UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
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:
(Exact Name of Registrant as Specified in Its Charter)
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(IRS Employer Identification No.) |
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(Address of Principal Executive Offices) |
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(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 |
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.
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).
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.
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Accelerated filer |
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Non-accelerated filer |
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Smaller reporting company |
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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 Exchange Act). Yes
As of October 24, 2023, the registrant had
INDEX TO FINANCIAL STATEMENTS
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Part I: Financial Information |
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Item 1: Financial Statements: |
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Consolidated Financial Statements |
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Consolidated Balance Sheets as of September 30, 2023 and December 31, 2022 (unaudited) |
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2 |
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3 |
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4 |
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6 |
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Item 2: Management’s Discussion and Analysis of Financial Condition and Results of Operations |
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Item 3: Quantitative and Qualitative Disclosures About Market Risk |
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40 |
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40 |
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Easterly Government Properties, Inc.
Consolidated Balance Sheets (unaudited)
(Amounts in thousands, except share amounts)
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September 30, 2023 |
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December 31, 2022 |
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Assets |
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Real estate properties, net |
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$ |
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$ |
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Cash and cash equivalents |
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Restricted cash |
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Tenant accounts receivable |
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Investment in unconsolidated real estate venture |
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Intangible assets, net |
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Interest rate swaps |
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Prepaid expenses and other assets |
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Total assets |
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$ |
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$ |
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Liabilities |
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Revolving credit facility |
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— |
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Term loan facilities, net |
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Notes payable, net |
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Mortgage notes payable, net |
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Intangible liabilities, net |
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Deferred revenue |
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Accounts payable, accrued expenses and other liabilities |
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Total liabilities |
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Equity |
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Common stock, par value $ |
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Additional paid-in capital |
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Retained earnings |
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Cumulative dividends |
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Accumulated other comprehensive income (loss) |
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Total stockholders’ equity |
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Non-controlling interest in Operating Partnership |
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Total equity |
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Total liabilities and equity |
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$ |
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$ |
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The accompanying notes are an integral part of these consolidated financial statements.
1
Easterly Government Properties, Inc.
Consolidated Statements of Operations (unaudited)
(Amounts in thousands, except share and per share amounts)
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For the three months ended September 30, |
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For the nine months ended September 30, |
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2023 |
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2022 |
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2023 |
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2022 |
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Revenues |
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Rental income |
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$ |
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$ |
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$ |
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$ |
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Tenant reimbursements |
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Asset management income |
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Other income |
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Total revenues |
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Expenses |
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Property operating |
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Real estate taxes |
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Depreciation and amortization |
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Acquisition costs |
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Corporate general and administrative |
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Total expenses |
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Other income (expense) |
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Income from unconsolidated real estate venture |
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Interest expense, net |
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( |
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( |
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Impairment loss |
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— |
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( |
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— |
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Net income |
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Non-controlling interest in Operating Partnership |
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Net income available to Easterly Government |
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$ |
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$ |
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$ |
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$ |
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Net income available to Easterly Government |
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Basic |
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$ |
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$ |
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$ |
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$ |
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Diluted |
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$ |
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$ |
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$ |
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$ |
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Weighted-average common shares outstanding |
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Basic |
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Diluted |
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Dividends declared per common share |
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$ |
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$ |
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$ |
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$ |
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The accompanying notes are an integral part of these consolidated financial statements.
2
Easterly Government Properties, Inc.
Consolidated Statements of Comprehensive Income (Loss) (unaudited)
(Amounts in thousands)
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For the three months ended September 30, |
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For the nine months ended September 30, |
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2023 |
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2022 |
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2023 |
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2022 |
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Net income |
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$ |
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$ |
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$ |
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$ |
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Other comprehensive income (loss): |
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Unrealized gain (loss) on interest rate swaps, net |
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Other comprehensive income (loss) |
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Comprehensive income |
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Non-controlling interest in Operating Partnership |
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( |
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( |
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( |
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( |
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Other comprehensive (income) loss attributable to |
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( |
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( |
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( |
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Comprehensive income attributable to |
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$ |
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$ |
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$ |
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$ |
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The accompanying notes are an integral part of these consolidated financial statements.
3
Easterly Government Properties, Inc.
Consolidated Statements of Cash Flows (unaudited)
(Amounts in thousands)
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For the nine months ended September 30, |
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2023 |
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2022 |
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Cash flows from operating activities |
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Net income |
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$ |
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$ |
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Adjustments to reconcile net income to net cash provided by operating activities |
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Depreciation and amortization |
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Straight line rent |
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Income from unconsolidated real estate venture |
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( |
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Amortization of above- / below-market leases |
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( |
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Amortization of unearned revenue |
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( |
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Amortization of loan premium / discount |
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Amortization of deferred financing costs |
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Amortization of lease inducements |
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Impairment loss |
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— |
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Distributions from investment in unconsolidated real estate venture |
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Non-cash compensation |
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Net change in: |
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Tenant accounts receivable |
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Prepaid expenses and other assets |
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Deferred revenue associated with operating leases |
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Principal payments on operating lease obligations |
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Accounts payable, accrued expenses and other liabilities |
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Net cash provided by operating activities |
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Cash flows from investing activities |
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Real estate acquisitions and deposits |
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( |
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( |
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Additions to operating properties |
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( |
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( |
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Additions to development properties |
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( |
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Distributions from investment in unconsolidated real estate venture |
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— |
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Investment in unconsolidated real estate venture |
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( |
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( |
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Net cash used in investing activities |
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( |
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Cash flows from financing activities |
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Issuance of common shares |
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Credit facility draws |
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Credit facility repayments |
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( |
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Term loan draws |
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— |
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Repayments of mortgage notes payable |
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( |
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( |
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Dividends and distributions paid |
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( |
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( |
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Payment of offering costs |
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( |
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( |
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Net cash (used in) provided by financing activities |
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( |
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Net increase in Cash and cash equivalents and Restricted cash |
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Cash and cash equivalents and Restricted cash, beginning of period |
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Cash and cash equivalents and Restricted cash, end of period |
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$ |
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$ |
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The accompanying notes are an integral part of these consolidated financial statements.
4
Easterly Government Properties, Inc.
Consolidated Statements of Cash Flows (unaudited)
(Amounts in thousands)
Supplemental disclosure of cash flow information is as follows:
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For the nine months ended September 30, |
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2023 |
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2022 |
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Cash paid for interest (net of capitalized interest of $ |
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$ |
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$ |
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Supplemental disclosure of non-cash information |
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Additions to operating properties accrued, not paid |
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$ |
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$ |
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Additions to development properties accrued, not paid |
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Offering costs accrued, not paid |
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— |
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Deferred asset acquisition costs accrued, not paid |
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— |
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Contingent consideration accrued, not received |
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— |
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Unrealized gain on interest rate swaps, net |
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Properties acquired for Common Units |
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Recognition of operating lease right-of-use assets |
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— |
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Recognition of liabilities related to operating lease right-of-use assets |
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— |
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Exchange of Common Units for Shares of Common Stock |
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Non-controlling interest in Operating Partnership |
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$ |
( |
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$ |
( |
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Common stock |
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— |
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Additional paid-in capital |
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Total |
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$ |
— |
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$ |
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The accompanying notes are an integral part of these consolidated financial statements.
5
Easterly Government Properties, Inc.
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, 2022, 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, 2022 filed with the U.S. Securities and Exchange Commission (the “SEC”) on February 28, 2023.
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, 2023, we wholly owned
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
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, 2023 and December 31, 2022, the consolidated results of operations for the three and nine months ended September 30, 2023 and 2022, and the consolidated cash flows for the nine months ended September 30, 2023 and 2022. 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.
6
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, the results of which form the basis for making judgments 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 our condensed consolidated financial statements are disclosed in our Annual Report on Form 10-K for the year ended December 31, 2022.
3. Real Estate and Intangibles
Consolidated Real Estate and Intangibles
Real estate and intangibles consisted of the following as of September 30, 2023 (amounts in thousands):
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Total |
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Real estate properties, net |
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Land |
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$ |
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Building and improvements |
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Acquired tenant improvements |
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Construction in progress |
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Accumulated depreciation |
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( |
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Total Real estate properties, net |
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Intangible assets, net |
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In-place leases |
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Acquired leasing commissions |
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Above market leases |
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Payment in lieu of taxes |
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Accumulated amortization |
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( |
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Total Intangible assets, net |
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Intangible liabilities, net |
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Below market leases |
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( |
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Accumulated amortization |
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Total Intangible liabilities, net |
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( |
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During the three and nine months ended September 30, 2023, we incurred $
The following table summarizes the scheduled amortization of our acquired above- and below-market lease intangibles for each of the five succeeding years as of September 30, 2023 (amounts in thousands):
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Acquired Above-Market Lease Intangibles |
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Acquired Below-Market Lease Intangibles |
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2023 (1) |
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$ |
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$ |
( |
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2024 |
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( |
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2025 |
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( |
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2026 |
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( |
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2027 |
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( |
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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.
7
4. Investment in Unconsolidated Real Estate Venture
The following is a summary of our investment in the JV (dollars in thousands):
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As of September 30, |
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Joint Venture |
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Ownership Interest |
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2023 |
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MedBase Venture |
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$ |
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On October 13, 2021, we formed an unconsolidated real estate venture, which we refer to as the JV, with a global investor to fund the acquisition of a portfolio of
During the nine months ended September 30, 2023, the JV acquired
We provide asset management services to the JV. During the three and nine months ended September 30, 2023, we recognized asset management service revenue of $
The following is a summary of financial information for the JV (amounts in thousands):
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As of September 30, |
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Balance sheet information: |
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2023 |
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Real estate, net |
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$ |
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Other assets, net (1) |
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Total assets |
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$ |
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Total liabilities (2) |
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$ |
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Total equity |
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Total liabilities and equity |
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$ |
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|
|
|
Company’s share of equity |
|
$ |
|
|
Basis differential (3) |
|
|
|
|
Carrying value of the Company’s investment in the unconsolidated venture |
|
$ |
|
|
|
For the three months ended September 30, |
|
|
For the nine months ended September 30, |
|
||||||||||
Income statement information: |
|
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
||||
Total revenue |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Operating income |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net income |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Company’s share of net income |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
8
5. Debt
At September 30, 2023, our consolidated borrowings consisted of the following (amounts in thousands):
|
|
Principal Outstanding |
|
|
Interest |
|
Current |
|
|
Loan |
|
September 30, 2023 |
|
|
Rate (1) |
|
Maturity |
|
|
Revolving credit facility: |
|
|
|
|
|
|
|
|
|
Revolving credit facility (2) |
|
$ |
— |
|
|
|
|
||
Total revolving credit facility |
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Term loan facilities: |
|
|
|
|
|
|
|
|
|
2016 term loan facility |
|
|
|
|
|
|
|||
2018 term loan facility |
|
|
|
|
|
|
|||
Total term loan facilities |
|
|
|
|
|
|
|
|
|
Less: Total unamortized deferred financing fees |
|
|
( |
) |
|
|
|
|
|
Total term loan facilities, net |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Notes payable: |
|
|
|
|
|
|
|
|
|
2017 series A senior notes |
|
|
|
|
|
|
|||
2017 series B senior notes |
|
|
|
|
|
|
|||
2017 series C senior notes |
|
|
|
|
|
|
|||
2019 series A senior notes |
|
|
|
|
|
|
|||
2019 series B senior notes |
|
|
|
|
|
|
|||
2019 series C senior notes |
|
|
|
|
|
|
|||
2021 series A senior notes |
|
|
|
|
|
|
|||
2021 series B senior notes |
|
|
|
|
|
|
|||
Total notes payable |
|
|
|
|
|
|
|
|
|
Less: Total unamortized deferred financing fees |
|
|
( |
) |
|
|
|
|
|
Total notes payable, net |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage notes payable: |
|
|
|
|
|
|
|
|
|
VA – Golden |
|
|
|
|
|
|
|||
USFS II – Albuquerque |
|
|
|
|
|
|
|||
ICE – Charleston |
|
|
|
|
|
|
|||
VA – Loma Linda |
|
|
|
|
|
|
|||
CBP – Savannah |
|
|
|
|
|
|
|||
USCIS – Kansas City |
|
|
|
|
|
|
|||
Total mortgage notes payable |
|
|
|
|
|
|
|
|
|
Less: Total unamortized deferred financing fees |
|
|
( |
) |
|
|
|
|
|
Less: Total unamortized premium/discount |
|
|
|
|
|
|
|
|
|
Total mortgage notes payable, net |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total debt |
|
$ |
|
|
|
|
|
|
9
As of September 30, 2023, the net carrying value of real estate collateralizing our mortgages payable totaled $
On January 26, 2023, we used $
On February 3, 2023, we entered into
On May 30, 2023, we entered into the third amendment to our second amended and restated credit agreement, dated as of July 23, 2021 and into the sixth amendment to our senior unsecured term loan agreement, dated as of September 29, 2016. These amendments added a daily simple SOFR-based option to the term SOFR-based floating interest rate option as a benchmark rate for borrowings denominated in U.S. dollars for all purposes under the credit and term loan agreements, including, in each case, a credit spread adjustment of
On July 20, 2023, we exercised in full the $
Financial Covenant Considerations
As of September 30, 2023, we were in compliance with all financial and other covenants related to our debt.
6. 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, 2023 (amounts in thousands):
Notional Amount |
|
|
Fixed Rate |
|
|
Floating Rate Index |
|
Effective Date |
|
Expiration Date |
|
Fair Value |
|
|||
$ |
|
|
|
% |
|
|
|
|
$ |
|
||||||
$ |
|
|
|
% |
|
|
|
|
$ |
|
||||||
$ |
|
|
|
% |
|
|
|
|
$ |
|
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, 2023 |
|
|
Interest rate swaps |
|
$ |
|
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 our variable rate debt.
We estimate that $
10
The table below presents the effects of our interest rate derivatives on our Consolidated Statements of Operations and Comprehensive Income (Loss) (amounts in thousands):
|
|
For the three months ended September 30, |
|
|
For the nine months ended September 30, |
|
||||||||||
|
|
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
||||
Unrealized gain recognized in AOCI |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Gain (loss) reclassified from AOCI into interest expense |
|
|
|
|
|
( |
) |
|
|
|
|
|
( |
) |
Credit-Risk-Related Contingent Features
We have agreements with each of our derivative counterparties that contain a provision where we could be declared in default on our derivative obligations if repayment of the underlying indebtedness is accelerated by the lender due to our default on such indebtedness. As of September 30, 2023, we were
7. 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 we determined that the majority of the inputs used to value our derivatives fall within Level 2 of the fair value hierarchy, the credit valuation adjustments associated with our derivatives utilize Level 3 inputs, such as estimates of current credit spreads to evaluate the likelihood of default by us and our counterparties. We have determined that the significance of the impact of the credit valuation adjustments made to our 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 our derivatives held as of September 30, 2023 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. The table below presents our assets measured at fair value on a recurring basis as of September 30, 2023, aggregated by the level in the fair value hierarchy within which those measurements fall (amounts in thousands):
|
|
As of September 30, 2023 |
|
|||||||||
Balance Sheet Line Item |
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
|||
Interest rate swaps |
|
$ |
— |
|
|
$ |
|
|
$ |
— |
|
For our disclosure of debt fair values, 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.
