Annual Statements Open main menu

JBG SMITH Properties - Quarter Report: 2023 June (Form 10-Q)

Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the quarterly period ended June 30, 2023

OR

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

For the transition period from ___________ to ___________

Commission file number 001-37994

Graphic

JBG SMITH PROPERTIES

________________________________________________________________________________

(Exact name of Registrant as specified in its charter)

Maryland

81-4307010

(State or other jurisdiction of incorporation or organization)

(I.R.S. Employer Identification No.)

4747 Bethesda Avenue Suite 200

Bethesda MD

20814

(Address of Principal Executive Offices)

(Zip Code)

Registrant's telephone number, including area code: (240) 333-3600

_______________________________

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

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Shares, par value $0.01 per share

JBGS

New York Stock Exchange

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

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

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

Large accelerated filer Accelerated filer Non-accelerated filer Smaller reporting company Emerging growth company

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

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

As of August 4, 2023, JBG SMITH Properties had 103,439,327 common shares outstanding.

Table of Contents

JBG SMITH PROPERTIES

QUARTERLY REPORT ON FORM 10-Q

QUARTER ENDED JUNE 30, 2023

TABLE OF CONTENTS

PART I – FINANCIAL INFORMATION

Item 1.

Financial Statements

Page

Condensed Consolidated Balance Sheets (unaudited) as of June 30, 2023 and December 31, 2022

3

Condensed Consolidated Statements of Operations (unaudited) for the three and six months ended June 30, 2023 and 2022

4

Condensed Consolidated Statements of Comprehensive Income (unaudited) for the three and six months ended June 30, 2023 and 2022

5

Condensed Consolidated Statements of Equity (unaudited) for the three and six months ended June 30, 2023 and 2022

6

Condensed Consolidated Statements of Cash Flows (unaudited) for the six months ended June 30, 2023 and 2022

8

Notes to Condensed Consolidated Financial Statements (unaudited)

10

Item 2.

Management's Discussion and Analysis of Financial Condition and Results of Operations

29

Item 3.

Quantitative and Qualitative Disclosures about Market Risk

47

Item 4.

Controls and Procedures

48

PART II – OTHER INFORMATION

Item 1.

Legal Proceedings

48

Item 1A.

Risk Factors

48

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

49

Item 3.

Defaults Upon Senior Securities

49

Item 4.

Mine Safety Disclosures

49

Item 5.

Other Information

49

Item 6.

Exhibits

51

Signatures

52

2

Table of Contents

PART I - FINANCIAL INFORMATION

ITEM 1. Financial Statements

JBG SMITH PROPERTIES

Condensed Consolidated Balance Sheets

(Unaudited)

(In thousands, except par value amounts)

    

June 30, 2023

    

December 31, 2022

ASSETS

 

  

 

  

Real estate, at cost:

 

  

 

  

Land and improvements

$

1,267,379

$

1,302,569

Buildings and improvements

 

4,175,488

 

4,310,821

Construction in progress, including land

 

694,793

 

544,692

 

6,137,660

 

6,158,082

Less: accumulated depreciation

 

(1,396,766)

 

(1,335,000)

Real estate, net

 

4,740,894

 

4,823,082

Cash and cash equivalents

 

156,639

 

241,098

Restricted cash

 

46,205

 

32,975

Tenant and other receivables

 

44,863

 

56,304

Deferred rent receivable

 

165,797

 

170,824

Investments in unconsolidated real estate ventures

 

309,219

 

299,881

Intangible assets, net

144,308

162,246

Other assets, net

 

175,677

 

117,028

TOTAL ASSETS

$

5,783,602

$

5,903,438

LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS AND EQUITY

 

  

Liabilities:

 

  

 

  

Mortgage loans, net

$

1,689,207

$

1,890,174

Revolving credit facility

 

62,000

 

Term loans, net

 

716,757

 

547,072

Accounts payable and accrued expenses

 

129,325

 

138,060

Other liabilities, net

 

139,445

 

132,710

Total liabilities

 

2,736,734

 

2,708,016

Commitments and contingencies

 

  

 

  

Redeemable noncontrolling interests

 

455,886

 

481,310

Shareholders' equity:

 

  

 

  

Preferred shares, $0.01 par value - 200,000 shares authorized; none issued

 

 

Common shares, $0.01 par value - 500,000 shares authorized; 105,139 and 114,013 shares issued and outstanding as of June 30, 2023 and December 31, 2022

 

1,052

 

1,141

Additional paid-in capital

 

3,156,511

 

3,263,738

Accumulated deficit

 

(641,813)

 

(628,636)

Accumulated other comprehensive income

 

43,491

 

45,644

Total shareholders' equity of JBG SMITH Properties

 

2,559,241

 

2,681,887

Noncontrolling interests

 

31,741

 

32,225

Total equity

 

2,590,982

 

2,714,112

TOTAL LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS AND EQUITY

$

5,783,602

$

5,903,438

See accompanying notes to the condensed consolidated financial statements (unaudited).

3

Table of Contents

JBG SMITH PROPERTIES

Condensed Consolidated Statements of Operations

(Unaudited)

(In thousands, except per share data)

Three Months Ended June 30, 

Six Months Ended June 30, 

    

2023

    

2022

    

2023

    

2022

REVENUE

 

  

 

  

  

 

  

Property rental

$

120,592

$

117,036

$

244,625

$

248,634

Third-party real estate services, including reimbursements

 

22,862

 

22,157

 

45,646

 

46,127

Other revenue

 

8,641

 

6,312

 

14,786

 

12,709

Total revenue

 

152,095

 

145,505

 

305,057

 

307,470

EXPENSES

 

  

 

  

 

 

  

Depreciation and amortization

 

49,218

 

49,479

 

102,649

 

107,541

Property operating

 

35,912

 

35,445

 

71,524

 

76,089

Real estate taxes

 

14,424

 

14,946

 

29,648

 

33,132

General and administrative:

 

  

 

  

 

 

  

Corporate and other

 

15,093

 

14,782

 

31,216

 

30,597

Third-party real estate services

 

22,105

 

24,143

 

45,928

 

51,192

Share-based compensation related to Formation Transaction and special equity awards

 

 

1,577

 

351

 

3,821

Transaction and other costs

 

3,492

 

1,987

 

5,964

 

2,886

Total expenses

 

140,244

 

142,359

 

287,280

 

305,258

OTHER INCOME (EXPENSE)

 

  

 

  

 

  

 

  

Income (loss) from unconsolidated real estate ventures, net

 

510

 

(2,107)

 

943

 

1,038

Interest and other income, net

 

2,281

 

1,672

 

6,358

 

15,918

Interest expense

 

(25,835)

 

(16,041)

 

(52,677)

 

(32,319)

Gain on the sale of real estate, net

 

 

158,767

 

40,700

 

158,631

Loss on the extinguishment of debt

 

(450)

 

(1,038)

 

(450)

 

(1,629)

Total other income (expense)

 

(23,494)

 

141,253

 

(5,126)

 

141,639

INCOME (LOSS) BEFORE INCOME TAX EXPENSE

 

(11,643)

144,399

 

12,651

 

143,851

Income tax expense

 

(611)

 

(2,905)

 

(595)

 

(2,434)

NET INCOME (LOSS)

 

(12,254)

 

141,494

 

12,056

 

141,417

Net (income) loss attributable to redeemable noncontrolling interests

 

1,398

 

(18,248)

 

(1,965)

 

(18,258)

Net loss attributable to noncontrolling interests

 

311

 

29

 

535

 

84

NET INCOME (LOSS) ATTRIBUTABLE TO COMMON SHAREHOLDERS

$

(10,545)

$

123,275

$

10,626

$

123,243

EARNINGS (LOSS) PER COMMON SHARE - BASIC AND DILUTED

$

(0.10)

$

1.02

$

0.09

$

0.99

WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING - BASIC AND DILUTED

 

109,695

 

121,316

 

111,862

 

123,984

See accompanying notes to the condensed consolidated financial statements (unaudited).

4

Table of Contents

JBG SMITH PROPERTIES

Condensed Consolidated Statements of Comprehensive Income

(Unaudited)

(In thousands)

Three Months Ended June 30, 

Six Months Ended June 30, 

    

2023

    

2022

    

2023

    

2022

NET INCOME (LOSS)

$

(12,254)

$

141,494

$

12,056

$

141,417

OTHER COMPREHENSIVE INCOME (LOSS):

 

  

 

  

 

  

 

  

Change in fair value of derivative financial instruments

 

21,789

 

7,225

 

12,820

 

32,320

Reclassification of net (income) loss on derivative financial instruments from accumulated other comprehensive income into interest expense

 

(7,534)

 

2,791

 

(15,350)

 

6,547

Total other comprehensive income (loss)

 

14,255

 

10,016

 

(2,530)

 

38,867

COMPREHENSIVE INCOME

 

2,001

 

151,510

 

9,526

 

180,284

Net (income) loss attributable to redeemable noncontrolling interests

 

1,398

 

(18,248)

 

(1,965)

 

(18,258)

Net loss attributable to noncontrolling interests

311

29

535

84

Other comprehensive (income) loss attributable to redeemable noncontrolling interests

 

(1,781)

 

(1,311)

 

444

 

(4,277)

Other comprehensive income attributable to noncontrolling interests

(1,019)

(67)

COMPREHENSIVE INCOME ATTRIBUTABLE TO JBG SMITH PROPERTIES

$

910

$

131,980

$

8,473

$

157,833

See accompanying notes to the condensed consolidated financial statements (unaudited).

5

Table of Contents

JBG SMITH PROPERTIES

Condensed Consolidated Statements of Equity

(Unaudited)

(In thousands)

Accumulated 

Additional 

Other 

Common Shares

Paid-In 

Accumulated 

 

Comprehensive

Noncontrolling

Total 

Shares

Amount

Capital

Deficit

 

Income

Interests

Equity

BALANCE AS OF MARCH 31, 2023

 

113,583

$

1,137

$

3,282,290

$

(607,465)

$

32,036

$

31,042

$

2,739,040

Net loss attributable to common shareholders and noncontrolling interests

 

 

 

 

(10,545)

 

 

(311)

 

(10,856)

Redemption of common limited partnership units ("OP Units") for common shares

 

821

 

8

 

11,718

 

 

 

 

11,726

Common shares repurchased

(9,321)

(93)

(135,654)

(135,747)

Common shares issued pursuant to employee incentive compensation plan and Employee Share Purchase Plan ("ESPP")

56

1,172

1,172

Dividends declared on common shares
($0.225 per common share)

(23,803)

(23,803)

Distributions to noncontrolling interests, net

 

 

 

 

 

 

(9)

 

(9)

Redeemable noncontrolling interests redemption value adjustment and total other comprehensive income allocation

 

 

 

(3,015)

 

 

(1,781)

 

 

(4,796)

Total other comprehensive income

 

 

 

 

 

14,255

 

 

14,255

Other comprehensive income attributable to noncontrolling interest

(1,019)

1,019

BALANCE AS OF JUNE 30, 2023

 

105,139

$

1,052

$

3,156,511

$

(641,813)

$

43,491

$

31,741

$

2,590,982

BALANCE AS OF MARCH 31, 2022

 

124,248

$

1,243

$

3,444,793

$

(609,363)

$

9,935

$

28,438

$

2,875,046

Net income (loss) attributable to common shareholders and noncontrolling interests

 

 

 

 

123,275

 

 

(29)

 

123,246

Redemption of OP Units for common shares

 

72

 

1

 

1,761

 

 

 

 

1,762

Common shares repurchased

(8,499)

(84)

(213,807)

 

 

(213,891)

Common shares issued pursuant to employee incentive compensation plan and ESPP

41

1,143

1,143

Dividends declared on common shares
($0.225 per common share)

(27,658)

(27,658)

Contributions from noncontrolling interests, net

 

 

 

 

 

 

3,231

 

3,231

Redeemable noncontrolling interests redemption value adjustment and total other comprehensive income allocation

 

 

 

51,621

 

 

(1,311)

 

 

50,310

Total other comprehensive income

 

 

 

 

 

10,016

 

 

10,016

BALANCE AS OF JUNE 30, 2022

 

115,862

$

1,160

$

3,285,511

$

(513,746)

$

18,640

$

31,640

$

2,823,205

See accompanying notes to the condensed consolidated financial statements (unaudited).

6

Table of Contents

JBG SMITH PROPERTIES

Condensed Consolidated Statements of Equity

(Unaudited)

(In thousands)

    

Accumulated 

Other 

Additional 

Comprehensive

Common Shares

Paid-In 

Accumulated

 

Income

Noncontrolling

Total 

Shares

Amount

Capital

Deficit

 

(Loss)

Interests

Equity

BALANCE AS OF DECEMBER 31, 2022

 

114,013

$

1,141

$

3,263,738

$

(628,636)

$

45,644

$

32,225

$

2,714,112

Net income (loss) attributable to common shareholders and noncontrolling interests

 

 

 

 

10,626

 

 

(535)

 

10,091

Redemption of OP Units for common shares

 

1,577

 

16

 

25,492

 

 

 

 

25,508

Common shares repurchased

(10,526)

(105)

(155,740)

(155,845)

Common shares issued pursuant to employee incentive compensation plan and ESPP

75

1,796

1,796

Dividends declared on common shares

($0.225 per common share)

(23,803)

(23,803)

Distributions to noncontrolling interests, net

 

 

 

 

 

 

(16)

 

(16)

Redeemable noncontrolling interests redemption value adjustment and total other comprehensive loss allocation

 

 

 

21,225

 

 

444

 

 

21,669

Other comprehensive loss

 

 

 

 

 

(2,530)

 

 

(2,530)

Other comprehensive income attributable to noncontrolling interest

(67)

67

BALANCE AS OF JUNE 30, 2023

 

105,139

$

1,052

$

3,156,511

$

(641,813)

$

43,491

$

31,741

$

2,590,982

BALANCE AS OF DECEMBER 31, 2021

 

127,378

$

1,275

$

3,539,916

$

(609,331)

$

(15,950)

$

22,507

$

2,938,417

Net income (loss) attributable to common shareholders and noncontrolling interests

 

 

 

 

123,243

 

 

(84)

 

123,159

Redemption of OP Units for common shares

 

280

 

3

 

7,773

 

 

 

 

7,776

Common shares repurchased

(11,840)

(118)

(306,921)

(307,039)

Common shares issued pursuant to employee incentive compensation plan and ESPP

44

1,429

1,429

Dividends declared on common shares

($0.225 per common share)

(27,658)

(27,658)

Contributions from noncontrolling interests, net

 

 

 

 

 

 

9,217

 

9,217

Redeemable noncontrolling interests redemption value adjustment and total other comprehensive income allocation

 

 

 

43,314

 

 

(4,277)

 

 

39,037

Other comprehensive income

 

 

 

 

 

38,867

 

 

38,867

BALANCE AS OF JUNE 30, 2022

 

115,862

$

1,160

$

3,285,511

$

(513,746)

$

18,640

$

31,640

$

2,823,205

See accompanying notes to the condensed consolidated financial statements (unaudited).

7

Table of Contents

JBG SMITH PROPERTIES

Condensed Consolidated Statements of Cash Flows

(Unaudited)

(In thousands)

Six Months Ended June 30, 

    

2023

    

2022

OPERATING ACTIVITIES:

 

  

 

  

Net income

$

12,056

$

141,417

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

 

  

 

  

Share-based compensation expense

 

20,514

 

25,375

Depreciation and amortization expense, including amortization of deferred financing costs

 

105,105

 

109,697

Deferred rent

 

(15,256)

 

(7,237)

Income from unconsolidated real estate ventures, net

 

(943)

 

(1,038)

Amortization of market lease intangibles, net

 

(510)

 

(621)

Amortization of lease incentives

 

1,340

 

4,303

Loss on the extinguishment of debt

 

450

 

1,629

Gain on the sale of real estate, net

 

(40,700)

 

(158,631)

(Income) loss on operating lease and other receivables

 

(351)

 

738

Income from investments, net

(1,305)

(15,282)

Return on capital from unconsolidated real estate ventures

 

9,354

 

6,028

Other non-cash items

 

5,800

 

(4,781)

Changes in operating assets and liabilities:

 

 

  

Tenant and other receivables

 

12,138

 

(2,847)

Other assets, net

 

4,273

 

(3,669)

Accounts payable and accrued expenses

 

(19,172)

 

(1,375)

Other liabilities, net

 

(3,362)

 

13,943

Net cash provided by operating activities

 

89,431

 

107,649

INVESTING ACTIVITIES:

 

  

 

  

Development costs, construction in progress and real estate additions

 

(164,776)

 

(128,114)

Acquisition of real estate

 

(19,551)

 

Proceeds from the sale of real estate

 

68,998

 

923,108

Proceeds from the sale of investments

19,030

Distributions of capital from unconsolidated real estate ventures

 

 

52,465

Investments in unconsolidated real estate ventures and other investments

 

(20,171)

 

(81,185)

Net cash (used in) provided by investing activities

 

(135,500)

 

785,304

FINANCING ACTIVITIES:

 

  

 

  

Borrowings under mortgage loans

 

251,714

 

Borrowings under revolving credit facility

 

122,000

 

Borrowings under term loans

 

170,000

 

Repayments of mortgage loans

 

(278,469)

 

(167,132)

Repayments of revolving credit facility

 

(60,000)

 

(300,000)

Debt issuance and modification costs

 

(17,213)

 

(1,256)

Redemption of partner's noncontrolling interest

 

(647)

 

Proceeds from common shares issued pursuant to ESPP

 

665

 

800

Common shares repurchased

(155,845)

(297,040)

Dividends paid to common shareholders

 

(49,455)

 

(56,323)

Distributions to redeemable noncontrolling interests

 

(7,895)

 

(8,196)

Distributions to noncontrolling interests

(15)

(21)

Contributions from noncontrolling interests

9,238

Net cash used in financing activities

 

(25,160)

 

(819,930)

Net (decrease) increase in cash and cash equivalents, and restricted cash

 

(71,229)

 

73,023

Cash and cash equivalents, and restricted cash, beginning of period

 

274,073

 

302,095

Cash and cash equivalents, and restricted cash, end of period

$

202,844

$

375,118

See accompanying notes to the condensed consolidated financial statements (unaudited).

8

Table of Contents

JBG SMITH PROPERTIES

Condensed Consolidated Statements of Cash Flows

(Unaudited)

(In thousands)

Six Months Ended June 30, 

    

2023

    

2022

CASH AND CASH EQUIVALENTS, AND RESTRICTED CASH, END OF PERIOD:

 

  

Cash and cash equivalents

$

156,639

$

162,270

Restricted cash

 

46,205

 

212,848

Cash and cash equivalents, and restricted cash

$

202,844

$

375,118

SUPPLEMENTAL DISCLOSURE OF CASH FLOW AND NON-CASH INFORMATION:

 

  

Cash paid for interest (net of capitalized interest of $7,221 and $3,928 in 2023 and 2022)

$

44,379

$

34,612

Accrued capital expenditures included in accounts payable and accrued expenses

 

75,565

 

57,426

Write-off of fully depreciated assets

 

3,335

 

7,993

Conversion of OP Units to common shares

 

25,508

 

7,776

Recognition of operating lease right-of-use asset

61,443

Recognition of liabilities related to operating lease right-of-use asset

61,443

Cash paid for amounts included in the measurement of lease liabilities for operating leases

 

1,967

 

1,092

See accompanying notes to the condensed consolidated financial statements (unaudited).

