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Item 7. Management’s Discussion and Analysis

2021-02-23 compared with 2020-02-25 · 378 added, 314 removed, 306 unchanged (69% of the section changed)

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion should be read in conjunction with the consolidated and combined financial statements and notes thereto appearing in Item 8 - Financial Statements and Supplementary Data of this Annual Report on Form 10-K.

The following discussion should be read in conjunction with the consolidated financial statements and notes thereto appearing in Item 8 - Financial Statements and Supplementary Data of this Annual Report on Form 10-K.

Organization and Basis of Presentation

JBG SMITH was organized as a Maryland REIT for the purpose of receiving, via the spin-off on July 17, 2017, substantially all of the assets and liabilities of Vornado's Washington, D.C.

On July 18, 2017, JBG SMITH acquired the management business and certain assets and liabilities of JBG.

Substantially all of our assets are held by, and our operations are conducted through, JBG SMITH LP, our operating partnership.

Prior to the Separation from Vornado, JBG SMITH was a wholly owned subsidiary of Vornado and had no material assets or operations.

On July 17, 2017, Vornado distributed 100% of the then outstanding common shares of JBG SMITH on a pro rata basis to the holders of its common shares.

Prior to such distribution by Vornado, Vornado Realty L.P.

("VRLP"), Vornado's operating partnership, distributed OP Units in JBG SMITH LP on a pro rata basis to the holders of VRLP's common limited partnership units, consisting of Vornado and the other common limited partners of VRLP.

Following such distribution by VRLP and prior to such distribution by Vornado, Vornado contributed to JBG SMITH all of the OP Units it received in exchange for common shares of JBG SMITH.

Our operations are presented as if the transfer of the Vornado Included Assets had been consummated prior to all historical periods presented in the accompanying consolidated and combined financial statements at the carrying amounts of such assets and liabilities reflected in Vornado’s books and records.

The assets and liabilities of the JBG Assets and subsequent results of operations and cash flows are reflected in our consolidated and combined financial statements beginning on the date of the Combination.

The following is a discussion of the historical results of operations and liquidity and capital resources of JBG SMITH as of December 31, 2019 and 2018 , and for each of the three years in the period ended December 31, 2019 , which includes results prior to the consummation of the Formation Transaction.

The historical results presented prior to the consummation of the Formation Transaction include the Vornado Included Assets, all of which were under common control of Vornado until July 17, 2017.

Unless otherwise specified, the discussion of the historical results prior to July 18, 2017 does not include the results of the JBG Assets.

Consequently, our results for the periods before and after the Formation Transaction are not directly comparable.

References to the financial statements refer to our consolidated and combined financial statements as of December 31, 2019 and 2018 , and for each of the three years in the period ended December 31, 2019 .

JBG SMITH, a Maryland REIT, owns and operates a portfolio of high-growth commercial and multifamily assets amenitized with ancillary retail.

Our portfolio reflects our 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 vibrant urban amenities.

Over half of our portfolio is in National Landing, where we serve as the exclusive developer for Amazon's new headquarters, and where Virginia Tech's new $1 billion Innovation Campus will be located.

In addition, our third-party asset management and real estate services business provides fee-based real estate services to the WHI, Amazon, the JBG Legacy Funds and other third parties.

Substantially all our assets are held by, and our operations are conducted through, JBG SMITH LP.

We were organized for the purpose of receiving, via the spin-off on July 17, 2017, substantially all the assets and liabilities of Vornado's Washington, D.C.

On July 18, 2017, we acquired the management business and certain assets and liabilities of JBG.

References to the financial statements refer to our consolidated financial statements as of December 31, 2020 and 2019, and for each of the three years in the period ended December 31, 2020.

References to our balance sheets refer to our consolidated balance sheets as of December 31, 2020 and 2019.

References to our statements of operations refer to our consolidated and combined statements of operations for each of the three years in the period ended December 31, 2019 .

References to our statements of cash flows refer to our consolidated and combined statements of cash flows for each of the three years in the period ended December 31, 2019 .

References to our statements of operations refer to our consolidated statements of operations for each of the three years in the period ended December 31, 2020.

References to our statements of cash flows refer to our consolidated statements of cash flows for each of the three years in the period ended December 31, 2020.

The accompanying financial statements are prepared in accordance with GAAP, which requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures 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.

The historical financial results for the Vornado Included Assets for periods prior to the Formation Transaction reflect charges for certain corporate costs allocated by Vornado which were based on either actual costs incurred or a proportion of costs estimated to be applicable to the Vornado Included Assets based on an analysis of key metrics, including total revenues.

Such costs do not necessarily reflect what the actual costs would have been if JBG SMITH had been operating as a separate standalone public company.

These charges are discussed further in Note 20 to the financial statements included herein.

We have elected to be taxed as a REIT under sections 856-860 of the Code.

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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 TRSs under the Code.

As such, we are subject to federal, state, and local taxes on the income from these activities.

As a REIT, we can reduce our taxable income by distributing all or a portion of such taxable income to shareholders.

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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.

We compete with a large number of property owners and developers.

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.

We own and operate a portfolio of high-growth commercial and multifamily assets, many of which are amenitized with ancillary retail.

Our portfolio reflects our 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 being within walking distance of a Metro station.

As of December 31, 2019 , our Operating Portfolio consists of 62 operating assets comprising 44 commercial assets totaling 12.7 million square feet ( 10.7 million square feet at our share) and 18 multifamily assets totaling 7,111 units ( 5,327 units at our share).

Additionally, we have (i) seven assets under construction comprising four commercial assets totaling 943,000 square feet ( 821,000 square feet at our share) and three multifamily assets totaling 1,011 units ( 833 units at our share);

and (ii) 40 future development assets totaling 21.9 million square feet ( 18.7 million square feet at our share) of estimated potential development density.

During 2019, we sold or recapitalized approximately $426 million of assets, which included approximately $270 million of operating assets, that were identified for sale or recapitalization because of their relatively low expected return potential and their high tax basis, enabling better capital retention.

The assets sold or recapitalized generated approximately $10 million of NOI in 2019.

We expect to continue this opportunistic strategy in 2020 by marketing over $500 million of assets for sale.

Based on the current challenging investment sales market, and our opportunistic expectations as a seller, we expect to transact on at least $200 million in 2020.

Also, consistent with our approach to capital recycling, in the competitive Washington, D.C.

office leasing market, we are focused on retaining tenants and avoiding the costly concessions associated with backfilling vacancy.

We believe this approach produces a higher comparable return while better positioning assets for potential sale or recapitalization, and simultaneously de-risking them at a time of greater supply and cyclical downturn risk.

The lease renewals we executed in 2017 and 2018 reduced our NOI in 2019, primarily due to free rent associated with these early renewals.

Because (i) the concessions in our commercial portfolio have burned off to stabilized levels, (ii) we delivered Under Construction assets on or ahead of schedule, and (iii) we acquired F1RST Residences, we expect NOI to rebound in 2020.

We do not, however, expect to see this NOI increase immediately flow through to FFO in 2020, primarily due to the reduction in capitalized interest from the delivery of our assets under construction.

As these assets stabilize, we expect the increase in earnings to offset the increase in interest expense which will increase FFO.

Since mid-2017, we have been focused on a comprehensive plan to reposition our holdings in National Landing through a broad array of Placemaking strategies.

Our Placemaking strategies include 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 a robust offering of amenity retail and improved public spaces.

In November 2018, Amazon announced it had selected sites that we own in National Landing in Northern Virginia as the location of an additional headquarters.

To date, Amazon has executed leases totaling approximately 857,000 square feet at five office buildings in our National Landing portfolio.

In March 2019, we executed three initial leases with Amazon totaling approximately 537,000 square feet at three of our office buildings in National Landing.

These three initial leases encompass approximately 88,000 square feet at 241 18th Street South, approximately 191,000 square feet at 1800 South Bell Street, and approximately 258,000 square feet at 1770 Crystal Drive.

Amazon began moving into 241 18th Street South and 1800 South Bell in 2019, and we expect Amazon to begin moving into 1770 Crystal Drive by the end of 2020.

In April 2019, we executed a lease with Amazon for an additional approximately 48,000 square feet of office space at 2345 Crystal Drive in National Landing.

Amazon moved its first employees into 2345 Crystal Drive during the second quarter of 2019.

In December 2019, we executed a lease with Amazon for an additional approximately 272,000 square feet of office space at 2100 Crystal Drive in National Landing.

We expect Amazon to begin occupying space in 2100 Crystal Drive in late 2020.

In March 2019, we also executed purchase and sale agreements with Amazon for two of our National Landing development sites, Metropolitan Park and Pen Place, which will serve as the initial phase of new construction associated with Amazon’s new headquarters at National Landing.

Subject to customary closing conditions, Amazon contracted to acquire these two development sites for an estimated aggregate $293.9 million , or $72.00 per square foot based on their combined estimated potential development density of up to approximately 4.1 million square feet.

In May 2019, Amazon submitted its plans to Arlington County for approval of two new office buildings, totaling 2.1 million square feet, inclusive of over 50,000 square feet of street-level retail with new shops and restaurants, on the Metropolitan Park land sites.

In January 2020, we sold the Metropolitan Park land sites to Amazon for $155.0 million , which represents an $11.0 million increase over the previously estimated contract value resulting from an increase in the approved development density on the sites.

We expect the sale of the Pen Place land site to Amazon to be completed in 2021.

As of December 31, 2020, our Operating Portfolio consisted of 62 operating assets comprising 41 commercial assets totaling 13.0 million square feet (11.1 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 pipeline assets totaling 5.6 million square feet of estimated potential development density;

and (iii) 29 future development pipeline assets totaling 14.8 million square feet (12.0 million square feet at our share) of estimated potential development density.

We continue to focus on our comprehensive plan to reposition our holdings in National Landing in Northern Virginia by executing a broad array of Placemaking strategies.

Our Placemaking strategies include 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.

We have also invested in CBRS wireless spectrum in National Landing as part of our efforts to make National Landing among the first 5G-operable submarkets in the nation.

In November 2018, Amazon announced it had selected sites that we own in National Landing as the location of its new headquarters.

We currently have leases with Amazon totaling approximately 857,000 square feet at five office buildings in National Landing.

In March 2019, we executed purchase and sale agreements with Amazon for two of our National Landing development sites, Metropolitan Park and Pen Place, which will serve as the initial phase of construction associated with Amazon's new headquarters at National Landing.

In January 2020, we sold Metropolitan Park to Amazon for $155.0 million and began constructing two new office buildings thereon, totaling 2.1 million square feet, inclusive of over 50,000 square feet of street-level retail with new shops and restaurants.

The sale of Pen Place to Amazon for approximately $149.9 million is expected to close, subject to customary closing conditions, in 2021.

We are the developer, property manager and retail leasing agent for Amazon's new headquarters at National Landing.

In February 2019, the Commonwealth of Virginia enacted an incentives bill, which provides tax incentives to Amazon if it creates up to 37,850 full-time jobs with average salaries of $150,000 or higher in National Landing.

As part of the incentive package, we expect $1.8 billion in infrastructure and education investments led by state and local governments.

Key highlights of operating results for the years ended December 31, 2019 included:

net income attributable to common shareholders of $65.6 million , or $0.48 per diluted common share, for the year ended December 31, 2019 as compared to $39.9 million , or $0.31 per diluted common share, for the year ended December 31, 2018 .

