false 2021 Q1 0001622194 --12-31 DC us-gaap:OtherLiabilitiesMember us-gaap:OtherLiabilitiesMember 2038-03-31 0.0267 0.0396 L + 150bps 0.0500 0.0441 0.0446 0.0421 0.0359 0.0340 us-gaap:AccountingStandardsUpdate201613Member us-gaap:AccountingStandardsUpdate201613Member 0001622194 2021-01-01 2021-03-31 xbrli:shares 0001622194 2021-04-23 iso4217:USD xbrli:shares 0001622194 2021-03-31 0001622194 2020-12-31 iso4217:USD 0001622194 2020-01-01 2020-03-31 0001622194 dea:TenantReimbursementsMember 2021-01-01 2021-03-31 0001622194 dea:TenantReimbursementsMember 2020-01-01 2020-03-31 0001622194 us-gaap:RealEstateOtherMember 2021-01-01 2021-03-31 0001622194 us-gaap:RealEstateOtherMember 2020-01-01 2020-03-31 0001622194 2019-12-31 0001622194 2020-03-31 0001622194 dea:OperatingPropertiesMember 2021-01-01 2021-03-31 0001622194 dea:OperatingPropertiesMember 2020-01-01 2020-03-31 0001622194 dea:DevelopmentPropertiesMember 2021-01-01 2021-03-31 0001622194 dea:DevelopmentPropertiesMember 2020-01-01 2020-03-31 dea:Property 0001622194 dea:WhollyOwnedOperatingPropertiesMember 2021-03-31 xbrli:pure 0001622194 dea:WhollyOwnedOperatingPropertiesMember 2021-01-01 2021-03-31 0001622194 dea:WhollyOwnedOperatingPropertiesMember us-gaap:GovernmentMember 2021-03-31 utr:sqft 0001622194 dea:WhollyOwnedOperatingPropertiesMember dea:PrivateTenantsMember 2021-03-31 0001622194 dea:WhollyOwnedPropertiesUnderDevelopmentMember 2021-03-31 0001622194 dea:OperatingPartnershipMember 2021-01-01 2021-03-31 0001622194 dea:OperatingPropertiesAcquiredMember dea:FBIKnoxvilleICELouisvilleAndUSAOLouisvilleMember 2021-03-31 0001622194 us-gaap:RealEstateInvestmentMember dea:OperatingPropertiesAcquiredMember dea:DEASterlingVAFDACollegeParkMDAndVariousGSAPortlandORJSCScffolkFBINewOrleansMember 2021-03-31 0001622194 dea:OperatingPropertiesAcquiredMember dea:DEASterlingVAFDACollegeParkMDAndVariousGSAPortlandORJSCScffolkFBINewOrleansMember 2021-03-31 0001622194 us-gaap:LeasesAcquiredInPlaceMember dea:OperatingPropertiesAcquiredMember dea:DEASterlingVAFDACollegeParkMDAndVariousGSAPortlandORJSCScffolkFBINewOrleansMember 2021-03-31 0001622194 dea:AcquiredLeasingCommissionsMember dea:OperatingPropertiesAcquiredMember dea:DEASterlingVAFDACollegeParkMDAndVariousGSAPortlandORJSCScffolkFBINewOrleansMember 2021-03-31 0001622194 us-gaap:AboveMarketLeasesMember dea:OperatingPropertiesAcquiredMember dea:DEASterlingVAFDACollegeParkMDAndVariousGSAPortlandORJSCScffolkFBINewOrleansMember 2021-03-31 0001622194 dea:BelowMarketLeasesAssumedMember dea:OperatingPropertiesAcquiredMember dea:DEASterlingVAFDACollegeParkMDAndVariousGSAPortlandORJSCScffolkFBINewOrleansMember 2021-03-31 0001622194 dea:OperatingPropertiesAcquiredMember dea:DHAAuroraFBIDEAElPasoVAMobileAndVAChicoAndFBIMember 2021-01-01 2021-03-31 0001622194 dea:OperatingPropertiesAcquiredMember 2021-01-01 2021-03-31 0001622194 us-gaap:LeasesAcquiredInPlaceMember 2021-03-31 0001622194 dea:AcquiredLeasingCommissionsMember 2021-03-31 0001622194 us-gaap:AboveMarketLeasesMember 2021-03-31 0001622194 us-gaap:RevolvingCreditFacilityMember 2021-03-31 0001622194 dea:TwoThousandSixteenTermLoanFacilityMember 2021-03-31 0001622194 dea:TwoThousandEighteenTermLoanFacilityMember 2021-03-31 0001622194 dea:TermLoanFacilityMember 2021-03-31 0001622194 dea:TwoThousandSeventeenSeriesASeniorNotesMember dea:SeniorUnsecuredNotesPayableMember 2021-03-31 0001622194 dea:TwoThousandSeventeenSeriesBSeniorNotesMember dea:SeniorUnsecuredNotesPayableMember 2021-03-31 0001622194 dea:TwoThousandSeventeenSeriesCSeniorNotesMember dea:SeniorUnsecuredNotesPayableMember 2021-03-31 0001622194 dea:TwoThousandNineteenSeriesASeniorNotesMember dea:SeniorUnsecuredNotesPayableMember 2021-03-31 0001622194 dea:TwoThousandNineteenSeriesBSeniorNotesMember dea:SeniorUnsecuredNotesPayableMember 2021-03-31 0001622194 dea:TwoThousandNineteenSeriesCSeniorNotesMember dea:SeniorUnsecuredNotesPayableMember 2021-03-31 0001622194 us-gaap:NotesPayableOtherPayablesMember 2021-03-31 0001622194 us-gaap:MortgagesMember dea:DEAPleasantonMember 2021-03-31 0001622194 us-gaap:MortgagesMember dea:VAGoldenMember 2021-03-31 0001622194 us-gaap:MortgagesMember dea:MEPCOMJacksonvilleMember 2021-03-31 0001622194 