UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 8-K/A

(Amendment No. 1)

 

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

 

Date of Report (Date of earliest event reported):  

November 22, 2016

 

Easterly Government Properties, Inc.

(Exact name of Registrant as Specified in Its Charter)

 

 

Registrant’s Telephone Number, Including Area Code: (202) 595-9500

Not Applicable

(Former Name or Former Address, if Changed Since Last Report)

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instructions A.2. below):

 

 

 

 

 

 

 

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Explanatory Note

 

On November 22, 2016, Easterly Government Properties, Inc. (together with its consolidated subsidiaries, the “Company”) completed the previously announced acquisition of a portfolio of four U.S. Government-leased properties (the “Government Properties Portfolio”) from an unaffiliated third party.  The Company completed the acquisition of three of the four properties on July 1, 2016 and completed the acquisition of the fourth property on November 22, 2016.

 

The acquisition of the Government Properties Portfolio was originally reported on a Current Report on Form 8-K, filed by the Company with the Securities and Exchange Commission on November 29, 2016 (the “Original Report”). This amendment to the Original Report is being filed to provide the historical financial statements required by Item 9.01(a) of Form 8-K and the pro forma financial information required by Item 9.01(b) of Form 8-K, which financial statements and information were not included in the Original Report as permitted by Item 9.01(a)(4) and Item 9.01(b)(2) of Form 8-K.  This Current Report on Form 8-K/A should be read in conjunction with the Original Report.

Item 9.01 Financial Statements and Exhibits.

 

 

 

 

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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 hereunto duly authorized.

 

Date: December 27, 2016

 

 

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EXHIBIT INDEX

 

 

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Exhibit 23.1

CONSENT OF INDEPENDENT ACCOUNTANTS

We hereby consent to the incorporation by reference in the Registration Statements on Form S-3 (Nos. 333-210049 and 333-210052) and Form S-8 (No. 333-202008) of Easterly Government Properties, Inc. of our report dated December 27, 2016 relating to the combined statement of revenues and certain expenses of the Government Properties Portfolio for the year ended December 31, 2015, which appears in the Current Report on Form 8-K/A filed with the Securities and Exchange Commission by Easterly Government Properties, Inc. on December 27, 2016.  

/s/ PricewaterhouseCoopers LLP

Boston, Massachusetts

December 27, 2016

 

 

Exhibit 99.1

 

Independent Auditor's Report

 

To the Board of Directors and Stockholders of Easterly Government Properties, Inc.:

 

We have audited the accompanying combined statement of revenues and certain expenses (the “Statement”) of Government Properties Portfolio (the “Portfolio”) for the year ended December 31, 2015.

 

Management’s Responsibility for the Combined Statement of Revenues and Certain Expenses

 

Management is responsible for the preparation and fair presentation of the Statement in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of the Statement that is free from material misstatement, whether due to fraud or error.

Auditor’s Responsibility

Our responsibility is to express an opinion on the Statement based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the Statement is free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the Statement. The procedures selected depend on our judgment, including the assessment of the risks of material misstatement of the Statement, whether due to fraud or error. In making those risk assessments, we consider internal control relevant to the Portfolio’s preparation and fair presentation of the Statement in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Portfolio’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the Statement. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Opinion

In our opinion, the Statement referred to above presents fairly, in all material respects, the combined revenues and certain expenses of Government Properties Portfolio for the year ended December 31, 2015 in accordance with accounting principles generally accepted in the United States of America.

Emphasis of Matter

We draw attention to Note 2 of the Statement, which describes the basis of accounting. The Statement was prepared for the purpose of complying with the rules and regulations of the Securities and Exchange Commission, as described in Note 2. The presentation is not intended to be a complete presentation of the Portfolio’s revenues and expenses. Our opinion is not modified with respect to this matter.

 

/s/ PricewaterhouseCoopers LLP

Boston, Massachusetts

December 27, 2016

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GOVERNMENT PROPERTIES PORTFOLIO

COMBINED STATEMENTS OF REVENUES AND CERTAIN EXPENSES

 

 

 

The accompanying notes are an integral part of the combined statements of revenues and certain expenses.

