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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

You should read the following discussion of our results of operations and financial condition in conjunction with the audited consolidated financial statements and related notes thereto as of December 31, 2021 and 2020 and for the years ended December 31, 2021, 2020 and 2019 and the sections entitled “Risk Factors,” “Forward Looking Statements,” “Business,” and “Properties” contained elsewhere in this Annual Report on Form 10-K. This discussion contains forward-looking statements that involve risks and uncertainties. The forward-looking statements are not historical facts, but rather are based on current expectations, estimates, assumptions and projections about our industry, business and future financial results. Our actual results could differ materially from the results contemplated by these forward-looking statements due to a number of factors, including those discussed in the sections of this Annual Report on Form 10-K entitled “Risk Factors” and “Forward Looking Statements.”

Overview

References to “Easterly,” “we,” “our,” “us” and “our company” refer to Easterly Government Properties, Inc., a Maryland corporation, together with our consolidated subsidiaries including Easterly Government Properties LP, a Delaware limited partnership, which we refer to herein as our operating partnership. We present certain financial information and metrics “at Easterly Share,” which is calculated on an entity-by-entity basis. “At Easterly Share” information, which we also refer to as being “at share,” “pro rata,” “our pro rata share” or “our share” is not, and is not intended to be, a presentation in accordance with GAAP.

We are an internally managed real estate investment trust, or 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, which we refer to herein as the 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, 2021, we wholly owned 85 operating properties and four operating properties through an unconsolidated joint venture in the United States encompassing approximately 8.6 million leased square feet (8.4 million pro rata), including 88 operating properties that were leased primarily to U.S. Government tenant agencies and one operating property that was entirely leased to a private tenant. As of December 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.

Our operating partnership holds substantially all of our assets and conducts substantially all of our business. We are the sole general partner of our operating partnership and owned approximately 89.0% of the aggregate limited partnership interests in our operating partnership, which we refer to herein as common units, as of December 31, 2021. 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.

Acquisitions

On March 17, 2021, we acquired a 99,130 leased square foot Federal Bureau of Investigation (“FBI”) field office in Knoxville, Tennessee. The building is a built-to-suit property completed in 2010. The facility is leased to the GSA for beneficial use of the FBI with a lease expiration of August 2025.

On March 17, 2021, we acquired a 60,000 leased square foot U.S Attorney’s Office (“USAO”) facility in Louisville, Kentucky. The building is a built-to-suit property completed in 2011. The facility is leased to the GSA for beneficial use of the USAO with a lease expiration of December 2031.

On March 17, 2021, we acquired a 17,420 square foot U.S Immigration and Customs Enforcement (“ICE”) office in Louisville, Kentucky. The building is a built-to-suit office facility completed in 2011. The facility is leased to the GSA for beneficial use of ICE which expired in May 2021 and is in holdover as of December 31, 2021.

On April 22, 2021, we acquired a 43,600 square foot U.S. Attorney’s Office (“USAO”) in Springfield, Illinois. The building is a build-to-suit property completed in 2002. The facility is leased to the GSA for beneficial use of the USAO with a lease expiration of March 2038.

On May 20, 2021, we acquired a 94,378 square foot National Weather Service Facility (“NWS”) in Kansas City, Missouri. The building was originally constructed in 1998 and substantially renovated in 2020. The facility is leased to the GSA for beneficial use of the NWS with a lease expiration of December 2038.

On July 22, 2021, we acquired a 61,384 square foot U.S. Department of Homeland Security facility in Cleveland, Ohio. The building was originally constructed in 1981 and substantially renovated in 2016 and 2021. The facility is primarily leased to the GSA for beneficial use of ICE and the NWS and has lease expirations ranging from August 2031 to September 2040.

On October 14, 2021, we acquired a 489,316 leased square foot U.S. Citizenship and Immigration Services (“USCIS”) facility in Kansas City, Missouri. The building was substantially renovated-to-suit in 1999. The facility is primarily leased to the GSA for beneficial use of the USCIS and has lease expirations ranging from 2024 to 2042. In conjunction with the acquisition, we assumed $51.5 million of mortgage notes payable.

On November 1, 2021, we acquired an 80,000 square foot Department of Veteran Affairs (“VA”) facility located in the Midwest United States. The building is a build-to-suit property that was completed during 2021. The facility is leased to the VA and has a lease expiration of May 2041.

Dispositions

On June 4, 2021, we sold SSA – Mission Viejo to a third party. Net proceeds from the sale of operating property were approximately $3.3 million and we recognized a gain on the sale of operating property of approximately $0.5 million for the year ended December 31, 2021.

On September 28, 2021, we sold United Technologies Midland to a third party. Net proceeds from the sale of operating property were approximately $4.0 million and we recognized a gain on the sale of operating property of approximately $0.8 million for the year ended December 31, 2021.

Investment in unconsolidated real estate venture

On October 13, 2021, we formed a new JV with a global investor (the “JV Partner”) to fund the acquisition of a portfolio of ten properties anticipated to encompass 1,214,165 leased square feet (the “Portfolio Acquisition”). We own a 53.0% interest in the JV, subject to preferred allocations as provided in the JV agreement, and will act as manager of the Portfolio Acquisition properties, with customary rights and obligations, and will receive asset management fees and a promote interest.

The JV will serve as the vehicle for the Portfolio Acquisition and was assigned the rights of the purchase and sale agreement entered into by our operating partnership on September 30, 2021. The aggregate contractual purchase price for the Portfolio Acquisition is $635.6 million and the portfolio is 100% leased to the VA with a weighted average lease term of 19.6 years. As of December 31, 2021, the JV had closed on four of the ten properties included in the Portfolio Acquisition.

On October 13, 2021, the JV acquired a 31,062 square foot VA field office located in Lenexa, Kansas. The building is a build-to-suit property that was completed during 2021. The facility is leased to the VA and has a lease expiration of May 2041.

On October 13, 2021, the JV acquired a 120,916 square foot VA field office located in Lubbock, Texas. The building is a build-to-suit property that was completed during 2020. The facility is leased to the VA and has a lease expiration of December 2040.

On November 17, 2021, the JV acquired a 94,566 square foot VA field office located in Chattanooga, Tennessee. The building is a build-to-suit property that was completed during 2020. The facility is leased to the VA and has a lease expiration of November 2035.

On December 22, 2021, the JV acquired a 226,148 square foot VA field office located in San Antonio, Texas. The building is a build-to-suit property that was completed during 2021. The facility is leased to the VA and has a lease expiration of August 2041.

We expect the JV to close on the remaining Portfolio Acquisition during 2022 and 2023.

Impact of the COVID-19 Pandemic

The novel coronavirus, or COVID-19, pandemic, has caused and continues to cause significant disruptions to the U.S., regional and global economies and has contributed to significant volatility and negative pressure in financial markets.

