JBG SMITH Properties 10-Q

ITEM 1. Financial Statements JBG SMITH PROPERTIES Condensed Consolidated Balance Sheets (Unaudited) (In thousands, except par value amounts) ​ ​ ​ ​ ​ ​ ​ ​ ​ September 30, 2022 December 31, 2021 ASSETS ​ ​ Real estate, at cost: ​ ​ Land and improvements ​ $ 1,273,947 ​ $ 1,378,218 Buildings and improvements ​ 4,117,823 ​ 4,513,606 Construction in progress, including land ​ 471,867 ​ 344,652 ​ ​ 5,863,637 ​ 6,236,476 Less: accumulated depreciation ​ ( 1,299,818 ) ​ ( 1,368,003 ) Real estate, net ​ 4,563,819 ​ 4,868,473 Cash and cash equivalents ​ 258,871 ​ 264,356 Restricted cash ​ 212,998 ​ 37,739 Tenant and other receivables ​ 48,221 ​ 44,496 Deferred rent receivable ​ 161,994 ​ 192,265 Investments in unconsolidated real estate ventures ​ 360,846 ​ 462,885 Intangible assets, net ​ ​ 155,812 ​ ​ 201,956 Other assets, net ​ 133,419 ​ 240,160 Assets held for sale ​ — ​ 73,876 TOTAL ASSETS ​ $ 5,895,980 ​ $ 6,386,206 ​ ​ ​ ​ ​ ​ ​ LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS AND EQUITY ​ Liabilities: ​ ​ Mortgages payable, net ​ $ 1,741,605 ​ $ 1,777,699 Revolving credit facility ​ 100,000 ​ 300,000 Unsecured term loans, net ​ 546,888 ​ 398,664 Accounts payable and accrued expenses ​ 130,408 ​ 106,136 Other liabilities, net ​ 98,831 ​ 342,565 Total liabilities ​ 2,617,732 ​ 2,925,064 Commitments and contingencies ​ ​ Redeemable noncontrolling interests ​ 491,479 ​ 522,725 Shareholders' equity: ​ ​ Preferred shares, $ 0.01 par value - 200,000 shares authorized; none issued ​ — ​ — Common shares, $ 0.01 par value - 500,000 shares authorized; 113,764 and 127,378 shares issued and outstanding as of September 30, 2022 and December 31, 2021 ​ 1,138 ​ 1,275 Additional paid-in capital ​ 3,265,659 ​ 3,539,916 Accumulated deficit ​ ( 558,788 ) ​ ( 609,331 ) Accumulated other comprehensive income (loss) ​ 46,870 ​ ( 15,950 ) Total shareholders' equity of JBG SMITH Properties ​ 2,754,879 ​ 2,915,910 Noncontrolling interests ​ 31,890 ​ 22,507 Total equity ​ 2,786,769 ​ 2,938,417 TOTAL LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS AND EQUITY ​ $ 5,895,980 ​ $ 6,386,206 ​ See accompanying notes to the condensed consolidated financial statements (unaudited). ​ 3 Table of Contents JBG SMITH PROPERTIES Condensed Consolidated Statements of Operations (Unaudited) (In thousands, except per share data) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended September 30, ​ Nine Months Ended September 30, ​ 2022 2021 2022 2021 REVENUE ​ ​ ​ ​ ​ Property rental ​ $ 119,811 ​ $ 125,900 ​ $ 368,445 ​ $ 370,960 Third-party real estate services, including reimbursements ​ 21,845 ​ 25,842 ​ 67,972 ​ 90,694 Other revenue ​ 5,958 ​ 5,280 ​ 18,667 ​ 15,301 Total revenue ​ 147,614 ​ 157,022 ​ 455,084 ​ 476,955 EXPENSES ​ ​ ​ ​ ​ Depreciation and amortization ​ 50,056 ​ 56,726 ​ 157,597 ​ 178,130 Property operating ​ 36,380 ​ 40,198 ​ 112,469 ​ 109,929 Real estate taxes ​ 14,738 ​ 18,259 ​ 47,870 ​ 55,127 General and administrative: ​ ​ ​ ​ ​ Corporate and other ​ 12,072 ​ 12,105 ​ 42,669 ​ 38,475 Third-party real estate services ​ 21,230 ​ 25,542 ​ 72,422 ​ 80,035 Share-based compensation related to Formation Transaction and special equity awards ​ 548 ​ 3,480 ​ 4,369 ​ 12,866 Transaction and other costs ​ 1,746 ​ 2,951 ​ 4,632 ​ 8,911 Total expenses ​ 136,770 ​ 159,261 ​ 442,028 ​ 483,473 OTHER INCOME (EXPENSE) ​ ​ ​ ​ Income (loss) from unconsolidated real estate ventures, net ​ ( 13,867 ) ​ 20,503 ​ ( 12,829 ) ​ 23,513 Interest and other income, net ​ 984 ​ 192 ​ 16,902 ​ 163 Interest expense ​ ( 17,932 ) ​ ( 17,243 ) ​ ( 50,251 ) ​ ( 50,312 ) Gain on the sale of real estate, net ​ — ​ — ​ 158,631 ​ 11,290 Loss on the extinguishment of debt ​ ( 1,444 ) ​ — ​ ( 3,073 ) ​ — Total other income (expense) ​ ( 32,259 ) ​ 3,452 ​ 109,380 ​ ( 15,346 ) INCOME (LOSS) BEFORE INCOME TAX EXPENSE ​ ( 21,415 ) ​ ​ 1,213 ​ 122,436 ​ ( 21,864 ) Income tax expense ​ ( 166 ) ​ ( 217 ) ​ ( 2,600 ) ​ ( 4,527 ) NET INCOME (LOSS) ​ ( 21,581 ) ​ 996 ​ 119,836 ​ ( 26,391 ) Net (income) loss attributable to redeemable noncontrolling interests ​ 2,546 ​ ( 103 ) ​ ( 15,712 ) ​ 2,472 Net (income) loss attributable to noncontrolling interests ​ ( 258 ) ​ — ​ ( 174 ) ​ 1,108 NET INCOME (LOSS) ATTRIBUTABLE TO COMMON SHAREHOLDERS ​ $ ( 19,293 ) ​ $ 893 ​ $ 103,950 ​ $ ( 22,811 ) EARNINGS (LOSS) PER COMMON SHARE - BASIC AND DILUTED ​ $ ( 0.17 ) ​ $ 0.00 ​ $ 0.86 ​ $ ( 0.18 ) WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING - BASIC AND DILUTED ​ 114,360 ​ 131,351 ​ 120,741 ​ 131,456 ​ See accompanying notes to the condensed consolidated financial statements (unaudited). ​ 4 Table of Contents JBG SMITH PROPERTIES Condensed Consolidated Statements of Comprehensive Income (Loss) (Unaudited) (In thousands) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended September 30, ​ Nine Months Ended September 30, ​ 2022 2021 2022 2021 NET INCOME (LOSS) ​ $ ( 21,581 ) ​ $ 996 ​ $ 119,836 ​ $ ( 26,391 ) OTHER COMPREHENSIVE INCOME: ​ ​ ​ ​ Change in fair value of derivative financial instruments ​ 32,939 ​ ( 329 ) ​ 65,259 ​ 4,678 Reclassification of net (income) loss on derivative financial instruments from accumulated other comprehensive income (loss) into interest expense ​ ( 333 ) ​ 3,901 ​ 6,214 ​ 11,476 Total other comprehensive income ​ 32,606 ​ 3,572 ​ 71,473 ​ 16,154 COMPREHENSIVE INCOME (LOSS) ​ 11,025 ​ 4,568 ​ 191,309 ​ ( 10,237 ) Net (income) loss attributable to redeemable noncontrolling interests ​ 2,546 ​ ( 103 ) ​ ( 15,712 ) ​ 2,472 Net (income) loss attributable to noncontrolling interests ​ ​ ( 258 ) ​ ​ — ​ ​ ( 174 ) ​ ​ 1,108 Other comprehensive income attributable to redeemable noncontrolling interests ​ ( 4,376 ) ​ ( 413 ) ​ ( 8,653 ) ​ ( 1,621 ) COMPREHENSIVE INCOME (LOSS) ATTRIBUTABLE TO JBG SMITH PROPERTIES ​ $ 8,937 ​ $ 4,052 ​ $ 166,770 ​ $ ( 8,278 ) ​ See accompanying notes to the condensed consolidated financial statements (unaudited). ​ 5 Table of Contents JBG SMITH PROPERTIES Condensed Consolidated Statements of Equity (Unaudited) (In thousands) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Accumulated ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Other ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Additional ​ ​ ​ ​ Comprehensive ​ ​ ​ ​ ​ ​ ​ Common Shares ​ Paid-In ​ Accumulated Income ​ Noncontrolling ​ Total ​ ​ Shares ​ Amount ​ Capital ​ Deficit (Loss) ​ Interests ​ Equity BALANCE AS OF JUNE 30, 2022 115,862 ​ $ 1,160 ​ $ 3,285,511 ​ $ ( 513,746 ) ​ $ 18,640 ​ $ 31,640 ​ $ 2,823,205 Net income (loss) attributable to common shareholders and noncontrolling interests — ​ — ​ — ​ ( 19,293 ) ​ — ​ 258 ​ ( 19,035 ) Conversion of common limited partnership units ("OP Units") to common shares 213 ​ 2 ​ 4,889 ​ — ​ — ​ — ​ 4,891 Common shares repurchased ​ ( 2,311 ) ​ ​ ( 24 ) ​ ​ ( 53,979 ) ​ ​ — ​ ​ — ​ ​ — ​ ​ ( 54,003 ) Common shares issued pursuant to employee incentive compensation plan and Employee Share Purchase Plan ("ESPP") ​ — ​ ​ — ​ ​ 377 ​ ​ — ​ ​ — ​ ​ — ​ ​ 377 Dividends declared on common shares ($ 0.225 per common share) ​ — ​ ​ — ​ ​ — ​ ​ ( 25,749 ) ​ ​ — ​ ​ — ​ ​ ( 25,749 ) Distributions to noncontrolling interests, net — ​ — ​ — ​ — ​ — ​ ( 8 ) ​ ( 8 ) Redeemable noncontrolling interests redemption value adjustment and total other comprehensive income allocation — ​ — ​ 28,861 ​ — ​ ( 4,376 ) ​ — ​ 24,485 Total other comprehensive income — ​ — ​ — ​ — ​ 32,606 ​ — ​ 32,606 BALANCE AS OF SEPTEMBER 30, 2022 113,764 ​ $ 1,138 ​ $ 3,265,659 ​ $ ( 558,788 ) ​ $ 46,870 ​ $ 31,890 ​ $ 2,786,769 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ BALANCE AS OF JUNE 30, 2021 131,841 ​ $ 1,319 ​ $ 3,650,217 ​ $ ( 466,230 ) ​ $ ( 28,605 ) ​ $ 16,540 ​ $ 3,173,241 Net income attributable to common shareholders and noncontrolling interests — ​ — ​ — ​ 893 ​ — ​ — ​ 893 Conversion of OP Units to common shares 180 ​ 2 ​ 5,668 ​ — ​ — ​ — ​ 5,670 Common shares repurchased ​ ( 2,317 ) ​ ​ ( 23 ) ​ ​ ( 68,907 ) ​ ​ — ​ — ​ — ​ ​ ( 68,930 ) Common shares issued pursuant to employee incentive compensation plan and ESPP ​ — ​ ​ — ​ ​ 210 ​ ​ — ​ ​ — ​ ​ — ​ ​ 210 Dividends declared on common shares ($ 0.225 per common share) ​ — ​ ​ — ​ ​ — ​ ​ ( 29,696 ) ​ ​ — ​ ​ — ​ ​ ( 29,696 ) Distributions to noncontrolling interests, net — ​ — ​ — ​ — ​ — ​ ( 45 ) ​ ( 45 ) Redeemable noncontrolling interests redemption value adjustment and total other comprehensive income allocation — ​ — ​ 19,274 ​ — ​ ( 413 ) ​ — ​ 18,861 Total other comprehensive income — ​ — ​ — ​ — ​ 3,572 ​ — ​ 3,572 BALANCE AS OF SEPTEMBER 30, 2021 129,704 ​ $ 1,298 ​ $ 3,606,462 ​ $ ( 