(Bloomberg) -- Easterly Government Properties Inc. said it has elevated co-founder and current board Chairman Darrell Crate to chief executive officer, effective at the beginning of next year.
Crate will replace fellow co-founder William Trimble, who will retire from his role as president and CEO effective Dec. 31, the real estate company said in a press release Thursday.
“I have every confidence he and the team will continue to drive shareholder value,” Trimble said in the statement.
Unlike other office real estate investment trusts, Easterly doesn’t face the same pressure from high vacancy rates caused by remote work because Easterly leases to US government agencies like the Federal Bureau of Investigation, Drug Enforcement Administration, Department of Veterans Affairs and a variety of federal court buildings that are required to work in-person for full functionality.
Easterly’s portfolio of buildings is 97.5% leased, according to an investor presentation last month. Operational usage of its facilities remained relatively unchanged following the pandemic compared to 2019.
Still, Easterly was swept up in the recent office REIT selloff as US Treasury yields surged to heights last seen in 2007 and investors shied away from commercial real estate investments. Shares of Easterly are down 13% year-to-date, compared to a broad gauge of office real estate investment trusts, which is down 11%.
Averting a government shutdown in November and more certainty around the federal budget has lifted the stock in recent weeks, but it’s still trading well below its 2020 high of $29 per share.
Nevertheless, the company is well-positioned moving forward with manageable outstanding debt and continued demand from government tenets, Crate said in a telephone interview.
“The FBI can’t do their work from their basement,” he said. “The DEA can’t bring drugs to their wine cellar. All of this has to be done out of a secure facility.”
Easterly has managed to avoid significant amounts of floating rate debt, with almost all of its balance sheet unsecured but termed out, he added. And with upcoming projects on the way, the company expects to show growth in funds from operations and cash available for distribution that is superior to the office sector.
“As we look forward broadly in REITs, with the continuing diminishment of private credit availability purely to developers, we’re going to be entering a period where public REITs are going to have a cost to capital advantage, relative to private buyers,” he said.
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