We continue to carefully monitor the COVID-19 pandemic, including the emergence of new variants, and its potential impact on our business. We are following guidelines established by the Centers for Disease Control and the World Health Organization and orders issued by the state and local governments where we operate. In addition, we have taken a number of precautionary steps to safeguard our business and our employees from the COVID-19 pandemic, including, but not limited to, implementing non-essential travel restrictions when necessary and facilitating telecommuting arrangements for our employees. We have taken these precautionary steps while maintaining business continuity so that we can continue to deliver service to and meet the demands of our tenants, including our U.S. Government tenant agencies.

To date, the impact of the COVID-19 pandemic on our business and financial condition has not been significant. The future impact of the COVID-19 pandemic on our operations and financial condition will, however, depend on future developments, which are highly uncertain and cannot be predicted with confidence, including the scope, severity and duration of the pandemic, the actions taken to contain the pandemic or mitigate its impact, and the direct and indirect economic effects of the pandemic and containment measures, among others. See “Item 1A Risk Factors” for a discussion of the potential adverse impact of the COVID-19 pandemic on our business, results of operations and financial condition.

Financial information analyzed below reflects the audited financial statements as of December 31, 2021, included in the F pages of this Annual Report on Form 10-K.

Results of Operations

Comparison of Results of Operations for the Years Ended December 31, 2021 and December 31, 2020

The financial information presented below summarizes the results of operations of our company for the years ended December 31, 2021 and 2020.

For the years ended December 31,

Revenues

Asset management income 136 — 136

Expenses

Other income (expense)

Income from unconsolidated real estate venture 271 — 271

Gain (loss) on the sale of operating properties 1,307 (3,995 ) 5,302

Revenues

Total revenues increased $29.8 million to $274.9 million for the year ended December 31, 2021 compared to $245.1 million for the year ended December 31, 2020.

The $29.3 million increase in Rental income is primarily attributable to an increase in revenues from the eight operating properties acquired since December 31, 2020, favorable lease renewals, a full period of operations from the nine operating properties acquired and one development property placed in service during the year ended December 31, 2020, offset by a decrease in revenues

attributable to the disposal of two operating propertiessince December 31, 2020 and the disposal of one operating property during the year ended December 31, 2020.

The $0.7 million increase in Tenant reimbursements are primarily attributable to an increase in tenant project reimbursements.

The $0.3 million decrease in Other income is primarily attributable to a decrease in parking and interest income.

The $0.1 million increase in Asset management income is attributable to the fee earned by the Company for asset management of the JV.

Expenses

Total expenses increased by $11.8 million to $203.8 million for the year ended December 31, 2021 compared to $192.1 million for the year ended December 31, 2020.

The $8.3 million increase in Property operating expenses is primarily attributable to an increase in property operating expenses associated with the eight operating properties acquired since December 31, 2020, a full period of operations from the nine operating properties acquired and one development property placed in service during the year ended December 31, 2020 and an increase in expenses associated with internal asset management costs.

The $3.3 million increase in Real estate taxes is also primarily attributable to the eight operating properties acquired since December 31, 2020 as well as a full period of operations from the nine operating properties acquired and one development property placed in service during the year ended December 31, 2020.

Additionally, the $2.5 million decrease in Depreciation and amortization is primarily attributable to a decrease in amortization related to fully amortized lease intangibles offset by the eight operating properties acquired since December 31, 2020, as well as a full period of operations from the nine operating properties acquired and one development property placed in service during the year ended December 31, 2020.

The $2.9 million increase in Corporate and general administrative costs was primarily due to an increase in employee costs.

Income from unconsolidated real estate venture

On October 13, 2021, the Company formed a new JV to fund the acquisition of a portfolio of ten properties in which the Company owns a 53.0% interest. The increase in Income from unconsolidated real estate venture is attributable to the Company’s pro rata share of operations from properties acquired by the JV in the fourth quarter of 2021.

Interest Expense

Interest expense increased by $3.2 million to $38.6 million for the year ended December 31, 2021 compared to $35.5 million for the year ended December 31, 2020. The increase is primarily related to issuances of our 2021 series unsecured senior notes (as described below) and a decrease in capitalized interest on our development projects resulting from the completion of FDA – Lenexa in the third quarter of 2020.

Gain (Loss) on the sale of operating properties

Gain (loss) on the sale of operating properties increased by $5.3 million to a $1.3 million gain for the year ended December 31, 2021 compared to a $4.0 million loss for the year ended December 31, 2020. Loss on the sale of operating properties in 2020 of $4.0 million was due to the sale of DEA – Otay in the fourth quarter of 2020. The gain on the sale of operating properties in 2021 of $1.3 million was due to the sale of SSA – Mission Viejo in the second quarter of 2021 and United Technologies – Midland in the third quarter of 2021.

Comparison of Results of Operations for the Years Ended December 31, 2020 and December 31, 2019

Information pertaining to fiscal year 2019 was included in our Annual Report on Form 10-K for the year ended December 31, 2020 on page 35 under Part II, Item 7, “Management’s Discussion and Analysis of Financial Position and Results of Operations”, which was filed with the Securities and Exchange Commission, or SEC, on February 24, 2021.

Liquidity and Capital Resources

We anticipate that our cash flows from the sources listed below will provide adequate capital for the next 12 months for all anticipated uses, including all scheduled principal and interest payments on our outstanding indebtedness, current and anticipated tenant improvements, planned and possible acquisitions of properties, including the remaining Portfolio Acquisition properties through the JV, stockholder distributions to maintain our qualification as a REIT and other capital obligations associated with conducting our business. At December 31, 2021, we had approximately $11.1 million available in cash and cash equivalents and there was $435.5 million available under our revolving credit facility.

Our primary expected sources of capital are as follows:

• cash and cash equivalents;

• operating cash flow;

• distribution of cash flows from the JV;

• available borrowings under our revolving credit facility;

• issuance of long-term debt;

• issuance of equity, including under our ATM Programs (as described below); and

• asset sales.

Our short-term liquidity requirements consist primarily of funds to pay for the following:

• tenant improvements allowances and leasing costs;

• recurring maintenance and capital expenditures;

• debt repayment requirements;

• corporate and administrative costs;

• interest payments on our outstanding indebtedness;

• interest swap payments; and

• distribution payments.

Our long-term liquidity needs, in addition to recurring short-term liquidity needs as discussed above, consist primarily of funds necessary to pay for acquisitions, non-recurring capital expenditures, and scheduled debt maturities. Although we may be able to anticipate and plan for certain of our liquidity needs, unexpected increases in uses of cash that are beyond our control and which affect our financial condition and results of operations may arise, or our sources of liquidity may be fewer than, and the funds available from such sources may be less than, anticipated or required. As of the date of this filing, there were no known commitments or events that would have a material impact on our liquidity.

