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Item 8. Financial Statements and Supplementary Data

2021-02-23 compared with 2020-02-25 · 620 added, 756 removed, 757 unchanged (65% of the section changed)

2 unchanged sentences

Consolidated Balance Sheets as of December 31, 2020 and 2019

Consolidated and Combined Statements of Operations for the years ended December 31, 2019, 2018 and 2017

Consolidated and Combined Statements of Comprehensive Income (Loss) for the years ended December 31, 2019, 2018 and 2017

Consolidated and Combined Statements of Equity for the years ended December 31, 2019, 2018 and 2017

Consolidated and Combined Statements of Cash Flows for the years ended December 31, 2019, 2018 and 2017

Notes to Consolidated and Combined Financial Statements

Consolidated Statements of Operations for the years ended December 31, 2020, 2019 and 2018

Consolidated Statements of Comprehensive Income (Loss) for the years ended December 31, 2020, 2019 and 2018

Consolidated Statements of Equity for the years ended December 31, 2020, 2019 and 2018

Consolidated Statements of Cash Flows for the years ended December 31, 2020, 2019 and 2018

Notes to Consolidated Financial Statements

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

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Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of JBG SMITH Properties and subsidiaries (the "Company") as of December 31, 2019 and 2018 , the related consolidated statements of operations, comprehensive income, equity, and cash flows, for the years ended December 31, 2019 and 2018 , t he related consolidated and combined statements of operations, comprehensive income (loss), equity, and cash flows, for the year ended December 31, 2017, and the related notes and the schedules listed in the Index at Item 15 (collectively referred to as the "financial statements").

We have audited the accompanying consolidated balance sheets of JBG SMITH Properties and subsidiaries (the "Company") as of December 31, 2020 and 2019, the related consolidated statements of operations, comprehensive income (loss), equity, and cash flows, for each of the three years in the period ended December 31, 2020, and the related notes and the schedules listed in the Index at Item 15 (collectively referred to as the "financial statements").

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2020 and 2019, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2020, in conformity with accounting principles generally accepted in the United States of America.

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Our responsibility is to express an opinion on the Company's financial statements based on our audits.

We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the US federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB.

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The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Investments in Unconsolidated Real Estate Ventures - Refer to Notes 2, 6 and 7 to the financial statements

Real Estate – Impairment Indicators - Refer to Note 2 to the consolidated financial statements

Critical Audit Matter Description

The Company has investments in unconsolidated real estate ventures which are required to be evaluated for consolidation, including determining whether the real estate venture is a variable interest entity ("VIE"), and if so, whether the Company is the primary beneficiary.

Significant judgment is required by management to determine whether the Company has the power to direct the activities that most significantly impact the entity’s economic performance.

Factors considered by management in determining whether the Company has the power to direct the activities that most significantly impact the entity’s economic performance include voting rights, involvement in day-to-day capital and operating decisions and the extent of the Company’s involvement in the entity.

In December 2019, the Company sold a 50.0% interest in a real estate venture that owns Central Place Tower, an office building.

The Company determined that the real estate venture was not a VIE, and it does not have a controlling financial interest in the venture.

As a result, the Company recognized an aggregate $53.4 million gain, net of certain liabilities, on the partial sale and subsequent remeasurement of its remaining interest in the real estate venture.

Given the complexities associated with the accounting for the Company’s investments in real estate ventures, and the related management judgments to determine whether a real estate venture is a VIE and whether the Company is the primary beneficiary or has a controlling financial interest, performing the audit procedures to evaluate these investments in real estate ventures, including the Central Place Tower venture, involved especially complex and subjective auditor judgment.

The Company has real estate which is required to be evaluated for impairment.

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.

The Company evaluates real estate assets for impairment whenever events or changes in circumstances occur that indicate the carrying amount of the asset may not be recoverable.

These indicators may include operating performance, intended holding periods and adverse changes in circumstances.

At December 31, 2020, the carrying value of the

Company’s real estate assets was approximately $4.77 billion, including an impairment loss in the year ended December 31, 2020 of $7.8 million .

Given the Company’s evaluation of possible indications of impairment of real estate assets requires management to make significant judgments, performing audit procedures to evaluate whether management appropriately identified events or changes in circumstances indicating that the carrying amounts of real estate assets may not be recoverable required an increased extent of effort and high degree of auditor judgment.

How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures related to management’s judgments to determine whether a real estate venture, including the entity that owns Central Place Tower, is a VIE and whether the Company is the primary beneficiary or has a controlling financial interest included the following, among others:

We tested the effectiveness of the controls over management’s judgments to determine whether a real estate venture is a VIE and whether the Company is the primary beneficiary or has a controlling financial interest, both at inception of a real estate venture and upon occurrence of a reconsideration event.

We assessed each of the Company’s new or modified real estate ventures and evaluated the appropriateness of the Company’s accounting conclusions upon formation and reconsideration events by:

Reading the operating agreements, including the operating agreement for the real estate venture that owns Central Place Tower, and other related documents and evaluating the structure and terms of the agreements to determine whether a real estate venture is a VIE and whether the Company is the primary beneficiary or has a controlling financial interest that should be consolidated.

Evaluating the evidence obtained in other areas of the audit to determine if there were additional reconsideration events that had not been identified by the Company, including, among others, reading board minutes and understanding changes to the real estate venture’s economics and status of development projects, if applicable.

Our audit procedures related to the evaluation of real estate assets for possible indications of impairment included the following, among others:

● We tested the effectiveness of controls over management’s review of impairment indicators, which include assessing possible circumstances that could indicate that the carrying amounts of real estate assets are not recoverable.

● We evaluated the reasonableness of management’s judgments by:

– Testing real estate assets for possible indications of impairment, including searching for adverse asset-specific and/or market conditions.

– Developing an expectation of assets for which impairment indicators are identified in management’s analysis.

/s/ Deloitte & Touche LLP

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(In thousands, except par value amounts)

December 31, 2019

December 31, 2018

Real estate, at cost:

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Less accumulated depreciation

( 1,232,690 )

( 1,119,571 )

Real estate, net

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Restricted cash

Tenant and other receivables, net

Deferred rent receivable, net

Tenant and other receivables

Deferred rent receivable

Investments in unconsolidated real estate ventures

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Other liabilities, net

Liabilities related to assets held for sale

Total liabilities

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Shareholders' equity:

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

Preferred shares, $ 0.01 par value - 200,000 shares authorized;

Common shares, $ 0.01 par value - 500,000 shares authorized;

134,148 and 120,937

shares issued and outstanding as of December 31, 2019 and 2018

131,778 and 134,148 shares issued and outstanding as of December 31, 2020 and 2019

Additional paid-in capital

Accumulated deficit

Accumulated other comprehensive income (loss)

Accumulated other comprehensive loss

Total shareholders' equity of JBG SMITH Properties

Noncontrolling interests in consolidated subsidiaries

TOTAL LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS AND

See accompanying notes to the consolidated and combined financial statements.

TOTAL LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS AND EQUITY

See accompanying notes to the consolidated financial statements.

JBG SMITH PROPERTIES

Consolidated and Combined Statements of Operations

Consolidated Statements of Operations

(In thousands, except per share data)

Year Ended December 31,

Property rentals

Property rental

Third-party real estate services, 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

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Income (loss) from unconsolidated real estate ventures, net

Interest and other income, net

Interest and other income (loss), net

Interest expense

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Loss on extinguishment of debt

Gain (reduction of gain) on bargain purchase

Impairment loss

Reduction of gain on bargain purchase

Total other income (expense)

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NET INCOME (LOSS) ATTRIBUTABLE TO COMMON SHAREHOLDERS

EARNINGS (LOSS) PER COMMON SHARE:

WEIGHTED AVERAGE NUMBER OF COMMON SHARES

See accompanying notes to the consolidated and combined financial statements.

EARNINGS (LOSS) PER COMMON SHARE - BASIC AND DILUTED

WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING - BASIC AND DILUTED

See accompanying notes to the consolidated financial statements.

JBG SMITH PROPERTIES

Consolidated and Combined Statements of Comprehensive Income (Loss)

Consolidated Statements of Comprehensive Income (Loss)

(In thousands)

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Change in fair value of derivative financial instruments

Reclassification of net loss on derivative financial

instruments from accumulated other comprehensive income (loss)

into interest expense

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

Other comprehensive income (loss)

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Net (income) loss attributable to redeemable noncontrolling interests

Other comprehensive (income) loss attributable to redeemable

noncontrolling interests

Other comprehensive (income) loss attributable to redeemable noncontrolling interests

Net loss attributable to noncontrolling interests

COMPREHENSIVE INCOME (LOSS) ATTRIBUTABLE TO

JBG SMITH PROPERTIES

See accompanying notes to the consolidated and combined financial statements.

COMPREHENSIVE INCOME (LOSS) ATTRIBUTABLE TO JBG SMITH PROPERTIES

See accompanying notes to the consolidated financial statements.

JBG SMITH PROPERTIES

Consolidated and Combined Statements of Equity

Consolidated Statements of Equity

(In thousands)

Noncontrolling

Comprehensive

Common Shares

Accumulated Deficit

Accumulated Other Comprehensive Income (Loss)

Noncontrolling Interests in Consolidated Subsidiaries

BALANCE AS OF JANUARY 1, 2017

Net loss attributable to common

shareholders and noncontrolling interests

Deferred compensation shares and

Contributions from former parent, net

Issuance of common limited partnership

units at the Separation

Issuance of common shares at the

Issuance of common shares in connection

with the Combination

Noncontrolling interests acquired in

connection with the Combination

Dividends declared on common shares

($0.45 per common share)

Distributions to noncontrolling interests

Contributions from noncontrolling

Redeemable noncontrolling interest

redemption value adjustment and other

comprehensive income allocation

Other comprehensive income

BALANCE AS OF DECEMBER 31, 2017

Net income (loss) attributable to common

shareholders and noncontrolling

Conversion of common limited partnership

units to common shares

Common shares issued pursuant to

Employee Share Purchase Plan ("ESPP")

Dividends declared on common shares

($1.00 per common share)

Distributions to noncontrolling interests

Contributions from noncontrolling

Redeemable noncontrolling interests

redemption value adjustment and other

comprehensive income allocation

Acquisition of consolidated real estate

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

Conversion of common limited partnership units to common shares

Common shares issued pursuant to Employee Share Purchase Plan ("ESPP")

Dividends declared on common shares ($ 1.00 per common share)

Distributions to noncontrolling interests, net

Redeemable noncontrolling interests redemption value adjustment and other comprehensive income allocation

Acquisition of consolidated real estate venture

Other comprehensive income

BALANCE AS OF DECEMBER 31, 2018

Net income attributable to common

shareholders and noncontrolling interests

Net income attributable to common shareholders and noncontrolling interests

Common shares issued

Conversion of common limited partnership

units to common shares

Conversion of common limited partnership units to common shares

Common shares issued pursuant to ESPP

Dividends declared on common shares

($0.90 per common share)

Dividends declared on common shares ($ 0.90 per common share)

Distributions to noncontrolling interests, net

Redeemable noncontrolling interests redemption value adjustment and other comprehensive loss allocation

Other comprehensive loss

BALANCE AS OF DECEMBER 31, 2019

Net loss attributable to common shareholders and noncontrolling interests

Conversion of common limited partnership units to common shares

Common shares repurchased

Common shares issued pursuant to ESPP

Dividends declared on common shares ($ 0.90 per common share)

Distributions to noncontrolling interests

Contributions from noncontrolling

Redeemable noncontrolling interests

redemption value adjustment and other

comprehensive (income) loss allocation

Redeemable noncontrolling interests redemption value adjustment and other comprehensive loss allocation

Other comprehensive loss

BALANCE AS OF DECEMBER 31, 2020

See accompanying notes to the consolidated and combined financial statements.

See accompanying notes to the consolidated financial statements .

JBG SMITH PROPERTIES

Consolidated and Combined Statements of Cash Flows

Consolidated Statements of Cash Flows

(In thousands)

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Amortization of lease incentives

Reduction of gain (gain) on bargain purchase

Reduction of gain on bargain purchase

Loss on extinguishment of debt

Impairment loss

Gain on sale of real estate

Net unrealized loss (gain) on ineffective derivative financial instruments

Losses on operating lease receivables

Losses on operating lease and other receivables

Return on capital from unconsolidated real estate ventures

Other non-cash items

Deferred tax benefit

Impairment of corporate assets

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Acquisition of real estate

Cash and restricted cash received in connection with the Combination, net

Deposits for real estate acquisitions

Deposits for real estate and other acquisitions

Proceeds from sale of real estate

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Investments in unconsolidated real estate ventures

Repayment of notes receivable

Proceeds from repayment of receivable from former parent

Net cash (used in) provided by investing activities

FINANCING ACTIVITIES:

Contributions from former parent, net

Acquisition of interest in consolidated real estate venture

Repayment of borrowings from former parent

Proceeds from borrowings from former parent

Finance lease payments

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Proceeds from common stock issued pursuant to ESPP

Common shares repurchased

Dividends paid to common shareholders

Distributions to redeemable noncontrolling interests

Contributions from noncontrolling interests

Distributions to noncontrolling interests

Net cash (used in) provided by in financing activities

JBG SMITH PROPERTIES

Consolidated and Combined Statements of Cash Flows

(In thousands)

Year Ended December 31,

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

Cash and cash equivalents and restricted cash as of the beginning of the year

Cash and cash equivalents and restricted cash as of the end of the year

CASH AND CASH EQUIVALENTS AND RESTRICTED CASH AS OF END

Contributions from noncontrolling interests

Net cash provided by (used in) financing activities

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

Cash and cash equivalents and restricted cash as of the beginning of the period

Cash and cash equivalents and restricted cash as of the end of the period

CASH AND CASH EQUIVALENTS AND RESTRICTED CASH AS OF END OF THE PERIOD:

Cash and cash equivalents

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Cash and cash equivalents and restricted cash

JBG SMITH PROPERTIES

Consolidated Statements of Cash Flows

(In thousands)

Year Ended December 31,

SUPPLEMENTAL DISCLOSURE OF CASH FLOW AND NON-CASH INFORMATION:

Transfer of mortgage payable to former parent

Cash paid for interest (net of capitalized interest of $29,806, $20,804 and $12,727 in

2019, 2018 and 2017)

Cash paid for interest (net of capitalized interest of $ 13,189 , $ 29,806 and $ 20,804 in 2020, 2019 and 2018)

Accrued capital expenditures included in accounts payable and accrued expenses

Write-off of fully depreciated assets

Cash received (payments) for income taxes

Cash received for income taxes

Deconsolidation of properties

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Accrued distributions to redeemable noncontrolling interests

Acquisition of consolidated real estate venture

Conversion of common limited partnership units to common shares

Initial recognition of operating right-of-use assets

Initial recognition of lease liabilities related to operating right-of-use assets

Recognition (derecognition) of operating lease right-of-use assets

Recognition (derecognition) of liabilities related to operating lease right-of-use assets

Recognition of finance lease right-of-use assets

Recognition of liabilities related to finance lease right-of-use assets

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

Non-cash transactions related to the Formation Transaction:

Issuance of common limited partnership units at the Separation

Issuance of common shares at the Separation

Issuance of common shares in connection with the Combination

Issuance of common limited partnership units in connection with the Combination

Contribution from former parent in connection with the Separation

See accompanying notes to the consolidated and combined financial statements.

