Easterly Government Properties, Inc.

Notes to the Consolidated Financial Statements (unaudited)

1. Organization and Basis of Presentation

The information contained in the following notes to the consolidated financial statements is condensed from that which would appear in the annual consolidated financial statements; accordingly, the consolidated financial statements included herein should be reviewed in conjunction with the consolidated financial statements for the fiscal year ended December 31, 2025, and related notes thereto, included in the Annual Report on Form 10-K of Easterly Government Properties, Inc. (the “Company”) for the year ended December 31, 2025 filed with the U.S. Securities and Exchange Commission (the “SEC”) on February 23, 2026.

The Company is a Maryland corporation that has elected to be taxed as a real estate investment trust (“REIT”) under the Internal Revenue Code of 1986, as amended (the “Code”), commencing with its taxable year ended December 31, 2015. The operations of the Company are carried 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 over 85% 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 primarily 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. We continue to pursue other potential opportunities to add properties to our portfolio, including acquiring properties leased to state and local governments with strong creditworthiness and other opportunities that directly or indirectly support the mission of select government agencies. As of June 30, 2026, we wholly owned 96 operating properties andten operating properties through an unconsolidated joint venture (the “JV”) in the United States, encompassing approximately 10.7 million leased square feet, including 93 operating properties that were leased primarily to U.S. Government tenant agencies, eight operating properties leased to tenant agencies of a U.S. state or local government andfive operating properties that were entirely leased to private tenants. As of June 30, 2026, our operating properties were 98% 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 three properties under development that we expect will encompass approximately 0.2 million leased square feet upon completion.

The Operating Partnership holds substantially all of our assets and conducts substantially all of our business. We are the sole general partner of the Operating Partnership and owned approximately 96.7% of the aggregate limited partnership interests in the Operating Partnership (“common units”) as of June 30, 2026. 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, Easterly Government Properties TRS, LLC, Easterly Government Services, LLC, the Operating Partnership and its other subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation.

Basis of Presentation

The condensed consolidated financial statements included herein are unaudited; however, they include all adjustments (consisting only of normal recurring adjustments) which, in the opinion of management, are necessary to state fairly the consolidated financial position of the Company at June 30, 2026 and December 31, 2025, the consolidated results of operations for the three and six months ended June 30, 2026 and 2025, and the consolidated cash flows for the six months ended June 30, 2026 and 2025. The year-end consolidated balance sheet data was derived from audited financial statements but does not include all disclosures required by GAAP. The results of operations for the interim periods presented are not necessarily indicative of the results to be expected for the full year.

The preparation of the consolidated financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosures of contingent assets and liabilities at the date of the balance sheet, and the reported amounts of revenues and expenses during the reporting period. We base our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, including the impact of extraordinary events, the results of which form the basis for making judgments about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

2. Summary of Significant Accounting Policies

During the six months ended June 30, 2026, we acquired a lease arrangement that qualifies for classification as a sales-type lease under Accounting Standards Codification Topic 842 Leases (“ASC 842”). Prior to the first quarter of 2026, all of our leases met the classification criteria of an operating lease in accordance with ASC 842. As a result, we updated our accounting policy to reflect the recognition and presentation of sales-type and direct financing leases as a lessor. There were no adjustments made retrospectively to the information in our consolidated financial statements as a result of the update in policy. See note 3, note 5 and note 12 for additional information on the impact of the adoption of sales-type lease accounting on our consolidated financial statements. All other significant accounting policies used in the preparation of our condensed consolidated financial statements are disclosed in our Annual Report on Form 10-K for the year ended December 31, 2025.

Revenue Recognition

Rental income includes base rents paid by each tenant in accordance with its lease agreement conditions. Upon lease commencement, we evaluate leases to determine if they meet criteria set forth in lease accounting guidance for classification as sales-type leases or direct financing leases; if a lease meets none of these criteria, we classify the lease as an operating lease. Upon commencement of sales-type leases, we derecognize the underlying asset, recognizing in its place a net investment in the lease equal to the sum of the lease receivable and the present value of any unguaranteed residual asset and recognize any selling profit or loss created as a result of the difference between those two amounts, less any related deferred initial direct lease costs. Similarly, for direct financing leases, we would derecognize the underlying asset and recognize a net investment in the lease, but, unlike in a sales-type lease, would defer profit and amortize it as interest income over the lease term. Our leases of properties as lessor are predominantly classified as operating leases, for which the underlying asset remains on our balance sheet and is depreciated consistently with other owned assets. We recognize rental income for our operating leases 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.