Equity

Shelf Registration Statement on Form S-3

On February 25, 2021, we filed an automatic universal shelf registration statement on Form S-3 with the SEC, which was deemed automatically effective and which provides for the registration of unspecified amounts of securities. However, there can be no assurance that we will be able to complete any such offerings of securities in the future.

Offering of Common Stock on a Forward Basis

On August 11, 2021, we and the operating partnership completed an underwritten public offering of 6,300,000 shares of common stock offered by forward dealers. We also entered into separate forward sale agreements with each of the forward purchasers (the “Forward Sales Agreements”), pursuant to which the forward purchasers borrowed and sold to the underwriters an aggregate of

6,300,000 shares of our common stock. On December 28, 2021, we partially settled 3,991,000 shares of common stock under the Forward Sale Agreements and received net proceeds of approximately $85.0 million. We expect to physically settle the remaining Forward Sale Agreements and receive proceeds, subject to certain adjustments, from the sale of those shares of common stock upon one or more such physical settlements within approximately one year from the date of the offering. Although we expect to settle the Forward Sale Agreements entirely by the physical delivery of shares of our common stock for cash proceeds, we may also elect to cash or net-share settle all or a portion of our obligations under the Forward Sale Agreements, in which case, we may receive, or may owe, cash or shares of our common stock from or to the forward purchasers. The Forward Sale Agreements provide for an initial forward price of $21.64 per share, subject to certain adjustments pursuant to the terms of each of the Forward Sale Agreements. The Forward Sale Agreements are subject to early termination or settlement under certain circumstances.

ATM Programs

On each of March 4, 2019 and December 20, 2019, we entered into separate equity distribution agreements with various financial institutions pursuant to which we may issue and sell shares of our common stock having an aggregate offering price of up to $200.0 million and $300.0 million, respectively, from time to time (the “2019 ATM Programs”) in negotiated transactions or transactions that are deemed to be “at the market” offerings as defined in Rule 415 under the Securities Act. The 2019 ATM Programs implemented on March 4, 2019 and December 20, 2019 are referred to as the “March 2019 ATM Program” and “December 2019 ATM Program” respectively. Under each of the 2019 ATM Programs, we may also enter into one or more forward transactions (each, a “forward sale transaction”) under separate master forward sale confirmations and related supplemental confirmations with each of the financial institutions and, under the December 2019 ATM Program only, Truist Bank, for the sale of shares of our common stock on a forward basis.

On June 22, 2021, we entered into separate equity distribution agreements with various financial institutions pursuant to which we may issue and sell shares of our common stock having an aggregate offering price of up to $300.0 million from time to time (the “2021 ATM Program”) in negotiated transactions or transactions that are deemed to be “at the market” offerings as defined in Rule 415 under the Securities Act. Under the 2021 ATM Program, we may also enter into one or more forward sale transactions under separate master forward sale confirmations and related supplemental confirmations with each of the financial institutions for the sale of shares of our common stock on a forward basis.

The following table sets forth certain information with respect to issuances, including in settlement of forward sales transactions, made under the 2019 ATM Programs in each fiscal quarter in the year ended December 31, 2021 (amounts in thousands except share amounts):

March 2019 ATM Program December 2019 ATM Program

No sales of shares of our common stock were made under the 2021 ATM Program during the year ended December 31, 2021.

We used the net proceeds received from such sales for general corporate purposes. As of December 31, 2021, we had approximately $300.0 million of gross sales of our common stock available under the 2021 ATM Program, $93.2 million of gross sales of its common stock available under the December 2019 ATM Program and no remaining availability under the March 2019 ATM Program.

Contribution of Property for Common Units

On May 20, 2021, we acquired NWS – Kansas City for which we paid, as partial consideration, 975,452 common units of our operating partnership. 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.

Debt

Indebtedness Outstanding

The following table sets forth certain information with respect to our outstanding indebtedness as of December 31, 2021 (dollars in thousands):

Principal Outstanding Interest Current

Loan December 31, 2021 Rate (1) Maturity

Revolving credit facility:

Total revolving credit facility 14,500

Term loan facilities:

Total term loan facilities 250,000

Less: Total unamortized deferred financing fees (1,421 )

Total term loan facilities, net 248,579

Notes payable:

Less: Total unamortized deferred financing fees (4,411 )

Total notes payable, net 695,589

Mortgage notes payable:

Total mortgage notes payable 251,458

Less: Total unamortized deferred financing fees (1,852 )

Less: Total unamortized premium/discount 2,815

Total mortgage notes payable, net 252,421

Our revolving credit facility, term loan facilities, notes payable, and mortgage notes payable are subject to ongoing compliance with a number of financial and other covenants. As of December 31, 2021, we were in compliance with all applicable financial covenants.

The chart below details our debt capital structure as of December 31, 2021 (dollars in thousands):

Debt Capital Structure December 31, 2021

Total principal outstanding $ 1,215,958

Weighted average maturity 6.7 years

Weighted average interest rate 3.5 %

% Variable debt 2.5 %

% Fixed debt (1) 97.5 %

% Secured debt 20.7 %

Private Placement of Senior Unsecured Notes

On May 11, 2021, we and our operating partnership entered into a note purchase agreement pursuant to which our operating partnership would issue and sell an aggregate of up to $250.0 million of fixed rate, senior unsecured notes (the “Notes”) consisting of (i) 2.62% Series A Senior Notes due October 14, 2028, in an aggregate principal amount of $50.0 million, and (ii) 2.89% Series B Senior Notes due October 14, 2030, in an aggregate principal amount of up to $200.0 million.

On October 14, 2021, our operating partnership issued and sold, an aggregate of $250.0 million of the Notes pursuant to the note purchase agreement entered into on May 11, 2021. The Notes are unconditionally guaranteed by us and various subsidiaries of our operating partnership.

Senior Unsecured Credit Facility and 2016 Term Loan Facility

On July 23, 2021, we entered into a second amended and restated senior unsecured credit agreement (the “second amended senior unsecured credit agreement”) governing our senior unsecured credit facility. The second amended senior unsecured credit agreement increased the borrowing capacity under our prior senior unsecured credit facility by $50.0 million for a total credit facility size of $650.0 million, consisting of: (i) a $450.0 million senior unsecured revolving credit facility (our “revolving credit facility”), and (ii) a $200.0 million senior unsecured term loan facility (our “2018 term loan facility”), up to $50.0 million of which will be available for a 364-day delayed draw period. Our revolving credit facility also includes an accordion feature that will provide us with additional capacity, subject to the satisfaction of customary terms and conditions, of up to $250.0 million.