495,033 ) ​ $ ( 25,446 ) ​ $ 16,495 ​ $ 3,103,776 ​ See accompanying notes to the condensed consolidated financial statements (unaudited). ​ 6 Table of Contents JBG SMITH PROPERTIES Condensed Consolidated Statements of Equity (Unaudited) (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, 2021 127,378 ​ $ 1,275 ​ $ 3,539,916 ​ $ ( 609,331 ) ​ $ ( 15,950 ) ​ $ 22,507 ​ $ 2,938,417 Net income attributable to common shareholders and noncontrolling interests — ​ — ​ — ​ 103,950 ​ — ​ 174 ​ 104,124 Conversion of OP Units to common shares 493 ​ 5 ​ 12,662 ​ — ​ — ​ — ​ 12,667 Common shares repurchased ​ ( 14,151 ) ​ ​ ( 142 ) ​ ​ ( 360,900 ) ​ ​ — ​ ​ — ​ ​ — ​ ​ ( 361,042 ) Common shares issued pursuant to employee incentive compensation plan and ESPP ​ 44 ​ ​ — ​ ​ 1,806 ​ ​ — ​ ​ — ​ ​ — ​ ​ 1,806 Dividends declared on common shares ( $ 0.45 per common share) ​ — ​ ​ — ​ ​ — ​ ​ ( 53,407 ) ​ ​ — ​ ​ — ​ ​ ( 53,407 ) Contributions from noncontrolling interests, net — ​ — ​ — ​ — ​ — ​ 9,209 ​ 9,209 Redeemable noncontrolling interests redemption value adjustment and total other comprehensive income allocation — ​ — ​ 72,175 ​ — ​ ( 8,653 ) ​ — ​ 63,522 Total other comprehensive income — ​ — ​ — ​ — ​ 71,473 ​ — ​ 71,473 BALANCE AS OF SEPTEMBER 30, 2022 113,764 ​ $ 1,138 ​ $ 3,265,659 ​ $ ( 558,788 ) ​ $ 46,870 ​ $ 31,890 ​ $ 2,786,769 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 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 — ​ — ​ — ​ ( 22,811 ) ​ — ​ ( 1,108 ) ​ ( 23,919 ) Conversion of OP Units to common shares 829 ​ 8 ​ 27,342 ​ — ​ — ​ — ​ 27,350 Common shares repurchased ​ ( 2,937 ) ​ ​ ( 29 ) ​ ​ ( 88,104 ) ​ ​ — ​ ​ — ​ ​ — ​ ​ ( 88,133 ) Common shares issued pursuant to employee incentive compensation plan and ESPP ​ 34 ​ ​ — ​ ​ 1,549 ​ ​ — ​ ​ — ​ ​ — ​ ​ 1,549 Dividends declared on common shares ( $ 0.45 per common share) ​ — ​ ​ — ​ ​ — ​ ​ ( 59,278 ) ​ ​ — ​ ​ — ​ ​ ( 59,278 ) Contributions from noncontrolling interests, net — ​ — ​ — ​ — ​ — ​ 17,436 ​ 17,436 Redeemable noncontrolling interests redemption value adjustment and total other comprehensive income allocation — ​ — ​ 8,032 ​ — ​ ( 1,621 ) ​ — ​ 6,411 Total other comprehensive income — ​ — ​ — ​ — ​ 16,154 ​ — ​ 16,154 BALANCE AS OF SEPTEMBER 30, 2021 129,704 ​ $ 1,298 ​ $ 3,606,462 ​ $ ( 495,033 ) ​ $ ( 25,446 ) ​ $ 16,495 ​ $ 3,103,776 ​ See accompanying notes to the condensed consolidated financial statements (unaudited). ​ 7 Table of Contents ​ JBG SMITH PROPERTIES Condensed Consolidated Statements of Cash Flows (Unaudited) (In thousands) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Nine Months Ended September 30, ​ 2022 2021 OPERATING ACTIVITIES: ​ ​ Net income (loss) ​ $ 119,836 ​ $ ( 26,391 ) Adjustments to reconcile net income (loss) to net cash provided by operating activities: ​ ​ Share-based compensation expense ​ 32,324 ​ 38,320 Depreciation and amortization, including amortization of deferred financing costs ​ 160,797 ​ 181,217 Deferred rent ​ ( 14,764 ) ​ ( 17,463 ) (Income) loss from unconsolidated real estate ventures, net ​ 12,829 ​ ( 23,513 ) Amortization of market lease intangibles, net ​ ( 874 ) ​ ( 896 ) Amortization of lease incentives ​ 6,175 ​ 6,083 Loss on the extinguishment of debt ​ 3,073 ​ — Gain on the sale of real estate, net ​ ( 158,631 ) ​ ( 11,290 ) Loss on operating lease and other receivables ​ 1,392 ​ 1,071 Income from investments, net ​ ​ ( 14,733 ) ​ ​ — Return on capital from unconsolidated real estate ventures ​ 8,483 ​ 13,212 Other non-cash items ​ ( 7,352 ) ​ 583 Changes in operating assets and liabilities: ​ ​ ​ Tenant and other receivables ​ ( 5,044 ) ​ 3,704 Other assets, net ​ ( 20,552 ) ​ ( 12,059 ) Accounts payable and accrued expenses ​ ( 3,648 ) ​ 5,954 Other liabilities, net ​ 11,055 ​ ( 4,120 ) Net cash provided by operating activities ​ 130,366 ​ 154,412 INVESTING ACTIVITIES: ​ ​ Development costs, construction in progress and real estate additions ​ ( 218,835 ) ​ ( 108,361 ) Acquisition of real estate ​ ( 15,232 ) ​ — Deposits for real estate and other acquisitions ​ ( 1,750 ) ​ ( 10,263 ) Proceeds from the sale of real estate ​ 923,108 ​ 14,370 Proceeds from the sale of investments ​ ​ 19,030 ​ ​ — Distributions of capital from unconsolidated real estate ventures ​ 54,759 ​ 40,188 Investments in unconsolidated real estate ventures and other investments ​ ( 86,678 ) ​ ( 32,685 ) Net cash provided by (used in) investing activities ​ 674,402 ​ ( 96,751 ) FINANCING ACTIVITIES: ​ ​ Borrowings under mortgages payable ​ 134,263 ​ 85,000 Borrowings under revolving credit facility ​ 100,000 ​ — Borrowings under unsecured term loans ​ 150,000 ​ — Repayments of mortgages payable ​ ( 268,627 ) ​ ( 4,462 ) Repayments of revolving credit facility ​ ( 300,000 ) ​ — Debt issuance and modification costs ​ ( 5,135 ) ​ ( 5,747 ) Proceeds from common shares issued pursuant to ESPP ​ 800 ​ 880 Common shares repurchased ​ ​ ( 361,042 ) ​ ​ ( 82,300 ) Dividends paid to common shareholders ​ ( 82,072 ) ​ ( 88,928 ) Distributions to redeemable noncontrolling interests ​ ( 12,398 ) ​ ( 13,705 ) Distributions to noncontrolling interests ​ ​ ( 166 ) ​ ​ ( 22 ) Contributions from noncontrolling interests ​ ​ 9,383 ​ ​ 17,464 Net cash used in financing activities ​ ( 634,994 ) ​ ( 91,820 ) Net increase (decrease) in cash and cash equivalents, and restricted cash ​ 169,774 ​ ( 34,159 ) Cash and cash equivalents, and restricted cash, beginning of period ​ 302,095 ​ 263,336 Cash and cash equivalents, and restricted cash, end of period ​ $ 471,869 ​ $ 229,177 ​ See accompanying notes to the condensed consolidated financial statements (unaudited). 8 Table of Contents JBG SMITH PROPERTIES Condensed Consolidated Statements of Cash Flows (Unaudited) (In thousands) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Nine Months Ended September 30, ​ 2022 2021 CASH AND CASH EQUIVALENTS, AND RESTRICTED CASH, END OF PERIOD: ​ Cash and cash equivalents ​ $ 258,871 ​ $ 194,277 Restricted cash ​ 212,998 ​ 34,900 Cash and cash equivalents, and restricted cash ​ $ 471,869 ​ $ 229,177 ​ ​ ​ ​ ​ ​ ​ SUPPLEMENTAL DISCLOSURE OF CASH FLOW AND NON-CASH INFORMATION: ​ Cash paid for interest (net of capitalized interest of $ 6,816 and $ 4,854 in 2022 and 2021) ​ $ 52,620 ​ $ 46,010 Accrued capital expenditures included in accounts payable and accrued expenses ​ 74,735 ​ 41,660 Write-off of fully depreciated assets ​ 10,642 ​ 46,278 Deconsolidation of real estate asset ​ — ​ 26,476 Conversion of OP Units to common shares ​ 12,667 ​ 27,350 Cash paid for amounts included in the measurement of lease liabilities for operating leases ​ 1,638 ​ 1,761 ​ ​ See accompanying notes to the condensed consolidated financial statements (unaudited) . ​ 9 Table of Contents ​ ​ JBG SMITH PROPERTIES Notes to Condensed Consolidated Financial Statements (Unaudited) 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. Approximately two-thirds 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, 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 September 30, 2022, JBG SMITH, as its sole general partner, controlled JBG SMITH LP and owned 88.3 % of its OP Units, after giving effect to 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, but exclude our 10.0 % subordinated interest in one commercial building and our 33.5 % subordinated interest in four commercial buildings, as well as the associated non-recourse mortgages payable, held through unconsolidated real estate ventures; these interests and debt are excluded because our investment in each real estate venture is zero, we do not anticipate receiving any near-term cash flow distributions from the real estate ventures and we have not guaranteed their obligations or otherwise committed to providing financial support. 