JBG SMITH Properties 10-Q

ITEM 1. Financial Statements JBG SMITH PROPERTIES Condensed Consolidated Balance Sheets (Unaudited) (In thousands, except par value amounts) ​ ​ ​ ​ ​ ​ ​ ​ ​ September 30, 2020 December 31, 2019 ASSETS ​ ​ Real estate, at cost: ​ ​ Land and improvements ​ $ 1,314,106 ​ $ 1,240,455 Buildings and improvements ​ 4,225,616 ​ 3,880,973 Construction in progress, including land ​ 400,933 ​ 654,091 ​ ​ 5,940,655 ​ 5,775,519 Less accumulated depreciation ​ ( 1,227,027 ) ​ ( 1,119,571 ) Real estate, net ​ 4,713,628 ​ 4,655,948 Cash and cash equivalents ​ 455,111 ​ 126,413 Restricted cash ​ 37,602 ​ 16,103 Tenant and other receivables, net ​ 47,460 ​ 52,941 Deferred rent receivable ​ 184,394 ​ 169,721 Investments in unconsolidated real estate ventures ​ 463,026 ​ 543,026 Other assets, net ​ 302,014 ​ 253,687 Assets held for sale ​ 74,089 ​ 168,412 TOTAL ASSETS ​ $ 6,277,324 ​ $ 5,986,251 ​ ​ ​ ​ ​ ​ ​ LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS AND EQUITY ​ Liabilities: ​ ​ Mortgages payable, net ​ $ 1,690,723 ​ $ 1,125,777 Revolving credit facility ​ — ​ 200,000 Unsecured term loans, net ​ 397,808 ​ 297,295 Accounts payable and accrued expenses ​ 111,440 ​ 157,702 Other liabilities, net ​ 216,494 ​ 206,042 Total liabilities ​ 2,416,465 ​ 1,986,816 Commitments and contingencies ​ ​ Redeemable noncontrolling interests ​ 490,921 ​ 612,758 Shareholders' equity: ​ ​ Preferred shares, $ 0.01 par value - 200,000 shares authorized, none issued ​ — ​ — Common shares, $ 0.01 par value - 500,000 shares authorized; 132,438 and 134,148 shares issued and outstanding as of September 30, 2020 and December 31, 2019 ​ 1,325 ​ 1,342 Additional paid-in capital ​ 3,721,059 ​ 3,633,042 Accumulated deficit ​ ( 307,975 ) ​ ( 231,164 ) Accumulated other comprehensive loss ​ ( 44,650 ) ​ ( 16,744 ) Total shareholders' equity of JBG SMITH Properties ​ 3,369,759 ​ 3,386,476 Noncontrolling interests in consolidated subsidiaries ​ 179 ​ 201 Total equity ​ 3,369,938 ​ 3,386,677 TOTAL LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS AND EQUITY ​ $ 6,277,324 ​ $ 5,986,251 ​ 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 September 30, ​ Nine Months Ended September 30, ​ 2020 2019 2020 2019 REVENUE ​ ​ ​ ​ ​ Property rental ​ $ 118,680 ​ $ 123,963 ​ $ 354,519 ​ $ 365,702 Third-party real estate services, including reimbursements ​ 26,987 ​ 34,587 ​ 83,870 ​ 91,765 Other revenue ​ 5,368 ​ 8,527 ​ 15,705 ​ 25,426 Total revenue ​ 151,035 ​ 167,077 ​ 454,094 ​ 482,893 EXPENSES ​ ​ ​ ​ ​ Depreciation and amortization ​ 56,481 ​ 46,862 ​ 157,586 ​ 141,576 Property operating ​ 37,572 ​ 35,800 ​ 105,867 ​ 100,087 Real estate taxes ​ 17,354 ​ 16,740 ​ 53,422 ​ 52,241 General and administrative: ​ ​ ​ ​ ​ Corporate and other ​ 11,086 ​ 11,015 ​ 37,478 ​ 34,888 Third-party real estate services ​ 28,207 ​ 29,809 ​ 86,260 ​ 86,585 Share-based compensation related to Formation Transaction and special equity awards ​ 7,133 ​ 9,549 ​ 25,432 ​ 30,203 Transaction and other costs ​ 845 ​ 2,059 ​ 7,526 ​ 9,928 Total expenses ​ 158,678 ​ 151,834 ​ 473,571 ​ 455,508 OTHER INCOME (EXPENSE) ​ ​ ​ ​ Income (loss) from unconsolidated real estate ventures, net ​ ( 965 ) ​ ( 1,144 ) ​ ( 17,142 ) ​ 647 Interest and other income (loss), net ​ — ​ ( 640 ) ​ 1,021 ​ 2,363 Interest expense ​ ( 16,885 ) ​ ( 10,583 ) ​ ( 44,660 ) ​ ( 40,864 ) Gain on sale of real estate ​ — ​ 8,088 ​ 59,477 ​ 47,121 Loss on extinguishment of debt ​ — ​ — ​ ( 33 ) ​ ( 1,889 ) Total other income (expense) ​ ( 17,850 ) ​ ( 4,279 ) ​ ( 1,337 ) ​ 7,378 INCOME (LOSS) BEFORE INCOME TAX (EXPENSE) BENEFIT ​ ( 25,493 ) ​ ​ 10,964 ​ ( 20,814 ) ​ 34,763 Income tax (expense) benefit ​ 488 ​ ( 432 ) ​ 3,721 ​ 689 NET INCOME (LOSS) ​ ( 25,005 ) ​ 10,532 ​ ( 17,093 ) ​ 35,452 Net (income) loss attributable to redeemable noncontrolling interests ​ 2,212 ​ ( 1,172 ) ​ 445 ​ ( 4,271 ) NET INCOME (LOSS) ATTRIBUTABLE TO COMMON SHAREHOLDERS ​ $ ( 22,793 ) ​ $ 9,360 ​ $ ( 16,648 ) ​ $ 31,181 EARNINGS (LOSS) PER COMMON SHARE: ​ ​ ​ ​ Basic ​ $ ( 0.18 ) ​ $ 0.06 ​ $ ( 0.14 ) ​ $ 0.23 Diluted ​ $ ( 0.18 ) ​ $ 0.06 ​ $ ( 0.14 ) ​ $ 0.23 WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING: Basic ​ 133,620 ​ 134,127 ​ 133,924 ​ 129,527 Diluted ​ 133,620 ​ 134,127 ​ 133,924 ​ 129,527 ​ See accompanying notes to the condensed consolidated financial statements (unaudited). ​ 4 Table of Contents JBG SMITH PROPERTIES Condensed Consolidated Statements of Comprehensive Income (Loss) (Unaudited) (In thousands) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended September 30, ​ Nine Months Ended September 30, ​ 2020 2019 2020 2019 NET INCOME (LOSS) ​ $ ( 25,005 ) ​ $ 10,532 ​ $ ( 17,093 ) ​ $ 35,452 OTHER COMPREHENSIVE INCOME (LOSS): ​ ​ ​ ​ Change in fair value of derivative financial instruments ​ ( 278 ) ​ ( 7,014 ) ​ ( 39,489 ) ​ ( 33,966 ) Reclassification of net (income) loss on derivative financial instruments from accumulated other comprehensive loss into interest expense ​ 3,823 ​ ( 211 ) ​ 8,137 ​ ( 2,001 ) Other comprehensive income (loss) ​ 3,545 ​ ( 7,225 ) ​ ( 31,352 ) ​ ( 35,967 ) COMPREHENSIVE INCOME (LOSS) ​ ( 21,460 ) ​ 3,307 ​ ( 48,445 ) ​ ( 515 ) Net (income) loss attributable to redeemable noncontrolling interests ​ 2,212 ​ ( 1,172 ) ​ 445 ​ ( 4,271 ) Other comprehensive (income) loss attributable to redeemable noncontrolling interests ​ ( 309 ) ​ 803 ​ 3,446 ​ 3,689 COMPREHENSIVE INCOME (LOSS) ATTRIBUTABLE TO JBG SMITH PROPERTIES ​ $ ( 19,557 ) ​ $ 2,938 ​ $ ( 44,554 ) ​ $ ( 1,097 ) ​ 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 ​ Noncontrolling ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Additional ​ ​ ​ ​ Other ​ Interests in ​ ​ ​ ​ ​ Common Shares ​ Paid-In ​ Accumulated Comprehensive ​ Consolidated ​ Total ​ ​ Shares ​ Amount ​ Capital ​ Deficit Loss ​ Subsidiaries ​ Equity BALANCE AS OF JULY 1, 2020 133,708 ​ $ 1,338 ​ $ 3,742,205 ​ $ ( 255,162 ) ​ $ ( 47,886 ) ​ $ 191 ​ $ 3,440,686 Net loss attributable to common shareholders and noncontrolling interests — ​ — ​ — ​ ( 22,793 ) ​ — ​ — ​ ( 22,793 ) Conversion of common limited partnership units to common shares 169 ​ 2 ​ 4,794 ​ — ​ — ​ — ​ 4,796 Common shares repurchased ​ ( 1,439 ) ​ ​ ( 15 ) ​ ​ ( 38,362 ) ​ ​ — ​ ​ — ​ ​ — ​ ​ ( 38,377 ) Common shares issued pursuant to Employee Share Purchase Plan ("ESPP") ​ — ​ ​ — ​ ​ 186 ​ ​ — ​ ​ — ​ ​ — ​ ​ 186 Dividends declared on common shares ($ 0.225 per common share) ​ — ​ ​ — ​ ​ — ​ ​ ( 30,020 ) ​ ​ — ​ ​ — ​ ​ ( 30,020 ) Contributions from (distributions to) noncontrolling interests — ​ — ​ — ​ — ​ — ​ ( 12 ) ​ ( 12 ) Redeemable noncontrolling interests redemption value adjustment and other comprehensive income allocation — ​ — ​ 12,236 ​ — ​ ( 309 ) ​ — ​ 11,927 Other comprehensive income — ​ — ​ — ​ — ​ 3,545 ​ — ​ 3,545 BALANCE AS OF SEPTEMBER 30, 2020 132,438 ​ $ 1,325 ​ $ 3,721,059 ​ $ ( 307,975 ) ​ $ ( 44,650 ) ​ $ 179 ​ $ 3,369,938 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ BALANCE AS OF JULY 1, 2019 134,127 ​ $ 1,342 ​ $ 3,644,699 ​ $ ( 184,373 ) ​ $ ( 19,156 ) ​ $ 346 ​ $ 3,442,858 Net income attributable to common shareholders and noncontrolling interests — ​ — ​ — ​ 9,360 ​ — ​ — ​ 9,360 Common shares issued pursuant to ESPP ​ — ​ ​ — ​ ​ 80 ​ ​ — ​ ​ — ​ ​ — ​ ​ 80 Dividends declared on common shares ($ 0.225 per common share) ​ — ​ ​ — ​ ​ — ​ ​ ( 30,179 ) ​ ​ — ​ ​ — ​ ​ ( 30,179 ) Contributions from (distributions to) noncontrolling interests — ​ — ​ — ​ — ​ — ​ ( 16 ) ​ ( 16 ) Redeemable noncontrolling interests redemption value adjustment and other comprehensive loss allocation — ​ — ​ ( 1,446 ) ​ — ​ 803 ​ — ​ ( 643 ) Other comprehensive loss — ​ — ​ — ​ — ​ ( 7,225 ) ​ — ​ ( 7,225 ) BALANCE AS OF SEPTEMBER 30, 2019 134,127 ​ $ 1,342 ​ $ 3,643,333 ​ $ ( 205,192 ) ​ $ ( 25,578 ) ​ $ 330 ​ $ 3,414,235 ​ 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 ​ Noncontrolling ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Additional ​ ​ ​ ​ Other ​ Interests in ​ ​ ​ ​ ​ Common Shares ​ Paid-In ​ Accumulated Comprehensive ​ Consolidated ​ Total ​ ​ Shares ​ Amount ​ Capital ​ Deficit Loss ​ Subsidiaries ​ Equity BALANCE AS OF JANUARY 1, 2020 134,148 ​ $ 1,342 ​ $ 3,633,042 ​ $ ( 231,164 ) ​ $ ( 16,744 ) ​ $ 201 ​ $ 3,386,677 Net loss attributable to common shareholders and noncontrolling interests — ​ — ​ — ​ ( 16,648 ) ​ — ​ — ​ ( 16,648 ) Conversion of common limited partnership units to common shares 1,112 ​ 12 ​ 40,662 ​ — ​ ​ ​ — ​ 40,674 Common shares repurchased ​ ( 2,857 ) ​ ​ ( 29 ) ​ ​ ( 79,540 ) ​ ​ — ​ ​ — ​ ​ — ​ ​ ( 79,569 ) Common shares issued pursuant to ESPP ​ 35 ​ ​ — ​ ​ 1,320 ​ ​ — ​ ​ — ​ ​ — ​ ​ 1,320 Dividends declared on common shares ($ 0.45 per common share) ​ — ​ ​ — ​ ​ — ​ ​ ( 60,163 ) ​ ​ — ​ ​ — ​ ​ ( 