Our operating partnership is the borrower, and certain of our subsidiaries that directly own certain of our properties are guarantors under our senior unsecured credit facility. Our revolving credit facility has an initial four-year term and will mature in July 2025, with two six-month as-of-right extension options, subject to certain conditions and the payment of an extension fee. Our 2018 term loan facility has a five-year term and will mature in July 2026. In addition, our 2018 term loan facility is prepayable without penalty for the entire term of the loan.

Borrowings under our senior unsecured credit facility bear interest, at our option, at floating rates equal to either:

If our operating partnership achieves certain sustainability targets as defined in the second amended senior unsecured credit agreement, the applicable margin will decrease by 0.01%.

In addition, on July 23, 2021, we entered into a fourth amendment to the loan agreement governing our $100.0 million senior unsecured term loan facility (our “2016 term loan facility”). The fourth amendment amends certain provisions in the loan agreement governing our 2016 term loan facility to conform to certain changes made to corresponding provisions in our second amended senior unsecured credit agreement.

Material Cash Commitments

The following table shows our material cash commitments as of December 31, 2021:

Payments due by period

Unconsolidated Real Estate Venture

We consolidate entities in which we have a controlling interest or are the primary beneficiary in a variable interest entity. From time to time, we may have off-balance sheet unconsolidated real estate ventures and other unconsolidated arrangements with varying structures.

As of December 31, 2021, we have investments in our unconsolidated real estate venture totaling $131.9 million. For a more complete description of our unconsolidated real estate venture, see Note 4 to the Consolidated Financial Statements.

As of December 31, 2021, we had capital commitments to our unconsolidated real estate venture totaling $131.2 million. As of December 31, 2021, none of the properties owned by our unconsolidated real estate venture were encumbered by mortgage indebtedness.

Dividend Policy

In order to qualify as a REIT, we are required to distribute to our stockholders, on an annual basis, at least 90% of our REIT taxable income, determined without regard to the deduction for dividends paid and excluding net capital gains. We anticipate distributing all of our taxable income. We expect to make quarterly distributions to our stockholders in a manner intended to satisfy this requirement. Prior to making any distributions for U.S. federal tax purposes or otherwise, we must first satisfy our operating and debt service obligations. It is possible that it would be necessary to utilize cash reserves, liquidate assets at unfavorable prices or incur additional indebtedness in order to make required distributions. It is also possible that our board of directors could decide to make required distributions in part by using shares of our common stock.

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

We use long-term investment partnership units in our operating partnership, which we refer to herein as LTIP units, as a form of performance-based award and service-based award for annual long-term incentive equity compensation. LTIP units are convertible into common units upon the satisfaction of certain conditions. 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 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.

Cash Flow

Comparison of Cash Flow for the Years Ended December 31, 2021 and December 31, 2020

The following table sets forth a summary of cash flows for our company for the years ended December 31, 2021 and 2020:

For the years ended December 31,

(Amounts in thousands)

Net cash provided by (used in):

Operating Activities

We generated $118.3 million and $145.2 million of cash from operating activities during the years ended December 31, 2021 and 2020, respectively. Net cash provided by operating activities for the year ended December 31, 2021 included $116.4 million in net cash from rental activities net of expenses and $2.0 million related to the changes in tenant accounts receivables, prepaid expense and other assets, deferred revenue associated with operating leases, principal payments on operating lease obligations and accounts payable, accrued expenses and other liabilities. Net cash provided by operating activities for the year ended December 31, 2020 included $105.0 million in net cash from rental activities net of expenses and $40.2 million related to the changes in tenant accounts receivables, prepaid expense and other assets, deferred revenue associated with operating leases, principal payments on operating lease obligations and accounts payable, accrued expenses and other liabilities.

Investing Activities

We used $363.0 million and $290.2 million in cash for investing activities during the years ended December 31, 2021 and 2020, respectively. Net cash used in investing activities for the year ended December 31, 2021 primarily included $214.7 million in real estate acquisitions, $131.6 million in investment in unconsolidated real estate venture, $17.9 million in additions to operating properties and $6.2 million in additions to development properties, offset by $7.3 million in proceeds from sales. Net cash used in

investing activities for the year ended December 31, 2020 primarily included $232.7million in real estate acquisitions, $43.0 million in additions to development properties and $18.0 million in additions to operating properties, offset by $3.5 million in proceeds from sales.

Financing Activities

We generated $250.2 million and $144.1 million in cash from financing activities during the years ended December 31, 2021 and 2020, respectively. Net cash provided by financing activities for the year ended December 31, 2021 included $250.0 million in gross proceeds from the issuance of Notes and $175.9 million in gross proceeds from issuance of shares of our common stock, offset by $100.0 million in dividends, $64.8 million in net paydowns under the revolving credit facility, $5.3 million in deferred financing costs, $4.2 million in mortgage debt repayment, and $1.5 million in payment of deferred offering costs. Net cash provided by financing activities for the year ended December 31, 2020 included $162.0 million in gross proceeds from issuance of shares of our common stock and $79.3 million in net draws under the revolving credit facility, offset by $91.7 million in dividends, $3.6 million in mortgage debt repayment, and $1.9 million in payment of deferred offering costs.

Comparison of Cash Flow for the Years Ended December 31, 2020 and December 31, 2019

Information pertaining to fiscal year 2019 was included in our Annual Report on Form 10-K for the year ended December 31, 2020 on page 42 under Part II, Item 7, “Management’s Discussion and Analysis of Financial Position and Results of Operations”, which was filed with SEC on February 24, 2021.

Non-GAAP Financial Measures

We use and present Funds From Operations, or FFO, and FFO, as Adjusted as supplemental measures of our performance. The summary below describes our use of FFO and FFO, as Adjusted, provides information regarding why we believe these measures are meaningful supplemental measures of our performance and reconciles these measures from net income (loss), presented in accordance with GAAP.

Funds From Operations and Funds From Operations, as Adjusted

FFO is a supplemental measure of our performance. We present FFO calculated in accordance with the current National Association of Real Estate Investment Trusts, or Nareit, definition set forth in the Nareit FFO White Paper – Restatement 2018. FFO includes the REIT’s share of FFO generated by unconsolidated affiliates. In addition, we present FFO, as Adjusted for certain other adjustments that we believe enhance the comparability of our FFO across periods and to the FFO reported by other publicly traded REITs. FFO is a supplemental performance measure that is commonly used in the real estate industry to assist investors and analysts in comparing results of REITs.

FFO is defined by Nareit as net income, (calculated in accordance with GAAP), excluding:

• Depreciation and amortization related to real estate.

• Gains and losses from the sale of certain real estate assets.

• Gains and losses from change in control.

We present FFO because we consider it an important supplemental measure of our operating performance, and we believe it is frequently used by securities analysts, investors and other interested parties in the evaluation of REITs, many of which present FFO when reporting results.

