What changed in this filing

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Item 1. Financial Statements

2021-05-04 compared with 2020-11-03 · 250 added, 347 removed, 513 unchanged (54% of the section changed)

3 unchanged sentences

(In thousands, except par value amounts)

September 30, 2020

March 31, 2021

December 31, 2020

9 unchanged sentences

Restricted cash

Tenant and other receivables, net

Tenant and other receivables

Deferred rent receivable

8 unchanged sentences

Other liabilities, net

Liabilities related to assets held for sale

Total liabilities

2 unchanged sentences

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;

132,438 and 134,148 shares issued and outstanding as of September 30, 2020 and December 31, 2019

131,277 and 131,778 shares issued and outstanding as of March 31, 2021 and December 31, 2020

Additional paid-in capital

2 unchanged sentences

Total shareholders' equity of JBG SMITH Properties

Noncontrolling interests in consolidated subsidiaries

Noncontrolling interests

TOTAL LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS AND EQUITY

3 unchanged sentences

(In thousands, except per share data)

Three Months Ended September 30,

Nine Months Ended September 30,

Three Months Ended March 31,

Property rental

12 unchanged sentences

OTHER INCOME (EXPENSE)

Income (loss) from unconsolidated real estate ventures, net

Interest and other income (loss), net

Loss from unconsolidated real estate ventures, net

Interest and other income, net

Interest expense

6 unchanged sentences

Net (income) loss attributable to redeemable noncontrolling interests

Net loss attributable to noncontrolling interests

NET INCOME (LOSS) ATTRIBUTABLE TO COMMON SHAREHOLDERS

EARNINGS (LOSS) PER COMMON SHARE:

EARNINGS (LOSS) PER COMMON SHARE - BASIC AND DILUTED

WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING:

3 unchanged sentences

(In thousands)

Three Months Ended September 30,

Nine Months Ended September 30,

Three Months Ended March 31,

NET INCOME (LOSS)

1 unchanged sentence

Change in fair value of derivative financial instruments

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

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

Other comprehensive income (loss)

1 unchanged sentence

Net (income) loss attributable to redeemable noncontrolling interests

Net loss attributable to noncontrolling interests

Other comprehensive (income) loss attributable to redeemable noncontrolling interests

4 unchanged sentences

(In thousands)

Noncontrolling

Common Shares

Comprehensive

BALANCE AS OF JULY 1, 2020

Noncontrolling

BALANCE AS OF DECEMBER 31, 2020

Net loss attributable to common shareholders and noncontrolling interests

1 unchanged sentence

Common shares repurchased

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

Dividends declared on common shares

($ 0.225 per common share)

Contributions from (distributions to) noncontrolling interests

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

Contributions from noncontrolling interests, net

Redeemable noncontrolling interests redemption value adjustment and other comprehensive income allocation

Other comprehensive income

BALANCE AS OF SEPTEMBER 30, 2020

BALANCE AS OF JULY 1, 2019

BALANCE AS OF MARCH 31, 2021

BALANCE AS OF DECEMBER 31, 2019

Net income attributable to common shareholders and noncontrolling interests

Common shares issued pursuant to ESPP

Dividends declared on common shares

($ 0.225 per common share)

Contributions from (distributions to) noncontrolling interests

Redeemable noncontrolling interests redemption value adjustment and other comprehensive loss allocation

Other comprehensive loss

BALANCE AS OF SEPTEMBER 30, 2019

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

JBG SMITH PROPERTIES

Condensed Consolidated Statements of Equity

(In thousands)

Noncontrolling

Common Shares

Comprehensive

BALANCE AS OF JANUARY 1, 2020

Net loss attributable to common shareholders and noncontrolling interests

Conversion of common limited partnership units to common shares

1 unchanged sentence

Common shares issued pursuant to ESPP

Dividends declared on common shares

($ 0.45 per common share)

Contributions from (distributions to) noncontrolling interests

Redeemable noncontrolling interests redemption value adjustment and other comprehensive loss allocation

Other comprehensive loss

BALANCE AS OF SEPTEMBER 30, 2020

BALANCE AS OF JANUARY 1, 2019

Net income attributable to common shareholders and noncontrolling interests

Common shares issued

Conversion of common limited partnership units to common shares

Common shares issued pursuant to ESPP

Dividends declared on common shares

($ 0.45 per common share)

Contributions from (distributions to) noncontrolling interests

Contributions from noncontrolling interests

Redeemable noncontrolling interests redemption value adjustment and other comprehensive loss allocation

Other comprehensive loss

BALANCE AS OF SEPTEMBER 30, 2019

BALANCE AS OF MARCH 31, 2020

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

2 unchanged sentences

(In thousands)

Nine Months Ended September 30,

Three Months Ended March 31,

OPERATING ACTIVITIES:

Net income (loss)

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

Adjustments to reconcile net income (loss) to net cash provided by operating activities:

Share-based compensation expense

1 unchanged sentence

Deferred rent

(Income) loss from unconsolidated real estate ventures, net

Loss from unconsolidated real estate ventures, net

Amortization of market lease intangibles, net

13 unchanged sentences

Development costs, construction in progress and real estate additions

Deposits for real estate and other acquisitions

Proceeds from sale of real estate

Distributions of capital from unconsolidated real estate ventures

Investments in unconsolidated real estate ventures

Net cash used in investing activities

Net cash (used in) provided by investing activities

FINANCING ACTIVITIES:

2 unchanged sentences

Borrowings under revolving credit facility

Borrowings under unsecured term loans

Repayments of mortgages payable

1 unchanged sentence

Debt issuance costs

Proceeds from the issuance of common stock, net of issuance costs

Proceeds from common stock issued pursuant to ESPP

Common shares repurchased

1 unchanged sentence

Distributions to redeemable noncontrolling interests

Distributions to noncontrolling interests

Contributions from noncontrolling interests

Net cash provided by (used in) financing activities

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

Net cash (used in) provided by financing activities

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

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

4 unchanged sentences

Cash and cash equivalents and restricted cash

JBG SMITH PROPERTIES

Condensed Consolidated Statements of Cash Flows

(In thousands)

Three Months Ended March 31,

SUPPLEMENTAL DISCLOSURE OF CASH FLOW AND NON-CASH INFORMATION:

12 unchanged sentences

Organization and Basis of Presentation

JBG SMITH Properties ("JBG SMITH") is a Maryland real estate investment trust ("REIT"), which owns and operates a portfolio of high-growth commercial and multifamily assets, many of which are amenitized with ancillary retail.

