Equity | 7. Equity The following table summarizes the changes in the Company’s stockholders’ equity for the three months ended September 30, 2020 and 2019 (amounts in thousands, except share amounts): Shares Common Stock Par Value Additional Paid-in Capital Retained Earnings Cumulative Dividends Accumulated Other Comprehensive Income (Loss) Non- controlling Interest in Operating Partnership Total Equity Three months ended September 30, 2020 Balance at June 30, 2020 79,655,374 $ 797 $ 1,371,293 $ 25,367 $ (249,811 ) $ (13,618 ) $ 149,004 $ 1,283,032 Stock based compensation — — 247 — — — 788 1,035 Dividends and distributions paid ($0.26 per share) — — — — (20,720 ) — (2,761 ) (23,481 ) Redemption of common units for shares of common stock 88,750 1 1,263 — — — (1,264 ) — Issuance of common stock 1,475,991 14 33,502 — — — — 33,516 Unrealized loss on interest rate swaps, net — — — — — 1,048 184 1,232 Net income — — — 4,264 — — 557 4,821 Allocation of non-controlling interest in Operating Partnership — — (792 ) — — — 792 — Balance at September 30, 2020 81,220,115 $ 812 $ 1,405,513 $ 29,631 $ (270,531 ) $ (12,570 ) $ 147,300 $ 1,300,155 Three months ended September 30, 2019 Balance at June 30, 2019 69,601,138 $ 696 $ 1,155,327 $ 18,023 $ (172,642 ) $ (4,751 ) $ 141,272 $ 1,137,925 Stock based compensation — — 223 — — — 491 714 Dividends and distributions paid ($0.26 per share) — — — — (18,835 ) — (2,563 ) (21,398 ) Redemption of common units for shares of common stock 245,125 2 3,508 — — — (3,510 ) — Issuance of common stock 3,493,413 35 67,665 — — — — 67,700 Unrealized loss on interest rate swaps, net — — — — — (1,642 ) (165 ) (1,807 ) Net income — — — 549 — — 54 603 Allocation of non-controlling interest in Operating Partnership — — (1,694 ) — — — 1,694 — Balance at September 30, 2019 73,339,676 $ 733 $ 1,225,029 $ 18,572 $ (191,477 ) $ (6,393 ) $ 137,273 $ 1,183,737 The following table summarizes the changes in the Company’s stockholders’ equity for the nine months ended September 30, 2020 and 2019 (amounts in thousands, except share amounts ) : Shares Common Stock Par Value Additional Paid-in Capital Retained Earnings Cumulative Dividends Accumulated Other Comprehensive Income (Loss) Non- controlling Interest in Operating Partnership Total Equity Nine months ended September 30, 2020 Balance at December 31, 2019 74,832,292 $ 748 $ 1,257,319 $ 20,004 $ (210,760 ) $ (4,690 ) $ 137,220 $ 1,199,841 Stock based compensation — — 712 — — — 2,344 3,056 Dividends and distributions paid ($0.78 per share) — — — — (59,771 ) — (8,113 ) (67,884 ) Grant of unvested restricted stock 21,930 1 (1 ) — — — — — Redemption of common units for shares of common stock 217,710 2 3,074 — — — (3,076 ) — Issuance of common stock 6,148,183 61 141,509 — — — — 141,570 Contribution of Property for common units — — — — — — 21,550 21,550 Unrealized loss on interest rate swaps, net — — — — — (7,880 ) (1,000 ) (8,880 ) Net income — — — 9,627 — — 1,275 10,902 Allocation of non-controlling interest in Operating Partnership — — 2,900 — — — (2,900 ) — Balance at September 30, 2020 81,220,115 $ 812 $ 1,405,513 $ 29,631 $ (270,531 ) $ (12,570 ) $ 147,300 $ 1,300,155 Nine months ended September 30, 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 — — 617 — — — 1,528 2,145 Dividends and distributions paid ($0.78 per share) — — — — (52,374 ) — (7,733 ) (60,107 ) Grant of unvested restricted stock 89,961 1 (1 ) — — — — — Redemption of common units for shares of common stock 339,929 3 5,012 — — — (5,015 ) — Issuance of common stock 12,060,580 121 219,743 — — — — 219,864 Unrealized loss on interest rate swaps, net — — — — — (8,805 ) (1,192 ) (9,997 ) Net income — — — 5,775 — — 838 6,613 Allocation of non-controlling interest in Operating Partnership — — (17,757 ) — — — 17,757 — Balance at September 30, 2019 73,339,676 $ 733 $ 1,225,029 $ 18,572 $ (191,477 ) $ (6,393 ) $ 137,273 $ 1,183,737 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. On May 11, 2020, i n connection with the Company’s 2020 annual meeting of stockholders, the Company issued an aggregate of 19,025 