What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2022-05-03 compared with 2021-11-02 · 185 added, 293 removed, 270 unchanged (64% of the section changed)

16 unchanged sentences

For further discussion of factors that could materially affect the outcome of our forward-looking statements, see "Risk Factors"

in Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2020 and "Management's Discussion and Analysis of Financial Condition and Results of Operations"

in this Quarterly Report on Form 10-Q and our Annual Report on Form 10-K for the year ended December 31, 2020.

One of the most significant factors that could cause actual outcomes to differ materially from our forward-looking statements is the adverse effect of the current pandemic of the novel coronavirus ("COVID-19") on our financial condition, results of operations, cash flows, performance, tenants, the real estate market, and the global economy and financial markets.

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.

Moreover, investors are cautioned to interpret many of the risks identified under the section titled "Risk Factors"

in our Annual Report on Form 10-K for the fiscal year ended December 31, 2020 as being heightened as a result of the ongoing and numerous adverse impacts of COVID-19.

in Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2021 filed with the Securities and Exchange Commission on February 22, 2022 ("Annual Report") and "Management's Discussion and Analysis of Financial Condition and Results of Operations"

in this Quarterly Report on Form 10-Q and our Annual Report.

For these forward-looking statements, we claim the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995.

5 unchanged sentences

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

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

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

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

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 over five million square foot 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 Amazon, the Washington Housing Initiative ("WHI") Impact Pool, 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.

8 unchanged sentences

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

References to our financial statements refer to our unaudited condensed consolidated financial statements as of September 30, 2021 and December 31, 2020, and for the three and nine months ended September 30, 2021 and 2020.

References to our balance sheets refer to our condensed consolidated balance sheets as of September 30, 2021 and December 31, 2020.

References to our statements of operations refer to our condensed consolidated statements of operations for the three and nine months ended September 30, 2021 and 2020.

References to our statements of cash flows refer to our condensed consolidated statements of cash flows for the nine months ended September 30, 2021 and 2020.

References to our financial statements refer to our unaudited condensed consolidated financial statements as of March 31, 2022 and December 31, 2021, and for the three months ended March 31, 2022 and 2021.

References to our balance sheets refer to our condensed consolidated balance sheets as of March 31, 2022 and December 31, 2021.

References to our statements of operations refer to our condensed consolidated statements of operations for the three months ended March 31, 2022 and 2021.

References to our statements of cash flows refer to our condensed consolidated statements of cash flows for the three months ended March 31, 2022 and 2021.

The accompanying financial statements are prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP"), which requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosure of contingent assets and liabilities as of the date of the financial statements and the reported amounts of revenue and expenses during the reporting periods.

11 unchanged sentences

Our success is also subject to our ability to refinance existing debt on acceptable terms as it comes due.

As of September 30, 2021, our Operating Portfolio consisted of 63 operating assets comprising 42 commercial assets totaling 13.1 million square feet (11.3 million square feet at our share) and 21 multifamily assets totaling 7,776 units (6,125 units at our share).

As of March 31, 2022, our Operating Portfolio consisted of 62 operating assets comprising 41 commercial assets totaling 13.0 million square feet (11.3 million square feet at our share), 20 multifamily assets totaling 7,715 units (6,502 units at our share) and one wholly-owned land asset for which we are the ground lessor.

Additionally, we have:

(i) one under-construction multifamily asset with 808 units (808 units at our share);

(ii) 11 near-term development assets totaling 5.3 million square feet (5.0 million square feet at our share) of estimated potential development density;

(i) two under-construction multifamily assets with 1,583 units (1,583 units at our share);

(ii) nine near-term development assets totaling 4.1 million square feet (3.9 million square feet at our share) of estimated potential development density;

and (iii) 20 future development assets totaling 13.0 million square feet (10.5 million square feet at our share) of estimated potential development density.

In 2021, we achieved carbon neutrality across our Operating Portfolio through the purchase of verified carbon offsets and renewable energy credits.

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

Our Placemaking strategies include the delivery of new multifamily and office developments, locally sourced amenity retail, and thoughtful improvements to the streetscape, sidewalks, parks and other outdoor gathering spaces.

Our Placemaking includes the delivery of new multifamily and office developments, locally sourced amenity retail, and thoughtful improvements to the streetscape, sidewalks, parks and other outdoor gathering spaces.

In keeping with our dedication to Placemaking, each new project is intended to contribute to authentic and distinct neighborhoods by creating a vibrant street environment with robust retail offerings and other amenities, including improved public spaces.

We have also invested in Citizens Broadband Radio Service ("CBRS") wireless spectrum in National Landing as part of our efforts to make National Landing among the first 5G-operable submarkets in the nation.

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

We currently have leases with Amazon totaling approximately 1.0 million square feet at six office buildings

in National Landing.

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

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

Additionally, the cutting-edge digital infrastructure investments we are

making, including the purchase of Citizens Broadband Radio Service wireless spectrum in National Landing and an agreement with AT&T, are advancing our efforts as we strive to make National Landing among the first 5G-operable submarkets in the nation.

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

We currently have leases with Amazon totaling 1.0 million square feet at six office buildings in National Landing.

In March 2019, we executed purchase and sale agreements with Amazon for two of our National Landing development sites, Metropolitan Park and Pen Place.

We are currently constructing two new office buildings for Amazon on Metropolitan Park, totaling 2.1 million square feet, inclusive of over 50,000 square feet of street-level retail with new shops and restaurants.

The sale of Pen Place to Amazon is expected to close, subject to customary closing conditions, during the second quarter of 2022 for $198.0 million, and we expect Amazon to begin construction in 2022.

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

A fundamental component of our strategy to maximize long-term net asset value per share is active capital allocation.

Since our inception in 2017, we have completed the sale, recapitalization and/or ground lease of $1.7 billion of primarily office assets, and we intend to opportunistically sell at least another $1.4 billion of non-core office assets and land.

We are currently targeting dispositions primarily of office assets in submarkets where we have less concentration and where we anticipate lower growth rates going forward relative to other opportunities within our portfolio.

Additionally, we may market select land assets where ground lease or joint venture execution may represent the clearest path to maximizing value.

Redeploying the proceeds from any such sales and recapitalizations will not only help fund our planned growth but will also further advance the strategic shift of our portfolio to majority multifamily.

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

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

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

The pandemic continues to evolve, and while we are optimistic about the future, we remain cautious about the medium-term implications for office assets.

Vacancy is still at record highs across the region, and most companies are still not fully back in the office.

Occupancy of our commercial portfolio declined by 180 basis points from June 30, 2021, the majority of which was related to pre-pandemic decision making, although we had two civilian agency Government Services Administration tenants that reduced their leased square footage due to a planned shift toward working from home.

We expect continued pressure on our office occupancy through the end of the year and into 2022.

Although parking revenue increased during the three months ended September 30, 2021 as compared to the same period in 2020, parking revenue in our commercial portfolio was approximately 60% below pre-pandemic levels of approximately $30 million annually due to delayed return-to-the-office plans for many of our office tenants.

We are seeing improvements in our multifamily portfolio, with a 390 basis point increase in the occupancy of our operating multifamily portfolio from June 30, 2021 and an increase in market rents due to increased demand and limited new supply.

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

These developments include:

the continued severity, duration, transmission rate and geographic spread of COVID-19 in the United States, the continued speed of the vaccine distribution, the effectiveness and willingness of people to take COVID-19 vaccines, the duration of associated immunity and the efficacy of vaccines against variants of COVID-19, the extent and effectiveness of other containment measures taken, and the response of the overall economy, the financial markets and the population, particularly in areas in which we operate, as containment measures continue to be lifted, and whether the residential market in the Washington, D.C.

