Greetings, and welcome to the Easterly Government Properties Third Quarter 2019 Earnings Call. At this time, all participants are in listen-only mode. A question-and-answer session will follow the formal presentation. Please note this conference is being recorded. I would now like to turn the conference over to your host Lindsay Winterhalter, Vice President-Investor Relations. Please go ahead.

Good morning. Before the call begins, please note the use of forward-looking statements by the company on this conference call. Statements made on this call may include statements which are not historical facts and are considered forward-looking. The company intends these forward-looking statements to be covered by the Safe Harbor provisions for forward-looking statements contained in the Private Securities Litigation Act Reform of 1995, and is making this statement for the purpose of complying with the Safe Harbor provisions.

Thank you, Lindsay. Good morning, everyone and thank you for joining us for this third quarter conference call. Today in addition to Lindsay, I'm also joined by Bill Trimble, the company's CEO; and Meghan Baivier, the company's CFO and COO. It was a strong quarter. Each area of our business performed well. We made progress on milestones that we expect will deliver solid performance over the long-term. Our bullseye properties performed well, the acquisition pipeline is robust which we expect will allow us to deliver on our $200 million plus target for the next several years, while being selective, our development effort progresses well with the delivery of FDA - Alameda and our two additional FDA laboratories under development on schedule. And our balance sheet is well-positioned to support all these growth initiatives. It is our goal to deliver 2% to 3% annual FFO growth over the long-term to shareholders along with the dividend, which today is approximately 5%. We believe this provides an attractive opportunity especially, given that we have the highest quality tenants with our rents backed by the full facing credit of the United States government.

Thanks, Darrell, and good morning. Thank you for joining us for our third quarter earnings call. This is another great quarter for the acquisitions team here at Easterly. We continue to deliver on our pipeline of actionable opportunities with the acquisition of nearly 170,000 square foot Environmental Protection Agency regional headquarters in Lenexa, Kansas. This single tenant GSA leased office building was originally constructed in 2007 and underwent a large-scale renovation to suit for the specific use of the EPA in 2012. At that point, the facility received a lead goal for new construction and a lead platinum certification for existing buildings. This facility was also awarded the ENERGY STAR with an impressive score of 94. The building is 100% occupied by the EPA through October of 2027 under its original 15-year lease which has a five-year renewal option thus potentially carrying the term through October of 2032. An acquisition like this is the perfect marriage of our bullseye strategy and our commitment to good environmental stewardship through the ownership and management of a green real estate portfolio. Further, subsequent to quarter end, Easterly acquired the U.S. Citizenship and Immigration Services facility in Tustin, California located in Orange County. This recently LEED-certified fully renovated to suit 67,000 square foot facility is 100% leased under a brand new 15-year lease which will expire in 2034. The extensive renovations ensure the tenant is receiving an optimal working space for their highly important mission. Through these two accretive acquisitions, we have not only extended our average remaining lease term, but we have also reduced the average age of the company's overall portfolio. In addition, the Easterly team is nearing its stated acquisition goal of $200 million for 2019 and I think you can expect to see us continue to deliver on this goal for the remainder of the calendar year.

Thank you, Bill. Good morning, everyone. Easterly's unique portfolio and business strategy allowed us in the third quarter to once again consistently post strong earnings this time against the backdrop of increasing market uncertainty and volatility. As you saw in our earnings release, for the third quarter, net income per share on a fully diluted basis was $0.01. FFO per share on a fully diluted basis was $0.29. FFO as adjusted per share on a fully diluted basis was $0.29. And our cash available for distribution was $20.7 million.

Thank you. We will now be conducting a question-and-answer session Our first question comes from Michael Carroll with RBC Capital Markets. Please go ahead.

Thanks. Bill, can you talk a little bit about what you're seeing in the acquisition market today? I know that you previously said that there has been more broker transactions coming in kind of looking within this space. I mean, how does that impact your volume and your pricing on these types of deals?

Good morning. Thanks for the question. I think I will say that we are seeing more brokerage opportunities. But I think recently, we've also seen some more off-market opportunities as well. And stepping back and looking at our pricing I think the supply is very strong. So Michael I feel really good about that. I'd say that we've probably seen 10 to 15 basis point change in the market over the last nine to 10 months. And so we're seeing what we were seeing 650s, I think we're seeing sort of in the 630, 635 category, but I'd also say that the properties that we've been purchasing, as you've noted have been brand-new state-of-the-art facilities that have very long lease terms. So that might be shading it a little bit. But our pipeline remains robust and we are seeing some more off-market opportunities now as well.

