UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
☒
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2021
OR
☐
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from To
Commission file number 001-36834
EASTERLY GOVERNMENT PROPERTIES, INC.
(Exact Name of Registrant as Specified in Its Charter)
Maryland
47-2047728
(State of Incorporation)
(IRS Employer Identification No.)
2001 K Street NW, Suite 775 North, Washington, D.C.
20006
(Address of Principal Executive Offices)
(Zip Code)
(202) 595-9500
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading
Symbol(s)
Name of each exchange on which registered
Common Stock
DEA
New York Stock Exchange
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large Accelerated Filer
Accelerated Filer
Non-Accelerated Filer
Smaller Reporting Company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒
As of October 26, 2021, the registrant had 86,138,038 shares of common stock, $0.01 par value per share, outstanding.
INDEX TO FINANCIAL STATEMENTS
Page
Part I: Financial Information
Item 1: Financial Statements:
Consolidated Financial Statements
Consolidated Balance Sheets as of September 30, 2021 and December 31, 2020 (unaudited)
1
Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2021 and 2020 (unaudited)
2
Consolidated Statements of Comprehensive Income for the Three and Nine Months Ended September 30, 2021 and 2020 (unaudited)
3
Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2021 and 2020 (unaudited)
4
Notes to the Consolidated Financial Statements
6
Item 2: Management’s Discussion and Analysis of Financial Condition and Results of Operations
21
Item 3: Quantitative and Qualitative Disclosures About Market Risk
39
Item 4: Controls and Procedures
Part II: Other Information
Item 1: Legal Proceedings
40
Item 1A: Risk Factors
Item 2: Unregistered Sales of Equity Securities and Use of Proceeds
Item 3: Defaults Upon Senior Securities
Item 4: Mine Safety Disclosures
Item 5: Other Information
Item 6: Exhibits
41
Signatures
Easterly Government Properties, Inc.
Consolidated Balance Sheets (unaudited)
(Amounts in thousands, except share amounts)
September 30, 2021
December 31, 2020
Assets
Real estate properties, net
$
2,287,208
2,208,661
Cash and cash equivalents
16,068
8,465
Restricted cash
7,680
6,204
Tenant accounts receivable
52,789
45,077
Intangible assets, net
157,906
163,387
Prepaid expenses and other assets
34,319
25,746
Total assets
2,555,970
2,457,540
Liabilities
Revolving credit facility
112,500
79,250
Term loan facilities, net
248,479
248,966
Notes payable, net
447,215
447,171
Mortgage notes payable, net
200,021
202,871
Intangible liabilities, net
20,686
25,406
Deferred revenue
89,077
92,576
Interest rate swaps
8,506
12,781
Accounts payable, accrued expenses and other liabilities
58,776
48,549
Total liabilities
1,185,260
1,157,570
Equity
Common stock, par value $0.01, 200,000,000 shares authorized,
86,116,538 and 82,106,256 shares issued and outstanding at
September 30, 2021 and December 31, 2020, respectively
861
821
Additional paid-in capital
1,521,446
1,424,787
Retained earnings
55,134
31,965
Cumulative dividends
(357,069
)
(291,652
Accumulated other comprehensive loss
(7,526
(11,351
Total stockholders’ equity
1,212,846
1,154,570
Non-controlling interest in Operating Partnership
157,864
145,400
Total equity
1,370,710
1,299,970
Total liabilities and equity
The accompanying notes are an integral part of these consolidated financial statements.
Consolidated Statements of Operations (unaudited)
(Amounts in thousands, except share and per share amounts)
For the three months ended September 30,
For the nine months ended September 30,
2021
2020
Revenues
Rental income
67,439
59,843
197,713
175,976
Tenant reimbursements
1,527
682
3,746
2,269
Other income
642
606
1,764
1,630
Total revenues
69,608
61,131
203,223
179,875
Expenses
Property operating
15,188
12,313
41,578
34,486
Real estate taxes
7,626
6,803
22,465
19,982
Depreciation and amortization
22,765
23,522
67,615
70,732
Acquisition costs
518
467
1,488
1,673
Corporate general and administrative
5,893
4,577
17,469
15,565
Total expenses
51,990
47,682
150,615
142,438
Other expense
Interest expense, net
(9,353
(8,628
(27,739
(26,535
Gain on the sale of operating property
777
—
1,307
Net income
9,042
4,821
26,176
10,902
(1,065
(557
(3,007
(1,275
Net income available to Easterly Government
Properties, Inc.
7,977
4,264
23,169
9,627
Properties, Inc. per share:
Basic
0.09
0.05
0.27
0.12
Diluted
Weighted-average common shares outstanding
83,961,693
80,334,976
83,306,654
77,144,791
84,472,257
80,928,844
83,774,752
77,745,370
Dividends declared per common share
0.265
0.260
0.785
0.780
Consolidated Statements of Comprehensive Income (unaudited)
(Amounts in thousands)
Other comprehensive income (loss):
Unrealized gain (loss) on interest rate swaps, net
1,180
1,232
4,275
(8,880
Other comprehensive income (loss)
Comprehensive income
10,222
6,053
30,451
2,022
Other comprehensive (income) loss attributable to
non-controlling interest
(167
(184
(450
1,000
Comprehensive income attributable to
8,990
5,312
26,994
1,747
Consolidated Statements of Cash Flows (unaudited)
Cash flows from operating activities
Adjustments to reconcile net income to net cash provided by operating activities
Straight line rent
(4,317
(2,106
Amortization of above- / below-market leases
(3,569
(4,499
Amortization of unearned revenue
(4,217
(2,138
Amortization of loan premium / discount
(57
(59
Amortization of deferred financing costs
1,164
1,137
Amortization of lease inducements
647
661
(1,307
Non-cash compensation
3,700
3,056
Other
69
46
Net change in:
(3,217
(17,675
(4,890
(10,169
Deferred revenue associated with operating leases
761
41,654
15,901
17,083
Net cash provided by operating activities
94,459
108,625
Cash flows from investing activities
Real estate acquisitions and deposits
(115,440
(130,107
Additions to operating properties
(14,070
(12,954
Additions to development properties
(5,278
(38,255
Proceeds from sale of operating property, net
7,336
Net cash used in investing activities
(127,452
(181,316
Cash flows from financing activities
Payment of deferred financing costs
(3,575
Issuance of common shares
90,914
143,201
Credit facility draws
159,500
183,500
Credit facility repayments
(126,250
(183,500
Repayments of mortgage notes payable
(2,948
(2,635
Dividends and distributions paid
(74,106
(67,884
Payment of offering costs
(1,463
(1,666
Net cash provided by financing activities
42,072
71,016
Net increase (decrease) in Cash and cash equivalents and Restricted cash
9,079
(1,675
Cash and cash equivalents and Restricted cash, beginning of period
14,669
15,549
Cash and cash equivalents and Restricted cash, end of period
23,748
13,874
Supplemental disclosure of cash flow information is as follows:
Cash paid for interest, net of capitalized interest
27,395
26,356
Supplemental disclosure of non-cash information
Additions to operating properties accrued, not paid
1,029
2,318
Additions to development properties accrued, not paid
1,022
8,309
Offering costs accrued, not paid
16
30
Deferred asset acquisition costs accrued, not paid
144
70
Contingent consideration accrued, not paid
336
Properties acquired for Common Units
20,790
21,550
Exchange of Common Units for Shares of Common Stock
(4,261
(3,076
Common stock
4,258
3,074
Total
5
Notes to the Consolidated Financial Statements (unaudited)
1. Organization and Basis of Presentation
The information contained in the following notes to the consolidated financial statements is condensed from that which would appear in the annual consolidated financial statements; accordingly, the consolidated financial statements included herein should be reviewed in conjunction with the consolidated financial statements for the fiscal year ended December 31, 2020, and related notes thereto, included in the Annual Report on Form 10-K of Easterly Government Properties, Inc. (the “Company”) for the year ended December 31, 2020 filed with the U.S. Securities and Exchange Commission (the “SEC”) on February 24, 2021.
The Company is a Maryland corporation that has elected to be taxed as a real estate investment trust (“REIT”) under the Internal Revenue Code of 1986, as amended (the “Code”), commencing with its taxable year ended December 31, 2015. The operations of the Company are carried on primarily through Easterly Government Properties LP (the “Operating Partnership”) and the wholly owned subsidiaries of the Operating Partnership. As used herein, the “Company,” “we,” “us,” or “our” refer to Easterly Government Properties, Inc. and its consolidated subsidiaries and partnerships, including the Operating Partnership, except where context otherwise requires.
We are an internally managed REIT, focused primarily on the acquisition, development, and management of Class A commercial properties that are leased to U.S. Government agencies that serve essential functions. We generate substantially all of our revenue by leasing our properties to such agencies, either directly or through the U.S. General Services Administration (“GSA”). Our objective is to generate attractive risk-adjusted returns for our stockholders over the long-term through dividends and capital appreciation.
We focus on acquiring, developing and managing U.S. Government leased properties that are essential to supporting the mission of the tenant agency and strive to be a partner of choice for the U.S. Government, working closely with the tenant agency to meet its needs and objectives. As of September 30, 2021, we wholly owned 83 operating properties in the United States, encompassing approximately 7.5 million leased square feet in the aggregate, including 82 operating properties that were leased primarily to U.S. Government tenant agencies and one operating property that was entirely leased to a private tenant. As of September 30, 2021, our operating properties were 99% leased. For purposes of calculating percentage leased, we exclude from the denominator total square feet that was unleased and to which we attributed no value at the time of acquisition. In addition, we wholly owned one property under development that we expect will encompass approximately 0.2 million leased square feet upon completion.
The Operating Partnership holds substantially all of our assets and conducts substantially all of our business. We are the sole general partner of the Operating Partnership. We owned approximately 88.5% of the aggregate limited partnership interests in the Operating Partnership (“common units”) at September 30, 2021. We believe that we have operated and have been organized in conformity with the requirements for qualification and taxation as a REIT for U.S. federal income tax purposes commencing with our taxable year ended December 31, 2015.
Principles of Consolidation
The accompanying consolidated financial statements are presented on the accrual basis of accounting in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and include the accounts of the Company, Easterly Government Properties TRS, LLC, Easterly Government Services, LLC, the Operating Partnership and its other subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation.
Basis of Presentation
The condensed consolidated financial statements included herein are unaudited; however, they include all adjustments (consisting only of normal recurring adjustments) which, in the opinion of management, are necessary to state fairly the consolidated financial position of the Company at September 30, 2021 and December 31, 2020, the consolidated results of operations for the three and nine months ended September 30, 2021 and 2020, and the consolidated cash flows for the nine months ended September 30, 2021 and 2020. The year-end condensed consolidated balance sheet data was derived from audited financial statements but does not include all disclosures required by GAAP. The results of operations for the interim periods presented are not necessarily indicative of the results to be expected for the full year.
The preparation of the consolidated financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosures of contingent assets and liabilities at the date of the balance sheet, and the reported amounts of revenues and expenses during the reporting period. We base our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, including the impact of extraordinary events such as the
novel coronavirus (COVID-19) pandemic, the results of which form the basis for making judgements about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.
2. Summary of Significant Accounting Policies
The significant accounting policies used in the preparation of the Company’s condensed consolidated financial statements are disclosed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020.
Reclassifications
Certain prior year amounts have been reclassified to conform to the current year presentation.
3. Real Estate and Intangibles
Acquisitions
During the nine months ended September 30, 2021, we acquired six operating properties in asset acquisitions, consisting of FBI – Knoxville, ICE – Louisville, USAO – Louisville, USAO – Springfield, NWS – Kansas City and VAR – Cleveland for an aggregate purchase price of $134.0 million. We allocated the aggregate purchase price of these acquisitions based on the estimated fair values of the acquired assets and assumed liabilities as follows (amounts in thousands):
Real estate
Land
6,186
Building
103,214
Acquired tenant improvements
9,539
Total real estate
118,939
Intangible assets
In-place leases
11,325
Acquired leasing commissions
3,436
Above-market leases
301
Total intangible assets
15,062
Intangible liabilities
Below-market leases
(1
Total intangible liabilities
Purchase price
134,000
We did not assume any debt upon acquisition of these properties. The intangible assets and liabilities of operating properties acquired during the nine months ended September 30, 2021 have a weighted average amortization period of 10.78 years as of September 30, 2021. During the nine months ended September 30, 2021, we included $5.4 million of revenues and $1.2 million of net income in our Consolidated Statements of Operations related to the operating properties acquired.