Net income attributable to common shareholders for the years ended December 31, 2019 and 2018 included gains on the sale of real estate of $105.0 million and $52.2 million , and transaction and other costs of $23.2 million and $27.7 million ;

On March 11, 2020, the World Health Organization declared the outbreak of COVID-19 a global pandemic and recommended containment and mitigation measures worldwide.

On March 13, 2020, a National Emergency was declared in the United States in response to COVID-19.

The efforts made by federal, state and local governments to mitigate the spread of COVID-19 included orders requiring the temporary closure of or imposed limitations on the operations of certain non-essential businesses, which have adversely affected many tenants, especially tenants in the retail industry.

While it is difficult to determine the long-term impact of COVID-19 on our business, it has adversely impacted our operations in 2020, and we expect it to continue to negatively impact our operations in 2021.

The key areas that have been, and likely will continue to be, negatively impacted include:

● significantly decreased retail revenue from rent deferral accommodations offered to certain tenants unable to pay rent while stores are closed or not operating at full capacity, resulting in increased credit losses and write-offs against both billed and deferred (straight-line) rent receivables, as discussed below;

● an increase in multifamily rental defaults as certain tenants fail to pay their rent;

● a decline in parking revenue as employees of office tenants work from home and transient parking declines (for the year ended December 31, 2020, parking revenue declined by $10.1 million, or 31.7%, compared to 2019);

● depressed near-term leasing activity in our commercial and multifamily portfolios, including delays in the lease-up of our recently delivered multifamily assets, resulting in higher concessions and lower rents in our multifamily assets;

● distress among co-working tenants, which comprised approximately 2.2% of our total square feet on a consolidated basis and 3.0% at our share as of December 31, 2020 and the failure on their part to pay rent;

● increased COVID-19-related cleaning costs at some of our commercial and multifamily assets, partially offset by an overall decrease in operating expenses in our commercial buildings as many tenants' employees work from home;

● decreased income from the Crystal City Marriott hotel in National Landing due to its temporary closure and lower occupancy.

The hotel closed in late-March 2020 and reopened in mid-June 2020.

NOI from this asset decreased $3.8 million for the year ended December 31, 2020 compared to 2019;

● increased interest expense from borrowings to provide additional liquidity and financial flexibility.

While we are always focused on the long term, we are providing the following data to provide additional information regarding the impact of the pandemic on rent collections for the three months ended December 31, 2020.

We make no assurances that our experience to date will be indicative of future performance.

In the future, we plan to return to providing only our customary metrics, and we undertake no obligation to continue to provide such information going forward.

● rent collections for our commercial office tenants were 98.5% (1) on a consolidated basis and 98.6% at our share (2019 annual average rate was 99.7%);

● rent collections for our multifamily tenants were 98.6% on a consolidated basis and 98.7% at our share (2019 annual average rate was 99.9%);

● rent collections for our commercial retail tenants were 74.3% (1) on a consolidated basis and 72.6% at our share (2019 annual average rate was 98.4%).

(1) Excludes $546,000 of deferred and abated rents, consisting of $100,000 for commercial office tenants and $452,000 for retail tenants.

Including these deferred and abated rents, our rent collections for the fourth quarter of 2020 on a consolidated basis would have been 98.4% for commercial office tenants and 70.2% for retail tenants.

Our rent collections for January 2021 kept pace with our fourth quarter of 2020 rent collections.

During the year ended December 31, 2020, we recorded $11.2 million of credit losses against billed rent receivables and $19.6 million against deferred (straight-line) rent receivables.

These losses are due to the effects of COVID-19, primarily on co-working and retail tenants, that are unable to pay rent while businesses are closed, not operating at full capacity or while employees continue to work from home.

During 2020, we recorded $8.2 million of income associated with certain lease guarantees.

Additionally, during the second quarter of 2020, we determined that our investment in the unconsolidated real estate 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 loss of $6.5 million.

On October 1, 2020, we transferred our interest in this venture to our former venture partner.

During 2020, we put all co-working tenants and all retailers except for grocers, pharmacies, essential businesses and certain national credit tenants on the cash basis of accounting.

Although we are experiencing supply chain and labor delays as a result of new job site procedures due to the effects of COVID-19, as of December 31, 2020, all of our construction projects are active and on schedule with the exception of 7900 Wisconsin Avenue, for which we revised the delivery date earlier this year to the first quarter of 2021, a delay of two quarters from the originally estimated completion date.

We are not aware of any material impact on the construction timeline for Amazon's new headquarters.

We obtained entitlements associated with approximately 820,000 square feet in National Landing immediately prior to Virginia's stay-at-home order in March 2020.

These entitlements added approximately 65,000 square feet of potential development density to our future development pipeline.

We anticipate COVID-19 will significantly impact the real estate industry for years to come.

Over the short term, uncertainty surrounding the pandemic has and will likely continue to suppress net new demand for office space and bias multifamily leasing to renewals.

Retail failures are likely to accelerate, and an already competitive marketplace will favor tenants for years to come.

Over the longer term, however, the story is likely to be more nuanced.

We believe the maturation of teleworking and the continuing trend to workplace flexibility are here to stay and will likely be felt through an increase in office workers served per square foot of space.

We believe this will be a headwind for office rent growth, much as densification served as a headwind over the past decade.

While the unfolding economic downturn continues to be significant, the Washington D.C.

metropolitan area has historically proven to be more resilient than other gateway markets.

Our concentration in this market, where a high percentage of demand for our businesses is driven by the federal government, government contractors and Amazon-related activity, should soften the anticipated impact of a recession on our business, and has the potential to translate into countercyclical growth.

We expect our heavy concentration in Amazon's path of growth at a time like this to bear fruit on multiple fronts.

First and foremost, Amazon has historically increased its hiring pace during economic downturns.

Recent announcements from Amazon suggest that it intends to accelerate hiring for its new headquarters in National Landing in the years ahead, and that the organization remains fully committed to its planned occupancies in National Landing.

In addition, especially if the pandemic were to worsen, the potential for construction cost reductions, an expected decline in the supply pipeline and limited disruptions to permitting and construction, should facilitate pursuit of our multifamily growth plans, especially those related to new development in National Landing.

Finally, we expect increased government spending in response to the pandemic to drive more agency and contractor spending locally, which should mitigate the effects of the downturn on our markets and could also provide stimulus for future growth.

Though we remain cautious on the short-and medium-term outlook for our business, as the impact of COVID-19 is difficult to predict, we see the potential for strong demand and growth in our markets over the long term.

The significance, extent and duration of the impact of COVID-19 on our business remains largely uncertain and dependent on future developments that cannot be accurately predicted at this time.

These developments include:

the continued severity, duration, transmission rate and geographic spread of COVID-19 in the United States, the speed of the vaccine roll-out, the effectiveness and willingness of people to take COVID-19 vaccines, the duration of associated immunity and

their efficacy against emerging variants of COVID-19, the extent and effectiveness of other containment measures taken, and the response of the overall economy, the financial markets and the population, particularly in areas in which we operate, once the current containment measures are lifted, and whether the residential market in the Washington, D.C.

region and any of our properties will be materially impacted by the moratoriums on residential evictions, among others.

These uncertainties make it difficult to predict operating results for our business for 2021.

Therefore, there can be no assurances that we will not experience material declines in revenue, net income, NOI or FFO.

For additional information, see "Part II – Item 1A.

Risk Factors"

included elsewhere in this Annual Report on Form 10-K.

Operating Results

Key highlights of operating results for the year ended December 31, 2020 included:

● net loss attributable to common shareholders of $62.3 million, or $0.49 per diluted common share, for the year ended December 31, 2020 as compared to net income attributable to common shareholders of $65.6 million, or $0.48 per diluted common share, for the year ended December 31, 2019.

Net income (loss) attributable to common shareholders for the years ended December 31, 2020 and 2019 included gains on the sale of real estate of $59.5 million and $105.0 million;

● third-party real estate services revenue, including reimbursements, of $113.9 million for the year ended December 31, 2020 as compared to $120.9 million for the year ended December 31, 2019;

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● operating multifamily portfolio leased and occupied percentages at our share of 86.5% and 81.1% as of December 31, 2020 and 89.5% and 87.2% as of December 31, 2019.

The decreases are due in part to the movement of West Half into our recently delivered operating assets during the fourth quarter of 2019.

The in service operating multifamily portfolio was 95.1% leased and 93.3% occupied as of December 31, 2019 ;

the leasing of approximately 2.3 million square feet, or 2.1 million square feet at our share, at an initial rent (1) of $45.61 per square foot and a GAAP-basis weighted average rent per square foot (2) of $46.31 for the year ended December 31, 2019 ;

The decreases are due in part to the movement of The Wren, 901 W Street and 900 W Street into our recently delivered operating assets during 2020.

The in-service operating multifamily portfolio was 91.3% leased and 87.8% occupied as of December 31, 2020 as compared to 95.1% leased and 93.3% occupied as of December 31, 2019;

● the leasing of approximately 897,000 square feet, or 812,000 square feet at our share, at an initial rent (1) of $46.04 per square foot and a GAAP-basis weighted average rent per square foot (2) of $46.05 for the year ended December 31, 2020;

● a decrease in same store (3) NOI of 4.3% to $287.9 million for the year ended December 31, 2020 as compared to $300.9 million for the year ended December 31, 2019.

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Represents the cash basis weighted average starting rent per square foot, which excludes free rent and fixed escalations.

Represents the weighted average rent per square foot that is recognized over the term of the respective leases, including the effect of free rent and fixed escalations.

(1) Represents the cash basis weighted average starting rent per square foot at our share, which excludes free rent and fixed escalations.

(2) 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 at our share.

(3) 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 year ended December 31, 2020 included:

the closing of an underwritten public offering of 11.5 million common shares (including 1.5 million common shares related to the exercise of the underwriters' option to cover overallotments) at $42.00 per share, which generated net proceeds, after deducting the underwriting discounts and commissions and other offering expenses, of $472.8 million ;

the sale of three commercial assets for the gross sales price of $165.4 million , and the sale of a 50.0% interest in a real estate venture that owns Central Place Tower for the gross sales price of $220.0 million ;

the execution of agreements for the sale of the Pen Place and Metropolitan Park land sites with Amazon for its headquarters in National Landing, for an estimated aggregate $293.9 million .

In January 2020 , we sold the Metropolitan Park land sites to Amazon for the gross sales price of $155.0 million , which represents an $11.0 million increase over the previously estimated contract value as the result of an increase in the approved development density on the sites;

the acquisition of F1RST Residences, a 325-unit multifamily asset located in the Ballpark submarket of Washington, D.C.

with approximately 21,000 square feet of street level retail, for $160.5 million through a like-kind exchange agreement with a third-party intermediary;

a $200.0 million draw under the revolving credit facility, which was repaid in 2020;

the repayment of mortgages payable totaling $709.1 million ;

● the acquisition of the Americana Portfolio for an aggregate total of $65.0 million.

$47.3 million was allocated to the former Americana Hotel site, of which $20.0 million has been deferred until the earlier of the approval of certain entitlements or January 1, 2023, and $17.7 million was allocated to the other three parcels.

The former Americana Hotel site has the potential to accommodate up to approximately 550,000 square feet of new development density and is located directly across the street from Amazon’s future headquarters;

● the sale of Metropolitan Park to Amazon for $155.0 million;

● the sale of Woodglen, commercial and future development assets located in Rockville, Maryland, by our unconsolidated real estate venture for $17.8 million.

We recognized our proportionate share of the loss from the sale of $3.0 million;

● the sale of Pickett Industrial Park, a commercial asset located in Alexandria, Virginia, by our unconsolidated real estate venture for $46.3 million.

