Equity | 7. Equity The following table summarizes the changes in the Company’s stockholders’ equity for the three months ended March 31, 2020 and 2019 (amounts in thousands, except share amounts): Shares Common Stock Par Value Additional Paid-in Capital Retained Earnings (Deficit) Cumulative Dividends Accumulated Other Comprehensive Income (Loss) Non- controlling Interest in Operating Partnership Total Equity Three months ended March 31, 2020 Balance at December 31, 2019 74,832,292 $ 748 $ 1,257,319 $ 20,004 $ (210,760 ) $ (4,690 ) $ 137,220 $ 1,199,841 Stock based compensation — — 224 — — — 776 1,000 Dividends and distributions paid ($0.26 per share) — — — — (19,516 ) — (2,570 ) (22,086 ) Grant of unvested restricted stock 2,905 — — — — — — — Redemption of common units for shares of common stock 42,000 1 596 — — — (597 ) — Issuance of common stock 200,000 2 4,823 — — — — 4,825 Contribution of Property for common units — — — — — — 21,550 21,550 Unrealized loss on interest rate swaps, net — — — — — (8,586 ) (1,260 ) (9,846 ) Net income — — — 1,697 — — 221 1,918 Allocation of non-controlling interest in Operating Partnership — — 7,796 — — — (7,796 ) — Balance at March 31, 2020 75,077,197 $ 751 $ 1,270,758 $ 21,701 $ (230,276 ) $ (13,276 ) $ 147,544 $ 1,197,202 Three months ended March 31, 2019 Balance at December 31, 2018 60,849,206 $ 608 $ 1,017,415 $ 12,831 $ (139,103 ) $ 2,412 $ 131,090 $ 1,025,253 Cumulative effect adjustment related to adoption of Leases (Topic 842) — — — (34 ) — — — (34 ) Stock based compensation — — 183 — — — 551 734 Dividends and distributions paid ($0.26 per share) — — — — (15,841 ) — (2,592 ) (18,433 ) Grant of unvested restricted stock 57,121 1 (1 ) — — — — — Redemption of common units for shares of common stock 33,125 — 493 — — — (493 ) — Issuance of common stock 7,066,455 71 125,653 — — — — 125,724 Unrealized loss on interest rate swaps, net — — — — — (2,631 ) (386 ) (3,017 ) Net loss — — — (416 ) — — (65 ) (481 ) Allocation of non-controlling interest in Operating Partnership — — (15,805 ) — — — 15,805 — Balance at March 31, 2019 68,005,907 $ 680 $ 1,127,938 $ 12,381 $ (154,944 ) $ (219 ) $ 143,910 $ 1,129,746 On January 3, 2020, the Company granted an aggregate of 146,199 performance-based long-term incentive plan units in the Operating Partnership (“LTIP units”) to members of management pursuant to the Easterly Government Properties, Inc. 2015 Equity Incentive Plan, as amended (the “2015 Equity Incentive Plan”), consisting of (i) 81,693 LTIP units that are subject to the Company achieving certain total shareholder return performance thresholds (on both an absolute and a relative basis) and (ii) 64,506 LTIP units that are subject to the Company achieving certain operational performance hurdles, in each case through a performance period ending on December 31, 2022. Fifty percent of the LTIP units that are subject to the Company’s total shareholder return performance will vest when earned following the end of the performance period and 50% of the earned award will vest on January 2, 2024, subject to the grantee’s continued employment and the other terms of the awards. All of the LTIP units subject to the Company’s operational performance will vest when earned. On January 3, 2020, the Company also granted an aggregate of 89,242 service-based LTIP units to members of management pursuant to the 2015 Equity Incentive Plan, which will vest on December 31, 2022, subject to the grantee’s continued employment and the other terms of the awards. On March 23, 2020, the Company issued an aggregate of 2,905 shares of restricted common stock to certain employees pursuant to the 2015 Equity Incentive Plan. The shares of restricted common stock will vest upon the second anniversary of the grant date so long as the grantee remains an employee of the Company on such date. A summary of the Company’s shares of restricted common stock and LTIP unit awards at March 31, 2020 is as follows: Restricted Shares Restricted Shares Weighted Average Grant Date Fair Value Per Share LTIP Units (1) LTIP Units Weighted Average Grant Date Fair Value Per Share Outstanding, December 31, 2019 92,197 $ 17.55 284,471 $ 18.66 Granted 2,905 23.06 235,441 21.17 Vested — — (27,732 ) 18.34 Forfeited — — — — Outstanding, March 31, 2020 95,102 $ 17.72 492,180 $ 19.88 (1) Reflects the number of LTIP units issued to the grantee on the grant date, which may be different from the number of LTIP units actually earned in the case of performance-based LTIP units. The Company recognized $1.0 million in compensation expense related to its shares of restricted common stock and the LTIP unit awards for the three months ended March 31, 2020. As of March 31, 2020, unrecognized compensation expense for both sets of awards was $7.7 million, which will be amortized over the applicable vesting period. A summary of dividends declared by the Company’s board of directors per share of common stock and per common unit at the date of record is as follows: Quarter Declaration Date Record Date Payment