During the nine months ended September 30, 2021, we incurred $1.5 million of acquisition-related expenses mainly consisting of internal costs associated with property acquisitions.
Dispositions
On June 4, 2021, we sold SSA – Mission Viejo to a third party. Net proceeds from the sale of operating property were approximately $3.3 million and we recognized a gain on the sale of operating property of approximately $0.5 million for the nine months ended September 30, 2021.
On September 28, 2021, we sold United Technologies – Midland to a third party. Net proceeds from the sale of operating property were approximately $4.0 million and we recognized a gain on the sale of operating property of approximately $0.8 million for the nine months ended September 30, 2021.
7
Consolidated Real Estate and Intangibles
Real estate and intangibles consisted of the following as of September 30, 2021 (amounts in thousands):
218,091
Building and improvements
2,215,548
85,795
Construction in progress
28,060
Accumulated depreciation
(260,286
Total Real estate properties, net
264,991
64,489
Above market leases
17,541
Accumulated amortization
(189,115
Total Intangible assets, net
Below market leases
(73,483
52,797
Total Intangible liabilities, net
(20,686
The following table summarizes the scheduled amortization of the Company’s acquired above- and below-market lease intangibles for each of the five succeeding years as of September 30, 2021 (amounts in thousands):
Acquired Above-Market Lease Intangibles
Acquired Below-Market Lease Intangibles
374
(1,134
2022
1,413
(4,201
2023
1,390
(4,024
2024
1,341
(2,877
2025
1,286
(2,170
Above-market lease amortization reduces Rental income on our Consolidated Statements of Operations and below-market lease amortization increases Rental income on our Consolidated Statements of Operations.
8
4. Debt
At September 30, 2021, our consolidated borrowings consisted of the following (amounts in thousands):
Principal Outstanding
Interest
Current
Loan
Rate (1)
Maturity
Revolving credit facility:
Revolving credit facility (2)
L + 125bps
July 2025 (3)
Total revolving credit facility
Term loan facilities:
2016 term loan facility
100,000
2.67% (4)
March 2024
2018 term loan facility
150,000
3.91% (5)
July 2026
Total term loan facilities
250,000
Less: Total unamortized deferred financing fees
(1,521
Total term loan facilities, net
Notes payable:
2017 series A senior notes
95,000
4.05%
May 2027
2017 series B senior notes
50,000
4.15%
May 2029
2017 series C senior notes
30,000
4.30%
May 2032
2019 series A senior notes
85,000
3.73%
September 2029
2019 series B senior notes
3.83%
September 2031
2019 series C senior notes
90,000
3.98%
September 2034
Total notes payable
450,000
(2,785
Total notes payable, net
Mortgage notes payable:
DEA – Pleasanton
15,700
L + 150bps (6)
October 2023
VA – Golden
8,878
5.00% (6)
April 2024
MEPCOM – Jacksonville
7,059
4.41% (6)
October 2025
USFS II – Albuquerque
15,543
4.46% (6)
ICE – Charleston
15,161
4.21% (6)
January 2027
VA – Loma Linda
127,500
3.59% (6)
July 2027
CBP – Savannah
11,402
3.40% (6)
July 2033
Total mortgage notes payable
201,243
(1,285
Less: Total unamortized premium/discount
63
Total mortgage notes payable, net
Total debt
1,008,215
(1)
At September 30, 2021, the one-month LIBOR (“L”) was 0.08%. The current interest rate is not adjusted to include the amortization of deferred financing fees or debt issuance costs incurred in obtaining debt or any unamortized fair market value premiums. The spread over the applicable rate for each of our revolving credit facility, our 2018 term loan facility and our 2016 term loan facility (each as defined below) is based on the Company’s consolidated leverage ratio, as set forth in the respective loan agreements.
(2)
Our revolving credit facility had available capacity of $337.5 million at September 30, 2021 with an accordion feature that permits us to request additional lender commitments for up to $250.0 million of additional capacity, subject to the satisfaction of customary terms and conditions.
(3)
Our revolving credit facility has two six-month as-of-right extension options subject to certain conditions and the payment of an extension fee.
(4)
Entered into two interest rate swaps with an effective date of March 29, 2017 with an aggregate notional value of $100.0 million to effectively fix the interest rate at 2.67% annually, based on our consolidated leverage ratio, as defined in our 2016 term loan facility agreement.
9
(5)
Entered into four interest rate swaps with an effective date of December 13, 2018 with an aggregate notional value of $150.0 million to effectively fix the interest rate at 3.91% annually, based on our consolidated leverage ratio, as defined in our 2018 term loan facility agreement. The four interest rate swaps mature on June 19, 2023, which is not coterminous with the maturity date of 2018 term loan facility.
(6)
Effective interest rates are as follows: DEA – Pleasanton 1.80%, VA – Golden 5.03%, MEPCOM – Jacksonville 3.89%, USFS II Albuquerque 3.92%, ICE – Charleston 3.93%, VA – Loma Linda 3.78%, CBP – Savannah 4.12%.
On July 23, 2021, we entered into a second amended and restated senior unsecured credit agreement (the “second amended senior unsecured credit agreement”) governing our senior unsecured credit facility. The second amended senior unsecured credit agreement increased the borrowing capacity under our prior senior unsecured credit facility by $50.0 million for a total credit facility size of $650.0 million, consisting of: (i) a $450.0 million senior unsecured revolving credit facility (our “revolving credit facility”), and (ii) a $200.0 million senior unsecured term loan facility (our “2018 term loan facility”), up to $50.0 million of which will be available for a 364-day delayed draw period. Our revolving credit facility also includes an accordion feature that will provide us with additional capacity, subject to the satisfaction of customary terms and conditions, of up to $250.0 million.
The Operating Partnership is the borrower, and certain of our subsidiaries that directly own certain of our properties are guarantors under our senior unsecured credit facility. Our revolving credit facility has an initial four year term and will mature in July 2025, with two six-month as-of-right extension options, subject to certain conditions and the payment of an extension fee. Our 2018 term loan facility has a five year term and will mature in July 2026. In addition, our 2018 term loan facility is prepayable without penalty for the entire term of the loan.
Borrowings under our senior unsecured credit facility bear interest, at our option, at floating rates equal to either:
•
a Eurodollar rate equal to a periodic fixed rate equal to LIBOR plus, a margin ranging from 1.20% to 1.80% for advances under our revolving credit facility and a margin ranging from 1.20% to 1.70% for advances under our 2018 term loan facility; or
a fluctuating rate equal to the sum of (a) the highest of (x) Citibank, N.A.’s base rate, (y) the federal funds effective rate plus 0.50% and (z) the one-month Eurodollar rate plus 1.00% plus (b) a margin ranging from 0.20% to 0.80% for advances under our revolving credit facility and a margin ranging from 0.20% to 0.70% for advances under our 2018 term loan facility, in each case with a margin based on our leverage ratio.
If the Operating Partnership achieves certain sustainability targets as defined in the second amended senior unsecured credit agreement, the applicable margin will decrease by 0.01%.
In addition, on July 23, 2021, we entered into a fourth amendment to the loan agreement governing our $100.0 million senior unsecured term loan facility (our “2016 term loan facility”). The fourth amendment amends certain provisions in the loan agreement governing our 2016 term loan facility to conform to certain changes made to corresponding provisions in our second amended senior unsecured credit agreement.
Private Placement of Senior Unsecured Notes
On May 11, 2021, the Company and the Operating Partnership entered into a note purchase agreement pursuant to which the Operating Partnership would issue and sell an aggregate of up to $250.0 million of fixed rate, senior unsecured notes (the “Notes”) consisting of (i) 2.62% Series A Senior Notes due October 14, 2028, in an aggregate principal amount of $50.0 million, and (ii) 2.89% Series B Senior Notes due October 14, 2030 in an aggregate principal amount of up to $200.0 million.
On September 30, 2021, the Operating Partnership exercised its option under the note purchase agreement to increase the Series B tranche of the Notes to a principal amount of $200.0 million.
On October 14, 2021, the Operating Partnership issued and sold, an aggregate of $250.0 million of Notes pursuant to the note purchase agreement entered into on May 11, 2021. The Notes are unconditionally guaranteed by the Company and various subsidiaries of the Operating Partnership.
Financial Covenant Considerations
As of September 30, 2021, we were in compliance with all financial and other covenants related to our revolving credit facility, 2016 term loan facility, 2018 term loan facility, notes payable and mortgage notes payable.
10
Fair Value of Debt
As of September 30, 2021, the fair value of our revolving credit facility was determined by considering the short term maturity, variable interest rate and credit spreads. We deem the fair value of our revolving credit facility as a Level 3 measurement. At September 30, 2021, the carrying value of our revolving credit facility approximated fair value.
As of September 30, 2021, the fair value of our 2016 term loan facility was determined by considering the variable interest rate and credit spreads. We deem the fair value of our 2016 term loan facility as a Level 3 measurement. At September 30, 2021, the fair value of our 2016 term loan facility was $100.0 million.
As of September 30, 2021, the fair value of our 2018 term loan facility was determined by considering the variable interest rate and credit spreads. We deem the fair value of our 2018 term loan facility as a Level 3 measurement. At September 30, 2021, the fair value of our 2018 term loan facility was $150.0 million.
As of September 30, 2021, the fair value of our notes payable was determined by discounting future contractual principal and interest payments using prevailing market rates. We deem the fair value measurement of our notes payable instruments as a Level 3 measurement. At September 30, 2021, the fair value of our notes payable was $497.1 million.
As of September 30, 2021, the fair value of our mortgage notes payable was determined by discounting future contractual principal and interest payments using prevailing market rates. We deem the fair value measurement of our mortgage notes payable instruments as a Level 3 measurement. At September 30, 2021, the fair value of our mortgage notes payable was $211.4 million.
5. Derivatives and Hedging Activities
The following table sets forth the key terms and fair values of our interest rate swap derivatives, each of which was designated as a cash flow hedge as of September 30, 2021 (amounts in thousands):
Notional Amount
Fixed Rate
Floating Rate Index
Effective Date
Expiration Date
Fair Value
1.41
%
One-Month LIBOR
March 29, 2017
September 29, 2023
(2,181
2.71
December 13, 2018
June 19, 2023
(6,325
The table below sets forth the fair value of our interest rate derivatives as well as their classification on our Consolidated Balance Sheet (amounts in thousands):
Balance Sheet Line Item
As of September 30, 2021
Interest rate swaps - Asset
Interest rate swaps - Liability
(8,506
Cash Flow Hedges of Interest Rate Risk
The gains or losses on derivatives designated and that qualify as cash flow hedges is recorded in Accumulated other comprehensive income (loss) (“AOCI”) and will be reclassified to interest expense in the period that the hedged forecasted transactions affect earnings on the Company’s variable rate debt.
Amounts reported in AOCI related to derivatives designated as qualifying cash flow hedges will be reclassified to interest expense as interest payments are made on the Company’s variable rate debt. The Company estimates that $5.2 million will be reclassified from AOCI as an increase to interest expense over the next 12 months.
The table below presents the effects of our interest rate derivatives on our Consolidated Statements of Operations and Comprehensive Income (Loss) (amounts in thousands):
Unrealized gain (loss) recognized in AOCI
(160
(60
324
(11,643
Loss reclassified from AOCI into interest expense
(1,340
(1,292
(3,951
(2,763
11
Credit-Risk-Related Contingent Features
The Company has agreements with each of its derivative counterparties that contain a provision where the Company could be declared in default on its derivative obligations if repayment of the underlying indebtedness is accelerated by the lender due to the Company’s default on such indebtedness. As of September 30, 2021, the fair value of derivatives in a liability position, which includes accrued interest but excludes any adjustment for nonperformance risk, related to these agreements was $8.8 million. As of September 30, 2021, the Company had not breached the provisions of these agreements and had not posted any collateral related to these agreements. If the Company breached any of these provisions it would be required to settle its obligations under the agreements at their termination value of $8.8 million.