Great. And then if you're looking about some of your assets that are within your portfolio that are more of the plain vanilla. I guess, what are you kind of thinking about in terms of asset sales. Is that something that you want to pursue right now? Or are you happy holding those properties here in the near term?

Well, I think as you've seen, we've renewed certainly the largest of our plain vanilla assets with very long lease terms going forward. So we have a number of years, the management team can decide what we're going to do there. I think we're pleased with everything we have in the portfolio. But as I've mentioned before, obviously we are always trying to refresh the portfolio, add new bull's-eye properties was because we believe in the long term they're going to be the most valuable. So I think no surprises there. As we see opportunities we'll certainly take advantage of.

Okay, great. And last one for me. Can you talk a little bit about the GSA build-to-suit opportunities? And then I guess Meghan, does your guidance range assume any other new starts this year? Or does it just assume that you complete the projects that are in your pipeline and start the project Atlanta?

Well, I think from the build-to-suit opportunities we are in a unique space in that the government decides when they want something to be built. We're not going out and doing speculative development. So there's two sides to that coin. I think we have mentioned that the FDA has 13 of these facilities throughout the country. The laboratories, through Mike Ibe and team's hard work, we've been awarded the first three of them. I would not be surprised to see us get awarded more of those in the future. I don't think I can guarantee we're going to get every single one of them. As we've mentioned before, there are some FBI opportunities, there's some FEMA opportunities. There's some stuff out there. So we will be certainly tuned -- attuned to what's happening there. And right now, I think we're on a terrific run rate of coming up and delivering one of these new projects every year. And we hope to stay in that way for quite some time.

And Mike our guidance contemplates the completion of Lenexa. And a very small level of initial investment in Atlanta, but nothing further.

Okay, great. Thank you.

Our next question comes from Merrill Ross with Compass Point. Please go ahead.

Thank you and good morning. You know I got asked, on the lease renewal at Richmond, what was the spread?

Yeah. Good morning, Merrill. This is Meghan. We're really excited about the outcome at Richmond. First of all, that renewal has been completed over a year in advance of exploration. So we're going to have good time to complete the TI worked before the commencement of that lease. And while that TI work is not yet fully determined by the government, we are expecting that lease on a net effective basis to roll up in the area of 25%.

Excellent, thank you, you have the other property and I know it’s small. DEA on the border in San Diego, and it looks like they're going to be leaving that building at the end of the lease, maybe they outgrew it I suspect. Are there any prospects to re-let that? It's clearly suited for a federal agency.

I couldn't agree more. I've stood on that property. We've got two facilities there. And you are literally looking at the Mexican border from one end with respect to the other a mile away. There are all sorts of opportunities for that building we believe. And also it is really one of the only office spaces along with our others located in that position. Most of it is warehouse and industrial. So, we are saying one about the prospects for that property. And I'm sure in our current situation with Mexico there'll be plenty of opportunities.

Yeah. It would seem that way. I just would like to know if you can circle Meghan, the lump sum expense reimbursement from Alameda.

I'm sorry if we can circle...

We did receive the lump sum $52 million. So that -- we have nothing further waiting -- we're not waiting on the government for that.

So was how much I'm sorry?

$52 million.

Thank you.

Our next question comes from Jon Petersen with Jefferies. Please go ahead.

Hi. This is Peter on for Jon, just looking at, some of your lease expirations through the rest of this year in 2020. I guess just from a higher level what are you seeing in terms of where those leases are rolling kind of directionally whether it'd be positive or negative spreads?

Well, I think the first thing is certainly where we anticipate them rolling is reflected in our guidance for next year which I'd be very happy to deliver today. I'd also say that, I think that we're certainly not worried about the leases going over the next year in fact, very positive in that we have sort of transitioned in the last two years where we had some plain vanilla. These are as evidenced by our FBI - Richmond, bull's-eye properties and you know where they renew very favorably for the most part. I will tell you that we are not going to begin a trend of discussing during negotiations with the federal government, where we think the leases are going to turn out. But I think they will be as anticipated. And we're very pleased to see how it's going.

Got it. Thank you.

Thank you. I would like to turn the floor over to, Darrell for closing remarks.

Thanks, Stacy. So thank you everyone for joining the Easterly Government Properties Third Quarter 2019 Conference Call. We appreciate your time. We look forward to keeping you posted on all of our work, as we strive to build a portfolio of pristine assets backed by the full faith and credit of the U.S. government.

This concludes today's conference. Thank you for your participation.