60,163 ) Contributions from (distributions to) noncontrolling interests — ​ — ​ — ​ — ​ — ​ ( 22 ) ​ ( 22 ) Redeemable noncontrolling interests redemption value adjustment and other comprehensive loss allocation — ​ — ​ 125,575 ​ — ​ 3,446 ​ — ​ 129,021 Other comprehensive loss — ​ — ​ — ​ — ​ ( 31,352 ) ​ — ​ ( 31,352 ) BALANCE AS OF SEPTEMBER 30, 2020 132,438 ​ $ 1,325 ​ $ 3,721,059 ​ $ ( 307,975 ) ​ $ ( 44,650 ) ​ $ 179 ​ $ 3,369,938 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ BALANCE AS OF JANUARY 1, 2019 120,937 ​ $ 1,210 ​ $ 3,155,256 ​ $ ( 176,018 ) ​ $ 6,700 ​ $ 204 ​ $ 2,987,352 Net income attributable to common shareholders and noncontrolling interests — ​ — ​ — ​ 31,181 ​ — ​ — ​ 31,181 Common shares issued ​ 11,500 ​ ​ 115 ​ ​ 472,665 ​ ​ — ​ ​ — ​ ​ — ​ ​ 472,780 Conversion of common limited partnership units to common shares 1,664 ​ 17 ​ 57,301 ​ — ​ — ​ — ​ 57,318 Common shares issued pursuant to ESPP ​ 26 ​ ​ — ​ ​ 1,018 ​ ​ — ​ ​ — ​ ​ — ​ ​ 1,018 Dividends declared on common shares ($ 0.45 per common share) ​ — ​ ​ — ​ ​ — ​ ​ ( 60,355 ) ​ ​ — ​ ​ — ​ ​ ( 60,355 ) Contributions from (distributions to) noncontrolling interests — ​ — ​ — ​ — ​ — ​ 126 ​ 126 Redeemable noncontrolling interests redemption value adjustment and other comprehensive loss allocation — ​ — ​ ( 42,907 ) ​ — ​ 3,689 ​ — ​ ( 39,218 ) Other comprehensive loss — ​ — ​ — ​ — ​ ( 35,967 ) ​ — ​ ( 35,967 ) BALANCE AS OF SEPTEMBER 30, 2019 134,127 ​ $ 1,342 ​ $ 3,643,333 ​ $ ( 205,192 ) ​ $ ( 25,578 ) ​ $ 330 ​ $ 3,414,235 ​ 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) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Nine Months Ended September 30, ​ 2020 2019 OPERATING ACTIVITIES: ​ ​ Net income (loss) ​ $ ( 17,093 ) ​ $ 35,452 Adjustments to reconcile net income to net cash provided by operating activities: ​ ​ Share-based compensation expense ​ 53,183 ​ 47,432 Depreciation and amortization, including amortization of debt issuance costs ​ 160,395 ​ 144,868 Deferred rent ​ ( 19,124 ) ​ ( 29,164 ) (Income) loss from unconsolidated real estate ventures, net ​ 17,142 ​ ( 647 ) Amortization of market lease intangibles, net ​ ( 356 ) ​ ( 486 ) Amortization of lease incentives ​ 5,144 ​ 4,344 Loss on extinguishment of debt ​ 33 ​ 1,889 Gain on sale of real estate ​ ( 59,477 ) ​ ( 47,121 ) Losses on operating lease and other receivables ​ 14,750 ​ 1,281 Return on capital from unconsolidated real estate ventures ​ 3,697 ​ 1,836 Other non-cash items ​ 265 ​ 70 Changes in operating assets and liabilities: ​ ​ Tenant and other receivables ​ ( 4,757 ) ​ ( 9,077 ) Other assets, net ​ ( 11,566 ) ​ ( 13,858 ) Accounts payable and accrued expenses ​ 1,366 ​ ( 17,171 ) Other liabilities, net ​ ( 15,747 ) ​ ( 7,009 ) Net cash provided by operating activities ​ 127,855 ​ 112,639 INVESTING ACTIVITIES: ​ ​ Development costs, construction in progress and real estate additions ​ ( 245,456 ) ​ ( 294,355 ) Deposits for real estate and other acquisitions ​ ( 25,274 ) ​ ( 9,125 ) Proceeds from sale of real estate ​ 154,493 ​ 157,810 Distributions of capital from unconsolidated real estate ventures ​ 70,818 ​ 7,557 Investments in unconsolidated real estate ventures ​ ( 12,277 ) ​ ( 7,325 ) Net cash used in investing activities ​ ( 57,696 ) ​ ( 145,438 ) FINANCING ACTIVITIES: ​ ​ Finance lease payments ​ ( 3,281 ) ​ ( 103 ) Borrowings under mortgages payable ​ 580,105 ​ — Borrowings under revolving credit facility ​ 500,000 ​ — Borrowings under unsecured term loans ​ 100,000 ​ — Repayments of mortgages payable ​ ( 6,680 ) ​ ( 482,810 ) Repayments of revolving credit facility ​ ( 700,000 ) ​ — Debt issuance costs ​ ( 14,856 ) ​ ( 515 ) Proceeds from the issuance of common stock, net of issuance costs ​ — ​ 472,780 Proceeds from common stock issued pursuant to ESPP ​ 887 ​ 747 Common shares repurchased ​ ​ ( 74,434 ) ​ ​ — Dividends paid to common shareholders ​ ( 90,347 ) ​ ( 99,654 ) Distributions to redeemable noncontrolling interests ​ ( 11,333 ) ​ ( 13,564 ) Distributions to noncontrolling interests ​ ​ ( 23 ) ​ ​ ( 19 ) Contributions from noncontrolling interests ​ — ​ 125 Net cash provided by (used in) financing activities ​ 280,038 ​ ( 123,013 ) Net increase (decrease) in cash and cash equivalents and restricted cash ​ 350,197 ​ ( 155,812 ) Cash and cash equivalents and restricted cash as of the beginning of the period ​ 142,516 ​ 399,532 Cash and cash equivalents and restricted cash as of the end of the period ​ $ 492,713 ​ $ 243,720 CASH AND CASH EQUIVALENTS AND RESTRICTED CASH AS OF END OF THE PERIOD: ​ Cash and cash equivalents ​ $ 455,111 ​ $ 230,147 Restricted cash ​ 37,602 ​ 13,573 Cash and cash equivalents and restricted cash ​ $ 492,713 ​ $ 243,720 SUPPLEMENTAL DISCLOSURE OF CASH FLOW AND NON-CASH INFORMATION: ​ Cash paid for interest (net of capitalized interest of $ 11,545 and $ 23,211 in 2020 and 2019) ​ 40,744 ​ 38,563 Accrued capital expenditures included in accounts payable and accrued expenses ​ 51,092 ​ 99,876 Write-off of fully depreciated assets ​ 29,393 ​ 49,319 Conversion of common limited partnership units to common shares ​ 40,674 ​ 57,318 Recognition (derecognition) of operating lease right-of-use assets ​ ​ ( 13,151 ) ​ ​ 35,318 Recognition (derecognition) of liabilities related to operating lease right-of-use assets ​ ​ ( 13,151 ) ​ ​ 37,922 Recognition of finance lease right-of-use assets ​ 42,354 ​ — Recognition of liabilities related to finance lease right-of-use assets ​ 40,684 ​ — Cash paid for amounts included in the measurement of lease liabilities for operating leases ​ 4,603 ​ 4,629 ​ See accompanying notes to the condensed consolidated financial statements (unaudited) . ​ 8 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") is a Maryland real estate investment trust ("REIT"), which owns and operates a portfolio of high-growth commercial and multifamily assets, many of which are amenitized with ancillary retail. JBG SMITH's portfolio reflects its longstanding strategy of owning and operating assets within Metro-served submarkets in the Washington, D.C. metropolitan area that have high barriers to entry and key urban amenities, including National Landing where it serves as the exclusive developer for Amazon’s new headquarters. Substantially all of JBG SMITH's assets are held by, and its operations are conducted through, JBG SMITH Properties LP ("JBG SMITH LP"), its operating partnership. As of September 30, 2020, JBG SMITH, as its sole general partner, controlled JBG SMITH LP and owned 90.4 % of its common limited partnership units ("OP Units"). JBG SMITH is hereinafter 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. 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 The JBG Companies ("JBG") (the "Combination"). The Separation and the Combination are collectively referred to as the "Formation Transaction." As of September 30, 2020, our Operating Portfolio consisted of 64 operating assets comprising 43 commercial assets totaling 13.3 million square feet ( 11.2 million square feet at our share) and 21 multifamily assets totaling 7,800 units ( 5,999 units at our share). Additionally, we have (i) two under-construction assets comprising one wholly owned commercial asset totaling 274,000 square feet and one multifamily asset totaling 322 units ( 161 units at our share); (ii) 10 wholly owned near-term development assets totaling 5.6 million square feet of estimated potential development density; and (iii) 28 future development assets totaling 14.2 million square feet ( 11.5 million square feet at our share) of estimated potential development density. We derive our revenues primarily from leases with commercial and multifamily 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 to third parties, the Washington Housing Initiative ("WHI"), Amazon.com, Inc. ("Amazon") and the legacy funds formerly organized by JBG (the "JBG Legacy Funds"). 