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

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

Therefore, we could experience material declines in revenue, net income, NOI and/or Funds from Operations ("FFO").

For more information, see "Risk Factors"

in our Annual Report on Form 10-K for the fiscal year ended December 31, 2020.

A fundamental component of our strategy to maximize long-term net asset value ("NAV") per share is active capital allocation.

We evaluate development, acquisition, disposition, share repurchase and other investment decisions based on how they may impact long-term NAV per share.

We intend to continue to opportunistically sell non-core office assets outside of National Landing as well as land sites where a ground lease or joint venture execution may represent the most attractive path to maximizing value.

Successful execution of our capital allocation strategy enables us to source capital at NAV from the disposition of assets generating low cash yields and invest those proceeds in new acquisitions with higher cash yields and growth, as well as in development projects with significant yield spreads and profit potential.

We view this strategy as a key tool to source capital and intend to continue disposing of assets where the disparity in public and private market valuations is greatest.

Consequently, at any given time, we expect to be in various stages of discussions and negotiations with potential buyers, real estate venture partners, ground lessors and other counterparties with respect to sales, joint ventures and/or ground leases for certain of our assets, including portfolios thereof.

These discussions and negotiations may or may not lead to definitive documentation or closed transactions.

Redeploying the proceeds from these sales will not only help fund our planned growth, but will also further advance the strategic shift of our portfolio to majority multifamily.

Our office portfolio performance remained relatively stable in the first quarter.

While the pandemic appears to be abating, and we are optimistic about the future, new leasing has been slow to recover and will likely continue to lag due to delayed return-to-the office plans and decision-making related to future office utilization.

We expect this lag to continue to impact our occupancy levels through 2022.

We have seen an increase in the number of employees returning to the office, with parking revenue in our commercial portfolio at approximately 65% of pre-pandemic levels of approximately $30 million annually, at our share.

Our multifamily portfolio has seen an improvement in occupancy as residents continue to return to urban environments, offices reinstate in-person mandates, and cities repopulate.

Although asking rents in our portfolio ended the quarter above pre-pandemic levels, average in-place rents ended the quarter approximately 8.5% below asking rents.

We expect in-place rents to increase as leases roll, resulting in incremental multifamily NOI growth.

Operating Results

Key highlights for the three and nine months ended September 30, 2021 included:

● net income attributable to common shareholders of $893,000, or $0.00 per diluted common share, for the three months ended September 30, 2021 compared to a net loss attributable to common shareholders of $22.8 million, or $0.18 per

diluted common share, for the three months ended September 30, 2020.

Net loss attributable to common shareholders of $22.8 million, or $0.18 per diluted common share, for the nine months ended September 30, 2021 compared to $16.6 million, or $0.14 per diluted common share, for the nine months ended September 30, 2020;

● third-party real estate services revenue, including reimbursements, of $25.8 million and $90.7 million for the three and nine months ended September 30, 2021 compared to $27.0 million and $83.9 million for the three and nine months ended September 30, 2020;

● operating commercial portfolio leased and occupied percentages at our share of 84.9% and 82.6% as of September 30, 2021 compared to 85.9% and 84.4% as of June 30, 2021, and 88.4% and 85.3% as of September 30, 2020;

● operating multifamily portfolio leased and occupied percentages at our share of 92.9% and 90.2% as of September 30, 2021 compared to 91.6% and 86.3% as of June 30, 2021, and 83.0% and 76.6% as of September 30, 2020.

The in-service operating multifamily portfolio was 95.1% leased and 92.1% occupied as of September 30, 2021, compared to 95.0% leased and 89.8% occupied as of June 30, 2021, and 92.8% leased and 88.1% occupied as of September 30, 2020;

● the leasing of 159,000 square feet, or 126,000 square feet at our share, at an initial rent (1) of $44.82 per square foot and a GAAP-basis weighted average rent per square foot (2) of $45.87 for the three months ended September 30, 2021, and the leasing of 1.2 million square feet on a consolidated basis and at our share, at an initial rent (1) of $46.04 per square foot and a GAAP-basis weighted average rent per square foot (2) of $45.43 for the nine months ended September 30, 2021;

● same store (3) NOI of $72.7 million for the three months ended September 30, 2021 was unchanged compared to the three months ended September 30, 2020, and a decrease in same store (3) NOI of 3.3% to $223.3 million for the nine months ended September 30, 2021 compared to $231.0 million for the nine months ended September 30, 2020.

Key highlights for the three months ended March 31, 2022 included:

● net loss attributable to common shareholders of $32,000, or $0.00 per diluted common share, for 2022 compared to $20.7 million, or $0.16 per diluted common share, for 2021;

● third-party real estate services revenue, including reimbursements, of $24.0 million for 2022 compared to $38.1 million for 2021;

● operating commercial portfolio leased and occupied percentages at our share of 85.2% and 83.3% as of March 31, 2022 compared to 84.9% and 82.9% as of December 31, 2021, and 87.3% and 86.9% as of March 31, 2021;

● operating multifamily portfolio leased and occupied percentages (1) at our share of 94.1% and 91.6% as of March 31, 2022 compared to 93.6% and 91.8% as of December 31, 2021, and 91.5% and 86.6% as of March 31, 2021.

The in-service operating multifamily portfolio leased and occupied percentages at our share of 95.5% and 92.9% as of March 31, 2022, compared to 95.4% and 93.4% as of December 31, 2021, and 92.9% and 89.2% as of March 31, 2021;

● the leasing of 210,000 square feet at our share, at an initial rent (2) of $53.78 per square foot and a GAAP-basis weighted average rent per square foot (3) of $53.49 for 2022;

● an increase in same store (4) NOI of 12.0% to $88.5 million for the three months ended March 31, 2022 compared to $79.0 million for the three months ended March 31, 2021.

Clark Street - Residential and 900 W Street are excluded from leased and occupied percentages as they are operated as short-term rental properties

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

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

(3) Includes the results of the properties that are owned, operated and in-service for the entirety of both periods being compared, which excludes properties for which significant redevelopment, renovation or repositioning occurred during either of the periods being compared.

Additionally, investing and financing activity during the nine months ended September 30, 2021 included:

● the lease of 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.

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

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.

See Note 5 to the financial statements for additional information;

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

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.

See Note 4 to the financial statements for additional information;

● recognition of an aggregate gain of $28.3 million from the sale of various assets by our unconsolidated real estate ventures.

(4) Includes the results of the properties that are owned, operated and in-service for the entirety of both periods being compared except for properties for which significant redevelopment, renovation or repositioning occurred during either of the periods being compared.

Additionally, investing and financing activity during the three months ended March 31, 2022 included:

● the sale of a development parcel for a gross sales price of $3.3 million.

See Note 3 to the financial statements for additional information;

● the execution of an agreement to acquire The Batley, a 432-unit multifamily asset in the Union Market submarket of Washington, D.C., for a purchase price of approximately $205 million, which we intend to use as a replacement property in a like-kind exchange for the proceeds from the sale of Pen Place to Amazon.

● recognition of an aggregate gain of $5.2 million from the sale of various assets by one of our unconsolidated real estate ventures.

See Note 4 to the financial statements for additional information;

● a new mortgage loan with a principal balance of $85.0 million, collateralized by 1225 S.

Clark Street.

The mortgage loan has a seven-year term and an interest rate of LIBOR plus 1.60% per annum;

● the payment of dividends to our common shareholders totaling $88.9 million and distributions to our noncontrolling interests of $13.7 million;

● the repurchase and retirement of 2.9 million of our common shares for $88.1 million, an average purchase price of $29.99 per share;

● the sale of investments in equity securities, which had been carried at cost, resulting in a realized gain of $13.9 million;

● the amendment of a $200.0 million unsecured term loan, originally maturing in January 2023, 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 1.15% to SOFR plus 1.75%, varying based on a ratio of our total outstanding indebtedness to a valuation of certain real property and assets;

● the payment of dividends totaling $28.7 million and distributions to our redeemable noncontrolling interests of $4.0 million;

● the repurchase and retirement of 3.3 million of our common shares for $93.1 million, a weighted average purchase price per share of $27.86;

● the investment of $52.7 million in development, construction in progress and real estate additions.

