Easterly Government Properties, Inc. 10-K

Item 8. Financial Statements and Supplementary Data This item is included in a separate section at the end of this report beginning on page F-1. Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure None. Item 9A. Controls Evaluation of Disclosure Controls and Procedures Our management carried out an evaluation required by the Exchange Act, under the supervision and with the participation of our principal executive officer and principal financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rules 13a -15(e) and 15d-15(e) of the Exchange Act, as of December 31, 2020. Based on this evaluation our principal executive officer and principal financial officer concluded that, as of December 31, 2020, our disclosure controls and procedures were effective to provide reasonable assurance that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and to provide reasonable assurance that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosures. Management’s Report on Internal Control over Financial Reporting Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act). Our management has assessed the effectiveness of our internal control over financial reporting at December 31, 2020. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) in Internal Control – Integrated Framework (2013 Framework). Based on our assessment management concluded that, as of December 31, 2020, our internal control over financial reporting is effective based on those criteria. The effectiveness of our internal control over financial reporting as of December 31, 2020 has been audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in their report, which appears on page F-2 of this Annual Report on Form 10 K. Changes in Internal Control over Financial Reporting There were no changes in our internal control over financial reporting during the quarter ended December 31, 2020 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. Item 9B. Other Information None. 48 PART III Item 10. Directors, Executive Officers and Corporate Governance The information required by Item 10 will be set forth in our Definitive Proxy Statement for our 2021 Annual Meeting of Stockholders, which we anticipate will be filed no later than 120 days after the end of our fiscal year ended December 31, 2020, to be filed pursuant to Regulation 14A under the Securities and Exchange Act of 1934, as amended, or our Proxy Statement, and is incorporated herein by reference. Item 11. Executive Compensation The information required by Item 11 will be set forth in our Proxy Statement and is incorporated herein by reference. Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters The following table summarizes certain information about our equity compensation plans as of December 31, 2020. Plan Category Number of securities to be issued upon exercise of outstanding options, warrants and rights Weighted-average exercise price of outstanding options, warrants and rights Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in the first column of this table) (a) (b) (c) Equity compensation plans approved by stockholders (1)(2) 3,086,211 $ — 1,993,822 Equity compensation plans not approved by stockholders — — — Total 3,086,211 $ — 1,993,822 (1) The amount in column (a) includes 3,086,211 LTIP units issued under our 2015 equity incentive plan that, upon the satisfaction of certain conditions, are convertible into common units, which may then be redeemed for cash, or, at our option, an equal number of shares of common stock, subject to certain restrictions. There is no exercise price associated with LTIP units. (2) The amount in column (c) excludes the number of LTIP units referenced in column (a) and 193,926 shares of restricted common stock issued under our 2015 equity incentive plan. Additional information concerning security ownership of certain beneficial owners and management required by Item 12 will be set forth in our Proxy Statement and is incorporated herein by reference. Item 13. Certain Relationships and Related Transactions, and Director Independence The information required by Item 13 will be set forth in our Proxy Statement and is incorporated herein by reference. Item 14. Principal Accounting Fees and Services The information required by Item 14 will be set forth in our Proxy Statement and is incorporated herein by reference. 49 PART IV Item 15. Exhibits and Financial Statement Schedules 1. Financial Statements The financial statements listed in the accompanying index to financial statements beginning on page F-1 are filed as a part of this report. 2. Financial Statement Schedule The financial statement schedule listed in the accompanying index to financial statements beginning on page S-1 are filed as a part of this report. All other schedules for which provision is made in Regulation S-X are either not required to be included herein under the related instructions or are inapplicable or the related information is included in the footnotes to the applicable financial statement and, therefore, have been omitted. 3. Exhibits The following documents are filed as exhibits to this report: Exhibit Exhibit Description 3.1 Amended and Restated Articles of Amendment and Restatement of Easterly Government Properties, Inc. (previously filed as Exhibit 3.1 to Amendment No. 2 to the Company’s Registration Statement on Form S-11 on January 30, 2015 and incorporated herein by reference) 3.2 Amended and Restated Bylaws of Easterly Government Properties, Inc. (previously filed as Exhibit 3.2 to Amendment No. 2 to the Company’s Registration Statement on Form S-11 on January 30, 2015 and incorporated herein by reference) 3.3 First Amendment to Amended and Restated Bylaws of Easterly Government Properties, Inc. (previously filed as Exhibit 3.1 to the Company’s Current Report on Form 8-K on February 27, 2019 and incorporated herein by reference) 4.1 Specimen Certificate of Common Stock of Easterly Government Properties, Inc. (previously filed as Exhibit 4.1 to Amendment No. 2 to the Company’s Registration Statement on Form S-11 on January 30, 2015 and incorporated herein by reference) 4.2 Description of Securities of Easterly Government Properties, Inc. (previously filed as Exhibit 4.2 to the Company’s Annual Report on Form 10-K on February 25, 2020 and incorporated herein by reference) 10.1 Amended and Restated Limited Partnership Agreement of Easterly Government Properties LP (previously filed as Exhibit 10.2 to the Company’s Current Report on Form 8-K on February 11, 2015 and incorporated herein by reference) 10.2 First Amendment to the Amended and Restated Agreement of Limited Partnership of Easterly Government Properties LP, dated May 6, 2015 (previously filed as Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q on August 6, 2015 and incorporated herein by reference) 10.3 Second Amendment to the Amended and Restated Agreement of Limited Partnership of Easterly Government Properties LP, dated February 26, 2016 (previously filed as Exhibit 10.3 to the Company’s Annual Report on Form 10-K on March 2, 2016 and incorporated herein by reference) 10.4† 2015 Equity Incentive Plan (previously filed as Exhibit 10.3 to the Company’s Annual Report on Form 10-K on March 30, 2015 and incorporated herein by reference) 10.5† Employment Agreement by and among Easterly Government Properties Services LLC, Easterly Government Properties, Inc., Easterly Government Properties LP and William C. Trimble, III, dated January 30, 2015 (previously filed as Exhibit 10.10 to Amendment No. 2 to the Company’s Registration Statement on Form S-11 on January 30, 2015 and incorporated herein by reference) 50 Exhibit Exhibit Description 10.6† Employment Agreement, by and among Easterly Government Properties Services LLC, Easterly Government Properties LP, Easterly Government Properties, Inc., and Meghan G. Baivier, dated May 12, 2015 (previously filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K on May 13, 2015 and incorporated herein by reference) 10.7† Form of Indemnification Agreement between Easterly Government Properties, Inc. and each of its Directors and Executive Officers (previously filed as Exhibit 10.4 to Amendment No. 2 to the Company’s Registration Statement on Form S-11 on January 30, 2015 and incorporated herein by reference) 10.8 Form of Tax Protection Agreement by and among Easterly Government Properties, Inc., Easterly Government Properties LP and Michael P. Ibe (previously filed as Exhibit 10.9 to Amendment No. 2 to the Company’s Registration Statement on Form S-11 on January 30, 2015 and incorporated herein by reference) 10.9 Tax Protection Agreement among Easterly Government Properties LP, West Pleasanton Lab, LLC and Michael P. Ibe, dated October 21, 2015 (previously filed as Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q on November 5, 2015 and incorporated herein by reference) 10.10 License Agreement between Easterly Government Properties, Inc. and Easterly Capital, LLC, dated January 26, 2015 (previously filed as Exhibit 10.11 to Amendment No. 3 to the Company’s Registration Statement on Form S-11 on February 4, 2015 and incorporated herein by reference) 10.11 Amended and Restated Credit Agreement among Easterly Government Properties LP, as Borrower, Easterly Government Properties, Inc., as Parent Guarantor, and certain subsidiaries of Easterly Government Properties, Inc. from time to time party thereto, as Guarantors, the initial lenders and the initial issuing banks named therein, Citibank, N.A., as administrative agent, PNC Bank, National Association and Wells Fargo Bank, N.A., as Co-Syndication agents, BMO Harris Bank, N.A., Raymond James Bank, N.A., Royal Bank of Canada and SunTrust Bank as Co-Documentation agents, and Citibank, N.A., PNC Capital Markets LLC and Wells Fargo Securities, LLC, as Joint Lead Arrangers and Joint Book Running Managers and the other financial institutions party thereto (previously filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K on June 21, 2018 and incorporated herein by reference) 10.12 Term Loan Agreement, among Easterly Government Properties LP, as Borrower, Easterly Government Properties, Inc., as Parent Guarantor, and certain subsidiaries of Easterly Government Properties, Inc. from time to time party thereto, as Guarantors, PNC Bank, National Association, as Administrative Agent, U.S. Bank National Association and SunTrust Bank, as Syndication Agents, and PNC Capital Markets LLC, U.S. Bank National Association and SunTrust Robinson Humphrey, Inc., as Joint Lead Arrangers and Joint Bookrunners and the Initial Lenders named therein, dated September 29, 2016 (previously filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K on October 5, 2016 and incorporated herein by reference) 10.13 Second Amendment to Term Loan Agreement by and among Easterly Government Properties, Inc., Easterly Government Properties LP, the Guarantors named therein, PNC Bank, National Association, as Administrative Agent and U.S. Bank National Association and SunTrust Bank, as Lenders, dated as of June 18, 2018 (previously filed as Exhibit 10.2 to the Company’s Current Report on Form 8-K on June 21, 2018 and incorporated herein by reference) 10.14 Third Letter Amendment to Term Loan Agreement, dated as of October 3, 2018, by and among Easterly Government Properties, Inc., as Parent Guarantor, Easterly Government Properties LP, as Borrower, the Subsidiary Guarantors named therein, PNC Bank, National Association, as Administrative Agent and U.S. Bank National Association and SunTrust Bank, as Lenders (previously filed as Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q on November 5, 2018 and incorporated herein by reference) 21.1* List of Subsidiaries of the Registrant 23.1* Consent of PricewaterhouseCoopers LLP 31.1* Certification of Chief Executive Officer Required by Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended 31.2* Certification of Chief Financial Officer Required by Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended 32.1** Certification of Chief Executive Officer and Chief Financial Officer Required by Rule 13a-14(b) of the Securities Exchange Act of 1934, as amended 51 Exhibit Exhibit Description 101.SCH * Inline XBRL Taxonomy Extension Schema Document 101.CAL* Inline XBRL Taxonomy Extension Calculation Linkbase Document 101.DEF* Inline XBRL Taxonomy Extension Definition Linkbase Document 101.LAB* Inline XBRL Taxonomy Extension Label Linkbase Document 101.PRE* Inline XBRL Taxonomy Extension Presentation Linkbase Document 104* Cover Page Interactive Data File (formatted as inline XBRL with applicable taxonomy extension information contained in Exhibits 101.*) † Exhibit is a management contract or compensatory plan or arrangement. * Filed herewith ** Furnished herewith Item 16. Form 10-K Summary Not applicable. 52 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Washington, District of Columbia, on February 24, 2021. EASTERLY GOVERNMENT PROPERTIES, INC. By: /s/ William C. Trimble, III Name: William C. Trimble, III Title: Chief Executive Officer and President Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by the following persons on behalf of the registrant and in the capacities and on the dates indicated. Signature Title Date /s/ William C. Trimble, III Chief Executive Officer, President and Director (Principal Executive Officer) February 24, 2021 William C. Trimble, III /s/ Meghan G. Baivier Executive Vice President, Chief Financial Officer and Chief Operating Officer (Principal Financial Officer) February 24, 2021 Meghan G. Baivier /s/ Alison M. Bernard Executive Vice President, Chief Accounting Officer (Principal Accounting Officer) February 24, 2021 Alison M. Bernard /s/ Darrell W. Crate Chairman of the Board of Directors February 24, 2021 Darrell W. Crate /s/ Michael P. Ibe Director, Vice Chairman of the Board of Directors and Executive Vice President—Development and Acquisitions February 24, 2021 Michael P. Ibe /s/ William H. Binnie Director February 24, 2021 William H. Binnie /s/ Cynthia A. Fisher Director February 24, 2021 Cynthia A. Fisher /s/ Scott D. Freeman Director February 24, 2021 Scott D. Freeman /s/ Emil W. Henry, Jr. Director February 24, 2021 Emil W. Henry, Jr. /s/ Tara S. Innes Director February 24, 2021 Tara S. Innes 53 INDEX TO FINANCIAL STATEMENTS Page Easterly Government Properties, Inc. Report of Independent Registered Public Accounting Firm F-2 Consolidated Balance Sheets as of December 31, 2020 and 2019 F-4 Consolidated Statements of Operations for the years ended December 31, 2020, 2019 and 2018 F-5 Consolidated Statements of Comprehensive Income (Loss) for the years ended December 31, 2020, 2019 and 2018 F-6 Consolidated Statements of Stockholders’ Equity for the years ended December 31, 2020, 2019 and 2018 F-7 Consolidated Statements of Cash Flows for the years ended December 31, 2020, 2019 and 2018 F-8 Notes to the Consolidated Financial Statements F-10 Schedule III - Real Estate and Accumulated Depreciation as of December 31, 2020 S-1 F-1 Report of Independent Registered Public Accounting Firm To the Board of Directors and Stockholders of Easterly Government Properties, Inc. Opinions on the Financial Statements and Internal Control over Financial Reporting We have audited the accompanying consolidated balance sheets of Easterly Government Properties, Inc. and its subsidiaries (the “Company”) as of December 31, 2020 and 2019, and the related consolidated statements of operations, of comprehensive income (loss), of stockholders' equity and of cash flows for each of the three years in the period ended December 31, 2020, including the related notes and financial statement schedule listed in the accompanying index (collectively referred to as the “ consolidated financial statements”). We also have audited the Company's internal control over financial reporting as of December 31, 2020, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2020 and 2019 , and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2020 in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2020, based on criteria established in Internal Control - Integrated Framework (2013) issued by the COSO. Basis for Opinions T he Company's management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in Management's Report on Internal Control over Financial Reporting appearing under Item 9A. Our responsibility is to express opinions on the Company’s consolidated financial statements and on the Company's internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits i n accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects. Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions. Definition and Limitations of Internal Control over Financial Reporting A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. F-2 Critical Audit Matters The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that (i) relates to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates. Purchase Price Accounting As described in Notes 2 and 3 to the consolidated financial statements, during the year ended December 31, 2020, the Company acquired nine operating properties in asset acquisitions for an aggregate purchase price of $252.7 million. When the Company acquires properties, management allocates the purchase price to numerous tangible and intangible components. Management allocates the purchase price of properties based on the estimated fair value of the assets acquired and liabilities assumed, which generally consists of land, building, tenant improvements, and intangible assets and liabilities, which include in-place leases, leasing commissions and above and below market leases. Management’s process for determining the allocation requires many estimates and assumptions, including (i) market land, rental, discount and capitalization rates; (ii) leasing and tenant improvement costs associated with the remaining term of acquired leases; (iii) assumptions used in determining the in-place lease and if-vacant value including the rental rates, period of time that it would take to lease vacant space and estimated tenant improvement and leasing costs; (iv) renewal probabilities; and (v) allocation of the if-vacant value between land and building. The principal considerations for our determination that performing procedures relating to purchase price accounting is a critical audit matter are (i) the significant judgment and estimation by management when developing the purchase price allocation, which in turn led to a high degree of auditor judgment and subjectivity in performing procedures to evaluate management’s estimates and significant assumptions, (ii) significant audit effort was necessary in evaluating significant assumptions related to discount rates, capitalization rates, market rental rates, market land rates, leasing costs, tenant improvement costs, and the period of time that it would take to lease vacant space, (iii) significant auditor judgment was necessary in evaluating audit evidence related to such assumptions, and (iv) the audit effort included the involvement of professionals with specialized skill and knowledge to assist in evaluating the audit evidence obtained from these procedures. Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures included testing the effectiveness of controls relating to purchase price accounting, including controls over the assumptions used related to discount rates, capitalization rates, market rental rates, market land rates, leasing costs, tenant improvement costs, and the period of time that it would take to lease vacant space to determine the fair value of the assets acquired and liabilities assumed and allocate the purchase price to the tangible and intangible components. These procedures also included, among others, reading the purchase agreements for all acquisitions and testing management’s process by evaluating the appropriateness of methods used to determine fair value of assets acquired and liabilities assumed, testing the significant inputs and evaluating the reasonableness of the significant assumptions utilized by management in developing the purchase price allocation, related to discount rates, capitalization rates, market rental rates, market land rates, leasing costs, tenant improvement costs, and the period of time that it would take to lease vacant space. Assessing the assumptions involved evaluating the consistency of the assumptions used with external market data and with evidence obtained in other areas of the audit. In conjunction with certain purchase price allocations, professionals with specialized skill and knowledge were used to assist in evaluating the reasonableness of certain significant assumptions utilized by management, as appropriate. /s/ PricewaterhouseCoopers LLP Boston, Massachusetts February 24, 2021 We have served as the Company’s or its predecessor’s auditor since 2014. F-3 Easterly Government Properties, Inc. Consolidated Balance Sheets (Amounts in thousands, except share amounts) December 31, 2020 December 31, 2019 Assets Real estate properties, net $ 2,208,661 $ 1,988,726 Cash and cash equivalents 8,465 12,012 Restricted cash 6,204 3,537 Deposits on acquisitions 1,300 1,800 Rents receivable 30,280 27,788 Accounts receivable 14,959 15,820 Deferred financing, net 1,039 1,749 Intangible assets, net 163,387 168,625 Interest rate swaps — 541 Prepaid expenses and other assets 23,245 13,991 Total assets $ 2,457,540 $ 2,234,589 Liabilities Revolving credit facility 79,250 — Term loan facilities, net 248,966 248,602 Notes payable, net 447,171 446,927 Mortgage notes payable, net 202,871 206,312 Intangible liabilities, net 25,406 24,578 Deferred revenue 92,576 54,659 Interest rate swaps 12,781 5,837 Accounts payable, accrued expenses and other liabilities 48,549 47,833 Total liabilities 1,157,570 1,034,748 Commitments and contingencies (Note 11) Equity Common stock, par value $ 0.01 , 200,000,000 shares authorized, 82,106,256 and 74,832,292 shares issued and outstanding at December 31, 2020 and December 31, 2019, respectively 821 748 Additional paid-in capital 1,424,787 1,257,319 Retained earnings 31,965 20,004 Cumulative dividends ( 291,652 ) ( 210,760 ) Accumulated other comprehensive loss ( 11,351 ) ( 4,690 ) Total stockholders' equity 1,154,570 1,062,621 Non-controlling interest in Operating Partnership 145,400 137,220 Total equity 1,299,970 1,199,841 Total liabilities and equity $ 2,457,540 $ 2,234,589 The accompanying notes are an integral part of these consolidated financial statements. F-4 Easterly Government Properties, Inc. Consolidated Statements of Operations (Amounts in thousands, except share and per share amounts) For the years ended December 31, 2020 2019 2018 Revenues Rental income $ 238,131 $ 208,544 $ 154,489 Tenant reimbursements 4,497 10,210 4,870 Other income 2,450 2,968 1,232 Total revenues 245,078 221,722 160,591 Expenses Property operating 48,430 48,279 30,912 Real estate taxes 27,125 23,643 17,311 Depreciation and amortization 93,803 92,439 66,403 Acquisition costs 2,087 1,738 1,579 Corporate general and administrative 20,630 20,184 14,824 Total expenses 192,075 186,283 131,029 Other income (expense) Interest expense, net ( 35,480 ) ( 33,460 ) ( 22,903 ) Gain (loss) on the sale of operating property ( 3,995 ) 6,245 — Net income 13,528 8,224 6,659 Non-controlling interest in Operating Partnership ( 1,567 ) ( 1,017 ) ( 955 ) Net income available to Easterly Government Properties, Inc. $ 11,961 $ 7,207 $ 5,704 Net income available to Easterly Government Properties, Inc. per share: Basic $ 0.15 $ 0.10 $ 0.09 Diluted $ 0.15 $ 0.10 $ 0.08 Weighted- average common shares outstanding Basic 78,219,491 68,769,526 53,511,137 Diluted 78,791,453 69,208,966 54,931,380 Dividends declared per common share $ 1.04 $ 1.04 $ 1.04 The accompanying notes are an integral part of these consolidated financial statements. F-5 Easterly Government Properties, Inc. Consolidated Statements of Comprehensive Income (Loss) (Amounts in thousands) For the years ended December 31, 2020 2019 2018 Net income $ 13,528 $ 8,224 $ 6,659 Other comprehensive loss: Unrealized loss on interest rate swaps, net ( 7,485 ) ( 8,061 ) ( 1,265 ) Other comprehensive loss: ( 7,485 ) ( 8,061 ) ( 1,265 ) Comprehensive income 6,043 163 5,394 Non-controlling interest in Operating Partnership ( 1,567 ) ( 1,017 ) ( 955 ) Other comprehensive loss attributable to non-controlling interest 824 959 274 Comprehensive income attributable to Easterly Government Properties, Inc. $ 5,300 $ 105 $ 4,713 The accompanying notes are an integral part of these consolidated financial statements. F-6 Easterly Government Properties, Inc. Consolidated Statements of Stockholders’ Equity (Amounts in thousands, except share amounts) Shares Common Stock Par Value Additional Paid-in Capital Retained Earnings (Deficit) Cumulative Dividends Accumulated Other Comprehensive Income Non- controlling Interest in Operating Partnership Total Equity Balance at December 31, 2017 44,787,040 448 740,546 7,127 ( 83,718 ) 3,403 123,283 791,089 Stock based compensation — — 406 — — — 2,633 3,039 Grant of unvested restricted stock 21,328 — — — — — — — Dividends and distributions paid ($ 1.04 per share) — — — — ( 55,385 ) — ( 10,571 ) ( 65,956 ) Redemption of common units to common stock 658,801 7 10,300 — — — ( 10,307 ) — Contribution of Property for common units — — — — — — 5,184 5,184 Issuance of common stock, net 15,382,037 153 286,350 — — — — 286,503 Unrealized loss on interest rate swaps — — — — — ( 991 ) ( 274 ) ( 1,265 ) Net income — — — 5,704 — — 955 6,659 Allocation of NCI in Operating Partnership — — ( 20,187 ) — — — 20,187 — 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 — — 841 — — — 4,068 4,909 Grant of unvested restricted stock 89,961 1 (1 ) — — — — — Dividends and distributions paid ($ 1.04 per share) — — — — ( 71,657 ) — ( 10,237 ) ( 81,894 ) Redemption of common units to common stock 396,929 4 5,824 — — — ( 5,828 ) — Issuance of common stock, net 13,496,196 135 251,309 — — — — 251,444 Unrealized loss on interest rate swaps — — — — — ( 7,102 ) ( 959 ) ( 8,061 ) Net income — — — 7,207 — — 1,017 8,224 Allocation of NCI in Operating Partnership — — ( 18,069 ) — — — 18,069 — 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 — — 960 — — — 3,133 4,093 Grant of unvested restricted stock 21,930 1 (1 ) — — — — — Dividends and distributions paid ($ 1.04 per share) — — — — ( 80,892 ) — ( 10,856 ) ( 91,748 ) Redemption of common units to common stock 255,210 2 3,605 — — — ( 3,607 ) — Contribution of Property for common units — — — — — — 21,550 21,550 Issuance of common stock, net 6,996,824 70 160,121 — — — — 160,191 Unrealized loss on interest rate swaps — — — — — ( 6,661 ) ( 824 ) ( 7,485 ) Net income — — 11,961 — — 1,567 13,528 Allocation of NCI in Operating Partnership — 2,783 — — — ( 2,783 ) — Balance at December 31, 2020 82,106,256 821 1,424,787 31,965 ( 291,652 ) ( 11,351 ) 145,400 1,299,970 The accompanying notes are an integral part of these consolidated financial statements. F-7 Easterly Government Properties, Inc. Consolidated Statements of Cash Flows (Amounts in thousands) For the years ended December 31, 2020 2019 2018 Cash flows from operating activities Net income $ 13,528 $ 8,224 $ 6,659 Adjustments to reconcile net income to net cash provided by operating activities Depreciation and amortization 93,803 92,439 66,403 Straight line rent ( 3,432 ) ( 2,276 ) ( 5,637 ) Amortization of above- / below-market leases ( 5,894 ) ( 6,320 ) ( 8,593 ) Amortization of unearned revenue ( 3,528 ) ( 1,007 ) ( 194 ) Amortization of loan premium / discount ( 78 ) ( 80 ) ( 82 ) Amortization of deferred financing costs 1,519 1,413 1,279 Amortization of lease inducements 888 — — (Gain) loss on the sale of operating property 3,995 ( 6,245 ) — Non-cash compensation 4,093 4,909 3,039 Other 79 — — Net change in: Rents receivable 915 ( 4,708 ) ( 2,729 ) Accounts receivable 836 ( 4,130 ) ( 2,343 ) Deferred revenue associated with operating leases 41,445 51,593 934 Prepaid expenses and other assets ( 10,230 ) ( 3,091 ) ( 2,948 ) Accounts payable, accrued expenses and other liabilities 7,258 11,594 6,994 Net cash provided by operating activities 145,197 142,315 62,782 Cash flows from investing activities Real estate acquisitions and deposits ( 232,679 ) ( 394,480 ) ( 402,569 ) Additions to operating properties ( 18,010 ) ( 7,196 ) ( 5,691 ) Additions to development properties ( 43,001 ) ( 60,608 ) ( 58,483 ) Proceeds from sale of operating property, net 3,515 19,943 — Net cash used in investing activities ( 290,175 ) ( 442,341 ) ( 466,743 ) Cash flows from financing activities Payment of deferred financing costs — ( 1,996 ) ( 3,474 ) Issuance of common shares 162,023 258,556 297,805 Credit facility draws 272,750 337,000 163,000 Credit facility repayments ( 193,500 ) ( 471,750 ) ( 128,000 ) Term loan draws — — 150,000 Issuance of notes payable — 275,000 — Repayments of mortgage notes payable ( 3,564 ) ( 3,391 ) ( 3,189 ) Dividends and distributions paid ( 91,748 ) ( 81,894 ) ( 65,956 ) Payment of offering costs ( 1,863 ) ( 7,055 ) ( 11,321 ) Net cash provided by financing activities 144,098 304,470 398,865 Net increase (decrease) in Cash and cash equivalents and Restricted cash ( 880 ) 4,444 ( 5,096 ) Cash and cash equivalents and Restricted cash, beginning of year 15,549 11,105 16,201 Cash and cash equivalents and Restricted cash, end of year $ 14,669 $ 15,549 $ 11,105 The accompanying notes are an integral part of these consolidated financial statements. F-8 Easterly Government Properties, Inc. Consolidated Statements of Cash Flows (Amounts in thousands) Supplemental disclosure of cash flow information is as follows: For the years ended December 31, 2020 2019 2018 Cash paid for interest, net of capitalized interest $ 34,248 $ 29,120 $ 21,289 Capitalized interest $ 1,605 $ 2,273 $ 1,702 Non-cash investing and financing activities: Additions to operating properties $ 3,447 $ 1,465 $ 460 Additions to development properties 4,469 13,274 11,469 Deferred asset acquisition 119 105 10 Offering costs, accrued not paid 34 65 8 Unrealized loss on interest rate swaps, net ( 7,485 ) ( 8,061 ) ( 1,265 ) Debt assumed on acquisition of operating property — — 9,414 Properties acquired for common units 21,550 — 5,184 Contingent consideration accrued, not paid 336 — — Exchange of Common Units for Shares of Common Stock Non-controlling interest in Operating Partnership $ ( 3,607 ) $ ( 5,828 ) $ ( 10,307 ) Common Stock 2 4 7 Additional paid-in capital 3,605 5,824 10,300 Total $ — $ — $ — The accompanying