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 September 30, 2022, our Operating Portfolio consisted of 56 operating assets comprising 35 commercial assets totaling 10.5 million square feet ( 8.9 million square feet at our share), 19 multifamily assets totaling 7,359 units ( 6,608 units at our share) and two wholly owned land assets for which we are the ground lessor. Additionally, we have: (i) two under-construction multifamily assets with 1,583 units ( 1,583 units at our share); (ii) eight near-term development assets totaling 3.7 million square feet ( 3.5 million square feet at our share) of estimated potential development density; and (iii) 16 future development assets totaling 8.8 million square feet ( 6.3 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. Basis of Presentation The accompanying unaudited condensed consolidated financial statements and notes are prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP") for interim financial information and with the instructions of Form 10-Q and Article 10 of Regulation S-X. Accordingly, these condensed consolidated financial statements do not contain certain information required in annual financial statements and notes as required under GAAP. In our opinion, all adjustments considered necessary for a fair presentation have been included, and all such adjustments are of a normal recurring nature. All intercompany transactions and balances have been eliminated. The results of operations 10 Table of Contents for the three and nine months ended September 30, 2022 and 2021 are not necessarily indicative of the results that may be expected for a full year. These condensed consolidated financial statements should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2021, filed with the Securities and Exchange Commission on February 22, 2022 ("Annual Report"). The accompanying condensed consolidated financial statements include our accounts and those of our wholly owned subsidiaries and consolidated variable interest entities ("VIEs"), including JBG SMITH LP. See Note 5 for additional information on our VIEs. The portions of the equity and net income (loss) of consolidated entities that are not attributable to us are presented separately as amounts attributable to noncontrolling interests in our condensed consolidated financial statements. References to our financial statements refer to our unaudited condensed consolidated financial statements as of September 30, 2022 and December 31, 2021, and for the three and nine months ended September 30, 2022 and 2021. References to our balance sheets refer to our condensed consolidated balance sheets as of September 30, 2022 and December 31, 2021. References to our statements of operations refer to our condensed consolidated statements of operations for the three and nine months ended September 30, 2022 and 2021. References to our statements of comprehensive income (loss) refer to our condensed consolidated statements of comprehensive income (loss) for the three and nine months ended September 30, 2022 and 2021. 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. We currently adhere and intend to continue to adhere to these requirements and to maintain our REIT status in future periods. We also participate in the activities conducted by our subsidiary entities that have elected to be treated as taxable REIT subsidiaries under the Code. As such, we are subject to federal, state and local taxes on the income from those activities. Reclassification Intangible assets totaling $ 202.0 million were reclassified from "Other assets, net" to "Intangible assets, net" in our balance sheet as of December 31, 2021 to present intangible assets separately from other assets, which is consistent with our current year presentation. 2. Summary of Significant Accounting Policies Significant Accounting Policies There were no material changes to our significant accounting policies disclosed in our Annual Report. Use of Estimates The preparation of the financial statements in conformity with GAAP requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosure of contingent assets and liabilities as of the date of the financial statements and the reported amounts of revenue and expenses during the reporting periods. The most significant of these estimates include: (i) the underlying cash flows and holding periods used in assessing impairment of our real estate assets; (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 estimated 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. 11 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 nine months ended September 30, 2022, we elected to apply the hedge accounting expedients that allows us to (i) continue to amortize previously deferred gains and losses in accumulated other comprehensive income (loss) related to terminated hedges into earnings in accordance with the underlying hedged forecasted transactions, (ii) modify loan agreements to replace the reference rate without treating the change as a contract modification and (iii) modify the reference rate of the hedging instruments without it being considered a change in critical terms requiring redesignation. We have 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 the past presentation of our derivatives. We will continue to evaluate the impact of the guidance and may apply other elections, as applicable. 3. Acquisition, Dispositions and Assets Held for Sale Acquisition On August 1, 2022, we acquired the remaining 36.0 % ownership interest in an unconsolidated real estate venture that owned Atlantic Plumbing, a multifamily asset, which was encumbered by a $ 100.0 million mortgage, for a purchase price of $ 19.7 million and our partner’s share of the working capital. The mortgage was repaid on August 10, 2022. Atlantic Plumbing was consolidated as of the date of acquisition. Dispositions The following is a summary of activity for the nine months ended September 30, 2022: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Gain (Loss) ​ ​ ​ ​ ​ ​ ​ ​ Total ​ Gross ​ Cash ​ on the Sale ​ ​ ​ ​ ​ ​ ​ ​ Square ​ Sales ​ Proceeds ​ of Real Date Disposed Assets Segment Location Feet Price from Sale Estate ​ ​ ​ ​ ​ ​ ​ ​ (In thousands) March 28, 2022 ​ Development Parcel ​ Other ​ Arlington, Virginia ​ — ​ $ 3,250 ​ $ 3,149 ​ $ ( 136 ) April 1, 2022 ​ Universal Buildings (1) ​ Commercial ​ Washington, D.C. ​ 659 ​ ​ 228,000 ​ ​ 194,737 ​ ​ 41,245 April 13, 2022 7200 Wisconsin Avenue, 1730 M Street, RTC-West and Courthouse Plaza 1 and 2 (2) Commercial/ Other Bethesda, Maryland, Washington, D.C., Reston, Virginia, Arlington, Virginia 2,944 ​ ​ 580,000 ​ 527,694 ​ ​ ( 3,980 ) May 25, 2022 ​ Pen Place (3) ​ Other ​ Arlington, Virginia ​ 2,082 ​ ​ 198,000 ​ ​ 197,528 ​ ​ 121,502 ​ ​ ​ ​ ​ ​ ​ 5,685 ​ $ 1,009,250 ​ $ 923,108 ​ $ 158,631 (1) Cash proceeds from sale excludes a lease termination fee of $ 24.3 million received during the first quarter of 2022. (2) Assets were sold to an unconsolidated real estate venture. See Note 4 for additional information. "RTC-West" refers to RTC-West, RTC-West Trophy Office and RTC-West Land. Total square feet include 1.4 million square feet of estimated potential development density. In April 2022, $ 164.8 million of mortgages payable related to 1730 M Street and RTC-West were repaid. (3) Total square feet represents estimated or approved potential development density. During the nine months ended September 30, 2022, our unconsolidated real estate ventures sold several assets. See Note 4 for additional information. 12 Table of Contents Assets Held for Sale There were no assets held for sale as of September 30, 2022. The following is a summary of assets held for sale as of December 31, 2021: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Total ​ Assets Held Assets Segment Location Square Feet for Sale ​ ​ ​ ​ ​ ​ (In thousands) Pen Place (1) ​ Other ​ Arlington, Virginia ​ 2,082 ​ $ 73,876 (1) Sold to Amazon in May 2022. Total square feet represents estimated or approved potential development density. ​ ​ ​ ​ 4. Investments in Unconsolidated Real Estate Ventures The following is a summary of our investments in unconsolidated real estate ventures: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Effective ​ ​ ​ ​ Ownership ​ ​ Real Estate Venture Partners Interest (1) September 30, 2022 December 31, 2021 ​ ​ ​ ​ (In thousands) Prudential Global Investment Management 50.0 % ​ $ 207,236 ​ $ 208,421 Landmark Partners ("Landmark") (2) 18.0 % - 49.0 % ​ 8,835 ​ 28,298 CBREI Venture (3) 5.0 % - 10.0 % ​ 17,074 ​ 57,812 Canadian Pension Plan Investment Board ("CPPIB") (4) 55.0 % ​ — ​ 48,498 J.P. Morgan Global Alternatives ("J.P. Morgan") (5) ​ 50.0 % ​ ​ 62,441 ​ ​ 52,769 Berkshire Group (6) 50.0 % ​ 50,963 ​ ​ 52,770 Brandywine Realty Trust 30.0 % ​ 13,755 ​ 13,693 Other ​ ​ 542 ​ ​ 624 Total investments in unconsolidated real estate ventures (7) ​ ​ ​ $ 360,846 ​ $ 462,885 (1) Reflects our effective ownership interests in the underlying real estate as of September 30, 2022. We have multiple investments with certain venture partners with varying ownership interests in the underlying real estate. (2) In connection with the preparation and review of the third quarter 2022 financial statements, an impairment loss of $ 15.4 million associated with certain commercial and future development assets located in Washington, D.C. was included in "Income (loss) from unconsolidated real estate ventures, net" in our statements