JBG SMITH Properties 10-K

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA ​ ​ ​ ​ TABLE OF CONTENTS ​ ​ ​ Page Report of Independent Registered Public Accounting Firm (PCAOB ID No. 34 ) ​ 66 Consolidated Balance Sheets as of December 31, 2021 and 2020 ​ 68 Consolidated Statements of Operations for the years ended December 31, 2021, 2020 and 2019 ​ 69 Consolidated Statements of Comprehensive Income (Loss) for the years ended December 31, 2021, 2020 and 2019 ​ 70 Consolidated Statements of Equity for the years ended December 31, 2021, 2020 and 2019 ​ 71 Consolidated Statements of Cash Flows for the years ended December 31, 2021, 2020 and 2019 ​ 72 Notes to Consolidated Financial Statements ​ 74 ​ ​ ​ ​ 65 Table of Contents REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Shareholders and the Board of Trustees of JBG SMITH Properties 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, 2021 and 2020, 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, 2021, and the related notes and the schedule 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, 2021 and 2020, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2021, in conformity with accounting principles generally accepted in the United States of America. We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 22, 2022, expressed an unqualified opinion on the Company's internal control over financial reporting. Basis for Opinion These financial statements are the responsibility of the Company's management. 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 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. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical Audit Matter The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. 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. Real Estate – Impairment Indicators - Refer to Note 2 to the consolidated financial statements Critical Audit Matter Description 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, shortened anticipated holding periods, and adverse changes in circumstances. At December 31, 2021, the carrying value 66 Table of Contents of the Company's real estate assets was approximately $4.87 billion, including an impairment loss in the year ended December 31, 2021 of $25.1 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 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 identification 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. – Inquiring of management and reading business performance reports and board minutes to identify properties that should be evaluated for shortened anticipated holding periods. – Developing an expectation of assets for which impairment indicators are identified in management's analysis. ​ /s/ Deloitte & Touche LLP McLean, Virginia February 22, 2022 We have served as the Company's auditor since 2016. ​ 67 Table of Contents JBG SMITH PROPERTIES Consolidated Balance Sheets (In thousands, except par value amounts) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, ​ 2021 2020 ASSETS ​ ​ Real estate, at cost: ​ ​ Land and improvements ​ $ 1,378,218 ​ $ 1,391,472 Buildings and improvements ​ 4,513,606 ​ 4,341,103 Construction in progress, including land ​ 344,652 ​ 268,056 ​ ​ 6,236,476 ​ 6,000,631 Less: accumulated depreciation ​ ( 1,368,003 ) ​ ( 1,232,690 ) Real estate, net ​ 4,868,473 ​ 4,767,941 Cash and cash equivalents ​ 264,356 ​ 225,600 Restricted cash ​ 37,739 ​ 37,736 Tenant and other receivables ​ 44,496 ​ 55,903 Deferred rent receivable ​ 192,265 ​ 170,547 Investments in unconsolidated real estate ventures ​ 462,885 ​ 461,369 Other assets, net ​ 442,116 ​ 286,575 Assets held for sale ​ 73,876 ​ 73,876 TOTAL ASSETS ​ $ 6,386,206 ​ $ 6,079,547 ​ ​ ​ ​ ​ ​ ​ LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS AND EQUITY ​ Liabilities: ​ ​ Mortgages payable, net ​ $ 1,777,699 ​ $ 1,593,738 Revolving credit facility ​ 300,000 ​ — Unsecured term loans, net ​ 398,664 ​ 397,979 Accounts payable and accrued expenses ​ 106,136 ​ 103,102 Other liabilities, net ​ 342,565 ​ 247,774 Total liabilities ​ 2,925,064 ​ 2,342,593 Commitments and contingencies ​ ​ Redeemable noncontrolling interests ​ 522,725 ​ 530,748 Shareholders' equity: ​ ​ Preferred shares, $ 0.01 par value - 200,000 shares authorized; none issued ​ — ​ — Common shares, $ 0.01 par value - 500,000 shares authorized; 127,378 and 131,778 shares issued and outstanding as of December 31, 2021 and 2020 ​ 1,275 ​ 1,319 Additional paid-in capital ​ 3,539,916 ​ 3,657,643 Accumulated deficit ​ ( 609,331 ) ​ ( 412,944 ) Accumulated other comprehensive loss ​ ( 15,950 ) ​ ( 39,979 ) Total shareholders' equity of JBG SMITH Properties ​ 2,915,910 ​ 3,206,039 Noncontrolling interests ​ 22,507 ​ 167 Total equity ​ 2,938,417 ​ 3,206,206 TOTAL LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS AND EQUITY ​ $ 6,386,206 ​ $ 6,079,547 ​ See accompanying notes to the consolidated financial statements. ​ 68 Table of Contents JBG SMITH PROPERTIES Consolidated Statements of Operations (In thousands, except per share data) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ 2021 2020 ​ 2019 REVENUE ​ ​ ​ ​ ​ Property rental ​ $ 499,586 ​ $ 458,958 ​ $ 493,273 Third-party real estate services, including reimbursements ​ 114,003 ​ 113,939 ​ 120,886 Other revenue ​ 20,773 ​ 29,826 ​ 33,611 Total revenue ​ 634,362 ​ 602,723 ​ 647,770 EXPENSES ​ ​ ​ ​ Depreciation and amortization ​ 236,303 ​ 221,756 ​ 191,580 Property operating ​ 150,638 ​ 145,625 ​ 137,622 Real estate taxes ​ 70,823 ​ 70,958 ​ 70,493 General and administrative: ​ ​ ​ ​ Corporate and other ​ 53,819 ​ 46,634 ​ 46,822 Third-party real estate services ​ 107,159 ​ 114,829 ​ 113,495 Share-based compensation related to Formation Transaction and special equity awards ​ 16,325 ​ 31,678 ​ 42,162 Transaction and other costs ​ 10,429 ​ 8,670 ​ 23,235 Total expenses ​ 645,496 ​ 640,150 ​ 625,409 OTHER INCOME (EXPENSE) ​ ​ ​ Loss from unconsolidated real estate ventures, net ​ ( 2,070 ) ​ ( 20,336 ) ​ ( 1,395 ) Interest and other income (loss), net ​ 8,835 ​ ( 625 ) ​ 5,385 Interest expense ​ ( 67,961 ) ​ ( 62,321 ) ​ ( 52,695 ) Gain on sale of real estate ​ 11,290 ​ 59,477 ​ 104,991 Loss on extinguishment of debt ​ — ​ ( 62 ) ​ ( 5,805 ) Impairment loss ​ ​ ( 25,144 ) ​ ​ ( 10,232 ) ​ ​ — Total other income (expense) ​ ( 75,050 ) ​ ( 34,099 ) ​ 50,481 INCOME (LOSS) BEFORE INCOME TAX (EXPENSE) BENEFIT ​ ( 86,184 ) ​ ( 71,526 ) ​ ​ 72,842 Income tax (expense) benefit ​ ( 3,541 ) ​ 4,265 ​ 1,302 NET INCOME (LOSS) ​ ( 89,725 ) ​ ( 67,261 ) ​ 74,144 Net (income) loss attributable to redeemable noncontrolling interests ​ 8,728 ​ 4,958 ​ ( 8,573 ) Net loss attributable to noncontrolling interests ​ 1,740 ​ — ​ — NET INCOME (LOSS) ATTRIBUTABLE TO COMMON SHAREHOLDERS ​ $ ( 79,257 ) ​ $ ( 62,303 ) ​ $ 65,571 EARNINGS (LOSS) PER COMMON SHARE - BASIC AND DILUTED ​ $ ( 0.63 ) ​ $ ( 0.49 ) ​ $ 0.48 WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING - BASIC AND DILUTED ​ 130,839 ​ 133,451 ​ 130,687 ​ See accompanying notes to the consolidated financial statements. ​ 69 Table of Contents JBG SMITH PROPERTIES Consolidated Statements of Comprehensive Income (Loss) (In thousands) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ 2021 2020 ​ 2019 NET INCOME (LOSS) ​ $ ( 89,725 ) ​ $ ( 67,261 ) ​ $ 74,144 OTHER COMPREHENSIVE INCOME (LOSS): ​ ​ ​ Change in fair value of derivative financial instruments ​ 11,326 ​ ( 38,137 ) ​ ( 27,722 ) Reclassification of net loss on derivative financial instruments from accumulated other comprehensive loss into interest expense ​ 15,378 ​ 11,912 ​ 1,694 Other comprehensive income (loss) ​ 26,704 ​ ( 26,225 ) ​ ( 26,028 ) COMPREHENSIVE INCOME (LOSS) ​ ( 63,021 ) ​ ( 93,486 ) ​ 48,116 Net (income) loss attributable to redeemable noncontrolling interests ​ 8,728 ​ 4,958 ​ ( 8,573 ) Net loss attributable to noncontrolling interests ​ ​ 1,740 ​ ​ — ​ ​ — Other comprehensive (income) loss attributable to redeemable noncontrolling interests ​ ( 2,675 ) ​ 2,990 ​ 2,584 COMPREHENSIVE INCOME (LOSS) ATTRIBUTABLE TO JBG SMITH PROPERTIES ​ $ ( 55,228 ) ​ $ ( 85,538 ) ​ $ 42,127 ​ See accompanying notes to the consolidated financial statements. ​ 70 Table of Contents JBG SMITH PROPERTIES Consolidated Statements of Equity (In thousands) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Accumulated ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Other ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Additional ​ ​ ​ ​ Comprehensive ​ ​ ​ ​ ​ ​ ​ Common Shares ​ Paid-In ​ Accumulated Income Noncontrolling ​ Total ​ ​ Shares ​ Amount ​ Capital ​ Deficit (Loss) ​ Interests ​ Equity BALANCE AS OF DECEMBER 31, 2018 120,937 ​ $ 1,210 ​ $ 3,155,256 ​ $ ( 176,018 ) ​ $ 6,700 ​ $ 204 ​ $ 2,987,352 Net income attributable to common shareholders and noncontrolling interests — ​ — ​ — ​ 65,571 ​ — ​ — ​ 65,571 Common shares issued 11,500 ​ 115 ​ 472,665 ​ — ​ — ​ — ​ 472,780 Conversion of common limited partnership units to common shares 1,664 ​ 17 ​ 57,301 ​ — ​ — ​ — ​ 57,318 Common shares issued pursuant to Employee Share Purchase Plan ("ESPP") 47 ​ — ​ 1,803 ​ — ​ — ​ — ​ 1,803 Dividends declared on common shares ($ 0.90 per common share) — ​ — ​ — ​ ( 120,717 ) ​ — ​ — ​ ( 120,717 ) Distributions to noncontrolling interests, net — ​ — ​ — ​ — ​ — ​ ( 3 ) ​ ( 3 ) Redeemable noncontrolling interests redemption value adjustment and other comprehensive loss allocation — ​ — ​ ( 53,983 ) ​ — ​ 2,584 ​ — ​ ( 51,399 ) Other comprehensive loss — ​ — ​ — ​ — ​ ( 26,028 ) ​ — ​ ( 26,028 ) BALANCE AS OF DECEMBER 31, 2019 134,148 ​ ​ 1,342 ​ ​ 3,633,042 ​ ​ ( 231,164 ) ​ ​ ( 16,744 ) ​ ​ 201 ​ ​ 3,386,677 Net loss attributable to common shareholders and noncontrolling interests — ​ — ​ — ​ ( 62,303 ) ​ — ​ — ​ ​ ( 62,303 ) Conversion of common limited partnership units to common shares 1,338 ​ 13 ​ 47,504 ​ — ​ ​ ​ — ​ ​ 47,517 Common shares repurchased ​ ( 3,776 ) ​ ​ ( 37 ) ​ ​ ( 104,737 ) ​ ​ — ​ ​ — ​ ​ — ​ ​ ( 104,774 ) Common shares issued pursuant to ESPP ​ 68 ​ ​ 1 ​ ​ 2,241 ​ ​ — ​ ​ — ​ ​ — ​ ​ 2,242 Dividends declared on common shares ($ 0.90 per common share) ​ — ​ ​ — ​ ​ — ​ ​ ( 119,477 ) ​ ​ — ​ ​ — ​ ​ ( 119,477 ) Distributions to noncontrolling interests — ​ — ​ — ​ — ​ — ​ ( 34 ) ​ ​ ( 34 ) Redeemable noncontrolling interests redemption value adjustment and other comprehensive loss allocation — ​ — ​ 79,593 ​ — ​ 2,990 ​ — ​ ​ 82,583 Other comprehensive loss — ​ — ​ — ​ — ​ ( 26,225 ) ​ — ​ ​ ( 26,225 ) BALANCE AS OF DECEMBER 31, 2020 131,778 ​ ​ 1,319 ​ ​ 3,657,643 ​ ​ ( 412,944 ) ​ ​ ( 39,979 ) ​ ​ 167 ​ ​ 3,206,206 Net loss attributable to common shareholders and noncontrolling interests ​ — ​ — ​ — ​ ( 79,257 ) ​ ​ — ​ ( 1,740 ) ​ ( 80,997 ) Conversion of common limited partnership units to common shares ​ 906 ​ 9 ​ 29,625 ​ — ​ ​ — ​ — ​ 29,634 Common shares repurchased ​ ( 5,370 ) ​ ​ ( 54 ) ​ ​ ( 157,632 ) ​ ​ — ​ ​ — ​ ​ — ​ ​ ( 157,686 ) Common shares issued pursuant to employee incentive compensation plan and ESPP ​ 64 ​ ​ 1 ​ ​ 2,426 ​ ​ — ​ ​ — ​ ​ — ​ ​ 2,427 Dividends declared on common shares ($ 0.90 per common share) ​ — ​ ​ — ​ ​ — ​ ​ ( 117,130 ) ​ ​ — ​ ​ — ​ ​ ( 117,130 ) Contributions from noncontrolling interests, net ​ — ​ — ​ — ​ — ​ ​ — ​ 24,080 ​ 24,080 Redeemable noncontrolling interests redemption value adjustment and other comprehensive income allocation ​ — ​ — ​ 7,854 ​ — ​ ​ ( 2,675 ) ​ — ​ 5,179 Other comprehensive income ​ — ​ — ​ — ​ — ​ ​ 26,704 ​ — ​ 26,704 BALANCE AS OF DECEMBER 31, 2021 ​ 127,378 ​ $ 1,275 ​ $ 3,539,916 ​ $ ( 609,331 ) ​ $ ( 15,950 ) ​ $ 22,507 ​ $ 2,938,417 ​ See accompanying notes to the consolidated financial statements . ​ 71 Table of Contents JBG SMITH PROPERTIES Consolidated Statements of Cash Flows (In thousands) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ 2021 2020 2019 OPERATING ACTIVITIES: ​ ​ ​ Net income (loss) ​ $ ( 89,725 ) ​ $ ( 67,261 ) ​ $ 74,144 Adjustments to reconcile net income (loss) to net cash provided by operating activities: ​ ​ ​ Share-based compensation expense ​ 51,551 ​ 66,051 ​ 65,273 Depreciation and amortization, including amortization of deferred financing costs ​ 240,454 ​ 225,597 ​ 195,795 Deferred rent ​ ( 21,964 ) ​ ( 20,084 ) ​ ( 39,174 ) Loss from unconsolidated real estate ventures, net ​ 2,070 ​ 20,336 ​ 1,395 Amortization of market lease intangibles, net ​ ( 1,189 ) ​ ( 442 ) ​ ( 791 ) Amortization of lease incentives ​ 7,973 ​ 6,603 ​ 6,336 Loss on extinguishment of debt ​ — ​ 62 ​ 5,805 Impairment loss ​ ​ 25,144 ​ ​ 10,232 ​ ​ — Gain on sale of real estate ​ ( 11,290 ) ​ ( 59,477 ) ​ ( 104,991 ) Loss on operating lease and other receivables ​ 2,595 ​ 25,805 ​ 1,560 Income from investment funds, net ​ ​ ( 3,620 ) ​ ​ — ​ ​ — Return on capital from unconsolidated real estate ventures ​ 15,912 ​ 4,302 ​ 2,690 Other non-cash items ​ ( 922 ) ​ 4,326 ​ 567 Impairment of corporate assets ​ — ​ ​ — ​ 10,170 Changes in operating assets and liabilities: ​ ​ ​ Tenant and other receivables ​ 8,812 ​ ( 9,231 ) ​ ( 8,382 ) Other assets, net ​ ( 12,780 ) ​ ( 11,075 ) ​ ( 9,177 ) Accounts payable and accrued expenses ​ 8,700 ​ 591 ​ ( 7,678 ) Other liabilities, net ​ ( 4,099 ) ​ ( 27,314 ) ​ ( 19,556 ) Net cash provided by operating activities ​ 217,622 ​ 169,021 ​ 173,986 INVESTING ACTIVITIES: ​ ​ ​ Development costs, construction in progress and real estate additions ​ ( 173,177 ) ​ ( 307,497 ) ​ ( 441,014 ) Acquisition of real estate ​ ( 208,342 ) ​ ( 45,688 ) ​ ( 165,208 ) Deposits for real estate and other acquisitions ​ — ​ ( 25,424 ) ​ ( 850 ) Proceeds from sale of real estate ​ 14,370 ​ 154,493 ​ 377,511 Distributions of capital from unconsolidated real estate ventures ​ 40,188 ​ 71,065 ​ 7,557 Investments in unconsolidated real estate ventures and other ​ ( 41,780 ) ​ ( 14,639 ) ​ ( 18,668 ) Net cash used in investing activities ​ ( 368,741 ) ​ ( 167,690 ) ​ ( 240,672 ) FINANCING ACTIVITIES: ​ ​ ​ Borrowings under mortgages payable ​ 190,000 ​ 580,105 ​ 2,200 Borrowings under revolving credit facility ​ 300,000 ​ 500,000 ​ 200,000 Borrowings under unsecured term loans ​ — ​ 100,000 ​ — Repayments of mortgages payable ​ ( 5,611 ) ​ ( 104,083 ) ​ ( 719,003 ) Repayments of revolving credit facility ​ — ​ ( 700,000 ) ​ — Debt issuance costs ​ ( 6,610 ) ​ ( 14,856 ) ​ ( 515 ) Finance lease payments ​ ( 19,970 ) ​ ( 3,531 ) ​ ​ ( 137 ) Proceeds from the issuance of common stock, net of issuance costs ​ — ​ — ​ 472,780 Proceeds from common shares issued pursuant to ESPP ​ 1,594 ​ 1,715 ​ 1,457 Common shares repurchased ​ ​ ( 157,686 ) ​ ​ ( 104,774 ) ​ ​ — Dividends paid to common shareholders ​ ( 118,115 ) ​ ( 120,011 ) ​ ( 129,834 ) Distributions to redeemable noncontrolling interests ​ ( 17,804 ) ​ ( 15,030 ) ​ ( 17,390 ) Distributions to noncontrolling interests ​ ​ ( 46 ) ​ ​ ( 46 ) ​ ​ ( 95 ) Contributions from noncontrolling interests ​ ​ 24,126 ​ ​ — ​ ​ 207 Net cash provided by (used in) financing activities ​ 189,878 ​ 119,489 ​ ( 190,330 ) Net increase (decrease) in cash and cash equivalents and restricted cash ​ 38,759 ​ 120,820 ​ ( 257,016 ) Cash and cash equivalents and restricted cash, beginning of period ​ 263,336 ​ 142,516 ​ 399,532 Cash and cash equivalents and restricted cash, end of period ​ $ 302,095 ​ $ 263,336 ​ $ 142,516 ​ ​ See accompanying notes to the consolidated financial statements. 