Activity subsequent to September 30, 2021 included:

● the declaration of a quarterly dividend of $0.225 per common share, payable on November 24, 2021 to shareholders of record as of November 10, 2021.

Critical Accounting Policies and Estimates

Our Annual Report on Form 10-K for the year ended December 31, 2020 contains a description of our critical accounting policies, including asset acquisitions and business combinations, real estate, investments in real estate ventures, revenue recognition and share-based compensation.

There have been no significant changes to our policies during the nine months ended September 30, 2021.

Activity subsequent to March 31, 2022 included:

● the sale of the Universal Buildings for a gross sales price of $228.0 million;

● the formation of an unconsolidated real estate venture with affiliates of Fortress Investment Group LLC to recapitalize a 1.6 million square foot office portfolio and land parcels for a gross sales price of $580.0 million comprising four wholly owned commercial assets (7200 Wisconsin Avenue, 1730 M Street, RTC-West/RTC-West Trophy Office/RTC-West Land and Courthouse Plaza 1 and 2).

See Note 3 to the financial statements for additional information;

● the repurchase and retirement of 707,000 common shares for $19.4 million, a weighted average purchase price per share of $27.39, pursuant to a repurchase plan under Rule 10b5-1 of the Securities Exchange Act of 1934, as amended;

● repaid $210.0 million on our revolving credit facility;

● the declaration of a quarterly dividend of $0.225 per common share, payable on May 27, 2022 to shareholders of record as of May 13, 2022.

Critical Accounting Estimates

Our Annual Report contains a description of our critical accounting estimates, including asset acquisitions, real estate, investments in real estate ventures and revenue recognition.

There have been no significant changes to our policies during the three months ended March 31, 2022.

Recent Accounting Pronouncements

1 unchanged sentence

Results of Operations

In January 2020, we sold Metropolitan Park.

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

In April 2021, we contributed Potomac Yard Landbay G to an unconsolidated real estate venture.

Comparison of the Three Months Ended September 30, 2021 to 2020

The following summarizes certain line items from our statements of operations that we believe are important in understanding our operations and/or those items which significantly changed in the three months ended September 30, 2021 compared to the same period in 2020:

Three Months Ended September 30,

Comparison of the Three Months Ended March 31, 2022 to 2021

The following summarizes certain line items from our statements of operations that we believe are important in understanding our operations and/or those items which significantly changed in the three months ended March 31, 2022 compared to the same period in 2021:

Three Months Ended March 31,

(Dollars in thousands)

10 unchanged sentences

Income (loss) from unconsolidated real estate ventures, net

Interest and other income, net

Interest expense

1 unchanged sentence

Property rental revenue increased by approximately $9.4 million, or 7.7%, to $131.6 million in 2022 from $122.2 million in 2021.

The increase was primarily due to (i) a $5.1 million increase related to the deferral of rent and the write-off of deferred rent receivables for tenants that were placed on the cash basis of accounting in 2020 and a decrease in uncollectable operating lease receivables attributable to COVID-19 in 2021, (ii) a $4.7 million increase related to 4747 Bethesda Avenue,

West Half, The Wren, 900 W Street and 901 W Street as these properties placed additional space into service, (iii) a $2.6 million increase related to 1770 Crystal Drive, which was placed into service in the fourth quarter of 2020, and (iv) a $1.8 million increase related to the commencement of the lease with Amazon at 2100 Crystal Drive.

The increase in property rental revenue was partially offset by a $6.4 million decrease related to lower occupancy at the Universal Buildings, 2011 Crystal Drive, 2101 L Street and RTC-West.

The increase was primarily due to (i) a $4.5 million increase related to higher occupancy at several recently developed properties (4747 Bethesda Avenue, West Half, The Wren, 900 W Street and 901 W Street), (ii) a $2.8 million increase related to the commencement of a lease with Amazon at 2100 Crystal Drive, (iii) a $2.8 million increase related to The Batley, which we acquired in November 2021 and (iv) a $1.7 million increase due to cash basis tenants paying previously deferred rent in 2022 and to a decrease in uncollectible operating lease receivables.

The increase in property rental revenue was partially offset by a $2.1 million decrease related to lower occupancy at the Universal Buildings.

Third-party real estate services revenue, including reimbursements, decreased by approximately $14.1 million, or 37.1%, to $24.0 million in 2022 from $38.1 million in 2021.

The decrease was primarily due to a $2.0 million decrease in reimbursements revenue, a $705,000 decrease in other service revenue and a $584,000 decrease in construction management fees, partially offset by a $1.4 million increase in development fee revenue primarily related to the timing of development projects and a $736,000 increase in leasing fees.

Depreciation and amortization expense increased by approximately $245,000, or 0.4%, to $56.7 million in 2021 from $56.5 million in 2020.

The increase was primarily due to (i) a $1.9 million increase related to 2345 Crystal Drive due to an increase in tenant improvements, (ii) a $1.7 million increase related to 4747 Bethesda Avenue, West Half, The Wren, 900 W Street and 901 W Street as these properties placed additional space into service, and (iii) a $924,000 increase due to 1770 Crystal Drive being placed into service.

The increase in depreciation and amortization expense was partially offset by a $4.0 million decrease related to 2000 South Bell Street and 2001 South Bell Street as we commenced construction on two new buildings in 2021.

The decrease was primarily due to a $10.7 million decrease in development fees related to the timing of development projects and a $2.9 million decrease in reimbursement revenue due to the termination of a management agreement.

Depreciation and amortization expense decreased by approximately $6.7 million, or 10.3%, to $58.1 million in 2022 from $64.7 million in 2021.

The decrease was primarily due to a $12.1 million decrease related to the Universal Buildings, RTC-West, 7200 Wisconsin Avenue and 2345 Crystal Drive primarily due to the amortization and disposal of certain tenant improvements in 2021.

The decrease in depreciation and amortization expense was partially offset by a $4.3 million increase related to The Batley.

Property operating expense increased by approximately $5.9 million, or 17.0%, to $40.6 million in 2022 from $34.7 million in 2021.

The increase was primarily due to (i) a $1.2 million increase related to 2451 Crystal Drive for costs incurred for construction management services provided to tenants, (ii) an $885,000 increase related to 4747 Bethesda Avenue, West Half, The Wren, 900 W Street and 901 W Street as these properties placed additional space into service, (iii) a $576,000 increase due to 1770 Crystal Drive being placed into service and (iv) $535,000 related to 2221 South Clark Street due to higher operating expenses.

The increase in property operating expense was partially offset by a $1.5 million decrease related to 1901 South Bell Street due to costs incurred in 2020 for construction management services provided to tenants.

Real estate tax expense increased by approximately $905,000, or 5.2%, to $18.3 million in 2021 from $17.4 million in 2020.

The increase was primarily due to a $548,000 increase related to 4747 Bethesda Avenue and The Wren as these properties placed additional space into service, and a $543,000 increase related to 5 M Street Southwest due to an increase in its applicable tax rate in 2021.

The increase was primarily due to (i) a $1.7 million increase related to technology initiatives in National Landing, (ii) an $879,000 increase related to The Batley, (iii) a $614,000 increase related to higher occupancy at several recently developed properties (4747 Bethesda Avenue, West Half, The Wren and 900 W Street), (iv) a $555,000 increase related to 2451 Crystal Drive due to costs incurred for construction management services provided to tenants, (v) a $524,000 increase related to 2221 S.