9

Table of Contents

JBG SMITH PROPERTIES

Notes to Condensed Consolidated Financial Statements

(Unaudited)

1.Organization and Basis of Presentation

Organization

JBG SMITH Properties ("JBG SMITH"), a Maryland real estate investment trust, owns, operates, invests in and develops mixed-use properties in high growth and high barrier-to-entry submarkets in and around Washington, D.C. Through an intense focus on placemaking, JBG SMITH cultivates vibrant, amenity-rich, walkable neighborhoods throughout the Washington, D.C. metropolitan area. Approximately two-thirds of our holdings are in the National Landing submarket in Northern Virginia, which is anchored by four key demand drivers: Amazon.com, Inc.'s ("Amazon") new headquarters; Virginia Tech's under-construction $1 billion Innovation Campus; the submarket’s proximity to the Pentagon; and our deployment of next-generation public and private 5G digital infrastructure. In addition, our third-party asset management and real estate services business provides fee-based real estate services to the Washington Housing Initiative ("WHI") Impact Pool, the legacy funds formerly organized by The JBG Companies ("JBG") (the "JBG Legacy Funds") and other third parties. Substantially all our assets are held by, and our operations are conducted through, JBG SMITH Properties LP ("JBG SMITH LP"), our operating partnership. As of June 30, 2023, JBG SMITH, as its sole general partner, controlled JBG SMITH LP and owned 88.1% of its OP Units, after giving effect to the conversion of certain vested long-term incentive partnership units ("LTIP Units") that are convertible into OP Units. JBG SMITH is referred to herein as "we," "us," "our" or other similar terms. References to "our share" refer to our ownership percentage of consolidated and unconsolidated assets in real estate ventures, but exclude our: (i) 10.0% subordinated interest in one commercial building, (ii) 33.5% subordinated interest in four commercial buildings (the "Fortress Assets") and (iii) 49.0% interest in three commercial buildings (the "L'Enfant Plaza Assets"), as well as the associated non-recourse mortgage loans, held through unconsolidated real estate ventures; these interests and debt are excluded because our investment in each real estate venture is zero, we do not anticipate receiving any near-term cash flow distributions from the real estate ventures, and we have not guaranteed their obligations or otherwise committed to providing financial support.

We were organized for the purpose of receiving, via the spin-off on July 17, 2017 (the "Separation"), substantially all of the assets and liabilities of Vornado Realty Trust's ("Vornado") Washington, D.C. segment. On July 18, 2017, we acquired the management business, and certain assets and liabilities of JBG (the "Combination"). The Separation and the Combination are collectively referred to as the "Formation Transaction."

As of June 30, 2023, our Operating Portfolio consisted of 51 operating assets comprising 31 commercial assets totaling 9.7 million square feet (8.2 million square feet at our share), 18 multifamily assets totaling 6,756 units (6,756 units at our share) and two wholly owned land assets for which we are the ground lessor. Additionally, we have two under-construction multifamily assets with 1,583 units (1,583 units at our share) and 20 assets in the development pipeline totaling 12.5 million square feet (9.8 million square feet at our share) of estimated potential development density.

We derive our revenue primarily from leases with multifamily and commercial tenants, which include fixed and percentage rents, and reimbursements from tenants for certain expenses such as real estate taxes, property operating expenses, and repairs and maintenance. In addition, our third-party asset management and real estate services business provides fee-based real estate services.

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements and notes are prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP") for interim financial information and with the instructions of Form 10-Q and Article 10 of Regulation S-X. Accordingly, these condensed consolidated financial statements do not contain certain information required in annual financial statements and notes as required under GAAP. In our opinion, all adjustments considered necessary for a fair presentation have been included, and all such adjustments are of a normal recurring nature. All intercompany transactions and balances have been eliminated. The results of operations

10

Table of Contents

for the three and six months ended June 30, 2023 and 2022 are not necessarily indicative of the results that may be expected for a full year. These condensed consolidated financial statements should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2022, filed with the Securities and Exchange Commission on February 21, 2023 ("Annual Report").

The accompanying condensed consolidated financial statements include our accounts and those of our wholly owned subsidiaries and consolidated variable interest entities ("VIEs"), including JBG SMITH LP. See Note 5 for additional information on our VIEs. The portions of the equity and net income (loss) of consolidated entities that are not attributable to us are presented separately as amounts attributable to noncontrolling interests in our condensed consolidated financial statements.

References to our financial statements refer to our unaudited condensed consolidated financial statements as of June 30, 2023 and December 31, 2022, and for the three and six months ended June 30, 2023 and 2022. References to our balance sheets refer to our condensed consolidated balance sheets as of June 30, 2023 and December 31, 2022. References to our statements of operations refer to our condensed consolidated statements of operations for the three and six months ended June 30, 2023 and 2022. References to our statements of comprehensive income refer to our condensed consolidated statements of comprehensive income for the three and six months ended June 30, 2023 and 2022.

Income Taxes

We have elected to be taxed as a real estate investment trust ("REIT") under sections 856-860 of the Internal Revenue Code of 1986, as amended (the "Code"). Under those sections, a REIT which distributes at least 90% of its REIT taxable income as dividends to its shareholders each year and which meets certain other conditions will not be taxed on that portion of its taxable income which is distributed to its shareholders. We currently adhere and intend to continue to adhere to these requirements and to maintain our REIT status in future periods. We also participate in the activities conducted by our subsidiary entities that have elected to be treated as taxable REIT subsidiaries under the Code. As such, we are subject to federal, state and local taxes on the income from those activities.

2.Summary of Significant Accounting Policies

Significant Accounting Policies

There were no material changes to our significant accounting policies disclosed in our Annual Report.

Use of Estimates

The preparation of the financial statements in conformity with GAAP requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities, and the disclosure of contingent assets and liabilities as of the date of the financial statements and the reported amounts of revenue and expenses during the reporting periods. Actual results could differ from those estimates.

Recent Accounting Pronouncements

Reference Rate Reform

In March 2020, the Financial Accounting Standards Board issued Accounting Standards Update ("ASU") 2020-04, Reference Rate Reform ("Topic 848"), which was amended in December 2022 by ASU 2022-06, Reference Rate Reform (Topic 848). Topic 848 contains practical expedients for reference rate reform related activities that impact debt, leases, derivatives and other contracts. The guidance in Topic 848 is optional and may be elected through December 31, 2024 as reference rate reform activities occur. We elected to apply the hedge accounting expedients that allow us to (i) continue to amortize previously deferred gains and losses in accumulated other comprehensive income related to terminated hedges into earnings in accordance with the underlying hedged forecasted transactions, (ii) modify loan agreements to replace the reference rate without treating the change as a contract modification and (iii) modify the reference rate of the hedging instruments without it being considered a change in critical terms requiring redesignation. We also elected to apply the hedge accounting expedients related to (i) the assertion that our hedged forecasted transactions remain probable and (ii) the assessments of effectiveness for future London Interbank Offered Rate ("LIBOR") indexed cash flows to assume that the

11

Table of Contents

index upon which future hedged transactions will be based matches the index on the corresponding derivatives. Application of these expedients preserves the past presentation of our derivatives. We will continue to evaluate the impact of the guidance and may apply other elections, as applicable.

3.Acquisition and Dispositions

Acquisition

During the six months ended June 30, 2023, we paid the deferred purchase price of $19.6 million related to the acquisition of a development parcel, formerly the Americana hotel, in 2020.

Dispositions

The following is a summary of activity for the six months ended June 30, 2023:

Gain (Loss)

Total

Gross

Cash

on the Sale

Square

Sales

Proceeds

of Real

Date Disposed

    

Assets

    

Segment

    

Location

    

Feet

    

Price

    

from Sale

    

Estate

(In thousands)

March 17, 2023

Development Parcel

Other

Arlington, Virginia

$

5,500

$

4,954

$

(53)

March 23, 2023

4747 Bethesda Avenue (1)

Commercial

Bethesda, Maryland

40,053

Other (2)

700

$

40,700

(1)We sold an 80.0% interest in the asset for a gross sales price of $196.0 million, representing a gross valuation of $245.0 million. See Note 4 for additional information.
(2)Represents recognition of contingent consideration related to a prior period disposition.

4.Investments in Unconsolidated Real Estate Ventures

The following is a summary of the composition of our investments in unconsolidated real estate ventures:

Effective

    

Ownership

Real Estate Venture

    

Interest (1)

    

June 30, 2023

    

December 31, 2022

(In thousands)

Prudential Global Investment Management

 

50.0%

$

198,475

$

203,529

J.P. Morgan Global Alternatives ("J.P. Morgan") (2)

50.0%

68,275

64,803

4747 Bethesda Venture (3)

20.0%

13,577

Brandywine Realty Trust

 

30.0%

 

13,682

 

13,678

CBREI Venture

 

9.9% - 10.0%

 

12,380

 

12,516

Landmark Partners (4)

 

18.0%

 

2,267

 

4,809

Other

 

 

563

546

Total investments in unconsolidated real estate ventures (5) (6)

$

309,219

$

299,881

(1)Reflects our effective ownership interests in the underlying real estate as of June 30, 2023. We have multiple investments with certain venture partners with varying ownership interests in the underlying real estate.
(2)J.P. Morgan is the advisor for an institutional investor.
(3)In March 2023, we sold an 80.0% interest in 4747 Bethesda Avenue for a gross sales price of $196.0 million, representing a gross valuation of $245.0 million. In connection with the transaction, the real estate venture assumed the related $175.0 million mortgage loan.
(4)Excludes the L'Enfant Plaza Assets for which we have a zero investment balance and discontinued applying the equity method of accounting after September 30, 2022.
(5)Excludes (i) 10.0% subordinated interest in one commercial building, (ii) the Fortress Assets and (iii) the L'Enfant Plaza Assets held through unconsolidated real estate ventures. For more information see Note 1. Also, excludes our interest in an investment in the real estate venture that owns 1101 17th Street for which we have discontinued applying the equity method of accounting since June

12

Table of Contents

30, 2018 because we received distributions in excess of our contributions and share of earnings, which reduced our investment to zero; further, we are not obligated to provide for losses, have not guaranteed its obligations or otherwise committed to provide financial support.
(6)As of June 30, 2023 and December 31, 2022, our total investments in unconsolidated real estate ventures were greater than our share of the net book value of the underlying assets by $7.0 million and $8.9 million, resulting principally from capitalized interest and our zero investment balance in certain real estate ventures.

We provide leasing, property management and other real estate services to our unconsolidated real estate ventures. We recognized revenue, including expense reimbursements, of $5.6 million and $10.8 million for the three and six months ended June 30, 2023, and $6.6 million and $12.2 million for the three and six months ended June 30, 2022 for such services.

The following is a summary of the debt of our unconsolidated real estate ventures:

Weighted

Average Effective

    

Interest Rate (1)

    

June 30, 2023

    

December 31, 2022

(In thousands)

Variable rate (2)

 

6.06%

$

358,271

$

184,099

Fixed rate (3)

 

4.13%

 

60,000

 

60,000

Mortgage loans (4)

 

418,271

 

244,099

Unamortized deferred financing costs and premium / discount, net

 

(10,082)

 

(411)

Mortgage loans, net (4) (5)

$

408,189

$

243,688

(1)Weighted average effective interest rate as of June 30, 2023.
(2)Includes variable rate mortgages with interest rate cap agreements.
(3)Includes variable rate mortgages with interest rates fixed by interest rate swap agreements.
(4)Excludes mortgage loans related to the Fortress Assets and the L'Enfant Plaza Assets.
(5)See Note 17 for additional information on guarantees of the debt of certain of our unconsolidated real estate ventures.

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

    

June 30, 2023

    

December 31, 2022

 

(In thousands)

Combined balance sheet information: (1)

Real estate, net

$

1,070,477

$

888,379

Other assets, net

 

184,566

 

160,015

Total assets

$

1,255,043

$

1,048,394

Mortgage loans, net

$

408,189

$

243,688

Other liabilities, net

 

53,163

 

54,639

Total liabilities

 

461,352

 

298,327

Total equity

 

793,691

 

750,067

Total liabilities and equity

$

1,255,043

$

1,048,394

13

Table of Contents

Three Months Ended June 30, 

Six Months Ended June 30, 

    

2023

    

2022

X

2023

    

2022

 

(In thousands)

Combined income statement information: (1)

Total revenue

$

24,952

$

41,379

$

44,985

$

84,253

Operating income (2)

5,088

36,108

 

7,579

 

84,534

Net income (loss) (2)

(2,214)

25,127

 

(3,934)

 

64,410

(1)Excludes amounts related to the Fortress Assets. Excludes combined balance sheet information for both periods presented and combined income statement information for the three and six months ended June 30, 2023 related to the L'Enfant Plaza Assets as we discontinued applying the equity method of accounting after September 30, 2022.
(2)Includes the gain on the sale of various assets totaling $32.3 million and $77.4 million during the three and six months ended June 30, 2022.

5.Variable Interest Entities

We hold various interests in entities deemed to be VIEs, which we evaluate at acquisition, formation, after a change in the ownership agreement, after a change in the entity's economics or after any other reconsideration event to determine if the VIE should be consolidated in our financial statements or should no longer be considered a VIE. An entity is a VIE because it is in the development stage and/or does not hold sufficient equity at risk, or conducts substantially all its operations on behalf of an investor with disproportionately few voting rights. We will consolidate a VIE if we are the primary beneficiary of the VIE, which entails having the power to direct the activities that most significantly impact the VIE’s economic performance. Certain criteria we assess in determining whether we are the primary beneficiary of the VIE include our influence over significant business activities, our voting rights and any noncontrolling interest kick-out or participating rights.

Unconsolidated VIEs

As of June 30, 2023 and December 31, 2022, we had interests in entities deemed to be VIEs. Although we may be responsible for managing the day-to-day operations of these investees, we are not the primary beneficiary of these VIEs, as we do not hold unilateral power over activities that, when taken together, most significantly impact the respective VIE's economic performance. We account for our investment in these entities under the equity method. As of June 30, 2023 and December 31, 2022, the net carrying amounts of our investment in these entities were $84.3 million and $83.2 million, which were included in "Investments in unconsolidated real estate ventures" in our balance sheets. Our equity in the income of unconsolidated VIEs was included in "Income (loss) from unconsolidated real estate ventures, net" in our statements of operations. Our maximum loss exposure in these entities is limited to our investments, construction commitments and debt guarantees. See Note 17 for additional information.

Consolidated VIEs

JBG SMITH LP is our most significant consolidated VIE. We hold 88.1% of the limited partnership interest in JBG SMITH LP, act as the general partner and exercise full responsibility, discretion and control over its day-to-day management. The noncontrolling interests of JBG SMITH LP do not have substantive liquidation rights, substantive kick-out rights without cause or substantive participating rights that could be exercised by a simple majority of noncontrolling interest limited partners (including by such a limited partner unilaterally). Because the noncontrolling interest holders do not have these rights, JBG SMITH LP is a VIE. As general partner, we have the power to direct the activities of JBG SMITH LP that most significantly affect its economic performance, and through our majority interest, we have both the right to receive benefits from and the obligation to absorb losses of JBG SMITH LP. Accordingly, we are the primary beneficiary of JBG SMITH LP and consolidate it in our financial statements. Because we conduct our business through JBG SMITH LP, its total assets and liabilities comprise substantially all our consolidated assets and liabilities.

As of June 30, 2023 and December 31, 2022, excluding JBG SMITH LP, we consolidated two VIEs (1900 Crystal Drive and 2000/2001 South Bell Street) with total assets of $392.2 million and $265.5 million, and liabilities of $198.7 million and $116.3 million, primarily consisting of construction in process and mortgage loans. The assets of the VIEs can only be

14

Table of Contents

used to settle the obligations of the VIEs, and the liabilities include third-party liabilities of the VIEs for which the creditors or beneficial interest holders do not have recourse against us.

6.Other Assets, Net

The following is a summary of other assets, net:

    

June 30, 2023

    

December 31, 2022

(In thousands)

Prepaid expenses

$

11,056

$

16,440

Derivative agreements, at fair value

53,569

61,622

Deferred financing costs, net

 

13,653

 

5,516

Deposits

 

401

 

483

Operating lease right-of-use assets (1)

61,908

1,383

Investments in funds (2)

19,671

16,748

Other investments (3)

3,589

3,524

Other

 

11,830

 

11,312

Total other assets, net

$

175,677

$

117,028

(1)Includes our corporate office lease at 4747 Bethesda Avenue as of June 30, 2023.
(2)Consists of investments in real estate-focused technology companies, which are recorded at their fair value based on their reported net asset value. During the three and six months ended June 30, 2023, unrealized (losses) gains related to these investments were ($338,000) and $1.7 million. During the three and six months ended June 30, 2022, unrealized gains related to these investments were $1.0 million and $1.2 million. During the three and six months ended June 30, 2023, realized losses related to these investments were $189,000 and $318,000. Unrealized (losses) gains and realized losses were included in "Interest and other income, net" in our statements of operations.
(3)Primarily consists of equity investments that are carried at cost. During the three and six months ended June 30, 2022, realized gains related to these investments were $178,000 and $14.1 million, which were included in "Interest and other income, net" in our statements of operations.

7.Debt

Mortgage Loans

The following is a summary of mortgage loans:

Weighted Average

Effective

   

Interest Rate (1)

  

June 30, 2023

   

December 31, 2022

(In thousands)

Variable rate (2)

 

5.43%

$

678,671

$

892,268

Fixed rate (3)

 

4.45%

 

1,025,535

 

1,009,607

Mortgage loans

 

1,704,206

 

1,901,875

Unamortized deferred financing costs and premium / discount, net (4)

 

(14,999)

 

(11,701)

Mortgage loans, net

$

1,689,207

$

1,890,174

(1)Weighted average effective interest rate as of June 30, 2023.
(2)Includes variable rate mortgage loans with interest rate cap agreements. For mortgage loans with interest rate caps, the weighted average interest rate cap strike was 2.42%, and the weighted average maturity date of the interest rate caps is August 2023. The interest rate cap strike is exclusive of the credit spreads associated with the mortgage loans. As of June 30, 2023, one-month LIBOR was 5.22% and one-month term Secured Overnight Financing Rate ("SOFR") was 5.14%.
(3)Includes variable rate mortgages with interest rates fixed by interest rate swap agreements.
(4)As of June 30, 2023 and December 31, 2022, excludes $2.0 million and $2.2 million of net deferred financing costs related to unfunded mortgage loans that were included in "Other assets, net" in our balance sheets.

As of June 30, 2023 and December 31, 2022, the net carrying value of real estate collateralizing our mortgage loans totaled $2.1 billion and $2.2 billion. Our mortgage loans contain covenants that limit our ability to incur additional indebtedness

15

Table of Contents

on these properties and, in certain circumstances, require lender approval of tenant leases and/or yield maintenance upon repayment prior to maturity. Certain mortgage loans are recourse to us. See Note 17 for additional information.