JBG SMITH 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 key urban amenities, including National Landing where it serves as the exclusive developer for Amazon’s new headquarters.

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

As of September 30, 2020, JBG SMITH, as its sole general partner, controlled JBG SMITH LP and owned 90.4 % of its common limited partnership units ("OP Units").

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 planned new $ 1 billion Innovation Campus is located.

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 The JBG Companies ("JBG") (the "JBG Legacy Funds") and other third parties.

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

As of March 31, 2021, 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 hereinafter referred to as "we,"

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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").

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

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

As of September 30, 2020, our Operating Portfolio consisted of 64 operating assets comprising 43 commercial assets totaling 13.3 million square feet ( 11.2 million square feet at our share) and 21 multifamily assets totaling 7,800 units ( 5,999 units at our share).

Additionally, we have (i) two under-construction assets comprising one wholly owned commercial asset totaling 274,000 square feet and one multifamily asset totaling 322 units ( 161 units at our share);

(ii) 10 wholly owned near-term development assets totaling 5.6 million square feet of estimated potential development density;

As of March 31, 2021, our Operating Portfolio consisted of 63 operating assets comprising 42 commercial assets totaling 13.3 million square feet ( 11.4 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 multifamily assets totaling 1,130 units ( 969 units at our share);

(ii) nine wholly owned near-term development assets totaling 4.8 million square feet of estimated potential development density;

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

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

In addition, our third-party asset management and real estate services business provides fee-based real estate services to third parties, the Washington Housing Initiative ("WHI"), Amazon.com, Inc.

("Amazon") and the legacy funds formerly organized by JBG (the "JBG Legacy Funds").

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.

Basis of Presentation

3 unchanged sentences

All intercompany transactions and balances have been eliminated.

The results of operations for the three and nine months ended September 30, 2020 and 2019 are not necessarily indicative of the results that may be expected for a full year.

The results of operations for the three months ended March 31, 2021 and 2020 are not necessarily indicative of the results that may be expected for a full year.

These condensed consolidated financial statements should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2020, filed with the Securities and Exchange Commission.

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

See Note 5 for additional information on our variable interest entities ("VIEs").

The portions of the equity and net income (loss) of

consolidated subsidiaries that are not attributable to JBG SMITH are presented separately as amounts attributable to noncontrolling interests in our condensed consolidated financial statements.

References to our financial statements refer to our condensed consolidated financial statements as of September 30, 2020 and December 31, 2019, and for the three and nine months ended September 30, 2020 and 2019.

References to our balance sheets refer to our condensed consolidated balance sheets as of September 30, 2020 and December 31, 2019.

References to our statements of operations refer to our condensed consolidated statements of operations for the three and nine months ended September 30, 2020 and 2019.

References to our statements of comprehensive income (loss) refer to our condensed consolidated statements of comprehensive income (loss) for the three and nine months ended September 30, 2020 and 2019.

References to our statements of cash flows refer to our condensed consolidated statements of cash flows for the nine months ended September 30, 2020 and 2019.

The accompanying condensed consolidated financial statements include our accounts and those of our wholly owned subsidiaries and consolidated variable interest entities ("VIEs"), including JBG SMITH LP.

See Note 5 for additional information on our VIEs.

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

References to our financial statements refer to our condensed consolidated financial statements as of March 31, 2021 and December 31, 2020, and for the three months ended March 31, 2021 and 2020.

References to our balance sheets refer to our condensed consolidated balance sheets as of March 31, 2021 and December 31, 2020.

References to our statements of operations refer to our condensed consolidated statements of operations for the three months ended March 31, 2021 and 2020.

References to our statements of comprehensive income (loss) refer to our condensed consolidated statements of comprehensive income (loss) for the three months ended March 31, 2021 and 2020.

References to our statements of cash flows refer to our condensed consolidated statements of cash flows for the three months ended March 31, 2021 and 2020.

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

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

We intend to adhere to these requirements and maintain our REIT status in future periods.

We also participate in the activities conducted by subsidiary entities which have elected to be treated as taxable REIT subsidiaries under the Code.

We currently adhere and intend to continue to adhere to these requirements and to maintain our REIT status in future periods.

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

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

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

These changes include:

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

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

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

technical correction "

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

to "15-year property"

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

During the nine months ended September 30, 2020, as a result of the CARES Act, we made adjustments to the net deferred tax liability amounts, which relate to "qualified improvement property"

owned by our TRSs.

Summary of Significant Accounting Policies

2 unchanged sentences

Use of Estimates

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

The most significant of these estimates include:

1 unchanged sentence

(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, or COVID-19, commencing in March 2020, authorities in jurisdictions where our properties are located issued stay-at-home orders and restrictions on travel and permitted businesses operations.

The effects of COVID-19 have most significantly impacted the operations of many of our retail tenants, which generated approximately 7 % of our revenue for the year ended December 31, 2019, revenue from our multifamily assets, our commercial parking revenue and our interest in the operations of the Crystal City Marriott and The Marriott Wardman Park hotels.

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

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

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

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

In March 2020, the World Health Organization declared a global pandemic related to the novel coronavirus ("COVID- 19").

The significance, extent and duration of the impact of COVID-19 on us and our tenants remains largely uncertain and dependent on near-term and future developments that cannot be accurately predicted at this time, such as the continued severity, duration, transmission rate and geographic spread of COVID-19, the roll-out, effectiveness and willingness of people to take COVID-19 vaccines, the extent and effectiveness of the containment measures taken, and the response of the overall economy, the financial markets and the population, particularly in the area in which we operate.

The ultimate adverse impact of COVID-19 is highly uncertain;

however, the 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.

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

We have entered into agreements with certain tenants, many of which have been placed on

the cash basis of accounting, resulting in the deferral to future periods or abatement of $ 1.9 million of rent that had been contractually due in the first quarter of 2021.

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

Recent Accounting Pronouncements

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

During the nine months ended September 30, 2020, we elected to apply the hedge accounting expedients related to (i) the assertion that our hedged forecasted transactions remain probable and (ii) the assessments of effectiveness for future LIBOR-indexed cash flows to assume that the index upon which future hedged transactions will be based matches the index on the corresponding derivatives.

Application of these expedients preserves the presentation of our derivatives, which will be consistent with our past presentation.