11
Financial assets and liabilities not measured at fair value
As of September 30, 2023, all financial instruments and liabilities were reflected in our balance sheets at amounts which, in our estimation, reasonably approximated their fair values, except for the following:
|
|
As of September 30, 2023 |
|
|||||
Financial liabilities |
|
Carrying Amount (1) |
|
|
Fair Value (2) |
|
||
|
|
|
|
|
|
|
||
Revolving credit facility |
|
$ |
— |
|
|
$ |
— |
|
2016 term loan facility |
|
$ |
|
|
$ |
|
||
2018 term loan facility |
|
$ |
|
|
$ |
|
||
Notes payable |
|
$ |
|
|
$ |
|
||
Mortgages payable |
|
$ |
|
|
$ |
|
8. Equity Incentive Plan
Restricted Shares
We award restricted stock to certain members of management and non‑employee directors. Management awards generally vest over a range of two to four years. Non‑employee director awards vest upon the earlier of the anniversary of the date of the grant or the next annual stockholder meeting, subject to the grantee's continued service with the Company through such date. Restricted stock awards issued under the 2015 Equity Incentive Plan, as amended (the “2015 Equity Incentive Plan”), may not be sold or otherwise transferred until restrictions have lapsed, as established by the compensation committee.
We value our non-vested restricted share awards at the grant date fair value, which was the market price of our common stock as of the applicable grant date. Compensation expense related to restricted common stock awards was $
The fair value of restricted stock that vested was $
A summary of the status of our restricted shares as of September 30, 2023 and changes during the nine months ended September 30, 2023 is presented below:
|
|
Restricted Shares |
|
|
Restricted Shares Weighted Average Grant Date |
|
||
Outstanding, December 31, 2022 |
|
|
|
|
$ |
|
||
Vested |
|
|
( |
) |
|
|
|
|
Granted |
|
|
|
|
|
|
||
Forfeited |
|
|
— |
|
|
|
— |
|
Outstanding, September 30, 2023 |
|
|
|
|
$ |
|
LTIP Units
We grant LTIP units to certain members of management and non‑employee directors. Management awards generally vest immediately or over a range of two to four years. Non‑employee director awards vest upon the earlier of the anniversary of the date of the grant or the next annual stockholder meeting, subject to the grantee's continued service with the Company through such date. Performance-based LTIP units are earned subject to us achieving certain thresholds, including absolute total shareholder returns, relative total shareholder returns, or operational hurdles through the performance period. Service-based LTIP units vest over time, subject to continued employment and other terms of the awards.
12
The following is a summary of our granted LTIP unit awards during the nine months ended September 30, 2023:
Award |
|
Grant |
|
Performance Period |
|
|
Vest Date |
|
Units Granted |
|
||
|
|
|
|
|
|
|
|
|
|
|
||
Service |
|
January 3, 2023 |
|
|
— |
|
|
|
|
|
||
Operational |
|
January 3, 2023 |
|
|
|
1 |
|
|
|
|||
Performance |
|
January 3, 2023 |
|
|
|
1 |
|
|
|
|||
Service |
|
March 2, 2023 |
|
|
— |
|
|
|
|
|
||
Service |
|
May 9, 2023 |
|
|
— |
|
|
2 |
|
|
|
|
2023 LTIP Grant |
|
|
|
|
|
|
|
|
|
|
We value our operational LTIP unit awards that are subject to us achieving certain performance conditions at the grant date fair value, which is the market price of our common stock as of the applicable grant date. We value our service-based LTIP unit awards at the grant date fair value, which is the market price of our common stock as of the applicable grant date, discounted by the risk related to the timing of book-up events. For the performance LTIP unit awards granted that are subject to us achieving certain total shareholder return thresholds, we used a Monte Carlo Simulation (risk-neutral approach) to determine the grant date fair value.
The following is a summary of the significant assumptions used to value the total shareholder return for performance-based LTIP units during the nine months ended September 30, 2023:
Expected volatility |
|
|
% |
|
Dividend yield |
|
|
% |
|
Risk-free interest rate |
|
|
% |
|
Expected life |
|
|
The fair value of LTIP units that vested were $
A summary of the status of our LTIP units as of September 30, 2023 and changes during the nine months ended September 30, 2023 are presented below:
|
|
LTIP Units (1) |
|
|
LTIP Units Weighted Average Grant Date Fair Value Per Share |
|
||
Outstanding, December 31, 2022 |
|
|
|
|
$ |
|
||
Vested |
|
|
( |
) |
|
|
|
|
Granted |
|
|
|
|
|
|
||
Forfeited |
|
|
( |
) |
|
|
|
|
Outstanding, September 30, 2023 |
|
|
|
|
$ |
|
13
9. Equity
The following table summarizes the changes in our stockholders’ equity for the three months ended September 30, 2023 and 2022 (amounts in thousands, except share amounts):
|
|
Shares |
|
|
Common |
|
|
Additional |
|
|
Retained |
|
|
Cumulative |
|
|
Accumulated |
|
|
Non- |
|
|
Total |
|
||||||||
Three months ended September 30, 2023 |
|
|||||||||||||||||||||||||||||||
Balance at June 30, 2023 |
|
|
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
|
|
$ |
|
|||||||
Stock based compensation |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|||
Dividends and distributions paid |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
Redemption of common units for |
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
||
Issuance of common stock, net |
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
||||
Unrealized loss on interest rate swaps |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Net income |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|||
Allocation of non-controlling interest |
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
Balance at September 30, 2023 |
|
|
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
|
|
$ |
|
|||||||
Three months ended September 30, 2022 |
|
|||||||||||||||||||||||||||||||
Balance at June 30, 2022 |
|
|
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
|
|
$ |
|
|||||||
Stock based compensation |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|||
Dividends and distributions paid |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
Forfeiture of unvested restricted stock |
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Unrealized gain on interest rate |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|||
Net income |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|||
Allocation of non-controlling interest |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
Balance at September 30, 2022 |
|
|
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
|
|
$ |
|
The following table summarizes the changes in our stockholders’ equity for the nine months ended September 30, 2023 and 2022 (amounts in thousands, except share amounts):
|
|
Shares |
|
|
Common |
|
|
Additional |
|
|
Retained |
|
|
Cumulative |
|
|
Accumulated |
|
|
Non- |
|
|
Total |
|
||||||||
Nine months ended September 30, 2023 |
|
|||||||||||||||||||||||||||||||
Balance at December 31, 2022 |
|
|
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
|
|
$ |
|
|||||||
Stock based compensation |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|||
Dividends and distributions paid |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
Grant of unvested restricted stock |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
Redemption of common units for |
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
||
Issuance of common stock, net |
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
||||
Contribution of property for |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
||
Unrealized gain on interest rate swaps |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|||
Net income |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|||
Allocation of non-controlling interest |
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
Balance at September 30, 2023 |
|
|
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
|
|
$ |
|
|||||||
Nine months ended September 30, 2022 |
|
|||||||||||||||||||||||||||||||
Balance at December 31, 2021 |
|
|
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
|
|
$ |
|
||||||
Stock based compensation |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|||
Dividends and distributions paid |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
Grant of unvested restricted stock |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
Redemption of common units for |
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|||
Issuance of common stock, net |
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
||||
Contribution of property for |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
||
Unrealized gain on interest rate |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|||
Net income |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|||
Allocation of non-controlling interest |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
Balance at September 30, 2022 |
|
|
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
|
|
$ |
|
14
A summary of dividends declared by our 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 2023 |
|
|
|
|
$ |
|
||||
Q2 2023 |
|
|
|
|
$ |
|
||||
Q3 2023 |
|
|
|
|
$ |
|
Offering of Common Stock on a Forward Basis
On August 11, 2021, we completed an underwritten public offering of
ATM Programs
We entered into separate equity distribution agreements on each of December 20, 2019 (the “2019 ATM Program”) and June 22, 2021 (the “2021 ATM Program” and, together with the 2019 ATM Program, the “ATM Programs”) with various financial institutions pursuant to which we may issue and sell shares of our common stock having an aggregate offering price of up to $
The following table sets forth certain information with respect to issuances under the 2019 ATM Program during the nine months ended September 30, 2023 (amounts in thousands except share amounts):
|
|
2019 ATM Program |
|
|||||
For the three months ended |
|
Number of Shares Issued(1) |
|
|
Net Proceeds(1) |
|
||
March 31, 2023 |
|
|
|
|
$ |
|
||
June 30, 2023 |
|
|
— |
|
|
|
— |
|
September 30, 2023 |
|
|
|
|
|
|
||
Total |
|
|
|
|
$ |
|
We used the net proceeds received from sales under our 2019 ATM Program for general corporate purposes. As of September 30, 2023, we had approximately $
15
Share Repurchase Program
On April 28, 2022, our Board of Directors authorized a share repurchase program whereby we may repurchase up to
Contribution of Property for Common Units
On January 25, 2023, the Operating Partnership issued
10. 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 our basic and diluted earnings per share of common stock for the three and nine months ended September 30, 2023 and 2022 (amounts in thousands, except per share amounts):
|
|
For the three months ended September 30, |
|
|
For the nine months ended September 30, |
|
||||||||||
|
|
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
||||
Numerator |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net income |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Less: Non-controlling interest in Operating Partnership |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Net income available to Easterly Government Properties, Inc. |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Less: Dividends on participating securities |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Net income available to common stockholders |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Denominator for basic EPS |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Dilutive effect of share-based compensation awards |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Dilutive effect of LTIP units (1) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Dilutive effect of shares issuable under forward sale agreements (2) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Denominator for diluted EPS |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Basic EPS |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Diluted EPS |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
16
11. Leases
Lessor
We lease 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 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
The following table summarizes the maturity of fixed lease payments under our leases as of September 30, 2023 (amounts in thousands):
|
|
Payments due by period |
|
|||||||||||||||||||||||||
|
|
Total |
|
|
2023 (1) |
|
|
2024 |
|
|
2025 |
|
|
2026 |
|
|
2027 |
|
|
Thereafter |
|
|||||||
Fixed lease payments |
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The table below sets forth our composition of lease revenue recognized between fixed and variable components (amounts in thousands):
|
|
For the three months ended September 30, |
|
|
For the nine months ended September 30, |
|
||||||||||
|
|
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
||||
Fixed |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Variable |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Rental income |
|
|
|
|
|
|
|
|
|
|
|
|
Lessee
We lease corporate office space under operating lease arrangements in Washington, D.C. and San Diego, CA. The 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. We have elected not to separate lease and non-lease components for our corporate office leases.
As of September 30, 2023, the unamortized balances associated with our right-of-use operating lease asset and operating lease liability were both $
The following table provides quantitative information for our commenced operating leases (amounts in thousands):
|
|
For the three months ended September 30, |
|
|
For the nine months ended September 30, |
|
||||||||||
|
|
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
||||
Cash flows from operating lease costs |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
In addition, the maturity of fixed lease payments under our commenced corporate office leases as of September 30, 2023 is summarized in the table below (amounts in thousands):
17
Corporate office leases |
|
Payments due by period |
|
|
2023 (1) |
|
|
|
|
2024 |
|
|
|
|
2025 |
|
|
|
|
2026 |
|
|
|
|
2027 |
|
|
|
|
Thereafter |
|
|
|
|
Total future minimum lease payments |
|
$ |
|
|
Imputed interest |
|
|
( |
) |
Total |
|
$ |
|
12. 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, 2023 and 2022 (amounts in thousands):
|
|
For the three months ended September 30, |
|
|
For the nine months ended September 30, |
|
||||||||||
Tenant |
|
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Department of Veteran Affairs (“VA”) |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
U.S. Joint Staff Command (“JSC”) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Federal Bureau of Investigation (“FBI”) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
U.S. Coast Guard (“USCG”) |
|
|
|
|
|
— |
|
|
|
|
|
|
|
|||
Customs and Border Protection (“CBP”) |
|
|
|
|
|
— |
|
|
|
|
|
|
|
|||
Department of Transportation (“DOT”) |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
The Judiciary of the U.S. Government (“JUD”) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Immigration and Customs Enforcement (“ICE”) |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
Federal Emergency Management Agency (“FEMA”) |
|
|
— |
|
|
|
|
|
|
|
|
|
|
|||
U.S. Citizenship and Immigration Services (“USCIS”) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Bonneville Power Administration (“BPA”) |
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
||
National Archives and Records Administration (“NARA”) |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
Food and Drug Administration (“FDA”) |
|
|
— |
|
|
|
|
|
|
|
|
|
|
|||
Internal Revenue Service (“IRS”) |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
||
Department of Labor (“DOL”) |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
Federal Aviation Administration (“FAA”) |
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
||
National Weather Service (“NWS”) |
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
||
Occupational Safety and Health Administration (“OSHA”) |
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
||
National Park Services (“NPS”) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
General Services Administration - Other |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
Drug Enforcement Agency (“DEA”) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
Patent and Trademark Office (“PTO”) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
Health Resources and Services Administration (“HRSA”) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
18
As of September 30, 2023 and December 31, 2022, the balance in Accounts receivable related to tenant construction projects and the associated project management income was $
The duration of the majority of tenant construction project reimbursement arrangements is 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, 2023 with a duration of greater than one year.
During the three and nine months ended September 30, 2023, we recognized $
During both the three and nine months ended September 30, 2023, we recognized less than $
There were
13. Concentrations Risk
Concentrations of credit risk arise for us when multiple of our tenants 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 obligations owed to us. We regularly monitor our tenant base to assess potential concentrations of credit risk.
As stated in Note 1 above, we lease commercial space to the U.S. Government or non-governmental tenants. At September 30, 2023, the U.S. Government accounted for approximately
14. Related Parties
We provide asset management services to properties owned by the JV. For the three and nine months ended September 30, 2023, we recognized Asset management income of $
15. Subsequent Events
For our consolidated financial statements as of September 30, 2023, we evaluated subsequent events and noted the following significant events.
On October 3, 2023, we acquired a
On October 3, 2023, we acquired a
19
On October 19, 2023, we acquired a
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:
21
For a further discussion of these and other factors that could affect us and the statements contained herein, see the section entitled “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2022, 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 present certain financial information and metrics “at Easterly Share,” which is calculated on an entity-by-entity basis. “At Easterly Share” information, which we also refer to as being “at share,” “pro rata,” “our pro rata share” or “our share” is not, and is not intended to be, a presentation in accordance with accounting principles generally accepted in the United States of America (“GAAP”).
We are an internally managed real estate investment trust (“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. We may also consider other potential opportunities to add properties to our portfolio, including acquiring properties leased to states and local governments with strong creditworthiness. As of September 30, 2023, we wholly owned 78 operating properties and nine operating properties through an unconsolidated joint venture (the “JV”) in the United States encompassing approximately 8.6 million leased square feet (8.2 million pro rata), including 86 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, 2023, our operating properties were 97% 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, 2023. 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.
22
2023 Activity
Acquisitions
On October 3, 2023, we acquired a 95,273 leased square foot Class A facility located in Anaheim, California. The building was renovated in 2020. The facility is 100% leased by tenant agencies of the state of California for beneficial use of the Employment Development Department and Department of Industrial Relations and has lease expirations ranging from 2033 to 2034.