In January 2023, we entered into a $187.6 million loan facility, collateralized by The Wren and F1RST Residences. The loan has a seven-year term and a fixed interest rate of 5.13%. This loan is the initial advance under a Fannie Mae multifamily credit facility which provides flexibility for collateral substitutions, future advances tied to performance, ability to mix fixed and floating rates, and staggered maturities. Proceeds from the loan were used, in part, to repay the $131.5 million mortgage loan collateralized by 2121 Crystal Drive, which had a fixed interest rate of 5.51%.

In June 2023, we repaid $142.4 million in mortgage loans collateralized by Falkland Chase – South & West and 800 North Glebe Road.

As of June 30, 2023 and December 31, 2022, we had various interest rate swap and cap agreements on certain mortgage loans with an aggregate notional value of $1.2 billion and $1.3 billion. See Note 15 for additional information.

Revolving Credit Facility and Term Loans

As of June 30, 2023, our unsecured revolving credit facility and term loans totaling $1.5 billion consisted of a $750.0 million revolving credit facility maturing in June 2027, a $200.0 million term loan ("Tranche A-1 Term Loan") maturing in January 2025, a $400.0 million term loan ("Tranche A-2 Term Loan") maturing in January 2028, which includes the $50.0 million remaining advance drawn in May 2023, and a $120.0 million term loan ("2023 Term Loan") maturing in June 2028.

Effective as of June 29, 2023, the revolving credit facility was amended to: (i) reduce the borrowing capacity from $1.0 billion to $750.0 million, (ii) extend the maturity date from January 2025 to June 2027 and (iii) amend the interest rate to daily SOFR plus 1.40% to daily SOFR plus 1.85%, varying based on a ratio of our total outstanding indebtedness to a valuation of certain real property and assets. We have the option to increase the $750.0 million revolving credit facility or add term loans up to $500.0 million, and we also have the right to extend the maturity date beyond June 2027 via two six-month extension options.

In addition, on June 29, 2023, we entered into a $120.0 million term loan maturing in June 2028 with an interest rate of one-month term SOFR plus 1.25% to one-month term SOFR plus 1.80%, varying based on a ratio of our total outstanding indebtedness to a valuation of certain real property and assets. We also entered into an interest rate swap with a total notional value of $120.0 million, which fixes SOFR at an interest rate of 4.01% through the maturity date.

In July 2023, we amended the covenants related to the Tranche A-1 Term Loan and the Tranche A-2 Term Loan to be consistent with the revolving credit facility and 2023 Term Loan covenants.

The following is a summary of amounts outstanding under the revolving credit facility and term loans:

Effective

    

Interest Rate (1)

    

June 30, 2023

    

December 31, 2022

(In thousands)

Revolving credit facility (2) (3)

 

6.49%

$

62,000

$

Tranche A-1 Term Loan (4)

 

2.61%

$

200,000

$

200,000

Tranche A-2 Term Loan (4)

 

3.54%

 

400,000

 

350,000

2023 Term Loan (5)

5.26%

120,000

Term loans

 

  

 

720,000

 

550,000

Unamortized deferred financing costs, net

 

  

 

(3,243)

 

(2,928)

Term loans, net

 

  

$

716,757

$

547,072

(1)Effective interest rate as of June 30, 2023. The interest rate for our revolving credit facility excludes a 0.15% facility fee.
(2)As of June 30, 2023, daily SOFR was 5.09%. As of June 30, 2023 and December 31, 2022, letters of credit with an aggregate face amount of $467,000 were outstanding under our revolving credit facility.

16

Table of Contents

(3)As of June 30, 2023 and December 31, 2022, excludes $11.7 million and $3.3 million of net deferred financing costs related to our revolving credit facility that were included in "Other assets, net" in our balance sheets.
(4)As of June 30, 2023 and December 31, 2022, the outstanding balance was fixed by interest rate swap agreements. As of June 30, 2023, these interest rate swap agreements fix SOFR at a weighted average interest rate of 1.46% for the Tranche A-1 Term Loan and 2.29% for the Tranche A-2 Term Loan. Interest rate swaps for the Tranche A-1 Term Loan with a total notional value of $200.0 million mature in July 2024. Interest rate swaps for the Tranche A-2 Term Loan with a total notional value of $200.0 million mature in July 2024 and with a total notional value of $200.0 million mature in January 2028. We have two forward-starting interest rate swaps that will be effective July 2024 with a total notional value of $200.0 million, which will effectively fix SOFR for the Tranche A-2 Term Loan at a weighted average interest rate of 2.81% through the maturity date.
(5)As of June 30, 2023, the outstanding balance was fixed by an interest rate swap agreement, which fixes SOFR at an interest rate of 4.01% through the maturity date.

8.Other Liabilities, Net

The following is a summary of other liabilities, net:

    

June 30, 2023

    

December 31, 2022

(In thousands)

Lease intangible liabilities, net

$

6,403

$

7,275

Lease assumption liabilities

 

1,228

 

2,647

Lease incentive liabilities

 

9,685

 

11,539

Liabilities related to operating lease right-of-use assets (1)

 

65,875

 

5,308

Prepaid rent

 

15,428

 

15,923

Security deposits

 

12,879

 

13,963

Environmental liabilities

 

17,990

 

17,990

Deferred tax liability, net

 

5,181

 

4,903

Dividends payable

 

 

29,621

Derivative agreements, at fair value

 

755

 

Deferred purchase price related to the acquisition of a development parcel

19,447

Other

 

4,021

 

4,094

Total other liabilities, net

$

139,445

$

132,710

(1)Includes our corporate office lease at 4747 Bethesda Avenue as of June 30, 2023.

9.Redeemable Noncontrolling Interests

JBG SMITH LP

OP Units held by persons other than JBG SMITH are redeemable for cash or, at our election, our common shares, subject to certain limitations. Vested LTIP Units are redeemable into OP Units. During the six months ended June 30, 2023 and 2022, unitholders redeemed 1.6 million and 280,451 OP Units, which we elected to redeem for an equivalent number of our common shares. As of June 30, 2023, outstanding OP Units and redeemable LTIP Units totaled 14.1 million, representing an 11.9% ownership interest in JBG SMITH LP. Our OP Units and certain vested LTIP Units are presented at the higher of their redemption value or their carrying value, with adjustments to the redemption value recognized in "Additional paid-in capital" in our balance sheets. Redemption value per OP Unit is equivalent to the market value of one common share at the end of the period. In July 2023, unitholders redeemed 257,151 OP Units and LTIP Units, which we elected to redeem for an equivalent number of our common shares.

Consolidated Real Estate Venture

We were a partner in a consolidated real estate venture that owned a multifamily asset, The Wren, located in Washington, D.C. As of June 30, 2022, we held a 96.0% ownership interest in the real estate venture. In October 2022, one partner redeemed its 3.7% interest, and in February 2023, another partner redeemed its 0.3% interest, increasing our ownership interest to 100.0%.

17

Table of Contents

The following is a summary of the activity of redeemable noncontrolling interests:

Three Months Ended June 30, 

2023

2022

Consolidated

Consolidated

JBG

Real Estate

JBG

Real Estate

   

SMITH LP

   

Venture

   

Total

   

SMITH LP

   

Venture

   

Total

 

(In thousands)

Balance, beginning of period

$

457,778

$

$

457,778

$

536,725

$

9,324

$

546,049

Redemptions

 

(11,726)

 

 

(11,726)

 

(1,762)

 

 

(1,762)

LTIP Units issued in lieu of cash compensation (1)

 

757

 

 

757

 

987

 

 

987

Net income (loss)

 

(1,398)

 

 

(1,398)

 

18,240

 

8

 

18,248

Other comprehensive income

 

1,781

 

 

1,781

 

1,311

 

 

1,311

Distributions

 

(3,927)

 

 

(3,927)

 

(4,110)

 

(79)

 

(4,189)

Share-based compensation expense

 

9,606

 

 

9,606

 

12,369

 

 

12,369

Adjustment to redemption value

 

3,015

 

 

3,015

 

(50,334)

 

(1,287)

 

(51,621)

Balance, end of period

$

455,886

$

$

455,886

$

513,426

$

7,966

$

521,392

Six Months Ended June 30, 

2023

2022

Consolidated

Consolidated

JBG

Real Estate

JBG

Real Estate

   

SMITH LP

   

Venture

   

Total

   

SMITH LP

   

Venture

   

Total

 

(In thousands)

Balance, beginning of period

$

480,663

$

647

$

481,310

$

513,268

$

9,457

$

522,725

Redemptions

 

(25,508)

 

(647)

 

(26,155)

 

(7,776)

 

 

(7,776)

LTIP Units issued in lieu of cash compensation (1)

 

5,213

 

 

5,213

 

6,584

 

 

6,584

Net income

 

1,965

 

 

1,965

 

18,237

 

21

 

18,258

Other comprehensive income (loss)

 

(444)

 

 

(444)

 

4,277

 

 

4,277

Distributions

 

(3,927)

 

 

(3,927)

 

(4,110)

 

(148)

 

(4,258)

Share-based compensation expense

 

19,149

 

 

19,149

 

24,896

 

 

24,896

Adjustment to redemption value

 

(21,225)

 

 

(21,225)

 

(41,950)

 

(1,364)

 

(43,314)

Balance, end of period

$

455,886

$

$

455,886

$

513,426

$

7,966

$

521,392

(1)See Note 11 for additional information.

10.Property Rental Revenue

The following is a summary of property rental revenue from our non-cancellable leases:

Three Months Ended June 30, 

Six Months Ended June 30, 

    

2023

    

2022

X

2023

    

2022

(In thousands)

Fixed

$

108,124

$

105,498

$

221,195

$

226,135

Variable

12,468

11,538

23,430

22,499

Property rental revenue

$

120,592

$

117,036

$

244,625

$

248,634

11.Share-Based Payments

LTIP Units and Time-Based LTIP Units

During the six months ended June 30, 2023, we granted to certain employees 945,872 LTIP Units with time-based vesting requirements ("Time-Based LTIP Units") and a weighted average grant-date fair value of $17.65 per unit that primarily vest ratably over four years subject to continued employment. Compensation expense for these units is primarily being recognized over a four-year period.

18

Table of Contents

In February 2023, we granted 280,342 fully vested LTIP Units to certain employees, who elected to receive all or a portion of their cash bonuses related to 2022 service as LTIP Units. The LTIP units had a grant-date fair value of $15.90 per unit. Compensation expense totaling $4.5 million for these LTIP Units was recognized in 2022.

In May 2023, as part of their annual compensation, we granted to non-employee trustees a total of 155,523 fully vested LTIP Units with a grant-date fair value of $11.30 per unit, which includes LTIP Units elected in lieu of cash retainers. The LTIP Units may not be sold while a trustee is serving on the Board of Trustees.

The aggregate grant-date fair value of the Time-Based LTIP Units and the LTIP Units granted during the six months ended June 30, 2023 was $22.9 million. The Time-Based LTIP Units and the LTIP Units were valued based on the closing common share price on the grant date, less a discount for post-grant restrictions. The discount was determined using Monte Carlo simulations based on the following significant assumptions:

Expected volatility

   

26.0% to 31.0%

Risk-free interest rate

 

3.4% to 4.9%

Post-grant restriction periods

 

2 to 6 years

Appreciation-Only LTIP Units ("AO LTIP Units")

In January 2023, we granted to certain employees 1.7 million performance-based AO LTIP Units with a grant-date fair value of $3.73 per unit. The AO LTIP Units are structured in the form of profits interests that provide for a share of appreciation determined by the increase in the value of a common share at the time of conversion over the participation threshold of $20.83. The AO LTIP Units are subject to a TSR modifier whereby the number of AO LTIP Units that will ultimately be earned will be increased or reduced by as much as 25%. The AO LTIP Units have a three-year performance period with 50% of the AO LTIP Units earned vesting at the end of the three-year performance period and the remaining 50% vesting on the fourth anniversary of the grant date, subject to continued employment. The AO LTIP Units expire on the tenth anniversary of their grant date.

The aggregate grant-date fair value of the AO LTIP Units granted during the six months ended June 30, 2023 was $6.4 million, valued using Monte Carlo simulations based on the following significant assumptions:

Expected volatility

   

30.0%

Dividend yield

 

3.2%

Risk-free interest rate

 

4.1%

LTIP Units with Performance-Based Vesting Requirements ("Performance-Based LTIP Units")

In January 2023, 470,773 Performance-Based LTIP Units, which were unvested as of December 31, 2022, were forfeited because the performance measures were not met.

Restricted Share Units ("RSUs")

In January 2023, we granted to certain non-executive employees 78,681 time-based RSUs ("Time-Based RSUs") with a grant-date fair value of $18.94 per unit. Vesting requirements and compensation expense recognition for the Time-Based RSUs are primarily consistent to those of the Time-Based LTIP Units granted in 2023.

The aggregate grant-date fair value of the RSUs granted during the six months ended June 30, 2023 was $1.5 million. The Time-Based RSUs were valued based on the closing common share price on the date of grant.

19

Table of Contents

ESPP

Pursuant to the ESPP, employees purchased 52,089 common shares for $665,000 during the six months ended June 30, 2023. The following is a summary of the significant assumptions used to value the ESPP common shares using the Black-Scholes model:

Expected volatility

   

30.0%

Dividend yield

 

2.4%

Risk-free interest rate

 

4.7%

Expected life

6 months

Share-Based Compensation Expense

The following is a summary of share-based compensation expense:

Three Months Ended June 30, 

Six Months Ended June 30, 

    

2023

    

2022

X

2023

    

2022

 

(In thousands)

Time-Based LTIP Units

$

5,324

$

6,202

$

10,856

$

12,328

AO LTIP Units and Performance-Based LTIP Units

 

3,282

 

3,590

 

6,942

 

7,747

LTIP Units

 

1,000

 

1,000

 

1,000

 

1,000

Other equity awards (1)

 

1,262

 

1,399

 

2,798

 

2,826

Share-based compensation expense - other

 

10,868

 

12,191

 

21,596

 

23,901

Formation awards, OP Units and LTIP Units (2)

 

 

1,017

 

108

 

1,974

Special Time-Based LTIP Units and Special Performance-Based LTIP Units (3)

 

 

560

 

243

 

1,847

Share-based compensation related to Formation Transaction and special equity awards (4)

 

 

1,577

 

351

 

3,821

Total share-based compensation expense

 

10,868

 

13,768

 

21,947

 

27,722

Less: amount capitalized

 

(782)

 

(1,297)

 

(1,433)

 

(2,347)

Share-based compensation expense

$

10,086

$

12,471

$

20,514

$

25,375

(1)Primarily comprising compensation expense for: (i) fully vested LTIP Units issued to certain employees in lieu of all or a portion of any cash bonuses earned, (ii) RSUs and (iii) shares issued under our ESPP.
(2)Includes share-based compensation expense for formation awards, LTIP Units and OP Units issued in the Formation Transaction, which fully vested in July 2022.
(3)Represents equity awards issued related to our successful pursuit of Amazon's additional headquarters in National Landing.
(4)Included in "General and administrative expense: Share-based compensation related to Formation Transaction and special equity awards" in our statements of operations.

As of June 30, 2023, we had $41.1 million of total unrecognized compensation expense related to unvested share-based payment arrangements, which is expected to be recognized over a weighted average period of 2.9 years.

20

Table of Contents

12.Transaction and Other Costs

The following is a summary of transaction and other costs:

Three Months Ended June 30, 

Six Months Ended June 30, 

    

2023

    

2022

X

2023

    

2022

 

(In thousands)

Completed, potential and pursued transaction expenses (1)

$

227

$

854

$

274

$

1,586

Severance and other costs

 

1,799

 

727

 

3,247

 

872

Demolition costs

1,466

406

2,443

428

Transaction and other costs

$

3,492

$

1,987

$

5,964

$

2,886

(1)Primarily consists of legal costs related to pursued transactions.

13.Interest Expense

The following is a summary of interest expense:

Three Months Ended June 30, 

Six Months Ended June 30, 

    

2023

    

2022

X

2023

    

2022

 

(In thousands)

Interest expense before capitalized interest

$

27,805

$

18,857

$

55,713

$

37,299

Amortization of deferred financing costs

 

1,351

 

1,121

 

2,630

 

2,251

Interest expense related to finance lease right-of-use assets

247

2,091

Net (gain) loss on derivative financial instruments designated as ineffective hedges:

 

  

Net unrealized (gain) loss

 

2,944

 

(2,027)

 

5,641

 

(5,394)

Net realized loss

 

97

 

 

230

 

Capitalized interest

 

(6,362)

 

(2,157)

 

(11,537)

 

(3,928)

Interest expense

$

25,835

$

16,041

$

52,677

$

32,319

14.Shareholders' Equity and Earnings (Loss) Per Common Share

Common Shares Repurchased

Our Board of Trustees previously authorized the repurchase of up to $1.0 billion of our outstanding common shares, and in May 2023, increased the common share repurchase authorization to $1.5 billion. During the three and six months ended June 30, 2023, we repurchased and retired 9.3 million and 10.5 million common shares for $135.7 million and $155.8 million, a weighted average purchase price per share of $14.54 and $14.79. During the three and six months ended June 30, 2022, we repurchased and retired 8.5 million and 11.8 million common shares for $213.9 million and $307.0 million, a weighted average purchase price per share of $25.15 and $25.91. Since we began the share repurchase program through June 30, 2023, we have repurchased and retired 33.8 million common shares for $779.3 million, a weighted average purchase price per share of $23.02.

During the third quarter of 2023, through the date of this filing, we repurchased and retired 2.0 million common shares for $31.5 million, a weighted average purchase price per share of $16.03, pursuant to a repurchase plan under Rule 10b5-1 of the Securities Exchange Act of 1934, as amended.

21

Table of Contents

Earnings (Loss) Per Common Share

The following is a summary of the calculation of basic and diluted earnings (loss) per common share and a reconciliation of net income (loss) to the amounts of net income (loss) available to common shareholders used in calculating basic and diluted earnings (loss) per common share:

Three Months Ended June 30, 

Six Months Ended June 30, 

2023

    

2022

X

2023

    

2022

(In thousands, except per share amounts)

Net income (loss)

$

(12,254)

$

141,494

$

12,056

$

141,417

Net (income) loss attributable to redeemable noncontrolling interests

1,398

 

(18,248)

 

(1,965)

 

(18,258)

Net loss attributable to noncontrolling interests

311

 

29

 

535

 

84

Net income (loss) attributable to common shareholders

(10,545)

123,275

10,626

123,243

Distributions to participating securities

(717)

(12)

 

(717)

 

(12)

Net income (loss) available to common shareholders - basic and diluted

$

(11,262)

$

123,263

$

9,909

$

123,231

Weighted average number of common shares outstanding - basic and diluted

109,695

121,316

 

111,862

 

123,984

Earnings (loss) per common share - basic and diluted

$

(0.10)

$

1.02

$

0.09

$

0.99

The effect of the redemption of OP Units, Time-Based LTIP Units, fully vested LTIP Units and Special Time-Based LTIP Units that were outstanding as of June 30, 2023 and 2022 is excluded in the computation of diluted earnings (loss) per common share as the assumed exchange of such units for common shares on a one-for-one basis was antidilutive (the assumed redemption of these units would have no impact on the determination of diluted earnings (loss) per share). Since OP Units, Time-Based LTIP Units, LTIP Units and Special Time-Based LTIP Units, which are held by noncontrolling interests, are attributed gains at an identical proportion to the common shareholders, the gains attributable and their equivalent weighted average impact are excluded from net income (loss) available to common shareholders and from the weighted average number of common shares outstanding in calculating diluted earnings (loss) per common share. AO LTIP Units, Performance-Based LTIP Units, formation awards and RSUs, which totaled 5.2 million and 5.3 million for the three and six months ended June 30, 2023, and 6.0 million and 5.9 million for the three and six months ended June 30, 2022, were excluded from the calculation of diluted earnings (loss) per common share as they were antidilutive, but potentially could be dilutive in the future.