We recognized our proportionate share of the gain from the sale of $800,000;

● borrowings of $500.0 million under our revolving credit facility, which were repaid in July 2020;

● the amendment of our $1.4 billion credit facility to extend the maturity date of the revolving credit facility to January 2025;

● a $100.0 million draw under our unsecured term loan;

● the closing of 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 20 th Street;

● the refinancing of the mortgage loan collateralized by RTC-West, increasing the principal balance by $20.2 million;

● the repayment of the mortgage loan collateralized by WestEnd25 with a principal balance of $94.7 million;

● a mortgage loan entered into by our real estate venture with Canadian Pension Plan Investment Board with a maximum principal balance of $160.0 million collateralized by 1900 N Street.

The venture initially received proceeds of $134.5 million ($74.0 million at our share) from the mortgage loan, with an additional $25.5 million available in the future.

We received a $70.8 million distribution from the venture;

● the payment of dividends totaling $120.0 million and distributions to our noncontrolling interests of $15.0 million;

● the repurchase and retirement of 3.8 million of our common shares for $104.8 million, an average purchase price of $27.72 per share;

● the investment of $307.5 million in development, construction in progress and real estate additions;

Activity subsequent to December 31, 2019 included:

the amendment of the credit facility to extend the maturity date of the revolving credit facility to January 2025;

the closing of a mortgage loan with a principal balance of $175.0 million collateralized by 4747 and 4749 Bethesda Avenue;

the issuance of 471,598 long-term incentive partnership units ("LTIP Units") and 593,100 LTIP Units with performance-based vesting requirements ("Performance-Based LTIP Units") to management and employees with an estimated aggregate fair value of $29.4 million .

● the investment of $25.3 million to acquire between 30 and 40 megahertz of 5G CBRS wireless spectrum licenses across National Landing.

Critical Accounting Policies and Estimates

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Actual results could differ from these estimates.

We consider an accounting estimate to be critical if changes in the estimate could have a material impact on our consolidated and combined results of operations or financial condition.

Our significant accounting policies are more fully described in Note 2 to the financial statements included in Part II, Item 8 of this Annual Report on Form 10-K;

We consider an accounting estimate to be critical if changes in the estimate could have a material impact on our consolidated results of operations or financial condition.

Our significant accounting policies are more fully described in Note 2 to the financial statements;

however, the most critical accounting policies, which involve the use of estimates and assumptions as to future uncertainties and, therefore, may result in actual amounts that differ from estimates, are as follows:

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We account for asset acquisitions, which includes the consolidation of previously unconsolidated real estate ventures, at cost, including transaction costs, plus the fair value of any assumed debt.

We estimate the fair values of acquired tangible assets (consisting of real estate, cash and cash equivalents, tenant and other receivables, investments in unconsolidated real estate ventures and other assets, as applicable), identified intangible assets and liabilities (consisting of the value of in-place leases, above- and below-market leases, options to enter into ground leases and management contracts, as applicable), assumed debt and other liabilities, and noncontrolling interests, as applicable, based on our evaluation of information and estimates available at the date of acquisition.

Based on these estimates, we allocate the purchase price, including all transaction costs related to the acquisition, to the identified assets acquired and liabilities assumed based on their relative fair value.

We estimate the fair values of acquired tangible assets (consisting of real estate, cash and cash equivalents, tenant and other receivables, investments in unconsolidated real estate ventures and other assets, as applicable), identified intangible assets and liabilities (consisting of in-place leases, above- and below-market leases, options to enter into ground leases and management contracts, as applicable), assumed debt and other liabilities, and noncontrolling interests, as applicable, based on our evaluation of information and estimates available at the date of acquisition.

Based on these estimates, we allocate the purchase price, including all transaction costs related to the acquisition and any contingent consideration, to the identified assets acquired and liabilities assumed based on their relative fair value.

We similarly account for business combinations by estimating the fair values of acquired tangible assets, identified intangible assets and liabilities, assumed debt and other liabilities, and noncontrolling interests, as applicable, based on our evaluation of information and estimates.

Any excess of the purchase price over the estimated fair value of the net assets acquired is recorded as goodwill, and any excess of the fair value of assets acquired over the purchase price is recorded as a gain on bargain purchase.

Any excess of the purchase price over the estimated fair value of the net assets

acquired is recorded as goodwill, and any excess of the fair value of assets acquired over the purchase price is recorded as a gain on bargain purchase.

If, up to one year from the acquisition date, information regarding the fair value of the assets acquired and liabilities assumed is received and the estimates are refined, appropriate adjustments are made on a prospective basis to the purchase price allocation, which may include adjustments to identified assets, assumed liabilities, and goodwill or the gain on bargain purchase, as applicable.

Transaction costs are expensed as incurred and included in "Transaction and other costs" in our statements of operations.

Transaction costs are expensed as incurred and included in "Transaction and other costs"

in our statements of operations.

For both asset acquisitions and business combinations, the results of operations of acquisitions are prospectively included in our financial statements beginning with the date of the acquisition.

The fair values of buildings are determined using the "as-if vacant" approach whereby we use discounted cash flow models with inputs and assumptions that we believe are consistent with current market conditions for similar assets.

The fair values of buildings are determined using the "as-if vacant"

approach whereby we use discounted cash flow models with inputs and assumptions that we believe are consistent with current market conditions for similar assets.

The most significant assumptions in determining the allocation of the purchase price to buildings are the exit capitalization rate, discount rate, estimated market rents and hypothetical expected lease-up periods.

We assess fair value of land based on market comparisons and development projects using an income approach of cost plus a margin.

We assess the fair value of land based on market comparisons and development projects using an income approach of cost plus a margin.

The fair values of identified intangible assets are determined based on the following:

The value allocable to the above- or below-market component of an acquired in-place lease is determined based upon the present value (using a discount rate which reflects the risks associated with the acquired lease) of the difference between (i) the contractual amounts to be received pursuant to the lease over its remaining term and (ii) management’s estimate of the amounts that would be received using market rates over the remaining term of the lease.

Amounts allocated to above- market leases are recorded as lease intangible assets in "Other assets, net" in our balance sheets, and amounts allocated to below-market leases are recorded as lease intangible liabilities in "Other liabilities, net" in our balance sheets.

These intangibles are amortized to "Property rentals revenue" in our statements of operations over the remaining terms of the respective leases;

Factors considered in determining the value allocable to in-place leases during hypothetical lease-up periods related to space that is leased at the time of acquisition include (i) lost rent and operating cost recoveries during the hypothetical lease-up period and (ii) theoretical leasing commissions required to execute similar leases.

These intangible assets are recorded as lease intangible assets in "Other assets, net" in our balance sheets and are amortized to "Depreciation and amortization expense" in our statements of operations over the remaining term of the existing lease;

● The value allocable to the above- or below-market component of an acquired in-place lease is determined based upon the present value (using a discount rate which reflects the risks associated with the acquired lease) of the difference between:

(i) the contractual amounts to be received pursuant to the lease over its remaining term and (ii) management's estimate of the amounts that would be received using market rates over the remaining term of the lease.

Amounts allocated to above- market leases are recorded as lease intangible assets in "Other assets, net"

in our balance sheets, and amounts allocated to below-market leases are recorded as lease intangible liabilities in "Other liabilities, net"

in our balance sheets.

These intangibles are amortized to "Property rental revenue"

in our statements of operations over the remaining terms of the respective leases;

● Factors considered in determining the value allocable to in-place leases during hypothetical lease-up periods related to space that is leased at the time of acquisition include:

(i) lost rent and operating cost recoveries during the hypothetical lease-up period and (ii) theoretical leasing commissions required to execute similar leases.

These intangible assets are recorded as lease intangible assets in "Other assets, net"

in our balance sheets and are amortized to "Depreciation and amortization expense"

in our statements of operations over the remaining term of the existing lease;

● The fair value of the in-place property management, leasing, asset management, and development and construction management contracts is based on revenue and expense projections over the estimated life of each contract discounted using a market discount rate.

These management contract intangibles are amortized to "Depreciation and amortization expense" in our statements of operations over the weighted average life of the management contracts.

The fair value of investments in unconsolidated real estate ventures and related noncontrolling interests is based on the estimated fair values of the identified assets acquired and liabilities assumed of each venture, including future expected cash flows from promote interests.

These management contract intangibles are amortized to "Depreciation and amortization expense"

in our statements of operations over the weighted average life of the management contracts.

The fair value of investments in unconsolidated real estate ventures and redeemable noncontrolling interests is based on the estimated fair values of the identified assets acquired and liabilities assumed of each venture, including future expected cash flows from promote interests.

The fair value of the mortgages payable assumed is determined using current market interest rates for comparable debt financings.

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Real estate is carried at cost, net of accumulated depreciation and amortization.

Maintenance and repairs are expensed as incurred and are included in "Property operating expenses" in our statements of operations.

As real estate is undergoing redevelopment activities, all property operating expenses directly associated with and attributable to the redevelopment, including interest expense, are capitalized to the extent that we believe such costs are recoverable through the value of the property.

Maintenance and repairs are expensed as incurred and are included in "Property operating expenses"

in our statements of operations.

As real estate is undergoing redevelopment activities, all property operating expenses directly associated with and attributable to the redevelopment,

including interest expense, are capitalized to the extent that we believe such costs are recoverable through the value of the property.

The capitalization period ends when the asset is ready for its intended use, but no later than one year from substantial completion of major construction activities.

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Tenant improvements are amortized on a straight-line basis over the lives of the related leases, which approximate the useful lives of the tenant improvements.

When assets are sold or retired, their costs and related accumulated depreciation are removed from the accounts with the resulting gains or losses reflected in net income or loss for the period.

When assets are sold or retired, their costs and related accumulated depreciation are removed from the accounts with the resulting gains or losses reflected in net income (loss) for the period.

Construction in progress, including land, is carried at cost, and no depreciation is recorded.

Real estate undergoing significant renovations and improvements is considered to be under development.

All direct and indirect costs related to development activities are capitalized into "Construction in progress, including land" on our balance sheets, except for certain demolition costs, which are expensed as incurred.

All direct and indirect costs related to development activities are capitalized into "Construction in progress, including land"

on our balance sheets, except for certain demolition costs, which are expensed as incurred.

Direct development costs incurred include:

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The capitalization of such expenses ceases when the real estate is ready for its intended use, but no later than one-year from substantial completion of major construction activities.

Our assets and related intangible assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable.

Our assets and related intangible assets are reviewed for impairment whenever there are changes in circumstances or indicators that the carrying amount of the assets may not be recoverable.

These indicators may include operating performance, intended holding periods, costs in excess of budgets for under-construction assets, and adverse changes in circumstances.

An impairment exists when the carrying amount of an asset exceeds the sum of the undiscounted cash flows expected to result from the use and eventual disposition of the asset.

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An impairment loss is recognized if the carrying amount of the asset is not recoverable and is measured based on the excess of the property's carrying amount over its estimated fair value.

If our estimates of future cash flows, anticipated holding periods, or fair values change, based on market conditions or otherwise, our evaluation of impairment charges may be different and such differences could be material to our financial statements.

If our estimates of future cash flows, anticipated holding periods, or fair values change, based on market conditions or otherwise, our evaluation of impairment losses may be different and such differences could be material to our financial statements.

Estimates of future cash flows are subjective and are based, in part, on assumptions regarding future occupancy, rental rates and capital requirements that could differ materially from actual results.

Investments in Real Estate Ventures

We analyze our real estate ventures to determine whether the entities should be consolidated.