notes are an integral part of these consolidated financial statements. F-9 Easterly Government Properties, Inc. Notes to the Consolidated Financial Statements 1. Organization and Basis of Presentation Easterly Government Properties, Inc. (the “Company”) is a Maryland corporation that has elected to be taxed as a real estate investment trust (a “REIT”) under the Internal Revenue Code, as amended (the “Code”) commencing with its taxable year ended December 31, 2015. The operations of the Company are carried out primarily through Easterly Government Properties, LP (the “Operating Partnership”) and the wholly owned subsidiaries of the Operating Partnership. As used herein, the “Company,” “we,” “us,” or “our” refer to Easterly Government Properties, Inc. and its consolidated subsidiaries and partnerships, including the Operating Partnership, except where context otherwise requires. We are an internally managed REIT, focused primarily on the acquisition, development, and management of Class A commercial properties that are leased to U.S. Government agencies that serve essential functions. We generate substantially all of our revenue by leasing our properties to such agencies either directly or through the U.S. General Services Administration (“GSA”). Our objective is to generate attractive risk-adjusted returns for our stockholders over the long term through dividends and capital appreciation. We focus on acquiring, developing, and managing U.S. Government-leased properties that are essential to supporting the mission of the tenant agency and strive to be a partner of choice for the U.S. Government, working closely with the tenant agency to meet its needs and objectives. As of December 31, 2020, we wholly owned 79 operating properties in the United States, encompassing approximately 7.3 million leased square feet (square feet unaudited herein and throughout the Notes) in the aggregate, including 77 operating properties that were leased primarily to U.S. Government tenant agencies and two operating properties that were entirely leased to private tenants. As of December 31, 2020, our operating properties were 99 % leased. For purposes of calculating percentage leased, we exclude from the denominator total square feet that was unleased and to which we attributed no value at the time of acquisition. In addition, we wholly owned one property under development that we expect will encompass approximately 0.2 million leased square feet upon completion. The Operating Partnership holds substantially all of our assets and conducts substantially all our business. The Company is the sole general partner of the Operating Partnership and owned approximately 88.8 % of the aggregate limited partnership interests in the Operating Partnership, which we refer to herein as common units, as of December 31, 2020. We have elected to be taxed as a REIT and believe that we have operated and have been organized in conformity with the requirements for qualification and taxation as a REIT for U.S. federal income tax purposes commencing with our taxable year ended December 31, 2015. Principles of Consolidation The accompanying consolidated financial statements are presented on the accrual basis of accounting in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and include the accounts of the Company, including Easterly Government Properties TRS, LLC and Easterly Government Services, LLC, the Operating Partnership and its other subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation. 2. Summary of Significant Accounting Policies The preparation of the consolidated financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the balance sheet and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Real Estate Properties Real estate properties comprise all tangible assets we hold for rent or development. Real property is recognized at cost less accumulated depreciation. Third party costs related to asset acquisitions are capitalized. Development, re-development and certain costs directly related to the improvement of real properties are capitalized. Maintenance and repair expenses are charged to expense as incurred. When we acquire properties, we allocate the purchase price to numerous tangible and intangible components. Our process for determining the allocation to these components requires many estimates and assumptions, including the following: (1) determination of market land, rental, discount and capitalization rates; (2) estimation of leasing and tenant improvement costs associated with the remaining term of acquired leases; (3) assumptions used in determining the in-place lease and if-vacant value including the rental rates, period of time that it would take to lease vacant space and estimated tenant improvement and leasing costs; (4) renewal F-10 probabilities; and (5) allocation of the if-vacant value between land and building. A change in any of the above key assumptions can materially change not only the presentation of acquired properties in our consolidated financial statements but also our reported results of operations. The allocation to different components affects the following: • the amount of the purchase price allocated among different categories of assets and liabilities on our consolidated balance sheets; and the amount of costs assigned to individual properties in multiple property acquisitions; • where the amortization of the components appear over time in our consolidated statements of operations. Allocations to above- and below-market leases are amortized into rental revenue, whereas allocations to most of the other tangible and intangible assets are amortized into depreciation and amortization expense. As a REIT, this is important to us since much of the investment community evaluates our operating performance using non-GAAP measures such as Funds From Operations, the computation of which includes rental revenue but does not include depreciation and amortization expense; and • the timing over which the items are recognized as revenue or expense in our consolidated statements of operations. For example, for allocations to the as-if vacant value, the land portion is not depreciated and the building portion is depreciated over a longer period of time than the other components (generally 40 years). Allocations to above- and below-market leases and in-place lease value are amortized over significantly shorter timeframes, and if individual tenants’ leases are terminated early, any unamortized amounts remaining associated with those tenants are written off upon termination. These differences in timing can materially affect our reported results of operations. Tenant improvements are capitalized in real property when we own the improvement. When we are required to provide improvements under the terms of a lease, we need to determine whether the improvements constitute landlord assets or tenant assets. If the improvements are considered landlord assets, we capitalize the cost of the improvements and recognize depreciation expense associated with such improvements over the shorter of the useful life of the assets or the term of the lease and recognize any payments from the tenant as rental revenue over the term of the lease. If the improvements are considered tenant assets, we defer the cost of improvements funded by us as a lease incentive asset and amortize it as a reduction of rental revenue over the term of the lease. Our determination of whether improvements are landlord assets or tenant assets also may affect when we commence revenue recognition in connection with a lease. In determining whether improvements constitute landlord or tenant assets, we consider numerous factors that may require subjective or complex judgments, including: whether the improvements are unique to the tenant or reusable by other tenants; whether the tenant is permitted to alter or remove the improvements without our consent or without compensating us for any lost fair value; whether the ownership of the improvements remains with us or remains with the tenant at the end of the lease term; and whether the economic substance of the lease terms is properly reflected. We capitalize pre-development costs incurred in pursuit of new development opportunities for which we currently believe future development is probable. Additionally, we capitalize interest expense, real estate taxes and direct and indirect project costs (including related compensation and other indirect costs) associated with properties, or portions thereof, undergoing construction, development and redevelopment activities. In capitalizing interest expense, if there is a specific borrowing for the property undergoing construction, development and redevelopment activities, we apply the interest rate of that borrowing to the average accumulated expenditures that do not exceed such borrowing; for the portion of expenditures exceeding any such specific borrowing, we apply our weighted average interest rate on unsecured borrowings to the expenditures. We continue to capitalize costs while construction, development or redevelopment activities are underway until the building is substantially complete and ready for its intended use, at which time rental income recognition can commence and rental operating costs, real estate taxes, insurance, and other subsequent carrying costs are expensed as incurred. Depreciation of an asset begins when it is available for use and is calculated using the straight-line method over the estimated useful lives. Each period, depreciation is charged to expense and credited to the related accumulated depreciation account. A used asset acquired is depreciated over its estimated remaining useful life, not to exceed the life of a new asset. Range of useful lives for depreciable assets are as follows: Category Term Buildings 40 years Building improvements 5 - 40 years Tenant improvements Shorter of remaining life of the lease or useful life Furniture and equipment 3 - 7 years We regularly evaluate whether events or changes in circumstances have occurred that could indicate an impairment in the value of long lived assets. If there is an indication that the carrying value of an asset is not recoverable, we estimate the projected undiscounted cash flows to determine if an impairment loss should be recognized. We determine the amount of any impairment loss by comparing the historical carrying value to estimated fair value. We estimate fair value through an evaluation of recent financial F-11 performance and projected discounted cash flows using standard industry valuation techniques. In addition to consideration of impairment upon the events or changes in circumstances described above, we regularly evaluate the remaining lives of our long lived assets. If we change our estimate of the remaining lives, we allocate the carrying value of the affected assets over their revised remaining lives. Cash and Cash Equivalents Cash and cash equivalents on the accompanying Consolidated Balance Sheets include all cash and liquid investments that mature three months or less from when they were purchased. Cash equivalents are reported at cost, which approximates fair value. We maintain our cash in bank accounts in amounts that may exceed federally insured limits at times. We have not experienced any losses in these accounts and believe that we are not exposed to significant credit risk because our accounts are deposited with major financial institutions. Restricted Cash Restricted cash on the accompanying Consolidated Balance Sheets consists of amounts escrowed for future real estate taxes, insurance, capital expenditures and debt service, as required by certain of our mortgage debt agreements or lease agreements. Rent Receivable and Accounts Receivable Rent receivable and Accounts receivable on the accompanying Consolidated Balance Sheets include accrued rental income and other tenant accounts receivable, respectively. The Company accrues rental and other tenant income earned, but not yet received, in accordance with GAAP. Deferred Costs Deferred financing fees and debt issuance costs include costs incurred in obtaining debt that are capitalized and are presented as a direct deduction from the carrying amount of the associated debt liability that is not a line-of-credit arrangement on the accompanying Consolidated Balance Sheets. Deferred financing fees and debt issuance costs related to line-of-credit arrangements are presented as an asset in prepaid expenses and other assets on the accompanying Consolidated Balance Sheets. The deferred financing fees and debt issuance costs are amortized through interest expense over the life of the respective loans on a basis which approximates the effective interest method. Any unamortized amounts upon early repayment of debt are written off in the period of repayment as a loss on extinguishment of debt. Fully amortized deferred financing fees and debt issuance costs are removed from the books upon maturity of the underlying debt. Deferred offering costs include certain legal, accounting and other third party fees that are directly associated with in-process equity financings until such financings are consummated. After consummation of the equity financing, these costs are recorded as a reduction to capital. Should the equity financing no longer be considered probable of being consummated, the deferred offering costs would be expensed immediately as a charge to corporate general and administrative expenses in the accompanying Consolidated Statement of Operations. Deferred leasing commissions include commissions, compensation costs of leasing personnel for those leases which commenced prior to the adoption of Accounting Standards Codification Topic 842, Leases (“ASC 842”) on January 1, 2019, and other direct and incremental costs incurred to obtain new tenant leases as well as to renew existing tenant leases and are presented in prepaid expenses and other assets on the accompanying Consolidated Balance Sheets. Leasing commissions are capitalized and amortized over the terms of the related leases upon lease commencement using the straight-line method. If a lease terminates prior to the expiration of its initial term, any unamortized costs related to the lease are accelerated into amortization expense. Changes in leasing commissions are presented in the cash flows from operating activities section of the accompanying Consolidated Statements of Cash Flows. Interest Rate Swaps The Company’s primary objective in using interest rate derivatives is to add stability to interest expense and to manage exposure to interest rate movements. To accomplish this objective, we primarily use interest rate swaps as part of our interest rate risk management strategy. Interest rate swaps designated as cash flow hedges involve the receipt of variable- rate amounts from a counterparty in exchange for our making fixed- rate payments over the life of the agreements without exchange of the underlying notional amount. Derivatives are used to hedge the cash flows associated with interest rates on existing debt as well as future debt. We recognize derivatives as assets or liabilities on the balance sheet at fair value. We defer the effective portion of changes in fair value of the designated cash flow hedges