Dividends Declared in August 2023

On August 3, 2023, our Board of Trustees declared a quarterly dividend of $0.225 per common share, payable on August 31, 2023 to shareholders of record as of August 17, 2023.

15.Fair Value Measurements

Fair Value Measurements on a Recurring Basis

To manage or hedge our exposure to interest rate risk, we follow established risk management policies and procedures, including the use of a variety of derivative financial instruments.

As of June 30, 2023 and December 31, 2022, we had various derivative financial instruments consisting of interest rate swap and cap agreements that are measured at fair value on a recurring basis. The net unrealized gain on our derivative financial instruments designated as effective hedges was $50.2 million and $55.0 million as of June 30, 2023 and December 31, 2022 and was recorded in "Accumulated other comprehensive income" in our balance sheets, of which a portion was allocated to "Redeemable noncontrolling interests." Within the next 12 months, we expect to reclassify $34.9 million of the net unrealized gain as a decrease to interest expense.

22

Table of Contents

Accounting Standards Codification 820 ("Topic 820"), Fair Value Measurement and Disclosures, defines fair value and establishes a framework for measuring fair value. The objective of fair value is to determine the price that would be received upon the sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (the exit price). Topic 820 establishes a fair value hierarchy that prioritizes observable and unobservable inputs used to measure fair value into three levels:

Level 1 — quoted prices (unadjusted) in active markets that are accessible at the measurement date for assets or liabilities;

Level 2 — observable prices that are based on inputs not quoted in active markets, but corroborated by market data; and

Level 3 — unobservable inputs that are used when little or no market data is available.

The fair values of the derivative financial instruments are based on the estimated amounts we would receive or pay to terminate the contracts at the reporting date and are determined using interest rate pricing models and observable inputs. The derivative financial instruments are classified within Level 2 of the valuation hierarchy.

The following is a summary of assets and liabilities measured at fair value on a recurring basis:

Fair Value Measurements

    

Total

    

Level 1

    

Level 2

    

Level 3

(In thousands)

June 30, 2023

 

Derivative financial instruments designated as effective hedges:

 

  

 

  

 

  

 

  

Classified as assets in "Other assets, net"

$

51,313

$

51,313

Classified as liabilities in "Other liabilities, net"

755

 

755

 

Derivative financial instruments designated as ineffective hedges:

 

  

 

  

 

  

 

  

Classified as assets in "Other assets, net"

 

2,256

 

 

2,256

 

December 31, 2022

 

  

 

  

 

  

 

  

Derivative financial instruments designated as effective hedges:

 

  

 

  

 

  

 

  

Classified as assets in "Other assets, net"

$

53,515

$

53,515

Derivative financial instruments designated as ineffective hedges:

 

  

 

  

 

  

 

  

Classified as assets in "Other assets, net"

 

8,107

 

 

8,107

 

The fair values of our derivative financial instruments were determined using widely accepted valuation techniques, including discounted cash flow analysis on the expected cash flows of the derivative financial instrument. This analysis reflected the contractual terms of the derivative, including the period to maturity, and used observable market-based inputs, including interest rate market data and implied volatilities in such interest rates. While it was determined that the majority of the inputs used to value the derivatives fall within Level 2 of the fair value hierarchy under authoritative accounting guidance, the credit valuation adjustments associated with the derivatives also utilized Level 3 inputs, such as estimates of current credit spreads to evaluate the likelihood of default. However, as of June 30, 2023 and December 31, 2022, the significance of the impact of the credit valuation adjustments on the overall valuation of the derivative financial instruments was assessed, and it was determined that these adjustments were not significant to the overall valuation of the derivative financial instruments. As a result, it was determined that the derivative financial instruments in their entirety should be classified in Level 2 of the fair value hierarchy. The net unrealized gains and losses included in "Other comprehensive income (loss)" in our statements of comprehensive income for the three and six months ended June 30, 2023 and 2022 were attributable to the net change in unrealized gains or losses related to effective interest rate swaps that were outstanding during those periods, none of which were reported in our statements of operations as the interest rate swaps were documented and qualified as hedging instruments.

23

Table of Contents

Financial Assets and Liabilities Not Measured at Fair Value

As of June 30, 2023 and December 31, 2022, all financial assets and liabilities were reflected in our balance sheets at amounts which, in our estimation, reasonably approximated their fair values, except for the following:

June 30, 2023

December 31, 2022

    

Carrying

    

    

Carrying

    

Amount (1)

Fair Value

Amount (1)

Fair Value

 

(In thousands)

Financial liabilities:

 

  

 

  

 

  

 

  

Mortgage loans

$

1,704,206

$

1,651,156

$

1,901,875

$

1,830,651

Revolving credit facility

 

62,000

 

65,295

 

 

Term loans

 

720,000

 

723,019

 

550,000

 

551,369

(1)The carrying amount consists of principal only.

The fair values of the mortgage loans, revolving credit facility and term loans were determined using Level 2 inputs of the fair value hierarchy. The fair value of our mortgage loans is estimated by discounting the future contractual cash flows of these instruments using current risk-adjusted rates available to borrowers with similar credit profiles based on market sources. The fair value of our revolving credit facility and term loans is calculated based on the net present value of payments over the term of the facilities using estimated market rates for similar notes and remaining terms.

16.Segment Information

We review operating and financial data for each property on an individual basis; therefore, each of our individual properties is a separate operating segment. We define our reportable segments to be aligned with our method of internal reporting and the way our Chief Executive Officer, who is also our Chief Operating Decision Maker ("CODM"), makes key operating decisions, evaluates financial results, allocates resources and manages our business. Accordingly, we aggregate our operating segments into three reportable segments (multifamily, commercial, and third-party asset management and real estate services) based on the economic characteristics and nature of our assets and services.

The CODM measures and evaluates the performance of our operating segments, with the exception of the third-party asset management and real estate services business, based on the net operating income ("NOI") of properties within each segment. NOI includes property rental revenue and parking revenue, and deducts property operating expenses and real estate taxes.

With respect to the third-party asset management and real estate services business, the CODM reviews revenue streams generated by this segment ("Third-party real estate services, including reimbursements"), as well as the expenses attributable to the segment ("General and administrative: third-party real estate services"), which are both disclosed separately in our statements of operations. The following represents the components of revenue from our third-party asset management and real estate services business:

Three Months Ended June 30, 

Six Months Ended June 30, 

    

2023

    

2022

X

2023

    

2022

 

(In thousands)

Property management fees

$

5,017

$

4,976

$

9,969

$

9,784

Asset management fees

 

1,255

 

1,513

 

2,358

 

3,284

Development fees

 

2,756

 

2,148

 

4,742

 

5,687

Leasing fees

 

1,256

 

1,038

 

2,612

 

2,877

Construction management fees

 

303

 

37

 

643

 

187

Other service revenue

 

1,422

 

1,499

 

2,646

 

2,315

Third-party real estate services revenue, excluding reimbursements

 

12,009

 

11,211

 

22,970

 

24,134

Reimbursement revenue (1)

 

10,853

 

10,946

 

22,676

 

21,993

Third-party real estate services revenue, including reimbursements

22,862

22,157

45,646

46,127

Third-party real estate services expenses

22,105

24,143

45,928

51,192

Third-party real estate services revenue less expenses

$

757

$

(1,986)

$

(282)

$

(5,065)

24

Table of Contents

(1)Represents reimbursement of expenses incurred by us on behalf of third parties, including allocated payroll costs and amounts paid to third-party contractors for construction management projects.

Management company assets primarily consist of management and leasing contracts with a net book value of $10.9 million and $13.7 million as of June 30, 2023 and December 31, 2022, which were included in "Intangible assets, net" in our balance sheets. Consistent with internal reporting presented to our CODM and our definition of NOI, the third-party asset management and real estate services operating results are excluded from the NOI data below.

The following is the reconciliation of net income (loss) attributable to common shareholders to consolidated NOI:

Three Months Ended June 30, 

Six Months Ended June 30, 

    

2023

    

2022

X

2023

    

2022

 

(in thousands)

Net income (loss) attributable to common shareholders

$

(10,545)

$

123,275

$

10,626

$

123,243

Add:

 

  

 

  

 

  

 

  

Depreciation and amortization expense

 

49,218

 

49,479

 

102,649

 

107,541

General and administrative expense:

 

  

 

  

 

  

 

  

Corporate and other

 

15,093

 

14,782

 

31,216

 

30,597

Third-party real estate services

 

22,105

 

24,143

 

45,928

 

51,192

Share-based compensation related to Formation Transaction and special equity awards

 

 

1,577

 

351

 

3,821

Transaction and other costs

 

3,492

 

1,987

 

5,964

 

2,886

Interest expense

 

25,835

 

16,041

 

52,677

 

32,319

Loss on the extinguishment of debt

 

450

 

1,038

 

450

 

1,629

Income tax expense

 

611

 

2,905

 

595

 

2,434

Net income (loss) attributable to redeemable noncontrolling interests

 

(1,398)

 

18,248

 

1,965

 

18,258

Net loss attributable to noncontrolling interests

(311)

(29)

(535)

(84)

Less:

 

  

 

  

 

  

 

  

Third-party real estate services, including reimbursements revenue

 

22,862

 

22,157

 

45,646

 

46,127

Other revenue

 

3,846

 

1,798

 

5,572

 

3,994

Income (loss) from unconsolidated real estate ventures, net

 

510

 

(2,107)

 

943

 

1,038

Interest and other income, net

 

2,281

 

1,672

 

6,358

 

15,918

Gain on the sale of real estate, net

 

 

158,767

 

40,700

 

158,631

Consolidated NOI

$

75,051

$

71,159

$

152,667

$

148,128

25

Table of Contents

The following is a summary of NOI by segment. Items classified in the Other column include development assets, corporate entities, land assets for which we are the ground lessor and the elimination of inter-segment activity.

Three Months Ended June 30, 2023

    

Commercial

    

Multifamily

    

Other

    

Total

 

(In thousands)

Property rental revenue

$

64,321

$

52,443

$

3,828

$

120,592

Parking revenue

 

4,426

 

295

 

74

 

4,795

Total property revenue

 

68,747

 

52,738

 

3,902

 

125,387

Property expense:

 

 

 

 

  

Property operating

 

18,252

 

18,394

 

(734)

 

35,912

Real estate taxes

 

8,195

 

5,648

 

581

 

14,424

Total property expense

 

26,447

 

24,042

 

(153)

 

50,336

Consolidated NOI

$

42,300

$

28,696

$

4,055

$

75,051

Three Months Ended June 30, 2022

    

Commercial

    

Multifamily

    

Other

    

Total

 

(In thousands)

Property rental revenue

$

71,903

$

42,939

$

2,194

$

117,036

Parking revenue

 

4,187

 

250

 

77

 

4,514

Total property revenue

 

76,090

 

43,189

 

2,271

 

121,550

Property expense:

 

 

  

 

  

 

  

Property operating

 

19,624

 

14,870

 

951

 

35,445

Real estate taxes

 

9,018

 

5,054

 

874

 

14,946

Total property expense

 

28,642

 

19,924

 

1,825

 

50,391

Consolidated NOI

$

47,448

$

23,265

$

446

$

71,159

Six Months Ended June 30, 2023

    

Commercial

    

Multifamily

    

Other

    

Total

 

(In thousands)

Property rental revenue

$

136,238

$

102,353

$

6,034

$

244,625

Parking revenue

 

8,564

 

519

 

131

 

9,214

Total property revenue

 

144,802

 

102,872

 

6,165

 

253,839

Property expense:

 

 

  

 

  

 

  

Property operating

 

37,623

 

35,849

 

(1,948)

 

71,524

Real estate taxes

 

17,196

 

11,256

 

1,196

 

29,648

Total property expense

 

54,819

 

47,105

 

(752)

 

101,172

Consolidated NOI

$

89,983

$

55,767

$

6,917

$

152,667

Six Months Ended June 30, 2022

    

Commercial

    

Multifamily

    

Other

    

Total

(In thousands)

Property rental revenue

$

159,524

$

85,047

$

4,063

$

248,634

Parking revenue

 

8,199

 

384

 

132

 

8,715

Total property revenue

 

167,723

 

85,431

 

4,195

 

257,349

Property expense:

 

  

 

  

 

  

 

  

Property operating

 

45,826

 

28,625

 

1,638

 

76,089

Real estate taxes

 

20,795

 

10,275

 

2,062

 

33,132

Total property expense

 

66,621

 

38,900

 

3,700

 

109,221

Consolidated NOI

$

101,102

$

46,531

$

495

$

148,128

26

Table of Contents

The following is a summary of certain balance sheet data by segment:

    

Commercial

    

Multifamily

    

Other

    

Total

(In thousands)

June 30, 2023

Real estate, at cost

$

2,585,492

$

3,126,375

$

425,793

$

6,137,660

Investments in unconsolidated real estate ventures

 

224,620

 

 

84,599

 

309,219

Total assets

 

2,787,056

 

2,508,503

 

488,043

 

5,783,602

December 31, 2022

 

  

 

  

 

  

 

  

Real estate, at cost

$

2,754,832

$

2,986,907

$

416,343

$

6,158,082

Investments in unconsolidated real estate ventures

 

218,723

 

304

 

80,854

 

299,881

Total assets

 

2,829,576

 

2,483,902

 

589,960

 

5,903,438

17.Commitments and Contingencies

Insurance

We maintain general liability insurance with limits of $150.0 million per occurrence and in the aggregate, and property and rental value insurance coverage with limits of $1.0 billion per occurrence, with sub-limits for certain perils such as floods and earthquakes on each of our properties. We also maintain coverage, through our wholly owned captive insurance subsidiary, for a portion of the first loss on the above limits and for both terrorist acts and for nuclear, biological, chemical or radiological terrorism events with limits of $2.0 billion per occurrence. These policies are partially reinsured by third-party insurance providers.

We will continue to monitor the state of the insurance market, and the scope and costs of coverage for acts of terrorism. We cannot anticipate what coverage will be available on commercially reasonable terms in the future. We are responsible for deductibles and losses in excess of the insurance coverage, which could be material.

Our debt, consisting of mortgage loans secured by our properties, a revolving credit facility and term loans, contains customary covenants requiring adequate insurance coverage. Although we believe that we currently have adequate insurance coverage, we may not be able to obtain an equivalent amount of coverage at a reasonable cost in the future. If lenders insist on greater coverage than we are able to obtain, it could adversely affect our ability to finance or refinance our properties.

Construction Commitments

As of June 30, 2023, we had assets under construction that, based on our current plans and estimates, require an additional $284.7 million to complete, which we anticipate will be primarily expended over the next three years. These capital expenditures are generally due as the work is performed, and we expect to finance them with debt proceeds, proceeds from asset sales and recapitalizations, and available cash.

Environmental Matters

Most of our assets have been subject to environmental assessments that are intended to evaluate the environmental condition of the assets. The environmental assessments did not reveal any material environmental contamination that we believe would have a material adverse effect on our overall business, financial condition or results of operations, or that have not been anticipated and remediated during site redevelopment as required by law. Nevertheless, there can be no assurance that the identification of new areas of contamination, changes in the extent or known scope of contamination, the discovery of additional sites or changes in cleanup requirements would not result in significant cost to us. Environmental liabilities totaled $18.0 million as of June 30, 2023 and December 31, 2022 and are included in "Other liabilities, net" in our balance sheets.

27

Table of Contents

Other

As of June 30, 2023, we had committed tenant-related obligations totaling $53.1 million ($51.4 million related to our consolidated entities and $1.7 million related to our unconsolidated real estate ventures at our share). The timing and amounts of payments for tenant-related obligations are uncertain and may only be due upon satisfactory performance of certain conditions.

There are various legal actions against us in the ordinary course of business. In our opinion, the outcome of such matters will not have a material adverse effect on our financial condition, results of operations or cash flows.

From time to time, we (or ventures in which we have an ownership interest) have agreed, and may in the future agree with respect to unconsolidated real estate ventures, to (i) guarantee portions of the principal, interest and other amounts in connection with borrowings, (ii) provide customary environmental indemnifications and nonrecourse carve-outs (e.g., guarantees against fraud, misrepresentation and bankruptcy) in connection with borrowings, or (iii) provide guarantees to lenders and other third parties for the completion of development projects. We customarily have agreements with our outside venture partners whereby the partners agree to reimburse the real estate venture or us for their share of any payments made under certain of these guarantees. At times, we also have agreements with certain of our outside venture partners whereby we agree to either indemnify the partners and/or the associated ventures with respect to certain contingent liabilities associated with operating assets or to reimburse our partner for its share of any payments made by them under certain guarantees. Guarantees (excluding environmental) customarily terminate either upon the satisfaction of specified circumstances or repayment of the underlying debt. Amounts that we may be required to pay in future periods in relation to guarantees associated with budget overruns or operating losses are not estimable.

As of June 30, 2023, we had additional capital commitments and certain recorded guarantees to our unconsolidated real estate ventures and other investments totaling $62.0 million. As of June 30, 2023, we had no debt principal payment guarantees related to our unconsolidated real estate ventures.

Additionally, with respect to borrowings of our consolidated entities, we have agreed, and may in the future agree, to (i) guarantee portions of the principal, interest and other amounts, (ii) provide customary environmental indemnifications and nonrecourse carve-outs (e.g., guarantees against fraud, misrepresentation and bankruptcy) or (iii) provide guarantees to lenders, tenants and other third parties for the completion of development projects. As of June 30, 2023, the aggregate amount of debt principal payment guarantees was $8.3 million for our consolidated entities.

In connection with the Formation Transaction, we have an agreement with Vornado regarding tax matters (the "Tax Matters Agreement") that provides special rules that allocate tax liabilities if the distribution of JBG SMITH shares by Vornado, together with certain related transactions, is determined not to be tax-free. Under the Tax Matters Agreement, we may be required to indemnify Vornado against any taxes and related amounts and costs resulting from a violation by us of the Tax Matters Agreement.

18.Transactions with Related Parties

Our third-party asset management and real estate services business provides fee-based real estate services to the WHI, the JBG Legacy Funds and other third parties. In connection with the contribution to us of certain assets formerly owned by the JBG Legacy Funds as part of the Formation Transaction, the general partner and managing member interests in the JBG Legacy Funds that were held by certain former JBG executives (and who became members of our management team and/or Board of Trustees) were not transferred to us and remain under the control of these individuals. In addition, certain members of our senior management team and Board of Trustees have ownership interests in the JBG Legacy Funds, and own carried interests in each fund and in certain of our real estate ventures that entitle them to receive cash payments if the fund or real estate venture achieves certain return thresholds.

