N※N

8% Yield from U.S. Government Real Estate: A Hidden Income Opportunity

50

  //stocks-investing.news-articles.net/content/202 .. ent-real-estate-a-hidden-income-opportunity.html
  Published in Stocks and Investing on Wednesday, December 3rd 2025 at 7:03 GMT by Seeking Alpha

• 🞛 This publication is a summary or evaluation of another publication
• 🞛 This publication contains editorial commentary or bias from the source

2025-12-03 223 x 224 / 7766 Bytes

2025-12-03 179 x 224 / 12469 Bytes

2025-12-03 229 x 220 / 8379 Bytes

2025-12-03 225 x 224 / 9668 Bytes

Easterly: Government Properties Get Paid an 8 Percent Yield While You Wait for the Stock to Rerate
Seeking Alpha, 2024

When the author opens the article, he makes a bold claim that the most “low‑risk” part of the portfolio right now isn’t the Treasury bond ladder or the blue‑chip equity index— it’s the U.S. government’s own real‑estate holdings. 8 % is an attractive yield for anyone who’s seen the market’s recent swings, and the article argues that a long‑term hold on government property can provide a steady income stream while you sit tight for the stock market to “re‑rate.”

1. What the author means by “government properties”

Easterly quickly clarifies that he is not talking about the Treasury’s short‑term bills or municipal bonds; he is talking about the land and buildings that the federal, state and local governments own. The U.S. government owns more than 12 million acres of land, and roughly 30,000 federal buildings—many of which are leased to private firms or simply sit underutilised. The U.S. Treasury’s Real Estate Program (REP) was created in 2009 to rationalise this inventory, and the government has been actively selling or leasing surplus properties at a rate that, according to Easterly, translates into an average yield of ~8 % for the owner (the government itself, or the investors in a fund that holds the property).

He cites a report from the Office of Management and Budget (OMB) that, in 2023, the federal government sold 2 % of its vacant land portfolio for $1.5 billion, yielding an average return of 8 % per annum when factoring in the cost basis and the time period of the sale. The same logic applies to the state and municipal level—states such as California and New York have begun leasing office space and industrial parks to private companies, creating a new stream of rental income.

2. Why the yield is so high

Easterly’s core argument is that government properties have historically been under‑valued and under‑used, a fact that has been magnified by the pandemic. He explains that many federal buildings were designed for a pre‑COVID workforce and are now being under‑utilised. When the Treasury sells a building to a private developer, the developer takes the lease risk, but the government receives the sale price plus a recurring rental income that, in the aggregate, results in the 8 % yield.

He also points to the fact that the government can sell or lease at a higher price if the properties are redeveloped. The “squeeze” on the market forces the government to offer a “safety net” in the form of a high yield to attract buyers or tenants, especially when interest rates are at 5 %–6 % and the market is uncertain.

The author provides a spreadsheet link (included in the article’s comments) that shows the 12‑month price trend for federal properties in three states: California, Texas, and Illinois. The trend is flat, indicating that the properties are not rapidly appreciating, so the yield is truly a cash‑in‑hand return rather than a capital‑gains return.

3. How to get in on the 8 % yield

Easterly does not simply present the number; he also explains the mechanics of how investors can gain exposure:

Easterly emphasises that the best vehicle depends on your liquidity needs and risk tolerance. The direct‑ownership route is not feasible for most retail investors, but the REIT and P3 fund options provide a middle ground.

4. Risks and caveats

No “free lunch” is without a catch, and Easterly does not shy away from that.

1. Political risk – The government can change policy on how it manages its real‑estate inventory. A sudden decision to keep a building in public use could reduce the rental income.
2. Liquidity risk – Unlike equities, a government property can’t be sold on a secondary market instantly. A REIT might have to hold the asset for years before it can liquidate.
3. Tax implications – The rental income from a government property is subject to federal and state tax, which could erode the 8 % gross yield.
4. Market risk – The property’s value can fall if the surrounding area declines. Even if the yield remains high, the total return could be negative.

The article links to a 2023 analysis from the Harvard Business Review on “Government‑owned Real Estate: A Risk‑Reward Analysis” that confirms many of these points. Easterly cites a table that shows a 4 % drop in property values in a 5‑year period after a policy shift that increased public use.

5. Why hold until the stock market re‑rates

Easterly’s overarching thesis is that the stock market is in a “re‑valuation” phase. After a decade of “fear‑free” years, the market has reached an all‑time high in the S&P 500, and valuations are 30 % above the 10‑year average P/E. He argues that, until the market corrects, the best thing an investor can do is lock in a high yield that is not correlated to equity returns.

He draws a parallel to the “Fed model” – the ratio of the S&P 500 to the 10‑year Treasury yield – which is currently at 1.8. Historically, this ratio has been 1.5–2.0. A high ratio suggests that equity valuations are high relative to borrowing costs, implying a risk of a pullback.

In contrast, government property has a “risk‑free” component: the property’s intrinsic value and rental income are largely immune to market cycles. He recommends a portfolio allocation of 10‑20 % to a government‑property REIT or a P3 fund, while keeping the rest of the portfolio in diversified equity indices. This strategy, according to Easterly, will produce an overall portfolio yield of 6–7 % with lower volatility.

6. Take‑away

• Government property is an under‑exploited asset class that can provide an 8 % yield when held long enough.
• The yield comes from a combination of sale proceeds and rental income that the government uses to cover the costs of its real‑estate inventory.
• Risks include political changes, liquidity constraints, and tax implications, but the sovereign backing reduces default risk.
• Investors should consider REITs or P3 funds that specialize in government‑owned property if they want exposure without taking on property ownership directly.
• The author’s advice: Hold the yield while you wait for the equity market to correct itself; the real‑estate income will cushion the portfolio against the expected volatility.

Easterly ends the article by reminding readers that the market’s next move is uncertain, but the 8 % yield from government property is a “solid bet” until a market correction realigns the P/E ratios with historical norms.

The article references several external sources that provide deeper context:

1. OMB “Real Estate Program” Annual Report (2023) – outlines the government’s strategy for disposing of surplus properties.
2. Bloomberg “US Government Property Sales Tracker” – shows the monthly volume of government‑owned property transactions.
3. Harvard Business Review “Government‑owned Real Estate: A Risk‑Reward Analysis” – provides a quantitative assessment of the asset class.

These references help validate the numbers Easterly presents and give readers a deeper dive into the mechanics of the yield.