Deferred purchase price related to acquisition

See accompanying notes to the consolidated financial statements .

JBG SMITH PROPERTIES

Notes to Consolidated and Combined Financial Statements

Notes to Consolidated Financial Statements

Organization and Basis of Presentation

JBG SMITH Properties ("JBG SMITH") was organized as a Maryland real estate investment trust ("REIT") for the purpose of receiving, via the spin-off on July 17, 2017 (the "Separation"), substantially all of the assets and liabilities of Vornado Realty Trust's Washington, D.C.

segment (the "Vornado Included Assets").

On July 18, 2017, JBG SMITH acquired the management business and certain assets and liabilities (the "JBG Assets") of The JBG Companies ("JBG") (the "Combination").

The Separation and the Combination are collectively referred to as the "Formation Transaction." JBG SMITH is hereinafter referred to as "we," "us," "our" or other similar terms.

References to "our share" refer to our ownership percentage of consolidated and unconsolidated assets in real estate ventures.

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

As of December 31, 2019 , we, as its sole general partner, controlled JBG SMITH LP and owned 89.9 % of its common limited partnership units ("OP Units").

Prior to the Separation from Vornado Realty Trust ("Vornado" or "former parent"), 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.

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.

Our revenues are derived primarily from leases with commercial and multifamily tenants, which include fixed rents and reimbursements from tenants for certain expenses such as real estate taxes, property operating expenses, and repairs and maintenance.

In addition, our third-party asset management and real estate services business provides fee-based real estate services to third parties and the legacy funds (the "JBG Legacy Funds") formerly organized by JBG.

JBG SMITH Properties ("JBG SMITH"), a Maryland real estate investment trust ("REIT"), owns and operates a portfolio of commercial and multifamily assets amenitized with ancillary retail.

JBG SMITH's portfolio reflects its longstanding strategy of owning and operating assets within Metro-served submarkets in the Washington, D.C.

metropolitan area that have high barriers to entry and vibrant urban amenities.

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

Substantially all our assets are held by, and our operations are conducted through, JBG SMITH Properties LP ("JBG SMITH LP"), our operating partnership.

As of December 31, 2020, JBG SMITH, as its sole general partner, controlled JBG SMITH LP and owned 90.5 % of its common limited partnership units ("OP Units").

JBG SMITH is referred to herein as "we,"

"us,"

"our"

or other similar terms.

References to "our share"

refer to our ownership percentage of consolidated and unconsolidated assets in real estate ventures.

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

On July 18, 2017, we acquired the management business and certain assets and liabilities of The JBG Companies ("JBG") (the "Combination").

The Separation and the Combination are collectively referred to as the "Formation Transaction."

As of 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 derive our revenue primarily from leases with commercial and multifamily tenants, which include fixed and percentage rents, and reimbursements from tenants for certain expenses such as real estate taxes, property operating expenses, and repairs and maintenance.

In addition, our third-party asset management and real estate services business provides fee-based real estate services to the Washington Housing Initiative ("WHI") Impact Pool, Amazon, the legacy funds formerly organized by JBG (the "JBG Legacy Funds") and other third parties.

Only the U.S.

federal government accounted for 10% or more of our rental revenue, which consists of property rentals and other property revenue, as follows:

federal government accounted for 10% or more of our rental revenue, which consists of property rental and other property revenue, as follows:

Year Ended December 31,

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Basis of Presentation

The accompanying consolidated and combined financial statements and notes are prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP").

The accompanying consolidated financial statements and notes are prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP").

All intercompany transactions and balances have been eliminated.

The accompanying consolidated financial statements include the accounts of JBG SMITH and our wholly owned subsidiaries and those other entities, including JBG SMITH LP, in which we have a controlling financial interest, including where we have been determined to be the primary beneficiary of a variable interest entity ("VIE").

See Note 7 for additional information on our VIEs.

The portions of the equity and net income of consolidated subsidiaries that are not attributable to JBG SMITH are presented separately as amounts attributable to noncontrolling interests in our consolidated and combined financial statements.

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 .

The accompanying consolidated financial statements include our accounts and those of our wholly owned subsidiaries and other entities, including JBG SMITH LP, in which we have a controlling financial interest.

See Note 7 for additional

information on our variable interest entities ("VIEs").

The portions of the equity and net income (loss) of consolidated subsidiaries that are not attributable to us are presented separately as amounts attributable to noncontrolling interests in our consolidated financial statements.

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 comprehensive income (loss) refer to our consolidated and combined statements of comprehensive income (loss) 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 .

Formation Transaction

JBG SMITH and the Vornado Included Assets were under common control of Vornado for all periods prior to the Separation.

The transfer of the Vornado Included Assets from Vornado to JBG SMITH was completed, at net book values (historical carrying amounts) carved out from Vornado’s books and records.

For purposes of the formation of JBG SMITH, the Vornado Included Assets were designated as the predecessor and the accounting acquirer of the JBG Assets.

Consequently, the financial statements of JBG SMITH, as set forth herein, represent a continuation of the financial information of the Vornado Included Assets as the predecessor and accounting acquirer such that the historical financial information included herein as of any date or for any periods on or prior to the completion of the Combination represents the pre-Combination financial information of the Vornado Included Assets.

The financial statements reflect the common shares as of the date of the Separation as outstanding for all periods prior to July 17, 2017.

The acquisition of the JBG Assets completed subsequently by JBG SMITH was accounted for as a business combination using the acquisition method whereby identifiable assets acquired and liabilities assumed are recorded at acquisition-date fair values and income and cash flows from the operations were consolidated into the financial statements of JBG SMITH commencing July 18, 2017.

Consequently, the financial statements for the periods before and after the Formation Transaction are not directly comparable.

The accompanying financial statements as of December 31, 2019 and 2018 and for the years ended December 31, 2019 and 2018 include our consolidated accounts.

The results of operations for the year ended December 31, 2017 reflects the aggregate operations and changes in cash flows and equity on a combined basis for all periods prior to July 17, 2017 and on a consolidated basis for all periods subsequent to July 17, 2017.

Therefore, our results of operations, cash flows and financial condition set forth in this report are not necessarily indicative of our future results of operations, cash flows or financial condition as an independent, publicly traded company.

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.

See Note 20 for additional information.

Reclassifications

Certain prior period amounts have been reclassified to conform to the current period presentation as follows:

Reclassification of parking revenue totaling $ 25.7 million and $ 23.1 million previously included in "Property rentals revenue" for the years ended December 31, 2018 and 2017 to "Other revenue" in our statements of operations.

Reclassification of tenant reimbursements totaling $ 39.3 million and $ 38.0 million for the years ended December 31, 2018 and 2017 to "Property rentals revenue" in our statements of operations.

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 comprehensive income (loss) refer to our consolidated statements of comprehensive income (loss) 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.

Summary of Significant Accounting Policies

Use of Estimates

The preparation of the financial statements in conformity with GAAP requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the financial statements and the reported amounts of revenue and expenses during the reporting period.

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

The most significant of these estimates include:

(i) the underlying cash flows used in assessing impairment and (ii) the determination of useful lives for tangible and intangible assets.

Actual results could differ from these estimates.

(i) the underlying cash flows and holding periods used in assessing impairment;

(ii) the determination of useful lives for tangible and intangible assets;

and (iii) the assessment of the collectability of receivables, including deferred rent receivables.

Due to the current pandemic of the novel coronavirus ("COVID-19"), commencing in March 2020, authorities in jurisdictions where our properties are located issued stay-at-home orders and restrictions on travel and permitted businesses operations.

The effects of COVID-19 have most significantly impacted the operations of many of our retail tenants, which generated approximately 7 % of our revenue for the year ended December 31, 2020, revenue from our multifamily assets, our commercial parking revenue, the operations of the Crystal City Marriott and our interest in the former unconsolidated venture that owns The Marriott Wardman Park hotel.

The extent to which COVID-19 impacts us and our tenants will depend on future developments, which are highly uncertain.

At this time, there are no outstanding stay-at-home orders in jurisdictions where our properties are located;

however, the extent and duration of restrictions on travel and permitted businesses operations and other effects of COVID-19 on us and our tenants have affected estimates used in the preparation of the underlying cash flows used in assessing our long-lived assets for impairment and the assessment of the collectability of receivables from tenants, including deferred rent receivables.

We have made what we believe to be appropriate accounting estimates based on the facts and circumstances available as of the reporting date.

To the extent these estimates differ from actual results, our consolidated financial statements may be materially affected.

Asset Acquisitions and Business Combinations

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.

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.

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.

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.

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.

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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.

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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 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.

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.

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.

Factors considered in determining whether we have the power to direct the activities that most significantly impact the entity's economic performance include voting rights, involvement in day-to-day capital and operating decisions, and the extent of our involvement in the entity.

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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.

Intangible assets consist of in-place leases, below-market ground rent obligations, above-market real estate leases and options to enter into ground leases that were recorded in connection with the acquisition of properties.

Intangible assets also include management and leasing contracts acquired in the Combination.

Intangible assets consist of:

(i) in-place leases, below-market ground rent obligations, above-market real estate leases and options to enter into ground leases that were recorded in connection with the acquisition of properties and (ii) management and leasing contracts acquired in the Combination.

Intangible liabilities consist of above-market ground rent obligations and below-market real estate leases that are also recorded in connection with the acquisition of properties.

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Assets, primarily consisting of real estate, are classified as held for sale when all the necessary criteria are met.

The criteria include (i) management, having the authority to approve action, commits to a plan to sell the property in its present condition, (ii) the sale of the property is at a price reasonable in relation to its current fair value and (iii) the sale is probable and expected to be completed within one year.

The criteria include:

(i) management, having the authority to approve action, commits to a plan to sell the property in its present condition, (ii) the sale of the property is at a price reasonable in relation to its current fair value and (iii) the sale is probable and expected to be completed within one year.

Real estate held for sale is carried at the lower of carrying amounts or estimated fair value less disposal costs.

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Amounts of consolidated net income (loss) attributable to redeemable noncontrolling interests and to the noncontrolling interests in consolidated subsidiaries are presented separately in our statements of operations.

Redeemable Noncontrolling Interests - Redeemable noncontrolling interests consists of OP Units issued in conjunction with the Formation Transaction and our venture partner's interest in 965 Florida Avenue.

The OP Units became redeemable for our common shares or cash beginning August 1, 2018, subject to certain limitations.

Redeemable noncontrolling interests are generally redeemable at the option of the holder and are presented in the mezzanine section between total liabilities and shareholders' equity on our balance sheets.

The carrying amount of redeemable noncontrolling interests is adjusted to its redemption value at the end of each reporting period, but no less than its initial carrying value, with such adjustments recognized in "Additional paid-in capital." See Note 12 for additional information.

See Note 12 for additional information.

Noncontrolling Interests - Noncontrolling interests represents the portion of equity that we do not own in entities we consolidate, including interests in consolidated real estate ventures.

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We assess the effectiveness of our cash flow hedges both at inception and on an ongoing basis.

If the hedges are deemed to be effective, the fair value is recorded in accumulated other comprehensive income (loss) and is subsequently reclassified into "Interest expense" in the period that the hedged forecasted transactions affect earnings.

If the hedges are deemed to be effective, the fair value is recorded in accumulated other comprehensive income (loss) and is subsequently reclassified into "Interest expense"

in the period that the hedged forecasted transactions affect earnings.

Our cash flow hedges become less than perfectly effective if the critical terms of the hedging instrument and the forecasted transactions do not perfectly match such as notional amounts, settlement dates, reset dates, calculation period and interest rates.

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Derivative Financial Instruments Not Designated as Hedges - Certain derivative financial instruments, consisting of interest rate swap and cap agreements, are considered economic hedges, but not designated as accounting hedges, and are carried at their estimated fair value on a recurring basis.

Realized and unrealized gains are recorded in "Interest expense" in our statements of operations in the period in which the change occurs.

Realized and unrealized gains are recorded in "Interest expense"

in our statements of operations in the period in which the change occurs.

Fair Value of Assets and Liabilities

Accounting Standards Codification ("ASC") 820 ("Topic 820"), Fair Value Measurement and Disclosures, defines fair value and establishes a framework for measuring fair value.

The objective of fair value is to determine the price that would be received upon the sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (the exit price).

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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.

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 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.

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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The transaction prices for our performance obligations that are expected to be completed in greater than twelve months are variable based on the costs ultimately incurred to develop the underlying assets.

period of time over which the development services are expected to be performed, which is the period over which the revenue is recognized.

Judgments impacting the timing and amount of revenue recognized from our development services contracts include the determination of the nature and number of performance obligations within a contract, estimates of total development project costs, from which the fees are typically derived, and estimates of the period of time over which the development services are expected to be performed, which is the period over which the revenue is recognized.

We recognize development fees earned from unconsolidated joint venture projects to the extent of the third-party partners' ownership interest.

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Lessee Accounting

We are obligated under non-cancellable operating leases, including ground leases on certain of our properties through 2061.

We are obligated under non-cancellable operating and capital leases, including ground leases on certain of our properties with terms extending through up through 2118.

When a renewal option is included within a 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.

Lease payments associated with renewal periods that we are reasonably certain will be exercised are included in the measurement of the corresponding lease liability and right-of-use asset.

Lease expense for our operating leases is recognized on a straight-line basis over the expected lease term and is included in our statements of operations in either "Property operating expenses" or "General and administrative expense" depending on the nature of the lease.

Lease expense for our operating leases is recognized on a straight-line basis over the expected lease term and is included in our statements of operations in either "Property operating expenses"

or "General and administrative expense"

depending on the nature of the lease.

Amortization of the right-of-use asset associated with a capital lease is recognized on a straight-line basis over the expected lease term and is included in our statements of operations in "Depreciation and amortization"

with the related interest on our outstanding lease liability included in "Interest expense."

Certain lease agreements include variable lease payments that, in the future, will vary based on changes in inflationary measures, market rates or our share of expenditures of the leased premises.

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We made a policy election to forgo recording right-of-use assets and the related lease liabilities for leases with initial terms of 12 months or less.

We have elected to be taxed as a REIT under sections 856-860 of the Internal Revenue Code of 1986, as amended (the "Code").

Under those sections, a REIT which distributes at least 90% of its REIT taxable income as dividends to its shareholders each year and which meets certain other conditions will not be taxed on that portion of its taxable income which is distributed to its shareholders.

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Future distributions will be declared and paid at the discretion of the Board of Trustees and will depend upon cash generated by operating activities, our financial condition, capital requirements, annual dividend requirements under the REIT provisions of the Code and such other factors as our Board of Trustees deems relevant.