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

COVID-19 Lease Modification Accounting Relief

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

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

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

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

During the three and nine months ended September 30, 2020, we entered into rent deferral agreements with certain tenants, many of which were placed on the cash basis of accounting, resulting in the deferral to future periods of $ 1.2 million and $ 2.4 million of rent that had been contractually due in the second and third quarters.

During the three and nine months ended September 30, 2020, we recorded $ 3.2 million and $ 7.9 million of credit losses against billed rent receivables and $ 935,000 and $ 4.5 million against deferred (straight-line) rent receivables.

These losses are due to the effects of COVID-19 primarily on retail tenants, that are unable to pay rent while businesses are closed or not operating at full capacity.

During the second quarter of 2020, we also recorded $ 2.4 million of reserves against receivables from a parking operator that filed for bankruptcy protection.

Additionally, during the second quarter of 2020, we determined that our investment in the venture that owns The Marriott Wardman Park hotel was impaired due to a decline in the fair value of the underlying asset and recorded an impairment charge of $ 6.5 million (see Note 4 for additional information).

Disposition and Assets Held for Sale

The following is a summary of disposition activity for the nine months ended September 30, 2020:

Date Disposed

(In thousands)

January 15, 2020

Metropolitan Park (1)

Arlington, Virginia

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

See Note 5 for additional information.

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

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

See Note 4 for additional information.

During the three months ended March 31, 2021, no elections were made.

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 London Interbank Offered Rate ("LIBOR") indexed cash flows to assume that the index upon which future hedged transactions will be based matches the index on the corresponding derivatives.

Application of these expedients preserves our past presentation of our derivatives.

We will continue to evaluate the impact of the guidance and may apply other elections, as applicable.

Assets Held for Sale

As of September 30, 2020 and December 31, 2019, certain real estate properties were classified as held for sale.

As of March 31, 2021 and December 31, 2020, we had a real estate property that was classified as held for sale.

The amounts included in "Assets held for sale"

1 unchanged sentence

The following is a summary of assets held for sale:

Liabilities Related

to Assets Held

Square Feet (1)

(In thousands)

September 30, 2020

March 31, 2021

Pen Place (2)

3 unchanged sentences

Arlington, Virginia

Metropolitan Park (3)

Arlington, Virginia

(1) Represents estimated or approved potential development density.

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

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

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

(2) In March 2019, we entered into an agreement for the sale of Pen Place to Amazon, which we expect to close in 2021.

Investments in Unconsolidated Real Estate Ventures

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

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

Real Estate Venture Partners

September 30, 2020

March 31, 2021

December 31, 2020

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Brandywine Realty Trust

Pacific Life Insurance Company (3)

Total investments in unconsolidated real estate ventures (2)

(1) Ownership interests as of September 30, 2020.

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

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

The venture initially received proceeds of $ 134.5 million from the mortgage loan, with an additional $ 25.5 million available in the future.

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

(3) During the second quarter of 2020 , we determined that our investment in the venture that owns The Marriott Wardman Park hotel was impaired due to a decline in the fair value of the underlying asset and recorded an impairment charge of $ 6.5 million, which reduced the net book value of our investment to zero , and we suspended equity loss recognition for the venture after June 30, 2020.

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

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

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

in our statements of operations for the nine months ended September 30, 2020.

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

(1) Reflects our effective ownership interests in the underlying real estate as of March 31, 2021.

We have multiple investments with certain venture partners with varying ownership interests in the underlying real estate.

(2) As of March 31, 2021 and December 31, 2020, our total investments in unconsolidated real estate ventures are greater than the net book value of the underlying assets by $ 19.5 million and $ 18.9 million, resulting principally from capitalized interest, partially offset by 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 $ 6.3 million and $ 19.3 million for the three and nine months ended September 30, 2020, and $ 7.2 million and $ 21.0 million for the three and nine months ended September 30, 2019 for such services.

We recognized revenue, including expense reimbursements, of $ 5.9 million and $ 6.7 million for the three months ended March 31, 2021 and 2020 for such services.

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

5 unchanged sentences

Interest Rate (1)

September 30, 2020

March 31, 2021

December 31, 2020

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) (5)

(1) Weighted average effective interest rate as of September 30, 2020.

Mortgages payable, net (4)

(1) Weighted average effective interest rate as of March 31, 2021.

(2) Includes variable rate mortgages payable with interest rate cap agreements.

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

(4) Excludes a $ 129.0 million mortgage loan collateralized by The Marriott Wardman Park hotel as of September 30, 2020.

On October 1, 2020, we transferred our interest in the related venture to our venture partner.

(4) See Note 17 for additional information on guarantees of the debt of certain of our unconsolidated real estate ventures.

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

September 30, 2020

March 31, 2021

December 31, 2020

3 unchanged sentences

Other assets, net

Borrowings, net

Mortgages payable, net

Other liabilities, net

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Total liabilities and equity

(1) Excludes all assets and liabilities related to The Marriott Wardman Park hotel as of September 30, 2020.

On October 1, 2020, we transferred our interest in the related venture to our venture partner.

Three Months Ended September 30,

Nine Months Ended September 30,

Three Months Ended March 31,

(In thousands)

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Operating income (loss)

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

On October 1, 2020, we transferred our interest in the related venture to our venture partner.

(2) Includes the loss from the sale of Woodglen of $ 16.4 million recognized by our unconsolidated real estate venture with Landmark during the nine months ended September 30, 2020.

Variable Interest Entities

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

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

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

An entity is a VIE because it is in the development stage and/or does not hold sufficient equity at risk, or conducts substantially all its operations on behalf of an investor with disproportionately few voting rights.

We will consolidate a VIE if we are the primary beneficiary of the VIE, which entails having the power to direct the activities that most significantly impact the VIE’s economic performance.

Certain criteria we assess in determining whether we are the primary beneficiary of the VIE include our influence over significant business activities, our voting rights, and any noncontrolling interest kick-out or participating rights.

Unconsolidated VIEs

As of September 30, 2020 and December 31, 2019, we had interests in entities deemed to be VIEs that are in the development stage and do not hold sufficient equity at risk, or conduct substantially all their operations on behalf of an investor with disproportionately few voting rights.

As of March 31, 2021 and December 31, 2020, we had interests in entities deemed to be VIEs.