6. Fair Value Measurements
Accounting standards define fair value as the exit price, or the amount that would be received upon sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The standards also establish a hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. Observable inputs are inputs market participants would use in valuing the asset or liability developed based on market data obtained from sources independent of us. Unobservable inputs are inputs that reflect our assumptions about the factors market participants would use in valuing the asset or liability developed based upon the best information available in the circumstances. The hierarchy of these inputs is broken down into three levels: Level 1, defined as observable inputs such as quoted prices in active markets; Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable; and Level 3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions. Categorization within the valuation hierarchy is based upon the lowest level of input that is most significant to the fair value measurement.
Recurring fair value measurements
The fair values of our interest rate swaps are determined using widely accepted valuation techniques, including discounted cash flow analysis on the expected cash flows of each derivative. This analysis reflects the contractual terms of the derivatives, including the period to maturity, and uses observable market-based inputs, including interest rate curves and implied volatilities in such interest rates. While the Company determined that the majority of the inputs used to value its derivatives fall within Level 2 of the fair value hierarchy, the credit valuation adjustments associated with its derivatives utilize Level 3 inputs, such as estimates of current credit spreads to evaluate the likelihood of default by the Company and its counterparties. The Company has determined that the significance of the impact of the credit valuation adjustments made to its derivative contracts, which determination was based on the fair value of each individual contract, was not significant to the overall valuation. As a result, all of the Company’s derivatives held as of September 30, 2021 were classified as Level 2 of the fair value hierarchy.
The carrying values of cash and cash equivalents, restricted cash, accounts receivable, other assets and accounts payable and accrued expenses are reasonable estimates of fair values because of the short maturities of these instruments. For our disclosure of debt fair values in Note 4, we estimated the fair value of our 2016 term loan facility and our 2018 term loan facility based on the variable interest rate and credit spreads (categorized within Level 3 of the fair value hierarchy) and estimated the fair value of our other debt based on the discounted estimated future cash payments to be made on such debt (categorized within Level 3 of the fair value hierarchy); the discount rates used approximate current market rates for loans, or groups of loans, with similar maturities and credit quality, and the estimated future payments included scheduled principal and interest payments. Fair value estimates are made as of a specific point in time, are subjective in nature and involve uncertainties and matters of significant judgment. Settlement at such fair value amounts may not be possible and may not be a prudent management decision.
The table below presents the Company’s assets and liabilities measured at fair value on a recurring basis as of September 30, 2021, aggregated by the level in the fair value hierarchy within which those measurements fall (amounts in thousands):
Level 1
Level 2
Level 3
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7. Equity
The following table summarizes the changes in the Company’s stockholders’ equity for the three months ended September 30, 2021 and 2020 (amounts in thousands, except share amounts):
Shares
Common
Stock
Par
Value
Additional
Paid-in
Capital
Retained
Earnings
Cumulative
Dividends
Accumulated
Comprehensive
Income (Loss)
Non-
controlling
Interest in
Operating
Partnership
Three months ended September 30, 2021
Balance at June 30, 2021
83,931,290
839
1,471,928
47,157
(334,815
(8,539
157,967
1,334,537
Stock based compensation
216
1,117
1,333
($0.265 per share)
(22,254
(3,075
(25,329
Grant of unvested restricted stock
11,066
Redemption of common units for
shares of common stock
59,774
836
(837
Issuance of common stock, net
2,114,408
49,926
49,947
Unrealized gain on interest rate swaps,
net
1,013
167
1,065
Allocation of non-controlling interest
in Operating Partnership
(1,460
1,460
Balance at September 30, 2021
86,116,538
Three months ended September 30, 2020
Balance at June 30, 2020
79,655,374
797
1,371,293
25,367
(249,811
(13,618
149,004
1,283,032
247
788
1,035
($0.260 per share)
(20,720
(2,761
(23,481
88,750
1,263
(1,264
1,475,991
14
33,502
33,516
Unrealized gain on interest rate
swaps, net
1,048
184
557
(792
792
Balance at September 30, 2020
81,220,115
812
1,405,513
29,631
(270,531
(12,570
147,300
1,300,155
13
The following table summarizes the changes in the Company’s stockholders’ equity for the nine months ended September 30, 2021 and 2020 (amounts in thousands, except share amounts):
Nine months ended September 30, 2021
Balance at December 31, 2020
82,106,256
600
3,100
($0.785 per share)
(65,417
(8,689
Grant of unvested restricted stock, net
35,865
303,185
3,671,232
37
89,868
89,905
Contribution of Property for
common units
3,825
450
3,007
1,933
(1,933
Nine months ended September 30, 2020
Balance at December 31, 2019
74,832,292
748
1,257,319
20,004
(210,760
(4,690
137,220
1,199,841
712
2,344
($0.780 per share)
(59,771
(8,113
21,930
217,710
6,148,183
61
141,509
141,570
Unrealized loss on interest rate
(7,880
(1,000
1,275
2,900
(2,900
On January 4, 2021, the Company granted an aggregate of 164,178 performance-based long-term incentive plan units in the Operating Partnership (“LTIP units”) to members of management pursuant to the Easterly Government Properties, Inc. 2015 Equity Incentive Plan, as amended (the “2015 Equity Incentive Plan”), consisting of (i) 82,070 LTIP units that are subject to the Company achieving certain total shareholder return performance thresholds (on both an absolute and a relative basis) and (ii) 82,108 LTIP units that are subject to the Company achieving certain operational performance hurdles, in each case through a performance period ending on December 31, 2023. Earned performance-based LTIP units, if any, will vest when performance is determined following the end of the performance period on December 31, 2023. On January 4, 2021, the Company also granted an aggregate of 113,703 service-based LTIP units to members of management pursuant to the 2015 Equity Incentive Plan, which will vest on December 31, 2023, subject to the grantee’s continued employment and the other terms of the awards.
On March 17, 2021, the Company issued an aggregate of 4,462 shares of restricted common stock to certain employees pursuant to the 2015 Equity Incentive Plan. The shares of restricted common stock will vest upon the second anniversary of the grant date so long as the grantee remains an employee of the Company on such date.
On May 19, 2021, in connection with the Company’s 2021 annual meeting of stockholders, the Company issued an aggregate of 22,760 shares of restricted common stock and 6,647 LTIP units to its non-employee directors pursuant to the 2015 Equity Incentive Plan. The restricted common stock and LTIP unit grants will vest upon the earlier of the anniversary of the date of the grant or the next annual stockholder meeting, so long as the grantee remains a director on such date.
On August 10, 2021, the Company granted an aggregate of 11,066 shares of restricted common stock to a member of management pursuant to the 2015 Equity Incentive Plan, of which 6,640 shares will vest on August 10, 2023, and 4,426 shares will vest on August 10, 2025, in each case subject to their continued employment with the Company and the other terms of the award.
During the nine months ended September 30, 2021, 32,385 LTIP units and 2,423 shares of restricted common stock were forfeited in connection with employee departures under the terms of the applicable award agreements.
A summary of the Company’s shares of restricted common stock and LTIP unit awards at September 30, 2021 is as follows:
Restricted Shares
Restricted
Shares Weighted
Average Grant
Date Fair Value
Per Share
LTIP Units (1)
LTIP Units
Weighted
Outstanding, December 31, 2020
89,891
19.36
492,180
19.88
Vested
(39,750
21.50
(93,085
18.55
Granted
38,288
21.08
284,528
22.18
Forfeited
(2,423
18.36
(32,385
21.03
Outstanding, September 30, 2021
86,006
19.16
651,238
21.02
Reflects the number of LTIP units issued to the grantee on the grant date, which may be different from the number of LTIP units actually earned in the case of performance-based LTIP units.
The Company recognized $3.7 million in compensation expense related to its shares of restricted common stock and the LTIP unit awards for the nine months ended September 30, 2021. As of September 30, 2021, unrecognized compensation expense for both sets of awards was $7.8 million, which will be amortized over the applicable vesting period.
A summary of dividends declared by the Company’s board of directors per share of common stock and per common unit at the date of record is as follows:
Quarter
Declaration Date
Record Date
Payment Date
Dividend (1)
Q1 2021
April 29, 2021
May 14, 2021
May 26, 2021
Q2 2021
July 27, 2021
August 12, 2021
August 24, 2021
Q3 2021
October 28, 2021
November 12, 2021
November 24, 2021
Prior to the end of the performance period as set forth in the applicable LTIP unit award, holders of performance-based LTIP units are entitled to receive dividends per LTIP unit equal to 10% of the dividend paid per common unit. After the end of the performance period, the number of LTIP units, both vested and unvested, that LTIP award recipients have earned, if any, are entitled to receive dividends in an amount per LTIP unit equal to dividends, both regular and special, payable per common unit. Holders of LTIP units that are not subject to the attainment of performance goals are entitled to receive dividends per LTIP unit equal to 100% of the dividend paid per common unit beginning on the grant date.
Offering of Common Stock on a Forward Basis
On August 11, 2021, the Company and the Operating Partnership entered into an underwriting agreement with RBC Capital Markets, LLC and BMO Capital Markets Corp., as underwriters, RBC Capital Markets, LLC and BMO Capital Markets Corp., as forward sellers, and Royal Bank of Canada and Bank of Montreal, as forward purchasers, in connection with an offering of 6,300,000 shares of the Company’s common stock. The Company also entered into separate forward sale agreements with each of the forward purchasers (the “Forward Sales Agreements”), pursuant to which the forward purchasers borrowed and sold to the underwriters an aggregate of 6,300,000 shares of the Company’s common stock. The Company expects to physically settle the Forward Sale Agreements and receive proceeds, subject to certain adjustments, from the sale of those shares of its common stock upon one or more such physical settlements within approximately one year. Although the Company expects to settle the Forward Sale Agreements entirely by the physical delivery of shares of its common stock for cash proceeds, it may also elect to cash or net-share settle all or a portion of its obligations under the Forward Sale Agreements, in which case, the Company may receive, or may owe, cash or shares of its common stock from or to the forward purchasers. The Forward Sale Agreements provide for an initial forward price of $21.64 per share, subject to certain adjustments pursuant to the terms of each of the Forward Sale Agreements. The Forward Sale Agreements are subject to early termination or settlement under certain circumstances.
15
ATM Programs
On each of March 4, 2019 and December 20, 2019, we entered into separate equity distribution agreements with each of Citigroup Global Markets Inc., BMO Capital Markets Corp., BTIG, LLC, Capital One Securities, Inc., Jefferies LLC, Raymond James & Associates, Inc., RBC Capital Markets, LLC, Truist Securities, Inc. (f/k/a SunTrust Robinson Humphrey, Inc.) and Wells Fargo Securities, LLC pursuant to which we may issue and sell shares of our common stock having an aggregate offering price of up to $200.0 million and $300.0 million, respectively, from time to time (the “2019 ATM Programs”) in negotiated transactions or transactions that are deemed to be “at the market” offerings as defined in Rule 415 under the Securities Act of 1933, as amended (the “Securities Act”). The ATM Programs implemented on March 4, 2019 and December 20, 2019 are referred to as the “March 2019 ATM Program” and “December 2019 ATM Program” respectively. Under each of the 2019 ATM Programs, we may also enter into one or more forward transactions (each, a “forward sale transaction”) under separate master forward sale confirmations and related supplemental confirmations with each of Citibank, N.A., Bank of Montreal, Jefferies LLC, Raymond James & Associates, Inc., Royal Bank of Canada and Wells Fargo Bank, National Association and, under the December 2019 ATM Program only, Truist Bank, for the sale of shares of our common stock on a forward basis.
On June 22, 2021, we entered into separate equity distribution agreements with each of Citigroup Global Markets Inc., BMO Capital Markets Corp., BTIG, LLC, Capital One Securities, Inc., CIBC World Markets Corp., Jefferies LLC, Raymond James & Associates, Inc., RBC Capital Markets, LLC, Truist Securities, Inc. and Wells Fargo Securities, LLC pursuant to which we may issue and sell shares of our common stock having an aggregate offering price of up to $300.0 million from time to time (the “2021 ATM Program”) in negotiated transactions or transactions that are deemed to be “at the market” offerings as defined in Rule 415 under the Securities Act. Under the 2021 ATM Program, we may also enter into one or more forward sale transactions under separate master forward sale confirmations and related supplemental confirmations with each of Citigroup Global Markets Limited, Bank of Montreal, Canadian Imperial Bank of Commerce, Jefferies LLC, Raymond James & Associates, Inc., Royal Bank of Canada, Truist Bank and Wells Fargo Bank, National Association for the sale of shares of our common stock on a forward basis.