of operations for the three and nine months ended September 30, 2022. (3) On August 1, 2022, we acquired the remaining 36.0 % ownership interest in an unconsolidated real estate venture that owned Atlantic Plumbing, a multifamily asset. (4) Our effective ownership interest reflects an investment in the real estate venture that owns 1101 17 th Street for which we have a zero investment balance and discontinued applying the equity method of accounting. (5) J.P. Morgan is the advisor for an institutional investor. (6) On October 5, 2022, we acquired the remaining 50.0 % ownership interest in 8001 Woodmont, a multifamily asset owned by the venture, for a purchase price of $ 115.0 million, including the assumption of the $ 51.9 million mortgage at our share. The asset is encumbered by a $ 103.8 million mortgage, which is consolidated in our balance sheet as of the date of acquisition. (7) As of September 30, 2022 and December 31, 2021, our total investments in unconsolidated real estate ventures were greater than our share of the net book value of the underlying assets by $ 4.4 million and $ 18.6 million, resulting principally from capitalized interest and our zero investment balance in certain real estate ventures . On April 13, 2022, we formed an unconsolidated real estate venture with affiliates of Fortress Investment Group LLC ("Fortress") 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 and Courthouse Plaza 1 and 2). Additionally, we contributed $ 66.1 million in cash for a 33.5 % interest in the venture, while Fortress contributed $ 131.0 million for a 66.5 % interest in the venture. In connection with the transaction, the venture obtained mortgage loans totaling $ 458.0 million secured by the properties, of which $ 402.0 million was drawn at closing. We provide asset management, property management and leasing services to the venture. Because our interest in the venture is subordinated to a 15 % preferred return to Fortress, we do not anticipate receiving any near-term cash flow distributions 13 Table of Contents from it. As of the transaction date, our investment in the venture was zero , and we have discontinued applying the equity method as we have not guaranteed its obligations or otherwise committed to providing financial support. We provide leasing, property management and other real estate services to our unconsolidated real estate ventures. We recognized revenue, including expense reimbursements, of $ 6.1 million and $ 18.2 million for the three and nine months ended September 30, 2022, and $ 5.9 million and $ 17.8 million for the three and nine months ended September 30, 2021, for such services. We evaluate reconsideration events as we become aware of them. Reconsideration events include, among other criteria, amendments to real estate venture agreements or changes in the capital requirements of the real estate venture. A reconsideration event could cause us to consolidate an unconsolidated real estate venture or deconsolidate a consolidated entity. The following is a summary of disposition activity by our unconsolidated real estate ventures for the nine months ended September 30, 2022: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Mortgages ​ Proportionate ​ ​ Real Estate ​ ​ ​ ​ ​ Gross ​ Payable ​ Share of ​ ​ Venture ​ ​ ​ Ownership ​ Sales ​ Repaid by ​ Aggregate Date Disposed Partner ​ Assets ​ Percentage Price ​ Venture ​ Gain (1) ​ ​ ​ ​ ​ ​ ​ ​ (In thousands) January 27, 2022 Landmark ​ The Alaire, The Terano and 12511 Parklawn Drive ​ 1.8 % - 18.0 % $ 137,500 ​ $ 79,829 ​ $ 5,243 May 10, 2022 ​ Landmark ​ Galvan ​ 1.8 % ​ ​ 152,500 ​ ​ 89,500 ​ ​ 407 June 1, 2022 ​ CPPIB ​ 1900 N Street ​ 55.0 % ​ ​ 265,000 ​ ​ 151,709 ​ ​ 529 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ $ 6,179 (1) Included in "Income (loss) from unconsolidated real estate ventures, net" in our statements of operations. ​ The following is a summary of the debt of our unconsolidated real estate ventures: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Weighted ​ ​ ​ ​ ​ ​ ​ ​ Average Effective ​ ​ ​ Interest Rate (1) September 30, 2022 December 31, 2021 ​ ​ ​ ​ (In thousands) Variable rate (2) 5.67 % ​ $ 509,393 ​ $ 785,369 Fixed rate (3) 4.57 % ​ 163,810 ​ 309,813 Mortgages payable (4) ​ ​ ​ 673,203 ​ 1,095,182 Unamortized deferred financing costs ​ ​ ​ ( 393 ) ​ ( 5,239 ) Mortgages payable, net (4) (5) ​ ​ ​ $ 672,810 ​ $ 1,089,943 (1) Weighted average effective interest rate as of September 30, 2022. (2) Includes variable rate mortgages with interest rate cap agreements. (3) Includes variable rate mortgages with interest rates fixed by interest rate swap agreements. (4) Excludes mortgages related to the unconsolidated real estate venture with Fortress. (5) See Note 17 for additional information on guarantees of the debt of certain of our unconsolidated real estate ventures. ​ 14 Table of Contents The following is a summary of financial information for our unconsolidated real estate ventures: ​ ​ ​ ​ ​ ​ ​ ​ ​ September 30, 2022 December 31, 2021 ​ (In thousands) Combined balance sheet information: (1) ​ ​ ​ ​ ​ ​ Real estate, net ​ $ 1,507,159 ​ $ 2,116,290 Other assets, net ​ 215,099 ​ 264,397 Total assets ​ $ 1,722,258 ​ $ 2,380,687 ​ ​ ​ ​ ​ ​ ​ Mortgages payable, net ​ $ 672,810 ​ $ 1,089,943 Other liabilities, net ​ 77,706 ​ 118,752 Total liabilities ​ 750,516 ​ 1,208,695 Total equity ​ 971,742 ​ 1,171,992 Total liabilities and equity ​ $ 1,722,258 ​ $ 2,380,687 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended September 30, ​ Nine Months Ended September 30, ​ 2022 2021 X 2022 2021 ​ (In thousands) Combined income statement information: (1) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Total revenue ​ $ 40,881 ​ $ 45,289 ​ $ 125,135 ​ $ 141,370 Operating income (loss) (2) ​ ​ ( 7,468 ) ​ ​ 51,068 ​ 77,066 ​ 94,275 Net income (loss) (2) ​ ​ ( 15,034 ) ​ ​ 42,261 ​ 49,376 ​ 69,091 (1) Excludes amounts related to the unconsolidated real estate venture with Fortress. (2) Includes the gain on the sale of various assets totaling $ 77.4 million during the nine months ended September 30, 2022, and $ 47.4 million and $ 85.5 million during the three and nine months ended September 30, 2021. Includes an impairment loss of $ 16.1 million during the three and nine months ended September 30, 2022. ​ ​ ​ 5. 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 September 30, 2022 and December 31, 2021, 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 entities, 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 September 30, 2022 and December 31, 2021, the net carrying amounts of our investment in these entities was $ 84.7 million and $ 145.2 million, which were included in "Investments in unconsolidated real estate ventures" in our balance sheets. Our equity in the income of unconsolidated VIEs is included in "Income (loss) from unconsolidated real estate ventures, net" in our statements of operations. Our maximum loss exposure in these entities is limited to our investments, construction commitments and debt guarantees. See Note 17 for additional information. 15 Table of Contents Consolidated VIEs JBG SMITH LP is our most significant consolidated VIE. We hold 88.3 % 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 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 qualified intermediary to facilitate a like-kind exchange. As a result, the qualified intermediary was the legal owner of the entity that owned this property as of December 31, 2021. We determined that the entity that owned the Batley was a VIE, and we were the primary beneficiary of the VIE. We consolidated the property and its operations as of the acquisition date. Legal ownership of this entity was transferred to us by the qualified intermediary when the like-kind exchange agreement was completed with the sale of Pen Place in May 2022. As of September 30, 2022, excluding JBG SMITH LP, we consolidated two VIEs with total assets of $ 199.5 million and liabilities of $ 69.7 million. As of December 31, 2021, excluding JBG SMITH LP, we consolidated three VIEs with total assets of $ 269.7 million and liabilities of $ 13.9 million. The assets of the VIEs can only be used to settle the obligations of the VIEs, and the liabilities include third-party liabilities of the VIEs for which the creditors or beneficial interest holders do not have recourse against us. 6. Other Assets, Net The following is a summary of other assets, net: ​ ​ ​ ​ ​ ​ ​ ​ ​ September 30, 2022 December 31, 2021 ​ ​ (In thousands) Prepaid expenses ​ $ 30,895 ​ $ 17,104 Derivative agreements, at fair value ​ ​ 62,055 ​ ​ 