us-gaap:MortgagesMember dea:USFSIIAlbuquerqueMember 2021-03-31 0001622194 us-gaap:MortgagesMember dea:ICECharlestonMember 2021-03-31 0001622194 us-gaap:MortgagesMember dea:VALomaLindaMember 2021-03-31 0001622194 us-gaap:MortgagesMember dea:CBPSavannahMember 2021-03-31 0001622194 us-gaap:MortgagesMember 2021-03-31 0001622194 us-gaap:RevolvingCreditFacilityMember 2021-01-01 2021-03-31 0001622194 us-gaap:MortgagesMember dea:DEAPleasantonMember 2021-01-01 2021-03-31 0001622194 dea:TwoThousandSixteenTermLoanFacilityMember 2021-01-01 2021-03-31 0001622194 dea:TwoThousandEighteenTermLoanFacilityMember 2021-01-01 2021-03-31 0001622194 dea:SeniorUnsecuredNotesPayableMember dea:TwoThousandSeventeenSeriesASeniorNotesMember 2021-01-01 2021-03-31 0001622194 dea:SeniorUnsecuredNotesPayableMember dea:TwoThousandSeventeenSeriesBSeniorNotesMember 2021-01-01 2021-03-31 0001622194 dea:SeniorUnsecuredNotesPayableMember dea:TwoThousandSeventeenSeriesCSeniorNotesMember 2021-01-01 2021-03-31 0001622194 dea:SeniorUnsecuredNotesPayableMember dea:TwoThousandNineteenSeriesASeniorNotesMember 2021-01-01 2021-03-31 0001622194 dea:SeniorUnsecuredNotesPayableMember dea:TwoThousandNineteenSeriesBSeniorNotesMember 2021-01-01 2021-03-31 0001622194 dea:SeniorUnsecuredNotesPayableMember dea:TwoThousandNineteenSeriesCSeniorNotesMember 2021-01-01 2021-03-31 0001622194 us-gaap:MortgagesMember dea:VAGoldenMember 2021-01-01 2021-03-31 0001622194 us-gaap:MortgagesMember dea:MEPCOMJacksonvilleMember 2021-01-01 2021-03-31 0001622194 us-gaap:MortgagesMember dea:USFSIIAlbuquerqueMember 2021-01-01 2021-03-31 0001622194 us-gaap:MortgagesMember dea:ICECharlestonMember 2021-01-01 2021-03-31 0001622194 us-gaap:MortgagesMember dea:VALomaLindaMember 2021-01-01 2021-03-31 0001622194 us-gaap:MortgagesMember dea:CBPSavannahMember 2021-01-01 2021-03-31 0001622194 us-gaap:LondonInterbankOfferedRateLIBORMember 2021-01-01 2021-03-31 dea:Swap 0001622194 dea:TwoThousandSixteenTermLoanFacilityMember us-gaap:InterestRateSwapMember 2021-03-31 0001622194 dea:TwoThousandSixteenTermLoanFacilityMember us-gaap:InterestRateSwapMember 2021-01-01 2021-03-31 0001622194 dea:TwoThousandEighteenTermLoanFacilityMember us-gaap:InterestRateSwapMember 2021-03-31 0001622194 dea:TwoThousandEighteenTermLoanFacilityMember us-gaap:InterestRateSwapMember 2021-01-01 2021-03-31 0001622194 dea:TwoThousandSixteenTermLoanFacilityMember 2021-03-31 0001622194 dea:TwoThousandEighteenTermLoanFacilityMember 2021-03-31 0001622194 dea:InterestSwapRateAtOnePointFourOnePercentageFixedRateMember 2021-03-31 0001622194 dea:InterestSwapRateAtTwoPointSevenOnePercentageFixedRateMember 2021-03-31 0001622194 dea:InterestSwapRateAtOnePointFourOnePercentageFixedRateMember 2021-01-01 2021-03-31 0001622194 dea:InterestSwapRateAtTwoPointSevenOnePercentageFixedRateMember 2021-01-01 2021-03-31 0001622194 us-gaap:FairValueInputsLevel2Member us-gaap:FairValueMeasurementsRecurringMember 2021-03-31 0001622194 us-gaap:CommonStockMember 2020-12-31 0001622194 us-gaap:AdditionalPaidInCapitalMember 2020-12-31 0001622194 us-gaap:RetainedEarningsMember 2020-12-31 0001622194 us-gaap:AccumulatedDistributionsInExcessOfNetIncomeMember 2020-12-31 0001622194 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2020-12-31 0001622194 dea:NoncontrollingInterestInOperatingPartnershipMember 2020-12-31 0001622194 us-gaap:AdditionalPaidInCapitalMember 2021-01-01 2021-03-31 0001622194 dea:NoncontrollingInterestInOperatingPartnershipMember 2021-01-01 2021-03-31 0001622194 us-gaap:AccumulatedDistributionsInExcessOfNetIncomeMember 2021-01-01 2021-03-31 0001622194 us-gaap:CommonStockMember 2021-01-01 2021-03-31 0001622194 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2021-01-01 2021-03-31 0001622194 us-gaap:RetainedEarningsMember 2021-01-01 2021-03-31 0001622194 us-gaap:CommonStockMember 2021-03-31 0001622194 us-gaap:AdditionalPaidInCapitalMember 2021-03-31 0001622194 us-gaap:RetainedEarningsMember 2021-03-31 0001622194 us-gaap:AccumulatedDistributionsInExcessOfNetIncomeMember 2021-03-31 0001622194 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2021-03-31 0001622194 dea:NoncontrollingInterestInOperatingPartnershipMember 2021-03-31 0001622194 