The following table sets forth certain information with respect to issuances under each of the 2019 ATM Programs during the quarters ended March 31, 2021, June 30, 2021 and September 30, 2021 (amounts in thousands except share amounts):
March 2019 ATM Program
December 2019 ATM Program
For the Three Months Ended:
Number of Shares Issued(1)
Net Proceeds(1)
March 31, 2021
1,556,824
39,998
June 30, 2021
246,363
6,451
1,868,045
43,556
3,424,869
83,554
Shares issued by the Company, which were all issued in settlement of forward sales transactions. Additionally, as of September 30, 2021, the Company had entered into forward sales transactions under the December 2019 ATM Program for the sale of an additional 1,885,289 shares of its common stock that have not yet been settled. Subject to its right to elect net share settlement, the Company expects to physically settle the forward sales transactions by the maturity dates set forth in each applicable forward sale transaction placement notice, which dates range from January 2022 to July 2022. Assuming the forward sales transactions are physically settled in full utilizing a net weighted average initial forward sales price of $21.94 per share, the Company expects to receive net proceeds of approximately $41.4 million, after deducting offering costs, subject to adjustments in accordance with the applicable forward sale transaction. The Company accounted for the forward sale agreements as equity.
No sales of shares of the Company’s common stock were made under the 2021 ATM Program during the quarters ended June 30, 2021 and September 30, 2021.
The Company used the net proceeds received from such sales for general corporate purposes. As of September 30, 2021, the Company had approximately $300.0 million of gross sales of its common stock available under the 2021 ATM Program, $98.9 million of gross sales of its common stock available under the December 2019 ATM Program and no remaining availability under the March 2019 ATM Program.
Contribution of Property for Common Units
On May 20, 2021, the Company acquired NWS – Kansas City for which it paid, as partial consideration, 975,452 common units. The issuance of the common units was effected in reliance upon an exemption from registration provided by Section 4(a)(2) under the Securities Act.
8. Earnings Per Share
Basic earnings or loss per share of common stock (“EPS”) is calculated by dividing net income attributable to common stockholders by the weighted average shares of common stock outstanding for the periods presented. Diluted EPS is computed after adjusting the basic EPS computation for the effect of dilutive common equivalent shares outstanding during the periods presented. Unvested restricted shares of common stock and unvested LTIP units are considered participating securities, which require the use of the two-class method for the computation of basic and diluted earnings per share.
The following table sets forth the computation of the Company’s basic and diluted earnings per share of common stock for the three and nine months ended September 30, 2021 and 2020 (amounts in thousands, except per share amounts):
Numerator
Less: Non-controlling interest in Operating
Less: Dividends on participating securities
(120
(72
(350
(217
Net income available to common stockholders
7,857
4,192
22,819
9,410
Denominator for basic EPS
Dilutive effect of share-based compensation awards (1)
49,200
51,495
50,299
54,318
Dilutive effect of LTIP units (2)
425,317
537,446
384,694
514,607
Dilutive effect of shares issuable under forward sale agreements (3)
36,047
4,927
33,105
31,654
Denominator for diluted EPS
Basic EPS
Diluted EPS
During both the three and nine months ended September 30, 2021, there were 11,066 unvested share-based compensation awards that were not included in the computation of diluted earnings per share because to do so would have been antidilutive for the period.
During both the three and nine months ended September 30, 2021, there were 195,096 unvested performance-based LTIP units that were not included in the computation of diluted earnings per share because to do so would have been antidilutive for the period. During both the three and nine months ended September 30, 2020, there were 74,481 unvested performance-based LTIP units that were not included in the computation of diluted earnings per share because to do so would have been antidilutive for the period.
During the three and nine months ended September 30, 2021, there were 435,289 and 6,735,289 shares, respectively, of underlying unsettled forward sales transactions that were not included in the computation of diluted earnings per share because to do so would have been antidilutive for the period. During the three and nine months ended September 30, 2020, there were 3,747,232 and 2,397,232 shares, respectively, of underlying unsettled forward sales transactions that were not included in the computation of diluted earnings per share because to do so would have been antidilutive for the period.
9. Leases
Lessor
The Company leases commercial space to the U.S. Government through the GSA or other federal agencies or nongovernmental tenants. These leases may contain extension options that are predominately at the sole discretion of the tenant. Certain of our leases contain a “soft-term” period of the lease, meaning that the U.S. Government tenant agency has the right to terminate the lease prior to its stated lease end date. While certain of our leases are contractually subject to early termination, we do not believe that our tenant
17
agencies are likely to terminate these leases early given the build-to-suit features at the properties subject to the leases, the weighted average age of these properties based on the date the property was built or renovated-to-suit, where applicable (approximately 15.9 years as of September 30, 2021), the mission-critical focus of the properties subject to the leases and the current level of operations at such properties. Certain lease agreements include variable lease payments that, in the future, will vary based on changes in inflationary measures, real estate tax rates, usage, or share of expenditures of the leased premises.
The following table summarizes the maturity of fixed lease payments under the Company’s leases as of September 30, 2021 (amounts in thousands):
Payments due by period
Thereafter
Fixed lease payments
1,887,601
55,191
209,229
194,390
178,731
167,317
1,082,743
Lessee
In August 2020, we entered into a lease agreement for office space in Washington, D.C. to replace our previous sublease that commenced March 2016 and was terminated in March 2021. This new lease commenced in March 2021 and expires in August 2026. We also lease office space in San Diego, CA under an operating lease that commenced in February 2015 and expires in April 2022.
The commenced leases include variable lease payments that, in the future, will vary based on changes in real estate tax rates, usage, or share of expenditures of the leased premises. The Company has elected not to separate lease and nonlease components for its corporate office leases.
As of September 30, 2021, the unamortized balances associated with the Company’s right-of-use operating lease asset and operating lease liability were $1.5 million and $1.7 million, respectively. As of December 31, 2020, the unamortized balance associated with the Company’s right-of-use operating lease asset and operating lease liability for the Company’s two commenced office leases was $0.4 million. The Company used its incremental borrowing rate, which was arrived at utilizing prevailing market rates and the spread on our revolving credit facility, in order to determine the net present value of the minimum lease payments.
The following table provides quantitative information for the Company’s commenced operating leases for the three and nine months ended September 30, 2021 and 2020 (amounts in thousands):
Operating leases costs
119
115
387
344
In addition, the maturity of fixed lease payments under the Company’s commenced corporate office leases as of September 30, 2021 is summarized in the table below (amounts in thousands):
1,867
101
278
277
446
456
309
18
10. Revenue
The table below sets forth revenue from tenant construction projects and the associated project management income disaggregated by tenant agency for the three and nine months ended September 30, 2021 and 2020 (amounts in thousands):
Tenant
Federal Bureau of Investigation (“FBI”)
1,141
411
1,791
Department of Veteran Affairs (“VA”)
352
779
Environmental Protection Agency (“EPA”)
204
94
Internal Revenue Service (“IRS”)
29
127
77
U.S. Citizenship and Immigration Services (“USCIS”)
108
Department of Energy (“DOE”)
95
Food and Drug Administration (“FDA”)
58
203
82
254
U.S. Joint Staff Command (“JSC”)
34
32
60
73
Department of Transportation (“DOT”)
49
General Services Administration - Other
25
Military Entrance Processing Command (“MEPCOM”)
66
Immigration and Customs Enforcement (“ICE”)
Federal Emergency Management Agency (“FEMA”)
The Judiciary of the U.S. Government (“JUD”)
Bureau of the Fiscal Service (“BFS”)
27
National Park Services (“NPS”)
19
U.S. Coast Guard (“USCG”)
Health Resources and Services Administration (“HRSA”)
Patent and Trademark Office (“PTO”)
Customs and Border Protection (“CBP”)
Social Security Administration (“SSA”)
1,639
795
4,090
2,556
The balance in Accounts receivable related to tenant construction projects and the associated project management income was $3.7 million as of September 30, 2021 and $3.0 million as of December 31, 2020.
The duration of the majority of tenant construction project reimbursement arrangements are less than a year and payment is typically due once a project is complete and work has been accepted by the tenant. There were no projects on going as of September 30, 2021 with a duration of greater than one year.
During the three and nine months ended September 30, 2021 and 2020, the Company recognized $0.1 million, $0.2 million, $0.1 million and $0.5 million, respectively, in parking garage income generated from the operations of parking garages situated on the Various GSA – Buffalo property and on the Various GSA – Portland property. The monthly and transient daily parking revenue falls within the scope of Revenue from Contracts with Customers (“ASC 606”) and is accounted for at the point in time when control of the goods or services transfers to the customer and the Company’s performance obligation is satisfied. The balance in Accounts receivable related to parking garage income was less than $0.1 million as of September 30, 2021, and less than $0.1 million as of December 31, 2020.
During the three and nine months ended September 30, 2021 and 2020, the Company recognized $0.3 million, $1.0 million, $0.2 million and $0.3 million in income for providing COVID-19 related cleaning services to certain tenants. The income falls within the scope of ASC 606 and is recognized over time as the performance obligation is satisfied. The balance in Accounts receivable related to these services was $0.2 million as of September 30, 2021, and $0.3 million as of December 31, 2020.
There were no contract assets or liabilities as of September 30, 2021 or December 31, 2020.
11. Concentrations Risk
Concentrations of credit risk arise for the Company when multiple tenants of the Company are engaged in similar business activities, are located in the same geographic region or have similar economic features that impact in a similar manner their ability to meet contractual obligations, including those to the Company. The Company regularly monitors its tenant base to assess potential concentrations of credit risk.
As stated in Note 1 above, the Company leases commercial space to the U.S. Government or non-governmental tenants. At September 30, 2021, the U.S. Government accounted for approximately 98.6% of our total annualized lease income and non-governmental tenants accounted for the remaining approximately 1.4%.
Seventeen of our 83 operating properties are located in California, accounting for approximately 17.7% of our total leased square feet and approximately 23.4% of our total annualized lease income as of September 30, 2021. To the extent that weak economic or real estate conditions or natural disasters affect California more severely than other areas of the country, our business, financial condition and results of operations could be significantly impacted.
12. Subsequent Events
For its consolidated financial statements as of September 30, 2021, the Company evaluated subsequent events and noted the following significant events.
On October 13, 2021, the Company formed a new joint venture (the “JV”) with a global investor (the “JV Partner”) to fund the acquisition of a portfolio of ten properties anticipated to encompass 1,214,165 leased square feet (the “Portfolio Acquisition”) in exchange for a 47.0% stake in the JV. The Company will retain a 53.0% stake in the JV, subject to adjustment as set forth in the applicable JV documentation, and will act as manager of the Portfolio Acquisition properties, with customary rights and obligations, and will receive customary fees and incentives.
The JV will serve as the acquisition vehicle for the Portfolio Acquisition and has been assigned the rights of the purchase and sale agreement, entered into by the Operating Partnership on September 30, 2021. The aggregate contractual purchase price for the Portfolio Acquisition is $635.6 million and the portfolio is 100% leased to the Department of Veterans Affairs (VA) with a weighted average lease term of 19.6 years. On October 13, 2021, the JV closed on two of the ten properties included in the Portfolio Acquisition, consisting of VA outpatient clinics located in Lubbock, Texas (VA – Lubbock) and Lenexa, Kansas (VA – Lenexa). The remaining eight properties are either ready for future acquisition or currently under construction. The Company expects the JV to close on the remaining Portfolio Acquisition properties on a rolling basis by the end of 2023.
On October 14, 2021, the Company acquired a 489,316 leased square foot USCIS facility in Kansas City, Missouri. The building was substantially renovated-to-suit in 1999. The facility is primarily leased to the GSA for beneficial use of the USCIS and has lease expirations ranging from 2024 to 2042. In conjunction with the acquisition, the Company assumed $51.5 million of mortgage notes payable.
On November 1, 2021, the Company acquired an 80,000 square foot VA facility located in the Midwest United States. The building is a build-to-suit property that was completed during 2021. The facility is leased to the VA and has a lease expiration of May 2041.