951 Deferred financing costs, net ​ 6,064 ​ 11,436 Deposits ​ 3,661 ​ 1,938 Operating lease right-of-use assets ​ ​ 1,452 ​ ​ 1,660 Finance lease right-of-use assets (1) ​ ​ — ​ ​ 180,956 Investments in funds (2) ​ ​ 15,894 ​ ​ 9,840 Other investments (3) ​ ​ 3,746 ​ ​ 8,869 Other ​ 9,652 ​ 7,406 Total other assets, net ​ $ 133,419 ​ $ 240,160 (1) Represents assets related to finance ground leases at 1730 M Street and Courthouse Plaza 1 and 2, which were sold to an unconsolidated real estate venture in April 2022. (2) Consists of investments in real estate focused technology companies, which are recorded at their fair value based on their reported net asset value. During the three and nine months ended September 30, 2022, we recorded unrealized gains (losses) totaling ($ 267,000 ) and $ 928,000 related to these investments, which are included in "Interest and other income, net" in our statements of operations . (3) Primarily consists of equity investments that are carried at cost. During the three and nine months ended September 30, 2022, we recorded realized gains (losses) of ($ 300,000 ) and $ 13.8 million related to these investments, which is included in "Interest and other income, net" in our statements of operations . ​ ​ ​ 16 Table of Contents 7. Debt Mortgages Payable The following is a summary of mortgages payable: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Weighted Average ​ ​ ​ ​ ​ ​ ​ ​ Effective ​ ​ ​ ​ ​ ​ ​ Interest Rate (1) September 30, 2022 December 31, 2021 ​ ​ ​ ​ (In thousands) Variable rate (2) 4.60 % ​ $ 846,432 ​ $ 867,246 Fixed rate (3) 4.40 % ​ 907,516 ​ 921,013 Mortgages payable ​ ​ ​ 1,753,948 ​ 1,788,259 Unamortized deferred financing costs and premium / discount, net (4) ​ ​ ​ ( 12,343 ) ​ ( 10,560 ) Mortgages payable, net ​ ​ ​ $ 1,741,605 ​ $ 1,777,699 (1) Weighted average effective interest rate as of September 30, 2022. (2) Includes variable rate mortgages with interest rate cap agreements. As of September 30, 2022, one-month LIBOR was 3.14 % and one-month term Secured Overnight Financing Rate ("SOFR") was 3.04 % , as applicable. (3) Includes variable rate mortgages with interest rates fixed by interest rate swap agreements. (4) As of September 30, 2022 and December 31, 2021, excludes $ 2.3 million and $ 6.4 million of net deferred financing costs related to unfunded mortgage loans that were included in "Other assets, net." As of September 30, 2022 and December 31, 2021, the net carrying value of real estate collateralizing our mortgages payable totaled $ 1.9 billion and $ 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 17 for additional information. In August 2022, we entered into a mortgage with a principal balance of $ 97.5 million collateralized by WestEnd25. The mortgage loan has a seven-year term and an interest rate of SOFR plus 1.45 %. We also entered into an interest rate swap with a total notional value of $ 97.5 million, which effectively fixes SOFR at an average interest rate of 2.71 % through the maturity date. As of September 30, 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 for additional information. Credit Facility As of September 30, 2022, our $ 1.6 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 2025, and a $ 400.0 million unsecured term loan ("Tranche A-2 Term Loan") maturing in January 2028, of which $ 50.0 million remains available to be borrowed until July 2023. In January 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 term SOFR. In July 2022, the Tranche A-2 Term Loan was amended to increase its borrowing capacity by $ 200.0 million. The incremental $ 200.0 million includes a delayed draw feature, of which $ 150.0 million was drawn in September 2022 and the remaining $ 50.0 million was undrawn as of the date of this filing. The amendment extends the maturity date of the term loan from July 2024 to January 2028 and amends the interest rate to SOFR plus 1.25 % to SOFR plus 1.80 %, varying based on a ratio of our total outstanding indebtedness to a valuation of certain real property and assets. We entered into two interest rate swaps with an effective date of September 30, 2022 and a total notional value of $ 150.0 million, which effectively fix SOFR at a weighted average interest rate of 2.15 % through the maturity date. We also entered into two forward-starting 17 Table of Contents interest rate swaps with an effective date of July 2024 and a total notional value of $ 200.0 million, which will effectively fix SOFR at a weighted average interest rate of 2.80 % through the maturity date. Additionally, we amended the interest rate of the revolving credit facility to SOFR plus 1.15 % to SOFR plus 1.60 %, varying based on a ratio of our total outstanding indebtedness to a valuation of certain real property and assets. The following is a summary of amounts outstanding under the credit facility: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Effective ​ ​ ​ ​ Interest Rate (1) ​ September 30, 2022 December 31, 2021 ​ ​ ​ ​ ​ (In thousands) Revolving credit facility (2) (3) 4.19 % ​ ​ $ 100,000 ​ $ 300,000 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Tranche A-1 Term Loan (4) 2.61 % ​ ​ $ 200,000 ​ $ 200,000 Tranche A-2 Term Loan (4) 3.40 % ​ ​ 350,000 ​ 200,000 Unsecured term loans ​ ​ 550,000 ​ 400,000 Unamortized deferred financing costs, net ​ ​ ( 3,112 ) ​ ( 1,336 ) Unsecured term loans, net ​ ​ $ 546,888 ​ $ 398,664 (1) Effective interest rate as of September 30, 2022. The interest rate for our revolving credit facility excludes a 0.15 % facility fee. (2) As of September 30, 2022, one-month term SOFR was 3.04 % . As of September 30, 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. In October 2022, we repaid the outstanding balance under our revolving credit facility. (3) As of September 30, 2022 and December 31, 2021, excludes $ 3.8 million and $ 5.0 million of net deferred financing costs related to our revolving credit facility that were included in "Other assets, net." (4) As of September 30, 2022 and December 31, 2021, the outstanding balance was fixed by interest rate swap agreements. As of September 30, 2022, the interest rate swaps fix SOFR at a weighted average interest rate of 1.46 % for the Tranche A-1 Term Loan and 2.15 % for the Tranche A-2 Term Loan . ​ ​ 8. Other Liabilities, Net The following is a summary of other liabilities, net: ​ ​ ​ ​ ​ ​ ​ ​ ​ September 30, 2022 December 31, 2021 ​ ​ (In thousands) Lease intangible liabilities, net ​ ​ 7,715 ​ ​ 8,272 Lease assumption liabilities ​ 3,349 ​ 5,399 Lease incentive liabilities ​ 5,419 ​ 21,163 Liabilities related to operating lease right-of-use assets ​ 5,499 ​ 6,910 Liabilities related to finance lease right -of-use assets (1) ​ — ​ 162,510 Prepaid rent ​ 15,402 ​ 19,852 Security deposits ​ 13,802 ​ 18,188 Environmental liabilities ​ 18,009 ​ 18,168 Deferred tax liability, net ​ 5,680 ​ 5,340 Dividends payable ​ — ​ 32,603 Derivative agreements, at fair value ​ — ​ 18,361 Deferred purchase price related to the acquisition of a future development parcel ​ ​ 19,845 ​ ​ 19,691 Other ​ 4,111 ​ 6,108 Total other liabilities, net ​ $ 98,831 ​ $ 342,565 ​ (1) Represents liabilities related to finance ground leases at 1730 M Street and Courthouse Plaza 1 and 2, which were sold to an unconsolidated real estate venture in April 2022. ​ ​ 18 Table of Contents 9. 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 convertible into OP Units. During the nine months ended September 30, 2022 and 2021, unitholders redeemed 493,596 and 829,107 OP Units, which we elected to redeem for an equivalent number of our common shares. As of September 30, 2022, outstanding OP Units and redeemable LTIP Units totaled 15.1 million, representing an 11.7 % ownership interest in JBG SMITH LP. 