If it is determined that these entities are variable interest entities ("VIEs") in which we have a variable interest, we assess whether we are the primary beneficiary of the VIE to determine whether it should be consolidated.

We are not the primary beneficiary of entities when we do not have voting control, lack the power to direct the activities that most significantly impact the entity's economic performance, or the limited partners (or non-managing members) have substantive participatory rights.

If it is determined that these entities are not VIEs, then the determination as to whether we consolidate is based on whether we have a controlling financial interest in the entity, which is based on our voting interests and the degree of influence we have over the entity.

We analyze each real estate venture to determine whether the entity should be consolidated.

If it is determined that an entity is a VIE in which we have a variable interest, we assess whether we are the primary beneficiary of the VIE to determine whether it should be consolidated.

We are not the primary beneficiary of an entity when we do not have voting control, lack the power to direct the activities that most significantly impact the entity's economic performance, or the limited partners (or non-managing members) have substantive participatory rights.

If it is determined that the entity is not a VIE, then the determination as to whether we consolidate is based on whether we have a controlling financial interest in the entity, which is based on our voting interests and the degree of influence we have over the entity.

Management uses its judgment when determining if we are the primary beneficiary of, or have a controlling financial interest in, an entity in which we have a variable interest.

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Significant influence is typically indicated through ownership of 20% or more of the voting interests.

Under the equity method, we record our investments in these entities in "Investments in unconsolidated real estate ventures" on our balance sheets, and our proportionate share of earnings or losses earned by the real estate venture is recognized in "Income (loss) from unconsolidated real estate ventures, net" in the accompanying statements of operations.

We earn revenues from the management services we provide to unconsolidated entities.

Under the equity method, we record our investments in these entities in "Investments in unconsolidated real estate ventures"

on our balance sheets, and our proportionate share of earnings or

losses earned by the real estate venture is recognized in "Income (loss) from unconsolidated real estate ventures, net"

in the accompanying statements of operations.

We earn revenue from the management services we provide to unconsolidated real estate ventures.

These fees are determined in accordance with the terms specific to each arrangement and may include property and asset management fees, or transactional fees for leasing, acquisition, development and construction, financing and legal services provided.

We account for this revenue gross of our ownership interest in each respective real estate venture and recognize such revenue in "Third-party real estate services, including reimbursements" in our statements of operations when earned.

Our proportionate share of related expenses is recognized in "Income (loss) from unconsolidated real estate ventures, net" in our statements of operations.

We account for this revenue gross of our ownership interest in each respective real estate venture and recognize such revenue in "Third-party real estate services, including reimbursements"

in our statements of operations when earned.

Our proportionate share of related expenses is recognized in "Income (loss) from unconsolidated real estate ventures, net"

in our statements of operations.

We may also earn incremental promote distributions if certain financial return benchmarks are achieved upon ultimate disposition of the underlying properties.

Promote fees are recognized when certain earnings events have occurred, and the amount is determinable and collectible.

Any promote fees are reflected in "Income (loss) from unconsolidated real estate ventures, net" in our statements of operations.

Any promote fees are reflected in "Income (loss) from unconsolidated real estate ventures, net"

in our statements of operations.

With regard to distributions from unconsolidated real estate ventures, we use the information that is available to us to determine the nature of the underlying activity that generated the distributions.

Using the nature of distribution approach, cash flows generated from the operations of an unconsolidated real estate venture are classified as a return on investment (cash inflow from operating activities) and cash flows from property sales, debt refinancing or sales of our investments are classified as a return of investment (cash inflow from investing activities).

On a periodic basis, we evaluate our investments in unconsolidated entities for impairment.

On a periodic basis, we evaluate our investments in unconsolidated real estate ventures for impairment.

We assess whether there are any indicators, including underlying property operating performance and general market conditions, that the value of our investments in unconsolidated real estate ventures may be impaired.

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We consider various qualitative factors to determine if a decrease in the value of our investment is other-than-temporary.

These factors include age of the venture, our intent and ability to retain our investment in the entity, financial condition and long-term prospects of the entity and relationships with our partners and banks.

If we believe that the decline in the fair value of the investment is temporary, no impairment charge is recorded.

These factors include the age of the venture, our intent and ability to retain our investment in the entity, financial condition and long-term prospects of the entity and relationships with our partners and banks.

If we believe that the decline in the fair value of the investment is temporary, no impairment loss is recorded.

If our analysis indicates that there is an other-than temporary impairment related to the investment in a particular real estate venture, the carrying value of the venture will be adjusted to an amount that reflects the estimated fair value of the investment.

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Leases will be classified as either operating, sales-type or direct finance leases based on whether the lease is structured in effect as a financed purchase.

Property rentals revenue includes base rent each tenant pays in accordance with the terms of its respective lease and is reported on a straight-line basis over the non-cancellable term of the lease, which includes the effects of periodic step-ups in rent and rent abatements under the lease.

When a renewal option is included within the lease, we assess whether the option is reasonably certain

of being exercised against relevant economic factors to determine whether the option period should be included as part of the lease term.

Further, property rentals revenue includes tenant reimbursements revenue from the recovery of all or a portion of the operating expenses and real estate taxes of the respective assets.

Property rental revenue includes base rent each tenant pays in accordance with the terms of its respective lease and is reported on a straight-line basis over the non-cancellable term of the lease, which includes the effects of periodic step-ups in rent and rent abatements under the lease.

When a renewal option is included within the lease, we assess whether the option is reasonably certain of being exercised against relevant economic factors to determine whether the option period should be included as part of the lease term.

Further, property rental revenue includes tenant reimbursement revenue from the recovery of all or a portion of the operating expenses and real estate taxes of the respective assets.

Tenant reimbursements, which vary each period, are non-lease components that are not the predominant activity within the contract.

We combine certain lease and non-lease components of our operating leases.

Non-lease components are recognized together with fixed base rent in "Property rentals revenue", as variable lease income in the same periods as the related expenses are incurred.

We have elected the practical expedient that allows us to combine certain lease and non-lease components of our operating leases.

Non-lease components are recognized together with fixed base rent in "Property rental revenue", as variable lease income in the same periods as the related expenses are incurred.

Certain commercial leases may also provide for the payment by the lessee of additional rents based on a percentage of sales, which are recorded as variable lease income in the period the additional rents are earned.

We commence rental revenue recognition when the tenant takes possession of the leased space or controls the physical use of the leased space and when the leased space is substantially ready for its intended use.

In circumstances where we provide a tenant improvement allowance for improvements that are owned by the tenant, we recognize the allowance as a reduction of property rentals revenue on a straight-line basis over the term of the lease when the tenant takes possession of the space.

Differences between rental revenue recognized and amounts due under the respective lease agreements are recorded as an increase or decrease to "Deferred rent receivable, net" on our balance sheets.

Property rentals revenue also includes the amortization or accretion of acquired above-and below-market leases.

We periodically evaluate the collectability of amounts due from tenants and recognize an adjustment to property rental revenue for the estimated losses resulting from the inability of tenants to make required payments under lease agreements.

Any changes to the provision for lease revenue determined to be not probable of collection are included in "Property rentals revenue" in our statements of operations.

In circumstances where we provide a tenant improvement allowance for improvements that are owned by the tenant, we recognize the allowance as a reduction of property rental revenue on a straight-line basis over the term of the lease commencing when the tenant takes possession of the space.

Differences between rental revenue recognized and amounts due under the respective lease agreements are recorded as an increase or decrease to "Deferred rent receivable, net"

on our balance sheets.

Property rental revenue also includes the amortization or accretion of acquired above-and below-market leases.

We periodically evaluate the collectability of amounts due from tenants and recognize an adjustment to property rental revenue for accounts receivable and deferred rent receivable if we conclude it is not probable we will collect the remaining lease payments under the lease agreements.

Any changes to the provision for lease revenue determined to be not probable of collection are included in "Property rental revenue"

in our statements of operations.

We exercise judgment in assessing the probability of collection and consider payment history and current credit status in making this determination.

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We account for forfeitures as they occur.

Distributions paid on unvested OP Units, LTIP Units, LTIP Units with time-based vesting requirements ("Time-Based LTIP Units") and Performance-Based LTIP Units are recorded to "Redeemable noncontrolling interests" in our balance sheets.

Distributions paid on unvested OP Units, LTIP Units, Time-Based LTIP Units and Performance-Based LTIP Units are recorded to "Redeemable noncontrolling interests"

in our balance sheets.

Recent Accounting Pronouncements

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Results of Operations

This section of this Form 10-K discusses 2019 and 2018 items and year-to-year comparisons between 2019 and 2018.

Discussions of 2017 items and year-to-year comparisons between 2018 and 2017 can be found in "Management’s Discussion and Analysis of Financial Condition and Results of Operations" in Part II, Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2018, filed with the SEC on February 26, 2019, which is incorporated herein by reference.

During the year ended December 31, 2019 , we sold Commerce Executive/Commerce Executive Metro Land, 1600 K Street, Vienna Retail and a 50.0% interest in the entity that owns Central Place Tower;

and during 2018, we sold Summit I and II, the Bowen Building, Executive Tower, 1233 20th Street and the out-of-service portion of Falkland Chase-North, which we collectively refer to as the "Disposed Properties" in the discussion below.

In December 2019, we acquired F1RST Residences, which did not have a material impact on our statement of operations for the year ended December 31, 2019 .

This following discusses certain line items from our 2020 and 2019 statements of operations and the year-to-year comparisons between 2020 and 2019.

Discussions of 2018 items and year-to-year comparisons between 2019 and 2018 can be found in "Management's Discussion and Analysis of Financial Condition and Results of Operations"

in Part II, Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2019, filed with the SEC on February 25, 2020, which is incorporated herein by reference.

During 2019 and 2020, we sold the Disposed Properties.

In December 2020, we acquired the Americana Portfolio, which did not have a material impact on our statement of operations for the year ended December 31, 2020.

In December 2019, we acquired F1RST Residences.

Comparison of the Year Ended December 31, 2020 to 2019

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Year Ended December 31,

(In thousands)

Property rentals revenue

(Dollars in thousands)

Property rental revenue

Third-party real estate services revenue, including reimbursements

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Third-party real estate services

Share-based compensation related to Formation Transaction and

special equity awards

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

Transaction and other costs

Income (loss) from unconsolidated real estate ventures, net

Interest and other income, net

Loss from unconsolidated real estate ventures, net

Interest expense

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Loss on extinguishment of debt

Reduction of gain on bargain purchase

Property rentals revenue, decreased by approximately $20.2 million , or 3.9% , to $493.3 million in 2019 from $513.4 million in 2018 .

The decrease was primarily due to a $26.1 million decline in property rentals revenue related to the Disposed Properties and a $2.8 million decline related to properties taken out of service for redevelopment.

The decrease in property rentals revenue was partially offset by a $4.2 million increase in revenue related to 1221 Van Street, which we placed into service during the first quarter of 2018, a combined $1.9 million increase in revenue related to West Half and 4747 Bethesda Avenue, which were both placed into service during the second half of 2019, and an increase in straight line rental revenue, primarily related to a ground lease at 1700 M Street that was executed in the fourth quarter of 2018.

Third-party real estate services revenue, including reimbursements, increased by approximately $22.2 million , or 22.5% , to $120.9 million in 2019 from $98.7 million in 2018 .

The increase was primarily due to an $8.1 million increase in development fee income and a $16.4 million increase in reimbursement revenue primarily driven by construction management revenue, resulting from an increase in construction projects in 2019.