us-gaap:CommonStockMember 2019-12-31 0001622194 us-gaap:AdditionalPaidInCapitalMember 2019-12-31 0001622194 us-gaap:RetainedEarningsMember 2019-12-31 0001622194 us-gaap:AccumulatedDistributionsInExcessOfNetIncomeMember 2019-12-31 0001622194 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2019-12-31 0001622194 dea:NoncontrollingInterestInOperatingPartnershipMember 2019-12-31 0001622194 srt:CumulativeEffectPeriodOfAdoptionAdjustmentMember us-gaap:RetainedEarningsMember 2020-01-01 2020-03-31 0001622194 srt:CumulativeEffectPeriodOfAdoptionAdjustmentMember 2020-01-01 2020-03-31 0001622194 us-gaap:AdditionalPaidInCapitalMember 2020-01-01 2020-03-31 0001622194 dea:NoncontrollingInterestInOperatingPartnershipMember 2020-01-01 2020-03-31 0001622194 us-gaap:AccumulatedDistributionsInExcessOfNetIncomeMember 2020-01-01 2020-03-31 0001622194 us-gaap:CommonStockMember 2020-01-01 2020-03-31 0001622194 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2020-01-01 2020-03-31 0001622194 us-gaap:RetainedEarningsMember 2020-01-01 2020-03-31 0001622194 us-gaap:CommonStockMember 2020-03-31 0001622194 us-gaap:AdditionalPaidInCapitalMember 2020-03-31 0001622194 us-gaap:RetainedEarningsMember 2020-03-31 0001622194 us-gaap:AccumulatedDistributionsInExcessOfNetIncomeMember 2020-03-31 0001622194 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2020-03-31 0001622194 dea:NoncontrollingInterestInOperatingPartnershipMember 2020-03-31 0001622194 dea:LongTermIncentivePlanMember dea:TwoThousandFifteenEquityIncentivePlanMember 2021-01-04 2021-01-04 dea:Tranche 0001622194 dea:LongTermIncentivePlanMember us-gaap:ShareBasedCompensationAwardTrancheOneMember 2021-01-04 2021-01-04 0001622194 dea:LongTermIncentivePlanMember us-gaap:ShareBasedCompensationAwardTrancheTwoMember 2021-01-04 2021-01-04 0001622194 dea:TwoThousandFifteenEquityIncentivePlanMember dea:EmployeeMember 2021-03-17 2021-03-17 0001622194 dea:TwoThousandFifteenEquityIncentivePlanMember dea:EmployeeMember 2021-01-01 2021-03-31 0001622194 us-gaap:RestrictedStockMember 2020-12-31 0001622194 us-gaap:RestrictedStockMember 2021-01-01 2021-03-31 0001622194 us-gaap:RestrictedStockMember 2021-03-31 0001622194 dea:LongTermIncentivePlanMember 2020-12-31 0001622194 dea:LongTermIncentivePlanMember 2021-01-01 2021-03-31 0001622194 dea:LongTermIncentivePlanMember 2021-03-31 0001622194 dea:TwoThousandFifteenEquityIncentivePlanMember 2021-01-01 2021-03-31 0001622194 dea:InstallmentOneQuarterOneTwoThousandTwentyMember 2021-01-01 2021-03-31 0001622194 dea:PerformanceBasedLTIPUnitsMember 2021-01-01 2021-03-31 0001622194 dea:ServiceBasedLTIPUnitsMember 2021-01-01 2021-03-31 0001622194 dea:TwoThousandSeventeenAndTwoThousandNineteenATMProgramMember 2019-03-03 2019-03-04 0001622194 dea:TwoThousandNineteenDollarTwoHundredMillionsATMProgramMember 2019-12-18 2019-12-20 0001622194 dea:DecemberTwThousandNineteenATMProgramMember 2021-01-01 2021-03-31 0001622194 dea:MarchTwoThousandNineteenAndDecemberTwoThousandNineteenATMProgramMember 2021-01-01 2021-03-31 0001622194 dea:MarchTwoThousandNineteenAndDecemberTwoThousandNineteenATMProgramMember 2021-03-31 0001622194 dea:MarchTwThousandNineteenATMProgramMember 2021-03-31 0001622194 dea:DecemberTwThousandNineteenATMProgramMember 2021-03-31 0001622194 us-gaap:StockCompensationPlanMember 2021-01-01 2021-03-31 0001622194 us-gaap:StockCompensationPlanMember 2020-01-01 2020-03-31 0001622194 dea:LongTermIncentivePlanMember 2020-01-01 2020-03-31 0001622194 dea:ForwardSalesAgreementsMember 2021-01-01 2021-03-31 0001622194 dea:ForwardSalesAgreementsMember 2020-01-01 2020-03-31 0001622194 dea:UnvestedPerformanceBasedLongTermIncentivePlanMember 2021-01-01 2021-03-31 0001622194 dea:UnvestedPerformanceBasedLongTermIncentivePlanMember 2020-01-01 2020-03-31 0001622194 us-gaap:ForwardContractsMember 2021-01-01 2021-03-31 0001622194 us-gaap:ForwardContractsMember 2020-01-01 2020-03-31 0001622194 stpr:CA dea:SanDiegoMember dea:LeaseMember 2021-01-01 2021-03-31 0001622194 stpr:DC dea:LeaseMember 2021-01-01 2021-03-31 dea:Agreement 0001622194 2020-10-01 2020-12-31 0001622194 dea:CorporateOfficeLeasesMember 2021-03-31 0001622194 dea:DepartmentOfVeteranAffairsMember