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, interest income recognized from our real estate loans receivable and other miscellaneous income.

Asset management income includes revenue from asset and property management services to our unconsolidated real estate venture. The asset management fees are earned by us for managing properties owned by related parties. The asset management service fees are based upon contractual rates applied to actively invested capital, with fee income recognized on a monthly basis. The property management service and engineering fees are based on a contractual rate in accordance with the management agreement. If construction management services are provided, a construction management fee is charged to the tenant in accordance with the management agreement. The fees are recognized as a single performance obligation comprised of a series of distinct services related to property operations. We believe 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.”

Standard Adopted

In November 2025, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) 2025-09, Derivatives and Hedging (Topic 815): Hedge Accounting Improvements (“ASU 2025-09”). We adopted ASU 2025-09 on April 1, 2026 on a prospective basis. ASU 2025-09 amends certain aspects of the hedge accounting guidance in ASC 815, Derivatives and Hedging, to provide targeted improvements intended to enhance the application of hedge accounting, including expanded eligibility of forecasted transactions, additional flexibility in measuring hedge effectiveness and clarifications related to hedging non-financial items. The implementation of this update did not have a material impact on our consolidated financial statements and related disclosures.

Recent Accounting Pronouncements Not Yet Adopted

In October 2023, the FASB issued ASU 2023-06, Disclosure Improvements: Codification Amendments in Response to the SEC’s Disclosure Update and Simplification Initiative (“ASU 2023-06”). ASU 2023-06 adds interim and annual disclosure requirements to GAAP at the request of the Securities and Exchange Commission (the “SEC”). The guidance in ASU 2023-06 is required to be applied prospectively and the GAAP requirements will be effective when the removal of the related SEC disclosure requirements is effective. If the SEC does not act to remove its related requirement by June 30, 2027, any related FASB amendments will be removed from the ASC and will not be effective. We do not anticipate that the adoption of ASU 2023-06 will have a material impact on our consolidated financial statements.

In November 2024, the FASB issued ASU 2024-03, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses (“ASU 2024-03”). ASU 2024-03 requires expanded interim and annual disclosures of certain expense information in the notes to the consolidated financial statements. The guidance is effective for annual reporting periods beginning after December 15, 2026, and interim reporting periods within annual reporting periods beginning after December 15, 2027, with early adoption permitted. The guidance can be applied on a prospective or retrospective basis. We are currently evaluating the potential impact of adopting this new guidance on our consolidated financial statement disclosures.

3. Real Estate and Intangibles

Acquisitions

During the six months ended June 30, 2026, we acquired three operating properties in asset acquisitions, consisting of a three building portfolio in Glen Allen, VA, for an aggregate purchase price of $44.6 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):

(1)

Both the investment in sales-type lease, net and credit loss allowance are recorded within Real estate loans receivable, net and investment in sales-type lease, net on our Consolidated Balance Sheet. No profit or loss was recognized upon commencement of the lease.

The intangible assets and liabilities of operating properties acquired during the six months ended June 30, 2026 have a weighted average amortization period of 7.4 years as of June 30, 2026. During the six months ended June 30, 2026, these acquisitions contributed $3.3 million of revenues and $0.8 million of net income in our Consolidated Statements of Operations related to the operating properties acquired.

During the three and six months ended June 30, 2026, we incurred $0.6 million and $1.2 million, respectively, of acquisition-related expenses, mainly consisting of internal costs associated with property acquisitions.

Consolidated Real Estate and Intangibles

Real estate and intangibles consisted of the following as of June 30, 2026 (amounts in thousands):

No operating properties were disposed of during the six months ended June 30, 2026.

The following table summarizes the scheduled amortization of our acquired above- and below-market lease intangibles for each of the five succeeding years as of June 30, 2026 (amounts in thousands):

(1)

Represents the six months ending December 31, 2026.

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 the JV (dollars in thousands):

On October 13, 2021, we formed an unconsolidated real estate venture, which we refer to as the JV, with a global investor to fund the acquisition of a portfolio often properties that encompasses 1,214,165 leased square feet (the “VA Portfolio”). We own a 53.0% interest in the JV, subject to preferred allocations as provided in the JV agreement. We have joint approval rights with our JV partner on major decisions, including those regarding property operations. As such, we hold a non-controlling interest in the joint venture and account for the JV under the equity method of accounting.

