Eastern government real estate is already feeling the heat. Its shares have fallen 12% since the US presidential election, as investors fear its business will take a major hit once the government's Ministry of Efficiency begins work. Trading under the stock symbol DEA, the company operates 100 government leases across the country, and 98% of its revenue comes from those buildings. DOGE, the advisory board led by entrepreneurs Elon Musk and Vivek Ramaswamy, aims to cut federal spending by $500 billion. “People have to understand that our properties serve parts of the government that President Trump doesn’t want to cut,” CEO Darrell Crete said in an interview with CNBC this week. “Our leases are located in DEA and FDA drug laboratories, where we help analyze things like fentanyl before they are admitted as evidence in a court case. We have state-of-the-art Veterans Affairs medical facilities, FBI field offices, courts and immigration enforcement facilities. Customs.” He said the stock was being subjected to “unfair punishment.” DEA Mountain 2024-11-05 Easterly Government Properties, which has significant exposure to government leases, has seen its shares decline since the election. Investors and some Wall Street analysts are not convinced. “The company has mission-critical leases, but a portion of its real estate portfolio may be in an area that is being cut,” John Kim, an analyst at BMO Capital Markets, told CNBC. “Yes, they have FBI offices, and I don’t think (the FBI) will be closed, but there may be changes.” Easterly pays a quarterly dividend of 27 cents per share, or a 9% yield, as of Thursday's market close. Kim, who has a sell rating on the stock, believes the yields are too high and expects the cut to be good for share prices. He said he suggested that to the CEO, “but they didn't want to cut it.” Raymond James analyst Jonathan Hughes agreed that the dividend was a problem, but said concerns about the stock were “overblown.” There are a total of six analysts covering the company, according to FactSet. Two have sell, two have adjusted, and two have buy ratings. Crete said he agrees there is government waste and wants to see it cleaned up. “We're excited about DOGE. We've been doing it before it actually starts,” he said, explaining that public-private collaboration helps the federal government by increasing quality and lowering costs. Musk and Ramaswamy have already made their case before members of Congress. They were on Capitol Hill on December 6 and published an op-ed in the Wall Street Journal just before Thanksgiving to lay out their plans. “DOGE has a historic opportunity to make structural cuts to the federal government,” they wrote. “We are prepared for attack from entrenched interests in Washington. We expect to prevail.” Crete acknowledged that his company needs to be clearer about its mission. “We support the most important things that the government is supposed to provide,” he said. “We are an example of what is part of the solution to stop government waste.” Crates may have a sympathetic ear in the Trump administration, where he can make his case directly. His brother, Bradley Crete, was Trump's campaign treasurer and is now helping the president-elect return to the White House. It doesn't seem to be helping yet. The stock is down another 4% so far in December.
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This real estate stock may have been unfairly hurt by fears of DOGE spending cuts