On October 3, 2023, we acquired a 91,185 leased square foot Department of Homeland Security (“DHS”) facility in Atlanta, Georgia. The building was renovated to suit in 2023. The facility is primarily leased to the GSA for beneficial use of the Custom and Border Protection and Transportation Security Administration and has lease expirations ranging from 2031 to 2038.
On October 19, 2023, we acquired a 35,005 leased square foot Judiciary of the U.S. Government (“JUD”) courthouse in Newport News, Virginia. The building is a build-to-suit courthouse completed in 2008. The facility is leased to the GSA for beneficial use of the JUD with a lease expiration of July 2033.
Investment in unconsolidated real estate venture
On September 22, 2023, the JV acquired a 69,276 square foot Veteran Affairs (“VA”) outpatient facility located in Corpus Christi, Texas. The building is a build-to-suit property that was completed during 2022. The outpatient facility is leased to the VA and has a lease expiration of November 2042. The facility is the ninth of ten properties to be acquired in the previously announced portfolio of ten properties 100% leased to the VA (the “VA Portfolio”). We anticipate the JV will acquire the tenth property in the VA portfolio in 2024.
23
Operating Properties
As of September 30, 2023, our operating properties were 97% leased with a weighted average annualized lease income per leased square foot of $35.79 ($35.44 pro rata) and a weighted average age of approximately 14.5 years based on the date the property was built or renovated-to-suit, where applicable. 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 net expense reimbursements earned by us for the last month in such period.
The table set forth below shows information relating to the properties we owned, or in which we had an ownership interest, at September 30, 2023, and it includes properties held by the JV:
Property Name |
|
Location |
|
Property |
|
Tenant Lease |
|
|
Leased |
|
|
Annualized |
|
|
Percentage |
|
|
Annualized |
|
|||||
Wholly Owned U.S. Government Leased Properties |
|
|
|
|
|
|
|
|||||||||||||||||
VA - Loma Linda |
|
Loma Linda, CA |
|
OC |
|
|
2036 |
|
|
|
327,614 |
|
|
$ |
16,592,268 |
|
|
|
5.5 |
% |
|
$ |
50.65 |
|
USCIS - Kansas City (3) |
|
Lee's Summit, MO |
|
O/W |
|
2024 - 2042 |
|
|
|
416,399 |
|
|
|
10,356,616 |
|
|
|
3.5 |
% |
|
|
24.87 |
|
|
JSC - Suffolk |
|
Suffolk, VA |
|
O |
|
|
2028 |
|
|
|
403,737 |
|
|
|
8,437,944 |
|
|
|
2.8 |
% |
|
|
20.90 |
|
Various GSA - Chicago |
|
Des Plaines, IL |
|
O |
|
|
2023 |
|
|
|
202,185 |
|
|
|
6,971,858 |
|
|
|
2.3 |
% |
|
|
34.48 |
|
IRS - Fresno |
|
Fresno, CA |
|
O |
|
|
2033 |
|
|
|
180,481 |
|
|
|
6,944,600 |
|
|
|
2.2 |
% |
|
|
38.48 |
|
FBI - Salt Lake |
|
Salt Lake City, UT |
|
O |
|
|
2032 |
|
|
|
169,542 |
|
|
|
6,904,306 |
|
|
|
2.2 |
% |
|
|
40.72 |
|
Various GSA - Portland (4) |
|
Portland, OR |
|
O |
|
2023 - 2039 |
|
|
|
205,478 |
|
|
|
6,837,561 |
|
|
|
2.2 |
% |
|
|
33.28 |
|
|
Various GSA - Buffalo (5) |
|
Buffalo, NY |
|
O |
|
2025 - 2039 |
|
|
|
273,678 |
|
|
|
6,788,982 |
|
|
|
2.2 |
% |
|
|
24.81 |
|
|
VA - San Jose |
|
San Jose, CA |
|
OC |
|
|
2038 |
|
|
|
90,085 |
|
|
|
5,765,363 |
|
|
|
1.9 |
% |
|
|
64.00 |
|
EPA - Lenexa |
|
Lenexa, KS |
|
O |
|
|
2027 |
|
|
|
169,585 |
|
|
|
5,684,119 |
|
|
|
1.8 |
% |
|
|
33.52 |
|
PTO - Arlington |
|
Arlington, VA |
|
O |
|
|
2035 |
|
|
|
190,546 |
|
|
|
5,339,380 |
|
|
|
1.7 |
% |
|
|
28.02 |
|
FBI - San Antonio |
|
San Antonio, TX |
|
O |
|
|
2025 |
|
|
|
148,584 |
|
|
|
5,262,920 |
|
|
|
1.7 |
% |
|
|
35.42 |
|
FBI - Tampa |
|
Tampa, FL |
|
O |
|
|
2040 |
|
|
|
138,000 |
|
|
|
5,177,074 |
|
|
|
1.7 |
% |
|
|
37.52 |
|
FDA - Alameda |
|
Alameda, CA |
|
L |
|
|
2039 |
|
|
|
69,624 |
|
|
|
4,892,834 |
|
|
|
1.6 |
% |
|
|
70.28 |
|
FBI / DEA - El Paso |
|
El Paso, TX |
|
O/W |
|
|
2028 |
|
|
|
203,683 |
|
|
|
4,655,530 |
|
|
|
1.5 |
% |
|
|
22.86 |
|
FEMA - Tracy |
|
Tracy, CA |
|
W |
|
|
2038 |
|
|
|
210,373 |
|
|
|
4,646,120 |
|
|
|
1.5 |
% |
|
|
22.09 |
|
FBI - Omaha |
|
Omaha, NE |
|
O |
|
|
2024 |
|
|
|
112,196 |
|
|
|
4,466,756 |
|
|
|
1.4 |
% |
|
|
39.81 |
|
TREAS - Parkersburg |
|
Parkersburg, WV |
|
O |
|
|
2041 |
|
|
|
182,500 |
|
|
|
4,355,673 |
|
|
|
1.4 |
% |
|
|
23.87 |
|
DOT - Lakewood |
|
Lakewood, CO |
|
O |
|
|
2039 |
|
|
|
122,225 |
|
|
|
4,154,365 |
|
|
|
1.3 |
% |
|
|
33.99 |
|
VA - South Bend |
|
Mishakawa, IN |
|
OC |
|
|
2032 |
|
|
|
86,363 |
|
|
|
4,149,754 |
|
|
|
1.3 |
% |
|
|
48.05 |
|
FDA - Lenexa |
|
Lenexa, KS |
|
L |
|
|
2040 |
|
|
|
59,690 |
|
|
|
4,102,149 |
|
|
|
1.3 |
% |
|
|
68.72 |
|
FBI - Pittsburgh |
|
Pittsburgh, PA |
|
O |
|
|
2027 |
|
|
|
100,054 |
|
|
|
4,037,239 |
|
|
|
1.3 |
% |
|
|
40.35 |
|
USCIS - Lincoln |
|
Lincoln, NE |
|
O |
|
|
2025 |
|
|
|
137,671 |
|
|
|
3,982,813 |
|
|
|
1.3 |
% |
|
|
28.93 |
|
VA - Mobile |
|
Mobile, AL |
|
OC |
|
|
2033 |
|
|
|
79,212 |
|
|
|
3,973,045 |
|
|
|
1.3 |
% |
|
|
50.16 |
|
FBI - New Orleans |
|
New Orleans, LA |
|
O |
|
|
2029 |
|
|
|
137,679 |
|
|
|
3,970,217 |
|
|
|
1.3 |
% |
|
|
28.84 |
|
JUD - Del Rio |
|
Del Rio, TX |
|
C/O |
|
|
2041 |
|
|
|
89,880 |
|
|
|
3,831,310 |
|
|
|
1.2 |
% |
|
|
42.63 |
|
FBI - Knoxville |
|
Knoxville, TN |
|
O |
|
|
2025 |
|
|
|
99,130 |
|
|
|
3,607,448 |
|
|
|
1.2 |
% |
|
|
36.39 |
|
FBI - Birmingham |
|
Birmingham, AL |
|
O |
|
|
2042 |
|
|
|
96,278 |
|
|
|
3,535,446 |
|
|
|
1.1 |
% |
|
|
36.72 |
|
EPA - Kansas City |
|
Kansas City, KS |
|
L |
|
|
2043 |
|
|
|
55,833 |
|
|
|
3,493,954 |
|
|
|
1.1 |
% |
|
|
62.58 |
|
ICE - Charleston |
|
North Charleston, SC |
|
O |
|
|
2027 |
|
|
|
65,124 |
|
|
|
3,334,548 |
|
|
|
1.1 |
% |
|
|
51.20 |
|
USFS II - Albuquerque |
|
Albuquerque, NM |
|
O |
|
|
2026 |
|
|
|
98,720 |
|
|
|
3,323,744 |
|
|
|
1.1 |
% |
|
|
33.67 |
|
VA - Chico |
|
Chico, CA |
|
OC |
|
|
2034 |
|
|
|
51,647 |
|
|
|
3,318,030 |
|
|
|
1.1 |
% |
|
|
64.24 |
|
FBI - Richmond |
|
Richmond, VA |
|
O |
|
|
2041 |
|
|
|
96,607 |
|
|
|
3,310,029 |
|
|
|
1.1 |
% |
|
|
34.26 |
|
24
Property Name |
|
Location |
|
Property |
|
Tenant Lease |
|
|
Leased |
|
|
Annualized |
|
|
Percentage |
|
|
Annualized |
|
|||||
Wholly Owned U.S. Government Leased Properties (Cont.) |
|
|||||||||||||||||||||||
FBI - Little Rock |
|
Little Rock, AR |
|
O |
|
|
2041 |
|
|
|
102,377 |
|
|
|
3,217,259 |
|
|
|
1.0 |
% |
|
|
31.43 |
|
DEA - Sterling |
|
Sterling, VA |
|
L |
|
|
2038 |
|
|
|
57,692 |
|
|
|
3,209,041 |
|
|
|
1.0 |
% |
|
|
55.62 |
|
USFS I - Albuquerque |
|
Albuquerque, NM |
|
O |
|
|
2026 |
|
|
|
92,455 |
|
|
|
3,180,431 |
|
|
|
1.0 |
% |
|
|
34.40 |
|
USCIS - Tustin |
|
Tustin, CA |
|
O |
|
|
2034 |
|
|
|
66,818 |
|
|
|
3,159,190 |
|
|
|
1.0 |
% |
|
|
47.28 |
|
DEA - Vista |
|
Vista, CA |
|
L |
|
|
2035 |
|
|
|
52,293 |
|
|
|
3,110,917 |
|
|
|
1.0 |
% |
|
|
59.49 |
|
VA - Orange |
|
Orange, CT |
|
OC |
|
|
2034 |
|
|
|
56,330 |
|
|
|
2,976,200 |
|
|
|
1.0 |
% |
|
|
52.84 |
|
VA - Indianapolis |
|
Brownsburg, IN |
|
OC |
|
|
2041 |
|
|
|
80,000 |
|
|
|
2,954,619 |
|
|
|
1.0 |
% |
|
|
36.93 |
|
ICE - Albuquerque |
|
Albuquerque, NM |
|
O |
|
|
2027 |
|
|
|
71,100 |
|
|
|
2,822,205 |
|
|
|
0.9 |
% |
|
|
39.69 |
|
DEA - Dallas Lab |
|
Dallas, TX |
|
L |
|
|
2038 |
|
|
|
49,723 |
|
|
|
2,774,089 |
|
|
|
0.9 |
% |
|
|
55.79 |
|
FBI - Mobile |
|
Mobile, AL |
|
O |
|
|
2029 |
|
|
|
76,112 |
|
|
|
2,773,577 |
|
|
|
0.9 |
% |
|
|
36.44 |
|
JUD - El Centro |
|
El Centro, CA |
|
C/O |
|
|
2034 |
|
|
|
43,345 |
|
|
|
2,772,153 |
|
|
|
0.9 |
% |
|
|
63.96 |
|
DEA - Upper Marlboro |
|
Upper Marlboro, MD |
|
L |
|
|
2037 |
|
|
|
50,978 |
|
|
|
2,745,212 |
|
|
|
0.9 |
% |
|
|
53.85 |
|
DEA - Pleasanton |
|
Pleasanton, CA |
|
L |
|
|
2035 |
|
|
|
42,480 |
|
|
|
2,743,024 |
|
|
|
0.9 |
% |
|
|
64.57 |
|
SSA - Charleston |
|
Charleston, WV |
|
O |
|
|
2024 |
|
|
|
110,000 |
|
|
|
2,712,183 |
|
|
|
0.9 |
% |
|
|
24.66 |
|
FBI - Albany |
|
Albany, NY |
|
O |
|
|
2036 |
|
|
|
69,476 |
|
|
|
2,697,700 |
|
|
|
0.9 |
% |
|
|
38.83 |
|
TREAS - Birmingham |
|
Birmingham, AL |
|
O |
|
|
2029 |
|
|
|
83,676 |
|
|
|
2,601,278 |
|
|
|
0.8 |
% |
|
|
31.09 |
|
USAO - Louisville |
|
Louisville, KY |
|
O |
|
|
2031 |
|
|
|
60,000 |
|
|
|
2,538,338 |
|
|
|
0.8 |
% |
|
|
42.31 |
|
JUD - Charleston |
|
Charleston, SC |
|
C/O |
|
|
2040 |
|
|
|
52,339 |
|
|
|
2,481,397 |
|
|
|
0.8 |
% |
|
|
47.41 |
|
JUD - Jackson |
|
Jackson, TN |
|
C/O |
|
|
2043 |
|
|
|
75,043 |
|
|
|
2,386,455 |
|
|
|
0.8 |
% |
|
|
31.80 |
|
NARA - Broomfield |
|
Broomfield, CO |
|
O/W |
|
|
2032 |
|
|
|
161,730 |
|
|
|
2,373,591 |
|
|
|
0.8 |
% |
|
|
14.68 |
|
Various GSA - Cleveland (6) |
|
Brooklyn Heights, OH |
|
O |
|
2028 - 2040 |
|
|
|
61,384 |
|
|
|
2,260,734 |
|
|
|
0.7 |
% |
|
|
36.83 |
|
|
CBP - Savannah |
|
Savannah, GA |
|
L |
|
|
2033 |
|
|
|
35,000 |
|
|
|
2,257,793 |
|
|
|
0.7 |
% |
|
|
64.51 |
|
DEA - Dallas |
|
Dallas, TX |
|
O |
|
|
2041 |
|
|
|
71,827 |
|
|
|
2,253,538 |
|
|
|
0.7 |
% |
|
|
31.37 |
|
NWS - Kansas City |
|
Kansas City, MO |
|
O |
|
|
2033 |
|
|
|
94,378 |
|
|
|
2,142,661 |
|
|
|
0.7 |
% |
|
|
22.70 |
|
DEA - Santa Ana |
|
Santa Ana, CA |
|
O |
|
|
2029 |
|
|
|
39,905 |
|
|
|
1,999,617 |
|
|
|
0.6 |
% |
|
|
50.11 |
|
DEA - North Highlands |
|
Sacramento, CA |
|
O |
|
|
2033 |
|
|
|
37,975 |
|
|
|
1,913,404 |
|
|
|
0.6 |
% |
|
|
50.39 |
|
NPS - Omaha |
|
Omaha, NE |
|
O |
|
|
2024 |
|
|
|
62,772 |
|
|
|
1,848,140 |
|
|
|
0.6 |
% |
|
|
29.44 |
|
VA - Golden |
|
Golden, CO |
|
O/W |
|
|
2026 |
|
|
|
56,753 |
|
|
|
1,730,399 |
|
|
|
0.6 |
% |
|
|
30.49 |
|
USCG - Martinsburg |
|
Martinsburg, WV |
|
O |
|
|
2027 |
|
|
|
59,547 |
|
|
|
1,604,660 |
|
|
|
0.5 |
% |
|
|
26.95 |
|
JUD - Aberdeen |
|
Aberdeen, MS |
|
C/O |
|
|
2025 |
|
|
|
46,979 |
|
|
|
1,572,610 |
|
|
|
0.5 |
% |
|
|
33.47 |
|
GSA - Clarksburg |
|
Clarksburg, WV |
|
O |
|
|
2024 |
|
|
|
63,750 |
|
|
|
1,522,026 |
|
|
|
0.5 |
% |
|
|
23.87 |
|
VA - Charleston |
|
North Charleston, SC |
|
W |
|
|
2040 |
|
|
|
97,718 |
|
|
|
1,472,208 |
|
|
|
0.5 |
% |
|
|
15.07 |
|
DEA - Birmingham |