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 for the three and nine months ended September 30, 2020 and 2019 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, 2019, filed with the Securities and Exchange Commission. The accompanying condensed consolidated financial statements include our accounts and those of our wholly owned subsidiaries and other entities, including JBG SMITH LP, in which we have a controlling financial interest. See Note 5 for additional information on our variable interest entities ("VIEs"). The portions of the equity and net income (loss) of 9 Table of Contents consolidated subsidiaries that are not attributable to JBG SMITH are presented separately as amounts attributable to noncontrolling interests in our condensed consolidated financial statements. References to our financial statements refer to our condensed consolidated financial statements as of September 30, 2020 and December 31, 2019, and for the three and nine months ended September 30, 2020 and 2019. References to our balance sheets refer to our condensed consolidated balance sheets as of September 30, 2020 and December 31, 2019. References to our statements of operations refer to our condensed consolidated statements of operations for the three and nine months ended September 30, 2020 and 2019. References to our statements of comprehensive income (loss) refer to our condensed consolidated statements of comprehensive income (loss) for the three and nine months ended September 30, 2020 and 2019. References to our statements of cash flows refer to our condensed consolidated statements of cash flows for the nine months ended September 30, 2020 and 2019. Income Taxes We have elected to be taxed as a 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 intend to adhere to these requirements and maintain our REIT status in future periods. We also participate in the activities conducted by subsidiary entities which 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 these activities. The Coronavirus Aid, Relief, and Economic Security Act (the "CARES Act") that was enacted on March 27, 2020 includes several significant tax provisions that could impact us and our taxable REIT subsidiaries ("TRSs"). These changes include: ● the elimination of the taxable income limit for net operating losses ("NOLs") for all taxable years beginning before January 1, 2021, thereby permitting corporate taxpayers to use NOLs to fully offset taxable income (although we, as a REIT, will continue to only be able to use NOLs against taxable income remaining after taking into account any dividends paid deduction); ● the ability for our TRSs to utilize carryback NOLs arising in 2018, 2019 and 2020 to the five taxable years preceding the taxable year of the loss; ● an increase of the business interest limitation under Section 163(j) of the Code from 30% to 50% for taxable years beginning in 2019 and 2020, and the addition of an election by taxpayers to use their 2019 adjusted taxable income as their adjusted taxable income in 2020 for purposes of applying the limitation; and ● a " technical correction " amending Section 168(e)(3)(E) of the Code to add "qualified improvement property" to "15-year property" and assigning a class life of 20-years under Section 168(g)(3)(B) of the Code to qualified improvement property under Section 168(e)(3)(E)(vii) of the Code . During the nine months ended September 30, 2020, as a result of the CARES Act, we made adjustments to the net deferred tax liability amounts, which relate to "qualified improvement property" owned by our TRSs. ​ 2. Summary of Significant Accounting Policies Significant Accounting Policies There were no material changes to our significant accounting policies disclosed in our Annual Report on Form 10-K for the year ended December 31, 2019. 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 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 period. The most significant of these estimates include: (i) the underlying cash flows and holding periods used in assessing impairment; (ii) the determination of useful lives for tangible and intangible assets; and (iii) the assessment of the collectability of receivables, 10 Table of Contents including deferred rent receivables. Due to the current pandemic of the novel coronavirus, or COVID-19, commencing in March 2020, authorities in jurisdictions where our properties are located issued stay-at-home orders and restrictions on travel and permitted businesses operations. The effects of COVID-19 have most significantly impacted the operations of many of our retail tenants, which generated approximately 7 % of our revenue for the year ended December 31, 2019, revenue from our multifamily assets, our commercial parking revenue and our interest in the operations of the Crystal City Marriott and The Marriott Wardman Park hotels. The extent to which COVID-19 impacts us and our tenants will depend on future developments, which are highly uncertain. At this time, there are no outstanding stay-at-home orders in jurisdictions where our properties are located; however, the extent and duration of restrictions on travel and permitted businesses operations and other effects of COVID-19 on us and our tenants have affected estimates used in the preparation of the underlying cash flows used in assessing our long-lived assets for impairment and the assessment of the collectability of receivables from tenants, including deferred rent receivables. We have made what we believe to be appropriate accounting estimates based on the facts and circumstances available as of the reporting date. To the extent these estimates differ from actual results, our consolidated financial statements may be materially affected. Recent Accounting Pronouncements Reference Rate Reform In March 2020, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update 2020-04, 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 over the period March 12, 2020 through December 31, 2022 as reference rate reform activities occur. During the nine months ended September 30, 2020, we 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 LIBOR-indexed cash flows to assume that the index upon which future hedged transactions will be based matches the index on the corresponding derivatives. Application of these expedients preserves the presentation of our derivatives, which will be consistent with our past presentation. We will continue to evaluate the impact of the guidance and may apply other elections, as applicable, as additional changes in the market occur. ​ COVID-19 Lease Modification Accounting Relief Due to the business disruptions and challenges severely affecting the global economy caused by COVID-19, we have provided rent deferrals and other lease concessions to certain tenants. In April 2020, the FASB issued a Staff Q&A that allows lessors to elect not to evaluate whether lease-related relief provided to mitigate the economic effects of COVID-19 is a lease modification under Accounting Standards Codification Topic 842, Leases ("Topic 842") if certain criteria are met. This election allows us to bypass a lease-by-lease analysis, and instead choose whether to apply the lease modification accounting framework, with such election applied consistently to leases with similar characteristics and circumstances. We have elected to apply the lease modification policy relief and have accounted for lease-related relief provided to mitigate the economic effects of COVID-19 as lease modifications under Topic 842, regardless of whether the right to such relief was embedded within the terms of the lessee’s lease. During the three and nine months ended September 30, 2020, we entered into rent deferral agreements with certain tenants, many of which were placed on the cash basis of accounting, resulting in the deferral to future periods of $ 1.2 million and $ 2.4 million of rent that had been contractually due in the second and third quarters. We are in the process of negotiating additional rent deferrals and other lease concessions with some of our tenants, which have been considered when establishing credit losses against billed and deferred rent receivables. ​ During the three and nine months ended September 30, 2020, we recorded $ 3.2 million and $ 7.9 million of credit losses against billed rent receivables and $ 935,000 and $ 4.5 million against deferred (straight-line) rent receivables. These losses are due to the effects of COVID-19 primarily on retail tenants, that are unable to pay rent while businesses are closed or not operating at full capacity. During the second quarter of 2020, we also recorded $ 2.4 million of reserves against receivables from a parking operator that filed for bankruptcy protection. Additionally, during the second quarter of 2020, we determined that our investment in the venture that owns The Marriott Wardman Park hotel was impaired due to a decline in the fair value of the underlying asset and recorded an impairment charge of $ 6.5 million (see Note 4 for additional information). ​ 11 Table of Contents 3. Disposition and Assets Held for Sale Disposition The following is a summary of disposition activity for the nine months ended September 30, 2020: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Gain on ​ ​ ​ ​ ​ ​ ​ ​ Total ​ Gross ​ Cash ​ Sale of ​ ​ ​ ​ ​ ​ ​ ​ Square ​ Sales ​ Proceeds ​ Real Date Disposed Assets Segment Location Feet Price from Sale Estate ​ ​ ​ ​ ​ ​ ​ ​ (In thousands) January 15, 2020 ​ Metropolitan Park (1) ​ Other ​ Arlington, Virginia ​ 2,150 ​ $ 154,952 ​ $ 154,493 ​ $ 59,477 (1) The property, which was sold to Amazon, was part of a like-kind exchange. See Note 