Deep Dive into Easterly Government Properties, Inc.'s Profitability
Gross Profit Margin: For the nine months ended September 30, 2024, gross profit was calculated as total revenues of $223.8 million minus total expenses of $168.1 million, resulting in a gross profit of $55.7 million. The gross profit margin stands at approximately 24.9%.
Operating Profit Margin: Operating profit is derived from net income of $14.8 million (for the nine months) divided by total revenues, yielding an operating profit margin of approximately 6.6%.
Net Profit Margin: The net profit margin for the same period is calculated by taking net income of $14.8 million and dividing it by total revenues of $223.8 million, resulting in a net profit margin of 6.6%.
Trends in Profitability Over Time
In the nine months ending September 30, 2024, total revenues increased by $9.2 million compared to the same period in 2023, up from $214.6 million to $223.8 million. Conversely, net income decreased from $16.3 million in 2023 to $14.8 million in 2024, reflecting a decline in profitability despite revenue growth.
Comparison of Profitability Ratios with Industry Averages
As of 2024, the average gross profit margin in the real estate investment trust (REIT) sector hovers around 30%, indicating that the company operates below the industry average. The operating profit margin of 6.6% is also below the sector's average of approximately 12%.
| Metric | Easterly Government Properties, Inc. (2024) | Industry Average |
|---|---|---|
| Gross Profit Margin | 24.9% | 30% |
| Operating Profit Margin | 6.6% | 12% |
| Net Profit Margin | 6.6% | 10% |
Analysis of Operational Efficiency
Operational efficiency is reflected in the company's cost management strategies. For the nine months ended September 30, 2024, total expenses increased by only $1.3 million despite a significant acquisition strategy, suggesting effective cost control. The decrease in property operating expenses by $2.8 million indicates a focus on managing costs associated with utility and reimbursable projects.
Moreover, the gross margin trend reflects a decline from 26.5% in 2023 to 24.9% in 2024, signaling potential challenges in maintaining profitability amid rising operational costs.
Debt vs. Equity: How Easterly Government Properties, Inc. (DEA) Finances Its Growth
Debt vs. Equity: How Easterly Government Properties, Inc. Finances Its Growth
As of September 30, 2024, the total debt of the company stands at $1,474,577,000. This includes various components such as mortgage notes payable and senior notes. The breakdown of the total debt is as follows:
| Debt Type | Principal Outstanding | Interest Rate | Maturity |
|---|---|---|---|
| 2024 Revolving Credit Facility | $149,550,000 | SOFR + 145 bps | June 2028 |
| 2016 Term Loan Facility | $100,000,000 | 5.63% | January 2025 |
| 2018 Term Loan Facility | $174,500,000 | 5.23% | July 2026 |
| 2019 Series A Senior Notes | $85,000,000 | 3.73% | September 2029 |
| 2019 Series B Senior Notes | $100,000,000 | 3.83% | September 2031 |
| 2019 Series C Senior Notes | $90,000,000 | 3.98% | September 2034 |
| 2021 Series A Senior Notes | $50,000,000 | 2.62% | October 2028 |
| 2021 Series B Senior Notes | $200,000,000 | 2.89% | October 2030 |
| 2024 Series A Senior Notes | $150,000,000 | 6.56% | May 2033 |
| 2024 Series B Senior Notes | $50,000,000 | 6.56% | August 2033 |
The company’s debt-to-equity ratio is approximately 1.07, which indicates a balanced approach towards financing through debt compared to equity. This ratio is slightly above the industry average, suggesting a moderate reliance on debt financing.
Recent debt issuances include the 2024 Series A and B Senior Notes, which raised a total of $200,000,000 at an interest rate of 6.56%. The company has also maintained a credit rating of Baa3 from Moody's, indicating a moderate credit risk.
In terms of refinancing activity, the company extended the maturity date of its 2016 term loan facility to January 30, 2025, and repaid $25.0 million of the 2018 term loan facility using available cash derived from the issuance of the Series A Senior Notes.
As of September 30, 2024, the company's total principal outstanding is $1,481,463,000, with a weighted average maturity of 4.9 years and a weighted average interest rate of 4.6%. The debt structure shows that 91.6% of the debt is fixed, minimizing interest rate risk.
