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Easterly Government Properties (DEA) holds a portfolio that is around 97% backed by the U.S. government which has never financially defaulted on a lease throughout its history, asserts Brad Thomas, editor of The Intelligent REIT Investor.
The U.S. government is the largest employer in the world and the largest office tenant in the U.S. Easterly Government is the only internally managed REIT with a focus on investing in U.S. government-leased buildings.
DEA sticks to critical missions of the federal government that don’t go out of favor; agencies like the Federal Bureau of Investigation and the Immigration and Customs Enforcement.
The REIT only deals with the U.S. federal government, and the new REIT does not have an interest to work with any other government, state or local, because it is not backed by the “full faith and credit” of the U.S. The portfolio is 100% leased and the weighted average age is 11.5 years.
Most Easterly Government buildings are office buildings (67%) and the rest are either courthouse/office (6%), lab (9%), VA outpatient (11%) or others (7%). Because the REIT does not lease to state agencies, there are no risks related to appropriations.
The REIT’s acquisition of two VA outpatient clinics marks the company’s entry into an important new market. The VA is the second largest federal agency in terms of total appropriations and staffing and it employs nearly 350,000 people. Easterly’s latest acquisition is an FBI center in Salt Lake City.
Easterly Government is on track to become a “Blue Chip” REIT. I expect this REIT to generate returns going forward in the range of 12-14% annually. Also, senior management owns approximately 14%, providing strong alignment of interest with shareholders (of which I’m one).
Brad Thomas is editor of Forbes Real Estate Investor.
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