Although we are engaged to act as the managing partner in charge of day-to-day operations of these investees, we are not the primary beneficiary of these VIEs, as we do not hold unilateral power over activities that, when taken together, most significantly impact the respective VIE's performance.

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

As of September 30, 2020 and December 31, 2019, the net carrying amounts of our investment in these entities were $ 116.0 million and $ 242.9 million, which are included in "Investments in unconsolidated real estate ventures"

As of March 31, 2021 and December 31, 2020, the net carrying amounts of our investment in these entities were $ 116.3 million and $ 116.2 million, which are included in "Investments in unconsolidated real estate ventures"

in our balance sheets.

1 unchanged sentence

in our statements of operations.

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

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

See Note 17 for additional information.

Consolidated VIEs

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.

JBG SMITH LP is our most significant 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.

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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.

As general partner, we have the power to direct the activities of JBG SMITH LP that most

significantly affect its performance, and through our majority interest, we have both the right to receive benefits from and the obligation to absorb losses of JBG SMITH LP.

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

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

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

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

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

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

During the second quarter of 2020, an under-construction multifamily asset at The Wren (formerly referred to as 965 Florida Avenue) in Washington, D.C.

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

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

See Note 9 for additional information.

Through the structure of the 1900 Crystal Drive transaction we executed in March 2021, we have the ability to facilitate an exchange out of an asset into 1900 Crystal Drive .

We leased the land underlying 1900 Crystal Drive located in National Landing to a lessee, which plans to construct an 808 -unit multifamily asset comprising two towers with ground floor retail.

The ground lessee has engaged us to be the development manager for the construction of 1900 Crystal Drive, and separately, we are the lessee in a master lease of the asset.

We have an option to acquire the asset until a specified period after completion.

In March 2021, the ground lessee entered into a mortgage loan collateralized by the leasehold interest with a maximum principal balance of $ 227.0 million and an interest rate of LIBOR plus 3.0 % per annum.

As of March 31, 2021, no proceeds had been received from the mortgage loan.

In connection with the mortgage loan, we have guaranteed the completion of the asset and provided certain carve-outs (e.g., guarantees against fraud, misrepresentation and bankruptcy).

The ground lessee is obligated to invest $ 17.5 million of equity funding, and we are obligated to provide the additional project funding through a mezzanine loan to the ground lessee.

As of March 31, 2021, the balance of the ground lessee’s equity contribution was $ 9.7 million.

We determined that 1900 Crystal Drive is a VIE and that we are the primary beneficiary of the VIE.

Accordingly, we consolidated the VIE with the lessee's ownership interest shown as "Noncontrolling interests"

in our balance sheet as of March 31, 2021.

The ground lease, the mezzanine loan and the master lease described above are eliminated in consolidation.

As of March 31, 2021, the VIE had total assets and liabilities totaling $ 5.7 million and $ 585,000 .

The assets can only be used to settle the obligations of the VIE, and the liabilities include third-party liabilities of the VIE for which the creditors or beneficial interest holders do not have recourse against us.

Other Assets, Net

The following is a summary of other assets, net:

September 30, 2020

March 31, 2021

December 31, 2020

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Management and leasing contracts, net

Other identified intangible assets, net

Operating lease right-of-use assets, net

Finance lease right-of-use assets, net (1)

Other identified intangible assets

Wireless spectrum licenses (1)

Operating lease right-of-use assets

Finance lease right-of-use assets

Prepaid expenses

Deferred financing costs on credit facility, net

Deferred financing costs, net

Total other assets, net

(1) Related to an amendment of the ground lease for 1730 M Street executed during the nine months ended September 30, 2020.

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

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

(1) During 2020, we deposited $ 25.3 million with the Federal Communications Commission in connection with the acquisition of wireless spectrum licenses.

In March 2021, we received the licenses.

While the licenses are issued for ten years , as long as we act within the requirements and constraints of the regulatory authorities, the renewal and extension of these licenses is reasonably certain at minimal cost.

Accordingly, we have concluded that the licenses are indefinite-lived intangible assets .

Mortgages Payable

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Interest Rate (1)

September 30, 2020

March 31, 2021

December 31, 2020

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Mortgages payable, net

(1) Weighted average effective interest rate as of September 30, 2020.

(1) Weighted average effective interest rate as of March 31, 2021.

(2) Includes variable rate mortgages payable with interest rate cap agreements.

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

As of September 30, 2020 and December 31, 2019, the net carrying value of real estate collateralizing our mortgages payable totaled $ 2.0 billion and $ 1.4 billion.

(4) As of March 31, 2021, net deferred financing costs related to an unfunded mortgage loan totaling $ 4.6 million were included in "Other assets, net."

As of March 31, 2021 and December 31, 2020, the net carrying value of real estate collateralizing our mortgages payable totaled $ 1.8 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.

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See Note 17 for additional information.

During the nine months ended September 30, 2020, we entered into four separate mortgage loans with an aggregate principal balance of $ 560.0 million, collateralized by 4747 Bethesda Avenue, The Bartlett, 1221 Van Street and 220 20th Street, and refinanced the mortgage loan collateralized by RTC-West, increasing the principal balance by $ 20.2 million.

As of September 30, 2020 and December 31, 2019, we had various interest rate swap and cap agreements on certain mortgages payable with an aggregate notional value of $ 1.3 billion and $ 867.6 million.

As of March 31, 2021 and December 31, 2020, we had various interest rate swap and cap agreements on certain mortgages payable with an aggregate notional value of $ 1.3 billion.

See Note 15 for additional information.

Credit Facility

As of September 30, 2020, our $ 1.4 billion credit facility consisted of a $ 1.0 billion revolving credit facility maturing in January 2025, a $ 200.0 million unsecured term loan ("Tranche A-1 Term Loan") maturing in January 2023 and a $ 200.0 million unsecured term loan ("Tranche A-2 Term Loan") maturing in July 2024.

As of March 31, 2021 and 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.

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

Interest Rate (1)

September 30, 2020

March 31, 2021

December 31, 2020

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Unsecured term loans, net

(1) Effective interest rate as of September 30, 2020.

(2) As of both September 30, 2020 and December 31, 2019, letters of credit with an aggregate face amount of $ 1.5 million were outstanding under our revolving credit facility.

(3) As of September 30, 2020 and December 31, 2019, net deferred financing costs related to our revolving credit facility totaling $ 7.1 million and $ 3.1 million were included in "Other assets, net."

(1) Effective interest rate as of March 31, 2021.