5 for additional information. Total square feet represents potential development density approved by Arlington County. In June 2020, we recognized a loss of $ 3.0 million from the sale of 11333 Woodglen Drive/NoBe II Land/Woodglen ("Woodglen") by our unconsolidated real estate venture with Landmark Partners (“Landmark”). See Note 4 for additional information. Assets Held for Sale As of September 30, 2020 and December 31, 2019, certain real estate properties were classified as held for sale. The amounts included in "Assets held for sale" in our balance sheets primarily represent the carrying value of real estate. The following is a summary of assets held for sale: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Total ​ Assets Held Assets Segment Location Square Feet (1) for Sale ​ ​ ​ ​ ​ ​ (In thousands) September 30, 2020 ​ ​ ​ ​ ​ ​ ​ ​ ​ Pen Place (2) ​ Other ​ Arlington, Virginia ​ 2,080 ​ $ 74,089 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, 2019 ​ ​ ​ ​ ​ ​ ​ ​ ​ Pen Place (2) ​ Other ​ Arlington, Virginia ​ 2,080 ​ $ 73,895 Metropolitan Park (3) ​ Other ​ Arlington, Virginia ​ 2,150 ​ ​ 94,517 ​ ​ ​ ​ ​ ​ 4,230 ​ $ 168,412 (1) Represents estimated or approved potential development density. (2) In March 2019, we entered into an agreement for the sale of Pen Place for $ 149.9 million, subject to customary closing conditions. We expect the sale of Pen Place to Amazon to close in 2021. (3) As noted above, we sold Metropolitan Park to Amazon in January 2020 . ​ ​ ​ ​ 12 Table of Contents 4. Investments in Unconsolidated Real Estate Ventures The following is a summary of the composition of our investments in unconsolidated real estate ventures: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Ownership ​ ​ ​ Real Estate Venture Partners Interest (1) September 30, 2020 December 31, 2019 ​ ​ ​ ​ ​ (In thousands) ​ Prudential Global Investment Management 50.0 % ​ $ 217,398 ​ $ 215,624 ​ Landmark 1.8 % - 49.0 % ​ 68,331 ​ 77,944 ​ CBREI Venture 5.0 % - 64.0 % ​ 65,598 ​ 68,405 ​ Canadian Pension Plan Investment Board ("CPPIB") (2) 55.0 % ​ 48,041 ​ 109,911 ​ Berkshire Group 50.0 % ​ 49,329 ​ ​ 46,391 ​ Brandywine Realty Trust 30.0 % ​ 13,769 ​ 13,830 ​ Pacific Life Insurance Company (3) 20.0 % ​ — ​ 10,385 ​ Other ​ ​ 560 ​ ​ 536 ​ Total investments in unconsolidated real estate ventures ​ ​ ​ $ 463,026 ​ $ 543,026 ​ (1) Ownership interests as of September 30, 2020. We have multiple investments with certain venture partners with varying ownership interests. (2) In April 2020, our real estate venture with CPPIB entered into a mortgage loan with a maximum principal balance of $ 160.0 million collateralized by 1900 N Street. The venture initially received proceeds of $ 134.5 million from the mortgage loan, with an additional $ 25.5 million available in the future. During the second quarter of 2020, we received a distribution of $ 70.8 million from the venture. (3) During the second quarter of 2020 , we determined that our investment in the venture that owns The Marriott Wardman Park hotel was impaired due to a decline in the fair value of the underlying asset and recorded an impairment charge of $ 6.5 million, which reduced the net book value of our investment to zero , and we suspended equity loss recognition for the venture after June 30, 2020. On October 1, 2020, we transferred our interest in this venture to our venture partner. In June 2020, our unconsolidated real estate venture with Landmark sold Woodglen, commercial and future development assets located in Rockville, Maryland, for $ 17.8 million. We recognized our proportionate share of the loss from the sale of $ 3.0 million, which is included in "Income (loss) from unconsolidated real estate ventures, net" in our statements of operations for the nine months ended September 30, 2020. Additionally, in connection with the sale, our unconsolidated real estate venture repaid the related mortgage payable of $ 12.2 million. We provide leasing, property management and other real estate services to our unconsolidated real estate ventures. We recognized revenue, including expense reimbursements, of $ 6.3 million and $ 19.3 million for the three and nine months ended September 30, 2020, and $ 7.2 million and $ 21.0 million for the three and nine months ended September 30, 2019 for such services. Reconsideration events could cause us to consolidate these unconsolidated real estate ventures in the future or deconsolidate a consolidated entity. We evaluate reconsideration events as we become aware of them. Reconsideration events include amendments to real estate venture agreements and changes in our partner's ability to make contributions to the venture. Under certain circumstances, we may purchase our partner's interest. The following is a summary of the debt of our unconsolidated real estate ventures: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Weighted ​ ​ ​ ​ ​ ​ ​ ​ Average Effective ​ ​ ​ Interest Rate (1) September 30, 2020 December 31, 2019 ​ ​ ​ ​ (In thousands) Variable rate (2) 2.34 % ​ $ 773,872 ​ $ 629,479 Fixed rate (3) (4) 3.79 % ​ 444,775 ​ 561,236 Unconsolidated real estate ventures - mortgages payable ​ ​ ​ 1,218,647 ​ 1,190,715 Unamortized deferred financing costs ​ ​ ​ ( 7,437 ) ​ ( 2,859 ) Unconsolidated real estate ventures - mortgages payable, net (4) (5) ​ ​ ​ $ 1,211,210 ​ $ 1,187,856 (1) Weighted average effective interest rate as of September 30, 2020. (2) Includes variable rate mortgages payable with interest rate cap agreements. 13 Table of Contents (3) Includes variable rate mortgages payable with interest rates fixed by interest rate swap agreements. (4) Excludes a $ 129.0 million mortgage loan collateralized by The Marriott Wardman Park hotel as of September 30, 2020. On October 1, 2020, we transferred our interest in the related venture to our venture partner. (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 the financial information for our unconsolidated real estate ventures: ​ ​ ​ ​ ​ ​ ​ ​ ​ September 30, 2020 December 31, 2019 ​ (In thousands) Combined balance sheet information: (1) ​ ​ ​ ​ ​ ​ Real estate, net ​ $ 2,287,736 ​ $ 2,493,961 Other assets, net ​ 274,321 ​ 291,092 Total assets ​ $ 2,562,057 ​ $ 2,785,053 ​ ​ ​ ​ ​ ​ ​ Borrowings, net ​ $ 1,211,210 ​ $ 1,187,856 Other liabilities, net ​ 143,939 ​ 168,243 Total liabilities ​ 1,355,149 ​ 1,356,099 Total equity ​ 1,206,908 ​ 1,428,954 Total liabilities and equity ​ $ 2,562,057 ​ $ 2,785,053 (1) Excludes all assets and liabilities related to The Marriott Wardman Park hotel as of September 30, 2020. On October 1, 2020, we transferred our interest in the related venture to our venture partner. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended September 30, ​ Nine Months Ended September 30, ​ 2020 2019 ​ 2020 2019 ​ (In thousands) Combined income statement information: (1) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Total revenue ​ $ 47,235 ​ $ 65,110 ​ $ 162,128 ​ $ 199,897 Operating income (loss) (2) ​ ​ 1,296 ​ ​ 10,925 ​ ( 24,418 ) ​ 21,034 Net loss (2) ​ ​ ( 6,265 ) ​ ​ ( 3,602 ) ​ ( 60,331 ) ​ ( 20,289 ) (1) Excludes information related to the venture that owns The Marriott Wardman Park hotel for the three months ended September 30, 2020 as we suspended equity loss recognition for the venture after June 30, 2020. On October 1, 2020, we transferred our interest in the related venture to our venture partner. (2) Includes the loss from the sale of Woodglen of $ 16.4 million recognized by our unconsolidated real estate venture with Landmark during the nine months ended September 30, 2020. ​ ​ ​ ​ 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 or after a change in the real estate venture's economics to determine if the VIEs should be consolidated in our financial statements or should no longer be considered a VIE. Certain criteria we assess in determining whether we are the primary beneficiary of the VIE and, therefore, should consolidate the VIE include our control over significant business activities, our voting rights and the noncontrolling interest kick-out rights. Unconsolidated VIEs As of September 30, 2020 and December 31, 2019, we had interests in entities deemed to be VIEs that are in the development stage and do not hold sufficient equity at risk, or conduct substantially all their operations on behalf of an investor with disproportionately few voting rights. Although we are engaged to act as the managing partner in charge of 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 performance. We account for our investment in these entities under the equity method. As of September 30, 2020 and December 31, 2019, the net carrying amounts of our investment in these entities were $ 116.0 million and $ 242.9 million, which are included in "Investments in unconsolidated real estate ventures" in our balance sheets. Our equity in the income of unconsolidated VIEs is 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 certain guarantees. See Note 17 for additional information. 