Equity | 7. Equity The following table summarizes the changes in the Company’s stockholders’ equity for the three months ended June 30, 2021 and 2020 (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 June 30, 2021 Balance at March 31, 2021 83,856,953 $ 839 $ 1,464,014 $ 38,956 $ (313,007 ) $ (9,741 ) $ 145,733 $ 1,326,794 Stock based compensation — — 166 — — — 867 1,033 Dividends and distributions paid ($0.26 per share) — — — — (21,808 ) — (2,783 ) (24,591 ) Grant of unvested restricted stock, net 20,337 — — — — — — — Redemption of common units for shares of common stock 54,000 — 760 — — — (760 ) — Contribution of Property for common units — — — — — — 20,790 20,790 Unrealized loss on interest rate swaps, net — — — — — 1,202 55 1,257 Net income — — — 8,201 — — 1,053 9,254 Allocation of non-controlling interest in Operating Partnership — — 6,988 — — — (6,988 ) — Balance at June 30, 2021 83,931,290 $ 839 $ 1,471,928 $ 47,157 $ (334,815 ) $ (8,539 ) $ 157,967 $ 1,334,537 Three months ended June 30, 2020 Balance at March 31, 2020 75,077,197 $ 751 $ 1,270,758 $ 21,701 $ (230,276 ) $ (13,276 ) $ 147,544 $ 1,197,202 Stock based compensation — — 241 — — — 780 1,021 Dividends and distributions paid ($0.26 per share) — — — — (19,535 ) — (2,782 ) (22,317 ) Grant of unvested restricted stock 19,025 1 (1 ) — — — — — Redemption of common units for shares of common stock 86,960 — 1,215 — — — (1,215 ) — Issuance of common stock 4,472,192 45 103,184 — — — — 103,229 Unrealized loss on interest rate swaps, net — — — — — (342 ) 76 (266 ) Net income — — — 3,666 — — 497 4,163 Allocation of non-controlling interest in Operating Partnership — — (4,104 ) — — — 4,104 — Balance at June 30, 2020 79,655,374 $ 797 $ 1,371,293 $ 25,367 $ (249,811 ) $ (13,618 ) $ 149,004 $ 1,283,032 The following table summarizes the changes in the Company’s stockholders’ equity for the six months ended June 30, 2021 and 2020 (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 Six months ended June 30, 2021 Balance at December 31, 2020 82,106,256 $ 821 $ 1,424,787 $ 31,965 $ (291,652 ) $ (11,351 ) $ 145,400 $ 1,299,970 Stock based compensation — — 384 — — — 1,983 2,367 Dividends and distributions paid ($0.52 per share) — — — — (43,163 ) — (5,614 ) (48,777 ) Grant of unvested restricted stock, net 24,799 — — — — — — — Redemption of common units for shares of common stock 243,411 2 3,422 — — — (3,424 ) — Issuance of common stock 1,556,824 16 39,942 — — — — 39,958 Contribution of Property for common units — — — — — — 20,790 20,790 Unrealized gain on interest rate swaps, net — — — — — 2,812 283 3,095 Net income — — — 15,192 — — 1,942 17,134 Allocation of non-controlling interest in Operating Partnership — — 3,393 — — — (3,393 ) — Balance at June 30, 2021 83,931,290 $ 839 $ 1,471,928 $ 47,157 $ (334,815 ) $ (8,539 ) $ 157,967 $ 1,334,537 Six months ended June 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 — — 465 — — — 1,556 2,021 Dividends and distributions paid ($0.52 per share) — — — — (39,051 ) — (5,352 ) (44,403 ) Grant of unvested restricted stock 21,930 1 (1 ) — — — — — Redemption of common units for shares of common stock 128,960 1 1,811 — — — (1,812 ) — Issuance of common stock 4,672,192 47 108,007 — — — — 108,054 Contribution of Property for common units — — — — — — 21,550 21,550 Unrealized loss on interest rate swaps, net — — — — — (8,928 ) (1,184 ) (10,112 ) Net income — — — 5,363 — — 718 6,081 Allocation of non-controlling interest in Operating Partnership — — 3,692 — — — (3,692 ) — Balance at June 30, 2020 79,655,374 $ 797 $ 1,371,293 $ 25,367 $ (249,811 ) $ (13,618 ) $ 149,004 $ 1,283,032 On January 4, 2021, the Company granted an aggregate of 164,178 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) 82,070 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) 82,108 LTIP units that are subject to the Company achieving certain operational performance hurdles, in each case through a performance period ending on December 31, 2023. Earned performance-based LTIP units, if any, will vest when performance is determined following the end of the performance period on December 31, 2023. On January 4, 2021, the Company also granted an aggregate of 113,703 service-based LTIP units to members of management pursuant to the 2015 Equity Incentive Plan, which will vest on December 31, 2023, subject to the grantee’s continued employment and the other terms of the awards. On March 17, 2021, the Company issued an aggregate of 4,462 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 19, 2021, in connection with the Company’s 2021 annual meeting of stockholders, the