us-gaap:AccountingStandardsUpdate201409Member 2021-01-01 2021-03-31 0001622194 dea:DepartmentOfVeteranAffairsMember us-gaap:AccountingStandardsUpdate201409Member 2020-01-01 2020-03-31 0001622194 dea:EnvironmentalProtectionAgencyMember us-gaap:AccountingStandardsUpdate201409Member 2021-01-01 2021-03-31 0001622194 dea:DepartmentOfTransportationMember us-gaap:AccountingStandardsUpdate201409Member 2021-01-01 2021-03-31 0001622194 dea:GeneralServicesAdministrationMember us-gaap:AccountingStandardsUpdate201409Member 2021-01-01 2021-03-31 0001622194 dea:FoodAndDrugAdministrationMember us-gaap:AccountingStandardsUpdate201409Member 2021-01-01 2021-03-31 0001622194 dea:MilitaryEntranceProcessingCommandMember us-gaap:AccountingStandardsUpdate201409Member 2021-01-01 2021-03-31 0001622194 dea:MilitaryEntranceProcessingCommandMember us-gaap:AccountingStandardsUpdate201409Member 2020-01-01 2020-03-31 0001622194 dea:UnitedStatesCitizenshipAndImmigrationServicesMember us-gaap:AccountingStandardsUpdate201409Member 2021-01-01 2021-03-31 0001622194 dea:FederalEmergencyManagementAgencyMember us-gaap:AccountingStandardsUpdate201409Member 2021-01-01 2021-03-31 0001622194 dea:InternalRevenueServiceMember us-gaap:AccountingStandardsUpdate201409Member 2021-01-01 2021-03-31 0001622194 dea:InternalRevenueServiceMember us-gaap:AccountingStandardsUpdate201409Member 2020-01-01 2020-03-31 0001622194 dea:FederalBureauOfInvestigationMember us-gaap:AccountingStandardsUpdate201409Member 2021-01-01 2021-03-31 0001622194 dea:FederalBureauOfInvestigationMember us-gaap:AccountingStandardsUpdate201409Member 2020-01-01 2020-03-31 0001622194 dea:BureauOfFiscalServiceMember us-gaap:AccountingStandardsUpdate201409Member 2021-01-01 2021-03-31 0001622194 dea:BureauOfFiscalServiceMember us-gaap:AccountingStandardsUpdate201409Member 2020-01-01 2020-03-31 0001622194 dea:HealthResourcesAndServicesAdministrationHRSAMember us-gaap:AccountingStandardsUpdate201409Member 2021-01-01 2021-03-31 0001622194 dea:USJointStaffCommandJSCMember us-gaap:AccountingStandardsUpdate201409Member 2021-01-01 2021-03-31 0001622194 dea:UnitedStatesImmigrationAndCustomsEnforcementMember us-gaap:AccountingStandardsUpdate201409Member 2020-01-01 2020-03-31 0001622194 dea:SocialSecurityAdministrationMember us-gaap:AccountingStandardsUpdate201409Member 2020-01-01 2020-03-31 0001622194 dea:TheJudiciaryOfTheUnitedStatesGovernmentMember us-gaap:AccountingStandardsUpdate201409Member 2020-01-01 2020-03-31 0001622194 us-gaap:AccountingStandardsUpdate201409Member 2021-01-01 2021-03-31 0001622194 us-gaap:AccountingStandardsUpdate201409Member 2020-01-01 2020-03-31 0001622194 us-gaap:AccountingStandardsUpdate201409Member 2021-03-31 0001622194 us-gaap:AccountingStandardsUpdate201409Member 2020-12-31 0001622194 dea:GSABuffaloMember dea:ParkingGarageMember us-gaap:AccountingStandardsUpdate201409Member 2021-01-01 2021-03-31 0001622194 dea:GSABuffaloMember dea:ParkingGarageMember us-gaap:AccountingStandardsUpdate201409Member 2020-01-01 2020-12-31 0001622194 dea:ParkingGarageMember srt:MaximumMember us-gaap:AccountingStandardsUpdate201409Member 2021-03-31 0001622194 dea:ParkingGarageMember srt:MaximumMember us-gaap:AccountingStandardsUpdate201409Member 2020-12-31 0001622194 us-gaap:AccountingStandardsUpdate201409Member dea:COVID19PandemicMember 2021-01-01 2021-03-31 0001622194 us-gaap:AccountingStandardsUpdate201409Member dea:COVID19PandemicMember 2021-03-31 0001622194 us-gaap:AccountingStandardsUpdate201409Member dea:COVID19PandemicMember 2020-12-31 0001622194 dea:DomesticGovernmentMember us-gaap:SalesRevenueNetMember us-gaap:CreditConcentrationRiskMember 2021-01-01 2021-03-31 0001622194 dea:NonGovernmentalTenantsMember us-gaap:SalesRevenueNetMember us-gaap:CreditConcentrationRiskMember 2021-01-01 2021-03-31 0001622194 stpr:CA 2021-03-31 0001622194 us-gaap:WhollyOwnedPropertiesMember 2021-03-31 0001622194 stpr:CA us-gaap:CreditConcentrationRiskMember us-gaap:SalesRevenueNetMember 2021-01-01 2021-03-31 0001622194 stpr:CA us-gaap:CreditConcentrationRiskMember dea:RentableSquareFeetMember 2021-01-01 2021-03-31 0001622194 us-gaap:SubsequentEventMember 2021-04-21 2021-04-22 0001622194 us-gaap:SubsequentEventMember 2021-04-22