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" in our balance sheets. Redemption value per OP Unit is equivalent to the market value of one of our common shares at the end of the period. Consolidated Real Estate Venture We are a partner in a consolidated real estate venture that owns a multifamily asset, The Wren, located in Washington, D.C. Our partners can redeem their interest for cash under certain conditions. As of September 30, 2022, we held a 96.0 % ownership interest in the real estate venture. On October 4, 2022, one of our partners redeemed their interest for $ 9.5 million, increasing our ownership interest to 99.7 %. The following is a summary of the activity of redeemable noncontrolling interests: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended September 30, ​ ​ 2022 ​ 2021 ​ ​ ​ ​ ​ Consolidated ​ ​ ​ ​ ​ ​ ​ Consolidated ​ ​ ​ ​ ​ JBG ​ Real Estate ​ ​ ​ ​ JBG ​ Real Estate ​ ​ ​ ​ SMITH LP Venture Total SMITH LP Venture Total ​ (In thousands) Balance, beginning of period ​ $ 513,426 ​ $ 7,966 ​ $ 521,392 ​ $ 536,171 ​ $ 8,468 ​ $ 544,639 OP Unit redemptions ​ ( 4,891 ) ​ — ​ ( 4,891 ) ​ ( 5,670 ) ​ — ​ ( 5,670 ) Net income (loss) ​ ( 2,557 ) ​ 11 ​ ( 2,546 ) ​ 116 ​ ( 13 ) ​ 103 Other comprehensive income ​ 4,376 ​ — ​ 4,376 ​ 413 ​ — ​ 413 Distributions ​ ( 4,083 ) ​ ( 119 ) ​ ( 4,202 ) ​ ( 3,993 ) ​ — ​ ( 3,993 ) Share-based compensation expense ​ 6,211 ​ — ​ 6,211 ​ 10,695 ​ — ​ 10,695 Adjustment to redemption value ​ ( 30,681 ) ​ 1,820 ​ ( 28,861 ) ​ ( 20,748 ) ​ 1,474 ​ ( 19,274 ) Balance, end of period ​ $ 481,801 ​ $ 9,678 ​ $ 491,479 ​ $ 516,984 ​ $ 9,929 ​ $ 526,913 ​ ​ Nine Months Ended September 30, ​ ​ 2022 ​ 2021 ​ ​ ​ ​ ​ Consolidated ​ ​ ​ ​ ​ ​ ​ Consolidated ​ ​ ​ ​ ​ JBG ​ Real Estate ​ ​ ​ ​ JBG ​ Real Estate ​ ​ ​ ​ SMITH LP Venture Total SMITH LP Venture Total ​ (In thousands) Balance, beginning of period ​ $ 513,268 ​ $ 9,457 ​ $ 522,725 ​ $ 522,882 ​ $ 7,866 ​ $ 530,748 OP Unit redemptions ​ ( 12,667 ) ​ — ​ ( 12,667 ) ​ ( 27,350 ) ​ — ​ ( 27,350 ) LTIP Units issued in lieu of cash bonuses (1) ​ 6,584 ​ — ​ 6,584 ​ 5,614 ​ — ​ 5,614 Net income (loss) ​ 15,680 ​ 32 ​ 15,712 ​ ( 2,400 ) ​ ( 72 ) ​ ( 2,472 ) Other comprehensive income ​ 8,653 ​ — ​ 8,653 ​ 1,621 ​ — ​ 1,621 Distributions ​ ( 8,193 ) ​ ( 267 ) ​ ( 8,460 ) ​ ( 9,282 ) ​ — ​ ( 9,282 ) Share-based compensation expense ​ 31,107 ​ — ​ 31,107 ​ 36,066 ​ — ​ 36,066 Adjustment to redemption value ​ ( 72,631 ) ​ 456 ​ ( 72,175 ) ​ ( 10,167 ) ​ 2,135 ​ ( 8,032 ) Balance, end of period ​ $ 481,801 ​ $ 9,678 ​ $ 491,479 ​ $ 516,984 ​ $ 9,929 ​ $ 526,913 ​ (1) See Note 11 for additional information. ​ 19 Table of Contents 10. Property Rental Revenue The following is a summary of property rental revenue from our non-cancellable leases: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended September 30, ​ Nine Months Ended September 30, ​ 2022 2021 X 2022 2021 ​ ​ (In thousands) Fixed ​ $ 109,193 ​ $ 114,100 ​ $ 335,328 ​ $ 339,321 Variable ​ ​ 10,618 ​ ​ 11,800 ​ ​ 33,117 ​ ​ 31,639 Property rental revenue ​ $ 119,811 ​ $ 125,900 ​ $ 368,445 ​ $ 370,960 ​ ​ 11. Share-Based Payments LTIP Units and Time-Based LTIP Units In January 2022, we granted to certain employees 660,785 LTIP Units with time-based vesting requirements ("Time-Based LTIP Units") and a weighted average grant-date fair value of $ 27.41 per unit that vest ratably over four years subject to continued employment. Compensation expense for these units is being recognized over a four-year period. In February 2022, we granted 252,206 fully vested LTIP Units to certain employees, who elected to receive all or a portion of their cash bonuses, related to 2021 service, as LTIP Units. The LTIP units had a weighted average grant-date fair value of $ 22.19 per unit. Compensation expense totaling $ 5.6 million for these LTIP Units was recognized in 2021. In April 2022, as part of their annual compensation, we granted to non-employee trustees a total of 95,084 fully vested LTIP Units with a grant-date fair value of $ 20.90 per unit, which includes LTIP Units elected in lieu of cash retainers. 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 the LTIP Units granted during the nine months ended September 30, 2022 was $ 25.7 million. The Time-Based LTIP Units and the LTIP Units were valued based on the closing common share price on the grant date, less a discount for post-grant restrictions. The discount was determined using Monte Carlo simulations based on the following significant assumptions: ​ ​ ​ ​ Expected volatility 30.0 % to 41.0 % Risk-free interest rate 0.4 % to 2.9 % Post-grant restriction periods 2 to 6 years ​ Appreciation-Only LTIP Units ("AO LTIP Units") In January 2022, we granted to certain employees 1.5 million performance-based AO LTIP Units with a weighted average grant-date fair value of $ 4.44 per unit. The AO LTIP Units are structured in the form of profits 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 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 % . The AO LTIP Units have a three-year performance period with 50 % of the AO LTIP Units that are earned vesting at the end of the three-year performance period and the remaining 50 % vesting on the fourth anniversary of the grant date, subject to continued employment. The AO LTIP Units expire on the ten th anniversary of their grant date. 20 Table of Contents The aggregate grant-date fair value of the AO LTIP Units granted during the nine months ended September 30, 2022 was $ 6.6 million, valued using Monte Carlo simulations based on the following significant assumptions: ​ ​ ​ ​ Expected volatility 27.0 % Dividend yield 2.7 % Risk-free interest rate 1.6 % ​ Performance-Based LTIP Units In January 2022, 469,624 LTIP Units with performance-based vesting requirements ("Performance-Based LTIP Units"), which were unvested as of December 31, 2021, were forfeited as the performance measures were not met. ESPP Pursuant to the ESPP, employees purchased 39,851 common shares for $ 801,000 during the nine months ended September 30, 2022. The following is a summary of the significant assumptions used to value the ESPP common shares using the Black-Scholes model: ​ ​ ​ ​ Expected volatility 23.0 % Dividend yield 1.6 % Risk-free interest rate 0.2 % Expected life ​ 6 months ​ Share-Based Compensation Expense The following is a summary of share-based compensation expense: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended September 30, ​ Nine Months Ended September 30, ​ 2022 2021 X 2022 2021 ​ (In thousands) Time-Based LTIP Units ​ $ 3,496 ​ $ 3,999 ​ $ 15,824 ​ $ 12,494 AO LTIP Units and Performance-Based LTIP Units ​ 2,167 ​ 3,216 ​ 9,914 ​ 9,615 LTIP Units ​ — ​ — ​ 1,000 ​ 1,091 Other equity awards (1) ​ 1,413 ​ 1,473 ​ 4,239 ​ 4,395 Share-based compensation expense - other ​ 7,076 ​ 8,688 ​ 30,977 ​ 27,595 Formation Awards ​ 281 ​ 476 ​ 1,424 ​ 1,923 OP Units and LTIP Units (2) ​ ( 423 ) ​ 1,676 ​ 408 ​ 6,725 Special Time-Based LTIP Units and Special Performance-Based LTIP Units (3) ​ 690 ​ 1,328 ​ 2,537 ​ 4,218 Share-based compensation related to Formation Transaction and special equity awards (4) ​ 548 ​ 3,480 ​ 4,369 ​ 12,866 Total share-based compensation expense ​ 7,624 ​ 12,168 ​ 35,346 ​ 40,461 Less: amount capitalized ​ ( 675 ) ​ ( 740 ) ​ ( 3,022 ) ​ ( 2,141 ) Share-based compensation expense ​ $ 6,949 ​ $ 11,428 ​ $ 32,324 ​ $ 38,320 (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 bonuses earned, (ii) restricted share units ("RSUs") and (iii) shares issued under our ESPP. (2) Includes share-based compensation expense for LTIP Units and OP Units issued in the Formation Transaction, which fully vested in July 2022. (3) Represents equity awards issued related to our successful pursuit of Amazon's additional headquarters in National Landing. (4) Included in "General and administrative expense: Share-based compensation related to Formation Transaction and special equity awards" in the accompanying statements of operations . 21 Table of Contents As of September 30, 2022, we had $ 50.5 million of total unrecognized compensation expense related to unvested share-based payment arrangements, which is expected to be recognized over a weighted average period of 3.2 years. 12. Transaction and Other Costs The following is a summary of transaction and other costs: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended September 30, ​ Nine Months Ended September 30, ​ 2022 2021 X 2022 2021 ​ (In thousands) Demolition costs ​ $ — ​ $ 1,422 ​ $ 428 ​ $ 2,869 Integration and severance costs ​ 1,146 ​ 154 ​ 2,018 ​ 616 Completed, potential and pursued transaction expenses (1) ​ 600 ​ 1,375 ​ 2,186 ​ 5,426 Transaction and other costs ​ $ 1,746 ​ $ 2,951 ​ $ 4,632 ​ $ 8,911 (1) Primarily consists of legal and dead deal costs related to pursued transactions. 13. Interest Expense The following is a summary of interest expense: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended September 30, ​ Nine Months Ended September 30, ​ 2022 2021 X 2022 2021 ​ (In thousands) Interest expense before capitalized interest ​ $ 22,801 ​ $ 17,278 ​ $ 60,100 ​ $ 50,744 Amortization of deferred financing costs ​ 1,118 ​ 1,096 ​ 3,369 ​ 3,188 Interest expense related to finance lease right-of-use assets ​ ​ — ​ ​ 430 ​ ​ 2,091 ​ ​ 1,284 Net unrealized (gain) loss on derivative financial instruments designated as ineffective hedges ​ ( 3,099 ) ​ 37 ​ ( 8,493 ) ​ ( 50 ) Capitalized interest ​ ( 2,888 ) ​ ( 1,598 ) ​ ( 6,816 ) ​ ( 4,854 ) Interest expense ​ $ 17,932 ​ $ 17,243 ​ $ 50,251 ​ $ 50,312 ​ 14. 