We launched the WHI with the Federal City Council in June 2018 as a scalable market-driven model that uses private capital to help address the scarcity of housing for middle income families. We are the manager for the WHI Impact Pool, which is the social impact debt financing vehicle of the WHI. As of June 30, 2023, the WHI Impact Pool had completed

28

Table of Contents

closings of capital commitments totaling $114.4 million, which included a commitment from us of $11.2 million. As of June 30, 2023, our remaining unfunded commitment was $4.3 million.

The third-party real estate services revenue, including expense reimbursements, from the JBG Legacy Funds and the WHI Impact Pool and its affiliates was $5.9 million and $10.8 million for the three and six months ended June 30, 2023, and $4.8 million and $10.3 million for the three and six months ended June 30, 2022. As of June 30, 2023 and December 31, 2022, we had receivables from the JBG Legacy Funds and the WHI Impact Pool and its affiliates totaling $3.8 million and $4.5 million for such services.

Commencing in March 2023, in connection with the sale of an 80.0% interest in 4747 Bethesda Avenue, we leased our corporate offices from an unconsolidated real estate venture and incurred $1.6 million and $1.8 million of rent expense for the three and six months ended June 30, 2023, which was included in "General and administrative expense" in our statements of operations.

We have agreements with Building Maintenance Services ("BMS"), an entity in which we have a minor preferred interest, to supervise cleaning, engineering and security services at our properties. We paid BMS $2.3 million and $4.6 million for the three and six months ended June 30, 2023, and $2.0 million and $5.1 million for the three and six months ended June 30, 2022, which was included in "Property operating expenses" in our statements of operations.

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Certain statements contained herein constitute forward-looking statements as such term is defined in Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements are not guarantees of future performance. They represent our intentions, plans, expectations and beliefs and are subject to numerous assumptions, risks and uncertainties. Our future results, financial condition and business may differ materially from those expressed in these forward-looking statements. You can find many of these statements by looking for words such as "approximates," "believes," "expects," "anticipates," "estimates," "intends," "plans," "would," "may" or other similar expressions in this Quarterly Report on Form 10-Q. Many of the factors that will determine the outcome of these and our other forward-looking statements are beyond our ability to control or predict. For further discussion of factors that could materially affect the outcome of our forward-looking statements, see "Risk Factors" in Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2022 filed with the Securities and Exchange Commission on February 21, 2023 ("Annual Report") and "Management's Discussion and Analysis of Financial Condition and Results of Operations" in this Quarterly Report on Form 10-Q and our Annual Report.

For these forward-looking statements, we claim the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. You are cautioned not to place undue reliance on our forward-looking statements, which speak only as of the date of this Quarterly Report on Form 10-Q. All subsequent written and oral forward-looking statements attributable to us or any person acting on our behalf are expressly qualified in their entirety by the cautionary statements contained or referred to in this section. We do not undertake any obligation to release publicly any revisions to our forward-looking statements to reflect events or circumstances occurring after the date of this Quarterly Report on Form 10-Q.

Organization and Basis of Presentation

JBG SMITH Properties ("JBG SMITH"), a Maryland real estate investment trust, owns, operates, invests in and develops mixed-use properties in high growth and high barrier-to-entry submarkets in and around Washington, D.C. Through an intense focus on placemaking, JBG SMITH cultivates vibrant, amenity-rich, walkable neighborhoods throughout the Washington, D.C. metropolitan area. Approximately two-thirds of our holdings are in the National Landing submarket in Northern Virginia, which is anchored by four key demand drivers: Amazon.com, Inc.'s ("Amazon") new headquarters; Virginia Tech's under-construction $1 billion Innovation Campus; the submarket’s proximity to the Pentagon; and our deployment of next-generation public and private 5G digital infrastructure. In addition, our third-party asset management and real estate services business provides fee-based real estate services to the Washington Housing Initiative ("WHI") Impact Pool, the legacy funds formerly organized by The JBG Companies ("JBG") (the "JBG Legacy Funds") and other

29

Table of Contents

third parties. Substantially all our assets are held by, and our operations are conducted through, JBG SMITH Properties LP ("JBG SMITH LP"), our operating partnership. JBG SMITH is referred to as "we," "us," "our" or other similar terms. References to "our share" refer to our ownership percentage of consolidated and unconsolidated assets in real estate ventures, but exclude our: (i) 10.0% subordinated interest in one commercial building, (ii) 33.5% subordinated interest in four commercial buildings and (iii) 49.0% interest in three commercial buildings (the "L'Enfant Plaza Assets"), as well as the associated non-recourse mortgage loans, held through unconsolidated real estate ventures; these interests and debt are excluded because our investment in each real estate venture is zero, we do not anticipate receiving any near-term cash flow distributions from the real estate ventures, and we have not guaranteed their obligations or otherwise committed to providing financial support.

We were organized for the purpose of receiving, via the spin-off on July 17, 2017 (the "Separation"), substantially all of the assets and liabilities of Vornado Realty Trust's ("Vornado") Washington, D.C. segment. On July 18, 2017, we acquired the management business, and certain assets and liabilities of JBG (the "Combination"). The Separation and the Combination are collectively referred to as the "Formation Transaction."

References to our financial statements refer to our unaudited condensed consolidated financial statements as of June 30, 2023 and December 31, 2022, and for the three and six months ended June 30, 2023 and 2022. References to our balance sheets refer to our condensed consolidated balance sheets as of June 30, 2023 and December 31, 2022. References to our statements of operations refer to our condensed consolidated statements of operations for the three and six months ended June 30, 2023 and 2022. References to our statements of cash flows refer to our condensed consolidated statements of cash flows for the six months ended June 30, 2023 and 2022.

The accompanying financial statements and notes are prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP"), which requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities, and the disclosure of contingent assets and liabilities as of the date of the financial statements and the reported amounts of revenue and expenses during the reporting periods. Actual results could differ from these estimates.

We have elected to be taxed as a real estate investment trust ("REIT") under sections 856-860 of the Internal Revenue Code of 1986, as amended (the "Code"). Under those sections, a REIT which distributes at least 90% of its REIT taxable income as dividends to its shareholders each year and which meets certain other conditions will not be taxed on that portion of its taxable income which is distributed to its shareholders. We currently adhere and intend to continue to adhere to these requirements and to maintain our REIT status in future periods. We also participate in the activities conducted by our subsidiary entities that have elected to be treated as taxable REIT subsidiaries under the Code. As such, we are subject to federal, state and local taxes on the income from those activities.

We aggregate our operating segments into three reportable segments (multifamily, commercial, and third-party asset management and real estate services) based on the economic characteristics and nature of our assets and services.

Our revenues and expenses are, to some extent, subject to seasonality during the year, which impacts quarterly net earnings, cash flows and funds from operations; this seasonality affects the sequential comparison of our results in individual quarters over time. For instance, we have historically experienced higher utility costs in the first and third quarters of the year.

We compete with many property owners and developers. Our success depends upon, among other factors, trends affecting national and local economies, the financial condition and operating results of current and prospective tenants, the availability and cost of capital, interest rates, construction and renovation costs, taxes, governmental regulations and legislation, population trends, zoning laws, and our ability to lease, sublease or sell our assets at profitable levels. Our success is also subject to our ability to refinance existing debt on acceptable terms as it comes due.

Overview

As of June 30, 2023, our Operating Portfolio consisted of 51 operating assets comprising 31 commercial assets totaling 9.7 million square feet (8.2 million square feet at our share), 18 multifamily assets totaling 6,756 units (6,756 units at our share) and two wholly owned land assets for which we are the ground lessor. Additionally, we have two under-construction

30

Table of Contents

multifamily assets with 1,583 units (1,583 units at our share) and 20 assets in the development pipeline totaling 12.5 million square feet (9.8 million square feet at our share) of estimated potential development density.

We continue to implement our comprehensive plan to reposition our holdings in the National Landing submarket in Northern Virginia by executing a broad array of Placemaking strategies. Our Placemaking includes the delivery of new multifamily and office developments, locally sourced amenity retail, and thoughtful improvements to the streetscape, sidewalks, parks and other outdoor gathering spaces. In keeping with our dedication to Placemaking, each new project is intended to contribute to authentic and distinct neighborhoods by creating a vibrant street environment with robust retail offerings and other amenities, including improved public spaces. Additionally, the cutting-edge digital infrastructure investments we are making, including our ownership of Citizens Broadband Radio Service wireless spectrum in National Landing and our agreements with AT&T and Federated Wireless, are advancing our efforts to make National Landing among the first 5G-operable submarkets in the nation.

During the second quarter of 2023, we completed the construction of two new office buildings for Amazon on Metropolitan Park in National Landing, totaling 2.1 million square feet, inclusive of approximately 50,000 square feet of street-level retail with new shops and restaurants, and Amazon took occupancy of its new headquarters in June 2023. We are the developer, property manager and retail leasing agent for Amazon's new headquarters at National Landing. We currently have leases with Amazon totaling 1.0 million square feet across six office buildings in National Landing.

Outlook

A fundamental component of our strategy to maximize long-term net asset value ("NAV") per share is active capital allocation. We evaluate development, acquisition, disposition, share repurchases and other investment decisions based on how they may impact long-term NAV per share. We intend to continue to opportunistically sell or recapitalize assets as well as land sites where a ground lease or joint venture execution may represent the most attractive path to maximizing value. Successful execution of our capital allocation strategy enables us to source capital at NAV from the disposition of assets generating low cash yields and invest those proceeds in share repurchases, new acquisitions with higher cash yields and growth, as well as in development projects with significant yield spreads and profit potential. We view this strategy as a key tool to source capital. Consequently, at any given time, we expect to be in various stages of discussions and negotiations with potential buyers, real estate venture partners, ground lessors and other counterparties with respect to sales, joint ventures and/or ground leases for certain of our assets, including portfolios thereof. These discussions and negotiations may or may not lead to definitive documentation or closed transactions. We anticipate redeploying the proceeds from these sales will not only help fund our planned growth, but will also further advance the strategic shift of our portfolio to majority multifamily. Curbed lending activity, however, has significantly slowed down the pace of asset sales and we expect this reduced activity to continue for the rest of 2023. In the meantime, we continue to advance our two under-construction multifamily assets in National Landing, 1900 Crystal Drive and 2000/2001 South Bell Street, totaling 1,583 units.

Our office portfolio occupancy as of June 30, 2023 decreased by 120 basis points to 84.0% as compared to March 31, 2023. New leasing and lease renewals have been slow and will likely continue to lag due to decision-making related to future office utilization, resulting in higher concessions and an increase in vacancy. During the three months ended June 30, 2023, we executed 210,000 square feet of office leases, approximately 30% of which comprised leases in National Landing. We have 1.8 million square feet of office leases in National Landing expiring through 2024 or on a month-to-month status. Based on tenant discussions to date, we anticipate 1.2 million square feet will vacate, implying an approximately 33% retention rate. Over half of the anticipated vacates are leases with Amazon (678,000 square feet), 300,000 square feet of which expires in 2023, and 378,000 square feet in 2024. 444,000 square feet of the Amazon vacates represent the entirety

31

Table of Contents

of 1800 South Bell Street and 2100 Crystal Drive, two assets that we plan to take off-line and entitle for an alternate use. Our ability to renew or re-lease this space will impact our future occupancy.

Our multifamily portfolio occupancy as of June 30, 2023 increased by 80 basis points compared to March 31, 2023 as higher leasing volume is typical for summer months. For second quarter lease expirations, we increased gross rents by 7.5% upon renewal while achieving a 49.3% renewal rate across our portfolio.

Operating Results

Key highlights for the three and six months ended June 30, 2023 included:

net loss attributable to common shareholders of $10.5 million, or $0.10 per diluted common share, for the three months ended June 30, 2023 compared to net income attributable to common shareholders of $123.3 million, or $1.02 per diluted common share, for the three months ended June 30, 2022. Net income attributable to common shareholders of $10.6 million, or $0.09 per diluted common share, for the six months ended June 30, 2023 compared to $123.2 million, or $0.99 per diluted common share, for the six months ended June 30, 2022;
third-party real estate services revenue, including reimbursements, of $22.9 million and $45.6 million for the three and six months ended June 30, 2023, as compared to $22.2 million and $46.1 million for the three and six months ended June 30, 2022;
operating commercial portfolio leased and occupied percentages at our share of 86.3% and 84.0% as of June 30, 2023 compared to 87.6% and 85.2% as of March 31, 2023, and 87.3% and 86.1% as of June 30, 2022;
operating multifamily portfolio leased and occupied percentages  (1) at our share of 96.8% and 93.7% as of June 30, 2023 compared to 95.0% and 92.9% as of March 31, 2023, and 95.7% and 92.3% as of June 30, 2022;
the leasing of 210,000 square feet at our share, at an initial rent (2) of $45.49 per square foot and a GAAP-basis weighted average rent per square foot (3) of $44.47 for the three months ended June 30, 2023, and the leasing of 323,000 square feet at our share, at an initial rent (2) of $47.40 per square foot and a GAAP-basis weighted average rent per square foot (3) of $46.78 for the six months ended June 30, 2023; and
an increase in same store (4) NOI of 0.1% to $78.3 million for the three months ended June 30, 2023 compared to $78.2 million for the three months ended June 30, 2022, and a decrease in same store (4) NOI of 0.7% to $153.5 million for the six months ended June 30, 2023 compared to $154.7 million for the six months ended June 30, 2022.
(1)2221 S. Clark Street - Residential and 900 W Street are excluded from leased and occupied percentages as they are operated as short-term rental properties.
(2)Represents the cash basis weighted average starting rent per square foot at our share, which excludes free rent and fixed escalations.
(3)Represents the weighted average rent per square foot recognized over the term of the respective leases, including the effect of free rent and fixed escalations.
(4)Includes the results of the properties that are owned, operated and in-service for the entirety of both periods being compared except for properties for which significant redevelopment, renovation or repositioning occurred during either of the periods being compared.

Additionally, investing and financing activity during the six months ended June 30, 2023 included:

the sale of an 80.0% interest in 4747 Bethesda Avenue. See Note 4 to the financial statements for additional information;
a $187.6 million loan facility, collateralized by The Wren and F1RST Residences. See Note 7 to the financial statements for additional information;
the repayment of $142.4 million in mortgage loans collateralized by Falkland Chase – South & West and 800 North Glebe Road;
net borrowings of $62.0 million under our revolving credit facility;
the amendment of our revolving credit facility. See Note 7 to the financial statements for additional information;
the drawing of the $50.0 million remaining advance under our Tranche A-2 Term Loan. See Note 7 to the financial statements for additional information;
a $120.0 million term loan. See Note 7 to the financial statements for additional information;

32

Table of Contents

the payment of dividends totaling $49.5 million and distributions to redeemable noncontrolling interests of $7.9 million;
the increase by our Board of Trustees of our common share repurchase authorization to $1.5 billion;
the repurchase and retirement of 10.5 million of our common shares for $155.8 million, a weighted average purchase price per share of $14.79; and
the investment of $164.8 million in development, construction in progress and real estate additions.

Activity subsequent to June 30, 2023 included:

the repurchase and retirement of 2.0 million common shares for $31.5 million, a weighted average purchase price per share of $16.03, pursuant to a repurchase plan under Rule 10b5-1 of the Securities Exchange Act of 1934, as amended; and
the declaration of a quarterly dividend of $0.225 per common share, payable on August 31, 2023 to shareholders of record as of August 17, 2023.

Critical Accounting Estimates

Our Annual Report contains a description of our critical accounting estimates, including asset acquisitions, real estate, investments in real estate ventures and revenue recognition. There have been no significant changes to our policies during the six months ended June 30, 2023.

Recent Accounting Pronouncements

See Note 2 to the financial statements for a description of recent accounting pronouncements.

Results of Operations

In March 2023, we sold an 80.0% interest in 4747 Bethesda Avenue to an unconsolidated real estate venture. In 2022, we sold the Universal Buildings and Pen Place, and sold 7200 Wisconsin Avenue, 1730 M Street, RTC-West/RTC-West Trophy Office/RTC-West Land and Courthouse Plaza 1 and 2 to an unconsolidated real estate venture. We collectively refer to these assets as the "Disposed Properties" in the discussion below. In 2022, we acquired the remaining 36.0% ownership interest in Atlantic Plumbing and the remaining 50.0% ownership interest in 8001 Woodmont, which were previously owned by unconsolidated real estate ventures and consolidated upon acquisition.

Comparison of the Three Months Ended June 30, 2023 to 2022

The following summarizes certain line items from our statements of operations that we believe are important in understanding our operations and/or those items which significantly changed in the three months ended June 30, 2023 compared to the same period in 2022:

Three Months Ended June 30, 

 

    

2023

    

2022

    

% Change

 

(Dollars in thousands)

 

Property rental revenue

$

120,592

$

117,036

 

3.0

%

Third-party real estate services revenue, including reimbursements

 

22,862

 

22,157

 

3.2

%

Depreciation and amortization expense

 

49,218

 

49,479

 

(0.5)

%

Property operating expense

 

35,912

 

35,445

 

1.3

%

Real estate taxes expense

 

14,424

 

14,946

 

(3.5)

%

General and administrative expense:

Corporate and other

 

15,093

 

14,782

 

2.1

%

Third-party real estate services

 

22,105

 

24,143

 

(8.4)

%

Share-based compensation related to Formation Transaction and special equity awards

 

 

1,577

 

(100.0)

%

Income (loss) from unconsolidated real estate ventures, net

 

510

 

(2,107)

 

124.2

%

Interest expense

 

25,835

 

16,041

 

61.1

%

Gain on the sale of real estate, net

 

 

158,767

 

(100.0)

%

33

Table of Contents

Property rental revenue increased by approximately $3.6 million, or 3.0%, to $120.6 million in 2023 from $117.0 million in 2022. The increase was primarily due to a $9.5 million increase in revenue from our multifamily assets, partially offset by a $7.6 million decrease in revenue from our commercial assets. The increase in revenue from our multifamily assets was primarily due to a $6.1 million increase related to the consolidation of Atlantic Plumbing and 8001 Woodmont, and higher occupancies and rents across the portfolio. The decrease in revenue from our commercial assets was primarily due to a $5.9 million decrease related to the Disposed Properties.

Third-party real estate services revenue, including reimbursements, increased by approximately $705,000, or 3.2%, to $22.9 million in 2023 from $22.2 million in 2022. The increase was primarily due to a $608,000 increase in development fees related to the timing of development projects.

Depreciation and amortization expense decreased by approximately $261,000, or 0.5%, to $49.2 million in 2023 from $49.5 million in 2022. The decrease was primarily due to a $2.3 million decrease related to the Disposed Properties and a $1.4 million decrease due to the amortization of the acquired in-place lease intangible at The Batley in 2022. The decrease in depreciation and amortization expense was partially offset by a $2.9 million increase related to the consolidation of Atlantic Plumbing and 8001 Woodmont.