(2) As of March 31, 2021 and December 31, 2020, letters of credit with an aggregate face amount of $ 1.5 million were outstanding under our revolving credit facility.

(3) As of March 31, 2021 and December 31, 2020, net deferred financing costs related to our revolving credit facility totaling $ 6.2 million and $ 6.7 million were included in "Other assets, net."

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

(5) As of September 30, 2020 and December 31, 2019, $ 200.0 million and $ 100.0 million of the outstanding balance was fixed by interest rate swap agreements.

(5) As of March 31, 2021 and December 31, 2020, the outstanding balance was fixed by interest rate swap agreements.

The interest rate swaps mature concurrently with the term loan and provide a weighted average interest rate of 1.39 % .

(6) As of September 30, 2020 and December 31, 2019, $ 200.0 million and $ 137.6 million of the outstanding balance was fixed by interest rate swap agreements.

As of September 30, 2020, the interest rate swaps mature concurrently with the term loan and provide a weighted average interest rate of 1.34 % .

(6) As of March 31, 2021 and December 31, 2020, the outstanding balance was fixed by interest rate swap agreements.

The interest rate swaps mature concurrently with the term loan and provide a weighted average interest rate of 1.34 % .

Other Liabilities, Net

The following is a summary of other liabilities, net:

September 30, 2020

March 31, 2021

December 31, 2020

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Environmental liabilities

Net deferred tax liability

Deferred tax liability, net

Dividends payable

Derivative agreements, at fair value

Deferred purchase price (1)

Total other liabilities, net

(1) Related to an amendment of the ground lease for 1730 M Street executed during the nine months ended September 30, 2020.

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

(1) Deferred purchase price associated with the acquisition of the former Americana Hotel site in December 2020.

Redeemable Noncontrolling Interests

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

During the nine months ended September 30, 2020 and 2019, unitholders redeemed 1.1 million and 1.7 million OP Units, which we elected to redeem for an equivalent number of our common shares.

As of September 30, 2020, outstanding OP Units totaled 14.0 million, representing a 9.6 % ownership interest in JBG SMITH LP.

During the three months ended March 31, 2021 and 2020, unitholders redeemed 119,178 and 787,253 OP Units, which we elected to redeem for an equivalent number of our common shares.

As of March 31, 2021, outstanding OP Units totaled 13.7 million, representing a 9.5 % ownership interest in JBG SMITH LP.

On our balance sheets, our OP Units and certain vested long-term incentive partnership units ("LTIP Units") are presented at the higher of their redemption value or their carrying value, with such adjustments recognized in "Additional paid-in capital."

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

In October 2020, unitholders redeemed 26,538 OP Units, which we elected to redeem for an equivalent number of our common shares.

In April 2021, unitholders redeemed 171,978 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 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 %.

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 under certain conditions.

As of September 30, 2020, we held a 95.9 % ownership interest in the real estate venture.

As of March 31, 2021, we held a 96.0 % ownership interest in the real estate venture.

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

Three Months Ended September 30,

(In thousands)

Balance as of the beginning of the period

OP Unit redemptions

Net income (loss) attributable to redeemable noncontrolling interests

Other comprehensive income (loss)

Distributions

Share-based compensation expense

Adjustment to redemption value

Balance as of the end of the period

Nine Months Ended September 30,

Three Months Ended March 31,

(In thousands)

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Other comprehensive income (loss)

Distributions

Contributions (distributions)

Share-based compensation expense

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

Three Months Ended September 30,

Nine Months Ended September 30,

Three Months Ended March 31,

(In thousands)

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LTIP Units and Time-Based LTIP Units

During the nine months ended September 30, 2020, we granted 381,504 LTIP Units with time-based vesting requirements ("Time-Based LTIP Units") to management and other employees with a weighted average grant-date fair value of $ 38.52

per unit that vest over four years , 25.0 % per year, subject to continued employment.

In January 2021, we granted 485,753 LTIP Units with time-based vesting requirements ("Time-Based LTIP Units") to management and other employees with a weighted average grant-date fair value of $ 29.21 per unit that vest ratably over four years subject to continued employment.

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

The aggregate grant-date fair value of these Time-Based LTIP Units granted during the nine months ended September 30, 2020 was $ 14.7 million, valued using Monte Carlo simulations.

During the nine months ended September 30, 2020, we granted 90,094 fully vested LTIP Units, with a grant-date fair value of $ 40.13 per unit, to certain executives who elected to receive all or a portion of their cash bonus paid in 2020, related to 2019 service, as LTIP Units.

Additionally, in January 2021, we granted 163,065 fully vested LTIP Units, with a grant-date fair value of $ 29.54 per unit, to certain employees who elected to receive all or a portion of their cash bonus, related to 2020 service, as LTIP Units.

Compensation expense totaling $ 4.8 million for these LTIP Units was recognized in 2020.

In April 2020, as part of their annual compensation, we granted a total of 54,607 fully vested LTIP Units to certain of our trustees with an aggregate grant-date fair value of $ 1.5 million.

The following is a summary of the significant assumptions used to value the LTIP Units and Time-Based LTIP Units:

The aggregate grant-date fair value of these Time-Based LTIP Units and LTIP Units granted during the three months ended March 31, 2021 was $ 19.0 million.

The LTIP Units were valued based on the closing common share price on the date of grant and the Time-Based LTIP Units were valued using Monte Carlo simulations.

The following is a summary of the significant assumptions used to value the Time-Based LTIP Units:

Expected volatility

18.0 % to 29.0 %

Risk-free interest rate

0.3 % to 1.5 %

Post-grant restriction periods

In April 2021, as part of their annual compensation, we granted a total of 71,792 fully vested LTIP Units to non-employee trustees with an aggregate grant-date fair value of $ 1.9 million.

The LTIP Units may not be sold while such trustee is serving on the Board of Trustees.

Performance-Based LTIP Units

During the nine months ended September 30, 2020, we granted 593,100 LTIP Units with performance-based vesting requirements ("Performance-Based LTIP Units") to management and other employees with a weighted average grant-date fair value of $ 18.67 per unit.

In January 2021, we granted 627,874 LTIP Units with performance-based vesting requirements ("Performance-Based LTIP Units") to management and other employees with a weighted average grant-date fair value of $ 15.14 per unit.