We also participate in the activities conducted by our subsidiary entities that have elected to be treated as taxable REIT subsidiaries ("TRS") under the Code.

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

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Any increase or decrease in the valuation allowance that results from a change in circumstances that causes a change in the estimated ability to realize the related deferred tax asset is included in deferred tax benefit (expense).

Accounting Standards Codification 740 ("Topic 740"), Income Taxes, provides guidance for how uncertain tax positions should be recognized, measured, presented and disclosed in our financial statements.

Topic 740 requires the evaluation of tax positions taken in the course of preparing our tax returns to determine whether the tax positions are "more-likely-than-not" of being sustained

by the applicable tax authority.

ASC 740 ("Topic 740"), Income Taxes, provides guidance for how uncertain tax positions should be recognized, measured, presented and disclosed in our financial statements.

Topic 740 requires the evaluation of tax positions taken in the course of preparing our tax returns to determine whether the tax positions are "more-likely-than-not"

of being sustained by the applicable tax authority.

Tax benefits of positions not deemed to meet the more-likely-than-not threshold are recorded as a tax expense in the current year.

The Coronavirus Aid, Relief, and Economic Security Act (the "CARES Act") that was enacted on March 27, 2020 includes several significant tax provisions that could impact us and our TRSs.

These changes include:

● the elimination of the taxable income limit for net operating losses ("NOLs") for all taxable years beginning before January 1, 2021, thereby permitting corporate taxpayers to use NOLs to fully offset taxable income (although we, as a REIT, will continue to only be able to use NOLs against taxable income remaining after taking into account any dividends paid deduction);

● the ability for our TRSs to utilize carryback NOLs arising in 2018, 2019 and 2020 to the five taxable years preceding the taxable year of the loss;

● an increase of the business interest limitation under Section 163(j) of the Code from 30% to 50% for taxable years beginning in 2019 and 2020, and the addition of an election by taxpayers to use their 2019 adjusted taxable income as their adjusted taxable income in 2020 for purposes of applying the limitation;

technical correction "

amending Section 168(e)(3)(E) of the Code to add "qualified improvement property"

to "15-year property"

and assigning a class life of 20-years under Section 168(g)(3)(B) of the Code to qualified improvement property under Section 168(e)(3)(E)(vii) of the Code .

During the year ended December 31, 2020, as a result of the CARES Act, we made adjustments to the net deferred tax liability amounts, which relate to "qualified improvement property"

owned by our TRSs.

Earnings (Loss) Per Common Share

Basic earnings (loss) per common share is computed by dividing net income (loss) attributable to common shareholders by the weighted average common shares outstanding during the period.

Unvested share-based compensation awards that entitle holders to receive non-forfeitable dividends, which include long-term incentive partnership units ("LTIP Units"), are considered participating securities.

Unvested share-based compensation awards that entitle holders to receive non-forfeitable dividends, which include long-term incentive partnership units ("LTIP Units"),

are considered participating securities.

Consequently, we are required to apply the two-class method of computing basic and diluted earnings that would otherwise have been available to common shareholders.

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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"), LTIP Units with performance-based vesting requirements ("Performance-Based LTIP Units") are recorded to "Redeemable noncontrolling interests" in our balance sheets.

in our balance sheets.

Recent Accounting Pronouncements

Adoption of Accounting Standards Update 2016-02, Leases ("Topic 842")

We enter into various lease agreements to make our properties available for use by third parties in exchange for cash consideration or to obtain the right to use properties owned by third parties to administer our business operations.

We account for these leases under Topic 842, which we adopted as of January 1, 2019 using a modified retrospective approach and by applying the several transitional practical expedients including the Comparatives Under 840 expedient, the Relief Package for existing leases and the Easement expedient for existing easements, but not the Hindsight expedient.

The Comparatives Under 840 expedient allows us not to recast our comparative periods in the period of adoption, and the Relief Package and Easement expedients allow us to maintain our historical accounting conclusions on current leases as of the date of adoption with respect to whether a contract contains a lease, what a lease’s classification should be, what initial direct costs are capitalizable and whether a land easement constituted a lease.

The adoption of Topic 842 did not result in a material change to our recognition of property rental revenue and did not impact our opening accumulated deficit balance, but resulted in:

(i) the inclusion of tenant reimbursements in "Property rentals revenue" in our statements of operations.

Such amounts were previously separately presented as "Tenant reimbursements" in our statements of operations;

(ii) the recognition, as of January 1, 2019, of right-of-use assets totaling $ 35.3 million in "Other assets, net" and lease liabilities totaling $ 37.9 million in "Other liabilities, net" in our accompanying balance sheet, associated with our corporate office lease and various ground leases for which we are the lessee.

The initial right-of-use assets comprised $ 37.9 million of lease liabilities, $ 3.5 million of ground lease deferred rent payable reclassified from "Other liabilities, net" and $ 767,000 of identified net intangible assets and $ 140,000 of prepaid expenses both reclassified from "Other assets, net;"

(iii) the inclusion as a deduction to revenue, as of January 1, 2019, of the impact of revenue deemed improbable of collection.

Such amounts were previously recognized within "Property operating expenses" in our statements of operations;

(iv) the change, as of January 1, 2019, in our capitalization policy for direct leasing costs to include only incremental costs associated with successful leasing arrangements, which would not have been incurred if the leasing arrangements had not been obtained.

As a result, we no longer capitalize internal leasing costs, which are now expensed as incurred within "General and administrative expense:

corporate and other" in our statements of operations.

Internal leasing costs capitalized for the years ended December 31, 2018 and 2017 totaled $ 6.5 million and $ 2.9 million .

Lessor Accounting

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

Year Ended December 31, 2019

(In thousands)

Property rentals:

As of December 31, 2019 , the undiscounted cash flows to be received from lease payments under our operating leases on an annual basis for the next five years and thereafter are as follows:

Year ending December 31,

(In thousands)

As of December 31, 2018 , future base rental revenue under our non-cancellable operating leases, as determined under ASC Topic 840, were as follows:

Year ending December 31,

(In thousands)

Lessee Accounting

As of December 31, 2019 , the weighted average discount rate used in calculating lease liabilities for our active operating leases was 5.4 % , which had a weighted average remaining lease term of 23.9 years .

As of December 31, 2019 , future minimum lease payments under our non-cancellable operating leases are as follows:

Year ending December 31,

(In thousands)

Total future minimum lease payments

Imputed interest

______________

The total for operating leases of $ 28.5 million corresponds to lease liabilities related to operating right-of-use assets, which was included in "Other liabilities, net" as of December 31, 2019 .

See Note 10 for additional information.

As of December 31, 2018 , future minimum rental payments under our non-cancellable operating leases, capital leases and lease assumption liabilities, as determined under Topic 840, were as follows:

Year ending December 31,

(In thousands)

For the year ended December 31, 2019 , we incurred $ 2.3 million of fixed operating and finance lease costs and $ 1.3 million of variable operating lease costs.

Reference Rate Reform

In March 2020, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update 2020-04, Reference Rate Reform ("Topic 848").

Topic 848 contains practical expedients for reference rate reform related activities that impact debt, leases, derivatives and other contracts.

The guidance in Topic 848 is optional and may be elected over the period March 12, 2020 through December 31, 2022 as reference rate reform activities occur.

During the year ended December 31, 2020, we elected to apply the hedge accounting expedients related to:

(i) the assertion that our hedged forecasted transactions remain probable and (ii) the assessments of effectiveness for future LIBOR-indexed cash flows to assume that the index upon which future hedged transactions will be based matches the index on the corresponding derivatives.

Application of these expedients allows us to continue to present our derivatives in a manner that is consistent with our past presentation.

We will continue to evaluate the impact of the guidance and may apply other elections, as applicable, as additional changes in the market occur.

COVID-19 Lease Modification Accounting Relief

Due to the business disruptions and challenges severely affecting the global economy caused by COVID-19, we have provided rent deferrals and other lease concessions to certain tenants.

In April 2020, the FASB issued a Staff Q&A that allows lessors to elect not to evaluate whether lease-related relief provided to mitigate the economic effects of COVID-19 is a lease modification under ASC Topic 842, Leases ("Topic 842") if certain criteria are met.

This election allows us to bypass a lease-by-lease analysis, and instead choose whether to apply the lease modification accounting framework, with such election applied consistently to leases with similar characteristics and circumstances.

We have elected to apply the lease modification policy relief and have accounted for lease-related relief provided to mitigate the economic effects of COVID-19 as lease modifications under Topic 842, regardless of whether the right to such relief was embedded within the terms of the lessee's lease.

During the year ended December 31, 2020, we entered into rent deferral agreements with certain tenants, many of which were placed on the cash basis of accounting, resulting in the deferral to future periods of $ 4.3 million of rent that had been contractually due in 2020.

We are in the process of negotiating additional rent deferrals and other lease concessions with some of our tenants, which have been considered when establishing credit losses against billed and deferred rent receivables.

During the 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 our former 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 (see Note 6 for additional information).

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.

The Combination

In the Combination on July 18, 2017, we acquired the JBG Assets in exchange for approximately 37.2 million common shares and OP Units.

The Combination has been accounted for at fair value under the acquisition method of accounting.

The following allocation of the purchase price was based on the fair value of the assets acquired and liabilities assumed (in thousands):

Fair value of purchase consideration:

Common shares and OP Units

Total consideration paid

Fair value of assets acquired and liabilities assumed:

Land and improvements

Building and improvements

Construction in progress, including land

Leasehold improvements and equipment

Restricted cash

Investments in unconsolidated real estate ventures

Identified intangible assets

Notes receivable (1)

Identified intangible liabilities

Mortgages payable assumed (2)

Capital lease obligations assumed (3)

Lease assumption liabilities (4)

Deferred tax liability (5)

Other liabilities acquired, net

Noncontrolling interests in consolidated subsidiaries

Net assets acquired

Gain on bargain purchase (6)

Total consideration paid

____________________

During the year ended December 31, 2017, we received proceeds of $ 50.9 million from the repayment of the notes receivable acquired in the Combination.

Subject to various interest rate swap and cap agreements assumed in the Combination that are considered economic hedges, but not designated as accounting hedges.

In the Combination, two ground leases were assumed that were determined to be capital leases.

On July 25, 2017, we purchased a land parcel located in Reston, Virginia associated with one of the ground leases for $ 19.5 million .

Includes a $ 14.0 million payment to a tenant, which was paid in 2018, and a $ 34.1 million lease liability we assumed in relocating a tenant to one of our office buildings.

The $ 34.1 million assumed lease liability was based on the contractual payments we assumed under the tenant’s previous lease, which are partially offset by estimated sub-tenant income we anticipate receiving as we actively pursue a sub-tenant.

Related to the management and leasing contracts acquired in the Combination.

The Combination resulted in a gain on bargain purchase of $ 24.4 million for the year ended December 31, 2017 because the fair value of the identifiable net assets acquired exceeded the purchase consideration.

As a result of finalizing our fair value estimates used in the purchase price allocation related to the Combination, during the year ended December 31, 2018, we adjusted the fair value of certain assets acquired and liabilities assumed consisting of a decrease of $ 468,000 to investments in unconsolidated real estate ventures, an increase of $ 4.7 million to lease assumption liabilities and an increase of $ 2.4 million to other liabilities acquired, resulting in a reduction of the gain on bargain purchase of $ 7.6 million for the year ended December 31, 2018.

The purchase consideration was based on the fair value of the common shares and OP Units issued in the Combination.

We have concluded that all acquired assets and liabilities were recognized and that the valuation procedures and resulting estimates of fair values were appropriate.

The fair value of the common shares and OP Units purchase consideration was determined as follows (i n thousands, except exchange ratio and price per share/unit):

Outstanding common shares and common limited partnership units prior to the Combination

Exchange ratio (1)

Common shares and OP Units issued in consideration

Price per share/unit (2)

Fair value of common shares and OP Units issued in consideration

Fair value adjustment to OP Units due to transfer restrictions

Portion of consideration attributable to performance of future services (3)

Fair value of common shares and OP Units purchase consideration

____________________

Represents the implied exchange ratio of one common share and OP Unit of JBG SMITH for 2.71 common shares and common limited partnership units prior to the Combination.

Represents the volume weighted average share price on July 18, 2017.

OP Unit consideration paid to certain of the owners of the JBG Assets, which have a fair value of $ 110.6 million , is subject to post-combination employment with vesting over periods of either 12 or 60 months and amortization is recognized as compensation expense over the period of employment in "General and administrative expense:

Share-based compensation related to Formation Transaction and special equity awards" in our statements of operations.

The JBG Assets acquired on July 18, 2017 comprise:

(i) 30 operating assets comprising 21 commercial assets totaling 4.1 million square feet ( 2.4 million square feet at our share) and nine multifamily assets with 2,883 units ( 1,099 units at our share);

(ii) 11 commercial and multifamily assets under construction totaling over 2.5 million square feet ( 2.2 million square feet at our share);

(iii) two near-term development commercial and multifamily assets totaling 401,000 square feet ( 242,000 square feet at our share);

(iv) 26 future development assets totaling 11.7 million square feet ( 8.5 million square feet at our share) of estimated potential development density;

and (v) JBG/Operating Partners, L.P., a real estate services company providing investment, development, asset management, property management, leasing, construction management and other services.

Before the Combination, JBG/Operating Partners, L.P.

was owned by 20 unrelated individuals, 19 of whom became our employees and three of whom serve on our Board of Trustees.

The following is a summary of the fair values of tangible and identified intangible assets and liabilities, which have definite lives:

Total Fair Value

Weighted Average Amortization Period

Useful Life (1)

(In thousands)

Tangible assets:

Building and improvements

Tenant improvements

Shorter of useful life or remaining life of the respective lease

Total building and improvements

Leasehold improvements

Shorter of useful life or remaining life of the respective lease

Total leasehold improvements and equipment

Identified intangible assets:

In-place leases

Remaining life of the respective lease

Above-market real estate leases

Remaining life of the respective lease

Below-market ground leases

Remaining life of the respective lease

Option to enter into ground lease

Remaining life of contract

Management and leasing contracts (2)

Estimated remaining life of contracts, ranging between 3 - 9 years

Total identified intangible assets

Identified intangible liabilities:

Below-market real estate leases

Remaining life of the respective lease

____________________

In determining these useful lives, we considered the length of time the asset had been in existence, the maintenance history, as well as anticipated future maintenance, and any contractual stipulations that might limit the useful life.

Includes in-place property management, leasing, asset management and development management contracts.

The total revenue and net loss of the JBG Assets for the year ended December 31, 2017 included in our statements of operations from the acquisition date was $ 71.3 million and $ 23.1 million .

In the Combination on July 18, 2017, we acquired the JBG Assets in exchange for approximately 37.2 million common shares and OP Units and cash of $ 20.6 million for total consideration valued at $ 1.2 billion.

The Combination was accounted for at fair value under the acquisition method of accounting.