Property operating expense increased by approximately $467,000, or 1.3%, to $35.9 million in 2023 from $35.4 million in 2022. The increase was primarily due to a $2.6 million increase related to the consolidation of Atlantic Plumbing and 8001 Woodmont, and a $879,000 increase in property operating expenses across our multifamily portfolio, primarily related to higher compensation expenses, cleaning expenses and rising costs. The increase in property operating expense was partially offset by a $1.7 million decrease related to the Disposed Properties and an $855,000 decrease in insurance claims covered by our captive insurance subsidiary.

Real estate tax expense decreased by approximately $522,000, or 3.5%, to $14.4 million in 2023 from $14.9 million in 2022. The decrease was primarily due to a $920,000 decrease related to the Disposed Properties, partially offset by a $728,000 increase related to the consolidation of Atlantic Plumbing and 8001 Woodmont.

General and administrative expense: corporate and other increased by approximately $311,000, or 2.1%, to $15.1 million in 2023 from $14.8 million in 2022. The increase was primarily due to a decrease in capitalized payroll, partially offset by lower compensation expenses.

General and administrative expense: third-party real estate services decreased by approximately $2.0 million, or 8.4%, to $22.1 million in 2023 from $24.1 million in 2022. The decrease was primarily due to lower compensation expenses.

General and administrative expense: share-based compensation related to Formation Transaction and special equity awards decreased by approximately $1.6 million, or 100.0%, to $0 in 2023 from $1.6 million in 2022. The decrease was primarily due to the graded vesting of certain awards issued in prior years, which resulted in lower expense as portions of the awards vested, as well as an increase in expense recovery due to termination forfeitures.

Income (loss) from unconsolidated real estate ventures increased by approximately $2.6 million, or 124.2%, to income of $510,000 in 2023 from a loss of $2.1 million in 2022. The increase was primarily due to a $2.1 million increase related to the consolidation of Atlantic Plumbing and 8001 Woodmont as these assets were not yet stabilized and incurring losses, and a $1.8 million loss on the extinguishment of debt related to a property that was sold in 2022. The increase in income (loss) from unconsolidated real estate ventures was partially offset by a $936,000 gain at our share from the sale of various assets in 2022.

Interest expense increased by approximately $9.8 million, or 61.1%, to $25.8 million in 2023 from $16.0 million in 2022. The increase in interest expense was primarily due to (i) a $5.0 million decrease in the fair value of our ineffective interest rate caps due to a decline in the forward interest rate curve, (ii) a $3.8 million increase due to new mortgage loans, (iii) a $3.7 million increase related to variable rate mortgage loans due to rising interest rates, (iv) a $2.1 million increase related to construction draws for 1900 Crystal Drive, (v) a $2.1 million increase related to additional draws on our term loans and (vi) a $1.2 million increase related to the consolidation of 8001 Woodmont. The increase in interest expense was partially offset by (i) a $4.2 million increase in capitalized interest, (ii) a $2.0 million decrease related to mortgage loans

34

Table of Contents

collateralized by 2121 Crystal Drive and Falkland Chase – South & West repaid during 2023 and (iii) a $1.5 million decrease related to the Disposed Properties.

Gain on the sale of real estate of $158.8 million in 2022 was due to the sale of the Disposed Properties.

Comparison of the Six Months Ended June 30, 2023 to 2022

The following summarizes certain line items from our statements of operations that we believe are important in understanding our operations and/or those items which significantly changed in the six months ended June 30, 2023 compared to the same period in 2022:

Six Months Ended June 30, 

    

2023

    

2022

    

% Change

 

(Dollars in thousands)

 

Property rental revenue

$

244,625

$

248,634

 

(1.6)

%

Third-party real estate services revenue, including reimbursements

 

45,646

 

46,127

 

(1.0)

%

Depreciation and amortization expense

 

102,649

 

107,541

 

(4.5)

%

Property operating expense

 

71,524

 

76,089

 

(6.0)

%

Real estate taxes expense

 

29,648

 

33,132

 

(10.5)

%

General and administrative expense:

Corporate and other

 

31,216

 

30,597

 

2.0

%

Third-party real estate services

 

45,928

 

51,192

 

(10.3)

%

Share-based compensation related to Formation Transaction and special equity awards

 

351

 

3,821

 

(90.8)

%

Income from unconsolidated real estate ventures, net

 

943

 

1,038

 

(9.2)

%

Interest and other income, net

 

6,358

 

15,918

 

(60.1)

%

Interest expense

 

52,677

 

32,319

 

63.0

%

Gain on the sale of real estate, net

 

40,700

 

158,631

 

(74.3)

%

Property rental revenue decreased by approximately $4.0 million, or 1.6%, to $244.6 million in 2023 from $248.6 million in 2022. The decrease was primarily due to a $23.3 million decrease in revenue from our commercial assets, partially offset by a $17.3 million increase in revenue from our multifamily assets. The decrease in revenue from our commercial assets was primarily due to a $24.4 million decrease related to the Disposed Properties. The increase in revenue from our multifamily assets was primarily due to an $11.4 million increase related to the consolidation of Atlantic Plumbing and 8001 Woodmont, and higher occupancies and rents across the portfolio.

Third-party real estate services revenue, including reimbursements, decreased by approximately $481,000, or 1.0%, to $45.6 million in 2023 from $46.1 million in 2022. The decrease was primarily due to a $945,000 decrease in development fees related to the timing of development projects and a $926,000 decrease in asset management fees due to the sale of assets within the JBG Legacy Funds. The decrease in third-party real estate services revenue was partially offset by a $683,000 increase in reimbursement revenue, a $456,000 increase in construction management fees and a $331,000 increase in other service revenue.

Depreciation and amortization expense decreased by approximately $4.9 million, or 4.5%, to $102.6 million in 2023 from $107.5 million in 2022. The decrease was primarily due to a $9.6 million decrease related to the Disposed Properties and a $4.3 million decrease due to the amortization of the acquired in-place lease intangible at The Batley in 2022. The decrease in depreciation and amortization expense was partially offset by a $9.1 million increase related to the consolidation of Atlantic Plumbing and 8001 Woodmont.

Property operating expense decreased by approximately $4.6 million, or 6.0%, to $71.5 million in 2023 from $76.1 million in 2022. The decrease was primarily due to (i) an $8.4 million decrease related to the Disposed Properties, (ii) a $1.2 million decrease in costs incurred related to digital infrastructure initiatives in National Landing and (iii) a $933,000 decrease in insurance claims covered by our captive insurance subsidiary. The decrease in property operating expense was partially offset by a $5.3 million increase related to the consolidation of Atlantic Plumbing and 8001 Woodmont, and a $1.9 million increase in property operating expenses across our multifamily portfolio, primarily related to higher compensation expenses, cleaning expenses and rising costs.

35

Table of Contents

Real estate tax expense decreased by approximately $3.5 million, or 10.5%, to $29.6 million in 2023 from $33.1 million in 2022. The decrease was primarily due to a $4.2 million decrease related to the Disposed Properties, partially offset by a $1.5 million increase related to the consolidation of Atlantic Plumbing and 8001 Woodmont.

General and administrative expense: corporate and other increased by approximately $619,000, or 2.0%, to $31.2 million in 2023 from $30.6 million in 2022. The increase was primarily due to a decrease in capitalized payroll, partially offset by lower compensation expenses.

General and administrative expense: third-party real estate services decreased by approximately $5.3 million, or 10.3%, to $45.9 million in 2023 from $51.2 million in 2022. The decrease was primarily due to lower compensation expenses.

General and administrative expense: share-based compensation related to Formation Transaction and special equity awards decreased by approximately $3.5 million, or 90.8%, to $351,000 in 2023 from $3.8 million in 2022. The decrease was primarily due to the graded vesting of certain awards issued in prior years, which resulted in lower expense as portions of the awards vested, as well as an increase in expense recovery due to termination forfeitures.

Income from unconsolidated real estate ventures decreased by approximately $95,000, or 9.2%, to $943,000 in 2023 from $1.0 million in 2022. The decrease was primarily due to a $6.2 million gain at our share from the sale of various assets in 2022. The decrease in income from unconsolidated real estate ventures was partially offset by (i) a $3.9 million increase related to the consolidation of Atlantic Plumbing and 8001 Woodmont as these assets were not yet stabilized and incurring losses, (ii) a $1.8 million loss on the extinguishment of debt related to a property that was sold in 2022, and (iii) an $875,000 increase related to our suspension of the equity method of accounting for the L’Enfant Plaza Assets as it was incurring losses.

Interest and other income decreased by approximately $9.6 million, or 60.1%, to $6.4 million in 2023 from $15.9 million in 2022. The decrease was primarily due to a $14.4 million decrease in realized gains primarily from the sale of investments in equity securities in 2022, partially offset by a $4.6 million increase in interest income on our outstanding cash balances and a $458,000 increase in unrealized gains from investments in real estate-focused technology companies.

Interest expense increased by approximately $20.4 million, or 63.0%, to $52.7 million in 2023 from $32.3 million in 2022. The increase in interest expense was primarily due to (i) an $11.0 million decrease in the fair value of our ineffective interest rate caps due to a decline in the forward interest rate curve, (ii) an $8.0 million increase related to variable rate mortgage loans due to rising interest rates, (iii) a $6.6 million increase due to new mortgage loans, (iv) a $3.5 million increase related to additional draws on our term loans, (v) a $3.5 million increase related to construction draws for 1900 Crystal Drive and (vi) a $2.5 million increase related to the consolidation of 8001 Woodmont. The increase in interest expense was partially offset by (i) a $7.6 million increase in capitalized interest, (ii) a $3.4 million decrease related to the Disposed Properties, (iii) a $3.2 million decrease related to mortgage loans collateralized by 2121 Crystal Drive and Falkland Chase – South & West repaid during 2023 and (iv) a $927,000 decrease related to a lower average outstanding balance on our revolving credit facility.

Gain on the sale of real estate of $40.7 million in 2023 and $158.6 million in 2022 was due to the sale of the Disposed Properties.

FFO

FFO is a non-GAAP financial measure computed in accordance with the definition established by the National Association of Real Estate Investment Trusts ("Nareit") in the Nareit FFO White Paper - 2018 Restatement. Nareit defines FFO as net income (loss) (computed in accordance with GAAP), excluding depreciation and amortization expense related to real estate, gains and losses from the sale of certain real estate assets, gains and losses from change in control and impairment write-downs of certain real estate assets and investments in entities when the impairment is directly attributable to decreases in the value of depreciable real estate held by the entity, including our share of such adjustments for unconsolidated real estate ventures.

36

Table of Contents

We believe FFO is a meaningful non-GAAP financial measure useful in comparing our levered operating performance from period-to-period and as compared to similar real estate companies because FFO excludes real estate depreciation and amortization expense, which implicitly assumes that the value of real estate diminishes predictably over time rather than fluctuating based on market conditions and other non-comparable income and expenses. FFO does not represent cash generated from operating activities and is not necessarily indicative of cash available to fund cash requirements and should not be considered as an alternative to net income (loss) (computed in accordance with GAAP), as a performance measure or cash flow as a liquidity measure. FFO may not be comparable to similarly titled measures used by other companies.

The following is the reconciliation of net income (loss) attributable to common shareholders, the most directly comparable GAAP measure, to FFO:

Three Months Ended June 30, 

Six Months Ended June 30, 

    

2023

    

2022

2023

    

2022

(In thousands)

Net income (loss) attributable to common shareholders

$

(10,545)

$

123,275

$

10,626

$

123,243

Net income (loss) attributable to redeemable noncontrolling interests

 

(1,398)

 

18,248

 

1,965

 

18,258

Net loss attributable to noncontrolling interests

 

(311)

 

(29)

 

(535)

 

(84)

Net income (loss)

 

(12,254)

 

141,494

 

12,056

 

141,417

Gain on the sale of real estate, net of tax

 

 

(155,642)

 

(40,700)

 

(155,506)

Gain on the sale of unconsolidated real estate assets

 

 

(936)

 

 

(6,179)

Real estate depreciation and amortization

 

47,502

 

47,242

 

99,113

 

102,759

Pro rata share of real estate depreciation and amortization from unconsolidated real estate ventures

 

3,111

 

6,416

 

5,871

 

13,286

FFO attributable to noncontrolling interests

 

311

 

(47)

 

535

 

(73)

FFO attributable to common limited partnership units ("OP Units")

 

38,670

 

38,527

 

76,875

 

95,704

FFO attributable to redeemable noncontrolling interests

 

(5,247)

 

(4,966)

 

(10,450)

 

(10,843)

FFO attributable to common shareholders

$

33,423

$

33,561

$

66,425

$

84,861

NOI and Same Store NOI

NOI is a non-GAAP financial measure management uses to assess an asset's performance. The most directly comparable GAAP measure is net income (loss) attributable to common shareholders. We use NOI internally as a performance measure and believe NOI provides useful information to investors regarding our financial condition and results of operations because it reflects only property related revenue (which includes base rent, tenant reimbursements and other operating revenue, net of free rent and payments associated with assumed lease liabilities) less operating expenses and ground rent for operating leases, if applicable. NOI also excludes deferred rent, related party management fees, interest expense, and certain other non-cash adjustments, including the accretion of acquired below-market leases and the amortization of acquired above-market leases and below-market ground lease intangibles. Management uses NOI as a supplemental performance measure of our assets and believes it provides useful information to investors because it reflects only those revenue and expense items that are incurred at the asset level, excluding non-cash items. In addition, NOI is considered by many in the real estate industry to be a useful starting point for determining the value of a real estate asset or group of assets. However, because NOI excludes depreciation and amortization expense and captures neither the changes in the value of our assets that result from use or market conditions, nor the level of capital expenditures and capitalized leasing commissions necessary to maintain the operating performance of our assets, all of which have real economic effect and could materially impact the financial performance of our assets, the utility of NOI as a measure of the operating performance of our assets is limited. NOI presented by us may not be comparable to NOI reported by other REITs that define these measures differently. We believe to facilitate a clear understanding of our operating results, NOI should be examined in conjunction with net income (loss) attributable to common shareholders as presented in our financial statements. NOI should not be considered as an alternative to net income (loss) attributable to common shareholders as an indication of our performance or to cash flows as a measure of liquidity or our ability to make distributions.

Information provided on a same store basis includes the results of properties that are owned, operated and in-service for the entirety of both periods being compared, which excludes disposed properties or properties for which significant redevelopment, renovation or repositioning occurred during either of the periods being compared. During the three months ended June 30, 2023, our same store pool increased to 50 properties from 49 properties due to the inclusion of 8001

37

Table of Contents

Woodmont as it was in service for the entirety of the comparable period. During the six months ended June 30, 2023, our same store pool increased to 49 properties from 47 properties due to the inclusion of The Wren and The Batley as they were in service for the entirety of the comparable periods. While there is judgment surrounding changes in designations, a property is removed from the same store pool when the property is considered to be under-construction because it is undergoing significant redevelopment or renovation pursuant to a formal plan or is being repositioned in the market and such renovation or repositioning is expected to have a significant impact on property NOI. A development property or under-construction property is moved to the same store pool once a substantial portion of the growth expected from the development or redevelopment is reflected in both the current and comparable prior year period. Acquisitions are moved into the same store pool once we have owned the property for the entirety of the comparable periods and the property is not under significant development or redevelopment.

Same store NOI increased $104,000, or 0.1%, to $78.3 million for the three months ended June 30, 2023 from $78.2 million for the same period in 2022. Same store NOI decreased $1.1 million, or 0.7%, to $153.5 million for the six months ended June 30, 2023 from $154.7 million for the same period in 2022. The decrease for the six months ended June 30, 2023 was substantially attributable to (i) increased abatement and higher vacancy, partially offset by an increase in parking revenue in our commercial portfolio and (ii) higher occupancy and rents, partially offset by higher concessions and higher operating expenses, in our multifamily portfolio.

The following is the reconciliation of net income (loss) attributable to common shareholders to NOI and same store NOI:

Three Months Ended June 30, 

Six Months Ended June 30, 

    

2023

    

2022

    

2023

    

2022

(Dollars in thousands)

Net income (loss) attributable to common shareholders

$

(10,545)

$

123,275

$

10,626

$

123,243

Add:

Depreciation and amortization expense

 

49,218

 

49,479

 

102,649

 

107,541

General and administrative expense:

Corporate and other

 

15,093

 

14,782

 

31,216

 

30,597

Third-party real estate services

 

22,105

 

24,143

 

45,928

 

51,192

Share-based compensation related to Formation Transaction and special equity awards

 

 

1,577

 

351

 

3,821

Transaction and other costs

 

3,492

 

1,987

 

5,964

 

2,886

Interest expense

 

25,835

 

16,041

 

52,677

 

32,319

Loss on the extinguishment of debt

 

450

 

1,038

 

450

 

1,629

Income tax expense

 

611

 

2,905

 

595

 

2,434

Net income (loss) attributable to redeemable noncontrolling interests

 

(1,398)

 

18,248

 

1,965

 

18,258

Net loss attributable to noncontrolling interests

(311)

(29)

(535)

(84)

Less:

Third-party real estate services, including reimbursements revenue

 

22,862

 

22,157

 

45,646

 

46,127

Other revenue

 

3,846

 

1,798

 

5,572

 

3,994

Income (loss) from unconsolidated real estate ventures, net

 

510

 

(2,107)

 

943

 

1,038

Interest and other income, net

 

2,281

 

1,672

 

6,358

 

15,918

Gain on the sale of real estate, net

 

 

158,767

 

40,700

 

158,631

Consolidated NOI

 

75,051

 

71,159

 

152,667

 

148,128

NOI attributable to unconsolidated real estate ventures at our share

 

5,175

 

8,321

 

9,604

 

15,268

Non-cash rent adjustments (1)

 

(6,311)

 

(1,978)

 

(14,688)

 

(3,769)

Other adjustments (2)

 

5,163

 

5,695

 

12,008

 

14,443

Total adjustments

 

4,027

 

12,038

 

6,924

 

25,942

NOI

 

79,078

 

83,197

 

159,591

 

174,070

Less: out-of-service NOI loss (3)

 

(902)

 

(2,046)

 

(1,611)

 

(3,498)

Operating Portfolio NOI

 

79,980

 

85,243

 

161,202

 

177,568

Non-same store NOI (4)

 

1,640

 

7,007

 

7,667

 

22,918

Same store NOI (5)

$

78,340

$

78,236

$

153,535

$

154,650

Change in same store NOI

 

0.1%

 

(0.7%)

Number of properties in same store pool

 

50

 

49

38

Table of Contents

(1)Adjustment to exclude straight-line rent, above/below market lease amortization and lease incentive amortization.
(2)Adjustment to include other revenue and payments associated with assumed lease liabilities related to operating properties and to exclude commercial lease termination revenue and related party management fees.
(3)Includes the results of our under-construction assets and assets in the development pipeline.
(4)Includes the results of properties that were not in-service for the entirety of both periods being compared, including disposed properties, and properties for which significant redevelopment, renovation or repositioning occurred during either of the periods being compared.
(5)Includes the results of the properties that are owned, operated and in-service for the entirety of both periods being compared.