5. Real Estate Loans Receivable

On August 6, 2024, we entered into a construction loan agreement (the “Construction Loan”) to lend up to $52.1 million to a developer (the “Borrower”). The Construction Loan will accrue interest monthly at a fixed market rate of 9.00% per annum. The Construction Loan shall be re-paid in full on or before August 31, 2027, the maturity date. Upon completion of the development, we had the option to purchase at fair value all of the issued and outstanding membership interest from the Borrower in a special purpose entity (“SPE”) which solely holds the developed property. We hold a variable interest in the SPE, but we do not consolidate the SPE as we are not the primary beneficiary due to the lack of power to direct significant activities performed by the SPE. The fair value of this real estate loan receivable was approximately $35.6 million as of June 30, 2026.

On April 1, 2025, the Borrower repaid $15.0 million of the Construction Loan outstanding upon substantial completion of the development and receipt of the lump sum reimbursement from the government. On April 15, 2025, we declined the option to purchase, at the stated price, all of the issued and outstanding membership interest from the Borrower.

On March 5, 2026, we entered into a mezzanine construction loan agreement (the “Mezzanine Construction Loan”) to lend $7.0 million to a developer (the “Mezzanine Borrower”). The Mezzanine Construction Loan will accrue interest monthly at a fixed market rate of 12.00% per annum. The Mezzanine Construction Loan matures on March 5, 2030. However, the Mezzanine Borrower has the option to extend the maturity date by an additional twelve months through March 5, 2031. We hold a variable interest in the Mezzanine Borrower entity, but we do not consolidate the entity as we are not the primary beneficiary due to the lack of power to direct significant activities performed by the Mezzanine Borrower. The fair value of this real estate loan receivable was approximately $7.8 million as of June 30, 2026.

A summary of our real estate loans receivable consisted of the following (dollars in thousands):

The table below sets forth the activity for our allowance for credit losses for the six months ended June 30, 2026 and 2025 (dollars in thousands):

(1)

As of June 30, 2026, both our Construction Loan and Mezzanine Construction Loan are included within the non-investment grade category as both entities lack credit agency ratings. We used a non-investment grade credit spread to the applicable U.S. treasury rate to determine a probability of default. As of June 30, 2026, there areno payments that are considered past due nor any on nonaccrual status.

(2)

Allowance for credit loss liability is included within Accounts payable, accrued expenses and other liabilities on our Consolidated Balance Sheets.

During the three and six months ended June 30, 2026, we recognized interest income from our real estate loans receivable of $1.0 million and $1.9 million, respectively. During the three and six months ended June 30, 2025, we recognized interest income from our real estate loans receivable of $0.7 million and $1.7 million, respectively. Interest income from our real estate loans receivable is included within Other income on our Consolidated Statements of Operations.

6. Debt

At June 30, 2026, our consolidated borrowings consisted of the following (amounts in thousands):

(1)

Effective interest ratesare as follows: 2016 term loan facility 5.49%, 2018 term loan facility 5.53%, 2026 term loan facility 5.11%,2017 series A senior notes 4.15%, 2017 series B senior notes 4.23%, 2017 series C senior notes 4.37%, 2019 series A senior notes 3.82%, 2019 series B senior notes 3.91%, 2019 series C senior notes 4.04%, 2021 series A senior notes 2.74%, 2021 series B senior notes 2.99%, 2024 series A senior notes 6.74%, 2024 series B senior notes 6.73%, 2025 series A senior notes 6.36%, 2025 series B senior notes 6.51%, USFS II – Albuquerque 3.92%, ICE – Charleston 3.93%, VA – Loma Linda 3.78%, CBP – Savannah 4.12%.

(2)

At June 30, 2026, the USD secured overnight financing rate (“SOFR”) with a five day lookback was 3.62%. The current interest rate is not adjusted to include the amortization of deferred financing fees or debt issuance costs incurred in obtaining debt or any unamortized fair market value premiums. The spread over the applicable rate for each of our $400.0 million senior unsecured revolving credit facility (the “2024 revolving credit facility”), our $200.0 million senior unsecured term loan facility (our “2026 term loan facility”), our $200.0 million senior unsecured term loan facility (as amended, our “2018 term loan facility”) and our $100.0 million senior unsecured term loan facility (as amended, our “2016 term loan facility”) is based on our consolidated leverage ratio, as set forth in the respective loan agreements.

(3)

Our $400.0 million senior unsecured 2024 revolving credit facility had available capacity of $356.8 million at June 30, 2026, in addition to an accordion feature that provides us with additional capacity of up to $300.0 million, subject to syndication of the increase and the satisfaction of customary terms and conditions.

(4)

Our 2024 revolving credit facility has two six-month as-of-right extension options subject to certain conditions and the payment of an extension fee.