We adjust FFO to present FFO, as Adjusted as an alternative measure of our operating performance, which, when applicable, excludes the impact of acquisition costs, straight-line rent, amortization of above-/below-market leases, amortization of deferred revenue (which results from landlord assets funded by tenants), non-cash interest expense, non-cash compensation, other non-cash items and the unconsolidated real estate venture’s allocated share of these adjustments. By excluding these income and expense items from FFO, as Adjusted, we believe we provide useful information as these items have no cash impact. In addition, by excluding acquisition related costs we believe FFO, as Adjusted provides useful information that is comparable across periods and more accurately reflects the operating performance of our properties.

FFO and FFO, as Adjusted are presented as supplemental financial measures and do not fully represent our operating performance. Other REITs may use different methodologies for calculating FFO and FFO, as Adjusted or use other definitions of FFO and FFO, as Adjusted and, accordingly, our presentation of these measures may not be comparable to other REITs. Neither FFO nor FFO, as Adjusted is intended to be a measure of cash flow or liquidity. Please refer to our financial statements, prepared in accordance with GAAP, for purposes of evaluating our financial condition, results of operations and cash flows.

The following table sets forth a reconciliation of our net income to FFO and FFO, as Adjusted for the years ended December 31, 2021, 2020, and 2019 (dollars in thousands):

For the years ended December 31,

(Gain) loss on the sale of operating properties (1,307 ) 3,995 (6,245 )

Unconsolidated real estate venture allocated share of above adjustments 362 — —

Adjustments to FFO:

Straight-line rent and other non-cash adjustments (4,417 ) (3,432 ) (2,276 )

Amortization of above-/below-market leases (4,589 ) (5,894 ) (6,320 )

Depreciation of non-real estate assets 77 — —

Factors That May Influence Future Results of Operations

Revenue

Our revenues primarily arise from the rental of space to tenants in our properties and tenant reimbursements, which include reimbursement for operating expenses, which are determined by the base year operating expenses and are subject to reimbursement in subsequent years based on changes in the Consumer Price Index for Urban Wage Earners and Clerical Workers, or urban CPI. Our revenue also includes amounts due from tenants for real estate taxes, projects and other reimbursements. Real estate taxes over the base year are reimbursed by the tenant.

Substantially all of our rental income comes from U.S. Government tenants. We expect that leases to agencies of the U.S. Government will continue to be our primary source of revenues for the foreseeable future. Due to such concentration, adverse events or conditions that affect the U.S. Government could have a more negative effect on our financial condition and operations than if our tenant base was more diverse. However, positive or negative changes in conditions in local markets, such as changes in economic or other conditions, employment rates, local tax and budget conditions, recession, competition for real property investments in these markets, uncertainty about the future and other factors are significantly less likely to impact our overall performance.

Operating Expenses

Our operating expenses generally consist of repairs and maintenance, utilities, roads and grounds, property management fees, insurance, janitorial and other operating expenses. Factors that may impact our ability to control these operating expenses include increases in utilities, increases in third party management expenses, increases in insurance premiums, increases in repair and maintenance costs and expenses related to inclement weather. Additionally, the cost of compliance with zoning and building codes as well as local, state and federal tax laws may impact our expenses. As a public company our annual general and administrative expenses are meaningfully higher due to legal, insurance, accounting, audit and other expenses related to corporate governance, SEC reporting, other compliance matters and the costs of operating as a public company. Increases in costs from any of the foregoing factors may adversely affect our future results and cash flows. Circumstances such as declines in market rental rates or increased competition may cause revenues to decrease, although the expenses of owning and operating a property will not necessarily decline. For certain of our properties, expenses may vary with occupancy, while costs arising from our property investments, interest expense and general maintenance will not be materially reduced even if a property is not fully occupied. As a result, our future cash flow and results of operations may be adversely affected and losses could be incurred if revenues decrease in the future.

Cost of Funds and Interest Rates

We expect future changes in interest rates will impact our overall performance. We manage and may continue to manage our market risk on variable rate debt by entering into interest rate swap agreements or similar instruments, subject to maintaining our qualification as a REIT for U.S. federal income tax purposes. Although we may seek to cost-effectively manage our exposure to future rate increases through such means, a portion of our overall debt may at various times float at then current rates.

Development Activities

As of December 31, 2021, we had one property under development. We intend to continue to engage in development and redevelopment activities with respect to our properties, including build-to-suit new developments and redevelopments for existing U.S. Government tenant agencies. These development activities may include some risks such as:

• the availability and timely receipt of zoning and other regulatory approvals;

• development costs exceeding expectations;

• the availability and pricing of financing on favorable terms or at all.

Inflation

Substantially all of our leases provide for operating expense escalation. We believe inflationary increases in expenses may be at least partially offset by the contractual expense escalations described above. We do not believe inflation has had a material impact on our historical financial position or results of operations.

Critical Accounting Estimates

The preparation of financial statements in conformity with GAAP requires management to use judgment in the application of accounting policies, including making estimates and assumptions. We base these estimates, judgments, and assumptions on historical experience, current trends, and various other factors that we believe to be reasonable under the circumstances. If our judgment or interpretation of the facts and circumstances relating to various transactions had been different, or different assumptions were made, it is possible that different accounting policies would have been applied, resulting in different financial results or a different presentation of our financial statements.

Below is a discussion of the accounting policies that we consider critical to an understanding of our financial condition and operating results that may require complex or significant judgment in their application or require estimates about matters which are inherently uncertain. A discussion of our significant accounting policies, which utilize these critical accounting estimates, can be found in Note 2, “Significant Accounting Policies,” of our consolidated financial statements.

Real Estate Properties Acquired

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 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.

We completed acquisitions of eight wholly owned properties for an aggregate purchase price of $287.6 million during the year ended December 31, 2021. We completed acquisitions of nine wholly owned properties for an aggregate purchase price of $252.7 million during the year ended December 31, 2020. These transactions were accounted for as asset acquisitions, and the purchase price of each was allocated based on the relative fair value of the asset acquired and liabilities assumed.

Impairment of Long-Lived Assets

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 estimate fair value through an evaluation of recent financial performance and projected discounted cash flows using standard industry valuation techniques. We determine the amount of any impairment loss by comparing the historical carrying value to estimated fair value. Upon determination that an impairment has occurred, a write-down is recognized to reduce the carrying amount to its estimated fair value.

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.

As of December 31, 2021 and 2020, no impairment related to our long-lived assets was identified.

Impairment of Unconsolidated Real Estate Venture

We account for our investment in the unconsolidated real estate venture under the equity method. Under the equity method of accounting, we initially recognize our investment at cost and subsequently adjust the carrying amount of the investment for our share of the earnings or losses, distributions received, and other-than-temporary impairments.

Our unconsolidated real estate venture is evaluated for impairment when conditions exist that may indicate that the decrease in the carrying amount of our investment has occurred and is other than temporary. Triggering events or impairment indicators for our unconsolidated real estate venture include, recurring operating losses of an investee, absence of an ability to recover the carrying amount of the investee, the ability of an investee to sustain an earnings capacity and a carrying amount that exceeds the fair value of the investment. Upon determination that an other-than-temporary impairment has occurred, a write-down is recognized to reduce the carrying amount of investment to its estimated fair value.

As of December 31, 2021, the carrying amount of our investment in in our unconsolidated real estate venture was $131.8 million, or approximately 4.7% of our total assets. During the year ended December 31, 2021, no other-than-temporary impairment related to our unconsolidated real estate venture was identified. We did not own an interest in the unconsolidated real estate venture as of December 31, 2020.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market risk is the risk of loss from adverse changes in market prices and interest rates. Our future earnings, cash flows and fair values relevant to financial instruments are dependent upon prevailing market interest rates. Our primary market risk results from our indebtedness, which bears interest at both fixed and variable rates. We manage and may continue to manage our market risk on variable rate debt by entering into swap arrangements to, in effect, fix the rate on all or a portion of the debt for varying periods up to maturity. This in turn, reduces the risks of variability of cash flows created by variable rate debt and mitigates the risk of increases in interest rates. Our objective when undertaking such arrangements will be to reduce our floating rate exposure and we do not intend to enter into hedging arrangements for speculative purposes.

As of December 31, 2021, $1.2 billion, or 97.5% of our debt, excluding unamortized premiums and discounts, had fixed interest rates and $30.2 million, or 2.5%, had variable interest rates. If market rates of interest on our variable rate debt fluctuate by 25 basis points, interest expense would increase or decrease, depending on rate movement, future earnings and cash flows, by $0.1 million annually.

In July 2017, the Financial Conduct Authority announced it intended to stop compelling banks to submit rates for the calculation of LIBOR after 2021. In March 2021, the ICE Benchmark Administration, the administrator of LIBOR, announced its intention to cease publication of certain LIBOR settings after 2021, while continuing to publish overnight and one-, three-, six-, and twelve-month U.S. dollar LIBOR rates through June 30, 2023. While this announcement extended the transition period to June 2023, the United States Federal Reserve Board and other regulatory bodies concurrently issued guidance encouraging banks and other financial market participants to cease entering into new contracts that use U.S. dollar LIBOR as a reference rate as soon as practicable and in any event no later than December 31, 2021. In the U.S., the Alternative Reference Rates Committee (“AARC”), which was convened by the Federal Reserve Board and the Federal Reserve Bank of New York, has recommended that the Secured Overnight Financing Rate (“SOFR”) plus a recommended spread adjustment as its preferred alternative to USD-LIBOR. There are significant differences between LIBOR and SOFR, such as LIBOR being an unsecured lending rate while SOFR is a secured rate, and SOFR is an overnight rate while LIBOR reflects term rates at different maturities.

We expect that all LIBOR settings relevant to us will cease to be published or will no longer be representative after June 30, 2023. As a result, any of our LIBOR-based borrowings that extend beyond such date will need to be converted to a replacement rate. Certain risks may arise in connection with transitioning contracts to SOFR or any other alternative variable rate, including any resulting value transfer that may occur. The value of loans, securities, or derivative instruments tied to LIBOR could also be impacted. Our senior unsecured revolving credit facility and term loan facilities provide for replacement of LIBOR if it becomes unavailable during the term of the facilities. However, for instruments into which we may enter in the future, the method of transitioningto an alternative rate may be challenging, as they may require substantial negotiation with each respective counterparty. If a contract is not transitioned to an alternative variable rate and LIBOR is discontinued, the impact is likely to vary by contract.

The discontinuation of LIBOR will not affect our ability to borrow or maintain already outstanding borrowings or swaps, but if our contracts indexed to LIBOR, including certain contracts governing our variable rate debt and our interest rate swaps, are converted to SOFR, the differences between LIBOR and SOFR, plus the recommended spread adjustment, could result in interest costs that are higher than if LIBOR remained available. Additionally, although SOFR is the AARC’s recommended replacement rate, it is also possible that lenders may instead choose alternative replacement rates that may differ from LIBOR in ways similar to SOFR or in ways that would result in higher interest costs for us. It is not yet possible to predict the magnitude of LIBOR’s end on our borrowing costs given the remaining uncertainty about which rates will replace LIBOR. See Note 2 to the Consolidated Financial Statements.

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, 2021. Based on this evaluation our principal executive officer and principal financial officer concluded that, as of December 31, 2021, 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, 2021. 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, 2021, 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, 2021 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, 2021 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Item 9B. Other Information

None.

Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections

Not applicable.

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 2022 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, 2021, 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, 2021.

(a) (b) (c)

Equity compensation plans not approved by stockholders — — —

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.

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

4.2* Description of Securities of Easterly Government Properties, Inc.

Exhibit Exhibit Description

21.1* List of Subsidiaries of the Registrant

23.1* Consent of PricewaterhouseCoopers LLP

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

† Exhibit is a management contract or compensatory plan or arrangement.

* Filed herewith

** Furnished herewith

Item 16. Form 10-K Summary

Not applicable.

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 28, 2022.

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

William C. Trimble, III

Meghan G. Baivier

Allison E. Marino

/s/ Darrell W. Crate Chairman of the Board of Directors February 28, 2022

Darrell W. Crate

Michael P. Ibe

/s/ William H. Binnie Director February 28, 2022

William H. Binnie

/s/ Cynthia A. Fisher Director February 28, 2022

Cynthia A. Fisher

/s/ Scott D. Freeman Director February 28, 2022

Scott D. Freeman

/s/ Emil W. Henry, Jr. Director February 28, 2022

Emil W. Henry, Jr.

/s/ Tara S. Innes Director February 28, 2022

Tara S. Innes

INDEX TO FINANCIAL STATEMENTS

Page

Easterly Government Properties, Inc.

Report of Independent Registered Public Accounting Firm (PCAOB ID: 238) F-2

Consolidated Balance Sheets as of December 31, 2021 and 2020 F-4

Notes to the Consolidated Financial Statements F-10

F-1

Report of Independent Registered Public Accounting Firm

To theBoard 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, 2021 and 2020, 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, 2021 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, 2021, 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, 2021 and 2020, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2021 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, 2021, based on criteria established in Internal Control - Integrated Framework (2013) issued by the COSO.

Basis for Opinions

The 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 consolidatedfinancial 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 in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidatedfinancial 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 consolidatedfinancial statements included performing procedures to assess the risks of material misstatement of the consolidatedfinancial 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 consolidatedfinancial 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 consolidatedfinancial 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 theconsolidated 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 consolidatedfinancial 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, 2021, the Company acquired eight operating properties in asset acquisitions for an aggregate purchase price of $287.6 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 28, 2022

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)

Assets

Investment in unconsolidated real estate venture 131,840 —

Liabilities

Accounts payable, accrued expenses and other liabilities 60,890 48,549

Commitments and contingencies (Note 13)

Equity

Accumulated other comprehensive loss (5,072 ) (11,351 )

Non-controlling interest in Operating Partnership 158,912 145,400

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,

Revenues

Asset management income 136 — —

Expenses

Other income (expense)

Income from unconsolidated real estate venture 271 — —

Gain (loss) on the sale of operating properties 1,307 (3,995 ) 6,245

Non-controlling interest in Operating Partnership (3,899 ) (1,567 ) (1,017 )

Net income available to Easterly Government Properties, Inc. per share:

Weighted- average common shares outstanding

Dividends declared per common share $ 1.05 $ 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,

Other comprehensive loss:

Unrealized gain (loss) on interest rate swaps, net 7,080 (7,485 ) (8,061 )

Non-controlling interest in Operating Partnership (3,899 ) (1,567 ) (1,017 )

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)

Grant of unvested restricted stock 89,961 1 (1 ) — — — — -

Unrealized loss on interest rate swaps — — — — — (7,102 ) (959 ) (8,061 )

Allocation of NCI in Operating Partnership — — (18,069 ) — — — 18,069 —

Grant of unvested restricted stock 21,930 1 (1 ) — — — — -

Contribution of property for common units — — — — — — 21,550 21,550

Unrealized loss on interest rate swaps — — — — — (6,661 ) (824 ) (7,485 )

Allocation of NCI in Operating Partnership — 2,783 — — — (2,783 ) —

Grant of unvested restricted stock 35,865 — — — — — — —

Contribution of property for common units — — — — — — 20,791 20,791

Unrealized gain on interest rate swaps — — — — — 6,279 801 7,080

Allocation of NCI in Operating Partnership — — (385 ) — — — 385 —

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,

Cash flows from operating activities

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

Income from unconsolidated real estate venture (271 ) — —

Amortization of above- / below-market leases (4,589 ) (5,894 ) (6,320 )

Amortization of loan premium / discount (290 ) (78 ) (80 )

Amortization of lease inducements 864 888 —

(Gain) loss on the sale of operating properties (1,307 ) 3,995 (6,245 )

Net change in:

Deferred revenue associated with operating leases 557 41,445 51,593

Principal payments on operating lease obligations (352 ) (470 ) (471 )

Accounts payable, accrued expenses and other liabilities 13,557 7,728 12,065

Cash flows from investing activities

Proceeds from sale of operating properties, net 7,336 3,515 19,943

Investment in unconsolidated real estate venture (131,568 ) — —

Cash flows from financing activities

Payment of deferred financing costs (5,306 ) — (1,996 )

Repayments of mortgage notes payable (4,233 ) (3,564 ) (3,391 )

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,

Cash paid for interest, net of capitalized interest $ 35,478 $ 34,248 $ 29,120

Non-cash investing and financing activities:

Deferred asset acquisition — 119 105

Offering costs, accrued not paid 29 34 65

Unrealized gain (loss) on interest rate swaps, net 7,080 (7,485 ) (8,061 )

Mortgage notes assumed on acquisition of operating property 53,816 — —

Properties acquired for common units 20,791 21,550 —

Contingent consideration accrued, not paid — 336 —

Recognition of operating lease right-of-use assets 1,677 — —

Derecognition of operating lease right-of-use assets 74 — —

Exchange of Common Units for Shares of Common Stock

Common stock 3 2 4

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, 2021, we wholly owned 85 operating properties and four operating properties through an unconsolidated joint venture in the United States encompassing approximately 8.6 million leased square feet, including 88 operating properties that were leased primarily to U.S. Government tenant agencies and one operating property that was entirely leased to a private tenant. As of December 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 our business. The Company is the sole general partner of the Operating Partnership and owned approximately 89.0% of the aggregate limited partnership interests in the Operating Partnership, which we refer to herein as common units, as of December 31, 2021. 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.

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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:

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 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

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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.

Investment in Unconsolidated Real Estate Venture

We analyze each real estate venture to determine whether the entity should be consolidated. If it is determined that an entity is a variable interest entity (“VIE”) in which we have a variable interest, we assess whether we are the primary beneficiary of the VIE to determine whether it should be consolidated. We are not the primary beneficiary of an entity when we do not have voting control, lack the power to direct the activities that most significantly impact the entity's economic performance or other partners have substantive participatory rights, we do not have the obligation to absorb losses or we do not have the right to receive returns from the VIE that could potentially be significant. If we determine that the entity is not a VIE, then we base our consolidation assessment on whether we have a controlling financial interest in the entity. Management uses its judgment when determining if we are the primary beneficiary of, or have a controlling financial interest in, an entity in which we have a variable interest. Factors considered in determining whether we have the power to direct the activities that most significantly impact the entity's economic performance include voting rights, involvement in day-to-day capital and operating decisions, and the extent of our involvement in the entity.

We use the equity method of accounting for investments in unconsolidated real estate ventures when we have significant influence but do not control the entity. Under the equity method, we record our investment in "Investment in unconsolidated real estate venture" on our Consolidated Balance Sheets and our proportionate share of earnings or losses, pursuant to the terms of the joint venture agreement as these may change depending on returns, in "Income from unconsolidated real estate venture" in the accompanying Consolidated Statements of Operations. We classify distributions received from equity method investees within our Consolidated Statements of Cash Flows using the nature of distribution approach. Under this method, cash flows generated from the operations of an unconsolidated real estate venture are classified as a return on investment (cash inflow from operating activities) and cash flows from property sales, debt refinancing or sales of our investments are classified as a return of investment (cash inflow from investing activities).

We earn revenue from asset management services to our unconsolidated real estate venture. These fees are determined following the terms specific to each arrangement. We account for this revenue gross of our ownership interest in the respective real estate venture and recognize such revenue as "Asset management income" in our Consolidated Statements of Operations when earned. Our proportionate share of related expense is recognized in "Income from unconsolidated real estate venture".

Periodically, we assess whether there are any indicators, including underlying property operating performance and general market conditions, that the value of our investment may be impaired. We consider an investment in a real estate venture impaired if we determine that its fair value is less than the net carrying value of the investment on an other-than-temporary basis. If our analysis indicates that there is an other-than-temporary impairment related to the investment in a particular real estate venture, the carrying value of the venture will be adjusted to an amount that reflects the estimated fair value of the investment.

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.

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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 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 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 qualifies 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 6 for more information pertaining to interest rate derivatives.

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

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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, 2021 and 2020 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.

Please refer to Note 7 for more information pertaining to fair value measurements.