The Combination resulted in a gain on bargain purchase of $ 24.4 million during the year ended December 31, 2017, as the fair value of the identifiable net assets acquired exceeded the purchase consideration.

During the year ended December 31, 2018, we finalized our fair value estimates used in the purchase price allocation related to the Combination, resulting in a reduction of the gain on bargain purchase of $ 7.6 million.

Acquisitions, Dispositions and Assets Held for Sale

In December 2020, we acquired a 1.4 -acre future development parcel in National Landing, which was formerly occupied by the Americana Hotel, and three other parcels 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.

Transaction costs related to the asset acquisition of $ 688,000 were included in the cost of the acquisition.

In December 2019, we acquired F1RST Residences, a 325 -unit multifamily asset in the Ballpark submarket of Washington, D.C.

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See Note 7 for additional information.

The multifamily portion of the building was 91.7 % occupied as of December 31, 2019 .

Transaction costs related to the asset acquisition of $ 4.7 million were included in the cost of the acquisition.

During the year ended December 31, 2018, we purchased a land parcel and the remaining interest in the West Half real estate venture for an aggregate purchase price of $ 28.0 million .

In December 2018, we purchased a land parcel and the remaining interest in the West Half real estate venture for an aggregate purchase price of $ 28.0 million.

The following is a summary of disposition activity for the year ended December 31, 2020:

Date Disposed

Total Square Feet

Gross Sales Price

Cash Proceeds from Sale

Gain on Sale of Real Estate

(In thousands)

February 4, 2019

Commerce Executive / Commerce Metro

Commercial / Other

Reston, Virginia

July 31, 2019

1600 K Street

Washington, D.C.

December 18, 2019

Vienna Retail

Vienna, Virginia

December 12, 2019

Central Place Tower (3)

January 15, 2020

Metropolitan Park (1)

Arlington, Virginia

______________

The sale also included 894,000 square feet of estimated potential development density.

The sale was part of a like-kind exchange.

(1) The property, which was sold to Amazon, was part of a like-kind exchange.

See Note 7 for additional information.

Cash proceeds include the reimbursement of $ 4.0 million of tenant improvement costs and leasing commissions paid by us prior to the closing.

Represents the gain, net of certain liabilities, on the sale of a 50.0 % interest in the entity that owns Central Place Tower and the remeasurement of our remaining 50.0 % interest to fair value.

Total square feet represents potential development density approved by Arlington County.

In June 2020, we recognized a loss of $ 3.0 million from the sale of 11333 Woodglen Drive/NoBe II Land/Woodglen ("Woodglen") by our unconsolidated real estate venture with Landmark Partners ("Landmark").

In October 2020, we recognized a gain of $ 800,000 from the sale of Pickett Industrial Park by our unconsolidated real estate venture with CBREI Venture.

See Note 6 for additional information.

During the year ended December 31, 2018, we sold four commercial assets, a future development asset and the out-of-service portion of a multifamily asset for an aggregate gross sales price of $ 427.4 million , resulting in gains on sale of real estate of $ 52.2 million .

During the year ended December 31, 2019, we sold three commercial assets for the gross sales price of $ 165.4 million and the 50.0 % interest in a real estate venture that owned Central Place Tower for the gross sales price of $ 220.0 million, resulting in an aggregate gain on the sale of real estate of $ 105.0 million.

During the year ended December 31, 2018, we sold four commercial assets, a future development asset and the out-of-service portion of a multifamily asset for an aggregate gross sales price of $ 427.4 million, resulting in an aggregate gain on the sale of real estate of $ 52.2 million.

Assets Held for Sale

As of December 31, 2020 and 2019, we had certain real estate properties that were classified as held for sale.

The amounts included in "Assets held for sale" in our balance sheets primarily represent the carrying value of real estate.

The amounts included in "Assets held for sale"

in our balance sheets primarily represent the carrying value of real estate.

The following is a summary of assets held for sale:

Total Square Feet

Assets Held for Sale

Liabilities Related to Assets Held for Sale

Square Feet (1)

(In thousands)

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Arlington, Virginia

December 31, 2019

Pen Place (2)

Arlington, Virginia

Metropolitan Park (3)

Arlington, Virginia

December 31, 2018

Commerce Executive /

Commerce Metro Land (2)

Reston, Virginia

_______________

In March 2019, we entered into agreements for the sale of Pen Place and Metropolitan Park, land sites having an aggregate estimated potential development density of up to approximately 4.1 million square feet, for approximately $ 293.9 million , subject to customary closing conditions.

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 sale was part of a like-kind exchange.

See Note 7 for additional information.

As noted above, we sold Commerce Executive/Commerce Metro Land in February 2019 .

Tenant and Other Receivables, Net

(1) Represents estimated or approved potential development density.

(2) In March 2019, we entered into an agreement for the sale of Pen Place for approximately $ 149.9 million, subject to customary closing conditions.

We expect the sale of Pen Place to Amazon to close in 2021.

(3) As noted above, we sold Metropolitan Park to Amazon in January 2020.

Tenant and Other Receivables

The following is a summary of tenant and other receivables:

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Third-party real estate services

Allowance for doubtful accounts (1)

Total tenant and other receivables, net

_______________

Due to the adoption of Topic 842 as of January 1, 2019, we recognize changes in the assessment of collectability of tenant receivables as adjustments to the specific tenant’s receivable in our balance sheet and to "Property rentals revenue" in our statement of operations.

Prior to the adoption of Topic 842, we recorded estimated losses on tenant receivables as an allowance for doubtful accounts in our balance sheets and to "Property operating expenses" in our statements of operations.

Total tenant and other receivables

(1) Includes $ 8.2 million associated with certain lease guarantees as of December 31, 2020.

Investments in Unconsolidated Real Estate Ventures

2 unchanged sentences

(In thousands)

Prudential Global Investment Management ("PGIM")

1.8 % - 49.0 %

CBREI Venture

5.0 % - 64.0 %

Canadian Pension Plan Investment Board ("CPPIB")

Berkshire Group

CIM Group ("CIM") and Pacific Life Insurance Company

Brandywine Realty Trust

Pacific Life Insurance Company ("PacLife")

Total investments in unconsolidated real estate ventures (2)

_______________

(1) Ownership interests as of December 31, 2020.

We have multiple investments with certain venture partners with varying ownership interests.

(2) As of December 31, 2020 and 2019, the difference between the investments in unconsolidated real estate ventures and the net book value of the underlying assets was $ 18.9 million and $ 14.3 million, resulting principally from capitalized interest and our zero investment balance in the real estate venture with CPPIB that owns 1101 17th Street.

We provide leasing, property management and other real estate services to our unconsolidated real estate ventures.

We recognized revenue, including expense reimbursements, of $ 25.5 million, $ 28.5 million and $ 26.1 million for each of the three years in the period ended December 31, 2020 for such services.

In December 2019, we sold a 50.0 % interest in a real estate venture that owns Central Place Tower, a 552,000 square foot office building located in Arlington, Virginia, to PGIM for the gross sales price of $ 220.0 million .

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

We evaluate reconsideration events as we become aware of them.

Reconsideration events include amendments to real estate venture agreements and changes in our partner's ability to make contributions to the venture.

Under certain circumstances, we may purchase our partner's interest.

In December 2019, we sold a 50.0 % interest in a real estate venture that owns Central Place Tower, a 552,000 square foot office building located in Arlington, Virginia, to PGIM for $ 220.0 million.

Per the terms of the venture agreement, we determined the venture was not a VIE and we do not have a controlling financial interest in the venture.

As a result, we deconsolidated our remaining 50.0 % interest in the real estate venture and recorded a gain as our unconsolidated interest was increased to reflect its fair value.

We recognized an aggregate $ 53.4 million gain, net of certain liabilities, recorded as "Gain on sale of real estate" in our statement of operations for the year ended December 31, 2019, on the partial sale and remeasurement of our remaining interest in the real estate venture subsequent to the transfer of control.

As of December 31, 2019 and 2018 , we had a zero investment balance in the real estate venture that owns 1101 17th Street and had suspended the equity method of accounting for the venture since June 30, 2018.

We recognized an aggregate $ 53.4 million gain, net of certain liabilities, which was included in "Gain on sale of real estate"

in our statement of operations for the year ended December 31, 2019, on the partial sale and remeasurement of our remaining interest in the real estate venture subsequent to the transfer of control.

In June 2020, our unconsolidated real estate venture with Landmark sold Woodglen, commercial and future development assets located in Rockville, Maryland, for $ 17.8 million.

We recognized our proportionate share of the loss from the sale of $ 3.0 million, which was included in "Income (loss) from unconsolidated real estate ventures, net"

in our statement of operations for the year ended December 31, 2020.

Additionally, in connection with the sale, our unconsolidated real estate venture repaid the related mortgage payable of $ 12.2 million.

CBREI Venture

In October 2020, our unconsolidated real estate venture with CBREI Venture sold Pickett Industrial Park, a commercial asset located in Alexandria, Virginia, for $ 46.3 million.

We recognized our proportionate share of the gain from the sale of $ 800,000 , which was included in "Income (loss) from unconsolidated real estate ventures, net"

in our statement of operations for the year ended December 31, 2020.

Additionally, in connection with the sale, our unconsolidated real estate venture repaid the related mortgage payable of $ 23.6 million.

As of December 31, 2020 and 2019, we had a zero investment balance in the real estate venture that owns 1101 17th Street and had suspended equity loss recognition for the venture since June 30, 2018.

We will recognize as income any future distributions from the venture until our share of unrecorded earnings and contributions exceeds the cumulative excess distributions previously recognized in income.

During the years ended December 31, 2019 and 2018 , we recognized income of $ 6.4 million and $ 8.3 million related to distributions from this venture, which was included in "Income (loss) from unconsolidated real estate ventures, net" in our statement of operations.

During the year ended December 31, 2018 , we also recognized the $ 5.4 million negative investment balance as income within "Income (loss) from unconsolidated real estate ventures, net" in our statement of operations as a result of the venture refinancing a mortgage payable collateralized by the property and eliminating certain principal guaranty provisions that had been included in a prior loan.

During the years ended December 31, 2019 and 2018, we recognized income of $ 6.4 million and $ 8.3 million related to distributions from this venture, which was included in "Income (loss) from unconsolidated real estate ventures, net"

in our statement of operations.

During the year ended December 31, 2018, we also recognized the $ 5.4 million negative investment balance as income within "Income (loss) from unconsolidated real estate ventures, net"

in our statement of operations as a result of the venture refinancing a mortgage payable collateralized by the property and eliminating certain principal guaranty provisions that had been included in a prior loan.

In December 2018, our unconsolidated real estate venture with CPPIB sold The Warner, a 583,000 square foot office building located in Washington, D.C., for $ 376.5 million.

In connection with the sale, the unconsolidated real estate venture recognized a gain on sale of $ 32.5 million , of which our proportionate share was $ 20.6 million , which was included in "Income (loss) from unconsolidated real estate ventures, net" in our statement of operations for the year ended December 31, 2018 .

The unconsolidated real estate venture recognized a gain on sale of $ 32.5 million, of which our proportionate share was $ 20.6 million, which was included in "Income (loss) from unconsolidated real estate ventures, net"

in our statement of operations for the year ended December 31, 2018.

Additionally, in connection with the sale, our unconsolidated real estate venture repaid the related mortgage payable of $ 270.5 million.

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We contributed 1900 N Street, valued at $ 95.9 million, to the real estate venture, and CPPIB committed to contribute approximately $ 101.3 million to the venture for a 45.0 % interest, which reduced our ownership interest from 100.0 % at the real estate venture's formation to 55.0 % as CPPIB's contributions were funded.

CIM and PacLife

In January 2018, we invested $ 10.1 million for a 16.67 % interest in a real estate venture with CIM and PacLife, which purchased the 1,152-key Wardman Park hotel, located adjacent to the Woodley Park Metro Station in northwest Washington, D.C.

Prior to the acquisition by this venture, the JBG Legacy Funds owned a 47.64 % interest in the Wardman Park hotel.

In April 2020, our real estate venture with CPPIB entered into a mortgage loan with a maximum principal balance of $ 160.0 million collateralized by 1900 N Street.

The venture initially received proceeds of $ 134.5 million from the mortgage loan.

During the second quarter of 2020, we received a distribution of $ 70.8 million from the venture.

In January 2018, we invested $ 10.1 million for a 16.67 % interest in a real estate venture led by PacLife, which purchased the 1,152-key Marriott Wardman Park hotel, located adjacent to the Woodley Park Metro Station in northwest Washington, D.C.

Prior to the acquisition by this venture, the JBG Legacy Funds owned a 47.64 % interest in The Marriott Wardman Park hotel.

The JBG Legacy Funds did not receive any proceeds from the sale, as the net proceeds were used to satisfy the prior mortgage debt.

A third-party asset manager oversees the hotel operations on behalf of the venture and our involvement will increase only to the extent a land development opportunity becomes the primary business plan for the asset.

In August 2018, JP Morgan, our former partner in the real estate venture that owned the Investment Building, a 401,000 square foot office building located in Washington, D.C., acquired our 5.0 % interest in the venture for $ 24.6 million , resulting in a gain of $ 15.5 million , which was included in "Income (loss) from unconsolidated real estate ventures, net" in our statement of operations for the year ended December 31, 2018.

During the second quarter of 2020, we determined that our investment in the venture 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 PacLife.

In August 2018, JP Morgan, our former partner in the real estate venture that owned the Investment Building, a 401,000 square foot office building located in Washington, D.C., acquired our 5.0 % interest in the venture for $ 24.6 million, resulting in a gain of $ 15.5 million, which was included in "Income (loss) from unconsolidated real estate ventures, net"

in our statement of operations for the year ended December 31, 2018.

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

Weighted Average Effective

Average Effective

Interest Rate (1)

2 unchanged sentences

Fixed rate (3) (4)

Unconsolidated real estate ventures - mortgages payable

Mortgages payable

Unamortized deferred financing costs

Unconsolidated real estate ventures - mortgages payable, net (4)

______________

Mortgages payable, net (4)

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

3 unchanged sentences

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

Combined balance sheet information:

(In thousands)

Combined balance sheet information:

Real estate, net

Other assets, net

Borrowings, net

Mortgages payable

Other liabilities, net

1 unchanged sentence

Total liabilities and equity

______________

On January 1, 2019, our unconsolidated real estate ventures adopted Topic 842, which required the ventures to record operating right-of-use assets totaling $ 52.4 million and related lease liabilities totaling $ 44.1 million .

Year Ended December 31,

Combined income statement information:

(In thousands)

Combined income statement information:

Total revenue

Operating income (1)

______________

Operating income (loss) (2) (3)

Net loss (2) (3)

(1) Excludes information related to the venture that owns The Marriott Wardman Park hotel for the second half of 2020 as we suspended equity loss recognition for the venture after June 30, 2020 .

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

(2) Includes the loss from the sale of Woodglen of $ 16.4 million and the gain from the sale of Pickett Industrial Park of $ 8.0 million recognized by our unconsolidated real estate ventures during the year ended December 31, 2020.