to accumulated other comprehensive income (“AOCI”) or loss (“AOCL”) and reclassify F-12 such deferrals to interest expense as interest expense is recognized on the hedged forecasted transitions. We recognize the ineffective portion of the change in fair value of interest rate derivatives directly in interest expense. When an interest rate swap designated as a cash flow hedge no longer qualifi es for hedge accounting, we recognize changes in fair value of the hedge previously deferred to AOCI or AOCL, along with any changes in fair value occurring thereafter, through earnings. We do not use interest rate derivatives for trading or speculative purposes. We manage counterparty risk by only entering into contracts with major financial institutions based upon their credit ratings and other risk factors. We use standard market conventions and techniques such as discounted cash flow analysis, option pricing models, replacement cost and termination cost in computing the fair value of derivatives at each balance sheet date. The Company made an accounting policy election to measure the credit risk of its derivative financial instruments that are subject to master netting agreements on a gross basis by counterparty portfolio. Please refer to Note 5 for more information pertaining to interest rate derivatives. Deferred Revenue Deferred revenue consists primarily of lump sum reimbursements made by tenants to the Company for landlord improvements in excess of a tenant improvement allowance. Lump sum reimbursements are recorded as Deferred revenue on the Consolidated Balance Sheets and are amortized over the life of the lease through Rental income. Deferred revenue also includes rent received in advance, which is recognized within Rental income once earned. Non-Controlling Interests Non-controlling interests relate to the common units of the Operating Partnership not owned by the Company. Unitholders receive a distribution per unit equivalent to the dividend per share of the Company’s common stock. Pursuant to the consolidation accounting standard with respect to the accounting and reporting for non-controlling interest changes and changes in ownership interest of a subsidiary, changes in parent’s ownership interest when the parent retains controlling interest in the subsidiary should be accounted for as equity transactions. The carrying amount of the non-controlling interest shall be adjusted to reflect the change in its ownership interest in the subsidiary, with the offset to equity attributable to the Company. Revenue Recognition Rental income includes base rents paid by each tenant in accordance with its lease agreement conditions. We recognize rental income on a straight-line basis over the lease term of the respective leases. For acquisitions of existing buildings, we recognize rental income from leases already in place coincident with the date of property closing. Lease incentives are recorded as a deferred asset and amortized as a reduction of revenue on a straight-line basis over the respective lease term. Above- and below-market leases are amortized into rental income over the terms of the respective leases. Further, Rental income includes certain tenant reimbursement income (real estate taxes, operating expenses, utility usage, and other reimbursements), which are accrued as variable lease payments in the same periods as the related expenses are incurred in accordance with ASC 842 which the Company adopted on January 1, 2019. Tenant reimbursement income includes income from tenant construction projects. We recognize revenue from tenant construction projects using the percentage of completion method when the revenue and costs for such projects can be estimated with reasonable accuracy; when these criteria do not apply to a project, we recognize revenue from that project using the completed contract method. Under the percentage of completion method, we recognize a percentage of the total estimated revenue on a project based on the cost of services provided on the project as of a point in time relative to the total estimated costs on the project. Fully reimbursed income was included within Tenant reimbursements and associated expenses were included in Property operating expenses. Income on these projects was included in Other income. Other income includes income on the associated tenant reimbursement construction projects, parking income and other miscellaneous income. Income Taxes We believe that we have operated and have been organized in conformity with the requirements for qualification and taxation as a REIT for U.S. federal income tax purposes commencing with our taxable year ended December 31, 2015. So long as we qualify as a REIT, we generally will not be subject to U.S. federal income tax on our net income that we distribute to our stockholders. To maintain our qualification as a REIT, we are required under the Code to distribute at least 90 % of our REIT taxable income (without regard to the deduction for dividends paid and excluding net capital gains) to our stockholders and meet certain other requirements. If we fail to qualify as a REIT in any taxable year, we will be subject to U.S. federal income tax on our taxable income at regular F-13 corporate rates. Even if we qualify as a REIT, we will be subject to certain U.S. federal, state and local taxes on our income and property, and on taxable income that we do not distribute to our stockholders. In addition, we may provide services that are not customarily provided by a landlord, hold properties for sale and engage in other activities (such as a management business) through Taxable REIT Subsidiaries (“TRSs”) and the income of those subsidiaries will be subject to U.S. federal income tax at regular corporate rates. For the years ended December 31, 2 020 , 201 9 and 201 8 , we did not incur any material tax liability associated with any of the above. We do not anticipate any potential expense related to uncertain tax positions as we closely monitor our REIT compliance, do not have any prohibited transactions related to property sales, and the states in which we operate do not subject us to withholding tax requirements. The following table reconciles GAAP net income to taxable income (amounts in thousands): For the years ended December 31, 2020 2019 2018 Net income $ 13,528 $ 8,224 $ 6,659 Book depreciation and amortization 93,367 92,248 66,260 Above/Below market lease amortization ( 5,894 ) ( 6,320 ) ( 8,593 ) Straight-line rent and other non-cash adjustments ( 3,377 ) ( 2,239 ) ( 5,619 ) Book/Tax differences on unearned rent ( 2,585 ) 1,646 3,714 Book/Tax differences on stock based compensation 3,634 4,156 3,039 Book/Tax differences on gain on sale of rental property 3,995 ( 6,245 ) — Book/Tax differences on fee waiver income from seller — — 1,400 Book/Tax differences on lease inducement 864 — — Other book/tax differences, net 137 588 749 Tax depreciation ( 52,152 ) ( 47,025 ) ( 34,612 ) Loss attributable to non-controlling interest ( 6,750 ) ( 6,922 ) ( 6,021 ) Taxable income subject to distribution requirements $ 44,767 (1) $ 38,111 (2) $ 26,976 (3) (1) The Company’s distributions are characterized as 53.63 % ordinary taxable dividend and 46.37 % return of capital. (2) The Company’s distributions are characterized as 51.47 % ordinary taxable dividend and 48.53 % return of capital. (3) The Company’s distributions are characterized as 45.83 % ordinary taxable dividend and 54.17 % return of capital. Stock Based Compensation The Company grants equity-based compensation awards to its officers, employees and non-employee directors in the form of restricted shares of common stock and long-term incentive plan units in the Operating Partnership (“LTIP units”). See Note 7 (Equity) for further discussion of restricted shares of common stock and LTIP units. The restricted shares of common stock and LTIP units issued to officers, employees, and non-employee directors vest over a period of time as determined by our board of directors at the date of grant. The Company recognizes compensation expense for non-vested restricted shares of common stock and LTIP units granted to officers, employees and non-employee directors on a straight-line basis over the requisite service and/or performance period based upon the fair market value of the shares on the date of grant, as adjusted for forfeitures. Earnings Per Share of Common Stock Amount Basic earnings per share is calculated by dividing net income available to Easterly Government Properties, Inc. by the weighted-average number of shares of common stock outstanding during the period, excluding the weighted average number of unvested restricted shares. Diluted earnings per share is calculated by dividing net income by the weighted-average number of shares of common stock outstanding during the period plus other potentially dilutive securities such as unvested restricted shares, LTIP units, and shares issuable under forward sales agreements. Unvested restricted shares and LTIP units are considered participating securities which require the use of the two-class method for the computation of basic and diluted earnings per share. Segments The Company manages its operations as a single segment for the purposes of assessing performance and making operating decisions. All revenue has been generated and all tangible assets are held in the United States. F-14 Reclassifications Certain prior year amounts have been reclassified to conform to the current year presentation. Recently Adopted Accounting Pronouncements On January 1, 2020, the Company adopted Accounting Standards Update (“ASU”) 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”). The purpose of this updated guidance is to provide financial statement users with more decision-useful information about the expected credit losses on financial instruments and other commitments to extend credit held by a reporting entity at each reporting date by replacing the current incurred loss impairment methodology with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. In November 2018, the Financial Accounting Standards Board issued ASU 2018-19, Codification Improvements to (Topic 326), Financial Instruments – Credit Losses (“ASU 2018-19”). ASU 2018-19 clarifies that receivables arising from operating leases are not within the scope of Accounting Standards Codification (“ASC”) 326-20, “Financial Instruments – Credit Losses – Measured at Amortized Costs,” which addresses financial assets measured at amortized cost basis, including net investments in leases arising from sales-type and direct financing leases. Impairment of receivables arising from operating leases should be accounted for in accordance with ASC Topic 842, Leases (“ASC 842”). We adopted ASU 2016-13 using the modified retrospective method and the adoption did not have a material impact on our consolidated financial statements. On January 1, 2020, the Company adopted ASU 2020-04 (Topic 848), Facilitation of the Effects of Reference Rate Reform on Financial Reporting (“ASU 2020-04”). ASU 2020-04 contains practical expedients for reference rate reform related activities that impact debt, leases, derivatives and other contracts. The guidance in ASU 2020-04 is optional and may be elected over time as reference rate reform activities occur. Unlike most other ASU’s, the guidance in ASU 2020-04 will generally no longer be available to apply after December 31, 2022. As of January 1, 2020, the Company has elected to apply the hedge accounting expedients related to probability and the assessments of effectiveness for future LIBOR-indexed cash flows to assume that the index upon which future hedged transactions will be based matches the index on the corresponding derivatives. Application of these expedients was applied prospectively and preserves the presentation of our derivatives consistent with past presentation, therefore, the adoption did not have a material impact on our consolidated financial statements. 3. Real Estate and Intangibles Acquisitions During the year ended December 31, 2020, we acquired nine operating properties in asset acquisitions, consisting of Tricare – Aurora, FBI/DEA – El Paso, VA – Mobile, VA – Chico, FBI – Mobile, VA – North Charleston, HRSA – Baton Rouge, DOI – Billings and JUD – Jackson for an aggregate purchase price of $ 252.7 million. During the year ended December 31, 2019, we acquired eight operating properties in asset acquisitions, consisting of DEA - Sterling, FDA - College Park, Various GSA - Portland , JSC – Suffolk, FBI – New Orleans, EPA – Lenexa, USCIS – Tustin, and VA – Orange for an aggregate purchase price of $ 382.6 million. F-15 We allocated the aggregate purchase price of these acquisitions based on the estimated fair values of the acquired assets and assumed liabilities as follows (amounts in thousands): December 31, 2020 December 31, 2019 Real estate Land $ 21,292 $ 36,198 Building 200,593 290,788 Acquired tenant improvements 8,138 11,492 Total real estate 230,023 338,478 Intangible assets In-place leases 16,218 36,384 Acquired leasing commissions 8,758 9,030 Above-market leases 6,553 161 Total intangible assets 31,529 45,575 Intangible liabilities Below-market leases ( 8,491 ) ( 1,492 ) Total intangible liabilities ( 8,491 ) ( 1,492 ) Accounts payable, accrued expenses and other liabilities Contingent consideration ( 336 ) — Purchase price 252,725 382,561 We did not assume any debt upon acquisition of these properties. The intangible assets and liabilities of the acquired operating properties have an aggregate weighted average amortization period of 10.39 years and 8.28 years as of December 31, 2020 and 2019, respectively. During the year ended December 31, 2020, we included $ 11.5 million of revenues and $ 3.8 million of net income in our Consolidated Statement of Operations related to the operating properties acquired. Additionally, we incurred $ 2.1 million of acquisition-related costs primarily consisting of internal costs associated with the property acquisitions. During the year ended December 31, 2019, we included $ 22.5 million of revenues and $ 4.1 million of net income in our Consolidated Statement of Operations related to the operating properties acquired. Additionally, we incurred $ 1.7 million of acquisition-related costs primarily consisting of internal costs associated with the property acquisitions. Dispositions On November 24, 2020, we sold DEA – Otay to a third party. Net proceeds from the sale of the operating property were approximately $ 3.5 million and we recognized the full loss on the sale of the operating property of approximately $ 4.0 million for the year ended December 31, 2020. On May 8, 2019, the Company sold CBP – Chula Vista to a third party. Net proceeds from the sale of the operating property were approximately $ 19.9 million and we recognized the full gain on the sale of the operating property of approximately $ 6.2 million for the year ended December 31, 2019. Development Placed in Service On September 25, 2020, the FDA – Lenexa development project was substantially completed and a 20 -year lease commenced with the GSA for the beneficial use of the Food and Drug Administration (“FDA”). On August 27, 2019, the FDA – Alameda development project was substantially completed and