Depreciation and amortization expense decreased by approximately $19.9 million , or 9.4% , to $191.6 million in 2019 from $211.4 million in 2018 .

The decrease was primarily due to a $14.1 million decline related to properties taken out of service for redevelopment and a $7.6 million decrease related to the Disposed Properties.

The decrease in depreciation and amortization expense was partially offset by an increase of $3.6 million related to 1221 Van Street, West Half and 4747 Bethesda Avenue.

Property operating expense decreased by approximately $10.5 million , or 7.1% , to $137.6 million in 2019 from $148.1 million in 2018 .

The decrease was primarily due to an $8.3 million decline related to the Disposed Properties, a $3.5 million decline in property operating expenses at Courthouse Plaza 1 and 2 due to a reduction in ground rent expense, and a $2.4 million reduction associated with properties taken out of service for redevelopment.

The decrease in property operating expense was partially offset by an increase of $2.9 million related to 1221 Van Street, West Half and 4747 Bethesda Avenue.

Real estate tax expense decreased by approximately $561,000 , or 0.8% , to $70.5 million in 2019 from $71.1 million in 2018 .

The decrease was primarily due to a $4.0 million decline related to the Disposed Properties and a $1.2 million decrease related to properties taken out of service for redevelopment for which we began capitalizing expenses during 2019.

The decrease in real estate tax expense was partially offset by an increase in real estate taxes related to various properties throughout our portfolio.

Impairment loss

* Not meaningful.

Property rental revenue, decreased by $34.3 million, or 7.0%, to $459.0 million in 2020 from $493.3 million in 2019.

The decrease was primarily due to a $35.1 million decrease related to the Disposed Properties, a $23.7 million decrease from the deferral of rent and the write-off of deferred rent receivable for tenants that were placed on the cash basis of accounting and an increase in uncollectable operating lease receivables attributable to COVID-19, a $6.8 million decrease related to 2100 Crystal Drive, which is currently vacant until Amazon takes occupancy of the entire building in 2021, and a $9.1 million decrease in our same-store multifamily assets due to lower occupancy and lower rents attributable to COVID-19.

The decrease in property rental revenue was partially offset by a $14.4 million increase related to 4747 Bethesda Avenue and West Half, both of which were placed into service during the second half of 2019, a $13.3 million increase related to the commencement of leases with Amazon at 1800 South Bell Street, 241 18th Street South and 2200 Crystal Drive, an $8.1 million increase related to F1RST Residences, which was acquired in December 2019 and a $3.2 million increase at 1901 South Bell Street due to higher tenant reimbursements for construction services.

Third-party real estate services revenue, including reimbursements, decreased by $6.9 million, or 5.7%, to $113.9 million in 2020 from $120.9 million in 2019.

The decrease was primarily due to a $4.3 million decrease in asset management fees and a $2.3 million decrease in property management fees due to the sale of assets within the JBG Legacy Funds, a $4.2 million decrease in development fee income primarily related to the timing of development projects and a $1.8 million decrease in leasing fees from lower leasing volume due to the impact of COVID-19.

The decrease in third-party real estate services revenue was partially offset by a $3.0 million increase in other service revenue, a $1.3 million increase in construction management fees and a $1.2 million increase in reimbursements revenue.

Depreciation and amortization expense increased by $30.2 million, or 15.8%, to $221.8 million in 2020 from $191.6 million in 2019.

The increase was primarily due to an $18.6 million increase related to 4747 Bethesda Avenue, West Half, The Wren and 901 W Street, which were placed into service in the second half of 2019 and during 2020, a $14.1 million increase related to 2000 South Bell Street and 2001 South Bell Street due to the shortening of the existing buildings' useful lives, a $5.9 million increase related to tenant improvements being placed into service related to leases with Amazon and

a $4.9 million increase related to F1RST Residences.

The increase in depreciation and amortization expense was partially offset by a $13.9 million decrease related to the Disposed Properties.

Property operating expense increased by $8.0 million, or 5.8%, to $145.6 million in 2020 from $137.6 million in 2019.

The increase was primarily due to a $7.1 million increase related to 4747 Bethesda Avenue, West Half, The Wren and 901 W Street, which were placed into service in the second half of 2019 and during 2020, a $4.4 million increase related to 1901 South Bell Street due to costs incurred for construction management services provided to tenants, a $3.9 million increase in property operating expenses across our same store multifamily asset pool, primarily due to higher operating costs as a result of COVID-19, and a $3.1 million increase related to F1RST Residences.

The increase in property operating expense was partially offset by an $8.7 million decrease related to the Disposed Properties.

Real estate tax expense increased by $465,000, or 0.7%, to $71.0 million in 2020 from $70.5 million in 2019.

The increase was primarily due to a $3.7 million increase at 4747 Bethesda Avenue, West Half, The Wren and 901 W Street as those assets were placed into service, a $1.3 million increase related to F1RST Residences and an increase in real estate tax assessments for various properties throughout the portfolio.

The increase in real estate tax expense was partially offset by a $5.1 million decline related to the Disposed Properties.

General and administrative expense:

corporate and other increased by approximately $13.1 million , or 38.8% , to $46.8 million in 2019 from $33.7 million in 2018 .

The increase was primarily due to an increase in share-based compensation expense from the issuance of the 2019 equity awards, an increase in compensation expense as a result of the adoption of Accounting Standards Update 2016-02, Leases ("Topic 842"), which requires the expensing of previously capitalized indirect internal leasing costs, and an increase in overall consulting, legal and marketing expenses.

corporate and other decreased by $188,000, or 0.4%, to $46.6 million in 2020 from $46.8 million in 2019.

The decrease was primarily due to declines in professional fees, rent expense, and travel and entertainment expense, partially offset by an increase in share-based compensation expense from the issuance of the 2020 equity awards and an increase in compensation costs.

General and administrative expense:

third-party real estate services increased by approximately $23.7 million , or 26.3% , to $113.5 million in 2019 from $89.8 million in 2018 .

The increase was primarily due to an increase in reimbursable expenses resulting from an increase in construction management projects, an increase in share-based compensation expense from the issuance of the 2019 equity awards and an increase in overall consulting and legal fees.

third-party real estate services increased by $1.3 million, or 1.2%, to $114.8 million in 2020 from $113.5 million in 2019.

The increase was primarily due to an increase in share-based compensation expense from the issuance of the 2020 equity awards, partially offset by a decrease in rent expense.

General and administrative expense:

share-based compensation related to Formation Transaction and special equity awards increased by approximately $6.1 million , or 17.0% , to $42.2 million in 2019 from $36.0 million in 2018 .

The increase was primarily due to share-based compensation associated with the special equity awards issued in the fourth quarter of 2018 related to our successful pursuit of Amazon's additional headquarters in National Landing, partially offset by the vesting of certain awards issued in prior years.

Transaction and other costs of $23.2 million in 2019 include $10.9 million of expenses related to the relocation of our corporate headquarters primarily due to an impairment charge on the right-of-use assets for leases associated with our former corporate headquarters, $5.4 million of demolition costs related to 1900 Crystal Drive, $5.3 million of costs incurred in connection with the Formation Transaction (including integration and severance costs), $651,000 of expenses related to other completed, potential and pursued transactions and $1.0 million of other costs related to a contribution to the Washington Housing Conservancy.

Transaction and other costs of $27.7 million in 2018 include $15.9 million of costs incurred in connection with the Formation Transaction (including transition services provided by our former parent, and integration and severance costs), $9.0 million of expenses related to other completed, potential and pursued transactions and $2.8 million of other costs related to the successful pursuit of Amazon's additional headquarters at our properties in National Landing.

Income (loss) from unconsolidated real estate ventures, net decreased by approximately $40.8 million , or 103.5% , to $(1.4) million for 2019 from $39.4 million in 2018 .

The decrease was primarily due to the 2018 sales of our 5% interest in a real estate venture that owned the Investment Building, resulting in a gain of $15.5 million, and the sale of The Warner Building by one of our unconsolidated real estate ventures, resulting in a gain of $20.6 million.

Interest and other income, net decreased by $9.8 million , or 64.5%, to $5.4 million in 2019 from $15.2 million in 2018 .

The decrease is primarily due to a greater reduction in assumed lease liabilities in 2018 and lower income from other investments.

The decrease in interest and other income was partially offset by higher interest income in 2019.

Interest expense decreased by approximately $21.8 million , or 29.2% , to $52.7 million in 2019 from $74.4 million in 2018 .

The decrease was primarily due to the repayment of several mortgages payable during 2019 and 2018, a $9.0 million increase in capitalized interest related to higher construction spend and additional projects under redevelopment and a $1.1 million decrease related to the Disposed Properties.

The decrease in interest expense was partially offset by additional revolving credit facility borrowings in 2019 and ceasing the capitalization of interest for 1221 Van Street and West Half.

share-based compensation related to Formation Transaction and special equity awards decreased by $10.5 million, or 24.9%, to $31.7 million in 2020 from $42.2 million in 2019.

The decrease was primarily due to the graded vesting of certain awards issued in prior years, which results in lower expense as portions of the awards become vested.

Transaction and other costs of $8.7 million in 2020 includes $4.0 million of costs related to 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, $3.7 million of integration and severance costs and $682,000 of demolition costs related to several under development properties.

Transaction and other costs of $23.2 million in 2019 includes $10.9 million of expenses related to the relocation of our corporate headquarters primarily due to an impairment loss on the right-of-use assets for leases associated with our former corporate headquarters, $5.4 million of demolition costs related to 1900 Crystal Drive, $5.3 million of integration and severance costs, $1.0 million of costs related to a contribution to the Washington Housing Conservancy and $651,000 of expenses related to other completed, potential and pursued transactions.

Loss from unconsolidated real estate ventures increased by $18.9 million to $20.3 million for 2020 compared to $1.4 million in 2019.

The increase was primarily due to a $6.5 million impairment loss related to an investment in a former unconsolidated real estate venture due to a decline in the fair value of The Marriott Wardman Park hotel, and losses resulting from the hotel's closure in March 2020 due to the effects of COVID-19, a $6.1 million decrease from the deferral of rent and the write-off of deferred rent receivables for tenants that were placed on the cash basis of accounting and an increase in uncollectable operating lease receivables attributable to COVID-19, and a $3.0 million loss from the sale of Woodglen by an unconsolidated real estate venture.

The decrease was also due to the recognition of $6.4 million of income during 2019 primarily related to distributions from the real estate venture that owns 1101 17th Street.

The increase in loss from unconsolidated real estate ventures was partially offset by an $800,000 gain from the sale of Pickett Industrial Park by our unconsolidated real estate venture in October 2020.

Interest expense increased by $9.6 million, or 18.3%, to $62.3 million in 2020 from $52.7 million in 2019.

The increase was primarily due to higher average outstanding balances under our revolving credit facility and our unsecured term loans,

and new mortgage loans collateralized by 4747 Bethesda Avenue, 1221 Van Street and 220 20 th Street.

The increase was also due to a $16.6 million decrease in capitalized interest primarily due to the placing into service of West Half, 4747 Bethesda Avenue, The Wren and 901 W Street.

The increase in interest expense was partially offset by lower interest rates, the repayment of several mortgages payable during 2019 and a $10.3 million decrease related to the Disposed Properties.

Gain on the sale of real estate of $59.5 million in 2020 was due to the sale of Metropolitan Park.

Gain on the sale of real estate of $105.0 million in 2019 was due to the sales of Commerce Executive/Commerce Metro Land, 1600 K Street, Vienna Retail, and a 50% interest in the entity that owns Central Place Tower and the subsequent remeasurement of our remaining interest to fair value.