(5)

Our 2016 term loan facility is subject tothree interest rate swaps with an effective date of December 23, 2024 and a notional value of $100.0 million, which effectively fixes the interest rate at 5.21% annually, based on our consolidated leverage ratio as defined in our 2016 term loan facility agreement.

(6)

Our 2016 term loan facility has two one-year as-of-right extension options subject to certain conditions and the payment of an extension fee.

(7)

Our 2018 term loan facility is subject tothree interest rate swaps, of whichone has an effective date of March 24, 2025 andtwo of the swaps have an effective date of June 30, 2025. Thethree swaps have an aggregate notional value of $200.0 million, which effectively fixes the interest rate at 5.09% annually, based on our consolidated leverage ratio as defined in our 2018 term loan facility agreement.

(8)

Our 2018 term loan facility has two one-year as-of-right extension options subject to certain conditions and the payment of an extension fee.

(9)

Weentered into two $50.0 million treasury lock agreements to fix the Treasury rate of our 2025 series B senior notes.

(10)

On July 14, 2026, we used $6.4 million of available cash to extinguish the mortgage note obligation on USFS II– Albuquerque.

As of June 30, 2026, the net carrying value of real estate collateralizing our mortgages payable totaled $206.6 million. See Note 8 for the fair value of our debt instruments.

2026 Term Loan Facility

On June 25, 2026, we entered into our $200.0 million senior unsecured 2026 term loan facility, which includes an accordion feature that provides us with additional capacity, subject to the satisfaction of customary terms and conditions, of up to $50.0 million for a total facility size of $250.0 million. The 2026 term loan facility matures on June 25, 2031 and is prepayable without penalty.

Borrowings under our 2026 term loan facility will, at our option, bear interest at floating rates equal to either (i) a fluctuating rate equal to the sum of (a) highest of (x) PNC Bank's base rate, (y) the federal funds effective rate plus 0.50% and (z) the one-month adjusted term SOFR rate plus 1.00%, plus, in each case, (b) a margin ranging from 0.20% to 0.70% based on the Company’s leverage ratio, (ii) the daily simple SOFR (the “DSS”), or (iii) the term SOFR (the “Term SOFR”), plus, in the case of borrowings bearing interest at DSS or Term SOFR, a margin ranging from 1.20% to 1.70% based on the Company’s leverage ratio.

Our 2026 term loan facility also contains certain customary covenants, including but not limited to financial covenants that require us to maintain maximum ratios of consolidated total indebtedness, consolidated secured indebtedness and consolidated secured recourse indebtedness to total asset value and a minimum consolidated fixed charge ratio.

2016 Term Loan Facility

On June 25, 2026, we entered into the eleventh amendment to our 2016 term loan facility to remove the credit spread adjustment applicable to SOFR-based borrowings, consistent with our 2026 term loan facility.

Financial Covenant Considerations

As of June 30, 2026, we were in compliance with all financial and other covenants related to our debt.

7. Derivatives and Hedging Activities

The following table sets forth the key terms and fair values of our interest rate swap derivatives, each of which was designated as a cash flow hedge as of June 30, 2026. We entered into these interest rate swap derivatives to reduce our exposure to the variability in future cash flows attributable to changes in our floating rate debt (amounts in thousands):

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

Cash Flow Hedges of Interest Rate Risk

The gains or losses on derivatives designated and that qualify as cash flow hedges are recorded in Accumulated other comprehensive income (“AOCI”) and will be reclassified to interest expense in the period that the hedged forecasted transactions affect earnings on our variable rate debt.

We estimate that $0.3 million will be reclassified from AOCI as a net decrease to interest expense over the next 12 months.

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

Credit-Risk-Related Contingent Features

We have agreements with each of our derivative counterparties that contain a provision where we could be declared in default on our derivative obligations if repayment of the underlying indebtedness is accelerated by the lender due to our default on such indebtedness. As of June 30, 2026, we were not in a net liability position with any derivative counterparty. As of June 30, 2026, we were in compliance with these agreements and had not posted any collateral related to these agreements.

8. Fair Value Measurements

Accounting standards define fair value as the exit price, or the amount that would be received upon sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The standards also establish a hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. Observable inputs are inputs market participants would use in valuing the asset or liability developed based on market data obtained from sources independent of us. Unobservable inputs are inputs that reflect our assumptions about the factors market participants would use in valuing the asset or liability developed based upon the best information available in the circumstances. The hierarchy of these inputs is broken down into three levels: Level 1, defined as observable inputs such as quoted prices in active markets; Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable; and Level 3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions. Categorization within the valuation hierarchy is based upon the lowest level of input that is most significant to the fair value measurement.

