Easterly Government Properties, Inc. (DEA): A Bull Case Theory
We came across a bullish thesis on Easterly Government Properties, Inc. (DEA) on Substack by Value Science. In this article, we will summarize the bulls' thesis on DEA. Easterly Government Properties, Inc. (DEA)'s share was trading at $20.2 as of April 29th. DEA's trailing and forward P/E were 44.49 and 32.05 respectively according to Yahoo Finance.
A real estate mogul in a business suit, discussing the long-term growth of a REIT.
Easterly Government Properties (DEA) is a real estate investment trust (REIT) that primarily leases properties to critical arms of the U.S. federal government, with 93% of lease income backed by the full faith and credit of the U.S. Treasury. The firm recently began to diversify modestly into state and local governments and select private sector tenants, but remains fundamentally anchored in recession-proof, long-term federal leases averaging 8.6 years. Despite this stability, DEA trades at a deeply discounted 6.7x P/FFO and is down 45% from its 52-week high, largely due to fears surrounding the federal government's effort—led by the Department of Government Efficiency (DOGE)—to cut waste through lease terminations. However, these fears appear overstated. DEA has experienced minimal direct impact, with just one small property known to be affected and none formally terminated due to DOGE's actions. CoStar data further supports this, showing only 13 of 800 terminated leases across all REITs, likely placing Easterly's exposure among the lowest.
DOGE's terminations only apply after the firm lease term ends, meaning Easterly's weighted average firm term remains intact. Additionally, DOGE's mission may actually favor DEA over time. Easterly's portfolio already avoids wasteful properties and aligns with the administration's priorities—both in purpose and leadership. CEO Darrell Crate, a Republican aligned with the current administration's approach, emphasizes that Easterly develops cost-efficient properties that the government would struggle to build for less than triple the cost. Trump-era policies ending remote work and decentralizing federal offices from D.C. support Easterly's suburban and regional footprint, where only 7% of lease income is in the capital region. These structural tailwinds suggest that DEA is positioned to benefit, not suffer, from the evolving government footprint.
The stock plunged further after a dividend cut on April 9, 2025—not due to DOGE—but because share issuance at depressed prices became an unsustainable funding source. With the dividend reset, Easterly can now fund operations more responsibly. Despite the overhang of rising interest rates—DEA's net debt is $1.6B with a 4.6% average rate—the worst-case interest cost increase would only reduce FFO to $2.44 per share, still implying 50% upside from current prices if assigned a conservative 12x P/FFO multiple. Analyst NAV estimates suggest an even higher fair value of $35. At ~$20/share, DEA offers a well-covered 9% dividend and uniquely counter-cyclical qualities, making it one of the few equities that could benefit from a recession or declining rates. The main remaining risk is dilution, but management has signaled it will only issue equity when accretive. With investment-grade debt, defensive cash flows, and structural tailwinds, DEA presents a compelling opportunity amid misplaced market fears.
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