(3) Includes gain on sale of The Warner of $ 32.5 million recognized by our unconsolidated real estate venture with CPPIB during the year ended December 31, 2018 .

Variable Interest Entities

We hold various interests in entities deemed to be VIEs, which we evaluate at acquisition, formation, after a change in the ownership agreement or after a change in the real estate venture's economics to determine if the VIEs should be consolidated in our financial statements or should no longer be considered a VIE.

Certain criteria we assess in determining whether the VIEs should be consolidated relate to our at-risk equity, our control over significant business activities, our voting rights, the noncontrolling interest kick-out rights and whether we are the primary beneficiary of the VIE.

We hold various interests in entities deemed to be VIEs, which we evaluate at acquisition, formation, after a change in the ownership agreement, after a change in the real estate venture's economics or after any other reconsideration event to

determine if the VIEs should be consolidated in our financial statements or should no longer be considered a VIE.

Certain criteria we assess in determining whether we are the primary beneficiary of the VIE and, therefore, should consolidate the VIE include our control over significant business activities, our voting rights and the noncontrolling interest kick-out rights.

Unconsolidated VIEs

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We account for our investment in these entities under the equity method.

As of December 31, 2019 and 2018 , the net carrying amounts of our investment in these entities were $ 242.9 million and $ 232.8 million , which are included in "Investments in unconsolidated real estate ventures" in our balance sheets.

Our equity in the income of unconsolidated VIEs is included in "Income (loss) from unconsolidated real estate ventures, net" in our statements of operations.

As of December 31, 2020 and 2019, the net carrying amounts of our investment in these entities were $ 116.2 million and $ 242.9 million, which were included in "Investments in unconsolidated real estate ventures"

in our balance sheets.

Our equity in the income of unconsolidated VIEs is included in "Income (loss) from unconsolidated real estate ventures, net"

in our statements of operations.

Our maximum loss exposure in these entities is limited to our investments, construction commitments and debt guarantees.

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Consolidated VIEs

JBG SMITH LP is our most significant consolidated VIE.

We hold the majority limited partnership interest in the operating partnership, act as the general partner and exercise full responsibility, discretion and control over its day-to-day management.

The noncontrolling interests of the operating partnership do not have substantive liquidation rights, substantive kick-out rights without cause, or substantive participating rights that could be exercised by a simple majority of noncontrolling interest limited partners (including by such a limited partner unilaterally).

Because the noncontrolling interest holders do not have these rights, the operating partnership is a VIE.

As general partner, we have the power to direct the core activities of the operating partnership that most significantly affect its performance, and through our majority interest in the operating partnership have both the right to receive benefits from and the obligation to absorb losses of the operating partnership.

Accordingly, we are the primary beneficiary of the operating partnership and consolidate the operating partnership in our financial statements.

As we conduct our business and hold our assets and liabilities through the operating partnership, the total assets and liabilities of the operating partnership comprise substantially all of our consolidated assets and liabilities.

In conjunction with the acquisition of F1RST Residences, located in the Ballpark submarket of Washington, D.C.

in December 2019, we entered into a like-kind exchange agreement with a third-party intermediary.

As of December 31, 2019, the third-party intermediary was the legal owner of the entity that owned this property.

The agreement that governed the operations of this entity provided us with the power to direct the activities that most significantly impacted the entity's economic performance.

This entity was deemed a VIE as of December 31, 2019 primarily because it may not have had sufficient equity at risk to finance its activities without additional subordinated financial support from other parties.

We determined we were the primary beneficiary of the VIE as a result of having had the power to direct the activities that most significantly impacted its economic performance and the obligation to absorb losses, as well as the right to receive benefits, that could have been potentially significant to the VIE.

Accordingly, we consolidated the property and its operations as of the acquisition date.

Legal ownership of this entity was transferred to us by the third-party intermediary as the like-kind exchange agreement was completed with the sale of the

Metropolitan Park land sites in January 2020 .

In conjunction with the acquisition of Potomac Yard Land Bay H, located in Alexandria, Virginia in December 2018, we entered into a like-kind exchange agreement with a third-party intermediary.

We consolidate a VIE when we control the significant business activities of an entity.

An entity is a VIE because it is in the development stage and/or does not hold sufficient equity at risk.

We are the primary beneficiary of a VIE because the noncontrolling interest holder does not have substantive kick-out or participating rights, and we control the significant business activities.

JBG SMITH LP is our sole consolidated VIE.

We hold 90.5 % of the limited partnership interest in JBG SMITH LP, act as the general partner and exercise full responsibility, discretion and control over its day-to-day management.

The noncontrolling interests of JBG SMITH LP do not have substantive liquidation rights, substantive kick-out rights without cause, or substantive participating rights that could be exercised by a simple majority of noncontrolling interest limited partners (including by such a limited partner unilaterally).

Because the noncontrolling interest holders do not have these rights, JBG SMITH LP is a VIE.

As general partner, we have the power to direct the activities of JBG SMITH LP that most significantly affect its performance, and through our majority interest, we have both the right to receive benefits from and the obligation to absorb losses of JBG SMITH LP.

Accordingly, we are the primary beneficiary of JBG SMITH LP and consolidate it in our financial statements.

Because we conduct our business and hold our assets and liabilities through JBG SMITH LP, its total assets and liabilities comprise substantially all of our consolidated assets and liabilities.

In conjunction with the acquisition of F1RST Residences in December 2019, we entered into a like-kind exchange agreement with a third-party intermediary.

As of December 31, 2019, the third-party intermediary was the legal owner of the entity that owned this property.

The agreement that governed the operations of this entity provided us with the power to direct the activities that most significantly impacted the entity's economic performance.

This entity was deemed a VIE as of December 31, 2018 primarily because it may not have had sufficient equity at risk to finance its activities without additional subordinated financial support from other parties.

Accordingly, we consolidated the property and its operations as of the acquisition date.

Legal ownership of this entity was transferred to us by the third-party intermediary as the like-kind exchange agreement was completed with the sale of Commerce Executive/Commerce Metro Land in February 2019 .

We consolidate VIEs in which we control the most significant business activities.

These entities are VIEs because they are in the development stage and do not hold sufficient equity at risk.

We are the primary beneficiaries of these VIEs because the noncontrolling interest holders do not have substantive kick-out or participating rights, and we control all of the significant business activities.

As of December 31, 2019 , excluding the operating partnership, we consolidated two VIEs with total assets and liabilities of $ 136.8 million and $ 11.8 million .

As of December 31, 2018 , excluding the operating partnership, we consolidated two VIEs with total assets and liabilities of $ 94.8 million and $ 43.4 million .

We determined we were the primary beneficiary of the VIE, and accordingly, we consolidated the property and its operations as of the acquisition date.

Legal ownership of this entity was transferred to us by the third-party intermediary when the like-kind exchange agreement was completed with the sale of Metropolitan Park in January 2020.

During the second quarter of 2020, The Wren, an under-construction multifamily asset in Washington, D.C.

that we own through a consolidated real estate venture, which we had deemed to be a VIE, began placing units into service and commenced operations.

We no longer deemed the real estate venture to be a VIE because it was determined to have sufficient equity to finance its activities without additional support.

See Note 12 for additional information.

Other Assets, Net

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(In thousands)

Deferred leasing costs

Accumulated amortization

Deferred leasing costs, net

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Other identified intangible assets, net

Operating right-of-use assets, net (1)

Operating lease right-of-use assets

Finance lease right-of-use assets (1)

Prepaid expenses

Deferred financing costs on credit facility, net

Derivative agreements, at fair value

Total other assets, net

______________

Related to our adoption of Topic 842 on January 1, 2019.

See Note 2 for additional information.

The following is a summary of the composition of lease intangible assets, net:

(1) Related to an amendment of the ground lease for 1730 M Street executed during the year ended December 31, 2020.

The amendment extended the expiration date of the lease from April 2061 to December 2118, and resulted in a change in its classification from an operating to a finance lease.

(2) Includes deposits totaling $ 25.3 million with the Federal Communications Commission in connection with the acquisition of wireless spectrum licenses.

The following is a summary of the composition of deferred leasing costs, lease intangible assets and other identified intangible assets:

December 31, 2020

December 31, 2019

Accumulated Amortization

(In thousands)

Deferred leasing costs

Lease intangible assets:

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Above-market real estate leases

Below-market ground leases

Total lease intangibles assets

Accumulated amortization:

In-place leases

Above-market real estate leases

Below-market ground leases

Total accumulated amortization

Lease intangible assets, net

The following is a summary of the composition of other identified intangible assets, net:

(in thousands)

Other identified intangible assets:

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Management and leasing contracts

Total other identified intangibles assets

Accumulated amortization:

Management and leasing contracts

Total accumulated amortization

Other identified intangible assets, net

The following is a summary of amortization expense related to lease and other identified intangible assets:

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Other amortization

Total lease and other identified intangible asset

amortization expense

___________________________________________

(1) Amounts are included in "Depreciation and amortization expense" in our statements of operations.

(2) Amounts are included in "Property rentals revenue" in our statements of operations.

(3) Amounts are included in "Property operating expenses" in our statements of operations.

The following is a summary of the estimated amortization of lease and other identified intangible assets for the next five years and thereafter as of December 31, 2019 :

Total lease and management and leasing contract amortization expense

(1) Amounts are included in "Depreciation and amortization expense"

in our statements of operations.

(2) Amounts are included in "Property rental revenue"

in our statements of operations.

(3) Amounts are included in "Property operating expenses"

in our statements of operations.

The following is a summary of the estimated amortization related to lease and other identified intangible assets for the next five years and thereafter as of December 31, 2020:

Year ending December 31,

(In thousands)

___________________________________________

(1) Estimated amortization related to the option to enter into ground lease is not included within the amortization table above as the ground lease does not have a definite start date .

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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.

Includes a variable rate mortgage payable with an interest rate cap agreement as of December 31, 2018 .

(2) Includes variable rate mortgage payable with interest rate cap agreements as of December 31, 2020.

(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 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 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 for additional information.

Credit Facility

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 points 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 unsecured term loan ("Tranche A-1 Term Loan") maturing in January 2023 and a $ 200.0 million unsecured term loan ("Tranche A-2 Term Loan") maturing in July 2024.

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.

(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 % .

Principal Maturities

Principal maturities of debt outstanding as of December 31, 2019 , including mortgages payable, revolving credit facility and the term loans, are as follows:

The following is a summary of principal maturities of debt outstanding, including mortgages payable, revolving credit facility and the term loans, as of December 31, 2020:

Year ending December 31,

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Lease incentive liabilities

Lease liabilities related to operating right-of-use assets (1)

Finance lease liability (2)

Liabilities related to operating lease right-of-use assets

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

Security deposits

Environmental liabilities

Ground lease deferred rent payable (3)

Net deferred tax liability

1 unchanged sentence

Derivative agreements, at fair value

Deferred purchase price (2)

Total other liabilities, net

__________________________

Related to our adoption of Topic 842 on January 1, 2019.

See Note 2 for additional information.

In December 2019, we sold a 50.0 % interest in Central Place Tower, which resulted in the deconsolidation of the entity that was the lessee to our sole finance lease.

See Note 6 for additional information.

In connection with our adoption of Topic 842 on January 1, 2019, the ground lease deferred rent payable balance as of December 31, 2018 was included in the initial determination of the operating right-of-use assets.

(1) Related to an amendment of the ground lease for 1730 M Street executed during the year ended December 31, 2020.

The amendment extended the expiration date of the lease from April 2061 to December 2118, and resulted in a change in its classification from an operating to a finance lease .

(2) Deferred purchase price associated with the acquisition of the Americana Hotel.

See Note 4 for additional information.

Amortization expense included in "Property rentals revenue" in our statements of operations related to lease intangible liabilities for each of the three years in the period ended December 31, 2019 was $ 2.5 million , $ 2.6 million and $ 2.3 million .

Amortization expense included in "Property rental revenue"

in our statements of operations related to lease intangible liabilities for each of the three years in the period ended December 31, 2020 was $ 2.0 million, $ 2.5 million and $ 2.6 million.

The following is a summary of the estimated amortization of lease intangible liabilities for the next five years and thereafter as of December 31, 2020:

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We have elected to be taxed as a REIT, and accordingly, we have incurred no federal income tax expense related to our REIT subsidiaries except for our TRSs.

Due to the passage of federal tax reform legislation, which was signed into law on December

22, 2017 and which we refer as the 2017 Tax Act, our TRSs were required to decrease the net deferred tax liability, which resulted in a net tax benefit of $ 3.9 million during the year ended December 31, 2017.

The recorded tax charges in 2017 for the impact of the 2017 Tax Act were made using the current available information and technical guidance on the interpretations of the 2017 Tax Act.

As permitted by Securities and Exchange Commission Staff Accounting Bulletin 118, Income Tax Accounting Implications of the Tax Cuts and Jobs Act, we subsequently finalized our accounting analysis based on the guidance, interpretations and data available as of December 31, 2018.

We did not have any changes to our 2017 estimate related to the 2017 Tax Act and therefore, it had no impact to our 2018 financial statements.

Our financial statements include the operations of our TRSs, which are subject to federal, state and local income taxes on their taxable income.

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Continued qualification as a REIT depends on our ability to satisfy the REIT distribution tests, stock ownership requirements and various other qualification tests.

As of December 31, 2019 , our TRSs have an estimated federal and state net operating loss of $ 3.6 million , which will expire in 2038 and 2039 .

As of December 31, 2020, our TRSs have an estimated federal and state NOL of approximately $ 11.0 million.

The net basis of our assets and liabilities for tax reporting purposes is approximately $ 168.0 million higher than the amounts reported in our balance sheet as of December 31, 2020.

5 unchanged sentences

Income tax benefit

As of December 31, 2019 and 2018 , we have a net deferred tax liability of $ 5.5 million and $ 6.9 million primarily related to the management and leasing contracts assumed in the Combination, partially offset by deferred tax assets associated with tax versus book differences, related general and administrative expenses and the net operating loss remaining from 2018 and 2017.

As of December 31, 2020 and 2019, we have a net deferred tax liability of $ 2.5 million and $ 5.5 million primarily related to the management and leasing contracts assumed in the Combination, partially offset by deferred tax assets associated

with tax versus book differences, related general and administrative expenses and the NOL remaining from 2019, 2018 and 2017.

We are subject to federal, state and local income tax examinations by taxing authorities for 2017 through 2020.

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Accrued bonus

Net operating loss

Deferred revenue

Bad debt expense

Charitable contributions

3 unchanged sentences

Deferred tax liabilities:

Management and leasing contracts

Basis difference - intangible assets

Basis difference - real estate

Total deferred tax liabilities

1 unchanged sentence

During the year ended December 31, 2020, our Board of Trustees declared cash dividends totaling $ 0.90 of which $ 0.405 was taxable as ordinary income for federal income tax purposes, $ 0.27 were capital gain distributions and the remaining $ 0.225 will be determined in 2021.