Recurring fair value measurements

The fair values of our interest rate swaps are determined using widely accepted valuation techniques, including discounted cash flow analysis, on the expected cash flows of each derivative. This analysis reflects the contractual terms of the derivatives, including the period to maturity, and uses observable market-based inputs, including interest rate curves and implied volatilities in such interest rates. While we determined that the majority of the inputs used to value our derivatives fall within Level 2 of the fair value hierarchy, the credit valuation adjustments associated with our derivatives utilize Level 3 inputs, such as estimates of current credit spreads to evaluate the likelihood of default by us and our counterparties. We have determined that the significance of the impact of the credit valuation adjustments made to our 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 our derivatives held as of June 30, 2026 were classified as Level 2 of the fair value hierarchy.

The carrying values of cash and cash equivalents, restricted cash, accounts receivable, other assets (excluding our real estate loans receivable) and accounts payable and accrued expenses are reasonable estimates of fair values because of the short maturities of these instruments. The fair value of our real estate loans receivable, as disclosed in Note 5, is based on the discounted estimated future cash flows of the loan (categorized within Level 3 of the fair value hierarchy); the discount rates used approximate current market rates for loans with similar maturities and credit quality, and the estimated cash payments include scheduled principal and interest payments. The table below presents our assets measured at fair value on a recurring basis as of June 30, 2026, aggregated by the level in the fair value hierarchy within which those measurements fall (amounts in thousands):

For our disclosure of debt fair values, we estimated the fair value of our 2016 term loan facility, our 2018 term loan facility, our 2026 term loan facility and our 2024 revolving credit facility based on the variable interest rate and credit spreads (categorized within Level 3 of the fair value hierarchy) and estimated the fair value of our other debt based on the discounted estimated future cash payments to be made on such debt (categorized within Level 3 of the fair value hierarchy); the discount rates used approximate current market rates for loans, or groups of loans, with similar maturities and credit quality, and the estimated future payments included scheduled principal and interest payments. Fair value estimates are made as of a specific point in time, are subjective in nature and involve uncertainties and matters of significant judgment. Settlement at such fair value amounts may not be possible and may not be a prudent management decision.

Financial assets and liabilities not measured at fair value

The following table summarizes the aggregate principal outstanding under the Company’s indebtedness and the corresponding estimate of fair value as of June 30, 2026:

(1)

The carrying amount consists of principal only.

(2)

We consider the fair value measurement of the financial liability instrument a Level 3 measurement.

9. Equity Incentive Plan

The following is a summary of our stock-based compensation expense, net for thethree and six months ended June 30, 2026 and 2025:

Stock-based compensation expense, net is included within corporate general and administrative expenses on our Consolidated Statements of Operations.

On January 5, 2026, we granted an aggregate of 268,766 performance-based LTIP units to members of management pursuant to the Easterly Government Properties, Inc. 2024 Equity Incentive Plan (as amended, the “2024 Plan”), consisting of:

(i)

20,589 LTIP units that are subject to us achieving certain total shareholder return performance thresholds (on a relative basis). These units will vest to the extent earned following the end of the performance period on December 31, 2028;

(ii)

25,806 LTIP units that are subject to us achieving certain operational performance hurdles. These units will vest to the extent earned following the end of the performance period on December 31, 2028; and

(iii)

222,371 LTIP units that are subject to us achieving certain performance conditions based on the appreciation of the Company’s common stock price. These units have a performance period beginning on the grant date and ending on January 5, 2034. These units will vest in full on January 5, 2031, subject to the recipient’s continued employment with the Company through such date and subject to achieving certain performance conditions.

Pursuant to the 2024 Plan, the significant assumptions used to value the performance-based LTIP units using a Monte Carlo Simulation (risk-neutral approach) include expected volatility (26.0% -27.0%), dividend yield (6.6% -8.3%), risk-free interest rate (3.5% -4.0%) and expected life (3 - 8 years).

On January 5, 2026, we also granted an aggregate of 136,314 service-based LTIP units to members of management pursuant to the 2024 Plan, which will vest on December 31, 2028. The LTIP units are subject to the grantee’s continued employment and the other terms of the awards.

On January 5, 2026, we granted an aggregate of 15,247 shares of restricted common stock to certain employees and members of management pursuant to the 2024 Plan. The shares will vest on January 5, 2028, subject to the grantee’s continued employment and the other terms of the awards.