Clark Street – Residential due to higher property management and other operating expenses and (vi) a

$512,000 increase related to higher operating costs associated with the commencement of a lease with Amazon at 2100 Crystal Drive.

Real estate tax expense decreased by approximately $124,000, or 0.7%, to $18.2 million in 2022 from $18.3 million in 2021.

The decrease was primarily due to a decrease in real estate tax assessments for various properties throughout our portfolio, partially offset by a $179,000 increase related to The Batley.

General and administrative expense:

corporate and other increased by approximately $3.3 million, or 26.8%, to $15.8 million in 2022 from $12.5 million in 2021.

The increase was primarily due to a decrease in capitalizable payroll costs related to development projects.

The increase was primarily due to an increase in compensation expense.

General and administrative expense:

third-party real estate services decreased by approximately $1.9 million, or 6.5%, to $27.0 million in 2022 from $28.9 million in 2021.

The decrease was primarily due to a decrease in reimbursable expenses.

The decrease was primarily due to a decrease in reimbursable expenses, partially offset by an increase in compensation expense.

General and administrative expense:

1 unchanged sentence

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

Transaction and other costs of $3.0 million in 2021 primarily included $1.4 million of demolition costs related to 2000 South Bell Street and 2001 South Bell Street and $1.4 million of expenses related to completed, potential and pursued transactions.

Transaction and other costs of $845,000 in 2020 consisted of $406,000 of integration and severance costs, $260,000 of expenses related to completed, potential and pursued transactions, and $179,000 of demolition costs related to 223 23rd Street and 2300 Crystal Drive.

Income from unconsolidated real estate ventures increased by approximately $21.5 million to $20.5 million for 2021 from a loss of $965,000 in 2020.

The increase was primarily due to the recognition of our proportionate share of the gain from the sale of 500 L'Enfant Plaza of $23.1 million.

The increase in income from unconsolidated real estate ventures was

partially offset by a $1.4 million impairment of our investment in an unconsolidated real estate venture due to a decrease in the value of the underlying asset.

Interest expense increased by approximately $358,000, or 2.1%, to $17.2 million in 2021 from $16.9 million in 2020.

The increase was primarily due to a $1.3 million decrease in capitalized interest primarily due to the placing of additional space into service at 4747 Bethesda Avenue, West Half, The Wren, 901 W Street and 1770 Crystal Drive, and a $293,000 increase due to a new mortgage loan at 1225 S.

Transaction and other costs of $899,000 in 2022 primarily included $732,000 of expenses related to completed, potential and pursued transactions, and $145,000 of integration and severance costs.

Transaction and other costs of $3.7 million in 2021 primarily included $2.4 million of expenses related to completed, potential and pursued transactions, and $1.0 million of demolition costs related to 2000/2001 South Bell Street.

Income from unconsolidated real estate ventures increased by approximately $4.1 million, or 433.5%, to $3.1 million for 2022 from a loss of $943,000 in 2021.

The increase was primarily due to the recognition of our proportionate gain totaling $5.2 million from the sale of various assets.

Interest and other income of $14.2 million in 2022 was primarily related to a realized gain of $13.9 million from the sale of investments in equity securities, which had been carried at cost.

Interest expense decreased by approximately $18,000, or 0.1%, to $16.3 million in 2022.

The decrease in interest expense was due to a $3.2 million change in the fair value of our interest rate caps due to rising interest rates.

The decrease in interest expense was partially offset by (i) a $1.4 million increase at Courthouse Plaza 1 and 2 due to a ground lease amendment in December 2021, which resulted in the ground lease being treated as a finance lease, (ii) an $894,000 increase related to our revolving credit facility as we drew on the revolver in November 2021 and (iii) an $830,000 increase due to new mortgage loans entered into in 2021 at 1225 S.

Clark Street and 1215 S.

Clark Street.

The increase in interest expense was partially offset by a $1.2 million decrease related to the repayment of a mortgage loan at WestEnd25 in 2020.

Comparison of the Nine Months Ended September 30, 2021 to 2020

The following summarizes certain line items from our statements of operations that we believe are important in understanding our operations and/or those items which significantly changed in the nine months ended September 30, 2021 compared to the same period in 2020:

Nine Months Ended September 30,

(Dollars in thousands)

Property rental revenue

Third-party real estate services revenue, including reimbursements

Depreciation and amortization expense

Property operating expense

Real estate taxes expense

General and administrative expense:

Corporate and other

Third-party real estate services

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

Transaction and other costs

Income (loss) from unconsolidated real estate ventures, net

Interest expense

Gain on sale of real estate

Property rental revenue increased by approximately $16.4 million, or 4.6%, to $371.0 million in 2021 from $354.5 million in 2020.

The increase was primarily due to (i) a $12.8 million increase related to 4747 Bethesda Avenue, West Half, The Wren, 900 W Street and 901 W Street as these properties placed additional space into service, (ii) an $11.1 million increase due to the deferral of rent and the write-off of deferred rent receivable for tenants that were placed on the cash basis of accounting in 2020 and a decrease in uncollectable operating lease receivables attributable to COVID-19, (iii) a $7.4 million increase related to 1770 Crystal Drive, which was placed into service in the fourth quarter of 2020, (iv) a $3.9 million increase related to 1225 S.

Clark Street due to the commencement of a lease and (v) a $3.2 million increase related to the additional space leased by Amazon at 2345 Crystal Drive.

The increase in property rental revenue was partially offset by (i) a $14.1 million decrease related to lower occupancy at the Universal Buildings, 2011 Crystal Drive, 2101 L Street and RTC-West, (ii) a $4.2 million decrease related to RiverHouse Apartments and The Bartlett due to increased rent concessions and lower market rents, and (iii) a $3.4 million decrease related to 1901 South Bell Street due to tenant reimbursements for construction services in 2020.

Third-party real estate services revenue, including reimbursements, increased by approximately $6.8 million, or 8.1%, to $90.7 million in 2021 from $83.9 million in 2020.

The increase was primarily due to a $14.2 million increase in development fees related to the timing of development projects.

The increase in third-party real estate services revenue was partially offset by a $3.8 million decrease in reimbursements revenue, a $1.7 million decrease in property and asset management fees due to the sale of assets within the JBG Legacy Funds and a $1.7 million decrease in construction management fees due to the timing of construction projects.

Depreciation and amortization expense increased by approximately $20.5 million, or 13.0%, to $178.1 million in 2021 from $157.6 million in 2020.

The increase was primarily due to (i) an $8.1 million increase related to 4747 Bethesda Avenue, West Half, The Wren, 900 W Street and 901 W Street as these properties placed additional space into service, (ii) a $6.8 million increase related to the Universal Buildings due to the write-off of certain tenant improvements, (iii) a $6.0 million increase related to 2345 Crystal Drive due to an increase in tenant improvements, (iv) a $2.5 million increase due to 1770

Crystal Drive being placed into service, (v) a $1.5 million increase related to 1550 Crystal Drive as additional space was placed into service and (vi) a $1.3 million increase related to RTC-West due to the acceleration of depreciation of certain assets.

The increase in depreciation and amortization expense was partially offset by a $5.1 million decrease related to 2000 South Bell Street and 2001 South Bell Street as we commenced construction on two new buildings in 2021.

Property operating expense increased by approximately $4.1 million, or 3.8%, to $109.9 million in 2021 from $105.9 million in 2020.

The increase was primarily due to (i) a $3.3 million increase related to 4747 Bethesda Avenue, West Half, The Wren, 900 W Street and 901 W Street as these properties placed additional space into service, (ii) a $2.8 million increase related to 2451 Crystal Drive due to costs incurred for construction management services provided to tenants, (iii) a $1.4 million increase due to 1770 Crystal Drive being placed into service and (iv) an $832,000 increase at Courthouse Plaza 1 and 2 related to ground rent expense.

The increase in property operating expense was partially offset by a $4.3 million decrease related to 1901 South Bell Street due to costs incurred in 2020 for construction management services provided to tenants.

Real estate tax expense increased by approximately $1.7 million, or 3.2%, to $55.1 million in 2021 from $53.4 million in 2020.

The increase was primarily due to (i) a $1.8 million increase at 4747 Bethesda Avenue, West Half, The Wren, 900 W Street and 901 W Street as these properties placed additional space into service, (ii) a $701,000 increase related to 5 M Street Southwest due to an increase in its applicable tax rate in 2021 and (iii) an increase of $533,000 due to 1770 Crystal Drive being placed into service.

The increase in real estate tax expense was partially offset by a decrease in real estate tax assessments for various properties located in National Landing.

General and administrative expense:

corporate and other increased by approximately $997,000, or 2.7%, to $38.5 million in 2021 from $37.5 million in 2020.

The increase was primarily due to a decrease in capitalizable payroll costs related to development projects.

General and administrative expense:

third-party real estate services decreased by approximately $6.2 million, or 7.2%, to $80.0 million in 2021 from $86.3 million in 2020.

This decrease was primarily due to a decrease in reimbursable expenses and a decrease in share-based compensation expense.

General and administrative expense:

share-based compensation related to Formation Transaction and special equity awards decreased by approximately $12.6 million, or 49.4%, to $12.9 million in 2021 from $25.4 million in 2020.

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

Transaction and other costs of $8.9 million in 2021 consisted of $5.4 million of expenses related to completed, potential and pursued transactions, $2.9 million of demolition costs related to 2000 South Bell Street and 2001 South Bell Street and $616,000 of integration and severance costs.

Transaction and other costs of $7.5 million in 2020 primarily included $4.0 million of costs related to a charitable commitment to the Washington Housing Conservancy, a non-profit that acquires and owns affordable workforce housing in the Washington, D.C.

metropolitan area, and $3.1 million of integration and severance costs.

Income from unconsolidated real estate ventures increased by approximately $40.7 million, or 237.2%, to $23.5 million for 2021 from a loss of $17.1 million in 2020.

The increase was primarily due to (i) the recognition of our proportionate share of the gain from the sale of various assets totaling $28.3 million as compared to a $3.0 million loss from the sale of Woodglen in 2020 and (ii) a $6.5 million impairment charge recognized in 2020 related to our investment in a venture that owned The Marriott Wardman Park hotel, and $2.7 million for losses incurred from its COVID-19 related closure.

The increase in income from unconsolidated real estate ventures was partially offset by a $1.4 million impairment of our investment in an unconsolidated real estate venture due to a decrease in the value of the underlying asset.

Interest expense increased by approximately $5.7 million, or 12.7%, to $50.3 million in 2021 from $44.7 million in 2020.

The increase was primarily due to a $6.7 million decrease in capitalized interest primarily due to the placing of additional space into service at 4747 Bethesda Avenue, West Half, The Wren, 901 W Street and 1770 Crystal Drive and a $5.7 million increase due to new mortgage loans entered into in 2020 at 1221 Van Street, The Bartlett and 220 20 th Street.

The increase was also due to higher average outstanding balances under our unsecured term loans.

The increase in interest expense was

partially offset by a lower outstanding balance under our revolving credit facility and a $3.6 million decrease related to the repayment of a mortgage loan at WestEnd25 in 2020.

Gain on the sale of real estate of $11.3 million in 2021 was based on the cash received and the remeasurement of our retained interest in the land we contributed to one of our unconsolidated real estate ventures.

See Note 4 to the financial statements for additional information.

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

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

3 unchanged sentences

FFO may not be comparable to similarly titled measures used by other companies.

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

Three Months Ended September 30,

Nine Months Ended September 30,

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

Three Months Ended March 31,

(In thousands)

Net income (loss) attributable to common shareholders

Net loss attributable to common shareholders

Net income (loss) attributable to redeemable noncontrolling interests

Net loss attributable to noncontrolling interests

Net income (loss)

Gain on sale of real estate

(Gain) loss on sale of unconsolidated real estate assets

Loss on the sale of real estate

Gain on the sale of unconsolidated real estate assets

Real estate depreciation and amortization

Impairment of investments in unconsolidated real estate ventures (1)

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

3 unchanged sentences

FFO attributable to common shareholders

(1) Related to decreases in the value of the underlying assets.

NOI and Same Store NOI

1 unchanged sentence

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

of free rent and payments associated with assumed lease liabilities) less operating expenses and ground rent, if applicable.

We use NOI internally as a performance measure and believe NOI provides useful information to investors regarding our financial condition and results of operations because it reflects only property related revenue (which includes base rent, tenant reimbursements and other operating revenue, net of free rent and payments associated with assumed lease liabilities) less operating expenses and ground rent for operating leases, if applicable.

NOI also excludes deferred rent, related party management fees, interest expense, and certain other non-cash adjustments, including the accretion of acquired below-market leases and the amortization of acquired above-market leases and below-market ground lease intangibles.

3 unchanged sentences

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

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

NOI should not be considered as an alternative to net income (loss) attributable to common shareholders as an indication of our performance or to cash flows as a measure of liquidity or our ability to make distributions.

During the three months ended September 30, 2021, our same store pool decreased to 55 properties from 56 properties due to the exclusion of 500 L'Enfant Plaza, which was sold by an unconsolidated real estate venture during the period.

During the nine months ended September 30, 2021, our same store pool increased from 52 properties to 55 properties due to the inclusion of 1800 South Bell Street, F1RST Residences, 1221 Van Street and the commercial portion of 2221 S.

Clark Street, and the exclusion of Fairway Apartments, which was sold during the period.

Information provided on a same store basis includes the results of properties that are owned, operated and in-service for the entirety of both periods being compared, which excludes properties for which significant redevelopment, renovation or repositioning occurred during either of the periods being compared.

During the three months ended March 31, 2022, our same store pool increased to 59 properties from 55 properties due to the inclusion of West Half, 901 W Street, 900 W Street 1770 Crystal Drive, 1900 N Street and 4747 Bethesda Avenue, and the exclusion of The Alaire and The Terano, which were sold during the period.

While there is judgment surrounding changes in designations, a property is removed from the same store pool when the property is considered to be under-construction because it is undergoing significant redevelopment or renovation pursuant to a formal plan or is being repositioned in the market and such renovation or repositioning is expected to have a significant impact on property NOI.

1 unchanged sentence

Acquisitions are moved into the same store pool once we have owned the property for the entirety of the comparable periods and the property is not under significant development or redevelopment.

Same store NOI remained at $72.7 million for the three months ended September 30, 2021 compared to the same period in 2020.

Same Store NOI was positively impacted by a decrease in uncollectable operating lease receivables and rent deferrals, which was offset by lower occupancy in our commercial portfolio, and lower rents and higher concessions for certain of our multifamily assets.

Same store NOI decreased $7.7 million, or 3.3%, to $223.3 million for the nine months ended September 30, 2021 from $231.0 million for the same period in 2020.

The decrease was substantially attributable to the COVID-19 pandemic, which commenced at the end of the first quarter of 2020, including (i) higher concessions and lower rents in our multifamily portfolio and (ii) lower occupancy and a decline in parking revenue in our commercial portfolio.

These declines were partially offset by a decrease in cleaning expenses across our commercial portfolio.

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

Three Months Ended September 30,

Nine Months Ended September 30,

(Dollars in thousands)

Net income (loss) attributable to common shareholders

Same store NOI increased $9.5 million, or 12.0%, to $88.5 million for the three months ended March 31, 2022 from $79.0 million for the same period in 2021.

The increase was substantially attributable to (i) higher occupancy and rents, and lower concessions in our multifamily portfolio and (ii) cash basis tenants paying previously deferred rent, a decrease in uncollectible operating lease receivables and an increase in parking revenue in our commercial portfolio.

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

Three Months Ended March 31,

Net loss attributable to common shareholders

Depreciation and amortization expense

5 unchanged sentences

Interest expense

Loss on extinguishment of debt

Loss on the extinguishment of debt

Income tax expense (benefit)

5 unchanged sentences

Interest and other income, net

Gain on sale of real estate

Loss on the sale of real estate

Consolidated NOI

17 unchanged sentences

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

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

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

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

2 unchanged sentences

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

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

Three Months Ended September 30,

Nine Months Ended September 30,

(In thousands)

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

Three Months Ended March 31,

Property management fees

8 unchanged sentences

Third-party real estate services revenue less expenses

(1) Estimated development fee revenue totaling $51.2 million as of September 30, 2021 is expected to be recognized over the next six years as unsatisfied performance obligations are completed.

(1) As of March 31, 2022, we had estimated unrecognized development fee revenue totaling $45.2 million, of which $10.4 million, $12.0 million and $6.3 million is expected to be recognized during the remainder of 2022, 2023 and 2024, and $16.5 million is expected to be recognized thereafter through 2027 as unsatisfied performance obligations are completed.

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

See discussion of third-party real estate services revenue, including reimbursements, and third-party real estate services expenses for the three and nine months ended September 30, 2021 in the preceding pages under "Results of Operations."

See discussion of third-party real estate services revenue, including reimbursements, and third-party real estate services expenses for the three months ended March 31, 2022 in the preceding pages under "Results of Operations."

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.

2 unchanged sentences

Consolidated NOI is calculated as property revenue less property expense.

See Note 16 to the financial statements for the reconciliation of net income (loss) attributable to common shareholders to consolidated NOI for the three and nine months ended September 30, 2021 and 2020.

See Note 16 to the financial statements for the reconciliation of net loss attributable to common shareholders to consolidated NOI for the three months ended March 31, 2022 and 2021.

The following is a summary of NOI by segment:

Three Months Ended September 30,

Nine Months Ended September 30,

(In thousands)

Three Months Ended March 31,

Property revenue:

4 unchanged sentences

Consolidated NOI

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

Comparison of the Three Months Ended September 30, 2021 to 2020

Property rental revenue increased by $3.0 million, or 3.2%, to $96.0 million in 2021 from $93.1 million in 2020.

Consolidated NOI increased by $2.7 million, or 4.9%, to $56.9 million in 2021 from $54.2 million in 2020.

The increase in property revenue and consolidated NOI was due to (i) a decline in rent deferrals and uncollectable operating lease receivables related to tenants impacted by COVID-19, (ii) increases related to 1770 Crystal Drive as the property was placed into service, and (iii) increases related to 2100 Crystal Drive, 1225 South Clark Street and 2345 Crystal Drive due to higher occupancy.

These increases were partially offset by a decrease related to the Universal Buildings and 2101 L Street due to lower occupancy.

(1) Includes activity related to future development assets and corporate entities and the elimination of inter-segment activity.

Comparison of the Three Months Ended March 31, 2022 to 2021

Property rental revenue increased by $1.8 million, or 2.0%, to $91.6 million in 2022 from $89.9 million in 2021.

Consolidated NOI increased by $3.3 million, or 26.5%, to $16.0 million in 2021 from $12.6 million in 2020.

The increase in property revenue and consolidated NOI was due to The Wren, 900 W Street, 901 W Street and West Half as these properties placed additional units into service.

These increases were partially offset by lower rents and higher concessions at RiverHouse Apartments and 2221 South Clark Street.

Comparison of the Nine Months Ended September 30, 2021 to 2020

Consolidated NOI decreased by $481,000, or 0.9%, to $53.7 million in 2022 from $54.1 million in 2021.

The increase in property revenue was due to an increase in occupancy at 2100 Crystal Drive, cash basis tenants paying previously deferred rent in 2022, a decrease in uncollectible operating lease receivables and an increase in parking revenue as tenants returned to the office.

The increase in property rental revenue was partially offset by a decrease in occupancy at the Universal Buildings and 2221 South Clark – Office.

The decrease in consolidated NOI was due to higher cleaning expenses as tenants returned to the office and lower occupancy at the Universal Buildings and 2221 South Clark – Office resulting in higher non-reimbursable expenses, partially offset by the increase in property rental revenue.

Property rental revenue increased by $9.6 million, or 29.4%, to $42.2 million in 2022 from $32.7 million in 2021.

Consolidated NOI increased by $8.1 million, or 53.0%, to $23.3 million in 2022 from $15.2 million in 2021.

The increase in property revenue and consolidated NOI was due to (i) a decline in rent deferrals and uncollectable operating lease receivables related to tenants impacted by COVID-19, (ii) increases in revenues related to 4747 Bethesda Avenue and 1770 Crystal Drive as these properties were placed into service, and (iii) increases related to 2100 Crystal Drive, 1225 South Clark Street and 2345 Crystal Drive due to higher occupancy.

These increases were partially offset by a decrease in parking revenue due to reduced transient and office parking and decreases related to the Universal Buildings, 2101 L Street and RTC-West due to lower occupancy.

Property rental revenue increased by $5.5 million, or 5.8%, to $100.6 million in 2021 from $95.1 million in 2020.

Consolidated NOI increased by $125,000, or 0.3%, to $46.9 million in 2021 from $46.8 million in 2020.

The increase in property revenue and consolidated NOI was due to The Wren, 900 W Street, 901 W Street and West Half as these properties placed additional units into service.

These increases were partially offset by lower rents and higher concessions at RiverHouse Apartments and The Bartlett.

The increases in property revenue and consolidated NOI were due to the acquisition of The Batley in November 2021 and higher occupancy and rental rates, and lower operating costs across the portfolio.

The increases in property rental revenue and consolidated NOI were partially offset by a decrease in occupancy at 2221 South Clark – Residential.

Liquidity and Capital Resources

Property rental income is our primary source of operating cash flow and is dependent on many factors including occupancy levels and rental rates, as well as our tenants' ability to pay rent.

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

Our assets provide a relatively consistent level of cash flow that enables us to pay operating expenses, debt service, recurring capital expenditures, dividends to shareholders and distributions to holders of OP Units.

Property rental income is our primary source of operating cash flow and depends on many factors including occupancy levels and rental rates, as well as our tenants' ability to pay rent.

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

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

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

Financing Activities

2 unchanged sentences

Interest Rate (1)

September 30, 2021

March 31, 2022

December 31, 2021

5 unchanged sentences

Mortgages payable, net

(1) Weighted average effective interest rate as of September 30, 2021.

Mortgages payable, net, related to assets held for sale

Mortgages payable, net, including mortgages payable related to assets held for sale

(1) Weighted average effective interest rate as of March 31, 2022.

(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 September 30, 2021, net deferred financing costs related to an unfunded mortgage loan totaling $4.0 million were included in "Other assets, net."

As of September 30, 2021 and December 31, 2020, the net carrying value of real estate collateralizing our mortgages payable totaled $1.8 billion.

(4) As of March 31, 2022 and December 31, 2021, excludes $6.1 million and $6.4 million of net deferred financing costs related to unfunded mortgage loans that were included in "Other assets, net."

As of March 31, 2022 and December 31, 2021, the net carrying value of real estate collateralizing our mortgages payable, including mortgages payable related to assets held for sale, 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.

1 unchanged sentence

See Note 17 to the financial statements for additional information.