14 Table of Contents Consolidated VIEs We consolidate a VIE when we control the significant business activities of an entity. An entity is a VIE because it is in the development stage and/or does not hold sufficient equity at risk. We are the primary beneficiary of a VIE because the noncontrolling interest holder does not have substantive kick-out or participating rights, and we control the significant business activities. JBG SMITH LP is our sole consolidated VIE. We hold 90.4 % 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 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 and hold our assets and liabilities through JBG SMITH LP, its total assets and liabilities comprise substantially all of our consolidated assets and liabilities. In conjunction with the acquisition of F1RST Residences in December 2019, we entered into a like-kind exchange agreement with a third-party intermediary. As of December 31, 2019, the third-party intermediary was the legal owner of the entity that owned this property. We determined we were the primary beneficiary of the VIE, and accordingly, we consolidated the property and its operations as of the acquisition date. Legal ownership of this entity was transferred to us by the third-party intermediary when the like-kind exchange agreement was completed with the sale of Metropolitan Park in January 2020. During the second quarter of 2020, an under-construction multifamily asset at The Wren (formerly referred to as 965 Florida Avenue) in Washington, D.C. that we own through a consolidated real estate venture, which we had deemed to be a VIE, began placing units into service and commenced operations. We no longer deemed the real estate venture to be a VIE because it was determined to have sufficient equity to finance its activities without additional support. See Note 9 for additional information. 6. Other Assets, Net The following is a summary of other assets, net: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ September 30, 2020 December 31, 2019 ​ ​ (In thousands) Deferred leasing costs, net ​ $ 119,636 ​ $ 126,016 Lease intangible assets, net ​ 17,148 ​ 23,644 Management and leasing contracts, net ​ ​ 26,989 ​ ​ 31,515 Other identified intangible assets, net ​ 17,277 ​ 17,105 Operating lease right-of-use assets, net ​ 6,286 ​ 19,865 Finance lease right-of-use assets, net (1) ​ ​ 42,103 ​ ​ — Prepaid expenses ​ 20,372 ​ 12,556 Deferred financing costs on credit facility, net ​ 7,075 ​ 3,071 Deposits (2) ​ 28,410 ​ 3,210 Other ​ 16,718 ​ 16,705 Total other assets, net ​ $ 302,014 ​ $ 253,687 (1) Related to an amendment of the ground lease for 1730 M Street executed during the nine months ended September 30, 2020. The amendment extended the expiration date of the lease from April 2061 to December 2118, and resulted in its reclassification from an operating to a finance lease. (2) Includes deposits totaling $ 25.3 million with the Federal Communications Commission in connection with the acquisition of wireless spectrum licenses. ​ ​ ​ 15 Table of Contents 7. Debt Mortgages Payable The following is a summary of mortgages payable: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Weighted Average ​ ​ ​ ​ ​ ​ ​ ​ ​ Effective ​ ​ ​ ​ Interest Rate (1) ​ September 30, 2020 December 31, 2019 ​ ​ ​ ​ ​ (In thousands) Variable rate (2) 2.18 % ​ ​ $ 679,446 ​ $ 2,200 Fixed rate (3) 4.37 % ​ ​ 1,021,825 ​ 1,125,648 Mortgages payable ​ ​ ​ ​ 1,701,271 ​ 1,127,848 Unamortized deferred financing costs and premium/ discount, net ​ ​ ​ ​ ( 10,548 ) ​ ( 2,071 ) Mortgages payable, net ​ ​ ​ ​ $ 1,690,723 ​ $ 1,125,777 (1) Weighted average effective interest rate as of September 30, 2020. (2) Includes variable rate mortgages payable with interest rate cap agreements. (3) Includes variable rate mortgages payable with interest rates fixed by interest rate swap agreements. As of September 30, 2020 and December 31, 2019, the net carrying value of real estate collateralizing our mortgages payable totaled $ 2.0 billion and $ 1.4 billion. Our mortgages payable 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 mortgages payable are recourse to us. See Note 17 for additional information. During the nine months ended September 30, 2020, we entered into four separate mortgage loans with an aggregate principal balance of $ 560.0 million, collateralized by 4747 Bethesda Avenue, The Bartlett, 1221 Van Street and 220 20th Street, and refinanced the mortgage loan collateralized by RTC-West, increasing the principal balance by $ 20.2 million. As of September 30, 2020 and December 31, 2019, we had various interest rate swap and cap agreements on certain mortgages payable with an aggregate notional value of $ 1.3 billion and $ 867.6 million. See Note 15 for additional information. Credit Facility As of September 30, 2020, our $ 1.4 billion credit facility consisted of a $ 1.0 billion revolving credit facility maturing in January 2025, a $ 200.0 million unsecured term loan ("Tranche A-1 Term Loan") maturing in January 2023 and a $ 200.0 million unsecured term loan ("Tranche A-2 Term Loan") maturing in July 2024. The following is a summary of amounts outstanding under the credit facility: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Effective ​ ​ ​ ​ Interest Rate (1) ​ September 30, 2020 December 31, 2019 ​ ​ ​ ​ ​ (In thousands) Revolving credit facility (2) (3) (4) 1.20 % ​ ​ $ — ​ $ 200,000 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Tranche A-1 Term Loan (5) 2.59 % ​ ​ $ 200,000 ​ $ 100,000 Tranche A-2 Term Loan (6) 2.49 % ​ ​ 200,000 ​ 200,000 Unsecured term loans ​ ​ 400,000 ​ 300,000 Unamortized deferred financing costs, net ​ ​ ( 2,192 ) ​ ( 2,705 ) Unsecured term loans, net ​ ​ $ 397,808 ​ $ 297,295 (1) Effective interest rate as of September 30, 2020. (2) As of both September 30, 2020 and December 31, 2019, letters of credit with an aggregate face amount of $ 1.5 million were outstanding under our revolving credit facility. (3) As of September 30, 2020 and December 31, 2019, net deferred financing costs related to our revolving credit facility totaling $ 7.1 million and $ 3.1 million were included in "Other assets, net." 16 Table of Contents (4) The interest rate for our revolving credit facility excludes a 0.15 % facility fee. (5) As of September 30, 2020 and December 31, 2019, $ 200.0 million and $ 100.0 million of the outstanding balance was fixed by interest rate swap agreements. The interest rate swaps mature concurrently with the term loan and provide a weighted average interest rate of 1.39 % . (6) As of September 30, 2020 and December 31, 2019, $ 200.0 million and $ 137.6 million of the outstanding balance was fixed by interest rate swap agreements. As of September 30, 2020, the interest rate swaps mature concurrently with the term loan and provide a weighted average interest rate of 1.34 % . ​ ​ ​ 8. Other Liabilities, Net The following is a summary of other liabilities, net: ​ ​ ​ ​ ​ ​ ​ ​ ​ September 30, 2020 December 31, 2019 ​ ​ (In thousands) Lease intangible liabilities, net ​ $ 10,753 ​ $ 12,324 Lease assumption liabilities ​ 11,683 ​ 17,589 Lease incentive liabilities ​ 15,408 ​ 20,854 Liabilities related to operating lease right-of-use assets ​ 11,204 ​ 28,476 Liabilities related to finance lease right-of-use assets (1) ​ 40,049 ​ — Prepaid rent ​ 25,734 ​ 23,612 Security deposits ​ 14,431 ​ 16,348 Environmental liabilities ​ 17,898 ​ 17,898 Net deferred tax liability ​ 3,179 ​ 5,542 Dividends payable ​ — ​ 34,012 Derivative agreements, at fair value ​ 49,236 ​ 17,440 Other ​ 16,919 ​ 11,947 Total other liabilities, net ​ $ 216,494 ​ $ 206,042 (1) Related to an amendment of the ground lease for 1730 M Street executed during the nine months ended September 30, 2020. The amendment extended the expiration date of the lease from April 2061 to December 2118, and resulted in its reclassification from an operating to a finance lease. ​ ​ ​ 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. During the nine months ended September 30, 2020 and 2019, unitholders redeemed 1.1 million and 1.7 million OP Units, which we elected to redeem for an equivalent number of our common shares. As of September 30, 2020, outstanding OP Units totaled 14.0 million, representing a 9.6 % ownership interest in JBG SMITH LP. On our balance sheets, our OP Units and certain vested long-term incentive partnership units ("LTIP Units") are presented at the higher of their redemption value or their carrying value, with such adjustments recognized in "Additional paid-in capital." Redemption value per