20
Item 2.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
Forward-Looking Statements
This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended (the “Securities Act”) and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). We caution investors that forward-looking statements are based on management’s beliefs and on assumptions made by, and information currently available to, management. When used, the words “anticipate”, “believe”, “estimate”, “expect”, “intend”, “may”, “might”, “plan”, “potential”, “project”, “result”, “seek”, “should”, “target”, “will”, and similar expressions which do not relate solely to historical matters are intended to identify forward-looking statements. These statements are subject to risks, uncertainties, and assumptions and are not guarantees of future performance, which may be affected by known and unknown risks, trends, uncertainties, and factors that are beyond our control. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those anticipated, estimated, or projected. We expressly disclaim any responsibility to update our forward-looking statements, whether as a result of new information, future events, or otherwise. Accordingly, investors should use caution in relying on forward-looking statements, which are based on results and trends at the time they are made, to anticipate future results or trends.
Some of the risks and uncertainties that may cause our actual results, performance, or achievements to differ materially from those expressed or implied by forward-looking statements include, among others, the following:
the factors included under the heading “Risk Factors” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020 and the factors included under the heading “Risk Factors” in the Company’s other public filings;
risks associated with our dependence on the U.S. Government and its agencies for substantially all of our revenues, including credit risk and risk that the U.S. Government reduces its spending on real estate or that it changes its preference away from leased properties;
risks associated with ownership and development of real estate;
the risk of decreased rental rates or increased vacancy rates;
loss of key personnel;
the continuing adverse impact of the novel coronavirus (COVID-19) on the U.S., regional and global economies and our financial condition and results of operations;
general volatility of the capital and credit markets and the market price of our common stock;
the risk we may lose one or more major tenants;
difficulties in completing and successfully integrating acquisitions;
failure of acquisitions or development projects to occur at anticipated levels or yield anticipated results;
risks associated with our joint venture activities;
risks associated with actual or threatened terrorist attacks;
intense competition in the real estate market that may limit our ability to attract or retain tenants or re-lease space;
insufficient amounts of insurance or exposure to events that are either uninsured or underinsured;
uncertainties and risks related to adverse weather conditions, natural disasters and climate change;
exposure to liability relating to environmental and health and safety matters;
limited ability to dispose of assets because of the relative illiquidity of real estate investments and the nature of our assets;
exposure to litigation or other claims;
risks associated with breaches of our data security;
risks associated with our indebtedness, including failure to refinance current or future indebtedness on favorable terms, or at all; failure to meet the restrictive covenants and requirements in our existing and new debt agreements; fluctuations in interest rates and increased costs to refinance or issue new debt;
risks associated with derivatives or hedging activity; and
risks associated with mortgage debt or unsecured financing or the unavailability thereof, which could make it difficult to finance or refinance properties and could subject us to foreclosure.
For a further discussion of these and other factors, see the section entitled “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2020, as may be supplemented or amended from time to time.
Overview
References to “we,” “our,” “us” and “the Company” refer to Easterly Government Properties, Inc., a Maryland corporation, together with our consolidated subsidiaries including Easterly Government Properties LP, a Delaware limited partnership, which we refer to herein as the Operating Partnership.
We are an internally managed real estate investment trust, or REIT, focused primarily on the acquisition, development and management of Class A commercial properties that are leased to U.S. Government agencies that serve essential functions. We generate substantially all of our revenue by leasing our properties to such agencies, either directly or through the U.S. General Services Administration, or GSA. Our objective is to generate attractive risk-adjusted returns for our stockholders over the long term through dividends and capital appreciation.
We focus on acquiring, developing and managing U.S. Government leased properties that are essential to supporting the mission of the tenant agency and strive to be a partner of choice for the U.S. Government, working closely with the tenant agency to meet its needs and objectives. As of September 30, 2021, we wholly owned 83 operating properties in the United States, encompassing approximately 7.5 million leased square feet in the aggregate, including 82 operating properties that were leased primarily to U.S. Government tenant agencies, and one operating property that was entirely leased to a private tenant. As of September 30, 2021, our operating properties were 99% leased. For purposes of calculating percentage leased, we exclude from the denominator total square feet that was unleased and to which we attributed no value at the time of acquisition. In addition, we wholly owned one property under development that we expect will encompass approximately 0.2 million leased square feet upon completion.
The Operating Partnership holds substantially all of our assets and conducts substantially all of our business. We are the sole general partner of the Operating Partnership and owned approximately 88.5% of the aggregate limited partnership interests in the Operating Partnership, which we refer to herein as common units, as of September 30, 2021. We have elected to be taxed as a REIT and we believe that we have operated and have been organized in conformity with the requirements for qualification and taxation as a REIT for U.S. federal income tax purposes commencing with our taxable year ended December 31, 2015.
Impact of the COVID-19 Pandemic
The novel coronavirus, or COVID-19, pandemic has caused and continues to cause significant disruptions to the United States, regional and global economies and has contributed to significant volatility and negative pressure in financial markets.
We continue to carefully monitor the COVID-19 pandemic and its potential impact on our business. We are following guidelines established by the Centers for Disease Control and the World Health Organization and orders issued by the state and local governments where we operate. In addition, we have taken a number of precautionary steps to safeguard our business and our employees from COVID-19, including, but not limited to, implementing non-essential travel restrictions and facilitating telecommuting arrangements for our employees. We have taken these precautionary steps while maintaining business continuity so that we can continue to deliver service to and meet the demands of our tenants, including our U.S. Government tenant agencies.
The ability of our employees, including those working remotely, to securely access our IT networks and related systems has been a critical component of our ability to maintain business continuity during the COVID-19 pandemic. During this time, we have made additional investments in our IT networks and enhanced our existing cybersecurity plan, which utilizes standards established by reference to the National Institute of Standards (“NIST”) framework. As part of our ongoing cybersecurity plan, we conduct cybersecurity awareness training at least annually for all our employees, carry out quarterly control reviews, periodic penetration tests and annual investments in our security infrastructure, perform an assessment at least annually of our cybersecurity program against the NIST framework and conduct ongoing phishing simulations to raise awareness of critical security threats. The Audit Committee of our Board of Directors oversees our risk management processes related to cybersecurity, including discussing no less than annually our cybersecurity plan with management or our internal auditor.
The operations of many of our U.S. Government tenant agencies are deemed essential. We are working closely with our tenants to follow directions from the various federal government tenant agencies with respect to building operations within our portfolio, and
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have issued guidance for our vendors and building engineers grounded in applicable federal, state and local guidelines. Whenever we learn of a confirmed case of COVID-19 involving an individual known to have been in one of our buildings, we immediately take additional steps in collaboration with our tenants and vendors to disinfect and sanitize the affected spaces and all common areas in the building.
To date, the impact of the COVID-19 pandemic on our business and financial condition has not been significant. Substantially all of our revenue continues to be generated through the receipt of rental payments from U.S. Government tenant agencies, which accounted for 98.6% of our annualized lease income as of September 30, 2021. We expect that leases to agencies of the U.S. Government will continue to be the primary source of our revenues for the foreseeable future. Notwithstanding the recent volatility in the financial markets, we also believe that our capital structure will continue to provide us with the resources, financial flexibility and the capacity to support the continued growth of our business. Since January 1, 2021, we have issued an aggregate of 3,671,232 shares of our common stock, which were all issued in settlement of forward sales transactions, under our March 2019 ATM Program and December 2019 ATM Program (each as described below). As of October 26, 2021, there are 1,885,289 shares underlying forward sale transactions that have not yet been settled. Subject to our right to elect net share settlement, we expect to physically settle the forward sales transactions between January 2022 and July 2022. As of September 30, 2021, we also had $337.5 million available under our $450.0 million senior unsecured revolving credit facility.
The future impact of the COVID-19 pandemic on our operations and financial condition will, however, depend on future developments, which are highly uncertain and cannot be predicted with confidence, including the scope, severity and duration of the pandemic, the actions taken to contain the pandemic or mitigate its impact, and the direct and indirect economic effects of the pandemic and containment measures, among others. See “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2020 for a discussion of the potential adverse impact of the COVID-19 pandemic on our business, results of operations and financial condition.
2021 Activity
On March 17, 2021, we acquired a 99,130 leased square foot Federal Bureau of Investigation (“FBI”) field office in Knoxville, Tennessee. The building is a built-to-suit property completed in 2010. The facility is leased to the GSA for beneficial use of the FBI with a lease expiration of August 2025.
On March 17, 2021, we acquired a 60,000 leased square foot U.S Attorney’s Office (“USAO”) facility in Louisville, Kentucky. The building is a built-to-suit property completed in 2011. The facility is leased to the GSA for beneficial use of the USAO with a lease expiration of December 2031.
On March 17, 2021, we acquired a 17,420 square foot U.S Immigration and Customs Enforcement (“ICE”) office in Louisville, Kentucky. The building is a built-to-suit office facility completed in 2011. The facility is leased to the GSA for beneficial use of ICE with a lease expiration of May 2021.
On April 22, 2021, we acquired a 43,600 square foot U.S. Attorney’s Office (“USAO”) in Springfield, Illinois. The building is a build-to-suit property completed in 2002. The facility is leased to the GSA for beneficial use of the USAO with a lease expiration of March 2038.
On May 20, 2021, we acquired a 94,378 square foot National Weather Service Facility (“NWS”) in Kansas City, Missouri. The building was originally constructed in 1998 and substantially renovated in 2020. The facility is leased to the GSA for beneficial use of the NWS with a lease expiration of December 2038.
On July 22, 2021, we acquired a 61,384 square foot U.S. Department of Homeland Security facility in Cleveland, Ohio. The building was originally constructed in 1981 and substantially renovated in 2016 and 2021. The facility is primarily leased to the GSA for beneficial use of ICE and the NWS and has lease expirations ranging from August 2031 to September 2040.
On October 14, 2021, we acquired a 489,316 leased square foot U.S. Citizenship and Immigration Services (“USCIS”) facility in Kansas City, Missouri. The building was substantially renovated-to-suit in 1999. The facility is primarily leased to the GSA for beneficial use of the USCIS and has lease expirations ranging from 2024 to 2042. In conjunction with the acquisition, we assumed $51.5 million of mortgage notes payable.
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On November 1, 2021, we acquired an 80,000 square foot Department of Veteran Affairs (“VA”) facility located in the Midwest United States. The building is a build-to-suit property that was completed during 2021. The facility is leased to the VA and has a lease expiration of May 2041.
On September 28, 2021, we sold United Technologies Midland to a third party. Net proceeds from the sale of operating property were approximately $4.0 million and we recognized a gain on the sale of operating property of approximately $0.8 million for the nine months ended September 30, 2021.
Other Transactions
On October 13, 2021, we formed a new joint venture (the “JV”) with a global investor (the “JV Partner”) to fund the acquisition of a portfolio of ten properties anticipated to encompass 1,214,165 leased square feet (the “Portfolio Acquisition”) in exchange for a 47.0% stake in the JV. We will retain a 53.0% stake in the JV, subject to adjustment as set forth in the applicable JV documentation, and will act as manager of the Portfolio Acquisition properties, with customary rights and obligations, and will receive customary fees and incentives.
The JV will serve as the acquisition vehicle for the Portfolio Acquisition and has been assigned the rights of the purchase and sale agreement entered into by the Operating Partnership on September 30, 2021. The aggregate contractual purchase price for the Portfolio Acquisition is $635.6 million and the portfolio is 100% leased to the Department of Veterans Affairs (VA) with a weighted average lease term of 19.6 years. On October 13, 2021, the JV closed on two of the ten properties included in the Portfolio Acquisition, consisting of VA outpatient clinics located in Lubbock, Texas (VA – Lubbock) and Lenexa, Kansas (VA – Lenexa). The remaining eight properties are either ready for future acquisition or currently under construction. We expect the JV to close on the remaining Portfolio Acquisition properties on a rolling basis by the end of 2023.
Operating Properties
As of September 30, 2021, our 83 operating properties were 99% leased with a weighted average annualized lease income per leased square foot of $34.47 and a weighted average age, based on the date of when the property was renovated or built-to-suit, of approximately 13.8 years. We calculate annualized lease income as annualized contractual base rent for the last month in a specified period, plus the annualized straight-line rent adjustments for the last month in such period and the annualized expense reimbursements earned by us for the last month in such period.