On April 29, 2026, in connection with our 2026 annual meeting of stockholders, we issued an aggregate of 21,060 shares of restricted stock and 5,983 LTIP units to our non-employee directors pursuant to the 2024 Plan. The grants will vest upon the earlier of the first anniversary of the grant date or the next annual stockholder meeting, so long as the grantee remains a director on such date.

Pursuant to the 2024 Plan, the significant assumptions used to value the service-based LTIP units using a Monte Carlo Simulation (risk-neutral approach) include expected volatility (25.0%), dividend yield (8.1%), risk-free interest rate (3.7%) and expected life (1 year).

On May 20, 2026, we granted an aggregate of 45,895 performance-based LTIP units to certain employees and members of management pursuant to the 2024 Plan. The grants will vest in full on the fifth anniversary of the grant date, subject to the grantee’s continued employment with the Company through such date and further subject to achieving certain performance conditions based on the appreciation of the Company's common stock price during the period beginning on the grant date and ending on the eighth anniversary of the grant date.

Pursuant to the 2024 Plan, the significant assumptions used to value the performance-based LTIP units using a Monte Carlo Simulation (risk-neutral approach) include expected volatility (26.0%), dividend yield (6.5%), risk-free interest rate (4.5%) and expected life (8 years).

On May 20, 2026, we granted an aggregate of 2,438 shares of restricted common stock to certain employees pursuant to the 2024 Plan. Of these,1,060 shares will vest on May 20, 2028, and 1,378 shares will vest on May 20, 2031, in each case subject to the grantee’s continued employment and the other terms of the awards.

10. Equity

The following table summarizes the changes in our stockholders’ equity for thethree months ended June 30, 2026 and 2025 (amounts in thousands, except share amounts):

(1) As of March 31, 2025, the Company reclassified $0.7 million from Common Stock to Additional Paid-in-Capital due to the reduction in shares outstanding in connection with the 1-for-2.5 reverse stock split of the Company’s issued and outstanding Common Stock, effective April 28, 2025 (the “Reverse Stock Split”). Concurrently with the Reverse Stock Split, our operating partnership completed a corresponding 1-for-2.5 reverse unit split of outstanding common units and LTIP units (the “Reverse Unit Split”).

(2)No fractional shares were issued as a result of the Reverse Stock Split. In lieu of issuing fractional shares, we paid cash to shareholders who would otherwise have been entitled to receive a fractional share. The total cash payment for fractional shares amounted to less than $0.1 million, which was recorded as a reduction to additional paid-in capital in the accompanying consolidated balance sheets.

The following table summarizes the changes in our stockholders’ equity for the six months ended June 30, 2026 and 2025 (amounts in thousands, except share amounts):

(1) As of December 31, 2024, the Company reclassified $0.6 million from Common Stock to Additional Paid-in-Capital due to the reduction in shares outstanding in connection with the Reverse Stock Split. .

(2)No fractional shares were issued as a result of the Reverse Stock Split. In lieu of issuing fractional shares, we paid cash to shareholders who would otherwise have been entitled to receive a fractional share. The total cash payment for fractional shares amounted to less than $0.1 million, which was recorded as a reduction to additional paid-in capital in the accompanying consolidated balance sheets.

A summary of dividends declared by our Board of Directors per share of common stock and per common unit (as adjusted to reflect the Reverse Stock Split and Reverse Unit Split) at the date of record is as follows:

(1) Prior to the end of the performance period as set forth in the applicable LTIP unit award, holders of performance-based LTIP units are entitled to receive dividends per LTIP unit equal to 10%of the dividend paid per common unit. After the end of the performance period, the number of LTIP units, both vested and unvested, that LTIP award recipients have earned, if any, are entitled to receive dividends in an amount per LTIP unit equal to dividends, both regular and special, payable per common unit.

Holdersof LTIP units that are not subject to the attainment of performance goals are entitled to receive dividends per LTIP unit equal to 100% of the dividend paid per common unit beginning on the grant date.

ATM Programs

We entered into an equity distribution agreement on June 22, 2021 (the “2021 ATM Program”) with various financial institutions. Pursuant to the 2021 ATM Program, 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 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 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 various financial institutions party to the 2021 ATM Program for the sale of shares of our common stock on a forward basis.

The following table sets forth certain information with respect to issuances under the 2021 ATM Program during thesix months ended June 30, 2026 (amounts in thousands except share amounts):

(1)Shares issued by us, which were all issued in settlement of forward sale transactions. As of June 30, 2026, we had settled all of our outstanding forward sale transactions under the 2021 ATM Program. We accounted for the forward sale transactions as equity.