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

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

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

The aggregate grant-date fair value of the Performance-Based LTIP Units granted during the nine months ended September 30, 2020 was $ 11.1 million, valued using Monte Carlo simulations.

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

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 Units granted during the three months ended March 31, 2021 was $ 9.5 million, valued using Monte Carlo simulations.

Compensation expense for the Performance-Based LTIP Units is being recognized over a four-year period.

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Risk-free interest rate

During the three months ended September 30, 2020, the three-year performance period ended for the Performance-Based LTIP Units granted on August 1, 2017.

While our relative TSR over the three-year performance period would have allowed these grants to be fully earned, because our TSR over the three-year performance period was negative, 50 % of the units ( 289,765 units) were forfeited, and the remaining 50 % will be earned and vest if and when we achieve a positive TSR during the succeeding seven years .

Pursuant to the ESPP, employees purchased 35,307 common shares for $ 887,000 during the nine months ended September 30, 2020.

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

Expected volatility

Dividend yield

Risk-free interest rate

Expected life

Restricted Share Units ("RSUs")

Beginning in 2021, certain non-executive employees were granted 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 LTIP Units.

In January 2021, we granted 18,343 Time-Based RSUs with a weighted average grant-date fair value of $ 31.33 per unit, and 11,886 Performance-Based RSUs with a grant-date fair value of $ 15.14 per unit.

The aggregate grant-date fair value of the RSUs granted during the three months ended March 31, 2021 was $ 755,000 .

The Time-Based RSUs were valued based on the closing price on the date of grant and the Performance-Based RSUs were valued using Monte Carlo simulations with the same significant assumptions used to value the Performance-Based LTIP Units above.

Share-Based Compensation Expense

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

Three Months Ended September 30,

Nine Months Ended September 30,

Three Months Ended March 31,

(In thousands)

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Share-based compensation expense

(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.

(1) Primarily comprising compensation expense for:

(i) certain employees who have elected to receive all or a portion of any cash bonus earned in the form of fully vested LTIP Units, (ii) RSUs and (iii) 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.

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in the accompanying statements of operations .

As of September 30, 2020, we had $ 59.7 million of total unrecognized compensation expense related to unvested share-based payment arrangements, which is expected to be recognized over a weighted average period of 1.9 years.

As of March 31, 2021, we had $ 57.3 million of total unrecognized compensation expense related to unvested share-based payment arrangements, which is expected to be recognized over a weighted average period of 1.9 years.

In April 2021, our shareholders approved an amendment to the JBG SMITH 2017 Omnibus Share Plan (the "Plan") to increase the common shares reserved under the Plan by 8.0 million.

Transaction and Other Costs

The following is a summary of transaction and other costs:

Three Months Ended September 30,

Nine Months Ended September 30,

Three Months Ended March 31,

(In thousands)

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Transaction and other costs

(1) Related to 223 23 rd Street and 2300 Crystal Drive for the three and nine months ended September 30, 2020.

Related to 1900 Crystal Drive for the three and nine months ended September 30, 2019.

(2) Represents a charitable commitment to the Washington Housing Conservancy, a non-profit that acquires and owns affordable workforce housing in the Washington D.C.

metropolitan region.

(1) Related to 2000 South Bell Street and 2001 South Bell Street.

(2) Related to a charitable commitment to the Washington Housing Conservancy, a non-profit that acquires and owns affordable workforce housing in the Washington, D.C.

metropolitan area.

Interest Expense

The following is a summary of interest expense:

Three Months Ended September 30,

Nine Months Ended September 30,

Three Months Ended March 31,

(In thousands)

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

Net unrealized loss on derivative financial

instruments not designated as cash flow hedges

Net unrealized gain on derivative financial instruments not designated as cash flow hedges

Capitalized interest

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

During the three and nine months ended September 30, 2020, we repurchased and retired 1.4 million and 2.9 million common shares for $ 38.4 million and $ 79.6 million, an average purchase price of $ 26.64 and $ 27.82 per share.

Earnings Per Common Share

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

Three Months Ended September 30,

Nine Months Ended September 30,

During the three months ended March 31, 2021, we repurchased and retired 619,749 common shares for $ 19.2 million, an average purchase price of $ 30.96 per share.

During the three months ended March 31, 2020, we repurchased and retired 1.4 million common shares for $ 41.2 million, an average purchase price of $ 29.01 per share.

Since we began the share repurchase program, we have repurchased and retired 4.4 million common shares for $ 124.0 million, an average purchase price of $ 28.18 per share.

Earnings (Loss) Per Common Share

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

Three Months Ended March 31,

(In thousands, except per share amounts)

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Net (income) loss attributable to redeemable noncontrolling interests

Net loss attributable to noncontrolling interests

Net income (loss) attributable to common shareholders

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:

The effect of the redemption of OP Units and Time-Based LTIP Units that were outstanding as of September 30, 2020 and 2019 is excluded in the computation of diluted earnings per common share as the assumed exchange of such units for common shares on a one-for-one basis was antidilutive (the assumed redemption of these units would have no impact on the determination of diluted earnings per share).

available to common shareholders and from the weighted average number of common shares outstanding in calculating diluted earnings per common share.

Performance-Based LTIP Units, Special Performance-Based LTIP Units and Formation Awards, which totaled 4.4 million and 4.9 million for the three and nine months ended September 30, 2020, and 4.7 million for the three and nine months ended September 30, 2019, were excluded from the calculation of diluted earnings per common share as they were antidilutive, but potentially could be dilutive in the future.

Weighted average number of common shares outstanding - basic

Effect of dilutive securities

Weighted average number of common shares outstanding — 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 March 31, 2021 and 2020 is excluded in the computation of diluted earnings per common share as the assumed exchange of such units for common shares on a one-for-one basis was antidilutive (the assumed redemption of these units would have no impact on the determination of diluted earnings per share).

Since OP Units and Time-Based LTIP Units, which are held by noncontrolling interests, are attributed gains at an identical proportion to the common shareholders, the gains attributable and their equivalent weighted average OP Unit and Time-Based LTIP Unit impact are excluded from net income (loss) 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, Formation Awards and RSUs, which totaled 3.9 million and 4.1 million for the three months ended March 31, 2021 and 2020, were excluded from the calculation of diluted earnings per common share as they were antidilutive, but potentially could be dilutive in the future.

Fair Value Measurements

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We do not enter into derivative financial instruments for speculative purposes.

