Equity

3 Months Ended

Mar. 31, 2021

7. Equity

The following table summarizes the changes in the Company’s stockholders’ equity for the three months ended March 31, 2021 and 2020 (amounts in thousands, except share amounts):

	Shares		Common Stock Par Value		Additional Paid-in Capital			Retained Earnings		Cumulative Dividends			Accumulated Other Comprehensive Income (Loss)			Non- controlling Interest in Operating Partnership			Total Equity
Three months ended March 31, 2021
Balance at December 31, 2020		82,106,256	$	821	$	1,424,787		$	31,965	$	(291,652	)	$	(11,351	)	$	145,400		$	1,299,970
Stock based compensation		—		—		218			—		—			—			1,116			1,334
Dividends and distributions paid ($0.26 per share)		—		—		—			—		(21,355	)		—			(2,831	)		(24,186	)
Grant of unvested restricted stock		4,462		—		—			—		—			—			—			—
Redemption of common units for shares of common stock		189,411		2		2,662			—		—			—			(2,664	)		—
Issuance of common stock		1,556,824		16		39,942			—		—			—			—			39,958
Unrealized gain on interest rate swaps, net		—		—		—			—		—			1,610			228			1,838
Net income		—		—		—			6,991		—			—			889			7,880
Allocation of non-controlling interest in Operating Partnership		—		—		(3,595	)		—		—			—			3,595			—
Balance at March 31, 2021		83,856,953	$	839	$	1,464,014		$	38,956	$	(313,007	)	$	(9,741	)	$	145,733		$	1,326,794
Three months ended March 31, 2020
Balance at December 31, 2019		74,832,292	$	748	$	1,257,319		$	20,004	$	(210,760	)	$	(4,690	)	$	137,220		$	1,199,841
Stock based compensation		—		—		224			—		—			—			776			1,000
Dividends and distributions paid ($0.26 per share)		—		—		—			—		(19,516	)		—			(2,570	)		(22,086	)
Grant of unvested restricted stock		2,905		—		—			—		—			—			—			—
Redemption of common units for shares of common stock		42,000		1		596			—		—			—			(597	)		—
Issuance of common stock		200,000		2		4,823			—		—			—			—			4,825
Contribution of Property for common units		—		—		—			—		—			—			21,550			21,550
Unrealized loss on interest rate swaps, net		—		—		—			—		—			(8,586	)		(1,260	)		(9,846	)
Net income		—		—		—			1,697		—			—			221			1,918
Allocation of non-controlling interest in Operating Partnership		—		—		7,796			—		—			—			(7,796	)		—
Balance at March 31, 2020		75,077,197	$	751	$	1,270,758		$	21,701	$	(230,276	)	$	(13,276	)	$	147,544		$	1,197,202

On January 4, 2021, the Company granted an aggregate of 164,178 performance-based long-term incentive plan units in the Operating Partnership (“LTIP units”) to members of management pursuant to the Easterly Government Properties, Inc. 2015 Equity Incentive Plan, as amended (the “2015 Equity Incentive Plan”), consisting of (i) 82,070 LTIP units that are subject to the Company achieving certain total shareholder return performance thresholds (on both an absolute and a relative basis) and (ii) 82,108 LTIP units that are subject to the Company achieving certain operational performance hurdles, in each case through a performance period ending on December 31, 2023. Earned performance-based LTIP units, if any, will vest when performance is determined following the end of the performance period on December 31, 2023. On January 4, 2021, the Company also granted an aggregate of 113,703 service-based LTIP units to members of management pursuant to the 2015 Equity Incentive Plan, which will vest on December 31, 2023, subject to the grantee’s continued employment and the other terms of the awards.

On March 17, 2021, the Company issued an aggregate of 4,462 shares of restricted common stock to certain employees pursuant to the 2015 Equity Incentive Plan. The shares of restricted common stock will vest upon the second anniversary of the grant date so long as the grantee remains an employee of the Company on such date.

A summary of the Company’s shares of restricted common stock and LTIP unit awards at March 31, 2021 is as follows:

	Restricted Shares			Restricted Shares Weighted Average Grant Date Fair Value Per Share		LTIP Units ⁽¹⁾			LTIP Units Weighted Average Grant Date Fair Value Per Share
Outstanding, December 31, 2020		89,891		$	19.36		492,180		$	19.88
Vested		(20,725	)		17.12		(93,085	)		18.55
Granted		4,462			21.76		277,881			22.30
Forfeited		—			—		—			—
Outstanding, March 31, 2021		73,628		$	20.14		676,976		$	21.06

(1)

Reflects the number of LTIP units issued to the grantee on the grant date, which may be different from the number of LTIP units actually earned in the case of performance-based LTIP units.

The Company recognized $1.3 million in compensation expense related to its shares of restricted common stock and the LTIP unit awards for the three months ended March 31, 2021. As of March 31, 2021, unrecognized compensation expense for both sets of awards was $10.1 million, which will be amortized over the applicable vesting period.

A summary of dividends declared by the Company’s board of directors per share of common stock and per common unit at the date of record is as follows:

Quarter		Declaration Date		Record Date		Payment Date		Dividend ⁽¹⁾
Q1 2021		April 29, 2021		May 14, 2021		May 26, 2021		$	0.26

(1)

Prior to the end of the performance period as set forth in the applicable LTIP unit award, holders of performance-based LTIP units are entitled to receive dividends per LTIP unit equal to 10% of the dividend paid per common unit. After the end of the performance period, the number of LTIP units, both vested and unvested, that LTIP award recipients have earned, if any, are entitled to receive dividends in an amount per LTIP unit equal to dividends, both regular and special, payable per common unit. Holders of LTIP units that are not subject to the attainment of performance goals are entitled to receive dividends per LTIP unit equal to 100% of the dividend paid per common unit beginning on the grant date.

ATM Programs

On each of March 4, 2019 and December 20, 2019, the Company entered into separate equity distribution agreements with each of Citigroup Global Markets Inc., BMO Capital Markets Corp., BTIG, LLC, Capital One Securities, Inc., Jefferies LLC, Raymond James & Associates, Inc., RBC Capital Markets, LLC, Truist Securities, Inc. (f/k/a 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 and, under the December 2019 ATM Program only, Truist Bank, for the sale of shares of its common stock on a forward basis.

The following table sets forth certain information with respect to issuances under each of the ATM Programs during the quarter ended March 31, 2021 (amounts in thousands except share amounts):

	March 2019 ATM Program				December 2019 ATM Program
For the Three Months Ended:	Number of Shares Issued⁽¹⁾		Net Proceeds⁽¹⁾		Number of Shares Issued⁽¹⁾		Net Proceeds⁽¹⁾
March 31, 2021		—	$	—		1,556,824	$	39,998

(1)

Shares issued by the Company, which were all issued in settlement of forward sales transactions. Additionally, as of March 31, 2021, the Company had entered into forward sales transactions under the March 2019 ATM Program and December 2019 ATM Program for the sale of an additional 2,949,697 shares of its common stock that have not yet been settled. Subject to its right to elect net share settlement, the Company expects to physically settle the forward sales transactions by the maturity dates set forth in each applicable forward sale transaction placement notice, which dates range from April 2021 to February 2022. Assuming the forward sales transactions are physically settled in full utilizing a net weighted average initial forward sales price of $24.43 per share, the Company expects to receive net proceeds of approximately $72.1 million, after deducting offering costs, subject to adjustments in accordance with the applicable forward sale transaction. The Company accounted for the forward sale agreements as equity.

The Company used the net proceeds received from such sales for general corporate purposes. As of March 31, 2021, the Company had approximately $123.7 million of gross sales of its common stock available under the December 2019 ATM Program and no remaining availability under the March 2019 ATM Program.