Gain on the sale of real estate of $52.2 million in 2018 was primarily related to the sales of Summit I and II, the Bowen Building, Executive Tower, 1233 20th Street and the out-of-service portion of Falkland Chase - North.

Loss on the extinguishment of debt was $5.8 million in 2019, of which $2.9 million related to our repayment of various mortgages payable and $2.9 million related to the termination of various interest rate swaps in connection with the repayment of the loan encumbering Central Place Tower.

Loss on extinguishment of debt of $5.2 million in 2018 was due to our repayment of various mortgages payable.

The reduction of gain on bargain purchase of $7.6 million in 2018 was due to finalizing the fair values used in the purchase price allocation related to the Combination.

FFO is a non-GAAP financial measure computed in accordance with the definition established by National Association of Real Estate Investment Trusts ("NAREIT " ) in the NAREIT FFO White Paper - 2018 Restatement issued in 2018.

NAREIT defines FFO as net income (computed in accordance with GAAP), excluding depreciation and amortization related to real estate, gains and losses from the sale of certain real estate assets, gains and losses from change in control 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.

Impairment loss of $10.2 million in 2020 was due to the decline in fair value of One Democracy Plaza, a commercial real estate asset located in Bethesda, Maryland, which was written down to its estimated fair value.

FFO is a non-GAAP financial measure computed in accordance with the definition established by 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 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.

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 and other non-comparable income and expenses, which implicitly assumes that the value of real estate diminishes predictably over time rather than fluctuating based on market conditions.

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 (computed in accordance with GAAP) as a performance measure or cash flow as a liquidity measure.

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 attributable to common shareholders, the most directly comparable GAAP measure, to FFO:

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

Year Ended December 31,

(In thousands, except per share amounts)

Net income attributable to common shareholders

Net income attributable to redeemable noncontrolling interests

Net income (loss) attributable to common shareholders

Net income (loss) attributable to redeemable noncontrolling interests

Net loss attributable to noncontrolling interests

Net income (loss)

Gain on sale of real estate

Gain on sale from unconsolidated real estate ventures

Loss (gain) on sale from unconsolidated real estate ventures

Real estate depreciation and amortization

Real estate impairment loss (1)

Impairment of investment in unconsolidated real estate venture (2)

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

Net income attributable to noncontrolling interests in consolidated real estate ventures

FFO attributable to noncontrolling interests in consolidated real estate ventures

FFO attributable to OP Units

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FFO attributable to common shareholders

FFO per diluted common share

Weighted average diluted shares

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FFO is presented for the two years ended December 31, 2019 and 2018.

FFO for the year ended December 31, 2017 is excluded due to the lack of comparability of periods prior to the Combination.

Due to our adoption of Topic 842, beginning in 2019, we no longer capitalize internal leasing costs and expense these costs as incurred (such costs were $6.5 million for the year ended December 31, 2018).

(1) In connection with the preparation and review of our 2020 annual financial statements, we determined that One Democracy Plaza, a commercial asset located in Bethesda, Maryland, was impaired due to a decline in the fair value of the asset and recorded an impairment loss of $10.2 million, of which $7.8 million related to real estate.

The remaining $2.4 million of the impairment loss was attributable to the right-of-use asset associated with the property’s ground lease and was not added back to "Net income (loss) attributable to common shareholders"

to arrive at "FFO attributable to common shareholders."

(2) 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 loss 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 former venture partner.

NOI and Same Store NOI

We utilize NOI, which is a non-GAAP financial measure, to assess a segment’s performance.

The most directly comparable GAAP measure is net income attributable to common shareholders.

NOI is a non-GAAP financial measure management uses to assess a segment'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, 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 amortization of acquired above-market leases and below-market ground lease intangibles.

Management uses NOI as a supplemental performance measure for 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.

Management uses NOI as a supplemental performance measure for 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.

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NOI presented by us may not be comparable to NOI reported by other REITs that define these measures differently.

We believe that to facilitate a clear understanding of our operating results, NOI should be examined in conjunction with net income attributable to common shareholders as presented in our financial statements.

NOI should not be considered as an alternative to net income 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.

We also provide certain information on a "same store" basis.

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 except for properties for which significant redevelopment, renovation or repositioning occurred during either of the periods being compared.

We believe that 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

During the year ended December 31, 2020, our same store pool changed from the prior year due to the inclusion of 1700 M Street and our 50% interest in Central Place Tower, and the exclusion of Woodglen and Pickett Industrial Park, which were sold by our unconsolidated real estate ventures, and 2000 and 2001 South Bell Street, which was taken out of service for redevelopment.

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 property under construction 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.

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.

During the year ended December 31, 2019 , our same store pool changed from the prior year due to the inclusion of the JBG Assets and one Vornado Included Asset (The Bartlett), and the exclusion of Commerce Executive, 1600 K Street and Vienna Retail, which were sold during 2019, and 2001 Richmond Highway, which is being phased out of service for future development.

Same store NOI decreased by $13.0 million, or 4.3%, for the year ended December 31, 2020 as compared to the year ended December 31, 2019.

The decrease in same store NOI for the year ended December 31, 2019 , was largely attributable to increased rental abatements and rent reductions, and an increase in assumed lease liability payments.

The lease renewals we executed in 2017 and 2018 reduced our NOI in 2019, primarily due to free rent associated with these early renewals.

The decrease in same store NOI for the year ended December 31, 2020 was substantially all attributable to COVID-19, including:

(i) lower occupancy, higher concessions, lower rents, higher operating costs, and an increase in uncollectable operating lease receivables at our multifamily properties, (ii) rent deferrals, an increase in uncollectable operating lease receivables and a decline in parking revenue at our commercial properties, and (iii) lower occupancy at the Crystal City Marriott.

These declines were partially offset by the burn-off of rent abatement across our commercial portfolio, resulting in flat same store NOI for the commercial assets.

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

Year Ended December 31,

(Dollars in thousands)

Net income attributable to common shareholders

Net income (loss) attributable to common shareholders

Depreciation and amortization expense

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Third-party real estate services

Share-based compensation related to Formation Transaction and

special equity awards

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

Transaction and other costs

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Loss on extinguishment of debt

Reduction of gain on bargain purchase

Impairment loss

Income tax benefit

Net income attributable to redeemable noncontrolling

Third-party real estate services, including reimbursements

Net income (loss) attributable to redeemable noncontrolling interests

Third-party real estate services, including reimbursements revenue

Other revenue

Income (loss) from unconsolidated real estate ventures, net

Interest and other income, net

Loss from unconsolidated real estate ventures, net

Interest and other income (loss), net

Gain on sale of real estate

Net loss attributable to noncontrolling interests

Consolidated NOI

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Number of properties in same store pool

___________________________________________________

Excludes parking revenue of $26.0 million and $25.7 million for the years ended December 31, 2019 and 2018 .

(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 allocated corporate general and administrative expenses to operating properties.

Includes the results for our under construction assets and future development pipeline.

Includes the results for properties that were not in service for the entirety of both periods being compared and properties for which significant redevelopment, renovation or repositioning occurred during either of the periods being compared.

The decrease in non-same store NOI was primarily attributable to lost income from disposed assets.

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.

(3) Includes the results of our under-construction assets, and near-term and future development pipelines.

(4) Includes the results of properties that were not in-service for the entirety of both periods being compared 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 except for properties that are being phased out of service for future development.

Reportable Segments

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therefore, each of our individual properties is a separate operating segment.

We defined 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.

We defined our reportable segments to be aligned with our method of internal reporting and the way our Chief Executive Officer, who is also our 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.

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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 revenues 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 disclosed separately in our statements of operations and discussed in the preceding pages under "Results of Operations." The following represents the components of revenue from our third-party real estate services business:

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 and discussed in the preceding pages under "Results of Operations."

The following represents the components of revenue from our third-party real estate services business:

Year Ended December 31,

(In thousands)

Property management fees

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Other service revenue

Third-party real estate services revenue,

excluding reimbursements

Reimbursements revenue (1)

Third-party real estate services revenue,

including reimbursements

_________________

Third-party real estate services revenue, excluding reimbursements

Reimbursement revenue (1)

Third-party real estate services revenue, including reimbursements

Third-party real estate services expenses

Third-party real estate services revenue less expenses

(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.

Third-party real estate services revenue, including reimbursements, increased by approximately $22.2 million , or 22.5% , to $120.9 million in 2019 from $98.7 million in 2018 .

Third-party real estate services revenue, including reimbursements, decreased by $6.9 million, or 5.7%, to $113.9 million in 2020 from $120.9 million in 2019.

Third-party real estate services expenses increased by $1.3 million, or 1.2%, to $114.8 million in 2020 from $113.5 million in 2019.

The increase was primarily due to an increase in share-based compensation expense from the issuance of the 2020 equity awards, partially offset by a decrease in rent expense.

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 rentals revenue plus other property revenue (primarily parking revenue).

Property revenue is calculated as property rental revenue plus other property revenue (primarily parking revenue).

Property expense is calculated as property operating expenses plus real estate taxes.

Consolidated NOI is calculated as total property revenue less total property expense.

See Note 18 to the financial statements for the reconciliation of net income attributable to common shareholders to consolidated NOI for each of the three years in the period ended December 31, 2019 .

See Note 19 to the financial statements for the reconciliation of net income (loss)

attributable to common shareholders to consolidated NOI for the years ended December 31, 2020 and 2019.

The following is a summary of NOI by segment:

Year Ended December 31,

(In thousands)

Property revenue:

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Consolidated NOI

_________________

Includes activity related to future development assets and corporate entities and the elimination of intersegment activity.

(1) Includes activity related to future development pipeline assets and corporate entities, and the elimination of intersegment activity.

Comparison of the Year Ended December 31, 2020 to 2019

Property revenue decreased by $21.1 million , or 4.9% , to $408.9 million in 2019 from $430.0 million in 2018 .

Property rental revenue decreased by $49.6 million, or 12.1%, to $359.3 million in 2020 from $408.9 million in 2019.

Consolidated NOI decreased by $39.4 million, or 16.0%, to $206.2 million in 2020 from $245.6 million in 2019.

The decrease in property revenue and consolidated NOI was primarily due to the sale of the Disposed Properties, properties that were taken out of service for redevelopment, and rent reductions at 2101 L Street and Courthouse Plaza 1 and 2.

These decreases were partially offset by an increase in revenue and consolidated NOI from Central Place Tower, which we placed into service during the first quarter of 2018, 4747 Bethesda Avenue, which we placed into service during the fourth quarter of 2019, and the ground lease at 1700 M Street executed in the fourth quarter of 2018.

Property revenue increased by $7.4 million , or 6.7% , to $116.7 million in 2019 from $109.4 million in 2018 .

Consolidated NOI increased by $2.9 million , or 4.5% , to $66.5 million in 2019 from $63.6 million in 2018 .

The increase in property revenue and consolidated NOI was primarily due to an increase in occupancy at 1221 Van Street, which we placed into service during the first quarter of 2018, an increase in occupancy at RiverHouse Apartments and the acquisition of F1RST Residences.

The decrease in property revenue and consolidated NOI was primarily due to the sale of the Disposed Properties and a decrease in property rental revenue due to the deferral of rent and the write-off of deferred rent balances for tenants that were placed on the cash basis of accounting and an increase in uncollectable operating lease receivables attributable to COVID-19.

The decrease in property revenue and consolidated NOI was partially offset by an increase in revenue from 4747 Bethesda Avenue, which was placed into service during the fourth quarter of 2019, and the commencement of leases with Amazon at 1800 South Bell Street, 241 18 th Street South and 2200 Crystal Drive.