As of September 30, 2020 and December 31, 2019, we had various derivative financial instruments consisting of interest rate swap and cap agreements that are measured at fair value on a recurring basis.

The net unrealized loss on our derivative financial instruments designated as cash flow hedges was $ 49.1 million and $ 17.7 million as of September 30, 2020 and December 31, 2019 and was recorded in "Accumulated other comprehensive loss"

As of March 31, 2021 and December 31, 2020, we had various derivative financial instruments consisting of interest rate swap and cap agreements that are measured at fair value on a recurring basis.

The net unrealized loss on our derivative financial instruments designated as cash flow hedges was $ 33.8 million and $ 43.9 million as of March 31, 2021 and December 31, 2020 and was recorded in "Accumulated other comprehensive loss"

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

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(In thousands)

September 30, 2020

March 31, 2021

Derivative financial instruments designated as cash flow hedges:

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Classified as liabilities in "Other liabilities, net"

Derivative financial instruments not designated as cash flow hedges:

Classified as assets in "Other assets, 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.

This analysis reflected the contractual terms of the derivative, including the period to maturity, and used observable market-based inputs, including interest rate market data and implied volatilities in such interest rates.

While it was determined that the majority of the inputs used to value the derivatives fall within Level 2 of the fair value hierarchy under authoritative accounting guidance, the credit valuation adjustments associated with the derivatives also utilized Level 3 inputs, such as estimates of

current credit spreads to evaluate the likelihood of default.

However, as of September 30, 2020 and December 31, 2019, the significance of the impact of the credit valuation adjustments on the overall valuation of the derivative financial instruments was assessed, and it was determined that these adjustments were not significant to the overall valuation of the derivative financial instruments.

While it was determined that the majority of the inputs used to value the derivatives fall within Level 2 of the fair value hierarchy under authoritative accounting

guidance, the credit valuation adjustments associated with the derivatives also utilized Level 3 inputs, such as estimates of current credit spreads to evaluate the likelihood of default.

However, as of March 31, 2021 and December 31, 2020, the significance of the impact of the credit valuation adjustments on the overall valuation of the derivative financial instruments was assessed, and it was determined that these adjustments were not significant to the overall valuation of the derivative financial instruments.

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

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

in our statements of comprehensive income (loss) for the three and nine months ended September 30, 2020 and 2019 were attributable to the net change in unrealized gains or losses related to the interest rate swaps that were outstanding during those periods, none of which were reported in our statements of operations as the interest rate swaps were documented and qualified as hedging instruments.

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

in our statements of comprehensive income (loss) for the three months ended March 31, 2021 and 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.

Financial Assets and Liabilities Not Measured at Fair Value

As of September 30, 2020 and December 31, 2019, all financial instruments and liabilities were reflected in our balance sheets at amounts which, in our estimation, reasonably approximated their fair values, except for the following:

September 30, 2020

As of March 31, 2021 and December 31, 2020, all financial assets and liabilities were reflected in our balance sheets at amounts which, in our estimation, reasonably approximated their fair values, except for the following:

March 31, 2021

December 31, 2020

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Mortgages payable

Revolving credit facility

Unsecured term loans

(1) The carrying amount consists of principal only.

The fair values of the mortgages payable, revolving credit facility and unsecured term loans were determined using Level 2 inputs of the fair value hierarchy.

The fair values of the mortgages payable and unsecured term loans were determined using Level 2 inputs of the fair value hierarchy.

The fair value of our mortgages payable is estimated by discounting the future contractual cash flows of these instruments using current risk-adjusted rates available to borrowers with similar credit profiles based on market sources.

The fair value of our unsecured term loans is calculated based on the net present value of payments over the term of the facilities using estimated market rates for similar notes and remaining terms.

Segment Information

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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.

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

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

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

Three Months Ended September 30,

Nine Months Ended September 30,

Three Months Ended March 31,

(In thousands)

5 unchanged sentences

Third-party real estate services revenue, excluding reimbursements

Reimbursements revenue (1)

Reimbursement revenue (2)

Third-party real estate services revenue, including reimbursements

1 unchanged sentence

Third-party real estate services revenue less expenses

(1) Estimated development fee revenue totaling $ 55.9 million as of March 31, 2021 is expected to be recognized over the next six 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 $ 27.0 million and $ 31.5 million and are classified in "Other assets, net"

in our balance sheets as of September 30, 2020 and December 31, 2019.

Management company assets primarily consist of management and leasing contracts with a net book value of $ 24.0 million and $ 25.5 million as of March 31, 2021 and December 31, 2020, which are classified in "Other assets, net"

in our balance sheets.

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

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

Three Months Ended September 30,

Nine Months Ended September 30,

Three Months Ended March 31,

(In thousands)

10 unchanged sentences

Net income (loss) attributable to redeemable noncontrolling interests

Net loss attributable to noncontrolling interests

Third-party real estate services, including reimbursements revenue

Other revenue

Income (loss) from unconsolidated real estate ventures, net

Interest and other income (loss), net

Loss from unconsolidated real estate ventures, net

Interest and other income, net

Gain on sale of real estate

Consolidated NOI

(1) Excludes parking revenue of $ 3.1 million and $ 10.3 million for the three and nine months ended September 30, 2020, and $ 6.3 million and $ 19.5 million for the three and nine months ended September 30, 2019.

The following is a summary of NOI by segment.

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

Three Months Ended September 30, 2020

(In thousands)

Property rental revenue

Other property revenue

Total property revenue

Property expense:

Property operating

Real estate taxes

Total property expense

Consolidated NOI

Three Months Ended September 30, 2019

(In thousands)

Property rental revenue

Other property revenue

Total property revenue

Property expense:

Property operating

Real estate taxes

Total property expense

Consolidated NOI

Nine Months Ended September 30, 2020

Three Months Ended March 31, 2021

(In thousands)

Property rental revenue

Other property revenue

Parking revenue

Total property revenue

4 unchanged sentences

Consolidated NOI

Nine Months Ended September 30, 2019

Three Months Ended March 31, 2020

(In thousands)

Property rental revenue

Other property revenue

Parking revenue

Total property revenue

6 unchanged sentences

(In thousands)

September 30, 2020

March 31, 2021

Real estate, at cost

9 unchanged sentences

We maintain general liability insurance with limits of $ 150.0 million per occurrence and in the aggregate, and property and rental value insurance coverage with limits of $ 1.5 billion per occurrence, with sub-limits for certain perils such as floods and earthquakes on each of our properties.