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, which it increased to an aggregate of $ 1.0 billion in June 2022. During the three and nine months ended September 30, 2022, we repurchased and retired 2.3 million and 14.2 million common shares for $ 54.0 million and $ 361.0 million, a weighted average purchase price per share of $ 23.35 and $ 25.49 . During the 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, a weighted average purchase price per share of $ 29.73 and $ 29.99 . Since we began the share repurchase program, we have repurchased and retired 23.3 million common shares for $ 623.5 million, a weighted average purchase price per share of $ 26.74 . 22 Table of Contents 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 net income (loss) to the amounts of net income (loss) available to common shareholders used in calculating basic and diluted earnings (loss) per common share: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended September 30, ​ Nine Months Ended September 30, ​ ​ 2022 2021 X 2022 2021 ​ ​ (In thousands, except per share amounts) Net income (loss) ​ $ ( 21,581 ) ​ $ 996 ​ $ 119,836 ​ $ ( 26,391 ) Net (income) loss attributable to redeemable noncontrolling interests ​ ​ 2,546 ​ ( 103 ) ​ ( 15,712 ) ​ 2,472 Net (income) loss attributable to noncontrolling interests ​ ​ ( 258 ) ​ — ​ ( 174 ) ​ 1,108 Net income (loss) attributable to common shareholders ​ ​ ( 19,293 ) ​ ​ 893 ​ ​ 103,950 ​ ​ ( 22,811 ) Distributions to participating securities ​ ​ ( 658 ) ​ ​ ( 763 ) ​ ( 671 ) ​ ( 1,497 ) Net income (loss) available to common shareholders - basic and diluted ​ $ ( 19,951 ) ​ $ 130 ​ $ 103,279 ​ $ ( 24,308 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Weighted average number of common shares outstanding - basic and diluted ​ ​ 114,360 ​ ​ 131,351 ​ 120,741 ​ 131,456 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Earnings (loss) per common share - basic and diluted ​ $ ( 0.17 ) ​ $ 0.00 ​ $ 0.86 ​ $ ( 0.18 ) ​ 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 September 30, 2022 and 2021 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. AO LTIP Units, Performance-Based LTIP Units, Formation Awards and RSUs, which totaled 5.9 million for the three and nine months ended September 30, 2022, and 5.2 million and 4.9 million for the three and nine months ended September 30, 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. ​ Dividends Declared in October 2022 On October 25, 2022, our Board of Trustees declared a quarterly dividend of $ 0.225 per common share, payable on November 22, 2022 to shareholders of record as of November 8, 2022. 15. 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 September 30, 2022 and December 31, 2021, 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 gain (loss) on our derivative financial instruments designated as effective hedges was $ 54.2 million and ($ 17.2 ) million as of September 30, 2022 and December 31, 2021 and was recorded in "Accumulated other comprehensive income (loss)" in our balance sheets, of which a portion was allocated to "Redeemable noncontrolling interests." Within the next 12 months, we expect to reclassify $ 22.8 million of the net unrealized gain as a decrease to interest expense. 23 Table of Contents Accounting Standards Codification 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 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) September 30, 2022 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Derivative financial instruments designated as effective hedges: ​ ​ ​ ​ Classified as assets in "Other assets, net" ​ $ 52,618 ​ ​ — ​ $ 52,618 ​ ​ — Derivative financial instruments designated as ineffective hedges: ​ ​ ​ ​ Classified as assets in "Other assets, net" ​ 9,437 ​ — ​ 9,437 ​ — ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, 2021 ​ ​ ​ ​ Derivative financial instruments designated as effective hedges: ​ ​ ​ ​ Classified as assets in "Other assets, net" ​ $ 393 ​ ​ — ​ $ 393 ​ ​ — Classified as liabilities in "Other liabilities, net" ​ ​ 18,361 ​ — ​ ​ 18,361 ​ — Derivative financial instruments designated as ineffective hedges: ​ ​ ​ ​ Classified as assets in "Other assets, net" ​ 558 ​ — ​ 558 ​ — ​ The fair values of our derivative financial instruments were determined using widely accepted valuation techniques, including discounted cash flow analysis on the expected cash flows of the derivative financial instrument. This analysis reflected the contractual terms of the derivative, including the period to maturity, and used observable market-based inputs, including interest rate market data and implied volatilities in such interest rates. While it was determined that the majority of the inputs used to value the derivatives fall within Level 2 of the fair value hierarchy under authoritative accounting guidance, the credit valuation adjustments associated with the derivatives also utilized Level 3 inputs, such as estimates of current credit spreads to evaluate the likelihood of default. However, as of September 30, 2022 and December 31, 2021, the significance of the impact of the credit valuation adjustments on the overall valuation of the derivative financial instruments was assessed, and it was determined that these adjustments were not significant to the overall valuation of the derivative financial instruments. As a result, it was determined that the derivative financial instruments in their entirety should be classified in Level 2 of the fair value hierarchy. The net unrealized gains and losses included in "Other comprehensive income" in our statements of comprehensive income (loss) for the three and nine months ended September 30, 2022 and 2021 were attributable to the net change in unrealized gains or losses related to effective interest rate swaps that were outstanding during those periods, none of which were reported in our statements of operations as the interest rate swaps were documented and qualified as hedging instruments. 24 Table of Contents Financial Assets and Liabilities Not Measured at Fair Value As of September 30, 2022 and December 31, 2021, all financial assets and liabilities were reflected in our balance sheets at amounts which, in our estimation, reasonably approximated their fair values, except for the following: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ September 30, 2022 ​ December 31, 2021 ​ Carrying ​ Carrying ​ ​ ​ Amount (1) ​ Fair Value ​ Amount (1) ​ Fair Value ​ (In thousands) Financial liabilities: ​ ​ ​ ​ Mortgages payable ​ $ 1,753,948 ​ $ 1,650,983 ​ $ 1,788,259 ​ $ 1,814,780 Revolving credit facility ​ 100,000 ​ 100,030 ​ 300,000 ​ 300,363 Unsecured term loans ​ 550,000 ​ 550,816 ​ 400,000 ​ 400,519 (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. 16. 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. To conform to the current period presentation, we have reclassified the prior period segment financial data for 1700 M Street, for which we are the ground lessor, that had been classified as part of the commercial segment to other to better align with our internal reporting. 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 statements of operations. The following represents the components of revenue from our third-party asset management and real estate services business: ​ 25 Table of Contents ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended September 30, ​ Nine Months Ended September 30, ​ 2022 2021 X 2022 2021 ​ (In thousands) Property management fees ​ $ 4,791 ​ $ 4,831 ​ $ 14,575 ​ $ 14,549 Asset management fees ​ 1,479 ​ 2,145 ​ 4,763 ​ 6,602 Development fees (1) ​ 1,426 ​ 4,032 ​ 7,113 ​ 22,705 Leasing fees ​ 1,713 ​ 1,822 ​ 4,590 ​ 4,106 Construction management fees ​ 169 ​ — ​ 356 ​ 375 Other service revenue ​ 1,909 ​ 1,295 ​ 4,224 ​ 4,783 Third-party real estate services revenue, excluding reimbursements ​ 11,487 ​ 14,125 ​ 35,621 ​ 53,120 Reimbursement revenue (2) ​ 10,358 ​ 11,717 ​ 32,351 ​ 37,574 Third-party real estate services revenue, including reimbursements ​ ​ 21,845 ​ ​ 25,842 ​ ​ 67,972 ​ ​ 90,694 Third-party real estate services expenses ​ ​ 21,230 ​ ​ 25,542 ​ ​ 72,422 ​ ​ 80,035 Third-party real estate services revenue less expenses ​ $ 615 ​ $ 300 ​ $ ( 4,450 ) ​ $ 10,659 ​ (1) As of September 30, 2022, we had estimated unrecognized development fee revenue totaling $ 41.1 million, of which $ 3.6 million, $ 12.4 million and $ 6.8 million is expected to be recognized during the remainder of 2022 , 2023 and 2024 , and $ 18.3 million is expected to be recognized thereafter through 2027 as unsatisfied performance obligations are completed. Changes in the timing and costs of planned development projects may impact these amounts. (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 $ 15.2 million and $ 19.6 million as of September 30, 2022 and December 31, 2021, which are classified in "Intangible assets, net" in our balance sheets. Consistent with internal reporting presented to our CODM and our definition of NOI, the third-party asset management and real estate services operating results are excluded from the NOI data below. 26 Table of Contents The following is the reconciliation of net income (loss) attributable to common shareholders to consolidated NOI: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended September 30, ​ Nine Months Ended September 30, ​ 2022 2021 X 2022 2021 ​ (In thousands) Net income (loss) attributable to common shareholders ​ $ ( 19,293 ) ​ $ 893 ​ $ 103,950 ​ $ ( 22,811 ) Add: ​ ​ ​ ​ Depreciation and amortization expense ​ 50,056 ​ 56,726 ​ 157,597 ​ 178,130 General and administrative expense: ​ ​ ​ ​ Corporate and other ​ 12,072 ​ 12,105 ​ 42,669 ​ 38,475 Third-party real estate services ​ 21,230 ​ 25,542 ​ 72,422 ​ 80,035 Share-based compensation related to Formation Transaction and special equity awards ​ 548 ​ 3,480 ​ 4,369 ​ 12,866 Transaction and other costs ​ 1,746 ​ 2,951 ​ 4,632 ​ 8,911 Interest expense ​ 17,932 ​ 17,243 ​ 50,251 ​ 50,312 Loss on the extinguishment of debt ​ 1,444 ​ — ​ 3,073 ​ — Income tax expense ​ 166 ​ 217 ​ 2,600 ​ 4,527 Net income (loss) attributable to redeemable noncontrolling interests ​ ( 2,546 ) ​ 103 ​ 15,712 ​ ( 2,472 ) Net income (loss) attributable to noncontrolling interests ​ ​ 258 ​ ​ — ​ ​ 174 ​ ​ ( 1,108 ) Less: ​ ​ ​ ​ Third-party real estate services, including reimbursements revenue ​ 21,845 ​ 25,842 ​ 67,972 ​ 90,694 Other revenue ​ 1,764 ​ 1,568 ​ 5,758 ​ 5,658 Income (loss) from unconsolidated real estate ventures, net ​ ( 13,867 ) ​ 20,503 ​ ( 12,829 ) ​ 23,513 Interest and other income, net ​ 984 ​ 192 ​ 16,902 ​ 163 Gain on the sale of real estate, net ​ — ​ — ​ 158,631 ​ 11,290 Consolidated NOI ​ $ 72,887 ​ $ 71,155 ​ $ 221,015 ​ $ 215,547 ​ The following is a summary of NOI by segment. Items classified in the Other column include future development assets, assets ground leased to third parties, corporate entities and the elimination of inter-segment activity. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended September 30, 2022 ​ Commercial Multifamily Other Total ​ (In thousands) Property rental revenue ​ $ 71,257 ​ $ 45,639 ​ $ 2,915 ​ $ 119,811 Parking revenue ​ 3,859 ​ 248 ​ 87 ​ 4,194 Total property revenue ​ 75,116 ​ 45,887 ​ 3,002 ​ 124,005 Property expense: ​ ​ ​ ​ ​ ​ ​ Property operating ​ 20,151 ​ 16,108 ​ 121 ​ 36,380 Real estate taxes ​ 8,603 ​ 5,311 ​ 824 ​ 14,738 Total property expense ​ 28,754 ​ 21,419 ​ 945 ​ 51,118 Consolidated NOI ​ $ 46,362 ​ $ 24,468 ​ $ 2,057 ​ $ 72,887 ​ ​ Three Months Ended September 30, 2021 ​ Commercial Multifamily Other Total ​ (In thousands) Property rental revenue ​ $ 89,099 ​ $ 35,020 ​ $ 1,781 ​ $ 125,900 Parking revenue ​ 3,520 ​ 111 ​ 81 ​ 3,712 Total property revenue ​ 92,619 ​ 35,131 ​ 1,862 ​ 129,612 Property expense: ​ ​ ​ ​ ​ Property operating ​ 27,064 ​ 14,212 ​ ( 1,078 ) ​ 40,198 Real estate taxes ​ 12,098 ​ 4,930 ​ 1,231 ​ 18,259 Total property expense ​ 39,162 ​ 19,142 ​ 153 ​ 58,457 Consolidated NOI ​ $ 53,457 ​ $ 15,989 ​ $ 1,709 ​ $ 71,155 27 Table of Contents ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Nine Months Ended September 30, 2022 ​ Commercial Multifamily Other Total ​ (In thousands) Property rental revenue ​ $ 230,781 ​ $ 130,686 ​ $ 6,978 ​ $ 368,445 Parking revenue ​ 12,058 ​ 632 ​ 219 ​ 12,909 Total property revenue ​ 242,839 ​ 131,318 ​ 7,197 ​ 381,354 Property expense: ​ ​ ​ ​ ​ Property operating ​ 65,977 ​ 44,733 ​ 1,759 ​ 112,469 Real estate taxes ​ 29,398 ​ 15,586 ​ 2,886 ​ 47,870 Total property expense ​ 95,375 ​ 60,319 ​ 4,645 ​ 160,339 Consolidated NOI ​ $ 147,464 ​ $ 70,999 ​ $ 2,552 ​ $ 221,015 ​ ​ Nine Months Ended September 30, 2021 ​ Commercial Multifamily Other Total ​ ​ (In thousands) Property rental revenue ​ $ 265,469 ​ $ 100,324 ​ $ 5,167 ​ $ 370,960 Parking revenue ​ 9,169 ​ 286 ​ 188 ​ 9,643 Total property revenue ​ 274,638 ​ 100,610 ​ 5,355 ​ 380,603 Property expense: ​ ​ ​ ​ Property operating ​ 76,125 ​ 38,449 ​ ( 4,645 ) ​ 109,929 Real estate taxes ​ 36,018 ​ 15,240 ​ 3,869 ​ 55,127 Total property expense ​ 112,143 ​ 53,689 ​ ( 776 ) ​ 165,056 Consolidated NOI ​ $ 162,495 ​ $ 46,921 ​ $ 6,131 ​ $ 215,547 ​ The following is a summary of certain balance sheet data by segment: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Commercial Multifamily Other Total ​ ​ (In thousands) September 30, 2022 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Real estate, at cost ​ $ 2,747,473 ​ $ 2,707,292 ​ $ 408,872 ​ $ 5,863,637 Investments in unconsolidated real estate ventures ​ 225,283 ​ 56,984 ​ 78,579 ​ 360,846 Total assets ​ 3,025,885 ​ 2,042,272 ​ 827,823 ​ 5,895,980 December 31, 2021 ​ ​ ​ ​ Real estate, at cost ​ $ 3,422,278 ​ $ 2,367,712 ​ $ 446,486 ​ $ 6,236,476 Investments in unconsolidated real estate ventures ​ 281,515 ​ 103,389 ​ 77,981 ​ 462,885 Total assets ​ 3,591,839 ​ 1,797,807 ​ 996,560 ​ 6,386,206 ​ ​ ​ 17. 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. 28 Table of Contents 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 September 30, 2022, we had assets under construction that, based on our current plans and estimates, require an additional $ 468.1 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 sales and recapitalizations, and available cash. Environmental Matters Most of our assets have been subject 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 $ 18.0 million and $ 18.2 million as of September 30, 2022 and December 31, 2021 and are included in "Other liabilities, net" in our balance sheets. Other As of September 30, 2022, we had committed tenant-related obligations totaling $ 67.3 million ($ 64.9 million related to our consolidated entities and $ 2.4 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. 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 September 30, 2022, we had additional capital commitments and certain recorded guarantees to our unconsolidated real estate ventures and other investments totaling $ 64.0 million. As of September 30, 2022, we had no principal payment guarantees related to our unconsolidated real estate ventures. ​ Additionally, with respect to borrowings of our consolidated entities, we have agreed, and may in the future agree, to (i) guarantee portions of the principal, interest and other amounts, (ii) provide customary environmental indemnifications and nonrecourse carve-outs (e.g., guarantees against fraud, misrepresentation and bankruptcy) or (iii) provide guarantees to 29 Table of Contents lenders, tenants and other third parties for the completion of development projects. As of September 30, 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. 18. Transactions with Related Parties Our third-party asset management and real estate services business provides fee-based real estate services to the WHI, 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 debt financing vehicle of the WHI. As of September 30, 2022, 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, 2022, our remaining unfunded commitment was $ 6.2 million. The third-party real estate services revenue, including expense reimbursements, from the JBG Legacy Funds and the WHI Impact Pool and its affiliates was $ 4.9 million and $ 15.1 million for the three and nine months ended September 30, 2022, and $ 5.6 million and $ 17.2 million for the three and nine months ended September 30, 2021. As of September 30, 2022 and December 31, 2021, we had receivables from the JBG Legacy Funds and the WHI Impact Pool and its affiliates totaling $ 4.1 million and $ 3.2 million for such services. We rented our former corporate offices from an unconsolidated real estate venture and made payments totaling $ 214,000 and $ 922,000 for the three and nine months ended September 30, 2022, and $ 246,000 and $ 1.0 million for the three and nine months ended September 30, 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 $ 2.7 million and $ 7.8 million during the three and nine months ended September 30, 2022, and $ 4.9 million and $ 13.4 million for the three and nine months ended September 30, 2021, which is included in "Property operating expenses" in our statements of operations. 30 Table of Contents