Property rental revenue increased by $5.2 million, or 4.4%, to $121.9 million in 2020 from $116.7 million in 2019.

Consolidated NOI decreased by $11.3 million, or 17.0%, to $55.1 million in 2020 from $66.5 million in 2019.

The increase in property revenue was primarily due to the acquisition of F1RST Residences and the placing of West Half, The Wren and 901 W Street into service in the second half of 2019 and during 2020, partially offset by a decrease in our same store multifamily assets due to lower occupancy, higher concessions, lower rents, higher operating costs and an increase in uncollectable operating lease receivables, which were attributable to the impact of COVID-19.

Further, the decline in consolidated NOI was also due to a reduction in capitalized expenses at West Half, The Wren and 901 W Street as the assets were placed into service.

Liquidity and Capital Resources

Property rental income is our primary source of operating cash flow and is dependent on a number of 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 estate services business provides fee-based real estate services to the JBG Legacy Funds, the WHI Impact Pool and other third parties.

Property rental income is our primary source of operating cash flow and is dependent 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 estate services business provides fee-based real estate services to the WHI, Amazon, 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.

Other sources of liquidity to fund cash requirements include proceeds from financings, asset sales and the issuance and sale of equity securities, including from any "at the market" ("ATM") offerings under our ATM program.

We anticipate that cash flows from continuing operations and proceeds from financings, recapitalizations and asset sales, together with existing cash balances, will be adequate to fund our business operations, debt amortization, capital expenditures, dividends to shareholders and distributions to holders of OP Units over the next 12 months.

Other sources of liquidity to fund cash requirements include proceeds from financings, asset sales and the issuance and sale of equity securities.

We anticipate that cash flows from continuing operations and proceeds from financings, recapitalizations and

asset sales, 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 over the next 12 months.

Financing Activities

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Mortgages payable

Unamortized deferred financing costs and premium/

discount, net

Unamortized deferred financing costs and premium/discount, net

Mortgages payable, net

__________________________

(1) Weighted average effective interest rate as of December 31, 2020.

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(3) Includes variable rate mortgages payable with interest rates fixed by interest rate swap agreements .

As of December 31, 2019 and 2018 , the net carrying value of real estate collateralizing our mortgages payable, excluding assets held for sale, totaled $1.4 billion and $2.3 billion .

As of December 31, 2020 and 2019, the net carrying value of real estate collateralizing our mortgages payable totaled $1.8 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 of our mortgages payable are recourse to us.

Certain mortgages payable are recourse to us.

See Note 20 to the financial statements for additional information.

As of December 31, 2019 , we were not in default under any mortgage loan.

We were not in default under any mortgage loan as of December 31, 2020.

During the year ended December 31, 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 payable collateralized by RTC-West, increasing the principal balance by $20.2 million.

In December 2020, we repaid the mortgage payable collateralized by WestEnd25 with a principal balance of $94.7 million.

During the year ended December 31, 2019, aggregate borrowings under mortgages payable totaled $2.2 million related to construction draws.

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The loss on the extinguishment of debt was $5.8 million for the year ended December 31, 2019, of which $2.9 million related to our repayment of various mortgages payable and $2.9 million related to the termination of various interest rate swaps in connection with the repayment of the loan encumbering Central Place Tower.

In February 2020, we entered into a mortgage loan with a principal balance of $175.0 million collateralized by 4747 and 4749 Bethesda Avenue.

During the year ended December 31, 2018 , aggregate borrowings under mortgages payable totaled $118.1 million , of which $47.5 million related to the principal balance on a new mortgage payable collateralized by 1730 M Street and the remainder related to construction draws under mortgages payable.

During the year ended December 31, 2018 , we repaid mortgages payable with an aggregate principal balance of $298.1 million , which resulted in a loss on the extinguishment of debt of $5.2 million .

As of December 31, 2019 and 2018 , we had various interest rate swap and cap agreements on certain of our mortgages payable with an aggregate notional value of $867.6 million and $1.3 billion .

As of December 31, 2020 and 2019, we had various interest rate swap and cap agreements on certain of our mortgages payable with an aggregate notional value of $1.3 billion and $867.6 million.

During the year ended December 31, 2020, we entered into various interest rate cap agreements on certain of our mortgages payable with an aggregate notional value of $560.0 million.

During the year ended December 31, 2019, in connection with the repayment of the loan encumbering Central Place Tower, we terminated various interest rate swaps with an aggregate notional value of $220.0 million.

During the year ended December 31, 2018 , we entered into various interest rate swap and cap agreements on certain of our mortgages payable with an aggregate notional value of $381.3 million .

See Note 18 to the financial statements for additional information.

As of December 31, 2019 , our $1.4 billion credit facility consisted of a $1.0 billion revolving credit facility maturing in July 2021 , with two six -month extension options, a delayed draw $200.0 million unsecured term loan ("Tranche A-1 Term Loan") maturing in January 2023 , and a delayed draw $200.0 million unsecured term loan ("Tranche A-2 Term Loan") maturing in July 2024 .

Effective as of July 17, 2019, the credit facility was amended to extend the delayed draw period of our Tranche A-1 Term Loan to July 2020.

In December 2019, we drew $200.0 million under the revolving credit facility, which was repaid in 2020.

Based on the terms as of December 31, 2019 , the interest rate for the credit facility varies based on a ratio of our total outstanding indebtedness to a valuation of certain real property and assets and ranges (a) in the case of the revolving credit facility, from LIBOR plus 1.10% to LIBOR plus 1.50% , (b) in the case of the Tranche A-1 Term Loan, from LIBOR plus 1.20% to LIBOR plus 1.70% and (c) in the case of the Tranche A-2 Term Loan, effective as of July 17, 2019, from LIBOR plus 1.15% to LIBOR plus 1.70% , reflecting a 40 basis point reduction from the prior credit facility.

As of December 31, 2020, our $1.4 billion credit facility consisted of a $1.0 billion revolving credit facility maturing in January 2025, a $200.0 million Tranche A-1 Term Loan maturing in January 2023 and a $200.0 million Tranche A-2 Term Loan maturing in July 2024.

Based on the terms as of December 31, 2020, the interest rate for the credit facility varies based on a ratio of our total outstanding indebtedness to a valuation of certain real property and assets and ranges (i) in the case of the revolving credit facility, effective January 2020, from LIBOR plus 1.05% to LIBOR plus 1.50%, (ii) in the case of the Tranche A-1 Term Loan, from LIBOR plus 1.20% to LIBOR plus 1.70% and (iii) in the case of the Tranche A-2 Term Loan, from LIBOR

plus 1.15% to LIBOR plus 1.70%.

There are various LIBOR options in the credit facility, and we elected the one-month LIBOR option as of December 31, 2020.

We were not in default under our credit facility as of December 31, 2020.

In January 2020, the credit facility was amended to extend the maturity date of the revolving credit facility from July 2021 to January 2025, and to reduce its range of interest rates by five basis points to LIBOR plus 1.05% to 1.50% .

As of December 31, 2019 and 2018 , we had interest rate swaps with an aggregate notional value of $100.0 million , which mature in January 2023 and effectively convert the variable interest rate applicable to our Tranche A-1 Term Loan to a fixed interest rate, providing weighted average base interest rates under the facility agreements of 2.12% per annum for both periods.

As of December 31, 2019 , we had interest rate swaps with an aggregate notional value of $137.6 million , which effectively convert the variable interest rate applicable to a portion of the outstanding balance of our Tranche A-2 Term Loan to a fixed interest rate, providing a weighted average base interest rate under the facility agreements of 2.59% per annum.

The following is a summary of amounts outstanding under the credit facility:

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Unsecured term loans, net

__________________________

Interest rate as of December 31, 2019 .

As of December 31, 2019 and 2018 , letters of credit with an aggregate face amount of $1.5 million and $5.7 million were provided under our revolving credit facility.

As of December 31, 2019 and 2018 , net deferred financing costs related to our revolving credit facility totaling $3.1 million and $4.8 million were included in "Other assets, net."

(1) Effective interest rate as of December 31, 2020.

(2) As of both December 31, 2020 and 2019, letters of credit with an aggregate face amount of $1.5 million were outstanding under our revolving credit facility.

(3) As of December 31, 2020 and 2019, net deferred financing costs related to our revolving credit facility totaling $6.7 million and $3.1 million were included in "Other assets, net."

(4) The interest rate for the revolving credit facility excludes a 0.15% facility fee.

The interest rate includes the impact of interest rate swap agreements.

Our existing floating rate debt instruments, including our credit facility, and our hedging arrangements, currently use LIBOR as a reference rate, and we expect a transition from LIBOR to another reference rate in the near term.

In July 2017, due to a decline in the quantity of loans used to calculate LIBOR, the United Kingdom regulator that regulates LIBOR announced that it intends to stop compelling banks to submit rates for the calculation of LIBOR after 2021, and LIBOR is expected to be phased out accordingly.

In April 2018, the New York Federal Reserve commenced publishing an alternative reference rate for the U.S.

dollar, the SOFR, proposed by a group of major market participants convened by the U.S.

Federal Reserve with participation by SEC Staff and other regulators, the ARRC.

ARRC has proposed a paced market transition plan to SOFR from LIBOR, and organizations are currently working on industry-wide and company-specific transition plans related to derivatives and cash markets exposed to LIBOR, but there remains uncertainty in the timing and details of this transition.

(5) As of December 31, 2020 and 2019, $200.0 million and $100.0 million of the outstanding balance was fixed by interest rate swap agreements.

As of December 31, 2020, the interest rate swaps mature concurrently with the term loan and provide a weighted average interest rate of 1.39%.

(6) As of December 31, 2020 and 2019, $200.0 million and $137.6 million of the outstanding balance was fixed by interest rate swap agreements.

As of December 31, 2020, the interest rate swaps mature concurrently with the term loan and provide a weighted average interest rate of 1.34%.

Our existing floating rate debt instruments, including our credit facility, and our hedging arrangements currently use as a reference rate the USD-LIBOR, and we expect a transition from LIBOR to another reference rate due to plans to phase out the reference rate by the end of 2021, after which point its continuation cannot be assured.

Though an alternative reference rate for USD-LIBOR, the SOFR, exists, significant uncertainties still remain.

We can provide no assurance regarding the future of LIBOR and when our LIBOR-based instruments will transition from USD-LIBOR as a reference rate to SOFR or another reference rate.

The discontinuation of a benchmark rate or other financial metric, changes in a benchmark rate or other financial metric, or changes in market perceptions of the acceptability of a benchmark rate or other financial metric, including LIBOR, could, among other things result in increased interest payments, changes to our risk exposures, or require renegotiation of previous transactions.

In addition, any such discontinuation or changes, whether actual or anticipated, could result in market volatility, adverse tax or accounting effects, increased compliance, legal and operational costs, and risks associated with contract negotiations.

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 year ended December 31, 2020, we repurchased and retired 3.8 million common shares for $104.8 million, an average purchase price of $27.72 per share.

Purchases, made pursuant to 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.

Liquidity Requirements

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● development expenditures;

dividends to shareholders and distributions to holders of OP Units and

● dividends to shareholders and distributions to holders of OP Units

● common share repurchases;

● possible acquisitions of properties, either directly or indirectly through the acquisition of equity interests therein.

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

● cash and cash equivalent balances;

● cash flows from operations;

● distributions from real estate ventures;

cash and cash equivalent balances;

proceeds from the issuance and sale of equity securities and

● proceeds from financings, recapitalizations and asset sales.