72 Table of Contents JBG SMITH PROPERTIES Consolidated Statements of Cash Flows (In thousands) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ 2021 2020 2019 CASH AND CASH EQUIVALENTS AND RESTRICTED CASH, END OF PERIOD: ​ ​ Cash and cash equivalents ​ $ 264,356 ​ $ 225,600 ​ $ 126,413 Restricted cash ​ 37,739 ​ 37,736 ​ 16,103 Cash and cash equivalents and restricted cash ​ $ 302,095 ​ $ 263,336 ​ $ 142,516 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ SUPPLEMENTAL DISCLOSURE OF CASH FLOW AND NON-CASH INFORMATION: ​ ​ Cash paid for interest (net of capitalized interest of $ 6,734 , $ 13,189 and $ 29,806 in 2021, 2020 and 2019) ​ $ 61,928 ​ $ 56,961 ​ $ 49,437 Accrued capital expenditures included in accounts payable and accrued expenses ​ 43,290 ​ 43,188 ​ 84,076 Write-off of fully depreciated assets ​ 61,123 ​ 30,798 ​ 66,533 Cash (paid) received for income taxes ​ ( 815 ) ​ 1,187 ​ 282 Deconsolidation of real estate asset ​ 26,476 ​ — ​ 181,813 Accrued dividends to common shareholders ​ 28,665 ​ 29,650 ​ 30,184 Accrued distributions to redeemable noncontrolling interests ​ 3,938 ​ 4,425 ​ 3,828 Conversion of common limited partnership units to common shares ​ 29,634 ​ 47,517 ​ 57,318 Recognition (derecognition) of operating lease right-of-use assets ​ ​ ( 1,596 ) ​ ​ ( 13,151 ) ​ ​ 35,318 Recognition (derecognition) of liabilities related to operating lease right-of-use assets ​ ​ ( 1,587 ) ​ ​ ( 13,151 ) ​ ​ 37,922 Recognition of finance lease right-of-use assets ​ 139,507 ​ 42,354 ​ — Recognition of liabilities related to finance lease right-of-use assets ​ 141,574 ​ 40,684 ​ — Cash paid for amounts included in the measurement of lease liabilities for operating leases ​ 2,295 ​ 5,201 ​ 6,202 Deferred purchase price related to acquisition ​ ​ — ​ ​ 19,479 ​ ​ — ​ See accompanying notes to the consolidated financial statements . ​ 73 Table of Contents JBG SMITH PROPERTIES Notes to Consolidated Financial Statements 1. Organization and Basis of Presentation Organization 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 with high barriers to entry and vibrant urban amenities. Over half of our portfolio is in National Landing in Northern Virginia, where we serve as the developer for Amazon.com, Inc.'s ("Amazon") new headquarters and where Virginia Tech's $ 1 billion Innovation Campus is under construction. 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 December 31, 2021, JBG SMITH, as its sole general partner, controlled JBG SMITH LP and owned 89.5 % of its common limited partnership units ("OP Units"), after incorporating the conversion of certain vested long-term incentive partnership units ("LTIP Units") that are convertible into OP Units. JBG SMITH is referred to herein as "we," "us," "our" or other similar terms. References to "our share" refer to our ownership percentage of consolidated and unconsolidated assets in real estate ventures. We were organized for the purpose of receiving, via the spin-off on July 17, 2017 (the "Separation"), substantially all of the assets and liabilities of Vornado Realty Trust's ("Vornado") Washington, D.C. segment. On July 18, 2017, we acquired the management business and certain assets and liabilities of JBG (the "Combination"). The Separation and the Combination are collectively referred to as the "Formation Transaction." As of December 31, 2021, our Operating Portfolio consisted of 64 operating assets comprising 42 commercial assets totaling 13.1 million square feet ( 11.3 million square feet at our share) and 22 multifamily assets totaling 8,208 units ( 6,557 units at our share). Additionally, we have: (i) one under-construction multifamily asset totaling 808 units ( 808 units at our share); (ii) 11 near-term development pipeline assets totaling 5.3 million square feet ( 5.0 million square feet at our share) of estimated potential development density; and (iii) 25 future development pipeline assets totaling 14.3 million square feet ( 11.6 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. Only the U.S. 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, ​ 2021 2020 2019 ​ ​ (Dollars in thousands) Rental revenue from the U.S. federal government ​ $ 83,256 ​ $ 84,086 ​ $ 86,644 ​ Percentage of commercial segment rental revenue ​ 22.0 % 23.4 % 21.2 % Percentage of total rental revenue ​ 16.2 % 17.8 % 16.7 % ​ Basis of Presentation 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. 74 Table of Contents The accompanying 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 6 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 consolidated financial statements. 2. Summary of Significant Accounting Policies Use of Estimates The preparation of the consolidated 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 consolidated financial statements and the reported amounts of revenue and expenses during the reporting period. The most significant of these estimates include: (i) the underlying cash flows and anticipated 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. Longer anticipated holding periods for real estate assets directly reduce the likelihood of recording an impairment loss. If there is a change in the strategy for an asset or if market conditions dictate an earlier sale date, an impairment loss may be recognized, and such loss could be material. 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 distribution, 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. During the years ended December 31, 2021 and 2020, we recorded $ 1.1 million and $ 11.2 million of credit losses against billed rent receivables, and $ 19.6 million against deferred (straight-line) rent receivables during the year ended December 31, 2020. These losses were due to the effects of COVID-19, primarily from co-working and retail tenants, that were unable to pay rent while businesses were closed, not operating at full capacity or while employees continue to work from home. During 2020, we began recognizing revenue from substantially all co-working tenants and retailers except for grocers, pharmacies, essential businesses and certain national credit tenants on the cash basis of accounting. We provided rent deferrals that had been contractually due during 2020 and 2021 totaling $ 10.1 million, of which $ 4.0 million was subsequently abated and $ 1.2 million was collected. During 2021, revenue for the majority of these tenants continued to be recognized on the cash basis of accounting. While we have seen some improvement in performance and cash collections, our retailers and co-working tenants are still experiencing some impact from the effects of COVID-19 and may continue to experience such impact. During the fourth quarter of 2021, we received $ 4.5 million of business interruption insurance proceeds for COVID-19 related losses, which were included in "Interest and other income (loss), net" in our consolidated statement of operations. Asset Acquisitions We account for asset acquisitions at cost, which includes the consolidation of previously unconsolidated real estate ventures, including transaction costs, plus the fair value of any assumed debt. We estimate the fair values of acquired tangible assets (consisting of real estate, tenant and other receivables, 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 75 Table of Contents the identified assets acquired and liabilities assumed based on their relative fair value. The results of operations of acquisitions are prospectively included in our consolidated 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 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 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 consolidated balance sheets, and amounts allocated to below-market leases are recorded as lease intangible liabilities in "Other liabilities, net" in our consolidated balance sheets. These intangibles are amortized to "Property rental revenue" in our consolidated statements of operations over the remaining terms of the respective leases; and ● 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 consolidated balance sheets and are amortized to "Depreciation and amortization expense" in our consolidated statements of operations over the remaining term of the existing lease. Real Estate 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 consolidated statements of operations. As real estate is undergoing redevelopment activities, all property operating expenses directly associated with and attributable to the redevelopment, including interest expense, are capitalized to the extent that we believe such costs are recoverable through the value of the property. The capitalization period ends when the asset is ready for its intended use, but no later than one year from substantial completion of major construction activities. General and administrative costs are expensed as incurred. Depreciation and amortization require an estimate of the useful life of each property and improvement as well as an allocation of the costs associated with a property to its various components. Depreciation and amortization are recognized on a straight-line basis over estimated useful lives, which range from three to 40 years . 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 (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" in our consolidated balance sheets, except for certain demolition costs, which are expensed as incurred. Direct development costs incurred include: pre-development expenditures directly related to a specific project, development and construction costs, interest, insurance and real estate taxes. Indirect development costs include: employee salaries and benefits, travel and other related costs that are directly associated with the development. Our method of calculating capitalized interest expense is based upon applying our weighted average borrowing rate to the actual accumulated expenditures if the property does not have property specific debt. If the property is encumbered by specific debt, we will capitalize both the interest incurred applicable to that debt and additional interest expense using our weighted average borrowing rate for any accumulated expenditures in excess of the principal balance of the debt encumbering the property. 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. 76 Table of Contents Our real estate 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, shortened anticipated 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. Estimates of future cash flows are based on our current plans, anticipated holding periods and available market information at the time the analyses are prepared. 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. Estimated fair values are calculated based on the following information in order of preference, dependent upon availability: (i) pending or executed agreements, (ii) market prices for comparable properties or (iii) the sum of discounted cash flows. If our estimates of future cash flows, anticipated holding periods, or fair values change, based on market conditions, anticipated selling prices or other factors, our evaluation of impairment losses may be different and such differences could be material to our consolidated 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. Cash and Cash Equivalents Cash and cash equivalents consist of highly liquid investments with a purchase date life to maturity of three months or less and are carried at cost, which approximates fair value due to their short-term maturities. Restricted Cash Restricted cash consists primarily of proceeds from property dispositions held in escrow, security deposits held on behalf of our tenants and cash escrowed under loan agreements for debt service, real estate taxes, property insurance and capital improvements. Investments in Real Estate Ventures 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 a VIE 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 judgment when determining if we are the primary beneficiary of or have a controlling financial interest in a VIE. 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. We use the equity method of accounting for investments in unconsolidated real estate ventures when we have significant influence, but do not have a controlling financial interest. 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" in our consolidated balance sheets, and our proportionate share of earnings or losses earned by the real estate venture is recognized in "Loss from unconsolidated real estate ventures, net" in the accompanying consolidated 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 consolidated statements of operations when earned. Our proportionate share of related expenses is recognized in "Loss from unconsolidated real estate ventures, net" in our consolidated statements of operations. 77 Table of Contents We may also earn incremental promote distributions if certain financial return benchmarks are achieved upon ultimate disposition of the underlying properties. Promote revenue is recognized when certain earnings events have occurred, and the amount of revenue is determinable and collectible. Any promote revenue is reflected in "Loss from unconsolidated real estate ventures, net" in our consolidated 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 real estate ventures for impairment. An investment in a real estate venture is considered impaired if we determine that its fair value is less than the net carrying value of the investment in that real estate venture on an other-than-temporary basis. Cash flow projections for the investments consider property level factors such as expected future operating income, trends and prospects, anticipated holding periods, as well as the effects of demand, competition and other factors. We consider various qualitative factors to determine if a decrease in the value of our investment is other-than-temporary. 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. Intangibles 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. Both intangible assets and liabilities are amortized and accreted using the straight-line method over their applicable remaining useful life. When a lease or contract is terminated early, any remaining unamortized or unaccreted balances are charged to earnings. The useful lives of intangible assets are evaluated each reporting period with any changes in estimated useful lives being accounted for over the revised remaining useful life. Intangible assets also include the wireless spectrum licenses we acquired. 