We also maintain coverage, through our wholly owned captive insurance subsidiary, for a portion of the first loss on the above limits and for both terrorist acts and for nuclear, biological, chemical or radiological terrorism events with limits of $ 2.0 billion per occurrence.

We also maintain coverage, through our wholly owned captive insurance subsidiary, for a portion of the first loss on the above limits and for both terrorist acts and for nuclear, biological, chemical

or radiological terrorism events with limits of $ 2.0 billion per occurrence.

These policies are partially reinsured by third-party insurance providers.

6 unchanged sentences

Construction Commitments

As of September 30, 2020, we had construction in progress that will require an additional $ 34.0 million to complete ($ 20.2 million related to our consolidated entities and $ 13.8 million related to our unconsolidated real estate ventures at our share), based on our current plans and estimates, which we anticipate will be primarily expended over the next one to two years .

These capital expenditures are generally due as the work is performed, and we expect to finance them with debt proceeds, proceeds from asset recapitalizations and sales, issuance and sale of equity securities, and available cash.

As of March 31, 2021, we had construction in progress that will require an additional $ 351.3 million to complete ($ 345.9 million related to a consolidated entity and $ 5.4 million related to an unconsolidated real estate venture at our share), based on our current plans and estimates, which we anticipate will be primarily expended over the next four years .

Environmental Matters

2 unchanged sentences

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

Environmental liabilities totaled $ 17.9 million as of both September 30, 2020 and December 31, 2019 and are included in "Other liabilities, net"

Environmental liabilities totaled $ 18.2 million as of March 31, 2021 and December 31, 2020 and are included in "Other liabilities, net"

in our balance sheets.

As of March 31, 2021, we had committed tenant-related obligations totaling $ 58.2 million ($ 54.6 million related to our consolidated entities and $ 3.6 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.

5 unchanged sentences

Amounts that we may be required to pay in future periods in relation to guarantees associated with budget overruns or operating losses are not estimable.

As of September 30, 2020, we had additional capital commitments and certain recorded guarantees to our unconsolidated real estate ventures totaling $ 56.9 million.

As of September 30, 2020, we had no principal payment guarantees related to our unconsolidated real estate ventures.

As of March 31, 2021, we had additional capital commitments and certain recorded guarantees to our unconsolidated real estate ventures totaling $ 53.8 million.

As of March 31, 2021, we had no principal payment guarantees related to our unconsolidated real estate ventures.

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

As of September 30, 2020, the aggregate amount of principal payment guarantees was $ 8.3 million for our consolidated entities.

As of March 31, 2021, the aggregate amount of principal payment guarantees was $ 8.3 million for our consolidated entities.

In connection with the Formation Transaction, we have an agreement with Vornado regarding tax matters (the "Tax Matters Agreement") that provides special rules that allocate tax liabilities if the distribution of JBG SMITH shares by Vornado, together with certain related transactions, is determined not to be tax-free.

Under the Tax Matters Agreement, we may be required to indemnify Vornado against any taxes and related amounts and costs resulting from a violation by us of the Tax Matters Agreement.

Under the Tax Matters Agreement, we may be required to indemnify Vornado for any taxes and related amounts and costs resulting from a violation by us of the Tax Matters Agreement.

Transactions with Related Parties

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

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

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

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

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

As of September 30, 2020, the WHI Impact Pool had completed closings of capital commitments totaling $ 112.0 million, which included a commitment from us of $ 10.9 million.

The third-party real estate services revenue, including expense reimbursements, from the JBG Legacy Funds and the WHI Impact Pool was $ 4.6 million and $ 17.3 million for the three and nine months ended September 30, 2020, and $ 10.2 million and $ 28.6 million for the three and nine months ended September 30, 2019.

As of September 30, 2020 and

December 31, 2019, we had receivables from the JBG Legacy Funds and the WHI Impact Pool totaling $ 8.1 million and $ 6.2 million for such services.

We rented our former corporate offices from an unconsolidated real estate venture and made payments totaling $ 403,000 and $ 4.1 million for the three and nine months ended September 30, 2020, and $ 867,000 and $ 3.4 million for the three and nine months ended September 30, 2019.

In November 2019, we relocated our corporate headquarters.

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

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

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

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

As of March 31, 2021, the WHI Impact Pool closed on capital commitments totaling $ 114.4 million, which includes 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 $ 5.8 million and $ 8.0 million for the three months ended March 31, 2021 and 2020.

As of March 31, 2021 and December 31, 2020, we had receivables from the JBG Legacy Funds and the WHI Impact Pool totaling $ 7.9 million and $ 7.5 million for such services.

We rented our former corporate offices from an unconsolidated real estate venture and made payments totaling $ 271,000 and $ 1.3 million for the three months ended March 31, 2021 and 2020.

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

We paid BMS $ 4.0 million and $ 12.6 million during the three and nine months ended September 30, 2020, and $ 5.5 million and $ 16.1 million during the three and nine months ended September 30, 2019 which is included in "Property operating expenses"

We paid BMS $ 4.3 million and $ 5.3 million during the three months ended March 31, 2021 and 2020, which is included in "Property operating expenses"

in our statements of operations.

Subsequent Events

On October 29, 2020, our Board of Trustees declared a quarterly dividend of $ 0.225 per common share, payable on November 30, 2020 to shareholders of record as of November 13, 2020.

On April 29, 2021, our Board of Trustees declared a quarterly dividend of $ 0.225 per common share, payable on May 27, 2021 to shareholders of record as of May 13, 2021.

In April 2021, we entered into two real estate ventures, in which we have 50 % ownership interests, to design, develop, manage and own approximately 2.0 million square feet of new mixed-use development located in Potomac Yard, the southern portion of National Landing.

Our venture partner contributed a land site that is entitled for 1.3 million square feet

of development it controls at Potomac Yard Landbay F, while we contributed the adjacent land with over 700,000 square feet of estimated development capacity at Potomac Yard Landbay G.

We will also act as pre-developer, developer, property manager and leasing agent for all future commercial and residential properties on the site.

As part of the transaction, our venture partner elected to accelerate the monetization of a 2013 promote interest in the land contributed by it to the ventures.

The total amount of the promote expected to be paid is approximately $ 17.5 million, of which $ 4.3 million will be paid to certain of our non-employee trustees and certain of our executives.

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-Q

Item 1. Financial Statements