During the year ended December 31, 2019, our Board of Trustees declared cash dividends totaling $ 0.90 of which $ 0.468 was taxable as ordinary income for federal income tax purposes and $ 0.432 were capital gain distributions.

During the year ended December 31, 2018, our Board of Trustees declared cash dividends totaling $ 1.00 (regular dividends of $ 0.90 per common share and a special dividend of $ 0.10 per common share) of which $ 0.531 was taxable as ordinary income for federal income tax purposes and $ 0.469 were capital gain distributions.

During the year ended December 31, 2017 , our Board of Trustees declared cash dividends of $ 0.45 per common share of which $ 0.385 was taxable as ordinary income for federal income tax purposes and $ 0.065 were capital gains distributions.

Redeemable Noncontrolling Interests

A portion of the OP Units held by persons other than JBG SMITH became redeemable for cash or, at our election, our common shares beginning on August 1, 2018, subject to certain limitations.

OP Units held by persons other than JBG SMITH are redeemable for cash or, at our election, our common shares, subject to certain limitations.

During the years ended December 31, 2020 and 2019, unitholders redeemed 1.3 million and 1.7 million OP Units, which we elected to redeem for an equivalent number of our common shares.

As of December 31, 2020, outstanding OP Units totaled 13.8 million, representing a 9.5 % ownership interest in JBG SMITH LP.

On our balance sheets, our OP Units and certain vested LTIPs are presented at the higher of their redemption value or their carrying value, with such adjustments recognized in "Additional paid-in capital." Redemption value per OP Unit is equivalent to the market value of one of our common shares at the end of the period.

Redemption value per OP Unit is equivalent to the market value of one of our common shares at the end of the period.

In 2021, as of the date of this filing, unitholders redeemed 93,978 OP Units, which we elected to redeem for an equivalent number of our common shares.

Consolidated Real Estate Venture

We are a partner in a real estate venture that owns an under construction multifamily asset located at 965 Florida Avenue in Washington, D.C.

We are a partner in a consolidated real estate venture that owns a multifamily asset located in Washington, D.C.

Pursuant to the terms of the real estate venture agreement, we will fund all capital contributions until our ownership interest reaches a maximum of 97.0 %.

Our partner can redeem its interest, for cash, two years after delivery, but no later than seven years after delivery.

Our partner can redeem its interest for cash under certain conditions.

As of December 31, 2020, we held a 96.0 % ownership interest in the real estate venture.

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Year Ended December 31,

Consolidated Real Estate Venture

(In thousands)

Balance as of beginning of period

Balance as of the beginning of the year

OP Unit redemptions

LTIP Units issued in lieu of

cash bonuses (1)

Net income attributable to

redeemable noncontrolling

Other comprehensive income (loss)

LTIP Units issued in lieu of cash bonuses (1)

Net income (loss) attributable to redeemable noncontrolling interests

Other comprehensive loss

Contributions (distributions)

1 unchanged sentence

Adjustment to redemption value

Balance as of end of period

__________________________

Balance as of the end of the year

(1) See Note 14 for additional information.

Property Rental Revenue

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

Year Ended December 31,

(In thousands)

Property rental revenue

As of December 31, 2020, the amounts that are contractually due, including amounts due from tenants that were placed on a cash basis, from lease payments under our operating leases on an annual basis for the next five years and thereafter are as follows:

Year ending December 31,

(In thousands)

Share-Based Payments and Employee Benefits

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in the Combination resulted in the issuance of 3.3 million OP Units to the former owners with an estimated grant-date fair value of $ 110.6 million.

The OP Units are subject to post-combination vesting over

periods of either 12 or 60 months based on continued employment.

The significant assumptions used to value the OP Units included expected volatility ( 18.0 % to 27.0 % ), risk-free interest rates ( 1.3 % to 1.5 % ) and post-vesting restriction periods ( 1 year to 3 years ).

The OP Units are subject to post-combination vesting over periods of either 12 or 60 months based on continued employment.

Compensation expense for these OP Units is recognized over the graded vesting period.

See Note 3 for additional information.

The following is a summary of the OP Units activity:

Unvested Shares

Weighted Average Grant-Date Fair Value

Unvested at December 31, 2018

Unvested at December 31, 2019

Average Grant-

Date Fair Value

Unvested as of December 31, 2019

( 1,351,682 )

Unvested as of December 31, 2020

The total-grant date fair value of the OP Units that vested for each of the three years in the period ended December 31, 2020 was $ 45.1 million, $ 4.3 million and $ 3.2 million.

JBG SMITH 2017 Omnibus Share Plan

On June 23, 2017, our Board of Trustees adopted the JBG SMITH 2017 Omnibus Share Plan (the "Plan"), effective as of July 17, 2017, and authorized the reservation of 10.3 million of our common shares pursuant to the Plan.

As of December 31, 2020, there were 3.1 million common shares available for issuance under the Plan.

Formation Awards

Pursuant to the Plan, on July 18, 2017, we granted 2.7 million formation awards ("Formation Awards") based on an aggregate notional value of approximately $ 100 million divided by the volume-weighted average price on July 18, 2017 of $ 37.10 per common share.

In 2018, we granted 93,784 Formation Awards based on an aggregate notional value of $ 3.2 million divided by the volume-weighted average price on the date of issuance of $ 34.40 per common share.

In 2018, we granted 93,784 Formation Awards based on the volume-weighted average price on the date of issuance of $ 34.40 per common share.

The Formation Awards are structured in the form of profits interests in JBG SMITH LP that provide for a share of appreciation determined by the increase in the value of a common share at the time of conversion over the volume-weighted average price of a common share at the time the formation unit was granted.

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The value of vested Formation Awards is realized through conversion of the award into a number of LTIP Units, and subsequent conversion into a number of OP Units determined based on the difference between the volume-weighted average price of a common share at the time the Formation Award was granted and the value of a common share on the conversion date.

The conversion ratio between Formation Awards and OP Units, which starts at zero, is the quotient of (i) the excess of the value of a common share on the conversion date above the per share value at the time the Formation Award was granted over (ii) the value of a common share as of the date of conversion.

The conversion ratio between Formation Awards and OP Units, which starts at zero, is the quotient of:

(i) the excess of the value of a common share on the conversion date above the per share value at the time the Formation Award was granted over (ii) the value of a common share as of the date of conversion.

Like options, Formation Awards have a finite 10-year term over which their value is allowed to increase and during which they may be converted into LTIP Units (and in turn, OP Units).

Holders of Formation Awards will not receive distributions or allocations of net income or net loss prior to vesting and conversion to LTIP Units.

The aggregate grant-date fair value of the Formation Awards granted during the years ended December 31, 2018 and 2017 was $ 725,000 and $ 23.7 million estimated using Monte Carlo simulations.

No Formation Awards were granted during the year ended December 31, 2019.

Holders of Formation Awards will not receive distributions or allocations of net income (net loss) prior to vesting and conversion to LTIP Units.

The aggregate grant-date fair value of the Formation Awards granted during the year ended December 31, 2018 was $ 725,000 estimated using Monte Carlo simulations.

No Formation Awards were granted during the years ended December 31, 2020 and 2019.

Compensation expense for these awards is being recognized over a five-year period.

The following is a summary of the significant assumptions used to value the Formation Awards:

Year Ended December 31,

December 31, 2018

Expected volatility

1 unchanged sentence

Dividend yield

2.5 % to 2.7 %

Risk-free interest rate

2.8 % to 3.0 %

Expected life

The following is a summary of the Formation Awards activity:

Unvested Shares

Weighted Average Grant-Date Fair Value

Unvested at December 31, 2018

Unvested at December 31, 2019

The total-grant date fair value of the Formation Awards that vested during the years ended December 31, 2019 and 2018 was $ 1.4 million and $ 333,000 .

Average Grant-

Date Fair Value

Unvested as of December 31, 2019

Unvested as of December 31, 2020

The total-grant date fair value of the Formation Awards that vested for each of the three years in the period ended December 31, 2020 was $ 6.9 million, $ 1.4 million and $ 333,000 .

LTIP, Time-Based LTIP and Special Time-Based LTIP Units

During the years ended December 31, 2019 and 2018 , as part of their annual compensation, we granted a total of 50,159 and 25,770 fully vested LTIP Units to non-employee trustees with an aggregate grant-date fair value of $ 1.8 million and $ 794,000 .

During each of the three years in the period ended December 31, 2020, as part of their annual compensation, we granted a total of 54,607 , 50,159 and 25,770 fully vested LTIP Units to non-employee trustees with an aggregate grant-date fair value of $ 1.5 million, $ 1.8 million and $ 794,000 .

The LTIP Units may not be sold while such non-employee trustee is serving on the Board.

On July 18, 2017, we granted a total of 47,166 fully vested LTIP Units to the seven independent trustees in the notional amount of $ 250,000 each.

On the same date, we also granted 59,927 LTIP units to a key employee of which 50 % vested immediately and the remaining 50 % vests ratably from the 31 st to the 60 th month following the grant date.

During each of the three years in the period ended December 31, 2019 , we granted 351,982 , 367,519 and 302,518 Time-Based LTIP Units to management and other employees with a weighted average grant-date fair value of $ 34.26 , $ 31.48 and $ 33.71 per unit that vest over four years , 25.0 % per year, subject to continued employment.

During each of the three years in the period ended December 31, 2020, we granted 381,504 , 351,982 and 367,519 Time-Based LTIP Units to certain employees with a weighted average grant-date fair value of $ 38.52 , $ 34.26 and $ 31.48 per unit that vest over four years , 25.0 % per year, subject to continued employment.

Compensation expense for these units is being recognized over a four-year period.

During the year ended December 31, 2019 , we granted 91,636 of fully vested LTIP Units, with a grant-date fair value of $ 34.21 per unit, to certain executives who elected to receive all or a portion of their cash bonus paid in 2019, related to 2018 service, as LTIP Units.

Additionally, during the year ended December 31, 2018 , related to our successful pursuit of Amazon's additional headquarters in National Landing, we granted 356,591 Special Time-Based LTIP Units to management and other employees with a weighted average grant-date fair value of $ 36.84 per unit.

During the years ended December 31, 2020 and 2019, we granted 90,094 and 91,636 of fully vested LTIP Units, with a grant-date fair value of $ 40.13 and $ 34.21 per unit, to certain executives who elected to receive all or a portion of their cash bonus paid in the subsequent year related to past service in the form of fully vested LTIP Units.

Additionally, during the year ended December 31, 2018, related to our successful pursuit of Amazon's new headquarters in National Landing, we granted 356,591 Special Time-Based LTIP Units to certain employees with a weighted average grant-date fair value of $ 36.84 per unit.

The Special Time-Based LTIP Units vest 50 % on each of the fourth and fifth anniversaries of the grant date, subject to continued employment.

Compensation expense for these units is being recognized over a five-year period.

The aggregate grant-date fair value of the LTIP, Time-Based LTIP and Special Time-Based LTIP Units granted (collectively "Granted LTIPs") for each of the three years in the period ended December 31, 2019 was $ 17.0 million , $ 25.5 million and $ 13.7 million , valued using Monte Carlo simulations.

The aggregate grant-date fair value of the LTIP, Time-Based LTIP and Special Time-Based LTIP Units granted (collectively "Granted LTIPs") for each of the three years in the period ended December 31, 2020 was $ 19.9 million, $ 17.0 million and $ 25.5 million, valued using Monte Carlo simulations.

Holders of the Granted LTIPs have the right to convert all or a portion of vested units into OP Units, which are then subsequently exchangeable for our common shares.

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Risk-free interest rate

0.3 % to 1.5 %

2.3 % to 2.6 %

1.9 % to 2.6 %

Post-grant restriction periods

The following is a summary of the Granted LTIP activity:

Unvested Shares

Weighted Average Grant-Date Fair Value

Unvested at December 31, 2018

Unvested at December 31, 2019

Average Grant-

Date Fair Value

Unvested as of December 31, 2019

Unvested as of December 31, 2020

The total-grant date fair value of the Granted LTIPs that vested for each of the three years in the period ended December 31, 2020 was $ 15.3 million, $ 12.0 million and $ 3.6 million.

In 2020, we issued 471,598 LTIP Units to management and employees with an estimated aggregate grant-date fair value of $ 18.3 million .

Performance-Based LTIP and Special Performance-Based LTIP Units

During each of the three years in the period ended December 31, 2019 , we granted 478,411 , 567,106 and 605,072 Performance-Based LTIP Units to management and other employees.

During the year ended December 31, 2018, related to our successful pursuit of Amazon's additional headquarters at our properties in National Landing, we granted 511,555 Special Performance-Based LTIP Units to management and other employees.

Performance-Based LTIP Units, including the Special Performance-Based LTIP Units, are performance-based equity compensation pursuant to which participants have the opportunity to earn LTIP Units based on the relative performance of the total shareholder return ("TSR") of our common shares compared to the companies in the FTSE NAREIT Equity Office Index, over the defined performance period beginning on the grant date, inclusive of dividends and stock price appreciation.

Our Performance-Based LTIP and Special Performance-Based LTIP Units have a three -year performance period.

Fifty percent of any Performance-Based LTIP Units that are earned vest at the end of the three -year performance period and the remaining 50 % on the fourth anniversary of the date of grant, subject to continued employment.

Fifty percent of any Special Performance-Based LTIP Units that are earned at the end of the three -year performance period vest on the fourth anniversary of the date of grant and the remaining 50 % on the fifth anniversary of the date of grant, subject to continued employment.

During each of the three years in the period ended December 31, 2020, we granted 593,100 , 478,411 and 567,106 Performance-Based LTIP Units to certain employees.

During the year ended December 31, 2018, related to our successful pursuit of Amazon's new headquarters at our properties in National Landing, we granted 511,555 Special Performance-Based LTIP Units to certain employees.

Our Performance-Based LTIP Units have a three-year performance period.

50 % of any Performance-Based LTIP Units that are earned vest at the end of the three-year performance period and the remaining 50 % vest on the fourth anniversary of the date of grant, subject to continued employment.

If, however, the Performance-Based LTIP Units do not achieve a positive absolute TSR at the end of the three-year performance period, but achieve at least the threshold level of the relative performance criteria thereof, 50 % of the units that otherwise could have been earned will be forfeited, and the remaining 50 % will be earned and vest if and when we achieve a positive absolute TSR during the succeeding seven years , measured at the end of each quarter .

During the year ended December 31, 2020, the three-year performance period ended for the Performance-Based LTIP Units granted on August 1, 2017.

Based on our relative and absolute TSR over the three-year performance period, 50 % of the units granted were forfeited, and the remaining 50 % of the units became earned and vested following achievement of positive absolute TSR on December 31, 2020.

In January 2021, the three-year performance period ended for the Performance-Based LTIP Units granted on February 2, 2018.

Based on our relative performance and absolute TSR over the three-year performance period, 100 % of the units granted were earned.

