An Idea Forms
In 2009, Crate and Trimble created a private equity real estate fund of $100 million and made one simple observation—the leases that the U.S. government were trading at, and the cap rates on the buildings, were incredibly high because people didn’t understand how to work with the government.
“Bidding rules, the way the government focuses on mission and not commerce, all of those things led there to be a misunderstanding in the market,” Crate says. “One of the things we knew was that the U.S. Treasury was the most creditworthy financial institution on earth, and we figured we could buy the real estate and sell the credit.”
That strategy turned out to be a savvy one, and the partners quickly raised a second $200 million fund, though they realized they were educating competitors a lot faster than they were educating investors.
So, in 2015, needing to find investors who understood capital markets, Easterly went public and also partnered with a developer to create a third leg of its strategy. As of March 2024, the company has a portfolio of approximately nine million square feet of real estate and is one of the largest landlords to the U.S. government.
Before founding Easterly, Crate had been in banking for more than a decade. He was CFO of a global financial services company where he managed more than $350 million of funds. That private equity institutional background, he believes, makes Easterly a little different from other REITs in that while many were created after families had built large portfolios and wanted some liquidity, Easterly, however, has more of an investor perspective than a real estate perspective.
“We’ve developed each of these areas of expertise, from understanding the capital markets, to having an expert in government relations [20-year government real estate veteran Stuart Burns], to asset managers who specialize in these types of leases,” Crate says. “We understand the difference between the agencies; they have different objectives and cultures and ways of being. We really work hard to understand those so we can be the best private/public partners to each of these agencies.”