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. Investments Investments in equity securities without readily determinable fair values are carried at cost. Investments in investment funds without readily determinable fair values that qualify for the net asset value ("NAV") practical expedient are carried at fair value based on their reported NAV. Investments in equity securities and investment funds are included in "Other assets" in our consolidated balance sheets. Realized and unrealized gains and losses are included in “Interest and other income (loss), net” in our consolidated statements of operations. Assets Held for Sale 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. Real estate held for sale is carried at the lower of carrying amounts or 78 Table of Contents estimated fair value less disposal costs. Depreciation and amortization is not recognized on real estate classified as held for sale. Deferred Costs Deferred financing costs consist of loan issuance costs directly related to financing transactions that are deferred and amortized over the term of the related loan as a component of interest expense. Unamortized deferred financing costs related to our mortgages payable and unsecured term loans are presented as a direct deduction from the carrying amounts of the related debt instruments, while such costs related to our revolving credit facility are included in other assets. Noncontrolling Interests We identify our noncontrolling interests separately in our consolidated balance sheets. Amounts of consolidated net income (loss) attributable to redeemable noncontrolling interests and to the noncontrolling interests in consolidated subsidiaries are presented separately in our consolidated statements of operations. Redeemable Noncontrolling Interests - Redeemable noncontrolling interests consists of OP Units issued in conjunction with the Formation Transaction, LTIP Units issued to employees and our venture partners' interests in The Wren. Redeemable noncontrolling interests are generally redeemable at the option of the holder for our common shares, or cash at our election, subject to certain limitations, and are presented in the mezzanine section between total liabilities and shareholders' equity in our consolidated 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 11 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. Derivative Financial Instruments and Hedge Accounting Derivative financial instruments are used at times to manage exposure to variable interest rate risk. Derivative financial instruments are recognized as either assets or liabilities and are measured at fair value. The accounting for changes in the fair value of a derivative depends on the intended use of the derivative and the resulting designation. Derivative Financial Instruments Designated as Cash Flow Hedges - Certain derivative financial instruments, consisting of interest rate swap and cap agreements, are designated as cash flow hedges, and are carried at their estimated fair value on a recurring basis. 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. 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. In addition, we evaluate the default risk of the counterparty by monitoring the creditworthiness of the counterparty. Derivative instruments and hedging activities require management to make judgments on the nature of its derivatives and their effectiveness as hedges. These judgments determine if the changes in fair value of the derivative instruments are reported in our consolidated statements of operations, or in our consolidated statements of comprehensive income (loss). Derivative Financial Instruments Not Designated as Accounting Hedges - Certain derivative financial instruments, consisting of interest rate swap and cap agreements, are considered cash flow hedges, but are 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 consolidated statements of operations in the period in which the change occurs. 79 Table of Contents 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). Topic 820 establishes a fair value hierarchy that prioritizes observable and unobservable inputs used to measure fair value into three levels: Level 1 — quoted prices (unadjusted) in active markets that are accessible at the measurement date for assets or liabilities; Level 2 — observable prices that are based on inputs not quoted in active markets, but corroborated by market data; and Level 3 — unobservable inputs that are used when little or no market data is available. The fair value hierarchy gives the highest priority to Level 1 inputs and the lowest priority to Level 3 inputs. In determining fair value, we utilize valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible as well as consider counterparty credit risk in our assessment of fair value. Investments that are valued using NAV as a practical expedient are excluded from the fair value hierarchy disclosures. Revenue Recognition We have leases with various tenants across our portfolio of properties, which generate rental income and operating cash flows for our benefit. Through these leases, we provide tenants with the right to control the use of our real estate, which tenants agree to use and control. The right to control our real estate conveys to our tenants substantially all of the economic benefits and the right to direct how and for what purpose the real estate is used throughout the period of use, thereby meeting the definition of a lease. 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 rental revenue includes base rent each tenant pays in accordance with the terms of its respective lease and is reported on a straight-line basis over the non-cancellable term of the lease, which includes the effects of periodic step-ups in rent and rent abatements under the lease. When a renewal option is included within the lease, we assess whether the option is reasonably certain of being exercised against relevant economic factors to determine whether the option period should be included as part of the lease term. Further, property rental revenue includes tenant reimbursement revenue from the recovery of all or a portion of the operating expenses and real estate taxes of the respective assets. Tenant reimbursements, which vary each period, are non-lease components that are not the predominant activity within the contract. We 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 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" in our consolidated 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 consolidated statements of operations. We exercise judgment in assessing the probability of collection and consider payment history and current credit status in making this determination. 80 Table of Contents Third-party real estate services revenue, including reimbursements, includes property and asset management fees, and transactional fees for leasing, acquisition, development and construction, financing, and legal services. These fees are determined in accordance with the terms specific to each arrangement and are recognized as the related services are performed. Development fees are earned from providing services to third-party property owners and our unconsolidated real estate ventures. The performance obligations associated with our development services contracts are satisfied over time and we recognize our development fee revenue using a time-based measure of progress over the course of the development project due to the stand-ready nature of the promised services. 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. 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 real estate venture projects to the extent of our venture partners' ownership interest. Third-Party Real Estate Services Expenses Third-party real estate services expenses include the costs associated with the management services provided to our unconsolidated real estate ventures and other third parties, including amounts paid to third-party contractors for construction projects that we manage. We allocate personnel and other overhead costs using estimates of the time spent performing services for our third-party real estate services and other allocation methodologies. Lessee Accounting We are obligated under non-cancellable operating and finance leases, including ground leases on certain of our properties with terms extending through the year 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 consolidated statements of operations in "Property operating expenses." Amortization of the right-of-use asset associated with a finance lease is recognized on a straight-line basis over the expected lease term and is included in our consolidated statements of operations in "Depreciation and amortization expense" 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. Such variable payments are recognized in lease expense in the period in which the variability is determined. Certain lease agreements may also include various non-lease components that primarily relate to property operating expenses associated with our office leases, which also vary each period. We have elected the practical expedient which allows us to combine lease and non-lease components for our ground and office leases and recognize variable non-lease components in lease expense when incurred. We discount our future lease payments for each lease to calculate the related lease liability using an estimated incremental borrowing rate computed based on observable corporate borrowing rates reflective of the general economic environment, taking into consideration our creditworthiness and various financing and asset specific considerations, adjusted to approximate a secured borrowing for the lease term. 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. Income Taxes We have elected to be taxed as a REIT under sections 856-860 of the Internal Revenue Code of 1986, as amended (the "Code"). Under those sections, a REIT which distributes at least 90% of its REIT taxable income as dividends to its shareholders each year and which meets certain other conditions will not be taxed on that portion of its taxable income which is distributed to its shareholders. Prior to the Separation, Vornado operated as a REIT and distributed 100% of its 81 Table of Contents REIT taxable income to its shareholders; accordingly, no provision for federal income taxes has been made in the accompanying consolidated financial statements for the periods prior to the Separation. We currently adhere and intend to continue to adhere to these requirements and to maintain our REIT status in future periods. As a REIT, we can reduce our taxable income by distributing all or a portion of such taxable income to shareholders. 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. Income taxes attributable to our TRSs are accounted for under the asset and liability method. Under the asset and liability method, deferred income taxes arise from temporary differences between the tax basis of assets and liabilities and their reported amounts in our consolidated financial statements, which will result in taxable or deductible amounts in the future. We provide for a valuation allowance for deferred income tax assets if we believe all or some portion of the deferred tax asset may not be realized. 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). ASC 740 ("Topic 740"), Income Taxes, provides guidance for how uncertain tax positions should be recognized, measured, presented and disclosed in our consolidated 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. 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 are considered participating securities. Consequently, we are required to apply the two-class method of computing basic and diluted earnings (loss) that would otherwise have been available to common shareholders. Under the two-class method, earnings for the period are allocated between common shareholders and participating securities based on their respective rights to receive dividends. During periods of net loss, losses are allocated only to the extent the participating securities are required to absorb their share of such losses. Diluted earnings (loss) per common share reflects the potential dilution of the assumed exchange of various unit and share-based compensation awards into common shares to the extent they are dilutive. Share-Based Compensation The fair value of share-based compensation awards granted to our trustees, management or employees is determined, depending on the type of award, using the Monte Carlo or Black-Scholes methods, which is intended to estimate the fair value of the awards at the grant date using dividend yields, expected volatilities that are primarily based on available implied data and peer group companies' historical data and post-vesting restriction periods. The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant. The shortcut method is used for determining the expected life used in the valuation method. Compensation expense is based on the fair value of our common shares at the date of the grant and is recognized ratably over the vesting period using a graded vesting attribution model. Compensation expense for share-based compensation awards made to retirement eligible employees is recognized over a six-month period after the grant date or over the remaining period until they become retirement eligible. We account for forfeitures as they occur. Distributions paid on unvested OP Units and LTIP Units are recorded to "Redeemable noncontrolling interests" in our consolidated balance sheets. Distributions paid on unvested Restricted Share Units ("RSUs") are recorded to "Additional paid-in capital" in our consolidated balance sheets. 82 Table of Contents Recent Accounting Pronouncements Reference Rate Reform In March 2020, the Financial Accounting Standards Board 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 of March 12, 2020 through December 31, 2022 as reference rate reform activities occur. During the year ended December 31, 2021, we did not make any elections. 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. 3. Acquisitions, Dispositions and Assets Held for Sale Acquisitions In November 2021, we acquired The Batley, a 432 -unit multifamily asset in the Union Market submarket of Washington, D.C., for $ 205.3 million, exclusive of $ 3.1 million of transaction costs that were capitalized as part of the acquisition. We intend to use The Batley as a replacement property in a like-kind exchange for the sale of Pen Place, which is expected to close during the second quarter of 2022. See Note 6 for additional information. ​ 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, exclusive of $ 688,000 of transaction costs that were capitalized as part of the acquisition. Of the total purchase price, $ 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. In December 2019, we acquired F1RST Residences, a 325 -unit multifamily asset in the Ballpark submarket of Washington, D.C. with approximately 21,000 square feet of street level retail, for $ 160.5 million, exclusive of $ 4.7 million of transaction costs that were capitalized as part of the acquisition. We used F1RST Residences as a replacement property in a like-kind exchange for the sale of Metropolitan Park in January 2020. See Note 6 for additional information. Dispositions In April 2021, we invested cash in and contributed land to two real estate ventures and recognized an $ 11.3 million gain on the disposition of land, which is included in "Gain on sale of real estate" in our consolidated statement of operations for the year ended December 31, 2021. See Note 5 for additional information. In January 2020, we sold Metropolitan Park for $ 155.0 million and recognized a $ 59.5 million gain, which is included in "Gain on sale of real estate" in our consolidated statement of operations for the year ended December 31, 2020. During the year ended December 31, 2019, we sold three commercial assets for a gross sales price of $ 165.4 million and a 50.0 % interest in a real estate venture that owned Central Place Tower for a gross sales price of $ 220.0 million, resulting in a $ 105.0 million aggregate gain, which is included in "Gain on sale of real estate" in our consolidated statement of operations for the year ended December 31, 2019. During the years ended December 31, 2021 and 2020, we recognized our proportionate share of the gain (loss) from the sale of various assets by our unconsolidated real estate ventures. See Note 5 for additional information. 83 Table of Contents On February 11, 2022, we entered into a definitive agreement with affiliates of Fortress Investment Group LLC to form a real estate venture in which we will have a noncontrolling interest. The unconsolidated real estate venture will acquire a 1.6 million square foot portfolio of four wholly owned commercial assets from us. The assets include 7200 Wisconsin Avenue, 1730 M Street, RTC-West and Courthouse Plaza 1 and 2. The transaction is expected to close in the first half of 2022, subject to financing and customary closing conditions. Assets Held for Sale The amounts included in "Assets held for sale" in our consolidated balance sheets primarily represent the carrying value of real estate. The following is a summary of assets held for sale: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Total ​ Assets Held Assets Segment Location Square Feet (1) for Sale ​ ​ ​ ​ ​ ​ (In thousands) December 31, 2021 ​ ​ ​ ​ ​ ​ ​ ​ ​ Pen Place (2) ​ Other ​ Arlington, Virginia ​ 2,082 ​ $ 73,876 December 31, 2020 ​ ​ ​ ​ ​ ​ ​ ​ ​ Pen Place (2) ​ Other ​ Arlington, Virginia ​ 2,082 ​ $ 73,876 (1) Represents estimated or approved potential development density. (2) In March 2019, we entered into an agreement for the sale of Pen Place to Amazon, which we expect to close during the second quarter of 2022. In December 2021, we finalized the agreement for the sale of Pen Place for $ 198.0 million, which represents a $ 48.1 million increase over the previously estimated contract value. ​ 4. Tenant and Other Receivables The following is a summary of tenant and other receivables: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, ​ 2021 2020 ​ ​ (In thousands) Tenants ​ $ 31,504 ​ $ 39,077 Third-party real estate services ​ 12,563 ​ 15,658 Other ​ 429 ​ 1,168 Total tenant and other receivables ​ $ 44,496 ​ $ 55,903 ​ ​ 5. Investments in Unconsolidated Real Estate Ventures The following is a summary of the composition of our investments in unconsolidated real estate ventures: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Effective ​ ​ ​ ​ Ownership ​ December 31, Real Estate Venture Partners Interest (1) 2021 2020 ​ ​ ​ ​ (In thousands) Prudential Global Investment Management ("PGIM") 50.0 % ​ $ 208,421 ​ $ 216,939 Landmark Partners ("Landmark") 1.8 % - 49.0 % ​ 28,298 ​ 66,724 CBREI Venture 5.0 % - 64.0 % ​ 57,812 ​ 65,190 Canadian Pension Plan Investment Board ("CPPIB") 55.0 % ​ 48,498 ​ 47,522 J.P. Morgan Global Alternatives ("J.P. Morgan") (2) ​ 50.0 % ​ ​ 52,769 ​ ​ — Berkshire Group 50.0 % ​ 52,770 ​ ​ 50,649 Brandywine Realty Trust 30.0 % ​ 13,693 ​ 13,710 Other ​ ​ 624 ​ ​ 635 Total investments in unconsolidated real estate ventures (3) ​ ​ ​ $ 462,885 ​ $ 461,369 84 Table of Contents (1) Reflects our effective ownership interests in the underlying real estate as of December 31, 2021. We have multiple investments with certain venture partners with varying ownership interests in the underlying real estate. (2) J.P. Morgan is the advisor for an institutional investor. (3) As of December 31, 2021 and 2020, our total investments in unconsolidated real estate ventures were greater than our share of the net book value of the underlying assets by $ 18.6 million and $ 18.9 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 $ 23.7 million, $ 25.5 million and $ 28.5 million for each of the three years in the period ended December 31, 2021, for such services. We evaluate reconsideration events as we become aware of them. Reconsideration events include amendments to real estate venture agreements or changes in our partner's ability to make contributions to the venture. Under certain circumstances, we may purchase our partner's interest. A reconsideration event could cause us to consolidate an unconsolidated real estate venture in the future or deconsolidate a consolidated entity. The following is a summary of disposition activity by our unconsolidated real estate ventures: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Mortgage ​ Proportionate ​ ​ Real Estate ​ ​ ​ ​ ​ Gross ​ Payable ​ Share of ​ ​ Venture ​ ​ ​ Ownership ​ Sales ​ Repaid by ​ Aggregate Date Disposed Partners ​ Assets ​ Percentage Price ​ Venture ​ Gain (Loss) (1) ​ ​ ​ ​ ​ ​ ​ ​ (In thousands) Year Ended December 31, 2021 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ May 3, 2021 CBREI Venture ​ Fairway Apartments/Fairway Land ("Fairway") ​ 10.0 % $ 93,000 ​ $ 45,343 ​ $ 2,094 May 19, 2021 ​ Landmark ​ Courthouse Metro Land/Courthouse Metro Land – Option ("Courthouse Metro") ​ 18.0 % ​ ​ 3,000 ​ ​ — ​ ​ 2,352 May 27, 2021 ​ Landmark ​ 5615 Fishers Lane ​ 18.0 % ​ ​ 6,500 ​ ​ — ​ ​ 743 September 17, 2021 ​ Landmark ​ 500 L'Enfant Plaza ​ 49.0 % ​ ​ 166,500 ​ ​ 80,000 ​ ​ 23,137 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ $ 28,326 Year Ended December 31, 2020 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ June 5, 2020 ​ Landmark ​ 11333 Woodglen Drive/NoBe II Land/Woodglen ("Woodglen") ​ 18.0 % ​ $ 17,750 ​ $ 12,213 ​ $ ( 2,952 ) October 28, 2020 ​ CBREI Venture ​ Pickett Industrial Park ​ 10.0 % ​ ​ 46,250 ​ ​ 23,572 ​ ​ 800 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ $ ( 2,152 ) (1) Included in "Loss from unconsolidated real estate ventures, net" in our consolidated statements of operations. PGIM 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, which was included in "Gain on sale of real estate" in our consolidated 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. 85 Table of Contents Landmark In connection with the preparation and review of their 2021 annual financial statements, our unconsolidated real estate venture with Landmark recorded an aggregate impairment loss of $ 48.7 million on the L'Enfant Plaza assets. Our proportionate share of the impairment loss was $ 23.9 million, which was included in "Loss from unconsolidated real estate ventures, net" in our consolidated statement of operations for the year ended December 31, 2021. In January 2022, our unconsolidated real estate venture with Landmark sold The Alaire, The Terano and 12511 Parklawn Drive, multifamily and future development assets located in Rockville, Maryland, for $ 137.5 million. Additionally, the venture repaid the related mortgages payable of $ 79.8 million. Our ownership in these assets ranged from 1.8 % to 18.0 %. CPPIB As of December 31, 2021 and 2020, 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 year ended December 31, 2019, we recognized income of $ 6.4 million related to distributions from this venture, which was included in "Loss from unconsolidated real estate ventures, net" in our consolidated statement of operations. 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, and as a result, we received a distribution of $ 70.8 million from the venture during the second quarter of 2020. JP Morgan In April 2021, we entered into two real estate ventures with an institutional investor advised by J.P. Morgan, in which we have 50 % ownership interests, to design, develop, manage and own 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 at Potomac Yard Landbay F, while we contributed cash and 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. We have determined the ventures are VIEs, but we are not the primary beneficiary of the VIEs and, accordingly, we have not consolidated either venture. We recognized an $ 11.3 million gain on the land contributed to one of the real estate ventures based on the cash received and the remeasurement of our retained interest in the asset, which was included in "Gain on sale of real estate" in our consolidated statement of operations for the year ended December 31, 2021. 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. During the second quarter of 2021, the total amount of the promote paid was $ 17.5 million, of which $ 4.2 million was paid to certain of our non-employee trustees and certain of our executives. PacLife During the second quarter of 2020, we determined that our investment in the venture that owned The Marriott Wardman Park hotel was impaired due to a decline in the fair value of the underlying asset and recorded an impairment loss of $ 6.5 million, which reduced the net book value of our investment to zero , and we suspended equity loss recognition for the venture after June 30, 2020. On October 1, 2020, we transferred our interest in this venture to PacLife. 86 Table of Contents The following is a summary of the debt of our unconsolidated real estate ventures: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Weighted ​ ​ ​ ​ ​ ​ ​ ​ Average Effective ​ December 31, ​ Interest Rate (1) 2021 2020 ​ ​ ​ ​ (In thousands) Variable rate (2) 2.50 % ​ $ 785,369 ​ $ 863,617 Fixed rate (3) 4.20 % ​ 309,813 ​ 323,050 Mortgages payable ​ ​ ​ 1,095,182 ​ 1,186,667 Unamortized deferred financing costs ​ ​ ​ ( 5,239 ) ​ ( 7,479 ) Mortgages payable, net (4) ​ ​ ​ $ 1,089,943 ​ $ 1,179,188 (1) Weighted average effective interest rate as of December 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) See Note 19 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: ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, ​ 2021 2020 ​ (In thousands) Combined balance sheet information: ​ ​ ​ ​ ​ ​ Real estate, net ​ $ 2,116,290 ​ $ 2,247,384 Other assets, net ​ 264,397 ​ 270,516 Total assets ​ $ 2,380,687 ​ $ 2,517,900 ​ ​ ​ ​ ​ ​ ​ Mortgages payable, net ​ $ 1,089,943 ​ $ 1,179,188 Other liabilities, net ​ 118,752 ​ 140,304 Total liabilities ​ 1,208,695 ​ 1,319,492 Total equity ​ 1,171,992 ​ 1,198,408 Total liabilities and equity ​ $ 2,380,687 ​ $ 2,517,900 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ 2021 2020 2019 ​ (In thousands) Combined income statement information: (1) ​ ​ ​ ​ ​ ​ ​ ​ ​ Total revenue ​ $ 187,252 ​ $ 203,456 ​ $ 266,653 Operating income (loss) (2) ​ 48,214 ​ ( 21,639 ) ​ 18,041 Net income (loss) (2) ​ 16,051 ​ ( 65,756 ) ​ ( 32,507 ) (1) Excludes information related to the venture that owned 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 our venture partner. (2) Includes the gain from the sale of Fairway, Courthouse Metro, 5615 Fishers Lane and 500 L'Enfant Plaza totaling $ 85.5 million during the year ended December 31, 2021. Includes the impairment loss recognized by the unconsolidated real estate venture that owns the L'Enfant Plaza assets totaling $ 48.7 million during the year ended December 31, 2021. 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 during the year ended December 31, 2020. 87 Table of Contents 6. Variable Interest Entities We hold various interests in entities deemed to be VIEs, which we evaluate at acquisition, formation, after a change in the ownership agreement, after a change in the entity's economics or after any other reconsideration event to determine if the VIE should be consolidated in our financial statements or should no longer be considered a VIE. An entity is a VIE because it is in the development stage and/or does not hold sufficient equity at risk, or conducts substantially all its operations on behalf of an investor with disproportionately few voting rights. We will consolidate a VIE if we are the primary beneficiary of the VIE, which entails having the power to direct the activities that most significantly impact the VIE's economic performance. Certain criteria we assess in determining whether we are the primary beneficiary of the VIE include our influence over significant business activities, our voting rights, and any noncontrolling interest kick-out or participating rights. Unconsolidated VIEs As of December 31, 2021 and 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 economic performance. We account for our investment in these entities under the equity method. As of December 31, 2021 and 2020, the net carrying amounts of our investment in these entities were $ 145.2 million and $ 116.2 million, which were included in "Investments in unconsolidated real estate ventures" in our consolidated balance sheets. Our equity in the income of unconsolidated VIEs is included in "Loss from unconsolidated real estate ventures, net" in our consolidated statements of operations. Our maximum loss exposure in these entities is limited to our investments, construction commitments and debt guarantees. See Note 19 for additional information. Consolidated VIEs JBG SMITH LP is our most significant consolidated VIE. We hold 89.5 % 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 economic performance, and through our majority interest, we have both the right to receive benefits from and the obligation to absorb losses of JBG SMITH LP. Accordingly, we are the primary beneficiary of JBG SMITH LP and consolidate it in our financial statements. Because we conduct our business 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 The Batley in November 2021, we entered into an agreement with a third-party intermediary to facilitate a like-kind exchange. As a result, the third-party intermediary was the legal owner of the entity that owned this property as of December 31, 2021. We determined that the entity that owns the Batley was a VIE, and we are the primary beneficiary of the VIE. We consolidated the property and its operations as of the acquisition date. Legal ownership of this entity will be transferred to us by the third-party intermediary when the like-kind exchange agreement is completed with the sale of Pen Place, which we expect to close during the second quarter of 2022. As of December 31, 2021, the VIE had total assets, consisting of