a 20 -year non-cancelable lease commenced with the GSA for the beneficial use of the FDA. F-16 Consolidated Real Estate and Intangibles In addition to the operating property acquisitions and development property placed in service, we acquired a 597,426 square foot parcel of land in Lincoln, Nebraska, which is adjacent to our USCIS – Lincoln facility, during the year ended December 31, 2020. During the year ended December 31, 2019, we acquired one property for development, FDA – Atlanta. Real estate and intangibles on our consolidated balance sheets consisted of the following (amounts in thousands): December 31, 2020 December 31, 2019 Real estate properties, net Land $ 215,073 $ 193,168 Building 2,103,808 1,824,998 Acquired tenant improvements 76,756 68,854 Construction in progress 26,237 57,775 Accumulated depreciation ( 213,213 ) ( 156,069 ) Total Real estate properties, net $ 2,208,661 $ 1,988,726 Intangible assets, net In-place leases $ 254,870 $ 240,223 Acquired leasing commissions 61,358 52,686 Above market leases 17,607 11,054 Accumulated amortization ( 170,448 ) ( 135,338 ) Total Intangible assets, net $ 163,387 $ 168,625 Intangible liabilities, net Below market leases $ ( 73,615 ) $ ( 65,459 ) Accumulated amortization 48,209 40,881 Total Intangible liabilities, net $ ( 25,406 ) $ ( 24,578 ) The projected amortization of total intangible assets and intangible liabilities as of December 31, 2020 are as follows (amounts in thousands): Total Intangible assets 2021 $ 25,028 2022 20,888 2023 18,985 2024 15,799 2025 13,841 Thereafter 68,846 $ 163,387 Intangible liabilities 2021 $ ( 5,832 ) 2022 ( 4,223 ) 2023 ( 4,024 ) 2024 ( 2,877 ) 2025 ( 2,170 ) Thereafter ( 6,280 ) $ ( 25,406 ) F-17 The following table summarizes the scheduled amortization of the Company’s acquired above- and below-market lease intangibles for each of the five succeeding years as of December 31, 2020 (amounts in thousands): Acquired Above-Market Lease Intangibles Acquired Below-Market Lease Intangibles 2021 $ 1,514 $ ( 5,832 ) 2022 1,424 ( 4,223 ) 2023 1,400 ( 4,024 ) 2024 1,314 ( 2,877 ) 2025 1,258 ( 2,170 ) Above-market lease amortization reduces Rental income on our Consolidated Statements of Operations and below-market lease amortization increases Rental income on our Consolidated Statements of Operations. F-18 4. Debt At December 31, 2020 and December 31, 2019, our consolidated borrowings consisted of the following (dollars in thousands): Principal Outstanding Interest Current Loan December 31, 2020 December 31, 2019 Rate (1) Maturity Revolving credit facility: Revolving credit facility (2) $ 79,250 $ - L + 130bps June 2022 (3) Total revolving credit facility 79,250 - Term loan facilities: 2016 term loan facility 100,000 100,000 2.67% (4) March 2024 2018 term loan facility 150,000 150,000 3.96% (5) June 2023 Total term loan facilities 250,000 250,000 Less: Total unamortized deferred financing fees ( 1,034 ) ( 1,398 ) Total term loan facilities, net 248,966 248,602 Notes payable: 2017 series A senior notes 95,000 95,000 4.05 % May 2027 2017 series B senior notes 50,000 50,000 4.15 % May 2029 2017 series C senior notes 30,000 30,000 4.30 % May 2032 2019 series A senior notes 85,000 85,000 3.73 % September 2029 2019 series B senior notes 100,000 100,000 3.83 % September 2031 2019 series C senior notes 90,000 90,000 3.98 % September 2034 Total notes payable 450,000 450,000 Less: Total unamortized deferred financing fees ( 2,829 ) ( 3,073 ) Total notes payable, net 447,171 446,927 Mortgage notes payable: DEA – Pleasanton 15,700 15,700 L + 150bps (6) October 2023 VA – Golden 9,011 9,179 5.00% (6) April 2024 MEPCOM – Jacksonville 7,926 8,946 4.41% (6) October 2025 USFS II – Albuquerque 15,914 16,255 4.46% (6) July 2026 ICE – Charleston 16,150 17,420 4.21% (6) January 2027 VA – Loma Linda 127,500 127,500 3.59% (6) July 2027 CBP – Savannah 11,991 12,755 3.40% (6) July 2033 Total mortgage notes payable 204,192 207,755 Less: Total unamortized deferred financing fees ( 1,441 ) ( 1,641 ) Less: Total unamortized premium/discount 120 198 Total mortgage notes payable, net 202,871 206,312 Total debt $ 978,258 $ 901,841 (1) Current interest rates as of December 31, 2020. At December 31, 2020 and 2019, the one-month LIBOR (“L”) was 0.14 % and 1.76 %, respectively. The current interest rate is not adjusted to include the amortization of deferred financing fees or debt issuance costs incurred in obtaining debt or any unamortized fair market value premiums. The spread over the applicable rate for each of the $ 450.0 million senior unsecured revolving credit facility (our “revolving credit facility”), the $ 150.0 million senior unsecured term loan facility (our “2018 term loan facility”) and the $ 100.0 million senior unsecured term loan facility (our “2016 term loan facility”) is based on the Company’s consolidated leverage ratio, as defined in the respective loan agreements. (2) Our revolving credit facility had available capacity of $ 370.7 million and $ 450.0 million at December 31, 2020 and 2019, respectively, with an accordion feature that permits us to request additional lender commitments for to $ 250.0 million of additional capacity, subject to the satisfaction of customary terms and conditions. (3) Our revolving credit facility has two six-month as-of-right extension options subject to certain conditions and the payment of an extension fee. F-19 (4) Entered into two interest rate swaps with an effective date of March 29, 2017 with an aggregate notional value of $ 100.0 million to effectively fix the interest rate at 2.67 % annually, based on the Company’s consolidated leverage ratio, as defined in our 2016 term loan facility agreement . (5) Entered into four interest rate swaps with an effective date of December 13, 2018 with an aggregate notional value of $ 150.0 million to effectively fix the interest rate at 3.96 % annually, based on the Company’s consolidated leverage ratio, as defined in our 2018 term loan facility agreement. (6) Effective interest rates are as follows: DEA – Pleasanton 1.80 %, VA – Golden 5.03 %, MEPCOM – Jacksonville 3.89 %, USFS II – Albuquerque 3.92 %, ICE – Charleston 3.93 %, VA – Loma Linda 3.78 %, CBP – Savannah 4.12 %. 2019 Activity On September 12, 2019, the Operating Partnership issued an aggregate of $ 275.0 million of fixed rate, senior unsecured notes (the “2019 senior unsecured notes”) in a private placement pursuant to a purchase agreement among the Operating Partnership, the Company and the purchasers of the 2019 senior unsecured notes dated July 30, 2019 (the “Purchase Agreement”). The 2019 senior unsecured notes consist of (i) 3.73 % Series A Senior Notes due September 12, 2029 in an aggregate principal amount of $ 85.0 million, (ii) 3.83 % Series B Senior Notes due September 12, 2031 in an aggregate principal amount of $ 100.0 million, and (iii) 3.98 % Series C Senior Notes due September 12, 2034 in an aggregate principal amount of $ 90.0 million. The 2019 senior unsecured notes are unconditionally guaranteed by the Company and various subsidiaries of the Operating Partnership (the “Subsidiary Guarantors”). Subject to the terms of the Purchase Agreement and the 2019 senior unsecured notes, upon certain events of default, including, but not limited to, (i) a default in the payment of any principal, “make-whole” amount or interest under the 2019 senior unsecured notes, and (ii) a default in the payment of certain other indebtedness of the Operating Partnership or of the Company or of the Subsidiary Guarantors, the principal and accrued and unpaid interest and the make-whole amount on the outstanding 2019 senior unsecured notes will become due and payable at the option of the holders. The Purchase Agreement and the 2019 senior unsecured notes also contains various covenants (including, among others, financial covenants with respect to debt service coverage, consolidated net worth, fixed charges and consolidated leverage and covenants relating to liens) and if the Operating Partnership or the Company breaches any of these covenants, the principal and accrued and unpaid interest and the make-whole amount on the outstanding 2019 senior unsecured notes will become due and payable at the option of the holders. Financial Covenant Considerations As of December 31, 2020, we were in compliance with all financial and other covenants related to our revolving credit facility, 2016 term loan facility, 2018 term loan facility, notes payable and mortgage notes payable. Fair Value of Debt As of December 31, 2020, the fair value of the revolving credit facility was determined by considering the short term maturity, variable interest rate and credit spreads. We deem the fair value of the senior unsecured revolving credit facility as a Level 3 measurement. At December 31, 2020, the carrying value of our revolving credit facility approximated fair value. As of December 31, 2020 and 2019, the fair value of the 2016 term loan facility was determined by considering the variable interest rate and credit spreads. We deem the fair value of the 2016 term loan facility as a Level 3 measurement. At December 31, 2020 and 2019, the fair value of our 2016 term loan facility was $ 99.4 million and $ 100.0 million, respectively. As of December 31, 2020 and 2019 , the fair value of the 2018 term loan facility was determined by considering the variable interest rate and credit spreads. We deem the fair value of the 2018 term loan facility as a Level 3 measurement. At December 31, 2020 and 2019, the fair value of our 2018 term loan facility was $ 149.2 million and $ 150.0 million, respectively. As of December 31, 2020 and 2019, the fair value of our notes payable was determined by discounting future contractual principal and interest payments using prevailing market rates. We deem the fair value measurement of our notes payable instruments as a Level 3 measurement. At December 31, 2020 and 2019, the fair value of our notes payable was $ 506.9 million and $ 471.7 million, respectively. As of December 31, 2020 and 2019, the fair value of our mortgage debt was determined by discounting future contractual principal and interest payments using prevailing market rates. We deem the fair value measurement of our mortgage debt instruments as a Level 3 measurement. At December 31, 2020 and 2019, the fair value of our mortgage debt was $ 215.1 million and $ 212.5 million, respectively. F-20 Aggregate Debt Maturities The Company’s aggregate debt maturities based on outstanding principal as of December 31, 2020 are as follows (dollars in thousands): Total 2021 $ 4,233 2022 84,547 2023 171,286 2024 114,126 2025 7,550 Thereafter 601,700 983,442 Unamortized premium/discount & deferred financing ( 5,184 ) $ 978,258 5. Derivatives and Hedging Activities The following table sets forth the key terms and fair values of our interest rate swap derivatives, each of which was designated as a cash flow hedge (dollars in thousands): Fair Value at December 31, Notional Amount Fixed Rate Floating Rate Index Effective Date Expiration Date 2020 2019 $ 100,000 1.41 % One-Month LIBOR March 29, 2017 September 29, 2023 $ ( 3,397 ) $ 541 150,000 2.71 % One-Month LIBOR December 13, 2018 June 19, 2023 ( 9,384 ) ( 5,837 ) The table below sets forth the fair value of our interest rate derivatives as well as their classification on our Consolidated Balance Sheets (dollars in thousands): Fair Value at December 31, Balance Sheet Line Item 2020 2019 Interest rate swaps-Asset $ — $ 541 Interest rate swaps-Liability ( 12,781 ) ( 5,837 ) Cash Flow Hedges of Interest Rate Risk The gains or losses on derivatives designated and that qualify as cash flow hedges is recorded in Accumulated other comprehensive income (loss) (“AOCI”) and will be reclassified to interest expense in the period that the hedged forecasted transactions affect earnings on the Company’s variable rate debt. Amounts reported in AOCI related to derivatives designated as qualifying cash flow hedges will be reclassified to interest expense as interest payments are made on the Company's variable rate debt. The Company estimates that $ 5.2 million will be reclassified from AOCI as an increase to interest expense over the next 12 months. The table below presents the effects of our interest rate derivatives on our Consolidated Statements of Operations and Comprehensive Income (Loss) (dollars in thousands): For the years ended December 31, 2020 2019 2018 Unrealized loss recognized in AOCI $ ( 11,554 ) $ ( 7,884 ) $ ( 713 ) Gain (loss) reclassified from AOCI into interest expense ( 4,069 ) 177 552 Credit-Risk Related Contingent Features The Company has agreements with each of its derivative counterparties that contain a provision where the Company could be declared in default on its derivative obligations if repayment of the underlying indebtedness is accelerated by the lender due to the Company's default on such indebtedness. As of December 31, 2020, the net fair value of derivatives in a liability position, which includes accrued interest but excludes any adjustment for nonperformance risk, related to these agreements was $ 13.2 million. As of December 31, 2020, the Company had not breached these provisions of these agreements and had not posted any collateral related to F-21 these agreements. If the Company had breached any of the provisions of these agreements it would be required to settle its obligations under the agreements at their termination value of $ 13.2 million. 