|
Birmingham, AL |
|
O |
|
|
2038 |
|
|
|
35,616 |
|
|
|
1,444,548 |
|
|
|
0.5 |
% |
|
|
40.56 |
|
DEA - Albany |
|
Albany, NY |
|
O |
|
|
2025 |
|
|
|
31,976 |
|
|
|
1,400,197 |
|
|
|
0.5 |
% |
|
|
43.79 |
|
USAO - Springfield |
|
Springfield, IL |
|
O |
|
|
2038 |
|
|
|
43,600 |
|
|
|
1,381,505 |
|
|
|
0.4 |
% |
|
|
31.69 |
|
DEA - Riverside |
|
Riverside, CA |
|
O |
|
|
2032 |
|
|
|
34,354 |
|
|
|
1,346,376 |
|
|
|
0.4 |
% |
|
|
39.19 |
|
25
Property Name |
|
Location |
|
Property |
|
Tenant Lease |
|
|
Leased |
|
|
Annualized |
|
|
Percentage |
|
|
Annualized |
|
|||||
Wholly Owned U.S. Government Leased Properties (Cont.) |
|
|||||||||||||||||||||||
JUD - Council Bluffs |
|
Council Bluffs, IA |
|
C/O |
|
|
2041 |
|
|
|
28,900 |
|
|
|
1,283,504 |
|
|
|
0.4 |
% |
|
|
44.41 |
|
SSA - Dallas |
|
Dallas, TX |
|
O |
|
|
2035 |
|
|
|
27,200 |
|
|
|
1,063,304 |
|
|
|
0.3 |
% |
|
|
39.09 |
|
JUD - South Bend |
|
South Bend, IN |
|
C/O |
|
|
2027 |
|
|
|
30,119 |
|
|
|
788,893 |
|
|
|
0.3 |
% |
|
|
26.19 |
|
ICE - Louisville |
|
Louisville, KY |
|
O |
|
|
2036 |
|
|
|
17,420 |
|
|
|
655,365 |
|
|
|
0.2 |
% |
|
|
37.62 |
|
DEA - San Diego |
|
San Diego, CA |
|
W |
|
|
2032 |
|
|
|
16,100 |
|
|
|
555,895 |
|
|
|
0.2 |
% |
|
|
34.53 |
|
DEA - Bakersfield |
|
Bakersfield, CA |
|
O |
|
|
2038 |
|
|
|
9,800 |
|
|
|
487,179 |
|
|
|
0.2 |
% |
|
|
49.71 |
|
SSA - San Diego |
|
San Diego, CA |
|
O |
|
|
2032 |
|
|
|
10,059 |
|
|
|
442,607 |
|
|
|
0.1 |
% |
|
|
44.00 |
|
ICE - Otay |
|
San Diego, CA |
|
O |
|
|
2027 |
|
|
|
7,434 |
|
|
|
259,066 |
|
|
|
0.1 |
% |
|
|
34.85 |
|
Subtotal |
|
|
|
|
|
|
|
|
|
7,544,936 |
|
|
$ |
266,119,083 |
|
|
|
86.2 |
% |
|
$ |
35.27 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Wholly Owned Privately Leased Property |
|
|
|
|
|
|
|
|||||||||||||||||
501 East Hunter Street - Lummus Corporation |
|
Lubbock, TX |
|
W/D |
|
|
2028 |
|
|
|
70,078 |
|
|
|
410,392 |
|
|
|
0.1 |
% |
|
|
5.86 |
|
Subtotal |
|
|
|
|
|
|
|
|
|
70,078 |
|
|
$ |
410,392 |
|
|
|
0.1 |
% |
|
$ |
5.86 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Wholly Owned Properties Total / Weighted Average |
|
|
|
7,615,014 |
|
|
$ |
266,529,475 |
|
|
|
86.3 |
% |
|
$ |
35.00 |
|
|||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Unconsolidated Real Estate Venture U.S. Government Leased Properties |
|
|
|
|
||||||||||||||||||||
VA - Phoenix (7) |
|
Phoenix, AZ |
|
OC |
|
|
2042 |
|
|
|
257,294 |
|
|
|
10,679,166 |
|
|
|
3.5 |
% |
|
|
41.51 |
|
VA - San Antonio (7) |
|
San Antonio, TX |
|
OC |
|
|
2041 |
|
|
|
226,148 |
|
|
|
9,341,291 |
|
|
|
3.0 |
% |
|
|
41.31 |
|
VA - Chattanooga (7) |
|
Chattanooga, TN |
|
OC |
|
|
2035 |
|
|
|
94,566 |
|
|
|
4,333,812 |
|
|
|
1.4 |
% |
|
|
45.83 |
|
VA - Lubbock (7) (8) |
|
Lubbock, TX |
|
OC |
|
|
2040 |
|
|
|
120,916 |
|
|
|
4,030,913 |
|
|
|
1.3 |
% |
|
|
33.34 |
|
VA - Marietta (7) |
|
Marietta, GA |
|
OC |
|
|
2041 |
|
|
|
76,882 |
|
|
|
3,908,473 |
|
|
|
1.3 |
% |
|
|
50.84 |
|
VA - Birmingham (7) |
|
Irondale, AL |
|
OC |
|
|
2041 |
|
|
|
77,128 |
|
|
|
3,154,679 |
|
|
|
1.0 |
% |
|
|
40.90 |
|
VA - Corpus Christi (7) |
|
Corpus Christi, TX |
|
OC |
|
|
2042 |
|
|
|
69,276 |
|
|
|
2,927,676 |
|
|
|
0.9 |
% |
|
|
42.26 |
|
VA - Columbus (7) |
|
Columbus, GA |
|
OC |
|
|
2042 |
|
|
|
67,793 |
|
|
|
2,887,003 |
|
|
|
0.9 |
% |
|
|
42.59 |
|
VA - Lenexa (7) |
|
Lenexa, KS |
|
OC |
|
|
2041 |
|
|
|
31,062 |
|
|
|
1,309,621 |
|
|
|
0.4 |
% |
|
|
42.16 |
|
Subtotal |
|
|
|
|
|
|
|
|
|
1,021,065 |
|
|
$ |
42,572,634 |
|
|
|
13.7 |
% |
|
$ |
41.69 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Total / Weighted Average |
|
|
|
|
|
|
|
|
|
8,636,079 |
|
|
$ |
309,102,109 |
|
|
|
100.0 |
% |
|
$ |
35.79 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Total / Weighted Average at Easterly's Share |
|
|
|
|
|
|
|
8,156,177 |
|
|
$ |
289,092,971 |
|
|
|
|
|
$ |
35.44 |
|
26
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 19.3 years as of September 30, 2023), the mission-critical focus of the properties subject to the leases and the current level of operations at such properties.
The following table sets forth a schedule of lease expirations for leases in place (including for wholly owned properties and properties held by the JV) as of September 30, 2023:
Year of Lease Expiration (1) |
|
Number of |
|
|
Leased Square |
|
|
Percentage of |
|
|
Annualized |
|
|
Percentage |
|
|
Annualized |
|
||||||
2023 |
|
|
4 |
|
|
|
226,108 |
|
|
|
2.6 |
% |
|
$ |
7,947,093 |
|
|
|
2.6 |
% |
|
$ |
35.15 |
|
2024 |
|
|
6 |
|
|
|
383,585 |
|
|
|
4.4 |
% |
|
|
11,454,330 |
|
|
|
3.7 |
% |
|
|
29.86 |
|
2025 |
|
|
15 |
|
|
|
630,692 |
|
|
|
7.3 |
% |
|
|
20,776,075 |
|
|
|
6.7 |
% |
|
|
32.94 |
|
2026 |
|
|
5 |
|
|
|
294,245 |
|
|
|
3.4 |
% |
|
|
9,575,114 |
|
|
|
3.1 |
% |
|
|
32.54 |
|
2027 |
|
|
9 |
|
|
|
506,510 |
|
|
|
5.9 |
% |
|
|
18,658,872 |
|
|
|
6.0 |
% |
|
|
36.84 |
|
2028 |
|
|
10 |
|
|
|
778,474 |
|
|
|
9.0 |
% |
|
|
16,547,020 |
|
|
|
5.4 |
% |
|
|
21.26 |
|
2029 |
|
|
4 |
|
|
|
337,372 |
|
|
|
3.9 |
% |
|
|
11,344,689 |
|
|
|
3.7 |
% |
|
|
33.63 |
|
2030 |
|
|
— |
|
|
|
— |
|
|
|
0.0 |
% |
|
|
— |
|
|
|
0.0 |
% |
|
|
— |
|
2031 |
|
|
2 |
|
|
|
100,502 |
|
|
|
1.2 |
% |
|
|
4,077,198 |
|
|
|
1.3 |
% |
|
|
40.57 |
|
2032 |
|
|
7 |
|
|
|
531,001 |
|
|
|
6.1 |
% |
|
|
16,863,155 |
|
|
|
5.5 |
% |
|
|
31.76 |
|
Thereafter |
|
|
55 |
|
|
|
4,847,590 |
|
|
|
56.2 |
% |
|
|
191,858,563 |
|
|
|
62.0 |
% |
|
|
39.58 |
|
Total / Weighted Average |
|
|
117 |
|
|
|
8,636,079 |
|
|
|
100.0 |
% |
|
$ |
309,102,109 |
|
|
|
100.0 |
% |
|
$ |
35.79 |
|
Information about our development property as of September 30, 2023 is set forth in the table below:
Property Name |
|
Location |
|
Tenant |
|
Property |
|
Lease Term |
|
Estimated Leased |
|
||
FDA - Atlanta |
|
Atlanta, GA |
|
Food and Drug Administration |
|
L |
|
20-year |
|
|
|
162,000 |
|
27
Results of Operations
Comparison of Results of Operations for the three months ended September 30, 2023 and 2022
The financial information presented below summarizes our results of operations for the three months ended September 30, 2023 and 2022 (amounts in thousands).
|
|
For the three months ended September 30, |
|
|||||||||
|
|
2023 |
|
|
2022 |
|
|
Change |
|
|||
Revenues |
|
|
|
|
|
|
|
|
|
|||
Rental income |
|
$ |
68,205 |
|
|
$ |
72,643 |
|
|
$ |
(4,438 |
) |
Tenant reimbursements |
|
|
2,704 |
|
|
|
1,616 |
|
|
|
1,088 |
|
Asset management income |
|
|
526 |
|
|
|
377 |
|
|
|
149 |
|
Other income |
|
|
579 |
|
|
|
405 |
|
|
|
174 |
|
Total revenues |
|
|
72,014 |
|
|
|
75,041 |
|
|
|
(3,027 |
) |
Expenses |
|
|
|
|
|
|
|
|
|
|||
Property operating |
|
|
18,746 |
|
|
|
17,802 |
|
|
|
944 |
|
Real estate taxes |
|
|
7,814 |
|
|
|
8,177 |
|
|
|
(363 |
) |
Depreciation and amortization |
|
|
22,245 |
|
|
|
25,050 |
|
|
|
(2,805 |
) |
Acquisition costs |
|
|
321 |
|
|
|
275 |
|
|
|
46 |
|
Corporate general and administrative |
|
|
6,107 |
|
|
|
5,870 |
|
|
|
237 |
|
Total expenses |
|
|
55,233 |
|
|
|
57,174 |
|
|
|
(1,941 |
) |
Other income (expense) |
|
|
|
|
|
|
|
|
|
|||
Income from unconsolidated real estate venture |
|
|
1,346 |
|
|
|
830 |
|
|
|
516 |
|
Interest expense, net |
|
|
(12,046 |
) |
|
|
(12,408 |
) |
|
|
362 |
|
Impairment loss |
|
|
— |
|
|
|
(5,540 |
) |
|
|
5,540 |
|
Net income |
|
$ |
6,081 |
|
|
$ |
749 |
|
|
$ |
5,332 |
|
Revenues
Total revenues decreased $3.0 million to $72.0 million for the three months ended September 30, 2023 compared to $75.0 million for the three months ended September 30, 2022.
The $4.4 million decrease in Rental income is primarily attributable to a decrease in revenues from the ten properties disposed of since September 30, 2022, offset by a full period of operations from the one operating property acquired during the three months ended September 30, 2022.
The $1.1 million increase in Tenant reimbursements is primarily attributable to an increase in tenant project reimbursements.
The $0.1 million increase in Asset management income is attributable to the fee we earned for asset management on two operating properties acquired by the JV since September 30, 2022, as well as from one operating property acquired during the three months ended September 30, 2022.
The $0.2 million increase in Other income is primarily attributable to an increase in project overhead income from our tenant reimbursable projects.
Expenses
Total expenses decreased $1.9 million to $55.2 million for the three months ended September 30, 2023 compared to $57.2 million for the three months ended September 30, 2022.
The $0.9 million increase in Property operating expenses is primarily attributable to an increase in reimbursable projects.
The $0.4 million decrease in Real estate taxes is primarily attributable to the ten properties disposed of since September 30, 2022, offset by a full period of operations from the one operating property acquired during the three months ended September 30, 2022.
28
The $2.8 million decrease in Depreciation and amortization is primarily attributable to the ten properties disposed of since September 30, 2022, offset by a full period of operations from the one operating property acquired during the three months ended September 30, 2022.
The $0.2 million increase in Corporate general and administrative is primarily due to an increase in legal and professional fees.
Income from unconsolidated real estate venture
The $0.5 million increase in Income from unconsolidated real estate venture is primarily attributable to our pro rata share of operations from two operating properties acquired by the JV since September 30, 2022, as well as a full period of operations from one operating property acquired during the three months ended September 30, 2022.
Interest expense, net
The $0.4 million decrease in Interest expense, net is primarily attributable to lower weighted average borrowings on our credit facility, partially offset by increased weighted average borrowings and interest rates on our swapped term loans.