shares of restricted common stock to its non-employee directors pursuant to the 2015 Equity Incentive Plan. The restricted common stock grants will vest upon the earlier of the anniversary of the date of the grant or the next annual stockholder meeting, so long as the grantee remains a director on such date. A summary of the Company’s shares of restricted common stock and LTIP unit awards at September 30, 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 21,930 25.85 235,441 21.17 Vested (24,236 ) 18.36 (27,732 ) 18.34 Forfeited — — — — Outstanding, September 30, 2020 89,891 $ 19.36 492,180 $ 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 $3.1 million in compensation expense related to its shares of restricted common stock and the LTIP unit awards for the nine months ended September 30, 2020. As of September 30, 2020, unrecognized compensation expense for both sets of awards was $6.1 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 Q2 2020 July 29, 2020 August 13, 2020 September 11, 2020 $ 0.26 Q3 2020 October 27, 2020 November 11, 2020 December 11, 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 each of March 4, 2019 and December 20, 2019, the Company entered into separate equity distribution agreements with each of Citigroup Global Markets Inc., BMO Capital Markets Corp., BTIG, LLC, Capital One Securities, Inc., Jefferies LLC, Raymond James & Associates, Inc., RBC Capital Markets, LLC, SunTrust Robinson Humphrey, Inc. and Wells Fargo Securities, LLC pursuant to which it may issue and sell shares of its common stock having an aggregate offering price of up to $200.0 million and $300.0 million, respectively, from time to time (the “ATM Programs”) in negotiated transactions or transactions that are deemed to be “at the market” offerings as defined in Rule 415 under the Securities Act of 1933, as amended (the “Securities Act”). The ATM Programs implemented on March 4, 2019 and December 20, 2019 are referred to as the “March 2019 ATM Program” and “December 2019 ATM Program” respectively. Under each of the ATM Programs, the Company may also enter into one or more forward transactions (each, a “forward sale transaction”) under separate master forward sale confirmations and related supplemental confirmations with each of Citibank, N.A., Bank of Montreal, Jefferies LLC, Raymond James & Associates, Inc., Royal Bank of Canada and Wells Fargo Bank, National Association for the sale of shares of its common stock on a forward basis. The following table sets forth certain information with respect to sales made under each of the ATM Program s as of September 30, 2020 (amounts in thousands except share amounts) : March 2019 ATM Program December 2019 ATM Program For the Three Months Ended: Number of Shares Sold (1) Net Proceeds (1) Number of Shares Sold (1) Net Proceeds (1) March 31, 2020 200,000 $ 4,835 — $ — June 30, 2020 3,920,992 88,939 551,200 14,455 September 30, 2020 — — 1,475,991 33,541 Total 4,120,992 $ 93,774 2,027,191 $ 47,996 (1) As of September 30, 2020, the Company had entered into forward sales transactions under the March 2019 ATM Program and December 2019 ATM Program for the sale of an additional 3,827,455 shares of its common stock that have not yet been settled. Subject to its right to elect net share settlement, the Company expects to physically settle the forward sales transactions by the maturity dates set forth in each applicable forward sale transaction placement notice, which dates range from April 2021 to September 2021. Assuming the forward sales transactions are physically settled in full utilizing a net weighted average initial forward sales price of $25.88 per share, the Company expects to receive net proceeds of approximately $99.1 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 September 30, 2020, the Company had approximately $157.9 million of gross sales of its common stock available under the December 2019 ATM Program and no remaining availability under the March 2019 ATM Program. Contribution of Property for Common Units On 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. |