Reportable Segments

We review operating and financial data for each property on an individual basis; therefore, each of our individual properties is a separate operating segment. We define our reportable segments to be aligned with our method of internal reporting and the way our Chief Executive Officer, who is also our Chief Operating Decision Maker ("CODM"), makes key operating decisions, evaluates financial results, allocates resources and manages our business. Accordingly, we aggregate our operating segments into three reportable segments (multifamily, commercial, and third-party asset management and real estate services) based on the economic characteristics and nature of our assets and services.

The CODM measures and evaluates the performance of our operating segments, with the exception of the third-party asset management and real estate services business, based on the NOI of properties within each segment.

With respect to the third-party asset management and real estate services business, the CODM reviews revenue streams generated by this segment ("Third-party real estate services, including reimbursements"), as well as the expenses attributable to the segment ("General and administrative: third-party real estate services"), which are both disclosed separately in our statements of operations. The following represents the components of revenue from our third-party asset management and real estate services business:

Three Months Ended June 30, 

Six Months Ended June 30, 

    

2023

    

2022

2023

    

2022

(In thousands)

Property management fees

$

5,017

$

4,976

$

9,969

$

9,784

Asset management fees

 

1,255

 

1,513

 

2,358

 

3,284

Development fees

 

2,756

 

2,148

 

4,742

 

5,687

Leasing fees

 

1,256

 

1,038

 

2,612

 

2,877

Construction management fees

 

303

 

37

 

643

 

187

Other service revenue

 

1,422

 

1,499

 

2,646

 

2,315

Third-party real estate services revenue, excluding reimbursements

 

12,009

 

11,211

 

22,970

 

24,134

Reimbursement revenue (1)

 

10,853

 

10,946

 

22,676

 

21,993

Third-party real estate services revenue, including reimbursements

22,862

22,157

45,646

46,127

Third-party real estate services expenses

22,105

24,143

45,928

51,192

Third-party real estate services revenue less expenses

$

757

$

(1,986)

$

(282)

$

(5,065)

(1)Represents reimbursements of expenses incurred by us on behalf of third parties, including allocated payroll costs and amounts paid to third-party contractors for construction management projects.

See discussion of third-party real estate services revenue, including reimbursements, and third-party real estate services expenses for the three and six months ended June 30, 2023 in the preceding pages under "Results of Operations."

Consistent with internal reporting presented to our CODM and our definition of NOI, the third-party asset management and real estate services operating results are excluded from the NOI data below. Property revenue is calculated as property rental revenue plus parking revenue. Property expense is calculated as property operating expenses plus real estate taxes. Consolidated NOI is calculated as property revenue less property expense. See Note 16 to the financial statements for the reconciliation of net income (loss) attributable to common shareholders to consolidated NOI for the three and six months ended June 30, 2023 and 2022.

39

Table of Contents

The following is a summary of NOI by segment:

Three Months Ended June 30, 

Six Months Ended June 30, 

    

2023

    

2022

2023

    

2022

(In thousands)

Property revenue: (1)

 

  

 

  

  

 

  

Commercial

$

68,747

$

76,090

$

144,802

$

167,723

Multifamily

 

52,738

 

43,189

 

102,872

 

85,431

Other (2)

 

3,902

 

2,271

 

6,165

 

4,195

Total property revenue

 

125,387

 

121,550

 

253,839

 

257,349

Property expense: (3)

 

  

 

  

 

  

 

  

Commercial

 

26,447

 

28,642

 

54,819

 

66,621

Multifamily

 

24,042

 

19,924

 

47,105

 

38,900

Other (2)

 

(153)

 

1,825

 

(752)

 

3,700

Total property expense

 

50,336

 

50,391

 

101,172

 

109,221

Consolidated NOI:

 

  

 

  

 

  

 

  

Commercial

 

42,300

 

47,448

 

89,983

 

101,102

Multifamily

 

28,696

 

23,265

 

55,767

 

46,531

Other (2)

 

4,055

 

446

 

6,917

 

495

Consolidated NOI

$

75,051

$

71,159

$

152,667

$

148,128

(1)Includes property rental revenue and parking revenue.
(2)Includes activity related to development assets, corporate entities, land assets for which we are the ground lessor and the elimination of inter-segment activity.
(3)Includes property operating expenses and real estate taxes.

Comparison of the Three Months Ended June 30, 2023 to 2022

Commercial: Property revenue decreased by $7.3 million, or 9.7%, to $68.7 million in 2023 from $76.1 million in 2022. Consolidated NOI decreased by $5.1 million, or 10.8%, to $42.3 million in 2023 from $47.4 million in 2022. The decreases in property revenue and consolidated NOI were primarily due to the Disposed Properties, partially offset by increased occupancy at 800 North Glebe and 2121 Crystal Drive.

Multifamily: Property revenue increased by $9.5 million, or 22.1%, to $52.7 million in 2023 from $43.2 million in 2022. Consolidated NOI increased by $5.4 million, or 23.3%, to $28.7 million in 2023 from $23.3 million in 2022. The increases in property revenue and consolidated NOI were primarily due to the consolidation of Atlantic Plumbing and 8001 Woodmont, and higher occupancy and rents across the portfolio. The increase in consolidated NOI was partially offset by an increase in property operating costs.

Comparison of the Six Months Ended June 30, 2023 to 2022

Commercial: Property revenue decreased by $22.9 million, or 13.7%, to $144.8 million in 2023 from $167.7 million in 2022. Consolidated NOI decreased by $11.1 million, or 11.0%, to $90.0 million in 2023 from $101.1 million in 2022. The decreases in property revenue and consolidated NOI were primarily due to the Disposed Properties.

Multifamily: Property revenue increased by $17.4 million, or 20.4%, to $102.9 million in 2023 from $85.4 million in 2022. Consolidated NOI increased by $9.2 million, or 19.8%, to $55.8 million in 2023 from $46.5 million in 2022. The increases in property revenue and consolidated NOI were primarily due to the consolidation of Atlantic Plumbing and 8001 Woodmont, and higher occupancy and rents across the portfolio. The increase in consolidated NOI was partially offset by an increase in property operating costs.

Liquidity and Capital Resources

Property rental income is our primary source of operating cash flow and depends on many factors including occupancy levels and rental rates, as well as our tenants' ability to pay rent. In addition, our third-party asset management and real

40

Table of Contents

estate services business provides fee-based real estate services to the WHI Impact Pool, the JBG Legacy Funds and other third parties. Our assets provide a relatively consistent level of cash flow that enables us to pay operating expenses, debt service, recurring capital expenditures, dividends to shareholders, and distributions to holders of OP Units and long-term incentive partnership units ("LTIP Units"). Other sources of liquidity to fund cash requirements include proceeds from financings, recapitalizations, asset sales, and the issuance and sale of securities. We anticipate that cash flows from continuing operations and proceeds from financings, asset sales and recapitalizations, together with existing cash balances, will be adequate to fund our business operations, debt amortization, capital expenditures, any dividends to shareholders, and distributions to holders of OP Units and LTIP Units over the next 12 months.

Mortgage Loans

The following is a summary of mortgage loans:

Weighted Average

Effective

    

  

Interest Rate (1)

    

June 30, 2023

    

December 31, 2022

(In thousands)

Variable rate (2)

 

5.43%

$

678,671

$

892,268

Fixed rate (3)

 

4.45%

 

1,025,535

 

1,009,607

Mortgage loans

 

 

1,704,206

 

1,901,875

Unamortized deferred financing costs and premium/discount, net (4)

 

 

(14,999)

 

(11,701)

Mortgage loans, net

$

1,689,207

$

1,890,174

(1)Weighted average effective interest rate as of June 30, 2023.
(2)Includes variable rate mortgage loans with interest rate cap agreements. For mortgage loans with interest rate caps, the weighted average interest rate cap strike was 2.42%, and the weighted average maturity date of the interest rate caps is August 2023. The interest rate cap strike is exclusive of the credit spreads associated with the mortgage loans. As of June 30, 2023, one-month London Interbank Offered Rate ("LIBOR") was 5.22% and one-month term Secured Overnight Financing Rate ("SOFR") was 5.14%.
(3)Includes variable rate mortgages with interest rates fixed by interest rate swap agreements.
(4)As of June 30, 2023 and December 31, 2022, excludes $2.0 million and $2.2 million of net deferred financing costs related to unfunded mortgage loans that were included in "Other assets, net" in our balance sheets.

As of June 30, 2023 and December 31, 2022, the net carrying value of real estate collateralizing our mortgage loans totaled $2.1 billion and $2.2 billion. Our mortgage loans contain covenants that limit our ability to incur additional indebtedness on these properties and, in certain circumstances, require lender approval of tenant leases and/or yield maintenance upon repayment prior to maturity. Certain mortgage loans are recourse to us. See Note 17 to the financial statements for additional information.

In January 2023, we entered into a $187.6 million loan facility, collateralized by The Wren and F1RST Residences. The loan has a seven-year term and a fixed interest rate of 5.13%. This loan is the initial advance under a Fannie Mae multifamily credit facility which provides flexibility for collateral substitutions, future advances tied to performance, ability to mix fixed and floating rates, and staggered maturities. Proceeds from the loan were used, in part, to repay the $131.5 million mortgage loan collateralized by 2121 Crystal Drive, which had a fixed interest rate of 5.51%.

In June 2023, we repaid $142.4 million in mortgage loans collateralized by Falkland Chase – South & West and 800 North Glebe Road.

As of June 30, 2023 and December 31, 2022, we had various interest rate swap and cap agreements on certain mortgage loans with an aggregate notional value of $1.2 billion and $1.3 billion. See Note 15 to the financial statements for additional information.

Revolving Credit Facility and Term Loans

As of June 30, 2023, our unsecured revolving credit facility and term loans totaling $1.5 billion consisted of a $750.0 million revolving credit facility maturing in June 2027, a $200.0 million term loan ("Tranche A-1 Term Loan") maturing in January 2025, a $400.0 million term loan ("Tranche A-2 Term Loan") maturing in January 2028, which includes the

41

Table of Contents

$50.0 million remaining advance drawn in May 2023, and a $120.0 million term loan ("2023 Term Loan") maturing in June 2028.

Effective as of June 29, 2023, the revolving credit facility was amended to: (i) reduce the borrowing capacity from $1.0 billion to $750.0 million, (ii) extend the maturity date from January 2025 to June 2027 and (iii) amend the interest rate to daily SOFR plus 1.40% to daily SOFR plus 1.85%, varying based on a ratio of our total outstanding indebtedness to a valuation of certain real property and assets. We have the option to increase the $750.0 million revolving credit facility or add term loans up to $500.0 million, and we also have the right to extend the maturity date beyond June 2027 via two six-month extension options.

In addition, on June 29, 2023, we entered into a $120.0 million term loan maturing in June 2028 with an interest rate of one-month term SOFR plus 1.25% to one-month term SOFR plus 1.80%, varying based on a ratio of our total outstanding indebtedness to a valuation of certain real property and assets. We also entered into an interest rate swap with a total notional value of $120.0 million, which fixes SOFR at an interest rate of 4.01% through the maturity date.

In July 2023, we amended the covenants related to the Tranche A-1 Term Loan and the Tranche A-2 Term Loan to be consistent with those of the revolving credit facility and 2023 Term Loan covenants.

The following is a summary of amounts outstanding under the revolving credit facility and term loans:

Effective

    

Interest Rate (1)

    

June 30, 2023

    

December 31, 2022

(In thousands)

Revolving credit facility (2) (3)

 

6.49%

$

62,000

$

Tranche A-1 Term Loan (4)

 

2.61%

$

200,000

$

200,000

Tranche A-2 Term Loan (4)

 

3.54%

 

400,000

 

350,000

2023 Term Loan (5)

5.26%

120,000

Term loans

 

 

720,000

 

550,000

Unamortized deferred financing costs, net

 

 

(3,243)

 

(2,928)

Term loans, net

$

716,757

$

547,072

(1)Effective interest rate as of June 30, 2023. The interest rate for our revolving credit facility excludes a 0.15% facility fee.
(2)As of June 30, 2023, daily SOFR was 5.09%. As of June 30, 2023 and December 31, 2022, letters of credit with an aggregate face amount of $467,000 were outstanding under our revolving credit facility.
(3)As of June 30, 2023 and December 31, 2022, excludes $11.7 million and $3.3 million of net deferred financing costs related to our revolving credit facility that were included in "Other assets, net" in our balance sheets.
(4)As of June 30, 2023 and December 31, 2022, the outstanding balance was fixed by interest rate swap agreements. As of June 30, 2023, these interest rate swap agreements fix SOFR at a weighted average interest rate of 1.46% for the Tranche A-1 Term Loan and 2.29% for the Tranche A-2 Term Loan. Interest rate swaps for the Tranche A-1 Term Loan with a total notional value of $200.0 million mature in July 2024. Interest rate swaps for the Tranche A-2 Term Loan with a total notional value of $200.0 million mature in July 2024 and with a total notional value of $200.0 million mature in January 2028. We have two forward-starting interest rate swaps that will be effective July 2024 with a total notional value of $200.0 million, which will effectively fix SOFR for the Tranche A-2 Term Loan at a weighted average interest rate of 2.81% through the maturity date.
(5)As of June 30, 2023, the outstanding balance was fixed by an interest rate swap agreement, which fixes SOFR at an interest rate of 4.01% through the maturity date.

As of June 30, 2023, we had fully-hedged debt with a principal balance totaling $692.7 million that used LIBOR as a reference rate. As of the date of this filing, all our debt and hedging arrangements use SOFR as a reference rate.

Common Shares Repurchased

Our Board of Trustees previously authorized the repurchase of up to $1.0 billion of our outstanding common shares, and in May 2023, increased the common share repurchase authorization to $1.5 billion. During the three and six months ended June 30, 2023, we repurchased and retired 9.3 million and 10.5 million common shares for $135.7 million and $155.8 million, a weighted average purchase price per share of $14.54 and $14.79. During the three and six months ended

42

Table of Contents

June 30, 2022, we repurchased and retired 8.5 million and 11.8 million common shares for $213.9 million and $307.0 million, a weighted average purchase price per share of $25.15 and $25.91. Since we began the share repurchase program through June 30, 2023, we have repurchased and retired 33.8 million common shares for $779.3 million, a weighted average purchase price per share of $23.02.

During the third quarter of 2023, through the date of this filing, we repurchased and retired 2.0 million common shares for $31.5 million, a weighted average purchase price per share of $16.03, pursuant to a repurchase plan under Rule 10b5-1 of the Securities Exchange Act of 1934, as amended.

Purchases under the program are made either in the open market or in privately negotiated transactions from time to time as permitted by federal securities laws and other legal requirements. The timing, manner, price and amount of any repurchases will be determined by us at our discretion and will be subject to economic and market conditions, share price, applicable legal requirements and other factors. The program may be suspended or discontinued at our discretion without prior notice.

Material Cash Requirements

Our material cash requirements for the next 12 months and beyond are to fund:

normal recurring expenses;
debt service and principal repayment obligations, including balloon payments on maturing mortgage loans — as of June 30, 2023, we had no debt on a consolidated basis and $13.7 million at our share scheduled to mature in 2023;
capital expenditures, including major renovations, tenant improvements and leasing costs — as of June 30, 2023, we had committed tenant-related obligations totaling $53.1 million ($51.4 million related to our consolidated entities and $1.7 million related to our unconsolidated real estate ventures at our share);
development expenditures — as of June 30, 2023, we had assets under construction that, based on our current plans and estimates, require an additional $284.7 million to complete, which we anticipate will be primarily expended over the next three years;
dividends to shareholders and distributions to holders of OP Units and LTIP Units — on August 3, 2023, our Board of Trustees declared a quarterly dividend of $0.225 per common share;
possible common share repurchases — during the third quarter of 2023, through the date of this filing, we repurchased and retired 2.0 million common shares for $31.5 million; and
possible acquisitions of properties, either directly or indirectly through the acquisition of equity interests.

We expect to satisfy these needs using one or more of the following:

cash and cash equivalents — as of June 30, 2023, we had cash and cash equivalents of $156.6 million;
cash flows from operations;
distributions from real estate ventures;
borrowing capacity under our revolving credit facility — as of June 30, 2023, we had $687.5 million of availability under our revolving credit facility; and
proceeds from financings, asset sales and recapitalizations.

While we do not expect to do so during the next 12 months, we also can issue securities to raise funds.

During the six months ended June 30, 2023, there were no significant changes to the material cash requirements information presented in Item 7 of Part II of our Annual Report.

See additional information in the following pages under "Commitments and Contingencies."

43

Table of Contents

Summary of Cash Flows

The following summary discussion of our cash flows is based on our statements of cash flows and is not meant to be an all-inclusive discussion of the changes in our cash flows:

Six Months Ended June 30, 

    

2023

    

2022

(In thousands)

Net cash provided by operating activities

$

89,431

$

107,649

Net cash (used in) provided by investing activities

 

(135,500)

 

785,304

Net cash used in financing activities

 

(25,160)

 

(819,930)

Cash Flows for the Six Months Ended June 30, 2023

Cash and cash equivalents, and restricted cash decreased $71.2 million to $202.8 million as of June 30, 2023, compared to $274.1 million as of December 31, 2022. This decrease resulted from $135.5 million of net cash used in investing activities and $25.2 million of net cash used in financing activities, partially offset by $89.4 million of net cash provided by operating activities. Our outstanding debt was $2.5 billion as of June 30, 2023 and December 31, 2022.

Net cash provided by operating activities of $89.4 million comprised: (i) $86.2 million of net income (before $114.8 million of non-cash items and a $40.7 million gain on the sale of real estate), (ii) $9.4 million of return on capital from unconsolidated real estate ventures and (iii) $6.1 million of net change in operating assets and liabilities. Non-cash income adjustments of $114.8 million primarily include depreciation and amortization expense, share-based compensation expense, deferred rent and other non-cash items.

Net cash used in investing activities of $135.5 million comprised: (i) $164.8 million of development costs, construction in progress and real estate additions, (ii) $20.2 million of investments in unconsolidated real estate ventures and other investments and (iii) a $19.6 million payment of a deferred purchase price related to the acquisition of a development parcel in 2020, partially offset by (iv) $69.0 million of proceeds from the sale of real estate.

Net cash used in financing activities of $25.2 million primarily comprised: (i) $278.5 million of repayments of mortgage loans, (ii) $155.8 million of common shares repurchased, (iii) $60.0 million of repayments on the revolving credit facility, (iv) $49.5 million of dividends paid to common shareholders, (v) $17.2 million of debt issuance and modification costs, and (vi) $7.9 million of distributions to our redeemable noncontrolling interests, partially offset by (vii) $251.7 million of borrowings under mortgage loans, (viii) $170.0 million of borrowings under term loans and (ix) $122.0 million of borrowings under the revolving credit facility.

Unconsolidated Real Estate Ventures

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 June 30, 2023, we had investments in unconsolidated real estate ventures totaling $309.2 million. For these investments, we exercise significant influence over but do not control these entities and, therefore, account for these investments using the equity method of accounting. For a more complete description of our real estate ventures, see Note 4 to the financial statements.