As of June 30, 2026, we had approximately $215.0 million of gross sales of our common stock available under the 2021 ATM Program.

Share Repurchase Program

On April 28, 2022, our Board of Directors authorized a share repurchase program whereby we may repurchase up to 1,815,597 shares of our common stock (adjusted for the Reverse Stock Split), or approximately 5% of our outstanding shares as of the original authorization date. We are not required to purchase shares under the share repurchase program, but may choose to do so in the open market or through privately negotiated transactions at times and amounts based on our evaluation of market conditions and other factors.

No repurchases of shares of our common stock were made under the share repurchase program during thesix months ended June 30, 2026.

11. Earnings Per Share

Basic earnings or loss per share of common stock (“EPS”) is calculated by dividing net income attributable to common stockholders by the weighted average shares of common stock outstanding for the periods presented. Diluted EPS is computed after adjusting the basic EPS computation for the effect of dilutive common equivalent shares outstanding during the periods presented. Unvested restricted shares of common stock and unvested LTIP units are considered participating securities, which require the use of the two-class method for the computation of basic and diluted earnings per share.

The following table sets forth the computation of our basic and diluted earnings per share of common stock for thethree and six months ended June 30, 2026 and 2025 (amounts in thousands, except per share amounts):

(1)

During both the three and six months ended June 30, 2026, there were 1,272,035 unvested performance-based LTIP units that were not included in the computation of diluted EPS because to do so would have been antidilutive for the period. During both the three and six months ended June 30, 2025, there were 254,061 unvested performance-based LTIP units that were not included in the computation of diluted EPS because to do so would have been antidilutive for the period.

12. Leases

Lessor

We lease commercial space to the U.S. Government through the GSA or other federal agencies, state and local governments or nongovernmental tenants. These leases may contain extension options that are predominately at the sole discretion of the tenant. Certain of our leases contain a “soft-term” period of the lease, meaning that the U.S. Government tenant agency has the right to terminate the lease prior to its stated lease end date. While certain of our leases are contractually subject to early termination, we do not believe that our tenant agencies are likely to terminate these leases early given the build-to-suit features at the properties subject to the leases, the weighted average age of these properties based on the date the property was built or renovated-to-suit, where applicable (approximately 21.1 years as of June 30, 2026), the mission-critical focus of the properties subject to the leases and the current level of operations at such properties. Certain lease agreements include variable lease payments that, in the future, will vary based on changes in inflationary measures, real estate tax rates, usage, or share of expenditures of the leased premises.

On February 22, 2026, we received a lump sum reimbursement for FDA – Atlanta relating to the landlord improvements in excess of the U.S. Government’s tenant improvement allowance of $12.6 million. Total reimbursements received for the project as of June 30, 2026 are $150.7 million. We recorded the payments as Deferred revenue on our Consolidated Balance Sheet and began amortizing over the life of the lease through Rental income.

The table below sets forth our composition of lease revenue recognized between fixed and variable components (amounts in thousands):

Lessee

We lease corporate office space under operating lease arrangements in Washington, D.C., San Diego, CA and West Palm Beach, FL. The leases include variable lease payments that, in the future, will vary based on changes in real estate tax rates, usage, or share of expenditures of the leased premises. We have elected not to separate lease and non-lease components for our corporate office leases.

As of June 30, 2026, the unamortized balances associated with our right-of-use operating lease asset and operating lease liability were $3.9 million and $4.4 million, respectively. We used our incremental borrowing rate, which was arrived at utilizing prevailing market rates and the spread on our revolving credit facility, in order to determine the net present value of the minimum lease payments.

The following table provides quantitative information for our commenced operating leases for thethree and six months ended June 30, 2026 and 2025 (amounts in thousands):

In addition, the maturity of fixed lease payments under our commenced corporate office leases as of June 30, 2026 is summarized in the table below (amounts in thousands):

(1)

Represents the six months ending December 31,2026.

13. Revenue

The table below sets forth revenue from tenant construction projects and the associated project management income disaggregated by tenant agency for thethree and six months ended June 30, 2026 and 2025 (amounts in thousands):

As of June 30, 2026 and December 31, 2025, the balance in Accounts receivable related to tenant construction projects and the associated project management income was $2.6 million and $2.5 million, respectively, which is inclusive of contract assets or liabilities.

The duration of the majority of tenant construction project reimbursement arrangements is less than a year and payment is typically due once a project is complete and work has been accepted by the tenant. There were no projects on-going as of June 30, 2026 with a duration of greater than one year.