Impairment loss
During the quarter ended September 30, 2022, we recognized an impairment loss totaling approximately $5.5 million for our ICE – Otay property in order to reduce its carrying value to its estimated fair value, which declined due to changes in expected cash flows related to the existing tenant’s lease expiration in 2022.
Comparison of Results of Operations for the nine months ended September 30, 2023 and 2022
The financial information presented below summarizes our results of operations for the nine months ended September 30, 2023 and 2022 (amounts in thousands).
|
|
For the nine months ended September 30, |
|
|||||||||
|
|
2023 |
|
|
2022 |
|
|
Change |
|
|||
Revenues |
|
|
|
|
|
|
|
|
|
|||
Rental income |
|
$ |
204,111 |
|
|
$ |
214,238 |
|
|
$ |
(10,127 |
) |
Tenant reimbursements |
|
|
7,279 |
|
|
|
3,676 |
|
|
|
3,603 |
|
Asset management income |
|
|
1,560 |
|
|
|
942 |
|
|
|
618 |
|
Other income |
|
|
1,657 |
|
|
|
1,244 |
|
|
|
413 |
|
Total revenues |
|
|
214,607 |
|
|
|
220,100 |
|
|
|
(5,493 |
) |
Expenses |
|
|
|
|
|
|
|
|
|
|||
Property operating |
|
|
54,263 |
|
|
|
48,811 |
|
|
|
5,452 |
|
Real estate taxes |
|
|
22,901 |
|
|
|
23,854 |
|
|
|
(953 |
) |
Depreciation and amortization |
|
|
67,945 |
|
|
|
73,552 |
|
|
|
(5,607 |
) |
Acquisition costs |
|
|
1,226 |
|
|
|
939 |
|
|
|
287 |
|
Corporate general and administrative |
|
|
20,426 |
|
|
|
17,819 |
|
|
|
2,607 |
|
Total expenses |
|
|
166,761 |
|
|
|
164,975 |
|
|
|
1,786 |
|
Other income (expense) |
|
|
|
|
|
|
|
|
|
|||
Income from unconsolidated real estate venture |
|
|
4,166 |
|
|
|
2,286 |
|
|
|
1,880 |
|
Interest expense, net |
|
|
(35,739 |
) |
|
|
(34,729 |
) |
|
|
(1,010 |
) |
Impairment loss |
|
|
— |
|
|
|
(5,540 |
) |
|
|
5,540 |
|
Net income |
|
$ |
16,273 |
|
|
$ |
17,142 |
|
|
$ |
(869 |
) |
Revenues
Total revenues decreased $5.5 million to $214.6 million for the nine months ended September 30, 2023 compared to $220.1 million for the nine months ended September 30, 2022.
The $10.1 million decrease in Rental income is primarily attributable to a decrease in revenues from the ten properties disposed of since September 30, 2022, offset by a full period of operations from the three operating properties acquired during the nine months ended September 30, 2022.
29
The $3.6 million increase in Tenant reimbursements is primarily attributable to an increase in tenant project reimbursements.
The $0.6 million increase in Asset management income is attributable to the fee we earned for asset management on two operating properties acquired by the JV since September 30, 2022, as well as from three operating properties acquired during the nine months ended September 30, 2022.
The $0.4 million increase in Other income is primarily attributable to an increase in project overhead income from our tenant reimbursable projects.
Expenses
Total expenses increased $1.8 million to $166.8 million for the nine months ended September 30, 2023 compared to $165.0 million for the nine months ended September 30, 2022.
The $5.5 million increase in Property operating expenses is primarily attributable to an increase in tenant reimbursable projects.
The $1.0 million decrease in Real estate taxes is primarily attributable to the ten properties disposed of since September 30, 2022, offset by a full period of operations from the three operating properties acquired during the nine months ended September 30, 2022.
The $5.6 million decrease in Depreciation and amortization is primarily attributable to the ten properties disposed of since September 30, 2022, offset by a full period of operations from the three operating properties acquired during the nine months ended September 30, 2022.
The $2.6 million increase in Corporate general and administrative is primarily attributable to an increase in employee costs.
Income from unconsolidated real estate venture
The $1.9 million increase in Income from unconsolidated real estate venture is primarily attributable to our pro rata share of operations from two operating properties acquired by the JV since September 30, 2022, as well as a full period of operations from three operating properties acquired during the nine months ended September 30, 2022.
Interest expense, net
The $1.0 million increase in Interest expense, net is primarily attributable to higher weighted average borrowings and interest rates on our swapped term loans.
Impairment loss
During the nine months ended September 30, 2022, we recognized an impairment loss totaling approximately $5.5 million for our ICE – Otay property in order to reduce its carrying value to its estimated fair value, which declined due to changes in expected cash flows related to the existing tenant’s lease expiration in 2022.
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, planned and possible acquisitions of properties, including the one remaining property in the portfolio of ten properties anticipated to be acquired through the JV (the “VA Portfolio”), stockholder distributions to maintain our qualification as a REIT, potential repurchases of common stock under our share repurchase program and other capital obligations associated with conducting our business. At September 30, 2023, we had $33.4 million available in cash and cash equivalents and there was $449.9 million available under our revolving credit facility.
Our primary expected sources of capital are as follows:
30
Our short-term liquidity requirements consist primarily of funds to pay for the following:
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.
Equity
Offering of Common Stock on a Forward Basis
On August 11, 2021, we completed an underwritten public offering of 6,300,000 shares of common stock offered on a forward basis. In connection with the offering, we 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 our common stock. On December 28, 2021, we issued 3,991,000 shares of our common stock for net proceeds of $85.0 million, which shares were issued in partial settlement of the Forward Sales Agreements entered into in connection with the underwritten public offering. During the three months ended March 31, 2023, we issued 2,309,000 shares of common stock under the Forward Sale Agreements and received net cash proceeds of approximately $46.8 million. As of September 30, 2023, all shares of common stock under the Forward Sales Agreements had been issued and settled.
ATM Programs
We entered into separate equity distribution agreements on each of December 20, 2019 (the “2019 ATM Program”) and June 22, 2021 (the “2021 ATM Program” and, together with the 2019 ATM Program, the “ATM Programs”) with various financial institutions pursuant to which we may issue and sell shares of our common stock having an aggregate offering price of up to $300.0 million under each ATM Program from time to time in negotiated transactions or transactions that are deemed to be “at the market” offerings as defined in Rule 415 under the Securities Act. Under each of the ATM Programs, we may 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 the various financial institutions party to the respective ATM Program for the sale of shares of our common stock on a forward basis.
31
The following table sets forth certain information with respect to issuances under the 2019 ATM Program during the nine months ended September 30, 2023 (amounts in thousands, except share amounts):
|
|
2019 ATM Program |
|
|||||
For the three months ended |
|
Number of Shares Issued(1) |
|
|
Net Proceeds(1) |
|
||
March 31, 2023 |
|
|
250,000 |
|
|
$ |
5,562 |
|
June 30, 2023 |
|
|
— |
|
|
|
— |
|
September 30, 2023 |
|
|
1,700,000 |
|
|
|
33,717 |
|
Total |
|
|
1,950,000 |
|
|
$ |
39,279 |
|
No sales of shares of our common stock were made under the 2021 ATM Program during the nine months ended September 30, 2023.
We used the net proceeds received from sales under our 2019 ATM Program for general corporate purposes. As of September 30, 2023, we had approximately $300.0 million of gross sales of our common stock available under the 2021 ATM Program and $87.4 million of gross sales of common stock available under the 2019 ATM Program.
Share Repurchase Program
On April 28, 2022, our Board of Directors authorized a share repurchase program whereby we may repurchase up to 4,538,994 shares of our common stock, or approximately 5% of our outstanding shares as of the authorization date. We are not required to purchase shares under the share repurchase program but may choose to do so in the open market or through privately negotiated transactions at times and amounts based on our evaluation of market conditions and other factors.
No repurchases of shares of our common stock were made under the share repurchase program during the nine months ended September 30, 2023.
32
Debt
Indebtedness Outstanding
The following table sets forth certain information with respect to our outstanding indebtedness as of September 30, 2023 (amounts in thousands):
|
|
Principal Outstanding |
|
|
Interest |
|
Current |
|
|
Loan |
|
September 30, 2023 |
|
|
Rate (1) |
|
Maturity |
|
|
Revolving credit facility: |
|
|
|
|
|
|
|
|
|
Revolving credit facility (2) |
|
$ |
— |
|
|
S + 135 bps |
|
July 2025 (3) |
|
Total revolving credit facility |
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Term loan facilities: |
|
|
|
|
|
|
|
|
|
2016 term loan facility |
|
|
100,000 |
|
|
5.05% (4) |
|
March 2024 |
|
2018 term loan facility |
|
|
200,000 |
|
|
5.39% (5) |
|
July 2026 |
|
Total term loan facilities |
|
|
300,000 |
|
|
|
|
|
|
Less: Total unamortized deferred financing fees |
|
|
(1,018 |
) |
|
|
|
|
|
Total term loan facilities, net |
|
|
298,982 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 |
|
|
100,000 |
|
|
3.83% |
|
September 2031 |
|
2019 series C senior notes |
|
|
90,000 |
|
|
3.98% |
|
September 2034 |
|
2021 series A senior notes |
|
|
50,000 |
|
|
2.62% |
|
October 2028 |
|
2021 series B senior notes |
|
|
200,000 |
|
|
2.89% |
|
October 2030 |
|
Total notes payable |
|
|
700,000 |
|
|
|
|
|
|
Less: Total unamortized deferred financing fees |
|
|
(3,589 |
) |
|
|
|
|
|
Total notes payable, net |
|
|
696,411 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage notes payable: |
|
|
|
|
|
|
|
|
|
VA – Golden |
|
|
8,480 |
|
|
5.00% (6) |
|
April 2024 |
|
USFS II – Albuquerque |
|
|
12,080 |
|
|
4.46% (6) |
|
July 2026 |
|
ICE – Charleston |
|
|
12,364 |
|
|
4.21% (6) |
|
January 2027 |
|
VA – Loma Linda |
|
|
127,500 |
|
|
3.59% (6) |
|
July 2027 |
|
CBP – Savannah |
|
|
9,762 |
|
|
3.40% (6) |
|
July 2033 |
|
USCIS – Kansas City |
|
|
51,500 |
|
|
3.68% (6) |
|
August 2024 |
|
Total mortgage notes payable |
|
|
221,686 |
|
|
|
|
|
|
Less: Total unamortized deferred financing fees |
|
|
(1,058 |
) |
|
|
|
|
|
Less: Total unamortized premium/discount |
|
|
820 |
|
|
|
|
|
|
Total mortgage notes payable, net |
|
|
221,448 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total debt |
|
$ |
1,216,841 |
|
|
|
|
|
|
33
On January 26, 2023, we used $15.7 million of available cash to extinguish the mortgage note obligation on DEA – Pleasanton.
On February 3, 2023, we entered into three SOFR-based interest rate swaps each with a notional value of $100.0 million that were designated as cash flow hedges of interest rate risk. Two of the interest rate swaps, with an aggregate notional value of $200.0 million, became effective in June 2023. The third swap, with a notional value of $100.0 million, became effective in September 2023. For more information on our interest rate swaps, see Note 6 to the Consolidated Financial Statements.
On May 30, 2023, we entered into the third amendment to our second amended and restated credit agreement, dated as of July 23, 2021 and into the sixth amendment to our senior unsecured term loan agreement, dated as of September 29, 2016. These amendments added a daily simple SOFR-based option to the term SOFR-based floating interest rate option as a benchmark rate for borrowings denominated in U.S. dollars for all purposes under the credit and term loan agreements, including, in each case, a credit spread adjustment of 0.10%.
On July 20, 2023, we exercised in full the $50.0 million delayed draw option on our 2018 term loan facility, increasing our 2018 term loan facility commitments from $150.0 million to $200.0 million, and transferred $50.0 million of our interest rate swap with a notional value of $100.0 million, from our revolving credit facility to the $50.0 million delayed draw.
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, 2023, we were in compliance with all applicable financial covenants.
The chart below details our debt capital structure as of September 30, 2023 (dollar amounts in thousands):
Debt Capital Structure |
|
September 30, 2023 |
|
|
Total principal outstanding |
|
$ |
1,221,686 |
|
Weighted average maturity |
|
5.0 years |
|
|
Weighted average interest rate |
|
|
4.0 |
% |
% Variable debt |
|
|
0.0 |
% |
% Fixed debt (1) |
|
|
100.0 |
% |
% Secured debt |
|
|
17.9 |
% |
Material Cash Commitments
During the nine months ended September 30, 2023, there were no material changes to the cash commitment information presented in Item 7 of Part II of our Annual Report on Form 10-K for the year ended December 31, 2022.
Unconsolidated Real Estate Venture
We consolidate entities in which we have a controlling interest or are the primary beneficiary in a variable interest entity. From time to time, we may have off-balance sheet unconsolidated real estate ventures and other unconsolidated arrangements with varying structures.
As of September 30, 2023, we have invested $284.5 million in the JV. As of September 30, 2023, we committed capital, net of return of over committed capital, to the JV totaling $291.8 million and have a remaining capital commitment of $46.5 million. None of the properties owned by the JV are encumbered by mortgage indebtedness.
For a more complete description of the JV, see Note 4 to the Consolidated Financial Statements.
34
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:
Quarter |
|
Declaration Date |
|
Record Date |
|
Payment Date |
|
Dividend (1) |
|
|
Q1 2023 |
|
April 26, 2023 |
|
May 11, 2023 |
|
May 23, 2023 |
|
$ |
0.265 |
|
Q2 2023 |
|
August 2, 2023 |
|
August 17, 2023 |
|
August 29, 2023 |
|
$ |
0.265 |
|
Q3 2023 |
|
October 26, 2023 |
|
November 9, 2023 |
|
November 21, 2023 |
|
$ |
0.265 |
|
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, 2023 and 2022 (amounts in thousands):
|
|
For the nine months ended September 30, |
|
|||||
|
|
2023 |
|
|
2022 |
|
||
Net cash provided by (used in): |
|
|
|
|
|
|
||
Operating activities |
|
$ |
96,945 |
|
|
$ |
103,783 |
|
Investing activities |
|
|
(48,659 |
) |
|
|
(189,313 |
) |
Financing activities |
|
|
(32,111 |
) |
|
|
86,881 |
|
Operating Activities
We generated $96.9 million and $103.8 million of cash from operating activities during the nine months ended September 30, 2023 and 2022, respectively. Net cash provided by operating activities for the nine months ended September 30, 2023 includes $76.7 million in net cash from rental activities net of expenses, $9.0 million related to distributions from investment in unconsolidated real estate venture and $11.2 million related to the change in tenant accounts receivable, prepaid expenses and other assets, deferred revenue associated with operating leases, principal payments on operating lease obligations, and accounts payable, accrued expenses and other liabilities. Net cash provided by operating activities for the nine months ended September 30, 2022 includes $94.0 million in net cash from rental activities net of expenses, $5.4 million related to distributions from investment in unconsolidated real estate venture and $4.3 million related to the change in tenant accounts receivable, prepaid expenses and other assets, deferred revenue associated with operating leases, principal payments on operating lease obligations, and accounts payable, accrued expenses and other liabilities.