Company issued an aggregate of 22,760 shares of restricted common stock and 6,647 LTIP units to its non-employee directors pursuant to the 2015 Equity Incentive Plan. The restricted common stock and LTIP unit 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. During the three months ended June 30, 2021, 32,385 LTIP units and 2,423 shares of restricted common stock were forfeited in connection with employee departures under the terms of the applicable award agreements. A summary of the Company’s shares of restricted common stock and LTIP unit awards at June 30, 2021 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, 2020 89,891 $ 19.36 492,180 $ 19.88 Vested (39,750 ) 21.50 (93,085 ) 18.55 Granted 27,222 20.46 284,528 22.18 Forfeited (2,423 ) 18.36 (32,385 ) 21.03 Outstanding, June 30, 2021 74,940 $ 18.66 651,238 $ 21.02 (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 $2.4 million in compensation expense related to its shares of restricted common stock and the LTIP unit awards for the six months ended June 30, 2021. As of June 30, 2021, unrecognized compensation expense for both sets of awards was $8.9 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 2021 April 29, 2021 May 14, 2021 May 26, 2021 $ 0.260 Q2 2021 July 27, 2021 August 12, 2021 August 24, 2021 $ 0.265 (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, we 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, Truist Securities, Inc. (f/k/a SunTrust Robinson Humphrey, Inc.) and Wells Fargo Securities, LLC pursuant to which we may issue and sell shares of our common stock having an aggregate offering price of up to $200.0 million and $300.0 million, respectively, from time to time (the “2019 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 2019 ATM Programs, we 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 and, under the December 2019 ATM Program only, Truist Bank, for the sale of shares of our common stock on a forward basis. On June 22, 2021, we entered into separate equity distribution agreements with each of Citigroup Global Markets Inc., BMO Capital Markets Corp., BTIG, LLC, Capital One Securities, Inc., CIBC World Markets Corp., Jefferies LLC, Raymond James & Associates, Inc., RBC Capital Markets, LLC, Truist Securities, Inc. and Wells Fargo Securities, LLC pursuant to which we may issue and sell shares of our common stock having an aggregate offering price of up to $300.0 million from time to time (the “2021 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 2021 ATM Program, we may also enter into one or more forward sale transactions under separate master forward sale confirmations and related supplemental confirmations with each of Citigroup Global Markets Limited, Bank of Montreal, Canadian Imperial Bank of Commerce, Jefferies LLC, Raymond James & Associates, Inc., Royal Bank of Canada, Truist Bank and Wells Fargo Bank, National Association for the sale of shares of our common stock on a forward basis. The following table sets forth certain information with respect to issuances under each of the 2019 ATM Programs during the quarters ended March 31, 2021 and June 30, 2021 (amounts in thousands except share amounts): March 2019 ATM Program December 2019 ATM Program For the Three Months Ended: Number of Shares Issued (1) Net Proceeds (1) Number of Shares Issued (1) Net Proceeds (1) March 31, 2021 — $ — 1,556,824 $ 39,998 June 30, 2021 — — — — Total — $ — 1,556,824 $ 39,998 (1) Shares issued by the Company, which were all issued in settlement of forward sales transactions. Additionally, as of June 30, 2021, the Company had entered into forward sales transactions under the 2019 ATM Programs for the sale of an additional 3,499,697 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 September 2021 to June 2022. Assuming the forward sales transactions are physically settled in full utilizing a net weighted average initial forward sales price of $23.96 per share, the Company expects to receive net proceeds of approximately $83.8 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. No sales of shares of our common stock were made under the 2021 ATM Program during the quarter ended June 30, 2021. The Company used the net proceeds received from such sales for general corporate purposes. As of June 30, 2021, the Company had approximately $300.0 million of gross sales of its common stock available under the 2021 ATM Program, $111.8 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 May 20, 2021, we acquired NWS – Kansas City for which we paid, as partial consideration, 975,452 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. |