During the three and six months ended June 30, 2026, we recognized $0.4 million and $0.7 million, respectively, in parking garage income. During the three and six months ended June 30, 2025, we recognized $0.2 million and $0.4 million, respectively, in parking garage income. The monthly and transient daily parking revenue falls within the scope of Revenue from Contracts with Customers (“ASC 606”) and is accounted for at the point in time when control of the goods or services transfers to the customer and our performance obligation is satisfied. As of June 30, 2026 and December 31, 2025, the balance in Accounts receivable related to parking garage income was $0.1 million and $0.2 million, respectively.

14. Concentrations Risk

Concentrations of credit risk arise for us when multiple of our tenants are engaged in similar business activities, are located in the same geographic region or have similar economic features that impact in a similar manner their ability to meet contractual obligations, including obligations owed to us. We regularly monitor our tenant base to assess potential concentrations of credit risk.

As stated in Note 1 above, we lease commercial space to the U.S. Government or non-governmental tenants. At June 30, 2026, the U.S. Government accounted for approximately 86.3% of our total annualized lease income, state and local government tenants accounted for approximately 8.4% of our annualized lease income and non-governmental tenants accounted for the remaining approximately 5.3%.

Seventeen of our 106 wholly-owned and unconsolidated operating properties are located in California, accounting for approximately 12.8% of our total leased square feet and approximately 16.7% of our total annualized lease income as of June 30, 2026. To the extent that weak economic or real estate conditions or natural disasters affect California more severely than other areas of the country, our business, financial condition and results of operations could be significantly impacted.

15. Segment Information

During the three and six months ended June 30, 2026 and 2025, our operations are reported withinone reportable and operating segment in the consolidated financial statements and all of our properties are included within this single reportable and operating segment (the “segment”).

Our chief operating decision makers (“CODMs”) include our Chief Executive Officer and Chief Financial Officer as they are responsible for allocating resources, assessing performance and determining appropriate operating segments.

The CODMs assess performance for the segment and decide how to allocate resources based on net income, which is reported on our Consolidated Statements of Operations as Net Income. The Consolidated Statements of Operations, inclusive of significant expenses, are provided to the CODMs for performance assessment. The CODMs use net income to evaluate income generated from our properties when deciding whether to reinvest profits into our assets or into other parts of the entity, such as for acquisitions or dividend payments. Net income is also used to monitor budgeted versus actual results. The CODMs also use net income in competitive analysis by benchmarking to our competitors. The competitive analysis, along with the monitoring of budgeted versus actual results, is used to assess the segment performance and to establish employee and management compensation.

The measure of segment assets is reported on our Consolidated Balance Sheets as Total Assets. The accounting policies of the segment are the same as those described in our Summary of Significant Accounting Policies.

16. Related Parties

We have reimbursement arrangements with entities controlled by our Chief Executive Officer and Vice Chairman, which provide for reimbursement of costs paid on our behalf, or those we pay on their behalf. During the three and six months ended June 30, 2026, we were responsible for reimbursing costs of $0.5 million and $0.6 million, respectively, and received reimbursement for costs of less than $0.1 million for both periods. During the three and six months ended June 30, 2025, we were responsible for reimbursing costs of $0.4 million and $0.6 million, respectively, and received reimbursement for costs of less than $0.1 million for both periods.

We provide asset management services to properties owned by the JV. For the three and six months ended June 30, 2026, we recognized Asset management income of $0.7 million and $1.3 million, respectively, and reimbursement for certain costs that we paid on their behalf of $0.1 million and $0.8 million, respectively. For thethree and six months ended June 30, 2025, we recognized Asset management income of $0.6 million and $1.2 million, respectively, and reimbursement for certain costs that we paid on their behalf of less than $0.1 million and $0.6 million, respectively.

As of June 30, 2026, receivables from related parties were $0.3 million which was included within prepaid expenses and other assets on our balance sheet. As of June 30, 2026, Accounts payable, accrued expenses and other liabilities owed to related parties was $0.3 million.

17. Subsequent Events

For our consolidated financial statements as of June 30, 2026, we evaluated subsequent events and noted the following significant events.

On July 14, 2026, we used $6.4 million of available cash to extinguish the mortgage note obligation on USFS II– Albuquerque.

On July 28, 2026, we entered into a sixth amendment to our 2018 term loan facility and a second amendment to our 2024 revolving credit facility to remove the credit spread adjustment applicable to SOFR-based borrowings, consistent with our 2016 term loan facility and our 2026 term loan facility. Other than the foregoing, the material terms of our 2018 term loan facility and our 2024 revolving credit facility remain unchanged.