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):  

June 1, 2017

 

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):

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (17 CFR §230.405) or Rule 12b-2 of the Securities Exchange Act of 1934 (17 CFR §240.12b-2).
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.    ☑

 

 

 

 

 

 

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Explanatory Note

On June 1, 2017, Easterly Government Properties, Inc. (the “Company”), through a wholly-owned subsidiary of its operating partnership, Easterly Government Properties LP, completed the previously announced acquisition of the Department of Veterans Affairs (VA) Ambulatory Care Center located in Loma Linda, California (“VA – Loma Linda”) for a contractual purchase price of $212.5 million from unaffiliated third parties, pursuant to the purchase and sale agreement entered into on March 10, 2017.  

The acquisition of VA – Loma Linda was originally reported on a Current Report on Form 8-K, filed by the Company with the Securities and Exchange Commission on June 5, 2017 (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: July 28, 2017

 

 

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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 July 28, 2017 relating to the statement of revenues and certain expenses of the Department of Veterans Affairs (VA) Ambulatory Care Center (VA – Loma Linda) for the period May 27, 2016 through December 31, 2016, which appears in this Current Report on Form 8-K/A of Easterly Government Properties, Inc.

/s/ PricewaterhouseCoopers LLP

Boston, Massachusetts

July 28, 2017

 

 

 

Exhibit 99.1

 

Report of Independent Auditors

 

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

 

We have audited the accompanying statement of revenues and certain expenses of the Department of Veterans Affairs (VA) Ambulatory Care Center (“VA – Loma Linda,” the “Property”) for the period May 27, 2016 through December 31, 2016.

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

Management is responsible for the preparation and fair presentation of the statement of revenues and certain expenses 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 of revenues and certain expenses 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 of revenues and certain expenses 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 of revenues and certain expenses is free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the statement of revenues and certain expenses. The procedures selected depend on our judgment, including the assessment of the risks of material misstatement of the statement of revenues and certain expenses, whether due to fraud or error. In making those risk assessments, we consider internal control relevant to the Property’s preparation and fair presentation of the statement of revenues and certain expenses 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 Property’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 of revenues and certain expenses. 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 of revenues and certain expenses referred to above presents fairly, in all material respects, the revenues and certain expenses of the Property for the period May 27, 2016 through December 31, 2016 in accordance with accounting principles generally accepted in the United States of America.

Emphasis of Matter

The accompanying special purpose financial statements were prepared in connection with Easterly Government Properties, Inc’s acquisition of VA – Loma Linda, as described in Note 2, for the purposes of complying with Rule 3-14 of the Securities and Exchange Commission’s Regulation S-X. These special purpose financial statements are not intended to be a complete presentation of the financial position, results of operations or cash flows of VA – Loma Linda. Our opinion is not modified with respect to this matter.

 

 

/s/ PricewaterhouseCoopers LLP

Boston, Massachusetts

July 28, 2017

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VA – LOMA LINDA

STATEMENT OF REVENUES AND CERTAIN EXPENSES

(dollars in thousands)

 

 

* The VA - Loma Linda lease commenced on May 27, 2016, upon completion of construction. As such the statement of revenues and certain expenses for the period ended December 31, 2016 reflects operations for the period from May 27, 2016, the date of commencement of the lease, through December 31, 2016.

 

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

 

 

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VA – Loma Linda

Notes to the Statement of Revenues and Certain Expenses

(dollars in thousands)

 

 

Note 1 – Organization and Nature of Business

 

On June 1, 2017, Easterly Government Properties, Inc. (together with its consolidated subsidiaries, the “Company”) completed the acquisition of the Department of Veterans Affairs (VA) Ambulatory Care Center located in Loma Linda, California (“VA - Loma Linda”) by acquiring 100% of the membership interest of WI Loma Linda, LLC from unaffiliated third parties.  VA – Loma Linda is a 327,614 rentable square foot state-of-the-art ambulatory care facility, constructed in 2016 and 100% leased to the U.S. Government through the VA. The accompanying statement of revenues and certain expenses (the “Statement”) relate to the operations of VA – Loma Linda.