In July 2021, we entered into a mortgage loan with a principal balance of $85.0 million, collateralized by 1225 S.

Clark Street.

The mortgage loan has a seven-year term and an interest rate of LIBOR plus 1.60% per annum.

As of September 30, 2021 and December 31, 2020, we had various interest rate swap and cap agreements on certain mortgages payable with an aggregate notional value of $1.3 billion.

As of March 31, 2022 and December 31, 2021, we had various interest rate swap and cap agreements on certain mortgages payable with an aggregate notional value of $1.3 billion.

See Note 15 to the financial statements for additional information.

Credit Facility

As of September 30, 2021 and December 31, 2020, our $1.4 billion credit facility consisted of a $1.0 billion revolving credit facility maturing in January 2025, a $200.0 million unsecured term loan ("Tranche A-1 Term Loan") maturing in January 2023 and a $200.0 million unsecured term loan ("Tranche A-2 Term Loan") maturing in July 2024.

Our $1.4 billion credit facility consists 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 2025 and a $200.0 million unsecured term loan ("Tranche A-2 Term Loan") maturing in July 2024.

Effective as of January 14, 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 SOFR plus 1.15% to SOFR plus 1.75%, varying based on a ratio of our total outstanding indebtedness to a valuation of certain real property and assets.

In connection with the loan amendment, we amended the related 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:

Interest Rate (1)

September 30, 2021

March 31, 2022

December 31, 2021

6 unchanged sentences

Unsecured term loans, net

(1) Effective interest rate as of September 30, 2021.

(2) As of September 30, 2021 and December 31, 2020, letters of credit with an aggregate face amount of $1.4 million and $1.5 million were outstanding under our revolving credit facility.

(3) As of September 30, 2021 and December 31, 2020, net deferred financing costs related to our revolving credit facility totaling $5.4 million and $6.7 million were included in "Other assets, net."

(1) Effective interest rate as of March 31, 2022.

(2) As of March 31, 2022 and December 31, 2021, letters of credit with an aggregate face amount of $467,000 and $911,000 were outstanding under our revolving credit facility.

(3) As of March 31, 2022 and December 31, 2021, excludes $4.6 million and $5.0 million of net deferred financing costs related to our revolving credit facility that were included in "Other assets, net."

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

(5) As of September 30, 2021 and December 31, 2020, the outstanding balance was fixed by interest rate swap agreements.

The interest rate swaps mature concurrently with the respective term loan and provide 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.

Our existing floating rate debt instruments, including our credit facility, with a principal balance totaling $1.6 billion and our hedging arrangements with a notional value totaling $1.7 billion currently use as a reference rate the U.S.

dollar London Interbank Offered Rate ("LIBOR"), and we expect a transition from LIBOR to another reference rate due to plans to phase out the reference rate by the end of 2021, after which point its continuation cannot be assured.

Though an alternative reference rate for LIBOR, the Secured Overnight Financing Rate ("SOFR"), exists, significant uncertainties still remain.

In April 2022, we repaid $210.0 million on our revolving credit facility.

(5) As of March 31, 2022 and December 31, 2021, the outstanding balance was fixed by interest rate swap agreements.

As of March, 31, 2022, the interest rate swaps mature in July 2024, and fix SOFR at a weighted average interest rate of 1.46% for the Tranche A-1 Term Loan and fix LIBOR at a weighted average interest rate of 1.34% for the Tranche A-2 Term Loan.

As of March 31, 2022, we had floating rate debt with a principal balance totaling $1.7 billion and hedging arrangements with a notional value totaling $1.4 billion that use LIBOR as a reference rate, including mortgages payable related to assets held for sale.

On November 30, 2020, the United Kingdom regulator announced its intentions, subject to confirmation following an early December consultation, to cease the publication of the one-week and two-month USD-LIBOR immediately following the December 31, 2021 publications, and the remaining USD-LIBOR tenors immediately following the June 30, 2023 publications.

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

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

3 unchanged sentences

In March 2020, our Board of Trustees authorized the repurchase of up to $500.0 million of our outstanding common shares.

During three and nine months ended September 30, 2021, we repurchased and retired 2.3 million and 2.9 million common shares for $68.9 million and $88.1 million, an average purchase price of $29.73 and $29.99 per share.

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

Since we began the share repurchase program, we have repurchased and retired 6.7 million common shares for $192.9 million, an average purchase price of $28.71 per share.

During the three months ended March 31, 2022, we repurchased and retired 3.3 million common shares for $93.1 million, a weighted average purchase price per share of $27.86.

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

Since we began the share repurchase program, we have repurchased and retired 12.5 million common shares for $355.6 million, a weighted average purchase price per share of $28.45.

In April 2022, we repurchased and retired 707,000 common shares for $19.4 million, a weighted average purchase price per share of $27.39, pursuant to a repurchase plan under Rule 10b5-1 of the Securities Exchange Act of 1934, as amended.

Purchases under the program are made either in the open market or in privately negotiated transactions from time to time as permitted by federal securities laws and other legal requirements.

The timing, manner, price and amount of any repurchases will be determined by us at our discretion and will be subject to economic and market conditions, share price,

applicable legal requirements and other factors.

The timing, manner, price and amount of any repurchases will be determined by us at our discretion and will be subject to economic and market conditions, share price, applicable legal requirements and other factors.

The program may be suspended or discontinued at our discretion without prior notice.

Liquidity Requirements

Our principal liquidity needs for the next 12 months and beyond include:

Material Cash Requirements

Our material cash requirements for the next 12 months and beyond include:

● normal recurring expenses;

● debt service and principal repayment obligations, including balloon payments on maturing debt;

● capital expenditures, including major renovations, tenant improvements and leasing costs;

● development expenditures;

● dividends to shareholders and distributions to holders of OP Units;

● common share repurchases;

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

● debt service and principal repayment obligations, including balloon payments on maturing debt — As of March 31, 2022, we had mortgages payable totaling $107.5 million on a consolidated basis and $194.1 million at our share scheduled to mature in 2022.

In April 2022, we repaid $210.0 million on our revolving credit facility;

● capital expenditures, including major renovations, tenant improvements and leasing costs — As of March 31, 2022, we had committed tenant-related obligations totaling $78.6 million ($73.2 million related to our consolidated entities and $5.4 million related to our unconsolidated real estate ventures at our share);

● development expenditures — As of March 31, 2022, we had assets under construction that will, based on our current plans and estimates, require an additional $569.0 million to complete, which we anticipate will be primarily expended over the next two to three years;

● dividends to shareholders and distributions to holders of OP Units and LTIP Units — On April 29, 2022, our Board of Trustees declared a quarterly dividend of $0.225 per common share;

● common share repurchases — In April 2022, we repurchased and retired 707,000 common shares for $19.4 million;

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

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

● cash and cash equivalent balances;

● cash and cash equivalents — As of March 31, 2022, we had cash and cash equivalents of $189.1 million;

● cash flows from operations;

● distributions from real estate ventures;

● borrowing capacity under our current credit facility — As of March 31, 2022, we had $699.5 million of availability under our credit facility;

● proceeds from financings, recapitalizations and asset sales.

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

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

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

As of September 30, 2021, we had $998.6 million of availability under our credit facility (net of outstanding letters of credit totaling $1.4 million).

As of September 30, 2021, we had no debt on a consolidated basis and at our share scheduled to mature in 2021.

Contractual Obligations and Commitments

During the nine months ended September 30, 2021, there were no material changes to the contractual obligation information presented in Item 7 of Part II of our Annual Report on Form 10-K for the year ended December 31, 2020.

As of September 30, 2021, we had additional capital commitments and certain recorded guarantees to our unconsolidated real estate ventures totaling $66.1 million.

