Easterly Government Properties has originated its first mezzanine loan, supplying capital to support the development of a new Veterans Affairs outpatient clinic in Kennewick, Washington. The real estate investment trust has committed $7 million in mezzanine financing toward the project, which is planned as a 120,000-square-foot medical facility.
The financing backs a project that is already fully leased to the Department of Veterans Affairs. According to Easterly, the VA has signed a 20-year firm term commitment for the clinic, providing a long-duration income stream for the sponsor and reinforcing the property’s role as a key healthcare asset for veterans in the region.
The development is expected to reach completion in October 2028, giving the construction team and project stakeholders a clearly defined delivery timeline. Easterly’s mezzanine loan carries a 12% yield, reflecting the risk-return profile of subordinate debt in a ground-up healthcare development while sitting behind senior financing in the project’s capital structure.
The transaction is sponsored by what Easterly describes as an experienced developer, although the developer’s name was not disclosed. As part of the financing arrangement, Easterly has secured an option to acquire the completed clinic, positioning the REIT to convert its lending relationship into long-term ownership once the project is delivered and stabilized under the VA lease.
Easterly Government Properties is a fully integrated real estate investment trust that focuses primarily on acquiring, developing and managing commercial properties leased to the U.S. government and related counterparties. By adding mezzanine lending to its toolkit, the company is using its balance sheet to support federal government-tenanted projects while potentially creating a pipeline of future acquisitions aligned with its investment strategy.
Darrell Crate, president and CEO of Easterly Government Properties, said the company entered 2026 with clearly defined priorities and noted that first-quarter activity reflects progress against those objectives. He pointed to stable operating performance across the portfolio and the successful execution of this inaugural mezzanine loan as evidence of Easterly’s approach to capital allocation and earnings growth.
The Kennewick VA outpatient clinic financing highlights how a specialized REIT can leverage its expertise in U.S. government tenancy to structure capital solutions for development sponsors. For Easterly, the combination of a 12% mezzanine yield, a long-term VA lease and a potential purchase option provides both current income and a path to expand its portfolio of government-leased healthcare assets.