6. Fair Value Measurements Accounting standards define fair value as the exit price, or the amount that would be received upon sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The standards also establish a hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. Observable inputs are inputs market participants would use in valuing the asset or liability developed based on market data obtained from sources independent of us. Unobservable inputs are inputs that reflect our assumptions about the factors market participants would use in valuing the asset or liability developed based upon the best information available in the circumstances. The hierarchy of these inputs is broken down into three levels: Level 1, defined as observable inputs such as quoted prices in active markets; Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable; and Level 3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions. Categorization within the valuation hierarchy is based upon the lowest level of input that is most significant to the fair value measurement. Recurring fair value measurements The fair values of our interest rate swaps are determined using widely accepted valuation techniques, including discounted cash flow analysis on the expected cash flows of each derivative. This analysis reflects the contractual terms of the derivatives, including the period to maturity, and uses observable market-based inputs, including interest rate curves and implied volatilities in such interest rates. While the Company determined that the majority of the inputs used to value its derivatives fall within Level 2 of the fair value hierarchy, the credit valuation adjustments associated with its derivatives utilize Level 3 inputs, such as estimates of current credit spreads to evaluate the likelihood of default by the Company and its counterparties. The Company has determined that the significance of the impact of the credit valuation adjustments made to its derivative contracts, which determination was based on the fair value of each individual contract, was not significant to the overall valuation. As a result, all of the Company’s derivatives held as of December 31, 2020 and 2019 were classified as Level 2 of the fair value hierarchy. The carrying values of cash and cash equivalents, restricted cash, accounts receivable, other assets and accounts payable and accrued expenses are reasonable estimates of fair values because of the short maturities of these instruments. For our disclosure of debt fair values in Note 4, we estimated the fair value of our 2016 term loan facility and our 2018 term loan facility based on the variable interest rate and credit spreads (categorized within Level 3 of the fair value hierarchy) and estimated the fair value of our other debt based on the discounted estimated future cash payments to be made on such debt (categorized within Level 3 of the fair value hierarchy); the discount rates used approximate current market rates for loans, or groups of loans, with similar maturities and credit quality, and the estimated future payments included scheduled principal and interest payments. Fair value estimates are made as of a specific point in time, are subjective in nature and involve uncertainties and matters of significant judgment. Settlement at such fair value amounts may not be possible and may not be a prudent management decision. The table below presents the Company’s assets and liabilities measured at fair value on a recurring basis as of December 31, 2020 and 2019, aggregated by the level in the fair value hierarchy within which those measurements fall (amounts in thousands). As of December 31, 2020 Balance Sheet Line Item Level 1 Level 2 Level 3 Interest rate swaps - Asset $ — $ — $ — Interest rate swaps - Liability $ — $ ( 12,781 ) $ — As of December 31, 2019 Balance Sheet Line Item Level 1 Level 2 Level 3 Interest rate swaps - Asset $ — $ 541 $ — Interest rate swaps - Liability $ — $ ( 5,837 ) $ — 7. Equity 2015 Equity Incentive Plan Our board of directors adopted, and our sole stockholder approved, our 2015 Equity Incentive Plan, as amended (the “2015 Equity Incentive Plan”) under which we may grant cash and equity incentive awards to our executive officers, non-employee directors F-22 and eligible employees in order to attract, motivate and retain the talent for which we compete. The 2015 Equity Incentive Plan is administered by the compensation committee of our board of directors and permits us to make grants of options, stock appreciation rights, restricted stock units, restricted stock, dividend equivalent rights, cash-based awards, performance-based awards and other equity-based awards, including LTIP units, or any combination of the foregoing. Grant awards of restricted stock, restricted stock units, performance shares or cash-based awards under the 2015 Equity Incentive Plan are intended to qualify as “performance-based compensation” under Section 162(m) of the Code. Those awards would only vest or become payable upon the attainment of performance goals that are established by our compensation committee and related to established performance criteria. From and after the time that we become subject to Section 162(m) of the Code, the maximum award that is intended to qualify as “performance-based compensation” under Section 162(m) of the Code that may be made to any one employee during any one calendar year period is 2,273,959 shares of our common stock with respect to stock-based award and $ 5.0 million with respect to a cash based award. The shares issued under the 2015 Equity Incentive Plan are authorized but unissued shares or shares that we reacquire. The shares of our common stock underlying any awards that are forfeited, cancelled, held back upon exercise or settlement of an award to satisfy the exercise price or tax withholding, reacquired by us prior to vesting, satisfied without any issuance of stock, expire or are otherwise terminated (other than by exercise) under the 2015 Equity Incentive Plan are added back to the shares available for issuance under the 2015 Equity Incentive Plan. At the Company’s 2017 annual meeting of stockholders held on May 9, 2017, the Company’s stockholders approved an amendment to the 2015 Equity Incentive Plan to increase the aggregate number of shares authorized for issuance under the 2015 Equity Incentive Plan by 3,000,000 shares to 5,273,959 shares of our common stock. The Company granted 891,000 LTIP units on May 6, 2015 and 40,000 LTIP units on February 26, 2016 to members of management as long-term incentive compensation under the 2015 Equity Incentive Plan subject to the Company achieving certain absolute and relative total shareholder returns through the performance period, which ended on December 31, 2017. Based on the Company’s absolute and relative total shareholder return performance through the end of the performance period, the compensation committee of the Company’s board of directors determined that an aggregate of 2,079,297 LTIP units were earned. Under the terms of the awards, earned awards vested 50 % on February 15, 2018 and 50 % on February 6, 2019, subject to the grantee’s continued employment. On January 4, 2018, the Company granted an aggregate of 173,381 performance-based LTIP units to members of management under the 2015 Equity Incentive Plan, subject to the Company achieving certain absolute and relative total shareholder returns through the performance period. The awards consist of three separate tranches of 32,448 LTIP units, 55,463 LTIP units and 85,470 LTIP units with performance periods ending on December 31, 2018, December 31, 2019 and December 31, 2020, respectively. The performance criteria for each tranche is based 75 % on the Company’s absolute total shareholder return performance and 25 % on the Company’s relative total shareholder return performance during the relevant performance period, with 50 % of the LTIP units vesting when earned following the end of the applicable performance period and 50 % of the earned award subject to an additional one year of vesting. During the performance period ending December 31, 2018, the Company’s total shareholder return performance (on both an absolute and relative basis) did not achieve the applicable thresholds for payouts. Accordingly, the compensation committee of the Company’s board of directors determined that none of the 32,448 LTIP units subject to the performance period ending December 31, 2018 had been earned. Such LTIPs were therefore forfeited and added back to the shares of common stock of the Company available for issuance under the 2015 Equity Incentive Plan. The performance period of the second tranche of LTIP units ended on December 31, 2019 and the Company’s total shareholder return over the performance period was sufficient for the grantees to earn an aggregate of 122,159 LTIP units under the applicable awards. Earned LTIP units vested 50 % on January 16, 2020 and 50 % on January 4, 2021. The performance period of the third tranche of LTIP units ended on December 31, 2020 and the Company’s total shareholder return over the performance period was sufficient for the grantees to earn an aggregate of 172,442 LTIP units under the applicable awards. Earned LTIP units vest 50 % on January 19, 2021 and 50 % will vest on January 4, 2022, subject to the grantee’s continued employment. On April 3, 2018, the Company issued an aggregate of 2,236 shares of restricted common stock to certain employees pursuant to the 2015 Equity Incentive Plan, which vested on April 3, 2020. In connection with its 2018 annual meeting of stockholders, the Company issued an aggregate of 19,092 shares of restricted common stock to its non-employee directors pursuant to the 2015 Equity Incentive Plan, which vested on May 7, 2019. On January 18, 2019, the Company granted an aggregate of 143,538 performance-based LTIP units to members of management pursuant to the 2015 Equity Incentive Plan, subject to the Company achieving certain absolute and relative total shareholder returns through the performance period. The awards consist of two separate tranches of 45,238 LTIP units and 98,300 LTIP units with performance periods ending on December 31, 2020 and December 31, 2021, respectively. Fifty percent of the LTIP units vest when earned following the end of the applicable performance period and fifty percent of the earned award is subject to an additional one F-23 year of vesting. The performance period of the first trading tranche of LTIP units ended on December 31, 2020 and the Company’s total shareholder return over the performance period was sufficient for the grantees to earn an aggregate of 98,776 LTIP units under the applicable awards. Earned LTIP units vested 50 % on January 19, 2021 and 50 % will vest on January 2, 2022, subject to the grantee’s continued employment. On January 18, 2019, the Company granted an aggregate of 54,041 shares of restricted common stock to members of management pursuant to the 2015 Equity Incentive Plan, of which an aggregate of 17,645 shares vested on January 18, 2021 and an aggregate of 36,396 shares will vest on January 18, 2022. On March 11, 2019, the Company issued an aggregate of 3,080 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. In connection with its 2019 annual meeting of stockholders, the Company issued an aggregate of 22,000 shares of restricted common stock to its non-employee directors pursuant to the 2015 Equity Incentive Plan, which vested on May 13, 2020. On June 13, 2019, the Company issued 10,840 shares of restricted common stock to a member of management pursuant to the 2015 Equity Incentive Plan. The shares of restricted common stock will vest on February 28, 2022, subject, to the grantee’s continued employment and the other terms of the awards. On December 19, 2019, the Company granted an aggregate of 99,803 LTIP units to certain members of management pursuant to the 2015 Equity Incentive Plan, which became fully vested upon grant and are subject to certain restrictions on transfer as set forth in the applicable award agreement for a period of three years beginning on the grant date. On January 3, 2020, the Company granted an aggregate of 146,199 performance-based LTIP units to members of management pursuant to 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 its 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. F-24 A summary of our non-vested common share awards at December 31, 2020, 2019 and 2018 is as follows: Restricted Shares Restricted Shares Weighted average grant date fair value LTIP Units (1) LTIP Units Weighted average grant date fair value Outstanding, December 31, 2017 17,912 $ 19.72 926,000 $ 8.91 Vested ( 15,220 ) 19.71 ( 463,000 ) 8.91 Granted 21,328 20.87 173,381 18.31 Forfeited — — — — Outstanding, December 31, 2018 24,020 $ 20.74 636,381 $ 11.47 Vested ( 21,784 ) $ 20.81 ( 562,803 ) $ 10.97 Granted 89,961 17.49 243,341 19.75 Forfeited — — ( 32,448 ) 19.15 Outstanding, December 31, 2019 92,197 $ 17.55 284,471 $ 18.66 Vested ( 24,236 ) $ 18.36 ( 27,732 ) $ 18.34 Granted 21,930 25.85 235,441 21.17 Forfeited — — — — Outstanding, December 31, 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. We recognized $ 4.1 million, $ 4.9 million and $ 3.0 million in compensation expense, related to the restricted common stock and the LTIP unit awards, for the years ended December 31, 2020, 2019 and 2018, respectively. As of December 31, 2020 unrecognized compensation expense for all awards was $ 5.1 million, which will be amortized over the vesting period. We valued our non-vested restricted share awards at the grant date fair value, which was the market price of our common stock as of the applicable grant date. We valued our LTIP unit awards that are subject to the Company achieving certain operational performance conditions at the grant date fair value, which was the market price of our common stock as of the applicable grant date. As of December 31, 2020, management considers it probable that the operational performance conditions on our 2020 grants will be achieved. We valued our service-based LTIP unit awards at the grant date fair value, which was the market price of our common stock as of the applicable grant date, discounted by the risk related to the timing of book-up events. For the LTIP unit awards granted that are subject to the Company achieving certain total shareholder return performance thresholds we used a Monte Carlo Simulation (risk-neutral approach) to determine the number of shares that may be issued pursuant to the award. For LTIP units granted in 2018 we utilized a risk-free rate of 2.1 %, derived from the Treasury note yield as of the grant date. Since the Company had a limited amount of operating history, the expected volatility assumption of 16.0 % was derived from the observed historical volatility of the common stock prices of a select group of peer companies within the REIT industry and the observed implied volatility on the Company’s stock options. Based on the selected dividend yields of guideline companies and expected dividend levels, we utilized an expected dividend yield of 5.0 %. For LTIP units granted in January 2019 we utilized a risk-free rate of 2.6 %, derived from the yield of zero-coupon U.S. Treasury securities for a three-year holding period as of the grant date. Since the Company had a limited amount of operating history, the expected volatility assumption of 19.0 % was derived from the observed historical volatility of the common stock prices of a select group of peer companies within the REIT industry and the observed implied volatility on the Company’s stock options. Based on the selected dividend yields of guideline companies and expected dividend levels, we utilized an expected dividend yield of 5.6 %. For LTIP units granted in December 2019 we utilized a risk-free rate of 1.73 %, derived from the yield of zero-coupon U.S. Treasury securities for a three-year holding period as of the grant date. The expected volatility assumption of 16.0 % was derived from the Company’s observed historical volatility equal to the three-year post-vesting restriction period. Based on the selected dividend yields of guideline companies and expected dividend levels, we utilized an expected dividend yield of 4.9 %. F-25 For LTIP units granted in January 2 020 we utilized a risk-free rate of 1.70 %, derived from the yield of zero-coupon U.S. Treasury securities for a three-year holding period as of the grant date. The expected volatility assumption of 16.0 % was derived from the Company’s observed historical volatility equal to the three-year performance period. Based on the Company’s historical annualized quarterly dividend yields and current dividend yield , we utilized an expected dividend yield of 4.8 % No additional shares of common stock or options were issued under the 2015 Equity Incentive Plan as of December 31, 2020. Offering of Common Stock on a Forward Basis On June 21, 2018, we completed an underwritten public offering of an aggregate of 20,700,000 shares of our common stock. The public offering included 13,700,000 shares sold by us directly to the underwriters (including 2,700,000 shares pursuant to the underwriters’ exercise of their option to purchase additional shares), resulting in net proceeds to us of approximately $ 252.9 million, after deducting underwriting discounts and commissions and our offering expenses. In connection with the public offering, we also entered into forward sale agreements with certain financial institutions, acting as forward purchasers pursuant to which the forward purchasers borrowed and the forward sellers, acting as agents for the forward purchasers, sold an aggregate of 7,000,000 shares. On March 27, 2019, we physically settled a portion of the forward sale agreements by issuing an aggregate of 6,700,000 shares of our common stock in exchange for approximately $ 119.2 million in net proceeds after deducting underwriting discounts and commissions and our offering expenses. On June 14, 2019, we completed the physical settlement of the remaining shares underlying the forward sale agreements by issuing an aggregate of 300,000 shares of our common stock in exchange for approximately $ 5.3 million in net proceeds after deducting underwriting discounts and commissions and our offering expenses. The Company accounted for the forward sale agreements as equity. Redemption of Common Units to Common Stock During the year ended December 31, 2018, we issued 658,801 shares of our common stock upon the redemption of 658,801 common units in accordance with the terms of the partnership agreement of the Operating Partnership. During the year ended December 31, 2019, we issued 396,929 shares of our common stock upon the redemption of 396,929 common units in accordance with the terms of the partnership agreement of the Operating Partnership. During the year ended December 31, 2020, we issued 255,210 shares of our common stock upon the redemption of 255,210 common units in accordance with the terms of the partnership agreement of the Operating Partnership. Dividends and Distributions Paid A summary of dividends declared by the board of directors per share of common stock and per common unit of our operating partnership at the date of record is as follows: Quarter Declaration Date Record Date Pay Date Dividend Q1 2018 May 3, 2018 June 11, 2018 June 28, 2018 0.26 Q2 2018 August 1, 2018 September 13, 2018 September 27, 2018 0.26 Q3 2018 October 29, 2018 December 13, 2018 December 27, 2018 0.26 Q4 2018 February 21, 2019 March 14, 2019 March 28, 2019 0.26 Q1 2019 May 2, 2019 June 10, 2019 June 27, 2019 0.26 Q2 2019 July 31, 2019 September 12, 2019 September 26, 2019 0.26 Q3 2019 October 30, 2019 November 13, 2019 December 27, 2019 0.26 Q4 2019 February 19, 2020 March 5, 2020 March 26, 2020 0.26 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 Q4 2020 February 18, 2021 March 5, 2021 March 17, 2021 0.26 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 of our operating partnership. 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 F-26 unit of our operating partnership. 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 issuances, including in settlement of forward sales transactions, made under each of the ATM Programs as of December 31, 2020 (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, 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 December 31, 2020 — — 848,641 18,634 Total 4,120,992 $ 93,774 2,875,832 $ 66,630 (1) Includes shares issued by the Company, including in settlement of forward sales transactions. Additionally, as of December 31, 2020, we had entered into forward sales transactions under the March 2019 ATM Program and December 2019 ATM Program for the sale of an additional 3,747,232 shares of our common stock that had not yet been settled. Subject to our right to elect net share settlement, we expect 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 $ 25.96 per share, we expect to receive net proceeds of approximately $ 97.3 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. We have used the net proceeds received from such sales for general corporate purposes. As of December 31, 2020, we had approximately $ 140.6 million of gross sales of our 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. On November 9, 2018, the Company acquired TREAS – Birmingham for which it paid 271,918 common units. The issuance of common units was effected in reliance upon an exemption from the registration provided by Section 4(a)(2) under the Securities Act. F-27 8. Earnings Per Share Basic earnings or loss per share of common stock (“EPS”) is calculated by dividing net income or loss attributable to common stockholders by the weighted average shares of common stock outstanding for the periods presented. Diluted EPS is computed after adjusting the basic EPS computation for the effect of dilutive common equivalent shares outstanding during the periods presented. Unvested restricted shares of common stock and unvested LTIP units are considered participating securities which require the use of the two-class method for the computation of basic and diluted earnings per share. The following table sets forth the computation of the Company’s basic and diluted earnings per share of common stock for the years ended December 31, 2020, 2019 and 2018 (dollars in thousands, except per share amounts): For the years ended December 31, 2020 2019 2018 Numerator Net income (loss) $ 13,528 $ 8,224 $ 6,659 Less: Non-controlling interest in Operating Partnership ( 1,567 ) ( 1,017 ) ( 955 ) Net income (loss) available to Easterly Government Properties, Inc. 11,961 7,207 5,704 Less: Dividends on participating securities ( 289 ) ( 119 ) ( 1,123 ) Net income (loss) available to common stockholders $ 11,672 $ 7,088 $ 4,581 Denominator for basic EPS 78,219,491 68,769,526 53,511,137 Dilutive effect of share-based compensation awards 55,567 22,855 9,510 Dilutive effect of LTIP units (1) 507,050 416,585 1,135,544 Dilutive effect of shares issuable under forward sales agreements (2) 9,345 — 275,189 Denominator for diluted EPS 78,791,453 69,208,966 54,931,380 Basic EPS $ 0.15 $ 0.10 $ 0.09 Diluted EPS $ 0.15 $ 0.10 $ 0.08 (1) During the years ended December 31, 2020 and December 31, 2018, there were approximately 74,481 and 173,381 unvested performance-based LTIP units, respectively, that were not included in the computation of diluted earnings per share because to do so would have been antidilutive for the period. (2) During the years ended December 31, 2020 and 2019, there were approximately 2,397,232 and 2,878,703 shares, respectively, of underlying unsettled forward sales transactions that were not included in the computation of diluted earnings per share because to do so would have been antidilutive for the period . 9. Leases Lessor The Company leases commercial space to the U.S. Government through the GSA or other federal agencies or nongovernmental tenants. These leases may contain extension options that are predominately at the sole discretion of the tenant. Certain of our leases contain a “soft-term” period of the lease, meaning that the U.S. Government tenant agency has the right to terminate the lease prior to its stated lease end date. While certain of our leases are contractually subject to early termination, we do not believe that our tenant agencies are likely to terminate these leases early given the build-to-suit features at the properties subject to the leases, the weighted average age of these properties based on the date the property was built or renovated-to-suit, where applicable (approximately 15.6 years as of December 31, 2020), the mission-critical focus of the properties subject to the leases and the current level of operations at such properties. Certain lease agreements include variable lease payments that, in the future, will vary based on changes in inflationary measures, real estate tax rates, usage, or share of expenditures of the leased premises . On September 25, 2020, the FDA – Lenexa development project was substantially completed and a 20 -year lease commenced with the GSA for the beneficial use of the FDA. Upon completion and their acceptance of work, the U.S. Government was obligated to pay a $ 41.7 million lump sum reimbursement to the Company for landlord improvements in excess of the U.S. Government’s tenant improvement allowance. The Company recorded the payment as Deferred revenue on the Consolidated Balance Sheet and began amortizing the amount over the life of the lease through Rental income. On August 27, 2019, the FDA – Alameda development project was substantially completed and a 20 -year non-cancelable lease commenced with the GSA for the beneficial use of the FDA. Upon completion and their acceptance of work, the U.S. Government paid a $ 52.5 million lump sum reimbursement to the Company for landlord improvements in excess of the U.S. Government’s tenant improvement allowance. The Company recorded the payment as Deferred revenue on the Consolidated Balance Sheets and began amortizing the amount over the life of the lease through Rental income. F-28 The following table summarizes the maturity of fixed lease payments under the Company’s leases as of December 31, 2020 (dollars in thousands): Payments due by period Total 2021 2022 2023 2024 2025 Thereafter Fixed lease payments $ 1,716,580 199,111 178,195 166,341 149,263 139,246 884,424 Information about our leases for our development property as of December 31, 2020 is set forth in the table below: Property Name Location Tenant Property Type (1) Lease Term Estimated Leased Square Feet FDA - Atlanta Atlanta, GA Food and Drug Administration L 20 -year 162,000 Total 162,000 (1) L=Laboratory Lessee In October 2015, we entered into a sublease agreement for office space in Washington, D.C. with a commencement date of March 2016 and an expiration date of June 2021 . We also lease office space in San Diego, CA under an operating lease that commenced in February 2015 and expires in April 2022 . In August 2020, we entered into a lease agreement for office space in Washington, D.C. to replace our existing lease that expires in June 2021. This lease has a commencement date of July 2021 and expiration date of August 2026 . Neither of the commenced leases contain extension options, however they do include variable lease payments that, in the future, will vary based on changes in real estate tax rates, usage, or share of expenditures of the leased premises. The Company has elected not to separate lease and nonlease components for both commenced corporate office leases. As of December 31, 2020, the unamortized balance associated with the Company’s right-of-use operating lease asset and operating lease liability for the Company’s two commenced office leases was $ 0.4 million. The Company used its incremental borrowing rate, which was arrived at utilizing prevailing market rates and the spread on the revolving credit facility, in order to determine the net present value of the minimum lease payments. The following table provides quantitative information for the Company’s commenced operating leases for the year ended December 31, 2020 and 2019 (dollars in thousands): For the year ended December 31, For the year ended December 31, 2020 2019 Operating leases costs $ 458 $ 461 Other Information Weighted average remaining lease term (in years) 1.01 1.91 Weighted average discount rate 3.83 % 3.84 % In addition, the maturity of fixed lease payments under the Company’s commenced corporate office leases as of December 31, 2020 is summarized in the table below (dollars in thousands): Payments due by period Total 2021 2022 2023 2024 2025 Thereafter Fixed lease payments $ 417 352 65 — — — — F-29 10. Revenue The table below sets forth revenue from tenant construction projects disaggregated by tenant agency for the years ended December 31, 2020, 2019, and 2018 (in thousands). For the year ended December 31, For the year ended December 31, For the year ended December 31, Tenant 2020 2019 2018 Federal Bureau of Investigation ("FBI") $ 2,040 $ 4,021 $ 1,317 Department of Veteran Affairs ("VA") 1,135 1,528 2,896 Environmental Protection Agency ("EPA") 572 30 4 Federal Emergency Management Agency ("FEMA") 422 136 — Food and Drug Administration ("FDA") 266 5,104 — Immigration and Customs Enforcement ("ICE") 144 53 9 National Park Service ("NPS") 116 — 40 U.S. Joint Staff Command ("JSC") 89 — — Internal Revenue Service ("IRS") 77 18 1 Military Entrance Processing Command ("MEPCOM") 68 — — Bureau of the Fiscal Service ("BFS") 34 46 — General Services Administration - Other 25 1 — Customs and Border Protection ("CBP") 23 23 — Social Security Administration ("SSA") 19 146 31 The Judiciary of the U.S. Government ("JUD") 12 40 201 Department of Transportation ("DOT") 8 137 1 Patent and Trademark Office ("PTO") 8 — — U.S. Citizenship and Immigration Services ("USCIS") — 158 39 Drug Enforcement Administration ("DEA") — 127 375 Small Business Administration ("SBA") — 68 — Department of Labor ("DOL") — 26 — U.S. Coast Guard ("USCG") — 22 6 U.S. Forest Service ("USFS") — 16 577 Bonneville Power Administration ("BPA") — 1 — National Labor Relations Board ("NLRB") — — 18 $ 5,058 $ 11,701 $ 5,515 The balance in Accounts receivable related to tenant construction projects and the associated project management income was $ 3.0 million and $ 4.3 million, as of December 31, 2020 and 2019, respectively. The duration of the majority of tenant construction project reimbursement arrangements are less than a year and payment is typically due once a project is complete and work has been accepted by the tenant. There were no projects ongoing as of December 31, 2020 or as of December 31, 2019 with a duration of greater than one year. During the years ended December 31, 2020, 2019, and 2018, the Company also recognized $ 0.6 million, $ 1.0 million, and $ 0.2 million, respectively, in parking garage income generated from the operations of a parking garages situated on both the Various GSA – Buffalo property and on the Various GSA - Portland property. The monthly and transient daily parking revenue falls within the scope of Revenue from Contracts with Customers (“ASC 606”) and is accounted for at the point in time when control of the goods or services transfers to the customer and the Company’s performance obligation is satisfied. As of December 31, 2020 and 2019, there was less than $ 0.1 million in Accounts receivable attributable to parking garage income. During the year ended December 31, 2020, the Company recognized $ 0.7 million in income for providing COVID-19 related cleaning services to certain tenants. The income falls within the scope of ASC 606 and is recognized over time as the performance obligation is satisfied. The balance in Accounts receivable related to these services was $ 0.3 million as of December 31, 2020. There was no associated Accounts receivable as of December 31, 2019. There were no contract assets or liabilities as of December 31, 2020 and 2019. F-30 11. Commitments and Contingencies a) Environmental As an owner of real estate, the Company is subject to various environmental laws of federal, state, and local governments. The Company’s compliance with existing laws has not had a material adverse effect on its financial condition and results of operations, and the Company