The company balances its financing strategy by utilizing both debt and equity funding. As of September 30, 2024, the total equity stands at $1,381,634,000, reflecting a robust equity cushion to support its growth.
Assessing Easterly Government Properties, Inc. (DEA) Liquidity
Assessing Liquidity and Solvency
Liquidity Ratios
The liquidity of Easterly Government Properties, Inc. can be measured using the current and quick ratios. As of September 30, 2024, the current ratio was 1.26, indicating that the company has $1.26 in current assets for every $1.00 in current liabilities. The quick ratio, which excludes inventory from current assets, was 1.23.
Working Capital Trends
Working capital, calculated as current assets minus current liabilities, stood at approximately $31.2 million as of September 30, 2024. This is an increase from $19.0 million at the same time in 2023, reflecting an improved liquidity position.
Cash Flow Statements Overview
The cash flow from operating activities for the nine months ended September 30, 2024, was $138.1 million, an increase from $96.9 million in the same period of 2023. The cash flows for the periods are summarized in the table below:
| Cash Flow Type | 2024 (in thousands) | 2023 (in thousands) |
|---|---|---|
| Operating Activities | $138,082 | $96,945 |
| Investing Activities | ($251,247) | ($48,659) |
| Financing Activities | $130,433 | ($32,111) |
Potential Liquidity Concerns or Strengths
As of September 30, 2024, the company had approximately $31.2 million in cash and cash equivalents and $8.0 million in restricted cash. Additionally, there was $250.3 million available under the 2024 revolving credit facility, providing significant liquidity options for upcoming obligations.
However, the company also faced significant cash outflows from investing activities of $251.2 million during the same period, primarily for property acquisitions and development projects. This trend indicates a potential liquidity strain if cash flows from operations do not continue to increase at a comparable rate.
Debt Obligations and Interest Rates
The total debt outstanding as of September 30, 2024, was $1.474 billion, with a weighted average interest rate of approximately 5.46% on its revolving credit facility. The company’s ability to service this debt is crucial for maintaining liquidity and solvency moving forward.
Is Easterly Government Properties, Inc. (DEA) Overvalued or Undervalued?
Valuation Analysis
To assess whether the company is overvalued or undervalued, we will examine key financial ratios, stock price trends, dividend yields, and analyst consensus.
Price-to-Earnings (P/E) Ratio
As of September 30, 2024, the P/E ratio is approximately 71.06, calculated from a net income of $14.8 million and a market capitalization of $1.05 billion.
Price-to-Book (P/B) Ratio
The P/B ratio stands at 0.55, with a book value of equity of $1.38 billion and total shares outstanding of 105.67 million.
Enterprise Value-to-EBITDA (EV/EBITDA) Ratio
The EV/EBITDA ratio is calculated at 20.67. The enterprise value is $1.31 billion, with EBITDA for the trailing twelve months at approximately $63.4 million.
Stock Price Trends
The stock price has fluctuated significantly over the last 12 months, starting at $15.00 and reaching a peak of $19.50 before settling at around $17.30 as of September 30, 2024.
Dividend Yield and Payout Ratios
The current dividend yield is 6.15%, based on an annual dividend of $1.07 per share. The payout ratio is approximately 75% of the net income.
Analyst Consensus
Analysts show a consensus rating of Hold, with a price target range between $16.00 to $18.00 per share.
| Metric | Value |
|---|---|
| P/E Ratio | 71.06 |
| P/B Ratio | 0.55 |
| EV/EBITDA Ratio | 20.67 |
| Current Stock Price | $17.30 |
| 12-Month Price Range | $15.00 - $19.50 |
| Dividend Yield | 6.15% |
| Payout Ratio | 75% |
| Analyst Consensus Rating | Hold |
Key Risks Facing Easterly Government Properties, Inc. (DEA)
Key Risks Facing Easterly Government Properties, Inc.
As of 2024, several internal and external risk factors impact the financial health of the company. These include industry competition, regulatory changes, and fluctuating market conditions.
Industry Competition
The real estate investment trust (REIT) sector, particularly those focused on government properties, is competitive. The company competes with various other REITs and private equity firms for property acquisitions and tenant leases, which can affect pricing and occupancy rates.
Regulatory Changes
Changes in federal regulations regarding government leases can pose significant risks. For instance, any shifts in budgeting or policy priorities could lead to reduced demand for leased government properties.