OP Unit is equivalent to the market value of one of our common shares at the end of the period. In October 2020, unitholders redeemed 26,538 OP Units, which we elected to redeem for an equivalent number of our common shares. Consolidated Real Estate Venture We are a partner in a consolidated real estate venture that owns a multifamily asset located in Washington, D.C. Pursuant to the terms of the real estate venture agreement, we will fund all capital contributions until our ownership interest reaches 17 Table of Contents a maximum of 97.0 %. Our partner can redeem its interest for cash under certain conditions. As of September 30, 2020, we held a 95.9 % ownership interest in the real estate venture. The following is a summary of the activity of redeemable noncontrolling interests: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended September 30, ​ ​ 2020 ​ 2019 ​ ​ ​ ​ ​ Consolidated ​ ​ ​ ​ ​ ​ ​ Consolidated ​ ​ ​ ​ ​ JBG ​ Real Estate ​ ​ ​ ​ JBG ​ Real Estate ​ ​ ​ ​ SMITH LP Venture Total SMITH LP Venture Total ​ (In thousands) Balance as of the beginning of the period ​ $ 493,067 ​ $ 6,016 ​ $ 499,083 ​ $ 568,242 ​ $ 5,986 ​ $ 574,228 OP Unit redemptions ​ ( 4,796 ) ​ — ​ ( 4,796 ) ​ — ​ — ​ — Net income (loss) attributable to redeemable noncontrolling interests ​ ( 2,176 ) ​ ( 36 ) ​ ( 2,212 ) ​ 1,172 ​ — ​ 1,172 Other comprehensive income (loss) ​ 309 ​ — ​ 309 ​ ( 803 ) ​ — ​ ( 803 ) Distributions ​ ( 3,723 ) ​ — ​ ( 3,723 ) ​ ( 3,831 ) ​ — ​ ( 3,831 ) Share-based compensation expense ​ 14,496 ​ — ​ 14,496 ​ 14,320 ​ — ​ 14,320 Adjustment to redemption value ​ ( 14,012 ) ​ 1,776 ​ ( 12,236 ) ​ 1,446 ​ — ​ 1,446 Balance as of the end of the period ​ $ 483,165 ​ $ 7,756 ​ $ 490,921 ​ $ 580,546 ​ $ 5,986 ​ $ 586,532 ​ ​ Nine Months Ended September 30, ​ ​ 2020 ​ 2019 ​ ​ ​ ​ ​ Consolidated ​ ​ ​ ​ ​ ​ ​ Consolidated ​ ​ ​ ​ ​ JBG ​ Real Estate ​ ​ ​ ​ JBG ​ Real Estate ​ ​ ​ ​ SMITH LP Venture Total SMITH LP Venture Total ​ (In thousands) Balance as of the beginning of the period ​ $ 606,699 ​ $ 6,059 ​ $ 612,758 ​ $ 552,159 ​ $ 5,981 ​ $ 558,140 OP Unit redemptions ​ ( 40,674 ) ​ — ​ ( 40,674 ) ​ ( 57,318 ) ​ — ​ ( 57,318 ) LTIP Units issued in lieu of cash bonuses (1) ​ 4,066 ​ — ​ 4,066 ​ 3,954 ​ — ​ 3,954 Net income (loss) attributable to redeemable noncontrolling interests ​ ( 366 ) ​ ( 79 ) ​ ( 445 ) ​ 4,266 ​ 5 ​ 4,271 Other comprehensive income (loss) ​ ( 3,446 ) ​ — ​ ( 3,446 ) ​ ( 3,689 ) ​ — ​ ( 3,689 ) Distributions ​ ( 7,505 ) ​ — ​ ( 7,505 ) ​ ( 7,670 ) ​ — ​ ( 7,670 ) Share-based compensation expense ​ 51,742 ​ — ​ 51,742 ​ 45,937 ​ — ​ 45,937 Adjustment to redemption value ​ ( 127,351 ) ​ 1,776 ​ ( 125,575 ) ​ 42,907 ​ — ​ 42,907 Balance as of the end of the period ​ $ 483,165 ​ $ 7,756 ​ $ 490,921 ​ $ 580,546 ​ $ 5,986 ​ $ 586,532 (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 September 30, ​ Nine Months Ended September 30, ​ 2020 2019 ​ 2020 2019 ​ ​ (In thousands) Fixed ​ $ 109,321 ​ $ 114,538 ​ $ 326,866 ​ $ 342,268 Variable ​ ​ 9,359 ​ ​ 9,425 ​ ​ 27,653 ​ ​ 23,434 Property rental revenue ​ $ 118,680 ​ $ 123,963 ​ $ 354,519 ​ $ 365,702 ​ ​ 11. Share-Based Payments LTIP Units and Time-Based LTIP Units During the nine months ended September 30, 2020, we granted 381,504 LTIP Units with time-based vesting requirements ("Time-Based LTIP Units") to management and other employees with a weighted average grant-date fair value of $ 38.52 18 Table of Contents per unit that vest over four years , 25.0 % per year, subject to continued employment. Compensation expense for these units is being recognized over a four-year period. The aggregate grant-date fair value of these Time-Based LTIP Units granted during the nine months ended September 30, 2020 was $ 14.7 million, valued using Monte Carlo simulations. During the nine months ended September 30, 2020, we granted 90,094 fully vested LTIP Units, with a grant-date fair value of $ 40.13 per unit, to certain executives who elected to receive all or a portion of their cash bonus paid in 2020, related to 2019 service, as LTIP Units. Compensation expense totaling $ 3.6 million for these LTIP Units was recognized in 2019. In April 2020, as part of their annual compensation, we granted a total of 54,607 fully vested LTIP Units to certain of our trustees with an aggregate grant-date fair value of $ 1.5 million. The following is a summary of the significant assumptions used to value the LTIP Units and Time-Based LTIP Units: ​ ​ ​ ​ Expected volatility 18.0 % to 29.0 % Risk-free interest rate 0.3 % to 1.5 % Post-grant restriction periods 2 to 3 years ​ Performance-Based LTIP Units During the nine months ended September 30, 2020, we granted 593,100 LTIP Units with performance-based vesting requirements ("Performance-Based LTIP Units") to management and other employees with a weighted average grant-date fair value of $ 18.67 per unit. Our Performance-Based LTIP Units have a three-year performance period. 50 % of any Performance-Based LTIP Units that are earned vest at the end of the three-year performance period and the remaining 50 % vest on the fourth anniversary of the date of grant, subject to continued employment. If, however, the Performance-Based LTIP Units do not achieve a positive absolute total shareholder return ("TSR") at the end of the three-year performance period, but satisfy the relative performance criteria thereof, 50 % of the units that otherwise could have been earned will be forfeited, and the remaining 50 % will be earned and vest if and when we achieve a positive TSR during the succeeding seven years , measured at the end of each quarter. The aggregate grant-date fair value of the Performance-Based LTIP Units granted during the nine months ended September 30, 2020 was $ 11.1 million, valued using Monte Carlo simulations. Compensation expense for the Performance-Based LTIP Units is being recognized over a four-year period. The following is a summary of the significant assumptions used to value the Performance-Based LTIP Units: ​ ​ ​ ​ Expected volatility 15.0 % Dividend yield 2.3 % Risk-free interest rate 1.3 % ​ During the three months ended September 30, 2020, the three-year performance period ended for the Performance-Based LTIP Units granted on August 1, 2017. While our relative TSR over the three-year performance period would have allowed these grants to be fully earned, because our TSR over the three-year performance period was negative, 50 % of the units ( 289,765 units) were forfeited, and the remaining 50 % will be earned and vest if and when we achieve a positive TSR during the succeeding seven years . ESPP Pursuant to the ESPP, employees purchased 35,307 common shares for $ 887,000 during the nine months ended September 30, 2020. The following is a summary of the significant assumptions used to value the ESPP common shares using the Black-Scholes model: ​ ​ ​ ​ Expected volatility 13.0 % Dividend yield 1.1 % Risk-free interest rate 1.7 % Expected life ​ 6 months ​ 19 Table of Contents Share-Based Compensation Expense The following is a summary of share-based compensation expense: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended September 30, ​ Nine Months Ended September 30, ​ 2020 2019 ​ 2020 2019 ​ (In thousands) Time-Based LTIP Units ​ $ 3,364 ​ $ 2,755 ​ $ 11,003 ​ $ 8,529 Performance-Based LTIP Units ​ 3,999 ​ 2,016 ​ 14,207 ​ 6,205 LTIP Units ​ — ​ — ​ 1,100 ​ 1,000 Other equity awards (1) ​ 1,690 ​ 1,403 ​ 4,829 ​ 3,443 Share-based compensation expense - other ​ 9,053 ​ 6,174 ​ 31,139 ​ 19,177 Formation Awards ​ 875 ​ 1,227 ​ 3,473 ​ 4,116 OP Units (2) ​ 4,780 ​ 6,747 ​ 17,398 ​ 21,491 LTIP Units (2) ​ 95 ​ 117 ​ 310 ​ 340 Special Performance-Based LTIP Units (3) ​ 657 ​ 654 ​ 2,015 ​ 1,938 Special Time-Based LTIP Units (3) ​ 726 ​ 804 ​ 2,236 ​ 2,318 Share-based compensation related to Formation Transaction and special equity awards (4) ​ 7,133 ​ 9,549 ​ 25,432 ​ 30,203 Total share-based compensation expense ​ 16,186 ​ 15,723 ​ 56,571 ​ 49,380 Less amount capitalized ​ ( 1,177 ) ​ ( 406 ) ​ ( 3,388 ) ​ ( 1,948 ) Share-based compensation expense ​ $ 15,009 ​ $ 15,317 ​ $ 53,183 ​ $ 47,432 (1) Primarily comprising compensation expense for certain executives who have elected to receive all or a portion of any cash bonus that may be paid in the subsequent year related to past service in the form of fully vested LTIP Units and related to our ESPP. (2) Represents share-based compensation expense for LTIP Units and OP Units issued in the Formation Transaction, which are subject to post-Combination employment obligations. (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 the accompanying statements of operations. As of September 30, 2020, we had $ 59.7 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 1.9 years. ​ 12. Transaction