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Information about our leased operating properties as of September 30, 2021 is set forth in the table below:
Property Name
Location
Property
Type (1)
Tenant Lease
Expiration
Year (2)
Leased
Square
Feet
Annualized
Lease
Income
Percentage
of Total
Income per
Foot
U.S. Government Leased
VA - Loma Linda
Loma Linda, CA
OC
2036
327,614
16,412,702
6.2
50.10
JSC - Suffolk
Suffolk, VA
O
2028
403,737
8,214,348
3.1
20.35
Various GSA - Buffalo (3)
Buffalo, NY
2021 - 2036
270,809
8,042,038
3.0
29.70
IRS - Fresno
Fresno, CA
2033
180,481
6,967,344
2.7
38.60
FBI - Salt Lake
Salt Lake City, UT
2032
169,542
6,754,537
2.6
39.84
Various GSA - Chicago
Des Plaines, IL
202,185
6,720,376
33.24
Various GSA - Portland (4)
Portland, OR
2022 - 2028
211,156
6,538,366
2.5
30.96
PTO - Arlington
Arlington, VA
2035
190,546
6,177,283
2.4
32.42
VA - San Jose
San Jose, CA
2038
90,085
5,856,687
2.3
65.01
EPA - Lenexa
Lenexa, KS
2027
169,585
5,541,749
2.1
32.68
FBI - San Antonio
San Antonio, TX
148,584
5,215,515
2.0
35.10
FDA - Alameda
Alameda, CA
L
2039
69,624
4,664,712
1.8
67.00
FEMA - Tracy
Tracy, CA
W
210,373
4,611,427
21.92
FBI - Omaha
Omaha, NE
112,196
4,458,634
1.7
39.74
TREAS - Parkersburg
Parkersburg, WV
2041
182,500
4,250,040
1.6
23.29
EPA - Kansas City
Kansas City, KS
71,979
4,226,457
58.72
FBI / DEA - El Paso
El Paso, TX
O/W
203,269
4,102,400
20.18
VA - South Bend
Mishakawa, IN
86,363
4,034,394
46.71
ICE - Charleston (5)
North Charleston, SC
2022 / 2027
86,733
3,948,509
1.5
45.52
FDA - Lenexa
2040
59,690
3,904,552
65.41
USCIS - Lincoln
Lincoln, NE
137,671
3,813,570
27.70
VA - Mobile
Mobile, AL
79,212
3,801,080
47.99
DOI - Billings
Billings, MT
149,110
3,774,591
25.31
FBI - Birmingham
Birmingham, AL
96,278
3,705,569
1.4
38.49
FBI - New Orleans
New Orleans, LA
2029
137,679
3,678,345
26.72
FBI - Pittsburgh
Pittsburgh, PA
100,054
3,672,014
36.70
DOT - Lakewood
Lakewood, CO
122,225
3,540,410
28.97
FBI - Knoxville
Knoxville, TN
99,130
3,506,460
35.37
VA - Chico
Chico, CA
2034
51,647
3,277,010
1.3
63.45
USFS II - Albuquerque
Albuquerque, NM
2026
98,720
3,143,422
1.2
31.84
FDA - College Park
College Park, MD
80,677
3,060,351
37.93
FBI - Richmond
Richmond, VA
96,607
3,057,054
31.64
USCIS - Tustin
Tustin, CA
66,818
3,038,090
45.47
OSHA - Sandy
Sandy, UT
75,000
3,010,443
40.14
USFS I - Albuquerque
92,455
3,003,143
32.48
FBI - Albany
Albany, NY
69,476
2,874,579
1.1
41.38
VA - Orange
Orange, CT
56,330
2,811,585
49.91
DEA - Upper Marlboro
Upper Marlboro, MD
2037
50,978
2,773,915
54.41
ICE - Albuquerque
71,100
2,752,678
38.72
JUD - Del Rio
Del Rio, TX
C/O
89,880
2,726,978
30.34
DEA - Vista
Vista, CA
54,119
2,690,635
1.0
49.72
DEA - Pleasanton
Pleasanton, CA
42,480
2,688,502
63.29
JUD - El Centro
El Centro, CA
43,345
2,659,873
61.37
FBI - Mobile
76,112
2,638,190
34.66
SSA - Charleston
Charleston, WV
110,000
2,606,498
23.70
DEA - Sterling
Sterling, VA
49,692
2,575,432
51.83
USAO - Louisville
Louisville, KY
2031
60,000
2,451,797
0.9
40.86
TREAS - Birmingham
83,676
2,448,654
29.26
DEA - Dallas Lab
Dallas, TX
49,723
2,415,077
48.57
DHA - Aurora
Aurora, CO
101,285
2,340,113
23.10
JUD - Charleston
Charleston, SC
52,339
2,333,282
44.58
FBI - Little Rock
Little Rock, AR
102,377
2,314,757
22.61
Various GSA - Cleveland (6)
Brooklyn Heights, OH
2028 - 2040
61,384
2,232,202
36.36
DEA - Dallas
71,827
2,224,141
30.97
MEPCOM - Jacksonville
Jacksonville, FL
2,204,839
0.8
73.49
U.S. Government Leased (Cont.)
CBP - Savannah
Savannah, GA
35,000
2,191,933
62.63
DOE - Lakewood
115,650
2,093,583
18.10
NWS - Kansas City
Kansas City, MO
94,378
2,088,585
22.13
JUD - Jackson
Jackson, TN
73,397
2,072,436
28.24
DEA - Santa Ana
Santa Ana, CA
39,905
1,901,162
0.7
47.64
NPS - Omaha
62,772
1,790,405
28.52
ICE - Otay
San Diego, CA
2022 - 2027
49,457
1,788,962
36.17
VA - Golden
Golden, CO
56,753
1,742,022
30.69
CBP - Sunburst
Sunburst, MT
33,000
1,619,940
0.6
49.09
USCG - Martinsburg
Martinsburg, WV
59,547
1,613,158
27.09
DEA - Birmingham (7)
35,616
1,590,100
44.65
JUD - Aberdeen
Aberdeen, MS
46,979
1,505,573
32.05
GSA - Clarksburg
Clarksburg, WV
63,750
1,472,868
DEA - North Highlands
Sacramento, CA
37,975
1,464,798
38.57
USAO - Springfield
Springfield, IL
43,600
1,408,624
0.5
32.31
VA - Charleston
97,718
1,383,687
14.16
DEA - Albany
31,976
1,360,800
42.56
DEA - Riverside
Riverside, CA
34,354
1,254,917
36.53
SSA - Dallas
27,200
1,036,871
0.4
38.12
HRSA - Baton Rouge
Baton Rouge, LA
27,569
850,262
0.3
30.84
VA - Baton Rouge
804,186
26.81
ICE - Pittsburgh (8)
2023 / 2032
25,245
803,823
JUD - South Bend
South Bend, IN
30,119
792,569
26.31
ICE - Louisville
17,420
713,911
40.98
DEA - San Diego
16,100
543,355
0.2
33.75
SSA - San Diego
10,059
424,038
42.16
DEA - Bakersfield
Bakersfield, CA
9,800
389,559
39.75
Subtotal
7,461,796
259,189,476
99.8
34.74
Privately Leased
501 East Hunter Street -
Lummus Corporation
Lubbock, TX
W/D
70,078
410,157
5.85
Total / Weighted Average
7,531,874
259,599,633
100.0
34.47
OC=Outpatient Clinic; O=Office; C=Courthouse; L=Laboratory; W=Warehouse; D=Distribution.
The year of lease expiration does not include renewal options.
Private tenants occupy 14,274 leased square feet.
Private tenants occupy 42,025 leased square feet.
A private tenant occupies 21,609 leased square feet.
A private tenant occupies 11,402 leased square feet.
(7)
The ATF occupies 8,680 leased square feet.
(8)
A private tenant occupies 3,854 leased square feet.
Certain of our leases are currently in the “soft-term” period of the lease, meaning that the U.S. Government tenant agency has the right to terminate the lease prior to its stated lease end date. We believe that, from the U.S. Government’s perspective, leases with such provisions are helpful for budgetary purposes. While some of our leases are contractually subject to early termination, we do not believe that our tenant agencies are likely to terminate these leases early given the build-to-suit features at the properties subject to the leases, the weighted average age of these properties based on the date the property was built or renovated-to-suit, where applicable (approximately 15.9 years as of September 30, 2021), the mission-critical focus of the properties subject to the leases and the current level of operations at such properties.
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The following table sets forth a schedule of lease expirations for leases in place as of September 30, 2021:
Year of Lease Expiration (1)
Number of
Leases
Expiring
Leased Square
Footage
Percentage of
Portfolio Leased Square
Footage Expiring
Lease Income
per Leased
Square Foot
242,718
3.2
8,274,814
34.09
160,772
5,944,406
36.97
395,208
5.2
14,536,364
5.6
36.78
727,374
9.7
22,955,119
8.8
31.56
619,541
8.2
21,459,657
8.3
34.64
263,740
3.5
8,349,558
31.66
502,963
6.7
17,876,156
6.9
35.54
794,405
10.5
16,881,043
6.5
21.25
493,794
6.6
13,919,123
5.4
28.19
2030
0.0
42
3,331,359
44.3
129,403,393
49.8
38.84
113
The year of lease expirations is pursuant to current contract terms. Some tenants have the right to vacate their space during a specified period, or “soft term,” before the stated terms of their leases expire. As of September 30, 2021, 17 tenants occupying approximately 5.9% of our leased square feet and contributing approximately 5.4% of our annualized lease income have exercisable rights to terminate their lease before the stated term of their respective lease expires.
Information about our development property as of September 30, 2021 is set forth in the table below:
Lease Term
Estimated Leased
FDA - Atlanta
Atlanta, GA
Food and Drug Administration
20-year
162,000
L=Laboratory.
Results of Operations
Comparison of Results of Operations for the three months ended September 30, 2021 and 2020
The financial information presented below summarizes our results of operations for the three months ended September 30, 2021 and 2020 (amounts in thousands).
Change
7,596
845
36
8,477
2,875
823
(757
51
1,316
4,308
Interest expense
(725
4,221
Total revenues increased $8.5 million to $69.6 million for the three months ended September 30, 2021 compared to $61.1 million for the three months ended September 30, 2020.
The $7.6 million increase in Rental income is primarily attributable to an increase in revenues from the ten operating properties acquired since September 30, 2020, as well as a full period of operations from the one operating property acquired during the three months ended September 30, 2020, offset by three properties disposed of since September 30, 2020.
The $0.8 million increase in Tenant reimbursements is primarily attributable to an increase in tenant project reimbursements.
Total expenses increased $4.3 million to $52.0 million for the three months ended September 30, 2021 compared to $47.7 million for the three months ended September 30, 2020.
The $2.9 million increase in Property operating expenses is primarily attributable to the ten operating properties acquired since September 30, 2020, as well as a full period of operations from the one operating property acquired during the three months ended September 30, 2020, and an increase in expenses associated with tenant project reimbursements, offset by three properties disposed of since September 30, 2020.
The $0.8 million increase in Real estate taxes is also primarily attributable to the ten operating properties acquired since September 30, 2020, as well as a full period of operations from the one operating property acquired during the three months ended September 30, 2020, offset by three properties disposed of since September 30, 2020.
The $0.8 million decrease in Depreciation and amortization is primarily related to the timing of intangible amortization and the three properties disposed of since September 30, 2020. This decrease is offset by an increase in depreciation attributable to the ten operating properties acquired since September 30, 2020, as well as a full period of operations from the one operating property acquired during the three months ended September 30, 2020.
Additionally, Corporate general and administrative costs increased by $1.3 million, primarily due to an increase in employee costs.
The $0.7 million increase in Interest expense is primarily related to increased borrowings from our senior unsecured revolving credit facility and a decrease in capitalized interest on our development projects.
On September 28, 2021, we sold United Technologies – Midland to a third party. Net proceeds from the sale of operating property were approximately $4.0 million and we recognized a gain on the sale of operating property of approximately $0.8 million for the three months ended September 30, 2021.
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Comparison of Results of Operations for the nine months ended September 30, 2021 and 2020
The financial information presented below summarizes our results of operations for the nine months ended September 30, 2021 and 2020 (amounts in thousands).
21,737
1,477
134
23,348
7,092
2,483
(3,117
(185
1,904
8,177
Other income (expense)
(1,204
15,274
Total revenues increased $23.3 million to $203.2 million for the nine months ended September 30, 2021 compared to $179.9 million for the nine months ended September 30, 2020.