The aggregate grant-date fair value of the Performance-Based LTIP and Special Performance-Based LTIP Units granted for each of the three years in the period ended December 31, 2020 was $ 11.1 million, $ 9.3 million and $ 21.1 million, valued using Monte Carlo simulations.

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Dividend yield

2.3 % to 2.5 %

2.5 % to 2.7 %

Risk-free interest rate

2.3 % to 2.6 %

2.3 % to 3.0 %

The following is a summary of both the Performance-Based LTIP and Special Performance-Based LTIP Units activity:

Unvested Shares

Weighted Average Grant-Date Fair Value

Unvested at December 31, 2018

Unvested at December 31, 2019

In 2020, we issued 593,100 Performance-Based LTIP Units to management and employees with an estimated aggregate grant-date fair value of $ 11.1 million .

Average Grant-

Date Fair Value

Unvested as of December 31, 2019

Forfeited / cancelled

Unvested as of December 31, 2020

The total-grant date fair value of both the Performance-Based LTIP and Special Performance-Based LTIP Units that vested for the year ended December 31, 2020 was $ 4.6 million.

JBG SMITH 2017 ESPP

The JBG SMITH 2017 ESPP authorized the issuance of up to 2.1 million common shares.

The ESPP provides eligible employees an option to purchase, through payroll deductions, our common shares at a discount of 15.0 % of the closing price of a common share on relevant determination dates, provided that the fair market value of common shares, determined as of the first day of the relevant offering period, purchased by any eligible employee may not exceed $ 25,000 in any calendar year.

The maximum aggregate number of common shares reserved for issuance under the ESPP will automatically increase on January 1 of each year, unless the Compensation Committee of the Board of Trustees determines to limit any such increase, by the lesser of (i) 0.10 % of the total number of outstanding common shares on December 31 of the preceding calendar year or (ii) 206,600 common shares.

Pursuant to the ESPP, employees purchased 47,022 and 20,178 common shares for $ 1.5 million and $ 597,000 during the years ended December 31, 2019 and 2018 .

The ESPP provides eligible employees an option to purchase up to $ 25,000 in any calendar year, through payroll deductions, of our common shares at a discount of 15.0 % of the closing price of a common share on relevant determination dates.

(i) 0.10 % of the total number of outstanding common shares on December 31 of the preceding calendar year or (ii) 206,600 common shares.

Pursuant to the ESPP, employees purchased 68,047 , 47,022 and 20,178 common shares for $ 1.7 million, $ 1.5 million and $ 597,000 during each of the three years in the period ended December 31, 2020.

The following is a summary of the significant assumptions used to value the ESPP common shares using the Black-Scholes model:

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13.0 % to 67.0 %

18.0 % to 28.0 %

Dividend yield

1.1 % to 3.3 %

2.6 % to 3.5 %

Risk-free interest rate

0.1 % to 1.7 %

2.2 % to 2.4 %

Expected life

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Special Time-Based LTIP Units (3)

Share-based compensation related to

Formation Transaction and special equity

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

Total share-based compensation expense

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Share-based compensation expense

______________________________________________

For the years ended December 31, 2019 and 2018 , primarily includes compensation expense for certain executives who have elected to receive all or a portion of any cash bonus that may be paid in the subsequent year related to past service in the form of fully vested LTIP Units and related to our ESPP.

For the year ended December 31, 2017, represents share-based compensation expense related to equity awards prior to the Formation Transaction.

Represents share-based compensation expense for LTIP Units and OP Units subject to post-Combination employment obligations.

Represents equity awards issued related to our successful pursuit of Amazon's additional headquarters in National Landing.

Included in "General and administrative expense:

Share-based compensation related to Formation Transaction and special equity awards" in the accompanying statements of operations.

(1) Primarily comprising compensation expense for certain executives who have elected to receive all or a portion of any cash bonus that may be paid in the subsequent year related to past service in the form of fully vested LTIP Units and related to our ESPP.

(2) Represents share-based compensation expense for LTIP Units and OP Units issued in the Formation Transaction, which are subject to post-Combination employment obligations .

(3) Represents equity awards issued related to our successful pursuit of Amazon's new headquarters in National Landing.

(4) Included in "General and administrative expense:

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

in the accompanying statements of operations.

As of December 31, 2020, we had $ 46.5 million of total unrecognized compensation expense related to unvested share-based payment arrangements, which is expected to be recognized over a weighted average period of 1.8 years.

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Our contributions for each of the three years in the period ended December 31, 2020 were $ 2.2 million, $ 2.0 million and $ 1.8 million.

Beginning in 2021, certain employees were granted restricted share units ("RSUs") with time-based vesting requirements ("Time-Based RSUs") and RSUs with performance-based vesting requirements ("Performance-Based RSUs") as part of their annual compensation.

Vesting requirements and compensation expense recognition for the Time-Based RSUs and the Performance-Based RSUs are identical to those of the Time-Based LTIP Units and Performance-Based Units.

In January 2021, we granted 485,753 Time-Based LTIP Units, 627,874 Performance-Based LTIP Units, 18,343 Time-Based RSUs and 11,886 Performance-Based RSUs to certain employees with an estimated aggregate grant-date fair value of $ 24.4 million.

In January 2021, we granted 163,065 fully vested LTIP Units, with a total grant-date fair value of $ 4.8 million, to certain employees who elected to receive all or a portion of their cash bonus earned during 2020 paid in the form of fully vested LTIP Units.

Transaction and Other Costs

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Demolition costs (2)

Formation transaction and integration costs (3)

Integration and severance costs (3)

Completed, potential and pursued transaction expenses

Transaction and other costs

__________________________

(1) In November 2019, we relocated our corporate headquarters.

Upon the relocation of our corporate headquarters, we incurred an impairment charge on the right-of-use assets for leases related to our former corporate headquarters as well as other costs.

See Note 17 for more information.

Related to 1900 Crystal Drive.

For the year ended December 31, 2019 includes integration and severance costs.

For the year ended December 31, 2018 includes transition services provided by our former parent, and integration and severance costs.

For the year ended December 31, 2017 includes severance and transaction bonus expense of $ 40.8 million , investment banking fees of $ 33.6 million , legal fees of $ 13.9 million and accounting fees of $ 10.8 million .

For the year ended December 31, 2019 represents a contribution to the Washington Housing Conservancy.

For the year ended December 31, 2018 represents costs related to the successful pursuit of Amazon's additional headquarters at our properties in National Landing.

Upon the relocation of our corporate headquarters, we incurred an impairment loss on the right-of-use assets for leases related to our former corporate headquarters as well as other costs.

See Note 18 for additional information.

(2) For the year ended December 31, 2020, related to 223 23 rd Street and 2250 Crystal Drive (formerly 2300 Crystal Drive).

For the year ended December 31, 2019, related to 1900 Crystal Drive.

(3) For the year ended December 31, 2018, included transition services provided by our former parent.

(4) For the years ended December 31, 2020 and 2019, related to charitable commitments to the Washington Housing Conservancy, a non-profit that acquires and owns affordable workforce housing in the Washington D.C.

metropolitan region.

For the year ended December 31, 2018, r elated costs associated with the successful pursuit of Amazon's new headquarters at our properties in National Landing for the year ended December 31, 2018.

Interest Expense

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(In thousands)

Interest expense

Interest expense before capitalized interest

Amortization of deferred financing costs

Net loss (gain) on derivative financial instruments

not designated as cash flow hedges:

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

Net loss (gain) on derivative financial instruments not designated as cash flow hedges:

Net unrealized

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Shareholders' Equity and Earnings (Loss) Per Common Share

Common Shares Repurchased

In March 2020, our Board of Trustees authorized the repurchase of up to $ 500 million of our outstanding common shares.

During the 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.

In 2021, as of the date of this filing, we repurchased and retired 270,862 common shares for $ 8.1 million, an average purchase price of $ 29.93 per share, pursuant to a repurchase plan under Rule 10b5-1 of the Exchange Act.

Shareholders' Equity

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Net income (loss)

Net (income) loss attributable to redeemable

noncontrolling interests

Net (income) loss attributable to redeemable noncontrolling interests

Net loss attributable to noncontrolling interests

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Distributions to participating securities

Net income (loss) available to common shareholders

— basic and diluted

Weighted average number of common shares

outstanding — basic and diluted

Earnings (loss) per common share:

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

Weighted average number of common shares outstanding - basic and diluted

Earnings (loss) per common share - basic and diluted

The effect of the redemption of OP Units and Time-Based LTIP Units that were outstanding as of December 31, 2020 and 2019 is excluded in the computation of diluted earnings per common share as the assumed exchange of such units for common shares on a one-for-one basis was antidilutive (the assumed redemption of these units would have no impact on the determination of diluted earnings per share).

and Time-Based LTIP Unit impact are excluded from net income available to common shareholders and from the weighted average number of common shares outstanding in calculating diluted earnings per common share.

Since OP Units and Time-Based LTIP Units, which are held by noncontrolling interests, are attributed gains at an identical proportion to the common shareholders, the gains attributable and their equivalent weighted average OP Unit and Time-Based LTIP Unit impact are excluded from net income (loss) available to common shareholders and from the weighted average number of common shares outstanding in calculating diluted earnings per common share.

Performance-Based LTIP Units, Special Performance-Based LTIP Units and Formation Awards, which totaled 4.7 million, 4.7 million and 3.9 million for each of the three years in the period ended December 31, 2020, were excluded from the calculation of diluted earnings per common share as they were antidilutive, but potentially could be dilutive in the future.

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As of December 31, 2020 and 2019, we had various derivative financial instruments consisting of interest rate swap and cap agreements that are measured at fair value on a recurring basis.

The net unrealized (loss) gain on our derivative financial instruments designated as cash flow hedges was $( 17.7 ) million and $ 8.3 million as of December 31, 2019 and 2018 and was recorded in "Accumulated other comprehensive income (loss)" in our balance sheets, of which a portion was reclassified to "Redeemable noncontrolling interests." Within the next 12 months, we expect to reclassify $ 5.5 million as an increase to interest expense.

The net unrealized (loss) gain on our derivative financial instruments not designated as cash flow hedges was $( 50,000 ) , $ 926,000 and $ 1.3 million for each of the three years in the period ended December 31, 2019 , and was recorded in "Interest expense" in our statements of operations and "Net unrealized loss (gain) on ineffective derivative financial instruments" in our statements of cash flows.

The net unrealized loss on our derivative financial instruments designated as cash flow hedges was $ 43.9 million and $ 17.7 million as of December 31, 2020 and 2019 and was recorded in "Accumulated other comprehensive loss"

in our balance sheets, of which a portion was reclassified to "Redeemable noncontrolling interests."

Within the next 12 months, we expect to reclassify $ 17.5 million as an increase to interest expense.

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

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Fair Value Measurements

December 31, 2019

(In thousands)

Derivative financial instruments designated as cash flow hedges:

Classified as liabilities in "Other liabilities, net"

December 31, 2020

Derivative financial instruments designated as cash flow hedges:

Classified as assets in "Other assets, net"

Classified as liabilities in "Other liabilities, net"

Derivative financial instruments not designated as cash flow hedges:

Classified as assets in "Other assets, net"

December 31, 2019

Derivative financial instruments designated as cash flow hedges:

Classified as liabilities in "Other liabilities, net"

The fair values of our derivative financial instruments were determined using widely accepted valuation techniques, including discounted cash flow analysis on the expected cash flows of the derivative financial instrument.

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As a result, it was determined that the derivative financial instruments in their entirety should be classified in Level 2 of the fair value hierarchy.

The net unrealized gains and losses included in "Other comprehensive income (loss)'' in our statements of comprehensive income (loss) for each of the three years in the period ended December 31, 2019 were attributable to the net change in unrealized gains or losses related to the interest rate swaps that were outstanding during those periods, none of which were reported in our statements of operations as the interest rate swaps were documented and qualified as hedging instruments.

The net unrealized gains and losses included in "Other comprehensive income (loss)"

in our statements of comprehensive income (loss) for each of the three years in the period ended December 31, 2020 were attributable to the net change in unrealized gains or losses related to the interest rate swaps that were outstanding during those periods, none of which were reported in our statements of operations as the interest rate swaps were documented and qualified as hedging instruments.

Fair Value Measurements on a Nonrecurring Basis

Fair value measurements on a nonrecurring basis consist of the right-of-use asset related to our former corporate office lease, which we measured for impairment upon relocation to our new corporate headquarters in November 2019.

Assets measured at fair value on a nonrecurring basis on our balance sheet as of December 31, 2020 consisted of a commercial real estate asset, One Democracy Plaza located in Bethesda, Maryland, that was written down to its estimated fair value of $ 3.3 million, including the right-of-use asset associated with the property’s ground lease, and was classified as Level 3 in the fair value hierarchy.

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.

Our estimate of fair value was determined using a discounted cash flow model, which considers, among other things, the anticipated holding period, current market conditions and utilizes unobservable quantitative inputs, including appropriate capitalization and discount rates.

In connection with the preparation and review of our 2020 annual financial statements, we recognized an impairment loss of $ 10.2 million, which is included in "Impairment loss"

on our statement of operations.

There were no other assets measured at fair value on a nonrecurring basis as of December 31, 2020.

Assets measured at fair value on a nonrecurring basis on our balance sheet as of December 31, 2019 consisted of the right-of-use asset related to our former corporate office lease, which we measured for impairment upon relocation to our new corporate headquarters in November 2019.

Prior to the relocation, we leased office space in a building we owned through one of our unconsolidated real estate ventures.

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Upon the relocation of our corporate headquarters, we impaired the right-of-use asset due to our change in use of the asset.

The fair value of the right-of-use asset subsequent to the relocation was based on Level 3 inputs, including estimated sublease income and our incremental borrowing rate.

For the year ended December 31, 2019, we incurred an impairment charge of $ 10.2 million and certain additional expenses related to the relocation of our corporate headquarters.

There were no other assets measured at fair value on a nonrecurring basis as of December 31, 2019 and 2018.

See Note 14 for more information.

The fair value of the right-of-use asset subsequent

to the relocation was based on Level 3 inputs, including estimated sublease income and our incremental borrowing rate.

During the year ended December 31, 2019, we recognized an impairment loss of $ 10.2 million and certain additional expenses related to the relocation of our corporate headquarters, which is included in "Transaction and other costs"

on our statement of operations.

There were no other assets measured at fair value on a nonrecurring basis as of December 31, 2019.

See Note 15 for additional information.

Financial Assets and Liabilities Not Measured at Fair Value

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Unsecured term loans

______________________________________

(1) The carrying amount consists of principal only.

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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 define our reportable segments to be aligned with our method of internal reporting and the way our Chief Executive Officer, who is also our Chief Operating Decision Maker ("CODM"), makes key operating decisions, evaluates financial results, allocates resources and manages our business.

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

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

NOI includes property rental revenue and other property revenue, and deducts property operating expenses and real estate taxes.

With respect to the third-party asset management and real estate services business, the CODM reviews 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 both disclosed separately in our statements of operations.