primarily real estate, and liabilities of $ 207.2 million and $ 792,000 . In March 2021, 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 December 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 88 Table of Contents and provided certain non-recourse carve-outs (e.g., guarantees against fraud, misrepresentation, bankruptcy and certain environmental liabilities). The ground lessee invested $ 17.5 million of equity funding and we are obligated to provide additional project funding through a mezzanine loan to the ground lessee estimated at $ 104.8 million, of which $ 34.9 million has been funded as of December 31, 2021. We determined that 1900 Crystal Drive is a VIE and that we are the primary beneficiary of the VIE. Accordingly, we consolidate the VIE with the lessee's ownership interest shown as "Noncontrolling interests" in our consolidated balance sheet. The aforementioned ground lease, the mezzanine loan and the master lease are eliminated in consolidation. As of December 31, 2021, the VIE had total assets, consisting of primarily construction in process, and liabilities of $ 58.6 million and $ 12.0 million. The assets of the VIE 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. In December 2021, we leased the land underlying 2000 South Bell Street and 2001 South Bell Street ("2000/2001 South Bell Street") located in National Landing to a lessee, which plans to construct a 775 -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 2000/2001 South Bell Street, 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 December 2021, the ground lessee entered into a mortgage loan collateralized by the leasehold interest with a maximum principal balance of $ 208.5 million and an interest rate of LIBOR plus 2.15 % per annum. As of December 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 non-recourse carve-outs (e.g., guarantees against fraud, misrepresentation, bankruptcy and certain environmental liabilities). The ground lessee is obligated to invest $ 16.0 million of equity funding, of which $ 6.7 million was funded as of December 31, 2021, and we are obligated to provide additional project funding through a mezzanine loan to the ground lessee, estimated at $ 96.2 million, none of which has been funded as of December 31, 2021. We determined that 2000/2001 South Bell Street is a VIE and that we are the primary beneficiary of the VIE. Accordingly, we consolidate the VIE with the lessee's ownership interest shown as "Noncontrolling interests" in our consolidated balance sheet. The aforementioned ground lease, the mezzanine loan and the master lease are eliminated in consolidation. As of December 31, 2021, the VIE had total assets and liabilities of $ 3.9 million and $ 1.1 million. The assets of the VIE 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. 7. Other Assets, Net The following is a summary of other assets, net: ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, ​ 2021 2020 ​ ​ (In thousands) Deferred leasing costs, net ​ $ 124,742 ​ $ 117,141 Lease intangible assets, net ​ 14,736 ​ 15,565 Other identified intangible assets ​ ​ 36,698 ​ ​ 43,012 Wireless spectrum licenses (1) ​ ​ 25,780 ​ ​ — Operating lease right-of-use assets ​ 1,660 ​ 3,542 Finance lease right-of-use assets (2) ​ ​ 180,956 ​ ​ 41,996 Prepaid expenses ​ 17,104 ​ 14,000 Deferred financing costs, net ​ 11,436 ​ 6,656 Deposits (1) ​ 1,938 ​ 28,560 Other (3) ​ 27,066 ​ 16,103 Total other assets, net ​ $ 442,116 ​ $ 286,575 (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. (2) Includes $ 139.4 million as of December 31, 2021 related to the amendment of the ground lease for Courthouse Plaza 1 and 2, which was executed in December 2021. The amendment extended the expiration date of the lease from January 2062 to December 2119, and resulted in a change in its classification from an operating lease to a finance lease. 89 Table of Contents (3) As of December 31, 2021, included $ 9.8 million of investments in funds, which invest in real estate focused technology companies, that are recorded at their fair value based on their reported NAV. During the fourth quarter of 2021, we recorded unrealized gains totaling $ 4.6 million related to these investments, which are included in "Interest and other income (loss), net" in our consolidated statement of operations . The following is a summary of the composition of deferred leasing costs, lease intangible assets and other identified intangible assets: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, 2021 ​ December 31, 2020 ​ Gross Accumulated Amortization ​ Net ​ Gross Accumulated Amortization ​ Net ​ ​ (In thousands) Deferred leasing costs ​ $ 219,751 ​ $ ( 95,009 ) ​ $ 124,742 ​ $ 202,940 ​ $ ( 85,799 ) ​ $ 117,141 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Lease intangible assets: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ In-place leases ​ $ 27,793 ​ $ ( 15,241 ) ​ $ 12,552 ​ $ 27,363 ​ $ ( 15,027 ) ​ $ 12,336 Above-market real estate leases ​ 6,585 ​ ( 4,401 ) ​ 2,184 ​ 7,515 ​ ( 4,286 ) ​ 3,229 ​ ​ $ 34,378 ​ $ ( 19,642 ) ​ $ 14,736 ​ $ 34,878 ​ $ ( 19,313 ) ​ $ 15,565 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Other identified intangible assets: ​ ​ ​ ​ ​ ​ Option to enter into ground lease ​ $ 17,090 ​ $ — ​ $ 17,090 ​ $ 17,090 ​ $ — ​ $ 17,090 Management and leasing contracts ​ 45,900 ​ ( 26,292 ) ​ 19,608 ​ 45,900 ​ ( 20,388 ) ​ 25,512 Other ​ — ​ — ​ — ​ 410 ​ — ​ 410 ​ ​ $ 62,990 ​ $ ( 26,292 ) ​ $ 36,698 ​ $ 63,400 ​ $ ( 20,388 ) ​ $ 43,012 ​ The following is a summary of amortization expense related to lease and other identified intangible assets: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ 2021 2020 2019 ​ ​ (In thousands) In-place lease amortization (1) ​ $ 4,171 ​ $ 5,695 ​ $ 7,375 Above-market real estate lease amortization (2) ​ 1,032 ​ 1,582 ​ 1,730 Management and leasing contract amortization (1) ​ 5,905 ​ 6,002 ​ 7,088 Other amortization ​ — ​ 16 ​ ( 240 ) Total amortization expense related to lease and other identified intangible assets ​ $ 11,108 ​ $ 13,295 ​ $ 15,953 (1) Amounts are included in "Depreciation and amortization expense" in our consolidated statements of operations. (2) Amounts are included in "Property rental revenue" in our consolidated 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, 2021: ​ ​ ​ ​ Year ending December 31, Amount ​ ​ (In thousands) 2022 ​ $ 9,571 2023 ​ 8,954 2024 ​ 8,376 2025 ​ 3,972 2026 ​ 1,669 Thereafter ​ 1,802 Total (1) ​ $ 34,344 90 Table of Contents (1) Estimated amortization related to the option to enter into ground lease is excluded from the amortization table above as the ground lease does not have a definite start date . Estimated amortization related to wireless spectrum licenses is excluded from the amortization table above as they are indefinite-lived. ​ 8. Debt Mortgages Payable The following is a summary of mortgages payable: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Weighted Average ​ ​ ​ ​ ​ ​ ​ ​ ​ Effective ​ ​ December 31, ​ Interest Rate (1) ​ 2021 2020 ​ ​ ​ ​ ​ (In thousands) Variable rate (2) 2.01 % ​ ​ $ 867,246 ​ $ 678,346 Fixed rate (3) 4.32 % ​ ​ 921,013 ​ 925,523 Mortgages payable ​ ​ ​ ​ 1,788,259 ​ 1,603,869 Unamortized deferred financing costs and premium / discount, net (4) ​ ​ ​ ( 10,560 ) ​ ( 10,131 ) Mortgages payable, net ​ ​ ​ ​ $ 1,777,699 ​ $ 1,593,738 (1) Weighted average effective interest rate as of December 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) As of December 31, 2021, excludes $ 6.4 million of net deferred financing costs related to unfunded mortgage loans that were included in "Other assets, net." As of December 31, 2021 and 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. Certain mortgages payable are recourse to us. See Note 19 for additional information. We were not in default under any mortgage loan as of December 31, 2021. During the year ended December 31, 2021, we entered into two separate mortgage loans with an aggregate principal balance of $ 190.0 million, collateralized by 1225 S. Clark Street and 1215 S. Clark Street. 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. As of December 31, 2021 and 2020, we had various interest rate swap and cap agreements on certain of our mortgages payable with an aggregate notional value of $ 1.3 billion. See Note 17 for additional information. Credit Facility As of December 31, 2021 and 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, 2021, 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 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, 2021. We were not in default under our credit facility as of December 31, 2021. Effective as of January 14, 91 Table of Contents 2022, the Tranche A-1 Term Loan was amended to extend the maturity date to January 2025 with two one-year extension options, and to amend the interest rate to Secured Overnight Financing Rate ("SOFR") plus 1.05 % to SOFR plus 1.65 %, in each case including a credit spread adjustment. In connection with the loan amendment, we amended the related LIBOR-based interest rate swaps, extending the maturity to July 2024 and converting the hedged rate from one-month LIBOR to one-month SOFR. The following is a summary of amounts outstanding under the credit facility: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Effective ​ ​ December 31, ​ Interest Rate (1) ​ 2021 2020 ​ ​ ​ ​ ​ (In thousands) Revolving credit facility (2) (3) (4) 1.15 % ​ ​ $ 300,000 ​ $ — ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Tranche A-1 Term Loan (5) 2.59 % ​ ​ $ 200,000 ​ $ 200,000 Tranche A-2 Term Loan (5) 2.49 % ​ ​ 200,000 ​ 200,000 Unsecured term loans ​ ​ 400,000 ​ 400,000 Unamortized deferred financing costs, net ​ ​ ( 1,336 ) ​ ( 2,021 ) Unsecured term loans, net ​ ​ $ 398,664 ​ $ 397,979 (1) Effective interest rate as of December 31, 2021. (2) As of December 31, 2021 and 2020, letters of credit with an aggregate face amount of $ 911,000 and $ 1.5 million were outstanding under our revolving credit facility. (3) As of December 31, 2021 and 2020, excludes net deferred financing costs related to our revolving credit facility of $ 5.0 million and $ 6.7 million that were included in "Other assets, net." (4) The interest rate for the revolving credit facility excludes a 0.15 % facility fee. (5) As of December 31, 2021 and 2020, the outstanding balance was fixed by interest rate swap agreements. As of December 31, 2021, the interest rate swaps mature concurrently with the respective term loan and fix LIBOR at a weighted average interest rate of 1.39 % for the Tranche A-1 Term Loan and 1.34 % for the Tranche A-2 Term Loan. Principal Maturities 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, 2021: ​ ​ ​ ​ Year ending December 31, Amount ​ ​ (In thousands) 2022 ​ $ 112,516 2023 ​ 373,344 2024 ​ 322,571 2025 ​ 858,890 2026 ​ 113,845 Thereafter ​ 707,093 Total ​ $ 2,488,259 ​ ​ ​ 92 Table of Contents 9. Other Liabilities, Net The following is a summary of other liabilities, net: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, ​ 2021 2020 ​ ​ (In thousands) Lease intangible liabilities ​ $ 32,893 ​ $ 33,256 Accumulated amortization ​ ( 24,621 ) ​ ( 22,956 ) Lease intangible liabilities, net ​ ​ 8,272 ​ ​ 10,300 Lease assumption liabilities ​ 5,399 ​ 10,126 Lease incentive liabilities ​ 21,163 ​ 13,913 Liabilities related to operating lease right-of-use assets ​ 6,910 ​ 10,752 Liabilities related to finance lease right-of-use assets (1) ​ 162,510 ​ 40,221 Prepaid rent ​ 19,852 ​ 19,809 Security deposits ​ 18,188 ​ 13,654 Environmental liabilities ​ 18,168 ​ 18,242 Deferred tax liability, net ​ 5,340 ​ 2,509 Dividends payable ​ 32,603 ​ 34,075 Derivative agreements, at fair value ​ 18,361 ​ 44,222 Deferred purchase price (2) ​ ​ 19,691 ​ ​ 19,479 Other ​ 6,108 ​ 10,472 Total other liabilities, net ​ $ 342,565 ​ $ 247,774 (1) Includes $ 121.6 million as of December 31, 2021 related to the amendment of the ground lease for Courthouse Plaza 1 and 2, which was executed in December 2021. The amendment extended the expiration date of the lease from January 2062 to December 2119, and resulted in a change in its classification from an operating lease to a finance lease. (2) Deferred purchase price associated with the acquisition of the former Americana Hotel site. See Note 3 for additional information. Amortization expense included in "Property rental revenue" in our consolidated statements of operations related to lease intangible liabilities for each of the three years in the period ended December 31, 2021 was $ 2.2 million, $ 2.0 million and $ 2.5 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, 2021: ​ ​ ​ ​ ​ Year ending December 31, Amount ​ ​ (In thousands) 2022 ​ $ 1,769 2023 ​ 1,761 2024 ​ 1,743 2025 ​ 1,179 2026 ​ 319 Thereafter ​ 1,501 Total ​ $ 8,272 ​ ​ 10. Income Taxes 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. Our consolidated financial statements include the operations of our TRSs, which are subject to federal, state and local income taxes on their taxable income. As a REIT, we may also be subject to federal excise taxes if we engage in certain 93 Table of Contents types of transactions. Continued qualification as a REIT depends on our ability to satisfy the REIT distribution tests, stock ownership requirements and various other qualification tests. Our TRSs have estimated federal and state net operating loss (“NOL”) carry forwards of $ 4.8 million and $ 11.0 million as of December 31, 2021 and 2020, all of which are subject to limitations. The net basis of our assets and liabilities for tax reporting purposes is approximately $ 297.0 million higher than the amounts reported in our consolidated balance sheet as of December 31, 2021. The following is a summary of our income tax (expense) benefit: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ 2021 2020 2019 ​ ​ (In thousands) Current tax (expense) benefit ​ $ ( 709 ) ​ $ 1,232 ​ $ ( 34 ) Deferred tax (expense) benefit ​ ( 2,832 ) ​ 3,033 ​ 1,336 Income tax (expense) benefit ​ $ ( 3,541 ) ​ $ 4,265 ​ $ 1,302 ​ As of December 31, 2021 and 2020, we have a net deferred tax liability of $ 5.3 million and $ 2.5 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 carry forward from 2020 and 2019, as well as NOLs converted from charitable contribution carry forwards from 2021 and 2020. We are subject to federal, state and local income tax examinations by taxing authorities for the tax years ending in 2018 through 2021. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, ​ 2021 2020 ​ ​ (In thousands) Deferred tax assets: ​ ​ Accrued bonus ​ $ 388 ​ $ 1,921 NOL ​ 1,206 ​ 2,770 Deferred revenue ​ 1,473 ​ — Capital loss ​ 3,130 ​ 1,283 Charitable contributions ​ 1,091 ​ 1,533 Other ​ 302 ​ 265 Total deferred tax assets ​ 7,590 ​ 7,772 Valuation allowance ​ ( 3,969 ) ​ ( 2,072 ) Total deferred tax assets, net of valuation allowance ​ 3,621 ​ 5,700 Deferred tax liabilities: ​ ​ Basis difference - intangible assets ​ ( 4,911 ) ​ ( 5,887 ) Basis difference - real estate ​ ​ ( 3,033 ) ​ ​ ( 2,164 ) Basis difference - investments ​ ​ ( 989 ) ​ ​ — Other ​ ( 28 ) ​ ( 158 ) Total deferred tax liabilities ​ ( 8,961 ) ​ ( 8,209 ) Net deferred tax liability ​ $ ( 5,340 ) ​ $ ( 2,509 ) ​ During the year ended December 31, 2021, our Board of Trustees declared cash dividends totaling $ 0.90 of which $ 0.252 was taxable as ordinary income for federal income tax purposes, $ 0.423 were capital gain distributions and the remaining $ 0.225 will be determined in 2022. During the year ended December 31, 2020, our Board of Trustees declared cash dividends totaling $ 0.90 of which $ 0.489 was taxable as ordinary income for federal income tax purposes and $ 0.411 were capital gain distributions. 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. ​ 94 Table of Contents 11. Redeemable Noncontrolling Interests JBG SMITH LP Op Units held by persons other than JBG SMITH are redeemable for cash or, at our election, our common shares, subject to certain limitations. Vested LTIP Units are redeemable into OP Units and, in turn cash or, at our election, our common shares, subject to certain limitations. During the years ended December 31, 2021 and 2020, unitholders redeemed 906,126 and 1.3 million OP Units and LTIP Units, which we elected to redeem for an equivalent number of our common shares. As of December 31, 2021, outstanding OP Units and redeemable LTIP Units totaled 14.9 million, representing a 10.5 % ownership interest in JBG SMITH LP. In our consolidated balance sheets, our OP Units and certain vested LTIP Units are presented at the higher of their redemption value or their carrying value, with adjustments to the redemption value recognized in "Additional paid-in capital." Redemption value per OP Unit is equivalent to the market value of one of our common shares at the end of the period. In 2022, as of the date of this filing, unitholders redeemed 205,455 OP Units and LTIP Units, which we elected to redeem for an equivalent number of our common shares. Consolidated Real Estate Venture We are a partner in The Wren, 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 are obligated to 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 December 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: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ ​ 2021 ​ 2020 ​ ​ ​ ​ ​ Consolidated ​ ​ ​ ​ ​ ​ ​ Consolidated ​ ​ ​ ​ ​ JBG ​ Real Estate ​ ​ ​ ​ JBG ​ Real Estate ​ ​ ​ ​ SMITH LP Venture Total SMITH LP Venture Total ​ (In thousands) Balance, beginning of period ​ $ 522,882 ​ $ 7,866 ​ $ 530,748 ​ $ 606,699 ​ $ 6,059 ​ $ 612,758 OP Unit redemptions ​ ( 29,634 ) ​ — ​ ( 29,634 ) ​ ( 47,517 ) ​ — ​ ( 47,517 ) LTIP Units issued in lieu of cash bonuses (1) ​ 5,614 ​ — ​ 5,614 ​ 4,066 ​ — ​ 4,066 Net loss attributable to redeemable noncontrolling interests ​ ( 8,671 ) ​ ( 57 ) ​ ( 8,728 ) ​ ( 4,818 ) ​ ( 140 ) ​ ( 4,958 ) Other comprehensive income (loss) ​ 2,675 ​ — ​ 2,675 ​ ( 2,990 ) ​ — ​ ( 2,990 ) Distributions ​ ( 17,170 ) ​ ( 148 ) ​ ( 17,318 ) ​ ( 15,629 ) ​ — ​ ( 15,629 ) Share-based compensation expense ​ 47,222 ​ — ​ 47,222 ​ 64,611 ​ — ​ 64,611 Adjustment to redemption value ​ ( 9,650 ) ​ 1,796 ​ ( 7,854 ) ​ ( 81,540 ) ​ 1,947 ​ ( 79,593 ) Balance, end of period ​ $ 513,268 ​ $ 9,457 ​ $ 522,725 ​ $ 522,882 ​ $ 7,866 ​ $ 530,748 (1) See Note 13 for additional information. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 12. Property Rental Revenue The following is a summary of property rental revenue from our non-cancellable leases: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ 2021 2020 ​ 2019 ​ ​ (In thousands) Fixed ​ $ 456,393 ​ $ 420,521 ​ $ 458,329 Variable ​ ​ 43,193 ​ ​ 38,437 ​ ​ 34,944 Property rental revenue ​ $ 499,586 ​ $ 458,958 ​ $ 493,273 95 Table of Contents ​ As of December 31, 2021, 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, Amount ​ ​ (In thousands) 2022 ​ $ 384,901 2023 ​ 303,558 2024 ​ 270,820 2025 ​ 230,133 2026 ​ 205,752 Thereafter ​ 2,215,589 ​ ​ 13. Share-Based Payments and Employee Benefits OP UNITS Certain OP Units issued in the Combination to the former owners of JBG/Operating Partners, L.P. are subject to post-combination vesting over a period of 60 months based on continued employment. Compensation expense for these OP Units is recognized over the graded vesting period through July 2022. The following is a summary of the OP Units activity: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Weighted ​ ​ Unvested ​ Average Grant- ​ Shares Date Fair Value Unvested as of December 31, 2020 ​ 1,520,570 ​ $ 33.39 Vested ( 1,079,472 ) ​ 33.39 Unvested as of December 31, 2021 441,098 ​ 33.39 ​ The total-grant date fair value of the OP Units that vested for each of the three years in the period ended December 31, 2021 was $ 36.0 million, $ 45.1 million and $ 4.3 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. In April 2021, our shareholders approved an amendment to the Plan to increase the common shares reserved under the Plan by 8.0 million. As of December 31, 2021, there were 8.9 million common shares available for issuance under the Plan. Formation Awards The formation awards issued in the Combination ("Formation Awards") were 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. The Formation Awards, subject to certain conditions, generally vest 25 % on each of the third and fourth anniversaries and 50 % on the fifth anniversary of the date granted, subject to continued employment. Compensation expense for these awards is being recognized over a five-year period through July 2022. 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 LTIP Units, which starts at zero, is the quotient of: 96 Table of Contents (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. 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 (net loss) prior to conversion to LTIP Units. The following is a summary of the Formation Awards activity: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Weighted ​ ​ Unvested ​ Average Grant- ​ Shares Date Fair Value Unvested as of December 31, 2020 ​ 1,697,555 ​ $ 8.80 Vested ​ ( 682,297 ) ​ ​ 8.81 Forfeited ( 7,745 ) ​ 8.04 Unvested as of December 31, 2021 1,007,513 ​ 8.80 ​ The total-grant date fair value of the Formation Awards that vested for each of the three years in the period ended December 31, 2021 was $ 6.0 million, $ 6.9 million and $ 1.4 million. Time-Based LTIP Units, LTIP Units and Special Time-Based LTIP Units During each of the three years in the period ended December 31, 2021, we granted to certain employees 498,955 , 381,504 and 351,982 LTIP Units with time-based vesting requirements ("Time-Based LTIP Units") with a weighted average grant-date fair value of $ 29.21 , $ 38.52 and $ 34.26 per unit that primarily vest over four years subject to continued employment. Compensation expense for these units is being recognized over a four-year period. Additionally, in July 2021, we granted to certain employees as part of a long-term retention incentive award 608,325 Time-Based LTIP Units with a weighted average grant-date fair value of $ 31.73 per unit that vest 50 % on the fifth anniversary of the grant date and 25 % on each of the sixth and seventh anniversaries of the grant date, subject to continued employment. Compensation expense for these units is being recognized over a seven-year period. During each of the three years in the period ended December 31, 2021, we granted 163,065 , 90,094 and 91,636 fully vested LTIP Units to certain employees, who elected to receive all or a portion of their cash bonus, related to prior service, as LTIP Units. The LTIP Units had a grant-date fair value of $ 29.54 , $ 40.13 and $ 34.21 per unit. During each of the three years in the period ended December 31, 2021, as part of their annual compensation, we granted to non-employee trustees a total of 71,792 , 54,607 and 50,159 fully vested LTIP Units with a grant-date fair value of $ 26.31 , $ 28.38 and $ 36.28 . The LTIP Units may not be sold while a trustee is serving on the Board of Trustees. The aggregate grant-date fair value of the Time-Based LTIP Units and LTIP Units granted (collectively "Granted LTIPs") for each of the three years in the period ended December 31, 2021 was $ 40.6 million, $ 19.9 million and $ 17.0 million. Holders of the Granted LTIPs and the Time-Based LTIP Units issued in 2018 related to our successful pursuit of Amazon's new headquarters ("Special Time-Based LTIP Units") have the right to convert vested units into OP Units, which are then subsequently exchangeable for our common shares. Granted LTIPs and Special Time-Based LTIP Units do not have redemption rights, but any OP Units into which units are converted are entitled to redemption rights. Granted LTIPs and Special Time-Based LTIP Units, generally, vote with the OP Units and do not have any separate voting rights except in connection with actions that would materially and adversely affect the rights of the Granted LTIPs and Special Time-Based LTIP Units. The Granted LTIPs were valued based on the closing common share price on the date of grant, less a 97 Table of Contents discount for post-grant restrictions. The discount was determined using Monte Carlo simulations, and the following is a summary of the significant assumptions used to value the Granted LTIPs: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ 2021 2020 2019 Expected volatility 34.0 % to 39.0 % ​ 18.0 % to 29.0 % ​ 18.0 % to 24.0 % Risk-free interest rate 0.1 % to 0.4 % ​ 0.3 % to 1.5 % ​ 2.3 % to 2.6 % Post-grant restriction periods 2 to 3 years ​ 2 to 3 years 2 to 3 years ​ The following is a summary of the Granted LTIPs and Special Time-Based LTIP Units activity: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Weighted ​ ​ Unvested ​ Average Grant- ​ Shares Date Fair Value Unvested as of December 31, 2020 ​ 1,171,551 ​ $ 35.90 Granted ​ 1,342,137 ​ ​ 30.24 Vested ​ ( 592,929 ) ​ ​ 32.19 Forfeited ​ ( 13,945 ) ​ ​ 32.68 Unvested as of December 31, 2021 ​ 1,906,814 ​ ​ 33.10 ​ The total-grant date fair value of the Granted LTIPs and Special Time-Based LTIP Units that vested for each of the three years in the period ended December 31, 2021 was $ 19.1 million, $ 15.3 million and $ 12.0 million. Performance-Based LTIP Units During each of the three years in the period ended December 31, 2021, we granted to certain employees 627,874 , 593,100 and 478,411 LTIP Units with performance-based vesting requirements ("Performance-Based LTIP Units") with a weighted average grant-date fair value of $ 15.14 , $ 18.67 and $ 19.49 per unit. 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 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 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 . Compensation expense for these units is generally being recognized over a four-year period. Additionally, in July 2021, we granted to certain employees as part of a long-term retention incentive award 844,070 Performance-Based LTIP Units with a weighted average grant-date fair value of $ 23.08 per unit that vest 50 % on the fifth anniversary of the grant date and 25 % on each of the sixth and seventh anniversaries of the grant date, subject to continued employment, based on our achievement of four share price targets during the performance period commencing on the first 98 Table of Contents anniversary of the grant date and ending on the sixth anniversary of the grant date. Compensation expense for these units is being recognized over a seven-year period. The aggregate grant-date fair value of the Performance-Based LTIP Units granted for each of the three years in the period ended December 31, 2021 was $ 29.0 million, $ 11.1 million and $ 9.3 million, valued using Monte Carlo simulations. The following is a summary of the significant assumptions used to value the Performance-Based LTIP Units: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ 2021 2020 2019 Expected volatility 31.0 % - 34.0 % ​ 15.0 % ​ 19.0 % to 23.0 % ​ Dividend yield 2.6 % ​ 2.3 % ​ 2.3 % to 2.5 % ​ Risk-free interest rate 0.2 % - 1.0 % ​ 1.3 % ​ 2.3 % to 2.6 % ​ ​ The following is a summary of the Performance-Based LTIP activity: ​ ​ ​ ​ ​ ​ ​ ​ ​ Weighted ​ ​ Unvested ​ Average Grant- ​ ​ Shares ​ Date Fair Value Unvested as of December 31, 2020 2,126,597 ​ $ 19.29 Granted 1,471,944 ​ 19.69 Vested (1) ​ ( 299,832 ) ​ ​ 17.07 Forfeited / cancelled (2) ( 522,467 ) ​ 22.10 Unvested as of December 31, 2021 (3) 2,776,242 ​ 19.21 (1) Primarily represents the Performance-Based LTIP Units granted in February 2018. Based on our relative performance and absolute TSR over the three-year performance period, all of the outstanding units were earned, with half of the units vesting at the end of the performance period and the remaining half vesting in February 2022. (2) Includes 506,182 Performance-Based LTIP Units issued in 2018 related to our successful pursuit of Amazon’s new headquarters ("Special Performance-Based LTIP Units") that were forfeited in November 2021 as the performance measures were not met. (3) In January 2022, 469,624 Performance-Based LTIP Units, which were unvested as of December 31, 2021, were forfeited as the performance measures were not met . ​ The total-grant date fair value of the Performance-Based LTIP that vested for the year ended December 31, 2021 and 2020 was $ 5.1 million and $ 4.6 million. RSUs In January 2021, we granted to certain non-executive employees 22,194 RSUs with time-based vesting requirements ("Time-Based RSUs") with a weighted average grant-date fair value of $ 31.52 per unit and 13,516 RSUs with performance-based vesting requirements ("Performance-Based RSUs") with a weighted average grant-date fair value of $ 15.16 per unit. Vesting requirements and compensation expense recognition for the Time-Based RSUs and the Performance-Based RSUs are similar to those of the Time-Based LTIP Units and Performance-Based LTIP Units granted in 2021. The aggregate grant-date fair value of the RSUs granted during the year ended December 31, 2021 was $ 905,000 . The Time-Based RSUs were valued based on the closing common share 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. 