does not believe it will have a material adverse effect in the future. However, the Company cannot predict the impact of unforeseen environmental contingencies or new or changed laws or regulations on its current properties or on properties that the Company may acquire. b) Tax Protection Agreements Concurrent with the completion of our initial public offering and the related formation transactions, the Company also entered into a tax protection agreement with Michael P. Ibe, a director and our Vice Chairman and Executive Vice President — Development and Acquisitions, under which we agreed to indemnify Mr. Ibe for any taxes incurred as a result of a taxable sale of the properties contributed by certain entities beneficially owned by Mr. Ibe in the formation transactions for a period of eight years after the closing of the initial public offering and the formation transactions. The Company also agreed in the tax protection agreement with Mr. Ibe to use the “traditional method” of making allocations under Section 704(c) of the Code for the eight-year period. On October 21, 2015, the Company entered into a second tax protection agreement with Mr. Ibe, under which the Company agreed to indemnify Mr. Ibe for any taxes incurred as a result of a taxable sale of the DEA – Pleasanton property for a period of eight years after the closing of the acquisition and to offer Mr. Ibe and certain affiliates of Mr. Ibe the opportunity to guarantee, in the aggregate, up to approximately $ 15.7 million of indebtedness of the Operating Partnership for two years following the contribution of the DEA – Pleasanton property and up to approximately $ 7.2 million of indebtedness thereafter until the eighth anniversary of the closing of the acquisition, subject to certain conditions. The Company also agreed in the tax protection agreement with Mr. Ibe to use the “traditional method” of making allocations under Section 704(c) of the Code for the eight-year period. In connection with our acquisition of a property in 2017, we entered into a tax protection agreement, under which we agreed to indemnify the contributor for any taxes incurred as a result of a taxable sale of such property for a period of two years. The Company also agreed in the tax protection agreement with the contributor to use the “traditional method” of making allocations under Section 704(c) of the Code for the two-year period. As of December 31, 2019, the applicable tax protection period had expired without a taxable disposition of the property. In connection with our acquisition of a property in 2018, we entered into a tax protection agreement, under which we agreed to indemnify the contributor 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 contributor to use the “traditional method” of making allocations under Section 704(c) of the Code for the four-year period. In connection with our acquisition of a property in 2020, we entered into a tax protection agreement, under which we 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. c) Letters of Credit As of December 31, 2020 and 2019, the Company had $ 0.1 million and $ 0.1 million of standby letters of credit, respectively. There were no draws against these letters of credit during the years ended December 31, 2020 or 2019. 12. Concentrations Risk Concentrations of credit risk arise for the Company when multiple tenants of the Company are engaged in similar business activities, are located in the same geographic region or have similar economic features that impact in a similar manner their ability to meet contractual obligations, including those to the Company. The Company regularly monitors its tenant base to assess potential concentrations of credit risk. As stated in Note 1 above, the Company leases commercial space to the U.S. Government or nongovernmental tenants. At December 31, 2020, the U.S. Government accounted for approximately 98.5 % of our total annualized leased income and non-governmental tenants accounted for the remaining approximately 1.5 %. At December 31, 2019, U.S. Government accounted for approximately 98.3 % of our total annualized leased income and non-governmental tenants accounted for the remaining approximately 1.7 %. F-31 At December 31, 2020, 18 of our 79 operating properties were located in California, accounting for approximately 18.5 % of our total leased square feet and approximately 24.8 % of our total annualized lease income. At December 31, 2019, 18 of our 70 operating properties were located in California, accounting for approximately 20.5 % of our total rentable square feet and approximately 26.9 % of our total annualized lease income. To the extent that weak economic or real estate conditions or natural disasters affect California, our business, financial condition and results of operations could be negatively impacted. 13. Related Party For each of the years ended December 31, 2020, 2019 and 2018, the Company was responsible for reimbursing certain entities controlled by our Chairman $ 0.1 million for certain costs they paid on our behalf. Additionally, during each of the years ended December 31, 2020, 2019 and 2018, certain entities controlled by our Vice Chairman were responsible for reimbursing us $ 0.1 million for certain costs that we paid on their behalf. As of December 31, 2020 and 2019, Accounts Payable, accrued expenses and other liabilities included less than $ 0.1 million owed to entities controlled by our Chairman and Accounts receivable included less than $ 0.1 million due from entities controlled by our Vice Chairman. 14. Subsequent Events For its consolidated financial statements as of December 31, 2020, the Company evaluated subsequent events as of the filing date of this Annual Report on Form 10-K and noted the following significant events: On January 4, 2021, the Company granted an aggregate of 164,178 performance-based LTIP units to members of management pursuant to 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 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. The performance-based LTIP units will vest when earned 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. The LTIP units are subject to the grantee's continued employment and the other terms of the awards. Subsequent to December 31, 2020, the Company entered into forward sales transactions under the December 2019 ATM Program for the sale of an additional 359,289 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 no later than February 2022 . Assuming the forward sales transactions are physically settled in full utilizing a net weighted average initial forward sales price of $ 22.59 per share, the Company expects to receive net proceeds of approximately $ 8.1 million, after deducting offering costs, subject to adjustments in accordance with the applicable forward sale transaction. F-32 Easterly Government Properties, Inc. Schedule III - Real Estate and Accumulated Depreciation December 31, 2020 (Amounts in thousands) Initial Cost to Company Cost amount carried at Close of Period Location Type (1) Encumbrances (2) Land Buildings and Improvements Costs Capitalized Subsequent to Acquisition Land Buildings and Improvements Total (3) Accumulated Depreciation (4) Original Construction Date(s) (Unaudited) Date Acquired Aberdeen, MS C/O $ — $ 1,147 $ 14,044 $ 132 $ 1,147 $ 14,176 $ 15,323 $ 2,054 2005 6/17/2015 Alameda, CA L — 5,438 4,312 70,290 5,438 74,602 80,040 2,507 2019 8/1/2016 Albany, NY O — 1,801 11,544 291 1,801 11,835 13,636 1,798 2004 2/11/2015 Albany, NY O — 1,412 17,128 921 1,412 18,049 19,461 1,859 1998 11/22/2016 Albuquerque, NM O — 3,062 28,201 126 3,062 28,327 31,389 4,399 2011 2/17/2016 Albuquerque, NM O — 2,905 23,804 797 2,905 24,601 27,506 4,455 2006 2/11/2015 Albuquerque, NM O 16,237 2,345 28,611 142 2,345 28,753 31,098 5,852 2011 2/11/2015 Aurora, CO O — 1,785 9,450 76 1,785 9,526 11,311 429 1998 1/7/2020 Arlington, VA O — 14,350 44,442 1,350 14,350 45,792 60,142 9,776 2009 2/11/2015 Bakersfield, CA O — 438 2,253 25 438 2,278 2,716 152 2000 10/16/2018 Baton Rouge, LA OC — 344 5,241 45 344 5,286 5,630 293 2004 10/16/2018 Baton Rouge, LA O — 565 8,733 — 565 8,733 9,298 20 1981 / 2020 12/1/2020 Billings, MT O/W — 1,722 42,708 — 1,722 42,708 44,430 27 2013 12/23/2020 Birmingham, AL O — 408 10,853 97 408 10,950 11,358 1,527 2005 7/1/2016 Birmingham, AL O — 755 22,537 803 755 23,340 24,095 2,867 2005 7/1/2016 Birmingham, AL O — 1,410 17,276 16 1,410 17,292 18,702 1,216 2014 11/9/2018 Buffalo, NY O — 246 80,913 1,339 246 82,252 82,498 8,329 2004 9/13/2018 Charleston, SC C/O — 1,325 21,189 350 1,325 21,539 22,864 1,179 1999 10/16/2018 Charleston, WV O — 551 13,732 753 551 14,485 15,036 1,037 1959 / 2000 9/13/2018 Chico, CA OC — 5,183 24,405 — 5,183 24,405 29,588 408 2019 4/30/2020 Clarksburg, WV O — 108 13,421 795 108 14,216 14,324 830 1999 9/13/2018 College Park, MD L — 4,927 28,037 348 4,927 28,385 33,312 1,495 2004 1/31/2019 Dallas, TX O — 1,005 14,546 319 1,005 14,865 15,870 2,842 2001 2/11/2015 Dallas, TX L — 2,753 23,848 1,265 2,753 25,113 27,866 3,094 2001 12/1/2015 Dallas, TX O — 740 8,191 124 740 8,315 9,055 587 2005 9/13/2018 Del Rio, TX C/O — 210 30,676 1,056 210 31,732 31,942 5,432 1992 / 2004 2/11/2015 Des Plaines, IL O — 1,742 9,325 295 1,742 9,620 11,362 789 1971 / 1999 9/13/2018 El Centro, CA C/O — 1,084 20,765 1,057 1,084 21,822 22,906 3,799 2004 2/11/2015 El Paso, TX O/W — 2,430 33,649 450 2,430 34,099 36,529 643 1998 -2005 3/26/2020 Fresno, CA O — 1,499 68,309 4,336 1,499 72,645 74,144 10,986 2003 2/11/2015 Golden, CO O/W 9,002 4,080 8,933 180 4,080 9,113 13,193 898 1996 / 2011 5/24/2018 Jackson, TN C/O — 332 24,324 — 332 24,324 24,656 12 1998 12/24/2020 Jacksonville, FL O 8,036 2,532 16,621 60 2,532 16,681 19,213 3,345 2010 2/11/2015 Kansas City, KS L — 828 33,035 699 828 33,734 34,562 4,131 2003 7/1/2016 Lakewood, CO O — 1,377 18,204 1,096 1,377 19,300 20,677 2,962 1999 4/1/2015 Lakewood, CO O — 1,521 32,865 733 1,521 33,598 35,119 6,219 2004 2/11/2015 Lenexa, KS O — 4,367 42,692 124 4,367 42,816 47,183 2,081 2007 / 2012 8/22/2019 Lenexa, KS L — 649 3,449 62,285 649 65,734 66,383 438 2020 5/27/2017 S-1 Easterly Government Properties, Inc. Schedule III - Real Estate and Accumulated Depreciation December 31, 2020 (Amounts in thousands) Initial Cost to Company Cost amount carried at Close of Period Location Type (1) Encumbrances (2) Land Buildings and Improvements Costs Capitalized Subsequent to Acquisition Land Buildings and Improvements Total (3) Accumulated Depreciation (4) Original Construction Date(s) (Unaudited) Date Acquired Lincoln, NE O — 2,310 26,328 1,107 2,310 27,435 29,745 4,936 2005 11/12/2015 Little Rock, AR O — 2,278 19,318 354 2,278 19,672 21,950 3,657 2001 2/11/2015 Loma Linda, CA OC 126,106 12,476 177,357 189 12,476 177,546 190,022 15,908 2016 6/1/2017 Lubbock, TX W/D — 541 972 — 541 972 1,513 195 2013 2/11/2015 Martinsburg, WV O — 1,700 13,294 82 1,700 13,376 15,076 2,341 2007 2/11/2015 Midland, GA W/M — 1,715 1,650 — 1,715 1,650 3,365 381 2014 2/11/2015 Mission Viejo, CA O — 1,454 1,690 147 1,454 1,837 3,291 470 2005 2/11/2015 Mobile, AL O — 2,045 20,400 110 2,045 20,510 22,555 144 2001 9/18/2020 Mobile, AL OC — 6,311 31,030 — 6,311 31,030 37,341 578 2018 4/3/2020 New Orleans, LA O — 664 24,471 165 664 24,636 25,300 1,014 1999 / 2006 5/9/2019 North Charleston, SC O 16,337 963 34,987 419 963 35,406 36,369 5,821 1994 / 2012 2/11/2015 North Charleston, SC W — 918 14,033 — 918 14,033 14,951 57 2020 11/3/2020 Omaha, NE O — 4,635 41,319 972 4,635 42,291 46,926 8,470 2009 2/11/2015 Omaha, NE O — 1,517 14,156 320 1,517 14,476 15,993 2,106 2004 5/19/2016 Orange, CT OC — 3,098 23,613 — 3,098 23,613 26,711 656 2019 11/21/2019 Parkersburg, WV O — 365 52,200 376 365 52,576 52,941 3,811 2004 / 2006 9/13/2018 Pittsburgh, PA O — 384 24,877 1,349 384 26,226 26,610 1,515 2001 9/13/2018 Pittsburgh, PA O — 200 5,339 74 200 5,413 5,613 355 2004 9/13/2018 Pleasanton, CA L 15,653 5,765 20,859 136 5,765 20,995 26,760 2,730 2015 10/21/2015 Portland, OR O — 4,913 75,794 543 4,913 76,337 81,250 4,270 2002 1/31/2019 Richmond, VA O — 3,041 23,931 566 3,041 24,497 27,538 3,830 2001 12/7/2015 Riverside, CA O — 1,983 6,755 236 1,983 6,991 8,974 1,283 1997 2/11/2015 Sacramento, CA O — 1,434 9,369 2,197 1,434 11,566 13,000 1,663 2002 2/11/2015 Salt Lake City, UT O — 2,049 79,955 340 2,049 80,295 82,344 7,471 2012 9/28/2017 San Antonio, TX O — 3,745 49,153 1,566 3,745 50,719 54,464 9,191 2007 2/11/2015 San Diego, CA W — 3,060 510 909 3,060 1,419 4,479 321 1999 2/11/2015 San Diego, CA O — 2,252 12,280 326 2,252 12,606 14,858 2,093 2001 9/11/2015 San Diego, CA O — 773 2,481 966 773 3,447 4,220 416 2003 2/11/2015 San Jose, CA OC — 10,419 52,750 6 10,419 52,756 63,175 3,261 2018 7/11/2018 Sandy, UT L — 2,361 31,574 87 2,361 31,661 34,022 3,534 2003 2/3/2017 Santa Ana, CA O — 6,413 8,635 543 6,413 9,178 15,591 1,754 2004 2/11/2015 Savannah, GA L 11,500 3,220 10,687 219 3,220 10,906 14,126 1,829 2013 2/11/2015 South Bend, IN C/O — 514 6,590 305 514 6,895 7,409 767 1996 / 2011 12/23/2016 South Bend, IN OC — 3,954 38,503 20 3,954 38,523 42,477 3,011 2017 11/16/2017 Sterling, VA L — 2,556 21,817 60 2,556 21,877 24,433 1,051 2001 1/31/2019 Suffolk, VA O — 7,141 61,577 2,771 7,141 64,348 71,489 2,598 1993 / 2004 5/8/2019 Sunburst, MT O — 2,192 9,423 402 2,192 9,825 12,017 1,687 2008 2/11/2015 Tracy, CA W — 2,678 548 29,604 2,678 30,152 32,830 1,690 2018 10/4/2017 Tustin, CA O — 8,532 24,279 130 8,532 24,409 32,941 933 1979 / 2019 10/22/2019 S-2 Easterly Government Properties, Inc. Schedule III - Real Estate and Accumulated Depreciation December 31, 2020 (Amounts in thousands) Initial Cost to Company Cost amount carried at Close of Period Location Type (1) Encumbrances (2) Land Buildings and Improvements Costs Capitalized Subsequent to Acquisition Land Buildings and Improvements Total (3) Accumulated Depreciation (4) Original Construction Date(s) (Unaudited) Date Acquired Upper Marlboro, MD L — 5,054 18,301 154 5,054 18,455 23,509 991 2002 11/15/2018 Vista, CA L — 3,998 24,053 916 3,998 24,969 28,967 3,657 2002 2/11/2015 Various Various — 4,076 15,691 10,545 4,076 26,236 30,312 — N/A Various $ 202,871 $ 215,073 $ 1,994,815 $ 211,986 $ 215,073 $ 2,206,801 $ 2,421,874 $ 213,213 (1) OC=Outpatient Clinic; O=Office; C=Courthouse; L=Laboratory; W=Warehouse; D=Distribution; M=Manufacturing. (2) Includes the unamortized balance of the fair value adjustments. (3) Excludes value of real estate intangibles. (4) Depreciation of real estate property is computed on a straight-line basis over the estimated useful lives of the assets. The estimated lives of our assets range from 5 to 40 years or to the term of the underlying lease . The aggregate cost and accumulated depreciation for tax purposes was approximately $ 2,360.7 million and $ 275.2 million, respectively. Analysis of the carrying amount of real estate properties and accumulated depreciation: Real Estate Properties Accumulated Depreciation Balance at December 31, 2017 1,298,552 68,390 Additions 433,894 37,439 Balance at December 31, 2018 1,732,446 105,829 Additions 426,516 51,132 Dispositions ( 14,167 ) ( 892 ) Balance at December 31, 2019 2,144,795 156,069 Additions 285,882 58,437 Dispositions ( 8,803 ) ( 1,293 ) Balance at December 31, 2020 2,421,874 213,213 S-3