and Other Costs The following is a summary of transaction and other costs: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended September 30, ​ Nine Months Ended September 30, ​ 2020 2019 ​ 2020 2019 ​ (In thousands) Demolition costs (1) ​ $ 179 ​ $ 503 ​ $ 179 ​ $ 4,693 Integration and severance costs ​ 406 ​ 1,021 ​ 3,066 ​ 4,274 Completed, potential and pursued transaction expenses ​ 260 ​ 535 ​ 281 ​ 961 Other (2) ​ — ​ — ​ 4,000 ​ — Transaction and other costs ​ $ 845 ​ $ 2,059 ​ $ 7,526 ​ $ 9,928 (1) Related to 223 23 rd Street and 2300 Crystal Drive for the three and nine months ended September 30, 2020. Related to 1900 Crystal Drive for the three and nine months ended September 30, 2019. (2) Represents a charitable commitment to the Washington Housing Conservancy, a non-profit that acquires and owns affordable workforce housing in the Washington D.C. metropolitan region. ​ 20 Table of Contents 13. Interest Expense The following is a summary of interest expense: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended September 30, ​ Nine Months Ended September 30, ​ 2020 2019 ​ 2020 2019 ​ (In thousands) Interest expense before capitalized interest ​ $ 18,274 ​ $ 17,911 ​ $ 52,751 ​ $ 60,758 Amortization of deferred financing costs ​ 857 ​ 698 ​ 2,255 ​ 2,576 Interest expense related to finance lease right-of-use assets ​ ​ 464 ​ ​ 230 ​ ​ 1,026 ​ ​ 691 Net unrealized loss on derivative financial instruments not designated as cash flow hedges ​ 202 ​ 2 ​ 173 ​ 50 Capitalized interest ​ ( 2,912 ) ​ ( 8,258 ) ​ ( 11,545 ) ​ ( 23,211 ) Interest expense ​ $ 16,885 ​ $ 10,583 ​ $ 44,660 ​ $ 40,864 ​ 14. Shareholders' Equity and Earnings Per Common Share Common Shares Repurchased In March 2020, our Board of Trustees authorized the repurchase of up to $ 500 million of our outstanding common shares. During the three and nine months ended September 30, 2020, we repurchased and retired 1.4 million and 2.9 million common shares for $ 38.4 million and $ 79.6 million, an average purchase price of $ 26.64 and $ 27.82 per share. Earnings Per Common Share ​ The following is a summary of the calculation of basic and diluted earnings per common share and a reconciliation of the amounts of net income (loss) available to common shareholders used in calculating basic and diluted earnings per common share to net income (loss): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended September 30, ​ Nine Months Ended September 30, ​ ​ 2020 2019 ​ 2020 2019 ​ ​ (In thousands, except per share amounts) Net income (loss) ​ $ ( 25,005 ) ​ $ 10,532 ​ $ ( 17,093 ) ​ $ 35,452 Net (income) loss attributable to redeemable noncontrolling interests ​ ​ 2,212 ​ ( 1,172 ) ​ 445 ​ ( 4,271 ) Net income (loss) attributable to common shareholders ​ ​ ( 22,793 ) ​ ​ 9,360 ​ ​ ( 16,648 ) ​ ​ 31,181 Distributions to participating securities ​ ​ ( 822 ) ​ ​ ( 679 ) ​ ( 1,729 ) ​ ( 1,674 ) Net income (loss) available to common shareholders — basic and diluted ​ $ ( 23,615 ) ​ $ 8,681 ​ $ ( 18,377 ) ​ $ 29,507 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Weighted average number of common shares outstanding — basic and diluted ​ ​ 133,620 ​ ​ 134,127 ​ 133,924 ​ 129,527 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Earnings (loss) per common share: ​ ​ ​ ​ ​ ​ ​ ​ Basic ​ $ ( 0.18 ) ​ $ 0.06 ​ $ ( 0.14 ) ​ $ 0.23 Diluted ​ $ ( 0.18 ) ​ $ 0.06 ​ $ ( 0.14 ) ​ $ 0.23 ​ The effect of the redemption of OP Units and Time-Based LTIP Units that were outstanding as of September 30, 2020 and 2019 is excluded in the computation of diluted earnings 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 per share). Since OP Units and 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 OP Unit and Time-Based LTIP Unit impact are excluded from net income (loss) 21 Table of Contents available to common shareholders and from the weighted average number of common shares outstanding in calculating diluted earnings per common share. Performance-Based LTIP Units, Special Performance-Based LTIP Units and Formation Awards, which totaled 4.4 million and 4.9 million for the three and nine months ended September 30, 2020, and 4.7 million for the three and nine months ended September 30, 2019, were excluded from the calculation of diluted earnings per common share as they were antidilutive, but potentially could be dilutive in the future. ​ 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. We do not enter into derivative financial instruments for speculative purposes. As of September 30, 2020 and December 31, 2019, 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 loss on our derivative financial instruments designated as cash flow hedges was $ 49.1 million and $ 17.7 million as of September 30, 2020 and December 31, 2019 and was recorded in "Accumulated other comprehensive loss" in our balance sheets, of which a portion was reclassified to "Redeemable noncontrolling interests." Within the next 12 months, we expect to reclassify $ 17.5 million as an increase to interest expense. 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) September 30, 2020 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Derivative financial instruments designated as cash flow hedges: ​ ​ ​ ​ Classified as liabilities in "Other liabilities, net" ​ $ 49,236 ​ — ​ $ 49,236 ​ — Derivative financial instruments not designated as cash flow hedges: ​ ​ ​ ​ Classified as assets in "Other assets, net" ​ 47 ​ — ​ 47 ​ — ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, 2019 ​ ​ ​ ​ Derivative financial instruments designated as cash flow hedges: ​ ​ ​ ​ Classified as liabilities in "Other liabilities, net" ​ $ 17,440 ​ — ​ $ 17,440 ​ — ​ 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 22 Table of Contents current credit spreads to evaluate the likelihood of default. However, as of September 30, 2020 and December 31, 2019, 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 loss" in our statements of comprehensive income (loss) for the three and nine months ended September 30, 2020 and 2019 were attributable to the net change in unrealized gains or losses related to the 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. Financial Assets and Liabilities Not Measured at Fair Value As of September 30, 2020 and December 31, 2019, all financial instruments and liabilities were reflected in our balance sheets at amounts which, in our estimation, reasonably approximated their fair values, except for the following: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ September 30, 2020 ​ December 31, 2019 ​ Carrying ​ Carrying ​ ​ ​ Amount (1) ​ Fair Value ​ Amount (1) ​ Fair Value ​ (In thousands) Financial liabilities: ​ ​ ​ ​ Mortgages payable ​ $ 1,701,271 ​ $ 1,699,355 ​ $ 1,127,848 ​ $ 1,162,890 Revolving credit facility ​ — ​ — ​ 200,000 ​ 200,177 Unsecured term loans ​ 400,000 ​ 389,493 ​ 300,000 ​ 300,607 (1) The carrying amount consists of principal only. The fair values of the mortgages payable, revolving credit facility and unsecured term loans were determined using Level 2 inputs of the fair value hierarchy. ​ 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 (commercial, multifamily, 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 other property 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 23 Table of Contents separately in our statements of operations. The following represents the components of revenue from our third-party real estate services business: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended September 30, ​ Nine Months Ended September 30, ​ 2020 2019 ​ 2020 2019 ​ (In thousands) Property management fees ​ $ 4,694 ​ $ 5,758 ​ $ 15,453 ​ $ 16,873 Asset management fees ​ 2,301 ​ 3,577 ​ 7,400 ​ 10,612 Development fees ​ 2,614 ​ 6,783 ​ 8,474 ​ 10,912 Leasing fees ​ 1,086 ​ 2,033 ​ 3,627 ​ 5,331 Construction management fees ​ 584 ​ 370 ​ 2,057 ​ 1,469 Other service revenue ​ 2,000 ​ 1,005 ​ 5,452 ​ 3,626 Third-party real estate services revenue, excluding reimbursements ​ 13,279 ​ 19,526 ​ 42,463 ​ 48,823 Reimbursements revenue (1) ​ 13,708 ​ 15,061 ​ 41,407 ​ 42,942 Third-party real estate services revenue, including reimbursements ​ ​ 26,987 ​ ​ 34,587 ​ ​ 83,870 ​ ​ 91,765 Third-party real estate services expenses ​ ​ 28,207 ​ ​ 29,809 ​ ​ 86,260 ​ ​ 86,585 Third-party real estate services revenue less expenses ​ $ ( 1,220 ) ​ $ 4,778 ​ $ ( 2,390 ) ​ $ 5,180 (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 $ 27.0 million and $ 31.5 million and are classified in "Other assets, net" in our balance sheets as of September 30, 2020 and December 31, 2019. 