99 Table of Contents The following is a summary of the RSUs activity: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Time-Based RSUs ​ Performance-Based RSUs ​ ​ Weighted ​ ​ Weighted ​ ​ Unvested ​ Average Grant- ​ Unvested ​ Average Grant- ​ ​ Shares ​ Date Fair Value ​ Shares ​ Date Fair Value Unvested as of December 31, 2020 — ​ $ — ​ — ​ $ — Granted 22,194 ​ 31.52 ​ 13,516 ​ 15.16 Forfeited ( 616 ) ​ 32.44 ​ — ​ — Unvested as of December 31, 2021 21,578 ​ 31.50 ​ 13,516 ​ 15.16 ​ ESPP The ESPP authorized the issuance of up to 2.1 million common shares. The ESPP provides eligible employees an option to contribute up to $ 25,000 in any calendar year, through payroll deductions, toward the purchase of our common shares at a discount of 15.0 % of the closing price of a common share on relevant determination dates. As of December 31, 2021, there were 1.9 million common shares available for issuance under the ESPP. Pursuant to the ESPP, employees purchased 64,321 , 68,047 and 47,022 common shares for $ 1.6 million, $ 1.7 million and $ 1.5 million during each of the three years in the period ended December 31, 2021. The following is a summary of the significant assumptions used to value the ESPP common shares using the Black-Scholes model: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ 2021 ​ 2020 ​ 2019 Expected volatility 22.0 % to 39 % ​ 13.0 % to 67.0 % ​ 18.0 % to 28.0 % Dividend yield 1.5 % to 3.1 % ​ 1.1 % to 3.3 % ​ 2.6 % to 3.5 % Risk-free interest rate 0.1 % ​ 0.1 % to 1.7 % ​ 2.2 % to 2.4 % Expected life ​ 6 months ​ 6 months ​ 6 months ​ Share-Based Compensation Expense The following is a summary of share-based compensation expense: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ 2021 2020 2019 ​ (In thousands) Time-Based LTIP Units ​ $ 16,705 ​ $ 14,018 ​ $ 11,386 Performance-Based LTIP Units ​ 13,101 ​ 17,815 ​ 8,716 LTIP Units ​ 1,091 ​ 1,100 ​ 1,000 Other equity awards (1) ​ 7,355 ​ 6,024 ​ 4,535 Share-based compensation expense - other ​ 38,252 ​ 38,957 ​ 25,637 Formation Awards ​ 2,874 ​ 4,242 ​ 5,734 OP Units and LTIP Units (2) ​ 7,927 ​ 21,836 ​ 30,282 Special Time-Based LTIP Units and Special Performance-Based LTIP Units ​ 5,524 ​ 5,600 ​ 6,146 Share-based compensation related to Formation Transaction and special equity awards (3) ​ 16,325 ​ 31,678 ​ 42,162 Total share-based compensation expense ​ 54,577 ​ 70,635 ​ 67,799 Less: amount capitalized ​ ( 3,026 ) ​ ( 4,584 ) ​ ( 2,526 ) Share-based compensation expense ​ $ 51,551 ​ $ 66,051 ​ $ 65,273 (1) Primarily comprising compensation expense for: (i) fully vested LTIP Units issued to certain employees in lieu of all or a portion of any cash bonus earned, (ii) RSUs and (iii) shares issued under our ESPP. 100 Table of Contents (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) Included in "General and administrative expense: Share-based compensation related to Formation Transaction and special equity awards" in the accompanying consolidated statements of operations. As of December 31, 2021, we had $ 62.6 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 3.6 years. Employee Benefits We have a 401(k) defined contribution plan covering substantially all of our officers and employees which permits participants to defer compensation up to the maximum amount permitted by law. We provide a discretionary matching contribution. Employees' contributions, which vests after one year of service. Our contributions for each of the three years in the period ended December 31, 2021 were $ 2.4 million, $ 2.2 million and $ 2.0 million. 2022 Grants Beginning in 2022, certain employees were granted performance-based, appreciation-only LTIP Units ("AO LTIP Units"). The AO LTIP Units are structured in the form of profit interests that provide for a share of appreciation determined by the increase in the value of a common share at the time of conversion over the participation threshold of $ 32.30 . The AO LTIP Units have a three-year performance period. 50 % of any AO 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. The AO LTIP Units are subject to a TSR modifier whereby the number of AO LTIP Units that will ultimately be earned will be increased or reduced by as much as 25 %. In January 2022, we granted 1.5 million AO LTIP Units, 702,888 Time-Based LTIP Units, 21,705 Performance-Based LTIP Units and 39,536 Time-Based RSUs to certain employees with an estimated aggregate grant-date fair value of $ 27.3 million. In February 2022, we granted 252,206 fully vested LTIP Units, with a total grant-date fair value of $ 5.6 million, to certain employees who elected to receive all or a portion of their cash bonus earned, related to 2021 service, as LTIP Units. 14. Transaction and Other Costs The following is a summary of transaction and other costs: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ 2021 2020 2019 ​ (In thousands) Demolition costs ​ $ 3,573 ​ $ 682 ​ $ 5,432 Integration and severance costs ​ 1,038 ​ 3,694 ​ 5,252 Completed, potential and pursued transaction expenses (1) ​ 5,818 ​ 294 ​ 651 Relocation of corporate headquarters (2) ​ ​ — ​ ​ — ​ ​ 10,900 Other (3) ​ — ​ 4,000 ​ 1,000 Transaction and other costs ​ $ 10,429 ​ $ 8,670 ​ $ 23,235 (1) Includes primarily legal and dead deal costs. (2) In November 2019, we relocated our corporate headquarters and incurred an impairment loss on the right-of-use assets for leases related to our former corporate headquarters as well as other costs. (3) 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 area . ​ 101 Table of Contents 15. Interest Expense The following is a summary of interest expense: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ 2021 2020 2019 ​ (In thousands) Interest expense before capitalized interest ​ $ 68,485 ​ $ 70,561 ​ $ 78,313 Amortization of deferred financing costs ​ 4,291 ​ 3,315 ​ 3,217 Interest expense related to finance lease right-of-use assets ​ ​ 2,261 ​ ​ 1,450 ​ ​ 921 Net unrealized (gain) loss on derivative financial instruments not designated as accounting hedges ​ ( 342 ) ​ 184 ​ 50 Capitalized interest ​ ( 6,734 ) ​ ( 13,189 ) ​ ( 29,806 ) Interest expense ​ $ 67,961 ​ $ 62,321 ​ $ 52,695 ​ ​ 16. Shareholders' Equity and Earnings (Loss) Per Common Share Common Shares Repurchased In March 2020, our Board of Trustees authorized the repurchase of up to $ 500.0 million of our outstanding common shares. During the year ended December 31, 2021, we repurchased and retired 5.4 million common shares for $ 157.7 million, a weighted average purchase price per share of $ 29.34 . During the year ended December 31, 2020, we repurchased and retired 3.8 million common shares for $ 104.8 million, a weighted average purchase price per share of $ 27.72 . Since we began the share repurchase program, we have repurchased and retired 9.1 million common shares for $ 262.4 million, a weighted average purchase price per share of $ 28.67 . Shareholders' Equity In April 2019, we closed an underwritten public offering of 11.5 million common shares (including 1.5 million common shares related to the exercise of the underwriters' option to cover overallotments) at $ 42.00 per share, which generated net proceeds, after deducting the underwriting discounts and commissions and other offering expenses, of $ 472.8 million. 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 (loss) per common share to net income (loss): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ ​ 2021 2020 2019 ​ ​ (In thousands, except per share amounts) Net income (loss) ​ $ ( 89,725 ) ​ $ ( 67,261 ) ​ $ 74,144 Net (income) loss attributable to redeemable noncontrolling interests ​ 8,728 ​ 4,958 ​ ( 8,573 ) Net loss attributable to noncontrolling interests ​ 1,740 ​ — ​ — Net income (loss) attributable to common shareholders ​ ​ ( 79,257 ) ​ ​ ( 62,303 ) ​ 65,571 Distributions to participating securities ​ ( 2,854 ) ​ ( 3,100 ) ​ ( 2,489 ) Net income (loss) available to common shareholders - basic and diluted ​ $ ( 82,111 ) ​ $ ( 65,403 ) ​ $ 63,082 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Weighted average number of common shares outstanding - basic and diluted ​ 130,839 ​ 133,451 ​ 130,687 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Earnings (loss) per common share - basic and diluted ​ $ ( 0.63 ) ​ $ ( 0.49 ) ​ 0.48 ​ 102 Table of Contents The effect of the redemption of OP Units, Time-Based LTIP Units, fully vested LTIP Units and Special Time-Based LTIP Units that were outstanding as of December 31, 2021 and 2020 is excluded in the computation of diluted earnings (loss) per common share as the assumed exchange of such units for common shares on a one-for-one basis was antidilutive (the assumed redemption of these units would have no impact on the determination of diluted earnings (loss) per share). Since OP Units, Time-Based LTIP Units, LTIP Units and Special Time-Based LTIP Units, which are held by noncontrolling interests, are attributed gains at an identical proportion to the common shareholders, the gains attributable and their equivalent weighted average impact are excluded from net income (loss) available to common shareholders and from the weighted average number of common shares outstanding in calculating diluted earnings (loss) per common share. Performance-Based LTIP Units, Formation Awards and RSUs, which totaled 4.5 million, 4.7 million and 4.7 million for each of the three years in the period ended December 31, 2021, were excluded from the calculation of diluted earnings (loss) per common share as they were antidilutive, but potentially could be dilutive in the future. ​ 17. Fair Value Measurements Fair Value Measurements on a Recurring Basis To manage or hedge our exposure to interest rate risk, we follow established risk management policies and procedures, including the use of a variety of derivative financial instruments. We do not enter into derivative financial instruments for speculative purposes. As of December 31, 2021 and 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 $ 17.2 million and $ 43.9 million as of December 31, 2021 and 2020 and was recorded in "Accumulated other comprehensive loss" in our consolidated balance sheets, of which a portion was reclassified to "Redeemable noncontrolling interests." Within the next 12 months, we expect to reclassify $ 11.4 million of the net unrealized loss 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. The derivative financial instruments are classified within Level 2 of the valuation hierarchy. The following is a summary of assets and liabilities measured at fair value on a recurring basis: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Fair Value Measurements ​ Total Level 1 Level 2 Level 3 ​ ​ (In thousands) December 31, 2021 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Derivative financial instruments designated as cash flow hedges: ​ ​ ​ ​ Classified as assets in "Other assets, net" ​ $ 393 ​ ​ — ​ $ 393 ​ ​ — Classified as liabilities in "Other liabilities, net" ​ ​ 18,361 ​ — ​ ​ 18,361 ​ — Derivative financial instruments not designated as accounting hedges: ​ ​ ​ ​ Classified as assets in "Other assets, net" ​ 558 ​ — ​ 558 ​ — ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, 2020 ​ ​ ​ ​ Derivative financial instruments designated as cash flow hedges: ​ ​ ​ ​ Classified as liabilities in "Other liabilities, net" ​ $ 44,222 ​ — ​ $ 44,222 ​ — Derivative financial instruments not designated as accounting hedges: ​ ​ ​ ​ Classified as assets in "Other assets, net" ​ 35 ​ — ​ 35 ​ — ​ 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 December 31, 2021 and 2020, the significance 103 Table of Contents of the impact of the credit valuation adjustments on the overall valuation of the derivative financial instruments was assessed, and it was determined that these adjustments were not significant to the overall valuation of the derivative financial instruments. As a result, it was determined that the derivative financial instruments in their entirety should be classified in Level 2 of the fair value hierarchy. The net unrealized gains and losses included in "Other comprehensive income (loss)" in our consolidated statements of comprehensive income (loss) for each of the three years in the period ended December 31, 2021 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 consolidated statements of operations as the interest rate swaps were documented and qualified as hedging instruments. Fair Value Measurements on a Nonrecurring Basis We evaluate the carrying amount of our assets 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. In connection with the preparation and review of our 2021 annual consolidated financial statements, we assessed the recoverability of the carrying amount of our real estate and related intangible assets. This assessment resulted in the remeasurement of 7200 Wisconsin Avenue, RTC-West and a future development parce1, which are non-core assets that were written down to their estimated aggregate fair value of $ 309.0 million and were classified as Level 2 in the fair value hierarchy. Our estimates of the fair values were based on expected sales prices as determined by contracts under negotiation as of December 31, 2021, after adjusting for estimated selling costs. The remeasurements results in impairment losses totaling $ 25.1 million, which are included in "Impairment loss" in our consolidated statement of operations. In connection with the preparation and review of our 2020 annual consolidated financial statements, we assessed the recoverability of the carrying amount of our real estate and related intangible assets. This assessment resulted in the remeasurement of One Democracy Plaza, a non-core commercial asset which 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. 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. The remeasurements resulted in an impairment loss of $ 10.2 million, which is included in "Impairment loss" in our consolidated statement of operations. There were no other assets measured at fair value on a nonrecurring basis as of December 31, 2021 and 2020. Financial Assets and Liabilities Not Measured at Fair Value As of December 31, 2021 and 2020, all financial instruments and liabilities were reflected in our consolidated balance sheets at amounts which, in our estimation, reasonably approximated their fair values, except for the following: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, 2021 ​ December 31, 2020 ​ Carrying ​ Carrying ​ ​ ​ Amount (1) ​ Fair Value ​ Amount (1) ​ Fair Value ​ (In thousands) Financial liabilities: ​ ​ ​ ​ Mortgages payable ​ $ 1,788,259 ​ $ 1,814,780 ​ $ 1,603,869 ​ $ 1,606,470 Revolving credit facility ​ 300,000 ​ 300,363 ​ — ​ — Unsecured term loans ​ 400,000 ​ 400,519 ​ 400,000 ​ 399,678 (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 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 revolving credit facility and 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. 