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

While we have not experienced a significant impact to date in this regard, we expect COVID-19 to continue to have an adverse impact on our liquidity and capital resources.

Future decreases in cash flows from operations resulting from tenant defaults, rent deferrals or decreases in our rents or occupancy, would decrease the cash available for the capital uses described above.

In light of the current lack of visibility regarding the long-term impact of COVID-19 on our revenue, we have taken various steps to mitigate its adverse effect on our liquidity, including the deferral of planned discretionary capital expenditures for our operating assets for 2020 and 2021.

During the year ended December 31, 2020, we repaid $500.0 million of draws under our revolving credit facility, in part with the proceeds from three separate mortgage loans with an aggregate principal balance of $385.0 million, collateralized by The Bartlett, 1221 Van Street and 220 20th Street.

We also made a $100.0 million draw on our Tranche A-1 Term Loan in April 2020, and repaid a mortgage payable collateralized by WestEnd25 with a principal balance of $94.7 million in December 2020.

As of December 31, 2020, we have $998.5 million of remaining availability under our credit facility (net of outstanding letters of credit totaling $1.5 million).

As of December 31, 2020, mortgages payable totaling $1.1 million on a consolidated basis and $103.4 million at our share are scheduled to mature in 2021.

Contractual Obligations and Commitments

The following is a summary of our contractual obligations and commitments as of December 31, 2020:

Contractual cash obligations

(principal and interest):

(In thousands)

Contractual cash obligations (principal and interest):

Debt obligations (1) (2)

Operating leases (3)

Finance leases (3)

Total contractual cash obligations (4)

_________________

(1) Interest was computed giving effect to interest rate hedges.

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See additional information in Off-Balance Sheet Arrangements section below.

With the adoption of Topic 842, as of January 1, 2019, we recognized right-of-use assets and lease liabilities in our balance sheet associated with our corporate office lease and various ground leases for which we are the lessee.

See Note 2 to the financial statements for more information.

Excludes obligations related to construction or development contracts, since payments are only due upon satisfactory performance under the contracts.

(3) We recognize operating and finance lease right-of-use assets and lease liabilities in our balance sheet associated with our corporate office lease and various ground leases for which we are the lessee.

See Note 20 to the financial statements for additional information.

(4) Excludes obligations related to construction or development contracts totaling $18.9 million ($9.6 million related to our consolidated entities and $9.3 million related to our unconsolidated real estate ventures at our share), based on our current plans and estimates, since payments are only due upon satisfactory performance under the contracts.

Also excludes committed tenant-related obligations totaling $56.1 million ($52.3 million related to our consolidated entities and $3.8 million related to our unconsolidated real estate ventures at our share) as timing and amounts of payments are uncertain and may only be due upon satisfactory performance of certain conditions.

See Commitments and Contingencies section below for additional information.

As of December 31, 2019 , we have capital commitments and certain recorded guarantees to our unconsolidated real estate ventures totaling approximately $57.7 million .

As of December 31, 2020, we have capital commitments and certain recorded guarantees to our unconsolidated real estate ventures totaling $56.1 million.

In December 2020, our Board of Trustees declared a quarterly dividend of $0.225 per common share, which was paid on January 11, 2021.

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Net cash provided by operating activities

Net cash (used in) provided by investing activities

Net cash used in financing activities

Net cash used in by investing activities

Net cash provided by (used in) financing activities

Cash Flows for the Year Ended December 31, 2020

Cash and cash equivalents, and restricted cash increased $120.8 million to $263.3 million as of December 31, 2020, compared to $142.5 million as of December 31, 2019.

This increase resulted from $169.0 million of net cash provided by operating activities and $119.5 million of net cash provided by financing activities, partially offset by $167.7 million of net cash used in investing activities.

Our outstanding debt was $2.0 billion and $1.6 billion as of December 31, 2020 and 2019.

The $376.0 million increase in outstanding debt was primarily from 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 20 th Street, and the remaining $100.0 million draw under our Tranche A-1 Term Loan, partially offset by the repayment of the revolving credit facility and the mortgage payable collateralized by WestEnd25 with a principal balance of $94.7 million.

Net cash provided by operating activities of $169.0 million primarily comprised:

(i) $211.7 million of net income (before $338.5 million of non-cash items and a $59.5 million gain on sale of real estate) and (ii) $4.3 million of return on capital from unconsolidated real estate ventures, partially offset by (iii) $47.0 million of net change in operating assets and liabilities.

Non-cash income adjustments of $338.5 million primarily include depreciation and amortization expense, share-based compensation expense, losses on operating lease and other receivables, net loss from unconsolidated real estate ventures, deferred rent and impairment loss.

Net cash used in investing activities of $167.7 million comprised:

(i) $307.5 million of development costs, construction in progress and real estate additions, (ii) $45.7 million related to the acquisition of the Americana Portfolio in December 2020, (iii) $25.4 million of deposits primarily related to the purchase of CBRS wireless spectrum licenses and (iv) $14.6 million of investments in unconsolidated real estate ventures, partially offset by (v) $154.5 million of proceeds from the sale of real estate and (vi) $71.1 million of distributions of capital from unconsolidated real estate ventures.

Net cash provided by financing activities of $119.5 million primarily comprised:

(i) $580.1 million of proceeds from borrowings under mortgages payable, (ii) $500.0 million of proceeds from borrowings under our revolving credit facility and (iii) $100.0 million of proceeds from borrowings under unsecured term loans, partially offset by (iv) $700.0 million of repayments of our revolving credit facility, (v) $120.0 million of dividends paid to common shareholders, (vi) $104.8 million of common shares repurchased, (vii) $104.1 million of repayments of mortgages payable, (viii) $15.0 million of distributions to redeemable noncontrolling interests, and (ix) $14.9 million of debt issuance costs.

Cash Flows for the Year Ended December 31, 2019

Cash and cash equivalents, and restricted cash decreased $257.0 million to $142.5 million as of December 31, 2019, compared to $399.5 million as of December 31, 2018.

This decrease resulted from $240.7 million of net cash used in investing activities and $190.3 million of net cash used in financing activities, partially offset by $174.0 million of net cash provided by operating activities.

Our outstanding debt was $1.6 billion and $2.1 billion as of December 31, 2019 and 2018 .

The $516.8 million decrease in outstanding debt was primarily from repayments of mortgages payable, partially offset by a draw on the revolving credit facility.

Net cash provided by operating activities of $174.0 million primarily comprised:

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(i) $719.0 million of repayments of mortgages payable, (ii) $129.8 million of dividends paid to common shareholders and (iii) $17.4 million of distributions to redeemable noncontrolling interests, partially offset by (iv) $472.8 million of net proceeds from the issuance of common stock and (v) $200.0 million of proceeds from borrowings under our revolving credit facility.

Cash Flows for the Year Ended December 31, 2018

Cash and cash equivalents, and restricted cash increased $61.0 million to $399.5 million as of December 31, 2018 , compared to $338.6 million as of December 31, 2017 .

This increase resulted from $188.2 million of net cash provided by operating activities and $66.3 million of net cash provided by investing activities, partially offset by $193.5 million of net cash used in financing activities.

Net cash provided by operating activities of $188.2 million primarily comprised:

(i) $227.7 million of net income (before $233.2 million of non-cash items and $52.2 million gain on sale of real estate) and (ii) $7.8 million of return on capital from unconsolidated real estate ventures, partially offset by (iii) $47.3 million of net change in operating assets and liabilities.

Non-cash income adjustments of $233.2 million primarily include depreciation and amortization expense, share-based compensation expense, income from unconsolidated real estate ventures, deferred rent and reduction of gain on bargain purchase.

Net cash provided by investing activities of $66.3 million primarily comprised:

(i) $413.1 million of proceeds from sale of real estate, (ii) $80.3 million of distributions of capital from sales of unconsolidated real estate ventures and (iii) $14.4 million of distributions of capital from unconsolidated real estate ventures, partially offset by (iv) $385.9 million of development costs, construction in progress and real estate additions, (v) $31.2 million of investments in unconsolidated real estate ventures and (vi) $23.2 million of real estate acquisitions.

Net cash used in financing activities of $193.5 million primarily comprised:

(i) $312.9 million of repayments of mortgages payable, (ii) $150.8 million repayment of our revolving credit facility, (iii) $107.4 million of dividends paid to common shareholders and (iv) $17.4 million of distributions to redeemable noncontrolling interests, partially offset by (v) $250.0 million of proceeds from borrowings under our unsecured term loans, (vi) $118.1 million of aggregate proceeds from borrowings under mortgages payable and (vii) $35.0 million of proceeds from borrowings under our revolving credit facility.

Off-Balance Sheet Arrangements

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For a more complete description of our real estate ventures, see Note 6 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 (1) guarantee portions of the principal, interest and other amounts in connection with borrowings, (2) provide customary environmental indemnifications and nonrecourse carve-outs (e.g., guarantees against fraud, misrepresentation and bankruptcy) in connection with borrowings or (3) provide guarantees to lenders and other third parties for the completion of development projects.

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.

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 December 31, 2019 , we have additional capital commitments and certain recorded guarantees to our unconsolidated real estate ventures totaling $57.7 million .

As of December 31, 2020, we had additional capital commitments and certain recorded guarantees to our unconsolidated real estate ventures totaling $56.1 million.

As of December 31, 2020, we had no principal payment guarantees related to our unconsolidated real estate ventures.

Reconsideration events could cause us to consolidate these unconsolidated real estate ventures and partnerships in the future or deconsolidate a consolidated entity.

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.

Some triggers to be considered are additional contributions required by each partner and each partner's ability to make those contributions.

Under certain of these circumstances, we may purchase our partner’s interest.

Our unconsolidated real estate ventures are held in entities which appear sufficiently stable to meet their capital requirements;

however, if market conditions worsen and our partners are unable to meet their commitments, we may have to consolidate these entities.

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.

Commitments and Contingencies

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Construction Commitments

As of December 31, 2019 , we have construction in progress that will require an additional $196.9 million to complete ( $160.1 million related to our consolidated entities and $36.8 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 two to 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 recapitalizations and sales, issuance and sale of equity securities and available cash.

As of December 31, 2020, we had construction in progress that will require an additional $18.9 million to complete ($9.6 million related to our consolidated entities and $9.3 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 and available cash.

As of December 31, 2020, we had committed tenant-related obligations totaling $56.1 million ($52.3 million related to our consolidated entities and $3.8 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.

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.

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 December 31, 2020, the aggregate amount of principal payment guarantees was $8.3 million for our consolidated entities.

In connection with the Formation Transaction, we have a 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.

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In connection with the ownership and operation of our assets, we may be potentially liable for such 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 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 such 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 (1) expose us to third-party liability (e.g., for cleanup costs, natural resource damages, bodily injury or property damage), (2) subject our properties to liens in favor of the government for damages and costs the government incurs in connection with the contamination, (3) impose restrictions on the manner in which a property may be used or businesses may be operated, or (4) materially adversely affect our ability to sell, lease or develop the real estate or to borrow using the real estate as collateral.

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 which 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.

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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 19 to the financial statements, environmental liabilities total $17.9 million as of both December 31, 2019 and 2018 , and primarily relate to a liability to remediate pre-existing environmental matters at Potomac Yard Land Bay H, which was acquired in December 2018.

significant cost to us.

Environmental liabilities total $18.2 million and $17.9 million as of December 31, 2020 and 2019, and are included in "Other liabilities, net"

in our balance sheets.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis