Easterly Government Properties (DEA -0.71%), a real estate investment trust focused on leasing properties to U.S. Government agencies, released its second quarter 2025 financial results on August 5, 2025. The headline news: while GAAP earnings per share (EPS) came in at $0.09, the company delivered Core Funds From Operations (Core FFO) per share of $0.74, far ahead of expectations, as non-GAAP EPS of $0.74 exceeded the analysts' estimate of $0.115 by $0.625 or 543.5%. GAAP revenue rose to $84.2 million, beating the $80.6 million GAAP consensus. Management characterized the period as one of continued stability and growth, highlighting strong leasing, accretive acquisitions, and robust development activity, even as property expenses and debt service costs edged higher.
| Metric | Q2 2025 | Q2 2025 Estimate | Q2 2024 | Y/Y Change |
|---|---|---|---|---|
| EPS | $0.09 | $0.12 | $0.11 | -18.2% |
| Revenue | $84.2 million | N/A | $76.2 million | 10.5% |
| Core FFO per Share (Non-GAAP) | $0.74 | $0.72 | 2.8% | |
| Cash Available for Distribution per Share (Non-GAAP) | N/A | N/A | N/A | |
| EBITDA (Non-GAAP) | $54.3 million | $45.9 million | 18.3% |
Source: Analyst estimates provided by FactSet. Management expectations based on management's guidance, as provided in Q1 2025 earnings report.
Business Description and Recent Focus
Easterly Government Properties specializes in owning, acquiring, and developing Class A office buildings and specialized facilities leased primarily to agencies of the U.S. Government. More than 90% of its income comes from tenants such as the General Services Administration (GSA), Department of Homeland Security, and state-level government agencies, with U.S. Government tenant agencies accounting for 93.3% of annualized lease income as of December 31, 2024. Over 95% of lease income comes from federal government tenants in firm-term, non-cancelable leases backed by strong government credit.
In recent quarters, the company has centered its strategy on three fronts: maintaining high occupancy rates and long lease terms with secure government tenants; expanding through targeted acquisitions and purpose-built developments; and sharpening capital structure discipline to support growth. Key to its success are rigorous property underwriting, strong tenant renewals, and enhanced environmental credentials on new and existing assets.
Quarterly Developments: Financial and Operational Highlights
Core FFO per share, the company's preferred metric for tracking operating performance, rose slightly to $0.74. Core FFO adjusts for non-cash items and one-time expenses, and is used by the company to reflect ongoing operational performance.
Major acquisitions included the Capitol Plaza property in Washington, DC, a 290,000-square-foot building that is 98% leased to the DC government through 2038 and carries LEED Silver and Energy Star certifications. Another addition was a 74,549-square-foot Department of Homeland Security-leased facility in Burlington, Vermont, under a 10-year lease. Both deals were structured to deliver an attractive spread above the company's cost of capital and added long-term contracted rent to the portfolio.
On the development side, Easterly acquired land and is in the design phase for a 40,000-square-foot federal courthouse in Medford, Oregon, with sitework expected to commence in the first half of 2026, which upon delivery in late 2027, will carry a 20-year non-cancelable lease with the GSA. The company also acquired land on July 2, 2025, for an approximately 64,000-square-foot forensic laboratory in Florida, backed by the state's law enforcement authority under a 25-year non-cancelable lease. The company reported two projects under construction totaling approximately 300,000 square feet as of June 30, 2025, each with 20-year lease commitments to government agencies.
Leasing and tenant retention was a bright spot. The portfolio comprised 102 properties with a weighted average lease term of 9.6 years as of Q2 2025, indicating long cash flow visibility. A proactive re-tenanting initiative in Albuquerque replaced a vacating federal tenant with the State of New Mexico, extending cash flows and expanding exposure to state agencies. Government and government-adjacent leases remained above 90% of all rental income as of December 31, 2024, supporting stability even as management started to diversify modestly into state and local government tenants.
Property operating costs increased to $19.2 million, up from $18.1 million in Q2 2024. Rising depreciation, interest expense, and property taxes offset the higher rental revenues, resulting in a decline in GAAP net income per share from $0.11 in Q2 2024 to $0.09 in Q2 2025. Interest expense rose to $18.96 million, reflecting a heavier debt load and higher rates.
The company continued to emphasize environmental and sustainability credentials. As of the 2024 certification year, over 45% of the portfolio meets one or more sustainability benchmarks, aligning with tenant and government energy policies and demonstrating solid progress on environmental, social, and governance (ESG) targets.
Looking Forward: Guidance and Investor Considerations
Management reiterated its full-year 2025 guidance, calling for Core FFO per share (non-GAAP) in the $2.98 to $3.03 range, unchanged from prior quarters. The company assumes approximately $140 million in acquisitions and gross development investments of $25 million to $75 million. The company is on track to deliver an estimated 2% to 3% Core FFO per share growth, with a continued emphasis on government-leased properties, and targets further expansion of state and local exposure to 15% of the portfolio over the next three to five years.
No new guidance was issued for revenue or GAAP net income beyond what has already been provided. Management did not announce any significant changes to its capital plan or dividend approach this quarter. The quarterly dividend was maintained at $0.45 per share, consistent with the “right-sized” dividend put in place earlier in the year to free up capital for future growth. This payout equates to an annualized yield of roughly 8% based on recent share prices, as discussed by management in Q1 2025.
As the company moves further into 2025, investors should monitor property operating costs, interest rates, and the company’s leverage ratio, which was 7.2 times pro forma EBITDA as of Q2 2025. Tenant retention, new government-leased developments, and the impact of rising financing costs will all factor into earnings, cash available for distribution, and dividend capacity in quarters ahead.
Revenue and net income presented using U.S. generally accepted accounting principles (GAAP) unless otherwise noted.