 

 

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Government Properties Portfolio

Notes to the Combined Statements of Revenues and Certain Expenses

Nine Months Ended September 30, 2016 (Unaudited) and Year Ended December 31, 2015

 

 

Note 1 – Organization and Nature of Business

 

The Government Properties Portfolio (the “Portfolio”) is not a legal entity, but rather is a combination of the following four properties (collectively, the “Properties”) located in three states that are 100% leased to the U.S. Government through the General Services Administration (“GSA”).

 

DEA – Birmingham, Alabama

EPA – Kansas City, Kansas

FBI – Albany, New York

FBI – Birmingham, Alabama

 

The Properties were sold to Easterly Government Properties LP (the “Operating Partnership”) by an unrelated third party during 2016. The acquisition of DEA – Birmingham, EPA – Kansas City, and FBI – Birmingham closed on July 1, 2016 and FBI – Albany closed on November 22, 2016. The accompanying combined statements of revenues and certain expenses (the “Statements”) relate to the operations of the Properties.

 

Note 2 – Summary of Significant Accounting Policies

 

Basis of Presentation

The accompanying Statements relate to the Portfolio and have been prepared for the purpose of complying with Rule 3-14 of Regulation S-X promulgated under the Securities Act of 1933, as amended, and accordingly, are not representative of the actual results of operations of the Portfolio for the nine months ended September 30, 2016 (unaudited) or year ended December 31, 2015, due to the exclusion of the following revenues and expenses which may not be comparable to the proposed future operations of the Portfolio:

Since the Properties were acquired from an unrelated third party, the Statements have been prepared for the most recent fiscal year and most recent interim period. For the year ended December 31, 2015 the Properties are presented on a combined basis as they were all under common control and ownership. The information presented for the nine months ended September 30, 2016 (unaudited) reflects the operations for DEA – Birmingham, EPA – Kansas City, and FBI – Birmingham for the period from January 1, 2016 through June 30, 2016 and the operations of FBI – Albany for the period from January 1, 2016 through September 30, 2016. Operations for DEA – Birmingham, EPA – Kansas City, and FBI – Birmingham for the period from July 1, 2016 through September 30, 2016 are included in the Easterly Government Properties, Inc. Quarterly Report on Form 10-Q for the period ended September 30, 2016 filed with the Securities and Exchange Commission on November 8, 2016.

Revenue Recognition

Rental income is recognized on the straight-line basis over the term of the related leases when collectability is reasonably assured. The straight-line rent adjustment increased revenue for the Properties by approximately $0.1 million and $0.3 million in the nine months ended September 30, 2016 (unaudited) and the year ended December 31, 2015, respectively.

Tenant reimbursements include reimbursement for operating expenses which are determined by the base year operating expenses and are subject to reimbursement in subsequent years based on changes in the consumer price index for urban wage earners and clerical workers. This portion of rental income is recognized in the period in which it is earned. Tenant reimbursements also include amounts due from tenants for real estate taxes and other reimbursements. Real estate taxes over the base year are reimbursed by the tenant and are recognized as revenues in the period during which the revenues are earned.

Tenant reimbursements are recognized and presented in accordance with accounting guidance which requires that these reimbursements be recorded on a gross basis because the Portfolio is generally the primary obligor with respect to the goods and services the purchase of which gives rise to the reimbursement obligation; because the Portfolio has discretion in selecting the vendors and suppliers; and because the Portfolio bears the credit risk in the event tenants do not reimburse the Portfolio.

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Government Properties Portfolio

Notes to the Combined Statements of Revenues and Certain Expenses

Nine Months Ended September 30, 2016 (Unaudited) and Year Ended December 31, 2015

 

 

Use of Estimates

Management has made a number of estimates and assumptions relating to the reporting and disclosure of revenues and certain expenses during the reporting period to prepare the accompanying Statements in conformity with accounting principles generally accepted in the United States of America. Actual results could differ from those estimates.

Unaudited Interim Combined Statement

The combined statement of revenues and certain expenses for the nine months ended September 30, 2016 is unaudited. In the opinion of management, this statement reflects all adjustments necessary for a fair presentation of the results of the interim period. All such adjustments are of a normal recurring nature.