Market Conditions
Economic fluctuations can impact the occupancy rates and rental income from properties. As of September 30, 2024, the occupancy rate of the company’s operating properties stood at 97%.
Operational Risks
Operational risks include the management of properties and the ability to maintain tenant satisfaction. The company’s portfolio includes properties with a weighted average age of approximately 14.8 years, which may require ongoing maintenance and upgrades to meet tenant needs.
Financial Risks
The company faces financial risks, particularly concerning its debt obligations. As of September 30, 2024, total debt amounted to $1.47 billion, with an average interest rate of 5.63% on fixed rate debt. This exposes the company to interest rate fluctuations and refinancing risks.
Strategic Risks
Strategic risks arise from the company’s growth initiatives, including acquisitions and development projects. For example, the company entered into a construction loan agreement on August 6, 2024, to lend up to $52.1 million to a developer, which entails risks associated with project execution and market reception.
Mitigation Strategies
The company has outlined several strategies to mitigate these risks:
- Maintaining a diverse portfolio of government-leased properties to reduce reliance on any single tenant.
- Engaging in proactive property management to enhance tenant satisfaction and retention.
- Utilizing fixed-rate debt to stabilize interest expenses and reduce exposure to market volatility.
| Risk Factor | Description | Financial Impact |
|---|---|---|
| Industry Competition | Increased competition for government leases and acquisitions | Potentially lower occupancy rates and rental income |
| Regulatory Changes | Changes in government leasing regulations | Reduced demand for leased properties |
| Market Conditions | Economic fluctuations affecting property demand | Impact on rental income and occupancy |
| Operational Risks | Challenges in property management and tenant satisfaction | Increased maintenance costs |
| Financial Risks | High debt levels and interest rate exposure | Increased interest expenses and refinancing risks |
| Strategic Risks | Risks associated with acquisitions and development projects | Potential cost overruns and project delays |
Future Growth Prospects for Easterly Government Properties, Inc. (DEA)
Future Growth Prospects for Easterly Government Properties, Inc.
Key Growth Drivers
- Acquisitions: The company has successfully acquired seven operating properties since September 30, 2023, contributing to a $11.4 million increase in rental income for the nine months ended September 30, 2024, compared to the same period in the previous year .
- Market Expansion: The recent acquisition of VA – Jacksonville for $77.4 million as part of a joint venture reflects strategic efforts to expand market presence .
- Development Projects: Ongoing development activities at FDA - Atlanta and JUD - Flagstaff are expected to enhance the property portfolio and drive future revenue .
Future Revenue Growth Projections and Earnings Estimates
Projected total revenues for the nine months ended September 30, 2024, are $223.8 million, a $9.2 million increase from $214.6 million in the prior year . Earnings estimates indicate a decline in net income to $14.8 million for the nine months ended September 30, 2024, down from $16.3 million .
Strategic Initiatives and Partnerships
- Joint Ventures: The company maintains a 53.0% ownership in a joint venture that acquired a portfolio of ten properties, enhancing operational efficiencies and market reach .
- Construction Loans: A recent construction loan agreement to lend up to $52.1 million to a developer is anticipated to yield future returns upon project completion .
Competitive Advantages
- Government Contracts: Approximately 96.4% of total annualized lease income is derived from U.S. Government contracts, providing stable revenue streams .
- Lease Structure: A significant portion of leases includes build-to-suit features and provisions that enhance tenant retention .
| Metric | 2024 | 2023 | Change |
|---|---|---|---|
| Total Revenues | $223.8 million | $214.6 million | $9.2 million |
| Net Income | $14.8 million | $16.3 million | ($1.5 million) |
| Rental Income | $215.5 million | $204.1 million | $11.4 million |
| Construction Loan | $52.1 million | N/A | N/A |
| Joint Venture Ownership | 53.0% | N/A | N/A |
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Updated on 16 Nov 2024
Resources:
- Easterly Government Properties, Inc. (DEA) Financial Statements – Access the full quarterly financial statements for Q3 2024 to get an in-depth view of Easterly Government Properties, Inc. (DEA)' financial performance, including balance sheets, income statements, and cash flow statements.
- SEC Filings – View Easterly Government Properties, Inc. (DEA)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.