104 Table of Contents ​ 18. Segment Information We review operating and financial data for each property on an individual basis; therefore, each of our individual properties is a separate operating segment. We define our reportable segments to be aligned with our method of internal reporting and the way our Chief Executive Officer, who is also our Chief Operating Decision Maker ("CODM"), makes key operating decisions, evaluates financial results, allocates resources and manages our business. Accordingly, we aggregate our operating segments into three reportable segments (commercial, multifamily, and third-party asset management and real estate services) based on the economic characteristics and nature of our assets and services. The CODM measures and evaluates the performance of our operating segments, with the exception of the third-party asset management and real estate services business, based on the net operating income ("NOI") of properties within each segment. NOI includes property rental revenue and parking revenue, and deducts property operating expenses and real estate taxes. With respect to the third-party asset management and real estate services business, the CODM reviews revenue streams generated by this segment ("Third-party real estate services, including reimbursements"), as well as the expenses attributable to the segment ("General and administrative: third-party real estate services"), which are both disclosed separately in our consolidated statements of operations. The following represents the components of revenue from our third-party asset management and real estate services business: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ 2021 2020 2019 ​ (In thousands) Property management fees ​ $ 19,427 ​ $ 20,178 ​ $ 22,437 Asset management fees ​ 8,468 ​ 9,791 ​ 14,045 Development fees (1) ​ 25,493 ​ 11,496 ​ 15,655 Leasing fees ​ 5,833 ​ 5,594 ​ 7,377 Construction management fees ​ 512 ​ 2,966 ​ 1,669 Other service revenue ​ 6,146 ​ 7,255 ​ 4,269 Third-party real estate services revenue, excluding reimbursements ​ 65,879 ​ 57,280 ​ 65,452 Reimbursement revenue (2) ​ 48,124 ​ 56,659 ​ 55,434 Third-party real estate services revenue, including reimbursements ​ ​ 114,003 ​ ​ 113,939 ​ ​ 120,886 Third-party real estate services expenses ​ ​ 107,159 ​ ​ 114,829 ​ ​ 113,495 Third-party real estate services revenue less expenses ​ $ 6,844 ​ $ ( 890 ) ​ $ 7,391 (1) As of December 31, 2021 , we had estimated unrecognized development fee revenue totaling $ 48.6 million, of which $ 13.8 million, $ 12.0 million and $ 6.3 million is expected to be recognized in 2022 , 2023 and 2024 , and $ 16.5 million is expected to be recognized thereafter through 2027 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 $ 19.6 million and $ 25.5 million as of December 31, 2021 and 2020, which are classified in "Other assets, net" in our consolidated 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. 105 Table of Contents The following is the reconciliation of net income (loss) attributable to common shareholders to consolidated NOI: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ 2021 2020 2019 ​ (In thousands) Net income (loss) attributable to common shareholders ​ $ ( 79,257 ) ​ $ ( 62,303 ) ​ $ 65,571 Add: ​ ​ ​ Depreciation and amortization expense ​ 236,303 ​ 221,756 ​ 191,580 General and administrative expense: ​ ​ ​ Corporate and other ​ 53,819 ​ 46,634 ​ 46,822 Third-party real estate services ​ 107,159 ​ 114,829 ​ 113,495 Share-based compensation related to Formation Transaction and special equity awards ​ 16,325 ​ 31,678 ​ 42,162 Transaction and other costs ​ 10,429 ​ 8,670 ​ 23,235 Interest expense ​ 67,961 ​ 62,321 ​ 52,695 Loss on extinguishment of debt ​ — ​ 62 ​ 5,805 Impairment loss ​ ​ 25,144 ​ ​ 10,232 ​ ​ — Income tax expense (benefit) ​ 3,541 ​ ( 4,265 ) ​ ( 1,302 ) Net income (loss) attributable to redeemable noncontrolling interests ​ ( 8,728 ) ​ ( 4,958 ) ​ 8,573 Net loss attributable to noncontrolling interests ​ ​ ( 1,740 ) ​ ​ — ​ ​ — Less: ​ ​ ​ Third-party real estate services, including reimbursements revenue ​ 114,003 ​ 113,939 ​ 120,886 Other revenue ​ 7,671 ​ 15,372 ​ 7,638 Loss from unconsolidated real estate ventures, net ​ ( 2,070 ) ​ ( 20,336 ) ​ ( 1,395 ) Interest and other income (loss), net ​ 8,835 ​ ( 625 ) ​ 5,385 Gain on sale of real estate ​ 11,290 ​ 59,477 ​ 104,991 Consolidated NOI ​ $ 291,227 ​ $ 256,829 ​ $ 311,131 ​ 106 Table of Contents The following is a summary of NOI by segment. Items classified in the Other column include future development pipeline assets, corporate entities and the elimination of intersegment activity. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, 2021 ​ Commercial Multifamily Other Total ​ (In thousands) Property rental revenue ​ $ 365,869 ​ $ 139,918 ​ $ ( 6,201 ) ​ $ 499,586 Parking revenue ​ 12,441 ​ 415 ​ 246 ​ 13,102 Total property revenue ​ 378,310 ​ 140,333 ​ ( 5,955 ) ​ 512,688 Property expense: ​ ​ ​ ​ ​ Property operating ​ 103,022 ​ 52,527 ​ ( 4,911 ) ​ 150,638 Real estate taxes ​ 45,701 ​ 20,207 ​ 4,915 ​ 70,823 Total property expense ​ 148,723 ​ 72,734 ​ 4 ​ 221,461 Consolidated NOI ​ $ 229,587 ​ $ 67,599 ​ $ ( 5,959 ) ​ $ 291,227 ​ ​ Year Ended December 31, 2020 ​ Commercial Multifamily Other Total ​ ​ (In thousands) Property rental revenue ​ $ 345,403 ​ $ 121,559 ​ $ ( 8,004 ) ​ $ 458,958 Parking revenue ​ 13,888 ​ 327 ​ 239 ​ 14,454 Total property revenue ​ 359,291 ​ 121,886 ​ ( 7,765 ) ​ 473,412 Property expense: ​ ​ ​ ​ Property operating ​ 105,489 ​ 47,508 ​ ( 7,372 ) ​ 145,625 Real estate taxes ​ 47,607 ​ 19,233 ​ 4,118 ​ 70,958 Total property expense ​ 153,096 ​ 66,741 ​ ( 3,254 ) ​ 216,583 Consolidated NOI ​ $ 206,195 ​ $ 55,145 ​ $ ( 4,511 ) ​ $ 256,829 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, 2019 ​ Commercial Multifamily Other Total ​ ​ (In thousands) Property rental revenue ​ $ 383,311 ​ $ 116,330 ​ $ ( 6,368 ) ​ $ 493,273 Parking revenue ​ 25,593 ​ 380 ​ — ​ 25,973 Total property revenue ​ 408,904 ​ 116,710 ​ ( 6,368 ) ​ 519,246 Property expense: ​ ​ ​ ​ ​ Property operating ​ 113,177 ​ 35,236 ​ ( 10,791 ) ​ 137,622 Real estate taxes ​ 50,115 ​ 15,021 ​ 5,357 ​ 70,493 Total property expense ​ 163,292 ​ 50,257 ​ ( 5,434 ) ​ 208,115 Consolidated NOI ​ $ 245,612 ​ $ 66,453 ​ $ ( 934 ) ​ $ 311,131 ​ 107 Table of Contents The following is a summary of certain balance sheet data by segment: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Commercial Multifamily Other Total ​ ​ (In thousands) December 31, 2021 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Real estate, at cost ​ $ 3,477,260 ​ $ 2,367,712 ​ $ 391,504 ​ $ 6,236,476 Investments in unconsolidated real estate ventures ​ 281,515 ​ 103,389 ​ 77,981 ​ 462,885 Total assets ​ 3,739,902 ​ 1,797,807 ​ 848,497 ​ 6,386,206 December 31, 2020 ​ ​ ​ ​ Real estate, at cost ​ $ 3,459,171 ​ $ 2,036,131 ​ $ 505,329 ​ $ 6,000,631 Investments in unconsolidated real estate ventures ​ 327,798 ​ 108,593 ​ 24,978 ​ 461,369 Total assets ​ 3,430,509 ​ 1,787,718 ​ 861,320 ​ 6,079,547 ​ ​ ​ 19. Commitments and Contingencies Insurance We maintain general liability insurance with limits of $ 150.0 million per occurrence and in the aggregate, and property and rental value insurance coverage with limits of $ 1.5 billion per occurrence, with sub-limits for certain perils such as floods and earthquakes on each of our properties. We also maintain coverage, through our wholly owned captive insurance subsidiary, for a portion of the first loss on the above limits and for both terrorist acts and for nuclear, biological, chemical or radiological terrorism events with limits of $ 2.0 billion per occurrence. These policies are partially reinsured by third-party insurance providers. We will continue to monitor the state of the insurance market, and the scope and costs of coverage for acts of terrorism. We cannot anticipate what coverage will be available on commercially reasonable terms in the future. We are responsible for deductibles and losses in excess of the insurance coverage, which could be material. Our debt, consisting of mortgages payable secured by our properties, a revolving credit facility and unsecured term loans, contains customary covenants requiring adequate insurance coverage. Although we believe that we currently have adequate insurance coverage, we may not be able to obtain an equivalent amount of coverage at a reasonable cost in the future. If lenders insist on greater coverage than we are able to obtain, it could adversely affect our ability to finance or refinance our properties. Construction Commitments As of December 31, 2021, we had assets under construction that will, based on our current plans and estimates, require an additional $ 291.4 million to complete, which we anticipate will be primarily expended over the next two to three years . These capital expenditures are generally due as the work is performed, and we expect to finance them with debt proceeds, proceeds from asset recapitalizations and sales, and available cash. Environmental Matters Most of our assets have been subject, at some point, to environmental assessments that are intended to evaluate the environmental condition of the assets. The environmental assessments did not reveal any material environmental contamination that we believe would have a material adverse effect on our overall business, financial condition or results of operations, or that have not been anticipated and remediated during site redevelopment as required by law. Nevertheless, there can be no assurance that the identification of new areas of contamination, changes in the extent or known scope of contamination, the discovery of additional sites or changes in cleanup requirements would not result in significant cost to us. Environmental liabilities totaled $ 18.2 million as of December 31, 2021 and 2020, and are included in "Other liabilities, net" in our consolidated balance sheets. 108 Table of Contents Operating and Finance Leases As of December 31, 2021, our operating and finance lease liabilities were calculated based on the weighted average discount rates of 5.5 % and 4.5 %, and had weighted average remaining lease terms of 5.4 years and 97.7 years. As of December 31, 2021, future minimum lease payments under our non-cancellable operating and finance leases are as follows: ​ ​ ​ ​ ​ ​ ​ ​ Year ending December 31, Operating Finance ​ ​ (In thousands) 2022 ​ $ 1,897 ​ $ 3,611 2023 ​ 1,102 ​ 3,703 2024 ​ 1,163 ​ 4,797 2025 ​ 1,227 ​ 4,893 2026 ​ 1,294 ​ 4,991 Thereafter ​ 1,404 ​ 1,343,761 Total future minimum lease payments ​ 8,087 ​ 1,365,756 Imputed interest ​ ( 1,177 ) ​ ( 1,203,246 ) Total liabilities related to lease right-of-use assets ​ $ 6,910 ​ $ 162,510 ​ During the year ended December 31, 2021, we incurred $ 731,000 and $ 2.8 million of fixed operating and finance lease expenses, and $ 2.6 million of variable operating lease expenses. During the year ended December 31, 2020, we incurred $ 1.1 million and $ 1.8 million of fixed operating and finance lease costs, and $ 1.6 million of variable operating lease costs. Other As of December 31, 2021, we had committed tenant-related obligations totaling $ 76.0 million ($ 70.7 million related to our consolidated entities and $ 5.3 million related to our unconsolidated real estate ventures at our share). The timing and amounts of payments for tenant-related obligations are uncertain and may only be due upon satisfactory performance of certain conditions. There are various legal actions against us in the ordinary course of business. In our opinion, the outcome of such matters will not have a material adverse effect on our financial condition, results of operations or cash flows. From time to time, we (or ventures in which we have an ownership interest) have agreed, and may in the future agree with respect to unconsolidated real estate ventures, to (i) guarantee portions of the principal, interest and other amounts in connection with borrowings, (ii) provide customary environmental indemnifications and nonrecourse carve-outs (e.g., guarantees against fraud, misrepresentation and bankruptcy) in connection with borrowings or (iii) provide guarantees to lenders and other third parties for the completion of development projects. We customarily have agreements with our outside venture partners whereby the partners agree to reimburse the real estate venture or us for their share of any payments made under certain of these guarantees. At times, we also have agreements with certain of our outside venture partners whereby we agree to either indemnify the partners and/or the associated ventures with respect to certain contingent liabilities associated with operating assets or to reimburse our partner for its share of any payments made by them under certain guarantees. Guarantees (excluding environmental) customarily terminate either upon the satisfaction of specified circumstances or repayment of the underlying debt. Amounts that we may be required to pay in future periods in relation to guarantees associated with budget overruns or operating losses are not estimable. As of December 31, 2021, we had additional capital commitments and certain recorded guarantees to our unconsolidated real estate ventures totaling $ 66.9 million. As of December 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 109 Table of Contents 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, 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. 20. 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. In connection with the contribution to us of certain assets formerly owned by the JBG Legacy Funds as part of the Formation Transaction, the general partner and managing member interests in the JBG Legacy Funds that were held by certain former JBG executives (and who became members of our management team and/or Board of Trustees) were not transferred to us and remain under the control of these individuals. In addition, certain members of our senior management team and Board of Trustees have ownership interests in the JBG Legacy Funds and own carried interests in each fund and in certain of our real estate ventures that entitle them to receive cash payments if the fund or real estate venture achieves certain return thresholds. We launched the WHI with the Federal City Council in June 2018 as a scalable market-driven model that uses private capital to help address the scarcity of housing for middle income families. We are the manager for the WHI Impact Pool, which is the social impact financing vehicle of the WHI. As of December 31, 2021, the WHI Impact Pool had completed closings of capital commitments totaling $ 114.4 million, which included a commitment from us of $ 11.2 million. As of December 31, 2021, our remaining commitment was $ 8.3 million. The third-party real estate services revenue, including expense reimbursements, from the JBG Legacy Funds and the WHI Impact Pool was $ 22.6 million, $ 22.4 million and $ 36.5 million for each of the three years in the period ended December 31, 2021. As of December 31, 2021 and 2020, we had receivables from the JBG Legacy Funds and the WHI Impact Pool totaling $ 3.2 million and $ 7.5 million for such services. We rented our former corporate offices from an unconsolidated real estate venture and made payments totaling $ 1.3 million, $ 4.6 million and $ 5.0 million for each of the three years in the period ended December 31, 2021. ​ 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 $ 18.6 million, $ 16.9 million and $ 21.8 million for each of the three years in the period ended December 31, 2021, which is included in "Property operating expenses" in our statements of operations. ​ ​ ​ 110 Table of Contents ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURES None. ​