As of September 30, 2021, we had committed tenant-related obligations totaling $76.9 million ($73.6 million related to our consolidated entities and $3.3 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.

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

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

As of September 30, 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 September 30, 2021, our remaining commitment was $8.3 million.

On October 27, 2021, our Board of Trustees declared a quarterly dividend of $0.225 per common share.

During the three months ended March 31, 2022, there were no material changes to the material cash requirements information presented in Item 7 of Part II of our Annual Report.

See additional information in the following pages under "Commitments and Contingencies."

Summary of Cash Flows

The following summary discussion of our cash flows is based on our statements of cash flows and is not meant to be an all-inclusive discussion of the changes in our cash flows:

Nine Months Ended September 30,

Three Months Ended March 31,

(In thousands)

1 unchanged sentence

Net cash used in investing activities

Net cash (used in) provided by financing activities

Cash Flows for the Nine Months Ended September 30, 2021

Cash and cash equivalents, and restricted cash decreased $34.2 million to $229.2 million as of September 30, 2021, compared to $263.3 million as of December 31, 2020.

Net cash used in financing activities

Cash Flows for the Three Months Ended March 31, 2022

Cash and cash equivalents, and restricted cash decreased $82.9 million to $219.2 million as of March 31, 2022, compared to $302.1 million as of December 31, 2021.

This decrease resulted from $119.5 million of net cash used in financing activities and $33.0 million of net cash used in investing activities, partially offset by $69.6 million of net cash provided by operating activities.

Our outstanding debt was $2.1 billion and $2.0 billion as of September 30, 2021 and December 31, 2020.

Our outstanding debt was $2.5 billion as of March 31, 2022 and December 31, 2021.

Net cash provided by operating activities of $69.6 million primarily comprised:

(i) $147.7 million of net income (before $185.4 million of non-cash items and $11.3 million gain on sale of real estate), (ii) $13.2 million of return on capital from unconsolidated real estate ventures and (iii) $6.5 million of net change in operating assets and liabilities.

Non-cash income adjustments of $185.4 million primarily include depreciation and amortization expense, share-based compensation expense, net income from unconsolidated real estate ventures, deferred rent and amortization of lease incentives.

(i) $50.7 million of net income (before $50.6 million of non-cash items and a $136,000 loss on the sale of real estate), (ii) $2.9 million of return on capital from unconsolidated real estate ventures and (iii) $16.0 million of net change in operating assets and liabilities.

Non-cash income adjustments of $50.6 million primarily include depreciation and amortization expense, net income from investments, share-based compensation expense, deferred rent, net income from unconsolidated real estate ventures, amortization of lease incentives and other non-cash items.

Net cash used in investing activities of $33.0 million comprised:

(i) $108.4 million of development costs, construction in progress and real estate additions, (ii) $32.7 million of investments in unconsolidated real estate ventures and other, and (iii) $10.3 million of deposits for real estate and other acquisitions, partially offset by (iv) $40.2 million of distributions of capital from unconsolidated real estate ventures and (v) $14.4 million of proceeds from the sale of real estate.

(i) $52.7 million of development costs, construction in progress and real estate additions and (ii) $7.2 million of investments in unconsolidated real estate ventures and other investments, partially offset by (iii) $17.8 million of proceeds from the sale of investments, (iv) $6.0 million of distributions of capital from unconsolidated real estate ventures and (v) $3.1 million of proceeds from the sale of real estate.

Net cash used in financing activities of $119.5 million primarily comprised:

(i) $88.9 million of dividends paid to common shareholders, (ii) $82.3 million of common shares repurchased, (iii) $13.7 million of distributions to redeemable noncontrolling interests, (iv) $5.7 million of debt issuance costs, and (v) $4.5 million of repayments of mortgages payable, partially offset by (vi) $85.0 million of borrowings under mortgages payable and (vii) $17.5 million of contributions from noncontrolling interests.

Off-Balance Sheet Arrangements

(i) $91.1 million of common shares repurchased, (ii) $28.7 million of dividends paid to common shareholders, (iii) $4.0 million of distributions to our redeemable noncontrolling interests and (iv) $1.2 million of repayments of mortgages payable, partially offset by (v) $6.0 million of contributions from noncontrolling interests.

Unconsolidated Real Estate Ventures

1 unchanged sentence

From time to time, we may have off-balance-sheet unconsolidated real estate ventures and other unconsolidated arrangements with varying structures.

As of September 30, 2021, we have investments in unconsolidated real estate ventures totaling $486.1 million.

As of March 31, 2022, we had investments in unconsolidated real estate ventures totaling $461.4 million.

For these investments, we exercise significant influence over but do not control these entities and, therefore, account for these investments using the equity method of accounting.

5 unchanged sentences

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

As of September 30, 2021, we had additional capital commitments and certain recorded guarantees to our unconsolidated real estate ventures totaling $66.1 million.

As of September 30, 2021, we had no principal payment guarantees related to our unconsolidated real estate ventures.

A reconsideration event could cause us to consolidate an unconsolidated real estate venture in the future or deconsolidate a consolidated entity.

As of March 31, 2022, we had additional capital commitments and certain recorded guarantees to our unconsolidated real estate ventures totaling $68.6 million.

As of March 31, 2022, we had no principal payment guarantees related to our unconsolidated real estate ventures.

We evaluate reconsideration events as we become aware of them.

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

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.

Commitments and Contingencies

6 unchanged sentences

Our debt, consisting of mortgages payable secured by our properties, a revolving credit facility and unsecured term loans, contains customary covenants requiring adequate insurance coverage.

Although we believe that we currently have adequate insurance coverage, we may not be able to obtain an equivalent amount of coverage at reasonable costs in the future.

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 September 30, 2021, we had assets under construction that will, based on our current plans and estimates, require an additional $320.3 million to complete, which we anticipate will be primarily expended over the next three years.

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

The timing and

amounts of payments for tenant-related obligations are uncertain and may only be due upon satisfactory performance of certain conditions.

As of March 31, 2022, we had assets under construction that will, based on our current plans and estimates, require an additional $569.0 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.

As of March 31, 2022, we had committed tenant-related obligations totaling $78.6 million ($73.2 million related to our consolidated entities and $5.4 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.

1 unchanged sentence

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

As of September 30, 2021, the aggregate amount of principal payment guarantees was $8.3 million for our consolidated entities.

As of March 31, 2022, 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

Environmental Matters

3 unchanged sentences

In connection with the ownership and operation of our assets, we may be potentially liable for such costs.

The operations of current and former tenants at our assets have involved, or may have involved, the use of hazardous materials or generated hazardous wastes.

The release of such hazardous materials and wastes could result in us incurring liabilities to remediate any resulting contamination.

The operations of current and former tenants at our assets have involved, or may have involved, the use of hazardous materials or generated hazardous waste.

The release of such hazardous materials and waste could result in us incurring liabilities to remediate any resulting contamination.

The presence of contamination or the failure to remediate contamination at our properties may (i) expose us to third-party liability (e.g., for cleanup costs, natural resource damages, bodily injury or property damage), (ii) subject our properties to liens in favor of the government for damages and costs the government incurs in connection with the contamination, (iii) impose restrictions on the manner in which a property may be used or which businesses may be operated, or (iv) materially adversely affect our ability to sell, lease or develop the real estate or to borrow using the real estate as collateral.

9 unchanged sentences

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

As disclosed in Note 17 to the financial statements, environmental liabilities totaled $18.2 million as of September 30, 2021 and December 31, 2020 and are included in "Other liabilities, net"

As disclosed in Note 17 to the financial statements, environmental liabilities totaled $18.2 million as of March 31, 2022 and December 31, 2021 and are included in "Other liabilities, net"

in our balance sheets.

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis