Easterly Government Properties, Inc.

The views expressed below are those of Anchor Capital Advisors, LLC (“Anchor”) as of the date written and are subject to change at any time. They are based on our proprietary research of the stated company and the following is a summary of the primary factors that support our beliefs and rationale for investing in the company. Please see additional disclosures at the end of this publication.

DEA: NYSE

Easterly Government Properties, Inc. is focused on the acquisition, development, and management of Class A properties for the U.S government.[1]

Investment thesis

Easterly is a REIT focused on high quality government properties. It owns what we believe are attractive government buildings in growing agencies. It is very defensive in economic recessions,[2] and is focused on mission critical agencies.[3]  Easterly’s yield and valuation are both noteworthy.

Confirmation through research

Easterly Government Properties has 68 properties and 6.3 million in square feet.[4]  The company has a very strict investment focus narrowed in on owning and operating what they believe are high quality assets occupied by mission critical government agencies, such as the DEA, FBI, and IRS.[5]  Specifically their efforts are centered on buildings with built to suit features making it difficult for tenants to find comparable assets.[6] They focus on agencies with growing budgets and are not impacted by changing political parties in power.[7]  The company has had 100% renewal since its founding,[8] never losing a building, with the average lease terms of around 15 years.[9] They did not see a shrink in rent during the 2008 recession or during sequester.[10]  Further, Easterly Government Properties has seen all renewals increase at above inflation. The company has nearly a 5% dividend yield,[11] and does not have any competitors that can compete on acquisitions due to their low cost of capital.[12]  In our view, the management team is well seasoned in the space, and owns approximately 11% of the company.[13]

Variant Perception

We do not believe the market is assigning fair value to the business, considering its 100% renewal rate of tenants, experienced management team, lack of cyclicality, above market dividend yield, and the low cost of capital. It is our opinion that the company has a long runway for growth in buildings, and will be able to continue to increase their dividend over time.