Note 3 – Operating Leases

The Properties are 100% leased to the U.S. Government through the GSA under non-cancelable operating leases with various expiration dates extending to 2023. Minimum future rentals for non-cancelable lease terms at December 31, 2015 are as follows (unaudited):

 

 

Total minimum future rentals presented above do not include amounts to be received as tenant reimbursements, straight-line rent adjustments, or other income.

Note 4 – Subsequent Events

Management has evaluated subsequent events through December 27, 2016, which is the date the financial statements were available to be issued, and concluded that there are no items requiring adjustment of the financial statements or additional disclosure.

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Exhibit 99.2

Easterly Government Properties, Inc.

Introduction to the Unaudited Pro Forma Consolidated Financial Statements

 

The unaudited pro forma consolidated financial statements (including notes thereto) of Easterly Government Properties, Inc. (together with its consolidated subsidiaries, the “Company”) are qualified in their entirety and should be read in conjunction with the historical financial statements included elsewhere.

 

During 2016 the Company acquired the Government Properties Portfolio from an unrelated third party. The Government Properties Portfolio consists of four properties with an aggregate 302,057 square feet, 100% leased to the U.S. Government through the General Services Administration (“GSA”). The acquisition of DEA – Birmingham, EPA – Kansas City, and FBI – Birmingham closed on July 1, 2016 and the acquisition of FBI – Albany closed on November 22, 2016. The Government Properties Portfolio had an aggregate purchase price of $96.9 million which was funded by issuing 4,300,170 shares of the Company’s common stock with a fair value of $77.4 million, a $14.0 million draw on the Company’s senior unsecured revolving credit facility, and $5.5 million in cash on hand.

 

The unaudited pro forma consolidated balance sheet as of September 30, 2016, reflects the financial position of the Company as if the acquisition of the Government Properties Portfolio had been completed on September 30, 2016. The unaudited pro forma consolidated statements of operations for the year ended December 31, 2015 and the nine months ended September 30, 2016 are presented as if the acquisition of the Government Properties Portfolio by the Company had occurred on February 11, 2015, the date of the Company’s initial public offering.

 

In management’s opinion, all adjustments necessary to reflect the acquisition of the Government Properties Portfolio have been made. The unaudited pro forma consolidated statements of operations should be read in conjunction with the historical financial statements and notes thereto of the Company included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2015 filed with the Securities and Exchange Commission on March 2, 2016 and the Company’s Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2016 filed with the Securities and Exchange Commission on November 8, 2016.

 

The unaudited pro forma consolidated financial statements as of September 30, 2016 and for the year ended December 31, 2015 and the nine months ended September 30, 2016 are not necessarily indicative of what the Company’s actual financial condition would have been at September 30, 2016 or what the Company’s actual results of operations would have been assuming the transactions had occurred as of February 11, 2015, nor do they purport to represent our financial condition or results of operation for future periods.

 

 

 

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Easterly Government Properties, Inc.

Unaudited Pro Forma Consolidated Balance Sheet

As of September 30, 2016

(Amounts in thousands, except share amounts)

 

 

 

The accompanying notes are an integral part of these consolidated financial statements.

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Easterly Government Properties, Inc.

Unaudited Pro Forma Consolidated Statement of Operations

For the Nine Months Ended September 30, 2016

(Amounts in thousands, except share and per share amounts)

 

 

 

The accompanying notes are an integral part of these consolidated financial statements.

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Easterly Government Properties, Inc.

Unaudited Pro Forma Consolidated Statement of Operations

For the Year Ended December 31, 2015

(Amounts in thousands, except share and per share amounts)

 

 

 

The accompanying notes are an integral part of these consolidated financial statements.

 

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Easterly Government Properties, Inc.

Notes to the Unaudited Pro Forma Consolidated Financial Statements

 

 

The adjustments to the unaudited pro forma consolidated balance sheet as of September 30, 2016 are as follows:

 

 

 

 

 

The adjustments to the unaudited pro forma consolidated statements of operations for the nine months ended September 30, 2016 and for the year ended December 31, 2015 are as follows:

 

 

 

 

 

 

 

 

 

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