The U.S. General Services Administration is a significant spoke in the wheel that is the government. The agency was created under the Federal Property and Administrative Services Act of 1949 and signed by President Harry S. Truman, “in part, to increase the efficiency and economy of Federal government operations concerning the procurement, utilization, and disposal of property” . The agency currently owns and leases over 376.9 million square feet of space, including land ports of entry, courthouses, laboratories, post offices, and data processing centers. The agency receives approximately $9 billion (0.29%) from the overall $3.3 trillion U.S. budget with about Eleven thousand employees as of 2018 .
The agency received national attention when it outfitted itself in a robe of partisanship during the presidential transition of 2020-2021. Emily Murphy, GSA Administrator, “faced criticism from Democrats, national security experts, and health officials, who argued that delaying the formal transition was hampering the incoming Biden administration from getting up to speed on the response to the coronavirus pandemic and jeopardizing national security” . Following events involved a correction in statements and a temperamental transition involving various historically significant moments. Isolating recent blips and focusing on the core mission of the U.S. General Services Administration: “deliver the best value in real estate, acquisition, and technology services to government and the American people” , looking for opportunities to make a U.S. government agency a tenant would bring a reliable tenant in terms of streams of consistent cash-flow.
Based out of Washington D.C. is a Real Estate Investment Trust or a REIT, Easterly Government Properties (NYSE: DEA), that focuses “on the acquisition, development and management of Class A commercial properties that are leased to U.S. Government agencies that serve essential U.S. government functions” .
According to the Federal Register, a total of 455 agencies constitute the United States Government, of which some Easterly’s tenants include the Customs and Border Protection, Department of Defense, Department of Energy, Department of Veteran Affairs, Drug Enforcement Agency, Environmental Protection Agency, Federal Bureau of Investigation, among others. A review of the company’s Corporate Responsibility webpage formulates effective execution of corporate values such as “Integrity, Innovation, Collaboration, and Stewardship.” The company highlights its efforts with the Anacostia Riverkeepers, infrastructural updates to existing construction such as adding smart controls to HVAC systems, LED lighting retrofits, the obligation of LEED certification in new construction, and structure of its executive management team to address and promote workplace equity.
A look at available year-end earnings releases from 2015-2020 of Easterly Government Properties (NYSE: DEA) renders the average year over year percentage increase in Funds From Operations (FFO) and Cash Available for Distributions (CAD) at approximately 22% and 21%, respectively. The company has consistently increased the number of properties from 36 in 2015 to 79 in 2020 with a consistent portfolio occupancy at 100%. In terms of retained earnings, the five-year-over-year average is about 61% and approximately 1700% between 2016 and 2020. Even though the company has not grown its quarterly dividend of $0.26 from December 21st, 2017, it has maintained this cash dividend.
My biggest attraction to the company was the CEO William Trimble’s following statement, highlighted on its homepage, “full faith and credit of the U.S. Government”. The U.S. government, roughly at 2.8 million, is one of the largest employers in the United States. Having one of the country’s largest employers as a tenant appears a financially viable option as it allows to formulate a precise understanding of the strength in incoming cash flows. In 2020, Easterly reported a 100% portfolio occupancy rate which makes sense because their tenants were not the average small business. These are massive operations with congressional mandates executing daily tasks that contribute to the health and safety of the United States.