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2021

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                      To                     

Commission file number 001-36834

 

EASTERLY GOVERNMENT PROPERTIES, INC.

(Exact Name of Registrant as Specified in Its Charter)

 

 

Maryland

 

47-2047728

(State of Incorporation)

 

(IRS Employer Identification No.)

 

 

 

2001 K Street NW, Suite 775 North, Washington, D.C.

 

20006

(Address of Principal Executive Offices)

 

(Zip Code)

(202) 595-9500

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading

Symbol(s)

Name of each exchange on which registered

Common Stock

DEA

New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes      No  

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes      No  

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large Accelerated Filer

 

Accelerated Filer

Non-Accelerated Filer

Smaller Reporting Company

 

Emerging growth company

 

 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.    

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).    Yes      No  

As of April 23, 2021, the registrant had 83,870,953 shares of common stock, $0.01 par value per share, outstanding.

 

 

 

 


 

 

INDEX TO FINANCIAL STATEMENTS

 

 

Page

Part I: Financial Information

 

 

 

   Item 1: Financial Statements:

 

Consolidated Financial Statements

 

 

 

Consolidated Balance Sheets as of March 31, 2021 and December 31, 2020 (unaudited)

1

 

 

Consolidated Statements of Operations for the Three Months Ended March 31, 2021 and 2020 (unaudited)

2

 

 

Consolidated Statements of Comprehensive Income for the Three Months Ended March 31, 2021 and 2020 (unaudited)

3

 

 

Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2021 and 2020 (unaudited)

4

 

 

Notes to the Consolidated Financial Statements

6

 

 

   Item 2: Management’s Discussion and Analysis of Financial Condition and Results of Operations

18

 

 

   Item 3: Quantitative and Qualitative Disclosures About Market Risk

30

 

 

   Item 4: Controls and Procedures

30

 

 

Part II: Other Information

 

 

 

   Item 1: Legal Proceedings

31

 

 

   Item 1A: Risk Factors

31

 

 

   Item 2: Unregistered Sales of Equity Securities and Use of Proceeds

31

 

 

   Item 3: Defaults Upon Senior Securities

31

 

 

   Item 4: Mine Safety Disclosures

31

 

 

   Item 5: Other Information

31

 

 

   Item 6: Exhibits

32

 

 

Signatures

 

 

 

 

 

 

 

 

 

 

 

 


 

 

Easterly Government Properties, Inc.

Consolidated Balance Sheets (unaudited)

(Amounts in thousands, except share amounts)

 

 

 

March 31, 2021

 

 

December 31, 2020

 

Assets

 

 

 

 

 

 

 

 

Real estate properties, net

 

$

2,255,241

 

 

$

2,208,661

 

Cash and cash equivalents

 

 

6,323

 

 

 

8,465

 

Restricted cash

 

 

6,816

 

 

 

6,204

 

Tenant accounts receivable

 

 

45,746

 

 

 

45,077

 

Intangible assets, net

 

 

162,351

 

 

 

163,387

 

Prepaid expenses and other assets

 

 

31,126

 

 

 

25,746

 

Total assets

 

$

2,507,603

 

 

$

2,457,540

 

 

 

 

 

 

 

 

 

 

Liabilities

 

 

 

 

 

 

 

 

Revolving credit facility

 

 

109,000

 

 

 

79,250

 

Term loan facilities, net

 

 

249,057

 

 

 

248,966

 

Notes payable, net

 

 

447,234

 

 

 

447,171

 

Mortgage notes payable, net

 

 

201,963

 

 

 

202,871

 

Intangible liabilities, net

 

 

23,738

 

 

 

25,406

 

Deferred revenue

 

 

92,118

 

 

 

92,576

 

Interest rate swaps

 

 

10,943

 

 

 

12,781

 

Accounts payable, accrued expenses and other liabilities

 

 

46,756

 

 

 

48,549

 

Total liabilities

 

 

1,180,809

 

 

 

1,157,570

 

 

 

 

 

 

 

 

 

 

Equity

 

 

 

 

 

 

 

 

Common stock, par value $0.01, 200,000,000 shares authorized,

  83,856,953 and 82,106,256 shares issued and outstanding at

   March 31, 2021 and December 31, 2020, respectively

 

 

839

 

 

 

821

 

Additional paid-in capital

 

 

1,464,014

 

 

 

1,424,787

 

Retained earnings

 

 

38,956

 

 

 

31,965

 

Cumulative dividends

 

 

(313,007

)

 

 

(291,652

)

Accumulated other comprehensive loss

 

 

(9,741

)

 

 

(11,351

)

Total stockholders’ equity

 

 

1,181,061

 

 

 

1,154,570

 

Non-controlling interest in Operating Partnership

 

 

145,733

 

 

 

145,400

 

Total equity

 

 

1,326,794

 

 

 

1,299,970

 

Total liabilities and equity

 

$

2,507,603

 

 

$

2,457,540

 

 

The accompanying notes are an integral part of these consolidated financial statements.

1

 


 

Easterly Government Properties, Inc.

Consolidated Statements of Operations (unaudited)

(Amounts in thousands, except share and per share amounts)

 

 

 

For the three months ended March 31,

 

 

 

2021

 

 

2020

 

Revenues

 

 

 

 

 

 

 

 

Rental income

 

$

64,179

 

 

$

56,583

 

Tenant reimbursements

 

 

320

 

 

 

1,152

 

Other income

 

 

502

 

 

 

483

 

Total revenues

 

 

65,001

 

 

 

58,218

 

Expenses

 

 

 

 

 

 

 

 

Property operating

 

 

12,094

 

 

 

11,258

 

Real estate taxes

 

 

7,286

 

 

 

6,562

 

Depreciation and amortization

 

 

22,325

 

 

 

23,556

 

Acquisition costs

 

 

487

 

 

 

538

 

Corporate general and administrative

 

 

5,808

 

 

 

5,483

 

Total expenses

 

 

48,000

 

 

 

47,397

 

Other expense

 

 

 

 

 

 

 

 

Interest expense, net

 

 

(9,121

)

 

 

(8,903

)

Net income

 

 

7,880

 

 

 

1,918

 

Non-controlling interest in Operating Partnership

 

 

(889

)

 

 

(221

)

Net income available to Easterly Government

   Properties, Inc.

 

$

6,991

 

 

$

1,697

 

Net income available to Easterly Government

   Properties, Inc. per share:

 

 

 

 

 

 

 

 

Basic

 

$

0.08

 

 

$

0.02

 

Diluted

 

$

0.08

 

 

$

0.02

 

Weighted-average common shares outstanding

 

 

 

 

 

 

 

 

Basic

 

 

82,120,353

 

 

 

74,892,711

 

Diluted

 

 

82,596,597

 

 

 

75,616,233

 

Dividends declared per common share

 

$

0.26

 

 

$

0.26

 

 

The accompanying notes are an integral part of these consolidated financial statements.

2

 


 

Easterly Government Properties, Inc.

Consolidated Statements of Comprehensive Income (unaudited)

(Amounts in thousands)

 

 

 

For the three months ended March 31,

 

 

 

2021

 

 

2020

 

Net income

 

$

7,880

 

 

$

1,918

 

Other comprehensive income (loss):

 

 

 

 

 

 

 

 

Unrealized gain (loss) on interest rate swaps, net

 

 

1,838

 

 

 

(9,846

)

Other comprehensive income (loss)

 

 

1,838

 

 

 

(9,846

)

Comprehensive income (loss)

 

 

9,718

 

 

 

(7,928

)

Non-controlling interest in Operating Partnership

 

 

(889

)

 

 

(221

)

Other comprehensive (income) loss attributable to

   non-controlling interest

 

 

(228

)

 

 

1,260

 

Comprehensive income (loss) attributable to

   Easterly Government Properties, Inc.

 

$

8,601

 

 

$

(6,889

)

 

The accompanying notes are an integral part of these consolidated financial statements.

 

3

 


 

 

Easterly Government Properties, Inc.

Consolidated Statements of Cash Flows (unaudited)

(Amounts in thousands)

 

 

 

For the three months ended March 31,

 

 

 

2021

 

 

2020

 

Cash flows from operating activities

 

 

 

 

 

 

 

 

Net income

 

$

7,880

 

 

$

1,918

 

Adjustments to reconcile net income to net cash provided by operating activities

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

22,325

 

 

 

23,556

 

Straight line rent

 

 

(1,413

)

 

 

(709

)

Amortization of above- / below-market leases

 

 

(1,286

)

 

 

(1,521

)

Amortization of unearned revenue

 

 

(1,421

)

 

 

(697

)

Amortization of loan premium / discount

 

 

(19

)

 

 

(20

)

Amortization of deferred financing costs

 

 

382

 

 

 

378

 

Amortization of lease inducements

 

 

214

 

 

 

207

 

Non-cash compensation

 

 

1,334

 

 

 

1,000

 

Other

 

 

10

 

 

 

 

Net change in:

 

 

 

 

 

 

 

 

Tenant accounts receivable

 

 

736

 

 

 

2,325

 

Prepaid expenses and other assets

 

 

(6,931

)

 

 

(17,340

)

Deferred revenue associated with operating leases

 

 

963

 

 

 

20,646

 

Accounts payable, accrued expenses and other liabilities

 

 

3,238

 

 

 

8,802

 

Net cash provided by operating activities

 

 

26,012

 

 

 

38,545

 

Cash flows from investing activities

 

 

 

 

 

 

 

 

Real estate acquisitions and deposits

 

 

(63,045

)

 

 

(30,305

)

Additions to operating properties

 

 

(5,628

)

 

 

(4,570

)

Additions to development properties

 

 

(3,423

)

 

 

(18,417

)

Net cash used in investing activities

 

 

(72,096

)

 

 

(53,292

)

Cash flows from financing activities

 

 

 

 

 

 

 

 

Issuance of common shares

 

 

40,403

 

 

 

4,883

 

Credit facility draws

 

 

80,000

 

 

 

56,500

 

Credit facility repayments

 

 

(50,250

)

 

 

(20,500

)

Repayments of mortgage notes payable

 

 

(940

)

 

 

(870

)

Dividends and distributions paid

 

 

(24,186

)

 

 

(22,086

)

Payment of offering costs

 

 

(473

)

 

 

(122

)

Net cash provided by financing activities

 

 

44,554

 

 

 

17,805

 

Net increase (decrease) in Cash and cash equivalents and Restricted cash

 

 

(1,530

)

 

 

3,058

 

Cash and cash equivalents and Restricted cash, beginning of period

 

 

14,669

 

 

 

15,549

 

Cash and cash equivalents and Restricted cash, end of period

 

$

13,139

 

 

$

18,607

 

 

The accompanying notes are an integral part of these consolidated financial statements.

 

4

 


 

 

Easterly Government Properties, Inc.

Consolidated Statements of Cash Flows (unaudited)

(Amounts in thousands)

 

Supplemental disclosure of cash flow information is as follows:

 

 

 

For the three months ended March 31,

 

 

 

2021

 

 

2020

 

Cash paid for interest, net of capitalized interest

 

$

9,597

 

 

$

9,358

 

Supplemental disclosure of non-cash information

 

 

 

 

 

 

 

 

Additions to operating properties accrued, not paid

 

$

1,269

 

 

$

1,784

 

Additions to development properties accrued, not paid

 

 

1,654

 

 

 

8,411

 

Offering costs accrued, not paid

 

 

6

 

 

 

1

 

Deferred asset acquisition costs accrued, not paid

 

 

65

 

 

 

151

 

Contingent consideration accrued, not paid

 

 

336

 

 

 

336

 

Unrealized gain (loss) on interest rate swaps, net

 

 

1,838

 

 

 

(9,846

)

Properties acquired for Common Units

 

 

 

 

 

21,550

 

Exchange of Common Units for Shares of Common Stock

 

 

 

 

 

 

 

 

Non-controlling interest in Operating Partnership

 

$

(2,664

)

 

$

(597

)

Common stock

 

 

2

 

 

 

1

 

Additional paid-in capital

 

 

2,662

 

 

 

596

 

Total

 

$

 

 

$

 

 

The accompanying notes are an integral part of these consolidated financial statements.

5

 


 

Easterly Government Properties, Inc.

Notes to the Consolidated Financial Statements (unaudited)

1. Organization and Basis of Presentation

The information contained in the following notes to the consolidated financial statements is condensed from that which would appear in the annual consolidated financial statements; accordingly, the consolidated financial statements included herein should be reviewed in conjunction with the consolidated financial statements for the fiscal year ended December 31, 2020, and related notes thereto, included in the Annual Report on Form 10-K of Easterly Government Properties, Inc. (the “Company”) for the year ended  December 31, 2020 filed with the U.S. Securities and Exchange Commission (the “SEC”) on February 24, 2021.

The Company is a Maryland corporation that has elected to be taxed as a real estate investment trust (“REIT”) under the Internal Revenue Code of 1986, as amended (the “Code”), commencing with its taxable year ended December 31, 2015. The operations of the Company are carried on 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 March 31, 2021, we wholly owned 82 operating properties in the United States, encompassing approximately 7.5 million leased square feet in the aggregate, including 80 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 March 31, 2021, 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 of our business. We are the sole general partner of the Operating Partnership. We owned approximately 89.0% of the aggregate limited partnership interests in the Operating Partnership (“common units”) at March 31, 2021. 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.

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, Easterly Government Properties TRS, LLC, Easterly Government Services, LLC, the Operating Partnership and its other subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation.

Basis of Presentation

The condensed consolidated financial statements included herein are unaudited; however, they include all adjustments (consisting only of normal recurring adjustments) which, in the opinion of management, are necessary to state fairly the consolidated financial position of the Company at March 31, 2021 and December 31, 2020, and the consolidated results of operations for the three months ended March 31, 2021 and 2020, and the consolidated cash flows for the three months ended March 31, 2021 and 2020. The year-end condensed consolidated balance sheet data was derived from audited financial statements but does not include all disclosures required by GAAP. The results of operations for the interim periods presented are not necessarily indicative of the results to be expected for the full year.

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. We base our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, including the impact of extraordinary events such as the

6

 


 

novel coronavirus (COVID-19) pandemic, the results of which form the basis for making judgements about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

 

 

2. Summary of Significant Accounting Policies

The significant accounting policies used in the preparation of the Company’s condensed consolidated financial statements are disclosed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020.

Reclassifications

Certain prior year amounts have been reclassified to conform to the current year presentation.

3. Real Estate and Intangibles 

Acquisitions

During the three months ended March 31, 2021, we acquired three operating properties in asset acquisitions, consisting of FBI – Knoxville, ICE – Louisville, and USAO – Louisville for an aggregate purchase price of $64.1 million. 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):

 

 

Total

 

Real estate

 

 

 

 

Land

 

$

4,860

 

Building

 

 

49,807

 

Acquired tenant improvements

 

 

3,326

 

Total real estate

 

 

57,993

 

Intangible assets

 

 

 

 

In-place leases

 

 

4,490

 

Acquired leasing commissions

 

 

1,293

 

Above-market leases

 

 

301

 

Total intangible assets

 

 

6,084

 

Intangible liabilities

 

 

 

 

Below-market leases

 

 

(1

)

Total intangible liabilities

 

 

(1

)

Purchase price

 

$

64,076

 

 

We did not assume any debt upon acquisition of these properties. The intangible assets and liabilities of operating properties acquired during the three months ended March 31, 2021 have a weighted average amortization period of 7.40 years as of March 31, 2021. During the three months ended March 31, 2021, we included $0.3 million of revenues and less than $0.1 million of net income in our Consolidated Statements of Operations related to the operating properties acquired.

During the three months ended March 31, 2021, we incurred $0.5 million of acquisition-related expenses mainly consisting of internal costs associated with property acquisitions.

7

 


 

Consolidated Real Estate and Intangibles

Real estate and intangibles consisted of the following as of March 31, 2021 (amounts in thousands):

 

 

Total

 

Real estate properties, net

 

 

 

 

Land

 

$

219,933

 

Building and improvements

 

 

2,157,087

 

Acquired tenant improvements

 

 

80,051

 

Construction in progress

 

 

26,811

 

Accumulated depreciation

 

 

(228,641

)

Total Real estate properties, net

 

 

2,255,241

 

Intangible assets, net

 

 

 

 

In-place leases

 

 

259,223

 

Acquired leasing commissions

 

 

62,643

 

Above market leases

 

 

17,889

 

Accumulated amortization

 

 

(177,404

)

Total Intangible assets, net

 

 

162,351

 

Intangible liabilities, net

 

 

 

 

Below market leases

 

 

(73,602

)

Accumulated amortization

 

 

49,864

 

Total Intangible liabilities, net

 

$

(23,738

)

 

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 March 31, 2021 (amounts in thousands):

 

 

Acquired Above-Market Lease Intangibles

 

 

Acquired Below-Market Lease Intangibles

 

2021

 

$

1,152

 

 

$

(4,164

)

2022

 

 

1,452

 

 

 

(4,223

)

2023

 

 

1,428

 

 

 

(4,024

)

2024

 

 

1,341

 

 

 

(2,877

)

2025

 

 

1,286

 

 

 

(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.

 

 

8

 


 

 

4. Debt

At March 31, 2021, our consolidated borrowings consisted of the following (amounts in thousands):

 

 

Principal Outstanding

 

 

Interest

 

 

Current

 

Loan

 

March 31, 2021

 

 

Rate (1)

 

 

Maturity

 

Revolving credit facility:

 

 

 

 

 

 

 

 

 

 

 

Revolving credit facility (2)

 

$

109,000

 

 

L + 130bps

 

 

June 2022 (3)

 

Total revolving credit facility

 

 

109,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Term loan facilities:

 

 

 

 

 

 

 

 

 

 

 

2016 term loan facility

 

 

100,000

 

 

2.67% (4)

 

 

March 2024

 

2018 term loan facility

 

 

150,000

 

 

3.96% (5)

 

 

June 2023

 

Total term loan facilities

 

 

250,000

 

 

 

 

 

 

 

 

Less: Total unamortized deferred financing fees

 

 

(943

)

 

 

 

 

 

 

 

Total term loan facilities, net

 

 

249,057

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Notes payable:

 

 

 

 

 

 

 

 

 

 

 

2017 series A senior notes

 

 

95,000

 

 

4.05%

 

 

May 2027

 

2017 series B senior notes

 

 

50,000

 

 

4.15%

 

 

May 2029

 

2017 series C senior notes

 

 

30,000

 

 

4.30%

 

 

May 2032

 

2019 series A senior notes

 

 

85,000

 

 

3.73%

 

 

September 2029

 

2019 series B senior notes

 

 

100,000

 

 

3.83%

 

 

September 2031

 

2019 series C senior notes

 

 

90,000

 

 

3.98%

 

 

September 2034

 

Total notes payable

 

 

450,000

 

 

 

 

 

 

 

 

Less: Total unamortized deferred financing fees

 

 

(2,766

)

 

 

 

 

 

 

 

Total notes payable, net

 

 

447,234

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Mortgage notes payable:

 

 

 

 

 

 

 

 

 

 

 

DEA – Pleasanton

 

 

15,700

 

 

L + 150bps (6)

 

 

October 2023

 

VA – Golden

 

 

8,965

 

 

5.00% (6)

 

 

April 2024

 

MEPCOM – Jacksonville

 

 

7,640

 

 

4.41% (6)

 

 

October 2025

 

USFS II – Albuquerque

 

 

15,826

 

 

4.46% (6)

 

 

July 2026

 

ICE – Charleston

 

 

15,824

 

 

4.21% (6)

 

 

January 2027

 

VA – Loma Linda

 

 

127,500

 

 

3.59% (6)

 

 

July 2027

 

CBP – Savannah

 

 

11,796

 

 

3.40% (6)

 

 

July 2033

 

Total mortgage notes payable

 

 

203,251

 

 

 

 

 

 

 

 

Less: Total unamortized deferred financing fees

 

 

(1,389

)

 

 

 

 

 

 

 

Less: Total unamortized premium/discount

 

 

101

 

 

 

 

 

 

 

 

Total mortgage notes payable, net

 

 

201,963

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total debt

 

$

1,007,254

 

 

 

 

 

 

 

 

 

(1)

At March 31, 2021, the one-month LIBOR (“L”) was 0.11%. 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 $341.0 million at March 31, 2021 with an accordion feature that permits us to request additional lender commitments for up 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.

 

(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 our consolidated leverage ratio, as defined in our 2016 term loan facility agreement.

9

 


 

 

(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 our 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%.

Financial Covenant Considerations

As of March 31, 2021, 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 March 31, 2021, 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 March 31, 2021, the carrying value of our revolving credit facility approximated fair value.

As of March 31, 2021, the fair value of our 2016 term loan facility was determined by considering the variable interest rate and credit spreads. We deem the fair value of our 2016 term loan facility as a Level 3 measurement. At March 31, 2021, the fair value of our 2016 term loan facility was $100.0 million.

As of March 31, 2021, the fair value of our 2018 term loan facility was determined by considering the variable interest rate and credit spreads. We deem the fair value of our 2018 term loan facility as a Level 3 measurement. At March 31, 2021, the fair value of our 2018 term loan facility was $150.0 million.

As of March 31, 2021, 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 senior unsecured notes payable instruments as a Level 3 measurement. At March 31, 2021, the fair value of our senior unsecured notes payable was $483.2 million.

As of March 31, 2021, the fair value of our mortgage notes payable was determined by discounting future contractual principal and interest payments using prevailing market rates. We deem the fair value measurement of our mortgage notes payable instruments as a Level 3 measurement. At March 31, 2021, the fair value of our mortgage notes payable was $209.6 million.

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 as of March 31, 2021 (amounts in thousands):

Notional Amount

 

 

Fixed Rate

 

 

Floating Rate Index

 

Effective Date

 

Expiration Date

 

Fair Value

 

$

100,000

 

 

 

1.41

%

 

One-Month LIBOR

 

March 29, 2017

 

September 29, 2023

 

$

(2,772

)

$

150,000

 

 

 

2.71

%

 

One-Month LIBOR

 

December 13, 2018

 

June 19, 2023

 

$

(8,171

)

 

The table below sets forth the fair value of our interest rate derivatives as well as their classification on our Consolidated Balance Sheet (amounts in thousands):

Balance Sheet Line Item

 

As of March 31, 2021

 

Interest rate swaps - Asset

 

$

 

Interest rate swaps - Liability

 

$

(10,943

)

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.

10

 


 

The table below presents the effects of our interest rate derivatives on our Consolidated Statements of Operations and Comprehensive Income (Loss) (amounts in thousands):

 

 

For the three months ended March 31,

 

 

 

2021

 

 

2020

 

Unrealized gain (loss) recognized in AOCI

 

$

547

 

 

$

(10,241

)

Loss reclassified from AOCI into interest expense

 

 

(1,291

)

 

 

(395

)

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 March 31, 2021, the fair value of derivatives in a liability position, which includes accrued interest but excludes any adjustment for nonperformance risk, related to these agreements was $11.3 million. As of March 31, 2021, the Company had not breached the provisions of these agreements and had not posted any collateral related to these agreements. If the Company breached any of these provisions it would be required to settle its obligations under the agreements at their termination value of $11.3 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 March 31, 2021 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.

11

 


 

The table below presents the Company’s assets and liabilities measured at fair value on a recurring basis as of March 31, 2021, aggregated by the level in the fair value hierarchy within which those measurements fall (amounts in thousands):

<

 

 

As of March 31, 2021

 

Balance Sheet Line Item