Date Dividend (1) Q1 2020 April 29, 2020 May 14, 2020 June 25, 2020 $ 0.26 (1) Prior to the end of the performance period as set forth in the applicable LTIP unit award, holders of performance-based LTIP units are entitled to receive dividends per LTIP unit equal to 10% of the dividend paid per common unit. After the end of the performance period, the number of LTIP units, both vested and unvested, that LTIP award recipients have earned, if any, are entitled to receive dividends in an amount per LTIP unit equal to dividends, both regular and special, payable per common unit. Holders of LTIP units that are not subject to the attainment of performance goals are entitled to receive dividends per LTIP unit equal to 100% of the dividend paid per common unit beginning on the grant date. ATM Programs On March 4, 2019, the Company entered into separate equity distribution agreements with each of Citigroup Global Markets Inc., BMO Capital Markets Corp., BTIG, LLC, Capital One Securities, Inc., Jefferies LLC, Raymond James & Associates, Inc., RBC Capital Markets, LLC, SunTrust Robinson Humphrey, Inc. and Wells Fargo Securities, LLC (collectively, the “Sales Agents”) pursuant to which it may issue and sell shares of its common stock having an aggregate offering price of up to $200.0 million from time to time (the “March 2019 ATM Program”) in negotiated transactions or transactions that are deemed to be “at the market” offerings as defined in Rule 415 under the Securities Act of 1933, as amended (the “Securities Act”). Under the March 2019 ATM Program, the Company may also enter into one or more forward transactions (each, a “forward sale transaction”) under separate master forward sale confirmations and related supplemental confirmations with each of Citibank, N.A., Bank of Montreal, Jefferies LLC, Raymond James & Associates, Inc., Royal Bank of Canada and Wells Fargo Bank, National Association (collectively, the “Forward Counterparties”) for the sale of shares of its common stock on a forward basis. On December 20, 2019, the Company entered into separate new equity distribution agreements with each of the Sales Agents pursuant to which it may issue and sell shares of its common stock having an aggregate offering price of up to $300.0 million from time to time (the “December 2019 ATM Program”) in negotiated transactions or transactions that are deemed to be “at the market” offerings as defined in Rule 415 under the Securities Act. Under the December 2019 ATM Program, the Company may also enter into one or more forward transactions under separate master forward sale confirmations and related supplemental confirmations with each of the Forward Counterparties for the sale of shares of its common stock on a forward basis. No sales of shares of the Company’s common stock were made under the December 2019 ATM Program during the three months ended March 31, 2020. The following table sets forth certain information with respect to sales made under the March 2019 ATM Program as of March 31, 2020 (amounts in thousands except share amounts): March 2019 ATM Program For the Three Months Ended: Number of Shares Sold (1) Net Proceeds (1) March 31, 2020 200,000 $ 4,835 (1) As of March 31, 2020, the Company had entered into forward sales transactions under the March 2019 ATM Program for the sale of an additional 3,402,100 shares of its common stock that have not yet been settled. Subject to its right to elect net share settlement, the Company expects to physically settle the forward sales transactions by certain dates between November 2020 and March 2021. Assuming the forward sales transactions are physically settled in full utilizing a net weighted average initial forward sales price of $22.91 per share, the Company expects to receive net proceeds of approximately $78.0 million, after deducting offering costs, subject to adjustments in accordance with the applicable forward sale transaction. The Company accounted for the forward sale agreements as equity. The Company used the net proceeds received from such sales for general corporate purposes. As of March 31, 2020, the Company had approximately $99.0 million and $300.0 million of gross sales of its common stock available under the March 2019 ATM Program and the December 2019 ATM Program, respectively. Contribution of Property for Common Units On March 26, 2020, the Company acquired FBI / DEA – El Paso for which it paid, as partial consideration, 870,730 common units. The issuance of the common units was effected in reliance upon an exemption from registration provided by Section 4(a)(2) under the Securities Act. In connection with this acquisition, the Company entered into a tax protection agreement, under which it agreed to indemnify the contributors for any taxes incurred as a result of a taxable sale of such property for a period of four years. The Company also agreed in the tax protection agreement with the contributors to use the “traditional method” of making allocations under Section 704(c) of the Code for the four-year period. |