Easterly Government Properties Q3 2026 FFO Rises as Rental Revenue Grows

Easterly Government Properties, Inc. (NYSE: DEA) reported higher third-quarter 2026 revenue and funds from operations, supported by increased rental income, while its portfolio remained heavily concentrated in U.S. government tenants. The government-focused real estate investment trust also outlined three development projects totaling nearly $119 million of cost incurred through September.

Total revenue increased to $93.6 million for the three months ended September 30 from $86.2 million a year earlier. Rental income, the company’s largest revenue source, rose to $90.0 million from $82.2 million, more than offsetting a decline in tenant reimbursements.

Net income available to common shareholders was $5.5 million, or $0.11 per diluted share, compared with $1.2 million, or $0.02 per share, in the prior-year quarter. The year-earlier period included a $2.5 million impairment loss, while the latest quarter included a $752,000 recovery of credit losses, compared with a $302,000 provision a year earlier.

Property operating expenses rose to $22.9 million from $20.7 million, and corporate general and administrative expenses increased to $7.2 million from $5.8 million. Interest expense also advanced to $20.0 million from $19.0 million.

FFO and property-level results improve

Funds from operations, a non-GAAP measure commonly used by REITs, increased to $38.5 million, or $0.79 per fully diluted share, from $34.8 million, or $0.74 per share. Core FFO rose to $38.0 million, or $0.78 per fully diluted share, from $35.6 million, or $0.76 per share.

Cash available for distribution increased to $32.8 million from $29.3 million. Easterly said the measure is intended to provide supplemental information about its ability to fund dividends and should not be viewed as GAAP cash flow.

Net operating income reached $65.7 million, up from $60.5 million, while cash NOI increased to $60.1 million from $57.9 million. EBITDA rose to $59.0 million from $54.2 million.

For the first nine months of 2026, total revenue was $277.6 million, compared with $249.1 million in the same period of 2025. FFO increased to $112.5 million, or $2.33 per fully diluted share, from $101.7 million, or $2.18 per share. Nine-month core FFO was also $112.5 million, or $2.33 per share, compared with $103.3 million, or $2.22 per share.

Government tenants remain central to the portfolio

Easterly’s operating portfolio totaled about 10.7 million leased square feet and generated $395.0 million of annualized lease income as of September 30. At the company’s proportionate share, the portfolio comprised approximately 10.2 million square feet and $371.1 million of annualized lease income.

U.S. government tenants represented 86.5% of total annualized lease income and 84.6% of leased space. The Department of Veterans Affairs was the largest tenant, contributing 24.8% of annualized lease income, followed by the Federal Bureau of Investigation at 14.1% and the Drug Enforcement Administration at 7.4%.

The portfolio’s weighted-average remaining lease term was 9.2 years. Leases representing 7.3% of annualized lease income expire in 2027, followed by 5.7% in 2028 and 6.3% in 2029. In addition, six U.S. government tenants accounting for about 2.3% of leased space and annualized lease income were operating under provisions permitting termination before their stated lease expirations.

Easterly owns 53% of an unconsolidated real estate venture holding government-leased outpatient properties. Its share of the venture’s third-quarter revenue was $6.8 million, while its share of net income was $1.8 million and core FFO was $3.9 million.

Development pipeline and balance sheet

The company had three projects under construction with 154,812 leased square feet and $118.8 million of cost incurred through September. The projects carry lease terms of 20 to 25 years and include laboratories in Fort Myers, Florida, and courthouses in Flagstaff, Arizona, and Medford, Oregon.

The Fort Myers laboratory was scheduled for completion and lease commencement in the fourth quarter of 2026, and Easterly said all significant construction activities were completed in October. The Flagstaff courthouse is expected to be completed and commence its lease in the first quarter of 2027, while the Medford courthouse is scheduled for the first half of 2028. Anticipated lump-sum reimbursements for the Flagstaff and Medford projects total $53.3 million.

Net debt stood at $1.68 billion at quarter-end, with adjusted net debt of $1.61 billion. Net debt was 7.1 times annualized quarterly EBITDA, while adjusted net debt was 6.8 times. Fixed-rate debt accounted for 87.2% of total debt, and the weighted-average interest rate was 4.6% with a weighted-average maturity of 3.8 years.

Easterly reported $383.8 million available under its $400 million revolving credit facility. Debt maturities are concentrated in 2027 and 2028, when 13.7% and 21.8% of total debt, respectively, are scheduled to mature.

The company identified its reliance on the U.S. government and its agencies for substantially all revenue as a central risk. Other disclosed uncertainties include changes in federal real estate spending or leasing preferences, government shutdowns, tenant losses, vacancies, refinancing conditions, interest rates, development execution and the ability to maintain REIT qualification.