 

Note 2 – Summary of Significant Accounting Policies

 

Basis of Presentation

The statement relates to VA – Loma Linda and has 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, is not representative of the actual results of operations of VA – Loma Linda for the three months ended March 31, 2017 (unaudited) or for the period ended December 31, 2016, due to the exclusion of the following revenues and expenses which may not be comparable to the proposed future operations of VA – Loma Linda:

Since VA – Loma Linda was acquired from an unrelated third party, the Statement has been prepared for the most recent fiscal year and most recent interim period.

Revenue Recognition

Rental income is recognized on the straight-line basis over the term of the related lease when collectability is reasonably assured. The straight-line rent adjustment increased revenue for VA – Loma Linda by approximately $0.7 million and $1.6 million in the three months ended March 31, 2017 (unaudited) and the period ended December 31, 2016, respectively.

Tenant reimbursements 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.

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 Statement in conformity with accounting principles generally accepted in the United States of America. Actual results could differ from those estimates.

Unaudited Interim Statement

The statement of revenues and certain expenses for the three months ended March 31, 2017 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.

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VA – Loma Linda

Notes to the Statement of Revenues and Certain Expenses

(dollars in thousands)

 

 

Note 3 – Operating Lease

VA – Loma Linda is 100% leased to the U.S. Government through the VA under a non-cancelable operating lease that expires in 2036, which is subject to various escalation clauses. Minimum future rentals for non-cancelable lease terms at December 31, 2016 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 July 28, 2017, 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. (the “Company”) are qualified in their entirety and should be read in conjunction with the consolidated financial statements for the fiscal year ended December 31, 2016, and related notes thereto, included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2016 filed with the U.S. Securities and Exchange Commission (the “ SEC”) on March 2, 2017 and the consolidated financial statements for the three months ended March 31, 2017, and related notes thereto, included in the Company’s Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2017 filed with the SEC on May 9, 2017.

 

On June 1, 2017, the Company, through a wholly-owned subsidiary of its operating partnership, Easterly Government Properties LP (the “Operating Partnership”), acquired the Department of Veterans Affairs (VA) Ambulatory Care Center located in Loma Linda, California (“VA – Loma Linda”) by acquiring 100% of the membership interest of WI Loma Linda, LLC from an unrelated third party. VA – Loma Linda is a 327,614 rentable square foot state-of-the-art ambulatory care facility, constructed in 2016 and 100% leased to the Department of Veterans Affairs (“VA”). VA – Loma Linda had an aggregate purchase price of $212.6 million which was funded by a $175.0 million private placement, $26.3 million credit facility draws and cash on hand. Subsequent to closing the Company, through a wholly-owned subsidiary of the Operating Partnership, entered into a $127.5 million mortgage loan secured by VA – Loma Linda and used the proceeds to pay down the Company’s senior unsecured revolving credit facility.

 

The unaudited pro forma consolidated balance sheet as of March 31, 2017, reflects the financial position of the Company as if the acquisition of VA – Loma Linda had been completed on March 31, 2017. The unaudited pro forma consolidated statements of operations for the year ended December 31, 2016 and the three months ended March 31, 2017 are presented as if the acquisition of VA – Loma Linda by the Company had occurred on May 27, 2016, the date of lease commencement.

 

In management’s opinion, all adjustments necessary to reflect the acquisition of VA – Loma Linda have been made.

 

The unaudited pro forma consolidated financial statements as of March 31, 2017 and for the year ended December 31, 2016 and the three months ended March 31, 2017 are not necessarily indicative of what the Company’s actual financial condition would have been at March 31, 2017 or what the Company’s actual results of operations would have been assuming the transactions had occurred as of May 27, 2016, 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 March 31, 2017

(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 Three Months Ended March 31, 2017

(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, 2016

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

 

 

 

* The VA - Loma Linda lease commenced on May 27, 2016, upon completion of construction. As such the statement of revenues and certain expenses for the period ended December 31, 2016 reflects operations for the period from May 27, 2016, the date of commencement of the lease, through December 31, 2016.

 

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 March 31, 2017 are as follows:

 

 

 

 

The adjustments to the unaudited pro forma consolidated statements of operations for the three months ended March 31, 2017 and for the year ended December 31, 2016 are as follows:

 

 

 

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