The $21.7 million increase in Rental income is primarily attributable to an increase in revenues from the ten operating properties acquired since September 30, 2020, as well as a full period of operations from the five operating properties acquired during the nine months ended September 30, 2020, offset by three properties disposed of since September 30, 2020.
The $1.5 million increase in Tenant reimbursements is primarily attributable to an increase in tenant project reimbursements.
Total expenses increased $8.2 million to $150.6 million for the nine months ended September 30, 2021 compared to $142.4 million for the nine months ended September 30, 2020.
The $7.1 million increase in Property operating expenses is primarily attributable to the ten operating properties acquired since September 30, 2020, as well as a full period of operations from the five operating properties acquired during the nine months ended September 30, 2020 and an increase in expenses associated with tenant reimbursements, offset by three properties disposed of since September 30, 2020.
The $2.5 million increase in Real estate taxes is also primarily attributable to the ten operating properties acquired since September 30, 2020, as well as a full period of operations from the five operating properties acquired during the nine months ended September 30, 2020, offset by three properties disposed of since September 30, 2020.
The $3.1 million decrease in Depreciation and amortization is primarily related to the timing of intangible amortization and the three properties disposed of since September 30, 2020. This decrease is offset by an increase in depreciation attributable to the ten operating properties acquired since September 30, 2020, as well as a full period of operations from the five operating properties acquired during the nine months ended September 30, 2020.
Additionally, Corporate general and administrative costs increased by $1.9 million, primarily due to an increase in employee costs.
The $1.2 million increase in Interest expense is primarily related to increased borrowings from our senior unsecured revolving credit facility and a decrease in capitalized interest on our development projects.
Liquidity and Capital Resources
We anticipate that our cash flows from the sources listed below will provide adequate capital for the next 12 months for all anticipated uses, including all scheduled principal and interest payments on our outstanding indebtedness, current and anticipated tenant improvements, stockholder distributions to maintain our qualification as a REIT and other capital obligations associated with conducting our business. At September 30, 2021, we had $16.1 million available in cash and cash equivalents and there was $337.5 million available under our revolving credit facility.
Our primary expected sources of capital are as follows:
cash and cash equivalents;
operating cash flow;
available borrowings under our revolving credit facility;
issuance of long-term debt;
issuance of equity, including under our ATM Programs (as described below); and
asset sales.
Our short-term liquidity requirements consist primarily of funds to pay for the following:
development and redevelopment activities, including major redevelopment, renovation or expansion programs at individual properties;
property acquisitions under contract, including our JV share of the remaining Portfolio Acquisition properties;
tenant improvements allowances and leasing costs;
recurring maintenance and capital expenditures;
debt repayment requirements;
corporate and administrative costs;
interest payments on our outstanding indebtedness;
interest swap payments; and
distribution payments.
Our long-term liquidity needs, in addition to recurring short-term liquidity needs as discussed above, consist primarily of funds necessary to pay for acquisitions, non-recurring capital expenditures, and scheduled debt maturities. Although we may be able to anticipate and plan for certain of our liquidity needs, unexpected increases in uses of cash that are beyond our control and which affect our financial condition and results of operations may arise, or our sources of liquidity may be fewer than, and the funds available from such sources may be less than, anticipated or required. As of the date of this filing, there were no known commitments or events that would have a material impact on our liquidity.
On August 11, 2021, the Company and the Operating Partnership entered into an underwriting agreement with RBC Capital Markets, LLC and BMO Capital Markets Corp., as underwriters, RBC Capital Markets, LLC and BMO Capital Markets Corp., as forward sellers, and Royal Bank of Canada and Bank of Montreal, as forward purchasers, in connection with an offering of 6,300,000 shares of the Company’s common stock. The Company also entered into separate forward sale agreements with each of the forward purchasers (the “Forward Sales Agreements”), pursuant to which the forward purchasers borrowed and sold to the underwriters an aggregate of 6,300,000 shares of the Company’s common stock. The Company expects to physically settle the Forward Sale Agreements and receive proceeds, subject to certain adjustments, from the sale of those shares of common stock upon one or more such physical settlements within approximately one year. Although the Company expects to settle the Forward Sale Agreements entirely by the physical delivery of shares of its common stock for cash proceeds, the Company may also elect to cash or net-share settle all or a portion of its obligations under the Forward Sale Agreements, in which case, the Company may receive, or may owe, cash or shares of its common stock from or to the forward purchasers. The Forward Sale Agreements provide for an initial forward price of $21.64 per share, subject to certain adjustments pursuant to the terms of each of the Forward Sale Agreements. The Forward Sale Agreements are subject to early termination or settlement under certain circumstances.
On each of March 4, 2019 and December 20, 2019, the Company entered into separate equity distribution agreements with each of Citigroup Global Markets Inc., BMO Capital Markets Corp., BTIG, LLC, Capital One Securities, Inc., Jefferies LLC, Raymond James & Associates, Inc., RBC Capital Markets, LLC, Truist Securities, Inc. (f/k/a SunTrust Robinson Humphrey, Inc.) and Wells Fargo Securities, LLC pursuant to which it may issue and sell shares of its common stock having an aggregate offering price of up to $200.0 million and $300.0 million, respectively, from time to time (the “2019 ATM Programs”) in negotiated transactions or transactions that are deemed to be “at the market” offerings as defined in Rule 415 under the Securities Act. The 2019 ATM Programs implemented on March 4, 2019 and December 20, 2019 are referred to as the “March 2019 ATM Program” and “December 2019 ATM Program” respectively. Under each of the 2019 ATM Programs, the Company may also enter into one or more forward transactions (each, a “forward sale transaction”) under separate master forward sale confirmations and related supplemental confirmations with each of Citibank, N.A., Bank of Montreal, Jefferies LLC, Raymond James & Associates, Inc., Royal Bank of Canada and Wells Fargo Bank, National Association and, under the December 2019 ATM Program only, Truist Bank, for the sale of shares of its common stock on a forward basis.
On June 22, 2021, the Company entered into separate equity distribution agreements with each of Citigroup Global Markets Inc., BMO Capital Markets Corp., BTIG, LLC, Capital One Securities, Inc., CIBC World Markets Corp., Jefferies LLC, Raymond James & Associates, Inc., RBC Capital Markets, LLC, Truist Securities, Inc. and Wells Fargo Securities, LLC pursuant to which it may issue and sell shares of its common stock having an aggregate offering price of up to $300.0 million from time to time (the “2021 ATM Program”) in negotiated transactions or transactions that are deemed to be “at the market” offerings as defined in Rule 415 under the Securities Act. Under the 2021 ATM Program, the Company may also enter into one or more forward sale transactions under separate master forward sale confirmations and related supplemental confirmations with each of Citigroup Global Markets Limited, Bank of Montreal, Canadian Imperial Bank of Commerce, Jefferies LLC, Raymond James & Associates, Inc., Royal Bank of Canada, Truist Bank and Wells Fargo Bank, National Association for the sale of shares of its common stock on a forward basis.
The following table sets forth certain information with respect to issuances under each of the 2019 ATM Programs during the quarters ended March 31, 2021, June 30, 2021 and September 30, 2021 (amounts in thousands, except share amounts):
31
Shares issued by us, which were all issued in settlement of forward sales transactions. Additionally, as of September 30, 2021, we had entered into forward sales transactions under the December 2019 ATM Program for the sale of an additional 1,885,289 shares of our common stock that have not yet been settled. Subject to our right to elect net share settlement, we expect to physically settle the forward sales transactions by the maturity dates set forth in each applicable forward sale transaction placement notice, which dates range from January 2022 to July 2022. Assuming the forward sales transactions are physically settled in full utilizing a net weighted average initial forward sales price of $21.94 per share, we expect to receive net proceeds of approximately $41.4 million, after deducting offering costs, subject to adjustments in accordance with the applicable forward sale transaction. We accounted for the forward sale agreements as equity.
Debt
The following table sets forth certain information with respect to our outstanding indebtedness as of September 30, 2021 (amounts in thousands):
At September 30, 2021, the one-month LIBOR (“L”) was 0.08%. The current interest rate is not adjusted to include the amortization of deferred financing fees or debt issuance costs incurred in obtaining debt or any unamortized fair market value premiums. The spread over the applicable rate for each of our revolving credit facility, our 2018 term loan facility and our 2016 term loan facility (each as defined below) is based on the Company’s consolidated leverage ratio, as defined in the respective loan agreements.
33
Our revolving credit facility, term loan facilities, notes payable, and mortgage notes payable are subject to ongoing compliance with a number of financial and other covenants. As of September 30, 2021, we were in compliance with all applicable financial covenants.
The chart below details our debt capital structure as of September 30, 2021 (dollar amounts in thousands):
Debt Capital Structure
Total principal outstanding
1,013,743
Weighted average maturity
6.5 years
Weighted average interest rate
% Variable debt
12.6
% Fixed debt (1)
87.4
% Secured debt
19.8
Our 2016 term loan facility and 2018 term loan facility are swapped to be fixed and as such are included as fixed rate debt in the table above.
On May 11, 2021, the Company and the Operating Partnership entered into a note purchase agreement pursuant to which the Operating Partnership would issue and sell an aggregate of up to $250.0 million of fixed rate, senior unsecured notes (the “Notes”) consisting of (i) 2.62% Series A Senior Notes due October 14, 2028, in an aggregate principal amount of $50.0 million, and (ii) 2.89% Series B Senior Notes due October 14, 2030, in an aggregate principal amount of up to $200.0 million.
On October 14, 2021, the Operating Partnership issued and sold, an aggregate of $250.0 million of the Notes pursuant to the note purchase agreement entered into on May 11, 2021. The Notes are unconditionally guaranteed by the Company and various subsidiaries of the Operating Partnership.
Senior Unsecured Credit Facility and 2016 Term Loan Facility
The Operating Partnership is the borrower, and certain of our subsidiaries that directly own certain of our properties are guarantors under our senior unsecured credit facility. Our revolving credit facility has an initial four-year term and will mature in July 2025, with two six-month as-of-right extension options, subject to certain conditions and the payment of an extension fee. Our 2018 term loan facility has a five-year term and will mature in July 2026. In addition, our 2018 term loan facility is prepayable without penalty for the entire term of the loan.
Dividend Policy
In order to qualify as a REIT, we are required to distribute to our stockholders, on an annual basis, at least 90% of our REIT taxable income, determined without regard to the deduction for dividends paid and excluding net capital gains. We anticipate distributing all of our taxable income. We expect to make quarterly distributions to our stockholders in a manner intended to satisfy this requirement. Prior to making any distributions for U.S. federal tax purposes or otherwise, we must first satisfy our operating and debt service obligations. It is possible that it would be necessary to utilize cash reserves, liquidate assets at unfavorable prices or incur additional indebtedness in order to make required distributions. It is also possible that our board of directors could decide to make required distributions in part by using shares of our common stock.
A summary of dividends declared by the board of directors per share of common stock and per common unit at the date of record is as follows:
35
Off-balance Sheet Arrangements
We had no material off-balance sheet arrangements as of September 30, 2021.
Inflation
Substantially all of our leases provide for operating expense escalations. We believe inflationary increases in expenses may be at least partially offset by the operating expenses that are passed through to our tenants and by contractual rent increases. We do not believe inflation has had a material impact on our historical financial position or results of operations.
Cash Flows
The following table sets forth a summary of cash flows for the nine months ended September 30, 2021 and 2020 (amounts in thousands):
Net cash (used in) provided by:
Operating activities
Investing activities
Financing activities
Operating Activities
The Company generated $94.5 million and $108.6 million of cash from operating activities during the nine months ended September 30, 2021 and 2020, respectively. Net cash provided by operating activities for the nine months ended September 30, 2021 includes $85.9 million in net cash from rental activities net of expenses and $8.6 million related to the change in tenant accounts receivable, prepaid expenses and other assets, deferred revenue associated with operating leases, and accounts payable, accrued expenses and other liabilities. Net cash provided by operating activities for the nine months ended September 30, 2020 includes a $77.7 million increase in net cash from rental activities net of expenses and $30.9 million related to the change in tenant accounts receivable, prepaid expenses and other assets, deferred revenue associated with operating leases, and accounts payable, accrued expenses and other liabilities.