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 September 30, ​ Nine Months Ended September 30, ​ 2020 2019 ​ 2020 2019 ​ (In thousands) Net income (loss) attributable to common shareholders ​ $ ( 22,793 ) ​ $ 9,360 ​ $ ( 16,648 ) ​ $ 31,181 Add: ​ ​ ​ ​ Depreciation and amortization expense ​ 56,481 ​ 46,862 ​ 157,586 ​ 141,576 General and administrative expense: ​ ​ ​ ​ Corporate and other ​ 11,086 ​ 11,015 ​ 37,478 ​ 34,888 Third-party real estate services ​ 28,207 ​ 29,809 ​ 86,260 ​ 86,585 Share-based compensation related to Formation Transaction and special equity awards ​ 7,133 ​ 9,549 ​ 25,432 ​ 30,203 Transaction and other costs ​ 845 ​ 2,059 ​ 7,526 ​ 9,928 Interest expense ​ 16,885 ​ 10,583 ​ 44,660 ​ 40,864 Loss on extinguishment of debt ​ — ​ — ​ 33 ​ 1,889 Income tax expense (benefit) ​ ( 488 ) ​ 432 ​ ( 3,721 ) ​ ( 689 ) Net income (loss) attributable to redeemable noncontrolling interests ​ ( 2,212 ) ​ 1,172 ​ ( 445 ) ​ 4,271 Less: ​ ​ ​ ​ Third-party real estate services, including reimbursements revenue ​ 26,987 ​ 34,587 ​ 83,870 ​ 91,765 Other revenue (1) ​ 2,292 ​ 2,196 ​ 5,438 ​ 5,951 Income (loss) from unconsolidated real estate ventures, net ​ ( 965 ) ​ ( 1,144 ) ​ ( 17,142 ) ​ 647 Interest and other income (loss), net ​ — ​ ( 640 ) ​ 1,021 ​ 2,363 Gain on sale of real estate ​ — ​ 8,088 ​ 59,477 ​ 47,121 Consolidated NOI ​ $ 66,830 ​ $ 77,754 ​ $ 205,497 ​ $ 232,849 24 Table of Contents (1) Excludes parking revenue of $ 3.1 million and $ 10.3 million for the three and nine months ended September 30, 2020, and $ 6.3 million and $ 19.5 million for the three and nine months ended September 30, 2019. The following is a summary of NOI by segment. Items classified in the Other column include future development assets, corporate entities and the elimination of intersegment activity. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended September 30, 2020 ​ Commercial Multifamily Other Total ​ (In thousands) Property rental revenue ​ $ 90,050 ​ $ 30,452 ​ $ ( 1,822 ) ​ $ 118,680 Other property revenue ​ 3,002 ​ 74 ​ — ​ 3,076 Total property revenue ​ 93,052 ​ 30,526 ​ ( 1,822 ) ​ 121,756 Property expense: ​ ​ ​ ​ ​ ​ ​ Property operating ​ 26,701 ​ 13,226 ​ ( 2,355 ) ​ 37,572 Real estate taxes ​ 12,136 ​ 4,656 ​ 562 ​ 17,354 Total property expense ​ 38,837 ​ 17,882 ​ ( 1,793 ) ​ 54,926 Consolidated NOI ​ $ 54,215 ​ $ 12,644 ​ $ ( 29 ) ​ $ 66,830 ​ ​ Three Months Ended September 30, 2019 ​ Commercial Multifamily Other Total ​ (In thousands) Property rental revenue ​ $ 94,678 ​ $ 28,946 ​ $ 339 ​ $ 123,963 Other property revenue ​ 6,237 ​ 94 ​ — ​ 6,331 Total property revenue ​ 100,915 ​ 29,040 ​ 339 ​ 130,294 Property expense: ​ ​ ​ ​ ​ Property operating ​ 27,200 ​ 9,490 ​ ( 890 ) ​ 35,800 Real estate taxes ​ 12,004 ​ 3,552 ​ 1,184 ​ 16,740 Total property expense ​ 39,204 ​ 13,042 ​ 294 ​ 52,540 Consolidated NOI ​ $ 61,711 ​ $ 15,998 ​ $ 45 ​ $ 77,754 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Nine Months Ended September 30, 2020 ​ Commercial Multifamily Other Total ​ (In thousands) Property rental revenue ​ $ 266,823 ​ $ 94,873 ​ $ ( 7,177 ) ​ $ 354,519 Other property revenue ​ 10,018 ​ 249 ​ — ​ 10,267 Total property revenue ​ 276,841 ​ 95,122 ​ ( 7,177 ) ​ 364,786 Property expense: ​ ​ ​ ​ ​ Property operating ​ 78,645 ​ 34,238 ​ ( 7,016 ) ​ 105,867 Real estate taxes ​ 36,532 ​ 14,088 ​ 2,802 ​ 53,422 Total property expense ​ 115,177 ​ 48,326 ​ ( 4,214 ) ​ 159,289 Consolidated NOI ​ $ 161,664 ​ $ 46,796 ​ $ ( 2,963 ) ​ $ 205,497 ​ ​ Nine Months Ended September 30, 2019 ​ Commercial Multifamily Other Total ​ ​ (In thousands) Property rental revenue ​ $ 285,551 ​ $ 86,069 ​ $ ( 5,918 ) ​ $ 365,702 Other property revenue ​ 19,212 ​ 263 ​ — ​ 19,475 Total property revenue ​ 304,763 ​ 86,332 ​ ( 5,918 ) ​ 385,177 Property expense: ​ ​ ​ ​ Property operating ​ 84,089 ​ 25,662 ​ ( 9,664 ) ​ 100,087 Real estate taxes ​ 37,257 ​ 11,243 ​ 3,741 ​ 52,241 Total property expense ​ 121,346 ​ 36,905 ​ ( 5,923 ) ​ 152,328 Consolidated NOI ​ $ 183,417 ​ $ 49,427 ​ $ 5 ​ $ 232,849 ​ 25 Table of Contents The following is a summary of certain balance sheet data by segment: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Commercial Multifamily Other Total ​ ​ (In thousands) September 30, 2020 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Real estate, at cost ​ $ 3,506,113 ​ $ 2,034,045 ​ $ 400,497 ​ $ 5,940,655 Investments in unconsolidated real estate ventures ​ 330,111 ​ 108,110 ​ 24,805 ​ 463,026 Total assets (1) ​ 3,473,426 ​ 1,798,714 ​ 1,005,184 ​ 6,277,324 December 31, 2019 ​ ​ ​ ​ Real estate, at cost ​ $ 3,415,294 ​ $ 1,998,297 ​ $ 361,928 ​ $ 5,775,519 Investments in unconsolidated real estate ventures ​ 396,199 ​ 107,882 ​ 38,945 ​ 543,026 Total assets (1) ​ 3,361,122 ​ 1,682,872 ​ 942,257 ​ 5,986,251 (1) Includes assets held for sale. See Note 3 for additional information. ​ 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 $ 1.5 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 mortgages payable secured by our properties, a revolving credit facility and unsecured 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 reasonable costs in the future. If lenders insist on greater coverage than we are able to obtain, it could adversely affect the ability to finance or refinance our properties. Construction Commitments As of September 30, 2020, we had construction in progress that will require an additional $ 34.0 million to complete ($ 20.2 million related to our consolidated entities and $ 13.8 million related to our unconsolidated real estate ventures at our share), based on our current plans and estimates, which we anticipate will be primarily expended over the next one to two years . These capital expenditures are generally due as the work is performed, and we expect to finance them with debt proceeds, proceeds from asset recapitalizations and sales, issuance and sale of equity securities, and available cash. Environmental Matters Most of our assets have been subject, at some point, to environmental assessments that are intended to evaluate the environmental condition of the subject and surrounding 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 $ 17.9 million as of both September 30, 2020 and December 31, 2019 and are included in "Other liabilities, net" in our balance sheets. 26 Table of Contents Other 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 September 30, 2020, we had additional capital commitments and certain recorded guarantees to our unconsolidated real estate ventures totaling $ 56.9 million. As of September 30, 2020, we had no 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 September 30, 2020, the aggregate amount of 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 third parties, the WHI, Amazon and the JBG Legacy Funds. We provide services for the benefit of the JBG Legacy Funds that own interests in the assets retained by the JBG Legacy Funds. In connection with the contribution to us of the 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 and Board of Trustees have an ownership interest 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. The WHI was launched by us and 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 investment vehicle of the WHI. As of September 30, 2020, the WHI Impact Pool had completed closings of capital commitments totaling $ 112.0 million, which included a commitment from us of $ 10.9 million. The third-party real estate services revenue, including expense reimbursements, from the JBG Legacy Funds and the WHI Impact Pool was $ 4.6 million and $ 17.3 million for the three and nine months ended September 30, 2020, and $ 10.2 million and $ 28.6 million for the three and nine months ended September 30, 2019. As of September 30, 2020 and 27 Table of Contents December 31, 2019, we had receivables from the JBG Legacy Funds and the WHI Impact Pool totaling $ 8.1 million and $ 6.2 million for such services. We rented our former corporate offices from an unconsolidated real estate venture and made payments totaling $ 403,000 and $ 4.1 million for the three and nine months ended September 30, 2020, and $ 867,000 and $ 3.4 million for the three and nine months ended September 30, 2019. In November 2019, we relocated our corporate headquarters. Upon the relocation of our corporate headquarters, we impaired the right-of-use asset due to our change in the use of the asset. ​ 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 $ 4.0 million and $ 12.6 million during the three and nine months ended September 30, 2020, and $ 5.5 million and $ 16.1 million during the three and nine months ended September 30, 2019 which is included in "Property operating expenses" in our statements of operations. 19. Subsequent Events On October 29, 2020, our Board of Trustees declared a quarterly dividend of $ 0.225 per common share, payable on November 30, 2020 to shareholders of record as of November 13, 2020. ​ 28 Table of Contents