From time to time, we (or ventures in which we have an ownership interest) have agreed, and may in the future agree with respect to unconsolidated real estate ventures, to (i) guarantee portions of the principal, interest and other amounts in connection with borrowings, (ii) provide customary environmental indemnifications and nonrecourse carve-outs (e.g., guarantees against fraud, misrepresentation and bankruptcy) in connection with borrowings, or (iii) provide guarantees to lenders and other third parties for the completion of development projects. We customarily have agreements with our outside venture partners whereby the partners agree to reimburse the real estate venture or us for their share of any payments made under certain of these guarantees. At times, we also have agreements with certain of our outside venture partners whereby we agree to either indemnify the partners and/or the associated ventures with respect to certain contingent liabilities

44

Table of Contents

associated with operating assets or to reimburse our partner for its share of any payments made by them under certain guarantees. Guarantees (excluding environmental) customarily terminate either upon the satisfaction of specified circumstances or repayment of the underlying debt. Amounts that we may be required to pay in future periods in relation to guarantees associated with budget overruns or operating losses are not estimable.

As of June 30, 2023, we had additional capital commitments and certain recorded guarantees to our unconsolidated real estate ventures and other investments totaling $62.0 million. As of June 30, 2023, we had no debt principal payment guarantees related to our unconsolidated real estate ventures.

Commitments and Contingencies

Insurance

We maintain general liability insurance with limits of $150.0 million per occurrence and in the aggregate, and property and rental value insurance coverage with limits of $1.0 billion per occurrence, with sub-limits for certain perils such as floods and earthquakes on each of our properties. We also maintain coverage, through our wholly owned captive insurance subsidiary, for a portion of the first loss on the above limits and for both terrorist acts and for nuclear, biological, chemical or radiological terrorism events with limits of $2.0 billion per occurrence. These policies are partially reinsured by third-party insurance providers.

We will continue to monitor the state of the insurance market, and the scope and costs of coverage for acts of terrorism. We cannot anticipate what coverage will be available on commercially reasonable terms in the future. We are responsible for deductibles and losses in excess of the insurance coverage, which could be material.

Our debt, consisting of mortgage loans secured by our properties, a revolving credit facility and term loans, contains customary covenants requiring adequate insurance coverage. Although we believe that we currently have adequate insurance coverage, we may not be able to obtain an equivalent amount of coverage at a reasonable cost in the future. If lenders insist on greater coverage than we are able to obtain, it could adversely affect our ability to finance or refinance our properties.

Construction Commitments

As of June 30, 2023, we had assets under construction that, based on our current plans and estimates, require an additional $284.7 million to complete, which we anticipate will be primarily expended over the next three years. These capital expenditures are generally due as the work is performed, and we expect to finance them with debt proceeds, proceeds from asset sales and recapitalizations, and available cash.

Other

As of June 30, 2023, we had committed tenant-related obligations totaling $53.1 million ($51.4 million related to our consolidated entities and $1.7 million related to our unconsolidated real estate ventures at our share). The timing and amounts of payments for tenant-related obligations are uncertain and may only be due upon satisfactory performance of certain conditions.

There are various legal actions against us in the ordinary course of business. In our opinion, the outcome of such matters will not have a material adverse effect on our financial condition, results of operations or cash flows.

With respect to borrowings of our consolidated entities, we have agreed, and may in the future agree, to (i) guarantee portions of the principal, interest and other amounts, (ii) provide customary environmental indemnifications and nonrecourse carve-outs (e.g., guarantees against fraud, misrepresentation and bankruptcy) or (iii) provide guarantees to lenders, tenants and other third parties for the completion of development projects. As of June 30, 2023, the aggregate amount of debt principal payment guarantees was $8.3 million for our consolidated entities.

In connection with the Formation Transaction, we have an agreement with Vornado regarding tax matters (the "Tax Matters Agreement") that provides special rules that allocate tax liabilities if the distribution of JBG SMITH shares by Vornado,

45

Table of Contents

together with certain related transactions, is determined not to be tax-free. Under the Tax Matters Agreement, we may be required to indemnify Vornado against any taxes and related amounts and costs resulting from a violation by us of the Tax Matters Agreement

Environmental Matters

Under various federal, state and local laws, ordinances and regulations, an owner of real estate is liable for the costs of removal or remediation of certain hazardous or toxic substances on that real estate. These laws often impose such liability without regard to whether the owner knew of, or was responsible for, the presence of hazardous or toxic substances. The costs of remediation or removal of these substances may be substantial, and the presence of these substances, or the failure to promptly remediate these substances, may adversely affect the owner's ability to sell the real estate or to borrow using the real estate as collateral. In connection with the ownership and operation of our assets, we may be potentially liable for these costs. The operations of current and former tenants at our assets have involved, or may have involved, the use of hazardous materials or generated hazardous wastes. The release of these hazardous materials and wastes could result in us incurring liabilities to remediate any resulting contamination. The presence of contamination or the failure to remediate contamination at our properties may (i) expose us to third-party liability (e.g., for cleanup costs, natural resource damages, bodily injury or property damage), (ii) subject our properties to liens in favor of the government for damages and costs the government incurs in connection with the contamination, (iii) impose restrictions on the manner in which a property may be used or businesses may be operated, or (iv) materially adversely affect our ability to sell, lease or develop the real estate or to borrow using the real estate as collateral. In addition, our assets are exposed to the risk of contamination originating from other sources. While a property owner may not be responsible for remediating contamination that has migrated onsite from an identifiable and viable offsite source, the contaminant's presence can have adverse effects on operations and the redevelopment of our assets. To the extent we send contaminated materials to other locations for treatment or disposal, we may be liable for the cleanup of those sites if they become contaminated.

Most of our assets have been subject to environmental assessments that are intended to evaluate the environmental condition of the assets. These environmental assessments generally have included a historical review, a public records review, a visual inspection of the site and surrounding assets, visual or historical evidence of underground storage tanks, and the preparation and issuance of a written report. Soil and/or groundwater subsurface testing is conducted at our assets, when necessary, to further investigate any issues raised by the initial assessment that could reasonably be expected to pose a material concern to the property or result in us incurring material environmental liabilities as a result of redevelopment. The tests may not, however, have included extensive sampling or subsurface investigations. In each case where the environmental assessments have identified conditions requiring remedial actions required by law, we have initiated appropriate actions. The environmental assessments did not reveal any material environmental contamination that we believe would have a material adverse effect on our overall business, financial condition or results of operations, or that have not been anticipated and remediated during site redevelopment as required by law. Nevertheless, there can be no assurance that the identification of new areas of contamination, changes in the extent or known scope of contamination, the discovery of additional sites or changes in cleanup requirements would not result in significant cost to us. As disclosed in Note 17 to the financial statements, environmental liabilities totaled $18.0 million as of June 30, 2023 and December 31, 2022 and are included in "Other liabilities, net" in our balance sheets.

46

Table of Contents

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Interest Rate Risk

We have exposure to fluctuations in interest rates, which are sensitive to many factors that are beyond our control. The following is a summary of our annual exposure to a change in interest rates:

    

June 30, 2023

December 31, 2022

 

    

    

Weighted 

    

    

    

Weighted 

 

Average

Annual

Average  

 

 Effective 

Effect of 1% 

Effective  

 

Interest 

Change in 

Interest  

 

Balance

Rate

   

Base Rates

Balance

Rate

 

(Dollars in thousands)

 

Debt (contractual balances):

Mortgage loans:

  

 

  

 

  

 

  

 

  

Variable rate (1)

$

678,671

 

5.43%

$

1,445

$

892,268

 

5.21%

Fixed rate (2)

 

1,025,535

 

4.45%

 

 

1,009,607

 

4.44%

$

1,704,206

$

1,445

$

1,901,875

Revolving credit facility and term loans:

Revolving credit facility (3)

$

62,000

 

6.49%

$

629

$

 

5.51%

Tranche A-1 Term Loan (4)

 

200,000

 

2.61%

 

 

200,000

 

2.61%

Tranche A-2 Term Loan (4)

 

400,000

 

3.54%

 

 

350,000

 

3.40%

2023 Term Loan (5)

120,000

5.26%

$

782,000

$

629

$

550,000

Pro rata share of debt of unconsolidated real estate ventures (contractual balances):

Variable rate (1)

$

56,916

 

5.84%

$

164

$

22,065

 

6.45%

Fixed rate (2)

 

33,000

 

4.13%

 

 

33,000

 

4.13%

$

89,916

$

164

$

55,065

(1)Includes variable rate mortgage loans with interest rate cap agreements. For mortgage loans with interest rate caps, the weighted average interest rate cap strike was 2.42%, and the weighted average maturity date of the interest rate caps is August 2023. The interest rate cap strike is exclusive of the credit spreads associated with the mortgage loans. As of June 30, 2023, one-month LIBOR was 5.22% and one-month term SOFR was 5.14%. The impact of these interest rate caps is reflected in our calculation of the annual effect of a 1% change in base rates.
(2)Includes variable rate mortgages with interest rates fixed by interest rate swap agreements.
(3)As of June 30, 2023, daily SOFR was 5.09%. The interest rate for our revolving credit facility excludes a 0.15% facility fee.
(4)As of June 30, 2023 and December 31, 2022, the outstanding balance was fixed by interest rate swap agreements. As of June 30, 2023, the interest rate swaps fix SOFR at a weighted average interest rate of 1.46% for the Tranche A-1 Term Loan and 2.29% for the Tranche A-2 Term Loan. See Note 7 to the financial statements for additional information.
(5)As of June 30, 2023, the outstanding balance was fixed by an interest rate swap agreement, which fixes SOFR at an interest rate of 4.01% through the maturity date.

The fair value of our mortgage loans is estimated by discounting the future contractual cash flows of these instruments using current risk-adjusted rates available to borrowers with similar credit profiles based on market sources. The fair value of our revolving credit facility and term loans is calculated based on the net present value of payments over the term of the facilities using estimated market rates for similar notes and remaining terms. As of June 30, 2023 and December 31, 2022, the estimated fair value of our consolidated debt was $2.4 billion. These estimates of fair value, which are made at the end of the reporting period, may be different from the amounts that may ultimately be realized upon the disposition of our financial instruments.

Hedging Activities

To manage or hedge our exposure to interest rate risk, we follow established risk management policies and procedures, including the use of a variety of derivative financial instruments.

47

Table of Contents

Derivative Financial Instruments Designated as Effective Hedges

Certain derivative financial instruments, consisting of interest rate swap and cap agreements, are cash flow hedges that are designated as effective hedges, and are carried at their estimated fair value on a recurring basis. We assess the effectiveness of our hedges both at inception and on an ongoing basis. If the hedges are deemed to be effective, the fair value is recorded in "Accumulated other comprehensive income" in our balance sheets and is subsequently reclassified into "Interest expense" in our statements of operations in the period that the hedged forecasted transactions affect earnings. Our hedges become less than perfectly effective if the critical terms of the hedging instrument and the forecasted transactions do not perfectly match such as notional amounts, settlement dates, reset dates, calculation period and interest rates. In addition, we evaluate the default risk of the counterparty by monitoring the creditworthiness of the counterparty. While management believes its judgments are reasonable, a change in a derivative's effectiveness as a hedge could materially affect expenses, net income (loss) and equity.

As of June 30, 2023 and December 31, 2022, we had interest rate swap and cap agreements with an aggregate notional value of $1.4 billion, which were designated as effective hedges. The fair value of our interest rate swaps and caps designated as effective hedges primarily consisted of assets totaling $51.3 million and $53.5 million as of June 30, 2023 and December 31, 2022, included in "Other assets, net" in our balance sheets.

Derivative Financial Instruments Designated as Ineffective Hedges

Certain derivative financial instruments, consisting of interest rate cap agreements, are cash flow hedges that are designated as ineffective hedges, and are carried at their estimated fair value on a recurring basis. Realized and unrealized gains or losses are recorded in "Interest expense" in our statements of operations. As of June 30, 2023 and December 31, 2022, we had various interest rate cap agreements with an aggregate notional value of $711.8 million, which were designated as ineffective hedges. The fair value of our interest rate cap agreements designated as ineffective hedges consisted of assets totaling $2.3 million and $8.1 million as of June 30, 2023 and December 31, 2022, included in "Other assets, net" in our balance sheets.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

As required by Rule 13a-15(b) under the Securities Exchange Act of 1934, as amended, we carried out an evaluation, under the supervision and with the participation of management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that as of June 30, 2023, our disclosure controls and procedures were effective.

Changes in Internal Control over Financial Reporting

There have been no changes in our internal control over financial reporting during the quarter ended June 30, 2023 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

We are, from time to time, involved in legal actions arising in the ordinary course of business. In our opinion, the outcome of such matters is not expected to have a material adverse effect on our financial position, results of operations or cash flows.

ITEM 1A. RISK FACTORS

There have been no material changes to the risk factors previously disclosed in our Annual Report.

48

Table of Contents

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

(a)Not applicable.
(b)Not applicable.
(c)Purchases of equity securities by the issuer and affiliated purchasers:

Period

Total Number Of Common Shares Purchased

Average Price Paid Per Common Share

Total Number Of Common Shares Purchased As Part Of Publicly Announced Plans Or Programs

Approximate Dollar Value Of Common Shares That May Yet Be Purchased Under the Plan Or Programs

April 1, 2023 - April 30, 2023

2,399,238

$

14.17

2,399,238

$

322,367,801

May 1 2023 - May 31, 2023

4,065,637

14.54

4,065,637

763,155,096

June 1, 2023 - June 30, 2023

2,856,095

14.86

2,856,095

720,668,410

Total for the three months ended June 30, 2023

9,320,970

14.54

9,320,970

Total for the six months ended June 30, 2023

10,526,158

14.79

10,526,158

Program total since inception in March 2020 (1)

33,823,567

23.02

33,823,567

(1)During the third quarter of 2023, through the date of this filing, we repurchased and retired 2.0 million common shares for $31.5 million, a weighted average purchase price per share of $16.03, pursuant to a repurchase plan under Rule 10b5-1 of the Securities Exchange Act of 1934, as amended.

In June 2022, our Board of Trustees authorized the repurchase of up to $1.0 billion of our outstanding common shares, and in May 2023, increased the authorized repurchase amount to $1.5 billion. Purchases under the program are made either in the open market or in privately negotiated transactions from time to time as permitted by federal securities laws and other legal requirements. The timing, manner, price and amount of any repurchases will be determined by us at our discretion and will be subject to economic and market conditions, share price, applicable legal requirements and other factors. The program may be suspended or discontinued at our discretion without prior notice, and, in any event.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5. OTHER INFORMATION

Trading Arrangements

During the three months ended June 30, 2023, none of our officers or trustees adopted or terminated any contract, instruction or written plan for the purchase or sale of our securities that was intended to satisfy the affirmative defense conditions of Rule 10b5-1(c) or any "non-Rule 10b5-1 trading arrangement."

49

Table of Contents

Second Amended and Restated Bylaws

On August 3, 2023, our Board of Trustees (the "Board") amended and restated our Amended and Restated Bylaws (the "Second Amended and Restated Bylaws"), effective immediately, to: (i) expressly provide for the ability of stockholders to participate in meetings of stockholders by electronic transmission, (ii) require any shareholder directly or indirectly soliciting proxies from other shareholders to use a proxy card color other than white, (iii) implement and update the procedure and information requirements for the nominations of persons for election to the Board, including to address matters relating to the new universal proxy rules set forth in Rule 14a-19 under the Securities Exchange Act of 1934, as amended, (iv) revise the information required to be included in or updated in a shareholder's notice regarding nomination of a trustee for election or reelection, (v) clarifying the instances in which a shareholder’s notice regarding nomination of a trustee for election or reelection may be disregarded and (vi) make certain other administrative, clarifying and conforming and/or immaterial changes throughout.

The foregoing description of the Second Amended and Restated Bylaws is not complete and is qualified in its entirety by reference to the Second Amended and Restated Bylaws, which are filed as Exhibit 3.4 hereto in unmarked form, and as Exhibit 3.5 hereto in redline form marking the amendments described above, and are incorporated herein by reference.

50

Table of Contents

ITEM 6. EXHIBITS

(a) Exhibit Index

Exhibits

Description

3.1

Declaration of Trust of JBG SMITH Properties, as amended and restated (incorporated by reference to Exhibit 3.1 to our Current Report on Form 8-K, filed on July 21, 2017).

3.2

Articles Supplementary to Declaration of Trust of JBG SMITH Properties (incorporated by reference to Exhibit 3.1 to our Current Report on Form 8-K, filed on March 6, 2018).

3.3

Articles of Amendment to Declaration of Trust of JBG SMITH Properties (incorporated by reference to Exhibit 3.1 to our current report on Form 8-K, filed on May 3, 2018).

3.4**

Second Amended and Restated Bylaws of JBG SMITH Properties, effective August 3, 2023.

3.5**

Second Amended and Restated Bylaws of JBG SMITH Properties, effective August 3, 2023 (redline).

10.1

Amended and Restated Credit Agreement, dated as of June 29, 2023, by and among JBG SMITH Properties LP, as Borrower, the financial institutions party thereto as lenders, and Bank of America, N.A., as administrative agent (incorporated by reference to Exhibit 10.1 to our Current Report on Form 8-K, filed on June 29, 2023).

10.2

Second Amendment to Credit Agreement, dated as of July 24, 2023, by and among JBG SMITH Properties LP, as Borrower, the financial institutions party thereto as lenders, and Wells Fargo Bank, National Association, as Administrative Agent (incorporated by reference to Exhibit 10.1 to our Current Report on Form 8-K, filed on July 28, 2023).

10.3

First Amendment to Credit Agreement, dated as of July 24, 2023, by and among JBG SMITH Properties LP, as Borrower, the financial institutions party thereto as lenders, and Wells Fargo Bank, National Association, as Administrative Agent (incorporated by reference to Exhibit 10.2 to our Current Report on Form - K, filed on July 28, 2023).

31.1**

Certification of Chief Executive Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934, as amended and Section 302 of the Sarbanes-Oxley Act of 2002.

31.2**

Certification of Chief Financial Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934, as amended and Section 302 of the Sarbanes-Oxley Act of 2002.

32.1**

Certification of Chief Executive Officer and Chief Financial Officer pursuant to Rule 13a-14(b) under the Securities Exchange Act of 1934, as amended and 18 U.S.C 1350, as created by Section 906 of the Sarbanes- Oxley Act of 2002.

101.INS

XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.

101.SCH

Inline XBRL Taxonomy Extension Schema

101.CAL

Inline XBRL Extension Calculation Linkbase

101.LAB

Inline XBRL Extension Labels Linkbase

101.PRE

Inline XBRL Taxonomy Extension Presentation Linkbase

101.DEF

Inline XBRL Taxonomy Extension Definition Linkbase

104

Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

**

Filed herewith.

51

Table of Contents

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

JBG SMITH Properties

Date:

August 8, 2023

/s/ M. Moina Banerjee

M. Moina Banerjee

Chief Financial Officer

(Principal Financial Officer)

JBG SMITH Properties

Date:

August 8, 2023

/s/ Angela Valdes

Angela Valdes

Chief Accounting Officer

(Principal Accounting Officer)

52