Investing Activities
The Company used $127.5 million and $181.3 million in cash for investing activities during the nine months ended September 30, 2021 and 2020, respectively. Net cash used in investing activities for the nine months ended September 30, 2021 includes $115.4 million in real estate acquisitions, $14.1 million in additions to operating properties and $5.3 million in additions to development properties, offset by $7.3 million in proceeds from the sale of SSA – Mission Viejo and United Technologies – Midland. Net cash used in investing activities for the nine months ended September 30, 2020 includes $130.1 million in real estate acquisitions, $38.3 million in additions to development properties and $13.0 million in additions to operating properties.
Financing Activities
The Company generated $42.1 million and $71.0 million in cash from financing activities during the nine months ended September 30, 2021 and 2020, respectively. Net cash generated by financing activities for the nine months ended September 30, 2021 includes $159.5 million in draws under our revolving credit facility and $90.9 million in gross proceeds from issuances of shares of our common stock, offset by $126.3 million in net pay downs under our revolving credit facility, $74.1 million in dividend payments, $3.6 million in payment of deferred financing fees, $2.9 million in mortgage notes payable repayment and $1.5 million in payment of offering costs. Net cash generated by financing activities for the nine months ended September 30, 2020 includes $183.5 million in draws under our revolving credit facility and $143.2 million in gross proceeds from issuances of shares of our common stock, offset by $183.5 million in net pay downs under our revolving credit facility, $67.9 million in dividend payments, $2.6 million in mortgage notes payable repayment and $1.7 million in payment of offering costs.
Non-GAAP Financial Measures
We use and present Funds From Operations, or FFO, and FFO, as Adjusted as supplemental measures of our performance. The summary below describes our use of FFO and FFO, as Adjusted, provides information regarding why we believe these measures are meaningful supplemental measures of our performance and reconciles these measures from net income, presented in accordance with GAAP.
Funds From Operations and Funds From Operations, as Adjusted
FFO is a supplemental measure of our performance. We present FFO calculated in accordance with the current National Association of Real Estate Investment Trusts, or Nareit, definition set forth in the Nareit FFO White Paper – Restatement 2018. In addition, we present FFO, as Adjusted for certain other adjustments that we believe enhance the comparability of our FFO across periods and to the FFO reported by other publicly traded REITs. FFO is a supplemental performance measure that is commonly used in the real estate industry to assist investors and analysts in comparing results of REITs.
FFO is defined by Nareit as net income, (calculated in accordance with GAAP), excluding:
Depreciation and amortization related to real estate.
Gains and losses from the sale of certain real estate assets.
Gains and losses from change in control.
Impairment write-downs of certain real estate assets and investments in entities when the impairment is directly attributable to decreases in the value of depreciable real estate held by the entity.
We present FFO because we consider it an important supplemental measure of our operating performance, and we believe it is frequently used by securities analysts, investors and other interested parties in the evaluation of REITs, many of which present FFO when reporting results.
We adjust FFO to present FFO, as Adjusted as an alternative measure of our operating performance, which, when applicable, excludes the impact of acquisition costs, straight-line rent, amortization of above-/below-market leases, amortization of deferred revenue (which results from landlord assets funded by tenants), non-cash interest expense, non-cash compensation, depreciation of non-real estate assets and other non-cash items. By excluding these income and expense items from FFO, as Adjusted, we believe we provide useful information as these items have no cash impact. In addition, by excluding acquisition related costs we believe FFO, as Adjusted provides useful information that is comparable across periods and more accurately reflects the operating performance of our properties. Certain prior year amounts have been updated to conform to the current year FFO, as Adjusted definition.
FFO and FFO, as Adjusted are presented as supplemental financial measures and do not fully represent our operating performance. Other REITs may use different methodologies for calculating FFO and FFO, as Adjusted or use other definitions of FFO and FFO, as Adjusted and, accordingly, our presentation of these measures may not be comparable to other REITs. Neither FFO nor FFO, as Adjusted is intended to be a measure of cash flow or liquidity. Please refer to our financial statements, prepared in accordance with GAAP, for purposes of evaluating our financial condition, results of operations and cash flows.
The following table sets forth a reconciliation of our net income to FFO and FFO, as Adjusted for the three and nine months ended September 30, 2021 and 2020 (amounts in thousands):
Depreciation of real estate assets
22,741
67,561
Gain on sale of operating property
(777
FFO
31,006
28,343
92,430
81,634
Adjustments to FFO:
Straight-line rent and other non-cash
adjustments
(1,580
Amortization of above-/below-market
leases
(1,058
(1,451
Amortization of deferred revenue
(1,398
(744
Non-cash interest expense
380
360
1,107
1,078
Depreciation of non-real estate assets
54
FFO, as Adjusted
29,225
27,233
86,676
78,698
38
Item 3.
Quantitative and Qualitative Disclosures About Market Risk
Market risk is the risk of loss from adverse changes in market prices and interest rates. Our future earnings, cash flows and fair values relevant to financial instruments are dependent upon prevailing market interest rates. Our primary market risk results from our indebtedness, which bears interest at both fixed and variable rates. We manage and may continue to manage our market risk on variable rate debt by entering into swap arrangements to, in effect, fix the rate on all or a portion of the debt for varying periods up to maturity. This in turn, reduces the risks of variability of cash flows created by variable rate debt and mitigates the risk of increases in interest rates. Our objective when undertaking such arrangements is to reduce our floating rate exposure and we do not intend to enter into hedging arrangements for speculative purposes.
As of September 30, 2021, $885.5 million, or 87.4% of our debt, excluding unamortized premiums and discounts, had fixed interest rates and $128.2 million, or 12.6% had variable interest rates. If market rates of interest on our variable rate debt fluctuate by 25 basis points, interest expense would increase or decrease, depending on rate movement, future earnings and cash flows, by $0.3 million annually.
In July 2017, the Financial Conduct Authority (the “FCA”), the authority that regulates LIBOR, announced that it intends to stop compelling banks to submit rates for the calculation of LIBOR after 2021 and, on March 5, 2021, the FCA announced that USD-LIBOR will no longer be published after June 30, 2023. The Alternative Reference Rates Committee, or the ARRC, has proposed that the Secured Overnight Financing Rate, or SOFR, is the rate that best represents the alternative to USD-LIBOR for use in derivatives and other financial contracts that are currently indexed to USD-LIBOR. The ARRC has proposed a paced market transition plan to SOFR from USD-LIBOR and organizations are currently working on industry wide and company specific transition plans as it relates to derivatives and cash markets exposed to USD-LIBOR. We intend to monitor the developments with respect to the scheduled phasing out of LIBOR in 2023 and work with our lenders to ensure such transition away from LIBOR will have minimal impact on our financial condition, but can provide no assurances regarding the impact of the discontinuation of LIBOR.
Item 4.
Controls and Procedures
Evaluation of Disclosure Controls and Procedures
We carried out an evaluation required by the Exchange Act, under the supervision and with the participation of our principal executive officer and principal financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rule 13a -15(e) and Rule 15d-15 of the Exchange Act, as of September 30, 2021. Based on this evaluation, our principal executive officer and principal financial officer concluded that, as of September 30, 2021, our disclosure controls and procedures were effective to provide reasonable assurance that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and to provide reasonable assurance that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosures.
Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting during the quarter ended September 30, 2021 that have materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
Part II
Item 1.
Legal Proceedings
We are not currently involved in any material litigation nor, to our knowledge, is any material litigation currently threatened against us.
Item 1A.
Risk Factors
Except to the extent updated below or to the extent additional factual information disclosed elsewhere in this Quarterly Report on Form 10-Q relates to such risk factors (including, without limitation, the matters discussed in Part I, “Item 2—Management’s Discussion and Analysis of Financial Condition and Results of Operations”), there were no material changes to the risk factors disclosed in Part I, “Item 1A. Risk Factors” of our Annual Report on Form 10-K for the year ended December 31, 2020.
We are subject to risks involved in real estate activity through joint ventures.
We have in the past acquired, are currently acquiring and may in the future acquire and own properties in joint ventures with other persons or entities when we believe circumstances warrant the use of such structures. Therefore, we may not be in a position to exercise sole decision-making authority regarding such joint venture or the properties held by such joint venture. Investments in joint ventures may involve risks not present were a third party not involved, including the possibility that our partners might become financially distressed or otherwise fail to fund their share of required capital contributions. Our partners might at any time have business, tax, or economic goals that are inconsistent with ours. These investments may also have the potential risk of impasses on decisions such as a sale, because neither we, nor the partner, would have full control over the joint venture. In addition, we may in certain circumstances be liable for the actions of our partners. If any of the foregoing were to occur, our cash flow, financial condition and results of operations could be adversely affected.
Unregistered Sales of Equity Securities and Use of Proceeds
None.
Defaults Upon Senior Securities
Not applicable.
Mine Safety Disclosures
Item 5.
Other Information
Item 6.
Exhibits
The following exhibits are included, or incorporated by reference, in this Quarterly Report on Form 10-Q:
Exhibit
Exhibit Description
Amended and Restated Articles of Amendment and Restatement of Easterly Government Properties, Inc. (previously filed as Exhibit 3.1 to Amendment No. 2 to the Company’s Registration Statement on Form S-11 on January 30, 2015 and incorporated herein by reference)
Amended and Restated Bylaws of Easterly Government Properties, Inc. (previously filed as Exhibit 3.2 to Amendment No. 2 to the Company’s Registration Statement on Form S-11 on January 30, 2015 and incorporated herein by reference)
3.3
First Amendment to Amended and Restated Bylaws of Easterly Government Properties, Inc. (previously filed as Exhibit 3.1 to the Company’s Current Report on Form 8-K on February 27, 2019 and incorporated herein by reference)
3.4
Second Amendment to Amended and Restated Bylaws of Easterly Government Properties, Inc. (previously filed as Exhibit 3.1 to the Company’s Current Report on Form 8-K on May 20, 2021 and incorporated herein by reference)
4.1
Specimen Certificate of Common Stock of Easterly Government Properties, Inc. (previously filed as Exhibit 4.1 to Amendment No. 2 to the Company’s Registration Statement on Form S-11 on January 30, 2015 and incorporated herein by reference)
10.1
Second Amended and Restated Credit Agreement, dated as of July 23, 2021, by and among Easterly Government Properties, Inc., Easterly Government Properties LP, the Guarantors named therein, with Citibank, N.A., as administrative agent, PNC Bank, National Association and Wells Fargo Bank, N.A., as Co-Syndication agents, BMO Harris Bank, N.A., Raymond James Bank, N.A., Royal Bank of Canada and Truist Bank as Co-Documentation agents, and Citibank, N.A., PNC Capital Markets LLC and Wells Fargo Securities, LLC, as Joint Lead Arrangers and Joint Book Running Managers and the other financial institutions party thereto (previously filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K on July 29, 2021 and incorporated herein by reference)
10.2
Fourth Amendment to Term Loan Agreement, dated as of July 23, 2021, by and among Easterly Government Properties, Inc., Easterly Government Properties LP, the Guarantors named therein, PNC Bank, National Association, as Administrative Agent and U.S. Bank National Association and Truist Bank, as Lenders (previously filed as Exhibit 10.2 to the Company’s Current Report on Form 8-K on July 29, 2021 and incorporated herein by reference)
10.3
Purchase and Sale Agreement, dated as of September 30, 2021, between the sellers identified therein and Easterly Government Properties LP (previously filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K on October 15, 2021 and incorporated herein by reference)
31.1*
Certification of Chief Executive Officer Required by Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended
31.2*
Certification of Chief Financial Officer Required by Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended
32.1**
Certification of Chief Executive Officer and Chief Financial Officer Required by Rule 13a-14(b) of the Securities Exchange Act of 1934, as amended
101.SCH*
Inline XBRL Taxonomy Extension Schema Document
101.CAL*
Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF*
Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB*
Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE*
Inline XBRL Taxonomy Extension Presentation Linkbase Document
104*
Cover Page Interactive Data File (formatted as inline XBRL with applicable taxonomy extension information contained in Exhibits 101.*)
*
Filed herewith
**
Furnished herewith
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
Date: November 2, 2021
/s/ William C. Trimble, III
William C. Trimble, III
Chief Executive Officer and President
(Principal Executive Officer)
/s/ Meghan G. Baivier
Meghan G. Baivier
Executive Vice President, Chief Financial Officer and Chief Operating Officer
(Principal Financial Officer)