With respect to the third-party asset management and real estate services business, the CODM reviews revenue streams generated by this segment ("Third-party real estate services, including reimbursements"), as well as the expenses attributable to the segment ("General and administrative:

third-party real estate services"), which are both disclosed separately in our statements of operations.

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

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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 (2)

Third-party real estate services revenue, including reimbursements

Third-party real estate services expenses

Third-party real estate services revenue less expenses

(1) Estimated development fee revenue totaling $ 69.8 million as of December 31, 2020 is expected to be recognized over the next seven years as unsatisfied performance obligations are completed.

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

Management company assets primarily consist of management and leasing contracts with a net book value of $ 31.5 million and $ 38.6 million and are classified in "Other assets, net" in our balance sheets as of December 31, 2019 and 2018 .

Management company assets primarily consist of management and leasing contracts with a net book value of $ 25.5 million and $ 31.5 million and are classified in "Other assets, net"

in our balance sheets as of December 31, 2020 and 2019.

Consistent with internal reporting presented to our CODM and our definition of NOI, the third-party asset management and real estate services operating results are excluded from the NOI data below.

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

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

Year Ended December 31,

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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 (gain) on bargain purchase

Impairment loss

Reduction of gain on bargain purchase

Income tax benefit

Net income (loss) 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

Interest and other income (loss), net

Gain on sale of real estate

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Consolidated NOI

__________________________

Excludes parking revenue of $ 26.0 million , $ 25.7 million and $ 23.1 million for each of the three years in the period ended December 31, 2019 .

The following is a summary of NOI by segment.

Items classified in the Other column include future development assets, corporate entities and the elimination of intersegment activity.

Items classified in the Other column include future development pipeline assets, corporate entities and the elimination of intersegment activity.

Year Ended December 31, 2020

(In thousands)

Property rentals revenue

Property rental revenue

Other property revenue

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(In thousands)

Property rentals revenue

Property rental revenue

Other property revenue

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(In thousands)

Property rentals revenue

Property rental revenue

Other property revenue

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

December 31, 2019

(In thousands)

December 31, 2020

Real estate, at cost

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Total assets (1)

__________________________

(1) Includes assets held for sale.

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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 .

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, issuance and sale of equity securities, and available cash.

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Nevertheless, there can be no assurance that the identification of new areas of contamination, changes in the extent or known scope of contamination, the discovery of additional sites or changes in cleanup requirements would not result in significant cost to us.

Environmental liabilities 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.

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.

Operating and Finance Leases

As of December 31, 2020, the weighted average discount rate used in calculating lease liabilities for our active operating and finance leases was 5.4 % and 4.2 %, which had weighted average remaining lease terms of 10.9 years and 98.0 years.

As of December 31, 2020, future minimum lease payments under our non-cancellable operating and finance leases are as follows:

Year ending December 31,

(In thousands)

Total future minimum lease payments

Imputed interest

(1) The total for operating leases of $ 10.8 million corresponds to liabilities related to operating lease right-of-use assets and the total for finance leases of $ 40.2 million corresponds to liabilities related to finance lease right-of-use assets, both of which are included in "Other liabilities, net"

as of December 31, 2020.

See Note 10 for additional information.

During the years ended December 31, 2020 and 2019, we incurred $ 2.9 million and $ 2.3 million of fixed operating and finance lease costs, and $ 1.6 million and $ 1.3 million of variable operating lease costs.

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.

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.

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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.

We also may guarantee portions of the principal, interest and other amounts in connection with the borrowings of our consolidated entities.

As of December 31, 2019 , the aggregate amount of principal payment guarantees was $ 8.3 million for our consolidated entities.

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.

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.

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

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

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.

Transactions with Vornado and Related Parties

Transactions with Vornado

As described in Note 1, the accompanying financial statements present the operations of the Vornado Included Assets as carved-out from the financial statements of Vornado for all periods prior to July 17, 2017.

In connection with the Formation Transaction, we entered into an agreement with Vornado under which Vornado provided operational support for a period that ended July 18, 2019.

These services included information technology, financial reporting and payroll services.

The charges for these services were based on an hourly or per transaction fee arrangement including reimbursement for overhead and out-of-pocket expenses totaling $ 3.6 million and $ 2.2 million for the years ended December 31, 2018 and 2017 .

Charges for these services for 2019 were de minimis.

Pursuant to agreements, we are providing Vornado with leasing and property management services for certain of its assets that were not part of the Separation.

The total revenue related to these services was $ 2.0 million , $ 2.1 million and $ 779,000 for each of the three years in the period ended December 31, 2019 .

We have agreements with Building Maintenance Services ("BMS"), a wholly owned subsidiary of Vornado, to supervise cleaning, engineering and security services at our properties.

We paid BMS $ 21.8 million , $ 20.9 million and $ 13.6 million for each of the three years in the period ended December 31, 2019 , which are included in "Property operating expenses" in our statements of operations.

In connection with the Formation Transaction, we have a Tax Matters Agreement with Vornado.

See Note 19 for additional information.

Certain centralized corporate costs borne by Vornado for management and other services including, but not limited to, accounting, reporting, legal, tax, information technology and human resources have been allocated to the assets in our financial statements based on either actual costs incurred or a proportion of costs estimated to be applicable to the Vornado Included Assets based on key metrics including total revenue.

The total amounts allocated for the year ended December 31, 2017 were $ 13.0 million .

These allocated amounts are included as a component of "General and administrative expense:

Corporate and other" expenses in our statement of operations and do not necessarily reflect what actual costs would have been if the Vornado Included Assets were a separate standalone public company.

In August 2014, we completed a $ 185.0 million financing of the Universal Buildings, a 687,000 square foot office complex located in Washington, D.C.

In connection with this financing, pursuant to a note agreement dated August 12, 2014, we used a portion of the financing proceeds and made an $ 86.0 million loan to Vornado at LIBOR plus 2.90 % due August 2019.

At the Separation, Vornado repaid the outstanding balance of the loan and related accrued interest.

We recognized interest income of $ 1.8 million for the year ended December 31, 2017 .

In connection with the development of The Bartlett, prior to the Separation, we entered into various note agreements with Vornado whereby we could borrow up to a maximum of $ 170.0 million .

Vornado contributed these note agreements along with accrued and unpaid interest to JBG SMITH at the Separation.

We incurred interest expense of $ 4.1 million for the year ended December 31, 2017 .

In June 2016, the $ 115.0 million mortgage payable (including $ 608,000 of accrued interest) secured by the Bowen Building, a 231,000 square foot office building located in Washington, D.C., was repaid with the proceeds of a $ 115.6 million draw on our former parent's revolving credit facility.

We repaid our former parent with amounts drawn under our revolving credit facility at the Combination.

We incurred interest expense related to the mortgage payable of $ 1.3 million for the year ended December 31, 2017 .

We had a consulting agreement with Mitchell Schear, a member of our Board of Trustees and formerly the president of Vornado’s Washington, D.C.

The consulting agreement expired on December 31, 2017 and provided for the payment of consulting fees and expenses at the rate of $ 169,400 per month for the 24 months following the Separation, including after the expiration of the consulting agreement.

The amount due under this consulting agreement of $ 4.1 million was expensed in connection with the Combination.

Additionally, in March 2017, Vornado amended Mr.

Schear’s employment agreement to provide for the payment of severance, bonus and post-employment services.

A total of $ 16.4 million was expensed in connection with the Separation for the year ended December 31, 2017 .

Transactions with the JBG Legacy Funds and the Washington Housing Initiative ("WHI")

Our third-party asset management and real estate services business provides fee-based real estate services to third parties, the JBG Legacy Funds and the WHI.

Transactions with Related Parties

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.

We provide services for the benefit of the JBG Legacy Funds that own interests in the assets retained by the JBG Legacy Funds.

In connection with the contribution of the JBG Assets to us, the general partner and managing member interests in the JBG Legacy Funds that were held by certain former JBG executives (and who became members of our management team and/or Board of Trustees) were not transferred to us and remain under the control of these individuals.

In connection with the contribution to us of the assets formerly owned by the JBG Legacy Funds as part of the Formation Transaction, the general partner and managing member interests in the JBG Legacy Funds that were held by certain former JBG executives (and who became members of our management team and/or Board of Trustees) were not transferred to us and remain under the control of these individuals.

In addition, certain members of our senior management and Board of Trustees have an ownership interest in the JBG Legacy Funds and own carried interests in each fund and in certain of our real estate ventures that entitle them to receive cash payments if the fund or real estate venture achieves certain return thresholds.

The WHI was launched by us and the Federal City Council in June 2018 as a scalable market-driven model that uses private capital to help address the scarcity of housing for middle income families.

To date, the WHI Impact Pool ("Impact Pool") completed closings of capital commitments totaling $ 104.8 million , which included a commitment from us of $ 10.2 million .

We are the manager for the Impact Pool, which is the social impact investment vehicle of the WHI.

The third-party real estate services revenue, including expense reimbursements, from the JBG Legacy Funds and the Impact Pool was $ 36.5 million , $ 33.8 million and $ 19.9 million for each of the three years in the period ended December 31, 2019 .

As of December 31, 2019 and 2018 , we had receivables from the JBG Legacy Funds and the Impact Pool totaling $ 6.2 million and $ 3.6 million for such services.

We rented our corporate offices from an unconsolidated real estate venture and made payments totaling $ 5.0 million , $ 4.9 million and $ 2.2 million for each of the three years in the period ended December 31, 2019 .

We are the manager for the WHI Impact Pool, which is the social impact debt financing vehicle of the WHI.

As of December 31, 2020, the WHI Impact Pool had completed closings of capital commitments totaling $ 114.4 million, which included a commitment from us of $ 11.2 million.

The third-party real estate services revenue, including expense reimbursements, from the JBG Legacy Funds and the WHI Impact Pool was $ 22.4 million, $ 36.5 million and $ 33.8 million for each of the three years in the period ended December 31, 2020.

As of December 31, 2020 and 2019, we had receivables from the JBG Legacy Funds and the WHI Impact Pool totaling $ 7.5 million and $ 6.2 million for such services.

We rented our former corporate offices from an unconsolidated real estate venture and made payments totaling $ 4.6 million, $ 5.0 million and $ 4.9 million for each of the three years in the period ended December 31, 2020.

In November 2019, we relocated our corporate headquarters.

Upon the relocation of our corporate headquarters, we impaired the right-of-use asset due to our change in the use of the asset.

See Note 18 for additional information.

We have agreements with Building Maintenance Services ("BMS"), an entity in which we have a minor preferred interest, to supervise cleaning, engineering and security services at our properties.

We paid BMS $ 16.9 million, $ 21.8 million and $ 20.9 million for each of the three years in the period ended December 31, 2020 which is included in "Property operating expenses"

in our statements of operations.

Quarterly Financial Data (unaudited)

First Quarter (1)

Second Quarter

Third Quarter (2)

Fourth Quarter (3)

Quarter (2) (3)

Quarter (2) (4)

(In thousands, except per share data)

2 unchanged sentences

Net income (loss) attributable to common shareholders

Earnings (loss) per share:

_______________

During the first quarter of 2019, we recognized a gain on the sale of real estate of $ 39.0 million from the sale of Commerce Executive/Commerce Metro Land.

During the third quarter of 2019, we recognized a gain on the sale of real estate of $ 8.1 million from the sale of 1600 K Street.

During the fourth quarter of 2019, we recognized an aggregate gain on the sale of real estate of $ 57.9 million , from the sale of Vienna Retail, and the partial sale and remeasurement of our remaining interest subsequent to the transfer of control in the real estate venture that owns Central Place Tower.

Additionally, during the fourth quarter of 2019, we incurred an impairment charge of $ 10.2 million and certain additional expenses related to the relocation of our corporate headquarters.

First Quarter

Second Quarter (1)

Third Quarter (2)

Fourth Quarter (3)

Earnings (loss) per share - basic and diluted

(1) During the first quarter of 2020, we recognized a gain on the sale of real estate of $ 59.5 million from the sale of Metropolitan Park.

(2) Beginning in the second quarter of 2020, as a result of COVID-19, we have experienced significantly decreased retail revenue, which has resulted in increased credit losses and write-offs against rent receivables, decreased multifamily revenue due to lower occupancy and higher concession, a decline in parking revenue, depressed near-term leasing activity in our commercial and multifamily portfolios and increased interest expense from borrowings.

(3) During the second quarter of 2020, we recorded a $ 6.5 million impairment loss related to our investment in our former unconsolidated real estate venture that owns The Marriott Wardman Park.

(4) During the fourth quarter of 2020, in connection with the preparation and review of our 2020 annual financial statements, we recorded a $ 10.2 million impairment loss due to the write-down of One Democracy Plaza, a commercial real estate asset located in Bethesda, Maryland, to its estimated fair value.

Additionally, during the fourth quarter of 2020, we recorded $ 15.0 million against deferred (straight-line) rent receivables and $ 8.2 million of income associated with certain lease guarantees.

(In thousands, except per share data)

2 unchanged sentences

Net income (loss) attributable to common shareholders

Earnings (loss) per share:

During the second quarter of 2018, we recognized an aggregate gain on the sale of real estate of $ 33.4 million from the sale of Summit I and II and the Bowen Building, a reduction to the gain on bargain purchase of $ 7.6 million related to the final adjustments to the fair value of certain asset acquired and liabilities assumed in the Formation Transaction and a loss on the extinguishment of debt of $ 4.5 million .

During the third quarter of 2018, we recognized a gain of $ 15.5 million related to the sale of our interest in a real estate venture that owned the Investment Building and a gain on the sale of real estate of $ 11.9 million from the sale of Executive Tower.

During the fourth quarter of 2018, we recognized a gain of $ 20.6 million from the sale of The Warner by our unconsolidated real estate venture with CPPIB, transaction and other costs of $ 15.6 million related to expenses incurred in connection with the Formation Transaction (including transition services provided by our former parent, integration costs, and severance costs), costs related to the pursuit of Amazon's additional headquarter, and costs related to other completed, potential and pursued transactions, and an aggregate gain on the sale of real estate of $ 6.4 million , from the sale of 1233 20th Street and the out-of-service portion of Falkland Chase - North.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL

Earnings (loss) per share - basic and diluted

(1) During the first quarter of 2019, we recognized a gain on the sale of real estate of $ 39.0 million from the sale of Commerce Executive/Commerce Metro Land.

(2) During the third quarter of 2019, we recognized a gain on the sale of real estate of $ 8.1 million from the sale of 1600 K Street.

(3) During the fourth quarter of 2019, we recognized an aggregate gain on the sale of real estate of $ 57.9 million, from the sale of Vienna Retail, and the partial sale and remeasurement of our remaining interest subsequent to the transfer of control in the real estate venture that owns Central Place Tower.

Additionally, during the fourth quarter of 2019, we incurred an impairment loss of $ 10.2 million and certain additional expenses related to the relocation of our corporate headquarters .

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURES

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 8. Financial Statements and Supplementary Data