35
Investing Activities
We used $48.7 million and $189.3 million in cash for investing activities during the nine months ended September 30, 2023 and 2022, respectively. Net cash used in investing activities for the nine months ended September 30, 2023 includes $20.2 million in additions to operating properties, $17.7 million in investment in unconsolidated real estate venture, $9.8 million in additions to development properties and $1.0 million in real estate acquisitions and deposits. Net cash used in investing activities for the nine months ended September 30, 2022 includes $93.7 million in real estate acquisitions and deposits, $71.3 million in investment in unconsolidated real estate venture, $16.1 million in additions to operating properties and $8.8 million in additions to development properties, offset by $0.6 million in distributions of capital from unconsolidated real estate venture.
Financing Activities
We used $32.1 million and generated $86.9 million in cash from financing activities during the nine months ended September 30, 2023 and 2022, respectively. Net cash used in financing activities for the nine months ended September 30, 2023 includes $83.8 million in dividend payments, $65.5 million in net pay downs under our revolving credit facility, $18.9 million in mortgage notes payable repayment and $0.4 million in the payment of offering costs, offset by $86.5 million in gross proceeds from issuance of shares of our common stock and $50.0 million delayed draw on our 2018 term loan. Net cash generated by financing activities for the nine months ended September 30, 2022 includes $163.3 million in net draws under our revolving credit facility and $9.5 million in gross proceeds from issuances of shares of our common stock, offset by $81.8 million in dividend payments, $3.9 million in mortgage notes payable repayment and $0.1 million in the payment of offering costs.
36
Non-GAAP Financial Measures
We use and present Funds From Operations (“FFO”), Core FFO and FFO, as Adjusted as supplemental measures of our performance. The summary below describes our use of FFO, Core 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 (“Nareit”) definition set forth in the Nareit FFO White Paper – Restatement 2018. FFO includes the REIT’s share of FFO generated by unconsolidated affiliates. In addition, we present Core FFO and 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:
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 Core FFO as an alternative measure of our operating performance, which, when applicable, excludes items which we believe are not representative of ongoing operating results, such as liability management related costs (including losses on extinguishment of debt and modification costs), catastrophic event charges, depreciation of non-real estate assets, and the unconsolidated real estate venture's allocated share of these adjustments. In future periods, we may also exclude other items from Core FFO that we believe may help investors compare our results. We believe Core FFO more accurately reflects the ongoing operational and financial performance of our core business.
We adjust FFO to present FFO, as Adjusted as an alternative measure of our operating performance, which, when applicable, excludes the impact of losses on extinguishment of debt, depreciation of non-real estate assets, acquisition costs, straight-line rent and other non-cash adjustments, amortization of deferred revenue (which results from landlord assets funded by tenants), non-cash interest expense, non-cash compensation, amortization of above-/below-market leases, and the unconsolidated real estate venture’s allocated share of these adjustments. 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.
FFO, Core 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, Core FFO and FFO, as Adjusted or use other definitions of FFO, Core FFO and FFO, as Adjusted and, accordingly, our presentation of these measures may not be comparable to other REITs. Neither FFO, Core FFO nor FFO, as Adjusted are 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.
37
The following table sets forth a reconciliation of our net income to FFO, Core FFO and FFO, as Adjusted for the three and nine months ended September 30, 2023 and 2022 (amounts in thousands):
|
|
For the three months ended September 30, |
|
|
For the nine months ended September 30, |
|
||||||||||
|
|
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
||||
Net income |
|
$ |
6,081 |
|
|
$ |
749 |
|
|
$ |
16,273 |
|
|
$ |
17,142 |
|
Depreciation of real estate assets |
|
|
21,995 |
|
|
|
24,802 |
|
|
|
67,194 |
|
|
|
72,810 |
|
Impairment loss |
|
|
— |
|
|
|
5,540 |
|
|
|
— |
|
|
|
5,540 |
|
Unconsolidated real estate venture allocated share of above adjustments |
|
|
1,887 |
|
|
|
1,347 |
|
|
|
5,637 |
|
|
|
3,352 |
|
FFO |
|
|
29,963 |
|
|
|
32,438 |
|
|
|
89,104 |
|
|
|
98,844 |
|
Adjustments to FFO: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Loss on extinguishment of debt |
|
|
— |
|
|
|
— |
|
|
|
14 |
|
|
|
— |
|
Natural disaster event expense, net of recovery |
|
|
8 |
|
|
|
— |
|
|
|
86 |
|
|
|
9 |
|
Depreciation of non-real estate assets |
|
|
250 |
|
|
|
248 |
|
|
|
751 |
|
|
|
742 |
|
Unconsolidated real estate venture allocated share of above adjustments |
|
|
17 |
|
|
|
17 |
|
|
|
50 |
|
|
|
48 |
|
Core FFO |
|
|
30,238 |
|
|
|
32,703 |
|
|
|
90,005 |
|
|
|
99,643 |
|
Adjustments to Core FFO: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Acquisition costs |
|
|
321 |
|
|
|
275 |
|
|
|
1,226 |
|
|
|
939 |
|
Straight-line rent and other non-cash adjustments |
|
|
(1,296 |
) |
|
|
1,090 |
|
|
|
(2,661 |
) |
|
|
559 |
|
Amortization of above-/below-market leases |
|
|
(676 |
) |
|
|
(769 |
) |
|
|
(2,052 |
) |
|
|
(2,373 |
) |
Amortization of deferred revenue |
|
|
(1,572 |
) |
|
|
(1,472 |
) |
|
|
(4,678 |
) |
|
|
(4,313 |
) |
Non-cash interest expense |
|
|
264 |
|
|
|
235 |
|
|
|
752 |
|
|
|
695 |
|
Non-cash compensation |
|
|
1,658 |
|
|
|
1,625 |
|
|
|
4,625 |
|
|
|
4,891 |
|
Natural disaster event expense, net of recovery |
|
|
(8 |
) |
|
|
— |
|
|
|
(86 |
) |
|
|
(9 |
) |
Unconsolidated real estate venture allocated share of above adjustments |
|
|
15 |
|
|
|
(391 |
) |
|
|
(55 |
) |
|
|
(1,099 |
) |
FFO, as Adjusted |
|
$ |
28,944 |
|
|
$ |
33,296 |
|
|
$ |
87,076 |
|
|
$ |
98,933 |
|
Critical Accounting Estimates
The preparation of financial statements in conformity with GAAP requires management to use judgment in the application of accounting policies, including making estimates and assumptions. We base these estimates, judgments, and assumptions on historical experience, current trends, and various other factors that we believe to be reasonable under the circumstances. If our judgment or interpretation of the facts and circumstances relating to various transactions had been different, or different assumptions were made, it is possible that different accounting policies would have been applied, resulting in different financial results or a different presentation of our financial statements.
Our Annual Report on Form 10-K for the year ended December 31, 2022 contains a discussion of our significant accounting policies, which utilize relevant critical accounting estimates. During the nine months ended September 30, 2023, there were no material changes to the discussion of our significant accounting policies included in our Annual Report on Form 10-K for the year ended December 31, 2022.
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 may bear 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. For more information on our interest rate swaps, see Note 6 to the Consolidated Financial Statements.
As of September 30, 2023, $1.2 billion, or 100.0% of our debt, excluding unamortized premiums and discounts, had fixed interest rates and none had variable interest rates. If market rates of interest on variable rate debt fluctuate by 25 basis points there would be no impact to us.
As of September 30, 2023, each of the agreements governing our variable rate debt have been transitioned to SOFR.
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, 2023. Based on this evaluation, our principal executive officer and principal financial officer concluded that, as of September 30, 2023, 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, 2023 that have materially affected, or are 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 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, 2022.
Item 2. Unregistered Sales of Equity Securities, Use of Proceeds, and Issuer Purchases of Equity Securities
None.
Item 3. Defaults Upon Senior Securities
Not applicable.
39
Item 4. Mine Safety Disclosures
Not applicable.
Item 5. Other Information
On
During the three months ended September 30, 2023, no other directors or officers (as defined in Rule 16a-1(f) of the Exchange Act) adopted, terminated or modified a Rule 10b5-1 trading arrangement or non-Rule 10b5-1 trading arrangement (as such terms are defined in Item 408 of Regulation S-K).
Item 6. Exhibits
The following exhibits are included, or incorporated by reference, in this Quarterly Report on Form 10-Q:
Exhibit |
|
Exhibit Description |
|
|
|
3.1 |
|
|
|
|
|
3.2 |
|
|
|
|
|
3.3 |
|
|
3.4 |
|
|
|
|
|
4.1 |
|
|
|
|
|
10.1 |
|
|
|
|
|
10.2 |
|
|
|
|
|
10.3 |
|
|
|
|
|
10.4 |
|
|
|
|
|
10.5 |
|
|
|
|
|
10.6 |
|
|
|
|
|
10.7 |
|
40
|
|
|
31.1* |
|
|
|
|
|
31.2* |
|
|
|
|
|
32.1** |
|
|
|
|
|
101.INS* |
|
Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because XBRL tags are embedded within the Inline XBRL document. |
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
41
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
|
|
Easterly Government Properties, Inc. |
|
|
|
|
|
Date: October 31, 2023 |
|
/s/ William C. Trimble, III |
|
|
|
William C. Trimble, III |
|
|
|
Chief Executive Officer and President (Principal Executive Officer) |
|
|
|
|
|
Date: October 31, 2023 |
|
/s/ Meghan G. Baivier |
|
|
|
Meghan G. Baivier |
|
|
|
Executive Vice President, Chief Financial Officer and Chief Operating Officer (Principal Financial Officer) |
EXHIBIT 10.1
FIRST AMENDMENT TO PURCHASE AND SALE AGREEMENT
THIS FIRST AMENDMENT TO PURCHASE AND SALE AGREEMENT (this “Amendment”) is made and entered into effective as of October 12, 2021 (the “Effective Date”), by and among the entities listed on Exhibit A attached hereto (each, a “Seller” and collectively, the “Sellers”), and EGP MEDBASE REIT LLC, a Delaware limited liability company (“Purchaser”).
R E C I T A L S:
NOW, THEREFORE, in consideration of the terms, conditions and covenants contained in the Purchase Agreement and in this Amendment, and of other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Sellers and Purchaser agree as follows:
[SIGNATURES ON NEXT PAGE]
2
IN WITNESS WHEREOF, the parties hereto have duly executed this Amendment as of the Effective Date.
SELLERS:
BIRMINGHAM VA MANAGING MEMBER LLC,
a Delaware limited liability company
By: /s/ Kevin T. Kelly
Name: Kevin T. Kelly
Title: Manager
CHATTANOOGA VA MANAGING MEMBER LLC,
a Delaware limited liability company
By: /s/ Kevin T. Kelly
Name: Kevin T. Kelly
Title: Manager
COLUMBUS VA MANAGING MEMBER LLC,
a Delaware limited liability company
By: /s/ Kevin T. Kelly
Name: Kevin T. Kelly
Title: Manager
CORPUS CHRISTI VA MANAGING MEMBER LLC,
a Delaware limited liability company
By: /s/ Kevin T. Kelly
Name: Kevin T. Kelly
Title: Manager
[Signature Page to First Amendment to Purchase and Sale Agreement]
JACKSONVILLE VA OPC MANAGING MEMBER LLC,
a Delaware limited liability company
By: /s/ Kevin T. Kelly
Name: Kevin T. Kelly
Title: Manager
JOHNSON COUNTY VA MANAGING MEMBER LLC,
a Delaware limited liability company
By: /s/ Kevin T. Kelly
Name: Kevin T. Kelly
Title: Manager
LUBBOCK VA MANAGING MEMBER LLC,
a Delaware limited liability company
By: /s/ Kevin T. Kelly
Name: Kevin T. Kelly
Title: Manager
COBB COUNTY VA MANAGING MEMBER LLC,
a Delaware limited liability company
By: /s/ Kevin T. Kelly
Name: Kevin T. Kelly
Title: Manager
PHOENIX VA MANAGING MEMBER LLC,
a Delaware limited liability company
By: /s/ Kevin T. Kelly
Name: Kevin T. Kelly
Title: Manager
[Signature Page to First Amendment to Purchase and Sale Agreement]
SAN ANTONIO VA MANAGING MEMBER LLC,
a Delaware limited liability company
By: /s/ Kevin T. Kelly
Name: Kevin T. Kelly
Title: Manager
[Signatures continue on following page.]
[Signature Page to First Amendment to Purchase and Sale Agreement]
PURCHASER:
EGP MEDBASE REIT LLC,
a Delaware limited liability company
By: /s/ Andrew G. Pulliam
Name: Andrew G. Pulliam
Title: Executive Vice President
[Signature Page to First Amendment to Purchase and Sale Agreement]
EXHIBIT A
LIST OF SELLERS, COMPANIES AND PROPERTIES
SELLER |
|
COMPANY |
|
PROPERTY |
Birmingham VA Managing Member LLC, a Delaware limited liability company (the “Birmingham Seller”) |
which owns 100% of the Membership Interests in: |
Birmingham VA LLC, a Delaware limited liability company (the “Birmingham Company”) |
which owns the: |
Birmingham Property |
Chattanooga VA Managing Member LLC, a Delaware limited liability company (the “Chattanooga Seller”) |
which owns 100% of the Membership Interests in: |
Chattanooga VA LLC, a Delaware limited liability company (the “Chattanooga Company”) |
which owns the: |
Chattanooga Property |
Columbus VA Managing Member LLC, a Delaware limited liability company (the “Columbus Seller”) |
which owns 100% of the Membership Interests in: |
Columbus VA LLC, a Delaware limited liability company (the “Columbus Company”) |
which owns the: |
Columbus Property |
Corpus Christi VA Managing Member LLC, a Delaware limited liability company (the “Corpus Christi Seller”) |
which owns 100% of the Membership Interests in: |
Corpus Christi VA LLC, a Delaware limited liability company (the “Corpus Christi Company”) |
which owns the: |
Corpus Christi Property |
Jacksonville VA OPC Managing Member LLC, a Delaware limited liability company (the “Jacksonville Seller”) |
which owns 100% of the Membership Interests in: |
Jacksonville VA OPC, LLC, a Delaware limited liability company (the “Jacksonville Company”) |
which owns the: |
Jacksonville Property |
Johnson County VA Managing Member LLC, a Delaware limited liability |
which owns 100% of the Membership Interests in: |
Johnson County VA LLC, a Delaware limited liability company (the “Lenexa Company”) |
which owns the: |
Lenexa Property |
company (the “Lenexa Seller”) |
|
|
|
|
Lubbock VA Managing Member LLC, a Delaware limited liability company (the “Lubbock Seller”) |
which owns 100% of the Membership Interests in: |
Lubbock VA LLC, a Delaware limited liability company (the “Lubbock Company”) |
which owns the: |
Lubbock Property |
Cobb County VA Managing Member LLC, a Delaware limited liability company (the “Marietta Seller”) |
which owns 100% of the Membership Interests in: |
Cobb County VA LLC, a Delaware limited liability company (the “Marietta Company”) |
which owns the: |
Marietta Property |
Phoenix VA Managing Member LLC, a Delaware limited liability company (the “Phoenix Seller”) |
which owns 100% of the Membership Interests in: |
Phoenix VA LLC, a Delaware limited liability company (the “Phoenix Company”) |
which owns the: |
Phoenix Property |
San Antonio VA Managing Member LLC, a Delaware limited liability company (the “San Antonio Seller”) |
which owns 100% of the Membership Interests in: |
San Antonio VA LLC, a Delaware limited liability company (the “San Antonio Company”) |
which owns the: |
San Antonio Property |
EXHIBIT 10.2
SECOND AMENDMENT TO PURCHASE AND SALE AGREEMENT
THIS SECOND AMENDMENT TO PURCHASE AND SALE AGREEMENT (this “Amendment”) is made and entered into effective as of November 1, 2021 (the “Effective Date”), by and among the entities listed on Exhibit A attached hereto (each, a “Seller” and collectively, the “Sellers”), and EGP MEDBASE REIT LLC, a Delaware limited liability company (“Purchaser”).
R E C I T A L S:
NOW, THEREFORE, in consideration of the terms, conditions and covenants contained in the Purchase Agreement and in this Amendment, and of other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Sellers and Purchaser agree as follows:
[SIGNATURES ON NEXT PAGE]
2
IN WITNESS WHEREOF, the parties hereto have duly executed this Amendment as of the Effective Date.
SELLERS:
BIRMINGHAM VA MANAGING MEMBER LLC,
a Delaware limited liability company
By: /s/ Kevin T. Kelly
Name: Kevin T. Kelly
Title: Manager
CHATTANOOGA VA MANAGING MEMBER LLC,
a Delaware limited liability company
By: /s/ Kevin T. Kelly
Name: Kevin T. Kelly
Title: Manager
COLUMBUS VA MANAGING MEMBER LLC,
a Delaware limited liability company
By: /s/ Kevin T. Kelly
Name: Kevin T. Kelly
Title: Manager
CORPUS CHRISTI VA MANAGING MEMBER LLC,
a Delaware limited liability company
By: /s/ Kevin T. Kelly
Name: Kevin T. Kelly
Title: Manager
[Signature Page to Second Amendment to Purchase and Sale Agreement]
JACKSONVILLE VA OPC MANAGING MEMBER LLC,
a Delaware limited liability company
By: /s/ Kevin T. Kelly
Name: Kevin T. Kelly
Title: Manager
JOHNSON COUNTY VA MANAGING MEMBER LLC,
a Delaware limited liability company
By: /s/ Kevin T. Kelly
Name: Kevin T. Kelly
Title: Manager
LUBBOCK VA MANAGING MEMBER LLC,
a Delaware limited liability company
By: /s/ Kevin T. Kelly
Name: Kevin T. Kelly
Title: Manager
COBB COUNTY VA MANAGING MEMBER LLC,
a Delaware limited liability company
By: /s/ Kevin T. Kelly
Name: Kevin T. Kelly
Title: Manager
PHOENIX VA MANAGING MEMBER LLC,
a Delaware limited liability company
By: /s/ Kevin T. Kelly
Name: Kevin T. Kelly
Title: Manager
[Signature Page to Second Amendment to Purchase and Sale Agreement]
SAN ANTONIO VA MANAGING MEMBER LLC,
a Delaware limited liability company
By: /s/ Kevin T. Kelly
Name: Kevin T. Kelly
Title: Manager
[Signatures continue on following page.]
[Signature Page to Second Amendment to Purchase and Sale Agreement]
PURCHASER:
EGP MEDBASE REIT LLC,
a Delaware limited liability company
By: /s/ Andrew G. Pulliam
Name: Andrew G. Pulliam
Title: Executive Vice President
[Signature Page to Second Amendment to Purchase and Sale Agreement]
EXHIBIT A
LIST OF SELLERS, COMPANIES AND PROPERTIES
SELLER |
|
COMPANY |
|
PROPERTY |
Birmingham VA Managing Member LLC, a Delaware limited liability company (the “Birmingham Seller”) |
which owns 100% of the Membership Interests in: |
Birmingham VA LLC, a Delaware limited liability company (the “Birmingham Company”) |
which owns the: |
Birmingham Property |
Chattanooga VA Managing Member LLC, a Delaware limited liability company (the “Chattanooga Seller”) |
which owns 100% of the Membership Interests in: |
Chattanooga VA LLC, a Delaware limited liability company (the “Chattanooga Company”) |
which owns the: |
Chattanooga Property |
Columbus VA Managing Member LLC, a Delaware limited liability company (the “Columbus Seller”) |
which owns 100% of the Membership Interests in: |
Columbus VA LLC, a Delaware limited liability company (the “Columbus Company”) |
which owns the: |
Columbus Property |
Corpus Christi VA Managing Member LLC, a Delaware limited liability company (the “Corpus Christi Seller”) |
which owns 100% of the Membership Interests in: |
Corpus Christi VA LLC, a Delaware limited liability company (the “Corpus Christi Company”) |
which owns the: |
Corpus Christi Property |
Jacksonville VA OPC Managing Member LLC, a Delaware limited liability company (the “Jacksonville Seller”) |
which owns 100% of the Membership Interests in: |
Jacksonville VA OPC, LLC, a Delaware limited liability company (the “Jacksonville Company”) |
which owns the: |
Jacksonville Property |
Johnson County VA Managing Member LLC, a Delaware limited liability |
which owns 100% of the Membership Interests in: |
Johnson County VA LLC, a Delaware limited liability company (the “Lenexa Company”) |
which owns the: |
Lenexa Property |
company (the “Lenexa Seller”) |
|
|
|
|
Lubbock VA Managing Member LLC, a Delaware limited liability company (the “Lubbock Seller”) |
which owns 100% of the Membership Interests in: |
Lubbock VA LLC, a Delaware limited liability company (the “Lubbock Company”) |
which owns the: |
Lubbock Property |
Cobb County VA Managing Member LLC, a Delaware limited liability company (the “Marietta Seller”) |
which owns 100% of the Membership Interests in: |
Cobb County VA LLC, a Delaware limited liability company (the “Marietta Company”) |
which owns the: |
Marietta Property |
Phoenix VA Managing Member LLC, a Delaware limited liability company (the “Phoenix Seller”) |
which owns 100% of the Membership Interests in: |
Phoenix VA LLC, a Delaware limited liability company (the “Phoenix Company”) |
which owns the: |
Phoenix Property |
San Antonio VA Managing Member LLC, a Delaware limited liability company (the “San Antonio Seller”) |
which owns 100% of the Membership Interests in: |
San Antonio VA LLC, a Delaware limited liability company (the “San Antonio Company”) |
which owns the: |
San Antonio Property |
EXHIBIT 10.3
THIRD AMENDMENT TO PURCHASE AND SALE AGREEMENT
THIS THIRD AMENDMENT TO PURCHASE AND SALE AGREEMENT (this “Amendment”) is made and entered into effective as of December 21, 2021 (the “Effective Date”), by and among the entities listed on Exhibit A attached hereto (each, a “Seller” and collectively, the “Sellers”), and EGP MEDBASE REIT LLC, a Delaware limited liability company (“Purchaser”).
R E C I T A L S:
WHEREAS, Sellers and Purchaser (as successor by assignment from Easterly Government Properties LP, a Delaware limited partnership) entered into that certain Purchase and Sale Agreement dated as of September 30, 2021, as amended by that certain First Amendment to Purchase and Sale Agreement dated as of October 12, 2021 and as further amended by that certain Second Amendment to Purchase and Sale Agreement dated as of November 1, 2021 (collectively, the “Purchase Agreement”);
WHEREAS, pursuant to the Purchase Agreement, Sellers agreed to sell to Purchaser, and Purchaser agreed to buy from Sellers, the Membership Interests in the Companies set forth next to such Seller’s name on Exhibit A to the Purchase Agreement; and
WHEREAS, Sellers and Purchaser desire to further amend the Purchase Agreement to set forth certain agreements of the parties as more particularly set forth herein.
NOW, THEREFORE, in consideration of the terms, conditions and covenants contained in the Purchase Agreement and in this Amendment, and of other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Sellers and Purchaser agree as follows:
[SIGNATURES ON NEXT PAGE]
IN WITNESS WHEREOF, the parties hereto have duly executed this Amendment as of the Effective Date.
SELLERS:
BIRMINGHAM VA MANAGING MEMBER LLC,
a Delaware limited liability company
By: /s/ Kevin T. Kelly
Name: Kevin T. Kelly
Title: Manager
CHATTANOOGA VA MANAGING MEMBER LLC,
a Delaware limited liability company
By: /s/ Kevin T. Kelly
Name: Kevin T. Kelly
Title: Manager
COLUMBUS VA MANAGING MEMBER LLC,
a Delaware limited liability company
By: /s/ Kevin T. Kelly
Name: Kevin T. Kelly
Title: Manager
CORPUS CHRISTI VA MANAGING MEMBER LLC,
a Delaware limited liability company
By: /s/ Kevin T. Kelly
Name: Kevin T. Kelly
Title: Manager
JACKSONVILLE VA OPC MANAGING MEMBER LLC,
a Delaware limited liability company
By: /s/ Kevin T. Kelly
Name: Kevin T. Kelly
Title: Manager
[Signature Page to Third Amendment to Purchase and Sale Agreement]
JOHNSON COUNTY VA MANAGING MEMBER LLC,
a Delaware limited liability company
By: /s/ Kevin T. Kelly
Name: Kevin T. Kelly
Title: Manager
LUBBOCK VA MANAGING MEMBER LLC,
a Delaware limited liability company
By: /s/ Kevin T. Kelly
Name: Kevin T. Kelly
Title: Manager
COBB COUNTY VA MANAGING MEMBER LLC,
a Delaware limited liability company
By: /s/ Kevin T. Kelly
Name: Kevin T. Kelly
Title: Manager
PHOENIX VA MANAGING MEMBER LLC,
a Delaware limited liability company
By: /s/ Kevin T. Kelly
Name: Kevin T. Kelly
Title: Manager
SAN ANTONIO VA MANAGING MEMBER LLC,
a Delaware limited liability company
By: /s/ Kevin T. Kelly
Name: Kevin T. Kelly
Title: Manager
[Signatures continue following page.]
[Signature Page to Third Amendment to Purchase and Sale Agreement]
PURCHASER:
EGP MEDBASE REIT LLC,
a Delaware limited liability company
By: /s/ Andrew G. Pulliam
Name: Andrew G. Pulliam
Title: Executive Vice President
[Signature Page to Third Amendment to Purchase and Sale Agreement]
EXHIBIT A
LIST OF SELLERS
SELLER |
Birmingham VA Managing Member LLC, a Delaware limited liability company |
Chattanooga VA Managing Member LLC, a Delaware limited liability company |
Columbus VA Managing Member LLC, a Delaware limited liability company |
Corpus Christi VA Managing Member LLC, a Delaware limited liability company |
Jacksonville VA OPC Managing Member LLC, a Delaware limited liability company |
Johnson County VA Managing Member LLC, a Delaware limited liability company |
Lubbock VA Managing Member LLC, a Delaware limited liability company |
Cobb County VA Managing Member LLC, a Delaware limited liability company |
Phoenix VA Managing Member LLC, a Delaware limited liability company |
San Antonio VA Managing Member LLC, a Delaware limited liability company |
EXHIBIT B
SAN ANTONIO CHANGE ORDER WORK
NO. |
Description |
Jacobsen Change |
1 |
Emergency Eyewash Stations: (1) outside OR suite, (2) in warehouse |
$ 26,780.68 |
2 |
CO2 Fire Extinguishers near laser room 1P117 |
36,000.00 |
5 |
Relocate FEC in SPS |
|
8 |
Temporary Plumbing Tie-ins for C of O
|
|
9 |
Temporary Electrical Boxes for C of O: (24) 2'x2' boxes
|
|
10 |
Temporary Dental Sinks
|
10,702.50 |
3 |
Additional PTZ cameras: (1) in Pharmacy, (1) camera in holding room, (1) camera in armory, (1) in police corridor |
39,104.02 |
4 |
Card Reader: (1) VBA space |
19,107.74 |
6 |
Elevator Indicators: Add verbal annunciation and physical indicator on which elevator is available. |
118,769.08 |
7 |
Optometry Lighting Controls
|
167,511.84 |
|
TOTAL – CHANGE ORDER #5 ITEMS |
$ 417,975.76 |
EXHIBIT 10.4
FOURTH AMENDMENT TO PURCHASE AND SALE AGREEMENT
THIS FOURTH AMENDMENT TO PURCHASE AND SALE AGREEMENT (this “Amendment”) is made and entered into effective as of December 21, 2021 (the “Effective Date”), by and among the entities listed on Exhibit A attached hereto (each, a “Seller” and collectively, the “Sellers”), and EGP MEDBASE REIT LLC, a Delaware limited liability company (“Purchaser”).
R E C I T A L S:
WHEREAS, Sellers and Purchaser (as successor by assignment from Easterly Government Properties LP, a Delaware limited partnership) entered into that certain Purchase and Sale Agreement dated as of September 30, 2021, as amended by that certain First Amendment to Purchase and Sale Agreement dated as of October 12, 2021, as further amended by that certain Second Amendment to Purchase and Sale Agreement dated as of November 1, 2021, and as further amended by that certain Third Amendment to Purchase and Sale Agreement dated as of December 21, 2021 (collectively, the “Purchase Agreement”);
WHEREAS, pursuant to the Purchase Agreement, Sellers agreed to sell to Purchaser, and Purchaser agreed to buy from Sellers, the Membership Interests in the Companies set forth next to such Seller’s name on Exhibit A attached hereto; and
WHEREAS, Sellers and Purchaser desire to further amend the Purchase Agreement to set forth certain agreements of the parties as more particularly set forth herein.
NOW, THEREFORE, in consideration of the terms, conditions and covenants contained in the Purchase Agreement and in this Amendment, and of other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Sellers and Purchaser agree as follows:
[SIGNATURES ON NEXT PAGE]
2
IN WITNESS WHEREOF, the parties hereto have duly executed this Amendment as of the Effective Date.
SELLERS:
BIRMINGHAM VA MANAGING MEMBER LLC,
a Delaware limited liability company
By: /s/ Kevin T. Kelly
Name: Kevin T. Kelly
Title: Manager
CHATTANOOGA VA MANAGING MEMBER LLC,
a Delaware limited liability company
By: /s/ Kevin T. Kelly
Name: Kevin T. Kelly
Title: Manager
COLUMBUS VA MANAGING MEMBER LLC,
a Delaware limited liability company
By: /s/ Kevin T. Kelly
Name: Kevin T. Kelly
Title: Manager
CORPUS CHRISTI VA MANAGING MEMBER LLC,
a Delaware limited liability company
By: /s/ Kevin T. Kelly
Name: Kevin T. Kelly
Title: Manager
JACKSONVILLE VA OPC MANAGING MEMBER LLC,
a Delaware limited liability company
By: /s/ Kevin T. Kelly
Name: Kevin T. Kelly
Title: Manager
[Signature Page to Fourth Amendment to Purchase and Sale Agreement]
JOHNSON COUNTY VA MANAGING MEMBER LLC,
a Delaware limited liability company
By: /s/ Kevin T. Kelly
Name: Kevin T. Kelly
Title: Manager
LUBBOCK VA MANAGING MEMBER LLC,
a Delaware limited liability company
By: /s/ Kevin T. Kelly
Name: Kevin T. Kelly
Title: Manager
COBB COUNTY VA MANAGING MEMBER LLC,
a Delaware limited liability company
By: /s/ Kevin T. Kelly
Name: Kevin T. Kelly
Title: Manager
PHOENIX VA MANAGING MEMBER LLC,
a Delaware limited liability company
By: /s/ Kevin T. Kelly
Name: Kevin T. Kelly
Title: Manager
SAN ANTONIO VA MANAGING MEMBER LLC,
a Delaware limited liability company
By: /s/ Kevin T. Kelly
Name: Kevin T. Kelly
Title: Manager
[Signatures continue on following page.]
[Signature Page to Fourth Amendment to Purchase and Sale Agreement]
PURCHASER:
EGP MEDBASE REIT LLC,
a Delaware limited liability company
By: /s/ Andrew G. Pulliam
Name: Andrew G. Pulliam
Title: Executive Vice President
[Signature Page to Fourth Amendment to Purchase and Sale Agreement]
EXHIBIT A
LIST OF SELLERS
SELLER |
Birmingham VA Managing Member LLC, a Delaware limited liability company |
Chattanooga VA Managing Member LLC, a Delaware limited liability company |
Columbus VA Managing Member LLC, a Delaware limited liability company |
Corpus Christi VA Managing Member LLC, a Delaware limited liability company |
Jacksonville VA OPC Managing Member LLC, a Delaware limited liability company |
Johnson County VA Managing Member LLC, a Delaware limited liability company |
Lubbock VA Managing Member LLC, a Delaware limited liability company |
Cobb County VA Managing Member LLC, a Delaware limited liability company |
Phoenix VA Managing Member LLC, a Delaware limited liability company |
San Antonio VA Managing Member LLC, a Delaware limited liability company |
EXHIBIT F-1
SUPPLEMENT TO CONSTRUCTION CONTRACTS
COMPANY |
SUPPLEMENTAL CONSTRUCTION CONTRACT(S) |
SUPPLEMENTAL ARCHITECT AGREEMENT(S) |
Birmingham Company |
Assignment between Birmingham Company and Birmingham Seller, consented to by Hoar Construction, LLC dated on or after the date hereof |
Assignment between each of Birmingham Company, Columbus Company, Corpus Christi Company, Jacksonville Company, Marietta Company, Phoenix Company and San Antonio Company, as Assignors, and each of Birmingham Seller, Columbus Seller, Corpus Christi Seller, Jacksonville Seller, Marietta Seller, Phoenix Seller and San Antonio Seller, as Assignees, and consented to by Hoefer Welker, LLC f/k/a Hoefer Wysocki Architects, LL, dated on or after the date hereof |
Columbus Company |
Assignment between Columbus Company, Columbus Seller, consented to by Meyer Najem Construction, LLC dated on or after the date hereof |
|
Corpus Christi Company |
Assignment between Corpus Christi Company, Corpus Christi Seller, consented to by Jacobsen Construction Company, Inc. dated on or after the date hereof |
|
Jacksonville Company |
Assignment between Jacksonville Company, Jacksonville Seller, consented to by Meyer Najem Construction, LLC dated on or after the date hereof |
|
Marietta Company |
Assignment between Marietta Company, Marietta Seller, consented to by Manhattan Construction Company dated on or after the date hereof |
|
Phoenix Company |
Assignment between Marietta Company, Marietta Seller, consented to by Jacobsen Construction Company, Inc. dated on or after the date hereof |
|
San Antonio Company |
Assignment between San Antonio Company, San Antonio Seller, consented to by Jacobsen Construction Company, Inc. dated on or after the date hereof |
EXHIBIT 10.5
FIFTH AMENDMENT TO PURCHASE AND SALE AGREEMENT
THIS FIFTH AMENDMENT TO PURCHASE AND SALE AGREEMENT (this “Amendment”) is made and entered into effective as of November 14, 2022 (the “Effective Date”), by and among the entities listed on Exhibit A attached hereto (each, a “Seller” and collectively, the “Sellers”), and EGP MEDBASE REIT LLC, a Delaware limited liability company (“Purchaser”).
R E C I T A L S:
WHEREAS, Sellers and Purchaser (as successor by assignment from Easterly Government Properties LP, a Delaware limited partnership) entered into that certain Purchase and Sale Agreement dated as of September 30, 2021, as amended by that certain First Amendment to Purchase and Sale Agreement dated as of October 12, 2021, that certain Second Amendment to Purchase and Sale Agreement dated as of November 1, 2021, that certain Third Amendment to Purchase and Sale Agreement dated as of December 21, 2021, and as further amended by that certain Fourth Amendment to Purchase and Sale Agreement dated as of December 21, 2021, (collectively, the “Purchase Agreement”);
WHEREAS, pursuant to the Purchase Agreement, Sellers agreed to sell to Purchaser, and Purchaser agreed to buy from Sellers, the Membership Interests in the Companies set forth next to such Seller’s name on Exhibit A to the Purchase Agreement; and WHEREAS, Sellers and Purchaser desire to further amend the Purchase Agreement to set forth certain agreements of the parties as more particularly set forth herein.
NOW, THEREFORE, in consideration of the terms, conditions and covenants contained in the Purchase Agreement and in this Amendment, and of other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Sellers and Purchaser agree as follows:
[SIGNATURES ON NEXT PAGE]
IN WITNESS WHEREOF, the parties hereto have duly executed this Amendment as of the Effective Date.
SELLERS:
BIRMINGHAM VA MANAGING MEMBER LLC,
a Delaware limited liability company
By: /s/ Kevin T. Kelly
Name: Kevin T. Kelly
Title: Manager
CHATTANOOGA VA MANAGING MEMBER LLC,
a Delaware limited liability company
By: /s/ Kevin T. Kelly
Name: Kevin T. Kelly
Title: Manager
COLUMBUS VA MANAGING MEMBER LLC,
a Delaware limited liability company
By: /s/ Kevin T. Kelly
Name: Kevin T. Kelly
Title: Manager
CORPUS CHRISTI VA MANAGING MEMBER LLC,
a Delaware limited liability company
By: /s/ Kevin T. Kelly
Name: Kevin T. Kelly
Title: Manager
[Signature Page to Fifth Amendment to Purchase and Sale Agreement]
JACKSONVILLE VA OPC MANAGING MEMBER LLC,
a Delaware limited liability company
By: /s/ Kevin T. Kelly
Name: Kevin T. Kelly
Title: Manager
JOHNSON COUNTY VA MANAGING MEMBER LLC,
a Delaware limited liability company
By: /s/ Kevin T. Kelly
Name: Kevin T. Kelly
Title: Manager
LUBBOCK VA MANAGING MEMBER LLC,
a Delaware limited liability company
By: /s/ Kevin T. Kelly
Name: Kevin T. Kelly
Title: Manager
COBB COUNTY VA MANAGING MEMBER LLC, a Delaware limited liability company
By: /s/ Kevin T. Kelly
Name: Kevin T. Kelly
Title: Manager
PHOENIX VA MANAGING MEMBER LLC,
a Delaware limited liability company
By: /s/ Kevin T. Kelly
Name: Kevin T. Kelly
Title: Manager
SAN ANTONIO VA MANAGING MEMBER LLC, a Delaware limited liability company
By: /s/ Kevin T. Kelly
Name: Kevin T. Kelly
Title: Manager
[Signatures continue on following page.]
[Signature Page to Fifth Amendment to Purchase and Sale Agreement]
PURCHASER:
EGP MEDBASE REIT LLC,
a Delaware limited liability company
By: /s/ Andrew G. Pulliam
Name: Andrew G. Pulliam
Title: Executive Vice President
[Signature Page to Fifth Amendment to Purchase and Sale Agreement]
EXHIBIT A
LIST OF SELLERS
SELLER |
Birmingham VA Managing Member LLC, a Delaware limited liability company |
Chattanooga VA Managing Member LLC, a Delaware limited liability company |
Columbus VA Managing Member LLC, a Delaware limited liability company |
Corpus Christi VA Managing Member LLC, a Delaware limited liability company |
Jacksonville VA OPC Managing Member LLC, a Delaware limited liability company |
Johnson County VA Managing Member LLC, a Delaware limited liability company |
Lubbock VA Managing Member LLC, a Delaware limited liability company |
Cobb County VA Managing Member LLC, a Delaware limited liability company |
Phoenix VA Managing Member LLC, a Delaware limited liability company |
San Antonio VA Managing Member LLC, a Delaware limited liability company |
EXHIBIT B
PHOENIX CHANGE ORDER WORK
|
|
VA Reim |
GC Cost |
Estimated Value of Unfinished Work |
CR-65 Two-way radios |
SLA 34 |
160,646 |
151,685 |
14,877 |
FCR-5 Signage |
SLA 34 |
76,430 |
72,364 |
50,000 |
|
|
237,076 |
224,049 |
64,877 |
EXHIBIT C
EXHIBIT 10.6
SIXTH AMENDMENT TO PURCHASE AND SALE AGREEMENT
THIS SIXTH AMENDMENT TO PURCHASE AND SALE AGREEMENT (this “Amendment”) is made and entered into effective as of April 10, 2023 (the “Effective Date”), by and among the entities listed on Exhibit A attached hereto (each, a “Seller” and collectively, the “Sellers”), and EGP MEDBASE REIT LLC, a Delaware limited liability company (“Purchaser”).
R E C I T A L S:
WHEREAS, Sellers and Purchaser (as successor by assignment from Easterly Government Properties LP, a Delaware limited partnership) entered into that certain Purchase and Sale Agreement dated as of September 30, 2021, as amended by that certain First Amendment to Purchase and Sale Agreement dated as of October 12, 2021, that certain Second Amendment to Purchase and Sale Agreement dated as of November 1, 2021, that certain Third Amendment to Purchase and Sale Agreement dated as of December 21, 2021 (the “Third Amendment”), that certain Fourth Amendment to Purchase and Sale Agreement dated as of December 21, 2021, and as further amended by that certain Fifth Amendment to Purchase and Sale Agreement dated as of November 14, 2022 (collectively, the “Purchase Agreement”);
WHEREAS, pursuant to the Purchase Agreement, Sellers agreed to sell to Purchaser, and Purchaser agreed to buy from Sellers, the Membership Interests in the Companies set forth next to such Seller’s name on Exhibit A to the Purchase Agreement; and
WHEREAS, Sellers and Purchaser desire to further amend the Purchase Agreement to set forth certain agreements of the parties as more particularly set forth herein.
NOW, THEREFORE, in consideration of the terms, conditions and covenants contained in the Purchase Agreement and in this Amendment, and of other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Sellers and Purchaser agree as follows:
[SIGNATURES ON NEXT PAGE]
IN WITNESS WHEREOF, the parties hereto have duly executed this Amendment as of the Effective Date.
SELLERS:
BIRMINGHAM VA MANAGING MEMBER LLC,
a Delaware limited liability company
By: /s/ Kevin T. Kelly
Name: Kevin T. Kelly
Title: Manager
CHATTANOOGA VA MANAGING MEMBER LLC,
a Delaware limited liability company
By: /s/ Kevin T. Kelly
Name: Kevin T. Kelly
Title: Manager
COLUMBUS VA MANAGING MEMBER LLC,
a Delaware limited liability company
By: /s/ Kevin T. Kelly
Name: Kevin T. Kelly
Title: Manager
CORPUS CHRISTI VA MANAGING MEMBER LLC,
a Delaware limited liability company
By: /s/ Kevin T. Kelly
Name: Kevin T. Kelly
Title: Manager
JACKSONVILLE VA OPC MANAGING MEMBER LLC,
a Delaware limited liability company
By: /s/ Kevin T. Kelly
Name: Kevin T. Kelly
Title: Manager
JOHNSON COUNTY VA MANAGING MEMBER LLC,
a Delaware limited liability company
By: /s/ Kevin T. Kelly
Name: Kevin T. Kelly
Title: Manager
LUBBOCK VA MANAGING MEMBER LLC,
a Delaware limited liability company
By: /s/ Kevin T. Kelly
Name: Kevin T. Kelly
Title: Manager
COBB COUNTY VA MANAGING MEMBER LLC,
a Delaware limited liability company
By: /s/ Kevin T. Kelly
Name: Kevin T. Kelly
Title: Manager
PHOENIX VA MANAGING MEMBER LLC,
a Delaware limited liability company
By: /s/ Kevin T. Kelly
Name: Kevin T. Kelly
Title: Manager
SAN ANTONIO VA MANAGING MEMBER LLC,
a Delaware limited liability company
By: /s/ Kevin T. Kelly
Name: Kevin T. Kelly
Title: Manager
[Signatures continue on following page.]
PURCHASER:
EGP MEDBASE REIT LLC,
a Delaware limited liability company
By: /s/ Andrew G. Pulliam
Name: Andrew G. Pulliam
Title: Executive Vice President
EXHIBIT A
LIST OF SELLERS
SELLER |
Birmingham VA Managing Member LLC, a Delaware limited liability company |
Chattanooga VA Managing Member LLC, a Delaware limited liability company |
Columbus VA Managing Member LLC, a Delaware limited liability company |
Corpus Christi VA Managing Member LLC, a Delaware limited liability company |
Jacksonville VA OPC Managing Member LLC, a Delaware limited liability company |
Johnson County VA Managing Member LLC, a Delaware limited liability company |
Lubbock VA Managing Member LLC, a Delaware limited liability company |
Cobb County VA Managing Member LLC, a Delaware limited liability company |
Phoenix VA Managing Member LLC, a Delaware limited liability company |
San Antonio VA Managing Member LLC, a Delaware limited liability company |
EXHIBIT B
SAN ANTONIO CHANGE ORDER WORK
Exhibit 31.1
Certification of Chief Executive Officer
Pursuant to Rule 13a-14(a) and Rule 15d-14(a)
I, William C. Trimble, III, certify that:
1. I have reviewed this Quarterly Report on Form 10-Q of Easterly Government Properties, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
Date: October 31, 2023
/s/ William C. Trimble, III |
William C. Trimble, III |
Chief Executive Officer and President |
(Principal Executive Officer) |
Exhibit 31.2
Certification of Chief Financial Officer
Pursuant to Rule 13a-14(a) and Rule 15d-14(a)
I, Meghan G. Baivier, certify that:
1. I have reviewed this Quarterly Report on Form 10-Q of Easterly Government Properties, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
Date: October 31, 2023
/s/ Meghan G. Baivier |
Meghan G. Baivier |
Executive Vice President, Chief Financial Officer and Chief Operating Officer |
(Principal Financial Officer) |
Exhibit 32.1
Certification
Pursuant to 18 U.S.C. Section 1350
The undersigned officers, who are the Chief Executive Officer and Chief Financial Officer of Easterly Government Properties, Inc. (the “Company”), each hereby certifies to the best of his or her knowledge, that the Company’s Quarterly Report on Form 10-Q to which this certification is attached (the “Report”), as filed with the Securities and Exchange Commission on the date hereof, fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934, as amended, and that the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
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/s/ William C. Trimble, III |
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/s/ Meghan G. Baivier |
William C. Trimble, III |
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Meghan G. Baivier |
Chief Executive Officer and President |
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Executive Vice President, Chief Financial Officer and Chief Operating Officer |
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October 31, 2023 |
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October 31, 2023 |
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