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 ASC 810 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 each lease. 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 revenue from tenant construction projects. When revenue and costs for such projects can be estimated with reasonable accuracy, 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 (percentage of completion method). When these criteria do not apply to a project, we recognize revenue from that project using the completed contract method. Fully reimbursed income was included within Tenant reimbursements and associated expenses were included in Property operating expenses within the Consolidated Statements of Operations.

Other income includes income on the associated tenant reimbursement construction projects, parking income and other miscellaneous income.

Asset management income includes revenue from asset management services to our unconsolidated real estate venture. The asset management fees are earned by the Company for managing properties owned by related parties. The asset management fees are

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based upon contractual rates applied to actively invested capital, with fee income recognized on a monthly basis. The fees are recognized as a single performance obligation comprised of a series of distinct services related property operations. The Company believes the overall services provided by asset management activities have the same pattern of performance over the term of the agreement. We account for this revenue gross of our ownership interest in the respective real estate venture and recognize such revenue as "Asset management income" in our Consolidated Statements of Operations when earned. Our proportionate share of related expense is recognized in "Income from unconsolidated real estate venture."

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 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, 2021, 2020 and 2019, 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,

Above/Below market lease amortization (4,589 ) (5,894 ) (6,320 )

Straight-line rent and other non-cash adjustments (4,536 ) (3,377 ) (2,239 )

Book/Tax differences on unearned rent (5,575 ) (2,585 ) 1,646

Book/Tax differences on stock based compensation 4,195 3,634 4,156

Book/Tax differences on lease inducement 904 864 —

Loss attributable to non-controlling interest (7,081 ) (6,750 ) (6,922 )

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 8 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.

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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.

Reclassifications

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

3. Real Estate and Intangibles

Acquisitions

During the year ended December 31, 2021, we acquired eight wholly-owned operating properties in asset acquisitions, consisting of FBI – Knoxville, ICE – Louisville, USAO – Louisville, USAO – Springfield, NWS – Kansas City, VAR – Cleveland, USCIS – Kansas City and VA – Midwest for an aggregate purchase price of $287.6 million. During the year ended December 31, 2020, we acquired nine wholly-owned 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.

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):

Real estate

Intangible assets

Payment in lieu of taxes 6,394 —

Intangible liabilities

Total intangible liabilities (427 ) (8,491 )

Accounts payable, accrued expenses and other liabilities

Contingent consideration — (336 )

Debt

Premium on mortgage notes payable (2,985 ) —

USCIS Kansas City benefits from a payment in lieu of tax (“PILOT”) program with Lees Summit, MO. The PILOT provides the Company with an average annual property tax savings of approximately 68% through December 31, 2028.

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In conjunction with the acquisition of USCIS – Kansas City, the Company assumed $51.5 million of mortgage notes payable. No debt was assumed on the other acquisitions made during the years ended December 31, 2021 and 2020. The intangible assets and liabilities of the acquired operating properties have an aggregate weighted average amortization period of 13.85 years and 10.39 as of December 31, 2021and 2020, respectively.

During the year ended December 31, 2021, we included $11.8 million of revenues and $2.9 million of net income in our Consolidated Statement of Operations related to the operating properties acquired. Additionally, we incurred $1.9 million of acquisition-related costs primarily consisting of internal costs associated with the property acquisitions.

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.

Dispositions

On September 28, 2021, we sold United Technologies – Midland to a third party. Net proceeds from the sale of operating property were approximately $4.0 million and we recognized a gain on the sale of operating property of approximately $0.8 million for the year ended December 31, 2021.

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.

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”).

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.

Real estate and intangibles on our consolidated balance sheets consisted of the following (amounts in thousands):

Real estate properties, net

Intangible assets, net

Payment in lieu of taxes 6,394 —

Intangible liabilities, net

Total Intangible liabilities, net $ (19,718 ) $ (25,406 )

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Amortization of all identified intangible assets (a component of Depreciation and amortization expense) was $25.4 million, $35.0 million and $41.2 million for the years ended December 31, 2021, 2020 and 2019, respectively.

The projected amortization of total intangible assets and intangible liabilities as of December 31, 2021 are as follows (amounts in thousands):

Total

Intangible assets

Intangible liabilities

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, 2021 (amounts in thousands):

Acquired Above-Market Lease Intangibles Acquired Below-Market Lease Intangibles

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.

4. Investment in Unconsolidated Real Estate Venture

The following is a summary of our investment in our unconsolidated real estate venture (dollars in thousands):

As of December 31,

Joint Venture Ownership Interest 2021 2020

On October 13, 2021, the Company formed a new joint venture with a global investor to fund the acquisition of a portfolio of ten properties anticipated to encompass 1,214,165 leased square feet. We own a 53.0% interest in the JV, subject to preferred allocations as provided in the JV agreement.

During the year ended December 31, 2021, the JV acquired four properties with our joint venture partner, consisting of VA – Lubbock, VA – Lenexa, VA – Chattanooga and VA – San Antonio for an aggregate purchase price of $236.4 million.

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We provide asset management services to our unconsolidated real estate venture. We recognized asset management service revenue of $0.1 million for the year ended December 31, 2021.

The following is a summary of financial information for our unconsolidated real estate venture:

As of December 31,

Other assets, net 53,955 —

Total liabilities (2) $ 6,904 $ —

Total liabilities and equity $ 254,951 $ —

Company's share of equity $ 131,465 $ —

Basis differential (3) 375 —

For the year ended December 31,

Total revenue $ 1,864 $ — $ —

Operating income 548 — —

Net income 512 — —

Company's share of net income $ 271 $ — $ —

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5. Debt

At December 31, 2021 and December 31, 2020 (dollars in thousands):

Principal Outstanding Interest Current

Revolving credit facility:

Term loan facilities:

Less: Total unamortized deferred financing fees (1,421 ) (1,034 )

Notes payable:

Less: Total unamortized deferred financing fees (4,411 ) (2,829 )

Mortgage notes payable:

DEA US Equity

DEA · 10-K · period ended 2021-12-31

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Item 8. Financial Statements and Supplementary Data

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

Item 9A. Controls

Item 9B. Other Information

Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections

Item 10. Directors, Executive Officers and Corporate Governance

Item 11. Executive Compensation

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

Item 13. Certain Relationships and Related Transactions, and Director Independence

Item 14. Principal Accounting Fees and Services

Item 15. Exhibits and Financial Statement Schedules

Item 16. Form 10-K Summary

DEA US Equity☆

DEA · 10-K · period ended 2021-12-31

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Item 8. Financial Statements and Supplementary Data

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

Item 9A. Controls

Item 9B. Other Information

Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections

Item 10. Directors, Executive Officers and Corporate Governance

Item 11. Executive Compensation

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

Item 13. Certain Relationships and Related Transactions, and Director Independence

Item 14. Principal Accounting Fees and Services

Item 15. Exhibits and Financial Statement Schedules

Item 16. Form 10-K Summary

DEA US Equity